The Western Australian Government Railways Commission v WESTBOND Credit Union Ltd - [2001] WADC 289

JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CIVIL

LOCATION: PERTH

CITATION: THE WESTERN AUSTRALIAN GOVERNMENT RAILWAYS COMMISSION -v- WESTBOND CREDIT UNION LTD [2001] WADC 289

CORAM: GROVES DCJ

HEARD: 22 JANUARY 2001

DELIVERED : 20 DECEMBER 2001

FILE NO/S: CIV 3165 of 1998

BETWEEN: THE WESTERN AUSTRALIAN GOVERNMENT RAILWAYS COMMISSION
Plaintiff
AND
WESTBOND CREDIT UNION LTD
Defendant

Catchwords:

Contract - Agreement to lease commercial premises - Interpretation - Demand - Interest payable - Turns on its own facts

Legislation:

Evidence Act 1906 s 79C(2)(a) & (b)

Result:

Claim and counterclaim both dismissed

Representation:

Counsel:

Plaintiff: Mr P G Clifford
Defendant: Mr J C Curthoys

Solicitors:

Plaintiff: Haydn Robinson
Defendant: Richard O'Shannassy & Co

Case(s) referred to in judgment(s):

Colonial Finance Mortgage, Investment & Guarantee Corp Ltd (1905) 6 SR NSW 6

Case(s) also cited:

Nil

GROVES DCJ: The plaintiff's claim is for interest pursuant to clause 3.9 of a Deed of Lease dated 12 August 1998 on monies which were owing but ultimately paid. A brief chronology will set the scene as to the circumstances giving rise to the claim.

Chronology

7 October 1993: By deed dated 7 October 1993 ("First Deed") (Exhibit 1) the plaintiff agreed to grant a lease and the defendant agreed to take on lease part of the southern undercroft of the William Street Bridge which is situated in the western wing of the Perth Central Railway Station at Wellington Street, Perth ("Leased Premises"). The agreement required inter alia the plaintiff to undertake and complete certain works for reinstatement of the Leased Premises with the commencement date to be one month after those works were completed.
26 May 1995: By deed of variation dated 26 May 1995 ("Second Deed") (Exhibit 2) the plaintiff and defendant agreed to vary the First Deed to provide for an increase in the scope of works to be undertaken to the leased premises, for the defendant to contribute to the costs of the extra works by paying additional rent and providing for the defendant to lend money to the plaintiff to fund the cost of the works which were to be carried out by the plaintiff.
27 & 30 June 1995: The defendant employed two additional staff members for the purpose of training them for employment at the Leased Premises.
17 October 1995: By exchange of correspondence between the plaintiff and the defendant (Exhibits 10 and 11) funding arrangements and the process for payment by the defendant of the additional rent referred to in the Second Deed were agreed.
17 October 1995: The plaintiff issued a contract to Central Development & Construction Pty Ltd for the required works to the Leased Premises (Exhibit 9).
November 1995: The defendant claims to have entered into sub-lease agreements with Thomas Cook and NCUIS Financial Planning for parts of the Leased Premises for terms commencing in November 1995.
16 February 1996: All of the works required to be undertaken to the Leased Premises were completed.
19 February 1996: The defendant occupied the Leased Premises.
17 March 1996: The "commencement date" of the lease term. The defendant was released from liability to pay rent from the commencement date until 16 September 1996.
9 March 1997: Main Roads requested payment of $46,005.20 to carry out work to the William Street Bridge, being part of the monies to be lent by the defendant to the plaintiff under the First and Second Deeds.
15 July 1997: The contract architects certified to the plaintiff's solicitor the total cost of the works ("final contract sum").
21 October 1997: The area of the defendant's tenancy of the Leased Premises was certified by licensed surveyors as comprising 858 m² (Exhibit 12).
23 October 1997: Stanton Hillier Parker as managing agents for the plaintiff write to the defendant advising amounts outstanding for rental and for tenants contribution to fitout and tenancy work. Interest on outstanding for tenancy works and consulting fees was also advised. This letter (quoted in full later in these reasons), the plaintiff contends, constitutes the demand for interest on monies outstanding (Exhibit 5).
24 March 1998: The amount outstanding (excluding interest) was agreed as between the plaintiff and the defendant and on 24 March 1998 the defendant paid to the plaintiff the agreed amount.
12 August 1998: Date of executed Deed of Lease (Westrail lease No L3505) (Exhibit 3). The Deed of Lease incorporates the terms and conditions of the First Deed with the necessary variations.
21 August 1998: The plaintiff issued the writ of summons commencing this action claiming interest on monies which were due and payable under the lease on the commencement date and which monies were not paid until 24 March 1998. The claim for interest is made pursuant to clause 3.9 of the Deed of Lease.

