Douglas v Cicirello

[2006] WASCA 226

DOUGLAS -v- CICIRELLO [2006] WASCA 226

Jurisdiction:	SUPREME COURT OF WESTERN AUSTRALIA	Citation No:	[2006] WASCA 226
Court:	THE COURT OF APPEAL (WA)
Case No:	CACV:86/2005	Heard:	8 AUGUST 2006
Coram:	STEYTLER P McLURE JA PULLIN JA	Delivered:	2/11/06
No of pages:	26	Judgment Part:	1 of 1
Result:	Appeal dismissed
Category:	B
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Parties:	OLIVER GEORGE DOUGLAS CARMELLA CICIRELLO
Catchwords:	Landlord and tenant Structural damage to premises Premises rendered unfit for habitation and use Implied term requiring landlord to repair Whether term an essential term Whether repudiation of term
Legislation:	Property Law Act 1969 (WA), s 21
Case References:	Ankar Pty Ltd v National Westminster Finance (Australia) Ltd (1987) 162 CLR 549 Ballas v Theophilos [No 2] (1957) 98 CLR 193 Barrett v Lounova (1982) Ltd [1990] 1 QB 348 Bowes v Chaleyer (1923) 32 CLR 159 Carbure Pty Ltd v Brile Pty Ltd [2002] VSC 272 Douglas v Cicirello [2005] WADC 118 DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423 Earnshaw v Gorman & Sons Pty Ltd [2001] WASCA 50 Harrington v Browne (1917) 23 CLR 297 Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd (1989) 166 CLR 623 Louinder v Leis (1982) 149 CLR 509 Mersey Steel & Iron Co Ltd v Naylor, Benzon & Co (1884) 9 App Cas 434 National Engineering Pty Ltd v Chilco Enterprises Pty Ltd [2001] NSWCA 291 Progressive Mailing House Pty Ltd v Tabali Pty Ltd (1985) 157 CLR 17 Shakibaee v Chan (2001) 24 WAR 97 Shevill v Builders Licensing Board (1982) 149 CLR 620 Tekely v Pryce [2000] NSWCA 6 Tramways Advertising Pty Ltd v Luna Park (NSW) Ltd (1938) 38 SR (NSW) 632 Wacal Investments Pty Ltd v Hurley [1992] 2 Qd R 455 Wallis, Son & Wells v Pratt & Haynes [1910] 2 KB 1003 Associated Newspapers Ltd v Bancks (1951) 83 CLR 322 Carr v J A Berriman Pty Ltd (1953) 89 CLR 327 Foran v Wight (1989) 168 CLR 385 Reid v Moreland Timber Co Pty Ltd (1946) 73 CLR 1

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA TITLE OF COURT : THE COURT OF APPEAL (WA) CITATION : DOUGLAS -v- CICIRELLO [2006] WASCA 226 CORAM : STEYTLER P

McLURE JA
PULLIN JA

HEARD : 8 AUGUST 2006 DELIVERED : 2 NOVEMBER 2006 FILE NO/S : CACV 86 of 2005 BETWEEN : OLIVER GEORGE DOUGLAS

Appellant

AND

CARMELLA CICIRELLO
Respondent

ON APPEAL FROM:

Jurisdiction : DISTRICT COURT OF WESTERN AUSTRALIA

Coram : YEATS DCJ

Citation : DOUGLAS -v- CICIRELLO [2005] WADC 118

File No : APP 61 of 2004

Catchwords:

Landlord and tenant - Structural damage to premises - Premises rendered unfit for habitation and use - Implied term requiring landlord to repair - Whether term an essential term - Whether repudiation of term

(Page 2)

Legislation:

Property Law Act 1969 (WA), s 21

Result:

Appeal dismissed

Category: B

Representation:

Counsel:

Appellant : Mr B H Taylor
Respondent : Mr A W Pass

Solicitors:

Appellant : Talbot & Olivier
Respondent : Frank Unmack & Cullen

Case(s) referred to in judgment(s):

Ankar Pty Ltd v National Westminster Finance (Australia) Ltd (1987) 162 CLR 549
Ballas v Theophilos [No 2] (1957) 98 CLR 193
Barrett v Lounova (1982) Ltd [1990] 1 QB 348
Bowes v Chaleyer (1923) 32 CLR 159
Carbure Pty Ltd v Brile Pty Ltd [2002] VSC 272
Douglas v Cicirello [2005] WADC 118
DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423
Earnshaw v Gorman & Sons Pty Ltd [2001] WASCA 50
Harrington v Browne (1917) 23 CLR 297
Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd (1989) 166 CLR 623
Louinder v Leis (1982) 149 CLR 509
Mersey Steel & Iron Co Ltd v Naylor, Benzon & Co (1884) 9 App Cas 434
National Engineering Pty Ltd v Chilco Enterprises Pty Ltd [2001] NSWCA 291
Progressive Mailing House Pty Ltd v Tabali Pty Ltd (1985) 157 CLR 17

(Page 3)

Shakibaee v Chan (2001) 24 WAR 97
Shevill v Builders Licensing Board (1982) 149 CLR 620
Tekely v Pryce [2000] NSWCA 6
Tramways Advertising Pty Ltd v Luna Park (NSW) Ltd (1938) 38 SR (NSW) 632
Wacal Investments Pty Ltd v Hurley [1992] 2 Qd R 455
Wallis, Son & Wells v Pratt & Haynes [1910] 2 KB 1003

Case(s) also cited:

Associated Newspapers Ltd v Bancks (1951) 83 CLR 322
Carr v J A Berriman Pty Ltd (1953) 89 CLR 327
Foran v Wight (1989) 168 CLR 385
Reid v Moreland Timber Co Pty Ltd (1946) 73 CLR 1

(Page 4)

1 STEYTLER P: I have had the advantage of reading the judgment of Pullin JA. It is consequently unnecessary for me to restate all of the circumstances giving rise to this appeal.

