RIHSF Pty Ltd v Bhullar Steel Distribution Pty Ltd

[2018] NSWDC 72

District Court

New South Wales

Medium Neutral Citation:

RIHSF Pty Ltd v Bhullar Steel Distribution Pty Ltd [2018] NSWDC 72

Hearing dates:

7 November 2017-10 November 2017; 8 February 2018

Date of orders:

28 March 2018

Decision date:

28 March 2018

Jurisdiction:

Civil

Before:

Dicker SC DCJ

Decision:

(1) Judgment for the plaintiffs against the first defendant on the Amended Statement of Claim;
(2) Judgment for the plaintiffs/cross–defendants on the Cross-Claim. The Cross-Claim is dismissed.
(3) Judgment for the second defendant in relation to the Amended Statement of Claim. The Amended Statement of Claim is dismissed against the second defendant.
(4) The first defendant is to pay the plaintiffs’ costs of the proceedings as agreed or assessed (excluding any costs of the plaintiffs relating to the claim against the second defendant).
(5) The plaintiffs are to pay the second defendant's costs of the proceedings as agreed or assessed.
(6) Liberty to apply within 14 days to vary the costs orders in (4) and (5) above.
(7) The parties are to bring in Short Minutes of Order within seven days in relation to the amount to be awarded against the first defendant in the Amended Statement of Claim including any interest.
(8) The exhibits are to be returned after 28 days.

Catchwords:

Leases-factory dealing with steel products-obligations on lessor concerning condition of cranes in factory at the time of commencement of lease - ongoing obligations on the lessee in relation to the maintenance and repair of cranes at factory - covenant to repair - covenant to make good - obligation to pay rent and whether defendant breached obligation - condition of premises leased upon vacant possession – whether make good obligation breached

 

Leases – holding over - whether lease varied-whether new lease entered into - terms of alleged varied and/or new lease

 

Guarantee - whether guarantee continues during holding over period of lease - whether guarantee continues during a variation of the original lease or a new lease

  Misleading or deceptive conduct - whether misleading conduct as to age of a crane installed at the leased premises - whether reliance – whether other misleading conduct

Legislation Cited:

Australian Consumer Law (Cth)

Cases Cited:

Alcatel Australia Ltd v Scarcella (1998) 44 NSWLR 349
Ankar Pty Ltd v National Westminster Finance (Australia) Ltd [1987] HCA 15; (1987) 162 CLR 549
Barecall Pty Ltd v Hoban [2009] NSWSC 1104
Barecall Pty Ltd v Hoban [2010] NSWCA 269
Caltex Australia Petroleum Pty Ltd v Troost [2015] NSWCA 64
Chan v Cresden (1989) 168 CLR 242
Crabtree Vickers Pty Ltd v Australian Direct Mail & Addressing Co Pty Ltd (1975) 133 CLR 72
Dasreef Pty Ltd v Hawchar (2011) 243 CLR 588
Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31
Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd [2017] HCA 12
Electricity Generation Corporation v Woodside Energy Ltd [2014] HCA 7; (2014) 251 CLR 640
Fabcot Pty Ltd v Port Macquarie Hastings Council [2011] NSWCA 167
Farrow Mortgage Services Pty Ltd (in liquidation) v Slade and Nelson (1996) 38 NSWLR 636
Haros v Linfox Aust Pty Ltd [2012] FCAFC 42
Henville v Walker (2001) 206 CLR 459
Kyluk Pty Ltd v Chief Executive, Office of Environment and Heritage [2013] NSWCCA 114
OXS Pty Ltd v Sydney Harbour Foreshore Authority [2016] NSWCA 120
Pozetu Pty Ltd Alexander James Pty Ltd [2016] NSWCA 208
Taub v R [2017] NSWCCA 198
Williams Group Australia Pty Ltd v Crocker [2016] NSWCA 265

Category:

Principal judgment

Parties:

RIHSF Pty Ltd (First Plaintiff)
DMHSF Pty Ltd (Second Plaintiff)
Bhullar Steel Distribution Pty Ltd (First Defendant)
Ranjit Singh (Second Defendant)

Representation:

Counsel:
E White (Plaintiffs)
D Parish (Defendants)

  Solicitors:
Coleman Greig Lawyers (Plaintiffs)
Matthews Dooley & Gibson (Defendants)

File Number(s):

2015/00375505

Judgment

1. These proceedings relate to the obligations of a lessor and lessee concerning premises leased in 2009 at Victoria Street, Smithfield in Sydney in the State of New South Wales. The plaintiffs, who are the lessors and registered proprietors of the premises leased, bring proceedings for the recovery of rent said to be outstanding and for damages for the alleged failure by the lessee to comply with a make good obligation under the lease.

2. The first defendant is the lessee under the lease entered into by the parties in 2009. The second defendant, Mr Ranjit Singh, is the guarantor under the lease entered into in 2009. He guaranteed the obligations of the first defendant, Bhullar Steel Distribution Pty Ltd (“BSD”) under the 2009 lease.

3. The first defendant has brought a Cross-Claim alleging:

1. A breach of the 2009 lease by the plaintiffs;

2. Misleading or deceptive conduct by the plaintiffs; and

3. A breach of a subsequent agreement alleged to have been entered into in 2013 to create a new lease and/or the continuation of the existing lease. The Cross-Claim seeks $299,889.38 for breach of the lease, loss of profits, additional labour and administration costs, business interruption costs and insurance premiums and access charges.

4. The plaintiffs deny any liability under the Cross-Claim. The defendants deny any liability under the lease and the Amended Statement of Claim.

5. There are substantial factual disputes between the parties. In particular, there are major factual disputes between the accounts of the representatives of the plaintiffs and the first defendant. The relevant representative of the plaintiffs was a director of the first plaintiff, RIHSF Pty Ltd, Mr Robert Hancock. The relevant representative of the first defendant, BSD, was Mr Michael Bhullar, its General Manager. A resolution of these factual matters is central to a determination of the issues in dispute between the parties.

6. There are also a number of expert issues which need to be determined in relation to the two cranes installed at the factory prior to the lease commencing. The parties have relied on a number of expert reports including a conclave report between the plaintiffs' expert, Mr Peter Spry, and the defendants' expert, Mr Paul Corazzol.

The pleadings

Amended Statement of Claim

7. An Amended Statement of Claim was filed by the plaintiffs on 18 April 2016.

8. In this pleading, the plaintiffs plead that rent is outstanding by the first defendant under a lease between the parties entered into in 2009 (“the Lease") as allegedly extended in January 2014, in the sum of $98,946.98. It is pleaded that the second defendant who guaranteed the obligations of the first defendant under the Lease is also liable for this sum pursuant to the guarantee.

9. The plaintiffs additionally plead that the first defendant failed to comply with its make good obligations and maintenance obligations under Articles 7 and 10 of the Lease upon giving vacant possession. It is alleged that as a result, rectification works were required to be completed by the plaintiffs to return the leased property (“the Premises”) to the condition it was in at the commencement of the Lease. It is said that both defendants are liable for these additional costs.

Amended Defence

10. An Amended Defence was filed by the defendants on 16 June 2016.

11. The defendants dispute any liability under the Lease as pleaded by the plaintiffs on the following bases:

1. It is pleaded that the Lease was not extended as alleged by the plaintiffs but a new lease was entered into in about December 2013 and that a document signed by the parties entitled “Continuation of Lease Agreement” dated 15 January 2014 only records some of the matters that were agreed between the parties;

2. It is alleged by the defendants that the plaintiffs agreed to obtain rectification at their expense (including the carrying out of any required repairs) of the five tonne crane at the Premises. It is also alleged that the plaintiffs agreed to install at their expense a fire exit (including staircase and doorway);

3. Whilst the first defendant agrees that it has not paid the three payments of rent referred to in paragraph 9 of the Amended Statement of Claim, it says that the plaintiffs breached the Lease by failing to obtain recertification of the five tonne crane, failing to install a fire exit in the Premises as agreed or at all and making a misleading or deceptive representation that the 10 tonne crane forming part of the Premises leased was less than 10 years old;

4. The defendants dispute the terms of either the amended Lease or the alleged second lease. In particular, it is asserted that there was no obligation in the second lease to comply with the maintenance obligations or make good obligations and in any case, that the first defendant carried out all such works as were notified by the plaintiffs to the first defendant with certain limited exceptions;

5. In the alternative, it is alleged that the make good obligations applied to the condition of the Premises and equipment as at the date of commencement of the second lease being 15 January 2014;

6. The defendants also state that no guarantee was given by the second defendant or any other person in relation to the second lease or in relation to the Lease beyond its term and any extension thereof by exercise of the option.

Cross-Claim

12. A Cross-Claim was filed by the first defendant on 22 January 2016.

13. In summary, the Cross-Claim alleges:

1. That it was a term and condition of the Lease that the cranes installed at the Premises were to be in good working order at the commencement date of the Lease and that the plaintiffs would at their expense commission a report in respect of the cranes and carry out any repairs or maintenance as the report may state as being required to bring the cranes into good working order/condition (paragraph 6);

2. The plaintiffs allegedly breached that obligation under the Lease;

3. There is alleged to have been a breach of a representation that the two cranes at the Premises would be upon commencement of the Lease, in good working order which was not the case;

4. The first defendant alleges that neither crane was ever in good working order and there had been significant interruptions to the first defendant's business by virtue of the cranes breaking down and otherwise performing below their capability;

5. The breach of the representation made was said to be a breach of s 18 of the Australian Consumer Law (“ACL”);

6. It is said that the Continuation of the Lease Agreement only continued some of the matters agreed between the parties and that the matters agreed were breached by the plaintiffs by failing to obtain recertification of the five tonne crane and by failing to install a fire exit;

7. It is also alleged that a representation by Mr Hancock on behalf of the plaintiffs that the 10 tonne crane was less than 10 years old was wrong and was misleading or deceptive.

14. As stated above, the first defendant seeks damages for breach of lease and misleading or deceptive conduct in the sum of $299,889.38.

Defence to Cross-Claim

15. A Defence to Cross-Claim has been filed by the defendants on 24 March 2016.

16. The plaintiffs deny the allegations in the Cross-Claim and in summary plead:

1. The plaintiffs commissioned a report from Demag, the manufacturer of the cranes, prior to the Lease and engaged Demag to carry out repairs to both cranes prior to the Lease;

2. That the two cranes were in good working order at the commencement of the Lease;

3. That the two cranes were regularly serviced by Demag at the instruction of the plaintiffs prior to the first defendant's occupation of the premises;

4. That the first defendant was negligent in ensuring regular service and maintenance of the two cranes throughout the term of the Lease;

5. That the entirety of the agreement between the parties is in the document entitled Continuation of Lease Agreement signed 22 January 2014.

Factual background

17. It is useful to set out a general factual background to the dealings between the parties which have led to these proceedings. Unless otherwise indicated, the following represent my factual findings.

