AAP Engineering Pty Ltd v Fernlog Pty Ltd

Issues in dispute

1. It may accordingly be seen that the main issues in dispute between the parties are as follows: 1. What is the proper construction of the Lease particularly Clauses 5 and 6.4; 2. If, on the Lease's proper construction, the defendant is not obliged to pay the amounts sought for the electricity and water charges from utility companies under the Lease, is the defendant nevertheless obliged to pay such sums to the plaintiff under restitutionary principles; 3. If the answer to (b) is no, does the common law doctrine of estoppel by convention apply such that the defendant is nevertheless obliged to pay the amount for utility charges sought by the plaintiff; 4. If the answer to (c) is no, what amount, if any, is the plaintiff obliged to pay to the defendant under the cross-claim? It appears not to be in dispute that work was performed by the defendant for the plaintiff.

Relevant contractual principles applicable to the Lease

1. The parties handed up at the commencement of the hearing detailed outlines of written submissions. These submissions set out the relevant legal principles applicable in the different areas. These initial written submissions have been supplemented by additional written and oral submissions.
2. In Caringbah Investments Pty Ltd v Caringbah Business & Sports Club Ltd (In Liquidation) [2016] NSWCA 165, the Court of Appeal applied general principles relating to the construction of commercial contracts to a commercial lease. Generally speaking, no different approach needs to be taken in relation to the construction of a lease compared to other commercial agreements. See also Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd [2017] HCA 12 at [16]-[17].
3. In Cordon Investments Pty Ltd v Lesdor Properties Pty Ltd [2012] NSWCA 184 Bathurst CJ (with whom Macfarlan and Meagher JJA agreed) stated at [52] as follows: "[52] The principles underlying the construction of written contracts are well established and it is not necessary to deal with them at length. A contract is to be construed by reference to what a reasonable person would understand by the language in which the parties have expressed their agreement having regard to the context in which the words appear and the purpose and object of the transaction: Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451 at [22]; Toll (FGCT) Pty Ltd v Alphafarm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165 at [40]; International Air Transport Assn v Ansett Australia Holdings Ltd [2008] HCA 3; (2008) 234 CLR 151 at [53]. At least in the case of ambiguity, resort can be had to the surrounding circumstances known to the parties in interpreting the particular provision: Codelfa Construction Pty Ltd v State Rail Authority of NSW [1982] HCA 24; (1982) 149 CLR 337 at 352; Western Export Services Inc v Jireh International Pty Ltd [2011] HCA 45; (2011) 282 ALR 604."
4. In Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640; [2014] HCA 7, the majority of the High Court said the following at paragraph [35]: "[35] Both Verve and the Sellers recognised that this court has reaffirmed the objective approach to be adopted in determining the rights and liabilities of parties to a contract. The meaning of the terms of a commercial contract is to be determined by what a reasonable businessperson would have understood those terms to mean. That approach is not unfamiliar. As reaffirmed, it will require consideration of the language used by the parties, the surrounding circumstances known to them and the commercial purpose or objects to be secured by the contract. Appreciation of the commercial purpose or objects is facilitated by an understanding "of the genesis of the transaction, the background, the context [and] the market in which the parties are operating". As Arden LJ observed in Re Golden Key Ltd, unless a contrary intention is indicated, a court is entitled to approach the task of giving a commercial contract a businesslike interpretation on the assumption "that the parties … intended to produce a commercial result". A commercial contract is to be construed so as to avoid it "making commercial nonsense or working commercial inconvenience" [emphasis added].
