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Petire Investments Pty Ltd v Body Corporate for Addison Quays Community Title Scheme 46485 QSC 162
SUPREME COURT OF QUEENSLAND
Petire Investments Pty Ltd & Ors v Body Corporate for Addison Quays Community Title Scheme 46485  QSC 162
PETIRE INVESTMENTS PTY LTD, LAUREN TRACEY MARMOTTA, MARDI CATHERINE CRAIN, PAUL BELT, JEREMY BATTEN, NICHOLAS DE LUCA, JEANETTE GLENDAY, ROBERT GLENDAY, RICHARD O'CONNOR, SHELLIE O'CONNOR AND SHANE ENDYCOTT
BODY CORPORATE FOR ADDISON QUAYS COMMUNITY TITLES SCHEME 46485
BS 7471 of 2022
Supreme Court at Brisbane
3 August 2022
18 July 2022
LANDLORD AND TENANT – TERMINATION OF THE TENANCY – PROVISIONS GIVING RIGHT TO TERMINATE IN NAMED CIRCUMSTANCES – IF PREMISES DAMAGED OR TOTALLY DESTROYED – where the respondent held a lease over land for the purpose of a marina and entered into various subleases for specific marina berths – where clause 9.1 of each sublease entitled the respondent to terminate the sublease if the marina was damaged to such an extent that use of the marina was “substantially affected” – where the marina was damaged during a major flood – where the respondent purported to terminate each sublease – whether damage to the marina had compromised its structural integrity to resist a future significant flood or weather event – whether the use of the marina to moor vessels was “substantially affected” – whether in the circumstances the respondent was entitled to rely on clause 9.1 to terminate each sublease
MEETINGS – CONDUCT OF BUSINESS – MOTIONS AND RESOLUTIONS – where the respondent passed a resolution to terminate all of the marina’s subleases – where the respondent passed a resolution to surrender the head lease – where each resolution was made conditional on the other – whether the resolution to terminate the subleases was conditional on the passing of the resolution to surrender the head lease – whether the first resolution should be interpreted as being conditional upon the actual surrender of the lease, something that the second resolution provided would only occur after the subleases had been successfully terminated – whether the unconditional notices of termination sent by the respondent to the applicants were authorised
Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640, cited
Progressive Mailing House Pty Ltd v Tabali Pty Ltd (1985) 157 CLR 17, cited
Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165, cited
B Kidston for the applicants
D de Jersey QC and M Downes for the respondent
Redchip Lawyers for the applicants
HWL Ebsworth Lawyers for the respondent
- The applicants are sublessees of berths in the respondent’s marina at Bulimba on the Brisbane River. The marina was damaged in late February and early March 2022 when the river flooded.
- Each sublease provides that the respondent may terminate it:
“…if the Marina or Berth are destroyed or damaged to such an extent that use of the Berth or the Marina is substantially affected.”
- On 20 June 2022 an extraordinary general meeting of the respondent passed two resolutions and the respondent’s solicitors issued notices purporting to terminate each sublease at the marina.
- The applicants dispute the lawfulness of that termination.
- They obtained interlocutory injunctions until the determination of paragraph 4 of their originating application. That part of the originating application was listed before me for a one-day hearing.
- Paragraph 4 seeks a declaration that the respondent’s purported termination by notice dated 20 June 2022 of each of the subleases between each of the applicants and the respondent in respect of their berths in the marina is invalid and of no effect.
- Two substantial issues arise for determination.
- The first is whether, as at the date of the purported termination, the marina was damaged to such an extent that use of it was “substantially affected”. That question turns on the meaning of “substantially affected” in its context and evidence about the damage to the marina and its consequences.
- The second issue concerns the meaning and effect of the two resolutions that were passed by the body corporate. One resolution related to the termination of the 18 subleases of berths in the marina. The second related to a surrender of the lease between the respondent and the State of Queensland. The terms of the two resolutions will be quoted later. In essence, each resolution was expressed to be conditional on the other. The termination of the subleases was said to be conditional upon the respondent successfully surrendering the lease. The surrender of the lease was said to be conditional upon the successful termination of the 18 subleases.
- According to the applicants’ interpretation, because the termination of the subleases was made conditional on the surrender of the lease, the unconditional notices of termination of the subleases were not authorised by the resolutions because, at the time they were given, the lease had not been surrendered.
- The respondent argues that the applicants’ interpretation of the resolutions would make them circular, ineffective, and, indeed, impossible to carry out. It argues that the resolutions should be given a purposive and common-sense interpretation. This is that the resolutions were conditional on each other in the sense that if the meeting voted both to terminate the subleases and to surrender the lease, then the resolutions would be put into effect. If, however, one resolution was carried and the other was defeated, neither resolution would be put into effect. The common-sense interpretation is that the resolutions were not intended to be circular and impossible to carry into effect. The first resolution should be interpreted as meaning that it was subject to the next resolution being carried.
- The respondent is a body corporate governed by the Body Corporate and Community Management Act 1997 (Qld). It is the body corporate for a residential community title scheme located at Bulimba comprising 24 lots and commonly referred to as “Addison Quays”.
- In 2008 the respondent was granted by the State of Queensland a lease over land I will describe as Lot 800 for a term of 30 years, expiring on 27 May 2038, for the purpose of a marine facility. Lot 800 is not part of the common property. However, the respondent’s assets include the lease.
- A marina was constructed on Lot 800. It consists of a fixed gangway supported by two piles. The fixed gangway is connected to a hinged gangway which gives access to a series of walkway pontoons and finger pontoons. The floating pontoons are arranged with two central walkways and 10 finger pontoons. Seven of them are double pontoons. The marina can accommodate 18 berths of various sizes. The floating pontoons consist of a reinforced concrete deck which sits above a polystyrene floatation block encased in a liner.
- Fifteen steel piles restrain the floating pontoon systems.
- The marina was designed to operate as a composite structure. It includes pile brackets that are supposed to adequately transfer the forces arising from the action of currents, wind, waves, and vessels on the floating structure to the piles.
- The specifications for the marina, which were developed by an expert in designing marina facilities, specified the loads for which the marina system was to be designed. These include vertical loads and a variety of horizontal loads for wind, waves, flow current and berthing impact. The specifications required the design to be capable of withstanding these loads and required possible combinations of dead load, vertical live load, and horizontal live loads to be considered in the design.
- They required the pile brackets to be designed to “enable a tolerance in the centreline position of the piles of 50 mm at mean tide level and an out-of-verticality of 1 in 200” maximum.
- By-law 12 of the relevant General Request for the Addison Quays Community Titles Scheme (Exhibit 1) relates to the marina. Clause 12.4 authorises the respondent to grant subleases of marina berths to “prescribed owners” (who are the owners of certain specified allotments) and up to four marina berths to members of the general public who reside outside the nominated allotments. It authorises the respondent to grant such subleases on terms that oblige the sublessee to pay a share of the “marina costs”. The share of marina costs applicable to each marina berth must add up to 100 percent.
- The by-law defines “marina costs” to include rent under the term lease for the marina and “all recurrent and capital costs of the operation, maintenance, repair and replacement of the marina, and the annual contributions to the sinking fund”. They also include future maintenance of the marina; costs of restoration of bank erosion; provision, maintenance, repair, replacement and removal of any approved service conduits; and any other financial obligations of the body corporate related to or associated with the marina.
- Each of the subleases includes terms set out in certain general requests. The relevant document defines the “Permitted Use” as “mooring a motor or sailing vessel in the Berth that does not intrude into, or materially prevent access to, another Berth in the Marina”. The sublessee may only use the berth to moor a vessel. The sublease obliges the sublessee to pay rent by instalments being the sublessee’s proportion of the rent payable under the lease. In addition, each financial year the sublessee must pay the sublessee’s proportion of the “Outgoings” and the “Marina Sinking Fund Contribution”. These terms are defined. “Outgoings” means all amounts reasonably paid or payable by the body corporate in respect of the land, marina or berth, including amounts of a capital nature. They include rates, levies, amounts payable under the lease, taxes and insurance. The sinking fund relates to the expected expenditure in that financial year and for future expenditure.
- Clause 6.7 obliges the sublessee to keep the berth in good condition and repair, but the sublessee need not repair fair wear and tear, damage caused by circumstances beyond the sublessee’s control, and structural damage.
- Clause 8.2 concerns maintenance and repair by the body corporate. It provides:
- “8.2The Body Corporate must use reasonable endeavours to:
- (a)keep the Marina clean but this does not oblige the Body Corporate to clean berths that are leased; and
- (b)keep the Marina (including the Berth) structurally sound and in good repair and condition (but the Body Corporate need not do work that is the Tenant’s responsibility under this lease); and
- (c)maintain, repair and replace the Services as needed so that they operate efficiently and in accordance with all relevant legal requirements.”
