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Platypus Catering Pty Ltd v Bronte Terrace Pty Ltd[2020] QDC 290

Platypus Catering Pty Ltd v Bronte Terrace Pty Ltd[2020] QDC 290

DISTRICT COURT OF QUEENSLAND

CITATION:

Platypus Catering Pty Ltd v Bronte Terrace Pty Ltd & Anor [2020] QDC 290

PARTIES:

PLATYPUS CATERING PTY LTD
ACN 162 736 727 AS TRUSTEE FOR THE ROBYN SHEPPARD FAMILY TRUST

(plaintiff)

v

BRONTE TERRACE PTY LTD
ACN 064 799 426

(defendant)

and

ROBYN BENITA SHEPPARD

(defendant added by counterclaim)

FILE NO:

4 of 2017

DIVISION:

Civil

PROCEEDING:

Claim

ORIGINATING COURT:

Cairns

DELIVERED ON:

13 November 2020

DELIVERED AT:

Cairns

HEARING DATE:

31 October 2019, 1 and 25 November 2019

JUDGE:

Morzone QC DCJ

ORDER:

  1. Judgment to the plaintiff against the defendant for $150,000.
  1. The defendant will also pay interest on $150,000 from the date of termination of 26 November 2016 to the date of judgment calculated in accordance with s 58 of the Civil Proceedings Act 2011 (Qld).
  2. I will hear the parties further on the issue of costs.
  3. Unless either party applies for a different costs order within 14 days of this judgment, I will also order that the defendant will pay the plaintiff’s costs of the proceeding (including reserved costs) to be assessed on the standard basis.

CATCHWORDS:

CIVIL PROCEEDING – CLAIM – REPUDIATION OF LEASE – DAMAGES – COUNTERCLAIM – whether the roof fall into disrepair, leaked and required repair – which party was responsible under the lease to the repair of the roof as required – whether adequate notice of the state of the roof was given – whether there was repudiation of the lease – whether plaintiff is entitled to terminate lease – whether defendant has compensable damage – whether the plaintiff can obtain specific performance of the lease for the valuation and payment by defendant for the tenant’s property.

LEGISLATION:

Civil Proceedings Act 2011 (Qld) s 58

CASES:

Advance Fitness Corp Pty Ltd v Bondi Diggers Memorial & Sporting Club Ltd [1999] NSWSC 264 

Alghussein Establishment v Eton College [1988] 1 WLR 587

Antill v Estate of Parkinson [1990] QSC (Full Court) 91

Buchanan v Byrnes (1906) 3 CLR 704

Canning v Temby (1905) 3 CLR 419 at 424 per Griffith CJ.

Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64

Darlington Futures Ltd v Delco Australia Pty Ltd (1986) 161 CLR 500

DTR Nominees Pty Ltd v Mona Homes (1978) 138 CLR 423

Granada Theatres Ltd v Freehold Investment (Leytonstone) Ltd [1958] 2 All ER 551

Granada Theatres Ltd v Freehold Investment (Leytonstone) Ltd [1959] 2 All ER 176

Griffin v Pillet [1924] 1 KB 17

Hughes v NLS Pty Ltd [1966] WAR 100

Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd (2007) 233 CLR 115

Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd (1989) 166 CLR 623

Luxer Holdings Pty Ltd v Glentham Pty Ltd (2007) 35 WAR 254 Progressive Mailing House Pty Ltd v Tabali Pty Ltd (1985) 157 CLR 17 Johnson v Perez (1988) 166 CLR 351

Ogle v Comboyuro Investments Pty Ltd (1976) 136 CLR 444.

Shevill v Builders Licensing Board (1982) 149 CLR 620

Sindel v Georgiou (1983-1984) 154 CLR 661

Thomas National Transport (Melbourne) Pty Ltd v May & Baker (Aust) Pty Ltd (1966) 115 CLR 353

Tsoa-Lee v Urban Real Property Consultants Pty Ltd [1983] 1 NSWLR 569

COUNSEL:

C Ryall for the Plaintiff

S Hogg for the Defendant

C Ryall for the Defendant added by Counterclaim

SOLICITORS:

Kahler Lawyers for the Plaintiff

Trianon Law for the Defendant

Kahler Lawyers for the Defendant added by Counterclaim

  1. [1]
    The plaintiff motel operator and tenant (“Platypus”) and its former landlord (“Bronte”) fell out over who was responsible to fix the roof of a leased motel building.  Platypus terminated the lease in response to the perceived failure of Bronte to take responsibility for, and to fix, the roof in a timely way.   But Bronte counter sues Platypus, and its director/guarantor Ms Sheppard, for damages for wrongfully terminating the lease and prematurely abandoning the property.
  2. [2]
    Platypus operated the Malanda Lodge Motel after buying the business off the former operator and taking an assignment of the original lease from 18 June 2013.  The lease was just within its first option period ending 20 June 2014, and about to enter the second option period ending 30 June 2019.  There were two prospective option periods ending on 30 June 2024 and 2029 respectively.
  3. [3]
    The motel comprised of a cluster of dedicated buildings surrounded by pavements, amenities and gardens.  It is located in the idyllic surrounds of the Atherton Tablelands renowned for humid and rainy seasonal weather patterns.  After communicating its concerns about the state of the motel’s roof, Platypus became intolerant of Bronte’s apparent obfuscation and inaction.  So, on 23 September 2016 Platypus’s solicitors gave an ultimatum to Bronte to fix the roof within 90 days.  But Bronte did not repair the roof within that time amidst further disputation about responsibility and the extent of necessary repair.  Consequently, Platypus terminated the lease on 25 November 2016 in reliance on what it considered was Bronte’s repudiatory conduct.  Bronte rejects Platypus’s right to terminate and itself terminated the lease with effect from 3 January 2017 alleging that Platypus wrongfully terminated the lease and abandoned the motel.
  4. [4]
    Platypus wants its loss and damage measured as the capital loss of value of the business purchased for $215,000, or alternatively, the reduced ‘business cash flow’ from 1 January 2016 to 25 November 2016 of $65,000 and lost future business cash flow of approximately $145,000 to the end of the current lease of 30 June 2019, and future discounted cash flow of $83,000 for two future option periods to 30 June 2029.  It also claims for specific performance for valuation and purchase of Platypus’s chattels since disposed by Bronte (if not included in the damages).
  5. [5]
    Bronte counterclaims against Platypus for $227,985.80 for loss of rent up to 25 July 2018 when it sold the property, and loss of trading profit (including outgoings) of $203,316.38 incurred after Platypus had abandoned the premises between 3 January 2017 and 25 July 2018.  It also claims the costs and expenses of $12,941.23 for terminating the lease, and interest of all overdue money under the lease.
  6. [6]
    The determinative issues in the proceeding are:
    1. (a)
      Did the roof fall into disrepair, leak and require repair? 
    2. (b)
      Who was responsible under the lease to repair the roof as required?
    3. (c)
      Did Platypus give Bronte adequate notice of the state of the roof?
    4. (d)
      If Bronte was responsible for the roof repair:
      1. Did Bronte repudiate the lease by its conduct of not doing required roof repairs in a timely way? 
      2. Was Platypus entitled to terminate the lease and sue for damages? 
      3. If so, what is Platypus’s loss (if anything)?
    5. (e)
      If Platypus was responsible for the roof repair:
      1. Did Platypus repudiate the lease by: prematurely terminating; stopping the payment of rent; and letting the premises run down (i.e. breaching its obligation to maintain the premises); and/or abandoning the premises?
      2. If so, what are Bronte’s compensable damages?
    6. (f)
      Can Platypus obtain specific performance of the lease for the valuation and payment by Bronte for the tenant’s property?
  7. [7]
    The trial proceeded over two days.  I have also been assisted by written submissions and oral addresses on a third day.
  8. [8]
    I have found that Bronte was responsible for maintaining and repairing the roof as demanded by Platypus.  Its failure to accept that responsibility and undertake the required repairs in a timely way amounted to repudiation of the lease.  Platypus did lawfully terminate the lease.  Consequently, Bronte’s counterclaim for wrongful termination and abandonment fails.  Specific performance of the lease for the valuation and payment, by Bronte, for the tenant’s property has been rendered impossible, and such value can be taken as part of the loss of the business.
  9. [9]
    I do not accept that Platypus has suffered a loss of anything beyond the current lease term by having to close its fledging and unprofitable motel business on the basis that damage for the option periods was too remote. 
  10. [10]
    Accordingly, I have given judgment to the plaintiff Platypus against the defendant Bronte for $150,000 for the loss of bargain of losing the lease (loss of goodwill and plant and equipment) calculated as at the date of the election to accept the repudiation, being the date of termination of the lease, being about 70% of the purchase price.  Interest will be payable on damages, and costs ought to follow the event unless a different order is sought.

Did the roof fall into disrepair, leak and/or require repair? 

  1. [11]
    Platypus contends that the defects are a result of fair wear and tear, latent defects in the construction design or installation - making the screws susceptible to rusting, and/or the failure by Bronte to properly maintain the roofs of the motel buildings.  Platypus asserts that the roof defects caused the roof leak resulting in damage to the interior of the buildings and interference with the use, including the kitchen which failed a local government inspection.
  2. [12]
    In paragraph 6 of the statement of claim, Platypus alleges that by about September 2015 the following roof defects required repair or maintenance:
    1. (a)
      The roof screws on all buildings needed to be replaced because some of the heads were rusted off;
    2. (b)
      All of the remaining screw heads were rusted, some were over tightened, some were under tight, and some of the seals for the screws were missing or in poor condition;
    3. (c)
      All of the deck tight collars were in poor condition and needed to be resealed and replaced;
    4. (d)
      All flashing around ducts penetrating the roof needed to be resealed and replaced;
    5. (e)
      All ridge capping ends at the hips and end knockdown and ends needed to be put in to stop [vermin] from getting in;
    6. (f)
      The ridge capping fell short and did not fold over the roof iron; and
    7. (g)
      On all walkways there were places where the bullnose roof did not cover the gutter causing leaking on structural timber.
  3. [13]
    Bronte denies any responsibility for these roof repairs, any failure to complete and instead asserts that they were the tenant’s responsibilities.  It also disputes the nature and extent of the state of the roof and asserts that the roof was in a good structural state and condition commensurate with buildings of like age.  This position, it seems to me, is contrary to the proof of evidence.
  4. [14]
    Each of Platypus’s allegations are borne out by the evidence of building inspections.  I find that as a result of the roof defects the roof leaked, which in turn damaged the interior of the building and interference with the use of the motel. 
  5. [15]
    The building inspection report of Mr Kopp dated 31 August 2016 followed his inspection on 24 August 2016 of the accessible interior, exterior and roof and roof spaces of the motel buildings.  The report contains a photographic chronical and commentary of those areas identifying the cause of water ingress into various sections of the reception and restaurant and the two accommodation buildings and identify water damage and resultant issues.  I accept the opinion of Mr Kopp that:

“Within the limitation and conditions of this inspection, at this point in time, it is our opinion; the cause of water ingress to the Main Building roof space is due to poor condition of roof screws, incorrect install of Valley gutters and flashings, minimal overlap of Bullnose roof into gutters and older weathered Deck tiles.

The cause of water ingress into the Accommodation Buildings can be attributed to the poor condition of screws and incorrect install of flashing.

Replacement of ceiling sections and cornice within the Kitchen of the Restaurant is required as a matter of urgency as it currently does not comply with AS 3.2.3-Food Premises & Equipment.

Replacement of restaurant Ladies Toilets is required along with repairs to the Bar.

All roofs must comply with BCA Clause 2.2.2.

Clause 2.2.2 states that “a roof and external walls must prevent the penetration of water that could cause”

a) Unhealthy and dangerous conditions, or loss of amenity for occupants;

b) Undue dampness or deterioration of building elements.”

