Konstantopoulos v R and M Beechey Carriers Pty Ltd
[2011] NSWCA 388
•15 December 2011
Court of Appeal
Supreme Court
New South Wales
Medium Neutral Citation: Konstantopoulos v R & M Beechey Carriers Pty Ltd [2011] NSWCA 388 Hearing dates: 20 September 2011 Decision date: 15 December 2011 Before: Basten JA at 1;
Young JA at 74;
Handley AJA at 75Decision: Appeal dismissed with costs.
[Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.]
Catchwords: CONTRACT - construction and interpretation of commercial lease - scope of the obligation of the lessees - no contractual obligation with respect to use of the common property
PRACTICE AND PROCEDURE - procedural fairness - alleged failure of primary judge to deal with claims - adequacy of reasons - claims expressly rejected - insufficient evidence to support the claims
TORTS - negligence - duty of care - lessee's liability - no evidence to support breach of duty of care - use of premises within permitted use specified in leaseLegislation Cited: Conveyancing Act 1919 (NSW), s 133A Category: Principal judgment Parties: Steve Konstantopoulos - First Appellant
Rosa Konstantopoulos - Second Appellant
R & M Beechey Carriers Pty Ltd - First Respondent
Ratcliffe & Polly Pty Ltd - Second Respondent
Matthew Beechey - Third Respondent
Benjamin Ratcliffe - Fourth RespondentRepresentation: Counsel:
Mr F C Corsaro SC with Mr D Mahendra - Appellants
Steven Naris & Co - Appellants
Mr P S Braham SC with Mr G B Carolan - First and Third Respondents
Mr M S White - Second and Fourth Respondents
Solicitors:
Frank Legal - First and Third Respondents
Diamond Conway Lawyers - Second and Fourth Respondents
File Number(s): CA 2008/289517 Decision under appeal
- Jurisdiction:
- 9111
- Citation:
- Konstantopoulos v R & M Beechey Carriers Pty Ltd [2010] NSWSC 753
- Date of Decision:
- 2010-07-09 00:00:00
- Before:
- Simpson J
- File Number(s):
- 2008/283086; 2008/289517
HEADNOTE
[This headnote is not to be read as part of the judgment]
On 23 November 2001 the corporate respondents, R & M Beechey Carriers Pty Ltd and Ratcliffe & Polly Pty Ltd, entered into a lease with the then owners of commercial premises in Fairfield. The demised premises were located at the northern corner of a commercial complex and consisted of a warehouse, known as 'Building F', which was surrounded by a concrete hardstand. The lease contained within it a licence providing the lessees with exclusive use of the hardstand as a transport depot, on which they would receive and unload shipping containers. There was a chain wire fence, which ran approximately along the eastern boundary of the area occupied by the lessees, between the hardstand and the driveway that provided entry into the complex and was common property. There was however doubt as to the precise location of the boundary and some of the shipping containers were stored on the driveway side of the fence.
In May 2003, some 18 months into the lease period, the complex was purchased from the original lessor by the appellants, Steve and Rosa Konstantopoulos, who later initiated proceedings seeking damages in the order of $900,000 primarily for repairs to the hardstand and common property. The evidence established that the lessees caused severe damage to the hardstand which was not capable of withstanding the forces applied to it in the transporting, loading and unloading of heavy containers by large forklifts. The primary questions in the proceedings were directed to determining which parties bore responsibility for making good the damage to the hardstand and common area. Although there was a claim in tort for negligence, the focus of the proceedings was a claim for breach of contract. The issues focused on whether the use made of the premises exceeded that permitted under the lease and licence and whether the damage fell within an exclusion for fair wear and tear, a term which was expressly defined in the lease.
At trial Simpson J gave judgment in favour of the lessees on each of the primary issues. After dismissing these claims, her Honour noted that there remained outstanding a number of ancillary claims, but held that the evidence in respect of these items was inadequate to sustain the claims and they were also rejected. It is from that decision that Steve and Rosa Konstantopoulos appealed to this Court.
The issues for determination on appeal were whether the primary judge:
(i) erred in dismissing the claim in respect to liability for damage to the hardstand;
(ii) erred in dismissing the claim in respect to liability for damage to the common area; and
(iii) denied the appellants procedural fairness in failing to deal with the additional minor claims
The Court held (per Basten JA, Young JA and Handley AJA agreeing) dismissing the appeal:
In relation to (i)
1. The primary claim of the appellants was that the hardstand suffered extensive damage only when the lessees purchased a larger forklift than that used at the commencement of the lease. They argued that the lease envisaged use of a forklift that could enter the building. However, the lease did not confine the business of the lessees to the size it was at the time of the commencement of the lease nor limit the size of the forklift that could be used to undertake the permitted activity: [10] - [12] and [18].
2. The evidence did not establish that the damage flowed from improper operation of the forklift on the hardstand; the damage to the hardstand was not a result of a lack of reasonable care, either in the proper maintenance or negligent operation of the machinery: [39] - [43] and [45] - [46].
3. The damage to the hardstand fell within the scope of "reasonable wear and tear", defined in the licence, for which the lessees were not responsible: [50] - [51].
In relation to (ii)
4. The lease and licence identified the scope of the permitted use of the premises and concrete hardstand. The lease and licence did not extend to the common area: [50] - [51].
5. The appellants did not establish that there was significant activity by the forklifts on the common area sufficient to demonstrate unreasonable use of that area and breach of duty of care: [62] - [62].
In relation to (iii)
6. The evidence adduced to support the additional claims was inadequate. These claims were addressed by the primary Judge, in order to reject them; at which time she also explained why she did so: [65] - [71].
Judgment
BASTEN JA : On 23 November 2001 the corporate respondents ("the lessees") entered into a lease with the then owner of commercial premises at 25 Fairfield Street, Fairfield in south-western Sydney. The lease permitted the lessees to use the premises for a "[t]ransport depot, receiving and unloading shipping containers". The lease expired on 22 November 2004, but the lessees, or at least one of them, remained on the premises until July 2005, pursuant to a holding-over arrangement.
