T & L Alexandria Pty Ltd v Sharvain Facades Pty Ltd

[2023] NSWSC 947

Supreme Court

New South Wales

Medium Neutral Citation:

T & L Alexandria Pty Ltd v Sharvain Facades Pty Ltd [2023] NSWSC 947

Hearing dates:

13-17 and 20 February 2023

Date of orders:

14 August 2023

Decision date:

14 August 2023

Jurisdiction:

Equity - Real Property List

Before:

Williams J

Decision:

See orders at [263]

Catchwords:

CONTRACTS — interpretation — commercial lease — implied requirement that landlord’s right to demand payment of outgoings be exercised within a reasonable time — legal meaning of reasonable time — reasonable time as a question of fact

CONSUMER LAW — misleading or deceptive conduct — no question of principle

LEASES AND TENANCIES — repudiation — where tenant terminated commercial lease after landlord asserted and threatened to exercise right to terminate lease by re-entry if tenant failed to pay sum demanded by landlord and its predecessor in title in respect of outgoings payable by tenant under previous, expired leases — whether landlord’s conduct demonstrated willingness to perform the lease only in a manner substantially inconsistent with landlord’s obligations — where landlord claimed that tenant repudiated lease by giving notice of termination, vacating the premises and ceasing to pay rent — held that lease was repudiated by landlord and validly terminated by tenant — tenant’s loss of bargain damages not proved — tenant’s termination for landlord’s repudiation discharged parties from performance of executory obligations, including tenant’s make good obligations

LEASES AND TENANCIES — fixtures and fittings — tenant’s fixtures — no question of principle

Legislation Cited:

Competition and Consumer Act 2010 (Cth), s 87, sch 2 – Australian Consumer Law, s 18

Conveyancing Act 1919 (NSW), s 117

Limitation Act 1969 (NSW), s 14(1)

Cases Cited:

Allianz Australia Insurance Ltd v Delor Vue Apartments CTS 39788 (2022) 97 ALJR 1; (2022) 406 ALR 632; [2022] HCA 38

Commonwealth v Amann Aviation Pty Limited (1991) 174 CLR 64; (1991) 66 ALJR 123; (1991) 104 ALR 1; [1991] HCA 54

Donau Pty Ltd v ASC AWD Shipbuilder Pty Ltd (2019) 101 NSWLR 679; [2019] NSWCA 185

Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd (2017) 261 CLR 544; (2017) 91 ALJR 486; (2017) 343 ALR 58; [2017] NSW ConvR 56-377; [2017] V ConvR 54-888; [2017] HCA 12

Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640; (2014) 88 ALJR 447; (2014) 306 ALR 25; (2014) 7 ARLR 361; [2014] HCA 7

FJ & PN Curran Pty Ltd v Almond Investors Land Pty Ltd [2019] VSCA 236

Franklins Pty Ltd v Metcash Trading Ltd (2009) 76 NSWLR 603; (2009) 264 ALR 15; (2009) 4 BFRA 351; [2009] NSWCA 407

Gumland Property Holdings Pty Limited v Duffy Bros Fruit Market (Campbelltown) Pty Limited and Others (2008) 234 CLR 237; (2008) 82 ALJR 576; (2008) 244 ALR 1; (2008) 2 BFRA 865; [2008] ANZ ConvR 8-017; [2008] NSW ConvR 56-212; [2008] Q ConvR 54-691; [2008] HCA 10

Jones v Dunkel (1959) 101 CLR 298; (1959) 32 ALJR 395; [1959] ALR 367; (1959) 76 WN (NSW) 278; [1959] HCA 8

Koompahtoo Local Aboriginal Land Council v Sanpine Pty Limited (2007) 233 CLR 115; (2007) 82 ALJR 345; (2007) 241 ALR 88; (2008) 24 BCL 272; [2008] Aust Contract Reports 90-279; [2007] HCA 61

Laurinda Pty Limited v Capalaba Park Shopping Centre Pty Limited (1989) 166 CLR 623; (1989) 166 CLR 623; (1989) 63 ALJR 372; (1989) 85 ALR 183; [1989] HCA 2

Mann v Paterson Constructions Pty Limited (2019) 267 CLR 560; (2019) 93 ALJR 1164; (2019) 373 ALR 1; [2019] HCA 32

Miller Heiman Pty Ltd v Sales Principles Pty Ltd (2017) 94 NSWLR 500; [2017] NSWCA 106

Moratic Pty Ltd v Gordon (2007) 13 BPR 24,713; [2007] ANZ ConvR 198; [2007] NSW ConvR 56-172; [2007] NSWSC 5

P & A Swift Investments v Combined English Stores Group Plc [1989] AC 632; [1988] 2 All ER 885; [1988] 3 WLR 313; (1989) 57 P & CR 42; [1988] 43 EG 73

Perri v Coolangatta Investments Pty Ltd (1982) 149 CLR 537; (1982) 56 ALJR 445; (1982) 41 ALR 441; [1982] HCA 29

Placer (GrannySmith) Pty Ltd v Thiess Contractors Pty Ltd (2003) 77 ALJR 768; (2003) 196 ALR 257; (2003) 19 BCL 431; [2003] HCA 10

Retirement Services Australia (RSA) Pty Ltd v 3143 Victoria St Doncaster Pty Ltd (2012) 37 VR 486; [2012] VSCA 134

Ryledar Pty Ltd v Euphoric Pty Ltd (2007) 69 NSWLR 603; [2007] Aust Contract Reports 90-254; [2007] NSWCA 65

Shimden Pty Ltd v Park Pty Ltd [2022] NSWSC 267

Strategic Communications Management Pty Ltd v Techfront Australia Pty Ltd [2020] NSWSC 847

TMA Australia Pty Ltd v Indect Electronics & Distribution GmbH [2015] NSWCA 343

Troulis v Vamvoukakis [1998] NSWCA 237

Vopak Terminal Darwin Pty Ltd v Natural Fuels Darwin Pty Ltd (2009) 258 ALR 89; [2009] FCA 742

Texts Cited:

B Edgeworth, Butt’s Land Law (7th ed, 2017, Thomson Reuters)

J D Heydon, Heydon on Contract: The General Part (2019, Lawbook Co)

Category:

Principal judgment

Parties:

T & L Alexandria Pty Ltd (ACN 624 661 776) as trustee for the T & L Alexandria Family Trust (First Plaintiff/First Cross-Defendant)
T & L Reich Investments Pty Ltd (ACN 081 629 156) (Second Plaintiff/Second Cross-Defendant)
Sharvain Facades Pty Ltd (ACN 116 437 462) (First Defendant/Cross-Claimant)
Bernard Matthew McSorley (Second Defendant)

Representation:

Counsel:
J K Mee (Plaintiffs/Cross-Defendants)
S Reuben (Defendants/Cross-Claimant)

Solicitors:
Holding Redlich (Plaintiffs/Cross-Defendants)
ALC Legal (Defendants/Cross-Claimant)

File Number(s):

2020/150432

Publication restriction:

N/A

Judgment

Introduction

1. These proceedings arise out of a series of leases pursuant to which the first defendant and cross-claimant, Sharvain Facades Pty Ltd (ACN 116 437 462) (Sharvain), occupied premises known as Unit 6 and Unit 7 at 119-133 McEvoy Street, Alexandria in New South Wales during the period from February 2006 until 29 August 2019.

2. The premises were owned by the second plaintiff and second cross-defendant, T & L Reich Investments Pty Ltd (ACN 081 629 156) (TLR), at all material times until about 15 October 2018, when they were transferred to the first plaintiff and first cross-defendant, T & L Alexandria Pty Ltd (ACN 624 661 776) as trustee for the T & L Alexandria Family Trust (TLA).

3. The last of the series of leases was between TLA (as landlord) and Sharvain (as tenant) for a term of three years commencing on 1 March 2019 (the 2019 lease).

4. Sharvain’s performance of its obligations under each of the leases was guaranteed by one of its directors, Mr Bernard McSorley. Mr McSorley is the second defendant.

5. During the period from February 2006 to June 2019, Sharvain paid the monthly rent stipulated by the successive leases, together with a monthly amount on account of outgoings. The leases required Sharvain to pay 100 per cent of outgoings, and made provision for the landlord to recover additional amounts in respect of outgoings at the conclusion of each “outgoings year” if actual outgoings exceeded the total monthly payments, or to pay a refund to Sharvain if its payments exceeded actual outgoings. With the exception of one occasion in 2009, no such adjustments were made under any of the successive leases until TLR and TLA sought to recover amounts totalling $310,847.00 in respect of past outgoings in July 2019. Sharvain denied liability to pay that sum, and TLA asserted a right to terminate the 2019 lease if it was not paid. TLA maintained that assertion in subsequent correspondence, which Sharvain treated as a repudiation of the lease that it then accepted by giving notice terminating the lease on 29 August 2019. Immediately thereafter, Sharvain delivered up vacant possession and returned the keys to TLA.

6. In these proceedings, TLR and TLA claim to recover amounts allegedly owing by Sharvain in respect of past outgoings, loss of bargain damages for Sharvain’s alleged repudiation of the 2019 lease on 29 August 2019, and damages for Sharvain’s alleged breached of its obligations under the 2019 lease in relation to landlord’s fixtures and make good. TLA claims that Mr McSorley is also liable for these alleged losses under the guarantee and indemnity given in favour of the landlord under each lease.

7. Sharvain denies liability to pay the past outgoings on the proper construction of the relevant clauses of the successive leases and, alternatively, contends that TLR and TLA are estopped from claiming those past outgoings. Sharvain maintains that TLA repudiated the 2019 lease, and makes its own claim for loss of bargain damages against TLA. Sharvain claims that TLA engaged in misleading or deceptive conduct that induced it to enter into the 2019 lease and claims damages and other relief in respect of that alleged conduct. Finally, Sharvain seeks an order for the return of the bank guarantee that it procured for TLA under the 2019 lease.

8. For the reasons that follow, all of the parties’ claims have failed, with the exception of Sharvain’s claim for a declaration that it validly terminated the 2019 lease.

Salient evidence and findings of fact

9. TLR and TLA adduced evidence from the following witnesses:

1. Mr Hong Liu, who was married to the sole director of TLR and TLA—Ms Monika Tu—and who gave evidence that he was responsible for making key commercial decisions about the premises under delegated authority from Ms Tu;

2. Ms Sabrina Lam, who was employed by a related company of TLR, and whose responsibilities included arranging the leasing of the premises in the period up to and including about August 2018 (reporting to Mr Liu and acting in accordance with his instructions) and issuing invoices to Sharvain for moneys payable to TLR under the leases; and

3. Mr Lung Pun (also known as Luke), who was employed by Black Diamondz Group in the position of Legal Counsel during the period in which TLR and TLA engaged that company as the managing agent for the premises, and during the events of 2018 and 2019 that gave rise to these proceedings.

10. Sharvain and Mr McSorley adduced evidence from the following witnesses:

1. Mr Boris Kostura, one of Sharvain’s three directors;

2. Mr McSorley;

3. Mr Rowan Sands, who was involved in the design and construction of pallet racking that Sharvain installed in the premises; and

4. Mr Constantine Mandadakis, an information technology consultant who gave evidence concerning Sharvain’s email systems.

11. Sharvain also adduced expert evidence from Mr Michael Binskin, an experienced commercial property agent, and from Mr Matthew Gwynne, a forensic accountant.

12. This section of these reasons for judgment summarises the relevant evidence given by the witnesses, together with the documentary evidence tendered by the parties, and records my findings of fact in relation to disputed matters that are material to the issues to be determined in these proceedings.

13. It is appropriate to make the following observation at the outset about the documentary evidence. As will become apparent below, many communications between the parties concerning the leases were conducted by email. Each of Ms Lam and Mr Kostura adduced evidence of emails that they exchanged with one another during the period from about 2006 until about 2018. Mr Kostura also adduced evidence of emails that he exchanged with Mr Jack Fontana of Black Diamondz Group during 2018 in the course of negotiating the terms of the 2019 lease. For understandable reasons, it was plain from the evidence given by Ms Lam and Mr Kostura in cross-examination that they do not now recall the emails that they exchanged at various times during the period stretching from 2006 to 2018, or the various schedules and other documents that were attached to the emails that they sent and received. In giving evidence about their communications in these proceedings, each of them was reliant on their own record of that email correspondence. To a large extent, each of Ms Lam and Mr Kostura had reconstructed the evidence of their communications assuming that her or his own records constituted a complete collection of all relevant email communications. There are certain discrepancies between their respective records.

