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Source: https://qldbusinesspropertylawyers.com.au/feed/

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<title>Supplier stays mum on closure plans: chook grower cries fowl</title>
<link>https://qldbusinesspropertylawyers.com.au/supplier-stays-mum-on-closure-plans-chook-grower-cries-fowl/</link>
<dc:creator><![CDATA[Peter Carter]]></dc:creator>
<pubDate>Tue, 24 Sep 2024 00:33:47 +0000</pubDate>
<category><![CDATA[Misleading conduct]]></category>
<guid isPermaLink="false">https://qldbusinesspropertylawyers.com.au/?p=20360</guid>
<description><![CDATA[Agricultural investors Phil Feitelson and Jacques Vorster have failed in a five-year pursuit of poultry Bartter Enterprises for allegedly misleading them by staying silent about the thought it was giving to closing its Steggles processing factory in Ipswich. Their company PJEV Pty Ltd had an initial win by quickly entering default judgment when the time […]]]></description>
<content:encoded><![CDATA[Agricultural investors Phil Feitelson and Jacques Vorster have failed in a five-year pursuit of poultry Bartter Enterprises for allegedly misleading them by staying silent about the thought it was giving to closing its Steggles processing factory in Ipswich.
Their company PJEV Pty Ltd had an initial win by quickly entering default judgment when the time expired for Bartter to file a notice that it intended to defend the $9.5mn claim in the Supreme Court in May 2019.
<img fetchpriority="high" decoding="async" class="alignleft wp-image-20368 size-medium" title="Chook grower cries fowl: Supplier sued for allegedly misleading them by staying silent on closure plans" src="https://qldbusinesspropertylawyers.com.au/wp-content/uploads/iStock-1270392109-300x200.jpg" alt="" width="300" height="200">
The processor successfully had the default judgment set aside and went on to eventually snatch victory when Chief Justice Helen Bowskill ruled against them following a three-day trial in Brisbane.
By way of background, PJEV had been investigating the $9.75mn acquisition of a broiler chicken production farm at Donnybrook north of Caboolture not far from the broiler farms they already operated – to supply Bartter’s competitor, Inghams – at Elimbah.
Broiler farms raise chickens from hatchlings – a few hours or a few days old – to table weight, before they are trucked off to be processed.
They are dependant on having reliable supply contracts with a nearby processor like Bartter who supplies its product to consumers under the Steggles and Lilydale brands.
The processor supplies the chicks, feed and medical supplements and is responsible for trucking the birds in and out to and from the grower’s poultry sheds.
The chicken farmer provides the land and sheds – with the requisite government and local government approvals – and equipment, labour and oversight for growing healthy chickens and in return receives a fee per fattened bird delivered.
PJEV’s 2016 Donnybrook deal was not conditional on receiving a new processing contract with Bartter or an assignment of the seller’s existing one, but it was something the pair claimed to have been depending upon.
After agreeing the purchase price and entering into a call option deed for the farm’s purchase, Vorster had a 5 to 10 minute phone conversation in August 2016 with state manager Mr Rapa about a number of things.
It was not in dispute that Rapa said Bartter would be unlikely to refuse an assignment of the Donnybrook broiler contract as he and Feitelson appeared to be suitable, experienced growers.
The pair were sufficiently familiar with the processor contract to not require any legal advice with respect to the right reserved to the processor to terminate same on three months notice if it closes its processing plant.
They went ahead to exercise the call option and nominated PJEV – a company they incorporated specifically for that purpose – as buyer for the deal that completed in November 2016.
Bartter consented to the assignment of the seller’s processor contract for the remaining two-years of its term but in August 2017, the company received notice terminating it to coincide with the closure of the Steggles processing plant in Ipswich in January 2018.
A termination notice stating “we have long tried to avoid this decision” was taken by the investors to mean that the closure decision had been in the works for some time.
Their lawsuit alleged Bartter had engaged in misleading or deceptive conduct contrary to the provisions of the Australian Consumer Law by failing to disclose something so significant that Vorster had a reasonable expectation of being informed of it in August 2016.
Its claim was for the loss it incurred by having gone ahead with the Donnybrook acquisition (a “no transaction” case) and alternatively, its loss of profit over the 12-month period during which it had no processor revenue until such time as it managed to secure a contract with Inghams from the start of 2019.
The chief justice was most immediately concerned with what precisely had been said by Rapa in his conversation with Vorster bearing in mind the former had no knowledge then of any closure decision and had told Vorster that approval of any processor contract assignment had to come from CEO/owner Simon Camilleri.
She observed that the contract term and its assignment appeared to be a low priority for discussion in his brief conversation with Rapa.
Having satisfied himself Bartter would see no conflict given his other dealings with Inghams and that no major upgrades were required at the farm, Vorster raised the grower contract only to request Bartter supply him with a letter of intent to approve its assignment, to satisfy their financier.
His claim to have been told by Rapa that Bartter would also grant a five year extension of the grower contract was rejected by the judge. She accepted Rapa would not have given that assurance without the paperwork in front of him to see if it included a renewal provision.
Chief Justice Bowskill accepted the evidence of the Camilleri brothers that no decision had been made to close the Steggles plant until July 2017.
There was no evidence it was probable as at the date of the Rapa conversation that the Ipswich plant would close in or about 2017 but because closure had been considered, it was as a possibility.
Bartter was not though obliged to have shared its internal high-level, confidential considerations with a potential assignee – who had a commercial relationship with its competitor – when it had not even done so with its manager Mr Rapa.
The court concluded – even if a breach had been made out – that PJEV had not established reliance on it to complete the Donnybrook because by its own “self-assessment”, it had concluded any plant closure was “highly unlikely”.
In any event, because PJEV had not been incorporated until after the Rapa discussion in August 2016, it could not contend that it relied on anything that occurred before then.
<a href="https://archive.sclqld.org.au/qjudgment/2024/QSC24-114.pdf" target="_blank" rel="noopener">PFJV Pty Ltd v Bartter Enterprises Pty Ltd [2024] QSC 114 Bowskill CJ, 6 June 2024</a>
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<title>Lottery win a bust for reticent former contributor</title>
<link>https://qldbusinesspropertylawyers.com.au/lottery-win-a-bust-for-reticent-former-contributor/</link>
<dc:creator><![CDATA[Peter Carter]]></dc:creator>
<pubDate>Sun, 22 Sep 2024 21:12:10 +0000</pubDate>
<category><![CDATA[Commercial & consumer law]]></category>
<guid isPermaLink="false">https://qldbusinesspropertylawyers.com.au/?p=20358</guid>
<description><![CDATA[Lottery syndicates – driven by a long odds dream that members will one day share in riches – are common in Australian communities. Many rely on handshake promises and keep no records of contributions. Consider the case of 76 yr-old Mark Bowling who in August 2022 purchased a ticket in a lotto draw from a […]]]></description>
<content:encoded><![CDATA[Lottery syndicates – driven by a long odds dream that members will one day share in riches – are common in Australian communities.