- Clause 9.1 is the critical provision in this matter and should be read in the context of clause 9.2. They provide:
- “9Damage and resumptions
Termination because of substantial damage or destruction
- 9.1The Body Corporate may terminate this lease if the Marina or Berth are destroyed or damaged to such an extent that use of the Berth or the Marina is substantially affected. A termination notice:
- (a)takes effect 30 days after service; and
- (b)may be given at any time before the start of works to reinstate the Marina or Berth (design, feasibility studies and seeking approvals from authorities is not the start of the reinstatement works).
- 9.2If the Marina or the Berth are destroyed or damaged to such an extent that use of the Berth is substantially affected then the Tenant may terminate this lease by 30 days’ notice to the Body Corporate if:
- (a)within six weeks after the damage occurs, the Body Corporate has not notified the Tenant that the Body Corporate is investigating the reinstatement of the Marina or Berth; or
- (b)works to reinstate the Marina or Berth do not start within a reasonable time after the damage occurs (which is taken to be not less than least three months); or
- (c)the reinstatement is not completed within a reasonable time after starting.
The Body Corporate is not obliged to reinstate the Marina or Berth or to continue reinstating the Marina or Berth after starting to do so.”
- As may be seen, clause 9.1 confers a right on the respondent to terminate the sublease, if the marina or berth are destroyed or damaged to such an extent that use of the berth or the marina is “substantially affected”. Clause 9.2 gives a right to the sublessee to terminate the sublease if the marina or the berth are destroyed to such an extent that the use of the berth is “substantially affected”.
- Importantly, the respondent is not obliged to reinstate the marina or berth.
The 2022 flood damage
- The precise mechanisms by which the marina was damaged in late February and early March 2022 are unimportant. A report (“the Cardno Report”) of Mr Paul Calver, a senior engineer employed by Cardno, reports that the marina was subject to impact from uncontrolled vessels and river-borne debris during the flood. Numerous photographs depict the scene shortly after these impacts and their aftermath.
- It is unnecessary to recount all the damage sustained by the marina, including damage to the HDPE lining encasing the polystyrene floatation blocks of most pontoons. The parties accept that this damage is capable of being repaired and whilst it may lead to the absorption of water by the polystyrene over time, all but one of the pontoons presently has adequate freeboard. Therefore, I will not address that damage or other damage which is not said to render the marina unsafe.
- The focus of the evidence was upon parts of the marina that Mr Calver gave a rating of 4 (very poor), being defects affecting performance and structural integrity that require immediate intervention, and upon piles that are tilted to varying degrees. Only one of the 15 piles is not tilted to an extent that places it outside of the verticality specified for the marina’s construction in 2014.
- The substantial damage to the marina may be summarised for present purposes as follows:
- (a)Four pontoons, that together comprised the outer section of the floating structures, were dislodged and damaged. None of them are considered suitable for repair and reinstatement.
- (b)Finger pontoons 9A, 9B and 10 were detached from the marina during the flood.
- (c)Finger pontoon 10 is missing, having floated away.
- (d)Finger pontoons 9A and 9B are currently secured to cleats at walkway pontoon 4.
- (e)Walkway pontoon 7, that once led to those finger pontoons, broke away from walkway pontoon 6.
- (f)Walkway pontoon 7 is damaged.
- (g)All piles but one (P1) were found to be out of alignment. Only P1 complies with the design specifications for the marina.
- (h)Three piles (P5, P10 and P15) were severely compromised.
- (i)Six pile brackets were damaged. Three are at the piles where pontoons were missing or dislodged (P5, P10, P15). The three others are at P11, P13 and P14. Each pile bracket was assessed as having a rating of 4 so as to require replacement in order to achieve a level of structural integrity to match the original design.
- Mr Calver reported:
“It is considered that no vessel can be safely moored at any finger where that finger has a pile bracket with a condition 4 rating.”
- The Cardno Report continued:
“The condition 4 rated pile brackets also compromise the structural integrity of the entire marina to resist any further significant flood or wind/wave/current event.”
- The focus of Mr Calver’s concerns about the structural integrity of the marina relate to the misalignment of the piles and the damaged pile brackets. The Cardno Report concludes:
“Based on the original pile bracket design, the present condition of the brackets, and the misalignment of the piles, then there’s an increase [sic] risk pontoon failure would occur in the next flood event.”
- Mr Calver and his co-author, another experienced maritime engineer, conclude that “the whole facility is unsafe for public use.” I interpret the reference to “public use” as not meaning the general public who, even in normal times, are unable to access the marina. The subleases each provide that the marina will not be open for public access and the sublessee must not leave the marina gate open. The reference to “public use” should be understood to be a member of the public to whom access to the marina is granted, such as a sublessee and their guests.
- The Cardno Report canvasses the possibility of finding a “suitable” pile bracket replacement to accommodate the misalignment of the piles. It states:
“‘Suitable’ pile bracket replacement design may be difficult to achieve, given that all but one of the existing piles (excluding piles P5, P10 and P15 rated as condition 4 and requiring replacement) have slopes in excess of the 1 in 200 maximum tolerance for ‘variation from verticality’.
The original pile bracket designs may not necessarily allow sufficient clearance to piles for pontoons for pontoons to move freely up and down a sloping pile with changes in water level or pontoon loading.
A pile bracket with increased pile clearance to suit a sloping pile may result in increased loads being transferred to existing undamaged pile brackets and may result in excessive pile loads. This would likely need to be assessed by the engineer or consultant responsible for the replacement pile bracket design.”
- These matters were the subject of oral evidence by Mr Calver to which I will return.
- The solicitors for the applicants engaged Mr John Leman who, like Mr Calver, is highly experienced in relation to marine engineering. Mr Leman specialises in planning and engineering design for marina facilities and was commissioned by the property developer to provide design drawings for the marina development approvals. Later, Mr Leman’s company drafted tender documents for the design and construction of the marina and provided assistance to the contractor in its supervision of the construction contract.
- Mr Leman inspected the marina on the afternoon of 5 July 2022, shortly after high tide when conditions were calm, and on 12 July 2022, shortly before low tide when conditions were again calm. The first inspection took between 30 and 60 minutes. The second inspection was to cross-check on some things and took about half an hour. He detected that 14 piles had some small lean out of vertical, and observed that they still had satisfactory performance in restraining the marina during the flood event. Mr Leman reported:
“A problem with piles that are too out of vertical is that they can restrict free movement of the floating structures as they move up and down with the tide or place undue strain on other piles.”
- Mr Leman observed free movement of the floating structures during his two inspections.
- Mr Leman’s report did not agree with Mr Calver’s view that the condition 4 rated pile brackets compromised the structural integrity of the marina to resist further significant flood or wind/wave/current event and that, for this reason, the whole facility was unsafe. He opined that the “remaining marina” is not unsafe notwithstanding the pile brackets that needed replacing. He thought that many of the berths at the time of his inspection were able to be used for the purpose of mooring a motor or sail vessel in them and that berths close to the damaged pile brackets could be used as soon as the pile bracket was replaced.
- Mr Leman thought that suitable pile bracket replacements could be fabricated to order and made with a slightly oval hole to accommodate the misalignment of the piles. His report referred to the tender specifications requiring a “1 in 200 pile verticality”. He explained that this specification was to achieve a high standard of construction and that it did not follow that if any of the piles no longer complied with that specification that the design, functionality or resilience of the marina was compromised. He did not accept that the misalignment of the piles reported upon by Cardno’s surveyors (with the exception of P5, P10 and P15) would have a significant effect on the performance of the marina in withstanding the next flood event.
- These views were the subject of cross-examination to which I will return.
- I should also note the evidence of Mr Dane Morris, who is the general manager of operations of a company trading as The Jetty Specialist. Mr Morris is a civil engineer and has been involved in and around the business of marinas, jetties and pontoons since 2004. The company was started by his father. Mr Morris has been involved directly in that work for the last five years, including the construction and removal of marina structures.
- Mr Morris expressed the opinion that the marina is not safe to be used. He explained that the marina is designed as a composite structure whereby forces are distributed between the piles. He doubts the integrity of the marina as a whole given that there are displaced or bent piles, missing modules and broken modules. He agreed with the findings of the Cardno Report and was of the opinion that the marina would require substantial repairs before it could be considered safe for long-term use.
- Mr Morris also gave evidence about the estimated cost of repairing the marina or demolishing it. He estimated that the cost to replace the entire pontoon system would be approximately $1.6 million. The cost of dismantling and removing existing damaged sections, replacing some piles and replacing some parts of the marina system would be approximately $1.2 million. In his view, the repair works needed to bring the marina to a working condition required the replacement of the entire marina with the exception of the access gangways.
- Mr Leman estimated the cost of undertaking what he regarded as the necessary works, including the removal and replacement of the P5, P10 and P15 piles, replacing the four outer damaged or missing pontoon units and other works, to be $345,000 plus GST. His estimate included $120,000 plus GST for piling. This was less than an estimate provided to him by a marine services operator which was $158,025 plus GST. The figure of $158,025 plus GST seems realistic given the oral evidence of Mr Morris about the current cost of piling. On that basis, Mr Leman’s estimate of the cost of repair would increase to $383,025 plus GST.
