Williams, P.L. v The Official Receiver & Anor Welona P/L v The Official Receiver & Anor Wilson, E.A. v The Official Receiver & Anor Welona P/L v The Official Receiver
[1992] FCA 926
•10 DECEMBER 1992
Re: PATRICIA LORRAINE WILLIAMS; THE OFFICIAL RECEIVER and ERNEST ARTHUR
WILSON
And: THE OFFICIAL RECEIVER; WELONA PTY LTD and ERNEST ARTHUR WILSON
Nos. 114 and 426 of 1986
FED No. 926
Number of pages - 25
Bankruptcy
COURT
FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
BANKRUPTCY DISTRICT OF THE STATE OF NEW SOUTH WALES
GENERAL DIVISION
Sweeney J.(1)
CATCHWORDS
Bankruptcy - sequestration orders - applications by bankrupts and creditor for review of decisions by Official Receiver on proof of debt - review of outstanding claims on proof of debt - whether claims recoverable.
Bankruptcy Act 1966
HEARING
MELBOURNE
#DATE 10:12:1992
Counsel for Mr Wilson and Ms Williams: Mr M. Hadley
Solicitors for Mr Wilson and Ms Williams: Peter R. Murphy and Co.
Counsel for Welona: Mr D. McGovern
Solicitors for Welona: C.E. Cranney and Co.
Counsel for the Trustee: Mr B. Skinner
Solicitors for the Trustee: Lobban McNally and Harney
JUDGE1
SWEENEY J. A sequestration order was made on 17 February 1986 against the estate of Patricia Lorraine Williams ("Ms Williams") of which the Official Receiver on behalf of the Official Trustee in Bankruptcy ("the Trustee") is the trustee.
A sequestration order was made on 23 April 1986 against the estate of Ernest Arthur Wilson ("Mr Wilson") of which the Official Receiver on behalf of the Official Trustee in Bankruptcy is also the trustee.
On 7 March 1975, Welona Pty Ltd ("Welona") had granted to one Wiggins ("Wiggins") a lease of a hotel known as the Gardners Inn and located at Blackheath, N.S.W. ("the hotel") for a term of 5 years.
On 6 April 1979 Wiggins agreed with Mr Wilson and Ms Williams to assign the balance of the lease to them.
After a meeting in July 1979 between Mr Wilson and Mr Ronald Bowen, ("Mr Bowen") a director of Welona, a memorandum of lease of the hotel was entered into by Welona with Mr Wilson and Ms Williams on 17 July 1980. The lease was for a term of five years commencing on 29 January 1980.
The trustee's report under s.19 of the Bankruptcy Act 1966 ("the Act") referred to the assignment to Ms Williams and Mr Wilson by Wiggins of the balance of the term of his lease of the hotel, as follows:
"The sales agreement also provided for the vendor to allow the purchaser an amount of $8,000.00 towards the painting of the hotel property. The painting to be carried out by the purchaser was a part of the contract. It appears that the bankrupt made arrangements with the proprietor of the hotel property Mr Bowen that an amount of $10,000.00 be deposited with a building Society in Katoomba in accordance with the requirement of the contract. The bankrupt has provided evidence of payment totalling $8,150 made by him in respect of painting of the property. He claims that he is entitled to payment of this amount from the fund of $10,000.00 held by Mr Bowen.
The hotel business ceased on the 29th January 1985 at which time the lease expired. The bankrupt advised that plant, equipment and stock was sold and the proceeds used to pay out creditors of the business. He claims that the only creditor in respect of the hotel is Wiggins, the bankrupt's father Keith Williams and Mr Don Bowden from whom the partnership borrowed $25,000.00 at the date of purchase.
Mr Bowen the owner of the hotel property has advised that he intends to make a claim in the estate for an amount of approximately $100,000.00 being arrears of rent and costs of repairs and renovations required to be carried out on the hotel after the bankrupt vacated the property."
A Proof of Debt dated 10 August 1988 against both estates was lodged in respect of a judgment debt and works carried out by Welona "pursuant to lease" after Mr Wilson and Ms Williams had vacated the hotel.
Notices of Rejection of Proof of Debt dated 28 March 1991 in relation to both estates were addressed to Welona.
