ALCATEL AUSTRALIA LIMITED V SCARCELLA & ORS (1998) 44 NSWLR 349
Supreme Court of New South Wales – 16 July 1998
Francesco, Helen and Rocky Scarcella (“Scarcella”) owned premises at 276-280 Botany Road, Alexandria and leased the premises to Alcatel Australia Limited (“Alcatel”). Alcatel became interested in a proposal to build a seven-storey administrative building on the premises under a sale and lease back arrangement. The proposal was realised and leased back to Alcatel for the term of fifty years. Covenant 2(f) of the lease stated that Alcatel was to observe and perform all lawful requirements.
Scarcella pressured the Council into imposing strict fire requirements on Alcatel requiring Alcatel to carry out substantial alterations to the staircase of the building. Alcatel refused to implement the fire requirements. Alcatel contended that it was not obliged to comply with covenant 2(f) of the lease as there was an implied term of good faith and reasonableness which bound Scarcella to ensure that Alcatel was not subjected to the expense and impact of an unreasonable fire order.
Whether there was an implied term of good faith and reasonableness.