Tabcorp Holdings Ltd v Bowen Investments Pty Ltd

[2008] HCATrans 396

[2008] HCATrans 396

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Melbourne  No M63 of 2008

B e t w e e n -

TABCORP HOLDINGS LTD

Appellant

and

BOWEN INVESTMENTS PTY LTD

Respondent

FRENCH CJ
GUMMOW J
HEYDON J
CRENNAN J
KIEFEL J

TRANSCRIPT OF PROCEEDINGS

AT MELBOURNE ON WEDNESDAY, 3 DECEMBER 2008, AT 10.02 AM

(Continued from 2/12/08)

Copyright in the High Court of Australia

FRENCH CJ:   Yes, Mr Bennett?

MR BENNETT:   Your Honours, after handing up a number of summaries I propose to deal with five matters and then put some conclusions.  The five matters I will be dealing with are first mandatory injunctions, the Lord Cairns’ Act, secondly, the construction of the 2006 agreement, thirdly, the Joyner v Weeks proviso, fourthly, the Witham v Kershaw rule distinguishing between different types of claim and when the action is brought and, fifthly, the significance of the interstate and English and New Zealand legislation.

Your Honours, we have prepared first a reprint of pages 962 and following of the appeal book and attached to it the transcript pages referred to which by and large are not in the appeal books.  We did not do very well at the hearing of the settling of the appeal books about what we wanted in it and what my learned friends wanted in it.  So we have those annexed to the schedule and I hand that to your Honours.

MR BENNETT:   Yes, secondly I have some pages of the transcript which deal with the issue of betterment.  Thirdly, as I foreshadowed yesterday, I hand up a page entitled “Table of cases referred to in Joyner v Weeks” and this table simply sets out in summary form in relation to each of the cases referred to in Joyner v Weeks what the covenant was, what the measure was and when the action was brought, so one can see the matters together.  Fourthly, I hand up a case called Yates v Dunster (1855) 11 Exch 15; (1855) 156 ER 726. I will not be spending any time on this. It is simply available to your Honours. Its only relevance is that it is a case where the replacement measure was used, but there was a deduction for betterment, so there is authority for taking that course.

Now, your Honours, in relation to the first matter, mandatory injunction in Lord Cairns’ Act, I hand to your Honours a copy of some pages from Meagher, Heydon & Leeming Equity:  Doctrines and Remedies, the 2002 edition.  These pages conveniently set out the language of Lord Cairns’ Act and its New South Wales equivalent.  Victoria enacted a corresponding provision in 1928.

The relevance of this is the passage at 23,040 and 23,045 which make the point that where specific performance or an injunction would be refused for discretionary reasons, one can still get Lord Cairns’ Act damages.  The problem here, of course, is that a mandatory order would require the supervision of the Court and, indeed, as I submitted yesterday, one can imagine the disputes that would arise between these parties if there were a mandatory order.  That is one of the very situations where it has been held that Lord Cairns’ Act is available and that is, as I say, discussed in these passages.

GUMMOW J:   I think the point is also made in some of the cases – I think Wroth v Tyler [1974] Ch 30 may be one and Radford [1977] 1 WLR 1262 may be another; the first a decision of Sir Robert Megarry and the second a decision of Lord Oliver – to the effect that it may be that damages are assessed at the hearing rather than at the time of the breach under the Lord Cairns’ Act. Now, what significance would that have in this case?

MR BENNETT:   Your Honour, that is, in effect, what happened here, as I understand it.  There was expert evidence as to the cost of reinstatement and that is what ‑ ‑ ‑

GUMMOW J:    But reinstatement when?

MR BENNETT:   I think, your Honour, at the time of the trial.  The second matter of the five concerns the construction of the 2006 agreement.

GUMMOW J:   But, Mr Bennett, that would not have been so if it was a non‑Lord Cairns’ Act situation, would it?  You would be assessing at the date of breach, would you not?  I am not putting it against you.  I am just trying to find out what the parameters were.

MR BENNETT:   On one clause it might be at the date of the failure to yield up.  On another clause it might be at the date of the destruction, yes.  That was not in issue, as I understand it.

GUMMOW J:   Anyhow, it seems to be sub silentio, it Lord Cairns’ Act that was being applied.

MR BENNETT:   Maybe it was, your Honour, sub silentio.

GUMMOW J:   We will not make jokes about talking prose.

MR BENNETT:   Your Honour, my learned friend complains about a lot of things happening sub silentio in this case and no doubt that could be added.  Your Honour, the clause in the 2006 agreement appears at page 1023 of volume 3.  Your Honour, we did make submissions in our written submissions below about Lord Cairns’ Act, I am told.  I can have those submissions ‑ ‑ ‑

GUMMOW J:   We had better see them.

MR BENNETT:   If your Honours wish to see them we have multiple copies.  I am just trying to avoid burdening your Honours with excessive paper, but it seems to be unavoidable.  Your Honours, the clause on page 1023, your Honours will see, is in very broad terms:

Nothing in the agreement in relation to –

and those are very wide words –

a varied lease and option shall be construed as affecting, limiting or compromising in any way whatsoever –

and one cannot be much wider than “affecting” in that context –

the litigation proceedings –

There is a slight tautology there –

in respect to the foyer.

So it is obvious what is being referred to.  Your Honours, we simply point out it is a special condition which the parties agreed to and it is very wide in its terms.  My learned friend says that is just about no waiver, but, your Honours, that is a very unlikely construction.  First, a “no waiver” clause would have been worded differently.  Secondly, there would not have been any waiver anyhow.  The mere fact that one does not terminate or grants a fresh lease cannot itself waive this sort of breach and it is not inconsistent in any way with suing for damages in relation to the past breach or the future breach, anticipatory breach – whichever it is.  So that, we submit, is an unlikely construction.

My learned friend then says there were three matters as to which they are surprised to find - the parties would be surprised, he said, to find the clause applied because they had a dramatic effect.  The first is that the appellant was in possession and likely to be in possession for many years.  Your Honours, first, that would probably have been an irrelevant matter anyhow.  There is a case which I hand to your Honours, which, I am sorry, is on its way, but I will refer to it in more detail later.  It is a case called Terroni v Corsini [1931] 1 Ch 515, where the facts were like Joyner v Weeks, except that the original tenant had had a renewal and the court said one still got the damages as at the date of the notional yielding up at the end of the first term.

MR BENNETT:   The second matter my learned friend relies on is that there would be no refurbishment until 2012 or 2017, or probably would be no refurbishment until those dates.  That is not absolutely clear.  The parties might have agreed on an earlier refurbishment or the court might have ordered an earlier refurbishment, but that fact, we would submit, was clearly one that the parties intended to exclude by reference to the wide clause.  The same applies to his third.  He says there was no damage to the reversion.

My learned friend has referred many times to damage to the reversion when he means a diminution in value of the reversion.  That is more than a semantic difference because damage to the reversion can mean the cost of reinstatement and can mean a diminution in value.  But the phrase “damage to the reversion” should not be used as if it were synonymous with diminution in the value of the reversion.  It is a reasonable inference that without the clause there probably would not have been a new lease.  In any event, the parties negotiated for it and it is there.  That is the second matter of the five.

