Pinaki Holdings Pty Limited v HSDCTLVMB Pty Limited; Pinaki Holdings Pty Limited v David John Byrne - [2019] NSWDC 855

District Court

New South Wales

Amendment notes

Medium Neutral Citation: Pinaki Holdings Pty Limited v HSDCTLVMB Pty Limited & Anor; Pinaki Holdings Pty Limited v David John Byrne & Anor [2019] NSWDC 855
Hearing dates: 25-29 November 2019, 2-6 December 2019
Date of orders: 06 December 2019
Decision date: 06 December 2019
Jurisdiction: Civil
Before: Neilson DCJ
Decision:
See [137], [138]

Catchwords:
LANDLORD AND TENANT.
Tenant vacates property and ceases to pay rent 13 months before end of term of lease. Rent for whole 13 months recoverable.

GUARANTEE. LIABILITY OF GUARANTORS. Former directors of tenant had given unlimited guarantee for tenant’s liabilities. Whether liability of guarantors affected by a change of position brought about by tenant’s dealings with a third party.

INTEREST. Whether stipulated interest rate of 12% per annum in lease was a penalty.

CONTRACT. SALE OF BUSINESS AND CERTAIN ASSETS OF BUSINESS. Tenant agrees to sell business and certain assets of business to a third party (‘TP’). What assets sold. Whether parties to contract of sale could vary its terms.

EQUITY. EQUITABLE ASSIGNMENT. Whether an equitable assignment of tenant’s lease to TP. TP enters into possession of demised premises. Whether TP equitable assignee or weekly tenant.

COMPANY LAW. Whether TP or its director liable to landlord. Whether weekly tenancy between landlord and company, or landlord and director personally.

TRESPASS TO LAND. Removal of certain fittings from demised property by TP.

DAMAGES. MITIGATION. Whether landlord failed to mitigate its losses.

DAMAGES. QUANTUM. Whether “make good”, painting and carpet provisions in lease breached. Replacement costs.
CONTRACT. IMPLICATION OF TERMS.
Legislation Cited: Conveyancing Act 1919
Corporations Act 2001
Sale of Goods Act 1923
Cases Cited: Ankar Pty Ltd v National Westminster Finance (Australia) Ltd (1987) 162 CLR 549
Australian Mutual Provident Society v 400 Saint Kilda Road Pty Ltd [1990] VR 646
BP Refinery (Westernport) Pty Ltd v The Shire of Hastings (1977) 180 CLR 266
Esanda Finance Corporation Ltd v Plessnig (1989) 166 CLR 131
Finlan v Eyton Morris Winfield [2007] EWHC 914 (Ch)
Karacominakis v Big Country Developments Pty Ltd [2000] NSWCA 313
Lemon v Lardeur [1946] KB 613
Lewy v Moss Nominees Pty Ltd [1996] NSWCA 325
Midcoast Petroleum Pty Ltd v Keldros Pty Ltd [2019] NSWSC 970
Paciocco v Australian New Zealand Banking Group Ltd [2016] HCA 28
Singh v Smithenbecker (1923) 23 SR (NSW) 207
Tabcorp Holdings Ltd v Bowen Investments Pty Ltd [2009] HCA 8; (2009) 236 CLR 272
The Progressive Mailing House Pty Ltd v Tabali Pty Ltd (1985) 157 CLR 17
Walsh v Lonsdale (1882) 21 Ch D 9
Warren v Keen [1953] 2 All ER
Waterways Authority of New South Wales v Coal and Allied Operations Pty Ltd [2005] NSWSC 1285
Young v Lamb (No 2) [2001] NSWSC 1014
Category: Principal judgment
Parties:
2016/00360721

Pinaki Holdings Pty Ltd – Plaintiff
HSDCTLVMB Pty Ltd – First Defendant
Jose Vieira – Second Defendant

2018/00050775
Pinaki Holdings Pty Ltd – Plaintiff
David John Byrne – First Defendant
Matthew William Byrne – Second Defendant
Representation:
Counsel:

2016/00360721
C.R. Ireland – Plaintiff
R. Freeman – 1st & 2nd Defendants

2018/00050775
C.R. Ireland – Plaintiff
S. Lees – 1st & 2nd Defendants

Solicitors:

2016/00360721
Teneo Legal - Plaintiff
R E Barros & Company – 1st & 2nd Defendants
2018/00050775
Teneo Legal - Plaintiff
Blake Lawyers – 1st & 2nd Defendants

File Number(s): 2016/003607212018/00050775
Publication restriction: Nil.

Judgement

05/12/2019

The parties

HIS HONOUR: There are before me two sets of proceedings. The plaintiff in each case is Pinaki Holdings Pty Ltd. The first set of proceedings is plaint number 2016/00360721. The defendants in those proceedings are a company known as HSDCTLVMB Pty Ltd, which is the first defendant and the second defendant is Mr Jose Vieira. The second set of proceedings is matter number 2018/00050775. The first defendant in those proceedings is Mr David John Byrne. The second defendant is his brother, Matthew William Byrne. I shall refer in this judgment to HSDCTLVMB Pty Ltd as the company. I shall refer to Mr Jose Vieira, as Mr Vieira. I shall refer to the Byrne brothers as the guarantors.
The proceedings arise out of a demise of commercial premises at Gladesville by the plaintiff to a company known as Rova Media Pty Ltd, and its vacation of the premises infra terminum, and a failure by Rova Media Pty Ltd to pay rent until the lease was due to expire 13 months later. I shall refer to Rova Media Pty Ltd as Rova. The guarantors are former directors of Rova, who guaranteed a lease, granted by the plaintiff, to Rova. The company bought the business of Rova and was in possession of the premises for a period of at least four weeks, after the cessation of the occupancy of the premises by Rova. Mr Vieira is a director of the company. The company has as its registered office, 22 Lucinda Avenue Wahroonga, a northern suburb of Sydney. Its sole director is Mr Vieira, whose residential address is that given for the company. The sole shareholder of the company is another company rejoicing in the Latin name Nunc Coepi Pty Ltd, the Latin meaning, “now I begin”. The address for that company is also the residential address of Mr Vieira at Wahroonga. The inference to be drawn is that Mr Vieira is the principal of the company. Mr Vieira is alleged by the plaintiff to be personally liable for what might otherwise be the liability of the company.

The plaintiff

The plaintiff company has two directors. They are Mr Pinaki Basu, and his sister, Ms Manisha Basu. They are also the shareholders of the plaintiff. The plaintiff owns the commercial premises at Gladesville, which were the subject of the lease to Rova. The plaintiff also owns three residential properties. The evidence given on behalf of the plaintiff has mainly been given by Mr Pinaki Basu. The inference to be drawn is that the plaintiff is a legal entity protecting Mr Basu's investment properties.

The property

The plaintiff bought the commercial premises at Gladesville, now in question, in 2005. The premises in question is Lot 18 in Strata Plan 61065. Those premises are described by Mr David Bird, a certified practicing valuer, in his valuation report, which is exhibit 15, and is dated 17 May 2019. The relevant part of his description is this:

"The subject property is strata title industrial unit, of a two level nature, suitable for warehouse/office usage, within a 1999 completed development of similar office and warehouse units, within the industrial area of Gladesville.
The subject property is set to the rear of an 18 unit complex to the southern side of Buffalo Road, between Cressy Road and Monash Road, at Gladesville in Sydney's mid north western suburbs.
The surrounding development comprises an older and well established industrial area with a strong mix of 'high tech' or office/showroom usages, along with a considerable presence of automotive related occupancies. Close by is the State Transit Ryde Bus Depot, as well as a major industrial/commercial redevelopment project underway on Victoria Road. Surrounding the industrial estate are established residential areas of a predominantly low density nature, along with medium density developments, closer to the Parramatta River or along the main roadway thoroughfares and close to the town centres. Holy Cross College is close by, as are several parks/reserves and playing fields.
Bus routes pass directly by, whilst the major arterial link of Victoria Road is within 800 metres. West Ryde rail station is within 4 kilometres."

Mr Bird goes on to point out that the current zoning for the area by the Ryde local council is 1N2 Light Industrial. Under the heading "Improvements", Mr Bird says this:

"A strata title industrial unit, situated to the rear of the block of similar 18 office/warehouse units, completed in around 1990. The subject is the largest unit of the complex, the majority of around 240 300 square metres of strata area, comprising ground floor warehouse space, covered by full first floor office area, and there is a basement car park. A café usage operates out of one of the front units. The units are arranged along either side of a central driveway leading to a rear L shape, the subject being situated closing off the rear of the complex along the western side boundary."

Later in the report, Mr Bird points out the area of the lot: ground floor, 231 square metres; first floor, 230 square metres; ground floor car space, 16 square metres; basement car spaces, 122 square metres; total strata area, 599 square metres. That is according to the Strata Plan.

Rova Media

When the plaintiff bought the property in 2005, there was an existing tenant described by Mr Basu in his oral evidence as MG UPS Pty Ltd, which was an "IT" company. The property was first let to Rova on 1 August 2009, for a term of four years, with an option to renew for a further period of four years. Rova was incorporated on 19 June 2002, under the name No 1 Taxi Media Pty Ltd. It changed its name to Rova Media Pty Ltd on 16 December 2005. Prior to moving to the premises now in question, it was situated nearby in 1/56 Buffalo Road, Gladesville. The street address for the premises now in question is unit 18, 46-48 Buffalo Road, Gladesville. Mr David John Byrne was, according to records kept by ASIC, a director of Rova between 18 September 2006 and 12 March 2014. He ceased to be a shareholder on 18 February 2015. Mr Matthew William Byrne was a director of Rova between 18 September 2006, until 16 March 2016. He ceased to be a shareholder in effect on 14 July 2015.
According to Mr Vieira’s evidence, Rova carried on a taxi media business, which involved the placing of advertisements at the rear of and on the roof of taxi cabs. The original lease to Rova can be found at CB 242. A further copy of it can be found at CB 612. As I have indicated, it ran from 1 August 2009 to 31 July 2013, with an option to renew for four years. That option appears to have been exercised, because the second lease commenced on 1 August 2013 for a period of four years ending on 31 July 2017, with no option to renew.

The lease to Rova

The second lease, the lease now in question, can be found at CB 151. A number of its provisions need to be considered. The annexure A to the affidavit specifies that the guarantors were David John Byrne and Matthew William Byrne. Their liability was unlimited. The lease as drafted included William Edward Cole as a guarantor, but his name has been deleted. It would appear from other evidence that prior to 1 August 2013, Mr Cole had died.
Item 13 of annexure A specified that the rent for the first year of the lease was $110,860 plus GST, to be paid by monthly instalments of $9,238.33 plus GST. Item 13 goes on to point out that at the end of each year, the rent was to be adjusted in accordance with the review process contained in other parts of the lease.
Item 14 in annexure A specifies outgoings, 100% of which were to be paid by Rova. It specifies these things as the outgoings:

"Outgoings -
(a) local council rates and charges;
(b) water sewerage, water usage and drainage charges
(c) land tax;
(d) insurance;
(e) management fees;
(f) air conditioning maintenance; and
(g) all levies and contributions of whatsoever nature determined and/or levied by the owner's corporation or any strata managing agent lessee, with the exception of any contributions to a sinking fund or special levy in respect of the strata scheme, of which the property forms part (if applicable)."

The item goes on to refer to the outgoings being for the part of the property which is covered by the lease. That appears to be unnecessary verbiage in the circumstances of the current lease.

