Omar Property Pty Ltd v Amcor Flexibles (Port Melbourne) Pty Ltd (No 4)

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE
COMMERCIAL COURT

S ECI 2019 00109

OMAR PROPERTY PTY LTD (ACN 602 739 668) (and others in accordance with the Schedule attached)	Plaintiffs
v
AMCOR FLEXIBLES (PORT MELBOURNE) PTY LTD (ACN 004 284 673)	Defendant

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JUDGE:	Garde J
WHERE HELD:	Melbourne
DATE OF HEARING:	17-20, 24-27 February 2020
DATE OF JUDGMENT:	1 May 2020
CASE MAY BE CITED AS:	Omar Property Pty Ltd & Ors v Amcor Flexibles (Port Melbourne) Pty Ltd (No 4)
MEDIUM NEUTRAL CITATION:	[2020] VSC 216

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LANDLORD AND TENANT – Tenant’s breaches of lease by performing structural works without a building permit – Tenant’s failure to seek prior consent from landlord for works - Whether breaches of lease were remedied – Default notice – Purported renewal of lease – Effect of Building Act 1993 (Vic) and Building Regulations 2006 (Vic) sch 8 item 4(a)(iii) – Whether landlord required not to unreasonably refuse retrospective application for consent – Whether consent was refused unreasonably – Building Act 1993 (Vic) ss 4(1), 4(2), 16 – Building Regulations 2006 (Vic) reg 1801, sch 8 item 4(a)(iii) – Property Law Act 1958 (Vic) s 146(1).

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APPEARANCES:	Counsel	Solicitors
For the Plaintiffs	Mr M Borsky QC with Mr R Chaile	Maddocks
For the Defendant	Mr D Collins QC with Mr L Hawas and Mr C Lum	Baker McKenzie

HIS HONOUR:

INTRODUCTION

The plaintiffs are the purchasers and former owner of land at 187 and 195-201 Williamstown Road, Port Melbourne (‘land’). They seek declarations that two option renewal notices (‘renewal notices’) given by Amcor Flexibles (Port Melbourne) Pty Ltd (ACN 004 284 673) (‘Amcor’) to renew a lease of the land (‘lease’) for a further term are of no effect, and that the lease expired on 31 March 2019. They also seek an order for possession of the land.

Amcor denies that the renewal notices are ineffective. It seeks a declaration that it was entitled to renew the lease and an order compelling the plaintiffs to execute a new lease.

Background

Amcor was known as Detmold Flexibles Pty Ltd (‘Detmold Flexibles’) when it was part of the Detmold Group. The Detmold Group operated a packaging manufacturing business on the land.

On 31 March 2014, Detmold Flexibles entered into a lease of the land with Gabb Property Victoria Pty Ltd (‘Gabb’), a member of the Detmold Group, for a term of five years with options to renew the lease for two further terms of five and two years.

By December 2014, the Amcor Group had acquired the shares in Detmold Flexibles as part of its acquisition of the business and operations conducted on the land and another site in Dandenong. It did not purchase the freehold of the land from Gabb.

On 29 June 2015, Omar Property Pty Ltd (ACN 602 739 668) (‘Omar’) became the registered proprietor of the land and the landlord under the lease.

On 4 March 2016, Omar sold the land to ID_Land Pty Ltd (ACN 126 819 636) (‘ID_Land’) for $32,500,000, payable under the contract of sale by a deposit of $1,625,000 and a balance of $30,875,000 by 30 June 2017. The sale was subject to the lease.

On 4 July 2016, the contract of sale was cancelled by deed and a substitute contract of sale (‘sale contract’) entered into between Omar and the second, third and fourth plaintiffs (‘purchasers’). The sale price was $31,650,000, payable by a deposit of $1,582,500 and balance of $30,067,500 on the earlier of 31 March 2019 or seven days before Amcor was due to surrender the lease. Condition 24.2 of the sale contract provided that Omar must deliver the land to the purchasers at settlement in the same condition that it was in on the day of sale except for fair wear and tear.

From September 2016, Matt Belford and Jeff Garvey, directors of ID_Land, periodically met with Amcor representatives to discuss Amcor’s tenancy of the land. Meetings continued until November 2018. ID_Land sought a surrender of the lease to obtain possession of the land for redevelopment. Amcor sought a lease surrender payment to meet the cost of relocating machinery and vacating the land. Despite the negotiations and correspondence, the parties could not agree. I will later address what took place.

Over the period from May to October 2017, Amcor installed a gravure printing press (‘press’) in a warehouse (‘building’) on the land described in an attachment to the lease as Building 2, 195 Williamstown Road, Port Melbourne. The press was over 45m in overall length, 10m at its widest point and 6.6m in height.

In order to install the press, Amcor and its builder, AJR Crow Pty Ltd (ACN 006 582 430) (‘AJR Crow’) carried out building work on the land (‘works’).

Amcor did not seek or obtain a building permit for the works, or the consent of Omar as landlord to perform the works.

On 11 December 2017, ID_Land obtained a permit from the City of Port Phillip for the development of 122 three-storey townhouses on the land. Such a development would necessitate the demolition of all existing buildings on the land.

On 18 June 2018, ID_Land’s building consultants, Napier & Blakely Pty Ltd, inspected the land, and saw that the press had been installed in the building. They observed that the floor slab of the building had been significantly modified to accommodate the increased loading of the press, and that numerous penetrations had been made to the roof for ductwork and infrastructure. They considered that a building permit was required to complete the work, although they had not then reviewed the design documentation or the relevant building regulations.

On 4 July 2018, Omar served a notice of default (‘default notice’) on Amcor under the lease. The default notice stated that without Omar’s consent Amcor had:

(a)modified and altered the structure of the building;
(b)broken the concrete slab of the floor;
(c)excavated the ground;
(d)carried out structural improvements and alterations to the concrete slab; and
(e)carried out alterations to the roof.

The default notice said in substance that the works breached three conditions of the lease, being:

(a) cl 5.2, in that Omar’s consent in writing had not been obtained for structural alterations or additions to the building;

(b) cl 5.4, in that building works had been undertaken without obtaining a building permit contrary to s 16 of the Building Act1993 (Vic) (‘Act’); and

(c) cl 5.6, in that the building had been cut, injured, damaged or defaced.

The default notice required Amcor to remedy each of these breaches within 28 days and to pay Omar’s reasonable costs and expenses.

On 25 July 2018, Amcor’s solicitors responded to the default notice. In substance, Amcor:

(a) admitted that the works included structural alterations or additions under cl 5.2, stating that the failure to obtain prior written consent was an oversight;

(b) requested that Omar provide retrospective written consent for the works;

(c) denied that cl 5.4 of the lease had been breached, stating that the builder had advised that no building permit was necessary; and

(d) denied any breach of cl 5.6 of the lease, asserting that cl 5.6 was not applicable.

On 31 July 2018, Omar requested copies of structural drawings and documents relating to the works and reserved its rights.

On 16 October 2018, Amcor forwarded a notice of exercise of option to renew the lease for a further term of five years (‘first renewal notice’) commencing on 31 March 2019.

Amcor responded to the request for drawings and documents on 23 October 2018 by providing structural drawings and other documents including a planning permit application for the works made to the City of Port Phillip in May 2017. The application stated that the cost of the works was $5.5 million.

On 16 November 2018, the purchasers advised Amcor that they did not consider that Amcor was entitled to renew the lease and had not done so by the first renewal notice.

As to cl 5.2 of the lease, they said that Amcor had not remedied the breach. Omar had not given its consent, and it was not unreasonable for Omar to withhold consent as it was required under condition 24.2 of the sale contract to deliver the land to the purchasers in the same state as it was at the time of execution of the sale contract, fair wear and tear excepted. The works would prevent satisfaction of that obligation by Omar which had a proper basis for withholding consent.

As for cls 5.4 and 5.6 of the lease, they disagreed with Amcor’s response, contending in the case of cl 5.4 that a building permit was required, and in the case of cl 5.6 that Amcor’s construction of that clause was clearly wrong. The purchasers said that cl 12.1(b)(A) was operative, and that Amcor was not entitled to renew the lease.

On 23 November 2018, the plaintiffs executed a deed of variation of the sale contract (‘variation deed’) to take effect retrospectively on 1 July 2018. The variation deed amended the sale contract so that the purchasers had the sole right and absolute discretion to make any decision in relation to the dispute with Amcor. The purchasers were required to keep Omar informed, to act reasonably, and in accordance with Omar’s obligations under the lease and the law.

In a letter dated 20 December 2018, Amcor contended that:

(a)Omar had been provided with detailed information about the works in the 23 October 2018 letter;
(b)there was no reasonable basis for Omar to refuse consent;
(c)the reason for withholding consent was that the purchasers sought possession of the land to pursue a residential development project;
(d)the breach of cl 5.2 had been remedied by the unreasonable withholding of consent to the works; and
(e)if there was a breach of cl 5.6, it had been remedied on the same basis as the breach of cl 5.2.

Amcor gave a second notice of exercise of the option to renew the lease (‘second renewal notice’) on 21 December 2018.

The trial

On 5 February 2020, I ordered that the trial of the proceeding be for the purpose of determining which party is entitled to possession of the land and exclude the question of damages suffered by the plaintiffs or by Amcor. As a result, this judgment solely addresses the competing claims of the purchasers and Amcor for possession of the land.

On the same day, I gave leave to Amcor to join AJR Crow and Mr Archibald John Ross Crow as third parties to the proceeding. Amcor elected not to join AJR Crow and Mr Crow or to file a third party notice.

On 17 February 2020, I gave leave to the plaintiffs to file and serve an amended statement of claim that would have permitted the plaintiffs to expand their case by including specified ancillary works carried out during the installation of the press. The plaintiffs elected not to proceed with the amendments to the statement of claim.

The land and its use

The land is zoned Capital City Zone (CCZ1) under the Port Phillip Planning Scheme, and is subject to the Development Contributions Plan Overlay (DCPO), Development Contributions Plan Overlay – Schedule 2 (DCPO2), Parking Overlay (PO), and Parking Overlay – Precinct 1 Schedule (PO1).

The land is used for industry and ancillary offices and contained five printing presses at the commencement of the lease. Four of the presses were flexographic presses and one was a gravure press installed in 2009. The gravure press sat on its own purpose built concrete slab. The presses had exhaust flues passing through the roof of the building, and relied on a regenerative thermal oxidiser for the treatment of fumes.

A building condition report prepared by Colliers International dated 24 March 2014 describes the building as in fair condition with some areas needing repair, including:

·areas of the floor where forklifts operated needed resurfacing;
·penetrations and holes in the external metal cladding; and
·extensive leakage throughout the roof.

Relevant provisions of the lease

Clause 1 of the lease defines terms used in the lease and contains the following:

(a) In this Lease unless the contrary intention appears:

Lessee includes the Lessee the executors administrators of the Lessee or being a body corporate its successors and assigns.
Lessee’s Associates includes an employee agent contractor licensee or invitee of the Lessee.
Lessor includes the Lessor the assigns executors and administrators of the Lessor or being a body corporate its successors and assigns and reversioner immediately expectant upon the term created by this Lease.

…
(g)Where it is provided in this Lease that the Lessee covenants promises undertakes or agrees to perform some act or thing or to refrain from doing or carrying out some act or thing such covenant promise undertaking or agreement shall be read and construed as including a provision that the Lessee shall procure the Lessee’s Associates to perform the act or thing or refrain from doing or carrying out the act or thing respectively.

Tenant’s covenants are found in cls 5 to 7 of the lease.