  1. [16]
    Mr Kopp was subjected to cross examination on his report, and reasonably conceded that he could not say how long the leaks had been present for or when they started.  Nevertheless evidence of the manifest internal damage observed by Mr Sheppard and her husband Mr Jurek who performed the role of chef, cleaner maintenance and gardening.  Mr Jurek testified about the footage of the leak, flooding and damage caused by the earlier extractor canopy.  He also recorded problems as at 6 September 2016 of black mould on the kitchen ceiling, delamination of paint and plaster from water damaged cornice in the kitchen,  adjacent to the canopy and florescent light, circuit breaker electrical problems in the kitchen and dining room, in the bar and restaurant there were down lights that had fallen and stopped working, a hole in the ceiling above the register and no ceiling in cleaners’ cupboard, mould and mouldy and musky smells in the restaurant, problem flickering light fittings in the reception, office and residence, indicia of rats and mice in the ceiling cavity, and guest complaints of vermin noises and odours in rooms from, mould, mildew and rats and mice urine.[1]  These were also born out in Ms Sheppard’s evidence and local government inspection and food safety assessment.
  2. [17]
    Platypus was the subject of a local government inspection on 30 August 2016 and follow up on 14 September 2016.  As at 14 September 2016 the inspector required Platypus to clean the oven doors and grill, but otherwise accepted that all other cleaning repairs identified in the inspection carried out on 20 August 2016 were completed.
  3. [18]
    Platypus was the subject of a further local government inspection and food safety assessment on 3 November 2016 and follow-up inspection on 10 November 2016.  Apart from operational cleaning and food storage matters, the assessment of 13 November 2016 identified the following matters for attention:

“Repair – Faulty electrical switch near stove, faulty light in kitchen and the damaged ceiling in the kitchen area.  All repairs must be completed prior to 3/12/16.  Also repair cornice in kitchen.

BAR – Repair holes in ceiling prior to 3/12/16.  …

Women’s WC – clean mould from cornice/ceiling and repair ceiling vent prior to 3/12/16.”

  1. [19]
    In the assessment of 10 November 2016 identified the following continuing matters for attention by 3 December 2016: 

“REPAIR – FAULTY ELECTRICAL WITCH NEAR STOVE, FAULTY KITCHEN LIGHT, DAMAGED CEILING & CORNICE IN THE KITCHEN, CELIING EXHAUST FAN IN THE LADIES ROOM, CEILING IN THE CLEANER’S SUPBOARD, CEILING IN THE BAR AREA,M FAULTY LIGHTS IN THE BAR AREA.”

  1. [20]
    It is also clear to me that the roof problems as indicia of the cause of the leaks and resultant damage was evident for a significant time. 
  2. [21]
    In June 2013 maintenance of the screws holding down the roof sheets were included in a 25 point list of repair issues raised by Platypus prior to their accepting the assignment of the lease.  Bronte’s property manager received that list, but later deflected the issue as a tenant’s responsibility in communication of 1 September 2014.
  3. [22]
    Mr Bailey was then the managing director, having extensive experience owning motels.  He was an officer of Bronte until March 2018 but continued to consult for the company.  He explained how Bronte relied heavily on the property manager, Rod Place, and when asked whether Mr Place would consult him about repair work to the motel, he said: “only if he felt it was necessary and only if he felt that it went over or outside his charter, if you like to say that”.  He recalled being copied into communications, and explained how he would communicate with Mr Place if he was aware of a leaking roof.
  4. [23]
    Bronte was acutely aware of a leak in the flue in the kitchen around February 2015 because it arranged for the plumber, Mr Hawes, to come and fix it, which he did.  By his letter dated 11 March 2015, Mr Hawes told Bronte that:[2]

“While repairing the roof leak, it was revealed that the roof screws on the entire roof & surrounding motel units are rusted out.  The screws will need to be replaced before the roof starts to also rust out. …”

  1. [24]
    The report of Mr Burnell attached to the letter from Platypus’s solicitors to Bronte dated 7 October 2015 states that inter alia the roof has “some loose roof sheets & badly rusty roof screws.  My means to solve the problem is all the screws need to be replaced.”
  2. [25]
    Mr Place acknowledged by email of 26 November 2015 that Bronte was aware that substantial works needed to be done on the roof.  He said: “… just informing you that the landlord has accepted a quotation from U Don’t Need a New Roof to re screw down the roofing iron with cyclone proof screws and repaint the roof.  Scott from U don’t need a New Roof will be in contact with you in the near future to arrange a suitable time for the works to be carried out.” 
  3. [26]
    It seems to me that the roof defects contended by Platypus demonstrate that the roof system of the motel was not in a good structural state or condition mainly due to rusting and deteriorating roof screws.  The condition of the roof screws was plainly the result of fair wear and tear, and related problems can be characterised as latent defects and/or the failure of timely maintenance of the roofs of the buildings comprising the motel.

Who was responsible under the lease to the repair of the roof as required?

  1. [27]
    The parties’ mutual obligations were governed by the registered lease dated 30 June 2014, and the deed of assignment made 18 June 2013.
  2. [28]
    Clause 3.1 prescribes Platypus’s obligation to pay rent.  By clause 6.1 Platypus was bound to keep the premises clean and continue to trade the motel business.
  3. [29]
    The disputation involves the obligations for maintenance, repair and alteration the subject of clause 7 and related clauses.  Clause 7 provides:

7 MAINTENANCE, REPAIR AND ALTERNATIONS

7.1 WHAT THE TENANT IS RESPONSIBLE FOR

The tenant must:

(a) keep the motel (including the exterior façade of the building, the roof, exterior and interior windows and doors and all plate glass, glass fixtures, carpets and signage and the landlords’ property clean and in good repairs; and

(b) keep the tenant’s property clean and in good repair; and

(c) repair any damage to the motel or the landlord’s property caused by the tenant or the tenant’s agents; and

(d) replace damaged plate glass and other glass with glass of similar quality; and

(e) maintain and repair the services;

(f) maintain the AAA rating; and

(g) whilst a AAA rating exists the tenant must without limiting the tenant’s obligations otherwise under this lease redecorate the motel when reasonably required by the landlord so to do but no more frequently than once in each period of five years from the date of the initial term of the lease.

7.2 IF THE AAA RATING CEASES

If the AAA rating ceases to exist and there is no alternative rating classification scheme, the tenant must:

(a) at reasonable times throughout the term or any extension thereof as determined by the landlord;

(i) redecorate the motel; and

(ii) paint, repaint, recover, clear or otherwise treat with materials all of the interior and exterior of the motel; and

(b) maintain the gardens and landscaping on the land. If required in the landlord’s reasonable opinion, the tenant must restore and replace the gardens and landscaping.

7.3 WHAT THE TENANT IS NOT RESPONSIBLE FOR

(a) despite the provisions of clause 7.1 and 7.2, the tenant is not responsible for:

- structural repairs, unless the repairs are required because of any act or negligence of tenant or the tenant’s agents; or

- fair wear and tear (having regard tot the condition of the motel at commencement of lease); or

- latent defects; and

- the replacement of the landlord’s property.

(b) For the purposes of this clause the landlord’s property means any property which comes within a depreciation allowance under the Income Tax Assessment Act (‘Tax Act”) or which is “qualifying expenditure” within the meaning of the Tax Act or which is (in the absence of other factors) capable of being depreciated or capable of thing ‘qualifying expenditure’ under the Tax Act in the accounts of the landlord.

(c) To remove any doubt the following are examples of the type of items that the landlord and tenant will be respectively obliged to replace when the item comes to the end of its life:

Items the Landlord Must Replace

- drains;

- guttering;

- underground pipes;

- tiles (either wall, floor or ceiling) where retiling is involved as distinct from replacing sundry broken and cracked tiles;

- air-conditioning ducting;

- toilet cisterns and pedestals; and

- shower systems excluding shower screens.

Items Which The Tenant Must Replace

- light bulbs and fittings;

- moveable items;

- curtain and blinds, hot water cylinders; swimming pool filters;

- cupboards, desks, port racks and cabinets;

- carpets;

- built in vanity units; and

- bed heads.

7.4 WHAT THE LANDLORD IS RESPONSIBLE FOR

The landlord must:

(a) ensure that the motel and the landlord’s property are kept in a good structural state and condition; and

(b) maintain the motel and the landlord’s property where maintenance is required as a result of:

(i) fair wear and tear (having regard to the condition of motel at commencement of the lease); or

(ii) latent defects; or

(iii) the necessity to replace the landlords’ property.

(c) For the purpose of this clause that landlord’s property includes any property which comes within a depreciation allowance under the Income Tax Assessment Act (“Tax Act”) or which is “qualifying expenditure” within the meaning of the Tax Act or which is (in the absence of other factors) capable of being depreciated or capable of being “qualifying expenditure” under the Tax Act in the accounts of the landlord.

7.5 NOTICE OF DAMAGE

The tenant must, immediately on becoming aware, inform the landlord in writing of:

(a) damage to the motel or the landlord’s property; or

(b) damage to or the defective operation of the services.

7.6 TENANT’S ALTERATIONS

(a) The tenant must not make any additions or alterations to the motel without the prior consent of the landlord.

(b) The tenant must:

(i) provide the landlord with plans, specifications and any other information about the proposed work that the landlord may reasonably require; and

(ii) pay the landlord’s reasonable costs of considering the proposed addition or alteration; and

(iii) obtain any necessary approvals or permits from the competent authority; and

(iv) use materials of the same or similar quality as those used when the motel was constructed or last redecorated; and

(v) ensure that doing the works, do not cause any material interference to the orderly operation of the motel or to the efficient operation of the services.

(c) Remains in existence after the end of this lease

  1. [30]
    The relevant terms “Building”, “End of the Lease”, “Landlord’s Property”, “Tenant’s Property” and “Motel” are defined in the lease “unless the contrary intention appears”, as follows:

“Building Means all structures and improvements that already exist or are erected on the land during this lease. This includes the landlord’s property and any modifications, extensions or alterations of the building or the landlord’s property.”

“End of the Lease Means the expiry date or the date that the lease is terminated as a result of default.”

“Landlord’s Property Means all the plant and equipment, fixtures and fittings of the landlord.

This clause includes the following types of items (this is not an exhaustive list)

- services;

- pool;

- toilet amenities and wash basins;

- the floor, wall and bathroom tiles;

- all paving and sealed driveways;

- drainage and conduits;

- electrical fittings and wiring;

- advertising signs;

- other property in, or fixed to the motel that is not the tenant’s property.”

“Tenant’s Property Means all property, plant and equipment fixtures and fittings owned and used by the tenant in the operation of the tenant’s business excluding any items of property that are the landlord’s property”

This clause included the following types of items (this is not an exhaustive list)

- movable furniture;

- office equipment;

- individual air-conditioning units (including the air-conditioning equipment);

- carpets or loose floor coverings;

- fixed bed heads and head boards;

- built-in cupboards and shelves;

- curtains and blinds;

- telephone handsets and systems;

- light fittings;

- hot water system; and

- swimming pool pump, salt water chlorinator and filtration equipment;

- gas lines;

- electronic watering system;

- other property in, or fixed to the motel that is not the landlord’s property.”

“Motel Means the premises described in the statutory form to this lease including the land and the building.”

  1. [31]
    In contrast to any express right to terminate by Platypus as tenant, Clause 11.3 provides for Bronte’s right to terminate as landlord, and Clause 11.4 bound Platypus to indemnify Bronte for loss arising from its breach, if any.  Ms Sheppard, the second defendant by counterclaim, guaranteed Platypus’s obligations under the Lease under Part 17.
  2. [32]
    Clause 7.1(a) delineates Platypus’s general responsibility as tenant to “keep the motel (including … the roof) and the landlord’s property clean and in good repair”. 
  3. [33]
    “Motel” is defined to mean “the premises … including the land and the building.”  “Building” is defined to mean “all structures and improvements that already exist …on the land during this lease.  This includes the landlord’s property and any modifications, extensions or alterations of the building or the landlord’s property”.  “Landlord’s property” means “all the plant and equipment, fixtures and fittings of the landlord.”
  4. [34]
    Despite the tenant’s obligations, clause 7.1, clause 7.3 expressly excludes from Platypus’s responsibility - structural repairs; or fair wear and tear; or latent defects, and clause 7.4 burdens the Bronte as landlord with the responsibility to ensure that the motel is kept in a good structural state and condition, and the responsibility to maintain the motel where maintenance is required as a result of fair wear and tear (having regard to the condition of motel at commencement of the lease), or latent defects.
  5. [35]
    “Structural” is defined in the Macquarie Dictionary as “mode of building, construction, or organisation; arrangement of parts, elements or constituents”, and in the Shorter Oxford Dictionary as being “of or pertaining to the structure of a building as distinct from its decoration or fittings”.
  6. [36]
    In Granada Theatres Ltd v Freehold Investment (Leytonstone) Ltd,[3] Vaisie J considered structural repairs and said:

“… “structural repairs” mean repairs of, or to a structure.  It is sometimes said that repairs must always be either structural or decorative, and if that is the simple criterion, we are in this case certainly not dealing with decorative repairs. …

Again, what is a “structure”? And what will be regarded as part of the structure? We are dealing here with (i) the roof, and (ii) one of the main walls of the cinema, and surely those parts of the structure of the building.  Indeed, it seems to me that the roof is an even more important part of a cinema that it is in the case of an ordinary dwelling house, because any leakage of rain into the auditorium of cinema is likely to be a much more serious matter than water coming into the attic or other upstairs apartment.”

