Australia: Landlord unable to force Lessee to trade - 29 January 2016

Last Updated: 31 January 2016
Article by James Bottomley and Kerrod Giles

Business failure is an unfortunate reality that most landlords are required to deal with from time to time. Often landlords are left in very difficult situations when a lessee's business fails, particularly where the lessee is unable to carry out its obligations under a lease with a significant term left to run.

This raises the question: what rights are available to a landlord when a lessee has been forced to prematurely bring leasing arrangements to an end? In the recent case of Sentinel Countrywide Retail Ltd v PC Emerald (Qld) Pty Ltd [2015] QSC 348, the Queensland Supreme Court dealt with precisely this issue.

In this alert, Partner James Bottomley, Solicitor Kerrod Giles and Law Clerk Bridie Feehely examine this decision and analyse the guidance it provides for landlords facing these situations.


PC Emerald (Qld) Pty Ltd (the lessee) leased a premises in a shopping centre located in Emerald, Queensland. The lessee operated a pizza store from the premises. The lease was for a term of seven years, commencing on 1 February 2014 and expiring on 31 January 2021.

Between 1 July 2015 and 30 October 2015, the lessee's business began operating at a significant loss. Further losses were also forecast for the period of November 2015 to January 2016. In view of those projected losses, the lessee decided that the business should cease trading.

Subsequently, the lessee notified Sentinel Countrywide Retail Ltd (the landlord) of its intention to cease trading from the premises. The landlord then served the lessee with a notice, demanding that it recommence trading from the premises, but the lessee continued to close the store operating from the premises.

The landlord then commenced proceedings to obtain a mandatory injunction that would require the lessee to recommence trading from the premises during the trading hours of the shopping centre.

Established practice

In order for a court to grant an injunction compelling a lessee to trade, "exceptional circumstances" must exist. Injunctions will not be ordered if damages are an adequate remedy. Traditionally, courts have been reluctant to make orders compelling a party to act in a way that may not be commercially viable. The other practical consideration is that Courts do not wish to be put in a position of potentially being required to monitor the future performance of the lease contract, where the terms of an injunction requiring the lessee to trade (if granted) would usually require detailed performance conditions to be imposed by the Court.

Here, the landlord alleged that the circumstances surrounding the dispute were so exceptional that the granting of an injunction compelling the lessee to continue trading was warranted. Conversely, the lessee argued that there were no exceptional circumstances that would permit the court to make such an order.

Issues at trial and the landlord's contentions

At trial, the landlord claimed that damages were not an adequate remedy and that exceptional circumstances existed because:

  • the closure of the lessee's store would have ongoing detrimental effects on the landlord that were unlikely to be quantifiable;
  • in the alternative, even if the loss sustained by the landlord could be quantified, there was a significant risk that the landlord would not be able to recover its losses from the lessee; and
  • an injunction could be drawn with sufficient specificity so as to remove the risk of further litigation occurring with respect to the lessee's mandatory continuation of trade.

Outcome of the proceedings

Inability to quantify loss

The Queensland Supreme Court dismissed the landlord's argument that damages were not capable of being quantified. Justice Applegarth found that although in this instance it may be difficult to quantify damages with precision, it did not mean that damages were not an adequate remedy.

In addressing the damage sustained by the landlord, Justice Applegarth found that there was no evidence that the lessee's business was crucial to attracting a large number of customers to the centre or that its closure would significantly impact the centre's trade. In drawing that conclusion, Justice Applegarth specifically pointed to uncontested evidence that 90 per cent of the trade conducted by the lessee's business occurred at times when other shops in the centre were closed.

Suggestions by the landlord that the closing of the lessee's business would affect the landlord's plans to develop a "food precinct" in the centre were similarly dismissed as there was no evidence that the landlord's plans could not continue without the lessee.

Inability to recover losses

The landlord then argued in the alternative that, even if damages could be quantified, damages were not adequate because there was a significant risk that the landlord would not be able to recover its losses should the lessee be permitted to cease trading. The landlord's submissions on this point rested on the fact that the lessee company was set up solely for the operation of the lessee's business and otherwise had no substantial assets.

Justice Applegarth acknowledged that although the nature of the lessee company might prevent the landlord from recovering any damages, the risk faced by the landlord had arisen out of the landlord's own commercial decision to lease the premises to an entity with no substantial assets. Consequently, Justice Applegarth also found against the landlord on this point.

Orders and continuing litigation

Finally, Justice Applegarth outlined that, even if the landlord was successful in proving damages were inadequate, the granting of an injunction would only serve to create continuing litigation between the parties.

That was because, in considering the nature of the lessee's business, an order governing the manner in which the lessee must operate its business may not be adaptable to the lessee's commercial needs for the remaining five year term of the lease. Any deviation by the lessee from an injunction would likely result in repeated applications by the landlord seeking strict enforcement of the original orders.

Additionally, Justice Applegarth pointed out that forcing the lessee to continue trading from the premises would be contrary to public policy because it would interfere with the legitimate commercial decision of the lessee to end a loss making venture, and further, could have the unintended effect of forcing the lessee's directors to engage in insolvent trading.

Key points for landlords

Key points from this decision that should be considered by landlords when entering into a lease, or otherwise dealing with a lessee who has made a commercially justified decision to bring its lease arrangement to an end, include:

  • landlords should ensure that they conduct adequate due diligence of lessee companies and, where the lessee company does not have substantial assets, obtain a guarantee from a related entity or the lessee's company directors;
  • where a lessee does not have significant assets, landlords may wish to consider negotiating shorter lease terms to reduce the potential loss that may be suffered should the lessee's business prematurely fail;
  • where a lessee prematurely ends a lease arrangement for commercial reasons, the most accessible court ordered remedy for a landlord will likely be damages – however, in these scenarios, courts will generally only award compensatory damages; and
  • landlords should be aware that the more likely scenario where a court may potentially order the operator of a loss-making business to continue operating is where the lessee is an anchor tenant or major lessee who with its business, brings customers to the centre in question. Proceedings against a lessee who does not fall into that category are more likely to fail.

© HopgoodGanim Lawyers

Award-winning law firm HopgoodGanim offers commercially-focused advice, coupled with reliable and responsive service, to clients throughout Australia and across international borders.

2015 AFR Beaton Client Choice Awards:
Best Law Firm (revenue $50m - $200m)
Best Professional Services Firm (revenue $50m - $200m)

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

James Bottomley
Kerrod Giles
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.