The third matter is the Joyner v Weeks proviso.  May I just start by saying this.  When one has a proviso to a common law rule there is an analogy to the reasoning this Court applied in Vines v Djordjevitch (1955) 91 CLR 512 at 519, point 8. I will not take your Honours to that case, but your Honours will be familiar with the purple passage there where it is said that whatever language a statute uses, whether it is a proviso, an exception, a qualification or something else, the onus will normally lie on the party seeking to prove the exception rather than on the party having the general burden of proof. Of course, that has been applied further to exceptions to exceptions, but I will not trouble your Honours with that line of authority.

The relevance of this case is that it is not surprising where one has a rule and an exception that, as a practical matter, the onus of bringing oneself within the exception lies on the party who says that the exception applies.  It may or may not be a strict legal onus in the particular case, but there is nothing surprising about that.

The second matter to note about the Joyner v Weeks proviso is that my learned friend refers in paragraph 65 of his submissions to Bellgrove and says that it establishes that in order to get the costs of renovation or restoration it must be “‘necessary’ and ‘reasonable’”.  Now, your Honours, we submit that Bellgrove simply does not decide that and that takes the passage in Bellgrove out of context.  Bellgrove is in the respondent’s book of authorities under tab 5.  It is Bellgrove v Eldridge (1954) 90 CLR 613. My learned friend’s submissions in paragraph 65 refer to the requirement that it be “‘necessary’ and ‘reasonable’”, but in fact what the case says at page 618 in the judgment of the Court is this:

The qualification, however, to which this rule is subject is that, not only must the work undertaken be necessary to produce conformity, but that also, it must be a reasonable course to adopt.

Just to take those separately, it is “necessary to produce conformity” ie, conformity to, in that case, the plans and specifications, or in this case conformity to the situation at the commencement of the lease.  It is not saying that it must be necessary that conformity be achieved, which is the way my learned friend’s submissions use it.  It is not suggesting that at all.  It is assuming that conformity must be achieved and then saying, well, the actual work has to be necessary to achieve that.  So it is quite wrong, we would submit, to say that the work must be necessary in the sense that it is essential that you do it.  That is simply ‑ ‑ ‑

GUMMOW J:   They are using “necessary” in the sense of act, I think, maybe.

MR BENNETT:   Yes, your Honour.  It is necessary in the sense that one cannot produce conformity in one way if it can be produced in another way, but it is not suggesting that the production of conformity is what has to be necessary.  In a sense, “in order to” perhaps is the better way of reading it.  Similarly, the word “reasonable” is rather taken out of context.  It must be a reasonable course to adopt and the example given, of course, is a very clear example.  Where a contract requires second‑hand bricks and the builder uses first quality bricks, it would hardly be reasonable to require the removal of the first quality bricks and their replacement with the second‑hand bricks.

The example shown is that “reasonable” is being used in the sense of not unreasonable, rather like, as your Honours will recall, in the Trade Practices Act in the phrase “substantial lessening of competition”, “substantial” has been held to mean not insubstantial.  It is a bit like that here.  “Reasonable” in this context with that example clearly means not unreasonable.  It does not become unreasonable, as my friend seems to suggest, merely because it exceeds the amount that would be recoverable on a diminution in value test.  If that were so, the exception would totally subsume the rule.

The third matter in relation to the Joyner v Weeks proviso, 3(c) if one wants to have a numerical detail, is the case of Ruxley.  This is at tab 10 of our book of authorities.  It is Ruxley Electronics & Construction Ltd v Forsyth [1996] 1 AC 344. This was a building case involving construction of a swimming pool and it was slightly less deep than the specifications had called for and the question was whether the owner could require the whole pool to be virtually demolished in order that it could be a little deeper. One gets the impression reading this case that the significance of the depth of a swimming pool was not regarded as highly in England as it might be in this country.

What is important about this case is that the Court treated it as being a case in the extreme category and that appears from the factors listed at page 354 where Lord Jauncey of Tullichettle at paragraph G refers to findings made by the trial judge relevant to the appeal, and they were that:

(1)      the pool as constructed was perfectly safe to dive into; (2) there was no evidence that the shortfall in depth had decreased the value of the pool –

so that is only one of the factors –

(3)      the only practicable method . . . would be to demolish the existing pool and reconstruct a new one –

at a very substantial cost –

(4)      he was not satisfied that the respondent intended to build a new pool at such a cost; (5) in addition such cost would be wholly disproportionate to the –

advantage, would “be unreasonable”, and so on.  Now, those are very strong findings and, of course, there is nothing like that here.  Here one only has the economic disparity.  We submit that it is important that the way reasonableness is put is that it would be unreasonable to do it.  It is put in that negative way which was the way I suggested the test should be applied.

GUMMOW J:   One looks at page 358, letters D to G, and you may get some assistance, I suspect, leading up to the extract Lord Oliver in Radford:

if I contracted for the erection of a folly in my garden which shortly thereafter suffered a total collapse it would be irrelevant to the determination of my –

MR BENNETT:   I am sorry, your Honour, I cannot hear.

GUMMOW J:   Page 358, letter D through to letter G.  See at letter E:

Accordingly if I contracted . . . it would be irrelevant –

that the folly contributed nothing to the value of the house.

CRENNAN J:   Lord Oliver picks up that aesthetic point that you were raising yesterday.

MR BENNETT:   Yes.

CRENNAN J:   Which gets into the area of a personal justification for reinstatement versus some other measure of damages or restoration.

MR BENNETT:   Your Honour, we put this case as higher than the mere lack of aesthetic pleasure.  It is something a bit higher than that.  There is a big difference in degree between painting red or blue, on the one hand, and having an expensive and beautifully designed marble granite structure as opposed to something with a much cheaper appearance and quality.

GUMMOW J:   Then over on page 360, Lord Mustill is perhaps the most significant member of this panel.  Lord Mustill, letters C and D, again refers to Radford.

MR BENNETT:   Yes:

it was for the plaintiff to judge what performance he required in exchange for the price.  The court should honour that choice.  Pacta sunt servanda.

Then the conclusion which we respectfully adopt:

If the appellant’s argument leads to the conclusion that in all cases like the present the employer is entitled to no more than nominal damages, the average householder would say that there must be something wrong with the law.

CRENNAN J:   Just going back for one minute to 358 where there is the quote from Lord Oliver.  You will notice that in the last few lines, in speaking of the proviso there, he says that the compensation must be:

for a genuine loss and not merely using a technical breach to secure an uncovenanted profit.”

Well that is, in a sense, without using the language of reasonableness is importing the same notion so that it is not unreasonable to do it.

