Motorline South City Pty Ltd v Cosmetic Suppliers Pty Ltd - [2016] QDC 45

DISTRICT COURT OF QUEENSLAND

CITATION:

Motorline South City Pty Ltd v Cosmetic Suppliers Pty Ltd [2016] QDC 45

PARTIES:

MOTORLINE SOUTH CITY PTY LTD ACN 004 555 088

Plaintiff

v

COSMETIC SUPPLIERS PTY LTD ACN 000 303 391

Defendant

FILE NO/S:

3780/2012

DIVISION:

Civil

PROCEEDING:

Trial

DELIVERED ON:

10 March 2016

DELIVERED AT:

Hervey Bay

HEARING DATE:

9, 10, 11 and 12 November 2015

JUDGE:

Bowskill QC DCJ

ORDER:

1.        Judgment for the plaintiff, with final orders to be made following directions 2-4 below.

2.        Direct that, in the event the parties are agreed on a form of order, consistent with these reasons, including as to interest and costs, they submit a draft order within 14 days of the date of these reasons, for the court’s consideration.

3.        Otherwise, direct that each party submit the form of order it proposes and brief submissions explaining the differences (no more than 3 pages), within 14 days of the date of these reasons.

4.        If a further oral hearing is required, it will be accommodated at a time convenient to the parties in the week commencing 28 March 2016.

CATCHWORDS:

LANDLORD AND TENANT – COVENANTS – where the lessor installed a lift in the building which included the leased premises under an express provision in the lease permitting it to do so - whether that was such as to breach the express covenant of quiet enjoyment or implied obligation not to derogate from the grant – whether a requirement for the lessor to exercise the right reasonably and in good faith could be implied in the circumstances

LANDLORD AND TENANT – COVENANTS – where as a result of renovation and construction work carried out by the lessor, including to the leased premises, the lessor left some parts of the leased premises, and areas visible from the premises, in an unfinished state – whether, in doing so, the lessor breached the express covenant of quiet enjoyment or implied obligation not to derogate from the grant – whether a covenant that the lessor would return the lessee to a leased area that was materially in the same physical and aesthetic condition as previously could be implied in the circumstances – whether the lessor breached this covenant

LANDLORD AND TENANT – TERMINATION OF THE TENANCY – REPUDIATION – whether the lessor repudiated the lease by its conduct in relation to the installation of the lift and leaving the leased premises, and areas visible from the premises, in an unfinished state – whether the lessee repudiated the lease by purporting to terminate the lease

Competition and Consumer Act 2010 (Cth), Schedule 2, ss 21 and 22

Apriaden Pty Ltd v Seacrest Pty Ltd (2005) 12 VR 319
Aussie Traveller Pty Ltd v Marklea Pty Ltd [1998] 1 Qd R 1
Australian Competition & Consumer Commission v CG Berbatis Holdings Pty Ltd (2003) 214 CLR 51
Byrnes v Jokona Pty Ltd [2002] FCA 41
Famous Makers Confectionary Pty Ltd v Sengos (1993) NSW Conv R 55-672
Glasshouse Investments Pty Ltd v MPJ Holdings Pty Ltd [2005] NSWSC 456
Gordon v Lidcombe [1966] 2 NSWR 9
Hudson Crushed Metals Pty Ltd v Henry [1985] 1 Qd R 202
Inverstanley Holdings Pty Ltd v South East Qld Water Corp Ltd [2004] QSC 201
Keswick Developments Pty Ltd v Keswick Island Pty Ltd [2012] 2 Qd R 114
Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd (2007) 233 CLR 115
Lagouvardis v Brett and Janet Cottee Pty Ltd (1994) NSW ConvR 55-714; (1994) 6 BPR 13,467
Southwark London Borough Council v Mills [2001] 1 AC 1
Spathis v Hanave Investment Co Pty Ltd & Anor [2002] NSWSC 304
Specialist Diagnostic Services Pty Ltd v Healthscope Ltd [2012] 41 VR 1
Orsay Holdings Pty Ltd v Mecanovic and Ors [2013] QCA 232
Pourzand v Telstra Corporation Ltd [2012] WASC 210
Progressive Mailing House Pty Ltd v Tabali Pty Ltd (1985) 157 CLR 17
Project Blue Moon Pty Ltd v Fairway Trading Pty Ltd [2000] ANZ Conv R 628
Telstra Corporation Ltd v Sicard Pty Ltd [2009] NSWSC 827
Todburn Pty Ltd v Taormina International Pty Ltd (1990) 5 BPR 11,173
Willmott Growers Group Inc v Willmott Forests Ltd (2013) 251 CLR 592

COUNSEL:

P J McCafferty for the Plaintiff

B McGlade for the Defendant

SOLICITORS:

McCullough Robertson Lawyers for the Plaintiff

Colin Biggers & Paisley for the Defendant

Introduction

This is a dispute about enforcement of a lease, which arose in circumstances where the plaintiff/lessor carried out renovations, including the installation of a lift, to the building in which the leased premises were located.
The plaintiff says that the defendant/lessee wrongfully purported to terminate the lease, and in doing so, unlawfully repudiated the lease. The plaintiff subsequently terminated the lease and, by these proceedings, seeks to recover rental arrears up to the date of the plaintiff’s termination of the lease, and lost rent for the balance of the term, together with other costs and expenses.
The defendant says that it had proper grounds to terminate the lease, on the basis of the plaintiff’s earlier repudiation of the lease. The defendant also counterclaims for damages for breach of contract, comprising costs incurred by it (additional rent, relocation and storage costs) as a consequence of the plaintiff’s repudiation of the lease; and, alternatively, on the basis that the plaintiff engaged in unconscionable conduct in breach of s 21 of the Australian Consumer Law.[1]
[1] Schedule 2 of the Competition and Consumer Act 2010 (Cth).
Although the pleadings are somewhat lengthy and convoluted, having regard to the nature and scope of the issues, ultimately the main issue to be determined is whether the defendant had a basis to terminate the lease when it did, because of the plaintiff’s actions in relation to the renovation of the building, in particular the installation of the lift and the physical state of the second floor following those renovations.[2]
[2]See also the expanded list of “key issues” in the Agreed Statement of Facts and Issues filed on 12 November 2015.
Regrettably, the factual context set out below is also somewhat lengthy and convoluted, reflecting the extensive exchanges that took place between the respective parties between about April 2010 and October 2011, the evidence before the court and the various issues agitated at the trial.
Before turning to that factual context, there is one further introductory matter to address.
Directions were made in advance of the trial that the evidence in chief of witnesses was to be by affidavit. Both parties relied on such affidavits, with the relevant deponents then being cross-examined. To a large extent, the documents annexed to these affidavits were common (comprising many emails exchanged between various representatives of the plaintiff and defendant, respectively).[3] In outlining the factual context, and summarising the relevant evidence in order to make appropriate findings, I have considered, and endeavoured to synthesise this material. However, I have focussed particularly on the documents, in many cases in preference to the witnesses’ general recollections set out in the affidavits. The relevant events occurred about 5 years ago, and I was left in some doubt about the reliability of those recollections, other than by reference to documents.[4]
[3]There was also sought to be tendered an agreed bundle of documents, comprising 4 folders. Other than about 3 emails, the contents of these folders duplicated the annexures to affidavits, and accordingly the tender was rejected.
[4]See Watson v Foxman (1995) 49 NSWLR 315 at 319, where McLelland CJ in Eq said “… human memory of what was said in a conversation is fallible for a variety of reasons, and ordinarily the degree of fallibility increases with the passage of time, particularly where disputes or litigation intervene, and the processes of memory are overlaid, often subconsciously, by perceptions or self-interest as well as conscious consideration of what should have been said or could have been said. All too often what is actually remembered is little more than an impression from which plausible details are then, again often subconsciously, constructed. All this is a matter of ordinary human experience”. See also Evans v Braddock [2015] NSWSC 249 at [70]-[77] per Hallen J.
The Court also had the advantage of a view of the premises, which of course is not evidence but merely an aid to understanding the evidence.

Factual context

The plaintiff (Motorline) is the owner of land and a building at 51 Edward Street in Brisbane, having purchased it in about April 2010. At that time, there was one tenant in the building, the defendant (Cosmetic),[5] which operated a hairdressing training studio from premises on the second floor of the building.[6]
[5]Cosmetic is a part of the Procter & Gamble group of companies, and is the registered holder of the “Wella Australia” business name (Affidavit of Lynton Rose (exhibit 1) (Rose) at [6] and pp 10 and 18). In some of the email correspondence referred to below, there are references to “Wella” or “P&G”, which, for the purposes of these reasons, are to be understood as references to Cosmetic.
[6] Current Title Search, Rose at p 25.
The building was described as an old heritage listed building. It has 5 levels, with the “ground floor” being in fact slightly above Edward Street level,[7] and there being an additional four levels above, and a basement below. Cosmetic’s leased premises were on the second floor of the building (the level above the ground floor).[8] Prior to 2010, the building had no lift, and access to all levels was by a set of wooden stairs located at the front of the building.[9]
[7] Rose at T 1-33.21.
[8]Although there was some inconsistency in how these levels were referred to in the evidence, for ease of reference in these reasons, I will refer to the level on which Cosmetic’s premises were located as the second floor and the lower level as the ground floor.
[9] Rose at [47].
Cosmetic had occupied those premises for some years. Craig Geerssen, who worked for Cosmetic as a sales consultant from 1998, and was the Queensland State Sales Manager of Cosmetic from 2005 until April 2011,[10] said Cosmetic had held a lease over the premises since around 2002 or 2003.[11]   Cosmetic entered into the lease the subject of this proceeding, with the previous owner of the building, in January 2010, for a 5 year term commencing on 2 November 2009 (the lease).[12] The lease was assigned to Motorline when it purchased the building.[13]
[10]          Affidavit of Craig Geerssen (exhibit 12) (Geerssen) at [8],
[11]Geerssen at [21]. Cf paragraph 2(b) of the Agreed Statement of Facts and Issues (filed in court 12 November 2015).
[12]          A copy of the lease appears at Rose at pp 34-69.
[13] Affidavit of Kristan Conlon (exhibit 9) at [9].
The premises occupied by Cosmetic under the lease comprised an area of 130m², taking up most but not all of the second floor of the building.[14] The area at the front of the building (facing Edward Street), including the stairs and landing, was not included in the leased area. Also, an area at the back of the building, including what was the fire escape, toilets, a corridor leading to the fire escape, and two other small areas, were not included in the leased area (although Cosmetic did use those other areas, for storage and for a washing machine and dryer).[15]
[14]See item 5 of the lease (Rose at p 34) and the attached lease plan (Rose at p 67); Rose at [15]-[25] and [36]; lease plans (Rose at pp 28-29) and diagram (Rose at p 31).
[15] Rose at [21]-[25].
It appears that there was a misunderstanding on the part of some of Cosmetic’s staff of the extent of the area leased to Cosmetic, in that they thought those area were included. For example, the plan annexed to Mr Geerssen’s affidavit, at p 33, shows the washing machine area and toilets, as part of the leased premises.[16]
[16]To similar effect, see the affidavit of Robert Bradder (exhibit 11) (Bradder) at [9] and p 1; and the affidavit of Jacqueline Pearson (exhibit 13) (Pearson) at [13] and p 153. This is also apparent from Ms Pearson’s email of 22 September 2011, referred to in paragraph [155] below.
As at April 2010, there were various partitions and fixtures in place within Cosmetic’s tenancy, including a larger room on the far left hand side (looking from Edward Street), used as a conference room; a smaller room on the far right hand side, used as an office; and an area adjacent to the “office” in which there was a raised “dais” (used as a “wet area” for sinks, client chairs and wash basins).[17]
[17] See the plans at Rose pp 29 and 31, and the explanation in Rose at [27]-[33].
The premises were used primarily by Cosmetic’s “Education team”, but also at times by its “Sales team” (when they needed an office to base themselves).[18] The Education team used the premises as a hairdressing training studio, which included conducting “theory classes”, “practical classes” and “guest artist seminars”, provided for paying customers, as well as “development days”, involving training or education for staff.[19]
[18] Geerssen at [24], referring to Pearson at [14]-[15].
[19] Bradder at [12]-[16].