18. From 1982 to 1986, Robert Hancock, the director of the first plaintiff, and his brother operated a business from premises at Riverstone in New South Wales under the name Epic Forge and Davis Engineering.

19. In 1986 the two brothers purchased the Premises. The Premises were then purchased from the two brothers by the plaintiffs in 2008. Between 1986 and 2009 the existing businesses were operated from the Premises and traded under the name of Epitech Pty Ltd (“Epitech”).

20. At the time of purchase in 1986 of the Premises, there were installed on the Premises a five tonne crane and a 10 tonne crane. In his oral evidence, Mr Hancock expressed the belief, based on the fact he had been operating a nearby business since 1979, that the cranes were installed in about 1982 when the warehouse at the Premises was constructed by the previous owner. Later evidence suggests the cranes may have been manufactured in 1975.

21. The first defendant, BSD, conducts a steel distribution and steel processing business and has done so since August 2006. Mr Rajit Singh, the second defendant, is the sole director and shareholder of BSD. Mr Michael Bhullar, his son, is the General Manager of BSD and has been so since August 2006.

22. In January 2007, Epitech purchased and had Demag, a crane company, install, a new crane hoist to replace the crane hoist of the 10 tonne crane installed at the Premises. Other parts of the 10 tonne crane were not replaced at this time.

23. In late 2007 or early 2008 the plaintiffs were incorporated and registered.

24. In the period from August 2009 to November 2009, there were negotiations between the plaintiffs represented by their agent LJ Hooker and the first defendant represented by Mr Bhullar in relation to a lease by the first defendant of the Premises. On about 8 September 2009, a signed application to lease, signed heads of agreement and a deposit was received from BSD.

25. There were also negotiations in relation to the provisions to be included in the proposed lease.

The Lease

26. On or about 13 November 2009, the Lease was executed by the parties being the plaintiffs and the first defendant for the lease of the Premises. The term of the Lease was three years commencing on 1 December 2009 and terminating on 30 November 2012 with an option to renew for a period of three years commencing on 1 December 2012.

27. The Lease incorporated Annexure A which is the Reference Schedule referred to in the Memorandum filed at the Land and Property Information Office and bearing number 7795727 as referred to on the first page of the Lease. The approved use of the Premises was steel processing and fabrication. There was a guarantor under the Lease who was the second defendant.

28. Clause 10(h) and Clause 11 of the Reference Schedule provided as follows:

“10(h) The Lessee must at its cost undertake throughout the term of the Lease and any holding over or renewal, a maintenance programme (the 'Maintenance Programme") for the Building, Land and Premises as follows:

i. lawns and gardens to be mowed, weeded and properly attended to on a fortnightly basis;

ii. overhead crane to be regularly serviced in accordance with Australian Standards under a service contract that the Lessee must enter with Demag or with any other highly experienced and fully insured overhead crane maintenance and repair company as is first approved by the Lessors (such approval not to be unreasonably withheld);

iii. fire hose reels, extinguishers, illuminated exit signs and emergency lighting to be maintained on a six monthly basis and to be repaired and put in order so as to pass the annual fire safety audit and certification;

iv. air conditioning units to be serviced, maintained, and if required then repaired on a quarterly basis and by a highly experienced and fully insured air conditioning contractor, and

v. roller shutter doors to be serviced and repaired on an annual basis.”

…

“11. The Lessors agree that the overhead cranes installed at the Premises are to be in good working order on the commencing date of this Lease in 2009 and the Lessors will at their expense commission a report on those cranes from an independent crane engineer concerning the working condition of those cranes and the Lessors will also promptly and at the cost of the Lessors, carry out any repairs or maintenance as the report may state as being required to bring the cranes into good working order/condition. This clause 11 is not to appear in any renewal of this Lease.”

29. Relevant parts of the Memorandum lodged at the Land and Property Information Office included the following:

ARTICLE 1: INTERPRETATION

In this Instrument and any lease or sub-lease incorporating this Memorandum unless repugnant to the context or the contrary intention appears:-

"the Lessor" means and includes the Lessor his, her or its successors and assigns and, where the context permits, his, her or its servants and agents;

"the Lessee" means and includes the Lessee and, if a natural person or persons, his, her or their respective executors, administrators and permitted assigns, and if a corporation, its successors and permitted assigns and, where not repugnant to the context, the licensees, invitees, servants and agents of the Lessee.

…

ARTICLE 3: RENT

The Lessee expressly covenants with the Lessor that:

3.01 The Lessee must during the whole of the term of the Lease as set out in the Reference Schedule forming part of the Lease pay to the Lessor without any prior demand therefor free of exchange, exclusive of GST and without any deductions or abatements in each year the annual rental (as set out in the Reference Schedule forming part of the Lease) payable by equal consecutive calendar periodical instalments as nominated in the Lease in advance and which shall become payable and be paid by the Lessee to the Lessor on or prior to the day of commencement of the- Lease and thereafter on the same day or date of each and every following nominated period.

…

ARTICLE 7: MAINTENANCE REPAIRS ALTERATIONS ETC

The Lessee further covenants with the Lessor that:

7.01 Notwithstanding any consents or directions given by the Lessor the Lessee will at all times during the term and any holding over well and sufficiently repair maintain amend and keep the demised premises and all landlord's fixtures fittings furnishings plant machinery and equipment therein in good and substantial repair, working order and condition (having regard to the conditions thereof at the commencement of the Lease) and damage by fire, lightning, storm, tempest, act of God, war damage and fair wear and tear only excepted save where any insurance moneys are irrecoverable through the act, neglect, default or misconduct of the Lessee

7.02 The Lessee will at the expiration or sooner determination of the Lease peaceably surrender and yield up unto the Lessor the demised premises and the fixtures, fittings, furnishings, plant, machinery and equipment therein of the Lessor in good and substantial repair, working order and condition in all respects (having regard to the condition thereof at the commencement of the Lease) and clean and free from rubbish, (damage by fire, lightning, storm, tempest, act of God, war damage and fair wear and tear only excepted). The Lessee will ensure that all fittings for electric light bulbs, tubes and globes are fitted with same and are in good working order and condition,

7.03 Without limiting or affecting the generality of the preceding sub-articles of this Article the Lessee must at its own expense during the term:

(i) so often as the Lessor may reasonably require but at intervals of not less than three (3) years paint, colour, treat with oil and cover with materials and to standards reasonably determined by the Lessor such, part or parts of the demised premises which have or ought to be painted, coloured, treated with oil or covered respectively

(ii) cause the demised premises to be kept clean and free from dirt and rubbish and in particular store and keep all trash refuse and garbage in proper receptacles and arrange for the regular removal thereof from the demised premises;

(iii) keep and maintain clean and in good order and repair and condition all its fittings fixtures plant furnishings and equipment;

(iv) from time to time make good any breakage defect or damage to the demised premises or any part thereof or to any adjacent or adjoining building or any facility or appurtenance thereof occasioned by want of care misuse or abuse on the part of the Lessee or the Lessee's servants, agents, contractors or sub-contractors, sub-tenants or other persons other than the Lessor or persons under the control of the Lessor or otherwise occasioned by any breach or default of the Lessee hereunder or by any other cause other than where directly caused by the Lessor or persons under the control of the Lessor;

…

(viii) upon vacating the demised premises or immediately prior thereto to return all keys to the demised premises to the Lessor and at the request of the Lessor remove any signs, names, advertisements or notices erected, painted, displayed, affixed or exhibited upon to or within the demised premises and make good any damage and disfigurement caused by reason of such erection, painting, displaying, affixing, exhibiting or removal thereof.

(ix) Keep and maintain in good order and repair and condition any air conditioning plant or equipment (whether of the Lessor or the Lessee) as maybe installed in the demised in the demised premises.

(x) Replace and renew all globes, fluorescent tubes, tap washers and fittings, and fire exit signs in the premises as require from time to time replacement or renewal.

…

ARTICLE 9: COVENANTS BY THE LESSOR AND RESPONSIBILITIES OF LESSEE

The Lessor covenants with the Lessee that:

9.01 The Lessee paying the rent hereby reserved and duly and punctually observing and performing the covenants obligations and provisions in the Lease on the part of the Lessee to be observed and performed may peaceably possess and enjoy the demised premises for the term hereby granted without any interruption or disturbance from the Lessor or any other person or persons lawfully claiming by from or under the Lessor except as otherwise herein provided.

9.02 The Lessee may at or prior to the expiration of the Lease take remove and carry away from the demised premises all fixtures, fittings, plant, equipment or other articles upon the demised premises in the nature of trade or tenants' fixtures brought upon the demised premises by the Lessee but the Lessee shall in such removal do no damage to the demised premises or shall forthwith make good any damage which the Lessee may occasion thereto and the Lessee must remove all rubbish and shall leave the demised premises in a clean state and condition. In the event that the Lessee does not remove and carry away such fixtures and fittings, plant, equipment or other articles at or prior to the expiration of the Lease the Lessor may at the expense of the Lessee remove and dispose of the same and any such fixtures, fittings, plant, equipment or other articles not removed by the Lessee by that date shall become the property of the Lessor.

9.03: Should the Lessee continue to occupy the demised premises after the expiration or sooner determination of the term of the Lease with the consent of the Lessor the Lessee will become a monthly tenant only of the Lessor at a monthly rental equivalent to a monthly proportion of 105% of the total annual rental and other moneys payable by the Lessee hereunder at the expiration or sooner determination of such term (as adjusted pursuant to the provisions of the Lease) payable monthly in advance and otherwise on the same terms and conditions mutatis mutandis as those herein contained so far as applicable, such tenancy being determinable at the will of either the Lessor or the Lessee by one (1) month's notice in writing expiring at any time.

9.04 If the Lessee vacates the premises whether with or without the Lessor’s consent then the Lessor must take all responsible steps to mitigate its loss and where reasonably practical to endeavour to re-lease the premises at a reasonable rent and on reasonable terms. However the conduct of the Lessor taken in pursuance of this duty to mitigate damages is not of itself to constitute acceptance of any breach or repudiation by the Lessee or of any surrender by operation of law.

…

ARTICLE 10: DEFAULT, TERMINATION

The Lessor and Lessee covenant and agree that:

…

10.03 Without prejudice to the rights powers and remedies of the Lessor otherwise provided for under the Lease, the Lessee must pay to the Lessor interest at the rate of thirteen per centum (13%) per annum (or at such other interest rate as may be set out in the Reference Schedule forming part of the Lease) on any moneys due but unpaid for fourteen (14) days by the Lessee to the Lessor on any account whatsoever pursuant to the Lease such interest to be computed from the due date for the payment of the moneys in respect of which the interest is chargeable until payment of such moneys in full and to be recoverable in like manner as rent in arrears and with the Lessee acknowledging that the interest does represent a genuine pre-estimate of the Lessors loss flowing from a breach of the Lease by the Lessee.