14. Much time and attention was devoted to these discrepancies during the hearing. Counsel for the plaintiffs contended that some of Mr Kostura’s emails were not genuine and had been fabricated by him, or that documents that he identified as having been annexed to emails had in fact been prepared by him more recently for the purpose of these proceedings. At the conclusion of the hearing, however, counsel properly withdrew those contentions. I say that those contentions were properly withdrawn at that time because it was apparent from the totality of the evidence that emerged in cross-examination that the discrepancies were most likely attributable to the different ways in which each of Ms Lam and Mr Kostura had maintained their records of email communications. In particular, Mr Kostura’s records of emails prior to about late 2018 were limited to hard copies that he had chosen to print and retain in a paper file. Mr Kostura gave evidence that his practice was to print hard copies of emails that he considered to be important, and to delete other emails that he considered to be non-essential. Due to a change in Sharvain’s email server in 2017 and the replacement of Mr Kostura’s computer in 2018, Mr Kostura had no electronic email records prior to that time.

The 2006/2007 leases

15. Sharvain is in the business of the integrated design and construction of building façades and glazing for building projects. At all times relevant to these proceedings, the directors of Sharvain were Mr Bernard McSorley, Mr Boris Kostura, and Ms Shangyun Zhao.

16. In February 2006, Sharvain leased Unit 7 from TLR for a three-year term expiring on 12 February 2009. In February 2007, Sharvain leased Unit 6 from TLR for a three-year term commencing on 1 March 2007 and expiring on 28 February 2010. The term of the Unit 6 lease was then extended to 28 February 2010 (the 2006/2007 leases).

17. As I have already mentioned, Ms Sabrina Lam was employed by TLR, or one of its related companies. Her responsibilities included arranging the leasing of Unit 6 and Unit 7, and managing invoices issued to the tenant. Mr Hong Liu was responsible for making key commercial decisions about the premises under delegated authority from TLR’s sole director, Ms Monika Tu. Ms Lam reported to Mr Liu and acted on his instructions in relation to matters concerning the leases.

18. Sharvain leased Unit 6 and Unit 7 for storage and distribution, and as a space in which to fabricate prototype façades. According to the evidence of Mr McSorley and Mr Kostura, both units were in a poor and run-down condition at the commencement of Sharvain’s leases in February 2006 and March 2007. This was not disputed by Ms Lam or Mr Liu. On the contrary, Ms Lam acknowledged that Sharvain had refurbished each of the units before moving in. Ms Lam describes the refurbishment as involving fixing lights, replacing ceiling tiles, cleaning blinds, and removing old signage. There is no evidence that either of the units were freshly painted, either by Sharvain or by TLR, before Sharvain moved in. Ms Lam could not recall whether Sharvain’s refurbishment extended to replacing the pallet racking in Unit 7, or to replacing any pallet racking in Unit 6.

19. It is common ground that Unit 7 contained pallet racking before Sharvain moved into the premises in February 2006. Ms Lam’s evidence suggests that the pallet racking had been in place since at least 2001. Mr McSorley and Mr Kostura gave evidence to the effect that the pallet racking was old and unsafe, and that it was unsuitable for storing Sharvain’s materials. Mr McSorley described it as “rusted” and “falling apart”.

20. According to Mr Kostura, Sharvain removed and disposed of the old pallet racking from Unit 7, and installed its own pallet racking, with the knowledge and consent of TLR.

21. Mr Kostura gave evidence that he had a conversation with Ms Lam in about late February 2006 in which he told her that Sharvain’s refurbishment work would include removing the racking and shelving, and fitting out Unit 7 with new, customised racking and shelving to suit Sharvain’s needs. According to Mr Kostura, Ms Lam told him: “That’s all fine”. Ms Lam denies having had any such conversation with Mr Kostura, but did not deny that Sharvain replaced the pallet racking. Ms Lam gave evidence that she simply does not know whether Sharvain replaced the pallet racking in Unit 7.

22. Mr Kostura also gave evidence of a similar conversation that he recalls having with Ms Monika Tu, a director of TLR, when she attended Unit 7 while Sharvain was in the process of carrying out that work on about 26 February 2006. Ms Tu did not give evidence in these proceedings.

23. In an affidavit sworn on 10 February 2023, Mr Liu asserted that a photograph contained in a 2018 valuation report depicted the same pallet racking that TLR had installed in Unit 7 when it first purchased the premises in about 1998. Mr Liu did not identify any features of the racking shown in the photograph that enabled him to say that it was the same racking that TLR had installed in Unit 7 approximately 25 years ago. Mr Liu’s assertion carries no weight.

24. The pallet racking that was in Unit 7 at the commencement of Sharvain’s lease had been used by the previous occupant—a business known as “Wendy’s Imports”. It is inherently unlikely that such pallet racking was suitable for Sharvain’s purposes in its business of designing and constructing building façades. I prefer the evidence of Mr Kostura to the evidence of Mr Liu, and I find that Sharvain did dispose of the existing pallet racking and install its own pallet racking in Unit 7 in about February 2006. I also accept Mr Kostura’s evidence that he discussed this with Ms Tu, who was not called to give evidence. On the basis of that evidence, I find that TLR consented to the replacement of the pallet racking, which necessarily involved the removal of the old pallet racking, either expressly or by its conduct in not objecting at the time. Given the evidence about the state of that old pallet racking, I infer that TLR would have assumed that Sharvain would dispose of it. The notion that the old and rusted racking would be stored somewhere and reinstated in Unit 7 in three years’ time at the end of Sharvain’s lease is fanciful.

25. Ms Lam’s evidence was equivocal about whether there was pallet racking in Unit 6 at the commencement of Sharvain’s lease. In his first affidavit sworn on 28 May 2021, Mr Liu gave evidence that he saw pallet racking when he inspected Unit 6 in February 2007, just before Sharvain moved in. Mr Liu did not describe the pallet racking that he claims to have seen, or its condition. In his first affidavit, Mr Liu also gave evidence that Sharvain had told TLR in about March 2007 that it was installing new pallet racking in Unit 6. Mr Liu did not suggest that TLR had raised any objection to that course at the time.

26. Mr Liu subsequently retracted his evidence that Sharvain informed TLR that it was installing new pallet racking in Unit 6. In his affidavit sworn on 10 February 2023, Mr Liu deposed that he had first become aware that Sharvain had installed new pallet racking in Unit 6 in about March 2018. Mr Liu did not offer any explanation for this change in his evidence, other than to say that he had made a mistake in his first affidavit. He did not put forward any explanation of the reasons for his alleged mistake. Given the passage of time, it is understandable that Mr Liu’s recollection about matters concerning pallet racking as long ago as 2007 is in a poor and confused state. His evidence about these matters is unreliable.

27. Mr McSorley and Mr Kostura gave evidence that there was no pallet racking in Unit 6 at the commencement of Sharvain’s lease, and that Sharvain had designed and fabricated its own heavy-duty racking system to suit the materials that Sharvain needed to store. This was confirmed by Mr Rowan Sands, the tradesman responsible for designing, constructing, and installing that pallet racking system in February and March 2007. Mr Sands was not shaken on any aspect of his evidence during cross-examination.

15. Given the unreliability of Mr Liu’s evidence, I prefer the evidence of Mr McSorley and Mr Kostura, which was corroborated by Mr Sands. I find that there was no pallet racking in Unit 6 at the commencement of Sharvain’s lease, and that Sharvain installed its own pallet racking in Unit 6 in about February or March 2007.

16. The Heads of Agreement for the Unit 7 lease recorded that outgoings were payable by the tenant and were estimated at $30.00 per square metre. The proposal for Unit 6, which Sharvain accepted by signing on 28 February 2007, recorded that outgoings were payable by the tenant, and were estimated at $32.00 per square metre. Mr Kostura gave evidence in cross-examination that he was aware that the outgoings were not fixed at the level of these estimates, and that the landlord was entitled to reconcile actual outgoings against estimated outgoings and require Sharvain to pay any shortfall.

17. Such a reconciliation was in fact carried out in January 2009 for the twelve-month period from 1 July 2007 to 30 June 2008. The outcome of that reconciliation was an adjustment of $149.41 in favour of TLR, which Sharvain paid.

18. It is common ground that this was the only outgoings reconciliation undertaken in respect of the 2006/2007 leases, or any of the subsequent leases, until June 2019. Ms Lam gave evidence that she forgot to carry out reconciliations after the 2007/2008 year because she was very busy. Mr Liu gave evidence that he left these matters to Ms Lam, and was not aware that the reconciliations had not been undertaken.

The 2010 leases

32. With the 2006/2007 leases due to expire on 28 February 2010, TLR and Sharvain negotiated during January 2010 and February 2010 for new leases for Unit 6 and Unit 7 for further terms of three years. Those negotiations were conducted by Ms Lam on behalf of TLR (acting on Mr Liu’s instructions) and Mr Kostura on behalf of Sharvain. According to their contemporaneous email correspondence, there was some discussion between them about whether TLR was looking to sell the premises and, if so, the price that it was looking for. The annual rent to be payable under the proposed new leases was otherwise the sole subject of the negotiations recorded in that email correspondence. During the course of the negotiations, Mr Kostura prepared various schedules calculating the rent payable under both proposed leases on the basis of TLR’s proposed rent increases, and on the alternative basis of Sharvain’s more modest proposed rent increases.

33. On 12 February 2010, Ms Lam sent an email to Mr Kostura attaching a “proposal from my boss” and requesting Mr Kostura to “give me a call so I can further explain to you”. Mr Kostura gave evidence that he had been unable to locate the attachment to Ms Lam’s email. Mr Liu has given evidence identifying the proposal that he had prepared at that time, being a spreadsheet setting out two alternative rental proposals for the proposed three-year term from March 2010 to February 2013. Sharvain would pay the same total rental under both alternatives, but the second alternative (entitled “New proposal”) provided for higher monthly rental payments in the first 33 months, followed by a rent-free period in the last three months of the three-year term. I infer that this spreadsheet was the “proposal from my boss” attached to the email that Ms Lam sent to Mr Kostura at 2:46pm on 12 February 2010.

34. Mr Liu gave evidence that he explained his “New proposal” to Mr Kostura in a conversation in February 2010. According to Mr Liu’s evidence, he explained to Mr Kostura that he wanted the monthly rent to be increased in line with what he considered to be the market rate so as to increase the valuation and potential sale price of the premises, but that he was prepared to offer a three month rent-free period at the end of the three year term so that Sharvain’s total rent under the proposed 2010 leases was the same as under the 2006/2007 leases. Mr Kostura has no recollection of any such conversation.

35. Mr Kostura gave evidence that he telephoned Ms Lam after receiving her 12 February 2010 email. According to Mr Kostura, Ms Lam said to him:

“The Landlords are trying to sell one or both units, but they are not in urgent need to sell but they may sell for the right price and the sale price will be higher if rent is higher. They need to bring up the rental income in line with industry rates.”

36. Ms Lam deposed that she did say this to Mr Kostura during their telephone conversation, because Mr Liu had told her in about early 2010 that TLR wanted to bring Sharvain’s rent into line with market rents at the time and that, based on his inquiries with commercial real estate agents, Mr Liu considered that this required an increase to the rent.

37. According to Mr Kostura’s evidence, Ms Lam also said to him:

“Don’t worry about the outgoings, the total payments agreed with Sharvain will not change. My boss does not care about the split of invoices, we will continue to invoice you as we have always invoiced you.”

38. Ms Lam denies that she said this to Mr Kostura. According to Ms Lam’s evidence, there was no specific discussion or negotiation concerning outgoings in relation to any of the leases. Ms Lam could not recall Mr Kostura ever having asked for information about outgoings. In cross-examination, Mr Liu denied having decided upon, or discussed with Mr Kostura, a strategy of increasing rent but keeping outgoings recoveries artificially low in order to maximise the potential sale price of the premises.

39. Mr Kostura gave evidence that he said to Ms Lam at the end of their conversation:

“I will send you an excel spreadsheet with the total including outgoings for the three years.”

40. Mr Kostura did send an email to Ms Lam (copied to his co-director, Ms Zhao) at 3:45pm on 12 February 2010 in reply to her 2:46pm email and its attached proposal. Mr Kostura’s email stated:

“We agree in principle, just one thing, please change the figure to Unit 7 rental to $7516.9 from ($7561.9) – there is a small difference in total amount because of this. I believe $7,516.9 is our current Unit 7 rental.

I attach both your amended and our amended Excel spread sheets.”

41. The documentary evidence suggests that the first attachment to Mr Kostura’s 3:45pm email was a copy of Mr Liu’s spreadsheet containing the two alternative proposals referred to at [33] above, which had been amended by changing the current rent figure for Unit 7 in accordance with Mr Kostura’s 3:45pm email, and by inserting the words: “We are OK with the New Proposal. BORIS & SHANGYUN”. Mr Kostura gave evidence that he did not believe that this document emanated from him. However, he did not identify any other candidate for the source of the document that he had described in his email as TLR’s or Ms Lam’s amended spreadsheet. As referred to below, elements of the “New proposal” were incorporated into the terms of the 2010 leases drafted by TLR’s solicitor after Ms Lam forwarded Mr Kostura’s 3:45pm email to him with instructions to prepare the leases. I find on the balance of probabilities that this amended version of Mr Liu’s spreadsheet was the first attachment to Mr Kostura’s 3:45pm email.

