Activ Foundation Incorporated v WBHO-CARR Pty Ltd - [2014] WADC 174

JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CIVIL

LOCATION: PERTH

CITATION: ACTIV FOUNDATION INCORPORATED -v- WBHO-CARR PTY LTD [2014] WADC 174

CORAM: DERRICK DCJ

HEARD: 3-6 NOVEMBER 2014

DELIVERED : 23 DECEMBER 2014

FILE NO/S: CIV 3579 of 2012

BETWEEN: ACTIV FOUNDATION INCORPORATED
Plaintiff
AND
WBHO-CARR PTY LTD
Defendant

Catchwords:

Offer to lease - Acceptance of offer to lease - Whether acceptance of offer to lease created binding agreement to lease - Repudiation - Damages for breach of agreement to lease

Legislation:

Corporations Act 2001 (Cth)
District Court Rules 2005 (WA)

Result:

Judgment for the plaintiff
Damages awarded

Representation:

Counsel:

Plaintiff: Mr M F Holler
Defendant: Ms K J Levy

Solicitors:

Plaintiff: Rockwell Olivier Lawyers
Defendant: Danaghers Commercial and Corporate Lawyers

Case(s) referred to in judgment(s):

African Minerals Ltd v Pan Palladium Ltd [2003] NSWSC 268
Allen v Carbone [1975] HCA 14; (1975) 132 CLR 528
Anaconda Nickel Ltd v Tarmoola Australia Pty Ltd [2000] WASCA 27; (2000) 22 WAR 101
Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540
Baulkham Hills Private Hospital Pty Ltd v GR Securities Pty Ltd (1986) 40 NSWLR 622
Bowen v Alsanto Nominees Pty Ltd [2011] WASCA 39
Brambles Holdings Ltd v Bathurst City Council [2001] NSWCA 61; (2001) 53 NSWLR 153
Chillingworth v Esche [1924] 1 Ch 97
Crossly v Maycock (1874) LR 18 Eq 180
Durban Roodepoort Deep, Limited v Newshore Nominees Pty Ltd [2005] WASCA 231
Farmer v Honan [1919] HCA 13; (1919) 26 CLR 183
Fink v Fink [1946] HCA 54; (1947) 74 CLR 127
Geebung Investments Pty Ltd v Varga Group Investments (No 8) Pty Ltd [1995] NSWCA 166
Godecke v Kirwan [1973] HCA 38; (1973) 129 CLR 629
Keppel v Wheeler [1927] 1 KB 577
Luxer Holdings Pty Ltd v Glentham Pty Ltd [2007] WASCA 209; (2007) 35 WAR 254
Masters v Cameron [1954] HCA 72; (1954) 91 CLR 353
May & Butcher Ltd v R [1934] 2 KB 17
Niesmann v Collingridge [1921] HCA 19; (1921) 29 CLR 177
NZI Insurance Australia Ltd v Baryzcka [2003] SASC 190; (2003) 85 SASR 497
Pagnan SpA v Feed Products Ltd [1987] 2 Lloyd's Rep 601
Regional Power Corporation v Pacific Hydro Group Two Pty Ltd [No 2] [2013] WASC 356
Rossiter v Miller (1878) 3 App Cas 1124
Sinclair Scott & Co Ltd v Naughton [1929] HCA 34; (1929) 43 CLR 310
Spottiswoode, Ballantyne & Co Ltd v Doreen Appliances Ltd [1942] 2 KB 32
Tern Minerals NL v Kalbara Mining NL (1990) 3 WAR 486
Terrex Resources NL v Magnet Petroleum Pty Ltd (1988) 1 WAR 144
Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165

DERRICK DCJ: The plaintiff claims damages for an alleged breach of an agreement to lease commercial premises. The defendant denies that any binding agreement came into existence.

Factual background

The plaintiff is the registered proprietor of land situated at 323 ‑ 327 Cambridge Street in Wembley (the land). The plaintiff has owned the land for many years.
During the period January 2010 to April 2011 the plaintiff constructed a three‑storey building (the building) together with 98 parking bays on the land. Since May 2011 the plaintiff has occupied the ground floor and level 1 of the building.
On 4 August 2010, prior to the completion of the building, Mr Jonathan Thomas, the plaintiff's General Manager – Assets, engaged Savills (WA) Pty Ltd (Savills) as an agent to market level 2 of the building for lease to third parties.
By March 2011 a significant portion of level 2 of the building had been leased to a company called Sentis Pty Ltd (Sentis).
In or about March 2011 the defendant was looking for office premises to move into. The defendant's board of directors gave Mr Mark Blayney, the defendant's Managing Director, responsibility for finding suitable premises for the defendant.
At around this time Mr Blayney regularly travelled along Cambridge Street in Wembley. On several occasions as he travelled along Cambridge Street he saw a Savills sign posted on the building offering premises in the building for lease. The premises which were available for lease were comprised of that portion of level 2 which was not occupied by Sentis (the premises).
In April 2011 Mr Blayney telephoned the Savills number shown on the sign posted on the building. He spoke to Ms Alyson Martinovich. Ms Martinovich was a leasing executive employed by Savills.
Mr Blayney asked Ms Martinovich if he could inspect the premises. Ms Martinovich said that he could and arrangements were made for the inspection to take place.
Mr Blayney first inspected the premises in early April 2011. He inspected the premises with Ms Martinovich. During the inspection he also looked at the building's bathroom facilities and car park area.
After inspecting the premises Mr Blayney told Ms Martinovich, in effect, that the premises would need to be fitted out and that fit out was a very important and expensive part of any lease for the defendant. Ms Martinovich responded to Mr Blayney by saying words to the effect that 'part of the rationale for a rent free period is an acknowledgment of the need for a fit out'.
On 18 April 2011 Mr Blayney inspected the premises as well as the building's bathroom facilities and car park for a second time. Ms Martinovich was again present.
Later on 18 April 2011 or on 19 April 2011, but in any event after his second inspection of the premises, Mr Blayney spoke to Ms Martinovich on the telephone. During the telephone conversation Ms Martinovich told Mr Blayney the rental price per square metre of the premises, the part of the building which was available for lease, the number of car bays available and the incentive being offered by the plaintiff, namely a rent‑free period. Ms Martinovich also said to Mr Blayney words to the effect that if the defendant was interested in the premises 'it better make up its mind quickly whether it is really interested or not because there are other people looking at the building'. Ms Martinovich then said to Mr Blayney, in effect, that if the defendant was interested in proceeding further the following would occur:
1.The defendant would have to apply to be considered as the preferred lessee by returning a signed offer to lease.
2.The defendant's application would then be assessed with the other applications of interest in the building.
3.The plaintiff would then decide who it preferred and the defendant would be advised whether the plaintiff wanted to proceed with the defendant or not.
4.If the defendant was selected the process would commence and a draft lease would be drawn up and sent through for negotiation between the plaintiff and the defendant.
Mr Blayney did not on this occasion discuss with Ms Martinovich any details about the terms of any lease of the premises that might be required by the plaintiff or the defendant. There was no mention of any deposit being payable.
On 19 April 2011 Ms Martinovich sent to Mr Blayney by email a copy of a document headed 'Offer to Lease – Commercial Office Premises'. Ms Martinovich's email to Mr Blayney, to which the copy of the offer to lease document was attached, was in the following terms:
Hi Mark
Thank you for inspection 323-327 Cambridge Street yesterday. Please find attached an Offer to Lease part level 2 as per our recent discussions.
Please don't hesitate to contact me should you have any queries or wish to discuss. Also, if you have any changes please advise. Otherwise if you could please arrange for the correct execution (where indicated), initial each page and email back to myself to present to the Landlord.
As mentioned yesterday, we have received a signed offer to lease from another party so time is of the essence.
Regards
Alyson Martinovich
Ms Martinovich's reference in her email to a signed offer to lease having been received from another party was a reference to an offer to lease the premises which had been made by a third party on 15 April 2011.
On 21 April 2011 Mr Blayney signed a copy of the offer to lease document. He signed the offer to lease document 'for and on behalf of' the defendant. His signature was witnessed by Mr Andrew Glover, the defendant's Financial Controller.
At the time of signing the offer to lease document Mr Blayney inserted a handwritten addition to the document just above the signing clause and just below his signature. The handwritten addition read, 'Offer subject to Board (WBHO) approval at scheduled meeting 9/5/11'.
Having signed the offer to lease document Mr Blayney sent a copy of the signed document by email to Ms Martinovich on 21 April 2011. Mr Blayney's covering email was in the following terms:
Alyson
Signed copy of offer to lease as per discussions. Following site inspection by Eric Meyerowitz yesterday, I have been instructed that such a long term commitment will need sign off at board level (which Eric advised will be a 'rubber stamp' exercise, though still necessary) by our South African equity partner, thus the inclusion on the last page. I trust this does not present any problems, because as you are aware we need to commence the process ASAP so we can vacate our current premises.
Trust you have a relaxing week-end 'down south' and do not imbibe too many wines.
Thanks and regards
Mark Blayney.
Mr Blayney's reference in his email to 'the inclusion on the last page' was a reference to his handwritten addition to the offer to lease document that the offer was subject to board approval.
On receipt of Mr Blayney's email to Ms Martinovich and the attached signed offer to lease document Mr Graham Postma, another employee of Savills, sent a copy of the signed offer to lease document to Mr Thomas. Mr Thomas, on reviewing the document, noticed Mr Blayney's handwritten addition that the offer was subject to WBHO board approval. He therefore discussed the defendant's offer with the plaintiff's Chief Executive Officer, Mr Tony Vis. Following this discussion Mr Vis signed the offer to lease document on behalf of the plaintiff. Mr Vis signed the offer to lease document on 21 April 2011. His signature was witnessed by Mr Thomas.
Later on 21 April 2011 Mr Thomas sent by email a copy of the signed offer to lease document to Mr Postma and Ms Martinovich. Mr Thomas' email was in the following terms:
Hi Graham and Alyson,
Please find attached the signed offer for [WBHO-Carr]. We prefer this offer over the ETAS offer for the range of reasons discussed with Graham today.
We note that the offer is subject to [WBHO] Board approval on the 9^th May 2011, please advise when you believe we can commence lease documentation preparation and I can instruct Talbot Olivier.
Thanks for all your assistance in securing this tenant.
Have a good Easter.
Kind regards
Jonathan Thomas.
By 20 May 2011 the defendant had not notified the plaintiff that board approval had been given to the signed offer to lease document. Accordingly, at about 3.00 pm on that date Ms Martinovich sent an email to Mr Blayney in the following terms:
Hi Mark
The attached executed Offer to Lease at the above premises between [WBHO] Carr and Activ Foundation is subject to board approval by 9 May 2011, which is yet to be provided. Can you please advise the current status?
Should there be any concerns please contact me to discuss and hopefully we can resolve (for example, if you require an extension of the board approval please advise).
Look forward to your response.
Regards
Alyson Martinovich
At about 4.30 pm on 20 May 2011 Mr Blayney sent an email to Ms Martinovich in which he said the following:
Alyson
Firstly sincere apologies for tardiness over the past few days – I have been tied up in meetings trying to get a couple of sizeable projects 'over the line'.
All required approvals have finally been communicated to me so, if the office space is still available, can we commence the process of formal lease preparation as you have previously discussed. Any queries, please do not hesitate to contact me.
Thanks and regards
Mark Blayney.
A few minutes later Mr Blayney sent a second email to Ms Martinovich in the following terms:
Alyson
As per email only 5 minutes ago (I forwarded my email as soon as I returned to the office and prior to reading all emails received (inclusive yours) whilst I have been in meetings), all approvals have now been secured so (all things being equal) we can now move forward.
Any queries please do not hesitate to contact me.
Thanks and regards
Mark Blayney
On 23 May 2011 Ms Martinovich replied to the second of Mr Blayney's emails sent on 20 May 2011 in the following terms:
Hi Mark
Not a problem, thanks for the email and we acknowledge that board approval has been received and we can now proceed to documentation stage once the deposit has been received.
The deposit/rent in advance was due upon Lessor acceptance of the offer to lease. Can you please arrange for this to be transferred into Savills Trust Account (details below) asap?
…
Amount = $64,405.06 (2 months gross rent inclusive of GST)
Regards
Alyson Martinovich
On 24 May 2011 the plaintiff instructed Savills to instruct the plaintiff's solicitors Talbot Olivier to prepare the lease and car parking licence as provided for in the signed offer to lease document. Talbot Olivier completed the preparation of the lease and car parking licence in draft form by 30 May 2011.
On 30 May 2011 Ms Martinovich purported to send by email a copy of the draft form lease and draft form car parking licence to Mr Blayney for review by the defendant's solicitors. However, Mr Blayney either did not receive the email or, if he did, did not see the email and the attachments thereto. In any event Mr Blayney never reviewed the draft lease and draft car parking licence prepared by Talbot Olivier and did not arrange for the defendant's solicitors to do so.
On 8 June 2011 the defendant advised the plaintiff, in substance, that it would not be proceeding with the lease of the premises. The advice was provided in an email from Mr Glover to Savills dated 8 June 2011 which was in the following terms:
Hi Alyson,
Please see the attached correspondence from our Board regarding the lease of the Cambridge Street. Unfortunately the Board have not given approval for the establishment of the office due to our current financial performance.
Our Managing Director Mark Blayney is currently overseas until next week therefore please contact myself if you would like to discuss further.
The correspondence which was attached to Mr Glover's email was a letter from WBHO Construction (Pty) Ltd to the defendant (marked to the attention of Mr Blayney) dated 7 June 2011. The letter was signed by Mr CV Henwood, a director of WBHO Construction (Pty) Ltd. The letter was in the following terms:
Dear Mark,
OFFICES IN PERTH
Following our strategy session and the current forecast result for CARR, WBHO Construction (Pty) Ltd don't believe it is prudent to commit to a long term lease and establish offices in Perth.
On 16 June 2011 Mr Glover sent an email to Ms Martinovich. In his email Mr Glover said the following:
Alyson,
As discussed Mark Blayney received a verbal approval for the lease from one of our directors which he acted upon. Unfortunately, on review of our financial performance the WBHO-CARR Board as a whole have not given approval for the lease of the premises at Cambridge Street.'
The defendant did not pay the two months' rent in advance.

