Sporco Investments Pty Ltd v Le Messurier
[2023] ACTMC 10
•24 April 2023
MAGISTRATES COURT OF THE AUSTRALIAN CAPITAL TERRITORY
| Case Title: | Sporco Investments Pty Ltd v Le Messurier |
| Citation: | [2023] ACTMC 10 |
| Hearing Date: | 1 and 2 December 2022 and 24 March 2023 |
| DecisionDate: | 24 April 2023 |
| Before: | Magistrate Theakston |
| Decision: | The Court will order judgment be entered for the plaintiff in the amount of $1,460,976 plus interest on unpaid and lost rent to be determined. The question of costs and legal costs available under the lease are reserved. |
Catchwords: . | MAGISTRATES – Jurisdiction and procedure generally – application of the “Leases (Commercial and Retail) Act 2001” LANDLORD AND TENANT – Retail and commercial tenancies legislation – Distinction between replacing existing lease and creating additional lease TORTS – Trespass – Trespass to Land and Rights of Real Property – Trespass by failing to remove waste following end of lease and within a reasonable time – Director of company as joint tortfeasor |
| Legislation Cited: | Leases (Commercial and Retail) Act 2001 (ACT) |
| Cases Cited: | ANZ Group Ltd v Manasseh [2015] WASC 34 |
| Texts Cited: | Macquarie Dictionary 5th ed Macquarie Dictionary Publishers Pty Ltd Sydney, Australia 2009 |
| Parties: | Sporco Investments Pty Ltd (Plaintiff) |
| Representation: | Counsel Junior Counsel J Bird (Plaintiff) |
| Solicitors | |
| File Numbers: | CS 21 of 2023 |
MAGISTRATE THEAKSTON:
Introduction
1․This case is about a Company who leased and then abandoned commercial premises, without repairing damage or removing hundreds of tonnes of hazardous glass waste. The plaintiff claims considerable damages from a director of the Company.
2․The Company was a business that recycled electronic waste. It leased two (and later three) commercial units from the plaintiff. The three units were adjacent to each other and on the same parcel of land in Fyshwick. Following various defaults by the Company, the plaintiff exercised its right to terminate the leases. The Company failed to pay rent, and repair damage to the units and the surrounding facilities. It also left an enormous amount of hazardous waste in and around the units. The Company ultimately became insolvent and has since been de-registered. The defendant was a director of the Company and, along with other directors, provided a guarantee for the initial lease on the first two units.
3․The plaintiff claims damages against the defendant for the Company’s breaches under the lease agreements and, in the alternative, damages for ongoing trespass by the Company, as a director who directed or procured that trespass.
4․The plaintiff’s evidence was presented by way of affidavits and documents. The defendant did not seek to cross-examine the deponents nor call or give evidence. Ultimately the only evidence put before me was the unchallenged evidence of the plaintiff.
5․The defendant admitted little through his pleadings and during submissions focused on the following issues:
a.the effect of negotiations that led to the Company taking possession of the third unit;
b.the claim of trespass in the alternative; and
c.damages.
6․I will make findings about uncontroversial facts based upon the plaintiff’s unchallenged evidence before moving onto the above issues. However, I will initially address the question of jurisdiction.
Jurisdiction
7․Sections 12, 17 and 144 of the Leases (Commercial and Retail) Act 2001 (ACT) provide this Court with exclusive jurisdiction to decide applications under that Act in relation to retail premises, other than large excluded premises, including matters in relation to a lease or negotiations for entering into a lease or in relation to the use or occupation of premises to which the lease relates. The parties agreed that this extends to a claim by the plaintiff against the defendant as a guarantor for a breach of contract and joint tortfeasor, and the units in question appear to fall within the definition of retail premises and not within the definition of large excluded premises. The significance of this, is that the Magistrates Court’s usual jurisdictional limit of $250,000, as provided by s 257 of the Magistrates Court Act 1930, does not apply. This Court therefore has jurisdiction to hear and determine this claim, which significantly exceeds that amount.
Uncontroversial findings
The participants
8․The Company, MRI (ACT) Pty Ltd, conducted a recycling business for electronic waste. The Company has since been de-registered. The waste included the older style glass cathode ray tube (CRT) televisions and computer monitors. The glass from those screens contained lead and the law required the same to be transported and processed in an approved facility. A recycler was required to be licenced and provide a financial assurance to the regulator.
9․The defendant, William Le Messurier, was one of the directors of the Company.
10․The plaintiff, Sporco Investments Pty Ltd, owns the three adjacent units located at 78-80 Townsend Street Fyshwick. It has four directors, Messrs Barilaro, Nappo, Pucci and Pucci.
Units 1 and 2
11․In mid-2011 the plaintiff and the Company executed a written agreement for a three-year lease for Units 1 and 2 of the above property and subsequently took possession. The defendant executed a guarantee with respect to the Company’s obligations as tenant under that agreement. The Company acknowledged in the agreement that the ‘Premises’ and ‘Facilities’, as defined within that agreement, were in good repair and working condition. At that time, Mr Nappo was not aware of any damage or defects affecting those units.
12․In May 2014 and following the end of the three-year term, the Company retained possession of the units. In those circumstances, the original agreement provided for the lease to continue as a monthly tenancy, which could be terminated by either party with one month’s notice.
Unit 3
13․Across December 2012 and January 2013, the plaintiff and the Company (through the defendant) engaged in negotiations about continuing the lease for the original two units and adding Unit 3, which was then vacant. The negotiations were initially conducted by phone and then an exchange of emails. There was also other contact, although there was no direct evidence about what may have been said during those interactions. An early email from the plaintiff attached a document described as ‘Heads of agreement proposal’. That document listed proposed terms for a lease agreement. The arrangement contemplated the formal execution of one or more new agreements covering the three units, with a term of four years and a three-year option. The negotiation continued and included different proposals. In January 2013 and without clear documentation, the Company took possession of Unit 3. The lease was on a month-to-month basis, with termination on providing one month’s notice.
14․At that time there was no requirement to perform any make good or rectification work on Unit 3, due to previous tenants.
