Enviro Remote Sensing Australia Pty Limited v Bankstown Airport Limited
[2008] NSWSC 1001
•25 September 2008
CITATION: Enviro Remote Sensing Australia Pty Limited v Bankstown Airport Limited [2008] NSWSC 1001 HEARING DATE(S): 15-17 July and 18 September 2008
JUDGMENT DATE :
25 September 2008JURISDICTION: EQUITY DIVISION JUDGMENT OF: Windeyer J at 1 DECISION: Breach of contract established. Nominal damages awarded. CATCHWORDS: LANDLORD AND TENANT – Breach of covenant by lessee – notice to remedy breach given under s129 of Conveyancing Act 1919 – notice signed by solicitor for lessor – no evidence of authority – whether notice valid - re-entry for non-compliance with notice – whether re-entry a repudiation accepted by the lessee - LANDLORD AND TENANT – Breach of covenant required by notice – whether adequate time given prior to re-entry – whether new approval of plans by building authority required - PRINCIPAL AND AGENT – Notice to remedy breach of covenant of lease signed by solicitor – whether authority implied - STATUTORY INTERPRETATION - Airports Act 1996 (Cth) and Airports (Building Control) Regulations 1996 (Cth) – whether prior approval remains in force if building works commenced within the prescribed period but not completed during the period – effect of transitional provisions on existing building entitlement - DAMAGES – Reliance damages – circumstances where evidence established the lease was of no value and no case put forward of loss of income from proposed activities of the lessee – onus of proof in reliance damages LEGISLATION CITED: Acts Interpretation Act 1901 (Cth)
Airports Act 1996 (Cth)
Airports (Building Control) Regulations 1996 (Cth)
Conveyancing Act 1919
Corporations Act 2001 (Cth)
National Security (Landlord and Tenant) Regulations 1941 (Cth)
Trade Practices Act 1974 (Cth)CATEGORY: Principal judgment CASES CITED: Commonwealth v Amann Aviation Pty Limited (1991) 174 CLR 64
Commonwealth of Australia v K W Harris Pty Limited [1965] NSWR 63
Ex parta Clews; Re Schache & anor (1946) 63 WN(NSW) 127
Ex parte Fuller; Re Taylor (1945) 62 WN(NSW) 158
Hawkins Constructions (Australia) Pty Ltd v Mac's Industrial Pipeworks Pty Ltd [2002] NSWCA 136
McRae v Coulton (1986) 7 NSWLR 644
Metropolitan Waste Disposal Authority v Willoughby Waste Disposals Pty LTd (1987) 9 NSWLR 7
O'Really v The State Bank of Victoria Commissioner (1983) 153 CLR 1TEXTS CITED: Bowstead & Reynolds on Agency, 18th ed
Lang's Commercial Leasing in AustraliaPARTIES: Enviro Remote Sensing Australia Pty Limited (Plaintiff)
Bankstown Airport Limited (Defendant)FILE NUMBER(S): SC 2418/05 COUNSEL: Mr P Braham (Plaintiff)
Mr M Green with him Dr E Peden (Defendant)SOLICITORS: Deacons (Plaintiff)
Bruce Stewart Dimarco (Defendant)
OF NEW SOUTH WALES
EQUITY DIVISION
WINDEYER J
THURSDAY 25 SEPTEMBER 2008
2418/05 ENVIRO REMOTE SENSING AUSTRALIA PTY LIMITED V BANKSTOWN AIRPORT LIMITED
JUDGMENT
Facts
1
The plaintiff is the lessee of part of the land at the Bankstown Airport pursuant to a lease dated 29 July 1997 from the Federal Airports Corporation (FAC). The lease commenced on 1 July 1997 and was for a term of 25 years ending on 30 June 2022. The lease is registered N3822789.
2
Pursuant to the Airports Act 1996 (Cth) and an instrument of government called The Bankstown Airport Transfer Instrument, the rights and liabilities of the FAC under the lease have been transferred to Bankstown Airport Limited, the defendant in this action. It is not necessary to go into this in detail. For the purposes of later leases the defendant obtained a head lease of the site, either from the Commonwealth or from the FAC and then granted sub-leases of parts of the site. That is not relevant here. The lease itself is a relatively short document, but it incorporates the terms of a memorandum which has been registered and which is of considerable length. So far as concerns the main issue here the memorandum provided:-
5.1 The tenant may not carry on a business at or from the Premises other than a Permitted Use without the consent of the Corporation.(a) 5. USE OF PREMISES
“Permitted use” is defined in Schedule 1 to the memorandum as meaning “the type of use set out in Item 7 of the reference schedule”. Item 7 of the reference schedule describes the permitted use as follows:-
Accommodation for student pilots; office space for rent to the aviation and environmental industries; associated administration and specifically excludes all other uses
(b) Clause 30 of the memorandum related to tenant’s works. Clauses 30.2 and 30.4 are as follows:-
30.2 The Tenant must on or before the date specified in item 13 of the Schedule or such later date as agreed, present for approval to the Corporation as landowner (which approval shall not be unreasonably withheld) the Plans and Specifications and Contract for the Works to be undertaken by the Tenant. The Corporation may consent to the Plans and Specifications on such terms and on the imposition of such conditions as the Corporation in its absolute discretion sees fit including the following:-
(a) all costs incurred by the Corporation associated with considering the Tenant’s application (regardless of whether or not the Works are undertaken) and in supervising progress of construction of the Works shall be borne by the Tenant;
(c) the Corporation shall have the right to approve the Tenant’s choice of contractors builders and architects to be employed in the course of undertaking the Works.(b) all consents, licenses, permits, requirements and regulations of the Corporation in the Corporation’s Official Capacity (including without limitation the Corporation’s requirements pursuant to the Airport Development Guidelines and the standards set out in the Building Code of Australia) shall be complied with by the Tenant at its own expense;
- 1. …
2.
30.4 The Tenant must at its own cost in all respects:
(b) comply on time with laws, official directives, easements and restrictive covenants which affect the works.(a) commence the Works within such reasonable time as the Corporation shall require and shall proceed to completion of the Works actively and continuously in a workmanlike manner in accordance with the Plans and Specifications approved by the Corporation; and
3
Item 13 of the Reference Schedule provided that the date for submission of plans under clause 30.2 was 1 November 1997. Clause 30.12 provided that the Corporation could terminate the lease on one month’s notice in writing if the works were not commenced to the reasonable satisfaction of the Corporation by the date specified in Item 14 which was 1 February 1998. So far as submission of the plans and approval of the plans and the date for commencement of the final works were concerned the plaintiff lessee complied with those requirements.
4
The works did commence in January 1998, and a steel frame for at least stage one of the works was erected. In January 1999 the plaintiff ceased construction. At that stage there was no concrete floor for any building; there was no cladding and there were no internal walls. What was there was just a frame.
5
The directors of the plaintiff company are Mr Hodgson and his mother. Mrs Hodgson owns or owed 99% of the shares, but there can be no doubt that Mr Hodgson is and was the person responsible for all the operations of the plaintiff company.
