Permanent Trustee Australia Limited v Trimwood Pty Ltd
[1998] QDC 279
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- Unreported Judgment
- Permanent Trustee Australia Limited v Trimwood Pty Ltd[1998] QDC 279
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Permanent Trustee Australia Limited v Trimwood Pty Ltd[1998] QDC 279
Permanent Trustee Australia Limited v Trimwood Pty Ltd[1998] QDC 279
IN THE DISTRICT COURT HELD AT BRISBANE QUEENSLAND | Plaint No 1268 of 1998 |
BETWEEN:
PERMANENT TRUSTEE AUSTRALIA LIMITED (ACN 008 412 913) | Plaintiff |
AND:
TRIMWOOD PTY LTD ACN 011 025 353 | First Defendant |
AND:
MICHAEL RONALD GRICE | Second Defendant |
AND:
CATHERINE LILLIAS GRICE | Third Defendant |
REASONS FOR JUDGMENT - SAMIOS D.C.J.
Delivered the 9th day of October 1998
The plaintiff, Permanent Trustee Australia Limited (“Permanent Trustee”) is the lessee of the land on which is situated the “Toowong Village” Shopping Centre (“the Centre”). In early 1987, a fitness centre and gymnasium was established in an area of 1772 m2 on the second level of the Centre. Of that 1772 m2,1244 m2 was indoors and was established as a gymnasium (“the indoor area”).The balance, 528 m2, was outdoors, to which access could be gained from the indoor area and was established for “golfing purposes” (“the outdoor area”). That is, for golfing purposes there were four driving booths along an artificial turf surface, a putting green with about five or six holes in it, and a sand trap or sand bunker, where the ball could be chipped out of the sand into a net and it would return through a return hole. In between these structures there was some terra cotta tile paving. I will refer to the fitness centre and gymnasium as “the premises”, and the facilities that enabled the outdoor area to be used for golfing purposes as “the facilities”.
The first defendant, Trimwood Pty Ltd (“Trimwood”) has since 10 April 1990 leased the 1772m2 from Permanent Trustee pursuant to two leases in writing. The first of these leases was entered into on 2 July 1991 and was for a term of five years commencing on 10 April 1990 and terminated on 9 April 1995 (“the first sub-lease”). The second of these leases was entered into on 23 August 1995 and is for a term of five years commencing on 10 April 1995 and will terminate on 9 April 2000 (“the second sub-lease”).
The second defendant, Michael Ronald Grice (Mr. Grice) and the third defendant, Catherine Lillias Grice (Mrs. Grice) are the directors of Trimwood Pty Ltd and have given a covenant to Permanent Trustee to be jointly and severally liable to Permanent Trustee for the due performance and observance of all the provisions of the leases, the subject of these proceedings.
Another tenant of Permanent Trustee, David Jones, had its business on a level in the centre below the premises. Due to water leaking through to David Jones, Permanent Trustee caused remedial work to be carried out to the outdoor area on 13 November 1995. This remedial work resulted in the facilities being removed. The facilities have not to date been replaced. What remains is a bare concrete surface.
The first sub-lease provided for an option for one further term of five years commencing on 10 April 1995. Clause 5.3 of the first sub-lease provided with respect to outgoings:-
“5.3 The sub-lease-lessee covenants to pay that proportion of the Commercial Office Outgoings which the area of the Premises bears to the total lettable area of the Commercial Office Portion of the Complex, and that proportion as at the date of commencement is expressed as a percentage in Item 2 of the Reference Appendix PROVIDED HOWEVER that the Sub-lease-Lessee's proportion of the Commercial Office Outgoings for any one Accounting Period shall not exceed the outgoing maximum (as hereinafter defined). For the purpose of this Lease, the outgoing maximum for the First Accounting Period shall be FORTY THOUSAND DOLLARS ($40,000.00) and for each successive year of the Term the outgoing maximum shall be increased by ten per centum (10%) of the maximum outgoing for the immediately preceding Accounting Period. The outgoing maximum shall continue to increase as aforesaid from the commencement of a further term referred to in Clause 2.4 and that it shall not revert to FORTY THOUSAND DOLLARS ($40,000.00) at the commencement of the further term.”
Correspondence in evidence before me indicates Trimwood, in late 1994, was experiencing a cash flow problem and had difficulty meeting its obligations for payments required under the first sub-lease. Towards the end of November 1994 in discussions with the Centre manager, Byvan Management (Qld) Pty Ltd, (“Byvan”), Trimwood sought to remove the outdoor area from the area let and later in a letter to Byvan, proposed that the rent for the period provided for in the option should be $100 per square metre. Trimwood was experiencing difficulty in achieving a profitable operation, and was concerned about the rent payable to Permanent Trustee in the event the option was exercised. Trimwood proposed a number of matters to Byvan with respect to any further lease between the parties. At the end of the negotiations for a further term in about mid 1995 Trimwood secured a further option of five years (which was not provided for by the first sub-lease), a base rent of $220,000 per annum for the first year of the further term (this level of rent being the base rent at the commencement of the first sub-lease), and a rent free period of three months from 10 April 1995 to 10 July 1995 amongst other benefits. In the correspondence, when setting out what had been agreed between the parties regarding the terms for a lease of the premises for a further term, expressions to the following effect were used, namely:
“All other terms and conditions of the original lease remain unchanged” (Letter - Byvan to Barry and Nilsson 26 April 1995)
“The balance of the terms are to be in accordance with the existing lease” (Letter - M.C. Richards & Associates to Messrs Barry and Nilsson 5 May 1995)
“We confirm that our respective clients have agreed to renewal of the term on the basis outlined in your letter of 5 May 1995”
(Letter Barry & Nilsson to M.C. Richards & Associates 23 May 1995)
After these negotiations, the second sub-lease was executed on 23 August 1995. The second sublease contained an outgoings clause in identical terms to Clause 5.3 as that clause appeared in the first sub-lease.
The effect of the duplication of Clause 5.3 in the second sub-lease is that in about the middle of 1997 the solicitors for Trimwood raised with the solicitors for Byvan the contention that Trimwood had been making payments for outgoings over and above that required. That is, Permanent Trustee through Byvan had been forwarding to Trimwood from the commencement of the second sub-lease accounts for rent and outgoings based on the quantum of outgoings at the end of the term of the first sub-lease increased by 10%, namely $64,420. Trimwood claimed that at the commencement of the further sub-lease the amount of the outgoings ought to have been $40,000 as it had been in the first year of the term of the first sub-lease.
When this contention was raised by Trimwood, it was disputed by Permanent Trustee.