5. In Mainteck Services Pty Ltd v Stein Heurtey SA [2014] NSWCA 184 Leeming JA (with whom Ward and Emmett JJA agreed) stated a number of important general principles relating to contractual construction at [73]-[85]. His Honour said as follows at paragraphs [80]-[84]: "[80] Mason J [in Codelfa at 352] was indicating that there are very real limits to the extent to which grammatical meaning can be displaced by contextual considerations. However, in order to determine whether more than one meaning is available, it may be necessary first to turn to the context. [81] Fourthly, what I have called "context" was formerly described as the "surrounding circumstances", and then, influenced by Lord Wilberforce in decisions such as Prenn v Simmonds [1971] 1 WLR 1381 at 1384 and Reardon Smith Line Ltd v Yngvar Hansen-Tangen [1976] 1 WLR 989 at 997, as the "matrix of facts". See Byrnes v Kendle [2011] HCA 26; 243 CLR 253 at [98]-[100] (Heydon and Crennan JJ) and J Carter, The Construction of Commercial Contracts (Hart Publishing, 2013), pp 8-9. [82] Although Lord Hoffmann in Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 All ER 98 at 114 referred to a "fundamental change" in the approach espoused by Lord Wilberforce, the "modern" contextual approach had nineteenth century precursors, at least in relation to commercial contracts. Without seeking to be exhaustive, the Earl of Selborne had deprecated and rejected the "extreme literalism" in the mercantile contract construed in McGowan v Baine [1891] AC 401 at 403 (contrast the (dissenting) speech of Lord Bramwell, who had required "necessity, or [something] approaching to it" in order to displace the "primary and natural meaning of the words": see at 409). To the same effect was Lord Herschell's rejection of a process of construction by reference to dictionary meaning, and insistence that contractual language must be "construed in a business fashion" and "interpreted in the way in which business men would interpret them" in Southland Frozen Meat and Produce Export Company Ltd v Nelson Brothers Ltd [1898] AC 442 at 444. The approach adopted by Lords Selborne and Herschell anticipated what was popularised by Lord Wilberforce in the following century. Professor Carter has examined the evolutionary process at pp 17-20 of his book referred to in the previous paragraph. [83] Fifthly, the approach endorsed in Woodside avoids the difficulty of identifying what is meant by "ambiguity", itself an ambiguous term, whose perception "differs from one judicial eye to the other": B & B Constructions (Aust) Pty Ltd v Brian A Cheeseman & Associates Pty Ltd (1994) 35 NSWLR 227 at 234. The various meanings of "ambiguity" in this context are described by M Walton, "Where now ambiguity?" (2011) 35 Aust Bar Rev 176 and D Wong and B Michael, "Western Export Services v Jireh International: Ambiguity as the gateway to surrounding circumstances?" (2012) 86 ALJ 57 at 67-69. [84] Sixthly, the approach to construction of written commercial contracts reflected in Woodside at [35] accords with what had been said in familiar passages in Pacific Carriers Ltd v BNP Paribas [2004] HCA 35; 218 CLR 451 at [22] (construction "requires consideration, not only of the text of the documents, but also the surrounding circumstances known to Pacific and BNP, and the purpose and object of the transaction"); Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; 219 CLR 165 at [40] ("The meaning of the terms … normally requires consideration not only of the text but also of the surrounding circumstances known to the parties, and the purpose and object of the transaction"); and the endorsement in Wilkie v Gordian Runoff Ltd [2005] HCA 17; 221 CLR 522 at [15] of the proposition that "Interpreting a commercial document requires attention to the language used by the parties, the commercial circumstances which the document addresses, and the objects which it is intended to secure". It means also that the Australian approach mirrors that adopted in England, New Zealand, Singapore and Hong Kong: Chartbrook Ltd v Persimmon Homes Ltd [2009] UKHL 38; [2009] 1 AC 1101; Vector Gas Ltd v Bay of Plenty Energy Ltd [2010] NZSC 5 ; [2010] 2 NZLR 444; Zurich Insurance (Singapore) Pte Ltd v B-Gold Interior Design & Construction Pte Ltd [2008] SGCA 27; 3 SLR(R) 1029 (where the court's reasons delivered by V K Rajah JA for the court survey much of the English decisions and academic literature); Fully Profit (Asia) Ltd v Secretary for Justice [2013] HKCFA 40; 6 HKC 374."
