United Petroleum v Skorpos - [2012] SASC 151

SUPREME COURT OF SOUTH AUSTRALIA
(Civil)
UNITED PETROLEUM v SKORPOS & ANOR
[2012] SASC 151
Judgment of The Honourable Justice Stanley
12 September 2012
LANDLORD AND TENANT - LEASES AND TENANCY AGREEMENTS - TERM OF LEASE OR TENANCY - COMMENCEMENT
LANDLORD AND TENANT - TENANCIES OTHER THAN FOR A TERM - TENANCIES AT WILL - CREATION - ENTRY UNDER AGREEMENT FOR LEASE
Landlord and tennant dispute concerning three service stations at Parkholme, Henley Beach and Port Adelaide - parties executed three memoranda of lease with respect to these sites - each agreement proposed that the parties would enter into a five-year fixed term lease subject to two express conditions.
Whether sites were occupied pursuant to lease agreements or tenancies at will - if occupation was pursuant to lease agreements, from what dates were the agreements operative - defendants submitted that tennancy at will existed because the terms of the leases had yet to commence - in the alternative, defendants submitted that the rights and obligations of the parties prior to the commencement of the agreements were governed by tenancies at will.
Held: Rights and obligations of the parties were governed by the lease agreements at all relevant times - defendant's submission that occupancy was pursuant to tenancies at will was dependent upon operation of clauses in the lease agreements - for the relevant clauses to be operative, the lease agreements must have been operative - lease agreements were operative - reference in clauses to "term not commencing" designed to confine obligation to pay rent and outgoings prescribed by the lease - no obligation on plaintiff to pay rent or outgoings at any of the sites until conditions prescribed in lease agreements had been fulfilled.

LANDLORD AND TENANT - COVENANTS - AS TO BUILDING AND ALTERATIONS AND IMPROVEMENTS - AS TO ALTERATIONS AND IMPROVEMENTS
LANDLORD AND TENANT - COVENANTS - AS TO REPAIR - WHAT CONSTITUTES GOOD AND SUBSTANTIAL REPAIR
Lease agreements' clauses regarding return of property - lease agreements include provisions for the protection of the plaintiff - whether plaintiff liable to meet the costs of, or undertake, or pay damages in respect of works claimed by defendants to make good premises, or to deliver up premises in "good tenantable repair".
Held: Liability of plaintiff to meet the costs of effecting "good tenantable repair" - condition is not so onerous as to require tenant to restore the premises to the condition they were in when they were let.

LANDLORD AND TENANT - COVENANTS - AS TO REPAIR - OBLIGATION ON LESSOR
Whether the defendants were liable under the lease agreements to pay for the costs of repair works undertaken by plaintiff at Henley Beach site.
Held: Liability of the defendants is as set out by the lease agreement.

PROCEDURE - COSTS - INTERLOCUTORY PROCEEDINGS - COSTS IN THE CAUSE
Whether plaintiff entitled to order for costs in respect of injunction proceedings.
Held: Plaintiff entitled to order that defendants pay costs of injunction proceedings.
Real Property Act 1886 (SA) s 124; Evidence Act 1929 (SA) s 45A; Supreme Court Civil Rules 2006 (SA), referred to.
Progressive Mailing House Pty Ltd v Tabali Pty Ltd (1985) 157 CLR 17, applied.
Craig Hargraves Investments Pty Ltd (ACN 008 185 117) v Australian Business Insurance Advisors Pty Ltd (ACN 081 402 379) & Ors (2011) 111 SASR 506; Royal Botanic Gardens and Domain Trust v South Sydney City Council (2002) 240 CLR 45; Codelfa Constructions Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337; Kellow-Falkiners Motors Pty Ltd v Nimorakiotakis [2001] ANZ Conv R 230; Leask v Farlmist Pty Ltd [1998] NSWCA 283; Wincant Pty Ltd v South Australia (1997) 69 SASR 126; Graham v Markets Hotel Pty Ltd (1943) 67 CLR 567; Collins v Winter [1924] NZLR 449, discussed.
Commonwealth Life (Amalgamated) Assurance Ltd v Anderson (1945) 46 SR (NSW) 47; Wheeler v Murcer [1957] AC 416; Turner v York Motors (1951) 85 CLR 55; Wickham v Rice (1887) 4 WN (NSW) 9; Prudential Insurance Co Ltd v London Residuary Body [1992] 2 AC 386; Fitzgerald v Masters (1956) 95 CLR 420, considered.