Issues for determination

The plaintiff's case is, in essence, that on the communication by the defendant of board approval to the offer to lease document which had by that time been signed on behalf of both the plaintiff and the defendant, the plaintiff and the defendant entered into a legally binding agreement pursuant to which the defendant agreed to lease the premises for five years and to take a licence of 21 car parking bays.
The defendant, for its part, does not dispute that the plaintiff's 'acceptance' of the offer to lease by Mr Vis signing the offer to lease document was communicated to it at some point after 21 April 2011 and in any event by no later than 20 May 2011. Nor does the defendant dispute that it is bound by the advice given by Mr Blayney to the plaintiff (through the plaintiff's agent Savills) on 20 May 2011 that the defendant's board had given approval to the offer to lease document. The defendant's case is that the signing of the offer to lease document by Mr Vis on behalf of the plaintiff and the subsequently conveyed approval of the defendant's board to the offer to lease document did not, on the proper construction of the document, create any binding agreement between the plaintiff and the defendant. The defendant's case is that the signed offer to lease document amounted to nothing more than an informal offer by the defendant to lease the premises subject to a formal binding lease agreement being entered into between the parties. That is, the defendant's case is that the signed offer to lease document fell into the third of the categories identified in Masters v Cameron [1954] HCA 72; (1954) 91 CLR 353, 360 ‑ 361. Further, and in the alternative, the defendant contends that if contrary to its primary position a binding agreement did come into existence between the plaintiff and the defendant from the point in time that Mr Blayney informed the plaintiff (through Savills) that the defendant's board had approved the offer to lease document, then the agreement was merely an agreement to negotiate a lease and a car parking licence.
It follows from the competing contentions of the parties that the questions for my determination in the present case are as follows:
1.Did the signed offer to lease document, on the communication by the defendant of board approval on 20 May 2011, constitute a legally binding agreement?
2.If the signed offer to lease document did, on the communication by the defendant of board approval on 20 May 2011, constitute a legally binding agreement was the agreement:
(1)an agreement by which the plaintiff and the defendant entered into a five year commercial lease of the premises and a car parking licence? or
(2)an agreement to negotiate a lease and car parking licence?
3.If a legally binding agreement did come into existence, did the defendant breach the agreement?
4.If the answer to question 3 is 'yes', what damages, if any, are payable by the defendant to the plaintiff?
The first and second of the above stated questions are obviously closely related. In order to determine the question whether the offer to lease constituted a legally binding agreement it is necessary to consider the terms of the document and to decide what those terms provided for. It is therefore appropriate and convenient to deal with the first and second questions together. This was in any event the way in which the parties argued their respective cases at trial.
During the trial counsel for the parties used different terms to refer to the offer to lease document. The plaintiff's counsel referred to the document as the 'offer to lease'. The defendant's counsel, given that the defendant's case is that no binding agreement ever came into existence, preferred to describe the offer to lease document as 'a four page document'. It is in light of this (probably unnecessary) dispute as to terminology that I have to this point used the neutral phrase 'offer to lease document' to refer to the document which is at the heart of the dispute between the parties.
As I have already indicated, the offer to lease document is headed 'Offer to Lease – Commercial Office Premises'. Therefore, from this point onwards I will for convenience refer to the document as the 'offer to lease'. The fact that I am going to do so does not mean that I do not appreciate the essence of the defendant's case.

The terms of the offer to lease

Before turning to deal with each of the above posed questions it is necessary to refer to the terms of the offer to lease.
The offer to lease is on Savills letterhead. It is obviously a form of document which was used by Savills on behalf of its landlord clients.

