United Food Corporation Pty Ltd v Mrs Crocket's Kitchen Pty Ltd - [2010] WADC 172

JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CIVIL

LOCATION: PERTH

CITATION: UNITED FOOD CORPORATION PTY LTD -v- MRS CROCKET'S KITCHEN PTY LTD [2010] WADC 172

CORAM: DERRICK DCJ

HEARD: 20-23 SEPTEMBER 2010

DELIVERED : 25 NOVEMBER 2010

FILE NO/S: CIV 2675 of 2008

BETWEEN: UNITED FOOD CORPORATION PTY LTD
Plaintiff
AND
MRS CROCKET'S KITCHEN PTY LTD
Defendant

Catchwords:

Landlord and tenant - Ownership of fixtures and fittings - Principles of construction of clauses of contracts - Nemo dat rule - Construction of clauses of lease - Breach of covenant to yield possession of premises in good and substantial repair and condition - Breach of covenant to remove fixtures and fittings erected or installed by tenant - Principles of assessment of damages for breaches of lease - Assessment of damages

Legislation:

Sale of Goods Act 1895 (WA)
Supreme Court Act 1935 (WA)

Result:

Judgment for plaintiff
Damages awarded

Representation:

Counsel:

Plaintiff: Mr S G Leslie
Defendant: Ms K M McNally

Solicitors:

Plaintiff: Metaxas & Hager
Defendant: Clayton Utz

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

Australian Broadcasting Commission v Australasian Performing Right Association Ltd (1973) 129 CLR 99
Australian Goldfields NL (in liq) v North Australian Diamonds NL [2009] WASCA 98; (2009) 72 ACSR 132
Bellgrove v Eldridge (1954) 90 CLR 613
BP Refinery (Westernport) Pty Ltd v Hastings Shire Council (1977) 180 CLR 266
Brewarrina Shire Council v Beckhaus Civil Pty Ltd [2006] NSWCA 361
Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337
Corporate Systems Publishing Pty Ltd v Lingard [No 4] [2008] WASC 21
De Cesare v Deluxe Motors Pty Ltd (1996) 67 SASR 28
Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41
J‑Corp Pty Ltd v Gilmour [2005] WASCA 136
Knockholt Pty Ltd v Graff [1975] Qd R 88
Lurcott v Wakely & Wheeler [1911] 1 KB 905
Maggbury Pty Ltd v Hafele Australia Pty Ltd [2001] HCA 70; (2001) 210 CLR 181
McCann v Switzerland Insurance Australia Ltd [2000] HCA 65; (2000) 203 CLR 579
Murphy v Zamonex Pty Ltd (1993) 31 NSWLR 439
Permanent Building Society (in liq) v Wheeler (1992) 10 WAR 109
Proudfoot v Hart (1890) 25 QBD 42
Scott Carver Pty Ltd v SAS Trustee Corporation [2005] NSWCA 462
Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 596
Tabcorp Holdings Ltd v Bowen Investments Pty Ltd [2009] HCA 8; (2009) 236 CLR 272
TCN Channel 9 Pty Ltd v Hayden Enterprises Pty Ltd (1989) 16 NSWLR 130
Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165
Wright Prospecting Pty Ltd v Hancock Prospecting Pty Ltd [No 9] [2010] WASC 44
Zhu v Treasurer of the State of New South Wales [2004] HCA 56; (2004) 218 CLR 530

DERRICK DCJ: The plaintiff has brought an action against the defendant claiming damages for alleged breaches of a lease. The dispute between the parties relates to the condition of the leased premises following the expiry of the lease.
The plaintiff called six witnesses at trial. The defendant did not call any witnesses.

Background

The plaintiff is, and was at all material times, the registered proprietor of 10 ‑ 12 Bell Street in Canning Vale (the Property). The plaintiff purchased the Property in the 1980s.
At all material times there was erected on that part of the Property comprising 12 Bell Street a building. The building consisted of an office and amenities area of approximately 265 sqm, a food processing area of approximately 1,232 sqm and a warehouse of approximately 417 sqm (the Building).
Prior to March 1991 the plaintiff used the Property for the purpose of conducting a business of manufacturing, wholesaling and retailing food products (the Business).
On 21 March 1991 the plaintiff and a company called GSK Corporation Pty Ltd (GSK) executed a lease agreement pursuant to which the plaintiff leased the floor space in the Building to GSK (the Initial Lease). The date of commencement of the Initial Lease was 1 March 1991. The term of the Initial Lease was three years, the termination date being 28 February 1994. Under the Initial Lease GSK had an option to extend the three‑year term for a further three years commencing on 1 March 1994.
On 25 March 1991 the plaintiff entered into a License Agreement with GSK (the Licence Agreement). Under the Licence Agreement the plaintiff granted GSK the right to operate the Business for a term of three years commencing on 1 March 1991. The Licence Agreement provided GSK with an option to extend the three‑year term of the licence for a further three years commencing on 1 March 1994. The Business was defined in the Licence Agreement to include plant and equipment used by the plaintiff in the Business.
On 14 May 1991 the plaintiff and GSK entered into an agreement to vary the terms of the Licence Agreement (the Licence Variation). The terms of the Licence Variation are not material to the action.
On 8 March 1993 the plaintiff and GSK entered into an agreement to vary the Initial Lease and to extend the term of the Initial Lease (the First Variation). Under the First Variation the term of the Initial Lease was extended for eight years and five months (the Additional Term). The First Variation provided that the Additional Term commenced on 1 March 1994 and expired on 31 July 2002.
The First Variation also replaced the Licence Agreement and provided that from 8 March 1993 the plaintiff licensed GSK to carry on the Business for the Additional Term. The First Variation defined the Business in substantially similar terms to the definition of the Business contained in the Licence Agreement. Clause 10.4 of the First Variation gave to GSK an option to purchase the Business at any time during the final month of the Additional Term, that is, July 2002.
On 30 December 1993 the plaintiff and the defendant entered into a second agreement to vary the Initial Lease (the Second Variation). The terms of the Second Variation are not material to the action.
On 20 August 1997 the plaintiff and GSK entered into a further agreement to vary the Initial Lease (the Third Variation). Under the Third Variation the Initial Lease was varied so that the option granted to GSK to purchase the Business could be exercised at any time during the Additional Term provided that GSK paid to the plaintiff an amount representing all of the licence fees due and payable for the unexpired portion of the Additional Term less a discount to be agreed for the instalments of licence fees not then accrued but which were brought forward by the purchase. The Third Variation also provided that if the option was exercised the plaintiff would sell the Business to GSK for a purchase price of $1. The Third Variation further provided that GSK had exercised its option to purchase the Business granted to it under the terms of the document.
In accordance with the terms of the exercise of the option as stipulated in the Third Variation GSK, on or about 20 August 1997, paid to the plaintiff by bank cheque dated 19 August 1997 the amount of $143,636.65 plus the agreed amount of $1 for the Business.
On 9 December 2002 the plaintiff and GSK entered into a new lease agreement in respect of the Property (the Lease). By the terms of the Lease the plaintiff leased to the defendant the 'Premises' (the Premises). The Premises were defined in cl 1.01 of the Lease to mean:
[T]he premises (extending to the centreline of inter‑tenancy walls or joint partitions and to (but not including) the outer face of external walls and other boundaries) more particularly described in Item 2(c) of the Reference Schedule and includes all Landlord's fixtures and appurtenances therein and thereto.
Item 2(c) of the Reference Schedule specified the Premises to be:
That part of the Building situate at and known as 12 Bell Street, Canning Vale comprising:
·office and amenities of approximately 265.72 [sqm];
·food processing area of approximately 1232.14 [sqm];
·Warehouse area of approximately 417.64 [sqm].
The commencement date of the Lease was 1 August 2002. The term of the Lease was six years. The Lease gave to GSK an option to extend the Lease for a period of three years commencing on 1 August 2008.
Paragraphs (a), (b) and (c) of Item 8 of the Reference Schedule to the Lease provided as follows:
Notwithstanding anything to the contrary contained or implied in this Lease the Landlord and the Tenant agree that:
(a)the Landlord will at the commencement of this Lease spend of a maximum amount of $140 000 to upgrade the existing bean sprout area including the removal of water tank. Details of the Landlord's works have been agreed per the documentation marked "Appendix A" signed by the Landlord and the Tenant;
(b)the Tenant will spend at the commencement of this Lease of a maximum amount of $70 000 in upgrading the Premises including without limitation the office and staff facilities area. Details of the Tenant's works have been agreed per the documentation marked "Appendix C" signed by the Landlord and the Tenant;
(c)subject to item 8(d) of this Reference Schedule, the Landlord and the Tenant will during the Term spend approximately $45 000 each in the general upgrade of the Premises. Details of the Landlord's and the Tenant's works have been agreed per the documentation marked "Appendix B" signed by the Landlord and the Tenant.
On 30 September 2005 the plaintiff, GSK and the defendant entered into an agreement pursuant to which GSK assigned the Lease to the defendant (the Assignment). The effective date of the Assignment was 1 October 2005.
Under cl 6 of the Assignment GSK assigned to the defendant the unexpired balance of the term of the Lease and the full benefit and advantage of the Lease subject to the defendant's payment of the rent payable under the Lease and the defendant's due compliance with and observance of GSK's covenants under the Lease. By cl 7 of the Assignment the defendant (in consideration of the plaintiff consenting to the Assignment) covenanted with the plaintiff to pay the rent due under the Lease and to comply with and observe GSK's covenants and otherwise be bound by the terms of the Lease from and including the date of Assignment.
Clause 15.1 of the Assignment provided that pars (a) and (b) of Item 8 of the Reference Schedule to the Lease 'have been satisfied and are of no ongoing effect'. Clause 15.2 of the Assignment provided that par (c) of Item 8 of the Reference Schedule to the Lease had 'not been performed and will be performed by the Lessor and the Assignee during the unexpired residue of the Term'. The 'Term' was defined in the Assignment as the period of six years commencing on 1 August 2002. Clause 15.2 further provided that the reference to 'Appendix B' in par (c) of Item 8 of the Reference Schedule to the Lease 'is hereby deleted'.
On 8 October 2005 the defendant entered into a Sale of Business Agreement with GSK (the Sale Agreement). By the Sale Agreement the defendant purchased all of the 'Assets … necessary to carry on the Business, so that the "Business and Assets" [were], as far as practicable, … sold as a going concern': Recital A and cl 3.
The Lease expired on 31 July 2008. The defendant vacated the Premises approximately one or two months prior to the expiration of the Lease.
On 8 September 2008 the plaintiff entered into an agreement to lease the Premises to a company called Stalker Engineering Pty Ltd (Stalker). Stalker was not involved in the manufacturing, wholesaling and retailing of food products.