  1. [37]
    Austin J later applied those principles in Advance Fitness Corp Pty Ltd v Bondi Diggers Memorial & Sporting Club Ltd[4] saying:

“In deciding whether the works in the House Report are properly described as structural works, I must have regard to the principles enunciated in such cases as [Grenada Theatres].  The distinction between structural and non-structural repairs requires the Court to make a practical judgment as to whether the work, having regard to its nature and extent, interferes with or alters the framework or structure of the building.  Older case law, referred to by Jenkins LJ in that case at page [p603], tended to describe all non-structural work as "decorative", but the modern connotation of that word may be too limited to allow it any continuing utility.”

  1. [38]
    In my view the roof of the motel, together with the other constituent elements of the building, namely the foundations, floors, and walls, are integral and form the structural state of the motel building itself.  The roof is not a mere decoration or some fixture or fitting within the meaning of “landlord’s property” or otherwise caught by the term “tenant’s property”.  Further, it seems to me that an obligation to keep the roof in a good structural state and condition involves steps necessary to assure the roof performs its structural purpose, that is, to provide protection from the elements including rain to avoid water penetration and damage to the interior or interfere with the use and enjoyment of the of the motel.  I find that the roof repairs sought by Platypus can be properly characterised as “structural repairs” required as a result of fair wear and tear and necessary to keep the building in good structural state and condition.  These are matters for a responsible landlord.
  2. [39]
    This can be easily distinguished with the tenant’s obligation the subject of clause 7.1(a) to keep the roof and the other items “clean and in good repair” except structural repairs, etc subject of operation of clause 7.3.  Within the meaning of those provisions Platypus’s responsibilities would include routine maintenance of clearing debris, leaves, and mould build-up of the roof, as distinct from structural repairs to the roof system.
  3. [40]
    Therefore, I conclude that the required roof repairs were out of the purview of Platypus’s responsibilities as tenant, and instead they were caught by operation of clauses 7.1, 7.3 and 7.4 to be firmly the responsibility of Bronte as landlord.
  4. [41]
    Having come to that view, it begs the question about how and when Bronte ought to have performed its obligation to repair.
  5. [42]
    In the course of writing the judgment, I invited and received further submissions about lease sub-clauses 1.3(b)(i), (ii) and (iii), and clauses 8.7, which were not the subject of any pleading or submissions, but purport to afford Bronte as landlord an absolute discretion as to if and when to undertake any remedial obligations and limit its liability.  This seems relevant to the parties' competing contentions about the temporal enforceability of the landlord’s obligations to repair, setting time of the essence to perform, and any exclusion of the Bronte’s liability for loss or damage for failure or delay to remedy. 
  6. [43]
    Clause 1.3 of the lease provides for the landlord’s exercise of rights.  Section 1.3(b) seems to repose unilateral discretion in Bronte and purports to exclude any liability for any loss caused by its failure or delay in exercising a right or obligation under the lease. Section 1.3(b) provides:

“1.3 GENERAL

…

(b) Exercise of Rights:

(i) The landlord may exercise a right, power or remedy at its discretion, and separately or together with another right, power or remedy.

(ii) If the landlord does not exercise or delays in exercising a right, power or remedy, the landlord may still exercise it at a later time.

(iii) The landlord is not liable for any loss caused by the exercise, attempted exercise, failure to exercise or delay in exercising a right, power or remedy under this lease.

“(d) Additional Remedies

The rights, powers and remedies provided in this lease are in addition to (not exclusive of) the rights powers or remedies provided by law.”

  1. [44]
    On one view clause 1.3(b) seems to render illusory the promise to repair in clause 7.4.  It is trite law that a contract that reserves to a party an unfettered discretion or option whether to carry out what appears to be a promise is void.  In my view the better construction is that clause 1.3(b) is confined to the Bronte’s exercise of its rights, powers or remedies against Platypus, as distinct from exercise of its obligations, for example the obligation to repair under clause 7.4.
  2. [45]
    As for the purported exclusion of liability in clause 3(b)(iii), it is the extent of seriousness that is important.[5]  The more serious the breach, or the more important the term, the less likely it is for the parties will have intended the exclusion in clause 1.3(iii) to apply.[6]  Relevantly here, the lease operates both as a contract and demise.,  It is plain that a failure to undertake timely and effective structural repairs potentially deprives Platypus of substantially the whole benefit of the lease for the motel use and business.  As discussed below, it seems to me in clause 7.4 obliging Bronte to do structural repairs is an essential term, and I think the failure to do so in a timely way is a fundamental breach.  In those circumstances, the purport of clause 3(b) affording Bronte’s discretion to exercise rights and avoid consequential liability for delaying or failing to repair in a timely way, ought not apply to a fundamental breach of clause 7.4.
  3. [46]
    This approach to clause 1.3(b)(iii) would be harmonious with clause 8.7 which provides for a contingent liability for loss or damage if Bronte is given written notice and does not rectify within a reasonable time.  Clause 8.7 is in these terms:

“8.7 LANDLORD NOT LIABLE

(a) The landlord is not liable for loss, damage, injury, or death to any property or person except that caused by the negligence or default of the landlord or the landlord’s agents.

(b) The landlord is not liable for any damage or loss caused by the neglect or default of the landlord or the landlord’s agent (despite any law to the contrary) to do anything in respect of the motel unless the tenant has given notice in writing to the landlord of such thing and the landlord had not rectified such thing within a reasonable time.”

  1. [47]
    Clause 8.7 is consistent with the common law that each party impliedly (if not expressly here) agrees to do all such things as are necessary on its part to enable the other party to have the benefit of the contract.  Where the required co-operation is not forthcoming, a plaintiff who fails to perform because of the defendant’s failure to co‑operate will have a good excuse for not performing.
  2. [48]
    In Granada Theatres Ltd v Freehold Investment (Leytonstone) Ltd,[7] Jenkins LJ (with whom the two other members of the Court of Appeal agreed) said:

“(1) It is well settled that a landlord's covenant to repair is a covenant to repair on notice.

(2) …

  1. (3)
    Where, as here, the covenant is to “keep” in repair, failure to perform it after notice constitutes a continuing breach in respect of which a fresh cause of action arises from day to day so long as the requisite repairs remain undone.
  1. (4)
    In the event of the landlord failing to do the requisite repairs within a reasonable time after notice, the tenant is entitled to sue him in damages without first incurring expense by doing the repairs himself (Hewitt v Rowlands (5) (1924), 131 LT 757 ).

(5) …

(6) …

  1. (7)
    The parties are under a duty to each other to act reasonably.  It behoves the landlord, who is in breach of his covenant, to be diligent in the remedying of such breach.  He is not entitled to keep the tenant waiting indefinitely and then complain if the tenant ultimately decides to do the work himself…”
  1. [49]
    Since a tenant has exclusive possession of the leased property, clauses 7.5(a) and 8.7(b) or by necessary implication, imposes on Platypus the positive obligation to notify Bronte of matters requiring repair or rectification.  There are references to “damage” or “damaged” in sub-clauses 7.1(c) & (d) and 8.7(b), and in various other places in the lease.  I interpret the term to be wider than deliberate or accidental damage, and to be wide enough to include damage resulting from fair wear and tear or latent defects of the roofing system, including the matters found proved above.  The roof repairs included replacement of failing screws as critical structural components of the roof system and buildings necessary to put and maintain the motel in a good structural state and condition.
  2. [50]
    It seems to me that Bronte was required to carry out effective structural repairs of the roof system within a reasonable time, which obligation was contingent on timely and effective notice by Platypus effectively informing Bronte of the thing needing repair.

Did Platypus give Bronte adequate notice of the state of the roof and repairs?

  1. [51]
    Platypus argues that it put Bronte on notice of the state or the roof and need for repairs and thereby enlivened Bronte’s obligations to undertake necessary and timely roof repairs. 
  2. [52]
    Bronte counter-argues that Platypus is bound by its pleading that it is the leaking of the roof that was causative of its loss, and therefore it is only relevant to determine whether Bronte was on notice from Platypus that the roof was leaking.  Bronte further contends that Platypus failed to give adequate notice before 23 September 2016 I do not accept Bronte’s contentions.
  3. [53]
    It seems to me that the requirement to give effective notice is not a matter to be drawn from pleadings about causation of damage (being a consequence of a failure to repair), but instead, a matter of construction of the obligation in the lease.  In that sense a tenant’s need only gives notice of an area of concern to constitute satisfactory notice sufficient to require a landlord to make its own inspection and investigations.[8] It is not required to notify of a detailed prescription of the precise nature and extent of maintenance or repair.[9]  Further, in my view any notice must be considered in the context of the landlords own knowledge.
  4. [54]
    Platypus argues that the exchange of correspondence in October and November 2015, in the context of Bronte’s state of knowledge, was sufficient to put Bronte on notice that it needed to inspect the roof to see if works were required.  I accept that submission and that an inspection would have discovered revealed the necessary course of repairs, as it did in relation to the rood screws.
  5. [55]
    In June 2013 maintenance of the screws holding down the roof sheets were subject of a 25 point list of repair issues raised by Platypus prior to their accepting the assignment of the lease.  Bronte’s property manager received that list, but later deflected the issue as a tenant’s responsibility in communication of 1 September 2014.
  6. [56]
    This was before Mrs Sheppard for Platypus had emailed on 23 February 2015 inquiring about “when the roof will repaired” and adding that “We had fine days all last week, and thought as the roof had been leaking badly it would have been done then.  According to the weather forecast, more rain is expected later this week, and chance of getting the repairs done before the weather changes again”.  To this Mr Place replied within an hour saying: “I have just spoken to Peter Hawes the plumber and (sic) has advised me that he is getting some new flashing made up but they havnt (sic) arrived as yet he expects them mid to latter (sic) this week, he said as soon as they show up he will fix.
  7. [57]
    Bronte had also received two short videos which showed water coming into the kitchen which was attributed the flue.  After fixing the leak in the flue in the kitchen in around February 2015, Mr Hawes told Bronte by letter dated 11 March 2015 that the “roof screws on the entire roof & surrounding motel units are rusted out.  The screws will need to be replaced before the roof starts to also rust out. …”. 
  8. [58]
    Then by letter from Platypus’s solicitors dated 7 October 2015, Bronte was put on notice that, incidentally to other plumbing, Mr Burnell reported that the roof has “some loose roof sheets & badly rusty roof screws. My means to solve the problem is all the screws need to be replaced.” The solicitors urged Bronte that “[t]his needs to be attended to by the landlord before the start of the Cyclone season.”
  9. [59]
    Bronte’s property manager, Rod Place, acknowledged by email of 26 November 2015 that Bronte was aware that substantial works needed to be done on the roof.  He said: “… just informing you that the landlord has accepted a quotation from U Don’t Need a New Roof to re screw down the roofing iron with cyclone proof screws and repaint the roof.  Scott from U don’t need a New Roof will be in contact with you in the near future to arrange a suitable time for the works to be carried out.” 
  10. [60]
    The quote from ‘U Don’t Need a New Roof” was dated 22 October 2015 and set out the following scope of roof work on the 3 large roofs and 1 small roof of the motel:

“ …

  • Complete Re-screw of all 4 roofs

= $26015 inc Gst

  • Entire Pressure Clean
  • Apply Rust Proofing Agent where required
  • Apply 2 x Coats of Commercial White Supa Cool Reflective Membrane (Commercial Roof Coat Sealer)

= $32,428.00 …”

  1. [61]
    However, Bronte recanted on that course and Mr Place “squashed the job” on behalf of Bronte, after he considered the total cost of “nearly $60,000” too much.  Mr Place emailed Platypus on 30 November 2015 saying:

“Due to a misunderstanding in the quote supplied by ‘U Don’t Need a New Roof’ the landlord has not accepted the quote and will not be proceeding with the roof repair with this Company.

I have spoken to Matthew the handyman to at least get him to re screw down any loose sheets and replace any missing screws.  As he is having a knee operation next week he won’t be available.  He is going to see if he can find someone else to do this for me.”