The Trustee rejected certain items in the proof to the extent of $55,162.18 admitting it in the amount of $96,694.39 and set out his reasons for doing so.
On 12 April 1991 Mr Wilson and Ms Williams filed an application to the court for the following order:
"1. That the following items in the Statement of Account lodged by Welona Pty Limited be deemed not to be provable in the bankruptcy of (the bankrupts' names were then set out in each application). Items 2, 3, 4, 5, 6, 9, 10, 12, 21, 22, 23, 25, 29, 32, 33, 35, 38, 39, 40, 41, 42, 43, 44, 45, 46, 47, 48, 49, 50, 57, 59, 61, 62, 63, 64 and 65."
On 24 February 1992, in each of matters 114/86 and 426/86 the following application was filed on behalf of Welona:
"1. That the Court reviews the decision of the Trustee of the Bankrupt Estate of (name of relevant bankrupt inserted) rejecting or partially rejecting the Proof of Debt lodged by the applicant in the said Bankrupt Estate.
2. That upon the application for review the Court reverses or varies the decision of the Trustee to allow in full the Proof of Debt.
3. That time be extended for the making of this application.
4. Costs.
5. Such further or other orders that the Court deems fit."
Both matters were set down for hearing on Tuesday 6 October 1992. On 11 May 1992, Hill J ordered that the two matters be heard together and that "evidence in one shall be evidence in the other".
ALLEGED ORAL AGREEMENT COLLATERAL TO LEASE:
13. It was submitted on behalf of Ms Williams and Mr Wilson that there was "an express oral agreement that the premises would be put into a proper state ie partially refurbished, prior to the commencement of or early in the tenancy" and that this "agreement was not performed by the landlord".
Mr Wilson gave evidence about a meeting he had with Mr Bowen at the St Georges League Club in July 1979, the purpose of which was to obtain Welona's permission to an assignment of the lease. He alleged, amongst other things that during the course of the meeting Mr Bowen promised to "do the structural repairs and get them done prior to you (Mr Wilson) painting it ..."
Mr Wilson disagreed with the proposition put to him by counsel for Welona that the lease agreement between the parties was contained within the document signed on 17 July 1980 but that he "signed this after I had a conversation with Mr Bowen at St George League Club and he started doing the work in 1979 and I did not have any question in my mind that the bloke would go back on his word ..."
Paragraphs 2 to 5 of an affidavit of Mr Bowen filed on 3 July 1991 read:
"2. I have read a photocopy of an affidavit purporting to have been sworn on the 22nd day of April, 1991 by Ernest Arthur Wilson (hereinafter called 'the Affidavit') and filed in these proceedings.
3. With reference to paragraph 6 of the Affidavit I say that early in 1979 I was contacted by Mr Ted Spensley, a hotel broker who informed me he had negotiated the sale of lease registered number Q960621 held by Mr Wiggins to a Mr. Wilson.
I made enquires (sic) in relation to Mr Wilson's background and as a result of those enquires (sic) I was not prepared to recommend to the Board of Directors of the Company it consent to a transfer of lease registered number Q920621 to Mr Wilson.
4. Mr Spensley requested me to meet with Mr Wilson to discuss the proposed transfer of the Hotel lease, and met at the St. George Rugby Leagues Club. I do not recall the date, to the best of my recollection the meeting took place about mid afternoon. We sat in the lounge of the Club and discussed the proposed transfer of lease for approximately two hours. During this discussion I can recall Mr Wilson saying words to the effect: 'I am buying the lease off Wiggins which includes a 5 year option.'
I said:
'The place has got to be painted and repairs done.' Mr Wilson said:
'There is an agreement between myself and the Wiggins that he will leave money in to do this work.' We then discussed the question of structural work which might be required at the Hotel and I said words to the effect: 'I will do any structural work required by the lease.' During this conversation Mr Wilson used words to the effect: 'When I become lessee I will have a free right to do what I like in the Hotel.'
I said to Mr Wilson words to the effect:
'You will not.'
He replied:
'Once I have the licence, that's it.'
I then informed Mr Wilson the company was not prepared to consent to a transfer of the lease held by Wiggins to him.