Building works

During the trial the plaintiff tendered a scale plan of the Building on which it had highlighted and marked 'A' to 'H' certain rooms that formed part of the Building as at 31 July 2008 (the Plan). A copy of the Plan is attached to these reasons.
The nature of the rooms marked 'A' to 'H' on the Plan and the times at which they were constructed is of significance to the plaintiff's action. It is therefore convenient to deal at the outset with the evidence relating to the nature and timing of the construction of the rooms and to state my findings in relation to these issues.

The evidence

The evidence as to the nature and construction of the rooms highlighted on the Plan was given by Mr Jungue Lai, Mr Gregory Rayner and Mrs Jennifer Lai. Mr Lai is, and was at all material times, the managing director of the plaintiff. Mr Rayner was at all material times a director of GSK, although not the director directly responsible for GSK's operation of the Business. Mrs Lai is, and was at all material times, a director of the plaintiff and the wife of Mr Lai.

Mr Lai

Mr Lai's relevant evidence was in substance as follows.
The configuration of the Building was not substantially changed until after the plaintiff sold the Business to GSK.
During the period leading up to the execution of the Lease, and as part of the negotiations that took place between the plaintiff and GSK prior to the execution of the Lease, the plaintiff agreed with GSK that it would contribute financially to the cost of renovation work that GSK wanted to carry out on the Building.
Appendices A, B, and C referred to in pars (a), (b) and (c) of Item 8 of the Reference Schedule to the Lease were signed or initialled by him and representatives of GSK prior to the execution of the Lease. However, they were not actually attached to the Lease.
Before the plaintiff and GSK entered into the Lease GSK approached the plaintiff with a proposal that would enable the plaintiff to spend considerably less than the $140,000 specified in par (a) of Item 8. The plaintiff agreed to the proposal. However, due to time constraints the decision was made that there would be no further attempts to itemise the Landlord's works and the Tenant's works referred to in pars (a) and (b) of Item 8 of the Reference Schedule. Rather, the plaintiff agreed with GSK that it would simply pay to GSK two‑thirds of the costs that GSK incurred in carrying out the renovation work to the Building. As a result the plaintiff and GSK effectively ignored Appendices A, B and C. The terms of Appendices A, B and C were not complied with.
The renovation work that the plaintiff agreed to pay two‑thirds of the cost of undertaking was all work required to be done under the regulations that were in force at the time. The plaintiff paid substantially less than the $140,000 referred to in par (a) of Item 8 of the Reference Schedule.
At the time that the Lease was entered into, and prior to GSK carrying out any renovation work to the Building, the areas marked on the Plan were used for the following purposes:
Area A – storage for product entry;
Area B – cool room used for storage;
Area C – office area;
Area D – bean sprout processing area;
Area E – noodles and bean curd processing area;
Area F – noodle production area;
Area G – temperature controlled processing area;
Area H – noodles and bean curd processing area.
In the bottom left‑hand corner of area E on the Plan was a small cool room.
Areas A, B and the small cool room within area E on the Plan were constructed on behalf of the plaintiff in the 1980s. These areas were constructed to enable the plaintiff to undertake the Business. Part of area A on the Plan was referred to as the 'hittpac' room. The hittpac room was used as a seafood packaging area. The small cool room within area E on the Plan was constructed of polystyrene panels.
After the plaintiff sold the Business to GSK the first major change to the structure of the Building consisted of the construction of area G on the Plan. This involved the enlargement of an existing area.
The second substantial change was to area D on the Plan.
The third major structural change consisted of the construction of areas F, E and H on the Plan.
The structural changes to areas G, D, F, E and H on the Plan were all completed before the assignment of the Lease to the defendant. The defendant did not make any significant alterations to these areas or the Building generally.
Most of the major structural changes to the Building were done in the months prior to the execution of the Lease, although some of the work may have been done shortly after the execution of the Lease. It was during the period leading up to the execution of the Lease that the plaintiff was fixing up all of the issues with GSK as to what each party had to spend in order to make the Premises comply with regulatory standards.
The work that was done to areas F and G on the Plan included making the working areas bigger. The areas were reconfigured so that they were more accessible and complied with new food processing regulations. The work involved removing walls and adding in new walls.
Areas E and H on the Plan were constructed of cool room panels although only the small area in the bottom left‑hand corner of area E was operated as a cool room. The rest of areas E and H were used for processing.
In addition to the major work done on the Building prior to the execution of the Lease there was, after the commencement of the Lease, continual upgrade work being performed in the processing area in order to comply with the standards imposed by major chains like Coles and Woolworths.
After 1997 the plaintiff did make financial contributions to the installation of plant, equipment and cool rooms in the Premises. However, it did not itself install any more cool rooms in the Premises.