…

11.06 The covenants, provisions, terms and agreements included herein either expressly or by statutory implication cover and comprise the whole of the agreement between the Lessor and the Lessee and the Lessor and Lessee expressly agree and declare that no further or other covenants, agreements, provisions or terms whether in respect of the demised premises or otherwise shall be deemed to be implied herein or to arise between the Lessor and the Lessee by way of collateral or other agreement or by way of condition precedent by reason of any promise, representation, warranty or undertaking given or made by either party to the other on or prior to the execution hereof and if necessary to effectuate the aforesaid any such implication or collateral or other agreement is hereby negative.

…

ARTICLE 12: GUARANTEE

This Lease is granted by the Lessor to the Lessee at the request of the Guarantors (more fully described in the Reference Schedule forming part of the Lease) AND in consideration of the Lessor entering into this Lease at the request of the Guarantors the Guarantors for themselves, their executors, administrators and assigns HEREBY EXPRESSLY GUARANTEE to the Lessor that

(i) They are and remain Jointly and severally liable for the due and punctual payment of all moneys hereby covenanted or agreed to be paid and the due and punctual performance, observance and fulfilment by the Lessee of all the covenants, terms, provisions and conditions herein contained or implied and on the part of the Lessee to be performed, observed and fulfilled;

(ii) They hereby jointly and severally indemnify the Lessor and agree at all times hereafter to keep the Lessor indemnified from and against all damages and all costs, losses and expenses which the Lessor may suffer or incur consequent upon or arising directly or indirectly out of any breach or non-observance by the Lessee of any of the covenants, terms, provisions or conditions AND remain liable to the Lessor under this indemnity notwithstanding that as a consequence of such breach or non-observance the Lessor has exercised any of its rights hereunder including Its rights of re-entry and notwithstanding that the Lessee (being a corporation) may be wound-up or (being a natural person) may be declared bankrupt and notwithstanding that the guarantee hereby given may for any reason whatsoever be unenforceable either in whole or in part;

(iii) The liability of the Guarantors hereunder is not affected by the granting of time or other Indulgence or concessions to the Lessee or by the compounding, compromise, release, abandonment, waiver, variation, relinquishment or renewal of any of the rights of the Lessor against the Lessee or by any neglect or omission to enforce such rights or by any other act, matter or thing which under the law relating to sureties would or might but for this provision release the Guarantors from their obligations hereunder or any thereof;

(iv) The guarantee and indemnity hereby given are to continue and are to remain in full force and effect until the due performance, observance and fulfilment by the Lessee of all the covenants, terms, provisions and conditions on the part Lessee to be performed, observed and fulfilled In accordance with the terms hereof;

(v) If the Lease contains an option for a further Lease and the Lessee exercises such option the Lessor's obligation to grant such Lease subject to the Guarantors guaranteeing the Lessee's obligations under such Lease and indemnifying the Lessor in respect thereof in the terms of the guarantees and indemnities contained in this Article;

(vi) They jointly and severally must pay all moneys hereby paid immediately upon the receipt by the guarantors of notice in writing from the Lessor that the Lessee has defaulted for more than seven (7) days in the payment thereof and to hold the Lessor indemnified against all losses, damages, expenses and costs which the Lessor may incur by reason of any breach or default on the part of the Lessee under its covenants and obligations contained in the Lease and in any such further Lease;

(vii) This guarantee is to continue in full force and effect notwithstanding the early termination or expiry of the term of the Lease and notwithstanding any disclaimer of the Lease by any liquidator of the Lessee;

(viii) The Guarantors must not prove or claim in any liquidation, composition, arrangement or assignment for the Lessee, until the Lessor has received one hundred cents in the dollar in respect of any monies due, owing or payable by the Lessee to the Lessor, and the guarantors will hold in trust for the Lessor any such proof and claim and any dividend received on it.

(ix) The Guarantors jointly and severally agree to indemnify and keep indemnified the Lessor against all claims direct or indirect, sustained or incurred by the Lessor consequent upon any disclaimer of this Lease by any liquidator of the Lessee for the residue of the Lease term which would have remained if there had been no such disclaimer.

(x) The rights, remedies and recourse of the Lessor against the Guarantors and each of them are not affected by the death, bankruptcy, disability, infancy, winding up, scheme or arrangement, reduction of capital, capital reconstruction or the appointment of a Receiver and/or Manager for the Lessee or any Guarantor and further are not affected by the fact that one or more of the persons named in this Lease as a Guarantor may never execute this Lease as Guarantor or that the execution of this Lease by any one or more of the Guarantors is or may become unenforceable, void or voidable.

(xi) If the Lessor's entitlements in this Lease or in the land (or both) are transferred or assigned to any person or persons then the benefit of this Guarantee and the indemnities extends to the Transferee or Assignee and the benefit of this guarantee and indemnity shall continue to enure concurrently for the benefit of the Lessor notwithstanding any such transfer or assignment.

(xii) The Guarantors acknowledge their obligation to the Lessor to guarantee any renewal of this Lease and to grant indemnities, all in the form of this Article 12.

…

ARTICLE 15 - YIELDING UP

In the event that the Lessee fails to leave the demised premises in a good and tenantable state of repair having regard to their condition as at the commencement of the Lease then the Lessor may repair the demised premises so as to bring them up to a good and tenantable state of repair and recover the costs thereof from the Lessee together with an amount equal to such rents and other amounts which the Lessor would have been entitled to receive from the Lessee had the period within which such repair is carried out by the Lessor been added to the term of this Lease. The Lessor's rights and remedies hereunder are in addition to and are not to be construed in limiting or in any way affecting all its other rights and remedies against the Lessee as a result of the Lessee's failure to leave the demised premises in a good and tenantable state of repair.

30. In relation to Clause 10(h) of the Reference Schedule concerning crane maintenance and repair, although the plaintiffs pressed for Demag to be the company undertaking crane maintenance as this had been the company used by the plaintiffs for servicing the cranes prior to the Lease, in due course Mr Hancock, on behalf of the plaintiffs, approved Austfurn Services Sydney Pty Ltd (“Austfurn”) as the first defendant's crane repair and maintenance company under the Lease: Exhibit A (“CB”) 1/126.

The Demag Reports

31. On 30 October 2009, a representative from Demag undertook an inspection of the two cranes at the Premises and completed a “Periodical Service Report” for each crane both dated 22 October 2009. These considered various aspects of the two cranes. The contact in the Epitech company was stated in the Reports to be Rod Parker. Most aspects of the two cranes were said to be “OK”. Some aspects were stated to require repairs. It appears that these repairs were completed by Demag on or about 10 November 2009 as reflected in a “Service Job” report dated 20 November 2009. This document appears to have been signed off by Mr Robert Hancock. It is noted that certain repairs were undertaken to both cranes and the Service Job document includes the following notation: “No outstanding repairs as of 20.11.09”. A tax invoice was sent by Demag to Epitech dated 27 November 2009 apparently setting out the work undertaken and the parts repaired and/or replaced. The invoice was in the sum of $6,266.81: CB 1/140. The plaintiffs assert that the Periodical Service Report documents and the other material which has been set out satisfy the obligation of the plaintiffs as lessors referred to in Clause 11 of the Reference Schedule which I have set out above.

32. As indicated above, the Lease commenced on 1 December 2009: CB 1/44.

33. The evidence shows that various repairs were undertaken to the cranes at various stages of the Lease by the first defendant. These were usually in response to breakdowns, it appears from the documents.

34. On 14 January 2010, following issues raised by Mr Bhullar with the cranes, there was a discussion between Mr Bhullar of the first defendant and representatives of Demag in relation to the cranes. Mr Bhullar sent an email to Mr Hancock on 14 January 2010 to the following effect:

“I had the meeting with Demag and they suggested that the drag in [is] normal and the reason I raised the question is because the crane we had worked with didn't have any drag without load and some drag with load.

But anyway cranes are fine and I don't think there is any need to make them come to the site, unless you want to have a work [word] for your satisfaction.”

35. Mr Bhullar had earlier set out issues that he wanted Demag to look at in relation to the cranes in an email dated 22 December 2009 which he had forwarded to Mr Hancock.

36. It seems that in August 2010 the first defendant had the first service completed in relation to the cranes. On 30 August 2010 Mr Bhullar sent an email to Mr Hancock stating as follows: “We just had the our [sic] first service completed and there are a few areas of concern. I'm yet to discuss it further with the technician so as to what needs immediate attention and what constitutes normal wear and tear." The email attached two documents entitled “Condition Report” in relation to the two cranes from the Austfurn Group and which referred to “faults” with the cranes.

37. On or about 30 March 2011, the first defendant through Mr Bhullar forwarded a document to Mr Hancock apparently after the second service on the cranes. The email stated relevantly as follows:

“I've asked my crane mechanic to compile a report after second service on the cranes. Please find it attached. Also there are few issues which were from the date we moved in and need attention. As you can see I have asked for professional opinion on the wear and tear of the cranes and recommendations are attached.”

38. The document included a covering letter from Austfurn with a detailed one page document referring to problems with the cranes.

39. The document also expressed opinions from Austfurn as to whether the items requiring repair or monitoring were “pre-existing faults” or not. It seems that the February 2011 service report is at pages 503–504 of Exhibit RIH-3 to the affidavit of Mr Hancock sworn 25 November 2016. This document notes as its description “6 monthly Aug Feb”.

40. Mr Bhullar in his affidavit claims that he had conversations with Mr Hancock in relation to the alleged continual delay on the part of the plaintiffs in supplying the first defendant with a “condition report” from Demag in accordance with Clause 11 of the Reference Schedule to the Lease. This is disputed by Mr Hancock.

41. Later conversations alleged to have occurred in December 2011 and January 2012 as asserted by Mr Bhullar are also denied by Mr Hancock in his affidavits. However, it seems to be clear that the issue relating to the condition of the cranes remained constant from at least late 2011 coinciding with requests from the plaintiffs for evidence of the repair and maintenance of the cranes as required under Clause 10(h) of the Reference Schedule to the Lease. In April 2012, Mr Hancock asserts that Mr Bhullar provided him with invoices for work done on the cranes between January and April 2012.

42. On 15 May 2012, there was an important meeting at the Premises between Mr Bhullar, Mr Hancock and a representative from Austfurn, the first defendant's crane maintainer. What occurred at that meeting is disputed. However, it seems that at the meeting both Mr Bhullar and Mr Hancock disputed each party's obligations under the Lease. At the end of the meeting, the Austfurn document referring to repairs was signed by both gentlemen: CB 1/163. Mr Hancock states that they agreed to divide the estimated cost of the repairs of $9,000 in half. Mr Bhullar claims that Mr Hancock said that each should put in half and “we will worry about the other repairs later”. Mr Hancock denies that.