  1. [62]
    Almost 8 months passed before Mr Place visited the property on 22 July 2016 for his annual inspection.  He later acknowledge that during his inspection he noted that some of the works that have appeared in works to the roof works (identified in Mr Kopp’s report) needed to be attended to by Bronte.[10]  But there was a further hiatus in communication between the parties and inaction by Bronte about the roof for another 2 months.
  2. [63]
    Platypus’s concerns persisted and they again turned to their lawyers.  By a solicitor’s letter to Bronte dated 23 September 2016 attaching the building inspection report by Mr Kopp dated 31 August 2016, Platypus asserted:

“I refer to this matter in which your company as landlord has been in breach of its obligations to repair the roof and associated structures of the motel from the end of November 2015.

A Building Inspection Report which identified damages to associated structures arising from the leaking roof has been obtained and is enclosed.  My client demands that the repair work identified in the Building Report be undertaken within a reasonable time and in this regard 30 days from the date of this letter to commence the work and 90 days from the date of this letter to complete the work are considered to be reasonable times.

My client the tenant give notice to you as landlord that regardless of any repair work that is completed in the future my client fully reserves its rights to take action to recover loss and damage caused by your breaches in this matter since November 2015.”

  1. [64]
    Mr Place responded by email dated 18 October 2016.  He refers to “some roof leaks and the Building Inspection Report …”, and conceded that “During our inspection, back in July 2016, we note some of the works that have appeared in your building report which needs to be attended to by the landlord.”  He advised that: “These works, along with other issues in your report, will be attended to in due course.  We will priorities the roof works as soon as I can get someone reliable to turn up when they say they will.”  He sought a recommendation of a “reliable roof plumber” and promised to advise of timeframes “when I am notified”.
  2. [65]
    On 19 October 2016, Mr Place advised Platypus’s solicitor by email that “I am having problems obtaining tradesmen to quote and take on the works but I am working on this and I will find someone, I will keep you updated with my progress.”  And the next day on Thursday 20 October 2016, he emailed that “Peter Hawes Plumbing has indicated to me he can attend the Malanda Lodge Motel either Friday afternoon or Saturday sometime to be able to provide a quote to me for the recrewing the roof along with other various issues”.
  3. [66]
    It seems to me that Bronte knew of problems with roof screws from June 2013 via the 25 points raised by Platypus at the time of assignment of the lease and later by Mr Hawes’ letter dated 11 March 2015.  But in any event, by its correspondence 7 October 2015 Platypus provided effective notice to Bronte that the roof required urgent repair before the Cyclone seasons.  After further correspondence and inspection before 26 November 2015 when Bronte accepted the nature and extent of necessary repairs the subject of the quote from ‘U Don’t Need a New Roof’.  Accordingly, it anticipated arrangements for a timeline for those works to be carried out.  But it abandoned that course only 4 days later having belated taking issue with the quoted cost in the sum of $58,443. 
  4. [67]
    I think Bronte was given the requisite notice from Platypus on 7 October 2015 upon which it acted well before receiving the more formal letter from solicitors dated 23 September 2016 and enclosed report.   Once sufficiently appraised of the thing needing repair there was no obligation on Platypus to reset or renew the reasonable time for compliance by some further notice.  Therefore, Bronte’s obligations to undertake necessary and timely repairs in a reasonable time was enlivened from 7 October 2015.

Did Bronte repudiate the lease by its conduct of not doing the required roof repairs in a timely way?

  1. [68]
    Repudiation of a contract is a very serious matter and is not lightly found or inferred.[11]  It is only shown where a party “evinces an intention no longer to be bound by the contract… or shows that he intends to fulfil the contract only in a manner substantially inconsistent with his obligations and not in any other way.”[12]  The conduct of the recalcitrant party must be such as to convey to a reasonable person, in the situation of the other party, renunciation either of the contract as a whole or of a fundamental or essential obligation under it.[13]
  2. [69]
    As to essentiality of a term, in DTR Nominees Pty Ltd v Mona Homes,[14] the majority of the High Court stated that:

“[T]he quality of essentiality depends … on a judgment which is made of the general nature of the contract and its particular provisions, a judgment which takes close account of the importance which the parties have attached to the provision as evidenced by the contract itself as applied to the surrounding circumstances.”

  1. [70]
    This is a case involving a breach of an essential term where performance was either expressly or impliedly to be completed within a reasonable time, as distinct from one which expressly specifies a time for performance.  The purpose of the grant of lease was to facilitate Platypus’s hotel business of providing shelter, accommodation and hospitality to guests and patrons. The successful operation of such business was necessarily dependent upon the structural integrity of the buildings such that obligations to maintain and make timely repair to structural components ought be considered an essential term.[15] 
  2. [71]
    There is no prescription in the lease setting time for performance of the obligation to repair, instead performance was required within a reasonable time after effective notice by Platypus effectively informing Bronte of the thing needing repair, but no sooner.  It seems to me that this inference is not rebutted by clause 1.3(b)(i) and (ii) of the lease, because to the extent that it purports to afford impunity and unfettered discretion to Bronte’s to “exercise a right, power or remedy at its discretion” it is void and ineffectual, and account must be taken if Bronte “does not exercise or delays the exercising a right, power of (sic) remedy, [it]  may still exercise it at a later time”.  It must also be borne in mind that a contracting party will not in normal circumstances be entitled to take advantage of his own breach as against the other party.[16]
  3. [72]
    Since it is an essential term, and although I think it effectively did so by its letter of 23 September 2016, it was not necessary for Platypus to deliver notice making time of the essence before termination for repudiation.[17]    The right to terminate “does not necessarily arise when the reasonable time expires but only when repudiation is clearly to be inferred from the circumstances in which the delay occurs.”[18]  Whether an inference is to be drawn that the party in breach intends no longer to be bound must to be assessed by asking whether the other party was entitled to infer that intention.[19]  When considering whether conduct evinces the relevant intention the court must have regard to all of the relevant circumstances[20].  The circumstances that are relevant to determining whether a party evinces an intention to no longer be bound include whether performance is offered,[21] and whether the party in breach is making efforts (known to the other party) to fulfil its obligations.[22] The notices given by Platypus are relevant.[23]  In some circumstances, particularly in a commercial lease such as this, procrastination may be so gross and protracted as to amount to repudiation.[24]
  4. [73]
    In Laurinda Park Ltd v Capalaba Park Shopping Centre Pty Ltd,[25] Brennan J explained:

“The difference between a contract which contains a stipulated day for performance of an essential term and a contract which, expressly or impliedly, requires performance within a reasonable time is important when the question is whether, on failure to perform within the time limited by the contract, the innocent party is entitled to rescind.  In the former case, a right to rescind arises at law when the stipulated day passes; in the latter, that right does not necessarily arise when the reasonable time expires but only when repudiation is clearly to be inferred from the circumstances in which the delay occurs.  Delay will amount to repudiation if the defaulting party "evinces an intention no longer to be bound by the contract … or shows that he intends to fulfil the contract only in a manner substantially inconsistent with his obligations and not in any other way”: Shevill v Builders Licensing Board  [1982] HCA 47 ; (1982) 149 CLR 620, at pp 625–626; Progressive Mailing House Pty Ltd. v Tabali Pty Ltd  [1985] HCA 14 ; (1985) 157 CLR 17, at pp 33, 40.”

  1. [74]
    Brennan J further explained that:[26]

“If the inference to be drawn from the circumstances is that the defaulting party intends to perform an essential promise after some minor delay, repudiation cannot be inferred; but if the inference is that the defaulting party intends so to delay performance that the promisee will be substantially deprived of the benefit of the promise, repudiation can be inferred. The inference is not lightly drawn: Progressive Mailing House Pty. Ltd. v. Tabali Pty. Ltd.”

  1. [75]
    Brennan J went on to say at 644 that persistent delay coupled with a failure to comply within a reasonable amount of time provided for by a notice from the innocent party could provide “a firm foundation for an inference of repudiation”.  His Honour formulated the test of whether delay in performance could amount to repudiation as follows:[27]

“The question whether an inference of repudiation should be drawn merely from continued failure to perform requires an evaluation of the delay from the stand point of the innocent party.  Would a reasonable person in the shoes of the innocent party clearly infer that the other party would not be bound by the contract or would fulfil it only in a manner substantially inconsistent with that party’s obligations and in no other way?”

  1. [76]
    Mason CJ distinguished a party’s reluctant conduct to perform at all, or in a timely way saying:[28]

“There is a difference between evincing an intention to carry out a contract only if and when it suits the party to do so and evincing an intention to carry out a contract as and when it suits the party to do so.  In the first case the party intends not to carry out the contract at all in the event that it does not suit him.  In the second case the party intends to carry out the contract, but only to carry it out as and when it suits him.  It is much easier to say of the first than of the second case that the party has evinced an intention no longer to be bound by the contract or to fulfil it only in a manner substantially inconsistent with his obligations and not in any other way.  But the outcome in the second case will depend upon its particular circumstances, including the terms of the contract.  In some situations the intention to carry out the contract as and when it suits the party may be taken to such lengths that it amounts to an intention to fulfil the contract only in a manner substantially inconsistent with the party's obligations and not in any other way.”

  1. [77]
    Deane and Dawson JJ said of a procrastinator:[29]

“It is not necessary for repudiation of a contract that the repudiator make plain that he will never perform his contractual obligations at all. What Lord Dunedin described (Forslind, at p190) as the assumption of ‘a shilly-shallying attitude in regard to the contract’ and what Lord Shaw of Dunfermline (ibid, at p192) called ‘procrastination ... persistently practised’ can, in some circumstances, reach the stage of repudiation even though accompanied by assurances of ultimate performance at some future time.  In that regard, the law was correctly stated by Lord Shaw in the following extract from his judgment in Forslind (at pp 191-192) which is directly in point to the circumstances of the present case:

If, in short, A, a party to a contract, acts in such a fashion of ignoring or not complying with his obligations under it, B, the other party, is entitled to say: ‘My rights under this contract are being completely ignored and my interests may suffer by non-performance by A of his obligations, and that to such a fundamental and essential extent that I declare he is treating me as if no contract existed which bound him.’ ... In business over and over again it occurs—as, in my opinion, it occurred in the present case—that procrastination is so persistently practised as to make a most serious inroad into the rights of the other party to a contract. There must be a stage when the person suffering from that is entitled to say: ‘This must be brought to an end. My efforts have been unavailing, and I declare that you have broken your contract relations with me.’”

