Sarina Investments Pty Ltd v Brotherhood of St Laurence (No 2)

[2022] VCC 2122

IN THE COUNTY COURT OF VICTORIA

AT Melbourne

COMMERCIAL DIVISION

Revised
Not Restricted
Suitable for Publication

Case No. CI-21-03545

SARINA INVESTMENTS PTY LTD (ACN 059 887 757)	Plaintiff/Defendant by counterclaim
v
BROTHERHOOD OF ST LAURENCE	Defendant/Plaintiff by counterclaim

---

JUDGE:	HIS HONOUR JUDGE MACNAMARA
WHERE HELD:	Melbourne
DATE OF HEARING:	24-28 October, 8-9 and 24 November 2022
DATE OF JUDGMENT:	7 December 2022
CASE MAY BE CITED AS:	Sarina Investments Pty Ltd v Brotherhood of St Laurence (No 2)
MEDIUM NEUTRAL CITATION:	[2022] VCC 2122

REASONS FOR JUDGMENT
---

Subject:Claim for damages for breach of lease by repudiation           

Catchwords:               Lease of office space – fall of render and other debris upon terrace which lessee was entitled to occupy – delay in make safe works – demand by lessee for further investigations and provision of engineer’s report – whether lessor in breach of covenant to repair and maintain building – whether lessor in breach of covenant for quiet enjoyment – whether lessor repudiated lease by failure to provide engineer’s report and carry out further investigations – no repudiation by lessor – lessee repudiated – liable for damages – lessee’s counterclaim based on alleged repudiation by lessor dismissed

Legislation Cited:      

Cases Cited:Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd (2007) 233 CLR 115; Shevill v The Builders Licensing Board (1982) 149 CLR 620; Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd (1989) 166 CLR 623; R & A Cab Co Pty Ltd v Kotzman [2008] VSCA 68; Louinder v Leis (1982) 149 CLR 509; Progressive Mailing House Pty Ltd v Tabali Pty Ltd (1985) 157 CLR 17; Versus v A.N.H Nominees Pty Ltd [2015] VSC 15; Galafassi v Kelly (2014) 87 NSWLR 119; Rawson v Hobbs [1961] HCA 72; Almond Investors Ltd v Kualitree Nursery Pty Ltd [2011] NSWCA 198; Universal Cargo Carriers Corporation v Citati [1957] 2 QB 401 Foran v Wight [1989] HCA 51; 168 CLR 385; Electricity Generation Corp v Woodside Energy Ltd (2014) 251 CLR 640; Hamilton v National Coal Board [1960] AC 633, 647; Haydon v Kent County Council [1978] QB 433, 464; Greetings Oxford Koala Hotel Pty Ltd v Oxford Square Investments Pty Ltd (1989) 18 NSWLR 33; Seiwa Australia Pty Ltd v Owners SP 35042 [2006] NSWSC 1157; Ridis v Strata Plan 10308 [2005] NSWCA 246;

Judgment:                   (1)  Within 14 days of this day the parties must bring in short Minutes to give effect to these reasons

(2)Costs reserved

---

APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr. L. Virgona	HWL Ebsworth Solicitors
For the Defendant	Mr. B. Petrie	Rigby Cooke Lawyers

HIS HONOUR:

Background

1By a lease dated 14 August 2014 the plaintiff, Sarina Investments Pty Ltd (“Sarina”), let premises, being Level 1, 219 Johnston Street, Fitzroy, to the defendant, the Brotherhood of St Laurence (“the Brotherhood”), for a term of four years commencing 1 August 2014 and terminating 31 July 2018, with an option to renew for a further period of four years. (Court Book (“CB”) 135-198)  It would seem that this option to renew was availed of. (CB 201-2)  A standard covenant for quiet possession in favour of the Brotherhood as lessee was to be found at clause 14.1 of the lease. (CB 177)  Clause 14.4 was a covenant by the lessor to repair and maintain the building, in the following terms:

“Repair and maintain building

The lessor:

(a)   must maintain the building in a structurally sound condition and endeavour to keep it wind and water tight;

(b)   Must use best endeavours to keep the lessor’s property, building services, plant and essential services in, or to, the building in good working order and available to the premises at all times; and

is responsible for all capital and structural repairs to the building and premises, whether or not such repairs are required due to damage or defect incurred during or prior to the Lease (except to the extent that such repairs are required due to fault or negligence of the lessee).”

2It will be seen that the lease draws a distinction between “the building” and “the premises”.  The “premises” were, as the description in the lease indicates, only part of the building.  The building included both residential and commercial units.  All of the commercial units were owned by Sarina.  The subdivision apparently included three owners corporations: one for the commercial units; one for the residential units; and a further “master” corporation. (Transcript (“T”) 190)  The “master” owners corporation, which was referred to at trial for convenience as “OC1”, was responsible for the common property pertaining to Level 1.

3On Level 1 were located a terrace and toilet facilities which formed part of the common property.  Clause 4(c) of the lease, dealing with these matters, stated:

“The lessor licences the use of the toilet facilities and terrace for use by the lessee, which the lessee accepts whilst not being part of the ‘net lettable area’ of the Premises are nonetheless its responsibility as if leased, and except rental provisions, this lease applies to those areas as fully as if part of the grant of lease in clause 4(a).”

4The terrace area was immediately adjacent to and outside the Level 1 office areas demised to the Brotherhood which constituted the “net lettable area” referred to in the lease.  The terrace was accessible only via the office premises demised to the Brotherhood.

5In early 2020, Mr Mahmoud Hussein (known as “Moody”) was a property administrator for the lessor, Sarina.  On the morning of 24 January 2020, Mr Edward Claridge, an assets and facilities service desk officer for the Brotherhood, sent an email to Mr Hussein stating:

“Hi Moody,

Sorry, but another building issue has arisen this week due to the large amount of rains at 219 Johnston Street, this time in the old tenancy area.  The terrace upper wall located above our balcony has started to shift significantly and as a result concrete debris has fallen onto our balcony area below.

Can you please arrange for a contractor to inspect to ensure the wall is structurally sound?  Please let me know when they are scheduled to attend and I will let the staff on site know.

Kind regards

Edward (Ned) Claridge  I  Assets and Facilities Service Desk Officer” (CB 206)

6The attached photographs appear to have been taken from the Level 1 terrace.  The first looks up and shows a wall immediately below the Level 2 balcony from which a large portion of the wall render has detached. (CB 207)  The second photograph, apparently taken on the terrace looking down to its floor, appears to depict fragments of the fallen render on the tiled flooring of the terrace. (CB 208)

7Later the same morning, a Ms McCaig of the Brotherhood, who was described as the “HIPPY site administration coordinator”, circulated an email to the Brotherhood personnel at Johnston Street in the following terms:

“Hi All,

THE OUTDOOR TERRACE AREA IS OFF LIMITS UNTIL FURTHER NOTICE.
On the Terrace you may have noticed that the upper wall on the left hand side had a bulge, part of the bulge has now collapsed and it is not safe to have people in that area.  BSL Maintenance has been in contact with Sarina Russo who have organised for someone attend our office and take a look at the structure of the building.  Until this has been completed and we have a report stating its safety, I ask that you not go out onto the Terrace as we are not sure how safe it really is.
I will update you when I have further information.
Kind regards,

Leanne

Leanne McCaig  I  HIPPY Site Administration Coordinator” (CB 209)

8HIPPY was one of the social welfare works conducted by the Brotherhood with assistance from the Commonwealth from the premises. In an earlier determination which I made relative to a jurisdictional issue, I explained the various Brotherhood operations which in early 2020 were being conducted from the Johnston Street premises. ([2022] VCC 935)

9Mr Hussein secured the attendance of a Mr Remo Sgro of “DC Build”, a building and construction company which did work for Sarina, to provide an estimate to carry out “make safe” works.  Sarina had been referred to Mr Sgro by a friend of his known as “Dean”, of Dejae Plumbing, which also did work for Sarina. (T347)  Mr Sgro responded to Mr Hussein by email dated 20 January headed “Re: 219 Johnston Street Fitzroy – Balcony Leaks Investigations and Potential Repair”.  He inquired about a plan for the site continuing, “we can attend site, provide protection to lower balcony to remove loose render and tiles and attempt to provide a temporary barrier to stop any further dislodgement.”   He costed this work at $3,950 plus Goods and Services Tax with the comment, “This would only be temporary and we cannot guarantee [scil against] any further dislodgment.” (CB 211)

10Mr Claridge sent a follow up email to Mr Hussein in the early afternoon of the following day, 29 January 2020, seeking confirmation “if a contractor has been scheduled to inspect this building issue?”  The following afternoon, 30 January, Mr Hussein emailed Mr Claridge:

“We had a technician on site over the past few days to provide a scope of works and quote for this.  We are looking at arranging a make safe and will get back to you once we have a solution in concrete.” (CB 217)

11Mr Hussein’s authority to make expenditures for maintenance on Sarina’s leased building without specific authority from his superiors was limited to $500.

12On 30 January 2020, Mr Hussein sent an email to Mr Andrew Pennisi with copies to Mr Ormesher and Mr Andrew Neill.  All of these individuals were Sarina executives.  The email stated:

“Hi Andrew Pennisi,

See email below and attached photographs. The tenant on L1, 219 Johnston Street Fitzroy has complained that the balcony on Level 2 has been falling away and is a risk. I’ve obtained a quote for make safe works as we note the complete repair of the balcony would be a major works upgrade and would take a lot more time to finalise, however these make safe works need to be undertaken with respect to the risks associated.

Can you please approve the attached budget estimate or advise accordingly.