The lease

Relevantly, under the lease:
(a)the “Premises” were defined in clause 2.1(15) to mean the area shown hatched on the sketch plan annexed to the lease;[20]
[20] Lease, in Rose at pp 37 and 67.
(b)the permitted use of the premises was “Hairdressing Training Studio” (clause 5.1 and item 6 of the reference schedule);
(c)clause 12.1 (quiet enjoyment) provided:
“If the Tenant promptly pays the Rent and observes and performs the covenants and agreements in this Lease the Tenant may peaceably hold and enjoy the Premises during the term of this lease without any interruption by the Landlord or any persons lawfully claiming under or in trust for the Landlord.”
(d)clause 13.1(1)(a) (default by tenant) gave the landlord a right to re-enter the premises and determine the lease, if the rent or any part of it was unpaid for 14 days after it became due;
(e)clause 13.1(2) (damages) provided for the damages recoverable by the landlord where the landlord determines the lease under clause 13.1(1);
(f)clause 19.2 required the tenant to remove fixtures, fittings etc within 14 days of the expiration or earlier determination of the lease and make good the premises, and gave the landlord a right to recover the costs of doing so, should the tenant fail to do so;
(g)clause 23 (special conditions) provided:
“The following conditions will apply to this Lease regardless of whether or not other provisions in respect of them are contained elsewhere in this Lease. To the extent of any inconsistency the provisions of this clause shall prevail:-
23.1The Landlord has the right to proceed with but is not obliged to effect the following works:-
(i)install an elevator in a location at the Landlord’s discretion;
(ii)construct a new fire escape at the rear of the Building incorporating decks off the 3 upper floors; and
(iii)create additional internal space for the Lower Ground and Ground Levels;
(iv)paint the exterior façade of the building fronting Edward Street.”[21]
[21] Emphasis added.

The proposed renovations

Soon after purchasing the building Motorline decided to renovate it.[22] The proposed renovation works were to remove the stairs at the front of the building, and build a new wooden floor where the old staircase used to be; install a new lift to serve every level of the building; construct a new fire escape at the rear of the building; replace the existing toilets on each level of the building with new exclusive use toilets situated on the rear fire escape, including a disabled toilet; and (with the exception of Cosmetic’s premises) refurbish each floor of the building.[23]
[22] Rose at [49]-[50]; Rose at T 1-30.
[23] Rose at [51].
In terms of where the new lift would be situated, Lynton Rose, a director and the controlling mind of Motorline, said this was chosen by him, having regard to advice from an architect, taking into account various structural limitations, and because he thought it maximised usable floor space, preserved the most natural light and would be the most appropriate for what he then considered the likely future use of the building (office space).[24]
[24] Rose at [53]-[55]; T 1-32.33-35; 1-59.46 – 1-60.
Motorline engaged another company, Electrite Pty Ltd (Electrite), to carry out the renovation works to the building. At that time (2010-2011), Mr Rose and his wife owned the Electrite business.[25] Robert Taylor was the general manager of Electrite, and had been for many years.[26]
[25] Rose at T 1-26.31.
[26] Affidavit of Robert Taylor (exhibit 5) (Taylor) at [4]; Rose at T 1-26.

Early communication of the proposed renovations

Motorline’s plans were communicated by Mr Rose and Mr Taylor, to representatives of Cosmetic, in or before June 2010.
Mr Geerssen’s evidence in chief was that shortly after Motorline purchased the building, he had a conversation with Mr Rose, sometime between early and mid-2010, in which among other things Mr Rose told him that he was going to install a lift, which would replace the stairs on the Edward Street side of the building, and that Cosmetic would have to move downstairs while that was being installed, but that Motorline would pay the costs associated with that.
Mr Geerssen’s recollection was that Mr Rose said to him something to the effect that “… [w]ith the floor of the building which you are currently on I am renovating it such that it will increase the size of the premises you are leasing at the moment. I would also like to refurbish your premises to bring it in line with the refurbishments done to the remainder of the building”. He also recalled Mr Rose saying that the renovations and refurbishments would add value to the premises and “you will need to pay more”, suggesting a rate of around $500 per m².[27]
[27] Geerssen at [39]-[45].
Mr Geerssen says that he responded by saying that he “would personally like to refurbish our level”, but that that he was not the person who made those sorts of decisions, and he would be happy to pass the information “up the chain”.[28]
[28] Geerssen at [46]-[47].
Mr Geerssen said he thought he ought to check whether the landlord had the right to install a lift, and so contacted Cosmetic’s in-house lawyer, Nimalan Rutnam, who informed him there was a clause in the lease permitting the landlord to install a lift.[29]
[29] Geerssen at [49].
In his affidavit, Mr Rose denied having this conversation with Mr Geerssen, saying that he could not recall meeting Mr Geerssen on site at the premises until February 2011.[30]   He was less clear in his recollection in cross-examination, saying he believed he only had one conversation with Mr Geerssen on site (being a meeting he describes in February 2011), but acknowledging that he could not really remember.[31]
[30]          Further affidavit of Mr Rose (exhibit 2) (Rose 2) at [15].
[31]          Rose at T 1-38 – 1-39; 1-41 – 1-42; 1-70.
I found Mr Geerssen to be a credible and reliable witness, whose evidence I generally accept. Although I also found Mr Rose to be a credible witness, he acknowledged some imperfection in his recollections, and I also consider there was some desire, on the part of Mr Rose, to distance himself from early comments attributed to him about plans to refurbish the whole building, including the second floor occupied by Cosmetic. On balance, I consider it is more likely than not that a conversation along the lines described by Mr Geerssen did take place.
That is not to say that, by this conversation, as described by Mr Geerssen, Mr Rose can be taken to have offered to, or indicated in any way that he was planning to, refurbish or renovate Cosmetic’s existing tenancy other than in circumstances where that would be, effectively, if indirectly, paid for by Cosmetic by entering into a new lease at an increased rent.I accept Mr Rose’s evidence that he had no intention to generally refurbish the interior of Cosmetic’s tenancy, as he considered that was Cosmetic’s responsibility under the lease,[32] and saw no reason to do so whilst the lease remained in place.[33]
[32] Rose at [52].
[33] Rose at T 1-46.28-29; 1-48.29-34; 1-52.

There was also evidence of a meeting between Mr Taylor and Sommah Flett, at the building, in June 2010.[34] Ms Flett was the National Education Co-Ordinator employed by Cosmetic.[35] The circumstances in which this meeting came about were disputed between Mr Taylor (who said it was planned[36]) and Ms Flett (who said it was a chance encounter[37]); and some aspects of what took place were disputed (in particular, whether Ms Flett was shown any plans, which Mr Taylor says she was,[38] but which she denies). But it was not disputed that Mr Taylor told Ms Flett that the renovations would involve the stairs being replaced by a lift, and that Cosmetic would have to move to the ground floor.[39]   They walked down to the ground floor and Mr Taylor showed her around that floor, which Ms Flett said was a good space, better than the second floor premises already occupied by Cosmetic.
[34]          Exhibit 15; Flett at T 3-49 – 3-51.
[35]          Affidavit of Sommah Flett (exhibit 16) (Flett) at [1]-[4].
[36]          Taylor at [34]-[37].
[37]          Flett at [26]-[31] and [40].
[38]          Taylor at [44]-[48].
[39] Flett at [42].
Prior to the meeting with Ms Flett, Electrite had commenced some of the renovation works, in particular to cut the lift well in the basement and ground floor of the building.[40] According to Mr Taylor, at the time of this meeting, a hole had already been cut through the ground floor for the lift well, and there was a waist high barricade erected around the lift well for safety, which they both walked past when looking at the ground floor premises.[41] Ms Flett could not recall seeing any such barriers.
[40] Taylor at [38]-[40].
[41] Taylor at [56]-[58].
Again, I found both Mr Taylor and Ms Flett to be credible witnesses. Mr Taylor candidly acknowledged, in his oral evidence, that he did not recall these events very well, after five years,[42] and Ms Flett, in some respects, had the same, understandable, inability to recall all the details of these events. This may be the explanation for the differences in their evidence; but in any event, it is unnecessary to resolve.
[42] Taylor at T 2-8.41-44.

Did Motorline obtain Cosmetic’s consent to the installation of the lift?

One of the issues that took up quite some time at the trial was whether Motorline had obtained Cosmetic’s consent to the installation of the lift, in the location it was installed (this being part of Motorline’s pleaded case in reply, and also the subject of evidence from Mr Rose and Mr Taylor).
However, I consider this issue was a distraction from the real issues in the case.
Clause 23.1(i) of the lease conferred on Motorline the right to “install an elevator in a location at the Landlord’s discretion”. As a matter of construction, there is nothing in clause 23, or indeed elsewhere in the lease, which could be said to make the exercise of that right conditional upon first obtaining the consent of Cosmetic.
As a matter of fact, on the evidence, I find that Motorline, by Mr Rose, was not under any misconceptions about that. Although the language of “consent” was used, in the affidavits, and then in cross-examination, it was apparent that what was sought, and obtained, was Cosmetic’s cooperation, in a practical sense, with the various inevitable inconveniences (including temporary relocation) associated with the proposed renovation works.
The effect of Mr Rose’s evidence, as I understood it, was that he knew the lease expressly contemplated the lessor (Motorline) installing a lift;[43] but since there was a tenant on the second floor (Cosmetic), and they would be affected (in an immediate sense, by an inability to access their premises during construction), he wanted them to agree to the work, because in a practical sense if they did not, it would be impossible to do the work.[44] Apart from anything else, Cosmetic needed to agree to relocate to the ground floor while the works were being carried out.[45]   Mr Rose made this clear when he said that if Cosmetic had not done so willingly, he would have involved his solicitors in order to resolve the situation (not that he would not have installed the lift).
[43]          See, for example, Rose at [67], referring to a conversation with Mr Taylor.
[44]          Rose at T 1-32 – 1-34; 1-36.
[45] Rose at [56].
Mr Geerssen gave clear evidence that neither Mr Taylor nor Mr Rose ever sought his consent to the location of the lift – rather, they presented the installation of the lift as something that was going to happen, and their discussions were about what Motorline was going to do to relocate Cosmetic to the ground floor temporary premises, while the installation work was carried out.[46] Ms Flett’s evidence was to the same effect.[47]
[46] Geerssen at [47] and [92]-[95].
[47] Flett at [40(c)] and [42(j)].