Item 15 in annexure A specifies an interest rate of 12% per annum.
The standard conditions of the lease are contained in annexure B. Between annexure A and annexure B are a set of conditions headed, "Alterations and additions to annexure B". I shall refer to these, if necessary, as the “special conditions”.
There are a number of special conditions which need to be noticed. They are these:

"8. Repair and maintenance:
(a) Notwithstanding anything here contained, the tenant shall be responsible for all repair and maintenance of the demised premises,
and any part thereof, excluding matters of a structural nature.
(b) The tenant's obligation to repair and maintain as above shall include the obligation to replace at the tenant's expense.
(c) Any replacements shall, upon the tenant's vacating the demised premises, become the property of the landlord.
9. Lessee to bear charges:
(a) In addition to the rent and outgains payable by the lessee under the lease, the lessee shall bear and pay:
(i) the costs of maintenance and upkeep of the premises by the lessor, excepting items of a structural nature, and having regard to the condition thereof at the commencement of the tenancy; and
(ii) the costs of operation and maintenance of all services provided, and all utilities consumed by or supplied to the lessee.
(b) In respect of the demised premises:
(i) the lessee shall pay any GST payable in respect of the above charges, GST being additional thereto; and
(ii) monies payable by the lessee under this clause shall be paid by the lessee to the lessor forthwith upon written demand being made upon the lessee.
10. Outgoings:
(a) At the commencement of the lease term, and upon each anniversary thereafter, the lessor will provide to the lessee an estimation of the outgoings payable by the lessee under the provisions of this lease.
(b) The lessor may elect to provide such estimation at different times to that specified above, but not less than annual intervals.
(c) Failure by the lessor to provide such an estimation shall not constitute or be deemed to constitute either a waiver of the right to provide the estimate, or a waiver of the obligation of the lessee to pay the outgoings as elsewhere provided.
(d) The estimation of the outgoings provided by the lessor shall be paid in monthly payments by the lessee to the lessor, each such payments[sic] being one twelfth of the total estimated amount.
(e) At the end of the estimation period, the lessor shall provide to the lessee a further calculation of the actual relevant outgoings for the period of the estimation, supported by copies of tax invoices and
receipts (where appropriate), for such outgoings.
(f) The lessor and the lessee shall then adjust the monies payable by the lessee on account of the outgoings against the actual outgoings for the same period.
(g) Any excess paid by the lessee shall be credited to the next outgoing period; and any shortfall shall be paid to the lessor within 14 days.
12. Lessor's consent and consent of third parties to works:
(a) The lessee shall not make any alterations, additions or improvements to the premises without the prior consent of the lessor, except for the installation of unattached, mobile objects which may be installed without drilling, cutting, or otherwise defacing or damaging the premises, which consent shall not be unreasonably withheld.
(b) For the purpose of obtaining the lessee's consent to any such proposed works, the lessee shall provide full details thereof to the lessor, together with a copy of any relevant plans.
(c) Where any such works require the consent or approval of any third party or parties, including (but not limited to) the local Council, Sydney Water, or the Owner's Corporation, where the demised premises comprises a lot or part of a lot in a Strata Plan, or Community Plan, the lessee shall not carry out any such works unless and until the consent of such third party or parties has been obtained.
(d) The lessee shall supply a copy of such third party consent to the lessor prior to carrying out any such work.
(e) In carrying out the works described above, the lessee shall comply with the requirements of the Building Code of Australia, any applicable standards and any requirements and conditions imposed by any third party or parties.
(f) The lessee shall be solely responsible for the repair and restitution needed to restore the affected premises to the original condition.
14. Lessor's works:
(a) Conditional upon compliance with clause (b) below, the lessor will cause:
(i) four skylights to be installed into the demised premises to add natural light to the rear office area.
(ii) install a small kitchenette on the outside of the conference room, in the position marked D on the attached plan, such kitchenette to include a wall mounted Zip hot water heater, and a sink with cold running water;
('the lessor's works')
(b) The carrying out of the lessor's works is conditional upon the lessor obtaining the consent of the Owner's Corporation, the Local Council, and any other requisite authorities to the works.
(c) The Lessor shall apply for, and pursue, the consent referred to in the preceding subclause with all due expedition.
(d) The lessor's works shall be carried out at the expense of the lessor.
(e) In carrying out the lessor's works, the lessor shall minimise the disturbance caused to the lessee."

Clause 14 was part of the first lease granted by the plaintiff to Rova. It would appear to have been reproduced, albeit that the "kitchenette", at least, had been inserted into the demised premises immediately after the commencement of the first lease was therefore unnecessary to insert it in the second lease. I should also point out that the special conditions sometimes spell lessor and lessee with capital letters, and sometimes they do not. I have standardised that for the purposes of this judgment.
Annexure B contains a number of clauses which need to be noted. They are these:

"5.1.5 [The lessee must pay to the lessor, or as the lessor directs] interest on these monies at the rates stated in item 15 in the schedule, when payment is more than 14 days overdue, calculated from the due date to the date of payment;
7.3.3 [The lessee must also] decorate the inside of the property in the last three months of the lease period (however it ends) 'decorate' here means restoring the surfaces of the property in a style, and to a standard of finish originally used, eg by repainting;
12.3 When this lease ends, unless the lessee becomes a lessee of the property under a new lease, the lessee must
12.3.1 return the property to the lessor in the state and condition that this lease requires the lessee to keep it in; and
12.3.2 have removed any goods and anything the lessee fixed to the property and have made good any damage caused by the removal.
Anything not removed becomes the property of the lessor, who can keep it, and remove and dispose of it, and charge to the lessee the cost of removal, making good and disposal.
12.6 If there is a breach of an essential term, the lessor can recover damages for losses over the entire period of this lease, but must do every reasonable thing to mitigate those losses and try to lease the property to another lessee on reasonable terms.
12.7 The lessor can recover damages even if -
12.7.1 the lessor accepts the lessee's repudiation of this lease; or
12.7.2 the lessor ends this lease by entering and taking possession of any part of the property, or by demanding possession of the property; or
12.7.3 the lessee abandons possession of the property;
12.7.4 a surrender of this lease occurs.

13 GUARANTEE

What are the obligations of a guarantor?

13.1 This clause applies if a guarantor of the lessee is named in item 10A in the schedule, and has signed or executed this lease or, if this lease is a renewal of an earlier lease, the earlier lease.
13.2 The guarantor guarantees to the lessor the performance by the lessee of all of the lessee's obligations (including any obligation to pay rent, outgoings or damages) under this lease, under any extension of it, or under any renewal of it, or under any tenancy, and including obligations that are later changed or created.

13.3 If the lessee does not pay any money due under this lease, under any extension of it or under any renewal of it, or under any tenancy, the guarantor must pay the money to the lessor on demand, even if the lessor has not tried to recover payment from the lessee.
13.4 If the lessee does not perform any of the lessee's obligations under this lease, under any extension of it, or under any renewal of it, or under any tenancy the guarantor must compensate the lessor even if the lessor has not tried to recover compensation from the lessee.
13.5 If the lessee is insolvent, and this lease or any extension or renewal of it is disclaimed, the guarantor is liable to the lessor for any damage suffered by the lessor because of the disclaimer. The lessor can recover damages for losses over the entire period of this lease or any extension or renewal, but must do every reasonable thing to mitigate those losses and try to lease the property to another lessee on reasonable terms.
13.6 Even if the lessor gives the lessee extra time to comply with an obligation under this lease, any extension of it, or under renewal of it, or under any tenancy, or does not insist on strict compliance with the terms of this lease, or any extension of it, or renewal of it, or of any tenancy, the guarantor's obligations are not affected.
13.7 If an amount is stated in item 10B in the schedule, the guarantor's liability under this clause is limited to that amount.
13.8 The terms of this guarantee apply even if this lease is not registered, even if any obligation of the lessee is only an equitable one, and even if this lease is extended by legislation."

I observe at this time, that as a matter of construction, I would construe the words, "under any tenancy", as meaning under any tenancy of the lessee, not as any tenancy of any person. The guarantors were guaranteeing the liability of the lessee, not of anybody who might occupy the premises at any time. The words, "under any tenancy", are actually applicable where the lease expires, and there has been no express extension of it, or any renewal of it, but the lessee stays in possession as a weekly, monthly, or annual tenant at common law. To construe the words, "under any tenancy" as including any tenancy held by the company would, in my view, be absolutely perverse.
There is a restriction on the use to which the premises may be put in the strata by laws. A search of the common property of the strata plan is exhibit G. That provides that the by-laws to be created upon registration of the strata plan are the Industrial Scheme model by laws, as far as the first 13 clauses are concerned. Cl 16 is this:

"USE:
A proprietor or occupier of a lot shall not, upon the parcel, carry on any of the following uses:
(i) panel beating workshop
(ii) motor vehicle repair workshop
(iii) motor vehicle or outboard motor mechanic
(iv) auto electrical workshop
(v) repairs to any motors, including outboard and lawn mower motors."

A copy of the by-laws can also be found as an annexure to the affidavit of Ms Kellie Tattersall, sworn on 21 June 2019, which is exhibit E1, and can be found at Court Book at 919. The inference to be drawn is that copy of the by-laws was that extant when Ms Tattersall was acting as the real estate agent for the plaintiff immediately after Rova quit possession of the premises on or about 30 June 2016. In other words, from both exhibit G and from the annexure to Ms Tattersall's affidavit, the restriction in use appears to have been effective during the whole of the period relevant to the current proceedings.

Sale of Rova Media’s business

The next issue to be considered is the purchase of the assets of Rova by the company. In his affidavit of 15 April 2019, which is exhibit 14C, Mr Vieira said this:

"1. I am the second defendant and sole director of [the company].
2. The company is the General Partner of the Appscloud Limited Partnership (Appscloud LP). The Appscloud LP is a corporate
partnership between the company and Omnia In Bonum Pty Ltd.
3. Between 1 May 2016 and 30 July 2016, Appscloud LP acquired and merged two competing media businesses in Australia, Ultimate Media Group Pty Ltd and Rova Media Pty Ltd, which then rebranded and traded under the name 'Nonstop Media'.
4. Appscloud, through a DOCA, with the administrator of Ultimate Media Group Pty Ltd, purchased and operated Ultimate Media Pty Ltd, which had premises at 24/6 Herbert Street St Leonards. The following involved (St Leonards Premises). The St Leonards Premises had numerous computers, servers and racks, which increased as the number of [businesses] acquired increased. The St Leonards Premises had copper lines connected to the installed fibre optic cable in the basement of the complex.
7. In 2016, I was looking for media businesses for the Company to acquire. In and around April or May 2016, I became aware that the business of a company owned by Rova Media Pty Ltd (Rova Media), was for sale.
8. I engaged in negotiations on behalf of the company (on behalf of Appscloud LP) to purchase the business of Rova Media with David Ha and Maureen Cole (on behalf of Rova Media). These negotiations commenced in and around May 2016. During the course of negotiations, I visited the premises from which Rova Media traded at Unit 18…
9. During the course of negotiations with Rova Media, due diligence was undertaken by the Company following (due diligence process). To the best of my recollection, the due diligence process occurred during May 2016 and terminated around or just prior to 9 June 2016 when the final agreement was signed. Through the due diligence process, I received a number of documents from which I gained information on the business. I refer to some of these documents below.
10. During the due diligence process, I became aware that Rova Media leased the Premises and I was provided with a copy of a lease for a term of four years for the premises, commencing on 1 August 2009 and terminating on 13 July 2013. Annexed to hereto and marked 'B' is a copy of a letter from Hughes and Taylor to the manager, Rova Media, dated 28 September 2009, attaching a copy of the lease for the premises for the period 1 August 2009, and terminating on 31 July 2013.
12. The negotiations between the company and Rova Media culminated in a written agreement being prepared by Brown Wright Stein Lawyers."

It should be noted as far as par 8 of that affidavit is concerned, which I have quoted above, that Maureen Cole was a director of Rova from 20 March 2016, and sole director after the retirement of the guarantors. It appears that she was the widow of William Edward Cole, who ceased to be a director on 29 November 2011. Maureen Cole was not a guarantor of the lease now in question, because she was not a director at the time of the execution of the second lease.

The sale agreement

The agreement for the sale of business between Rova and the company is a lengthy document, comprising 21 pages, with a four page schedule. Two and a half copies were provided in the Court Book. The first copy can be found at CB 76. A further copy can be found at CB 494. A part copy can be found at CB 649, being a redacted copy because of fears by Mr Vieira that some of its provisions were “commercial in confidence”. The multiplication of relevant documents in the Court Book is something to be decried, and I shall have more to say about that later. There are a number of things to be observed about the agreement, which is dated 9 June 2016. When defining the "purchaser" on the first page of the agreement, this occurs "HSDCTLVMB Pty Ltd … as general partner for the Appscloud Limited Partnership of...(the purchaser)". That ties in with the evidence of Mr Vieira, which I have already quoted.
A number of provisions of the agreement need to be considered. Clause 1.1 provides definitions. The word, "Assets" is defined thus "Assets means all interest, right and title of the Vendor to all assets of the Business, including:

"(a) the Plant and equipment;
(b) to (k) [omitted]
(l) any assets or benefits agreed to be sold or vested in the Purchaser under this Agreement,
but excludes the Excluded Assets."