2 The critical facts seem to me to be as follows.

3 On 5 April 2001 the parties entered into an agreement for lease ("lease") under which the appellant agreed to lease from the respondent business premises in Fremantle for a term of five years commencing on 1 May 2001 ("term"). The appellant proposed to use the premises for the purpose of conducting his "cash store" business, a facility described in the judgment appealed from (Douglas v Cicirello [2005] WADC 118 at [16], per Yeats DCJ) as "not unlike a small bank or credit society".

4 By special condition cl 27B of the lease the appellant accepted that the condition of the leased property was to be "the same as was inspected 3 April 2001". Clause 21 of the lease read as follows:

"If at any time during the tenancy the building the subject of this Lease shall be destroyed or damaged so as to become unfit for habitation and use … the rent hereby reserved or a fair and just proportion thereof according to the nature and extent of the damage sustained … shall be suspended and cease to be payable until the said premises shall again have been rendered fit for habitation and use."

5 Yeats DCJ found (and this finding is not challenged) that it was an implied term of the lease that the respondent was obliged to repair any damage such that the premises became unfit for habitation and use. Both parties accept that there was a further implied term that the repairs would be effected within a reasonable time.

6 On 30 April 2001, prior to the commencement of the term, a bus collided with the awning at the front of the leased premises, causing damage to the awning and to the building itself. Notwithstanding this, the appellant entered into possession of the leased premises on 1 May 2001. On 28 May 2001 some remedial work was done by way of removal of the damaged awning and the filling of a gap left by the awning in the wall of the leased premises. On 24 June 2001 the appellant began operating his business in the leased premises. No further repair work had been carried out by 16 August 2001. On that day the appellant wrote a letter to the respondent's agent, Mr Anthony Cavallo of LJ Hooker Fremantle, which, so far as it is relevant, reads as follows:

(Page 5)

"I am writing to you out of concern as to the condition of the property which we are leasing …

Since May this year, my fellow director Stiven Pucar, has been liaising directly with you regarding the serious damage inflicted to the building, which I am advised occurred at some time during April 2001. I am advised that the awning of the building was struck by a high heavy vehicle …

When I was advised of the damage in late April, I inspected the building and noticed that the awning was hanging precariously … and looked in danger of collapsing … It is to be noted that it was left in this condition for some weeks … I was advised to prohibit our trademan and staff from entering the building until the dangerous awning was removed.

In view of this advice, it was necessary for me to issue instructions that no tradesmen … were to do any work in relation to the fitout until the … awning was removed and I asked Stiven to communicate with you regarding this matter. This I understand he did and he advised me that the landlord was making arrangements to remove the damaged awning and replace it within a couple of weeks. I am advised that the damaged awning was not removed for a month.

In June, Stiven told me that he had spoken with you on a number of occasions and had been advised that a new awning would be built within two weeks. After the awning was removed we fitted out and painted the premises expecting the new awning to be constructed at the same time. This was not the case and we were left with a damaged and unsightly building. During the fitout period Stiven … made further inquiry as to the stability of the building's remaining structure and was subsequently advised that the front wall of the building was in a weakened and dangerous condition and would need replacing. In addition, parts of the toilet brick wall have deteriorated to the point where there are also safety concerns for our personnel.

After weeks of delay caused by this accident, we reluctantly opened for business on 24^th of June albeit on a restricted trading basis, allowing only Stiven to operate the store without the assistance of support staff …

(Page 6)

As can be appreciated this matter has severely and adversely impacted on our business and we are still uncertain as to when the building will be in a safe and presentable condition.

…

I am advised that you had contacted the office today seeking lease payments however under the circumstances I believe that we are owed some very firm advices in relation to the following:

1. The actual condition of the front wall and the rest of the leased premises.

2. The expected date for the completion of repairs and replacement of the front wall.

3. The landlord's position on compensation to us for the past delays, substantial interference and resultant loss of income for our business caused by this most unfortunate accident.

… "

7 On the same day Mr Cavallo responded to that letter as follows:

"In acknowledging receipt of your faxed letter dated 16/8/2001, please be advised that we are extremely disappointed in the stance that you have adopted, seemly to avoid your responsibility in paying rent due under the agreement entered into on 5/4/2001.

The agreement obligates you to pay rent effective 1/5/2001 with possession having been granted upon acceptance of your offer as per date of contract (5/4/2001). Special Condition 27B states that 'the lessee takes the property in the condition that it was inspected on the 3/4/2001'. You were fully aware of the status of the building at this point.

In regards to the building's lack of awning we confirm the matter is with the City of Fremantle Council awaiting their approval on plans for the new structure. This has been conveyed to Stiven Pucar on several prior occasions. However, we suggest to you that the building's lack of awning has no bearing to you undertaking your daily business being of an

(Page 7)

aesthetic value only. In fact, the owner has today conveyed to us that she has observed that normal trading is taking place at the premises.

Meanwhile, for the record, your communication today is the first time that any other matters besides the awning, pertaining to the premises have been raised. Given the length of time that your company has been in occupation and the fact that you have been carrying out normal trading, we question why you have not communicated any concerns with us prior and ask why no documentation in regards to the stability of the building has been forwarded to us.