5. After the interview with Mr. Wilson I attended my solicitor, Mr John Smithers and informed him of the statements made by Mr Wilson and that I did not want Mr Wilson as a lessee of the Hotel.
The Company refused its consent to a transfer lease number Q920621 to Mr Wilson and in due course Mr Wilson applied to the Supreme Court of New South Wales in respect of the Company's refusal.
Mr Nash of Counsel appeared in the Supreme Court of New South Wales on my behalf to oppose an application for leave to transfer the lease. Shortly prior to the matter being heard Mr Nash advised me to withdraw my objection and to consent to a transfer of the lease. I accepted the advice of Counsel. Lease number Q9020621 (sic) was transferred to the applicant and a Miss Williams. When that lease expired the Company granted a further lease in terms of the option and the registered number of the further lease was R964001 (hereinafter called 'the Lease')."
Having seen both Mr Wilson and Mr Bowen give evidence I have no hesitation in preferring the evidence of the latter. My opinion of the credibility of the witnesses and the course of the litigation in the Supreme Court satisfied me Mr Bowen was quite reluctant to lease the hotel to Mr Wilson and that the lease was not subject to any collateral agreement.
Items 61-63 relate to substantial claims and I will consider them first.
61. Painting work $8,272
62. Plastering work $ 928
63. Painting work and $50,933
wallpapering work.
Total $60,133
These three amounts were all admitted by the Trustee.
In relation to these items, paragraph 8 of Mr Wilson's first affidavit reads:
"61-63.
The hotel was painted by the applicants in the first year of the lease. Painting at a cost of some $8,000.00 was carried out."
Paragraph 20 of Mr Bowen's first affidavit reads:
"Items 61 to 63, the Company alleges the lessees failed to paint the subject premises in accordance with the covenants contained in the lease".
Subsequent to the determination of the lease on 28 January 1985, the painting and plastering work was done to the hotel.
The notes to items 61 to 63 in the Welona's annexure to the Statement of Account read:
"61-63 See Benson report and earlier R.H. Benson report of 12.5.83".
The Benson report of 1983 became exhibit 1 and both reports are referred to in the report of Nigel Richmond Bell ("Mr Bell"), a chartered architect who was paid by Welona but nominated by the Trustee (see paragraph 8 of the affidavit of James Thomas Garrett sworn 2 July 1992) to clarify what work had been carried out by Welona. The report dated 14 May 1990 is annexed to the affidavit of Mr Bell and marked "A". After considering the claim in the Statement of Account and the two reports prepared by Mr Benson and dated 12/5/83 and 28/1/85, Mr Bell concluded in his report that the claims for painting and plastering as contained in items 61 to 63 were justified.
Mr Bell was extensively cross examined but nothing emerged to lead me to doubt his conclusions.
He said, amongst other things,
"Can I say I found nothing contradictory in either of those two reports in my reading of it. I did not see there was any reason to doubt the Benson report of 83 or 85. Yes, obviously one writer compared to another might have put a different emphasis or had spelling corrections, but essentially I felt that what was written 83 and 85 plus everything else all led in the same directions and it is written up in my affidavit.
Can I say, I could give you a much longer list of aspects of vandalism that had occurred by 1985. I just gave you a couple of quick examples. It would appear, as I have said, from the photographs, from the build up of evidence, from the Benson Report and my inspection, that obviously the kitchen and associated spaces, storerooms and so on, were obviously in a particularly deplorable conditions. The photographs showed it being absolutely appalling in terms of public health and in terms of the quality of the fitments and the like. The photographs from memory showed a whole series of rooms where - and once again going back to the evidence and statement of claim and Benson Report, where there was major electrical problems right throughout the building where items had been broken or pulled off walls, or light fittings pulled off ceilings. The question of things like plumbing had obviously - there'd been obviously major leaks in the not so distant past in terms of 1985. In terms of water damage to ceilings it was visible in photographs, with once again reference to where Benson talks about, you know, plumbing difficulties, leaks and so on. There was every good reason, every bit of supporting evidence to suggest it was happening in the early part of the 1980s. Yes, some aspects might have happened earlier, but all the evidence to my mind essentially established that the major deterioration not - well and over and above normal wear and tear happened basically in that period of time leading up to the mid 80s."