Engagement with the regulator
15․While the Company retained possession of the units it engaged in the business of recycling electronic waste, including CRT monitors. It received the devices, disassembled them, and shipped components to various sites. It also stockpiled waste on the premises. By the end of 2020 it had stockpile 600 to 700 tonnes of CRT glass waste. The cost of transporting and processing that waste was in excess of $600 per tonne.
16․Between late 2017 and late 2020, the Company negotiated with the waste regulator, Transport Canberra and City Services Directorate about licencing for the purpose of conducting their waste recycling business. Those negotiations included a condition of the licence for financial assurance to cover any future need to clean up the site and a timetable to reduce the stockpile of CRT glass waste. A licence was issued for Units 1 and 2, but not for Unit 3. No financial assurance was ever provided, notwithstanding numerous demands by the regulator. Between mid-2018 and mid-2020, the Company did not comply with the timetable to reduce the stockpile of CRT glass, and instead increased the size of that stockpile considerably.
Terminations of the leases
17․The Company paid rent for the three units up until 1 August 2019. In early June 2019 and following a notice from the plaintiff, the monthly tenancy for Units 1 and 2 was terminated. In early February 2021 and again following a notice from the plaintiff, the lease for Unit 3 was terminated.
18․When the Company vacated the property it left waste within and outside of the units. That waste included glass waste inside each of the three units and outside in the common area. For example, Unit 3 contained approximately 600 to 800 tonnes of CRT glass waste. Various parts of the premises were damaged including, electrical fittings, walls, floors, external hard surfaces, doors and gates.
What were the effects of the negotiations
19․The plaintiff claims that the negotiations effectively extended the original agreement for Units 1 and 2, along with the defendant’s guarantee, to Unit 3. The defendant submits that the negotiations superseded that original agreement, there was no subsequent execution of a guarantee and therefore the defendant was not liable under any guarantee for any of the units. A consideration of the circumstances, including the content of the emails exchanged, demonstrates that the original agreement for Units 1 and 2, and associated guarantee by the defendant, continued with respect to those units following and notwithstanding the negotiations; and that the relationship between the participants with respect to Unit 3 was, in contrast, governed by the new negotiated arrangements, as informal as they were, and without a guarantee from the defendant. In the following discussion I refer to facts that are demonstrated by the evidence and I find accordingly.
20․In December 2012 – when the negotiations commenced, the relationship between the participants with respect to Units 1 and 2 was governed by the lease agreement and guarantee as executed in mid-2011. The lease term had not yet expired. The negotiations commenced with a telephone conversation between the defendant and Mr Pucci, a director of the plaintiff. The defendant indicated that the Company would like to lease Unit 3. A week or so later, Mr Pucci then sent an email to the defendant, which stated (emphasis added):
Further to our conversation the other day please find attached a copy of the Heads of agreement proposal for MRI in relation to the Fyshwick operations of MRI. As agreed the key points are as follows:
· Rate $138.00 / per sqm based on lettable area
· Term 4 years commencing 31 Jan 2012 (sic) with a three year option
· Sinking fund set at $1,000 by way of bank guarantee (over the term of the lease)
21․The Heads of agreement proposal document attached to the email contained a table with listing items in the first column, the plaintiff’s proposal in the second, and provided space in the third for the Company’s response. Relevantly, the table proposed the area and rent for the new arrangement. In doing so it included all three units, but specified separately the area and rent figures for Unit 3. It also proposed a four-year term with a commencement day 31 January 2013 and that the lease would be documented in accordance with the plaintiff’s ‘usual form of lease consistent with the Commercial and Retail Act 2001’ (sic).
22․The following month in January 2013, the defendant responded by email, stating that the Company was not convinced that taking over Unit 3 was a long-term option. He went on to acknowledge the Company had applied some pressure on the plaintiff to have the previous tenant vacate Unit 3, but all its waste needed to be stored undercover, in accordance with the required standard. The defendant then proposed two options. First, a 3 plus 3-year lease with the plaintiff installing an undercover area and another door in the existing units. Secondly and in the alternative, no modifications, current rent rate, and the Company leasing Unit 3 on a month-to-month basis until alternative accommodation was found. Then the Company would move out and be responsible for subleasing Units 1 and 2 and end the lease on Unit 3 with one month’s notice. Clearly, this second option proposed a separate lease agreement for Unit 3.
23․Ten days later, Mr Pucci responded to the defendant and the other directors of the Company. That email noted the keys to Unit 3 had been handed over to the Company that day, indicated further information was required in relation to option 1 and that, rather than ‘wait until we can come to an agreement’, immediate access to Unit 3 had been provided to the Company because it was empty and the Company had a pressing need for additional space. The email went on to propose the rent for Unit 3 and observed that the figure was ‘consistent your option B’ (sic). (As described above, that second option had proposed a lease on a month to month basis, with termination on one month’s notice.) The email also suggested the plaintiff would be in a position to ‘finalise long term arrangements’ around mid-February. Mr Pucci did not receive a response to that email.
24․There was no other evidence about the content of those negotiations. The following day, Mr Nappo – another director of the plaintiff, emailed the first invoice for Unit 3. That invoice related solely to Unit 3, and not the other two units, and for an amount consistent with the amount of rent for Unit 3 discussed during the negotiations. Subsequently, the plaintiff continued to invoice the Company separately for the first two units and Unit 3.
25․The defendant’s submissions focused on the table within the ‘Heads of agreement proposal’ document and claimed that the contents therein redefined the area, term and rent when described the lease terms for the three units. He also referred to ANZ Group Ltd v Manasseh [2015] WASC 34, which, at [100] – [144], recognises that changes to a credit contract may be a mere variation or a new agreement, and based on the construction of the guarantor’s instrument in that case, the latter may release the guarantor. The relevant factors appeared to be the construction of the various agreements and the nature and scale of the resultant changes. That principle was echoed on appeal in ANZ Group Ltd v Manasseh [2016] WASCA 41. In that decision McLure P at [21] also observed that ‘whether or not a variation involves the termination and replacement of the existing contract depends on the objectively determined intention of the parties.’ The defendant also submitted that an agreement for a lease, while different to a lease in the legal sense, can in equity be treated and enforced as a lease: Chan v Cresdon Pty Ltd [1989] CLR 242; and may, as in that case, be distinguishable from an earlier lease with an associated guarantee and therefore replace the earlier lease, minus any associated guarantee.
