Bird v Biedrzycki
[2019] ACTSC 214
•13 August 2019
SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
Case Title: | Bird v Biedrzycki |
Citation: | [2019] ACTSC 214 |
Hearing Date: | 8 August 2019 |
DecisionDate: | 13 August 2019 |
Before: | Elkaim J |
Decision: | See [50] |
Catchwords: | APPEAL – GENERAL PRINCIPLES – Appeal against order of Magistrates Court – Appeal to set aside order of compensation – Assessment of damages – cost of replacing missing items |
Legislation Cited: | Leases (Commercial and Retail) Act 2001 (ACT) ss 81, 84, 113, 122 |
Cases Cited: | ACN 116 746 859 (formerly Palermo Seafoods Pty Ltd) v Lunapas Pty Ltd & Anor [2017] NSWSC 1583 Armory v Delamirie (1722) 1 Strange 505; 93 ER 664, KB. Walker Group Constructions Pty Ltd v Tzaneros Investments Pty Ltd [2017] NSWCA 27; 94 NSWLR 108 |
Parties: | Francis Bird (First Appellant/ Cross-Respondent) Cheryl Smith (Second Appellant/ Cross-Respondent) Michael Biedrzycki (Respondent/ Cross-Appellant) |
Representation: | Counsel R Arthur (Appellants/ Cross-Respondents) B Buckland (Respondent/ Cross-Appellant) |
| Solicitors KJB Law (Appellants/ Cross-Respondents) Bradley Allen Love Lawyers (Respondent/ Cross-Appellant) | |
File Numbers: | SCA 19 of 2019 |
Decision under appeal: | Court: ACT Magistrates Court Before: Magistrate Fryar Date of Decision: 7 March 2019 Case Title: Biedryzcki v Bird & Smith [2019] ACTMC 8 Court File Numbers: CL 17 of 2016 |
ELKAIM J:
This is an appeal from a decision of Magistrate Fryar made on 7 March 2019 (Biedrzycki v Bird & Smith [2019] ACTMC 8). There is also a cross-appeal. The Magistrate’s orders were:
(a)In relation to the cross-claim for rental arrears there is judgment in favour of the Respondents against the Applicant in the sum of $23,015.30 plus pre-judgment interest from 15 September 2016.
(b)The Applicant’s claim for damages with regard to the value of lost work as a result of the conditions of the premises, the costs of the fitout and generally for conversion/ detinue are dismissed.
(c)In relation to the missing items there is judgment for the Applicant against the respondents in the sum of $150,000 plus pre-judgment interest from 10 February 2017.
(d)The Applicant is also entitled to the return of the security deposit together with pre-judgment interest from the date of the completion of the making good of the premises.
(e)There is no order as to costs.
The background to the matter begins with a commercial lease, dated 18 November 2013, pursuant to which the respondent leased the premises at Unit 1, 9 Whyalla St, Fyshwick, for a term of two years beginning on 1 December 2013. The appellants’ were the owners of the premises and the landlords in the lease.
For convenience, I will refer to the appellants as the landlords and the respondent as the tenant.
The tenant occupied the premises for the whole of the term and then remained in occupation on a monthly tenancy.
The tenant was a plumber and operated his business from the premises. During his tenancy he made alterations to the premises and also sublet a part of it.
The respondent stopped paying rent in March 2016. On 11 August 2016 the landlords served a Notice of Termination of the lease. On 19 September 2016 the landlords prevented access by the respondent, or his sub-tenant, to the premises.
The landlords’ complaint concerns the Magistrate’s order that they pay the respondent $150,000 plus interest for the “missing items”. The obligation to pay is not challenged, rather the quantum is said to be significantly excessive. The landlords says the payment should be nominal or, at best, $20,000.
The cross-appeal raised the following assertions by the tenant:
(a)The tenant said he should have been awarded the full cost of the items to be replaced, namely $187,290.74. This is essentially the other side of the argument, to the appeal.
(b)The rent of $23,400, being held in trust, should be returned to him. This is because of the effect of s 84 of the Leases (Commercial and Retail) Act 2001. Unless otherwise stated all references to sections of an Act are sections of this Act.