Mr Rayner

Mr Rayner's evidence in relation to the rooms marked A to H on the Plan was as follows.
When GSK entered into the Initial Lease the cool room area B on the Plan, the lower half of area G on the Plan (that is, the portion which extends from the bottom of the Plan to a point in line with the top of the areas A and F) and the small cool room in the bottom left-hand corner of area E on the Plan were all in place.
In the 1990s, after the execution of the Initial Lease, GSK extended the lower portion of area G on the Plan. The area was extended in size upwards from the point on the Plan in line with the top of areas A and F to the extent shown on the Plan. The area was converted into a cool room, part of which was surrounded by polystyrene panels.
The right‑hand portion of area A on the Plan was the hittpac room. The hittpac room consisted of the tub salad production area and the freezer.
Area H on the Plan was a new cool room constructed for the receipt of raw produce. The construction of this cool room occurred at some point after GSK entered into the Initial Lease with the plaintiff.
During the course of negotiating the terms of the Lease negotiations were undertaken for renovation work to be done to the Building. GSK's business was growing and the Building required, by law, some extensions to the toilet facilities because of the amount of staff that GSK was employing. GSK also required some extensions to the cool room facilities to continue the growth of the Business.
As part of the negotiations relating to the Lease the plaintiff agreed to pay a proportion of the costs of the renovations. The 'upshot' of the negotiations was as set out in pars (a), (b) and (c) of Item 8 of the Reference Schedule to the Lease.
Following the negotiations relating to the Lease renovation work was carried out on the Building. The work was done after the execution of the Lease or at least after the commencement date of the Lease, that is, 1 August 2002. The cost of the renovation work was shared between the plaintiff and GSK in the proportions specified in pars (a), (b) and (c) of Item 8 of the Reference Schedule. However, the plaintiff and GSK may not have spent the maximum amount of money specified in pars (a), (b) and (c).
Work was done to area C on the Plan. This was the toilet and canteen area.
Area D on the Plan was also built. This area had initially been a processing area for bean sprouts but was converted and refurbished to become a cool room used for fresh noodle processing. All of the growing room for the bean sprouts was removed, the floor was cleaned and resurfaced, and then cool room polystyrene panelling was put in place to completely enclose the area.

Area E on the Plan, save for the cool room shown on the Plan in the bottom left corner of the area, was also built. Area E was a cool room.
Area F on the Plan was constructed. The area was a cool room enclosed by polystyrene panels. The room was used for potato processing, vegetable processing and salad mixing. Prior to the renovation work being undertaken the area had consisted of noodle production plant.

Mrs Lai

Mrs Lai's evidence‑in‑chief was given by way of the tendering of a witness statement signed by her on 21 September 2010. Her evidence as to the rooms in the Building highlighted on the Plan was to the following effect.
The cool rooms in areas D, E and F on the Plan were installed during the time that GSK negotiated the Lease with the plaintiff. GSK dealt with the contractors and organised the installation of the cool rooms. The plaintiff reimbursed GSK two‑thirds of the cost of the total work to install the cool rooms and also the toilet and staff upgrade in the area marked 'C' on the Plan. The cool rooms consisted of white panels, condensers and lighting.
Before the installation of the cool room in area D on the Plan the area consisted of the bean sprout cultivating room and bean sprout washing room. There was no cool room in that location at that time. The area consisted of concrete walls. The concrete walls remained when the cool room was installed.
Before the installation of the cool room in area F on the Plan there was no cool room in this area. The area consisted of windows, concrete walls, lighting and smooth concrete floors. The concrete walls remained when the cool room was installed.
The Appendices referred to in pars (a), (b) and (c) of Item 8 of the Reference Schedule to the Lease were not attached to the Lease at the time that the Lease was signed. However, the agreement between the plaintiff and GSK was for the plaintiff to contribute up to $140,000 for the renovation work and for GSK to spend up to $70,000. The plaintiff actually spent much less than the amount specified in par (a) of Item 8 of the Reference Schedule.

Findings as to rooms marked on Plan

Mrs Lai's evidence was, so far as it went, consistent with the evidence of Mr Rayner. Mr Lai's and Mr Rayner's evidence as to the nature and construction of the rooms marked 'A' to 'H' on the Plan was substantially consistent, although Mr Rayner, when he gave evidence, appeared to have a clearer recollection than Mr Lai of the precise timing and nature of some of the construction work undertaken. This is perhaps not surprising given that he was at the relevant time a director of GSK, the company which had occupied the Building since 1991 and for whose benefit any construction work was undertaken. To the extent that there was any inconsistency between the evidence of Mr Lai and Mr Rayner, I prefer the evidence of Mr Rayner.
On the basis of the evidence given by Mr Lai, Mr Rayner and Mrs Lai I make the following findings:
1.Areas A, B, C and the lower section of area G on the Plan (that is, the portion commencing from the bottom of the plan up to the point between the top of areas A and F) were constructed by the plaintiff prior to the execution of the Initial Lease.
2.Areas A and B on the Plan were cool rooms, area C was a toilet and staff area.
3.The small cool room in the bottom left‑hand corner of area E on the Plan was constructed by the plaintiff prior to the execution of the Initial Lease.
4.During the Initial Lease but after GSK's purchase of the Business, GSK constructed the upper section of area G on the Plan (that is, the portion from the point on the Plan in line with the top of areas A and F) and converted all of area G into a cool room.
5.During the Initial Lease but after GSK's purchase of the Business, GSK constructed a cool room which is shown as area H on the Plan.
6.After the commencement date of the Lease GSK carried out renovation work in area C on the Plan.
7.After the commencement date of the Lease GSK constructed three separate cool rooms which are shown as areas D, E and F on the Plan. Cool room E encompassed the small pre‑existing cool room referred to in point 3 above which remained in place, that is, as a separate cool room within cool room E.
8.The cool room walls and ceilings were constructed in the main of polystyrene panels.
For ease of reference I will hereafter refer to the areas marked 'A', 'B', 'D', 'E', 'F', 'G' and 'H' on the Plan as cool rooms A, B, D, E, F, G and H respectively.

The ownership of the cool rooms

A significant part of the plaintiff's claim arises from the defendant's failure to remove from the Premises at the expiration of the Lease all of the cool rooms (that is the panels, ceilings and doors constituting the cool rooms) that were constructed in the Building. It is therefore convenient, for reasons that will become apparent, to deal with the issue of the ownership of the cool rooms at the time of the expiration of the Lease before turning to the plaintiff's specific allegations of breach of the Lease. In order to deal with this issue it is necessary to give consideration to the terms of the First Variation, the Third Variation and the Sale Agreement.

