Pourzand v Telstra Corporation Ltd
[2012] WASC 210
•19 JUNE 2012
| JURISDICTION | : | SUPREME COURT OF WESTERN AUSTRALIA IN CIVIL |
| CITATION | : | POURZAND -v- TELSTRA CORPORATION LTD [2012] WASC 210 |
| CORAM | : EDELMAN J | ||
| HEARD |
| ||
| DELIVERED |
| ||
| FILE NO/S |
| ||
| BETWEEN | : HOSSEAN POURZAND |
JENNY MARIA POURZAND
Plaintiffs
AND
TELSTRA CORPORATION LTD
Defendant
Catchwords:
Real property - Leases - Landlords effect major works to demised premises taking at least five months while tenant is seeking to sublease the premises - Sublease impossible while major works continuing - Major works undertaken by landlords without the knowledge or consent of the tenant - Whether major works amount to renunciation of the lease entitling the tenant to terminate - Whether major works amount to a serious breach of an intermediate term entitling tenant to terminate
Real property - Leases - 'Make good' obligation - Whether tenant's make good obligation operates before the expiry of the lease term when the lease is terminated for breach or renunciation by the landlords - Failure of landlords to comply with precondition of notice to the tenant - Conduct of landlords in removing ceilings entirely depriving tenant of opportunity to repair ceilings
[2012] WASC 210
Damages - Availability of substantial damages for alleged breach of a repair covenant in the absence of financial loss - Difference between obligation to perform or to provide a substitute for performance, and obligation to compensate for consequential losses
Legislation:
Conveyancing Act 1919-1939 (NSW), s 133A
Law of Property Act 1925 (UK)
Result:
Plaintiffs' claims dismissed
Category: B
Representation:
Counsel:
| Plaintiffs | : | Mr P G McGowan & Mr P J Hannan |
| Defendant | : | Mr S M Davies SC & Mr H H Jackson |
Solicitors:
| Plaintiffs | : | Lewis Blyth & Hooper |
| Defendant | : | Lavan Legal |
Case(s) referred to in judgment(s):
Alfred McAlpine Construction Ltd v Panatown Ltd [2001] 1 AC 518
Ankar Pty Ltd v National Westminster Finance (Australia) Ltd [1987] HCA 15;
(1987) 162 CLR 549
Anstruther-Gough-Calthorpe v McOscar [1924] 1 KB 716
Apriaden Pty Ltd v Seacrest Pty Ltd [2005] VSCA 139; (2005) 12 VR 319
Attorney-General of Botswana v Aussie Diamond Products Pty Ltd [No 3]
[2010] WASC 141
Aussie Traveller Pty Ltd v Marklea Pty Ltd [1998] 1 Qd R 1
Baier v Heinemann [1962] Qd R 192
Bellgrove v Eldridge (1954) 90 CLR 613
Buchanan v Byrnes [1906] HCA 21; (1906) 3 CLR 704
[2012] WASC 210
Byrnes v Jokona Pty Ltd [2002] FCA 41
Byrnes v Kendle [2011] HCA 26; (2011) 243 CLR 253
CMA Recycling Victoria Pty Ltd v Doubt Free Investments Pty Ltd [2011]
TASSC 71
Decro-Wall International SA v Practitioners in Marketing Ltd [1971] 1 WLR
361; [1971] 2 All ER 216
Graham v The Markets Hotel Pty Ltd [1943] HCA 8; (1943) 67 CLR 567
Graystone Property Investments Ltd v Margulies (1983) 47 P & CR 472
Halliday v Nevill (1984) 155 CLR 1
Hawkesbury Nominees Pty Ltd v Battik Pty Ltd [2000] FCA 185
Inderwick v Leech (1885) 1 TLR 484
JC Berndt Pty Ltd v Walsh [1969] SASR 34
Jenkins v Jackson (1888) 40 Ch D 71
Joyner v Weeks [1891] 2 QB 31
Kenny v Preen [1963] 1 QB 499
Koompahtoo Local Aboriginal Land Council v Sanpine Pty Limited [2007]
HCA 61; (2007) 233 CLR 115
Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd [1989] HCA 23;
(1989) 166 CLR 623
Lurcott v Wakely [1911] 1 KB 905
Maori Trustee v Rogross Farms Ltd [1994] 3 NZLR 410
Moore v Western Australia [1907] HCA 56; (1907) 5 CLR 326
Parsons v Payne [1945] VLR 34
Permanent Mortgages Pty Ltd v Vandenbergh [2010] WASC 10; (2010) 41
WAR 353
Permanent Trustee Australia Co Ltd v FAI General Insurance Co Ltd [2001]
NSWCA 20; (2001) 50 NSWLR 679
Progressive Mailing House Pty Ltd v Tabali Pty Ltd (1985) 157 CLR 17
Rawlings v Morgan (1865) 18 CB (NS) 776
Ruxley Electronics & Construction Ltd v Forsyth [1996] AC 344
Sanpine Ptd Ltd v Koompahtoo Local Aboriginal Land Council [2006] NSWCA
291
Scott v Irom [1968] HCA 24; (1968) 121 CLR 247
Southwark LBC v Tanner [2001] 1 AC 1
Tabcorp Holdings Ltd v Bowen Investments Pty Ltd [2009] HCA 8; (2009) 236
CLR 272
Todburn Pty Ltd v Taormina International Pty Ltd (1990) Butterworths Property
Reports 11,173
Volley Investments Pty Ltd v Coles Myer Ltd [2005] WASCA 52
Wilson v McDonald [2009] WASCA 39; (2009) 253 ALR 560
Wood Factory Pty Ltd v Kiritos Pty Ltd (1985) 2 NSWLR 105
[2012] WASC 210
Table of Contents
Introduction: the issues in the trial ............................................................................................5
The evidence and factual conclusions ........................................................................................6
The Lease and the Licence over the floors at 251 St Georges Terrace ..................................7
Telstra vacates the Building ...................................................................................................7
Telstra uses a property manager and leasing agent to assist with sub-leasing .......................8
Telstra remains in possession of the leased floors until 11 September 2009 .......................11
The Pourzands engage work on the Leased floors without Telstra's knowledge .................12
The date at which the Pourzands commenced the work...................................................12
Telstra's discovery of the work which Mr Pourzand was undertaking.............................14The time taken for the completion of the work ................................................................18
The Pourzands re-lease several floors of the Building and offer Telstra's furniture to a new
tenant ....................................................................................................................................21
Mr Pourzand's evidence........................................................................................................22
Matters not in issue in the case: estoppel, acquiescence, waiver, or forbearance ...................25
Any claim based on authorisation or knowledge must fail ......................................................26
The first claim: Was Telstra entitled to terminate the Lease and Licence on 11 September
2009? ........................................................................................................................................30
The Licence was co-terminous with the Lease.....................................................................30
Two sources of a power to terminate in this case.................................................................31
Renunciation of the Lease by the Pourzands........................................................................32
A sufficiently serious breach of an intermediate term by the Pourzands .............................34
Telstra's alternative arguments .............................................................................................37
The second claim: Alleged damage to the ceilings in the floors leased by Telstra.................39
| (1) | The claim is not within the 'make good' obligation..................................................39 |
| (2) | No notice was given under cl 4.5 .............................................................................42 |
| (3) | The damage done by Telstra was repairable but Mr Pourzand's actions prevented |
Telstra from repairing...........................................................................................................43
The nature of the damage to the ceilings..........................................................................43
Telstra was deprived of the opportunity to 'make good' any damage to the ceilings .......45
| (4) | Recovery of damages in the absence of financial loss?............................................46 |
Conclusion................................................................................................................................52
ANNEXURE A: Exhibit 185, photo 35 - approximately 21 August 2009 .............................54
ANNEXURE B: Exhibit 185, photo 27 - approximately 21 August 2009 .............................55
ANNEXURE C: Exhibit 186, photo 1 - approximately 4 September 2009............................56
ANNEXURE D: Exhibit 187, photo 1 - approximately 5 September 2009............................57
ANNEXURE E: Exhibit 114, photo 5 - 10 September 2009 ..................................................58
ANNEXURE F: Exhibit 196, photo 6 - approximately 16 December 2009 ...........................59
[2012] WASC 210
EDELMAN J:
Introduction: the issues in the trial
1 The defendant in this trial, Telstra Corporation Ltd (Telstra), leased
commercial premises in St Georges Terrace, Perth from the plaintiffs, the Pourzands. Telstra vacated its employees from the premises by June 2009, leaving behind only furniture and equipment. The lease had 10 months still to run. Telstra's estate agent was looking for a sub-tenant and Telstra was contemplating a 'business case' which would involve paying out to the Pourzands the remainder of the Lease term and the money equivalent of any 'make good' obligations.
2 In early September 2009, while Telstra was looking for a sub-tenant
for the remaining seven months of its lease and contemplating the business case, Mr Pourzand commenced major work on the leased floors of the building. He had previously been doing work on a small scale. It is no exaggeration to say that the major work involved Mr Pourzand's contractors tearing the demised premises apart. Many walls and internal rooms were knocked down. Carpets were stripped. All the ceilings were removed. Telstra's furniture was scattered across the floors and piled in heaps. The major work took at least five months to complete. Telstra's prospects of sub-leasing the building for the remainder of its tenancy were destroyed.
3 Before Mr Pourzand started the major work he had been warned that
the 'business case' might not be approved by Telstra. Mr Pourzand's leasing agent had repeatedly asked him whether he had authority from Telstra for the work he was undertaking. Mr Pourzand did not have that authority. Nevertheless, he went ahead with the major work.
4 Telstra's property manager United Group Services Pty Ltd (United),
knew in August of minor work such as replacement of some carpet and, generally to facilitate that, the removal of some partitions and ceiling tiles. But neither Telstra nor United had any idea of the scale of the work which Mr Pourzand was undertaking. Nor did they have any inkling that such major work would occur without express approval from Telstra. On 10 September 2009, an employee from Telstra discovered the premises in a state of utter devastation. She took photos. Telstra terminated the lease the next day.
5 In November 2009, the Pourzands secured a new tenant. The new
lease commenced on 1 February 2010 when the major renovations were nearly complete and shortly before Telstra's lease would have expired. In
[2012] WASC 210
the new lease the Pourzands promised to provide the new tenant with some furniture belonging to Telstra. Telstra had previously written to the Pourzands saying that the furniture had not been abandoned. Telstra wanted to keep the furniture in the building to make it attractive for a prospective tenant. Other furniture belonging to Telstra was also promised to the new tenant but eventually not accepted. The only reason the other furniture was not included in the final version of the new lease was because the new tenant did not want it. The other furniture included Telstra's workstations worth $2,500 - $3,000 each.
6 This trial involved essentially two issues. First, was Telstra entitled
to terminate the Lease for a renunciation of it by the Pourzands, alternatively a sufficiently serious breach by the Pourzands of Telstra's rights to quiet enjoyment?
7 Secondly, is Telstra liable to the Pourzands for the state in which
Telstra left the Premises? The only claim which is made in respect of the state of the Premises is that Telstra's alleged use of excessive amounts of cabling had damaged the ceilings leased by Telstra on four floors of the building.[1]
The quantum of each claim was agreed. For the first issue it was $1,270,000. For the second issue it was $312,800.[2]
9 The law in relation to these two issues is relatively well established.
The findings of fact which I have very broadly summarised above lead to the conclusion that Telstra had a right to terminate the Lease. Telstra is also not liable for any damage to the ceilings.
10 One legal issue of some controversy concerns the availability and
assessment of damages for breach of a contract where no financial loss is proved. However, for the reasons I explain below at [186] - [209] it is not necessary to reach a conclusion concerning how that legal question should be resolved in this case.
The evidence and factual conclusions
11 The discussion which follows is my finding of facts. Substantial,
detailed written closing submissions were devoted to the assessment of the evidence. In the following discussion I have footnoted the passages from the evidence upon which I have placed most reliance.
[2012] WASC 210
The Lease and the Licence over the floors at 251 St Georges Terrace
12 On 26 June 2000, Telstra executed a lease with Trendhale Pty Ltd
(the Original Lease) over part of the ground floor, as well as the 1st, 2nd, 3rd and 4th floors of a seven level building (the Building) located on land at 251 St Georges Terrace, Perth. The Original Lease was for a term from 1 April 2000 until 31 March 2007.[3]
13 At the same time as it entered the Original Lease, Telstra also
entered into a licence agreement with Trendhale Pty Ltd (the Original Licence). The Original Licence gave Telstra the right to use 48 car bays located within the Building. The term of the Original Licence was the same as the Original Lease.
