R L & I G Howard v Hotel Investments Pty Limited
[1990] TASSC 76
•19 December 1990
Serial No 75/1990
List "A"
COURT: SUPREME COURT OF TASMANIA (FULL COURT)
CITATION: R L & I G Howard v Hotel Investments Pty Limited [1990] TASSC 76; A75/1990
PARTIES: HOWARD, R L
HOWARD, I G
v
HOTEL INVESTMENTS PTY LIMITED
FILE NO/S: FCA 60/1990
JUDGMENT
DELIVERED ON: 19 December 1990
DELIVERED AT: Hobart
JUDGMENT OF: Cox, Underwood and Zeeman JJ
Judgment Number: A75/1990
Number of paragraphs: 26
Serial No 75/1990
List "A"
File No FCA 60/1990
R L & I G HOWARD v HOTEL INVESTMENTS PTY LIMITED
REASONS FOR JUDGMENT FULL COURT
COX J
UNDERWOOD J
ZEEMAN J
19 December 1990
Orders of the Court
Appeal allowed in part.
Judgment for the respondent for $3,212.48 set aside.
Order that judgment be entered for the respondent in the sum of $2,412.48.
Serial No 75/1990
List "A"
File No FCA 60/1990
R L & I G HOWARD v HOTEL INVESTMENTS PTY LIMITED
REASONS FOR JUDGMENT FULL COURT
COX J
19 December 1990
I agree with the reasons for judgment prepared by Zeeman J. which I have had the advantage of perusing.
File No FCA 60/1990
R L & I G HOWARD v HOTEL INVESTMENTS PTY LIMITED
REASONS FOR JUDGMENT FULL COURT
UNDERWOOD J
19 December 1990
I have read and agree with the reasons for judgment of Zeeman J. There is nothing I wish to add.
File No FCA 60/1990
R L & I G HOWARD v HOTEL INVESTMENTS PTY LIMITED
REASONS FOR JUDGMENT FULL COURT
ZEEMAN J
19 December 1990
By a deed expressed to have been made on 27 November 1983 the respondent demised unto the appellants the licensed premises known as "The Star and Garter Hotel" at New Norfolk for a term of three years commencing on 1 November 1983. On 28 August 1986 the parties entered into an agreement whereby (inter alia) the appellants agreed to sell and the respondent agreed to purchase certain plant and equipment and stock–in–trade used in connection with those licensed premises. Whilst the agreement is silent on the matter, it may be inferred from its terms that delivery of the personalty the subject of its provisions was to occur upon the expiration of the term of the lease so that the respondent would then be in the position of obtaining possession of the premises as a going concern.
The appellants commenced proceedings in the Court of Requests at Hobart claiming the unpaid balance of the purchase moneys payable under the agreement in respect of the stock. The respondent defended that action and counterclaimed for arrears of rent and damages flowing from alleged breaches of certain of the covenants contained in the lease. The amount claimed in the counterclaim exceeded the limit of the jurisdiction of the Court of Requests and accordingly the action was transferred to this court. The learned trial judge found for the appellants on their claim in the sum of $3,735.20 and found for the respondent on the counterclaim in the sum of $6,947.68. It appears that it was ordered that those amounts be set off against one another. In the net result judgment was entered for the respondent against the appellants in the sum of $3,212.48, being the difference between the two awards.
Certain of the conclusions reached by the learned trial judge on the counterclaim are challenged on this appeal. The amount allowed on the counterclaim was summarized by his Honour as comprising the following items:
Rental due $5,082.68
Repair glass and windows 1,065.00
Repair sewerage drain 800.00
$6,947.68
Each of those items has been challenged by the appellants.
I deal firstly with the claim for rent. The relevant provisions of the lease are in the following terms:
"3 On the First day of November, 1984 and thereafter on the First day of November of each and every successive year during the currency of this Agreement the rental hereby reserved shall be reviewed and shall thereafter be such annual rental (payable in manner aforesaid) as the parties hereto may mutually agree upon or, in default of agreement, as shall be determined in the manner provided in the next succeeding clause provided always that the revised rental shall not be less than that of the proceeding twelve month period.
4 In the event of the parties being unable to agree to the increase in rental for each year then and in such case the rental shall be increased by the percentage by which the Consumer Price Index for Hobart published by the Commonwealth Statistician shall have risen in Hobart for the previous year."
It was common ground before the learned trial judge that throughout the term of the lease the appellants paid rent at the rate of $34,320.00 per annum. The rent payable under the lease in respect of the first year of the term thereof was $34,320.00 and it was this amount which was to be reviewed in accordance with clauses 3 and 4. The rent claimed by the counterclaim, the whole of which was allowed by the learned trial judge, represented the additional rent payable in respect of the second and third years of the term of the lease if the formula provided for in clause 4 applied so as to increase the rent on and from each of the first days of November 1984 and 1985, less an amount in respect of the period 1 January 1986 to 31 October 1986 which was abandoned by the respondent at the trial.