UNITED PETROLEUM v SKORPOS & ANOR
[2012] SASC 151
Civil
Introduction

This is a landlord and tenant dispute.
It concerns three service stations at Parkholme, Henley Beach and Port Adelaide, owned by the defendants. The parties executed three memoranda of lease (“the lease agreements”) with respect to these sites on 18 August 2009. The lease agreements were in substantially similar terms. Each agreement proposed that the parties would enter into a five-year fixed term lease commencing on 1 September 2009 subject to two express conditions. I will return to those conditions shortly.
The plaintiff went into occupation of the Henley Beach site on 1 September 2009. It commenced trading from the site on 29 October 2009. It continues to trade from that site. Ultimately it paid the rent prescribed under the lease agreement from 1 September 2009, except for a period from 14 October 2009 to 28 October 2009, during which period it says it was unable to trade because of works it was undertaking on the site, which it alleges should have been undertaken by the defendants. The defendants claim an entitlement to rent for this period from 14 October 2009 to 28 October 2009. The claim is for an amount equal to the rent prescribed by the lease agreement. This claim is not made pursuant to the lease agreement of 18 August 2009 but pursuant to a tenancy at will.
The plaintiff commenced occupation of the Parkholme site either on 1 September 2009 or 23 October 2009. During the period from 1 September 2009 to 22 October 2009 the Parkholme site was occupied and operated by Neibren Pty Ltd (“Neibren”). Neibren was controlled by Mr Neil Butler. Neibren operated as a commission agent during this period. There is a dispute between the parties as to whether Neibren was the commission agent of the plaintiff or the defendants during this period. In any event, during this period Neibren was trading from the site. It continued to trade from the site from 23 October 2009 until 11 January 2010. Trading ceased on this date for reasons I will come to shortly.
On 22 December 2009 the plaintiff gave notice of termination of the Parkholme lease in accordance with its terms. It was required to vacate the premises in accordance with the lease by 21 January 2010. On 11 January 2010 the defendants re-entered the premises and purported to distrain for rent approximately 76,000 litres of fuel and 15,000 litres of LPG. These matters were the subject of an action for an injunction before Anderson J. His Honour made orders permitting the plaintiff to remove the fuel on certain terms.
The plaintiff did not pay rent in respect of the Parkholme site. The defendants claim an entitlement to rent for the period from 1 September 2009 to 11 January 2010. The claim is for an amount equal to the rent prescribed by the lease agreement. This claim is not made pursuant to the lease agreement of 18 August 2009 but pursuant to a tenancy at will.
The plaintiff did not trade from the Port Adelaide site. It took occupation of the premises from about 1 September 2009 for the purposes of undertaking a fit-out and branding of the premises in preparation for the commencement of trading. The plaintiff terminated the lease in relation to the Port Adelaide site by notice given on 22 December 2009. The plaintiff did not pay rent in respect to this site. The defendants claim an entitlement to rent for the period from 1 September 2009 to 22 January 2010. The claim is for an amount equal to the rent prescribed by the lease agreement. This claim is not made pursuant to the lease agreement of 18 August 2009 but pursuant to a tenancy at will.
The lease agreements include two provisions for the protection of the plaintiff. The first provides that prior to the commencement date of the lease the plaintiff would obtain an environmental site assessment (“ESA”) report relating to any contamination of the site.[1] The cost of the report was to be shared equally between the parties. The lease agreements permitted the plaintiff to terminate the lease at its sole discretion within 30 days of receipt of the report if it considered the site was unacceptably contaminated. The second provides that prior to the commencement date the plaintiff was to commission a tank and line integrity test to confirm the integrity of the underground fuel system.[2] Again the cost of the test was to be shared equally between the parties. The lease agreements required the defendants at their sole cost to effect any repairs required to the underground fuel system. The lease agreements enabled the plaintiff to elect not to enter into or continue with the lease if the defendants did not effect those repairs. Importantly, both provisions stipulated that, despite anything else in the agreements, the term of the lease would not commence until the report was given and the underground fuel system passed the test.
[1] Clause 16.
[2] Clause 18.
The plaintiff commissioned environmental assessment and tank and line testing reports in respect of each site. The defendants failed to pay half the cost of these reports. That occasioned some delay in the reports being commissioned. The tank and line testing reports were received by the plaintiff in October 2009. These reports identified some problems with tanks and lines at Parkholme and Port Adelaide. In respect of Henley Beach it reported problems with tank check valves. Draft environmental assessment reports were received by the plaintiff in December 2009. The draft report for Port Adelaide identified a contamination problem.
In these circumstances the plaintiff refused to pay rent at Parkholme and Port Adelaide in reliance upon the lease agreements. It eventually paid rent at Henley Beach with the exception of the period 14 to 28 October 2009.
The defendants acknowledge they are liable for one half of the costs of the reports but not the repairs that were subsequently undertaken, at the instigation of the plaintiff, at Henley Beach.
Once the plaintiff occupied the various sites, it undertook various works on each site in the nature of fitting out and branding the sites. The defendants claim that the plaintiff must make good the Parkholme and Port Adelaide premises. The plaintiff says that its obligation under the lease agreements merely is to return the sites in good tenantable repair. The Court heard extensive evidence directed to the nature and costs of this work.
The issues to be determined in the case are:
(1)whether the sites were occupied pursuant to the lease agreements and, if so, from what date? Or were the sites occupied by the plaintiff pursuant to tenancies at will? The answers to these questions will determine the liability of the plaintiff to the defendants for rent, outgoings and interest in respect of the three sites;
(2)the liability of the plaintiff to meet the costs of, or undertake, or pay damages in respect of the works claimed by the defendants to make good the premises or deliver up the premises in “good tenantable repair” as stipulated in the lease agreements, and the quantum of any costs or damages;
(3)whether the defendants are liable to the plaintiff for the costs of the repair works undertaken by the plaintiff at Henley Beach; and
(4)the entitlement of the plaintiff to an order for costs in respect of the injunction proceedings before Anderson J.
The evidence
Much of what occurred relevant to this matter can be objectively determined by reference to the documentary evidence. To the extent that there are inconsistencies in the oral evidence of the various witnesses from whom I heard, I am satisfied that this was not the result of any witness attempting to mislead the Court. On the contrary, I am satisfied that each of the witnesses from whom I heard endeavoured to give evidence honestly from the best of their recollection. In this context I observe that Mr Skorpos, at times, appeared to be arguing his case from the witness box. Nonetheless, I accept that he intended to convey the truth of the situation as he genuinely perceived it even if his perception was coloured by his belief in the righteousness of his position. To the extent that any of these findings depart from his view of the evidence, that should not be misunderstood as any reflection upon his honesty in giving his evidence.
Factual background
The plaintiff operates approximately 225 service stations across Australia, with an annual turnover of around $1.6 billion.
Mr and Mrs Skorpos are the registered proprietors of the Henley Beach, Port Adelaide and Parkholme sites. Mr Skorpos has been involved with service stations since 1972 when he leased Parkholme. The defendants purchased the Parkholme site in about 1977 or 1978. Mr Skorpos undertook considerable work on that service station to expand it to its present size. He purchased the Henley Beach site in the early 1990s. He established the Port Adelaide site after purchasing the vacant land in 1995 and opening a service station on that site in 1997.
It is unnecessary to recite the lengthy history of Mr Skorpos’ business dealings in relation to each of the three sites. It is sufficient to find that the defendants operated each of the sites until 13 January 2007. They then leased the premises to South Australian Farmers’ Fuels until the liquidation of that company in or about March 2009. On 22 April 2009 the defendants entered into a heads of agreement with the plaintiff. Its terms included the following:[3]
[3]    Exhibit P1 p 1.
United Petroleum Pty Ltd And OR Nominees (“United”) has agreed to lease from Michael Skorpos and Colleen Kaula Skorpos (“Skorpos”), and Skorpos has agreed to lease to United, the following service station sites:
(a)646 Marion Road, Parkholme, SA 5043 (“Parkholme”); and
(b)10 Henley Beach Road, Henley Beach, SA 5022 (“Henley Beach”); and
(c)Cnr Grand Junction and Endeavour Roads, Port Adelaide, SA 5015 (“Port Adelaide”).
The commercial terms (binding upon the parties) under which United undertake (sic) to lease (“Lease”) each of the above premises from Skorpos are agreed as follows:
1.Premises
The areas identified as a service station and convenience store located at:
(a)     Parkholme;
(b)     Henley Beach; and
(c)     Port Adelaide.
(“Premises”)
The Leases are to include all buildings and equipment at each of the above Premises except as referred to below. Reference to Premises includes a Premises or all three of the Premises (as the context requires).
2.Start Date
To be confirmed for all Premises after the results of the ESA and tank and line tests are known for each Premises. United to take possession of the sites as soon as can be practically arranged.
3.Term
Five (5) years for all Premises.
4.Further terms
Four (4) further terms of five (5) years.
5.Rental
The initial gross rental cumulatively for all Premises will be $390,000.00 per annum plus GST to be paid in monthly instalments in advance.
The cumulative gross rental of $390,000.00 per annum is to be apportioned between the Premises as follows:
(a)Henley Beach $90,000 per annum.
(b)Parkholme $150,000 per annum.
(c)Port Adelaide $150,000.00 per annum.
The rental will also include the equipment, referred to in paragraph 17 below.
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11.Dealing with the Premises
United needs Skorpos’ consent (which must not be unreasonably withheld) to assign, sublet or licence the Premises. United may, however, engage a commission agent or franchisee to operate the business without the consent of Skorpos.
United will be liable for any reasonable cost, expenses and duties in connection with the procurement and execution of any assignment or sublease, together with the Skorpos’ reasonable costs and expenses in obtaining such consent.
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13.     Maintenance
United must maintain the Premises, except for fair wear and tear or where structural repairs are required or capital costs are to be incurred. Skorpos must keep the Premises in a sound structural and watertight condition and ensure all services are working efficiently.
United must obtain Skorpos’ consent (which must not be unreasonably withheld) to make any structural alterations to the Premises. United may, however, erect it’s “get up” including price board and signage and must remove it at the end of the lease at its own cost. United agree that it is not to paint over the brickwork on the sites (unless already painted) on any of the properties. United however may cover the brickwork with cement sheeting (or other material) and paint that material.
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18.Condition precedent
Prior to United entering into Leases for the sites, United will obtain a tank and line test and an environmental assessment for each site from a qualified environmental consultant that must identify any contamination at the Premises (“ESA”). The cost of the environmental assessment and the tank and line test are to be shared equally between the parties.
United may elect not to enter into a Lease for a Premises or any of the Premises if United in its absolute discretion considers that the Premises is unacceptably contaminated.
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20.     Additional Clauses:
At the end of the Lease, United will obtain an ESA for the Premises (at the equally shared cost of the parties) stating that the Premises is suitable for ongoing use of the Premises as a service station, and must remediate (at its cost) the Premises until it can obtain such a report.
Skorpos must remove all disused equipment and other chattels, and workshop stock from the Premises prior to the start date including from workshop and office areas and in particular disused cars from the Parkholme Premises.
These terms are immediately legally binding, but the parties intend to negotiate and execute further, more detailed, lease documents containing additional terms which are not inconsistent with these terms. United will draft that further document and provide it to Skorpos for execution within 30 days of the date of this letter.
The heads of agreement were executed by David Szymczak, on behalf of the plaintiff, and by the defendants.
Thereafter negotiations proceeded between the parties concerning the terms of the lease agreements until the Skorpos’ left for overseas on or about 30 April. They returned from overseas on 11 August 2009. While they were overseas, negotiations continued by facsimile transmission. The plaintiff’s case is that negotiations had concluded by 7 July 2009 but there may have been further negotiations thereafter, including in the week prior to the execution of the lease agreements on 18 August 2009, after the Skorpos’ returned from overseas.
During the period after the execution of the heads of agreement, the Parkholme site continued to be operated by Neibren. From around mid 2009 Neibren paid rent to the defendants for Parkholme until at least 31 August 2009. There is an issue whether they paid rent beyond this date. Henley Beach did not trade during the same period. Port Adelaide continued to trade until 15 May 2009. Thereafter it did not trade prior to the execution of the lease agreement on 18 August 2009.
Before the lease agreements were executed, the plaintiff obtained quotes from the firm Leighton O’Brien Field Services Pty Ltd (“Leighton O’Brien”) for tank and line testing and sought quotes for the ESA reports. Mr Hayden Burge, the manager, Asset Management and Operations, of the plaintiff, sent emails to three contractors on 21 and 22 July 2009 inviting them to submit a scope of works and quote for the ESAs. He wrote:[4]
We will be entering into leases at the 3 sites below and will need benchmark ESAs to be attached to each lease. We will do the ESAs after the lease commencement. We are currently organising tank & line tests.
[4] Exhibit P1, p 24.