  1. [78]
    Platypus relies upon to Laurinda Park Ltd v Capalaba Park Shopping Centre Pty Ltd[30] and Antill v Estate of Parkinson,[31] to argues that the relevant circumstances of Bronte’s repudiatory conduct include:
  1. Its attempts to deny any obligation to attend to the relevant maintenance;
  2. Organising to have maintenance done then to cancel the order to the contractor who was to do the work;
  3. Stating that some lesser work would be done but then such work was not done;
  4. Having found through its own processes that work was to be done but not organising for it to be done from July 2016 onwards;
  5. Having been put on notice that the plaintiff wanted the work done within a reasonable time and in particular such work commencing within 30 days in late September 2016, responding by saying such work would be programmed at a time suitable to the defendant landlord; and
  6. When warned that this conduct might be treated as repudiatory, having the defendant’s solicitor deny any past breach and not put forward any concrete proposition for an agreed timetable for the completion of the works.
  1. [79]
    In stark contrast, Bronte denies any repudiatory conduct on its part, and instead claims that Platypus repudiated the lease by purporting to terminate the lease prematurely and unreasonably.  Bronte points to the following conduct:
  1. Bronte’s correspondence show that in mid-October 2016 Mr Place was trying to locate a reliable plumber to come and quote for the work but he was having some trouble.
  1. Platypus was on notice at this point that Bronte was taking steps to have the roof fixed.
  2. Bronte wrote to Platypus on 11 November 2016 saying it was attempting to locate contractors to carry out the structural work identified in Mr Kopp’s report.  Bronte’s solicitors again wrote to Platypus’s solicitors on 21 November 2016 saying Bronte had engaged Mr Burnell to perform the works.
  3. Even after being on notice of Bronte’s efforts to locate someone to perform the works at the property, Platypus purported to terminate the lease by its solicitors’ letter of 25 November 2016.
  4. Bronte also appear to have engaged Mr Hawes to provide a quote. Mr Hawes’ evidence was that he provided a quote on 30 November 2016 (exhibit 40) to perform the repairs to the roof. Mr Hawes also said in his oral evidence that coming into the Christmas season was always a busy time for him, and as far as he knew from talking to other plumbers, a busy time for them too.  He estimated that given the rainy season was on its way, and his workload at the time, that he would not have been able to start the job for around 3 months, and that it would take him approximately 3 weeks to complete.
  5. Platypus was not acting reasonably in purporting to terminate.  It knew that Bronte was taking steps to comply with its obligations under the lease. Accordingly, the defendant did not repudiate the Lease.
  6. Further, Platypus cannot rely on Bronte’s failure to take steps to repair the roof before 23 September 2016 as conduct that was repudiatory because Platypus was under an obligation under clause 7.5 of the Lease to notify Bronte of any damage to the Motel.  In doing so, it would be relying on its own breach of clause 7.5 of the Lease as a basis to terminate.
  1. [80]
    I have already found that Platypus gave sufficient notice on 7 October 2015 (which enabled Bronte to further inform itself by 26 November 2015) and thereafter enlivened Bronte’s obligations to undertake necessary and timely roof repairs.  It seems to me that the plaintiff can rely upon Bronte’s conduct after 7 October 2015, and before and after the more formal letter from Platypus’s solicitors dated 23 September 2016.  After the further exchange of correspondence, Platypus purported to terminate the lease by its letter of 23 November 2016.
  2. [81]
    Mr Place was cross-examined about the letter from Platypus’s solicitors dated 7 October 2015 Bronte that “[t]his needs to be attended to by the landlord before the start of the Cyclone season” by reference to the enclosed Mr Burnell’s reported that the roof has “some loose roof sheets & badly rusty roof screws.  My means to solve the problem is all the screws need to be replaced.”  Mr Place was asked: “Did you think it was good advice from the plumber, Mr Burnell, to then replace the screws?, to which he answered “No.  I didn’t, because I didn’t want to replace the screws because it – the roof wasn’t leaking.”
  3. [82]
    Mr Place also testified about the apparent acceptance and recantation of the quote from ‘U Don’t Need a New Roof” dated 22 October 2015.  Mr Place insisted that Bronte misunderstood that the total price was the sum of two stated prices but conceded that he “probably would have” proceeded with the quoted work if it was half the cost.  However, that was only on the basis that “It was a cosmetic type of thing that I wanted to [indistinct] the motel up also. … Well, I believe the – the client.  So – are more interested in seeing a nice roof if they’re driving in the driveway.”  Mr Place made it clear in his evidence that Bronte had no interest in that part of the quote dealing with the screws, and instead turned to the unqualified handyman.  Mr Place testified that: “And I contacted Matthew and I asked him would he go along and, if he found any loose screws, to re-screw them down” and “believed he did”. 
  4. [83]
    In my view Bronte’s conduct after 7 October 2015 and before 23 November 2016 proved to be inadequate and ineffectual.  It seems to me that Bronte did engage in intolerable obfuscation, gross and protracted procrastination and inaction, and inordinate delay in fulfilling its obligation to repair.  In that period Bronte disputed and obfuscated about any obligation to attend to the relevant maintenance; communicated acceptance of maintenance work but recanted despite the contractor being ready and able to complete work within a reasonable time around November 2015; anticipating that, but not proceeding with. some lesser work would be done by others; and reminding itself of the need for works by inspection in July 2016 but still failing to act. 
  5. [84]
    This was met by Platypus’s solicitors’ letter of 23 September 2016 attaching the building inspection report by Mr Kopp dated 31 August 2016.  Platypus correctly in my view called out Bronte’s breach of its obligations to repair the roof and associated structures of the motel from the end of November 2015 and reserved its rights to damages.  The attached report appraised Bronte of the apparent consequential water damage.  Platypus fairly identified “30 days form the date of this letter to commence the work and 90 days from the date of this letter to complete the work are considered to be reasonable times.”  The letter was sufficient to put the defendant on notice that consequential action would be taken if work remained incomplete. 
  6. [85]
    Bronte has not in its defence nor in any of its correspondence in evidence disputed the reasonableness of the times proffered of 30 days for commencement of works or 90 days for the completion of works. 
  7. [86]
    While Mr Place responded by email dated 18 October 2016, that communication was not clear about the extent that Bronte accepted responsibility for the work that would be prioritised and attended to “in due course”.  On 19 October 2016, he advised of problems obtaining tradesmen to quote and take on the works.  And the next day on Thursday 20 October 2016, he emailed that “Peter Hawes Plumbing has indicated to me he can attend the Malanda Lodge Motel either Friday afternoon or Saturday sometime to be able to provide a quote to me for the rescrewing the roof along with other various issues”. 
  8. [87]
    But Mr Hawes did not attend as indicated by Mr Place. 
  9. [88]
    Faced with further apparent inaction, on 2 November 2016 Platypus’s solicitor warned Bronte that its conduct might be treated as repudiatory.  The letter noted that no repairs had been initiated since the formal demand made on 23 September 2016 and asked whether Bronte had made arrangements to commence works.  That letter made it plain that the plaintiff was considering its options including the possibility of accepting the ongoing failure to repair as a repudiation.   It gave 14 days for Bronte to assure compliance with this essential term of the lease within a reasonable time by informing it of some firm plan to remedy the breach.
  10. [89]
    This warning was met with correspondence from Bronte’s solicitor dated 11 November 2016.  It asserted that Bronte was attempting to locate contractors to carry out the structural work identified in Mr Kopp’s report and that Bronte had “always intended, to meet their obligations under the lease”.  But these must be read with the express denial that Bronte was in breach of obligations under the lease, that it was Platypus’s obligation to keep the roof and the landlord’s property in good repair, that the ceiling in the restaurant was not a structural element, rejection of the proposition that the repairs were required in November 2015, that there was no ongoing breach and the absence of any certain timetable for the completion of the works. 
  11. [90]
    Bronte’s solicitors again wrote to Platypus’s solicitors on 21 November 2016 saying Bronte had engaged Barry Burnell Plumbing, an unidentified electrical contractor and plasterer to perform works identified in Platypus’s building report.  Relevantly, Bronte’s solicitor asserted that Barry Burnell Plumbing “was not, at this stage, available to start the work until about mid to late January 2017”.  The letter also demanded evidence of completion of things Bronte said required Platypus’s attention in its letter dated 3 August 2016.
  12. [91]
    Although Bronte’s correspondence tends to indicate that Mr Place was trying and having trouble to locate a reliable plumber and other contracts to come and quote for the work, this is not proof of those things.  I am not persuaded that Bronte made sufficient timely efforts to find and engage an appropriate plumber or other trades people to carry out necessary work. 
  13. [92]
    There was a dearth of evidence of Mr Place’s efforts to engage trades (beyond a few including Greg Barr, Bob Green a plasterer, an unidentified electrician, Peter Hawes and Mr Burnell) or any other convincing evidence of the unavailability of tradespeople to attend to the relevant roofing work in a timely way.  As for Mr Burnell’s engagement - that proved illusory.  Mr Place testified that he could not recall whether Mr Burnell was engaged by Bronte or even the scope of work of any engagement.  Although he recalled that Mr Burnell subsequently did “some work on the rook” it was “only the verandah roof”.  He insisted that “Perter Hawes is the only person I’ve ever got to do work on the roof … I’m pretty sure it was after – in the new year, after January or something like that … 2017”.  As for Mr Hawes - Mr Place was not sure whether Mr Hawes went or not on 21 or 22 October 2016 (as indicated in the email of 20 October 2016).  Mr Hawes recalled attending in November 2016.  I accept Mrs Sheppard’s evidence that Mr Hawes did not attend until after the termination letter of 25 November 2016.  On that day she was attending the hospital with her husband.  Mr Hawes’ evidence was that he later provided a quote on 30 November 2016 to perform repairs to the roof.  Mr Hawes also testified that coming into the Christmas season was always a busy time for him, and as far as he knew from talking to other plumbers, a busy time for them too.  He estimated that given the rainy season was on its way, and his workload at the time, that he would not have been able to start the job for around 3 months, and that it would take him approximately 3 weeks to complete.  This apparent engagement of Mr Hawes was not foreshadowed in the letter of 21 November 2016 nor was it timely. 
  14. [93]
    It seems to me that Bronte’s conduct showed persistent hesitation or lack of decisiveness or resolution about its obligation to repair since 7 October 2015.  Although there were veil assurances of ultimate performance at some future time they proved to be hollow.  On my reckoning, repudiation is clearly to be inferred from the circumstances Bronte’s inordinate delay and inaction from 7 October 2015 characterised by its shilly-shallying attitude in regard to its core obligations under the lease, half-hearted acknowledgment, procrastination, recanted promise, persistent passive resistance and residual disputation about the nature, extent and timing of its obligation to repair up to 11 November 2016.  Bronte’s apparent procrastination continued despite Platypus’s efforts ahead of the looming wet season.  In all of those circumstances its conduct was sufficient to amount to repudiation as evincing an intention to fulfil the contract only in a manner substantially inconsistent with its obligations to repair within a reasonable time, and not in any other way. 
  15. [94]
    I pause to observe that this is also consistent with the defendant’s pleading which maintains that it was not required to conduct the repairs due to the terms of the lease and insufficient notice of damage. [32]  And further or alternatively it denies that it failed to complete any repairs of roofs on the grounds that it was the Platypus’s obligation to so repair, the roof was in good condition for its age, and the roof rescrews were not rusty and did not require replacing. [33]
  16. [95]
    Faced with this situation, I think that Platypus was entitled to consider its rights under the lease were being completely ignored, that their interests will continue to suffer by non-performance and that Bronte considered itself not bound by the obligation to repair under the lease.  It saw through the façade of Bronte’s correspondence and its purported efforts to locate someone to perform the works at the property.  It turns out that Bronte was neither taking timely steps as indicated nor acting in compliance with its obligations under the lease.  This is consistent with Bronte’s solicitor’s subsequent denial of any past breach and not putting forward any concrete proposition for an agreed timetable for the completion of the works.  No repairs were done by the defendant.  No notice had been given to the plaintiff that any contract had been made with any person to complete any of the repairs or maintenance required to the roof in a timely way.  Bronte’s belated assurance of some roof repair work starting in mid to late January was too little too late.  By then Bronte’s inaction rendered the motel buildings and interiors so compromised and damaged by water penetration which substantially deprived Platypus of the benefit of the promise of timely repair and burdened by a noncompliant use subject of local government regulatory enforcement, damp and smell diminishing amenity, complaints and practical business interruption.  I am not satisfied that the Bronte was fulfilling, or intended to fulfil, its lease obligations within a reasonable time and Platypus was acting reasonably in purporting to terminate.  
  17. [96]
    I have to conclude that Bronte’s conduct did repudiate the Lease despite being given sufficient notice satisfying clause 7.5.  Platypus gave notice of termination of the lease by its solicitors’ letter of 25 November 2016. [34] 

Was Platypus entitled to terminate the lease and sue for damages?

  1. [97]
    Having come to the conclusion it is unnecessary to answer the contradictory questions relating to the Bronte’s counterclaim, except whether Platypus was itself in breach and precluded from exercising the right to terminate on the grounds of repudiation. 
  2. [98]
    Bronte’s alleges Platypus breached the lease by one or more of:
  1. Repudiating the Lease by sending its letter of 25 November 2016 purporting to terminate;
  1. Failing to pay rent pursuant to clauses 3.1 and 11.1 of the lease;
  2. Failing to keep the motel open in breach of cllauses 6.1(a) to 6.1(c) of the lease, and
  3. Abandoning the motel on 22 December 2016.
  1. [99]
    None of these matters predate the notice of termination by Platypus. 
  2. [100]
    I do note that Bronte’s solicitors’ letter of 21 November 2016 demanded evidence of completion of things Bronte said required Platypus’s attention in its letter dated 3 August 2016.  But none of these are pleaded by Bronte and thereby relied upon as disentitling conduct to the right to terminate.  And I am not persuaded that Platypus was in default as at 25 November 2016 as alleged, and Platypus provided a satisfactory answer to those matters in any event.
  3. [101]
    Therefore, in the absence of any such precluding conduct, I find that once Platypus accepted Bronte’s act of repudiation by letter of 25 November 2016, the lease was irrevocably terminated and Platypus entitlement to damages if enlivened. [35] 

What is Platypus’s loss (if anything)?

