Alemany P/L v Bewick, Bewick, Guppy & Guppy No. DCCIV-97-828 Judgment No. D73

Alemany Pty Ltd
v Malcolm Joseph Bewick, Robyn Mary Bewick,
Christopher David Jewell Guppy and Tracey Lyn Guppy
[1999] SADC D73

Civil
Judge Kitchen

In this action the plaintiff’s claim against the defendants is upon a guarantee and indemnity given by the defendants to the plaintiff for the payment of rent and other sums payable by or recoverable from Solutions Group Australia Pty Ltd (“Solutions Group”) as lessee from the plaintiff of the plaintiff’s land and premises at 211 Glen Osmond Road, Frewville pursuant to a lease dated 2nd June 1993. The land is that comprised in Certificate of Title Register Book Volume 4341 Folio 142 on which there is a two-storey office building. The lease was duly registered. It is Exhibit P3. The guarantee and indemnity is incorporated as part of the lease.
The lease was for the term of five years commencing on 31st March 1992 and Solutions Group had the right to extend it by two further terms each of three years. The rent reserved by the lease was $90,000 per annum payable by equal monthly instalments in advance, and provision is made for a periodic review of and variation in the rent. In addition to the rent Solutions Group covenanted to pay the outgoings described in Clause 2.2 of the lease.
A clause in the lease headed “Special Conditions” provided (by Item 11 of the Schedule to the lease) that no rent was payable by Solutions Group for the period from 31st March 1992 to 31st December 1992 and in the same item it is recorded that Solutions Group had paid to the plaintiff $90,000 as rent for the period 1st January 1993 to 31st December 1993.
The lease permitted Solutions Group to use the premises for the purposes of its business in dealing with computers. There is no doubt that the lease is a commercial tenancy agreement within the meaning of the Landlord and Tenant Act 1936 (“the Act”), but further the action before the Court was conducted on the footing that Part 4 of the Act applied to the premises, that is that they were ‘shop premises’ as that term is defined in s.54 of the Act.
Section 56 of the Act provides that an action involving a claim arising under or in respect of a commercial tenancy agreement or a related guarantee, that is one under which the guarantor guarantees the performance of obligations by the tenant, should be commenced before the Commercial Tribunal, but if, inter alia, the action involves a monetary claim in excess of $20,000 then the action should be commenced before a court, in which event the court in which the action is commenced “may exercise any of the powers conferred on the Tribunal under this Part in relation to a commercial tenancy agreement or a related guarantee”. In this case the plaintiff’s claim greatly exceeds $20,000.
The plaintiff’s case is that Solutions Group defaulted in payment of the rent payable under the lease and the plaintiff, after due notice, terminated the lease by re-entry on 17th May 1995 and distrained upon Solutions Group’s goods in the premises. The plaintiff claims to recover from the defendants pursuant to the guarantee and indemnity the amounts to which alleges it is entitled from Solutions Group under the terms of the lease or to enforce the indemnity against the default by Solutions Group to observe and perform the terms and conditions of the lease; in brief it claims the arrears of rent at the date of re‑entry, loss of rent after re‑entry to the expiration of the original term (less rent received from other tenants put in by the plaintiff and less receipts from the sale of the goods distrained), the cost and fees incurred in connection with the re‑entry and distraint, outgoings payable under the lease, maintenance and repair costs incurred prior to the re‑letting of the premises and interest on the unpaid amounts.
It is no longer disputed by the plaintiff that at 5.30 pm on 16th May 1995 Solutions Group duly appointed an administrator pursuant to s.436A(1) of the Corporations Law. At a meeting of creditors on 13th June 1995 it was resolved that Solutions Group enter into a Deed of Company Arrangement (“the DOCA”). It was entered into on 4th July 1995. It is Exhibit D58.
Section 440J(1) of the Corporations Law provides that during the administration of a company a guarantee of a liability of that company cannot be enforced as against a director of the company, or the spouse of such a director, except with the leave of the Court. On 16th May 1995 the first and third defendants were directors of Solutions Group and the second and fourth defendants their respective spouses. By Clause 27 of the DOCA it was to continue in operation until, inter alia, “the expiration of one year from the commencement date”. Clause 4 of the DOCA defined the commencement date to be the date upon which it was executed, namely 4th July 1995.
The defendants filed a joint defence in which they admit the lease to Solutions Group and the guarantee and indemnity signed by them but put in issue the liability of Solutions Group to the plaintiff under the lease, the quantum of the claim and assert, on various grounds, that the guarantee and indemnity is unenforceable against them.
In 1996 and when the DOCA was still on foot the plaintiff brought proceedings against the defendants making essentially the same claims as those in this present action. Some months after those proceedings were instituted and after the DOCA had expired the plaintiff sought leave nunc pro tunc to proceed with its action. The application was refused. The plaintiff subsequently instituted these present proceedings.
This action came on for trial on 1st June 1998 before His Honour Judge Bishop. The defendants were unrepresented having terminated their solicitor’s instructions in the previous month. His Honour granted the defendants’ application that the trial date be vacated. The plaintiff offered to make the material documents available to the defendants whose own documents were still in the possession of their solicitor who, as I infer, claimed a lien over them for his unpaid fees.
On the Friday preceding the commencement of the trial before me, the defendants made application that the trial be adjourned. The, or a, basis for that application, as I understand, was the defendants assertion that they had not obtained copies of all the documents they required for the conduct of their defence. Master Kelly heard and refused the application.
When the action was called on for trial, Mr. and Mrs. Bewick, who were unrepresented, appeared but Mr. and Mrs. Guppy did not. Mr. Guppy had written a letter to the Court received by the Court on the morning of the trial stating in effect that he had not received any relevant documentation and because of his employment commitments he could not attend at the trial. Mr. Bewick renewed his application for an adjournment of the trial. After ascertaining what difficulty Mr. and Mrs. Bewick could identify concerning the lack of documents, and standing over the progress of the trial to facilitate them obtaining what I judged they reasonably required bearing in mind an earlier trial had been aborted and a recent application to adjourn had been refused, the trial proceeded. I deferred entering any judgment against the absent defendants for their failure to appear.
It is convenient at this point to briefly identify in chronological order the events which precipitated these proceedings, many of which are not in dispute, and the substance of the issues raised by the defendants in their defence and upon which the defendants allege that their liability upon the guarantee and indemnity was discharged or that the guarantee and indemnity is unenforceable against them. If any of those challenges is upheld, it will be unnecessary to deal with the quantum of the plaintiff’s claim. If no challenge succeeds then I will turn to the plaintiff’s claim.
Mr. Bewick is a computer programmer. In about 1990 he, with others, promoted the incorporation of Solutions Plus Pty Ltd (“Solutions Plus”). Its business was in the computer industry. In 1991 the Australian Submarine Corporation invited tenders for the supply and installation of a computer network to be located in Garden Island, Western Australia. The network was to consist of some sixty computers. Solutions Plus was not a large enough organisation to alone tender for the contract. In the course of Solution Plus’ business Mr. Bewick had become acquainted with Mr. Guppy who, with his wife as I understand, controlled Custom Connection Company Pty Ltd trading as Custom Cable Company (“Custom Cable”). Solutions Plus and Custom Cable, both of which were based in South Australia, put in a joint offer for the Australian Submarine Corporation tender which was accepted in December 1991 and a contract was entered into in early 1992.
It was foreseen that larger premises would be required, not only for the purposes of the work which the Australian Submarine Corporation contract would involve, but also to accommodate two other business entities with which Mr. Guppy had had some previous dealings and, as Mr. Bewick and Mr. Guppy agreed, with which Solutions Plus and Custom Cable would form some loose co‑operative with a view to securing further work. Those two entities were Management Information Services (MIS) and H & L Management Systems Pty Ltd (HL). Mrs. Guppy was given the task of searching for premises.
Sometime in late 1991 the plaintiff’s building at Glen Osmond Road had become vacant. The plaintiff, the principal shareholder and a director of which is Dr Leon Pitchon, had purchased the building in about 1989 and thereafter it was managed by Myles Pearce whose employee Mr. Cooney had responsibility for that task. Mr. Cooney advertised the building for lease and that led to him meeting with Mrs. Guppy. On 31st January 1992 he sent a facsimile to her setting out the Council and E&WS rates and insurance premiums paid in relation to the building in 1991/1992; it is Exhibit P9.
At a meeting between Mr. Cooney and Mrs. Guppy (and probably Mr. Guppy) Mr. Cooney was told that “they” were in the computer industry specialising in cabling and they were going to join up with some other people. An inspection of the building took place. There were other meetings. The plaintiff was looking for a rent of $93,700 for a term of five years with one right of renewal for five years. In early 1992 an offer was made on behalf of Ehud Pty Ltd to lease the building. Ehud Pty Ltd (the directors of which between December 1991 and April 1994 were the defendants) changed its name to Solutions Group in June 1992. The offer was for a term of three years with two rights of renewal, each of three years, at a rent of $85,000 per annum with annual rent reviews and a rent review on renewal, no rent to be payable for the first 12 months of the lease and, significantly, a payment of 12 months rent in advance. Mr. Cooney sought advice from a solicitor upon the legality of the component of the offer proposing 12 months rent in advance, presumably because of the provisions of s.58(1) of the Landlord and Tenant Act; this topic is one of the grounds upon which the defendants dispute their liability for the plaintiff’s claim, the payment of that sum having been made part of the terms upon which the plaintiff and Solutions Group eventually agreed to the latter leasing the building, those terms being recorded in an agreement to lease dated 27th March 1992. It is Exhibit P2 which provides, inter alia, for a term of five years commencing on 31st March 1992 at a rent of $90,000 per annum payable at the rate of $7,500 per month in advance, a rent free period between 31st March 1992 and 31st December 1992, and (Clause 18) that:-
“It is hereby agreed by the parties hereto that the Lessee shall pay to the Lessor the rental for year two being the amount of $90,000 (less any deposit paid pursuant to Item 19 of this agreement) on or before the 15th day of May 1992. This amount shall be applied as the rental for year two in advance and is not refundable should there be an earlier termination of this lease within the period of the initial term (i.e. first 5 years).”

It also provided for a guarantee by each of the defendants for the payment of rent and other moneys, and the performance of the other terms and conditions, by the lessee. The agreement stipulated that the “date of occupation” was to be “31st March 1992 or upon Lessee’s execution of the formal lease document, whichever is the latter (sic)”. The agreement P2 was executed by Ehud Pty Ltd, and by each of the defendants as guarantors.