6
There was a meeting in July 2001 between Mr Hodgson and Mr Ellis, the then general manager of the airport and Mr Campbell, the property manager. Mr Ellis said this arose as a result of complaints about the site by other tenants. There is some dispute about what was said but there can be no doubt Mr Ellis was requiring completion. According to Mr Ellis, Mr Hodgson said, “How about I just put cladding around the structure and make it look good. Would that be OK?” and he said, “Yes, while you are working on finishing the building that would be OK.” Mr Hodgson said Mr Ellis said to him, “Finish it or else we’ll get nasty and you know I will keep a record of this meeting. You have been warned.” While Mr Ellis denied making any threatening statement it is quite clear the defendant was requiring action on the building. There was some discussion about a joint venture to get it completed which came to nothing.
7
On 2 September 2002, the defendant sent to the plaintiff a notice of breach of covenant said to be pursuant to s129 of the Conveyancing Act 1919. The breach alleged was breach of clause 30.4 in failing to complete the works in a workmanlike manner, and requiring the breach to be remedied. This notice was signed by Mr Pritchard of Emil Ford & Co. solicitors for the lessor and was as follows:
TO: ENVIRO REMOTE SENSING AUSTRALIA PTY LIMITED the Lessee of premises Site 629, Bankstown Airport.
1. Your lease of the above premises contains the following covenant:
30.4 The Tenant must at its own cost in all respects:
(a) commence the Works within such reasonable time as the Corporation shall require and shall proceed to completion of the Works actively and continuously in a workmanlike manner in accordance with the Plans and Specifications approved by the Corporation; and
2. You have breached that covenant by failing to proceed to completion of the Works actively and continuously.
We give you notice that the Lessor requires you to remedy the breaches by:
A. Recommencing the Works, and
B. Completing the Works in a workmanlike manner in accordance with the approved plans and specifications.
Dated this 2nd day of September 2002
P Pritchard (signature)
Lessor’s Solicitor
NOTE - The Lessor will be entitled to re-enter or forfeit the lease in the event of the lessee failing to comply with this notice within a reasonable time - see section 129 of the Conveyancing Act 1919.
8
A letter from those solicitors was forwarded with the notice in the following terms:
Premises: Site 629, Bankstown Airport
We enclose notice of breach of covenant
Your obligation is to remedy the breaches of covenant within a reasonable time after service of this notice.
If those breaches are not remedied within that period, the lessor will regard itself as being legally justified to terminate your lease.The Lessor has not specified in the notice the date for compliance with this notice, as that is a matter of law. However, we are instructed to indicate that the lessor regards 30th September 2002 a reasonable time for you to commence the Works and 3lst December 2002 as a reasonable time by which to complete the Works and obtain a certificate from the Airport Building Controller.
9
That letter with the notice was sent to the registered office of the plaintiff lessee company. Follow up letters were sent on 8 October 2002, when there had been no response and a copy of the notice was also sent to Mr and Mrs Hodgson at 18 Joylyn Road, Annangrove on 8 October 2002. Mr Hodgson said he received the notice on 18 September 2002.
10
The follow-up letter of 8 October 2002 from the solicitors stated that there had been no apparent activity to recommence the works; that the defendant was entitled to terminate; that the defendant would consider any representations the plaintiff wished to make; and that if there was no acceptable response by 5.00 pm on 16 October 2002, the defendant would proceed to terminate the lease.
11
This brought about a meeting between Mr Hodgson and Mr Campbell, the then property manager of the defendant, when Mr Hodgson complained about the notice and the time frame nominated, and said he had commenced work as he had cut the grass.
12
It is not suggested that the notice of breach was not received by the company. On 16 October 2002, Lyon Law Firm, writing on behalf of the plaintiff, stated that the plaintiff would be disputing the notice to terminate its lease, as it was defective. That letter stated as follows:
BANKSTOWN AIRPORT LIMITED LEASE TO ENVIRO REMOTE SENSING AUSTRALIA PTY LTD.
PREMISES: SITE 629 BANKSTOWN AIRPORTWe refer to the abovementioned matter and inform you that we act on behalf of our client, Enviro Remote Sensing Australia Pty Ltd.
1. Our client will be disputing your purported notice to terminate its lease, as outlined in letter dated 8 October 2002, as it is defective. The time given to our client to commence and complete works, as outlined in your letter 2 September 2002, is unreasonable and unfair. Furthermore, no prior written notice has been issued to our client in relation to this matter.Please note that we have received a copy of the letters, from your firm to our client, dated 8 October 2002 and 2 September 2002. Furthermore, we have been instructed to reply as follows;
2. Our client has commenced works prior to the date outlined in item 14, being the 1 February 1998. Our client anticipates to complete the works in the near future, in which dates [sic] will be advised by our client.
3. Our client will defend and seek interlocutory relief if your client pursues its attempt to terminate its lease.
4. Our client now requires your client to formally withdraw any notices and provide a written undertaking that it will not pursue any action as specified in your letter dated 8 October 2002. Please note that this is required by 5 pm on 17 October 2002.
13
The response to this was a letter dated 17 October 2002 from Emil Ford & Co in the following terms:
Bankstown Airport Limited re Enviro Remote Sensing Australia Pty Ltd
Premises: Site 69 Bankstown Airport
We refer to your fax of 16 October 2002.
Our instructions are as follows:
1. Your comment is misconceived. The notice served on your client was a notice under Section 129 of the Conveyancing Act.
2. The Notice of Breach of Covenant does not state that your client did not commence the works. It is not a sufficient response to the Notice of Breach of Covenant to say that your client "anticipates to complete the works in the near future".
3. Noted. If your comment is intended to indicate that your client will seek relief against forfeiture if the lease is terminated, than to succeed in such an application, your client would have to satisfy the court that it is in a position to comply with its obligations under the lease. Our client therefore requests your client to provide it, by 4pm on 31 October 2002, with evidence that would be likely to satisfy the court that it should grant relief against forfeiture.
4. Not agreed. The response in your letter is not an acceptable response as it gives no clear indication that your client has any time frame within which it would recommence and complete the works.
14
A further letter was sent by the Lyon Law Firm to Emil Ford & Co, either on 31 October or 1 November 2002 in the following terms:
BANKSTOWN AIRPORT LIMITED LEASE TO ENVIRO REMOTE SENSING AUSTRALIA PTY LTD.
PREMISES: SITE 629 BANKSTOWN AIRPORTWe refer to the above mentioned matter and as per previous correspondence, our client still maintains that there has been no breach of the lease. Please note that we have been instructed as follows:
Furthermore, our client has indicated that he would like to see this matter resolved as soon as possible.1. The obligations under the lease that our client has undertaken, have been met, both financially and in relation to the commencement of construction on the site. At no time has our client been in breach, as the lease only indicated a commencement date for works to begin and not a completion date.
2. Our client be allowed to continue building at a reasonable pace, as the financial outlay as you may appreciate, is not insignificant.
3. Our client entered into the long lease (25 years) to, inter alia, do the works and "add value" to the property at a "steady" pace.
4. Our client reserves its rights.
15
Emil Ford & Co responded to that by letter of 1 November 2002 saying: “Our client re-entered and terminated the lease before your letter was received this morning”. It went on to refer to the obligations of the tenant under clause 31.2(b) of the lease providing for removal of the works, namely the improvements made by the tenant, within three months.