Given that you have chosen to ignore the repeated Tax Invoices which have been forwarded to both 232 South Tce, Fremantle & subsequently to your postal address as above, on the owners [sic] instructions, we have advised solicitors, Frank, Unmack & Cullen to commence legal proceedings in order to recover rental monies due plus associated legal costs in accordance to [sic] the Contract to Lease Commercial Premises by Offer & Acceptance. We advise that this document that you have signed – is a legally binding contract, which you have ratified by taking possession."

8 On 21 September 2001 the appellant arranged for an engineer to inspect the premises. The engineer subsequently provided a report to the appellant regarding the building's structural condition. The appellant did not give the respondent a copy of that report until much later (7 January 2003). By 7 November 2001 the premises had still not been repaired. On that day the appellant (by Mr Pucar) informed the respondent that he was vacating the premises. He did so later on that day. By 1 January 2002 the respondent had repaired the premises. Yeats DCJ accepted, with the concurrence of the parties, that the premises had been unfit for safe occupation between 1 May 2001 and 1 January 2002.

The judgment of Yeats DCJ

9 The judgment of Yeats DCJ was given on an appeal from the decision of a magistrate who had found against the appellant's contention that the respondent, by its conduct, had repudiated the lease. The magistrate found that the appellant was liable to pay rent and outgoings in respect of the leased premises during the period of his occupation, and damages thereafter. The appellant contended, on the appeal to Yeats DCJ, that the magistrate should have found that the respondent had repudiated

(Page 8)

the lease and that the appellant had accepted that repudiation by vacating the premises on 7 November 2001.

10 As I have mentioned, Yeats DCJ found that it was an implied term of the lease that the respondent was obliged to repair any damage such that the premises became unfit for habitation and use. However, she found that, because there was no time fixed under cl 21 for the repairs dealt with by that clause to be done, it was unlikely that the respondent's obligation to repair was a fundamental term of the lease (at [39] of her reasons). She also found (at [39]) that there was no evidence that delay in repairing the damage was so lengthy, and the result of the delay so serious for the tenant, as to amount to a repudiation of the lease. She added (also at [39]) that, in circumstances in which the obligation to repair was not a fundamental term of the lease, the tenant could not terminate the lease for delay without giving notice requiring the landlord to repair within a specific time. Finally, she found (at [38]) that there was nothing in the correspondence between the parties that indicated an intention by the respondent no longer to be bound by the lease or that the respondent was unwilling or unable to perform her obligations to repair the damage. She consequently dismissed the appeal.

Grounds of appeal

11 The grounds of appeal, more fully set out in the judgment of Pullin JA, essentially advance five propositions, as follows:

1. The trial Judge erred in finding that there was no evidence of a repudiation on the part of the respondent (ground 1).

2. The trial Judge erred in finding that the implied term requiring the respondent to repair any damage rendering the leased premises unfit for habitation and use was not a fundamental term of the lease (ground 2).

3. The trial Judge erred, in any event, in finding that there was no evidence, apart from delay in effecting repairs, that might give rise to a repudiation of the lease (ground 3).

4. The trial Judge erred in finding that it was necessary for the appellant to give the respondent notice requiring the respondent to repair the damage within a reasonable time before the appellant could terminate the lease (ground 4).

5. The trial Judge erred in finding that the appellant did not bring the lease to an end by vacating the premises on 7 November 2001 (ground 5).

(Page 9)

Grounds 2 and 4

12 I will deal first with grounds 2 and 4.

13 The importance of a fundamental or essential term is, of course, that its breach entitles the other party to terminate the contract immediately. The test of essentiality ordinarily applied is that expounded by Jordan CJ in Tramways Advertising Pty Ltd v Luna Park (NSW) Ltd (1938) 38 SR (NSW) 632 at 641 - 642, being:

" … whether it appears from the general nature of the contract considered as a whole, or from some particular term or terms, that the promise is of such importance to the promisee that he would not have entered into the contract unless he had been assured of a strict or a substantial performance of the promise, as the case may be, and that this ought to have been apparent to the promisor … "

(See also DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423 at 430 - 431; Shevill v Builders Licensing Board (1982) 149 CLR 620 at 627, 636; and Ankar Pty Ltd v National Westminster Finance (Australia) Ltd (1987) 162 CLR 549 at 556.) Of course, it is always open to the parties to stipulate that the performance of an obligation is essential. Where that is not done, and where the relevant considerations are finally balanced, courts will ordinarily hold that a term does not give rise to an automatic right to rescind: Ankar, above, at 556.

14 Where the stipulation is one as to time, if, according to the rules of equity, that stipulation is not deemed to be or to have become of the essence of the contract, the stipulation will be construed and have effect at law in accordance with the rule of equity: s 21 of the Property Law Act 1969 (WA). Consequently, performance on time will be an essential term only if that is agreed or is reasonably to be implied (see, for example, Ballas v Theophilos [No 2] (1957) 98 CLR 193 at 197 and Wacal Investments Pty Ltd v Hurley [1992] 2 Qd R 455 at 458; and see, generally, Cheshire & Fifoot Law of Contract 8th Aust ed [21.15] - [21.17]).

15 In the case of commercial or mercantile contracts, stipulations as to time (other than those as regards time of payment) are usually regarded as being of the essence of the contract: Harrington v Browne (1917) 23 CLR 297 at 304 - 305. As Pullin JA has pointed out, generally speaking at least, where a term does not fix a time for performance, with the consequence that a reasonable time is implied, the obligation to perform

(Page 10)

in that time is unlikely to be held to be an essential term: Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd (1989) 166 CLR 623 and Earnshaw v Gorman & Sons Pty Ltd [2001] WASCA 50 at [26]. However, these are only prima facie rules, capable in any given case of being defeated by the application of the test in Tramways Advertising.