There were protracted negotiations between the plaintiff and Solutions Group (or their respective legal advisers or agents) concerning the terms of the lease in the form in which it was proffered by the plaintiff on a date which appears to have been 16th June 1992, the date of the letter (part of Exhibit P10) from Mrs. Guppy on behalf of Solutions Group to Mr. Cooney. In its final negotiated form, the lease (Exhibit P3) was executed on 2nd June 1993 but there is no real dispute that Solutions Group went into possession on or very shortly after 31st March 1992.
The defendants assert that the guarantee and indemnity is unenforceable against them because the plaintiff failed to comply with s.62(2) of the Act which requires that information in a prescribed form (commonly referred to as Form 5) must be provided with a commercial tenancy agreement, or a memorandum of such an agreement, presented to a tenant for execution.
The lease incorporated the guarantee and indemnity upon which the plaintiff relies in these proceedings. In substance the defendants guaranteed the due and punctual payment by Solutions Group of all rent and other sums payable by Solutions Group under the lease “and the due observance and performance by the Lessee of all the covenants terms and conditions contained in the lease and any extension thereof and on the Lessee’s part to be observed and performed thereunder and indemnifies the Lessor against any default by the Lessee thereunder”. There are other provisions in the guarantee and indemnity to which it will be necessary to refer.
The defendants allege that there was no consideration given for the guarantee and indemnity and therefore it is unenforceable against them.
The lease, as I identified earlier, included “special conditions” one of which (item 11) provided that no rent was payable by Solutions Group for the period 31 March 1992 to 31 December 1992 and “it is hereby acknowledged by the parties that the Lessee has paid to the Lessor the sum of $90,000 being rent due for the period 1 January 1993 to 31 December 1993”. That sum had been paid on 30 June 1992.
The defendants allege that the plaintiff’s receipt of the sum of $90,000 as rent in advance was a breach of s.58(1) of the Act and that the defendants were thereby discharged from their guarantee.
One of the matters which occupied the attention of those who negotiated the final form of the lease concerned the obligation of Solutions Group for the maintenance of the air-conditioning units within the building. In April 1992, Mr. Cooney received a report of an inspection he had sought by Atlas Air‑Conditioning of the five air-conditioning units which served the building. In June 1992 a copy of it was sent to Mr. Attwood one of whose duties included managing property matters for Solutions Group. After July 1992 there were a number of incidents relating to the performance of the air-conditioning units which involved expense to rectify them (Exhibit P45), but a particular complaint of Solutions Group was that the units servicing the area of the first floor of the building, which was occupied by MIS and HL as approved sub-tenants of Solutions Group, were failing to cool that area on days of high outside ambient temperature a failure which allegedly affected the performance of some ten computers used by the sub-tenants and made the working conditions of the approximately twelve staff of those sub-tenants intolerable.
In June 1992 the plaintiff had consented to some partitioning works on the first floor to create further offices for the sub-tenants. Consent was given on condition that, inter alia, the works were to be “at (Solutions Group) expense in all things including all cabling and alterations to air‑conditioning ducts and/or air balance adjustments” and at the determination of the lease they were to be removed at the expense of Solutions Group.
Exhibit D43 comprises a number of letters, admitted by consent, in which the issue of the air‑conditioning is mentioned. Solutions Group’s complaints concerning the air‑conditioning came to a head in the latter part of 1994. On 17th August 1994 Mr. Cooney acknowledged in a letter to Solutions Group (part Exhibit P45) that there were problems associated with the air-conditioning service “identified as cooling capacity during summer months in the first floor units; this is being attended to at the present time”. In September 1994 Mr. Cooney sought from Adtherm Cooling and Heating Company an assessment of the adequacy of the air‑conditioning service and in November 1994 he received a report (Exhibit P40 is a part of it) from an engineer which included the advice:-
“The present first floor air-conditioning units besides being inefficient have insufficient capacity to meet the cooling demands during summer conditions ... The air circulation levels are low resulting in a feeling of stuffiness throughout the areas .... In addition the supply and return air-ducts are of insufficient size for the quantity of air necessary for conditioning the areas.”
On 21st December 1994 Mr. Cooney wrote to Solutions Group (Exhibit P13), which had failed to pay the rent for the months of November and December 1994, informing Solutions Group that tenders for the necessary works to upgrade the air-conditioning service would close on 30th December 1994 and that the scheduled installation and commissioning date for the new air-conditioning units was 29th January 1995 with contingency items to be completed on or before 7th February 1995; the letter went on:-
“Although we note your refusal to pay rent until air conditioning services are upgraded, this is not acceptable. The building has continued to be occupied as normal and that the ground floor air-conditioning service is very adequate. We are not aware of your arrangements with your sub-tenants as no documentation has ever been forwarded to us. Notwithstanding this, and I repeat, the responsibility of rental payments to the Lessor is your Company’s only. The immediate payment of rental is demanded. I have also been instructed to charge default interest in accordance with Clause 4.5 of the Lease.”

It appears that Solutions Group’s sub-tenants, the occupiers of the first floor of the premises, had refused to pay rent to Solutions Group for the months of November and December 1994 on the grounds that the air-conditioning service to the first floor was inefficient and insufficient.

The new air‑conditioners were installed and, it would appear, in February 1995 they were in operation. The plaintiff paid $35,000 for the new air‑conditioners and associated works. Mr. Bewick accepted that the new air‑conditioners satisfactorily resolved the problems Solutions Group had earlier complained about.
On 23rd February 1995 Solutions Group made application to the Commercial Tribunal. It is Exhibit P14. It is signed by Mr. Bewick on behalf of Solutions Group. The application asserts that:-
......... “since the signing of the Commercial Tenancy Agreement (the plaintiff) has consistently breached its covenant to ensure adequate air-conditioning.”
.“during the latest heat waves the sub-tenants and (Solutions Group) withheld paying rent which has prompted (the plaintiff) to do something”.
......... the sub-tenants were “threatening to sue (Solutions Group) for lack of air-conditioning, damages and loss to their business and abandoned the premises. (The plaintiff) has threatened to seize goods of (Solutions Group) and the goods (the plaintiff) knows do not belong to (Solutions Group) to pay arrears of rent claimed by (the plaintiff)”.
.“the withholding of the arrears of rent was to force some action by (the plaintiff) which worked and is now withheld as a set-off and counterclaim by (Solutions Group) against (the plaintiff) for claims (Solutions Group) has against (the plaintiff)”.

Solutions Group sought orders from the Tribunal that the plaintiff pay Solutions Group compensation for the breach of an alleged covenant to provide adequate air-conditioning to the premises, that until the plaintiff provided adequate air-conditioning there be an abatement or reduction in rent, that the plaintiff be prohibited from distraining for rent or re-entering or terminating the lease; and, alternatively, that Solutions Group be released from the lease.

On 6th March 1995 the Tribunal made a consent order (Exhibit P1). Mr. Bewick represented Solutions Group. The order was:-
“1..... That the amount owed by the applicant to the respondent will be reduced by the sum of $3,000. This is in full and final satisfaction of all matters raised in this application.
2.Default interest on arrears will not be charged for the period 21 January 1995 to 28 February 1995 inclusive.
3...... The applicant will indemnify and keep the respondent indemnified with respect to any claim by any sub-tenant of the applicant arising out of matters raised in this application.
4.Each party is to bear its own costs.”
The defendants allege that the provision by the plaintiff of adequate air-conditioning for Solution Group’s use of the building was an essential term of the lease which the plaintiff breached and therefore the guarantee and indemnity is unenforceable against the defendants.
In June 1994 and pursuant to Clause 4.9 of the Lease the plaintiff had reviewed and increased the rent to $93,600 per annum, that is $7,800 per calendar month (Exhibit P15). The rent due on the first day of each of the months November 1994 to April 1995, inclusive, totalled $46,800 of which Solutions Group paid a total of $28,000 only so that the arrears of rent on 1st April 1995 were $18,800 less the credit of $3,000 required by the Tribunal’s order leaving a balance of $15,800 (Exhibit P25; as to that exhibit Mr. Cooney said that the $4,000 shown to have been paid by Solutions Group in November 1994 was in fact received in January 1995).
By notice, pursuant to s.10 of the Act amd dated 27th April 1995 (Exhibit P16), to Solutions Group Mr. Cooney, as agent for the plaintiff, demanded payment of the sum of $16,737 by 12th May 1995. That sum was made up of the arrears of rent, $15,800, plus $877.60 “default interest” plus $60 fees paid in respect of Solution Group’s cheques which were returned by its bankers marked “refer to drawer”.
On 28th April 1995 Solutions Group wrote to Mr. Cooney. It is Exhibit D44. It is signed by Mr. Bewick. The letter referred to the notice (Exhibit P16) and went on:-
“As I had advised you verbally we are finding it extremely difficult to reconcile the account regarding the rent for this building for two reasons.
1...... Our accounting system was not up to date when we moved the processing and responsibility for it from Perth back to Adelaide in February this year.
2.We have not been receiving regular invoices and payment receipts from you. As there have been some cheques that have been dishonoured, and interest charges levied, I need to see a reconciliation from you in order to establish the current position.
3...... There is also a credit to be applied from the proceedings in the Rent Tribunal.
4.I would also question your figure of $60 for “refer to drawer” cheque fees. Please explain why this figure is so high.
Please advise at your earliest convenience so that we may at least get the amount owed sorted out.”
The defendants allege that the plaintiff contrary to s.62A of the Act failed to provide a statement of operating expenses and therefore the guarantee and indemnity is unenforceable against them.
Solutions Group failed to pay the amount demanded in the notice Exhibit P16. By notice dated 17th May 1995 (Exhibit P17) the plaintiff on that day terminated the lease, re-entered the premises and distrained for non‑payment of moneys totalling $23,600 allegedly due by Solutions Group under the lease. Exhibit P17 includes a notice of re-entry, a warrant authorising Reidel Mercantile, including its employee Andrew Hook, to distrain all goods at the premises, and an inventory of the goods distrained.
Re-entry was effected at about 7.00 am on 17th May 1995. As I earlier noted, on the previous day Solutions Group had appointed an administrator pursuant to s.436A(1) of the Corporations Law. It is not disputed that until about 10.30 or 11.30 am on 17th May 1995 when Mr. Bewick and the administrator, Mr. Broome, arrived at the premises, the plaintiff had no knowledge of that appointment nor any information or indication it was to occur.
Section 440C of the Corporations Law provides that during the administration of a company an owner or lessor of property, used or occupied by or in the possession of the company, cannot take possession of the property or otherwise recover it except with the administrator’s written consent or with the leave of the Court. The administration of a company begins when an administrator is appointed under, inter alia, s.436A of the Corporations Law. Neither the administrator’s consent nor leave of the Court was obtained by the plaintiff before re-entry or distraint.
The defendants say that the plaintiff’s acts of re-entry and distraint were unlawful, constituted trespass and conversion of Solutions Group’s goods and discharged the defendants from their liability under the guarantee and indemnity.
Some of the goods which the plaintiff distrained upon were goods of Solutions Plus. It is alleged that to the plaintiff’s knowledge Solutions Plus was a sub-tenant of Solutions Group. Mr. and Mrs. Bewick allege that the plaintiff unlawfully refused them access to Solution Plus’ goods which caused economic loss to and damage to the goodwill of Solutions Plus. Mr. and Mrs. Bewick plead that on the principal of Black v Ottoman Bank 15 ER 573 they were discharged from their liability under the guarantee and indemnity by reason of those actions of the plaintiff. Mr. and Mrs. Guppy make a similar claim upon similar allegations in relation to Bar Bar Pty Ltd.
The defendants further claim that when Mr. Bewick and Mr. Broome attended at the premises on 17th May 1995 Mr. Bewick protested to Mr. Cooney, who was present with Mr. Hook, that in effect the re-entry by the plaintiff, and the distraint, imperilled an arrangement which Solutions Group had negotiated for an investor to contribute funds to Solutions Group, the prospect of obtaining which Mr. Bewick said he had alerted Mr. Cooney to during the proceedings before the Commercial Tribunal which culminated in the consent order Exhibit P1. The defendants plead that the plaintiff’s actions caused damage to Solutions Group and that by way of penalty the plaintiff is liable to Solutions Group in treble damages.
By notice dated 23rd May 1995 Mr. Broome as administrator of Solutions Group informed the plaintiff that “I do not propose to exercise rights in relation to” the premises.
At a meeting of the creditors of Solutions Group the plaintiff by its agent, Mr. Cooney, voted for the DOCA; the plaintiff was in any event bound by it.
The defendants allege that by the terms of the DOCA and because of the absence from the guarantee and indemnity of any express provision to preserve their liability to the plaintiff notwithstanding that the plaintiff discharged the liability of Solutions Group to it pursuant to the DOCA, the defendants were discharged from their liability under the guarantee and indemnity.