The argument put for the appellants raises the question of the proper construction of clauses 3 and 4 of the lease. Essentially that argument was that those clauses required there to be an actual attempt at reaching agreement on the rent payable for a year commencing on the first day of November as a condition precedent to the operation of the formula contained in clause 4. The argument proceeded that as neither of the parties had made any attempt to agree upon a new rent the formula did not operate. In my view, such a construction is not reasonably open. A determination of annual rent in the manner provided for in clause 4 is expressed to arise "in default of agreement". The effect of clause 3 must be that if on, or at least by, the first day of November in any year the rent payable in respect of the period of twelve months commencing on that day has not been agreed upon, then there is, within the meaning of clause 3, a default of agreement. Once there is such a default of agreement, the lease in its terms operates to fix the rent for the relevant period. I do not consider that the words "being unable to agree" can reasonably be construed as derogating from that construction. The meaning of the clauses is clear and unambiguous. In those circumstances, I do not consider it necessary to consider the various rules of construction referred to by counsel for the appellants which only arise, if at all, in the case of ambiguity. The conclusions of the learned trial judge as to the proper construction of the rent variation provisions contained in the lease were plainly right.
I deal next with the matter referred to as the sewerage drain claim. As pleaded, this was a claim by the respondents for damages for breach of a covenant contained in the lease on the part of the appellants. The notice of appeal asserts that the learned trial judge was wrong in finding that the appellants were liable to rectify the damage to the sewerage drain under the terms of the lease.
In dealing with the various allegations made on the pleadings as to breaches of covenant on the part of the appellants, the learned trial judge said:
"It is common ground that the plaintiffs did not have any obligation to put the premises in repair but had an obligation to yield up the premises in good and tenantable repair, fair wear and tear excepted. I make the following findings in respect of the allegations of the plaintiffs' breaches of that covenant as they have been particularised in the counterclaim."
After dealing with other alleged breaches, his Honour dealt with the alleged breach relating to the sewerage drain, in respect of which he said:
"I am satisfied that this damage occurred during the tenancy and that it could not be characterised as fair wear and tear. I have no reason not to find that the amount of $800 charged by the contractor was reasonable."
It appears from that that the learned trial judge found as a fact that the appellants had been in breach of the lessee's covenant contained in the lease whereby the appellants covenanted with the respondent in the following terms:
"at the expiration or other sooner determination of the term hereby granted to yield up possession of the demised premises to the Lessor in good and tenantable repair order and condition in accordance with the covenants hereinbefore contained ...."
With respect, his Honour's conclusion that there was a breach of this covenant in relation to the sewerage drain finds no support in the evidence. It is clear that the appellants remained in possession as lessees under the lease until the expiration of the term thereof, namely 31 October 1986. It is also clear from the evidence that the work required to remedy any defect in the sewerage drain was effected long before the expiration of the lease. I note that Mr Gardner's account relating to the carrying out of that remedial work (which was in evidence before the learned trial judge) is dated 23 April 1986.
It appears that the respondent was relying upon quite a different covenant, namely one whereby the appellants covenanted with the respondent "to keep ... the drains pipes and water apparatus ... in at least the same state of repair as the same are now in fair wear and tear and damage by fire storm flood tempest acts of the Queen's enemies or other act of God only excepted". I note that both covenants were relied upon in the pleadings. However, the evidence did not disclose a breach of this latter covenant. It appears to have been common ground between the parties upon the trial of this action that so soon as the defect in the sewerage drain occurred, the appellants retained a plumber to investigate the problem which had arisen. Having obtained a report from that plumber as to the remedial work required, the first named appellant then spoke to Mr Binny, a director of the respondent. There was evidence from Mr Binny that during that conversation Mr Howard expressed an inability to pay for the remedial work, whereupon it was agreed that the work would be done; that Mr Binny or the respondent would pay the costs thereof; and that the appellants would reimburse Mr Binny or the respondent at some time in the future. The evidence suggests that the appellants disputed the proposition that they were to reimburse the amount paid to have the sewerage drain repaired but otherwise what Mr Binny said on this matter appears to be undisputed. The learned trial judge did not make any specific findings of fact on this question. It is unnecessary to resolve any questions of fact relating to this matter for the purposes of this appeal. On one version, so soon as the requirement to repair the sewerage drain became apparent, Mr Binny agreed to pay for the necessary works. On another version, he agreed to pay for those works, but upon the basis that he was making the payment at the request of and for the benefit of the appellants and that they would reimburse him in due course. On either view of the facts, there was no breach of any obligation on the part of the appellants to keep the sewer drain in repair. The appellants may or may not have become liable to reimburse the respondent in the sum of $800.00. However, if such a liability arose, it could only have arisen upon the basis of money paid. No question of the breach of any covenant arose. No claim for money paid was pleaded, and no application was made to the court for leave to make any amendment to the pleadings.