43. There appears to have been ongoing verbal complaints about the cranes according to Mr Bhullar, although these are not reflected, it is alleged by the plaintiffs, in email correspondence.

44. On 30 November 2012, the term of the Lease expired and the first defendant BDS held over on a month-to-month basis as contemplated under the Lease: see Article 9.03. Mr Bhullar claims in his affidavit that BDS did not exercise the option to renew, as he was concerned about the condition of the cranes and the offices forming part of the Premises including that the offices did not have a fire exit. Mr Hancock disputes this, and says that the Lease was not renewed because of a downturn in the steel market and refers to an email from Mr Bhullar to him dated 7 January 2013 which states: “I have discussed with my father and looking at the market, we can continue the lease till June with either party to terminate the lease with three months' notice from end of the month. If the market picks up then we will be able to extend the Lease for longer duration after June”: CB 1/167.

45. At about this time, Mr Bhullar pressed for the provision of a 10 year inspection report in relation to the cranes and asserted that it was mandatory to have the reports done on the cranes every 10 years. Mr Hancock countered this by pressing for evidence of repairs being completed to the cranes particularly those agreed in May 2012 when the parties had apparently split the cost of the repairs as to $4,500 each: CB 1/179.

46. Somewhat earlier, in response to Mr Bhullar's requests for proof of the 10 year inspection, Mr Hancock had stated to Mr Bhullar in an email dated 15 August 2013: “The Good news is that the 10 tonne crane is less than 10 years old (Purchased in Jan 2007), so don't require the inspection”: CB 1/374. This is alleged by the defendants to constitute misleading or deceptive because it is accepted by the plaintiffs that only the hoist part of the 10 tonne crane was replaced in 2007 not the entirety of the crane itself.

Continuation of Lease Agreement

47. After extensive negotiations, a document on the letterhead of the plaintiffs was signed by both parties. Excluding a rental schedule, the document was as follows:

This agreement dated 15th January 2014 is to document a verbal agreement between RIHSF Pty Ltd & DMHSF Pty Ltd and Bhullar Steel Distribution Pty Ltd (Bhullar) to extend the existing lease number AF131465T dated 11th November 2009 for a further period as documented below.

1. RIHSF Pty Ltd & DMHSF Pty Ltd and Bhullar agree to extend the lease to 30th March 2015.

2. Notice to quit shall be in writing by either party is 3 months with the earliest notice to quit date 31st December 2014.

3. During November 2014 Bhullar will advise their intention in writing to extend the lease or their intention to exercise the option to quit.

4. RIHSF Pty Ltd & DMHSF Pty Ltd will provide a rental discount over calendar year 2014 of $18,000, subject to point 6 below.

5. Rental in January 2015 will continue without the discount

6. Unpaid excess water consumption of $5000 will be applied as a reduction of the rental discount at $833.33 per month from January 2014 to June 2014

7. All future excess water consumption will be invoiced.

…

Signed on this day: 22-01-2014

RIHSF PTY LTD & DMHSF PTY LTD

[signed]

R.I. HANCOCK

BHULLAR STEEL DISTRIBUTIONS PTY LTD

[signed]

M. BHULLAR

48. The plaintiffs assert that this amounted to an amendment to the existing Lease and constituted an extension of the term of the Lease to 30 March 2015. It is also asserted that the second defendant, Mr Singh, remained liable for the obligations under the amendment under his guarantee in the Lease.

49. The first defendant, through Mr Bhullar, claims that the document does not set out all of the agreements between the parties and refers to the matters allegedly discussed in paragraphs 52-56 of his affidavit. The conversations set out in those paragraphs are denied by Mr Hancock in his affidavits.

50. There appears to have been continued disputes about the cranes between the parties including a meeting between Mr Bhullar, Mr Hancock and representatives of Demag on 22 October 2015.

51. From 11 November 2015, there appears to have been claims by the plaintiffs for the payment of rental arrears with assertions by Mr Bhullar that he would deduct the cost of crane repairs from the rental arrears claimed.

52. On 9 December 2015, the plaintiffs entered into a Contract for Sale of the Premises. On 10 December 2015, a notice was issued from the plaintiffs to the first defendant terminating the Lease.

53. There then occurred a number of interactions between the parties in relation to make good obligations. It is asserted by the plaintiffs that the first defendant did not comply with its make good obligations leaving the Premises dirty, filled with rubbish, leaving items which required disposal and other items needing repairs.

54. On or about 21 March 2016, the first defendant vacated the Premises. There is a substantial dispute between the parties as to the condition of the Premises on the date of vacation.

The issues in the proceedings

55. The parties are agreed in relation to the issues in the proceedings. They were set out in a document which was handed up to the court and they are as follows:

Amended Statement of Claim

1. What is the amount of outstanding rent?

2. What was the status of the tenancy between the plaintiffs and the defendant after 30 November 2012? In particular:

a.. Did the occupancy after 1 December 2012 constitute:

i. a new lease on the same terms as the original lease (the Lease) or

ii. a continuation of the Lease?

iii. a tenancy at will at common law?

b. In respect of the Continuation of Lease Agreement dated 14 January 2014:

i. Was it valid at all insofar as it contradicted the Lease document?

ii. Could it constitute a variation or continuation of the Lease when the Lease had expired on 30 November 2012?

3. Based on the answer to the above questions, did the guarantee contained in the Lease given by the second defendant survive the termination of the Lease by the effluxion of time on 30 November 2012?

4. What were the maintenance and make good obligations of the first defendant?

5. Did the first defendant breach those maintenance and make good obligations, and the make good request?

6. If the answer to question 5 is yes, what are the damages?

Cross Claim

7. Did the plaintiffs/cross-defendants commission a report on the cranes from an independent crane engineer concerning the working of those cranes?

8. Were the cranes in good working order at the commencement date of the Lease on 1 December 2009?

9. Did the plaintiffs/cross-defendants engage in misleading and deceptive conduct about the state of the cranes as being in good working order?

10. Did the Continuation of Lease Agreement contain oral terms and if so what were those terms?

11. Did the plaintiffs/cross-defendants engage in misleading and deceptive conduct in representing that the 10 tonne crane was less than 10 years old and did not require recertification?

12. If any of the answers lead to the conclusion that the plaintiffs/cross-defendants have breached section 18 of the Australian Consumer Law or a term of the Lease or Continuation of Lease Agreement:

a. Did those breaches cause damage?

b. What is the quantum of those damages?

Evidence for the plaintiffs

Evidence of Mr Robert Hancock

56. The plaintiffs read three affidavits from Mr Robert Hancock sworn 23 March 2016, 15 July 2016 and 25 November 2016, respectively. The later affidavits have extensive exhibits of documents and correspondence.

57. In his first affidavit sworn 23 March 2016, Mr Hancock essentially annexes the important documents in the case being the Lease and the Continuation of Lease Agreement dated 15 January 2014 apparently purporting to extend the Lease to 30 March 2015. He also provides evidence of the notice terminating the Lease served by the plaintiffs on the first defendant. Evidence is given in relation to the delay in the first defendant vacating the Premises and the assertion by Mr Bhullar on or about 18 March 2016, that the first defendant was still “cleaning up the building. We will restore the lights, paint and clean”.

58. Mr Hancock gives evidence about attending the Premises on 21 March 2016 and conducting an inspection with his wife Mrs Hancock and Ms Dogra who he describes as Rose Bhullar, who is Mr Bhullar’s de facto partner. He states that he saw plenty of rubbish and materials still on the floor of the Premises. Mr Hancock gives evidence that the first defendant vacated the Premises on 21 March 2016. He also gives evidence of rental money in the sum of $98,946.98 which he asserts is outstanding from the first defendant to the plaintiffs. He annexes to his affidavit a schedule (CB 1/90) setting out the amount outstanding.

59. The second affidavit of Mr Hancock was sworn 15 July 2016. In this affidavit, Mr Hancock gives the background to the businesses run by he and his brother and their various corporate entities and the purchase in 1986 of the Premises which were eventually transferred from the two brothers to Epitech and then to the plaintiffs. In paragraph 8 of the second affidavit, Mr Hancock states that in around January 2007 Epitech purchased and had Demag install a new crane hoist to replace the 10 tonne crane hoist in the Premises. There is an issue between the parties as to whether this in effect was a replacement of the 10 tonne crane. The plaintiffs say it was and the defendants say it was not.

60. Mr Hancock notes in his affidavit that between 1982 and 2009, the plaintiffs and Epitech and the two Hancock brothers maintained a crane service contract primarily with Demag (the full name of which is MHE-Demag Australia Pty Ltd) apart from the period between 1998 and 2000 when it was given to another entity. Mr Hancock gives evidence that Demag conducted a routine service of the cranes each quarter and that any non-routine maintenance requirements were documented on a service report. Mr Hancock notes that it was the practice of the management of the business to approve the Demag recommended repairs to maintain reliability and reduce risks of accident.

61. Mr Hancock gives the background to the negotiations concerning the Lease and exhibits email chains for this period. He refers to the signing of the Lease and the provision prior to commencement of the Lease of an inspection and report on the cranes by Demag on Epitech's instructions. He refers to the 30 October 2009 Demag Periodical Service Reports which identified the need for several repairs which he annexes to his affidavit and states that these were completed by 20 November 2009 at a cost of $5,697 plus GST which was paid by Epitech.

62. In paragraphs 20 and following of his second affidavit, Mr Hancock refers to dealings with Mr Bhullar of the first defendant in relation to issues concerning the cranes and the provision by the first defendant of inspection reports under Clause 10(h) of the Lease. These inspection reports have already been referred to above. Mr Hancock notes in paragraphs 21 and 22 of his affidavit that the first inspection report obtained by the first defendant from Ausfurn occurred nine months after the first defendant took occupancy of the Premises and the second report occurred some 15 months after the first defendant took occupancy of the Premises. He annexes those reports to his second affidavit.

63. Mr Hancock gives his versions of the 15 May 2012 meeting between Mr Bhullar and Andrew, a representative from Austfurn, the subsequent discounting of the plaintiffs’ rent for June-August 2012 by $1,500 per month (paragraph 29) and correspondence between himself and Mr Bhullar relating to Mr Bhullar’s request for a “10 yearly crane inspection report”. Mr Hancock refers to correspondence between him and Mr Bhullar in which Mr Bhullar sought the 10 yearly crane inspection report and he sought evidence that the repairs to the crane as agreed on 15 May 2012 had been completed by the first defendant.

64. Mr Hancock notes in his second affidavit that for the 18 month period between 22 January 2014 and 29 July 2015, he has no records or recollections of communications with the first defendant other than him seeking the payment of outstanding rent.

