Guss v Ajax Technology Centre Pty Ltd
[1999] VSCA 160
•23 September 1999
SUPREME COURT OF VICTORIA
COURT OF APPEAL Not Restricted
No. 7688 of 1997
| ANTONY DAVID GUSS |
| Appellant |
| v |
| AJAX TECHNOLOGY CENTRE PTY. LTD. |
| Respondent |
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JUDGES: | WINNEKE, P., TADGELL and PHILLIPS, JJ.A. | |
WHERE HELD: | MELBOURNE | |
DATE OF HEARING: | 23 September 1999 | |
DATE OF JUDGMENT: | 23 September 1999 | |
MEDIA NEUTRAL CITATION: | [1999] VSCA 160 | |
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Landlord and tenant – Sub-lease – Whether sub-tenant overholding pursuant to terms of lease or in accordance with new agreement – Entitlement of tenant to damages for misrepresentation as to state of premises – No basis demonstrated for interfering with decision of trial judge.
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APPEARANCES: | Counsel | Solicitors |
For the Appellant | Mr. C.R. Best | Joe Guss |
| For the Respondent | Mr. R. Berglund | Russell Kennedy |
WINNEKE, P.:
The respondent, Ajax Technology Centre Pty. Ltd. (formerly known as Rosmear Engineering Pty. Ltd.) was at all times material the lessee of premises known as 38-50 Buckland Street, Clayton. The appellant, Antony Guss, was a sub-lessee from the respondent of those premises pursuant to a sub-lease dated 17 February 1992.
In these proceedings, conducted in the County Court in October 1997, the respondent claimed from the appellant the sum of $81,068.50, plus interest, as arrears of rental alleged to be owing pursuant to the sub-lease, and more particularly a "holding-over" by the appellant under the sub-lease from 1 March 1995 until 18 December 1995. The appellant denied liability to the respondent in respect of any sum for unpaid rental and, by a counterclaim, sought damages from the respondent for misleading and/or deceptive conduct. He further alleged that the respondent was in breach of covenants given by it for quiet enjoyment and claimed that the respondent had failed to refund a security deposit of $6,250 at the conclusion of the sub-lease.
The trial of these issues, which largely consisted of issues of fact, were conducted before the County Court over five days commencing on 3 October 1997. The amended defence and counterclaim, which was finally relied upon by the appellant, was filed and served upon the respondent on 6 October 1997 pursuant to directions of the trial judge. In accordance with reasons given by his Honour on 20 October 1997, a judgment was given in the sum of $100,477.61 (which included interest) in favour of the respondent on the claim and for $1,678 in favour of the appellant on the counterclaim. By notice dated 3 November 1997 the appellant has appealed from the whole of the judgment and orders made by the judge.
The evidence before the judge revealed that the initial period of the sub-lease was for a term slightly in excess of twelve months expiring at the end of February 1993. The sub-lease gave to the appellant an option to renew for a period of two years, an option which was in fact exercised. The renewed lease was on the same terms as the initial one. Those terms (inter alia) stipulated that the appellant was to pay rent monthly in advance. Clause 11 of the sub-lease provided that in the event of the appellant "holding-over" at the end of the option period the appellant was to occupy the premises as a monthly tenant at a monthly rental equivalent to an aliquot portion of the annual rent and such other moneys payable by the appellant at the expiration of the renewed lease. If moneys were then owing the appellant was obliged, if required by the respondent, to pay interest on the sum in arrears.
In fact the appellant overheld the premises after the conclusion of the renewed sub-lease and did so until shortly before the end of 1995. During this period he paid no rental or interest thereon.
The respondent claimed unpaid rent and interest on the basis that the appellant was over-holding pursuant to the terms of Clause 11 of the sub-lease. It therefore claimed that the appellant owed to it $81,068.50, which was the amount owed pursuant to the sub-lease, together with interest. The appellant disputed this claim on the basis that he was not overholding pursuant to the terms of the sub-lease but rather pursuant to an oral agreement which he claimed to have made in a telephone conversation with the secretary of the respondent in the course of which, as he claimed, an agreement was made that he would continue to occupy the premises for the ensuing 10 months "at a reduced or reasonable rental to be agreed between the parties". This agreement, he claimed, was an informal agreement which "displaced" any obligation which he had under Clause 11 of the sub-lease. On the basis of this agreement, he asserted that he did not owe the $81,000 (approximately) claimed but owed in fact an amount equivalent to about $35,000 which, he said, was a "reasonable" rental.