On 28 November 2005, the plaintiffs, Mr and Mrs Pourzand, became the registered proprietors of the land at 251 St Georges Terrace. In 2007, the Pourzands entered a Deed of Lease (the Lease) and a Deed of Licence (the Licence) with Telstra which extended the terms of the Original Lease and the Original Licence from 1 April 2007 until 31 March 2010.[4]
Telstra vacates the Building
15 On 3 December 2008, Telstra engaged Knight Frank Australia Ltd
(Knight Frank) as its exclusive leasing agent to 'negotiate leases, subleases, surrenders or assignment of leases for the occupation of any vacant space in the [five floors leased] in accordance with [Telstra's] instructions'.[5]
16 Telstra subsequently began to vacate its leased floors. On
13 December 2008, Telstra vacated the whole of the third floor of the Building and most of the 1st floor.[6] By 23 May 2009, all five floors had been vacated by Telstra.[7] All Telstra staff gave their MIL and FOB keys to Mr Sinclair, Telstra's Business Administrator.[8] Mr Sinclair returned those keys to the building security and Perth Management Services (the property manager for the Pourzands) in June and August.[9] However,
[2012] WASC 210
Knight Frank and United both retained keys on behalf of Telstra, as well as relevant personnel from Telstra.[10]
17 Telstra left behind furniture and equipment including: (1) fixed
partitioning; (2) workstations, office desks and chairs; and (3) office filing
and storage cabinets.[11]18 During 2009, the Pourzands and Telstra executed a Deed of
Surrender of the Lease and the Licence in relation to the ground floor of the Building and six of the car bays.[12] Telstra paid a surrender fee of $50,000.
19 On 1 June 2009, after the Deed of Surrender took effect, Telstra
remained the lessee from the Pourzands of the 1st, 2nd, 3rd and 4th floors of the Building. Telstra was also the licensee from the Pourzands of 42 car bays in the Building. Although the floors were vacant, Telstra was liable to the Pourzands for the rent on each of those floors and for the car bay licence fee for another 10 months.
Telstra uses a property manager and leasing agent to assist with sub-leasing
By late 2005, Telstra had engaged United as its property managers. This engagement was by a lengthy written contract.[13]
21 On 18 June 2009, Mr Kenneth Hutchings commenced work for
United.[14] He worked for United from 18 June 2009 until 15 March 2010.[15] He was employed as a property manager.[16] He was responsible for all of Telstra's commercial property in Western Australia[17] and he was the only United person 'on the ground' in Perth who was responsible for the floors in the Building leased by Telstra.[18] His role involved lease administration; in his words, 'dealing with rents and payment of outgoings and ... lease renewals and rent reviews'.[19]
22 On 24 June 2009, Mr Hutchings conducted his first site visit to the
Building. He went there with Mr McAlpine from the leasing agent,
[2012] WASC 210
Knight Frank.[20] Mr Hutchings familiarised himself with the leased floors of the Building and Mr McAlpine showed Mr Hutchings the things that Mr McAlpine thought should be done to improve the presentation.[21]
23 In December 2008, Telstra entered into an exclusive agency
agreement with Knight Frank for the purpose of Knight Frank arranging for the sub-leasing, assigning, or surrendering of the four remaining Telstra floors in the Building.[22] Mr Edwards, from Knight Frank, dealt with Mr Slater from United and Mr Chiodo, the head of property at Telstra, based in Melbourne.[23]
24 In July 2009, Telstra began investigating a possible pay-out of the
Pourzands for the remainder of the Lease term.[24] Simultaneously Telstra was exploring sub-lease options through Knight Frank.
25 Employees of Knight Frank, Mr Edwards and Mr McAlpine, worked
to find a sub-tenant for Telstra. They spoke with prospective tenants and showed prospective tenants through Telstra's leased floors of the Building.[25] One type of prospective tenant which Knight Frank investigated was a tenant for short term leases of several months, ie 'project space'. There were several reasons why a sub-lease for project space, or even a longer lease, was a real possibility.
(1)
On 1 June 2009, the same date that Telstra had surrendered the ground floor,[26] the Pourzands had re-leased the ground floor to Offshore Marine Services Pty Ltd for project space.[27]
(2)
Clough Engineering, who were another tenant of the Pourzands on different floors, had wanted to sub-lease several of Telstra's leased floors from May 2009, possibly extending six months beyond Telstra's lease expiry. But the Pourzands did not agree to this.[28]
[2012] WASC 210
(3) Mr McAlpine had been told in April 2009 that several mining companies had the Telstra space as their first or second choice for a lease if they won the Chevron 'Wheatstone' project.[29] (4) As I will explain below, AGC Industries Pty Ltd had expressed interest in leasing Telstra's floors in September or October 2009, and had made an offer at the end of October,[30] culminating in an agreement with the Pourzands on 4 November 2009. In the agreement the Pourzands leased the first and second floor of the Building and also licensed 15 car bays to AGC. The lease and licence was for a seven year term commencing on 1 February 2010. It contained a clause allowing for early possession. As I explain below, some of Telstra's furniture and fittings were included in the lease agreement.
26 In oral evidence, Mr Edwards suggested that the market for project
space was 'very difficult' and had 'died' in 2009.[31] I do not accept this conclusion. The more accurate conclusion, derived in part from in Mr Edwards' email of 17 April 2009, is that the leasing market was generally 'slow' at the start of 2009 but that, as Knight Frank expected, it would 'improve in the second half of 2009'.[32]
27 The examples above show that there was a reasonable basis for the
view that the leasing market was picking up in 2009, after the global financial crisis which affected the leasing market in late 2008.[33] This was particularly so in relation to project space which was less affected, and perhaps even benefitted, from the global financial crisis.
28 I accept the evidence of Ms Dean on this issue. Ms Dean
commenced work with Telstra as Telstra's national leasing manager in July 2009.[34] Her responsibilities include all of Telstra's commercial leasing in Western Australia, including Telstra's lease over the floors of the Building.[35] She is responsible for management and oversight of 2,100,000 sq m of Telstra's tenancy portfolio.[36] She explained that after the global financial crisis in late 2008, many mining and resources companies who were committed to projects faced uncertainty in the market. Those mining and resources companies were unwilling to
[2012] WASC 210
commit to long term space, preferring instead the short term 'project space'. Telstra's tenancy in the Building was ideal for that short term project space.[37] As Ms Dean explained, after the global financial crisis there remained a healthy demand for short term, inexpensive office space that would enable companies, particularly those in the mining sector and servicing it, to meet existing obligations while minimising their exposure to long term, higher costs if the mining and resources sector collapsed.[38]
29 In summary, although from June 2009 there was a risk that Telstra
might not obtain a sub-tenant of its floors in the Building,[39] there was still a good chance that Telstra would obtain a sub-tenant and Ms Dean's expectation that this chance was 'relatively high' was reasonable.[40]
Telstra remains in possession of the leased floors until 11 September 2009
The question of possession is a mixed question of fact and law.[41] Although there was some equivocation on this point, it does not appear that there was any real dispute that until Telstra terminated the Lease on 11 September 2009, Telstra was in possession of its leased floors of the Buildings as a matter of both fact and law. This is so for four reasons.
31 First, and fundamentally, it was common ground that although
Telstra had moved its staff from the Building, the Lease remained operative until 11 September 2009. Telstra retained access to its leased floors which contained Telstra's furniture and fittings; Telstra was in possession of keys,[42] and Telstra paid rent until 11 September 2009.[43]
Secondly, Telstra continued to use the car bays under the Licence.[44]
33 Thirdly, Telstra's investigations concerning a sub-lease continued
until 11 September 2009. For this purpose, its leasing agents retained
keys and access to the leased floors of the Building.34 Fourthly, as the Pourzands' property manager (Perth Management
Services) confirmed in relation to the period up to 4 September,[45] it was 'obvious to all and sundry that Telstra was clearly still in possession of the tenancy and the carbays'.
[2012] WASC 210
The Pourzands engage work on the Leased floors without Telstra's knowledge
The date at which the Pourzands commenced the work
35 The critical evidence on this issue was given by Mr Hutchings and
Mr Pourzand. I commence with the discussion of the evidence of Mr Hutchings. The reason for this is that although there was some confusion in his oral evidence I generally accept Mr Hutchings' evidence. Counsel for the Pourzands and senior counsel for Telstra respectively submitted that Mr Hutchings should be accepted as an honest,[46] and credible and reliable witness.[47] In contrast with the evidence of Mr Hutchings, and for reasons which I explain below, I do not accept the evidence of Mr Pourzand.
In his witness statement, Mr Hutchings identified the occasions he went to the Building as 24 June 2009;[48] 15 July 2009;[49] 27 July 2009;[50] 5 or 8 August 2009;[51] 19 August 2009;[52] and late August or early September 2009.[53] Mr Hutchings left for a holiday in Bali on 4 September 2009.[54]
37 Mr Hutchings also said that on his visit to the Building on 5 or
8 August 2009, he met with a representative from Bovis Lend Lease and two representatives from Swan Cabinet Works. He said that during that visit Telstra's fit out was intact and none of Mr Pourzand's workmen was present on any of the floors.[55]
38 Mr Hutchings said that on his visit on 19 August 2009 with
Mr Pourzand he observed that Mr Pourzand had started recarpeting the floors on levels 1 and 2 and had moved Telstra's loose furniture into two rooms near the elevators.[56] Mr Hutchings initially said that he had observed that Telstra had removed fixed partitions, but he removed that
[2012] WASC 210
sentence from his witness statement: he couldn't be absolutely certain that
this was the case although it was his best recollection.[57]39 Mr Hutchings said that in his visit in late August or early September
he observed that Mr Pourzand had started removing Telstra's fixed partitioning. He described a conversation with Mr Pourzand on that visit to the Building when Mr Pourzand suggested to him that Telstra had made cuts in the ceiling T-bars and where Mr Pourzand suggested to him that Telstra had repainted the T-bars with cream paint.[58]
40 The effect of Mr Hutchings' witness statement is that at a time
around 19 August 2009 Mr Pourzand had started to recarpet two of the floors, a quarter of the area of each floor at most.[59] Mr Pourzand had probably also started to remove a small number of Telstra's fixed partitions at that time. It is likely that these removals were to facilitate the re-carpeting. However, although Mr Pourzand had told Mr Hutchings that new ceilings had been ordered, and although Mr Hutchings had observed that some fixed partitions and some ceiling tiles had been removed,[60] the ceilings had not been removed prior to Mr Hutchings' departure for holiday in Bali on 4 September 2009. Further, Mr Hutchings expected that the ceilings would not be removed without a 'deal' between Mr Pourzand and Telstra.[61] Mr Hutchings never saw the large scale removal of ceiling tiles which preceded the later removal of the whole ceilings.[62]
41 There was some inconsistency between, on the one hand, this
sequence of dates and observations as explained by Mr Hutchings in his witness statement and, on the other hand, the evidence of dates and observations which Mr Hutchings gave in cross-examination. Counsel for the Pourzands submitted that Mr Hutchings' evidence in his witness statement should be rejected as an understandable mistake of memory.[63] I do not accept this submission for five reasons.
42 First, Mr Hutchings had prepared his witness statement with the
benefit of an electronic diary and notes he made whilst he was employed
at United.[64]
[2012] WASC 210
43 Secondly, a number of the dates in Mr Hutchings' witness statement
correspond with the admitted approximate dates in the pleadings upon which the various works commenced. Those agreed dates are set out below at [62].
44 Thirdly, the evidence in Mr Hutchings' witness statement of what
Mr Hutchings said he saw for the first time on 19 August 2009 is consistent with his silence about these matters at a meeting of the Telstra Project Committee on 17 August 2009. The minutes of that meeting, which Mr Hutchings attended, show that 'United [was] looking at pay-out of remaining floors' and that a make good estimate was to be provided by Bovis and a high electricity cost was to be investigated.[65] Mr Hutchings did not say anything at that meeting concerning any re-carpeting or other works which were being carried out on any of Telstra's leased floors of the Building.[66] It is likely that he did not say anything because the work which had commenced was minor.