  1. [102]
    Since Platypus has rightly terminated the lease in consequence of the Bronte’s breach of an essential term or by acceptance of Bronte’s repudiation, the lessor is entitled, in accordance with ordinary contractual principles, to sue the lessee for damages for loss of the benefit of the lease.
  2. [103]
    The general contractual principle is that the innocent party suing for breach of contract is to be placed in the same position, so far as money can do it, as if the lease had been performed.[36]  The measure of these damages is for the loss of bargain in losing the lease.[37]  The damages are calculated as at the date of the election to accept the repudiation being the date of termination of the lease,[38] although subsequent events can be relevant to the value of loss of bargain damages or whether a party has mitigated its loss.[39] 
  3. [104]
    Platypus claims that it suffered loss and damages as a result of the defendant’s breach of the lease and repudiation of the lease, which was pleaded as a capital loss estimated as the difference of the amount paid for the motel and value of tenant’s chattels.  By way of further and better particulars, the plaintiff reframed its loss and damages on the basis of an economic loss on projected cash flow for the current lease term from 31 December 2015, and a loss of a chance for the option periods.  Platypus has particularised its estimated loss and damage as:
    1. (a)
      The difference between actual and expected cash flow between 31 December 2015 and date of termination of 25 November 2016 of $65,051.87;
    2. (b)
      Loss of discounted cash flow after termination of the lease from 16 November 2016 to the end of the lease on 30 June 2019 of $145,086.37;
    3. (c)
      Loss of discounted cash flow for the period up to 30 June 2029 of $83,076.51
  4. [105]
    Bronte argues that Platypus suffered no loss but was ‘better off’ because it was suffering trading losses at the time of the termination of the Lease.
  5. [106]
    Platypus relied upon the expert account of Mr Parry who I found to be qualified and honest in his forensic work and opinions.  However, as I explain below, I think his methodology distorted actual deterioration in Platypus’s financial performance between 2014 and 2016 by artificially excluding financial benefits derived through the entity, reducing actual costs repairs and maintenance, and deleting interest costs.
  6. [107]
    The financial statements showed consecutive losses of $19,066 in the 2014 financial year, $75,042 in the 2015 financial year, and $77,426 in the 2016 financial year. 
  7. [108]
    In order to calculate the claimed losses, Mr Parry undertook a comparative process using 2014 financial year as the base year and compared subsequent yearly losses with that base year.  In doing so, Mr Parry relied upon assumptions that the motel business experienced a number of incidents relating to water and moisture ingress during 2014/2015 period, the need for substantial repairs to the roof and adverse local government assessments in 2016.  Mr Parry conceded that “I’ve made an assumption that – that the dispute [with Bronte] impacted 2015 and 2016 results … and that 2014 as a base year was unaffected by the dispute”. 
  8. [109]
    It seems to me that those assumptions are not entirely borne out by the evidence which first revealed a leak in the flue in the kitchen around February 2015, and whilst that caused some disruption, it was fixed.  This was followed by the gratuitous observations of Mr Hawes in his letter dated 11 March 2015.  Still no dispute had arisen at that time, nor was that sufficient notice to enliven Bronte’s obligations to repair as discussed above.  Things came to a head with the requisite notice from Platypus’s solicitor to Bronte on 7 October 2015, which included the report of Mr Burnell.  The condition of the roof screws was plainly the result of fair wear and tear and rendered the roof system of the motel as not in a good structural state or condition mainly due to rusting and deteriorating roof screws.  Having received the quote from ‘U Don’t Need a New Roof” was dated 22 October 2015, Bronte was poised to carry out the work by the end of 2016 but it elected not to do so as discussed above in breach of the lease and causative of loss.  Platypus did not actively agitate matters until September 2016 when interior problems seemed more manifest as evidenced by the observations of Ms Sheppard and Mr Jurek and another wet season was looming. 
  9. [110]
    Nevertheless, it is appropriate to take account of any unusual disruption to the business as part of the accounting exercise.  I accept the evidence of Ms Sheppard, Mr Jurek, and Mr Kopp that the motel rooms and restaurant were manifesting problems associated with water ingress, mould, mildew and associated strong odours.  They were the subject of poor reviews and complaints that the rooms, restaurant and public areas had a persistent musty smell notwithstanding reasonable efforts made to air out and deodorise those areas.  Ms Sheppard affirmed that the leaks caused issues in running the motel as follows: “Absolutely.  It stunk.  The whole place stunk of rotten wood and mould and mildew.  You would walk in the next morning after having the place closed up for the night and it just reeked.  So you would have to open all the doors and the windows and I used to get the girls – my housekeepers – to vacuum the floor, rewash all the tiles, wipe down benches and everything to try and get rid of the odour, but it would be back there the next day.  So consequently, people didn’t really want to ever come up and have breakfast in the mornings.  It turned them off a bit.”  She remarked that “Well, a good income for us was the restaurant, but people don’t want to come to a restaurant if it stinks.  It puts people off, which is natural.  And we had a few bad reviews because of it, of odours and whatnot.  Yeah.  So it did have a – it had a detrimental effect, definitely.”  Despite taking mitigating and deodorising action, Ms Sheppard described the recurring smell “Just it seemed to grow as time went on.  It wasn’t just not there and then suddenly it was.  It just got worse and worse and worse and worse.”
  10. [111]
    The effect of these interior problems is somewhat intangible and invites a degree of speculation to determine the likely impact on return business and public reviews to potentially impact new business.  This can be buttressed by excluding any other potential management or staffing changes that would have impacted on the functioning of the motel business.  During the course of the lease Ms Sheppard had engaged a real estate agent Mr Shane Mullins to see if the plaintiff could sell the business.  Mr Jurek has had one knee replacement and is due to have another, which presumably would mean he is unlikely to be able to assist in any business the plaintiff conducts.  Mr Jurek also suffered debilitating mental health problems in November 2016. Whilst Ms Sheppard or Mr Jurek could not participate in the business to the full extent, other staff members were obtained or re-tasked to ensure the proper operation of the motel.  There were no other external market factors adversely affecting the operation of the business.
  11. [112]
    Mr Parry used a differential “business related cash flow” method to determine the loss up to termination of the lease to reflect the difference between expected business cash flow and actual business cash flow.  For the period following termination he used a diminished annual “business related cash flow” method to reflect, upon termination, the lost opportunity for Platypus to receive business related cash flow of the magnitude it received in 2014.  He defined “business related cash flow” for the purposes of these calculations as Platypus’s financial performance adjusted as follows:
  • Excluding form reported business expenses appropriate allowances to reflect the contributions to the lifestyle of proprietors engaged in the business for business such board (kitchen stores and food at $10,400 pa or $200/week), electricity ($100/week), car expenses ($40/week) and a portion of rent for the manager’s residence $);
  • Adding an amount of $7,000 for general insurances to the calculation of 2014 cash flow to reflect this type of normal expense and result in an adjusted annual loss of ($19,066).
  • Reducing annual repairs and maintenance expenditure to $3,120 ($60/week) to reflect estimated normalised expenditure likely to be incurred across the life of the lease and its options, as opposed to the higher level of early life expenditure incurred.
  1. [113]
    Accordingly, Mr Parry deducted from the expenses for the trading periods ending 30 June 2014, 30 June 2015 and 30 June 2016 to arrive at business related cash flows of $75,179, $11,843 and ($973) those respective years.  It addition, Mr Parry excluded interest in the amounts of $15,283, $15,474, and $14,829 for the trading periods ending 30 June 2014, 30 June 2015 and 30 June 2016, respectively.
  2. [114]
    Mr Parry was cross-examined about his reduction for annual repairs and maintenance to $3,120 meant a change from $14,829, $7602 and $6,680 for the trading periods ending 30 June 2014, 30 June 2015 and 30 June 2016 respect.  Mr Parry explained that “the repairs and maintenance was reduced with an expectation that there would be lower repairs and maintenance in the latter life of the lease” and assumed a constant amount of $3,120 would be incurred annually.  There is no evidence to support such a reduction and it seems contrary to the age and state of the motel.  There is no reason to doubt the higher expenditure of $14,829 as being necessary and reasonable in 2014, and the lower expenditure in the years ending 2015 and 2016 is consistent with Platypus holding off on work contingent on Bronte’s repairs.  In my view Mr Parry offered impermissible speculation without any evidentiary basis.  Therefore, I do not accept the adjustment and those expenses ought be included as a proper expense of the business.
  3. [115]
    Mr Parry was challenged about his methodology to exclude non-business expenses he attributed to the lifestyle of Ms Sheppard and Mr Jurek such board (kitchen stores and food), electricity, car expenses and a portion of rent for the manager’s residence, without making any commensurate adjustment for salaries for their pivotal roles in the motel business.  He explained that this involved an exercise to “separate business from personal and lifestyle issues, so that I could simply concentrate on the business, to the exclusion of other factors” and distil the “pure business cash flow”.  This involved Mr Parry using a “value judgment” and extracting a proportion of expenses representing the owner’s living expenses.  When asked about the need to factor in owner’s salaries, Mr Parry emphasised that “Well, I’m only looking at the loss of the business here” and explained the exercise as “separating business and non-business expenditure, such that we can look at what the business cash flows are”, so “We’re looking at the lost business cash flow”.  He conceded that the business would operate at a continuing loss if account were taken of those expenses as being commensurate with salary. 
  4. [116]
    It seems to me that Mr Parry indulged in impermissible speculation in setting the amounts associated with lifestyle benefits and in doing so failed to properly account for business costs for the services of Ms Sheppard and Mr Jurek.  Mr Jurek undertook the critical roles of chef, cleaner, maintenance and gardening.  Ms Sheppard was pivotal to the administration of the business and shared those other roles especially when Mr Jurek was incapacitated.  If those expenses were commensurate with salary then Platypus’s financial performance ought to have included amounts at least of $32,959,[40] $33,757,[41] and $32,754[42] for the trading periods ending 30 June 2014, 30 June 2015 and 30 June 2016 respectively.
  5. [117]
    As I mentioned, Mr Parry also excluded interest in the amounts of $15,283, $15,474, and $14,829 from the trading periods ending 30 June 2014, 30 June 2015 and 30 June 2016, respectively, because he regarded that expense “a cost of ownership as opposed to an operating result for the business”.  When asked: “… in actual dollar terms, there’s no reason to suppose that this business would have stopped incurring interest in 2016, is there?, Mr Parry replied: Well, I – I don’t know what that interest was for.  It’s simply that it is not a cost of operating a business.”  It seems to me that it is nevertheless a cost to Platypus for operating this particular motel business, and there is no evidence to show it relates to a different enterprise or undertaking.  Therefore, I do not accept that as a proper adjustment in the calculation of damage flowing from the breach and acceptance of the repudiation.
  6. [118]
    Bronte also contends that the discount rates applied by Mr Parry should be significantly increased.
  7. [119]
    Mr Parry also used a discount of 30 per cent associated with commercial business risk for the periods comprising the balance of the 2015 financial year after 31 December 2015 and part of the 2016 financial year until the date of termination on 25 November 2016.  He then used for these periods a discount of 45 per cent for a greater risk for the chance of Platypus not exercising its lease option. 
  8. [120]
    Bronte argues that the evidence shows that Platypus was more likely than not to, fail in its business before the lease expired in June 2019, and also because it was unlikely to have exercised its option to renew for another two option periods.  It seems to me that there is significant force in the argument.
  9. [121]
    Ms Sheppard and Mr Jurek were inexperienced in running motels.  Neither of them had run a motel before and were self-learning on the job.  The only formal training undertaken by Ms Sheppard before starting the business was for serving alcohol.  The property was a regional motel impacted by monsoonal seasonal weather patterns.  Given the age and state of the motel there was bound to be problems associated with fair wear and tear despite the best efforts of the parties.  There were no other external market factors shown to impact the operation of the business except I note the coincidence of significantly reduced revenue with the marked reduction in advertising expense for the 2015 and 2016 financial years of $1,100 and $140 respectively when compared to $7,015 for the 2014 financial year.  During the course of the lease Mr Jurek had one knee replacement and was due to have another, which reduced his capacity to assist in the business.  Mr Jurek also suffered debilitating mental health problems in November 2016.  These directly impacted his multiple roles of chef, cleaner maintenance and gardening.  Sheppard’s relief teaching stints would take her away from the day to day running of the business thereby increasing its risk of failure, especially where her husband was unable to work due to health reasons.  So for the periods they could not participate in the business to the full extent, other staff members were obtained or re-tasked to ensure the proper operation of the motel in its already diminished state.  Mr Parry accepted that when a business owner is not actively working in the business but instead leaving it to others to manage, it heightens the risk of the business failing.  Indicia of the fledging business is found in the general presentation of the motel as depicted in the photographic evidence of rusting signage, operational and cleaning matters identified in the local government inspection reports, and general roof gutters, pavement, and garden maintenance. 
  10. [122]
    However, I accept that Bronte’s repudiatory conduct in substantial breach of the lease caused Platypus greater loss between 31 December 2015 and date of termination of 25 November 2016.  For that calculation I will use the 2014 financial year results but exclude depreciation of $43,401 and include a notional expense of $7,000 for general insurance.  It seems to me matters relevant to commercial risk factors were already materialising as reflected in the financial results for 2015 and 2016 and would have continued to militate against the prospects of a viable motel business and placed the business at a high risk of failure before the end of the lease on 30 June 2019.   I do not accept the basis of Mr Parry’s discount rate of 30 per cent for commercial risk during the current lease term after termination until 30 June 2019.  On my reckoning Platypus would have continued to struggle in a fledging business despite the impact of water damage and associated detriment on the motel amenity.  There is also a limited basis to assess any loss of diminished cash flow after termination of the lease from 16 November 2016 to the end of the lease on 30 June 2019 since Platypus ceased trading the motel and thereby arrested additional trade losses loss due to any breach and mitigated against continuing trading losses which would have been incurred in any event.
  11. [123]
    But I am not persuaded that Platypus would have realistically exercised any further options to renew the lease in any event.  During the course consideration was given to sell the business.  Ms Sheppard and Mr Jurek have not had any interest in another hotel business since closing.  Apart from some relief teaching by Ms Sheppard they are both retired.  I do not accept there is any loss incurred beyond the term of the lease after 30 June 2019.  Therefore, I am bound to conclude that whilst Platypus were entitled to terminate for substantial breach amounting to repudiation which they accepted, it has not suffered any consequential loss for the period from 30 June 2019 to 30 June 2029.
  12. [124]
    I find that Platypus suffered a greater loss between 31 December 2015 and date of termination of 25 November 2016 of $34,647.99 caused by Bronte’s repudiatory conduct in substantial breach of the lease calculated as follows:
    1. (a)
      I utilise the adjusted cash flow of $17,335 for the 2014 financial year adjusted by excluding depreciation of $43,401 from the reported loss of $19,066 but including a notional expense of $7,000 for general insurance. 
    2. (b)
      I calculate negative cash flow of $55,542 for the 2016 financial year by adjusting the reported loss of $77,426 by excluding depreciation of $21,884. 
    3. (c)
      The basis of loss from 31 December 2015 until the date of termination of the lease on 25 November 2016 will be the difference of cash flow between 2014 and 2016 financial periods being $38,207 so as to reflect the difference between expected cash flow and actual cash flow.
    4. (d)
      I do not apply any further discount for the risk of commercial uncertainties since such matters were already materialising and impacting the business operations in that period.
    5. (e)
      Proportionally the loss sustained for the 183 day period from 31 December 2015 to 30 June 2016 will be $19,155.84, and for the 148 day period 1 July 2016 to 25 November 2016 will be $15,492.15.
  13. [125]
    I find that Platypus suffered diminished cash flow after termination of the lease from 16 November 2016 to the end of the lease on 30 June 2019 of $46,275.70 caused by Bronte’s repudiatory conduct in substantial breach of the lease calculated as follows:
    1. (a)
      The basis for the loss after the lease termination is the diminished cash flow represented by the adjusted cash flow of $17,335 for the 2014 financial year (as above) reflecting the lost opportunity for Platypus to receive business cash flow of the magnitude received in 2014.
    2. (b)
      For the 217 day period from 26 November 2016 to 30 June 2017 the diminished case flow would be $10,306.01adjusted to $10,519.74 to account for the CPI.
    3. (c)
      For the 365 day period from 1 July 2017 to 30 June 2018 the diminished cash flow is $17,335 adjusted to $17,694.50 to account for the CPI.
    4. (d)
      For the 365 day period from 1 July 2018 to 30 June 2019 the diminished cash flow is $17,335 adjusted to $18,061.46 to account for the CPI. .[43]
  14. [126]
    On my assessment Platypus has suffered loss and damage of $80,923.69 caused by Bronte’s repudiatory conduct in substantial breach of the lease.
  15. [127]
    Platypus, by reverting to its original damages claim based on a capital loss, proffered an alternative approach, or way of testing the business related cash flow assessment by Mr Parry, by using the purchase price $215,000.00 for the business (including the inventory of chattels) and evidence of interest expressed at about that level before the termination of the lease from a potential purchaser. 
  16. [128]
    Platypus paid $215,000 for the business on “walk-in, walk out” basis “plus stock at valuation”.  The stock in trade had a nominated value of $8,000 and was subject to stocktake on the morning of settlement.  The base sale price comprised goodwill and plant and equipment but the contract did not apportion the purchase price purchase price between those components.  The plant and equipment comprise the items listed in schedule “A” to the contract.
  17. [129]
    Subsequent to Platypus taking possession the lease term was extended and further options were available until 2029, which arguably provided greater value to the business.  But Platypus did not adduce any expert evidence of the loss of value of the business and the evidence about expressions of interest by potential purchasers is of little weight in the form it was given. 
  18. [130]
    Mr Parry gave evidence that it was usual for an incoming motel operator to bring forward investments in improvements achieved by repairs and maintenance so as to maximise the benefit flowing from those steps.  This is not so evident in the 2014 financial records.  Further, Mr Parry also testified that inexperienced traders would often have results inferior to those who may be experienced.  This is also consistent with a downturn in revenue and increased losses since Platypus acquired by the business (apart from matters associated with the dispute). 
  19. [131]
    The state of the evidence does not permit me to make an accurate assessment of the lost value of the business at the time of termination relative to its purchase value of $215,000 subject to the Business Contract made on 13 April 2013.  Doing the best I can on the available evidence, it seems to me that the loss of bargain of losing the lease (loss of goodwill and plant and equipment) calculated as at the date of the election to accept the repudiation being the date of termination of the lease is about 70 per cent of the purchase price, which equates to $150,000.