Hence, in this action Permanent Trustee claims a declaration that on a proper construction of the second sub-lease:-
- (i)The reference in Clause 5.3 to “first accounting period” is a reference to the period 1 July 1990 to 30 June 1991; and
- (ii)The effect of Clause 5.3 is to limit the maximum outgoings payable by the first defendant to the plaintiff thereunder as follows:-
1 July 1995 to 30 June 1996 | $62,420.00 |
1 July 1996 to 30 June 1997 | $70,862.00 |
1 July 1997 to 30 June 1998 | $77,948.00 |
1 July 1998 to 30 June 1999 | $85,743.00 |
1 July 1999 to 30 June 2000 | $94,317.00 |
In the alternative, Permanent Trustee claims rectification of the second sub-lease by deleting the amount of $40,000 in each place it appears in Clause 5.3 and substituting in its place the amount of $62,420.
A consequential order is sought by Permanent Trustee in these proceedings for payment by the defendants to Permanent Trustee of so much of the disputed outgoings as are due and payable on the date of judgment (but not exceeding the sum of $250,000) together with interest thereon pursuant to the second sub-lease or, in the alternative, the Supreme Court Act 1995.
The defendants deny Permanent Trustee's entitlement to the relief claimed. Further, the defendants claim that the second sub-lease upon its proper construction is a fresh lease negotiated between Permanent Trustee and Trimwood and not an option granted pursuant to the first sub-lease. Further, that Permanent Trustee is estopped from asserting that the second sub-lease is an option granted pursuant to the first sub-lease and it would be inequitable to construe or rectify the second sub-lease as alleged by Permanent Trustee. Basically, Trimwood's claim in this respect is that because the exercise of the option would not have resulted in base rent for the second sub-lease in the sum of $220,000, a three months base rent free period, a further option for five years, replacement of the carpet by Permanent Trustee and “all other terms of the first sub-lease unchanged”, the second sub-lease was a new agreement and one, with respect to Clause 5.3 in particular, that was required to be read on its own account without reference back to what the outgoings may have been immediately before the first sub-lease came to an end. In support of this claim, Trimwood relied upon Clause 1.44 in the second sub-lease, the effect of which was that the provisions in that sub-lease expressly or by statutory implication cover and comprise the whole of the agreement between the parties.
In these proceedings, Trimwood also seeks to counter-claim and/or set off against the claim of Permanent Trustee, claims it has against Permanent Trustee because of the circumstances of the removal of the facilities and the failure to reinstate the facilities or some other alternative agreed to by Trimwood. In this respect the following clauses of the second sub-lease are relevant, namely:-
“6.1 Quiet Enjoyment
The Sub-Lessee paying the rent and other amounts payable pursuant to this Sub-Lease and duly and punctually observing its provisions shall peaceably possess and enjoy the Premises during the continuance of this Sub-Lease without any interruption or disturbance from the Sub-Lessor or any other persons lawfully claiming through or under the Sub-Lessor (except where such interruption or disturbance is permitted by other provisions of this Sub-Lease).
...
13.2 Sub-Lessor May Carry Out Works or Repair or Comply with Requirements of Authorities
The Sub-Lessor and those authorised by it may upon reasonable notice (except in cases where the Sub-Lessor forms the opinion that there is an emergency when no notice shall be required) enter upon the Premises with all necessary materials and -
- (a)carry out any works, or make any repairs, alterations or additions to the Premises, any part of the Complex or any buildings adjacent which the Sub-Lessor may consider necessary or desirable; or
- (b)comply with any request, notification or order of any authority having jurisdiction or authority over the Premises for which the Sub-Lessee is not liable.
In exercising such rights, the Sub-Lessor shall cause no more interference with the Sub-Lessee's use and occupation of the Premises than is, in the reasonable opinion of the Sub-Lessor, reasonably necessary. The Sub-Lessor shall remove from the Premises as soon as practicably possible all rubbish resulting from the exercise of such rights and shall leave those parts of the Premises affected in a clean condition.
...
16.1 Effect of Resumption, Destruction or Damage
If:--
- (a)the Building or the Premises is resumed or taken for public purposes by any competent authority; or
- (b)the whole or any part of the Building is destroyed or damaged by fire, flood, lightning, storm, tempest or other disabling cause,
so as to render the Premises during the Term inaccessible or substantially unfit for the use and occupation of the sub-Lessee, or deprive the Sub-Lessee of use of a substantial part of the Premises, or (in the event referred to in Clause 16.1(b) only) to render the rebuilding or reconstruction of the building in its previous form impracticable or undesirable in the opinion of the Sub-lessor, then Clause 16.2 shall apply.
16.2 Sub-Lease May Be Terminated Without Compensation; Abatement
- (a)Subject to the provisions of Clause 16.2(b) this Sub-Lease may be terminated without compensation or other liability attaching to either the Sub-Lessor or the Sub-Lessee as a consequence of such termination by the Sub-Lessor or by the Sub-Lessee by notice in writing to the other.
- (b)The Sub-Lessee shall only be entitled to terminate this Sub-Lease pursuant to Clause 16.2(a) in the event referred to in Clause 16.1(b) if the Sub-Lessor shall have failed after notice in writing from the Sub-Lessee to rebuild or reinstate the Premises or make the same accessible within a reasonable time after such notice has been given having regard to the extent of the damage or destruction and the work required to rebuild or reinstate the Premises or make the same accessible.
- (c)Any such termination shall be without prejudice to the rights of the Sub-Lessor or the Sub-Lessee in respect of any antecedent breach or thing.
- (d)Nothing in this clause shall impose any obligation upon the Sub-Lessor to rebuild or reinstate the Premises or to make them accessible or fit for the use and occupation of the Sub-Lessee.
- (e)Upon the happening of any such damage or destruction the Base Rent and all money payable by the Sub-Lessee pursuant to Part Three or Part Five (or a proportionate part of them according to, in the opinion of the Sub-Lessor, the nature and extent of the damage sustained) shall abate until the Premises have been rebuilt or reinstated or are made accessible or made fit for the use and occupation and use of the Sub-Lessee or until this Sub-Lease shall be terminated pursuant to Clause 16.2(a).”
Trimwood claims that the outdoor area was used by Trimwood in conjunction with the business of the gymnasium to earn income. It claims that the failure to rebuild the golf putting area, the sand bunker, the artificial grass strip and the paved area constituting the facilities was a breach of the covenant for quiet enjoyment. By reason of the failure to reinstate the facilities, Trimwood was unable to use the outdoor area and thereby has suffered loss and damage. It claims a loss of income from the use of the outdoor area in the sum of $59,168.15, and a consequential loss generally for having rendered the outdoor area unavailable to Trimwood's customers in additional advertising costs in the sum of $121,061 in the 1996 and 1997 financial years.
