Quadra Pacific (Aust) Corporation P/L v Mercantile Credits Ltd
[2000] QCA 284
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- Quadra Pacific (Aust) Corporation P/L v Mercantile Credits Ltd[2000] QCA 284
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Quadra Pacific (Aust) Corporation P/L v Mercantile Credits Ltd[2000] QCA 284
Quadra Pacific (Aust) Corporation P/L v Mercantile Credits Ltd[2000] QCA 284
SUPREME COURT OF QUEENSLAND
CITATION: | Quadra Pacific (Aust) Corporation P/L v Mercantile Credits Ltd [2000] QCA 284 |
PARTIES: | QUADRA PACIFIC (AUST) CORP PTY LTD ACN 060 599 420 (plaintiff/appellant) v MERCANTILE CREDITS LIMITED ACN 000 030 508 (defendant/respondent) |
FILE NO/S: | Appeal No 6341 of 1999 DC No 3371 of 1997 |
DIVISION: | Court of Appeal |
PROCEEDING: | General civil appeal |
ORIGINATING COURT: | District Court at Brisbane |
DELIVERED ON: | 25 July 2000 |
DELIVERED AT: | Brisbane |
HEARING DATE: | 8 June 2000 |
JUDGES: | de Jersey CJ, Pincus JA and Dutney J Separate reasons for judgment of each member of the Court, each concurring as to the order made. |
ORDER: | Appeal dismissed with costs. |
CATCHWORDS: | CONTRACTS – GENERAL CONTRACTUAL PRINCIPLES – CONSTRUCTION AND INTERPRETATION OF CONTRACTS – OTHER MATTERS – construction of clauses in a lease – whether respondent obliged to pay a sum in lieu of an obligation to “make good” the premises at the lease’s expiration PROCEDURE – COURTS AND JUDGES GENERALLY – JUDGES – DISQUALIFICATION FOR INTEREST OR BIAS – IN GENERAL – REASONABLE SUSPICION OF BIAS – whether trial Judge’s comments and questioning of witnesses might have caused an apprehension of apparent bias – whether within ambit of trial Judge’s entitlement to comment in view of stage of proceedings, context and subject matter of comments Re ABC Coupler & Engineering Co Ltd (No 3) [1970] 1 WLR 702, referred to Devries v Australian National Railways Commission (1993) 177 CLR 472, followed Ex parte Baroness Willoughby D’Eresby; re Thomas (1881) 44 LT 781, followed Galea v Galea (1990) 19 NSWLR 263, considered Immer (No 145) Pty Ltd v The Uniting Church in Australia Property Trust (NSW) (1993) 182 CLR 26, referred to In the Marriage of Sealey (1986) 10 FamLR 1055, referred to In the Marriage of Stiffle (1988) 93 FLR 206, referred to Rasanayakam v Thillainadesan (1996) 20 FamLR 557, referred to Re Lusink (1980) 55 ALJR 12, considered Sargent v ASL Developments Ltd (1974) 131 CLR 634, referred to State Rail Authority of New South Wales v Earthline Constructions Pty Ltd (in liq) [1999] HCA 3 (1999) 73 ALJR 306; 160 ALR 588, followed Vakauta v Kelly (1989) 167 CLR 568, considered |
COUNSEL: | SSW Couper QC for the appellant JH Dalton for the respondent |
SOLICITORS: | Lynch & Co for the appellant Corrs Chambers Westgarth for the respondent |
- de JERSEY CJ: I have had the advantage of reading the reasons for judgment of Dutney J. I agree that the appeal should be dismissed with costs, for the reasons expressed by His Honour.
- PINCUS JA: I agree with the reasons for judgment of Dutney J, and with the orders His Honour proposes.
- DUTNEY J: The appellant (plaintiff) is the owner of a commercial office tower at the corner of Edward and Mary Streets, Brisbane and an adjacent low rise annex constructed on the same parcel of land. The respondent (defendant) had been the lessee of most of the ground and first floors of the annex pursuant to a 12 year lease entered into with the appellant’s predecessor in title commencing from 1 May, 1983 and terminating on 30 April, 1995.