Many rely on handshake promises and keep no records of contributions.
<img decoding="async" class="alignleft wp-image-20367 size-medium" title="Lottery win a bust for reticent former contributor; handwriting expert called to give evidence" src="https://qldbusinesspropertylawyers.com.au/wp-content/uploads/iStock-1010630260-300x200.jpg" alt="" width="300" height="200">
Consider the case of 76 yr-old Mark Bowling who in August 2022 purchased a ticket in a lotto draw from a newsagency south of Sydney.
He had done so on behalf of a syndicate that had comprised several unemployed residents of an apartment complex who each received social security benefits on which they were almost totally dependent.
Bowling would collect $20 cash from each of the others and invest that sum – with his own $20 – at a local newsagency.
The syndicate had minor wins from time to time which were used to purchase tickets -sometimes over several weeks – freeing members from having to contribute for that period.
Alan Way had been a contributing member from April 2019 until at least September 2021.
By August 2022 the syndicate consisted only of Bowling, 89-yr-old Moya Posar and – so he claimed – the reticent Alan Way.
The win by Bowling’s ticket of the $5mn Saturday Lotto first prize set off a bitter dispute that has only just been resolved.
From the winnings he paid Way $200,000 as a gift in recognition of his earlier contributions and $400.000 to Posar.
The remaining $4.4mn went to his relatives, in an apparent attempt to protect his own Centrelink entitlements and those of Posar.
Once Way learned that the winnings were vastly more than what he previously understood them to be, he filed legal proceedings in the NSW Supreme Court claiming to be a member of the syndicate right up until the winning ticket was purchased.
He contended he had paid whatever sum Bowling requested from time to time and produced a hand written diary in which he had recorded $20 contributions on a regular fortnightly basis from July 2021 to 18 August 2022.
To counter that argument, Bowling engaged handwriting expert Steve Dubedat to provide an opinion as to whether the entries referring to payments to Bowling for Lotto were “contemporaneous with other entries apparently made on that date or whether they were made at a different time”.
Dubedat performed microscopic and infrared examinations using a video spectral comparator and examined the diaries for ink transference to determine the sequencing of ink strokes and the relative dating of ink entries.
The handwriting expert concluded the diary entries were synchronous to a high degree which was very unusual but not that the specific entries challenged by Bowling had been inserted later.
Justice James Hmelnitsky was thus left to decide between the two competing historical accounts solely on their plausibility and the credibility of each protagonist.
Way’s case depended on proving Bowling had for a long time set out to deceive him so that when the riches inevitably appeared he could be shafted.
Bowling on the other hand needed to convince the court Way had dishonestly recreated diary entries but only once he learned that there was about $1.5mn to be gained by doing so.
“This is an inherently more plausible theory,” ruled the judge. “The numerous discrepancies between the diary entries and the otherwise verifiable facts make it all the more compelling”.
Way had not – so decided the court – contributed to the purchase of the winning ticket and had ceased contributing to the syndicate in September 2021.
His claim was dismissed and for what it is worth, Way was ordered to pay Bowling’s legal costs of the claim and the four day trial.
The only challenge Bowling now faces, is to recover the $4.4 mn his relatives are holding for him and his 89-yr-old syndicate partner.
<a href="https://www.caselaw.nsw.gov.au/decision/19130805a244d9a35f89efe3" target="_blank" rel="noopener">Way v Bowling [2024] NSWSC 986 Hmelnitsky J, 16 August 2024</a>
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<title>Careless agent to blame for open house blaze disaster</title>
<link>https://qldbusinesspropertylawyers.com.au/careless-agent-to-blame-for-open-house-blaze-disaster/</link>
<dc:creator><![CDATA[Peter Carter]]></dc:creator>
<pubDate>Sun, 22 Sep 2024 01:44:09 +0000</pubDate>
<category><![CDATA[Agency practice]]></category>
<guid isPermaLink="false">https://qldbusinesspropertylawyers.com.au/?p=20356</guid>
<description><![CDATA[The burning to the ground of a prestige home during the course of an open house buyer inspection must be every real estate agent’s worst nightmare. Peter Bush had appointed Domain Residential to market his spacious two-story residence that commanded spectacular water views at Avalon in Sydney’s northern beaches, in April 2019. Domain sales executive […]]]></description>
<content:encoded><![CDATA[The burning to the ground of a prestige home during the course of an open house buyer inspection must be every real estate agent’s worst nightmare.
Peter Bush had appointed Domain Residential to market his spacious two-story residence that commanded spectacular water views at Avalon in Sydney’s northern beaches, in April 2019.
<img decoding="async" class="alignleft wp-image-20369 size-medium" title="Careless agent to blame for open house blaze disaster" src="https://qldbusinesspropertylawyers.com.au/wp-content/uploads/iStock-157977847-300x225.jpg" alt="" width="300" height="225">
Domain sales executive Julie Bundock was charged with supervising an open house on the last Saturday in May in advance of an auction scheduled the following week.
She had opened up the home on at least four earlier occasions and as usual, had arranged for the four tenant occupants to be away for the duration of the morning’s inspection.
To enhance presentation, the agent removed two bedsheets hanging on a makeshift clothesline on the front deck and placed (or perhaps threw) them on to a shelf in a downstairs bedroom.
The shelf was about 20cm below a wall light that she switched on as she left the room and closed the bedroom door.
The home erupted in flames about 20 minutes later, just as the first would-be buyers began to walk through the front door.
Devastated by the calamity, Bush sued the agency for his loss. The tenants did likewise for the value of their destroyed belongings.
They contended that the blaze was caused by the heat generated by the wall light igniting the bedding Bundock had tossed on the shelf.
The sole issue for determination when the lawsuits came before the NSW Supreme Court was the cause of the fire.
Bundock had lamented at the scene “I think that’s what started the fire” by throwing the sheets on a shelf in the bottom bedroom up against a light.
But when giving testimony she claimed she had carefully “draped [the sheets] over the front and around the sides of the shelf”.
Justice David Hammerschlag was not impressed. “Her denials that she did what she is reported to have done, are untruthful,” he wrote in the 16-page judgment.
But had the sheets been ignited by the heat of the light?
Bush relied on the testimony of Phillip Glover – a career firefighter and fire investigator –that the probable origin of the fire was the bedding which had been put so close to the wall light.
On the other hand, Domain’s expert – chartered chemist Peter Jeffrey who held qualifications in forensic science – argued that any conclusion the fire was started by the bedsheets was unsupported by evidence.
He asserted Glover’s conclusion was inconsistent with accepted forensic methodology and was at best, a mere suspicion. The fact that the fire occurred after the bedding was thrown near the light was a mere coincidence – he reasoned – and its cause must be considered “undetermined”.
The judge considered the coincidence contention “fanciful” and without having to rely on Glover’s opinion, ruled the factual evidence sufficient to establish the agent’s actions “were the probable (if not the certain) cause of the fire”.