The matters at issue

Clause 3.9 of the Deed of Lease (which is in identical terms to clause 3.9 of the First Deed) is in the following terms:
"3.9Interest on arrears:
The Lessee shall pay to the Commission on demand by the Commission interest on all monies owing by the Lessee but unpaid in breach of the provisions of this lease for more than seven (7) days from and including the due date without any demand being required, calculated on a daily basis on the total of the monies owing from time to time and computed from and including the due date at the rate …"
The reference in clause 3.9 to "the Commission" is a reference to the plaintiff and the reference to "the Lessee" is a reference to the defendant. The balance of the clause identifies the rate at which interest is to be paid. At trial the plaintiff tendered correspondence from the National Australia Bank Ltd (Exhibit 6) setting forth the "Benchmark Rate" charged by that Bank during the period 27/12/95 to 04/08/97. Against the defendant's objection that schedule was admitted under s 79C(2)(a) and s79C(2)(b) of the Evidence Act 1906 as a "business record". The rates as detailed were otherwise not challenged.
The first issue is to understand what clause 3.9 of the Deed of Lease is saying. Pursuant to the lease the defendant is required to pay certain amounts eg annual rent by monthly instalments in advance on the first day of each successive month, rates and taxes, services, insurance, variable outgoings etc. These are payable by the defendant without any demand being required therefore. It is clear then that the first reference to "demand" in clause 3.9 of the lease is a reference to a demand being required as a prerequisite to liability for payment of interest on monies for which the defendant is liable to pay but which remain unpaid for more than seven days. The second reference to "demand" in clause 3.9 is in the context of a demand not being required for monies agreed to be paid by the defendant in terms of the lease that are overdue by seven days or more for which monies the defendant is liable to pay in terms of the lease. Simply stated, monies due by the defendant under the lease do not require demand being made therefore. However if interest is sought to be charged on monies outstanding then demand must be made for the claim for interest thereon.
The plaintiff claims interest pursuant to clause 3.9 of the Deed of Lease on four separate amounts. Those items on which interest is claimed are as follows:

(a)     Floor coverings:
The Second Deed required the defendant to pay to the plaintiff the amount by which the actual cost of supply and installation of floor coverings in the Leased Premises exceeded $43,242.00. The actual cost of supply and installation of floor coverings in the Leased Premises exceeded $43,242.00 by $9,712.00 being therefore the amount payable by the defendant to the plaintiff "immediately on demand" pursuant to item 10(g)(v) of the Schedule to the First Deed as varied by the Second Deed. The plaintiff claims interest on $9,712.00 from 23 October 1997 (being the date of demand – Exhibit 5) to 24 March 1998 being the date when payment was made.
(b)     Late payment of the monthly instalments of annual rent:
The Deed of Lease provides that the defendant "… shall pay to the (plaintiff) for the leased premises the annual rent … at the times and by the instalments specified in item 3 of the Schedule without any demand being required therefore." (clause 2.2 of the Deed of Lease which is in the same terms in clause 2.2 of the First Deed). The plaintiff claims interest on each monthly instalment from the date that instalment was due to 24 March 1998 being the date when payment was made. Again the plaintiff contends that the demand was made for interest by its managing agent on 23 October 1997 (Exhibit 5).
(c)     Additional rent for use of fixtures and fittings:
By the First Deed as varied by the Second Deed item 10(g)(i)(iii) & (iv) the plaintiff agreed that the defendant may use the plaintiff's fixtures and fittings contained in the Leased Premises wherefore the defendant agreed to pay to the plaintiff additional rent. Sub-clause (vi) provides that the additional rent shall be paid to the plaintiff on the commencement date. The Deed of Lease reflects this agreement in item 10.2 of the Schedule thereto. By the time the Deed of Lease had been prepared and executed the additional rent had been quantified in the amount of $239,224.29 (item 10.2(c)). Interest on that amount is claimed by the plaintiff from 17 March 1996 being the "commencement date" to 24 March 1998 being the date when the defendant made payment in settlement of this amount. Again the demand for interest is claimed to have been made by the managing agent's letter of 23 October 1999 (Exhibit 5).
(d)     Main Roads work:
Item 10.3 of the Deed of Lease (which picks up clause 1(13) of the Second Deed) required the plaintiff and the defendant to pay immediately on demand from Main Roads in equal shares the amounts required by Main Roads to carry out and complete its works to the William Street Bridge which works totalled $46,005.20. The defendants equal share being $23,002.70 was payable on demand by the defendant to the plaintiff. The plaintiff claims interest on that amount from 23 October 1997 (being the date of demand - Exhibit 5) to 24 March 1998 when that amount was paid by the defendant to the plaintiff.