How can Platypus be compensated for the value of the tenant’s property?

  1. [132]
    Platypus also claims for specific performance of clause 9.2 of the lease compelling Bronte to consent to the President of the Queensland Law Society appointment a valuer to assess the value of Platypus’s property remaining in the motel. 
  2. [133]
    Clause 9.2 of the lease provided that:

“At the end of the lease the landlord must purchase the tenant’s property.

  1. (a)
    The purchase price of the tenant’s property is to be agreed on by the landlord and the tenant.
  1. (b)
    If the purchase price cannot be agreed then it will be determined by a valuer nominated by President of the Law Society at the request of either the landlord or the tenant.
  1. (c)
    The valuer’s decision will be final and is not to be disputed by either party.
  1. (d)
    The costs of the valuation must be paid equally by the landlord and the tenant.
  1. (e)
    The valuer must:
  1. (i)
    be a member of the Australian Institute of Valuers; and
  1. (ii)
    have a minimum of 5 years’ experience in valuing property similar to the tenant’s property; and
  1. (iii)
    value the tenant’s property on their existing use in situ in the motel and as a going concern; and
  1. (iv)
    act as an expert and not an arbitrator.
  1. (f)
    The landlord must pay the purchase price to the tenant within 14 days of the price being agreed or determined by the valuer.
  1. (g)
    The landlord may deduct the following amounts from the purchase price:
  1. (i)
    any amount payable by the tenant under this lease; and
  1. (ii)
    all reasonable costs and expenses incurred by the landlord as a result of the tenant’s default.
  1. (h)
    The risk and ownership of the tenant’s property passes to the landlord upon payment of the purchase price to the tenant.
  1. (i)
    The landlord must not re-enter the motel and use the tenant’s property until the purchase price has been paid to the tenant. This clause does not apply where the tenant has vacated or abandoned the motel.”
  1. [134]
    In reliance on that term, on 25 November 2016 Platypus sought Bronte’s agreement that the purchase price for the tenant’s property would be $100,584, and proposed that the valuation process be commenced if Bronte disagreed.  Unfortunately, the process got buried in the parties’ disputation of claim and counter-claim, and Bronte has since sold the motel property to a third party.
  2. [135]
    In those circumstances, Platypus seeks an order requiring Bronte to participate in an assessment of the value of the tenant’s property as provided for by the lease with liberty to apply.[44]  Further, the plaintiff relies upon r 156 of the Uniform Civil Procedure Rules 1999 which gives the power to grant relief whether general or other relief is expressly claimed in the pleadings.  It argues that in considering its power the court can have regard to Bronte’s belated objection in the submissions on the grounds of impossibility.  The alternative relief would involve the appointment of an independent expert to value the property (if available) subject to access and co‑operation of the new owners and operators of the motel property and business, unless the parties can reach agreement.
  3. [136]
    Bronte argues that the claim for specific performance cannot succeed given the effluxion of time and the lack of evidence.  Further, it argues that valuing the chattels would be impossible because there is no evidence of what was there when it vacated the motel and the defendant has sold the property, so any specific performance would require a third party’s consent.  I agree.
  4. [137]
    It seems to me that an exercise of valuation according to clause 9.2 or otherwise will only involve the parties in continued disputation, cost, delay and uncertainty. 
  5. [138]
    Alternatively, if the assessment of damages does reflect the value of the business lost on the termination by the plaintiff including an allowance for the tenant’s property the subject of the purchase then Platypus accepts that this claim is subsumed in the valuation.
  6. [139]
    The purchase price of $215,000 comprised goodwill and plant and equipment intrinsic to the motel business.  But the contract did not apportion the purchase price between those components.  It is not clear whether the plant and equipment listed in schedule “A” to the contract equate to the tenant’s property left behind when Platypus vacated and are subject of the specific performance claim.  It is evident that Platypus did receive the benefit of $94,605 as asset depreciation accounted for in the financial years ending 2014, 2015 and 2016 of $43,401, $29,320 and $21,884 respectively.  In the end, the state of the evidence does not permit me to make an accurate assessment of the value of the tenant’s properties at the time of termination.  At best I think the value of the tenant’s property would be in the order of $65,000.
  7. [140]
    It seems me that my assessment of the differential and diminished cash flow together with the value of tenant’s property would compare to the estimated loss of bargain of losing the lease (goodwill and plant and equipment) as at the date of termination of $150,000. 
  8. [141]
    Platypus is also entitled to interest on damages in accordance with s 58 of the Civil Proceedings Act 2011 (Qld) calculated from the date of termination of 26 November 2016.  And costs will follow the event unless there is an application for a different order.

CONCLUSION

  1. [142]
    For these reasons, I will give judgment to the plaintiff against the defendant and make the following orders:
  1. Judgment to the plaintiff against the defendant for $150,000.
  1. The defendant will also pay interest on $150,000 from the date of termination of 26 November 2016 to the date of judgment calculated in accordance with s 58 of the Civil Proceedings Act 2011 (Qld).
  2. I will hear the parties further on the issue of costs.
  3. Unless either party applies for a different costs order within 14 days of this judgment, I will also order that the defendant will pay the plaintiff’s costs of the proceeding (including reserved costs) to be assessed on the standard basis.

Judge DP Morzone

Footnotes

[1]Exhibit 44

[2]Exhibit 6

[3]Granada Theatres Ltd v Freehold Investment (Leytonstone) Ltd [1958] 2 All ER 551 at 553; approved by the Court of Appeal in Granada Theatres Ltd v Freehold Investment (Leytonstone) Ltd [1959] 1 Ch 592, [1959] 2 All ER 176.

[4]Advance Fitness Corp Pty Ltd v Bondi Diggers Memorial & Sporting Club Ltd [1999] NSWSC 264 at [108] per Austin J.

[5]Cf. Darlington Futures Ltd v Delco Australia Pty Ltd (1986) 161 CLR 500.

[6]Thomas National Transport (Melbourne) Pty Ltd v May & Baker (Aust) Pty Ltd (1966) 115 CLR 353.

[7]Granada Theatres Ltd v Freehold Investment (Leytonstone) Ltd [1959] 2 All ER 176 at 184 per Jenkins LJ.

[8]Griffin v Pillet [1924] 1 KB 17

[9]Griffin v Pillet [1924] 1 KB 17

[10]Exhibit 13

[11]Shevill v Builders Licensing Board (1982) 149 CLR 620 at 633 (Wilson J), followed recently in Wash Investments Pty Ltd v SCK Properties Pty Ltd [2016] QCA 258 at [22]-[27] (McMurdo JA, Philippides JA and Daubney J agreeing).

[12]Shevill v Builders Licensing Board (1982) 149 CLR 620 at 625-6 (Gibbs CJ).

