DH MB Pty Ltd v Manning Motel Pty Ltd

The appeal concerned a dispute between DH MB Pty Ltd (the first appellant) and Manning Motel Pty Ltd (the respondent), with a second appellant also involved. The core of the disagreement revolved around a lease agreement between the first appellant and the respondent, and a separate promise made by the second appellant to purchase room sales from the respondent. This promise was allegedly made to induce the respondent to enter into the lease. The respondent also claimed damages for breach of a covenant to repair under the lease, which had necessitated the respondent obtaining alternative accommodation. The matter was heard by Meagher, Barrett and Gleeson JJA.

The court was required to determine two primary legal issues. Firstly, whether the promise made by the second appellant regarding the purchase of room sales constituted a collateral contract, and if so, whether there was an intention to create legal relations in respect of that promise. Secondly, the court had to consider the appropriate measure of damages for the first appellant's alleged breach of its covenant to repair under the lease, particularly in light of the respondent having to secure alternative accommodation.

The court found that the promise made by the second appellant did not give rise to a collateral contract. It was held that the necessary intention to create legal relations was absent, meaning the promise was not legally binding. Regarding the breach of the covenant to repair, the court determined that the respondent was entitled to damages. The measure of these damages was assessed based on the costs incurred by the respondent in obtaining alternative accommodation due to the landlord's failure to maintain the premises as covenanted.

The appeal was dismissed, and the appellants were ordered to pay the respondent's costs of the appeal.