Further, Trimwood claims that pursuant to Clauses 16.1 and 16.2 of the second sub-lease it is entitled to an abatement of the lease payments calculated pursuant to that clause. Trimwood claims that since 13 November 1995 it has paid Permanent Trustee in respect of rent and outgoings based upon rateable apportionment of the rental and outgoings by area to the end of August 1998 the sum of $198,541 for the space rendered unusable by the actions of Permanent Trustee. An alternative claim is made that of the amount so paid, based upon a fair market value of the rental and outgoings, Permanent Trustee has been paid to the end of August 1998 the sum of $108,155 in respect of rent and outgoings for the space rendered unusable by the actions of Permanent Trustee. The consequence is that Trimwood claims that either the sum of $198,541 of the monies paid to Permanent Trustee, or alternatively, $108,155 of the monies paid to Permanent Trustee ought to have been rebated.
A further and alternative claim is made by Trimwood that in any event the amount paid by it to Permanent Trustee for the outgoings has been overpaid in the sum of $123,045.07 because the calculation of the outgoings is contrary to the calculation provided for by the Building Owners and Managers Association of Australia Limited publication “Method for the Measurement of Buildings, May 1985 Review, The BOMA Method”. That is, pursuant to Clause 5.3, the obligation was to pay these outgoings on the basis of the proportion which the area of the premises leased by Trimwood bore to the total lettable area of the commercial office portion of the complex. Further, Clause 1.23 provided:-
“If the area of the Premises shall be relevant, whether for the purpose of review of the Base Rent or for any other purpose connected with this Sub-Lease, the area of the Premises shall be measured in accordance with the specifications for measurement of net rentable area as published by the Building Owners and Managers Association of Australia Limited publication “Method for the Measurement of Buildings” May 1985 review, provided that the provisions of Clause 4.2.3.2 of that specification for measurement shall apply only to levels 4, 8 and 13 and those other levels which are not wholly sub-leased by one sublessee.”
The contention of Trimwood is that the BOMA method excludes from the definition of net lettable area “balconies, terraces, external gardens or verandahs...” It claims the outgoings were calculated by including the area comprising the balcony sky garden within the area of the premises for the purposes of Clause 5.3. Trimwood's claim is that the outside area of 528 m2 was “balcony sky garden” for the purposes of this contention. Therefore, by a process of proportionality, 528/1772 × $412,946.74 = $123,045.07 has been overpaid to Permanent Trustee by way of outgoings.
Trimwood claims that Permanent Trustee has appropriated to itself rent and outgoings paid by Trimwood and attributable to the unusable 528 m2 of outdoor area and accepted the benefit thereof and has thereby been unjustly enriched. It claims it would be unconscionable and inequitable for Permanent Trustee to retain the payments. In the alternative, it claims the money was paid under a mistake of fact or to the use of Permanent Trustee or in a manner constituting a constructive or resulting trust. Trimwood seeks in these proceedings to set off the amounts alleged for loss of income and advertising costs, the amount for the abatement of the rent and outgoings and the amount alleged to have been overpaid by way of outgoings because of what is alleged to be the “incorrect” calculation of the area by reason of the failure to apply the BOMA method when calculating the area for the purposes of the calculation for the outgoings and seeks to set off these monies against any amount which may be due by Trimwood to Permanent Trustee.
After I had reserved my decision in this matter, I relisted the matter for further consideration as it appeared to me arguable that, although not pleaded by Trimwood, it was possible the circumstances of this matter were such that besides the matters pleaded by Trimwood, Trimwood might plead a breach of clause 13.2 of the lease and damage for its breach as the parties had conducted the trial as if clause 13.2 was relevant to Permanent Trustee's actions. Consequently, Trimwood amended its pleadings to raise a breach of clause 13.2 and damages for its breach. The parties put forward further evidence and made further submissions as a consequence of the amendments made by Trimwood for which I gave leave to be made.
Trimwood had, made by amendment to its amended Entry of Appearance and Defence and Counter-Claim and/or Setoff at the commencement of the trial, relied upon s.105 of the Property Law Act. It claimed there is no inconsistency between s.105 of the Property Law Act (“the Act”) and Clause 16.2. However, Clause 1.39 provides:
“Unless application is mandatory by law the covenants and powers implied in every lease by virtue of sections 105 and 107 of the Property Law Act 1974 shall not apply to or be implied in this Sub-Lease, except insofar as the same or some part or parts thereof are expressed or implied in the provisions contained in this Sub-Lease.”
Section 105 of the Act provides by sub-section 1 thereof that the section is subject to the provisions of the lease. Therefore, I find Trimwood cannot in these proceedings rely upon s. 105. In any event, I find that s.105 would not apply in the present matter because I consider the removal of the fixtures in the outside area does not come within the events referred to in s. 105 of the Act.
The evidence in Exhibit 1 which is a book of documents the parties ultimately agreed upon for the purposes of the trial (except I reserved my decision as to whether a letter was without prejudice and ought not to be received) shows by rent invoices and statements that Permanent Trustee's agent, Byvan, acted as if the outgoings payable by Trimwood would be continued to be paid during the term of the second sub-lease at the level the outgoings were immediately before the end of the first sub-lease, and increased thereafter by 10% per annum. These rent invoices and statements all proceed on the basis after the commencement of the second sub-lease that the outgoings were, for the first accounting period of the second sub-lease, $64,420. These rent invoices and statements as issued are not challenged, except as being inconsistent in quantum with what Trimwood says is the agreement regarding the quantum of outgoings for the term of the second sub-lease. Consequently I find that Permanent Trustee acted in a manner that I accept showed its intention was that the outgoings for the term of the second sub-lease would be at the level the outgoings were at the end of the term of the first sub-lease and increased by 10%.
During the negotiations for the second sub-lease, Mr. Grice on behalf of Trimwood and Ms. Mokany on behalf of Byvan, did not expressly discuss the quantum of the outgoings and how the outgoings might be calculated for the term of the second sub-lease. At the time of these negotiations Mr. Grice was concerned to reduce the amount of payments that Trimwood might have to make to Permanent Trustee pursuant to a lease of the premises for a further term. In this respect he negotiated and obtained base rent of $220,000 which is what it was at the start of the first term. He negotiated and obtained three months free base rent. He negotiated and obtained a commitment by the landlord to provide a new carpet. He negotiated and obtained a further option of five years.