6. In the Caringbah Investments case, above, Bathurst CJ (with whom McColl and Macfarlan JJA agreed) stated as follows at [93]: "[93] The relevant principles of construction are well established. In Electricity Generation Corporation v Woodside Energy Ltd [2014] HCA 7; 251 CLR 640, the plurality reaffirmed that the meaning of the terms of a commercial contract is to be determined by what a reasonable business person would have understood them to mean. It requires consideration of the language used, the surrounding circumstances known to the parties and the commercial purposes or objects to be secured by the contract: at [35]; see also Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd [2015] HCA 37; 89 ALJR 990 at [46]-[52]."

Consideration of the construction of the Lease issue

1. In relation to the construction of the Lease issue, the plaintiff, in summary, makes the following submissions: 1. Electricity has been connected to the building of which the Premises forms part for the period of occupancy by the defendant of the Premises; 2. The meter measuring the electricity to the building also measured another building nearby also owned by AAP; 3. Water has been connected to the building of which the Premises forms part for the period of occupancy by the defendant of the Premises. The building has a meter measuring water usage. The meter measures water usage for the building and the only user of water to the building was the defendant during its occupancy of the Premises according to Mr Steyn in his affidavit, who it was submitted should be accepted on this issue; 4. However, it should be noted that Mr Steyn only commenced employment with the plaintiff in late 2014 and his knowledge of water usage is therefore limited to that extent. The evidence of the plumber, Mr Maidment, and Exhibit 1 establishes that there were two taps and two fire hoses also connected to the water meter external to the leased Premises (T42.36-43.17) although one of these taps was placed there at the request of Mr Williams, a director of the defendant. Mr Williams said he requested Mr Maidment to do this as he, in turn, was requested to arrange this by Mr Witchard of the plaintiff (T91.12); 5. The plaintiff received quarterly invoices from Sydney Water for water usage for the Premises which were paid by the plaintiff; 6. In 2009 the plaintiff installed a separate sub-meter to measure electricity use to the Premises and this was made known to the defendant. The sub-meter was not installed by an electricity utility authority. The sub-meter provided readings of electricity use for the Premises but for technical reasons (which are unexplained) two rows of lights within the Building near the dividing barrier on the plaintiff's side were included on the sub-meter: T71.10-.20. As a result, for the purposes of invoicing the defendant, the plaintiff in due course allowed a 10% discount to allow for the usage of those rows of lights; 7. The report of Dr Colin Grantham, a consulting electrical engineer, relied on for the proceedings, concludes that the sub-meter accurately measures electricity energy usage from the Premises. This was confirmed by Dr Grantham in cross-examination although he conceded that the 10% discount allowed was not a precise figure: T75.23; 8. In December 2012 the plaintiff discovered that notwithstanding that it had installed the sub-meter in 2009, the plaintiff had not been recovering from the defendant charges for the defendant's use of electricity at the Premises. After the exchange of various emails the defendant started making monthly payments of $5,000 towards the outstanding electricity amounts. Further invoices were sent by the plaintiff to the defendant for electricity and the defendant continued to pay instalments for the period up to 19 February 2015; 9. The defendant has not made any further payments towards electricity usage since 19 February 2015 after which date it vacated the Premises and has made no payments towards water usage. The amounts sought by the plaintiff from the defendant for electricity to the Premises was deducted from the amounts claimed by the defendant for construction work done for the plaintiff; 10. The plaintiff claims an entitlement to recover the amount of outstanding charges for water and electricity from the defendant pursuant to Clause 6.4 of the Lease. It is submitted that on the proper construction of Clause 6.4, the plaintiff is entitled to claim for the charges it paid for water and electricity connected to the Premises even though invoices were forwarded to the plaintiff and not to the defendant and included for some use or potential use of water and electricity by the plaintiff; 11. The relevant principles applicable pursuant to High Court authority and authorities from the Court of Appeal which are set out above is that the meaning of the terms of a commercial contract is to be determined by what a reasonable business person would have understood them to mean in the surrounding circumstances. It is assumed that the parties intended to produce a commercial result and a commercial contract is to be construed so as to avoid it making commercial nonsense or working commercial inconvenience; 12. It is submitted by the plaintiff that the commercial purpose of Clause 6.4 of the Lease is to make the defendant as tenant liable to pay for all utility charges for services such as water and electricity which are connected to the Premises and that that construction would be consistent with liabilities imposed on tenants in a commercial lease. It is not to the point that Clause 5 states that outgoings are "nil". The plaintiff relies on the fact that there is no definition of "outgoings" in the Lease and claims that that renders the significance of Clause 5 as "neutral"; 13. It is submitted that although Clause 6.4 of the Lease