McKendrick & Co Pty Ltd v Fush

SUPREME COURT OF VICTORIA
COMMON LAW DIVISION	Not Restricted

No. 7158 of 1999

McKENDRICK & CO. PTY LTD (ACN 004 198 663)	Plaintiff
v
FRANK FUSH, MAUREEN FRANCES FUSH, COLLIE & TIERNEY (MILDURA) PTY LTD (ACN 005 110 118)	Defendants

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JUDGE:	Ashley J
WHERE HELD:	Melbourne
DATES OF HEARING:	26, 27, 28 February, 1, 2, 5, 6 and 7 March 2001
DATE OF JUDGMENT:	18 April 2001
CASE MAY BE CITED AS:	McKendrick v Fush and Ors
MEDIUM NEUTRAL CITATION:	[2001] VSC 95

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Lease – enforceability – s. 54(2), Property Law Act 1958 – part performance – estoppel - anticipatory breach – term going to root of contract – repudiation – acceptance - damages – conduct in breach of Part V of Trade Practices Act 1974 and Part II of Fair Trading Act 1985 – negligence – causation – damages.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr N. Jones	McKean & Park
For the Defendants	Mr G. Lucas	Connery & Partners

HIS HONOUR:

Overview and basic chronology

The plaintiff, McKendrick & Co Pty Ltd, is a long established wholesale and retail timber and hardware merchant in Mildura. For a period up to and including August 1999 its managing director (he was also a full-time employee) was Mr David McKendrick (“Mr McKendrick”). The business had been established by his grandfather. His father, Mr Ross McKendrick, had been the company’s previous managing director. Mr Ross McKendrick retained a practical involvement in the company’s affairs at pertinent times.

The first and second defendants, Frank and Maureen Fush, were at relevant times the registered proprietors of premises at the corner of Etiwanda Avenue and Hynes Court, Mildura (“Etiwanda Avenue”). The premises comprised offices, an area suitable for a showroom, a warehouse and an open yard. The major part of the site consisted of the open yard which had gates onto both Etiwanda Avenue and Hynes Court.

The third defendant, Collie & Tierney (Mildura) Pty Ltd, was at relevant times a real estate agency operating in Mildura. One of its principals was Mr Frank Tierney. Another shareholder and director, and apparently the head of its commercial property section, was Mr Steve Garsed. An employee in the commercial property section was Mr Nathan Murphy. The last-mentioned gentleman was relatively inexperienced in the leasing of commercial property at pertinent times.

In early 1999 the plaintiff carried on its business from two Mildura premises - premises which it owned in Langtree Avenue (“Langtree Avenue”); and premises in Ninth Street, which it held under a licence agreement (“Ninth Street”).

Langtree Avenue was used as a retail hardware outlet. Ninth Street was used for preparation and storage of timber and for sale of timber and builders’ hardware.

The records of the company were computerised. The main computer was situate at Langtree Avenue. There was also an office at Ninth Street. It was computer-linked with Langtree Avenue. The evidence of Messrs David and Ross McKendrick well-satisfied me that it was necessary to have an office at Ninth Street; and that it was necessary to have an office at any premises at which some part of the business was carried on. I reject the defendants’ contention that the timber and builders’ hardware business could have been adequately managed from the Langtree premises.

Langtree Avenue is a major street in Mildura. Mr McKendrick gave evidence, which I accept, that to conduct the retail hardware business at that premises produced an insufficient return on capital.

The Ninth Street premises were some five acres in size, though not all of that area was needed by the plaintiff. The premises had originally been leased by the plaintiff in 1993 for a five year term. What happened at the end of that term partly emerged in the evidence of Mr McKendrick and was partly disclosed by the terms of a licence agreement signed by the parties and dated 5 March 1999. In 1998 the plaintiff apparently exercised an option to take a further five year term. There was some argument concerning the new lease. In the end the plaintiff abandoned any rights that it had under either lease and a licence agreement was struck by which the plaintiff became licensee for a period ending on 30 July 1999.

Argument concerning the 1998 lease and the 1999 licence occurred against a background of other disputes between the plaintiff and its landlord. According to Mr Kendrick the disputes concerned the landlord’s refusal to attend to various defects in the state of the premises. The rights and wrongs of those disputes need not be examined. They partly explain, however, the landlord’s firm position in June and July 1999 that the plaintiff must vacate by 30 July. That position is further explained by the circumstance that, having unsuccessfully attempted to sell the property in early 1999, the owners had entered into a contract of sale by which vacant possession was to be given on Monday 2 August 1999.

The plaintiff - by which I mean, and I will not keep repeating it, Mr David McKendrick with advice at times from his father – considered even before early 1999 that there were multiple reasons to consolidate the plaintiff’s business at a single site on which a business specific premises could be erected. Langtree Avenue was not earning a sufficient return on capital invested, Ninth Street was unsatisfactory for a number of reasons, and there would be cost savings by having the entire business under one roof.

In the latter part of 1998 the Deakin Group, builders and developers operating in the Mildura area, proposed a scheme to the plaintiff whose essence was that the Group would purchase a site and build thereon premises fitted for the plaintiff’s needs, the plaintiff then taking a lease of the premises. The particular proposal did not proceed; but conceptually it fitted with the plaintiff’s plans, plans which had their origin in the early 1990s.

Aljor Constructions was a developer operating in the Mildura area. It was the plaintiff’s largest client. Mr Larry Dimasi was a director of and a leading figure in that organisation.

Following upon discussions between the parties in 1998, in late February 1999 Aljor made a purchase, build and lease proposal to the plaintiff. The proposal was to purchase land in Seventh Street, build a business specific premises thereon, and lease it to the plaintiff.

The land the subject of this proposed development was situate next door to a property on which an auto wrecker’s business was conducted. Mr McKendrick was not anxious to antagonise the plaintiff’s largest customer, but he was adamant that he would not have the plaintiff’s business conducted next door to such a business and he told Mr Dimasi so.

Mr McKendrick was aware that Aljor had an option to purchase the property which was the proposed site of the development; and that the option must be exercised, if at all, within a certain time. He knew also that Mr Dimasi was not accepting of the plaintiff’s refusal to conduct its business next door to the auto wrecking business, considering that there were ways of screening off one from the other.

Against this background, in March 1999 the plaintiff’s then solicitor on Mr McKendrick’s instructions communicated with Aljor and its solicitors in ambiguous terms. A lease prepared by Aljor’s solicitors which anticipated the plaintiff’s acceptance of the Seventh Street proposal was not executed by the plaintiff. But in a letter dated 31 March 1999 sent to Aljor’s solicitors the plaintiff’s then solicitor raised issues concerning the detail of the lease rather than making it clear that the plaintiff would not lease the particular property (though see paragraph 15).

Coming now to July 1999, the position was that Aljor had not then acquired any property in Seventh Street, but that it still held an option over a five acre site. Mr Dimasi had proposed to Mr McKendrick that the property be subdivided, with premises for the plaintiff being constructed on the lot distant from the auto wreckers. Mr McKendrick had neither accepted nor rejected that proposal. He believed, he said, that there was plenty of time to settle upon a suitable arrangement by reason of what the plaintiff asserts was the lease of, or an agreement to lease, Etiwanda Avenue. He accepted, he told me, a statement made by Mr Dimasi sometime earlier in 1999 that the plaintiff could have occupancy of a purpose built premises “in some capacity” within 10 weeks of Aljor commencing construction; and a more recent intimation that, the plaintiff moving into such premises, Aljor would pay out the balance of a 12 months’ lease taken by the plaintiff of Etiwanda Avenue.

I should refer to a letter written by Mr Joseph Watson (the plaintiff’s then solicitor) to Aljor’s solicitors and dated 21 July 1999. The plaintiff, in substance, then declined to sign an agreement to lease. There was said to be an unresolved issue concerning building design. The letter said nothing concerning the property on which the building was to be constructed. It did make it clear that the parties would remain in discussion.

It was put to and denied by Mr McKendrick that the plaintiff took a five year lease of premises at Byrne Court, Mildura (“Byrne Court”) in late July 1999 simply to enable him to tell Mr Dimasi that the plaintiff could not proceed with the Seventh Street proposal. I accept Mr McKendrick’s denial. Later in these reasons I shall explain why I do so.

In the event, by the latter part of July 1999 the Aljor proposal was on hold - at least temporarily. But that was unrelated to any default of the defendants. It certainly did not occur in consequence of the plaintiff being obliged to take up the lease of Byrne Court.

I must go back. In May 1999 the plaintiff gave the third defendant an exclusive authority to auction Langtree Avenue on 18 June 1999. $1.7M was set as the provisional reserve price. The contract of sale gave the plaintiff a right to take a lease of the property for up to six months. That provision was consistent with the unresolved state of the Aljor project.

The property was put up for auction. It failed to sell.

Somewhat earlier in June 1999 the owners of the Ninth Street premises had made it very clear, in answer to requests by Mr McKendrick for an extension of the licence agreement, that there would be no extension[1]. Mr McKendrick had been seeking an extension of three months to give time for the Aljor proposal to crystallise into premises.
[1]See Exhibit K.

The position taken by the owners in their letter of 8 June was restated by their solicitors by letter dated 9 July.

It was, in the event, clear by early June that after 30 July the plaintiff would require a premises on which to carry on its Ninth Street business. The business being carried on at Langtree Avenue, on the other hand, could continue until the Aljor proposal crystallised.

Mr McKendrick approached several estate agents in connection with a Ninth Street replacement. One was a Mr Roccisano. He offered the plaintiff an old fruit shed in Eighth Street. I am satisfied, for reasons described by Mr McKendrick and his father, that those premises was not at all suitable, but that they would have sufficed at a pinch. An attraction was that the property was available for short term lease.

In the event, the plaintiff decided to lease the Eighth Street property. But the situation changed when Mr McKendrick learned of and inspected Etiwanda Avenue. The change in intent occurred on or about 9 July after inspection of Etiwanda Avenue and discussion concerning that property with representatives of the third defendant. On 9 July Mr McKendrick faxed the third defendant confirming, subject to final discussion, an oral arrangement to enter into a lease of Etiwanda Avenue. On the same day Mr McKendrick senior unsuccessfully attempted to have withdrawn from the Sunraysia Daily an advertisement placed by Roccisano Real Estate concerning a sale of surplus stock, the advertisement reading in part: “McKendricks are moving to a temporary address of 57-61 Eighth Street while their new Seventh Street premises are constructed.”

That takes me to the plaintiff’s contact generally with the third defendant concerning a premises for short term lease. Mr McKendrick spoke with Mr Tierney in June 1999. He told Mr Tierney that the plaintiff needed a premises with storage space, cupboard storage space and other facilities. He explained that 30 July “was D Day”. Mr Tierney, he said, knew the type of business that the plaintiff conducted at Ninth Street, and thus knew what the plaintiff’s needs at a temporary premises would be.