65. Mr Hancock refers to a meeting on 22 October 2015 with representatives of Demag in an attempt to reach some resolution in relation to the issues concerning the cranes. He then gives the background in paragraph 40 and following of his second affidavit to demands on the first defendant to pay rent and the events leading up to the termination of the leasehold arrangements with the first defendant by the issuing of a notice to quit. In paragraph 48 of his affidavit, Mr Hancock sets out in some detail the steps which he took on behalf of the plaintiffs to complete cleaning and apparent make good works under the Lease for which the plaintiffs received an invoice in the sum of $3,513.60 plus GST. Other expenses incurred by the plaintiffs are also referred to in this paragraph. Mr Hancock annexes to his second affidavit a copy of a report from Westside Industrial Property dated 1 December 2009 to which he has added his comments in relation to the condition of the Premises when the first defendant vacated supporting the need for the extra make good works.

66. Mr Hancock's third affidavit dated 25 November 2016 is very detailed. Two exhibits to the affidavit, being Exhibits RIH-2 and RIH-3, are large bundles of documents to which he refers in the affidavit.

67. It is unnecessary for the purposes of this judgment to set out in detail the contents of this affidavit. In the affidavit Mr Hancock responds to the affidavits of Mr Bhullar, Ms Dogra and Mr Singh. In relation to the affidavits of Mr Bhullar and Ms Dogra, Mr Hancock disputes virtually all conversations referred to in those affidavits. I have already referred to some of the more significant differences in general terms above.

68. More important matters noted in Mr Hancock's third affidavit are as follows:

1. It has been his habit to make file notes of business-related phone conversations whilst talking on the phone and to retain those file notes on file (paragraph 6);

2. The two cranes located at the Premises were in the period 1986 to 2009 used to unload two tonne bundles of steel wire and rod coming into the factory and to move bins and were typically used with loads less than 2 tonnes in weight with usage being infrequent and usually limited to less than two hours per day for each crane;

3. The hardcopy company records of Epitech have been destroyed and Mr Hancock has restored an electronic backup of the MYOB accounting package used by Epitech up until December 2009 to print transactions between Epitech and Demag from May 2007 to November 2009 which were completed by Demag including regular quarterly services by Demag on the cranes in that period (paragraphs 9-10);

4. Mr Hancock approved the first defendant's nominated crane company Austfurn in October 2009 and informed the plaintiffs’ agent of this. It is not in dispute that Austfurn was the approved company to service and maintain the cranes whilst the first defendant was in possession of the Premises;

5. Mr Hancock observed from time to time the operations of the first defendant and these included steel fabrication of very heavy steel girders used for bridges with most of the raw materials being heavy steel plate (paragraph 12);

6. An email from Mr Bhullar dated 10 December 2012 was the first occasion that Mr Bhullar had sought a 10 year crane inspection report. Mr Hancock gives evidence that he was not aware that such reports were required;

7. Mr Hancock concedes that on 15 August 2013 he had a meeting with Mr Bhullar and subsequently sent an email of that date in which he confirmed that the 10 tonne crane “is less than 10 years old (purchase Jan 2007), so does not require inspection”. Mr Hancock states that by this statement he meant that the main working part of the 10 tonne crane, the hoist, was less than 10 years old (paragraph 20);

8. Says that the payments under the Lease were never brought up to date by the first defendant in the period 15 August 2013 until the termination of the Lease in March 2016;

9. The matter of a major inspection of the cranes was not raised again by Mr Bhullar until some two years later in July 2015;

10. After it commenced occupation, the first defendant provided to Mr Hancock the service and maintenance records it carried out for the cranes in emails dated 30 August 2010, 8 March 2011, 15 February 2012 and in an email from Mr Corazzol of Austfurn dated 9 July 2013 (paragraph 26). The plaintiffs assert that the maintenance and repairs were not carried out in accordance with the Lease and the first defendant failed to undertake the repairs identified by Austfurn in their various reports;

11. After termination of the Lease on 21 March 2016 Mr Hancock says that he visually inspected the two cranes and took photographs of them which he exhibits to his affidavit;

12. After vacation of the premises Mr Hancock had Demag undertake an inspection and report on the cranes which documents he annexes to his affidavit.

69. Mr Hancock was cross-examined by counsel for the defendants. Mr Hancock was asked questions in relation to the invoice which Exafast Pty Ltd forwarded to the plaintiffs which is at page 149 of Exhibit RIH-1 to Mr Hancock's second affidavit. This invoice relates to work allegedly undertaken in making good the Premises after vacation by the first defendant. Mr Hancock said that the invoice was issued to the plaintiffs as he had instructed Exafast employees to do the work indicated and it was agreed that Exafast would be paid for the work. He agreed that the invoice was not paid. It was put to him that the purpose of the creation of the invoice was to create a liability for the purpose of the proceedings. Mr Hancock said that the work was done and was invoiced and that the creation of a liability was a consequence of the issuing of the invoice but was not the purpose of Exafast in issuing the invoice.

70. Mr Hancock was asked some questions about his understanding and knowledge of the history of the two cranes at the Premises. He agreed that the cranes were at the Premises when they were purchased in 1986 and these were the same cranes when the property was leased to the first defendant in 2009. He could not recall whether a report had been obtained in relation to the reliability of the cranes when the Premises were purchased in 1986 but he stated that the cranes had been regularly serviced. He agreed that the reliability of the cranes was significant to his businesses and he took some steps with Demag by entering into a service agreement. He agreed that it was possible that he may have had the cranes checked before purchase of the Premises. He said he did not know the age of the cranes in 1986 but accepted that they were more than one year old. He agreed that Mr Parker, an employee of Epitech, was in charge of the maintenance of the cranes for most of the time since the purchase of the premises. He said Mr Parker reported in relation to the cranes to the general manager of Epitech and that he liaised with Mr Parker from time to time but not regularly.

71. Mr Hancock agreed that he knew the cranes required periodic servicing each three months and that he knew that from 1986 and even before, because he had previously owned a crane at other premises which had been serviced by Demag. He agreed that he knew that Demag did quarterly reports in relation to servicing the cranes through liaising with Mr Parker. Mr Hancock stated that he was aware that there was an Australian Standard in relation to cranes but only had general knowledge of it prior to the Lease. He did not know that the Standard required quarterly servicing but he knew that Demag undertook quarterly servicing. In answer to the question whether Epitech maintained a service logbook during the servicing of the cranes when it owned the Premises, Mr Hancock said that Epitech retained service records in a folder which he regarded as equivalent to maintaining a logbook. These were kept back to 1986 and were destroyed where relevant after seven years. Specifically, Mr Hancock believed the records that were kept by Epitech satisfied the requirements of paragraph 7.6 of Australian Standard 2550.3 relating to cranes, hoists and winches, being the 2002 Australian Standard he exhibits to his affidavit. He states that the records relating to the cranes were not transferred to the 2013 purchaser following the purchase.

72. Mr Hancock was then asked questions as to whether he knew what the first defendant intended to use the cranes for when it entered the Lease. He said he had a concept of what was going to be undertaken and was aware that the first defendant was engaged in fabrication of steel beams and girders. He did not know whether the first defendant's load and use of the cranes would be more or less than prior to the commencement of the Lease. In relation to the inspection and maintenance by Demag of the cranes prior to 2009, he agreed that a service contract had been entered into with Demag since 1986. He said it was not necessary to contact Demag as they scheduled regular inspections.

73. Mr Hancock was then taken to paragraph 18 of his second affidavit and his statement that prior to the commencement of the Lease, Epitech instructed Demag to conduct an inspection and report on the cranes which resulted in a 30 October 2009 Demag Periodical Service Report which identified the need for repairs. Mr Hancock stated that he believed Epitech contacted Demag to do that inspection rather than Demag merely turning up as scheduled. Mr Hancock said he believed that the general manager of Epitech asked for the inspection but had no recollection that he was involved in the request. It was put to Mr Hancock that the report dated 30 October 2009 was obtained at about the same time as the usual quarterly report based on the dates of the other reports. He agreed that the inspection at the end of October 2009 was about 2½ to 3 months after the previous inspection and conceded that it appeared that it broadly coincided with when the inspection report from Demag was due. He also agreed that the 30 October 2009 Demag report used the same criteria as the routine inspection report. He accepted that the report dated 30 October 2009 was broadly in the same form as previous reports. However, Mr Hancock said he was aware that Clause 11 was in the reference schedule to the Lease when he executed it on behalf of the plaintiffs. This is a factor pointing to the likelihood that the Demag reports were as a result of a request by Epitech.

69. Mr Hancock confirmed his view that there was no difference between a service report and a condition report and that a Periodic Service Report was sufficient to record the maintenance obligations in relation to the crane. He agreed that his view was that a crane condition report was the same as a Periodic Service Report because every quarter, the crane’s condition was assessed by Demag. This was his view at all times including at the commencement of the Lease and in December 2015.

70. Mr Hancock agreed that he first learnt of the concept of major inspections of cranes in 2012 and that prior to that time he had no idea of the concept of a 10 yearly crane inspection report or what it involved. In answer to the suggestion that a major inspection report was required from time to time, he disagreed and said it was not required but could be done. He agreed that no major inspections of the cranes were undertaken when Epitech used the cranes prior to November 2009 as it depended on the quarterly inspections by Demag.

71. Mr Hancock was asked questions about his conversation on 22 October 2015 with representatives of Demag as referred to in paragraph 39 of his second affidavit. He agreed that the two persons were Mr Grosse and Mr Baldwin of Demag and that he had previously been aware of Mr Grosse as he had turned up for inspections on behalf of Demag in the 1980s and 1990s.

72. Mr Hancock was taken to his 22 October 2015 email to Mr Bhullar in relation to crane repairs which he sent to Mr Bhullar after visiting Demag: see pages 94 to 95 of Exhibit RIH1 to his second affidavit. In relation to the five tonne crane, Mr Hancock put in his affidavit: “crane Hoist is over 30 years old and effectively passed end of life.” In relation to the 10 tonne crane, Mr Hancock stated: “crane Hoist was new in 2007 … Girder and Carriages are over 30 years old.” Mr Hancock said that the email did not set out all of the things which were said to him by the Demag representatives in the meeting. He said there was also raised by the Demag representatives an issue in relation to a gap in the crane girder which was explained to him. Mr Hancock confirmed that the material relating to the five and 10 tonne cranes as to the age, with the five tonne crane being effectively passed end of life and the 10 tonne crane having a new crane hoist in 2007, was the result of his own knowledge. Mr Hancock was also taken to his letter to Mr Bhullar dated 30 October 2015 where he stated as follows: “As discussed we do not have exact dates for the installation of the crane Girder, and the Hoists. The Girders and the five tonne Hoists was installed prior to our acquisition of the building in 1986. We replaced the original 10 tonne hoist with a new hoist in 2007”.