contemplates that the tenant pay the proper utility Authorities the utility charges, the obligation must be understood in the context that the Premises form part of the building owned by the plaintiff and that electricity and water meters were connected to the building at the time the Lease was entered into and the relevant meters measured use to the building and not merely to the Premises. That was why the invoices from the utility Authorities were addressed to the plaintiff. The plaintiff submits that that does not mean that as a matter of construction the defendant was not liable to reimburse the plaintiff for utilities services connected to the Premises and paid for by the plaintiff as landlord. It was submitted that this is recognised by Clause 6.4 providing for the landlord to recover the amount paid by the landlord from the tenant in the event that the landlord pays the charges; 14. The requirement that the Premises must be "separately metered" is not defined in the Lease. It is submitted that in the context of the surrounding circumstances in which the Lease was executed and on a proper reading of the Lease, the ordinary meaning of "separately metered" means that the use by the defendant of the utilities to the Premises can be measured. It is asserted that the expert reports of Dr Grantham and Mr Maidment establish that this can occur satisfactorily and their opinions are not contested; 15. It is finally submitted that to confine the meaning of "separately metered" to "separately metered and invoiced by the proper Authorities" as suggested by the defendant would not be consistent with giving the Lease a business-like interpretation and would work a commercial nonsense or would work a commercial inconvenience within the principles stated by the High Court in the Woodside Energy Ltd case, above, at [35].
2. The defendant makes the following submissions, in summary, in relation to the proper construction of the Lease: 1. The Lease has to be construed in the context of the surrounding circumstances: at the time the Lease was entered into there was no separate electricity meter installed for the Premises, the part to be rented by the defendant was only part of the building and substantial work had to be completed by the defendant to the Premises. The latter is reflected in Clause 3.1 of the Lease and the remainder of Clause 3 which provides for reduced rent in the earlier part of the Lease period. Clause 5 provides that the "outgoings", which would normally include electricity and water charges, are to be "nil". This was highly relevant. Therefore, the only obligation on the defendant to pay for outgoing charges such as utilities is if the requirements of Clause 6.4 of the Lease are satisfied. 2. The defendant submitted that there was no evidence that outgoings were not in these circumstances included as part of the gross rental: submissions paragraph 1. If, as the plaintiff asserts, commercial tenants are generally liable to pay for all utility charges, then at the time the lease was entered into the only way the plaintiff could recover electricity and water charges from the defendant was by grossing up those amounts in the rent itself: submissions paragraph 10. It was further said that at least in the period 2007-9 the plaintiff accepted liability for the electricity charges for the leased premises irrespective of the level of use by the defendant as no separate meter was on any view installed in that period. 3. In its reply submissions, AAP disputed this argument and said there was no evidence that the rent paid by the defendant under the Lease was inclusive of electricity and water so that the parties had "grossed up" the utility charges in the rent. Utility usage charges were unpredictable and variable: reply submissions paragraphs 4 and 6. However, it seems clear that the plaintiff accepted liability for those charges due to the defendant's use at least until 2009; 4. Clause 6.4 of the Lease on its proper construction requires the "proper Authorities" to issue invoices for the separate meter to the plaintiff or the defendant. It was not asserted that the invoice had to be issued to the defendant itself by an Authority. However, the plaintiff cannot be a proper utility Authority for the purposes of Clause 6.4. Otherwise, if the plaintiff could charge the defendant directly in relation to a sub-meter installed at its request and not by an Authority, the phrases "proper Authorities" and "separately metered" are "pointless" in clause 6.4; 5. Accordingly, any issue by an Authority of an invoice for usage by the defendant at the Premises had to be for a meter installed by the Authority not the plaintiff. 6. It is submitted that the plaintiff's submission gives no effect to Clause 5 of the Lease and the surrounding commercial circumstances at the time the Lease was negotiated; 7. The defendant accepts that Clause 6.4 of the Lease was to have operation and when the defendant had a gas supply connected to the Premises it was separately metered by Origin which was a proper utility Authority and paid for by the defendant directly; 8. Further, the electricity and water was not separately metered. The expert reports of Dr Grantham and Mr Maidment do not assist the plaintiff, but rather confirm the defendant's position. The electricity sub-meter installed on behalf of the plaintiff includes usage for the two rows of lights on the plaintiff's side of the building and the water meter includes usage for the fire hoses and a tap. There is no satisfactory evidence before the court that there was no use of the water outlets on the plaintiff's side. Mr Steyn's evidence can only be taken at its highest from his commencement in employment in late 2014. Mr Williams' evidence was that the fire hoses and the tap were used by the plaintiff and this should be accepted.
