Cleve Smith Excavations Pty Ltd v Hodgson
[2010] NSWDC 230
•13 October 2010
CITATION: Cleve Smith Excavations Pty Ltd v Hodgson [2010] NSWDC 230 HEARING DATE(S): 19, 20, 21, 22, 26, 27, 28, 29 October, 2 & 3 November 2009
JUDGMENT DATE:
13 October 2010JURISDICTION: Civil JUDGMENT OF: Levy SC DCJ DECISION: 1. Verdict for the plaintiff on the plaintiff’s claim against the defendant in the sum of $108,148.76;
2. Verdict and judgment for the defendant/cross claimant on the cross claim against the plaintiff in the sum of $126,743;
3. The set-off of the respective claims and entry of final judgment is deferred pending the parties being heard on the outstanding questions of interest and costs. In this regard, each party is directed to provide written submissions on the issues, limited to no more than 5 pages, including setting out the contended interest calculations consequent upon my findings and the contended costs consequences of the set-off of such calculations. In the case of the plaintiff, those submissions are to be filed and served within 7 days; in the case of the defendant, those submissions are to be filed and served within 14 days.CATCHWORDS: LEASES – extractive industry carried out on land leased as a quarry – mining of sandstone deposits for bricklayer’s sand – whether lessor’s refusal to allow sand extraction in specified areas of quarry was unreasonable – claims concerning unpaid rent, maintenance on buildings, plant and equipment, environmental rehabilitation of the land and contribution towards legal fees in respect of lease of the premises – cross claim concerning repairs to dangerous electrical installation – economic loss and contribution to legal costs in respect of proceedings in Land and Environment Court – construction of lease to rectify mistaken description of party named in the contract - DAMAGES – breach of contract – lease – measure of damages for breach of conditions of lease – interest to be treated as rent in arrears – whether compound interest permitted LEGISLATION CITED: Conveyancing Act 1919
Environmental Planning and Assessment Act 1979
Uniform Civil Procedure Rules 2005CASES CITED: Baramon Sales Pty Ltd v Goodman Fielder Mills Limited [2001] FCA 1672
Angel v Hawkesbury City Council [2008] NSWCA 130
Darlington Futures Ltd v Delco Australia Pty Ltd [1986] HCA 82; (1986) 161 CLR 500
Glebe Island Terminals v Continental Seagram (1993) 40 NSWLR 212
H & E Van Der Sterren Cibernetics (Holdings) Pty Ltd [1978] 44 ALJR 157
Haberecht & Anor v Chapman (1993) CCH Conveyancing Reports at 279
Kamil Export (Aust) Pty Ltd v NPL (Australia) Pty Ltd [1996] VR
Kenny v Preen [1963] 1 QB 513
McCall v Abelesz [1976] QB 585
Nittan (UK) Ltd v Solent Steel Fabrication Ltd [1981] 1 Lloyds Rep 633
Short v Stone (1846) 115 ER 911
Sydney Corporation v West [1965] HCA 68; (1965) 114 CLR 481
Wilson v Wilson (1854) 5 HL Cas 40; 10 ER 811TEXTS CITED: Butt, Land Law, 5th ed
Cheshire and Fifoot; Law of Contract, 8th Australian ed
Cheshire and Fifoot, 9th Australian ed
The Interpretation of Contracts / Lewison K, 2nd editionPARTIES: Cleve Smith Excavations Pty Ltd (Plaintiff)
Martin Robert Hodgson (Defendant)FILE NUMBER(S): 1493 of 2009; 2009/334526 COUNSEL: Mr J Lazarus (Plaintiff)
Mr P Menadue (Defendant)SOLICITORS: Conditsis & Associates (Plaintiff)
Brennan Tipple Partners (Defendant)
JUDGMENT
Table of Contents
A. INTRODUCTION Background [1] – [6] Issues [7] Witnesses and credibility of testimony [8] – [14] Facts [15] – [32] B. FINDINGS ON ISSUES ARISING – PLAINTIFF’S CLAIM Issue 1 – Quantum of rent and nature of interest owing [33] – [42] Issue 2 – Alleged failure to maintain buildings, plant and equipment [43] – [75] Issue 3 – Alleged failure to rehabilitate the land [76] – [92] Issue 4 – Alleged liability for legal fees in respect of lease [93] C. FINDINGS ON ISSUES ARISING – DEFENDANT’S CROSS CLAIM Issue 5 – Claim for repair of sub-standard electrical wiring [94] Issue 6 – Claim that consent to mining was unreasonably withheld [95] – [143] Issue 7 – Contribution to cost of appeal from Land and Environment Court [144] – [152] D. DISPOSITION & ORDERS Disposition [153] – [156] Interim Orders [157] – [158]
A. INTRODUCTION
Background
1. The plaintiff, Cleve Smith Excavations Pty Ltd, is the owner of land in Somersby, NSW. The land has been used as a sandstone and sand quarry for over 40 years, a use that preceded the plaintiff’s ownership of the land. The defendant, Mr Martin Hodgson, is the proprietor of a sandstone and sand quarrying business known as Hodgson Contracting Services, supplying sand and sandstone products to the building industry. He is also a director of HB Rindean Pty Limited.
2. In 2001 the defendant took a 3 year lease from the plaintiff to mine the plaintiff’s quarry to extract sandstone products. That lease followed an earlier and similar lease over the property that operated between 1997 and 2000. The consideration for the second lease was payment by the defendant of an annual rent of $126,000 plus royalty payments of $1.50 per tonne in respect of material extracted from the quarry.
3. The plaintiff’s claim against the defendant alleges a number of breaches of the terms of the lease and principally involves claims for unpaid rent, maintaining buildings, plant and equipment in a good state of repair, rehabilitation of the land, a guarantee over certain legal costs and consequential claims for interest. The total quantum of the plaintiff’s claim was ultimately identified as being $240,582. There is a dispute as to whether interest on the component for unpaid rent should be calculated on a simple or compound basis.
4. The defendant’s cross claim against the plaintiff alleges the plaintiff was also in breach of the lease by unreasonably withholding its consent to mine certain areas within the quarry. The defendant claims consequential losses of income, the cost of repairing allegedly sub-standard and dangerous electrical wiring together with a claim for partial reimbursement of legal costs concerning a proposed appeal from unsuccessful litigation in the Land and Environment Court against Gosford City Council. Those proceedings involved challenges to conditions imposed by the Council for the use of the quarry. The total revised quantum of the defendant’s cross claim was ultimately identified as being $273,000 plus interest.
5. A former second defendant to the proceedings, Mr Ralph Betts, was released from the proceedings on 16 September 2009 on terms that were agreed between the parties.
6. The hearing in this Court proceeded over the course of 10 days of hearing. In addition to extensive oral evidence, the written evidence and expert reports comprised 13 volumes of lever arch folders. I am grateful to the skilful efforts of both counsel who adroitly addressed the extensive evidence by focussed submissions relating to the issues in dispute.
Issues for determination
7. Pursuant to directions issued at the commencement of the trial, the parties formulated an agreed list of 11 issues for determination : MFI “1”. I have condensed that list into the following 7 issues.
Issue 1 : The quantum of rent and interest under the lease that remains owing by Mr Hodgson to the plaintiff;
Issue 2 : Whether Mr Hodgson breached the terms of the lease by failing to maintain buildings, plant and equipment on the land in good repair, and if so, what is the quantum of the plaintiff’s claimed loss in this regard, including any entitlement to interest;
Issue 4 : Whether Mr Hodgson is liable as guarantor for the sum of $7928 for legal fees incurred in respect of the agreement for lease;Issue 3 : Whether Mr Hodgson breached the terms of the lease by failing to rehabilitate the land at the conclusion of mining operations, and if so, what is the quantum of the plaintiff’s claimed loss in this regard, including any entitlement to interest;
Issue 5 : Whether the plaintiff was in breach of the terms of the lease as a consequence of having installed sub-standard wiring in the premises, and if so what is the quantum of Mr Hodgson’s claimed loss in respect of repairs, including any entitlement to interest;
Issue 6 : Whether the plaintiff was in breach of the terms of the lease by failing to give its consent to the plaintiff for the mining of the so-called “ banned areas ” in the quarry, and if so, what is the measure of Mr Hodgson’s claimed losses in this regard, including any entitlement to interest;
Issue 7 : Whether the plaintiff is liable for the sum of $23,000 in legal costs plus interest pursuant to clause 9.7 of the agreement for lease.
Witnesses and credibility of testimony
8. The following witnesses gave oral evidence:
(a) Mr Cleveland Smith, the director and guiding mind of the plaintiff company;
(b) Mr Martin Hodgson, the first defendant;
(c) Mr Ralph Betts, the former second defendant;
(d) Mr Ronald Lamont, the plaintiff’s expert accountant;
(f) Mr Daryl Holland, the defendant’s expert accountant.(e) Ms Helen Scholes, the defendant’s bookkeeper;
9. Consequent upon directions made during the course of the trial, a formal meeting was convened between Mr Lamont, Ms Scholes and Mr Holland in order to seek agreement on the economic loss issues. After that meeting the issues were narrowed and these witnesses then gave their evidence concurrently, pursuant to UCPR r 31.35(c)(i). The evidence of these economic loss witnesses was not the subject of credibility challenges.
10. The credibility of the evidence of Mr Smith was not directly challenged by cross-examination although submissions were made as to whether aspects of his evidence should be accepted. That said, I have not accepted his evidence in every respect, and where this has occurred, I have set out my reasons for making findings to that effect.
11. The plaintiff mounted a vigorous challenge to the credibility of the evidence of both Mr Hodgson and Mr Betts. Most significantly, this was with regard to a meeting with Mr Smith that they alleged had taken place on 26 June 2001. The plaintiff challenged the probity of a note kept of that meeting by Mr Betts, and contended that the meeting had not occurred as had been claimed.
12. The substance of the challenge was based on the proposition that a contour plan of the property dated 28 June 1989 had not been provided to either Mr Hodgson or to Mr Betts before October 2001, yet the minutes of the claimed meeting referred to that contour plan notwithstanding that it had not previously been provided to them. On behalf of the plaintiff it was claimed that there was a glaring inconsistency between the evidence of Mr Hodgson and Mr Betts on the one hand, and Mr Smith on the other, as to when the contour plan had been provided to them. In this regard, on behalf of the plaintiff, Mr Lazarus submitted that the evidence of Mr Hodgson and Mr Betts should not be accepted.