16 In this case, cl 21 of the lease (which, as will be apparent, deals with damage to or destruction of the leased premises during the term of the lease) does not specify a time within which repairs must be effected, as has been remarked upon by each of Yeats DCJ and Pullin JA. However, the absence of a term as to time seems to me not to be surprising as the time would vary depending upon the nature of the damage. While the parties could, of course, have stipulated that the damage was to be repaired as soon as was reasonably possible, this would seem to me to add little to the term which is implied by law in any event. Of considerably more significance, as it seems to me, is the fact that the lease was one of business premises, with the consequence that it must have been obvious to both promisor and promisee that a failure to effect repairs within a reasonable time would, or at least might, have serious consequences for the business concerned if the premises were not habitable until repairs were effected. The suspension of the obligation to pay rent would by no means entirely ameliorate the position, given that the business would not be expected to be able to operate from the premises until repairs were effected, with a consequential loss of income and damage to the goodwill of the business.

17 Because the purpose of the lease was that of enabling the lessee to operate a business in the leased premises, a breach of the obligation (whether express or implied) to effect repairs within a reasonable time would go directly to the substance of the contract or, to put it differently, would deprive the lessee of the substantial benefit of the contract: Progressive Mailing House Pty Ltd v Tabali Pty Ltd (1985) 157 CLR 17 at 31, per Mason J. As Fletcher Moulton LJ said in Wallis, Son & Wells v Pratt & Haynes [1910] 2 KB 1003 at 1012:

"[F]rom a very early period of our law it has been recognized that … [contractual] obligations are not all of equal importance. There are some which go so directly to the substance of the contract or, in other words, are so essential to its very nature that their non-performance may fairly be considered by the other party as a substantial failure to perform the contract at all. On the other hand there are other obligations which, though they must be performed, are not so vital that a failure to perform

(Page 11)

them goes to the substance of the contract. Both classes are equally obligations under the contract, and the breach of any of them entitles the other party to damages. But in the case of the former class he has the alternative of treating the contract as being completely broken by the non-performance and (if he takes the proper steps) he can refuse to perform any of the obligations resting upon himself and sue the other party for a total failure to perform the contract."

(See also Bowes v Chaleyer (1923) 32 CLR 159 at 178 - 179.)

18 It consequently seems to me that the implied obligation to repair damage that was such as to render the premises uninhabitable was an essential or fundamental term of the lease. However, where an essential term is to be performed within a reasonable time, and that time passes without performance (time not having been made of the essence) the innocent party acquires a right to rescind only if "repudiation is clearly to be inferred from the circumstances in which the delay occurs": Laurinda at 642 ­- 643 per Brennan J and at 658 - 659 per Deane and Dawson JJ. Brennan J went on to say, in that case (at 643):

"If the inference to be drawn from the circumstances is that the defaulting party intends to perform an essential promise after some minor delay, repudiation cannot be inferred; but if the inference is that the defaulting party intends so to delay performance that the promisee will be substantially deprived of the benefit of the promise, repudiation can be inferred. The inference is not lightly drawn: Progressive Mailing House Pty Ltd v Tabali Pty Ltd … "

Grounds 1, 3 and 5

19 That brings me to the remaining grounds of appeal.

20 In order to prove a repudiatory breach of the implied term to which I have referred, it was, as the judgments to which I have referred reveal, necessary for the appellant to establish that the leased premises were not repaired within a reasonable time and that the respondent's conduct in that respect amounted to the manifestation of an inability or unwillingness to perform its obligations under the lease either at all or in a manner substantially consistent with those obligations: see also Progressive Mailing House, above, at 33 and Shakibaee v Chan (2001) 24 WAR 97 at 121 [132]. In my opinion the evidence fell short of establishing this.

(Page 12)

21 It is important to appreciate that, on the evidence of Mr Cavallo, (uncontradicted by any admissible evidence), the respondent was not aware of any damage to the structure of the building until Mr Cavallo's receipt of the letter dated 16 August 2001. Prior to that, she knew only of the damage to the awning and the damaged awning was, as I have said, removed on about 28 May 2001. There is no suggestion that the absence of the awning, of itself, rendered the premises uninhabitable or unfit for use (the premises have since been re-let without an awning) and nor does the evidence disclose that any assertion to that effect was ever made. The only assertions were to the effect that the absence of the awning made the premises uncomfortable in the afternoons. Consequently, the relevant period of delay seems to me to have been that which followed the notification received by the respondent on 16 August 2001.

22 As to that, there is no evidence to establish what steps to repair the damage should have been taken, but were not taken, by the appellant between 16 August 2001 and 7 November 2001. Nor was there evidence of any communications between the parties during that time. The only evidence that bore upon what was done during that period by the respondent was that of Mr Cavallo. He said that, because the building was heritage listed, it was necessary to apply to the Fremantle Council for approval to restore the awning and that an application in that respect was lodged on about 3 August 2001. He said that approval was granted in early 2002. There is no evidence concerning the question whether the application for approval might have been pursued with greater vigour. Nor is there any evidence whether or not attempts were made by the respondent to retain contractors to effect repairs to the structure of the building and, if so, what was the outcome of her efforts in that regard (the only evidence concerning the availability of tradespeople was that of Mr Cavallo, to the effect that there were delays, after the awning was damaged, in "getting the tradespeople that would undertake … that cosmetic type of work that's suitable to … [the Fremantle Council]"). Moreover, it seems to me that the respondent was reasonably entitled to await further information concerning the appellant's assertion, made for the first time on 16 August 2001, that the building was not fit for use (and the demand for payment of rent must be understood in that context). It is important to bear in mind in this respect that, after receiving the appellant's letter of 16 August 2001, Mr Cavallo asked why no documentation in regard to the stability of the building had been forwarded to him, but no further approach was made to him in that, or any other, respect. This was so even though, as I have said, the appellant obtained an engineer's report at some time after 21 September 2001.