(c)He should be compensated, pursuant to s 81 of the Act, for the interference to his tenancy. This was assessed at $55,100.
(d)The notice of termination that he received did not comply with s 122, giving rise to a right to damages under s 113. These damages were assessed at about $6000.
In order for the appeal or the cross-appeal to succeed, error must be identified. Both parties said there was error in the assessment of the damages arising from the lost equipment. I agree. I do not however agree with all of the other assertions of error made by the tenant, as will be apparent below.
Having identified error, it is open to me, where appropriate, to substitute orders that I think should have been made.
It is convenient to deal with the issues in the order that I have set them out as arising from the cross-appeal.
The tenant submitted that her Honour should have made a finding that conversion or detinue had been made out. Her Honour’s finding of liability, at [42], was correct but she should have based this liability as arising from either the tort of detinue or the tort of conversion. I agree but do not think it necessary to go beyond her Honour’s finding of liability because, in essence, the only dispute between the parties is as to the assessment of damages arising from the liability, however based. I do appreciate there is a possible distinction between the amount of interest that might be payable. I will return to this point below.
I also note that the landlords conceded that the assessment of damages was the same whether made under her Honour’s general finding of liability or a finding of conversion. This concession affects both the principles of assessment and the starting point for any interest calculation.
There was detailed evidence about the cost of the items lost and the cost of replacing them, by purchasing them, essentially off-the-shelf. A concise summary of the items lost commences at AB 851 with respective purchase and replacement costs listed at AB 1030. The total replacement cost, claimed by the tenant, is the $187,290.74. The document also shows that the total purchase price for the items was $114,769.90.
The landlords submitted that, whatever else might be the case, the assessment should not exceed the $114,769.90. This was because the items could not have increased in value. Further an examination of the schedule, starting at AB 1030, showed that many of the items were not new, the oldest going back to 2006 (No 22). Further, there was no evidence about the condition of any of the items as at the time they were ‘lost’, and therefore no basis upon which it could be concluded that they had any value at all.
Yet further, the landlords submitted that there was no evidence, but should have been on behalf of the tenant, to show that the items were not available on the second-hand market. The landlords said the tenant was simply claiming the cost of new items which was an erroneous measure of the necessary assessment.
The tenant, accepting he had the onus to prove his claim, responded that he had done his best and had not been challenged on any of his estimates concerning the original prices or the replacement costs. If the landlords wished to suggest that he could have obtained the items at a cheaper price, for example, in a second-hand marketplace, then that should have been put to him in cross-examination. It was not. The tenant relied upon the principles stated in Browne v Dunne (1893) 6 R 67.
Both sides took me to a number of authorities said to support their respective positions. Starting with the tenant, I was first referred to Armory v Delamirie (1722) 1 Strange 505; 93 ER 664, KB. Paragraph 3 was relied upon:
As to the value of the jewel several of the trade were examined to prove what a jewel of the finest water that would fit the socket would be worth; and the Chief Justice directed the jury, that unless the defendant did produce the jewel, and shew it not to be of the finest water, they should presume the strongest against him, and make the value of the best jewels the measure of their damages: which they accordingly did.
The next case referred to was Walker Group Constructions Pty Ltd v Tzaneros Investments Pty Ltd [2017] NSWCA 27; 94 NSWLR 108, where the following was said, in particular concerning the onus, from [201]:
I have already indicated why I am of the view that it was reasonable to undertake the repair works on the whole pavement such that damages fall to be assessed on the principle in Bellgrove supra. The question of betterment must be considered in this context. In Tyco Australia Pty Ltd supra, Hodgson JA stated relevantly that there were two circumstances in which an allowance for betterment would be made. The first was when a plaintiff chose to acquire a more valuable asset than that which had to be replaced, where for less expenditure it could have acquired an asset which would have been as satisfactory as that replaced. He pointed out that the onus is on the defendant to establish that this could occur: Tyco Australia Pty Ltd supra at [260], [264]; British Westinghouse Electric and Manufacturing Company Ltd v Underground Railways Company of London Ltd [1912] AC 673 at 689-690.
