Posts Tagged Robert Hay Property Law Melbourne

AirBnB guests occupied apartment under a lease

VCAT recently held that a tenant had not breached a lease by permitting users of AirBnB to stay in the tenant’s apartment. The landlord argued that the tenant had breached the lease by subletting the apartment in breach of the lease. The landlord sought possession of the apartment. The cornerstone of a lease is that the tenant has “exclusive possession” of the premises. The landlord’s case failed in VCAT because the Tribunal held that the AirBnB guests did not have exclusive possession of the apartment and therefore did not occupy the apartment under a sublease. VCAT held that the nature of the legal relationship between the tenant and the AirBnB guests was a licence to occupy, rather than a lease.

The landlord applied for leave to appeal. The application was determined this morning by Justice Croft. See: Swan v Ueker and Greaves [2016] VSC 313. Justice Croft granted leave to appeal and granted the landlord’s appeal. His Honour held that VCAT either identified the wrong legal test concerning exclusive possession or applied the correct legal test wrongly.  The judgment contains a detailed analysis of what is meant by “exclusive possession”.

Justice Croft said that this was not a case about the merits of AirBnB’s arrangements but rather the legal character of the arrangement. His Honour also said that a broad prohibition in the lease on sub-leasing, assigning the lease, granting any licence to occupy all or part of the premises or otherwise parting with possession without the landlord’s prior consent would avoid the need to characterise the nature of the arrangement as a sub-lease or a licence.

I will be writing further about this judgment.

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Valuers must furnish detailed reasons for rental determinations under Retail Leases Act

Valuers determining the “current market rent” rent under leases concerning retail premises must ensure that the valuation:

  • contains “detailed reasons” for the determination; and
  • “specify the matters to which the valuer had regard in making the determination”.

See: s.37(6)(b) and (c) of the Retail Leases Act 2003.

Both requirements must be met; a determination that specified the matters to which the valuer had regard but failed to provide detailed reasons for the determination would not comply with s.37(6).

In Higgins Nine Group Pty Ltd v Ladro Greville St Pty Ltd [2016] VSC 244 Justice Croft had to consider what was required of a valuer in “giving detailed reasons” and “specifying the matters” to which he or she had regard in making the determination. Higgins concerned an application for leave to appeal from a decision given in VCAT.

After reviewing case law concerning provisions in New South Wales similar to s.37(6), His Honour said at [40] that it was not sufficient for a valuer to “leap to a judgment”: the valuation “must disclose the steps of reasoning” and that both the Victorian and NSW provisions “eschew and do not entertain any ‘blinding flash or light’ as satisfying their ‘requirements’”.

In Higgins the valuer examined the tenant’s financial records and determined the rent using the “profits method” of valuation for determining the rent. The tenant had a 24 hour liquor licence but traded only to 11pm. The valuer referred to the tenant’s actual sales and determined that an additional $536,782 was achievable in annual turnover for the business, being a 26% increase over the actual sales. The only indicator as to how that figure was arrived at was in comments made by the valuer in a document furnished after the valuation was made where he said the figure was derived:

“Based on the liquor licence in place, and comparable venues in the region which I hold on file.”

No details of the comparable venues were furnished.

The landlord sought to defend the valuation on the basis that it was an opinion of an expert and, given the valuer’s experience, that was sufficient in terms of reasoning for the purpose of s.37(6).

Justice Croft rejected the landlord’s argument and refused refused leave to appeal. His Honour referred to and agreed with the following analysis of the valuation given by the Tribunal:

“One might speculate that the Valuer placed considerable emphasis on the fact that the Tenant traded up until 11 pm in circumstances where the 24 hour liquor licence allowed it to trade well beyond that time. However, having to speculate as to how the Valuer formed his opinion is, in my view, contrary to what is required under s.37(6) of the Act. Moreover, no detail was provided as to what other venues were used as a comparator. That, of itself, raises a number of questions: Did those other venues have similar GLAR? Did they have the same type of liquor licence? Were they also being operated as a restaurant/bar? Was their location proximate or did they cater for the same demographic clientele? Without those details, I consider the reasoning to be deficient and not in accordance with the Act.”

His Honour said at [44] that the valuer’s reference to an undisclosed file of material upon which he had made an assessment was “worse than a mere ‘blinding flash of light’” and that the reasoning process was “entirely opaque”.

When a valuer is engaged the parties should refer the valuer to the requirement in s.37(6) to both provide detailed reasons and specify the matters to which the valuer had regard. A determination based on an opinion that does not disclose the valuer’s reasoning will not comply with s.37(6).