45 Fourthly, as I explain below, the dates in Mr Hutchings' witness
statement are consistent with the photographic evidence in exhibits 185 - 189. A small sequence of those photos is annexed to these reasons to illustrate the progression of the major work undertaken by Mr Pourzand.
46 Fifthly, the cross-examination of Mr Hutchings proceeded by
counsel asking him to recall dates without the benefit of his witness statement. On occasion when Mr Hutchings was asked about dates in cross-examination his reply was to refer back to his witness statement. So, when he was asked about the date at which he saw that come re- carpeting had begun, he replied '[w]ithout looking at my notes, I can't remember the date, no'.[67] When pressed about whether the date was early, mid, or late August, he said that he 'guessed' that it was early.[68] Much of the cross-examination about dates was built on a foundation of such 'guesses' in circumstances in which Mr Hutchings acknowledged his need to refer to his witness statement to confirm the dates.
Telstra's discovery of the work which Mr Pourzand was undertaking
47 In opening submissions, counsel for the Pourzands said that the work
done by Mr Pourzand was done with the knowledge of Telstra.[69] In
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closing submissions, that position was maintained.[70] It is necessary to set out exactly what Mr Hutchings knew about the work undertaken by Mr Pourzand.
48 As I have explained at [38] - [40] above, Mr Hutchings was aware of
some small scale work being done by Mr Pourzand. Mr Hutchings gave evidence that he told Ms Millican (another employee at United) that work was being done by the Pourzands when he 'started to get a bit worried that [Mr Pourzand] was doing significant work'.[71] He said that his conversation with Ms Millican occurred after the second time that he went to look at the ceiling.[72] Mr Hutchings did not say whether the small worry that was developing in his mind concerned the possibility of significant work to parts of the base building not included in the Lease or whether it was significant work on the parts of the floors which were in Telstra's Lease.
49 Mr Hutchings said in cross-examination that the first time he went to see the ceilings was contained in his witness statement, and that he thought it was 23 August 2009.[73] But his witness statement did not refer to a meeting on 23 August 2009. I conclude that the meeting to which Mr Hutchings was referring was the meeting in late August or early September. It was at that meeting when, as I explain above, Mr Pourzand made the allegations to Mr Hutchings that Telstra had made cuts in the ceiling T-bars and had repainted the T-bars with cream paint. At this time the re-carpeting would also have involved the removal of some fixed partitions. And the removal of the fixed partitions would have involved removal of some, though not many, ceiling tiles. Mr Hutchings also said in cross-examination that his reference to the 'works to the base building' which he saw on 19 August 2009 involved the removal of ceiling tiles 'to help partition removal for recarpeting purposes'.[74]
50 There was also a second occasion when Mr Hutchings went to look
at the ceilings. That second occasion would also have been in very late August or early September 2009.[75] I conclude that it was after this time, but before 4 September 2009, when Mr Hutchings spoke with Ms Millican and when he had just started to develop a concern that Mr Hutchings might be doing, or about to do, significant work.
[2012] WASC 210
51 Mr Hutchings was not asked in cross-examination about the detail of
what he had said to Ms Millican. My conclusion is that Mr Hutchings would have, in his words, informed Ms Millican that Mr Pourzand was doing some work in the Building. I do not consider that Mr Hutchings would have been any more specific than this, and neither Ms Millican nor Mr Hutchings would have raised any concerns with Telstra.
52 In summary, Mr Hutchings was only a 'bit worried'.[76] He had seen some recarpeting underway and, to facilitate that, some removal of full length fixed partitions, and some ceiling tiles removed. Some of the full length partitions were supporting the ceiling and the removal of those partitions and the ceiling tiles above them would also have enabled him to see into the ceiling void.[77] But this work was only minor. Mr Hutchings clarified in cross-examination that the only ceiling tile removal he saw was those tiles which were removed to help partition removal for recarpeting purposes.[78]
53 I note also that Mr Vodesil's evidence, which I accept on this point,
was that the ceilings were removed on the first floor first, then the second floor, then the third and fourth floors.[79] The work that Mr Hutchings had seen on the second floor, which he visited in early September,[80] was not the major work which subsequently took place. That major work was primarily the removal of ceilings, but it also included work such as the removal of internal meeting rooms.
54 Mr Hutchings did not expect that work would be done on the
considerable scale which occurred; in particular, he did not expect that the ceilings would be replaced without agreement from Telstra. And although he had seen a few ceiling tiles removed to facilitate recarpeting, he said (and I have accepted) that there had not been a lot of work done at the time of his final visit.[81]
55 Even on the basis that Mr Hutchings' knowledge should be attributed
to Telstra (a matter on which no substantial submissions were made) Mr Hutchings had no knowledge or expectation of the significant work which would occur. And, for the reasons below, Telstra had no actual knowledge at all.
[2012] WASC 210
56 Ms Zuvela is a Telstra employee, with the title 'Business Operations
Specialist for Western Australia, South Australia and the Northern Territory'.82 She commenced work with Telstra in January 2009,[83] and was always based at Telstra's premises at 80 Stirling Street, Perth.[84] She only came to the Building on St Georges Terrace on an 'as required basis'.[85]
57 On 9 or 10 September 2009, a person from Swan Interiors who was
doing work near the Building told Ms Zuvela that demolition works were underway at the Building.[86] On the evening of 10 September 2009, after confirming that Telstra had not sub-leased its tenancy or reached any arrangement with the Pourzands, Ms Zuvela went to the Building.[87] She observed, and photographed:[88]
(i) furniture and workstations had been dismantled and moved; (ii) partitions had been removed, including full-height partition walls; (iii) large parts of the ceiling had been removed and new ceiling grids were being installed; (iv) cables and air conditioning ducts were hanging out of the ceilings; (v) new carpet tiles had been delivered and had been installed in some places; and (vi) there were a number of tradesmen working. 58 The work that Ms Zuvela observed on 10 September 2009 was on a
massive scale. Annexure E to these reasons is one of the photos she took.[89] I find that the major work involving the large scale removal of all the ceiling tiles and grids commenced after the final time Mr Hutchings visited the Building before he left for holidays, although it is possible that the large scale work had commenced earlier on floors, such as the first floor, that Mr Hutchings did not see in his final visit. Mr Hutchings' final visit was probably around 2 September 2009.[90] Mr Hutchings never saw
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the state of the premises when this large scale or major work had
commenced.59 Later in the evening of 10 September 2009, Ms Zuvela sent an email
to Mr Whitney, her manager who was based in Brisbane,[91] as well as to Ms Dean and Mr Slater.[92] Ms Zuvela attached photos she had taken. Ms Dean replied with '[g]reat find Elena!!!' and observed that 'I think we have an excellent case to claim they have taken possession of the premises'.[93]
I find that the first time that Telstra knew that substantial work was being undertaken by the Pourzands was on 10 September 2009.
61 On 11 September 2009, Mr Mark Slater of United wrote to the
Pourzands asserting that their actions in commencing building works within the premises, including the removal of suspended ceilings and fixtures and fittings, were a repudiation of the Lease and that Telstra accepted the repudiation. He also said that Telstra did not abandon its ownership or entitlement to any of its property in the premises.[94]
The time taken for the completion of the work
62 Although, as I have explained above, there was some inconsistency
in the dates and order of events given by Mr Hutchings in his oral evidence, the dates below were either admitted on the pleadings or are consistent with Mr Hutchings' witness statement which I consider to be reliable.
(1)
At around 19 August 2009 some recarpeting of levels 1 and 2 of the Building had commenced and some partitioning had been removed;[95]
(2)
On a date after 27 August 2009, but probably Friday 28 August 2009,[96] steel ceiling grids were delivered to level 2 for installation on levels 1 - 4 of the Building;[97]
(3) In late August or early September 2009, ceilings began to be
removed and new ceilings began to be installed.98
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63 I have explained above my conclusion that Mr Hutchings never saw
Telstra's leased floors of the Building with the major work underway, including primarily the removal of the ceilings, but also the removal of numerous walls and internal rooms. I consider that the most likely time when that major work commenced was very shortly after 2 September 2009 with the ceiling removal starting on the first floor.
64 Mr Pourzand conceded in cross-examination that the premises were
in 'complete disarray' during the works.99 This is an understatement. The premises were utterly devastated while the major work was going on. I have attached to these reasons several photographs which demonstrate the nature and progression of the work.
65 The first two photographs, Annexures A and B,100 were taken around 21 August 2009. There was a little work going on then such as some re-carpeting and removal of partitions to facilitate that, but nothing of great significance.
66 The third photograph, Annexure C,101 was probably taken around 4 September102 and probably of level 2103 (the second level to have the ceiling removed).104 It shows that major work had commenced but the ceiling had not yet been removed.
67 The fourth photograph, Annexure D, was probably taken several
days after Mr Hutchings' final visit, and probably around 5 September 2009.105 The work had begun in earnest and the devastation of level 2 can be seen in that photo. I accept Mr Pourzand's evidence that the mere removal of the ceiling tiles was easy and was not a big job.106 The removal of the ceiling tiles and grids occurred rapidly. The replacement took much longer.
68 The fifth photograph is Annexure E. It was taken on 10 September
2009.107 It shows that Telstra's leased floors are still in a state of utter
disrepair at that date.
98 Re-Amended Defence [34(b)(iv), (vi)]; Amended Reply [4(5A), (6)].
99 ts 161 (Mr Pourzand).
100 Exhibit 185, photo 35; exhibit 185, photo 27.
101 Exhibit 186, photo 1.
102 ts 114 (Mr Pourzand).
103 ts 114 (Mr Pourzand).
104 ts 296 (Mr Vodesil).
105 Exhibit 187, photo 1.
106 ts 211 (Mr Pourzand).
107 Exhibit 114, photo 5.
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69 The sixth photograph, Annexure F, shows the premises on
16 December 2009.[108] There is still work underway and ceilings are still
incomplete.70 One matter which is clear from these photographs is that the sheer
size and scale of the work took months to complete. The major work commenced shortly after 2 September 2009. Much of it occurred simultaneously[109] and, as Mr Vodesil said, the installation and replacement of the new ceiling grids and tiles took about five months.[110] The sheer scale of the work undertaken, and the devastation of the premises by 10 September 2009, is such that it would have been entirely reasonable for Telstra to expect that the completion of the work would take the entire remaining time of its lease. As it turned out, when Telstra terminated the Lease on 11 September 2009, the work had at least five months until completion.
71 The five month time period for the major work is also consistent with
the delivery dates of the new ceiling tiles. Those dates were from 6 October 2009 until 25 January 2010.[111] Photos taken on 16 December 2009 also show work remaining to replace ceiling tiles.[112] The new carpets arrived on 2 November 2009.[113] The remaining partitioning was removed around 10 November 2009. The cost of removing the partitioning at around that date, $308,000, suggests that this was not a small task.[114] The lighting and power cabling was removed on 18 November 2009.[115]
72 Mr Vodesil gave evidence that the work stopped for a period after
11 September 2009, when the Pourzands received Telstra's termination letter. He thought it was a few weeks, but he was not entirely clear about that.[116] I accept that the work stopped for a brief period but this period was unlikely to be more than a couple of weeks. The photographic evidence which showed the progression of the work, and the stream of invoices and the sheer scale of the work which needed to be completed in five months meant that any cessation of work would have only been very brief.
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73 For completeness, I should add that I do not accept the accuracy of
Mr Vodesil's recollection in relation to the time when the removal of the ceilings occurred. Mr Vodesil initially suggested that it took two months to remove the ceilings on Telstra's leased floors and that the work had been completed when the ceiling grids arrived on 28 August 2009.[117] This is contrary to the photographic evidence around 21 August 2009 (which showed that the ceilings were intact). It is also contrary to Mr Hutchings' evidence.