The first sentence of the offer to lease is in the following terms:
The Lessee described below hereby offers to lease from the Lessor described below the premises described below on terms and conditions as set out hereunder.
Clause 1 provides as follows:
1.DESCRIPTION OF PREMISES
Premises described as Part Level 2, 323 – 327 Cambridge Street, Wembley having an area of approximately 666 m² which is to be surveyed in accordance with the Property Council of Australia Method of Measurement (1997) (Revision) at the Lessor's cost.
If the surveyed area differs from the area specified above the annual rental will be adjusted accordingly.
Clause 2 specifies the 'Lessor' to be the plaintiff.
Clause 3 specifies the 'Lessee' to be 'WHBO-Carr' not 'WBHO-Carr'. This is obviously a typographical error. The defendant does not suggest that it was not the identified 'Lessee' under the offer to lease.
Clause 4 is in the following terms:
4.LEASE PREPARATION
The Lessor's standard form of lease for the Building will be used.
The Lessee shall be responsible for the Lessee and Lessor's legal costs in connection with the negotiation, preparation and execution of the legally binding Lease documentation.
Clause 5 deals with the issue of rental. It provides as follows:
5.NET RENTAL
The Lessee will pay to the Lessor a net rental of $385 per square metre plus GST of the final surveyed area, accordingly the annual net rental shall be $256,410 plus GST (based on the estimated area), which is payable by equal calendar monthly instalments.
Clauses 6 – 13 are in the following terms:
6.LEASE TERM
Five (5) years
7.LEASE COMMENCEMENT DATE
1 July 2011
8.OPTION
Five (5) years
9.NET RENT REVIEW STRUCTURE
The net rent shall be reviewed as follows:
Commencement Year 2: Fixed 4%
Commencement Year 3: Fixed 4%
Commencement Year 4: Fixed 4%
Commencement Year 5: Fixed 4%
Option (if exercised): Market Review
Commencement Year 7: Fixed 4%
Commencement Year 8: Fixed 4%
Commencement Year 9: Fixed 4%
Commencement Year 10: Fixed 4%
Rent shall be reviewed at Option (if exercised by Lessee) to then prevailing Market face rent (excluding incentives) as defined in the Lessor's standard lease, but any event to be not less than the rate payable in the immediately preceding period.
10.DATE OF POSSESSION TO FITOUT
Possession of the premises will be available to the Lessee for the purposes of fitting out, upon all parties correctly executing and delivering to the Lessor or their Agents the Lease and Car Park Licence and providing the required deposits and bank guarantee, and evidence of Insurance.
Should the Lessee take Possession of the premises prior to the Lease Commencement Date the Lessee shall not be required to pay Rental, Outgoings or Car Parking but shall be required to pay for all consumables, including but not limited to electricity etc, up until the Lease Commencement Date.
11.INCENTIVE
The Lessee shall be granted an incentive equal to seven (7) months net rent free from the Lease Commencement Date.
All charges (other than net rent) including outgoings, car parking, cleaning and after hours air-conditioning payable by the Lessee under the Lease, will be payable by the Lessee during the rent free period.
12.VARIABLE OUTGOINGS AND RATES & TAXES ('OUTGOINGS')
i.Outgoings are estimated at $74.46/m² per annum plus GST for the 2010/2011 financial year.
ii.The Lessee will be responsible for all normal outgoings associated with the premises, such outgoings will be apportioned in the ratio that the net lettable area of the premises bears to the total area of the building.
iii.Outgoings and tenancy cleaning charges are payable from the Lease Commencement Date.
13.CAR PARKING
The Lessee shall Licence twenty one (21) open car bays for a term coterminous with the Lease at an initial rate of $150 per car bay per calendar month plus GST and DOT Levy.
Car bays shall be reviewed annually to market, but in any event to be not less than the rate payable in the immediately preceding period.
Clause 14 provides, in substance, that the Lessee is responsible for obtaining any approvals and permits that may be necessary for its use of the premises, and that the Lessee's use of the premises is for the purposes of offices and is acceptable to the Lessor.
Clause 15 deals with the issue of alterations to the building and the premises. It provides, in effect, that such alterations are to be carried out at the Lessee's expense and with the prior approval of the Lessor.
Clause 16 provides for the installation of signage on the side of the building by the Lessee subject to the Lessor's approval.
Clause 17 is in the following terms:
17.INITIAL RENTAL PAYMENT (IN ADVANCE)
Upon Lessor acceptance of this Offer to Lease, the Lessee shall tender a sum equivalent to two (2) months gross rent being $63,030.06 inclusive of GST payable to Savills REBA Trust Account. Once accepted, the deposit will be:
·Placed in trust by the agents for the Lessor and will be subsequently applied towards the first two (2) months gross rent.
·Be forfeited to the Lessor if this Offer is accepted but through any default or non-performance by the Lessee the Lessee does not execute the Lease and Car Park Licence.
Clause 18 imposes an obligation on the Lessee at the 'expiration or sooner termination of the Lease', and if required by the Lessor, to reinstate and make good the premises in accordance with the Lease. The clause specifies minimum requirements for the reinstatement or making good of the premises.
Clause 19 provides:
19.BANK GUARANTEE
The Lessee will provide an unconditional Bank Guarantee from an Australian Trading Bank prior to the Lease Commencement Date such Guarantee is not to expire prior to three (3) months after the Lease Expiry Date. The amount of the Bank Guarantee shall be equivalent to six (6) months gross rent being an amount equal to $189,090.18 including GST.
Clause 20 provides that the Lessee must maintain from the Lease Commencement Date contents and public liability insurance to the amount of $20 million and indemnity cover. The clause further provides that all other insurances are included in variable outgoings.
The penultimate page of the offer to lease contains the signing clause for the Lessee. Under the heading, 'Lessee's Approval' the words, 'Signed for and on behalf of WHBO-Carr' appear. Under this clause provision is made for the signing of the document by a 'director' or 'director/secretary' of the Lessee. Provision is also made for the witnessing of the signature of the Lessee's director or director/secretary.
The final page of the offer to lease is headed 'Lessor's Acceptance'. The clause which appears under this heading is in the following terms:
I/We hereby accept this Offer on the Terms and Conditions stated herein and agree to pay Savills (WA) Pty Ltd leasing fees on occupation of the premises by the Lessee or completion of lease documentation whichever is earliest.
Under this clause provision is made for the signing of the document by a 'director' or 'director/secretary' of the Lessor and the witnessing of the signature or signatures.

Was there a binding agreement and if there was what did it bind the parties to do?

As I have already indicated, the central question in this case is whether the signed offer to lease created a legally binding contractual relationship between the plaintiff and the defendant from the date on which the defendant informed the plaintiff that its board had given approval to the document, notwithstanding that documentation in the form of a formal lease and formal car parking licence had not been agreed to and executed. The question is not a novel one. It is of a type which has been considered in many previous cases.
Although the type of question which arises for determination in the present case has been considered in previous cases, it must be said that previous cases can provide only limited guidance. The reason for this is, not surprisingly, that the factual matrix of the various cases differs from case to case. Nonetheless, there are some well-established legal principles which can be derived from the cases and by reference to which the question in the present case must be determined. It is useful to refer to these legal principles before turning to deal with the specifics of the present case.

Legal principles

Where parties who have been in negotiation reach agreement upon terms of a contractual nature and also agree that the subject matter of their negotiation is to be dealt with by a formal contract, the case may belong to any one of the following four categories:
1.The parties have reached finality in relation to all of the terms of their agreement and intend to be immediately bound to the performance of those terms, but at the same time propose to have the terms restated in a form which will be fuller or more precise but not different in effect (category 1);
2.The parties have completely agreed upon all the terms of their bargain and intend no departure from or addition to that which their agreed terms express or imply but nevertheless have made performance of one or more of the terms conditional upon the execution of a formal document (category 2);
3.The intention of the parties is not to make a concluded bargain at all, unless and until they execute a formal contract (category 3); or
4.The parties are content to be bound immediately and exclusively by the terms which they have agreed upon whilst expecting to make a further contract in substitution for the first contract containing, by consent, additional terms (category 4): see generally Sinclair Scott & Co Ltd v Naughton [1929] HCA 34; (1929) 43 CLR 310; Masters v Cameron (360); Godecke v Kirwan [1973] HCA 38; (1973) 129 CLR 629; Baulkham Hills Private Hospital Pty Ltd v GR Securities Pty Ltd (1986) 40 NSWLR 622, 628; Tern Minerals NL v Kalbara Mining NL (1990) 3 WAR 486, 494 ‑ 495; Anaconda Nickel Ltd v Tarmoola Australia Pty Ltd [2000] WASCA 27; (2000) 22 WAR 101 [1], [24] - [25]; Bowen v Alsanto Nominees Pty Ltd [2011] WASCA 39 [85].
In cases falling within category 1 and category 2 there is a binding contract from which neither party may withdraw. In a category 1 case there is a contract binding the parties at once to perform the agreed terms whether the contemplated formal document comes into existence or not, and to join (if they have so agreed) in settling and executing a formal document: Masters v Cameron (360). In a category 2 case there is a contract binding the parties to join in bringing the formal contract into existence and then to carry it into execution. However, the obligation to perform the contract is postponed until the execution of the formal document: Niesmann v Collingridge [1921] HCA 19; (1921) 29 CLR 177; Masters v Cameron (360).
In cases falling within category 3 there is no contract unless and until the formal contract is executed.
In relation to cases falling within category 4, it is well recognised that parties may enter into a valid contract containing a limited number of terms which are essential to the bargain that they wish to conclude, in the expectation that at a later date a more formal contractual document will be prepared and executed which will contain, by consent, additional negotiated terms that are not inconsistent with the existing contract and which will facilitate and clarify the existing contract: Pagnan SpA v Feed Products Ltd [1987] 2 Lloyd's Rep 601, 619; Tern Minerals v Kalbara (494 ‑ 495); Anaconda Nickel v Tarmoola [1], [25]. As Kennedy J said in Terrex Resources NL v Magnet Petroleum Pty Ltd (1988) 1 WAR 144, 159:
An agreement does not have to be worked out in meticulous detail. A bargain can be made containing certain terms, regarded as essentials, whilst the parties recognise that a formal document will eventually be drawn up in the full expectation that a number of additional terms will, by consent, be included in that document.
If the parties in a category 4 case fail to reach agreement on the additional terms, the existing contract is not invalidated unless the failure to reach agreement on such further terms renders the contract as a whole (after the usual process of construction and implication is undertaken) unworkable or void for uncertainty: Pagnan SpA v Feed Products (619, 620); Anaconda Nickel v Tarmoola [1], [28], [63] ‑ [97].
The question whether parties, by signing a particular document, intended to create a legally binding agreement between them is to be determined objectively having regard to the terms of the document when read in light of the surrounding circumstances: Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540, 548 ‑ 549; Anaconda Nickel v Tarmoola [1], [26]; Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165; Bowen v Alsanto [86]. 'Intention' in this context means intention to contract not what the parties intended by the terms of the contract: Anaconda Nickel v Tarmoola [1], [26]. Thus as was stated by the court in Toll (FGCT) v Alphapharm [38]:
In their consideration in Ermogenous v Greek Orthodox Community of SA Inc [(2002) 209 CLR 95 [25]] of the requisite intention to create contractual relations, Gaudron, McHugh, Hayne and Callinan JJ said:
Although the word 'intention' is used in this context, it is used in the same sense as it is used in other contractual contexts. It describes what it is that would objectively be conveyed by what was said or done, having regard to the circumstances in which those statements and actions happened [Codelfa ConstructionPty Ltd v State Rail Authority of NSW (1982) 149 CLR 337, 348 ‑ 353; Royal Botanic Gardens and Domain Trust v South Sydney City Council (2002) 76 ALJR 436]. It is not a search for the uncommunicated subjective motives or intentions of the parties.
The surrounding circumstances may include pre-contractual negotiations and pre-contractual conduct as well as post-contractual conduct: Geebung Investments Pty Ltd v Varga Group Investments (No 8) Pty Ltd [1995] NSWCA 166 [20]; Anaconda Nickel v Tarmoola [26]; Brambles Holdings Ltd v Bathurst City Council [2001] NSWCA 61; (2001) 53 NSWLR 153 [25] ‑ [27], [139]; African Minerals Ltd v Pan Palladium Ltd [2003] NSWSC 268 [28] ‑ [30]; Bowen v Alsanto [87] ‑ [89]. The surrounding circumstances also include the commercial circumstances surrounding the particular transaction: Allen v Carbone [1975] HCA 14; (1975) 132 CLR 528, 531 ‑ 532.
Against this background of applicable legal principles I turn to answering the question whether the signed offer to lease amounted to a legally binding agreement.