Clause 5.1 provides:

Not without the consent in writing of the Lessor, which consent shall not be unreasonably withheld, to use or permit the Premises to be used for any purpose other than the purpose or use set out in Item 7 of the First Schedule…

Clause 5.2 provides:

Not to make or permit any structural alterations or additions to be made to the Premises (the Tenancy Works) without first obtaining the consent in writing of the Lessor which consent shall not be unreasonably withheld provided that all Tenancy Works the subject of that consent shall be carried out with all due diligence in a proper and workmanlike manner to the reasonable satisfaction of the Lessor and shall be in conformity with the Victoria Building Regulations or any other requirements of the relevant municipality or other relevant authority. The Lessee must notify the Lessor in writing if the Lessee intends to carry out a re-arrangement of the internal layout of the Premises by the erection and installation of non-structural Lessee’s fixtures and fittings or to the removal or replacement of plant or equipment, all in the ordinary course of business, and work of this nature shall be carried out in a proper and workmanlike manner and in compliance with all statutes and must not diminish the value of the Premises.[1]

[1]Emphasis in original.

Clause 5.4 provides:

To observe perform and fulfil all the requirements of all statutes so far as they apply to the Premises or to any business or businesses from time to time being conducted on the Premises and not permit anything to be done which may conflict with any statutes provided that nothing in this Clause shall require the Lessee to undertake any structural repairs or alterations or incur expenditure in respect of items of a capital or structural nature, unless such structural repairs are required because of the wrongful or negligent act or omission or default of the Lessee or the Lessee’s Associates or, because of the Lessee’s particular use or occupation of the Premises...[2]

[2]Emphasis in original.

Clause 5.6 provides:

Not to cut injure damage or deface any services facilities plant and equipment or any other part of the Premises or any conveniences or appliances installed on the Premises and not use or permit the Premises to be used for any purpose or in any manner other than those for which they are provided or are properly available and not to abuse or misuse those facilities.

Clause 6.1(a) provides:

The Lessee will at all times… at the Lessee’s own expense maintain and keep the Premises and the Lessor’s Installations clean and in good and substantial repair… damage by fire, fair wear and tear and act of God only excepted provided that the Lessee shall not be liable under this Lease to undertake work of a structural or capital nature including replacement of any of the Lessor’s Installations unless any such structural repairs are required because of the Lessee’s obligations to make good under clauses 11.3 and 11.4 or because of the wrongful or negligent act or omission or default of the Lessee… or, because of the Lessee’s particular use or occupation of the Premises…[3]

[3]Emphasis in original.

Clause 6.2 provides:

The Lessee will, at its own expense, promptly make good any breakage, damage, defects or wants of repair to the Premises…

Clause 7.1 provides:

Subject to Clauses 7.2 and 7.3, the Lessee shall not assign, sublet, license or part with possession or the whole or part of the Premises without the prior written consent of the Lessor and section 144 of the Property Law Act 1958 (Vic) does not apply.

Clause 7.2 provides:

The Lessor’s consent shall not be unreasonably withheld in the case of a sub-lease or an assignment of the lease of the whole or part of the Premises where:
(a)in the Lessor’s reasonable opinion, the assignee or sub-lessee is a responsible respectable and solvent person or company;
(b)the assignee or sub-lessee signs such agreements and covenants as are reasonably required by the Lessor;
(c)the assignee or sub-lessee meets all proper and reasonable costs of the Lessor; and
(d)in the case of an assignment, provision is made that the Lessee shall not be released from its obligations under this Lease.

Other relevant clauses of the lease include the following.

Clause 10.1 is concerned with re-entry following breach or default:

If:
…
(b)the Lessee commits or permits any breach or default to occur in the due and punctual performance and observance of any of the covenants obligations and provisions of this Lease;
…

then in any one or more of either of those events the Lessor subject only to the provisions of section 146(1) of the Property Law Act 1958 (Vic) shall have the right to re-enter into and upon the Premises and to repossess and enjoy the Premises as of its former estate but without prejudice to any action or other remedy which either party may have against the other party for any antecedent breach of the terms and conditions and covenants of this Lease.

Clause 10.2 permits a default notice to be given in the case of a breach of cl 5.2, 5.4 or 5.6:

In the case of a breach of the covenants obligations and provisions contained in this Lease other than the covenants to pay rent then the notice of default to the Lessee to be given under section 146 of the Property Law Act 1958 (Vic) shall provide that the period of 28 days or such longer period the Lessor considers is reasonable in the circumstances is the time within which the Lessee is to remedy any breach if it is capable of remedy or to make reasonable compensation in money to the satisfaction of the Lessor.

Clause 11.4 provides for the reinstatement of the land at the expiration of the lease:

The Lessee shall at the expiration or sooner determination of this Lease peaceably surrender the Premises to the Lessor (subject to Clauses 11.2 and 11.3) and subject to the exceptions set out in clause 6.1, reinstate the Premises to the condition of the Premises as at the Commencing Date as shown in the Condition Report including the remediation of any Contamination caused by the Lessee after the Commencement Date as assessed against the Baseline Environment Report.

Clause 11.8 provides:

If the doing or execution of any act matter or thing by the Lessee under this Lease is dependant [sic] on the consent or approval of the Lessor that consent or approval shall not be unreasonably withheld or delayed.

Clause 12.1(b) of the lease deals with the renewal of the lease, and provides:

The Lessee shall not be entitled to renew this Lease if:
(A)at the time of exercise there is any unremedied breach by the Lessee of this Lease of which the Lessor has given written notice to the Lessee; or
(B)the Lessee has persistently committed material breaches of this Lease of which the Lessor has given notice during the Term.

Relevant statutory provisions

Section 4(1) sets out the objectives of the Act in these terms:

(a)to protect the safety and health of people who use buildings and places of public entertainment;

…
(e)to facilitate the cost effective construction and maintenance of buildings and plumbing systems;

…
(g)to aid the achievement of an efficient and competitive building and plumbing industry.

Section 4(2) of the Act directs that these objectives are to be taken into account in the administration of the Act.

It is an offence under the Act if building work is carried out without a building permit unless the building work is exempt. Section 16 provides:

(1)A person must not carry out building work unless a building permit in relation to the work has been issued and is in force under this Act.
Penalty: [not set out]
(2)A person must not carry out building work unless the work is carried out in accordance with this Act, the building regulations and the building permit issued in relation to that work.
Penalty: [not set out]
(3)An owner of land must ensure in relation to building work carried out on that land that a building permit in relation to the work has been issued and is in force under this Act.
Penalty: [not set out]
(4)A building practitioner or an architect who is engaged to carry out building work must ensure that a building permit in relation to the work has been issued and is in force under this Act.
Penalty: [not set out]
(4A)A builder named in a building permit must ensure that the building work to which the building permit applies is carried out in accordance with this Act, the building regulations and the building permit.
Penalty: [not set out]
(5)Subsection (3) does not apply to an owner if the owner has engaged a building practitioner or architect to carry out the building work on that land.
(6)Subsections (1), (2), (3), 4 and (4A) do not apply if the building work is exempted by or under this Act or the regulations.

Section 146(1) of the Property Law Act 1958 (Vic) provides:

A right of re-entry or forfeiture under any proviso or stipulation in a lease or otherwise arising by operation of law for a breach of any covenant or condition in the lease, including a breach amounting to repudiation, shall not be enforceable, by action or otherwise, unless and until the lessor serves on the lessee a notice—
(a) specifying the particular breach complained of; and
(b)if the breach is capable of remedy, requiring the lessee to remedy the breach; and
(c)in any case, requiring the lessee to make compensation in money for the breach—

and the lessee fails, within a reasonable time thereafter, or the time not being less than fourteen days fixed by the lease to remedy the breach, if it is capable of remedy, and to make reasonable compensation in money, to the satisfaction of the lessor, for the breach.

THE WORKS
View

On 18 February 2020, with the assistance of senior counsel and legal representatives, I had the benefit of a view of the press and the building. I observed the press, the concrete slab floor, and the penetrations to the roof internally within the building and externally from a nearby location. From the ground, I was able to observe the structures erected on the roof of the building. The view permitted me to better understand the evidence. The photographs in the schedule to these reasons show the press and the works.

The works

The parties relied on the evidence of structural engineers. The plaintiffs retained Patrick Irwin and Amcor retained Richard Drew. Both were highly qualified and experienced engineers, and inspected the works on a number of occasions. Their qualifications and expertise were unchallenged. Ultimately, their evidence was substantially similar. They were not cross-examined.

Mr Irwin’s reports

Mr Irwin prepared two reports.

First report

In his first report dated 6 June 2019, Mr Irwin described the building as a steel framed and clad industrial structure of dimensions of about 80m x 30m. It had a flat concrete slab floor and was of simple gable construction. The press was located in the centre of the building.[4]
[4]First Expert Report of Patrick Irwin, 5 (‘First Irwin Report’).

Mr Irwin described the construction of the building as typically undertaken in the following manner:

(a)Concrete pad footings are cast in the ground to carry the columns. The main steel frames are fixed to these columns to carry the building envelope gravity loads.
(b)A flat slab floor is poured onto an engineered sub-base and sub-grade.
(c)The main steel frame is a self-supporting portal frame consisting of pairs of columns jointed by roof trusses and forming a rigid frame.
(d)The portal frames are joined together with lighter steel members that carry the roof, wall linings and bracing. The steel purlins span across the roof from frame to frame. The purlins carry the roof lining directly.[5]

[5]Ibid 6–7.

The engineering drawings for the installation of the press show a floor cut out of about 41m x 2.8m. The design called for a 400mm deep slab with a large central area set down another 750mm and additional set downs at each end of 180mm. The existing slab was to be cut out with concrete saws, broken up and removed, and an extra 500mm of earth excavated.[6]
[6]Ibid 9.

Amcor’s geotechnical investigation showed that the fill beneath the existing concrete slab was not an appropriate foundation. As a result, screw piles were installed in the sand to ensure a sound foundation. Polythene moisture barriers were placed over the sub-grade, and the old polythene barrier restored. After the new slab was poured and the concrete cured, installation of the press could occur.[7]
[7]Ibid 10.

Roof works

Mr Irwin said that some of the new roof penetrations required alterations to the roof frame locally, while others were accommodated within the existing roof frame by cutting away roofing material.

The largest penetrations were for two ducts at the northern and southern ends of the press. They involved the cutting of a purlin for each duct and the trimming of the opening with a light gauge steel member.[8]
[8]Ibid 14.

There were six penetrations for ventilation shafts accommodated between purlins. The fans and motors in each shaft were of substantial weight, and were supported by the purlins and trimmers immediately below the roof. Small rotary ventilators and exhaust risers had been installed, and required penetrations in the roof sheeting. They did not affect the building structure.[9]
[9]Ibid 15.

Answers to questions

Mr Irwin answered questions contained in his instructions as follows:

Q: Did any, and if so what, part of the works involve structural alterations or additions to the [building]?
A: [(a)]The cutting out of the floor slab and replacement with the machine base slab.
[(b)]The cutting of roof purlins and their trimming around to accommodate the large diameter ductwork.

Q: Did any, and if so what, part of the works involve cutting of any services, facilities, plant or equipment or other part of the [building]?
A: I can only answer this question with regard to the building structure. My answers are:
[(a)] The cutting out of the floor slab to enable its removal locally for the machine base slab.
[(b)] The cutting of roof purlins to accommodate the large diameter ductwork.

Q: Did any, and if so what, part of the [works] include the removal of any element of the [building] that was contributing to the support of any other element of the building?
A: Yes. The cutting and removal of part of the roof purlins that were carrying the roof…
Q: Did any, and if so what, part of the [works] include the alteration of any element of the [building] that was contributing to the support of any other element of the building?
A: [(a)] Yes.The cutting and removal of part of the roof purlins that were carrying the roof… Also, the additions of the large diameter ducts, mechanical ventilation shafts.
[(b)] As far as I can tell the slab, in the areas in which it was cut out, was not contributing to the support of other parts of the building…[10]
[10]Ibid 22–23.