42. The second attachment to Mr Kostura’s 3:45pm email was his own Microsoft Excel spreadsheet in which he set out his calculation that the total rent payable over the three-year term to commence on 1 March 2010, in accordance with the landlord’s proposal, represented a 13.99 per cent increase on the total amount of rent that had been payable under the expiring 2006/2007 leases.

43. There was no reference to outgoings in either Mr Kostura’s email, sent to Ms Lam at 3:45pm on 12 February 2010, or in the attachments to that email.

44. Curiously, Mr Kostura sent a further email to Ms Lam (also copied to his co-director, Ms Zhao) at 5:17pm on 12 February 2010. That email stated:

“We understand the proposal now. I have captured costs to Sharvain in attached revised table. It is good we can agree on these things, win win is what we are after when doing business.

Please get lease work under way.”

45. According to Mr Kostura’s evidence, his 5:17pm email attached a different version of his spreadsheet that had been the second attachment to his 3:45pm email. In the version attached to his 5:17pm email, Mr Kostura had added a section to that spreadsheet entitled “Sharvain costs” in which he had inserted an amount for each of the three years of the forthcoming term that was described as “all inclusive”, and a total amount for the three years that was also described as “all inclusive”. The “all inclusive” amount for the three-year period was $117,972.00 higher than the corresponding rental amount shown in the schedule. Mr Kostura gave evidence that the difference of $117,972.00 represented “the aggregate outgoings amounts for units 6 and 7 fixed over the three year term”. Mr Kostura also inserted in the schedule the words “Agreed with Sabrina”.

46. Ms Lam accepts that she received Mr Kostura’s 5:17pm email but denies that the revised spreadsheet referred to above was attached to that email. According to Ms Lam, that spreadsheet includes information about outgoings which had not been included in any discussions or prior emails.

47. Mr Liu also gave evidence that he first saw the spreadsheet that Mr Kostura claims to have attached to the email that he says he sent at 5:17pm on 12 February 2020 when he reviewed the exhibit to Mr Kostura’s affidavit served in these proceedings. Mr Liu deposed that he would not have agreed to the proposal set out in that spreadsheet if it had been raised with him at the time, because he was aware that the leases required Sharvain to pay 100 per cent of outgoings.

48. I find that the spreadsheet referred to at [45] was attached to Mr Kostura’s email sent to Ms Lam at 5:17pm on 12 February 2010. However, I accept Ms Lam’s and Mr Liu’s evidence that they did not see that spreadsheet at the time. Mr Kostura’s description of the attachment as merely capturing the costs to Sharvain of the proposal to which he had earlier agreed on behalf of Sharvain would not have given Ms Lam any cause to review the attachment or to bring it to Mr Liu’s attention at the time. The costs of the agreed terms to Sharvain were a matter for Sharvain, rather than for TLR. This most likely explains the absence of any evidence that Ms Lam or Mr Liu responded to Mr Kostura’s 5:17pm email or its attachment at the time. It is also the most likely explanation for the fact that it was Mr Kostura’s 3:45pm email, and not his 5:17pm email, that Ms Lam forwarded to TLR’s solicitor on 16 February 2010 with instructions to commence preparation of the new lease.

49. The leases that Sharvain and TLR later signed in respect of Unit 6 and Unit 7 provided for yearly rents in the amounts that had been proposed by TLR on 12 February 2010 and accepted by Sharvain, as referred to at [33] and [40]-[41] above (the 2010 leases). Clauses 3.01(a), (b), and (c) of each of the 2010 leases provided that the annual rent was payable in equal monthly instalments throughout the three-year term of each lease, which commenced on 1 March 2010. Clause 3.01(d) provided that the landlord agreed to grant the tenant a rent-free period from 28 November 2012 to 28 February 2013. This was partly consistent with TLR’s “New proposal”. However, inconsistently with the “New proposal”, the 2010 leases did not provide for the increased monthly rent payments to ensure that the aggregate rent agreed for the three-year term was recovered over 33 months.

50. Clause 4.01 of each of the 2010 leases (read together with the reference schedule) provided that Sharvain would pay to the landlord “on demand by way of reimbursement” 100 per cent of the “Yearly Outgoings” for each “Outgoings Year”. The “Yearly Outgoings” were defined in clause 1.15 of each lease as including local authority rates, taxes, charges and assessments, land taxes at the rate payable by the landlord on a multiple holding basis, strata levies, insurance premiums payable by the landlord in respect of the building in which the premises were located, and repair and maintenance costs incurred in respect of the building. An “Outgoings Year” was defined as each period of twelve months ending on 30 June during the term of the lease, with the first outgoings year being the period from the commencement of the lease until the next 30 June and the last outgoings year being the period from the last 30 June during the term of the lease until the expiry date of the lease.

51. It is convenient to set out the terms of clause 4 of each of the 2010 leases in full:

“4.01   YEARLY OUTGOINGS

It is hereby expressly agreed by and between the parties hereto (and notwithstanding anything to the contrary herein contained) that in addition to the Yearly Rent hereby reserved the Tenant will in respect of each outgoings year pay to the Landlord in the manner herein mentioned on demand by way of reimbursement the Tenant’s proportion of the yearly outgoings as set forth in item 17 of the reference schedule and a statement signed by the Landlord or the Landlord’s managing agent or any duly authorised officer of the Landlord shall be prima facie evidence of the amount of such yearly outgoings PROVIDED ALWAYS where any outgoings year is less than twelve months the amount of the yearly outgoings for that outgoings year shall be the appropriate proportion on a daily basis of the yearly outgoings for that outgoings year of less than twelve (12) months.

4.02   ESTIMATE

Prior to the commencement of each outgoings year the Landlord may estimate the yearly outgoings for that outgoings year and advise the Tenant of such estimated yearly outgoings payable by it and the Tenant shall pay the Tenants proportion of such yearly outgoings by equal monthly instalments on the days fixed for payment of instalments of the yearly rent. As soon after the expiration of each outgoings year as the necessary information is available to calculate the actual yearly outgoings in respect of that outgoings year the Landlord shall calculate such yearly outgoings and the amount of yearly outgoings actually payable by the Tenant in pursuance of this clause and the difference between the amount so paid by the Tenant and the amount paid by it in respect of instalments paid by the Tenant during such outgoings year shall be paid by the Tenant to the Landlord or by the Landlord to the Tenant as the case may be to the intent that the Tenant shall have paid its proportion of the actual yearly outgoings for the outgoings year in question. Such payment by the Landlord or the Tenant shall be payable notwithstanding the fact that this Lease has in the meantime expired or been determined prior to such payment having been demanded or made.

4.03   SEPARATE RATES, TAXES AND SERVICES TO PREMISES

The Tenant shall promptly pay any other charges, outgoings or assessments which may at any time during the term, or at any time thereafter in respect of the term, be separately levied or imposed on the land or any part thereof.”

52. Clause 21.01 of the 2010 leases provided that the tenant’s covenants in clause 4 of the leases were essential and fundamental terms of the leases.

53. Mr Kostura was aware of these provisions of the 2010 leases at the time that Sharvain signed the leases. He was also conscious of the fact that TLR had in fact conducted an outgoings reconciliation the previous year in respect of the 2007/2008 period under the 2006/2007 leases. In cross-examination, Mr Kostura gave evidence that, during the negotiation of the 2010 leases and each of the subsequent leases in the period up to 2019, he thought about the fact that the landlord had not reconciled outgoings, but he did not do anything about it. Mr Kostura said that, at the time of each negotiation, he was focussed on understanding the total cost of the premises for the forthcoming lease period. Notwithstanding that he caused Sharvain to sign the 2010 leases, which provided for the tenant to pay 100 per cent of the outgoings, Mr Kostura maintained in cross-examination that:

“In my understanding was – the deal was for – for paying outgoings, as we understood there were, because they told us what the outgoings were and then invoiced, and that’s all you need to pay. That was my understanding of it.”

54. The cross-examination continued:

“Q.   But you understood that the landlord had just previously conducted an adjustment --

A.   Yes.

Q.   So, you accepted that didn’t you, that they could conduct an adjustment going forward, under this lease?

A.   What I say is that the amount of those reconciliations was pretty much in line with invoices that we received for outgoings.

Q.   Yes. But leaving aside the question of how much, you accepted in principle that they could conduct a reconciliation?

A.   I did not think of that.

Q.   You didn’t think about it at all?

A.   I did not think they could because we agreed that they would not.

Q.   Did you think they couldn’t?

A.   I didn’t think they could, I didn’t know that they couldn’t or not.

Q.   Do you accept that the terms of this lease are the same as the terms of the previous one?

A.   Yeah.

…

Q.    … And so you didn’t think the deal had changed between the previous lease and this one, did you?

A.   I had no reason to believe there would be different – different value invoiced, and it wasn’t.

Q.   That was the invoices –

A.   Mm-hmm.

Q.   But I’m talking about the deal overall?

A.   Yeah, I didn’t think of that.

Q.   … And as regards outgoings, it had been a previous term of the deal that the landlord could conduct a reconciliation?

A.   That’s what the lease says, yeah.

Q.   And you also accepted that it was a term of the deal – at this time – at the commencement of the 2010 lease, at that time –

A.   I didn’t think about it, but the lease says that, yes.

Q.   You didn’t think about it?

A.   No.”

55. Mr Kostura’s evidence that he did not think about whether the landlord could conduct outgoings reconciliations when negotiating the 2010 leases and when Sharvain signed those leases is inconsistent with his evidence given a very short time earlier in cross-examination that, during the 2010 negotiation—and each subsequent lease negotiation—he did think about the fact that the landlord had not reconciled outgoings, but that he did not raise this with the landlord or do anything about it. It is implicit in that earlier evidence that Mr Kostura understood at the time of each negotiation that the landlord was entitled under the terms of the then-current lease to reconcile outgoings. The earlier evidence was volunteered by Mr Kostura in answer to a very general question asked of him, at a time when he did not appear to understand the significance of his answer for Sharvain’s estoppel defence and cross-claim in these proceedings. The significance of that answer appeared to be dawning on Mr Kostura by the time he gave the later evidence. I prefer the earlier evidence, and I find that Mr Kostura understood at the time of the 2010 lease negotiation, and at the time of each subsequent lease negotiation, that the landlord was entitled under the terms of the then current lease to reconcile outgoings. I note that the email sent by Mr Kostura to Mr Pun on 2 July 2019, referred to at [109]-[110] below, also supports this finding.

56. I accept that Mr Kostura was concerned during the 2010 lease negotiations to estimate the total costs of the premises to Sharvain for the proposed new three-year term. I accept that Mr Kostura used the total amount of outgoings that Sharvain had paid under the 2006/2007 leases for the purpose of preparing his estimate. However, as I have already mentioned, Mr Kostura knew that the terms of the 2010 leases entitled TLR to recover 100 per cent of the outgoings from Sharvain. Mr Kostura may have been hopeful that those outgoings would not exceed the amount that Sharvain had paid under the 2006/2007 leases, but I reject his evidence that TLR had accepted or agreed that the total outgoings charges would be fixed at that amount for the 2010 leases. If any such agreement had been reached, it is highly improbable that Mr Kostura would have caused Sharvain to sign leases on terms that required it to pay 100 per cent of outgoings and included the provisions of clauses 4.01 to 4.03 set out above. The notion that Mr Kostura would have done so as part of some strategy by TLR to trade higher rent for fixed outgoings in order to maximise the potential sale price of the premises, as suggested in his evidence to at [35]-[38] above, is implausible. In the event that the premises were sold, this would obviously have left Sharvain exposed to paying the higher rent whilst being bound to pay the purchaser and incoming landlord 100 per cent of the actual outgoings. I find that Ms Lam did not say to Mr Kostura during the 2010 lease negotiations words to the effect that Mr Kostura attributes to her at [37] above. The notion that TLR or Mr Liu would “not care” whether TLR was able to recover outgoings from its tenant is implausible, irrespective of whether TLR was considering selling the premises at that time. There is no evidence to suggest that any sale was expected or imminent. Mr Kostura’s evidence that Ms Lam said to him words to the effect set out at [37] above is therefore inherently improbable, and I am not persuaded that Mr Kostura in fact recalls Ms Lam saying those words more than ten years before he first gave evidence in these proceedings.

55. It is common ground that, during the term of the 2010 leases, TLR issued monthly outgoings invoices to Sharvain for the same amounts that it had invoiced during the term of the 2006/2007 leases based on TLR’s estimate of total outgoings at the commencement of the 2006/2007 leases. As I have already mentioned, Ms Lam gave evidence that she forgot to carry out outgoings reconciliations during the term of the 2010 leases because she was very busy with other work which occupied most of her time.

56. Pursuant to clause 25.01 of each of the 2010 leases, Mr McSorley guaranteed to the landlord the due and punctual performance of the tenant’s obligations under the lease, and indemnified the landlord against all loss, damage, costs, and expenses suffered or incurred by the landlord as a result of any failure by the tenant to pay any moneys under the lease or as a result of any breach by the tenant of the lease.