73. Mr Hancock agreed that his belief that the five tonne hoist had been installed circa 1982 was based on his knowledge of the owners and the previous building but was “a guess”. He confirmed he did not obtain the information from Demag but the building appeared some time after he started business in the area in 1979. In relation to the view that the five tonne crane was “effectively passed end of life”, Mr Hancock said this was his understanding which he had formed himself at about that time based on the age of the cranes and six years of alleged poor maintenance by the first defendant. He agreed that he did not hold this view in 2009 but had been a view which he had concluded by October 2015. He also agreed that the 10 tonne crane was about 30 years old except for the crane hoist. He did not have the view that the 10 tonne crane was effectively passed the end of its life as the major component of the crane, being the crane hoist, had been replaced in 2007.

74. It was put to Mr Hancock that other parts of the crane, other than the hoist, were important to its effective use and he agreed with that. He agreed that the other parts were 30 years old. When asked whether the other parts had passed their end of life he answered “not necessarily”.

75. Mr Hancock was asked questions about a telephone conversation with Mr Bhullar on 19 December 2011, a file note in relation to which is at page 93 of Exhibit RAH2 to his third affidavit. He agreed that there was nothing relating to a discussion concerning Clause 11 of the Lease in the file note and on that basis he believed there was no discussion in relation to that clause, although there was a discussion in relation to cranes. He agreed that Mr Bhullar had complained that he had undertaken $20,000 of repairs. Mr Hancock was taken to his email to Mr Bhullar dated 19 December 2011 at page 42 to Exhibit MB1 to Mr Bhullar's affidavit. He expressed the opinion that the email was probably sent after the telephone conversation and did deal with Clause 11 of the Lease. He agreed that he could not be 100 per cent certain that Clause 11 was not discussed in the telephone conversation with Mr Bhullar, although it is not referred to in his file note. He accepted that he had denied Mr Bhullar's account of the conversation in his third affidavit.

76. Mr Hancock was asked questions about the events of August 2013 when he was in the process of negotiating terms with Mr Bhullar following the expiry of the initial term of the Lease. He agreed that he told Mr Bhullar that the 10 tonne crane was less than 10 years old: see the email from Mr Hancock to Mr Bhullar dated 15 August 2013 at page 16 of Exhibit RAH2 to Mr Hancock's 25 November 2016 affidavit. He also agreed that he did not refer to the hoist but to the crane. Mr Hancock said he referred to the crane but in doing that he was intending to refer to the hoist which he regarded as the main part of the crane. It was put to Mr Hancock that he intended to convey to Mr Bhullar that the 10 tonne crane had been purchased in 2007. He denied that and said he was referring only to the hoist. He accepted that components of the crane were older than 2007 and some had been up to 30 years old. When it was put to him that he was trying to convey to Mr Bhullar that the 10 tonne crane did not require an inspection, he said that his intention was to convey that the crane hoist did not require an inspection. He stated that Mr Bhullar had expressed doubts in relation to the age of the 10 tonne crane.

77. Mr Hancock was asked questions about paragraph 85 of his third affidavit and Annexure D to Ms Dogra’s affidavit. His evidence in his affidavit was that Ms Dogra did not make the ticks or annotations on Annexure D to her affidavit during the inspection. He said he could not recall whether he talked to his wife in relation to his recollections before swearing the affidavit.

78. Mr Hancock confirmed that he said the hoist was the main part of the crane. He accepted it was not the only important part and that the crane carriage and girders were also important and that problems with each could affect the operation of the crane. He said, however, that the hoist was the main component.

79. In re-examination, Mr Hancock gave evidence that many things can stop a crane working, including problems with the pendant box and the wire.

80. Overall, Mr Hancock appeared to me to be an honest, careful and considered witness who gave his evidence directly and made concessions where appropriate.

Evidence of Mrs K Hancock

86. The plaintiffs read the affidavit of Mrs Kathleen Hancock sworn 16 November 2016.

87. Mrs Hancock is the wife of Robert Hancock and currently the office administrator of Exafast Pty Ltd. Mrs Hancock gives evidence in her affidavit that she has been employed by her husband and his brother David in various entities since 1989.

88. Mrs Hancock gives evidence that in November 2009 she assisted with the preparation of the Premises for the new tenant. Her job was to ensure all the offices and facilities were clean.

89. Mrs Hancock also gives evidence in relation to two meetings which she attended in relation to the Premises at the end of the period when the first defendant was in possession. Mrs Hancock gives evidence that she attended the Premises on 9 March 2016 with Mr Bykersma and Mr Hancock and found that the Premises had not been vacated or cleaned.

90. On 14 March 2016, Mrs Hancock attended the Premises for the purposes of an inspection with Mr Hancock and Ms Dogra. She indicated in that conversation that the cleaning was not good enough and that in her view the offices and facilities were still unclean. She states that Ms Dogra said that they had used a professional cleaner for the offices and facilities.

91. Mrs Hancock gives evidence of work conducted by her in cleaning the Premises from 22 March 2016. She describes the Premises as “dirty” and goes through what she did to clean the Premises which involved scrubbing of the walls and the amenities and toilet area. She states that she was aware that Mr Bykersma required the Premises to be clean on taking possession and had formed the view that they were “disgusting” as reflected in an email from him dated 10 March 2016 following his inspection on 9 March 2016. Mrs Hancock confirms that when she attended the Premises for a final inspection with Mr Bykersma on 31 March 2016 he indicated that the Premises were clean to his satisfaction. Mrs Hancock states that the total time she spent cleaning the Premises was 22 hours and 40 minutes.

92. Mrs Hancock responds to the affidavit of Ms Dogra dated 4 October 2016 and states that Ms Dogra did not make the ticks or annotations on Annexure D to her affidavit during the inspection on 21 March 2016. She said she recalled Mr Hancock agreeing that some of the items discussed were completed but not all of the items.

93. Mrs Hancock annexes to her affidavit the Westside Industrial Property Inspection Report dated 1 December 2009 to which Mr Hancock has annexed comments as at 21 March 2016. In paragraph 9 of her affidavit she indicates that Mr Hancock has “accurately reported the condition of the Premises as I saw them during my inspection of the Premises on 22 March 2016.”

94. In cross-examination, Mrs Hancock agreed that there were two meetings at the Premises where Ms Dogra was present which she attended being the meetings on 14 March 2016 and 21 March 2016. She indicated that she did not take any documents to the latter meeting but that Mr Hancock had what she believed was a list of works to be done. She said that she did not know whether the document which Mr Hancock had at the meeting was the letter from Coleman Greig lawyers dated 15 March 2016 which was Annexure D to Ms Dogra’s affidavit but without the annotations on the letter. Mrs Hancock said she did not know what document Mr Hancock had with him. She said the document was not shown to her by Mr Hancock but that she understood that it set out what the remaining make good issues were. Mrs Hancock said that she did not take notes during the meetings and the matters in her affidavit were based solely on her recollections of the meeting and Mr Hancock's annotations on the 1 December 2009 Westfield Industrial Inspection Report.

95. Mrs Hancock conceded that prior to swearing her affidavit she would have had conversations with Mr Hancock in relation to her recollections.

96. Mrs Hancock said that she did not recall exactly whether Ms Dogra had any documents with her in the 21 March 2016 meeting but she may have. She agreed that she did not see Ms Dogra make the annotations to the Coleman Greig letter indicated in Annexure D to Ms Dogra’s affidavit. She agreed that she was inspecting the Premises and was not with Ms Dogra at every moment during the inspection.

97. In answer to the suggestion that she could not say for certain that Ms Dogra did not make the annotations during the meeting, Mrs Hancock said that she did not see her make the annotations.

98. Mrs Hancock was asked questions about Mr Bykersma’s expectations in relation to the cleaning. She said that the cleaning was completed to a standard:

1. Commensurate to what a new purchaser would expect; and

2. To the standard that the premises were left in in 2009.

99. She confirmed that she prepared the cleaning of the Premises in 2009.

100. Mrs Hancock said she did not know whether she believed that Mr Bykersma would refuse to settle if he was not satisfied with the cleaning of the Premises and could not recall whether this was going through her mind at the time. She agreed that her husband had shown her an email from Mr Bykersma who described the Premises as “disgusting”.

101. Mrs Hancock impressed me as an honest and truthful witness. She gave her evidence directly and made concessions where appropriate. I have no difficulty in accepting her as a witness of truth who was doing her best to give her evidence honestly and completely.

Evidence of Mr R Parker

102. The plaintiffs read an affidavit of Rodney Parker sworn 21 November 2016. Mr Parker is currently the technical manager at Exafast Pty Ltd. He has been employed by the Hancock brothers in various entities since 1986, initially as a maintenance fitter. In 1986 Mr Parker assisted in the move to the Premises of the business run by Epitech. He noted that there were two existing cranes at the Premises being the five tonne and the 10 tonne cranes.

103. During the period between 1986 and November 2009, apart from a short period between 1998 and 2000, Mr Parker was responsible for managing the maintenance of the cranes on behalf of Epitech, the company that occupied the Premises at that time and his then employer. He noted in his affidavit that the maintenance work was contracted to Demag which included a quarterly routine maintenance schedule. In addition, any repairs to the cranes were carried out by Demag.

104. Mr Parker noted the MYOB purchase details report for Epitech (previously named Yesterday Manufacturing Pty Ltd) showing payments made to Demag for quarterly services and other repairs in the period from May 2007 to November 2009. Mr Parker states that in late 2006 Demag recommended some major repairs to the hoist of the 10 tonne crane. He recalled that spare parts were hard to acquire for the model and some parts would need to be made to order and, as a result, in comparing the repair costs and the costs of replacement, the Board of Epitech instructed Mr Parker to cause Demag to replace the 10 tonne hoist and upgrade any required accessories. Mr Parker gave evidence that he recalled the cost was approximately $19,000 and the work was completed in or about early 2007.

105. Mr Parker gave evidence about the usage of the cranes between 1986 and 2009 at the Premises and stated that typically, loads were under two tonnes in weight and usage was infrequent, usually limited to less than two hours per day for each crane. Mr Parker also noted that during his time at the Premises the cranes were reliable and there were minimal delays caused by crane outages.

106. In his affidavit, Mr Parker also gives evidence in relation to the make good in March 2016. On 22 March 2016, Mr Robert Hancock asked him to help inspect the kitchen facilities in the workers’ lunchroom. Mr Parker noted that the kitchen units had significant water damage and the drawer units were falling apart. In undertaking this task, Mr Parker noted that there was a leaking hose to the sink tap and it was apparent the whole kitchen was water damaged and beyond repair. As a result, he rebuilt the kitchen using some second hand drawer units from Exafast and a new benchtop. He annexes to his affidavits photographs of the kitchen during demolition, clearly establishing in my view the damage in the kitchen and in particular the water damage. Mr Parker gives evidence that he spent in total 12 hours performing the work to the kitchen.

107. In oral evidence in chief, he confirmed that the services and the invoices provided by Demag to Yesterday Manufacturing/Epitech were as recorded in the MYOB printout. He stated that as far as he knows, all of the invoices between 5 May 2009 to November 2009 were stated on the MYOB print out.