16
The plaintiff then instructed new solicitors, Messrs Deacons, who wrote on 20 November 2002 to Emil Ford & Co stating that the termination was without grounds and wrongful and therefore constituted a repudiation of the lease and of the obligations of the lessor thereunder and that the lessee accepted the repudiation and considered the lease to be at an end. It is probably convenient to set out part of the letter:
Pursuant to the terms of that lease
·
our client was obliged to submit plans for development of the premises to FAC for approval prior to 1 November 1997·
to commence the development works “within such reasonable time” as the FAC shall require·
If the works have not commenced by 1 February 1998, FAC may determine the lease on 1 month’s notice in writing.·
an event of default occurs if the works are not completed within the time stipulated in the contract.We are instructed that there was no contract and that no time was stipulated by FAC in relation to completion of the works. The works were commenced by our client and have not been completed. For reasons irrelevant to the present dispute our client did not proceed to completion of the works "actively and continuously". This however was well known to and accepted by FAC. Our client contends therefore that it is quite inappropriate for your client to unilaterally nominate a 3 month completion deadline for the works as it purported to do by your letter of 2 September 2002. Having done so however our client was entitled to the duration of the nominated period to resume the works and to proceed to completion. The nominated completion date was 31 December 2002. Significantly prior to this date your client has purported to terminate the lease on the basis that our client has not proceeded with the works "actively and continuously". Our client contends that your client is clearly estopped from terminating the lease on this basis and that there is strong High Court support for this contention.
We are instructed that our client has suffered and will suffer considerable loss as a result of your client's actions in relation to which it reserves all its rights.Our client also contends that the Notice of Breach issued by your client was defective in that it was not given by an "authorised officer" of your client as required by the terms of the lease.
17
To determine some of the questions which arise it is necessary now to set out some further terms of the lease incorporated by the memorandum.
13. CORPORATION’S RIGHTS
Delegation
13.1 The Corporation may appoint agents to exercise some or all of its rights and perform some or all of its duties under this lease. If the Corporation does so and notifies the Tenant that it has done so:
(a) the Tenant must deal with those agents in relation to the matters delegated to them; and
(b) the Tenant may treat the delegated acts of the agents as the acts of the Corporation
until the Corporation notifies the Tenant that the agents are no longer its agents for those purposes. Communications from the Corporation prevail over communications from the agents if there is any inconsistency between them.
16. DEFAULT
Essential terms(a) the obligations to pay money under clauses 1 to 3 inclusive;. and16.1 The following obligations of the Tenant are essential terms of this lease:
(b) the obligations under clauses 4.1, 4.2, 5.1, 6.1, 6.4, 9.5, 16.3, 16.11 and 34.3.
This clause 16.1 does not prevent any other obligation under this lease from being an essential term.
Events of Default
16.2 An Event of Default occurs if:
(a) the Tenant repudiates this lease; or
- …
- …
(b) the Tenant fails to comply with an essential term of this lease; or
(c) a fundamental breach of this lease by the Tenant occurs; or
(d) the Tenant does not comply with any of its obligations under this lease which is not an essential term and, if the non-compliance can be remedied, the non-compliance is not remedied within 7 days after the Corporation notifies the Tenant of its occurrence; or
( e) a person becomes or ceases to be a Parent of the Tenant and the Tenant has not complied with clause 4.6; or
(f) a judgment, order or an Encumbrance is enforced, or becomes enforceable, or can be rendered enforceable by the giving of notice, lapse of time or fulfillment of any condition, against the Tenant's interest in this lease, the Tenant's Property or any other property used in connection with the Tenant's Business; or
(g) any essential term of this lease is claimed to be wholly or partly void, voidable or unenforceable by the Tenant or by anyone on its behalf; or
(h) the Airport or the Premises are damaged or destroyed and:
(i) the damage or destruction was caused by , contributed to by, or arises from, an act or omission of the Tenant or the Tenant's Employees and Agents; or
(ii) a policy of insurance in connection with the Airport has been prejudiced or made void or payment of policy money has been refused by the insurer because of an act or omission of the Tenant or the Tenant's Employees and Agents; or
if the Tenant or a Guarantor is a company,
(i) an Insolvency Event occurs in respect of the Tenant or a Guarantor; or
(j) a receiver or receiver and manager is appointed in respect of any part of the property of the Tenant or a Guarantor; or
(k) without the consent of the Corporation, the Tenant or a Guarantor takes action to reduce its capital or passes a resolution referred to section 188(2) of the Corporations Law.
16.3 The Tenant must ensure that no Event of Default occurs.
Termination Events
16.4 A Termination Event occurs if any essential term of this lease is or becomes wholly or partly void, voidable or unenforceable even if not claimed to be so by the Tenant or by anyone on its behalf.
Corporation's right to terminate
16.5 The Corporation may:
if an Event of Default or a Termination Event occurs. If the Corporation takes action under clause 16.5(c) the Tenant remains bound under this lease as if that action had not been taken.(a) terminate this lease by re-entering the Premises without notice, or if required by law, with notice; or
(b) terminate this lease by notice to the Tenant; or
(c) convert this lease by notice to the Tenant into a tenancy which may be terminated at the will of the Corporation but not of the Tenant;
23.1 A notice, approval, certificate, consent or other communication in connection with this lease:
(a) may be given by the Tenant (if an individual), the Corporation (if an individual) or an Authorised Officer of the relevant party; and
(b) must be in writing unless expressly specified otherwise in this lease; and(c) must be left at the address of the addressee or sent by prepaid ordinary post (airmail if posted to or from a place outside Australia) to the address of the addressee or sent by telex or facsimile to the telex or facsimile number of the addressee which is set out in item 9 of the Reference Schedule or if the addressee notifies another address or telex or facsimile number then to that address or telex or facsimile number.
23.2 Unless a later time is specified in it a notice, approval, consent or other communication takes effect from the time it is received.23.3 A letter, telex or facsimile is taken to be received:
(b) in the case of a telex, on receipt by the sender of the answerback code of the addressee after transmission of the telex; and(a) in the case of a posted letter, on the third (seventh, if posted to or from a place outside Australia)' day after posting; and
(c) in the case of a facsimile, on production of a transmission report by the machine from which the facsimile was sent which indicates that the facsimile was sent in its entirety to the facsimile number of the recipient notified for the purpose of this clause.
28. NO GUARANTEE OF TRADE
28.3 The tenant has made and relied on its own enquiries in relation to all matters relevant to its decision whether or not to enter into this lease and has not relied on any representation, warranty or undertaking (except as expressly contained in this lease) given by the Corporation in determining whether or not to enter into this lease.…
- 18
Item 9 of the Reference Schedule giving an address for notices in accordance with clause 23.1 had an address for Federal Airports Corporation, but no address was set out for the lessee. Prior to the lease being signed, a letter was written by the Airports Corporation to Mr Hodgson dated 17 June 1997, setting out details needed for preparation of the lease document and asking that each paragraph be initialled. The paragraphs had various headings, such as “Tenant”, “Names of Directors”, “Address for Notices” and the like. Against the address for notices was the address 18 Joylyn Road, Annangrove, which was not initialled by Mr Hodgson. All this is said to be relevant to a claim that the notice was not properly served and I will return to that.