Mr Calver’s oral evidence
- In his oral evidence Mr Calver explained that the function of the pile brackets is to provide a means of transferring the critical load from wind, waves and current to the piles. They also support against excessive forces on the connectors where the finger pontoons are connected to the walkway pontoons. The rollers on the pile brackets enable the pontoon to float up and down as the water level rises. If the piles are not vertical or close to vertical but are tilted, excessive forces may be generated by the movement of the pontoon up and down the tilted pile. Mr Calver described this as “snagging”.
- If a pile bracket became stuck or snagged on the pile, then one possibility is that the pontoon would submerge under the water as the tide rose. Another possibility is that the pontoon would not be floating on the surface of the water but be stuck above where it should be floating.
- While Mr Calver did not see any signs during his inspection of the walkway snagging or operating in that way, this did not remove his concern about safety. He explained that when he spoke about safety in the conclusions to the Cardno Report:
“… it’s with regard to safety to withstand the design ultimate loading, and so when we saw these damaged pile brackets … I was concerned that they wouldn’t be able to carry the design ultimate load and, therefore, the marina would be unsafe.”
- The damaged pile brackets could not be considered to have a proper functionality. Mr Calver accepted that it would be possible to replace the damaged pile brackets with brackets fabricated to appropriate specifications and installed in lieu of the damaged pile brackets. The concern remained, however, that the tilted piles may induce an extra force into the pile bracket as the pontoon is moving along the pile, with extra lateral force caused by the tilted pile.
- Mr Calver’s concern was based on the fact that at the time the marina was constructed he did his own check calculations which indicated that “the piles were working close to their limits … and, therefore, a small increase in load caused by a tilted pile may be problematic.” His concern was that the tilt may result in excessive pile loads and any excessive pile loads may affect the marina. Mr Calver had not done calculations in this regard to work out whether it was still safe or not with the tilted piles.
- As to the use of individual berths at the marina in its present condition, Mr Calver accepted that there were some berths at which it would be possible to moor a boat. For example, a boat might be moored on each side of P11. However, he did not consider that boats moored at certain other locations would be as secure. He remained, however, of the view that while the pile brackets are in their current state, “the whole marina is not capable of resisting its design ultimate load”.
- Mr Calver explained that the problem with the tilt on the piles is that if one had a “design flood event” with the associated possibility of wind and waves:
“… broken pile brackets wouldn’t be able to take any load, so more load would be put on some of the other piles which would make them possibly fail, or the pile brackets elsewhere may fail and you might get a kind of a chain reaction where the whole thing fails, similar to what happened in the Brisbane 2011 floods with the New Farm Park floating walkway.”
- He reiterated that, with the damaged pile brackets, “if another extreme event comes there’s a risk of the whole marina getting lost.”
- Mr Calver explained that even if the damaged pile brackets were replaced, the tilt of the piles might put an extra load on some of the pile brackets. The design of the marina, with its exacting one in 200 verticality standard for piles, assumed that there were no additional lateral forces caused by the slope of piles. The tilt of the piles was a problem that needed to be looked at before the marina could be verified as safe.
- As for replacement pile brackets that allow for the various tilts of piles tabulated in the Cardno Report, Mr Calver accepted that it may be possible for a suitably qualified engineer to design them. This would need to take account of the direction of the tilt and the amount of the tilt. Any engineer who was asked to design the pile brackets would need to take into account how much allowance for the pile tilt should be allowed over the range from the lowest astronomical tide up to, say, a 1-in-100-year flood level. A 1-in-100-year flood level was specified in 2014 but is higher now. The difficulty identified by Mr Calver in undertaking such a design is that if a pile bracket has a large clearance of, say, 100 mm to accommodate the tilt of the pile, it might not take as much load as it would have taken in the original design with consequences to nearby piles.
- Normally the design sets an optimal amount for clearances and any new design would adjust what would otherwise be the optimal distance between the roller on the bracket and the pile to accommodate the tilt. Whoever did the pile bracket design would have to take into account the tilt of the piles and the fact that a larger clearance might cause increased pile loads on other piles. The issue is whether loads on other piles would be increased to such an extent that they no longer make the marina safe. Mr Calver’s concern was based upon the fact that the calculations that he undertook on the design in 2014 showed that “the piles were working fairly close to their limit”. Therefore he was concerned, having done his inspection, that a small increase in load on the pile brackets caused by tilted piles might cause other piles to fail.
- The present situation, in which three piles are unable to accept any significant load because the pile brackets on them were severely damaged, meant that it was going to throw “a lot of extra load” on the other piles if an extreme event occurs. Mr Calver could not say precisely how much “play” was left in the other piles before they would fail since this would require a structural engineering analysis.
- On the assumption that the three severely damaged pile brackets were replaced so as to take into account the tilt of all the piles and it was checked whether all the other piles and pile brackets could take any additional load that might occur to the tilted piles at other locations, then it would be possible to use the fingers of the marina.
- Mr Calver explained that even with an appropriate bracket designed to accommodate the tilt that appears at P11, P13 and P14, issues remained in relation the balance of the berths. There still was the risk of “the tilted pile effect on the other piles and berths”. One outcome might be the need to design appropriate pile brackets, if that were possible, for many of the piles.
Mr Leman’s oral evidence
- Mr Leman confirmed that during his two inspections he did not see any jamming up of pile brackets against piles and that there was free movement.
- Whereas Mr Leman had developed specifications for the marina, he did not design the pile brackets that were installed in 2014. He accepted that it is necessary to undertake calculations on the basis that the whole marina is a system that would need to meet design loads. Mr Leman indicated that his inspection involved looking at damage and that he did not think he needed to do any design calculations based upon the actual physical structure of the piles following the 2022 flood. He accepted that to conclude that it was possible to achieve the desired outcome using brackets that had an oval rather than a round shape, one would need to measure from the high tide to the low tide and build them accordingly. This would involve an assumption that all the piles were essentially leaning in the same direction. Mr Leman’s impression is that most of the piles were leaning in one direction. One or two were leaning in another direction but seemed to be “pretty much vertical”.
- I note that at page 7 of his report Mr Leman had concluded that “the marina could still function as long as the lean was not significantly different between the piles.”
- Mr Leman accepted that after the tender was awarded, the performance of the marina was predictable in the sense that the successful tenderer was expected to undertake analysis of the forces upon each particular pile and each particular bracket to ensure that they were distributed evenly or appropriately for the expected forces of the waves and weather. He accepted that such an analysis had not been done in respect of the proposed modification of brackets and for the piles having their tilts. Instead, he had undertaken a visual inspection to see if the piles and their current lean were causing significant problems with the marina functioning. His observations consisted of the movement up and down of the pontoons on the piles and was limited to the movement caused by waves at high tide on the day of his first inspection, and at low tide on the day of his second inspection. He could see that under those conditions there was “just enough movement there for me to see it moving freely”.
Analysis of the expert evidence
- Because Mr Morris deferred to and relied upon the report prepared by Mr Calver, his views about the integrity of the marina were not the subject of much cross-examination. Most of the oral evidence on this matter came during the cross-examination of Mr Calver and the cross-examination of Mr Leman.
- Each witness was highly qualified in marine engineering. For the reasons that follow, the resolution of the issues turns upon an assessment of risk of failure in the event of a significant flood or weather event.
- Mr Leman may believe that the marina, as constructed, gave it the performance and structural integrity that his specifications were intended to achieve, including a sufficient margin that will allow it to perform adequately when its piles are misaligned and pile brackets with greater clearances that he specified are installed. Mr Calver explained, however, that, as built, “the piles were working close to their limits.”
- The issue is not, as Mr Leman mentioned in his report, whether the remaining piles performed satisfactorily in restraining most of the marina during the flood. The issue is that, because of the flood, they are out of vertical and even then, do not lean in the same direction. Only one of the piles is within the design specification. The fact that the floating pontoons can move up and down on the piles in the tide, wind, and wave conditions in which Mr Leman observed them in July 2022 is relevant. It is possible that with modified brackets the pontoons will be able to move up and down in more extreme conditions. Mr Leman assumes that they will. However, he has not undertaken any calculations in that regard based on extreme tides and different wind and current conditions.
- Mr Calver has not undertaken those calculations either but is concerned that with modified pile brackets that provide greater clearance than was provided for in the marina, as built, the forces transferred to the piles will result in the marina exceeding its limits, with disastrous consequences.
- The evidence of Mr Calver that the marina, as constructed in 2014, comprised piles that were working fairly close to their limits was not contested. It was based on calculations he performed at the time. The phrases “close to their limits” or “fairly close to their limit” were not explored. But in context, I understood the phrases to refer to what Mr Calver elsewhere described as the critical loading of wind, wave and current. I accept that the piles, as designed by Cardno in 2014 and as apparently constructed in accordance with those designs, were working fairly close to their limits before the 2022 flood.