13. On the other hand, Mr Hodgson and Mr Betts claimed that they had been informed of the content of the contour plan before it had been provided to them, and this accounted for the reference to the plan in the minute of the claimed meeting. Further, it was claimed that Mr Hodgson’s diary revealed a notation of a medical appointment he had in Gosford at the time the alleged meeting was claimed to have taken place. In response to a credit challenge based on that notation, Mr Hodgson stated that the appointment had been rearranged to another time, and that the meeting had in fact taken place. : Paragraphs [9]-[28] of Plaintiff’s Written Submissions.
14. In my view these credit challenges were peripheral, and were not central to the issues to be decided in this case. I am satisfied that the claimed meeting in fact took place as claimed by Mr Hodgson and Mr Betts. In my view the minute in question was an aide memoir constructed after the meeting and was not intended as an accurate or complete transcript of all matters that were described at that meeting. In my view the remaining matters of credibility of testimony arise for determination on the discrete areas of evidence when they arise in connection with the issues calling for decision.
Facts
15. Except where otherwise indicated, the following outline of facts is not in dispute. Where there is a relevant factual dispute I will identify my findings of fact concerning such disputes in connection with the issues with which the dispute relevantly arises.
16. The premises in question, which are situated on the Wiseman’s Ferry Road at Somersby, had been operated as a quarry for approximately 40 years, which was well before the plaintiff had acquired the property on 17 August 1994. Beforehand, on 9 February 1979, Gosford Shire Council granted formal approval for the use of the property for an extractive industry subject to a number of specified conditions. In 1994, when the plaintiff took possession of the quarry, there were a number of pieces of plant and equipment on the site that were used as part of the previous quarrying activities. For a relatively short period, the plaintiff himself undertook some quarrying activities on the site before giving a lease of the site to Mr Hodgson. That plant and equipment remained on-site when, in November 1996, Mr Hodgson entered the site with the permission of the plaintiff in order to pursue sand mining operations.
17. The site of the quarry is visually represented in the aerial photographs comprising Exhibit “1” and Exhibit “G”, as well as the diagrammatic representation comprising Exhibit “P”. The site comprises a large area of differing levels substantially denuded of natural vegetation and topsoil, with obvious signs that sandstone mining has taken place on the site on a significant scale over a period of time. The site comprises a number of worked areas described as cells, with related ramps and roadways for access between the different levels. There are a number of settling ponds, a freshwater dam, an area where plant and equipment was located, as well as a Stockpile Area. There was an elevated area described as the Top Bench or Bench Area, which extended to just above the Stockpile Area. There was also a Washplant near the Stockpile Area for the processing of mined materials.
18. On 18 March 1998 the plaintiff granted Mr Hodgson a backdated lease of the premises for a 3 year term stated to commence on 1 January 1998 and terminating on 31 December 2000, together with an option to take a further lease for a further term of 3 years. During the term of that lease, in early 2001, the plaintiff permitted Mr Hodgson and Mr Betts to clear an area of the quarry near the top dam on the property for the purpose of storage of material. Subsequently, in September 2001, Mr Smith advised Mr Hodgson that he was not permitted to carry out mining in the Sales Stockpile Area of the property.
19. On 24 October 2001 the plaintiff granted Mr Hodgson another lease of the property for a further 3 year term. This lease was backdated to operate from 1 January 2001 and to terminate on 31 December 2003.
20. During the currency of that lease, on 13 February 2002 there was a conversation between Mr Hodgson and Mr Smith in which Mr Smith told Mr Hodgson that he could not mine in the Bench Area above the Washplant on the property. Notwithstanding that request, on about 31 May 2002, Mr Hodgson recommenced mining in the Bench Area of the property and continued to do so until Mr Smith told him to cease doing so. About 26 June 2002, Mr Hodgson recommenced digging in the Sales Stockpile Area of the property until Mr Smith told him to cease doing so, at which time he ceased.
21. Beforehand, in April 2002, Hodgson Contracting Services, which was Mr Hodgson’s trading name, had lodged a modification application to the Council pursuant to s 96 of the Environmental Planning and Assessment Act 1979. This was for the purpose of expanding the mining operations at the quarry.
22. On 11 September 2002, the Council advised Mr Hodgson that the application in question was considered not to be substantially the same as the development that had been previously approved by the council and that consequently, the Council had no power to approve the application under consideration at that time. Further, the Council claimed that the then existing Conditions of Consent, identified as items (c), (e), (f), (g), (h) and (j) had been breached. Accordingly, the Council required the cessation of the use of the land as an extractive industry by 25 September 2002. Advice to that effect was forwarded to the plaintiff on 16 September 2002.
23. In late 2002, these events resulted in Mr Hodgson scaling back his operations at the quarry and at the same time, pursuing other mining operations at another and unrelated quarry nearby, known as Somersby Sands. This appears to have been necessitated by the orders issued by the Council to cease quarrying. Against this background the parties sought to overcome the position of the Council through litigation in the Land and Environment Court.
24. On 11 August 2003 the parties entered into an agreement for lease of the property. The agreement for lease referred to HB Rindean Pty Limited as the lessee. Mr Hodgson claims this was a mistaken reference and that he was the intended lessee. By this time, quarrying had effectively stopped at the property.
25. On 23 September 2003 the judgment of the Land and Environment Court of New South Wales in proceedings number 10889 of 2002 refused the application lodged by Mr Betts for modification of the consent for an extractive industry on the property pursuant to s 96 of the Environmental Planning and Assessment Act 1979. The effect of that decision was that the existing consent conditions concerning the property remained on foot. Advice was then sought as to the merits of a proposed appeal from that decision.
26. On 5 November 2003, notice was served on the plaintiff, through solicitors, advising that the proposed appeal from the decision of the Land and Environment Court would not proceed. Thereafter, Mr Hodgson made it clear that he did not wish to take up the option to renew the lease. Mr Hodgson agreed that he would vacate the premises.
27. On 31 December 2003 the relevant lease had expired by the effluxion of time. Following the expiry of the lease, Mr Hodgson conceded that there was an amount outstanding for legal fees concerning that lease, as well as an amount owing in respect of unpaid rent under the lease.
28. For historical completeness, I set out a short chronology of subsequent events concerning the property to provide a context for the litigation, although those subsequent events have no practical bearing on the liability of the defendant.
29. Following the vacation of the premises by Mr Hodgson, the plaintiff attempted to obtain more favourable development consent from the Council. On 17 December 2004 the plaintiff lodged a Development Application with the Council seeking development consent for alterations or revisions to the existing approved quarry use and for the temporary storage of stockpiles of previously extracted materials on the site.
30. On 20 June 2006 the Council granted Deferred Commencement Consent for the plaintiff ‘s Development Application. On the same day the plaintiff applied for a second s 96 application to modify the Deferred Commencement Consent.
31. On 17 September 2007 the Council determined the plaintiff’s s 96 application by granting approval and modifying the Deferred Commencement Consent and included, amongst other things, permission for the work to be carried out in stages over a period of 19 years, and for the decommissioning and rehabilitation of tailing ponds numbered 1 and 2 which were situated on the property.
32. On 14 December 2006 the plaintiff commenced the present proceedings in this Court. On 16 September 2009, one month before the commencement of the trial, the plaintiff’s claim against Mr Betts was settled on terms reduced to writing. It is not necessary to outline those terms in this factual summary.
B. FINDINGS ON ISSUES ARISING FROM PLAINTIFF’S CLAIM
Issue 1 – Quantum of rent and nature of interest owing by the defendant
33. At the commencement of the trial the plaintiff’s claim for unpaid rent and interest was announced to be in the total amount of $133,257.21. This amount included a claim for compound interest on unpaid rent at the rate of 15 per cent per annum.
34. The defendant did not seek to make out a defence to the principal amount comprising the claim for unpaid rent, other than by way of set-off, and disputed the plaintiff’s entitlement to compound interest, submitting instead that the plaintiff’s claim for interest was limited to the principal amount owing, plus simple interest on that amount. During the course of the trial, following the meeting between the expert financial witnesses, the parties agreed that if the defendant’s argument were to prevail, the amount owing to the plaintiff, including simple interest, would be in the sum of $75,000. Conversely, if the plaintiff’s argument concerning compound interest were to prevail, the amount owing to the plaintiff would be $105,210.76.
35. Those figures were derived from the product of the meeting of the financial witnesses : Exhibit “Q”.
36. The basis of the plaintiff’s claim for rent was that the lease between the parties provided for a 3 years lease commencing on 1 January 2001 and terminating on 31 December 2003, requiring the payment of rent of $126,000 per annum in equal monthly instalments of $10,500 with provision for CPI increments and interest to apply to unpaid rent. The lease also provided for the lessee to pay the lessor royalties of $1.50 per tonne of all materials removed from or brought onto the premises by the lessee with the rent being credited against the royalties.
37. The matter at issue here is therefore whether the plaintiff should be awarded the sum of either $105,210.76 or $75,000, depending on whether compound or simple interest applies.
38. It is therefore necessary to determine whether the plaintiff is entitled to compound interest on any unpaid rent. The terms of the lease concerning interest on unpaid rent are to be found in clause 14.06 which provides:
“ 14.06 Interest on overdue money : If the rent or any part thereof or any other moneys payable by the lessee to the lessor hereunder shall at any time remain unpaid for fourteen (14) days after the same shall have become due (whether any formal or legal demand therefore shall have been made or not) then the lessee shall pay to the lessor interest at the rate stated in item 14 of the reference schedule on such moneys from the date on which such moneys fall due for payment to the date on which such moneys are paid to or recovered by the lessor as the case may be. The lessor shall be entitled to recover such interest from the lessee as if such interest were rent in arrears .”
39. The relevant rate of interest was 15 per cent.
40. Although the lease makes no reference to compound interest, the plaintiff seeks to construe the terms of the interest provision in clause 14.06 as an entitlement to compound interest. The defendant maintains that only simple interest is payable on any rent that remains unpaid. The clause therefore requires construction.