Second report

Mr Irwin completed a second report dated 18 November 2019. In a tabular summary of responses to key questions, he noted that both the base work and the roof penetrations involved structural alterations or additions. He said that the roof penetrations, but not the base works, involved the removal and alteration of an element that was contributing to the support of another element of the building.[11]
[11]Second Expert Report of Patrick Irwin, 2 (‘Second Irwin Report’).

Mr Irwin said that 20 service shaft penetrations were made of the roof and one removed during the work. Chimneys were erected above the large diameter ducts at the northern and southern ends of the press. They consisted of a light metal tube with welded supporting frame imposing wind loads, adding considerable mass to the roof. Two guy wires were put in place to support each chimney. Six evaporative coolers were erected above service shafts supported by perimeter frames on the roof.[12]
[12]Ibid 15–16.

Mr Irwin answered the question set out below:

Q: Describe in detail the roof works the [sic] were undertaken, including without limitation, their nature, scope and effect.
A: [(a)] For the penetrations to carry the large diameter ducts (2 cases): Roof sheeting was cut back, a purlin was cut away locally and a penetration trimmed around with light metal sections…The surrounds were flashed around from atop. If this was done without engineering guidance and approval, there is potential for the remaining purlins, locally to fail during high wind events…Once the penetrations were established the ducts were fitted. Since these appear to be permanent, fixed installations, strictly the ducts become part of the roof frame.
[(b)]For the six mechanical ventilation shafts… roof sheeting was cut back, and penetrations trimmed around with light metal sections. Additional light framing members were installed to assist the support of the shafts. These works have the potential to overload the roof structure by local gravity loads and cause local failure. This is unlikely to be a problem, as the design of such roofs is typically governed by wind load uplift, however, as I don’t know the mass of services installation applied, I cannot rule out a problem. The additional light framing members installed to support the shafts have little potential to cause damage as the loads they carry are negligible. Once the penetration was established the services shaft and mechanical installation were fitted. Since these appear to be permanent, fixed installations, they become part of the roof frame.[13]

Mr Drew’s reports

[13]Ibid 35.

Mr Drew prepared two reports.

First report

In his first report dated 7 December 2019, Mr Drew described the existing building superstructure as comprising a trussed portal frame system fabricated from steel angles. The trusses had an overall depth of 930mm, span of approximately 31.5m, and approximate internal height of about 8.4m.[14]
[14]First Expert Report of Richard Drew, 6, 13 (‘First Drew Report’).

The roof sheeting was supported on what appeared to be bespoke and symmetrical steel purlin “C” sections of about 150mm depth. The base metal thickness of the purlins averaged about 4mm. The roof bracing system was steel angle and strut, and was independent of the secondary structure. The secondary structure consisted of relatively lightweight purlins and girts that supported the roof and wall sheeting, and transmitted the load to the primary structure.[15]
[15]Ibid 6.

The secondary roof structure was modified to permit two flues associated with the press to penetrate the roof. Each flue involved the cutting of an existing purlin, and the installation of new trimming purlins. The flues were stabilised above the roof line with cable stays fixed to the roof structure. It was standard practice to connect guy wires to the primary structure through the roof sheeting.[16]
[16]Ibid 7.

Mr Drew estimated the total weight of the 5m flue on the northern end of the roof as about 170kg, consisting of 813mm diameter x 0.8mm spiro ducting (100kg) and cowl (70kg).

The 7m flue on the southern end of the roof was significantly heavier, and weighed about 380kg. It consisted of 1016mm diameter x 1mm spiro ducting (210kg), cowl (130kg), and brace and damper (40kg).[17]
[17]Ibid 9.

The existing floor was understood to be a 150mm concrete slab, underlain by 150mm of crushed rock and imported, compacted fill to 1.5m depth which was underlain by medium dense natural sands. The slab was understood to be a ground bearing floating slab independent of the superstructure and footings. The superstructure would be supported on a system of piles or pad footings.[18]
[18]Ibid 14, 15.

The press was installed on a new, piled slab approximately 41m long and 2.8m wide. It was generally 400mm thick and flush with the existing floor, or recessed 180-350mm. The piles were helical screw piles recommended to be installed to a depth of 3m.[19]
[19]Ibid 15.

Preliminary structural analysis of the northern and southern flues was carried out under Mr Drew’s supervision. This indicated the need for a more sophisticated analytical approach to determine the structural adequacy of the assemblage of the flues stabilised with guy wires on the secondary structure of the roof. The evaluation of combined structural capacity of the asymmetrical roof purlins and the thin-walled flues acting in combination required consideration of torsional and local buckling of thin walled sections. This was beyond the capacity of the proprietary software used by Mr Drew’s firm.[20]
[20]Ibid 16.

Mr Drew identified the northern flue as the critical flue for the evaluation of structural adequacy due to its thinner base metal thickness of 0.8mm, and eccentric “dog-leg” to the flue where it joined the press. The bend in the northern flue caused significantly higher stresses under wind action and self-weight than were seen on the straight southern flue.[21]
[21]Ibid.

Mr Drew considered that if the northern flue could be shown to be satisfactory under the wind load mandated under the applicable Australian standard,[22] then the southern flue could reasonably be considered to satisfy the same structural standard for design load.[23]
[22]Australian/New Zealand Standard, Structural design actions - Part 2: Wind actions AS/NZS 1170.2:2011 (30 March 2011) (‘AS/NZS 1170.2:2011’).
[23]First Drew Report, 16.

In order to undertake the necessary structural analysis of the northern flue, Amcor engaged Dr Tuan Nguyen and Professor Tuan Ngo of the Department of Infrastructure Engineering at the University of Melbourne. Each is a very highly qualified engineer holding Doctorate of Philosophy and Master of Engineering degrees. They analysed the interaction of the structure on the northern flue with the supporting roof structure to assess the elastic behaviour (with the imposed deformation compatibility of the purlins and flues) of the structural elements involved,[24] and to check that the elastically determined structural actions could be sustained in potential non-linear failure mechanisms.[25]
[24]Elastic analysis assumes that the structural materials under design actions are in the linear elastic range and are not subject to non-linear effects such as overall or local buckling, or plastic deformation which occurs once the material is stressed past the yield point. Mr Drew noted that this generally sufficed for design purposes but may not be conservative for the evolution of slender structural elements or those incorporating thin sheets of steel where local buckling may lead to rapid and sudden failure – such as the exhaust flues.
[25]First Drew Report, 16–17.

Mr Drew said that the critical applied loading was a (static) wind load under the applicable standard[26] for a return period of 500 years as required by the Building Code of Australia for a building of Importance Level 2.[27] He said that the relevant wind velocity was 45m/sec (or 162kph). The assumed terrain capacity was TC3 corresponding to surrounds of suburban housing with low-rise buildings.[28]
[26]AS/NZS 1170.2:2011.
[27]Under the Building Code of Australia, an Importance Level defines the level of consequences in the event of a building failure. A building of Importance Level 1 has a low degree of hazard to life and other properties in case of failure. A building of Importance Level 3 contains a large number of people. A building of Importance Level 4 is essential to post-disaster recovery or hazardous materials facilities. A building of Importance Level 2 is a building or structure not included in Levels 1, 3 and 4.
[28]First Drew Report, 17.

Mr Drew said that the assumptions necessary to undertake the structural analysis of the flues with supporting roof structures were:

(a)the guy wires to the flues are 10mm diameter with negligible pre-tension and are connected to the primary roof structure at an angle of approximately 50 degrees to the horizontal;
(b)the steel flues are modelled as effectively continuous and integral at the joints;
(c)the original purlins have a yield strength of 240MPa;
(d)the flue geometry and weight were as estimated;[29]
(e)the steel ducting has a yield strength of 250MPa;
(f)the new, trimming purlins installed are 150 C 19-Lysaght type, grade 450MPa; and
(g)the layout and plan geometry of the flues and guy wires were estimated, as access to the relevant part of the roof was not possible.[30]

[29]See [72]–[73].

[30]First Drew Report, 17–18 (footnote omitted).

Mr Drew’s report was accompanied by a report dated 27 November 2019 prepared by Dr Nguyen and Professor Ngo.

Dr Nguyen and Professor Ngo undertook a finite element analysis of the structural behaviours and load sharing mechanism of the roof and flue structures based on the ‘as built’ conditions advised by Mr Drew, having regard to the relevant design standards.[31]
[31]Australian/New Zealand Standard, Structural design actions – Part 1: Permanent, imposed and other actions (4 June 2002) AS/NZS 1170.1:2002; AS/NZS 1170.2:2011; Australian/New Zealand Standard, Cold-formed steel structures (15 May 2018) AS/NZS 4600:2018; Australian/New Zealand Standard, Steel Structures (5 June 1998) AS 4100–1998.

They found that the critical structural component is the flue under the combined action of wind pressure for ultimate limit states derived from AS1170.2:2011 (1.0 kPa), which is applied on the flue surface above the roof and axial compression force (2.5 kN) applied at the top of the flue. The capacity of the flue reduced by 20% in terms of axial buckling load and buckling pressure when nonlinear, local buckling behaviour was considered. Ultimately, they concluded that the flue had the capacity to carry the load, calculated for ultimate limit states.[32]
[32]Report of Dr Tuan Nguyen and Professor Tuan Ngo, 3.

In an addendum to their report, Dr Nguyen and Professor Ngo provide an additional structural assessment of the capacity of the old purlins after considering their potential for lateral torsional buckling and distortional buckling.

They considered that as the building purlins were constructed a few decades ago and of asymmetric section, they were prone to complex buckling behaviours that may undermine their load capacity. Ultimately, they determined that the load capacity of the old purlins was double the maximum bending moment derived in their calculations. As a result, they confirmed the structural adequacy of the flues as constructed on the roof of the building.[33]
[33]Ibid 13–17.

Answers to questions

Mr Drew answered questions contained in his instructions, as follows:

Q: [Did] any of the [works]… involve any structural alterations or additions to the [building]?
A: The existing slab was cut and a piled slab of higher load capacity was installed over an area of approximately 7% of the floor area of the space in which the printing machinery has been installed. I would consider this a structural alteration (effectively an improvement) of the building.
Two roof purlins that I would consider to be part of the “secondary” structure of the building have been cut (one at each flue location), and additional trimming purlins added to support the flues and purlins that have been cut. In my view this constitutes an alteration to the secondary steel roof structure that supports the roof cladding.
Q: [Did] any of the [works]…adversely affect the structural soundness of the building…?
A: The structural soundness of the floor slab in the footprint of the printing machinery has been improved and the load capacity increased. The floor recesses can be filled with concrete to return the floor to its original, planar profile.
The primary steel building frame is unaltered and in my opinion not adversely affect [sic] by the installation of the flues.
Structural analysis of the roof structure and flue assembly indicates that the purlin structure can support the flues and roof cladding in the 1:500 year wind condition, which…in my opinion would be the relevant and critical load condition for the building in terms of statutory compliance.
The load imposed by the flues on the main roof trusses is relatively light and the trusses comprising the primary roof structure would not be adversely affected. By this is meant [sic] that for the purlins directly supporting the flues the weight of the flues and the wind actions transmitted by the flues are significant. The roof trusses that comprise the primary structure support relatively high loads as a consequence of their span geometry and the addition, the loads transmitted to the trusses by the flues are relatively minor as the flues, as shown by analysis, are to significant degree self-supporting.
Therefore, neither the structural soundness of the roof overall nor the footings of the building have been adversely affected by the works carried out.
Given the very limited intervention to the roof cladding and purlins, and the use of bolted connections which are readily decommissioned, the roof alterations in my opinion represent minor work to the secondary structure of the building.
Q: [Did any of the [works]…involve the removal or alteration of any element of the building…that is contributing to the support of any other element of the building…?
A: Sections of ground bearing slab have been removed to install the piled slab which supports the printing machinery. The ground bearing slab is acting purely as a serviceable floor, and is not supporting any other element of the building. As noted in the foregoing, the slab which has been installed in place of the ground bearing slab is of greater capacity than what it has replaced. In my experience the installation of suitable supporting slab structure within existing buildings is a fundamental and routine requirement for the operation of commercial printing machinery.
Sections of purlin (approximately 1 metre in length) have been removed from two existing purlins to create the necessary opening for the vent-flues associated with the printing machinery. The cut purlins have been trimmed with new 150mm C-section purlin sections that support the cut purlins. The purlins concerned previously supported only the lightweight roof cladding for the building.
In my view only minor, secondary structure has been altered, the bolted connections employed mean that the installation is minor and is easily decommissioned. It has been demonstrated in the representative analyses carried out that in respect of the relevant design standards, there is no adverse effect on the roof structure consequent of the installation of the flues.
Q: Have the [works] been carried out in a manner which does not adversely affect the structural soundness of the building…?
A: As described in the foregoing sections of this report, the installation of a new, piled slab does not affect the capacity of the surrounding areas of slab, and (necessarily so) the new slab is of considerably greater load-bearing capacity than the original slab.
Structural calculations carried out confirm that the secondary roof structure in its altered state conforms to the pertinent requirements of the relevant Australian design standards...The primary structure (viz. the steel trusses / portal frame structures) is unaltered and is not adversely affected.[34]
[34]First Drew Report, 19–21 (footnotes omitted).