The Pourzands re-lease several floors of the Building and offer Telstra's furniture to a new tenant
74 On 4 November 2009, the Pourzands entered into an agreement with
AGC Industries Pty Ltd by which the Pourzands would lease the first and second floor of the Building and also licence 15 car bays to AGC for a seven year term. The term would commence on 1 February 2010.[118] An early possession clause permitted AGC to enter early occupation any time after execution of the formal lease.[119]
One of the conditions of the lease offer from AGC was that the Pourzands would [120]
2.5 Remove all solid Gyprock and glass partition walls all workstation desks and screens and chairs and all electrical and data cabling, the UPS and batteries currently insitu in the Premises prior to possession being granted to the Lessee. The Lessor is to supply 187 existing mobile pedestals and 90 existing storage units.
76 The lease and licence to AGC were executed shortly after the offer.
Mr Pourzand accepted that the reference to the mobile pedestals and storage units which he had promised to provide to AGC was part of Telstra's existing fit-out. Mr Pourzand claimed in evidence that he thought that Telstra had abandoned these.[121] Mr Pourzand conceded that it had initially been contemplated that Mr Pourzand would also provide AGC with Telstra's workstation desks (which were worth $2,500 - $3,000 each)[122] and Telstra's screens and chairs. But Mr Pourzand said that this 'didn't work' for AGC.[123] The underlying assertion by Mr Pourzand was that Telstra had abandoned these too. This was false.
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77 Mr Pourzand had never given Telstra a formal notice to remove any
of its furniture.[124] And as explained above at [61], Telstra had written to Mr Pourzand just over a month earlier explaining that it did not abandon its ownership or entitlement to any of its property in the premises. As Ms Dean and Ms Zuvela both explained, Telstra's existing furniture and fit-out had been left in the Building to make it more attractive for project space; otherwise Telstra would have sold its furniture.[125]
78 Some time after April 2010, the Pourzands also leased another of
Telstra's former floors to a company called Compass for a short term lease, five or six months.[126] Space was also leased to RCR Tomlinson.[127]
Mr Pourzand's evidence
79 In the discussion above, I have not relied upon Mr Pourzand's
evidence in any significant respect. I do not consider that his evidence was reliable. This assessment is based only in part upon my consideration of his demeanour and manner of giving evidence. There are four supporting reasons why I do not accept his evidence as reliable.
80 The first reason was the selectivity of his memory in giving
evidence. Mr Pourzand had some limitations with his English expression but he could clearly understand the cross-examination and he had a very strong command for business matters. His recall of commercial events and deals he had engaged in on previous occasions was remarkable and impressive. For instance, he had a near-perfect recall of the many companies in which he had been a director, the dates of his directorships, controlling interests in the companies, relevant shareholdings, the nature of the ventures involved, and prices paid in commercial transactions. This recall stretched back over a period of fifteen years.
81 In striking contrast with this remarkable memory and his crisp
answers to these questions, Mr Pourzand's evidence on important matters relating to the issues in the trial, even involving much more recent events, was confused, contradictory, and sometimes contrary to clear documentary evidence.
82 Secondly, in relation to matters concerning dates and sequence of
events, Mr Pourzand did not keep a diary.[128] His recollection was shaky
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on dates, even in instances in which he had initially asserted them with
confidence.83 An example is that Mr Pourzand referred in his witness statement to
a meeting with Mr Hutchings on 7 September 2009.[129] This was an important part of Mr Pourzand's evidence because this was a meeting at which Mr Pourzand said that Mr Hutchings had approved the removal of meeting rooms and walls and when Mr Hutchings was alleged to have said that the ceilings had to be removed. Mr Pourzand had initially said in his witness statement that he knew that 7 September 2009 was the correct date because he had lunch with Mr Hutchings at Bar One on that day and he had paid by visa and obtained a visa statement. He had said this was the only occasion he had lunch with Mr Hutchings at Bar One. But Mr Hutchings went on holiday to Bali on 4 September 2009.
84 In Mr Hutchings' witness statement, Mr Hutchings contradicted the
account of Mr Pourzand, saying that the date when he had lunch with Mr Pourzand was 27 July 2009. So, in oral evidence, Mr Pourzand amended his witness statement from 7 September 2009 to 27 July 2009.[130] Mr Pourzand was asked six times in cross-examination whether in the lead up to trial he had been told that Mr Hutchings was on holidays on 7 September 2009. When he eventually answered the question he said that he could not recall being told.[131]
Thirdly, there were important aspects of Mr Pourzand's evidence which were false. Several examples can be given.
(1)
Mr Pourzand repeated, over and over, in cross-examination that he had obtained approval from Mr Hutchings for every step he took in the works performed on the Building.[132] This was never pleaded. No claim for estoppel, acquiescence or waiver was ever raised. These assertions were never put to Mr Hutchings in cross-examination. And this evidence was contrary to the evidence of Mr Hutchings which all parties accepted was honestly given, and which was also reliable and credible.
(2)
Important statements which Mr Pourzand alleged had been made to him by Mr Hutchings were also denied by Mr Hutchings whose evidence on these points was firm and cogent. For instance, in relation to Telstra's cabling in the ceiling void, Mr Hutchings
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denied having told Mr Pourzand statements such as '[h]ow could they have left all that behind?'.[133] Mr Hutchings denied having said that the cabling 'could have fallen any day'.[134] Mr Hutchings denied having said 'I know the ceilings have to be done'.[135] Mr Hutchings denied having been shown carpet samples by Mr Pourzand.[136]
(3) Mr Pourzand said in cross-examination that Clough Engineering were not looking for project space in 2009 but were trying to lease their own space.[137] Mr Pourzand was then confronted with emails from Mr Edwards explaining that Mr Pourzand had refused to agree to sub-lease Telstra's floors for project space to Clough Engineering in January 2009.[138] He still denied knowing about this.[139] He was taken to another email where Mr Edwards said that he had had 'a long discussion with [Mr Pourzand] regarding the Clough offer'.[140] He then said that he could not recall but
141
doubted that this was the advice Mr Edwards would give him.
(4)
In an attempt to suggest that Mr Hutchings had seen extensive renovation work to Telstra's leased floors in the Building, Mr Pourzand said that Mr Hutchings came to visit the Building on five or six occasions between the end of August and 4 September 2009.[142] As I have explained, Mr Hutchings' evidence, which was not contested in cross-examination, was that he only went to the Building a handful of times in the months between June and September 2009. It is not credible that he visited five or six times in a single week.
(5)
Mr Pourzand gave evidence that Telstra's blue cable needed to be kept in cable trays. But when Mr Pourzand fixed the ceiling himself he did not put the blue cable in cable trays. He said it was sufficient to tie it up.[143]
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86 Fourthly, important aspects of Mr Pourzand's claims were said to
have been omitted by mistake from his witness statement. For instance, he said that shortly after 20 August 2009 he removed internal meeting rooms and some walls which he thought was blocking light and that prior to that Mr Hutchings had said '[t]hey've got to be removed. Go ahead'.[144] In his oral evidence Mr Pourzand said that Mr Hutchings had also authorised the removal of the level 2 wall, the meeting room, and the server room. Mr Pourzand said that he had forgotten to include these crucial issues in his witness statement.[145] The omission of these significant allegations (which allegations I do not accept) from Mr Pourzand's witness statement and his claims of them for the first time in oral evidence, cast further doubt upon the reliability of Mr Pourzand's evidence.
For these reasons, I do not accept Mr Pourzand's evidence in any significant respect.
Matters not in issue in the case: estoppel, acquiescence, waiver, or forbearance
88 Telstra's defence to the Pourzands' claims for debts due under the
Lease and Licence, and damages for breach of each, was based on the submission that the Lease and Licence were properly terminated on 11 September 2009.
89 Telstra's defence of termination was based upon a submission that
the Lease had been renounced or that there had been a sufficiently serious breach of an intermediate term entitling termination. The Pourzands' primary response was that no breach had occurred. Alternatively, their case was that any breach was of an intermediate term which did not permit Telstra to terminate the Lease.[146]
90 In opening, I raised with counsel the fact that no case of waiver was
pleaded by the Pourzands.[147] The same is true of estoppel, acquiescence, forbearance or affirmation although, in a case like this, these concepts might all have described a similar argument. The argument might have been that Telstra's conduct manifested an intention not to object to the major work undertaken upon which the Pourzands had reasonably relied.
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91 With the possible exception of authorisation, such an argument was
never pleaded or expressly advanced. My conclusions on the evidence are
that such an argument could not have succeeded.
Any claim based on authorisation or knowledge must fail
92 A claim based on authorisation was never clearly pleaded. Although
there was oblique mention of it by counsel in opening, by closing submissions, counsel for the Pourzands had apparently retreated from any firm reliance upon authorisation.[148] However, for the reasons below, it is necessary to deal with this issue.
93 It is possible, as senior counsel for Telstra submitted in closing, that
par 10(1)(b) of the Pourzands' reply pleading might be understood as a plea that Mr Hutchings had authorised the Pourzands to do the work. That paragraph was a limited pleading. It was a pleading that Mr Hutchings had agreed on behalf of Telstra that the Pourzands would carry out the 'make good' works at their own cost, subject to Telstra reimbursing the Pourzands to the extent of $100 per square metre.
94 In written closing submissions, the Pourzands submitted that even if
the work by Mr Hutchings would otherwise have been a breach of the covenant of quiet enjoyment, 'those works were done with the consent of Mr Hutchings and thereby the consent/authorisation of Telstra'.[149] Such a case of authorisation goes well beyond the specific pleading. But, in any event, it is contrary to the oral evidence and my findings of fact; it is contrary to the documentary evidence; it is contrary to admissions made by Mr Pourzand; and it is contrary to the legal authority conferred upon Mr Hutchings.
95 First, as I have explained above, Mr Hutchings' knowledge of the
works being undertaken by Mr Pourzand was limited to some re-carpeting and removal of partitions (and associated ceiling tiles). He was not aware of any of the major work commenced by Mr Pourzand shortly after 2 September 2009.
96 Secondly, Mr Hutchings' evidence, which I accept, was that some
time after 25 August 2009, Mr Pourzand told him (Mr Hutchings) that Mr Pourzand was 'going to go ahead and replace the ceilings and sort out how to fund it after'.[150] Mr Hutchings accepted that the question of Telstra approving or not approving the work to replace the ceilings just
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did not come up.[151] Mr Hutchings expected that Mr Pourzand would wait
until Telstra had reached a decision on the business case.97 Mr Hutchings said that he warned Mr Pourzand several times that the
business case which Mr Hutchings was going to put to Telstra might not be approved by Telstra.[152] The business case was to propose that Telstra pay out Mr Pourzand for the remainder of the lease in addition to a make-good amount. Mr Hutchings also told Mr Pourzand that if the business case were not approved then Mr Pourzand could be funding work for which he would not be reimbursed.[153] Although Mr Pourzand told Mr Hutchings that Mr Pourzand had ordered new ceilings,[154] Mr Hutchings reasonably expected that Mr Pourzand would wait until a business case was approved before installing the new ceilings.[155]
98 Thirdly, a further reason why any pleaded case based on
authorisation cannot succeed is that the pleading that Mr Hutchings had agreed on behalf of Telstra for the 'make good' works to be done subject to reimbursement was 'part and parcel' of discussions which took place 'no later than 15 July 2009'.[156] But the emails relied upon by the Pourzands as part of the particulars of the alleged discussions are directly contrary to this pleading. Mr Pourzand's email on 16 July 2009 to Mr Hutchings, as part of this exchange, only described the following agreement for minor cosmetic work to Telstra's leased floors:[157]
As discussed the following will be attended to:
• Clean balcony • Painting of balconies • Remove blinds from all floors • Remove and dispose of excess furniture as required • Lift lobbies to be repainted • Lighting will be addressed as required These are small cosmetic issues which will enhance Telstra's chance of leasing the space in a speedier time frame and as agreed by you, you will be invoiced for these small jobs until Telstra decide what they would like to do with their 'make good' obligations.
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99 Mr Hutchings had agreed that work could be done to upgrade the
bathrooms, and install showers, on the third and fourth floors. He explained that he agreed to this because it would improve the prospects of the floors being sub-let, and also because the toilets were not part of Telstra's Lease.[158]
100 Fourthly, if there were any doubt about the question, another reason
why any authority argument cannot succeed is because Mr Pourzand admitted in cross-examination that the terms of the email exchange show that there was no authorisation given on 15 July 2009 beyond at the most small cosmetic issues.[159]
101 Fifthly, as a matter of law, and in any event, Mr Hutchings had no
authority to approve the major works which were undertaken by
Mr Pourzand.102 A copy of the agreement between Telstra and United was tendered
during trial.[160] The Pourzands did not refer to that agreement in any detail during trial or in submissions. The agreement imposed significant restrictions on any work which Mr Hutchings could approve. For instance, cl 4.2.1(e) and cl 5.2.1(n) provided that for all 'Property decisions above a monetary level determined by Telstra' or 'all Property decisions determined by Telstra', United was required to prepare a Business Case for Telstra's consideration.
