SUPREME COURT OF VICTORIA
COURT OF APPEAL
| ROBERT TEBB | S APCI 2009 3818 |
| Appellant | |
| v | |
| FILSEE PTY LTD (ABN 11 084 496 239) and GATELL PTY LTD (ABN 17 084 496 202) | Respondents |
| and | |
| S APCI 2009 3819 | |
| ROBERT TEBB | Appellant |
| v | |
| KKV PTY LTD (ACN 075 355 145) and CARONVALE PTY LTD (ACN 074 605 897) | Respondents |
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| JUDGES | NETTLE, REDLICH and HARPER JJA |
| WHERE HELD | MELBOURNE |
| DATE OF HEARING | 7 October 2010 |
| DATE OF JUDGMENT | 24 November 2010 |
| MEDIUM NEUTRAL CITATION | [2010] VSCA 311 |
| JUDGMENT APPEALED FROM | [2009] VCC 0791 (Judge Anderson) |
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GUARANTEES – Securities for obligations of lessee – Default by tenant in payment of rent and land tax – Failure to remedy breach – Repudiation and re-entry by landlord – Licence arrangement to permit tenant’s access to premises in return for immediate payment of a portion of arrears and land tax, resolution of the balance of indebtedness by payment of fees equal to the rent payable under terminated lease and reinstatement of bank guarantees – Failure to comply with all further conditions – Whether guarantees continued to apply or were discharged or extinguished on termination of the leases and grant of the licence – Whether by entry into the licence the landlords fully mitigated their loss such that the landlords’ damages were nil – Progressive Mailing House v Tabali (1984–1985) 157 CLR 17 distinguished – Koch Marine Inc v D’Amica Di Navigazione ARL [1980] 1 Lloyd’s Rep 75 and Luxer Holdings Pty Ltd v Glentham Pty Ltd (2007) 35 WAR 254 considered – Appeal dismissed.
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Appearances: | Counsel | Solicitors |
| For the Appellant | Mr V R W Gray | Somerset Ryckmans through their Melbourne agents Herman Partners Consulting Lawyers |
| For the Respondents | Mr M A Robins | Nathan Kuperholz |
NETTLE JA:
REDLICH JA:
We have had the advantage of reading in draft the reasons for judgment of Harper JA and we agree that the appeal should be dismissed. We wish to add only some observations as to the principal oral argument advanced by counsel for the appellant.
As is explained in Harper JA’s reasons, the respondents’ claim at first instance was for damages for breach of a lease dated 24 September 2004. By the lease, the respondents leased premises at Lot 1, Justin Road, Brooklyn to Precision Container Services Pty Ltd (‘Precision’) for a term of five years beginning on 6 September 2004. It was not in issue that Precision repudiated the lease or that, as a matter of principle, damages for repudiation of the lease were to be assessed in accordance with contractual principles.[1] What was in issue was whether and to what extent the damages were to be reduced to take account of the fact that, following repudiation and forfeiture of the lease, the respondents entered into a further agreement with Precision to licence the premises to Precision for a period corresponding to the remainder of the term of the forfeited lease.
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- Case
- [2010] VSCA 311
- Decision Date
CaseChat Overview and Summary
The court examined the legal principles surrounding the guarantees and the circumstances of the tenants' default and the landlords' actions. It distinguished the case from Progressive Mailing House v Tabali, where the court held that a landlord was not required to mitigate losses by taking reasonable steps to re-let the premises. The court considered the cases of Koch Marine Inc v D’Amica Di Navigazione ARL and Luxer Holdings Pty Ltd v Glentham Pty Ltd, which dealt with the effect of a licence agreement on the underlying lease and security interests. The court held that the guarantees remained in effect as they were not expressly discharged by the licence and the tenants' failure to comply with the terms of the licence did not affect the enforceability of the guarantees. The landlords' damages were not nil as they had not fully mitigated their loss by entering into the licence arrangement.
The appeal was dismissed, and the landlords were entitled to claim the amounts due under the guarantees. The court held that the landlords were not required to mitigate their losses by entering into the licence arrangement, as the arrangement was not a reasonable step to mitigate the loss. The guarantees remained valid and enforceable, and the landlords were entitled to claim the amounts due under the guarantees from the tenants. The court further held that the landlords had not fully mitigated their loss by entering into the licence arrangement, as the arrangement was not a reasonable step to mitigate the loss.
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