The demised premises consisted of a warehouse, known as 'Building F'; it was surrounded by a concrete area known as the hardstand. Together they formed part of a complex of some six commercial buildings positioned three on either side of a driveway providing access from Fairfield Street, which was the southern boundary of the complex. As the hardstand was approached from Fairfield Street, it was at the rear (or northern end) of the complex and on the left (west) of the driveway. By turning left at the northern boundary of the property and proceeding behind the hardstand and Building F, a further driveway connected the property to Donald Street, which was perpendicular to Fairfield Street and to the west of the complex. Donald Street was not able to carry large container carriers, known as B-doubles, and in practice trucks carrying containers did not use Donald Street, but turned around, using the hardstand and the driveway and left the premises by the road from which they had entered, namely Fairfield Street.
There was a chain wire fence which ran approximately along the eastern boundary of the area occupied by the lessees, between the hardstand and the driveway. However, there was doubt as to the precise location of the boundary and, when the business expanded, the lessees stored some containers on the driveway side of the fence. There was also a fence on the western boundary of the area occupied by the lessees, but its state and location remained unclear in the evidence.
The evidence established beyond doubt that the lessees caused severe damage to the hardstand, which was not capable of withstanding the forces applied to it in the transporting and loading and unloading of heavy containers by large forklifts. The driveway adjacent to the hardstand was also damaged, though the cause was less clear. The primary questions in the proceedings were which parties bore responsibility for making good the damaged areas, it being necessary to address separately the hardstand and common areas.
In May 2003, some 18 months into the lease period, the whole of the complex was purchased from the original lessor by the appellants, Steve and Rosa Konstantopoulos. The proceedings were initiated by them seeking damages in the order of $900,000, primarily for repairs to the hardstand and common property, with a number of small amounts in relation to damage to the wire fence, a roller door on the warehouse and two small garden areas. Although there was a claim in tort for negligence, the focus of the proceedings was a claim for breach of contract, being the lease.
In respect of the major claims, the issues raised were twofold; namely, whether the use made by the lessees of the premises exceeded that permitted under the lease and whether the damage fell within an exclusion for fair wear and tear, a term which was expansively defined in the lease.
On each issue, the primary judge, Simpson J, found for the lessees and accordingly gave judgment in their favour and, consequentially, in favour of the individual respondents who were guarantors of the obligations of the lessees under the lease: Konstantopoulos v R & M Beechey Carriers Pty Ltd [2010] NSWSC 753.
After dismissing the primary claims, her Honour noted that there remained outstanding a number of "ancillary claims". In respect of one, entitled "unpaid rent", it appeared that a claim of some $5,636 was made in respect of the period from 12 May 2005 to 20 June 2005. She stated that no submissions were directed to that claim: at [89]. That issue forms no part of the appeal. There remained the claims in respect of "gardens, fence and roller door". She stated that the evidence in respect of those items was inadequate to sustain the claims and they were rejected: at [93]. In the notice of appeal, it was said that this part of the case "was not dealt with" by the primary judge and that her Honour denied the appellants procedural fairness.
It is convenient to deal with the issues in the following order:
(a) liability for damage to hardstand;
(b) liability for damage to common area, and
(c) additional minor claims.
Each of the challenges should be rejected and the appeal dismissed. Certain other issues, including the respondents' contention in respect of the operation of s 133A of the Conveyancing Act 1919 (NSW), limiting the damages recoverable for breach of covenant, need not be addressed.
Liability for damage to hardstand
(a) provisions of lease
The reference schedule to the lease described the demised premises as "Building F - 25 Fairfield Street, Fairfield". The lease contained within it a licence providing the lessees with exclusive use of the hardstand, for the same permitted use set out in the reference schedule to the lease. The rent included both the demised premises and the licence: lease, cl 8.2. It was not submitted that the terms of the licence varied in any material respect from the terms of the lease. However, neither the lease nor the licence included the driveway adjacent to the hardstand.
The lease incorporated, with minor adjustments, lease memorandum E378569. Both the lease and the lease memorandum contained provisions relevant to maintenance and repair. Those will be identified in considering the second issue below. Clause 7 of the lease, which is relevant to both the permitted use and the question of reasonable wear and tear, read as follows:
"7.1 The Lessor acknowledges and accepts that the Lessee's permitted use of the Premises includes the regular passing and repassing of the Land by the Lessee's trucks and the loading and unloading of shipping containers therefrom and the use of a large container forklift for moving containers from outside to undercover and vice versa.
7.2 The Lessor accepts that any damage requiring repair arising from the Lessee's use of the concrete hardstand area under the licence referred to in Clause 8 for the purposes aforesaid will fall within the 'reasonable wear and tear' exception referred to in Clause 5.1. The Lessor covenants with the Lessee that the Lessor will, promptly and as soon as practicable after the Lessee shall notify the Lessor of the need to repair the hardstand area affected by fair wear and tear, cause the hardstand area affected by fair wear and tear to be repaired.
7.3 Subject to Clause 7.2, the Lessee shall maintain and repair the concrete hardstand area having regard to the state of repair at the Commencement Date."
The reference in cl 7.2 to "clause 5.1" is to the general clause so numbered in the lease memorandum, referring to the lessee's obligation to maintain and repair. That clause, so far as relevant provided:
"5.1 The Lessee will during the whole of the term and otherwise so long as the Lessee may remain in possession or occupation when, where and so often as need shall be maintain, replace, repair and keep the whole of the Demised Premises in good and substantial repair working order and condition .... This covenant shall not impose on the Lessee any obligation in respect of any structural maintenance replacement or repair except when the same is rendered necessary by any act, neglect, default, omission or misconduct on the part of the Lessee its employee, agent, contractor, licensee or invitee and/or by the Lessee's use or occupancy of the Demised Premises. The Lessee acknowledges that the Demised Premises were in good and substantial, repair, order and condition at the commencement of the Term."