41. The plaintiff argues that notwithstanding the absence of any mention of compound interest in clause 14.06, which would normally require the lease to be construed contra proferentem, the conferring of an entitlement to claim interest as if it were rent in arrears must be a reference to compound interest.
42. The defendant has submitted that if the parties had intended that compound interest would apply to unpaid rent by treating interest as unpaid rent, the draftsman would have specifically included a reference to compound interest in the clause. Accordingly, it was argued that the contra proferentem rule should apply and the effect of the clause should be limited to a claim for compound interest. In my view, the defendant’s argument is flawed in that there would be no other apparent purpose for treating interest as rent in arrears, other than to enable compound interest to be claimed on unpaid rent. Accordingly, I find that the defendant is liable to the plaintiff in the amount of $105,210.76, including interest pursuant to the lease but not including pre-judgment interest.
Issue 2 – Alleged failure to maintain buildings plant and equipment
43. The plaintiff makes a claim for the cost of a remedying the alleged failure of the defendant to maintain the buildings, plant and equipment at the quarry in a good state of repair. General views of some of this plant and equipment are evident in the multiples photographs that comprise Exhibit “G”. The plaintiff quantified its claim in the amount of $122,421 based on the evidence of Mr Sunter. The foundation of this component of the plaintiff’s claim is based upon several clauses of the lease.
44. First, clause 13.04 of the lease appears in section 13 of the lease and concerns the lessor’s covenants. It provides:
“ 13.04 Plant and equipment
To make available to and to permit the Lessee to use the plant and equipment presently on the premises, namely the washing plant consisting of a raw feed bin, main conveyer rumbler, screen washing bowl, pumps and towers, but the lessor will not be obliged to repair or replace any part of that equipment .”
45. Secondly, clause 5.08 of the lease appears in section 5 of the lease and concerns the lessee’s covenants. It provides:
“ 5.08 to keep all levels, watercourses, machinery and other works and conveniences being used or to be used in good and substantial repair and condition and working order and to deliver them up in such repair and condition and working order at the determination of the lease, fair wear and tear excepted .”
46. In the course of his opening address on behalf of the plaintiff, Mr Lazarus outlined the plaintiff’s claim relating to the plant and equipment component of the claim as comprising some 17 items of machinery. In fact only 5 items of such equipment were listed in clause 13.04 of the lease. There was no separate inventory under the lease in addition to those 5 items. Those items were not exhaustively listed in the evidence but after discussion during the course of the trial they ultimately became the subject of entries in a schedule that was marked MFI “10”. This claim was reduced to 11 items in the plaintiff’s written submissions : Plaintiff’s Written Submissions at [57].
47. The building component of the plaintiff’s claim relates to a shed type building that had been blown over in a storm that occurred during the currency of the lease. The plaintiff’s claim was that the defendant should be liable for the cost of rebuilding the shed. This component of the claim was based upon Mr Smith’s evidence claiming that the defendant had told him he would rebuild this building.
48. In my view, in the absence of an agreement for consideration importing additional items to the obligations under the lease, the parameters of the claim by the plaintiff in respect of plant and equipment should be limited to those items specified in the lease. Accordingly, my analysis of the evidence on these matters will proceed upon the basis of this assumption and should exclude the cost of the shed.
49. The plaintiff’s submissions at paragraphs [41]-[42] identified the 5 items referred to in clause 13.04 of the lease, and added two additional items comprising safety railings and screen decks that were not mentioned in the lease – [41(i)], and then went on to expand the items and categories of equipment claimed, to list a further 4 items listed in [41(ii)-(v)] comprising safety railings and walkways around the plant, a workshop, an office sliding door and an office air-conditioner. At paragraph [42] the plaintiff’s submissions went on to particularise a further 20 items that were said to be evidence of the claim that the defendant left the buildings, plant and equipment in a less than good and substantive state of repair. Those particulars ranged from the presence of rock spillage around the plant, to claims for the replacement of fittings, wiring and repairs generally.
50. In my view this component of the plaintiff’s claim is problematic for two principal reasons. First, the items now claimed extend well beyond the 5 items listed in clause 13.04 of the lease. For example, the lease makes no mention of a workshop, office air-conditioner, safety railings, screen decks and the like. Secondly, there is no objective evidence in the form of a survey of the condition and state of the equipment at the commencement of the last lease which is the subject of this claim compared to the condition of the plant and equipment at the time Mr Hodgson left the premises. I consider this to be a matter of some importance in approaching the task of fairly assessing any entitlement of the plaintiff to damages in respect of the claims made. I find myself unable to rely on Mr Smith’s descriptions alone, notwithstanding the absence of challenge through cross-examination, because of what I consider to be the extravagant terms in which the claim has been advanced beyond the parameters specified in the lease.
51. Mr Smith acknowledged that on 30 November 2003, an independent examiner, Mr Chilman, had examined the plant and described it as being archaic. This led to a prohibition of the use of the equipment. Mr Smith was not aware of the details of any prior accountancy calculations of depreciation of the equipment in question. He stated that he expected depreciation would have been claimed on behalf of the plaintiff company by his accountant. Mr Smith had no knowledge as to the actual age of the plant and equipment and acknowledged that he had been told that the equipment in question was built in either late 1979 or 1980, indicating that it was therefore approximately 18 years old when Mr Hodgson had commenced using it at the quarry in 1996.
52. In his evidence, Mr Smith agreed that in 1989, according to his understanding, the plant and equipment on the site had been refurbished by a previous lessee. This was effected by sandblasting it to remove rust, following which it was repainted. Mr Smith also acknowledged that since 1989 the plant and machinery had not been sandblasted or painted again, and he agreed that as a consequence, by 2000, that most of the plant was badly rusted. That evidence did not produce a meaningful insight into whether it was in good or substantial repair and condition and in working order. Instead, it rather suggests a contrary position was likely.
53. Mr Smith stated that as a mechanic, he supervised regular maintenance of the plant on Saturday mornings. The evidence of the dates or periods of such maintenance was not specific. The maintenance he described seemed to relate to some cleaning up activity underneath the machinery rather than effecting repairs to the machinery itself and/or to attending to preventive maintenance. He acknowledged that the conveyor at the plant did not have a maintenance walkway for the purpose of access for maintenance. This evidence did not sit well with his claim that the defendant should be held liable in damages for safety railings and walkways around the plant : Plaintiff’s Written Submissions [41(ii)]. It appears that the plaintiff’s claim for the safety walkways had its genesis in the terms of the prohibition order issued by Mr Chilman on 30 November 2003.
54. Mr Smith acknowledged that the various quotations he had received concerning the cost of effecting repairs and maintenance to the plant and equipment had not been acted upon, and that the machinery had been sitting idle and not maintained for a considerable period since the defendant had left the site in 2003. Other than by the evidence of Mr Smith, there was no objective evidence to the effect that when the defendant had left the site at the termination of the lease, the machinery in question was not in good or substantial repair and condition and in working order. Mr Smith stated that the machinery was last used about 18 months previously, which I understood to refer to 18 months before the trial, which indicates this was in about May 2007. I infer from this evidence that it was used at that time and that it was therefore in working order.
55. The foregoing evidence suggests the plant and equipment was old and rusted but in working order both at the time Mr Hodgson took on the lease and at the time he left the site.
56. In respect of this claimed head of damage, the critical question becomes whether Mr Smith’s evidence should be accepted as to the condition of the plant and equipment at the time of the commencement of the last lease, compared to the condition of the plant and equipment at the end of the lease. This is an important issue because of the practical necessity of establishing a baseline from which to assess the condition of the equipment in order to be able to arrive at a proper understanding of Mr Hodgson’s obligations under the lease to maintain the plant and equipment at the quarry in a state of good and substantial repair and in working order, reasonable wear and tear excepted. I shall return to this question after taking an overview of the evidence on the issue.
57. According to Mr Smith, at the commencement of both the first and the second leases, the plant and equipment at the site were in good and substantial repair, condition and working order. According to Mr Hodgson, the equipment was in working order. There does not appear to be a great disparity between these two bodies of evidence and I consider that there is some force in the plaintiff’s submission that the absence of complaint by Mr Hobson as to the condition of the plant and equipment on the premises, taken together with Mr Hodgson’s evidence that he did not seek to undertake substantive repairs or replacement, is confirmatory of this position. Therefore, in order to identify any liability of the defendant for damages for repair to the plant and equipment on the site, the real question is what constitutes reasonable wear and tear in the circumstances of equipment, its location, exposure to the elements and its reasonable use. The relevance of that issue is that such wear and tear is to be excepted from any liability of the defendant for the cost of repairs.
58. In order to quantify its claim concerning reinstatement or rectification costs for the plant and equipment the plaintiff relied upon expert evidence from Mr Sunter, an expert engineer with experience in the design and maintenance of plant and equipment. Mr Sunter’s opinion was that the reasonable cost of restoring the plant and equipment on the site to a good state of repair was $87,608. It becomes important to review his evidence in order to understand the basis of his opinion and to analyse how Mr Sunter arrived at this view.
59. The plaintiff read Mr Sunter’s affidavit sworn on 29 August 2009. That affidavit exhibited Mr Sunter’s undated report, which he had prepared following his inspection of equipment on site on 23 July 2008, a date which was well after Mr Hodgson vacated premises and well after Mr Smith had, as he acknowledged, used some of the equipment on site. A question arises as to whether Mr Sunter’s evidence should be seen as having any probative value, or whether it should be characterised as being speculative in its terms, and therefore not probative of the loss claimed by the plaintiff.
60. Mr Sunter’s methodology was to review eight identified quotations for repairs totalling $120,950 as listed at paragraph 3.1 of his report. He then made an arbitrary assumption that 50 per cent of the quoted costs should be reduced on account of due allowance being made for wear and tear, and to then apply allowances for the impact of inflation between 2005 and 2009 as well as allowances for variations in steel prices. In this way he estimated the quantum of the plaintiff’s claim for maintenance and repairs in the discounted sum of $122,421.
61. I consider the claim for the cost of maintenance and repairs as advanced by the plaintiff to be flawed and inappropriate on several bases.