Regards

Moody Hussein | Property Administrator

Sarina Russo | Group”

(CB 221)

13This email is apparently an attempt to obtain executive approval for the “make safe” works which had been quoted for by Mr Remo Sgro.  At that time Mr Pennisi held an executive position within the Sarina Group, and who was possessed of authority to approve these matters.  Also holding such authority was another now former executive of Sarina who gave evidence at trial, Mr Andrew Neill.  It was Mr Neill who suggested to Mr Hussein that he obtain Mr Pennisi’s authority. (T478‑9)

14Mr Neill, who was Mr Hussein’s immediate superior and held a senior executive position at Sarina’s head office in Brisbane (T470), explaining why he had not approved the “make safe works” suggested by Mr Hussein and quoted for by Mr Sgro, Mr Neill said:

“I could have certainly approved that value under my delegation.  It wasn’t so much the cost of the works, it was whether or not those works were going to potentially impede [scil impinge] on any works he [that is Mr Pennisi] had in place.” (T479, L27-30)

15Over a month after the email to Mr Pennisi, he responded to Mr Hussein’s application:

“Sadly, I have no idea of the issues concerning this building.

Largely due to the fact that others have lead [sic] the charge over the years, and not included me.

I understand that Mark Berlese is leading some type of approach with Sarina.

Until such time he or she hands over to me with a full understanding, there’s not much value I can add or authority I can approve.

Cheers

Andrew James Pennisi

Chief Operating Officer

Sarina Investments”

(CB 273)

16This left Mr Hussein being the point of contact with the Brotherhood with nothing to respond to the Brotherhood’s complaints except soft soap. (T409, L6-10)  This placed Mr Hussein in a very difficult position. (ibid L20-24)  He lacked authority to deal with the Brotherhood’s complaint but in accordance with normal corporate reporting protocols was precluded from saying to the Brotherhood, “This is beyond my authority, trying ringing Mr Neill or Mr Ormesher.” (T409, L27 – T410, L6)  This consideration dictated the responses by Sarina to the Brotherhood’s entreaties for the next several months.

17Meanwhile on the Brotherhood side the matter was escalated.  Ms Melinda Illevold was and is the Senior Manager, Facilities & Assets for the Brotherhood. She has held that position since 15 November 2019.  Her portfolio of properties or assets extends to 21 buildings owned by the Brotherhood and 69 leasehold properties. (T585, L21‑31)  Her responsibilities extend to preventative maintenance and reactive maintenance.  Based on the width of her responsibilities, she was also a member of the crisis management team for the Brotherhood which met daily during the first year of the pandemic. (T586, L5-9)  As to the effect on the Brotherhood’s operations and the status of its properties in Victoria, Ms Illevold said, “Community programs closed for around a week, there was a little bit of confusion there about whether the community programs was an essential service or not.” (T590, L14-16)

18These programs were ruled “essential” by the Victorian Government on or about 4 April 2020. (ibid L21-28)  Consequently the Brotherhood’s operations at the Johnston Street property were ruled essential services. (ibid L29-31)  She said:

“the programs that were essential – staff worked at sites where they could.  If staff were not wanting to work on sites that would be a discussion with their manager, and each individual case was evaluated from that time.” (T591, L26-30)

19Ms Illevold said she first became aware of the building issues at Johnston Street in late afternoon of 3 March 2020. (T601, L14-15)  She read some of the emails already referred to and met with Mr Claridge “to get a brief on what was happening”. (T601, L21-26)  She was alerted to the building issues by an email from Mr Claridge to Ms Leanne McCaig, the manager of the Johnston Street facility, on the afternoon of 3 March 2020. (CB 256-7)  Mr Claridge reported that Sarina had obtained quotations for repair work “but Moody mentioned he will need approval from the owner prior to” disclosing the quote and scope of works. 

20Ms McCaig had sent an email to Mr Claridge earlier that afternoon complaining that her maintenance request had been outstanding for six weeks.  She asked that the matter be “escalated” and it is presumably for this reason that Ms Illevold was copied into Mr Claridge’s response later that afternoon.  At 4:30pm on 3 March 2020, Ms Illevold emailed Ms McCaig and Mr Claridge advising that she had reviewed the lease and would “need to contact the landlord” to escalate the matter and advise that repairs were required.  She continued:

“I will need an engineers [sic] report.  Ned, have we consulted an engineer for a formal inspection review?  Do we have anything else I could provide to the landlord which advises state of building integrity?”

21She asked Ms McCaig to carry out a workplace risk assessment and sought further information. (CB 254)  Ms McCaig asked Mr Richard King, described as “HSE advisor”.

22HSE manager, Seema Patterson, asked Ms Illevold for advice “from the structural engineer”. (CB 264)  By email transmitted in the late afternoon of 4 March to Ms McCaig, Ms Illevold said:

“The photographs show evidence of render cladding falling away.  This will not impact the integrity of the wall itself, but nevertheless could cause injury if a person stands in the area and is subjected to further pieces falling …”  (CB 291)

23In the early afternoon of 5 March, Ms Illevold sent an email to Mr Hussein referring to a telephone conversation that they had had and continuing:

“The Defects at [Johnstone Street] which were reported to you on the 24^th January 2020 are of significant concern to the Brotherhood of Laurance.  Could we ask the landlord to share a copy of the engineers report so that we may conduct a thorough workplace assessment to ensure the occupancy of The Brotherhood of St Laurence is fit for purpose.” (CB 284)

24She copied the repair covenant from the lease together with clause 16.1 dealing with suspension of rent.  Ms Illevold then emailed Ms McCaig with copies to Seema Patterson, Edward Claridge and Richard King, stating that she strongly urged “that a workplace risk assessment is completed by HSC asap.” (CB 289)  Ms Illevold had arranged to carry out her own inspection of the premises on the morning of 6 March. (CB 290)  On 5 March Ms Illevold also telephoned Mr Hussein.  She said she introduced herself, explaining that Mr Claridge was part of her team and that he had been dealing with the matter until then. (T607, L8-13)  She said:

“I told Moody that I was concerned with the area and that I asked whether Moody had arranged for the area to be inspected and remediated.  I asked whether Sarina’s could get a structural engineer report to make sure that the cause of the damage wasn’t anything sinister or significant.  And Mood said we already have a report.  I took that to be an engineer’s report.” (ibid) L13-20.

25She said that she also “informed him that we’d actually blocked the space off, so that we’d restrict the staff going up there.” (ibid) L23-25  This meant that the staff were precluded from going out on the terrace. (ibid) L26-31  Ms Illevold said that Mr Hussein never told her that Sarina did not have an engineer’s report. (T610, L22-23)  Early on 6 March, Ms Illevold carried out her own inspection on site.  She said:

“I couldn’t go out to the balcony [viz the terrace], I could only look through the window in one area, but I wanted to go down and have a look myself and also, what had been done to block the area off – and just to ascertain really where the dangers were.  Richard [King] was doing the same thing …” (T613, L13-17)

26The doors to the terrace were padlocked and some hazard tape was erected.  This was done by one of the Brotherhood’s contractors, Mr Mark Lewis. (T614, L13-17)  At the time of these events, there were 49 Brotherhood staff working onsite, all of whom were involved in the Brotherhood’s community projects with the exception of two receptionists. (T616, L21-31)  Whilst the original lease documents apparently referred to Wesley Mission as a sub-tenant of the Brotherhood, as at March 2020, they had ceased to be in occupancy. (T617, L5-11)

27On the late afternoon of 6 March 2020, HSE advisor Mr Richard King, provided the outcome of his workplace safety assessment by email to relevant persons at the Brotherhood. (CB 305-306)  According to the review the terrace area is “out of bounds until the engineering inspection report is undertaken and we have more information to work with.” (CB 306)  The doors were locked and shut with chains and padlocks.  On 10 March 2020, Ms Illevold sent an email to Mr Hussein at Sarina, stating: 

“The lessee has appointed an Engineer to inspect the property and provide a report so that we can ascertain OHS for the tenancy.

The engineer has asked if the landlord has the original engineering drawings or subsequent reports. 

Could you kindly respond as a matter of urgency.”

(CB 316)

28The drawings were not made available.  On the evening of 10 March 2020, Ms Illevold emailed Mr Hussein referring to a telephone conversation and advising of possible Coronavirus contacts at Johnston Street. (CB 320)  Later that evening, based on further information, she said that the risk was minimised but the Brotherhood would “still proceed with the precautionary response and shut the office down for 24 hours”. (CB 321)

29Mr Iscaro of NSIENT Consulting Engineers provided a report on his inspection of the damaged balcony at Level 2, 219 Johnston Street.  Mr Isaac passed the report on to Ms Illevold. (CB 337)  The report noted that the Level 2 slab in the Johnston Street building: 

“… appears to be constructed with pre-cast concrete planks, similar to a Hollowcore Slab system, spanning between the supporting pre-cast concrete panels and concrete beams.

It appears that movement has occurred in the slab at the Eastern end of the Level 2 Slab resulting in the Level 2 Balcony tiles and grout overhanging the slab edgy by approximately 30mm.  Some render at the edge of the Level 2 Balcony has also become dislodged and fallen onto the Level 1 Balcony below.” (CB 339)

30Under the heading “Recommendations”, Mr Iscaro said:

“In our opinion the loose render, tiles and grout at the edge of the slab are a hazard and may cause injury to any users of the Level 1 Balcony if they become fully dislodged and fall.  All lose render and tils should be removed immediately along the edge of the Level 2 Balcony.”

31The report then observed that:

“The cause of the movement is not clear at this stage and further investigation will be required.  The following items should be undertaken in immediate to short term to further investigate the likely cause of the movement:

•      The tiles and grout on the Level 2 Balcony should be removed for an extent of 1.0m from the slab edge in order to expose the underlying superstructure to enable this to be inspected by a Structural Engineer.