In the present case, apart from contending only a limited number of the panels required replacement, the respondent did not point to any other method of repair of the pavement which would cost less than the solution proposed by Mr Davis and would have produced a pavement in conformity with the contract. In the circumstances, there was no entitlement to a credit for betterment on this basis.
The second basis referred to by Hodgson JA (at [262]) in which allowance is made are circumstances where even though there is no alternative available to the plaintiff, the plaintiff may have to give credit if there is a benefit which is not remote in time or speculative and can be quantified. In my opinion, care should be taken in applying a discount in these circumstances as it could result in the defendant’s breach requiring a plaintiff to pay for capital expenditure which it would otherwise be unwilling or perhaps financially unable to undertake. (Underlining added)
The tenant submitted that their submissions on onus were reinforced by the often repeated principles stated in Purkess v Crittenden [1965] HCA 34; 114 CLR 164. Next I was taken to Australian Capital Territory v Vladen Vucetic Sca [1991] ACTSC 104 at [31], although the relevance of this passage was not entirely clear. I do however note that, at [37], Higgins J (as he then was), said: “Lack of precise evidence to enable accurate assessment of loss has not always led to a refusal of any damages”. I think this point partially answers the landlords’ assertion that damages should only have been nominal.
The final authority the tenant relied upon in this area was Placer (Granny Smith) Pty Ltd v Thiess Contractors Pty Ltd [2003] HCA 10; 77 ALRJ 768 at [37] and [38]:
Placer undoubtedly bore the burden of proving not only that it had suffered damage as a result of Thiess Contractors' breach of contract, but also the amount of the loss it had sustained. It goes without saying that it had to prove these matters on the balance of probabilities and with as much precision as the subject matter reasonably permitted.
It may be that, in at least some cases, it is necessary or desirable to distinguish between a case where a plaintiff cannot adduce precise evidence of what has been lost and a case where, although apparently able to do so, the plaintiff has not adduced such evidence. In the former kind of case it may be that estimation, if not guesswork, may be necessary in assessing the damages to be allowed. References to mere difficulty in estimating damages not relieving a court from the responsibility of estimating them as best it can may find their most apt application in cases of the former rather than the latter kind. This case did not invite attention to such questions. Placer sought to calculate its damages precisely.
Turning to the landlords’ authorities, the first referred to was Furness v Adrium Industries Pty Ltd [1996] VR 668 (Furness). At page 669 is this passage:
If there exists a market into which the deprived person can go and purchase identical goods to those of which he has been deprived, the price he must pay for them on that market is prima facie the value of the goods. Where there is no such market - and there was really no such market in any relevant sense in Caxton - some other method of ascertaining the value of the goods may be resorted to. But if there is such a market then the price on it available to the plaintiff will in most if not all cases provide the value of the goods for the purpose of assessing damages. Where there is no such market, and perhaps also in a case where there is such a market but there are also such peculiar circumstances as lead the court to conclude that the market does not accurately show the value of the goods in the sense intended by Lord Roche, the court may have to resort to the price which the owner could have obtained for the goods, or resort to some other indicium of value.
This being that approach to the measure of damages which I would deduce from the authorities, it seems to me that there was in the present case no reason -
requiring or enabling the learned trial judge to take as the measure of damages the value of the goods as indicated by "the wholesale price" of the goods. There was clearly a market for the goods, in which the respondent could buy them, at the date when it in fact bought them. There was no reason for thinking that there was no longer any market for the goods at the date of conversion, and some reason for considering that a market for these novelties still subsisted not only at the date of conversion but also at the date of trial. The learned trial judge in his reasons expressly refers to the plaintiff's "suppliers", and to the prospect that the suppliers might have replaced the defective goods.
I was also referred to page 676 in Furness, to emphasise the submission that the cost price of the goods was a starting point and it was necessary for there to have been evidence to, for example defeat any suggestion of deterioration in the goods.
It was next submitted that where the tenant is being placed in a position of “betterment” this should only occur in exceptional circumstances (Voaden v Champion (“Baltic Surveyor”) [2002] EWCA Civ 89 at [83] to [88]).