The first sub-lease did not contain a second option period of five years. Consequently in the context of seeking these benefits it was open to Mr. Grice to expressly raise in these negotiations some change with respect to the outgoings. Of course he claimed in evidence that the reference in his solicitor's letter to all other conditions being the same must have been one of the instructions he provided to his solicitors and that these instructions which included all those matters referred to in that letter reflected the matters he had discussed and agreed with Ms. Mokany. Mr. Grice claimed that after instructing his solicitors he was subsequently provided with a draft lease for the new term to read which he did. He claimed he read it from front to back, line to line, under instruction from his solicitor. He claimed he appreciated having read the draft lease what his obligations would be in respect of outgoings. He claimed his understanding was that after reading the draft the outgoings would be $40,000 to start the term and to increase by 10% per year. He claimed that if the lease reflected the landlord's construction with respect to the amount of outgoings, he believed he would not have entered into the lease. He claimed that in the first proposal he put with respect to rental the figure he proposed was $100 per square metre which was what he and his accountant had researched was a fair going rate for gymnasiums at the time and he was also looking at another premises as an alternative premises for this business. He said that if the higher outgoings had been provided for, it would have been too expensive for his business to cope with. Mr. Grice also claimed that despite the rent invoices and statements showing outgoings calculated on the basis contended for by the landlord sent to Trimwood from the commencement of the second term he took no notice of this because the decisions he was making and those employed by him were simply to find whatever money they could find to pay Permanent Trustee an amount against the bottom line amount of the invoice. Mr. Grice said he was under a lot of financial stress and a lot of personal stress and he took his eye off the ball. He denied he knew what the outgoings were after the commencement of the term of the second sub-lease.
Mr. Grice agreed that it was some time in November 1996, after having paid outgoings since April 1995, that he knew Trimwood was paying Permanent Trustee in excess of the $40,000 per annum for the outgoings. At that time Trimwood was in negotiations again with Permanent Trustee seeking a variation of the terms of the sub-lease, and on the advice of his solicitor, Mr. Grice decided he would not say anything at that point in time until the negotiations were over. These negotiations were about the arrears of rent of$82,086.85, and a dispute by Trimwood regarding the replacement of the carpets situated in the premises.
Despite the wording “all conditions to remain the same” and the duplication of Clause 5.3 in the second sub-lease in exactly the same terms as in the first sub-lease, I find in the negotiations leading up to the execution of the second sub-lease and at the time of execution of that sub-lease, it was Permanent Trustee's intention that the outgoings for the term of the second sub-lease would be based on the level of outgoings at the end of the term of the first sub-lease, and be for the first year of the term of the second sub-lease $64,420.
Regarding Mr. Grice and his intention, which, for the purposes of these proceedings was the intention of Trimwood, I do not accept his evidence that it was his intention that for the further term the outgoings would commence in the sum of $40,000 to be increased by 10% per annum thereafter. I find Trimwood was in difficult financial circumstances during the period the terms of the second sub-lease were being negotiated. This may have been because a number of reasons. Mr. Grice was examining how he could reduce the cost of running the business. In his negotiations what he tried was to see if he could get the rent down to $100 per square metre, and that the equipment rental as set out in paragraph 3.2(b) of the first sub-lease continue at the rate of $10,000 per annum with an option to buy the equipment at the end of the lease option period at consideration of $1.00 (letter Toowong Fitness to Byvan 1 December 1994). Thereafter chartered accountants, Mam Judd on behalf of Trimwood, wrote to Byvan by letter dated 7 February 1995 seeking an urgent response to Mr. Grice's contact with Byvan in December when he apparently highlighted the difficulties Trimwood's business was experiencing in achieving a profitable operating position and the fact that rent was a major expense, and seeking what would be the rental rate payable under the new lease.
These chartered accountants said “This figure is critical to the future plans for the operation of the fitness centre, and to the proprietors personally”. Then Byvan wrote advising that the landlord had agreed to waive the right to review the rent to market upon the exercise of Trimwood's option. Byvan also advised the landlord was open for discussion for the purchase of the equipment at the expiry of the five years. Mr. Grice wrote again to Byvan and proposed the rent free period of six months at the beginning of the term, plus recarpeting of the premises as stipulated in Clause 8.4(a) of the lease, and in addition requested a further option of five years. Thereafter, the landlord, through Byvan, offered three months base rent free period, agreed to recarpet the premises with a normal commercial grade carpet in accordance with the lease provisions, but advised it was not prepared to grant a further option as the original lease was for a five year lease plus an option for five years. Then in a letter to Byvan from Mr. Grice dated 5 April 1995, he asked for further consideration of concessions, and stated in this letter dated 5 April 1995:--
“I know we may have been late in our rent payments at times, however, the bottom line is that we have paid $1.1 million in rent, $244,000 in outgoings and $50,000 in equipment rental over the past five years.”
Based on $40,000 as the start for outgoings increased by 10% over the five year period of the first term, the total outgoings would be $244,204. This I find equates to the $244,000 mentioned by Mr. Grice in his letter just referred to. Consequently I find that it was apparent to Mr. Grice in April 1995 what the level of outgoings were that he had been paying, he was keen to ensure the best position he could achieve, yet he did not expressly seek a reduction of the outgoings when it was open to him to do so as he had done when seeking the other benefits. The use of the expression “all other terms and conditions of the original lease remain unchanged” I do not accept was put forward by the parties, including Mr. Grice and his solicitors with the intention to provide in the second sub-lease an outgoings clause whereby the outgoings amount would commence at $40,000. Although it was obiter, Justice Giles in Showa Shoji Australia Pty Ltd v. Oceanic Life Limited (1994) 34 NSWLR 548 at 570-1 with respect to the expression “on the same terms and conditions as are herein contained ...” in the context of the renewal of a lease and the rent payable on renewal said:-
“In construing a written agreement, the court should give its words the natural meaning which they bear. Subject to that, in giving meaning to the words the court will endeavor to avoid a construction which makes commercial nonsense or is shown to be commercially inconvenient, because the court will infer that commercial parties would normally not themselves make a commercially nonsensical or inconvenient agreement. It would make no sense at all if, although it was paying the 1993 rent, on exercising its option to review Telecom or McIlwraith McEacharn fell back to the 1989 rent and paid that rent for the first two years of the renewed term before a review took the rent to the current annual open market rent in 1995. It could not be sensibly concluded that Burns Philp and Telecom or McIlwraith McEacharn so intended. The words in cl 16, “on the same terms and conditions as are herein contained”, were apt to pick up what had occurred in accordance with those terms and conditions during the period of the leases to date, and it seems to me that they readily enough permitted it to be said that at the time of the exercise of the option in cl 16 “the terms and conditions ... herein contained” would include the 1993 rent then payable.”
I find Mr. Grice knew the level of outgoings in 1995. He was trying to reduce rent and seek other concessions from the landlord but did not seek a reduction in the outgoings and it would accord with commercial sense that the level of outgoings to be paid would not fall back to the level five years earlier unless expressly discussed by the parties. I therefore find it was also Mr. Grice's intention, and therefore Trimwood's intention, in the negotiations and upon execution of the second sub-lease that the outgoings would be in the first year of the term of the second sub-lease the sum of $64,240 and be increased thereafter at 10% per annum. This I find was the common intention of both parties.