62. First, other than through the unreasoned opinion of Mr Smith, there is no survey evidence that establishes that the relevant plant and equipment was kept in good and substantial repair and condition and in working order either when Mr Hodgson took over the second lease or when that lease expired and when he left the premises. Mr Smith’s opinion was generic and was not detailed by adequate reasoning. In my view, as a consequence, the plaintiff has not established through satisfactory evidence the baseline condition of the plant and equipment, or any changes to that condition, at the end of the lease.
63. Secondly, the condition of the plant and equipment at the time the various quotes for repair were obtained has not been shown to have arisen during the currency of Mr Hodgson’s lease. Further, the respective quotations do not establish with sufficient particularity or precision, exactly what is wrong with the plant and equipment that requires repair and which specifically relates to matters other than reasonable wear and tear within the terms of the proviso of clause 13.04.
64. Thirdly, I consider Mr Sunter’s methodology to be problematic in its approach and as to its evidentiary foundations in the following respects:
(a) The opinion concerning the allowance for fair wear and tear in paragraph 3.2.2 of Mr Sunter’s first report refers to the status of the equipment at the time the relevant quotations were obtained. The quotations that relate to equipment range in dates from 9 February 2005 to 10 April 2006 and in my view have no bearing on the state of the plant and equipment as at 31 December 2003 when the relevant lease expired. In my view, the evidence that such equipment deteriorates slowly lacks precision for it to be reliable and does not reasonably permit an inference that the equipment was in the same state as when the quotations were obtained compared to the relevant date of the obligation under the lease as at 31 December 2003. In my view this is particularly so given that the plant and equipment in question was at all relevant times, exposed to the elements and was rusting, which undoubtedly influenced its condition and working order at the times the quotations were obtained;
(b) None of the quotes in evidence, being the Mercer quote for structural and mechanical equipment repair, the Central Coast Metal Protectors quote for re-painting equipment, the Steel Modular Systems quote for supplying and installing a workshop and shed, the Central Coast Tractors quote for water system repairs, the Water Crane Service quote for re-balancing the tower and the lifting of the rumbler, the Continental Conveyor quote to supply a head pulley and the Warren Electrical quote for cabling replacement and related repairs have been demonstrated to be specifically referable to the need to restore the plant and equipment to good condition and working order as distinct from effecting repairs that were necessitated due to reasonable wear and tear;
(c) Mr Sunter based his opinions on photographs and statements that were provided to him by Mr Smith. Whilst he has stated that the information provided by Mr Smith was consistent with his own observations, he has not identified the substance of the information provided to him by Mr Smith nor has he stated the substance of his observations. Accordingly, I consider that the reasons for the opinions he has expressed cannot be properly evaluated. In this regard Mr Sunter’s opinions do not adequately comply with the requirement of Schedule 7 Clause 5(c) of the Uniform Civil Procedure Rules 2005 concerning the obligation on an expert to relevantly state the reason for each opinion expressed. Further, the formation of conclusions based on the interpretation of photographs is a process that is potentially flawed and fraught with the potential for error, even when undertaken by experts, as photographs can be deceptive. There is an onus on a party seeking to rely on such photographs to adequately explain the content of such photographs, particularly where an opinion is being advanced based on the interpretation of the photographs: Angel v Hawkesbury City Council [2008] NSWCA 130. In my view, in this case, no adequate explanation of the kind required was advanced through the evidence of either Mr Smith or Mr Sunter. Whilst the photographs comprising Exhibit “G” provide some general insight into the condition of the plant and equipment they provide very little if any insight into the question of whether that equipment was in a “ good and substantial repair and working order ”. Accordingly, I consider the absence of such evidence to afflict the probative value of Mr Sunter’s opinions;
(d) Mr Smith did not give evidence as to the detail of the assumptions that he had provided to Mr Sunter. In my view, the effect of this serves to undermine the utility of Mr Sunter’s opinions;
(e) Mr Sunter’s opinion in paragraph 4.9.1 of his first report concerning typical practices of similar quarrying operations cannot be tested for its probative value and this too undermines the utility of his evidence. There is no evidence that reliably equates other quarrying operations to the condition, wear and tear of the plant and equipment on this particular site;
(g) There is no evidence that links the claims for the need for a clean-up of the quarry or the provision of a replacement workshop to be related to the condition and working order of the plant and machinery;(f) Mr Sunter’s reasoning concerning the need for the work described in items 4.2 to 4.8 of his first report is not linked to a need to establish or re-establish a state of “ good and substantial repair and condition and working order … fair wear and tear excepted ” as at 31 December 2003.
65. For the reasons I have outlined above, I do not accept Mr Sunter’s opinions concerning the cost of restoring plant and equipment as being referable to the defendant’s obligations under the lease.
66. Mr Sunter was given an operational history of the machinery on the site. He was told it was operated for the best part of a 6 year period before it was laid idle. Of the history beforehand he gave the following evidence:
“ Q. And what were you told about what happened before that six year period?
A. Actually I don't really recollect at this stage exactly. The most fundamental thing to me is that it has plainly been operating and been able to operate for a period of time and I know what that requires. I've seen a lot of equipment, you know both what it's like new, how soon it deteriorates and what repairs are required generally and when major overhauls are required. So I'm able to assess that without really having to have precise details of what's actually happened there.Q. I understand. I'm just asking you whether in that process you made any assumptions as to the age of the equipment?Q. What assumption did you make as to the age of the equipment?
A. I think it's a bit all over the place actually. I think there's some new stuff that's been constructed, particularly the fabricated stuff would have been less than probably eight years old, that type of timing. Although I don't have a basis to pick an age and I've not needed to make assessments of it. What I was actually asked to do was to assess the reasonableness of the quotations to undertake the repairs.
A. I don't, I didn't, at least not directly. I may have intuitively, I'd have to think about that. I don't see it as highly relevant to the thing that I was basically asked to do .”
67. In my view, the foregoing evidence is an unsatisfactory foundation on which to base a finding of liability for repairs above and beyond reasonable wear and tear and the quantification of such repairs. Mr Sunter agreed that he was not asked to consider the condition of the equipment in either 2000, 2001 or 2003. He said he was not asked to consider what deterioration might have occurred between 2000 and 2003 although he said he did consider this. Whatever factors emerged from such consideration did not feature in his evidence. He was asked whether such a consideration was relevant to the expression of his opinion as an expert. He avoided giving a direct answer, as is evident from the following evidence:
Q. Yes, but my question was did you consider the matters asked of you by Mr Menadue to be relevant to the expression of your opinion.“ Q. Do you consider that to be a matter relevant to the expression of your expert opinion?
A. I think that quite simply equipment that's standing idle deteriorates very slowly. I've had some quite detailed experiences of exactly that, of relocating equipment that's been off for seven years in Tasmania and bringing it back to the Hunter Valley, setting it up again and if necessary repairs, reconfigurations, that sort of thing, the equipment itself doesn't deteriorate very quickly at all.
A. Oh. Slightly, but it's actually probably not going to do him any favours because the reality is that the lack of continuity of operating of this plant is more of a hazard for, you know, what's involved in starting it up again and that different legislation and the interpretation of the WorkCover authorities and that, or the approving authorities lets say, can actually create a considerably increased scope of work. The increased scope of work from the passage of time is minimal to the point of being nil, the, the same work, the same repairs, the same holes need fixing, the same weaknesses need fixing, there is a point when the - and there's a differentiation between functional capacity and aesthetics and people often make that discrimination, I guess, for all sort of qualitative reasons. But in terms of operating the plant, the aesthetics is a very low issue and it's just not affected costs wise on the quotations that are provided here across that period .”
68. I consider Mr Sunter’s evidence that the equipment in question deteriorates very slowly to be unpersuasive, especially since that view must be relative and it was not explained with reasons that demonstrate its specific relevance to the plant and equipment in question. It also appears to be contrary to the evidence that the equipment, which exposed to the elements, was badly rusted.
69. In reality, Mr Sunter was not asked to consider any differences in the state of the equipment between 2000 and 2003. He only saw what was evident to him at the time of his inspection. Without more, I do not consider that this circumstance provided him with any reasonable or meaningful opportunity to assess the condition of the equipment as at 31 December 2003 and I consider this undermines the probity of his evidence on that issue.
70. Mr Sunter’s views on what was considered to be fair wear and tear on the equipment was based on his assessment as at the dates of the quotes, not the relevant date, namely 31 December 2003, which was the date on which the assessment of good condition, working order and fair wear and tear were required to be made concerning this component of the claim. In this regard, Mr Sunter gave the following evidence:
“ Q. Thank you. I just want to ask you to reflect on your answer about the relevance of the machinery being inactive for a while, whether that would have had an effect on its workability or wear and tear, summarising rather than quoting. Do you recall that evidence?
A. In nature yes.Q. If moving parts are left to stand still then they have a tendency to seize up in the ordinary atmosphere unless kept lubricated don't they?Q. Yes. A lot of this machinery had moving parts didn't it?
A. Yes.
A. Yes. That was actually the point I was in the process of making to the defendant counsel when he cut me off, is that what actually significant about is the amount of things that aren't on here and they're things of that nature. It's a simply, silent, there's been no attempt to get recovery for that, probably an acceptance that at the time of entry into they were in some condition and now at the completion of you know the relevance leases in some other condition and there's simply no attempt to get you know recovery for anything other than stuff that is simply missing.”
71. This was taken up by Mr Lazarus in re-examination as follows:
“Q. Just in relation to the answer you just gave, are you able to give or provide an explanation by way of examples as to the kind of equipment that you were expecting would have been the subject of these quotes but actually were not?
…
Q. Thank you. And in answer to a question, possibly the last question before the morning tea adjournment, you were asked by my friend, and I just want to clarify your answer here, that it was put to you words to the effect that the purpose or the focus of your report was to assess these particular quotes and assess whether they were fair and reasonable. I think the words used by my friend were 'at the time they were given' and you answered yes in relation to that. Are you able to say by reference to your more recent report whether that is a complete answer to the question?Q. Yes?