[13]Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd (2007) 233 CLR 115 at 135 [44] (Gleeson CJ, GUmmow, Heydon and Crennan JJ).

[14]DTR Nominees Pty Ltd v Mona Homes (1978) 138 CLR 423 at 431

[15]See for example Justelle Nominees Pty Ltd -v-Martin [No 3] [2009] WASC 264 at [80] and Antill v Estate of Parkinson, [1990] QSC (Full Court) 91 at 5 per de Jersey J (Macrossan CJ and Derrington J agreed).

[16]Alghussein Establishment v Eton College [1988] 1 WLR 587 at 592 (Lord Jauncey of Tullichettle, with whom the rest of the House agreed); c.f. Suttor v Gundowda Pty Ltd (1950) 81 CLR 418 at 440-2 (Latham CJ, Williams and Fullagar JJ).

[17]Laurinda Park Ltd v Capalaba Park Shopping Centre Pty Ltd (1989) 166 CLR 623, 642 – 3

[18]Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd (1989) 166 CLR 623 at 643 (Brennan J).

[19]Tsoa-Lee v Urban Real Property Consultants Pty Ltd [1983] 1 NSWLR 569 at 575 (Wootten J).

[20]Ogle v Comboyuro Investments Pty Ltd (1976) 136 CLR 444, 462. Carr -v- JA Berriman Pty. Ltd (1953) 89 C.L.R. 327 per Fullagar J. at page 351 and Hudson Crushed Metals Pty. Ltd. -v- Henry [1985] 1 QdR 282.

[21]Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd (1989) 166 CLR 623 at 667 (Gaudron J).

[22]Shevill v Builders Licensing Board (1982) 149 CLR 620 at 634 (Wilson J).

[23]Canning v Temby (1905) 3 CLR 419 at 424 per Griffith CJ.

[24]Sindel v Georgiou (1983-1984) 154CLR 661 at 671 citing Forsling v Bechely-Crundall [1922] SC (HL) 173), but as Barwick CJ and Jacobs J pointed out in Neeta (Epping) Pty Ltd v Phillips (1974) 131 CLR 286 at 302.

[25]Laurinda Park Ltd v Capalaba Park Shopping Centre Pty Ltd (1989) 166 CLR 623 at 643.

[26]Laurinda Park Ltd v Capalaba Park Shopping Centre Pty Ltd (1989) 166 CLR 623 at 643.

[27]Laurinda Park Ltd v Capalaba Park Shopping Centre Pty Ltd (1989) 166 CLR 623 at 644.

[28]Laurinda Park Ltd v Capalaba Park Shopping Centre Pty Ltd (1989) 166 CLR 623 at 634.

[29]Laurinda Park Ltd v Capalaba Park Shopping Centre Pty Ltd (1989) 166 CLR 623 at 658

[30]Laurinda Park Ltd v Capalaba Park Shopping Centre Pty Ltd (1989) 166 CLR 623 per Mason CJ at 634, Brennan J at 643 and 644 & Deane and Dawson JJ at 658.

[31]Antill v Estate of Parkinson [1990] QSC (Full Court) 91 at 5 per de Jersey J (Macrossan CJ & Derrington J agreed)

[32]Defence and Counter-Claim para 8(a) & (b).

[33]Defence and Counter-Claim para 2 and 8.

[34]Counterclaim at [13]-[17].

[35]Progressive Mailing House Pty Ltd v Tabali Pty Ltd (1985) 157 CLR 17 T 42; Johnson v Perez (1988) 166 CLR 351

[36]     Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64 per Mason CJ and Dawson J at 80; Wenham v Ella (1972) 127 CLR 454 per Gibbs J at 471

[37]Hughes v NLS Pty Ltd [1966] WAR 100.

[38]Buchanan v Byrnes (1906) 3 CLR 704 at 715.

[39]Luxer Holdings Pty Ltd v Glentham Pty Ltd (2007) 35 WAR 254; Progressive Mailing House Pty Ltd v Tabali Pty Ltd (1985) 157 CLR 17; Johnson v Perez (1988) 166 CLR 351.

[40]For 2014FY > ($18,564 + $3,839 + $131,203) – (10,400 + $13,364 + $2,080 + $115,603) = $32,959.

[41]For 2015 FY > ($19,357 + $4637 + $131,203) - (10,400 + $14,157 + $2,080 + $115,603) = $33,757.

[42]For 2015 FY > ($16,716 + $4034 + $132,138) - (10,400 + $11,516 + $2,080 + $116, 538) = $33,757.

[43]Using CPI average of Brisbane all groups 3 years July 2013 to June 2016

[44]Fylas Pty Ltd v Vynal Pty Ltd [1992] 2 Qd R 593 at 598 per McPherson SPJ.

Close

Editorial Notes

  • Published Case Name:

    Platypus Catering Pty Ltd v Bronte Terrace Pty Ltd & Anor

  • Shortened Case Name:

    Platypus Catering Pty Ltd v Bronte Terrace Pty Ltd

  • MNC:

    [2020] QDC 290

  • Court:

    QDC

  • Judge(s):

    Morzone QC DCJ

  • Date:

    13 Nov 2020

Appeal Status

Please note, appeal data is presently unavailable for this judgment. This judgment may have been the subject of an appeal.

Cases Cited

Case NameFull CitationFrequency
Advance Fitness Corp Pty Ltd v Bondi Diggers Memorial & Sporting Club Ltd [1999] NSWSC 264
2 citations
Jump To
Cite 1 - [1999] NSWSC 264
Cite 2 - [1999] NSWSC 264
Alghussein Establishment v Eaton College (1988) 1 WLR 587
2 citations
Jump To
Cite 1 - (1988) 1 WLR 587
Cite 2 - (1988) 1 WLR 587
Antill v Ervin [1990] QSCFC 91
3 citations
Jump To
Cite 1 - [1990] QSCFC 91
Cite 2 - [1990] QSCFC 91
Cite 3 - [1990] QSCFC 91
Buchanan v Byrnes (1906) 3 CLR 704
2 citations
Jump To
Cite 1 - (1906) 3 CLR 704
Cite 2 - (1906) 3 CLR 704
Canning v Temby (1905) 3 CLR 419
2 citations
Jump To
Cite 1 - (1905) 3 CLR 419
Cite 2 - (1905) 3 CLR 419
Carr v J.A. Berriman Pty. Ltd. (1953) 89 C.L.R., 327
1 citation
Jump To
Cite 1 - (1953) 89 C.L.R., 327
Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64
2 citations
Jump To
Cite 1 - (1991) 174 CLR 64
Cite 2 - (1991) 174 CLR 64
Darlington Futures Ltd v Delco Australia Pty Ltd (1986) 161 CLR 500
2 citations
Jump To
Cite 1 - (1986) 161 CLR 500
Cite 2 - (1986) 161 CLR 500
DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 C.L.R 423
2 citations
Jump To
Cite 1 - (1978) 138 C.L.R 423
Cite 2 - (1978) 138 C.L.R 423
Forslind v Bechely-Crundall (1922) S.C. H.L. 173
1 citation
Jump To
Cite 1 - (1922) S.C. H.L. 173
Fylas Pty Ltd v Vynal Pty Ltd [1992] 2 Qd R 593
1 citation
Jump To
Cite 1 - [1992] 2 Qd R 593
Granada Theatres Ltd v Freehold Investment (Leytonstone) Ltd [1959] 2 All E.R. 176
3 citations
Jump To
Cite 1 - [1959] 2 All E.R. 176
Cite 2 - [1959] 2 All E.R. 176
Cite 3 - [1959] 2 All E.R. 176
Granada Theatres Ltd v Freehold Investment (Leytonstone) Ltd [1958] 2 All ER 551
2 citations
Jump To
Cite 1 - [1958] 2 All ER 551
Cite 2 - [1958] 2 All ER 551
Granada Theatres Ltd v Freehold Investment (Leytonstone) Ltd [1959] 1 Ch 592
1 citation
Jump To
Cite 1 - [1959] 1 Ch 592
Griffin v Pillet [1924] 1 KB 17
3 citations
Jump To
Cite 1 - [1924] 1 KB 17
Cite 2 - [1924] 1 KB 17
Cite 3 - [1924] 1 KB 17
Hewitt v Rowlands (1924) 131 LT 757
1 citation
Jump To
Cite 1 - (1924) 131 LT 757
Hudson Crushed Metals Pty. Ltd. -v- Henry [1985] 1 Qd R 282
1 citation
Jump To
Cite 1 - [1985] 1 Qd R 282
Hughes v NLS Pty Ltd [1966] WAR 100
2 citations
Jump To
Cite 1 - [1966] WAR 100
Cite 2 - [1966] WAR 100
Johnson v Perez (1988) 166 CLR 351
3 citations
Jump To
Cite 1 - (1988) 166 CLR 351
Cite 2 - (1988) 166 CLR 351
Cite 3 - (1988) 166 CLR 351
Justelle Nominees Pty Ltd v Martin (No. 3) [2009] WASC 264
1 citation
Jump To
Cite 1 - [2009] WASC 264
Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd (2007) 233 CLR 115
2 citations
Jump To
Cite 1 - (2007) 233 CLR 115
Cite 2 - (2007) 233 CLR 115
Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd (1989) 166 C.L R. 623
10 citations
Jump To
Cite 1 - (1989) 166 C.L R. 623
Cite 2 - (1989) 166 C.L R. 623
Cite 3 - (1989) 166 C.L R. 623
Cite 4 - (1989) 166 C.L R. 623
Cite 5 - (1989) 166 C.L R. 623
Cite 6 - (1989) 166 C.L R. 623
Cite 7 - (1989) 166 C.L R. 623
Cite 8 - (1989) 166 C.L R. 623
Cite 9 - (1989) 166 C.L R. 623
Cite 10 - (1989) 166 C.L R. 623
Luxer Holdings Pty Ltd v Glentham Pty Ltd (2007) 35 WAR 254
2 citations
Jump To
Cite 1 - (2007) 35 WAR 254
Cite 2 - (2007) 35 WAR 254
Neeta (Epping) Pty Ltd v Phillips (1974) 131 CLR 286
1 citation
Jump To
Cite 1 - (1974) 131 CLR 286
Ogle v Comboyuro Investments Pty Ltd (1976) 136 CLR 444
2 citations
Jump To
Cite 1 - (1976) 136 CLR 444
Cite 2 - (1976) 136 CLR 444
Progressive Mailing House Pty Ltd v Tabali Pty Ltd (1985) 157 CLR 17
4 citations
Jump To
Cite 1 - (1985) 157 CLR 17
Cite 2 - (1985) 157 CLR 17
Cite 3 - (1985) 157 CLR 17
Cite 4 - (1985) 157 CLR 17
Progressive Mailing House Pty Ltd v Tabali Pty Ltd [1985] HCA 14
1 citation
Jump To
Cite 1 - [1985] HCA 14
Shevill v Builders Licensing Board [1982] HCA 47
1 citation
Jump To
Cite 1 - [1982] HCA 47
Shevill v Builders' Licensing Board (1982) 149 CLR 620
5 citations
Jump To
Cite 1 - (1982) 149 CLR 620
Cite 2 - (1982) 149 CLR 620
Cite 3 - (1982) 149 CLR 620
Cite 4 - (1982) 149 CLR 620
Cite 5 - (1982) 149 CLR 620
Sindel v Georgiou (1984) 154 CLR 661
2 citations
Jump To
Cite 1 - (1984) 154 CLR 661
Cite 2 - (1984) 154 CLR 661
Suttor v Gundowda Pty Ltd (1950) 81 C.L.R., 418
1 citation
Jump To
Cite 1 - (1950) 81 C.L.R., 418
Thomas National Transport (Melbourne) Pty Ltd v May & Baker (Australia) Pty Ltd (1966) 115 CLR 353
2 citations
Jump To
Cite 1 - (1966) 115 CLR 353
Cite 2 - (1966) 115 CLR 353
Tsoa-Lee v Urban Real Property Consultants Pty Ltd [1983] 1 NSWLR 569
2 citations
Jump To
Cite 1 - [1983] 1 NSWLR 569
Cite 2 - [1983] 1 NSWLR 569
Wash Investments Pty Ltd v SCK Properties Pty Ltd [2016] QCA 258
1 citation
Jump To
Cite 1 - [2016] QCA 258
Wenham v Ella (1972) 127 CLR 454
1 citation
Jump To
Cite 1 - (1972) 127 CLR 454

Cases Citing

No judgments on Queensland Judgments cite this judgment.

1

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