In accordance with the principles for rectification discussed in Maralinga Pty Ltd v. Major Enterprises Pty Ltd (1973) 128 CLR 336, 349 and Pukallus v. Cameron (1982) 180 CLR 447, 452, 456-7, I am satisfied that the second sub-lease ought to be rectified on the basis that it was the common intention of the parties that the outgoings be the sum of $64,240 and that that figure ought to be inserted in Clause 5.3 in lieu of the figure of $40,000 wherever that figure appears. I will hear from the parties regarding the appropriate orders, including consequential orders, bearing in mind the second sub-lease is registered.
Although with rectification of the lease the position will be that Permanent Trustee has charged Trimwood the correct amount for rent and outgoings since November 1995, it remains to be considered whether Trimwood does have valid claims for the loss it claims to have suffered by reason of the breach of the covenant for quiet enjoyment and, the breach of clause 13.2 and whether it is entitled to an abatement of the rent and outgoings by reason of the removal of the facilities and the failure to reinstate those facilities or provide some alternative agreed to by Trimwood.
With respect to these claims Permanent Trustee denied there had been a breach of the relevant covenants of the lease, and that even if there had been a breach Trimwood had not suffered any loss, or at least with respect to the abatement, Permanent Trustee considered at best for Trimwood the amount of the abatement would be a sum of $3,556.
Permanent Trustee's view of the outdoor area was that prior to November 1995 the outdoor area had fallen into disrepair, was in a dilapidated condition and was not being used for golfing. As far as Permanent Trustee was concerned, it did not have much value because according to a number of Byvan's employees who gave evidence, little actual use appeared to have been made of the outdoor area. These witnesses had seen only some exercise equipment of a minor nature in the outdoor area and a punching bag set up. They had not seen any great number of people using the area regularly. Nevertheless, on their evidence it is apparent these witnesses had their own responsibilities and duties in the Centre which I consider were such that they might not have made observations of the use being made of the outdoor area when it was being used. I also consider these witnesses would not have been taking particular notice because the use being made of this outside area was not an issue for these witnesses until after November 1995. Therefore, with respect to those witnesses called by Permanent Trustee about their observations of the use of the outdoor area I am not persuaded by those witnesses that the condition of the area was such that it was not useful to nor used by Trimwood. While golfing may have ceased, on the evidence I find the area was useful and used by Trimwood. That is, I accept the evidence of Mr. Grice and his witness, Mr. King, about the use of this area and its condition before the facilities were removed by Permanent Trustee in November 1995. I also accept their evidence that the outdoor area was not, after that work was done, useful to Trimwood.
Mr. Grice had discussions with Ms. Mokany of Byvan at the end of 1994 with a view to removing this 528 m2 from Trimwood's leased area. I find Mr. Grice's intention in that respect was not because the area was not useful to Trimwood's business, but because the business was having financial difficulties and the removal of the area might have reduced Trimwood's commitment to rent which would have lessened the burden upon Trimwood by way of expenses in running the business. Evidence was given by Mr. Grice that prior to November 1995 the outside area was regularly used and was part of the business. In 1991 the driving booths along the artificial turf surface were removed by the maintenance people of the Centre trying to stem some of the leaks into the tenancy of David Jones below and were not reinstated. However, I accept the evidence of Mr. Grice that a little later a net structure was put up to be used for baseball coaching and practice. I also accept Mr. Grice's evidence that a Mr. King, who is an elite strength conditioning specialist used the outside area in conjunction with his work with elite athletes. I accept that Mr. King used the outside area for sprinting drills, flexibility drills, jumping tests, various types of fitness testing, and various types of co-ordination drills. I also accept Mr. Grice's evidence that Mr. King brought in to the premises groups such as the Queensland Rugby Union and other groups, and individual clients involved in elite sport. I accept the evidence of Mr. Grice that until November 1995 the outside area was used on a daily basis.
I also accept the evidence of Mr. King, whom I found to be impressive as a witness, that the outside area had an important use prior to November 1995 in his work of physical preparation of elite athletes. He confirmed the outside area was used on a daily basis in summer and in winter sometimes two times a week and groups of people would be between 15 to 16 people down to one person. He also observed people using the outside area for batting and pitching practice in baseball and other persons practicing various forms of martial arts or boxing or tai chi or yoga. He also confirmed, and I accept his evidence, that with the change of the outside area in that the grass was removed and there being a concrete area left in its place, that he would not use it. This was because normally one would not train athletes on concrete and secondly, there was glare out there in the summer months, and although Mr. King did not expressly say so, Mr. Grice said it was hot out there. I would accept that would be the situation when one makes a comparison of Exhibit 34 and other exhibits of the before and after for this outside area. I find that in the before sense, this area was an attractive addition to the inside area of the gymnasium. I find that one would accept that it provided a pleasant environment, being able to look out on to this green area, even though it may have had some paving. I also find it would have been comfortable to use for the purposes described by Mr. Grice and Mr. King. I also accept the evidence of Mr. Grice that it would have assisted in attracting custom to the business by having these people come through with Mr. King, and being attracted to the business. I accept the evidence of Mr. King that the use of the area decreased after the area was reduced to bare concrete.
Although it may be correct to say that the landlord could, pursuant to Clause 13.2 upon reasonable notice, enter the premises and carry out the works it considered necessary or desirable to avoid the complaints of David Jones about the leaking from the outside area, Clause 13.2 provides that in exercising those rights the landlord shall cause no more interference with the tenants use and occupation of the premises than is, in the reasonable opinion of the landlord, reasonably necessary. Permanent Trustee relied on Clause 13.2 to justify Permanent Trustee's disturbance of the outside area. I find that to remove the golfing fixtures while not directly being used for golfing but having the beneficial uses and aspects I have mentioned above for Trimwood's business, and to fail to provide some alternative rather than leave the area a bare concrete area would not be complying with the landlord's obligations pursuant to Clause 13.2. That is, I find what has occurred is more interference with Trimwood's use and occupation of the premises than was reasonably necessary in the circumstances. I accept the evidence of Mr. Grice of his meetings with Ms. Mokany in November 1995 and January 1996 as evidenced by his diary note of those meetings, Exhibit 18. I accept his evidence that Permanent Trustee's actions with respect to the outside area were something Trimwood had to accept. I also accept Mr. Grice's evidence that Ms. Mokany was to return to him with a proposal which might have included a tennis court, or a volleyball court and types of surface options. I find that these options would have been at the cost of the landlord because otherwise the landlord would not be complying with its obligations under the lease, including those obligations in clause 13.2. Any opinion held by the landlord that it had caused no or very little harm to Trimwood because of the observations of the employees of Byvan I find would be an unreasonable opinion because it would be an opinion wrongly formed. That is, I find that the correct opinion to have been formed by the landlord if it did form one would have been that the outside area was important to Trimwood's business. It may well have been the case that the outside area was no longer being used for golfing activities, however it could be put to alternative uses and was being put to alternative uses that had substance in those uses. That is, it was not just being used on a token basis. It was not until very recently (letter 26 August 1998 from Barry & Nilsson for Permanent Trustee to M.C. Richards & Associates, solicitors for Trimwood) that Permanent Trustee offered to expend a sum to a maximum of $15,000 on resurfacing the outdoor terrace, provided it was then accepted there was no further obligation on Permanent Trustee to reinstate the outdoor terrace (Exhibit 5). Trimwood had called upon Permanent Trustee to reinstate the outside area to its pre-November 1995 condition (letter M.C. Richards & Associates to Byvan dated 8 October 1997).. I find that the offer made by Permanent Trustee is too late in the context of providing relief for its breach of Clause 13.2 and as it has been made on the eve of the trial, I find it is reasonable that offer has not been accepted.
