Quadra Pacific (Aust) Corp Pty Ltd v Mercantile Credits Limited
[1999] QDC 209
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- Quadra Pacific (Aust) Corp Pty Ltd v Mercantile Credits Limited[1999] QDC 209
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Quadra Pacific (Aust) Corp Pty Ltd v Mercantile Credits Limited[1999] QDC 209
Quadra Pacific (Aust) Corp Pty Ltd v Mercantile Credits Limited[1999] QDC 209
IN THE DISTRICT COURT |
HELD AT BRISBANE
QUEENSLAND
[Before McGill DCJ]
[Quadra Pacific (Aust) Corp Pty Ltd v. Mercantile Credits Limited]
Plaint No 3371 of 1997
QUADRA PACIFIC (AUST) CORP PTY LTD | Plaintiff |
AND
MERCANTILE CREDITS LIMITED | Defendant |
JUDGMENT
Judgment delivered: | 4 June 1999 |
Catchwords: | LANDLORD AND TENANT – covenants – performance – make good at end of term – sub-tenants remaining in possession as tenants of landlord – election – estoppel – whether claim within lease LANDLORD AND TENANT – covenants – to yield up in good repair – whether obligation waived – whether entitlement to recover cost of work – scope of obligation |
Counsel for the plaintiff: | T.W. Quinn |
Counsel for the defendant: | J.H. Dalton |
Solicitors for the plaintiff: | Lynch and Co |
Solicitors for the defendant: | Corrs Chambers Westgarth |
Dates of Hearing: | 19, 20, 21, 22 January 1999. |
IN THE DISTRICT COURT HELD AT BRISBANE QUEENSLAND | Plaint No 3371 of 1997 |
QUADRA PACIFIC (AUST) CORP PTY LTD | Plaintiff |
AND
MERCANTILE CREDITS LIMITED | Defendant |
REASONS FOR JUDGMENT - McGILL D.C.J.
Delivered the 4th day of June 1999
By this action the plaintiff claimed monies alleged to be payable by the defendant pursuant to a lease. Prior to 30 April 1995, the defendant was lessee of premises owned by the plaintiff which were in turn occupied by sub-tenants of the defendant under sub-leases due to expire the previous day. The defendant advised the plaintiff that it was not going to continue the tenancy after that date, and the plaintiff made arrangements with the three sub-tenants for them to stay on in their respective premises, as tenants of the plaintiff, after expiration of the lease. This came to the attention of the defendant, and at the expiration of the subleases, and then the lease, the sub-tenants were left in possession of the premises, where they remained for some time until eventually they moved to other premises. The plaintiff then stripped the premises, refurbished them and fitted them out to suit new tenants.
The plaintiff claims the cost of doing work which it alleges the defendant was required to do at the expiration of the lease pursuant to its obligations under the lease to “make good”[1] the premises, on the basis of provisions that if this was not done by the defendant the plaintiff could do the work at the defendant's cost. Indeed, the plaintiff was asserting a right to be paid the estimated cost of making good the premises even before the expiration of the lease, and at all times thereafter. The defendant denies liability, and in addition there is a dispute as to various aspects of quantum. There is no claim for damages for breach of the relevant covenants, presumable because of s. 112 of the Property Law Act 1974.
Essential Facts
By a lease dated 19 July 1983, and registered in the Titles Office on 3 September 1984, the Commonwealth Banking Corporation leased to the defendant certain premises, being most of the ground and first floors of a building which was an annexe to a tower block, situated at the corner of Edward and Mary Streets in Brisbane.[2] The lease was for a term of 12 years, terminating on 30 April 1995. After the defendant was taken over by Esanda, a subsidiary of the ANZ Bank (“the bank”), its staff which had been in the demised premises were relocated to other premises in Brisbane, and sub-tenants were put into possession of the premises: p. 270.
During the term of the lease the plaintiff became the registered proprietor of the land and building, pursuant to a Memorandum of Transfer registered on 9 September 1993. Prior to that time, the defendant had entered into sub-leases of two parts of the demised premises: on 2 June 1992 a sub-lease of most of the first floor of the demised premises in favour of P & O Container Shipping Pty Ltd (“P & O”) dated 21 September 1990 was registered, with a term commencing on 15 May 1990 and terminating on 29 April 1995. On 21 September 1992 there was registered a sub-lease of part of the ground floor of the demised premises in favour of CPS Credit Society Ltd (“CPS”) for a term commencing on 1 June 1991 and terminating on 29 April 1995. By a sub-lease which appears to be undated, the defendant leased another part of the ground floor of the building to Protech Australia (SA) Pty Ltd (“Protech”) for a term from 4 October 1993 to 29 April 1995.[3] I shall, for convenience, refer to these three as the sub-tenants, although that status later changed. Consent of the then lessor, Commonwealth Banking Corporation, to the sub-lease to P & O was endorsed on that instrument: Exhibit 1, p. 161. It was not suggested that the other two sub-leases were not made with the consent of the then owner of the building.
Upon the transfer of the freehold to the plaintiff, it became entitled to the benefit of the defendant's covenants under the lease: Property Law Act s. 117. There was no need for a separate assignment of the benefit of the covenants under s. 199 of the Property Law Act 1974 although there may well have been one in the documentation. I think it is clear that the plaintiff is entitled to enforce the lease against the defendant.
The ANZ Bank which was responsible for managing the lease for the defendant did not want to continue to occupy the premises. By a letter dated 16 February 1995 the bank advised the plaintiff that the defendant would not be renewing the lease and invited it to contact the sub-tenants directly to ascertain their intentions and negotiate directly with them: Exhibit 1, p. 195. This was acknowledged by a letter from the plaintiff which, among other things, said: “We shall proceed on this basis ...”: Exhibit 1, p. 196. This would not have been news to the plaintiff, because P & O had opened negotiations by writing to the plaintiff's property managers on 5 May 1994: Exhibit 1, p. 215. In response, the plaintiff wrote to P & O offering a lease of “existing premises” for 12 months from 30 April 1995, on the same terms as the current sub-lease, but with a right on the plaintiff's part to relocate the tenant to a floor in the adjoining tower block on three months notice: Exhibit 1, p. 217. This was said in the letter to have been sought to give the plaintiff “flexibility in the refurbishment of the annexe”. After further negotiations, by 20 December 1994 there was an arrangement in place between the plaintiff and P & O as shown by a letter from the plaintiff of that date: Exhibit 1, p. 220. This said, among other things: “Please accept this letter of confirmation and assurance of your tenancy”. The letter on the previous page of Exhibit 1 indicates that it was to be a 12 month lease commencing 30 April 1995.
Protech in February 1995 advised the plaintiff that it was interested in extending the existing tenancy on a monthly or three monthly basis, and expressed some interest in relocating to the tower: Exhibit 1, p. 221. After some further negotiations, an offer from the plaintiff for a tenancy for three months and monthly thereafter (in a letter 30 March 1995: p. 224) was accepted by a letter dated 13 April 1995: p. 227.
On 6 April 1995, the plaintiff wrote to CPS offering a six month tenancy with a monthly tenancy thereafter: Exhibit 1, p. 229. CPS responded with an offer to continue as a tenant of the plaintiff from month to month (10 April 1995: p. 230), and that was accepted by the plaintiff on 11 April 1995: p. 231.
On 6 March 1995 the plaintiff wrote to the bank (on behalf of the defendant) raising the question of make good obligations. The material parts of that letter were in the following terms:
“You would be aware ... that there are certain obligations which must be met by Mercantile Credits Limited in regard to this tenancy.
We have obtained two quotes in regards to making goods the tenancies, both on ground floor and first floor of the annexe building at 133 Mary Street. The lowest (sic) of these two prices is $38,450.
As you can appreciate, Quadra Pacific is in the best position to undertake these works on behalf of Mercantile Credits Limited at a timing to suit the landlord. We therefore request that you forward a cheque payble to Quadra Pacific (Aust) Corp Pty Ltd for $38,450”.
In my opinion, what this letter is saying is that the plaintiff is holding the defendant to its obligations under the lease in regard to making good (without specifying what is required) and advising that it is prepared to do the work it says is necessary to fulfil those obligations “at a timing to suit the landlord” for $38,450. The reference to timing indicates that the plaintiff had in mind not doing the work on the expiration of the lease, which is consistent with the fact that there was already in place an agreement with one of the sub-tenants, P & O, for that sub-tenant to remain in occupation for some time after the lease expired. It is, in substance, an offer to accept payment of the nominated amount in discharge of the defendant's obligations to make good under the lease.
The copy of the letter which is at p. 197 of Exhibit 1 has a receipt stamp dated 28 April 1995 on it, but that was put on a copy of this letter which was received at a later date. A letter otherwise identical to that at p. 197 was received by the bank on about 6 March 1995 (p. 271) and given to Mr. Bacon who was at the time responsible for the administration of leased property held by the bank and its subsidiaries in Queensland: p. 269. On the letter Mr. Bacon's superior had written an instruction to obtain advice from the bank's solicitors (p. 271, and see Exhibit 2), but he did not then do so. He said that because of pressure of work he did not attend to it until he received a follow up letter dated 26 April 1995: p. 271. There is no reason to doubt that evidence and I accept it. Mr. Bacon no longer works for the bank, having been retrenched after 28 years service on 31 July 1998: p. 269. In those circumstances, he is unlikely to be going out of his way to give evidence favourable to the defendant, and my impression of him at the time was that he was doing his best to give an honest account of what he actually recalled, although for reasons I shall come to I think that in at least one respect his recollection was in error.
In any case, nothing happened until a telephone conversation on 24 April 1995 when Mr. Petfield, the operations manager of the plaintiff, spoke to Mr. Bacon. Mr. Petfield was very vague in his evidence about his conversations with Mr. Bacon, which is spread over pages 11-13 of the transcript, but all that he says occurred is that when he spoke to Mr. Bacon, he was told that Mr. Bacon believed he had not received the letter of 6 March 1995, and as a result he faxed a second copy to him: p. 11. His recollection was that in a further conversation Mr. Bacon thought that the amount sought was excessive[4], and Mr. Petfield pointed out that the premises were not a standard tenancy, and suggested that he view the tenancy which apparently prompted the response that Mr. Bacon had been familiar with it for an extended period of time. Mr. Petfield said in effect that he was left with the impression that Mr. Bacon would come back to him at some stage in the future: p. 13. Mr. Bacon's recollection was that in the first phone call he had told Mr. Petfield that he was uncertain whether he had received the letter and a copy was then faxed to him: p. 272. I am not prepared to find that in these conversations Mr. Bacon made any commitment to the plaintiff.
After the phone calls Mr. Bacon made an appointment to see Mr. O'Keefe as he had been earlier instructed: p. 273. Mr. Bacon spoke to each of the sub-tenants on 27 April[5] and was advised that an arrangement was in place for each of them to stay on, as recorded in his contemporaneous diary note: Exhibit 37. His recollection is that P & O declined to advise him as to the terms on which they were staying on, but did tell him that arrangements had been made to stay on: p. 273. The terms on which they were staying on were, of course, irrelevant, all that mattered in the circumstances was whether the sub-tenants were going to stay in possession under an arrangement with the plaintiff. Mr. Bacon ascertained that, and undoubtedly communicated it to his superiors within the bank. Legal advice was obtained from Mr. O'Keefe, and although there is no evidence as to the content of that advice, it is not difficult to infer that the advice was to ignore the letter of 6 March 1995. Had the defendant been advised that it was entitled to ignore the letter, the advice would, in my opinion, have been correct. In the circumstances where the bank was managing the lease on behalf of the defendant, his knowledge that such arrangements had been put in place should be attributed to the defendant[6].
Once it was ascertained that the sub-tenants were staying, neither Mr. Bacon nor anyone else on behalf of the defendant took steps to make the premises good: p. 274. This decision was taken after the defendant had obtained legal advice (p:286) and hence after it knew of the arrangements with the subtenants for them to stay on. The natural inference which I draw is that it was taken in reliance of the fact that those arrangements were made. According to Mr. Bacon, the usual practice of the bank when making premises good was to have particular contractors, which it regularly used, carry out the work for it: p. 274. He said that he would have been able to have this work done in a couple of days if necessary: p. 275. I accept this evidence and I think that if it had been necessary even at that late stage for the premises actually to be made good by the defendant, it could have been done either before the lease expired or within a very short time thereafter. Had the three sub-tenants been vacating at the expiration of the sub-leases, the day before the lease expired, there would have been no practical obstacle to the defendant's performing its obligations to make the premises good, whatever they were. The bank would have followed its almost invariable practice (p. 274) and had its contractors do the work, rather than pay the plaintiff the amount demanded, or any amount. Mr. Petfield said that Mr. Bacon said that the estimate seemed to be excessive (p. 13) and if that was his view at the time it would have encouraged him to follow the bank's usual practice. It was in excess of the amount the plaintiff ultimately sought in submissions, $31,473.52.
In the event, of course, the sub-tenants remained in occupation, as the defendant expected. Plainly, the premises were not in fact made good by the defendant because the defendant knew that the sub-tenants were staying on as tenants of the plaintiff. The lease expired, the sub-tenants remained in possession as they had been, and the only practical consequence of the change may have been that the plaintiff obtained two payments of rent for 30 April 1995 for that part of the premises occupied by P & O: that was the last day of the lease to the defendant, but it was apparently also to be the first day of the new lease to P & O: Exhibit 1, p. 217. Perhaps this element of the proposal of 23 November 1994 was not ultimately implemented; it is in any case irrelevant. The sub-tenants on 30 April 1995 were holding over as sub-tenants of the defendant, their sub-leases having expired. On 1 May 1995, the defendant's lease having expired, the sub-tenants became tenants at law of the plaintiff pursuant to s. 129 of the Property Law Act: Chan v. Cressdon Pty Ltd (1989) 168 CLR 242.
Ultimately, the sub-tenants vacated the premises. CPS vacated on 31 October 1995: Exhibit 1, p. 233. Protech went at about the same time, possibly earlier: p. 74. P & O moved out in July 1996: p. 95. None of them were asked by the plaintiff to make good the premises (p. 76) and none did so. They were not, of course, asked by the defendant to make good, but had they been vacating on 29 April 1995, the defendant would have required them to fulfil their obligations to make good before it carried out any additional work necessary: p. 313. All of the subleases contained relevant provisions; for provisions similar to the plaintiff's clause 11.4, see P & 0 clause 11.4 (p. 149), CPS clause 11.4 (p. 115) and Protech clause 5.1 (p. 166).
The Lease to the Defendant - Election
By clause 11.4 of the lease to the defendant, it was at the expiration of the term to:
“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 ...”
Although the clause does not refer expressly to vacant possession, it provides for the ordinary obligation of a tenant at the expiration of the term to give to the landlord vacant possession of the premises free from any sub-tenant: McDonald v. Jane [1960] VR 184. Indeed, apart from covenant such an obligation is implied at the end of the term from the relationship of landlord and tenant: Henderson v. Squire (1869) LR 4 QB 170; Anderson v. Bowles (1951) 84 CLR 310 at 319; Fice v. Ontario (1921) 64 DLR 535.
The arrangements made between the plaintiff and the sub-tenants plainly contemplated that they would be able to continue their existing occupation of the premises after 1 May 1995; there was no suggestion from the plaintiff that there was any part of those arrangements that the sub-tenants would get out to enable the premises to be made good, and that they would then have available to them premises which had been “made good” to occupy, as if they were new premises, on 1 May 1995 or any other date. The evidence of Mr. Daniel, an officer of CPS, was that if that company had had to vacate the premises prior to 30 April 1995, it would not have come back in on or after 1 May: p. 119. I accept this evidence, and in any case that is, I think, an obvious enough inference to draw in respect of any sub-tenant. Mr. Stewart conceded that, if the sub-tenants had had to vacate to enable the premises to be made good, it was very unlikely that they would have returned: p. 225[7]. It was not suggested to Mr. Daniel that any part of his arrangement with the plaintiff involved allowing the defendant to do make good work while CPS was still in occupation of its part of the premises.
In my opinion, by arranging for the sub-tenants to stay on in the premises after 1 May 1995, the plaintiff had plainly elected not to enforce its right to have the defendants surrender up vacant possession at the end of the lease and hence to surrender possession of 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.” This is because the performance of that obligation by the defendant was inconsistent with the implementation of the arrangement the plaintiff had made with the sub-tenants. I shall analyse the other specific provisions of the lease individually below, but broadly speaking, the performance of the obligation to make good the premises was obviously inconsistent with the sub-tenants' remaining in occupation. Apart from anything else, for the defendant to yield up the premises in the same condition as at the commencement of the term, the intertenancy walls on the ground floor would have to be removed, something inconsistent with the continued occupation of the premises as they were by CPS and Protech. The same reasoning applies by analogy in respect of every other element of the fixtures and fit-out as it was immediately prior to the expiration of the lease. It appears to have been accepted in McDonald v. Jane (supra) that the right to vacant possession can be waived, i.e., lost by election, and that also follows from the way the majority of the High Court in Anderson v. Bowles (supra) at 319 spoke of the right to vacant possession “should the landlord require it.”
At the end of the lease the plaintiff had an election, in that it could not both keep on the sub-tenants as its own tenants of the premises as they were, and require the premises to be made good by the defendant. The defendant's obligation under clause 11.4 was one to be performed at a particular time, “forthwith upon the expiration of the term”, not “at a timing to suit the landlord”: (Exhibit 2). These two positions were therefore necessarily inconsistent, so the plaintiff could only adopt one. The plaintiff having elected the former, it cannot now pursue the latter right. A similar analysis applies in relation to the other provisions of the lease relied on by the plaintiff. Under some of them the lessor has the right to require something (clauses 7.1, 10.2) and therefore may elect not to require, as occurred here, as there was no requirement made.
