In brief - Lessor to pay significant damages to lessee after
The Supreme Court of NSW has determined that a lessor which
terminated a lease and repossessed the premises without giving the
lessee a reasonable opportunity to remove its fixtures and other
property was in breach of the terms of the lease and liable to
compensate the former tenant.
Conversion and disposal of lessee's fittings, cash and
On 15 July 2013, the Supreme Court of NSW handed down judgment
in NSL Pty Ltd v 2 Roslyn Street Pty Ltd  NSWSC
930, which considered the liability of the defendant lessor for
the conversion and disposal of the lessee's fittings, cash and
trading stock upon exercising its right to re-entry.
The Supreme Court held the lessor accountable for the conversion
of a number of the lessee's goods upon the termination of the
lease and repossession of the leased premises.
This case demonstrates the need for lessors to comply
sufficiently with re-entry clauses of any lease to ensure they are
not exposed to claims of conversion and detinue by lessees upon
Lessor's repossession of premises used to run a nightclub
The plaintiff lessee, NSL Pty Limited, operated a nightclub
business between October 2001 and June 2004 from the premises known
as 2 Roslyn Street, Kings Cross. NSL continued to trade until
re-entry by the defendant lessor, 2 Roslyn Street Pty Limited on 15
June 2004 pursuant to clause 39 of the lease arrangement.
2 Roslyn Street effected its re-entry by replacing the locks on
the premises and terminating the lease.
Lessor obliged to give lessee a reasonable opportunity to
remove its goods from premises
Clause 39 of the lease agreement stated:
If the lessor shall enter into
possession of the demised premises and the lessee shall not have
removed his goods or any of them after the lessor has given the
lessee a reasonable opportunity to do so, the lessor shall be at
liberty to sell or otherwise dispose of such goods or any of them
as if the lessee were at all times the beneficial owner thereof and
had assigned all his right, title and interest in and to such goods
to the lessor and the lessor shall not be liable to account to the
lessee in respect of the net amount (if any) actually received by
the lessor following the sale or disposal of such goods after
deduction of all moneys outstanding by the lessee including
expenses incurred by the lessor in detaining or maintaining
possession of the goods or selling or disposing of the
Cash, trading stock and fittings not returned to lessee
In compliance with the above clause, 2 Roslyn Street sold or
otherwise disposed of the lessee's goods, including certain
fittings, trading stock and cash which has not been accounted for.
By 12 October 2004, 2 Roslyn Street had re-let the premises to the
second defendant, Pink Star Entertainment Pty Limited, whilst NSL
had not been permitted to enter the premises before that occurred.
Upon inspection of the premises on 13 October 2004, NSL contended
$20,800 was stored in cash at the time of re-entry and was
never accounted for
Trading stock, namely bottled liquor and similar goods
amounting to $29,800 that was present at the time of re-entry have
not been returned
Certain fitout and fittings have been converted by 2 Roslyn
Street, under the subsequent lease arrangement between 2 Roslyn
Street and Pink Star
It is important to note, however, that NSL accepts that 2 Roslyn
Street had validly exercised its right of re-entry, but alleges
that it had failed to comply with the terms of clause 39 which
required it to permit the removal of fixtures and other chattels
within a reasonable time by giving NSL a reasonable opportunity to
Court finds that lessee was entitled to immediate possession of
its own goods
In considering the extensive affidavit sworn by the applicant
and the balance of probabilities, the court was satisfied that 2
Roslyn Street had breached the terms of clause 39 and thus, awarded
judgement in favour of NSL for $110,600. The court found that the
fixtures and fittings, cash and stock in trade allegedly converted
by 2 Roslyn Street were all items in respect of which NSL was
either the owner or entitled to immediate possession.
Although the lease had been terminated, clause 39 continued to
apply to restrict the conversion of the lessee's items by 2
Roslyn Street until it had given the lessee a reasonable
opportunity for removal of such items.
Terms of lease are still significant after termination of
This decision by Harrison J indicates that parties to a lease
should be sufficiently aware of any potential rights and
obligations that may continue to arise after the repossession and
termination of the lease by the lessor. The terms of the lease
remain significant and therefore, a breach of any term of the lease
may render either party liable for damages.
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