I also find it is reasonable that Trimwood has not accepted that offer as Trimwood has a quote at least of substantial proportions in money terms for it to achieve what it had before November 1995 (Exhibit 26), and what has been offered by Permanent Trustee is an artificial turf surface which it considers can be provided for $15,000, which it might not be able to provide when it comes to do the work and does not provide some attraction which was what Ms. Mokany was suggesting in discussions with Mr. Grice when talking of a tennis court or volley ball court. I also have evidence in the form of the affidavit of Mr. Benesoczky that the cost to install the facilities was $73,054.00. I accept this evidence as I see no reason to reject it. What may be provided for that sum may be superior because it will be new, nevertheless, that is what is necessary to be done to give Trimwood what it had before. This persuades me that it is reasonable for Trimwood to not accept Permanent Trustees' offer and unreasonable for Permanent Trustee to make this offer and to have made this offer. I consider for Permanent Trustee to comply with its obligations under Clause 13.2 and to obtain the protection of Clause 13.2, it was obliged to reinstate the area, if not with similar facilities, some facilities that provided a benefit to Trimwood or reach agreement with Trimwood on some alternative. I consider Permanent Trustee could not just leave the outside area as bare concrete, nor just an artificial grassed area unless that was agreed to by Trimwood. Trimwood did not have “just a grassed area” before the facilities were removed. Trimwood had facilities that made the outside area attractive, usable (although no longer used for golfing purposes) and part of its business premises as a fitness centre and gymnasium and for which it was paying rent and outgoings agreed at an earlier time, on the basis of what Trimwood leased, it had to pay for the use of it. In the circumstances I find Permanent Trustee has breached Clause 13.2 of the second sub-lease and is therefore not entitled to rely upon Clause 13.2 to justify its actions.
I also find in the circumstances Permanent Trustee has breached the covenant for quiet enjoyment. Those circumstances are removing the fixtures in the outdoor area and leaving the area in bare concrete. I refer to the decision of Powell J in Todburn Pty Ltd v. Taormina International Pty Ltd (1990) 5 BPR 97 333 where his Honour conveniently sets out the relevant considerations regarding the covenant for quiet enjoyment at p.11,177:-
“The covenant for quiet enjoyment operates to secure the tenant, not merely in the possession, but in the enjoyment, of the subject premises and any rights appurtenant thereto, for all usual purposes; and where the ordinary and lawful enjoyment of the premises (see, for example, Owen v. Gadd [1956] 2 QB 99; 2 All ER 28; Kenny v. Preen [1963] 1 QB 499; [1962] 3 All ER 814) or of the rights appurtenant thereto (see Dikstein v. Kanevsky [1947] VLR 216; Dowse v. Wynyard Holdings Ltd [1962] NSWR 252; Arndale (Kilkenny) Pty Ltd v. Gaetjens [1970] 44 ALJR 434; Karaggianis v. Malltown Pty Ltd (1979) 21 SASR 381) is substantially interfered with by the acts or omissions of the landlord or those lawfully claiming under him, the covenant is broken, even if neither title to, nor the possession of, the demised premises, or of those rights, is otherwise affected. Whether or not any interference is substantial is a question of fact.”
I find that the actions of Permanent Trustee in removing the facilities from the outside area and leaving the area as a bare concrete surface has been a substantial interference with Trimwood's quiet enjoyment of the outside area. While it may have been able to enter to do works with the authority of Clause 13.2, to leave the outdoor area as it did I consider is a breach of Clause 6.1.
However, with respect to the claim for abatement of the rent and outgoings payable by Trimwood to Permanent Trustee, it was submitted by Mr. Savage, counsel for Permanent Trustee, that the circumstances that have occurred do not come within Clause 16.2 because the words “or other disabling cause” should be read ejusdem generis with the preceding words “... by fire, flood, lightning, storm, tempest...” That is, on the proper construction of the clause, the circumstances for its application do not include something done to the premises by the landlord but include something external to the premises causing damage to premises. I consider Mr. Savage's submission is correct. In Saner v. Bilton (1878) 7 Ch.D. 815, a similar clause was read by Fry LJ ejusdem generis so as to deny a tenant abatement.
For this reason I find Trimwood is not entitled to an abatement of the rent and outgoings. However, I find, subject to proof of damages, that Trimwood is entitled to damages for Permanent Trustee's breaches of Clauses 6.1 and 13.2 of the second sub-lease (quiet enjoyment and interference with the use and occupation of the premises more than was reasonably necessary).
However, as to Trimwood's claim for loss of profits and the increased cost of advertising claimed by it as loss flowing from the breach of the covenant for quiet enjoyment, I am not satisfied the evidence establishes Trimwood's claim to damages based on loss of profits and increased cost of advertising. I am in the same position with respect to the breach of Clause 13.2 I am mindful of the considerations relevant to an assessment of damages discussed by the Court of Appeal in Ray Teese Pty Ltd v. Syntex Australia Ltd (1998) 1 Qd.R. 104. I am mindful of the obligation upon a court that where precise evidence is not available the court must do the best it can and ... uncertainty as to profits to be derived from a business by reason of contingencies is not a reason for a court refusing to assess damages (Ray Teese, p. 109).
In this action Trimwood called evidence from an accountant, Mr. Vincent, who prepared some schedules after analyzing the financial records of Trimwood. These schedules concerned the adjusted fee income of Trimwood and an analysis of it. These schedules reveal that for the years ended 30 June 1993, 30 June 1994 and 30 June 1995, fee income was increasing, and for the average of those three years the increase was just over 20% per annum. The trend after that point in time was a downward trend. In the 1996 year it was a 5.7% decrease, and in the next year a 7.96% decrease. Mr. Vincent's analysis of Trimwood's books and records did not reveal any apparent cause for the loss. On the basis of Mr. Grice's instructions, the only cause that he saw for that decline was the closure of the outside area. Mr. Vincent, from his experience and given the nature of the business, thought it was foreseeable that a loss could be suffered if one part of the tenancy such as the outside area, were destroyed. However he did not do any projection of the potential loss in the schedules. He thought all other factors being equal it was feasible that the 20% growth pattern could continue. Prior to the destruction of the area, he calculated that the net profit ratio to adjusted fee income in the 1995 year for Trimwood's business was 7.97%. He thought it was a conservative approach to apply that percentage rate to the potential loss to gross income. He also factually pointed out how advertising had increased above the average advertising costs incurred by the business after 1995.