- Part of the design specified by Mr Leman was for the pile brackets to have “a tolerance… of 50 mm at mean tide level and an out-of-verticality of one in 200” as a maximum. Although Mr Leman stated that this verticality requirement was “to achieve a very high standard of construction”, it was part of the design, and Mr Leman did not suggest that a tilt in the piles beyond the specified limit was irrelevant to the marina’s performance. Instead, his view was to the effect that non-compliance with this specification did not necessarily compromise the functionality or resilience of the marina. So much may be accepted. However, as Mr Calver explained, tilting piles may induce an extra lateral force into the pile bracket as the pile bracket is moving along the pile.
- The simple fact is that three of the piles are severely comprised. Two of them (P5 and P15) no longer have any connection to the floating structure and one (P10) is connected to a dislodged walkway. All but one of the piles (P1) is not within its verticality requirement of one in 200, or 0.5 percent. As a result, the tilt may induce greater lateral force than the force for which the marina’s design provided.
- Disregarding the tilt of so many piles and the lack of support provided by P5, P10 and P15, what remains of the marina consists of various floating pontoons, three damaged pile brackets and other piles. The pile brackets need to be replaced. In their presently damaged condition, the pile brackets do not perform their function for the pontoons in their vicinity or the marina as a whole. I accept Mr Calver’s opinion that while the pile brackets are in their current state the whole marina is “not capable of resisting its design ultimate load”.
- This conclusion relied on the fact that, even with all pile brackets being undamaged and functioning as intended in conjunction with piles constructed according to the exacting specification, the marina was operating close to its design limit.
- Mr Leman’s evidence did not persuade me to a contrary conclusion. The fact that the remaining piles remained on the marina during the 2022 flood and have done so since does not mean that the marina is safe for use in its present state or would be able to be used in that state to safely moor vessels during a “significant flood or wind/wave/current event” (to quote the Cardno Report).
- Mr Leman disagreed with the statements in the Cardno Report that the damaged pile brackets compromise the structural integrity of the entire marina to resist any further “significant flood or wind/wave/current event” and that, based on this, the whole marina is unsafe for use. However, his original report did not expose his reasoning that the remaining marina “is not unsafe notwithstanding there are three pile guides that need replacing”. Paragraph 7 of his affidavit explained that, in his view, all of the berths save for P, R, S, and T “were, at the time of my inspection, able to be used for the purpose of mooring a motor or sailing vessel in them.” However, this does not explain adequately his reasons for disagreeing with Mr Calver on the issue of safety during a significant event.
- The fact that a number of berths are capable of being used at the present time does not mean that they are, or the remaining marina is, safe for use over a period of time that may include a significant weather or flood event. The Cardno Report was concerned with safe use, not the physical ability to moor a vessel at a particular berth.
- I accept Mr Leman’s view that a number of berths at the marina were, at the time of his inspection, able to allow a motor or sailing vessel to berth at them. The physical ability of several berths to moor a vessel is also demonstrated by Mr Biedak’s affidavit about how he was able to moor his vessel at a number of berths on 2 and 3 July 2022. However, for reasons to be developed, the issue of “use” for the purpose of clause 9 of the sublease is not determined by reference to use during calm conditions of the kind that prevailed when Mr Leman inspected the marina on 5 and 12 July 2022, or even during an extended period when there is no significant event.
- Mr Calver correctly accepted under cross-examination that it would be possible to moor a vessel at a number of berths under current conditions. He did not consider, however, that it would be safe to do so. He said that it “would not be a secure berth” if you moored a vessel in those berths. This was because, as he explained, with another extreme event, with associated wind and waves, the broken pile brackets would not be able to take any load, additional loads would be placed on other piles, and the possibility existed of a chain reaction. He did not elevate that increased risk of the whole marina being lost to a certainty, or even a high probability. The risk of further parts of the marina failing in such an event did, however, render the marina unsafe.
- I find that it is possible to physically moor a motor or sailing vessel at a number of the existing berths. Of course, it is not possible to moor a vessel at berths S and T because floating pontoons 9A, 9B and 10 are no longer there. It would be possible to physically moor a vessel at other berths in the vicinity of a broken pile bracket, even though Mr Calver thought that a vessel should not do so or could not be safely moored at such a berth. It also would be physically possible to moor a vessel at berths that are presently unusable because floating pontoons 9A and 9B are tied up to a nearby walkway. That could occur once they are removed.
- While, therefore, it is possible to moor a vessel at a number of the berths that remain in the marina, I accept the evidence of Mr Calver that a vessel cannot be “safely moored” at any finger where that finger has a pile bracket with a condition 4 rating. Leaving aside P5, P10 and P15, this concerns the pile brackets located at P11, P13 and P14.
- The issue for resolution does not turn upon the status of individual berths. The issue, as joined between the parties in their submissions, is whether the marina was damaged to such an extent that its use (as distinct from the use of certain individual berths) was “substantially affected”. One aspect is the complete loss of certain berths which, it is accepted, would have to be rebuilt with new piles and new floating pontoons. The heart of the issue, however, concerns the use of what remains of the marina.
- The respondent’s position, as supported by Mr Calver’s expert evidence, is that the combined effect of the damaged pile brackets, the absence of any effective support from P5, P10 and P15, and the tilts on the piles that remain mean that the marina has ceased to perform as a composite structure in the way it was designed to perform, with all component parts present and in a condition substantially similar to the conditions it was in when the marina was designed and constructed.
- The marina may be capable of being repaired, on one view by being decommissioned with all its parts apart from the gangway being removed, or to some lesser extent.
- According to the respondent, in the marina’s present condition (and also quite possibly even with the installation of replacement pile brackets of the kind contemplated by Mr Leman) it cannot be safely used because the structural integrity of the marina to resist another significant event has been compromised. On the respondent’s case, because the whole of the marina is not safe to use in its present condition, each berth that remains in it cannot be safely used.
- The question of whether damage to the marina has substantially affected its use should have regard to its use in its present state, and also, I think, to its use if certain repairs are done in a reasonably short time. This is because it would be unreasonable to conclude (either in the context of clause 9.1 or 9.2) that the use of the marina or a berth was “substantially affected” by existing damage, thereby triggering a right of termination, when that damage was capable of what may be described as a “quick fix”.
- Therefore, I should address the expert evidence about the state of the marina in the event custom-made pile brackets for P11, P13 and P14 (and possibly all the other piles that are at a tilt in excess of their design specification) were fabricated and installed.
- Mr Leman’s evidence is that pile brackets can be fabricated to order with a slightly oval hole to accommodate the alignments of the piles recorded in the Cardno Report (save for P5, P10 and P15 which have to be replaced). He added that it would usually take seven to 30 days from ordering to installation, depending on how busy the metal fabricating contractors were. While I am not required to decide reinstatement or repair cost issues, I mention that Mr Leman estimated that pile bracket replacements could be fabricated and installed for about $3,000 plus GST for each pile bracket.
- For present purposes there are two areas of disagreement between the experts.
- One relates to whether the marina as a whole in its present condition could be safely used to moor multiple vessels at multiple berths over an extended period that included a significant weather event involving a combination of loads from currents, wind and waves.
- The other area is whether the marina could be safely used in such conditions after at least the damaged pile brackets, and possibly a number of others, were replaced with oval-shaped brackets with increased pile clearance to accommodate the tilting piles.
- As noted, Mr Calver did not think that the marina in its present condition could be safely used. He also doubted whether it would be possible to achieve “suitable” pile bracket replacement designs. As the Cardno Report observed, a pile bracket with increased pile clearance to suit a tilting pile may result in increased loads being transferred to other brackets and may result in excessive pile loads. Whether this would occur would need to be assessed by an engineer responsible for designing the replacement pile bracket.
- Neither Mr Calver nor Mr Leman was asked to perform those calculations. I infer that this is because of the time constraints placed upon the preparation of their reports and the timetable within which their evidence had to be filed and served to enable the hearing to proceed in the civil list on 18 July 2022. Mr Calver’s affidavit of 13 July 2022 noted that if he had more time, he would have engaged engineers to advise on the effect of the tilted piles or the strength and serviceability of existing and replacement pile brackets. Mr Leman’s report dated 13 July 2022 responded to the Cardno Report and his affidavit, which supplemented his report, was sworn only a few days before the hearing on Monday, 18 July 2022.
- Mr Leman’s belief that newly designed pile brackets could address the problem is based on great experience and expertise in the field. However, the possibility that such a solution exists so as to make use of the marina safe does not make it probable. This is especially so in the absence of calculations of the kind that both Mr Leman and Mr Calver accepted would have to be done in order to be satisfied that custom-made pile brackets did not result in excessive pile loads.
- Mr Leman’s opinions were based on two inspections he undertook during calm conditions, when the floating pontoons were able to freely move up and down the piles as occasional waves from a ferry or other river vessels passed. There was no sign of jamming at low or high tide.