103 Further, sch 8, cl 25.2 of the agreement also imposed a cascading
level of checks in relation to 'ad hoc services' of increasing financial value. Services of less than $500 required United to notify the relevant Telstra property manager of the estimated value. Services of more than $1,000 but less than $2,000 required United to provide Telstra with at least two written quotes, and so on. Consistently with this, Mr Hutchings said that he had authority to approve work to be done by Mr Pourzand at Telstra's expense in relation to 'small items'.[161]
104 Sixthly, Mr Edwards said, and I accept, that he repeatedly asked
Mr Pourzand whether Mr Pourzand had informed Telstra of the work which Mr Pourzand was undertaking or planning.[162] Mr Edwards accepted that it was not at all normal for work of the type done by Mr Pourzand to occur without some formal or written authorisation from
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the tenant.[163] It is telling that Mr Edwards repeatedly kept asking Mr Pourzand whether he had authorisation. In any event, it was not true that Mr Pourzand had any authorisation whether from Mr Hutchings or anyone else.
For these six reasons, any authorisation case advanced by the Pourzands has no foundation in any evidence, facts or law.
106 For completeness, it is necessary also to address some related matters
raised in written closing submissions by the Pourzands in a section
entitled 'Works done with Telstra consent/authority'.[164]107 The Pourzands said that Telstra's consent might be inferred from
silence and a lack of activity with knowledge. The passages from the authority cited, Byrnes v Kendle,[165] focus upon defences including laches, acquiescence, and consent. None of these defences is pleaded. None is consistent with my findings of fact concerning Telstra's lack of knowledge of the major works. And even if Telstra had full knowledge of the commencement of the major works in early September 2009, any delay before termination was barely a week. This could not be sufficient for any of these defences to arise.
108 There were also passing references made in the Pourzands' closing
written submissions to communications between Mr Pourzand and Mr Edwards.[166] As to these, no issue can arise concerning any knowledge which Mr Edwards might or might not have had concerning the works undertaken by Mr Pourzand. The Pourzands only pleaded that Mr Edwards, or Knight Frank, was engaged as a leasing agent.[167] As senior counsel for Telstra emphasised at the start of trial,[168] and counsel for the Pourzands apparently accepted,[169] there was no pleading of any knowledge of Mr Edwards of the works undertaken by Mr Pourzand. Nor was there a pleading or submission that any knowledge of Mr Edwards could be attributed to Telstra; there was no factual basis for any such attribution. These concepts are sometimes encapsulated in the unfortunate description 'agent to know'.
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109 Even if Mr Edwards' knowledge had been pleaded as a relevant
matter, such attribution of knowledge would have been very doubtful as a matter of law.[170] Further, and as a matter of fact, Mr Edwards gave clear evidence that, acting as Telstra's leasing agent, he had never authorised Mr Pourzand to do any work.[171] He said that neither he nor Knight Frank had ever acquiesced on behalf of Telstra in anything that Mr Pourzand was proposing to do.172 He explained that both Mr Pourzand and Telstra were his clients and that he was also advising Mr Pourzand in relation to the Building.173
110 Finally, even if Mr Edwards' knowledge had been an issue in this
trial, my conclusion is that Mr Edwards did not see any major work being undertaken prior to 9 September 2009 (when there was a possibility that he saw the works being done)174 and, in any event, he did not say anything to Telstra about any of the works which Telstra discovered the next day, nor was he obliged to do so.
The first claim: Was Telstra entitled to terminate the Lease and Licence on
11 September 2009?
The Licence was co-terminous with the Lease
111 The trial was conducted on the assumption that the Licence was
co-terminous with the Lease. This assumption is correct. Item 5 of the
Schedule to the Original Licence provided:Commencing from and including 1 April 2000 for the Term of the Lease and the Further Term (if any) granted by the Licensor pursuant to the Lease and expiring on the earlier of the date of expiration of the Term of the Lease and any Further Term or the termination of those terms howsoever occurring.
112 The Licence provided for a Further Term. Clause 2.1 of the Licence
provided that Telstra 'has exercised the option to renew the grant of the [Original Licence]' and the renewed term was subject to 'the observance and performance of the covenants and agreements exceptions and reservations specified in the [Original Licence]'. The Licence therefore incorporated the provision that it would terminate upon the termination of the Lease term, howsoever occurring.
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Two sources of a power to terminate in this case
113 There are two, overlapping ways in this case in which Mr Pourzand's
conduct might have given Telstra the power to terminate. These two ways
are well settled in contract law as well as in relation to leases.114 First, a power to terminate arises if conduct involves a renunciation
of a contract; an unwillingness to render substantial performance of the contract. As the joint judgment in Koompahtoo Local Aboriginal Land Council v Sanpine Pty Limited[175] explained, this is sometimes described as conduct of a party which evinces an intention no longer to be bound by the contract or to fulfil it only in a manner substantially inconsistent with the party's obligations.[176]
115 Secondly, a contract can be terminated by one party if the conduct of
the other party involves a sufficiently serious breach of a non-essential, intermediate, term. The nature of the term is primarily a matter of construction of the contract, at the time the parties entered into it, to determine if its breach could be such as to deprive the injured party of a substantial part of the benefit to which he is entitled under the contract.[177] It is only after the determination of the nature of the term is made that it can be considered whether the seriousness of the breach, including the kind and degree of breach and its consequences, gives rise to a power to terminate.[178] In this assessment it may be relevant to consider the adequacy of damages as a remedy.[179]
In both of these situations involving the power of termination the reasoning in relation to contracts generally applies equally to leases.[180] This is because the ordinary common law principles in relation to contract generally apply to leases.[181]
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117 There was no dispute in this case that the conduct of the contractors
in performing work upon the instructions of Mr Pourzand was an interruption by Mr Pourzand, or by the contractors as persons claiming a right of entry under Mr Pourzand, within the meaning of cl 8.1 of the Original Lease.[182]
Renunciation of the Lease by the Pourzands
118 The contractual test for renunciation is whether the conduct of one
party conveys to a reasonable person in the situation of the other party either renunciation of the contract as a whole or renunciation of a fundamental obligation under it.183 The test is an objective one. It does not matter whether 'the lessor was unlikely to have subjectively desired to repudiate its agreement to grant a lease ... It suffices that, viewed objectively, the conduct of the relevant party has been such as to convey to a reasonable person, in the situation of the other party, repudiation or disavowal either of the contract as a whole or of a fundamental obligation under it'.[184]
119 When Mr Pourzand undertook major work to Telstra's leased floors
in early September, he knew that Telstra was seeking a sub-tenant to defray the costs under the Lease.[185] He knew that the leased floors would be unusable during the renovations.186 He knew that once the major work had commenced, the floors could not simply be 'put back together'.187 And he must have known that the work would take months, perhaps the entirety of Telstra's remaining tenancy. The effect of this was that once the major work commenced in early September, Mr Pourzand knew (as was the case) that Telstra's floors would be unusable, and a sub-lease would be impossible for most, if not all, of Telstra's remaining tenancy.
120 The effect of Mr Pourzand's conduct was to deprive Telstra of the
primary, almost exclusive, purpose of Telstra's tenancy. No sub-tenant would be obtained. As I have explained above at [25] - [29], there was a good chance that Telstra could have found a sub-tenant for the remainder of its tenancy. But not after the major work commenced.
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121 There is a further reason why the conduct of Mr Pourzand reasonably
conveyed to Telstra that he had renounced the Lease as a whole, or his fundamental obligation under it to allow possession. This reason was the failure by Mr Pourzand to seek any consent or approval from Telstra for any of the major works in which he engaged. This failure to seek consent, and the absence of any knowledge of the major works by Telstra or United, contrasts starkly with the agreement which Mr Pourzand sought, and which he subsequently documented by email, in relation to minor cosmetic matters in July 2009: see above at [98] - [99].
122 In written submissions, Telstra also characterised the conduct of
Mr Pourzand as a re-taking of possession. It is accurate to say that the major work undertaken by Mr Pourzand deprived Telstra of any effective right to possession under the Lease, including Telstra's prospect of a sub- lease. This deprivation of any meaningful exercise of possession by Telstra demonstrated both unwillingness, and subsequently an inability, for the Pourzands to comply with their fundamental obligation under the Lease. The conduct amounted to a renunciation of the Lease.
123 The Pourzands also submitted that Telstra's knowledge and
acquiescence in Mr Pourzand's work was relevant to the question of repudiation.[188] I have explained above, at [47] - [60] why Telstra had no knowledge of, and had not acquiesced or consented to, the major work by Mr Pourzand.
124 In any event, the test for renunciation focuses upon the conduct of
the Pourzands, not upon the knowledge of Telstra. The submission to the contrary by counsel for the Pourzands,[189] is inconsistent with the approach taken by the High Court on appeal that the issue of renunciation is a separate issue from construction of the contract (which involves the parties' common contemplation as to future performance). In relation to renunciation the question is 'the intention evinced by one of the parties [ie the renouncing party] at the time of breach'[190] (emphasis added).
125 The renunciation of the Lease by the Pourzands means that the Lease
came to an end on 11 September 2009 when the renunciation was accepted by Telstra. The Pourzands are not entitled to a claim for debt or damages for failure by Telstra to pay rent or outgoings after that date.
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A sufficiently serious breach of an intermediate term by the Pourzands
126 There is a second reason why Telstra was entitled to terminate the
Lease and Licence. This is for a sufficiently serious breach by
Mr Pourzand of an intermediate term of the Lease.
Clause 8.1 of the Original Lease, as incorporated by cl 3.2 of the Lease provided as follows:
8.1 Quiet enjoyment As long as the Tenant performs its obligations under this Lease, the Tenant may occupy and use the Premises without any interruption by the Landlord or any person lawfully claiming under the Landlord.
128 It was common ground that the proper construction of this clause
was a promise by the Pourzands that so long as Telstra performed its obligations under the Original Lease then Telstra may occupy and use the Premises without any interruption by the Pourzands or any person lawfully claiming under the Pourzands.[191]
129 The covenant of quiet enjoyment, sometimes expressed as a
requirement that there be no 'substantial interference' with quiet enjoyment, has been expressed or implied into leases and conveyances for centuries. But, in determining whether the covenant has been breached, care must be taken in two ways with the language used in this area.
130 First, although it is clear that it is a question of fact whether there has
been a substantial interference with quiet enjoyment,[192] including any inferences to be drawn from the evidence,[193] caution should be taken with the adjective 'substantial' in the phrase 'substantial interference'.[194] It does not require 'practical frustration' of the lease.[195]
131 Secondly, caution also must be exercised with the expression 'quiet
enjoyment'. The word 'quiet' does not mean 'undisturbed by noise'. It means 'without interruption of possession'.[196] Further, 'enjoyment' is not a reference to derivation of pleasure. The phrase has Roman roots and is
[2012] WASC 210
probably a rough translation of the Latin fruor, which is better understood
as meaning the benefits and exercise of the right to possession.[197]132 In summary, an assessment of whether there has been a substantial
interference with quiet enjoyment requires a determination of whether there has been an interference with the tenant's right to possession of the demised premises, and the extent of that interference.