- The essential facts relating to liability were not in significant dispute during the trial. The argument, except insofar as it related to the quantum of the claim, turned on the construction of the various clauses of the lease and some other documents (mainly correspondence).
- During the term of the lease the respondent had been taken over by ANZ Bank. The leased premises were surplus to the needs of the respondent’s new owners and sub-tenancies were entered into, in each case with consent of the then lessor. The first floor of the annex was subleased to P & O Container Shipping Pty Ltd (“P & O”) pursuant to a registered sublease from 15 May 1990 until 29 April 1995, the day preceding the expiration of the head lease. The ground floor of the annex was sub-leased in part to CPS Credit Society Ltd (“CPS”) from 1 June 1991 until 29 April 1995 and the balance of the leased portion of the ground floor sub-leased to Protech Australia (SA) Pty Ltd (“Protech”) from 4 October 1993 until 29 April 1995.
- By a letter from the ANZ Bank to the appellant dated 16 February 1995 the bank, on behalf of the respondent, gave notice that it would not be renewing the lease on the expiration of the term on 30 April that year. The same letter invited the appellant, if it wished, to contact the sub-tenants directly to ascertain their intentions and to negotiate directly with them. By reply dated 1 March 1995 the appellant said:
“We appreciate your early notification to us that the bank does not wish to renew the lease after 30 April 1995 at 133 Mary St, Brisbane.
We shall proceed on this basis and will contact you closer to the time in regards to the final arrangements in regards to your tenancy.”
- Even before 1 May 1995, P & O had opened direct negotiations with the appellant with a view to taking a lease of the part of the premises they occupied. By letter from the appellants dated 23 November 1994 P & O had been offered a lease directly with the appellant from 30 April 1995 for 12 months. This offer contained special conditions regarding relocation of P & O from the annex to the tower on at least three months notice so that the annex could be refurbished. The appellant confirmed the tenancy to P & O by letter dated 20 December 1994.
- Some initial negotiations with Protech were undertaken commencing with an expression of interest by Protech by letter dated 15 February 1995. An offer of a three month tenancy of their existing area followed by month to month occupation was made to Protech by the appellant by letter dated 30 March 1995 and accepted by Protech by letter dated 11 April 1995.
- On 6 April 1995 the appellant offered a 6 month tenancy to CPS to commence from 30 April 1995. A counter offer of a monthly tenancy was made by CPS on 10 April 1995 and accepted by the appellant in writing on 11 April 1995. By 11 April 1995, therefor, the existing sub-tenants had agreed terms with the appellant to remain in occupation of their existing areas but on the basis of a direct landlord/tenant relationship with the appellant from the expiration of the respondent’s lease.
- On 6 March 1995 the appellant wrote to the bank on behalf of the respondent raising the obligation to make good. The material part of the letter was as follows:
“You would be aware … that there are certain obligations which must be met by Mercantile Credits Limited in regards to this tenancy.
We have obtained two quotes in regards to making good the tenancies, both on ground floor and first floor of the annex building at 133 Mary Street. The lowest of these two prices is $38,450.00.
As you can appreciate Quadra Pacific is in the best position to undertake these works on behalf of Mercantile Credits Limited at a timing t suit the landlord. We therefore request that you forward a cheque payable to Quadra Pacific (Aust) Corp Pty Ltd for $38,450.00”
- No action was taken by the bank in relation to the letter until a follow up was received by Mr Bacon, a bank officer, dated 26 April, 1995. Mr Bacon spoke to a Mr Petfield from the appellant about the initial correspondence on 24 April 1995 but the trial judge found that no commitment was made concerning payment of the sum requested by the appellant. Although the trial judge’s acceptance of Mr Bacon’s evidence generally is criticised by the appellant this particular finding seems uncontroversial and accords with Mr Petfield’s evidence at pages 11-13 of the transcript. Mr Bacon then ascertained that the sub-tenants were all remaining in occupation of the premises and took no further steps to make good. The sum of $38,450 was added to a rental statement under cover of a letter from the appellant of 2 June 1995 and interest claimed. The respondent’s solicitors responded by letter of 7 June 1995 disputing the appellant’s right to the payment and asserting the respondent had been prevented from making good by reason of the continuing occupation of the former sub-tenants.