Judgement was entered against Domain Residential Northern Beaches Pty Limited in favour of the tenants for $120,000 and for Bush in the sum of $741,000. Bundock was not named personally as a defendant.
<a href="https://www.caselaw.nsw.gov.au/decision/18e4ff0124e78b1558665426" target="_blank" rel="noopener">Coulter v Bush; Coulter v Domain Residential Northern Beaches Pty Ltd [2024] NSWSC 267 Hammerschlag CJ in Eq, 19 March 2024</a>
]]></content:encoded>
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<item>
<title>Developer stymied in rising market rescission strategy</title>
<link>https://qldbusinesspropertylawyers.com.au/beautiful-modern-house-with-garden/</link>
<dc:creator><![CDATA[Peter Carter]]></dc:creator>
<pubDate>Sat, 21 Sep 2024 01:40:41 +0000</pubDate>
<category><![CDATA[Contract termination]]></category>
<guid isPermaLink="false">https://qldbusinesspropertylawyers.com.au/?p=20354</guid>
<description><![CDATA[In a rising property market, some developers no doubt look for an opportunity to escape pre-sale contracts to escalate the return on their investment. Even more so the case where the costs of construction comes in at a multiple that had previously been unthinkable, of the build cost estimate. A dispute over 15 off-the-plan Royal […]]]></description>
<content:encoded><![CDATA[In a rising property market, some developers no doubt look for an opportunity to escape pre-sale contracts to escalate the return on their investment.
Even more so the case where the costs of construction comes in at a multiple that had previously been unthinkable, of the build cost estimate.
<img loading="lazy" decoding="async" class="alignleft wp-image-20364 size-medium" title="Developer’s rising market rescission strategy stymied" src="https://qldbusinesspropertylawyers.com.au/wp-content/uploads/iStock-1148845445-300x200.jpg" alt="" width="300" height="200">A dispute over 15 off-the-plan Royal Pines Projects contracts at around $500,000 each for condominiums near the eponymous golf course and resort in Benowa on the Gold Coast, provides a case study of how a rising market rescission might be attempted.
As construction was nearing completion and it was apparent the plan was about to be registered, the buyers’ solicitors wrote on 1 July 2024 to their counterparts opposite, requesting access for valuers appointed by their client’s financiers to conduct inspections of the various lots.
Later that day the developer’s solicitors gave notification the plan had registered and called for settlement in 14 days – as allowed for under the contracts – but did not respond to the access request.
Further access requests having been ignored, the buyers’ made an urgent application to the Supreme Court contending that although there was no specific requirement for the seller to allow pre-settlement access for a valuation inspection, such obligation was implied.
Before the hearing of that argument Justice Peter Applegarth had scheduled before him on Thursday 11 July, the sellers notified that they would consider each buyer’s request for valuation access.
They stressed they had not responded earlier only because of site accessibility issues due to the ongoing presence of tradesmen conducting.
On hearing the application relating to the implied duty, the judge heard that by failing to respond for a full week, the developer had left insufficient time for most buyers to have valuations completed in time for settlement on 16 July.
The seller had thus denied – so ran the buyers’ argument – sufficient time to have valuations completed and thereby could not rely on their failure to settle on the due date as grounds for terminating the contracts.
Because of the rapid pace of the court proceedings, no material was filed to address each individual buyer’s finance and valuation requirements.
Justice Applegarth was thus not in a position to make findings on 12 July in respect of each buyer or grant the declaratory relief the buyers sought.
He ruled though, that a term was implied in each contract requiring each party cooperate to allow the other party the contracts’ benefit.
He further reasoned that having regard to that implied term and “the commercial reality” that buyers would be relying on financiers, the seller should have allowed access when requested.
The seller’s one-week delay in even responding to the request was thus unreasonable and amounted to a breach of duty.
On that basis the court granted injunctions to protect the buyers’ positions by restraining the seller from purporting to terminate their contracts in reliance on a failure to settle on 16 July.
Royal Pines sought an urgent hearing of an appeal to challenge those rulings. The court of appeal obliged by hearing argument on 25 July at the conclusion of which, the court unanimously dismissed the appeal instanto.
The appeal judges’ decision published on 13 August observed that while none of the contracts were specifically subject to finance, they contemplated in their terms – e.g. by requiring the buyer to ensure any financier never lodged a caveat over the lot – that funds for the purchase might be borrowed.
Further – contrary to the developer’s submission – the judge had been entitled to take judicial notice of the fact that buyers are likely to obtain finance to complete such a contract, “either because they needed finance to complete or because of the negative gearing taxation advantages available” where the purchase is an investment.
“That is a very common method of purchasing homes and investment properties in Australia,” remarked Justice Jean Dalton in giving the lead judgement of the court.
The appeal court also ruled because the 14-day settlement notice was to be given at a time “reasonably determined” by the seller, it was required to act reasonably in determining the time it chose to give the notice.
The buyers were thus permitted to have their financiers’ valuers inspect their lots and then proceed to settlement on properties that had likely significantly appreciated in value above what they each were required to pay.
<a href="https://archive.sclqld.org.au/qjudgment/2024/QSC24-149.pdf" target="_blank" rel="noopener">Brightman & Ors v Royal Pines Projects Pty Ltd [2024] QSC 149 Applegarth J, 15 July 2024</a>
<a href="https://archive.sclqld.org.au/qjudgment/2024/QCA24-147.pdf" target="_blank" rel="noopener">Royal Pines Projects Pty Ltd v Brightman [2024] QCA 147 Dalton JA and Wilson and Crowley JJ, 13 August 2024</a>
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<title>The full bottle: Bordeaux château flops Aussie wine injunction claim</title>
<link>https://qldbusinesspropertylawyers.com.au/the-full-bottle-bordeaux-chateau-flops-aussie-wine-injunction-claim/</link>
<dc:creator><![CDATA[Peter Carter]]></dc:creator>
<pubDate>Tue, 19 Mar 2024 23:31:20 +0000</pubDate>
<category><![CDATA[Misleading conduct]]></category>
<guid isPermaLink="false">https://qldbusinesspropertylawyers.com.au/?p=20321</guid>
<description><![CDATA[A Bordeaux wine estate’s recent injunction claim against a Tasmanian winemaker has produced a rich blend of intriguing information about the international wine business and Australian wine consumption. Vieux Château Certan produces two types of expensive French red wine using various high-end grapes. It sued Australian brand Pipers Brook Vineyard, a company majority owned by […]]]></description>
<content:encoded><![CDATA[A Bordeaux wine estate’s recent injunction claim against a Tasmanian winemaker has produced a rich blend of intriguing information about the international wine business and Australian wine consumption.
Vieux Château Certan produces two types of expensive French red wine using various high-end grapes.