19
The lease refers throughout to the tenant and “the Corporation”. Although it does not say so, it is obvious enough that the Corporation means the lessor under the lease. It will become of some importance when I deal with the question of notice under clause 23 of the memorandum.
20
Schedule 1 of the memorandum is headed “Interpretation” and contains definitions. “Authorised officer” is defined as follows:
(b) in the case of the Tenant, a person appointed by the Tenant to act as an Authorised Officer for the purpose of this lease.(a) in the case of the Corporation, a director, secretary or an officer whose title contains the word “manager” or a person performing the functions of any of them or any other person appointed by the Corporation to act as an Authorised Officer for the purpose of this lease; and
21
It is convenient now to set out the various claims of the plaintiff before dealing with them each in turn.
A. The first claim is what is described as “the collateral agreement claim”. This is a claim that in consideration of the plaintiff entering into the lease, the lessor undertook on the expiration of that lease to renew the lease for a further period of 25 years.
B The second claim is described as the representation claim. This is a claim by the plaintiff that the FAC represented to Mr Hodgson that it would renew the lease for a further term of 25 years if this was requested and on the basis of that representation the plaintiff assumed that the lessor was bound to renew the lease for a further term if requested, that the plaintiff was induced by the representation to adopt the assumption and in reliance on it entered into the lease for 25 years. The pleaded claim is that this was a representation made in trade and commerce in respect of a future matter and if the collateral agreement did not exist then relying on s51A of the Trade Practices Act 1974 (Cth) there was no reasonable grounds for making the representation and that the representation was misleading or deceptive contrary to s 52 of the Trade Practices Act.
C. The third claim is a promissory estoppel claim based upon the same facts as in B.
D. The next claims of the plaintiff are that the notice to remedy breach was ineffective. This is put on four bases as follows:
(i) that it was not sent to the address to which it should have been directed.
(ii) that the notice was not properly signed.
(iii) that the time indicated in the letter from the solicitors to commence work and the time indicated as a proper time for completion of the works were not reasonable times.
(iv) that at the date of purported forfeiture and termination by re-entry, namely 1 November 2002, inadequate time had been given to remedy the claimed breach.
that therefore the re-entry based upon that invalid notice or claimed unreasonable time was invalid and was itself a repudiatory act accepted by the lessee as bringing the lease to an end and giving a right to damages for breach contract.
22
The claimed relief is for damages for breach of contract, damages pursuant to s 82 of the Trade Practices Act plus interest and costs. So far as the damages for breach by repudiation claim is concerned, damages claimed are loss of value of the leasehold and loss of expenditure for works on the subject property. This is how the claim is made but both cannot be awarded. So far as the claim based on misrepresentation is concerned, the loss claimed as a result of this is expenditure on rent for the premises up to the date of termination and cost of construction of the works so far as they had gone.
23
The evidence of Mr Hodgson was that he asked Miss Williams, who was in charge of leasing sites at the Bankstown Airport, for a 25 year lease together with an option for a further 25 years. Paragraph 14 of his statement of 23 August 2006 is as follows:
"OK, as long as I can stay for another term."14. When I received the proposed agreement for lease, I noticed that there was no option for a second 25 year term. I recall that I went to FAC's offices and had a conversation with Lyn Williams, the head of property at the FAC, outside her office and said to her words to the following effect"
"Lyn, the proposed lease does not have an option for another 25 year term. I want to have an option because I am looking at a long term investment."
She said to me words to the effect:
"Don't worry Brett, the maximum lease we can give is 25 years and there is a policy not to grant options which would extend past 25 years however, all you need to do is renew your lease before it expires and you will then be granted a further 25 year lease."
I said:
24
Miss Williams could not remember the actual conversation which took place. She said that she would not have said that because options were not being granted and she would not have been able and had no authority to commit the lessor to any longer term than 25 years. She accordingly denied the terms of the conversation alleged by Mr Hodgson. She gave evidence of her invariable practice as follows:
15. I recall it was invariably my practice that if a prospective tenant asked me whether their lease could be renewed after expiry of the initial lease term during my employment with the FAC, I would say “ FAC policy permits the granting of a further lease term. If you’re a good tenant, we don’t see why you wouldn’t be granted a further term, but that will be a matter for the management at the time and it is not known who that might be.”
25
Whatever the effect of the conversation, even as claimed by Mr Hodgson, it could not have amounted to an agreement to enter into a further lease for 25 years at the conclusion of the lease term in consideration of the plaintiff entering into the first lease. An amended defence was filed raising a defence of lack of writing. This amendment was probably made as a result of a comment made by me and must be a good defence in absence of part performance. While there was no pleaded reply, I allowed an oral reply to be put forward based on part performance, the part performance stated to be the entry into the first lease. That entry could not be said to be properly referrable only to the claimed contract. In any event I can see no basis for the collateral agreement claim, even leaving aside the defence of lack of writing. Accepting the exchange took place as Mr Hodgson claimed it gave rise to no concluded agreement. It would have been quite uncertain as to term, rent or other conditions.
26
The only evidence of inducement and reliance is Mr Hodgson’s evidence of the conversation with Miss Williams. In circumstances where a request for an option has been refused but a lessee was told that if the lease were renewed prior to its termination, then a new lease would be granted, whatever that might mean, it is just unreasonable to think that this was some serious representation that whatever the circumstances at the time, a new lease would be entered into. In those circumstances it is not necessary to consider whether the defendant became liable for any liability which the Federal Airports Corporation would have had for misleading and deceptive conduct.
27
The estoppel claim as an alternative to the collateral agreement claim must fail for the same reason. In any event so far as misrepresentation is concerned the plaintiff by electing to treat the claimed wrongful re-entry as repudiation prevented any chance of the claimed representation being made good. And finally, while clause 28.3 of the memorandum is not determinative, in my opinion having regard to the time involved this clause, in spite of its inappropriate heading, is strongly against any finding of inducement or reliance.
28
As I have said, the plaintiff’s claim is that the notice was not a proper notice because: (a) it was not served in accordance with the requirements of the lease; (b) it was not given by an authorised officer of the defendant as required by clause 23.1(a) of the memorandum; and (c) it required the plaintiff to complete works, which was not a requirement in clause 30.4 of the lease.
29
Item 9 of the reference schedule did not set out an address of the lessee. There is no basis upon which the letter which preceded the lease could in some way be incorporated into the lease so as to bring about the position that the address in that letter, which was not initialled by Mr Hodgson, was the address to which the notice had to be sent. The notice was served on the plaintiff company in accordance with the requirements of s 170 of the Conveyancing Act 1919 and s 109X of the Corporations Act 2001 (Cth). Pursuant to the latter provision, together with ss 29 and 160 of the Acts Interpretation Act 1901 (Cth), the notice was received on 6 September 2002. It was received by the company and by Mr Hodgson. The fact that it may not have come into the hands of Mr Hodgson until 16 September 2002 is irrelevant.