Offer to lease – analysis

As I have said, the defendant's primary case is that the signed offer to lease amounted to nothing more than an informal offer by the defendant to lease the premises subject to a final binding lease agreement being entered into between the parties. As I have also already said, the defendant's alternative case is that if a binding agreement did come into existence between the plaintiff and the defendant from the point in time that Mr Blayney informed the plaintiff that the defendant's board had approved the offer to lease, then the agreement was merely an agreement to negotiate a lease. In relation to this alternative case the defendant contends that the terms of the agreement to negotiate, on a proper construction of the offer to lease and in particular cl 4, cl 17 and cl 19, were as follows:
1.The defendant would pay to the plaintiff the sum specified in cl 17.
2.The plaintiff would provide to the defendant its standard form lease agreement and car park licence (cl 4).
3.The parties would negotiate for a period of up to two months the terms of the lease agreement and the terms of the car parking licence which were additional to the terms set out in the offer to lease.
4.During the two month negotiation period the plaintiff would not offer to enter into a lease of the premises with any other party.
5.The defendant would pay the legal costs incurred by the plaintiff in negotiating with the defendant and preparing the formal lease documentation.
6.Prior to entering into an agreement to lease the premises the defendant would provide to the plaintiff an unconditional bank guarantee equal to $189,090.18 as provided for in cl 19 of the offer to lease.
7.If the parties were unable to reach an agreement in relation to the terms and conditions of the lease and the car parking licence the agreement to negotiate a lease would come to an end and the plaintiff would repay to the defendant the amount paid by the defendant under cl 17.
8.If the parties did reach agreement in relation to the terms and conditions of the lease agreement and car parking licence but the defendant failed to execute the negotiated and prepared formal document, the plaintiff would be entitled to retain the amount paid under cl 17.
Thus on the defendant's alternative case it secured for itself an opportunity to negotiate the terms under which it would be prepared to lease the premises for five years and a reasonable period, two months, to reach agreement on all terms with the plaintiff. Further, the plaintiff, in return for diverting its resources from marketing the property to negotiating with the defendant for the two month period, secured for itself an ability to be compensated if the defendant through any default or non‑performance failed to execute the negotiated and prepared formal documentation. The means by which the plaintiff would be compensated would be by retaining the sum paid by the defendant under cl 17.
Ultimately, I have come to the conclusion that the parties did, by signing the offer to lease, intend to create a legally binding agreement and that the agreement was for a five year lease of the premises. My reasons for coming to this conclusion are as follows.
First, the offer to lease is formal in its terms and structure. It is written in the language of a contract.
Second, the offer to lease is headed 'Offer to Lease Commercial Office Premises' and begins with the words:
The Lessee described below hereby offers to lease from the Lessor described below the premises described below on terms and conditions as set out hereunder. (emphasis added)
It is true that the offer to lease is on Savills letterhead and that the offer is expressly addressed to Savills so as to indicate that the offer is to be forwarded to Savills, the plaintiff's agent. However, I do not think that this in any way detracts from the fact that the document is clearly expressed as an offer by the Lessee (the defendant) to lease the premises from the Lessor (the plaintiff).
Third, the 'Lessee's approval' clause and the 'Lessor's acceptance' clause are both expressed in formal terms.
On this point it was submitted on behalf of the defendant that the Lessor's acceptance clause does not in fact have the necessary air of formality about it. In support of this submission it was pointed out that part of the clause is concerned with the Lessor's obligation to pay Savills' 'licensing fees on occupation of the premises by the Lessee or completion of the lease documentation, whichever is earlier'. That is, it was submitted that the acceptance clause is more concerned with the plaintiff's arrangements with its agent and has nothing to do with the plaintiff and the defendant.
I do not accept the submissions made on behalf of the defendant in this regard. It is true that the clause fulfils a dual purpose, the second of these purposes being to state the plaintiff's obligations to its agent. However, I do not see that this detracts from the force and formality of the statement, 'I/We hereby accept this Offer on the Terms and Conditions stated herein …'. It is, in my opinion, simply not correct to say that the clause is all about the plaintiff and Savills and has nothing to do with the plaintiff's relationship with the defendant.