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Tenants should dispute rent nominated by landlord within time period specified in the lease

Tenants should dispute the rent specified by a landlord at a rent review date within the time specified by the lease. Dire consequences can follow if the time periods are ignored . The rent review process for setting the market rent commonly provides for:

  • the landlord to propose the new rent and, if the tenant does not object within a specified period of time, the rent proposed by the landlord is the new rent;
  • the rent to be determined by a valuer if the tenant objects to the rent proposed by the landlord.

The question often arises whether time is of the essence in the construction of clauses concerning rent reviews.

The starting point is the House of Lords decision United Scientific Holdings Ltd v Burnley Borough Council (1978) AC 904. In Mailman & Associates Pty Ltd v Wormald (Aust) Pty Ltd (1991) 24 NSWLR 80 (CA) Gleeson CJ referred with apparent approval to a summary of the effect of United Scientific in the judgment of Slade LJ in Trustees of Henry Smith’s Charity v AWADA Trading and Promotion Services Ltd (1983) 47 P & CR 607, 619 as follows:

“(1)      Where a rent review clause confers on a landlord or tenant a right for his benefit or protection, as part of the procedure for ascertaining the new rent, and that right is expressed to be exercisable within a specified time, there is a rebuttable presumption of construction that time is not intended to be of the essence in relation to any exercise of that right.

(2)       In a case where the presumption applies, the other party concerned may, if he wishes to bring matters to a head after the stipulated time for the exercise of the right has expired, give to the owner of the right a notice specifying a period within which he requires the right to be exercised, if at all; the period thus specified will if it is reasonable then become of the essence of the contract …

(3)       The presumption is rebuttable by sufficient ‘contraindications in the express words of the lease or in the interrelation of the rent review clause itself and other clauses or in the surrounding circumstances.’ …

(4)       Though the best way of rebutting the presumption is to state expressly that stipulations as to the time by which steps provided for by the rent review clause are to be taken is to be treated as being of the essence (see United Scientific Holdings Ltd v Bunley Borough Council per Lord Diplock [[1978] AC] at 936, and per Lord Salmon [[1978] AC] at 947), this is not the only way. Any form of expression which clearly evinces the concept of finality attached to the end of the period or periods prescribed will suffice to rebut the presumption. The parties are quite free to contract on the basis that time is to be of the essence if they so wish.”

The authorities make it plain that it is a question of construction of a lease whether there is express or implied rebuttal of the presumption that time is not of the essence

In Mailman the rent review provision the lease allowed the tenant a specific time to dispute the lessor’s assessment of the market rent and spelt out the consequence of failing to dispute the assessment within than time. There was no clause stating that time was of the essence. The relevant clauses were as follows:

“Prior to the expiration of fourteen (14) days…[from the service of the lessor’s notice], the Lessee may, by notice in writing, dispute the amount set out..[in the Lessor’s notice}…(clause 2.02(b))”

Another clause provided that if the lessee did not serve a notice of dispute within the prescribed time it was deemed to have agreed that the amount set out in the notice was current market rental.

The Court of Appeal held unanimously that the lease evidenced an intention that the 14 day time stipulation was of the essence. The decisive factor was the deeming of the tenant to have agreed to the rent if it failed to serve the notice of dispute.

The issue of whether time periods in rent review clauses are of the essence was revisited recently in Sentinel Asset Management Pty Ltd v Primo Moratis  [2014] QSC 200. The tenant failed to serve a notice disputing the rent specified by the landlord within the time prescribed by the lease with the consequence that iff time was of the essence the rent would increase by 22%. The critical clause provided that:

“Unless the Tenant gives the Landlord a notice stating that the Tenant’s assessment of the current annual market rent of the Premises at the relevant Market Review Date within 30 days after the Landlord gives the its notice, the Rent on and from the relevant Market Review Date is the current annual market rent in the Landlord’s notice.”

The lease also said that if “the Tenant gives a notice…. on time” (underlining added) the parties must attempt to agree the rent in writing failing which a valuer could be be appointed to determine the market rent.

The court found that time was of the essence with the consequence that the rent specified by the landlord applied.

The court also rejected an argument that the rent specified by the landlord had to be “reasonable”. The rent specified by the landlord in its notice was higher than the rent contained in an expert valuation obtained by the landlord.

The lesson is that it is critical for tenants to respond within the time prescribed by the lease.