- Protech and CPS vacated the premises in about October 1995 and P & O left in about July 1996. The former sub-tenants were in occupation as lessees in their own right for at least five months. As the premises became vacant the appellant refurbished the annex.
- The case as conducted and pleaded concerned the obligation of the respondent to “make good” the premises at the expiration of the lease and more particularly to pay an amount of money in lieu of that obligation. At the hearing of the appeal Mr Couper SC for the appellant conceded that the entitlement of the appellant to succeed depended on a favourable construction of one of three clauses in the lease. These clauses were clause 10.2, 10.3 and 11.4. They were in these terms:
“10.2REMOVAL OF TENANT’S FIXTURES. The Tenant may at or prior to the determination of this lease (and shall if so required by the Owner at or immediately following the expiration or sooner determination of the term) take remove and carry away from the demised premises all fixtures fittings plant equipment or other articles upon the demised premises in the nature of trade or tenants’ fixtures brought upon the demised premises by the Tenant with the consent of the Owner but the Tenant shall in such removal do no more damage to the demised premises than is reasonably necessary or shall forthwith make good any damage which the tenant may occasion thereto.
10.3 TENANT’S FIXTURES NOT REMOVED. If the Tenant does not remove and carry away any of such fixtures fittings plant equipment and other articles or items at or immediately following the determination of this lease the Owner may at the expense of the tenant remove and dispose of the same and any such fixtures fittings plant equipment and other articles or items not removed by the Tenant as aforesaid shall become the property of the Owner.
11.4 YIELDING UP. The Tenant shall forthwith upon the expiration of the term or sooner determination of this lease peaceably surrender and yield up to the Owner the demised premises clean and free from rubbish and in good and substantial repair and condition (having regard to the age of what is being surrendered or yielded up) in all respects and as nearly as possible in the same condition as the commencement of the term or in the event of any part thereof having been replaced or renewed during the term as nearly as possible in the same condition as after the date of such replacement or renewal…..”
- Clauses 10.2 and 10.3 provide for two different ways in which the landlord may achieve removal of tenants’ fixtures. Under clause 10.2 it may do so by requiring the tenant to remove them and under clause 10.3 it may remove them itself at the tenant’s expense. The first mode is restricted in that the requirement may be made only at or immediately following the end of the term, but clause 10.3 has no such express time limit. That is, reading clause 10.3 quite literally the landlord could exercise the right to remove at the tenant’s expense years after the end of the term and irrespective of any supervening events. For example, the landlord could at the end of the term occupy the premises itself for a few years using the tenant’s fixtures and then remove them and send the tenant the bill. Alternatively, he could let the premises to somebody else, perhaps for a very long time, and then remove the fixtures at the tenant’s expense. This result in a commercial document is strange. Why should the parties have subjected the tenant to an obligation strictly limited in time under the one clause and to a quite similar obligation with no time limit under the other? The contemplation of the parties must surely have been that the landlord would make up its mind promptly whether it wanted to leave the fixtures in place or remove them. That is, if the tenant was content to leave the fixtures behind and the landlord wanted to be rid of them, it would have to decide to do so promptly. In other words, the landlord would have to act within a reasonable time. It had the choice of removing the fixtures at the tenant’s expense or acquiring title thereto, itself.
- The other view would make the obligation on the tenant a perpetual one. There would not be a six year time limit because the landlord’s cause of action would not arise until the fixtures were removed.
- A difficulty in the path of an interpretation which would allow the landlord to re-let the premises, with fixtures, to another tenant and then purport to charge the account of the first tenant for their removal at the end of the second tenant’s lease is the use of the expression “tenant’s fixtures” at the beginning of clause 10.2. The tenant there being spoken of is of course the first tenant because the second tenant would acquire no rights in respect of the fixtures, not having put them in place. After the re-letting to the second tenant the fixtures simply became part of the freehold free of any right in the first tenant.[1]
- The result here is that neither clause 10.2 nor clause 10.3 can give rise to any legitimate claim by the appellant against the respondent. No reading of the letter from the appellant to the respondent of 6 March 1995 nor the subsequent correspondence of 26 April 1995 and 2 June 1995 can discern any requirement to make good as distinct from a demand for the payment of a nominated sum of money in lieu thereof. The result is that there has been no requirement made of the respondent to remove its fixtures and fittings and no damages flowing from the failure to do so under clause 10.2. As far as clause 10.3 is concerned the appellant did not remove the fixtures and fittings at the expiration of the term of the lease but entered into fresh tenancy arrangements with the former sub-tenants involving the use of the fixtures. By then, by operation of clause 10.3, the fixtures had become the property of the appellant. By the time the former sub-tenants vacated the premises a reasonable time to remove the fixtures and fittings at the respondent’s expense had long expired.