Fourth, the offer to lease is a relatively detailed document. It obviously contains the essential terms of an agreement to lease, namely the identification of the parties, the identification of the premises to be let, the commencement and duration of the term, and the rent payable: NZI Insurance Australia Ltd v Baryzcka [2003] SASC 190; (2003) 85 SASR 497 [31]. However, it also contains a significant number of other terms of the lease.
It is true that the offer to lease does not, as was argued on behalf of the defendant, contain all of the terms and conditions that one would expect to find in a lease of commercial premises. That this is the case is readily apparent from a review of the draft formal lease document that was prepared by the plaintiff's solicitors following the defendant's advice that board approval had been given to the offer to lease. For example, the offer to lease does not contain provisions dealing with the right to occupy, the restrictions or conditions upon assigning the lease or sub‑letting the premises, the plaintiff's obligations to maintain the common areas and fabric of the building, the statutory provisions which do not apply to the lease, or the rights and obligations of the parties in the event of a breach. Nonetheless, the offer to lease is a 20-clause document which goes well beyond merely specifying the bare essentials of a lease. It provides for a rent review structure for each year including for the option period if exercised, the arrangements for early possession for the purposes of fitting out the premises, an agreed rent‑free period as an incentive, an estimate of the variable outgoings, the licensing of 21 car bays at a specified rate, the proposed use of the premises, the carrying out of alterations to the building by the Lessee, the installation of tenant's signage, the payment of an amount of rent in advance, the making good of the premises at the end of the lease, the provision of a bank guarantee and an obligation to insure.
Fifth, the offer to lease does not contain any express term that the offer is 'subject to' the signing of a formal lease document. There are no words used in the offer to lease which would create any presumption that the offer to lease was not binding: Crossly v Maycock (1874) LR 18 Eq 180, 181; Farmer v Honan [1919] HCA 13; (1919) 26 CLR 183; Chillingworth v Esche [1924] 1 Ch 97; Keppel v Wheeler [1927] 1 KB 577; Masters v Cameron (362 – 363); Pagnan v SpA v Feed Products (619).
While on this point I need to deal with cl 4 of the offer to lease. The words used in this clause are not in my view akin to a 'subject to contract' clause. By its terms cl 4 provides only that on the offer to lease being accepted a formal lease document will be prepared which will be in the form of the plaintiff's standard form of lease for the building, and that the defendant shall be responsible for the plaintiff's and defendant's legal costs in connection with the negotiation, preparation and execution of the 'legally binding' lease documentation. I do not consider, when the clause is read in the context of the remainder of the document and the objective circumstances to which I will refer in due course, that the reference to the 'legally binding' lease documentation means, by implication, either that the offer to lease is not legally binding or that if the offer to lease is legally binding it only obliges the parties to enter into negotiations regarding the terms of the lease and the car parking licence. The fact that the formal lease document is to be binding does not of itself mean that the offer to lease is not also binding.
Sixth, cl 17 of the offer to lease provides for the payment of two months gross rent on the Lessee's acceptance of the offer to lease. This is a significant amount of money. It is a reflection, in my view, of the legally binding nature of the commitment that the parties are making.
Seventh, the surrounding circumstances support the conclusion that the parties intended to be immediately bound by the offer to lease and that each party was committing itself to a five-year lease of the premises. In this context, I make the following points:
1.The defendant was at all material times looking for office premises to move into. Mr Blayney was given responsibility for finding suitable premises.
2.Mr Blayney inspected the premises on two separate occasions, once in early April and then again on 18 April 2011.
3.During her conversation with Mr Blayney on 18 or 19 April 2011, Ms Martinovich made clear to Mr Blayney that the defendant needed to decide quickly if it was really interested in the premises because other parties were looking at the building. In other words, it was made clear to Mr Blayney that there was competition for the premises.
4.Ms Martinovich, in her email to Mr Blayney sent on 19 April 2011, to which she attached a copy of the offer to lease, told Mr Blayney that if he had any questions about the offer to lease, or if he wished to discuss it, he should contact her. Ms Martinovich also stated in the email that if Mr Blayney had 'any changes' to the offer to lease he should advise her, and that if he did not have any changes, then he should arrange for the correct execution 'where indicated' of the offer to lease, initial each page and email the document back to herself to present to the plaintiff. Thus, by the terms of her email Ms Martinovich provided Mr Blayney with the opportunity to enter into some negotiations in relation to the terms of the offer to lease, and also emphasised the importance of the commitment that was being made by the signing of the offer to lease. If the offer to lease was not intended to be binding, there would be little point in Ms Martinovich making clear to Mr Blayney that if he had any questions or wished to discuss the document he should contact her, and that if he had any changes to make to the document he should tell her.
5.Ms Martinovich, in her email sent on 19 April 2011, again also made clear to Mr Blayney that the plaintiff had received a signed offer to lease the premises from another party so that time was of the essence. Thus, once again it was made clear to Mr Blayney that there was competition for the premises.
6.Mr Blayney took two days to return the offer to lease to Ms Martinovich. Accordingly, there was sufficient time for him to contemplate and consider the terms and conditions of the offer to lease and to discuss them with Ms Martinovich if he wished. I note in this regard that Mr Blayney's evidence was that he read the offer to lease before signing it although he did not seek legal advice in relation to it.
7.In his email to Ms Martinovich sent on 21 April 2011, to which he attached the copy of the offer to lease which he had signed, Mr Blayney stated that he had been 'instructed that such a long‑term commitment will need sign off at board level … by our South African equity partner, thus the inclusion on the last page'. Mr Blayney's reference to 'such a long‑term commitment' can only be read as a reference to the five‑year lease of the premises provided for in the offer to lease. Therefore, by his email Mr Blayney stated that the commitment to the five‑year lease required board approval. To put it another way, an objective reading of the email is that Mr Blayney needed to obtain the protection of board approval because, by signing the offer to lease, he was committing the defendant to a five‑year lease of the premises.
8.In addition, Mr Blayney also said in his email dated 21 April 2011, 'I trust this does not present any problems, because as you are aware we need to commence the process ASAP so we can vacate our current premises'. Mr Blayney's email would therefore appear to reflect the commercial imperative from the defendant's viewpoint in securing a lease of the premises.
With respect to the issue of the surrounding circumstances, one of the points that was emphasised on behalf of the defendant was that Mr Blayney did not seek legal advice in relation to the offer to lease before signing it. It was submitted that in a transaction of this magnitude it could reasonably be expected that both parties would take legal advice before committing to the lease. It was submitted that the fact that the parties would be legally represented is clearly contemplated by cl 4 of the offer to lease. It was submitted that the fact that the offer to lease was issued to the defendant and signed by both parties within a short timeframe (two days) without either party, most specifically the defendant, having sought and obtained legal advice was an objective indicator that the parties did not intend to be bound by the offer to lease.
I do not accept the submissions made on behalf of the defendant in this regard. The offer to lease was the plaintiff's document. This being the case there is no reason to expect that the plaintiff would need to seek legal advice in relation to its terms once it was signed on behalf of the defendant. Further, Mr Blayney could have sought legal advice in relation to the offer to lease if he wished to do so, and there was nothing in his conduct following the provision of the document to him which ought to have suggested to the plaintiff either that he wanted to seek legal advice or that he had not done so during the two days that it took him to return the signed document. In addition, if Mr Blayney did decide to seek legal advice this may have resulted in a delay which may in turn have caused the plaintiff to proceed to accept the offer to lease the premises that had, to the knowledge of Mr Blayney, been made by the other party. Thus Mr Blayney had a commercial judgment to make – sign the offer to lease as quickly as he reasonably could and thereby secure the defendant's lease of the premises or, if he thought it necessary, seek legal advice but risk losing out to the other party. Finally, cl 4 contemplates each party obtaining legal representation in relation to the negotiation and preparation of the formal lease documentation, not the offer to lease. This is, in my view, consistent with what would be expected. Whether to take a five-year lease of certain premises at a specified rent is in essence a commercial decision in relation to which legal advice would be of limited utility. However, once the commercial decision to commit to the proposed lease is made, the negotiation and preparation of the detail contained in the formal lease documentation is when one would expect the legal representatives of the parties to have a significant role to play.
In summary, in my opinion the circumstances which lead up to and surrounded Mr Blayney's signing of the offer of lease support the conclusion that the offer to lease created a legally binding agreement to lease the premises for five years. In my view the circumstances to which I have referred, viewed objectively, convey an intention on the part of the parties to create by signing the offer to lease a legally binding agreement to lease the premises.
I have in stating my reasons for concluding that the parties did by signing the offer to lease intend to create a legally binding agreement to lease the premises, dealt with a number of the arguments advanced by the defendant in support of its position that the signing of the offer to lease did not create a legally binding lease agreement. However, the defendant advanced a number of additional arguments which I need to address.
Perhaps the principal argument advanced on behalf of the defendant in support of its primary contention that the offer to lease was not legally binding is that by its terms the document contemplates that there will be further negotiations and that the formal lease documentation will contain some additional terms. It was submitted that because the offer to lease does not settle everything which needs to be settled, no legally binding agreement was formed. It was submitted that in these circumstances it was irrelevant that the essential terms of a lease are provided for in the offer to lease. The defendant relied, in support of these submissions, on a number of older decisions including Rossiter v Miller (1878) 3 App Cas 1124; Van Hatzfeldt‑Wildenburg v Alexander [1912] 1 Ch 284; Farmer v Honan; Keppel v Wheeler; May & Butcher Ltd v R [1934] 2 KB 17; Spottiswoode, Ballantyne & Co Ltd v Doreen Appliances Ltd [1942] 2 KB 32; Summergreene v Parker [1950] HCA 13; (1950) 80 CLR 304; Godecke v Kirwan; Allen v Carbone [1975] HCA 14; (1975) 132 CLR 528. The defendant's counsel sought to emphasise the weight of these submissions by asking rhetorically, 'what was to happen in the present case if the plaintiff and defendant could not agree the terms of the formal lease documentation'.
As I have already indicated, the offer to lease by its terms does provide for the parties to negotiate additional terms. However, the difficulty with the defendant's submission in my view is that it does not reflect the current state of the law. As is apparent from my above discussion of the relevant legal principles, it is now well established that parties may enter into a valid contract containing a limited number of terms which are essential to the bargain that they wish to conclude in the expectation that at a later date a more formal contractual document will be prepared and executed which will contain, by consent, additional negotiated terms that are not inconsistent with the existing contract and which will facilitate and clarify the existing contract. The law has moved on from the position stated in the authorities relied upon by the defendant. The fact that the offer to lease envisages further negotiations and additional terms does not, in my view, provide a basis for concluding that it was not intended to be legally binding, particularly bearing in mind the reasonably detailed nature of the terms of the document. The position under the offer to lease was, in my view, that once the offer to lease came into effect the parties were under an obligation to negotiate in good faith additional terms within the framework of the offer to lease and the plaintiff's standard form of lease for the building, that only terms agreed upon would be included in the lease, and that in the absence of agreement recourse could if necessary be had to the court for the purpose of determining if a term could be implied: Tern Minerals v Kalbara (487).
Another argument advanced on behalf of the defendant was that the offer to lease was merely signed by representatives of the plaintiff and the defendant and not executed by use of the common seal of each company. It was submitted that this reflected a degree of informality and was thus an objective indicator of an absence of an intention to be bound. I do not accept this submission. The offer to lease was signed by the managing director of the defendant and the chief executive officer of the plaintiff, that is, very senior people within each organisation. Each signed on behalf of their respective company. Further, each was acting within their company's express authority and on behalf of the company. Therefore, they each had the power to make a contract on behalf of their company without using the company's common seal: Corporations Act 2001 (Cth), s 126. In these circumstances I do not think that the fact that the offer to lease was not executed in a manner contemplated by s 127 of the Corporations Act is of any significance.
It was further argued on behalf of the defendant that cl 19 and cl 20 of the offer to lease, which provide for the defendant to provide a bank guarantee and insurances respectively, are indicative of the offer to lease not being legally binding. In this context it was pointed out that cl 19 provides for the bank guarantee to be provided prior to the lease commencement date as defined in the offer to lease (1 July 2011), and that the insurance was to be provided from the lease commencement date. It was submitted that the fact that the requirement to provide the bank guarantee and insurance was tied to the lease commencement date and consequently the occupation of the premises is an objective indicator that the parties did not intend to be immediately bound by the offer to lease.
I do not accept the defendant's submissions on this point. In my view, the fact that the obligations imposed on the defendant by cl 19 and cl 20 of the offer to lease are linked to the commencement date of the lease does not provide a basis for inferring that the parties did not intend to be immediately bound by the offer to lease. This is particularly so in the case of the obligation imposed by cl 20. There is no obvious reason why the defendant should be responsible for insurances before it actually takes possession of the premises. In any event, even if cl 19 and cl 20 can be read as providing an objective indicator that the parties did not intend to be immediately bound, this one point alone is not, in light of all the other matters to which I have referred, sufficient to justify the conclusion that the offer to lease was not binding.
For the reasons I have stated, I am satisfied that the signed offer to lease, upon communication by the defendant of the defendant's board approval to the document, constituted a legally binding agreement between the plaintiff and the defendant pursuant to which the plaintiff and the defendant agreed for the defendant to take a five‑year lease of the premises on the terms and conditions set out in the offer to lease. I do not consider that there is any basis for construing the terms of the offer to lease as binding the parties to do no more than enter into negotiations for a lease of the premises and a car parking licence.

Did the defendant breach the agreement?

The next question is whether the defendant, by failing to proceed with the five year lease of the premises (the lease agreement), breached the agreement. This question must obviously be answered in the affirmative. The defendant, by notifying the plaintiff of its intention not to proceed with the lease of the premises, breached the lease agreement by repudiation. The plaintiff accepted the repudiation and thereby terminated the lease agreement. As a consequence the plaintiff now has a right to damages for loss caused by the defendant's breach.

What damages are payable?