A. The comment that effectively in here is that it is on the low, you know bottom end, there relating - that's answering that basic question of the types of equipment to be the cyclones and any of the rotating equipment, the conveyor drives, the pulleys that dealt with the rotating equipment, idlers arm, the crushing equipment. It's not dealt with in any way other than whether it is there or not there. This is all about wear plates, pipes that relocated, stuff that's worn our, is physically visibly deteriorated as opposed to a, cause to properly answer the question that leads from what other equipment, it's actually a fairly expensive investigation, you just wouldn't undertake it. You'd actually, it's cheaper to pull the things out and to do the repair and to deal with the bills that come from it and share them according, you know between the parties. That would be a normal way of dealing with that or just making an arbitrary allowance based on operational history, which is also quite a good indication of what the costs are likely to be.
A. I think they're relevant at the time they were given, they're relevant you know as at today and the further deterioration for the nature of the repairs that were needed will be low to the point of being, being irrelevant in these proceedings .”
72. It is clear from the above testimony that Mr Sunter took extraneous considerations into account in stating his views concerning this head of claim.
73. In summary, the plaintiff’s claim for the damages in respect of plant and equipment was made in terms that went well beyond the terms of the lease as to the number of individual items that could legitimately form the basis of a claim in this regard. Further, in my view the evidence does not satisfactorily establish first, the condition of the equipment at the commencement of the relevant lease, secondly, the nature of what might be reasonably considered to be legitimate wear and tear from ordinary use, and thirdly, what proportion of Mr Sunter’s expert opinion, if any, could be fairly and reasonably attributed to reasonable wear and tear so as to enable reasonable quantification of the claim for maintenance and repair of the equipment in question to proceed in a rational way.
74. In my view, the evidence concerning damages for the cost of maintaining the relevant plant and equipment has been left in a speculative state that does not reasonably permit a rational assessment of the plaintiff’s entitlement to damages for this component of the plaintiff’s claim. For the foregoing reasons I consider that the plaintiff has not discharged the onus of making out its claim concerning damages for the cost of maintenance and repair of the equipment on the site as an incident of the defendant’s obligations under the lease in question.
75. I therefore find that the plaintiff has failed to establish an entitlement to quantifiable damages for this component of the claim. Further, I consider that the state of the evidence does not enable a proportion of the claimed amount to be awarded because to follow such a course would involve unwarranted speculation.
Issue 3 – Alleged failure to rehabilitate the land
76. The plaintiff makes a claim for damages in respect of the alleged failure by the defendant to reinstate or rehabilitate the land of the quarry once he had ceased mining operations. The claim asserts a breach of clauses 5.12 and 5.16 of the lease, the latter provision requiring compliance with all relevant consents, which in this case includes the 1979 consent. The quantum claimed is $79,233 and relates only to two tailing dams or ponds and not to the entirety of the site.
77. The defendant has contended he is not liable for this claim because the tailings dams were full or almost full at the time he took possession of the site
78. The plaintiff asserts that the defendant’s response to this component of the claim is irrelevant because the defendant assumed an unqualified obligation imposed by the lease to reinstate the surface of the premises at the conclusion of the mining operations in each area : Lease clause 5.12. Further, the plaintiff asserts that the submitted obligation of the defendant extended to compliance with the terms of all consents and approvals governing the mining operations on the premises : Lease clause 5.16.
79. By this route of argument the plaintiff claims that the relevant planning consent that had been engaged comprised the 1979 Development Consent exhibited to the 24 June 2008 affidavit of Mr Smith as Exhibit “CLS-3”, which included, amongst other things:
““ (e) No area larger than 0.5ha is to be worked at any one time, consequentially the procedure should be 0.5ha being prepared for extraction, 0.5ha being worked and 0.5ha being rehabilitated.”
“(i) All topsoil is to be stockpiled and respread over disturbed areas including graded banks, no topsoil to be stockpiled longer than 6 months nor is it to be stockpiled in watercourses or graded banks.”
“(k) After topsoil respreading, all disturbed areas, banks and batters are to be sown and fertilised with the following mixtures:- ””“(j) All disturbed areas are to be re-shaped such that no water ponding occurs on the extraction site.”
80. The evidence of Mr Smith to the effect that the defendant failed to reinstate the land was unchallenged and the defendant did not deny that he had not reinstated the land. The question is therefore whether the defendant was obliged to carry out the reinstatement rehabilitation as claimed by the plaintiff.
81. The defendant claimed that when he first entered the property the first tailing pond was almost full and the second tailings pond was about 70 per cent full, and at the end of the lease, that pond was about 85 per cent full. The defendant also conceded that he had placed slurry into the tailings ponds on the property, including to stop leaking of the contents onto the property, which was in fulfilment of another obligation he had under the lease. Notably, by the time the defendant took on the lease in question, the “topsoil” referred to in condition (k) imposed by the 1979 Consent was no longer available on site for “respreading” as required.
82. According to the lease, the lessee’s obligation to rehabilitate or reinstate the land was obviously dependent on the conclusion of mining operations. It is necessary to determine what constituted mining operations in order to determine if they had concluded and to determine any consequential liability of the defendant in respect of this head of claim.
83. The lease did not define what in fact constituted mining operations. Further, the lease did not identify which particular mining operation or aspects of mining operations, or activity incidental to mining operations should be ceased so as to engage the obligation to reinstate the land.
84. In my view, the plaintiff’s claim for reinstatement is based on a misconception that mining operations had ceased on the property. All that had ceased was the defendant’s occupation as lessee. Mining operations per se had not ceased. The land still comprised a quarry. In fact Mr Smith conceded that after the defendant had left the quarry, he had personally used the pumps and motors located on pontoons on the tailing ponds located on the property in order to siphon water out of those ponds. This suggests that some sort of operation had been undertaken on the property after the defendant had left the site.
85. More importantly, there was the concession by Mr Smith to the effect that the Council had granted a Deferred Commencement Development Consent on 20 June 2006 and had granted a subsequent modification of that Deferred Commencement Consent on 17 September 2007. These Consents were clearly confirmatory of proposed new workings of the quarry in stages over a period of some 19 years. In my view this is compelling evidence that mining operations on the site had not ceased but were in fact intended to continue following the departure of the defendant from the site. In my view it is not to the point that the plaintiff had not undertaken substantial commencement pursuant to those Consents.
86. In addition to the foregoing analysis, it must be observed that on assuming the obligations under the lease in question, the defendant removed no topsoil from the quarry as the ground had already been broken by pre-existing mining operations. In those circumstances, having regard to the likely cost of bringing topsoil onto the site and carrying out planting as claimed, I consider it fundamentally unjust to visit the cost thereof onto the defendant when neither he nor his associated company was responsible for the pre-existing denuded condition of the surface of the quarry. At best, the defendant would have been liable to “respread” stockpiled topsoil on the site, not for bringing in topsoil to replace that which had been removed from the site. “Respreading” could have no other relevant meaning in this context.
87. Accordingly, I find that in the circumstances under review, the obligation to reinstate or to rehabilitate the land comprising the quarry, or part of it, did not arise as a burden to be discharged by the defendant. It follows that the plaintiff’s claim against the defendant arising from the alleged obligation to reinstate or rehabilitate the land must fail.
88. In accordance with convention, and to allow for the possibility that I may be incorrect in respect of the foregoing construction of the lease, in brief terms I propose to address a further aspect of the quantum sought by the plaintiff regarding this component of the claim.
89. The first matter to be observed concerning the proposed cost of reinstatement of the quarry is the concession made by Mr Burns, the expert called by the plaintiff, to the effect that the rehabilitation that he was recommending involved a different form of vegetation than that which was required under the 1979 Consent. I consider this to be an important matter.
90. In my view, it is fundamental that like proposals be compared and costed with like requirements and that the correct scenario be costed. It is not to the point that the grass seed and fertiliser mix involved in the 1979 consent scenario was a more expensive proposition than the recommendation made by Mr Burns. It is for the plaintiff to correctly prove the required quantum of its claim, and in this regard it is fundamental that the correct rehabilitation scenario be costed.
91. Similarly, I consider that it is not to the point to argue, as does the plaintiff, that the tree seeding quotation considered and recommended by Mr Burns was less expensive than other rehabilitation quotations. The fundamental point here being that the correct scenario ought to be costed, and unless it has been costed correctly, the conclusion must be that the plaintiff has failed to prove quantum in the appropriate manner. It is inappropriate for the plaintiff to rely upon a costing scenario for something approximating rather than complying with what is required under the 1979 Consent.
92. In view of my findings concerning the land rehabilitation issues, I consider that the plaintiff has not made out its case for damages concerning this head of claim.
Issue 4 - Liability for legal fees in respect of lease in the sum of $7928
93. The plaintiff claimed the sum of $7928 plus interest in respect of lease preparation costs. The claim arose pursuant to clause 9.7(d) of the lease. On the face of the lease this claim was maintainable against HB Rindean Pty Limited but the defendant has been sued as the guarantor of the obligations of that company under the lease in any event. The defendant raises no dispute concerning his liability for this amount, but the plaintiff gives the defendant credit for the sum of $5000, which has already been contributed by Mr Betts, the former second defendant, in respect of this liability. Accordingly, I find the defendant is liable to the plaintiff for the balance of this sum, namely $2928 plus interest.
C. FINDINGS ON ISSUES ARISING IN DEFENDANT’S CROSS CLAIM
Issue 5 – Alleged sub-standard electrical wiring on the plaintiff’s property
94. The evidence indicated that Mr Smith had installed some unauthorised electrical wiring and connections at the quarry. Mr Hodgson claimed that the master switch for the electricity supply to the premises was unsafe and dangerous. Initially Mr Hodgson cross claimed for the cost of electrical repairs to the premises to make the installation safe, including the installation of an isolator safety switch for the plant and equipment. At the commencement of the case, these claimed sums were identified in the amounts of $3061 and $3900, totalling $6961. In his closing address, on behalf of the defendant, Mr Menadue indicated that these amounts were no longer pressed. Accordingly, there is no need to give consideration to this issue.