Plaintiff’s alleged failure to provide Form 5 in breach of s.62(2) of the Act

There is in evidence a Form 5 relating to the Lease. It is Exhibit P8. It is dated 5th July 1993 and signed by Mr. Bewick.
Form 5 is the prescribed form for the purposes of s.62(2)(b) of the Act; see regulation 6a of the Landlord and Tenant (Commercial Tenancies) Regulations 1986. Section 62(2)(b) of the Act provides that a written statement in the prescribed form (the Form 5) must be presented to the tenant with, and should be signed by the tenant before executing, a document to which s.62(1) applies. By s.62(1):-
“62(1)....... This section applies to a document -
(a).... that is intended to constitute a commercial tenancy agreement (or part of such an agreement), or a memorandum of such an agreement; and
(b)that has been prepared by the landlord or a legal practitioner or other person acting on behalf of the landlord.”
Mr. Cooney said that the Form 5 was prepared by the plaintiff’s solicitor and was sent to Solutions Group with the Lease in the form first proposed by the plaintiff, which, as I have already inferred, was on 16th June 1992. He said that the Form 5 was not signed and delivered to him as the plaintiff’s agent until after the Lease, in its final negotiated form, was executed. Mr. Bewick said he signed the Form 5 on the date appearing in it but he is not aware whether or not the Form 5 accompanied the Lease as originally prepared by the plaintiff; he remarked that he was not involved in the negotiations concerning the terms of the Lease. It would appear that is was Mrs. Guppy who undertook that task.
I have no reason to reject the evidence of Mr. Cooney, indeed there is some evidence to support him; the Form 5 identifies, inter alia, Clause 2.3 of the Lease as one imposing upon Solutions Group a liability for operating expenses but Clause 2.3 of the Lease has the words “this sub-clause has been deleted by agreement” a proposal that was put by Solutions Group’s solicitors in its letter to Myles Pearce dated 24th March 1993 (part of Exhibit P10). I find that the Form 5 was delivered to Solutions Group with the Lease in its first form.
I note that by Clause 21 of the Agreement to Lease (Exhibit P1) Solutions Group agreed:-
“... to execute the formal lease document prepared by the Lessor’s solicitors, within fourteen (14) days of its submission to the Lessee, if the same is acceptable to the Lessee and/or its solicitors and in any event prior to the said date of commencement of occupation. Failure to so execute shall not in any way prejudice the binding nature of this agreement.”

and by Clause 22 of Exhibit P1 the obligations of the plaintiff and Solutions Group were not conditional, or in any way dependent, upon the preparation and execution of the Lease.

It might be argued that P1 itself was a document to which s.62(1) applied and therefore a Form 5 should have accompanied it. However, that did not form part of the defendants’ case and it was not argued. The defence pleaded that the Form 5 was “prepared and served after the execution of the Lease”.
I also note that the Form 5, in that part of it dealing with the operating expenses payable by Solutions Group, is incomplete. No issue was raised by the defendants in their defence concerning that. The plaintiff’s obligations pursuant to s.62A of the Act concerning operating expenses is in contest between the parties but that is not in the context of Form 5.
The failure of a lessor to provide, inter alia, a Form 5 does not affect the validity of the lease but on the application of the tenant the Court may make an order of the kind enumerated in s.62(10), which includes avoiding the lease in whole or in part. Here there is no application by Solutions Group and, as I have found, the alleged non-compliance by the plaintiff has not been proved.

No consideration given for the guarantee

The Agreement for Lease (Exhibit P1) in Clause 20 provided:-
“The persons (if any) mentioned as Guarantors hereunder HEREBY GUARANTEE for no consideration whatsoever the payment by the lessee of the rent and any other moneys herein referred to and the performance and observance by the lessee of the covenants, terms and conditions stated in and implied by this agreement and the performance and observation (sic) by the lessee of the covenants, terms and conditions which are to be embodied in the formal lease agreement to be prepared by the lessor’s landbroker/solicitor.”
The guarantee and indemnity contained in the Lease, in its terms material to this issue, provide:-
“In consideration of the Lessor ... entering into the memorandum of Lease ... at the request of (the guarantor) ... the guarantor hereby covenants and agrees with the Lessor as follows ...”

and then follow in Clause 1 the operative words of the guarantee and indemnity. Clause 2 of the guarantee and indemnity includes this sub-clause:-

“2.5 It is to the advantage of the guarantor that the lease subsists.”

In paragraph 28 of the defence, the defendants plead that “the guarantee is unenforceable as it fails for want of consideration” which, in submissions, was expanded to assert that the guarantee was entered into when the agreement to lease (Exhibit P1) was signed by the defendants, that that was before the lessee entered into the lease and so it was argued “past consideration is not good consideration”.
Clause 20 of the Agreement for Lease provided that the guarantee was given “for no consideration whatsoever”. That being the case that guarantee was likely unenforceable against the defendants. The guarantee incorporated into the lease, however, was expressed to have been given in consideration of the plaintiff, as lessor, entering into the lease with Solutions Group, as lessee. The lease in the form in which it was first proffered by the lessor was clearly not acceptable to Solutions Group and there were prolonged negotiations about its terms before agreement was reached.
The extent of the proposals by either side to the other concerning the terms of the lease and the guarantee, can be seen in or inferred from the correspondence in Exhibit P10. It is apparant that the plaintiff, as lessor, retreated from positions, favourable to it, contained in the form of the lease in which it was first proffered to Solutions Group. A guarantee given consideration of an owner of property entering into a lease of the property to another is sufficient consideration: Chan v Cresdon Pty Ltd (1989) 168 CLR 242.
Further upon registration under the Real Property Act 1886 the lease, which included the guarantee and indemnity, had the effect of and is to be deemed and taken to be a deed duly executed by the parties who have signed it; s.57 Real Property Act 1886.
A guarantee or any other promise made or obligation undertaken in the form of a speciality, that is a deed, is enforceable without proof of any consideration. Rann v Hughes 1778 7 Term Rep. 350; 101 ER 1014.
This plea must fail.