The 2013 leases

59. The negotiations for new leases to commence on the expiry of the 2010 leases were again conducted by Ms Lam on behalf of TLR (acting in accordance with Mr Liu’s instructions) and Mr Kostura on behalf of Sharvain. According to Ms Lam, there was no specific discussion or negotiation concerning outgoings. Ms Lam could not recall Mr Kostura ever having asked for information about outgoings in any of the lease negotiations. Mr Kostura’s affidavit evidence did not refer to any discussion concerning outgoings during the negotiation of the 2013 leases, and the contemporaneous email correspondence recording those negotiations makes no mention of outgoings. When the email correspondence was put to him in cross-examination, Mr Kostura suggested that there had been some separate discussion with Ms Lam concerning outgoings during the negotiation of the 2013 leases. When asked to give an account of those discussions, Mr Kostura said he would need to check his affidavit. As I have said, none of Mr Kostura’s affidavits mention any such discussions.

60. The contemporaneous email correspondence includes a schedule that Ms Lam sent to Mr Kostura by email at 4:04pm on 12 February 2013 setting out the rent proposed by TLR for each year of the proposed new three-year leases. Ms Lam’s email asked Mr Kostura to indicate whether Sharvain accepted TLR’s proposal. Ms Lam’s evidence identified an email that she appears to have received from Mr Kostura at 3:48pm on 15 February 2013, stating “please proceed with preparation of lease agreement reflecting your latest figures as soon as possible”. Mr Kostura gave evidence that he had no record or recollection of having sent any such email. In cross-examination, however, Mr Kostura acknowledged that “[s]omething like this has been sent out, yes”. I find that Mr Kostura did send an email to Ms Lam at 3:48pm on 15 February 2013 communicating Sharvain’s agreement to enter into new leases of Unit 6 and Unit 7 at the rents set out in the schedule attached to Ms Lam’s email sent to Mr Kostura at 4:04pm on 12 February 2013, in circumstances where there had been no negotiation or discussion in relation to outgoings.

61. Mr Kostura gave evidence that he sent an email to Ms Lam at 4:35pm on 15 February 2013 attaching a copy of the schedule that had been attached to Ms Lam’s 12 February 2013 email sent at 4:04pm, in which Mr Kostura had inserted immediately below Ms Lam’s calculation of the total rent for the three year term an amount of $117,972.00 for outgoings, which was then added to the total rent figure to calculate an amount described in the schedule as “Total 3 years – all costs”. Mr Kostura’s email to Ms Lam stated:

“Once more, I have attached agreed lease break up figures. Please proceed with lease preparation to match our total agreed amounts. Please call if any questions.”

62. Ms Lam gave evidence that she does not have a record of having received Mr Kostura’s email that appears to have been sent at 4:35pm on 15 February 2013. I find that Mr Kostura did send that email and attachment to Ms Lam, although it is unsurprising that Ms Lam did not retain a record of that email. On its face, the email purported to attach the same figures that had been agreed in Mr Kostura’s email sent to Ms Lam at 3:48pm, earlier that afternoon. Nothing in the email alerted Ms Lam to the fact that Mr Kostura’s schedule included figures that had not been the subject of any discussion, let alone agreement.

63. Sharvain entered into three-year leases with TLR in respect of each of Unit 6 and Unit 7, commencing on 1 March 2013 and expiring on 29 February 2016 (the 2013 leases).

64. An executed copy of the 2013 lease for Unit 6 was not in evidence. However, Sharvain continued to occupy Unit 6 after the expiry of the 2010 leases and Mr Kostura gave evidence in cross-examination that he had no reason to believe that the lease was not signed. I proceed on the basis that it was signed.

65. Each of the 2013 leases provided for outgoings in the same terms as the 2010 leases referred to above.

66. During the term of the 2013 leases, TLR issued monthly outgoings invoices to Sharvain for the same amounts that it had invoiced during the term of the 2006/2007 leases and the 2010 leases. Those monthly amounts reflected TLR’s estimate of total outgoings at the commencement of the 2006/2007 leases. TLR did not conduct a reconciliation of those payments against actual outgoings in respect of any outgoings year under the 2013 leases at any time during the term of those leases. As I have already mentioned, Ms Lam gave evidence that she forgot to carry out outgoings reconciliations because she was very busy with other work which occupied most of her time. As referred to in more detail later in these reasons, it was not until June 2019 that TLR first raised the question of outgoings reconciliations with Sharvain.

67. Clause 25.01 of the 2013 leases contained a guarantee and indemnity by Mr McSorley in favour of the landlord in the same terms as the 2010 leases referred to above.

The 2016 lease

68. The negotiations for a new lease to commence on the expiry of the 2013 leases were again conducted by Ms Lam on behalf of TLR (acting under instructions from Mr Liu) and Mr Kostura on behalf of Sharvain. The parties adduced evidence of email correspondence between Ms Lam and Mr Kostura between December 2015 and February 2016 concerning the annual rent under the proposed new lease. That correspondence makes no reference to outgoings, although an email sent by Mr Kostura to Ms Lam at the commencement of the negotiations on 16 December 2015 stated that Sharvain needed to “understand incremental rent increase, all costs included” and that “overall costs of premises (total amount paid) is relevant since they are high at the best of times”. Ms Lam denied receiving that email. It is understandable that Ms Lam may no longer recall receiving the email. However, the documentary evidence indicates that it was sent, and I so find.

69. The email correspondence after 16 December 2015 concerned the rent that would be payable under the proposed new lease, and Sharvain’s request for a rent-free period, which TLR declined. Email correspondence exchanged between Ms Lam and Mr Kostura on 23 February 2016 records that, on that date, they reached agreement as to the rent and Mr Kostura requested that Ms Lam prepare the new lease for Sharvain’s execution as soon as possible. Mr Kostura gave evidence that he had no recollection, and no record, of this email exchange. I find on the basis of the documentary evidence that these emails were exchanged, and that Mr Kostura did request that Ms Lam prepare a new lease based on the rent agreed as at 23 February 2016. There is no evidence that there had been any negotiation or discussion of outgoings, notwithstanding that Mr Kostura had expressed a desire to understand the “overall costs or premises (total amount paid)” in his 16 December 2015 email referred to above.

70. Later, at 5:19pm on 23 February 2016, Mr Kostura sent an email to Ms Lam attaching a document entitled “Rental Proposal 2016-2019”. According to Mr Kostura’s evidence, the attached document was a schedule in which he set out the calculation of rent payable in each year of the three-year term, and the total rent payable over that three-year period. The schedule then included a figure of $117,972.00 for outgoings, which was added to the total rent figure to calculate an amount described as “Total 3 years – all costs”. Mr Kostura’s email to Ms Lam stated:

“We have put the table / schedule together as before, see attached.

It shows how rental would be increased over the next 3 years. I assume, as before, invoices will match these values”

71. There is no evidence of any reply by Ms Lam to Mr Kostura’s 5:19pm email, and she gave evidence that she has no record of having received it. In cross-examination, Ms Lam initially gave evidence that she did not recall receiving the email. Upon reading the contents of the email and the document that Mr Kostura says was attached to it, Ms Lam denied receiving the email and the attachment.

72. Mr Kostura’s email sent to Ms Lam at 5:19pm on 23 February 2016 is consistent with his pattern of conduct during the 2010 and 2013 lease negotiations referred to above. That pattern was to first agree the rent to be payable under the new leases, then to request that Ms Lam prepare the lease documents reflecting the agreed rents, and only then to send Ms Lam a schedule setting out the agreed rents for each unit for each month and year of the forthcoming three-year terms to which Mr Kostura had added an amount for outgoings, notwithstanding that there had been no negotiation or discussion about the amount of outgoings. Mr Kostura’s pattern of conduct also included sending that spreadsheet to Ms Lam attached to an email drafted in obscure terms that made no reference to outgoings, let alone to any suggestion that outgoings payable by Sharvain during the forthcoming leases would be limited to the amount in Mr Kostura’s schedule.

73. On the basis of the documentary evidence, I find that Mr Kostura did send Ms Lam the email and attachment referred to above at 5:19pm on 23 February 2016. However, I accept that Ms Lam has no record of, and does not now recall, receiving either that email or the attached schedule. Given the terms of the email, and the fact that it was sent after Mr Kostura had already communicated Sharvain’s agreement to the rent proposed by TLR and had requested Ms Lam to arrange for leases to be prepared on that basis, it is likely that Ms Lam would have not regarded the email to be material when it arrived in her inbox, and that she would not have retained a copy of the email or its attachment.

74. A lease for a term of three years commencing on 1 March 2016 and expiring on 28 February 2019 was prepared and executed (the 2016 lease).

75. The 2016 lease related to both Unit 6 and Unit 7 and provided for outgoings in the same terms as the 2010 and 2013 leases referred to above.

76. TLR continued to issue monthly outgoings invoices to Sharvain for the same amounts that it had invoiced during the term of the 2006/2007 leases, the 2010 leases, and the 2013 leases. This continued after TLR transferred Unit 6 and Unit 7 to TLA on or about 15 October 2018. Neither TLR nor TLA conducted a reconciliation of those payments against actual outgoings in respect of any outgoings year under the 2016 leases at any time prior to June 2019. As I have already mentioned, Ms Lam has given evidence taking responsibility for this. As referred to at [99] below, the issue of outgoings reconciliations was first raised with Sharvain in June 2019 by Black Diamondz Group, which had been engaged as TLR’s property managing agent in about August 2018 and as TLA’s agent from October 2018.

77. Clause 25.01 of the 2016 lease contained a guarantee and indemnity by Mr McSorley in favour of the landlord in the same terms as the 2010 leases referred to above.

The 2019 lease

78. Mr Kostura gave evidence that Mr Jack Fontana of Black Diamondz Group telephoned him on about 1 August 2018 enquiring about Sharvain’s interest in taking a further lease of Unit 6 and Unit 7. According to Mr Kostura, he told Mr Fontana that Sharvain would “like to stay on provided we can negotiate an appropriate figure for the new rental and to fix all costs”.

79. Mr Kostura then sent Mr Fontana an email later that day in the following terms:

“We would like to re-confirm our phone discussion that Sharvain Projects would like to extend our current lease for another 3 years plus 3 year (or 2 year) option. Our current lease is expiring in January 2019.

We assume that would be OK with you guys but please kindly confirm it in writing and arrange for the Lease accordingly.

Also, a while back, we have discussed with Sabrina if there was a possibility of getting some rental free periods at some stage, considering we have been here over 12 years and I assume the Landlord was generally satisfied with our payment discipline and the fact we have been looking well after the property.

We look forward to hearing from you ASAP, thank you.”

80. Mr Fontana replied, indicating that TLA proposed a rental arrangement calculated at the rate of $250.00 per square metre, meaning that “the annual income will be $299,500.” Mr Fontana asked Mr Kostura to “advise your position and intentions moving forward”.

81. Mr Kostura replied to Mr Fontana later that afternoon, stating:

“I am pretty confident that we would be able to agree on lease terms, I believe that there is a benefit to both parties (for commercial reasons and for convenience) if the relationship continues.

May I suggest you email us proposal on how the rate is calculated and terms of lease etc.?”

82. Mr Fontana replied on 2 August 2018, advising that his calculation was “based on a fee of $250 per square metre for the total area i.e. 1198sqm”.

83. Irrespective of whether Mr Kostura expressed a desire to “fix all costs” in his discussion with Mr Fontana on 1 August 2018, there was no mention of either outgoings or of fixing the amount of outgoings in their subsequent communications referred to above.

84. Mr Kostura and Mr Fontana met in person on 6 August 2018. Mr Kostura gave evidence that, during that meeting, he said to Mr Fontana:

“We have been operating on a basis where the outgoings remain the same and they have been fixed since 2010 and rent is set so that the total payable represents around market value on a $ per square metre basis. The landlord wants the rent to be kept high so that if they were to sell, the higher rent would help to increase the sale price. I’m mentioning this because I want to ensure transparency in the negotiations. Every time there’s been a rent negotiation, I prepare a table with a break up of the figures including the outgoings which remain the same for the whole term. I will first send you the rent figures we propose. … In the past, on the lease negotiations we have not been prepared to give the landlord an open cheque book on the outgoings which have not been reviewed and we will only enter into a new lease if the outgoings amounts stay the same.”

85. According to Mr Kostura, Mr Fontana responded by saying:

“If that’s the way you’ve done it in the past, then that should be ok. I’ll have to check with the landlord. I’ll let you know if there is any issue.”

86. Later on 6 August 2018, Mr Kostura sent an email to Mr Fontana attaching a signed spreadsheet setting out Sharvain’s proposal for a renewed lease. The attached spreadsheet contained proposed monthly and annual rental amounts for each of Unit 6 and Unit 7, calculated at rates of less than $250.00 per square metre, with no increases over the proposed three-year term of the lease. The email did not mention outgoings and the spreadsheet did not contain any outgoings figures or “all inclusive” cost figures.

