Tabcorp Holdings Ltd v Bowen Investments Pty Ltd

Tabcorp Holdings Ltd (the tenant) and Bowen Investments Pty Ltd (the landlord) were parties to a lease agreement. The dispute concerned the tenant's breach of a covenant in the lease which prohibited the making of substantial alterations to the premises without the landlord's consent. The landlord sought damages for this breach. The case was heard by the High Court of Australia.

The central legal issue before the High Court was the appropriate measure of damages for the tenant's breach of the covenant not to make substantial alterations without consent. Specifically, the court had to determine whether the landlord was entitled to the costs of rectifying the alterations made by the tenant, or if damages should be limited to the diminution in the value of the landlord's reversionary interest. The court also considered the application of the principle established in *Robinson v Harman* to this context, including whether the costs of rectification must be reasonable and the relevance of the commercial character of the premises.

The High Court held that the measure of damages for breach of a covenant to repair or not to alter premises is the cost of rectifying the breach, provided that the rectification work is necessary to restore the premises to the state they would have been in had the covenant been performed. The court rejected the argument that damages should be limited to the diminution in the value of the reversion, finding that this approach would undermine the contractual rights of the landlord. The court emphasised that the landlord is entitled to have the premises in the condition stipulated by the contract, and the cost of achieving that condition is the appropriate measure of damages. The commercial character of the premises and the reasonableness of the rectification costs were relevant considerations in assessing the quantum of damages, but did not preclude the recovery of rectification costs altogether.

The appeal was dismissed with costs.