Demand for interest on monies due and payable

In its statement of claim the plaintiff pleads in par 8:
"On 23 October 1997 the plaintiff by its managing agent Stanton Hillier Parker (WA) Pty Ltd demanded payment of all monies due and payable under the Lease."
By its defence par 12(a) the defendant admits that it received the letter "… but otherwise denies each and every allegation". Thus there is issue as to whether or not demand was made for any monies payable under the Lease.
The letter referred to and dated 23 October 1997 (Exhibit 5) was in the following terms:
"WESTRAIL LEASE NO L3505 – HORSESHOE BRIDGE, PERTH
We refer to the attached correspondence from Haydn Robinson dated 20 October 1997 and advise as follows:
1.     Rental amounts currently outstanding
Rent 16/9/96-30/9/96  $ 2,801.82
        Rent 1/10/96-31/10/97                   $79,134.25
Rent 1/11/97-30/11/97                   $ 6,087.25
2.     Tenants contribution to fitout and tenancy works:
Tenancy Work Revision B              $231,830.00
        Floor Coverings   $    9,712.00
        Consulting Fees  $ 23,110.48
Main Roads Works  $ 23,002.70
3.Interest on outstanding for tenancy works and consulting fees $42,605.91, recoverable @ 2% of the National Australia Bank's Indicator benchmark rate for commercial lending 10.75% (please note: to assist in expediting this matter Westrail has agreed to claim interest only from February 1996 on the amounts of $231,830.00 and $23,110.48 if all amounts are paid by 31 October 1997).
Therefore, in accordance with the attached statement could you please forward $418,325.60 to our office by 31 October 1997.
Should you have any queries regarding the above please do not hesitate to contact the undersigned.
Yours faithfully
STANTON HILLIER PARKER (WA) PTY LTD"
Having regard to the requirement of clause 3.9 that demand is required as a prerequisite to liability for payment of interest and the content of that letter three of the items on which interest is claimed can be simply disposed of. They are the claims for interest on rental amounts, floor coverings and Main Roads works. The managing agent's letter makes no reference to nor any claim for interest on those amounts advised as outstanding or owing. In contrast it does advise an amount for "interest on outstanding for tenancy works and consulting fees …". It goes on to say "… Westrail has agreed (sic) to claim interest only from February 1996 on the amounts … (for tenancy works and consulting fees) if all amounts are paid by 31 October 1997". A statement of account attached to that letter details the same items and same amounts. Attached also is the letter from the plaintiff's solicitor to the managing agents dated 20 October 1997. That letter makes reference to the plaintiff being entitled to interest on arrears but says nothing about demand being required for payment of interest.
Can the presentment of an account for payment of monies due under the lease amount to a demand for payment of interest on those monies? The Oxford English Dictionary, 2 ed, vol IV defines demand as:
"1.An act of demanding or asking by virtue of right or authority; an authoritative or peremptory request or claim
2a.The action of demanding; claiming; peremptory asking
b.On demand: (payable) on being requested, claimed or presented
3.Law : The action or fact of demanding or claiming in legal form; a legal claim."
In Colonial Finance Mortgage, Investment & Guarantee Corp Ltd (1905) 6 SR NSW 6, Walker J at p 9 said:
"There must be a clear intimation that payment is required to constitute a demand; nothing more is necessary, the word demand need not be used; neither is the validity of a demand lessened by its being clothed in the language of politeness; it must be of a peremptory character and unconditional but the nature of the language is immaterial provided it has this effect."
As is apparent from the correspondence there was no demand made by the plaintiff (or its agent) for interest on either the rental amounts outstanding or the costs for floor coverings or Main Roads works. It was not alleged and nor was there any evidence of any other demand having been made for payment of interest on these three items. Accordingly there has been a failure by the plaintiff to make demand for interest on arrears as required by clause 3.9 of the Deed of Lease. Accordingly the plaintiff's claim for interest on these amounts fails.