26․In the instant case we have an initial idea floated by the Company, that triggers a preliminary proposal by the plaintiff with a number of precise details and the need for further clarification and documentation. The Company rejected that proposal, while suggesting that the long-term leasing of the additional unit may not be suitable for its purposes and suggesting two alternatives – one with a long term arrangement involving all units but with modifications to the premises; and a second with an additional arrangement on a short term basis for the third unit only – with the view of vacating all units in the near future and then sub-leasing the first two units and terminating the month to month lease on the third. At that stage the negotiations were ongoing and neither participant had taken a step consistent with an intention to immediately change their legal relationship with the other, for example a formal offer or acceptance.
27․Then the formality of arrangements deteriorated further with the plaintiff simply handing over the keys for the third unit to the Company and sending an email to the Company proposing the rent for that third unit and making an imperfect reference to the Company’s second proposal. That email, including its reference to the Company’s second proposal, could not have incorporated the terms described in the Heads of agreement proposal.
28․Considering the formality and mutual protections provided by the original written lease agreement, including how it contained comprehensive terms, took the form of a deed and included guarantees by third parties, it is inconceivable that the participants intended to depart from those arrangements without doing so clearly in writing. Further, the email exchange is simply inconsistent with any intention to revoke the existing agreement involving Units 1 and 2. No new long-term arrangement was agreed between the participants. At best, it may be implied that the participants adopted the second option proposed by the Company, and that option involved a separate lease arrangement for Unit 3, in addition to the existing lease for the first two units. Ultimately, there was no clear written adoption by either party of an arrangement that could be regarded as an express or implied variation to the original lease arrangement for Units 1 and 2. And while the negotiations initially extended to all three units, they eventually narrowed to concern only Unit 3. It cannot be said there was an agreement to enter into a new lease with respect to the first two units. Accordingly, I find on the balance of probabilities that the original lease arrangements for Units 1 and 2 continued beyond the negotiations conducted in late 2012 and early 2013, and it continued to include the guarantee provided by the defendant with respect to Units 1 and 2.
29․The plaintiff submitted that there was an adoption of the Heads of agreement proposal document, and because that document described that the new lease would be in accordance with the lessor’s usual form of lease, and as the original lease between the participants included a guarantee by the defendant, then the new arrangement with respect to Unit 3 must also involve the defendant having provided an identical guarantee. That submission must fail. As described above it could not be said that the participants adopted the contents of the Heads of agreement proposal. Even if they did, there was no evidence about what the usual form of lease would be. That is the case notwithstanding having one example of what the plaintiff had done in the past. Further, even if there was some understanding to prepare a lease in accordance with the limited terms provided in the Heads of agreement proposal document, that would be, in itself and at best, an agreement to agree and not an intention to create legal relations. That is because there remained many uncertainties. Finally, even if by stretch there was such an agreement, the defendant remained a third party and would have needed to, in his personal capacity, execute that guarantee. For those reasons it simply cannot be said that the defendant is a guarantor for the arrangements involving Unit 3, and I find accordingly.
Trespass – the law
30․In the alternative to breach of contract, the plaintiff claims the defendant directed and procured the Company to commit trespass on the plaintiff by failing to remove the glass waste within a reasonable time after the Company vacated the units. This would be consequential if I am wrong about the defendant’s guarantee with respect to Units 1 and 2 and is significant in any event with respect to the glass waste remaining in Unit 3, where I have ruled the defendant had not guaranteed the Company’s obligations with respect to that unit.
31․The plaintiff pointed to the UK authority of Konskier v B Goodman, Limited [1926] 1 KB 421 at 426 for the principle that a continuing trespass occurs on premises when material is left on premises a reasonable time after any licence or authority allowing for it to be there has passed. Greer LJ concluded his decision by noting that it is as much a trespass at that time as if there had been no licence. I was not taken to any Australian authority adopting that principle and said to be binding on me. The defendant did not argue that this principle was not Australian law but reserved his position in that regard for another forum. He later characterised this as a trespass by omission, rather than action, in that it only arose after the end of a circumstance and involved the failure of a participant to do something. However, the discussion in Konskier describes an initial positive action, with a lingering requirement to take further action within a reasonable time after the end of a licence. The brief discussion by Sargant LJ in Konskier is also consistent with construing the licence or authority as not being absolute, but rather as conditional upon the material being later removed. Accordingly, this principle appears to involve the positive action of allowing material to be on premises, during a time while there was conditional authority for it to be there, which then manifests as trespass a reasonable time after the end of that authority.
32․Here the plaintiff’s claim of trespass is against the defendant as a director the Company. The parties referred to two key authorities that described when a director may be a joint tortfeasor with a Company. The first was Keller v LED Technologies Pty Ltd [2010] FCAFC 55. Besanko J described two tests having been used in the authorities. The first was formulated by Atkin LJ in Performing Right Society Ltd v Ciryl Theatrical Syndicate Ltd [1924] 1 KB 1. It required the director to ‘direct or procure’ or perhaps ‘authorise’ the tortious act, but it needed to be something more than the director merely sitting on a board that directs or allows such company actions. Something more is required by way of ‘close personal involvement’: See [272] and [291].
33․The second test was described at [273] as being formulated by Le Dain J of the Canadian Federal Court of Appeal in Mentmore Manufacturing Co Ltd v National Merchandising Manufacturing Co Inc (1978) 89 DLR (3d) 195. In that case liability was said to occur:
only where [the director] has engaged in the deliberate, wilful and knowing pursuit of a course of conduct that is likely to constitute infringement or which reflected an indifference to the risk of it.
