The Supreme Court of New South Wales has recently handed down its decision in the case of Alamdo Holdings Pty Ltd v Reece Australia Pty Ltd [2025] NSWSC 946, confirming the position that a party cannot rely on its own breach to terminate a lease. Importantly, the position adopted by the Court will apply to any form of contract or agreement.
Key facts
Alamdo Holdings Pty Ltd (“Alamdo”) granted a commercial lease to Reece Australia Pty Ltd (“Reece”) which commenced on 23 December 2022. Reece was required to obtain development consent for the purpose of undertaking its proposed fit out works and to use the premises for storage, distribution and sales of hardware, building and landscaping supplies.
Article 29(9) of the lease provided that:
“either party may terminate this lease if an occupation certificate is not obtained within the period ending six months from the Commencement Date”.
As the occupation certificate was not obtained by 23 June 2023 (the deadline specified in Article 29(9)), Reece purported to terminate the lease on 27 June 2023. Alamdo disputed Reece’s termination, claiming that Reece had breached its obligations under Articles 29(1) and 29(2) of the lease, which required Reece to provide the requisite documents and diligently progress the necessary approvals. In those circumstances, Alamdo argued that Reece could not rely on Article 29(9) as the delay in obtaining the occupation certificate was due to Reece’s own default.
Relevantly, some of the key circumstances surrounding Reece’s compliance (or lack thereof) included:
- Reece lodged a development application for its proposed fit-out works on 20 December 2022.
- Council issued a notice to Reece’s consultants on 4 January 2023 stating the fee payable for the development application and requesting payment within 2 business days. Reece’s consultants paid the fee on 12 January 2023.
- Council issued three separate requests for information, the first being issued on 2 February 2023 in respect of the development application with a request for a response within 30 days. Reece (via its consultants and subcontractor) was slow in responding to this request and missed the deadline. The subsequent two requests for information were also not dealt with expeditiously.
- Furthermore, the compliance reports provided to the Council by Reece (and its contractors) had repeated deficiencies and failed to address all of Council’s requests.
- Meanwhile, the Council issued a Fire Safety Order to Alamdo requiring completion of certain fire safety works. The Council did not indicate that development consent would be withheld on the basis that the fire safety works had not been completed and instead advised that these works could be completed by Alamdo as part of the general construction works.
Alamdo contended that the above steps led to delays by Council in processing the development consent application.
Reece counterclaimed, seeking return of its bank guarantee, on the basis that it had validly terminated the lease as Article 29(9) permitted either party to terminate if the occupation certificate had not been obtained within six months, regardless of fault. Reece argued that its own conduct had not caused the delay to the occupation certificate being issued and instead argued that Alamdo’s failure to comply with a fire safety order was also relevant and contributed to the delay.
The decision
The Court held in favour of Alamdo, finding that Article 29(2) should be interpreted on the principle that a party cannot take advantage of its own breach to terminate a lease. The Court found that Reece caused, or materially contributed to, the failure to obtain the occupation certificate due to its poor management (being a breach of its obligations under the lease) and as such, could not rely on Article 29(9).
The Court rejected Reece’s argument that Alamdo had also contributed to the delay in obtaining the occupation certificate as Alamdo’s failure to comply with its fire safety order was a minor issue and was not a requirement for Council to complete its development approval process.
The lease therefore remained on foot and Reece was ordered to pay for the unpaid rent and outgoings owing to Alamdo. Reece’s counterclaim for repayment of its bank guarantee also failed.
Key takeaways
The Court’s decision reinforces the principle that a party cannot rely on its own breach to terminate an agreement, and that strict compliance with procedural obligations in agreements is essential. While this decision involved a lease, the principles are clearly applicable to any form of agreement.
Any party seeking to terminate for failure to satisfy a condition should carefully consider any role its actions (or inactions) have played, and exercise caution before relying on a termination right where it may have been a contributor.
Should you require any advice in relation to these issues, please do not hesitate to contact Emile McPhee or Faye Winterflood.