It might be thought unsatisfactory to deal with this part of the counterclaim in this way. It would appear to leave available to the respondent a further cause of action against the appellants capable of being pursued in fresh proceedings. However, having regard to the way in which the case was conducted before the learned trial judge and to the pleadings upon which the trial proceeded an amendment to the pleadings at this stage would inevitably require a further hearing on this issue.
It follows that the sum of $800.00 allowed as part of the counterclaim cannot stand as there was no evidence upon which the learned trial judge could have found that the appellants were in breach of any covenant in relation to the sewerage drain.
The final matter related to the claim in relation to broken windows. It was not argued that the appellants were not in breach of a covenant in the lease which, prima facie, gave rise to an entitlement on the part of the respondent to the damages awarded by the learned trial judge under this head. However, the appellants argue that an estoppel arose. That is the only basis upon which the findings of the learned trial judge on this part of the counterclaim are attacked.
The relevant principles were stated by Brennan J. in The Commonwealth v Verwayen (1990) 95 ALR 321, at p340 in the following terms:
"Estoppel by representation of a fact (estoppel in pais) precludes a party who, by his representation, has induced another party to adopt or accept the fact and thereby to act to the other party's detriment from asserting a right inconsistent with the fact on which the other party acted ... Equitable estoppel or, as I prefer to call it, an equity arising by estoppel precludes a party who, by a promise, has induced another party to rely on the promise and thereby to act to his detriment from resiling from the promise without avoiding the detriment ... An estoppel, whether in pais or arising in equity, in binding so soon as it is acted on to the detriment of the other party."
For present purposes, it may be assumed that the representations relied upon were as described by the first appellant in evidence. He said that on an occasion two or three weeks prior to the expiration of the lease builders retained by the respondent arrived at the hotel wishing to commence works. Mr Howard refused admission to the builders and they duly left. He said that later that day he received a telephone call from Mr Binny. Initially Mr Howard persisted with his refusal to permit access to the builders until the expiration of the lease. Mr Howard then continued:
"And he explained the difficulties it would create for him and a new lessee coming in. And I said, 'Well, I've got some work to be done on the hotel prior to leaving at the end of my lease'. He said, 'Don't worry about that. Let it go because I am going to pull the guts out of the place and if you let them in, I'll forget about the work'. And I said, 'I would have to have that in writing because I don't trust you'. He said, 'I'm at the airport ready to board a plane overseas and I haven't got a fucking carrier pigeon to send the contract over'. And I said, 'Well, if that's the problem you are having and the new lessees will have, I will allow you in, but I will probably live to regret it', or some such thing."
Mr Howard then went on to describe the work which he understood he was required to do prior to leaving the premises, which included replacing windows. As it transpired, the works carried out by the respondent were such that the windows still required replacement.
Counsel for the appellants argued that the representation made by Mr Binny was one that the respondent would not enforce the covenant to keep in repair if the appellants permitted access to the respondent's builder and permitted the builder to proceed with the works prior to the expiration of the lease. He further submitted that the detriment suffered by the appellants was in permitting the respondent's builder to enter the premises and carry out works, although it became clear that the real detriment alleged was a downturn in business as a result of the dislocation occasioned whilst the building works were being carried out.
That argument overlooks the fact that by refusing access the appellants were in breach of the agreement of 28 August 1986 which contained a provision whereby the appellants covenanted with the respondent that they would allow the respondent "to undertake and effect all renovations and/or alterations to the premises known as 'The Star and Garter Hotel' from the date hereof until the 1st day of November, 1986". There was no suggestion other than that the builders who arrived at the premises, and to whom the first appellant refused access, were there for the purposes referred to in this covenant. The first appellant was in breach of that covenant by refusing access. Mr Binny did no more than persuade Mr Howard that he should comply with that covenant.
It cannot be said that the appellants suffered a detriment in permitting the respondent's builder to enter the premises to carry out works. They were under a contractual obligation to permit this. The learned trial judge expressed the view that the covenant contained in the agreement ought to be read down "so that the plaintiffs' right to possession and their right to trade until the end of the term were preserved". There is no reason to suppose that the permission granted by Mr Howard to Mr Binny during their telephone discussion ought not to be read down in the same way and that in that sense, the appellants agreed to do no more than what they were contractually bound to do.
The learned trial judge expressed the following conclusion:
"The evidence might be capable of showing that the work undertaken by the defendant caused a falling off in trade but it has not been shown that that falling off in trade was caused by work done by the defendant which would not have been authorised by the clause."
That conclusion was not really challenged by counsel for the appellants during argument. An examination of the evidence suggests that that conclusion cannot be challenged. The evidence as to the effect of the building works was sketchy to say the least, and certainly not such as to enable a finding to be made that what was in fact done by the builders during the relatively short period that the appellants remained in possession of the premises went beyond that which was authorised by the agreement of 28 August 1986.
I would respectfully agree with what the learned trial judge said in relation to this portion of the counterclaim.
In the result, the appeal succeeds to the extent of $800.00 so that for the sum of $3,212.48 awarded to the respondent there should be substituted the sum of $2,412.48.
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