It was argued on behalf of the plaintiff that there was no intention to give up the right to have the premises made good, and there was evidence led in support of this[8]. But it is important, I think, to identify just what it was that the plaintiff was seeking from the defendant. There was no evidence that, in April 1995, the plaintiff wanted the defendant actually to make good the premises at or before the expiration of the lease. What the plaintiff wanted was for the sub-tenants to stay on[9], and for the defendant to pay it a sum of money, in effect to purchase for the amount sought by the plaintiff relief from its obligations to make good. The plaintiff seems to have had the attitude that the make good provisions, in effect, imposed on the tenant an obligation to pay the plaintiff a sum of money at the end of the lease; Mr. Stewart said that this was how most tenants dealt with the matter (p. 224) and that was supported by the evidence of Mr. McDonald: p. 112. But the obligation imposed on the tenant by this lease is not either to do particular work or to pay a sum of money at the election of the landlord[10], or even at the election of the tenant; the obligation was to do particular work. If the tenant does not do that, the landlord may do it and may be entitled to recover the cost of doing the work. What the plaintiff was really seeking was not to enforce the make good obligation, but to obtain something it did not have under the lease, an entitlement to be paid an estimate of the cost of doing the make good work. This misapprehension appears to have misled the plaintiff throughout this dispute. It follows that this evidence does not mean there was no election. Knowledge of the relevant facts is necessary, but not a correct appreciation of the legal position.
If the plaintiff has elected not to require the defendants to perform obligations in the lease to make the premises good, it necessarily follows that provisions in the lease which entitled the plaintiff to do, at the defendant's expense, work which the defendant ought to have done but has not done, do not apply, because once the plaintiff has elected not to require performance of the obligation, the work ceases to be work the defendant ought to have done. It follows that these provisions do not apply here and the cost of doing the work (assuming that that work was done) is not recoverable by the plaintiff from the defendant. The plaintiff also claimed interest on the money owing pursuant to the lease, which claim falls with the claim for money owing. The plaintiff also claimed legal costs alleged to be “in respect of the defendants breach of the covenants of the lease referred to in para.11.” Since the obligation had gone, in my opinion there was no such breach, and it follows that this claim must also fail. It follows that the plaintiff's entire claim fails and the action must be dismissed.
Estoppel
Although it seems to me that the matter is properly analysed by way of election, the same result is arrived at by the application of the doctrine of estoppel. The plaintiff, by making the arrangements with each of the sub-tenants, was representing by conduct that it was not requiring, at the expiration of the lease, vacant possession of premises which had been made good, because, as I have explained, that would be inconsistent with these arrangements. Although the plaintiff omitted any express representation to the defendant, its' conduct is, I think, a representation to the defendant if the defendant became aware, as it did, of that conduct; see for representation by conduct Spencer Bower and Turner “Estoppel by Representation” 3rd ed., p. 46; Craine v. Colonial Mutual Fire Insurance Co Ltd (1920) 28 CLR 305 at 327; Northern Assurance Co Ltd v. Cooper [1968] Qd.R. 46. In the present case, Mr. Baker was informed by each of the sub-tenants of the existence of the arrangements on 27 April 1995: Exhibit 37. I accept his evidence to the effect that in reliance on that nothing was done to make the premises good, and the sub-tenants were allowed to remain in possession without themselves performing similar obligations. It follows that in reliance on the implied representation by conduct of the plaintiff, the defendant has lost the opportunity itself to make good the premises, possibly at a lower cost than that claimed by the plaintiff.[11] That would be sufficient detriment, but I think it also has lost the opportunity to Obtain the benefit of the “make good” obligations in the sub-leases[12]. It would therefore be unjust for the plaintiff to resile from its representation, and it is estopped from alleging that the defendant was obliged to make the premises good on the termination of its lease.
Specific Provisions: Clause 5.2
Apart from these considerations, it seems to me that the plaintiff's claim fails simply because the plaintiff has not proved that the work in respect of which it claims falls within the terms of the relevant clauses in the lease. The first specific obligation relied on as having been breached was the obligation in clause 5.2(b) to:
“paint in the original colours ... such parts of the demised premises which have been previously painted ... subsequent to the removal from the demised premises of all fixtures, fittings, plant and equipment, the property of the tenant, prior to the termination of this lease by the affluxion of time ...”
In my opinion, this obligation is dependent upon the removal of the fixtures, fittings, plant and equipment the property of the tenant prior to the termination of this lease, or there being an obligation to do that, since the obligation arises in the sequence after the removal of “all fixtures, fittings, plant and equipment the property of the tenant”, followed by the termination of the lease. For reasons set out above, that situation never, in fact, occurred, nor was there ever an obligation on the tenant to take that step, so the dependent obligation to repaint never arose. In any case, there is no evidence that any of the subsequent painting done by the plaintiff involved painting “in the original colours”; the evidence about the colour used in some later painting work was very vague, the contractor having no clear recollection of the colour applied (p. 194), but there was simply no evidence that it corresponded with the original colour. It follows that the work subsequently done by the plaintiff on any view of the matter was not shown to have been in performance of the obligation on the tenant under clause 5.2(b) (if there were any such obligation), therefore it was not work the cost of which the defendant was obliged to pay pursuant to the lease.
The next matter relied on was the obligation in clause 5.2 at the same time to “shampoo and otherwise clean all carpets in the demised premises the property of the owner”. The only evidence of lack of cleanliness of the carpets, in photograph N in Exhibit 6, appears to have been in part of the area near the tea room on the ground floor (see photograph Q), which is not part of the demised premises: p. 55. The plan on p. 90 of Exhibit 1, makes it clear that an area occupied by toilets and a tearoom falls outside the demised premises. There is also no evidence that the work, the cost of which is claimed by the plaintiff, included shampooing or other cleaning of the carpets. The carpets were removed as part of the refurbishment: pp. 235, 236 and see Exhibit 6, photograph F.
Clause 7.1
The next matter relied on is an allegation that there was a breach of the obligation in clause 7.1 of the lease to remove “any signs ... visible from outside the demised premises” ... “forthwith upon receipt of a written request from the owner”. The obligation is limited to signs “referred to in such request”, and the entitlement of the owner itself to remove the sign at the expense of the tenant is dependent upon the failure to comply with such a request “within 10 business days of receipt of same”. There is no evidence that any such request was ever given, and it follows that the obligation never arose, and there was no entitlement to recover any money pursuant to that clause. The only evidence about removal of a sign is that after the subsequent tenancy of P & O came to an end, and that company vacated the premises, one of its signs was removed from the front doors: Exhibit 1, p. 252. That was referable to the tenancy of P & O; indeed, there was no evidence that that sign was on the doors prior to 1 May 1995.
Clause 7.7
This clause, which is referred to in the plaintiff's written submissions, provides as follows:
“The tenant shall not use nor permit nor suffer to be used the lavatories toilets sinks and drainage and other plumbing facilities in the demised premises or the common parts for any purpose other than those for which they were constructed or provided and shall not deposit or permit to be deposited therein any sweepings rubbish or other matter which they are not designed to receive and any damage thereto caused by misuse shall be made good by the tenant forthwith.”
There was no evidence of any breach of this clause. The clause was relied on in an attempt to justify a claim for the cost of converting part of the common area on the first floor from a shower cubicle to a tearoom, by supplying and installing a new sink unit and connecting plumbing and making good tiling in an area which is outside the leased area. There was no evidence as to how the shower came to be there, and I think the natural inference is that it was put there by the owner of the building at the time it was installed, or with the consent of the owner. Once it was put there, it became part of the common parts constructed for the purpose of use as a shower, so that clause 7.7 applied to it in that state. There is, in my view, nothing in the clause which imposes an obligation on the defendant to convert the shower to a tea room, even ifit was converted from a tea room to a shower at some time after the commencement of the lease. I think that this clause was relied on in an attempt to find some justification, however spurious, for a claim which I suspect was formulated without regard to the fact that the place where the work was done lay outside the demised premises. Indeed, clause 7.7 is not one of the clauses breach of which is alleged in para. 11 of the second Further Amended Plaint which was forwarded by the plaintiff's solicitors on 25 January 1999, after the trial, so that strictly speaking there is no claim before me for breach of clause 7.7 anyway.
Clause 7.12
The next matter relied on is the failure to remove internal partitions contrary to clause 7.12 of the lease. Clause 7.12 provides for a restriction on the installation of internal partitions within the demised premises and continues:
“All costs and expenses of and incidental to the installation of internal partitions including (but without limiting the generality of the foregoing) the fees of the owner's architect shall be borne by the tenant who shall also be responsible to the making good of any such installation and the removal of the internal partitions and if the tenant fails to make good any such damage the owner may make the same good and all costs and expenses incurred by the owner as a result thereof shall be paid by the tenant to the owner as an immediately payable liquidated debt.”
This particular clause is ungrammatical and is difficult to interpret; for instance, the reference to “any such damage” is hard to follow because there is no earlier reference in the clause to damage. The plaintiff's claim proceeds on the basis that the clause creates an obligation to remove the internal partitions, but the clause refers separately to “the making good of any such installation” and “the removal of the internal partitions.” If it provides for the removal of the partitions, it does so in a way which is less specific than, and indeed perhaps inconsistent with, the provisions in clauses 10.2 and 10.3 for the removal of “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”. There is no reason why that clause would not cover the removal of the internal partitions, unless clause 7.12 makes more specific provision. I think that the reference to “the making good of any such installation” was really intended to be a reference to the making good of any damage caused by such installation, and the clause should be so construed. If the clause is read as making the tenant “responsible for the making good of any damage caused by such installation and the removal of the internal partitions, and if the tenant fails to make good any such damage, the owner may make the same good and all costs and expenses incurred by the owner ... (etc)”, the clause makes a good deal more sense, its meaning fits more comfortably with the words actually used, and the clause covers a topic not dealt with as specifically elsewhere, namely any incidental damage caused in the course of installing or removing the internal partitions. That, however, is not the subject of the plaintiffs' claim. There was no evidence that any damage was caused in the installation of the internal partitions, and they were not removed by the tenant.
Clause 10.2 and 10.3
The next matter complained of is the failure to take, remove and carry away all fixtures, fittings, plant and equipment contrary to the obligations pursuant to clause 10.2 of the lease. This, on my construction of the lease, should be taken as including a failure to remove the internal partitions[13]. Clause 10.2 provides:
“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 ...”
The meaning of the clause is clear. The tenant has a right if it wishes at or prior to the expiration of the lease to remove the items mentioned, but is under an obligation to do so only “if so required by the owner at or immediately following the expiration ... of the term.” There is no evidence the plaintiff required the removal of those items or any of them “at or immediately following the expiration ... of the term.” The term expired on 30 April 1995, and there was no communication from the plaintiff to the defendant (so far as appears from the evidence) between 26 April 1995 and 2 June 1995: Exhibit 1, p. 198-199. The letter of 2 June 1995 is outside the time contemplated by the lease, and does not in terms require the removal of anything. The letter of 26 April 1995, assuming that would be regarded as close enough to 30 April to amount to “at” the expiration of the term, does not contain a requirement to remove anything from the premises; in so for as it requires anything, it repeats the requirement in the letter of 6 March 1995 (p. 197) “that you forward a cheque payable to Quadra Pacific (Aust) Corp Pty Ltd for $38,450.” There is, in my opinion, no basis upon which that correspondence can be construed as a requirement that the plaintiff take out of the premises the items specified in clause 10.2 of the lease. It follows that there was no such requirement and therefore no obligation on the part of the defendant to remove those items. It follows that there can be no amount payable because of any subsequent removal of those items by the plaintiff.
It seems to me that the reference in clause 10.3 to “such fixtures, fittings, plant, equipment and other articles or items” must be a reference to those referred to in a requirement by the owner pursuant to clause 10.2. Otherwise, there would be little point in having the provision for a requirement, since the tenant would have to remove the items in every case or face the prospect of having to pay for the removal by the owner pursuant to clause 10.3. It may in some cases be convenient to the parties for the items concerned, or some of them at least, to remain in position, because the owner may have a prospective tenant who would want to have the use of them, thereby reducing its own fit out costs[14]. That is really what happened here; the plaintiff's new tenants (the sub-tenants) wanted the premises just as they were, so they could continue their occupation undisturbed. If such items can be left in place so that the outgoing tenant is relieved of the cost of removing them and the ingoing tenant is relieved of the cost of replacing them, the arrangement would be plainly sensible and satisfactory all round, and I think that such a possibility was contemplated in the drafting of clause 10.2. That clause gives the owner a choice whether to require the tenant to remove all or some of the nominated items, and I think the only sensible construction of clause 10 as a whole is one which confines the right to remove the items at the tenants' expense to those which the tenant was required by the owner to remove but did not do so. On this construction, the clause has no application here because there was no requirement made by the plaintiff.
Clause 11.3 (and 5.8 and 12.18)
Clause 11.3 is referred to repeatedly in the submissions on behalf of the plaintiff, but its only effect is to provide that if there is something which the tenant has covenanted to do, and which the tenant omits to do, it shall be lawful but not obligatory for the landlord to do such thing by itself as if it were the tenant, and for that purpose to enter upon the demised premises. It then goes on to provide for interest, to which provision I shall return. The fact that express provision is made for power to go onto the demised premises suggests that this part at least of the clause was only intended to operate during the term of the lease, when prima facie the grant of the lease involves a grant to the tenant of possession exclusive even as against the landlord, so that some right must be reserved in the lease for the landlord to be able to enter during the term of the lease. There is nothing in the lease which would prevent the landlord from entering the demised premises after the expiration of the lease, and it is difficult to see why this part of the clause would therefore survive the expiration of the term. Assuming however that it does, it simply provides that the landlord may do anything which the tenant has covenanted to do. There is nothing in clause 11.3 which makes the tenant liable to the landlord for the cost to the landlord of exercising its option “to do or effect such thing by itself as if it were the tenant ...”.
Reliance was also placed in the written submissions on clause 12.18, but that clause clearly refers to “any liability imposed on the tenant under or by virtue of this lease notwithstanding that any statute, ordinance, proclamation, order, regulation or moratorium, present or future, directly or indirectly imposes such liability upon the owner.” It is concerned with liabilities imposed on the owner under any statute et cetera in respect of matters which under the lease are to be paid by the tenant; in such a situation if the landlord pays the money in discharge of such liability the tenant shall forthwith upon demand pay to the owner that amount. I do not think it has any wider operation, for example, to cover the cost to the landlord of doing something under clause 11.3; that clause contemplates that the thing may be done by the landlord itself, something which would not necessarily (or indeed usually) involve paying to a third party an amount of money for which the tenant was liable under the lease. The tenant was not made liable by the lease to pay the bill from Rintoul, its liability was (at most) to do certain things. I do not think clause 12.18 applies to the cost to the landlord of doing something under clause 11.3. If clause 12.18 is as broad as this argument would suggest, it would mean that a number of other specific provisions in the lease for the tenant to reimburse the landlord's cost of doing something, including clauses 7.1, 7.12, and 10.3, are superfluous. If I thought the position were unclear, I would construe it contra proferentem.
Clause 5.8 is also referred to in the second Further Amended Plaint, although I do not think it is relied on expressly in the written submissions on behalf of the plaintiff. The clause, like the first part of clause 11.3, is essentially concerned with giving a right to the landlord to enter the demised premises for particular purposes, including to carry out works which the tenant has failed to carry out in accordance with the provisions of part 5 of the lease. Since such a power is only needed during the term of the lease, I do not think this provisions survives the expiration of the lease, so that it is not a power which can be exercised after the expiration of the lease. Since clause 5.8(b) gives a right in the landlord to recover from the tenant only costs and expenses incurred by the landlord in the execution of “any such work” it follows from the fact that this clause is not applicable to any work done after the expiration of the term that it is of no assistance to the plaintiff in this case when all of the work relied on as the basis of the plaintiff's claims was done after the expiration of the term. In any case, it only applies to the alleged breach of clause 5.2, the only matter raised in part 5 of the lease.
Clause 11.4
The final matter relied on was the alleged failure to yield up the premises to the plaintiff at the expiration of the term “in good and substantial repair and condition in all respects and as nearly as possible in the same condition as the premises were at the commencement of the term”. If, as I think is the correct construction of this clause, it imports an obligation to yield up vacant possession, plainly that was not done, but the plaintiff is not claiming for the costs of securing vacant possession from the sub-tenants. It did not secure vacant possession from them; it entered into separate agreements for them to remain in possession. The fact that ultimately they all left is, I think, irrelevant to this point. So far as the obligation was to yield up the premises “clean and free from rubbish”, the premises were not in this state as vacant premises, but there is no evidence that, considered as premises occupied by the sub-tenants, they were not at the relevant time “clean and free from rubbish”. The fact that after the sub-tenants had vacated and work had started on stripping the interior of the ground floor that part of the premises was rather a mess, as shown by Exhibit 6, is I think irrelevant and provides no evidence of lack of cleanliness or presence of rubbish as at 1 May 1995. There is also no evidence that at that time the premises were not “in good and substantial repair and condition (having regard to the age of what is being surrendered or yielded up) in all respects” viewed as premises occupied by sub-tenants, which was what was being surrendered and yielded up.