Mr Bell also said:
"the two reports I find quite consistent with the photographs and everything else. I frankly have no problem with them and obviously I do reports of that ilk myself and I've looked at many other reports of that type of situation".
Mr Bowen said that at around January 1980 the condition of the leased premises was "quite good". He also disagreed with the suggestion put to him in cross-examination that by 1979 the building was showing considerable signs of wear. He also rejected suggestions that in 1979 the corrugated iron on the roofs was rusting and leaking in places. He described the guttering as at 1979 as serviceable.
I accept the evidence of Mr Bell. I note in particular, his evidence that there had been "accelerating vandalism and deterioration" of the leased premises during the period 1980 to 1985. I also accept the evidence of Mr Bowen as to the state of the premises in January 1980 rather than that of Mr Wilson. I am satisfied that items 61, 62 and 63 should be admitted in full.
Refrigeration
28. I turn next to consider items 16, 17 and 18 which read as follows:
" Particulars
16. Refrigeration Units and Existing refrigeration installation $ 7,591 units had either been removed and sold, or were in poor condition: see Benson report pages 6, 7, 9, 10 and 12.
17. Coolroom assembly $ 1,922.51
18. Temprite cooler and
sundries $ 8,079.38"
Mr Bell stated in his report that he had no basis for appraisal of these items.
In an affidavit sworn on 11 March 1992, Mrs Bowen refers to items 16, 17 and 18 as follows:
"When my husband and I originally purchased the Hotel all of the beer drawing equipment was replaced with items of a stainless steel construction. Four Kelvinator Temprites were installed beneath the bar and fixed in position by means of brackets and bolts and were connected by means of pipes to four Coldstream condenser/compressor units located in the cellar to ensure that the Temprites would operate to perform their task of chilling the beer. There were six Coldstream condenser/compressor units in all located in the cellar and these were bolted to a wooden bench and wired to the electricity supply. The coolroom contained a forced draft cooler and a glass merchandiser cabinet which had been constructed to allow the condenser/compressors to feed continuously cool air to the cabinet. All of this equipment had been removed by the Lessee Wilson and sold to Parklands of Blackheath just prior to vacation of the Hotel and the amounts of $1,040.00, $7,591.00 and $1,922.51 were the amounts that were expended to replace the equipment. Evidence of payment in the form of invoices and cheque butt details have been furnished to the Official Receiver."
The submissions on behalf of Mr Wilson and Ms Williams on this issue read:
"Mr Wilson's evidence is that there were no working temprites when he took over. T 30.3-7
Mrs Bowen describes what was put into the Hotel when 'originally purchased' ie in 1970. There is no evidence that the equipment was working in 1980 (or 1975).
If it was wrong for the tenant to discard the equipment, then the landlord should give credit for the difference in value between new equipment and what had been removed. The Trustee referred to the depreciation schedule for the Bowen Family Trust for the year ended 30 June 1984 which records the refrigeration as having a written down value of $2670."
The submissions on behalf of Welona read:
"1. The factual dispute should be resolved in favour of Welona accepting the evidence of Mr and Mrs Bowen.
2. Wilson agreed that he took everything out of the premises including the temprites (T29.9). Although he suggests that he was required to purchase the temprite when he took over the hotel (T30.2) the items in question do not form part of the inventory on the sale of the Lease (Exhibit 10). Furthermore the evidence of Mrs Bowen in her Affidavit at (p 4.8) is very detailed on this point and was not cross examined upon. Moreover Wilson admitted sale of the items in question during the course of his public examination (T7.9).
3. As to the value of the equipment the Court has the evidence in the Trustee's exhibit which annexes all of the copy invoices confirming the purchase of the equipment. In particular reference is made to the invoice from H.M. Refrigeration Service to Welona Pty Limited dated 20 February 1985 for the installation of beer cooling equipment, Technidoors Pty Limited invoice No. 1080 for the supply of 3 door cool room assembly and the Carlton and United Breweries invoice No. M079226.