3. In my opinion, having carefully considered the submissions made, the defendant's construction of the Lease should generally be preferred.
4. Although the word "outgoings" in Clause 5 is not defined in the Lease, I accept the defendant's submission that the word "outgoings" in relation to a commercial lease is a wide term which usually would include expenses such as utility charges including, in this context, relating to utilities in the lessor's name. See Salvatore Sanfilippo v Anvest Holdings Pty [No 2] [2014] NSWSC 712 at [34]. Even if I am wrong in relation to that issue, in my view a proper construction of the Lease requires that the terms of Clause 6.4 of the Lease must be satisfied by the lessor before any utility charges can be sheeted home to the defendant lessee. This seems to have been accepted by the parties.
5. The requirement in Clause 6.4 of the Lease for the tenant to pay "to the proper Authorities" all charges for utility and other services connected to the Premises clearly indicates to me that the clause contemplates that the utility charges in question arise from separate metering which has been installed by or on behalf of the relevant utility Authority for the services supplied to the Premises. The evidence shows that the electricity meter installed and billed by AGL (later Origin Energy) measured supply and usage for the entire building of which the Premises were a part and the separate property at 31 Monro Avenue Kirrawee (Steyn, 2 August 2016 affidavit, paragraph 17) until in 2009 an electrician installed on behalf of the plaintiff a sub-meter which measured electricity usage for the Premises and the two rows of lights on the plaintiff's side (Steyn, 2 August 2016 affidavit, paragraph 19).
6. It is readily contemplated that a tenant would wish to pay utility charges as and when they arose rather than being presented with a large invoice of which it had no knowledge some years later. A tenant may also wish to investigate whether it could change the relevant utility authority to obtain a cheaper rate or adjust its usage or the time of usage of electricity to reduce charges. The inconvenience to a tenant is shown by the present case where a demand was made several years later for a large amount for utility use, the amount of which it was not previously aware. The use of the phrase "should the tenant default in payment of such charges" in Clause 6.4 suggests to me that the utility Authority itself must forward the separate invoice for the Premises to the plaintiff or the defendant not that the plaintiff sends an invoice based on a sub-meter reading of a sub-meter installed by the plaintiff. It is readily contemplated that the tenant would want to view a bill created by the utility authority itself for usage in the Premises as some real comfort as to its accuracy. The ability of the landlord under Clause 6.4 to pay the same in default in my view suggests that the invoice was contemplated to be sent by the utility Authority for usage for the Premises and if not paid the landlord could pay it (thereby stepping in to make the payment) to avoid any potential consequences for other near or related properties.
7. In my view the previous analysis is sufficient to decide the construction point against the plaintiff. The sub-meter invoice for electricity usage was prepared by the plaintiff not by a utility Authority for usage by the defendant at the Premises.
8. Further, I do not believe that the relevant utility charges were "separately metered" which is a clear requirement of Clause 6.4 of the Lease.