30
Clause 34.4 required the plaintiff to commence the works within a reasonable time and to proceed to completion of the works actively and continuously in a workmanlike manner. The notice required the lessee to remedy the breaches by recommencing the works and completing the works in a workmanlike manner in accordance with the plans and specifications. There was no requirement to complete the works by a specified date. The notice is not defective on that count.
31
It is clear from its form that the notice was adapted from the form of notice of breach of covenant which appears in It is clear from its form that the notice was adapted from the form of notice of breach of covenant which appears in Lang’s Commercial Leasing in Australia , para [32-110]. The letter which was forwarded with the notice was quite clearly adapted from paragraph [32-120] of the same work. The main difference is that in the precedent to which I have referred, it is clear that the notice is given by the lessor itself, rather than by a solicitor who gives “notice that the lessor requires you to remedy the breaches by …”. The form in Schedule 5 to the Conveyancing Act 1919 and the precedent form both imply that the notice will be signed by the lessor. The question then is whether or not the notice can be signed by the solicitor for the lessor in a case where the lessor is not even named or whether the notice was invalid through lack of proper signature.
32
It was argued, rather faintly, that signature was not necessary. I reject that, as without it the notice would be just a piece of paper. I have set out the terms of clause 23.1(a). It is in rather strange language. “Corporation” must mean “Lessor” as if that were not the position the corporation could not be an individual as nobody would be thinking about a corporation sole. The solicitor was not an authorised officer within the definition of the term under Schedule 1 to the memorandum. It is not suggested that the solicitor was appointed by the Corporation to act as an authorised officer for the purposes of the lease. The question arises then as to whether the methods of giving notice under clause 23.1(a) are mandatory and exclusive or non-exclusive. It would be very strange if the clause were read in such a way as to mean that a notice were not valid if it were executed under the common seal of a corporation or in any way authorised by the Corporations Act 2001 for execution of documents by a company. This points to the mode of execution not being mandatory and I consider that to be correct.
33
In my view the ordinary authority of a solicitor would not extend to signing a notice on behalf of a lessor client nor would the solicitor, without other authorisation, be the agent of the client, in this case lessor, for that purpose. As I have pointed out the lessor is not mentioned by name in the notice and the solicitor is not claiming to sign as agent for the lessor.
34
Paragraph 24 of the third further amended statement of claim reads as follows:
24. Furthermore, the Notice was not given by an authorised officer of the defendant, as required by clause 23.1(a) of the Memorandum.
The defence includes a denial of that paragraph. This was, perhaps, not a perfect pleading raising the issue, but there can be no doubt that the question as to whether or not the notice was invalid as not properly signed was an issue in the proceedings before me. I should add that at the end of the hearing it seemed to me that counsel should have the opportunity to make further written submissions on the question of the signature and further submissions were received which did not take the matter much further.
35
The defendant has referred to two cases, namely McRae v Coulton (1986) 7 NSWLR 644 and O’Reilly v The State Bank of Victoria Commissioner (1983) 153 CLR 1, which determine so far as statutory construction is concerned that where legislation requires signature by a person, then unless the legislation is clearly to the contrary, the signature of a person on a document can be made by an authorised agent if that agent signs in the form of X by his agent Y or Y as agent for X. The cases do not really assist the defendant in absence of proof of authority.
36
Clause 13.1 of the memorandum, which I have set out, authorises the corporation to appoint agents to exercise some or all of its rights and perform some or all of its duties under the lease. It is not suggested there was any such appointment and there is no evidence of any such appointment. There is no evidence of actual authority in Mr Pritchard. No submissions were addressed as to possible ratification and I pass this by other than to say that as property rights are affected it appears ratification of an invalid notice cannot take place after the time allowed by the notice has expired and in this case the only possible act of ratification would have to be by implication by re-entry which could only take place after a reasonable time elapsed or expired: See Bowstead & Reynolds on Agency 18th ed 2-089. In any event re-entry would not necessarily be ratification. No argument has been addressed to apparent or ostensible authority; the defendant did not hold out its solicitor as its agent to the plaintiff.
37
I should add that I have done some research on this matter as it is technical and because until after the event Mr Hodgson did not contend the notice was invalid except perhaps in general terms. Thus I have considered authorities in relation to signature of notices to quit particularly those that quote Ex parte Fuller; Re Taylor (1945) 62 WN(NSW) 158. The question in that case was whether regulation 15 of the National Security (Landlord and Tenant) Regulations 1941 (Cth) required a notice to quit to be personally signed. The judgment of the Chief Justice, Jordan CJ, with whom the other judges agreed was very short and as follows:
I can see nothing in reg. 15 of the National Security (Landlord and Tenant) Regulations to indicate an intention to alter the rules of the law of the State with respect to the manner of giving notices to quit. That regulation is not directed to the form in which the notice to quit may be given but to the circumstances in which it may be given. I respectfully agree with the reasons of Mr Justice Macfarlan in Heyward v Miles [1944] VLR 155, in this respect. For these reasons I am of opinion that the rule nisi should be made absolute.
38
A similar point was dealt with in a decision of Street J, Ex parte Clews; Re Schache & Anor (1946) 63 WN(NSW) 127 the relevant paragraph of which is at page 128 as follows:
One other point was taken with regard to the exercise of discretion, namely that the information was bad because it was not laid by the informant or by an agent as prescribed by the section of the Landlord and Tenant Act. In point of fact the information was laid by the applicant’s solicitor, and with proper instructions he is a person who is authorised to lay that information. there is nothing before me to suggest that he had not proper instructions, and I do not think that I should infer that he had not those instructions so as to defeat the present application.
39
Both of these cases were referred to by Isaacs J in Commowealth of Australia v K W Harris Pty Limited [1965] NSWR 63 where an issue arose about a notice to quit signed by the Acting Crown Solicitor. There were claims as to delegation which was found proper and another claim as to authority to sign which was answered by saying “that a solicitor has general authority to sign a notice to quit on behalf of the landlord unless there is some statutory provision to the contrary”.
40
None of these decisions is directly referable to s129 notices and all seem to me, if carefully read, to be dependent upon authority. Finally in None of these decisions is directly referable to s129 notices and all seem to me, if carefully read, to be dependent upon authority. Finally in Hawkins Constructions (Australia) Pty Ltd v Mac’s Industrial Pipeworks Pty Ltd [2002] NSWCA 136 the Court of Appeal dismissed an appeal from a decision of mine holding that a statutory demand served on a debtor signed by an employed solicitor as “solicitor for the creditor” was valid. The thrust of the argument in that case was directed to s 459E(2)(f) of the Corporations Law 2001 and the note to form 509H. The decision held that solicitors with general authority to carry out work for winding up a company had authority to sign a demand and to use admitted employee lawyers to so sign. This followed Metropolitan Waste Disposal Authority v Willoughby Waste Disposals Pty Ltd (1987) 9 NSWLR 7. In the Court of Appeal, Davies AJA held at [17] that where a solicitor signs a statutory demand on behalf of a creditor, then absent evidence to show lack of authority, the court will proceed on the basis of authorisation.