- The relevant enquiry, so far as the marina in its present state is concerned, is not with its performance during calm conditions but its performance over a period that may include extreme tides and significant weather events.
- Any calculation of the clearances required for modified pile brackets would need to make allowances for the difference in the tilt of each pile over a range from the lowest astronomical tide to an extremely high tide during a flood event, not the range that Mr Leman observed during his inspections.
- Any new design also would have to accommodate the fact that not all the remaining piles are tilted in the same direction. Although Mr Leman’s recollection was that it was only P1 and P2 that were tilting in a different direction, the pile survey findings in the Cardno Report indicate that others were as well. I accept Mr Leman’s evidence that a marina that has all its piles leaning in one particular direction “could still function as long as their lean was not significantly different between the piles.” Here, however, one has piles with different degrees of lean and piles which lean in different directions (excluding, of course, P5, P10 and P15 which need to be replaced). This highlights the importance of ensuring that modified, oval-shaped pile brackets with sufficient clearance to move up and down on a particular pile over a large range would allow the marina as a whole to distribute combined loads over all of the piles, not only some.
- This issue does not arise in the context of a marina that was able to operate prior to the 2022 floods well within its design limits. The issue of excessive pile loading occurring due to tilting piles and modified pile brackets with increased pile clearance arises in the context of a marina which was designed to perform close to combined anticipated loads.
- Mr Leman accepted that, at the time the marina was being built, the expectation was that the successful tenderer had done an analysis of the forces upon each particular pile and each particular bracket to ensure that they were distributed evenly or appropriately for the expected forces of the waves and the weather. He also accepted that he had not done that sort of analysis. His opinion was based upon his visual inspection and his experience, including looking to see that there was not a problem with the piles in their current lean causing significant difficulties with the marina’s functioning. He did not see any significant tilt to them, and the movement caused by waves was from passing vessels at high tide and low tide on calm days.
- His report expressed the opinion that the tilting of the piles recorded in the Cardno Report had “negligible if any effect on the performance of the marina and its capacity to withstand the next flood event”. His observations during his inspections provided a basis to explain his opinion about the performance of the marina under ordinary conditions. His conclusion about its capacity to withstand a flood event was not adequately explained in his report. His evidence at the hearing did not reveal a sufficiently strong foundation for such a conclusion.
- His conclusion does not seemingly involve the fact that the design of the marina was based on the verticality specified in the tender and that, based on that exacting requirement, calculations done at the time indicated that the marina, as constructed, would operate close to its design limits.
- Neither expert could place the matter higher than a possibility that suitable replacement brackets could be designed to accommodate piles that are out of vertical to different degrees beyond the design specification, with some piles pointing in different directions. The marina in its present state does not resemble the example given by Mr Leman in his report of a marina that has all its piles leaning in one direction.
- It would require a structural engineering analysis and calculations to see if it were possible to design pile brackets that would be in different oval shapes to accommodate tilting piles, but not result in increased loads being transferred to other piles. The design task, as I understood it, would be to design suitable brackets with an increased pile clearance to allow the bracket to slide up and down a tilting pile over a substantial range of tidal conditions, but for the clearance to not be so large as to greatly exceed the kind of clearances that were included in the original design. Such a modified pile bracket design would need to ensure that it did not result in excessive pile loads in a marina which, as designed with specified clearances and “an out-of-verticality of 1 in 200”, was expected to perform close to its design limit.
- In the circumstances, the evidence does not allow one to conclude that modified pile brackets will be able to be designed to ensure that loads are distributed evenly and appropriately for the expected forces of wind, waves and current during an extreme weather event, so as to avoid excessive pile loads.
Summary – the marina’s present condition
- I accept Mr Calver’s evidence that the condition 4 rated pile brackets compromise the structural integrity of the marina to resist any further “significant flood or wind/wave/current event”. This conclusion is not falsified by Mr Leman’s opinion that the remaining parts of the marina are able to function by floating up and down on the piles in the kind of calm conditions that he observed on 5 and 12 July 2022 and, by inference, that they have functioned similarly in the tidal movements since the 2022 flood.
- Mr Calver’s opinion relates to the structural integrity of the marina in its present condition to resist a significant event. His conclusion that the damaged pile brackets, together with the tilting piles, “compromise” the structural integrity of the entire marina to resist such an event should not be equated with a conclusion that it is compromised to such an extent that it cannot presently allow vessels to moor at many of its berths. The evidence is that presently it is physically possible for vessels to moor at many berths during prevailing calm conditions of the kind that Mr Leman encountered at the times of his inspections.
- The gist of Mr Calver’s opinion is that the marina’s present condition compromises its structural integrity to enable it to resist further significant events and, therefore, the marina is unsafe. I do not treat that conclusion as saying that the marina would be unsafe to use to moor a vessel for a short time, as, for example, Mr Biedak did on 2 and 3 July 2022. Instead, Mr Calver’s concern was with the heightened risk, as a result of the damage, that the remaining marina in its present condition cannot be used to safely moor multiple vessels at multiple berths over an extended period that may include significant weather events. Those conditions would place significant loads on a marina that was designed to operate close to its limits. Mr Calver’s opinion that the marina is unsafe to resist such an event is persuasive and I accept it.
Summary – modified pile brackets
- As to the safe use of the marina following repairs of the kind contemplated by Mr Leman and discussed in Mr Calver’s evidence, the evidence leaves the situation in considerable doubt. Absent a design by a suitably qualified engineer who undertook the calculations which Mr Calver and Mr Leman acknowledged would need to be done, it cannot be concluded that oval-shaped pile brackets would be effective to transfer loads across the marina as a whole and to allow it to perform within its design limits. The evidence does not permit me to conclude that this is likely so as to allow the marina to be safely used after the installation of an alternative pile bracket design. The evidence leaves this matter no higher than a possibility.
- Accordingly, I accept Mr Calver’s evidence that modified pile brackets that were designed to achieve increased pile clearances to tilting piles may increase loads being transferred to the other pile brackets and may result in excessive pile loads. Pile brackets would fail in such an event, placing more loads on the other piles and placing them at risk of failure.
- The evidence identifies the difficulty of designing a “suitable” pile bracket to allow the whole marina to resist combined loads in a not unexpected extreme event. This is not to conclude that suitable pile brackets could not be designed to achieve such an outcome. The evidence, including the evidence of Mr Leman, does not allow me, however, to reach the conclusion that with modified pile brackets the marina will have the capacity to withstand such an event.
- Instead, in the absence of design calculations, I conclude that, given the limits of the original design of the marina, which included specifications for pile brackets and the verticality of its piles, the evidence does not establish that modified pile brackets to accommodate tilting of piles probably will enable the marina to withstand the load to which it may be subjected during a significant flood or weather event.
Findings of fact
- In summary, I find:
- 1.The marina was damaged by the 2022 flood in various respects. The damage includes damage that presently does not compromise the structural integrity or safety of the marina, such as damage to the lining of the polystyrene floatation blocks. The damage bearing on the use of individual berths and the marina has been detailed above and appears more fully in the Cardno Report. It includes:
- (i)the loss or detachment of four pontoons from the outer section of the marina;
- (ii)three piles that were badly damaged and need to be replaced; and
- (iii)three pile brackets at P11, P13 and P14 that were damaged, do not perform their required function for the nearby floating pontoons or the marina as a composite structure, and need to be replaced.
- 2.Leaving aside the three damaged piles that need to be replaced, all but one (P1) of the remaining piles that are part of the floating system are tilted beyond the level permitted under the specification for the marina’s design.
- 3.The damaged pile brackets, in combination with the tilting of the piles, affect the performance of the marina and mean that its present structural integrity is less than it was before the flood and less than it would be if the marina were constructed in accordance with the specifications that governed its construction in 2014.
- 4.The marina was designed in 2014 to comply with tender specifications that included an exacting requirement for the verticality of the piles and to provide certain clearances for pile brackets. The marina was designed to perform close to its limits for combined loads from currents, wind, waves, and other forces.
- 5.It was physically possible to moor a vessel at a number of berths as at 20 June 2022, the date of the relevant resolutions and the purported termination notices. This had been and remains the case in the kind of conditions that prevailed when Mr Leman inspected the marina and Mr Biedak moored his boat there on occasions in July 2022.
- 6.Those berths do not include berths where floating pontoons and walkways had been dislodged or disappeared (FP9A, FP9B, FP10 and WP7), namely berths over subleases S and T, or berths close to where two dislodged and damaged floating pontoons are being secured. Berths in the vicinity of damaged pile brackets, particularly P14 (subleases P and R), are not able to be used for the purpose of mooring a motor or sailing vessel at them. The impaired functioning of pile brackets at P11 and P13 also calls into question whether they have been able to be used for the purpose of mooring a vessel at them in recent months. In any event, berths associated with subleases P, R, S and T have not been able to be used to moor a vessel at them since the flood.