Principles of construction

The primary duty of a court in construing any contract is to endeavour to discover the intention of the parties as embodied in the words that they have used in the contract: Australian Broadcasting Commission v Australasian Performing Right Association Ltd (1973) 129 CLR 99, 109 – 110; Permanent Building Society (in liq) v Wheeler (1992) 10 WAR 109, 118 – 119; Corporate Systems Publishing Pty Ltd v Lingard [No 4] [2008] WASC 21 [251]; Wright Prospecting Pty Ltd v Hancock Prospecting Pty Ltd [No 9] [2010] WASC 44 [94]. Accordingly, I must interpret the words used in the First Variation, Third Variation and Sale Agreement as having the meaning and effect that a reasonable person in the position of the contracting parties would have understood their meaning and effect to be: Maggbury Pty Ltd v Hafele Australia Pty Ltd [2001] HCA 70; (2001) 210 CLR 181, 188; Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52 [40]; (2004) 219 CLR 165, 179; Corporate Systems v Lingard [252] ‑ [253]; Australian Goldfields NL (in liq) v North Australian Diamonds NL [2009] WASCA 98 [145]; (2009) 72 ACSR 132, 169; Wright Prospecting v Hancock [87]. In performing this task I must consider not only the text of the relevant provisions of the First Variation, Third Variation and Sale Agreement, but also the context in which the provisions appear, the surrounding circumstances known to both parties and the purpose and object of the transaction the subject of the contract: Toll v Alphapharm [40], 179; Corporate Systems v Lingard [253].
I should, if the words of the relevant provision of the contract permit, avoid interpreting the provision in a way which is not commercially sensible or which gives rise to a commercial nonsense: McCann v Switzerland Insurance Australia Ltd [2000] HCA 65; (2000) 203 CLR 579, 589; Maggbury v Hafele [43] 198; Zhu v Treasurer of the State of New South Wales [2004] HCA 56; (2004) 218 CLR 530, 559. This is so because a commercial interpretation is more likely to give effect to the intention of the parties.

The First Variation

I have stated above that the First Variation defined the Business in substantially similar terms to the definition of the Business contained in the Licence Agreement. The precise terms of the definition of the Business under the First Variation, which appeared in cl 1.1, were as follows:
"Business" means the manufacture, wholesale and retail distribution of food stuffs conducted by [GSK] under the [Initial Lease] including the Plant …
Clause 1.1 of the First Variation defined 'Plant' to mean:
The plant and equipment used by [GSK] to conduct the Business which is permanently or ordinarily situated on the Premises and which is more particularly described in Schedule 3.
Schedule 3 specified the 'Plant' to include nine items of refrigeration equipment. Schedule 3 did not make any reference to the cool rooms that were at the time constructed in the Building.

The Third Variation

The Third Variation, which was the agreement under which GSK exercised its option to purchase the Business, did not alter the definition of the Business contained in the First Variation. In particular, it did not alter the definition of 'Plant' contained in the First Variation.

Evidence as to the intention of the parties in executing the First Variation and the Third Variation

When Mr Lai gave evidence he testified that it was his understanding that when GSK purchased the Business from the plaintiff it purchased 'everything' including the cool rooms. He said, in effect, that it was not possible to sell the refrigeration equipment associated with the operation of a cool room without also selling the cool room itself.
Mr Rayner gave similar evidence. He said that when GSK purchased the Business from the plaintiff it purchased the plant and equipment that was used to conduct the Business and that he understood that the plant included not only the refrigeration equipment required to operate the cool rooms but also the cool rooms themselves. He said that he understood that by reason of the purchase of the Business GSK owned the cool rooms.

Ownership of the cool rooms following the plaintiff's sale of the Business to GSK

The First Variation and the Third Variation were clearly intended by the plaintiff and GSK to set out all of the terms of the agreements reached between them. The documents contained the 'entire bargain' arrived at between the plaintiff and GSK.
It follows, in my view, that the post event evidence given by Mr Lai and Mr Rayner as to what the plaintiff and GSK believed was sold as part of the Business is not relevant to the determination of the question whether the plaintiff actually sold the cool rooms as part of the Business: Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 596, 606; Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337, 347. Rather, the question whether the plaintiff sold the cool rooms that were constructed in the Building at the time of the execution of the Third Variation (which I have found to be cool room A, cool room B and the small cool room which was subsequently encompassed within cool room E), must be answered by reference to the terms of the First Variation and the Third Variation read in light of both the surrounding circumstances known to the parties at the time of the execution of the Third Variation and the purpose and object of the transaction the subject of the Third Variation.
By the terms of the First Variation the 'Plant' that was sold by the plaintiff to GSK as part of the Business was the plant and equipment used by GSK to conduct the Business which was permanently or ordinarily situated in the Building and which was described in Schedule 3. The cool rooms, as was known by both the plaintiff and GSK, were used by GSK to conduct the Business. Moreover, the cool rooms were clearly permanently or ordinarily situated in the Building. However, the cool rooms were not identified and described in Schedule 3. The parties could, if they had intended for the cool rooms to be sold and purchased as part of the Business, identified and described the cool rooms in Schedule 3. Therefore, giving the words of the relevant provisions of the First Variation and the Third Variation their natural and ordinary meaning the cool rooms that were constructed at the time of the execution of the Third Variation were not, in my opinion, sold by the plaintiff to GSK as part of the Business. The plaintiff did not by the Third Variation convey title to the cool rooms to GSK.
In my opinion the above construction of the relevant provisions of the First Variation and the Third Variation is not inconsistent with either the purpose of the sale transaction or commercial common sense. It was possible for GSK to conduct the Business without purchasing the cool rooms because GSK was, in effect, the long term lessee of the Building from which the Business was conducted and in which the cool rooms were constructed.
In summary, in my opinion the cool rooms that at the time of the Third Variation were constructed in the Building, namely cool room A, cool room B and the cool room that was subsequently encompassed within cool room E, were not sold by the plaintiff to GSK as part of the Business. These cool rooms remained the property of the plaintiff.

Ownership of cool rooms constructed by GSK after GSK's purchase of the Business

The next question so far as the issue of ownership of the cool rooms is concerned is whether GSK owned the cool rooms that it constructed in the Building after it purchased the Business from the plaintiff, namely cool rooms D, E, F, G and H. The plaintiff contends that GSK was the owner of these cool rooms. The defendant contends that the cool rooms were part of the plaintiff's appurtenances.
The defendant's contention that GSK did not own any of the cool rooms that GSK constructed in the Building after it purchased the Business was not expanded upon in any detail at trial. The defendant's counsel did not point me to any provisions of the Initial Lease or the Lease in support of the contention. However, I gather from the terms of the defence and some of the cross‑examination of the plaintiff's witnesses that at least in so far as any cool rooms constructed after the execution of the Lease are concerned, namely cool rooms D, E and F, the contention is founded on the terms of pars (a) and (c) of Item 8 of the Reference Schedule to the Lease and the fact that the plaintiff contributed financially to the cost of constructing these cool rooms.
All of cool rooms D, E, F, G and H were constructed by GSK to enable GSK to conduct the Business that it had purchased from the plaintiff. They were an important part of the operation of that business. The plaintiff, having sold the Business, had no interest in cool rooms. It could make no use of them. The plaintiff does not assert ownership of the cool rooms.
Against this background the fact that the plaintiff apparently did, pursuant to at least par (a) of Item 8 of the Reference Schedule, make some contribution to the cost of the construction by GSK of one or more of cool rooms D, E and F does not, in my opinion, provide a basis for concluding that any of these cool rooms were the property of the plaintiff. The plaintiff's agreement to contribute to the cost of constructing the cool rooms pursuant to par (a) or otherwise was clearly part of the price that it had to pay for securing GSK as a long term tenant.
Nor, in my opinion, does cl 13.04 of the Lease (which was not referred to by the defendant's counsel) require or support the conclusion contended for by the defendant. Cool rooms D, E and F were brought onto the Premises by GSK and were installed and constructed by GSK, even if they were in part paid for by the plaintiff.
In the circumstances I do not accept the submission that the cool rooms constructed in the Building after GSK purchased the Business from the plaintiff formed part of the plaintiff's appurtenances and were therefore owned by the plaintiff. In my opinion it was at all times accepted and agreed between the plaintiff and GSK that any cool room constructed in the Building after GSK's purchase of the Business formed part of the Business and was the property of the GSK.

