Commercial Lease for Australian [Non-Retail]

What is a Force Majeure clause?

A force majeure clause is a method of allocating the risk of a disruptive event. It is a broad catch-all provision whereby the parties list categories or specific instances of otherwise frustrating events, together with the party or parties to bear the risk of the event occurring.

The clause can also grant options to vary, suspend or terminate the contract to one or more of the parties. [1]

Force majeure clauses form part of a contract’s express terms, subject to the conventional methods of construction.

Absent a force majeure clause, it is unlikely a contract’s commercial purpose would suggest that such a provision is so apparent that it goes without saying [2], meaning a court is likely to refuse to imply it.

Further Reading:

For a more detailed discussion please refer to our blog article “Force Majeure Clauses & Frustration: Why the COVID-19 Pandemic is a Wake-Up Call" by Shakvaan Wijetunga | Virtual Intern at Blue Ocean Law Group℠.

Footnotes:

[1] Eg., Yara Nipro P/L v Interfert Australia P/L [2010] QCA 128, [26].

[2] BP Refinery (Westernport) Pty Ltd v Hastings Shire Council (1977) 180 CLR 266, 283.

Important Notice:‍

This FAQ is intended for general interest + information only.

It is not legal advice, nor should it be relied upon or used as such.

We recommend you always consult a lawyer for legal advice specifically tailored to your needs & circumstances.

Lease v. Licence to Occupy

Commercial Distinctions

A lease is quite often a significant obligation on the part of businesses. It is both a financial commitment, and a time commitment.

Traditionally, the majority of the time, a business would look for security of tenure, and a landlord for a long-term tenant.

The lease was an appropriate arrangement suiting the needs of both parties equally.

However, an insistence on occupancy by way of a lease on the part of landlord prevents businesses from engaging in more experimental ventures.

With smaller or newer businesses particularly, risks cannot be taken with their business model when they have rent to pay for the coming fortnight; and so rental obligations may push them into a certain conservatism with their business, a reluctance to try different things and be different, for fear of insolvency.

Such risks are often mitigated with a Licence to Occupy affords an occupant many of the same rights as a lessee or tenant under a Lease, though usually for the short-term.

There are other legal distinctions between a lease and a licence, a summary of which can be found below, though the primary difference of interest in a commercial sense is the greater scope of risk-taking a business may undertake with a licence to occupy.

Legal Distinctions

For a more detailed discussion of the commercial and legal differences between these two types of property law agreements please refer to our blog article “Licences to Occupy - A viable Alternative to Leases?" by Suk Jae Chung | Virtual Intern at Blue Ocean Law Group℠.

Important Notice:‍

This FAQ is intended for general interest + information only.

It is not legal advice, nor should it be relied upon or used as such.

We recommend you always consult a lawyer for legal advice specifically tailored to your needs & circumstances.

Nuisance

"The essence of the tort of nuisance is interference with the enjoyment of land".

- RP Balkin; JLR Davis. “Law of Torts 5th Edition.”

When the word nuisance is brought up in colloquial use, we think first of some form of bother or annoyance coming from somewhere. The nuisance is to me, to my person; my neighbour practicing the saxophone at midnight, or the smell coming from a nearby stable, are nuisances, as the noise / smell is offensive to me.

But the way the law sees it, at least with regards to private nuisance, for any action for the tort of nuisance to be actionable (meaning: to have legal grounds for suit), the plaintiff must have an interest in land, first and foremost. A nuisance (according to the law) occurs when an annoyance or bother interferes with my enjoyment of my land, not merely when I have been annoyed or bothered without any connection to land.

In practical terms, this means that you must either own land, or have leased land to be able to sue for nuisance.

When you are repeatedly woken up by bad jazz coming from your neighbour's apartment downstairs, you have an action in nuisance, not simply because you've been disrupted in your sleep, but because in doing so, your neighbour has interfered with your right to enjoy your land as you see fit.

Types of Nuisance

Nuisance can fall into one of two categories:

1️⃣  Nuisance by unreasonable physical injury to land; or

2️⃣  Nuisance by unreasonable substantial interference with the right to enjoyment of land.

Physical Injury to Land

The first of the two categories is perhaps easier to identify, as it involves physical damage. Balkin and Davis, the authors of a distinguished book on torts, gives the examples of a neighbour setting up vibrations which cause your building to collapse, or the fumes from a nearby factory damaging plants and vegetables being grown by a plaintiff. The damage is plain to see, as it is to property, and it is equally plain to see why physical damage to property amounts to an interference with your enjoyment of your land.

Substantial Interference

If you cast your mind back to the example of the saxophonist neighbour, for all your lost sleep, there is no damage to your property which you could show before a court. The damage, in this example, is to your ability to make use of your land, to your right to use your land for rest. Fortunately, the law does recognise this as a form a nuisance, though the interference with your rights must be substantial.

This means that trivial interferences will not constitute nuisance, though what is trivial is a matter for the courts to decide. In general, substantial interference as determined by the courts, seems to have a lower bar than what we might consider substantial in an everyday sense. As per Andreae v Selfridge & Co Ltd [1937] 3 All ER 255, lost sleep through excessive noise is substantial, as can be other activities such as a neighbour's use of their land as premises for prostitution, or the installation of floodlights, which ends up bleeding light onto an adjacent piece of land (again examples cited in Balkin and Davis, “Law of Torts 5th Edition”).

Unreasonableness

Any nuisance must also be unreasonable, a concept which has not been given a clear definition by the courts.

The reasons as to why reasonableness is relevant to liability in nuisance does, however, give some guidance: my neighbour also has the right to make use of his or her land, including for the practice of musical instruments. Unfortunately, acoustics pays little heed to human subdivisions of space, no matter human attempts to erect walls with sound-proofing. The interference with my right to enjoyment of my land has started from my neighbour's land; he or she has not stepped foot in my apartment (which would make things a lot easier, being an act of trespass).

Reasonableness looks to balance the nature and circumstances of my neighbour's activity which has given rise to the nuisance, against the nature and circumstances in which I have suffered interference.

As noted above, we do not have a clear definition for what makes a nuisance reasonable or unreasonable, and so we don't have a definitive list of considerations, though we can look to certain things courts took into account in previous cases.

For example, residents who have moved into industrial areas have diminished prospects of success for nuisance from industrial by-products given that courts will look to locality; unfortunately, industrial production often involves by-products, and in areas designated for such use, it is not unreasonable for run off to affect neighbouring land, unless there was something unreasonable about the production process in the first place.

Another such consideration is the hypersensitivity of plaintiffs. An action in nuisance is unlikely to succeed where the plaintiff has suffered interference on account of particular sensitivity requiring exceptional freedom from interference. If my neighbour has consistently awoken me, for I am in fact awoken by any sort of noise, my claim may well fail.

Note, however, that once unreasonable substantial interference has been made out, in the process of calculating damages, the particular hypersensitivity of a plaintiff will not diminish the quantum of any damages. The defendant must find the plaintiff as they were in this regard. The Privy Council in McKinnon Industries Ltd v Walker [1951] 3 DLR 577 noted that the particular vulnerability of orchids to industrial fumes became irrelevant once it was proved that the damage to the orchids were the consequence of a non-trivial interference with land.

Credits:

This FAQ was written by Suk Jae Chung | Practical Legal Training (PLT) Placement, Blue Ocean Law Group℠.

Important Notice:

This FAQ is intended for general interest + information only.

It is not legal advice, nor should it be relied upon or used as such.

We recommend you always consult a lawyer for legal advice specifically tailored to your needs & circumstances.