Notwithstanding Mr. Vincent's evidence I was not satisfied that Trimwood has proven a connection between the removal of the facilities in the outside area and a drop in income and increase of advertising expenses for Trimwood. Mr. Vincent did say that one could see a reversal in Trimwood's growth of 20% up to 1995 to a minus 5% position thereafter. The overall reversal would amount to 25% drop in income. Mr. Vincent agreed that something must have occurred to have significantly change that trend. He thought it would have to be a significant event for that to happen. He thought there was no evidence of so called tough economic times or the opening up of a competing business next door or people becoming overnight unhealthy to provide a reason for this reversal. However, Trimwood did not put before me any figures to show, other than this analysis, of where or how the removal of the facilities in the outside area may have affected the receipt of its income. An analysis of members, or what they might have paid, was not produced. I have accepted the concept that the outside area was important to Trimwood and was being used, however, I am unable to find evidence that satisfies me that the outside area becoming unavailable for the uses it had been put to before November 1995 caused the drop of income. On the evidence I felt I would be guessing at Trimwood's loss. My reluctance in this respect to act on a mere before and after comparison of income is that I find on the evidence (in the correspondence in Exhibit 1), a letter written by Mr. Grice that shows in September 1994 the business had difficulty meeting its obligations to pay what was due under the first sub-lease to Permanent Trustee. Apparently its accounts were outstanding. In early September 1994 Trimwood proposed an amount of at least $20,000 of the outstanding amount was to be repaid by the end of September. It is recorded that this was not the first time that the owners had to chase Trimwood's account. At the end of November 1994, as I have said above, Mr. Grice and Ms. Mokany discussed the removal of the 528 m2 from the lettable area. Further, in December 1994 Mr. Grice writes to Ms. Mokany advising it had not been possible to operate the Centre at a trading profit. The correspondence continues to show Mr. Grice's attempts to make payments to the landlord. I have no doubt he has experienced considerable strain when reading the correspondence. However, what the correspondence shows is difficulty making payments, and in mid-September 1995 apparently there was a complete “crash/breakdown” of the hard drive in the computer with associated problems with running the business. The letter dated 6 December 1995 from Mr. Grice to Byvan, while referring to all the difficulties created by this computer problem, and the downturn in comparisons of cash flow between 1994 and 1995, ends by saying:-
“As you can see, the loss of computer system had a profound impact on our business and cash flow. Unfortunately, December is a seasonally slow time for our business, as historically you will be aware, with January seeing an escalation of sales.”
A proposal is put by Trimwood regarding outstanding rent to be paid by the end of January 1996. This letter does not refer to any downturn in income because of what has occurred to the outside area. There was a fire in the premises in February 1996, and in a letter from Mr. Grice to Byvan dated 29 August 1996, Mr. Grice said:-
“I am sure you would agree that the fire in February has had a dramatic impact on our business. The ongoing lack of action in rectifying our tenancy to an acceptable level and standard has definitely had a detrimental effect on our cash-flow and profitability.
In past discussions, you have made it clear that the issues of outstanding payments and the carpet/insurance claim are mutually exclusive. I think it's time to realize that these issues are related. Our business appeals to people who take pride in appearance and style. Clearly the appearance of our tenancy is not what it should be, so naturally it will impact on people's decision making in buying.
Further, the drawn out repair process was a great inconvenience to our customers and the business itself. Six and one half months later and we still have a sub-quality tenancy without a satisfactory solution to the problem put before us.”
Although I do accept that the removal of the facilities in the outside area has had an impact on Trimwood's business, that an impact had occurred was not expressed in any of the correspondence. I consider it would have been expressed in the correspondence if Trimwood had been able to demonstrate the impact in monetary terms. Although Mr. Grice did not say so in evidence, other factors such as the computer breakdown or the fire or both may have masked the monetary loss from the loss of the use of the outside area. Further, Mr. Norling, a chartered accountant having particular skills and interests in market, economic and urban research and a consultant to the property industry, was of the opinion that the loss of the outdoor facilities had not caused the reduction in turnover, and one of his key reasons for that view was that the first defendant had failed to provide a breakdown of income between indoor and outdoor activities to justify the claim. Mr. Hellen, a chartered accountant called by Permanent Trustee regarding Trimwood's claims, found that no documentation of Trimwood indicated that income was derived directly from the use of the outdoor terrace area and the company's cash receipts subsequent to the works being undertaken did not indicate a decrease in membership income when the outdoor terrace area was altered. He felt that the overall analysis of cash receipts indicated that trading over the period of one year immediately after the work was undertaken was strong, which indicated that other factors may be responsible for the relatively lower reported income during the 1996 and 1997 financial years. What Mr. Norling and Mr. Hellen persuade me on this issue is that it may well be that because of Trimwood's records, it could not show a decline in income caused by the loss of the outside area and therefore did not refer to it in correspondence and hence was not able to prove in evidence a link between the decline in income and the loss of the use of the outside area. Mr Vincent, called by Trimwood, only produced schedules without an analysis of the source of the downturn of Trimwood's income.
For these reasons I am not prepared to accept Trimwood's claim for damages by way of loss of profit and increased advertising expenses were a consequence of the breach of the covenants contained in clauses 6.1 and 13.2.
However, I do find Trimwood has suffered damage caused by the breach of either Clause 6.1 or Clause 13.2 or both those clauses, and I am satisfied as to its quantification. That is, notwithstanding Trimwood may not be able to prove to my satisfaction damages in the form of loss of profits and the need for increased advertising, I accept there has been damage suffered which can be quantified. In the context of the claim for an abatement pursuant to clause 16.2, Permanent Trustee contended if there was to be an abatement, only an amount of $3,556 was justified for the reasons set out in Exhibit 4. That is, it based its opinion on the view that Trimwood was making very little use of the outside area, that the golfing aspect had ceased, that the area was dilapidated, and very few people used it anyway. It may be factually correct that the golfing aspect of it ceased before November 1995, however, because of the findings I have made, the outside area was substantially being used before November 1995, and used in a way that would be profitable to Trimwood. The difficulty I have had is being satisfied that Trimwood could prove that loss in terms of loss of profits and increased advertising. However, I find that Trimwood was put in a position of having to agree with the landlords' removal of these facilities on the basis that there was no option but to agree, however, it was on the basis offered by Permanent Trustee through its Centre manager, Byvan, that some other surface would be put in place which would give that outside area some meaningful capacity to be used. As it is, I find it cannot be used usefully for Trimwood's business, and I find it is an integral part of Trimwood's business. Trimwood called a registered valuer in support of its claim for an abatement. Mr. Johnston approached the task on two bases. First of all he approached the task on an area basis and provided calculations showing an abatement based on the loss of the outside area as a proportion to the total area. The alternative he provided was to assess commercial rates for the letting of the outside area before the damage occurred to the outside area and after.