The appellants raised two arguments in respect of these provisions. The first was that the reference in cl 7.1 to a "large container forklift" was constrained by the purpose of its use, identified as "moving containers from outside to undercover and vice versa". Accordingly, it was submitted, the lease did not in terms permit the use of a forklift which was too large to move containers into the building.
On one view of the evidence, the damage to the hardstand was either the result of, or exacerbated by, the replacement in March 2004 of a Luxford forklift originally used by the lessees, with a significantly larger Mitsubishi forklift. Although it was agreed that the Mitsubishi was larger and heavier than the Luxford, the evidence did not establish which machine imposed a greater load on the concrete hardstand.
The evidence did establish an approximate doubling of the volume of the lessees' business in the course of the lease, but that was not itself said to involve a breach of the lease or licence, although it must have had an effect on the loads required to be borne by the hardstand.
The second limb to the appellants' argument was that the damage was caused by "dropping" containers which, regardless of the size of the forklift permitted under the lease, did not constitute reasonable use of the hardstand.
(b) limitation on size of forklift
Clause 7.1 identified the permitted use of the premises as involving three elements. First, there was the passing and repassing by trucks; secondly, the loading and unloading of shipping containers therefrom, and, thirdly, the use of a large container forklift to move containers into and out of the building. Nowhere in the lease documentation was there any express limit on the construction or capacity of the permitted forklift. True it is that part of the permitted use involved moving of containers from the outside area (presumably the hardstand) to the "undercover" area (presumably inside the building). It was envisaged that that activity would involve the use of a large container forklift. It might be inferred that such a forklift would be capable of moving into the building and out again. However, that is not the only inference available: there may have been other means of moving containers into the building and out again, if indeed that were to occur. In any event, that movement was distinct from the second of the permitted uses, namely the loading and unloading of containers from trucks. The mechanism by which that exercise was to take place was not specified. No doubt it was to be inferred that a forklift would be used for that purpose, but there is nothing in the text to suggest that only a forklift capable of entering the building was permitted to carry out the loading and unloading exercise.
The trial judge noted that the reason for the purchase of the larger forklift was to permit quicker turnaround of the trucks as the business expanded in size. Her Honour concluded at [81]:
"There is nothing in the lease that confines Beechey's business to the size it was at the time of the commencement of the lease, or inhibits the use of forklifts of increased size to accommodate an expanding business. There is nothing in the lease documents that limits the number of movements that Beechey could make or the size of the forklift that it could use."
That conclusion should be accepted and the appellants' challenge to it must fail.
Although not relied upon by the respondents, there is an assumption underlying the appellants case in respect of this issue, namely that the original (Luxford forklift), which was being used when the appellants bought the property and about which there appears to be no complaint, was itself capable of entering the building. No evidence appears to have been directed to this point and in opening, counsel for the appellants (then the plaintiffs) acknowledged that the original forklift probably could not have entered the building: Tcpt, 15/02/10, pp 3-4. It is clear that the focus of the argument and the evidence was not so much on the height of the forklift, but on its manner of operation.
(c) "dropping" containers
There was evidence from Mr Bennett (an electro-hydraulic engineer) that impact damage to the concrete was caused by containers being dropped on the concrete. Such conduct, it was submitted, was not within the scope of reasonable use of the land and the damage resulting did not, therefore, fall within even an expanded scope of fair wear and tear. There were three limbs to this argument: it was necessary to establish - first, what was meant by "dropping"; secondly, that the activity was unreasonable and therefore outside the range of activities permitted under the lease and, thirdly, that the damage to the hardstand was, at least in part, the result of such unreasonable activity.
The appellants asserted that the "dropping" of containers was relied on at trial as a cause of the damage to the hardstand, but was not addressed as a separate issue. The respondents submitted that no such separate claim was maintained. This dispute may involve a matter of emphasis: the allegation as pleaded was that the Mitsubishi, having an overhead spreader, rather than tines to be inserted below the container, was operated so as to allow "the containers to drop to the ground in an uncontrolled fashion and cause impact damage to the premises": further amended statement of claim, paragraph 22(g) and (h). Although that complaint received only brief attention in the submissions for the appellants at the end of the trial, it was addressed by both groups of respondents. There is no doubt that evidence on both sides addressed this allegation. Accordingly, it can properly be raised on appeal. Because the issue was not addressed in her Honour's reasons, the Court will need to make its own assessment of the challenge. (Neither party objected to this course.)
Before turning to the evidence, it is important to understand the way in which the case was opened for the appellants at trial. In her oral opening, counsel identified the case almost entirely in terms of damage done by the large Mitsubishi forklift obtained by the respondents in March 2004. It was the size and weight of the forklift which was identified as critical to the destruction of the hardstand and the common area. Counsel also handed up a document entitled "Summary of Facts and Submissions of Plaintiff," dated 15 February 2010, being the date on which the trial commenced. The issue of "dropping" was adverted to only briefly, in a discussion of the need for fair wear and tear to be interpreted as referrable to the "reasonable" use of the premises by the tenant and the ordinary operation of natural forces. After referring to the acquisition of the larger Mitsubishi forklift in March 2004, the opening submission continued (p 10):
"The lifting mechanism of the Mitsubishi forklift was such that the containers were dropped onto the hardstand or common area rather than be lowered on tines and the tines then being slid out of the container as the Luxford lift had done. Edward Bennett, the plaintiffs' expert says that the damage to the new area of concrete hardstand appears to have been caused by impact damage rather than excess load damage."
It will be necessary to deal with the evidence of Mr Bennett shortly. It is sufficient for present purposes to note that his reference to the "new area of concrete hardstand" was to an area which was repaired by the appellants prior to the acquisition of the Mitsubishi forklift and not seriously damaged in the subsequent 15 months of usage. There was no claim that the respondents were liable for that expense of approximately $100,000.