State of Cosmetic’s premises prior to the renovation works

One of the complaints made by Cosmetic concerns the physical state of its premises on the second floor, following the renovation works. In order to understand the arguments put by each of Cosmetic and Motorline about this issue, it is necessary to have a sense of what the premises looked like before the renovations were undertaken.
Unfortunately, there was no objective (for example, photographic) evidence of the state of the premises occupied by Cosmetic prior to April 2010.
Mr Rose described the tenancy as of “a fairly poor level of quality” and as “very, very ordinary indeed” as far as inner city accommodation is concerned.[48] In an email he sent on 9 September 2011 to a consultant engaged by Cosmetic, Mr Rose described the premises as “very old, grubby and in need of refurbishment”.[49] Mr Taylor described the tenancy, including its flooring, prior to the renovation works, as “well past its use by date”.[50]
[48]          Rose at T 1-29.30-32; T 1-90.14-21.
[49]          See paragraph [129] below.
[50]          Taylor at T 2-28.31.
Mr Geerssen said that when Cosmetic first moved into the premises at 51 Edward Street (which he had said was in about 2002 or 2003), it was not a newly refurbished premises, and agreed that it was “quite tired”.[51]
[51] Geerssen at T 2-77.30.
Ms Flett gave evidence of her impressions, on the occasion when she was at the building in June 2010 (this being the first, and it seems only, time she went there), as follows:
“And he took you to the – what I’ll call the ground floor of that building. Is that right? --- That’s right.
To show you the works that the landlord had completed already? --- To show me the floor?
Yeah? --- Not necessarily what had been completed or what hadn’t been completed. He just showed me the ground floor, which was shiny new tiles, freshly painted.
New tiles, did you say? --- Yes.
Freshly painted? --- Which – I mean, from not having seen that ground floor before, to me, in comparison to the first floor, which we occupied, that looked like it was shiny and new and had been renovated.”[52]
[52] Flett at T 3-54.10-23. Emphasis added.
Her evidence in this regard was spontaneous, not given in response to any particular question about how either the existing premises, or the ground floor appeared.
Ms Flett’s evidence also was that, “[s]ometime shortly prior to 2 July 2010 some of the members of the Education team had seen the ground floor area of the building and thought it might be a preferable space to use”.[53] She said that this was because the ground floor was newly refurbished.[54] The people she was referring to, she said, included Mr Bradder. What she said was:
“When they saw that it was beautiful on the ground floor and that our first floor still, you know, looked not so good, they actually thought that it would be better to go to the ground floor… because it was prettier…”[55]
[53] Flett at [45].
[54] Flett at T 3-55.17 (there is an error in the transcript, “nearly” ought to read “newly”).
[55] Flett at T 3-55.32-36. Emphasis added.
On the other hand, Mr Bradder, a senior technical educator, who had been working at the premises since 2007,[56] who was asked directly about the appearance of the second floor, did not agree that the fit out (on the second floor) was “tired”, and said it was “definitely adequate”.[57] When asked about the ground floor (to which Cosmetic were temporarily relocated), he said it “looked like it had been used… it looked old”.[58] His evidence was quite at odds with that given by Mr Geerssen and Ms Flett, as well as Mr Rose and Mr Taylor, and I do not accept it as reliable. There were other respects in which it appeared Mr Bradder was disposed to give evidence which was supportive of the defendant’s position; not necessarily reflective of the true position.[59]
[56]          Bradder at T 2-52.30.
[57]          Bradder at T 2-37.39-41.
[58]          Bradder at T 2-54.3.
[59]          See, for example, paragraph [58] below.
On the basis of Ms Flett’s and Mr Geerssen’s evidence, which is consistent with that of Mr Rose and Mr Taylor, I find that, prior to September 2010, the appearance of Cosmetic’s second floor premises, in terms of walls and flooring, was tired, old, and past its “use by date”.

Early interest in moving to the ground floor

In the context of the reaction of Cosmetic’s staff, as described by Ms Flett, to the “prettier” ground floor, on instructions from Gina Thomas (who was Ms Flett’s supervising manager[60]), Ms Flett emailed Mr Rose on 2 July 2010 enquiring about the possibility of moving to the ground floor.[61]
[60] Flett at [43].
[61] Flett at [47]-[48] and p 3; Rose at p 74.
Mr Rose responded to say that there would be no issue if Cosmetic wanted to move to another floor, although that would involve a new lease, and the rent would be significantly higher.[62]
[62] Flett at [50] and p 2; Rose at p 73.
Ms Flett said that, after receiving that email, a decision was made by Ms Thomas not to relocate to the ground floor or have a complete makeover of the studio.[63] That was communicated to Mr Rose on 9 July 2010.[64]
[63] Flett at [51].
[64] Flett at [53]; Rose at p 72.

Cosmetic’s knowledge of the location of the new lift

Cosmetic was relocated to the temporary premises on the ground floor between about 30 September and 4 October 2010,[65] at a cost to Motorline of $43,312 plus GST.[66]
[65] Paragraph 10 of the Agreement Statement of Facts and Issues.
[66] Rose at [84] and pp 83-84; Taylor at [93].
Prior to this, Mr Taylor met with Mr Geerssen in late August 2010.[67] In the course of this meeting, Mr Taylor said, among other things, that they discussed in some detail the proposed fit out for the ground floor during Cosmetic’s temporary relocation there.[68] They walked around the ground floor. By this time, Mr Taylor said floor to ceiling partition walls had been erected by Electrite, around the lift well, leaving about 1.5m on each side, to create a construction space. Although the lift itself was not, therefore, visible, he said “you could tell where the Lift well was, as the partition walls formed a rough square shape around the Lift Well, and you could walk right around the Lift well to the windows on the Edward St side of the Building”.[69]
[67]          Taylor at [63]-[79].
[68]          Taylor at [72]-[76].
[69]          Taylor at [67]-[70].
In these respects, Mr Geerssen agreed with what Mr Taylor said about their conversation, including that Mr Taylor showed him where the lift would be installed.[70]
[70] Geerssen at [65]-[68].
On 26 August 2010, Mr Taylor sent an email to Mr Geerssen, attaching a plan showing the proposed fitout for the ground floor to which Cosmetic would be temporarily relocated while the renovation works were being carried out.[71] This plan shows the location of the lift, at the Edward Street end of the building.
[71] Rose at pp 77-79; Taylor at [81]-[83] and p 25.
After a further exchange between Mr Taylor and Mr Geerssen about timing of the relocation works, Mr Geerssen forwarded the email chain to Ms Flett asking if she could “arrange sign off so we can get underway”. Ms Flett in turn forwarded that to Ms Thomas, seeking approval for the relocation work, which Ms Thomas communicated in a one-word email on 26 August 2010 “approved”.[72] Mr Geerssen passed this on to Mr Taylor, emailing him to say “Approval below. We’re good to go”.[73]
[72] Rose at pp 80-82; Taylor at pp 26-28.
[73] Taylor at p 26.
Plainly, what was “approved” was the fit out of the temporary ground floor premises. But, relevantly, the location of the proposed lift was shown on the drawing attached to the email which was circulated.
The lift was constructed and installed while Cosmetic were in occupation of the ground floor temporary premises, with the “construction wall” around the lift well.[74]
[74] Rose at [93]-[94]
On the basis of the August 2010 meeting between Mr Taylor and Mr Geerssen, when Mr Geerssen was shown the location of the lift; the 26 August 2010 email, attaching a plan showing the location of the lift, forwarded to Ms Flett and Ms Thomas; and the construction of the lift, while Cosmetic was on the ground floor; it is reasonable to conclude that Cosmetic did know, from that time, where the lift was going to be in the building, including on the second floor.
Cosmetic did not seriously contend to the contrary; but did contend that its staff did not appreciate, at that time, the impact the lift would have on the second floor.[75]
[75] Defendant’s closing submissions at [61]-[62].
In that regard, Mr Bradder said that it had occurred to him, shortly after Cosmetic was moved down to the ground floor, that the location of the lift “might possibly affect our ability to conduct our Education classes when we were moved back upstairs”. His evidence was that he recalled raising the matter with “the project manager”, whose name he could not recall, and that he said to this person “The lift is not going to cause us problems is it”. He says the project manager responded, “No. It won’t have any significant impact. Once the lift is installed it will be similar to what it was like before”.[76] Mr Bradder said that this “alleviated my concerns” and he did not turn his mind to the issue again, and that this is why he never raised the issue with any of Mr Geerssen, Ms Pearson or Ms Thomas.[77] But Mr Bradder acknowledged, in cross-examination, that he had not told this project manager what Cosmetic’s operations were, or explained how the classes operated, and so they would not have had any idea what Cosmetic’s operations involved at a practical level.[78]   His evidence about having “concerns”, and those concerns being alleviated by some unnamed person is, in the circumstances, implausible.
[76]          Bradder at [17]-[20].
[77] Bradder at [21].
[78]          Bradder at T 2-56 – 2-57.

Renewed interest in remaining on the ground floor

Almost immediately after being relocated to the ground floor, there was renewed interest in moving there permanently. On 2 September 2010, Ms Flett emailed Mr Rose asking for a copy of the “contract for the Wella Studio on 51 Edward St”, and saying “we would like to change our contract to be permanently on ground level once the renovations are complete” and asking if he could help with this.[79] Mr Rose responded saying he would have no problem with that, but again saying the rent would be “significantly higher” than what Cosmetic was paying under its existing lease.[80]
[79] Rose at p 86.
[80] Rose at pp 87-88.
The only response to that email was from an Adrian Mounsey, following up the request for a copy of the lease (for the purpose of preparation of annual financial statements), and otherwise saying he would “leave the issue of the possible relocation with Sommah/Gina/Craig and you”.[81]
[81] Rose at p 89.
Mr Rose said he had no further contact with anyone from Cosmetic until 1 November 2010. On that date, he sent an email to Ms Flett, saying:
“As you are aware, as part of the renovations to the building, we have temporarily relocated your business to the Ground floor and will refit it back to the 2^nd floor as works are completed with at least the elevator operating. This building work has been carried out at our expense.
It is not our intention to do any renovations to your tenancy as this lease was in place prior to building upgrade.
You have mentioned on a number of occasions that you would like to relocate to the Ground floor.
It is expected that the entire building works will be completed in January 2011 subject to all approvals from the relevant authorities and engineers so it is timely to enquire just what your plans are.
It would be appreciated if you could please confirm;
·that you want to relocate back to your original tenancy, or,
·you want to relocate back to your original tenancy but would like it refurbished in a similar manner to the other floors at an additional annual rent, or,
·you would like to negotiate a new lease and rent to relocate to the Ground floor.
If you are not the person who will make the final decision, I would be pleased if you would ask that person to contact us as soon as possible as we have a time line for the building works we need to work with.”[82]
[82] Rose at p 92.
Ms Flett did not respond to that email.[83]
[83] Rose at [114].
On 26 November 2010, Mr Rose sent a follow up email, asking for a response, and saying “[i]t is critical you advise your intentions within the next 5 days if you want … us to do any work to your tenancy or you want to move to another location”.[84] Ms Flett responded that day, saying “[w]e would like to return to original tenancy”.[85]
[84] Rose at p 93.
[85] Rose at p 95.
That of course answered one of the questions (whether Cosmetic wanted to relocate permanently to the ground floor), but not the other (whether Cosmetic wanted to refurbish its existing premises, on the second floor).

To refurbish / renovate the second floor premises – or not?

As a result, Mr Rose responded to Ms Flett on 8 December 2010, saying:
“Thank you for your reply.
I assume you are happy to return to it as it was? That is to say, we will not refurbish it to the level of the other floors as this would involve additional rent.
Is that what you want?”[86]
[86] Geerssen at p 14.
Ms Flett forwarded that email on to Ms Thomas on 8 December, asking her to “please confirm regarding QLD tenancy below”. Ms Thomas then sent that email on to Jennifer Lee (whose role was not explained in the evidence, but who appears, from her email signature, to have been the Finance Manager[87]), copied to Mr Geerssen, saying:
“Hi Jennifer and Craig
FYI below – just confirming that we will be moving back upstairs as planned – please align”.[88]
[87] Geerssen at p 24.
[88] Geerssen at p 13.
On 9 December 2010 Mr Geerssen responded to Ms Flett, Ms Thomas and Ms Lee, saying “aligned”.[89]
[89] Geerssen at p 13.
It does not appear, from the evidence, that this was communicated to Mr Rose, in response to his 8 December 2010 email.
There is then a time gap in the correspondence, until Mr Rose sent a further email to Ms Flett, on 24 January 2011, saying:
“I would appreciate you advising me who in your organisation is the correct decision making person to talk to regarding your lease at the above address.
As you are aware, we are in the process of renovating the building, which apart from renovating each level, the main alteration will be the new fire escape (complete with toilet block on each level), and elevator to each floor.
Accordingly your lettable area will increase and as such the lease should reflect this change.
As we are renovating each floor you might like to have the renovation done to your floor.
It seems to make sense that the whole of the building should be brought up to the same level and as the net lettable floor area will alter in any case it would make further sense to address a new lease with the new renovation as well as the additional floor area.
I am not sure you will want to be is (sic) a building with (sic) you have the only non renovated floor.
As the works are drawing to a close, we would like to have discussions with you as quickly as possible.”[90]
[90] Rose at p 97 (emphasis added).