(Page 13)

23 There is nothing in Mr Cavallo's letter dated 16 August 2001, looked at on its own or in conjunction with the other matters to which I have referred, that is sufficient to give rise to a repudiation of the lease by the respondent. That letter makes it plain that steps had been taken to have the awning replaced. It also makes plain the respondent's understanding (which was not subsequently challenged) that the lack of an awning "has no bearing to you undertaking your daily business". The letter records that the respondent had, that day, conveyed to Mr Cavallo that she had observed that normal trading was taking place at the premises. It was consequently readily apparent to the appellant that the respondent was not aware that, although the appellant's business continued to operate from the premises, they were (as the parties have since agreed) in fact unfit for habitation. Finally, so far as the reference to special condition 27B of the lease is concerned, it seems to me, as it does to Pullin JA, that this reference was made only in respect of damage to the property that had occurred prior to 3 April 2001, damage of that kind having been identified in the appellant's letter of 16 August 2001.

24 In all of the circumstances, it seems to me that the alleged repudiation was not proved and that the appellant's claim in that respect was rightly dismissed. Grounds 1, 3 and 5 have consequently not been made out.

25 I would accordingly dismiss the appeal.

26 McLURE JA: I agree with Steytler P.

27 PULLIN JA: The respondent was the landlord of premises at 232 South Terrace, Fremantle. The respondent sued the appellant, who was the tenant and obtained judgment in the Local Court for $13,050.21. The appellant appealed to the District Court. The appeal was dismissed and the appellant now appeals to this Court.

The facts

28 The parties entered into a contract to lease the premises as commercial premises on 5 April 2001. Terms of the contract were that:

(a) the lease term would commence on 1 May 2001 and run for five years with a renewal option;

(b) the appellant as lessee, should maintain the premises in the same condition as existing on the date of occupancy,

(Page 14)

except in respect of events for which the lessor had undertaken insurance;

(c) no structural alterations would be made by the lessee without the written consent of the lessor;

(d) cl 21 read:


"If at any time during the tenancy the building the subject of this Lease shall be destroyed or damaged so as to become unfit for habitation and use (provided the monies payable under any policy of insurance effected by the Lessor shall not have been rendered through any act or default of the Lessee) the rent hereby reserved or a fair and just proportion thereof according to the nature and extent of the damage sustained (to be ascertained in case the parties cannot mutually agree by reference to a licensed valuer appointed by the Australian Institute of Valuers and Land Economist Inc (WA Division)) shall be suspended and cease to be payable until the said premises shall again have been rendered fit for habitation and use."

(e) It was a special condition of the lease that the lessee accepted the condition of the property in the same condition as was inspected on 3 April 2001.

29 On the appeal in the District Court her Honour found that a term should be implied in cl 21 of the agreement to lease:

"… that if there is any damage to the building so as to render it unfit for habitation and use that it is the landlord's duty to repair and render the building fit for habitation and use."

I will refer to this as the "landlord repair clause".

30 Her Honour made this finding by reference to the facts in the case and by reference to Barrett v Lounova (1982) Ltd [1990] 1 QB 348; [1989] 1 All ER 351 and Carbure Pty Ltd v Brile Pty Ltd [2002] VSC 272. Her Honour relied on these cases notwithstanding her Honour's observation that Barrett's case had been heavily criticised by a number of text writers and was "generally considered not to be a reliable authority." The respondent does not challenge the conclusion that the landlord repair clause was an implied term and this Court is therefore not asked to consider the two authorities referred to.

(Page 15)

31 On 30 April 2001, a bus collided with the awning to the building. This rendered the premises unfit for habitation and use from 1 May 2001 until 1 January 2002. This fact is agreed notwithstanding the appellant's evidence that on 1 May 2001 he took possession of the premises, began fitting them out for his business and on 24 June 2001 commenced trading from the premises. The respondent landlord did not render the premises fit for habitation and use in the period between 1 May 2001 and 1 January 2002. The appellant vacated the premises on 7 November 2001 by reason of the premises being unfit for habitation and use (and unsafe for occupation). The appellant never paid any rent or outgoings.

32 By 1 January 2002 the respondent repaired the premises making them fit for habitation.

33 On 6 February 2002 the Local Court made an order for possession in favour of the respondent as from 21 February 2002 unless rent was paid. Arrears were not paid and possession was retaken on 21 February 2002.

34 The Local Court in dealing with the claim for rent, held that the respondent was entitled to rent for the term of the lease, reduced by the amount by which the respondent mitigated his loss by releasing the premises.

The reasons for decision in the courts below

35 The oral reasons for decision which were given by the Magistrate in the Local Court on 19 August 2003 are not available. This is because of some unexplained failure in the transcription service. It appears that neither counsel took a note of the Magistrate's reasons.

36 The parties therefore proceeded in the appeal in the District Court by agreeing that her Honour should accept the facts pleaded by the tenant and then consider the issues of law raised by the tenant. Her Honour said that the success of the tenant's appeal depended upon whether as a matter of law, terms should be implied in the lease and whether breaches of those implied terms amounted to a repudiation of the respondent's obligations under the lease. The respondent argued in the District Court, but not here, that no landlord repair clause should be implied. Her Honour considered the correspondence which passed between the parties and concluded:

"There is nothing in this correspondence indicating an intention by the landlord no longer to be bound by the contract or indicating that the landlord is unwilling or unable to perform her obligation to repair the damage.