108. In cross-examination, Mr Parker confirmed that he had been assigned responsibility for maintaining the cranes in 1986 and carried out these tasks until 2009 except for a short period. He confirmed that this was the first time he had had a responsibility for dealing with cranes as he had not had such duties prior to 1986. At the time, he was not familiar with the Australian Standards as to cranes. He said that he relied on Demag's expertise in relation to the maintenance and servicing of the cranes and they were given contracts for quarterly services and maintenance. His role was primarily to liaise with Demag in relation to this work and to facilitate their maintenance schedule. He reported initially to the manager of the company and then Mr Robert Hancock and later to other managers. In the latter period up to 2009, he was the manager of the business. He was appointed to that position in the late 1980s and then he reported to the board of the company. When he was not reporting to the board he would report to Mr Robert Hancock. He indicated he would only report to Mr Hancock in relation to crane maintenance issues if there were expensive repairs required, such as when the 10 tonne crane hoist was replaced which required board approval. He agreed that in 2007 only the hoist of the 10 tonne crane was replaced. This was required as it was a fairly old hoist and replacement parts were difficult to obtain and some had to be handmade. The expense justified a replacement as the new hoist had additional features.

109. Mr Parker was asked questions in relation to breakdowns of the cranes and he said he did not recall the detail of breakdowns. He was taken to paragraph 12 of his affidavit in which he states that during his time at the Premises the cranes were reliable and there were minimal delays caused by crane outages. He said this was more of a general impression and he would be surprised if outages were more than one or two days during this time. His recollection was that generally parts were available and repairs were attended to promptly with no major things going wrong. He did not know when the two cranes were manufactured but said they were in the building when he moved in in 1986. Mr Parker said the cranes were inspected by Demag at every service. He denied that the work Demag did was confined to the quarterly inspections of the cranes other than in 2007 and said they were called out if there was a break down to the cranes.

110. Mr Parker appeared to be an honest witness who answered questions directly and clearly. I accept him as a witness of truth.

Evidence of Mr C Jones

111. The plaintiffs read an affidavit of Craig Jones sworn 16 November 2016. He is currently the storeman at Exafast Pty Ltd and has been employed since 2013.

112. Mr Jones was involved in the make good steps in March 2016. On 22 March 2016, Robert Hancock advised him that the factory would need to be cleaned and prepared for the purchaser to settle on 4 April 2016. Mr Hancock asked Mr Jones if he could help by working over Easter to which he agreed.

113. He noted that he inspected the toilet and washroom facilities and described their condition as damaged, filthy and unhygienic. Together with John Small, a casual Exafast employee, they worked in cleaning, painting, scrubbing and water blasting those areas. He also did some heavy general cleaning to assist Mrs Hancock. Mr Jones notes in his affidavit that the offices, kitchen, factory and yard were dirty and needed considerable work to make them presentable. Mr Jones annexes to his affidavit a number of photos which support this conclusion. He kept a note of his hours and he spent 22.5 hours performing the work.

114. Mr Jones was not required for cross-examination.

Evidence of Mr D Bykersma

115. The plaintiffs read an affidavit of Darren Bykersma sworn 23 November 2016. Mr Bykersma through a company apparently owned by him was the purchaser of the Premises in April 2016. He annexes to his affidavit the front page of the contract for sale. The completion date under the contract was to be on or before 14 March 2016. Mr Bykersma also annexes special conditions to the contract which in substance provided that the plaintiffs as vendors had to ensure that the first defendant complied with its make good requirements under the Lease.

336. Further, for the reasons given above, I do not accept that either crane was not in good working order as at the date of commencement of the Lease. I specifically reject the submission made in paragraph 55 of the submissions dated 1 December 2017 from the defendants, that it was within Mr Hancock's knowledge that both cranes were past their working lives. This is inconsistent with the service history for the cranes, the evidence of Mr Parker, the evidence of Mr Hancock, the fact that the first defendant used the cranes in its business for several years after 1 December 2009, the history of regular servicing by Demag prior to 1 December 2009 and the reports prepared in October and November 2009.

337. The materials show that the cranes were regularly serviced by Demag which had been involved in the historical servicing of the cranes for an extensive period of time: see paragraph 9 of Mr Hancock's affidavit sworn 15 July 2016 and paragraph 5 of Mr Parker's affidavit sworn 21 November 2016.

338. In my view, no such representation was made and I reject this part of the first defendant's Cross-Claim

10. Did the Continuation of Lease Agreement contain oral terms, and if so, what were those terms?

344. It is the first defendant’s submission that there were additional oral terms to those set out in the Continuation of Lease Agreement: see paragraph 5(d) of the Amended Defence and paragraphs 46-51 of the defendants’ submissions dated 1 December 2017. The plaintiffs submit that there were no such additional oral terms.

345. The first issue is whether the conversations occurred as alleged by Mr Bhullar and the first defendant. As I have found above, I regard Mr Bhullar as an unreliable witness in relation to the oral conversations at the various meetings with Mr Hancock and I prefer Mr Hancock's evidence where it is inconsistent. Mr Hancock denies the relevant conversations on which the defendants rely: see paragraphs 52-56 of Mr Bhullar’s affidavit and paragraphs 60-62 of Mr Hancock’s third affidavit. I accept that evidence of Mr Hancock.

346. In my view, it is inherently unlikely that Mr Bhullar said to Mr Hancock words to the effect that the plaintiffs would be required to install a fire exit including staircase and doorway for occupational health and safety purposes so that the first defendant could comply with fire safety regulations. The matter was raised between the parties but it was raised by Mr Hancock to Mr Bhullar in an email dated 3 November 2012 as a virtual aside when Mr Hancock stated: “Michael, I forgot to discuss but we may need to open a fire access wall on the west wall of the factory, at some stage. We would need access to do this when appropriate”: see CB 1/70. This did not appear to be an issue between the parties: see the version with marked up responses at CB 1/167-8. There is nothing to suggest that this issue would have been likely raised by Mr Bhullar or that it was important to him other than the reference in Mr Bhullar's affidavit. In the light of this analysis and my view of the reliability of Mr Bhullar’s evidence, I find that no such representation was made by the plaintiffs as asserted in Mr Bhullar's affidavit or that there was any agreement as to the fire exit which became an oral term in addition to the Continuation of Lease Agreement.

347. Even if there was such an agreement, I cannot see how any breach of that agreement by the plaintiffs could possibly have caused any loss to the first defendant. I reject this aspect of the Cross-Claim.

348. Consideration therefore needs to be given as to whether there was an agreement between the plaintiffs and the first defendant in or prior to January 2014 which became an oral term of the Continuation of Lease Agreement that the plaintiffs would obtain recertification at the plaintiffs’ expense of the five tonne crane: see paragraph 5(d)(i)-(iii) of the Amended Defence. The first defendant relies on the fact that an agreement was reached to provide certification of the five tonne crane by a proposal from Mr Hancock on 22 October 2015.

349. However, the position was quite different at the end of 2013 and in early 2014. Mr Hancock had made it abundantly clear that as at January 2014 he regarded crane repairs as the responsibility of the first defendant: email dated 10 January 2014 in which Mr Hancock stated: “Your responsibility anyway”: CB 1/181. This email is inconsistent with Mr Hancock agreeing suddenly on behalf of the plaintiffs at or about the time of the execution of the Continuation of Lease Agreement to take responsibility for certification of the five tonne crane. There is no mention of cranes in Mr Hancock's 8 January 2014 email: CB 1/183. Mr Hancock responded on 10 January 2014: “If you don't like my proposal, then it’s over mate”: CB 1/181.

350. Having regard to all these matters, I consider that the conversation stated by Mr Bhullar in his affidavit on which the first defendant relies in its Amended Defence is highly unlikely and did not occur. The contemporaneous documents are important on this issue. In coming to this conclusion, I take into account the email from Mr Hancock to Mr Bhullar dated 15 August 2013: CB 3/890-891. I find that no such agreement was made between the plaintiffs and the first defendant giving rise to the alleged further oral term. This part of the first defendant's Cross-claim is rejected.

11. Did the plaintiffs/cross-defendants engage in misleading or deceptive conduct in representing that the 10 tonne crane was less than 10 years old and did not require recertification?

351. Paragraph 19 of the First Cross-Claim filed 22 January 2016 provides as follows:

“19. Bob, on behalf of the Cross Defendants, represented to Michael, on behalf of the Cross Claimant, that the 10 tonne crane forming part of the premises was less than 10 years old and, therefore, the aforesaid Australian Standard did not require recertification (“the second representation"). The second representation was made in trade and commerce, was relied upon by the Cross Claimant in entering into the agreement in or about December 2013, was misleading or deceptive and was a misrepresentation.

Particulars

1. The crane girder which, pursuant to the Australian Standard required recertification every 10 years and which is the integral part of the crane structure, was manufactured in about 1982 and was not the subject of the current recertification;

2. The second representation was made in an email from Bob to Michael dated 15 December 2013.”

352. This is denied in paragraph 19 of the Defence to Cross Claim filed 24 March 2016.

353. The representation alleged was said to have been made in an email from Mr Hancock to Mr Bhullar dated 15 December 2013. The email referred to has to be seen in the context of a history of emails between Mr Bhullar and Mr Hancock: see CB 1/371-373 and CB 3/872-878. What is clear from these emails, is that Mr Bhullar, on behalf of the first defendant, was pressing for a “10 yearly crane inspection report” (email dated 10 December 2012: CB 3/878) and a “mandatory” crane report (email dated 17 December 2012: CB 3/877). The emails also establish that there was a meeting on 15 August 2013 between at least Mr Hancock and Mr Bhullar: see email dated 15 August 2013 (CB 1/374). In the email dated 15 August 2013, the following is stated by Mr Hancock: “The Good news is that the 10 tonne crane is less than 10 years old (Purchased in Jan 2007), so does not require the inspection.” Despite the particulars in paragraph 19 of the Cross-Claim, this appears to be the email relied upon by the defendant: submissions dated 1 December 2017, paragraphs 57-62.

354. Mr Bhullar, in his affidavit sworn 28 September 2016, relies on this representation as being important to him in the lease negotiations which led to the Continuation of Lease Agreement being signed: see paragraphs 47-56 of Mr Bhullar’s affidavit, particularly paragraphs 47 and 55. If accepted, Mr Bhullar's affidavit, particularly at paragraph 55, would establish that Mr Bhullar, on behalf of the first defendant, relied upon the representation that the 10 tonne crane was less than 10 years old in signing the Continuation of Lease Agreement on behalf of the first defendant.

355. The evidence clearly establishes that although the hoist of the 10 tonne crane was replaced in early 2007 the remaining parts of the crane were not replaced and were significantly more than 10 years old: see T44.20-.27; T45.38-46.8; T50.44–T52.35; T246.1-.21.