The Sale Agreement

The final question relating to the issue of ownership of the cool rooms is whether GSK by the Sale Agreement conveyed to the defendant title to any of the cool rooms that were constructed by GSK after GSK purchased the Business from the plaintiff, namely cool rooms D, E, F, G and H.
The operative sale clause of the Sale Agreement was cl 3. By cl 3 GSK sold and assigned to the defendant 'the Assets … so that the Business and Assets are, as far as practicable, to be sold as a going concern'.
Clause 1.1 of the Sale Agreement defined 'Business' to mean 'the business carried on by [GSK] of manufacturing and preparing pre‑prepared salads and ready to heat and eat meals'.
Clause 1.1 defined the term 'Assets' to mean and include, among other things, 'the Plant and Equipment' and 'the Other Assets'.

Definition - Plant and Equipment

Clause 1.1 of the Sale Agreement defined the phrase 'Plant and Equipment' to mean:
[T]hose items of plant and equipment, machinery … owned by [GSK] and exclusively used in or relating exclusively to the Business being the items which are more particularly described in Schedule 6.
Schedule 6 of the Sale Agreement specified the items of Plant and Equipment under 12 headings. The 10^th heading was 'Refrigeration Plant'. Under the heading Refrigeration Plant there were 10 subheadings. The 10 subheadings were:
(a)Walk In Freezer – Hittpac Room;
(b)Salad Packing Room;
(c)Coolroom 2 Egg Noodles;
(d)Coolroom 1;
(e)Hittpac Room;
(f)Coolroom 3;
(g)Coolroom 4;
(h)Coolroom 5;
(i)Coolroom 6;
(j)Packing Room/Mayonnaise Room.
Under each of these 10 subheadings appeared a list of refrigeration equipment including compressors, motors, condensers and evaporators. The refrigeration equipment specified under the 10 subheadings was clearly the refrigeration equipment used in the operation of the cool rooms that at the time of the execution of the Sale Agreement formed part of the Premises.
The list that appeared under the 10^th subheading, that is, the subheading '(j) Packing Room/Mayonnaise Room' was as follows:
Carrier Semihermetic 4 Cyl.
Compressor and Blower.
Cool Room Panels/Doors;
·Main Factory
·Egg Noodle Area;
·Processing Area;
·Coolroom 4 and 6.
Thus at first glance Schedule 6 of the Sale Agreement specified as part of the Plant and Equipment sold by GSK to the defendant the cool room panels and doors associated with the 'Packing Room' and 'Mayonnaise Room'. However, in my view this is not a proper construction of the Schedule. If the intention of the parties was to provide that only the cool room panels and doors from the Packing Room and Mayonnaise Room were to be sold, there would have been no point listing under the words 'Cool Room Panels/Doors' the areas referred to as 'Main Factory', 'Egg Noodle Area', 'Processing Area' and 'Coolroom 4 and 6'. Rather, it is clear, in my view, that the reference to 'Coolroom Panels/Doors' as it appears under subheading (j) was intended to, and should, be read either as a main heading in its own right, or as a separate subheading under the main heading 'Refrigeration Plant'.
The above construction of Schedule 6 of the Sale Agreement is supported by the Inventory of Plant and Equipment as at 30 September 2005 (the Inventory) which both GSK and the defendant provided to Mr Lai at the time of GSK's sale of the Business to the defendant. The Inventory was signed by Mr Rayner on behalf of GSK. On p 14 of the Inventory 'Coolroom Panels/Doors' appeared as a separate heading to the heading 'Packing Room/Mayonnaise Room'. Moreover, under the heading 'Coolroom Panels/Doors' was the following list:
Main Factory;
Egg Noodle Area;
Processing Area;
Coolroom 4 & 6.
Accepting that the reference to 'Coolroom Panels/Doors' in Schedule 6 should be read as a main heading or as a separate sub‑heading under the main heading 'Refrigeration Plant', the next question is which cool rooms were the parties referring to by the use of the terms 'Main Factory', 'Egg Noodle Area', 'Processing Area' and 'Coolroom 4 & 6'. In this regard the plaintiff submits that the list that appeared under the heading 'Coolroom Panels/Doors' should be read inclusively and that I should therefore find that all of the cool rooms in the Building, in addition to those expressly listed, fell within the definition of 'Plant and Equipment' contained in the Sale Agreement. The plaintiff contends that I should interpret the list in this way for two reasons. First, because Mr Lai and Mr Rayner gave evidence that they understood that when the plaintiff sold the Business to GSK it sold all of the cool rooms as well as the refrigeration equipment. Secondly, because without refrigeration equipment cool rooms do not work and have no function and that consequently there would have been no sensible reason for GSK and the defendant to include in the definition of 'Plant and Equipment' some only of the cool rooms.

I have already expressed the view that the evidence of Mr Lai and Mr Rayner as to what they believed that the plaintiff sold to GSK is irrelevant to the interpretation of the First Variation and the Third Variation. For the reasons that I expressed in that context, I also consider this evidence of the subjective intention of the parties to be irrelevant to the interpretation of the terms of Schedule 6 of the Sale Agreement.
As to the second of the reasons put forward by the plaintiff for interpreting the 'Coolroom Panels/Doors' list inclusively, I accept that cool rooms will generally be of little use in the absence of refrigeration equipment. However, this fact does not in my view provide a sufficient basis for ignoring the clear words used by the parties. GSK and the defendant have gone to the trouble of specifying in the Sale Agreement the cool rooms (that is, the panels, ceilings and doors) within the Building which are to be sold. If they had intended for all of the cool rooms in the Building to be sold to the defendant (leaving aside the issue that GSK did not actually own all of the cool rooms) there would have been no need to descend into this level of detail.
Accordingly, I do not accept the plaintiff's submission. In my view the definition of 'Plant and Equipment' contained in the Sale Agreement included only the cool rooms listed under the heading 'Coolroom Panels/Doors'. It therefore remains to determine which cool rooms are identified in the list.
Mr Rayner gave some evidence in relation to this issue. He identified the 'Main Factory' as the area below cool room D on the Plan and above cool rooms A and F, including cool room G, extending to the line between the right end wall of cool room D to the top of cool room F. He said that beyond the line between the right end wall of cool room D and the top of cool room F was the warehouse area. Mr Rayner also said that the 'Egg Noodle Area' was cool room D. He said that he could not say what areas of the Building were intended to be encompassed by the terms 'Processing Area' and 'Coolroom 4 & 6'.
I accept Mr Rayner's evidence as to what comprised the 'Main Factory'. I therefore find that the reference to 'Main Factory' used in Schedule 6 was a reference to cool room G.
I also accept Mr Rayner's evidence that the description 'Egg Noodle Area' was a reference to the cool room comprising cool room D.
Despite Mr Rayner's evidence that he could not say which area of the Building was encompassed by the description 'Processing Area', I find that this was a reference to cool room F. I make this finding on the basis of Mr Rayner's previously referred to evidence that area F on the Plan was a food processing area.
That leaves the reference to 'Coolroom 4 & 6'. Bearing in mind that cool room G, cool room D and cool room F were all constructed by GSK after it had purchased the Business, the words 'Coolroom 4 & 6' in my view, were used by GSK and the defendant to describe, and should be interpreted as meaning, cool room E and cool room H. These are the only two cool rooms that were constructed by GSK after it had purchased the Business which are not encompassed by any of the other cool room descriptions which appear under the heading 'Coolroom Panels/Doors'. Moreover, in my view this interpretation is consistent with the apparent purpose of the Sale Agreement, namely to convey title to the defendant in any cool rooms constructed in the Building that GSK owned.
In summary, I find that the definition of 'Plant and Equipment' in the Sale Agreement expressly included cool rooms D, E, F, G and H.