•      The tiles and grout should also be removed for an extent of 1.0m each side of where the tiles have popped up in the middle of the Level 2 Balcony in order to expose the underlying superstructure to enable this to be inspected by a Structural Engineer.

•      The Level 2 floor should be surveyed in order to assist in determining the direction and amount of movement that may have occurred. The survey results should be provided to a Structural Engineer for review in order to assist in determining the likely cause of the movement.

•      The Structural Drawings should be provided to a Structural Engineer in order to confirm the structural system of the building and to assist in determining the likely cause of the movement.

•      An extended visual inspection of the Level 2 slab soffit along the Eastern edge of the building should be undertaken to inspect for any cracking at the connection of the slab soffit to pre-cast panel connection.

•      The movement may also be a result of thermal and/or expansion due to water absorption of the tiles. We did not observe any expansion joints in the tiles along the Level 2 Balcony. The location of any expansion joints in the tiles of the Level 2 Balcony should be picked up on the survey indicated above.”

(CB 339)

32The text of the report indicates that it was an investigation of a problem at Level 2.  The photographs attached (CB 340-342) indicate an inspection carried out at Level 2 as well as within the opposite area at Level 1. (CB 344)

33Meanwhile, Dr Lucia Boxelarr, the Director of Community Programs for the Brotherhood, sent an email to a number of senior figures in the Brotherhood relative to the operation of the community programs during the Coronavirus pandemic.  She said:

“… while in a traditional sense our services perhaps are non-essential, we are now part of advocacy with government to help them recognise that the kinds of services we perform are a critical part of the response given increasing vulnerabilities of the people we work with.”

34She then said:

“Our position is that we’ll continue in our current mode of serve delivery unless one of our external triggers requires a different response, as per the documentation I shared with you on Friday.

Can I please request that if you need to stop a service, or move to remote delivery, that you discuss that with me first.  Also, one of the things that HR are working on is a way to manage opportunities for staff to be redeployed.  I will keep you posted.  In the meantime, can you please discuss with me when a specific staff member becomes idle, what our option are.” (CB 356)

35NSIENT invoiced the Brotherhood $1,320 inclusive of Goods and Services Tax for “site inspection”. (CB 358)

36Toward the end of March 2020, at least before the designation of community programs as “essential”, on 4 April 2020 as recounted by Ms Illevold, staff were working remotely on community programs including those conducted from Johnston Street. (T360)  Precisely what role Covid on the one hand and apprehension as to the structural integrity of the building on the other hand played in the use or non-use of the Johnston Street premises by the Brotherhood was a matter of controversy.  Ms Marian Pettit, who is National Manager of HIPPY Australia, sent an email to various Brotherhood employees in the early afternoon of 23 March 2020, stating:

“In discussion with the HA team leaders and Katrina, HIPPY Australia staff will not be working from Johnston St from cob today Monday 23/03/2020 and will work remotely from home. Leanne and Vanni at front reception will also be working from home.

Several staff were on ADOs today and will come into work tomorrow, Tuesday to pick up laptops etc to enable them to safely work at home.

We have set up communication channels with our providers, backups and protocols to enable us to continuing working delivering to families and communicating over the next months.

I will be the first point of contact over the coming months, and then triaged to Melissa and Nicola.  [Presumably the “Melinda” referred to is one of the addressees, Melinda Moore, Senior Officer for the Brotherhood’s community programs.]  (CB 360)

37Later the same day Ms Pettit sent a follow-up clarification stating:

“To clarify, Johnston St is not closing, Leanne will be available for WESSI staff by telephone (redirection of reception no 9445 2400 to mobile), email to support people at Johnston St. Leanne has the flexibility if necessary to come in from home subject to government requirements. If this is required please contact both Leanne and myself.” (ibid)

38Ms Pettit sent a further email dated 25 March 2020 reiterating that “Johnston Street remains open” and noting that Leanne [McCaig] had agreed to collect mail, sort mail and so forth at Johnston Street on Tuesdays and Thursdays from 10:00am to noon.  Ms Illevold raised an issue by email of 31 March 2020 about there being “a risk in being in the office alone”. (CB 364)  This was responsive to an earlier email from Ms Pettit indicating that Ms McCaig would be attending the Johnston Street premises twice a week on Tuesday and Thursday mornings for two hours to collect mail and print invoices. (CB 365)

39A situation report dated 1 April 2020 for the Brotherhood observed, “Johnston St office will close today – it is not public facing.  The team will be communicating this internally.” (CB 369)  Despite the apparent attribution of the total or partial closure of the Johnson Street premises by the Brotherhood to cope, Ms Illevold said that concerns about the integrity of the Johnston Street building also mandated the total or partial closure of Johnston Street.  The closure was attributed to Covid she said, because:

“Covid was quite new at the time and staff were very panicky heightened about what would happen, people were scared to come to the office as it was.  And we didn’t want staff … to have this additional worry about the office … Feeling unsafe in the office that they’d been working in an office that was potentially unsafe.” (T599, L19‑26)

40She said she anticipated at that time that “remediation” would be done in a relatively short period of time (T600, L1-3) so therefore it would “probably be better that we didn’t disclose that full extent to staff.” (ibid L6-7)  Ms Illevold agreed that as of 23 March 2020, even in the absence of any concerns as to the integrity of the Johnston Street building, the Brotherhood staff would have been sent home.  However, in the absence of any building concerns, “the staff would’ve returned from 4 April” (ibid L18-23) because from that time onwards the community programs were designated as essential.

41Late in April 2020, viz 24 April 2020, Ms Illevold sent an email to responsible figures in the Brotherhood, headed “Suspension of services – BSL sites”.  It announced the temporary closure of some seven offices in metropolitan Melbourne, “effective 5pm today” with a requirement that contractor “Initial arrange to empty Hygiene Sanitary Bins and then suspend all services until further notice.”  The seventh of the premises referred to was Johnston Street. (CB 375) This email attributed the closures to Covid-19.  By the end of May 2020 there had been no action from Sarina. 

42As a result, Ms Illevold sent a follow-up email to Mr Hussein on the morning of 29 May 2020 asking him to “provide an update on the repair works needed at 219 Johnston Street”.  Mr Hussein responded some 10 minutes later stating inter alia “I'll follow up where we’re with this internally and advise you ASAP.  Just wanting to confirm, have BSL returned to work in the office?”  Ms Illevold responded five minutes later, “Limited staff and we are now working through plans to return …” (CB 391-392)

43Presumably as a result of the “follow up” Mr Hussein sent an email to Mr Jarreau Taueki, who was apparently the manager of the principal owners’ corporation for 219 Johnston Street, asking for a follow up:

“you were engaging an engineer/discussing the balcony issue with an engineer a few months back with a view to producing a report on the works required at [the Johnston Street] property.”

44Mr Taueki replied about an hour-and-a-half later that the owners’ corporation:

“had engaged 2 engineers to attend the property, One of which was provided with the relevant information … but we have not followed since.  I am sorry for dropping the ball on this one.”

45He then referred to an unrelated planning issue affecting the Johnston Street property. (CB 397-8)

46Ms Illevold sent a further “follow up” email to Mr Hussein on the morning of 19 June 2020.  She enclosed a copy of the NSIENT report dated 18 March remarking, “As discussed previously we have lost use of part of the office due to the defective building …”  She concluded, “I have continually followed this up with you and to date, have not been provided any assurance that the landlord is planning to action the request.” (CB 422)  Within the hour Ms Illevold received a response from Mr Arjun Sharma who described himself as a fleet and property administrator with Sarina.  He apologised for the delay and continued:

“This is to confirm that this matter has been forwarded to our mangers and they are looking into this. Unfortunately, in these unprecedented times due to COVID-19 there have been some delays. However, once Moody is back on Tuesday I’ll update him of this and we’ll provide you with an update.

Please let me know if you have any questions.” (CB 445)

47A few minutes later Ms Illevold responded by an email remarking she understood the challenging nature of “the current environment” but noted “the construction industry has worked the entire way through”.  Continuing, “BSL have utilised this time to undertake major repairs and improvements to site’s (sic) whilst they are unoccupied”.  She expressed surprise and disappointment at the lack of action noting that the Brotherhood had obtained its own report which it had provided to the landlord.  She asked for urgent consideration “so that our business operations are not disrupted when we return to the office in July”. (CB 450)

48On the afternoon of 24 June 2020, Ms Illevold sent a further email addressed to Mr Sharma and also copied to Mr Hussein.  She complained that no “update on the property reinstatement” had been provided and no scheduled repair date had been advised.  She said that unless satisfactory advices were received by 12.00pm on 25 June 2020, “we will be forced to escalate the matter”.  She said the Brotherhood owed a duty of care to its staff and noted, “this matter has remained unresolved for 5 months”. (CB 456)

49A Covid crisis report generated by the Brotherhood on 22 September 2020 under the heading “Key Issues and Actions” noted, “Clea is looking into whether HIPPY can access their resources at the office, to continue remote delivery.” (CB 478)   Under the heading “Community Programs update” it was reported, “HIPPY materials collection/delivery, to facilitate continuation of remote delivery – could be ongoing access to office, but as infrequent as possible. A risk assessment will be required.” (CB 481)

50A further email from Ms Illevold dated 8 July 2020 (CB 465) was directed to Mr Sharma and copied to Mr Hussein.  She complained once again that “We have not received an update from you.”  She asked for contact details for Sarina’s “internal legal counsel so that we may discuss the matter direct.”  She noted that the six-week lockdown which had been announced meant that the urgency of the matter had been downgraded, “never the less once restrictions are lifted BSL must ensure that workplaces are safe before becoming operational.”  She said, “The structural engineers report advises that it is not safe with the current damage to building.”  This appears to be a reference to NSIENT report dated 18 March.  Sarina never provided the contact details for legal counsel. (T287 L15-17)

51Consequently, when the Brotherhood’s solicitors, Rigby Cooke, sent a letter of demand to Sarina, it was marked for the attention of the relatively junior employee, Mr Hussein. (CB 484)  Ms Illevold had instructed Rigby Cooke to send the letter of demand dated 9 October 2020.  She said, “Because I was fed up, I wasn’t getting anywhere myself.  Because basically we’d exhausted all avenues. … the amount of time that had passed was becoming just ridiculous.” (T640, L20-25)  Rigby Cooke’s letter (CB 484) complained of “structural damage” to the building in Johnston Street continuing:

“Specifically, this comprises the damage to the wall located above the Level 1 terrace of the Premises (Building Damage) which has resulted in (inter alia) debris falling onto the terrace and causing part of the Premises to be unable to be used.”