In his defence and counterclaim the appellant made further allegations. He claimed:
(a) that the respondent was, in any event, estopped from contending that he was over-holding pursuant to the terms of Clause 11 of the sub-lease.
(b) that the respondent had breached covenants of the sub-lease by failing to permit him to peaceably hold and enjoy the premises and by failing to keep the premises in a sound structural state. In support of this claim he contended that throughout the period of his occupation the airconditioning and the heating in both the office and showroom area and in the factory were not fully operative. He also contended that the roof leaked. He said that the loss caused by these breaches amounted to a sum of nearly $60,000, being the difference (at a rate of $1300 per month) between the true rental value of the premises throughout his occupation and the amount fixed by the sub-lease.
(c) the appellant also claimed that the respondent through its agent had engaged in misleading and deceptive conduct contrary to the Fair Trading Act 1985 by falsely representing to him before he entered into occupation pursuant to the sub-lease that the premises were in "as new condition"; that the airconditioning and heating in the premises were working effectively and that the premises were suitable for use as a factory for the manufacture of outdoor furniture and as a showroom. These representations he said were false and that as a result of them he was induced to execute the sub-lease. He claimed, as damages, the sum previously referred to of approximately $60,000 equating to, as he said, a reduction in the rental value of the premises at the rate of $1,300 per month throughout the period of occupation.
Having listened to the evidence called by both parties over a number of days, the learned judge made the following findings:
(a) Firstly, he found that the respondent's agent had represented the premises to the appellant as being in "as new condition" and, further, that the heating and airconditioning were effective and operating. In fact, upon entry, neither the heating nor the airconditioning was working in the factory area, nor was the airconditioning working in the office and showroom. The heating in the upstairs office was limited and there was no heating downstairs. In the winter of 1992, the roof leaked causing some inconvenience in the office.
(b) His Honour found that the "roof leaks" were repaired "early in the January" and were "no more than a minor inconvenience".
(c) That the absence or malfunction of airconditioning or heating had "little or no impact" on the use and occupation of the premises by the appellant or his company "Tropitone". Those factors were "not a commercial consideration" and "the failure to function does not entitle (the appellant) to a 'valid claim or defence'". His Honour noted that, with full knowledge of the state of these facilities, Tropitone had entered into a further lease of the premises at the end of the holding- over period for three-and-a-quarter years with a three-year option at an increased rental.
(d) Next, that the absence of the airconditioning in the office between February of 1992 and July of 1992 and the absence of heating downstairs until 1994 was "not significant". The appellant could have effected repairs to the heating at small cost at any time and charged it to the respondent. When the appellant exercised his option to renew the lease in February of 1993 no mention was made of defects in these facilities and because the appellant "had full knowledge of the condition of the premises at that time, any claim for damages arising out of the building defects ends at the date of renewal".
(e) That, although the appellant contended that, at the expiry of the renewed sub-lease in February of 1995, he had agreed with the respondent to continue in occupation until the head-lease had expired in December 1995 at a reduced rental to be agreed, his Honour found that no such agreement had been made. He also found that at most there was "an agreement to negotiate". His Honour further found that whatever conversation there was between the appellant and the respondent by way of a telephone conversation in February 1995, it was not intended by either party to operate as a legally binding agreement. Indeed the appellant could have been under no misconception that the respondent was looking for a monthly rental of $8,106 after he received the respondent's letter to that effect on 29 May 1995.
(f) There was no basis for the appellant's claim that the respondent was estopped from relying upon the "over-holding clause" in the sub-lease. There was no conduct on the part of respondent which caused the appellant to act to his detriment and there was no detriment suffered by the appellant nor had the respondent acted in any "unconscionable way" towards the appellant.
(g) That, in any event and on the best view of the evidence, a "reasonable rental" for the premises during the over-holding period was approximately $8,100 or the amount called for pursuant to Clause 11. In that respect his Honour preferred the evidence of the respondent's valuer, Mr Murray, to that of the valuers called by the appellant, Messrs Kalb and Guyett.