According to Mr McKendrick, Mr Tierney produced a list of properties. More than half were unsuitable. Byrne Court was on the list. He and his father inspected it. That apparently occurred on 8 June, and the inspection was in company with Mr Garsed. Messrs McKendrick considered the property to be unsuitable. Nonetheless there was toing and froing over several weeks. It culminated in a meeting on 22 June which was attended by Mr McKendrick, Mr Garsed and Mr Haynes, the last–mentioned being the owner’s representative. The plaintiff sought but could not get a short term lease. The owner required, preferably, a five year lease; or alternatively a three year lease. The proposed rental was very considerable in either case. The premises were also partly occupied; and the plaintiff could not have vacant possession at the outset of any lease. Negotiations broke down.

I turn to Etiwanda Avenue. Mr Fush advised the third defendant of its availability for lease in late June. He apparently produced to Mr Garsed some correspondence that had recently passed between his solicitors and Telstra’s agent in connection with Telstra’s then occupation of the property.

In the event, Mr Garsed spoke to Mr Murphy, it would seem in early July, informing him of the availability of the property in the course of discussion about the plaintiff’s outstanding requirement for premises. That led on to the third defendant contacting Mr McKendrick, and to his inspecting Etiwanda Avenue.

Mr McKendrick gave evidence that on initial inspection he observed that Telstra was in occupation. Covered shedding and offices were in use, but not much gear was in the open yard. He said that he told Mr Murphy that a short term lease was necessary because of the intended shift to Seventh Street. Mr Murphy said that he would have to check with the owners; but that he did not believe a short term lease would be a problem. I accept Mr McKendrick’s evidence about these matters.

Mr McKendrick told me that, given full occupancy of the site, it was suitable for the plaintiff’s needs. It had “highway frontage” and enough room. On all the evidence it is clear, however, that not all the equipment which was set up at Ninth Street could have been accommodated at Etiwanda Avenue; and that the plaintiff had definite plans in that connection.

Mr McKendrick said that he and Mr Murphy inspected the property a second time a few days later. He decided that it was the best property on offer. He indicated that it would be suitable subject to the owners’ requirements as regards the amount of rental, duration of lease and so on.

There was, said Mr McKendrick, further discussion between he and Mr Murphy. The latter indicated that short term lease was acceptable. There was discussion about rental. Mr McKendrick made it clear that the plaintiff had to have occupancy by 31 July. Mr Murphy offered a “sweetener” – that when agreement was reached regarding terms and conditions, and a deposit was paid, the plaintiff would be given keys to the premises so that it could begin shifting stores into the open yard.

According to Mr McKendrick agreement was in fact reached. It was his recollection that it was reached in discussion between he and Mr Murphy. He denied that he discussed and largely agreed on terms and conditions in a telephone conversation with Mr Tierney on 8 July. There was no reason for him to seek to mislead me about that matter. But I think that the fax sent by Mr McKendrick to Mr Tierney on 9 August[2] was to that effect. The subject of the “final discussion” referred to in the fax said Mr McKendrick, was his concern that Telstra’s occupation of the premises end in sufficient time for the plaintiff to make an orderly shift; and a related issue – the need for the plaintiff to have immediate access to (some of) the property.
[2]Exhibit M.

The evidence of Mr Murhpy and Mr Tierney did not wholly accord with the evidence of Mr McKendrick concerning the course and content of negotiations concerning Etiwanda Avenue. Nor, for that matter, was the evidence of Messrs Murphy and Tierney completely in accord. For the most part, however, I do not consider that the differences were of critical importance. So, for example, Mr McKendrick said that he visited the premises twice with Mr Murphy before 9 July; and that his major discussions up to that date concerning terms and conditions were with Mr Murphy. But Mr Murphy said that he only met once on site with Mr McKendrick before 9 July; and (at least on several occasions in his evidence) that terms and conditions were discussed up to 9 July principally between Mr McKendrick and Mr Tierney. Concerning this last matter Mr Tierney’s recollection varied.

One significant difference, however, did arise in the evidence of Messrs McKendrick and Murphy concerning their early discussions. Mr Murphy said that he only learned from Mr McKendrick that the plaintiff must be out of Ninth Street on 20 July. The burden of Mr McKendrick’s evidence was to the contrary. For reasons to which I shall later refer I prefer the evidence of Mr McKendrick.

Given the variations in the evidence of the leading witnesses, there is really no doubt that some arrangement – to use a neutral word – was reached with respect to Etiwanda Avenue between the plaintiff and third defendant as agent for first and second defendants. That conclusion is supported by the third defendant’s letters dated 9 and 19 July addressed to the solicitors for the first and second defendants. The reason why two letters in the same terms were prepared by Mr Murphy must later be explained. For present purposes it is enough to note that the terms of what was said to be “a new lease on the subject premises” included terms as follows: “Land Commencement: 14^th day of July 1999”; and “Commencement: 1^st day of August 1999”. The clear implication conveyed by the letters was that pursuant to whatever arrangement had been reached the plaintiff was to have vacant possession by 1 August. The nature of the arrangement that was reached, and the date upon which it was reached, remain for later consideration.

Mr McKendrick gave evidence that he was given a copy of the 9 July letter by Mr Murphy. His evidence on this point was not quite certain, but its import was that this took place on a day when he gave a $5000 cheque drawn on the plaintiff’s account to Mr Murphy as a deposit – later he said a prepayment of rent – and received from Mr Murphy keys permitting access to the yard at Etiwanda Avenue.

There was in fact a cheque payable to the third defendant. It was dated (Thursday) 15 July and was debited to the plaintiff’s account on 20 July, a Tuesday. Mr McKendrick’s evidence was that the meeting occurred on a Friday – it must have been 16 July. Mr Murphy gave evidence that the meeting occurred on Monday 19 July. The bank debit date suggests that Mr Murphy’s evidence was accurate. This much is clear: there was a meeting. A cheque and keys were handed over.

Mr McKendrick agreed that, according to his recollection, the meeting in question was held too late on the Friday for any work to be done over the weekend to move from Ninth Street to Etiwanda Avenue. Upon his evidence a move did not begin before 19 July. In fact I am satisfied that a move did begin, but on 20 July. That is compatible with Mr Murphy’s evidence concerning the date of the meeting in question. The consequence of the date on which the move began was this: it left a little less than two working weeks in which to complete the shift of timber and other stores from Ninth Street.

Between the date on which the cheque and keys were handed over and Wednesday 27 July the plaintiff disassembled racking for timber which was situate at Ninth Street and re-erected some of it in the yard at Etiwanda Avenue. The evidence was uncertain as to what proportion of the racking was moved. The estimates of Mr McKendrick and of Mr Leslie, the plaintiff’s yard foreman, differed. What is clear is that the racking was moved on 20 and 21 July, and that a Mr Johnston, engaged to re-erect it, worked for about a week and a half on that project.

There was debate in the evidence whether, in addition to the racking, the plaintiff moved any timber to Etiwanda Avenue in the period 20-27 July. I am persuaded by the evidence of Mr McKendrick, his father and his brother that some timber was moved.

It is clear, however, that in the period under discussion no builder’s hardware was moved to Etiwanda Avenue from Ninth Street.

It is next clear that in late July a representative of the third defendant requested Mr McKendrick to meet Mr Fush at Etiwanda Avenue. There was a meeting. Mr Fush said: “There is a problem. It is not my doing”. He showed Mr McKendrick a letter dated 27 July 1999 from the Australian Government Solicitor to the solicitors for the first and second defendants[3]. It asserted that the owners were obliged to give Telstra one month’s notice to vacate and that no such notice had been given. It confirmed that on receipt of a valid notice Telstra would vacate the premises on the expiry of the notice period. It stated that in the interim Telstra was prepared to negotiate with the owner of Etiwanda Avenue to provide, subject to certain provisions, some storage space on the site.
[3]Exhibit J.

Mr Fush emphasised that he would do what he could to facilitate the plaintiff’s access to the site. He indicated that (all) the premises should be available by the end of August. But to no avail. Mr McKendrick made it clear that the plaintiff would not proceed with the lease in the circumstances.

It is clear that there was some prior indication that Telstra might not quit Etiwanda Avenue by 1 August. Mr McKendrick gave evidence that at the times of his various inspections and attendances at the premises Telstra was taking no significant step to vacate; and that its staff told him variously that they knew nothing about what was happening, and nothing certain about moving. He also gave evidence of being told by a local Telstra manager that Telstra had no intention of moving from the site.

I am next satisfied that what Mr McKendrick observed and what he was told by Mr Murphy concerning Telstra did not coincide. Mr McKendrick gave evidence, in short, that he constantly pressed representatives of the third defendant concerning the Telstra situation, and was told that all was well. Later I shall refer in more detail to his evidence, and to evidence of his father and of Mr Murphy concerning that matter.

Notwithstanding what he was told by Mr Murphy, Mr McKendrick evidently had doubts whether Telstra would in fact vacate; the more so as time went on. So, he told me, he had his men slow down the move to Etiwanda Avenue. I accept his evidence upon that matter.

Concerning Etiwanda Avenue it is presently only necessary to add two things. First, the move from Ninth Street stopped altogether after Mr McKendrick and Mr Fush met on site. Second, over an indeterminate period after 30 July the plaintiff moved some racking and timber from Etiwanda Avenue to Byrne Court. But some racking was never shifted. Mr McKendrick said that the plaintiff was unable to shift all the racking because it was locked out. That may have been the case. But if so, the lock‑out did not occur until mid September 1999, and apparently not until the plaintiff had been requested on a number occasions to remove the remaining racking.

I turn to Byrne Court. As I noted earlier, it was inspected by Mr McKendrick and his father in June 1999 and they did not consider it to be suitable. But ultimately the plaintiff signed a five year lease of the premises. The plaintiff took partial occupation on 30 July – that is, before the lease was signed, but after there was agreement upon a lease and its terms. Occupation was only partial at the outset because a good deal of the premises was then tenanted. Over a period of time the other tenants left. Now the plaintiff has occupation of at least the vast majority of the premises.

Before the plaintiff took up the lease of Byrne Court Mr McKendrick and his father inspected it again; and Mr McKendrick negotiated with the owner’s representative concerning the terms and conditions of lease.

The evidence satisfies me that the inspection and negotiations took place on the morning of 29 July and that the plaintiff formally agreed to the final terms and conditions of the proposed lease on 30 July.

The evidence further satisfies me that Mr McKendrick requested inspection on the late afternoon of 28 July; and that this followed his meeting Mr Fush at Etiwanda Avenue earlier that day.

In reaching those conclusions I have found it necessary to reject some of the chronology attested to by Mr McKendrick and also by Mr Fush. I am satisfied that neither witness sought to mislead me. Neither had a diary, both gave evidence from recollection, and in the case of Mr McKendrick there should be brought into account the impact of the revelation contained in the letter from Telstra’s solicitor dated 27 July and the consequential need to act quickly to secure the plaintiff’s position. I am not surprised that in all those circumstances there were errors in the chronology to which the witnesses attested.