Between the execution of the lease agreements on 18 August and 1 September 2009 the plaintiff commissioned Leighton O’Brien to undertake the tank and line tests at the three sites. By letters dated 25 August 2009 the plaintiff asked the defendants to pay half the cost of the testing in the sum of $20,322.50.[5] The defendants did not pay. The failure of the defendants to pay, in accordance with the terms of the lease agreements, delayed the undertaking of the tests. Initially the plaintiff was unprepared to authorise the work until the defendants paid. Notwithstanding their failure to do so, the plaintiff eventually authorised the work on 4 September 2009. On 28 August 2009 the plaintiff received a quote from SMEC Australia Pty Ltd (“SMEC”) to undertake the ESAs.[6] The plaintiff authorised SMEC to undertake the ESAs on 11 September 2009.   The plaintiff received the Leighton O’Brien report in respect of Henley Beach on 9 October 2009. The tanks and lines passed the testing. The report stated, however, that tank check valves associated with the lines to three tanks were non-functional and recommended that those valves be serviced prior to commissioning. The plaintiff received the Leighton O’Brien report in respect of Parkholme on 12 October 2009. It reported that all but one tank and eight lines passed the testing. The plaintiff received the Leighton O’Brien report in respect of Port Adelaide on 12 October 2009. It reported that five tanks did not pass the testing and one tank could not be tested as it would not hold any pressure. The plaintiff received draft ESA reports in respect of Henley Beach and Parkholme on 9 December 2009. It received a draft ESA report in respect of Port Adelaide on 10 December 2009. Final reports from SMEC were not received by the plaintiff until 23 September 2010. The reports warned of the risk of significant contamination of the Port Adelaide site.
[5]    Exhibit P1, p 179.
[6]    Exhibit P1, p 132.
The parties were in dispute over repair works the plaintiff insisted were required by reason of the Leighton O’Brien reports. The defendants objected to the work that was undertaken at Henley Beach that required breaking the concrete covering the tanks to check the valves. They also refused to undertake certain works at Parkholme which they insisted were the responsibility of Mr Butler.
From shortly after 1 September 2009 the defendants demanded payment of rent. As I have said, the plaintiff refused to pay rent at Parkholme and Port Adelaide in reliance upon clauses 16 and 18 of the lease agreements. I will refer to the terms of these clauses shortly. Initially it also refused to pay rent at Henley Beach but, as a gesture directed to achieving a compromise between it and the defendants over the stand-off which developed between the parties over the problems with the tanks, lines and contamination at the various sites, it offered to pay rent at that site from 1 September 2009 except for the period from 14 October to 28 October 2009, because it said it was unable to trade during this period because of the need to undertake repair work. No compromise was agreed but the plaintiff nonetheless paid the rent for Henley Beach.
The lease agreements
The lease agreements contain the following terms relevant to the determination of the proceedings:[7]
[7]    Exhibit P1. Parkholme at p 29; Henley Beach at p 62, Port Adelaide at p 95.
1.Definitions and Interpretation
1.2     Definitions
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(3)     Commencement Date means the date stated in Item 5;
(4)     Contaminant means any substance, matter or thing on, in or under the Premises which case (sic) them to be:
(a)    unsafe or unfit for habitation or occupation by persons or animals;
(b)    degraded in their capacities to support plant life; or
(c)    otherwise environmentally degraded;
…
(12)   Landlord’s Property means the fixtures, fittings, equipment, plant, underground fuel tanks, lines, pumps, LPG Equipment, and other things that were on and in the Premises on the 23^rd April 2009 including, for the avoidance of doubt, all the items of equipment listed in Schedule 3.
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(16)   Outgoings means all costs incurred in providing services to the Premises including heating, cooling, air conditioning, waste collection, landscaping, fire protection and control and the costs of maintaining and repairing the Building, statutory rates, taxes (excluding land tax with the exception of any increase in Land Tax that results as a consequence in any improvements effected by the Tenant) and charges separately assessed in respect of the Premises. The Tenant will not be liable for costs associated with structural repairs or payments of a capital nature other than expressly required by this lease.
…
(22)   Services mean all utilities and Services in or to the Premises;
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(26)   Term means the Term stated in Item 4.
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2.    Term and Holding Over
2.1     Term
The Landlord leases the Premises to the Tenant for the Term.
2.2    Monthly Tenancy
If the Tenant continues to occupy the Premises after the Term with the Landlord’s consent then:
(1)     the Tenant does so as a monthly tenant on the same basis and at the same Rent as at the last day of the Term; and
(2)     either party may terminate the monthly tenancy by giving to the other 1 month’s notice expiring on any day.
3.     Rent and Rent Reviews
3.1     Rent
The Tenant must:
(1)     subject to clauses 3.1, 3.2 and 3.4, pay the Rent by equal monthly instalments in advance on the first day of each month;
…
4.     Outgoings.
4.1     Payment by Tenant of Outgoings
The Tenant must pay the Outgoings as and when they become due and payable, and within 30 days after the Landlord provides invoices for the Outgoings.
….
6.     Damage and Destruction
6.1Rent Reduction
If the Premises, the Building or the Landlord’s Property are damaged or destroyed in whole or in part, then from the date of the damage or destruction:
(1)the Rent and any other money payable to the Landlord under this Lease is reduced by a reasonable amount depending on the type and extent of damage or the distraction and impact on the Tenant’s use of the Premises;
(2)the covenants to repair are suspended,
until the Premises are fit for use or accessible.
6.2Landlord to Reinstate
If the Premises, the Building or the Landlord’s Property are damaged or destroyed the Landlord must promptly rebuild and reinstate the Premises, the Building or the Landlord’s Property (as the case may be) to substantially the same layout, design, elevations and specification as the Premises. The Landlord will use every endeavour to obtain planning and Building approval to do so.
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9.Use of the Premises
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9.5Alterations
The Tenant may at the cost and expense of the Tenant make any alterations, refurbishments or additions to the Landlord’s Equipment or the Premises, provided that it first obtains:
(1)     any necessary consent from any relevant government authority and complies with the relevant laws; and
(2)     the Landlord’s consent (which consent must not be unreasonably withheld) for any structural alterations to the Premises.
If the Tenant makes any alterations or replaces any of the Landlord’s Property in or about the Premises then the Tenant must be deliver the Landlord’s Property to a location in metropolitan Adelaide nominated by the Landlord.
In relation to clause 9, to avoid any doubt, the Tenant will not paint the cement render over any exposed brick surfaces on the Premises (unless already painted as at the Commencement Date). The Tenant, however, may cover the brickwork with compressed cement sheeting or other cladding and paint or cement render that cladding provided the Tenant does not bolt cam lock or drill into the brickwork.
…
10.     Maintenance and Repair by the Tenant
10.1Repair
(1)     the Tenant must:
(a)keep the Premises the Landlord’s Property and the Landlord’s Equipment (of which the Landlord’s pumping equipment is in poor condition) in reasonable repair and condition except for fair wear and tear including cathodic protection of the LPG Equipment and/or safety equipment; and
(b)fix any damage caused by the Tenant, the Tenant’s employees, the Tenant’s contractors, or the Tenant’s customers.
(2)     The Tenant is not obliged to carry out structural repairs or make payments of a capital nature or replace of any of the Landlord’s Property.
10.2   Cleaning
The Tenant must:
(1)     keep the Premises clean and tidy;
…
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13.     Landlord’s Obligations
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13.3   Quiet Enjoyment
The Landlord must allow the Tenant to occupy and use the Premises without undue interruption or disturbance. …
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13.4Maintenance of Services Landlord’s Property and Landlord’s Equipment
(1)     the Landlord must maintain, repair, replace and keep operational the Services and must make such alterations and improvements as may be required to the Services as are necessary from time to time to make them comply with relevant Australian standards….
…
(4)     the Landlord must repair and replace as necessary any part of the underground fuel system unless such repair or replacement is as a result of neglect or failure by the Tenant, the Tenant’s employees or contractors in fulfilling the Tenant’s obligations.
14.     Default and Termination
14.1    Default
The Tenant defaults under this lease if:
(1)     the Rent or any money payable by the Tenant is unpaid for 14 days;
(2)     the Tenant breaches any other Term of this Lease;
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14.2Forfeiture of Lease
If the Tenant defaults and does not remedy the default within 30 days of the Landlord serving written notice on the Tenant specifying the default and seeking rectification, the Landlord may do any one or more of the following:
(1)     re-enter and take possession of the Premises;
(2)     by notice to the Tenant, terminate this Lease;
(3)     exercise any of its other legal rights;
…
15.Termination of Term
15.1Tenant’s Obligations
Within 30 days after termination of this Lease, the Tenant:
(1)     must vacate the Premises and give them back to the Landlord in as good tenantable repair as at the Commencement Date or the Commencement Date of any prior Lease of which this Lease is a renewal, whichever is the earlier date;
(2)     can, at its option, remove the Tenant’s Property from the Premises or if required by the Landlord must require the Tenant’s Property from the Premises. If the Tenant leaves any of the Tenant’s Property in the Premises after the date 30 days after the date of Termination of this lease, it becomes the Landlord’s Property;
(3)     must repair any damage caused by removal of the Tenant’s Property and leave the Premises clean;
16    Environmental Report
16.1    Report
(1)     Prior to the Commencement Date, the Tenant will obtain an Environmental Site Assessment Report (“the Report”) from a qualified environment consultant that must identify the location, concentration and nature of any contamination at the Premises. The cost of the Report is to be shared equally between the parties. The Landlord must reimburse one-half of the GST-inclusive cost of the Report within 30 days from the date a tax invoice is provided to the Landlord. The Landlord must provide security suitable to the Tenant before the Tenant will arrange for the report.
(2)     The Tenant may Terminate the lease within 30 days of receiving the Report if the Tenant in its absolute discretion considers that the Premises are unacceptably contaminated.
…
(4)     Where the Report is not completed by the Commencement Date, the Landlord agrees that the Report will form the benchmark referred to in clause 16.1(4) from the date that the Report is completed an annexed to the Lease. The Landlord agrees to release and indemnify the Tenant against any Claim, action or damage suffered by the Landlord or any third party as a result of any Contaminants located on the Premises prior to the Report being completed and annexed to the Lease.