52The solicitors then referred to the NSIENT report of 18 March 2020, noting that NSIENT recommended:

“immediate removal of loose render and tiles along the edge of the Level 2 terrace and further investigations into the cause of the Building Damage to ensure safety in the immediate to short term.”

53Paragraph 8 of the letter (CB 485) said:

“Due to COVID restrictions in Victoria, staff have not been attending work at the Premises. However, subject to those restrictions being lifted, BSL intends for staff to return to work at the Premises from early December 2020.”

54The letter rehearsed the history of the Brotherhood’s attempts to obtain a satisfactory response, stating inter alia:

“In the phone call on 5 March 2020, Sarina advised BSL that it had obtained and was now reviewing an engineer’s report in respect of the Building Damage.” (CB 486)

55According to paragraph 17 of the letter:

“As a result of the Building Damage, BSL has been required:

(a)since 24 January 2020, to restrict access to the Level 1 terrace – which comprises 35sqm of the 663sqm of the Premises; and

(b)since 18 March 2020 (upon receiving the findings in NSIENT’s report)  to cordon off the workstations situated adjacent to the glass wall that separates the Level 1 office space from the Level 1 terrace – comprising approximately 50sqm of that office space.”

56Consequently it sought a rent abatement of 5.28% for the loss of the Level 1 terrace and 7.54% for the loss of the office space adjacent to the terrace. (CB 487)  In paragraph 23 (CB 487) the letter demanded provision of a works program by 13 November 2020.  Copies of any engineering reports that Sarina had received relative to the Building Damage, including the report “in or about early March 2020”, sought reimbursement of what was said to be overpayments of rent for the office, and required that Sarina:

“provide written confirmation that the Premises was currently structurally sound for occupation by BSL, save for the restrictions already adopted by BSL to accommodate the hazards posed by the Building Damage.”

57The letter said that failing a satisfactory response within the stipulated time “BSL may exercise its rights and remedies under the Lease without further notice, which include commence court proceedings.” (ibid)  As to this demand, Ms Illevold said that she would not have regarded as satisfied merely by written confirmation, assertion or warranty from Sarina as to the structural soundness of the building.  Such “confirmation” would have to be backed up by expert opinion. (T743, L4-23)

58The entry of a law firm on behalf of the Brotherhood led to an escalation of the issue within Sarina.  Mr Ormesher, one of Sarina’s internal legal counsel, sent an email to Rigby Cooke referring to the letter of demand and continuing:

“We have been preparing scheduled works which have been inhibited by the COVID-19 restrictions.

In any event, we are prepared to work with your client amicably and will have our proposal to you tomorrow together with further information by your requested date under your  tomorrow 4pm.”

59The email was transmitted at 4:30pm on 15 October. (CB 491)

60Mr Ormesher followed up the following afternoon with a substantive response.  He observed that according to the terms of the lease, the terrace did not form part of the Net Lettable Area and therefore not a part of the floor space for which rental was charged.  Therefore, according to Mr Ormesher, a restriction on the use of the terrace provided no entitlement to a reduction in rent.  He said that the area the subject of the damage was “within the Body Corporate”, which I take to mean common property rather than property owned solely by Sarina.  He continued:

“The simple issue has been that given Stage 4 Restrictions, the Lessor has been precluded from undertaking the repairs given that the Body Corporate has advised that it is not deemed to be emergency repairs such as to be permitted under Stage 4 Restrictions. This was reiterated by the Owners Corporation Manager to us on 13 October 2020.”

61He continued:

“Accordingly, we are unable to provide to you the schedule of works requested under your Demand until such time as we may obtain approval to undertake the works. However, given the Damage is relatively minor, we are advised that the repairs should only take insert weeks.” (emphasis added)

62Presumably the emphasised words represented a “blank” which should have been completed in the email as transmitted but were not. (CB 494)  He said, “we note that the Lessee has full use of the Premises notwithstanding the Building Damage.”

63As a goodwill gesture a credit of $4,000 was offered.  There was an attempt, apparently unsuccessful, to have Mr Sgro proceed with the works he had quoted on months earlier. (CB 508)  Mr Neill put the matter in the hands of a Mr Tristan Jolly.  Mr Neill who, it will be recalled, was Mr Hussein’s superior and seems to have taken direct control of the issue following the Rigby Cooke letter said that Mr Jolly was the “brother of a consultant I was using at the Sarina Russo Group at the time in Brisbane.”  He said that he explained the problem to his consultant in Brisbane sharing his frustration “around not being able to get trades and the like in Victoria because of lockdowns”.  He said according to Mr Neill that he could “pull some strings to get this brother to squeeze us in”.  Mr Jolly’s business was known as “Trimax”. (T498, L19‑29)  The email to Mr Jolly stated inter alia:

“Hi Tristan

Per our discussion today re the Level 2, 219 Johnston St, Fitzroy balcony, we need to undertake urgent remedial works (phase 1) to make safe part of the balcony where the render is coming off from the wall (per attached images numbered 6; 7; 8 in structural engineers report) as well as repairing / making safe damage to balcony area (per attached images numbered 1; 2; 3). These works will be to ensure the Lv 1 balcony below is safe to inhabit for our tenants on that floor.

Once these works have been completed we need to review the larger part of the repairs works (phase 2) being the tiled balcony areas and water proofing membrane of the Lv 2 balcony areas.” (CB 511)

64Mr Neill explained that what were described as “phase 1 works” were “make safe” works only. (T499, L7-12)  Mr Neill sought a recommendation from Mr Jolly as to an appropriate structural engineer to engage, ultimately deciding to retain NSIENT, the engineers who had provided the March report to the Brotherhood. (T499, L17-25)  Mr Hussein emailed Ms Illevold on 2 November with a view to arranging access for Mr Jolly. (CB 523-526)  Mr Ormesher sent an email dated 5 November 2020 to Mr Cormie of Rigby Cooke observing that Sarina’s “builders have access to the property in preparation for the commencement of works late next week.” (CB 531)  The email continued:

“The scope will be provided before commencement and we are confident that these works will be suitably completed and signed off by our structural engineer prior to the end of November 2020.  Which is prior to your client’s proposed return to office.”

65The email also said:

“We had begun our procurement of repair works in January 2020 which had gone through staging. However, the onset of COVID-19 restrictions inhibited the commencement of the works. We note you have acknowledged that COVID restrictions have been in place for the last 7 Months. Again, these did impede the repair works because they are not deemed emergency repairs.” (CB 531)

66Mr Cormie had responded to Mr Ormesher’s initial response on 28 October 2020 repeating the requirement for a reimbursement of overpaid rent observing “BSL has lost the use not just of the terrace and but also adjacent office space for OH&S reasons because of the Building Damage.” (CB 532)

67He continued complaining as to the lack of an engineering report and “any assurance that the Premises are currently structurally sound for occupation by BSL …”  He said, “This information is necessary to inform BSL’s decision as to whether or not its employees can return to work at the Premises from early December 2020.”  He denied that the works had been delayed by Covid restrictions. (CB 533)  Mr Jolly quoted $1,846 inclusive of Goods and Services Tax.  His quote was accepted by Mr Neill on behalf of Sarina. (CB 542)

68Mr Neill retained NSIENT to report on the situation (CB 553) and an inspection was coordinated with Mr Jolly for Friday, 13 November 2020. (CB 554-555)  On the afternoon of Friday, 13 November 2020, Ms Illevold sent an email to Ms Pettit who was the head of community programs for the Brotherhood, stating inter alia:

“The landlord had a builder in 2 weeks back to quote and they are sending us a schedule of works any day now.

I understand your frustration but the repairs impact the whole of the rear of the building and all of the tenants.” (CB 557)

69Following the inspection on 13 November 2020, Mr Iscaro, following his inspection, sent an email stating:

“As discussed could you please forward to us a copy of the Structural Drawings of the building in order for us to proceed with the next phase of the investigation to determine why the tiles had become dislodged and why the balustrade is pushing against the building.” (CB 562)

70As a result of that request, Mr Neill said:

“I went through our complete property folders, I went through our archives.  We just couldn’t find – we just didn’t have anything on record.  I went to the local council and we paid the fee to get the complete file done that sits on council for every single document for that building, which we got, and there was – I can’t remember the number but there was a significant number of documents but none of them were structural drawings.” (T505, L15-23)

71Mr Neill sent an email to NSIENT dated 18 November 2020 stating:

“Thank you for your site visit.

As part of your inspection can you please advise if the areas in question per your report to Brotherhood of Saint Lawrence have now been made safe?