133 The covenant of quiet enjoyment in the Lease is an intermediate
term. In Koompahtoo Local Aboriginal Land Council v Sanpine Pty Limited,198 Gleeson CJ, Gummow, Heydon and Crennan JJ explained that intermediate terms are those in which the existence of a power to terminate will depend upon 'the nature of the contract and the relationship it creates, the nature of the term, the kind and degree of the breach, and the consequences of the breach for the other party'.[199]
134 The breach of the cl 8.1 quiet enjoyment obligation could range from
a minor to a major disturbance. Its breach is properly classified as a breach of an intermediate term which will not always entitle termination.[200]
135 A court will not readily construe an intermediate term as one which
gives rise to a right to terminate. There is a preference for a construction that will encourage performance rather than the termination of contractual obligations.[201] In addition, as the plurality judgment explained in Koompahtoo, quoting from Professors Treitel and Peel, 'the policy of leaning in favour of classifying stipulations as intermediate terms can be said to promote the interests of justice by preventing the injured party from rescinding on grounds that are technical or unmeritorious'.[202]
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136 An assessment of whether there has been an interference with quiet
enjoyment, and the extent of the interference, depends upon the known
purpose for which the premises were possessed by the tenant.[203]137 The assumption common to the parties in this case was that the
known purpose for Telstra's possession of the premises at the relevant time was its desire to re-lease the premises.[204] It was plain from the evidence of Mr Pourzand, Ms Dean, and Ms Zuvela that both Telstra and the Pourzands were aware that the central purpose of Telstra's possession, from June 2009 at the latest, was to find a sub-tenant to sub-lease Telstra's floors so that Telstra could recoup the cost of its rental payments and outgoings.
138 As I have explained above, Telstra had a reasonable expectation that
one way in which such a sub-lease might be achieved was by Telstra sub-leasing its floors for 'project space'; a short sub-lease for the term of a project. But, as Ms Dean said, the actions of Mr Pourzand ruined Telstra's chances of sub-leasing its floors in the Building.[205]
139 In these circumstances, there can be little doubt that a breach of the
covenant of quiet enjoyment occurred and that the breach was sufficiently serious as to permit Telstra to terminate the Lease. The very essence of the Lease was for possession by Telstra. And when Mr Pourzand undertook the major works, the benefit of Telstra's right to possession - the opportunity to sub-lease - was almost completely destroyed.
140 There was, understandably, very little focus in submissions in this
case upon the question of the adequacy of damages. In many cases the question of adequacy of damages may be a conclusion which is dependent upon the nature of the breach which goes to the root of the contract. The plurality decision of the High Court in Koompahtoo said only that this may be a factor in assessing whether the breach goes to the root of the contract.[206]
141 Even if it were necessary to consider the adequacy of damages to
determine whether the breach by the Pourzands was sufficiently serious to entitle termination it can readily be seen that damages would be inadequate. Mr Pourzand's acts deprived Telstra of almost the entirety of the benefit of its rights to possession. Just as Telstra could have insisted
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upon specific performance or an injunction if Mr Pourzand had demanded possession for the purpose of performing the major works, so too it is not adequate to confine Telstra to damages, rather than a power of termination, for Mr Pourzand's acts in taking possession and performing the major works.
142 There was also a heavy focus in the Pourzands' submissions on the
issue of Mr Hutchings' and Telstra's knowledge. I have dealt with that issue, and Telstra's lack of knowledge, above at [47] - [60]. However, even if Telstra had known in early September of the major work which had been planned and commenced by Mr Pourzand (which it did not), the speed with which the major works (especially the removal of the ceilings) were commenced by Mr Pourzand, and the very short period subsequently until 10 September 2009, could not prevent Mr Pourzand's breach from being one which was so serious as to entitle Telstra to terminate.
Telstra's alternative arguments
143 It is strictly not necessary for me to address Telstra's other arguments
concerning the termination of the Lease and Licence. This is because of the conclusion I have reached that Mr Pourzand's conduct was a renunciation of the Lease and a serious breach of an intermediate term, both of which entitled Telstra to terminate.
144 However, I express my views on those arguments briefly for
completeness. The first argument was made by Telstra in the alternative to its submissions concerning its power terminate on 11 September 2009 for renunciation or serious breach of an intermediate term. As an alternative, Telstra relied on the law of surrender. Telstra pleaded that the retaking of possession by the Pourzands, accepted by Telstra on 11 September 2009, was a surrender of the Lease so that all obligations were terminated from that date.
145 I do not accept this argument. If, as I have concluded, Mr Pourzand's
conduct amounted to a renunciation, or was a serious breach of an intermediate term, then Telstra had a power to terminate and no question of mutual surrender would arise. Alternatively, if (for some reason) Mr Pourzand's conduct were somehow a retaking of possession which did not amount to renunciation or breach then Telstra's unilateral termination could not operate as a surrender at law unless Telstra could show an objective concurrence of both parties to bring the Lease to an end by
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surrender.[207] But apart from the circumstances which amount to renunciation or breach, there was no separate basis for a finding of mutual surrender.
146 Telstra also pleaded, and submitted, that Mr Pourzand's continuation
of the major work after 11 September 2009 was a continued renunciation of the Lease and continued breach of an intermediate term.[208] Telstra pointed out that the premises were in complete disarray and Mr Pourzand did not offer to stop the major works.
147 It may be that this plea was included for an abundance of caution.
But, in light of my findings of fact and conclusions of law, is difficult to see what this alternative plea adds to the submission of renunciation, or termination for breach, on 11 September 2009. If the Lease were properly terminated on that date then it came to an end then. Any continued renunciation or continued breach is beside the point. If the major work did not amount to a breach which entitled Telstra to terminate on 11 September 2009, then it is hard to see how it could amount to a breach subsequently. The 11 September 2009 letter from Telstra simply sets out the matters which I have accepted: without any prior notice to or permission from Telstra the Pourzands commenced major building works within the demised premises, and that those actions were a repudiation of the Lease which Telstra accepted.
192 Mr Vodesil said that he did not 'push' for payment because his
relationship with Mr Pourzand was based on trust.[257] I do not accept Mr Vodesil's evidence. This is not merely a matter of demeanour. The reasons why Mr Vodesil has not demanded payment from Mr Pourzand for nearly three years are not clear but the circumstances suggest that, for
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whatever reason, he is unlikely to make the demand. And without
demand Mr Pourzand is not ever likely to pay Mr Vodesil.193 The circumstances which lead me to the conclusion that Mr Vodesil
is unlikely to make a demand of Mr Pourzand are as follows: (i) Mr Vodesil's false statements to his lawyers that he had been paid; the size of the debt, which is more than a quarter of a million dollars and Mr Vodesil's modest financial circumstances; (ii) the expenses that Mr Vodesil had incurred in paying his contractors which would have required reimbursement if Mr Vodesil were to be repaid; (iii) Mr Vodesil's abstention for nearly three years from asking Mr Pourzand for payment.
194 Although my conclusion is that in the absence of any demand by
Mr Vodesil (which is unlikely) Mr Pourzand will suffer no financial loss arising from any breach by Telstra, this would not necessarily have precluded recovery.
195 For more than a hundred years, the common law case usually cited in
relation to assessment of damages for breach of a covenant to repair is Joyner v Weeks.[258] In that case the lessor sued the lessee for breach of a covenant to leave the demised premises in repair. The cost of repair was
₤70. However, upon determination of the lease, the lessor had agreed
with a third party to grant a new lease to pull down part of the premises. The lessee argued that he should not be required to pay damages for a failure to repair, at least in relation to the part of the premises which was to be pulled down.
196 The English Court of Appeal rejected the lessee's argument and
awarded the full measure of damages; the subsequent conduct of the lessor and his agreement with the third party was considered irrelevant. Lord Esher MR was 'strongly inclined' to think that an award of the cost of repair for breach of a covenant to repair was 'an absolute rule applicable under all circumstances'.[259] In contrast, Fry LJ thought that the rule was 'a general rule ... that, where a cause of action exists, the damages must be estimated with regard to the time when the cause of action comes into existence'.[260]
197 The decision in Joyner reflected a line of earlier authority to similar effect. It did not matter if a landlord suffered no financial loss from the
[2012] WASC 210
failure to repair because the landlord had decided to pull down the
premises; tenants remained liable for the cost of repair.[261]198 The effect of the decision in Joyner was ameliorated in England and Wales by s 18 of the Law of Property Act 1925 (UK), and, in New South Wales, by s 133A of the Conveyancing Act 1919-1939 (NSW). But it remained an established common law rule. It is a powerful illustration that the award of damages at common law for breach of a contract or covenant is not limited to the financial loss which is suffered from the breach.
199 Joyner v Weeks was approved by the High Court of Australia in Graham v The Markets Hotel Pty Ltd.[262] The decision in Graham involved a different situation in which the state of repair had rendered the premises unlettable at the end of the lease because they were disqualified from a liquor licence. But the High Court did not accede to the submission of Barwick KC that Joyner v Weeks should be confined to its 'special facts'.[263] Latham CJ described Joyner v Weeks as creating a 'general rule',[264] and Starke J described it as the 'true measure'.[265]
200 The question of the correctness of the decision in Joyner was raised in argument in the High Court of Australia in Tabcorp Holdings Ltd v Bowen Investments Pty Ltd.[266] A tenant had breached obligations in a lease by undertaking work on the leased premises without the consent of the landlord. The tenant appealed to the High Court from an award of damages for the full cost of restoring the foyer to its original condition. Senior counsel for the tenant emphasised three points: (i) there had been no loss of value to the building by the tenant's repairs; (ii) the building was erected for commercial purposes; and (iii) that extensive renovation to the foyer would have been necessary at the end of the lease in any event. He submitted that 'the rule [in Joyner v Weeks] often produces injustice. Lessees have been forced to pay for the full cost of repairs where buildings were to be demolished and the repairs would have no impact on the value of the lessor's interest'.[267]
201 The tenant's appeal in Tabcorp was dismissed. It was not necessary for the court to consider directly the nature and operation of the award in
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Joyner, because the foyer in Tabcorp needed to be rebuilt.268 However, the joint judgment of the High Court emphasised that the aim of damages is to put the plaintiff in the same situation as if the contract had been performed; it is not limited to putting the plaintiff in as good a financial position as if the contract had been performed.[269]
202 It may be that there is a conceptual distinction between (i) the
damages which would enable a plaintiff to obtain a close equivalent to the promised performance when performance is due, and (ii) a separate, alternative claim for recoverable, consequential financial losses suffered by a plaintiff. As Tipping J, then sitting in the New Zealand Court of Appeal, said of the former (ie (i)) in Maori Trustee v Rogross Farms Ltd:270
Damages in contract are designed to represent the monetary equivalent of the promised benefit which has not been provided ... That sum of money will ordinarily equate to the cost to the lessor of having the covenant performed.
203 In other words, when a promise to repair is made to a plaintiff then,
at the date of breach or threatened breach, the plaintiff is entitled to the performance of that promise. If specific performance or a mandatory injunction is not ordered to enforce performance then the plaintiff is ordinarily entitled to the reasonable cost of obtaining the promised performance as a substitute for obtaining that performance.[271]
204 It is not necessary in this case to consider the boundaries or extent of
any principle entitling a plaintiff to damages for the reasonable cost of obtaining a substitute for performance. And since Mr Pourzand intended to, and did, make major renovations to the ceilings it is not necessary to consider the boundaries of the decision in Joyner or the circumstances in which substantial damages will be available where a plaintiff has no intention to repair. It is sufficient to observe that it is established that a plaintiff can recover substantial damages for a breach of contract or covenant even in the absence of financial losses such as the absence of any payment, or prospective payment, by Mr Pourzand for the work done.
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205 A hypothetical example given by Lord Goff of Chieveley in Alfred McAlpine Construction Ltd v Panatown Ltd[272] (dissenting in the result, but joined in this reasoning on this point by Lord Millett;[273] and Lord Browne-Wilkinson assuming it to be true[274]) is instructive. Lord Goff spoke of a wealthy philanthropist who contracts for work to be done to the village hall. The work is defective. Can the philanthropist sue the builder, perhaps to obtain damages to repair the work? Lord Goff described as 'absurd' the suggestion the philanthropist will fail because he does not own the hall, and because he will not incur the expense himself of employing another builder to do the remedial work:
The philanthropist's cause of action does not depend on his having actually incurred financial expense … he 'has suffered loss because he did not receive the bargain for which he had contracted with the first builder'.
206 In Tabcorp, there were two qualifications placed by the High Court of Australia upon the availability of this award of the cost of obtaining promised performance. One of these was a possible issue of betterment.[275] That issue was not raised in this case.