(h) That there was no basis for the appellant's claim that the respondent had acted in breach of its covenant to permit "peaceable enjoyment of the premises" or its covenant "to keep the premises in sound structural repair". His Honour noted that appellant's counsel did not pursue those claims in his final address.
(i) In respect of the appellant's claim for damages for misleading and deceptive conduct in representing the premises to be "as new" and the "heating and airconditioning to be in working order", his Honour found that the appellant had no claim for damages in this respect after February of 1993 at which time he had negotiated the renewal of the sub-lease with full awareness of the condition of the premises. However, his Honour accepted that damages should be allowed in this respect for the first period of the sub-lease and, accordingly, he allowed $1678 based on the evidence of the respondent's valuer, which he accepted.
The grounds of appeal set out in the appellant's notice of 3 November 1997 do not raise any substantive issues of law but rather amount to a traversal of his Honour's findings of fact, asserting that the judge should have found the facts in accordance with the contentions which the appellant had made to him.
Upon the hearing of this appeal, appellant's counsel, whom I note was not counsel who appeared below, pursued these grounds by submitting that his Honour was, firstly, bound to find on the evidence that an agreement had been made in early 1995 that the appellant was to remain in occupation of the premises at a "reduced rental" to be agreed and not pursuant to the "over-holding clause" in the sub-lease. It was further submitted that it was not open to the judge to find that, in any event, the reasonable market rental during the over-holding period was $8,100 or thereabouts per month.
In my opinion there is no substance in this submission. It was based upon evidence given by the appellant that in or about February of 1995 and shortly before the renewed sub-lease was to expire, there had been a telephone conversation between the appellant and one Norman, the secretary of the respondent, in which the appellant had said that he "may remain" in the premises for the short time available before the head-lease expired "if we get a reduction in the rental for the period". He claimed that Norman said that "he would make enquiries and get back to him".
Norman gave evidence to the effect that he had told the appellant that he "could not say what we could achieve in the way of an agreement" and that he would talk to an agent "to find out what the current value was". He denied that there was any agreement of the type contended for by the appellant. In the state of this evidence no sound basis in my view has been shown for attacking his Honour's conclusion that no binding agreement was proven by the evidence or for attacking his finding that it disclosed nothing more than "an agreement to negotiate" which did not have the effect of "displacing" Clause 11 of the sub-lease. The evidence disclosed in my view nothing more than that Norman was prepared to make enquiries to see whether the respondent would be prepared to accommodate the appellant's desire to achieve a "reduced rent", presumably below that which Clause 11 called for. In the event the respondent continued to claim the rent which was owing in accordance with Clause 11 of the sub-lease. There was nothing in the evidence which bound his Honour, in my view, to find that there was anything in the nature of a contractual agreement ousting the provisions of Clause 11 of the sub-lease. Indeed, the appellant pleaded in his amended defence and counterclaim that the arrangement amounted to "an agreement to agree", his Honour was entitled to so treat it and to reject it as having any binding force.
The conclusion which I have expressed avoids any need to address a further argument put by the appellant to this Court that his Honour was in error in failing to accept the evidence of valuers called by him as to the "reasonable rental" for the premises during the "over-holding period" or that he was bound to reject the evidence of the respondent's valuer in this regard. It will be necessary to return to his Honour's treatment of the valuers in another respect hereafter.
In the event that the Court rejected the appellant's argument that a binding agreement was made in February of 1995 ousting the provisions of Clause 11 of the sub-lease and creating a new agreement between the parties, the appellant contended that the events which occurred in February and thereafter estopped the respondent from contending that rent was payable in accordance with Clause 11. The trial judge rejected this argument and in my view was correct to do so. It was submitted that the detriment suffered by the appellant was the fact that he remained in occupation of the premises and did so upon the faith of representations by the respondent that it would negotiate a reduced rental. It suffices to say that no basis is to be found in the evidence for such a contention because there was no obligation upon the appellant to remain in occupation.