Issue 6 – Alleged unreasonable withholding of consent to mine the “banned areas”
95. Mr Hodgson claimed that he had lost substantial profits in the 2003 calendar year because the plaintiff had refused to allow him to dig within two areas that were within the footprint of the quarry where, from his point of view, there was still good and easily exploitable control sand from which he could readily produce his staple product which he supplied to the building industry. He described that product as yellow brickie sand, which was the major product sold from the quarry. The areas in question were described for convenience as the “banned Areas”. These comprised the Stockpile Area and the Bench Area.
96. Mr Hodgson’s initial quantum claim in respect of the claimed loss of profits was $227,000. Following the meeting of the financial experts, subject to proof of certain assumptions, to which I will return, it is agreed that the defendant’s net economic loss on the cross claim was limited to the amount of $103,743.
97. The basis of the claim for this sum is that Mr Hodgson believed, and I accept, that by late 2001, the footprint at the quarry was basically exhausted of the type of control sand he required for his favoured product, except for three small areas in the quarry mainly the Stockpile Area, the Bench Area above the Washplant, as well as at the top north-western corner of the property known as the Top Pad where, in respect of the latter area, the Council sought to have mining stopped.
98. In September 2001 and June 2002 Mr Hodgson stated, and I accept, that he undertook some earthworks in the quarry to level and shape the Stockpile Area. He stated, and I accept, this work was aimed at improving drainage at the site and, at the same time, it would also give him access to yellow control sand which he needed to make his product. In February 2002 and May 2002 Mr Hodgson attempted to level and shape the Bench Area of the quarry which would also have given him the yellow control sand he needed. On all of these occasions, Mr Smith refused to allow him to carry out the work and ordered him to work elsewhere within the footprint of the quarry. The evidence of Mr Hodgson on these matters is located at paragraphs 37, 43, 44 and 45 of his first affidavit. That evidence was admitted by Mr Smith, and was as follows:
‘37. In about September 2001 after I had spent some time levelling and shaping some of the Sales Stockpile Area, Mr Smith came onto the site and we had a conversation that included words to the following effect:“ Stockpile Area
He said: “What are you doing here?”I said: “I’m levelling this area to get the drainage right and am getting control material for the yellow brickie.”
He said: “You can’t do that.”
I said: “But I need it for the yellow brickie colour.”
He said: “No. You’ve got to get it out of the holes.”
He said: “That’s not my problem. You can only dig in the holes.’I said: “But it’s just not there.”
Bench Area
‘43. On about 13 February 2002, Mr Smith came onto the site and we had a conversation that included words to the following effect:
He said: “What are you doing here?”
I said: “I’m levelling the area out and getting colour for yellow brickie.”
He said: “You can’t dig here. You’ve got the two areas down the bottom.”
I said: “But down there it’s not the right colour and quality. It’s just too hard, it’s not breaking up, and the recovery rate is just not worth it”
He said: “That’s not my problem.”
I said: “But where am I going to get the yellow from to keep the sales going?”
He said: “In the other areas.”
He said: “Well, that’s not my problem. You’re just not operating properly.’I said: “It’s just not there.”
Bench Area
‘44. In May 2002 the situation was dire. I had no control materials. As a result, I started digging again on the Bench Area. After a short time, Mr Smith came onto the site and we had a conversation which included words to the following effect:
He said: “Look, I told you I don’t want you to dig here any more. I only want you to dig in the lower areas.”
I said: “Yeah. But where do I find the control colour?”
He said: “I don’t know and I’m not worried. Dig in the bottom area.”
I said: “OK. Then why don’t you tell me where to find it in the bottom area.”
He said: “Anywhere in the lower area.”
I said: “OK. Then why don’t you take the place back over.”
He said: “Maybe I will.”
He said: “It’s not my worry.’I said: “Because I’m going to run out of yellow brickie sand.”
‘45. By June 2002, I had once again run out of control material, so I started digging on the Sales Stockpile Area again. On the first day of ripping, Mr Smith turned up and we had a conversation which included words to the following effect:Stockpile Area
He said: “Look, I’ve already told you, I don’t want you digging here.”He said: “I don’t care. Rip in the bottom hole.’ ”I said: “I’m doing it to get the control material and get the drainage going the right way.
99. The undisputed evidence of Mr Hodgson on these matters was also supported by the evidence of Mr Betts, who confirmed that on more than just isolated occasions, Mr Smith declined to permit any mining activity anywhere on the site other than in the hole at the bottom of the property. In this regard, I accept the evidence of Mr Hodgson to the effect that the bottom hole was fully exploited for the purpose of producing his product.
100. The effect of Mr Smith’s conduct in this regard was to continue to charge Mr Hodgson rent but at the same time to also prevent him from running a profitable operation. Mr Hodgson claims that Mr Smith’s repeated refusals to allow him to mine in the Banned Areas constituted a clear breach of provisions 13.01 and 13.03 of the lease which respectively provided for the lessee to have quiet enjoyment of the property and to permit the property to be used for the purpose of the lease, noting that in this case it was to extract sandstone and sand from the quarry.
101. As a consequence, Mr Hodgson claims that Mr Smith’s interference with the exercise of his rights under the lease forms a legitimate basis upon which to claim damages and pecuniary loss, including lost business profits : Butt, Land Law, 5th ed, at pp 1560 and 1565; Kenny v Preen [1963] 1 QB 513 per Pearson J; McCall v Abelesz [1976] QB 585 per Lord Denning MR at 594.
102. In response to the defendant’s claim in this regard, Mr Smith places reliance upon Special Condition 2 (Item 20) of the lease which provides : “The Lessee shall not mine any area within the Premises without the consent of the Lessor, which shall not be unreasonably withheld”.
103. Mr Hodgson argues that on at least the four occasions that have been identified, Mr Smith entered the premises and stopped him from levelling, shaping and excavating the Banned Areas. This was in circumstances where the implication of Mr Hodgson’s activity was to seek to dig in those areas to obtain the material he needed and Mr Smith did not merely withhold his consent, but he positively forbad Mr Hodgson from digging in those areas, and instead directed him to only dig in the holes that had already been exploited. In cross-examination Mr Smith admitted that he was “insistent” that Mr Hodgson could not dig in the Banned Areas and that he “wasn’t even prepared to consider” allowing Mr Hodgson to be in those areas.
104. Mr Hodgson argues that this evidence is proof that Mr Smith’s refusal to consent to him digging in those areas was unreasonable, and therefore constituted a breach of Special Condition 2.
105. By way of answer, Mr Smith argues that there is a line of authorities dealing with a landlord’s refusal to consent to the assignment of lease or improvements on the premises, including those dealing with s 12 of the Conveyancing Act 1919 and on the basis of those authorities, Mr Hodgson is not entitled to damages for an alleged breach of Special Condition 2.
106. Accordingly, the matter at issue is that of reasonableness or, the claimed unreasonableness, of the plaintiff’s position in withholding the giving of consent to the defendant in the absence of a rational explanation.
107. In my view, what Mr Smith did in this case, was to arbitrarily reject out of hand and without sound reasons, Mr Hodgson’s desire to mine in the Banned Areas. In my view this constituted unreasonableness in the absence of a rational explanation.
108. As a consequence of the unreasonable refusal and withholding of consent for the mining in question, I find, as was submitted on his behalf, that Mr Hodgson was therefore released from the obligation to obtain consent, analogous to the circumstances in Haberecht & Anor v Chapman (1993) CCH Conveyancing Reports at 279 per Meagher JA (with whom Sheller JA agreed). Accordingly, I consider that Mr Smith’s actions in positively and insistently forbidding Mr Hodgson from working in the Banned Areas and directing him to work elsewhere, was a clear breach of Mr Hodgson’s entitlement to quiet enjoyment of leased premises pursuant to clauses 13.01 and 13.03 of the lease.
109. In my view this is evident from the context of the relationship between the parties. The relevant lease was entered into after Mr Hodgson exercised an option dated 18 March 1998 enabling him to take a further lease on the property for a term of three years. Hence the lease in question, which was dated 24 October 2001, in fact commenced on 1 January 2001. It would have been unreasonable to assume that having entered into the formalities of a lease to exploit the quarry in those circumstances, that Mr Smith could legitimately object to Mr Hodgson, as lessee, ripping material within the Banned Areas since they were within the existing footprint of the ground that had already been broken within the quarry, and because there were no reasonable economic alternatives to the Banned Areas for Mr Hodgson to exploit in order to make his product.
110. The relationship between the parties had to have a mutual commercial benefit. There is no dispute that the good quality control sand that Mr Hodgson required for his product was either not available, or of poor quality and difficult to exploit if it was sought to be obtained from outside the Banned Areas. I accept Mr Hodgson’s evidence that it was difficult for him to sell a lesser quality product obtained by such means. He had leased a quarry and was paying rent and royalties to the plaintiff for materials extracted from the quarry. In my view he was entitled to take reasonable steps to commercially exploit what he was paying for. There were a number of mutual benefits that flowed from him being able to do so. If he had been able to level the Bench Area this would have provided a better gradient for machine operation on the site, and for the drainage of rain water, as well as allowing a more efficient and better stockpiling of raw materials near the Washplant for processing. I accept Mr Hodgson’s evidence to the effect that unless this was done, the Stockpile Area would remain unlevelled which would impede drainage, which did not constitute good quarry management.
111. I do not accept the reasonableness of Mr Smith’s explanations for not wanting Mr Hodgson to mine in the Banned Areas. His explanation for refusing to allow Mr Hodgson to carry out levelling, namely his belief that levelling was not required, was based on the assumption that previous operators had no problem in that regard, but this ignored the fact that the site had been exploited since previous operators had left, and the site had obviously changed. Further, in my view, this statement that “… just that there was no need to mine in that area, it was a sales stockpile area and it had a specific purpose” showed that he had little regard for the need for Mr Hodgson to make a profit from his rental of the quarry. In my view this is apparent from his acknowledgement that he knew there was good-quality yellow control material in the Stockpile Area that Mr Hodgson wished to mine, and because he was aware of Mr Hodgson’s complaints of not being able to get access to such material elsewhere on the site. In this context, I infer from the fact that he was not even prepared to consider allowing Mr Hodgson to mine in the Banned Areas, that his refusals were unreasonable.