- The same result can be arrived at by the application of the doctrine of election.[2] At the expiration of the lease between the appellant and the respondent the choices facing the appellant concerning the removal of tenant’s fixtures and fittings and making good were mutually inconsistent. On the one hand the appellant was entitled to require the respondent to remove fixtures and make good or do so itself at the former tenant’s expense. On the other hand the appellant had sitting tenants who wished to avail themselves of those same fixtures and take the premises in their then condition. Clause 10.3 entitled the respondent to retain those fixtures as its own property. The appellant sought to avoid the necessity to elect by demanding money in lieu of the contractual obligations under the lease. Plainly, the lease gave the appellant no such right. By agreeing terms with the former sub-tenants and allowing them to remain in possession of the fixtures after the expiration of their sub-leases with the respondent the appellant achieved three ends. It effectively deprived the respondent of the right to make good and remove fixtures itself. It exercised powers of ownership over the fixtures formerly the property of the respondent. It passed the premises to subsequent tenants in their existing condition with the result that the premises ceased to be in the same state of repair as they were when possession was notionally delivered up by the respondent. It is sufficient to constitute an election that two choices are available and the taking of one necessarily precludes the other. The landlord was aware that it could remove and make good and charge the cost to the account of the respondent or take over the fixtures so as to let them as part of the premises to the former sub-tenants. The achievement of the ends outlined is inconsistent with the insistence by the landlord on the make good and removal of fixture obligations. The choices open were to require the outgoing tenant to make good the premises and impose on the new tenants the obligation to themselves refit the premises for occupation or to offer them the premises in the condition those tenants then occupied them. This is not a case of sub-tenants “holding over” at the expiration of the head lease.[3] With each former sub-tenant there was the creation of an entirely new lease.
- The same conduct deprives the appellant of a claim under clause 11.4 of the lease. That clause obliges the tenant to deliver up the premises at the conclusion of the lease in the same condition subject to fair wear and tear as at the commencement. The clause does not give the landlord the right in the first instance to demand payment in lieu. Further, the letting of the premises to a new tenant in the condition in which they were delivered up at the conclusion of the previous lease is inconsistent with the insistence on the right to make good for the reasons already outlined. If the premises are re-let in their existing condition it also follows that unless there is, by reason of the condition of the premises, a reduction of rental received there is no identifiable loss from any failure to make good. The evidence here does not suggest that the condition of the premises was such as to reduce the rental which might otherwise have been charged.[4]
- In all the circumstances I am satisfied that the decision of the trial judge to dismiss the appellant’s claim was correct.
- A number of other issues were raised in the notice of appeal. These in large part related to the operation of other clauses in the lease. Having regard to the concession made at the commencement of the appeal that it was necessary to succeed under one of clauses 10.2, 10.3 and 11.4 and because of the conclusion to which I have come in relation to those clauses it is not necessary to deal with these other issues. It is sufficient that most of the arguments advanced in the written outline rely on construing the letter of 6 March 1995[5] as a demand to make good. As already indicated this construction is not open and the argument consequently fails. In relation to the trial judge’s acceptance or rejection of the various witnesses about which complaint is also made it should only be remarked that none of the submissions advanced by the appellant (save for the issue of bias with which I will deal separately) would justify the intervention of this court consistently with the principles set out in Devries v Australian National Railways Commission[6] and State Rail Authority of New South Wales v Earthline Constructions Pty Ltd (in liq).[7]. In any case the determination of the critical issues does not depend on the trial judge’s findings on credibility.