(5)     Despite anything else in this document, the Term will not commence until the Report is given to the Tenant and Item 5 of the Reference Schedule will be construed accordingly.
16.2    End of Term
(1)unless a Further Lease has been entered into under clause 17, subject to clause 16.2(2), at the expiry or sooner determination of the lease, the Tenant must, at the cost of the Tenant, give the Landlord a Further Report from an appropriate environmental consultant stating that the Premises are not contaminated beyond the level identified in the Report. The Tenant must carry out any necessary remediation works required to be undertaken (and) to obtain Further Report at its own cost.
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18    Tank and Line Integrity Testing
(1)The Tenant must commission a tank and line integrity test prior to the Commencement Date to confirm the integrity of the underground fuel system (“initial integrity test”). The Landlord must reimburse one-half of the GST-inclusive cost of the initial integrity test within 30 days from the date a tax invoice is provided to the Landlord. The Landlord must provide security suitable to the Tenant before the Tenant will arrange for the “initial integrity test”;
(2)if the underground fuel system does not pass the initial integrity test, the Landlord at its sole cost must effect repairs as required to the underground fuel system.
(3)the Tenant may elect to not enter into and/or continue with the lease for the Premises if the landlord does not effect required repairs to the underground fuel system.
(4)despite anything else in this document, the Term will not commence until the underground fuel system passes the initial integrity test and Item 5 of the Reference Schedule will be construed accordingly.
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19.    General[8]
[8]    This clause is clause 20 in the Henley Beach lease agreement.
19.1   Notices
(1)     In Writing
Any notice given under this lease must be in writing. ….
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19.4   Entire Understanding
This Lease
(1)     contains the entire agreement and understanding between the parties on everything between the parties on everything connected with the subject matter of this Lease; and
(2)     supersedes any prior agreement or understanding on anything connected with that subject matter.
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Reference Schedule
Item 1 Landlord   COLLEEN KOULA SKORPOS and MICHAEL SKORPOS … as Joint Tenants
Item 2 Tenant   UNITED PETROLEUM PTY LTD ACN 085 779 255 …
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Item 4 Term  Five (5) years fixed
Item 5 Commencement Date     September 1 2009
Item 6 Termination Date           August 31 2014
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Item 10 Permitted use               The Premises may be used as a service station, convenience store and workshop for the sale of fuel and motor vehicle products and services, operation of a workshop, grocery, newsagency or supermarket products and other items commonly associated with the operation of a convenience store.
Interpretation of the lease agreement
The ordinary rules for the construction of contracts apply to leases: Progressive Mailing House Pty Ltd v Tabali Pty Ltd.[9]
[9] (1985) 157 CLR 17 per Mason J at 29 (with whom Wilson, Deane and Dawson JJ agreed at 38; 51 and 56 respectively.
The purpose of construction of contracts is to ascertain, by reference to the words used, in the factual matrix in which the parties dealt with one another, what an objective person in the position of the parties would reasonably understand them to have intended.
This Court described the contemporary approach to the interpretation of contracts in Craig Hargraves Investments Pty Ltd (ACN 008 185 117 v Australian Business Insurance Advisors Pty Ltd (ACN 081 402 379)[10] as follows:[11]
[10] (2011) 111 SASR 506.
[11] (2011) 111 SASR 506 at 516 – 518 [46] – [52].
The contemporary approach is authoritatively outlined by Lord Hoffmann in Investors Compensation Scheme v West Bromwich Building Society:[12]
[12] [1998] 1 WLR 896 at 912-914.
I do not think that the fundamental change which has overtaken this branch of the law, particularly as a result of the speeches of Lord Wilberforce in Prenn v Simmonds [1971] 3 All ER 237 at 240–242, [1971] 1 WLR 1381 at 1384–1386 and Reardon Smith Line Ltd v Hansen-Tangen, Hansen-Tangen v Sanko Steamship Co [1976] 3 All ER 570, [1976] 1 WLR 989, is always sufficiently appreciated. The result has been, subject to one important exception, to assimilate the way in which such documents are interpreted by judges to the common sense principles by which any serious utterance would be interpreted in ordinary life. Almost all the old intellectual baggage of ‘legal’ interpretation has been discarded. The principles may be summarised as follows.
(1)    Interpretation is the ascertainment of the meaning which the document would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract.
(2)    The background was famously referred to by Lord Wilberforce as the ‘matrix of fact’, but this phrase is, if anything, an understated description of what the background may include. Subject to the requirement that it should have been reasonably available to the parties and to the exception to be mentioned next, it includes absolutely anything which would have affected the way in which the language of the document would have been understood by a reasonable man.
(3)    The law excludes from the admissible background the previous negotiations of the parties and their declarations of subjective intent. They are admissible only in an action for rectification. The law makes this distinction for reasons of practical policy and, in this respect only, legal interpretation differs from the way we would interpret utterances in ordinary life. The boundaries of this exception are in some respects unclear. But this is not the occasion on which to explore them.
(4)    The meaning which a document (or any other utterance) would convey to a reasonable man is not the same thing as the meaning of its words. The meaning of words is a matter of dictionaries and grammars; the meaning of the document is what the parties using those words against the relevant background would reasonably have been understood to mean. The background may not merely enable the reasonable man to choose between the possible meanings of words which are ambiguous but even (as occasionally happens in ordinary life) to conclude that the parties must, for whatever reason, have used the wrong words or syntax (see Mannai Investment Co Ltd v Eagle Star Life Assurance Co Ltd [1997] 3 All ER 352, [1997] 2 WLR 945.
(5)    The ‘rule’ that words should be given their ‘natural and ordinary meaning’ reflects the commonsense proposition that we do not easily accept that people have made linguistic mistakes, particularly in formal documents. On the other hand, if one would nevertheless conclude from the background that something must have gone wrong with the language, the law does not require judges to attribute to the parties an intention which they plainly could not have had. Lord Diplock made this point more vigorously when he said in Antaios Cia Naviera SA v Salen Rederierna AB, The Antaios [1984] 3 All ER 229 at 233, [1985] AC 191 at 201:
‘… if detailed semantic and syntactical analysis of words in a commercial contract is going to lead to a conclusion that flouts business common sense, it must be made to yield to business common sense.’
The principles outlined by Lord Hoffmann were succinctly summarised in BCCI v Ali[13] by Lord Bingham of Cornhill:[14]
[13] [2002] 1 AC 251.
[14] [2002] 1 AC 251 at 259.
To ascertain the intention of the parties the court reads the terms of the contract as a whole, giving the words used their natural and ordinary meaning in the context of the agreement, the parties’ relationship and all the relevant facts surrounding the transaction so far as known to the parties. To ascertain the parties’ intentions the court does not of course inquire into the parties’ subjective states of mind but makes an objective judgment based on the materials already identified.
In Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd[15] the High Court of Australia said:[16]
[15] (2004) 219 CLR 165.
[16] (2004) 219 CLR 165 at 179.
This Court … has recently reaffirmed the principle of objectivity by which the rights and liabilities of the parties to a contract are determined. It is not the subjective beliefs or understandings of the parties about their rights and liabilities that govern their contractual relations. What matters is what each party by words and conduct would have led a reasonable person in the position of the other party to believe. References to the common intention of the parties to a contract are to be understood as referring to what a reasonable person would understand by the language in which the parties have expressed their agreement. The meaning of the terms of a contractual document is to be determined by what a reasonable person would have understood them to mean. That, normally, requires consideration not only of the text, but also of the surrounding circumstances known to the parties, and the purpose and object of the transaction.[17]
[17] Affirmed in Byrnes & Anor v Kendle (2011) 243 CLR 253 at 284 [98].
(Footnote added)
These observations have been repeated in relation to the construction of commercial contracts. In Lake v Simmons[18] Viscount Sumner observed:[19]
[18] [1927] AC 487.
[19] [1927] AC 487 at 509.
Every one must agree that commercial contracts are to be interpreted with regard to the circumstances of commerce with which they deal, the language used by those who are parties to them, and the objects which they are intended to secure.
These words were drawn on in McCann v Switzerland Insurance Australia Ltd,[20] where Gleeson CJ observed:[21]
[20] (2000) 203 CLR 579.
[21] (2000) 203 CLR 579 at 589.
A policy of insurance, even one required by statute, is a commercial contract and should be given a businesslike interpretation. Interpreting a commercial document requires attention to the language used by the parties, the commercial circumstances which the document addresses, and the objects which it is intended to secure.
(Footnotes omitted)
In Pacific Carriers Ltd v BNP Paribas[22] the High Court stated the general principles in regard to the construction of commercial contracts in the following terms:[23]
The case provides a good example of the reason why the meaning of commercial documents is determined objectively: it was only the documents that spoke to Pacific. The construction of the letters of indemnity is to be determined by what a reasonable person in the position of Pacific would have understood them to mean. That requires consideration, not only of the text of the documents, but also the surrounding circumstances known to Pacific and BNP, and the purpose and object of the transaction. In Codelfa Constructions Pty Ltd v State Rail Authority of NSW, Mason J set out with evident approval the statement of Lord Wilberforce in Reardon Smith Line Ltd v Hansen‑Tangen:
In a commercial contract it is certainly right that the court should know the commercial purpose of the contract and this in turn presupposes knowledge of the genesis of the transaction, the background, the context, the market in which the parties are operating.
As Mr Justice Holmes of the US Supreme Court wrote extracurially:[24]
[P]arties may be bound by a contract to things which neither of them intended, and when one does not know of the other’s assent … [T]he making of a contract depends not on the agreement of two minds in one intention, but on the agreement of two sets of external signs, - not on the parties’ having meant the same thing but on their having said the same thing.
(Emphasis in original)
[22] (2004) 218 CLR 451.
[23] (2004) 218 CLR 451 at 461-462.
[24] Holmes, “The Path of the Law”, (1897) 10 Harvard Law Review 457 at 463-464 cited with approval in Byrnes & Anor v Kendle (2011) 243 CLR 253 at 285 [100].