207 The other exception is where the insistence by the plaintiff upon the
right to repair is 'unreasonable'. The High Court emphasised that this requirement is only to be established in fairly exceptional circumstances, citing the example of an owner who demolishes a building which is completed with new bricks instead of the promised second hand bricks.[276] The court explained that on one view of this narrow exception it would not be unreasonable to insist upon rebuilding a swimming pool, which was built to a depth of 6 feet rather than the required 7 foot 6 inches, but otherwise perfectly adequate.[277]
208 Although Telstra submitted, and I accept, that the replacement of the
ceilings by Mr Pourzand was not necessary this does not mean that the replacement was unreasonable within the narrow exception contemplated by the High Court of Australia.
209 I have concluded above that it was unreasonable for Mr Pourzand to
replace the ceilings without notice to Telstra or opportunity for Telstra to
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make its repairs. For the same reason, it might fairly have been argued that the replacement of the ceilings by Mr Pourzand, without giving Telstra any notice or opportunity to object, fell within the limited notion of unreasonableness in relation to this aspect of damages. But in the absence of submissions on this point it is not necessary to reach a conclusion on whether substantial damages would have been recoverable.
Conclusion
The plaintiffs' claims must be dismissed.
211 Underlying the Pourzands' claims against Telstra was a complaint of
opportunism. In one sense it is true that Telstra's conduct was opportunistic. At the same time that Telstra was trying to find a sub-tenant for the remainder of its tenancy, Telstra was also considering a business case to pay out the Pourzands for the remainder of the tenancy. By 25 August 2009, Mr Hutchings had prepared a draft business case recommending that Mr Pourzand be paid out the balance of the lease and be paid an amount in respect of the 'make good' obligations in the Lease.[278] The opportunism followed the 'great find' of Ms Zuvela concerning the work done by Mr Pourzand, the effect of which was that Telstra would be able to terminate the Lease and be relieved of its obligations to pay Mr Pourzand for the remainder of the Lease term.[279]
212 But opportunism requires opportunity. The conduct of the Pourzands
in tearing apart the leased Premises without the knowledge or consent of Telstra was also opportunistic. Telstra's personnel were not physically present on the leased floors of the Building. So Mr Pourzand seized on the absence of a continued presence of Telstra's personnel to make major renovations to those floors of the Building, whilst expecting Telstra to pay rent for the five month period of major renovations. It was this conduct which also destroyed Telstra's chance of sub-leasing its floors in the Building and which gave rise to Telstra's power to terminate. Mr Pourzand's claims must fail.
213 It remains to thank counsel and those instructing them in this trial.
Although the documentary material was voluminous, cross-examination was clear and crisp and submissions were clearly and cogently presented and of great assistance. The sensible manner in which the quantification
[2012] WASC 210
of damages was approached avoided the need for potentially lengthy
evidence and submissions on those issues.
[2012] WASC 210
EDELMAN J
ANNEXURE A: Exhibit 185, photo 35 - approximately 21 August 2009
[2012] WASC 210
EDELMAN J
ANNEXURE B: Exhibit 185, photo 27 - approximately 21 August 2009
[2012] WASC 210
EDELMAN J
ANNEXURE C: Exhibit 186, photo 1 - approximately 4 September 2009
[2012] WASC 210
EDELMAN J
ANNEXURE D: Exhibit 187, photo 1 - approximately 5 September 2009
[2012] WASC 210
EDELMAN J
ANNEXURE E: Exhibit 114, photo 5 - 10 September 2009
[2012] WASC 210
EDELMAN J
ANNEXURE F: Exhibit 196, photo 6 - approximately 16 December 2009
[3] Exhibit 3 cl 2.1, cl 2.2. Registered in accordance with the Transfer of Land Act 1893 (WA) as H494160.
exhibit 102 (MIL keys to Trevlac Access and Security Service Pty Ltd); exhibit 116 (300 FOB keys to Perth
Management Services on 18 August 2009).
[20] ts 395 (Mr Hutchings). [21] ts 399 (Mr Hutchings). [22] Exhibit C (witness statement of Mr Edwards) [20].
(Mr Hutchings).
[37] Exhibit G (witness statement of Ms Dean) [29] - [32].
[43] ts 355 (Ms Dean).
[44] ts 183 (Mr Pourzand); ts 227 (Ms Turner).
[45] Exhibit 140 [11].
[47] ts 440 (closing, Mr Davies SC).
[48] Exhibit J (witness statement of Mr Hutchings) [16].
[49] Exhibit J (witness statement of Mr Hutchings) [24].
[50] Exhibit J (witness statement of Mr Hutchings) [45].
[51] Exhibit J (witness statement of Mr Hutchings) [48].
[52] Exhibit J (witness statement of Mr Hutchings) [50].
[53] Exhibit J (witness statement of Mr Hutchings) [53].
[54] ts 416, 432 (Mr Hutchings).
[55] Exhibit J (witness statement of Mr Hutchings) [49].
[56] Exhibit J (witness statement of Mr Hutchings) [51].
[46] Plaintiffs written closing submissions [59].
[58] Exhibit J (witness statement of Mr Hutchings) [54].
[59] ts 433 (Mr Hutchings).
[60] ts 415 (Mr Hutchings).
[61] ts 434 (Mr Hutchings).
[62] ts 416 (Mr Hutchings).
[63] Plaintiffs' closing submissions, page 54 chronology [28].
[64] ts 396 (Mr Hutchings).
[57] ts 430 (Mr Hutchings).
[66] ts 417 (Mr Hutchings).
[67] ts 415 (Mr Hutchings).
[68] ts 415 (Mr Hutchings).
[69] ts 16 (counsel).
[65] Exhibit 99.
[71] ts 417 (Mr Hutchings).
[72] ts 417 (Mr Hutchings).
[73] ts 418 (Mr Hutchings).
[74] ts 429, 433 (Mr Hutchings).
[75] Exhibit J (witness statement of Mr Hutchings) [53] - [64].
[80] Exhibit J (witness statement of Mr Hutchings) [54].
[81] ts 415 (Mr Hutchings).
[70] ts 462 (counsel).
[76] ts 417 (Mr Hutchings). [77] ts 432 (Mr Hutchings). [78] ts 429 (Mr Hutchings). [79] ts 295 (Mr Vodesil).
82 Exhibit I (witness statement of Ms Zuvela) [1].
[83] Exhibit I (witness statement of Ms Zuvela) [3].
[84] ts 375 (Ms Zuvela).
[85] ts 376 (Ms Zuvela).
[86] Exhibit I (witness statement of Ms Zuvela) [25].
[87] Exhibit I (witness statement of Ms Zuvela) [26] - [27].
[88] Exhibit I (witness statement of Ms Zuvela) [28].
[89] Exhibit 114, photo 5.
[90] ts 402 (Mr Hutchings).
[92] Mr Slater was a 'minister without portfolio' within Telstra: ts 400 (Mr Hutchings).
[93] Exhibit 121.
[94] Exhibit 119.
[95] Re-Amended Defence [34(b)(i), (ii)]; Amended Reply [4(3)], [4(4)].
[96] See delivery date on Exhibit 111.
[97] Re-Amended Defence [34(b)(iii)]; Amended Reply [4(5)].
[91] ts 353 (Ms Dean).
[109] ts 93 (Mr Pourzand).
[110] Exhibit F (witness Statement of Mr Vodesil) [23].
[111] Exhibits 142 - 143, 145, 155, 162, 168.
[112] Exhibit 196, photos 8 - 10 and 15 - 25.
[113] Exhibit 157.
[114] Exhibit 152.
[115] Exhibit 156.
[116] ts 295 (Mr Vodesil).
[108] Exhibit 196, photo 6; see also exhibit E (affidavit of Mr Kendle) [13].
[118] Exhibit 169; ts 140 - 141 (Mr Pourzand).
[119] Exhibit 169, Annexure A, cl 15.
[120] Exhibit 169, Annexure A, cl 17 (2.5).
[121] ts 141 (Mr Pourzand).
[122] Exhibit H (witness statement of Mr Sinclair) [52].
[123] ts 142 (Mr Pourzand).
[117] ts 296 - 297 (Mr Vodesil).
[125] Exhibit G (witness statement of Ms Dean) [37] - [39]; exhibit I (witness statement of Ms Zuvela) [14] - [15].
[126] ts 180 - 181 (Mr Pourzand).
[127] ts 181 (Mr Pourzand).
[128] ts 79 (Mr Pourzand).
[124] Exhibit J (witness statement of Mr Hutchings) [65]; exhibit G (witness statement of Ms Dean) [40].
[130] ts 57 (Mr Pourzand).
[131] ts 81 (Mr Pourzand).
[132] ts 79, 84 - 85, 108, 118 - 120, 175, 202 (Mr Pourzand).
[133] ts 424 (Mr Hutchings); exhibit A (witness statement of Mr Pourzand) [84].
[134] ts 424 (Mr Hutchings); exhibit A (witness statement of Mr Pourzand) [84].
[135] ts 424 (Mr Hutchings); exhibit A (witness statement of Mr Pourzand) [85].
[136] ts 426 (Mr Hutchings); exhibit A (witness statement of Mr Pourzand) [88].
[137] ts 162 (Mr Pourzand).
[138] Exhibit 15.
[139] ts 165 (Mr Pourzand).
[140] Exhibit 18.
141 ts 169 (Mr Pourzand).
[142] ts 94 (Mr Pourzand).
[143] ts 151 - 152 (Mr Pourzand).
[129] Exhibit A (witness statement of Mr Pourzand) [77] - [86].
[145] ts 79 (Mr Pourzand).
[146] ts 461 (counsel).
[147] ts 17.
[144] Exhibit A (witness statement of Mr Pourzand) [82]; ts 78 (Mr Pourzand).
[149] Plaintiffs' written closing submissions [6], [219] - [220].
[150] ts 418 (Mr Hutchings).
[157] Exhibit 73.
[148] ts 462 (counsel).
[159] ts 195 (Mr Pourzand).
[160] Exhibit 184.
[161] ts 408 (Mr Hutchings).
[162] ts 246 (Mr Edwards).
[151] ts 424 (Mr Hutchings). [152] ts 423 (Mr Hutchings). [153] ts 428 (Mr Hutchings). [154] ts 434 (Mr Hutchings). [155] ts 434 (Mr Hutchings) [156] Amended Reply [10(2)]; Re-Amended Statement of Claim [76], sch 1.
[158] ts 405 (Mr Hutchings); exhibit 71.
[164] Plaintiffs' closing submissions, section J [219] - [220].
[163] ts 246 (Mr Edwards).
[165] Byrnes v Kendle [2011] HCA 26; (2011) 243 CLR 253 [24] - [30] (French CJ), [74] - [80] (Gummow &
Hayne JJ).
[166] Plaintiffs' opening submissions [160]; plaintiffs' closing submissions [217(8)], [219(4)].
[167] Re-Amended Statement of Claim [72].
[168] ts 28 (senior counsel for Telstra).
[169] ts 32 (counsel for the Pourzands accepting that no submission of attribution from Mr Edwards was made
beyond his role as a real estate agent).
[170] Permanent Mortgages Pty Ltd v Vandenbergh [2010] WASC 10; (2010) 41 WAR 353, 417 [321]
(Murphy J) and the authorities cited there. See also Permanent Trustee Australia Co Ltd v FAI General
Insurance Co Ltd [2001] NSWCA 20; (2001) 50 NSWLR 679, 698 (Handley JA).
[171] ts 244 (Mr Edwards). 172 ts 245 (Mr Edwards). 173 ts 245 (Mr Edwards). 174 ts 252 (Mr Edwards).
[175] Koompahtoo Local Aboriginal Land Council v Sanpine Pty Limited [2007] HCA 61; (2007) 233 CLR 115,
135 [44] (Gleeson CJ, Gummow, Heydon & Crennan JJ).
[176] Koompahtoo Local Aboriginal Land Council v Sanpine Pty Limited [2007] HCA 61; (2007) 233 CLR 115,
135 [44]; Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd [1989] HCA 23; (1989) 166 CLR 623,
634 (Mason CJ).
[177] Koompahtoo Local Aboriginal Land Council v Sanpine Pty Limited [2007] HCA 61; (2007) 233 CLR 115,
140 [54] - [55]; Decro-Wall International SA v Practitioners in Marketing Ltd [1971] 1 WLR 361, 380; [1971]
2 All ER 216, 232 (Buckley LJ).
[178] Koompahtoo Local Aboriginal Land Council v Sanpine Pty Limited [2007] HCA 61; (2007) 233 CLR 115,
140 [54].
