Young v Lamb (No 2)

[2001] NSWSC 1014

CITATION:	Young v Lamb (No.2) [2001] NSWSC 1014
CURRENT JURISDICTION:	Equity
FILE NUMBER(S):	SC 5096/98
HEARING DATE(S):	8 November 2001
JUDGMENT DATE:	9 November 2001
PARTIES :	Robert Francis Patrick Young (P) Kenneth John Lamb (D1) Louise Ann Lamb (D2) William Thomas Newell (D3) Dianne Margaret Newell (D4)
JUDGMENT OF:	Austin J

COUNSEL :	M Heath (P) S Dixon (D)
SOLICITORS:	Button Hawdon & McMahon (Batemans Bay) (P) Daryl Hurst (Moruya) (D)
CATCHWORDS:	CONTRACT - assessment of damages - tenants' breach of contract to renew lease - loss of rent - damage to demised premises would have caused rent to abate if tenant had performed the contract by renewing the lease - damages for loss of rent reduced by amount corresponding to abatement - mitigation of loss - landlord failed to find tenant for three year duration of renewed term - whether landlord had mitigated loss
CASES CITED:	British Westinghouse Co v Underground Railway [1912] AC 673 Buchanan v Byrnes (1983) 3 CLR 179 Karacominakis v Big Country Developments Pty Ltd [2000] NSWCA 313 Marshall v Mackintosh (1898) 78 LT 750 Nangus Pty Ltd v Charles Donovan Pty Ltd [1990] VR 184 NLS Pty Ltd v Hughes (1966) 120 CLR 583 Progressive Mailing House v Tabali Pty Ltd (1985) 157 CLR 17 Re Eastdoro Pty Ltd (No 2) [1990] 1 Qd R 424 Wenkart v Pitman (1998) 46 NSWLR 502
DECISION:	Judgment for plaintiff in the sum of $120,629 (loss of rent $106,148 and interest $14,481)

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

AUSTIN J

FRIDAY 9 NOVEMBER 2001

5096/98 ROBERT FRANCIS PATRICK YOUNG V KENNETH JOHN LAMB & ORS

HIS HONOUR :
Facts

1 The plaintiff, by summons filed on 22 December 1998 and subsequently a statement of claim, sought a declaration that the defendants had validly exercised the option to renew the lease between them, and a declaration that the defendants had repudiated the agreement to renew the lease constituted by the exercise of the option, and an order that the defendants pay the plaintiff damages.

2 The matter came before me on 15 and 16 June 2000, and I delivered my reasons for judgment on 27 July 2000. I decided against making the declaration sought by the plaintiff, and consequently I did not order or assess the amount of damages that the plaintiff had claimed. In their reasons for judgment delivered on 13 July 2001, the Court of Appeal overturned my decision with respect to the declarations sought by the plaintiff, and remitted the matter to this Division to assess the damages to be awarded to the plaintiff/appellant. Their Honours considered it inappropriate for the Court of Appeal to assess damages, given that there was contested evidence on mitigation of loss, and they have provided no specific guidance with respect to the assessment of damages. The matter is to be decided by me upon the evidence, in light of established principles.

3 The lease in question was for a period of three years commencing on 1 November 1995 and terminating on 31 October 1998. It included an option for renewal for a further three years. The Court of Appeal found that, by a letter dated 22 July 1998, the defendants validly exercised the option to renew the lease.

4 By letter dated 28 August 1998, the plaintiff by its solicitors submitted a new lease to the defendants which was in virtually identical terms to the initial lease. It was to commence on 1 November 1998 and to terminate on 31 October 2001. By letter dated 21 September 1998, the defendants' solicitor advised that his clients would not be "proceeding with the new lease", and the draft lease was returned. By letter dated 30 October 1998, the plaintiff's solicitors gave notice that the return of the lease constituted a repudiation of the contract to renew the lease that had arisen upon the exercise of the option, and they said that the plaintiff accepted the repudiation. The plaintiff obtained vacant possession of the demised premises on 1 December 1998.