This analysis of the relevant principles must be read subject to the High Court’s observation in Royal Botanic Gardens and Domain Trust v South Sydney City Council[25] that it was unnecessary to determine whether Lord Hoffman and Lord Bingham took a broader view of the admissible “background” than was taken in Codelfa[26] and that until that determination is made by the High Court, other Australian courts, if they discern any inconsistency with Codelfa should continue to follow Codelfa. The reference by the High Court in Royal Botanic Gardens[27] to Codelfa is to be understood as referring to the requirement, set out by Mason J, with the concurrence of Stephen and Wilson JJ, that it is essential to identify ambiguity in the language of the contract before the court may have regard to the surrounding circumstances and object of the transaction. Evidence of surrounding circumstances is not admissible to contradict the language of the contract when it has a plain meaning. Where the issue is which of two or more possible meanings is to be given to a contractual provision the court looks to the objective framework of facts within which the contract came into existence and to the parties’ presumed intention in this setting.
[25] (2002) 240 CLR 45 at 62 – 63 [39].
[26] Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337.
[27] (2002) 240 CLR 45.
Tenancy at will
The defendants submit that, in accordance with the express language of the lease agreements, the term of the lease had not commenced to run when the plaintiff went into occupation of the three sites in early September 2009. They submit that the terms of the lease agreements did not commence until, at the earliest, 9 December 2009 when the plaintiff received the environmental reports for the three sites. They rely for this submission on the terms of clause 16.1(5) and clause 18(4). They accept that the Parkholme and Port Adelaide leases were terminated on 22 December 2009. Accordingly, the defendants contend that the plaintiff was not occupying any of the sites pursuant to the lease agreements at least prior to 9 December 2009. In these circumstances, the defendants contend that the plaintiff was occupying the sites pursuant to tenancies at will.
A tenancy at will is created when a person occupies land as a tenant on the basis that the owner or the occupier may terminate the tenancy at any time. In a tenancy at will there is no agreement as to duration and usually no agreement as to payment of rent: Commonwealth Life (Amalgamated) Assurance Ltd v Anderson.[28]The legal theory of tenancy at will is that usually the tenancy at will is founded on an implied contract: Wheeler v Murcer.[29]Where an owner of land lets another person occupy the premises without having reached a concluded agreement for a lease, there is a tenancy at will which the parties may change into a periodic tenancy by the payment and acceptance of rent. A tenancy at will can be created where a person is in possession of land without any express contract, for example, while holding over during negotiations for an agreement for a lease: Turner v York Motors.[30]The tenancy at will continues while the parties continue in negotiation and unless or until they reach an agreement as to the terms on which the prospective tenant is to have possession under the proposed lease: Kellow-Faulkiners Motors Pty Ltd v Nimorakiotakis.[31]In Turner v Yorke Motors Ptd Ltd[32] Dixon J said:[33]
The first of these five views [that the defendants may have been tenants at will only] is based on the notion that the defendants went into possession of the premises provisionally pending agreement upon and the execution of a lease and that from beginning to end the defendant’s possession remained of this character so that no fixed or periodical term arose and the defendants held as tenants at will only. If an intending lessor lets the intending lessee into occupation of the premises in anticipation of an agreement for a lease or of a lease, simply so that he may temporarily occupy while they proceed to negotiate concerning the conditions upon which the intending tenant shall hold, it is of course true that in the meantime the intending lessee holds as a tenant at will only. It is not inconsistent with the intending lessee’s continuing so to hold that he pays the landowner some compensation for the use of the land and indeed if it is not intended that his occupation of land shall be gratuitous the owner may recover from him a quantum valebat for use and occupation. But the reservation and receipt of a periodical rent as such affords strong evidence of the creation of a periodical term. “Where parties enter under a mere agreement for a future lease they are tenants at will; and if rent is paid under the agreement, they become tenants from year to year, determinable on the execution of the lease contracted for, that being the primary contract”: per Littledale J in Hammerton v Stead. The case where the parties have not actually reached an agreement for a future lease depends upon the same principle, that is upon an implication from the receipt of a compensation for the use of the land, but the inference to be drawn from the circumstances may be less certain.
[28] (1945) 46 SR (NSW) 47.
[29] [1957] AC 416 at 427.
[30] (1951) 85 CLR 55 at 65 per Dixon J.
[31] [2001] ANZ Conv R 230 at [30].
[32] (1951) 85 CLR 55.
[33] (1951) 85 CLR 55 at 65.
A tenancy at will may also be created where a tenant holds over following the expiry of the term of a lease: Wickham v Rice.[34]
[34] (1887) 4 WN (NSW) 9.
A tenancy at will can also exist where a tenant occupies a property under a void lease: Prudential Insurance Co Ltd v London Residuary Body.[35]
[35] [1992] 2 AC 386.
The categories in which a tenancy at will can be implied are not closed.
Were the parties’ rights and obligations fixed by the lease agreements or by tenancies at will?
In my view the rights and obligations of the parties were governed by the lease agreements.
Each of the lease agreements must be construed as a whole. This enables the Court to reconcile any consistencies of expression in the words used in a natural and commonsense way: Fitzgerald v Masters.[36]
[36] (1956) 95 CLR 420 per McTiernann, Webb and Taylor JJ at 437.
The defendants contend that a tenancy at will existed because the term of the lease had yet to commence and, accordingly, the plaintiff’s occupation of the premises could not have been pursuant to the lease agreement. They submitted that, therefore, the plaintiff’s occupancy of the three sites was pursuant to tenancies at will.
This submission depended upon the operation of clauses 16.1(5) and 18(4) of the lease agreements.
Recognition of this fact exposes the flaw in the defendants’ argument.
The rights and obligations of the parties must be governed by the lease agreements in order for clauses 16.1(5) and 18(4) to operate.
This conclusion is inconsistent with the fundamental proposition underpinning the defendants’ submission. The defendants’ submission is predicated upon the proposition that the lease agreements were not operative because by reason of clauses 16.1(5) and 18(4) the term of the lease did not commence to operate until the conditions set out in those clauses had occurred. This analysis exposes the circularity of the defendants’ argument. They contend that the lease has not commenced by reason of the operation of these clauses of the lease. That cannot be correct.
The lease agreements and the rights and duties prescribed must exist and subsist in order for the conditions precedent in clauses 16.1(5) and 18(4) to operate. That is what occurred in this case.
For reasons I will develop, the operation of clauses 16.1(5) and 18(4) cannot have been intended to terminate or void the lease. Accordingly, those provisions must have been intended to operate in a more limited way.
In my view it is tolerably clear that where those clauses refer to the term not commencing the parties intended by that provision merely to confine the obligation to pay the rent and outgoings prescribed by clauses 3 and 4 to the term prescribed by clause 2 of the lease agreements. The language of the lease agreements is not so intractable as to preclude this construction. “Term” is defined in clause 1.2(26) to mean the term stated in item 4 of the Reference Schedule, namely, five years fixed. There is an obvious relationship between the provisions of clauses 2, 3 and 4. Clause 2.1 provides that the landlord leases the premises to the tenant for the Term. Clause 3 requires the tenant to pay the rent. Clause 4 requires the tenant to pay the outgoings. It is implicit that the payments required by clauses 3 and 4 need only be made during the currency of the Term. Accordingly, where clauses 16 and 18 refer to the Term not commencing in the circumstances prescribed, that expression can be construed as confining the obligation to pay the rent and outgoings which would otherwise be payable during the currency of the Term.
The purpose of clauses 16 and 18 reinforces this construction of the lease agreements. These clauses are included for the protection of the plaintiff. In the context of the commercial agreement being made, the work to be performed by these clauses is obvious. The plaintiff, in occupying the leased sites without the benefit of a pre-contractual due diligence exercise, required the assurance that the sites were not contaminated and the tanks and lines were operating in a condition fit for purpose. The terms of clauses 16 and 18 do not suggest that the failure to obtain the reports or to undertake the test, or any delay in either of these events occurring, would terminate or void the lease agreements. On the contrary, the terms of clause 18(2) provides that if the underground fuel system does not pass the initial integrity test, the landlord, at its sole cost, must effect repairs as required to the system. This strongly points to an interpretation of the agreement whereby the rights and obligations set out in the lease agreements operate when the underground fuel system does not pass the initial integrity test, notwithstanding that the term of the lease does not commence if the underground fuel system does not pass the initial integrity test.
This construction finds further support in the terms of clause 2.2 of the lease agreements. The parties there prescribe their respective rights and obligations during a period where the plaintiff continues to hold over following expiry of the lease agreements’ term. The fact that the parties did not agree any provision for the payment of rent by the plaintiff in an interim period prior to the commencement of the lease term, evidences their intention that, pursuant to the bargain they struck, there was no obligation on the plaintiff to pay rent or outgoings until such time as the conditions precedent prescribed by clauses 16 and 18 had been satisfied. Such a construction is consistent with the commercial purpose of the agreement and the parties’ express agreement that the lease agreements were entire agreements on everything connected with the subject matter of the lease.[37] By the terms of the lease agreement, read as a whole, the parties address exhaustively the commercial arrangement into which they have entered. This leaves no room for the implication of a tenancy at will.
[37] Clause 19.4 of the Parkholme and Port Adelaide lease agreements and clause 20.4 of the Henley Beach lease agreement.
In the alternative, if it is considered that the reference to the term not commencing in clauses 16.1(5) and 18(4) is susceptible of more than one possible meaning, I consider the surrounding circumstances support the construction I have given the lease agreements. Having regard to the genesis of the lease agreements, and the background and the context in which the parties were operating, including the heads of agreement of 22 April 2009, I am satisfied that the objective intention of the parties was that the obligation to pay rent and outgoings would not commence until the performance of the tests and the provision of the reports prescribed by clauses 16 and 18. Those provisions were included for the benefit of the plaintiff. The plaintiff was proposing to operate petrol stations from sites it had not previously occupied, the condition of which was not known by it. It was understandable it sought protections from the risk that the sites might prove unsuitable by reason of contamination or problems with tanks or lines. However, the failure to undertake the tests or provide the reports was not intended to render the lease agreements inoperative. On the contrary, the parties had expressly agreed that the lease agreements could be terminated at the election of the tenant in the specific circumstances prescribed by clauses 16.1(2) and 18(3). Until the lease agreements were terminated, the rights and obligations prescribed by the whole of the lease agreements would continue to obtain. Those rights included the right of the tenant to be relieved of the obligation to pay rent and outgoings until such time as the conditions precedent prescribed by clauses 16.1(5) and 18(4) had been satisfied.
The defendants relied upon Leask v Farlmist Pty Ltd,[38] a judgment of the New South Wales Court of Appeal. In that case, the appellant entered into negotiations with a real estate agent to lease premises for a shop selling cane products. This was a prohibited use under the council zoning regime. It was necessary to lodge a development application with the council. The agent represented to the appellant that this was pro forma and he would take care of it. The proposed lease had a three-year term. The appellant paid one month’s rent in advance and occupied the premises before the council consent had been obtained, in anticipation it would follow. The trial judge concluded that the parties had come to an arrangement that they would enter into the lease once council consent had been obtained. The appellant had occupied the premises before entering into the lease on this basis. It transpired that obtaining council approval was not straightforward. Some months passed with the appellant trading from the premises. Eventually council refused the development application. Before this occurred the respondent landlord had issued a letter of demand for unpaid rent. In response the appellant vacated the premises. The respondent landlord issued proceedings claiming damages for lost rent during the period of occupation and thereafter until a subsequent tenancy began. The trial judge found the appellant liable on the basis of a tenancy at will. The Court of Appeal, while allowing the appeal on a narrow ground, upheld the trial judge’s conclusion that the appellant occupied the shop premises pursuant to a tenancy at will. It did so in reliance upon the principle identified by Dixon J in Turner v York Motors Pty Ltd[39] set out above at [31].
[38] [1998] NSWCA 283.
[39] (1951) 85 CLR 55.
In my view Leask is distinguishable on its facts. In Leask the tenant entered into occupation of the premises in anticipation of the parties entering into a lease agreement. The circumstances of this case are different. The parties had entered into a binding lease agreement prior to the plaintiff occupying the sites. The rights and obligations of the parties in respect of the plaintiff’s occupation of the sites are to be decided by the terms of each lease agreement. There is no room for the operation of a tenancy at will.
It is not to the point that these terms might operate harshly on the defendants where they had permitted the plaintiff to occupy the premises before the reports were obtained. No doubt the defendants permitted this to occur in anticipation that the plaintiff would commence to pay rent and outgoings from the date stipulated in item 5 of the Reference Schedule. The subjective intentions or expectations of the defendants are irrelevant to the construction of the lease agreements.
It follows that the rights and obligations of the parties were governed by the lease agreements from the time of their execution on 18 August 2009. In these circumstances, there was no room for the operation of a tenancy at will. I so find.
Accordingly, I reject the defendants’ submission that in the period prior to 10 December 2009 the rights and obligations of the parties were governed by tenancies at will. This conclusion renders unnecessary any decision as to the terms of any tenancy at will.
Therefore, there was no obligation on the plaintiff to pay rent or outgoings at any of the sites, including Henley Beach, until the conditions prescribed in clauses 16 and 18 had been fulfilled. This did not occur until 9 December 2009 in the case of Henley Beach.[40] It did not occur at all in the case of Parkholme and Port Adelaide. Pursuant to clause 18(4) neither site had passed the initial integrity test before the leases ceased to operate. The Parkholme lease ceased to operate on 22 January 2010 at the latest, and the Port Adelaide lease terminated on that same day.
[40] The fulfilment of the conditions prescribed by clauses 16 and 18 in respect of Henley Beach by 9 December 2009 has no practical consequence as the plaintiff was paying the rent and outgoings for that site at that date.
This conclusion means there is no need for the plaintiff to rely upon the operation of clause 13.4 of the lease agreement to relieve it of the obligation to pay rent and outgoings for Henley Beach during the period 14 to 28 October 2009.
This conclusion also makes it unnecessary to decide whether Neibren was the commission agent of the plaintiff or the defendants from 1 September 2009. In any event, I am inclined to the view that it was the commission agent of the plaintiff. I reach this conclusion on the basis that notwithstanding the terms of the Commission Agency Agreement between the plaintiff and Neibren which expressly provides in schedule 3 that the Commencement Date of the agreement is 23 October 2009, the plaintiff effectively assumed control of the Parkholme site from 1 September 2009. I am satisfied Neibren did not pay rent to the defendants after 31 August 2009. The plaintiff was supplying the fuel for the site from 1 September 2009. From this date the site was being branded in the United colours.
Was the plaintiff under an obligation to make good the site premises or to deliver up the premises in “good tenantable repair”?
After the plaintiff took occupation of each of the sites it undertook work in the nature of fitting out and branding the sites. The defendants claim that the plaintiff must make good the Parkholme and Port Adelaide premises. They assert this obligation arises at common law. They submit that in the absence of any express covenant in a lease the common law implies that a tenant must use the premises in a tenant like manner; being an obligation to take proper care of the place and repair damage caused by the tenant, and deliver up the premises in the same condition as the tenant received them, allowing for reasonable wear and tear.
This submission is predicated upon the proposition that the lease agreements were not operating and the parties’ rights and obligations were fixed by a tenancy at will. This is because the lease agreements include express covenants in relation to the tenant giving the premises back to the landlord upon termination of the lease in as good tenantable repair as at the Commencement Date. The plaintiff seeks to rely upon the express covenant found in clause 15.1 of the lease agreements.
I reject the defendants’ submission. As I indicated earlier, a tenancy at will did not exist. By reason of my earlier conclusion that the parties’ rights and obligations are fixed by the terms of the lease agreements the obligation of the plaintiff was to vacate the sites and give them back to the defendants in as good tenantable repair as at the Commencement Date. To the extent there is a relevant distinction at law between the concepts of making good the premises and returning the premises in good tenantable repair, the plaintiff was under the latter obligation.