The remaining item on which the plaintiff claims to be entitled to interest is that for the additional rent for the use of the plaintiff's fixtures and fittings. By its statement of claim par 10.1(c) the plaintiff claims interest on the sum of $239,224.29 from 17 March 1996 to 24 March 1998. Interest on that amount is claimed at the rate prescribed by clause 3.9 of the Deed of Lease. The managing agent's letter makes no reference to a sum in that amount. There is however an item:
"Tenancy Works Revision B $231,830.00"
It is a threshold question as to whether the item particularised in the managing agent's letter is one and the same as that which is the subject of the claim for interest in the writ. For a start the amounts referred to are different. The language of the items particularised is also different. The item on which interest is claimed by the writ is said to be pursuant to item 10.2(c) and 10.2(d) of the Schedule to the Deed of Lease (Exhibit 3). The defendant admits that it paid $239,224.29 but otherwise denies that assertion. The Deed of Lease post dates the date of the managing agent's letter although the commencement date of the Lease is expressed to be 17 March 1996. As at the date of the managing agent's letter the First Deed as varied by the Second Deed effectively reflected the obligations of the parties at that time. The Second Deed incorporated a scope of works for reinstatement of the tenancy area described as Revision "B". The Second Deed also added as sub-paragraph (i) to item 10 of the Schedule reference to the plaintiff agreeing to provide materials and labour to pay the cost for the internal fitout as per the plans and specifications marked "AB". Those plans and specifications were not tendered and the court is not able to draw any conclusion as to what that work was. Further by the same sub-paragraph the Lessee acknowledged that the signs, partitions, doors, glass, vents, fixtures, fittings, plant, equipment and furnishings (Commission's fixtures and fittings) comprised in the internal fitout would be the property of the Commission. The defendant agreed to pay to the plaintiff additional rent for the use of the Commission's fixtures and fittings. The additional rent was to be paid to the plaintiff on the commencement date. The reference to these matters are picked up in items 10.2(a), (b), (c) and (d) of the Deed of Lease.
The point in making reference to the Second Deed in this context is to endeavour to ascertain whether or not the additional rent for fixtures and fittings is one and the same as "Tenancy Works Revision B". The plaintiff did not lead any oral evidence at trial. It relied on the documents tendered and admissions made by the defendant on the pleadings. Thus no evidence or explanation was forthcoming as to what "Tenancy Works Revision B" referred to or what, if any, reference this item had to the claim for interest on the additional rent for fixtures and fittings.
I am not able to conclude that they are necessarily one and the same. That is for these reasons. The Revision B to the Second Deed does not particularise the tenancy works and I am not able to know or conclude that that reference is only to fixtures and fittings on which additional rent would be payable. Nor does the court know and nor is it able to determine whether the internal fitout as per the plans and specifications marked "AB" is referable only to including fixtures and fittings on which additional rent was payable. Furthermore, there is an ambiguity in the description "Tenants contribution to fitout and tenancy works" which precedes the items listed thereunder. Are "fitout" and "tenancy works" referable to one and the same thing, namely the plaintiff's fixture and fittings comprised in the internal fitout, or are they referable to two different cost issues, viz, one being the fitout and the other tenancy works? In the absence of any evidence or admissions it is not possible for the Court to resolve the ambiguity. That being the case I am not able to conclude that "Tenancy Works Revision B" on which interest was claimed in the managing agent's letter is one and the same as the item for additional rent on which interest is claimed in the writ.
In those circumstances the plaintiff has failed to discharge the onus which rests upon it and I conclude that the plaintiff has failed to make demand in terms of clause 3.9 of the Deed of Lease. Therefore the claim for interest on the additional rent for fixtures and fittings must also fail. It was not alleged and nor was there any evidence of any other demand having been made for interest on this item.
The plaintiff's claim for interest on all items on which interest was claimed accordingly fails.