4. If the evidence of Mr and Mrs Bowen is accepted on this point (and given the absence of cross examination of either of them on the issue it should be) what Wilson and Williams did amounted to a conversion of the equipment. The proper measure of damages is what Welona had to pay to buy similar articles in the marketplace: Caxton Publishing Co. v Sutherland Publishing Co. (1939) AC 178; Hall v Barclay
(1937) 3 ALLER 620. It is unlikely on the probabilities that Welona would have paid a premium or above market value to replace the items in question. Indeed the contrary is more probable, namely, that it paid the minimum amount necessary to replace the converted goods.
5. The written down or depreciated value is an artificial figure, that is to say, it does not bear any relationship to market value. Its only significance is for income tax purposes and as an alternative to the claim made by Welona should not be preferred over the cost of replacement of the converted items as evidenced by what was actually paid by Welona."
The relevant clause in the lease here is clause 4(a) which reads:
"And the lessee FURTHER COVENANTS with the lessor that the lessee will:
At the expiration or other sooner determination of the said term peaceably surrender and yield up unto the lessor the said premises with the appurtenances both inside and outside together with all buildings erections and fixtures now or hereafter to be built or erected thereon in good and substantial repair and condition in all respects to the extent of the lessee's covenants herein contained".
Where the evidence of Mrs Bowen and Mr Wilson conflicts, I prefer the evidence of Mrs Bowen and I am of the view that the equipment that was replaced by items 16, 17 and 18 was the property of Welona and was wrongfully removed by Mr Wilson.
There is no doubt that the new refrigeration equipment installed by Welona was in better condition than that which was removed from the hotel. It is difficult to assess the difference in value of the new equipment and the old. Bearing in mind the fact that the administration of the estates of the bankrupts should do justice not only to them and Welona, but also to the other creditors of the estates who have proved, in my opinion the appropriate order is that the claims for items 16, 17 and 18 should be admitted for half the amounts eventually claimed which were $6591, $1500 and $6000 respectively. I am satisfied that the amounts claimed were paid for the new equipment.
CARPENTRY: I turn next to deal with item number 7 which read as follows:
"7. Breach of lease covenant 2(e)
Carpentry work $12,944."
The particulars given by Welona in relation to it were:
"Extensive carpentry work was necessary, including work on windowsills, doors corrugated iron roof overhaul, flashings, parapet walls, flagpole, fascia and cover boards, lining boards on eaves, insect screens, vents, lattice frame, flooring, gate and fence, wall brackets, door-closer, mirror, window cords, exhaust fans, architraves, windows prior to glazing, skirting, kitchen cupboards; refer report of R.H. Benson, 28.1.85 copy enclosed."
This claim is made pursuant to clause 2(e) of the lease which reads:
"2. the lessee DOTH HEREBY COVENANT with the lessor: ...
(e) AND ALSO will during the said term well and sufficiently repair maintain pave empty cleanse amend and keep the said premises with the appurtenances both inside and outside in good and substantial repair together with all chimney pieces windows door fastenings water closets cisterns partitions fixed presses shelves pipes pumps pales rails locks and keys and all other fixtures and things which at any time during the said term shall be erected and made when where and so often as need shall be damage by fire only excepted."
In Mrs Bowen's affidavit sworn 11 March 1992 she said, amongst other things, that:
"the extensive carpentry work that was required at the Hotel was undertaken by a local contractor Mr. Peter Stanton. Mr. Stanton was recommended to us by a local painting contractor David Collins. Stanton attended the Hotel premises approximately one week after my husband and I took possession. ... The total amount paid to Mr. Stanton for carpentry work was $12,944.00 and Welona has provided the Official Receiver with cheque butt details in evidence of payment."
In his affidavit sworn on 1 April 1992, Mr Bowen provides a list of the carpentry works which he observed that Mr Stanton performed over a ten month period.
The submissions on behalf of Mr Wilson and Ms Williams here read:
"ITEM 7 Carpentry
Document 12 from the Trustees Bundle shows only a series of payments over a period of 14 months. When combined with evidence from Mr Bell and Mr Bowen, the evidence does not permit a finding that an amount is attributable to Mr Wilson's failure to repair. It is conceded that on Mr Bell's evidence, there must be some amount attributable to repair. Whatever that is, it is intermingled with refurbishment or enhancement work; or rectification of matters present in 1980 (or 1975). The creditor's onus has not be discharged.