- 7.Subject to arrangements to allow sublessees to collect property and for certain inspections to occur, the marina remained closed to use because of concerns by the committee of the respondent about its safety. Vessels that remained at the marina after the flood had to be removed to facilitate salvage operations or could only be removed once sunken vessels and other obstacles were removed.
- 8.After the salvaging of vessels and the removal of major debris, concerns remained about the safe use of the marina. A gate to the marina was locked between the time of the flood damage and 5 July 2022.
- 9.As a result, save for rare occasions when a boat has been moored at a berth, such as when Mr Biedak moored his vessel at various berths on 2 and 3 July 2022, the marina was not used to moor vessels at it after the flood, namely for a period of more than three months prior to the date of purported termination.
- 10.It was unsafe to use the marina, including to use it to moor vessels, during this period.
- 11.As at the date of the termination of the subleases there was, and there remains, a reasonable concern as to whether the marina can be safely used over an extended period, including not unexpected weather events that will subject it to the combined effects of tide, current, wind and waves.
- 12.The expert opinion of Mr Calver, which I accept, is that no vessel can be safely moored at any pontoon where the pontoon has a pile bracket that is damaged and given a condition 4 rating (including FP11, FP13 and FP14). I also accept Mr Calver’s opinion that those damaged pile brackets “also compromise the structural integrity of the entire marina to resist any further significant flood or wind/wave/current event.”
- 13.I accept Mr Calver’s evidence that because the structural integrity of what remains of the marina to resist any such event has been compromised, the marina cannot be safely used and therefore should not be used.
- 14.Major works to rectify the damage to the marina and to reinstate it substantially to the condition it was designed to have and did have prior to the flood would entail decommissioning the marina, save for its gangway, precluding use of the marina pending the commencement of construction and during the construction period.
- 15.More limited works of the kind outlined by Mr Leman’s report have not been shown to be sufficient to allow the marina to be safely used.
- 16.Whether such works would or not depends upon design calculations being undertaken to ascertain if modified pile brackets, of an oval shape and with increased pile clearance outside that provided for in the marina’s original design, would allow the marina to perform with its presently misaligned piles (excluding P5, P10 and P15). The design calculations would determine whether such modified pile brackets and numerous misaligned piles resulted in excessive pile loads during significant flood and weather events, including at very high and very low tides.
- 17.The evidence does not permit the court to conclude that such modified pile brackets would allow the marina to perform within its design limits when subject to significant combined loads from current, wind, waves, and other forces during significant events, or without an unacceptable risk of failure in such an event.
- 18.In the absence of such design calculations, the evidence does not permit the court to conclude that works of the kind outlined in Mr Leman’s report, if undertaken, would allow the marina to perform within its design limits and to be sufficiently safe for it to be used to moor numerous vessels at it. The state of the evidence leaves this only as a possibility.
The meaning and operation of Clause 9.1
- The first sentence in clause 9.1 has a dual operation. The respondent may terminate the sublease:
- (a)if the marina is damaged or destroyed to such an extent that use of the marina is “substantially affected”; or
- (b)if the berth is damaged or destroyed to such an extent that use of the berth is “substantially affected”.
- The respondent does not rest its case on termination on the basis that each berth was damaged. Its case rests on the first aspect, namely that various parts of the marina were damaged, and therefore the marina as a composite structure, where forces are distributed between piles, was damaged to such an extent that use of the marina was “substantially affected”.
- The issue, then, relates to the consequences of the damage to the use of the marina and whether that use has been “substantially affected”.
- The ultimate issue is not whether the marina was substantially damaged, the extent of required repairs, or the cost of different repair options. Instead, the nature and extent of the damage, what effect that had on its use, what is required to repair the damage, the duration of those repairs, and whether the marina could or should be used while any such repairs are being done are relevant to the question of whether the marina’s use has been substantially affected.
Principles of interpretation
- The principles of contractual interpretation apply to leases. These principles are not in contest, and I gratefully adopt the following statements from the applicants’ submissions:
- (a)the object of contractual construction is to ascertain and give effect to the intentions of the contracting parties and to ascertain that normally requires consideration not only of the text, but also of the surrounding circumstances known to the parties, and the purpose and object of the transaction;
- (b)the meaning of contractual terms “is to be determined by what a reasonable person would have understood them to mean”;
- (c)such a reasonable person is one who has all the background knowledge which would reasonably have been available to the parties in the situation which they were in at the time of the contract;
- (d)the words under consideration take colour from the context in which they are found – the contract as a whole is to be considered and a harmonious interpretation preferred;
- (e)it is not for the court to re-write the contract to make it accord with its notion of what is fair or just. Sight should not be lost of the fact that the parties are free to include in their contract whatever terms they see fit. It is the meaning of those terms which must be ascertained, not the terms of a more harmonious or workable arrangement they may have made with the advantage of greater thought and judgment;
- (f)the interpretation of contracts requires “attention to... the commercial circumstances which the document addresses, and the objects which it is intended to secure”; and
- (g)a construction that makes commercial sense and reflects business common sense is to be preferred.
- These principles were encapsulated by the High Court in Electricity Generation Corporation v Woodside Energy Ltd:
“The meaning of the terms of a commercial contract is to be determined by what a reasonable businessperson would have understood those terms to mean. That approach is not unfamiliar. As reaffirmed, it will require consideration of the language used by the parties, the surrounding circumstances known to them and the commercial purpose or objects to be secured by the contract. Appreciation of the commercial purpose or objects is facilitated by an understanding “of the genesis of the transaction, the background, the context [and] the market in which the parties are operating”. As Arden LJ observed in Re Golden Key, unless a contrary intention it indicated, a court is entitled to approach the task of giving a commercial contract a businesslike interpretation on the assumption “that the parties… intended to produce a commercial result”. A commercial contract is to be construed so as to avoid it “making commercial nonsense or working commercial inconvenience”.”
The meaning of “substantial” in its context
- The parties’ submissions assisted with various dictionary definitions of “substantially” and “substantial”. I need not quote them.
- The applicants point to the contractual context in which a sublessee must contribute to the costs of, among other things, operating, repairing and maintaining the marina. The rent under the sublease is nominal. Different amounts were paid by applicants to “purchase” a marina berth from a seller with whom they entered into a Marina Berth Agreement. Such agreements provided for an assignment of the rights, interests and obligations under the sublease to the buyer with the consent of the respondent. The sublease does not provide for the body corporate to pay compensation in the event that the sublease is terminated.
- According to the applicants, in these circumstances, and where all the costs of the marina, including repair costs, are to be paid by the sublessees, it does not make commercial sense or reflect business common sense for the condition upon which the respondent can terminate a sublease to be easily satisfied. In other words, whatever range of dictionary meanings the word “substantially” might encompass, the intention of the parties must have been that circumstances only at “the high end of that range” would entitle the respondent to terminate the subleases or any of them. Accordingly, the applicants submit that the word “substantially” in clause 9.1 ought to be interpreted to mean “a considerable amount”, “quite a lot” or “largely”.
- The respondent accepts that the word “substantially” should be given a meaning that is consistent with a dictionary definition. The matters pointed to by the applicants are not said to assist in determining the meaning of “substantially” in its context. According to the respondent, given the nature of the leased property and the obvious risk of personal injury and property damage if it is used while it is damaged, it would be surprising if “substantial” set a more demanding standard than set by the dictionary definitions that are cited. It submits that clause 9.1 does not necessarily set a high bar.
- The respondent also submits that a purposive reading produces the same or a similar answer. The evident purpose of clause 9.1 is to enable the body corporate to determine the sublease if the marina or the berth is damaged to such an extent that its use is substantially affected. Clause 9.1 is described as “an important circuit breaker” in circumstances in which the body corporate is obliged only to keep the marina clean, structurally sound, and in good repair and condition, but not to repair it.
- This “circuit breaker” submission suggests that where the use of the marina has been substantially affected and different views exist as to what should be done to repair or reinstate it, or not to repair it at all, the body corporate may terminate the subleases, and demolish and remove the damaged facility with a view to surrendering the head lease.
- As for context, regard may be had to clause 9.2 which confers a right on a sublessee to terminate the sublease in certain circumstances if damage to the marina or the berth is to such an extent that use of the berth is “substantially affected”. Given the identical words, one would not expect the word “substantially” to have a different meaning in clause 9.2. It might be satisfied in circumstances in which use of the berth had been affected by being left in a state of disrepair. To interpret “substantially” as requiring more than the ordinary meaning of the word suggests would deprive a sublessee of the right to terminate, even if the exercise of that right meant there was no compensation for an investment made some years earlier in “purchasing” the berth under a different agreement.
- On the other hand, an interpretation of the word that required only some material effect on the use of the berth might allow the sublessee to terminate too easily, and to avoid the obligation to contribute to the substantial costs of repairing the marina if the body corporate decides to reinstate the marina at great expense. To read “substantially” as if it meant some material effect would also enable the body corporate to terminate when the damage only affected use to a limited extent or to a significant extent for only a short time.