Ms Flett emailed on 27 January 2011, asking Mr Rose to “provide a costing per square metre for 1^st floor of 51 Edward St Brisbane”.[91] Mr Rose responded, on 27 January, providing rates for the ground floor ($700 per m² plus outgoings); and the second floor (i.e. Cosmetic’s tenancy), in respect of which Cosmetic was then paying $430 per m², but which Mr Rose said would increase to $500 per m², if Cosmetic wanted Motorline to refurbish the current tenancy to the same standard as the other floors.[92]
[91] Rose at p 98.
[92] Rose at p 99.
Subsequently, on 2 February 2011, and in response to Mr Rose’s email of 24 January, Ms Flett emailed Mr Rose and advised that “[a]t the moment our lease renovations/renewal in 2014 is being decided between Management”, and that his contacts were Gina Thomas and Craig Geerssen.[93]
[93] Rose at p 101.
Following this, Mr Rose said he decided to contact Mr Geerssen, as he had found Ms Flett “quite frustrating to deal with”.[94]
[94] Rose at [132].
Mr Rose telephoned Mr Geerssen in about early February 2011, and arranged to meet at the building a few days later. According to Mr Rose, when they met, Mr Geerssen said that he wanted to refurbish Cosmetic’s tenancy once the renovation works were complete, that he had been looking at the issue for some time, had submitted a proposal to management, and was waiting to hear back. Mr Rose said that Mr Geerssen said he was thinking about general refurbishing, plus moving the conference room up to the front of the building to access the natural light. Mr Rose says he told Mr Geerssen that Motorline would assist with that, provided Cosmetic was willing to enter into a new lease.[95]
[95] Rose at [136].
Mr Geerssen recalled having a conversation with Mr Rose at around this time, and said that the conversation was, to the best of his recollection, consistent with an email that he sent, on 7 February 2011, to Jennifer Lee, David Kennedy (the managing director of Cosmetic[96]) and Gina Thomas, with a copy to Nimalan Rutnam. He also recalled saying to Mr Rose something to the effect that, “[w]here the lift is at the moment – in the middle of the floor – is going to affect our ability to do classes and the number of people we can cater for. We need a more open spaced area like we had before. We’ll need to do something such as renovations which relocate the conference room and the laundry”.[97]
[96] Thomas at [6(d)].
[97] Geerssen at [84].
Mr Rose denied that Mr Geerssen said anything like that,[98] his evidence being that no one made any comment about the location of the lift, until the lawyers’ letter received on 27 January 2012 (referred to below).[99]
[98] Rose at T 1-71.8.
[99] Rose 2 at [17].
Mr Geerssen’s 7 February email, to Ms Thomas and others, was in the following terms:
“Hi All
I just wanted to outline and give a few more specifics regarding the current situation in the Brisbane Studio.
·Renovations to the building are a few weeks away from completion. There has been a lift, a new fire escape and new toilets being installed on each floor. Nimalan and I have both checked current lease agreement and there was a provision for the landlord to do these works included as a clause in the contract.
·Due to the refurbishment our floor space will increase from 130 sq mtrs to 185 sq mtrs approx. This will be confirmed exactly by a 3^rd party surveyor engaged by the landlord. The reasons for the increase is due to the removal of the front stairwell and the current fire escape. These areas are both now internal floor space which can be utilised. The increase in rent would be $23,650 p.a. based on the extra space based on our sq mtr rate of $430 per annum. Current $55,900 new rent $79,550.
·This increase applies is [if] we move back into the current space (we are currently relocated onto the ground floor) as is, which is not feasible. The location of the lift shaft reduces our current studio space quite considerably unless we do some renovation such as relocating the conference room and laundry.
·Based on this, the landlord has offered to do the renovations and give a brand new space to our specs if we accept a rent increase to $500 per sq mtr per annum. As we are in the CBD this rate is still quite reasonable. This would include new ceilings, air conditioning, walls and floor. This would increase our rent to $92,500 ($12,950 extra p.a. based on 185 sq mtrs).
·If we decided to engage a 3^rd party to do the renovations (which need to be done it to make the space workable) it would probably cost at $80,000-100,000 which would need to be budgeted for in the same FY. If we accept the increase and the landlord does the renovation as part of his building renovations it would cost $51,800 over 4 years ($12,950 per annum x 4 years left on lease). This would be the easiest and more economical way to do it as we can do it now whilst the landlord ahs (sic) the builders already engaged on site. To do this I need to give him written confirmation quite quickly within the next 2 weeks.
·The Brisbane studio, based on numbers is the busiest in ANZ (Gina can supply exact numbers) so we need to make sure we have a workable space.
Can you please look at this and address this as a matter of urgency as we have a lot of class bookings that need to be catered from next week. We are OK in our current temporary studio but we will be moving back upstairs in the next 3-4 weeks. Before you ask, yes I have explored the option to [of] staying on the ground floor but the sq mtr rate is over $700 per annum so isn’t feasible.”[100]
[100] Geerssen at [85] and pp 20-21. Emphasis added.
Having regard to the contents of that email, I consider it more probable than not that Mr Geerssen did say something to Mr Rose about how the presence of the lift might impact on the layout of their premises. Plainly, the installation of the lift, and the removal of the stairs at the front of the building, did alter the layout of those premises. It seems hardly surprising that this would be the topic of discussion between Mr Rose and Mr Geerssen.
But equally, the impression I formed of the discussion between Mr Geerssen and Mr Rose was not that Mr Geerssen saw this as an intractable problem. My impression, based on Mr Geerssen’s evidence, is that he was operating on the basis that the landlord had a right to install the lift; therefore, he would not have been complaining to Mr Rose about that, as opposed to thinking of solutions to work around it. It was apparent that he could visualise some changes to the layout that would improve the workability and use of the space; he considered that what Mr Rose was proposing (in terms of carrying out these internal renovations, on the basis of a new lease at $500 per m²) was reasonable; and he was trying to “sell” this to his superiors within Cosmetic.
It becomes apparent, from the subsequent emails, that Mr Geerssen was frustrated by the response, or lack of response, he received from those superiors. The correspondence also reveals increasing frustration on the part of Mr Rose.
On 10 February 2011, Mr Geerssen sent an email to Mr Rose, saying “I am just waiting for sign off from the MD so we can get the ball rolling… hopefully I can finalise everything with you next week. Sorry its taken a so long”.[101]
[101] Geerssen at p 19; Rose at [138].
Some 2 weeks later, on 25 February 2011, Mr Rose sent an email in reply saying “I need some action on this issue please”.[102]
[102] Geerssen at p 18-19.
On 1 March 2011, Mr Geerssen emailed Mr Rose, saying “It shouldn’t be too much longer. Finance never make things easy”, and also asking if Mr Rose could send him a letter with “the new floor size and per sq mtr pricing as I know they will request something in writing next”.[103]
[103] Geerssen at p 18; Rose at [140].
Mr Rose responded that the approximate size of the new floor would be about 185 m²; that the rate would be $500 per m²plus outgoings and GST; and that “we can probably do most of the relocation internal work for you if you want to sign up on a new 5 year lease on the above rates”.[104]
[104] Geerssen at p 18; Rose at [142].
Separately from these exchanges, on 4 March 2011, Ms Flett sent an email to Ms Rosa Cannizzaro (Mr Rose’s assistant), asking, among other things, “[d]o you have details regard the proposed renovations to 1^st floor that we are returning to soon?”[105] Mr Rose responded to that email, on the same date, saying:
“As mentioned to Craig, we do not intend to do any renovation work to Level 2 unless you agree to the restructure of the lease and rent as I have previously outlined. We will just complete the necessary works to get you back as you were before.
When we complete the renovations, level two will have the current toilets removed and placed within a new exclusive use toilet complex on the new fire escape structure thus providing more space within the floor.
What I have said to Craig is that we would probably be able to accommodate his wishes at no charge to you with the relocation of office / lecture room, but I do not know exactly what he wants.
However, I would think a very broad cost we would incur be in the order of at least $20K to $25K.”[106]
[105] Rose at p 103.
[106] Rose at p 103.
Reflecting the apparent communication breakdown, Ms Flett responded on 4 March 2011, saying:
“Just to confirm the only changes to renovations on level 2 will be the bathroom area? The original layout for the rest of the studio will remain the same but with an upgrade such as floor/walls etc. Can you provide a list of all changes you will make in the renovations finishings / paint etc…”[107]
[107] Rose at p 105. Emphasis added.
I accept Mr Rose’s evidence that he had not said anything to Ms Flett which would explain why she thought there would be any upgrade to the floor/walls of Cosmetic’s original tenancy, absent a new lease being entered into.[108] Motorline’s position was clearly articulated in the earlier emails. Ms Flett’s email does not refer to the discussions that had taken place with Mr Geerssen. Ms Flett’s email demonstrates a problem, which becomes more apparent from subsequent emails, resulting from, I infer, the involvement of a number of people within Cosmetic, at differing levels of seniority and decision-making ability, some of whom had no first-hand knowledge of the circumstances at the building, and who were at times at cross-purposes with what the people in Brisbane, such as Mr Geerssen, were doing.
[108] Rose at [151].
In any event, Mr Rose responded, on 4 March 2011, by saying:
“Yes. The only change will be to the bathroom area if you decide to do nothing. The original walls as it is now, will remain the same unless you decide to agree to previous emails.”[109]
[109] Rose at p 105.
Within Cosmetic, and seemingly also involving consultants from Jones Lang LaSalle, there were discussions continuing in late March 2011, in relation to Mr Geerssen’s proposals in his email of 7 March 2011.[110]
[110] Geerssen at [87]-[88] and pp 22-25.
Mr Geerssen’s frustration with these internal discussions, and the delay in getting an answer, is evident from the email he sent to Mr Rose on 28 March 2011, after Mr Rose had pressed him for a response:
“I have explained your off[er] to them 4 times, its not that difficult to understand.
The joys of dealing with decision makers that aren’t locally based I suppose.
Thanks for your patience, I have just sent them a fairly scathing email, which should solicit a response.”[111]
[111] Rose at p 110.
About 2 weeks later, on 12 April 2011, Ms Flett sent an email to Mr Rose (copied to a number of people, including Ms Thomas and Mr Geerssen), in which she said:
“Apologies for the delays in getting back to you.
Confirmation we will not be going ahead with the refurbishment and rental increase on return to our original tenancy.
Can you please provide our new floor plan for original tenancy with the recent inclusion of lift.”[112]
[112] Rose at p 113.
Mr Geerssen resigned from Cosmetic shortly after this.[113]
[113] Geerssen at [91].