Clause 1.1 also contains a definition of "Plant and Equipment". It is this:

"Plant and Equipment means all the plant, equipment (including office and computer equipment), machinery, tools, furniture, fixtures and fittings and the spare parts and accessories for those items owned or used by the Vendor in connection with the Business."

The words, "Excluded Assets" are defined thus:

"Excluded Assets means the following assets used in or forming part of the business:
(a) cash, including funds held with any bank or financial institution to the credit of the Vendor, and cash on hand as at Completion; and
(b) the assets specified by the purchaser as excluded assets prior to Completion in accordance with clause 7."

The terms "Completion" and "Completion Date" are also defined in cl 1.1:

"Completion means the completion of the sale and purchase of the Business and the Assets in accordance with cl 19.
Completion Date means the later of:
(a) 28 June 2016; and
(b) such other date as the Vendor and the Purchaser may agree."

Clause 1.1 also defines the "Purchase Price" as meaning $250,000, excluding GST. Clause 4(a) provides for the payment of a deposit of $155,000 as at the time of the making of the contract, that is on 9 June 2016.

The Following clauses must also be noted:

7. Asset Register
(a)    Within 7 days of the execution of this Agreement, the Vendor will provide to Purchaser a complete list of all the assets of the Business, including but not limited to, the assets listed on the “2016 depreciation schedule”.
(b)   Following its compliance with clause 7(a) and by no later than 2 days before the time referred to in clause 7(c), the Vendor will permit the Purchaser to view the assets of the Business for the purpose of specifying the Excluded Assets.
(c)   By no later than 7 days prior to the Completion Date, the Purchaser will provide the Vendor with a list of the assets of the Business that the Purchaser specifies and Excluded Assets for the purpose of this Agreement.
8. Transfer of property and risk
Title to and the risk of the Business and the Assets:
(a)   until Completion, remains solely with the Vendor; and
(b)   on and from Completion, passes from the Vendor to the Purchaser effective on and from Completion.
9. Liabilities
(a)   The Vendor is liable for any Liabilities incurred in respect of the Business before Completion, and the Purchaser is liable for any Liabilities incurred in respect of the Business on or after Completion.
(b)   The Vendor will indemnify the Purchaser against all Claims and proceedings, including legal costs which may be incurred by the Purchaser, arising from all Liabilities in connection with the Business before Completion.
(c)   The Purchaser will indemnify the Vendor against all Claims and proceedings, including legal costs which may be incurred by the Vendor, arising from all Liabilities in connection with the Business on or after Completion.
(d)   This clause 9 does not merge on Completion.
10. Leases
In the event that the leases for any of the Premises are not Excluded Assets:
(a)   the Vendor agrees to use its best endeavours and to act promptly and reasonably in seeking to obtain the lessor’s consent to the assignment of the lease;
(b)   the Purchaser agrees to assist the Vendor in obtaining the lessor’s consent and to act promptly and reasonably in providing references and evidence regarding the Purchaser’s financial status and those matters which the lessor may require under the lease covenant relating to assignment;
(c)   if required by the lessor as a condition of consent to the assignment, the Purchaser will procure the execution of guarantees for the performance of lease covenants by the Purchaser, for the residue of the lease term and for any further lease whilst the Purchaser remains the lessee, by not more than two of the Purchaser’s directors of principal shareholders; and
(d)   the costs of the assignment of leases shall be borne by the Purchaser.
19. Completion
(a)   Completion of this Agreement will take place on the Completion Date at Suite 6, Level 1, 74-76 Burwood Road, Burwood NSW 2134 or at another time and place agreed in writing by the parties.
(b)   On Completion the Vendor will vest in the Purchaser title to and possession and control of the Business and each Asset included in the sale under this Agreement.
(c)   The Purchaser may by notice (Waiver Notice) given to the Vendor on or before the Completion Date, and at the request of the Vendor, waive the requirement of the Vendor to comply with one or more of the requirements referred to in clause 20, in which case Completion will still occur and the Vendor is not required to comply with the requirements specified in the notice on or before Completion, but instead must comply with:
(1)   those requirements as soon as reasonably possible after Completion; and
(2)   any conditions to the waiver of the Purchaser set out in the Waiver Notice.
20. Obligations of Vendor on Completion
On or before Completion, the Vendor must give the Purchaser unencumbered title to and ownership of the Business and the Assets and Place the Purchaser in effective possession and control of the Business and the Assets, and to this end the Vendor must (without limitation):
(a)   deliver to the Purchaser each of the following, in a form previously approved by the Purchaser and duly executed by all relevant parties (other than the Purchaser) and, if required by Law, stamped at the expense of the Purchaser:
(1)   without limiting clause 15, an effective Assignment of each of the Contracts and Licences that are not Excluded Asses to the Purchaser, together with the written consent to the Assignment of all necessary persons unless that consent is provided under the terms of the relevant Assignment document;
(2)   the certificate of registration or other title document (if any) and an effective transfer to the Purchaser of each item of the Intellectual Property Rights, Trade Marks and Domain Names;
(b)   deliver to the Purchaser the Plant and Equipment and Stock, together with any relevant title documents, by delivery at the respective places where they are located;
(c)    deliver to the Purchaser the Records (including the originals of all Contracts) by delivery to the Sydney Premises;
(d)   deliver to the Purchaser all other documents relating to the Business or the Assets or necessary for the Business to be carried on, including such other notices, documents, instruments and assignments as are reasonably requested by the Purchaser prior to Completion which are required to be executed or registered under any statute or otherwise to enable the Purchaser to take possession of the Assets or for the Future conduct of the Business;
(e)   deliver to the Purchaser all documents necessary to record the changes of ownership of any of the Assets at each place the relevant Asset is registered or recorded, duly executed by the Vendor as transferor in favour of the Purchaser;
(f)   deliver to the Purchaser possession of, and all security devices and keys for, the Premises; and
(g)   deliver to the Purchaser all other documents and things required by this Agreement to be done by or delivered by the Vendor to the Purchaser on the Completion Date, or which are reasonably required by the Purchaser to vest full ownership, title, possession and benefit of the Assets in the Purchaser and to enable the Purchaser to conduct the Business in the same manner as the Vendor conducted it before the Completion Date.
21.   Obligations of Purchaser on Completion
At Completion the Purchaser Must:
(a)   pay the balance of the Purchase Price to the Vendor or as the Vendor directs in writing;
(b)   accept from the Vendor an Assignment of each of the Contracts and Licences that are not Excluded Assets, subject to clause 15;
(c)   take possession of the Plant and Equipment and the Records that are not Excluded Assets;
(d)    accept all the documents and other items specified in clause 20 which the Vendor gives the Purchaser under that clause; and
(e)   do all other acts and execute all other documents that this Agreement requires the Purchaser to do or execute at Completion.

Completion of the sale

The completion of the sale did not proceed in accordance with the terms of the written contract, and to show that one must trace a path through a number of emails, which in accordance with normal but unacceptable practice, are strewn higgledy piggledy throughout in the Court Book. On Monday 13 June 2016, Mr Bruce McKay of McKay's Legal Practice at Burwood, who was acting for Rova, sent this email to Mr Vieira:

"When do you propose completion of this sale?
I note there are a few documents or lists to be dealt with before then.
With respect to the assets, my understanding from David is that there are no assets other than those on the 2016 depreciation schedule, so no other list needs to be prepared. That's right, isn't it, David? [one infers that this email was copied to David]
We will need from you the list of Excluded Assets, particularly in relation to real property leases and vehicles, so we can start the process of transferring these things to you. We will also need to know the employees to whom you intend to offer positions.
Documentation for assignment of contracts, et cetera, is in your court.
As I recall, there was a suggestion that completion would be on the 21st. If that is the case, then the lists above should be provided today, unless we can agree to shorten the time periods otherwise set out in the contract.
To a large extent, we are in your hands from here on, so please let us know if there is anything you specifically require at this stage."

On the same day at 7.14pm, Mr Vieira replied thus:

"Thanks and would like to move to shorten the period of notice to 24 hours, as seven days is impractical, and anything unfinished can be concluded post settlement on your side.
If we all agree to this, I will try to give all details tomorrow, or shortly thereafter, after discussing details with David in respect of excluded assets and employees etc.
Confidentiality of the sale is important to maintain until all the issues are settled, and would appreciate if it is not disclosed until it suits my situation with the administrator of Ultimate.
I will get back in touch tomorrow with other requirements."

At 7.31pm on the same day Mr McKay replied:

"Yes, we can [be] flexible on timing so long as we have sufficient time to do anything we need to. From our end, disclosure can be delayed for a day or two, but the other shareholder (Gary with 5%) will have to be informed quite soon and, naturally, staff will have to be informed if you are planning on making offers to any. Naturally, if there is anything much to be done from our side, Ron will be the best person to do things, as he has already been in touch with landlords etc, in anticipation of a potential sale some time back."

On Friday 17 June at 1.42am, Mr McKay sent this to Mr Vieira:

"With completion looming, would you be able to let us have details of Excluded Assets, employees who are to be retained, etc, and drafts of the forms of documents to be used or assignment of contracts, etc, please? Or are you anticipating that the final payment will be made and then all paperwork sorted out later?"

At 2.16pm that day, Mr Vieira replied:

"I don't think I can attend to all the matters prior to completion, given the demands that I am under for the next few days.
I would propose that I can settle today, for the balance of the purchase price, on the basis that the parties agree to attend to all other matters required for completion, to be completed as soon as practicable from Monday [20 June] forward.
If I can get an email response, the I can settle today before 4pm."

At 2.42pm on the same day, Mr McKay replied "That seems fine to me. It was always an ambitious timetable...do you still have my trust account details?". At 3.35pm, Mr McKay sent to Mr Vieira details of his trust account. At 4pm on the same day, Mr Vieira sent this to Mr McKay "All done. Please confirm receipt. Will get in touch on Monday. Many thanks". The inference to be drawn thus far is that the purchaser, acting through Mr Vieira, paid the balance of the purchase price on Friday 17 June 2016 and the parties agreed to postpone other formalities to a date as yet unspecified.

The next relevant email is this: it was sent on 28 June 2016 at 5.15pm by Mr Vieira to Mr McKay:

"After evaluating the circumstances of the business, I can advise of the following in respect of outstanding matters that need to be finalised.
Property Leases
All leases will be deemed excluded assets. We would propose to pay existing lease costs on a week to week basis, but expect that we could vacate the premises within 28 days. Please advise if this is agreeable, or if we need to act sooner.
Motor Vehicles
Excluded assets/finance contract are as follows:
[Here follow the registration numbers of five vehicles]
We will pay out the other vehicles tomorrow, being [registration numbers of two vehicles].
Other Lease/Credit Agreements
We will pay out the finance contracts for the phone system and computer system. We believe that these are the only remaining credit liabilities covering any of the Assets. Please advise if this is not the case.
Bank Account
Could you please indicate what funds have been received since settlement. Could you please arrange to deposit these funds into the following account, and any future amounts received.
[Details of Appscloud Account]
We will be making offers to the existing relevant employees that we have identified, tomorrow. As previously advised, we will not be offering contracts to RB and CJ and there will be a few others that we will not require.
I will get back to you on other matters tomorrow."

There was no communication, as far as I am aware, on 29 June 2016.

On 30 June 2016 at 9.36am, Mr Vieira sent this email to Mr McKay:

"We have had an opportunity to review the requirements for taxi agreements and have identified that we will need to reduce the number of taxis by approximately 1,000, and they will be excluded contracts/licenses under the Sale Agreement.
Having said this, we do not know as yet exactly which taxis are to be excluded, and therefore would advise of our intention to reduce the number of taxis and related agreements so as to achieve an overall reduction of 1,000 taxis. Having said that, we will be able to identify and finalise the exact agreements by COB tomorrow.
Employees
We will be making offers to the following employees under the terms of the sale agreement. [There follow the names of 11 employees].
Please note that all other employees are not required, and we need to advise them of the outcome at the earliest time and arrange for handover of assets etc.
I would appreciate also that the deliverables under the contract being finalised at the earliest time and a response to my earlier emails.
Lastly, I need to let RB know that I won't be offering him a position, and need him to leave the premises so that we can operate the business.
I look forward to speaking today."