MR BENNETT:   Yes, precisely, your Honour, and, for the reasons I have given, that accusation cannot be levied at us.  Now, the fourth matter in relation to the proviso is James v Hutton [1950] 1 KB 9 at 17. That is in the appellant’s bundle, tab 5. The importance of that case is that on the facts it was also an extreme case. The language used there at page 17, in the middle of the page, just before the end of the long paragraph:

The official referee evidently thought that not only did the plaintiff not intend to do this work, but that it would be a sheer waste of money if the work were done –

That is a much stronger finding than applies in many of the other cases.  The extreme case, of course, is the case of intended demolition, but it should be noted that there are two cases where notwithstanding intended demolition, the renovation cost was ordered.  They are both early cases.  I will just give your Honours the reference at this stage without taking your Honours to them.  One is Rawlings v Morgan (1865) 18 CBNS 776, which is also in volume 144 of the reprint at page 650, and the other is Inderwick v Leech (1884) 1 TLR 484. These are both referred to in our schedule of Joyner v Weeks cases. 

There are two features of Inderwick v Leech which are interesting.  I am not taking your Honours to it at this stage.  The first is that it was a case where the diminution in value was measured by the cost of repair, which of course occurs in some cases and avoids the problem.  The other feature of the case is that one of the reasons given for providing the cost of repair, notwithstanding intended demolition, is that otherwise a tenant might deliberately damage the property so badly that it had to be demolished and then say “Well, all I have to pay is the damage to the diminution in value of the reversion, not the replacement cost because as it was going to be demolished, you do not get the replacement cost”.

That, of course, resonates in this case where if what the appellant had done was simply to cover our floor and our columns with its material, then it would have been comparatively easy to remove and that would obviously have been, without any question, the appropriate order, without all the issues that arose in this case.  But by taking the jackhammers to our foyer first, what was done was to make, in effect, a measure of demolition necessary in order to restore.  So that is, in a sense, the sort of case being referred to in that example. 

The sixth case I want to refer to in relation to the Joyner v Weeks proviso is the New Zealand case of Maori Trustee v Rogross Farms Ltd [1994] 3 NZLR 410. It is at tab 7 in our book of authorities. All I want to say about that case is that in relation to the proviso it restates the question without answering it. The passage at page 420 says at line 12:

We would therefore state the law as follows.  The rule in Joyner v Weeks is not an absolute rule.  It is, however, the prima facie rule which will be applied unless the lessee can show by sufficiently cogent evidence that in both the short and the long term the lessor will definitely suffer no loss or will suffer a loss which can definitely be assessed at less than the prima facie measure.

What is the loss that is suffered rather begs the question of whether it is the renovation cost or diminution in value.  So that test simply asks the question without answering it, but it significantly it talks about “cogent evidence” and “definitely” and perhaps, more importantly, at page 421 the phrase used is that:

It follows, in our judgment, that the Maori Trustee was entitled to substantial damages calculated on the basis of the prima facie Joyner v Weeks measure which was not shown to be inapplicable.

Onus on the tenant.  Above that, at the very top of the page:

It is impossible on the evidence to say that the Maori Trustee acted unreasonably in rejecting the Rogross tender.

So again, it is put on the basis of very much a negative test.  Finally, your Honour, seventhly in relation to the Joyner v Weeks proviso, I simply remind your Honours that in Eyre v Rea [1943] KB 567 at 569, which a case in which we place some emphasis – it is at tab 14 of the appellant’s submissions – we simply remind your Honours that the proviso is put in these terms at 569 point 4:

There may be cases in which no one would dream of repairing; for instance, a case in which a house was almost certainly going to be pulled down at an early date –

et cetera.  So, the exception is put very much in terms of the extreme case and that is the way it should be regarded.  That is the third section of my submissions.  The fourth and fifth will be much shorter. 

The fourth concerns the time of the action and the difference between the provisions and the case of Whitham v Kershaw [1885] 16 QB 613. It is the appellant’s cases, tab 11. The facts are not of great relevance here. It is an interesting case in that what was given in the end in lieu of the costs of reinstatement was the full value of the land. It was assumed that the land itself was rendered totally valueless by the Act and the full value of it was given, so in a sense it is not really a case on the facts of the type we are talking about.

The other matter concerning the time at which the action is brought, the reference to near or after the end of the term, well here we are 14 months from the end of a 10‑year lease which is, for relevant purposes, near the end of the term, particularly where the damage was done near the commencement and the action for waste is statute barred.  So it is certainly, if one uses a phrase like “near the end” whatever that – it is a very subjective and uncertain phrase, but we are within it.

The other thing we say about Whitham v Kershaw is this, that in the same way that the Joyner v Weeks rule is subject to an exception in certain types of case so the rule the other way in relation to the action brought during the term on a covenant to keep in repair must have exceptions in the extreme case and the case where the tenant takes a jackhammer to valuable marble, like this case, and the lessor wants its foyer back is, in my respectful submission, as I put yesterday, the extreme case the other way.

So if one has exceptions to the Joyner v Weeks end for extreme cases, one needs exceptions to the Whitham v Kershaw principle at the other end.  In any event, here we have, as I have put, a number of provisions we rely on other than keeping in repair during the term.

Fifthly and finally, the significance of the legislation – there are four points we make about the legislation.  The first is that it is a cap only and the second limb, the exception if one likes, appears in the statute but is confined to demolition cases, to cases where there is about to be demolition by external or internal order.  So it is in the rule laid down in those cases the exception is treated in a limited way.

The second matter to note about the legislation is what was said by Justice McHugh in Bannon v The Queen (1995) 185 CLR 1 at page 41. I hand up just that page of the report. The rest of it is irrelevant. The case was about a provision which appeared in the Evidence Act in some places and not in others, including Canada.  In the last paragraph of his judgment, Justice McHugh said this at page 41, point 3:

Plainly, adoption of the Canadian principle would have the potential to alter the practical operation of the law of evidence in the day to day administration of justice.  For this reason, the respondent argues that, if any further exception to the hearsay rule is to become part of the law of Australia, it should come about as the result of legislative reform, rather than judicial development.  To some extent this has already occurred.  On the recommendation of the Australian Law Reform Commission, the federal Parliament has enacted the Evidence Act 1995 (Cth) . . . So far only New South Wales has adopted comparable legislation.

This case was apparently in another State.

However, it is conceivable that other States will adopt some, if not all, of the provisions of the Commonwealth Act.  The recent legislative activity in this field provides a sound reason for this Court proceeding cautiously when invited to alter the settled rule against hearsay evidence.

In other words, what one can say is, “Well, there is this common law rule.  Some places have changed it.  Victoria has chosen not to.  Why should we impose the changes in New Zealand, England, New South Wales and the Northern Territory on Victoria?”  This Court applies what has been described as the common law of Australia, and the common law of Australia is not changed because some States or New Zealand or the United Kingdom choose to change the common law.  His Honour goes on to say:

If a change is to come about as the result of judicial law-making, it should only occur after the Court has had the benefit of full argument from counsel representing the States and the Commonwealth.

GUMMOW J:   There are some judgments by Justice Gibbs to the same effect, I think.

MR BENNETT:   Yes, I think there are, your Honour.  I do not have the references here.

FRENCH CJ:   The question of the common law duty to give reasons was in the context of, I think, the magistrate’s case in – was it not? 