Second report

Mr Drew’s second report dated 8 February 2020 included the following findings:

(ii)… My view is that the works addressed in Mr Irwin’s report and that I have inspected are highly likely to prove adequate in respect of structural compliance, should a detailed verification be carried out, such as was carried out for the two exhaust flues (“Northern” and “Southern”) that have been considered in my first report.
…

(iv)My view is that the works described in Mr Irwin’s report are: (i) to the secondary structure and cladding, (ii) reversible, and (iii) insofar as I am familiar with printing facilities and able to comment, fundamentally necessary for the operation of such a business as [Amcor] operates. Logically, this would constitute enhancement of the building to the extent that it allows the tenant to carry out the printing operations, which presumably is the purpose of the lease. I do not see that from a structural engineering perspective that the building modifications mitigate against the future usability of the building.
(v)Concerning the scope and description of the works carried out, I am in general and overall agreement with Mr Irwin’s observations. I have not verified the timing of such works, but my understanding is that it is not controversial that the works discussed by Mr Irwin occurred while [Amcor] has occupied the premises as a tenant.
(vi)The matters of the slab modifications to receive the printing machinery and the localised work done to the roof to accommodate two exhaust flues associated with the printing machinery are the subject of my previous report in which I found that the slab modifications effectively constitute an upgrade to the load carry capacity of the existing slab, and the roof modifications were to secondary elements of structure and were compliant with the relevant structural standards.
…
(viii)As outlined in following sections of this report, in my opinion the works that involve modification of structure “contributing to the support of any other element of the building” are the creation of openings to… the roof, and involve secondary elements of structure... These works, whilst constituting modification to the fabric of the building envelope (as opposed to the primary structure or “skeleton” of the building), I consider to be structurally standard, minor modifications clearly consequent of the use of the building for commercial printing.
(ix)The works which are the subject of Mr Irwin’s report I consider to be very minor compared to past modifications to the group of buildings that house the printing operation. Such structural modifications are evident in the North section of the “later” building where a large steel portal structural has been installed evidently to replace what was previously a wall…This work in relative terms I consider to constitute a significant, structural building modification; but could be considered an “improvement” in improving the usability of the internal space.[35]

[35]Second Expert Report of Richard Drew, 3–5 (footnotes omitted) (‘Second Drew Report’).

As to the roof penetrations and installation of the two flues on the roof of the building, Mr Drew said:

The criteria that determine whether engineering analysis and design is carried out for routine installation of services on industrial buildings are to significant degree subject to experience and judgement. I agree with Mr Irwin that a chimney or flue of large scale will at some degree of magnitude “invite engineering analysis”.
However, if an installer of building services and fixtures routinely carries out a large number of such installations, and becomes conversant with the conditions whereby the scale of components and associated loads becomes critical and structural consideration warrant engineering intervention, then they may choose to exercise judgement rather than revert to engineering analysis in every instance.
The analysis carried out for my earlier report indicates that the installation of the two (“North” and “South”) flues is structurally justifiable in the case of the subject building works. That is, analysis shows the altered purlin structure supporting the roof (and partially the flues) to comply with the relevant loading (wind) and material (steel) design standards.
There are other minor service shaft penetrations that have been made to the roof…These appear to be rotary ventilators and minor exhaust risers which in my view are trivial in structural terms.
Mr Irwin also notes the installation of six evaporative cooling units on the roof. I do not have a complete specification for the weight of these, although the supplier’s documents indicate an operating weight of 411 kg…
The installation of these units has not involved the cutting of purlins or any structural elements. I have not assessed the structural actions on the roof purlins from these cooling units. However, having assessed the existing purlins to support the North and South flues I consider it likely that the installation is adequate with respect to the relevant structural standards.[36]

[36]Ibid 6–7 (footnotes omitted).

As to the roof penetrations for the exhaust flues and cooling units on the roof, Mr Drew expressed the following opinions:

The roof penetrations for the two principal (“North” and “South”) exhaust flues were examined in my previous report. These have been assessed by independent analysis to be satisfactory.
Whilst I concur with Mr Irwin that the installation of cooling units of the type observed at the site, on a steel framed roof may “invite” engineering assessment and possibly calculations; on the basis of having assessed the capacity of the roof framing to support these flues under ultimate load wind conditions (in my first report), I consider it likely that the cooling units can be adequately supported to conform to the requirements of the relevant structural standards.[37]

[37]Ibid 13 (footnotes omitted).

Commenting on the works, Mr Drew said:

From an engineering perspective I agree with Mr Irwin, and in my view the fundamental concern of an industrial/process facility is functionality and safety, which I presume to constitute the impetus for the various works carried out.
…
It is clear that considerable modification to the building has occurred over time, and the most recent works (which are the subject of this report) I would have to consider to be relatively very minor.
…
In my view the works which are the subject of this report and Mr Irwin’s report conform to such considerations, and I agree with Mr Irwin that it is not relevant to adopt such terms as defacement or damage – certainly in respect of purposeful works carried out by a contractor in order that the building may be effectively utilised for the purpose required by the occupant.[38]

William Hunter

[38]Ibid 15–16 (footnotes omitted) (emphasis included).

William Hunter, Amcor’s operations manager since 2015, gave evidence as to the installation of the press and the performance of the works.

He managed the construction work necessary to prepare the building for the press together with Lalith Fernando, Amcor’s Engineering Manager for PE South. Julian Dunwill, Engineering Manager for Amcor’s Preston, site focused on the installation of the press once the construction work was complete.

The purchase of the press was proposed in about October 2016. In November 2016, Mr Fernando engaged structural engineers to produce drawings for the press which was to be located in the building. A geotechnical report was obtained in December 2016.

In January 2017, Mr Hunter was asked to reduce activity on the press installation as Omar had agreed to sell the land and Mr Terry was holding discussions with the buyer about the terms on which Amcor might vacate the land.[39]
[39]Mr Terry was Vice President and General Manager (Australia) at the time.

In early February 2017, Mr Hunter received a proposed press base design from the structural engineers. Given the level of soil contamination beneath the land, that design did not proceed.

In March 2017, Mr Terry said that Amcor management had decided to install the press on the land and instructed him to proceed with press installation as swiftly as possible. In early April 2017, he accepted a preliminary quotation from AJR Crow to construct the press base. AJR Crow completed these works by late May 2017. The press base required a month to cure before it could carry the weight of the press.

Amcor began to install the press on 19 June 2017. Amcor’s employees and contractors installed, calibrated and commissioned the press and were assisted by representatives of the manufacturer.

On 8 August 2017, Mr Crow quoted for AJR Crow to perform work to the roof to allow for installation of the exhaust flues for the press. The work was completed in mid-August 2017. AJR Crow cut a small section of the roof rafters and a hole in the sheet metal of the roof in two locations for the exhaust flues. A small frame was attached to the inside of the roof.

Representatives from the manufacturer and other contractors subsequently installed the exhaust flues. With the use of a crane, they passed the flues down through the holes in the roof and the frame attached to the inside of the roof before attaching the flues to the press. The exhaust flues were connected to existing ducting on the roof and to a regenerative thermal oxidiser on the ground next to the building. The area on the outside of the roof where the exhaust flues passed was flushed and sealed.

In about May 2017, Mr Hunter was instructed by Mr Terry to hire and install a diesel generator to supply power to the press as a power upgrade to the land had not been agreed to by Omar. The press still operates on a diesel generator.

After trials of the press, printing commenced on 27 October 2017. The press was fully operational by February 2018.

Mr Hunter was not cross-examined.

Mr Crow’s evidence

Archibald John Ross Crow, a director of AJR Crow, gave evidence as to the works completed by AJR Crow to the floor slab and the purlins.

Mr Crow said that he was a registered builder and commenced as a builder in the late 1960s. He has specialised in commercial building since 2002. The Amcor Group had engaged AJR Crow to carry out building work on many occasions, including the construction of concrete foundations for six other printing presses.

In March 2017, Amcor asked Mr Crow to provide a quotation for the work to the press base, providing him with the construction design and documents.

On 5 April 2017, AJR Crow provided Amcor with a preliminary quotation for the works in the amount of $203,560 plus GST. A screw pile design was adopted, as this would involve the excavation of less contaminated soil.

Between 1 May and 10 June 2017, AJR Crow engaged subcontractors to build the machine base according to the construction design, but with the screw piles drilled deeper in some locations. Edge grinding and base coating work were completed by June 2017.

Based on his experience of similar machine bases, Mr Crow was of the opinion that no building permit was required for the press base. He spoke to Damien Wadsworth, a building surveyor, who confirmed this view.

In August 2017, after the installation of the press was substantially complete, Amcor requested roof work to create space for flues in two locations. On 8 August 2017, AJR Crow provided a quotation for this work in the amount of $5,520 plus GST. The roof work involved removing a section of purlin at each location to create space for a flue, and connecting each curtailed purlin to the two adjacent purlins by means of trimmers. The work was done at short notice and there were no designs or plans.

Mr Crow was of the view, based on experience, that no building permit was required for the roof work. He considered that the work did not affect the structure of the building, and that the support structure of the roof was not affected by the changes made to the purlins. He did not consult a building surveyor before doing this work.

Mr Crow said that the roof was structurally sound and the purlins could do the job that they were designed to do. They supported the roof, which sits on the purlins. If there were no purlins, the roof would probably drape over the beams.

BREACH OF CL 5.4
The issues

The plaintiffs submit that Amcor contravened cl 5.4 of the lease because the performance of the works was an offence under s 16 of the Act. They say that the works were undertaken without a permit, which was required under the Act.

Amcor admits that no building permit was ever sought or obtained, and advanced three contentions:

(a) no building permit was required for the works by reason of an exemption in the BuildingRegulations 2006 (Vic) (‘Regulations’);

(b) the de minimis principle applied so as to excuse any breach of the Act or cl 5.4 of the lease; and

(c) the alterations to the purlins and the trimming work was completed by AJR Crow, and not by Amcor as alleged in the statement of claim.

Was the work done building work under the Act?

‘Building work’ is defined widely in the Act to mean ‘work for or in connection with the construction, demolition or removal of a building’.[40] In turn, ‘building’ is broadly defined to include ‘structure, temporary building, temporary structure and any part of a building or structure’.[41]
[40]Act s 3.
[41]Ibid.