On this day, 30 June 2016, Rova appointed an administrator. At CB 178, CB 505 and CB 699 is a formal notice of appointment of administrator under the Corporations Act 2001. That notice is addressed to the company, for the attention of Mr Vieira. The formal notice is this:

"TAKE NOTICE that on the 30th day of June 2016, Steven Nichols was appointed Administrator of the company, by a resolution of the company's Board of Directors. Records indicate that you hold a Charge over whole, or substantial whole, of the company's assets.
In terms of s 450A(3), you are hereby put on notice.
Dated this 30th day of June 2016."

The notice has been signed by Steven Nichols as administrator. Mr Nichols belonged to the firm of Nichols Brian, who have premises in 350 Kent Street Sydney, as well as in 70 Market Street, Wollongong. Mr Vieira in his oral evidence told me that he was advised of the appointment of the administrator orally on 30 June 2016. Since it is not mentioned in his email of 30 June 2016, sent at 9.36am, I infer that he was advised sometime after that time of the appointment of the administrator. At CB 179, 186, 506 and 700, one can find a formal notice of the external administration and the appointment of an external administrator, signed by Mr Nichols and dated 30 June 2016. 30 June was a Thursday.

On Saturday 2 July 2016 at 12.49pm, Mr Vieira sent an email to Mr Basu. He opened the email by attaching a copy of the notice of 30 June 2016, from which I have already quoted. The email continues:

"During the purchase process, I took a charge that they are referring to. I now have completed the purchase and own the business and assets of Rova Media Pty Ltd.
Ryan Bradbury on [phone number] is the Manager taking care of the administration. He can be reached at [email number].
As per their advice to me, they [Administrator] will disown the premises and have seven days to finalise and therefore advise me to make contact with the landlord to discuss an orderly exit from the premises, as I do not want to take over the premises.
I would appreciate if you can take your advice and get back to me at the earliest time, about under what conditions WE can stay on a temporary basis or otherwise [my emphasis].
Many thanks."

Mr Vieira signed the email, pointing out that he was a director of the company whose name was specified. On Tuesday 5 July 2016 at 12.10pm. Mr Vieira sent another email to Mr Basu:

"I am following up the earlier email and call from last week.
I would appreciate hearing from you at the earliest time so that
unnecessary costs can be avoided for all parties.
Many thanks."

At 3.23pm on that day, Mr Basu replied "Thank you for your call this afternoon. I will get back to you on this matter ASAP. Kind regards". At 5.21pm on 5 July 2016, Mr Basu sent this email to Mr Vieira:

"This is following your request for temporary occupancy of the premises at 18/46 48 Buffalo road, Gladesville. Pinaki Holding Pty Ltd is happy for you to continue occupying the property on a week to week basis to continue your business. I have attached the invoice for the first week of occupancy starting 1 July 2016. The monthly rent paid by the previous tenant, Rova Media Pty Ltd, has been adjusted to the weekly period. The rent is now due for payment. An invoice will be issued to you for every week of your occupancy. If your circumstances changes, and you wish to move out, then kindly provide us with sufficient notice for Handover. Kindly advise if we can show the property to potential clients, accompanied by Real Estate agents.
Kind regards."

On Thursday 7 July 2016 at 9.38am, Mr Vieira sent this email to Mr Basu:

"Many thanks for your offer, and we accept the offer to stay on a week to week basis. We expect to stay for around four weeks, but it might extend if things don't go to plan. We are happy to have potential tenants come through with a few hours' notice.
I will arrange for payment of the invoice this week.
Many thanks."

It is clear that Mr Vieira, on behalf of the purchaser, and Mr Bruce McKay, solicitor, on behalf of the vendor, agreed to vary the formal arrangements of the agreement for the sale of the business. The purchaser agreed to pay the balance of the purchase price on 17 June 2016, rather than 21 June 2016 as fixed by par (a) of the definition of Completion Date in the agreement for sale. However, the specification of what were to be excluded assets was left to a later date as were various obligations under clauses 20 and 21 of the sale agreement.

An equitable assignment of the lease?

From what I have recited thus far, I can deal with three substantive issues in these proceedings. The first is whether there was an equitable assignment of the lease by Rova to the company. In the 2016 proceedings, the plaintiff originally pleaded this:

"13. By agreeing to the Assignment, Rova breached the term pleaded in subpara 6(f) above, and repudiated the lease.
14. On 2 July 2016, the first defendant informed the plaintiff by email of the assignment.
Particulars
Email from the second defendant to the Plaintiff dated 2 July 2016
15. On 6 July 2016, the administrator informed the plaintiff of the assignment.
Particulars
Letter from the Administrator to the Plaintiff dated 6 July 2016
16. The plaintiff did not accept the repudiation by Rova, referred to in par 13, above, and, as a result, is taken to have affirmed the Lease.
17. By reason of the facts pleaded in pars 9 to 16 above, there was a novation (either expressed or implied) by which the parties agreed to transfer the lease to the first defendant.
18. The first defendant, as transferee of the Lease, owes obligations to the Plaintiff for the period of the Lease, and in terms pleaded in subpara 6(a) to (f) above."

The guarantors, in their final amended defence in the 2018 proceedings pleaded the following, however, it must be noted that in handwritten matter at the top of the first page of the final amended defence is an asterisk and the following statement "All references in this pleading to 'novation' should be read as 'novation, assignment (legal or equitable) or, agreement to assign". The relevant part of the pleading is this:

Novation of the lease
“15. On or about 9 June 2016, Rova contracted with HSDCTLVMB Pty Ltd (HSDCTLVMB) to sell its business to HSDCTLVMB (Sale Agreement).
Particulars
“Agreement for Sale of Business” 9 June 2016
16. The Sale Agreement relevantly contained the following definitions:
(a) 'Assets' includes Rova's rights and benefits under the Contracts.
(b) 'Contracts' means all contracts and commitments entered into by the Vendor in connection with the Business or the Assets that are wholly or partly unperformed as at Completion Date.
(c) 'Completion Date' means the later of 21 June 2016 and such other date as Rova and HSDCTLVMB may agree.
(d) 'Landlord' means the Plaintiff.
Particulars
Sale Agreement, cl 1.1.
17. The Lease was a 'Contract' for the purposes of the Sale Agreement.
18. It was an express term of the Sale Agreement that:
(a) Rova agreed to vest in HSDCTLVMB each contractual arrangement relating to the business which subsisted as at the date of the Sale Agreement.
(b) Rova would use all reasonable endeavours to ensure that each contract was assigned or novated to HSDCTLVMB.
(c) If Rova was unable to get an Assignment, Rova assigned to HSDCTLVMB and HSDCTLVMB accepted an assignment for the benefit (and assumed the burden) of each contract with effect from completion.
(d) At completion, HSDCTLVMB would accept from Rova an assignment of each of the contracts (assignment).
Particulars
Sale Agreement clauses 14(a), 21
19. The Sale Agreement was completed on or about 17 June 2016.
20. On 2 July 2016, HSDCTLVMB informed the Plaintiff by email of the Assignment.
21. On 6 July 2016, the administrator informed the Plaintiff of the assignment.
22. The Plaintiff accepted (either expressly or impliedly), the transfer of the Lease from Rova to HSDCTLVMB.
23. By reason of the facts pleaded in paras 16 to 22, there was a novation (either express or implied) by which the parties agreed that HSDCTLVMB would be substituted for Rova, and would receive the benefits and burdens arising under the Lease.
24. As a result of the novation, HSDCTLVMB, as transferee of the lease, owed obligations to the plaintiff as lessee for the period of the Lease.
25. As a result of the novation, Rova is not liable to the plaintiff for any obligations arising under the lease after 17 June 2016.
26. Further, or in the alternative to par 6 (d)-(f) above, to the extent that any guarantee given by the second defendant or the obligation of Rova under the Lease continued as at June 2016 (which is denied) the guarantee obligations were discharged from the date of the novation of the lease to HSDCTLVMB."

The plaintiff abandoned the argument made on its behalf and par 16 of its pleading was amended into this form "The plaintiff accepted the repudiation by Rova, referred to in para 13”. Clause 17 of its pleading was also deleted.

It ought be clear that completion of the sale agreement did not occur on 21 June 2016, as I have already pointed out. The list of excluded assets was not provided to the vendor, Rova, or to its solicitor, Mr McKay, until 30 June 2016, and the property lease had been excluded on 28 June 2016. The vendor, through its solicitor, has agreed to this. During addresses, there was no submission made that there had been an actual novation of the lease between the plaintiff and Rova, so that the lease became one between the plaintiff and the company. The only submission was that there was an equitable assignment of the lease. I have been referred to the 33rd edition of Snell’s Equity. 3 O14(a) of that work states this:

"No particular form is required for a valid equitable assignment, whether voluntary or for value. Equity has always looked to the intent rather than the form, and all that is needed is a sufficient outward expression of an intention to make an immediate disposition of the assignor's right.
'It may be couched in the language of command. It may be a courteous request. It may assume the form of mere permission. The language is immaterial if the meaning is plain'.".

That quotation was taken from Finlan v Eyton Morris Winfield [2007] EWHC 914 (Ch). I have also been referred to the 5th edition of Meagher, Gummow and Lehane's 'Equity, Doctrines and Remedies', (2015) LexisNexis. At [6- O5O] the learned authors say this:

"A purported assignment, for value, of legal property, which fails at law, or a contract, for value, to assign legal property, effects an equitable assignment when the consideration is paid or executed. This is a case where equity regards as done that which ought to be done. The Privy Council has described the principles as, 'fairly fundamental'. Lord O'Hagan called them, 'rudimental'. The effects of a valid equitable assignment of a legal interest in property after payment or execution of the consideration is to constitute the assignor as trustee of the property, for the benefit of the assignee. It is not relevant in that case to ask whether the contract (or the purported immediate assignment, treated as a contract) is one of a kind of which specific performance would be ordered. Whether it is or not equity, once the assignee has done what is required of the assignee, regards that as done which ought to have been done by the assignor."

Those authorities were cited to me by Mr C. Ireland, who appeared for the plaintiff. Mr C.D. Freeman, who appeared for the company, and Mr Vieira cited to me a later portion of the latter work, which at p 238 says this:

"The purchaser's equitable interest is certainly unusual...the equitable interest or trust, can arise only if the contract is one of a kind which specific performance might be ordered...It has been said that the interest of the assignee is an interest commensurate with the relief which equity will give by way of specific performance...The interest of the assignee is defeasible, because the contract may be avoided or rescinded."

Here there is no obvious intention expressed either by the vendor or the purchaser to assign the lease of the property granted by the plaintiff to Rova. Indeed, prior to final settlement on 30 June 2016, there was a stipulation by the purchaser, the company, that it wished to treat the lease as an "Excluded Asset". The company as the purchaser had done nothing to comply with its obligations under cl 10 of the agreement for sale of business entered into on 9 June 2016. There was no intention expressed by the company to acquire the lease from Rova. There was nothing which could in any way be specifically enforced if that remedy was sought in equity. The primary position, however, is that there was no express or implied agreement for the transfer of the lease from Rova to the company. There was nothing that could be specifically enforced, and there was no words, of any fashion, to express an intention that the lease be transferred. Neither the alleged assignee nor the alleged assignor had done anything required of either of them when one considers the provisions of cl 10 of the contract for the sale of the business.
The evidence does not establish any intention of either party to effect an assignment of the lease from Rova to either the company or Mr Vieira personally. The submission of Mr S.A. Lees, who appeared for the guarantors, on this point, are based on the proposition that the lease was never validly designated as an excluded asset, because Mr Vieira did not give notice to Rova, "far enough in advance of actual completion": see his written submission MFI 6 at [9]. In other words, he was submitting that Mr Vieira did not give notice of the lease being an excluded asset within seven days of 9 June 2016, that is, by 17 June 2016, which is the date, fortuitously, when the purchaser paid the balance of the purchase price to the vendor. That ignores the ability of the parties to agree to vary any earlier agreement, and would allow a non-party to the agreement to insist upon its written terms, as if it were a party to the agreement. That offends our doctrine that a contract is one between certain parties, and only those parties can enforce it: the doctrine of privity of contract. An equitable assignment can only arise if it be the agreement between the parties to the alleged assignment, objectively determined. I am not so persuaded on the balance of probabilities in this case. The basal principle relied upon by the guarantors is that in Walsh v Lonsdale (1882) 21 Ch D 9. See also Australian Mutual Provident Society v 400 Saint Kilda Road Pty Ltd [1990] VR 646 at 657.