 

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Date of termination confirmed as the date for assessing damages for breach of contract for sale of land

The general rule is that damages for a breach of a contract for the sale of land are assessed at the date of the breach. The task is usually to compare the contract price with the value of the land a the time of the breach. If the value is greater than the contract price, the vendor has suffered no loss. But if the value is less than the contract price, it may be inferred that the discrepancy is an element of the vendor’s loss (Vitek v Estate Homes Pty Ltd [2010] NSWSC 237 at [179]).

 

In Ng v Filmlock Pty Ltd [2014] NSWCA 389 the NSW Court of Appeal heard an appeal by a purchaser of land from a judgment where the trial judge had assessed the vendor’s loss as being the difference between the contract price and the price obtained on a resale. The contract restricted the use of the resale price as an element in the quantification of loss to a resale within 12 months of termination but otherwise the vendor was entitled to damages for breach of contract. The resale took place more than 12 months after termination and therefore the general law applied. The land had declined significantly in value by the time of the resale.

The vendor argued that there was no available market as at the date of the breach of contract and therefore the resale price was relevant to the calculation of loss. The argument was based on a proposition said to be derived from the decision of the English Court of Appeal in Hooper v Oates [2014] Ch 287: the correct date for assessment of damages for breach of contract is the date of breach only where there is an immediately available market for the subject matter of the sale.

Emmett JA, after noting that the English Court of Appeal did not explain what was meant by an “immediately available market”, said at [26]:

“While a sale of land might take longer than the sale of other types of assets, it does not follow that there should be a departure from the general rule, which focuses on the value of the land as at the date of termination of the contract. There is good reason for that approach where the damages sought by the innocent seller are loss of bargain damages. The critical date is when the bargain was lost.”

While the appeal was successful the court accepted that in an appropriate case the interests of justice may require that “the date of breach” rule should not apply and damages may be assessed by reference to a later date, such as the contract price on resale. See: Johnson v Perez (1988) 166 CLR 351 at 367.

Gleeson JA said at [58]:

“….whether a market value may be assessed in the case of land as at “the date of breach” is ultimately a question of fact. Of necessity, the sale of land will generally require a period to elapse for proper marketing. Unsuccessful attempts by a vendor to resell the property are not determinative as to whether there is no market for the land. Much will depend on the usual method of sale for the land in question having regard to its location, particular characteristics, the range of likely interested purchasers, and the time usually required for proper marketing of land of that type. Expert valuation evidence is likely to have a significant role.”

And at [59]:

“It needs to be emphasised that that departure from the general rule is not a matter of discretion: Clark v Macourt [2013] HCA 56 at [109] (Keane J). A vendor claiming damages assessed at a date later than “the date of breach” must demonstrate that there are particular reasons on the facts which would make it unjust to apply the prima face or “usual” measure of damages.”

 

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Parties can agree to higher standard than that imposed by s.52 of Retail Leases Act

 

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Section 52 of the Retail Leases Act 2003 implies into a “retail premises” lease an obligation on landlords to maintain “in a condition consistent with the condition of the premises when the retail premises lease was entered into” things such as the “structure of, and fixtures in” the premises, “plant and equipment at retail premises” and “the appliances, fittings and fixtures provided under the lease by the landlord relating to the gas, electricity, water drainage or other services”.

When is the lease entered into if an option is exercised? Is it the date when the lease commenced or when the new lease arising by reason of the option being exercised commences?

In Ross-Hunt Pty Ltd v Cianjan Pty Ltd[1] the Tribunal held that that the relevant date was the date that the new term commenced following the exercise of an option and not the commencing date of the first term of the lease.

A further question then arose about whether a provision in a lease that imposes a higher standard on a landlord than that imposed by s.52 is void under s.94 on the ground that it is contrary to or inconsistent with s.52.

In Savers INC (ARB 075 452 185) v Herosy Nominees[2][the Tribunal held that if parties wished to contract for more than was provided for under s.52 they were free to do so; in that case the leases (and earlier leases to which the landlords and tenant were parties) contained terms that obliged the landlords to undertake repairs to the premises and imposed obligations that were more onerous than those imposed by s.52.

In the recent decision of Di & Li Australia Pty Ltd v Jin Dun Pty Ltd[3] Senior Member Riegler rejected an argument that lease provisions which imposed more onerous obligations on the landlord than those imposed by s.52 were void. The Senior Member said:

“[20] In my view, s 52 does not prohibit the parties from agreeing to extend the Landlord’s obligations to repair or maintain its installations. The situation might be different if s 52 was expressed as a provision limiting a landlord’s obligation to maintain plant and equipment to a condition consistent with its condition when the lease was entered into. However, the provision does not expressly limit a landlord’s obligations but rather, imposes what I consider to be a minimum obligation on a landlord.