If a building permit was required, it was an offence under ss 16(1), (2) and (4) for the work to be done without a building permit. Under s 16, if a building practitioner is engaged, an offence is committed by the person doing the work,[42] and the building practitioner.[43] Both Mr Crow and AJR Crow were building practitioners as defined in the Act.
[42]Ibid ss 16(1), 16(2).
[43]Ibid s 16(4).

In McAskell & Anor v Cavendish Properties Ltd & Ors (No 2), the issue was whether the laying of a concrete slab could be classified as building work or merely site preparation work.[44] Hansen J held that the test was whether the work was work ‘for or in connection with’ the construction of a building. If this test was satisfied, the work was ‘building work’ regardless of whether it could be described as site preparation works.[45] The Court of Appeal dismissed an appeal holding that the laying of the concrete slab was an essential part of the construction of the building.[46]
[44][2008] VSC 563 (Hansen J).
[45]Ibid [35].
[46]McAskell v Timelink Pacific Pty Ltd (2010) 30 VR 134 (Mandie and Harper JJA, Emerton AJA).

I conclude that the works are ‘building work’ as defined in the Act. Consequently, the works required a building permit unless exempt under the Regulations.

Was the work exempt under the Regulations?

Regulation 1801 of the Regulations provided at the relevant time that a building permit was not required under the Act for the building works identified in sch 8. Item 4 of sch 8 exempted:

Alterations to a building, if the building work –
(a) will not adversely affect the structural soundness of the building, and does not include -
(i)an increase or decrease in the floor area or height of the building; or

(ii)underpinning or replacement of footings; or
(iii)the removal or alteration of any element of the building that is contributing to the support of any other element of the building…

It was not submitted that the works affected the structural soundness of the building. The parties also agreed that items 4(a)(i) and (ii) did not apply. However the interpretation of item (a)(iii) was disputed.

The plaintiffs submitted that the alteration and partial removal of the purlins to make way for the erection of the northern and southern flues involved the removal or alteration of an element of the building that was contributing to the support of another element of the building. The works did not fall within the exemption and therefore required a building permit.

Mr Irwin and Mr Drew were each asked the question whether the works included the removal of any element of the building that was contributing to the support of any other element of the building.[47]
[47]See [64], [87].

Mr Irwin answered in the affirmative, referring to the cutting and removal of part of the roof purlins that were carrying the roof. He also noted the addition of the large diameter ducts for the northern and southern flues and the mechanical ventilation shafts.[48] Mr Drew said that the ground bearing slab did not support any other element of the building. He also said that approximately one metre in length was removed from two existing purlins to create the necessary opening for the vent-flues associated with the printing machinery. He said that the cut purlins previously supported only the lightweight roof cladding for the building.[49]
[48]See [64].
[49]See [87].

Amcor submitted that the application of item 4(a)(iii) turned on the meaning of the words ‘element of the building’, and that the issue reduced to whether the two roof purlins cut by AJR Crow and the roof lining under which the purlins sat were separate elements of the building, or whether the relevant element was the roof of which the purlins and roof lining formed part.

In support of its submission, Amcor contended that:

(a) it was necessary to examine the characteristics of each individual building to determine whether the relevant alteration would fall within item 4(a)(iii);

(b) item 4(a)(iii) should be given a logical, ‘real-world’ application, and not a rigid or artificial application that would lead to an absurd result;

(c) the relevant element of the building is the roof, of which the purlins and roof lining form part, and does not descend to the individual building materials of which the roof was constructed; and

(d) the purlin cuts and trimming work performed by AJR Crow were alterations to the roof which did not support any other building element.

The plaintiffs submitted that:

(a) the correct approach required the identification of the nature and effect of the works;

(b) Amcor’s distinction between the roof and the roof lining was semantic, as the purlins supported the roof; and

(c) the works properly articulated did not satisfy the exemption in item 4(a)(iii).

The plaintiffs drew attention to the fact that both Mr Irwin and Mr Drew approached the exemption in a similar way, treating the purlins as an element of the building that supported the roof. They submitted that:

(a) the cutting and removal of the purlins that were carrying the roof involved the removal or alteration of an element of the building that supported the roof; and

(b) the affected purlins supported the large diameter ducts that were installed on the roof.

Mr Drew said that:

(a) he was in ‘general and overall agreement with Mr Irwin’s observations concerning the scope and description of the works carried out’;

(b) the works to the roof involved secondary elements of structure, and constituted modifications to the fabric of the building envelope as opposed to the primary structure or skeleton of the building; and

(c) the modifications were structurally standard minor modifications clearly consequent on the use of the site for commercial printing.[50]

[50]See [88].

Principles of statutory construction

The principles of statutory construction are well established and apply to regulations just as much as statutes. In Project Blue Sky Inc v Australian Broadcasting Authority, the plurality said:

[T]he duty of a court is to give the words of a statutory provision the meaning that the legislature is taken to have intended them to have. Ordinarily, that meaning (the legal meaning) will correspond with the grammatical meaning of the provision. But not always. The context of the words, the consequences of a literal or grammatical construction, the purpose of the statute or the canons of construction may require the words of a legislative provision to be read in a way that does not correspond with the literal or grammatical meaning.[51]

[51](1998) 194 CLR 355, [78] (McHugh, Gummow, Kirby and Hayne JJ) (citations omitted).

The plurality of the High Court emphasised the importance of text, context and purpose in SZTAL v Minister for Immigration and Border Protection:

The starting point for the ascertainment of the meaning of a statutory provision is the text of the statute whilst, at the same time, regard is had to its context and purpose. Context should be regarded at this first stage and not at some later stage and it should be regarded in its widest sense. This is not to deny the importance of the natural and ordinary meaning of a word, namely how it is ordinarily understood in discourse, to the process of construction. Considerations of context and purpose simply recognise that, understood in its statutory, historical or other context, some other meaning of a word may be suggested, and so too, if its ordinary meaning is not consistent with the statutory purpose, that meaning must be rejected.[52]

[52](2017) 262 CLR 362, [14] (Kiefel CJ, Nettle and Gordon JJ) (citations omitted).

In CIC Insurance Ltd v Bankstown Football Club Ltd, the majority of the High Court said:

[T]he modern approach to statutory interpretation (a) insists that the context be considered in the first instance, not merely at some later stage when ambiguity might be thought to arise, and (b) uses ‘context’ in its widest sense to include such things as the existing state of the law and the mischief which, by legitimate means such as those just mentioned, one may discern the statute was intended to remedy. Instances of general words in a statute being so constrained by their context are numerous.[53]

[53](1997) 187 CLR 384, 408 (Brennan CJ, Dawson, Toohey and Gummow JJ) (citations omitted).

These principles are consistent with s 35 of the Interpretation of Legislation Act 1984 (Vic), which requires that when interpreting a subordinate instrument, a construction that would promote the purpose or object underlying the instrument is to be preferred to a construction that would not promote that purpose or object.

Another important consideration when considering the interpretation of subordinate legislation was stated by Lord Reid in Gill v Donald Humberstone and Co Ltd:

I find it necessary to make some general observations about the interpretation of regulations of this kind. They are addressed to practical people skilled in the particular trade or industry, and their primary purpose is to prevent accidents by prescribing appropriate precautions. Any failure to take prescribed precautions is a criminal offence….They have often evolved by stages as in the present case, and as a result they often exhibit minor inconsistencies, overlapping and gaps. So they ought to be construed in light of practical considerations, rather than by a meticulous comparison of the language of their various provisions, such as might be appropriate in construing sections of an Act of Parliament…Of course, difficulties cannot always be foreseen, and it may happen that in a particular case the requirements of a regulation are unreasonable or impracticable; but, if the language is capable of more than one interpretation, we ought to discard the more natural meaning if it leads to an unreasonable result, and adopt that interpretation which leads to a reasonably practicable result.[54]
[54][1963] 3 All ER 180, 183 (emphasis added), quoted in Driscoll v J Scott Pty Ltd (1976) 50 ALJR 528, 531 (Murphy J); Meade v Nillumbik Australia Pty Ltd & Anor (Ruling) [2019] VSC 786, [43] (Cavanough J).

Summary of competing submissions

The plaintiffs submit that the purlins are an element of the building that contributed to the support of the roof. As a result, a building permit was needed as the works removed or altered an element that supported the roof.

Amcor submitted that the purlins formed part of the roof, which was the relevant element of the building. As the portal frames of the building supported themselves, and the roof did not support anything, the exemption applied.[55]

Construction of item 4(a)(iii) of sch 8

[55]This may not be strictly accurate as the roof supports two chimneys and six evaporative cooling units.

Item 4(a)(iii) stands to be construed in accordance with the accepted principles of statutory construction.

The objectives of the Act assist in the interpretation of the provisions of the Act and Regulations. The first objective in s 4(1) involves the protection of the safety and health of people who use buildings. This points to an interpretation of item 4(a)(iii) that will not result in, or at least will minimise, risks to the safety of people.

Amcor pointed to the objectives stated in ss 4(1)(e) and (g) of the Act, and the need for buildings to be constructed in a cost effective and efficient manner.

Meaning of ‘element’

In my view, the plaintiffs’ submission as to the construction of item 4(a)(iii) is correct, and gives the word ‘element’ its natural and ordinary meaning of ‘a component or constituent part of a whole’. The objectives of the Act and considerations of context and purpose confirm this interpretation. I reject Amcor’s interpretation of item 4(a)(iii) for the following reasons:

(a) The first and ordinary meaning of the word ‘element’ as stated in the online Macquarie Dictionary is ‘a component or constituent part of a whole’.[56] While the word ‘element’ is a protean word used in many fields of human knowledge, it typically assumes a like meaning in the many contexts in which it is used.
[56]Macquarie Dictionary (online at 27 April 2020) ‘element’.

(b) The adoption of this meaning of the word ‘element’ gives effect to the objective contained in s 4(1)(a) of the Act. It provides an appropriate level of protection to people using a building who might otherwise be at risk if unsafe or inappropriate building work were completed.

(c) If the word ‘element’ were read as relating only to a major building component such as a roof, the exemption would be wide. Roof work would effectively be exempt from the requirement of obtaining a building permit under item 4(a)(iii). This is plainly inconsistent with the protection and safety of people using the building. It would not be a reasonably practicable result.

(d) While the objectives of cost effective construction and efficiency are significant, the preferred interpretation of item 4(a)(iii) would have minimal impact on cost and efficiency in the building industry.

(e) The preferred interpretation is consistent with textual references in the Act. For example, the definition of ‘external wall cladding product’ in s 3(1) refers to any product or material that is, or could be used on or in the external wall of a building (including an attachment or ancillary element). Section 160B(4)(g) of the Act makes reference ‘to any exceptional technical factors (such as the effect of load bearing elements on the structural integrity of the building)’.[57] Both of these references plainly use the word ‘element’ in its ordinary English meaning.
[57]Emphasis added.

(f) Equally, references to the word ‘element’ in the Regulations also bear its ordinary meaning:

(i)       Regulation 710(7)(b) refers to the fire-resistance level of building elements separating each sole occupancy from nominated public areas;
(ii)      Regulation 803 refers to primary building elements in the context of termite risk areas; and
(iii)      Regulation 1105 speaks of ‘fire safety elements’. [58]

(g) The preferred meaning of the word ‘element’ leads to a practical result capable of application by skilled people in the building trade and in structural engineering. It was the meaning adopted by both Mr Irwin and Mr Drew in their expert reports.

[58]Emphasis added.

Relevant authority

In Fair Trading Administration Corporation v Owners Corporation Strata Plan 43551, the word ‘element’ stood to be interpreted in the context of the definition of ‘major structural defect’ in cl 31 of the Building Services Corporation Regulation 1990 (NSW).[59]
[59][2002] NSWSC 624.