A discharge of guarantors’ obligations?

The next issue of a substantive nature is whether such an assignment would discharge the guarantor's obligations. Mr Lee’s written submissions (MFI 6) contain this:

"13. The effect of an assignment is that the lessee becomes a surety to the lessor for the assignee: Wolveridge v Steward (1833) 149 ER 557 at 564.
14. It is a well-established principle of law that when conduct on the part of a creditor has the effect of altering the surety's rights, it will discharge the surety from the guarantee, unless the alteration is unsubstantial and not prejudicial to the surety (ie, reduction of rent or rate of interest). The Court is not committed to inquire in the effect of the alteration; Ankar Pty Ltd v National Westminster Finance (Australia) Ltd (1987) 162 CLR 549 at [559 560], applying Holmes v Brunskill (1877) 3 QBD 495.
15. HSDC becoming a new lessee (on novation) or assignee (on
assignment) changes the identity of the obligor from Rova, to whom the Byrnes gave the guarantee, and but for the principle in Ankar, would make them responsible for a third party whose credit worthiness and reliability is unknown to them. The alteration is clearly prejudicial and not unsubstantial.
16. Here the agreement to assign, and Pinaki's agreement found in the emails at CB 189, causes prejudice to the guarantors. Formal assignment could have been completed quickly and without any notice to the Byrnes, and they would have no capacity to prevent it.
17. In answer to HSDC's submission that the agreement to assign or equitable assignment is not capable of being specifically performed; the promise which equity would enforce would be HSDC's promise to take assignment of the lease. If Rova had not been placed in administration, HSDC would have been estopped from denying it had promised to take assignment of the lease when it did not designate the lease as an excluded asset in conformity with the business sale agreement."

I should point out that it was not pressed, as already mentioned, that there was a novation of the lease from Rova to the company, but it was only pressed that there was an equitable assignment.

With respect, the submissions by Mr Lee on this point involve a misunderstanding of the principle in Ankar. At 162 CLR 560, Mason ACJ, Wilson, Brennan and Dawson JJ said this:

"The foundation of the rule is that the creditor, by varying the principal contract or extending time, has altered the surety's rights without consulting it, though the surety has an interest in the principle contract, and that the creditor cannot be permitted to do so; see Rees v Berrington (1795) 30 ER 765."

At 561, their Honours said this:

"If the surety is to be discharged for breach of a promissory term in the suretyship contract, the justification for the discharge must be that the creditor has failed to comply with a provision that, as a matter of interpretation, requires strict performance as a condition precedent to the sureties obligation, or at least requires substantial performance of the promise, such that the surety would not have entered into the contract if it had not been assured that there would not be a breach such as the breach which in fact occurred. If, on its true interpretation, the term is not intended so to operate, it is not easy to understand why the surety should be discharged by its
breach. Of course, in construing the contract, the Court is entitled to look to the general setting in which the contract has come into existence; see, eg the discussion in Reardon Smith Line Ltd v Hansen Tangen [1976] 3 All ER 570 at pp 574 575."

In the current case, the creditor, the person to whom the obligation is owed, is the plaintiff, not Rova. The plaintiff did nothing which might affect the obligations of the guarantors to the plaintiff. The plaintiff did nothing that could be seen to discharge the liability which the guarantors had to it. As I said, the submission is misconceived, because it assumes that the liability which the guarantors had was not to the plaintiff, but to Rova. That argument of the guarantors also fails.

Is Mr Vieira personally liable?

The third substantive point which I can deal with at this time is whether Mr Vieira, the second defendant in the 2016 proceedings, has any personal liability. The only case against Mr Vieira is based on the use of the first person, singular pronoun in his email of 2 July 2016, at 12.49pm, which I have already quoted. However, that use of the first person, singular pronoun ignores the use of the first person, plural pronoun later in the email, which I emphasised earlier when I quoted the email. Mr Vieira was neither the monarch nor the editor of a newspaper. He was not entitled to use the plural personal pronoun. He was speaking for himself and another. That other could only be the company, or Appscloud LP, a partnership between two companies. At the end of the email itself, Mr Vieira identified himself as a director of the company.
Mr Basu, acting for the plaintiff, was not mislead. He issued each of the four invoices for the weekly tenancy offered by the plaintiff. Those invoices were addressed to the company, and were paid for by Appscloud [LP] trading at Rova Taxi Media; see the affidavit of Mr Vieira of 15 April 2019, exhibit 14C, annexure N at Court Book 714 to 718.
On the evidence presented, the purchaser of the business of Rova was the company, and not Mr Vieira personally. There is no evidence that Mr Vieira was ever intended to be personally liable for the actions of the company, nor did Mr Basu say that he was under that understanding. Common modern commercial experience is that anyone undertaking such a business as that which had been conducted by Rova, would conduct it through a company, giving the beneficial holder of the business the benefit of the veil of incorporation. Even if Mr Basu said that he were mislead, such an averment would be highly implausible. Mr Basu often referred to his company using the first person singular pronoun. I am not persuaded on the balance of probabilities that Mr Vieira was a party to the transaction conducted by the buyer of the Rova business, and the plaintiff. Mr Vieira is entitled to judgment in his favour.

Events after 30 June 2016

I turn now to consider the further dealings between the plaintiff and the company. As is clear from Mr Basu's email on 5 July 2016 at 5.21pm, he enclosed an invoice addressed to the company. It is numbered 01, and is dated 1 July 2016, even though it was only delivered on 5 July 2016. That invoice covered the period from 1 July to 7 July 2016. It can be found at CB 512. It was paid on 8 July 2016, as can be seen at CB 715. As to the further invoices:

Number   Period      CB   Paid      CB
02   8 July to 14 July   513   18 July      716
03   5 July to 21 July   514   25 July      717
04   22 July to 28 July   518   9 December   718

Each of those invoices and each payment was for $2,865.64.

On 5 July 2016, the administrator of Rova sent a letter to the plaintiff. It can be found at CB 176. It provided formal notice of what no doubt Mr Basu already knew. The relevant contents of the letter are these:

"I advise that Steven Nichols was appointed Voluntary Administrator of the above company pursuant to resolution of the board of directors on 30 June 2016.
The company has ceased to trade, and as administrator, I am not incurring liabilities in respect to same. I anticipate in providing a formal notice under s 443B(3) of the Corporations Act 2001 in the near future.
Please provide a copy of any lease you hold with the company and advise the current rental position in respect to same. Please include details as to what point rent is paid and any security you hold in respect to unpaid rental obligations.
On 17 June 2016, the company completed a sale of business transaction, which is currently subject to review by this office. I have recommended the business purchaser contact you directly in regards to the ongoing use of your premise, or alternatively, the recovery of their purchased assets from same.
Should you have any queries regarding the above matter, please do not hesitate to contact Ryan Bradbury of my Wollongong office."

On the following day, the administrator delivered a notice under s 443B(3) of the Corporations Act 2001. It can be found at CB 182. The relevant part of the notice is this:

"I again confirm that on 17 June 2016, the company completed a sale of business transaction. Therefore, as at my appointment on 30 June 2016, the company did not occupy the premise that it previous leased from yourself. There has been no trade on (sic) activity by the administrator's office, nor has any debt been incurred on behalf of the company by same."

I merely observe that the averment by the administrator of Rova is incorrect. On 17 June 2016, the purchaser may have paid the balance of the purchase price to Rova, but the sale transaction had certainly not been completed. The earliest date on which one could see completion as having occurred is on 30 June 2016, the same day on which the administrator was appointed.

On 26 July 2016 at 11.36am, Mr Basu sent an email to Mr Vieira. It is this:

"Thank you for calling me yesterday, and apprising me of your situation regarding further tenancy or vacation. In this regard, can you please also send me an email once you have a firm decision.
You mentioned about a willingness to purchase the property. At this stage, I could consider an offer around $2.5 Million for the property. The size of the property is around 550 square metres, including nine car spaces.
Kindly ensure that all the present rent invoices are paid on time."

At 2.31 on the same day Mr Vieira replied to Mr Basu "To confirm our intention to vacate the premises this week. I have passed on your price to the party and will revert if he has an interest".

On the following day of 27 July 2016, at 9.34am, the plaintiff's then solicitor, Mr Otto Stichter, sent an email to the administrator of Rova. After pointing out that he was acting for the plaintiff, the letter continues thus:

"We comment as follows:
1. Mr Steven Nichols of your office is the administrator for Rova Media Pty Ltd (Rova).
2. That company was the lessee of the premises 18/46 48 Buffalo Road, Gladesville.
3. The business undertaking of Rova has been sold, with the purchaser electing to move the business elsewhere rather than taking over the Rova lease.
4. Our client has engaged Colliers International to seek a new tenant for the premises.
5. The lease to Rova is personally guaranteed by David John Byrne and Matthew William Byrne.
6. Would you please advise the addressees for those two persons,
if you have those addresses.
7. We also note that our client holds a bank guarantee for three months base rent.
8. It is our client's intention to claim any losses and expenses arising from the lessee's default from the bank guarantee and, if that guarantee is insufficient, from the guarantors.
Those amounts cannot at this stage be quantified."

I observe that the plaintiff was clearly looking to pursue the claim that it makes in the 2018 proceedings.

On the day after that, however, Mr Stichter sent an email to Mr Vieira. That was sent at 6.15pm. After recording that he was acting for the plaintiff, Mr Stichter continued:

"I am instructed that you are removing from the premises various fixtures and fittings which did/do not belong to the previous lessee, Rova Entertainment Pty Ltd, and that furthermore, damage has been, and is being, caused in removal.
We advise that:
(a) The costs of lessor's fixtures removed by you will be claimed from you, as will the cost of installation and of repairs/make good.
(b) The costs of repair and make good for any lessee's fixtures and fittings removed will also be claimed from you.
(c) The rent for the period of your occupation is also to be paid by you."

That can only be seen as pointing to a dispute, which I shall later determine, between the plaintiff and all the parties to these proceedings, about certain fixtures or fittings in the demised premises.

On 28 and 29 July 2016, there was an exchange of various emails between Mr Basu and Mr Vieira, showing some antagonism in the context of a dispute concerning ownership of an alarm system and a hot water system, again, the subject of a claim for damages, which I shall deal with in due course. On 1 August 2016 at 6.12pm, there was another email sent by Mr Vieira to Mr Basu. There was some agreement reached. The first line of the email refers to Mr Vieira agreeing to meet with Mr Basu at the time that Mr Basu had requested. The email then continues:

"As discussed and agreed, we have left a few office desks which are in good order, that may be used by future tenants, as well as a few mobile display panels for pinning various papers, et cetera. We have cleaned and vacuumed the premises so it will look presentable for prospective tenants.
We have never sought to take any roller door, or the like, so I can't understand your comments [in earlier emails].
I look forward to finalising matters tomorrow.
Regards."

On 2 August 2016, Mr Basu and Mr Vieira met at the premises for a "handover". According to Mr Vieira’s affidavit (exhibit 14C):

"At the time, and in view of the content and the tone of the emails of Mr Basu, I took a video and photos of the condition of the Premises. Annexed here to and marked 'V' is a copy of the photographs I took of the premises on that day. Annexed...is a USB drive that contains that video I took on 2 August 2016."

That USB is exhibit 14D. When it was shown, I observed that the premises as displayed on that video made looked like “Buckingham Palace” compared to the non-public areas of the Downing Centre. That may be hyperbole, but it was my recording that the premises looked to be in good order, clean, and largely uncluttered. They appeared to me to be in a tenantable state. On 2 August 2016, the company quit the premises.

On 5 August 2018 at 12.45pm, Mr Vieira sent another email to Mr Basu. It is in these terms:

"As per our meeting on 2 August, we are wanting to finalise matters and need your confirmation of the property hand over so that we can make the last payment owing to you for rent.
We hope that the tenants that you brought through worked out for you.
Kind regards."