9. First, in relation to the electricity charges, it is clear on the evidence that some of the usage by the plaintiff with the two rows of lights was in the metered amount. The fact that an expert, like Dr Grantham, after the event may be able to assess with some accuracy the usage is not to the point. A tenant would wish to avoid the need to retain an expert and would want to have an accurate assessment of its (and its alone) use of the electricity. Dr Grantham, whilst satisfied that the plaintiff's invoices for electricity were generally fair, readily conceded that they were not precisely accurate: T75.23.
10. In relation to the water usage, the fact is that there were two fire hoses and two taps on the plaintiff's side of the building which were unconnected to usage by the defendant: Exhibit 1. Mr Steyn could only give evidence of his knowledge of the water usage and he commenced employment with the plaintiff in late 2014. There is no satisfactory evidence from the plaintiff in relation to the totality of water usage by the plaintiff between 2007 and 2014. In addition, it is unlikely that Mr Steyn as the Financial Controller would have day to day knowledge of the use of the fire hoses and taps. It is expected that the fire hoses would have been at least tested on a regular basis. The only direct evidence of the plaintiff's usage of these water outlets is that of Mr Williams (the director of the defendant) who gave evidence that the plaintiff did use these outlets for its own use, at least for cutting purposes: see Williams affidavit paragraph 6: T91.26; T92.11. It is surprising that no direct evidence from the plaintiff covering the period from 2007-2014 was led.
11. Mr Williams gave oral evidence that the plaintiff used one of the taps to provide water for their manufacturing and that at least one fire hose was used, from his observation, for washing down the plaintiff's area: T115.16-.50. Mr Williams was strongly challenged on this evidence by counsel for the plaintiff and it was put to him that it was incorrect evidence. Mr Williams denied this: T115.50. Although Mr Williams gave slightly inconsistent answers in some of his evidence (see paragraph 57 of the plaintiff's submissions in chief), overall I accept his evidence on this issue. It is noted that the plaintiff did not call any witnesses to rebut the material in paragraph 6 of Mr Williams' affidavit other than an affidavit from Mr Steyn who only commenced work for the plaintiff in late 2014. No explanation for the failure to call relevant witnesses (such as the foreman or manager in charge of the area) was provided. The usual Jones v Dunkel inference can be drawn.
12. Mr Williams also gave evidence that the tap which he instructed the plumber, Mr Maidment, to install on the AAP side of the divided building, was installed by Mr Maidment as a result of a further request by Mr David Witchard of the plaintiff for the tap to be installed whilst plumbing work was being done for the defendant.
13. This evidence, which I accept, reinforces the conclusion that water from taps and hoses on the AAP side of the divided wall was used by AAP which was metered and which is claimed by the plaintiff from the defendant. Accordingly, the defendant's water usage was not separately metered within Clause 6.4.
14. For all of these reasons in my view the plaintiff has not complied with the requirements of the Lease, particularly Clause 6.4, to entitle it under the Lease to demand the payments sought from the defendant for utility charges as a matter of the proper construction of the Lease. There was no relevant breach by the defendant of the Lease.

Restitutionary claim

1. If the plaintiff is not successful in its contractual claim, as I have found it is not, the plaintiff claims amounts for the electricity and water paid by it on a restitutionary basis.
2. The plaintiff submits as follows: 1. The plaintiff is entitled to claim from the defendant the amounts paid by the plaintiff for electricity and water provided to the Premises as money had and received on the basis it is unjust for the defendant to retain the benefit of the payments made by the plaintiff. The plaintiff relies on the judgment of Bathurst CJ (with whom McColl and Macfarlan JJA agreed) in the Caringbah Investments Pty Ltd case, above, at paragraph [114] where his Honour said in slightly different facts as follows: "[114] In my opinion, the respondent had an entitlement to recover these charges either as damages for breaches of the implied covenant on the part of the lessor to pay them or as money had and received on the basis it was unjust for the appellant to retain the benefit of the payment made by the respondent: Australian Financial Services and Leasing Pty Ltd v Hills Industries Ltd [2014] HCA 14; 253 CLR 560 at [6], [15], [78]. In Armstrong v Commissioner of Stamp Duties (1967) 69 SR (NSW) 38, Wallace P, with whom Holmes JA agreed, referred with approval to the statement in Johnson v Royal Mail Steam Packet Co (1867) LR 3 CP 38 at 45, that a right to reimbursement existed in a case where a person occupying property is compelled to pay a claim in respect thereof, which should have been paid by another (in this case the appellant): at [44]." 1. Reliance is also placed on Australian Financial Services and Leasing Pty Ltd v Hills Industries Ltd (2014) 253 CLR 560; [2014] HCA 14 at [6], [15] and [78] ("Hills Industries").