Rent

5 The agreement which arose upon the exercise of the option for renewal was that the plaintiff would grant the defendants a renewed lease for three years beginning 1 November 1998 and ending 31 October 2001. The rent for the renewed term was not expressly agreed at the time of exercise of the option. The letter of 22 July 1998 asserted that there should be "little or no increase" in rent.

6 In my opinion, in the absence of any stipulation to the contrary at the time of exercise of the option, the rent for the renewed term was to be ascertained by the application of the mechanism provided for in clause 43 (e) of the lease, read in the light of clause 5 (g). Clause 43 (e) stated that the renewal upon exercise of the option would be for a lease containing identical covenants to the covenants contained in the original lease, subject to alterations including the following:

"(ii) the rental payable under any Lease renewed pursuant to this clause shall be such rent as is agreed between the parties as being the current market rent for the Premises at the time of renewal provided that if the parties are unable to agree on the rent within fourteen (14) days of the date of the Lessee's notice of acceptance under clause (d) (ii), then the rent shall be calculated by valuation in accordance with the provisions of clauses (b) (ii) - (g) of clause 5 hereof."

7 Clause 5 provided for annual rent reviews, proportionately to increases in the Consumer Price Index. It set up a procedure for the Lessor to notify the Lessee of his assessment of the new rent, but if the Lessee did not accept the Lessor's assessment, then the rent would be fixed by taking the mean of two valuations of current market rent prepared by Registered Valuers on behalf of the Lessor and the Lessee. If the Lessee failed to obtain a valuation, then the Lessor's valuation would determine the annual rent. Clause 5 (g) contained a proviso that the rent was to increase annually by at least the percentage figure referred to in Item 8 of Schedule Two and the rent was not to be less than the highest rent payable by the Lessee in any year prior to the review.

8 The parties failed to agree on rent within fourteen days of the letter of 22 July 1998, but there is no evidence that the procedure contemplated by clause 5 (g) was followed. However, it is unnecessary for me to consider the consequences of this lack of evidence, because at the hearing on 8 November 2001 the parties agreed that, for the purpose of assessment of damages, the rent for the renewed term was $3,500 per calendar month. I shall proceed on that basis.

Measure of damages

9 The exercise of the option gave rise to a binding agreement for lease between the plaintiff and the defendants: Re Eastdoro Pty Ltd (No 2) [1990] 1 Qd R 424, 429. Ordinary principles of the law of contract, including principles with respect to repudiation, apply to leases: Progressive Mailing House v Tabali Pty Ltd (1985) 157 CLR 17, 29 per Mason J. Where a contract has been validly repudiated and the innocent party accepts the repudiation, that party has a right to recover damages for breach of contract, assessed in accordance with ordinary contractual principles. Those principles include the principles with respect to mitigation of damages: Buchanan v Byrnes (1983) 3 CLR 179. Where the lessee has repudiated, damages are awarded to the lessor to compensate him for loss of the benefit of the lessee's covenants to pay rent and outgoings: Progressive Mailing, at 55 (per Deane J) and 47 (per Brennan J). The entitlement to damages is from the date of breach - in this case, 1 December 1998, the day the defendants gave vacant possession: see Nangus Pty Ltd v Charles Donovan Pty Ltd [1990] VR 184, 188.

The plaintiff's claim

10 The hearing of the assessment of damages was held on 8 November 2001. The plaintiff drew attention to the fact that by that time, the renewed lease would have expired. Therefore, he said, the damages to be assessed were for, in effect, a past loss. That loss was to be measured by loss of rent at $3,500 per month for the 35 months from the date of vacant possession (1 December 1998) to the date when the lease would have expired, 31 October 2001, a period of 35 calendar months. Rental at $3,500 per month for 35 months is $122,500. The plaintiff proposed that an amount be deducted for what would have been the agent's commission, in the sum of $4,900, leaving a net amount of $117,600. The plaintiff claimed interest on that amount at an average rate of 9.5 percent in the sum of $11,172. Therefore the total amount of damages claimed, as at 8 November 2001, was $128,772. Except for a question as to the amount of the monthly rent for the period from June to October 2001, the defendants do not contest this method of calculating loss, or the calculations themselves.