41
The last case really went to whether an employee of a firm of solicitors could be authorised to sign. It could not, I think, determine that, when the question of authority is put into issue, albeit not in a well pleaded way, then it is for the party challenging authority to adduce evidence of lack of authority. Agency depends upon authority, and only the agent or the principal is able to adduce the evidence necessary to establish this. In this case no evidence was given; no leave to re-open was sought.
42
I therefore conclude on this technical ground that the notice under s129 was not a valid notice; that re-entry for failure to comply with that notice was therefore unauthorised and amounted to a repudiation upon which the tenant could rely to terminate the contract and claim damages. I should say that this is a decision that in modern days courts may be reluctant to embrace. Nevertheless, by the letter from Messrs Deacons, dated 20 November 2002 it was claimed that the notice of breach was defective in that it was not given by an authorised officer as required by the terms of the lease. That at least must, or should, have flagged to the defendant lessor the question of proper signature. There would have been no difficulty in issuing a new notice of breach at that stage. Although this conclusion determines the matter apart from damages, I should deal with the other arguments about the notice.
43
Clause 16, as printed, of the memorandum relates to default. It is not very well expressed but at least sets out certain terms of the lease which are essential terms. Clause 30.4 is not one of these. Clause 16.1 however states that it does not prevent any other obligation under the lease from being an essential term. Clause 16.2 provides that an event of default occurs if the tenant repudiates the lease or fails to comply with an essential term or the tenant does not comply with any obligation under the lease which is not an essential term and if non-compliance can be remedied, the non-compliance is not remedied within seven days after the corporation notifies the tenant of its occurrence. Clause 16.5 provides that if an event of default or a termination event occurs the corporation may terminate the lease by re-entry without notice or if required by law, with notice, or terminate the lease by notice to the tenant.
44
It was sought to argue that there had been breach of an essential term giving a right to terminate without notice; or that even if clause 30.4 were not an essential term, the breach was so significant as to amount to a repudiation.
45
When these arguments were first raised I stated that the issue before the court on the pleadings was whether the lease had been brought to an end by re-entry through failure to comply with the terms of a s129 notice. I stated that the arguments outlined were not raised in any pleading and were not the subject of issues before the court. I said that again towards the end of the closing submissions. No application was made to amend nor was any leave sought to bring a cross-claim. Counsel for the defendant endeavoured to raise these matters again in a written outline for oral submissions and again by further written submissions which I allowed to be sent to me. Each of these matters would require a specific pleading. I do not intend to deal with them further and I always indicated that to be my position.
46
The time given to remedy the breach was not the time indicated in the letter but a reasonable time. In fact the time between notice and re-entry was almost two months. Even accepting that Mr Hodgson did not know of the notice of breach until 16 September, there was still a period of six weeks in which to recommence the work. The question is whether or not the time was reasonable.
47
It is claimed by the plaintiff that the time was not reasonable, first because the defendant having stood by allowing the breach and making no complaint about it was estopped from relying on the breach. There is nothing in that argument. It does not accord with the evidence of either the plaintiff or Mr Ellis of the meeting in July 2001 and in any event there is no evidence of reliance. The second argument was that the time was insufficient for recommencement of the works because, first it was necessary to have the plans which had previously been approved, re-approved; and second because it was necessary then to arrange for contractors to come to the site and recommence the work. The statement by Mr Hodgson that he had done some work as he had mown the grass can be disregarded.
48
The original plans were approved by the original lessor, Federal Airports Corporation. This was a term of the lease and was complied with within the given time. The more difficult question is whether or not that approval continued to operate after transfer of the airport to the defendant.
49 This requires a consideration of the Airports Act 1996 and the Airports (Building Control) Regulations 1996. Division 5 of the Act relates to building control. Section 98 which is the interpretation section defines “building activities” as follows:
(a) constructing buildings or other structures;
(b) altering the structure of buildings or other structures;
(c) undertaking, constructing or altering earthworks (whether or not in relation to buildings or other structures);
(d) undertaking, constructing or altering engineering works, electrical works or hydraulic works (whether or not in relation to buildings or other structures);
(e) demolishing, destroying, dismantling or removing:
(i) buildings or other structures; or
(ii) earthworks; or
(iii) engineering works; or
(iv) electrical works; or
(v) hydraulic works;
(f) undertaking land clearing.
The work required to be done by the notice would fall within sub-clause (a).
50
Section 99 is headed “building activities not to be carried out without approval”. For the purposes of this section the plaintiff is a person other than an airport lessee company, the airport lessee company being the defendant although it is fair to say this was not established by evidence.
51
Section 99(3) is as follows:
99(3) A person other than an airportlessee company must not:
(a) carry out a building activity on an airport site; or
(b) cause or permit to be carried out on an airport site a building activity;
unless:
(c) carrying out the activity is in accordance with an approval granted under regulations made for the purposes of this Subdivision; or
(d) all of the following conditions are satisfied:
(i) the activity is of a kind declared by the regulations to be exempt from this Subdivision;
(ii) in a case where a final master plan is in force for the airport—the activity is consistent with the plan;
(iii) in a case where the building activity is an element of a major airport development—the activity is consistent with a major development plan approved under Division 4 for the development.
52
Section 100 is the regulation making power about building approvals and provides that regulations may be made making provision for grant of approvals, authorising building activities, conditions of approval and the like.
53
Part 2 of the Airport (Building Control) Regulations relates to building activity approvals. Regulation 2.02 is as follows:
2.02. (1) A person requiring a building approval must
(a) apply in writing to the airport building controller for the airport site; and
(b) pay a fee of:
(i) if the proposed building activity is the demolition of a structure - $400; or
(ii) in any other case – the amount, according to the total estimated cost of the proposed building or works, set out in Schedule 1 for the airport site.
(2) An application may be for an approval of any of the following kinds:
(a) if the proposed building activity is the construction or alteration of a building-a building permit;
(b) if the proposed building activity is the construction or alteration of works-a works permit;
(c) if the proposed building activity is the demolition, destruction, dismantling or removal of a building, or works-a demolition authorisation.
- 1.
(a) the airport-lessee company for the airport site, or a person on behalf of the airport-lessee company;
(b) the sub-lessee, or a person on behalf of the sub-lessee, of the building or of the land in or on which the building work is to be carried out.
54
This regulation would appear to envisage the airport lessee company holding the head lease and a lessee from that company holding a sub-lease. In the present case, although there is no evidence apart from evidence of the sub-lease of a different area to Mr Hodgson, it is possible that there may have been a lease which would then have been a concurrent lease from the Commonwealth to the defendant. There is no evidence of that and it cannot be assumed and it may not have been the fact so far as the premises, the subject of the lease here were concerned. Nevertheless, there is no doubt that s99(3) of the Act would apply to building works so far as it was relevant. The difficulty, however, is that regulation 2.02 provides that the applicant for building approval may be either the airport lessee company or the sub-lessee of a building or land in or on which the building work is to be carried out. On that basis the regulation may not apply in its terms to the plaintiff. However, both parties proceeded on the basis it did and I will do the same.