Additionally please find attached the construction plans for the site as requested – can you please confirm if you require any other documentation at this time?” (CB 575)

72It would seem that these plans were architectural plans and not engineering plans as requested, as Mr Iscaro in an email to Mr Neill dated 19 November 2020 pointed out. (CB 573-4)  NSIENT provided a report dated 26 November 2020 addressed to Mr Neill at Sarina Russo Group. (CB 108-9)  It stated, “In our opinion the loose render, tiles and grout at the edge of the slab have been removed and is now considered to be safe.”

73The additional recommendations which appeared in the initial report were substantially repeated, introduced by the words “The following items should be undertaken in the immediate to short term to further investigate the likely cause of the movement.”  There was a further dot point in these terms:

“•The balcony edge should be regularly inspected to ensure temporary render patching has not become loosened by further movement. This office is to be contacted immediately for further advice should damage to the temporary patched render occur.”

74One may infer that the recommendation for further investigations derived from NSIENT’s inability to refer to the original structural drawings. (CB 108-9)  Despite these continuing provisos, when Mr Ormesher forwarded the second NSIENT report to Mr Cormie of Rigby Cooke by email of 27 November 2020, he said:

“Please see your Engineer’s Report attached which confirms the area is now considered to be safe.

For your client’s assuredness, we obtained this Report from your client’s engineer.” (CB 600)

75Mr Ormesher said that Sarina considered “the matter resolved” and looked back to welcoming the Brotherhood into the premises 1 December 2020. (CB 600)

76Mr Hussein sent an email to Ms Illevold in the late afternoon 8 December 2020 stating:

“We’ve been liaising with Mark from the Johnston Street Brotherhood of St Laurence office, but can confirm that the works on the balcony of level 1 have been completed.” (CB 619)

77Ms Illevold responded:

“Could I ask you to kindly liaise with Ed Cormie at Rigby Cooke on this matter.

BSL have appointed Rigby Cooke to act on BSL’s behalf to resolution.

Mark Lewis is an external contractor to BSL and not authorised to act on BSL’s behalf regarding the tenancy.” (CB 625)

78Rigby Cooke then sent a letter by email to Mr Ormesher dated 16 December 2020.  The letter first challenged the characterisation of the incident, report noting that the recommendations for further investigations repeated in the second report had been recommended in the first report and still remained outstanding.  At paragraph 8 Rigby Cooke stated:

“For obvious reasons, BSL cannot occupy the Premises until such time as the investigations recommended by NSIENT have been undertaken and there is appropriate engineering certification that the Premises are structurally sound for occupation.”

79There was a demand for confirmation by 4.00pm 18 December 2020 that:

“(a)Sarina will undertake the investigations recommended in the NSIENT reports as a matter of urgency and provide BSL with a copy of the engineer’s findings.

(b)It is agreed by Sarina that 100% of the rent and building outgoings are suspended pursuant to clause 16.1 of the Lease until such time as there is appropriate engineering certification that the Premises are structurally sound for occupation by BSL.” (CB 633-4)

80Mr Ormesher responded in an email to Mr Cormie and his supervising partner, Mr Demian Walton, dated 18 December 2020, stating inter alia:

“3.In accordance with your client’s Engineers confirmation relating to this common area, we confirmed to you that the area is safe for your client’s estimated return to office date of 1 December 2020. Our Property Team has likewise confirmed with your client’s Facilities Team that the Premises remain fit for occupation by your client who has unfettered access to the Premises.”

81In the following paragraph Mr Ormesher said:

“there are no reasonable grounds for your client to consider that the Premises was unfit for occupation. The Premises continues to be fit for occupation by your client.” (CB 640)

82On 19 January 2021, Ms Paula Rowe, Administration Lead and Project Advisor of the Brotherhood, sought an “Update for Johnston Street” from Ms Illevold asking:

“I am trying to prepare for a COVID-safe staff return to Johnston Street and am wondering if there is any update on the state of Johnston Street site?

Has there been in communication from Sarina Russo on their intentions please?” (CB 649)

83Ms Illevold responded:

“They have until 25th to respond.

Can you delay until then please.” (CB 649)

84An organisation known as Kingdom Construction Group Pty Ltd rendered a tax invoice for work carried out on 27 February 2021 and 28 February 2021 and the supply of boxes; total amount invoiced $7,055.64. (CB 663)  A further invoice including charges for rubbish disposal, van hire and the supply of labour on 2 March 2021 was rendered in the sum of $1,210,000. (CB 665)  Rigby Cooke sent an email to Mr Ormesher dated 3 March 2021, reciting the history of the matters and quoting from a third NSIENT report which was enclosed, in which Mr Iscaro said:

“In my opinion the immediate risk to of injury to people on the lower level due to falling loose render at the edge of the slab has been rectified however, it is still not clear why the cracks have occurred or why they were so large. It is not clear if the loose render was a local problem caused by any number of minor construction issues or if it is an indication of a significant failure within the structure and/or an indication of significant movement or distress in the structure. In my opinion it is not clear if there is still a risk of injury to the tenants without further investigation.

A report confirming that the building is safe for staff to return to work can’t be provided when the cause of these significant cracks still remains unknown.” (CB 668)

85According to Rigby Cooke these matters remained unresolved despite the warning which it had given in its letter of 16 December 2020 and this was seen:

“as evincing Sarina’s unwillingness or inability to render performance of the Lease and a repudiation of its obligations under the Lease.” (CB 668)

86Paragraph 9 stated:

“We advise that BSL hereby accepts Sarina’s repudiation of the Lease, and the Lease is therefore now at an end.” (CB 667-8)

87The charges by Kingdom were for moving the Brotherhood out of the Johnston Street premises, a move which had been completed the day before Rigby Cooke’s email.  Ms Illevold said that the Brotherhood would not have determined or purported to determine the lease in this way:

“Provided we had an engineering report that confirmed that those inspections had been done, and that the building – there wasn’t structural damage and no risk to staff.  We wouldn’t have terminated the lease.” (T647, L25-29)

88Referring to the photographs at CB 106, Mr Neill said they depicted the state of the premises after the Brotherhood had moved out with a partition used by the Brotherhood, which Mr Neill described as “very old school”, were left in situ. (CB 507-8)  Removal of these fixtures and fittings according to Mr Neill would cost at least $50,000. (CB 509)

89Mr Hussein complained that he had difficulty accessing the former area of the Wesley Mission sub-tenancy which had its own separate electronic access regime, which had not been arranged by Sarina.

90The premises have since been re-let to the Victorian Electoral Commission but this re-letting commenced after the expiry of the original lease term held by the Brotherhood.

91Sarina’s solicitors, HWL Ebsworth, sent an email to Rigby Cooke dated 18 March 2021 denying the allegations of repudiation by Sarina.  In particular, it denied that the NSIENT reports entailed any finding that the Johnston Street premises were structurally unsound or unfit. (CB 677-80)  A further letter from HWL Ebsworth to Rigby Cooke dated 1 April 2021 demanded $375,828.78 inclusive of GST by way of damages relative to loss of rent, repairs and alterations minus the face value of a bank guarantee of $66,330. (CB 682)  With this demand unsatisfied, the solicitors for Sarina filed the Writ commencing this proceeding in August 2021.

92Those solicitors retained Mr Ian Flanders of Clive Steele Partners Pty Ltd, consulting structural and civil engineers, to give expert evidence on the plaintiff’s behalf in the proceeding. (CB 64)  Mr Flanders prepared an expert report dated 7 April 2022. (CB 56)  Mr Flanders had already been retained by Sarina in the period April to May 2021. (T571, L12-13)

93Mr Neill said that he called Mr Flanders “out of the blue”. He said “I was going through looking for structural engineers and when I mentioned the site, you know, he said, yes, that’s actually my site, I know that site and I’ve got the plans.” (T571, L17-21)

94Mr Neill said “It was certainly a Eureka moment … It was one of those punch the air moments”. (T572, L16-17, L24-25)

95According to Mr Flanders’ report:

“The building was originally designed and documented by our office (Clive Steele Partners Pty Ltd) in June 2001.  The undersigned [viz Mr Flanders] was the design engineer responsible for the project”. (CB 57)

96Mr Flanders’ report said:

“Floor levels taken by myself on the level 2 balcony on 10 May 2021 … were checked again on 30 March 2022, with no discernible changes, given the variable compressibility of some of the floor coverings (carpet etc)”. (CB 58)

97He said the floor levels “showed minimal fall to the drainage outlets.  The general levels along the balcony were within normal construction tolerances”. (ibid)

98Crucially, responding to a question posed by the solicitors, Mr Flanders said:

“The structural condition and integrity of the balcony [viz the Level 2 balcony] is currently compliant with current building practices and standards. The cracked and dislodged tiles currently present trip hazards, but this does not affect the structural integrity of the balcony and/or wall. I do not consider that the cracking and lifting of the tiles has been caused by any issues with the structural integrity of the roof slab.” (CB 60)

99He said he believed:

“that the cause for the dislodgement of the balcony tiles/render is one of a lack of expansion joints in the tiles. All concrete structures shrink over time, with the majority of the shrinkage occurring in the first 12 months after the concrete has been placed. Further minor movements can occur due to thermal effects on the structure from hot to cold seasons. The applied tiles will often expand due to water absorption. For these reasons, expansion joints in the tiling are normally installed at regular centres to allow movements. From photo B6, it is apparent that there has been compression in the tiles, forcing one line of tiles to rise up over the adjacent tiles, thereby creating its own expansion joint. Had there been regular expansion joints installed, this is unlikely to have occurred.” (CB 61)

The current proceeding

Statement of Claim

100By its Statement of Claim, Sarina recited the existence and relevant terms of the 2014 lease and its renewal pursuant to the exercise of an option.  Next, it recited the history of complaints and demands for repairs made on behalf of the Brotherhood, and Sarina’s advices as at 18 December 2020, that the premises were safe for occupancy.