87. I also reject Mr Kostura’s account of his conversation with Mr Fontana at the 6 August 2018 meeting, which is inherently implausible, and so lacks credibility. It is implausible that Mr Kostura would have committed Sharvain to paying higher rent in return for lower, fixed outgoings in the past, as he suggests in his account of the 6 August 2018 conversation, to aid the landlord in driving up the sale price of the premises. For the reasons identified at [56] above, it would have been obvious to Mr Kostura that this would be to Sharvain’s commercial detriment if the premises were indeed sold during the term of the lease. In addition, it is implausible that Mr Kostura would have said to Mr Fontana that Sharvain would “only enter into a new lease if the outgoings amounts stay the same”, yet excluded the outgoings amounts that he now says Sharvain had wanted to fix from the table that he sent to Mr Fontana by email later that day. Mr Kostura’s explanation for this in cross-examination was that “we said we don’t need to deal with outgoings because they are already agreed”. I reject that explanation. Even on Mr Kostura’s account of the meeting (which I have rejected), there was no discussion about the amount of the outgoings, and Mr Fontana had told him that he would need to check with the landlord about whether outgoings would remain at the same level as previous leases.

88. Mr Fontana replied to Mr Kostura that he had forwarded Sharvain’s 6 August 2018 proposal to the owner and was awaiting a response. That response was not forthcoming for some weeks. On 29 August 2018, Mr Fontana sent an email to Mr Kostura setting out the owner’s response, which was described as a final offer. That response was for a higher monthly rental than Sharvain had offered for the first year of the proposed three-year term, increasing in the second and third years.

89. Mr Kostura gave evidence that he replied to Mr Fontana’s 29 August 2018 email on 3 September 2018. Mr Kostura’s email referred to an “attached lease break up” in which he had allocated the total rental amounts stipulated by the owner between Unit 6 and Unit 7, on the basis that “[b]oth units are little different and rental was always different”. The document that Mr Kostura has identified as having been attached to his email recorded the rental amounts stipulated by the owner as $295,740.00.00 per annum (or $24,465.00 per month) for the first year of the new term, $316,446.24 (or $26,370.52 per month) for the second year, and $338,597.40 (or $28,216.45 per month) for the third year. Mr Kostura’s document also included a total figure for outgoings of $117,972.00. Mr Kostura gave evidence that he considered that this figure represented “fixed outgoings” for the forthcoming three-year term.

90. Mr Kostura also gave evidence that he telephoned Mr Fontana on 4 September 2018, and asked him to confirm that he had received “my updated table” and that “we have a deal”. According to Mr Kostura, Mr Fontana replied: “Yes, we have a deal. You will receive a lease when its ready.”

91. There is no evidence of any email reply by Mr Fontana to Mr Kostura’s 3 September 2018 email. Mr Pun gave evidence that he had searched Black Diamondz Group’s email archives and had not been able to find Mr Kostura’s 3 September 2018 email. Mr Liu gave evidence that he had never seen the spreadsheet that Mr Kostura claims to have attached to his 3 September 2018 email prior to reviewing the exhibits to Mr Kostura’s affidavit. Nevertheless, on the basis of the copy of the email that was tendered in evidence, and in circumstances where an allegation that Mr Kostura had fabricated the email was withdrawn, I find that the email and “attached lease break up” were in fact sent to Mr Fontana.

92. Mr Pun’s email archive searches did identify an email that Mr Fontana sent to Mr Liu on 4 September 2018, which indicates that the lease negotiations had not yet resulted in a “deal”, contrary to Mr Kostura’s evidence. Mr Fontana’s email to Mr Liu states:

“I have spoken to Boris, and his response to your proposal is that a 7% increase is unreasonable as this is more than double the previous increases of 3%.

I managed to get him to agree to a 5% annual increase which is at the top end of the regular 3-5% increase.

Therefore the proposed figures are below:

Monthly Rent (U6+U7)
Monthly Rent 01/03/2016 – 28/02/2017	$24,184.68
Monthly Rent 01/03/2017 – 28/02/2018	$25,393.91
Monthly Rent 01/03/2018 – 28/02/2019	$26,663.61”

93. It appears that Mr Liu did not provide instructions about this proposal for some time. On 19 October 2018, Mr Fontana re-forwarded his 4 September 2018 email to Mr Liu and asked him to “confirm if you agree to the tenant’s proposal”.

94. In light of the evidence of the email correspondence between Mr Fontana and Mr Liu on 4 September and 19 October 2018, it is highly improbable that Mr Fontana told Mr Kostura on 4 September 2018 that they had “a deal” on the basis of Mr Kostura’s 3 September 2018 spreadsheet. I reject Mr Kostura’s evidence to that effect and find that no such conversation occurred. I find that the position as at 4 September 2018 was that Mr Kostura had communicated a willingness to agree to the rents set out in Mr Fontana’s email to Mr Liu, and that Mr Fontana was awaiting instructions from Mr Liu.

95. It was not until 23 January 2019 that Mr Pun sent an email to Mr Kostura and Mr David Clear of Sharvain attaching the proposed new lease for Unit 6 and Unit 7 for their review and consideration. There followed correspondence between the parties in relation to the provision of certificates of currency for the insurance policies that the lease required Sharvain to take out, the return of the bank guarantee that Sharvain had provided under the 2016 lease, and the provision of a new bank guarantee for the 2019 lease. The lease was ultimately executed in late March 2019. It was for a term of three years commencing on 1 March 2019 and expiring on 28 February 2022 (the 2019 lease).

96. As Mr Pun identified in his affidavit sworn on 28 May 2021, the rent payable under the 2019 lease was consistent with Mr Fontana’s 4 September 2018 email to Mr Liu, not with Mr Kostura’s document referred to at [88]-[89] above about which he claimed to have concluded “a deal” with Mr Fontana. That provides further support for my finding that Mr Fontana did not tell Mr Kostura that they had a deal on the terms of Mr Kostura’s “attached lease break up” referred to at [89] above. The rent payable in the first year of the 2019 lease was $290,217.00 (plus GST), which equates to $242.00 per square metre on the basis that the total area of the premises was 1198 square metres. ^[1] The provisions of the 2019 lease concerning outgoings were in the same terms as the 2010 leases, the 2013 leases, and the 2016 lease referred to above.

    1. See [82] above.

97. Clause 25.01 of the 2019 lease contained a guarantee and indemnity by Mr McSorley in favour of the landlord in the same terms as the 2010, 2013, and 2016 leases referred to above

98. Mr Fontana was not called to give evidence in these proceedings. TLA adduced evidence that he had declined to meet with its solicitors in March 2021 to provide a witness statement. At that time, Mr Fontana had ceased working for Black Diamondz Group and was apparently employed with a property agency in Newtown, New South Wales. There is no evidence of any reason why he could not have been served with a subpoena to give evidence.

June – August 2019: Dispute about past and future outgoings culminating in termination of the 2019 lease

99. On 25 June 2019, Mr Pun of Black Diamondz Group sent an email to Sharvain providing an estimate of $117,851.61 for outgoings for the forthcoming period from 1 July 2019 to 30 June 2020, and stating that the monthly outgoings instalments payable by Sharvain for Unit 6 and Unit 7 would therefore increase to $9,820,97. Mr Pun’s email also contained a demand for Sharvain to pay outgoings adjustments in respect of the periods from 1 July 2018 to 30 June 2019 and from 1 July 2017 to 30 June 2018. Mr Pun acknowledged that there had not been a review of actual outgoings against estimated outgoings “for many previous years (maybe none at all since the Tenant’s first lease year)” and stated that TLA and TLR reserved their rights to claim outgoings adjustments for periods prior to 1 July 2017. Mr Pun’s email attached invoices for rent and the increased monthly amount for estimated outgoings for July 2019, together with invoices for outgoings adjustments for the periods from 1 July 2018 to 30 June 2019 and from 1 July 2017 to 30 June 2018.

100. Mr Kostura replied to Mr Pun’s email later that same day, stating:

“Thanks Luke – we will review this but just as I see it, the Land Tax should not be included in the outgoings … please check it at your end.

Also please provide us copies of Council Rates and Strata Levies etc for our records. Thank you.”

101. Mr Pun replied to Mr Kostura by email a short time later that date with a Dropbox link to all outgoings records that he had relied on in calculating the adjustments for the 2018/2019 and 2017/2018 periods. Mr Pun’s email also noted that the terms of the lease had always defined outgoings as including land taxes.

102. Mr Kostura replied to Mr Pun by email on 27 June 2019, stating:

“Luke

As Sabrina has said, we have been a ‘dream tenant’ for almost 15 years so please respect this and be reasonable, perhaps consult with Sabrina on the past dealings.

OK?”

103. Mr Kostura gave evidence that he telephoned Mr Pun at about the time that he sent the email referred to immediately above, and that they had a conversation to the following effect:

[Mr Kostura]   “We have been paying the agreed amounts. There is 13 years of precedence about how we did business with the Landlord and how the leases were set up, interpreted and invoices paid for. We pre-determined and agreed the rent and outgoings as a total cost for each lease period and both parties complied with what was agreed. We budget for business costs and if we had known the arrangements would change and outgoings would be increased like this, the total amount of payments under the lease would be well above the market value and we would not have proceeded with the lease – it’s as simple as that.

[Mr Pun]   That’s not what the lease says. It’s your fault that you were not paying the correct amounts. You should have enquired.

[Mr Kostura]   We relied upon what was said in our lease negotiations for each term, including showing the amounts for outgoings that would be payable in a table. You should have told us after the change of ownership and before the lease started. You’re acting as an extortionist. How can you claim $300,000 for all these previous expired leases? It’s both commercial and morally wrong and simply unacceptable.

[Mr Pun]   I don’t care and if it comes to it, unless you pay what we ask you to, we will remove you from the premises and take legal action to recover all due moneys no matter what.”

104. Mr Pun denied that their conversation was in those terms. In particular, Mr Pun denied that Mr Kostura said anything to him to indicate that he considered that there had been an agreement fixing or pre-determining the amount of outgoings or the total costs of the leases. According to Mr Pun’s evidence, his conversation with Mr Kostura was to the following effect:

[Mr Pun]   “The 2019 lease includes an obligation to pay outgoings and the Landlord will need this paid.

[Mr Kostura]   You’re acting as an extortionist. How can you claim $300,000 for all those previous expired leases? It’s both commercially and morally wrong and simply unacceptable.

[Mr Pun]   The landlords are claiming to recover outstanding outgoings owed by Sharvain. Perhaps there can be a middle ground in the amount Sharvain will pay for the outstanding outgoings.

[Mr Kostura]   I am not going to even pay one dollar.”

105. Subject to one qualification, I accept Mr Pun’s evidence about this conversation, and I reject Mr Kostura’s evidence, which is irreconcilably inconsistent with the contemporaneous email correspondence. If Mr Kostura had understood or assumed that there had been an agreement to limit outgoings payable by Sharvain to a fixed amount, as he now contends, and as he claims to have told Mr Pun in their conversation on or about 27 June 2019, it is most improbable that he would not have said so in his emails to Mr Pun on 25 and 27 June 2019. In cross-examination, Mr Kostura sought to explain his failure to say so in those emails on the basis that he was in a state of shock about the demand to pay $310,847.00. That explanation lacks credibility, given that Mr Kostura claims to have said to Mr Pun in their 27 June 2019 conversation the very thing that he claims to have been too shocked to say in his emails sent at the same time. Moreover, it is implausible that Mr Kostura was too shocked to tell Mr Pun in his 25 and 27 June 2019 emails that nothing was owing because Sharvain had agreed with the landlord that it would only pay outgoings in the fixed amounts that had been previously invoiced, yet went to the trouble of raising matters that would be irrelevant if any such agreement had been reached—requesting evidence of the outgoings now claimed by the landlords and querying the inclusion of land tax in those outgoings. For those reasons, I find that the conversation between Mr Kostura and Mr Pun on or about 27 June 2019 was in the terms described by Mr Pun, subject to one qualification, and that Mr Kostura did not say to Mr Pun in that conversation that outgoings had been pre-determined and agreed at the commencement of each lease in the amounts shown in a table.

106. The qualification referred to above is that I do not accept that Mr Pun suggested to Mr Kostura that there may be “a middle ground in the amount Sharvain will pay for the outstanding outgoings”, and that Mr Kostura replied that he would not pay “even one cent”. I consider it to be improbable that Mr Pun made that suggestion, the tone and sentiment of which is starkly inconsistent with the tone and sentiments expressed in Mr Pun’s 25 June 2019 email, and in his subsequent emails sent on 2 July and 5 July 2019, within a few days of this conversation. However, nothing turns on whether or not that exchange formed part of the conversation on 27 June 2019.

107. On 1 July 2019, Sharvain paid TLA’s invoice for the July 2019 rent plus increased monthly estimated outgoings that had been attached to Mr Pun’s 25 June 2019 email. There is no evidence that Sharvain made this payment subject to any reservation of rights.