The main direct evidence of what was identified as "impact damage" appeared in an affidavit of the first respondent, Mr Steve Konstantopoulos, sworn on 21 November 2007. This was not his first affidavit. An earlier affidavit, sworn two years after the respondents ceased occupation of the premises, made no reference to "dropping" containers. At that stage his concern was with the size of the Mitsubishi forklift and the increase in the number of containers being transferred in a day. Mr Konstantopoulos' November affidavit responded to an affidavit of Mr Ronald Beechey sworn on 4 October 2007 which referred, at paragraph 22, to the uncontentious fact that Mr Konstantopoulos had arranged for a portion of the hardstand to be repaired in stages, such action being taken "as a result of complaints being made by me and my son Matthew". In response, Mr Konstantopoulos stated:
"Throughout the period of the lease, I observed that damage was caused by the forklifts dropping the containers on the concrete. When this was done, I heard a loud 'boom' when the containers hit the ground, and I observed that there was damage on the concrete where the containers hit the ground. I said to the drivers on many occasions words to the effect:
'Don't do that, you are damaging the concrete. Place them gently on the ground so they won't damage the concrete.'
The drivers said words to the effect: 'We are very busy. I have to move these containers out as soon as I can.'
I did observe there were large numbers of containers coming in and out of the yard, as many as fifty a day."
To the extent that this constituted a reply to Mr Beechey's statement as to complaints, it must have covered the period during which the Luxford forklift was operating: the reference to "forklifts" (in the plural) would at least support the proposition that it was not limited to the later stages when the Mitsubishi was in operation.
Mr Konstantopoulos' evidence was the subject of challenge in cross-examination. The critical passage was in the following terms (Tcpt, 16/02/10, p 60(45)-63(50)):
"Q. Part of what you say is that damage was caused by the Mitsubishi forklift dropping containers, is that right?
A. It was problem because oil leak everywhere in the property.
Q. Answer me a question at a time. You say that the Mitsubishi container lifter dropped containers?
A. Yeah, was dropping containers.
Q. How often did you see that[?]
A. I saw few times sparking coming out from the container.
Q. You saw a few times?
A. Sparking - dropping in the containers.
Q. You saw sparks coming off the concrete when the steel hit the concrete?
A. Yes.
Q. The containers weren't dropped, were they?
A. They were dropped.
Q. They were lowered to the ground using--
A. And probably - that - there was some problem with the forklift because they were losing oil everywhere and it was oil everywhere in the yard - and it was dropping from so far - I'm not sure how far but it was dropped from - but the container was dropped so hard.
Q. Where did that happen?
A. Everywhere.
Q. Where exactly?
A. Common area and hardstand.
Q. And how often did you see that happen?
A. Each time I was looking - we were doing something - I saw few times - I wasn't looking at the forklift every day.
Q. Try and be precise?
A. Few times.
Q. How many is a few times?
A. Probably ten, fifteen times.
Q. Where did that happen?
A. I told you, common and hardstand.
Q. Where exactly?
A. Everywhere in the yard.
Q. Everywhere in the yard. Where exactly did you see it happen 10 or 15 times?
A. I can't remember exactly the - you know - the part of the - or the yard - but it was - I saw sparkling coming out from the forklift.
Q. You saw it drop how far?
A. I can't recall - I just saw - the noise from the truck - and I was looking round and I saw sparkling coming out.
Q. Where did you see the sparks come from?
A. Just from the - down from the yard - the container went down on the steel.
Q. When the container struck the cement a spark was emitted?
A. Yeah.
Q. Are you saying the container separated from the forklift and dropped in free fall?
A. I just heard the noise and looked around and there was sparkling coming out.
Q. You didn't see it drop?
A. I saw it dropping, yeah, of course.
Q. So it separated from the forklift?
A. I saw it coming down - because it was getting - that part from the thing - the forklift - it couldn't hold it - it was going down very hard.
Q. You say it couldn't hold it. What happened?
A. I think it was something wrong - Mr Beechey told me it was something wrong with the forklift.
Q. What did he say was wrong with it?
A. He was fixing it all the time there - the mechanic was there every second day fixing it.
Q. Are you sure about that?
A. Yeah.
Q. What did you say to Mr Beechey - firstly, which Mr Beechey did you speak to?
A. Young Mr Beechey.
Q. Mr Matthew Beechey?
A. Yes.
Q. What did you say to him?
A. He's told me he's got problems with the forklift.
Q. What problems did he say he had?
A. Something wrong - he was bringing big truck with mechanic on it - he was fixing it every second day.
Q. Every second day?
A. Yeah.
Q. None of this is recorded in your affidavit though?
A. I mean that's what's happen.
Q. Is there some reason why you didn't put it in your affidavit?
A. Well, I probably never think about it.
Q. You have read the report of Mr Bennett, haven't you?
A. Yes.
Q. And he suggests that the concrete was damaged through impact?
A. Yeah, that is I think is the truth.
Q. Did you ever speak to Mr Bennett about this?
A. No, no, because I knew what's - no - nobody discuss with Mr Bennett.
Q. There's only one reference in your statement or your affidavit to this happening?
A. Well, I probably never think about - I mean, really, - but that's exactly what happen to the truck.
Q. So when exactly did this happen?
A. As soon as they bought the Mitsubishi.
...
Q. Can I suggest to you that that is all complete fabrication?
A. No, it's not.
Q. The forklift was never broken in the way that you suggested, was it?
A. No, it's many times broken.
Q. And you didn't ever see containers dropping, did you?
A. I saw - of course.
Q. You saw them separated from the forklift?
A. No, if it comes - I don't know how high it was - it was dropping it hard.
Q. You say the forklift lowered it on to the concrete?
A. Lowered it slowly and sometimes was dropping, boom, and it was very noisy."
Mr Konstantopoulos was also challenged as to the damage done by the alleged dropping of the containers: at Tcpt, 64-65. He described the damage as "marks where the forklift - not damage but it's got white - because the time when it hit on the corner - you can see little damage there": p 64(15). However, apart from one photograph (taken three years after the respondents ceased to occupy the premises) exhibited to Mr Bennett's expert report, and Mr Konstantopoulos' evidence itself, there was no material before the Court illustrating the damage allegedly so caused.