(The bankrupts are not prepared to concede an estimated amount, in view of the decision to concede various items, which would otherwise have been contested, in the interests of saving time."
The relevant "Supplementary Submissions" on behalf of Welona read:
"Carpentry
1. Most of the work necessitating carpentry was occasioned by repairing the vandalism which had occurred during the period of the Wilson/Williams tenancy (T89.9-90.1). In some instances what was done was simply an expedient way of undertaking repair which was appropriate in the circumstances (T90.3). There was evidence which according to Bell demonstrated that things like the flooring had been allowed to rot because appliances which leaked had been allowed to sit on the timber floor over a number of years
(T90.3).
2. References also made to the evidence in the Affidavits of Mr Bowen (1/4/92 p 2-7. Mrs Bowen (11/3/92 para 6, p 2.7) and in Mr Bell's report at p 3.4."
On this issue, Welona's "outline of submissions" read:
"Mr Bowen says that he engaged Peter Stanton to undertake carpentry work and that Bowen personally supervised and approved the work that was undertaken. All of that work is listed in Bowen's Affidavit (Bowen 1/4/92 p 2-7).
Bell says claim is supportable from the evidence (Report p 3.4). June Bowen confirms that the work was undertaken (11/3/92 para 6 p 2.7).
Garrett (a witness called by the Trustee) agreed that there were source documents supported payments and the nature of the work claimed to have been done.
Bell was of the opinion that most of the work was occasioned by the need to repair vandalism other than or over and above normal wear and tear. Although for example metal flashings over the window sills were relined rather than repainting this was merely expedient and did not constitute anything other than repair having regard to the pre-existing condition of the window sills. The flooring was timber and freezers and refrigerators had been allowed to leak over a period of time so that the floor beneath and visibly deteriorated. He reiterated that most of the repair work was due to neglect and unless this work was done 'you don't get to refurbish'. He did not believe that there was a significant degree of improvement associated with this claim."
In his report Mr Bell assessed item 7 as follows:
"Claim: Carpentry work to P. Stanton to the value of $12,944 via 12 cheques. The note attached to statement of claim outlined work as follows:
'Extensive carpentry work was necessary, including work on windowsills, doors, corrugated iron roof overhaul, flashings, parapet walls, flagpole, fascia and cover boards, lining boards on eaves, insect screens, vents, lattice frame, flooring, gate and fence, wall brackets, door-closer, mirror, window cords, exhaust fans, architraves, windows prior to glazing, skirting, kitchen cupboards; refer report of R.H. Benson'.
Evidence: Benson reports (2, 3) plus photos (4, 5) and discussion with others confirm what site investigation by itself cannot - that extensive work was undertaken.
Assessment: Carpentry rates (7) per Award were $9.54 an hour for employees. Costing rates for Sub-Contractors such as Mr Stanton would have been around $17/hour. Thus, at this rate around 761 hours or so man/weeks of time was involved. It would be useful to correlate working time with date of cheques and knowledge of whether Mr Stanton had his own assistance.
I cannot suggest it would be illuminating to try to measure quantities and impute costs against the work so loosely described. It could be done item by item, but would not have any great order of accuracy and could in fact become misleading. I do suggest it likely that in total 20 carpenter/weeks (or more) were involved in the repairs. Unless there is any further need to attempt to dissect costs here, I would suggest the claim is supportable from the evidence (1, 2, 3, 4, 5)."
During cross examination, Mr Bell said:
"Certainly it looked like the most of the work was occasioned by repairing the vandalism, for lack of a better word than to do with just normal wear and tear".
He also said:
"... certainly, looking at number 7, most of those things are really to do with fairly fundamental repairs due to some years of neglect and until those repairs were done you don't get to purely refurbishment - refurbishment as I take it as being, you know, the making more attractive and colours and interior design aspects".
On this claim I accept the evidence of Mr and Mrs Bowen and that of Mr Bell and I am of the view that the claim for $12,944 should be admitted in full.