101Next, the Statement of Claim referred to Rigby Cooke’s letter dated 3 March 2021, which it described as the “Purported Termination”, asserting that it was ineffective because Sarina “had not evinced an intention that it no longer intended to be bound by the lease; … had not repudiated the lease”.  It was said that the Brotherhood’s conduct constituted a repudiation which had been accepted as such by Sarina on or about 1 April 2021.  The claim sought damages in accordance with HWL Ebsworth’s letter of demand before action.

Defence and Counterclaim

102By its Defence and Counterclaim, the Brotherhood recited the history of the lease of the Johnston Street property and its renewals.  It also referred to Sarina’s covenant to give the Brotherhood quiet enjoyment of the premises and to maintain the building in a structurally sound condition and be responsible for all capital and structural repairs.  Further, it referred to clauses for the suspension of payment “if any part of the Building is damaged … at any time by rendering the whole or any part of the Premises physically unfit for use by [the Brotherhood] …”.

103It referred to a further provision in the lease for termination thereof if restoration is not practically completed within a reasonable time.

104Next, the Defence and Counterclaim referred to what was described as a “roof slab defect” and the history of complaints by the Brotherhood in light of the Brotherhood’s obligations under occupational health and safety legislation. 

105Sarina, it was said, had failed or refused to investigate or rectify the roof slab defect.  It admitted that the Brotherhood had terminated the lease and said it was entitled to do so.  It denied the allegation of breach or wrongful repudiation of the lease by the Brotherhood, and alleged a failure to mitigate Sarina’s damages.  

106The Counterclaim sought damages for breaches by Sarina inter alia of the covenant for quiet enjoyment.  It sought recovery of the costs of two of the NSIENT reports, various outlays associated with the Brotherhood’s termination, and the face value of the bank guarantee drawn down by Sarina.

Reply and Defence to Counterclaim

107By its Reply and Defence to Counterclaim, Sarina joined issues with the Brotherhood, admitting certain matters but denying various other matters.  Paragraph 8C of the Defence and Counterclaim of the Brotherhood asserted that Mr Hussein had told Ms Illevold that Sarina “was in receipt of an engineer’s report in relation to the damage to the exterior wall above the terrace”.  This was described as the “Undisclosed Engineer’s Report”. 

108Paragraph 12 of the Reply and Defence to Counterclaim admitted that Mr Hussein had told Ms Illevold that Sarina “was in receipt of an engineer’s report”. At the outset at trial, counsel for Sarina sought to withdraw this admission and was given leave to do so.

Conclusions

Sarina – a model lessor?

109The Brotherhood’s case, in resisting Sarina’s claim and propounding its counterclaim, necessarily entailed a sustained critique of Sarina’s performance in the lessor/lessee relationship.  Sarina’s witness, property administrator, Mr Hussein, internal legal counsel, Mr Ormesher, and former senior executive, Mr Neill, were all cross-examined along these lines.  The foregoing narrative paints a sad story of rank discourtesy to the Brotherhood by Sarina’s team.  No intemperate language was used, but the Brotherhood was repeatedly “strung along” with promises of action and investigation in circumstances where the evidence showed that one executive, Mr Pennisi, declined even to consider the matter and the other, Mr Neill, declined to take any action out of a fear that he might tread on somebody else’s toes.  The Brotherhood was required to instruct a legal practitioner, no doubt at not inconsiderable expense, before Sarina was prepared to turn its mind to the Brotherhood’s concerns or render anything that could be described as a substantive response to them.

110Wisely, Sarina’s counsel did not attempt to defend the indefensible.  The question for consideration now, however, is whether Sarina’s treatment of these matters went beyond discourtesy and poor business practice, and constituted repudiation.

Structural defect?

111The unhappy dispute which has led these parties to court originated from concern on the part of the Brotherhood that the displacement of tiles at the level above the Brotherhood’s premises, and the detachment of rendering from a wall abutting the terrace area outside the Brotherhood’s office, was indicative of a structural defect in the building rather than being merely a flaw in its outer finishes.  The narrative began with an email from Mr Claridge of the Brotherhood to Mr Hussein of Sarina complaining that after “large amounts of rain”, the “upper wall located above our balcony has started to shift significantly …” ([5] above)  Even before carrying out an onsite inspection, Ms Illevold was satisfied that there was no structural issue relative to the wall.  She told the Brotherhood’s local manager, Ms McCaig, that the detachment of the render would “not impact the integrity of the wall itself”. ([22] above)

112Thereafter, there seemed to have been no concern as to possible structural issues with the wall from which the render fell.  There were concerns that a structural defect may have been affecting what has been described in this proceeding as “the roof slab” – that is, a concrete slab which serves as the ceiling of what was the Brotherhood’s tenants and the floor of the unit above.  The concerns seem to date from the first of the NSIENT reports obtained in March 2020 ([29]‑[32] above) which referred to movement having occurred “in the slab at the Eastern end of the Level 2 slab …”

113The NSIENT reports have been put in evidence as part of the narrative.  They have not been advanced as evidence of the correctness of the opinions expressed.  The formalities required by Order 44 as to expert evidence were not undertaken and no-one from NSIENT gave evidence.  The only expert opinion evidence on the question as to whether at material times a structural defect existed in the “roof slab” came from Mr Flanders.  His conclusions were that the displacement of render on the vertical walls and tiles from the upper surface of the roof slab resulted from a failure to install any or adequate expansion joints, and not as a result of any movement or fracturing of the slab. ([95]-[99])  Mr Flanders’ evidence stands uncontradicted and unchallenged in the sense that it was not put to him in cross-examination that his opinion was incorrect.

114There was no structural defect in the building of the type feared by the Brotherhood or slated for further investigation by NSIENT.

115It follows that the Brotherhood’s case that it accepted a repudiation of the lease offered by Sarina must depend upon the manner in which Sarina responded to its complaints.  The issue with displaced tiles and falling render had been made safe several months before the Brotherhood moved out.  During which time it elected to treat the lease as enforceable by paying rent.

Repudiation

116The Brotherhood’s counsel, Mr Petrie, said that according to the decision of the High Court in Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd (2007) 233 CLR 115 [44], repudiation of a contract may occur in one of two ways:

“(a)by any breach of a contract by a promisor that justifies termination (this would include, for instance, breach of a condition, or breach of an intermediate term that carries sufficiently serious consequences); or

(b)by conduct which evinces an unwillingness or an inability to render substantial performance of the contract. The test is whether the conduct of one party is such as to convey to a reasonable person, in the situation of the other party, renunciation either of the contract as a whole or of a fundamental obligation.”

(Brotherhood’s Outline of Closing Submissions dated 23 November 2022, paragraph 9)

117The paragraph referenced by Mr Petrie in the High Court’s Judgment [44] is as follows:

“In its letter of termination, Koompahtoo claimed that the conduct of Sanpine amounted to repudiatory breach of contract.  The term repudiation is used in different senses.  First, it may refer to conduct which evinces an unwillingness or an inability to render substantial performance of the contract.  This is sometimes described as conduct of a party which evinces an intention no longer to be bound by the contract or to fulfil it only in a manner substantially inconsistent with the party's obligations[5]. It may be termed renunciation. The test is whether the conduct of one party is such as to convey to a reasonable person, in the situation of the other party, renunciation either of the contract as a whole or of a fundamental obligation under it. (In this case, we are not concerned with the issues that arise where the alleged repudiation takes the form of asserting an erroneous interpretation of the contract. Nor are we concerned with questions of inability as distinct from unwillingness.) Secondly, it may refer to any breach of contract which justifies termination by the other party. It will be necessary to return to the matter of classifying such breaches. Campbell J said this was the sense in which he would use the word ‘repudiation’ in his reasons. There may be cases where a failure to perform, even if not a breach of an essential term (as to which more will be said), manifests unwillingness or inability to perform in such circumstances that the other party is entitled to conclude that the contract will not be performed substantially according to its requirements. This overlapping between renunciation and failure of performance may appear conceptually untidy, but unwillingness or inability to perform a contract often is manifested most clearly by the conduct of a party when the time for performance arrives. In contractual renunciation, actions may speak louder than words.” ((2007) 233 CLR 115, 135‑6)

118The contention that any breach of contract which would justify termination of the relevant contract necessarily constitutes repudiation must be rejected.  This proposition is not to be found in [44] of the High Court’s Judgment in Koompahtoo.  It is inconsistent with the High Court’s decision in Shevill v The Builders Licensing Board (1982) 149 CLR 620. In Shevill’s case, a landlord exercised its rights under a proviso for re-entry based on a failure by the tenant to pay rent.  Whilst not questioning the validity and legality of the landlord’s action in re-entering and terminating the lease, the High Court concluded that the tenant had not repudiated the lease and therefore could not be rendered liable for “loss of bargain” damages.  Shevill’s case is referred to in paragraph 11 of Mr Petrie’s closing submissions.

119Mr Petrie said the inquiry as to whether a repudiation has occurred “is an objective one, which focuses on the conduct of the defaulting party.”  There was no occasion for an inquiry into the subjected state of mind of the allegedly repudiating party.  He referred to Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd (1989) 166 CLR 623, 647 per Brennan J (as he then was). (Closing submissions, paragraph 12) Aside from these matters, all circumstances surrounding the relevant dispute were available for consideration as to whether a repudiation had occurred. He referred to R & A Cab Co Pty Ltd v Kotzman [2008] VSCA 68 [48] per Ashley JA. (Closing submissions, paragraph 14)

120According to Mr Petrie, unreasonable delay in performance was amongst “some long-established categories of conduct  that had been found to support a finding or inference of repudiation.”  Again, he referred to the Judgment of Brennan J in Laurinda, where his Honour observed that to secure a finding of repudiation, it would be prudent for the innocent party to serve a notice to complete. ((1989) 166 CLR 623, 644, closing submissions, paragraph 15) He referred also to the Judgment of Mason J (as he then was) in Louinder v Leis (1982) 149 CLR 509, 526, where his Honour said that a defaulting party’s failure to perform in the time limited by a notice to perform an obligation could justify a finding of repudiation, even in a case where the relevant term was not an essential one.

