Howard v Hotel Investments Pty Ltd
[1990] TASSC 113
•11 July 1990
Serial No B36/1990
List "B"
COURT: SUPREME COURT OF TASMANIA
CITATION: Howard v Hotel Investments Pty Ltd [1990] TASSC 113; B36/1990
PARTIES: HOWARD
v
HOTEL INVESTMENTS PTY LTD
FILE NO/S: 350/1990
DELIVERED ON: 11 July 1990
JUDGMENT OF: Green CJ
Judgment Number: B36/1990
Number of paragraphs: 25
Serial No B36/1990
List "B"
File No 350/1990
HOWARD & ANOR v HOTEL INVESTMENTS PTY LTD
REASONS FOR JUDGMENT GREEN CJ
11 July 1990
The plaintiffs' claim is for money payable for the sale of stock in trade and consumable stores to the defendant upon the determination of a lease of the Star and Garter Hotel by the defendant to the plaintiffs.
The defendant denies liability for part of the plaintiffs' claim and by way of counterclaim seeks payment of unpaid rent and damages for breaches of covenants in the lease. The plaintiffs deny liability on the counterclaim and in the alternative claim that the defendant is estopped from making the claims appearing in the counterclaim. I turn to the principal issues raised by the pleadings.
Plaintiffs' claim for sale of stock in trade and consumable stores
The plaintiffs agreed to sell and the defendant agreed to purchase "all the good clean and saleable stock in trade and consumable stores on hand" at the hotel on 1 November 1986 for an agreed sum or in default of agreement for an amount to be determined by a valuer. In the end it became clear that whether or not a valuation within the meaning of the agreement had been carried out was not relevant and that the only issues were whether 39 spirit measures passed under the agreement as stock in trade or consumable stores and whether some stock known as post mix should not have been included as "saleable stock" because it was old.
The schedule to one of the copies of the agreement for sale headed "plant and equipment" includes the words "39 spirit measures" against which appears a cross and in another copy of the schedule the same item has been crossed out. Mr Howard said that the cross was placed against the item after a discussion with the defendant's agent Mr Binney in which it was agreed that the spirit measures should not have been included in plant and equipment but should have been included as part of the stock. Mr Binney denied that there was any such oral agreement and said that the cross was placed against the item long after the agreement had been executed for the purpose of drawing it to the attention of his solicitors and not for the purpose of excluding it from the list of plant and equipment. Although he might have been mistaken in respect of some minor matters I prefer Mr Binney's evidence to that of Mr Howard. Mr Howard changed his evidence about the signing of the documents and the number of documents the parties had before them and was at times clearly basing his evidence on his reconstruction rather than his memory of events. Further, I accept the submission that spirit measures are not stock in trade or consumable items.
I accept the plaintiffs' submission that the only direct evidence about the post mix stock tended to show that all the post mix stock that passed from the plaintiffs to the defendant was clean and saleable and that the evidence was too tenuous to enable me to be affirmatively satisfied that the old post mix stock in the possession of the subsequent lessee comprised part of the stock sold by the plaintiffs to the defendant.
Rental
Clause 3 of the agreement for lease provided that the rental was to be reviewed each year and was thereafter to be such rental as was agreed upon by the parties or "in default of agreement" the rental determined in accordance with clause 4. Clause 4 provided that "In the event of the parties being unable to agree" the rental was to be increased by reference to the Consumer Price Index.
Although why the craftsman chose to use different expressions in clauses 3 and 4 is unclear I construe the agreement as meaning that in the event of the parties not reaching agreement the rental would be fixed by reference to the Consumer Price Index.
It is common ground that no agreement was reached in respect of the period 1 November 1984 to 31 December 1985 and that the plaintiffs did not increase their rental payments at any time up to the determination of the lease on 31 October 1986. It follows that prima facie the defendant has made out its claim unless it is estopped from asserting it.
The case for the plaintiffs in respect of the claim for rent until 31 December 1985 is that the defendant accepted rent at the original rate and "by its silence induced the plaintiffs to believe that the rental was not to be increased". The case for the plaintiffs in respect of the claim for rent for the balance of the term of the lease is the same as that relied upon in respect of the first period together with an allegation that in December 1985 in response to a letter from the defendant asking for payment of rent at a higher rate Mr Howard telephoned Mr Binney and said that the business could not support an increase in the rent to which Mr Binney replied "Don't worry about it.
I'll talk to you later". An allegation by the plaintiffs that the lease agreement had been varied was abandoned.
I am quite unpersuaded that the defendant is estopped from recovering the rent at the increased rate. The rental increase occurred automatically without any step having to be taken by the defendant. As the rental was paid by automatic bank transfer the only sense in which it could be said that the defendant had accepted the rental at the lower rate was that it delayed claiming rent at the higher rate for some time. Even if one were to accept Mr Howard's evidence as to his conversation with Mr Binney it was too vague and uncertain to constitute a promise or representation on the part of the defendant that the rent would be reduced or not increased. Further I am not satisfied that the detriment that the plaintiffs claim to have suffered namely that they now have to pay a lump sum instead of the periodical payments and that had the rent been increased they would "have made some attempt" to sell the lease is sufficient to give rise to the estoppel pleaded.
In respect of the period 1 January to 31 October 1986 the defendant relied in the alternative upon an agreement made between the parties. However it is unnecessary for me to make a finding as to whether such an agreement was entered into as the defendant's claim based upon the agreement is less than that which would have been payable by applying the Consumer Price Index formula and the defendant by its counsel has limited its claim to the lesser amount.