The general principles relating to damages for conversion were said to be set out at [256] in Jiwira v PIBA [2000] NSWSC 1094 at [256]:
The general principle governing assessment of damages for conversion is that the loss must be compensated by an award of money which represents the full value of the goods: Furness v Adrium Industries Pty Ltd [1996] 1 VR 668, 675. Accordingly, the relevant value is the amount of money required to buy a similar article in the market at the date of the act of conversion: Western Credits Pty Ltd v Dragan Motors Pty Ltd [1973] WAR 184, 187; Chubb Cash Ltd v John Crilley & Son [1983] 2 All ER 294, 296. Mr Baker is therefore entitled to damages equivalent to the market price of goods of similar quality and condition to those converted. He is not entitled to the amount needed to buy new versions of those goods, as this would place him in a better position than if he had not suffered any wrong, in contravention of the underlying principle: J & E Hall Ltd v Barclays [1937] 3 All ER 620, 623. On that basis the loss to Mr Baker related to the fair market value of the items, rather than the replacement cost relied upon by Mr Baker.
In relation to the onus the landlords referred me to Sinclair v Haynes [2000] NSWSC 642 at [3] and Longden v Kenalda Nominee [2003] VSCA 128, from [10].
I think there is a concise summary of the principles to be applied in assessing damages for conversion in the Victorian County Court Katranis v Bahrou & D’Azzena [2019] VCC 602 in turn relying on the judgment of Slattery J in ACN 116 746 859 (formerly Palermo Seafoods Pty Ltd) v Lunapas Pty Ltd & Anor [2017] NSWSC 1583:
38 Again, the principles relevant to assessing damages for conversion are conveniently summarised by Slattery J in Palermo Seafoods at [162]-[164] as follows (omitting citations):
• the measure of damages for an established conversion is ordinarily the value of the goods converted at the date of conversion, together with any consequential loss which may be proved by the plaintiff;
• if a market value for the goods can be determined, that value will likely be considered appropriate;
• but where there is no market value, an award equivalent to the replacement cost of the goods in a similar condition may be considered an appropriate remedy;
• courts have recognised in some situations the possibility of consequential loss for conversion, additional to the loss of the value of the goods;
• Australian authorities have also recognised that an award to reflect any consequential damages may be appropriate in particular circumstances, such as an increase in market value;
• when profit-earning goods are converted, the hire value to the party which has converted the goods can be a basis for an award of damages;
• the purpose of such an award of damages must be to place the plaintiff in the position it would have been in, had the tort or torts not been committed; and
• despite the actions taken by a defendant in converting goods, a plaintiff is ordinarily required to mitigate its loss if able to do so.
Dealing first with the landlords’ submission that any damages should not exceed the purchase price of the items, the difficulty is that some of the items were purchased some time ago so that the prices paid would not necessarily reflect the current amounts necessary to pay for the replacement goods. However against this must be balanced the possibility that the goods were not in the same condition, almost inevitably, as they were when purchased and their value would have lessened over time.
On yet another approach, it might be said that when the tenant was deprived of the goods the only available means of putting him in the position he would have been but for the conversion, or breach of liability, was to purchase new items. Some of the items would have undoubtedly been less then their new value but, there replacement cost is the market value. There was no challenge to the replacement values put forward by the tenant.
I think this is a case, as suggested in Placer, where the court is called upon to make an estimation. I reject the landlords’ submission that there should only be a nominal value attached to the goods because the tenant called no evidence to show that he had enquired as to the existence of a second-hand market. The landlords chose not to challenge the tenant on his costings and chose not to put to him that the goods were available at a cheaper price. If this was a defence to the claim then the suggestion should have been made to the tenant. In my view the tenant had met his onus by providing the details that were before the court.
I think, starting with the purchase costs of $114,769.90, and then factoring in that some items had been purchased some years ago, some had obviously been used frequently, there would have been wear and tear and appreciation and, on the other hand, some items were new or near new and prices would have increased over the years, that a fair estimation would be $100,000.
Because of the concession that the basis of liability adopted by her Honour gave rise to the same basis as the assessment for conversion, I will allow interest on the $100,000 from 30 September 2016. The interest figure is $15,998.64. This conclusion deals with both the appeal and Grounds 6 to 10 of the cross-appeal.