121Mr Petrie said the doctrine of repudiation applied to leases as it does to other contracts.  He referred to Progressive Mailing House Pty Ltd v Tabali Pty Ltd (1985) 157 CLR 17. (Closing submissions, paragraph 17)

122Mr Virgona, for Sarina, broadly agreed with the analysis of the doctrine of repudiation advanced by Mr Petrie.  He referred to a number of other authorities; in particular, Versus v A.N.H Nominees Pty Ltd [2015] VSC 15 [130], per Croft J, where his Honour applied the formulation of what constituted repudiation adopted by Brennan J in Laurinda. (Closing submissions, paragraphs 61‑62)  Mr Virgona said that there was a distinction to be drawn between reluctance to perform obligations in a timely manner, on the one hand, and reluctance ever to perform them, on the other.  He referred to the Judgment of Mason CJ in Laurinda (1989) 166 CLR 623, 634, where his Honour said that the outcome of the analysis in the second instance would “depend upon its particular circumstances, including the terms of the contract.” (Closing submissions, paragraphs 63‑64)

123Accordingly, said Mr Virgona:

“it is indeed a rarity where a landlord will have been found to have repudiated a lease by reason of a failure to comply with a repair clause contained in a lease.” (Closing submissions, paragraph 65)

124He referred to a dictum of Mason J in Progressive Mailing House Pty Ltd v Tabali Pty Ltd (1985) 157 CLR 17, 32‑3, where his Honour said:

“repudiation of a contract is a serious matter and is not to be lightly inferred … neither a breach of a covenant to pay rent nor a breach of a covenant to repair, without more, constitutes a breach of a fundamental term, nor amounts to a repudiation of a lease.”

125Mr Virgona referred to the decision of New South Wales Court of Appeal in Galafassi v Kelly (2014) 87 NSWLR 119, 133 where Gleeson JA (as she then was) said:

“62.For the conduct of a party to constitute a renunciation of its contractual obligations it must be shown that the party is either unwilling or unable to perform its contractual obligations, that is, it has evinced an intention to no longer be bound by the contract or stated that it intends to fulfil the contract only in a manner substantially inconsistent with its obligations and in no other way: Shevill v Builders Licensing Board [1982] HCA 47; 149 CLR 620 at 625-626; Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd [1989] HCA 23; 166 CLR 623 at 634, 647-648, 658; Koompahtoo at [44]; Foran v Wight [1989] HCA 51; 168 CLR 385 at 423. Where inability to perform is declared the conduct amounts to a refusal to perform and the innocent party need not prove that the other party was actually unable to perform as a matter of fact: Universal Cargo Carriers Corporation v Citati at 437. ([1957] 2 QB 401)

63.A renunciation can be made either by words or conduct, provided it is clearly made: Universal Cargo Carriers Corporation v Citati at 436.  The test is whether the conduct of one party is such as to convey to a reasonable person, in the situation of the other party, renunciation either of the contract as a whole or of a fundamental obligation under it: Koompahtoo at [44]; Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd at 659 (Deane and Dawson JJ) and at 647 (Brennan J).

64.So far as factual inability to perform is concerned what needs to be shown is that the party in question has become wholly and finally disabled from performing the essential terms of the contract altogether: Rawson v Hobbs [1961] HCA 72; 107 CLR 466 at 481; Almond Investors Ltd v Kualitree Nursery Pty Ltd [2011] NSWCA 198 at [62] (Bathurst CJ; Giles JA and Handley AJA agreeing). It is well accepted that factual inability must be proved ‘in fact and not in supposition’:  Universal Cargo Carriers Corporation v Citati at 50.”

(2014) 87 NSWLR 119, 133

Has there been a repudiation?

126To determine whether Sarina repudiated its obligations as lessor, the first step is to determine what its obligations as to repair and maintenance were.

127The relevant clause in the lease – clause 14.4 – is quoted at [1] above. The parties were agreed that the final unlettered paragraph, appearing after paragraphs (a) and (b), should be regarded as a separate and substantive sub-clause as if numbered or lettered (c) and reading “the lessor … is responsible for all capital and structural repairs to the building …”

128Mr Petrie advanced a number of principles which he said should inform the characterisation of Sarina’s obligations under clause 14.4.

“35…

(a)the obligation applies to the building, and not the premises. This accords with common sense and commercial reality, given the Premises are located within the building, and it would not do any good for the premises, but not the building, to be structurally sound. In any event, at trial, Sarina readily, and properly, acknowledged that clause 14.4 imposes a requirement on Sarina in connection with the whole of the building, and not merely the Premises;

(b) the obligation is not merely to maintain generally, but to maintain, specifically, the building in a structurally sound condition. The obligation is not, for instance, merely to ensure that the paintwork or some other incidental aspect of the building remains in good condition, but is directed to ensuring that the building maintains its structural integrity in the sense that it is not unsound. The Court should accordingly proceed on the basis that it was important to both parties that the building be structurally sound;

(c) the obligation is directed to structural soundness. This is to be contrasted with, for instance, an obligation to keep a building free from structural defects or structural damage. While the dictionary meaning of the adjective “sound” includes things that are free from “damage” or “defect”, it equally includes things that are simply “secure”, or “reliable”. These definitions may be contrasted with the antonym “unsound”, which includes things that are “impaired”, “defective” or simply “unreliable”, or “not solid or firm, as foundations”. Accordingly, the concept of ‘soundness’ is a broad term, and may be read as equally referring to actual damage or something that is merely ‘secure’ or ‘reliable’. There is no reason why the Court should give the word any special meaning beyond its plain and ordinary meaning, and the Court should proceed on the basis the parties deliberately chose that word;

(d) the reference to keeping the building ‘wind and water tight’ are not words of limitation. That is, sub-paragraph (a) should not be read down in any way so as to limit its application to matters of wind and water only. Such an approach would create an inconsistency with the reference to structural soundness, which has nothing to do with whether or not the building is wind and water tight. Moreover, it is clear from the preceding word ‘and’, that the obligation to keep the building wind and water tight is simply an additional obligation to the requirement of maintaining the building in a structurally sound condition.

…

37First, the ordinary meaning of the word ‘maintain’ is to ‘preserve’, ‘keep in due condition’, to ‘keep unimpaired’, or to ‘keep in a specified state’.  Applying the ordinary meaning of this word to the subject matter of sub-paragraph (a), Sarina’s obligation is necessary to preserve the building in a structurally sound condition, or to keep the building in a state of structural soundness.”

(Closing submissions, paragraphs 35 and 37)

129Mr Petrie stressed that the clause chose:

“to impose two separate obligations on Sarina – one being to maintain and build in a structurally sound condition, and the other being to undertake structural repairs to the building – the parties clearly intended to create obligations of different characters.” (Closing submissions, paragraph 38)

130He continued “the obligation to maintain could not be regarded as only engaged where actual structural damage had occurred.”  By that time, he said the Duty to Maintain would have been breached already and the Duty to Repair would have arisen. (Closing submissions, paragraph 39)  Mr Petrie said that were it otherwise, it would be open to the lessor, under a repair and maintenance obligation such as this, to refrain from taking any maintenance action and be obliged to act only in the face of a building collapse.  He concluded:

“Accordingly, the Duty to Maintain did not require Sarina to undertake comprehensive engineering assessments on a daily basis; rather, it was only required to satisfy itself that the building was structurally sound if it ever had cause to doubt or be unsure about the structural integrity of the building.  Such an approach accords with business common sense.” (Closing submissions, paragraphs 40 and 41)

131Mr Petrie had already referred to the High Court’s mandate to Courts to apply a business-like interpretation to business contracts.  Electricity Generation Corp v Woodside Energy Ltd (2014) 251 CLR 640, 656‑7 [35]

132Mr Petrie stressed the mandatory effect of the word “must” relative to the obligation to maintain the building in a structurally sound condition stood in contrast to the obligation to maintain it wind and water tight which only required the use of best endeavours. (Closing submissions, paragraph 43)

133Mr Petrie referred to a number of decisions on the operation of repair and maintenance covenants, namely, Hamilton v National Coal Board [1960] AC 633, 647; Haydon v Kent County Council [1978] QB 433, 464; Greetings Oxford Koala Hotel Pty Ltd v Oxford Square Investments Pty Ltd (1989) 18 NSWLR 33; Seiwa Australia Pty Ltd v Owners SP 35042 [2006] NSWSC 1157; and Ridis v Strata Plan 10308 [2005] NSWCA 246. He said that these authorities were generally supportive of the principles that he advocated. He conceded, however, that none could be regarded as “on all fours” with the present dispute. In particular, he conceded that he could refer me to no authority where a lessor had been held in breach of a covenant to repair and maintain by reason of a failure or refusal to commission expert engineering reports or make them available to the lessee.

134Mr Petrie agreed that the duty to repair, as distinct from the duty to maintain, only arose in the case of actual damage and was engaged by reason of the actual damage on the terrace.  Uncertainty as to structural soundness did not engage the obligation to repair. (Closing submissions, paragraph 48)

135It follows that sustaining a finding of repudiation by Sarina requires a finding relative to its performance of the duty to maintain, whether by way of an actual breach of the obligation or an intimation or indication of unwillingness to perform.