112. I accept the submission made on behalf of Mr Hodgson that Mr Smith did not base his refusal to allow digging in the Banned Areas upon the grounds referred to in his affidavits. In this regard I am satisfied that he was not concerned about possible disturbance to the footings of the Stockpile tower, matters of development consent, possible breaches of the lease or the need for mining plans. He was simply unconcerned about the problems faced by Mr Hodgson in seeking to exploit the quarry pursuant to his lease. In my view his refusals were simply unreasoned, and therefore unreasonable.
113. It is noteworthy that the lease made no provision for any formal procedure for obtaining the consent of the lessor. The relationship between the parties was initially one of informality but I accept that over time, Mr Smith became resistant to Mr Hodgson’s desire to exploit the quarry. Mr Hodgson correctly summed up the problem as follows:
“ A. “You’re Honour...I’m in a quarry that’s been operating for quite a number of years. I hadn’t broken new ground, I hadn’t pushed trees over and removed topsoil. I was doing a two-fold effect there...and Mr Smith, again, didn’t like what I was doing, came down and let me know that he didn’t want me there. It’s very hard, your Honour, you’re leasing a quarry that’s been operating and I’m just trying to progress along and I get stopped doing this in this area and I’ve got to go back to a couple of areas that certainly aren’t producing quality material .”
114. It was apparent that Mr Hodgson had been digging in Banned Areas without interference before Mr Smith had later intervened to ask him to cease. As Mr Hodgson had not broken new ground in the quarry and was digging within the existing footprint, the topsoil having been removed long beforehand by other operators, owners and lessees. In my view it could not reasonably be said that he was operating contrary to any development consent. In this regard, as the topsoil had already been removed, and the quarry had been mined and reduced in levels, in my view there was no need to submit a mining plan.
115. Mr Smith’s stated concern about the stability of the footings around the Stockpile tower is in my view a matter of late invention after the event. In this regard I accept Mr Hodgson’s evidence that the footings were surrounded by very stable sandstone material and it was his intention to stay well away from the footings. In my view Mr Smith did not consider any of these matters in refusing to give his consent. In my view he simply acted unreasonably in refusing and withholding his consent.
116. Mr Hodgson stated that had he been allowed to dig in the Stockpile Area alone he would have recovered at least 46,000 tonnes of yellow brickie control sand. He believed that the deposit was a lot larger than that estimate, based on his extensive experience in the quarrying industry. I accept his evidence in this regard as he was in a good position to ascertain and make this estimate.
117. The significance of the evidence was that he needed about 25 per cent, or at worst, 50 per cent, control sand, to blend with other materials to make up his yellow brickie sand product. He said if he had been allowed to mine sand containing 50 per cent control material, which he said was a worst case scenario, he would have been able to obtain at least 92,000 tonnes of finished product for sales which is well in excess of the more conservative assumptions used to base the expert accountancy calculations.
118. He based this evidence on his visual inspection of the depth of the cross-section of the control sand that was evident to him on his examination of the eastern face of the Stockpile Area. This evidence was not relevantly contradicted. Mr Smith was not in a position to contradict this evidence as he had not looked into the issue from that perspective. I accept Mr Hodgson’s evidence concerning the availability of control sand in this area as a reasonable and reliable estimate because of his experience in the quarry industry, and in light of his reference point, namely, that he had extracted at least 4000 tonnes of good quality yellow brickie sand from the Stockpile Area before Mr Smith had stopped him from continuing. In this regard, Mr Hodgson’s evidence concerning the availability of yellow brickie sand in the Stockpile Area was supported by the evidence of Mr Betts, who confirmed the existence of yellow control material in the Banned Areas. I also accept the evidence of Mr Betts in this regard.
119. I accept the foregoing evidence notwithstanding geo-technical evidence relied upon by the plaintiff. That evidence, which was based on the 1989 bore drilling results undertaken on the site by the firm Coffey Partners, makes no mention of yellow control sand. In this regard I accept the explanatory evidence of Mr Hodgson that the bore logs of Coffey Partners relied upon by the plaintiff were not representative of the available materials at those locations because the “washings” from the sampling process would not give a good indication of what sand and colour of sand was within the bore because the water used in the process would have washed the colour out of the residual sand that had been left for examination in the base process. I accept Mr Hodgson’s evidence in this regard in light of his unchallenged experience and expertise in the quarrying industry.
120. Mr Hodgson impressed me as an experienced and efficient quarry operator who gave credible evidence as to the manner in which he efficiently and profitably organised his business at the quarry, insofar as he was able to do so within the operating strictures imposed by Mr Smith. I therefore felt confident that I could rely upon his evidence that he had lost a significant sum of money during the 2003 calendar year as a result of Mr Smith prohibiting him from digging in the Banned Areas to obtain his principal marketing product from the quarry, namely yellow brickie sand. In this regard, the following figures from within the evidence are insightful:
| “Calendar year | Tonnage | Sales |
| 2000 | 45,906 | $315,806.39 |
| 2001 | 44,763 | $304,892 |
| 2002 | 62,263 | $513,238 |
| 2003 | 16,137 | $96,351” |
121. Mr Hodgson said, and I accept, notwithstanding that sales had been affected by the intervention of the Council in late 2002, if he had been permitted access to the material, he could have continued to sell yellow brickie sand during 2003. Clearly, this would have resulted in significant sales in the volume and profitability. I accept the conservative estimate identified through the evidence of the accountants, in the sum of $103,743.
122. In this regard, it is significant to note that the interference from the Council was not in the form of a stop-work order. It is also of some significance to note that if Mr Hodgson had been permitted unfettered access to the Banned Areas in 2002, he would have had a significant stockpile of yellow brickie sand that would have comprised a very substantial reserve and which would have enabled him to service his existing customers, and to maintain his sales in the 2003 year, as claimed in his cross claim for economic loss.
123. In my view, it was not reasonably possible for Mr Hodgson to mitigate his resultant loss by shifting his customers to another product from another quarry. In this regard he said, and I accept:
“As I have said previously, the products sold from Rindean were characteristic to Rindean and could not be easily interchanged with products from other sites. While the Somersby material was similar to the yellow brickie sand sold from Rindean, it had a different texture and very different colour which meant that bricklayers (who tend to be very fussy) would not buy both. Brickies are very hard to change from one product to another. Further, there were approximately four other quarries in the immediate area which sold similar products to yellow brickie sand and other products sold from Rindean. It was easy for customers to go to those quarries when Rindean could not supply those products.”
124. In this regard, I consider it noteworthy that Mr Smith agreed that most quarry customers, particularly bricklayers, liked to obtain sand from particular quarries because of the consistency of a particular product from the quarry with which they were accustomed to dealing. I infer from this that Mr Hodgson’s attempts to shift his customers to the alternative product from his nearby Somersby quarry were understandably unsuccessful.
125. I have come to these conclusions on the cross-claim notwithstanding the arguments to the contrary that are relied upon by the plaintiff.
126. The plaintiff has sought to refute any liability to Mr Hodgson by reliance upon clause 16.01 of the lease which provides :
“ 16.01 Lessor’s non-liability for loss of damage : Notwithstanding any implications or rule of law to the contrary the Lessor shall not be liable for any damage or loss the Lessee may suffer by any act, default or neglect of the Lessor or any other persons in carrying out the powers, authorities and provisions herein contained or otherwise with respect to the premises or any building on the premises or by reason of the Lessor neglecting to do something to the premises or to any building on the premises and which as between the Lessor and the Lessee it might be legally liable to do unless the Lessee has given the Lessor written notice to do such thing and the Lessor has without reasonable cause failed within a reasonable time thereafter to take proper steps to comply therewith. ”
127. In my view, clause 16.01 of the lease is of no assistance to the plaintiff because, as a matter of interpretation of the lease, the exclusion clause in question could not apply to the defendant’s claim when the lease is construed as a whole. In taking that approach, and giving due weight to the context in which the clause appears, including the nature and object of the contract, the clause must be construed contra proferentem to the plaintiff where there is an ambiguity : Darlington Futures Ltd v Delco Australia Pty Ltd [1986] HCA 82; (1986) 161 CLR 500 at [16]; pp 510-511.
128. In withholding consent to mine in the Banned Areas, it cannot be reasonably said that the plaintiff was carrying out powers conferred under the lease. The argument by the plaintiff to the contrary is based on an ambiguity which, as a matter of principle, must be construed contra proferentem to the interests of the plaintiff : Darlington Futures at [16].
129. A limitation clause such as 16.01 ought not defeat the main object of the lease unless it is “clearly and unambiguously expressed to do so” such that it is the only logical operation which may be given to it : Kamil Export (Aust) Pty Ltd v NPL (Australia) Pty Ltd [1996] VR per Marks J at 547 ff: H & E Van Der Sterren Cibernetics (Holdings) Pty Ltd [1978] 44 ALJR 157 per Walsh J at 158.
130. Mr Smith’s withholding of consent to mine in the Banned Areas was a deliberate breach of the lease which was not permitted by the contract between the parties and therefore the limitation clause expressed in general terms could have no application to the actions of the lessor that were not permitted or authorised under the contract : Cheshire and Fifoot; Law of Contract, 8th Australian ed, at [10.76]-[10.77]; Sydney Corporation v West [1965] HCA 68; (1965) 114 CLR 481. In West, at p503, Windeyer J stated:
“…if you undertake to do a thing in a certain way …and have broken the contract by not doing the thing contracted for in the way contracted for…you cannot rely on the conditions which were only intended to protect you if you carried out the contract in the way in which you had contracted to do it…”
131. In short, exclusion clauses of the kind embodied in clause 16.01 of the lease should not be applied so as to exclude liability for a “fundamental breach of the contract” : Glebe Island Terminals v Continental Seagram (1993) 40 NSWLR 212 at 241 per Handley JA.
132. Further, clause 16.01 of the lease does not apply to a breach of the covenant of quiet enjoyment because that is a prohibition within the lease which is a negative (“shall not”) stipulation on the plaintiff. It is not a “power, authority or provision” in the lease that the plaintiff was obliged to “carry out”. Further, clause 16.01 is expressed in general terms and does not expressly exclude liability for a deliberate breach on the part of the lessor, which I find to be the case here.
