A scrap metal company has lost the lease of its wrecking yard because it sub-let a granny flat in the on-site residence to a part time worker.

James & Roslyn Goldsmith took over the Mareeba site after the former owner gave up the business he had run there for 16 years.

Wreckage company losing leaseFrank Grepo – whose home neighboured the yard – gave the new operator a three year lease with options in May 2010.

It included an ancient caretaker’s cottage – which the Goldsmiths occupied – and the granny flat.

Goldsmith’s company expanded the business to eight staff and to a much bigger scale to that of his predecessor’s small-time operation (he operated with only one casual and wife Beryl doing the bookkeeping).

In November 2012 – to accord with the requisite 6 month notice period – the company registered its intention to exercise the first three year option to stay on the land until May 2016.

As the business grew, Grepo’s resentment of the goings on next door grew also.

He wanted his successor gone and on various grounds – “rent under payments, tyres, fumes, grass, termites, rats, dust and sub-letting” – refused to grant the option and took steps to get Goldsmith’s company out.

The tenant stayed put after the May 2013 expiry date. Grepo decided to force the issue via court action and recover an alleged $4k owing for rent shortfall.

It was not disputed that Property Law Act s 128 prevented the lessor relying on any pre-notice breach that had already been rectified, to refuse the new term.

But the lessor contended that the section did not excuse the company in the same way for breaches of the lease during the 6 month period from the option exercise date to the start of the option period.

In one of the final rulings of his 29 year judicial career, Chief Justice Paul de Jersey agreed with the landlord’s proposition but was satisfied there had been no breach of the lease after the option exercise date.

He ruled an “antagonistic and cantankerous” Grepo was surprised by the busy and expanded operation which had “fed a sense of grievance and led to his exaggerating in his own mind his concerns, as resident next door neighbour.”

The tenant was not required, ruled the Chief Justice, to “self -calculate” CPI increases and had only to pay CPI supplements if the lessor had “determined” what the new rent should be.

Two of the three appeal judges agreed that a failure to pay rent at the higher rate following a scheduled CPI rent escalation did not constitute a default.

The now state governor had ruled the tenant company’s allocation of the granny flat to occupants who contributed to expenses, paid rent or provided labour, was permissible as they were a “lodger” rather than subtenant. But on appeal the judges noted the occupant paid a market rent and notwithstanding the tenant was a company and that the occupant was its employee of sorts, such conduct was “unauthorised subletting”.

The third alleged breach the landlord asked the appeal court to decide on was the tenant’s failure to keep the premises “free and clear of rodents, termites cockroach and other vermin”.

Although various experts were of the view that the termite infestation probably predated the tenant’s occupation, its failure to conduct regular termite treatments was held to be a breach of the lease.

“The lessee admitted that has undertaken no termite treatment or maintenance at all. The only available conclusion was that it had breached this covenant of the lease”.

The landlord was thus able to convince the appeal judges on just two of eight breaches complained of but that was enough to justify its position in refusing the company’s exercise of its option and to be granted an order that the company vacate the yard forthwith.

Grepo & Anor v Jam-Cal Bundaberg Pty Ltd [2015] QCA 131 Holmes and Morrison JJA and Douglas J 17/07/2015


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