34․The defendant relied heavily on the comments of Jessup J in Keller at [404] – [406]:
For a director to be liable because he or she directs or procures his or her company to commit a wrong, the context must be such that the director is effectively standing apart from the company and directing or procuring it as a separate entity … Likewise with a joint enterprise, unless the director is conceptually separate from the Company, there is, it seems to me, no “jointness” about the enterprise at all, but merely a one-person wrong in which the Company is actor
… the director should make the tort his or her own …
I see no reason to draw the line at the proceedings of the board, but short of acts done by a director consistently with board decisions. I would apply the proposition to any act done by a director in what he or she, in good faith, reasonably perceives to be the interests of the company. In such a circumstance, the act of the director should be seen as the means by which the company itself acts, and not as the director “directing or procuring” the company to act, or participate in some joint enterprise.
35․However, Besanko J in Keller appeared to have taken a less strict approach when discussing the two tests: see [276] and [277]. I also note that Emmett J in Keller observed at [83]:
… it is necessary to show something more than the company acting through that person. Where a person is acting in the capacity of a director, the person will not be liable for the act of the company unless it can be shown that, in so acting, the director was doing something more than acting as a director. The person must do something that makes him or her, in addition to the company, an invader of the victim’s rights …
36․The second key authority was Hashtag Burgers Pty Ltd v In-N-Out Burgers, Inc [2020] FCAFC 235. The Court in a joint judgment adopted, at [136], the principle from an earlier full court decision in JR Consulting & Drafting Pty Ltd v Cummings [2016] FCAFC 20 at [350], namely:
… the director must be shown to have directed or procured the tort and the conduct must, clearly enough, go beyond causing the company to take a commercial or business course of action or directing the company’s decision-making where both steps are the good faith and reasonable expression of the discharge of the duties and obligations of the director, as a director. The additional component required is a “close personal involvement” in the infringing conduct of the company and inevitably the quality or degree of that closeness will require careful examination on a case by case basis.
37․The Court also adopted, at [138], a statement by Besanko J in Keller that the director’s knowledge would be relevant when determining the question of ‘close personal involvement’.
Trespass – the facts
38․As mentioned above, the defendant did not present evidence nor cross examine witnesses. He did not personally attend the proceedings. There was no explanation for that approach. That created a challenge. There was much of what occurred that is solely within the knowledge of the Company, its directors and employees. Some insight was provided by the unchallenged evidence of Mr Samsudin, an employee from 2010 to 2020. However, much remains unclear. For example, what plans did the Company, other entities within the related group and the defendant and the other directors have for the growing stockpile of CRT glass? Clearly, I should make an Jones and Dunkel [1959] HCA 8; (1959) 101 CLR 298 inference, that any evidence the defendant could have given or called would not have assisted him. Of course, that inference cannot rise to the level of being adverse to the defendant, or be used to fill any gap in the plaintiff’s case.
39․The plaintiff submitted that the failure of the defendant to give or call evidence is also relevant for other purposes. Statements of principle from three authorities are helpful. The first is Tozer Kemsley & Millbourn (A’Asia) Pty Ltd v Collier’s Interstate Transport Services Ltd [1956] HCA 6; (1956) 94 CLR 384 at 403:
… the election of the defendant to call no evidence has, to my mind, more than ordinary significance in this case … The silence of one party cannot, of course, fill the place of actual evidence on any issue, but it may serve to resolve a doubt or an ambiguity, especially where the facts are peculiarly within the knowledge of the silent party.
40․The second is The Insurance Commissioner v Joyce [1948] CLR 39 at 49:
Obviously the question was one to be decided on circumstances. But when circumstances are proved indicating a conclusion and the only party who can give direct evidence of the matter prefers the well of the court to the witness box a court is entitled to be bold. … this is not a criminal case in which we are called upon to allow our imagination to play upon the facts and find reasonable hypotheses consistent with innocence. A balance of probabilities is enough.
41․And the third is United Group Resources Pty Ltd v Calabro (No 5) [2011] FCA 1408 at [75]-[76]:
… the failure of the unrepresented respondents to deny an industrial motivation, or to give an explanation of an alternative innocent motivation, operates in three related ways:
(a)It confirms any inference that may properly be drawn against the unrepresented respondents, rendering more probable the inferences against them that are open on the evidence and makes “the inference … less unsafe than it could otherwise possible appear”
(b)The fact that the unrepresented respondents have not denied that they were industrially-motivated, or given evidence in support of such a denial, may more readily enable a court to be satisfied that they were so motivated. This is so even if the weight of the evidence in support of industrial motivation is “not great”, and even if only “slight evidence explanatory of the circumstances might displace the inference which may be drawn from it" …
(c)The failure of the unrepresented respondents to deny or explain facts when to do so was in their exclusive power, “gives a colour to the other evidence against [them]”, “allows increased strength or weight to be given to primary facts favourable to [the applicants and the ABCC] and allows inferences favourable to [the applicants and the ABCC] to be more confidently drawn” (Authorities omitted)
42․Mr Samsudin’s unchallenged evidence was plausible, and I have no reason to doubt its reliability. Accordingly, I accept that evidence and find:
a.The Company was one of a number of companies within a Group. Those companies were:
i.MRI PSO Pty Ltd, which was the contracting partner in the Commonwealth’s National Television and Computer Recycling Scheme, which received payment from the government for receiving and processing e-waste and paid out funds to the other companies according to the proportion of the e-waste processed by the companies. The defendant was the CEO of this company.
ii.MRI (Aust) Pty Ltd was the entity that paid the processing fee to Nyrstar, who would take the CRT glass for processing. The defendant was the managing director of this company.
iii.The Company was one entity, along with similar entities in NSW, QLD and Victoria, which received electronic products under the Commonwealth’s recycling scheme, separated those products into their various waste components for subsequent selling, processing or recycling.
b.The Defendant was the managing director of MRI (Aust) Pty Ltd and a number of the other entities within the MRI Group. He made all key decisions for the Group. He would provide Mr Dawes, another director of the Company, with directions about the running of the Company. Mr Samsudin held the role of Operations Manager at the units in question and reported to Mr Dawes.
c.Employees of the Company sorted and manually disassembled products in Units 1 and 2, before the various types of waste were stored outside in the common area. After the Company took possession of Unit 3, the waste was also stored inside that unit.
d.The CRT glass is dangerous and must be transported and disposed of in an approved manner. The only facility approved to process that glass is Nyrstar in Port Pirie South Australia. The Company did not and could not send CRT glass to land fill.
e.In 2016, the Company – at the direction of the defendant, sent multiple trucks of CRT glass to Nyrstar. The defendant then gave a direction to the Company that no more CRT glass was to be sent to Nyrstar for processing, because the MRI (Aust) Pty Ltd account had not been paid and Nyrstar was not accepting any more glass from the Company until all invoices had been paid.
f.Subsequently, the Company did not dispose of any CRT glass and it was stockpiled on the premises.