Definition – Other Assets

As stated above, cl 1.1 of the Sale Agreement defined 'Assets' to mean and include 'the Other Assets'. Clause 1.1 of the Sale Agreement defined 'Other Assets' to mean:
All assets which [GSK] owns, other than the Excluded Assets and those listed in paragraphs (a) – (j) (inclusive) of the definition of Assets, which are exclusively used in or relate exclusively to the Business.
The cool rooms were not 'Excluded Assets' within the meaning of that term as defined in cl 1.1 of the Sale Agreement. However, they were clearly exclusively used in, or related exclusively to, the Business. Accordingly, if contrary to my above expressed view cool rooms D, E, F, G and H were not 'Plant and Equipment', they were, given that they were owned by GSK, 'Assets' for the purposes of the Sale Agreement.

Plaintiff's submission that plaintiff is precluded from denying GSK's authority to sell cool rooms

It is a fundamental principle that a seller cannot pass to a buyer a better title to goods than that which the seller enjoys. This principle, known as the nemo dat rule, is given statutory effect to by s 21(1) of the Sale of Goods Act 1895 (WA). It was also reflected in the definitions of 'Plant and Equipment' and 'Other Assets' contained in the Sale Agreement which referred to items 'owned' by GSK.
The above referred to nemo dat rule is subject to one exception. The exception is that title in the goods will pass to the buyer if the owner of the goods is precluded by his conduct from denying the seller's authority to sell. This exception to the rule, like the rule itself, is given statutory effect to by s 21(1) of the Sale of Goods Act.
In reliance on the exception to the nemo dat rule the plaintiff submits that it is precluded by its conduct from denying GSK's authority to sell all of the cool rooms that were in the Building at the time of the execution of the Sale Agreement and that I should therefore find that GSK did pass title to all of the cool rooms to the defendant. The plaintiff contends that it is so precluded because 'of the creation of the common belief in the plaintiff and GSK (as initial seller and buyer) that "everything" was being sold, and the adoption/ratification of that by accepting for both GSK (as reseller) and the defendant (as the buyer), without challenge [the Inventory]'.
There are two main difficulties with the plaintiff's submission. First, this is not a case in which the plaintiff is denying the authority of GSK to sell all of the cool rooms that were in the Building prior to the execution of the Sale Agreement. To the contrary, the plaintiff argues that I should find that GSK was the owner of all of the cool rooms and therefore had the authority to sell them. It makes this argument because it considers that if all of the cool rooms were the property of the defendant at the time of the expiration of the Lease the amount of damages it can claim for the defendant's alleged breaches of the Lease is increased.
The second difficulty with the submission is that by the terms of the Sale Agreement GSK did not purport to exercise authority to sell any cool rooms that it did not actually own.
In these circumstances I do not consider that the exception to the nemo dat rule has any application to the present case or provides a basis for concluding that upon executing the Sale Agreement the defendant became the owner of all of the cool rooms that were at that time constructed in the Building.

Conclusion on issue of ownership of cool rooms

For the reasons stated, I find that at the time of the expiration of the Lease the defendant was the owner of cool rooms D, E (not including the small separate cool room within cool room E), F, G and H.

The plaintiff's claim for loss - summary

The plaintiff alleges that the defendant has breached the Lease in a number of respects and that as a result of these breaches it has suffered loss and damage comprised of the cost of undertaking make good work. The work which the plaintiff alleges that it performed, the clause or clauses of the Lease which the plaintiff alleges the defendant breached by failing to do some or all of the work performed by the plaintiff, the clause or clauses of the Lease pursuant to which the plaintiff alleges it can recover the cost of performing some or all of the work, and the cost which the plaintiff alleges it incurred in performing the work is set out in the below table. The cost of performing the work forms the basis of the plaintiff's damages claim.

Scope of work	Relevant clauses of Lease	Cost of work
Demolish cool room walls ceilings doors and associated trims as marked on site	9.08 and 10.2	$65,499.33
Decommission internal compressors salvage ozone depleting gases and disposal	9.08 and 10.2	$11,065.94
Demolish external plant stand and compound, dispose of plant	9.08 and 10.2	$9,034.31
Plumbing	9.08 and 10.2	$16,939.33
Remove all existing floor coverings and dispose	5.01, 9.07 and 9.08	$3,162.00
Repaint existing painted walls to offices, entry, passages, tea room and toilets, repair walls	5.03	$21,456.48
Repair paint and clean up existing walls and windows to room in the S/E corner (flour store)	5.01 and 9.07	$8,987.39
Repair cyclone fencing and gates	5.01 and 9.07	$5,822.11
Repair downpipes external sheeting	5.01 and 9.07	$1,574.46
Electrical demolition	9.08 and 10.2	$1,087.83
Western Power disconnection	9.08 and 10.2	$3,312.58
Repair roof penetrations	5.01 and 9.07	$6,845.56
Repair walls behind old fridge panels	9.08 and 10.2	$18,423.22
Restore awning façade	5.01 and 9.07	$51,305.70
Additional electrical costs	All	$69,052.46
Builder's Profit	All	$29,318.12
Insurance, scaffold, bobcats, bins, BCITF	All	$10,163.69
TOTAL	$333,052.59

It is not in dispute that by the Assignment the defendant assumed GSK's obligations as tenant under the Lease. It is the extent of the obligations as described in the Lease that is in issue. The principles of construction of contracts that I have already referred to are obviously applicable to the interpretation of the provisions of the Lease.
I will deal with each of the alleged breaches of the Lease in turn. Once I have dealt with the alleged breaches I will turn to the issue of the assessment of damages, if any, to be paid to the plaintiff.

