United Petroleum Pty Ltd v Bousaleh

[2018] NSWSC 1324

Supreme Court

New South Wales

Medium Neutral Citation:	United Petroleum Pty Ltd v Bousaleh [2018] NSWSC 1324
Hearing dates:	23 August 2018
Date of orders:	30 August 2018
Decision date:	30 August 2018
Jurisdiction:	Equity
Before:	Darke J
Decision:	Orders made for specific performance of agreement to grant new lease. Claim for damages not made out.
Catchwords:	LAND LAW – leases – lessee of a service station covenanted to keep premises in good and substantial repair and condition – premises include underground fuel tanks – whether covenant extends to fuel tanks – whether lessor has obligation to repair them – not suggested that any of the exceptions to the covenant operated – lessor does not have obligation to repair fuel tanks – not shown that problems with fuel tanks were the result of poor maintenance – lessee’s claim for damages not made out
Legislation Cited:	Uniform Civil Procedure Rules 2005 (NSW), r 29.7
Category:	Principal judgment
Parties:	United Petroleum Pty Ltd (Plaintiff) Salah Bousaleh (First Defendant) Gail Christine Bousaleh (Second Defendant)
Representation:	Counsel: Mr M Cleary (Plaintiff)   Solicitors: McCullough Robertson Lawyers (Plaintiff)
File Number(s):	2016/330224
Publication restriction:	None

Judgment

1. By a Further Amended Statement of Claim filed on 31 July 2017, the plaintiff seeks relief in respect of a lease of a service station in Merewether. The plaintiff as lessee entered into the lease with the defendants as lessor in 2010 for a five year term commencing on 3 October 2010. The lease contains three options to renew for further periods of five years each.

2. The plaintiff seeks declarations that it validly exercised the first option to renew, and that a valid and enforceable agreement for lease exists accordingly. The plaintiff seeks orders for specific performance in relation to the execution of a new lease. The plaintiff also seeks a declaration that a Notice of Termination served by the defendants on 28 October 2016 is invalid. Finally, the plaintiff claims damages for breach of the agreement for lease.

3. When the matter was called on for hearing there was no appearance by either defendant. The hearing proceeded on an undefended basis, as envisaged by Uniform Civil Procedure Rules 2005 (NSW) r 29.7. A cross-claim filed by the defendants against the plaintiffs was dismissed with costs pursuant to the same rule.

4. The plaintiff read three affidavits, namely affidavits sworn by Fiona Garvey, the plaintiff’s National Property Manager, on 6 June 2018 and 20 August 2018, and an affidavit sworn by Josephine Sheehan, solicitor, on 17 August 2018. The Court was assisted by written and oral submissions by Mr Cleary of counsel for the plaintiff.

5. The evidence comfortably satisfies the Court that on 1 May 2015 the plaintiff exercised the first option to renew contained in the lease, and that such exercise was in accordance with the provisions of the lease. The plaintiff thereby became entitled to the grant of a new lease for the renewed term. I note that there is evidence that in September 2015 the validity of the exercise of the option was apparently accepted by the defendants.

6. The Court is further satisfied that the plaintiff’s entitlement to a new lease for a five year term commencing on 3 October 2015 is not affected by the defendants’ Notice of Termination served on 28 October 2016. That notice was based on the plaintiff’s failure to execute certain lease documents. These documents appear to differ significantly from that which would accord with the terms of the option to renew. In addition, on 18 July 2016 the plaintiff’s solicitor sent an executed lease to the defendants’ solicitor. The executed lease was for the period 3 October 2015 to 2 October 2020 and, subject to one matter, appears to be in accordance with the terms of the option to renew. The matter to which I refer is an erroneous reference in Item 4 of the annexure to the lease to three further terms each of five years. The reference should have been to two further terms each of five years. I regard that as a patent error, such that the submission of the executed lease could not possibly be regarded as a repudiation of the agreement that would justify its termination. I agree that the Notice of Termination is invalid.

7. Subject to the correction of that error, there seems to be no reason why the Court should not make orders in the nature of specific performance to compel the defendants to execute the lease for the period 3 October 2015 to 2 October 2020.

8. I turn now to the plaintiff’s claim for damages. The claim is pleaded in paragraphs 15 to 29 of the Further Amended Statement of Claim. In essence, it is alleged that the defendants breached cll 12(e) and 13 of the agreement for lease in relation to repairs to underground fuel tanks at the service station.

9. Clause 12(e) obliges the lessee to allow the lessor and its agents, with or without workmen, to enter the Premises and view its condition. This right is subject to a proviso that not less than 7 days written notice is given to the lessee (except in the case of emergency) and further “that the Lessor shall not cause any undue interference with the Lessee’s occupation and use of the Premises”.

10. Clause 13 is in the nature of a covenant for quiet enjoyment.

11. The plaintiff alleges that these clauses were breached by the defendants by failing to provide written notice as required by cl 12(e), and by failing to carry out repairs to the underground tanks in a timely manner such that the plaintiff’s business was interrupted.

12. Lost profits of $158,613.60 are claimed. All bar about $4,000 of that amount is attributable to one of the unleaded petrol tanks (tank 1) which was not operating between 1 June 2015 and 19 February 2016. The balance is attributable to the diesel tank (tank 5) which was not operating between 17 January 2016 and 23 February 2016.