Moving back to the second floor

Other than an email from Ms Flett on 28 April 2011, asking for a “move in date”,[114] Mr Rose said he had no further contact with anyone from Cosmetic until 28 June 2011.[115]
[114] Rose at p 115.
[115] Rose at [172].
On 28 June 2011, Mr Taylor sent an email to Mr Rose, saying:
“I have tried to make contact with Craig from Wella, but unfortunately he no longer works there. I have made contact with a Gina Thomas who is overseeing the tenancy.
I have explained to her that we will be moving them back and there is some areas that will require them to make good at there (sic) costs.
She has asked for the landlord contact details so she can discuss flooring and lease details.
Her contact details are…
I have not given her your details, but she did say that Wella was not contributing to any upgrade costs.”[116]
[116] Taylor at p 38.
This email prompted Mr Rose to send a detailed email to Gina Thomas, in order to clarify matters.[117] In that email, dated 28 June 2011, he said:
[117] Rose at [175]-[178].
“As Craig is no longer with your company I will bring you up to speed with what I had discussed with him in the past in case you are not aware.
First of all, you will not be paying for any work to your tenancy that is required because of the renovations to the building.
Likewise we will not be doing any work to the tenancy that is not required for us to complete the renovations to the building.
The relocation of your tenancy to level 1 and back to level 2 we will complete ASAP once the elevator is completed and the fire escape is serviceable.
Once the work is completed we will survey the building so as to have an accurate measurement of the each level (sic). This will alter the square meterage of the tenancy and we will then have to amend the lease to reflect the new area and this will mean that additional rent will be payable. Currently, the area in the lease is 130m2. A rough measurement of the new area is about 185m2.
The existing toilet area will be demolished and you will have new exclusive use toilets at the rear of the building incorporated in the new steel structure.
Craig had spoken of the need to better service your business, to erect office partitions within the new tenancy area. What he had in mind exactly, I do not know, but such cost would have to be to your account.
You are currently paying $412.50/m2 plus limited outgoing expenses. We will be renting the renovated levels 3 and 4 at $500/m2 + outgoings. Basement and level 1 will be a higher rent.
As I mentioned to Craig, if you did want to re-fit out your tenancy, I would be prepared to consider doing the work at no charge to yourself (this would be subject to assessing the cost of exactly what you wanted) in return for you accepting the $500 m2 +outgoings.
If you accepted this proposal, we would also be prepared to offer a new 5 year lease with fixed 4% annual increases.
If you did decide to accept this proposal we would need to have a written agreement in place so each party fully understands the position.
If you do not want to proceed with the proposal as outlined above then that is fine and we will simply complete the renovation works, measure the tenancy and move to have the lease amended to reflect the new area. …”[118]
[118] Rose at p 116-117.
Mr Rose said he received no response to this email from Ms Thomas.[119]
[119] Rose at [179].
Ms Flett emailed Mr Rose on 9 August 2011, asking for a new floor plan showing the original occupancy with the dimensions now that the lift had been installed;[120] and requesting confirmation that the floor area of the original tenancy would be made safe, referring to reports of nails sticking out of the floor.[121]
[120] She had earlier requested this, by email on 28 July 2011 (Rose at p 118).
[121] Rose at p 120.
Mr Rose responded, on the same date, saying:
“As I have mentioned to you several times recently, I cannot give you the floor plan until I get the building measured and drawn by the surveyor and this cannot be done until all works have been completed which should occur by the 25^th August 2011. Once I have completion I will get a surveyor to measure the building after that date…”[122]
[122]Although it is not expressly referred to, I infer that Mr Rose (or someone on his behalf) did subsequently send Ms Flett a copy of the new survey plan for the leased floor: see the email from Mr Rose to Ms Cheah on 8 September 2011 (Rose at p 125).
In that email, Mr Rose also noted that “Electrite are currently working on having your floor reinstated and when the work is completed we will move you back into it” and that “[u]ntil then rest assured that every item of detail will be attended with no nails sticking out of floors”.[123]
[123] Rose at p 119.
It seems that Mr Taylor (Electrite) had already made arrangements to move Cosmetic back into their tenancy, later in the week of 9 August 2011.[124]
[124] Rose at p 121.
Cosmetic moved back into its original tenancy on 11 and 12 August 2011,[125] again at Motorline’s cost.[126]
[125] See also paragraph 12 of the Agreed Statement of Facts and Issues.
[126] Rose at [191], [201]-[202]; Taylor at [114], [116].

Complaints about the state of the premises, after moving back

On 15 August 2011, Ms Flett sent an email to Mr Rose, saying:
“I need to talk to you urgently regarding our site. Please provide your contact number or call me.
We have classes to be conducted next week and both ground floor and first floor are incomplete and will not be suitable for our business to continue. If this work is incomplete we will need to look for alternative arrangements.”[127]
[127] Exhibit 4.
Mr Rose’s evidence was that apart from some issues regarding unfinished flooring, both within and outside of Cosmetic’s tenancy, Cosmetic’s tenancy was returned to Cosmetic in exactly the same condition as it had been before the renovation works.[128] In relation to the unfinished flooring, Mr Rose’s evidence was that he understood from previous discussions with Mr Taylor that Cosmetic were obtaining quotes for new flooring, and because of this he instructed Electrite not to finish off a couple of areas where the flooring was unfinished (described in Rose at [194]), until they knew what Cosmetic was doing.
[128] Rose at [192]-[198].
Mr Taylor said that, apart from the renovation works (installation of the lift etc[129]), “Cosmetic’s Tenancy was returned to Cosmetic in the same state it was in before the Renovation Works. If there were blemishes on the walls before the Renovation Works, those same blemishes were there after the Renovation Works”.[130] Mr Taylor also said:
“On Mr Rose’s instructions, Cosmetic’s Tenancy had not been refurbished (unlike the other floors in the Building). Essentially, apart from the Renovations, and aside from a few walls which Electrite painted with a single coat of paint, the Premises were returned to Cosmetic in the same condition as before.
Electrite wasn’t supposed to paint any walls at all inside Cosmetic’s tenancy. My workmen did so because they were painting the new walls around the Lift, had some extra paint, and thought they could use it to freshen up a few tired looking walls. They asked my permission and I said do it.”[131]
[129] Taylor at [19].
[130] Taylor at [20].
[131] Taylor at [118]-[119].
The evidence given by Cosmetic’s witnesses was quite at odds with this. For example, Ms Flett said that shortly after Cosmetic moved back up to their original tenancy, she was informed by (unnamed) members of the Education team, that “the studio was in an appalling state and that, until the situation was rectified, they needed to obtain an alternate premises to run their classes and seminars from”.[132] Ms Flett said that she was instructed by Ms Thomas to look for alternative premises, until the situation with the studio and the landlord was sorted out, which she did, with the first arrangement to hire alternative rooms commencing from 26 September 2011.[133]
[132] Flett at [72].
[133] Flett at [75]-[80].

Mr Bradder’s evidence was that, at the time Cosmetic was to be relocated back up to the second floor, the premises was an “absolute mess”; there were “significant defects in the premises”;[134] it had not been cleaned and there was dust everywhere.[135] He telephoned Ms Jacqueline Pearson, who took over the role of State Sales Manager from Mr Geerssen, and told her about this.[136]
[134]         See also Bradder at [64]-[78].
[135]         Bradder at [23]-[27].
[136]         Bradder at [28]; Pearson at [31]-[32].
Ms Pearson said that she went to the premises about a week later, and noted a number of problems. In her affidavit, she said that at this time she also noticed “that the location of the lift was problematic”.[137] Although she had been to the premises frequently prior to this, she said it was not until August 2011 that she realised the location of the lift was “going to have a significant adverse effect on the ability of the Education team to conduct its business activities from the studio”, although at that stage her primary concern was the “state of the studio”.[138]
[137] Pearson at [35].
[138] Pearson at [35].
Ms Pearson sent a lengthy email to Ms Thomas (and others within Cosmetic) on 2 September 2011, detailing a number of issues with the premises, and saying that “it is not suitable for clients to attend”.[139] The “key problems” referred to in Ms Pearson’s email are as follows:
[139]         Pearson at [37] and pp 3A-3B.
“1.       Floor area around lift has no covering on it. Where the original stairs were and floor has been installed this has not been covered to match in with existing floor.
2.        In the 18 months the builders have been working on the lift and new building area the existing studio floor has had a lot of wear and tear. The images attached are the floor after cleaning and supposedly ready for studio use. This should really be replaced.
3.        In one area when Rob walked on the floor his foot went through it.
4.        Fire hose has been installed into what was the original laundry and the space to get to it is not a legal door size. This would not meet the fire Marshalls check or OHS.
5.        The gate at the bottom of the stairs to outside (because they have not yet put some sort of barrier to stop someone putting their hand through the fence) has been padlocked. Thus if there was a fire on the premises we & our clients (if could not use lift – Which in fires they tell you not to do) could not get out of the building. This would definitely be in breach of fire safety regulations.
6.        Where toilets used to be the walls and toilets have been removed, the holes in the floor and ceiling have not been repaired and the floor where the walls have been removed have not been repaired. Again another safety issue.
7.        Door from Studio to laundry cracked and door does not stay closed.
8.        Projector not installed properly, screen hung in wrong place and audio not working
9.        Old laundry area now a recess that cannot be used (unless we incorporate into storage area in board room, however this will mean the fire hose door would need to be moved to where the fire sign is currently)
10.       back window has been bricked in but no covering added inside the building
11.       Ceiling tiles in board room badly marked, I was of the understanding these were being replaced but builders confirmed yesterday they are not.
12.       Lots of marks on all walls, looks very tacky. The whole area needs to be painted in a crisp clean white.
13.       Wireless and photo copier/printer not working since coming back upstairs.”
It is noteworthy that the location of the lift is not one of the issues she mentions.
Having regard to Ms Pearson’s contemporaneous email, I accept that the second floor premises were in somewhat of a mess when Cosmetic moved back up there in August 2011. It may be inferred that, in part at least, this was a consequence of the construction works which had been taking place for more than 12 months by then. It may also have been contributed to by the process of moving Cosmetic’s fit out back to the second floor. But it is also reasonable to infer that the second floor premises, which were tired and old before the renovations, were a disappointment to Cosmetic’s staff after having spent over a year on the “shiny and new” ground floor. There were clearly some unfinished areas, including the new wooden flooring which had been installed following the removal of the stairs and landing at the Edward Street end of the building; some areas of flooring needing patching around the lift (point 1 from Ms Pearson’s email); and the areas at the back of the premises (including where the original toilet had been removed), which had not been finished off (point 6).
Otherwise, in relation to the list of problems referred to by Ms Pearson:
(a)the state of the second floor premises prior to the renovations must be borne in mind - having regard to the finding made about that above, and the evidence of Mr Taylor,[140] which I accept, I also find that the problems identified with the flooring (point 2), the crack in the door (point 7), the ceiling tiles (point 11) and the walls (point 12) were more likely than not to have been there prior to April 2010; and
(b)in part, it reflects the misunderstanding on the part of Cosmetic’s staff, as to what was or was not part of its original leased area. This is apparent from points 6 (where the toilets used to be) and 9 (that laundry cannot now be used).
[140]See, for example, Taylor at [179] (crack in door); [216]-[221] (ceiling tiles), [236]-[240] and [246] (walls), [242] (floors) and at T 2-28.29-.32; T2-35.37 - 2-36.2.
I will return to these matters below.

Cosmetic’s evidence about the impact of the renovations on its activities

As I understood Mr Bradder’s evidence, about 4 or 5 weeks after moving back to the second floor, Cosmetic had moved to alternate premises, and did not conduct any further classes or seminars from the Edward Street studio (although they did use the studio for development days).[141] Ms Pearson suggested it as a shorter period, of around 2 to 3 weeks.[142]
[141] Bradder at [31]-[33].
[142] Pearson at [39].
This was said to be mainly because of the physical appearance of the premises. But it was also Cosmetic’s case that the renovations, in particular the installation of the lift, had a serious impact on their business activities, in terms of reducing the number of customers who could attend the various classes they offered.
Mr Bradder’s evidence was that after the renovations, the number of people Cosmetic could accommodate, for its theory classes, guest artist seminars and practical training sessions was markedly reduced.[143] He sought to demonstrate this by comparing diagrams drawn by him, illustrating the layout of the premises before and after the installation of the lift.[144] There was no objective evidence about this, however, either in the form of photographs of how the studio was set up for various classes before and/or after; or in the form of records of numbers of customers who attended, before and/or after.
[143]Bradder at [36]-[63] and pp 3-8 (diagrams depicting how, according to Mr Bradder, the premises were set up for each of these types of sessions, pre and post the renovations).
[144] Bradder at pp 3-8.
Each of Ms Thomas,[145] Mr Bradder[146] and Mr Geerssen[147] acknowledged that people attending the classes are paying customers, and there are records kept of bookings, and attendances, and payments.   Yet no evidence of any of those kinds of records was produced by Cosmetic, to support its contention that following the installation of the lift, fewer people could attend the various sessions.
[145]         Thomas at T 3-37.
[146]         Bradder at T 2-57.
[147]         Geerssen at T 2-76.10.
Even if it be accepted that not many classes were conducted after the renovations, records of this kind could at least have corroborated what was being said about numbers of customers before.
Mr Bradder’s evidence about this was not persuasive, in part because of concerns elsewhere expressed about his reliability, but also because the “before and after” comparison was somewhat artificial and contrived.[148] Another difficulty emerging from Mr Bradder’s evidence was that he described the ground floor (where Cosmetic were relocated to) as being smaller than the premises on the second floor (prior to the renovations),[149] something which is readily understandable given that not only was there a lift well, but a construction wall surrounding it. Yet there was no evidence led about how that impacted on Cosmetic’s ability to run classes, and cater for numbers of customers.
[148]Bradder, cross-examination, at T 2-59.7 – 2-62.10 (in terms of size and location of walkways provided for, and whether other adaptations could have been made, such as moving the projector, or changing where lunch was served, and so forth).
[149] Bradder at T 2-53.32.
Having regard to these matters, I am not satisfied, on the balance of probabilities, that as a consequence of the installation of the lift, it was no longer possible to cater for the same number of customers as before.