11 In the normal course, where a component of damages for breach of contract is payment of a future economic loss, the ordinary rule is that the amount of the claim is discounted: see NLS Pty Ltd v Hughes (1966) 120 CLR 583. However, since by the time of the hearing of the assessment of damages the renewed lease would have expired, this is not a case of compensation for future economic loss. It would not be appropriate to apply any discount factor, because the discount is applied in order to identify the current value of a future revenue stream, a concept not appropriate here. It seems to me, therefore, that the plaintiff is entitled to the actual past loss of rent without any discount, after allowing for the agent's commission. I therefore agree with the plaintiff that he is entitled to $117,600 plus interest, subject to the question of the correct monthly rental for the period from June to October 2001, and subject also to any question of mitigation of loss.

12 The plaintiff also claimed interest on the amount of unpaid rent. His proposal was to use an average interest rate of 9.5% for the whole period. The defendants did not disagree with this interest rate.

13 After discussion at the hearing, the plaintiff submitted that interest should be calculated separately on each monthly rental instalment, for the period between the date upon which that instalment fell due and the date of judgment. His instructing solicitor made some calculations, which indicate that if rent of $3,500 fell due each month, interest for the period to 8 November 2001 would be $17,436.10. The defendants agreed at the hearing that this would be the correct method of calculation of interest.

14 I am therefore content to apply this method to calculate interest, at the rate of 9.5%. The actual amount of interest will be different from the amount calculated by the plaintiff's solicitor, because in my view the loss of rent for the period from June to October 2001 was less than $3,500 per month.

Rent for the period from June to October 2001

15 As I have said, the plaintiff claims damages for his loss of rent in the period from 1 December 1998, the date when vacant possession was given, to 31 October 2001, the date of expiry of the renewed term. In cross-examination he gave evidence that in June 2001 he took a prospective purchaser to inspect the premises and while there, he discovered that there had been severe water damage to the office in the premises. Water had leaked from a rusted internal downpipe over the gyprock roof of the office, which had collapsed. There had been damage to the carpet, electrical fittings and the cabinet in the toilet. The plaintiff described the damage as "very bad" and "dreadful". The insurance assessor told him that he could "see blue sky" through the roof of the building.

16 Mrs Newell, one of the defendants, gave evidence that she had visited the premises on 13 October 2001 and had looked into the premises through an open window. Her description of the damage is consistent with the plaintiff's evidence in cross-examination. She said that she detected a "damp, mouldy" smell that was very strong.

17 The plaintiff gave evidence that he promptly made an insurance claim in respect of the damage, and then set about finding a contractor to carry out the repair work. He said he contacted about half a dozen tradesmen, who told him they were fully booked until about March next year. He then endeavoured to find a tradesman by lodging an advertisement in the local newspaper. Eventually he found someone to do the repair work to the downpipe. This work, and the repair of the office itself, took about four days and the job was completed "about three weeks ago" that is, on about 18 October 2001. The cost of rectification was in excess of $3,507.

18 In my opinion these events are relevant to the assessment of damages. I am required to determine how much rent the plaintiff lost through the defendants' breach of contract. In making that determination, I must take into account any events that would have reduced the amount of rent payable by the defendants during the renewed term.

19 As I have said, clause 43 of the original lease, the option clause, provided (in paragraph (e)) that if the option was exercised the renewed lease would, subject to a few exceptions not relevant here, contain identical covenants to the covenants contained in the original lease. Clause 8 of the original lease was in the following terms (to the extent relevant):

