'All reasonable endeavours' defence collapses as judge finds tenant simply stalled on payment
The Federal Court has ordered a Darwin nightclub tenant to give up its premises and pay more than $1.5m over unpaid lease and loan debts.
In J & N Nominees Pty Ltd v Deva Darwin Pty Ltd [2026] FCA 693, Justice McDonald found that Deva Darwin Pty Ltd, which runs the Discovery nightclub, the Lost Arc bar, and the Fantasy Lounge venue on Mitchell Street, breached a February 2025 Heads of Terms with its landlord, J & N Nominees Pty Ltd.
The parties signed the Heads of Terms after Deva fell behind on rent and loan repayments. Deva acknowledged it owed $316,516.29 under the lease and $151,506 under the loan agreements. The contract required Deva to pay the lease amount and required both parties to use all reasonable endeavours to enter a new lease and new loan agreement by 5 March 2025.
Deva did not pay the lease amount. It argued the landlord breached its endeavours obligations by delivering draft documents too late, which it claimed prevented its shareholders from releasing funds. Deva cross-claimed for specific performance, damages, estoppel and misleading conduct under s 18 of the Australian Consumer Law.
Justice McDonald rejected each argument. He held that Deva's duty to pay the lease amount stood independent of the mutual reasonable endeavours obligations. The contract fixed payment for a date before the parties needed to finalise the new agreements, expressed the payment duty as Deva's alone, and tied the new lease's commencement to the lease amount being paid.
The court found Deva never told the landlord that its capacity to pay depended on shareholder funding, or that shareholders required finalised documents, until 28 March 2025. By then, Deva had separately represented that its director had arranged alternative finance.
Justice McDonald also found the landlord committed no material breach. Preparing the new documents required careful checking rather than onerous drafting, and Deva's own solicitor accepted the task was straightforward. The judge concluded it suited Deva to delay so it could argue the Heads of Terms remained on foot.
Even assuming a breach, the court held Deva failed to act within a reasonable time. The parties had settled the agreements by late March 2025, yet Deva still did not pay. The only reasons to withhold payment, the judge found, were an inability to raise funds or an attempt to gain negotiating leverage.
The court dismissed the misleading conduct claim. It found the solicitor's email neither represented that Deva had sufficient time to finalise the documents nor represented that the draft complied with the Heads of Terms. Deva could read the attached drafts and assess them directly.
Justice McDonald rejected the prevention principle argument, holding the landlord did not take advantage of its own conduct. Deva's failure to pay the lease amount caused the loss of its rights.
The court also declined specific performance. Deva carried the burden of proving it stood ready, willing and able to comply, and it had not paid the lease amount even by trial.
Justice McDonald ordered J & N to recover possession, entered judgment of $1,535,058.08 against Deva and guarantor Mario Madaffari, and ordered the respondents to pay costs.