I should say something about the relative merits of Etiwanda Avenue and Byrne Court from the plaintiff’s standpoint. On an assumption that Telstra would quit by 1 August the following considerations stood in favour of Etiwanda Avenue when the arrangement pertaining to it was reached:

§ Etiwanda Avenue was on a main thoroughfare, whereas Byrne Court was on an industrial estate.
§ The main storage area in Byrne Court was divided into two.
§ The height of the main shed at Byrne Court was too low; contrast Etiwanda Avenue.
§ The Byrne Court premises were substantially tenanted, and by a number of tenants. They could be asked to vacate, but it would take some time to achieve vacant possession. Etiwanda Avenue had a single tenant which, the plaintiff was assured, would quit by 1 August.
§ The owners of Byrne Court required a three or five year lease, whereas the owners of Etiwanda Avenue would give a six or 12 months’ lease.
§ the owner of Byrne Court had proposed a first year rent (on a five year term) of $48,000 plus outgoings, with yearly rental review based on CPI increases;
§ the owner of Byrne Court had proposed a first year rent (on a three year term) of $51,000 plus outgoings, rising to $53,500 plus outgoings in the third year.
§ the proposed rental of Etiwanda Avenue was $27,000 plus outgoings, with a review if the plaintiff exercised a two year option.

There were considerations which tended in favour of Byrne Court. It was larger than Etiwanda Avenue, it had been constructed for a use compatible with the use which the plaintiff required of a temporary premises, and the rental proposed was lower than the licence fee which the plaintiff was paying for Ninth Street. Even so, it is the fact that the plaintiff had rejected Byrne Court even before Etiwanda Avenue became available, and that it only resurrected negotiations for Byrne Court after the meeting between Mr McKendrick and Mr Fush on 28 July. It is clear to me that Byrne Court represented, from the plaintiff’s standpoint, a less satisfactory situation.

According to the plaintiff, default by the defendants obliged it to make a hasty move to less satisfactory premises at Byrne Court. This caused it substantial loss and damage. Thus this proceeding.

The plaintiff’s claim

Against the background so far described it is possible to consider the plaintiff’s claim. As refined in the course of the trial, it was put in five ways[4]. In some part they were alternatives.

The lease claim

[4]I include in this number the plaintiff’s claim in reliance on estoppel, regardless whether it should strictly be so categorised.

The plaintiff alleged that on or about 15 July the first and second defendants leased Etiwanda Avenue to it for a one year period. The lease was partly in writing and partly oral. It was constituted by the fax dated 9 July from the plaintiff to the third defendant as agent for the first and second defendants and by the third defendant’s letter to the owners’ solicitors dated 9 July, a copy of which was in due course provided to the plaintiff. It was further constituted by discussions held between Mr McKendrick for the plaintiff and representatives of the third defendant both before and after 9 July, but not later than the time at which the cheque for $5000 was given by Mr McKendrick to Mr Murphy and Mr McKendrick received the keys to the yard of the property in return. Initial discussions culminated in the third defendant’s letter of 9 July. Later discussions involved reiteration and continued acceptance by the plaintiff of the matters set out in that letter, and also the reaching of agreement that the plaintiff would pay the amount of $5000 as a condition of being given possession of the yard.

According to the plaintiff’s case:

§ the terms of the lease were very largely those set out in the third defendant’s letter of 9 July;
§ there was a further term that possession of part of the property would be given on payment of $5000, this representing prepayment of rent;
§ there was no conflict between the dates of “land commencement” and “commencement” set out in the letter of 9 July;
§ the import of the lease was that possession would be given of the vacant land comprising the Hynes Court element of the property on 14 July (in fact this became, by agreement, 19 July); and that possession of the balance of the property would be given on 1 August;
§ there was no uncertainty as to the period in respect of which rent was to be paid. The period commenced on 1 August 1999. In substance, the period of occupation prior to that date represented a rent free period.

Counsel for the plaintiff conceded, as was evidently the case, that it was always in the contemplation of the parties that a formal lease would be prepared. It is also evident that certain matters mentioned in the letter of 9 July were then unresolved – simply because they had not been discussed between the parties; and that such matters remained unresolved at the time when the parties parted ways. Instances are the basis for rent review if the plaintiff exercised the option, and details of the landlord’s fittings and fixtures. It might have been expected, again, that directors’ guarantees would be required. Mr McKendrick anticipated that this would be so. It was not an issue that had been discussed as at 9 July; nor was it discussed and agreed thereafter.

Counsel for the plaintiff properly conceded that the alleged lease did not satisfy the requirements of either s. 53(1) of the Property Law Act 1958 or s. 126 of the Instruments Act 1958. The third defendant did not have the requisite authorization in writing. Counsel submitted, however, that the lease fell within s. 54(2) of the former Act; or else was sufficiently evidenced by part performance. In the event that neither of these submissions prevailed he submitted, alternatively, that the defendants were estopped from denying that a lease had been concluded.

Further according to the plaintiff’s claim the first and second defendants committed anticipatory breach of the lease by informing the plaintiff in late July that they could not give it vacant possession of the balance of the property on 1 August. That breach went to the root of the contract. In the circumstances, time was of the essence. The plaintiff was entitled to accept the defendants’ repudiation – for that is what it was – and to sue for damages.

The plaintiff’s claim founded upon an alleged lease was challenged by the defendants in a number of respects. Counsel made the following submissions:

First, there was no lease because there was no concluded agreement. Matters which must necessarily be dealt with remained undiscussed, let alone resolved, at any relevant time.

Second, if there was a concluded lease it was one operating as from 1 August 1999. That was the true import of the plaintiff’s fax dated 9 July, the third defendant’s letter of that date, and any pertinent discussions. Giving possession of part of the property to the plaintiff on 19 July was not a giving of possession pursuant to the alleged lease. Section 54(2) of the Property Law Act refers to the “creation by parol of leases taking effect in possession”. The alleged lease never took effect in possession.

Third, the alleged lease was not evidenced by part performance. The matters relied upon by the plaintiff – the payment of $5000, the giving of keys, the taking of possession of part of the premises, movement of racking to the site – did not constitute part performance of a contract such as the plaintiff alleged. Moreover, the plaintiff had not made a claim for any relief that could be related to reliance upon the doctrine of part performance.

Fourth, the first and second defendants could not have repudiated the lease – if enforceable agreement there was – in late July because the lease was only to operate from 1 August.

Fifth, even if there was an enforceable lease, and even if the first and second defendants made it clear in late July that could not and they would not give vacant possession of the whole property on 1 August, that would not constitute a repudiation. Time was not of the essence. The alleged breach did not go to the root of the contract.

Sixth, if there was an enforceable lease, if there was repudiation, and if the plaintiff accepted the repudiation, the plaintiff’s entitlement to damages was limited in one or more ways.

I consider that, subject to later consideration of the question of estoppel, the plaintiff’s lease claim fails for more than one reason. I should address most, though not all, of the matters raised in argument.

Counsel for the plaintiff submitted that there was an agreement of the first type described in Masters v Cameron[5]. Extending that submission, he pointed out that the court will attempt to give effect to commercial arrangements citing in that connection Brown v Gould[6] and Charles Clay & Sons Ltd v British Railways Board[7]. Counsel for the defendants submitted that the circumstances fell within the third class described in Masters. He pointed out that the alleged agreement was silent as to the basis of rent review, particularisation of landlord’s fixtures and fittings, obligations as regards repairs and maintenance, covenants of quiet enjoyment, rights of the landlord should the tenant default, and directors’ guarantees.
[5](1954) 91 CLR 353 at 360-363.
[6][1972] Ch 53.
[7][1971] All ER All ER 1007 at 1010 – 1011.

It is inescapable that the third defendant’s letter to the first and second defendants’ solicitors dated 9 July, and discussions between the third defendant’s representatives and Mr McKendrick before and after that date left undiscussed each of the matters which counsel for the defendants identified. It is also clear that the “lease documentation” to which the letter referred must sensibly have addressed all of those matters – or nearly all of them. But the question remains whether, assuming for the moment that all the major terms had been agreed, the parties were reserving to themselves the right to say that there was no agreement if they could not agree upon additional matters.

Notwithstanding the force of the defendant’s submissions, I would thus far accept the plaintiff’s case. Objectively viewed, the evidence suggests that a lease agreement was concluded. In that respect the opening sentence of the agent’s letters of 9 July and 19 July accurately stated the situation. The parties certainly anticipated that a lease document would be prepared and executed. But that does not deny the existence of an agreement. The major terms of an agreement – subject to an argument as to their meaning – were settled. It could have been expected that other terms would be included in the formal lease document. But that is not to say that they were indispensable; nor that the common law would not supply them in any event.

The lease agreement, in my opinion, was concluded on 19 July. That was the day on which the plaintiff’s cheque was handed over and Mr Murphy gave the plaintiff the keys to the yard. Mr Murphy rightly treated that day as being decisive. That is why he then gave a copy of his letter of 9 July to Mr McKendrick; and why he re-dated the letter 19 July and sent it to the solicitors for the first and second defendants. He neglected to correct the date of land commencement to 19 July. But that does not alter the significance of 19 July.

Was the agreement a lease to operate from 19 July 1999; or one to operate from 1 August? In my opinion the latter is the case. That is the objective import of the documents and the discussions. The reference to “land commencement” in the agent’s letter of 9 July was no more than reference to a concession by the landlord – important thought that concession was in practical terms – that in return for payment of a “deposit” or rent prepayment the plaintiff could have access to part of the premises in order to ready itself for the commencement of the lease on 1 August. The submission for the plaintiff that the lease was to operate from 14 July with a rent free period up to 1 August was, I consider, highly artificial and at odds with paragraph 5(c)(d) and (e) of the plaintiff’s statement of claim. By paragraph 5(c) it was alleged that the lease commenced on 1 August. A distinction was drawn between commencement of the lease and taking of possession of the vacant land. See also paragraph 12(b). The distinction was in my opinion properly drawn.

It follows from the conclusion just expressed that the assumed lease was not one protected by s. 54(2) of the Property Law Act. It did not take effect in possession. Possession between 20-27 July was preparatory only to the commencement of the lease.