133. Significantly, it is clear from the evidence of Mr Smith, that he would not have allowed Mr Hodgson to work in the Banned Areas in any event. It was therefore pointless for Mr Hodgson to give written notice of his wish to do so. Mr Smith made his verbal refusal clear at the time the work was sought to be undertaken and he categorically continued to justify his refusal when he gave evidence in these proceedings. Accordingly, I consider that the contended failure of Mr Hodgson to make a written request is no answer to the cross claim because such a written request would have been refused out of hand, which was consistent with the evidence Mr Smith gave in these proceedings.
134. In these circumstances, it was clear that Mr Smith did not intend to change his mind or to remedy the situation caused by his breach. He gave no requirement to Mr Hodgson for him to send a written notice under clause 16.01 of the lease and in my view, as a consequence, he has waived his right to rely upon a lack of notice from Mr Hodgson under that clause. Notice was not mandatory. Clause 16.02 of the lease provided for an optional procedure that notices “may be” served pursuant to s 170 of the Conveyancing Act 1919, and that only applied to notices the lessor may send.
135. It is a well-settled principle that: “A party itself unable or unwilling to perform a contract cannot complain of the other parties breach” : Cheshire and Fifoot, 9th Australian ed, at [2.26]. Accordingly, Mr Hodgson argues that since the plaintiff never intended to allow work to proceed in the Banned Areas even if a notice was received under clause 16.01, it therefore dispensed with the requirement for notice to be given under clause 16.01. That submission invoked the following statement by Coleridge J in Short v Stone (1846) 115 ER 911 at 915:
“If the defendant disables himself from fulfilling such a request, then, in the first place, he dispenses with the request, because it has become impossible to make the request effectually, and, secondly, he has broken his own contract, because he is no longer able to fulfil that.”
136. Whilst Short was a case that involved a breach of promise of marriage, I consider that the contractual principle nevertheless holds good in this case.
137. The plaintiff raises a defence based on clause 5.09 of the lease which provides for Mr Hodgson to indemnify the plaintiff against all “claims arising out of his use of the premises and all operations of land.” In this regard, the plaintiff claims that as a consequence of the operation of the doctrine of circuity of action, the plaintiff is not liable for its own breach of the lease. The defendant’s answer to that defence is that clause 5.09 has no application to the facts of this case because the plaintiff’s claim does not arise out of the defendant’s “use of the premises”, but rather, arises out of the plaintiff’s breach of the covenant of quiet enjoyment.
138. I accept that submission and the defendant’s related submission that clause 5.09 does not apply to a situation where the lessee sues the lessor for breach of the lease. If the contrary were true, this would lead to an absurd result.
139. The final matter relied upon by the plaintiff in answer to the cross claim by the defendant invoked clause 5.07 of the lease which is in the following terms :
“… to work the premises in sections approved by the lessor and not to break new ground until the old has been worked to the full depth of the materials in that location. Before commencing to break new ground, to provide the lessor with plans of the mining works to be carried out in the new location.”
140. In this regard, I accept the submission of the defendant to the effect that clause 5.07 is of no application to the present case because the evidence has indisputably established that working in the Banned Areas in question did not involve the breaking of new ground. Those areas were all existing work areas which were within the existing footprint of the quarry where Mr Hodgson attempted to level and in the process, extract his control sand for his product. In my view, in those circumstances, it would be unreasonable to have expected Mr Hodgson to provide “mining plans” to dig within an area that had already been the subject of excavation within the existing quarry footprint.
141. Further, Mr Smith did not request that he be provided with any such plans. In my view, the evidence discloses that any such plans, if provided, would not have had the slightest impact on Mr Smith’s thinking on the subject as he was adamant that there was to be no digging within the Banned Areas. In those same circumstances, I consider that the provision of plans by Mr Hodgson would have been pointless.
142. Finally, to the extent to which there was a conflict between a clause of the lease such as clause 5.07 and a special condition such as Special Condition 2, I consider that the special condition should prevail to the extent that consent should be withheld unreasonably.
143. I therefore find that Mr Hodgson is entitled to succeed on his cross claim against the plaintiff for economic loss in the amount of $103,743.
Issue 7 – Liability of the plaintiff for legal costs of $23,000 : clause 9.7 of the lease
144. Following intervention by the Council concerning activities on the site, Mr Hodgson spent the sum of $330,000 in legal costs in unsuccessful litigation in the Land and Environment Court seeking to overturn conditions of use of the site imposed by the Council. An appeal from that decision was contemplated. Clause 9.7 of the lease provided that the plaintiff and the “the Lessee” bear the cost of such an appeal in equal proportions. The plaintiff’s liability in this regard was limited to $30,000 plus GST although Mr Hodgson paid a much higher sum in contemplation of such an appeal. The appeal did not ultimately proceed.
145. The plaintiff has already paid Mr Hodgson a sum of $10,000 in connection with such costs, leaving a balance of $23,000 including GST according to Mr Hodgson. That payment to Mr Hodgson was of some significance to the alleged liability of the plaintiff in this litigation because the plaintiff claimed that the lessee was HB Rindean Pty Limited, which f correct, means that the plaintiff has a liability to pay HB Rindean Pty Limited and no liability to Mr Hodgson. In contrast, Mr Hodgson claimed the lease should have referred to him as the “Current Lessee” instead of the reference to “the Lessee” as HB Rindean Pty Limited. Mr Hodgson claimed this was a mistake in the naming of a party to the contact, and that it should be construed as such.
146. It is therefore necessary to refer to the evidence. Mr Hodgson’s evidence was that HB Rindean Pty Limited had no involvement in the Land and Environment Court litigation and did not pay any of the costs, whereas he had paid such costs in the sum of $330,000 in connection with the litigation. He stated that the sole function of HB Rindean Pty Limited was to become the new lessee of the quarry if the litigation proved successful, in which case clause 3.1 of the lease gave HB Rindean Pty Limited the right to become the new lessee.
147. Relevantly, when cross-examined on this topic, Mr Smith’s evidence was as follows:
Q. So far as you were aware, the person who was the driving force behind the section 96 application was Mr Hodgson?“Q. So far as you were aware HB Rindean Pty Ltd had nothing to do with the section 96 consent application, did it?
A. No, that's correct.
A. That's right.”
148. It is also of significance that on 29 August 2003 the subsequent and substantial payments for legal costs in connection with the proposed appeal were made by Mr Hodgson personally, through his trading name Hodgson Contracting Services.
149. On behalf of Mr Hodgson it was submitted that clause 9.7 of the lease should be construed in recognition of the content of error in description of the parties. In support of that argument, attention was drawn to clause 9.7 (2)(i) where the draughtsman wrote “the Lessee” when he really meant “the Current Lessee” and to clause 9.7(2)(ii) which stated that “prior to the date of this agreement the Lessor paid to the Lessee $10,000.” In fact the lessor, being the plaintiff company, paid $10,000 to Mr Hodgson personally, and did not make any payments to “the Lessee” HB Rindean Pty Limited. Accordingly, it was argued that where clause 9.7(2)(ii) refers to “the Lessee”, this must be a reference to Mr Hodgson, and not a reference to HB Rindean Pty Limited.
150. The plaintiff’s response to this contended construction was that as the reference was to the lessee and not to Mr Hodgson, the claimed sum was not available to Mr Hodgson on the cross claim because he was not the lessee.
151. I consider that the plaintiff’s argument in response is flawed. I accept the argument advanced on behalf of the defendant that clause 9.7 of the lease should be construed as if it included a mistaken reference to the naming of HB Rindean Pty Limited as the lessee, and instead that I should read that clause as if it referred to Mr Hodgson as the lessee, as was intended by the parties : The Interpretation of Contracts / Lewison K, 2nd edition. London: Sweet & Maxwell, 1997, pages 227, 229 and 230; Baramon Sales Pty Ltd v Goodman Fielder Mills Limited [2001] FCA 1672 per Finkelstein J at [3], citing Wilson v Wilson (1854) 5 HL Cas 40; 10 ER 811 and Nittan (UK) Ltd v Solent Steel Fabrication Ltd [1981] 1 Lloyds Rep 633.
152. As a consequence of this finding, it follows that Mr Hodgson is entitled to succeed on his claim for the balance of the outstanding legal costs he has claimed, namely $23,000 including GST, and I so find.
D. DISPOSITION & ORDERS
Disposition
153. The monetary effect result of my findings is as follows.
154. The plaintiff’s claim against the defendant has succeeded in part to the extent of $108,148.76 and in the following respects:
(b) liability for contribution to legal costs in the amount of $2928 plus pre-judgment interest.(a) unpaid rent and interest in the amount of $105,210.76 including compound interest under the lease but excluding pre-judgment interest pursuant to the Uniform Civil Procedure Rules 2005;
155. The defendant’s cross claim against the plaintiff has succeeded in part to the extent of $126,743 in the following respects:
(b) contribution to legal costs of the Land and Environment Court Proceedings in the amount of $23,000 plus pre-judgment interest.(a) economic loss in the amount of $103,743 plus pre-judgment interest;
156. Before ordering a set-off of these amounts to identify the resultant judgment, I will hear the parties on the manner and amount in which interest should be calculated on these sums. As both parties have partly succeeded and partly failed in their respective claims against each other and because interest is yet to be calculated, it is inappropriate to make an order for costs before hearing the parties on the result.
Interim Orders
157. I make the following interim orders:-
(a) Verdict for the plaintiff for the plaintiff on the plaintiff’s claim against the defendant in the sum of $108,148.76;
(b) Verdict for the defendant/cross claimant on the defendant’s cross claim against the plaintiff in the sum of $126,743;
(c) The set-off of the respective claims and entry of final judgment is deferred pending the parties being heard on the outstanding questions of interest and costs. In this regard, each party is directed to provide written submissions on the issues, limited to no more than 5 pages, including setting out the contended interest calculations consequent upon my findings and the contended costs consequences of the set-off of such calculations. In the case of the plaintiff, those submissions are to be filed and served within 7 days; in the case of the defendant, those submissions are to be filed and served within 14 days.
158. In the interests of saving further costs, unless the parties indicate in their submissions that they wish to be heard in oral argument on these outstanding issues, I intend to enter final orders after reviewing the foreshadowed written submissions.
0
6
3