55
Regulations 2.19 and 2.25 are follows:
2.19. (1) A building approval has effect from the time it is granted:
(a) until the end of 3 years after the grant; or
(b) if it specifies a period shorter than 3 years-until the end of the specified period; or
(c) if it is extended under this regulation-until the end of the extended period; or
(d) if, under regulation 2.20, it is revoked before it would otherwise cease to be in force-until the time it is revoked.
- 1.
(2) On application by the person carrying out the building activity, an airport building controller may extend the period for which the approval has effect for an additional period of 1 year.
(3) The application is ineffective unless made before the approval ceases to be in force, but may be granted after the approval has ceased to be in force.
(4) Application may be made, and granted, whether or not the period during which an approval has effect has already been extended, but an approval may be extended no more than twice.
(5) A building approval does not cease to have effect for the reason only that the person to whom it was granted has given up all, or any, of its interest in the proposed building, structure or works or the land on which it is to be constructed.
(6) Building activity that is commenced to be carried out on an airport site only after an approval for the building activity has ceased to be in force is a contravention of subsection 99 (1) or (3) of the Act, as the case may be.
1. …
2.
2.25. (1) A building activity on an airport site, that, before an airport lease for the airport is granted by the Commonwealth, is the subject of a written permission, or approval, however described, granted by the FAC, has, for section 99 of the Act, approval:
(a) until the end of 3 years after the date on which the building permit was granted; or
(b) if the permit is expressed to be in force for a period shorter than 3 years-until the end of the specified period; or
(c) if the term for which the building permit is expressed to be in force has been extended, in writing, by the FAC-until the end of the earlier of:
(i) the extended period; and
(ii) 3 years after the date the extension was granted.
(2) A condition, subject to which the building permit was granted, has effect as if it were a condition imposed by the building controller for the airport, and, to the extent that it is inconsistent with a duty under regulation 2.17, prevails over the duty.
(3) If:
(a) before commencement of the Act, the FAC consented to a building activity under a lease of land that, under the Act, is on an airport site; and
(b) had not, immediately before commencement of the airport lease of the airport site, issued a permit to commence work on the building activity; and
(c) under the Airports (Transitional) Act 1996, the airport-lessee company for the airport site has acquired the rights and obligations of the FAC in relation to the person to whom the consent was given;
the airport-lessee company must not withdraw the consent for the purpose only of avoiding a contractual obligation touching on, or concerning, the lease.
(4) In sub regulation (1), "airport lease" means:
(a) an airport lease under the Airports (Transitional) Act 1996; or
(b) if an airport lease for the airport site is not granted under that Act-under the Act.
56
The reason why it is necessary to give consideration to the proper interpretation and meaning of these sections is that the plaintiff has argued one of the reasons why re-entry was not justified when it took place was that it was necessary for it to have its plans re-approved by the defendant company as the original approval had expired. The argument was that the plans for what were described as the stage one works were approved in October 1997, and for the stage two and three works in June 1998, so that the approvals expired in October 2000 and June 2001 respectively in accordance with regulation 2.19. The argument of the defendant company is that no new approval was necessary as the work had commenced within three years of the original approval and therefore, in accordance with regulation 2.25 read in conjunction with regulation 2.19(6), regulation 2.19 meant that the approval was still in force.
57
I conclude that new approval was not required for the reasons which follow. Construction of a building is a building activity under s98 of the Airports Act . Leaving aside approvals given prior to the Act coming into force, subject to any extension, the building approval has effect and lasts for a period of three years. Approval is however approval to carry out building activity. Pursuant to regulation 2.19(6) building activity which has been approved, which is commenced only after the expiration of three years or any extension given, contravenes s 99(1) or s 99(3) of the Act. The word commenced must be given its ordinary meaning and not be construed to mean continued. As there could perhaps be some doubt about this, recourse may be made to the explanatory statement to the Regulation which states:
Regulation 2.19 provides that, unless extended or revoked, a building approval has effect for 3 years or such shorter period as is specified in the building approval. This provision also makes it clear that while building activity must be commenced during the currency of a building approval, there is no requirement that it must be completed during this period.
58
Regulation 2.25 when read in accordance with such construction then reads sensibly in that the same three year period applies from the date of the approval. Section 2.19(6) then applies so that no new consent is required. The result of this is that I consider that the question of reasonable notice is not affected by any requirement and time which would be taken to obtain a new approval. I should add that it is perfectly clear the plaintiff did not ever raise as an objection, at the time notice was given, the fact that a new approval would be required and no doubt this argument has been thought of later. That perhaps does not matter as the test is an objective test, but in any event the contention is not sound.
59
I expressed a preliminary view during the hearing that the time given prior to forfeiture by re-entry was probably reasonable unless new consent was required. I have given this further consideration and I adhere to this preliminary view. Arguments about the time which the solicitors gave in their letter as their view of a reasonable time for completion of the work seem to me to be irrelevant. The breach of covenant could be remedied by proceeding with the work and bringing the works to completion, actively and continuously from the time of recommencement. I add that the notice makes it perfectly clear that so far as the lessor is concerned, there was no requirement for re-approval. An eight week period or at worst a six week period to get builders onto the site is not shown to have been unreasonable. Shortage of labour on some general basis is not in itself a sound reason for failure to recommence.
60
Mr Markovic is an experienced builder and developer and friend of Mr Hodgson. He said he was contacted by Mr Hodgson in mid October 2002 and asked to give his opinion on how long it would take to finish the building and the cost. He told Mr Hodgson it would take six to eight months to finish, but he would not be prepared to work on the building if the lease was to be terminated at the end of the year. In a second statement dated 15 July 2008, he said that in 2002 he was involved in several construction projects; that he had regular contractors he could call upon; that it took between two and three weeks to obtain quotations and on acceptance of a quotation a further one to two weeks for work to start. Taking the longer periods and allowing five weeks it was reasonable to re-enter if nothing was done for eight weeks. There was no evidence to the contrary.
61
The plaintiff company through Mr Hodgson was given by the follow up letters every opportunity to negotiate and although the defendant company did threaten to terminate after 16 October 2002, it did not do so until two weeks after that date in spite of a meeting with Mr Hodgson on 15 October 2002. Had there been a definite time stated for completion of the work the matter could have been different, but there was not.
62
The result of all of this is that so far as the validity of the s129 notice of the re-entry is concerned, the plaintiff has failed on all grounds other than the defect in signature. It is now necessary to turn to the question of damages.
63
The main claim is for the value of the lease based upon the income return over the period of the lease from the time construction was complete, which is accepted would be a period of 18 years as both parties proceeded on the basis of income commencing on 1 January 2004. It is now, I think, accepted that the cost of construction would have to be determined and I turn to that. It was agreed that the improvements would comprise approximately 800 square metres of warehouse type accommodation and 400 square metres of office space or accommodation units.
64
For the plaintiff the only evidence of construction cost was given orally by Mr Markovic. He said the total construction cost would be $500 per square metre for factory and $700 to $800 for office space. He had not considered the requirements of the particular approved plans and did not take into account the fitting out cost. His evidence was not really satisfactory as it was presented on the basis he was explaining how he came to a figure in his statement which particular piece of evidence was rejected. In any event his figures per square metre would add up to about $720,000 from which the cost of building that was then there would have to be deducted. There is no real evidence of that figure. I conclude that the evidence of Mr Markovic provided nothing more than a rough guide to building costs and cannot be relied upon.