136Mr Virgona, on behalf of Sarina, referred to a number of the same authorities as to repair covenants as were cited by Mr Petrie, in particular, the proceeding of Young J in Greetings Oxford Koala Hotel v Oxford Square Investments Pty Ltd.  After referring to a number of formulations of the obligation to maintain, Mr Virgona observed:

“As those definitions correctly identify, the concept of maintenance – particularly in respect of a structure – connotes keeping something in the same state it is required to be kept.  Where that state remains throughout the relevant period, how can it possibly be said that there has been a failure to maintain?” (Closing submissions, paragraph 89)

137Mr Virgona noted, however, that in the Greetings Oxford case, the obligation to maintain extended inter alia to a lift system where his Honour held that the obligation to maintain the lift extended to cases not only of malfunction but also required the taking of preventative measures to ensure that the lifts would not malfunction. His Honour noted that the lease under consideration entailed not only the maintenance of the lifts but, in appropriate circumstances, their replacement. ((1989) 18 NSWLR 19, 33, 40)

Was there a breach of the covenant to “maintain”?

138In considering whether Sarina can be said to have actually breached its duty to maintain the building in Johnston Street, it is necessary to bear in mind that a duty to maintain a complex structure such as an office building may operate differently relative to different parts of that structure.  There may be instances where a structural member of a building is constituted by a beam or girder which, by reason of the metal chosen or perhaps location – for instance, adjacent to the sea in a windy climate – might require regular application of anti-corrosive paint.  The obligation to “maintain”  therefore would require what are sometimes described as “programmed maintenance” relative to this structural member.  On the other hand, concrete members in a structure, which are not normally subject to corrosion in the same way as an exposed metal member might be, whilst subject to a duty to maintain, would not normally command for the purposes of compliance with the relevant covenant a duty to have a regime of programmed maintenance.

139None of the authorities canvassed by counsel indicate that an obligation to maintain simpliciter carries with it an obligation to obtain expert reports.  There is no reliance here upon any alleged implied term which would enlarge the obligation to be found within the four corners of the written clause 14.4.  I reject the contention that the obligation to maintain in the present situation extends to an obligation to obtain a structural engineer’s report and/or to provide that report to the Brotherhood.

140Insofar as deadlines have been prescribed relative to the provision of reports and the carrying out of investigations by solicitors’ letters written on behalf of the Brotherhood, the failure to meet such deadline would not constitute, and did not constitute, repudiation by Sarina because Sarina was under no obligation under the terms of the lease to undertake the steps.

141I am fortified in the conclusions by the further consideration.  Requirements for the provision of reports are not uncommon in leases. Typically, they arise in connection with provisions restricting a tenant’s entitlement to carry out alterations to the demised premises without landlord consent.  Had a regime of mandatory engineering reports been agreed by the parties, express provisions along those lines could have been inserted in the lease.  Their absence tells against the existence of any such obligation.

142Further, Mr Petrie’s analysis of the obligation to repair and maintain assumes that all structural defects are preceded by a period of deterioration which the duty to maintain should ensure do not progress towards becoming actual defects.  Yet there must be potential instances where the structure is sound at one time and, after a single event, becomes unsound and in need of repair.

143Again, I am prepared to assume, contrary to the contentions of Mr Virgona on behalf of Sarina, that Sarina evinced an intention not to perform its obligations under the covenant to maintain embodied in clause 14.4 of the lease by the process of inspection and reporting demanded by the Brotherhood.  Since the demand from the Brotherhood, however, was not based on Sarina’s actual obligations under the lease, the evincing of the intention not to perform could not be a repudiation.

144I should note that Mr Virgona contended, upon analysis of the email record between the parties, it was only in Rigby Cooke’s letter in December of 2020 that the first demand was made specifically for the implementation of the recommendations to be found in NSIENT’s first (March) report. 

145Mr Petrie observed, however, that implementation of the recommendations had been implicitly demanded by the Brotherhood’s referring of the report to Sarina as the basis of its concern. 

146If I accept Mr Virgona’s contention that implementation of the NSIENT recommendation was only the subject of a demand for performance in December of 2020, there still remained a period of delay on Sarina’s part were it in fact obliged to obtain a structural engineer’s report as to the soundness of the building.  It follows that I reject the Brotherhood’s contention that Sarina repudiated the lease.

147Further, or alternatively, the Brotherhood alleged that there had been a breach of the covenant in the lease for quiet enjoyment.  As I understand it, this was advanced as an alternative basis for an alleged repudiation and as the basis for recovery of rent said to have been overpaid.  Alternatively, damages for breach of the covenant.

148The premise underlying the contention that there had been a breach of the covenant for quiet enjoyment was “that in the events that occurred the whole of the tenancy was unfit for use and therefore denied to the lessee”. (T850, L20-24)  No such finding should be made.  Acceptance of the evidence of Mr Flanders necessarily entails the conclusion that there was never a risk that the ceiling or “roof slab” of the demised premises would collapse, insofar as a small percentage of the office floor space was “taped off” following the fall of render from the wall onto the terrace.  This represented only 7.54 per cent of the office space, as calculated for the purposes of Rigby Cooke’s October letter of demand.

149By an email dated 31 March 2020, the National Manager of the HIPPY program advised Mr Glen Fernandez of the Brotherhood that Leanne McCaig, the local manager of the HIPPY program at Johnston Street, was coming in twice a week on Tuesday and Thursday mornings for two hours to collect mail, et cetera. (CB 365)  This arrangement had previously been referred to by Ms Pettit in an email to a number of Brotherhood managers dated 25 March 2020. (CB 362)

150On 19 June 2020, Ms Illevold in an email to Mr Hussein said “As discussed previously we have lost use of part of the office due to the defective building (report attached)”.  This correspondence suggests that not only viewed objectively was there no structural problem which deprived the Brotherhood of the entire use of the relevant office space, but also that the Brotherhood did not believe that it was deprived of the use of the office space because of a threat posed by a structural defect.  These items of correspondence date from months after the first NSIENT report.  Nothing has changed since.  The premise for a finding of breach of the covenant for quiet enjoyment is therefore not made out.  To that extent also, the defence of the Brotherhood failed.

The plaintiff’s claim

151It follows that the plaintiff’s claim therefore succeeds.  The premises remained vacant until the original agreed termination date under the renewal of the lease.  The Court Book contains material establishing that the premises were offered for reletting with an upgrade to the agency agreement. (CB 734, 745-7, T230, L3-10) 

152Ms Illevold conceded that in vacating the premises the Brotherhood left behind a substantial number of workstations. (T775, L11-12)  She said that approximately 15 workstations had been removed. (ibid, L23-24)

153As to the damages claimed based on the loss of the opportunity to derive rental through to the contractual expiry date of release, nothing has been urged upon me to suggest that the marketing program adopted by Sarina was other than appropriate.  The pandemic has been frequently mentioned in these reasons and in the evidence.  The period 2021-2022 was obviously a time of depressed markets for office space.

154Mr Neill estimated the cost of “make good” at $50,000. (T509, L9-13)  The property has been relet.  There was no evidence that $50,000 had in fact been expended.  The obvious inference is that the new tenant has been prepared to accept the premises as is, including the “old school” partitions.  In my view, the evidence does not make good this claim.

155The plaintiff’s claim should otherwise succeed.

Counterclaim

156What I have said already indicates that the defendant’s counterclaim must fail.  As the party which wrongfully repudiated the lease, it has no entitlement to damages.  It was not deprived of the whole, or substantially the whole, of the occupancy of the premises.  There is no basis for the recovery on a restitutionary basis of any of the rent which it has paid.

157Indeed, it has not been demonstrated that it lost the use of any part of the premises.  Despite Mr Petrie’s contentions to the contrary, the terrace was not part of the premises demised.  The premises which are the subject of the demise by clause 4a of the lease (CB 161) are defined at some length in the definition clause in the lease. (CB 154-155)  Most of the definition extends to things like the median line of intertenancy walls, internal face of internal building walls, et cetera.  The primary definition of the premises demised is:

“the portion of the building hatched in black on the attached sketch and for all purposes connected with the obligations of the lessee under this lease … The attached plan delineates the leased premises in a black line excluding the terrace.”

158It is perhaps an unusual use of the word “hatched”.  In context, however, and having regard to the form of the plan, I am clear that it is the bold black lines on the plan which delineate the boundaries of the premises and the terrace is outside that boundary.

159Had it been necessary to consider the counterclaim, I would have found the evidence problematic in at least one respect.  Ms Illevold gave evidence and referred to outlays made by the Brotherhood in vacating the premises in late February and early March 2021.  There was nothing in the evidence to suggest that this process of vacating was other than in accordance with a schedule convenient to the Brotherhood.  Nothing to suggest that excessive outlays had to be made because the move had to be done under duress or in an atmosphere of crisis.  Hence, no reason to think that the removal costs incurred in 2021 would have been any larger than the removal costs which would necessarily have been incurred at the end of the renewed lease in 2022.  The loss or damage incurred, therefore, would be calculated by reference to the time value of money being the difference between the cost of outlaying the relevant amounts in March 2021 as compared to outlaying approximately the same amount of money in July or August 2022.  At a time of very low interest rates the sum involved would be modest.

160As it is, however, Mr Petrie objected to my taking that view.  He said that, as he took Ms Illevold through these outlays in her evidence-in-chief, he was assured by his opponent, Mr Virgona, that these matters were not in contest and that detailed examination of the invoices via the witness was unnecessary.  I am sceptical that, but for Mr Virgona’s intervention, anything would have emerged in evidence which would invalidate what I have said already.  Mercifully, however, this is a matter which I do not have to determine.

Disposition

161I will direct the parties within 14 days to bring in short Minutes to give effect to these reasons.

Costs

162I have heard no argument on the subject of costs and so I will reserve them.