I will now turn to the s 84 issue. This section states:
84 Damaged Premises unable to be used
(1) This section applies if—
(a) leased premises are, or the building containing the premises is, damaged; and
(b) the premises cannot be used for their normal purpose because of the damage.
(2) The tenant is not required to pay rent or outgoings under the lease while the premises cannot be used unless the Magistrates Court decides otherwise.
(3) The lessor may apply to the Magistrates Court for an order for payment (in full or in part) of rent or outgoings if—
(a) the damage to the premises or building was caused (fully or partly) by an act or omission of the tenant; or
(b) the lessor is unable to claim insurance for the damage because the tenant has invalidated the lessor’s insurance.
(4) This section does not apply to the extent (if any) to which the lessor and tenant agree to the payment, or reduced payment, of rent or outgoings after the premises are, or the building is, damaged.
The tenant submitted that the overarching purpose of the lease was for a commercial enterprise and he was entitled to not pay rent or outgoings while the premises were unable to be used. The landlords responded that the interruption to the rent only arose if the premises were wholly unable to be used. The learned Magistrate said at [17] – [18]:
It is unclear from the evidence whether the ingress of water occurred because of “damage” (in line with the provisions of the Act) or simply an inadequacy of drainage. The actual cause for the ingress of the water is not, in my view, something that I can assume. Further, I am not satisfied that the legislative threshold of “use for its normal purpose” was entirely flouted. It seems from the evidence that the Applicant also used the premises as his residence, and although the flooding caused considerable problems for the regular conduct of his business which may have entitled him to make an application to the court pursuant to section 85 of the Act, he did not do so.
Although the damaged roller door caused substantial inconvenience, the Applicant agreed that he was still able to use the Premises in part. Therefore the Applicant was not entitled to simply withhold rent, and there was no relevant application made to the Court pursuant to section 85.
I agree with her Honour. The tenant was living in the premises and continued to do so. No doubt the flooding, from time to time, and the absence of the roller door caused him, in his business, a good deal of inconvenience. But it did not prevent him living in the premises and, by the length of time he had been living there, and noting that he had himself made alterations to permit the premises being used as a residence, I am of the view that the premises continued to be used, in part, for their normal purpose.
Accordingly the tenant’s submission is rejected and the amount held by way of arrears of rent should be returned to the landlords. I will make orders to provide for an effective set off of this amount against the verdicts in favour of the tenant.
The next area of contention arises from s 81. This section states:
81 Compensation for disturbance
(1) The lessor is liable to pay the tenant reasonable compensation for loss or damage (other than nominal loss or damage) suffered by the tenant if the lessor—
(a) materially inhibits access by the tenant to the premises; or
(b) takes action that would materially inhibit or alter the flow of customers to the premises; or
(c) fails to fix a breakdown of plant or equipment under the lessor’s care and maintenance as soon as practicable; or
(d) for premises located in the retail area of a shopping centre— does not adequately clean, maintain or repair the shopping centre (including common areas); or
(e) otherwise adversely affects the trade of the tenant by the lessor’s conduct without reasonable cause, whether by act or omission.
(2) The lessor is not liable to pay the tenant compensation in relation to an action of the lessor mentioned in subsection (1) (a) or (b) if—
(a) the action was a reasonable response to an emergency or in compliance with a statutory requirement or a lawful direction of a government entity; and
(b) the emergency was not caused by, or the requirement or lawful direction did not apply because of, any neglect or failure of the lessor.
The landlords did not contest quantum of the loss of business ($55,100). However the landlords said that there was no entitlement at all to this figure. This was because the landlords were not liable to, or responsible for, repairs to the roller door. The lease did not establish any such obligation, nor was there any statutory imposition of the obligation.
The tenant acknowledged that neither the lease nor statute imposed the obligation, but said there had been an admission by the landlords that they were responsible for the repairs to the roller door. This admission was enforced by the following:
(a)The landlords sought a quote for the repairs and ultimately carried out the repairs. The landlords corresponded by email with the repairers indicating their acceptance of their obligation to repair the roller door (AB 620).