108. Mr Pun sent a further email to Mr Kostura on 2 July 2019 reiterating demands for payment in respect of outgoings adjustments to reflect actual outgoings for the periods from 1 July 2018 to 30 June 2019 and from 1 July 2017 to 30 June 2018, and calculating the amounts said to be payable in respect of outgoings adjustments for the periods from 1 July 2016 to 30 June 2017 and from 1 July 2015 to 30 June 2016. Mr Pun reiterated that, at that stage, “the Landlords” required payment in respect of the 2018/2019 and 2017/2018 periods only, but that they were reserving their rights in respect of earlier periods.

109. Mr Kostura replied to Mr Pun by email sent later the same day, stating:

“We are not in position to pay for any outgoings which were not invoiced within the required time frame and certainly for outgoings related to expired leases.”

110. Implicit in that email is an acceptance that the landlord was entitled under the terms of the leases to reconcile and adjust outgoings within some timeframe prior to the expiry of the relevant lease. That is wholly inconsistent with Mr Kostura’s evidence in these proceedings to the effect that he understood that the landlord had agreed to fix the amount of outgoings at the commencement of each lease, and to fix them at the 2006/2007 levels. That provides further support for my finding above in relation to the conversation between Mr Kostura and Mr Pun on or about 27 June 2019. ^[2]

     2. See [102]-[106] above.

111. Mr Kostura’s 2 July 2019 email sought a meeting with Mr Pun to discuss issues as to outgoings. No such meeting took place. Mr Pun replied to Mr Kostura by email on 5 July 2019, criticising “the Tenant’s lack of respect for the leases” and stating that “the Landlords are not interested in meeting to talk about nonsense.” Mr Pun’s email stated (emphasis in original):

“Because of the way you are handling this Outgoings adjustment issue, the Landlords have now instructed me to pursue all Outgoings recoverable.

…

I attach to this email 4 Outgoings adjustment invoices for the Tenant’s immediate payment.

Outgoings year	Outgoings outstanding
2018/2019	$78,527.61 + GST
2017/2018	$65,314.99 + GST
2016/2017	$94,870.06 + GST
2015/2016	$43,875.52 + GST

The Landlords reserve their rights to all other unadjusted Outgoings years.”

112. The total amount of the invoices attached to Mr Pun’s email was $310,847.00 (including GST). Mr Pun’s email also included Dropbox links to what he described as the outgoings records for the 2016/2017 and 2015/2016 years.

113. I note that the period described as the 2018/2019 “Outgoings Year” in the list of outgoings adjustments invoices in Mr Pun’s email in fact comprised the final outgoings year under the 2016 lease (being the period from 1 July 2018 to 28 February 2019) and the first outgoings year under the 2019 lease (being the period from 1 March 2019 to 30 June 2019). The 2017/2018 and 2016/2017 periods referred to in Mr Pun’s email refer to outgoings years that fell wholly within the term of the 2016 lease between TLR and Sharvain, and that each of those years expired before TLR transferred the premises to TLA. The 2015/2016 “Outgoings Year” referred to Mr Pun’s email comprised the final outgoings year under the 2013 leases between TLR and Sharvain (being the period from 1 July 2015 to 28 February 2016) and the first outgoings year under the 2016 lease between TLR and Sharvain (being the period from 1 March 2016 to 30 June 2016).

114. Referring to clause 20.04(c) of “the lease”, Mr Pun’s email stated (emphasis in original):

“The Landlord treats your email dated 2 July 2019 as an anticipated breach of the lease. You have 14 days under the lease to rectify the Tenant’s outstanding monetary obligations to the Landlord, failing which the Tenant will be in a fundamental breach of the lease entitling the Landlord to a suite of rights, including termination of the lease.

I suggest that you treat this issue seriously and urgently. Your previous email indicated that you require 30 days to be able to discuss with the Landlord on a legal basis. You do so at your own risk. …

I suggest that you go back to all my previous emails on this issue and read them properly to understand the Landlords’ position. If you want to go on a frolic of your own, disregarding commercial leases, disregarding the Landlords’ rights, disregarding the law, then the Landlords will not hesitate to pursue all their rights. As a Tenant in the Landlord’s property, I suggest you start talking in terms of the lease which governs the Tenant’s obligations and show some respect to the same. How the Tenant deals with this matter moving forward will determine how the Landlords will exercise their rights.

…

For avoidance of doubt, all correspondences to the Tenant concerning the Outgoings adjustments are (where applicable) on behalf of both the current Landlord T & L Alexandria Pty Ltd and the former Landlord T & L Reich Investments Pty Ltd. For convenience, T & L Alexandria Pty Ltd is authorised by T & L Reich Investments Pty Ltd to collect all outstanding Outgoings under the previous leases.”

115. By this time, Sharvain had engaged Ms Alison Cordwell of ALC Legal. On 23 July 2019, Ms Cordwell wrote to Mr Pun putting forward various grounds relied on by Sharvain in disputing the landlords’ entitlement to demand payment of the amounts in Mr Pun’s 5 July 2019 email. First, clause 4.02 of the successive leases did not entitle the landlord to adjust outgoings in respect of past outgoings years in circumstances where Sharvain had paid outgoings “in reliance on the Landlord’s monthly notice which under Clause 4.01 of the leases operated as ‘prima facie evidence of the amount of such yearly outgoings’”. Alternatively, if the landlord had been entitled to elect to seek a reconciliation and adjustment under clause 4.02, the landlords had not made any such election under the successive leases and were now out of time to do so or had waived their rights to do so. Alternatively:

“…even if a contractual right was retained under Clause 4.02 (which is denied) it was varied by the giving of monthly notice of the required amount of outgoings to be paid and the monthly payment of the Tenant of the notified amount.

This variation reflected the parties' common assumption (alternatively the conduct of each party induced in the other an assumption, thereby resulting in the parties' common assumption) between 2007 and July 2019 that the Reconciliation mechanism would not be invoked by the parties and the payment of the monthly outgoings notified would satisfy the outgoing obligation under Clause 4.01 of the leases.

In the circumstances of the common assumption between the Landlord and Tenant even assuming the enforceability of Clause 4.02, that term is affected by an estoppel by convention which operates to prevent retrospectively the Reconciliation the Landlord now asserts it is entitled to under Clause 4.02.

Moreover, and leaving aside limitation issues, it would be unconscionable to allow now the Landlord after 12 years to retrospectively claim for amounts the Tenant was never made aware having relied upon the representations in the monthly notices as to the extent of its liability under the !eases for outgoings.”

116. Ms Cordwell continued:

“This then leads to the future claims for outgoings on a basis that departs from the arrangement which has operated for over 12 years and in respect of which the Landlord did not at the time of offering the Lease inform that it would no longer regulate the monthly payments of outgoings.

In this regard the Tenant says the Landlord is prevented by an estoppel by convention from now departing from the mutual assumption by which the parties have conducted the assessment, notice of payment under the Lease.

In the absence of any specific assertion by the Landlord to alter the terms under which the parties had conducted their affairs prior to the point of entry into the current lease, the estoppel continues to operate in the Tenant's favour so as to prevent the Landlord asserting any other basis in the current lease.

Further, it would be unconscionable for the Landlord to now assert an entitlement, having allowed a state of affairs to subsist for a number of years to permit the Tenant to assume that the state of affairs was going to continue to operate.

In the alternative, the Landlord seeking to alter the terms under which the parties have conducted their affairs for more than 12 years would constitute misleading or deceptive conduct or negligent misrepresentation as to the ongoing arrangements under the new lease.”

117. Mr Pun replied to Ms Cordwell by letter dated 27 July 2019. In strident terms, Mr Pun disputed each of the contentions made in the 23 July 2019 letter.

118. On the same day—27 July 2019—Mr Pun sent a separate letter to Sharvain (care of ALC Legal) in the following terms (emphasis added):

“Letter of Demand

We refer to the lease (commencing 1 March 2019) between you as Tenant and T & L Alexandria Pty Ltd (ACN 624 661 776) as Landlord, as well as a series of expired leases between you as Tenant and T & L Reich Investments Pty Ltd (ACN 081 629 156) as Landlord (hereby the "Leases"), you agreed to occupy Units 6 & 7/119-133 McEvoy Street, Alexandria, NSW 2015 ("Premises") subject to the terms and conditions of the Leases since the commencement of your occupation on or about February 2006.

Clause 21.01 of the Leases provide that the payment of Outgoings pursuant to clause 4 is a fundamental term of the Leases.

In my emails to you dated, 25 June 2019, 2 July 2019 & 5 July 2019, the Landlords have set out the particulars of their demand for the outstanding Outgoings accrued. You had 14 days from 5 July 2019 (being until 19 July 2019) to pay the outstanding Outgoings demanded by the Landlords.

The demands made by TLR and TLA in January 2020

223. I have referred at [134]-[137] to the signed demands issued by TLR and TLA in respect of outgoings on 8 January 2020.

224. For the reasons explained at [216] above, TLR was not entitled as at 8 January 2020 to issue those demands in respect of outgoings years under the previous leases up to and including 30 June 2018.

225. It remains to consider whether clause 4 of the 2019 lease entitled TLA to issue the demand on 8 January 2020 for any outgoings shortfall in respect of the outgoings year from 1 March to 30 June 2019, and in respect of the months of July and August 2019.

226. I have reviewed Mr Pun’s evidence identifying the invoices issued to, and paid by, TLA in respect of outgoings for those periods. That documentary evidence reveals that all of those invoices had been issued to TLA by the relevant authority or supplier by 3 July 2019. There is no evidence suggesting that TLA required any information other than the invoices in order to calculate the total outgoings for the premises in respect of the outgoings year from 1 March to 30 June 2019. There is no evidence that the calculation of the actual outgoings for the premises for that outgoings year involved any difficulty or complexity once TLA had those invoices to hand. I accept that it was reasonable for TLA to wait for a period after the end of the months of July and August 2019 to ensure that all outgoings in respect of those months were known. The nature of the outgoings and the pattern of invoicing reveals that the outgoings were charges that invoiced to TLA as the landowner in advance (such as council rates and strata levies) or within a very short time after the relevant charges had been incurred or had been assessed (such as water rates, land tax, and repair bills).

227. On the basis of the evidence referred to above, I find that that the reasonable time within which TLA was entitled to make a demand for payment of any shortfall in respect of the outgoings year from 1 March to 30 June 2019 under clause 4 of the 2019 lease, construed as set out at [206]-[209] above, had expired by three months after the end of that outgoings year (i.e. by 30 September 2019). I further find that the reasonable time within which TLA was entitled to make a demand for payment of any shortfall in respect of the period between July and August 2019 expired within three months after 31 August 2019. It follows that the reasonable time for TLA to demand reimbursement for the outgoings set out in the signed statement and demand provided to Sharvain on 8 January 2020 had expired prior to that date, and the demand was not validly issued under clause 4 of the 2019 lease.

Conclusion in relation to landlords’ claims to recover outgoings

228. For all of the reasons explained at [196]-[227] above, neither the 27 July 2019 letter of demand nor the 8 January 2020 demands were valid and effective demands under the leases, and TLA and TLR have failed in their claims to recover outgoings totalling $361,665.54 under the 2013, 2016, and 2019 leases.

Conventional estoppel and waiver

229. In view of my conclusions that neither the 27 July 2019 letter of demand nor the 8 January 2020 demands were valid and effective demands under the leases, it is not strictly necessary to address Sharvain’s contentions in relation to conventional estoppel and waiver. I shall nevertheless record my views in relation to those contentions as briefly as possible, in case of any appeal.

230. The elements of conventional estoppel were articulated by Brereton J (as his Honour then was) in the following terms in Moratic Pty Ltd v Gordon,^[12] which has been approved and applied by the Court of Appeal in many subsequent cases:^[13]

“ … In common law conventional estoppel, it is necessary for a plaintiff to establish (1) that it has adopted an assumption as to the terms of its legal relationship with the defendant; (2) that the defendant has adopted the same assumption; (3) that both parties have conducted their relationship on the basis of that mutual assumption; (4) that each party knew or intended that the other act on that basis; and (5) that departure from the assumption will occasion detriment to the plaintiff …”

12. (2007) 13 BPR 24,713; [2007] ANZ ConvR 198; [2007] NSW ConvR 56-172; [2007] NSWSC 5 at [32].

13. Ryledar Pty Ltd v Euphoric Pty Ltd (2007) 69 NSWLR 603; [2007] Aust Contract Reports 90-254; [2007] NSWCA 65 at [200] (Tobias JA, Mason P and Campbell JA agreeing) (Ryledar); Franklins Pty Ltd v Metcash Trading Ltd (2009) 76 NSWLR 603; (2009) 264 ALR 15; (2009) 4 BFRA 351; [2009] NSWCA 407 at [572] (Campbell JA) (Franklins); TMA Australia Pty Ltd v Indect Electronics & Distribution GmbH [2015] NSWCA 343 at [115] (Meagher JA, Macfarlan JA and Bergin CJ in Eq agreeing); Miller Heiman Pty Ltd v Sales Principles Pty Ltd (2017) 94 NSWLR 500; [2017] NSWCA 106 at [42]-[44] (Macfarlan JA, McColl JA and Sackville AJA agreeing) (Miller Heiman).