Payment of $90,000 as rent in advance; the alleged breach of s.58 of the Act

Section 58 of the Act provides:-
“Rent in advance
58.(1) A person shall not before the tenant becomes entitled to go into occupancy of premises under a commercial tenancy agreement require, as rent under the agreement, an amount exceeding-
(a)the amount payable under the agreement for one months occupancy of the premises; or
(b).... one-twelfth of the amount payable under the agreement for one year's occupancy of the premises, whichever is the lesser. Penalty: Division 9 fine.
(2)... A person shall not require any payment of rent (other than the first payment) under a commercial tenancy agreement earlier than seven days before the commencement of the period of occupancy in respect of which the rent is payable. Penalty: Division 9 fine.
(3) An agreement that imposes obligations as to the time of payment of rent that are inconsistent with this section is, to the extent of the inconsistency, void.”
Dr Pitchon’s evidence is that the provision in the special conditions of the lease concerning the payment of $90,000 was probably a topic the inclusion of which was reported to him by Mr. Cooney as the plaintiff’s agent and as far as he (Dr Pitchon) remembered the plaintiff “never asked for it as a condition of the lease”.
Mr. Cooney said that in the negotiations which preceded the agreement to lease (Exhibit P1) Mr. Guppy, after proposing there by a rent free period, asked him what the plaintiff’s attitude would be to a payment of twelve months rent in advance, Mr. Guppy stating that “he had a tax problem”. Mr. Cooney related that he “spoke to the lessor” who instructed him to obtain the opinion of the lessor’s solicitor, Mr. Brown of Grope Hamilton, that he spoke to Mr. Brown concerning whether “it was legally acceptable to take that as well as the taxation implications” and was told by him that the payment could be accepted. Mr. Cooney said that the solicitor for Solutions Group, Mr. Meister, also said “it would be okay”.
Mr. Bewick said that he did not take part in the negotiations which preceded the Agreement for Lease or the lease itself but he was aware of them from meetings between himself and his co-directors. His evidence is that Mr. and Mrs. Guppy were authorised to conduct the negotiations on behalf of Solutions Group. In cross-examination he was questioned about the payment of rent in advance:-
(Transcript line 20 p483 to line 2 p484)
“Q....... Now at the directors meetings that authorised the Guppys to have these conversations, it was proposed that rent be paid in advance to give Solutions Group a tax deduction. Is that correct.
A. I believe that was the general - yes.
Q...... The advantage to Solutions Group was that the tax deduction would be - or would occur if you like, in the financial year ending June 1992. That’s correct isn’t it.
A.Correct.
Q...... Whereas if the rent had been paid monthly in the year it was due, the calendar year of 1993, the deduction may not have been as advantageous to Solutions Group Australia Pty Ltd, is that correct.
A.As I recall it though, the rent would not have been paid until nine months after occupation, so most of that year would have expired.
Q...... Yes, but the principle was to bring an expense to the company forward so that it was received in a year that would give the company an advantage in its tax return.
A.It would certainly give us a tax advantage, yes.”
(Transcript line 23 p485 to line 31 p487)
“Q....... As part of that process for the taxation advantage, your business required a payment in advance of rent, didn’t it.
A.We offered a payment of rent in advance, it did not require it.
Q...... So you offered and if it was accepted, it gave the taxation advantage that we’ve discussed.
A.It also gave the landlord a very large benefit that he could draw on if he wished. He did not have to accept the offer.
Q...... I’m not denying that, but if you listen to the question. If it was accepted, it would provide your company with an advantage, a taxation advantage.
A.Yes it would.
Q...... That was the full extent of the discussions about the $90,000 wasn’t it. It was offered, if accepted it give the landlord rent in advance and it gave you a taxation benefit, your company.
A.I was not, involved directly in all those negotiations, so I can’t say yes to that question.
Q...... At no stage was it a condition of either you or the landlord, that $90,000 be paid in advance was it, to get the lease.
A.I don’t recall it being a condition on anybody’s part, no.
Q...... So it was a mutual agreement if you like, that gave either side some advantage.
A.I would say that is correct.
Q...... If it had not been accepted, your company couldn’t have brought forward its taxation receipts if you like for want of a better description.
A.And we would have made other arrangements.
Q...... Alemany wouldn’t have perhaps considered your request for a rent free period on your evidence, as favourably.
A.Rent free periods were very, very common at that point and it would be unheard of to lease any building of that amount of rent without a rent free period, there were lots and lots of empty buildings.
Q...... There was always going to be a rent free period.
A.Yes, there was.
Q...... So all we’re dealing with is the landlord receiving a payment in advance which gives him a secure pre-paid tenant and you getting the taxation advantage, your company.
A.That is correct.
Q...... It if hadn’t have been agreed, as I understand it, the premises would have still been suitable and most probably occupied by your company.
A.If the terms had not been agreed to we would probably have looked at one of the other two buildings which were comparable.
Q...... I’m just talking about the $90,000. It wasn’t essential that that must be paid in advance was it.
A.It was not an essential term, no. It was a benefit to the landlord and a benefit to the Solution Group.
Q...... As Mr Cooney said, it was a sweetener and for you it was a benefit. It is hadn’t gone ahead it wouldn’t have stopped you leasing that property.
A.We would have very seriously considered not leasing the property because there were other buildings that we were looking at.
Q...... But as to it being a requirement, it wasn’t the principal requirement. The principal requirement was the term, the amount of rent and the other general terms and conditions, rent review and so on. That’s really what was at issue wasn’t it.
A.You keep saying requirement, it was not a requirement.
Q...... What wasn’t a requirement.
A.The $90,000.”
(Transcript line 15 p488 to line 3 p489)
“Q....... Whilst we might debate about whether or not you may have gone to another building the fact was you never made it a condition that the landlord had to accept the rents in advance did you.
A.No, we did not.
Q...... In return the landlord never made it a condition that it be paid.
A.No, he did not.
Q...... I think at the time that this $90,000 was paid it was agreed that it might be paid in May but in actual fact it was paid very late in that financial year wasn’t it, in June.
A.It was paid on 30 June and that was agreed between all the parties because of the procrastination and the problem with the lease. There was nothing - we did not delay payment, it was just agreed that we would do it at that point.
Q...... No, it wasn’t suggesting that. It was certainly paid in that financial year on 30 June.
A.Correct. As I understand it, the timing of the issue was that we paid the cheque to the land agent on 30 June in order that he could deposit it into his book on 1 July thereby giving them a financial advantage in the following year.
Q...... Was that something Mr Cooney said to you or was that something you understand.
A.That’s something I understand. It was not said to me.”

Earlier in these reasons I set out that part of Clause 18, headed Special Conditions, in Exhibit P2 which included provision for the payment of $90,000 by Solutions Group to the plaintiff to be applied as rent in advance. The lease itself simply acknowledged (Schedule Item 11) that $90,000 had been paid by Solutions Group to the plaintiff “being rent due for the period 1 January 1993 to 31st December 1993”.
It is clear from the evidence of Mr. Cooney and Mr. Bewick that the payment of $90,000 for future rent was proposed by Solutions Group to achieve a taxation advantage for itself and it was a proposition put forward by all the defendants in their capacity as directors of Solutions Group. Provision for it was incorporated into the Agreement for Lease Exhibit P2 in words which made it a term of the Agreement, but even if that provision amounted to a requirement within the meaning of s.58 of the Act and therefore the plaintiff was in breach of that section, in my opinion that fact did not, as the defendants contend, discharge them from their liability under the guarantee.
Section 58 makes it an offence for a person, before a tenant becomes entitled to go into occupancy of premises, to require as rent an amount exceeding, in effect, one months rent, or to require any payment of rent earlier than seven days before the commencement of the period of occupancy in respect of which the rent is payable and it provides that an agreement that imposes an obligation as to the time of payment of rent inconsistent with that section is, to the extent of the inconsistency, void.
The section does not invalidate the agreement in toto or make it illegal and neither does it empower the Court to declare the agreement in toto to be void - it avoids the agreement only to the extent of the inconsistency described. In my opinion the inconsistent part of the agreement was severable (compare Silverton Ltd v Harvey (1975) NSWLR 659) but, subject to that, the agreement is enforceable according to its terms so that although Solutions Group had no enforceable obligation to pay $90,000 for rent in advance it would have been liable for rent for the period of the lease, its obligation for the payment of which would attract the guarantee. In the events which occurred Solutions Group continued in occupation of the premises throughout the year 1st January 1993 to 31st December 1993 the rent for which was paid albeit by means of the lump sum of $90,000. In my opinion payment in that manner did not negate Solutions Group’s obligation to pay rent for the period of its occupation of the premises and the guarantee attached to that obligation.

Air-conditioning; the alleged breach of a covenant

Paragraph 8.4 of the defence alleges that Solutions Group’s business concerned computers:-
“and in particular such business required a stable climatic environment and temperature thereby making the air-conditioning covenant in the lease (“the Air-conditioning Covenant”) an essential term of the lease insofar as (Solutions Group) was concerned which was made known to the plaintiff”.
By Clause 2.8 of the Lease, but subject to Clause 2.11, Solutions Group covenanted “to maintain, replace, repair, cleanse and keep the whole of the Demised Premises ... in good and substantial repair, order and condition ...”. The words “Demised Premises” were defined in Clause 1 which expressly excluded “all air-conditioning plant if any”. By Clause 2.11 (headed “Air‑conditioning”):-
“Notwithstanding anything hereinbefore appearing the Lessee shall clean the filters and at all times properly use the air-conditioning units situated within the Demised Premises and the Lessee shall as at the commencement of this lease pay the cost of any service or maintenance agreement in place in respect of the said air-conditioning units to ensure that the air-conditioning units are properly serviced and maintained. The Lessee shall be obliged to maintain the air-conditioning units in the same order and condition as the units were as at the commencement of this lease subject only to fair wear and tear.”
Clause 4.15 of the Lease provided that the expressed, or statutorily implied, covenants in the Lease “comprise the whole of the agreement between the parties and the parties expressly agree that no further or other covenants, agreement, provisions or terms whether in respect of the Demised Premises or otherwise shall be deemed to be implied herein or to arise between the parties by way of collateral or other agreement by reason of any promise, representation, warranty or undertaking given or made by either party to the other on or prior to the execution hereof and the existence of any such implication or collateral or other agreement is hereby negatived.”
By Clause 5.0 of the Lease:-
“The Lessee acknowledges and declares that no promise, representation, warranty, assurance or undertaking is being given by the Lessor in respect of the suitability of the Demised Premises for any purpose to be carried on therein or to the fittings, finish, facilities and amenities of the Demised Premises otherwise than in this lease contain.”
Section 66 of the Act provides:-
“66.(1)... Where a landlord had, before entering into a commercial tenancy agreement, notice from the tenant that the premises were required for carrying on a particular business, the agreement shall subject to subsection (2) be deemed to include a warranty that the premises will, for the duration of the agreement, be structurally suitable for that purpose.
(2)The warranty referred to in subsection (1) is excluded if the landlord gives notice of the exclusion, in the prescribed manner and form, before execution of the agreement by the tenant.”

Regulation 7 of the relevant regulations under the Act prescribes a form (Form 4) for the purposes of s.66(2) and requires that a notice in that form is to be “inserted immediately above the place provided for the tenant’s signature in the document referred to in s.62(1) of the Act.” Such a notice, and in the stipulated position, is contained in the Lease. “Premises” is defined in the Act to include “(a) any part of premises and (b) land and appurtenances appurtenant to premises and (c) unimproved land.”