356. Mr Hancock in cross-examination, stated that he did not intend to convey that the 10 tonne crane was purchased in 2007 because by the email in question, he was only referring to the hoist which had been replaced in 2007: T52.23. Mr Hancock accepted that there were components of the 10 tonne crane older than 2007: T52.27.

357. In paragraphs 57-62 of its submissions dated 1 December 2017: the defendants submit:

1. It cannot seriously be in doubt that Mr Hancock misrepresented that the 10 tonne crane was less than 10 years old and did not require recertification in the 15 August 2013 email. It was said it was the excuse deployed by Mr Hancock for the plaintiffs’ inaction;

2. The representation alleged was made, it was untrue and Mr Hancock knew it was untrue;

3. The only serious dispute was whether the first defendant relied on the representation and it caused it loss;

4. When the representation is put in context it is clear it caused loss to the first defendant as it was made at the time when the parties were renegotiating a further lease and Mr Bhullar had made consistent complaints about the lack of certification for both cranes. Mr Hancock allegedly made the representation when Mr Bhullar was reluctant to commit to a new lease because of the outstanding certifications and the numerous breakdowns of the cranes. It is alleged Mr Bhullar accepted the assurances given to them by Mr Hancock about the 10 tonne crane's age in entering into the continuation of Lease Agreement;

5. While Mr Hancock denies that he had a conversation about the 10 tonne crane on 14 January 2014, this is inherently improbable given the disputes between the parties in relation to the cranes.

358. As stated above, a person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive: s 18 of the ACL.

359. Section 236 of the ACL provides as follows:

“236 Actions for damages

(1) If:

(a) a person (the claimant) suffers loss or damage because of the conduct of another person; and

(b) the conduct contravened a provision of Chapter 2 or 3;

the claimant may recover the amount of the loss or damage by action against that other person, or against any person involved in the contravention.

(2) An action under subsection (1) may be commenced at any time within 6 years after the day on which the cause of action that relates to the conduct accrued.”

360. Accordingly, in order for a party to recover damages for a breach of s 18 of the ACL, that party must prove that the loss or damage allegedly suffered was caused because of the conduct of another person.

361. This raises a question of causation which is to be determined as a matter of common sense and experience taking into account the legal framework in the ACL: Henville v Walker (2001) 206 CLR 459. The relevant conduct does not have to be the sole cause of the parties’ actions but it must be a cause which materially contributes to the damage allegedly suffered. Reliance in a case such as the present must be established by the defendant. It is up to the party alleging loss to prove the causal connection between the misleading or deceptive conduct and the loss alleged: Haros v Linfox Aust Pty Ltd [2012] FCAFC 42.

362. In my view, the representation alleged was clearly made by Mr Hancock on behalf of the plaintiffs in the 15 August 2013 email. When read as a whole, the representation was untrue and was misleading or deceptive. I reject the plaintiffs’ submission to the contrary: paragraph 131 of their 22 December 2017 submissions. I do not consider that the representation made can be seen to be limited to the hoist as opposed to the entirety of the crane and it is clear that a hoist is only one, albeit a major, component of the crane. The representation was clearly made in trade or commerce between parties in a commercial setting.

363. It is alleged that Mr Hancock knew that the representation was untrue. As set out above, he asserts in cross-examination that he did not know this and he was intending to only refer to the hoist. In my view, it is unnecessary to determine this question as the representation was clearly misleading or deceptive. If required to decide the issue, I would have accepted Mr Hancock's explanation as it is unlikely that he would have deliberately made such a falsehood in the light of the fact that the age of the crane could readily have been ascertained by Mr Bhullar through asking representatives of Austfurn, the first defendant’s expert.

364. I therefore turn to the question whether the first defendant relied on the representation and it caused it loss.

365. I find that the first defendant has failed to establish that Mr Bhullar on behalf of the first defendant relied on the representation relating to the age of the 10 tonne crane in entering into the Continuation of Lease Agreement for the following reasons:

1. The reports prepared by the Austfurn group dated 30 August 2010, on which the first defendant placed some reliance, suggested wear in the 10 tonne crane as at that date: see CB 3/855 and CB 3/858;

2. Mr Bhullar described in an email to Mr Hancock's daughter that the report suggested to him that “the cranes are pretty old”: see email dated 2 December 2011 at CB 3/860;

3. At T106.41 Mr Bhullar conceded that it was plain to him as at 2 December 2011 that components of the 10 tonne crane were more than 10 years old. This is inconsistent with reliance on the email from Mr Hancock;

4. In his 17 December 2012 email to Mr Hancock, Mr Bhullar stated: “I am sure these cranes are more than 10 years old”;

5. At paragraph 47 of his affidavit, Mr Bhullar states: “… I was astounded when I received his email later that day advising that the 10 tonne crane was less than 10 years old.”;

6. In my view, Mr Bhullar's affidavit at paragraphs 52 to 55 is unreliable in relation to the conversations he asserts. First, I have indicated above that I found Mr Bhullar to be an unreliable witness and I prefer the evidence of Mr Hancock where it was inconsistent. Secondly, there is nothing in the email correspondence close to the execution of the Continuation of Lease Agreement that indicates any reliance on the representation made on 15 August 2013. See the emails at CB 3/890-899. In my view, the conversations in paragraphs 52 and 55 of Mr Bhullar’s affidavit, which are denied by Mr Hancock, are inherently unlikely having regard to the email correspondence on and around that time and I reject them.

7. For these reasons, I find that Mr Bhullar on behalf of the first defendant did not rely on the 15 August 2013 representation to enter into the Continuation of Lease Agreement and accordingly, the representation, although misleading and deceptive, caused no loss. I also note that Mr Singh in his evidence stated that he and his son started looking for new premises because “the cranes were giving [a] lot of trouble” and it took two and a half to three years to locate alternative premises: T200.15-.23. This also suggests that the first defendant had little alternative but to continue with a leasing arrangement until it located alternative premises for its factory which was taking some considerable time. However, I do not place a lot of weight on Mr Singh's evidence as it was in some parts inconsistent: T200.43.

366. This cause of action is accordingly rejected.

12. Causation and damages issues

367. Based on my reasoning above, I find that there was no breach of s 18 of the ACL by the plaintiffs.

368. In relation to the alleged breach of the oral terms of the Continuation of Lease Agreement, I have found that there were no oral terms as alleged.

369. Accordingly, there can be no damages for the breaches relied on. This also is the case in relation to the 10 year crane representation which I have found was not relied upon by Mr Bhullar (or anyone else) on behalf of the first defendant.

370. In relation to the alleged breach of Clause 11 of the Lease, in my view there was no breach of this clause by the plaintiffs. Accordingly, no damages should be awarded for breach of the Lease by the plaintiffs.

371. If I am wrong in that conclusion, and there was a breach of Clause 11 of the Lease as alleged by the defendants, as the reports provided by the plaintiffs to the first defendant as prepared by Demag did not comply with the Lease, I find that the cranes were in good working order and condition in any case. Accordingly, even if there was a breach of the Lease by the plaintiffs by not providing the report within Clause 11, any report provided would have established that the cranes were in good working order and condition. Therefore, I would have awarded nominal damages only of $10 if this breach was established.

372. In the alternative, even if I had determined a breach of the Lease as alleged, on the basis that the cranes were not in good working order as at 1 December 2009, I would have found that they were in reasonable working order based on the Demag reports and their service history. Further, for the reasons set out earlier in this judgment, I find that the principal assumption on which the Furzer Crestani report was prepared, being the accuracy of Attachment B to that report, has not been established. Accordingly, having regard to the importance of that assumption, I could not rely on that report for the purposes of either causation or assessing damages as claimed by Furzer Crestani.

373. I also was not satisfied as to the accuracy of any part of attachment B having regard to the cross-examination of Mr Bhullar on it, his email dated 14 January 2010 and the first defendant’s practice of only calling out Austfurn when there was a breakdown: cf paragraphs 65-66 of the first defendant submissions dated 1 December 2017.

374. I have reviewed the submissions in paragraphs 65-68 of the defendants’ written submissions dated 1 December 2017, the plaintiffs’ written submissions in paragraphs 138-139 (and the Appendix A) of their submissions dated 22 December 2017, the cross-examination of Mr Bhullar, the relevant invoices relied on and the job sheets for the work undertaken where available. I am not satisfied that any aspect of the work charged and paid for was as a result of the condition of the cranes as at 1 December 2009 not complying with Clause 11 or otherwise the cranes being not in good working order as at 1 December 2009 as opposed to the condition of the cranes following use of them by the first defendant following it taking possession of the Premises.

375. I also do not consider that the first defendant has established causation in relation to this part of its Cross-Claim even if a breach of Clause 11 is found. In particular, I was not satisfied on the evidence that any failure by the plaintiffs to undertake 10 year/25 year inspections was causative of any loss having regard to the October/November 2009 reports and the history of the cranes, including the regular maintenance of the cranes by Demag.

376. If I am wrong in that conclusion, I find that the 15 May 2012 signed document (CB 1/163) which was signed at the 15 May 2012 meeting constituted an agreement between the parties to limit to $4,500 (which was paid via a rent reduction for a period) the plaintiffs’ liability for any pre-lease issues relating to the condition of the cranes. I prefer Mr Hancock’s account of the meeting in paragraph 28 of his 15 July 2016 affidavit to the competing version of Mr Bhullar. Mr Hancock’s version appears to be consistent with the document itself and the prior correspondence between the parties. I also have found Mr Hancock to be a more reliable witness in relation to the meetings between the parties.

367. For these reasons I dismiss the first defendant's Cross-Claim.

Disposition

378. I thank Counsel for their assistance in their detailed written submissions.

379. For the reasons set out above, I make the following orders:

1. Judgment for the plaintiffs against the first defendant on the Amended Statement of Claim;

2. Judgment for the plaintiffs/cross–defendants on the Cross-Claim. The Cross-Claim is dismissed;

3. Judgment for the second defendant in relation to the Amended Statement of Claim. The Amended Statement of Claim is dismissed against the second defendant.

4. The first defendant is to pay the plaintiffs’ costs of the proceedings as agreed or assessed (excluding any costs of the plaintiffs relating to the claim against the second defendant).

5. The plaintiffs are to pay the second defendant's costs of the proceedings as agreed or assessed.

6. Liberty to apply within 14 days to vary the costs orders in (4) and (5) above.

7. The parties are to bring in Short Minutes of Order within seven days in relation to the amount to be awarded against the first defendant in the Amended Statement of Claim including any interest.

8. The exhibits are to be returned after 28 days.

380. As will be seen above, I have found for the second defendant against the plaintiffs. The same counsel and solicitors represented both defendants. In order to assist any assessing officer, I note my preliminary view, subject to submissions, is that the issues concerning the second defendant did not exceed 10% of the hearing time taken up in the proceedings.

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Decision last updated: 29 March 2018