Dib Group Pty Limited v Coolabah Tree Aust-Wide Pty Limited

[2011] HCATrans 287

[2011] HCATrans 287

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Sydney  No S212 of 2011

B e t w e e n -

DIB GROUP PTY LIMITED

Applicant

and

COOLABAH TREE AUST-WIDE PTY LIMITED

Respondent

Application for special leave to appeal

HAYNE J
BELL J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON FRIDAY, 7 OCTOBER 2011, AT 2.52 PM

Copyright in the High Court of Australia

MR D.L. COOK:   May it please the Court, I appear for the applicant.  (instructed by Macree Law)

MR A.J. GREINKE:   If it please the Court, I appear for the respondent.  (instructed by Freestone Law Pty Ltd)

HAYNE J:   Yes, Mr Cook.

MR COOK:   Your Honour, the error made by the Full Court can be found at page 101 of application book in paragraph 93 in the last two sentences of that paragraph where the Court held that:

to obtain that rent, Dib Group would have had to maintain the head lease.  Therefore it had to offset against that lost rent the payment for rent it would have made to Kevmark.

No other reason than that primary judge was correct to reason that way was offered by the Full Court for the deduction that was said to be necessary in order to calculate the damages.  If your Honours turn to page 70 of the application book you will see the reasons in the trial judge’s second set of reasons as to why the amount had to be deducted at paragraphs (d) and in paragraph (e).  At paragraph (d) his Honour held that:

in order to be in a position to derive that rent, Dib Group would have had to maintain its lease from Kevmark.  Thus, it would have had to pay rent to Kevmark under the head lease –

He then goes on to calculate what that amount would have been and then in paragraph (e) proceeds to deduct that rent that otherwise would have had to be paid by the applicant to Kevmark from that sum.  No reason is given for why that deduction is made.  What it seems to suggest though is that the primary judge linked the entitlement of the applicant to receive future rentals under the sublease with a cost, namely, that of maintaining the head lease and an obligation to pay payment under the head lease.  In doing so, he was wrong because, as the Full Court recognised, the two lease agreements and the obligations that arose under both of those were separate and distinct matters.  Had the applicant in this case been the owner of the premises, there is little doubt that his Honour would have considered deducting from the future rentals due under the sublease, or in this case it would be a lease, the mortgage payments that the applicant otherwise would have to make in order to retain possession of the property.

HAYNE J:   If things had been different, things would have been different, I fear, Mr Cook.

MR COOK:   Yes, and, your Honour, similarly, it seems to be what his Honour’s thinking was that if this had been a contract for the future supply of goods yet to be manufactured by the applicant, the fact that the applicant would have incurred expenses in making those goods would be a matter that is taken into account, but in this case, your Honour, there was no cost savings whatsoever for the applicant by reason of subsequent events.  What his Honour should have done is looked at the question on the day that the sublease was terminated and assess damages on that date and on that date the applicant still had a liability under the head lease to make payment for rentals and that liability has never evaporated, has never gone away.

The only thing that changed in subsequent events that happened after the sublease was terminated was that that liability to make payment under the head lease was summarised into a damages payment that his Honour made, the primary judge in the same proceedings.  In other words, the applicant received no cost savings whatsoever by reason of the subsequent termination of the head lease.  What he in fact had to do was to pay the present value of all of those future rental payments by way of damages, that amount only being reduced in the ordinary course by the extent to which the landlord himself was able to mitigate his loss by the Webb lease which happened afterwards.

So what his Honour seemed to have done, and it was, with respect, incorrect, was to become confused with the proximity of the two terminations.  If the second termination of the head lease had happened a year down the track, it is unlikely that his Honour would have made this mistake, but because the two happened, as it were, back to back, his Honour seems to have treated the two terminations as one singular event. 

His Honour should not have done that, he should have looked at each lease and each separate termination, which were a few days apart, separately, but if his Honour was going to treat it as one singular event, and that seems to be consistent with the factual findings that the parties all agreed that it was reasonable for the applicant to have terminated the lease, then what his Honour had to do in giving credit for the cost savings, as he saw it, of the termination of the head lease is to take into account that that cost savings came at an expense, namely, the obligation to pay the landlord damages for the rest of the lease and his Honour did not do that.  He took what he perceived as a benefit that needed to be taken into account through this singular event without taking into account the concomitant cost to the applicant of gaining that benefit.

Your Honour, this is why we have the illogical result where the Full Court said there was nothing illogical where leases for the same terms, for all material terms, identical terms, with the subtenant having to pay a higher rent than the applicant was required to pay under the head lease, receiving a far smaller amount of damages from its subtenant than it was required to pay its own landlord when his Honour found that they were almost terminated identically on the same date.  That simply was illogical.  There was no conceivable basis upon which the applicant ought to have come out receiving less in the calculations of damages than it was to receive from its subtenant.  It, as a matter of logic, simply could not happen.