43․It is open from my findings to infer that the defendant coordinated the movement and management of products and their disassembled components and waste within the Group and beyond to other entities for sale, processing or recycling. He had knowledge of major issues that arose within the Group, including regulatory, logistical and financial.
44․There is also direct evidence from the company searches that the defendant, held a financial interest, to some degree, in the group.
45․There is direct evidence that he personally negotiated the arrangements for Unit 3, he advised the regulator that the Company was not able to obtain an unconditional bank guarantee, he was copied into emails from the regulator about the ongoing failure by the Company to provide financial assurance for the stockpile, he was copied into emails about the non-payment of rent and was aware of problems with paying Nyrstar’s invoices and that they were no longer accepting glass from the Company for processing. There are inferences available that the problem with Nyrstar arose as early as 2016 and extended to other companies within the group. There is evidence that between mid-2018 and mid-2020 the regulator required the Company to reduce the stockpile of CRT glass, and instead that stockpile grew considerably. An inference is available that the defendant was aware of this and allowed it to continue. Another available inference is he was aware generally of the cost involved in dealing with that stockpile.
46․There is an inference available that while all the above was occurring, the Group continued to receive Commonwealth payments for receiving electronic products, the Company continued to receive its share of those products and the defendant was aware of this and allowed it to continue. An inference is available that the defendant had direct knowledge that an unsustainable stockpile was accumulating in Unit 3, the significant scale of that stockpile and that there was a growing risk that the Company would become insolvent and abandon that stockpile.
47․All of the above inferences are properly open. Further, the operation and circumstances of the Group, including the Company, were within the knowledge of the defendant and it could also be presumed he would know who to call to explain any details and where to obtain documents in support. That contrasts with the knowledge of the plaintiff. In those circumstances the defendant’s election to not call or give evidence and not challenge the plaintiff’s evidence is of more than ordinary significance. It allows me to place more weight on the facts that supports those inferences and renders those inferences more probable and makes them less unsafe than they might otherwise appear. I am not required to imagine what hypotheses may assist the defendant. I am entitled to be bold when deciding whether or not to accept those inferences as having been established on the balance of probabilities. Ultimately, I do find they have been proved to that standard and make findings accordingly.
48․In light of those findings, I comfortably find on the balance of probabilities that the defendant directed or procured the actions of the Company that resulted in the stockpile of lead glass remaining in and around the units, including within Unit 3, after the Company surrendered possession of those units. The defendant’s role across the Group and beyond the Company meant that he stood apart from the Company and directed or procured the stockpile as a separate entity. This was not a case of the defendant merely directing the company’s decision-making from within. It is clear the defendant’s vision and interests extended beyond the Company, to other companies and arrangements within the Group. His awareness of, and contribution to, the growth of a stockpile of that type, size and significance on premises with an unpredictable monthly to month lease and by a company with precarious finances amounted to a close personal involvement in the actions of the Company that gave rise to the trespass. Accordingly, I find that the defendant is jointly liable as a tortfeasor with the Company in relation to the trespass in the three units and on the associated common property by leaving various waste, including but not limited to the significant quantity of CRT glass waste located in Unit 3.
Damages
49․The damages for this matter relate to both breach of contract and the tort of trespass. During his submissions, the defendant conceded that notwithstanding the different ways damages are calculated for those two different causes of action, in this matter there would be no difference. I accept that submission. There is no discernible difference here between putting the plaintiff in the expected position it would have been in if there had been no breach of the lease, and putting the plaintiff back in the position it was in before there was a trespass.
50․I will address the components of damages in the order as listed in the schedule used by the parties.
Removing the waste from the common area, including that left in Units 1 and 2
51․The plaintiff claims $47,449.76 for the removal, transport and disposal of the waste located in the common areas. This component follows the finding of breach of contract and in the alternative the finding of trespass. I have proceeding on the basis that the requirement under the lease to remove all moveable items at the end of the lease extended to the common area, notwithstanding how the term ‘Premises’ is defined within the agreement. If I am wrong about that, then liability in relation to waste in the common areas arises solely due to trespass.
52․This waste includes waste left by the Company within Units 1 and 2 and later moved by the plaintiff to the common area. The defendant submitted that the waste in the common area should be treated differently to that left in Units 1 and 2 and later moved into the common area. That submission appears to be based on the fact that the waste left in the common area was adjacent to Unit 3 and therefore had some greater nexus to the arrangements with respect to Unit 3. That may have been significant, had I not found the defendant liable for the mountain of material left in Unit 3. The submission would also be significant if the defendant was only liable for the unknown proportion of the waste left by the Company in Units 1 and 2.
53․My view is that the Company’s obligations under the original lease for Unit 1 and 2 unsurprisingly extended to removing waste left in the common area, as well as that left within those two units. The fact that the Company had another arrangement to occupy Unit 3 does not necessary remove that responsibility, nor the defendant’s obligation to honour his guarantee. It is of little consequence that the Company had left that waste closer to Unit 3, than the other two units.
54․Additionally, the trespass relates to all waist in each of the three units and common area. The defendant is liable for the plaintiff’s cost of dealing with that waste. The unchallenged evidence is that the CRT glass abandoned in the common area was approximately 49.68 tonnes. The unchallenged evidence was that the cost of transporting and disposing of that material was $906 per tonne, plus daily equipment rental. Therefore, this component of the damages is $45,010, plus daily equipment rental.