(Page 16)

Delay in meeting one's obligations under a lease can amount to repudiation of the lease. But there is no evidence in this case that delay in repairing the damage was so lengthy and the result of the delay so serious for the tenant as to lead to repudiation of the contract."

37 Her Honour then added at [39]:

"Even if such were the case there seems to be one requirement of law that would be fatal to this appeal. Normally it would be essential that the tenant communicate his election to terminate the lease. In this case all the tenant did was to vacate the premises on 7 November 2001. There is some authority for the proposition that such an act could in itself be sufficient communication of termination of a lease (Karacominakis v Big Country Developments Pty Ltd [2000] NSWCA 313 per Giles JA at [154], [155]). But in that case the lessor had re-entered and re-let the premises after the tenant had abandoned them. In this case the tenant relies on the landlord's delay in repairing the premises."

Her Honour also said:

"There was no time fixed under cl 21 for those repairs to be done. In such circumstances it is unlikely that the landlord's obligation to repair is a fundamental term of the lease (Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd (1989) 166 CLR 623). But, more importantly, the tenant cannot terminate the lease for a delay without giving notice requiring the landlord to repair within a specified time (Laurinda's case at 638)."

38 Her Honour then concluded, for those reasons, that the landlord's failure to repair the premises did not give rise to any repudiation of the agreement to lease and that the tenant did not bring the equitable least to an end by vacating the premises on 7 November 2001 and that the lease remained on foot.

Grounds of appeal

39 The grounds of appeal read:

"GROUND 1

1. Her Honour Judge Yeats erred in fact in finding that there was no evidence that:

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1.1 the respondent evinced an intention no longer to be bound by the Contract; and/or

1.2 the respondent was unwilling or unable to perform her obligation to repair any damage to the premises the subject of the Contract (Premises) such that the Premises were fit for habitation and use (Implied Term), (which obligation was implied by Her Honour into clause 21 of the Contract - for finding see Judgment at paragraph 38; for implied term see Judgement at paragraph 36).

GROUND 2

2. Her Honour erred in law in finding that the Implied Term was not a fundamental term of the Contract (see Judgment at paragraph 39).

GROUND 3

3. In the event that it is found that the Implied Term was not a fundamental/essential term of the Contract, Her Honour erred in fact and in law in finding that it was only the respondent's delay in repairing the damage which might give rise to a repudiation of the Contract in circumstances where there is other evidence that the respondent indicated an intention not to comply with the Implied Term (for finding see Judgment at paragraph 39).

GROUND 4

4. Her Honour erred in law in finding that it was necessary for the appellant to give the respondent notice requiring the respondent to repair the damage complained of within a reasonable time before the appellant could terminate the Contract for repudiation (see Judgment at paragraph 39).

GROUND 5

5. Her Honour erred in fact and in law in finding that the appellant did not bring the Contract to an end by vacating the premises on 7 November 2001 (Judgment at paragraph 40)."

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Ground 2

40 Logically, ground 2 should be dealt with first. This is a challenge to her Honour's conclusion that it was "unlikely that the landlord's obligation to repair is a fundamental term of the lease". By this I take her Honour to have determined that the landlord repair clause was not a "fundamental" or an "essential" term, or in other words, not a condition of the lease (thereby distinguishing it from a warranty or non-essential or subsidiary term). I will hereafter refer to such a term as an "essential term". A term may be expressly designated as essential, but because the term under consideration was an implied term there was no such express designation in this case. In the absence of express agreement, the law determines whether a term is essential or not.

41 If a term is an essential term, then breach of it will amount, per se, to a repudiation of the contract allowing the other party to immediately rescind or terminate the contract. If a term is a non-essential term a breach of it will not per se amount to a repudiation: Louinder v Leis (1982) 149 CLR 509 at 529. As Brennan J said in Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd (1989) 166 CLR 623 at 643:

"More than a mere failure in timeous performance is necessary to warrant an inference of repudiation".

42 However, if the breach of the non-essential term viewed in the context of other facts, amounts to evidence of a renunciation, that is an absolute refusal to perform the contract, then it will amount to a repudiation: Mersey Steel & Iron Co Ltd v Naylor, Benzon & Co (1884) 9 App Cas 434 at 349 per Lord Selbourne LC; Associated Newspapers Ltd v Bancks (supra) at 339. Brennan J Laurinda at 643 expressed the point in this way:

" … delay may be so serious as to amount to a refusal to perform and in such a case an innocent party has a right to rescind."

43 Whether there has been such a repudiation will depend upon an examination of the conduct of the parties in the circumstances of the particular case. See Laurinda (supra) at 634 per Mason CJ.

44 In relation to terms requiring performance on time there is a well developed and settled body of law. Her Honour, in the District Court, briefly adverted to this when she said "… the tenant cannot terminate the lease for a delay without giving notice requiring the landlord to repair

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within a specified time …". In my opinion that statement is correct if it is qualified by a recognition that a notice is not necessary if the delay in all the circumstances amounts to a repudiation of the contract. Putting that qualification aside the legal position adverted to by her Honour may be summarised as follows.