"In the event that the whole or any part of the Demised Premises are during the term:-
(a) …
(b) Destroyed or damaged by fire, flood, lightning, storm, tempest, war or other similar occurrences so as to render the premises uninhabitable or unfit for the use specified in Item 2 of Schedule Two [retail sale of furnishings and bedding];
THEN:-
(i) This Lease may be terminated without compensation by either the Lessor or the Lessee by notice in writing served on the other within one (1) month from the happening of such occurrence PROVIDED THAT the Lessee shall not be entitled to rely on any such notice terminating this lease if the Lessor shall have rebuilt repaired or reinstated the Demised Premises prior to the service of such notice.
(ii) …
(iii) …
(iv) Upon the happening of any such damage or destruction as aforesaid the total rent hereby reserved or a proportionate part thereof according to the nature and extent of the damage sustained shall abate and all or any remedies for the recovery of such rent or such proportionate part thereof shall be suspended until the Demised Premises or the building of which the Demised Premises forms part shall have been rebuilt or re-instated so as to make the premises fit for occupation and the use of the Lessee or until the Lease shall have been terminated pursuant to the provisions of subclause (i) as the case may be; …."

20 The office occupies an area of about 35 sq m, out of a total floorspace of about 700 sq m. Therefore the damage to the office was insignificant in terms of floorspace. However, an office is essential for the conduct of a retail furnishings and bedding business. Between the time when the office was damaged in the manner described above, and the time of completion of the repair work, the office was completely unusable. I do not have any evidence as to how the defendants used the office or as to the equipment contained there, but in order to make a proper assessment of damages I must do my best to assess the impact of the damage to the office upon the permitted use of the premises by the lessees. For that purpose, I infer that the office contained facilities for taking customer payments, including facilities for direct debit transactions, books and records, and a computer for financial recording. It is more probable than not that damage to the office of the kind described by the plaintiff would have destroyed books and records, and would have prevented the defendants from using those facilities, and would therefore have prevented them from carrying on their retail business until alternative arrangements could have been made.

21 I have no evidence to assist me to determine whether alternative office arrangements could have been made for the period until the repair work was done. There was ample alternative floorspace to be used for an office, but I am unable to conclude that electrical connections for the defendants' sales transaction and recording equipment would have been readily available in any other part of the premises. Given the evidence of the plaintiff that he was unable to find a tradesman to repair the downpipe for over three months, I am unable to infer that arrangements could have been made for the installation of alternative electrical sources to permit a temporary office to be established.

22 My conclusion is that for the purposes of clause 8 (b) of the lease, the premises were, by virtue of the damage described by the plaintiff, "unfit for the use specified in Item 2 of Schedule Two" until the repair work was completed. In my opinion this would not have given the defendants (had they been in occupation under a renewed lease at the time) an immediate right of termination under clause 8 (i), without prior notification to the plaintiff of the damage and need for repair. However, the defendants would have been entitled to a substantial abatement of rent under clause 8 (iv).

23 In my opinion the abatement would not have been for the whole of the rent payable during that period in which the office was in a damaged state, because during that time, although the defendants would have been substantially prevented from carrying out their retail business, they would have been able to continue to store their furnishings and bedding stock in the premises. During cross-examination the plaintiff accepted that a rental of $1,000 per month would be an appropriate rental of the premises for short-term storage purposes. Therefore it seems to me that during the period in which the office was in a damaged state, the rental would have abated from $3,500 per calendar month to $1,000 per calendar month.

24 The next question is, when would the period of abatement of rent have begun? That depends upon when the office first became unusable by virtue of the water damage. The evidence does not indicate when the damage occurred. The plaintiff discovered the damage in June 2001, and when he visited the premises 12 months earlier, there was no damage. But as far as that evidence goes, the damage could have been caused any time during the 12 months prior to June 2001.

25 It seems to me, however, that for the purpose of assessing damages, I should infer that the defendants, hypothetically in occupation under a renewed lease, would have discharged their implied obligation under the lease by informing the plaintiff of the damage promptly after it occurred. Therefore, I should infer, for the purpose of calculating damages, that the office was damaged not long before the plaintiff in fact discovered the problem. Doing the best I can in the circumstances, I shall assess abatement of rent and damages on the basis that the damage occurred on 1 June 2001.

26 My conclusion is that the monthly rent of the premises would have been reduced from $3,500 to $1,000 during the period from 1 June 2001 to 18 October 2001, that is a period of four months and 18 days. On my calculation, this reduces the damages recoverable for loss of rent by $11,452, from $117,600 to $106,148. Interest must be added to this figure. I have calculated the interest for the period from 1 December 1998 to 9 November 2001, using the method adopted by the plaintiff but the reduced figures for rent for June to October 2001, at $14,481.