What, then, of part performance? There seem to me to be two points at which the plaintiff’s argument falls down. First, it is at least doubtful whether any of the circumstances relied upon by the plaintiff were unequivocally referable to “some such agreement as that alleged”[8]. Some if not all of the acts relied upon – the giving of the keys, the taking possession of the yard, the movement and erection of racking, and the payment of $5000 – were acts done in anticipation of an agreement which, on the view I take, was to commence at a later time; in which case Cooney v Burns[9] is relevant. Counsel for the plaintiff made it clear in his final submissions that the part performance argument was “predicated on the fact that possession… of the land was a term of the agreement or the lease”[10]. The dicta of Gibbs J in Regent and Anor v Millett and Anor[11], relied upon by the plaintiff, do not assist it in the circumstances as I have found them to be. Perhaps, despite the fact that the payment of money has usually been held not to be a sufficient act of part performance in the analogous case of a contract to purchase[12], the plaintiff could gain some assistance from payment in the present instance. But that is debatable, because although the payment was admittedly made and accepted as a deposit on account of rent the moneys were apparently held in trust pending commencement of a lease on 1 August. That this is so emerges from the fact that when the plaintiff took up the lease of Byrne Court it instructed the third defendant to apply the moneys to the rent of Byrne Court; and this the third defendant did, returning the balance to the plaintiff.
[8]Maddison v Alderson (1883) 8 App Cas 467 at 479-481 per Lord Selborne.
[9](1922) 30 CLR 218.
[10]T743.
[11](1976) 133 CLR 679 at 682-683.
[12]See Meagher, Gummow and Lehane, Equity: Doctrines and Remedies, 3^rd Ed, para. 2041 and the cases there cited.

Second, part performance is an equitable doctrine which protects a wronged party against the other party’s reliance upon the Statute of Frauds or similar legislation. In doing so it enables the wronged party to obtain specific performance. It is not a doctrine which yields relief at large[13]. It has been held not to permit recovery of damages at law. On the face of the statement of claim[14] that is just what the plaintiff claimed.
[13]See Equity Doctrines and Remedies, supra, at paragraph 2044; see, also, Spry, Equitable Remedies, 4^th Ed, at pp. 252-253.
[14]See particularly paragraphs 10 and 15 and the prayer for relief.

It is true that the local equivalent of Lord Cairns Act permits this Court to allow equitable damages in some cases – particularly, for present purposes, in a case where part performance is relied upon to prevent a defence based upon the Statute of Frauds being set up. But it is necessary that the court have jurisdiction to entertain an application for specific performance at material times; and it seems that this jurisdiction must exist at the time of commencement of the proceedings[15]. In the present case the plaintiff had, as it claimed, accepted the second defendant’s repudiation of the contract well before the proceeding was initiated.
[15]See, Equitable Remedies, supra, at pp. 616-617.

I should refer to the question of repudiation. In doing so I must assume that there was an enforceable agreement on foot at the time when the first and second defendants, through Mr Fush, informed the plaintiff that they could not and would not give it vacant possession of Etiwanda Avenue on 1 August 1999. According to the plaintiff that was an anticipatory breach of contract which was sufficiently serious to entitle it to elect to terminate the contract.

Counsel submitted that in some circumstances breach of a stipulation fixing the time for performance of an obligation under a contract will enable the party not in default to terminate. That will be so if the agreement expressly stipulates that time is of the essence; or if there is something in the nature of the subject matter or in the surrounding circumstances which indicates that time was intended to be of the essence.

According to the plaintiff’s argument the present case fell into the second of those categories. Counsel emphasised the circumstances that the plaintiff had a deadline by which it must vacate Ninth Street, that it had a business to run, that the need to move the equipment and stock of the business evidently made it important to have vacant possession on the agreed date, and that the plaintiff evidently required all of Etiwanda Avenue to run that business. The third defendant, specifically Mr Tierney, was aware of those circumstances before the agreement was reached, for the most part because Mr McKendrick informed him about them. Mr Fush, independently of the agent, was aware of some of the circumstances. The entire purpose of the contract, counsel submitted, was to have a premises at which the defendant’s business could be run from 1 August. In the absence of vacant possession the lease was unable to be substantially performed.

Counsel for the defendants submitted that the case was one in which the first and second defendants would have been relieved in equity from the harshness of the old common law rule that a stipulation as to time was to be regarded as an essential contractual term. He submitted that by virtue of s. 41 of the Property Law Act what he described as the equitable rule that stipulations as to time are not in general deemed to be of the essence of the contract is now of general application. In the event, the first and second defendants were entitled to have been relieved from an attempt by the plaintiff to terminate the contract.

I understand the import of s. 41 of the Property Law Act to be that described by Kitto J in Holland v Wiltshire[16]:

“(the) construction of contracts is not affected…(If) the parties have expressly made time of the essence, or a consideration of the subject matter of contract or the surrounding circumstances indicates that the parties intended time to be essential, the court will not… come to the assistance of the promisor.“[17]

Thus understood, the role of equity in the case of stipulations as to time is more confined than counsel for the defendants appeared to suggest.

[16](1954) 90 CLR 409 at 418-419. See also Louinder v Leis (1982) 149 CLR 509 at 532 per Brennan J.

[17]Carter, Breach of Contract, 2^nd edition, at para. 545; see, also, the cases there cited.

Counsel for the defendants further submitted that in the present case neither the subject matter of the contract nor the surrounding circumstances indicated that the parties intended the giving of vacant possession to the plaintiff on 1 August to be essential. He submitted that it put the matter too high for the plaintiff to contend that it could not run its business at Etiwanda Avenue if it did not have vacant possession; and that this showed, whether viewed objectively or subjectively, a common intention that time was of the essence. Regard should be had to the fact that the plaintiff in fact ran its business in part only of Byrne Court – albeit with some disruption – for a period of time; and that the plaintiff could have had vacant possession of Etiwanda Avenue within a relatively short period.

All in all, making the assumption that an agreement was on foot as at 28 July, I consider that the first and second defendant’s anticipatory breach of contract did involve a time stipulation which went to the heart of the agreement. Objective circumstances known to all parties[18] made it very clear that, so far as Etiwanda Avenue was concerned, it was critical that the plaintiff have vacant possession on 1 August. The fact that the plaintiff was forced at short notice to take a lease of other premises which were partly occupied does not tell against that conclusion.
[18]Mr Murphy gave evidence that he did not know until 20 August that the plaintiff had to vacate Ninth Street by 31 July. I doubt his recollection. Mr Tierney knew of the situation even before 9 July. It seems improbable that he did not inform the man whom he put in charge of the matter of that circumstance. It also seems improbable that Mr McKendrick would never have raised it in conversations with Mr Murphy which undoubtedly took place before 9 July and in the period 9 July to 19 July. It was a circumstance, after all, which was very much on Mr McKendrick’s mind. But even if Mr Murphy’s recollection was correct, still the third defendant knew of the circumstance at earlier and pertinent times.

I should add two things. First, the assumed Etiwanda Avenue contract was a commercial contract; and in such contracts stipulations as to time are readily, if not generally, read as conditions whose breach gives rise to a right to terminate[19]. Second, I am satisfied that the anticipatory breach was not inconsequential, as certain evidence given by Messrs Fush and Murphy – by reference to the extent of Telstra’s occupation of the premises in late July – suggested was the case. It is at least clear that Telstra remained in occupation of the office section of the premises; and this was evidently and obviously important to the plaintiff.
[19]Carter, Breach of Contract, supra, at para. 563 and following.

That is all that need presently be said concerning the claim founded upon a lease. It is not now necessary to address submissions that dealt with the measure of damages in such a case.

The claim founded on an agreement to lease

In his careful argument counsel for the plaintiff did not much press the submission that the evidence disclosed an agreement to lease. But insofar as the matter was addressed counsel submitted that the documents and discussions which were the foundation for its claim that a lease had been concluded could be understood to show that the parties had concluded an agreement to lease.

He accepted that if I upheld his submission that an agreement had been made by which the defendants agreed to give possession of part of the property to the plaintiff in mid-July and by which possession of the balance of the property was to be given on 1 August, and in the certain event that the plaintiff went into possession of part of the property on or about 19 July, then the agreement should be regarded as a lease and not as an agreement to lease. But he contended that it would be otherwise if I concluded that there was an agreement by which a lease was to be granted as from 1 August.

Counsel rightly conceded that if any concluded agreement was an agreement to lease it would fall foul of the requirements for writing imposed by the Property Law Act and the Instruments Act. It could not be rescued by s. 54(2) of the former Act. But, he submitted, it was a contract which could be evidenced by part performance. If there was no part performance, then the plaintiff’s case could be sustained by reliance upon an estoppel.

In addition to the obvious fact that, in connection with an agreement to lease, the plaintiff was confronted by inability to rely upon s. 54(2) of the Property Law Act, counsel for the defendants raised analogous arguments to the first, third, fourth, fifth and sixth arguments advanced by him on the lease claim.

I have concluded that there was a lease agreement whose commencing date was 1 August 1999, albeit that – subject always to consideration of the plaintiff’s estoppel argument - for different reasons it could not be enforced by the plaintiff. In those circumstances it is not open to conclude that what passed between the parties in July 1999 constituted an agreement to lease.

If the oral and written communications between the parties, contrary to my conclusion, did not constitute a lease agreement, then equally they did not constitute an agreement for a lease. The gaps would be the same in each instance.

It is unnecessary in the circumstances to deal with issues of part performance, repudiation and measure of damages.

Estoppel

The plaintiff’s case was that a lease was granted to it when, but not before, Mr McKendrick gave Mr Murphy the plaintiff’s cheque for $5000 and Mr Murphy gave Mr McKendrick the keys to the yard section of Etiwanda Avenue and a copy of the defendant’s letter to the solicitors for the first and second defendants dated 9 July. That was made clear by paragraph 4 of the amended statement of claim which referred to the lease being granted “on or about 15 July”. I have concluded that the particular events in fact took place on 19 July.

The defendants denied by their amended defence that the first and second defendants granted a lease to the plaintiff. They pleaded also that if the first and second defendants did enter into a lease the same was unenforceable by reason of s. 126 of the Instruments Act and/or s. 54 of the Property Law Act 1958.

I have found that a lease was granted; and that its terms were generally as alleged by the plaintiff. Upon an issue of construction I have held, however, that the lease was not one commencing in mid-July 1999, as the plaintiff contended; but was rather a lease commencing on 1 August 1999.

It was common ground that, in the event that a lease had been granted, there was no authorization of the third defendant in writing as would satisfy either of the statutes. I have found also that the plaintiff could not obtain the benefit of s. 54(2) of the Property Law Act; and that it could not successfully rely upon the doctrine of part performance.

The plaintiff alleged that it had an enforceable lease not in order to enforce the same; but rather to permit it to contend that the first and second defendants committed an anticipatory breach which went to the root of the contract; that leading on to the plaintiff’s allegation that it accepted the first and second defendant’s repudiation of the lease; and thus to its claim for damages.

I have found that it was an implied term of the lease, going to the root of the contract, that vacant possession be given on 1 August 1999. Grant of a lease ordinarily implies the giving of vacant possession at commencement. In the present case, for reasons described, that was – viewed both objectively and subjectively – a matter of cardinal importance.

The plaintiff alleged, by paragraph 30 of its amended statement of claim, that by reason of certain matters the defendants were estopped from, inter alia, “denying that the first and second defendants entered into the lease”. This allegation was simply denied by the defendants[20].
[20]Paragraph 30 of the amended defence.