Under cl 31(b), a ‘major structural defect’ included ‘an inherent or damage-induced defect’:

in a substantial functional element essential to the habitability of a dwelling (for example, a penal wall, masonry veneer wall or slab on ground) which is of such a kind that the element itself does not have adequate structure for its purposes.

As to the meaning of the word ‘element’, Burchett AJ said:

The use of the word “element” has provoked argument, but Chambers Science and Technology Dictionary (1988) shows that, in various technologies, the word simply means a unit of an assembly, a component or a constituent. These meanings are in keeping with the general use of the word in English, as is shown by the New Shorter Oxford English Dictionary (1993), where the meanings given include “[c]omponent part” and “[a] component part of a structure or device”.[60]

[60]Ibid [16].

Amcor sought to distinguish the decision of Burchett AJ as the definition of ‘major structural defect’ in cl 31 also used words such as ‘substantial’, ‘functional’ and ‘essential to the habitability of a dwelling’. The surrounding words narrowed the meaning of ‘element’ in the context of cl 31. Examples given in the Regulations indicated that the meaning of the word ‘element’ had to encompass these aspects.

The plaintiffs submitted that the approach of Burchett AJ to the concept of ‘element’ supported their submission. His Honour accepted that a balustrade was a distinct element, and not just a component of a staircase. Likewise, the roof purlins are properly to be characterised as a separate ‘element’ of the building, notwithstanding that they may also be said to be a ‘component’ or a ‘component part’ of the roof structure.

While I accept as submitted by Amcor that there were words in cl 31 which assisted Burchett AJ to arrive at the interpretation that he did, considerations of purpose and context both point towards the adoption of a similar meaning for the word ‘element’ in the present case.

The experts’ view

While the construction of the word ‘element’ in item 4(a)(iii) is a matter of statutory interpretation for the Court, both expert witnesses used the term in their reports in the sense that I have accepted. Both considered that the work done by AJR Crow in removing parts of two purlins and undertaking trimming work was building work that removed or altered an element of the building that was contributing to the support of another element of the building.

A real-world approach

I agree with Amcor’s submissions that it is important to take a ‘real-world’ and not an artificial approach to the need for a building permit. Here the partial removal of purlins several decades old was required by a more extensive building project. It was necessary to partially remove the purlins to erect two large flues on the roof of the building. The 7m flue added a load of about 380kg while the 5m flue added a load of about 170kg.

When the need arose to confirm that what had been done was structurally sound, it proved to be beyond the capacity of Mr Drew, a very experienced chartered structural engineer, and his engineering firm. The assessment of structural soundness required a separate study by experts from the Department of Infrastructure Engineering of the University of Melbourne. They ultimately concluded that the building work that had been completed was structurally sound.

There can hardly be a better demonstration as to why a building permit was needed for the works. Before issuing a building permit, a building surveyor would have reviewed the structural adequacy of the works proposed having regard to the age and strength of the purlins and the existing roof, the configuration and wind load of the new structures, and the dog leg of the northern flue immediately below the roof of the building. The works required assessment by a building surveyor in accordance with the applicable Australian standards, particularly as to the weight of the new structures on the roof, the effect of wind action, the strength of the old purlins and supporting structures.

Conclusion

I conclude that ‘building work’ as defined in the Act was undertaken without a building permit, and that the work was not exempt under item 4(a)(iii) of sch 8 to the Regulations.

De minimis principle

Amcor next submitted that the works were of such a trivial nature that the exemption contained in item 4(a)(iii) of sch 8 to the Regulations still applied. Amcor said that the de minimis principle should lead the Court to conclude that there was no contravention of cl 5.4 of the lease.

The plaintiffs say that the de minimis principle has no application as Amcor’s failure to obtain a permit was not trifling and gave rise to a contravention of the Act.

Amcor relied on Farnell Electronic Components Pty Ltd v Collector of Customs, where the issue was whether a trade catalogue related ‘exclusively’ to products or services of a country other than Australia.[61] Hill J accepted that the de minimis principle applied expressly or by implication in a wide variety of situations where a trivial failure to comply with a specific condition was ignored. However, it did not apply on the facts of the case.
[61](1996) 72 FCR 125.

Hill J held that the word ‘exclusively’ meant what it said. It was not a case where resort to logic or legislative policy required the word ‘exclusively’ to admit of exceptions. 81 items as against 40,000 items was not of such triviality that it could be ignored.[62]
[62]Ibid 131.

Hill J said:

…there are many references in texts and cases to the de minimis rule as a rule of construction. F.A.R Bennion. Statutory Interpretation: A Code (2nd ed, 1992), p 780 refers to there being a general rule of statutory interpretation that:
unless the contrary intention appears, an enactment by implication imports the principle of the maxim de minimis non curat lex (the law does not concern itself with trifling matters).

Similarly, Halsbury’s Law of England (4th ed, 1995), Vol 44(1), par 1441, under the title “Statutory Interpretation” says:
De Minimis Principle. Unless the contrary intention appears, an enactment by implication imports the principle of legal policy expressed in the maxim de minimis non curat lex (the law does not concern itself with trifling matters); so if an enactment is expressed to apply to matters of a certain description it will not apply where the description is satisfied only to a very small extent.[63]

[63]Ibid 127.

In Victoria, Smith J applied the de minimis principle in Pinho v Andre, where a bank debt was treated as paid even though the amount of $7.63 was still owing.[64]
[64](Supreme Court of Victoria, Smith J, 20 December 1994) 23.

The plaintiffs submit that Amcor’s reliance on the de minimis principle is misplaced. They contended that:

(a)parties must perform their obligations exactly to the requirements of the contract unless exact compliance is excluded by the parties in their agreement, or implied;[65]

Installation of the new press

Progress with the new press was as follows:

(a) Amcor ordered the new press in October 2016. Structural engineers retained by Amcor in November 2016 advised on the foundation work required to install the press. By early December 2016, Amcor had decided where on the land the press would be installed. Amcor reviewed whether to install the press on the land following ID_Land’s offers for an early surrender of the lease.

(b) The decision to install the press on the land was made in about mid-March 2017. In early April 2017, AJR Crow quoted for the construction of the press base. Base works were completed by late May 2017. The press arrived by ship in June 2017 with assembly commencing on 19 June 2017. Modifications to the roof were completed by August 2017 with the press in operation from 27 October 2017.

(c) The press was fully operational in February 2018.

Mr Terry said that he was not aware of the provisions of the lease. He was not aware of any requirement to inform Omar of the installation of the press or of any specific requirement for Omar’s consent to be obtained for building modifications. When the press was installed in 2017, he did not believe that the work was of such a nature as to require consent.

Mr Terry denied that Amcor did not seek consent for the works during his dealings with ID_Land because obtaining consent was not going to be straightforward. He believed that Amcor was open with ID_Land during meetings.

Mr Terry agreed that ID_Land was not informed by Amcor during 2017 that installation of the press had begun or been completed. He could not recall what he or others said at the February 2018 meeting, which was over three months after the press became operational. Apart from explaining that the date of the meeting was immediately before his departure to Singapore with his family, he was not able to give any reason why ID_Land was not informed that the press had been installed at that meeting.

Mr Terry could not explain why ID_Land had not been kept informed of progress with the press installation, or why Mr Garvey in ID_Land’s letter of offer dated 14 February 2018 still spoke of ‘confirmation of interim works with regards to installation of any new press’.

Andrew Allibon

Mr Allibon said that from about July 2016 he was involved in the project to install a new gravure press on the land to replace three gravure presses at Nunawading.

He said that he did not review the lease in any detail. It did not occur to him that the works required Omar’s consent under the lease.

Mr Allibon attended meetings with representatives of ID_Land in 2016 and until early 2017. At the first meeting in early 2016, Mr Garvey and Mr Belford advised that ID_Land had purchased the land. They asked whether Amcor was willing to vacate the land before the lease expired, stating that ID_Land was prepared to offer Amcor incentives to vacate early and to waive the make good obligation under the lease. Mr Allibon said he responded that Amcor was yet to make any decision about the future of the land. Amcor would incur significant costs from relocating equipment, employee redundancy, and customer interruption. He said that if ID_Land had a particular proposal, they should put it to him to discuss with Amcor’s senior management.

Mr Allibon said that the meeting with Mr Garvey and Mr Belford in September 2016 covered the same ground. He stated that Amcor proposed to install a large new gravure press on the land at substantial cost. If the new press was installed, Amcor would be unlikely to vacate the land before the end of the lease term.

Following receipt of ID_Land’s letter of 11 October 2016, he told Mr Garvey in a telephone conversation on 17 November 2016 that the offer was too low and would need to be substantially improved if Amcor was to give it serious consideration. He suggested that Amcor would need a cash payment in the vicinity of $8–10 million but was prepared to consider a lower cash payment with other incentives such as lower rent and outgoings. He said that he told Mr Garvey that once the press was installed, Amcor would not vacate the land given the time to dismantle, reposition and commission the press, conduct customer trials, transition as well as the loss of production.

Mr Allibon’s last meeting with ID_Land was on 10 February 2017. At this meeting, Mr Terry repeated that ID_Land would need to improve its offer substantially for Amcor to consider it seriously. If it did not, Mr Terry was clear that Amcor would proceed to install the press on the land. When he left Amcor in March 2017, planning for the press installation was proceeding.

Paul Crabtree

Mr Crabtree took over the day-to-day management of Amcor’s leases after Mr Allibon left Amcor. In about late May 2017, he received a list of properties leased by Amcor and electronic versions of Amcor’s leases. He did not recall reading the provisions of the lease that required Omar’s consent to structural alterations until after the default notice was received.

Scott Jackson

In mid-2017, Mr Jackson attended a meeting with Mr Garvey and Mr Belford. He recalled that they stated that ID_Land wished to redevelop the land and pressed their offer for Amcor to vacate the land. Mr Terry described the cost to Amcor of vacating the land early and said that the offers ID_Land had made were too low. Mr Jackson said he attended two further meetings with Mr Garvey and Mr Belford in 2018 with Simon Roy who had replaced Mr Terry as Amcor’s Australian Vice President.

Findings as to correspondence and meetings concerning the installation of the press and performance of the works

I make the following findings of fact:

(a)Since the purchase of the land in 2016, the purchasers have consistently sought the early surrender of the lease and vacation of the land by Amcor.
(b)In June 2016, Amcor’s board decided to purchase a new gravure press for installation on the land. From this time on, Amcor’s intention was to install the press on the land.
(c)In November 2016, structural engineers were engaged by Amcor to provide drawings for the press and a geotechnical report was obtained.
(d)After ID_Land’s offer of 22 December 2016 was received, Mr Terry instructed Amcor staff to reduce activity on the installation of the press.
(e)In March 2017, Amcor management decided to proceed with press installation. Mr Terry directed Mr Hunter to proceed with press installation as swiftly as possible.
(f)Prior to 24 April 2017, Mr Belford and Mr Garvey became aware of interim works with regard to the installation of a new press, referring to these works in ID_Land’s offer of that date.
(g)The installation of the new press base by AJR Crow commenced in early April 2017, and was completed by late May 2017.
(h)ID_Land was not informed by Amcor management that press installation had commenced in June 2017 or that the new press was in operation from 27 October 2017.
(i)Amcor did not tell ID_Land that the new press was fully operational in February 2018.
(j)While the attendees at the meeting between ID_Land and Amcor on 14 February 2018 do not have a clear recollection of what was said at this meeting, Amcor representatives did not make known to the ID_Land representatives that the press had been installed and was about to become fully operational.
(k)When they made the offer of 14 February 2018, ID_Land’s directors still believed that the installation of the press had not progressed beyond the performance of interim works.
(l)Mr Roy’s letter of 9 May 2018 on behalf of Amcor said that the parties had moved beyond discussion. It did not say that the press had been installed, and had been operating for a number of months.
(m)Mr Garvey and Mr Belford discovered shortly after 18 June 2018 that the press had been installed on the land.
(n)Amcor’s intention to install the press on the land inevitably conflicted with ID_Land’s desire to develop the land as soon as possible.
(o)During meetings and negotiations, both parties were well aware of their conflicting positions.
(p)Amcor management was aware that if ID_Land was informed of the installation of the press and the works, it would oppose Amcor’s proposal just as it had refused to consent to the power upgrade.
(q)Amcor management did not review the contents of the lease, and did not understand that Amcor needed consent from Omar to perform the works. Amcor elected to proceed with the works regardless of the likely objection from ID_Land.