Other Items in Dispute:
Item Number Consideration or Amount Particulars
Nature of Debt
9. Wages = B Muir 379.50 Muir worked cleaning the yard of excess growth and drains, also fumigation; see Benson report Pages 2 and 7.
10. Wages + R Stokes 2,056.89 Stokes also worked cleaning the yard and drains, as well as labouring for the other tradesmen, and fumigation; see Benson report Page 2.
11. Wages = R and 7,700.00 The work involved arrangement J Bowen and supervision of tradesmen, arrangement of building materials and liaison with Council and licensing authorities. R. Bowen attended to many of the minor repair jobs; see Benson report.
12. Builder's Inspection 350.00
Report 375.00
45.00
13. TV Mounting Bracket 168.00 The existing bracket had been removed and disposed of; see Benson report Page 10.
14. Plumbing, drainage 574.00 Extensive work was and guttering work 2,285 necessary on cleaning 107.00 and/or replacing 931.00 gutters, valleys, 617.00 rainheads, downpipes; stormwater pipes, grate covers, vent pipes, wash basins, toilet cisterns, toilet seats, drainage lines, most taps (which leaked), and bathroom floor tiles. See Benson report Pages 4, 5, 9, 15, 16, 18, 19 and 20.
15. Exhaust fan The exhaust fan was alterations damaged beyond repair. and window The windowsill covers sill covers 1,040.00 protect previously deteriorated sills which were uneconomic to replace.
19. Range and oven 2,495.40 Through neglect and lack of cleaning, the range and oven unit was uneconomic to repair; see Benson report Page 18.
20. TV Antennas and 1,000.00 The television installation antennae had been removed. This amount is an estimate, allowing for certain other work which was also carried out.
21. Backhoe and This was to remove tipper hire 520.00 debris after cleaning work.
23. Guttering 1,096.19 See Note on 14. supplies
25. Replacement of Light fittings had broken switches been removed and/or and power points/ were useless, while light fixture = power outlets were labour 683.00 discoloured due to arcing: see Benson report Page 8.
26. Garage doors 1,125.00 These were purchased
at auction for approximately half price. Repair was uneconomic, see Benson report Page 7.
27. Timber 1,113.58 See Note on 7.
30. Use of truck The truck was involved belonging to in building work from R Bowen 2,500.00 28.1.85 to 12.6.86.
31. Doors closers 82.50 See Benson report Page
10. Closers needed to be fitted or replaced.
32. Glazing work 164.85 Glass was broken,cracked or previously ununiformly
33. Glazing work 75.25 repaired. See Benson 160.00 report Pages 5, 12, 13, 16, 18 and 19.
34. Toilet cisterns 132.00 See Note on 14.
36. Sundry hardware 112.56 See Note on 7.
37. Handbasins and See Note on 14. pillar cocks 100.00
412.00
38. Glazing work 75.00 See Note on 32-33.
39. Cleaning liquid 188.09
41. Fluorescent tubes
and sundry
electrical items 121.76
50. Fluoroscent tubes 61.80
and starters
51. Sundry nails 17.10
52. Powerboards 101.83
53. Glue 19.98
54. Fly wire 9.58
55. Paint and paper 142.95
58. Loss of rent 6,000.00
66. Consent to Licence
changes (2) 150.00
150.00"
All of these items remained in dispute between the parties but counsel for Ms Williams and Mr Wilson made no submissions in relation to items 13, 25, 31, 34, 36, 39, 41, 50, 53, 54, 55, 58 and 66.
In relation to all the items in dispute set out above I accept the evidence of Mr Bowen, Mrs Bowen and, Mr Bell. Save in respect of item 36, which was not made out on the evidence, I am satisfied that the various payments were made for work done and materials supplied, at reasonable costs in the circumstances, which were recoverable from the lessees under the lease. I am satisfied that the estimate in relation to item 20 was reasonable and justified the amount claimed. In particular, I accept Mrs Bowen's evidence that she paid wages to cleaners and labourers personally; that in some cases the Bowens bought their own materials and paid for them as described; and that they did not employ a contract builder but undertook supervisory and administrative work in relation to repair work as a cost cutting measure, and were entitled to the wages which were paid to them by Welona and are recoverable by it. In respect of item 66 I am satisfied that Welona was entitled to these amounts under the lease.