Removing waste from Unit 3
55․The plaintiff claims $670,692.43 for the removal of waste from within Unit 3. The unchallenged evidence is that this waste amounted to between 593.685 and 831.30 tonnes. The plaintiff submitted that the mid-point between those two figures should be used and the defendant made no submission to the contrary. The mid-point would be 712.49 tonnes. Applying the above $906 rate per tonne, this component for damages is $645,516, plus daily equipment rental.
56․The CRT glass would total 762.17 tonnes. The expert assessed the glass would be removed at a rate of 36 tonnes per day. It would therefore require 21 days to remove the glass. Applying the equipment rental rate of $1,220 per day, the cost of equipment rental to remove all of the CRT glass would be $25,620.
Costs of repairs to date under the first lease agreement
57․This component involves work done already and relates to damage caused by the Company as the tenant for Units 1 and 2. It includes damage in and around that unit, as well as in the common area more generally. I have proceeded on the basis that the fact the Company had another agreement to lease Unit 3, without a corresponding guarantee from the defendant, does not of itself limit its liability for this damage and, accordingly, the defendant is also liable as guarantor. There was unchallenged evidence that the following items were not damaged when the Company took possession of the units and were damaged when it vacated the units.
58․The defendant did not dispute the assessment of $3,762 for damage to a motorised roller shutter in Unit 1. The damage required the full curtain and guides to be replaced. Similarly, the defendant did not dispute the assessment of $7,975 for damage to a motorised roller shutter in Unit 2. The damage required the full curtain, guides, motor and drum to be replaced. Likewise, the defendant did not dispute the assessment of $1,828 for the complete removal and replacement of a damaged door and hinges in Unit 2.
59․The plaintiff claimed $4,400 for repairs to the dividing wall between Units 1 and 2. The defendant submitted that anything of a structural nature need not be repaired. However, it was not clear that this wall was load bearing and therefore requiring ‘Structural repair’. Further, the exceptions to requiring ‘Structural repairs’ at clause 30(2)(b) are not absolute and, in any event, that provision is expressly subject to clause 30(3), which separately provides the Company was required to repair damaged that was caused by the ‘lack of care or misuse by the [Company] or anyone at the Building expressly or by implication with the [Company’s] authority’.
60․The plaintiff claimed $630 for the cleaning of Units 1 and 2, including bathrooms and floor areas. The defendant disputed this saying it was wholly unreasonable. That conclusion is not obvious on the face of the invoice, particularly considering the general state of the premises and what work can potentially be required to clean an industrial unit, including its floors and bathroom. In any event, Mr Nappo attested he engaged those cleaners so that the units were suitable for incoming tenants. The defendant did not call or give evidence or cross examine Mr Nappo about his assertion. I accept the Mr Nappo’s reasons for commissioning the work and the quantum surveyor’s assessment that this work was reasonable in those circumstances.
61․The plaintiff claimed $53,449 for the repair completed for the cracking, depressions and unevenness across the concrete floors of Units 1 and 2. There was evidence that machinery and pallets were moved within the units over many years. Mr Barilaro gave evidence about the damage. There were several clear images, in the material from the ACT Government contained within the tender bundle, that depicted areas with significant damage to the concrete surface within those units. It is clear the surface of the concrete within those units was damaged significantly, and I find accordingly.
62․Additionally, the quantity surveyor assessed the work done to repair that damage as being appropriate. Neither Mr Barilaro or the quantity surveyor were cross examined. The defendant submitted that this work was an improvement rather than repair, and if necessary then a Structural repair – due to the reference to ‘substrate’ in the invoice. As discussed above the exclusions of Structural repairs is not absolute and does not apply to repairs required under clause 30(3). In relation to the contention that it was only an improvement, the evidence that it was only a repair was not challenged, and the defendant could only point to images of the new flooring that depicted it as now having a clean and smooth epoxy finish and more suited to a showroom than a warehouse. While the invoice does disclose that substantial work was undertaken, that is not unexpected considering the nature and scale of the damage. Additionally, those works, as described in the invoice and the quantum surveyor’s report, are not obviously inconsistent with being repairs. There was nothing before me to suggest that applying epoxy to the surface of the floor was inconsistent with appropriately repairing the concrete floor which was cracked with depressions and uneven. In the circumstances where the defendant did not call or give evidence and did not cross examine the witnesses about the extent of the damage or the nature of the repairs, I comfortably find that these repairs were necessary.
63․The plaintiff also claimed for the damage outside of the units, namely: the motorised front gate, corrugated iron gate of the fence adjacent to Unit 1, and the damaged door in the front wall to Units 1 and 2. The plaintiff claimed $1,275 to repair the motorised gate, which involved replacing a damaged motor and wiring. The plaintiff claimed $9,272.12 to replace the iron gate and the removal of extensive material and general rubbish left at the site. The defendant suggested the latter component involving rubbish had been counted elsewhere. However, that component related to work already done and any assessment for further work would be axiomatically additional in nature. The plaintiff claimed $1,430 to replace the damaged door. Again, there was evidence of this damage and the quantity surveyor assessed these repairs were reasonable.
64․The defendant submitted that because the term ‘Premises’ is defined to include only the inside area and surfaces of the units, and the leases only related to the units and not beyond, then there was no contractual obligation to repair those items. However, the requirement under clause 30(3) to repair damage extended beyond the Premises and to ‘Facilities’. That term is defined within the agreement very broadly and includes facilities in the Common area. It also lists a broad range of items, such as Air Conditioning, Lifts, Fire Equipment, toilets, sinks, which are consistent with the ordinary meaning of the word, namely a building, piece of equipment or resource designed to provide a particular service.
65․The defendant also submitted that there was no evidence that the Company was responsible for the damage to these items. However, the established facts are that when the Company took possession of the units there was no damage at the site, and from January 2013 it had possession of all three units and essentially controlled the entire site. An inference is therefore available that the damage was done by either the staff or visitors of the Company. Due to the nature and scale of the damage described within the report it may also be properly inferred that the damage was due to a lack of care or misuse. When deciding whether or not to make findings in accordance with those inferences, I again note my earlier observations about the defendant not calling or giving evidence or cross examining witnesses, where he would have knowledge about the activities at the site and where the plaintiff did not. I find the above damage was caused either by the Company or someone at the site with the Company’s express or implied authority, and the lease agreement required the Company to therefore rectify that damage. It did not do so.