- I accept the applicants’ submission that whatever range of dictionary definitions of the word “substantially” might have, the consequences to sublessees arising from termination mean that the condition should not be lightly satisfied. The apparent commercial purpose of clause 9.1 would not be achieved if there was simply some material effect on use. In its contractual context, the word “substantially” in clause 9.1 should be given its ordinary meaning so as to require use to have been affected to a considerable amount.
- Clause 9.1 is intended to operate when the marina’s use has been substantially affected by damage to it in circumstances in which the body corporate is not obliged to reinstate or repair it. This would include circumstances in which the body corporate may be uncertain or divided about whether to undertake such works.
- The fact that the body corporate might look to sublessees via the sinking fund and obligations in relation to outgoings to pay for the costs of repairs is relevant. Where, however, the body corporate is not obliged to repair or reinstate a damaged marina, the use of which is substantially affected, clause 9.1 empowers it to terminate in circumstances in which the damage poses a risk of injury to individuals or property and thereby exposes the body corporate to liability.
- Having regard to its context and purpose, clause 9.1 should not be interpreted to deprive a body corporate of the right to terminate a sublease where damage has “substantially affected” use of the marina and has had other consequences affecting the potential liability of the body corporate if the marina remains in a state of disrepair.
- If the body corporate decides to terminate the subleases, to demolish and remove the facility and to not reinstate it, then this has significant financial consequences for it and the sublessees. Such a course would deprive the body corporate of an asset, being one in respect of which it may look to the sublessees to fund operating costs, including repairs. It also would deprive a sublessee of rights under the sublease, as well as relieving the sublessee of future obligations under it.
- Whether described as a “circuit breaker” or not, the right to terminate under clause 9.1, like the right to terminate under clause 9.2, necessarily alters rights. If the sublease is terminated, then neither party has an entitlement to compensation. The sublease should be interpreted on the basis that the parties might have, but did not, provide for compensation in the event of termination. The clause should be interpreted on the basis that if the “substantially affected” condition is satisfied then there may be significant practical and financial consequences from the exercise of a right of termination.
- The commercial purpose of clause 9.1 would not be served by concluding that the parties intended the “substantially affected” condition to be satisfied in the case of major damage to the marina that could be rectified in a relatively short time and paid for by the body corporate out of the sinking fund or by making an insurance claim.
- The use of the marina would not be “substantially affected” by damage sustained to only a few berths. While the use of an individual berth may have been substantially affected, so as to trigger an entitlement to terminate it, the use of the marina as a whole would not be substantially affected in such a case.
- The issue is not the extent of damage, but the extent to which the damage (substantial or otherwise) has resulted in use of the marina being substantially affected.
The meaning of “use”
- The relevant use is the use of the marina’s berths to moor a motor or sailing vessel in each berth.
- The applicants’ counsel submitted that the word “use” should not be glossed as if it read “safe use”. Still, the word “use” should be interpreted in its context and in accordance with the principles that have been outlined above.
- It would be an odd, inconvenient, and apparently unintended result if use of the berth or marina were not substantially affected in circumstances in which, whilst it was physically possible to moor a vessel or vessels at it, it was dangerous or unsafe to do so. To take an extreme example, suppose the safety of the marina, users of the river, property and public safety prompted the relevant marine authorities to order that vessels be removed from it or not be moored at it. The fact that it was physically possible, in disregard of that order and legitimate safety considerations, to moor the vessel at the marina would not mean that it should be used. Similarly, if vessels had to be removed to allow clean-up, salvage operations and repairs to the marina, then the possibility that a vessel could be moored at the marina (and impede those operations) would not determine the question of whether the use of the marina had been affected. In such a case, use of the marina would be affected for so long as the repairs remained incomplete.
- It makes commercial sense to interpret “use” to mean use of the marina to moor vessels when it is safe to do so. The fact that vessels could physically moor does not necessarily determine the question of use.
- Therefore, I adopt the view that use of the marina will be affected if it could not or should not be used for the permitted use of mooring a vessel.
A temporal aspect
- The assessment of whether use of the marina has been “substantially affected” is made at the time of the purported termination and has regard to the period over which and the respects in which its use has been affected at as that date. That alone may satisfy the condition in some circumstances.
- In other circumstances, it may be appropriate to take account of repairs that will enable the marina to be used again to moor vessels and the time that those repairs will take. Such a consideration may mean that its use has not been “substantially affected”. Depending upon the circumstances, the nature and extent of repairs may mean that the marina cannot be used for another six days, six weeks, six months or longer.
- Clause 9.1 does not involve a simple snapshot of whether the marina’s use is “substantially affected” on the day of the purported termination. That would be an odd approach to its intended operation, even in the case of major damage, if the damage could be repaired in a reasonably short time.
- Therefore, the expected repair period may be relevant. A relatively short period to complete repairs, combined with the period that the marina has already been unable to be used, may mean that its use has not been “substantially affected”. A much longer period may be different.
- This aspect has relevance in the present circumstances where the design, fabrication and installation of custom-made pile brackets may be completed in a matter of weeks and possibly result in 16 out of the original 18 berths being able to be used. The essence of the applicants’ argument is that the use of the marina is not “substantially affected” if repairs can be made in a number of weeks so as to allow all but two of its berths to be used.
- Different considerations would apply if, instead of quick repairs, the marina had to be decommissioned and practically rebuilt to bring it to a condition similar to the condition it was in prior to the flood. Counsel for the applicants fairly conceded that if it were necessary to rebuild the marina then it would be substantially affected.
- The relevant issue then is whether, in its damaged state as at 20 June 2022, and having regard to proposed repairs of the kind contemplated by Mr Leman’s report, the marina’s use was “substantially affected”.
An objective question
- That issue is an objective matter for the court to decide on the evidence before it, including expert evidence that was not available at the time the respondent purported to terminate the subleases on 20 June 2022. The issue does not turn on the respondent’s subjective assessment of whether the condition was satisfied or its assessment of risk and whether the prudent course in circumstances of uncertainty and with concerns about safety, was to decommission the marina based upon the information and advice which it had received at the time.
- The reasonableness of the respondent’s conduct in purporting to terminate the subleases is not in issue. The issue, instead, is whether as a matter of objective fact, use of the marina was substantially affected as at the date of the purported termination.
Was use of the marina “substantially affected” as at 20 June 2022?
- Based on my findings of fact, as at 20 June 2022 damage to the marina had compromised its structural integrity. Before that damage, the marina’s design meant that it performed close to its limits.
- In its damaged state, the marina was unsafe to use. Based on Mr Calver’s opinion, which I accept, it should not be used because it is unsafe to do so. Mr Morris’ opinion was to the same effect.
- Because of the marina’s damaged state and the risks that are a consequence of that damage, the marina should not be used to moor vessels at its remaining berths. The fact that it is physically capable of allowing a number of vessels to moor at many of its berths does not mean that they should do so. As at 20 June 2022, the marina was damaged to an extent that it was not able to be used to moor vessels at it. As at 20 June 2022, it had not been used to moor vessels for more than three months. This was because it should not have been used to moor vessels during that period. On that basis, its use was substantially affected.
- It remains necessary to consider whether the proposed repairs to pile brackets will enable the marina to be used after such repairs are effected. For the reasons given, I am unable to conclude that such repairs will make the marina safe or in a condition that it should be used to have multiple vessels moor at it. The evidence before me does not establish that such modified pile brackets will render a currently unsafe marina safe. They certainly would not restore the marina (or to be more precise, its 16 remaining berths and the remaining composite structure) to the design that was adopted in 2014 which, with vertical piles and pile brackets with lesser and concentric clearances, meant that the marina, with those design features, operated close to its design limits.
- The structural integrity of the marina to resist a future significant event has been compromised by the flood damage. The evidence does not establish that the proposed replacement of pile brackets in conjunction with misaligned piles will allow a transfer of critical loads to the piles and avoid excessive pile loads and failure in a significant event.
- In summary, as at 20 June 2022, the marina had not been able to be used for months. It could not be used to moor multiple vessels at its numerous berths because it was not safe to do so. This meant that its use had been substantially affected.
- In addition, it is only possible, not probable, that limited repairs using modified pile brackets with increased clearances to suit tilting and misaligned piles will allow the marina to perform safely and within its design limits during a significant flood or wind/wave/current event. It is only possible, not probable, that those repairs, if undertaken, will allow vessels to moor at 16 out of its 18 berths.
- Therefore, I conclude that as at 20 June 2022 the marina was damaged to such an extent that use of it was “substantially affected” within the meaning of clause 9.1. The respondent, therefore, was entitled to exercise its right under clause 9.1 to terminate each sublease.
The second issue: the meaning and effect of the resolutions
- The second issue for determination is previewed above at  – . On 20 June 2022, an extraordinary general meeting of the respondent carried four resolutions. One related to the termination of the 18 subleases in the marina. Another related to the surrender of the head lease. The two relevant resolutions were the second and third resolutions passed at the meeting. For convenience I will refer to them as the first and the second resolution.