There is little doubt that, by 2004, Mr Konstantopoulos was aware that the use of the hardstand for the leased purposes was causing damage, which he agreed to repair. The fact that large areas of the hardstand had been broken up by July 2005 demonstrated that it lacked the strength to bear the use to which it was put. So much was undisputed. The issue in the case was whether the damage was caused by usage not permitted by the lease, or by negligent misuse in the course of activities which were otherwise permissible. Mr Konstantopoulos' evidence appeared to suggest that containers were allowed to land (using a neutral term) heavily on the hardstand, for one of two reasons. The first was that the forklift (or at least the Mitsubishi) had mechanical problems with its hydraulic lifting system which prevented proper control of the lowering of the container as it was unloaded. Secondly, it was to be inferred that the speed at which the forklift operator was required to work precluded the exercise of reasonable care in handling the containers. Each thesis had its forensic difficulties.
First, the suggestion that the Mitsubishi forklift suffered from mechanical problems was not supported by the appellants' hydraulic and mechanical expert, Mr Duncan. He reviewed records provided in respect of the Mitsubishi forklift between 8 April 2004 and 24 June 2005 and found evidence that a "twist lock pin and anchor nut" had failed in late March 2005. He noted that, two months later, all the twist locks were replaced. He concluded (Report, 20 November 2008):
"7.7 Failure of the twist locks will most likely result in a container being dropped. Failure of a single twist lock would result in 1 corner of the container being dropped, and substantial torsional loads being applied to the spreader-bar attachment, and other twist locks.
...
8.3 Maintenance records indicate that the twist locks on the forklift were heavily worn when it was first purchased by R & M Beechey. Further, the records indicate at least one incidence [sic] of failure of the twist locks. A likely consequence of the twist lock failing in service is a dropped shipping container, resulting in very high impact loading to the concrete."
Mr Duncan disavowed any expertise to comment on concrete damage: Report, par 6.2.
The appellants also relied upon evidence from Mr Bennett, a civil and structural engineer. In his first report of 29 June 2007, Mr Bennett concluded:
"It is my opinion that there is now conclusive evidence derived from field testing and computer analyses of six (6) random locations within the 'Slab Areas' to state that the reinforced/unreinforced concrete slabs have been destroyed by the use of laden 30 tonne & 50 tonne forklifts by manoeuvring, loading and unloading containers on this site."
That evidence was entirely uncontroversial. In a later affidavit of 11 April 2008, Mr Bennett added a further conclusion at paragraph 14:
"At no time when I compiled my first report was I aware that the second and larger forklift was a container lifter that grabbed the containers from the top rather than lifting on tines from the bottom of the container. I have now seen a photograph of the larger container ... and assuming that this was the method used to transport containers from about early 2004 it is my opinion that the machine would have caused the impact damage that I observed on my first site inspection in about April [2007] and that the weight of the machine would have only been a contributing cause after the slab had been weakened by impact."
Again, there is no hint of mechanical failure or of improper operating practices.
Mr Duncan gave joint evidence with Dr Robert Casey, a mechanical engineer called by the respondents. Their joint report concluded that the Mitsubishi forklift contained a protective valve which "would offer some protection against an uncontrolled dropping of the load in the event of a blown hydraulic hose": Report, p 2. They also noted their joint view that "there is no evidence to suggest that uncontrolled dropping of the load due to hydraulic failures or twist lock failures occurred on a frequent basis". As counsel for the appellants put to Mr Duncan in the course of his oral evidence, it was "common ground that the fastest lowering of a container by this machine is 0.28 metres per second": Tcpt, p 341(50). He stated that "containers lowering from that speed are capable of exerting quite a high load on the concrete and the empirical evidence that I have seen would suggest that it has caused some damage, but the extent of the damage and the more direct causes of it I don't think I'm qualified to comment on": Tcpt, p 342(10). He agreed that the forklift was capable of lowering containers at less than the speed noted above.
The respondents called evidence from Mr Shane Williamson who had been employed as a storeman and forklift driver by the first respondent since 1989. He described one of his main responsibilities as loading and unloading shipping containers from trucks and trailers in the warehouse yard. He described the operation of both the Luxford forklift and the Mitsubishi FD 400 forklift, which he still operated at the time of his affidavit, namely 9 October 2007. He was cross-examined by counsel for the appellants, but at no stage was it suggested to him that the Mitsubishi was out of operation for repairs or otherwise had significant mechanical problems. He was not asked if he had ever "dropped" a container, nor whether there were occasions when containers landed on the ground more heavily than on other occasions. He was not asked if he had witnessed marks being caused on the concrete as a result of containers being lowered and hitting it, at a slight angle to the horizontal. He did deny evidence in his affidavit of spinning the tyres on the forklift, which he described as physically impossible due to the very low gear ratios: paragraph 23.
Accordingly to Mr Williamson, Mr Matthew Beechey was responsible for servicing the forklifts. In examination-in-chief he was asked whether the Mitsubishi suffered from "rapid or catastrophic oil leaks": Tcpt, 18/02/10, p 253(45). He stated that the Luxford did, but the Mitsubishi did not. His explanation of oil losses in respect of the hydraulic system of the Luxford related to the disengagement of the hydraulic leads from the overhead spreader in order to use the tines.
Contrary to the evidence of Mr Williamson, who considered himself solely responsible for driving the forklifts, Mr Matthew Beechey gave evidence that he also operated the forklift "on occasions" (Tcpt, p 286(30)), although how often was not explored. He was asked (Tcpt, p 255(1)):
"Q. Did you, when you were driving the Mitsubishi forklift drop a container, in the sense that it detached from the spreader and fell on the concrete?