Was the refusal unreasonable?

Amcor requested that Omar provide retrospective consent to the works on 25 July 2018. In response, Omar requested documents and information concerning the press and works on 31 July 2018. Amcor responded with documents and information on 23 October 2018. On 16 November 2018, the purchasers refused retrospective consent.

Solicitors’ correspondence

The letter of 16 November 2018 by the purchasers’ solicitors stated that:

(a) the purchasers had a clear interest in the issue whether Amcor was entitled to renew the lease;

(b) the purchasers considered that Amcor was not entitled to renew the lease and had not done so;

(c) it would not have been unreasonable for Omar to have withheld consent if consent had been sought prior to the works, and it was not unreasonable for Omar to withhold consent;

(d) the land was subject to the sale contract at the time of the works;

(e) the sale contract required that at settlement Omar deliver the land to the purchasers in the same state that it was in at the time of the execution of the sale contract, fair wear and tear excepted;

(f) the works prevented satisfaction of that obligation by Omar, which had a proper basis for withholding consent; and

(g) if Omar had sought the purchasers’ consent to the works, the purchasers would have decided not to give consent.

On 6 December 2018, Omar’s solicitors wrote to Amcor’s solicitors advising that Omar had authorised the purchasers to deal with the dispute and to have the conduct of any litigation arising from the renewal notice.

Amcor’s solicitors replied on 20 December 2018, asserting among other things that the reason for withholding consent was that the purchasers sought possession of the land to pursue a residential development project. The purchasers’ solicitors responded, seeking vacant possession of the land by 31 March 2019.

Both Mr Fielder and Mr Belford said that ID_Land had taken responsibility for dealings with Amcor in relation to the default notice and the renewal notice.

Mr Belford’s reasons for refusing consent

In final submissions, counsel for the plaintiffs summarised Mr Belford’s evidence as to why ID_Land considered that retrospective consent should not be given to Amcor as follows:

(a) Amcor had no reservation about deliberately breaching the lease because it had not informed Omar or ID_Land of the installation of the press;

(b) Amcor’s conduct was particularly alarming because it was aware that ID_Land was concerned about the impact that new press would have on the contamination levels on the land and the possibility of vacant possession;

(c) Mr Belford considered that he had been misled by Amcor throughout his interactions and negotiations with Amcor. His concerns intensified after learning of the way in which Amcor engaged with the issue once it was raised; and

(d) he was concerned about ID_Land’s capacity to have a working relationship with Amcor given that Amcor was willing to breach the lease without notice to ID_Land at a time when it was aware that ID_Land was trying to reach agreement with Amcor.

The reasons for refusal

In Secured Income, Mason J said:

I am inclined to the view that the landlord is entitled to rely on a ground not taken at or about the time of refusal. It would be most unjust if the landlord could not take advantage of an important ground justifying refusal merely because it was not known to him at the time…the general rule in contract is that a party can justify his termination or rescission of a contract by reference to grounds not taken at the relevant time.[151]

[151]Secured Income (n 121) 611.

It is appropriate to consider each reason advanced by the plaintiffs for refusing consent for the works, whether the reason was advanced by Mr Belford or Mr Fielder in evidence or is found in solicitors’ correspondence.

Relevant principles

In Iqbal v Thakrar, the English Court of Appeal considered whether a landlord’s refusal to consent to proposed structural alterations was unreasonable. Although no case was cited to the court that dealt with that type of consent, it held that the principles laid down in cases relating to the giving of consent by the landlord to an assignment of lease could be applied with any necessary changes.[152]
[152][2004] EWCA Civ 592, [26] (Gibson LJ) (‘Iqbal v Thakrar’).

The Court summarised the principles accepted in International Drilling Fluids Ltd v Louisville Investments (Uxbridge) Ltd[153] with some modifications to allow for requests for consent in relation to structural alterations or additions:
[153][1986] Ch 513, 519–20 (Balcombe LJ) (‘International Drilling’).

(1)The purpose of the consent is to protect the landlord from the tenant effecting alterations and additions which damage the property interests of the landlord;
(2)A landlord is not entitled to refuse consent on grounds which have nothing to do with his property interests;
(3)It is for the tenant to show that the landlord has unreasonably withheld his consent to the proposals which the tenant has put forward…;
(4)It is not necessary for the landlord to prove that the conclusions which led him to refuse consent were justified, if they were conclusions which might be reached by a reasonable landlord in the particular circumstances;
(5)It may be reasonable for the landlord to refuse consent to an alteration or addition to be made for the purpose of converting the premises for a proposed use even if not forbidden by the lease. But whether such refusal is reasonable or unreasonable depends on all the circumstances…;
(6)While a landlord need usually only consider his own interests, there may be cases where it would be disproportionate for a landlord to refuse consent having regard to the effects on himself and on the tenant respectively;
(7)Consent cannot be refused on grounds of pecuniary loss alone. The proper course for the landlord to adopt in such circumstances is to ask for a compensatory payment;
(8)In each case it is a question of fact depending on all the circumstances whether the landlord, having regard to the actual reasons which impelled him to refuse consent, acted unreasonably.[154]

[154]Iqbal v Thakrar (n 152) [26].

The principles in International Drilling[155] and Iqbal v Thakrar[156] were applied by Nettle J in Cathedral Place Pty Ltd v Hyatt of Australia Ltd & Ors in holding that the tenant had the burden of establishing that the landlord’s refusal of consent was unreasonable.[157]
[155]International Drilling (n 153).
[156]Iqbal v Thakrar (n 152).
[157][2003] VSC 385, [13]. See also Pimms Ltd v Tallow Chandlers Company [1964] 2 QB 547, 564 (Willmer, Danckwerts and Diplock LJJ); International Drilling (n 153) 520; Tamsco (n 131) [49].

Similarly, Ginnane J held in Camperdown Dairy International v The Camperdown Cheese Company:

…the Tenant bears the onus of showing that the Landlord’s withholding of consent was unreasonable. The question of whether the Landlord’s conduct was reasonable or unreasonable is a question of fact for the Court to decide. The question is whether the landlord’s conduct was reasonable, not right or justifiable.[158]

[158][2016] VSC 693, [56].

In cases where an assignee of a lease or approval of sublease is in issue, the character and personality of the assignee or sublease may be of great importance. However, in a case such as the present where consent is sought for structural alterations, the significance of a consideration such as the character and personality of the sitting tenant is much less. Rather the landlord’s reason for refusal would ordinarily involve a matter affecting the property or the use or occupation of the premises arising out of the structural alterations.

In Masters Home Improvement, Croft J said:

It is the task of the Court to discern the real and true reason for a landlord’s refusal of consent. If the landlord’s main aim is to obtain some collateral advantage, for example the surrender of the lease, then refusal of consent is unreasonable.[159]

[159]Masters Home Improvement (n 104) [132].

Later Croft J said:

… refusal would be unreasonable if, in the circumstances, refusal amounts to a derogation from the grant comprised by the lease and an arbitrary and capricious attempt to deprive the tenant of a benefit under the lease.
It is, however, clear, that in considering whether to consent to a sublease – accepting that similar considerations apply with respect to consent to an assignment of a lease – a landlord is entitled to have regard to its property interests. Nevertheless, as the authorities indicate, these interests must have some more immediate connection with the lease in question and do not include extraneous broader commercial factors. Thus, in Commercial Tenancy Law, it is said that:
The court will not interfere if a reasonable person in the lessor’s position might have regarded the proposed transaction as damaging to his or her own property interests, even though some persons might take a different view…Consequently, the lessor is entitled to consider the effect which the assignment may have on other premises owned by him or her…

…
Another aspect of refusal of consent is that it would be unreasonable if, in the circumstances, the refusal amounts to a derogation from the grant comprised by the lease and an arbitrary and capricious attempt to deprive the tenant of a benefit under the lease. Intrinsic to a lease is an implied term of cooperation and the implied obligation on the landlord not to derogate from the grant of the demise. The relevant question with respect to the obligation not to derogate from grant is whether the effect of the act disturbs or interferes with the tenant’s occupation. There is also an implied obligation on each party to a lease to do all that is reasonably necessary to secure performance of the lease.[160]

[160]Ibid 74–75 [145]–[146], [148], citing Commercial Tenancy Law (n 145) [15.14].

To the same effect is the decision of the Court of Appeal in Bromley Park Garden Estates Ltd v Moss.[161] Cummings-Bruce LJ said:

… The reason described… in evidence, and accepted by the judge as his ground for decision, was wholly extraneous to the intention of the parties to the contract when the covenant was granted and accepted. That reason cannot be relied upon merely because it would suit the landlords’ investment plans, or their purpose in obtaining...the surrender of [the] lease. It may well enhance the financial interests of the landlord to obtain a single tenant holding the whole building on a full repairing covenant with long-term capital advantage when they put the building upon the market, but that intention and policy is entirely outside the intention to be imputed to the parties at the time of the granting of the lease… or the assignment…[162]

[161](1982) 1 WLR 1019 (Cumming-Bruce, Dunn and Slade LJJ) (‘Bromley Park’).

[162]Ibid 1031.

In the same decision, Dunn LJ said:

…but there is nothing in the cases to indicate that the landlord was entitled to refuse his consent in order to acquire a commercial benefit for himself by putting into effect proposals outside the contemplation of the lease under consideration, and to replace the contractual relations created by the lease by some alternative arrangements more advantageous to the landlord, even though this would have been in accordance with good estate management.[163]

[163]Ibid 1033.

Brodan Pty Ltd v Clearview Industrial Estate Pty Ltd involved a request by a tenant of an industrial property for approval to install pits below new furnaces used to anneal copper and copper compounds.[164] The landlord and tenant had been in dispute for some time about a range of matters. The landlord responded by asking for further details, and then advising that until the defaults earlier advised were attended to, the landlord was unable to consider the request for consent. Ultimately, the landlord pointed to damage that was adversely affecting the appearance of the floor and enhancing the difficulty of selling or leasing the premises at the end of the lease.
[164](1986) 4 BPR 9173 (‘Brodan v Clearview’).

Young J held:

It seems to me quite clear that when the court is considering the question as to whether a landlord’s refusal to consent is reasonable or not, the court looks not only at his expressed reason, but also looks at certain circumstances which existed at the time of refusal, but which were not then known to the landlord, and also to reasons which existed, but which the landlord did not then express. One does not, however, look either to any new reasons which have occurred, because of circumstances after the refusal, nor does one look to see whether some of the reasons which then existed are no longer valid reasons.[165]

[165]Ibid 9176 (citations omitted).

In a later passage, Young J said:

The cases show that what is meant by “subject matter” is something which is closely connected to the premises or the relationship of lessor and lessee or perhaps the concern with respect to neighbouring premises. It does not, however, cover such situations where a landlord seeks to obtain a collateral benefit, such as to put pressure on the tenant to obtain immunity from possible increase in rates or to put pressure on the tenant to gain a surrender of the lease, or the like.[166]
[166]Ibid 9179.