- The issue pursued most vigorously by the appellant in oral argument was whether certain comments made by the trial judge and questioning by the trial judge during the evidence of the witnesses, Petfield and McDonald, might have caused an onlooker to reasonably apprehend that the judge was biased against the appellant. Because the case can be fully determined on the basis of uncontroversial evidence the issue of whether or not the trial judge created such an apprehension of bias that he should have disqualified himself is of only academic interest. There is no practical purpose to be served in remitting the action for a retrial (that being the appropriate course in a case where the result is tainted by bias) when because of the view I have taken on the merits only one outcome is available to any judge hearing such a retrial. I would not order a retrial where a different outcome on the substantive issues is not open.
- Notwithstanding my view as to whether the issue of bias can result in a retrial it is a matter with which I should deal having regard to the importance it assumed in argument.
- The fact that during the course of the trial a trial judge expresses aloud his thinking as to the way in which the evidence is leading or even a tentative view as to the ultimate outcome is not in itself sufficient to create the reasonable apprehension of bias necessary to have the judge disqualify himself. In Vakauta v Kelly[8] Brennan, Deane & Gaudron JJ said on this topic:
“It seems to us that a trial judge who made necessary rulings but otherwise sat completely silent throughout a non-jury trial with the result that his or her views about the issues, problems and technical difficulties involved in the case remained unknown until they emerged as final conclusions in his or her judgment would not represent a model to be emulated.”
- That approach is evident in numerous decisions of the Full Court of the Family Court[9] and in the same context in the following passage from the judgement of Murphy J in Re Lusink[10] which illustrates what I regard, with respect, as the correct approach to the apprehension of bias when it is said to arise from comments made by the trial judge during the course of the trial:
“There is no suggestion in this case that the trial judge came to the case biassed or prejudiced. The complaint is that, during the course of the case, the judge expressed views adverse to the husband’s case before hearing all the evidence to be presented by the husband. I say all the evidence because documentary material emanating from the husband was before the court, some part of his case had been presented in cross-examination, and his counsel had made an open offer of settlement. Some may think it an ideal that trial judges (sitting without a jury) should keep completely aloof until they give judgment, express no view about what they consider important or unimportant and not indicate what impression any evidence makes on them, whether they would need further evidence to be satisfied on some point, or what they think are the real points in issue. In practice this would make trials artificial and longer.
Almost all experienced practitioners welcome indications by judges, whether at first instance or on appeal, of the provisional impressions made upon them by evidence or argument of factual or legal issues.
The judicial process is quite opposed to the idea that a judge forms no impression until the very last word just before judgment. On the contrary, one side begins by introducing arguments or evidence intended to create a provisional view in its favour, and often succeeds. The other side seeks to reverse the process by cross-examination and then presenting its case. The extent to which any impression is formed depends upon the strength of the evidence and the conduct of the case up until that point.
… In family law cases, judges often have to make an order tailored to meet the realities of the financial or custodial situation of a broken family; it is very often important for them to direct parties’ attention to the kind of order contemplated if the judge were to arrive at a conclusion warranted by the evidence that had emerged thus far. In this way, a party has the opportunity to dispel any adverse impression by evidence or show that such an order would not be appropriate.”
- In Galea v Galea[11] Kirby ACJ after setting out the passage from Vakauta above referred to the approach taken in the United States which also encourages expressions of judicial interim thinking[12] went on to say:
“It is argued that it may represent a failure of the judicial decision-maker to expose to the party who may be adversely affected (and that party’s representatives) preconceptions, opinions and formulating conclusions so that the party has an opportunity, before judgment, to be heard to correct and to persuade. I take considerations of this kind to lie behind Powell J’s repeated warning to the appellant (and through him to his counsel) concerning the inferences he was inclined to draw from the answers given to questions during cross-examination. His Honour was doing no more than to give the appellant (as he earlier did the respondent) the opportunity to know the progress of his thinking and to correct an unfavourable impression if this was the product of passing inattention or inexperience in the giving of evidence.”