231. If the first four elements are established, the fifth element requires the plaintiff (or the party relying on the estoppel) to demonstrate that it would have acted differently but for the alleged common assumption. ^[14]

     14. Miller Heiman at [45]-[49] (Macfarlan JA, McColl JA and Sackville AJA agreeing).

232. As formulated in closing submissions, Sharvain’s conventional estoppel defence and cross-claim relied on the conduct of the 2010 lease negotiation and each subsequent lease negotiation, including TLR’s failure to make any response to the tables prepared by Mr Kostura at the conclusion of each lease negotiation stipulating an amount in respect of outgoings over the three year term of the relevant lease, or setting out figures for what were described as “all inclusive” costs of the lease to Sharvain, and the fact that TLR invoiced Sharvain for the same monthly amount of outgoings throughout the terms of the 2010, 2013, 2016, and 2019 leases, and took no steps to calculate and adjust outgoings under clause 4 of those leases prior to June 2019.

233. Sharvain submitted that the matters referred to above demonstrate that it assumed at all times from and including the time of the negotiation of the 2010 leases that the terms of its legal relationship with TLR and TLA were that the amount payable to the landlord in respect of outgoings under the 2010, 2013, 2016, and 2019 leases was fixed in a sum equivalent to the monthly payments that Sharvain in fact made on account of outgoings, and that this amount paid for each outgoings year would not be reviewed or reconciled against actual outgoings for that year as contemplated by clause 4.02 of each lease. It is convenient to refer to this as the fixed outgoings assumption.

234. Sharvain submitted that, because TLR and TLA took no steps prior to June 2019 to calculate actual outgoings and identify any shortfall under clause 4.02 of the successive leases, the Court should infer that TLR and TLA adopted the same fixed outgoings assumption, notwithstanding Ms Lam’s evidence that she made a mistake and forgot to undertake clause 4.02 reconciliations. Sharvain also placed some reliance on representations allegedly made by or on behalf of TLR and TLA during the negotiations for each of the 2010, 2013, 2016, and 2019 leases.

235. It was submitted that each of Sharvain and TLR conducted their relationship on the basis of the fixed outgoings assumption from the negotiation of the 2010 lease until 15 October 2018, when TLR ceased to be the owner of the premises, and that Sharvain and TLA conducted their relationship on the basis of the same assumption at all relevant times after 15 October 2018. It was further submitted that each party knew or intended that the other had adopted the fixed outgoings assumption, and that Sharvain would suffer detriment if TLR and TLA were now permitted to depart from that assumption because Sharvain had agreed to pay (and had paid) the amount of rent provided for under each lease on the understanding that the amounts payable in respect of outgoings under each lease were fixed in the amounts set out in Mr Kostura’s tables referred to above.

236. If it had been necessary to determine the conventional estoppel defence and cross-claim, I would have found that Sharvain had failed to establish that it made the fixed outgoings assumption. Both parties’ submissions implicitly assumed and accepted that Mr Kostura’s state of mind represented Sharvain’s state of mind. The fixed outgoings assumption is inconsistent with what I have found to be Mr Kostura’s state of mind at the time of each lease negotiation. ^[15] Sharvain has not established that TLR or TLA made any representations during those negotiations that would have caused Mr Kostura to adopt the alleged fixed outgoings assumption. ^[16] The notion that Mr Kostura negotiated and agreed for Sharvain to pay higher rent on the basis that outgoings would be fixed is commercially implausible, and so lacks credibility. ^[17] None of these matters are outweighed by Mr Kostura’s tables, including rent and outgoings figures that he introduced into his email communications with Ms Lam during the lease negotiations only after they had reached agreement about rent and Mr Kostura had asked Ms Lam to commence preparing the lease for execution, and without alerting Ms Lam to his inclusion of outgoings figures in the table. ^[18] I have rejected Mr Kostura’s evidence that he and Mr Fontana struck a “deal” on the basis of the table that Mr Kostura prepared during the 2019 lease negotiation. ^[19] In addition, Mr Kostura’s correspondence with Mr Pun in June and July 2019 is irreconcilable with the alleged fixed outgoings assumption. ^[20]

     15. See [53]-[56] above.

     16. See [59], [69] and [78]-[96] above.

     17. See [56] and [86] above.

     18. See [72]-[73] above.

     19. See [78]-[96] above.

     20. See [100], [102] and [109] above.

237. The assertion that Sharvain had made the alleged fixed outgoings assumption first emerged on 23 July 2019, when Sharvain’s solicitor first wrote to Mr Pun. ^[21] I do not accept that Mr Kostura’s failure to make that assertion in his earlier correspondence with Mr Pun was attributable to a lack of legal advice at that time. It would have been a simple matter for Mr Kostura to communicate that assertion, and his failure to do so strongly suggests that he had not in fact made the alleged fixed outgoings assumption. Another matter that points to the same conclusion is the different formulation of the alleged assumption in Sharvain’s defence that was verified by Mr Kostura and filed on 23 July 2020—“that if the landlord did not perform the calculation required in Clause 4.02 of the Lease within the timeframe as required Clause 4.02 or before entering into a new lease for the premises there would be no retrospective adjustment of outgoings payable by the tenant” and “that the landlord would not claim for a retrospective adjustment of outgoings on a spent lease” (emphasis added).

     21. See [115] above.

238. For those reasons, Sharvain’s conventional estoppel defence and cross-claim would have failed at the first hurdle referred to at [230] above. If it had been necessary to determine those aspects of Sharvain’s defence and cross-claim, it would have been necessary to consider whether the alleged fixed outgoings assumption, to the extent that it is said to have arisen out of the negotiations for each lease, is capable of giving rise to an estoppel by convention in circumstances where those negotiations concluded with the parties entering into a lease on terms that departed from the alleged assumption. That question raises issues about the relationship between the parol evidence rule, the doctrine of rectification, and the doctrine of estoppel by convention. Divergent views have emerged in cases in which the question has arisen over many years, but intermediate appellate courts have not found it necessary to determine the question, and it has not arisen for determination by the High Court. ^[22] The present case is yet another case in which it is unnecessary to determine the question.

     22. Johnson Matthey Pty Ltd v AC Rochester Overseas Corporation (1990) 23 NSWLR 190 at 195-196 (McLelland J); Ryledar at [205]-[214] (Tobias JA) and the authorities there referred to; Franklins at [32]-[34] (Allsop P) and [577]-[582] (Campbell JA); Retirement Services Australia (RSA) Pty Ltd v 3143 Victoria St Doncaster Pty Ltd (2012) 37 VR 486; [2012] VSCA 134 at [137]-[139] (Warren CJ, Harper JA, and Robson AJA); FJ & PN Curran Pty Ltd v Almond Investors Land Pty Ltd [2019] VSCA 236 at [219]-[226] (Whelan, Niall, and Ashley JJA) and the authorities there referred to.

239. Sharvain’s defence of “waiver” was bundled together with conventional estoppel in Sharvain’s pleadings, and was referred to only in passing in submissions. As I understand it, Sharvain relies on essentially the same factual matters in support of its waiver and conventional estoppel defences. Had it been necessary to determine Sharvain’s waiver defence, I would have held that the evidence did not support a finding that TLR or TLA had made (and communicated to Sharvain) an unequivocal decision in respect of any particular outgoings year, at any time at which it remained open to the landlord to exercise its right to demand payment of any outgoings shortfall from Sharvain under clauses 4.01 and 4.02 of each lease, not to exercise that right. Moreover, it is my opinion that the evidence in the present case did not reveal any exceptional circumstances that would have rendered any such waiver irrevocable. ^[23]

     23. Allianz Australia Insurance Ltd v Delor Vue Apartments CTS 39788 (2022) 97 ALJR 1; (2022) 406 ALR 632; [2022] HCA 38, especially at [28]-[33] (Kiefel CJ, Edelman, Steward, and Gleeson JJ).

Alleged misleading or deceptive conduct in relation to the 2019 lease

240. Sharvain has failed to prove that Mr Fontana made the alleged representations on which its misleading or deceptive conduct claim is founded. For the reasons explained at [78]-[96] above, I have found that there was no discussion of outgoings between Mr Kostura and Mr Fontana during their August 2018 negotiations leading up to their meeting on 6 August 2018, that Mr Kostura did not say to Mr Fontana during that meeting that they had been operating on the basis that the outgoings remained the same and that outgoings had been fixed since 2010, that Mr Kostura did not say to Mr Fontana that Sharvain would only enter into a new lease if the outgoings amounts stay the same, and that Mr Fontana did not say to Mr Kostura that they had “a deal” on the terms of Mr Kostura’s 3 September 2018 table. ^[24] Thus, the express representations pleaded by Sharvain were not made expressly.

     24. See [78]-[94] above.

241. I do not consider that the evidence supports a finding that representations to that effect were made impliedly, including by TLA not disclosing any revised amount of estimated outgoings to Sharvain before it entered into the 2019 lease.

242. Mr Kostura’s June and July 2019 email correspondence with Mr Pun is inconsistent with the contentions that the alleged representations were made (expressly, or impliedly by non-disclosure), that Sharvain had relied on those representations in entering into the 2019 lease, and that Sharvain would not have entered into that lease if it had known the likely amount of outgoings. ^[25] I reject Sharvain’s submission that Mr Kostura’s evidence was “uncontradicted”. His evidence was contradicted by his own contemporaneous correspondence.

     25. See [100], [102] and [109] above.

243. The failure of TLR and TLA to adduce evidence from Mr Fontana does not assist Sharvain. The “rule” in Jones v Dunkel ^[26] does not operate to fill gaps in a party’s evidence^[27] or to permit the Court to accept evidence that is inherently improbable, even assuming that the absent witness would have given evidence that did not assist the party who failed to call that witness.

     26. (1959) 101 CLR 298; (1959) 32 ALJR 395; [1959] ALR 367; (1959) 76 WN (NSW) 278; [1959] HCA 8.

     27. Ibid at 101 CLR 308 (Kitto J); 101 CLR 312 (Menzies J).

244. Sharvain bears the onus of proving the alleged conduct, and its alleged misleading or deceptive character. For the reasons explained above, Sharvain has not discharged that onus and it is not entitled to the declarations, damages, restitution, and other relief sought in its cross-claim in respect of the alleged misleading or deceptive conduct.

Repudiation of 2019 lease

245. The submissions made on behalf of TLA accepted that it was not entitled to terminate the 2019 lease on account of a failure by Sharvain to pay amounts said to be due for outgoings adjustments under previous leases. Contrary to TLA’s submissions, that is precisely what TLA claimed to be entitled to do in July and August 2019, and threatened to do in clear and unambiguous terms, as I have explained at [217]-[222] above. TLA asserted that right, and made that threat, on 27 July 2019,^[28] re-asserted that position on 26 August 2019,^[29] and failed to withdraw the threat by close of business on 28 August 2019 notwithstanding the clear and succinct explanation set out in Ms Cordwell’s 27 August 2019 email of the reasons why TLA had no entitlement to terminate the 2019 lease. ^[30]

     28. See [118] above.

     29. See [122]-[123] above.

     30. See [124] above.

246. I reject TLA’s submissions that it was not obliged to respond to Ms Cordwell’s 27 August 2019 email, and that Sharvain should have “let the issue go” and sought relief against forfeiture if and when TLA later terminated the 2019 lease in circumstances that Sharvain considered unlawful. In the context of TLA’s earlier communications, TLA’s failure to respond to Ms Cordwell’s 27 August 2019 email would have conveyed to a reasonable person in Sharvain’s position that TLA continued to assert that it was entitled to terminate the 2019 lease by re-entry on account of Sharvain’s non-payment of the whole of the $310,847.00 sum demanded on 27 July 2019, and that TLA’s threat to do so remained very much alive. The reasonable person would have understood that TLA’s willingness to allow Sharvain to continue in possession of the premises was conditional upon TLA not deciding to exercise its asserted rights by re-entering the premises and terminating the lease, which TLA claimed to be entitled to do at any time without further notice to Sharvain. In my opinion, TLA thereby demonstrated its willingness to perform the 2019 lease only in a manner that was substantially inconsistent with TLA’s grant of a lease of the premises to Sharvain for a term of three years, together with a warranty under clause 19.01 that Sharvain may “peaceably hold and enjoy the demised premises during the term … without interruption by the Landlord”. That constituted a repudiation of the 2019 lease. ^[31] Sharvain was entitled to accept that repudiation and terminate the 2019 lease, which it promptly did on 29 August 2019 by the written notice referred to at [126] above. It is appropriate to make the declaration sought by Sharvain in prayer 8 of the cross-claim that it validly terminated the 2019 lease by written notice to TLA dated 29 August 2019. That declaration is likely to be of utility to Sharvain in demonstrating to its bank that Sharvain has no remaining obligations under the 2019 lease, and that there will therefore be no demand for payment made by TLA under the bank guarantee issued in respect of the 2019 lease.