- The first resolution was as follows:
“THAT the Body Corporate for Addison on Quays CTS 46485 (Body Corporate) resolves to terminate the eighteen (18) various subleases (Subleases) of berths in the marina (Marina) over which it is a holder of a term lease issued by the State of Queensland represented by the Department of Natural Resources and Mines (Lease) (Termination)
AND THAT the Body Corporate resolves to issue each of the sub-lessees of the Subleases with a termination notice notifying them of its intention to terminate the Subleases in thirty (30) days' time (Termination Notices) on such terms as to be approved by the Committee in conjunction with advice from HWL Ebsworth Lawyers
AND THAT the Body Corporate approves the Committee or HWL Ebsworth Lawyers or any other duly authorised representative of the Body Corporate signing and issuing the Termination Notices on behalf of the Body Corporate
AND THAT the Body Corporate approves the Committee or HWL Ebsworth Lawyers or any other duly authorised representative of the Body Corporate to give the Termination Notices to the sub-lessees on behalf of the Body Corporate
AND THAT the Body Corporate resolves to do all other things reasonably necessary in respect of the Termination Notices and Termination
AND THAT the Termination be conditional upon the Body Corporate successfully surrendering the Lease to the Department of Natural Resources and Mines”
- The second resolution was as follows:
“THAT the Body Corporate for Addison on Quays CTS 46485 (Body Corporate) resolves to surrender the lease entered into between it and the State of Queensland represented by the Department of Natural Resources and Mines (DNRM) (Lease) commencing on 28 May 2008 (Surrender)
AND THAT the Body Corporate approves authorising the Committee or HWL Ebsworth Lawyers to take all steps necessary to effect the Surrender, including but not limited to negotiating with the DNRM and the terms and conditions of the Surrender
AND THAT the Body Corporate resolves to do all other things reasonably necessary in respect of the Surrender
AND THAT the Surrender be conditional upon the successful termination of the eighteen (18) various subleases (Subleases) of berths in the marina (Marina) (that is the subject of the Lease) over which the Body Corporate is the lessor of that are (Termination)”
- The applicants argue that, because the first resolution to terminate the subleases was made conditional upon the successful surrender of the head lease, notices of termination that were not expressed to be conditional on that event were unauthorised and ineffective.
- The applicants submit that, while there was good reason that the respondent might wish to pass both resolutions or neither of them, the resolutions were not expressed in terms that made the passage of one conditional on the passage of the other. They contend for a literal interpretation of the resolutions, partly because resolutions passed by a body corporate form part of its records and serve a public purpose. Persons with an interest may search the body corporate’s records prior to a purchase and, save for information that is in the public domain, will not know of other surrounding circumstances and will interpret the resolutions according to their terms. Because of the status of such resolutions, the applicants urge caution in going beyond their language to ascertain their meaning. They should not be re-written under the guise of interpreting them.
- In reply, the respondent contends that no reasonable person would interpret the resolutions on the basis that the body corporate intended to pass circular resolutions that would be impossible to perform. It argues that the resolutions should be given a purposive and common-sense interpretation.
- A resolution is to be construed like any other private document. This requires reference to its text, context and purpose. The task of construction involves an analysis of what meaning the resolution would convey to a reasonable person. A reasonable person would not interpret resolutions as intending to achieve the impossible, or to have a circular operation and therefore be of no effect. As with the interpretation of contracts and the interpretation of statutes, it is unlikely that persons intend to do or require what is clearly impossible.
- The first resolution should be interpreted in the context of the following resolution that proposed that the head lease be surrendered upon the successful termination of the 18 subleases. A reasonable interpretation of the first resolution, in the context of a proposal to surrender the lease, is that the first resolution was concerned not simply to effect termination of the subleases, if that proved possible, leaving the body corporate with ongoing financial and other responsibilities under the head lease and without the benefit of the 18 subleases to financially support those responsibilities. A reasonable interpretation is that the meeting intended to make the terminations contemplated by the first resolution conditional upon the passage of the second resolution.
- A literal interpretation of the first resolution, which made termination of the subleases conditional upon the prior surrender of the head lease, would make no sense. It would make no commercial or other sense to surrender the head lease unless and until the subleases had been successfully terminated. Surrendering the head lease without first terminating the subleases would expose the respondent to legal claims by the sublessees that surrendering the head lease or preparing to do so amounted to a repudiation of each sublease.
- A reasonable person would not understand the first resolution, given its context with the proposed second resolution, as requiring the respondent to serve a notice of termination that was made conditional upon the successful surrender of the lease, something that could not happen, even if the second resolution was passed, because that resolution was itself conditional upon the successful termination of the subleases.
- To read the first resolution that way would be to read it as requiring the issuing of notices that were bound to be ineffective to terminate each sublease.
- A court should not rewrite resolutions simply to overcome an inconvenient result. It should, however, construe a resolution by having regard to its text, context, and purpose, according to the meaning that it would convey to a reasonable person.
- In my view, a reasonable person would interpret the first resolution as meaning that the passage of the resolution and carrying it into effect were conditional upon the passage of the second resolution. The first resolution should not be interpreted as being conditional upon the actual surrender of the lease, something that the second resolution provided would only occur after the subleases had been successfully terminated. The first resolution should not be interpreted as if the respondent intended to pass resolutions that were circular in their effect, ineffective and impossible to perform.
- The first resolution should be interpreted as authorising the issuing of termination notices that were effective, rather than termination notices that were expressed to be conditional upon a surrender that could not occur in accordance with the second resolution.
- The respondent, therefore, authorised the unconditional termination notices that were issued. They were effective to terminate each of the subleases between each of the applicants and the respondent.
Conclusion and orders
- I decline to grant the final relief sought in paragraph 4 of the further amended originating application. The orders will be:
- The application for the declaratory relief sought in paragraph 4 of the further amended originating application is dismissed.
- Reserve costs.
- The future conduct of the proceeding is unlikely to bear upon the issue of costs in relation to the substantial hearing before me. My provisional view is that the costs associated with that part of the application should follow the event. I will hear the parties, if necessary, on the issue of costs. Otherwise, the parties should submit a form of order within seven (7) days which dismisses paragraph 4 of the application and addresses the question of costs in relation to that part of the application.
 T1-50 l 25, l 45.
 T1-51 l 4.
 T1-51 l 16.
 T1-51 l 28.
 T1-51 l 34.
 T1-51 ll 35-40.
 T1-51 l 44.
 T1-52 ll 5-10.
 T1-52 l 25.
 T1-53 l 45.
 T1-57 l 43.
 T1-58 ll 7-10.
 T1-59 l 5.
 T1-59 l 13.
 T1-61 l 14, l 36.
 T1-61 l 45.
 T1-65 ll 9-14.
 T1-65 l 35.
 T1-66 ll 1-5.
 T1-57 ll 1-27-29.
 T1-66 l 10.
 T1-67 l 5.
 T1-67 l 15.
 T1-67 l 35.
 T1-67 l 35.
 T1-67 ll 35-41.
 T1-67 l 48.
 T1-68 l 1.
 T1-68 l 18.
 T1-68 l 20.
 T1-71 ll 10-20.
 T1-72 l 45.
 T1-73 l 15.
 T1-113 l 33.
 T1-114 l 35.
 T1-114 ll 40-45.
 T1-115 l 25.
 T1-115 l 45.
 T1-58 ll 7 to 10.
 T1-67 l 48.
 T1-50 ll 25 to 30.
 T1-61 l 44.
 T1-62 l 7.
 Page 7 of his report.
 T1-115 l 48.
 T1-116 l 5.
 T1-110 l 5.
 Progressive Mailing House Pty Ltd v Tabali Pty Ltd (1985) 157 CLR 17.
 Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165.
 Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165 at 179 .
 Investors Compensation Scheme Ltd v West Bromwich Building Society  1 WLR 896 at 912.
 Australian Broadcasting Commission v Australasian Performing Right Association Ltd (1973) 129 CLR 99 at 109.
 Sutcliffe v Thackrah  AC 727 at 745; Nikko Hotels (UK) Ltd v MEPC Plc  2 EGLR 103.
 McCann v Switzerland Insurance Australia Ltd (2000) 203 CLR 579 at 589 .
 HIGB Pty Ltd v Townsville City Council  QSC 285 at .
 (2014) 251 CLR 640 at 656-657  (citations omitted).
 Herzfeld and Prince, Interpretation , 2nd edition, Thomson Reuters, [19.40].
 At [19.60].
 The Epaphus  2 Lloyd’s Rep 215 at 218-9.
 Leichhardt Municipal Council v Montgomery (2007) 230 CLR 22 at 34-35 .
- Published Case Name:
Petire Investments Pty Ltd & Ors v Body Corporate for Addison Quays Community Title Scheme 46485
- Shortened Case Name:
Petire Investments Pty Ltd v Body Corporate for Addison Quays Community Title Scheme 46485
 QSC 162
03 Aug 2022