On 8 August 2016, at 12.49pm, Mr Basu sent this email to Mr Vieira:

"As per your acceptance to our offer below, the fourth week's rent has been due for the last two weeks. Please note that you will be charged interest for any delay of the rent payments.
We are in the process of finalising the Damage and Make good for the property that you vacated, as being the last occupier of the premises. You will be contacted soon with all the details by our solicitor, Mr Otto Stichter."

On 9 August 2016 at 9.17am, Mr Vieira replied:

"I left the premises in better, cleaner conditions than when I arrived, which I had no obligation to do. You did not visit the premises until a week before our departure, so I don't know what you are relying on. Please confirm your finalisation of the premises handover so we can pay the final week's rent."

On 18 August 2016, at 8.22am, Mr Vieira pursued Mr Basu by email:

"Can you please advise so that we can finalise the matter.
I am seeking your confirmation so that the final payment can be made and the matter finalised.
There are no outstanding matters that I need to attend to and want to pay and finalise.
I am not delaying the finalisation of the arrangement."

At 3.18pm on that day, Mr Basu replied, "You will be hearing from our Solicitor regarding the finalisation matter when it is completed at our end".

On 31 August 2016, a legal secretary at Mr Stichter's practice sent to Mr Vieira a letter which bears the date 30 August 2016. The letter can be found at CB299, CB536, and CB758. It was a letter of demand claiming $36,261.84, being the fourth instalment of rent, and the cost of replacing and installing a hot water system, replacing and installing an alarm security system, replacing and installing carpets, making good walls damaged by the lessee's removal of fixtures and fittings attached by the lessee, the cost of removal of garbage and the replacement and making good of damage to fibre optic equipment. A further letter was sent by Mr Stichter to the company on 23 September 2016. That can be found at CB302, CB546, and CB769. It made an additional claim for the further costs of making good damaged data cabling and demanded payment now of $40,101.84 within seven days. There was a final letter prior to action, sent by Mr Stichter on 24 November 2016. Like his earlier communications of 30 August and 23 September 2016, the letter is addressed not only to the company, but also to Mr Vieira, albeit at the same address. The letter of 24 November 2016 enclosed a copy of a statement of claim, which Mr Stichter proposed to file in the Local Court at Burwood, unless, within seven days, the sum of $40,101.84 was paid to the plaintiff.
There can be no doubt that proceedings were actually commenced by the plaintiff against the company and Mr Vieira in the Local Court at Burwood. The plaint number was 360721 of 2016, in other words, the same plaint number as those proceedings have in this Court. I know that that was the plaint number in the Local Court at Burwood, because the early affidavits used in these proceedings were all sworn in proceedings in the Local Court at Burwood.

Claim against the company

I turn now to consider the claim against the company, but not considering issues relating to damages. The relevant part of the plaintiff's claim against the company, after disposing of the allegation of an equitable assignment, is this:

19.   By an agreement (Occupancy Agreement) made partly by implied terms and partly by email exchanges between:
(a)   Pinaki Basu, the director of the Plaintiff, for the Plaintiff; and
(b)   The Second Defendant, either in his own right or for the First Defendant;
The parties agreed that the First Defendant and/or the Second Defendant would continue occupation of the Premises.
21.   The emailed agreed terms of the Occupancy Agreement were:
(a)   the occupation would be on a week to week basis;
(b)   the First Defendant would be paid rent in the amount of
$2,865.64 per week’
(c)   the above rent would be paid weekly;
(d)   prospective tenants to be allowed to view the Premises;
(e)   appropriate notice was given for vacating
22.   The Occupancy Agreement included implied terms that:
(a)   the occupant would take reasonable care of the Premises;
(b)   the occupant would not damage the Premises;
(c)   the occupant would not remove the lessor’s fixtures and

fittings; and
(d)   the occupant would make good any damage caused by
removal of the lessee’s and/or occupant’s fixtures and fittings.
23.   The aforesaid implied terms arise as follows:
(b)   (further, and, in the alternative) the terms are implied by law in that they arise by virtue of the nature of the agreement between the Plaintiff and the First Defendant and/or the Second Defendant itself.
24.   The First Defendant gave one week’s notice by email on 26 July 2016
of intention to vacate the Premises.
25.   The Premises were vacated on 2 August 2016, being the date of
return of the keys to the Premises.

I accept that there was such an occupancy agreement. The only written terms of the occupancy agreement are contained in the exchange of emails of Mr Basu of 5 July 2016 at 5.21pm, and the enclosed invoice, which I have already cited, and Mr Vieira’s reply of 7 July 2016 at 9.38am, which I have already cited. This establishes a weekly tenancy at a rate of $2,865.64, commencing on 1 July 2016. Such a tenancy is determinable by the giving of one week's clear notice: Lemon v Lardeur [1946] KB 613, subject to any applicable statutory provision, and I have been referred to none.
There is, however, a dispute about implied terms. The plaintiff relies upon the decision of the Privy Council in BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266. The advice of the majority of the Board was given by Lord Simon of Glaisdale, the majority included Viscount Dilhorne and Lord Keith of Kinkel. At 282, Lord Simon said this:

"Their Lordships do not think it necessary to review exhaustively the authorities on the implication of a term in a contract which the parties have not thought fit to express. In their view, for a term to be implied, the following conditions (which may overlap) must be satisfied:
(1). it must be reasonable and equitable;
(2). it must be necessary to give business efficacy to the contract, so that no term will be implied if the contract is effective without it;
(3). it must be so obvious that 'it goes without saying';
(4). it must be capable of clear expression;
(5). it must not contradict any express term of the contract.
Their Lordships venture to cite only three passages albeit they are familiar to every student of this branch of the law. In The Moorcock (1889) 14 PD 64 at 68, Bowen LJ said 'I believe if one were to take all the cases, and they are many, of implied warranties or covenants in law, it would be found that in all of them, the law is raising an implication from the presumed intention of the parties with the object of giving to the transaction such efficacy as both parties must have intended that in all events it should have. In business transactions
such as this, what the law desires to effect by the implication is to give such business efficacy to the transaction as must have been intended at all events by both parties who are business men'.
It is because the implication of a term rests on the presumed intention of the parties that the primary condition must be satisfied, that the terms sought to be implied must be reasonable and equitable. It is not to be imputed to a party that he is assenting to an unexpressed term, which will operate unreasonably and inequitably against himself.
In Reigate v Union Manufacturing Co. [1918] 1 KB 592 at 605, Scrutton LJ said 'A term can only be implied, it is necessary in the business sense to give efficacy to the contract, ie, if it is such a term that it can confidently be said that if at the time of the contract was being negotiated, someone had said to the parties, 'what will happen in such a case?', they would both have replied: 'of course, so and so will happen; we did not trouble to say that; it is too clear.' ‘
In Shirlaw v Southern Foundries (1926) Ltd [1939] 2 KB 206 at 227, MacKinnon LJ said 'Prima facie, that which in any contract is left to be implied and need not be expressed, is something so obvious that it goes without saying; so that, if, while the parties are making their bargain, an officious bystander were to suggest some express provision for it in their agreement, they would testily suppress him with a common, 'Oh, of course'."

Whole rent recoverable

There are a few minor matters to discuss before I go to the question of the quantum of damages. The first is that the Plaintiff has the ability as lessor to recover the whole of the rent for the balance of the term, assuming Rova stayed in possession of the premises until the end of the term on 31 July 2017. That appears to me to be clear from the terms of the lease itself, but counsel nevertheless referred me to cases such as The Progressive Mailing House Pty Ltd v Tabali Pty Ltd (1985) 157 CLR 17 in particular at 32, and Lewy v Moss Nominees Pty Ltd [1996] NSWCA 325 per Priestley JA with whom Clarke JA and Giles AJA concurred. His Honour pointed out that it was submitted by the appellant guarantors that the entire term of the lease could only refer to the whole of the period of time during which the lease subsisted and in that case they submitted that the entire term came to an end either upon the termination of the lease by the lessor or the ejectment of the lessee from the premises. The respondent to the appeal in that case relied inter alia on the The Progressive Mailing House Pty Ltd v Tabali Pty Ltd. His Honour clearly accepted the principle in that case and dismissed the appeal. I accept that the Plaintiff is entitled to recover from the guarantors the rent that would have been payable by Rova up until 31 July 2017.

Outgoings

The next issue to which I should advert is the submission made by Mr Lees on behalf of the guarantors that the Plaintiff failed to prove what the relevant outgoings were which affects the quantum of the rent for the final year of the lease. When he made that submission, my jaw fell agape. No one, during the course of the evidence had mentioned outgoings. It was only raised by Mr Lees in his address. The simple fact is that the estimate was given by Mr Basu of what the outgoings were. That was never challenged. No challenge was made to Mr Basu nor was any challenge made to Ms Tattersall who accepted what Mr Basu told her and would clearly have an idea of what the reasonable outgoings were. They were estimated by Mr Basu to be $40 per square metre per annum. Indeed, even Mr Bird accepted that they were at least $35 per square metre per annum. There being no challenge to Mr Basu or any witness for the Plaintiffs, or indeed any witness at all, as to what the quantum of the outgoings was, I reject the submission that that it has not been proved. It was accepted by everybody during the course of the evidence and therefore did not become any issue that needed to be addressed.

Replacement costs

The next item concerns the claim by the Plaintiff for replacement costs. I was referred of course to Tabcorp Holdings Ltd v Bowen Investments Pty Ltd [2009] HCA 8; (2009) 236 CLR 272. In that case there was a lease of office premises for a term of ten years. The lease contained a covenant by the tenant not to make or permit to be made any substantial alteration or addition to the premises without the written approval of the landlord first obtained, which was not to be unreasonably withheld or delayed. Although the tenant applied for such consent, it commenced work on the proposed alterations before any site meeting could be held at which the landlord was going to consider the proposed alterations. Work continued until it was finished. The landlord did not consent to the work and sued the tenant in the Federal Court. It obtained judgment for a sum of money most of which was an assessment of the difference between the value of the premises at the end of the term with the old foyer and the value with the new foyer constructed by the tenant. The amount of damages was increased on appeal by a substantial amount being the cost of restoring the foyer to the original condition as well as lost rent during the period of the restoration. The High Court held that the loss sustained by the landlord from the tenant's failure to perform its contractual obligation to preserve the premises without alteration which had not been approved and that the loss was the cost of restoring the premises to the condition in which they would have been if the obligation had not been breached, in other words, the increased award of damages made by the Federal Court was the correct measure of the damages.
The judgment was that rara avis, a unanimous joint judgment of the High Court of Australia, French CJ, Gummow, Heydon, Crennan and Kiefel JJ. At the foot of p 286 of the CLR their Honours said this:

"However, in cases where the contract is not for the sale of marketable commodities, selling the defective item and purchasing an item corresponding with the contract is not possible. In such cases diminution in value damages will not restore the innocent party to the 'same situation...as if the contract had been performed'."

On p 287 their Honours said this:

"So, here the landlord was contractually entitled to the preservation of the premises without alterations not consented to; its measure of damages is the loss sustained by the failure of the Tenant to perform that obligation; and that loss is the cost of restoring the premises to the condition in which they would have been if the obligation had not been breached."

I was also referred to the decision of Ward CJ in Eq in Midcoast Petroleum Pty Ltd v Keldros Pty Ltd [2019] NSWSC 970. At [279] her Honour said this:

"It is noted that if the lessor has repairs actually carried out that is strong evidence that the cost of the works is the proper amount of damages (Jones v Herxheimer [1950] 2 KB 106) but that, otherwise, the lessor should prove the actual diminution in the value of the premises to achieve more than nominal damages, (Espir v Basil Street Hotel Ltd [1936] 3 All ER 91; James v Hutton [1950] 1 KB 9; [1949] 2 All ER 243)."

At [285] her Honour said this:

"The basis on which Midcoast sought to maintain its claim to items that might be said now to have become otiose because of the renovations was that it was the obligation at the date of the termination of the Lease that was relevant. However that does not take into account s 133A of the Conveyancing Act. A whole series of items relating to the shop premises cannot possibly now be recoverable (such as the items relating to the shop counter which has now been relocated and the items relating to the new toilets which have been installed). Although it was said that some of the areas of the shop premises (such as the rear elevation) had not been altered, I was left with insufficient evidence to be able to conclude that the claim to make good items (even those where rectification works were admitted by Keldros to be required as at the date it vacated the Lease) are now recoverable."