Mitigation of loss

27 The principal contest between the parties relates to whether, as the defendants contended, the plaintiff failed to mitigate his loss during the period from 1 December 1998 to 31 October 2001.

(15th ed (1988) paras 275ff) identifies three rules with respect to mitigation of loss:

(a) the plaintiff must take all reasonable steps to mitigate the loss to him consequent upon the defendant's wrong ( British Westinghouse Co v Underground Railway [1912] AC 673, 689 per Viscount Haldane LC;

(b) where the plaintiff takes reasonable steps to mitigate the loss to him, he can recover for costs incurred in so doing (there appears to be no claim for recovery in this category in the present case); and
(c) where the plaintiff takes steps to mitigate the loss to him, and the steps are successful, the defendant is entitled to the benefit accruing from the plaintiff's actions.

29 Where a tenant fails to pay rent in breach of the lease, and the landlord fails to mitigate his loss by re-letting the premises, damages for loss of rent should be assessed on the basis that the landlord would have been able, if he acted reasonably, to re-let the premises at a realistic monthly rental after a reasonable period for re-letting had expired. That is, damages should be the difference between the rent payable under lease, and the realistic rental that the landlord would have received had he mitigated his loss: Marshall v Mackintosh (1898) 78 LT 750. .

30 What is the standard which the plaintiff must observe when acting to mitigate his loss? In Karacominakis v Big Country Developments Pty Ltd [2000] NSWCA 313, at paragraph 187, the Court of Appeal of New South Wales said:

"A plaintiff who acts unreasonably in failing to minimise his loss from the defendant's breach of contract will have his damages reduced to the extent to which, had he acted reasonably, his loss would have been less. This is often misleadingly referred to as a duty to mitigate, although the plaintiff is not under a positive duty. The plaintiff does not have to show that he has fulfilled his so-called duty, and the onus is on the defendant to show that he has not and the extent to which (TCN Channel 9 Pty Ltd v Hayden Enterprises Pty Ltd (1989) 16 NSWLR 130). Since the defendant is a wrongdoer, in determining whether the plaintiff has acted unreasonably a high standard of conduct will not be required, and the plaintiff will not be held to have acted unreasonably simply because the defendant can suggest other and more beneficial conduct if it was reasonable for the plaintiff to do what he did (Banco de Portugal v Waterlow and Sons Ltd [1932] AC 452; Pilkington v Wood [1953] Ch 770; Sacher Investments Pty Ltd v Forma Stereo Consultants Pty Ltd [1976] 1 NSWLR 5)."

31 Where the assessment of damages relates to a commercial operation, the question relates to what the plaintiff "would do in the ordinary course of business": Sacher Investments at 9; Wenkart v Pitman (1998) 46 NSWLR 502. At the hearing on assessment of damages there was contention between the parties as to whether evidence of the plaintiff's financial circumstances could be taken into account in determining whether the plaintiff had sufficiently mitigated his loss. Evidence was adduced that the plaintiff had a finance facility which had been negotiated on the assumption that rental would be received from the defendants, and accordingly he was in very difficult financial circumstances after the defendants failed to renew their lease, and it was necessary for him to dispose of several properties to repay the financier. He said that he could not have continued to pay for newspaper advertisements beyond mid-1999, because of his financial circumstances.

32 It is unnecessary for me to decide whether the plaintiff's financial circumstances are relevant to the question of mitigation, since (for reasons I shall give) my view is that the plaintiff in fact did enough to mitigate his loss regardless of his financial circumstances. In my opinion, however, it is relevant to take into account the plaintiff's financial circumstances in deciding whether his loss has been mitigated, at least to the extent that the defendants' breach has produced the plaintiff's financial difficulty, in foreseeable circumstances. On the evidence before me, the defendants' failure to pay rent in breach of contract, in difficult market circumstances, caused the plaintiff's financial difficulty, and financial difficulty of the kind suffered by the plaintiff was reasonably foreseeable.