If the air-conditioning is to be regarded as part of the structure of the premises then the warranty in s.66(1) of the Act has been effectively excluded. If the air-conditioning is not part of the structure then such obligations as the plaintiff had with respect to the air-conditioning must be found to be expressed or implied within the terms of the lease.
The general rule is that there are no implied covenants by a lessor that premises are fit for the purpose for which they are let. Manchester Bonded Warehouse Co. v Carr (1880) 5 CPD 507. The tenant takes the premises as they are and in the absence of fraud the landlord can only be held liable to the tenant where he has expressly warranted the suitability or the condition of the premises or has expressly agreed to repair and been given notice of disrepair by the tenant; Manchester Bonded Warehouse at p.511.
Here, Solutions Group covenanted to repair etcetera the Demised Premises and, inter alia, the plaintiff’s plant, but Solutions Group was not liable in respect of any structural maintenance replacement or repair unless it was made necessary by any act or omission of Solutions Group, or by the use of the Demised Premises “notwithstanding that such use of the Demised Premises may be within the scope of the permitted use”.
There is no evidence, or suggestion, of fraud on the part of the plaintiff.
Mr. Cooney admitted that in the Report, of which Exhibit P40 formed part, there was some advice to the effect that the air-conditioning breached some provisions of the Occupational Health and Safety Act or the Building Code or both. That was elicited from him in cross-examination. Mr. Bewick sought to tender the whole of the Report; counsel for the plaintiff objected and I ruled that unless it be by agreement the Report could not be received as evidence of its contents unless the author of it were called. That was not pursued by Mr. Bewick.
In cross-examination Mr. Cooney said he understood (I infer before the Agreement for Lease was executed) that Solutions Group sold computers and provided software and network services to a number of councils and others. He said he did not know and was not made aware what type or number of computers there would be on the premises after Solutions Group took possession. He stated that, particularly because matters concerning air‑conditioning was a topic of negotiations, he “would have” given Solutions Group the opportunity to investigate by its own architects or engineers its requirements for air‑conditioning. He was questioned about his knowledge of the capacity of computers to generate heat; he admitted to believing there were tolerances within which they work, but in my view it is apparent that his knowledge of computers or their function is very limited as his explanation about the concept of a computer “crashing” demonstrates.
Mr. Cooney said and I accept that during the occupancy of the previous tenant of the premises he was not aware of any inadequacy concerning air‑conditioning.
Mr. Bewick’s evidence was that the preferred ambient temperature within a building for satisfactory operation of computers is 22 degrees Celsius and if the temperature exceeds 28 degrees Celsius mainframe computers would overheat and shut down. He did not say that he, or any person on behalf of Solutions Group, made this information known to the plaintiff either through Mr. Cooney or anyone else and neither did he suggest it was made known to the plaintiff what number or kind of computers would likely be used in the premises. He described that the air-conditioning in the premises was not able to cope when the outside temperature exceeded 35 degrees Celsius, that that occurred on six occasions in the summer of 1992/1993 and that he was aware of what he judged to be the unreliability of the air-conditioning at the time the lease was signed.
Through Mr. Bewick’s evidence the defendants case on the issue of the alleged essential term came down to pointing to the permitted use of the premises, expanded perhaps by what Mr. Cooney may have seen in the period between 31st March 1992 to the date the lease was signed, of the number of persons working in the premises and the number of computers available for use there.
The evidence is wholly inadequate to suggest, let alone prove, that air‑conditioning to any particular standard or capacity suitable for Solutions Group’s permitted use of the building was a term, expressed or implied, of the Lease. As appears from Exhibit P43 the plaintiff paid for work in relation to the maintenance or repair of air‑conditioning. I am not satisfied that the plaintiff should have investigated the adequacy or efficiency of the air‑conditioning prior to August 1994 when it sought a report. After the receipt of the report, in my view, the plaintiff proceeded with reasonable speed to give effect to it.
I reject the defendants’ submission that the plaintiff’s acts, or omissions to act, or delay in acting, in relation to the air‑conditioning amounted to a repudiation of the lease by it.
The defendants assert that the withholding by Solutions Group’s sub‑tenants of rent due to Solutions Group in November and December 1994 because of the sub‑tenants dissatisfaction with the air‑conditioning caused Solutions Group to suffer financial loss which resulted in it failing to pay rent with the ultimate consequence the Lease was terminated by the plaintiff. It is unclear on the evidence what rent Solutions Group’s sub-tenants were paying but in any event it is apparent from Mr. Bewick’s evidence that Solutions Group by December 1994 was already in financial difficulties because of unpaid debts due to its creditors, including an amount of some $46,000 owing to the Commissioner of Taxation, which it is not and could not be suggested were attributable in any way to the deficiency in the air‑conditioning.
Furthermore, Mr. Bewick (I presume with the authority of each of the other defendants) had the carriage of Solutions Group’s application to the Commercial Tribunal in February 1995 which resulted in the consent order Exhibit P1. Mr. Bewick and Mr. Guppy were directors of Solutions Group at that time; the other two defendants had resigned when another person became a director. In my opinion it is impossible for the defendants to claim that they were prejudiced by the resolution of that dispute which entirely concerned the air‑conditioning; certainly Mr. Bewick was instrumental, as a director of Solutions Group, in bringing about that result and there is no evidence that any other defendant did not know or approve of that course.

Plaintiff failed to provide a statement of operating expenses

Section 62A of the Act provides:-
“62A.(1)... Where a tenant is or is to be required to pay any amount in respect of operating expenses, the landlord must give to the tenant a written statement setting out-
(a)the nature of those expenses; and
(b).... estimates of the amount of the tenant's liability in respect of each separate category of those expenses over each accounting period.
Penalty: Division 9 fine.
(2) The estimates referred to in subsection (1) must be given-
(a).... in relation to a commercial tenancy agreement entered into before the commencement of this section-within one month of the commencement of the first accounting period and thereafter at least one month before the commencement of each successive accounting period; or
(b)in relation to a commercial tenancy agreement entered into on or after the commencement of this section-before it is entered into and thereafter at least one month before the commencement of each successive accounting period.
(3)... A landlord must, within three months of the expiration of an accounting period, give the tenant a written statement, certified by the landlord or his or her agent to be correct, setting out, under each separate category of operating expenses, the amount actually incurred by the landlord, and the amount payable by the tenant, for that period. Penalty: Division 9 fine.
(6) A statement may be given to a tenant under this section-
(a).... personally; or
(b)by leaving the statement at the business premises of the tenant with a person apparently employed by the tenant; or
(c).... by posting the statement to the tenant at his or her business addresses or last known residential address.”

“Operating Expenses” is defined in s.54 of the Act to mean expenses that may be recovered by a landlord from the tenant under a commercial tenancy agreement; they include any fees charges or levies chargeable by a council or a statutory authority for services provided to land or premises, or insurance costs.

Solutions Group, by Clause 2.2 of the Lease, covenanted to pay water and sewerage rates and council rates and by Clause 2.27 to insure the premises.
Mr. Cooney’s evidence was that Solutions Group effected insurance with an insurer of its own choosing and which sent premium accounts to Solutions Group, and that in relation to water and sewerage rates and council rates he believed the accounts for those were sent to Solutions Group by the relevant authority pursuant to an arrangement he made with Solutions Group as a matter of convenience to avoid “double handling”. Mr. Bewick could not refute that such an arrangement had been reached with Solutions Group and he accepted that Exhibit P9 which sets out the E&WS and council rates for the 1991/1992 financial year had been provided to Solutions Group and as I infer on about the date of that document, 31st January 1992.
The plaintiff’s obligation under s.62A was to:-
1...... give to Solutions Group before the lease was entered into and at least one month before the commencement of each accounting period (a phrase defined in s.62A(8)) an estimate of the operating expenses.
2.within three months of the expiration of an accounting period give to Solutions Group a written statement, certified by the plaintiff or its agent to be correct, setting out for each category of operating expenses the amount incurred by the landlord and the amount payable by Solutions Group.
From Mr. Cooney’s evidence concerning the arrangement reached with Solutions Group for the payment of rates the plaintiff did not comply with s.62A particularly sub-section (8) of that section. However the consequence of the failure to comply is prescribed by the Act to be a fine. Sub-section 4 of s.62A makes it clear that if the tenancy agreement so provides a landlord is entitled to payment of operating expenses by the tenant when they have fallen due for payment, and in my opinion there is no substance in the claim that the failure of the plaintiff to provide a statement of operating expenses released the defendants from or otherwise effected their liability under the guarantee and indemnity.
Mr. Bewick said that on an occasion in 1995 prior to 27th April 1995 and also by letter to the plaintiff on that date, he sought a “reconciliation” of payments made by Solutions Group to the plaintiff. The letter is Exhibit D44. It is plain from the content of the letter that Mr. Bewick on behalf of Solutions Group wanted to know how the sum claimed in the notice of demand dated 27th April 1995 (Exhibit P16) was made up. He explained in evidence that Solutions Group’s records had been kept in Perth until they were returned to Mr. Bewick in Adelaide in February 1995 and he implied that the records were insufficient or inadequate for him to satisfy himself what was due to the plaintiff. The explanation he sought was confined to rent and dishonoured cheque fees; operating expenses were not mentioned. Accordingly the plea (paragraph 8.1 of the defence) that when requested by Solutions Group the plaintiff in breach of the lease failed to, inter alia, provide a reconciliation of outgoings is not made out and the claim that the alleged failure discharged the defendants from their liability under the guarantee and indemnity must fail.

Termination, re-entry and distraint

Section 440C of the Law provides:-
“440C....... During the administration of a company, the owner or lessor of property that is used or occupied by, or is in the possession of, the company cannot take possession of the property or otherwise recover it, except:
(a).... with the administrator’s written consent; or
(b)with the leave of the Court.”
By s.435C the administration of a company begins when, inter alia, an administrator is appointed under s.436A. As I recorded earlier in these reasons the plaintiff now admits that Solutions Group duly appointed an administrator at about 5pm on 16th May 1995, and it is the fact that the plaintiff obtained neither the administrator’s written consent nor the leave of the Court to re‑enter the premises or to distrain upon Solutions Group’s goods.
Section 441F operates to negate the effect of s.440C:-
“... if, before the beginning of the administration of a company, a receiver or other person;
(a).... entered into possession, or assumed control, of property used or occupied by, or in the possession of, the company; or
(b)exercised any other power in relation to such property;
for the purpose of enforcing a right of the owner or lessor of the property to take possession of the property or otherwise recover it.”
In Tymray v Mercantile Mutual Life Insurance 13 ACSR 111 a company was the tenant of premises which were the subject of a registered mortgage from the lessor to the mortgagee. Following default under the mortgage by the lessor, the mortgagee gave notice to the company claiming possession of the premises and requiring the company to pay the rent to the mortgagee. The company subsequently fell into arrears of rent and the mortgagee in three separate letters to the company in January and February 1994 demanded payment of the outstanding rent and threatened eviction in the event of non‑payment. On 10th March 1994 the company appointed an administrator pursuant to s.436A. The mortgagee was unaware of that appointment and on 11th March 1994 the mortgagee took physical possession of the premises in purported exercise of the right of re‑entry for non‑payment of rent. The Court (McLelland CJ in Equity) rejected the mortgagees argument that the three letters it had sent to the company constituted the exercise of a relevant power in relation to the premises for the purposes of s.441F, finding that:-
“Those letters had no legal effect under the terms of the lease or otherwise. No demand was required to trigger a right of re‑entry, and the letters were not written in the exercise of any “power”.”