Counsel for the plaintiff, in his final submissions, written and oral, addressed the question of estoppel. But counsel for the defendants did not discretely address the question at all.

The consequence of the form of the pleadings and the way in which the question of estoppel was addressed (or in one case not addressed) by counsel is that a number of matters pertinent to that question were either not developed at all, or else superficially. There was thus no debate whether the representations said to give rise to an estoppel were representations of existing fact or future intention, or partly one and partly the other, and the consequences in either case.

Having regard to what was an incompletely developed debate upon pleadings which were themselves unsatisfactory, this is not the occasion to compile a treatise on principles of estoppel.[21] I approach the matter having regard to the way which plaintiff’s counsel put it in his address – a way which was not entirely a replication of the plaintiff’s pleaded case; I assume that it is still pertinent to distinguish between representations of different kinds[22]. I assume also that it remains the case that the relief obtainable in reliance upon common law estoppel and in reliance upon equitable estoppel, including promissory estoppel, may vary[23].
[21]Even if I assumed a capacity to resolve issues which courts of high authority and text writers of great eminence appear to have been unable to resolve in an unambiguous way.
[22]That there is not yet an accepted “overarching doctrine of estoppel” in Australia; cf Commonwealth v Verwayen (1990) 170 CLR 394 per Mason CJ at 410-411.
[23]The possible limits of the latter being described by Mason CJ and Brennan J (both dissenting in the result) in Verwayen at 412-413 and at 428-429 respectively. See also per McHugh J, dissenting, at 500-501. Compare per Deane J at 443, and per Gaudron J, obiter dicta at 487.

According to counsel’s submission, representations made by the defendants, most particularly Mr Murphy, gave rise to an equitable estoppel in consequence of which it must be assumed – the defendant being precluded from denying it – that the first and second defendants had granted the plaintiff not merely a lease, but an enforceable lease, a cardinal term of which was that vacant possession of Etiwanda Avenue be given on 1 August 1999.

So, counsel submitted, the plaintiff was induced to assume and did assume, that a lease had been granted. That assumption was induced “on the basis of the discussions between the parties and the … two letters of the 9^th of July”; and further by Mr McKendrick being given “every assurance that the lease was proceeding” by Mr Murphy. The plaintiff had acted or abstained from acting in reliance on the assumption. That was to the plaintiff’s detriment in the event that the assumption was not fulfilled. The first and second defendants had failed to avoid the detriment by fulfilling the assumption.

Since the critical assumption was said to be that “there was an (enforceable) lease”, and since on the plaintiff’s case (which in substance I have accepted) the lease was not concluded until the day upon which the cheque for $5000 was handed over and keys and a copy of the third defendant’s letter to the solicitors for the first and second defendants dated 9 July were given in return, it follows that the critical representations upon which the plaintiff relies must have been made on and after that day. Upon the plaintiff’s case, then, it is necessary to focus on the period which commenced (according to my conclusions) on 19 July and which ended (as I later conclude) on 27 July.

In making the submissions which I have identified plaintiff’s counsel referred to and sought to apply criteria identified by Brennan J in Waltons Stores (Interstate) Ltd v Maher[24]. He assumed in making his submission that the circumstances in the present case fitted what Brennan J described in Waltons Stores[25] as the first of three distinct bases for holding that Waltons was estopped from denying the existence of the contract sued upon. The three bases were these:

§ an expectation that Waltons would duly complete an exchange of counterpart deeds;
§ an assumption that Waltons had duly completed the exchange;
§ an assumption that there was a binding contract in existence whether or not an exchange had been completed.

[24](1988) 164 CLR 387 at 428-429.

[25]At 413 and 417.

Brennan J pointed out[26] that the second and third bases were radically different from the first. The former could be supported, if at all, upon the principles of estoppel in pais. They rested upon assumptions as to an existing state of affairs. Contrast the latter, which rested upon an expectation of what Waltons would do; and which could be supported, if at all, upon principles of equitable estoppel.
[26]At 413.

It seems to me, with respect, that the case sought to be made out by the present plaintiff was not – contrary to counsel’s submissions – a case raising principles of equitable estoppel at all. According to the plaintiff’s case the assumption which the plaintiff was induced to make was that an enforceable lease had been granted. True it is that the lease was to operate from 1 August, vacant possession being given then. But those circumstances were no more than features of the lease which , on the plaintiff’s case, it was induced to assume had been granted.

It does not follow from what I have said that the plaintiff cannot rely upon an estoppel. But the alleged estoppel must be considered according to the principles of estoppel in pais. Thus considered, the relief which is available if an estoppel arises is not so limited as might be the situation where an equitable estoppel is concerned.

To make out an estoppel in pais, a plaintiff must satisfy the court that the defendant has caused it to assume a particular state of affairs – here, according to the plaintiff, that an enforceable lease with particular features had come into existence. It is necessary to show that the conduct of the defendant inducing the assumption was unambiguous – that it justified the particular assumption being made by the plaintiff.

In support of the proposition that the plaintiff did assume that it had been granted an enforceable lease counsel for the plaintiff referred me to two portions of the evidence of Mr McKendrick[27]. I consider that the first of them does not but the second does justify a conclusion that the relevant assumption was made.
[27]T154, T260.

Whilst the required assumption is not simply an assumption that a lease had been granted, but that the defendant would not in later proceedings rely upon want of necessary formality and whilst Mr McKendrick, understandably, did not express his (and thus the plaintiff’s) assumption in the latter way, I consider it only sensible to conclude that he assumed that the lease of which the plaintiff was to have the benefit was not to be without remedy in the event of breach[28].
[28]I note that in Collin v Holden [1989] VR 510 at 514 Tadgell J reached a similar conclusion in a different factual setting.

In support of the proposition that the plaintiff was induced by the defendants’ conduct to make the pertinent assumption counsel for the plaintiff mainly relied upon assurances allegedly given by Mr Murphy that vacant possession would be given on 1 August; and upon the defendants standing by whilst the plaintiff moved racks and stock to the Etiwanda Avenue yard after 19 July.

I am satisfied, as will later be seen, that Mr Murphy did tell Mr McKendrick on a number of occasions between 19 and 27 July that Telstra would be out of the Etiwanda Avenue premises by 1 August. Bearing in mind the identical letters of 9 and 19 July written over Mr Murphy’s hand to the solicitors for Mr and Mrs Fush, letters which asserted that a new lease had been negotiated, such lease to commence on 1 August (one of which letters was given to Mr McKendrick on 19 July) I consider that the plaintiff has made out its contention that it was induced by the conduct of the defendants (most particularly the conduct of Mr Murphy, which should be taken to have been authorised by the first and second defendants) to assume that an enforceable lease had been granted to it by which vacant possession of Etiwanda Avenue was to be given by 1 August. The common understanding of the parties that a formal lease document would be prepared does not tell to the contrary in the circumstances of the particular case.

I have considered whether the defendants’ conduct should be held not to have induced the assumption upon which the plaintiff relies because in one respect the plaintiff’s understanding of the import of the lease was incorrect[29]. I have concluded that a conclusion favourable to the defendants should not be reached. The plaintiff’s assumption was, in truth, that a lease mainly but not entirely in the terms of the third defendant’s letter of 9 July had been granted to it. What those terms amounted to does not bear upon the core of the assumption.
[29]That is, whether the lease commenced, as to the bare land, in mid-July 1999.

Being satisfied that the plaintiff did assume that an enforceable lease had been granted it by which vacant possession of Etiwanda Avenue was to be granted on 1 August and being satisfied that such assumption was induced by the conduct of the defendants, I turn to the question whether the plaintiff acted upon the assumption. I am satisfied that it did. It moved racking and stock to Etiwanda Avenue. It desisted from attempts to find other premises. It informed its trade clients that it was moving to Etiwanda Avenue; and deprived itself of the opportunity to advise those clients in good time of the premises to which, ultimately, it had to move. That action and inaction suffice for present purposes. I add only that I am well-satisfied that the conduct which I have identified should be attributed to the plaintiff’s assumption that a lease had been granted by which vacant possession of the whole property was to be given on 1 August. It is quite clear, in my opinion, that the plaintiff would not have acted in the way it did, nor have desisted from acting in the way it did, had it simply assumed that there was a lease by which it was to have vacant possession of the yard in mid-July.

That leaves two questions for consideration. First, did the defendants know or intend the plaintiff to act upon the assumed state of affairs? Second, would the plaintiff suffer detriment if the assumption was not adhered to by the first and second defendants.

In my opinion the answer to the first question is yes. The defendants, by Mr Murphy, encouraged the plaintiff to do what it did in anticipation of commencement of the lease: by providing Mr McKendrick with the keys to the yard and thereby facilitating the movement of racking and stock; and by reiterating that the plaintiff would have vacant possession of the property by 1 August.

I turn to the second of the questions. It should also be answered yes. If the defendants – particularly the first and second defendants – were permitted to rely upon the unenforceability of the lease the plaintiff would be precluded from relying upon an anticipatory breach of contract going to the essence of that contract; and thus would be precluded from asserting that it accepted the repudiation and from claiming for the loss and damage which flowed. There is room for argument as to the nature and extent of compensable loss. But it was not submitted for the defendants that, assuming the plaintiff could rely upon the alleged lease, there was no loss and damage.

Later it will be necessary to consider discretely the items of loss and damage alleged by the plaintiff. Presently it is necessary to make only two points. First, it follows from what I have so far said that the plaintiff is entitled to rely upon principles of estoppel to deny the defendants the right to contend that the lease was not enforceable for want of necessary formality. Second, as will soon be seen, the plaintiff has in any event satisfied me that it has an entitlement to damages against all the defendants in reliance upon statutory and common law causes of action. For the most part the plaintiff is able, conceptually, to recover under those causes of action for the loss and damage which it claims. The practical significance of the plaintiff being able to rely upon the lease is thus limited. The case is thus one in which the matter mentioned by way of precaution by Deane J in Waltons Stores[30] arises, though not completely.

The misleading or deceptive conduct claim

[30]At 453-454.

The plaintiff alleged by paragraphs 16-20 of its statement of claim that the first and second defendants had engaged in conduct that was misleading or deceptive or was likely to mislead or deceive contrary to s. 11 of the Fair Trading Act 1985, that it had relied upon the representations constituting the impugned conduct, and that it had suffered loss by conduct of the defendants in contravention of that section.

The plaintiff made parallel allegations against the third defendant by paragraphs 21‑24 of the statement of claim, relying upon both s. 11 of the Fair Trading Act and s. 52 of the Trade Practices Act 1974 (Cth).