MR BENNETT:   Yes.  The last sentence of his Honour’s judgment is inapplicable here, where one has an area of law of this type.  The reference to a hearing from the law offices of the States and the Commonwealth by some procedure analogous to section 78B ‑ ‑ ‑

HEYDON J:   Except that if the common law is changed for Victoria, that is a change in the common law of Australia for States that do not have legislation in pari materia with the English legislation.

MR BENNETT:   There may well be a case for some sort of procedure analogous to section 78B, but the real point is it just should not be done on that basis.  The existence of the legislation is a reason against rather than a reason for, bearing in mind that Victoria has chosen not to follow suit.  It should also be noted that the statute does not apply to covenants to repair, and that is part of the discussion in the James Case. 

I mentioned at the beginning of my submissions the case of Terroni v Corsini and I hand up to your Honours copies of that.  That is the case where notwithstanding that the same tenant was in possession under a renewed lease, the damages were given on a reinstatement basis.  There is a reference to the “doctrine of interesse termini” and the abolition of that doctrine which probably does not help very much either way, but the case is of interest in relation to that aspect.  It is an extension of what appeared in Joyner v Weeks itself where the fresh lease to a third party was said to be res inter alios acta. 

To conclude, we put these matters:  first, that the simplest and most direct way of getting to the correct result in this case is to treat it as Lord Cairns’ Act damages, and I have dealt with that.  Our second preference is the approach taken by Justice Rares, where he reads the clauses together instead of imposing the sort of extreme categories laid down in Whitham v Kershaw.  He takes the clauses and shows how they form a composite whole, and I have done that in the course of my argument yesterday.  Thirdly, one can simply apply Joyner v Weeks.  If one does that, one comes to the question about whether the rule is absolute.  My learned friend said a number of times that the rule was inflexible.  That does not seem to be the case because most of Joyner v Weeks itself was dealing with a question of whether there was an exception in the case where there had been a fresh lease.  I have dealt with what we have called the proviso to Joyner v Weeks. 

Of course, if one does take an absolute rule, the argument about convenience, which is referred to in Joyner v Weeks, is applicable.  If one has the exception, the proviso, of course the convenience aspect is less significant.  That is so in any area of law where one is asking, are there subjective qualifications or not?  It may be fairer and more just to have subjective qualifications but it means cases cost more money.  That is the sort of judgment the common law has to make all the time.  So the fourth approach is to have Joyner v Weeks qualified by the proviso and we have dealt with the nature of the proviso.  There is no doubt that the fairest result is reached by having Joyner v Weeks with the proviso and noting that, one needs a corresponding proviso to the other extreme of the rule in Whitham v Kershaw.

The next matter is my friend’s submissions about unfairness.  For the reasons we have given, there is no unfairness in changing whether we rely on one clause or another or a combination of clauses and the documents there and the issue at the trial is the same because it was being argued that we were entitled to damages of the one type and my learned friend submitted we were entitled to damages of the other type.  Whether we relied on one clause or another to get that result is classically within the Connecticut Fire principle.  There is no unfairness about the 2006 agreement being raised the way it was.  It was before the trial judge, it was before the Full Court and we submit the Full Court was correct about the meaning.

Finally, may I say this.  The ultimate question in this case – and I have used this phrase before – is, can a tenant arrogantly impose economic rationalism on an unwilling landlord?  We submit that economic rationalism is a crude and unfair criterion when imposed on an unwilling party which has its own reasons in this case for simply wanting its foyer back.  In my respectful submission, we are entitled, as the Full Court said, to get our foyer back without considerations of economic rationalism, which is

probably the dirtiest word I know, being imposed upon us.  May it please the Court.

FRENCH CJ:  Thank you, Mr Bennett.  Yes, Mr Young.

MR YOUNG:  May I remind the Court that the case put at trial and argued before the Full Court concerned the assessment of common law damages for breach of clause 2.13.  The Full Court overturned the decision of the trial judge on the ground that those common law damages should be assessed by reference to the rule in Joyner v Weeks.  That is the subject matter of the appeal.

KIEFEL J:  But that does not accord with the pleadings.  Are you saying that there was a change of direction from the pleadings, because equitable compensation is clearly sought by the application?

MR YOUNG:  Yes, and either rejected or not dealt with by the trial judge and then not the subject of any ground of appeal.

GUMMOW J:   Well, it is in the material handed up this morning, is it not?

MR YOUNG:   Those submissions you are referring to, your Honour?

GUMMOW J:   Yes.

MR YOUNG:   That was part of the set of submissions distributed I think prior to the outset of the trial.  My answer to Justice Kiefel went to the subject matter of the appeal.

KIEFEL J:   But from the outset they were always seeking equitable compensation as an alternative to injunction and as an alternative to compensation under the Trade Practices Act.  There was not any hint of common law damages there.

MR YOUNG:   No, from the outset they sought various forms of relief, including common law damages, section 82 compensation, section 87 orders and equitable compensation as an alternative to section 82 damages.  Can I ask the Court to go to volume 1 of the appeal book.  That sets out the application and the relief that was sought and it is as I just described.

KIEFEL J:   But putting it in the way they do in paragraph F of the application is simply to say that the compensation which equity might give is comparable to that under the Trade Practices Act.  It is just linking it from a legal perspective.

MR YOUNG:   Yes.

KIEFEL J:   But clearly juxtaposed to paragraph E, they are seeking equitable compensation.

MR YOUNG:   Yes, I am not disputing that, your Honour.

KIEFEL J:   Yes.

MR YOUNG:   But at trial his Honour gave judgment and his judgment awarded common law damages only.  His Honour either did not deal with the claim for equitable compensation or rejected it and that rejection or failure to deal with the matter was not the subject of the appeal to the Full Court.

HEYDON J:   What about page 968 of volume 3?

MR YOUNG:   Well, your Honour, I was referring principally, first of all, to the amended notice of appeal.

HEYDON J:   You are quite correct about that, but that was months before this.  This is 20 November, shortly after the appeal was argued.  There must have been something said about it in argument.

MR YOUNG:   Well, no.

HEYDON J:   What was the provenance of the document then and why is it in the appeal book?

MR YOUNG:   Well, the provenance of the document is explained at 951, your Honour, at the very end of argument on the appeal.  Mr Colbran is asked to clarify what he was seeking and at page 951 at about lines 6 to 10 he said:

I should, I think, ask the Court to rule on 2.10 to find that there has been a breach of that, to award us damages for that.  Or perhaps to award a mandatory injunction or an order of that kind.  I have really got to figure it out.  Or a declaration.

That prompted Justice Finkelstein to adjourn briefly and to make the direction that appears at line 30 on that page.

HEYDON J:   Yes, I see that.

MR YOUNG:   That is what prompted the documents that appear from 957 through to 969 in the case of Bowen and then a responsive submission.  So all I can say, your Honour, is there is a reference bracketed to equitable compensation in the orders that were handed up pursuant to that direction.

HEYDON J:   Yes, but in paragraph A, in paragraphs 1 and 2, that is Lord Cairns’ Act damages, is it not?

MR YOUNG:   No, we would submit not, your Honour.

HEYDON J:   “Alternatively” to a mandatory injunction “damages for breach of clause 2.13”.