I am reinforced in this view by the terms of s 124 of the Real Property Act 1886 (SA) which provides:
124—Covenants to be implied in every lease against the lessee
In every lease there shall be implied the following covenants by the lessee with the lessor, that is to say:
(a) that he will pay the rent thereby reserved at the times therein mentioned, and all rates and taxes which may be payable in respect of the demised property, during the continuance of the lease;
(b) that he will keep and yield up the demised property in good and tenantable repair, reasonable wear and tear excepted.
This Court considered the meaning of the comparable obligation to yield up premises at the expiration of a lease in good and substantial repair and condition in Wincant Pty Ltd v South Australia.[41]In Wincant, Doyle CJ and Matheson J treated that obligation as consonant with an obligation to deliver up the premises in tenantable repair. Doyle CJ said that means that if the tenant elects not to remove fixtures, the landlord may require the tenant to do so. But the tenant is not obliged always to remove its fixtures. It means only that the tenant can be obliged to remove fixtures, the presence of which has the result that the premises are not in good and tenantable repair. Matheson J cited with approval the High Court’s judgment in Graham v Markets Hotel Pty Ltd[42] which was an appeal from the Full Court of the Supreme Court of New South Wales.[43] In Graham Starke J said that the state of repair required by a covenant to yield and deliver up premises well and substantially repaired depends primarily upon the words used.
[41] (1997) 69 SASR 126.
[42] (1943) 67 CLR 567.
[43] (1943) 43 SR (NSW) 98.
In this case the language of the covenant obliges the plaintiff to restore the leased premises to a state fit for the requirements of a future tenant likely to take the premises at the termination of the lease, consistent with the state of the premises at the commencement of the lease. It is unnecessary to decide conclusively whether this constitutes a different obligation from that for which the defendants contend. Whatever may be the content of the obligation to make good the premises, the content of the obligation to give the premises back in good tenantable repair is not so onerous as to require the tenant to restore the premises to the condition they were in when they were let.
The requirement to return the premises in a state consistent with the state of the premises at the Commencement Date presents two difficulties. The first is a difficulty of construction and application of the lease agreements. For the reasons already explained, the term of the lease had not commenced when the plaintiff gave up occupation of the Parkholme and Port Adelaide sites, by reason of the operation of clauses 16 and 18. The second is a factual difficulty. The plaintiff contends that particular alterations at Parkholme, the subject of the defendants’ claim, had occurred prior to it taking occupation.
The first difficulty can be disposed of shortly.
Clause 15.1 relevantly provides:
Within 30 days after termination of this Lease, the Tenant:
(1) must vacate the Premises and give them back to the Landlord in as good tenantable repair as at the Commencement Date or the Commencement Date of any prior Lease of which this Lease is a renewal, whichever is the earlier date …
The “Commencement Date” is defined in clause 1.2(3) to mean the date stated in item 5. This is a reference to item 5 of the Reference Schedule. Item 5 provides that the Commencement Date is 1 September 2009. I am satisfied that this is the relevant date for the purposes of determining the requirement to return the premises in as good tenantable repair as they were at the Commencement Date (i.e. 1 September 2009). In my view it is not to the point, for the purposes of the operation of clause 15, that the term of the lease had yet to commence by reason of the operation of clauses 16 and 18. The issue, and for that matter the subject matter of clause 15 on the one hand and clauses 16 and 18 on the other hand, are different if related.
I will address the second difficulty in the context of addressing each of the defendants’ claims.
Parkholme
I address each of the defendants’ claims as follows:
The sum of $97.09 inclusive of GST for an LPG cathotic protection survey for the period 1 September 2009 to 25 December 2009.
I do not allow this claim.
Mr Skorpos gave evidence the claim related to the plaintiff’s proportion of the cost of a cathotic protection survey for that period. The claim does not relate to any obligation arising pursuant to clause 15.1, although I note it arguably is an obligation arising under clause 10.1. In any event, no invoice for the survey is in evidence, nor any receipt in respect of payment for such a survey.
The sum of $316 to replace the damaged dip caps and fitting allegedly damaged by the plaintiff. The claim relates to four dip cap units at $72 per unit.
I allow this claim.
Mr Skorpos gave evidence that the caps were damaged in the process of the plaintiff attempting to recover the fuel which had been distrained for rent. I accept his evidence.
The sum of $52.50 in travel time to acquire caps and fittings.
I do not allow this claim.
The claim is for Mr Skorpos’ costs by way of travel time to acquire the replacement caps and fittings. I do not consider this claim is reasonable.
The sum of $260.50 in labour to fit the dip cap units.
I do not allow the claim on the same basis as the previous claim.
The sum of $3,896 to repair and replace the display fridge and cut pipe and electrical wiring.
This claim is no longer pursued by the defendants.
The sum of $1,980 to refit the ice fridge, repair and replace and cut pipes and electrical.
I allow this claim.
Liability for this claim is admitted by the plaintiff.
The sum of $3,645.40 to supply and install display shelving on the back wall behind the console area.
I do not allow this claim.
The only evidence is a quotation from John Arnold shop fitters.[44] Mr Skorpos did not give evidence in relation to this matter. The claim runs contrary to Mr Saleh’s evidence that the plaintiff did not undertake any work inside the shop. I accept Mr Saleh’s evidence as truthful.
[44] Exhibit P4 p 1004.
The sum of $14,707 to remove and dispose of all of the tiles and clean the face bricks and replace with neutral tiles:
(a) to remove and replace existing tiles to brick face;
(b)to remove existing panel and studs off brick face;
(c)silicone sealant to a wall joint;
(d)to remove panel and studs from frozen food fridge in sales area;
(e)to remove and replace floor in console area;
(f)to remove stud walls in sales area;
(g)remove studs in wall in console area;
(h)replace mouldings on fridges.
I allow this claim in part.
The claim concerns work in various parts of the shop. The first part of the shop is the area known as Ali’s Coffee Shop. The plaintiff concedes that work was done in Ali’s Coffee Shop while it was in occupation of the premises which was in breach of clause 9.5 of the lease agreement. It accepts its liability to undertake this repair work. There is a dispute as to the nature of the work and the cost. I will return to this. The claim also concerns work that was done around the console area in the shop and some panelling work which was done around a frozen food fridge. This work was done by Mr Muhlbach. Mr Butler gave evidence that the work performed by Mr Muhlbach placing panelling around the frozen food fridge occurred some time in August or September 2009.[45] The work performed by Mr Muhlbach removing the floor in the console area occurred around July / August 2009.[46]
[45] T 171.
[46] T 172.
The plaintiff admits its liability to repair the walls in Ali’s Coffee Shop. The claim is to re-tile those walls. In my view, that claim cannot be justified. While the brick walls cannot be restored to their state at the Commencement Date, I do not consider that it is reasonable to require the plaintiff to bear the costs of retiling. The existing tiles which were fixed to the wall must be removed, and that process will damage the brick wall. A portion of that wall is currently clad in gyprock and I am satisfied on the evidence that that gyprock was in place at the Commencement Date. In my view, the obligation to give up the premises in good tenantable repair will be fulfilled if the balance of the walls in Ali’s coffee shop is covered in gyprock and painted. There are two quotes for this work from A & M Painting.[47] They total $2,960 (GST inclusive). Mr Baroutas, the principal of A & M Painting, gave evidence that there may be a further additional cost associated with making good, work required following the removal of a stud wall at the western end of Ali’s Coffee Shop.[48] I would allow a further $220 (GST inclusive) for this work. Mr Tiani was called to give evidence by the defendants. He gave evidence of a quote for the re-tiling of Ali’s Coffee Shop.[49] For the reasons set out above, I do not consider this appropriate. Accordingly, I have not relied on his evidence on this matter.
[47] Exhibit P4 p 106 and Exhibit P6.
[48] T 543.
[49] T 409.
I am satisfied that Mr Muhlbach performed work in relation to panelling around the frozen food fridge during the period subsequent to the Commencement Date. There is a quote from Mr Muhlbach to undertake this work in the sum of $750.[50] There is a competing quote from Mr Tiani in the sum of $1,945.[51] Mr Tiani, in cross-examination, conceded that he had built into the quote an amount to reflect make good work that might be required once the panelling was removed.[52] This amounted to $745. I am satisfied that such make good work is not required. I did not hear directly from Mr Muhlbach. I prefer the evidence of Mr Tiani as to the cost of this work. Accordingly I would allow the claim to remove the panelling and studs in the sum of $1,200 plus GST. I am not satisfied that the work performed by Mr Muhlbach in the console area did occur after the Commencement Date. Accordingly, I would reject the rest of the claim. Accordingly, the final total for this claim which I am prepared to allow is $4,500.
A claim for $1,100 to clean the upstairs area and offices, the console and the sales areas, the display cool room, the freezer and the console area north.
[50] Exhibit P9.
[51] Exhibit P4, p 1007.
[52] T 419.
I allow this claim.
The cost of cleaning is evidenced by an invoice from VIP Commercial Services.[53] The plaintiff says that the shop was clean at the time of termination as a state of cleanliness was required for trade. Further, it says that it was denied the opportunity to undertake any cleaning by reason of the defendants’ re-entry on 11 January 2010. I am satisfied that the premises did require cleaning. The fact that the plaintiff was deprived of the opportunity to undertake that cleaning is not to the point. The cost would still have been incurred.
[53] Exhibit P4 p 735.
The sum of $660 to clean all of the windows inside and out.
I would allow this claim on the same basis as the previous claim.
A claim for $1,870 to paint over the plaintiff’s colours on the canopy columns.
I do not allow this claim.
The basis of this claim goes to the issue of the content of the obligation to return the premises in good tenantable repair. On the basis already developed earlier in these reasons, the covenant to return the premises in good tenantable repair obliges the plaintiff to restore the leased premises to a state fit for the requirements of a future tenant likely to take the premises at the termination of the lease, consistent with the state of the premises at the commencement of the lease. That does not mean that the premises must be repainted so that the premises have the precise appearance they enjoyed at the Commencement Date. The premises were as tenantable at the termination of the lease as at the Commencement Date of the lease with respect to the condition of the canopy. Any new tenant may wish to repaint the canopy in its own brand colours, but that does not impose any obligation on the plaintiff to re-paint or to meet the cost of repainting the canopy.
A claim in the sum of $1,431.35 to supply and replace the pump and product identification and numbers.
I do not allow this claim.
I accept Mr Skorpos’ evidence that the pump and product identification and numbers were missing after the defendants re-entered the premises. However, Mr Butler gave evidence that at the time of the re-entry he had not removed any product identification or numbers from the pumps. I accept his evidence. I suspect that these items may have been lost due to vandalism. In any event, the defendants carry the onus of proving these claims. I am not satisfied the onus has been discharged.
A claim in the sum of $941.16 to supply and replace two automatic door sensors.
I do not allow this claim.
I do not allow this claim for the same reason I rejected the previous claim. Mr Butler gave evidence that he had not removed any door sensors. I accept this evidence. I accept Mr Skorpos’ evidence that they were missing but I am not satisfied that this had occurred prior to the termination of the lease.
A claim in the sum of $335 to supply large rubbish bin and dumping.
I allow this claim.
The claim was conceded by the plaintiff.
TOTAL: $8,891.00.
Port Adelaide
The sum of $15,400 to paint over the plaintiff’s colours inside and out including sales area, canopy and fascias.
I do not allow this claim.
I would not allow this claim on the same basis I would not allow the claim for re-painting the canopy at Parkholme. The obligation imposed on the plaintiff by the terms of clause 15.1 to return the premises in good tenantable repair does not require repainting.
The sum of $60,434 to replace the advertising light boxes and curved moulded pearl special Perspex advertising panels inside sales area, on top of brick walls, above freezer, above ice fridge, above cooler and surrounding walls and also outside above windows and surrounds.
I allow this claim in part.
The plaintiff conceded a liability for most of this work in the sum of $36,850. It accepted that it was necessary to return the premises with the light boxes in situ, alternatively, to compensate the defendants for the reasonable cost of replacing those light boxes. The Court heard from two witnesses in relation to the costs of this exercise. Both witnesses were called by the defendant. Mr Corey Armstrong of Infinity Signs provided a quote for $36,850.[54] Ms Julie Rochester of Sign Concepts provided a quote for $60,434.[55] Ms Rochester provided her quote after visiting the site. Mr Armstrong provided his quote from photographs without visiting the site. Part of the explanation for the difference in price lay in Ms Rochester’s preference for superior standards of finish and the use of galvanised steel in the boxing. Her quote also allowed for the moulding of the lights so that they curved and were folded underneath. In my view, these costs are excessive. They would involve imposing on the plaintiff a cost to provide lighting which was superior in kind and quality to the lights which existed at the Commencement Date. Accordingly, I approach the assessment on the basis of a preference for the approach of Mr Armstrong over that of Ms Rochester. However, I would allow additional costs for the supply of graphics, which Mr Armstrong estimated would cost $6,000 plus GST.[56] I would also make a further allowance for the cost of removing melamine panelling and the fixing of the light boxes on that site which Mr Armstrong had not allowed for in his quote. Doing the best I can, I would allow an extra $2,000 plus GST for this. Accordingly, I would allow the sum of $45,650.
The sum of $3,018.40 for electrical to replace advertising light boxes and pearl special Perspex advertising panels above all front windows and surrounding corner under canopy.
[54] Exhibit P4 p 1015.
[55] Exhibit P4 p 722.
[56] T 443.
I allow this claim in part.
The defendants obtained a quote in the above amount from Andrew Smith of Electrical Laser.[57] There was no evidence led in relation to this matter. The plaintiff would allow $1,000 for the installation by an electrician. I would allow this amount.
[57] Exhibit P4 p 1011.
The sum of $14,927 to:
(a)   remove and dispose of the panelling above or outside front window;
(b)   remove panelling and stud wall of brick face left hand side inside building;
(c)   remove panelling above fridges, tile and make good.
I allow this claim in part.
The defendants obtained a quote from Mr Tiani. He provided a quote to remove gyprock panelling on the interior walls of the shop and to supply and fix tiling in lieu thereof and to remove panelling above the fridges in the shop. He also provided a quote to remove panelling above the windows and on the front external wall of the service station and make that good.[58] The quote to remove the panelling above the fridges and make good concerned an area 50 metres in length. The quote for the removal of panelling above the window on the external wall of the service station was for an area of 30 metres in length.
[58] Exhibit P4 p 1014.
I am satisfied that the work set out in the quotes for removal of the panelling above the window on the external wall and making good that area are justified. However, the actual area is not 30 metres but 18 metres. The quote for this work was $1,200. I would allow $720 plus GST for this part of the claim. I am also satisfied that the removal of the panelling above the fridges and making good this area is warranted. However, the quote was for 50 metres when the true area is 34 metres. The quote that was given for this work was $1,800. I would allow $1,224 plus GST for this part of the claim. The rest of the work quoted for concerned the removal of panelling on the interior walls of the shop and its replacement with tiles. I reject this claim. The gyprock panelling in place is perfectly acceptable. It is not, however, to the taste of Mr Skorpos. The plaintiff fixed the gyprock panelling to exposed brick walls. In my view, the obligation to return the premises in good tenantable repair does not require the removal of the gyprock panelling and its replacement with tiles. The defendants submitted that this work was required by the terms of clause 9.5 of the lease agreement. In particular, they relied upon the requirement that the landlord’s consent be obtained for any structural alterations to the premises, which they said had not been obtained, and the following words:
In relation to clause 9, to avoid any doubt, the Tenant will not paint or cement render over any exposed brick surfaces on the premises (unless already painted as at the Commencement Date). The Tenant, however, may cover the brickwork with compressed cement sheeting or other cladding and paint or cement render that cladding provided the Tenant does not bolt cam lock or drill into the brickwork.
I am not satisfied that the fixing of gyprock panels to the walls constitutes “structural alterations to the premises”.
In Collins v Winter[59] Sim J considered that the phrase “structural alteration” generally means building work done to the fabric of a building and that an improvement for the more convenient use of the building which did not involve any alteration in the structure of the building or its fabric is not a structural alteration.
[59] [1924] NZLR 449.
In my view the reference to “structural alterations” in clause 9.5(2) of the lease agreement is to be understood in its context as a reference to building work which would alter the structure of the building such as the knocking out of a wall or the insertion of a door or window into a wall, or the addition of a room. I do not consider that the fixing of gyprock cladding to a wall constitutes a structural alteration. Accordingly, the defendants’ consent was not required for that work. In any event, even if it was considered to constitute a structural alteration, an exception is made within the terms of clause 9.5 for covering brickwork with compressed cement sheeting or other cladding provided the tenant does not bolt, cam lock or drill into the brick work for that purpose. That did not occur here. It follows that the plaintiff was entitled to undertake the work that it did. It is not liable for the removal of the gyprock panelling and the re-tiling of the walls. Accordingly, I would not allow for that part of the claim. In the circumstances I would allow the sum of $2,138.40.
The sum of $3,083.49 to supply and replace all pump identification product and pump numbers on columns and replace double-sided advertising panels in front of pump island.