[21] There is nothing inconsistent or contrary to s 52 for the parties to increase that obligation and in the present case, it made eminent sense for the Landlord to continue to have that obligation upon renewal, given that it held the reversionary interest in the plant and equipment.

Further, it is not the case that s 52 is devoid of any limitation. In particular, sub-section (3) sets out various circumstances which limit its operation.

Those circumstances do not include limiting the comparator to the commencement of the Lease.

In my opinion, it was open for Parliament to have limited the operation of s 52(2) of the Act to the current term by stating words to the effect that a lease is not to include a term which requires the landlord to maintain plant and equipment, other than in a condition commensurate with the condition of the plant and equipment at the commencement of the lease.

However, the section is not expressed in such prohibitory terms, nor is it expressed to indicate any intention on the part of the legislature to ‘cover the field’ in respect of a landlord’s repair liability.”

 

[1] [2009] VCAT 829.

[2]2011] VCAT 1160

[3] [2014] VCAT 349

 

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Undertaking as to damages must not be a ritual or a formality

 

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Parties seeking injunctions are required to offer an undertaking as to damages as the price for the injunction. All too often the undertaking is given lightly and without an understanding of the potential consequences.  If the person against whom the injunction is granted succeeds at trial and has suffered loss or damage the consequences can be severe. The inquiry is not whether the actual loss suffered was foreseen at the time the undertaking was given, but is whether loss of a kind actually sustained could have been foreseen.

In Love v Thwaites [2014] VSCA 56 the Court of Appeal upheld a trial judge’s order that the party who obtained an injunction pay damages and interest of more than $5,000,000 pursuant to an undertaking.

This disastrous outcome was the consequence of the appellant seeking and being granted an interlocutory injunction restraining the Roads Corporation from demolishing a property.

The appellant gave the usual undertaking as to damages. During the proceeding the appellant had been asked to consent to the discharge of the injunction but the requests were refused.

After the appellant’s proceeding was dismissed and the injunction discharged there was then a trial to determine the damages suffered by the Roads Corporation resulting from the granting of the injunction. The trial judge[1] set out the principles governing the assessment of damages as follows:

“30. In Davinski Nominees Pty Ltd v I&A Bowler Holdings Limited, Kaye J described the basis for the assessment of damages on an undertaking to the court as uncontroversial: damages flowing directly from the injunction and which could have been foreseen when the injunction was granted, following the decisions of the High Court in Air Express Limited v Ansett Transport Industries (Operations) Pty Ltd and European Bank Limited and Robb Evans of Robb Evans & Associates.

31.  In Air Express, Aickin J held that in a proceeding of an equitable nature ‘the damages should be those that flow directly from the injunction and which could have been foreseen when the injunction was granted’.

On appeal, Barwick CJ agreed with the reasoning of Aickin J. Gibbs J identified the generally accepted view to be that ‘the damages must be confined to loss which is the natural consequence of the injunction under the circumstances of which the party obtaining the injunction has notice’ adding that the party seeking to enforce the undertaking must show that the making of the order was a cause without which the damage would not have been suffered’.

Stephen J referred to the court having the power, as far as monetary compensation allows, to make good the harm of which the grant of the injunction was a cause and that but for it he would not have suffered. Mason J said generally speaking, so long as the claim for damages is not trivial or trifling, an enquiry should be directed and the defendant will be entitled to recover the loss which is the natural consequence of the grant of the injunction.

The causal connection between the damage and the injunction is to be identified from the purpose for which the undertaking as to damages is designed to serve. That object is to protect a party from damage sustained in the event that it emerges that the plaintiff is not entitled to the relief sought. Its purpose is not to protect the defendant from damage otherwise sustained.

32.  In European Bank, the High Court, in a joint judgment, affirmed Air Express, restating the significance of the nature of the undertaking. It is not a contract between parties or some other cause of action upon which a party could sue, but is given to the court for enforcement by the court. The joint judgment emphasised the phrase ‘which could have been foreseen’.

It is well established that for damage to be reasonably foreseeable it need only be damage of a type or character that is foreseeable or damage of a type or character that could not be considered unlikely.Roads Corporation submitted that the tortious concept ‘reasonable foreseeability’ is a wider concept than the contractual ‘reasonable contemplation’.