The involvement of Ms Cheah

Around this time Cosmetic decided to involve an external consultant in its engagement with Mr Rose, an “Analyst from Jones Lang LaSalle Property Consultants based in Singapore” who was to be Mr Rose’s “point of contact regarding the relocation”.[150]
[150] Email from Ms Flett dated 6 September 2011 (Rose at p 124).
Ms Cheah was not called to give evidence at the trial, and the plaintiff invited the Court to draw a Jones v Dunkel inference that her evidence would not have assisted the defendant’s case. The email exchanges between Mr Rose and Ms Cheah are numerous and detailed. Although the plaintiff describes them as “critical to the case”, it is unclear what Ms Cheah could have added to the emails, had she given oral evidence. I am not convinced there is any inference to be drawn.
Mr Rose made contact with Ms Cheah, by email dated 8 September 2011, saying:
“I assume for the purposes of this email you have a copy of the current lease and Sommah [Flett] has sent you a copy of the new survey plan of the leased floor.
As to a quick background, we have carried out improvements to the building which primarily involved installing an elevator to service the 5 levels and a new fire escape, and new exclusive use toilets to each level. All works associated with the relocation of your client and the placement back to their original tenancy has been executed at no cost to your client.
On completion of the works we have had the building surveyed to establish the net lettable area for each of the levels. The current lease has survey plan showing 130 sq meters against a new survey of 168 sq meters.
Accordingly we have instructed your (sic) lawyers to prepare an amendment or new lease (whichever is applicable or more desirable) to reflect the changes.
Once this is available I will arrange for it to be emailed to you…”[151]
[151] Rose at p 125.
There was then an exchange of emails between Ms Cheah and Mr Rose, on 8 and 9 September 2011, the relevant parts of which are as follows.
On 8 September Ms Cheah emailed Mr Rose, saying “[I] Understand that improvement works have been made to the building. Kindly advise whether there is any agreement signed between P&G and the Landlord/Building Management for this. If yes, I would appreciate that you share a copy with me”.[152]
[152] Rose at p 129.
Mr Rose responded, on the same date, by saying that “[t]here is/was no written agreement with P&G regarding the refurbishment of the building. We simply sought and received their verbal co-operation to make the refurbishment works possible and in doing so, they liaised on a day to basis with the builder”. He also said that “[t]heir particular tenancy whilst now serviced by an elevator and new toilet block has not been refurbished other than what was necessary to complete the overall works”.[153]
[153] Rose at p 128.
Ms Cheah responded to this by saying:
“I understand from P&G that there are damages to the physical space e.g. holes in the walls and ceiling, exposed wires. P&G is unable to conduct their hairdressing training classes.
Kindly advise whether these damages can be made good to the original condition.”[154]
[154] Rose at p 128. Emphasis added.
Mr Rose responded to Ms Cheah’s email, saying:
“I think that is all incorrect.
I was in the tenancy a week or so ago and frankly it looked quite good. The builders have in fact repainted just about all the walls. However I will check it out and come back to you.”[155]
[155] Rose at p 128.
The following day, 9 September 2011, Ms Cheah sent a further email to Mr Rose, saying:
“P&G has sent me photos showing the following:
·     Holes in the walls, floor and ceiling
·     Unfinished floor
·     Exposed wires on walls
·     Windows blocked by bricks
·     Doors that don’t close
·     Glue that has not been removed
·     Stains on ceiling
With the above damages, P&G’s Business is interrupted as they have expressed the condition is unsuitable for visitors/clients.
Appreciate your help to check the physical conditions. It is best that you can share photos so that we are sure the Landlord/Building Management has made good to the original condition before moving the tenant back to the unit…”[156]
[156]         Rose at p 127. Emphasis added.
It is clear from these emails that the focus of complaint was on the physical conditions in the premises. There is no mention of the lift.
Mr Rose responded to Ms Cheah in the following terms:
“… P&G have been back in their tenancy for at least 3 weeks now. It is incorrect to say that the tenancy is not suitable for staff and visitors. They have used the tenancy without any loss of time and continue to do so. They have never NOT been able to occupy their tenancy.
I suggest you send me the photos so I can deal with a specific issue rather than generalities.
I have made it perfectly clear to P&G that we would NOT being (sic) refurbishing their particular tenancy. I assume they have forwarded that correspondence to you.
You need to understand that their tenancy is (sic) been like it is for several years, I (sic) my very person view, very old, grubby and in need of refurbishment. Anything we have done in the moving and relocating back would have been an improvement to it.
I note you have mentioned a number of items that appear very minor.
Whilst I will investigate each one, the list demonstrates what I have stated that they simply do not understand the situation.
An example of this is the “Windows blocked by bricks”
The window is not blocked by bricks, it is deliberately partly bricked up to a certain level to provide fire rating to the fire escape to comply with regulations.[157]
The item “Unfinished Floor”. Again, this is not our responsibility. The tenancy has a wooden floor. As I mentioned in the previous email the stairs at the front of the building were removed and the floor replaced. That is where the job ends. It is the tenants (sic) responsibility to fit whatever floor coverings they wish as part of their fit out. Likewise at the rear of the tenancy, we have removed the old toilets and opened up the area. In the process we have left it freshly painted, but again the tenant have to put down whatever floor coverings they want at their cost…”[158]
[157]This is a window which was at the rear of the building, outside the area leased to Cosmetic (Rose at [225] and at p 29).
[158] Rose at pp 126-127.
In response to this email, Ms Cheah sent a further email on 9 September 2011, in which she said “I understand that there may [be] a communication breakdown in the team”, and sought clarification on a number of points.[159]
[159] Rose at p 146.
Ms Cheah also sent the photographs to Mr Rose, on 9 September 2011.[160]
[160] Rose at pp 130-143.
Mr Rose then sent a lengthy email in reply to Ms Cheah on that date, which commenced with him saying:
“I have had a look at the photos and have also just arrived back in my office from a visit to the building and in particular the P&G tenancy.
The simple reply I have to all the photos is that apart from the ones that show the flooring, all the others are outdated, some are irrelevant and in my view no further action is required. As for the floor, as I mentioned in my last email, it is up to the tenant to place the floor coverings of their choice on the floor.
I think you need to understand that this is a very old building, Heritage listed going back to the 1890’s. Very little renovation had been done to the building since the 1980’s. Each level was accessed by an open staircase at the front of the building running parallel to the front wall. All P&G’s clients and staff had to use these open tread wooden stairs to access the tenancy and the general décor was very very ordinary. In my personal view it was a disgrace and in fact, they were the only tenant in the building when we purchased it. In commercial terms, the building was near unlettable. …”[161]
[161] Rose at pp 144-145.
Mr Rose said that, on 13 September 2011, he visited Cosmetic’s tenancy and spoke to “Cosmetic’s on-site manager, Anne-Maree”. He recalled a conversation with Anne-Maree, in which she said to him that “Brisbane management want to put down new floor coverings and relocate the meeting room to take advantage of the natural light”, to which Mr Rose responded, in part, that he could have Electrite provide a quote. He said that he also discussed the areas around the lift with Anne-Maree (where the linoleum was missing); Anne-Maree asked him if that was going to be fixed, and Mr Rose said that it would be fixed up, “but there’s no point doing anything about it now until we know if Cosmetic is going to replace the floor coverings”.[162]
[162] Rose at [239]-[242].
I note that, in some of the Cosmetic emails there is reference to “Marianne”,[163] which may be the same person that Mr Rose is referring to, albeit by the wrong name (although this was not explored at the trial). In any event, it is clear that there were internal discussions within Cosmetic about fixing up the flooring[164] and, in the circumstances, I accept Mr Rose’s evidence about this.
[163] See, for example, paragraph [147] below.
[164] See below at paragraphs [159] and [162].
That Mr Rose had such a conversation with the “manager” is also supported by the email that he sent to Ms Cheah later on 13 September:
“Below is an email I sent to Gina (I have no idea who Gina is) as I was directed to do so by Sommah Flett back on 28^th June 2011 for your information.[165]
[165] This was the email Mr Rose sent to Gina Thomas on 28 June 2011 – see paragraph [94] above.
I have been to the tenancy this morning and have spoken to the manager. She has told me that Craig Geerssen had plans drawn up for the refitout of the tenancy but they were rejected by head office. She believes that the layout on these plans is what is needed for the refit to allow the school to operate efficiently.
I have not seen the plans but the work she described to me I have estimated at being worth about $30,000. It could not be more than $40,000.
I do not think that the powers that be have any idea of the poor conditions in the tenancy, otherwise they would act on the recommendation.
When we purchased the building P&G were already using areas outside of the leased premises for storage. The additional space created appears to me to be absolutely necessary for their operation.
There is no doubt a level of frustration from their Brisbane management with head office in Sydney as it is fairly simple to resolve the matter and Sydney seem to be doing nothing at all.
Because head office have not responded to OK the refit, the people are in a state of transition and frankly fed up with it all. There is equipment everywhere and in the view of the Brisbane management this is making the workplace difficult to work in. This is NOT a fault of the renovation work carried out by us. What I mentioned in my last email, that P&G simply need to resolve what they want to do with the extra space and do it, is causing problems to the point that I understand the group that actually do the teaching are moving to another location at the end of the week.
As mentioned to P&G previously, if they do not want the extra space (ie the difference between the 130 sq m and the 168 sqm) then we will build partition walls to cordon the areas off. This will effectively remove the space that they are saying has no floor coverings or has holes in the floor.
So there is no doubt as to what I am saying, I do not have a problem if they do not want to pay for the additional space, but at the same time we will not allow them to use it free of charge.
If they do wish to use the additional space then they will have to pay for it. They would have a right to have that additional space at the same rate per square meter as they are currently paying.
If they want to do a refit, then they can do so, subject to us approving who the contractors are to do the work as the new refurbishment works are under warranty. Their lease has 3 years remaining from November 1 next. If they wish, I am happy to enter into a new 5 year lease as detailed below, that is $500 per square meter plus outgoings at $82.00 per square meter, I am happy to do so.
What is important is that this saga is not drawn out. We want the matter resolved without delay.”[166]
[166] Rose at pp 152-153 and [245]. Emphasis added.

As to that latter point, although again this was not addressed by Motorline as a matter of law, it is reasonable to imply a term that the landlord would, following the exercise of its right to install the lift, return the tenant to premises of an equivalent area (that is, accounting for space lost to the lift), and which were in substantially the same physical condition, at least in so far as it concerns walls, floors etc. It follows from the discussion above that it was inevitable that something would change because of the installation of the lift in terms of the internal layout of the premises.
In considering this argument, it is necessary to separate out the impact of the installation of the lift, from the physical state of the premises post-construction, and to keep in mind the physical state of the premises prior to the construction works.