<img loading="lazy" decoding="async" class="alignleft wp-image-20325 size-medium" title="The full bottle: Bordeaux château flops Aussie wine injunction claim" src="https://qldbusinesspropertylawyers.com.au/wp-content/uploads/iStock-1423384412-300x200.webp" alt="" width="300" height="200">It sued Australian brand Pipers Brook Vineyard, a company majority owned by Kreglinger for wrongly representing an association with and passing-off as its elite château product.
VCC’s Federal Court injunction claim in Melbourne claimed a high degree of visual similarity between the presentation of its wine – the use of a pink cap, a label featuring a stately rural home, French text, and the name “Certan” – and Pipers Brook New Certan product and that the Tasmanian producer thereby represented it was in some way connected with them.
VCC produces 30,000 to 50,000 bottles annually but sales in Australia have been very limited. It retails here for between approximately $500 and $800 per bottle.
One of Pipers Brook’s estate – Mount Pleasant – is situated on land owned by Paul de Moor, a Kreglinger director who claimed to be a descendant of the Belgian wine merchant Georges Thienpont whose family had developed a VCC estate in Pomerol in the Bordeaux region of France that lies to the east of the Dordogne River, part of the wine making region referred to as the Right Bank.
To decide the contest Justice Johnathan Beach heard evidence from 10 wine experts over six days to determine whether or not the similarities were likely to mislead consumers of fine wine and members of the fine wine trade to erroneously believe there was such an association.
His 112 page judgment is a rich in observations from wine experts about French and Australian vino.
Imported wines accounted for 31.4% of the Australian wine market by value, (US $1.907 billion) of which the majority of those wines originate from France (37.6% by value) and New Zealand (40.1%).
Bordeaux represents just 1% of all French wine sold in Australia for off-premises consumption.
$25 is the demarcation price point for identifying non-premium product according to wine author and critic, Jeremy Oliver.
A consumer purchasing a wine under $25 is someone who “likes wine but is not obsessed by it”. This type of consumer, he said, may buy a $50 bottle of wine for a gift or special occasion, but not very often.
Such a consumer has minimal knowledge of Bordeaux estates but might have heard of some of the more elite châteaux like Lafite and Latour, and maybe even Haut-Brion from Graves.
Buyers of $70 to $100 bottles of wine on the other hand are likely to be people with a cellar or collection, are wealthier, better educated about wine, subscribers to a wine publication or website, users of wine apps such as Vino and Decanter, members of a wine club or a wine group and visitors to wineries much of which they do to gain knowledge they can show off.
A typical Australian buyer of a $500 Pomerol wine would generally obtain a personal allocation from a “negociant” and buy it to consume at the optimum time a decade or so later.
Tasmanian pinot noir is typically light to medium body in structure and of medium flavour intensity – he observed – whereas the premium wines from the right bank in Bordeaux deliver significant depth of flavour and structure. In his opinion, they could hardly be more different.
Mr Oliver said that in his experience a Tasmanian pinot noir drinker would be more expected to gravitate to and be far more interested in Burgundy and Rhone wine, unless they are an individual who likes and purchases every style of wine, which is rare.
Other experts gave evidence including wine writer and critic Jane Faulkner, wine importer and distributor Daniel Airoldi, MW Master of Wine Andrew Caillard, Negociants Australia’s Timothy Evans and wine judge Philip Rich.
None of these experts were in Justice Beach’s view “representative of the ordinary and reasonable consumer”.
Huon Hooke – a professional wine writer and critic – and Ms Faulkner both swore they thought the pink cap and label similarities and name “Certan” spoke to them of a connection between Pipers Brook and VCC.
In its defence Pipers Brook argued that despite the similarity of appearance, there was no risk of confusion because few Australian consumers of Tasmanian pinot noir would have heard of, far less be able to recall much if anything about the VCC product even if they had at one time or another encountered it.
After all, the brand described it as Pinor Noir from Tasmania not a Bordeaux from France.
And, so ran their argument, New Certan is sold in a Burgundy shaped bottle – the bottle shape used for pinot noir – whereas VCC Wine is sold in a classic Bordeaux (cabernet sauvignon) shaped bottle.
Justice Beach agreed. Very few consumers would ever have been exposed to the pink cap and other visual features of the VCC presentation and, he thought, they would not be representative of the ordinary and reasonable consumer.
That said, he accepted that those very fortunate people who can afford to collect wines from Pomerol and Right Bank châteaux – typically deep enthusiasts – might also be prepared to buy a $75 to $95 Tasmanian pinot noir.
Thus by a thin margin he was satisfied VCC has made out its case that at lease that narrow class of consumers – members of the fine wine trade who had knowledge of the French original – were likely to have been misled or deceived into thinking that the New Certan wine had some association with VCC.
That though was only up to the time Pipers Brook changed the presentation of its New Certain pinot noir. The change to a bronze cap and an off white, straight-edged label, eliminated any prospect of confusion and therefore CVV’s request for an injunction should be refused.
The judge – in assessing what loss VCC had suffered by reason of the “passing-off” for that limited period to a very limited class of consumer – concluded there had been no loss or damage to it from Piper Brook’s conduct.
The judge also found de Moor had not created the label with any intention to deceive or mislead: “His motivations for creating the New Certan wine were quite personal,” derived from his familial connection to VCC in that he was in fact the grandson of Georges Thienpont’s only daughter.
Justice Beach accepted Piper Brook’s undertaking not to sell the remaining 1,755 bottles of New Certan in pink cap bottles that had previously been marketed on the Kreglinger website and via the Qantas Frequent Flyer loyalty program.
He also refused CVV’s demand that the Piper Brook trademark for “New Certan” be cancelled on the ground of its similarity to its “Vieux” (old) Certan label because that argument wrongly assumed Australian consumers understand the meaning of that word and would recollect the name Vieux Château Certan.
Because each party had had “some measure of success” on their arguments, he ordered that Pipers Brook was not required to pay any of CVV’s legal costs of its claim.
<a href="https://www.judgments.fedcourt.gov.au/judgments/Judgments/fca/single/2024/2024fca0248" target="_blank" rel="noopener">Societe Civile et Agricole du Vieux Chateau Certan v Kreglinger (Australia) Pty Ltd [2024] FCA 248 Beach J 15 March 2024</a>
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<title>Buyer falls flat: No PEXA extension for lender’s failure to settle</title>
<link>https://qldbusinesspropertylawyers.com.au/buyer-falls-flat-no-pexa-extension-for-failure-to-settle/</link>
<dc:creator><![CDATA[Peter Carter]]></dc:creator>
<pubDate>Mon, 18 Mar 2024 21:12:35 +0000</pubDate>
<category><![CDATA[Property development]]></category>
<guid isPermaLink="false">https://qldbusinesspropertylawyers.com.au/?p=20319</guid>
<description><![CDATA[A property developer who signed up the $4 million buy of a 52 acre development site in Rockbank, in Melbourne’s outer west in August 2017 has stumbled at the finish line when it failed to have finance available to settle 5 years later. The contract required VS Property to settle with sellers Nick and Sherryn […]]]></description>
<content:encoded><![CDATA[A property developer who signed up the $4 million buy of a 52 acre development site in Rockbank, in Melbourne’s outer west in August 2017 has stumbled at the finish line when it failed to have finance available to settle 5 years later.