At [300] her Honour said this:

"Midcoast has succeeded but only to a very minor extent compared to the amount it claimed from Keldros (this being most evident in terms of the remediation claims). "

Her Honour went on then to limit the costs recoverable by the Plaintiff.

I was also referred to the Waterways Authority of New South Wales v Coal and Allied Operations Pty Ltd [2005] NSWSC 1285, a decision of Barrett J. The relevant principles are contained in [24] to [26]:

24 This measure of common damages is sometimes described as the measure in Joyner v Weeks [1891] 2 QB 31. Lord Esher MR said in that case, at p.43:
“That rule is that, when there is a lease with a covenant to leave the premises in repair at the end of the term, and such covenant is broken, the lessee must pay what the lessor proves to be a reasonable and proper amount for putting the premises into the state of repair in which they ought to have been left.”

25 The correctness of this approach, in an appropriate case, was recognised by the High Court in Graham v Market Hotels Ltd (1943) 67 CLR 567.
26 There may, however, be circumstances in which the cost of putting the premises into the contracted state does not represent the applicable measure of damages. That will be so where, for example, the lessor does not, in reality, want or require premises in the contracted state and is well content to have and enjoy the premises in the state in which they actually exist at the end of the term. As is recognised in cases such as James v Hutton and J Cook and Sons Ltd [1950] 1 KB 9 and Re Zis; O’Donnell v Keogh [1961] WAR 120, such a lessor does not suffer through the breach damages commensurate with the cost of causing the premises to be in the contracted state, although that lessor may suffer damage to the extent of any reduction in the value of the reversion and, if there is no basis on which the court can come to that conclusion, damages will be nominal only.

I was also of course referred to s 133A of the Conveyancing Act, a provision which of course is referred to by Ward CJ in her judgment which I have quoted.

Quantum

I trust now that I have addressed sufficiently the general issues to be able to turn to the damages claimed.

(a) Rent

The first relevant claim is the claim for rent for the balance of the term that would have been paid by Rova had Rova remained in possession of the premises and paying rent. Rent for July 2016 was $9,800.94. Rent for the remaining 12 months of the lease was at the rate of $10,094.96. That sum multiplied by twelve is $121,139.52. The total of the rent is $130,940.46. That must be reduced by the amount paid by the company, namely $11,462.56. That reduces the sum payable to $119,477.90. From that sum also must be deducted the amount of the bank guarantee as shown in exhibit 2, $28,498.25, reducing the amount payable to $90,979.65. In the pious expectation that I would have finished giving these reasons by the close of business yesterday, I only calculated interest until yesterday. I trust that no one will be aggrieved by the lack of interest for one day. Interest on $90,979.65 at 12% per annum for 2.68 years is $29,259.06. The total payable is $120,238.71.

(b) Hot water system

I turn now to the various losses claimed in both the 2016 and 2018 proceedings. The schedule of losses claimed in each statement of claim is identical. The first item concerns the hot water system. The hot water system in question was installed by the plaintiff pursuant to its obligation under the first lease, special condition 14 found at CB253 and repeated in the second lease at CB160. On 31 July 2009, the plaintiff purchased from Cass Brothers the hot water system in question: It cost $2,659.50 (CB275). There was some work associated with its installation. At CB273 is a tax invoice from CMF Plumbing dated 10 August 2009. The work done by it is recorded thus:

"04/08/09 We drilled a core hole through the concrete slab for the new drainage line. We ran a 50 mm PVC drainage line and a 15 mm copper cold waterline from the new upstairs tea sink through to the existing services at the sink downstairs. We then installed a ZIP Hydro Tap unit and new flick mixer tap in the upstairs tea sink [both supplied by owner]. We then connected water and drainage to the new sink and tested for leaks."

The sum charged was $2,238.30 plus GST. The total was $2,462.13. Clearly only a small part of that work included the installation of the hot water service. I would allow for the cost of the installation of the hot water system and the provision of the hot water system itself, $3,000.
The hot water service was repaired under warranty on 10 August 2009 (CB277). However, subsequent service of the hot water system was paid for by Rova. These are the relevant dates, amounts and page numbers of the Court Book:

Date

Cost

Page number

24 August 2011

$288.20

519

25 May 2012

$218.48

521

4 October 2012

$614.02

522

27 November 2013

$234.85

523

17 December 2014

$154.00

524

The total of those sums is $1,509.55. If one need any reference to the affidavit evidence, one need only go to Mr Vieira’s first affidavit, exhibit 14A, of 24 March 2017 at [27].

There is no dispute that the hot water service was removed. The hot water service was removed by someone on behalf of the company. The company through Mr Vieira believed that Rova was the owner because the item appeared on Rova's depreciation schedule. That probably occurred because Rova had been paying for maintenance of the hot water service since 24 August 2011. However, it is clear to me that the hot water service was only removed after 2 July 2016, that is after the company was in possession of the hot water service. Fortunately, I was not addressed by anybody about the law for fixtures. I would merely repeat the maxim quicquid solo plantatur, solo cedit. It was clearly a fixture. It was the landlord's fixture. The removal of it amounted to trespass to the land in accordance with the principles that I quoted yesterday.
There is a quotation dated 12 August 2016 for a new hot water service and for its installation. That can be found at CB227. The cost is $5,244.33. However, that is only a quotation. The hot water service has not been replaced. It may be that the present tenant, GAS, has no need of it. Why it has not been replaced is not adequately explained on the evidence. However, when GAS leaves the premises, there may be a need for the Plaintiff to install a new hot water service. The appropriate thing to do in my view is to award a sum providing for the deferred payment of the quoted sum. If one defers the quoted sum of $5,244.33 until 31 March 2023 at 4%, one obtains 77 cents in the dollar. That would reduce the amount to $4,038.13. If one defers the quote until 31 March 2028, when the GAS second term would expire, the deferral rate is 63 cents in the dollar. That reduces the sum to $3,303.93. I would therefore be prepared to allow $3,650 for the hot water service. However, other questions will arise; will any future tenant want that hot water service reinstalled? Might a future tenant require a whole kitchen to be installed, or a larger system? In the circumstances there must be a discount. I am prepared to allow the sum of $2,000. That will be paid by the company.

(c) Alarm System

The next claim is in respect of the alarm system. I find this claim to be unscrupulous. At CB279 is a depreciation schedule for unit 18. That shows that the total cost in 1999 of "alarms, hoses and nozzles" as $1,339.94. I am prepared to proceed on the basis that almost the entirety of that sum relates to the installation of the alarm system. The "hoses and nozzles" may refer to some fire prevention devices. A new alarm system was installed on 28 June 2015. By that time, the old system was 16 years old. The old alarm system had been depreciated at the rate of 10% per annum. That would indicate that its residual value was 18.53% of its original cost. That would indicate that its value at the end of 16 years was $252. The new alarm system was installed by Rova Media which paid for it on 7 July 2015. The cost of the new system was $4,073.18 (CB725). In evidence at CB520 is an email from Mr Vieira to Mr Basu dated 28 July 2016 at 9.03pm. It says, inter alia, this:

"As you indicated the building had a [alarm] system that was replaced due to fault and you refused to repair. There has been no damage caused by Rova or myself. The alarm system was located in the same position as previous."

There is no dispute that the alarm system was removed by someone on behalf of the company. Again, the alarm system is typically a fixture. Even if it were a tenant's fixture, it was left in situ in the premises when Rova essentially gave up possession on 30 June 2016 or perhaps more correctly on 1 July 2016 as Rova paid rent until 30 June 2016. Yesterday I had cause to quote cl 12.3 of the second lease granted by the plaintiff to Rova. When Rova quit the premises, the Plaintiff as the owner of the premises, was entitled to possession of the alarm system. No one has addressed me on the provisions of the Sale of Goods Act 1923 as to whether this was specific property in deliverable state where the property may have passed to the purchaser on the payment of consideration or the entry into the contract. All I can find is that the alarm system was still in situ when Rova gave up possession, that it then became the possession of the Plaintiff and that trespass has been caused by the company.
The quotation obtained by the Plaintiff can be found at CB230. That should be compared with the account paid by Rova on 7 July 2015 which can be found at CB725 but a much clearer copy of it is at CB566. There are a large number of similarities between the account of Buffalo Locksmiths paid by Rova and the quotation of Buffalo Locksmiths provided to the Plaintiff. However, there notable dissimilarities. The greatest dissimilarity is in the ultimate price. Rova paid on 7 July 2015 $4,073.19. The quotation created by Buffalo Locksmiths for the Plaintiff on 11 August 2016, some 13 months later, is $6,263.87. Such a gross difference is not explicable merely by CPI increases or the like over a period of 13 months. Importantly, at CB566 there was a charge for "useables" which included “Labour, cabling, conduit and other useables", which was $846.92. The quotation obtained by the Plaintiff shows under “miscellaneous”, useables and there is a separate labour cost. The quotation for the useables is $407 but the quotation for the labour is $2,112. However, the quotation makes it clear that the quotation was a "rough estimate only". At CB230 immediately prior to the quotation being made, this sentence occurs:

"Adam would need to attend site to check what parts are there (damage to cable/cut too short, etc.)." [Misspellings corrected]

In the circumstances, I cannot accept the quote as being reliable. I accept the invoice of 28 June 2015 paid on 7 July 2015 as being a fair measure of the Plaintiff's loss allowing for depreciation to be cancelled out by price increases. The sum of $4073.19 deferred until 31 March 2023 gives a figure of $3,136.36 and deferred to 31 March 2028 is the sum of $2,566.11. I would allow $2,800. However, I then must raise these questions. Will a future tenant want an alarm system? Will a future tenant like GAS install its own alarm system? In the circumstances I would only allow $1,500. That must be paid by the company.

(d) Carpet

The next item is carpet. The current carpet was installed on 17 September 2008 at a total cost of $6,734 (CB285). I note at CB290 that the outgoing tenant MG UPS Pty Ltd paid to the Plaintiff $5,554 in order to enable the Plaintiff to make good the existing carpets. The new carpet was probably funded mainly by what the outgoing tenant paid for making good the existing carpet. The Plaintiff claims $8,800 being the cost of new carpet quoted by Stevens Carpets Pty Ltd of James Ruse Drive, Granville. However, new carpets have not been installed. As I have mentioned earlier, at CB417 and CB925 is an account from The Steam Cleaners dated 11 December 2016 for $720 for steam cleaning the carpet on the first floor of the premises. There is no corresponding averment in any of the affidavits, this account being only in annexures to affidavits. Oral evidence was given by Mr Basu of such an amount being paid for cleaning and he also gave oral evidence about the sum of $500 being paid to someone to stitch up tearing in various places of the carpet. However, he did not claim either the $500 or the $720. Learned counsel for the Plaintiff sought leave to make the amendment against the company and Mr Vieira but not against the guarantors during the course of addresses. I refused to grant leave because no one had had an opportunity of dealing with that claim.
In any event, the carpet is still in situ in the premises. As I pointed out, that has now been let to GAS which will be potentially the tenant until 31 March 2028. There are pictorial representations of the state of the carpet. They can be found in Mr Vieira’s affidavit, exhibit 14C, at [81] and the photographs are annexure AH to that affidavit and there is the video exposed on 2 August 2016 which is exhibit 14B upon which I already commented today. One must wonder what the value of the $8,800 might be if, some time on or after 31 March 2028, the carpet needs to be replaced. I would allow a nominal $1,000 for any necessary cleaning or some discounting of rent payable by GAS. I would point out that the current carpet has now been in situ for 11 years and as far as the evidence disclosed is still being used by GAS.

The amount which I have allowed ought be paid by the guarantors. After all, the company was only in possession for the premises for 33 days between 1 July and 2 August 2016, yet Rova had been in possession of the premises between 1 August 2009 and 1 July 2016.