The High Court in European Bank makes it clear that the inquiry is not whether the actual loss suffered was foreseen at the time the undertaking was given, but is whether loss of a kind actually sustained could have been foreseen. “

(citations omitted)

The Court of Appeal dismissed the appeal. The Court accepted that the concept of mitigation of damage applied (at least by analogy) in this case.

Tate JA said at [62]:

“While there is no suggestion that the usual undertaking was here given lightly, the consequences that have flowed from the failure of Mr Love to make out his case at trial have been significant. In my view, these consequences provide a salutary lesson to practitioners and their clients to appreciate the conditions governing the grant of an interlocutory injunction. The usual undertaking carries serious risks; it would be wholly erroneous to view it as no more than a ritual or a formality.”

[1] Love v Thwaites (No. 4) [2012] VSC 521

 

 

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Mortgagor fails in last minute bid to stop auction

Bill Stark has posted an interesting article on his blog about a case concerning a defaulting mortgagor’s last minute unsuccessful attempt to prevent the sale of the mortgaged land. See: Melbourne Property Law Blog.  Attempts by mortgagors to prevent  sales proceeding are rarely successful and the price for an injunction preventing a sale proceeding is usually payment of the amount owing into court. In the case analysed by Bill (Pearl Beach Property Administration Pty Ltd v Wisewoulds Nominees Limited [2014] VSC 113)  the mortgagee advertised the property for sale at an auction with an expected price range of $3,900,00 – $4,200,000. The day before the auction the borrower “sold” the land for $5,000,000; however, the mortgagee did not consent to the proposed sale preferring to go to auction. The borrower sought an injunction on the day of the auction alleging that the mortgagee had breached its duty to act “in good faith and having regard to the interests of the mortgagor” under s.77(1) of the Transfer of Land Act 1958 and/or its obligations to the mortgagor under s.420A of the Corporations Act. The alleged bad faith was the mortgagee marketing the property for sale in a price range that was less than the valuation of $4,800,000 allegedly obtained by it. Despite the mortgagee not appearing at the hearing of the injunction  the injunction was refused.  Justice Dixon  held at [21] that “It was not properly open to infer a want of good faith or want of reasonable care in the conduct of the proposed sale from the fact that the property has been advertised as available within a range that is below the sworn valuation”.  His Honour said that under quoting did not mean that the property was likely to be sold at an undervalue at auction.  There is authority that a mortgagee is  not bound to withdraw a property from auction merely because private offers are made  See: Southern Goldfields Ltd v General Credits Ltd (1991) 4 WAR 138. See also Qorum Pty Ltd v Younger (1995) NSW Conv R 55-738 (BC9504362).  While it is usual for a mortgagee to sell mortgaged property by auction it is not a breach of duty by the mortgagee if property is sold by private contract. See: s77(1) of the TLA. However, where land is sold by private contract it is desirable for the mortgagee to obtain one or more estimates of the value of the mortgaged property from competent estate agents. See: Croft and Hay The Mortgagee’s Power of Sale, 2012, para 6.2. It is not a breach of duty merely because land is sold by private contract without advertising: the question is always whether the land sold in good faith and for a fair price. See: Vasiliou v Westpac Banking Corporation (2007 19 VR 229. The critical issue is the price obtained and not the presence or absence of advertising. See: Vasiliou at [63]. A mortgagee may also not be acting in bad faith by proceeding with an auction despite the existence of a lucrative offer for private sale if there is no evidence that the purchaser will be able to perform its obligations under the contract. See: Esanda Finance Corporation Ltd v C Conti (unreported, Supreme Court of Queensland, 15 January 1993, BC9303066).

 

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Proprietary estoppel – estopped party does not have to disprove reliance

 

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The High Court has rejected the notion that the onus of proof in relation to detrimental reliance can shift to the party said to be estopped. In Sidhu v Van Dyke [2014] HCA 19 0the Court had to consider the sufficiency of proof of detrimental reliance required to given rise to an equitable estoppel (proprietary estoppel).

The appellant and his wife owned land as joint tenants.

The trial judge found that the appellant had promised to give the respondent part of the land owned by him and his wife once that land was subdivided.

The appellant and the respondent formed a relationship which resulted in the respondent’s husband leaving her.

The respondent did not seek a property settlement from her husband because of the promises made by the appellant.

The trial judge accepted that respondent had worked on the land and gave up opportunities for employment and that these activities might  be sufficient to amount to detrimental reliance for the purpose of an equitable estoppel; however, Her Honour concluded that the respondent may well have done all or most of those things in any event.