The contract required VS Property to settle with sellers Nick and Sherryn Zurzolo on 5 November 2020.
<img loading="lazy" decoding="async" class="alignleft wp-image-20328 size-medium" title="A property developer whose failure to settle a $4 mil buy of a 52 acre development site in Rockbank has lost his case to force the seller to complete" src="https://qldbusinesspropertylawyers.com.au/wp-content/uploads/iStock-147875257-300x200.webp" alt="" width="300" height="200">
After signing, a dispute arose with the relevant water authority – to which the buyer became a party – in relation to the vendors’ grant of an easement to the authority over part of the subject land.
The dispute remained unresolved due in part to the buyer seeking a significantly higher amount of compensation for the easement than that which the Zurzolos had agreed to.
The settlement date of 5 November 2020 passed and with no resolution in sight.
In March 2022, the Zurzolos – who were facing personal and financial difficulties due to the delay – called for settlement on or before 2 May 2022.
Buyer and seller were both aware the value of the land had also increased significantly.
After a further failure to settle on 11 May, the Zurzolos purported to terminate the contract due to the purchaser’s failure to settle.
But then in late June they served a 14 day default notice on VS calling for settlement by 12 July under pain of termination.
The water easement dispute was eventually settled in July with a settlement deed that agree the settlement date be extended to 15 September 2022.
The buyer was however unable to put the finance required to settle in place and completion did not occur.
The vendors – who had been ready, willing and able to settle – terminated pursuant to the settlement deed provision that treated the contract as automatically at an end by reason of the buyers not completing on the due date.
VS contested the termination and issued court proceedings for specific performance.
Its first contention was that the settlement deed automatic termination provision was not engage because the failure to settle was not a “default” on its part resulted only by reason of delay in their lender’s processes.
Justice Michelle Quigly agreed there was a distinction between the terms ‘fault’ and ‘default’ but held the buyer’s conduct was indeed a ‘default’ notwithstanding it arose from someone else’s ‘fault’.
The buyers further contended the termination – in the absence of a prior 14 day ‘Default Notice’ that the contract itself otherwise provided – was invalid.
Justice Quigly also rejected this argument. In her view, the failure to settle triggered the operation of the termination clause but not to bring it to an automatic end but the settlement deed term specifying contract coming “immediately to an end” effectively overrode the 14 day default notice period in the contract itself.
By notification of termination in the absence of a default notice, the sellers had – she ruled – lawfully terminated the contract.
Not to be outdone, the buyers also argued the seller’s termination was in breach of a special condition requiring – in the case of an electronic settlement – the parties to ‘do everything reasonably necessary to effect settlement on the next business day’ if it does not occur by the end of the agreed date.
Justice Quigly noted the ‘next day’ settlement provision was only to apply in circumstances where the PEXA electronic workspace was ‘locked’ at the nominated settlement time but settlement has not occurred by 4:00pm (or 6:00pm, if the nominated settlement time is after 4:00pm).
She noted the provision dealt with a situation where settlement does not occur because of some technical malfunction arising after the workspace has ‘locked’ and dismissed the assertion that the clause could be relied on in these circumstances.
“I reject the notion that Special Condition 2.7 can be relied on in circumstances where settlement did not occur at the scheduled settlement time because the purchaser had failed to secure finance by the agreed settlement date,” she wrote in her 47 page judgment.
“It would be a nonsensical interpretation to [say] it provides carte blanche to allow an additional day to complete settlement for a reason not associated with the mechanism and requirements of the technical procedure of the electronic settlement regime”.
The buyer’s claim for specific performance was dismissed and damages for the buyer’s breach were ordered as was the removal of the buyer’s caveat. The judgment does not refer to any amount of damages that the seller’s had claimed.
<a href="https://www.austlii.edu.au/cgi-bin/viewdoc/au/cases/vic/VSC/2024/89.html" target="_blank" rel="noopener">VS Property and Holding Pty Ltd v Zurzolo [2024] VSC 89 Quigly J, 6 March 2024</a>
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<title>Agency in rent roll contract win; judge’s errors prolong 6 year fight</title>
<link>https://qldbusinesspropertylawyers.com.au/agency-in-rent-roll-contract-win-judges-errors-prolong-6-year-fight/</link>
<dc:creator><![CDATA[Peter Carter]]></dc:creator>
<pubDate>Mon, 18 Mar 2024 09:58:09 +0000</pubDate>
<category><![CDATA[Rent roll]]></category>
<guid isPermaLink="false">https://qldbusinesspropertylawyers.com.au/?p=20316</guid>
<description><![CDATA[Investors who defaulted on a rent roll buy have been ordered to pay more than $200,000 for the disruption caused to the seller by their last-minute refusal to settle. Babstock Pty Ltd sold its $800,000 residential management portfolio to Marburg Investments Pty Ltd – of which Dorothy Marburg was the sole director – in December […]]]></description>
<content:encoded><![CDATA[Investors who defaulted on a rent roll buy have been ordered to pay more than $200,000 for the disruption caused to the seller by their last-minute refusal to settle.
Babstock Pty Ltd sold its $800,000 residential management portfolio to Marburg Investments Pty Ltd – of which Dorothy Marburg was the sole director – in December 2017.
<img loading="lazy" decoding="async" class="alignleft wp-image-20327 size-medium" title="Agency in rent roll contract win; judge's errors prolong 6 year fight " src="https://qldbusinesspropertylawyers.com.au/wp-content/uploads/iStock-1270110980-300x200.webp" alt="" width="300" height="200">
The rent roll contract was due to complete in February but after a number of extensions settlement was set for May 2018.
Alan Marburg – Dorothy’s husband who was to operate the business despite no experience in the role – spent 4 weeks or so prior to completion in the seller’s Bellbowrie office to learn the ropes and get a taste of how hard managing residential tenancies, tenants and owners might be.
The couple also engaged an expert consultant – who reported only trivial irregularities in the management paperwork – to satisfy themselves of the agency’s regulatory compliance.
When it came time to stump up with the cash, Mr Marburg alleged flaws he had discovered in entry condition reports (ECRs) for some 30 of the 148 properties under management even though the buyer had notified it was satisfied with such issues on due diligence.
The seller called for settlement noting that the rent roll contract allowed for managements with unrectified documentation to be retrospectively rejected on the adjustment date 90 days following settlement and any money paid for them, refunded to the buyer from the retention fund.
Babstock had already announced the sale and the retirement of its key staff to its owners and introduced Mr Marburg as a competent and reliable successor by the time the buyers’ new solicitor contended that the seller was “in anticipatory breach” and purported to terminate.
The seller rectified most of the buyer-claimed paperwork defects before nominating a time and place for completion on the due date and when that didn’t occur, again one week later.