In assessing the damages for the loss of the use of the outside area, it seems to me a commercial rate ought to be applied rather than making a calculation of the proportion of the area lost to the total area of the lease times the rent provided for under the lease. I consider a commercial rate applied to the unusable area will yield the fairest assessment of the loss. Consequently I find that Trimwood is entitled to damages in the sum of $108,155 for loss of rental and loss of outgoings paid and payable on the area of its lease that Permanent Trustee to the end of August 1998 has rendered unusable in a practical sense.
I also find in the circumstances that Permanent Trustee would be unjustly enriched or it would be unconscionable were Permanent Trustee not to credit Trimwood with that sum of $108,155. Permanent Trustee did what it wished to overcome the complaints of David Jones which was in Permanent Trustee's interests, however failed to restore the outside area in the interests of Trimwood, yet has sought to be paid rent and outgoings for that outside area without proper deduction for the condition of the outside area and in breach of its obligations to permit Trimwood quiet enjoyment of the outside area. (Pavey & Matthews Proprietary Limited v. Paul (1986) 162 CLR 221). If I am wrong on the issue whether there can be an abatement of the rent and outgoings in this matter for the same reasons I have given for assessing the damages suffered at $108,151.00, I would assess the proper amount for abatement to be $108,151.00 to the end of August 1998.
I also consider that damages for the future can be assessed. An injunction was sought by Trimwood against Permanent Trustee to restrain Permanent Trustee seeking rent and outgoings for the premises without an abatement as and from 1 September 1998. I do not consider it is appropriate to grant an injunction for the period 1 September 1998 to the end of the term of the second lease. The further evidence put forward by the parties since the recent amendments is intended to persuade me as to the cost to reinstate the premises. It seems to me it was a matter for Permanent Trustee whether it reinstated the premises. As it has failed so far to do so and does not claim it will do so at some point in the future I consider the damages for the breach of the relevant clauses of the lease should be assessed on the basis the breach has occurred and is unlikely to be remedied. I do not consider it is right to proceed on the basis of allowing Trimwood the cost to reinstate the premises because I do not consider Trimwood has the right to do so. I also do not consider it is right to proceed on the basis of assessing the damages on the basis of what it might cost Permanent Trustee to reinstate the premises. The true measure of the damages suffered by Trimwood, I consider is the rent and outgoings, assessed on a commercial basis, Trimwood are required to pay for the outside area rendered unusable in a practical sense by the actions of Permanent Trustee. If before the trial Permanent Trustee had reinstated the premises or offered a reasonable alternative to Trimwood which Trimwood had unreasonably refused, different considerations may have applied to the assessment of the damages. The evidence by way of further affidavits exchanged by the parties since the recent amendments persuades me the previous offer by Permanent Trustee to provide $15,000 was unreasonable and its stand at all relevant times regarding the outside area also is unreasonable.
As I have said above, Permanent Trustee, through Ms. Mokany, was to get back to Mr. Grice or alternatively, Permanent Trustee could have done something to restore the outside area. It was within its power to restore the outside area pursuant to clause 13.2 of the lease. I accept the evidence of the valuer, Mr. Johnston. I assess the future loss to be $62,075 for the balance of the current term. It seems to me that as there is no certainty one way or the other that Trimwood will exercise the option, an injunction should be granted in favour of Trimwood to the effect that in the event Trimwood exercises the option, Permanent Trustee be restrained from seeking to be paid by Trimwood rent and outgoings for the outside area in an amount that is represented by Mr. Johnston's market rate being, on my calculations, $4,863.00 per month for so long as Permanent Trustee does not restore the outside area to the extent reflected by Mr. Benesoczky's quote in the sum of $73,054.20. To attempt to calculate damages for the further term in the event the option were exercised is, I consider, impossible and could lead to unfair results. That is, as I have said, there is no way of knowing whether the option will be exercised. To make an allowance for the chance could lead to a result that one party is seriously disadvantaged or overcompensated. For example, if it were right to say there was a 50% chance that the option will be exercised and allow Trimwood $145,890 for damages being 30 months at $4,863.00 per month, and Trimwood did not, in about 19 months time, exercise the option that would, I consider, be a windfall to Trimwood. On the other hand, if some lesser amount were allowed to Trimwood and Trimwood did exercise the option, then Trimwood would, I consider, be undercompensated. In the circumstances, I find it is just and equitable to grant an injunction framed in such a way as to deal with the situation should Trimwood exercise the option and no change occurs to the premises.
I will hear further submissions from the parties regarding the appropriate orders with respect to the rectification aspect of the proceedings and orders to give effect to my judgment, and costs.
Regarding the final point raised by Trimwood regarding the method of measurement, I do not accept that this outside area comes within the BOMA document so as to be excluded from the method of measurement. That is, in the BOMA document it provides by clause 3.4:-
“3.4 Treatment of Balconies, Verandas, Etc.
Balconies, terraces, external gardens or verandas should be excluded from tenancy area calculations, but may be separately identified for the purpose of negotiating rentals.”
In my view the outdoor area does not come within clause 3.4 to be excluded from the tenancy area calculations. Consequently, I do not accept Trimwood's claim in this respect.
With respect to the letters marked “without prejudice” in Exhibit 1, I rule these letters are admissible and are admitted as part of Exhibit 1.
Therefore, in terms of the monetary amounts relevant to these proceedings, and giving effect to the set off claimed by Trimwood -
Permanent Trustee's claim for outstanding rental and outgoings as at 31.8.98 | $135,188.88 |
LESS | |
Trimwood's damages to 31.8.98 | $108,151.00 |
LESS | |
Trimwood's damages from 1.9.98 to the end of current term | $62,075.00 |
Balance in Favour of Trimwood | $35,037.12 |
I consider it is in the circumstances proper to give effect to the set off claimed by Trimwood (Connaught Restaurants Ltd v. Indoor Leisure Ltd (1994) 1 WLR 501, 511; British Anzani (Flexistowe) Ltd v. International Marine Management (U.K.) Ltd (1980) QB 137; Lee-Parker v. Izzett (1971) 1 WLR 1688).
I should record here that Permanent Trustee's claim in the plaint was for the amount of outgoings in dispute as a consequential order. However, it seemed to be accepted by both parties the $135,188.88 referred to above was the sum Permanent Trustee could claim if the issue relating to the calculation and charging of outgoings was found in its favour, although that amount included rent.
There will be judgment for Trimwood against Permanent Trustee for the sum of $35,037.12.