This conclusion was based on answers given by the respondent in the course of cross-examination. The trial judge also held that it was not reasonable for the respondent to rely on a promise of a transfer of land when  performance depended on the land being subdivided and the consent of the appellant’s wife.

The Court of Appeal upheld the respondent’s contention that the trial judge erred in holding that it was unreasonable to rely on the promises.

The Court of Appeal also held that the onus of proof in relation to detrimental reliance shifted to the party said to be estopped (ie the male appellant) where inducement by the promise could be inferred from the conduct of the claimant (ie the respondent).

The Court of Appeal held that an award of equitable compensation measured by reference to the value of the respondent’s disappointed expectation was the appropriate form of relief, being the value of the land at the date of judgment.

The High Court rejected the notion that the onus of proof in relation to detrimental reliance shifted: reliance was a fact that had to be found and not imputed on the basis of evidence that fell short of proof of the fact; the respondent at all times bore the legal burden of proving that she had been induced to rely upon the appellant’s promises.

The Court said that the real question was the appropriate inference to be drawn from the whole of the evidence. The Court also held that the evidence established reliance.

As to the relief, the High Court said that “this category of equitable estoppel serves to vindicate the expectations of the represented against a party who seek unconscionably to resile from an expectation he or she has created”. See: French CJ, Keifel, Bell and Keane JJ at [77].

Had  the respondent been induced to make a relatively small, readily quantifiable monetary outlay on the faith of the appellant’s assurances, then it might not be unconscionable for the appellant to resile from his promises to the respondent on condition that he reimburse her for the outlay.

However,  the  Court decided that this case was one to which the observations of Nettle JA in Donis v Donis (2007 19 VR 577, at 588-589 were apposite:

“[H]ere, the detriment suffered is of a kind and extent that involves life-changing decisions with irreversible consequences of a profoundly personal nature…beyond the measure of money and such that the equity raised by the promisor’s conduct can only be accounted for by the substantial fulfillment of the assumption upon which the respondent’s actions were based.”

 

 

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Tenants beware of onerous “make good” obligations

 

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Lawyers acting for tenants often fail to advise their clients about the burden of the repair obligations imposed by the lease during the term of the lease and the “make good” obligations at the end.

These obligations can be particularly onerous in Victoria because of  cases such as Joyner v Weeks [1891] 2 QB 31.

In Joyner the landlord brought an action against the tenant upon a covenant in a lease that the tenant would leave the leased premises in repair at the end of the lease.

When the lease came to an end the premises were out of repair. The landlord proved before the official referee that the cost of putting the premises into repair was £70; however, the tenant claimed the landlord was entitled only to nominal damages because he had leased the premises to a third party who had covenanted to pull down and rebuild the premises and also to pay a higher rent than the defendant had paid and consequently there was no loss.

The official referee gave the landlord a farthing damages, and gave the tenant all the costs of the action; however, on appeal the Court of Appeal held that the measure of damages was the amount which the landlord proved to be the fair and reasonable sum necessary to put the premises into the state of repair in which he was entitled to have them left, being £70.

What is often referred to as the “rule in Joyner v Weeks” is not an absolute rule, but it is a prima facie rule. The effect of Joyner has been abrogated in some States but not in Victoria. Joyner was applied by the Full Court of the Federal Court in Bowen Investments Pty Ltd v Tabcorp Holdings Ltd (2008) FCR 494[1].

In a case similar to Joyner, the Supreme Court of Victoria  recently considered the consequence of a tenant failing to comply with a make good obligation that required it to maintain the premises in good repair during the currency of the lease and to deliver them up to the lessor at the end of the lease in as good condition as they were at the commencement of the lease, fair wear and tear excepted. The tenant breached the obligation to maintain the premises in good repair and failed to deliver them up at the end of the lease in good condition. The landlord conducted a complete refurbishment of the premises, including both internal and external reconfiguration and extensions. The tenant argued that the landlord’s refurbishment rendered the precise works necessary to meet its make good obligations theoretical or irrelevant and therefor the landlord had suffered no loss. Hargrave J rejected the tenant’s arguments and held that the landlord was entitled to recover the cost of performing the precise works which were reasonably necessary to bring the premises up to the state that they would have been in had the tenant complied with its make good obligations during and at the end of the lease. See: Fenridge Pty Ltd v Retirement Care Australia (Preston) Pty Ltd [2013]  VSC 464

 

[1] The appeal was dismissed by the High Court in High Court Tabcorp Holdings Ltd v Bowen Investments Pty Ltd (2009) 236 CLR 272.

 

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