The Marburgs refused to settle and alleged the seller to have been in breach. They then sued for recovery of their $40,000 deposit. The agency counterclaimed for the managements and revenue it lost after having to go cap in hand back to owners to get new appointments signed up.
Judge Kenneth Barlow ruled in the Marburgs’ favour in the District Court in December 2020 by accepting their “anticipatory breach” contention.
That decision was reversed by the Court of Appeal in April 2022 which concluded the seller had not breached the sale contract when insisting on settlement regardless of paperwork deficiencies.
Its adherence to rent roll contract usual practice – for rejected managements to be accounted for at the end of the 90-day retention period if the deficiencies remained unrectified – was upheld.
But because Judge Barlow had addressed neither the Marburg’s misleading conduct claim nor the agency’s counterclaim, the appeal judges remitted the case back to him for further argument and a decision on those points.
In his second judgment in February 2023, the judge ordered the contract to be rescinded under Australian Consumer Law s 237 by reason of Alan Marburg having relied on misleading pre-contract statements.
Those statements – contained in the business broker’s Sale Information Booklet – were that the ECRs were 100% “fully signed by all tenants and agency staff” and all properties were in the immediate locality.
He concluded “at least 19 of the ECRs were not signed” or otherwise non-compliant and “16 properties were in suburbs other than Bellbowrie and Moggill” and that the buyer had relied on the former misleading statement (ECRs) but not on the second (property locations).
The ACL s 237 ruling was made notwithstanding the entitlement to such relief hadn’t been sought by Marburg “in pleadings or at the conclusion of the trial” and had only been asked for in submissions more than three years following the trial’s end.
The matter inevitably went to appeal for a second time.
On 25 January 2024, the Court of Appeal again reversed Judge Barlow’s decision by reason of the “substantial injustice” of numerous errors in his reasoning.
And in the absence of the determination of essential points by the judge, the appeal court was required to come to its own factual conclusions on many critical issues.
The appeal judges reasoned Babstock had correctly terminated the contract due to the buyer’s repudiation and thus “had an accrued right to keep the deposit and an accrued right to damages for breach of contract” which it assessed at $190,000.
Justice Jean Dalton in giving the lead judgment of the court concluded – by examining evidence that the trial judge hadn’t – that just 13 of the ECRs could not be described as “fully signed by all tenants and agency staff”. Oher irregularities were to trivial to be of concern.
Regardless, the buyer company could not have relied on the representations – which the seller conceded had been misleading – because the testimony of Dorothy Marburg, its sole director, was that “she had nothing to do with the proposed purchase…it was all her husband’s doing”.
“Mrs Marburg gave extraordinarily unhelpful evidence,” observed Justice Dalton. “I cannot see that any decision-maker could regard it as reliable, or a sufficient basis for a finding of reliance by Marburg Investments or by her as guarantor”.
Even if Mr Marburg was a de facto director – something the evidence hadn’t established – he knew there were ECR deficiencies but decided to go ahead at due diligence regardless.
“The trial judge was wrong to find that Marburg Investments relied upon the literal truth of the representations in the brochure…. he ought to have found to the contrary”.
Justice Dalton further reasoned – in overruling the trial judge’s finding that somehow the buyer was still relying on the brochure representations when deciding not to terminate on due diligence grounds – that even if such reliance had been proven, the chain of reliance causation had been broken by the buyer choosing to commission its own report upon which to rely.
Finally, Justice Dalton observed the buyer had not proved that it would have sustained any loss as a result of the misleading statements, had it been required to complete the contract. It could after all, have retrospectively rejected the tenancies still suffering from incomplete paperwork and be refunded the amount it had paid for them on the adjustment date. These were issues the trial judge did not consider.
In a summation – with which Justices Bond and Mullins concurred – Justice Dalton declared “the overwhelming weight of the evidence was against the trial judge’s findings; he misunderstood the significance of some important evidence; and he nowhere rests his finding on his observations of the Marburgs as they gave evidence”.
Rescission of the contract should not have been ordered because the buyer’s case was simply wrong on all points.
The appeal court – in doing what in retrospect the trial judge ought to have done in December 2020 – awarded Babstock over $200,000 in damages and interest as well as ordering the company and Mrs Marburg as guarantor to pay all the seller’s legal costs of the hearings and appeals.
Once costs are accounted for, the buyers will likely have spent the full equivalent of the purchase price and – instead of an asset – have only the indelible scars that 6 years of ultimately unsuccessful litigation can leave, to show for it.
<a href="https://archive.sclqld.org.au/qjudgment/2024/QCA24-003.pdf" target="_blank" rel="noopener">Babstock Pty Ltd & Anor v Laurel Star Pty Ltd & Anor (No 5) [2024] QCA 3 Mullins P and Bond and Dalton JJA, 25 January 2024</a>
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<title>Court voids “utterly crushing” 417% p.a. interest; 70% p.a. ok</title>
<link>https://qldbusinesspropertylawyers.com.au/court-voids-utterly-crushing-417-p-a-interest-70-p-a-ok/</link>
<dc:creator><![CDATA[Peter Carter]]></dc:creator>
<pubDate>Sun, 17 Mar 2024 02:04:31 +0000</pubDate>
<category><![CDATA[Penalty]]></category>
<guid isPermaLink="false">https://qldbusinesspropertylawyers.com.au/?p=20314</guid>
<description><![CDATA[A private lender’s interest rate of 417% has been ruled to be “utterly crushing” but a court has approved its 70% per annum rate on a $430,000 six-month loan. Connie Huang and her adult daughter Stephanie Chien applied for a “cash flow funding” loan in October 2019 through a website controlled by broker MaxFunding. They […]]]></description>
<content:encoded><![CDATA[A private lender’s interest rate of 417% has been ruled to be “utterly crushing” but a court has approved its 70% per annum rate on a $430,000 six-month loan.
Connie Huang and her adult daughter Stephanie Chien applied for a “cash flow funding” loan in October 2019 through a website controlled by broker MaxFunding.
<img loading="lazy" decoding="async" class="alignleft wp-image-20324 size-medium" title="A private lender's interest rate of 417% has been ruled to be "utterly crushing" but a court has approved its 70% per annum rate on a $430,000 six-month loan." src="https://qldbusinesspropertylawyers.com.au/wp-content/uploads/iStock-496766546-300x225.webp" alt="" width="300" height="225">They offered their Burwood residence to which they attributed a value of $3 million as security and disclosed that it had a current $1.5 million mortgage debt to NAB.
MaxFunding referred the loan application to lender Commercial N who approved an advance repayable in 26 weeks with interest at 1.36% per week except when the lender notified in writing that it would accept interest at a lower rate of 0.35% per week.
The borrowers received advice from a local solicitor they had chosen from those suggested in the area by the broker and signed the loan and security documents which also provided that the higher interest rate was payable in all circumstances when the borrower was in default.
The valuation for the property came in late and low – just $2.6 million – resulting in reduction in the amount of the advance from $600k to $430k and denying the borrowers the additional cash they needed to service the interest for the six-month period.