He held that on the assumption the commencement of the administration preceded the entry by the mortgagee, the entry was unlawful although he specifically noted there was no evidence that the mortgagee was aware of the administrators appointment.

Clause 4.1.2 of the Lease provides that if the rent or any part of it is unpaid fourteen days after the date for payment then although there has been no formal or legal demand therefor the lessor had the right to re‑enter the premises. However by s.10 of the Act a right of re‑entry under a stipulation in a lease for a breach of any covenant or condition is not enforceable by action or otherwise unless a notice specifying the breach is served upon the lessee and the lessee fails within a reasonable time to remedy the breach if it is capable of remedy. Here the plaintiff served upon Solutions Group a notice dated 27th April 1995 pursuant to s.10 of the Act (Exhibit P16) requiring the breach, the failure to pay rent, to be remedied by 12th May 1995. Is the giving of such a notice the exercise of a power for the purposes of s.441F of the Law, the date of the giving of which was before the administration of Solutions Group began?
The right to re-enter arose under the lease upon rent being unpaid for fourteen days. In my view the right to re-enter is to be equated with a power to re-enter and take possession of the premises, but that power cannot be exercised unless a notice complying with s.10 of the Act is first given to the lessee, that is the power to re-enter could only be triggered by that means. In the absence of such a notice the plaintiff could not exercise the right to take possession of the premises; in my view the giving of the s.10 notice was the exercise of a power in relation to the premises for the purpose of enforcing the plaintiff’s right to possession. The notice was given before the administrator was appointed. In my opinion s.441F of the Act preserved the plaintiff’s right to take possession of the premises.

100 I note that Clause 15(3) of the DOCA provided that unless otherwise expressly provided nothing in that document affected the rights of a lessor of property, in the possession of Solutions Group or the administrator, to recover the property. In view of the conclusion I have reached it is not necessary to consider the effect of Clause 15(3) on the events the subject of these proceedings.

The plaintiff refused access to Solutions Plus’ goods

101 Mr. Cooney identified Exhibit D59 as a copy of the notes he made in meetings with Mr. and Mrs. Guppy, or one of them, before the Agreement for Lease Exhibit P2 was executed. In that note there appeared “Solutions ~~Plus~~ Group” and “Ehud Pty Ltd as trustee for the Solutions Group Unit Trust”.

102 Mr. Cooney said that he was not informed that Solutions Plus Pty Ltd was a sub-tenant of the premises until the day, or a few days after, the plaintiff re-entered the premises although he had seen the name of Solutions Plus “on the outside of the building”, and that before the day of re-entry he “knew” Mr. Bewick was a director of it and believed it was “a related company, a related trading name”. His evidence concerning Bar Bar Pty Ltd was that he did not learn of the existence of that company until Mrs. Guppy telephoned him after the day of re-entry and laid claim on behalf of Bar Bar Pty Ltd to certain goods the plaintiff had distrained against.

103 Mr. Cooney was cross-examined concerning his note Exhibit D59 and his knowledge of Solutions Group Pty Ltd:

“Q...... Can you read to the court please the first line of that note.
A...... Yes, there is three words. The first word is ‘Solutions’. The second word is ‘Plus’, which is crossed out. The third word is ‘Group’.
Q.You did not know about the existence of Solutions Plus Pty Ltd.
A...... No.
Q.In 1992.
A...... No, I didn’t.
Q.You have given evidence that you knew that the company called Solutions Group Australia Pty Ltd was to be formed by the joining of two other companies, did you not.
A...... Yes.
Q.What were those two companies.
A...... Well, there is one company actually, in fact, on the same note paper that I have in front of me. It was Ehud Pty Ltd as trustee for Solutions Group Unit Trust.
Q.That is not the question that I asked you.
A...... They were not two companies, no.
Q.You weren’t aware of Custom Connection Company or Custom Cable Company.
A...... I was aware of that as a company but not as a joining together. It was told to me - what I relied on was the name for the lessee which was Ehud Pty Ltd, because when Solutions Plus Group - the first line I have just referred to, when ‘Plus’ was crossed out, I only knew those as I perceived as a trading entity. The lessee company - and I’m conversant with the fact that if a lease has to be signed it has to be a legal entity - it would have to be a company or an individual. Solution Group I would not accept as a tenant.
Q.The name of the company at that time was not Solutions Group, it was Ehud Pty Ltd.
A...... The information was given to me. I didn’t create it.
Q.Why would you have written Solutions Plus, crossed out ‘Group’ on top of that note.
A...... That was what was related to me. It is not Pty Ltd. What I am suggesting to you is that because it is not a Pty Ltd company, I cannot accept it as a tenant.
Q.I am not expecting you to answer that. I am simply asking you were you aware of the existence of Solutions Plus Pty Ltd.
A...... No.
Q.Were you aware of a company colloquially called Solutions Plus.
A...... Yes.
Q.Was it reasonable to assume that they are the same entity.
A...... Pty Ltd was never put to me, so it was a trading entity, if they existed at all.
Q.Did you assume that -
A...... There was a distinct difference in my mind if they existed, but Solutions Plus was crossed out. We never pursued any further with that. I was looking for the lessee to tell me who they would like to trade or who would be the tenant. I was not interested as to what might have been occupants of the building at that stage.”

104 He was pressed further (to page 286) and denied knowledge of Solutions Plus Pty Ltd before 17th May 1995. I accept his evidence on the topic; in my view his evidence was consistent and credible.

105 Mr. Bewick related that Solutions Group (formerly Ehud Pty Ltd) was the vehicle by which he and his wife joined with Mr. and Mrs. Guppy for the purpose, inter alia, of the Australian Submarine Corporation Contract. The commercial or other relationship of Solutions Plus and Custom Cable Company to or with Solutions Group was not made clear to the court, but I infer that the first two companies continued to be controlled by Mr. and Mrs. Bewick and Mr. and Mrs. Guppy respectively. However, it is clear from Exhibit P39 that the only sub-tenants of the premises of whom the plaintiff or Mr. Cooney was aware prior to 17th May 1995 were HL, MIS, Leisure Time Project Management and Alpha Bridge Pty Ltd;. I accept Mr. Cooney’s evidence that there was no distraint upon the goods of any of those sub-tenants.

106 Mr. Bewick said that when he attended at the premises on 17th May 1995, and learned the plaintiff had re-entered, he informed Mr. Cooney that, acting in his capacity as an employee of Solutions Plus, he demanded access but it was refused on the grounds “they were a related company” (page 472).

107 Mr. Cooney denied that Mr. Bewick asked him for access, explaining that he (Mr. Cooney) was at the premises as an observer only leaving to Mr. Hook that which was Mr. Hook’s task as the holder of the warrant to distrain. Mr. Cooney agreed that there were discussions between him and Mr. Bewick concerning property belonging to Solutions Plus and he said that Mr. Bewick did “wander around the building” and so had access.

108 The Act provides, by ss.19 and 22, the procedure for a person other than the immediate tenant to claim that goods against which a landlord levies, or threatens to levy, distraint for arrears of rent are the property of or are in the lawful possession of that person. It is not clear whether Solutions Plus adopted that procedure (although there is no evidence it was adopted on the day of re‑entry) but in any event Mr. Bewick agreed that on about 16th June 1995 after exchanges (subsequent to 17th May 1995 as I infer) between the plaintiff’s solicitors and an accountant engaged by Mr. Bewick, such of the goods, distrained against by the plaintiff, as were shown to be the property of Solutions Plus were delivered into its possession. In my opinion the claim that a refusal to permit Solutions Plus access to its goods in the premises on 17th May 1995 negated or reduced the liability of the defendants under their guarantee must be dismissed.

That the actions of the plaintiff caused Solutions Group to “lose” a potential investor

109 Mr. Cooney thinks he has a memory of being told by Mr. Bewick on the occasion of the proceedings before the Commerical Tribunal which resulted in the consent order Exhibit P1, that investors were being sought to inject capital “into the business”, and as I understand his evidence on later occasions in telephone conversations between him and Mr. Bewick in the period after the date of the consent order and the demand for arrears of rent, Mr. Bewick told him that finance was being sought “for the business”.

110 Mr. Bewick in his evidence related that the months of December and January were particularly bad for Solutions Group and in early 1995, as he had foreseen, it was having “cash flow problems”, and there were unpaid creditors, to try to deal with which there were attempts to seek out equity investors, approaches to banks for loans and discussions with creditors concerning payment of their accounts. He related that in early May 1995 he journeyed to Brisbane and spoke to a Mr. Guireck about that gentleman investing up to $70,000 in Solutions Group. The discussions canvassed, amongst other things, what Mr. Bewick described as “quarantining” Solutions Group’s debts from any investment Mr. Guireck might make in Solutions Group which led to the topic that Solutions Group be placed in administration. Mr. Bewick said that he returned from Brisbane and on 16th May 1995 he had lengthy discussions over the telephone with Mr. Guppy, obtained advice from Mr. Martin an accountant and it was decided to put Solutions Group into administration, which was accomplished that day by the appointment of Mr. Broome as administrator. The next day, Mr. Bewick said, he learned that the plaintiff had re-entered the premises and “... the investors we were talking to in trying to obtain finance for the company were obviously then informed and that ended any negotiations with them as regard to investing in Solutions Group”. He related that in the first week of June 1995 Solutions Group was offered a contract for which it had previously tendered to supply network infrastructure to the State Tax Office in Western Australia to a value in excess of $250,000 but:

“As we had no access to the goods that were distrained we could not service this contract and we were unable to accept appointment to that contract. The office in Perth, Western Australia, was closed and all the employees there were retrenched and there were two contracts at this point, one with IBM for supply of back-up services to Santos Petroleum and another one for services to the Australian Submarine Corporation in Garden Island, Western Australia”.

He said the administrator completed those latter contracts in the following fourteen months but they were not renewed.

111 The evidence does not support, and it is not alleged, that in any of the conversations between Mr. Bewick and Mr. Cooney, or anyone else on behalf of the plaintiff, that the plaintiff represented or misled or otherwise lulled Solutions Group, Mr. Bewick or anyone else into the belief that to permit Solutions Group to search for investment in or loans to it the plaintiff would not exercise its rights to re-enter the premises arising upon the notice of demand for unpaid rent pursuant to the lease. The defendants’ claim is that as a consequence of the re-entry a prospective investor ended any further negotiations with Solutions Group with the consequences related by Mr. Bewick. In my opinion those events could not impair the plaintiff’s rights against the defendants upon their guarantee, unless the plaintiff’s actions on the 17th May 1995 were unlawful. For the reasons I have set out earlier, they were not unlawful.