A. No."
He was asked a number of questions as to the speed at which the containers were lowered, and how long it took to lower them, but the evidence was inconclusive: Tcpt, pp 286-287. He was also asked if a container, when unevenly loaded, would land on one side before the other: pp 287-288. He agreed: p 288(5). He was also asked if the container made a noise when it hit the ground. He responded:
"The container hitting the ground doesn't make the noise. The spreader hitting the top of the container makes a noise."
In his report of 29 June 2007, Mr Bennett noted that he had inspected the broken concrete slab and stated:
"It is my understanding that the damage was caused over a period of time in 2004, by the use of large forklifts loading and unloading containers on of [sic] off the slab areas. The damage is believed to have been caused by imposed impact (dynamic) forces."
Mr Bennett drilled and removed four core samples from the slab of the hardstand and two from the common area. The length of the cores (and thus the depth of the concrete) of the hardstand was 190mm, 210mm, 250mm and 200mm. The cores for the common area were 235mm and 200mm respectively. He recorded an average length (indicating depth) of 214mm. Based on that information, a report was prepared by Inducta Engineering (supervised by Mr Jankulovski), as to the likely consequences of the use of the forklifts. Inducta concluded:
"It is highly probable that the 30 tonne mobile crane laden with a 20 foot container (max weight of 24 tonne) would produce some permanent cracks to the slab, as indicated by the final stress ratio of 1.3. Due to the repetitive nature of the loading, the damage to the slab would be visible cracks, spalling and breaking up of the surface. We believe that this damage would be of a much lesser degree than the current damage shown in the photos.
The large 50 tonne unladen mobile crane is expected to cause some permanent damage to the slab as the stress ratio is close to that of a laden smaller 30 tonne mobile crane.
A 50 tonne mobile crane laden with one 40 foot container (max weight of 32 tonne) would unquestionably cause major permanent and irreversible damage to the concrete slab. This damage would consist of larger cracks, spalling and breaking up of the surface with permanent settlements of up to 10mm to 20mm."
These figures were found to have underestimated the likely damage. Inducta worked on a slab thickness of 250mm: that thickness reflected one core sample taken by Mr Bennett, but was well above the average of 214mm and did not give separate consideration of areas where the thickness was 200mm or less. The likelihood of severe 'permanent' damage was thus significantly underestimated. This material may have provided some support to a case based upon impermissible use of the Mitsubishi forklift; however, it provided no assistance if it were necessary to show that the damage was causally related to defective machinery or negligent operation. The evidence demonstrated that the kind of damage which did occur could readily be explained by the ordinary operation of the larger forklift.
Although Mr Bennett, in later evidence, sought to maintain that his reference to "imposed impact (dynamic) forces" had been intended to cover "dropping" containers, it is clear from the discussion in that report that that was not the case. Her Honour was critical of Mr Bennett's evidence: at [38]-[42]. Her conclusion, that she did not find his reports "very useful" and that Mr Bennett appeared to regard himself as an advocate for the appellants, is fully supported by reading the documentary evidence.
Accepting Mr Jankulovski's report at face value (without the increased effects required by reference to thinner concrete than he assumed), her Honour concluded at [36]:
"Use of the Mitsubishi, unladen, would be expected to cause some permanent damage, and when laden with a 40 foot container, would 'unquestionably' cause major permanent and irreversible damage to the concrete slab."
Acceptance of that evidence was inconsistent with the appellants' contention that the damage flowed from improper operations of the forklift on the hardstand. If, pursuant to the terms of the lease, use of the Mitsubishi were permissible, their claim in relation to the hardstand must fail.
Were it necessary for this Court to make a finding, I would not be satisfied that the appellants established on the balance of probabilities lack of reasonable care, either in the proper maintenance of the machinery (namely the forklifts), or negligent operation by lowering containers at an uncontrolled speed. That conclusion is reinforced by the evidence of Mr Brian Merchant, an hydraulic mechanic called by the respondents, who had inspected the Mitsubishi forklift and expressed opinions inconsistent with the description of its use given by Mr Konstantopoulos.
Liability for damage to common area
The contractual arrangement between the appellants and the respondents involved a lease of the demised premises with an exclusive licence in respect of the hardstand. In addition, there was a non-exclusive entitlement to use the common area, being the driveway from Fairfield Street to the back of the complex, which ran alongside the respondents' hardstand and provided access to it. Clause 7.1 of the lease involved acknowledgment and acceptance by the lessor that the lessees' use of the premises included "the regular passing and re-passing of the Land by the Lessee's trucks". The term "Land" was defined in the lease memorandum, cl 1.1, to mean the land described in item 1 of the reference schedule, which was to be found in the lease. Her Honour concluded that it meant the whole of the complex owned by the appellants on Fairfield Street and thus included the driveway.
The further amended statement of claim asserted that the respondents used the Mitsubishi forklift "to move the containers around the premises and thereafter further damage was caused to the hardstand area and to the common property": paragraph 14. It was further alleged that they used the hardstand area as storage for containers and "commenced to unload containers from delivery trucks in the common areas outside the hardstand area": paragraph 18. The common area was damaged by the unloading of containers: paragraph 19. In the particulars of damage, the cost of repair of the hardstand and the common area was each said to be in an amount of $434,200.
The claim thus revealed by the pleading was limited to the use of the common area by the forklifts, loading and unloading trucks, and, it would appear, primarily the use of the Mitsubishi for that purpose. There was a secondary aspect to the claim, namely that part of the common area was used for the storage of containers. That gave rise to a dispute on the evidence as to where the hardstand (and thus area subject to the licence) ended and the common area started. There was a galvanised wire fence running along the general boundary between the hardstand and the common area, but Mr Beechey gave evidence that it did not form the boundary and that, in his view, the hardstand extended beyond the fence, thus justifying the storage of containers on either side of the fence. Her Honour did not resolve that issue, but its relevance appears to be limited in that the storage of containers on the common area was not shown to have caused damage; rather the storage of containers outside the fence was evidence that the forklifts operated outside the fence and of necessity on the common area.