MR YOUNG:   Well, it is not put in terms of Lord Cairns’ Act and it is not put in terms of these are damages in lieu of or in substitution for the grant of an injunction.

GUMMOW J:   No, in the alternative to, that is right.

HEYDON J:   And in substitution.

MR YOUNG:   Well, I will deal more ‑ ‑ ‑

CRENNAN J:   That is to say damages in lieu of induction.

MR YOUNG:   Yes.

GUMMOW J:   Sooner or later it would be a good idea if you would tell us why you are so worried about Lord Cairns’ Act?

MR YOUNG:   Well, I am going to deal with it, your Honour, if I may.  Can I deal firstly with how these matters were argued, because that arises directly out of the questions that were put to Mr Bennett.  We prepared a folder of extracts from the relevant transcripts.  Can I hand that up to the Court?  The Court asked a number of questions about how matters were put and we have identified what we think are the relevant passages in the transcript and we have produced a short synopsis of the references. 

The folder addresses two issues.  The synopsis document, in its first two pages, contains an extract of how the claim for a mandatory injunction was put at trial.  I will address that forthwith, but can I mention the second set of references in the next two pages.  That deals with the multiple tenancy issue and your Honour Justice Heydon asked a question about what Mr Macaulay was responding to at a particular point of time and the next set is addressing that issue.

HEYDON J:   Just so that I am quite clear, the first two pages you refer to are actually the pages numbered 2 and 3?

MR YOUNG:   Yes, your Honour.

HEYDON J:   The next two pages are 4 and 5?

MR YOUNG:   Yes, your Honour, I am sorry for the lack of clarity.

HEYDON J:   I am just making sure I have got the right document.

MR YOUNG:   What appears behind that are the actual pages of the transcript.  The way in which it was put at trial as summarised at pages 2 and 3 of this document was essentially that a mandatory injunction was sought to take effect in 2012 or 2017, that is to say, at the end of Tabcorp’s occupancy under its new lease.  The way in which it was formulated with a stay that procured that effect was no concession to Tabcorp.  That was the way it was sought because the relief they wanted was to take the benefit of Tabcorp as a major corporate tenant for the duration of the new lease and then get an order, a mandatory order, for restoration of the foyer at the end of Tabcorp’s occupancy.  That is clear from these extracts summarised at pages 2 and 3.

I draw attention to the second passage at page 517, line 32, the injunction and it was not yet formulated – there was no piece of paper formulating it – but Mr Colbran said it:

would be along the same lines of the ultimate remedy that would be obtained were you to accept the submission that parties entered into the lease with a concurrent belief that there was a reinstatement obligation at the end of the term.

That is a reference to the way in which the rectification and section 87 unconscionability argument was put.  The same point is repeated throughout, that is, that the injunction was to take effect when they leave at the end of the lease.  So you can approach it as an order similar to that which would be obtained through the rectification approach.  Then late in the trial the injunction was handed up and his Honour Justice Tracy raised, and we have not summarised them, a lot of self‑evident questions about an injunction to operate many years into the future and how could it be appropriate to grant such an order.

FRENCH CJ:   And as a qualification on the relief sought in the application itself which did not ‑ ‑ ‑

MR YOUNG:   Yes.

FRENCH CJ:   It just spoke of a mandatory injunction and the ordinary assumption would be to take effect immediately?

MR YOUNG:   Yes, your Honour.  But the way in which the trial conducted was not to seek a normal mandatory injunction to enforce obligations arising directly on the breach of 2.13.  These were obligations to take effect under the mandatory order in 2012 at the end of a new lease; not the one that was breached, but a new lease.

GUMMOW J:   The proper order might be to make the order now but suspend it until a future date.

MR YOUNG:   Your Honour, that is, in substance, granting an injunctive order to operate many years into the future.

GUMMOW J:   It does make one faint with shock.  That is the prospect that can be achieved.  The question is should it be.

MR YOUNG:   That sort of order was rejected implicitly by his Honour the trial judge.  When it was raised at the Full Court it was not within the grounds of appeal, but there was brief reference to it.

GUMMOW J:   Where do we see the grounds of appeal for the Full Court?

MR YOUNG:   Volume 3, your Honour, at page 739.  There is no reference to equitable compensation or Lord Cairns’ Act, or assessing damages on an alternative basis to a common law basis.

KIEFEL J:   What about the reference in ground 2(a)?

MR YOUNG:   Your Honour, we submit that that relates to the way in which the appellant in this instance, Bowen, relied upon Bellgrove v Eldridge, and his written submissions filed in support of the appeal confirmed that at page 755. The submissions in support of the appeal make no reference to equitable damages or Lord Cairns’Act or, indeed, to the refusal of a mandatory order to take effect at a future date.

FRENCH CJ:   I notice, by the way, that in the defence which was filed, I think in the last paragraph of the defence, it is pleaded that the claim for equitable compensation in paragraph (f) of the application was misconceived.

MR YOUNG:   Yes, I will make a submission to that effect in a moment, your Honour.

FRENCH CJ:   Was there argument about that?

MR YOUNG:   No.  On the appeal hearing, the way in which it arose, your Honour, in our submission, was in the context of the court’s view that through clause 2.10 or a combination of several covenants – I should not say “the court’s view”, the court’s query – to the effect that via 2.10 and several other covenants there was in fact a “make good” obligation and the questions that arose at the appeal hearing were really in the context of seeking specific performance in effect of a “make good” obligation to be discerned from the covenants, not addressing a form of damages for breach of 2.13.  We have given the passages.

The Full Court in fact dealt with the mandatory order and the Court has not been taken to the Full Court’s reasons rejecting a mandatory order as in effect misconceived.  The joint judgment dealt with it at page 1001 and 1002 at paragraph 26, and this was addressing the mandatory order that was formulated to take effect long into the future.  Their Honours Justices Finkelstein and Gordon said:

a reinstatement order is not appropriate.  Ever since Hill . . . it has been thought that no order for specific performance would go in respect of a repair covenant.

No authority:

Here it would not be appropriate.  There is all manner of difficulty in making an order that will not come into effect for many years perhaps at a time when the person who controls the appellant may not want the order.

So in the way in which it was mentioned to the Full Court, notwithstanding that there was no relevant ground of appeal, the Full Court dealt with it and rejected it, and there is no cross‑appeal or notice of contention complaining of that decision by the Full Court.

CRENNAN J:   May I just raise this, at least for your consideration, in this context?  As Radford’s Case shows, you can adopt a pure common law approach to this problem of a breach of a covenant like 2.13.  So you start with Robinson v Harman and Baron Parke and you can get by starting there to 1.3 million, there is possibly a discount for betterment, so, in a sense, there is not only one route to the result which is the subject of your appeal.

MR YOUNG:   What your Honour says is right, and we have not disputed the proposition that the contractual measure of damages may, depending on the facts, result in an award of restoration or renovation costs.  It all depends on the nature of the contract and the findings made by the judge as to what is the true measure of loss.  Having regard to the nature of the contract, the breach and the factors mentioned by Bellgrove, the reasonableness or unreasonableness of awarding restoration cost, having regard to the disproportion between those costs, and the assessed diminution in the value of the property, it all depends on the facts.