The proceeds were fully deployed to pay out arrears on the NAB loan, clear another short-term $370k loan and meet the lender’s expenses.
When it came time to pay the first interest payment of $6,325 in November, they asked for a deferral and paid it in early December after a default notice had issued.
No further payments were made.
In March 2020 they were advised a payout figure of $530,000.
The lender filed suit in November 2022 to recover the principal and interest of $3.2 million calculated on a monthly compounding basis at the higher rate which annualised at 70.72%.
The borrowers retaliated with a challenge to the higher rate arguing it was as a penalty and therefore void.
The contract provided the higher rate was payable at all times unless notified otherwise and was not one that increases the rate of interest upon failure to make prompt payment.
The lender contented the interest rate provisions thus did not operate to penalise the borrower for breach but rather provided for a ‘concessional’ lower rate whilst ever there has been no default.
Put another way – it argued – the liability to pay interest at the higher rate compounding monthly “does not impose an additional or different contractual liability that arises upon the non-observance of the primary contractual obligation”.
Justice Trish Henry agreed. “The formula provides for an amount of interest that I would readily accept is seemingly extravagant, out of all proportion or unconscionable due to the operation of the capitalisation /compounding factor [but] I am not satisfied that those clauses are unenforceable as contractual penalties,” she decided.
Mrs Huang and Ms Chen also argued the terms were unconscionable having regard to s 12CC(1) of the ASIC Act and s 22(1) of the ACL and should therefore be varied.
The lender had known they were at a ‘special disadvantage’ – they alleged – particularly because Mrs Huang did not speak, read or write English and no translation certificate had been procured for her signing the documents. Further they were both financially experienced and the security documents were long and complicated.
They also submitted that a reasonable lender would have known they were certain to have defaulted once the advance was reduced and there were no surplus funds to pay interest while their exit strategy was put in place.
Justice Henry observed that an “unconscionability” finding requires more the mere breach of accepted standards of commercial behaviour and more than mere element of hardship or unfairness.
Rather, she explained “it requires conduct that is characterised by a substantial departure from that which is generally acceptable commercial behaviour that is so plainly or obviously contrary to what is expected, that it is offensive”.
The judge agreed that Mrs Huang’s inadequate English seriously affected her ability to make a judgement as to her own best interests and she therefore suffered a special disadvantage but concluded the loan was not unconscionable on that ground given there was “no doubt” both borrowers “understood the risk of not meeting their obligations to repay loan monies, particularly where secured by a registered mortgage against their residence”.
Neither was the “very high” 70.72% annual interest rate unconscionable in the absence of expert evidence stating same to be “excessive or even unusual in the context of a short-term financing by way of a second mortgage”.
That said, monthly capitalisation that lead to total interest of $3.2 million at an effective annual rate of about 417% “could never be said to be reasonably necessary for the protection of legitimate interests [and] is utterly crushing”.
She declared the monthly capitalisation provision to be void by reason of its unconscionability and ordered the interest to be calculated on a simple basis at 70.72% p.a. totalling $882k.
<a href="https://www.caselaw.nsw.gov.au/decision/18d5c73facd1f7f769f9c55c" target="_blank" rel="noopener">Commercial N Pty Limited v Huang & Ors [2024] NSWSC 23 Henry J, 31 January 2024</a>
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<title>DIY litigant opens up court on Sunday for fence dispute</title>
<link>https://qldbusinesspropertylawyers.com.au/diy-litigant-opens-up-supreme-court-on-sunday-for-a-fence-dispute/</link>
<dc:creator><![CDATA[Peter Carter]]></dc:creator>
<pubDate>Sat, 11 Nov 2023 23:40:37 +0000</pubDate>
<category><![CDATA[Fences and boundaries]]></category>
<guid isPermaLink="false">https://qldbusinesspropertylawyers.com.au/?p=20291</guid>
<description><![CDATA[A neighbour spat over trees and a dividing fence dispute that drafted not one but two Supreme Court duty judges into the the courtroom for an urgent weekend sitting has been listed for a final hearing just over three weeks after the court proceedings were filed. Rhonda Slattery’s residential lot – in picturesque Davistown near […]]]></description>
<content:encoded><![CDATA[A neighbour spat over trees and a dividing fence dispute that drafted not one but two Supreme Court duty judges into the the courtroom for an urgent weekend sitting has been listed for a final hearing just over three weeks after the court proceedings were filed.
Rhonda Slattery’s residential lot – in picturesque Davistown near Kincumber on the NSW Central Coast – adjoined that of 30 yr career builder David Dunn and his wife Kim Dunn.
<img loading="lazy" decoding="async" class="alignleft wp-image-20300 size-medium" title="DIY litigant opens up Supreme Court on Sunday for a fence dispute" src="https://qldbusinesspropertylawyers.com.au/wp-content/uploads/iStock-1467254245-300x225.webp" alt="" width="300" height="225">In discussions over the development of their site – for which they had recently gained approval – she learned the Dunns wanted to replace the existing boundary fence which had been in situ for 16 years.
Ms Slattery floated two options for modification of the fence – part of which likely encroached on the Dunns’ land – neither of which were suitable to the Dunns.
Their proposal was to demolish the fence and rebuild a new one at their expense precisely on the common boundary and in the course of which “trim” the trunks of two paperbark trees and a concrete slab which they claimed encroached on to their land.
Slattery was concerned the proposal would imperil her trees and damage the concrete slab.
Her investigations revealed that the development consent from the NSW Central Coast Council did not provide approval for fencing work or demolition of the existing boundary fence.
Her anxiety escalated to alarm when she received a letter from the Dunns on Saturday 7 October notifying her they intended to commence boundary fence demolition works at 7.00am on the coming Monday.
Her response was to prepare paperwork for an urgent court application and drive to Sydney the following morning to open up the Supreme Court registry to file it and to find a judge to make orders to prevent the demolition.
Ms Slattery swore in her affidavit that the application needed to be dealt with urgently because – among other issues – she had two large dogs that need to be confined.
Siting in the Land and Environment Court, Justice Moore indicated he would grant the temporary injunctions to the self-represented – provided she gave the “usual undertaking”, ie to compensate the Dunns for losses suffered if their position prevailed over hers at the final hearing – restraining the Dunns from interfering with either of the paperback trees or demolishing any part of the concrete slab.
The application to restrain the demolition of the dividing fence was though – in his view – outside the jurisdiction of that court.
He therefore transferred the proceedings to the weekend Supreme Court equity judge, Justice Trish Henry, who considered the fence application later that Sunday also on an ex parte basis.
Ms Slattery was – after having been again called on to give the “usual undertaking” and again obliging by giving it – granted her the stop-demolition injunction which she was ordered to serve on the Dunns before 8pm that night.
The matter came before Justice Henry again two days later when she transferred it back to the Land and Environment Court thereby conferring on it the jurisdiction to deal the dividing fence issue which it had initially lacked.