[179] Koompahtoo Local Aboriginal Land Council v Sanpine Pty Limited [2007] HCA 61; (2007) 233 CLR 115,
140 [54].
[180] Apriaden Pty Ltd v Seacrest Pty Ltd [2005] VSCA 139; (2005) 12 VR 319, 321 - 322 [3] (Ormiston JA;
Batt JA agreeing).
[181] Progressive Mailing House Pty Ltd v Tabali Pty Ltd (1985) 157 CLR 17, 29 (Mason J); Byrnes v Jokona
Pty Ltd [2002] FCA 41 [59] (Allsop J); CMA Recycling Victoria Pty Ltd v Doubt Free Investments Pty Ltd
[2011] TASSC 71 [98] (Crawford CJ). Walsh [1969] SASR 34, 38 (Walters J). 183 Koompahtoo Local Aboriginal Land Council v Sanpine Pty Limited [2007] HCA 61; (2007) 233 CLR 115,
[182] Volley Investments Pty Ltd v Coles Myer Ltd [2005] WASCA 52 [12] (the Court); JC Berndt Pty Ltd v
135 - 136 [44].
[184] Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd [1989] HCA 23; (1989) 166 CLR 623,
657 - 658 (Deane & Dawson JJ).
[185] ts 162 (Mr Pourzand). 186 ts 162 (Mr Pourzand). 187 ts 162 (Mr Pourzand).
[188] Plaintiffs' closing submissions [222].
[189] Quoting Sanpine Ptd Ltd v Koompahtoo Local Aboriginal Land Council [2006] NSWCA 291 [103].
[190] Koompahtoo Local Aboriginal Land Council v Sanpine Pty Limited [2007] HCA 61; (2007) 233 CLR 115,
140 [56].
[192] Hawkesbury Nominees Pty Ltd v Battik Pty Ltd [2000] FCA 185 [37] (Hill J); Byrnes v Jokona Pty Ltd
[191] Re-Amended Defence [34](a); Re-Amended Reply [3].
[2002] FCA 41 [62] (Allsop J); Southwark LBC v Tanner [2001] 1 AC 1, 9 - 11 (Lord Hoffmann).
[193] Aussie Traveller Pty Ltd v Marklea Pty Ltd [1998] 1 Qd R 1, 10 - 11 (McPherson JA).
[194] Byrnes v Jokona Pty Ltd [2002] FCA 41 [64] (Allsop J).
[195] Aussie Traveller Pty Ltd v Marklea Pty Ltd [1997] 1 Qd R 1, 8 - 10 (McPherson JA); Hawkesbury
Nominees Pty Ltd v Battik Pty Ltd [2000] FCA 185 [39] (Hill J).
[196] Jenkins v Jackson (1888) 40 Ch D 71, 74 (Kekewich J); Southwark LBC v Tanner [2001] 1 AC 1, 10
(Lord Hoffmann). (Lord Hoffmann). 198 Koompahtoo Local Aboriginal Land Council v Sanpine Pty Limited [2007] HCA 61; (2007) 233 CLR 115.
[197] Kenny v Preen [1963] 1 QB 499, 511 (Pearson LJ); Southwark LBC v Tanner [2001] 1 AC 1, 10
[199] Koompahtoo Local Aboriginal Land Council v Sanpine Pty Limited [2007] HCA 61; (2007) 233 CLR 115,
140 [54].
[200] Todburn Pty Ltd v Taormina International Pty Ltd (1990) Butterworths Property Reports 11,173, 11,176
(Powell J); Hawkesbury Nominees Pty Ltd v Battik Pty Ltd [2000] FCA 185 [66] (Hill J); Byrnes v Jokona Pty
Ltd [2002] FCA 41 [70] (Allsop J).
[201] Ankar Pty Ltd v National Westminster Finance (Australia) Ltd [1987] HCA 15; (1987) 162 CLR 549,
556 - 557 (Mason ACJ, Wilson, Brennan & Dawson JJ); Attorney-General of Botswana v Aussie Diamond
Products Pty Ltd [No 3] [2010] WASC 141 [228] (Murphy J).
[202] Koompahtoo Local Aboriginal Land Council v Sanpine Pty Limited [2007] HCA 61; (2007) 233 CLR 115,
139 [50]. See Treitel The Law of Contract (11th ed, 2003) 797; Peel (ed) Treitel's Law of Contract (12th ed,
2007), 890. See now Peel (ed) Treitel's Law of Contract (13th ed, 2011) 884.
[203] Byrnes v Jokona Pty Ltd [2002] FCA 41 [68] (Allsop J).
[204] Re-Amended Statement of Claim [73A]; Re-Amended Defence [69A].
[205] ts 355 (Ms Dean).
[206] Koompahtoo Local Aboriginal Land Council v Sanpine Pty Limited [2007] HCA 61; (2007) 233 CLR 115,
140 [54].
39 (Herring CJ); Wood Factory Pty Ltd v Kiritos Pty Ltd (1985) 2 NSWLR 105, 128 (Priestley JA).
[207] Buchanan v Byrnes [1906] HCA 21; (1906) 3 CLR 704, 713 (Griffith CJ). Parsons v Payne [1945] VLR 34,
[208] Re-Amended Defence [44(b)]; Plaintiffs' closing submissions [95].
[209] Re-Amended Defence [44(c)].
[210] Moore v Western Australia [1907] HCA 56; (1907) 5 CLR 326, 334 (Griffith CJ); Wood Factory Pty Ltd v
Kiritos Pty Ltd (1985) 2 NSWLR 105, 133 (Priestley JA).
[211] Re-Amended Statement of Claim [76(2)].
[212] Plaintiffs' closing submissions [231].
[213] Plaintiffs' closing submissions [232].
214 Plaintiffs' closing submissions [245].
[215] Exhibit 3.
[216] Scott v Irom [1968] HCA 24; (1968) 121 CLR 247, 255.
[218] Graystone Property Investments Ltd v Margulies (1983) 47 P & CR 472.
[219] Baier v Heinemann [1962] Qd R 192, 199.
[217] Scott v Irom [1968] HCA 24; (1968) 121 CLR 247, 261.
[220] ts 185 (Mr Pourzand).
[221] Wilson v McDonald [2009] WASCA 39; (2009) 253 ALR 560, 566 [25] (Martin CJ; Wheeler JA &
Beech AJA agreeing).
[222] Wilson v McDonald [2009] WASCA 39; (2009) 253 ALR 560, 566 [25].
[223] Halliday v Nevill (1984) 155 CLR 1, 6 (Gibbs CJ, Mason, Wilson & Deane JJ); Wilson v McDonald [2009]
WASCA 39; (2009) 253 ALR 560, 566 [25].
[224] Re-Amended Defence [15(d)], [102(c)].
[226] Exhibit G (witness statement Ms Dean) [40].
[227] Exhibit I (witness statement of Ms Zuvela) [18].
[228] Exhibit I (witness statement of Ms Zuvela) [19] - [23].
[229] Exhibit I (witness statement of Ms Zuvela) [17].
[230] Exhibit I (witness statement of Ms Zuvela) [21] - [22].
[225] ts 175 (Mr Pourzand).
[232] Exhibit E (affidavit of Mr Kendle) [10] - [12].
[233] Exhibit H (witness statement of Mr Sinclair) [29] - [30].
[234] Exhibit H (witness statement of Mr Sinclair) [24] - [30].
[231] Exhibit H (witness statement of Mr Sinclair) [49] - [50].
[236] Plaintiffs' closing submissions [248].
[237] ts 249 (Mr Edwards).
[238] Exhibit H (witness statement of Mr Sinclair) [32].
[239] ts 174 (Mr Pourzand).
[240] ts 424 (Mr Hutchings).
[241] ts 425 (Mr Hutchings).
[242] Exhibit J (witness statement of Mr Hutchings) [54].
[243] Exhibit J (witness statement of Mr Hutchings) [62].
[244] Exhibit J (witness statement of Mr Hutchings) [63].
[235] Exhibit H (witness statement of Mr Sinclair) [42].
[245] Graham v The Markets Hotel Pty Ltd [1943] HCA 8; (1943) 67 CLR 567, 585 (Starke J). See also
Anstruther-Gough-Calthorpe v McOscar [1924] 1 KB 716, 729 (Scrutton LJ); Lurcott v Wakely [1911] 1 KB
905, 921 (Fletcher Moulton LJ).
[246] Exhibit D (witness statement of Mr Foster) [59].
[247] Defendant's Re-amended Defence [102(e)]; closing submissions of the defendant [138].
[248] Exhibit F (witness statement of Mr Vodesil) [22]. Nothing turns upon the incorrect addition in the invoice,
slightly undercharging Mr Pourzand.
[249] Exhibit F (witness statement of Mr Vodesil) [35].
[250] ts 281 (Mr Vodesil).
[251] ts 282 (Mr Vodesil).
[252] ts 283 (Mr Vodesil).
[253] ts 283 (Mr Vodesil).
[254] ts 287 (Mr Vodesil).
[255] ts 283 (Mr Vodesil).
[256] ts 285 (Mr Vodesil).
[257] ts 283 (Mr Vodesil).
[258] Joyner v Weeks [1891] 2 QB 31.
[259] Joyner v Weeks [1891] 2 QB 31, 43.
[260] Joyner v Weeks [1891] 2 QB 31, 48.
[262] Graham v The Markets Hotel Pty Ltd [1943] HCA 8; (1943) 67 CLR 567.
[263] Graham v The Markets Hotel Pty Ltd [1943] HCA 8; (1943) 67 CLR 567, 576 (Barwick KC).
[264] Graham v The Markets Hotel Pty Ltd [1943] HCA 8; (1943) 67 CLR 567, 582.
[265] Graham v The Markets Hotel Pty Ltd [1943] HCA 8; (1943) 67 CLR 567, 588.
[266] Tabcorp Holdings Ltd v Bowen Investments Pty Ltd [2009] HCA 8; (2009) 236 CLR 272.
[267] Tabcorp Holdings Ltd v Bowen Investments Pty Ltd [2009] HCA 8; (2009) 236 CLR 272, 274 – 275.
268 Tabcorp Holdings Ltd v Bowen Investments Pty Ltd [2009] HCA 8; (2009) 236 CLR 272, 289 [19].
[261] Inderwick v Leech (1885) 1 TLR 484, 484 (Cave J); Rawlings v Morgan (1865) 18 CB (NS) 776.
[269] Tabcorp Holdings Ltd v Bowen Investments Pty Ltd [2009] HCA 8; (2009) 236 CLR 272, 286 [13]. 270 Maori Trustee v Rogross Farms Ltd [1994] 3 NZLR 410, 418 - 419. See also B Coote Contract as
Assumption (2010), ch 8, especially pages 143 - 146.
[271] 'Generally speaking, the performance obtained following an order for specific performance is also a substitute
for actual performance because the performance is rendered late': D Winterton and F Wilmot-Smith 'Steering a
course on contract damages and failure of consideration' (2012) 128 LQR 23, 27.
Alfred McAlpine Construction Ltd v Panatown Ltd
Alfred McAlpine Construction Ltd v Panatown Ltd
Tabcorp Holdings Ltd v Bowen Investments Pty Ltd
[276] Tabcorp Holdings Ltd v Bowen Investments Pty Ltd [2009] HCA 8; (2009) 236 CLR 272, 288 [17];
[272] Alfred McAlpine Construction Ltd v Panatown Ltd [2001] 1 AC 518, 547. [273] [2001] 1 AC 518, 587. [274] [2001] 1 AC 518, 577. [275] [2009] HCA 8; (2009) 236 CLR 272, 291 [25].
Bellgrove v Eldridge (1954) 90 CLR 613, 618 (the Court).
[277] Tabcorp Holdings Ltd v Bowen Investments Pty Ltd [2009] HCA 8; (2009) 236 CLR 272, 289 [18] Ruxley
Electronics & Construction Ltd v Forsyth [1996] AC 344.
[278] ts 417 (Mr Hutchings).
[279] Despite Ms Dean's assertion about her subjective understanding of these words this is their objective
meaning. But I do accept Ms Dean's evidence that the actions of Mr Pourzand ruined Telstra's chances of
subleasing the premises: ts 355.
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