That the plaintiff is precluded from enforcing the guarantee by reason of the terms of the DOCA

112 By paragraph 27 of their defence the defendants plead that pursuant to Clauses 19 and 20 of the DOCA the plaintiff’s claims against Solutions Group were “released, discharged, satisfied and extinguished” and that the DOCA was an absolute bar to any debt of, or claim against, Solutions Group arising on or before 16th May 1995 whether or not the debt or claim was admitted pursuant to the provisions of the DOCA or any dividend was paid in respect of the claim.

113 The general principle is that, a guarantor’s engagement to pay being accessory to the principal debtor’s obligation, whenever the principal debtor is discharged not only by actual payment but also by a release the guarantor is discharged likewise, but that principle:-

“.... does not extend to a discharge of the principal debtors personal liability by operation of law when the discharge is for the purpose of liquidating his affairs or transforming the rights of the creditor against him into rights against or in respect of his assets. The doctrine should be understood to look rather to the continuance of a just claim and the creditor to receive payment in respect of the principal debtors obligation than to the latters relief from actual personal liability”.

McDonald v Dennys Lascelles Ltd (1933) 48 CLR 457 per Dixon J at page 480.

114 In Hill v Anderson Meat Industries Ltd (1971) 1 NSWLR 868 a company proposed a scheme of arrangement with it’s creditors. A statutory majority of the creditors, required by the Companies Act, agreed to the scheme which was subsequently approved by a formal order of the court. The plaintiff was an unsecured creditor of the company pursuant to an agreement by the company to repay to the plaintiff monies lent by her to the company, the re-payment of which the defendant had guaranteed. The plaintiff voted against the scheme. A clause (Clause 3) in the scheme of arrangement extinguished and discharged all debts or claims of unsecured creditors of the company. The plaintiff made demand upon the defendant pursuant to the guarantee. The question was whether the defendant was bound as guarantor to pay the plaintiff the amount the company had agreed to pay her. Street J wrote (at page 875):-

“It may be conceded that the present scheme contains an express provision that the creditor’s claims will be forever extinguished and discharged. They are, however, replaced with a right to prove and receive a dividend of sixty cents in the dollar from the trustees of the scheme. The scheme appears to me to fall squarely within the general statement of Rich J in McDonald v Dennys Lascelles Ltd: ‘In cases in which the bankruptcy law, or the law relating to the winding up of companies, or the law authorising compromises and schemes of arrangement among shareholders and creditors of companies, absolves the principal debtor from liability, the object is not to disentitle the creditor from the benefit which the principal obligation was intended to secure, but merely to change the nature of his right, in the interests as well as himself as of all others who have claims of like degree against the debtor.

He held that the discharge of the company by the scheme of arrangement did not release the defendant as guarantor.

115 In another case (Kemsley & Co v Anderson Meat Industries) heard and decided at the same time by Street J, and contained in the same report Kemsley & Co voted for the scheme. Street J wrote (page 877):-

“At first sight this might appear to place Kemsley & Co in a different category from Mrs. Hill. It was, however, made clear by the Court of Chancery Appeals in exparte Jacobs (22) in the extract I have quoted above, that support by the creditor of the proposed scheme at the meeting of creditors does not operate to discharge the guarantor. This circumstance is as irrelevant as is any suggestion that the scheme does not contain any reservation of rights against sureties (see re London Chartered Bank of Australia (23) ).”

116 By s.444D(1) of the Law a deed of company arrangement binds all creditors of the company, so far as concerns claims arising on or before the day specified in the deed under s.444A(4)(i).

117 Section 444H of the Law provides that a deed of company arrangement releases the company from a debt only in so far as the deed provides for the release and the creditor concerned is bound by the deed. Clause 19 of the DOCA provides:-

“Upon distribution or issue to the Unsecured Creditors of everything that might be distributed or issued to them under Clause 11 hereof or upon the Administrators declaration of a final distribution to Creditors pursuant to the Arrangement (whichever is the first to occur) all Unsecured Creditors Claims against the Company as a result of anything done or omitted by or on behalf of the Company before the Admissible Claim Date shall hereby be fully and effectually forever released, discharged, satisfied and extinguished.”

118 The evidence of Mr. Broome, the administrator, is that no divided, or I infer distribution, was made to creditors.

119 In my opinion the release or discharge of Solutions Group from debts or claims arising on or before the Admissible Claim Date did not release the defendant from their guarantee. In my view, by analogy with the cases to which I have referred, the release or discharge of Solutions Group was by way of operation of law.

120 In any event the guarantee contains the following clause:-

“2.1.. that this Guarantee and Indemnity shall be a continuing Guarantee and shall not be affected by:
....
2.1.5The fact that the Lessee may be discharged from liability to pay the total rent and any other sum paid by the Lessee pursuant to the Lease for any reason other than the payment of the total rent and any other sum paid pursuant to the Lease have been made to the Lessor and to such extent as it may be necessary to give effect to this sub-clause this Guarantee and Indemnity shall be treated and construed as an Indemnity the Guarantor Hereby Indemnifies the Lessor in respect of any failure by the Lessee to pay the total rent and any other sum due pursuant to the Lease.”

121 I turn to the plaintiff’s claim.

A. Unpaid rent and damages by way of loss of rent

122 By Clause 2.1 of the lease Solutions Group covenanted to pay rent throughout the term of the lease. The term commenced on 31st March 1992 and, subject to extension at the option of Solutions Group, expired on 30th March 1997.

123 The plaintiff was entitled to re-enter the premises and repossess them in the event, inter alia, rent was unpaid for fourteen days; re-entry and repossession were without prejudice to any rights of the plaintiff to arrears of rent, for breach of covenant or for damages (Clause 4.1.2). By Clause 4.1.4 Solutions Group covenanted to compensate the plaintiff for any breach of an essential term of the lease and that clause entitled the plaintiff to damages from Solutions Group in respect of such breach. Clause 2.1 of the lease was identified as an essential term (Clause 4.1.1). I am satisfied that Solutions Group was in breach of Clause 2.1 of the lease. It follows that the plaintiff is entitled to recover unpaid rent to 17th May 1995 and thereafter damages for breach of Clause 2.1 of the lease; Shevill v Buildins Licensing Board (1982) 42 ALR 305.

124 The rent was $90,000 payable in advance by twelve equal monthly instalments on the first day of each month. By Clause 4.9 of the lease provision is made for increases in the rent upon review on, and payable from, the first day of July in each of the years 1994, 1995 and 1996, the increase to be either as agreed between the plaintiff and Solutions Group or, failing agreement, the higher of a rent determined by a licensed valuer or by a formula (the CPI increase) in each case as prescribed in Clause 4.9 of the lease. The rent was increased, according to the formula in 4.9.2 on 1st July 1994. The plaintiff claims damages based upon the formula in Clause 4.9.2 with respect to the years commencing 1 July 1995 (3.8 percent) and 1 July 1996 (4 percent).

125 By their defence the defendants admitted the review of the rent for the period commencing 1st July 1994 (the rent was increased (see Exhibit P15) to $7,800 per month, $93,600 per annum, which Solutions Group paid and did not dispute) and admitted that, if the lease had remained on foot the rent would have been reviewed, increased and payable at the rate of $8,424 per month from 1st July 1996. As to the twelve month period commencing on 1st July 1995, the court has, by consent, a letter dated 21st December 1998 from the Australian Bureau of Statistics setting out information which supports the plaintiff'’s claim that were the lease to have remained on foot the rent would have been increased by 3.8 percent, or to $8,100 per month.

126 I am satisfied that the unpaid rent, and the rent which would have been payable by Solutions Group were the lease to have remained on foot, to 10th October 1995 totalled $55,700 less $10,460.73 received by the plaintiff from MIS and HL (Solutions Group’s sub-tenants at the time of re-entry) between 1st June 1995 and 31st August 1995, a balance of $45,239.27.

127 On 10th October 1995 the plaintiff’s secured a tenant (Aspect Computing Pty Ltd) for the whole of the premises at a rent of $7,916.67 per month. The plaintiff claims as damages the difference between what it received by way of rent from Aspect and what it would have received from Solutions Group, a total of $6,215.94 to 30th March 1997,

128 I am satisfied that the plaintiff took all reasonable steps to mitigate its loss by seeking to obtain another tenant, but it was unsuccessful until Aspect agreed to take the premises.

129 The total under this head which I allow is $51,455.2.

B...... Dishonour fees paid on Solutions Group’s unpaid cheques tendered for rent

130 Mr. Cooney said that two cheques paid by Solutions Group for, or towards, arrears of rent were dishonoured, one of them twice, in respect of which the agent’s bank charged $10 for each of the occasions the cheques were dishonoured. The agent, that is Myles Pearce, charged those fees to the plaintiff and also charged the plaintiff a fee of $10 for the work involved for each reversal in the plaintiff’s account with Myles Pearce made necessary by the dishonour. The plaintiff claims the sum of $60 is damages pursuant to Clause 4.1.4 of the lease. In my opinion either pursuant to that Clause or Clause 2.4.6 the plaintiff is entitled to succeed.

C. Water and Council Rates and Building Insurance

131 By the terms of the lease Solutions Group covenanted to pay water rates and council rates (Clause 2.2) and to insure the premises in the joint names of Solutions Group and the plaintiff (Clause 2.27). Solutions Group, I find, failed to pay water rates for the third and fourth quarters of the year 1994/95 and for the first quarter of the year 1995/96 in breach of its covenant. The plaintiff also claims damages on account of the insurance of the premises that it effected for the period 1st July 1995 to 30th September 1995 (after that date Aspect obtained the relevant insurance), and also damages representing water and council rates paid by the plaintiff in the period 1st July 1995 to 30th March 1997 which Solutions Group would have paid if the lease had remained on foot; the plaintiff I find was unable to obtain Aspects’ agreement, in its lease of the premises, to pay council and water rates. The sum of these various amounts is $12,291.73 which I allow.

D. Legal costs occasioned by Solutions Group including the costs of distraint

132 The plaintiff called its solicitor Mr. Brown who gave evidence (and produced copies of his records) concerning the work he, or his firm, did, the time expended and the rate per hour for those services all of which he deposed was incurred by the plaintiff with his firm in and about the demand for arrears of rent, the re-entry and the distraint including attendances in connection with matters raised by the administrator, and claimants to some of the goods distrained. He also deposed that his fees were charged upon the basis of a fee agreement with his firm; the fee agreement was not produced but I accept his evidence both as to that fee and that the work done was reasonably necessary for the protection of the plaintiff’s interests pursuant to the lease in exercising its rights against Solutions Group. In my opinion the plaintiff is entitled to the costs it incurred (see Exhibit P37) with its solicitor for those purposes - see Clause 4.1.5 of the lease. The total is $3,088.50, after deducting a charge for the preparation of the lease to Aspect which is not recoverable from Solutions Group, and is recoverable from the defendants.