There is some authority for the proposition that a clause such as clause 11.4 does impose an obligation to remove tenants' fixtures, of the nature of partitioning, at least in some circumstances, if their presence has the effect that the premises as a result have become untenantable. This was the view of the majority of the Full Court of South Australia in Wincant Pty Ltd v. State of South Australia (Full Court of South Australia, 13 August 1997, BC 9703640.) In that case there was a right on the part of the tenant to remove tenant's fixtures at the expiration of the lease, corresponding to the provision in clause 10.2, but unlike clause 10.2 there was no right on the part of the landlord to require the tenant to remove the fixtures, nor any automatic obligation imposed specifically to remove those fixtures. The court however went on to consider whether their presence meant that there was a breach of the obligation to yield up the premises in good and tenantable repair. Doyle CJ said:
“The premises should be regarded as having been vacant premises when possession was taken ... The obligation of the tenant is to yield up the premises in a lettable condition having regard to their condition at the time when possession was taken. ... It does not follow that a covenant to yield up premises in good and tenantable repair means that a tenant is always obliged to remove tenants' fixtures. It means only that a tenant can be obliged to remove fixtures, the presence of which has the result that the premises are not in good and tenantable repair.”
He noted that this approach applied specifically in a case where “the lease provides for no more than the usual right for a tenant to remove tenants' fixtures and the usual covenant to deliver up premises in good and tenantable repair.” It follows that this construction was adopted in the light of the terms of the lease as a whole, so that even a clause worded in similar terms would not necessarily receive the same construction if there was some other relevant provision elsewhere. There was a similar approach adopted by Matheson J, the other majority judge.
Olsson J dissented. He noted that, as he put it, the lease contained no “decommissioning clause”, and the proposition that prima facie there is no obligation to remove tenants' fixtures at the conclusion of the term: Neverstop Railway (Wembley) Ltd v. British Empire Exhibition 1924) Inc [1946] 1 Ch 877. After some further analysis of the terms of the lease, his Honour, for reasons which I need not summarise, concluded that the presence of the tenant's fixtures did not mean that the tenant was in breach of the equivalent of clause 11.3 of the present lease. Personally, I find the reasoning of Olsson J rather more persuasive than that of the majority, and would observe that it accords with the position advanced in an English text on the subject, Dowding and Reynolds “Dilapidations” (Sweet and Maxwell, 1995) at p. 479. In any case, the majority decision is distinguishable in this case because clause 10.2 provided an express right on the part of the lessor to require the lessee to remove tenant's fixtures at the expiration of the term, a right not found in the lease there under consideration. This, I think, is relevant to the construction of the “yield up” term since the lease must be construed as a whole, and I think reduces the force of the argument relied on by the majority that unless that clause is given such an effect the landlord is left without a remedy where the practical effect of the tenant's fixtures being left in place was that the premises were untenantable. The decision of the majority can therefore be distinguished. Indeed, it could also be distinguished on the basis that in the present case the premises were not untenantable as they were on 1 May 1995; on the contrary, immediately upon the expiration of the lease to the defendant the whole of the premises were let “as is” to new tenants, that is the sub-tenants. That is a practical basis for distinguishing the decision in Wincant.
The premises were not in the same condition as at the commencement of the term; apart from anything else, intertenancy walls had been erected on the ground floor, the fit out in QPS was almost entirely put in by that sub-tenant (pp. 122, 310), and some changes had been made on the first floor: p. 311. Presumably there had been some other changes. If, contrary to my view, one approaches the matter on the basis that the obligation in clause 11.4 applied to require the removal of tenant's fixtures and had not been waived[15], the tenant was in breach of it.
Clause 11.4 contains no power for the landlord to do at the tenant's expense what is required to remedy any failure to comply with the clause. This is because the ordinary remedy is an action for damages for breach of covenant. On my construction of the lease, clause 11.3 does not apply because by the time clause 11.4 has been breached, the lease has expired, and in any case it gives no entitlement to recover the cost of work done under it. If I am wrong about these two matters, however, it would follow that a failure to comply with the obligation in clause 11.4 gave a right on the part of the plaintiff itself to “do or effect such thing by itself as if it were the tenant ...”: clause 11.3. Leaving aside for the moment any difficulties that this may have caused the plaintiff in respect of the agreements it had made with the sub-tenants, the plaintiff would have been entitled (on this hypothesis) pursuant to the lease, upon the failure of the defendant to fulfil its obligation under clause 11.4, itself to make 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 ...”. The plaintiff did not do that. What it did was simply continue the tenancies it had negotiated with the sub-tenants pursuant to which they continued to use the premises as they were, and pay rent to the plaintiff.
I do not think that the clause in the defendant's lease means that if at, any later time the landlord does such work on the demised premises, it can charge the defendant the costs of doing the work. In the absence of any stipulation as to time, any such work must be done within a reasonable time: Canning v. Temby (1905) 3 CLR 419 at 424. Because clause 10.2 provides that any removal by the tenant at the instance of the landlord occur “at or immediately following the expiration of the term”, a reasonable time would be fairly short. If the defendant had remained in possession under this lease until 30 April 1995, and then yielded up the premises “as is”, and the plaintiff had then entered into a new lease under which the premises were let “as is” to a new tenant, the plaintiff would not be entitled, after that tenant had departed, to make good the premises at the expense of the defendant. That is not the situation contemplated by clause 11 of the lease, but that is in effect what happened here. It is as if the defendant yielded up the premises “as is” and the plaintiff let them “as is” to the sub-tenants. It then sought, after the expiration of the respective new tenancies, to make good the premises at the expense of the defendant. Whether or not it could do so at the expense of the sub-tenants is, I think, irrelevant; in my opinion it cannot do so at the expense of the defendant. That is not within a proper construction of clauses 11.3 and 11.4.
That conclusion renders it unnecessary to deal with the separate question of whether any of the works subsequently undertaken by the plaintiff in fact amount to performance by it of the obligations of the defendant under clause 11.4 (assuming that there were some), or indeed any of the other clauses. In fact, the plaintiff did not at any time “make good” the demised premises; what it did was substantially refurbish them and then fit them out to suit new tenants. That is different work, not the performance of any obligations of the defendant under the lease, and accordingly the work does not fall within clause 11.4 and the cost of it is not recoverable. In my opinion, that applies whether or not some details of the works carried out happened to correspond with things which would have been done if the premises had been “made good” by the plaintiff. The work done by the plaintiff must be considered and characterized as a whole: Brew Bros v. Snax (Ross) Ltd [1970] 1 QB 612 at 641, 645. It follows that on this basis as well the plaintiff's claim would fail.
Perhaps I should stop at this point, but I have not dealt with all the arguments advanced on behalf of the plaintiff, not dealt with any issues of contested fact or credibility, and most importantly, have not dealt more specifically with the question of quantum. However confident I may feel about the outcome on liability, I think that it is my responsibility to deal in detail with the issue of quantum in case different views may be taken elsewhere. It is also convenient in the process to deal in more detail with the sequence of events as revealed by the evidence. This more detailed history was not set out earlier, as I think reference to it is really unnecessary to decide the case, but it may prove to be necessary if a different view is taken.
Detailed History
The Certificate of Title on p. 1 of Exhibit 1 was originally issued on 29 March 1983 to Kern Konstruction Pty Ltd, with a transfer to Commonwealth Banking Corporation being presented on 8 April 1983 and registered on 21 April: p. 2. There is a Certificate of Classification dated 25 March 1983 (p. 3) which suggests that the building was then new. The lease to the defendant was produced on 16 August 1984, and registered on 3 September 1984, but it expressed to run from 1 May 1983: Exhibit 1, p. 2. On 8 April 1986, two leases to the Commonwealth of Australia were produced and registered 28 April 1986: both ran from 1 December 1983 to 13 November 1993, and appear to cover all of the floors. The inference is that the building originally had only two leases, one for the annexe in favour of the defendant and one for the tower in favour of the Commonwealth of Australia. According to Mr. Stewart, the plaintiff's general manager (p. 206), the tower was occupied by the Department of Veterans' Affairs in 1993, but the department moved out when the lease to the Commonwealth of Australia expired: p. 230.
The freehold was transferred to Commonwealth Bank Officers' Superannuation Corporation by some vesting instrument produced on 12 July 1991 and registered in 28 November 1991, and the transfer to the plaintiff was then produced on 1 September and registered 9 September 1993: Exhibit 1, p. 2. This was pursuant to a contract dated 31 July 1993: Exhibit 1, p. 17.
The plaintiff, a subsidiary of a Canadian company (p. 230), during the relevant period owned two other properties in Brisbane: p. 6. According to Mr. Stewart, in 1993 the building needed major refurbishment: p. 230. His intention (therefore the intention of the plaintiff) was for the building to be refurbished to A grade quality office space: p. 231. The intention was also to refurbish the annexe (p. 231) along the lines of what had been done in the tower, subject to access to the annexe (p. 218) where the lease ran for 17 months longer than the lease in the tower. The annexe was also seen as needing upgrading: p. 58. By May 1995, the refurbishment program, which had transformed the tower from a rundown former government tenancy to a building which Mr. Stewart agreed could possibly be one of the city's finest A grade buildings (p. 235) was nearing completion. This would have led to higher rents: p. 116. The refurbishment cost several million dollars, including a complete overhaul of the airconditioning system, the refurbishment of the lobby and courtyard areas, stripping of all internal areas and a cosmetic face lift to the lift areas (p. 235) and the replacement of all ceiling tiles: pp. 53-4.
I have already referred to the earlier negotiations between the plaintiff and P & O. The first advice on behalf of the defendant that it was not interested in seeking to extend the lease was the letter from ANZ Bank of 16 February 1995: Exhibit 25. The reaction of Mr. Petfield was endorsed on the letter: “Great news”:p. 100. He passed the letter on to Mr. Stewart, who returned it with a note: “We should now proceed with our homework on reviewing the lease and sub-leases and determine the applicable make-good in order to table with ANZ”: Exhibit 25, p. 101. Mr. Petfield said he spoke with two contractors to ascertain the works that would be required for a make-good in accordance with the lease: p. 11. One was Rintoul, from which company Mr. Glover was asked to do some pricing on 5 March 1995: p. 174. He then produced a quote to the plaintiff dated 8 March 1995: Exhibit 1, p. 235. This was for a total price of $33,447, but did not make provision to remove the carpet or to replace the ceiling tiles and carpet: Exhibit 1, p. 237. Mr. Petfield's recollection was that a quote was also obtained from someone else, either a firm called Quadric or a firm called Formula, although he could not recall which: p. 76. He was vague about this matter, but thought that more than likely it would have been a quote in writing.
No such quote was discovered by the plaintiff but, in response to a call made on the first day of the trial, on the third day of the trial counsel for the plaintiff produced what was identified as a copy of a quotation from Quadric Pty Ltd to the plaintiff which became Exhibit 33: p. 210. The document is certainly not an original document, it is dated 8 March 1995, and was sent to the attention of Mr. David Petfield, setting out a quote totalling $39,899. The document has on it a “received” stamp which when applied (either to Exhibit 33 or an original of which Exhibit 33 is a photocopy (see p. 252)) was dated 31 August 1995, but someone had altered the date to 4 (or 14) March 1995; Mr. Stewart said that the initials on ex 33 were those of Mr. Petfield: p. 251. Unfortunately, by the time the document was produced, Mr. Petfield was no longer available to answer questions about it.
The document is a curious document in a number of respects. The signature looks as though it has been sent through a facsimile, but the document does not contain the usual line across the top found on documents which have been transmitted by facsimile. That also suggests that this is a photocopy of the document received on the facsimile. One advantage of those lines is that they provide some evidence of when the document was sent. The fact that the date has been altered is curious, but the alteration is quite obvious, and appears to have been initialled by someone, possibly Mr. Petfield. The other feature is that, like the quotation from Rintoul, it is dated 8 March 1995, but on 6 March the plaintiff wrote to ANZ Bank saying:
“We have obtained two quotes in regards to making goods the tenancies both on ground floor and first floor of the annexe building at 133 Mary Street. The lowest of these two prices if $38,450.”
No quote dated prior to 8 March 1995 was produced, and the lower of the two quotes carrying that date was $33,447: Exhibit 1, p. 237. Mr. Petfield did say that on or about 6 March the price of $38,450 was supplied to him by Rintoul: p. 16.
There was a quote for $38,450 provided by Rintoul, on 13 October 1995: Exhibit 1, p. 239-41. Except for one matter, the work is described in identical terms to the work in the earlier quote; the one difference is that the earlier quote contains in respect of the tenants in 1, 2 and 3 an item “Install ceiling tiles supplied by Quadra Pacific to replace damaged ceiling tiles removed” whereas the corresponding item in the later quote says: “Supply and install ceiling tiles to replaced damaged tiles”. The earlier quote contains the note: “No allowance to remove carpet or replace ceiling tiles and carpet” and the later quote contains the notes: “The supply of ceiling tiles has now been included. No allowance for carpet removal or replacement”. On the face of it therefore the difference between the two quotes is that the later one includes the cost of the supply of ceiling tiles. If that is the only difference between the quotes the use of the price of $38,450 in March might be because that figure was quoted orally (or calculated) as a figure including the ceiling tiles. The difficulty with this however is that the difference, $5,003, is not evenly divisible by 12 and the ceiling tiles were being charged for at a rate of $12 each. This appears from the quote at p. 248 of Exhibit 1. At this rate the difference represents approximately 417 tiles, significantly more than the number ultimately claimed by the plaintiff, 346: Plaint para. 13A(a)(i). The proposition that the other prices were changed to reflect increased costs seems unlikely since the items on p. 3 of each quote (p. 237 and p. 241 of Exhibit 1) which do not include any ceiling tiles come to the same amount. As well, it would be a remarkable coincidence if changes in price levels between March and October 1995 happened to produce the figure used by Mr. Petfield in March. The explanation given by Mr. Petfield initially that the later quote involved an updating of the prices (p. 15) was not correct.
Mr. Petfield's evidence at p. 16 about the supply of the ceiling tiles was less than frank; it is true that they were unique ceiling tiles for the building, but there was no question of Rintoul having an impossible task to supply them, because the tiles were to be supplied by the plaintiff from tiles it had obtained in a larger order. There was no difficulty about Rintoul's quoting a price which included the supply of the tiles, as it did in October, and as it must have done if the figure of $38,450 was provided to Mr. Petfield on 6 March as he claimed: p. 16. I think it more likely that Mr. Petfield simply obtained a verbal quote from Mr. Glover and adjusted it, in a way not explained in the evidence, to take into account one or more of the matters excluded from it. I think it more likely that, in August, when the defendant's solicitors had complained that no copies of the two quotes had been provided (Exhibit 1, p. 205), Mr. Petfield procured Exhibit 33 and the “revised” quote from Rintoul to justify his letter of 6 March.
In any case, the letter of 6 March 1995 did not produce any response from the defendant, nor did the follow up letter of 26 April 1995. On 2 June 1995, a further letter was signed by Mr. Petfield and sent by the plaintiff to the bank which referred to the letters of 6 March and 26 April and continued:
“As at this date, we have not received any correspondence from your organisation in regard to the make-good at the above address totalling $38,450. You will notice on your current rental statement that this amount has been included and will continue to be included together with interest calculated in accordance with your lease until such time as the outstanding amount is paid.”
That letter was written at a time when there had been no agreement to pay that amount, and when on the plaintiff's case none of that money had been expended by the plaintiff. There is, of course, no provision in the lease requiring the defendant to pay to the plaintiff an amount of an estimate or giving the plaintiff any entitlement to interest as asserted in the letter. No attempt was made during the trial to seek to justify on any basis an entitlement to $38,450 as an existing debt in early June 1995. Mr. Petfield, when asked about the letter, said that he disagreed with the proposition that the entry go on the rental statement, but he was instructed to write the letter: p. 99[16]. Mr. Stewart, in his evidence in chief, accepted responsibility for the letter, which he described as a “somewhat stiffer letter than what had been sent previously” (p. 226) in order to jolt the defendant into some sort of activity to get some discussions going: p. 223. Mr. Stewart said that he would have read the relevant clause in the lease before that letter was sent (p. 227) and accepted that he did not expect to receive payment in response. He obviously has considerable experience with commercial leasing, and to his credit he did not pretend that he had any belief that on some basis or other that amount was properly payable at that time.
That letter, in my opinion, was a misguided and thoroughly disgraceful attempt to intimidate the defendant, which was quite unsuccessful; the reaction it prompted was a letter from the defendant's solicitors denying liability in that sum, or any amount: Exhibit 1, p. 200. Endorsed on the letter is a note by Mr. Stewart: “David, see notes attached”. Those notes were not discovered, and Mr. Stewart could not offer any explanation for that omission: p. 227. The failure to discover that note might not be significant itself, but there were other serious deficiencies in the plaintiff's discovery in this action, and that is an issue to which I shall return. The plaintiff responded to the solicitor's letter with the surprising assertion (Exhibit 1, p. 201) that the arrangement with the sub-lessees had no relevance to the obligation to make good under the lease, and again requesting payment as detailed in the previous letter, within 14 days, notwithstanding that as at 19 June there was still no basis upon which any amount was payable on any view of this lease. The defendant's solicitors held firm: Exhibit 1, p. 202.