General principles

In Luxer Holdings Pty Ltd v Glentham Pty Ltd [2007] WASCA 209; (2007) 35 WAR 254 Buss JA (Wheeler JA agreeing) stated the principles that apply to the measure of damages for a breach and repudiation of a lease. The principles stated by Buss JA which are relevant to the present case are as follows:
1.The ordinary principles of contract, including those relating to termination for breach of an essential term or for repudiation, apply to leases, even though a lease also involves the grant of an estate or interest in land: [28].
2.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 contract had been performed: [29].
3.If a lessor terminates the lease agreement in consequence of the lessee's breach of an essential term or by acceptance of the lessee'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 lessee's covenant to pay future rent, outgoings and other amounts. In other words, the lessor is entitled to sue the lessee for loss of bargain damages: [30].
4.A lessor's cause of action for damages for loss of the benefit of the lessee's covenant to pay future rent, outgoings and other amounts accrues on the date on which the lessor terminates the lease agreement: [32].
5.The normal measure of damages where a lessor sues the lessee for damages for loss of the benefit of the lessee's covenant to pay future rent is the full amount of the agreed rent for the whole term less the sum which the lessor is likely to derive as profits from the use of the land during the residue of the term: [34].
6.The rule that a lessor's loss of bargain damages are ordinarily to be assessed as at the date of termination does not mean that evidence of events occurring after that date is excluded. Evidence of subsequent events which are relevant to the assessment process may be taken into account. For example, subsequent events may be relevant to the value of the lost bargain or whether the lessor has mitigated its damage or not: [35].
7.Where the trial of the lessor's action against the lessee occurs before the term of the lease would otherwise have expired the normal measure of damages is the total rent and outgoings and other amounts that would otherwise have been payable after the date of termination less:
(1)any amount the lessor has obtained as profits from the use of the premises between the date of termination and the date of trial; and
(2)any amount the lessor is likely to obtain as profits from the use of the premises between the date of the trial and the date on which the lease would otherwise have expired,
by re‑letting the whole or part of the premises or otherwise: [39].
8.The onus is on the lessor to prove, according to the applicable measure, that it has suffered damage. But the onus is on the lessee to prove that the lessor has failed to take reasonable steps to mitigate its damage and to demonstrate the extent to which there has been a failure to mitigate: [41].

The above stated principles are consistent with general principles of contractual damages and, in my view, apply equally to a breach and repudiation of an agreement for lease as they do to a formal lease.
It is not contended on behalf of the defendant that the plaintiff has failed to take reasonable steps to mitigate its damage.

Liquidated damages argument

In the present case the defendant contends that the above stated ordinary principles for the assessment of damages in the case of a breach of an agreement for lease do not apply. The defendant contends that cl 17 of the offer to lease is a liquidated damages clause and a complete answer to the plaintiff's claim for damages. That is, the defendant contends that the offer to lease and in particular cl 17, to use the words of Kenneth Martin J in Regional Power Corporation v Pacific Hydro Group Two Pty Ltd [No 2] [2013] WASC 356 [31], 'lays down an exclusive contractual code of relief applicable for any breaches' of the lease agreement.
In Regional Power Corporation v Pacific Hydro Group Two Pty Ltd [No 2] Kenneth Martin J said the following [35] ‑ [38]:
In Concut Pty Ltd v Worrell [2000] HCA 64; (2000) 176 ALR 693 the High Court of Australia, citing Castlemaine Tooheys Ltd v Carlton & United Breweries Ltd (1987) 10 NSWLR 468 observed that an express contractual provision 'may be regarded as designed to augment rather than to restrict or remove the rights at common law which a party otherwise would have had on breach' (700) (Gleeson CJ, Gaudron and Gummow JJ).
In J-Corp Pty Ltd v Mladenis [2009] WASCA 157 [44], Newnes JA applied Concut Pty Ltd v Worrell. His Honour observed it was 'common ground that clear words are needed to rebut the presumption that a contracting party does not intend to abandon any remedies for breach of contract arising by operation of law'.
That presumption was recently applied in Electricity Generation Corporation t/as Verve Energy v Woodside Energy Ltd [2013] WASCA 36 [215] (Murphy JA). I also applied that presumption in Wavemaster International Pty Ltd (In liq) v JR Marine Systems Pte Australian Ltd [2009] WASC 203 at [172], which was not challenged on the (unsuccessful) appeal, see JR Marine Systems Pte Ltd v Wavemaster International Pty Ltd (In liq) [2011] WASCA 16.
The presumption is that a contracting party's breach remedies, including its rights to seek common law damages for breach of contract, can only be excluded by clear words …
Clause 17 of the offer to lease does not contain any reference to liquidated damages. It does not provide that the payment of the two months gross rent is to be in full and final satisfaction of any right to claim damages for breach of the accepted offer to lease, or is to be in lieu of damages for breach of the accepted offer to lease. In short, there is no clear statement in the clause, or in any other clause in the offer to lease, that the clause removes or curtails the plaintiff's common law rights to claim damages for breach of contract. It would not have been difficult for the parties to include a clear statement to this effect in cl 17 or in some other clause of the document. In these circumstances I am satisfied that the clause does not operate as a liquidated damages clause. In my view the clause is intended to, and does no more than, make clear that on signing the offer to lease the defendant is to pay two months gross rent to the plaintiff in advance and that if through any default or non‑performance by the defendant the defendant does not execute the formal lease and car parking licence documentation, the defendant forfeits the two months gross rent. The clause is, in my view, simply a provision which makes clear what is to happen to the sum held in trust by the agent for the plaintiff in the event that the offer to lease is accepted by the plaintiff but through any default or non‑performance by the defendant the defendant does not execute the formal documentation. It follows that the plaintiff's damages for loss caused by the defendant's breach of the lease agreement are to be calculated in accordance with the principles stated in Luxer Holdings v Glentham.

Assessment of damages

The plaintiff claims damages under the following heads:
1.loss of rent;
2.outgoings;
3.car park licence fees;
4.signage fees;
5.costs of preparation of formal lease documentation;
6.marketing costs;
7.construction of a corridor; and
8.fit out costs.
I will deal with each of these heads of claim in turn.

Rent

The plaintiff has calculated its loss of rent caused by the defendant's breach of the lease agreement to be $387,237.83. The plaintiff has also calculated the interest payable on this loss up until 6 November 2014 (the date of trial) to be $34,494.62.
I have reviewed the plaintiff's calculations for its loss of rent claim as set out in the plaintiff's 'Substituted Particulars of Loss and Damage Calculated to 30 June 2016' dated December 2014 filed with the court on 4 December 2014 (the particulars). I am satisfied that the plaintiff's calculations are supported by the evidence adduced at trial and accord with the principles to be applied in measuring damages for loss of rent as stated by Buss JA in Luxer v Glentham. Further, the defendant does not dispute the plaintiff's calculations. Accordingly, in respect of loss of rent I award damages in the amount of $387,237.83 plus interest in the amount of $34,494.62.