The critical conduct alleged against all defendants, as was made clear in the final address of counsel for the defendant, was the making of a representation that the plaintiff would be given (vacant) possession of the whole of the Etiwanda Avenue premises on 1 August 1999[31]. That representation was alleged to have been made both explicitly and by necessary implication by the third defendant. The representation was said to have been made both orally and in writing – orally, in discussions between (mainly) Mr McKendrick and Mr Murphy which occurred as early as about 8 July and as late as about 27 July; in writing, by the third defendant’s letter of 9 July, a copy of which was given by Mr Murphy to Mr McKendrick on 19 July.
[31]The representation must have been founded upon a lease which was in prospect, or a lease which had been concluded.

The trial proceeded throughout on the footing that the third defendant was the agent for the first and second defendant and that its representatives were authorised by those defendants to say and do what they did in connection with the lease of Etiwanda Avenue. I will assume the correctness of that commonly adopted position.

For reasons to which I shall soon refer, I think it is clear that at all times up to and including 27 July the third defendant did represent to the plaintiff that the first and second defendants had the capacity to require the existing tenant, Telstra, to vacate by 1 August so as to give the plaintiff the vacant possession that a lease concluded between the parties would ordinarily imply. That representation was made orally both before and after the letter of 9 July was compiled. It was made by Mr Murphy before and after that date, and by Mr Tierney in the presence of Mr Fush probably on 8 July.

There were two aspects to that representation: first, the willingness of the first and second defendants to give the plaintiff vacant possession of the property on 1 August. Second, that the first and second defendants had the capacity or would be able to give such possession.

There is no reason to believe that the first and second defendant were not at all times willing to give the plaintiff vacant possession on 1 August. All the evidence indicates to the contrary.

There are two possibilities as to the way in which the second element of the representation should be considered: First, by reference to s. 52 of the Trade Practices Act and s. 11 of the Fair Trading Act in accordance with the third proposition advanced by Toohey J in James v ANZ Banking Group[32], this not involving recourse, respectively, to ss. 51A and 10A of those Acts. Second, by considering the defendants’ conduct having regard to the latter provisions.
[32](1986) 64 ALR 347 at 372.

Counsel for the defendants submitted that his clients’ conduct could not be considered by reference to ss. 52 and 11 simpliciter. The case was one in which the plaintiff was alleging a representation with respect to a future matter; but that had not been pleaded. Counsel submitted that in those circumstances the reverse onus contemplated by s. 51A(2) and s. 10A(2) should not be cast upon his clients. I did not understand him to submit that the plaintiff could not otherwise rely upon ss. 51A(1) and 10A(1). For his part, counsel for the plaintiff, assuming for purposes of argument that ss. 51A(1) and 10A(1) were pertinent, submitted that there was no obligation upon his client to plead the sections; but that if that was wrong then in the absence of pleading ss. (1) could in each case be relied upon; but not ss. (2). In the event, the end point of the submissions was in substance the same.

In my opinion the second element of the impugned representation might well be considered to fall within ss. 52(1) and s. 11 without reference to ss.51A and 10A. But if that be wrong then the pertinent allegations in the statement of claim sufficiently disclosed that what was being alleged was a representation with respect to a future matter. It is the fact that the plaintiff did not allege that the defendants did not have reasonable grounds for making such representation; but there is doubt whether such an allegation need be made.

All things considered, I have decided to approach the second element of the impugned representation by requiring the plaintiff to establish breach of ss. 52(1) and 11 by recourse to ss. 51A(1) and 10A(1) and by requiring the plaintiff to show that the defendants did not have reasonable grounds for making that representation. That is the most favourable approach possible from the defendants’ standpoint. As Heerey J pointed out in Sykes v Reserve Bank of Australia[33], s. 51A (and s. 10A) makes a concession in favour of representators.
[33](1999) ATPR 41-699.

The representation may conveniently be considered in two time frames. The first covers the period up to 19 July, which on the view I take preceded the making of the lease agreement. The second covers the period 20-27 July, and thus postdates the making of that agreement[34].
[34]Although if I was wrong in holding that a lease agreement was made on 19 July the plaintiff would still be able to rely upon the representations, arguing that they were made in anticipation of a lease agreement being concluded.

It is convenient to deal with the latter period first. On 19 July Telstra’s agent faxed Mr Murphy advising “that Telstra will not be in a position to vacate the Etiwanda Avenue property until 31 August”. Mr Murphy told me that he spoke to Ms Ritchie, the person handling the matter for Telstra’s agent, on the morning of 20 July. He said, in evidence to which no objection was taken, that she told him that “an arrangement was being made so that it would be beneficial for both parties to use the premises”[35]. He did not know what was meant by an agreement that would be favourable to both parties[36]. Ms Ritchie made, it seems, some reference to the matter being in the hands of the solicitors. Thereafter, he said, he communicated with Mr Fush’s solicitor, “waiting to see if a fax had been received regarding the state of the premises, basically what the arrangement would be that would be beneficial to both parties”[37]. Then, on the morning of 28 July, he saw the fax dated 27 July sent by Telstra’s agent to the solicitors.
[35]T606.
[36]T624.
[37]T607-608.

It is clear that from the late afternoon of 19 July onwards Mr Murphy was in possession of material which made it apparent that Telstra would not be vacating by 1 August. He took that material to represent the fact; and implicitly Telstra’s right. He did not address the question – nor did anyone else on the defendants’ side, it seems – whether Telstra’s stated position was legally defensible.

There are two versions of what Mr Murphy said to Mr McKendrick in this period. According to Mr McKendrick, whose evidence was to an extent corroborated by evidence of his father, he, Mr McKendrick, raised on a number of occasions with Mr Murphy the circumstance that Telstra was not taking steps to vacate, and equivocal statements by Telstra workers in that connection. On each occasion Mr Murphy told him that he was panicking, that everything was under control. On numerous occasions Mr Murphy said that a notice (to vacate) had been given. On one occasion Mr Murphy did say that the matter was in the hands of solicitors; but he then also said that it was not a problem, and would be sorted out.

Mr Murphy’s account was significantly different. He gave evidence that he told Mr McKendrick on 20 August that Telstra “may not be out of the property by the due date, but they were endeavouring to come up with a solution that would be beneficial to both parties, and that the matter was now in the hands of the solicitors”[38]; and that Telstra “had indicated there was some problem with them getting out on time, it was now in the solicitors’ hands, and that an agreement was trying to be reached that would be favourable to both parties”[39]. He said that he had told Mr Fush the same thing. Contrast the evidence of Mr Fush[40]. He agreed that on 23 July he might have thought that because the existing tenant was not going to move out there were going to be a lot of problems; but he said that he did not think he told Mr McKendrick those things. The witness agreed that Mr McKendrick may have rung him on a number of occasions expressing concern that Telstra would not be moving out. He gave evidence that he had said it was “in the hands of solicitors and an arrangement was trying to be met that would be favourable to both parties”[41]. He denied Mr McKendrick’s version of the conversations.
[38]T606.
[39]T622.
[40]T589.
[41]T629-630.

I have reached the clear conclusion, as I said earlier, that Mr McKendrick’s account should be preferred. He gave extensive evidence, which included substantial and probing cross-examination. He emerged as a truthful and generally reliable witness – although that is not to say that his evidence was always entirely consistent or in complete accordance with what I consider were the facts. In the present debate his evidence was clear, generally accorded with the evidence given by his father, and was supported by action which he initiated after 19 July[42].
[42]I doubt, however, that Mr McKendrick spoke to Mr Garsed concerning Telstra’s continuing occupation – something that he asserted he had done, and which Mr Garsed denied had occurred.

It is, I think, highly improbable that he would have directed or arranged for steps to be taken on 20 and 21 July to move racking to Etiwanda Avenue – this involving hire of machines and labour and some dislocation at Ninth Street – if he had been informed on 20 July that the plaintiff could not have vacant possession of Etiwanda Avenue on 1 August. It is highly improbable that Mr Johnston would have been left erecting racks at Etiwanda Avenue for about a week and a half. It is highly improbable that Mr McKendrick would have directed the moving of timber to Etiwanda Avenue in the period 20-27 July by employees of the plaintiff (as I am satisfied did occur), or stood by whilst that happened. It is very clear that the plaintiff required the use of all the premises at Etiwanda Avenue; and that the plaintiff had every reason to believe, in the latter half of July, that it must be out of Ninth Street by 31 July. It seems highly improbable that Mr McKendrick would have set in train a move to Etiwanda Avenue knowing that the plaintiff could not have vacant possession by 1 August, and not knowing when it was likely to get vacant possessions. It seems highly improbable that, if he knew on 20 July that the plaintiff could not have vacant possession by 1 August, he would not have sought alternative accommodation before 28 July (as I am satisfied was the case).

It was submitted for the defendants that not much was done about moving to Etiwanda Avenue between 20 and 27 July. This was put two ways: first, that it reflected the plaintiff’s response to Mr Murphy’s communications – this giving support for Mr Murphy’s account of what he said. Second, that if Mr Murphy had said what Mr McKendrick attributed to him, nonetheless Mr McKendrick evidently had not acted upon the representations, but had rather acted upon what he saw of Telstra's activities and what he was told by Telstra employees.

I reject the first of those submissions. I am satisfied that the plaintiff’s move to Etiwanda Avenue did slow down. In my view that was attributable to concern which Mr McKendrick felt about the situation notwithstanding Mr Murphy’s representations that all was on track for the plaintiff to have vacant possession by 1 August. With those representations were to be contrasted Mr McKendrick’s observation of what was happening in fact; and as well the remarks of Telstra employees.

Those conclusions bear upon the second of the defendants’ submissions, a submission addressing reliance. They do not deny reliance. Of this, more later.

In the event, I am satisfied that Mr Murphy’s recollection of what he said to Mr McKendrick was mistaken; just as was his recollection of what he said to Mr Fush about the matter. I consider, in the circumstances, that the plaintiff has established that the third defendant, and thereby the first and second defendants, engaged in proscribed conduct in the period 20-27 July.

Counsel for the defendants submitted, however, that I should not so conclude because Telstra did not have a right to a month’s notice before vacating Etiwanda Avenue. Whether or not his submission concerning notice had merit, it flies in the face of what actually happened when Telstra indicated that it would not be vacating by 1 August. From 19 July onwards the first and second defendants, presumably with the advice of their solicitor, who did not give evidence, accepted Telstra’s stated position. The defendants treated it as being the true situation. Their representations should be considered in that context.

I said that the impugned representation might be considered in two time frames, the first covering the period 9-19 July. To that period I now turn.

The plaintiff has not satisfied me that before 19 July the defendants did not have reasonable grounds for representing that the first and second defendants had the capacity or would be able to give vacant possession of Etiwanda Avenue on 1 August.

As at 9 July Mr Fush clearly believed that he would be able to obtain vacant possession as soon as a replacement tenant for Telstra was found. That was his understanding of the import of communications between Telstra’s agent and his solicitors in June 1999[43] and an oral communication with a representative of Telstra’s agent on about 9 July[44]. In my opinion it was reasonable that he held the belief that he did.
[43]Exhibits 12 and 13.
[44]In the course of the trial it seemed to me that evidence given by Mr Fush of what the managing agent said was objectionable as hearsay. Perhaps that was not so. In the event, I have had regard to this evidence.