I allow this claim in part.
There was little evidence in relation to this claim. There is a quote for the work.[60] The plaintiff submitted that the existing pump identification product and pump numbers on columns are all that was there when it took possession of the site. I so find. It accepts liability for the replacement of three double-sided advertising panels. That is all I am prepared to allow. I would allow the sum of $699.81 by adjusting the quote which was for four panels and bolts and nuts.
The sum of $3,135 to transport and erect large identification sign and price board and reconnect electrical.
[60] Exhibit P4 p 1013.
I allow this claim.
The claim is conceded by the plaintiff.
The sum of $550 to clean inside sales area and console area and offices.
I allow this claim.
The claim is conceded by the plaintiff.
The sum of $220 to clean windows inside and out.
I allow this claim.
The claim is conceded by the plaintiff.
The sum of $335 to supply large rubbish bin and subsequent dumping.
I allow this claim.
The claim is conceded by the plaintiff.
TOTAL: $53,728.21.
Henley Beach
There was also a claim by the defendant for $375 for the replacement of the automatic door sensor at Henley Beach as a result of water damage. This was conceded by the plaintiff.[61]
[61] T 57.
Plaintiff’s claim against the defendants for the costs of works at Henley Beach
The plaintiff claims an entitlement to the sum of $16,450.50 expended by it in engaging the firm Petrol Services Australia Pty Ltd (PSA) to undertake work on tank and line repairs at Henley Beach in October and early November 2009. The plaintiff submits that the defendants are liable to meet these costs pursuant to clause 13.4 of the Henley Beach lease agreement. The plaintiff submits that where the landlord failed to effect repairs to the tanks and lines as required by clause 13.4, thereby requiring the plaintiff to undertake those repairs, the defendants are liable to meet the costs incurred by the plaintiff.
The nature of the work undertaken is set out in the invoice to the plaintiff from PSA of 9 November 2009.[62] The scope of works involved the supply of labour and materials to install tank identification markers; the conversion of one storage tank from Bio-Diesel to Premium 100, which required a flushing of the tank; repairing air detects in two pumps, checking bypass valves in four pumps; and replacement of those units; replacing two processor boards; replacing two relay boards; and the calibration of pumps. This work involved cutting concrete over a tank in an area of three by two metres, and the removal and the disposal of the concrete. This was necessary to locate the two tank valves, to remove and clean poppets and test the operation.
[62] Exhibit P2 p 315.
The defendants deny liability for this cost. The defendants submit that the work was unnecessary. Further, they complain that it was undertaken without their permission.
In addition, the defendants deny liability for this work on the basis that no liability could arise under the lease agreement because it did not apply. For the reasons already explained, I reject this submission. Liability for the cost of this work is to be determined by reference to the terms of the Henley Beach lease agreement.
Clause 13.4 imposes an obligation on the defendants to maintain, repair, replace and keep operational the services. Services are defined in clause 1.2(22) to mean all utilities and services in or to the premises. In addition, the defendants were obliged to repair and replace as necessary, any part of the underground fuel system, unless such repair or replacement resulted from neglect or failure by the plaintiff or the plaintiff’s employees or contractors, in fulfilling its obligation.
I am satisfied that the defendants were obliged by the terms of clause 13.4 to maintain the underground fuel system and to repair and replace any parts of that system when required. I am further satisfied that to the extent repair and replacement of the parts of the underground fuel system were necessary in this instance, such repair or replacement was not a result of any neglect or failure by the plaintiff, its employees or contractors.
I am further satisfied that where the defendants failed to meet their obligations under the lease agreement, they are liable for any costs incurred by the plaintiff in effecting any necessary repairs the defendants were required to perform pursuant to clause 13.4.
Accordingly, the issue is whether it has been proved the work undertaken by PSA was necessary.
The plaintiff submits that from the time it commenced occupation at Henley Beach in early September 2009 it experienced regular problems with fuel lines and tanks at that site. While it could trade from the site, there were regular problems, disruptions and an inability to sell certain products. It alleges that the defendants failed to remedy all of these operational issues despite its complaints and requests to the defendant throughout September and early October 2009. As a result, the plaintiff engaged its own contractor, PSA, to undertake the work necessary to rectify the problems with the lines and tanks.
The defendants contend the work undertaken by PSA was unnecessary. They submit there was no need to cut the concrete to expose the valves. They submit the pumps did not work because there was not any fuel in the tank supplying those pumps. There had not been any problem with the lines or the tanks when the Henley Beach site had been trading earlier in 2009 before the plaintiff took possession of the site. The defendants deny any request by the plaintiff to undertake the works performed by PSA. On the contrary, Mr Skorpos says he was taken completely by surprise when he discovered the work being performed at the site.
No evidence was called by the plaintiff from any officer or employee of PSA or any other expert to prove the works undertaken by PSA were necessary because of defects in the operation of the tanks or lines at Henley Beach.
The Leighton O’Brien report does not prove the works undertaken by PSA were necessary for this purpose. The Leighton O’Brien report was admitted for a limited purpose, namely, as evidence of the fact of the receipt of the report not as evidence of the truth of the opinions contained therein. This occurred in circumstances where the author of the report was not called to give evidence. As the report relevantly concerned matters of opinion rather than fact, I was not prepared to admit it as a business record, having regard to the terms of s 45A(2) of the Evidence Act 1929 (SA), given the failure to call the author of the document. Accordingly, I am not prepared to rely upon the Leighton O’Brien report as proof that the works undertaken at Henley Beach by PSA were necessary except in one respect which I will return to shortly.
It is the plaintiff who bears the onus of proving its claim.
In the circumstances, the plaintiff has failed to prove the necessity for this work. However, that is not the end of the matter.
Clause 18(1) of the lease agreement obliged the plaintiff to commission a tank and line integrity test prior to the Commencement Date to confirm the integrity of the underground fuel system. As I have noted, the plaintiff commissioned the firm Leighton O’Brien to undertake this work. Clause 18(2) provides that if the underground fuel system did not pass the initial integrity test, the defendants, at their sole cost, had to effect repairs as required to the underground fuel system. In my view, the terms of clause 18(1) and (2) obliged the defendants to effect repairs as required by the terms of the initial integrity test report at their sole cost. Accordingly, to the extent that the Leighton O’Brien report required the PSA work to be performed, I consider the defendants are liable to meet that cost.
While the Leighton O’Brien report was not admitted as proof of the contents of the opinions contained therein, for the purposes of the operation of clause 18(2), it was unnecessary to prove the truth of the opinions contained in the Leighton O’Brien report. By its terms clause 18(2) required the landlord at its sole cost to effect the repairs identified as being required in the initial integrity test report. Accordingly, the receipt of the Leighton O’Brien report into evidence on the limited basis referred to earlier in these reasons forms a sufficient evidentiary foundation for this finding.
The Leighton O’Brien report in relation to Henley Beach of 9 October 2009 found that all tanks and lines passed the test.[63] It recommended, however, that tank check valves associated with certain lines be serviced prior to commissioning. Those lines were diesel tank 3 to pump 1 and 2, PULP tank 2 to pump 10 and 11, ULP tank 1 to pump 10 and 11, and ULP tank 1 to pump 6 and 7.
[63] Exhibit P2 p 212.
The report found non-functioning tank check valves in relation to ULP tank 1 to pump 10 and 11, ULP tank 1 to pump 6 and 7, diesel tank 3 to pump 1 and 2, and PULP tank 2 to pump 1 and 2.
I cannot reconcile that last finding in relation to PULP tank 2 to pump 1 and 2 with the recommendations which appear to relate not to pump 1 and 2 but to pump 10 and 11, but in any event, I am satisfied that the Leighton O’Brien report identified that the Henley Beach site had to that extent failed the initial tank and line integrity test. It follows that the defendants, at their sole cost, were obliged to effect repairs as required in accordance with the terms of the Leighton O’Brien report.
A consideration of the terms of the PSA invoice indicate that the cost of the work required for the testing and replacement of the tank valves was $4,630 plus GST.
No question arises as to the failure of the defendants to approve this work. The defendants were obligated to undertake this work at their sole cost. Whether it commissioned the performance of the work or the plaintiff did is irrelevant to the issue of who must bear the costs of that work.
I am satisfied that the defendants are liable to the plaintiff in this amount, namely $5,093. Otherwise the plaintiff’s claim is dismissed.
LPG rebate
The plaintiff made a claim for an LPG rent rebate at Henley Beach. The defendants acknowledge the entitlement of the plaintiff to its claim in the sum of $491.80.
The entitlement of the plaintiff to an order for costs in respect of the injunction proceedings before Anderson J
The plaintiff seeks an order in its favour for the costs of and incidental to the injunction proceedings conducted before Anderson J on 13 and 15 January 2010. It submits that the quantum of any costs order should be a matter for the taxing master.
The defendants oppose any order as to costs.
In my view the plaintiff is entitled to an order for costs.
The plaintiff is entitled to an order for costs because the defendants had no right to distrain for rent.
For the reasons I have explained, according to the terms of the Parkholme lease agreement, the plaintiff was not required to pay rent or outgoings as at 11 January 2010 or any time prior thereto. There being no default under the lease agreement, there was no right in the defendants to distrain.
I am satisfied it is appropriate to make an order that the costs be taxed.
Cost of reports
The defendants concede their liability pursuant to the lease agreements to pay one half of the costs of the Leighton O’Brien and SMEC reports. Those costs are:-