Our point is, of course that outcome can be achieved via the ordinary contractual measure of damages.  His Honour considered it in that fashion, and on the facts and on the evidence at trial, his Honour Justice Tracey rejected that view of the facts, and that was his Honour’s factual decision, and it has not been challenged as a factual decision.  The challenge was abandoned.

CRENNAN J:   But is it purely a view of the facts?  I mean, his Honour did not deal, as, say, Lord Justice Oliver did in Radford, with really following a common law path where Lord Justice Oliver was saying, well, the prima facie measure for damages for a breach of covenant, like a reinstatement covenant, is the cost of restoration, provided it is a genuine loss and provided it is not taking advantage of a technical breach to secure an uncovenanted profit.  That is where discounts for betterment might come into play.

MR YOUNG:   Your Honour, basically, we do not disagree.  Lord Justice Oliver was dealing with a case where a fence was knocked down and replaced with a shabby prefabricated fence and the question was whether it was reasonable or unreasonable to require the cost of putting in something better.

CRENNAN J:   I do not know that those words were used precisely.  It was really a question of, well, what is the prima facie approach to take when you had a flagrant breach of a covenant of that kind.

MR YOUNG:   Your Honour, I have not used the expression “prima facie” because that connotes some sort of presumption that needs to be displaced.  That is not what Lord Justice Oliver or any of the cases have said applying a common law measure.  That is the twist that Joyner imposes by reversing the onus effectively to displace it.  There is an inquiry into the reasonableness of the measure of restoration costs, but the plaintiff still has to prove the true measure of loss, and reasonableness goes to the assessment of what is the loss that is being proved, and reasonableness depends heavily on the nature of the contract. 

CRENNAN J:   Well, they would say, the loss of their original foyer for which there was a covenant not to demolish or change without consent.

MR YOUNG:   In the context of a commercial investment premises and a commercial lease is the point I am making, your Honour.  Can I come back to your Honour’s point, if I may, because the second set of transcript references and questions that were asked of Mr Bennett concerning Ruxley and the folly in the garden, the matters I would like to address, and they touch on what your Honour has said, but, if I may, can I complete what I was going to say about the mandatory injunction.  The Full Court dealt with it. 

The next point we wanted to make is that this is a case where, in our submission, the joint judgment in the Full Court rightly concluded that a mandatory order of the kind sought at trial was unobtainable on first principles.  It was not an open remedy.  It was not a case that attracted Lord Cairns’ Act because the covenant in question was not susceptible – or the breach of covenant in question was not susceptible to ‑ ‑ ‑

GUMMOW J:   Are you saying there is no jurisdiction?

MR YOUNG:   Yes, your Honour.

GUMMOW J:   That is a debatable question.

MR YOUNG:   It was not susceptible to the grant of this kind of order that was sought at trial and therefore the doorway to Lord Cairns’ Act does not open.  The issue is discussed in the High Court in Wentworth and I will give the Court a citation. That is (1982) 149 CLR 672 at 677 to 679. It is discussed in Meagher, Heydon & Leeming and it seems to be generally accepted that the doorway to damages under Lord Cairns’ Act does not open unless the prayer for injunction in the form in which it is put at trial is one which would be available – in other words susceptible to being granted but for the existence of some kind of discretionary defence, such as delay.

HEYDON J:   It is not a very fashionable distinction now, that sharp distinction between jurisdiction and discretion in relation to specific performance and injunctions.  The language was much more common 130 years ago or so than it is now.

MR YOUNG:   Yes, “jurisdiction” is not a word that is necessary to use because it is really a question that Lord Cairns’ Act provides that the power of the court to award damages is conditioned on the court having power to grant the relevant injunction.  If, on first principles, the form of injunctive relief is wholly inappropriate it is not a case in which you would proceed to the next step.

FRENCH CJ:   So, if it is an exercise that arises by way of section 79 of the Judiciary Act then it is so conditioned.  If it is a power which you invoke by analogy, as it were, using section 23 of the Federal Court Act does the same constraint apply?

MR YOUNG:   Yes, your Honour.

FRENCH CJ:   Why?

MR YOUNG:   Well, because if it is down to a Lord Cairns’ Act, your Honour, it is a statutory grant of power to award damages and you would have ‑ ‑ ‑

FRENCH CJ:   Yes, that is the 79 route, yes.

MR YOUNG:   ‑ ‑ ‑ have to go through section 79.  Under section 23 it may be that you analyse it simply more on first principles as to whether this is a form of relief that could be granted.  Then, if the answer is no, you do not ask the next question of do we move to some assessment of damages, other than assessment of damages on general common law principles for the breach of 2.13?

FRENCH CJ:   Well, maybe you do not use 23 to create new remedies, or maybe you do not?

MR YOUNG:   Yes, your Honour.  I think in a nutshell that is what I was saying.

GUMMOW J:   The point Justice Heydon was putting to you is emphasised by Lord Justice Lawrence Collins’ judgment in Rainbow Estates [1999] Ch 64, I think.

MR YOUNG:   That is one of the cases cited by Justice Finkelstein.  Yes, your Honour, but in our ‑ ‑ ‑

CRENNAN J:   So there is not a bright line between jurisdiction and discretion of the kind you are contending for in reliance on Wentworth?

MR YOUNG:   Well, there is, your Honour.  One does not have to use the word “jurisdiction” but Lord Cairns’ Act damages do not become available if the form of equitable, mandatory injunction sought is wholly inappropriate.

GUMMOW J:   You keep using this expression “wholly inappropriate” which disguises the question whether we are talking about jurisdictional power.

MR YOUNG:   I am using that to refer to the fact that this breach of this covenant was not susceptible to that relief as a matter of first principles.  In any event, that was the Full Court’s view.

HEYDON J:   Well, they said there is all manner of difficulty in one sentence.

MR YOUNG:   Yes, your Honour.  Some of those difficulties are identified by Justice Tracey in the discussion with Mr Colbran at trial when it was first advanced.  The premises may be sold; other things may happen between now and 2012 and 2017.

HEYDON J:   There is such a thing as an application to dissolve an injunction or get discharged from it in the light of changed circumstances.

MR YOUNG:   Yes, your Honour, but normally the making of an order to take effect many years into the future would not ordinarily be considered simply because an application can be made to rehear the case, effectively, to consider whether it should be dissolved or not.  Justice Tracey mentioned that difficulty, your Honour.

Can I then say this?  Justice Gummow observed to Mr Bennett that in many respects an assessment of equitable damages – and I am moving on and assuming it could be argued and could be addressed – might be similar but not entirely similar because the date of assessment may differ.  That is a reference to Vice‑Chancellor Megarry’s decision in Roth.  The same issue was later considered by the House of Lords in Johnson v Agnew.

But accepting for the purposes of my argument that the date of assessment of equitable damages might differ from the date of assessment of common law damages which the trial judge said was the date of breach –July and August 1997 – that would require the whole question of damages to be considered somewhat differently than it was considered by the Full Court or indeed by the trial judge, because the assessment would be at a different date and there would be discounts for betterment and discounts for the time value of money and so forth.