45 At common law, performance on time was essential, but this was not so in equity unless this was expressly agreed or reasonably to be implied. The equitable rule prevails because of s 21 of the Property Law Act 1969. There is no term of this contract which states that the landlord repair clause was essential. The question is whether it might be reasonably implied that it was essential. Speaking generally, a term which does not fix a time for performance and which therefore leads to the further implication that performance is required within a reasonable time is not likely (as her Honour said) to be held to be an essential term. See Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd (supra); Earnshaw v Gorman & Sons Pty Ltd [2001] WASCA 50 at [26]; Tekely v Pryce [2000] NSWCA 6 and National Engineering Pty Ltd v Chilco Enterprises Pty Ltd [2001] NSWCA 291. In Earnshaw (supra), Malcolm CJ said at [26] and [27]:

"26 The general rule in the law of contract is that if a contract does not state a specific time for performance, performance by any particular time is not an essential term. … Where a contract fixes no time for performance, with the result that a reasonable time is to be implied, the obligation to perform in that time is unlikely to be held to be an essential term: Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd (1989) 166 CLR 623; cf Ellmore (Maitland) Pty Ltd v Tull (1995) 7 BPR 14,035 per Mahoney JA at 14,307 - 14,308.

27 It is also significant that, if time is not of the essence of a contract or has ceased to be of the essence of a contract, the party not in default cannot terminate a contract for delay in performance without first giving notice requiring performance within a specified time. If the notice is not complied with, the contract may be terminated: Carr v JA Berriman Pty Ltd (1953) 89 CLR 327 at 348 - 349 per Fullagar J; Balog v Crestani (1975) 132 CLR 289 at 296 per Gibbs J; Green v Somerville (1979) 141 CLR 594; Louinder v Leis (1982) 149 CLR 509; Ciavarella v Balmer (1983) 57 ALJR 632; and Laurinda Pty Ltd v

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Capalaba Park Shopping Centre Pty Ltd, supra. The time allowed must be reasonable and the onus of proof of reasonableness is on the party giving the notice: Sunstar Fruit Pty Ltd v Cosmo [1995] 2 Qd R 214; and see Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd at 638 - 640 per Mason CJ; and at 647 per Brennan J. …"

46 The landlord repair clause did not contain any date for performance. It was therefore an implied term that the repairs had to be carried out by the respondent within a reasonable time. The landlord repair clause and the implied term about the time for performance (which I will regard as part of the landlord repair clause) was not an essential term. I reach that conclusion because of the general rule referred to above which is fortified by the presence of the rent abatement clause. It provided that if the premises were destroyed during the tenancy then rent would be suspended either wholly or in part. The damage in this case occurred just before the tenancy began but its existence militates against a conclusion that the premises had to be habitable and useable at all times, and militates against the suggestion that the landlord repair clause should be characterised as an essential or fundamental term. Ground 2 must therefore be dismissed.

Ground 4

47 The consequence of the conclusion that the landlord repair clause was not an essential term, means that delay in performance did not give the appellant any immediate right to rescind, providing the delay in all the circumstances did not establish that the respondent repudiated the lease. (The issue about repudiation is the subject of grounds 1 and 3 which I deal with below). Before the appellant could terminate for delay alone, notice had to be given requiring performance within a further specified reasonable time and stating that if not complied with, the contract may be terminated. As to the need to specify reasonable time, see Carr v Berriman at 348; and for the need to warn about termination, see Laurinda at 638 - 640, 647 and 655.

48 Ground 4 challenges her Honour's conclusion that because no notice was given, the appellant could not terminate the lease or rather treat non-performance of the obligation to repair within a reasonable time as a repudiation entitling the appellant to rescind. It is not in dispute that no notice was given. In my opinion, her Honour's conclusion was right. It correctly stated the legal position. I should add that no effort was made

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by the appellant in the grounds of appeal to establish what a reasonable time for performance was before a notice could be given.

49 This ground has no merit and must be dismissed.

Grounds 1 and 3: Was there conduct of the respondent evincing an intention not to be bound by the contract

50 Her Honour found that there was no such conduct and no such intention. This finding is challenged. It was this aspect of the appeal on which counsel for the appellant concentrated. This requires a review of the evidence.

51 The respondent did not give evidence. A Mr Cavallo, an agent employed with L J Hooker Fremantle, the agent for the respondent, gave evidence that he found out about the damage to the awning when the appellant contacted him to say that the damages had occurred. Mr Cavallo said that as a result, tradesmen were retained to examine the damage and they took down damaged awning. Mr Cavallo gave evidence that because the building was heritage listed, it was necessary to apply to Council for approval to restore the awning which the appellant wanted done. This application was made early in August and before 3 August 2001.

52 The appellant gave evidence. His evidence was that on 24 June 2001 the premises were opened for business on a restricted trading basis. On 16 August 2001, the appellant wrote to Mr Cavallo expressing concern as to the condition of the property. The letter read:

"Dear Tony,

Re: 232 South St Fremantle.

I am writing to you out of concern as to the condition of the property which we are leasing at the captioned address.

Since May this year, my fellow director Stiven Pucar, has been liaising directly with you regarding the serious damage inflicted to the building, which I am advised occurred at some time during April 2001. I am advised that the awning of the building was struck by a high heavy vehicle whilst turning from South Terrace into South St.

When I was advised of the damage in late April, I inspected the building and noticed that the awning was hanging precariously

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from its fittings and looked in danger of collapsing on to the footpath. It is to be noted that it was left in this condition for some weeks. I became extremely concerned as to our public liability exposure in relation to injury to our tradesman, staff or anyone else we sent on to the premises. I took some legal advice and I was advised to prohibit our tradesman and staff from entering the building until the dangerous awning was removed.

In view of this advice, it was necessary for me to issue instructions that no tradesmen engaged by Aussie Cash were to do any work in relation to the fitout until the 'dangling' awning was removed and I asked Stiven to communicate with you regarding this matter. This I understand he did and he advised me that the landlord was making arrangements to remove the damaged awning and replace it within a couple of weeks. I am advised that the damaged awning was not removed for a month.