On 26 July 1995, the plaintiff's solicitors wrote to the defendant's solicitors again demanding payment of $38,450 “together with interest thereon at the rate specified under clause 11.3” without however identifying the date from which interest was said to accrue. The relevant part of the letter continues “We will notify you of the accrued interest once your client's remittance to cover the outstanding costs is received”: Exhibit 1, p. 204. Earlier in the letter there is the statement “The cost to our client of repairing and making good is $38,450.” Reference is also made to a number of clauses in the lease, none of which provide for payment on the basis of an estimate of costs, or payment prior to work actually being done by the lessor. At the date when this letter was sent no work had been done with a view to making good the premises. It is difficult to believe that a letter in these terms would be sent by a responsible firm of solicitors other than on instructions from its client that the work had been done.
The letter also contains a statement: “In discussions as early as February 1995, our client clearly requested that all tenants fixtures, fittings and signage be removed at the expiration of the term”. Again, it is difficult to believe that responsible solicitors would include such a statement in the letter without instructions from the client to that effect. Any such instructions must have been false. There has not been one word of evidence before me of any such discussions which “clearly” requested that these items be removed, and the only reference to make good obligations at any time was in very general terms, and was plainly directed to extracting a sum of money from the defendant rather than the performance of work. That does emerge “clearly” from the evidence is that the plaintiff not only never requested that any particular work be done, but did not want any work to be done by the defendant; what the plaintiff wanted was a contribution from the defendant to subsidise the cost of renovating the premises in accordance with its long standing intention. Not surprisingly, the letter of 26 July 1995 was rejected in detail by the solicitors for the defendant: Exhibit 1, p. 205. In the course of that letter the point was made that the defendant had not been furnished with copies of the quotes.
The next letter from the plaintiff's solicitors was dated 17 October 1995. The date, I think, explains the fact that a quote was obtained from Rintoul on 19 October 1995 for an amount which corresponded with the amount which had been demanded in the earlier letters. It appears that a copy of that quote was enclosed: see Exhibit 1, p. 208. The letter of 17 October 1995 contains the surprising statement: “Clearly, any arrangement made by our client with any sub-lessee was following the expiration of your client's head lease, and subsequent to the full and ample opportunity of your client to fulfil its make good obligations under the headlease.” That statement is plainly false; arrangements had been made with each of the sub-lessees prior to the expiration of the lease to the defendant for the sub-lessees to stay in possession as tenants of the plaintiff on the expiration of the lease to the defendant. Again, a demand for payment is made of a sum no part of which had at that stage been expended by the plaintiff, but that circumstance did not deter the solicitors from repeating a demand for interest. The contents of this letter also suggest that the solicitors were receiving false instructions from the plaintiff. The letter was comprehensively rebutted by the solicitors for the defendant: Exhibit 1, p. 209.
In a further letter dated 5 December 1995, (Exhibit 1, p. 211), the plaintiff's solicitors, who say that they now have the benefit of counsel's opinion, advised that their client “will now be undertaking the make good works in rectification of your client's breach without further reference to your client”. By this time CPS had vacated its premises on (31 October: Exhibit 1, p. 233). It is not clear whether CPS was the first sub-tenant to leave; Mr. Petfield did not know whether CPS or Protech left first (p. 74) and the plaintiff made no attempt to prove the dates when the various sub-tenants vacated. It appears however that P & O was still in occupation of more than half of the annexe in December 1995. Mr. Petfield said that P & O moved out in July 1996, evidence which he gave under cross-examination after he had been shown a document which he said refreshed his memory: p. 95. Although much of Mr. Petfield's evidence was very vague, I think that this part was accurate. There appears however to have been no obstacle in December 1995 to the plaintiff's “now” undertaking make good works in at least part of the downstairs area.
The plaintiff had obtained a further quote from Rintoul on 29 November 1995 for certain works to be done, for an amount of $13,127. This was limited to works on the ground floor, and was much less extensive than the earlier quotes. A number of matters were excluded, at the request of Mr. Petfield: p. 174. By a purchase order dated 30 November 1995, the plaintiff instructed Rintoul to “make good the tenancies of CPS and Protech” in accordance with that quote: Exhibit 1, p. 243. That work was done from 4 December 1995 (p. 134) and an invoice of $13,127 in accordance with the quote was sent by Rintoul on 11 December, received by the plaintiff on 14 December (Exhibit 1, p. 244) and paid by cheque dated 29 December: Exhibit 1, p. 257[17]. The quote at p. 242 of Exhibit 1 does not contain details of the costs for the particular work, but (reconstructed: p. 134) details were provided by Mr. Glover: Exhibit 29. This work involved essentially clearing out the space formerly occupied by CPS and Protech, and putting it into the fairly bare state described by Mr. Stewart as the state in which it was marketed, that is without floor coverings et cetera: p. 237.
Part of the space previously occupied by CPS was then let to Priority One: p. 49, p. 74. It is not clear when Priority One went into occupation, but it appears from the purchase order dated 20 February 1996 which is at p. 246 of Exhibit 1 that it was in occupation by that date. At some stage there was a change to the general configuration of the downstairs tenancy. Although a plan of the offices occupied upstairs by P & O (p. 190) eventually came into evidence through Mr. Glover (Exhibit 31), at no stage was there evidence of the actual layout on the ground floor either at the time when the sub-tenants were occupying it or after it was re-let; ultimately Air New Zealand occupied just under half of the ground floor (p. 195) and the rest was divided between Priority One, Flight Centre and NID with the Flight Centre tenancy being apparently somewhat smaller than the other two: p. 114[18]. There had to be some change to the configuration on the ground floor, to accommodate these different tenancies; a new corridor was put in to provide for access to the toilets and tea room by the various tenants, which must have been an addition to the common area. The plan of the first floor at p. 91 of Exhibit 1 shows that an area (occupied by toilets and a shower) along the southeastern wall was excluded from the tenancy, and a stair well (see Exhibit 31) on the northeastern wall was also excluded. The plan of the ground floor on p. 90 of Exhibit 1 contains similar exclusions and a further area linking the two, which was apparently some further stairs as it was necessary to go up a few stairs in order to get to the toilets on the ground floor: p. 55. This left a lease area on the ground floor of 415 square metres, but that area must have been reduced by the corridor to enable access by the various tenants to the toilets. No details were provided of where this corridor was put in, or when the work was done, but I think it probable that the creation of this corridor would have affected the area let to Priority One so I think it likely that it was done before the Priority One tenancy became established.
The upgrading works involved upgrading the airconditioning and replacing the ceiling tiles. A large quantity of ceiling tiles was supplied by Armstrong World Industries Pty Ltd to the plaintiff pursuant to an order dated 15 May 1995, originally for a total of almost 8,000 square metres (Exhibit 7) although subsequently about 1200 square metres was credited and presumably not delivered: Exhibit 10. The balance was 6,735.1 square metres, very much more than was required to replace all the tiles in the annexe. The price was $12 per carton, less 2.5% discount for prompt payment, and after deducting the amount of the credit note and the 2.5% (see Exhibit 7), and apparently making some other minor adjustment, an amount of $77,052.42 was paid by the plaintiff to the supplier by cheque dated 1 June 1995 (Exhibit 9) after having been certified as correct for payment on 23 May 1995 by Robert Talbot Projects (Exhibit 8), who were the project managers for the refurbishment of the whole building: p. 43. It is a matter of calculation from Exhibits 7 and 10 that the cost of the tiles to the plaintiff was $5.55 each. A figure of $5.64 was calculated during the trial (p. 43) but this does not allow for the 2.5% discount, which the documents show the plaintiff received.
Nevertheless, the quote from Rintoul dated 21 August 1996 contains a quote for supply of ceiling tiles at $12.00 per tile: Exhibit 1, p. 248. According to Mr. Glover, if tiles had to be supplied to the account of a tenant, the plaintiff would charge for the tiles at $12.00 each (p. 183) and that was confirmed by Mr. Petfield: p. 91. Mr. Glover conceded that he did not necessarily receive an invoice from or pay the plaintiff for the supply of these tiles: p. 183. The tiles apparently are specific to the building, and effectively not available other than from the plaintiff.
Where a contractor like Rintoul is engaged by the tenant to do this work, and buys the tiles from the plaintiff at $12.00 per tile, the plaintiff is merely exploiting its position as the monopoly supplier to make a substantial profit at the expense of the tenant. According to Mr. Glover, the plaintiff is not the only landlord of a large building which engages in this practice, an indication of the business morality of such people, made worse by their refusal to supply the tiles other than in boxes of 10, even if only one is required: p. 184. Apart from any question of commercial morality, where the plaintiff is seeking to recover the cost to it of doing the work itself, it is obvious that the only amount which can be recovered is the cost of the tiles as supplied to the plaintiff; that is the cost paid to Armstrong for the tiles actually used, and ultimately that was the only cost sought in submissions in writing on behalf of the plaintiff at the end of the trial. However, prior to the trial[19], claims had been consistently advanced of an entitlement to recover $12.00 per tile on the basis that the tiles were “supplied” at that price by the plaintiff to Rintoul, and then supplied by Rintoul back to the plaintiff. That was a sham, and was an attempt to increase the amount recoverable by returning to the plaintiff a profit element to which it was not entitled. To claim $12.00 per tile in these circumstances was, in my opinion, clearly dishonest, and wholly unjustified by the terms of the lease.
According to Mr. Petfield, the whole of the renovation work on the ground floor was not done at the one time: p. 49. He also thought that Priority One may have been in occupation before it was done: p. 92. I suppose it is possible for the ceiling tiles in the Priority One tenancy to have been replaced after the tenant went into occupation (by 20 February 1996: Exhibit 1, p. 246 and see transcript p. 76), although it seems unlikely. I think, however, that it is very likely that at some stage before February 1996 the walls necessary to create the area being let to Priority One would have been built, and some suitable floor covering put down, and if necessary an access door created. Since the tenancy was part of the area previously occupied by CPS, at least one new intertenancy wall would have to be created, and if there was a corridor created at the back, there would have to be another wall built there. I think that the reasonable inference is that all the work was done at the same time, but what has occurred is that separate documentation was created in respect of that part of the work which was to be the subject of the claim from the defendant. Other works were separately documented in this way, as is shown by the next piece of work that was done.
On 18 February 1996, Rintoul quoted the plaintiff amounts for replacing a sheet of glass and a glass fin, which in the quote was said to be “due to vandals over the weekend”: Exhibit 1, p. 245. Both pieces of glass were replaced, and indeed both pieces were ordered by Rintoul at the same time (p. 182) so Rintoul was asked to do all of the work referred to in the quote of 18 February 1996, but separate purchase orders were issued, the one for replacing the glass fin being number 175 dated 20 February 1996: Exhibit 1, p. 246. An invoice in respect of that purchase order from Rintoul is dated 30 May 1996, for $740 (Exhibit 20), and was marked by Mr. Stewart: “Re make good OK”, and also contained an annotation “Tenant Charge Mercantile Mutual”. No one gave any evidence in support of the existence of the damage to the glass fin prior to 1 May 1995[20]. It was not mentioned on either of the quotes dated 8 March 1995 or the quote dated 13 October 1995, or the quote dated 29 November 1995 which was specific to the area where the fin must have been. It seems extraordinary that Mr. Glover would miss this damage if it had been in existence when these earlier quotes were prepared. No damage is shown in the bundle of photographs which became Exhibit 6 and which must have been taken at the time when work started on clearing out the CPS premises in December 1995. There is a glass fin, apparently undamaged, shown in the photograph Exhibit 3. Had there been any damage to the glass fin at that stage, I think it likely that it would have attracted the photographer's attention.
The natural reading of the quote at p. 245 of Exhibit 1 is that both pieces of glass were damaged over the weekend by vandals. Mr. Petfield was characteristically vague about the damage to the glass fin, but he asserted that the damage occurred in two separate incidents on two separate occasions, and that the fin was damaged first: p. 20. I think that this evidence was false and was intended to cover the circumstance that plainly what happened here was a dishonest attempt to recover the cost of the damage to the glass fin from the defendant by pretending that it was part of the make good work. The inference that that was dishonest is, I think, supported by the fact that the document which appears at p. 245 of Exhibit 1 was not discovered by the plaintiff prior to the trial[21]. The claim was persisted in until the end of the trial when it was formally abandoned by counsel for the plaintiff: p. 317. There was not a shred of evidence led before me that the $740 claimed for the cost of replacing the glass fin was work necessary to make good the premises following the expiration of the defendant's lease, and I think that the fact that this amount was claimed at all, and as long as it was, reflects very badly on the plaintiff.
After P & O vacated the premises in July 1996, it was not necessary for them to be marketed as arrangements were made with Air New Zealand[22], a tenant of the plaintiff in a different building, to move into the space occupied by P & O, and just under half (p. 195) of the ground floor: p. 238. On 21 August 1996, Rintoul provided two quotations to the plaintiff for doing work in what was described as “P & O annexe building”, each for $18,769. One of the quotations, which became Exhibit 28, gives details of the amounts allowed for 16 specific items, and also priced a further four items which were presented as savings “if both stages proceed”. The second quote dated the same day omits the details of the charges and, presumably by mistake, item 16, and the four items of saving, but is for the same total: Exhibit 1, p. 248. Again, the impression is that the latter document was produced for the purpose of being shown to the defendant[23].
There was a purchase order issued by Mr. Petfield dated 28 August 1996, but apparently signed in early September 1996, for the works to be carried out as outlined in “your letter dated 21 August 1996” at a price of $18,769: Exhibit 1, p. 249. The same day (p. 85) Mr. Petfield signed a further purchase order which asked the plaintiff not to carry out five items of work, which were the items 4, 9, 12, 13 and 14 in Exhibit 28: Exhibit 4. Mr. Petfield's explanation for the raising of this “credit” is on p. 22:
“There were certain works that were not carried out at that time. We deemed it appropriate for a credit to apply in this instance. We had raised a purchase, 249, for the full amount of - of 18, however certain works weren't carried out, so in order to finalise and complete that job, we credited out the works that were not undertaken at that time but which were to be undertaken at a subsequent time.”
That answer is inconsistent with the second order having been issued at the same time as the purchase order; it suggests that, after other work had been done, the further order was issued to cancel the remaining work. A further attempt to explain on the same page was no more helpful:
“Can't be exact except I believe we - our intention would have been to carry out the entire works of $18,000 odd at the time, and as works were not too - weren't going to proceed for some time we raised the credit note of approximately $8,000 to remove the scope of works which did not proceed for that particular job.”
According to Mr. Glover, the work was done between 29 August and 6 September 1996: p. 176. I think it unlikely, however, that work started before the purchase orders were even signed, and this discrepancy makes me doubt Mr. Glover's reliability.
After the work was done, Rintoul forwarded two documents, an invoice number 5296 dated 20 September 1996 for $18,796 (Exhibit 24) and a credit note for $8,122: Exhibit 23. There is a stamp on Exhibit 24 which makes provision for the cheque number to be inserted, and cheque number 487958 has been written there with the amount $18,769. The stub for cheque 487958 appears at p. 260 of Exhibit 1, but it is for $32,903, and includes a number of items as shown on the left hand side of the page: p. 215-6. The usual practice of the plaintiff when filling in the details of one of these payment stamps on an invoice was to refer to the cheque number and the amount of the cheque[24]. Mr. Stewart accepted that the entry on Exhibit 24 was unusual in not following this normal practice: p. 245. After further cross-examination Mr. Stewart admitted that the information was completed in this form on the invoice Exhibit 24 because this was part of the claim and he wanted the record to show that the amount of $18,000 odd had been paid, when in fact it had not been because of the credit: p. 246.
Thereafter and up until just before the trial, the plaintiff's claim proceeded on the basis that it was entitled to be reimbursed the full amount of $18,769 in respect of that expenditure on this invoice. It was one of the invoices enclosed with the letter before action on 21 March 1997: Exhibit 1, p. 214. When the plaint was filed on 12 August 1997, this invoice was identified in the particulars of the cost incurred by the plaintiff and paid to Rintoul alleged in para. 13, without any reference to the credit note[25]. In an affidavit sworn on 12 August 1997 and filed the same day (Exhibit 39), Mr. Stewart in support of an application for summary judgment, swore in para. 32:
“The plaintiff paid Rintoul the sum of $35,255 with respect to the work undertaken by Rintoul in making good the premises which is the subject of the invoices being Exhibit RWS 22 herein in the following manner:”
and there was then listed five invoices, one of which was number 5296, Exhibit 24. Although the cheque butt number 487958 was part of Exhibit RWS 24 to that affidavit (appearing as it does on p. 260 of Exhibit 1) there was no indication that the credit amount of $8,124 related to the invoice for $18,769. He further swore in para. 39:
“I know from my own knowledge that each and every of the facts pleaded in the plaint is true and correct”.
That includes verifying the allegation in para. 13 of the plaint that by cheque number 487958 the plaintiff paid $18,769 to Rintoul on 31 October 1996 in satisfaction of Rintoul's invoice number 5296 (i.e., Exhibit 24), which statement counsel for the plaintiff conceded was false (p. 256) although it had been repeated in an amended pleading filed as recently as five days before the commencement of the trial. Mr. Stewart knew about the credit note as early as 1 November 1996: p. 242.