The appellant next submitted that his Honour was in error in concluding that the representations made by or on behalf of the respondent in early 1992 gave no right in the appellant to damages after February of 1993 when he exercised his option to renew the sub-lease. I do not agree with the appellant's contention in this regard. The essence of this claim is an allegation of misleading or deceptive conduct pursuant to the Fair TradingAct. It was not alleged that the appellant was induced to exercise his option on the faith of the representations pleaded. The only claim made by the appellant was that he had been induced to enter the sub-lease in 1992 on the faith of the truth of those representations. In a claim under the Fair Trading Act a plaintiff is required to strictly plead and prove that he has suffered particular damage as a consequence of proved representations. See Victorian Pethard Industries Pty. Ltd. v. State Electricity Commission, Court of Appeal, unreported, 1 November 1996. In this case there was no allegation, as I have said, to suggest that the representations made in early 1992 were still operating to induce the exercise of the option in 1993. Thus his Honour was correct to conclude that the so-called misleading conduct pleaded had no causal nexus which operated to induce such exercise of option. It seemed to me that, at the end of the day, appellant's counsel was contending that the inducement to exercise the option was an implied, but unpleaded, representation to the effect that the respondent was to put the airconditioning and heating into proper repair or, alternatively, that the influence of the original representations was still operating to cause relevant damage. Such a proposition was neither pleaded nor put to the judge and I agree with the respondent's counsel that, if it had been, the respondent might have been able to call evidence to traverse it.
It was further put by the appellant that his Honour was wrong, in assessing damages for the misleading conduct constituted by the false representations, to rely upon the evidence of Mr Murray, the respondent's valuer, in preference to the evidence of Messrs Guyett and Kalb, the valuers called by the appellant. It was said that there was much about the evidence of the latter valuers, including their local knowledge and expertise, which should have driven his Honour to act on their evidence. Furthermore, it was contended that his Honour had failed to disclose his reasons as to why he preferred the evidence of Murray to that of Guyett and Kalb and that his failure to do so amounted to an appealable error. Counsel referred to Sun Alliance Insurance Co. v. Massoud (1989) V.R. At p.80.
Once again I am unable to accept this submission. In this regard it must be remembered, as respondent's counsel pointed out to this Court, that the valuers were called only to assist his Honour to form a view as to the proper assessment of damages. In any event, it is apparent from the judgment that his Honour did give reasons why he preferred Mr Murray's opinion to those given by the appellant's valuers, which were adequate to the purpose for which the evidence was led. Those reasons, in my view, are sufficient to enable us to ascertain why it was that his Honour was satisfied that the opinion of Murray was to be preferred for that purpose. Murray's evidence was not, as it seems to me, internally inconsistent in the way in which it is now contended. In an action of this sort, in which the judge is being asked to assess the impact on rental value of premises of the absence of heating and cooling for a limited period, it is unrealistic to expect and to require him to give "chapter and verse" reasons for his preferment of one valuer's view over another, provided that his preference is not demonstrably perverse. Having reviewed evidence of the valuers, I am not prepared to conclude that his Honour, who had the advantage of seeing and hearing them, was bound to prefer the evidence of Guyett and Kalb over that of Murray on this issue. Nor, in my view, is there anything to persuade me that the reason which his Honour gave for accepting Murray and rejecting the other two valuers amounted to a failure to give adequate or proper reasons consistent with the task which confronted him.
It was finally contended that his Honour was in error in concluding that there had been no relevant breach, sounding in damages, of the covenant for quiet enjoyment and maintaining the premises in sound structural repair. As his Honour noted, this argument was not pressed by appellant's counsel before him in final addresses and I think, in this Court, it was ultimately conceded that it could not be made out.
It remains to note that the amount which is owing by way of the security deposit is, pursuant to the agreement, to be deducted from the amount of damages which his Honour has found in favour of the respondent.
For those reasons I would dismiss this appeal.
TADGELL, J.A.:
I could discern but two fundamental issues raised by this appeal. The first concerned the legal consequences of the physical shortcomings of the subject premises. The second concerned the legal basis of the over-holding.
I agree, for the reasons assigned by the President, that we are bound to decide each issue unfavourably to the appellant. In my judgment the appeal is entirely hopeless and should be dismissed.
PHILLIPS, J.A.:
I agree also. Mr Best, who appeared on behalf of the appellant, presented a thorough and well-researched argument in which he put all that could be said on behalf of the appellant but, despite his valiant efforts, the appeal must fail for the reasons given by the President.
WINNEKE, P.:
The formal orders of the court will be that the appeal is dismissed with costs.
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