(e) Wall repairs and painting

The next claim is in respect of wall repairs and painting. Originally claimed was the sum of $6,996 inclusive of GST, pursuant to a quotation from Painting Projects NSW Pty Ltd of 9 August 2016 (CB234). There is, however, an invoice from Gold Touch Painting Services dated 4 October 2016 for $4,900 (CB236). In Mr Basu's affidavit of 28 February 2019, exhibit B3, at CB397, he said that he paid $4,900 in full on 2 October 2016. I therefore allow $4,900. I allow interest on that sum at the rate of 12% per annum from 3 October 2016 to 4 December 2019, that is the sum of $1,858.08. The total of those two sums is $6,758.08. That must be paid by the guarantors. Again, one must consider the length of the period during which Rova was in possession, Rova's covenant to repaint, and the short period of time in which the company was in possession. It might be thought that damage was done to the walls when the company removed from the walls, Velcro which had been affixed to the walls by Rova in order to support its decorations. However, the damage was done to the walls when Rova affixed the Velcro. When the Velcro was removed it would be inevitable that the first layer of paint would come off with the Velcro. One could hardly repaint premises when there was Velcro on the walls. It had to be removed. This sum must be paid by the guarantors.

(f) “Garbage” removal

The next claim is in respect of "garbage" removal. As I have sought to point out this is really removal of unwanted chattels left on the premises. There is no evidence that anything was brought onto the premises by the company or Mr Vieira. They were there to remove what they had purchased from Rova. Anything that was left on the premises belonged to Rova. There is no evidence that what was left on the premises had passed into the legal possession of the company. $500 was paid in cash for the removal of the unwanted chattels. I allow that sum. Interest on $500 at 12% per annum for 2.52 years is $151.20. The total is $651.20.

(g) Fibre optic equipment and data cabling

The final two items are a claim for fibre optic equipment and a claim for making good data cabling. The Plaintiff claims under the first heading $4,662. That is on a quotation from Telstra. That quotation can be found nine times in the Court Book. I regret I find it necessary to recite the number of pages on which this piece of paper can be found. It is found at CB238, CB386, CB410, CB423, CB545, CB572, CB767, CB833 and CB931. The quotation for the making good of the data cabling is from All Electrical World and is for the sum of $3,840. That can be found on CB240 and merely on five other pages of the Court Book. There is a conflict in the evidence about this equipment.
Evidence concerning it can be found in Mr Basu's affidavit of 16 May 2019, exhibit B4. Between [23] and [26] he explains in detail the claims made by the Plaintiff. However, what he does not say is how the equipment came to be there. It appears to me that all of that equipment was installed by Rova. Mr Vieira addresses this issue in his affidavit of 15 April 2019 which is exhibit 14C. In particular, he addresses it at [87] to [91]:

87.   As to the fibre optic equipment, the same were ordered and paid for by Rova Media with a company called Escapenet. Mr Basy asserts in his E-Mail of 28 July 2016 that the NBN company had services in the building during the tenancy of Rova Media. Annexed hereto and marked “AJ” is a copy of a printout from the NBN website which records that they would not be servicing the Gladesville area until late 2018. NBN were not providing services to Rova Media.
88.   In my experience with the RSLCOM Australia Pty Ltd as noted above, fibre services could be spliced and re-terminated and there is no requirement to replace 100 metres of fibre to the nearest fibre access point as per the quote provided by the plaintiff, a copy of which is annexed hereto as marked “AK”.
89.   Annexed hereto and marked “AL” is a document purporting to be an invoice for internet and telephony service for the Premises dated December 2016. This company was a provider of internet and telephony services to Rova Media. As to the data cabling, the removal of our equipment and rack was managed by IT Removalists.
90.   The quote issued by All Electrical World 90916 relied on by the plaintiff reads as if for replacement of data cabling concerned for the entire Premises. Apart from the cutting of Ethernet cable to allow for the removal of the rack, to my observation the remainder of the network cabling was entirely untouched and in good working order. Annexed hereto and marked “AM” is a picture where the Ethernet cables were cut to allow for the removal of equipment.
91.   The All Electrical World quotation 90916 refers to supply, installation and testing of 58 Cat 5 point items. At the time the Company vacated the Premises, I estimate from my testing that there were no more than 20 Ethernet port connections that were in the Premises in good working order. Therefore there was no basis for the supply of 58 such items. I would also say there is no basis for the patch panels to be charged to the Company as any patch panels removed with the computer rack were purchased by the Company from Rova Media and were not the property of the plaintiff. The cable ends can be respliced and a new Ethernet connector attached which can be done with a new provider of internet services.

In view of that evidence, I can accept that there were 20 Ethernet point connections which were severed. Based on the All Electrical World quotation at CB240 I would allow 20 times $20, 20 times $30 and 20 times $10 and one $120. The total of that is $1,320, rather than the total quotation made by All Electrical World of $3,840.
However, the material to be supplied by Telstra appears to be material that would be supplied to a tenant by the tenant's choice of the provider of telephony and internet services. Clearly, enough cable has been left for a new provider to splice into cables that remain in situ. It has not been necessary for the Plaintiff to provide any of these services to the current tenant as the current tenant may not need them. It may not be necessary or convenient for them to be provided to any future tenant either. This may be because the current tenant and any other potential tenants have no need of the services that Rova provided for itself or have very different needs and who knows what the state of technology may be in 2028? For example, it would be of no utility for the Plaintiff to provide a Telstra router at a cost of $2,800 if the current or a future tenant had an alternative provider which would need to provide its own router at its own cost. In these circumstances, a purely nominal award should be allowed for these matters. I would allow the sum of $2,250. That will be payable by the company.

(h) Totals

In summary therefore, the damages payable by the guarantors are the rent and interest, $120,238.71, the carpet $1,000, the wall repairs and painting and interest $6,758.08 and the removal of abandoned goods and interest on that sum, that is $651.20. The total of those items is $128,647.99.
The damages payable by the company are interest on late paid rent of $2,865.64 for the period from 28 July 2016 to 18 December 2016. That sum was calculated by Mr Freeman or by his solicitor as being $64.83. To that must be added the sum for the hot water system of $2,000, the alarm system of $1,500 and the claims in respect of fibre optic equipment and making good the data cabling. That is the sum of $2,250. All those claims are in the tort trespass. The total of the sums of $5,814.83.

Orders

For those reasons, in matter number 00360721 of 2016 I give verdict and judgment for the Plaintiff against the First Defendant for $5,814.83. I give verdict and judgment for the Second Defendant against the Plaintiff.
In matter number 00050775 of 2018 I give verdict and judgment for the Plaintiff against each of the Defendants for $128.647.99.

Envoi

I cannot leave this case without observing a number of things. The first is the condition of the Court Book. It was delivered to me as three lever arch binders. Most of the primary documents, that is the annexures to the affidavits, were duplicated at least twice, some of them as many as nine times. When I removed the duplications et cetera, I reduced the volume of the Court Book from three lever arch binders to two lever arch binders. There was no attempt to arrange the documents in any useful order which has made my task extremely, physically difficult. Some emails appear in different volumes of the Court Book let alone as annexures to different affidavits. What the parties ought to have done is put together once only all the relevant primary documents in chronological order and then have the affidavits resworn which could refer to each of the documents in the agreed tender bundle. That is what Court Books should be, not what was here done, merely putting every pleading and affidavit and other exhibits into binders which although very nicely presented, created a major problem for me.
The other matter on which I ought comment is that. I was not greatly assisted by any of the parties on the question of damages. The Plaintiff claimed the full amount. No concession was made nor any alternative submission that if I did not, for example, allow the total cost of the renewal of the hot water service as claimed that there should be a fall-back position such as the one that I eventually found. Counsel's duty is not merely to advocate their client's cause but also to assist the Court. The same criticisms can be levelled at the defendants, because they said nothing should be paid and themselves made no alternative submissions by way of assistance to the Court. The only exception to that was Mr Lees who did provide a submission as to the quantum of the interest that ought be paid by the guarantors, a submission that I unfortunately could not accept because it is based upon the alleged failure to mitigate.

Note: The quantum of the judgment entered against the guarantors was subsequently amended as the sums of rent in [116] were based on net rent rather than gross rent, an error contained in MFI 6 [47].

**********

Amendments

19 March 2020 - *Dating of decision malfunction corrected

19 March 2020 - Addition of heading "The parties" at commencement of judgment

Decision last updated: 19 March 2020

Medium Neutral Citation:	Pinaki Holdings Pty Limited v HSDCTLVMB Pty Limited & Anor; Pinaki Holdings Pty Limited v David John Byrne & Anor [2019] NSWDC 855
Hearing dates:	25-29 November 2019, 2-6 December 2019
Date of orders:	06 December 2019
Decision date:	06 December 2019
Jurisdiction:	Civil
Before:	Neilson DCJ
Decision:	See [137], [138]
Catchwords:	LANDLORD AND TENANT. Tenant vacates property and ceases to pay rent 13 months before end of term of lease. Rent for whole 13 months recoverable. GUARANTEE. LIABILITY OF GUARANTORS. Former directors of tenant had given unlimited guarantee for tenant’s liabilities. Whether liability of guarantors affected by a change of position brought about by tenant’s dealings with a third party. INTEREST. Whether stipulated interest rate of 12% per annum in lease was a penalty. CONTRACT. SALE OF BUSINESS AND CERTAIN ASSETS OF BUSINESS. Tenant agrees to sell business and certain assets of business to a third party (‘TP’). What assets sold. Whether parties to contract of sale could vary its terms. EQUITY. EQUITABLE ASSIGNMENT. Whether an equitable assignment of tenant’s lease to TP. TP enters into possession of demised premises. Whether TP equitable assignee or weekly tenant. COMPANY LAW. Whether TP or its director liable to landlord. Whether weekly tenancy between landlord and company, or landlord and director personally. TRESPASS TO LAND. Removal of certain fittings from demised property by TP. DAMAGES. MITIGATION. Whether landlord failed to mitigate its losses. DAMAGES. QUANTUM. Whether “make good”, painting and carpet provisions in lease breached. Replacement costs. CONTRACT. IMPLICATION OF TERMS.
Legislation Cited:	Conveyancing Act 1919 Corporations Act 2001 Sale of Goods Act 1923
Cases Cited:	Ankar Pty Ltd v National Westminster Finance (Australia) Ltd (1987) 162 CLR 549 Australian Mutual Provident Society v 400 Saint Kilda Road Pty Ltd [1990] VR 646 BP Refinery (Westernport) Pty Ltd v The Shire of Hastings (1977) 180 CLR 266 Esanda Finance Corporation Ltd v Plessnig (1989) 166 CLR 131 Finlan v Eyton Morris Winfield [2007] EWHC 914 (Ch) Karacominakis v Big Country Developments Pty Ltd [2000] NSWCA 313 Lemon v Lardeur [1946] KB 613 Lewy v Moss Nominees Pty Ltd [1996] NSWCA 325 Midcoast Petroleum Pty Ltd v Keldros Pty Ltd [2019] NSWSC 970 Paciocco v Australian New Zealand Banking Group Ltd [2016] HCA 28 Singh v Smithenbecker (1923) 23 SR (NSW) 207 Tabcorp Holdings Ltd v Bowen Investments Pty Ltd [2009] HCA 8; (2009) 236 CLR 272 The Progressive Mailing House Pty Ltd v Tabali Pty Ltd (1985) 157 CLR 17 Walsh v Lonsdale (1882) 21 Ch D 9 Warren v Keen [1953] 2 All ER Waterways Authority of New South Wales v Coal and Allied Operations Pty Ltd [2005] NSWSC 1285 Young v Lamb (No 2) [2001] NSWSC 1014
Category:	Principal judgment
Parties:	2016/00360721 Pinaki Holdings Pty Ltd – Plaintiff HSDCTLVMB Pty Ltd – First Defendant Jose Vieira – Second Defendant 2018/00050775 Pinaki Holdings Pty Ltd – Plaintiff David John Byrne – First Defendant Matthew William Byrne – Second Defendant
Representation:	Counsel: 2016/00360721 C.R. Ireland – Plaintiff R. Freeman – 1st & 2nd Defendants 2018/00050775 C.R. Ireland – Plaintiff S. Lees – 1st & 2nd Defendants Solicitors: 2016/00360721 Teneo Legal - Plaintiff R E Barros & Company – 1st & 2nd Defendants 2018/00050775 Teneo Legal - Plaintiff Blake Lawyers – 1st & 2nd Defendants
File Number(s):	2016/003607212018/00050775
Publication restriction:	Nil.

Date	Cost	Page number
24 August 2011	$288.20	519
25 May 2012	$218.48	521
4 October 2012	$614.02	522
27 November 2013	$234.85	523
17 December 2014	$154.00	524