It is clear, as indeed was admitted by Mr. Stewart, that the documentation was prepared in an artificial way to give the impression that more work had been done and paid for than had actually been done and paid for, in order to enable the plaintiff to claim the larger amount from the defendant and that exaggerated claim was persisted in in the plaint and in the judgment summons. Mr. Stewart was aware of the credit note, and indeed his initials appear on the invoice, Exhibit 24. He must have known of this arrangement. In the circumstances it follows that his affidavit in which he swore that this payment had been made was either a deliberate lie or at best displays a reckless indifference as to whether the contents were accurate. In this context, it is significant that until just before trial neither the credit note nor the other documentation which showed that the full amount of invoice 5296 had not been paid on 31 October 1996 was discovered, as admitted by counsel for the plaintiff during the trial: p. 256. I do not think that this was a case where a person was swearing to something of which he really did not have personal knowledge and was relying on other people to put together an affidavit for him to swear, and I reject his attempt at p. 266 to put the blame on Mr. Wigan. Mr. Wigan was the then financial controller of the plaintiff, and was on more than one occasion blamed by Mr. Stewart or Mr. Petfield for false aspects of the plaintiff's claim[26]. Mr. Wigan was not called as a witness by the plaintiff.
Steps were also taken about the same time to carry out the upgrading on the airconditioning system, and the other aspects of the refurbishment referred to earlier, in that part of the annexe where that work had not previously been completed. On 10 September 1996, the plaintiff obtained from East Coast Mechanical Services a quotation to carry out airconditioning works on the annexe (Exhibit 26), and in response on 23 September 1996, Mr. Petfield signed the plaintiff's purchase order number 380 for the work to be carried out in accordance with that quote at a price of $74,000, and also to carry out airconditioning work on the first floor involving replacement of flexible duct work, insulated header boxes and repairs to existing insulation at a price of $6,326: Exhibit 26. Much of this work must have been done during the month of October, because on 22 October 1996, East Coast sent an invoice for $65,000: Exhibit 26. By 12 November 1996, the work was described as 80% complete, although the outdoor condenser units were not then on site: Exhibit 26. A further invoice dated 22 November 1996 for the work done during November was forwarded by East Coast: Exhibit 27. The outdoor condenser units were installed and practical completion of the work was on 29 November 1996: Exhibit 7 (letter of 127 December 1996). That the upgrading involved replacement of flexible duct work and insulated header boxes is consistent with the evidence of Mr. Petfield that the whole airconditioning system was replaced except for some of the hard metal ducts: p. 104. I am therefore prepared to accept that evidence. He also said that the airconditioning work was done in conjunction with the tenancy fit out for the new tenant, Air New Zealand: p. 44, p. 92. This included work done specifically to suit the requirements of that tenant: p. 108.
Other upgrading work and the tenancy fit out for Air New Zealand was done by Rintoul, at about the same time. It is not clear from the evidence when the quotation process for this work commenced, but Exhibit 21 is a “revised quotation” from Rintoul dated 10 October 1996. Only five of the six sheets said to comprise the fax are in the Exhibit, and four of them are based on pages which had been faxed by the plaintiff at 5.33 p.m. on 30 September 1996. These pages headed “Schedule of Costs” are meaningless as they stand, and must have referred to an earlier document, presumably an earlier quote from Rintoul in response to some earlier request from the plaintiff to quote on identified work. The plaintiff then prepared a schedule in which it divided up the work in the quotation into four categories; work covered by purchase order 403, work covered by purchase order 404, work not required and work to be the subject of further discussion: see p. 252 of Exhibit 1. On 18 October 1996, Mr. Stewart signed the plaintiff's purchase order 403 in respect of the work in the second column in the schedule which commences at p. 252 of Exhibit 1 (Exhibit 22), and the following day he signed purchase order 404 in respect of the work in the third column: p. 251 of Exhibit 1. The purpose of having separate purchase orders was that the work the subject of order 404 was to be included in the claim[27]. That work was done and included in invoices from Rintoul number 5357 dated 26 November 1996 (p. 256 of Exhibit 1) and number 1254 dated 20 December 1996: p. 258 of Exhibit 1. On 26 November 1996, Rintoul also sent invoice 5358 seeking payment for the work done pursuant to purchase order 403 (subject to adjustments) for $17,002: Exhibit 11. Payment was made for invoices 5357 and 5358 on 31 December 1996 by one cheque number 771337 for $18,812: p. 261 of Exhibit 1. Although invoice 5357 has had “landlord works” written on it by someone, and “please include incentive drawdown” written on it by someone else, the amount covered by this invoice and in voice number 1254, also endorsed “landlord works” have always been included in the plaintiff's claim. The balance of the works covered by purchase order 403 was charged for on 20 December 1996 by an invoice, also numbered 1254, for $2,100: Exhibit 12.
The reference to the “incentive” is a reference to the fact that, as an incentive to Air New Zealand to relocate to this-building, the plaintiff paid the cost of the fit out in an amount of about $100,000: p. 84. Exhibit 35 includes a page headed “Incentive Drawdown Air New Zealand”. That suggests that the amount of the incentive was about $136,000. Mr. Petfield said Air New Zealand was in possession before 25 December 1996: p. 29.
At some stage Mr. Petfield worked out a total amount to claim of $41,833.05: Exhibit 5. This document must have been prepared after 31 January 1997, and probably after 1 March 1997 which is the last date that it bears, but not long after that because there was a further account from the plaintiff's solicitors dated 26 March 1997 not included: p. 268 of Exhibit 1. This list includes the same five invoices which were in the plaint when it was filed, and which must be the invoices referred to in a letter dated 21 March 1997 from the plaintiff's solicitors at p. 214 of Exhibit 1. The date in Exhibit 5 of 1 March 1997 for “supply only ceiling tiles to Rintoul” is curious. Mr. Petfield, after he identified the document, initially suggested that “that may be around the date when the works were carried out as a whole package, around that date (p. 26)”. That is clearly wrong, as the installation of the ceiling tiles, at least in the area to be occupied by Air New Zealand, was included in the works covered by the plaintiff's purchase order number 403. See, for example, item 6 under area A in the Scope of Works document at p. 252 Exhibit 1. The tiles were apparently installed in or about November 1996.
Mr. Petfield said that the supply price for the tiles was $12.00, but the amount in Exhibit 5, $4,160, is not evenly divisible by 12. It is, for that matter, also not evenly divisible by $5.55. At p. 29, Mr. Petfield agreed that Exhibit 5 may have been prepared to provide instructions to the plaintiff's solicitors to write the letter of 21 March 1997, which refers to a claim in an amount which equals the total of the invoices at the top of Exhibit 5, although it does not refer to the other amounts on that document. He also suggested that it could have been sent to the accounts area to “make sure that those items were invoiced on the rental statement for the tenant”. In any case, the figure of $4,160 appears to have sunk without trace. Whatever the intended use was, the document is false in that it asserts that $18,769 was paid on 31 October 1996 to Rintoul. It is difficult to believe that by March the following year Mr. Petfield had forgotten the fact that not all of the work covered by purchase order 353 had been carried out by 31 October 1996, having been stopped by the “purchase order” number 354, and that because of the credit note the full amount was not paid on 31 October 1996. Mr. Petfield agreed at p. 97 that the entry on Exhibit 5 was not correct, but he offered the excuse that “our financial controller was to check the details so that these amounts could be forwarded to our legal representatives”. In other words, he was seeking to put the blame on the absent Mr. Wigan. I do not accept that Mr. Petfield intended when preparing Exhibit 5 that the relevant references to the credit for work not done in relation to this purchase order should be inserted subsequently by someone else.
Assessment of Credibility
There was, I thought, good reason to be very wary about the reliability of the evidence of Mr. Stewart. He swore the affidavit in support of the judgment summons (Exhibit 39) which contained the false statement referred to earlier in circumstances where he knew the true facts and either knew the affidavit was false or swore it without regard to whether it was true or false. He accepted responsibility for the letter of 2 June 1995 (Exhibit 1, p. 199); p. 223. I think he must have been aware of and approved the various unjustified claims which were made against the defendant. He asserted that the glass fin would not have been damaged by vandals because it was internal (p. 211) whereas it is obvious from the photograph, Exhibit 3, that the glass fin was one immediately abutting the external glass and therefore susceptible to damage in the event of a blow in the vicinity of the end of the fin. He claimed not to have noticed any changes internally in the premises from 30 April 1995 until Air New Zealand and the other new tenants moved in (p. 224) but since on 30 April 1995 the premises was wholly occupied by the sub-tenants, and after they left substantial work was done by Rintoul in the premises, much of which was claimed for in this action, before Air New Zealand and the new tenants moved in, this answer if true must mean that he had nothing to do with the premises during that period. He said that the work done by East Coast on the airconditioning system was performed prior to the fitouts being concluded and the move in of Air New Zealand, (p. 216). But this is inconsistent with the evidence of Mr. Glover that the fitout for Air New Zealand was finalised in October 1996 give or take a week (p. 125-6) and the invoices from East Coast which show that a significant amount of work was carried out in November and practical completion did not occur until 29 November: Exhibit 27. It may be however that this is not a problem of Mr. Stewart's credibility, but that of Mr. Glover; as will appear in a moment, he was, I think, in other respects unreliable as to the dates on which work was done. I dare say much of what Mr. Stewart said was accurate, but on the whole I do not think that I can regard him as a witness whose evidence is reliable except when it is supported by other evidence or documentation, or seems inherently plausible.
I have referred elsewhere to a number of deficiencies in Mr. Petfield's evidence. He said that the October quote from Rintoul (Exhibit 1, p. 239) involved updating prices (p. 15) which was obviously wrong. Apart from the fact that the scope of works was different and there was no change in the amount for that part which did not involve supplying ceiling tiles, it is fanciful to suggest that a quote which changed because of changes in price levels between March and October 1995 would, by coincidence, come to the same figure which had been used by Mr. Petfield in March 1995 in correspondence with the defendant. His evidence was frequently vague: by way of example, it was evasive and unresponsive at p. 79, line 50, and vague and unresponsive at p. 86, His evidence about the photographs, Exhibit 6, was very vague: p. 94, 95. He admitted that an entry he made in Exhibit 5 was false: p. 97. He claimed it was not intended to mislead, but it is, I think, only consistent with an intention to claim from the defendant an amount to which the plaintiff was not entitled because it had not done the work, something he must have appreciated at that time. It may not have been intended to mislead, but it was clearly intended to deceive the defendant. It was also untrue to claim that the work referred to in Exhibit 4 was in fact done later in 1996: p. 24. I am satisfied that the air conditioning was never returned to standard, and there was no evidence (and it would be equally improbable) that the lighting or the fire speakers were either. Overall, Mr. Petfield struck me as someone who was willing to say almost anything that he thought would be of assistance to the plaintiff in its' pursuit of this claim, regardless of whether it happened to be true, and I would not place any reliance on anything Mr. Petfield said unless it was backed up by reliable evidence, or was obviously right.
Mr. Glover was not directly associated with the plaintiff, but as a contractor being employed by the plaintiff and similar companies, he obviously had an interest in remaining on good terms with it. Parts of his evidence struck me as being fairly frank, such as when he was discussing the arrangement in relation to the ceiling tiles, but at other times it seemed to me that he was also trying to say what would be helpful to the plaintiff rather than trying to give his accurate recollection. He was vague about why there was an invoice for the full amount and a credit note following the two purchase orders (p. 176) but suggested that the full invoice may have been done first and the credit note prepared after it was realised that this was a mistake: p. 177. He later said that he was not asked to prepare the documents in this way by someone from the plaintiff, although he could not explain how that came about: p. 192. He did say elsewhere that the plaintiff was pretty pedantic about paperwork: p. 186. Mr. Petfield said much the same (p. 87) although this evidence is contradicted by Exhibit 12. Unless it was the case that someone on behalf of the plaintiff asked that the documentation from Rintoul be prepared in this way, the most likely explanation is that Rintoul was following the format of the two purchase orders given to it because it understood that that was what was expected of it.
I have also mentioned some difficulty in reconciling the evidence about when the work on the Air New Zealand tenancy was completed. If all this work was completed when he said, it seems strange that the Rintoul invoice number 5358, sent as late as 26 November 1996, was not for the whole of the work, but only for $17,002, said to be the value of “works completed to date”: Exhibit 11. Furthermore, invoice 5357 of the same date which related to the works in the plaintiff's purchase order number 404 also claims only about two thirds of the total contract sum on the basis of “works completed to date”: Exhibit 34. I think this shows that Rintoul was still doing this work after 26 November 1996, and I think that demonstrates that Mr. Glover's evidence at p. 126 is unreliable. Given that this purported to be a carefully considered answer following research into Rintoul's records, I think this must cast serious doubt on the reliability of his evidence generally. His evidence about when the work was done in response to the plaintiff's purchase order number 353 (Exhibit 1, p. 249) is consistent with the date in the upper part of the document, but not consistent with the date beside the signature which is a date in early September. I think it unlikely that Rintoul would have started the work before it received the purchase order, and most unlikely that that would have occurred prior to the date it bears as the date on which it was signed to authorise the work being done. I think that here again Mr. Glover's evidence is really not consistent with the contemporaneous documents. I therefore have to be, I think, reasonably cautious about Mr. Glover's evidence as well, and do not necessarily accept everything he says as being accurate.
Some reliance was placed on the evidence of Mr. Glover as to what were “make good” items of work: e.g. plaintiff's submissions at p. 27. Mr. Glover's experience was in renovating and fitting out office buildings; no expertise was proved as to the interpretation of clauses in leases, and if it had been it would have been irrelevant. The question of whether or not particular work falls within a particular provision in a lease is a question of law, a matter of construction of the lease. Mr. Glover can say that he did work X, Y and Z; he cannot say that that work is work which the lessee was required to do pursuant to a particular provision in the lease. To the extent that either Mr. Glover or Mr. Petfield gave evidence to the effect that particular work was “make good”, that is, fell within the terms of a particular provision of the lease, the evidence was inadmissible and I give it no weight.
I have already said something about the credibility of Mr. Bacon. On 3 September 1997 he swore an affidavit in response to an application for summary judgment by the plaintiff in which he referred to a conversation with the Queensland manager of P & O when he was advised that that company had made arrangements to stay in its premises on a month to month tenancy: p. 290. The reference to “month to month tenancy” is not reflected in Exhibit 37 and is inconsistent with Mr. Bacon's recollection during the trial that he was not told the terms on which P & O were staying on. In view of the documentation in Exhibit 1 concerning the negotiation for P & O to stay on, it is unlikely that he was told that it was a month to month tenancy since that is not what had been arranged. However, the affidavit and Exhibit 37 are not actually inconsistent. I do not think that this involves any deliberate modification of Mr. Bacon's account, but may reflect simply a change in what his recollection is at different times. As I have said, whether he was told anything or what about the terms of the arrangement with P & O is, in my opinion, irrelevant. In paragraph 11 of that affidavit, Mr. Bacon said that all fitout, carpet, drapes and partitions installed in the leased premises were paid for by the defendant: p. 306. However, in court he resiled from that statement, saying that it was an assumption on his part, as he did not have the file from the defendant when the premises were originally set up: p. 307. In any case, the statement is inconsistent with other evidence in relation to partitions and other fittings within the CPS tenancy; Mr. Bacon said that that was largely a vacant area when let to that company (p. 310) and that was confirmed by Mr. Daniel: p. 122, so I think that this part of the evidence is reliable. In these circumstances, I think that the statement in the affidavit was an assumption on the part of Mr. Bacon, and, in relation to the carpet at least, is unlikely to be reliable.
Mr. Bacon at times did seem very nervous about giving evidence (p. 272) but it can be a stressful experience for anyone, particularly a person who is not experienced in giving evidence. His discomfort may have been greater because of an expectation that he was going from the court to a dentist appointment: p. 312. There were some discrepancies in his answers on occasions, but my overall impression was, as recorded elsewhere, that he was honestly trying to tell me what he could recall about the matters. In the light of the various matters to which I have referred, I do not necessarily accept as correct everything that Mr. Bacon said, but on the whole I think he was a reasonably reliable witness. I would certainly prefer his evidence to that of Mr. Petfield.
What Work Was Done
I have not dealt in detail with the question of what work was actually carried out, because I think it is more helpful if I do this by reference to the claim and submissions on behalf of the plaintiff.
Invoice 4969 - $13,127
Item 1: Pull Down Partitioning
For reasons given earlier, in my opinion this amount is not recoverable under clauses 7.12, 10.2, 10.3, 11.3 or 11.4 of the lease. If, however the cost of pulling down existing petitioning and removing it from the site was recoverable under one or other of those provisions, I accept that this work was done by Rintoul at a cost to the plaintiff of $6,277 so that that amount would be the amount recoverable.
Item 2: Pull Down All Ceiling Tiles
For reasons given earlier, in my opinion this amount is not recoverable under clauses 10.2, 10.3, 11.3 or 11.4 of the lease. If contrary to my conclusion there was any obligation in relation to the ceiling tiles, it was only to replace those which were damaged. The plaintiff pulled down and dumped all of the ceiling tiles because part of the process of renovating the building rather than repairing damaged ceiling tiles: p. 53. Therefore, this work was part of the process of renovating the building involved the complete replacement of all ceiling tiles, and in my opinion is therefore not recoverable.
If contrary to my view it is necessary for me to apportion this cost on the basis of the number of ceiling tiles which were damaged, the evidence for this is quite unsatisfactory. There is no evidence that the figure of $800 was not what it is said to be, namely the cost in respect of all of the ceiling tiles in the ground floor tenancies previously occupied by CPS and Protech. The amount is broadly comparable with the amount quoted in Exhibit 28 on p. 2: “Remove all ceiling tiles and dump - $681.00”. This related to the P & O tenancy, which was the whole of the first floor and part of the ground floor. Plainly the figure of $800 does not relate to removing only damaged tiles. There was no evidence that there was some other amount paid for pulling down and dumping the balance of the ceiling tiles on the ground floor.