13. A further claim is made for expenses totalling $33,974.15. These expenses are said to have been incurred as a result of the defendants’ “failure to repair and maintain the underground storage tanks at the Premises”.

14. The claim seems to be based at least in part on the contention that the lessor had an obligation under the agreement for lease to carry out repairs to the underground tanks. However, I am unable to accept that contention.

15. Clause 12(a) contains a covenant given by the lessee to the lessor that it will keep the Premises (including but without limiting the generality of the foregoing, all plant, equipment…pipes, drains…and other fixtures and things therein or which at any time during the term shall be erected or installed by the Lessor) in good and substantial repair and condition, reasonable wear and tear and damage by fire, lightning, storm, tempest and earthquake excepted (save where the said wear and tear or damage shall be caused by the neglect, default or misconduct of the Lessee).

Premises is defined in the annexure to the agreement for lease by reference to the address of the property.

16. I do not agree with the plaintiff’s submission that the covenant does not extend to the underground tanks. In circumstances where the Premises is defined in the manner it is, and the permitted use of the Premises is Service Station and Convenience Store, there is no reason to read the reference to the Premises in cl 12(a) as excluding the underground tanks that are obviously integral to the carrying on of a service station. It is true that the tanks are not mentioned in the words that are in parentheses, but those words are expressly stated to not limit the generality of the expression “the Premises”. In my view, neither the text of cl 12(a) nor the context in which the clause appears supports the existence of the limitation contended for. There are no express covenants in the lease that require the lessor to undertake repairs to the underground tanks, and by cl 8 it is stated that the lessor gives no warranty that the Premises are or will remain suitable or adequate for the known purposes of the lessee.

17. In my opinion, the defendants are not obliged under the agreement for lease to carry out repairs to the underground tanks. The tanks form part of the Premises. The plaintiff is obliged, subject to the express exceptions in cl 12(a), notably fair wear and tear, to keep the tanks in good and substantial repair and condition. The plaintiff did not submit that any of those exceptions operated in this case.

18. Nevertheless, the evidence establishes that in September 2015 the defendants agreed to carry out at their own expense “inspection and repair of the underground tanks as necessary”. This agreement appears to have been made in the course of negotiations for a new lease. The works agreed to be undertaken were intended to commence on 28 September 2015 but it appears that certain work permits that were required had not been obtained. The plaintiff was evidently keen to ensure that no work was carried out until all necessary permits had been obtained.

19. It seems that no work was done until late January 2016. By that time the problems with the diesel tank had emerged. The evidence contains no explanation of the reason or reasons why there was no work done in the period from about October 2015 to late January 2016.

20. A contractor engaged by the defendants came to the service station on 29 January 2016 to carry out work on the tanks. This occurred without notice to the plaintiff, and there is evidence that this caused a fuel delivery truck to be turned away. This is likely to have caused the plaintiff to suffer some loss but the evidence does not identify the nature or extent of any loss sustained.

21. By about 23 February 2016 all of the works had been completed and all of the fuel tanks were back in operation.

22. My conclusion that the defendants were not obliged to repair the tanks means that the plaintiff’s claims for lost profits and expenses incurred cannot be sustained, at least in their entirety. The lost profits claim assumes that the damage to the tanks was a result of default on the part of the defendants in relation to the repair and maintenance of the tanks. The claim is for profits lost during the entire period the tanks were not in operation due to the damage. Similarly, the expenses claim is for costs incurred as a result of the occurrence of the damage. In any event, the evidence does not establish that the problems with the tanks were the result of a failure to properly maintain them.

23. I have considered whether the evidence might support a conclusion that the manner in which the defendants carried out the works, including by failing to carry out the works with reasonable dispatch, caused the plaintiff to suffer some part of the losses claimed. However, even allowing for the fact that the defendants did not choose to defend the claim and thus adduced no evidence, I cannot see a proper basis to reach that conclusion. There appears to have been some delay in relation to the works on the unleaded fuel tank, but there is insufficient evidence to infer that this was the result of some default on the part of the defendants. Still less does the evidence permit a rational assessment of the duration of any delay so caused.

24. I have also considered whether the attendance of the defendants at the premises without notice may have caused loss to the plaintiff. Again, however, the evidence is not sufficient to establish either that such a loss occurred, or the extent of the loss. I note further that it is at least doubtful that the carrying out of the works by the defendants was done pursuant to the agreement for lease itself or cl 12(e) in particular, as opposed to a separate agreement.

25. For the above reasons, I am not satisfied that the plaintiff has established that it is entitled to damages for any breaches of the agreement for lease. A plaintiff claiming substantial damages always bears the onus of proving its loss, even if the matter is not defended. The plaintiff has not discharged that onus in this case.

26. Mr Cleary has provided the Court with a draft set of orders. The Court will make declarations and orders substantially to the effect of draft orders 1 to 5, 8 and 10, save that it will be provided that the form of lease to be executed by the defendants will contain only two further options to renew, not three. Orders 6 and 7, which deal with damages and interest, will not be made. Order 9, which provides for the dismissal of the cross-claim, has already been made.

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Decision last updated: 30 August 2018