Repudiation / fundamental breach - principles

The ordinary principles of contract law, including as to termination for repudiation or fundamental breach, apply to leases.[286]
[286]Progressive Mailing House Pty Ltd v Tabali Pty Ltd (1985) 157 CLR 17 at 29; Apriaden Pty Ltd v Seacrest Pty Ltd (2005) 12 VR 319 at [3] and [63]; Willmott Growers Group Inc v Willmott Forests Ltd (2013) 251 CLR 592 at [39].
Relevantly, repudiation refers to conduct of a party which evinces an intention no longer to be bound by the contract or to fulfil it only in a manner substantially inconsistent with the party’s obligations.[287] The test is an objective one, as to “whether the conduct of one party is such as to convey to a reasonable person, in the situation of the other party, renunciation either of the contract as a whole or of a fundamental obligation under it”.[288]
[287]Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd (2007) 233 CLR 115 (Koompahtoo) at [44], referring to Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd (1989) 166 CLR 623 at 634 per Mason CJ.
[288]Koompahtoo at [44], Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd at 659.
It is frequently observed that repudiation is “a serious matter, not to be lightly found or inferred”.[289]
[289]See Keswick Developments Pty Ltd v Keswick Island Pty Ltd [2012] 2 Qd R 114 at 129 [56] per Muir JA (and the authorities there referred to).
In Byrnes v Jokona Pty Ltd at [71]-[72] Allsop J discussed the distinction between repudiation and substantial breach warranting termination. By reference to Mahoney JA’s reasons in Honner v Ashton (1979) 1 BPR 9478 at 9492, he described the distinction as follows:
“In the case of repudiation… the intention or the acts of the defaulting party can be distilled as the relevant factor. There is an evincing of an intention not to be bound by the obligations of the contract, or whilst intending to comply, only to do so in a manner inconsistent with those obligations and in no other way… In the case of substantial failure of performance… one looks to the nature and consequences of the breaches, which may or may not direct attention to acts of the other contracting party.”[290]
[290] References omitted.
Allsop J illustrated the potential significance of the difference by reference to Lagouvardis v Brett and Janet Cottee Pty Ltd,[291] a case in which although the consequences of the breaches were relatively minor, taken together they evinced an intention not to be bound by the contract.
[291]Lagouvardis v Brett and Janet Cottee Pty Ltd (1994) NSW ConvR 55-714; (1994) 6 BPR 13,467 (Lagouvardis).
But of course there are other examples, such as Pourzand v Telstra Corporation Ltd [2012] WASC 210 (Pourzand) where the breach is so serious, as to constitute both a fundamental breach, and repudiation. In that case, it was found that the landlord - by his conduct in undertaking major works, without the consent or approval of the tenant (and there being no provision in the lease permitting such works), which rendered the leased premises unusable - had reasonably conveyed to the tenant that he had renounced the lease as a whole, or his fundamental obligation under it to allow possession (at [119]-[122]). In addition, the landlord’s actions deprived the tenant of “almost the entirety of the benefit of its rights to possession”, which was found to be a breach sufficiently serious to permit the tenant to terminate the lease (see at [136]-[140]).
Lagouvardis was an appeal from the decision of a Local Court Magistrate. The landlord sought to recover rent and outgoings from the tenants, after the tenants vacated the premises before the expiry of the lease; the tenants cross-claimed for damages. The tenants’ complaint was that dust was entering their premises from the carpark owned by the landlord, behind their workshop. The tenants carried on a window tinting business, and it was found that the dust interfered with the fixing of the window tint film to the cars. The quantum of their loss associated with rectification work to cars was $3,000 (which is why the breaches were described as minor). The balance of the rent sought to be recovered was $40,000. Young J observed that:
“From the findings of fact it would seem that the Magistrate considered that not only did the landlords know that the tenants were conducting a very sensitive business on the premises, but also that the tenants had complained about the problem, the landlords had promised to seal the carpark but had failed to do so, the landlords had promised to sweep the carpark regularly, but had failed to do so and a serious amount of dust was entering the premises form the carpark (the carpark being under the control of the landlords) which was causing great detriment to the tenants’ business. He also found that the dust penetration was a nuisance.”[292]
[292] (1994) 6 BPR 13,467 at p 3.
Young J concluded as follows:
“It is said that repudiation is not lightly to be inferred, Ross T Smyth and Co Ltd v TD Bailey, Son and Co [1940] 3 All ER 60 at 71. It might be thought that some of the factors mentioned are minor, but it is clear that a series of minor matters may together constitute repudiation: Hudson Crushed Metals Pty Ltd v Henry [1985] 1 Qd R 202. However, finding that on particular facts there was repudiation is a question of fact to be judged on the totality of the parties’ conduct…”
Hudson Crushed Metals Pty Ltd v Henry [1985] 1 Qd R 202 concerned an agreement for the extraction and removal of “certain materials” by the appellant from land owned by the respondent. The respondent terminated the contract, on the basis of what it alleged was repudiation by the appellant. It was a term of the agreement that the appellant carry out all conditions imposed by the local council under any extraction permit. It was found that there had been breaches of 11 different obligations imposed on the appellant, including of the conditions under the council’s permit, and the agreement itself, some of which had continued for considerable periods, and that complaints from the respondent had no effect such that “the respondents would have had no reason to believe that the situation would improve” (at 205). The Full court (Connolly, Thomas and Derrington JJ) affirmed the correctness of the approach taken at first instance that, although none of the breaches, alone, was sufficiently serious to be regarded as amounting to a repudiation, considered as a whole, the conduct of the appellant could be characterised in that way.[293]
[293] See per Connolly J at 205-207; Thomas J (at 207) and Derrington J (at 208) agreeing.
As to what needs to be shown to justify termination, in Byrnes v Jokona Pty Ltd Allsop J observed that “the essential element is the deprivation of a benefit or of an entitlement or the imposition of a burden, sufficiently serious as to change the character of the grant to, or of other obligations or entitlements of, the other party to the contract to such a degree that it can be said to be a commercially different bargain” (at [78]). Further, that “it can be said that the breach went to the ‘root’ of the contract (properly construed), that commercially it could not be performed (as originally contracted for) and that the party has been deprived of substantially the whole benefit of the contract (as originally agreed) – even if some residual contractual purpose or benefit is provided, if it is not what, in substance, was contracted for” (at [79]).
Adequacy of damages may be a factor to be taken into account in deciding whether the breach goes to the root of the contract.[294]
[294] Koompahtoo at [54].
The covenant of quiet enjoyment in the lease is an intermediate term; being one in respect of which the existence of a power to terminate will depend upon “the nature of the contract and the relationship it creates, the nature of the term, the kind and degree of the breach, and the consequences of the breach for the other party”.[295]
[295]Pourzand at [133] per Edelman J, referring to Koompahtoo at [54]. See also Byrnes v Jokona Pty Ltd at [70] per Allsop J.
Plainly, in so far as there is an implied term to return the tenant to premises in substantially the same physical condition, the same analysis applies.
As Edelman J observed in Pourzand at [135]:
“A court will not readily construe an intermediate term as one which gives rise to a right to terminate. There is a preference for a construction that will encourage performance rather than the termination of contractual obligations.”[296]
[296] Referring to Koompahtoo at [50]
Motorline submitted that it is generally more difficult to establish repudiation in respect of a lease than an ordinary contract, relying upon a passage from a 2004 decision of Muir J (as his Honour then was).[297] In a more recent decision, Muir JA (with whom Fraser and Chesterman JJA agreed) qualified this proposition with the words “at least where the term of the lease is long and its terms and conditions are favourable to the lessee”,[298] which reflects the reasoning of Mason J (at 33-4) and Deane J (at 53) from Progressive Mailing House Pty Ltd v Tabali Pty Ltd (1985) 157 CLR 17.[299] Otherwise, and consistent with authority, there is no warrant to apply a different test in the case of a lease.
[297]Inverstanley Holdings Pty Ltd v South East Qld Water Corp Ltd [2004] QSC 201 at [110].
[298] Keswick Developments Pty Ltd v Keswick Island Pty Ltd [2012] 2 Qd R 114 at 129 [59]-[61].
[299]See also Apriaden Pty Ltd v Seacrest Pty Ltd (2005) 12 VR 319 at [3] per Ormiston JA and at [64] per Williams AJA.

Consideration

I have already found that the installation of the lift, pursuant to clause 23.1(i) of the lease, did not breach the express covenant for quiet enjoyment, the implied obligation not to derogate from the grant, or any implied obligation to exercise the right under clause 23.1(i) reasonably. That action on the part of Motorline cannot be relied upon as repudiation of the lease.
In so far as the physical state of the premises is concerned, in my view, the evidence does not support a finding that, by its conduct, Motorline repudiated the lease, or a fundamental obligation under it (such as possession). On the contrary, all of Mr Rose’s communications were in terms of retaining Cosmetic in possession of its premises, albeit that there were extensive exchanges variously about whether or not Cosmetic wanted to rearrange or refurbish the second floor premises and if so how; and whether Cosmetic would take up the larger floor area created by the renovations and installation of the lift. Both in his engagements with Ms Cheah, and with Ms Pearson, Mr Rose makes it clear that Cosmetic can continue with the existing lease, on its terms and conditions including as to rent and, importantly, area (his point being, if Cosmetic wanted to remain with its existing lease, that would be for an area of 130m², and not more).
It is fair to conclude that in some respects Motorline did not return Cosmetic to premises which were in substantially the same physical state, because it left the areas at the back of the tenancy (the old toilet, and the area used as a laundry); as well as the new area at the front, unfinished. Motorline’s position was that those areas were outside the leased premises, and therefore it was not required to do anything to them. However, given that they were plainly visible from within Cosmetic’s leased area, in my view, there was an obligation on Motorline to at least finish these areas so that they did not present a worse appearance than had previously been the case. Some of these areas would not have been visible once the partitions were put up (for example, some of the flooring at the front of the premises and, it seems, areas at the back), but there remained parts of the flooring to be reinstated; the partitions to be painted; and, to the extent they were not hidden by partitions, the areas at the rear of the premises to be at least finished off.
But the arguments at this point become circular. Motorline submits that any failure on its part to return Cosmetic to premises in materially the same physical and aesthetic condition is attributable to Cosmetic’s conduct and delay in failing to instruct Motorline as to whether it wanted to renovate or reinstate the tenancy; and points to Mr Rose’s indication of willingness to fix the things of which Cosmetic complained.[300] Cosmetic submits that Motorline had an absolute obligation to “rectify the defects” from the moment that Cosmetic returned to the tenancy.
[300] Plaintiff’s closing submissions at [112(g)] and [133].
On balance, although I acknowledge, on the basis of the factual analysis set out above, the difficulties caused to Motorline by the prevarication, delay, and miscommunication on the part of some of Cosmetic’s staff, in my view Motorline did breach the implied term to return Cosmetic to premises on the second floor which, although expectedly altered as to floor layout, were no worse in terms of physical appearance than it had previously enjoyed. Having regard to the principles referred to above,[301] I am not inclined to the view that this was a breach of either the covenant for quiet enjoyment, or the implied obligation not to derogate from the grant.
[301] See at paragraphs [200]-[204] above.
However, having regard to the factual findings above about the physical state of the premises after the renovation/construction works, I do not regard the nature of the breach as sufficient to conclude that Motorline repudiated the lease. In this respect, I regard this case as clearly distinguishable from Lagouvardis and Hudson Crushed Metals Pty Ltd v Henry,[302] which involved multiple breaches, having a more substantial impact, ongoing for a considerable period despite complaints and where the requisite intention – not to be bound – could be imputed to the landlord/other contracting party. Here, the areas left unfinished were not extensive (particularly after the partitions were installed); were readily fixable; Motorline had offered to fix them; and save perhaps for a short period of time (which I discuss below) need not have substantially interfered with Cosmetic’s possession of the leased premises.
[302] See paragraphs [232], [234]-[236] above.
In all the circumstances, in my view, the physical state of the premises, in so far as it was attributable to the renovation / construction works, although a breach, was not such as to give rise to a right to terminate the lease. Cosmetic’s remedy for such a breach lay perhaps in specific performance, or damages.