These claims except that for item 36 should all be admitted in full, including item 58 which related to loss of rent in the amount of $6,000. This claim represented the estimated loss of rent due to the condition in which the hotel was left. It is based upon a period of ten weeks at $600 per week. I am satisfied that this was a reasonable estimate which justifies the admission of the proof for the amount of $6,000.
On the first morning of the hearing counsel for Welona made an open offer "to resolve the matter upon the basis that its proof as ultimately allowed by the trustee, namely, the sum of $95,218.78 is accepted as the sum to which it is entitled in the estates of Mr Wilson and Ms Williams, together with costs".
Counsel for Mr Wilson and Ms Williams then announced that "the bankrupts are prepared to settle the matter on the basis of the proof of debt being admitted in the sum of $40,000 ... on the basis of the parties bearing their own costs". He added that there was no dispute about a number of items, amounting to "something like $15,000", adding that there were still two items under discussion between the parties, namely items 64 and 65.
Counsel for the trustee sought an order that his client's costs should be paid by the unsuccessful party or parties.
In relation to costs the submissions on behalf of Ms Williams and Mr Wilson read as follows:
"With regard to the costs of the bankrupts and the creditor, the Court ought to exercise its discretion according to the following factors:
- whether the proof of debt is ultimately increased or reduced;
- the size and number of items challenged by the parties. As to the Trustee's costs the Court is asked to follow the usual course which is understood to involve payment from the estate. If the Court wishes to attribute the Trustee's costs to parties then the above factors should also apply."
The submissions on behalf of Welona read as follow:
"1. Welona should have its costs in respect of the application by Williams and Wilson paid out of the estate whatever the ultimate result. Welona came into the proceedings with its own representation consequent upon a decision of the Trustee that it should no longer act on Welona's behalf as one of a number of the creditors of the estate. Part of its task was to support the decision of the Trustee and to repulse the attack of Wilson and Williams upon the Trustee's determination to uphold various items of the proof of debt. Were Wilson and Williams to be successful in persuading the Court to reject some items for the proof of debt previously accepted by the Trustee all of the costs should come out of the estate in any event because it was not Welona's decision in the first place but that of the Trustee which is overturned.
2. However, Welona has made an open offer to settle the claim for the amount admitted to proof by the Trustee. Its claim is greater than that sum by virtue of the reopening of the number of its rejected claims. Upon the assumption that Welona is admitted to proof in an amount equal to if not greater than the amount accepted by the Trustee than it should have its costs as a successful litigant, there being no special circumstances justifying some other order: Ritter v. Godfrey (1920) 2 KB 47. The costs should be paid out of the estate or alternatively by Wilson and Williams personally since the failure to accept the open offer will have led to the incurring of unnecessary legal expenses and a consequent depletion in the value of the estate available to creditors unless an order is made against Wilson and Williams personally.
The open offer made by Wilson and Williams was a sum of $40.000 inclusive of costs. That open offer was so unreasonable that even if Welona succeeded only upon a proportion of its claim the circumstances make it reasonable that all of its costs be paid either out of the estate or by Wilson and Williams personally rather than any order being made that Welona bear the expenses of litigating that portion of its claim upon which it may fail: Forster v. Farquahar (1893) 1QB 564.
3. As an alternative the Court may reserve the question of costs for further argument depending upon the resolution of the substantive issues.
Bearing in mind the findings made and the history of the case I am of the opinion that Welona's costs should be paid by Mr Wilson and Ms Williams personally. The Trustees costs should also be paid by Mr Wilson and Ms Williams personally.
It is not entirely clear from the transcript which items of the proof of debt were the subject of agreement between the parties and, accordingly, of consent orders.
I direct that Welona deliver to my Associate and to the other parties draft short minutes of orders, specifying those which are the subject of consent, by 15 December 1992 and that the other parties submit any comments thereon to all concerned by 21 December 1992. If it transpires that the parties are agreed upon short minutes of orders, they may submit them under Order 35 Rule 10.
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