Outgoings

The plaintiff's claim for damages in respect of loss of outgoings is based on cl 12 of the offer to lease. The defendant disputes this aspect of the plaintiff's damages claim.
The reasoning behind the plaintiff's claim in respect of loss of outgoings may be summarised as follows.
Under cl 12 of the offer to lease the defendant would have been responsible for 'all normal outgoings associated with the premises … apportioned in the ratio that the net lettable area of the premises' bore to the total lettable area of the building. 'Normal outgoings' associated with the premises would not be restricted to consumables arising from the occupation of the premises. They would include things such as council rates, lift fees and audit fees.
The plaintiff does not profit from the payment of outgoings. Rather, the plaintiff is merely entitled to recover all outgoings payable by it in respect of the building from the individual tenants according to the proportion of the lettable area of the building which they occupy. An untenanted area of the building comprises part of the total lettable area of the building against which the outgoings payable by a tenant are apportioned. Accordingly, if the entire lettable area of the building is not tenanted, then the portion of the outgoings being paid by the tenants who are in the building do not add up to 100% of the outgoings for the building and the plaintiff as the landlord must cover the shortfall. This means that to the extent that the premises remained untenanted the plaintiff paid and did not recover the portion of the outgoings payable for the net lettable area of the premises. The plaintiff would have recovered this amount from the defendant if the defendant had entered into possession of the premises in accordance with the lease agreement. This is the plaintiff's loss. The plaintiff is entitled to recover the portion of the outgoings that would have been paid by the defendant in respect of the premises if the defendant had entered into occupation of the premises in accordance with the lease agreement less any amount paid for outgoings by tenants who have subsequently occupied part or all of the premises.
On the basis of the above outlined reasoning the plaintiff has calculated its loss in respect of outgoings as follows:
1.For the period from 1 July 2011 to 1 February 2012 the premises were not tenanted.
2.The area of the premises was 650.6 sqm.
3.From 1 February 2012 the tenant AHL Investments Pty Ltd (AHL) leased and entered into possession of part of the premises.
4.AHL leased and entered into possession of 399.9 sqm of the premises. Accordingly, the remaining untenanted area of the premises after AHL entered into possession was 250.7 sqm.
5.For the 2011/2012 financial year, the amount of outgoings paid by the plaintiff in respect of the premises while they remained completely unoccupied can be calculated by multiplying the area of the premises (650.6 sqm) by the amount paid by AHL per square metre for outgoings during the financial year taking into account any amount repaid to AHL at the end of the financial year following the financial year's reconciliation.
6.For the 2011/2012 financial year, the amount of outgoings paid by the plaintiff in respect of the part of the premises that remained unoccupied following AHL entering into possession of part of the premises can be calculated by multiplying the area of the untenanted portion of the premises (250.7 sqm) by the amount paid by AHL per square metre for outgoings during the financial year taking into account any amount repaid to AHL at the end of the financial year following the financial year's reconciliation.
7.For each financial year following the 2011/2012 financial year the amount of outgoings paid by the plaintiff in respect of the part of the premises that remained unoccupied following AHL entering into possession of part of the premises can be calculated by multiplying the area of the untenanted portion of the premises (250.7 sqm) by the amount paid by AHL per square metre for outgoings for each of those financial years taking into account any amount repaid to AHL at the end of the financial year following the financial year's reconciliation.
8.On 1 December 2013 Tactica Partners Pty Ltd (Tactica) leased and entered into possession of the untenanted portion of the premises. Accordingly, no damages in respect of outgoings are payable from this date because from this date the area encompassed by the premises was fully occupied.
Using the above methodology the plaintiff has calculated its loss in respect of outgoings to be $44,613.87. It has calculated the interest payable on this amount to the date of trial to be $4,057.22.
On behalf of the defendant it is not argued that the plaintiff does not have a right to claim damages for any loss in respect of outgoings. Rather, it is submitted that the plaintiff's methodology for calculating its loss is based on a false premise, and is flawed, and that as a consequence the plaintiff has failed to prove any compensable loss. It is submitted that references to amounts which the defendant would have paid are irrelevant to the question of the calculation of loss unless the plaintiff is entitled to loss of profit. It is submitted that the plaintiff does not claim loss of profit and that there is no proper basis on which the court could find that the plaintiff is entitled to damages for loss of profit. It is submitted that the proper methodology for calculating loss in respect of outgoings is to calculate the total of the amounts that were in fact paid out by the plaintiff in respect of outgoings and to deduct from this total the total of the amounts received by the plaintiff from the tenants who occupied the building. It is submitted that the net difference between these two amounts, if a positive number, is the actual loss claimable by the plaintiff for outgoings. It is submitted, and this is not in dispute, that the plaintiff has not identified the amounts that it in fact paid out by way of outgoings for the building as a whole. It is further submitted, and again this is not in dispute, that the plaintiff's calculations do not identify the net difference between the amounts paid out by the plaintiff in respect of outgoings and the amount received from the tenants for outgoings.
The methodology contended for by the defendant assumes that during the period in which the premises or part thereof were untenanted all other lettable areas in the building were tenanted. This assumption is supported by the evidence adduced at trial. At the time that the plaintiff and the defendant entered into the lease agreement and at all material times thereafter, the ground floor and level 1 of the building were occupied by the plaintiff and that part of level 2 not comprised of the premises was occupied by Sentis.
I accept that the methodology contended for by the defendant could be used to calculate the loss suffered by the plaintiff in respect of outgoings consequent upon the defendant's breach of the lease agreement. However, I do not accept that this is necessarily the only methodology for calculating such loss. The question which therefore remains is whether the methodology that has been used by the plaintiff is in the circumstances of the present case an appropriate means of calculating the loss suffered by the plaintiff in respect of outgoings.
I am satisfied that the methodology used by the plaintiff to calculate its loss in respect of outgoings is appropriate in the circumstances of the case. It is not in dispute that while the premises or part of the premises were unoccupied following the defendant's breach of the lease agreement, the plaintiff was responsible for paying that portion of the total outgoings for the building that was proportionately attributable to the premises or unoccupied part thereof. In these circumstances I do not see how it can be said that the plaintiff's methodology is in effect a claim for loss of profit. To the contrary, it seems to me that the plaintiff's methodology for calculating its loss is broadly consistent with the terms of cl 12 of the offer to lease.
In addition, in my view the plaintiff's methodology for calculating its loss is (in apparent contrast to the defendant's proposed methodology), consistent with the principles stated by Buss JA in Luxer Holdings v Glentham to which I have already referred. As his Honour stated in that case, where the trial of the lessor's action occurs before the term of the lease would otherwise have expired (as in this case) the normal measure of damages is the total rent, outgoings and other amounts that would otherwise have been payable after the date of termination, less:
1.any amount the lessor has obtained as profit from the use of the premises between the date of termination and the date of trial; and
2.any amount the lessor is likely to obtain as profits from the use of the premises between the date of trial and the date on which the lease would otherwise have expired.
In summary, in my view the plaintiff's methodology represents a reasonable approach to assessing the outgoings that would have been payable by the defendant after the date of termination of the lease agreement less the outgoings that the plaintiff has and will receive in respect of the premises up until the date on which the lease would otherwise have expired.
In arriving at this conclusion I have not overlooked the fact that while part or all of the premises were not occupied consumables (for example, cleaning, air conditioning and water), which would have contributed to the amount per square metre being paid by AHL for outgoings, were presumably not being used in the premises while they remained completely unoccupied or in the part of the premises that remained unoccupied after AHL entered into possession. However, I do not think that this means that making use of the amount paid by AHL per square metre for outgoings in calculating the plaintiff's loss by reason of the defendant's breach will result in the plaintiff being over compensated. I say this for two reasons.
First, the total amount of outgoings paid by AHL for the 2011/2012 financial year, which the plaintiff has used to calculate the amount per square metre paid by AHL for outgoings in that financial year, was the amount paid by AHL for only approximately five months of the financial year, this being the period of the relevant financial year for which AHL was in possession of part of the premises. Accordingly, the amount paid per square metre by AHL during the 2011/2012 financial year, upon which the plaintiff's calculation of its loss for that financial year is based, is necessarily significantly lower than the amount per square metre which would have been paid by the defendant in respect of outgoings for that financial year if it had entered into possession of the premises on 1 July 2011 in accordance with the terms of the lease agreement. In other words, the defendant on the plaintiff’s calculations of its loss for the 2011/2012 financial year derives a significant benefit from the fact that AHL was only in occupation of the portion of the premises which it leased for less than half of the 2011/2012 financial year.
Second, the amount paid per square metre by AHL in respect of outgoings during the financial years in question, being an amount arrived at by the apportioning process provided for under the clause of the agreement between the plaintiff and AHL equivalent to cl 12 of the offer to lease, must necessarily to some extent reflect the fact that consumables were not being used in the portion of the premises that remained untenanted prior to Tactica entering into occupation.
The figures used in the plaintiff's calculations of its loss in respect of outgoings, undertaken in accordance with the above outlined methodology, are supported by the evidence adduced at trial. Further, the defendant does not dispute the accuracy of the calculations. In these circumstances, and for the reasons I have stated, I award damages for loss of outgoings in the amount of $44,613.87 plus interest in the amount of $4,057.22.

Car park licence fees

The plaintiff has calculated its loss of car park licence fees caused by the defendant's breach of the lease agreement to be $53,090.78. The plaintiff has also calculated the interest payable on this loss up until the date of trial to be $4,057.22. I have reviewed the plaintiff's calculations for its loss of car park licence fees as set out in the particulars. I am satisfied that the plaintiff's calculations are supported by the evidence adduced at trial and accord with the principles to be applied in measuring damages for loss caused by breach of an agreement to lease as stated by Buss JA in Luxer Holdings v Glentham. In addition, the defendant does not dispute the plaintiff's calculations. I therefore award in respect of loss of car park licence fees damages in the amount of $53,090.78 plus interest in the amount of $4,057.22.

Signage fees

The plaintiff's claim for loss of signage fees is based on cl 16 of the offer to lease. Clause 16 provides:
Signage
The Lessee may install tenant signage on façade of the building subject to the Lessor's approval (which will not be unreasonably withheld) as to size, colour and design and subject to approval by the Town of Cambridge and any other relevant authorities.
The annual licence fee for non-exclusive signage rights on the building is $7,500 per annum plus GST. Signage shall be reviewed at the same time and in the same manner as the net rental.
The Lessee will bear all costs (including installation and the removal and make good when the lease ends) in relation to the Lessee's signage.
The defendant disputes the plaintiff's entitlement to damages for loss of signage fees. On behalf of the defendant it is submitted that the use of the word 'may' in cl 16 makes clear that it was for the lessee to decide whether or not it wanted signage on the façade of the building. It is submitted that the plaintiff has not adduced any evidence capable of proving that the defendant would have in fact taken up the option to install signage and that in these circumstances the plaintiff has failed to prove the loss claimed.
On behalf of the plaintiff it is contended that properly construed cl 16 constituted an agreement for the defendant to put up signage at the agreed cost.

In my view the use of the word 'may' in cl 16 makes clear that installation of signage was at the option of the lessee. I do not accept that the clause imposed an obligation on the defendant to install signage. There is no evidence before me which supports a finding that the defendant, had it not breached the lease agreement, would have taken up the option to install signage on the façade of the building. Accordingly, I decline to award damages for loss of signage fees.

Costs of preparation of formal lease documentation

The plaintiff's loss arising from the costs that it incurred in preparing the formal lease documentation for the premises and car park licence has been agreed at $1,265.70 plus interest to the date of trial in the amount of $252.38. Accordingly, in respect of this claimed head of loss I award damages in the amount of $1,265.70 plus interest in the amount of $252.38.

Marketing costs

The plaintiff's loss arising from expenditure on marketing costs following the defendant's breach of the lease agreement has been agreed at $6,067.12 plus interest to the date of trial in the amount of $954.27. Accordingly, I award damages for marketing costs in the amount of $6,067.12 plus interest in the amount of $954.27.