Unconscionable conduct

I propose to deal only briefly with Cosmetic’s alternative claim, that Motorline’s conduct, both in relation to the installation of the lease, and the physical state of the premises after those works,[303] was unconscionable, in breach of s 21 of the Australian Consumer Law. In particular, Cosmetic relies upon the matters in s 22(1)(a) (the relative strengths of the bargaining positions of the parties) and s 22(1)(l) (the extent to which the parties acted in good faith) of the Australian Consumer Law.
[303]See paragraph 27(k) of the further amended defence, and paragraph 9 of the further amended counterclaim.
There is no basis in this case to conclude that Cosmetic was in a position of relevant (special) disadvantage, in its dealings with Motorline. Cosmetic is a substantial corporation, well able to be advised, make a judgment about, and look after its own interests – as indeed is evident from the material referred to above. Even if there was some difference of bargaining power, by virtue of the rights and interests of the parties under the lease as lessor and lessee, respectively, that does not lead to the conclusion that an outcome one party is dissatisfied with was the result of unconscionable conduct on the part of the other. [304]
[304]See Australian Competition & Consumer Commission v CG Berbatis Holdings Pty Ltd (2003) 214 CLR 51 at [7], [8], [11], [15] (per Gleeson CJ), [46], [55]-[57] (per Gummow and Hayne JJ), [111]-[112] (per Kirby J) and [170]-[171] (per Callinan J).
Cosmetic’s claim in this regard will be dismissed.

Conclusion

Cosmetic was not entitled to terminate the lease on the basis of either the installation of the lift, or the physical state of the premises post renovation.
Accordingly, in circumstances where Cosmetic gave notice of termination, and abandoned the premises, Cosmetic plainly repudiated the lease.
Motorline was entitled to terminate the lease when it did, on 10 August 2012, and it is entitled to recover damages for Cosmetic’s repudiation of the lease, comprising the rental arrears up to the date of termination, and lost rent for the remainder of the term (together with the other amounts dealt with below).
In this regard, I note that, despite its attempts, which I accept on the evidence were reasonable, Motorline was not able to re-let the second floor premises (indeed, it has been unable to let any of the floors in the building, and the building is now for sale).[305]
[305] Affidavit of Philip Everson (exhibit 10)
By its counterclaim, Cosmetic seeks to recover damages as a consequence of the contractual breaches pleaded in paragraph 27 of the further amended defence.[306] Those contractual breaches include, in part at least, the breach of the implied term that Motorline would return Cosmetic to premises in substantially the same physical state, which I have found has been made out.
[306] Paragraph 10 of the further amended counter-claim.

Damages

Motorline is entitled to recover:
(a)rental arrears for the period 1 May 2012 to 4 September 2012 (the date of termination of the lease) in the sum of $23,728.06 (including GST), under clause 13.1(2)(a) of the lease;[307]
(b)interest on that amount, at a rate, and for a period, to be determined following further submissions from the parties;[308]
(c)lost rent for the period 4 September 2012 to 31 October 2014 in the sum of $138,776.16 (not including GST), under clause 13.1(2)(b) of the lease;[309]
(d)interest on that amount, pursuant to s 58 of the Civil Proceedings Act 2011 (Qld), for a period to be determined following further submissions from the parties;
(e)legal costs in the sum of $3,206.56, under clause 13.1(2)(c)(iv) of the lease;[310] and
(f)the expenses incurred in its attempts to re-let the premises, in the sum of $3,769.12, pursuant to clause 13.1(2)(c)(iii) of the lease.[311]
[307]         Paragraph 144(a) of the plaintiff’s closing submissions.
[308]Cf clause 13.5 of the lease (providing for interest on arrears, at the “stipulated rate” defined as 18% per annum); and footnote 5 on p 38 of the plaintiff’s closing submissions (interest under s 58 of the Civil Proceedings Act 2011 (Qld)).
[309]         Paragraph 144(b) and schedule A to the plaintiff’s closing submissions.
[310]         Paragraph 144(c) of the plaintiff’s closing submissions.
[311]         Paragraph 144(e) of the plaintiff’s closing submissions.

Motorline also claims an amount of $19,745 as the cost of removing Cosmetic’s abandoned fixtures and fittings, and “making good” the premises. The claim is brought on the basis of clause 13.1(2)(c) (any other amount necessary to compensate the landlord as a result of the tenant’s default) and/or clause 19.3 of the lease (recovery of the cost and expense associated with making good any damage caused by removal of abandoned fixtures and fittings).[312]
[312]See paragraphs 25-26 of the statement of claim; paragraph 144(d) of the plaintiff’s closing submissions.
I accept, for present purposes, that Motorline is entitled to recover the reasonable costs of making good the premises, as a result of removal of abandoned fixtures and fittings, and that it does not matter that those costs have not (yet) been incurred by Motorline.[313]
[313] See Pourzand at [195]-[203] per Edelman J.
In support of this aspect of its claim, Motorline relied upon a quote prepared by a Graeme Osborne from Electrite, described as a quote “to bringing the tenancy back to a clear floor ready for the next tenant to complete their fit out requirements”, in an amount of $19,745.[314]
[314] Taylor at pp 48-49.
Cosmetic was critical of that quote, for a number of reasons, including that Graeme Osborne was not called to give evidence, and therefore could not be cross-examined about it; and because the quote seems to be a quote to “make good” the entire second floor premises. In my view, there is substance to Cosmetic’s complaints in this regard (among other things, Mr Taylor acknowledged that the quote seems to include an amount for painting the entire floor). It is also fair to, once again, keep in mind the state of the premises prior to the renovation works being carried out, which was an important part of Motorline’s case. The evidence does not permit a finding to be made about whether that was the result of Cosmetic’s occupation; or the pre-existing state of the premises in any event.
I am not satisfied the whole of the amount claimed ought to be awarded to Motorline. As to what is a “reasonable cost”, the court is not in a position to speculate about that. However, in the interests of fairness, pragmatism and finality, although acknowledging immediately the imprecision, what I propose (subject to hearing further from the parties should they wish to do so) is:
(a)to allow two-thirds of the amount claimed (roughly, $12,000);
(b)but to set-off against that amount, the amount of $4,840, representing the cost incurred by Cosmetic of renting alternative space for the period up to the end of October,[315] for the reasons given in the following paragraphs.
[315] See annexure A to the further amended counterclaim, which is supported by Ms Flett’s evidence.
The damages claimed by Cosmetic as a consequence of the contractual breach include rent paid on alternative premises, up until April 2012, as well as relocation and storage costs.[316]
[316] Paragraph 10 of the further amended counterclaim.
It follows from the findings above that the relocation and storage costs are not recoverable. However, in light of the finding of a breach of the implied term that Cosmetic would be returned to premises in an equivalent state, and balancing that against the undertaking by Motorline to fix various things, and the overall conduct of the parties, in my view it is fair and reasonable to allow Cosmetic to recover, as damages for the breach, the costs it incurred in the period up to the end of October 2011.
However, as foreshadowed, I will refrain from making final orders until after the parties have had an opportunity to consider these reasons, in the event that either party wishes to be heard further in relation to these proposed orders, given that they were not discussed at the hearing.
I will also hear the parties as to costs.
I therefore direct that:
(a)In the event the parties are agreed on a form of order, consistent with these reasons, including as to interest and costs, they submit a draft order within 14 days of the date of these reasons, for my consideration.
(b)Otherwise, each party submit the form of order it proposes, and brief submissions explaining the differences (no more than 3 pages), within 14 days of the date of these reasons.
(c)If a further oral hearing is required it will be accommodated at a time convenient to the parties in the week commencing 28 March 2016.

CITATION:	Motorline South City Pty Ltd v Cosmetic Suppliers Pty Ltd [2016] QDC 45
PARTIES:	MOTORLINE SOUTH CITY PTY LTD ACN 004 555 088 Plaintiff v COSMETIC SUPPLIERS PTY LTD ACN 000 303 391 Defendant
FILE NO/S:	3780/2012
DIVISION:	Civil
PROCEEDING:	Trial
DELIVERED ON:	10 March 2016
DELIVERED AT:	Hervey Bay
HEARING DATE:	9, 10, 11 and 12 November 2015
JUDGE:	Bowskill QC DCJ
ORDER:	1. Judgment for the plaintiff, with final orders to be made following directions 2-4 below. 2. Direct that, in the event the parties are agreed on a form of order, consistent with these reasons, including as to interest and costs, they submit a draft order within 14 days of the date of these reasons, for the court’s consideration. 3. Otherwise, direct that each party submit the form of order it proposes and brief submissions explaining the differences (no more than 3 pages), within 14 days of the date of these reasons. 4. If a further oral hearing is required, it will be accommodated at a time convenient to the parties in the week commencing 28 March 2016.
CATCHWORDS:	LANDLORD AND TENANT – COVENANTS – where the lessor installed a lift in the building which included the leased premises under an express provision in the lease permitting it to do so - whether that was such as to breach the express covenant of quiet enjoyment or implied obligation not to derogate from the grant – whether a requirement for the lessor to exercise the right reasonably and in good faith could be implied in the circumstances LANDLORD AND TENANT – COVENANTS – where as a result of renovation and construction work carried out by the lessor, including to the leased premises, the lessor left some parts of the leased premises, and areas visible from the premises, in an unfinished state – whether, in doing so, the lessor breached the express covenant of quiet enjoyment or implied obligation not to derogate from the grant – whether a covenant that the lessor would return the lessee to a leased area that was materially in the same physical and aesthetic condition as previously could be implied in the circumstances – whether the lessor breached this covenant LANDLORD AND TENANT – TERMINATION OF THE TENANCY – REPUDIATION – whether the lessor repudiated the lease by its conduct in relation to the installation of the lift and leaving the leased premises, and areas visible from the premises, in an unfinished state – whether the lessee repudiated the lease by purporting to terminate the lease Competition and Consumer Act 2010 (Cth), Schedule 2, ss 21 and 22 Apriaden Pty Ltd v Seacrest Pty Ltd (2005) 12 VR 319 Aussie Traveller Pty Ltd v Marklea Pty Ltd [1998] 1 Qd R 1 Australian Competition & Consumer Commission v CG Berbatis Holdings Pty Ltd (2003) 214 CLR 51 Byrnes v Jokona Pty Ltd [2002] FCA 41 Famous Makers Confectionary Pty Ltd v Sengos (1993) NSW Conv R 55-672 Glasshouse Investments Pty Ltd v MPJ Holdings Pty Ltd [2005] NSWSC 456 Gordon v Lidcombe [1966] 2 NSWR 9 Hudson Crushed Metals Pty Ltd v Henry [1985] 1 Qd R 202 Inverstanley Holdings Pty Ltd v South East Qld Water Corp Ltd [2004] QSC 201 Keswick Developments Pty Ltd v Keswick Island Pty Ltd [2012] 2 Qd R 114 Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd (2007) 233 CLR 115 Lagouvardis v Brett and Janet Cottee Pty Ltd (1994) NSW ConvR 55-714; (1994) 6 BPR 13,467 Southwark London Borough Council v Mills [2001] 1 AC 1 Spathis v Hanave Investment Co Pty Ltd & Anor [2002] NSWSC 304 Specialist Diagnostic Services Pty Ltd v Healthscope Ltd [2012] 41 VR 1 Orsay Holdings Pty Ltd v Mecanovic and Ors [2013] QCA 232 Pourzand v Telstra Corporation Ltd [2012] WASC 210 Progressive Mailing House Pty Ltd v Tabali Pty Ltd (1985) 157 CLR 17 Project Blue Moon Pty Ltd v Fairway Trading Pty Ltd [2000] ANZ Conv R 628 Telstra Corporation Ltd v Sicard Pty Ltd [2009] NSWSC 827 Todburn Pty Ltd v Taormina International Pty Ltd (1990) 5 BPR 11,173 Willmott Growers Group Inc v Willmott Forests Ltd (2013) 251 CLR 592
COUNSEL:	P J McCafferty for the Plaintiff B McGlade for the Defendant
SOLICITORS:	McCullough Robertson Lawyers for the Plaintiff Colin Biggers & Paisley for the Defendant