The alleged breaches of cl 5.01 and cl 9.07

The relevant clauses

Clause 9.07 of the Lease, which appeared in the section of the Lease headed 'Additional Covenants by the Tenant' provided, so far as is relevant, that the Tenant, which following the Assignment was obviously the defendant, shall:
At the expiration or sooner determination of the Term yield and deliver up possession of the Premises to the Landlord in such good and substantial repair and condition and state of cleanliness and decoration as shall be consistent with the due performance by the Tenant of the Tenant's obligations under this Lease …
The defendant's obligations under the Lease included an obligation specified in cl 5.01 of the Lease to keep the Premises in good repair. Clause 5.01 appeared in the section of the Lease headed 'Repairs and Maintenance by Tenant'. The clause provided, so far is relevant, that the Tenant shall:
At the Tenant's own expense keep the Premises and every part thereof and all additions thereto including (without limiting the generality of the foregoing) all exterior and interior entrances floor coverings glass and show windows and plate and other glass and all partitions doors fixtures fittings equipment furnishings and appurtenances lighting heating air-conditioning sewerage and plumbing plant equipment and machinery fixtures fittings installations and facilities and the Tenant's fixtures, fittings, equipment and furnishings in good and substantial and tenantable repair, order and condition …
A tenant complies with an obligation to keep leased premises in good and substantial and tenantable repair, order and condition if the tenant keeps the premises in a state of repair which, taking into account the age, character and locality of the premises, will make the premises reasonably fit for occupation by a reasonably minded tenant of the class likely to lease the premises: Proudfoot v Hart (1890) 25 QBD 42.
The plaintiff alleges that the defendant breached cl 5.01 and cl 9.07 in a number of respects. In support of its case that the defendant breached cl 5.01 and cl 9.07 the plaintiff called, in addition to Mr Lai, Mr David Lamb and Mr Shayne Jennings.
Mr Lamb is, and was at all material times, an industrial real estate agent and the director of NLV Real Estate (NLV).
Mr Jennings is, and was at all material times, a builder. He is the director of Jenstruct Pty Ltd which trades as Jenstruct Builders (Jenstruct). It was Jenstruct that the plaintiff engaged to undertake work at the Premises after the defendant had vacated the Premises.
Mr Jennings gave evidence about the nature of the work that Jenstruct performed on the Premises, the reasons for Jenstruct undertaking the work and the amount that Jenstruct charged for the work.
The plaintiff adduced only a small amount of evidence as to the condition of the Premises prior to and at the time of the commencement of the Lease. The evidence came from Mr Rayner who said that he could not say if GSK had ever painted the Premises but that he was sure that GSK kept the Premises to the standard required because if it had not done so it would not have secured the Lease. He said that Mr and Mrs Lai were quite clear on what their requirements were and that they kept GSK 'honest'. He said that he was not aware of GSK being required at the end of the Initial Lease to undertake any make good type work on the Premises.
The absence of any detailed evidence as to the condition of the Premises at the time of the commencement of the Lease is of little moment. The obligation imposed by cl 9.07 is not, by the terms of the clause, limited by the condition of the Premises at the time of the commencement of the Lease. The obligation imposed on the Tenant is to deliver up the Premises in good and substantial repair and condition as shall be consistent with the performance of the Tenant's obligations under the Lease regardless of the condition of the Premises as at the time of the commencement of the Lease: Lurcott v Wakely & Wheeler [1911] 1 KB 905, 915. The provision is clearly premised on the not unreasonable assumption that if the Premises were not in good and substantial repair at the time of the commencement of the Lease the Tenant would not have entered into the Lease.
Before dealing with the specifics of the alleged breaches of cl 5.01 and cl 9.07 it is convenient to refer to the evidence given by Mr Lai and Mr Lamb as to the general condition of the Premises at or around the time of the expiration of the Lease.

The evidence as to the condition of the Premises at the expiration of the Lease

Mr Lai

Mr Lai gave evidence to the following effect.
He inspected the Premises with the defendant's representative Mr David Richards in early April 2008. He inspected the Premises with Mr Richards in relation to the condition in which the Premises were to be returned to the plaintiff.
He inspected the Premises again in July 2008. The condition of the Premises was the same as when he had inspected them in April 2008 save that there was rubbish everywhere. Everything was in a mess, nothing was clean and no painting had been done. He did not notice that any work had been done on the Premises since he had inspected them in April 2008.

Mr Lamb

Mr Lamb's evidence was as follows.
On 14 April 2008 he received a letter from the defendant requesting NLV to inspect the Premises for the benefit of both the defendant and the plaintiff. The defendant and the plaintiff also asked him to prepare a report of the results of his inspection. At this time the defendant was still trading from the Premises.
He inspected the Premises on 2 May 2008. After conducting his inspection he formed the view that the Premises were very run‑down. He believed that no maintenance had been done on the Premises for three to four years. The property had not been recently painted.
In accordance with the request made by the plaintiff and the defendant he prepared a property condition report dated 2 May 2008 (the Property Report). He believes that the Property Report accurately states what he saw when he conducted his inspection of the Premises. In the Property Report he identified the specific items of work on the Premises that he 'recommended … be finalised to the lessor's reasonable satisfaction prior to the end of the [L]ease'. He stated in the Property Report that NLV had prepared the report 'for the benefit of both parties' and that NLV hoped that the report would 'help in the make good of the property'.

The alleged breaches

Remove all existing floor coverings

The plaintiff alleges that the defendant breached cl 5.01 and cl 9.07 of the Lease by failing to remove floor coverings that were in the Premises. The plaintiff does not allege that the defendant's failure to remove floor coverings constituted a breach of cl 6.15 of the Lease which, without limiting the generality of cl 5.01, dealt with the replacement and maintenance of carpet installed by the plaintiff. The plaintiff's failure to place any reliance on cl 6.15 is unsurprising given that no evidence was adduced in relation to the issue of who installed the carpet the subject of this aspect of the plaintiff's claim.
In the Property Report Mr Lamb stated that the floor coverings in the office and amenities area of the Premises needed to be replaced and that the floor covering in the lunch room needed to be cleaned.
Mr Jennings testified that throughout the amenity and office areas of the Premises there was carpet and vinyl. He said that there were also some offices within the warehouse part of the Premises which were carpeted. He said that all of the existing floor coverings were removed because they were 'pretty damaged'. He testified that he engaged workers to remove the carpet and vinyl and to place it in a bin.
The evidence of Mr Lamb and Mr Jennings as to the condition of the floor coverings in the Premises was not disputed. I accept their evidence.
On the basis of the evidence given by Mr Lamb and Mr Jennings I find that the defendant failed to keep the carpet and vinyl floor coverings in the Premises in good and substantial and tenantable repair order and condition and that it thereby contravened cl 5.01. I also find that the defendant, by vacating the Premises without replacing the floor coverings in the Premises, contravened cl 9.07 of the Lease. I therefore find the alleged breaches of the Lease proved.

Repair, paint and clean existing walls and windows to room in south‑east corner

The plaintiff alleges that the defendant breached cl 5.01 and cl 9.07 of the Lease by failing to carry out certain repairs to an area in the south‑east corner of the Premises.
In relation to these alleged breaches Mr Jennings testified that the area in question was an office area that was within cool room F. He said that the office area had highlight windows which had been blacked out with paint. He said that the area had been tiled. He said that he had to replace the windows and the glazing, strip off the existing tiles and re‑render and re‑paint the stripped off area. He said the tiles needed to be removed because they were unsightly. He said that once the cool room had been removed the tiles were unnecessary and not required for the future use of the Premises. The evidence of Mr Jennings in relation to the condition of the area in question and the work done was not challenged. I accept his evidence
On the basis of the evidence given by Mr Jennings I find that the defendant's failure to replace the painted windows and glazing prior to vacating the Premises constituted a contravention of cl 9.07 of the Lease. To this extent I find the alleged breach of the Lease proved.
I am not satisfied that the defendant's failure to remove the 'unsightly' tiling and re‑render and re‑paint the stripped off area constituted a breach of either cl 5.01or cl 9.07. The evidence does not, in my view, establish that the removal of the tiles was necessary for the defendant to comply with its obligation to deliver possession of the Premises to the plaintiff in such good and substantial repair and condition as was consistent with the performance of its obligations under the Lease.