I next consider that the assumption made by the claim that the nett differential in rental would hence remain the same over the three year period is likely to be favourable to the defendants. That cannot be said with certainty because, as I earlier noted, the basis for review at Etiwanda Avenue had not been discussed. But the likelihood is that review would expand the differential. Certainly it would do so if the basis for review was the same.

As to the outgoings at the two properties, a review of the evidence shows that the Byrne Court outgoings were slightly greater than that at Etiwanda Avenue[62].
[62]$2836.70 compared to $2757.86; see exhibits N and S.

It is the fact, as I noted a little earlier, that Byrne Court is larger than Etiwanda Avenue. But it was not the plaintiff’s property of choice, for reasons described by Mr McKendrick and his father. I do not consider that it would be proper to reduce the plaintiff’s claim to reflect the fact that the less desirable property which has been leased is larger than the property which the plaintiff sought to obtain.

The claim ought to have made allowance, on the other hand, for the rent free period ($3667) and for the rental reduction which must have been allowed to the plaintiff during such time as the undercover bays at the rear of Byrne Court remained tenanted. Nearly all the bays were tenanted when the plaintiff arrived. They became available over time – most at the expiration of a month. The evidence about the matter was not precise. Mr Haynes was not asked by counsel for any of the parties to quantify the amount of the reduction. Doing the best I can, I would reduce the claim by $280 – that is, 14 bays for one month at $20 each.

The claim must also make some discount for present value, albeit that the three year period is now more than half in the past. No evidence was adduced about this matter.

All in all, I consider that this claim should be allowed at $35,000.

This reflects three years rental differential less amounts for the rent free period, other rental reduction, present value and what might be viewed either as a break in the chain of causation or as a failure to mitigate.

Damaged Goods

The plaintiff has satisfied me that goods stored in the open at Byrne Court were damaged in a storm on 8 August 1999. I am satisfied that the goods could not be stored under cover at Byrne Court by 8 August because there was then insufficient room to do so; and that they were damaged despite the plaintiff’s best attempt to make them weatherproof. I am satisfied also that but for the defendants’ default the plaintiff would have had sufficient time, and the opportunity, to arrange for the undercover storage of the goods by 8 August; and that this would have been done – not at Byrne Court but at premises close by. I add, regardless whether it is strictly necessary to reach such a conclusion, that I am in fact satisfied that had vacant possession been given at Etiwanda Avenue by 1 August the goods would have been stored undercover there by 8 August.

I do not accept a submission made for the defendants that the damage was either too remote or outside the range of statutory compensability. It seems to me to have been a quite likely consequence of new arrangements made necessary by the delayed revelation of the true situation at Etiwanda Avenue that the plaintiff would or might well have difficulty in placing its stock in secure locations, particularly in the short term.

I am next satisfied that the goods in question – timber and composition material – were permanently damaged in the storm. They have been retained by the plaintiff. Some probably have a little value. Others have no value at all. The value of those items retaining a little value will be whatever a second-hand dealer or a person interested to buy damaged goods will give for them. There was no evidence directed to what that amount might be.

The plaintiff’s claim in the present connection was fixed at $57,653.67. That amount was calculated by converting a stocktake of damaged goods undertaken by Mr Leslie, the plaintiff’s timber yard foreman, to the value of those goods to the plaintiff at 1999 sale prices. Assuming - there was no suggestion to the contrary – that the plaintiff had paid or later paid its suppliers for the goods, I consider that, subject to some reduction for retained value, the claim should be allowed. I am satisfied that Mr Leslie’s stocktake was accurate. There was no suggestion that the sale prices of the goods were other than those asserted by the plaintiff.

I raised the issue whether any of the goods had some retained value in questions asked of Mr McKendrick senior. Neither counsel explored the matter thereafter – either in further questioning of Mr McKendrick or in questions asked of any other witness. The overall import of the evidence which was given was that any retained value was likely to be quite small. Doing the best I can I consider that I should allow $52000 for this item of loss and damage – this reflecting a reduction upon the amount claimed of a little less than 10%.

Loss of profit

The plaintiff makes a claim for $61372 for profit lost in the period August, September and October 1999. It asserts that the move to Byrne Court was very disorganized by reason of the haste with which it was undertaken; and that this explains a major sales reduction in the period in question.

Pertinent evidence was given by Mr James Harvey, a chartered accountant and Adelaide partner in the firm of Grant Thornton.

His evidence showed that there was a dramatic decline in the plaintiff’s sales of timber and building supplies in the three months in question by comparison with sales in the same months in the two preceding financial years. His evidence also showed that there was a steady sales increase beyond the three month period.

I accept that the dramatic sales decline was attributable to the disruption associated with the move to Byrne Court. It was suggested in cross-examination of Mr Harvey that it reflected a declining pattern of sales by the plaintiff over the years. Mr Harvey rejected that suggestion. So do I. There had been very little change in sales of the pertinent type in the corresponding three months period in the two preceding years.

Counsel for the defendants did not challenge the methodology adopted in calculating this aspect of the plaintiff’s claim. It involved determination of the dollar amount of sales lost, application of an average gross profit margin of 27%, and the sum arrived at being treated as the amount of the plaintiff’s loss on the footing that relevant overheads were largely fixed. I am content, in the circumstances, to assume the correctness of this approach.

Counsel for the defendants submitted, however, that the claim should not be allowed because there would have been the same disruption whether the move had been made to Etiwanda Avenue or Byrne Court. That submission would apply equally whether the claim was viewed in contract, tort, or under statute. I consider it first in the context of breach of common law duty and of statute.

It is necessary to keep carefully in mind the effect of those breaches. They did not deny the plaintiff use of Etiwanda Avenue. They caused the plaintiff to start the move to Etiwanda Avenue; and they caused the plaintiff to delay in seeking new premises. To the extent that those factors caused business disruption and profit loss, the loss should, prima facie, be considered compensable under these heads of claim. The defendant’s submission really amounts to saying that, by the time the plaintiff got around to doing something about rental premises, it was too late to effect a move in an orderly way; and that what in fact happened at Etiwanda Avenue showed that there would have been disruption equivalent to that which in fact occurred wherever the plaintiff went – because its move was unplanned and poor in execution.

I do not accept, for the most part, the defendants’ submission. The plaintiff has satisfied me that the relevant breaches caused business disruption and loss of profits. I do accept, however, the defendants’ submission that there would have been some degree of business disruption and loss of profits in any event.

The following considerations are pertinent:

§ But for the defendants’ default the plaintiff would have had the opportunity of securing Byrne Court considerably earlier than in fact occurred. Parts of that premises being unoccupied, there is good reason to think that the plaintiff could or would have begun to move equipment and goods there well before 30 July. After all, when the crisis arose the plaintiff concluded a lease of Byrne Court and began its move very quickly. But for the defendants’ default, then, the plaintiff would probably have been better set up at Byrne Court on 2 August than was in fact the case. That is not to say that there would not have been a degree of disruption.
§ The move to Byrne Court necessitated a double move of some equipment and stores – from Etiwanda Avenue to Byrne Court; and to Byrne Court from other premises at which temporary storage was obtained at short notice after the plaintiff learned of the true situation at Etiwanda Avenue and secured Byrne Court.
§ Money was paid and the move to Etiwanda Avenue began on 20 July. The opportunity for the plaintiff orally advising its customers that it was moving to those premises on 1 August therefore existed for some weeks before that date. Mr McKendrick gave evidence that the opportunity was taken. There was time and opportunity to correct the import of the clearing sale advertisement of 10 July which mentioned a move to Eighth Street - quite apart from what could have been said at the clearing sale itself, which was held on 24 July and thus before Byrne Court was revisited.
§ To the contrary of the Etiwanda Avenue situation, the move to Byrne Court was only consummated on 30 July; and business commenced at Byrne Court in very early August. There was very little time for the plaintiff to notify customers, although Mr McKendrick gave evidence that he busily advised customers of the new business premises by telephone after the property was secured.
§ The plaintiff took no steps to have a telephone service connected to Byrne Court by 2 August. Nothing could have been done, of course, before 30 July. Want of telephone connection had (in the case of Etiwanda Avenue, would have had) two consequences: first, it inhibited customer contact with the business. Second, it precluded setting up a computer link with the main computer at Langtree Avenue. Those matters likely contributed to business disruption and profit loss.
§ Whilst it is the fact that no steps to obtain a telephone connection had been taken with respect to Etiwanda Avenue before 28 July it does not follow that no step would have been taken by that date if the complication of Telstra’s continued occupancy had not persisted. Mr McKendrick’s attention was, I consider, distracted by the Telstra occupancy issue. I do not consider, then, that the experience of Etiwanda Avenue casts clear light on what the situation would have been at Byrne Court had the plaintiff obtained an earlier lease of the latter premises. But it is an indication that there would probably have been some delay in obtaining a telephone connection; and therefore in establishing a computer link with Langtree Avenue.
§ Neither the move to Etiwanda Avenue nor the move to Byrne Court was planned with military precision. In the latter case that could not be surprising. In the former case I draw little from it. Mr McKendrick and Mr Leslie impressed me as practical people who would not have needed a battle plan to ensure that equipment and goods were transferred from one place in another with despatch and efficiency. Further, the actual speed of the move to Etiwanda Avenue is not a reliable guide to what the plaintiff could have achieved in unexceptional circumstances. I have earlier concluded that the move was slowed down because of Mr McKendrick’s concern that, despite what he was being told by Mr Murphy, and despite his reliance upon it, he harboured some doubts about the situation.

As I said a little earlier, looking at pertinent considerations it seems likely to me that by reason of the breaches now under consideration there was greater business disruption than would otherwise have been the case. It is likely that disruption was more pronounced at the outset than it would have otherwise been. The extent of initial disruption was likely, I think, to have reflected itself in the extent and duration of sales impact – for instance, by discouraging customers. It follows that the impact upon the plaintiff’s trading and profits was likely to have been greater and to have persisted for longer than it would otherwise have done. It is impossible to assess the monetary consequences of the breaches with scientific precision. Taking into account the various factors to which I have referred, I consider that the breaches now under consideration were responsible, in money terms, for a little in excess of half the amount claimed.

That conclusion leads on to consideration of the claim in contract. I am satisfied, as I have said, that there would have been some business disruption even had the lease of Etiwanda Avenue gone forward. It is impossible to assess with scientific accuracy the monetary impact of the loss of the bargain. Doing the best that I can I consider that the contractual breach was responsible in money terms for about two thirds of the amount claimed. That is the amount that the plaintiff should recover. I round it off to $41,000.