3. As the plaintiff submits in paragraph 41 of its amended submissions, the action for money had and received is a common law action for the recovery of the value of an unjust enrichment: Australia and New Zealand Banking Ltd v Westpac Banking Corporation (1988) 164 CLR 373.
4. Whilst it is accepted that the principles of restitution as reflected in a traditional money count can apply independently of contract that is only if it is not inconsistent with the provisions of a contract. That is because a contract is regarded as creating "an existing and bargained-for allocation of risk or liability": Hills Industries [2012] NSWCA 380 at [74] affirmed at (2014) 253 CLR 560.
5. I accept that it is clear that a right to reimbursement exists in a money claim where a person occupying a property is compelled to pay a claim in respect of that property, such as an electricity claim, which should have been paid by another party: see the Caringbah case, above, at [114] and the authorities there cited.
6. These principles contemplate that an obligation rests on another party to pay the sum involved.
7. In my view, those principles do not apply in the present case because there was no obligation under the Lease for the defendant to pay the charges relating to the electricity and water supplied to the Premises because the requirements of Clause 6.4 were not satisfied. In other words, the "unjust" part of the requirement of an unjust enrichment is not satisfied. The defendant had no obligation to pay outgoings such as for electricity or water under Clause 5 of the Lease unless the requirements in Clause 6.4 of the Lease were established.
8. For the above reasons, in my opinion, the plaintiff's claim to recover the amounts sought for the electricity and water charges should be rejected. There is a provision in the Lease which expressly covers the amounts sought. It is not as if the Lease was silent on the issue and the amounts were paid anyway and sought to be recovered under a money claim.

Estoppel by convention

1. The plaintiff submits that even if its claims under contract and in restitution are rejected by the Court, that the defendant is estopped by convention from denying liability to the plaintiff to pay the amounts paid to the proper utility Authorities by the plaintiff for electricity and water supplied to the Premises.
2. In Con-Stan Industries v Norwich Winterthur Insurance (Aust) Ltd (1986) 160 CLR 226 at 244-5 the High Court in a joint judgment stated as follows: "Estoppel by convention is a form of estoppel founded not on a representation of fact made by a representor and acted on by a representee to his detriment, but on the conduct of relations between the parties on the basis of an agreed or assumed state of facts, which both will be estopped from denying. … there is no estoppel unless it can be shown that the alleged assumption has in fact been adopted by the parties as the conventional basis of their relationship … In the absence of proof of custom, there is no evidence that the parties adopted the alleged assumption. Secondly, just as estoppel by representation requires a representation of fact, so too estoppel by convention requires the assumed state of affairs to be an assumed state of fact …"
3. In Ryledar Pty Ltd v Euphoric Pty Ltd (2007) 69 NSWLR 603; [2007] NSWCA 65, Tobias JA [with whom Mason P and Campbell JA agreed] stated as follows at [194]-[201]: [194] On the other hand, estoppel by convention is a form of estoppel founded upon an assumed state of affairs by the parties whether as to a matter of fact or a matter of legal effect which both will be estopped from denying: Con-Stan Industries of Australia Pty Ltd v Norwich Winterthur Insurance (Australia) Ltd (1986) 160 CLR 226 at 244-245. That assumed state of affairs takes as a given the terms of the contract as known to and understood by the parties but from which the parties have departed for the purpose of their furtherance of their relationship under the contract. [195] As Dixon J therefore observed in Grundt v Great Boulder Pty Gold Mines Ltd (1937) 59 CLR 641 at 676, belief in the correctness of the facts or state of affairs assumed is not always necessary. Parties may adopt as the conventional basis of a transaction between them an assumption which they know to be contrary to the actual state of affairs. [196] In his recent