It was submitted on behalf of the plaintiff that Mr. Petfield's evidence was that item 2 on quotation 29 of November 1995 referred to a portion of the tiles on the ground floor rather than all the tiles, relying on p. 92 lines 49-52. What Mr. Petfield actually said, after conceding that pulling down and dumping all of the ceiling tiles was not part of the make good, was:
“Again, if there is a breakdown of costs on that, the cost I think will - may imply that it was a proportion rather than a 100% as the English states in that item 2.”
The answer is patent speculation on the part of Mr. Petfield in an attempt by him to prop up what was on its face a false claim by the plaintiff. Counsel for the defendant promptly called for any such breakdown, but no such breakdown was ever produced. To rely on that evidence by Mr. Petfield is grasping at straws. So is the suggestion that the qualification in the quote of 8 March 1995 should somehow be read into Exhibit 29 to qualify the inconsistent statement in that Exhibit. No detail was given of the breakdown of the quote of 8 March 1995. The evidence is overwhelming in my view that the figure of $800 was the cost of removing all the ceiling tiles.
There is no evidence that anyone ever counted the damaged ceiling tiles on the ground floor at a particular number. By a process of reconstruction based on the proposition that the number of damaged ceiling tiles in the P & O tenancy had been counted at 250[28], a figure of 96 ceiling tiles requiring replacement on the balance of the ground floor was referred to in the evidence and apparently adopted by Mr. Petfield at p. 26 line 58; in my opinion, the evidence on behalf of the plaintiff is not sufficiently reliable to persuade me on the balance of probabilities that there were 96, or any similar number, of damaged ceiling tiles on the ground floor. The figure of 96 was based on Mr. Petfield's figure of $4,160 in Exhibit 5. Given that Exhibit 5 also contained the false, and I believe dishonest, proposition that Rintoul had been paid $18,769 on 31 October 1996 in respect of the plaintiff's purchase order 353, it is difficult to see how I can place any reliance on this document. Calculations based on the assumption that the tiles were priced at $12.00 each (p. 26) are inconsistent with the fact that $4,160 is not evenly divisible by 12. It seems to me nonsense to suggest that $4,160 was arrived at by multiplying a counted number of damaged tiles by $12.00. Either the figure was simply one Mr. Petfield made up, or it was derived by a different process, not explained by the evidence. The entry in Exhibit 5 also suffers from the difficulty that the ceiling tiles were not supplied on 1 March 1997; all of them had been installed by December 1996 at the latest. In the circumstances I am not prepared to place any reliance on Exhibit 5 as evidence of the number of ceiling tiles supplied. Photograph K in Exhibit 6 shows 3 tiles slightly damaged. If any of the other tiles had been damaged there was nothing to stop a photograph being taken of them as well. No damage to tiles is apparent in photographs I and K. The plaintiff has only proved that there were 3 damaged tiles on the ground floor. If it is necessary for me to apportion, I would allow 3 tiles out of the total number required for the ground floor, a number also not proved but able to be calculated from the area of 415 sq.m. on p. 188 of Exhibit 1, since each tile is .474 sq.m: Exhibit 7. This is 876 tiles, but more would have been needed because of the irregular shape, so I will assume 900 tiles were replaced. On this basis, if I had to allow an apportioned amount, I would allow $3.00.
Item 3: Remove Joinery
For reasons given earlier, in my opinion this amount is not recoverable under clauses 10.2, 10.3, 11.3 or 11.4 of the lease. If, however, work of this nature were recoverable, I am satisfied that this work was done and paid for and, on the balance of probabilities, that it related to the removal of tenant's fixtures. I would allow the amount claimed of $800.
Item 4: Remove Bulkhead from Above Old Counter Unit in CPS Credit Union
The position is the same as item 3 and I would allow $550.
Item 5: Lift All Existing Carpet
Item 6: Lift All Existing Tiled Floor Areas
For reasons given by me earlier, in my opinion, this amount is not recoverable under clauses 10.2, 10.3, 11.3 or 11.4 of the lease. There is no evidence that the carpet was a tenant's fixture, nor was there evidence that it needed to be removed in order to leave 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). The reference to carpet on p. 65 of Exhibit 1 suggests that it was the property of the plaintiff. The argument on behalf of the plaintiff is really based on the proposition that it was necessary to lift all of the carpet because in part of the CPS tenancy the carpet had already been lifted and replaced with tiles and there was an obligation to lift and remove the tiles. The proposition was advanced that the tiles had been installed by CPS[29], although that was not put to Mr. Daniel, the witness from CPS called by the defendant. Mr. Daniel did say under cross-examination however that there “would have been carpet on the floor” when CPS moved in (p. 122) and despite the unsatisfactory nature of the evidence, on the whole I think it more likely than not that the tiles were laid for CPS.
The question then becomes whether there was an obligation on the defendant to remove the tiles at the expiration of the term. In relation to this, in clauses 10.2, 10.3, 11.3 and 11.4 are relied upon. For reasons given earlier, in my opinion there was no obligation under any of these clauses on the defendant to remove the tiles, but assuming that my reasoning earlier is wrong, I think the tiles were fixtures[30], and if there was an obligation to remove them, they were not removed and the plaintiff subsequently spent $600 removing them. I would not, however, regard them as falling within clause 11.4; the obligation there to have the premises “as nearly as possible in the same condition as the commencement of the term” is qualified by the further provision “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 having regard to the age thereof”. What happened during the term was that part of the carpet was replaced by the tiles, and there is no reason to think that the tiles were not clean and free from rubbish and in good and substantial repair and condition having regard to their age at the expiration of the term, so as to require them to be taken up and replaced[31]. There was no evidence of any agreement at the time the tiles were installed between the plaintiff and the defendant under which the defendant agreed to reinstate carpet in the area concerned, nor did the plaintiff attempt to sue on any such agreement.
On the basis however that the plaintiff was entitled to make good the area tiled, the question arises whether that entitled the plaintiff to pull up the whole of the carpet on the ground floor, apart from that part occupied by P & O. There was no evidence that that was necessary in order to reinstate carpet in the tiled area, and indeed it is clear that the taking up of the carpet, and for that matter the tiles, was really undertaken as part of the renovation of the building. The refurbishment included stripping of all internal areas: p. 65. I would, in any event, not allow any part of items 5 or 6 on the basis that this was really done as part of the refurbishment. If that approach is in error, there was at best an entitlement to remove the tiles, so that a maximum amount of $600 is allowable in respect of item 6.
Item 7: Dump All Rubbish
It is difficult to know to what this relates. There is a certain amount of rubbish shown in the photograph, Exhibit 6 (and Exhibit 3), but only that produced by lifting tiles and carpet and removing partitions. It appears that otherwise the premises were quite free from rubbish. There was no evidence that there was any rubbish other than that which would have been produced by the process of doing the work referred to in Exhibit 29, and items 1 and 2 were expressed to include the removal of what was pulled down. There was nothing to show that dumping rubbish was not confined in practice to that produced by the work, but if it was the plaintiff has not proved what amount is properly attributable to works falling within the terms of the lease. I would not allow any amount under item 7.
Item 8: Remove All Signage From Shop Front
Reliance was placed on clauses 10.2, 10.3, 11.3 and 11.4. For reasons referred to earlier in my opinion this amount is not recoverable under any of these clauses. In relation to signs, there is a specific provision in the lease dealing with signs, clause 7.1. This was not relied on, no doubt because there was no evidence that there was ever a written request from the plaintiff for the removal of whatever signs were the subject of item 8. In my opinion, the specific provision in relation to signs, clause 7.1, would exclude the operation in respect of signs of clauses 10.2, 10.3, 11.3 and 11.4. Accordingly, no amount is recoverable in respect of this item. If I am wrong about that, there is evidence that this work was done so the amount of $400 would be allowable.
Item 9: Sheet Over Inside of Glass Shop Front With Brown Paper
The plaintiff claims this amount pursuant to clauses 10.2, 10.3, 11.3 and 11.4 of the lease. Plainly, the work does fall within the provisions of any of those clauses. There was no evidence that at the commencement of the lease the glass shop front windows were sheeted over with brown paper, and indeed, if they had been sheeted over like that during the lease I would have thought that if anything clause 11.4 would have required the tenant to remove the brown paper. Even Mr. Glover seems to have found this claim surprising: Exhibit 30. Plainly, this was done in connection with the works the plaintiff was intending to do inside the premises. The proposition that this was part of the “make good” is ridiculous. This was blatant exaggeration of the claim.
Item 10: Disconnect Electrical in Partitions and Remove Excess Cabling
For reasons already given, in my opinion no amount is recoverable under clauses 7.12, 10.2, 10.3, 11.3 or 11.4 of the lease in respect of this amount. If I am wrong in those matters, this work was, I accept, reasonably necessary in order to remove the internal partitioning, and the amount which would be allowable under this heading would be $1,100.
Were it not for the other matters to which I have referred elsewhere, therefore, the most the plaintiff could recover in respect of the work the subject of invoice 4969 is $9,730.
Invoice 5296:
Amount of Invoice - $18,769
Amount Claimed - $10,647 (excluding items 4, 9, 12, 13 and 14) which amount was paid: Exhibit 1, pages 250,262.
Item 1: Pull Down All Existing Partitioning
This item is analogous to item 1 in respect of invoice 4969. For reasons given there, if contrary to the conclusions expressed earlier the cost of this work is recoverable it was $4,131.
Item 2: Removal All Joinery
This is analogous to item 3 of invoice 4969. For reasons given in respect of that item and that invoice, the appropriate amount established by the evidence is $350.
Item 3: Lift and Remove All Vinyl Floor Coverings
There is a reference to vinyl floor in one room in Exhibit 31. For reasons given earlier, I think it likely that initially the premises were carpeted and that any vinyl flooring would probably have been put in by the defendant or P & O. Accordingly, the vinyl floor coverings would have been fixtures, and if there was an obligation to remove them, the appropriate amount recoverable is $475.
Item 5: Strip Out Shower and Old Tea Room
Item 7: Convert Shower Back to Tea Room
Item 8: Make Good Tiling in Tea Room
It appears from Exhibit 31 that at least while P & O was in the premises there was on the first floor a shower between the toilets, and there was a separate kitchen built within the leased area. The toilets and the shower were not part of the demised premises (p. 93), and therefore there can be no liability in respect of those areas pursuant to clause 10.2, 10.3, 11.3 or 11.4 of the lease. Clause 10.2 refers to fixtures et cetera “brought upon the demised premises by the tenant” and clause 10.3 refers to “such fixtures” et cetera. Clause 11.4 refers to the state of “the demised premises” when yielded up. Clause 7.7 is also relied on, but in my opinion that is plainly not relevant. There was no evidence that the defendant was using the lavatories, sinks and drainage and other plumbing facilities for any purpose other than those for which they were constructed or provided, or that it had deposited or permitted to be deposited therein any sweepings, rubbish or other matter which they were not designed to receive, nor that any damage had been caused to such fecilities by misuse.
Mr. Petfield's evidence at p. 93 was very vague about this. The evidence of Mr. Glover at p. 190 is a reference to the physical state of the premises, not who put the shower in, let alone on what terms it was installed. The toilets and “tea room converted into a shower” on the first floor are plainly within the definition of common “common parts” of the lease in clause 1.1, but there is no evidence that anyone ever used the shower for any purpose other than that for which it was constructed, or caused any damage to it. The plaintiff's arguments in respect of these items are entirely without substance; indeed, it seems to me that these costs are so clearly not recoverable under the provisions of the lease relied on that this should be regarded as another example of exaggeration of the claim by the plaintiff.
There is simply no evidence as to how the shower came to be in the place which Mr. Glover thought had originally been a tea room[32], but the inference is that either it was provided by the plaintiff's predecessor in title, or was installed with the consent of the plaintiff's predecessor in title. It may have been the subject of a separate agreement, or it may have been provided by the Commonwealth Bank as an incentive to obtain the defendant as a tenant, or that bank may have consented to the defendant's installing the shower in that position in return for a payment then made of an amount to cover the cost of removing it in due course. There may also have been some arrangement between P & O and the then owner of the premises if the shower was installed for the use of P & O. Indeed, there may have been an independent agreement between the plaintiff and the defendant about the shower; it would not matter, it is not sued on in this action. It is sufficient to say that nothing which was done in respect of the tea room is recoverable under the clauses of the lease relied on in the second Further Amended Plaint, so items 5, 7 and 8 must fail.
Item 6: Dump All Rubbish
For reasons essentially the same as those which I have given in respect of item 7 on invoice 4969, in my opinion no amount is recoverable under this item. There was no evidence that there was any “rubbish” in these premises in the sense that that term is used in clause 11.4 either on 1 May 1995, or for that matter at the time when P & O vacated, although the idea that in some way the defendant should be responsible for any rubbish left behind when P & O vacated the premises merely serves to underline the complete unreality of the plaintiff's whole claim. The natural inference is that the “rubbish” referred to was that which would be generated by the process of doing the work set out elsewhere in the quote, and there was no evidence to the contrary. There is no basis on which I can find the amount properly attributable to those parts which would properly fall within the relevant clauses if the plaintiff was otherwise entitled to succeed. The plaintiff has not proved its entitlement to this item and it is not allowed.
Item 10: Make Good Ceiling Grid
For reasons given earlier, in my opinion this amount is not recoverable under clauses 10.2, 10.3, 11.3 and 11.4 of the lease. The evidence justifying this item was very thin, and for all I know, it may be a reference to work made necessary by other work being done on the ceiling, for example the replacement of the whole of the ceiling tiles. Counsel for the plaintiff did not trouble to identify in his written submissions any evidence relied on to support this claim; his written submissions were based on a reversal of the onus of proof, assuming he need say nothing about matters not expressly disputed by the defendant. In my opinion, the onus remains on the plaintiff to prove its claim. Notwithstanding the absence of assistance in respect of this item, I think on the whole it is more likely than not that this is properly characterised as repairs to the ceiling grid because of something which had been done to it as a consequence of the fitting out of the premises for P & O, or for the defendant, or possibly because of the slab-to-slab intertenancy wall built on the ground floor (p. 33), so that if my conclusions are otherwise in error, $80.00 is recoverable.
Item 11: Removal of Redundant Cabling And Terminate Switchboard
The reasoning in respect of item 10 for invoice 4969 applies here as well, and $670 would be allowable in respect of this item were it not for the other considerations referred to earlier.
Item 15: Leave Site Clean and Tidy
There is no explanation of the distinction between this item and item 6, and in my opinion the reasoning which applies to item 6 applies also to item 15 and I will not allow any amount under this item.
Item 16: Strip Wallpaper from Lobby Walls
This item appears in Exhibit 28, although it is unclear whether it is part of the plaintiff's claim. It does not appear in the quote of 21 August 1996 which is part of annexure A to the plaint referred to in the particulars to para. 12, and is not listed on p. 20 of the submissions in writing on behalf of the plaintiff, but on p. 24 item 15 is described incorrectly as “Strip Wallpaper from Lobby Walls”. There was evidence that after the premises had been vacated there was wallpaper on the lobby walls, but there is no evidence as to who put it there. The plaintiff has not proved that the wallpaper in the lobby did not involve having the premises as nearly as possible in the same condition as at the commencement of the term, nor that the wallpaper was not in good and substantial repair and condition having regard to its age. If it is part of the claim, the plaintiff has not discharged the onus of proving that this amount is recoverable.
The amount which I would therefore allow in respect of the amounts claimed for invoice 5296, if I was in error in all other respects, would be $5,706.
Invoices 5357 and 1254
Amounts Claimed - $1,810 and $809
It is convenient to deal with these invoices together since they do not themselves provide any differentiation in respect of the work done. These items reflect that part of the scope of works document commencing at p. 252 which was asserted to be properly part of the “make good”. The plaintiff had this work carried out as part of the reconditioning of the premises (which in my opinion is how the whole of the work included in the scope of works document should be characterised) and it was carried out in conjunction with the fit out of the premises for the new tenant, Air New Zealand: p. 185. On that basis, in my opinion nothing is recoverable under the provisions of the lease relied on.
Apart from these considerations, the items can be considered individually.
Item 2: Patch and Paint All Columns in Area A
There is a specific provision in the lease dealing with painting in clause 5.2, which in my opinion would exclude painting from the operation of the other provisions of the lease apart from clauses 5.1 and 11.4. No attempt has been made to rely on clause 5.1. Clause 5.2 is an obligation to paint “in the original colours”[33] and there is no evidence that the painting which was done in late 1996 was in “the original colours”. It is therefore not shown to be work which ought to have been done by the defendant under clause 5.2, and is therefore not recoverable. In relation to clause 11.4, there is no evidence that the columns in Area A were not in good and substantial repair and condition having regard to the age of what was being surrendered. It is not clear what is meant by Area A (p. 187), this being one of the matters that the plaintiff did not bother to prove. The position was simply that all of the painting costs in Area A on the ground floor (apparently the part of the ground floor which was to be within the Air New Zealand tenancy) were treated as part of the “make good” together with some of the painting costs on the first floor; there was no explanation of the distinction between painting the core walls and painting the core doors and frames (items 1 and 6 in the “first floor (general)” section on p. 254 of Exhibit 1.