In June, Stiven told me that he had spoken with you on a number of occasions and had been advised that a new awning would be built within two weeks. After the awning was removed we fitted out and painted the premises expecting the new awning to be constructed at the same time. This was not the case and we were left with a damaged and unsightly building. During the fitout period Stiven, made further inquiry as to the stability of the building's remaining structure and was subsequently advised that the front wall of the building was in a weakened and dangerous condition and would need replacing. In addition, parts of the toilet brick wall have deteriorated to the point where there are also safety concerns for our personnel.

After weeks of delay caused by this accident, we reluctantly opened for business on 24th June albeit on a restricted trading basis, allowing only Stiven to operate the store without the assistance of support staff. It was necessary for me to once again to [sic] issue instructions that in view of the obvious injury and liability risks than [sic] no support staff were to work on the premises at all and that no lightbox signs were to be erected on the front wall.

As can be appreciated this matter has severely and adversely impacted on our business and we are still uncertain as to when the building will be in a safe and presentable condition.

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In addition to the above, I have paid $600 to solicitors Franck [sic] Unmack and Cullen on 30th April as requested for the preparation of the lease and to date I have not sighted the document for execution.

I am advised that you had contacted the office today seeking lease payments however under the circumstances I believe that we are owed some very firm advices in relation to the following:

1. The actual condition of the front wall and the rest of the leased premises.

2. The expected date for the completion of repairs and replacement of the front wall.

3. The landlord's position on compensation to us for the past delays, substantial interference and resultant loss of income for our business caused by this most unfortunate accident.

4. The date upon which I can expect the lease document to be delivered to this office.

I will be available to speak with you at any time to discuss the matters raised and in this regard I look forward to hearing from you in due course.

Yours sincerely

Oliver Douglas


Director"

53 This letter may be read as complaining about:

(a) the condition of the building generally;

(b) the awning problem; and

(c) damage consequential on the awning damage.

54 Mr Cavallo responded by a letter on the same day. His letter read:

"Dear Oliver

RE: 232 SOUTH TERRACE, FREMANTLE

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In acknowledging receipt of your faxed letter dated 16/8/2001, please be advised that we are extremely disappointed in the stance that you have adopted, seemly [sic] to avoid your responsibility in paying rent due under the agreement entered into on 5/4/2001.

The agreement obligates you to pay rent effective 1/5/2001 with possession having been granted upon acceptance of your offer as per date of contract (5/4/2001). Special Condition 27B states that 'the lessee takes the property in the condition that it was inspected on the 3/4/2001'. You were fully aware of the status of the building at this point.

In regards to the building's lack of awning we confirm the matter is with the City of Fremantle Council awaiting their approval on plans for the new structure. This has been conveyed to Stiven Pucar on several prior occasions. However, we suggest to you that the building's lack of awning has no bearing to you undertaking your daily business being of an aesthetic value only. In fact, the owner has today conveyed to us that she has observed that normal trading is taking place at the premises.

Meanwhile, for the record, your communication today is the first time that any other matters besides the awning, pertaining to the premises have been raised. Given the length of time that your company has been in occupation and the fact that you have been carrying out normal trading, we question why you have not communicated any concerns with us prior and ask why no documentation in regards to the stability of the building has been forwarded to us.

Given that you have chosen to ignore the repeated Tax Invoices which have been forwarded to both 232 South Tce, Fremantle & subsequently to your postal address as above, on the owners instructions, we have advised solicitors, Frank, Unmack & Cullen to commence legal proceedings in order to recover rental monies due plus associated legal costs in accordance with the Contract to Lease Commercial Premises by Offer & Acceptance. We advise that this document that you have signed - is a legally binding contract, which you have ratified by taking possession.

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Yours sincerely
L J HOOKER FREMANTLE

TONY CAVALLO


PRINCIPAL/DIRECTOR"

55 In my opinion, this letter is to be understood as responding in the second paragraph to the complaint about the condition of the building generally, responding in the third paragraph to the problem concerning the awning, and in the fourth paragraph responding to the complaint about
structural damage said to be consequential on the awning damage. It seems clear that the damage consequential on the awning damage only came to Mr Cavallo's knowledge on receipt of the letter from the appellant on 16 August. The complaint about the condition of the building generally is irrelevant because the appellant agreed to accept the building as inspected.

56 There was no further contact between the parties before the appellant advised on 7 November 2001 that he intended to vacate the premises in November. The appellant obtained a structural report from an engineer in September 2001 but did not provide it to the respondent until 2003. The appellant apparently believed that no application had been made to the Council for approval to replace the awning but no evidence was led seeking to contradict Mr Cavallo's evidence that an application had been made in early August 2001.

57 In my opinion, there is nothing in the circumstances by which it can be said that the respondent evinced any intention on the part of the respondent to repudiate the contract. The respondent wanted rent which had not been paid and was pressing for payment, and indeed instructed solicitors to effect recovery. Early repairs were carried out to deal with the awning damage and an application was made for approval to replace the awning. It is impossible to reach any conclusion that delay to repair the structural problems consequential on the awning damage amounts to repudiation. I should add that there is no ground alleging that there was any failure to repair the structural problem in a reasonable time and without evidence I would not assume that the failure to repair that damage before the appellant vacated the premises amounted to a breach of the landlord repair clause.

58 However, even if there were such a delay, there is nothing in the circumstances which make this a case like the case of Laurinda, where

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delay and related circumstances led the court to conclude that there had been repudiation. These grounds must be dismissed.

Ground 5

59 This ground must be dismissed because it depends on a conclusion that the respondent had repudiated the lease. The finding was that there was no repudiation and the challenge to that finding has failed. The appellant's departure from the premises did not terminate the lease.

60 The result is that the appeal should be dismissed.