When the matter came before Justice Sarah Prichard in the Land and Environment Court on 12 October, Ms Slattery was represented by counsel. Mr and Mrs Dunn were self-represented but were armed with an arborists report and a survey plan to prove the alleged encroachments and the suitability of the proposed trimming of the paperbark trees’ trunks.
The judge referred the matter for an on-site mediation and listed it for a further directions hearing on 18 October indicating it would be then listed for final hearing if not resolved. The injunctions were extended once again as were Ms Slattery’s undertakings.
The parties participated in the mediation but that proved unsuccessful and when the matter was next dealt with on 18 October, Ms Slattery appeared by telephone from the Central Coast, self-represented.
Justice Pritchard expressed her consternation that the matter hadn’t been resolved and warned them of the consequences of adverse costs orders and in Ms Slattery’s case, the risk of having to pay compensation by reason of her undertaking.
When Ms Slattery informed the judge that she didn’t understand the obligations comprised by the “usual undertaking”, the term was explained to her in some detail prompting the response “Yes, I do” to the judge’s “Do you now understand ?”
The matter was listed for a final hearing on 2 November but there is no record of a court determination on that date.
This may suggest that the parties – when faced with the risk of adverse costs orders and in Ms Slattery’s case the undertaking risks – may have resolved the dispute among themselves with a modicum of common sense.
Slattery v Dunn [2023] NSWLEC 107 Pritchard J, 18 October 2023 <a href="https://www.caselaw.nsw.gov.au/decision/18b3f8430cce82a01276d8ae" target="_blank" rel="noopener">Read case</a>
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<title>Lessor floored: make good costs reduced by windfall benefit</title>
<link>https://qldbusinesspropertylawyers.com.au/lessor-floored-make-good-costs-reduced-by-windfall-benefit/</link>
<dc:creator><![CDATA[Peter Carter]]></dc:creator>
<pubDate>Sat, 11 Nov 2023 03:12:58 +0000</pubDate>
<category><![CDATA[Commercial, retail & industrial leasing]]></category>
<guid isPermaLink="false">https://qldbusinesspropertylawyers.com.au/?p=20289</guid>
<description><![CDATA[Landlords and tenants squabbling over make good costs in commercial leases should consider this dispute relating to an industrial warehouse leased to a heavy machinery hire company. Kingston Industries took up occupation of the western Sydney premises in August 2010 and after its lease extensions expired in July 2017, it continued occupation on a month-to-month […]]]></description>
<content:encoded><![CDATA[Landlords and tenants squabbling over make good costs in commercial leases should consider this dispute relating to an industrial warehouse leased to a heavy machinery hire company.
Kingston Industries took up occupation of the western Sydney premises in August 2010 and after its lease extensions expired in July 2017, it continued occupation on a month-to-month basis until December that year.
<img loading="lazy" decoding="async" class="alignleft wp-image-20299 size-medium" title="Lessor floored; make good costs reduced by windfall benefit" src="https://qldbusinesspropertylawyers.com.au/wp-content/uploads/iStock-89282768-300x200.webp" alt="" width="300" height="200">Landlord Diana Morabito claimed Kingston was responsible for the make good cost of replacing concrete surfaces in the warehouse and the car park which she claimed had been shattered by the tenant’s steel track earthmoving equipment.
She demanded the former tenant pay $344,000 in make good costs plus lost rent of $295,000 for the 18-month period between when Kingston departed and the date the premises were re-let in June 2019.
The lease – which specified a permitted use of “Plant Hire/Distribution” – contained the usual provisions in relation to the tenant’s maintenance and repair obligations but excluded damage caused by the landlord’s negligence or which occurred “outside its control” from the realm of tenant’s responsibility.
The terms also prohibited the tenant from “allowing the floor to be broken or damaged by overloading”.
The landlord was obliged to “maintain the structure of the premises in good repair” but it gave no warranty or representation that they were suitable for the tenant’s use.
When Kingston refused to pay, the landlord filed proceedings to recover her make good costs in the NSW Supreme Court.
Morabito contended that the permitted use did not extend to moving steel tracked equipment on the concrete surfaces without using protective measures of mapping or steel plates.
Justice Elisabeth Peden had to consider whether machinery with steel tracks was “plant”- and therefore permitted – that would ordinarily be expected to be moved around.
She saw no need to resort to the principle that lease covenants including those in relation to permitted use “are strictly construed against a lessor” because the word “plant” unambiguously included the tenant’s steel tracked equipment – some of over 22 tonnes in weight – of which the landlord had been aware.
Suspecting that the concrete surfaces were defective, Kingston engaged engineers to inspect and test the damaged paving.
Kingston managed to locate Fernando Algorry, the engineer who originally designed the concrete surfaces who swore that – because he was not provided with instructions about the type required – he had adopted a standard specification for concrete suitable for light to medium industry and machinery with pneumatic tyres only.
He also attested that the concrete supplied to the job – by reference to the few cartage delivery documents the landlord produced in discovery – was even inferior to the grade of product he had specified.
And had he known what was actually supplied, he “would not have certified” the low grade concrete that had been supplied.
This allowed Kingston to argue the failure in the concrete fell into one of the exceptions to its maintenance and repair obligations because it was caused by the landlord’s negligence; beyond its control; or it had occurred as a result of “fair wear and tear”.
Justice Peden accepted Kingston’s submission that Ms Morabito’s failure to produce many missing cement truck delivery dockets entitled the court to conclude they would not benefit her case and that it should conclude all batches delivered had been of low grade.
She went on to conclude that the paving damage had not been caused by Kingston’s machinery or overloading but rather by “a matter beyond its control and for which it ought not be liable”.
She went on to consider the validity of landlord’s figures to decide the damages to which she would be entitled should an appeal court decide otherwise regarding the concrete defects.
In the absence of the landlord taking reasonable steps to mitigate her loss by promptly recruiting a replacement tenant, her claim for lost rent was dismissed.
The court also decreed that any damages for the cost to replace the damaged paving should be reduced by “the betterment obtained from the new concrete”. That benefit was – having regard to the projected 50 year “life” of the new concrete paving – an additional 7.5 years.
“A successful plaintiff should not be awarded a windfall amount by reason of obtaining a better outcome, than had the defendant performed its obligations”. Similar reductions apply if a landlord gains “greater efficiency or productivity” from the repairs conducted from make good funds.
Thus Kingston – if it were to be liable at all – would have had to pay the replacement cost for the slabs, reduced in proportion by such “betterment”.
And a $58,000 claim for other make good items was reduced to $3,320 because Mrs Morabito had not demonstrated the damage was caused by Kingston as opposed to “fair wear and tear”.
Morabito v Kingston Industries Pty Ltd [2023] NSWSC 1020 Peden J, 31 August 2023 <a href="https://www.caselaw.nsw.gov.au/decision/18a265aafda7b644a3371cce" target="_blank" rel="noopener">Read case</a>
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