66․Accordingly, I find the defendant as guarantor for the Company, liable for the above repairs, which total $84,021.
67․The plaintiff also claimed amounts for electrical work evidenced by two separate invoices. It was not clear from the invoice for the lesser amount where that work had been done, and therefore whether the defendant as guarantor could be liable. The invoice for the larger amount related to work that included updating existing wiring and a switchboard. It was not itemised. On the face of that second invoice, it appears that a substantial part of the work related to upgrading that wiring and switchboard and goes beyond repairing damage. The quantity surveyor did not assess otherwise. Accordingly, I do not find the defendant liable for the amounts in those invoices.
Further repairs to the outside of Unit 1
68․The plaintiff claimed the amount of $12,584 for the costs of replacing three damaged down pipes and holes in the brick wall outside Unit 1. The defendant again submitted he was not liable as the damage was not within the Premises and there was no evidence about who caused the damage. My earlier comments about Facilities and clause 30(3), and the defendant’s imputed knowledge and his failure to call or give evidence or cross-examine witnesses apply equally here. I find this damage was caused either by the Company or someone at the site with the Company’s express or implied authority and the damage was to ‘Facilities’ as defined by the agreement, and the lease agreement again required the Company to rectify the same. Again it did not do so. Accordingly, the defendant is liable for the same, as guarantor for the Company.
Further repairs to driveways
69․The plaintiff also claims the amount of $249,860 for the replacement of the entire concrete surface outside of the units, including damaged metal stormwater grates. The defendant again takes issue that the damage was not done to the ‘Premises’ and submits he is therefore not liable. To my mind the concrete outside of the units fits within the definition of ‘Facilities’, as defined in the agreement, as it is a ‘facility in Common areas’. Clearly it is in a ‘Common area’ as defined within the agreement. It is a facility, in the ordinary sense of that word, because it is ‘something that makes possible the easier performance of [an] action: See the definition in the Macquarie Dictionary 5th edition. It is common knowledge that concrete provides a hard surface. It is stable across use and weather. It allows forklifts and other vehicles to readily move around. Without that surface, forklifts may have difficulty operating effectively or safely. Repeated use, particularly in wet weather, would be expected to cause a less permanent surface to deteriorate and make use of those vehicles more difficult.
70․The defendant again suggests that he could not be responsible for Structural repairs. That limitation is qualified and exists at clause 30(2) of the agreement. It is also expressly made subject to the independent liability created at clause 30(3) which relates to damaged Facilities.
71․The defendant submits that the evidence does not support a finding that there was damage to the driveway to a degree that justifies its complete replacement. Mr Barilaro attested in his initial affidavit:
29. On or around early February 2021, I attended the Premises and observed the following:
…
(l) the stormwater grates in the driveway of the Premises were damaged;
…
(o)the concrete slab in the driveway areas around Unit 1, Unit 2 and Unit 3 was chipped, cracked or otherwise damaged;
…
30. Having attended the Premises a number of times prior to the commencement of the respective leases and throughout the term of the respective leases, the damage referred to in paragraph 29 arose during the term of MRI ACT’s lease.
…
43. Neither I nor any of the other directors of the Applicant have yet engaged a contractor or tradesperson in relation to the following outstanding make good and rectification work, which I observed while attending the Premises during and after the MRI ACT tenancies:
(a) cracking across concrete driveway outside of Unit 1, Unit 2 and Unit 3 which requires resurfacing and replacement and the corresponding need to re-concrete the visible inconsistent and uneven re-patching of damaged concrete which was attempted during the MRI ACT tenancy;
…
44. From time to time during MRI ACT’s tenancies I observed a forklift being driven across the common area driveway and carparking areas of the Premises.
45. The forklift would often carry a steal pallet and on the pallet was a large bulk bag filled with waste material (or similar).
46. I often observed the forklift driver drop the pallet (and therefore the waste material) onto the concrete below causing it to chip, break and become damaged.
47. I observed the events at paragraphs 44 – 46 approximately 10 – 15 times while I was in attendance at the Premises.
72․Mr Pucci attested, at [24(c)] of his affidavit, he attended the site in February 2021 and observed:
cracking, chipped and unevenness throughout the concrete driveway in front of and around Unit 1, Unit 2 and Unit 3 and across the floor of Unit 1 and Unit 2.
73․Annexed to Mr McGilvray’s affidavit, are several images of the concrete surface taken in November 2020. They show the concrete in an unsightly worn condition, with many cracks, particularly adjacent to Unit 1, which appear to have been patched roughly with a lighter coloured material. There are also a couple of close-up images depicting the rough patching. In places the surface appears to be loose. However, it is difficult to fully appreciate the state of the concrete from those images.
74․There are also a number of aerial images of the block annexed to Mr Barilaro’s subsequent affidavit, where contrasting patching of the cracks is clearly visible. The damage can be seen to be wide-spread, across much of the paved area – although not across all of it. It is particularly apparent adjacent to Units 1 and 2.
75․The quantity surveyor made the following statement in his report:
46. For the purpose of preparing my report, I have been asked to make the following assumptions about the defects to the Property resulting from MRI ACT’s tenancy.
47. Cracks in concrete across the driveway area associated with each Unit which have been poorly patched during MRI ACT’s tenancy and require complete re-concreting.
76․The letter of instruction confirms that the quantity surveyor was asked to assume the concrete needed replacing:
For the purpose of preparing your report, we ask you make the following assumptions about the defects to the Property resulting from MRI ACT’s tenancy.
…
Work that is required to be carried out:
…
11. Cracks in concrete across driveway outside the Units which have been poorly patched during MRI ACT’s tenancy and require complete concreting.
77․What is compelling from the evidence is that the concrete was damaged during the Company’s time at the site and the plaintiff has, consequently, suffered a loss. I also find that the damaged was caused by the Company or someone at the site with the Company’s express or implied authority. The initial lease agreement at clause 30(3) required the Company to repair that damage, and I find that the defendant, as guarantor, is liable for that damage. The precise nature and scale of the damage is not clear. The patching of the cracks is stark and unsightly, and the surface appears loose in places. There is no direct evidence about the effect of the damage on the functionality of the surface. The quantity surveyor’s report assists only to quantify the cost of replacing the concrete. It does not provide advice about whether replacing the concrete is necessary or appropriate. It does not identify other options, which may for example, be more or less expensive or durable. There is simply no evidence about those options.