Defendant's counterclaim

By its counterclaim the defendant seeks damages for losses which it claims to have incurred by reason of the plaintiff failing to use its best endeavours to complete the internal fitout of the Leased Premises expeditiously in that it unreasonably delayed in issuing contracts for the carrying out of the internal fitout which thereby delayed occupation of the premises by the defendant.

The evidence of the defendant's then General Manager, Mr T S Jones, was that after the Second Deed had been executed the defendant expected to take occupation of the Leased Premises by November 1995. His evidence was that in expectation of occupation the defendant towards the end of June 1995 employed two additional staff for the purpose of training them for employment at the Leased Premises and thereby incurred wages costs. Furthermore it was Mr Jones' evidence that the defendant had entered into sub-lease agreements for parts of the Leased Premises commencing in November 1995 with two commercial tenants. As it transpired the defendant took occupancy of the Leased Premises on 19 February 1996 some three months later than expected.
The Second Deed was executed on 26 May 1995. Clause 1(12) of the Second Deed inserted item 10(i) to the Schedule to provide that the plaintiff would use its best endeavours to complete the internal fitout of the Leased Premises expeditiously. It was Mr Jones' evidence that by about October 1995 he was becoming worried about the delay in awarding a contract to carry out the work. When he spoke with the plaintiff's Chief Engineer he was told that he (the Chief Engineer) had been told to put the project on hold. Mr Jones then spoke with the plaintiff's Commissioner for Railways, Mr Ross Drabble, and was again told that the project had been put on hold and that it was his (Mr Drabble's) job to run trains. He did say however that he would look to his legal requirements. Mr Jones indicated then that he had incurred costs in anticipation of occupation to which Mr Drabble invited him to send details of those costs which he indicated would be reimbursed. Details were sent by Mr Jones to which he received a reply from the plaintiff's solicitors. No amount was reimbursed. It was not until 17 October 1995 that Westrail let a tender for the work.
In response the plaintiff points to item 10(b) of the Schedule to the First Deed (which was operative at the relevant time) which states:
"The Commission shall not be liable for any loss or damage suffered by the Lessee due to delay in completion of the works."
I find that to be conclusive so far as defeating the defendant's counterclaim.
If more were needed I would add that the defendant proceeded prematurely in making the arrangements with new employees and prospective sub-tenants when it knew or at least did not enquire prior to October 1995 whether or not appropriate steps had been taken towards letting of the contract for the works. As to the two new staff who were employed and trained (at other of the defendant's premises) they were presumably usefully occupied elsewhere pending moving into the Leased Premises. There was no evidence that this was not so or that they had to be stood down on pay because no work was available for them until the new premises opened. As to sub-letting part of the Leased Premises no lease documentation was tendered in support of either such agreement to sub-lease or for sub-lease of the premises. Evidence from Mr Jones on this aspect was scant. Furthermore it was a term of the First Deed by clause 9.5 that the defendant would not sub-let any part of the Leased Premises without the plaintiff's "… prior written consent …". Nor was there evidence that such prior consent had been obtained.
In these circumstances both aspects of the defendant's counterclaim for damages must fail.
Accordingly for the reasons stated both the plaintiff's claim and the defendant's counterclaim will be dismissed.