GUMMOW J:   It might be at a different date.

MR YOUNG:   It might be, your Honour, yes.

GUMMOW J:   It does not have to be at a different date.  It might be at a different date.

MR YOUNG:   But those matters have never been argued.

GUMMOW J:   I thought we were told the expert evidence was directed to the trial ‑ ‑ ‑

MR YOUNG:   No.  The judge assessed ‑ ‑ ‑

GUMMOW J:   Rather than looking backwards to 1997.

MR YOUNG:   The judge assessed damages on the basis that the relevant date was the date of breach.  The judge says that in his judgment.  The figures advanced were I think neither fish nor fowl.  I think the figures were 2004 figures.  That appears in the particulars of loss in the statement of claim at paragraph 21, page 10 of the appeal book.  The estimated costs of reinstatement were August 2004.  The loss of rent figure was taken from the rent Tabcorp agreed to pay under its new 2006 lease.  That is why I said it was neither fish nor fowl.

HEYDON J:   Can I just put this and see whether there is something fundamentally wrong.  One approach would be to pick 1997 and work out a dollar sum.  If you do that, you would have to add interest, would you not, until the time of judgment, in fairness? 

Then, although the work is not going to be done for many years, the recipient of the money can invest it, get interest on it, pay half of it to the government, but at the end of the time there will be some money there to do the work which it was contemplated would be done.  Does it matter much whether you take 1997 or, as you say, curiously, 2004 or the date of the trial, because the money sum will naturally rise with the passing years because of slow inflation, just ignoring huge recessions and.....periods, and that will be compensated for over time by awards of interest.  The award of interest would be lower if you have a later date for fixing the loss, higher if you have an earlier date.

MR YOUNG:   There will be some give and take like that, we agree, your Honour, we would not dispute that, but I do not know if that is the same thing as saying if you move to an assessment of equitable damages in lieu of a mandatory injunction to take effect in 2012, that all of the differences between the different dates of assessment can be accommodated by the reasoning your Honour put to me.

HEYDON J:   These are imponderables, the future rate of inflation, the future value of money, the nominal value of money in relation to the real value, these are impossible to estimate.

MR YOUNG:   Yes.  Can I move to the next point I was going to make which is that if we leave aside the time of assessment which might differ in equity from that of common law, all of the other factors that the Full Court put out of account would be relevant to an assessment of equitable damages.  By that I mean that you have the trial judge’s findings that it would have to be taken into account by any court assessing damages, whether in equity or at common law, to the effect that in trying to assess the true measure of loss the foyer is going to require knocking down and rebuilding, in any event, in 2012.

CRENNAN J:   But is that right?  This word “refurbishment” is terribly equivocal, in a sense.  I mean, Mr Bennett was saying, well, refurbishment will not cost very much.

MR YOUNG:   Polish the marble.

CRENNAN J:   I am just not sure what the evidence precisely says.  Does it say the foyer would have to be restored in 15 to 20 years in the sense of rebuilt or is it saying refurbish which would be a different idea and cost a lot less, I assume.

MR YOUNG:   Yes.  Your Honour, there is some evidence that I was thinking of that goes way beyond what Mr Bennett was describing; substantial works.  I perhaps overstated it by saying knocking it down and rebuilding it, but they were not simply repolishing the marble.  The evidence was to the effect that there was going to need to be substantial works in future.  His Honour’s finding is not detailed but Justice Tracey said at page 722, paragraph 102 that the:

refurbishment of the foyer will be necessary –

and would be necessary whichever foyer –

in order to take account of architectural developments and the need to “freshen up” the building to make it attractive to potential tenants.

But your Honour’s question really, I think, goes – that is his Honour’s only finding, but the evidence which his Honour summarised was talking about foyer upgrades, for instance, at the top of 721 and at 720 at about line 35:

upgrading in about five years to reflect “the commercial realities of competition with new and refurbished buildings.”

If one goes back to the evidence, your Honour, there is evidence indicating that substantial works were required.  That factor would have to be taken into account, so would the comparison, and we say the disproportionality between the costs of refurbishment and the diminution in the value of the building, and so too with the nature of the contract.  All of the factors that we say the Full Court left out of account would have to be taken into account in an equitable assessment of damages just as we say they should have been taken into account in a common law assessment of damages.  So the issues concerning the way in which damages were assessed that we have raised do not disappear if one says it is available to consider at this late stage; equitable damages. 

The same issues would arise as to the effect of the 2006 agreement on any assessment of damages.  It is no panacea for what we say are the problems in the Full Court’s approach to damages.  Moreover, in an equitable assessment of damages the onus would not be reversed.  We would not fail because we had failed to demonstrate the unreasonableness of Mrs Bergamin’s adamant view about the foyer, as it is under Joyner v Weeks.  So that framework, the Joyner framework, would not be there and the onus would not be applied against us in the same way.  The same issues would arise about the conduct of the way the appeal was conducted in relation to the issues concerning assessment of damages that were not fully ventilated during the course of the hearing.

We come back to the proposition that the Full Court overturned Justice Tracey on the grounds that his Honour’s assessment of damages is wrong because he did not apply joinder.  That is the nub of the appeal.

GUMMOW J:   But these extra considerations, if I can put it that way, that you were just putting to us a few minutes ago, they are not really allowed for by the trial judge either at the other end of the spectrum, are they?

MR YOUNG:   Well, they are, your Honour.  I have taken most of them from his findings.  He found it was an investment property in a commercial purposes lease.  He found reworking of the foyer in any event, no matter which foyer, in 2012.  He found no diminution in value aside from the small diminishment of lettable area, and he found that it was unreasonable and disproportionate to impose by way of damages the costs of restoration.

GUMMOW J:   Yes, but what I am putting to you, I suppose, is looking at what Lord Oliver said in Radford and how it was taken up in Ruxley in a pure common law case – it comes from Radford which is a Lord Cairns case – taken into Ruxley, the reasoning of Lord Oliver does not sit very well with the trial judge, does it?

MR YOUNG:   It does, your Honour.  Can I demonstrate why by reference to Ruxley?  It is tab 8.  Your Honour Justice Gummow directed Mr Bennett to the passage and the quote from Justice Oliver’s decision in Radford at page 358 of Ruxley.  There is the example of the folly that precedes the discussion.  After the extract from Radford, Lord Jauncey said:

However where the contractual objective has been achieved to a substantial extent the position may be very different.

GUMMOW J:   Well, the difficulty is this phrase “contractual objective” which masks various things.

MR YOUNG:   Yes, that goes back to what Lord Jauncey said on the preceding page, page 357, that what needs to be assessed is unreasonableness in the context of the particular contract in question, and it is ‑ ‑ ‑

GUMMOW J:   What I am trying to put to you is the contractual evidence of this covenant, 2.13 is it, is pretty clear.

MR YOUNG:   Well, I am referring as well, your Honour, not just to the covenant but to the objective and purpose of the lease.

GUMMOW J:   But the actions would be to the covenant.