78․While there is uncertainty about the quantum of the plaintiff’s loss, and I would have been much more comfortable with clear evidence about the above issue, I must nevertheless do my best to quantify the loss, even if a degree of speculation or guess work is involved; and the award must be for more than nominal damages: Enzed Holdings Ltd v Wynthea Pty Ltd [1984] FCA 373; FCR 450 at [68].
79․The defendant submitted that he should not be paying for the plaintiff’s new driveway. However, I have found there is damage to the concrete outside the units. The quantity surveyor has provided an estimated for the cost of replacing that concrete. That process would rectify the damage and an inference must be available that it could be the appropriate approach. That is because it is an obvious remedy and conceivable that concrete could be chipped, cracked and otherwise damaged to such a degree that necessitates its complete replacement. The plaintiff’s pleadings and the quantity surveyor’s report would have put the defendant on clear notice that damages were sought on the basis of completely replacing the concrete. The defendant did not call or give evidence or cross examine either Messrs Barilaro or Pucci or the quantity surveyor about the necessity to replace the concrete. I should infer that any evidence the defendant could call, including from an expert, would not have been of assistance to him. In those circumstances I make a finding that replacing the concrete is appropriate, notwithstanding that the evidence in support of that is only slight.
Further repairs to Unit 3
80․The plaintiff claims damages in the amount of $126,105 relating to repairing damage to the inside and outside of Unit 3, including the removal of general waste inside and out of that unit. The damage was to the front wall, which had been pushed out of alignment, the internal walls, windows, door, roller shutter door and facade. However, I have ruled the defendant’s indemnity did not cover the Company’s dealings with the plaintiff with respect to this unit. Accordingly, the defendant is not liable for these damage due the Company’s breach of contract.
Removal of general waste from Unit 3
81․As discussed above, the defendant is responsible as joint tortfeasor with respect to the waste left in and around Unit 3. The most expensive component of that waste is the CRT glass addressed already above. However, there was also other, more general waste, remaining in and around Unit 3. The defendant is liable for that, and the unchallenged evidence from the quantity surveyor quantifies the cost of removing that waste at $5,525. I accept that evidence and find accordingly.
Occupancy fee and lost rent for Units 1 and 2
82․The plaintiff claims damages for the ongoing occupation of Units 1 and 2, by way of an occupancy fee pursuant to clause 34 of the agreement. However, that provision relates to what the agreement refers to as ‘Works’, which is narrowly defined. There is no evidence to suggest that the issue with the two units related to such Works.
83․In the alternative, the plaintiff claims loss of rent from the beginning of 1 August 2019 to the beginning of July 2021. (The rent for those units was paid up until the August date.) During that time negotiations continued about removing waste and repairing those units. The plaintiff was told that the waste was of a prescribed type and could not be moved without an appropriate licence. In February 2021, the plaintiffs moved the waste from Units 1 and 2 and placed it neatly in the common area. In July 2021 the concrete floor in those units was repaired and the units were ready for another tenant. An inference is available that the units could not be leased to another tenant before that work was done, and that there was no unnecessary delay. Due to the defendant’s approach to this hearing – as discussed a number of times above, I find in accordance with that inference. Accordingly, I find the defendant is liable to pay damages equivalent to the rent for that period.
84․The plaintiff claims the rent at a rate which was paid at the end of the lease, namely $6,940.25 per calendar month, inclusive of GST. That figure appears less than market rent, as evidence by the report by Mr Giorgi – a local leasing agent specialising in industrial real estate, and therefore reasonable. As the period is 23 months, the total is therefore $159,625.
Rent and occupancy fee and lost rent for Unit 3
85․The plaintiff also makes similar claims for Unit 3, although in the case of that unit, the Company stopped paying rent well before that lease was formally terminated in February 2021. As this lease did not incorporate the terms of the other lease, an occupancy fee does not arise. However, there is unpaid rent claimed between 1 August 2019 and February 2021, and damages claimed thereafter for the loss of the opportunity to lease the unit out to another tenant. The unit remains full of the CTR glass and therefore unavailable to be rented out. The plaintiff claims the same rate for both periods, based upon the rent payable. That is the amount of $5,300.35 inclusive of GST. As with the other units, this amount appears to be less than the market rent, as evidence by Mr Giorgi’s report, and therefore reasonable. Come the end of this month, the total period would be 44 months, and therefore the total is $233,215.
Interest on unpaid and lost rent
86․The plaintiff claims interest on the unpaid rent and lost rent components. Due to my above findings, I will need to hear further from the parties about if and how that should be calculated.
Legal costs
87․As requested, legal costs payable under the lease and more generally are reserved.
Summary
88․
For the above reasons I have found that the plaintiff has suffered the above losses due either to the Company breaching the lease agreement for Units 1 and 2 or the trespass associated with Unit 3, including the necessary causation, and the defendant is liable for the former as guarantor under the lease and for the latter as joint tortfeasor.
The amounts total:
Removing the waste from the common area, including Units 1 and 2 $45,010
Removing the waste from Unit 3 $645,516
Daily equipment rental for the above removal of waste $25,620
Repairs to date $84,021
Further repairs to the outside of Unit 1 $12,584
Further repairs to driveway $249,860
Removal of general waste from Unit 3 $5,525
Lost rent for Units 1 and 2 $159,625
Unpaid and lost rent on Unit 3 $233,215
Total $1,460,976
Orders
89․The Court will order judgment be entered for the plaintiff in the amount of $1,460,976 plus interest on unpaid and lost rent to be determined. The question of costs and legal costs available under the lease are reserved.
| I certify that the preceding eighty-nine [89] numbered paragraphs are a true copy of the Reasons for Decision of his Honour Magistrate Theakston. Associate: Jack Watson Date: 24 April 2023 |
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