Evidence as to mitigation

33 The plaintiff engaged Dedrick Real Estate in 1997 to act as his agents with respect to the premises. Mr Furzer was the person with whom the plaintiff principally dealt at Dedrick. He had been involved in real estate for 10 years at the time he gave his evidence, and had done a great deal of the commercial leasing in the Bateman's Bay area, managing around 550 properties.

34 Mr Furzer gave evidence that Dedrick advertised the property for lease in the Sydney Morning Herald on 10 occasions in the period from 21 November 1998 to 20 March 1999, and in the Canberra Times on 11 occasions between 13 February 1999 and 8 May 1999. The property was also advertised in the Southern Star, the last advertisement appearing in that newspaper on 22 March 1999.

35 Two inquiries were made, and one inquiry was made for purchase of the premises, and Mr Furzer approached some parties to see if they would be interested in taking a lease. Although his oral evidence was vague on the point, he said the recalled approaching Knott’s Pine and Furniture in the Raw, as the premises were thought to be suitable for, and were in fact used by the defendants as, a furniture showroom.

36 Mr Furzer gave further evidence that advertisements were placed in the Sydney Morning Herald on five separate occasions between 3 April 1999 and 15 May 1999, and he continued to advertise the premises in the Southern Star as part of a general display advertisement of properties available through the agency. In May 1999, he stopped lodging paid advertisements for the lease of the premises at the plaintiff's request, although he maintained a photograph of the premises in the window of Dedrick's office. He stopped paid advertisements, he said, "as I had received no responses or inquiry to any of that advertising … and as I became aware of the increasing financial constraints of the plaintiff".

37 In February 1999 he received instructions from the plaintiff to market the premises for sale at $375,000, subsequently reduced to $290,000. No sale was achieved, although the plaintiff was selling other, smaller units in the building. Attempts to sell the premises are relevant to the question of mitigation, although the requirement to mitigate loss does not require a plaintiff landlord to sacrifice the property itself by selling at a low price: McGregor on Damages para 317ff.

38 The plaintiff gave evidence that he had two real estate agents acting for him (as well as a third to whom he had given oral instructions to find a tenant or buyer), and that one of the agents (Dedrick) advertised in the local newspapers. When asked, in cross-examination at the initial hearing, what he could do to make the property more attractive, the plaintiff had little to offer by way of suggestions. He referred to the nature of the premises and the possible type of tenant that would be interested in them. The plaintiff was also asked how many interested parties had inquired as to the premises and he responded that there were two. He personally took Mr Place, who was interested in purchasing the property, for inspection in June 2001.

39 By the time he gave evidence in June 2000, the plaintiff said he was offering the property for $2,000 per month, which he suggested was "a steal". The evidence indicates that the plaintiff eventually, in March 2000, instructed Mr Furzer to agree to reduce the rent to $1,500 per month on the basis of a monthly tenancy.

40 The plaintiff suggested that the generally depressed commercial environment in the South Coast was one of the factors causing the property to remain untenanted. When asked if there was anything more that either he or his agents could do to attract a tenant for the premises, the plaintiff said he thought there could be more advertising.

41 Mr Furzer said in cross-examination that only about 50% of the commercial properties on his books were tenanted. When asked the reason for this low percentage, he said he thought it was the result of lack of people interested in starting businesses, rather than any difficulty over the amount of rent being asked. He drew attention to the specific economic difficulties experienced in Moruya. Mr Furzer gave evidence that he advised his clients to market their properties properly, to advertise them, and if they were unable to find tenants, then to sell them.

42 He said that a specific difficulty in finding a tenant for the subject premises was the large floor size. He said it would be difficult to subdivide the premises for the purposes of leasing, without incurring substantial cost, because there was only one office and toilet facility. He said that the premises could definitely be leased if the right tenant could be found.