Amcor’s submissions

Amcor submitted that the purchasers lacked reasonable grounds for refusing consent. The main submissions made by Amcor were that:

(a) Omar let the purchasers make the decision;

(b) the asserted concern as to the purchasers’ capacity to work effectively with Amcor was not a reasonable ground for refusing consent;

(c) contamination caused by the new equipment was not a real reason why the purchasers refused consent; and

(d) the purchasers acted in their commercial interest to end Amcor’s tenancy.

Omar’s submissions

The plaintiffs submitted that both Omar and the purchasers had reasonable grounds for refusing consent because they were concerned that:

(a) the land needed to be left in the same state (fair wear and tear excepted) when the sale contract was signed;

(b) Amcor misled them concerning the installation of the press;

(c)the purchasers could not establish a working relationship with Amcor; and
(d)possible contamination would increase costs to the purchasers in developing the land.

Was there enough information to decide whether to consent?

By 16 November 2018, Omar had considerable information concerning the land and the press:

(a) The principals of Omar had extensive experience of printing operations on the land, and had considerable industry knowledge.

(b) Mr Belfold and Mr Garvey had met with Amcor representatives on at least seven occasions, and were cognisant of the possibility that Amcor might seek to install a new press.

(c) ID_Land’s building consultants had conducted an inspection of the press and building on 18 June 2018, and reported on what they saw. Almost five months had elapsed since that inspection of the land.

(d) Amcor had provided plans, documentation and some photographs under cover of its solicitors’ letter of 23 October 2018.

(e) ID_Land had successfully applied for a planning permit, and supplied plans and documentation to the City of Port Phillip to obtain a permit for the development of 122 three-storey townhouses.

I am satisfied that Omar and ID_Land had sufficient information to be able to decide whether to retrospectively consent to the works.

The purchasers not Omar made the decision to refuse consent

Late in 2018, Omar formed the view that it was appropriate for the purchasers to assume responsibility for dealing with Amcor’s breaches of the lease given that on settlement of the sale contract the purchasers would have to deal with Omar on a continuing basis. It was the purchasers who made the decision to withhold consent to the structural alterations.

In the letter of 16 November 2018, the purchasers’ solicitors stated that Omar was obliged under the sale contract to deliver the land to the purchasers in the same state as it was in at the time of execution of the sale contract, fair wear and tear excepted. While this was the case, it was the purchasers and not Omar who were the real decision-makers. The letter stated that the purchasers did not consider that Amcor was entitled to renew the lease, but did not specify the reason why they had declined to give consent to the structural alterations.

To identify the reasons why the purchasers refused retrospective consent to the works, it is necessary to look to the evidence.

Concerns about Amcor’s conduct and poor working relationship

The purchasers bought the land subject to the existing lease. When they signed the sale contract, Amcor was the sitting tenant. They did not get to choose Amcor as the tenant. The consent that Amcor sought was a consent to structural alterations to the building required by the installation of the press. This did not depend on whether the purchasers approved of Amcor as a tenant, or could enjoy a working relationship with Amcor.

Concerns about Amcor’s conduct and the potential for a poor working relationship are not persuasive reasons to refuse consent for works intended to install a modern press. They raise doubt as to whether the purchasers understood the nature of the consent that was sought, particularly as there were at the commencement of the lease five existing printing presses on the land with exhaust flues through the roof including one gravure printing press installed on its own concrete slab.

I find that the purchasers’ objection to the past conduct of Amcor was not the real or substantial reason why consent was refused to the works. Rather, the principal reason for the refusal was to prevent Amcor from entrenching itself as a tenant and from exercising its options to renew the lease. This was an unreasonable basis for declining to give consent to the works.

Contamination concerns

Mr Belford said that prior to late 2016, he told Mr Allibon that ID_Land was concerned about the impact that the installation would have on the contamination level of the land. Mr Allibon did not recall the statement.

The plaintiffs did not express any concern about contamination caused by the new press in correspondence or in emails passing between the parties. Throughout its attempts to induce Amcor to surrender the lease, ID_Land repeatedly offered to waive the make good provisions of the lease despite the fact that there were older presses on the land that had been operating for a number of years.

Although the press uses solvents and vents to air after exhaust gasses are treated, there is no evidence of any contamination or pollution to the land caused by the press. The purchasers did not procure an expert environmental review of press waste or emissions or request an environment management plan. They did not seek expert advice as to whether there really was a problem, or investigate whether environment protection licences or works approvals were needed. They were protected at all times by the covenants of the lease.

I do not consider that the risk or threat of contamination caused by the future use of the press was a significant concern. It was an unreasonable basis for the purchasers to refuse consent to the structural alterations.

The purchasers’ commercial interest in ending Amcor’s tenancy

The purchasers had a very strong commercial interest in obtaining possession of the land to redevelop it as a residential estate. They made a large investment exceeding $30 million in purchasing the land and sought to commence residential development of the land as soon as possible.

In December 2017, ID_Land obtained a two year permit to develop the land for 122 townhouses. Although the permit was capable of extension, it expired in December 2019.

On many occasions, Mr Garvey and Mr Belford expressed their desire to have Amcor vacate the land and not exercise its options to renew the lease. At every opportunity, they pressed the importance to ID_Land of early possession of the land.

In a series of escalating offers, over the period from October 2016 until February 2018, ID_Land offered Amcor large sums of money to obtain the surrender of the lease.

In his evidence, Mr Belford discounted the significance to ID_Land of obtaining vacant possession of the land in the decision to refuse consent to the structural alterations. However, ID_Land was a developer, not a long term investor in industrial property. It had no interest in waiting five or seven years for the lease to conclude and possession of the land to revert to the purchasers.

ID_Land’s aspiration to obtain possession of the land as soon as possible is illustrated by its unwillingness to enter into a lease with CitiPower for an upgraded power supply. If placed in an inconvenient location, a new substation might impinge on the residential development of the land. It might also serve to entrench Amcor as the sitting tenant.

Having regard to the whole of the evidence, I am satisfied that the principal reason for the plaintiffs’ refusal to consent to the works was the desire to obtain early possession of the land for residential development. The existence of continuing and unremedied breaches of the lease by Amcor suited ID_Land’s interests and could debar Amcor from validly exercising its option to renew the lease. This would mean that Amcor would have to vacate the land at the end of the lease on 30 March 2019.

Did the purchasers unreasonably withhold consent to the works?

In Ashworth Frazer Ltd v Gloucester City Council, Lord Bingham set out three overriding principles to be considered when deciding whether a landlord’s withholding of consent was reasonable:

(a) There must be a connection between the landlord’s reasons and the relevant subject matter of the lease.

(b) The question of whether the landlord’s conduct was reasonable is one of fact.

(c) The question is whether the landlord’s conduct was reasonable, and not whether it was right or justifiable.[167]

[167][2001] 1 WLR 2180, 2182–2183.

A landlord is entitled to have regard to its property interests in deciding whether consent should be given under a covenant of a lease. Indeed, as Young CJ observed in Tamsco, there is no independent rule that a collateral purpose necessarily makes the refusal of consent unreasonable as the collateral purpose may be connected with the terms of the lease.[168] However, a decision to refuse consent for extraneous broader commercial factors without any immediate connection to the lease is outside the range of permissible proprietary interests.[169]
[168]Tamsco (n 131) [53].
[169]Masters Home Improvement (n 104) [146], [148] (Croft J); Eddadock Pty Ltd v Denning Properties Pty Ltd [2002] NSWSC 208 [72] (Bergin J); McKenzie v McAllum [1956] VLR 208, 215 (Duffy J).

In Secured Income, Mason J adopted a passage from Colvin v Bowen[170] where Walsh J held that the desire of the landlord to resume possession of the property in order to occupy it was not a proper ground for refusing consent.[171] To the same effect are Bates v Donaldson[172] and InRe Winifrey & Chatterton’s Agreement.[173]
[170](1958) 75 WN (NSW) 262, 264.
[171]Secured Income (n 121) [34].
[172][1896] 2 QB 241 (Kay and Smith LJJ).
[173][1921] 2 Ch 7 (Sargant J).

In Boss v Hamilton Island Enterprises Ltd, the Queensland Court of Appeal held that a landlord was not entitled to refuse consent to the assignment of a sublease for the purpose of acquiring a commercial benefit through more advantageous management arrangements.[174]
[174][2010] 2 Qd R 115, 130 [14], 155 [145] (Fraser JA, Chesterman JA and Margaret Wilson J agreeing at 156). See also Bromley Park (n 161) 1033A.

Likewise, in Brodan v Clearview, where a landlord refused to consent to alterations and sought to put pressure on a tenant to gain a surrender of the lease as a collateral benefit, Young J held that the landlord’s conduct was unreasonable.[175] The landlord’s reasons were not within the scope of permissible considerations which might cause a landlord to refuse consent.
[175]Brodan v Clearview (n 164) 9179.

For the reasons that I have given, I am satisfied on the balance of probabilities that the predominant reason for the purchasers’ refusal to consent to the structural alterations was to advance their commercial interests by denying Amcor the opportunity to renew the lease, and thereby to regain possession of the land. This was important to them as they sought to redevelop the land for townhouses at the earliest opportunity. They were principally motivated by an extraneous commercial purpose unrelated to the covenants of the lease.

CONCLUSION
General conclusion

I have found that Amcor acted in breach of cl 5.4 of the lease when it performed the works. Its breach of cl 5.4 was unremedied when the renewal notices were given. Amcor also acted in breach of cls 5.2 and 5.6 of the lease by carrying out structural alterations. The cutting of the purlins and the cutting out of the roof in a number of locations were unremedied when the renewal notices were served.

Amcor did not request consent from Omar before it commenced the works. Amcor did seek retrospective consent after performing the works but this was too late to attract the requirement that the consent not be unreasonably refused. Had the request for consent been made within time, and been refused, on the evidence before me, I would have held that it was unreasonably refused.

The result is that Amcor was not entitled to exercise its option to renew the lease as under cl 12(1)(b)(A), there were continuing unremedied breaches of cls 5.2, 5.4 and 5.6 of the lease at the time when the renewal notices were given.

Remedies

The plaintiffs are entitled to a declaration that the renewal notices were of no effect and that the lease expired on 31 March 2019. They are entitled to possession of the land. The counterclaim must be dismissed.

SCHEDULE OF PHOTOGRAPHS

Photograph 1 – General view of interior of the building showing steel trusses, purlins and installed printing plant with southern flue at far end.

Photograph 2 - Slab cut out and excavation works in progress in 2017.

Photograph 3 – Freshly poured slab with finishing works in progress.

Photograph 4 – Northern flue roof penetration from the interior showing cut purlin and trimming purlins.

Photograph 5 – Northern flue.

Photograph 6 - Southern flue with bracing frame/damper.

SCHEDULE OF PARTIES

OMAR PROPERTY PTY LTD

(ACN 602 739 668)

First Plaintiff

(First Defendant by counterclaim)

MB WILLIAMSTOWN ROAD PTY LTD

(ACN 612 177 723) AS TRUSTEE FOR THE MB WILLIAMSTOWN ROAD TRUST

Second Plaintiff

(Second Defendant by counterclaim)

JG WILLIAMSTOWN ROAD PTY LTD

(ACN 612 179 352) AS TRUSTEE FOR THE JG WILLIAMSTOWN ROAD TRUST

Third Plaintiff

(Third Defendant by counterclaim)

ID WILLIAMSTOWN ROAD PTY LTD

(ACN 612 184 675)

Fourth Plaintiff

(Fourth Defendant by counterclaim)

AMCOR FLEXIBLES (PORT MELBOURNE) PTY LTD (ACN 004 284 673)

Defendant

(Plaintiff by counterclaim)

[2020] VSC 216

1 May 2020