Construction of corridor

As I have already indicated, in the 2011/2012 financial year AHL offered to lease part of the premises and the plaintiff accepted the offer. However, in order to enable AHL to lease the part of the premises in question the plaintiff was required to construct a corridor so that the part of the premises to be leased by AHL and the untenanted area, which the plaintiff still intended to attempt to lease, both had separate access to the fire escapes, lift area and amenities on level 2 of the building.
The corridor, which covered approximately 43.7 sqm, was built by a company called Built NSW Pty Ltd (Built). The cost of constructing the corridor was $28,874.97 (GST exclusive). The invoice issued by Built to the plaintiff for the work done in constructing the corridor records that the work involved 'dry walls and skirtings works', 'glass entrance door works', 'fire escape door’ work and 'painting works' (annexure PDD60 to exhibit A).
The plaintiff contends that it was reasonable for it to take steps to mitigate its loss by accepting AHL's offer to lease part of the premises, that the construction of the corridor was a necessary incident of mitigating its loss in this way, and that it is therefore, subject to one qualification, entitled to recover as damages the amount paid for the construction of the corridor, namely $28,874.97.
The one qualification to the plaintiff's claim arises out of evidence given by the plaintiff's witness Mr William France, licensed surveyor. Mr France testified that if the defendant had entered into occupation of the premises an enclosed area of approximately 5.9 sqm (the enclosed area) would need to have been constructed around the rear emergency exit on level 2 of the building in order to separate the premises from the rear emergency exit while at the same time ensuring that the occupant of the premises had secure access to the emergency exit. The plaintiff accepts, in light of this evidence, that an amount equal to the approximate cost of constructing the enclosed area should be deducted from the amount which it paid for the construction of the corridor. I note in this context that it is not in dispute that the enclosed area would, if it had been constructed, have fallen within the area currently encompassed by the corridor constructed by Built.
The defendant does not suggest that it was not reasonable for the plaintiff to mitigate its loss by accepting AHL's offer to lease part of the premises and by consequently paying for the construction of the corridor. Nor does the defendant dispute that the cost incurred by the plaintiff in constructing the corridor was $28,874.97. The defendant does, however, contend, in accordance with the plaintiff's concession, that an amount equal to the cost of constructing the enclosed area should be deducted from any damages awarded for the construction of the corridor. The defendant further contends that the plaintiff has failed to adduce evidence capable of supporting a 'reasoned finding (not a guess)' as to the cost of constructing the enclosed area. The defendant therefore asserts that the court should make an order pursuant to r 26 and r 32 of the District Court Rules 2005 (WA) that the plaintiff 'obtain a quote from a suitably qualified person to adequately and reasonably quantify the cost of construction of the [enclosed area] and after proper conferral with the defendant, seek to tender that quote by consent or otherwise'.
I am satisfied on the basis of Mr France's evidence that if the defendant had occupied the premises the enclosed area would have to have been built. I am also satisfied that it is appropriate to deduct from any amount awarded to the plaintiff for the construction of the corridor an amount representing the cost of constructing the enclosed area. The question is whether the evidence adduced at trial is sufficient to enable me to make a reasonable assessment of the cost that the plaintiff would have incurred if it had been required to build the enclosed area. In order to deal with this question it is necessary to refer further to the evidence given by Mr France in relation to this issue as well as the evidence given by Mr Thomas on this point.
When Mr France gave evidence he said in his evidence-in-chief that in order for the enclosed area to be built it would be necessary to build two short right angle walls. He did not give evidence as to the cost of building the walls, or for that matter the cost of constructing a door in one of the walls which would obviously be required in order to permit access from the premises to the emergency exit.
In cross-examination Mr France confirmed that he did not undertake any assessment of the things that would need to be taken into account in constructing the enclosed area, for example the electrical and mechanical works. He said he did not do so because this was not part of a surveyor's role.
Mr Thomas' evidence on this issue, which was given during cross‑examination and on the basis that as part of his employment with the plaintiff he was familiar with fit outs and in particular the fit out for the building, was as follows:
1.In order to construct the enclosed area basic Gyprock walls would need to be installed.
2.A door would need to be constructed.
3.Some painting would be required.
4.The need for any modification to things such as lighting, air conditioning, or smoke detection systems would need to be reviewed on construction of the enclosed area.
On the basis of the above referred to evidence of Mr France and Mr Thomas the plaintiff makes the following submissions:
1.The corridor constructed by Built is approximately 7.4 times the area that would have been encompassed by the enclosed area.
2.On a rough comparison using the to scale diagrams on pages 8 and 9 of the report of Mr France dated 21 September 2012 (exhibit 16) the length of the corridor wall constructed by Built is approximately 9 to 10 times the total length of the wall that would have been installed in order to construct the enclosed area.
3.Construction of the enclosed area would only have required the installation of one door.
4.It is reasonable to assess the cost of constructing the enclosed area as a proportion of the cost of constructing the corridor.
5.Based on the area of the enclosed area compared to the area of the corridor, the rough comparison of the length of the walls that would need to be installed for the enclosed area compared to the length of the walls installed for the corridor, and the extent of the work that was required to be carried out by Built in constructing the corridor, it is reasonable to estimate that the cost of constructing the enclosed area would have been in the vicinity of one‑tenth to one‑seventh of the amount paid by the plaintiff to Built for the construction of the corridor.
6.Accordingly, a deduction of $4,000 to represent the cost of constructing the enclosed area, being slightly less than one‑seventh of the amount paid by the plaintiff to construct the corridor, is reasonable.
On behalf of the defendant it is submitted that the above outlined approach adopted by the plaintiff is 'illogical and specious'. It is submitted that there is no evidence to support a finding that 'a proportionate reduction in cost would obtain by reference to floor area'. It is submitted that 'logically the cost of constructing the walls, doors, and mechanical and electrical services in respect of [the enclosed area] would not be reduced by the same proportionate amount as the reduced floor area'.
There is no question that the evidence relating to the cost of constructing the enclosed area is less than complete. However, it is well established that a difficulty in estimating damages does not relieve the court from the responsibility of estimating them as best it can and that uncertainty in quantification does not prevent an assessment provided some broad estimate can be made or a broad brush approach taken: Fink v Fink [1946] HCA 54; (1947) 74 CLR 127, 143; Durban Roodepoort Deep, Limited v Newshore Nominees Pty Ltd [2005] WASCA 231 [36]. I accept the defendant's submission that there is no clear logical basis for assessing the cost of constructing the enclosed area by reference to the floor space encompassed by the enclosed area as compared to the floor space encompassed by the corridor. Nonetheless, I think that the evidence adduced as to the lengths of wall used in the construction of the corridor and the length of walls that would have been used in the construction of the enclosed area, taken in conjunction with the evidence as to the work that was involved in the construction of the corridor, does provide a sufficient basis for making a broad estimate of the cost that would have been incurred by the plaintiff in constructing the enclosed area.
The length of wall used to construct the corridor does appear to me, from reviewing the diagrams on pages 8 and 9 of Mr France's report, to be approximately 9 to 10 times the total length of the walls that would need to be erected to construct the enclosed area. Further, it is fair to assume that the type of work involved in constructing the corridor as specified in the invoice issued by Built (including the installation of a door) would also be required to be carried out, albeit on a smaller scale, in constructing the enclosed area. In these circumstances I think that to estimate the cost of building the enclosed area to be approximately one‑ninth of the cost of building the corridor is in broad terms reasonable although I would, in light of Mr Thomas' evidence, allow a further deduction of $3,000 to take account of the possibility that construction of the enclosed area would require modification work to things such as lighting, air conditioning, and smoke detection systems.
In accordance with the above expressed reasoning, and adopting a broad brush approach, I would estimate the cost to the plaintiff of constructing the enclosed area to be $6,200 ($3,200 being approximately one ninth of $28,875 plus $3,000). Accordingly, I award damages in respect of the construction of the corridor in the amount of $22,675.
In relation to the issue of interest, the amounts of pre-trial interest claimed by the plaintiff in relation to all of its heads of claim have been calculated at the rate of 6% per annum from a date approximately one month after the date on which the relevant payment would have become due through to the date of trial. The defendant, as is apparent from what I have already said, does not dispute the appropriateness of calculating pre‑trial interest in this way.
The invoice issued by Built for the construction of the corridor indicates that the due date for the payment of the amount charged was 13 April 2012. Accordingly, consistently with the plaintiff's approach, I will calculate interest as being payable from 13 May 2012 to the date of trial. I therefore allow interest in the amount of $3,401 ($22,675 x 0.06 x 2.5 years).

Fit out costs

In late 2013 the plaintiff received an offer to lease the balance of the premises to Tactica. However, it was a condition of Tactica's offer that the plaintiff pay Tactica's fit out costs. The plaintiff accepted Tactica's offer on this basis. As previously mentioned, Tactica's lease of the balance of the premises commenced on 1 December 2013.
The plaintiff submits that it was reasonable, in order to mitigate its loss, for it to accept Tactica's offer to lease on the condition that it pay Tactica's fit out costs. The plaintiff claims damages in the amount of $90,000 in respect of the fit out costs plus interest to the date of trial in in the amount of $5,303.84.
The defendant does not suggest that it was not reasonable for the plaintiff to pay the fit out costs of Tactica in order to mitigate its loss. Nor does the defendant dispute the amount claimed by the plaintiff in this regard.
I am satisfied that the course taken by the plaintiff in paying the Tactica fit out costs was a reasonable step for the plaintiff to take in order to mitigate its loss caused by the defendant's breach of the lease agreement. I therefore allow damages for fit out costs in the amount of $90,000 plus interest in the amount of $5,303.84.

Summary of damages awarded

In summary I award the following damages (inclusive of interest to the date of trial):

Loss of rental

$421,732.45

Outgoings

$48,671.09

Car park licence fees

$57,148

Cost of lease preparation

$1,518.08

Marketing costs

$7,021.39

Construction of corridor

$26,076.00

Fit out costs

$95,303.84

Total

$657,470.85

It is not in dispute between the parties that the plaintiff is entitled to claim pre‑judgment interest pursuant to s 32 of the Supreme Court Act 1935 (WA) at the rate of 6% per annum on any damages ordered to be paid. Accordingly, pursuant to s 32 I award the plaintiff pre-judgment interest on the above total damages award at the rate of 6% per annum calculated from 7 November 2014.

Loss of rental	$421,732.45
Outgoings	$48,671.09
Car park licence fees	$57,148
Cost of lease preparation	$1,518.08
Marketing costs	$7,021.39
Construction of corridor	$26,076.00
Fit out costs	$95,303.84
Total	$657,470.85