HAYNE J:   Sorry, can you put that last proposition again?  What is the proposition?

MR COOK:   Your Honour, the proposition is that by virtue of the fact that the subtenant had to pay a higher rent than the applicant had to pay under the head lease, that on termination on almost identical dates, as a matter of logical analysis, it could never be the situation that the applicant recovered less from the tenant who was required to pay more rent than it itself was obliged to pay the landlord at a lower rent.  It just could not work in any other way than the applicant receiving a bigger cheque from the subtenant than it was required to pay to the landlord because the sublease was a more profitable contract to the applicant than it was to the landlord – the lease between the applicant and the landlord was.  So, as a matter off pure logic, whatever way one approached damages, my client had to receive more than it was required to pay the landlord and one cannot escape from that logic no matter what way one approaches the damages. 

Your Honour, if his Honour had approached what the correct damages, the correct approach, what he would have done is looked on the date of 1 July when the sublease was terminated and found that there was an unexpired portion of rent to be payed and, as a starting point, taken those damages and only then considered what deductions should be made by virtue of the duty to mitigate.  It was common ground at the hearing that the landlord had acted reasonably and had got a lease on terms which were reasonable, the Webb lease on 1 October.  Nobody took the point that the applicant could have done better.  So his Honour should then have deducted the Webb lease payments from what otherwise would have been paid under the sublease and he would have got to the correct answer, as he did initially in his first reasonings, but what happened on the weekend is his Honour – and one can only infer from this – giving judgment on the Monday without the benefit of any assistance from counsel, took into mind that there had been a cost savings because the lease had been terminated and that is where his Honour fell into a blatant error because even if his Honour were to be robust in damages and regarded it a cost savings, he had to take into account the cost to the applicant of getting the cost savings, and his Honour did not do that. 

Whilst it is regrettable that his Honour fell into that error, what is perhaps inexcusable, with respect, is that when the Full Court’s attention was drawn directly to this issue, and this was the subject of the appeal and the error was highlighted in written and oral arguments, the Full Court in rejecting the submission that there was an error did nothing more than what I have taken your Honours to at page 101, which is to repeat the error, and that is to say that the amount should be deducted and to say that his Honour was right to do so without offering any explanation for why there was no error and if it was not in error, why it was proper to deduct that amount from the future rental.  Neither judgment tells your Honours why it is necessary to deduct to future rentals.  One is left to infer that it is because the lease has been terminated that there is a cost saving.  If that is the basis, it is wrong because there was not a cost saving, save to the extent that one brings a Webb lease back into it. 

So you have a patent error here.  The Full Court’s attention is drawn to it and instead of fixing the error, the Full Court perpetuates the error and then does not offer the applicant any reasons as to why the error has not been corrected and, with respect, this is the type of error that should not slip past the Full Court and it is the type of error that invites the visitorial jurisdiction of this Court to rectify because, as your Honours would have seen from the affidavit of Mr Basil Macree, which is sworn in support of an extension of time, an address was made to the Full Court to attempt to correct this error by addressing some factual errors in that paragraph and pointing out the inconsistencies in paragraph 97 where the Full Court at page 102 recognised that the two were separate agreements and the liabilities and losses arising out of both of them were separate and yet had come to the conclusion that the two could be treated together in calculating damages.

That kind of failure to correct an obvious mistake on very basic principles is properly the sort of matter that does invite the visitorial jurisdiction of this Court because there is no other remedy other than that.  Your Honours, there is one mistake that I must admit to, and that is in my submissions.  I have said that the amount involved is some $163,000, in fact it is an amount of $239,554, which is a quarter of a million dollars which is not a trifling amount and an injustice that the applicant simply should not have to suffer having followed the system, drawn it to the Full Court’s attention and given the Full Court every opportunity to correct what was a very basic error in the calculation of these damages.  In those circumstances your Honours ought to grant special leave.

HAYNE J:   Yes.  Thank you, Mr Cook.

MR COOK:   I am sorry, your Honours, there is one matter I did neglect to point out and that is that if leave were granted, this was an appeal that would take less than an hour to deal with.

HAYNE J:   That is an appeal to judicial indolence, Mr Cook, which is never terribly persuasive.  We need not, I think, trouble counsel for the respondent.

In our opinion an appeal to this Court would enjoy insufficient prospects of success to warrant a grant of special leave.  Special leave to appeal is refused.  It must be refused with costs.

Adjourn the Court to 10.15 am on Tuesday, 25 October 2011 in Canberra.

AT 3.06 PM THE MATTER WAS CONCLUDED