Anticipated savings lost

The plaintiff claims an amount of between $77460 and $154920 for costs savings that it would have obtained had it moved into new purpose built premises thereby consolidating two places of business into one.

Counsel for the defendants did not dispute the actual arithmetic of the savings - $38730 annually. But he submitted that no amount should be allowed to the plaintiff under this head of claim.

The plaintiff’s claim assumes that the plaintiff is locked into the Byrne Court lease for five years as a consequence of the defendants’ breaches; and that potential savings which it could have achieved by consolidating its business at a premises built for it by Aljor have been lost in that period.

Upon the assumption that the plaintiff is locked into Byrne Court for five years, then assuming that the Aljor premises would otherwise have been ready for occupation at the end of the first year of the Byrne Court lease, the plaintiff quantifies its claim at $154,920. But if the premises had only been ready for occupation at the end of three years’ occupation at Etiwanda Avenue – that is, the term of the lease plus the option period – then the plaintiff quantifies its claim at $77,460.

In my opinion the plaintiff has not made out its claim. It is clear on the evidence that the Aljor premises now in contemplation will not be completed at least before about mid-2002 and that it will thus be at least so long before the plaintiff takes occupation of a single premises for its business. But the unavailability of such premises until 2002 is unrelated to any default of the defendants.

Moreover, the claim assumes that the plaintiff is locked into the Byrne Court lease for five years. There is no reason of which I was made aware why the plaintiff could not seek to sub-let the premises if and when the Aljor premises are constructed. There was nothing to suggest that a sub-lease of the premises would be either impossible or difficult. I am not prepared to make the assumption that the plaintiff’s claim requires.

There are other objections to this claim which would, in my opinion, be fatal to its success. I need not refer to them.

Legal costs

The plaintiff claims $675.97 being charges rendered by Mr Watson to the plaintiff for work done by him in connection with the Aljor project in the period March to July 1999.

In my opinion this head of claim must be rejected. Suspension of the project in July 1999 was for reasons unassociated with any default by the defendants.

Aljor’s costs

Aljor invoiced the plaintiff for work done by it in connection with the project in the period up to July 1999. There was either a contractual obligation to pay Aljor or the plaintiff felt that there was a practical obligation to do so. The amount of the invoice was $3,500. The plaintiff paid that amount.

As I understand it, the plaintiff asserts that because of the defendants’ default it had to take a five year lease with Byrne Court, this bringing the Aljor project to an end – at least temporarily.

In my opinion this head of claim is not well-founded.

As at July 1999 the plaintiff would not proceed with the project because of concerns it had with the Seventh Street site; and because of some issue about the design of the premises. That had nothing to do with any default by the defendants. Then Aljor did not take up its option to purchase the particular land. That was Aljor’s decision. It may have been influenced by the fact that the plaintiff had not accepted what was on offer. But the plaintiff’s refusal stood apart from any default of the defendants. In all, there is no connection between any such default and the claim by Aljor upon the plaintiff with respect to its costs.

Increased costs of moving

The plaintiff alleges that by reason of the defendants’ default it was necessary:

§ to double–move equipment and goods that had been moved to Etiwanda Avenue;
§ to obtain assistance to move a large quantity of goods in a hurry to Byrne Court rather than making the move in its own time with its own resources;
§ to double-move equipment and goods that could not be stored at Byrne Court at the outset.

The plaintiff makes claim in respect of the cost of such work.

There is no doubt that steel-framed racking was moved to Etiwanda Avenue. That took place on 20 and 21 July. The plaintiff engaged a local builder, Mr Peter Johnston, to disassemble and re-assemble the racking.

Later, some but not all of the racking was moved to Byrne Court. Mr Johnston also did work in that connection.

Mr Johnston charged $27 per hour for his work. That was his normal rate. It was not suggested for the defendant that it was unreasonable. I should have thought that, even by standards in 1995, it was quite modest.

Mr Johnston rendered an invoice to the plaintiff. Dated 13 September 1999, it was for $3666 plus materials and hire costs of $220. The main amount represents about 136 hours work. Mr Johnston said that he worked a 10 hour day. In cross-examination he said that he worked roughly a week and a half dismantling and re-assembling the racking; and two days dismantling the racking at Etiwanda Avenue. He said also that the charge he made for re-assembling the racking at Byrne Court was on another invoice.

I am sure that Mr Johnston attempted to give accurate evidence; but I think it likely that his invoice in fact included work done both at Etiwanda Avenue and Byrne Court in connection with the second move. There was really insufficient time in late July for Mr Johnston to have spent 136 hours dismantling the racking at Ninth Street and re-erecting it at Etiwanda Avenue. Probably he spent about 75 hours on that job and about 61 hours on the move to Byrne Court.

The plaintiff is entitled to damages for the cost of double-moving the racking. In this case I consider that the damage is to be measured by the additional cost of moving some of the racking to Byrne Court. The plaintiff would have incurred the cost of moving all the racking in the absence of default by the defendants.

I therefore allow, in respect of Mr Johnston’s work, damages of $1750 – that is, representing about 61 hours’ work plus a proportion of the cost of materials and hire service.

I should refer next to four invoices submitted by Inland Crane Hire for amounts totalling $7015.

Two invoices pertained to the movement of racking: one, for $1850, dealt with movement of racking from Ninth Street to Etiwanda Avenue on 20 and 21 July. The other, for $900, related to the movement of racking from Etiwanda Avenue to Byrne Court on 20 August. The difference in charges is compatible with the fact that not all the racking was moved on the second occasion. I think that the plaintiff’s damages should reflect an allowance for the $900 spent, but not the $1850. It is the fact that the $1850 was spent. True also it is that the plaintiff did not in the end obtain the (possible) advantage of having all the racks at Byrne Court. But I am not persuaded that these circumstances (the latter of which was, I consider, more a matter of choice than necessity – contrary to evidence given by Mr McKendrick) require allowance to be made for the higher rather than the lower amount.

The other two invoices submitted by Inland Crane Hire related to the removal of a hopper associated with wood cutting machinery from Ninth Street; and its relocation to Byrne Court from an intermediate premises at which it had been temporarily stored.

It would have been necessary to remove the hopper from Ninth Street in any event. The plaintiff contended that, had the move to Etiwanda Avenue eventuated, the hoper would not have been installed. It would have been mothballed until Aljor constructed purpose-built premises; and then Aljor would have moved and installed the hopper at its cost. I see no reason not to accept the evidence given in that connection. The question which then arises is whether the defendants should be saddled with the cost of reinstatement. I consider that they should, not for breach of common law duty or of statute, but as damages in contract.

The consequence of the defendants’ default was that the plaintiff had to set up at Byrne Court. It had to commit to a lease of five years duration. In the exigencies of the time there was no other realistic choice. The period of the lease compelled a re-thinking by the plaintiff of what functions it should carry out at the leased premises. The decision to carry out a function that would not have been carried out at Etiwanda Avenue, this involving the set-up of some machinery, was apparently sensible. I do not consider that the cost which was incurred was too remote to sound in damages.

I consider that the plaintiff should be allowed, in its damages, the cost of reinstatement work, $1,750; but not the cost of removal, $2,515. The latter cost would have been incurred in any event.

It follows from what I have said that the plaintiff should be allowed, in its damages, $2,650 for work done by Inland Crane Hire.

I next refer to an invoice submitted by DWR Services in an amount of $5838. The evidence shows that it related to the setting up of a dust extractor system at Byrne Court. The system was part of the wood-cutting machinery established at Byrne Court. The argument against its compensability was essentially the same argument as was raised for the defendants and rejected by me in connection with the Inland Crane Hire charge for reinstating the hopper at Byrne Court. I consider that the plaintiff’s damages should involve an allowance for the work done by DWR.

The same conclusion applies to invoices totalling $3996.40 submitted by Foreman-Sheean electrical contractors to the plaintiff. The invoices related to electrical wiring necessary to run the plaintiff’s operations at Byrne Court.

Kelly & Young Trucking Co Pty Ltd performed work for the plaintiff on 1, 2 and 3 August, moving equipment and stores to Byrne Street. The company tendered invoices amounting to $975.

It is obvious that the plaintiff was placed in the position of having to move much equipment and stores urgently when it secured Byrne Court. But for Mr McKendrick’s persisting doubt – despite what he was told by Mr Murphy – that Telstra might not quit Etiwanda Avenue by 1 August, it is probable that the plaintiff would have moved more equipment and stores to Etiwanda Avenue in preparation for commencement of business on 2 August than occurred in fact. But for the defendants’ default there would have been less to move in the period immediately after 30 July than was in fact the case. But I also consider it likely that there would have been a need for some outside help in the days immediately after 30 July. There would have been a good deal to do, and quickly.

I am satisfied, then, that by reason of the defendants’ defaults the plaintiff did incur some additional cost in the period immediately after 31 July. I think that cost would be fairly, if arbitrarily, reflected by allowing one third of the invoices rendered by Kelly & Young. I would allow the same proportion of invoices totalling $580 submitted by Deakin Taxi Trucks.

Finally, the plaintiff called evidence to show that it paid its employees $4932.14 for weekend work associated with the move to Byrne Court. It was contended that this cost was incurred because of the need to do a great deal in a short time in order to set up Byrne Court for business. Again, I think that the defendants’ defaults probably brought about a need for the plaintiff’s staff to do more weekend work than would have been necessary had the move to Etiwanda Avenue proceeded. Doing the best I can, I think that the cost of additional work should be reflected by allowing one third of the overtime paid.

It does not follow, I should add, because I have allowed only one third of the invoices rendered by Kelly & Young and Deakin Taxi Trucks, and because I have allowed only one third of the overtime claim, that the extent of business losses suffered by reason of the defendants’ default was one third of the amount claimed rather than the two thirds which I have allowed. Considerations attending the different heads of damage were not the same.

In summary, I consider that the plaintiff ought recover damages against the defendants[63] in a rounded-off amount of $144,396 made up as follows:
[63]No question of contribution was said to arise.

§ Increased rent $35,000.00

§ Damaged goods $52,000.00

§ Loss of profit $41,000.00

§ Johnston Builders $1,750.00

§ Inland Crane Hire $2,650.00

§ DWR Services $5,838.00

§ Foreman-Sheean $3,996.40

§ Kelly & Young $325.00

§ Deakin Taxi Trucks $193.00

§ Overtime $1,644.00
Conclusion

Having regard to the manner in which the trial was conducted, there should be judgment for the plaintiff against all defendants for $144,396.

---

§ Increased rent	$35,000.00
§ Damaged goods	$52,000.00
§ Loss of profit	$41,000.00
§ Johnston Builders	$1,750.00
§ Inland Crane Hire	$2,650.00
§ DWR Services	$5,838.00
§ Foreman-Sheean	$3,996.40
§ Kelly & Young	$325.00
§ Deakin Taxi Trucks	$193.00
§ Overtime	$1,644.00

[2001] VSC 95

18 April 2001