     31. Laurinda Pty Limited and Others v Capalaba Park Shopping Centre Pty Limited (1989) 166 CLR 623; (1989) 166 CLR 623; (1989) 63 ALJR 372; (1989) 85 ALR 183; [1989] HCA 2 at 166 CLR 634 (Mason CJ); Koompahtoo Local Aboriginal Land Council v Sanpine Pty Limited (2007) 233 CLR 115; (2007) 82 ALJR 345; (2007) 241 ALR 88; (2008) 24 BCL 272; [2008] Aust Contract Reports 90-279; [2007] HCA 61 at [44] (Gleeson CJ, Gummow, Heydon and Crennan JJ).

247. For all of those reasons, Sharvain did not repudiate the 2019 lease by vacating the premises and returning the keys on 29 August 2019. Sharvain returned the keys after it had given written notice validly terminating the lease for TLA’s repudiation.

Sharvain’s claim for loss of bargain damages

248. I have discussed the evidence adduced by Sharvain in support of its claim for loss of bargain damages at [140]-[157] above. For the reasons there explained, Sharvain failed to discharge its onus of proving a causal connection between any component of that claim and its termination of the lease following its acceptance of TLA’s repudiation on 29 August 2019. Further, Sharvain failed to adduce evidence that would provide a rational foundation for the Court to assess damages in respect of the claimed issues. Justice does not dictate that a figure be “plucked out of the air”. ^[32]

Pallet racking and make good claims

32. Commonwealth v Amann Aviation Pty Limited (1991) 174 CLR 64; (1991) 66 ALJR 123; (1991) 104 ALR 1; [1991] HCA 54 at 174 CLR 83 (Mason CJ and Dawson J); Placer (GrannySmith) Pty Ltd v Thiess Contractors Pty Ltd (2003) 77 ALJR 768; (2003) 196 ALR 257; (2003) 19 BCL 431; [2003] HCA 10 at [38] (Hayne J, Gleeson CJ, McHugh and Kirby JJ agreeing); Troulis v Vamvoukakis [1998] NSWCA 237 at 14 (Gleeson CJ, Mason P and Stein JA agreeing); Strategic Communications Management Pty Ltd v Techfront Australia Pty Ltd [2020] NSWSC 847 at [95] (Hammerschlag J); J D Heydon, Heydon on Contract: The General Part (2019, Lawbook Co) at par [26.100].

Pallet racking

249. Clause 1.10 of the 2019 lease provided:

“The ‘Landlord’s Fixtures and Fittings’ means all the Landlord’s fittings, fixtures, furnishings and chattels at the demised premises at the commencement of this Lease and includes but is not limited to the items mentioned in Item 20 of the Reference Schedule.”

250. Item 20 of the Reference Schedule described the Landlord’s Fixtures and Fittings as “partitioning and pallet racking”.

251. I have found that Sharvain disposed of existing pallet racking and installed its own pallet racking in Unit 7 in about February 2006, with TLR’s consent. I have also found that Unit 6 was devoid of any pallet racking before Sharvain installed its own custom-designed and custom-built racking in March 2007. Contrary to TLA’s submissions, clause 11.06 of the 2019 lease did not require Sharvain to maintain the old pallet racking that TLR had installed in Unit 7 at some time prior to 2001 and that Sharvain had removed in February 2006 with TLR’s consent. The pallet racking in Unit 6 and Unit 7 at the commencement of the 2019 lease, and upon termination of that lease, had been designed, built, and installed by Sharvain for the purposes of its trade conducted from the leased premises. It was a tenant’s fixture, and so not did not come within the definition of “Landlord’s Fixtures and Fittings” referred to above. The inclusion of “partitioning and pallet racking” in Item 20 of the Reference Schedule is an error. Sharvain was entitled to remove its racking on termination of the 2019 lease in accordance with clauses 20.07 and 22.02 of the lease and with established general law principles. ^[33]

     33. B Edgeworth, Butt’s Land Law (7th ed, 2017, Thomson Reuters) at pars [7.2150]-[7.2160], citing Vopak Terminal Darwin Pty Ltd v Natural Fuels Darwin Pty Ltd (2009) 258 ALR 89; [2009] FCA 742 at [65]-[67] (Lindgren J).

252. If I had been persuaded that Sharvain had breached an obligation to maintain pre-2001 pallet racking during the term of the 2019 lease, and to reinstate that racking immediately prior to terminating the lease for TLA’s repudiation, TLA’s claim for damages would have failed because it adduced no evidence of the quantum of any loss suffered as a result of the alleged breach. TLA’s evidence was limited to a quotation issued in November 2019 for $29,005.00 for the installation of a new pallet racking system in Unit 6 and Unit 7. As counsel for TLA properly conceded in closing submissions, there is no evidence that this quote was for pallet racking of a similar kind and quality to that which TLA alleged was in place in Unit 6 and Unit 7 prior to the 2006/2007 leases.

Make good

253. Upon Sharvain’s election made on 29 August 2019 to accept TLA’s repudiation and to terminate the 2019 lease, both parties were released from further performance of their obligations under the lease, although any rights that had accrued prior to that date remained enforceable. ^[34]

     34. Mann v Paterson Constructions Pty Limited (2019) 267 CLR 560; (2019) 93 ALJR 1164; (2019) 373 ALR 1; [2019] HCA 32 at [9]-[13] (Kiefel CJ, Bell and Keane JJ) and [165] (Nettle, Gordon, and Edelman JJ), and the authorities there referred to.

254. TLA submitted that Sharvain was nevertheless required to comply with clause 11.03 of the 2019 lease, which requires the tenant to redecorate the premises, including by painting, “prior to the end of the term or sooner determination of the Lease”. It was submitted on behalf of TLA, without reference to authority and without any analysis of the proper construction of clause 11.03, that there are “various exceptions” to the established principle to which I have referred above “in relation to survival of necessary things that are required to be done”, and that redecoration under clause 11.03 “will be one example”.

255. I reject that submission. In my opinion, the words “sooner determination of the Lease” in clause 11.03 of the 2019 lease would not be understood by a reasonable businessperson to include termination of the lease in any and all circumstances prior to the expiry of the three-year term. Whilst such a construction is literally available, it would result in commercially absurd consequences. For example, it would require a tenant whose default has entitled the landlord to terminate by re-entry under clause 20.06 to redecorate before the landlord’s termination, notwithstanding that the tenant is not entitled to prior notice of the landlord’s intention to re-enter. More relevantly to the present case, it would require a tenant who elects to terminate the lease for the landlord’s repudiation to pause and redecorate the premises before making or giving effect to that election, risking the redecoration and/or the delay being relied on by the landlord as an election by the tenant to affirm the lease. For those reasons, it is my opinion that the tenant’s obligation to redecorate under clause 11.03 “prior to the end of the term or sooner determination of the Lease” applies in circumstances where the lease comes to an end by effluxion of time, or by the landlord exercising the right under clause 31.01 to determine the lease earlier by giving the tenant six months’ notice during the final year of the three-year term.

256. It follows that Sharvain was not required by clause 11.03 of the 2019 lease to redecorate the premises before it gave effect to its election to accept TLA’s repudiation and terminate the lease. On termination, both TLA and Sharvain were released from performance of executory obligations under the lease. In my opinion, Sharvain’s obligation under clause 12.02 to make good the premises, including redecorating as described in clause 11.03, was one such executory obligation. I see no reason in principle for treating it otherwise, and no such reason was identified in TLA’s submissions. The fact that Sharvain did not redecorate is one matter that would have needed to be taken into account in assessing Sharvain’s loss of bargain damages as part of comparing the position that it was in following TLA’s repudiation with the position that it would have been in the lease had been performed in accordance with its terms. No such comparison has been undertaken because, for the reasons that I have already explained, Sharvain has not proved any loss of bargain damages.

Claims against the guarantor

257. For all of the foregoing reasons, TLR and TLA have not established any liability on the part of Sharvain under any of the leases. It follows that their claims against Mr McSorley, as the guarantor, fail.

Sharvain’s claim for return of bank guarantee

258. Clause 26.01 of the 2019 lease required Sharvain to furnish to TLA an irrevocable bank guarantee in favour of TLA issued by a Sydney trading bank in a form satisfactory to TLA, expressed to be enforceable against the bank without reference to Sharvain and notwithstanding any notice issued by Sharvain to the bank not to pay against the guarantee.

259. Contemporaneous email correspondence establishes that Sharvain provided to TLA on 17 May 2019 a guarantee issued by the Commonwealth Bank. The guarantee bears the date 14 May 2020. On the basis of the email correspondence, and given that Sharvain had terminated the lease on 29 August 2019, I assume that the reference to 2020 is an error and that the guarantee was in fact issued on 14 May 2019. The guarantee is expressed as an unconditional undertaking by the bank to pay on written demand any sum that may from time to time be demanded by TLA up to the maximum aggregate amount of $53,206.32, until such time as the bank receives written notice from TLA that the guarantee is no longer required, until TLA returns the guarantee to the bank, or until the bank pays TLA the whole of the guaranteed sum or such lesser amount as TLA may require.

260. Sharvain’s submissions did not articulate a legal or equitable basis for its claim to an order (which it characterised as a mandatory injunction) requiring TLA to return the bank guarantee to the Commonwealth Bank. I decline to make that order. As I have already said, it will be open to Sharvain to rely on these reasons for judgment and the declaration that it validly terminated the 2019 lease in order to persuade the Commonwealth Bank that there is no longer any prospect of TLA making a demand for payment under the guarantee. If TLA were to make such a demand, notwithstanding the dismissal of its claims in these proceedings, Sharvain would have a claim for damages against TLA.

Observations in relation to matters not determined

261. As I have determined that TLA repudiated the lease, its claim for loss of bargain damages does not arise for determination. In case it may become relevant in any subsequent appeal, I record that the submissions made on behalf of Sharvain did not dispute the accuracy of Mr Pun’s calculations referred to at [158]-[159] above. However, it was submitted that TLA had unreasonably failed to mitigate its loss by taking more than one year (in the case of Unit 6) and almost two years (in the case of Unit 7) to lease the premises to new tenants. It was submitted that, if Sharvain were found to have repudiated the 2019 lease (which it denies), then any loss of bargain damages in favour of TLA should be calculated as an amount equal to four months’ lost rent and outgoings on the basis that the premises could reasonably have been leased to new tenants within four months.

262. If I had concluded that Sharvain repudiated the lease, I would have held on the basis of the evidence and my findings referred to at [158]-[168] above that TLA unreasonably failed to mitigate its losses by failing to engage an experienced commercial property leasing agent to market the premises from September 2019. On the basis of my findings at [168] above, I would have assessed TLA’s loss of bargain damages as an amount equivalent to the rent and outgoings that Sharvain would have been paid under the 2019 lease during the period from September 2019 to January 2020, plus any difference (if there were any) between:

1. the amount of rent and outgoings that Sharvain would have paid under the 2019 lease from February 2020 to February 2022, on the one hand; and

2. the total of the following amounts, on the other hand:

1. a gross rent of $280.00 per square metre^[35] that would have been paid by a tenant for Unit 6 from February 2020 to October 2020 in the counterfactual in which there was no unreasonable failure to mitigate; plus

   35. The mid-point of Mr Binskin’s market rental range; see above at [161].

2. the actual rent and outgoings paid by the new tenant of Unit 6 from November 2020 to February 2022; less

3. the value of any incentives provided by TLA to that new tenant of Unit 6 during the period from November 2020 to February 2022; plus

4. a gross rent of $280.00 per square metre^[36] that would have been paid by a tenant for Unit 7 from February 2020 to May 2021 in the counterfactual in which there was no unreasonable failure to mitigate; plus

5. the actual rent and outgoings paid by the new tenant of Unit 7 from June 2021 to February 2022; less

6. the value of any incentives provided by TLA to that new tenant of Unit 7 during the period from June 2021 to February 2022.

   36. The mid-point of Mr Binskin’s market rental range; see above at [161].

Conclusion and orders

263. The orders of the Court are as follows:

1. Dismiss the plaintiffs’ claims for relief against the defendants.

2. Declare that the cross-claimant validly terminated the lease between the first cross-defendant (as landlord) and the cross-claimant (as tenant) dated on or about 1 March 2019 of the premises known as Unit 6 and Unit 7, 119-133 McEvoy Street, Alexandria, by notice in writing given to the first cross-defendant on 29 August 2019.

3. Order that the cross-claimant’s claims against the cross-defendants are otherwise dismissed.

264. I will hear the parties in relation to the costs of the proceedings.

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Endnotes

Decision last updated: 14 August 2023