The evidence relied on in support of this claim amounted to very vague assertions by Mr. Petfield and Mr. Glover that these amounts were properly part of the “make good”. In view of the fact that the same assertions covered as well a large number of matters which plainly do not properly fall within the lease obligations, and in view of my general lack of satisfaction with the evidence of Mr. Petfield, and concern about the evidence of Mr. Glover, I am not prepared to accept these general assertions. It seems curious that, if there was something actually in need of repair or not in good and substantial repair and condition, at the time when someone had a camera taking the photographs which became Exhibit 6, no one took the trouble to photograph those parts of the premises which would show want of repair. The plaintiff did not prove that these areas were painted because they needed to be painted. There is also the consideration that there is no evidence at all of any deficiencies in the painting present as at 1 May 1995; there is no reason why the defendant should be required to make good any damage to the paintwork caused after P & O became a direct tenant of the plaintiff. In my opinion items 2, 5 and 7 are not shown to come within clause 5.2 or clause 11.4 and are not recoverable. The true position was obviously that all of this painting was done to ready the premises for Air New Zealand.
Item 8:
This refers to the removal of P & O signage from the front doors. On this occasion the plaintiff did rely on clause 7.1, but there is no evidence of “a written request from the owner” to remove “all such of the tenant's signs referred to in such request”, and accordingly there was no obligation to remove this sign under that clause. In circumstances where there is a specific clause dealing with signs, in my opinion, the more general provisions of the lease do not apply, but if they otherwise do apply, there is no evidence that the sign was not one put up by P & O after 1 May 1995. It is not referred to either in Exhibit 33 or in Rintoul's quote of 8 March 1995 at p. 235 of Exhibit 1. This claim also fails.
The remaining items involving painting on the first floor: p. 254. For the reasons referred to earlier, in relation to painting items on the ground floor at p. 252, these amounts are not recoverable. It follows that on any view of the matter in my opinion the whole of the claim for invoices 5357 and 1254 fails.
Replacing Ceiling Tiles: Second Further Amended Plaint Paragraph 13A
The first thing to be said about the replacement of the tiles is that this was not work which involved repairing defect or damage; the renovation of the building included, throughout the tower and the annexe, the complete replacement of all ceiling tiles: p. 53. This was therefore not an exercise in repairing damage or undertaking work which the defendant ought to have done, and no amount is recoverable.
If I am wrong about that, the remaining issues are:
• how many tiles needed to be replaced;
• what was the cost of the tiles;
• what was the cost of the labour.
Number of Tiles To Be Replaced
There is no reliable direct evidence, in the form of contemporaneous documents, identifying the number of ceiling tiles requiring replacement. The figure of 250 tiles appears in Exhibit 28 and the equivalent document in Exhibit 1, but Exhibit 28 also contains a price for removing “all ceiling tiles” and I do not regard it as a clear contemporaneous document indicating that there were 250 ceiling tiles which were damaged and required to be replaced because they were damaged. What Exhibit 28 does show is that Rintoul was “charging” at $12.00 per tile for supply of new ceiling tiles, and $1.20 per tile to install them. Mr. Glover gave evidence that he counted the ceiling tiles that needed replacing at 250 on the first floor: p. 188. Mr. Petfield also said that he counted the tiles needing replacement in the P & O tenancy at 250: p. 27. I was quite unimpressed by Mr. Petfield's evidence and I have referred to a number of matters where it is unreliable, and I am not prepared to attribute much weight to his evidence. The tiles had an area of .474 square metres (Exhibit 7) and the leased area of the first floor was 443 square metres (Exhibit 1, p. 91) so it would have needed at least 935 tiles to replace the ceiling, and probably a few more because of the uneven shape. 250 therefore represented about one tile in four on the first floor. That seems a high proportion damaged, particularly if the ground floor which was of fairly similar size did have only 96 damaged tiles. Mr. Petfield attributed the relatively high level of damage on the first floor to the fact that cables from the P & O equipment were taken on ducting through the ceiling at points where four tiles met, so that more than usual damage was done. On the whole, in spite of my doubts about Mr. Glover's evidence, and grave reservations about that of Mr. Petfield, I am prepared to accept the figure of 250 tiles which were damaged on the first floor, and needing replacement for that reason, because the figure does appear in Exhibit 28 and such evidence as there is is uncontradicted. For reasons given earlier, the plaintiff has not proved that more than three tiles on the ground floor needed replacing.
Reliance was placed on behalf of the plaintiff on the principle in Enzed Holdings Ltd v. Winthea Pty Ltd (1984) 57 ALR 167 at 183 for the proposition that if a court finds that damage has occurred it must do its best to quantify the loss, even if a degree of speculation is involved. The court said when dealing with a claim for damages under the Trade Practices Act:
“If the court finds damage has occurred it must do its best to quantify the loss, even if a degree of speculation and guess work is involved. Furthermore, if actual damage is suffered, the award must be for more than nominal damages.”
As was pointed out in Atkinson v. Hastings Deering (Queensland) Pty Ltd (1985) 8 FCR 481 at 492, it is not easy to reconcile this proposition with earlier statements of principle in the High Court in Ted Brown Quarries Pty Ltd v. General Quarries (Gilston) Pty Ltd (1977) 16 ALR 23 and in Woodman v. Rasmussen [1953] St.R.Qd 202, especially at 215 per Philp J and 218 per Townley J.
In my opinion the principle referred to in the Full Federal Court applies in circumstances where a court is satisfied that there has been real damage suffered, but that the precise quantification of the damage is either necessarily, or in a practical sense, impossible, under which circumstances a court has to do the best it can. It is not a principle which justifies a court at guessing an amount of damages when the damages are, by their nature, capable of proof with some precision, and all the plaintiff does is show that it may have suffered, or even probably did, suffer some damage: Syntex Australia Ltd v. Ryan (Appeal 100/95, Court of Appeal, 6.8.96, unreported). I think it remains necessary for the plaintiff to prove its case. In the present case the issue of how many ceiling tiles were damaged was susceptible of proof with a high degree of precision, but no attempt was made to do this properly.
In this case the plaintiff had the opportunity to gather evidence over of a number of months before the work was done, a significant period after there had been an emphatic denial of liability on the part of the defendant. The plaintiff in this case had all the opportunity in the world to prepare its case properly and gather clear and reliable evidence of any damage, and it is difficult to believe that the failure to provide any proper evidence of the supposed deficiencies in the condition of the premises at the expiration of the lease was due to anything other than the fact that the premises were actually in a good state of repair, so that there was little damage to prove. A number of photographs, Exhibit 6, were tendered to illustrate the deficiencies; although these photographs were taken, there was no proper record of when or of what they showed, and although obviously there is some damage shown in them, it is not clear to what extent this reflects damage caused to the basic structure as distinct from damage to partitions which were to be removed anyway. There is no evidence of whether, for example, photograph H shows walls which were part of the basic structure of the building, or walls which were part of the partitions which were removed by Rintoul.
The second difficulty with reliance on the principle in Enzed Holdings (supra) is that that principle relates to the assessment of damages. Here the plaintiff is suing in debt: Jervis v. Harris [1996] Ch. 195. The principle has no application in this case. If the plaintiff is suing in debt, the plaintiff either proves that the defendant is indebted to it in a particular amount, or fails.
Cost of the Tiles
Paragraph 13A of the second further amended plaint claims an amount of $6.62 per tile. Exhibit 7 is an invoice for 7,905.4 square metres of tiles at $12 per square metre, but it is apparent from notations on the exhibit that the plaintiff deducted 2.5% for payment. Accordingly, the plaintiff actually paid $11.70 per square metre for the tiles. Each tile has an area of .474 square metres, so the cost per tile to the plaintiff was $5.55. Mr. Petfield, at p. 43 when calculating a price per tile of $5.64 cents, did not take into account the 2.5% discount. Counsel for the plaintiff in submissions at p. 31 relies on the figure of $5.64, which is said to have been admitted in the defendant's written submissions at p. 20. In fact, at p. 20 the defendant's written submissions merely refers to this passage in the evidence of Mr. Petfield, and a passage at p. 91 which does not refer to a supply price with great precision. At p. 92, Mr. Petfield was unable to explain the figure of $6.62 claimed in the plaint, and no elucidation emerged from the submissions from counsel for the plaintiff. It appears to be simply another manifestation of the plaintiff's propensity to exaggerate its claim. I do not consider that anything in the defendant's written submissions prevents me from making what I consider to be a correct assessment on the basis of the evidence before me, which is that the cost to the plaintiff per tile was $5.55.
Installation Costs
In Exhibit 28, Rintoul quoted in effect $1.20 per tile to instal the new tiles. In view of this, Mr. Glover's evidence at p. 178 that the labour costs for installing 250 tiles would be about $580 - $600 is clearly an exaggeration and I reject it. He produced a document which became Exhibit 30 (incorrectly identified at p. 178 of the transcript as Exhibit 13) which is based on an item of $2,200 for installing ceiling tiles to the first floor. It expressly allows for removing tiles from the lessor's stock in the tower, but even allowing for the fact that some 100 cartons would have been involved, it seems strange that this increased the cost from $1.20 per tile to $2.20 per tile, particularly because the tiles for the ground floor also had to be brought from the tower: p. 127. It seems to me that the two quotes are just inconsistent and suggest that Mr. Glover's pricing was somewhat erratic. I think the lower one, Exhibit 28, is likely to be the more reliable, or at least more reasonable. At $1.20 per tile the installation for the number of tiles I would allow (253) is $303.60.
The total cost of the replacement proved was therefore $1,707.75, but for reasons given earlier this is not recoverable.
Airconditioning Costs
Paragraph (b) of para. 13A of the Second Further Amended Plaint claims an amount for “returning the airconditioning back to a standard layout” on the basis that this was part of the work done by East Coast Mechanical Services. The work which was to be done by East Coast according to the plaintiff's purchase order included the replacement of flexible duct work and insulated header boxes: Exhibit 26. Mr. Petfield said, and I accept, that everything except some of the hard metal ducting was replaced: p. 104. There is no reliable evidence that, prior to the time when the whole of the airconditioning system except the hard metal ducting was removed, the airconditioning unit was returned to a standard configuration[34]. No one in his right mind would have gone through the farce of repositioning the airconditioning ducts which were about to be dismantled and removed anyway, and I would require clear evidence from a reliable source to persuade me that someone had actually behaved in such a fashion. There is, in fact, no clear evidence from any source that this work was done; the only evidence relied upon are vague generalisations. It is irrelevant whether, when the new flexible duct work was put in, it was put in to a standard layout or non-standard layout. That was either part of the process of virtually replacing the airconditioning system, as part of the general renovation of the building, or, to the extent that something specific was done to the airconditioning system in order to accommodate the requirements of Air New Zealand, part of the fit out for Air New Zealand[35]. Work on the airconditioning system would only have been recoverable if the existing system had been returned to a standard layout. Although at an earlier stage that was included in the quotes, and was part of the work dishonestly included in the claim for the full amount for invoice 5296, that work was not then done, and I find that it was never done. This part of the claim is wholly rejected.
Legal Costs
By clause 12.4 of the lease the defendant is liable to pay the plaintiff's legal costs “of or incidental to any and every breach or default by the tenant hereunder and in or incidental to the exercise or attempted exercise of any right, power, privilege, authority or remedy of the owner under or by virtue of this lease ...”: Exhibit 1, p. 87. The plaintiff claimed a total of $16,067.49 on this basis, particularising the full amount of 5 accounts from Messrs Clayton Utz, one fee note from Mr. Campbell of counsel, and 5 accounts from Messrs Lynch and Co: Second Further Amended Plaint, para. 15. In circumstances where I am not persuaded there was any relevant breach of covenant on the part of the defendant, or at least no breach which survives election or estoppel, there is necessarily no amount recoverable under clause 12.4.
However, apart from this difficulty, again the plaintiff has failed to prove its case. There is evidence that it paid the various accounts and fee note referred to in pea. 15, but there is no evidence of what work was done for which those charges were made. In the absence of such evidence, the plaintiff has not proved that they were costs which met the description specified in clause 12.4 of the lease: see Outlook Credit Union Cooperative Ltd v. Popovic (unreported, Writ 4463/86, 4.9.87, Thomas J) especially at p. 16. The evidence of the plaintiff was limited to the assertion that all of these costs were incurred in connection with the dispute with the defendant, but in circumstances where much of what was in dispute between the plaintiff and the defendant did not, on any view of the matter, involve any breach of the lease on the part of the defendant, that in my view is not good enough. The only evidence of what has been done by the former solicitors are the letters which appear at pages 203, 207, 211 and 214 of Exhibit 1. All but the last of those letters contained assertions which, in my opinion, were completely unjustified, for reasons that I have already advanced; the last of the letters demanded payment in an amount substantially in excess of any amount which at that stage could properly be regarded as owing. The question whether $3,173.05 is a reasonable amount for legal fees for the writing of five letters admits of only one answer. For all I know, most of the fees charged by Messrs Clayton Utz resulted from that firm's strenuous, lengthy and comprehensive but ultimately unsuccessful attempts to persuade the plaintiff not to pursue its unjustified, exaggerated and dishonest claims. The plaintiff changed solicitors before the proceedings started. Counsel for the plaintiff, in his written submissions, did not seek recovery of the fees paid to Messrs Lynch and Co other than by way of an order for the costs of the action, (p. 41) so I need not consider that part of the claim.
The submissions in writing from both sides dealt at some length with the question of what a plaintiff has to show in terms of the amount charged by the solicitors, and whether or not the quantum of the amount can be challenged in proceedings of this nature, or whether it is necessary for the defendant to apply for taxation of the bills pursuant to the Queensland Law Society Act 1952. I mean no disrespect to those helpful submissions, but given that I am of the view that no amount is recoverable anyway, I do not propose to extend this already very lengthy judgment further by any analysis of those questions. If the matter goes on appeal, these important questions of principle can be resolved by the Court of Appeal. Once that court determines what it is that the plaintiff has to prove in a case such as this, the outcome in relation to this part of the claim should be fairly obvious, since the plaintiff's evidence in support of this part of the claim is almost vanishingly thin. I think the only other thing that I need to say is that, notwithstanding my views otherwise about Mr. Stewart as a witness, I accept his evidence at p. 216, lines 11-18. I should also say that I do not accept the evidence of Mr. Stewart at p. 228 to the effect that the change was made from Messrs Clayton Utz to Messrs Lynch and Co because the former firm was going too slowly. I have serious reservations about Mr. Stewart's reliability, and in the circumstances and given the nature of the claim the plaintiff was trying to assert, I think it more likely that Messrs Clayton Utz were declining to pursue the claim in the manner in which the plaintiff wanted it pursued, or at least were giving unwelcome advice about the matter.
Interest
Again, given my findings to date I do not think it is appropriate that I attempt any interest calculations. I should however say something about an issue which arises in relation to the interpretation of clause 11.3 of the lease, which provides for interest on “any monies due by the tenant to the owner or any account whatsoever pursuant to this lease but unpaid for 10 business days...”. Although the provision is in a clause permitting the lessor to rectify the lessee's default, it is in its terms not confined to money recoverable on that basis. It provides for a payment of interest:
“...at the rate 2 percentage points higher than the interest rate per annum then being charged by the Commonwealth Trading Bank of Australia for overdraft accommodation of less than $100,000 on any money due by the tenant to the owner on any account whatsoever pursuant to this lease ... to be computed from the due date for the payment of the monies in respect of which the interest is changeable until payment of such monies in full and be recoverable in like manner as rent in arrears.”
The difficulty with this clause is that it attempts to define an interest rate by reference to something which, although it may have existed at the time the clause was drafted, no longer existed at the times relevant to this action. There was at the relevant time no longer a “Commonwealth Trading Bank of Australia”: p. 197. The current equivalent, the Commonwealth Bank, does not have an annual rate for overdraft interest, interest on overdraft accounts being charged either quarterly or monthly: p. 202. In addition, there is no single “interest rate per annum then being charged” by the Commonwealth Bank “for overdraft accommodation of less than $100,000 ...” since the rates vary depending on the individual circumstances of the borrower: p. 203. This demonstrates that such a clause is badly drafted, but it does not necessarily follow that it is void for uncertainty.
In circumstances where it is clear that there was an intention to make some provision for interest to be charged on monies outstanding, I think a court should strive to give some meaning to the clause, although difficulties in construction should, I think, be resolved contra proferentum. The evidence of Mr. Connell, which I accept, is that there used to be something called a standard rate but this was discontinued for new customers some time ago, although existing customers on that rate are not disadvantaged by subsequent changes; more recently the overdraft rate is calculated by reference to an overdraft index rate (OIR) but the rate charged in a particular case might be higher or lower than the OIR. Although the rates charged for individual customers might be above or below the OIR (p. 202), very few customers would get less than the OIR (p. 205) and the average customer would be paying a bit more than the OIR, in effect the same as the amounts quoted for the standard rate: p. 203.
An interest rate is commonly expressed as a certain percentage per annum, even if interest is to be paid more frequently than that. The clause, I think, was intended to ensure that the bank rate used as a basis for the calculation was to be one expressed as a rate per annum, so that the 2 percentage points had the effect of increasing that interest by 2% per annum in order to calculate the interest payable per annum under the lease. The more usual and lower interest rate was that charged monthly (p. 198) and I think that is the rate I should use when applying clause 11.3. It seems to me that the competing rational constructions of this clause are that it provides for interest at the “average” interest rate, which in fact corresponds to the “standard” rate or, that I should apply the OIR on the basis that this is the benchmark rate. The fact that the lease provides for a loading over and above the bank rate provides some logical support for the use of the benchmark rate, that is, the OIR, and I think that is reinforced by the rule of construction referred to earlier since the OIR is the lower rate. Accordingly, if it were necessary to calculate interest pursuant to clause 11.3, I would do so at the rate of 2% per annum in excess of the OIR rate for interest charged monthly as stated in Exhibit 32. The only other point I should make is that it is clear that clause 11.3 provides for simple interest, since interest is payable at the specified rate “computed from the due date for payment ... until payment of such monies in full ...” There is no justification for the compounding displayed in annexure B to the Second Further Amended Plaint.