- The particular passages about which complaint was made are to be found at pages 95 to 99 and page 112 of the transcript. The first of these passages is during the evidence of Mr Petfield. It is important to place the passage in context. Although Petfield was the appellant’s first witness his examination and cross-examination had been completed prior to the judge’s intervention. In addition the judge had had the benefit of the appellant’s opening and a bundle of agreed documents extending to some 280 pages and including all of the documents to which I have made reference earlier in these reasons. In the circumstances I consider it unrealistic to imagine that the trial judge had not formed a view and perhaps a strong view of the relative merits of the case and in particular of the evidence given by the witness then in the box, subject only to the impact of subsequent evidence and submissions. His Honour’s questions arose out of a perception that particular parts of the appellant’s claim had been fraudulently compiled. This was not a conclusion to which his Honour had come independently of the evidence. One aspect had been the subject of cross-examination at pages 91-92. A further aspect of the claim which appeared to be plainly fraudulent was the subject of cross examination at pages 85-89. The trial judge’s questioning on these topics was in my view a quite proper attempt by his Honour to make sure that the initial and obvious impression created by the cross-examination was not unfair. It was at the end of these questions and in the light of the unsatisfactory and sometimes evasive answers his Honour received that his Honour remarked, perhaps injudiciously:
“Are you just making this up as you go along? Answering whatever answer you think is going to be convenient at the time? – Not at all, Your Honour.
Well, no doubt whether it’s like that – a convenient tactic – when dealing with tenants who don’t have the resources of a major bank behind them well I regard that sort of conduct as utterly disgraceful.”
- In my view the above remarks and those preceding them and at page 112 were within the ambit of the trial judge’s entitlement to comment in an interim way on the progress of the case before him. In view of the stage of the proceedings at which the comments were made and the context and subject matter of the comments I do not think a reasonable person would apprehend that the judge had a bias against the appellant or had shut his mind to evidence relevant to the issue which might be later adduced.
- There is, in my view, no basis to the complaint that the trial judge’s questioning was so extensive as to take him into the adversarial arena. In any case, the reluctance of the witness to directly answer the trial judge’s questions was itself the cause of the judge having to ask more questions then would otherwise have been the case.
- Even if I believed that the findings by the trial judge on controversial evidence might affect the ultimate result in this case I can find no proper basis in the conduct of the case by the trial judge or any comment made by him which would give rise to any reasonable apprehension of bias.
- I would dismiss the appeal with costs.
Footnotes
[1] Ex parte Baroness Willoughby D’Eresby; re Thomas (1881) 44 LT 781.
[2] See Sargent v ASL Developments Ltd (1974) 131 CLR 634 especially at 656-657; Immer (No. 145) Pty Ltd v The Uniting Church in Australia Property Trust (NSW) (1993) 182 CLR 26.
[3] Cf re ABC Coupler & Engineering Co Ltd (No 3) [1970] 1 WLR 702.
[4] See for example Volume 2 pp 550-552 of the appeal record. The correspondence there set out suggests the rental in fact went up in absolute terms and no effort was made to establish a real reduction as against market. In the end, the only real claim by the appellant was the cost of making good (or refurbishment generally) at the expiration of the subsequent tenancies which is a fundamentally different matter from making good in April 1995.
[5] See paragraph [8].
[6] (1993) 177 CLR 472.
[7] [1999] HCA 3; (1999) 73 ALJR 306; 160 ALR 588.
[8] (1989) 167 CLR 568 at 571.
[9] See for example Rasanayakam v Thillainadesan (1996) 20 FamLR 557 at 565; In the Marriage of Stiffle (1988) 93 FLR 206; In the Marriage of Sealey (1986) 10 FamLR 1055.
[10] (1980) 55 ALJR 12 at 15-16.
[11] (1990) 19 NSWLR 263 at 279.
[12] Reference was made to David L Shapiro, “In Defence of Judicial Candor” (1987) 100 Harvard L Rev 731 at 737 as well as to Australian authority from various jurisdictions, namely, Stead v State Government Insurance Commission (1986) 161 CLR 141 at 145; Gordon M Jenkins & Associates Pty Ltd Coleman (1989) 87 ALR 477 at 484 (FFC); Cavanet v Chambers [1968] SASR 97 at 101 (FC).