Damages for breaches of covenant[i]
It is common ground that the plaintiffs did not have any obligation to put the premises in repair but had an obligation to yield up the premises in good and tenantable repair fair wear and tear excepted. I make the following findings in respect of the allegations of the plaintiffs' breaches of that covenant[ii] as they have been particularised in the counterclaim.
Repair broken glass and windows
I find that windows were broken and that the plaintiffs were obliged to repair them. I reject the submission that the plaintiffs discharged their obligation by replacing the glass with wood. I find that the cost of repairs was $1065.00.
Repair fireplace
I hold that even if the plaintiffs had a duty to repair the fireplace, in the circumstances of this case the defendant suffered no loss as a result of their failure to do so.
Repair showers
Repair kitchen coolroom
Repair flat and kitchen tiles and locks
Blackberries
Fencing
Save for the kitchen locks I am satisfied that by the end of the term the repairs or work referred to in these items needed to be done but in my view the evidence is insufficient to justify a finding as to what state of repair the premises were in, in relation to these items at the commencement of the lease. There was some evidence which would be capable of supporting a finding that some of the deterioration referred to in these items had occurred after the commencement of the lease but it was not sufficiently specific to sustain a finding that any particular repair needed to be done as a result of deterioration which occurred during the term or that the deterioration was not normal wear and tear. The defendant carries the burden of proof in respect of these claims but in my view it has failed to discharge it.
Sewerage drain
I am satisfied that this damage occurred during the tenancy and that it could not be characterised as fair wear and tear. I have no reason not to find that the amount of $800 charged by the contractor was reasonable.
Kitchen Tiles
Coolroom
Exit Sign
These claims were based upon the plaintiffs' obligation under cl 5(h) of the lease to "comply with the requirements of all governmental and semi–governmental authorities having jurisdiction in the matter necessary to be complied with to enable the user of the demised premises for the purposes hereinbefore authorised". I hold that the purposes referred to in this clause were those of a licensed hotel.
Put at its highest the defendant's case was that the failure to undertake the work referred to in these claims was a breach of conditions of the licence which was capable of being the subject of a complaint which may have led to a review which may have resulted in the cancellation of the licence. I am quite unpersuaded that in those circumstances I could be satisfied that it could be said that the carrying out of this work was necessary to enable the premises to be used as a hotel. The failure to do the work did not in fact prevent the premises being used as a hotel and the defendant has not demonstrated that as a matter of law it was an inevitable or necessary consequence of that failure that the premises could no longer be used as a hotel.
The plaintiffs claim that the defendant is estopped from enforcing the covenant to repair by virtue of a telephone conversation which took place between Mr Howard and Mr Binney in October 1986. The plaintiffs concede that the estoppel could not have affected the claim in relation to the sewerage drain and I am therefore only concerned with the question of whether the defendant is estopped from pursuing the claim in relation to the broken windows.
The plaintiffs' case rests upon evidence given by Mr Howard that some 10 days before 31 October 1986 Mr Howard had refused admission to some builders who had arrived at the hotel to do some work for Mr Binney. Later that day Mr Binney telephoned Mr Howard and asked him why he wouldn't let the builders in. Mr Howard's evidence continued:
"I said, 'No, not until me lease finishes.' He said, 'Well it's getting on towards Christmas and I want to get the builders started prior to Christmas because they have their Christmas breakup and may take on another job and it will hold this job up.' And I said, 'I'm sorry, I'd have to have–sorry, I won't allow it till me lease finishes'.
. . .
He explained the difficulties it would create for him and a new lessee coming in. And I said 'Well I've got some work to be done on the hotel prior to leaving at the end of my lease.' He said 'Don't worry about that, let it go because I am going to pull the guts out of the place and if you let them in I'll forget about the work.'
There was a dispute between the parties as to what was said in that conversation but even if I were to accept Mr Howard's evidence I am not persuaded that the plaintiffs have discharged the onus of showing that what was said raised an estoppel which would prevent the defendant claiming for the cost of repairing the windows.
In the agreement dated 28/8/86 between the parties the plaintiffs covenanted "to allow the (defendant) to undertake and effect all renovations and/or alterations to the premises". It seems clear that that clause must be read down so that the plaintiffs' right to possession and their right to trade until the end of the term were preserved but it undoubtedly did confer upon the defendant the right to enter the premises and to do building work. The detriment which the plaintiffs claim to have suffered was the adverse effect which the work done by the defendant had upon their trade. However in order to raise the estoppel relied upon the plaintiffs would have to show that they suffered a reduction in trade which was caused by activities on the part of the defendant which went beyond those which the defendant would have been entitled to have undertaken under the clause in any event. Looked at in the most favourable light from the plaintiffs' point of view the evidence is quite insufficient to discharge the onus of proof resting upon the plaintiffs. The evidence might be capable of showing that the work undertaken by the defendant caused a falling off in trade but it has not been shown that that falling off in trade was caused by work done by the defendant which would not have been authorised by the clause.
Further, save for a reference which Mr Howard made to a front window and another unidentified window which had been broken the evidence does not show with any precision whether any and if so which of the repairs which are the subject of this part of the defendant's claim were in the contemplation of Mr Howard and Mr Binney during the conversation. I have reached the conclusion that the evidence is too vague to show that if an estoppel was raised that it extended to the obligation to repair the glass and the windows.
I find that the parties are entitled to the following awards:
Plaintiffs' claim
Price of stock in trade and
consumable stores set by valuation $12,097.89
Less spirit measures $ 768.00
$11,329.89
Less paid by defendant $ 7,594.69
Balance due $ 3,735.20
Defendant's counterclaim
Rental due $5,082.68
Repair glass and windows $1,065.00
Repair sewerage drain $ 800.00
$6,947.68
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