Deficiencies In Discovery
I should not conclude this judgment without making some comment on the serious deficiencies in the plaintiff's discovery which emerged in the course of the trial. The first deficiency was that the documents which demonstrated that not all the work apparently charged for by Rintoul's invoice 5296 had actually been done, that is, the second “purchase order” and the credit note, were not included in any affidavit of documents and were made available to the defendant's advisors only shortly before the beginning of the trial. These documents are not even included in the trial book which became Exhibit 1. No valid reason for the failure to discover these documents was advanced either by Mr. Petfield or by Mr. Stewart. Mr. Petfield said these documents were with the other papers relating to the work (p. 87) and that they had been supplied to the legal advisors (p. 88). Mr. Stewart, at p. 249, said that he assumed that the solicitor knew about it and he relied on the solicitor's advice. I am very reluctant to accept that any solicitor who was told of the true situation here would not promptly advise that all of the documents were discoverable. I think these documents were suppressed because the creation of the separate documentation was a deliberate exercise by the plaintiff in making it appear that more work had been done than was actually done at that stage, in order dishonestly to inflate the claim against the defendant.
The second deficiency was that the letter at p. 245 of Exhibit 1, which indicates that the glass in the window and the fin were damaged by vandals in February 1996, was not discovered. Mr. Stewart could not advance any explanation for the failure to discover this document (p. 261) but I think again the obvious inference is that it was suppressed because it showed that the claim for reimbursement of the sum of $740 was unjustified. The third was the failure to discover the notes referred to on p. 200 of Exhibit 1, which Mr. Stewart could not explain (p. 227) but which might have just become detached and misplaced. The fourth was the failure to discover (or provide as requested: p. 250), the “second” quote, Exhibit 33. The fifth was the failure, indeed apparently the refusal, to disclose the documentation in relation to other work done by Rintoul, and others, on these premises, which again Mr. Stewart could not explain: p. 250. Here, however, it was actually argued on behalf of the plaintiff that these documents, some of which were ultimately referred to in the particulars in the later versions of the frequently amended plaint, were not discoverable because they were not relevant until the plaintiff claimed that some of the work done pursuant to them included work which was the subject of its claim. In my opinion, given the nature of the claim, and particularly in the light of the issue raised in para. 26 of the Entry of Appearance and Defence filed on 21 October 1997, all of the documentation relating to all of the work done for the plaintiff on the annexe from the time the sub-tenants moved out until the annexe was re-let was relevant and discoverable within the established test for the application of the requirement imposed by rule 182(1) of the District Court Rules. It is not clear whether the argument to the contrary was an attempt to defend the position taken spontaneously by the plaintiff, or whether it reflected bad legal advice which had been given to the plaintiff about the extent of its obligation to make discovery, but in either case it shows that there was a serious failure on the part of someone properly to approach the obligation to make discovery in this action. I do not think that this was a case where various relevant documents were simply innocently overlooked. In view of what did emerge, and such documents as were produced, I have perhaps more than the usual doubts about the extent to which the conclusions I have arrived at on the basis of the evidence before me in this case correspond with reality.
Conclusion
It follows that the plaintiff's action should be dismissed with costs. Costs were reserved on 5 September 1997 when a judgment summons by the plaintiff was unsuccessful. Given that the plaintiff has ultimately failed, and in the light of the fact that that judgment summons was supported by a false affidavit by Mr. Stewart, the plaintiff should also pay those reserved costs.
The order as drawn up says that, in respect of this application and hearing, “there be no order as to costs”. That was an error which arises from an erroneous endorsement by my associate to that effect. In my book I have written “costs reserved”; and the transcript of my reasons on that occasion shows that I said that I would reserve the costs. I therefore order pursuant to rule 108(2) that paragraph 3 of my order of 5 September 1997 filed 16 September 1997 be deleted and replaced with:
“Costs of and incidental to the application be reserved.”
The matter was again before me on 22 April 1998 on the hearing of the plaintiff's application for the defendant to file and serve an affidavit of documents. Again, unfortunately, the endorsement made by my associate of the order does not correspond with the order I made as recorded in my book, and in the transcript. On this occasion I did make no order as to costs. Again, pursuant to rule 108(2) I order that paragraph 2 of my order of 22 April 1998 be amended by deleting “costs to be reserved” and substituting “there be no order as to costs”. On 17 August 1998, His Honour Senior Judge Trafford-Walker made an order by consent in terms of a draft that the certificate of readiness be dispensed with, the action be set down on the callover list and the costs be reserved. The costs on that occasion were reserved because they were agreed to be reserved, and subject to any further argument, they should follow the event.
Subject to any further argument about the costs reserved on 17 August 1998, I give judgment for the defendant and order the plaintiff to pay the defendant's costs of and incidental to the action including reserved costs to be taxed.
Counsel for the plaintiff: | T.W. Quinn |
Counsel for the defendant: | J.H. Dalton |
Solicitors for the plaintiff: | Lynch and Co |
Solicitors for the defendant: | Corrs Chambers Westgarth |
Dates of Hearing: | 19, 20, 21, 22 January 1999. |
IN THE DISTRICT COURT HELD AT BRISBANE QUEENSLAND | Plaint No. 3371 of 1997 |
Between:
QUADRA PACIFIC (AUST.) CORP. PTY LTD | Plaintiff |
And:
MERCANTILE CREDITS LIMITED | Defendant |
SUMMARY OF REASONS FOR JUDGMENT
PREPARED BY McGILL DCJ
4 JUNE 1999
The plaintiff was at the material time the owner of an office building at the corner of Edward and Mary Streets, Brisbane, consisting of a tower block and a two story annex. The defendant leased the annex from a prior owner of the building, but had sub-leased the space to three sub-tenants, whose sub-leases were to expire the day before the lease to the defendant expired.
The lease contained various clauses refening to the state of the premises at the end of the lease, which can be conveniently referred to as the obligation to make good the premises. The sub-leases contained similar provisions.
Prior to the end of the lease the plaintiff made arrangements with the sub-tenants for them to stay on in their space after the end of the lease as tenants of the plaintiff. The defendant was told of these arrangements by the sub-tenants, and as a result did not require them to vacate the premises so as to enable it to give vacant possession to the plaintiff at the end of the lease, or to make good their premises before the defendant did any additional make good work required of it under the lease. Had it been vacating the premises, it would have done this work itself.
At the end of the subleases and at the end of the lease the sub-tenants remained in possession of the annex as the premises were. A few months later, two of them left, and the areas occupied by them were stripped. Within a year the third sub-tenant had also left, and the remaining area was stripped, and the premises were renovated. This was part of the plaintiff's plan to renovate the whole building.
By this action the plaintiff claimed what it said was the cost to it of doing work to make good the premises, which was done after the sub-tenants left, on the basis that this was work which could have been done by the defendant under the make good provisions. The defendant disputed liability.
In my opinion by arranging for the sub-tenants to stay on in possession of the premises at the end of the lease the plaintiff had elected not to require the defendant to give it vacant possession at the end of the lease, and had therefore elected not to require the defendant to make good the premises, since that could not be done with the sub-tenants in occupation of the premises. As well, the plaintiff, by making this arrangement with the sub-tenants, represented by conduct that the defendant was not required to vacate and make good, and in reliance on that representation the defendant did not do so, so the plaintiff is estopped from alleging that the defendant was required to make good the premises.
Apart from this, the plaintiff has not shown that its' case comes within the specific terms of the lease relied on:
- (a)Clause 5.2, because the situation referred to did not arise, and because the plaintiff has not proved its case;
- (b)Clauses 7.1 and 10.2, because the plaintiff did not require the defendant to do the relevant work;
- (c)Clauses 7.7, 7.12 and 11.4 because on their true construction there was no breach proved;
- (d)Clause 10.3 because on its true construction it does not apply;
- (e)Clause 11.3, because it did not provide for work to be done at the expense of the defendant.
As well, I have found that several aspects of the plaintiff's claim were exaggerated and unjustified:
- (a)Claims were made for costs of the removal and replacement of all the ceiling tiles with new tiles, although this was not a matter of repairing damage, but renovating the building.
- (b)The cost of returning the air-conditioning to standard was claimed, when that was not done; virtually all the airconditioning system was replaced as part of the renovation.
- (c)The cost of removing carpet was claimed when that was not required under the lease.
- (d)The cost of work done outside the leased area was claimed, although that was not within the provisions of the lease relied on, and there was no reliable evidence that the work was the responsibility of the defendant.
- (e)Repainting which was part of the process of renovating the premises for a new tenant was claimed, when there was no evidence that there was any damage to the old paint work.
In assessing the reliability of the plaintiff's evidence; it was relevant for me to take into account that I was satisfied that claims which had been made prior to the trial, but were not persisted in, were unjustified, exaggerated or dishonest:
- (a)The plaintiff had prepared documents in such a way as to make it appear that work costing $18,769 had been done, when work costing only $10,647 had been done and paid for. This was to make it possible to claim the larger amount from the defendant, and the general manager of the plaintiff swore a false affidavit in support of this claim. As well the documents which showed that the claim was false were not disclosed to the defendant until just before trial.
- (b)The plaintiff claimed that a glass fin had to be replaced, when there was no evidence that it was damaged at the relevant time, and the only evidence of the cause of the damage was that it was caused by vandals months after the end of the lease. At the end of the trial the plaintiff abandoned this claim.
- (c)The plaintiff until just before trial was claiming that the cost of replacement ceiling tiles was $12 each, when the actual cost to it was $5.55 each, but the plaintiff had pretended to supply these tiles to its contractor at $12 each so that the contractor could supply them back to it at that price, thus making it appear that $12 was the supply price. Such a process is in my opinion dishonest, and quite unjustified by the terms of the lease.
The way in which the plaintiff made the make good claim against the defendant, and pursued it in this case, was thoroughly unsatisfactory. There were serious deficiencies in the plaintiff's discovery, and much of the claim was clearly unsupported by any provision in the lease. There was evidence that it is common for make good obligations to be resolved by the payment of an amount by the tenant to the landlord. If the behaviour of this landlord in this case is typical of its' behaviour generally, or of the behaviour of such landlords generally, it would I think be a cause for serious concern on the part of tenants. The only evidence before me which referred to anything other than this lease was evidence that the practice of overcharging on the supply of ceiling tiles was something done as well by other landlords. Whatever may be the position under other leases, where the lease is in the terms of this lease and the work is done by the landlord all that the landlord can claim is the cost of tiles to the landlord. To charge a greater amount is unjustified by the terms of the lease, and if it is done without disclosing to the tenant the true situation, is in my opinion clearly dishonest. If there is such a practice, it should stop.
Footnotes
[1]The term “make good” is not used in most of the relevant provisions of the lease, but it was used during the trial and is a convenient way of referring collectively to various provisions of the lease which are relevant, so long as one does not assume that the effect of those provisions is necessarily to require the lessee to make good the premises.
[2]This and all other documents not otherwise identified as exhibits were in a bundle of documents which became Exhibit 1. It is at pages 73-96.
[3]This document is described in the index to Exhibit 1 as “unstamped” yet on p. 162 there are notations which indicate that the document has come to the attention of the Commissioner of Stamp Duties and suggest that it is properly stamped, and on the basis of those notations I find that stamp duty has been paid and will not exclude it from evidence.
[4]See also p. 79 when Mr. Petfield said that Mr. Bacon claimed that the defendant could carry out the works at substantially reduced cost. If that was said, it was true, in view of my findings later.
[5]He said at one stage that he believed that he had the advice from Mr. O'Keefe before he spoke to the sub-tenants (p. 287), but by reference to a diary note the consultation can be fixed at 28 April 1995: p. 290. It is possible that he also spoke to Mr. O'Keefe on or before 27 April, by telephone, and spoke to the sub-tenants as a result; otherwise his recollection of the sequence is wrong. As well, I accept that he spoke to them deliberately to find out this information, not casually when out for a walk: p. 288
[6]The defendant was criticised, in the submissions on behalf of the plaintiff, for remaining incommunicado in the hope that its make good obligations would be consigned to history, thus evading its obligations under the lease: submissions p. 53. In a context where the plaintiff apparently failed to inform the defendant of the arrangements it had made with the defendant's sub-tenants, this is the pot calling the kettle black. In my opinion, the defendant was under no duty to speak as to its position, and if the plaintiff, by its inaction, foiled to take advantage of some provision of the lease, that was the plaintiff's problem. In fact, there was nothing the plaintiff could have done, consistent with its agreements with the sub-tenants, to improve its position.
[7]Mr. Petfield agreed in respect of P & O: -p. 69
[8]See Mr. Stewart p. 206, p. 239; note by Mr. Stewart on Exhibit 25.
[9]There was evidence that this was in the hope that they could be kept as long term tenants, if possible in the tower: p. 238, and see Exhibit 13, 14. Therent money was also a consideration: pp. 60, 65, Exhibit 16. But I do not think it matters why the plaintiff entered into the agreements with the sub-tenants, what matters is that it did so.
[10]For an example of a lease with such a provision, see Jollis Pty Ltd v. SBS Corporation (1994) 6 BPR 13, 354, the facts of which illustrate how unjustly such a provision can operate, and why no tenant in Queensland, with the protection of s. 112 of the Property Law Act, should ever sign a lease with such a clause in it.
[11]At the least, it would have been spared those aspects of the plaintiff's claim which were exaggerated, a matter dealt with below.
[12]Mr. Daniel said that CPS was always ready to make good with all its tenancies (p. 120) if it was moving (p. 121) but because of the arrangements with the plaintiff the question of make good at the end of the sub-lease never arose: p. 120. This was no admission of any continuing willingness to pay anything to the defendant.
[13]Such partitions were regarded as tenants fixtures in Wincant Pty Ltd v. South Australia (Full Court of South Australia, 13.8.97, unreported).
[14]See the example given by Mr. Bacon: p. 274. He had, through his position at the bank, extensive experience of commercial leasing: p. 296.
[15]That is, lost by election or estoppel: Freshmark Ltd v. Mercantile Mutual Insurance (Aust) Ltd [1994] 2 Qd.R. 390 at 403.
[16]Something he had not disclosed when I had asked him directly whether he prepared it on instructions given by someone else, four questions earlier on p. 99.
[17]Mr. Glover said Rintoul was paid on 8 February 1996, which seems a long delay in view of the date of the cheque.
[18]Flight Centre and NIB moved in after Air New Zealand, into space which had been renovated, at least so for as the airconditioning and ceiling tiles went, and probably generally in connection with the work in the Air New Zealand area: p. 49.
[19]e.g., in the further amended plaint filed 18 January 1999.
[20]Mr. Petfield said that how it was damaged was probably a mystery: p. 19.
[21]Mr. Stewart could not explain this deficiency in the plaintiff's discovery: p. 261.
[22]These were the product of negotiations started prior to 24 March 1995: p. 73. When all the work in this area was done it was in the knowledge or expectation that this tenant would be moving in.
[23]Mr. Glover was uncertain whether Exhibit 28 was sent: p. 132. I think it likely that it was, because it contained additional information and gave full details as to the price, whereas the other quote was inaccurate because of the omission of item 16: p. 135.
[24]The entries on the payment stamps on Exhibits 11 and 34 illustrate the practice of the plaintiff which was not followed in the stamp on Exhibit 24.
[25]The allegation remained in the further amended plaint filed 18 January 1999.
[26]See Mr. Stewart at p. 247; Mr. Petfield at p. 99 (concerning the debit to the rent statement for work not done); p. 97 (concerning the false statement in Exhibit 5). Mr. Stewart also credited him with the change of solicitors (p. 228) but for reasons given later I do not accept this evidence.
[27]Order 403 was for refurbishment works, and some fit out work: p. 82.
[28]A figure which is claimed by Mr. Petfield (p. 27) and Mr. Glover (p. 188) to be the result of a count of damaged tiles.
[29]This is supported by the evidence of Mr. Petfield (p. 35) that at some stage prior to 30 April 1995 some carpet had been taken up and tiles or vinyl flooring installed, but he had not been with the plaintiff prior to 1994 (p. 6) so this was hearsay or an assumption on his part. Under cross-examination he admitted he did not know this: p. 93. He did not know who supplied the carpet: p. 57.
[30]They may not however be tenants' fixtures, as there is some authority that this does not include fixtures which cannot be removed without effectively destroying them: Thom v. Browne (1960) 26 DLR (2d) 115 at 118 (panels which would be destroyed and useless after removal); D'Evncourt v. Gregory (1866) LR 3 Eq 382 (wallpaper). Photographs P, R and V suggest that the tiles belong in this category, but the point was not argued.
[31]According to Thom v. Browne (supra), it would have been a breach of this covenant if the tiles had been taken up by the defendant.
[32]P. 191: This was apparently speculation on his part (as was the similar evidence of Mr. Stewart: p. 229), because of the layout on the ground floor and the pattern in the tower: p. 190. There was really no evidence that the shower was not installed when the annexe was built.
[33]The areas taken by Air New Zealand were painted to suit that tenant: p. 194.
[34]Mr. Petfield claimed that “it was to be done in conjunction with works at a later stage”: p. 24.
[35]Mr. Petfield said that setting up the system for Air New Zealand was done in conjunction with the major airconditioning works: p. 108.