Her Honour rejected the claim in respect of the common area on two broad bases. First, she construed the lease provisions to permit the scope of "reasonable wear and tear" in cl 7.2 to extend to the common area. Secondly, she held that the respondents were not liable because it had not been shown that they were "responsible, or solely or principally responsible, for that damage": at [87].
The construction argument should not be accepted. Clause 7.1 of the lease identified the scope of the permitted use of "the premises": that is the premises the subject of the lease. Clause 7.2 related specifically to the lessee's use of the "concrete hardstand area" under the licence in cl 8. It dealt with what may fall within "reasonable wear and tear" of the hardstand area: it did not refer to the demised premises, nor to the common area. The reference to cl 5.1 of the lease memorandum, engaged the obligation of the lessee to maintain and keep in good repair "the whole of the Demised Premises": the common area was not part of the demised premises. Indeed, the lessee had no specific obligation in respect of the common area. If the use of the common area for loading and unloading trucks was not covered by the lease, it may have involved a trespass to property of the appellants. However, the case was not pleaded on that basis and, had it been, it would have been necessary to address factual issues as to the extent of the use of the common area in this manner, the knowledge of the appellants as to its use and the steps taken to prevent such use.
The second basis of her Honour's rejection of the claim is available, and depends upon the use demonstrated by the evidence. However, it is important that it be assessed in relation to the pleaded cause of action. The appellants' case must be reliant upon a cause of action in negligence, although the pleading and particulars are obscure as to the precise scope of the duty and of its breach. The potentially relevant particulars (found in par 22) were as follows:
"a. Using the forklifts outside the premises on the common areas outside the hardstand area to unload containers from delivery trucks.
b. Using a 65 tonne Mitsubishi forklift with top loading mechanism on the hardstand area and on the common property when it was known to the plaintiff [sic] that the 30 tonne Luxor [sic] forklift had caused damage to the hardstand.
c. Failing to use reasonable care in loading and unloading containers from delivery trucks by using a forklift that was oversized and unnecessary for the purpose."
In written submissions, the appellants called in aid cl 18.5 of the lease memorandum which stated:
" Common Areas
18.5 The Lessee shall not use or permit to be used the common area or any part thereof for any business or commercial purpose or display or advertisement of any goods or services except with the consent in writing of the Body Corporate and in accordance with any conditions imposed by the Body Corporate."
That reliance should be rejected. As the respondents noted, part 18 of the lease memorandum related to demised premises forming part of a strata scheme. There was no evidence that the building occupied by the respondents was part of a strata scheme, nor that there was any common area controlled by a body corporate.
Although senior counsel for the appellants had some difficulty in articulating the case in negligence, the duty must be expressed in terms of a failure to take reasonable care not to damage the appellants' land. That such damage might occur through the use of the forklifts (or at least the use of the Mitsubishi forklift) was something that might reasonably have been inferred from the damage done to the hardstand, together with the reasonable expectation that the driveway was no stronger than the hardstand. Alternatively, once it became apparent that damage was being caused to the driveway, it was arguable that the respondents should have desisted from further use of that area by the forklifts.
The difficulties with this part of the appellants' case arose partly from the failure to plead with clarity a cause of action in negligence, trespass or perhaps more appropriately nuisance; it also arose from a lack of evidence as to the cause of the damage to the driveway. Thus, the driveway was used by trucks containing one or two containers, which were required to turn on both the common area and the hardstand. To the extent that damage was caused by the trucks, no complaint was made. However, it then became necessary to determine to what extent the damage was caused by the forklifts as opposed to the trucks.
One aspect of the appellants' evidence which was deficient was the comparison between the strain put on the concrete area (both hardstand and common area) by the smaller Luxford forklift and that resulting from use of the larger Mitsubishi forklift. Each was capable of manoeuvring a 40 foot container; while the Mitsubishi was itself heavier, the comparative impact on the pavement would depend upon the distribution of the load and hence upon the number of axles and tyres and the size of the tyres on each. There was no information of a reliable kind in relation to the Luxford. One reason given by Mr Beechey for obtaining the Mitsubishi was that the containers were tending to get heavier, and the Mitsubishi was a stronger vehicle. However, if the containers were increasing in weight, presumably the load placed on the pavement by trucks was also increasing. What the appellants needed to demonstrate to succeed in a case in negligence was that the respondents ought reasonably to have been aware that the damage being caused to the common area resulted not from the use of the area by trucks, but by the respective forklifts.
The appellants complained that the primary judge had not dealt in this regard with the affidavit of Mr John Zeng of 14 May 2008. Mr Zeng's company was a tenant of another building in the complex during the relevant period. He recalled movement of trucks and semi-trailers delivering shipping containers. He stated:
"I also remember observing a large forklift used by Beecheys in the common area, outside the fence of Building 'F'. I can recall the wheels of the forklift spinning and making holes in the concrete and digging it up when the forklift was carrying more than one container. There was a lot of smoke while the wheels were spinning."
Mr Zeng also said in his affidavit that prior to Beechey moving in, there was "no damage" in the common area. In cross-examination, he was shown photographs of the area prior to occupation by the respondents and agreed there were cracks. The thrust of his oral evidence appeared to be not that there was no damage prior to the respondents moving in, but that there was significantly more damage thereafter. He also abandoned his description of the spinning wheels occurring when the forklift was carrying more than one container (which it could not do if the containers were full). He was sure, however, that he had seen the wheels spinning: Tcpt, 18/02/10, p 236. The lack of reliability of his affidavit, the lack of precision as to when and, if on more than one occasion, how often, he witnessed such events and the question of the cause of the damage noted above, deprived this evidence of significant weight.