65 Mr Meredith is a well qualified quantity surveyor called by the defendant. In a report of July 2008 he assessed the value or cost of the completed works at $107,800 and in oral evidence changed this to $115,000. He estimated that the cost to complete the work in June 2004 was $1,105,000. He said that because recommencement was required and certain remedial work was also required an additional sum of $55,000 would be involved but in cross-examination he agreed that this should be reduced to approximately $44,000. In addition to that he stated that a figure of approximately $215,000 would be required to complete works that were not shown on the approved plans but which were obviously required, such as flooring and end walls.
66
I accept the evidence of Mr Meredith. It was carefully prepared and carefully given.
67
I turn now to the claim for damage on the basis of income foregone. Again there is competing evidence, this time of accepted experts, Mr Mannix for the plaintiff and Mr Phippen for the defendant. Those experts agreed on a number of matters and both based their figures on the income from 1 January 2004 until the end of the lease. They ultimately agreed that net rent, that is gross rent less outgoings, was the relevant figure. They agreed that outgoings were usually about 18.5% of gross rent, if that included land tax. Mr Mannix said that land tax was about one third of outgoings. They agreed that opportunity cost should be calculated at 7% of construction cost and that the development finance cost should be calculated at 8%. It is accepted of course that both opportunity cost and development finance cost cannot be taken into account and it must be one or the other or a combination of both. Probably 7.5% across the whole would be reasonable.
68 Mr Mannix considered the gross rent for the premises would be $132,000 per annum which appears to be based on a figure of $110 per square metre. Mr Phippen on the other hand, considered that the gross rent would be $114,000, based on a figure of $80 per square metre for the warehouse accommodation and $125 per square metre for the office or residential accommodation. It was very difficult to understand the oral evidence of Mr Mannix as to this, as at one stage it seemed to be accepted by him that $114,000 was the appropriate figure.
69
Mr Mannix had not inspected the lease. His figures were given without reference to the use provisions of the lease. He had not looked at other leased sites at the airport to see what rents were being obtained for those sites or if he did he did not take those into account. The comparable properties which he relied upon to aid him in coming to his conclusions were away from the airport, away from airport noise, were unlikely to have had such limited use restrictions and generally were of superior construction. As I have said, Mr Mannix calculated the value of the rent over 18 years at $1,300,000. With respect to him there is considerable confusion in his reports between gross and net returns. His final figure appears to be calculated on a gross rent of $125 per square metre for 1,200 square metres. On any basis it seems that must be incorrect as net return is what matters. In addition, his valuation took no account of the cost of building the premises for lease. I accept that this was cleared up in oral evidence but nevertheless it was never properly explained.
70
Mr Phippen, on the other hand, took into account rents which were being obtained for other leased premises on the airport land, rather than from building away from that land. He considered that the restrictions on use were of some significance and he considered that the airport noise was significant in determining what rentals could be obtained. I prefer his evidence and accept it. There was discussion, but no evidence as to whether or not land tax was payable on the land the subject of the lease. In the long term it will make no difference but it was for the plaintiff to prove.
71
There has been introduced into evidence in Exhibit 9 calculations based on a rent assessment of $132,000 gross per annum as perhaps put forward by Mr Mannix and on a rent assessment of $114,000 gross per annum put forward by Mr Phippen. It does not matter which gross rent figure is accepted because either will result in an annual loss, after allowing for construction costs. Both those calculations have outgoings assessed at 18.5% per annum of gross rent. Even if that figure is reduced by one third there would still be an annual loss after allowing for the accepted opportunity cost or the accepted loan cost. On that basis the evidence is that whichever valuer is accepted if the lease remained in place there would an increasing loss to the plaintiff each year. As I accept the figures of Mr Phippen, then the loss is greater than it would be if the figure of Mr Mannix were correct and on either figure there would be a loss.
72
There has been an argument put forward on the basis of Commonwealth v Amann Aviation Pty Limited (1991) 174 CLR 64 that reliance damages should be awarded so that at least the amount expended by the plaintiff on the building up to termination (which was not established) and the amount of the rent paid up to that date should be recoverable. I do not think that argument could succeed. The evidence is that had the contract been performed those costs would not have been recovered. Neither could it be said, in my view, that there was anything other than a hope of a new lease on completely uncertain terms. The lease in Amann was for a term of three years. In the instant action the time from termination to the original expiry date was nearly 20 years. It is not easy to assume in such circumstances any percentage of chance of the lease continuing in existence till expiry or chance of extension for any further term at least without some evidence to support this. As I understand Amann for a claim of reliance damages to succeed it is necessary to show that whether or not a profit would be made the expenditure would be recovered over the term of the lease granted and any reasonable prospect of renewal. That was not established. It may be it is for the defendant to establish there would not be recovery but if so that is established. I did relist the matter for some further submissions on reliance damages. Counsel for the plaintiff suggested that it was for the defendant to establish the moneys expended would not have been recovered had the premises been put to the plaintiff’s intended use for aerial surveys and accommodation for helicopter pilots. That could not be correct. The plaintiff put nothing forward about this and did not suggest any claim for loss of profits based upon such use.
73
It follows from all this that the plaintiff has proved no damage. As a matter of law, once breach of contract is established, nominal damages should be awarded. While it seems that is not always done, if that remains the position then I would fix those damages at $20, but in any event as the plaintiff’s real claim has failed I propose to order that the plaintiff pay the defendant’s costs.
74
The defendant has made a claim for indemnity costs. Clauses 16.6 and 16.7 are as follows:
Damages for breach
16.6 The Tenant indemnifies the Corporation against any liability, loss or damage arising from, and any costs, charges and expenses incurred in connection with, an Event of Default including, without limitation, legal costs and expenses on a full indemnity basis or solicitor and own client basis, whichever is the higher.
16.7 If an Event of Default occurs and as a consequence this lease is terminated, the Tenant indemnifies the Corporation against any liability or loss arising from, and any costs, charges and expenses incurred:
(a) in connection with the Corporation re-entering the Premises; and
(b) because the Corporation will not receive the benefit of the Tenant performing its obligations under this lease from the date of that termination until the Expiry Date; and
whether before or after termination of this lease including, without limitation, liability , loss, costs, charges and expenses on account of funds borrowed, contracted for or used to fund any amount payable under any Transaction Document and including in each case, without limitation, legal costs and expenses on a full indemnity basis or solicitor and own client basis, whichever is the higher. The Corporation’s rights under this clause 16.7 are in addition to its rights under clause 16.6.(c) in connection with anything else relating to that termination including, without limitation, in the Corporation attempting to mitigate its loss
75
I am of the view and I think this is probably accepted by the defendant that the right to indemnity costs only arises in the case where the defendant succeeds. In this case I have determined that the re-entry was invalid and that it was the re-entry which amounted to a repudiation by the defendant of the lease. In those circumstances there is no right to indemnity costs.
1. Judgment for the plaintiff for $20.00
2. Plaintiff to pay defendant’s costs.
3. Exhibits may be returned.
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