MR YOUNG:   Yes, the actions for a breach of covenant, but the assessment of damages ‑ ‑ ‑

GUMMOW J:   It is only because of the breach of the covenant that it is still alive after all these years.

MR YOUNG:   Yes, your Honour.  The example of a folly is taken up at page 371 by Lord Lloyd in the last two lines of page 370, he starts.  At 371, his Lordship said, just below A:

The eccentric landowner is entitled to his whim, provided the cost of reinstatement is not unreasonable. 

His Lordship goes on to say that the judge dealt with it. 

Nevertheless, he found as a fact that the cost of reinstatement was unreasonable in the circumstances.

Now, that is a good description of what Justice Tracey did.  He was very conscious of the wishes and preferences, and we have not denigrated any of them for a moment, of the owners.  But his Honour, conscious of them and acknowledging them, assessed that the costs that they sought as a measure of damages was unreasonable.  His Honour has done that.  That assessment needs to take account, in our submission, of the nature of the contract and the benefit sought to be obtained by the covenant in 2.13.  Lord Mustill addresses that briefly at page 360.  His Honour has just cited Radford.  At just above G at 360, Lord Mustill said:

There are not two alternative measures of damage, at opposite poles, but only one; namely, the loss truly suffered by the promisee.  In some cases ‑ ‑ ‑

GUMMOW J:   The difficulty with that is the word “truly”. 

MR YOUNG:   Your Honour, let me assume it is not there for a moment:

In some cases the loss cannot be fairly measured except by reference to the full cost of repairing the deficiency in performance.

GUMMOW J:   The difficulty there is the word “fairly”.  The business owner would have a field day with this sort of judicial language. 

MR YOUNG:   It is next observation that we say is correct and pertinent.

GUMMOW J:   This is one category of indeterminate reference after another.

MR YOUNG:   His Lordship then makes the point that:

In others, and in particular those where the contract is designed to fulfil a purely commercial purpose, the loss will very often consist only of the monetary detriment brought about by the breach of contract.

There is an example given by Justice Cardozo, which is instructive, which is referred to at page 367 in Ruxley. The example runs from 366 to 367. I will not read it, but we say the approach in paragraph B is the correct approach, and that is what Justice Tracey applied at 367. The point is, in our submission, that reasonableness needs to be assessed in the context of the particular contract and here the way in which the case was put was that the loss arose because the foyer had been designed for tenants to achieve a certain pulling power. Can I go back to our folder of transcript references to show how this point arose.

From the very outset of the trial, the loss that was claimed associated with the foyer and the desire to retain the original foyer was put in terms of the original foyer being designed “to be attractive to a mix of tenants”.  That is how it is put in the opening passages of our learned friend Mr Colbran’s opening of the trial at page 7:

So it was intended to be timeless in the sense of appealing to a broad range of tenants –

and then repeatedly the emphasis was placed on the fact that the foyer was going to be going into a market – that is, post one major corporate tenant of Tabcorp - where multi‑tenancy was going to be the likely environment and the worth of the original foyer was its ability to attract a mix of tenants.  That is how the case was put.

Mr Bennett proceeded as if we were criticising Mrs Bergamin’s personal preference for the former foyer.  We were not; we never have.  The trial judge did not; he acknowledged it.  The question is how that connects up with loss.  The way they sought to make it connect up was to say this tenancy or this foyer, the original foyer, would have had greater powers in attracting a mix of tenants at the end of the Tabcorp occupancy.

The passage at 515 is the one that connects to Mr Macaulay’s observations.  Justice Heydon, you observed, when taken to what was said by Mr Macaulay about the foyer at the transcript that appears in volume 3 at 984, your Honour observed that it would be helpful to have the passage to which Mr Macaulay was responding.  That is in fact the passage at 515 in this list of references.  If your Honours would go into the body of the pages of the transcript in our volume, your Honours will see page 514 is the opening of the day to which Mr Macaulay was responding, and at 515, at about line 22, Mr Colbran’s submission was:

your Honour, this case is entirely about a foyer which we painstakingly conceived and constructed which was taken from us and which we want back.  You can listen to all of the experts who will tell you that, in a conventional way, it is typical to have a refurbishment cycle and that wishes come and go for tenants and so forth . . . 

That they, going into a market where multi-tenancy is the more likely environment, this is just what they want . . . 

gone to the trouble of ensuring that they had control over how this building presented itself to the world and they were denied that opportunity by the events which occurred some time around 11 July.

The loss case made was that the original foyer presented itself in an attractive way to future tenants and particularly the expected multiple tenants that would follow Tabcorp.  It was not like – I withdraw that; I have said enough.  That was the case the trial judge addressed and that was why his Honour found that restoration costs were unreasonable, because he rejected that evidence about the greater attraction in this foyer for tenants.

Two other very short points:  Mr Bennett addressed the 2006 agreement and its construction.  We made submissions to the effect that it was open to several different constructions, not confined to waiver, and can I illustrate one point in this fashion.  The proceedings were instituted in 2005 for breach of clause 2.13.  The damages were to be assessed at the date of breach and that was the claim.

Leaving aside the 2006 agreement that followed, damages would have been assessed without any shifting of onus and in a way that took account of all relevant factors bearing upon value and reasonableness.  The 2006 agreement comes along and our learned friends say that the Full Court was right to say that that requires damages to be assessed artificially including reversing the onus and eliminating a lot of factors that but for the 2006 agreement would have been relevant to the assessment of damages.  Therefore, on that construction the special condition affects, limits or compromises rights that my clients would have enjoyed earlier in relation to the assessment of damages. 

The whole case is that damages are to be assessed differently than they would previously and Tabcorp’s rights are limited, compromised or affected in that respect, vastly different from what they were before.  So that is a construction that does not honour the language of the special condition.  It speaks about not affecting either party.  Submissions like that have never been put because the issue was not fully identified.  One small point about Joyner in terms of whether it should be considered; Graham was a case which considered Joyner in the context of section 133A of the Conveyancing Act, therefore they were applying the modified rule.  Graham was not a set of circumstances that exposed any of the problems with Joyner because it was a hotel left delivered up in disrepair without a toilet and non‑compliant with liquor control regulations.  If the Court pleases, those are our submissions.

FRENCH CJ:    Thank you, Mr Young.

MR BENNETT:    Your Honours, might I have leave just to say two things in relation to the last two things my learned friend said?  Each will be about one sentence.

FRENCH CJ:    Yes, Mr Bennett.

MR BENNETT:   Your Honours, the first is in relation to page 515 of the transcript.  I simply invite your Honours to read the whole page which gives a different impression to the parts of it my learned friend read.  The second matter is that when my friend says the affect of the clauses, the damages would be assessed differently to the way they would be assessed previously, what he means is, differently to the way they would be assessed if one had the new lease without that clause.  That was never something that was ever

going to happen.  He does not mean differently if that lease had never existed.

FRENCH CJ:   Thank you, Mr Bennett.  The Court will reserve its decision.  We will adjourn to reconstitute for the next matter.

AT 11.44 AM THE MATTER WAS ADJOURNED