In addition to the use of the common area by trucks delivering containers and collecting containers, there was evidence of some use of the common area by forklifts when unloading containers and delivering them to other occupiers of premises within the complex, including to a company owned by the appellants (or at least Mr Konstantopoulos), known as H & O Products Pty Ltd. Further, to the extent that the fence precluded use of part of the hardstand for storage of containers it was no doubt ancillary to the use of the hardstand that the forklifts used the common area for placing and removing containers from that part of the hardstand which was between the common area and the fence.
In order to establish what might have been found to be unreasonable use of the common area by the forklifts, one would have expected cross-examination of either Matthew Beechey, or his father, Ronald Beechey as to their knowledge and understanding of the damage occurring on the common area during their occupation of the premises. No questions were asked of either Ronald or Matthew Beechey in that regard.
Based on the evidence to which the Court was taken on appeal, the appellants did not establish error on the part of the primary judge in not being satisfied that there was significant activity by the forklifts on the common area, sufficient to demonstrate unreasonable use of that area and breach of a duty of care. Had the pleadings focused squarely on the claim in negligence with respect to the common area, the evidence might have been of greater assistance to the appellants. Error has not been demonstrated and the ground of challenge to this aspect of the claim must be rejected.
Additional minor claims
In the further amended statement of claim filed on 27 March 2009, almost four years after the respondents had vacated the premises, there appeared a claim for $7,400 in the following particulars:
Breaking doors - back door $2,500
Landscaped garden $4,000
Chain wire fence $ 900.
On 13 May 2008 Mr Steve Konstantopoulos swore an affidavit to which he annexed a page from the cash book of S & R Konstantopolous for $6,120, said by him to have been the cost of repair of approximately 110 metres of fencing along the western boundary of the leased premises. He also stated that the roller door had been broken and that he had repaired it "so that it is sealed" (no cost being specified) and asserted that the cost of a replacement door was $3,500, although no source was provided for that figure, nor was the reason for replacement identified. He also noted that a garden area on the western side of the building, on the common property, which had existed when he purchased the property, had been destroyed and that a further garden area on the hardstand on the southern side of the building had also been destroyed. He gave no evidence as to the reinstatement of the first garden, but said that he had partly reinstated the latter, though no cost was put on that activity.
The trial judge dealt briefly with these claims, noting that the evidence of the asserted damage was inadequate to support them: at [93]. The notice of appeal asserted that her Honour had "not dealt with" these claims and had thereby denied the appellants "procedural fairness". The written submissions added a further ground, namely a failure to give proper reasons.
Neither of the pleaded grounds can be maintained in their terms: her Honour did address the claims, in order to reject them; she also explained, perhaps peremptorily, why she did so. Even if the amount of the additional items was, as asserted in oral submissions at trial, $15,624 (Tcpt, 25/02/10, p 405(25)), the claims warranted little attention in the context of an overall claim in the order of $1 million. In any event, further inquiry demonstrates that her Honour's conclusion was correct.
In response to Mr Konstantopoulos' assertions, Mr Ronald Beechey agreed there was a garden bed on the western side of the building, but said that it had no plants growing in it during the term of the lease. With respect to the other bed, he also agreed that it existed, but was not maintained as a garden: affidavit, 27 August 2008, pars 7 and 8. It appears that neither deponent was cross-examined in relation to these matters. Without resolving this conflict, there being no evidence as to the cost of "restoration" of the beds, her Honour was correct to reject the claim.
In respect of the roller door, Mr Ronald Beechey gave evidence that there were two doors on the eastern side of the building, both of which were operating when the premises were vacated: paragraph 6. He further said that no-one had raised the need for repairs to the door, although he had agreed to pay the cost of replacing the electric cover on the switchbox on the south eastern corner of the boundary. He said he had not been asked to pay for the repairs to the cover and that was clearly not the claim which Mr Konstantopoulos was asserting. Again, neither deponent was cross-examined in respect of his affidavit evidence in this regard. Her Honour was correct to find that Mr Konstantopoulos' bare statement that there was a need to replace a roller door, without explanation as to the nature of the malfunction or damage, and without evidence as to when that occurred, was insufficient to establish the claim.
The claim in relation to the fencing was more precise, although the only evidence of payment was an item in the appellants' "cash disbursements journal" showing that on 5 October 2006 an amount of $6,120 was paid to "M Souliars fencing". Nevertheless, Mr Konstantopoulos stated in his affidavit that it was for the repair of 110 metres of chain wire fencing on the western side of the leased premises. Again, there was no cross-examination on this issue.
The basis relied on by Mr Konstantopoulos for alleging that the lessees were responsible for damage to the fencing was a statement by Mr Ron Beechey, during a post-vacation damage inspection to the effect, "we did the damage, we will replace it". It could be inferred from Mr Konstantopoulos' affidavit that such a statement related to the damage to fencing on both the eastern and the western side of the building. Mr Beechey agreed that he had said those words, but only in relation to the eastern fence and the gatepost on the western exit, which were restored. In relation to the fence on the western side of the property, Mr Beechey said that the fence "adjacent to the exit gate was always in disrepair and was only about 8- 9 metres in length". He further said that not all of the southern and western boundary was fenced "at the level of the hardstand".
In the absence of cross-examination of either party in respect of these issues, the Court is entitled to accept Mr Beechey's evidence as to the extent to which he had accepted responsibility for the fencing, as it was consistent with the work that was concededly undertaken by the respondents. Absent the concession, there was no evidence as to the state of the western fence line when the respondents first occupied the premises. Mr Konstantopoulos gave no evidence in that regard. Accordingly, the Court could not properly have been satisfied that the claim had been made out.
The appeal in respect of the additional items must be rejected.
Conclusion
Each of the challenges raised by the appellants having been rejected, the appeal must be dismissed. The appellants must pay the respondents' costs of the proceedings in this Court.
YOUNG JA : I agree with Basten JA.
HANDLEY AJA : I agree with Basten JA.
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Decision last updated: 15 December 2011
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