E. Reidel fee for effecting entry and distraining

133 These are comprised in Exhibit P34, in the sum of $1108. There was no real dispute concerning this cost. I assess it in the sum claimed - $1108.

F. Cleaning, painting, maintenance and repairs

134 These claims are contained in paragraphs 33.17 to 33.21 inclusive of the Statement of Claim. Solutions Group covenanted, by Clauses 2.8, 2.12 and 2.13 of the Lease, to maintain, replace, repair and cleanse the demised premises; by Clause 2.10, to paint the painted surfaces of the interior of the demised premises immediately prior to the expiration of the initial term and by Clause 2.11 to service and maintain the air‑conditioning units.

There is evidence to satisfy me of, and Mr. and Mrs. Bewick admitted (page 159), items 33.17, 33.18 and 33.19, a sum of $300 for garden maintenance, $108 for general cleaning and $140 for carpet cleaning respectively which will be allowed in the sum of $548. Items 33.20 and 33.21 were put in issue by Mr. and Mrs. Bewick.

136 Item 33.20 is a claim in the sum of $3,750 for “painting, maintenance and repairs - ground floor”. That amount comprises part of the account of G&HK Scamoni Exhibit P23.

137 Mr. G. Scamoni gave evidence. He said that he was called in by Mr. Cooney. This was after the plaintiff had re-entered. Together they inspected the premises and the work needed to be done; he described it to be removal of “excess” electrical, computer and Telecom cabling, making good, repairs to brickwork and painting which he carried out for the price of $3,500, $400 of which he said related to the removal of cabling. He said that the walls (I infer he meant all the painted surfaces) which he prepared and painted were not in a bad state of repair but all had to be repainted - re‑touching was not sufficient. A further charge of $200 concerned the removal, cleaning and replacement of air returns in the air‑conditioning system. He said the work was carried out in the course of other works he was engaged to do by Aspect (the new tenant).

138 Mr. Scamoni was taxed at some length about the kind and the position of the cabling he removed and the need to remove it. He said it was mainly data cabling. As to the painting, he commented that he had recently repainted the interior of the premises for a price of $3,000, applying one coat of paint.

139 There is no challenge to Mr. Scamoni’s competence or the accuracy of his evidence, and I am satisfied that it was reasonably necessary for the works to be carried out so that the plaintiff could relet the premises. I allow $3,750.

140 Item 33.21 is a claim for servicing air‑conditioning.

141 In anticipation of Aspect going into possession of the premises the plaintiff arranged an inspection of the air‑conditioning system following which work was done upon the system by JPM Mechanical Services Pty Ltd (JPM) at a total (quoted) cost of $10,730 (Exhibit P22). Mr. Cooney said that he had no records to show that Solutions Group had regularly serviced the air‑conditioning system, so he asked JPM “to advise what sort of costs would be involved in just checking the system and reporting on the system” (page 166); he was not given a quotation but was told a price of “approximately $500 ... just to examine the units, clean the filters”. Mr. Cooney said he authorised that that service be performed, but no account for $500 was produced by him or in the plaintiff’s case. Mr. Cooney said the $10,730 paid to JPM was in addition to the $500 for the service, however, in the absence of even an account for the service, and that a sum of $200 was charged by Scamoni for cleaning parts of the air-conditioning system I am not satisfied upon the evidence that the plaintiff has proved its claim for $500.

G...... A claim for portion of the agent’s fee paid by the plaintiff for re-letting the premises

142 The amount claimed is $5,123.13 “half share of agent’s fees to re-let the premises”. As I understand it, one half of the re-letting fee was charged to the new tenant Aspect (page 206).

143 Mr. Cooney gave evidence of the recommended fee within the Real Estate industry. However, in my opinion, the plaintiff is entitled to damages under this head not for the fee, or even one half of it, but only to the loss suffered by the earlier payment of it than would otherwise likely have been the case. Solutions Group’s lease of the premises was for five years unless it extended the lease. Mr. Broome’s opinion was that the premises were too large for Solutions Group’s requirements, and I infer that was Mr. Bewick’s view as well. It is more likely than not that Solutions Group would not have extended the lease at the end of the initial term. Therefore the plaintiff would have incurred a fee for re-letting in March 1997. On the footing that the nett re‑letting fee paid by the plaintiff would have been approximately $5,000 in March 1997, the plaintiff’s loss is the difference between that sum and its present value at September 1995. The Court does not have evidence of the present value of $5,000 payable in “n” years at any particular rate of interest, but from the table in Luntz; Assessment of Damages (Third Edition) the calculation, at 7 percent compound interest payable in two years, is a difference of $287. I will round it up to $300 having regard to the period being less than two years and that a lower rate of interest may have been warranted.

H. Fee paid to Panel Kerr Forsters dealings with the Administrator

144 The claim is for $200 which, as I understand, was substantially for a Miss Orr’s fees for attending meetings of creditors of Solutions Group on behalf of the plaintiff. There is no satisfactory evidence as to how it was that he plaintiff reasonably required Miss Orr’s services as an incident of Solutions Group breach of the lease. The plaintiff’s claim for this item fails.

Maintenance/Service cost for air‑conditioning

145 The plaintiff claims as part of its damages the cost of servicing air‑conditioning in the premises for the period 1 October 1995 to 30 March 1997 which would have been paid by Solutions Group had the lease continued on foot but which Aspect had no obligation to pay under the terms of its lease (Exhibit P29). Mr. Cooney said he made an allowance of $2,000 per annum in respect of that (pages 199 and 204); for the relevant period the claim is for $3,030.

146 In April 1992, Mr. Cooney obtained and sent to Solutions Group a proposal by Atlas Air‑Conditioning for maintenance of the air‑conditioning in the premises; it was for six bi-monthly filter cleans at $45 per visit and six bi‑monthly plant services at $110 per visit, a total cost per annum of $930 (or $77.50 per month) for the year 1st April 1992 to 31st March 1993. It appears that that proposal was not taken up by Solutions Group, however, it is some evidence as to the cost of maintenance and service of the air‑conditioning system. It is considerably less than the allowance Mr. Cooney made and on which the plaintiff relies; even allowing for some increase in the cost of obtaining those services in the relevant period the amount claimed by the plaintiff has not been justified in my opinion. I will allow $1,550.

General

147 The plaintiff reduced the quantum of its claim to account for the proceeds of the sale of the goods it distrained against. The plaintiff stored the distrained goods in the premises until the goods were sold at auction for a nett return of $2,777.74. In July 1995 before the goods were sold, MIS offered to purchase them for $8,000 (Exhibit P35). Mr. Cooney spoke to Mr. Broome the administrator who suggested that Mr. Cooney telephone Mr. Bewick to seek his approval to accept the offer; he did so but Mr. Bewick told him “it is up to you, you can do what you like”. Mr. Cooney said he sought advice from a solicitor and was told that the goods should be sold by public auction, the means of sale which is required by s.34 of the Act. There can be no complaint, in these circumstances, that the plaintiff did what the statute required. Therefore the plaintiff’s claim is to be reduced by $2,777.74 only.

148 Clause 4.5 of the Lease required Solutions Group to pay interest “on any monies due but unpaid after the same fell due and payable by the Lessee to the Lessor on any account whatsoever pursuant to this Lease such interest to be computed from the due date for the payment of the monies in respect of which the interest is chargeable until payment of such monies is made in full and shall be recoverable in like manner as rent in arrears.” The rate of interest was stated to be:-

“The rate charged from time to time by the National Australia Bank Limited on overdrafts between $50,000 and $100,000 increased by 2 percent ...”

149 The plaintiff tendered the affidavit of Mr. Glasson sworn on 2nd December 1998 (Exhibit P62). Mr. Glasson is the Network Operation Manager, Personal Financial Services of the National Australia Bank Limited (the Bank). He deposes that the Bank has the two different overdraft rate structures described in his affidavit, namely code B the standard overdraft rate applied to overdraft facilities provided to all non-corporate customers and code BE the overdraft rate offered to corporate customers, mainly public companies. Neither rate meets the description of that in Clause 4.5 of the Lease, therefore there is no rate of default interest upon which the plaintiff and Solutions Group agreed. However, the plaintiff is entitled to interest pre‑judgment at a rate fixed by the Court (s.39 District Court Act) and where as here interest is to be awarded for a substantial period the Court should fix a rate which reflects the fluctuations of commercial interest rates within the period; Richardson v Schultz (1980) 25 SASR 1.

150 The plaintiff’s counsel provided to the Court a schedule showing an interest calculation upon the amounts it claims, at rates varying from time to time applied to components of its claim by reference to the date the particular component fell due for payment or the loss was incurred by the plaintiff. The interest rate used is one of those attested to by Mr. Glasson. I have found that those rates were not agreed to by Solutions Group. In anticipation of that possible finding, counsel for the plaintiff produced a schedule calculating interest at the rate stipulated from time to time in Schedule 3 to the Supreme Court Rules. I will use that as a basis. The Court has the power (s.39(2) District Court Act), without proceeding to calculate interest, to award a lump sum instead of interest. I will adopt that course.

Summary

151 The plaintiff has proved in these proceedings an entitlement against Solutions Group to, and the defendants are liable under their guarantee for,

A.     Unpaid rent and damages by way of loss of rent               $51,455.20
B.     Dishonour fees on Solutions Group unpaid cheques                $60.00
C.     Water and council rates and building insurance                $12,291.73
D.     Legal costs incurred by reason of Solutions
Group default   $3,088.50
E.     Reidel’s fee for effecting re-entry and distraint                 $1,108.00
F.     Cleaning, painting, maintenance and repair   $4,248.00
G.     Damages for reletting fee   $300.00
H.     Fee paid to Panel Kerr Forster  nil
I.      Maintenance/service costs for air‑conditioning                 $1,550.00

Total $74,101.43

Less proceeds of sale of distrained goods $2,777.74

Total $71,323.69

152 I fix $19,250 as a lump sum in lieu of interest to the date of judgment. There will be judgment for the plaintiff against the defendants in the sum of $90,573.69.

153 I will hear the parties as to costs.

[1999] SADC 73

28 May 1999