(b)One of the landlords, under cross-examination, made a specific admission of responsibility. She stated that it was correct that it was “your obligation, as the landlord, to keep it in good or working order” (AB 205).
The landlords’ response to the apparent admission was that it was incorrect. I do not accept that conclusion. In my view, based on the above two factors, the position as between the two parties, although not evidenced in the lease, was their common acceptance, or agreement, that the landlord was responsible for the repairs to the roller door.
The next point taken by the landlords was that, as found by the Magistrate, the tenant had not established the necessary elements, in particular it had not been established that the repair had not been carried out “as soon as practicable”.
The evidence established that the quote was obtained within four days of the roller door stopping to work. However it took a further 76 days before it was repaired, because the landlords waited for their insurance claim to be met. The amount of the invoice for the repair was $3,883 (AB 619). In my view it was unreasonable for the landlords to not pay this amount within, say 14 days, to have the repair effected.
There is no reason why they could not have waited to be recompensed by the insurer. As there is no challenge to the quantum I allow the claim for $55,100 together with pre-judgment interest from 19 September 2016. Interest is $8,815.25.
The final matter to be decided arises from s 122. This section states:
122 Procedure for termination of lease by lessor etc
(1) If the lessor has a right to terminate the lease, the lessor may give written notice of termination to the tenant (the termination notice).
(2) Within 14 days after being given the termination notice (the allowed period), the tenant may—
(a) contest the termination by application to the Magistrates Court; or
(b) agree to the termination by written notice to the lessor.
(3) The termination takes effect in accordance with the terms of the termination notice if, within the allowed period, the tenant—
(a) does not contest the termination by application to the Magistrates Court; or
(b) agrees to the termination by written notice to the lessor.
(4) If the tenant contests the termination by application to the Magistrates Court within the allowed period—
(a) the termination does not have effect unless it is confirmed by the Magistrates Court; and
(b) if the termination is confirmed—it has effect on the day ordered by the court.
(5) The lease may be terminated by the lessor only in accordance with this section.
(6) If the tenant is in possession of the premises, the lessor may enter the premises to recover possession of the premises only—
(a) under a court order or warrant; or
(b) if the lease has been terminated in accordance with this section.
The tenant submitted that a notice of termination under this section required a statement of the grounds for termination and secondly the tenant disputed that the notice had been properly served. If the tenant was correct on both points he said that he was entitled, by way of damages, to a sum in the order of $6000.
The landlords disputed both assertions made by the tenant. I do not think it necessary to decide the service point, because I do not think that s 122 requires the grounds for the termination to be stated. I accept that s 123 (1)(c) refers to notice of a breach but it does not state that that notice should have been given in the notice of termination. I think, on a plain reading of s 122, that the tenant’s argument fails.
No submissions were made to me concerning the costs in the Magistrates Court. I do not intend to make any different costs order. In relation to the appeal, I am of the view that there has been a degree of success for both sides so that the same order should be made.
The final judgment sum in favour of the tenant will be $179,913.89, made up of $100,000 plus interest of $15,998.64 and $55,100 plus interest of $8,815.25.
Orders
I make the following orders:
(a)The appeal is allowed.
(b)The cross-appeal is allowed.
(c)In lieu of the orders made in the Magistrates Court on 7 March 2019, the following orders are made:
(i)Judgment for the cross-appellant (the tenant) in the sum $179,913.89.
(ii)The rental arrears held in trust by KJB Law are to be paid to the cross-respondents (the landlords) upon the cross-appellant (the tenant) acknowledging that he has received the sum referred to in order (i) above.
(iii)Each party is to pay its own costs of the hearing in the Magistrates Court.
(iv)Each party is to pay its own costs of the appeal and the cross-appeal.
(d)Liberty to both parties to apply in respect of the ‘payment out’ of the rental arrears.
I will hear the parties if any alternate cost orders are sought.
| I certify that the preceding fifty [50] numbered paragraphs are a true copy of the Reasons for Sentence of his Honour Justice Elkaim. Associate: Date: 13 August 2019 |