I note that given the defendant's statement in its facsimile that it did not have any make good obligations it is difficult to see what purpose the provision of the list referred to in pars 18(a) and 21(b) would have served.

Paragraph 18(b) of the defence

The defendant pleads in par 18(b) of the defence that any damages payable to the plaintiff should be reduced, to the extent which the court considers just and equitable, having regard to all circumstances including the plaintiff's failure to spend approximately $45,000 or any part thereof in general upgrade of the Premises as required by Item 8(c) of the Lease and cl 15.2 of the Assignment. The defendant pleads that this sum ought to be set‑off against any cost of painting, floor or wall treatments or other items unaffected by structural changes made to the Premises by the plaintiff after 22 May 2008. The defendant's counsel did not make any submissions in support of this plea during the trial.
The defendant has not adduced any evidence to show that the plaintiff did not after the Assignment spend the amount specified in Item 8(c) in general upgrade of the Premises. It has therefore failed to make out its set off claim. However, even if it is assumed that the plaintiff did not spend some or all of the amount specified in Item 8(c) it is my view that the plaintiff's failure to do so does not provide a basis for reducing the damages payable by the defendant to the plaintiff as a result of the defendant's breaches of the Lease.
It is clear from the terms of Item 8(c) that the work that was to be undertaken pursuant to the item was not for the benefit of property owned by the defendant. The work was to be performed on the general upgrade of the Premises, that is, the property owned by the plaintiff. Therefore the measure of any loss suffered by the defendant by reason of the plaintiff not spending some or all of the $45,000 on a general upgrade of the Premises is not the amount not spent but rather the loss of the benefit, if any, to the defendant from the upgrade work not having been done. The defendant has not adduced any evidence going to show that it suffered any such loss. It has therefore not proved any loss to be set off against the plaintiff's claim for damages. In these circumstances I do not consider that the plaintiff's failure to comply with its obligations under Item 8(c), assuming there was such a failure, impeaches the title of any aspect of the plaintiff's claim or requires that the defendant should, to the extent of the claimed set off, be protected from the plaintiff's claim: Murphy v Zamonex Pty Ltd (1993) 31 NSWLR 439, 465; cf Knockholt Pty Ltd v Graff [1975] Qd R 88.

Conclusion

Damages

In respect of the defendant's breaches of cl 9.07 of the Lease I award the plaintiff damages in the amount of $55,618.40 comprised of the following amounts:
Remove floor coverings $3,162.00
Repair windows $1,500.00
Repair gates and cyclone fencing $5,822.11
Remove downpipes and external sheeting $1,574.46
Removing and replacing exhaust fans $3,000.00
Repair awning and façade $40,559.83
In respect of the defendant's breach of cl 5.03 of the Lease I award the plaintiff damages in the amount of $21,456.48.
In respect of the defendant's breaches of cl 9.08 of the Lease I award the plaintiff damages in the amount of $110,154.94 comprised of the following amounts:
Removal of cool rooms  $51,556.96
Removal of plumbing equipment $6,075.00
Electrical demolition $1,087.83
Repair walls behind fridge panels  $12,282.15
Additional electrical work  $39,153.00
In respect of the defendant's breaches of both cl 9.07 and cl 9.08 of the Lease I award $3,049 for insurance, scaffold, bobcats, bins and BCITF costs.
Pursuant to cl 10.03 of the Lease I award the plaintiff liquidated damages in the amount of $48,726.79 ($44,297.08 and $4,429.71 GST).
Accordingly, the total amount of damages that I award to the plaintiff is $239,005.61.
In the defendant's written closing submissions the point is made that the 'make good' component of the sum claimed by the plaintiff, which is significantly more than I have awarded, is equivalent to over three years of the rent payable under the terms of the Lease. No doubt the sum that I have awarded for the defendant's breaches of cl 5.03, cl 9.07 and cl 9.08 of the Lease also represents a significant proportion of the rent payable under the Lease for a three‑year period. However, this is the consequence of the defendant's acceptance of the terms of the Assignment.

Interest

Pursuant to cl 3.12 of the Lease the plaintiff claims interest on all monies payable by the defendant to the plaintiff at 10% per annum from 1 August 2008 to the date of judgment. Clause 3.12 of the Lease provided:
The Tenant shall pay to the Landlord on demand interest at the Rate of Interest on all moneys owing by the Tenant but unpaid in breach of the provisions of the Lease for more than 7 days from and including the due date the said interest to be calculated on a daily basis on the total amount of the moneys owing from time to time and computed from and including the due date.
Clause 1.1 of the Lease defined 'Rate of Interest' to mean 'the then current maximum rate charged by the Commonwealth Bank of Australia on overdraft accounts with a limit of less than $100,000 plus 2%.
On 21 September 2010 the plaintiff's solicitors issued to the defendant a Landlord's Certificate dated 21 September 2010 under cl 13.17 of the Lease. By cl 13.17 the Landlord's Certificate is prima facie evidence of the factual matters stated in it. Paragraph 5.7 of the Landlord's Certificate states that the Rate of Interest under the Lease is 10% per annum on all outstanding monies from 1 August 2008 to date of judgment. The defendant has not sought to dispute the plaintiff's assertion that the Rate of Interest is 10%.
The amounts of damages that I have awarded in respect of the defendant's breaches of cl 5.03 and cl 9.07 of the Lease are not amounts that are unpaid 'in breach of the provisions of the Lease'. Therefore so far as these amounts are concerned I am only prepared to award interest calculated at the rate provided for by s 32 of the Supreme Court Act 1935 from 4 December 2008. I have nominated 4 December 2008 as the date from which the interest is to be calculated because this is the date of the invoice issued by Jenstruct to the plaintiff for the work undertaken on the Premises by reference to which Mr Jennings gave his evidence. It was not until at least this date that the plaintiff paid for all of the work in respect of which I have awarded damages.
The amount that I have awarded for the defendant's breaches of cl 9.08 is, by virtue of the terms of cl 10.01, an amount that is 'unpaid in breach of the provisions of the Lease'. So too is the amount that I have awarded under cl 10.03 of the Lease. Therefore I award interest on these amounts to be calculated pursuant to cl 3.12 of the Lease at the rate of 10% per annum. The interest payable on the amount awarded for the breaches of cl 9.08 is to be calculated from 4 December 2008. The interest payable on the amount awarded under cl 10.03 is to be calculated from 1 August 2008.
I have found that the plaintiff's insurance, scaffold, bobcats, bins and BCITF costs were incurred as a result of the defendant's breaches of both cl 9.07 and cl 9.08. Accordingly, for the purpose of calculating interest half of the amount awarded in respect of these costs should be treated as damages awarded for the breaches of cl 9.07 of the Lease and the other half as damages awarded for the breaches of cl 9.08.