HenleyBeach:

Leighton O’Brien

$4,604.50.

SMEC

$9,107.03.

Parkholme:

Leighton O’Brien

$8,020.50.

SMEC

$8,150.00.

Port Adelaide:

Leighton O’Brien

$4,604.50.

SMEC

$9,107.03.

Total Cost of Reports:

$43,593.56.

Interest

Interest on the amounts owing is to be calculated at the rates prescribed by the Supreme Court Rules 2006 (SA).
The defendants’ entitlement to interest in respect of the good tenantable repair claims are to be calculated from the date of filing of the set-off and cross-claim, namely, 16 April 2010. Interest on the $375 owing to the defendants for the costs of the door sensors at Henley Beach paid by the defendants is to be calculated from the date of payment in October 2009.
The plaintiff’s entitlement to interest in respect of the costs of the reports is to be calculated from the date of payment in October 2009. The plaintiff’s entitlement to interest in respect of the payments to which it is entitled under the terms of the lease agreements for the costs of works at Henley Beach is to be calculated from the date these sums were paid, namely, November 2009. The plaintiff’s entitlement to interest in respect of the LPG rebate is to be calculated from the date of the statement of claim, namely, 25 March 2010.
Conclusion
Accordingly, the plaintiff is entitled to damages as follows:

Costs of work at HenleyBeach:

$5,093.00.

Interest on this sum:

$1,496.10.

LPG rebate:

$491.80.

Interest on this sum:

$123.97.

Costs of reports:

$43,593.56.

Interest on this sum:

$12,805.55.

TOTAL:

$63,603.98.

The defendants are entitled to damages as follows:

Costs of good tenantable repair Parkholme:

$8,891.00.

Costs of good tenantable repair Port Adelaide:

$53,728.21.

Interest on these sums:

$15,797.43.

Cost of replacing light sensor Henley Beach:

$375.00.

Interest on this sum:

$118.28.

TOTAL:

$78,909.92.

After setting off the parties’ respective liabilities to each other, the defendants are entitled to judgment in the sum of $15,305.94.
The plaintiff is entitled to an order that the defendants pay the costs of the injunction proceedings before Anderson J on 13 and 15 January 2010 to be taxed.
I will hear the parties as to costs.

HenleyBeach:	Leighton O’Brien	$4,604.50.
SMEC	$9,107.03.
Parkholme:	Leighton O’Brien	$8,020.50.
SMEC	$8,150.00.
Port Adelaide:	Leighton O’Brien	$4,604.50.
SMEC	$9,107.03.
Total Cost of Reports:	$43,593.56.

Costs of work at HenleyBeach:	$5,093.00.
Interest on this sum:	$1,496.10.
LPG rebate:	$491.80.
Interest on this sum:	$123.97.
Costs of reports:	$43,593.56.
Interest on this sum:	$12,805.55.
TOTAL:	$63,603.98.

Costs of good tenantable repair Parkholme:	$8,891.00.
Costs of good tenantable repair Port Adelaide:	$53,728.21.
Interest on these sums:	$15,797.43.
Cost of replacing light sensor Henley Beach:	$375.00.
Interest on this sum:	$118.28.
TOTAL:	$78,909.92.