43 The plaintiff gave evidence that he placed two signs on the western wall of the premises, one about 1 m square, and the other a smaller sign, advertising the premises for sale or lease. After some time he decided to take one of the signs from the wall and place it at the northwestern corner of the property, supported by star stakes. That sign fell over and lay in the grass for some time. There was some contested evidence as to how long it was there. The plaintiff said that he regularly inspected the premises and when he found that the sign had fallen from its supports, he restored it. It seems likely, however, that for a period of at least some months the sign was not on proper display, although the other sign on the western wall was still there.

44 The plaintiff gave evidence that, after he moved to Wollongong in mid-2000, he inspected the exterior of the premises about every four to six weeks, but before that time when he was living closer, he inspected them more often. He said that he instructed the managing agents to attend to any repairs that needed to be done. Additionally, he engaged a gardener to cut the lawns and keep the gardens tidy, and the gardener was present for that purpose about once every two weeks in the summer months, and about once every month in the winter months. He said the gardener was instructed to keep the external areas tidy.

45 Mrs Newell inspected the exterior of the property on 13 October 2001, as I have said. She took some photographs. They show a rusted exterior downpipe; a pile of a dozen or so pieces of wood, which could well be fencing, on the lawn; some rather overgrown trees behind a retaining wall and some leaf material and a broken branch just in front of the retaining wall, and two trees adjacent to the wall of the building which were a little overgrown. In my opinion none of the photographs shows anything that would discourage a potential tenant who was otherwise interested in taking a lease of the premises. The lack of maintenance, if it can be described as such at all, is relatively minor, and an intending tenant would presumably insist on these matters being addressed or require a reduction in rent to enable him to do so.

The defendants' submissions on mitigation

46 The defendants submitted that the plaintiff did not take reasonable steps to mitigate his loss, by failing reasonably to maintain the premises so as to attract any potential lessee. In their written submissions, they said that the plaintiff sat back in expectation that the defendants would pay the rent, but they withdrew that submission at the hearing. They made to alternative submissions as to assessment of damages.

47 The defendants contended that the plaintiff should be allowed a reasonable period for the re-letting of the premises, to (say) July 1999, and thereafter the damages should be assessed on the basis that the plaintiff would have been able, if he acted reasonably, to re-let the premises at a realistic monthly rental. As an alternative submission, the defendants urged the Court to find that the condition of the premises had been left to deteriorate to such a state that the plaintiff should not be entitled to recover for rent at all, after July 1999. I reject these submissions.

48 The defendants relied particularly on the fact that the plaintiff had discontinued paid advertising in about May 1999. In my opinion, however, it was reasonable for the plaintiff to decide, having advertised reasonably extensively up until that time, and in view of the depressed economic circumstances of the area, that it would be pointless to continue to pay money for advertising, and that a better strategy would be to rely on the advertising signs on the premises, and direct approaches and word-of-mouth. The standard required of a plaintiff is not, according to the case law on mitigation, overly high, and I am satisfied having heard the evidence that the plaintiff reached the standard with respect to paid advertising.

49 The evidence indicates that reasonable attempts were made to find a tenant by direct approaches and word-of-mouth, and that adequate advertising signs were placed on the premises. Although one of them had blown down for a period of time, the length of which is unclear, it appears that one sign remained in place, facing the busiest of the three streets to which the premises had frontages.

50 For the reasons I have already given, I reject the contention that there was a failure to mitigate by virtue of failure adequately to maintain the premises.

51 As to the damage to the office, I have taken that into account in my assessment of damages for loss of rent. I do not believe, in all the circumstances, that the evidence shows a failure to mitigate by avoiding damage of this kind over any period before June 2001. Although the plaintiff personally did not inspect the interior of the premises during the preceding 12 months, he had instructed managing agents and a gardener to look after his interests, and in my opinion that was an adequate means of mitigation in the circumstances of this case.

Conclusions

52 The defendants have failed to discharge the onus placed upon them to show that the plaintiff has not mitigated his loss. The plaintiff is therefore entitled to damages in the sum of $106,148 plus interest in the sum of $14,481.

53 I shall therefore enter judgment for the plaintiff for $120,629. Interest on the unpaid judgment debt will accrue in accordance with the Supreme Court Rules. I shall hear submissions as to costs.

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Last Modified: 11/14/2001