book, Estoppel by Conduct and Election (2006) Sydney, Thomson Sweet & Maxwell, at 115 [8-001], KR Handley described estoppel by convention in the following terms: "When parties make a statement of fact or of mixed fact and law the conventional basis of their transaction … both are estopped from questioning its truth for the purposes of that transaction. Estoppels by convention can be created ad hoc, expressly, by a course of dealing, or by other acts and declarations. In such a case 'there must be some mutually manifest conduct by the parties' with the intention of affecting their legal relationship." [197] In Amalgamated Investment & Property Co Ltd (In Liq) v Texas Commerce International Bank Ltd [1982] QB 84 at 121, Lord Denning MR observed: "To use the phrase of Latham CJ and Dixon J in [Grundt] … the parties by their course of dealing adopted a 'conventional basis' for the governance of the relations between them … They are bound by the 'conventional basis' on which they conducted their affairs. The reason is because it would be altogether unjust to allow either party to insist on the strict interpretation of the original terms of the contract - when it would be inequitable to do so having regard to dealings which have taken place between the parties." His Lordship also observed (at 121) that: "[t]here is no need to inquire whether their particular interpretation is correct or not - or whether they were mistaken or not - or whether they had in mind the original terms or not. Suffice it that they have, by the course of dealing, put their own interpretation on their contract, and cannot be allowed to go back on it." [198] The principles were restated by Lord Steyn in delivering the principal speech in The "Indian Grace" (No 2) [1998] AC 878 at 913, where his Lordship said: "… an estoppel by convention may arise where parties to a transaction act on an assumed state of facts or law, the assumption being either shared … or made by one and acquiesced in by the other. The effect of an estoppel by convention is to preclude a party from denying the assumed facts or law if it would be unjust to allow him to go back on the assumption … ." [199] Recently the principles were restated by Brereton J in Moratic Pty Ltd v Gordon (2007) Aust Contract Reports ¶90-255 (89,904); NSW Conv R 56-172 (56,205), where his Honour observed (at 89,913 [30]; 56,215 [30]) that the doctrine of conventional estoppel precluded either party to a contract from denying an assumption which has formed the conventional basis of the relationship between them. Accordingly, it is necessary to determine whether the parties have in fact adopted such an assumption as the conventional basis of their relationship. [200] His Honour then stated the matters necessary to establish conventional estoppel (at 89,914 [32]; 56,215 [32]) as being that: (a) the plaintiff has adopted an assumption as to the terms of its legal relationship with the defendant; (b) the defendant has adopted the same assumption; (c) both parties have conducted their relationship on the basis of that mutual assumption; (d) each party knew or intended that the other act on that basis; and (e) departure from the assumption will occasion detriment to the plaintiff. [201] In noting the differences between promissory estoppel and conventional estoppel his Honour then observed with respect to the latter (at 89,914 [33]; 56,216 [33]) that it: "[33] … is focussed on the consensual basis of the parties' relationship: it operates when both parties have adopted the same assumption as the basis of their relationship, often without appreciating that any departure from the strict legal position is involved, so as to hold both parties to their common understanding.""
4. This analysis shows that it is not necessary that the assumed position or conventional basis of the parties is correct under the original terms of the contract. It does not matter whether the parties are mistaken. It is sufficient if the parties have, by their course of dealing, adopted an assumed state of affairs or convention and put their own interpretation on the contract. If they have and they have conducted their affairs in accordance with it, the parties cannot be allowed to go back on it.
5. In TMA Australia Pty Ltd v Indect Electronics & Distribution GmbH [2015] NSWCA 343, Meagher JA (with home Macfarlan JA and Bergin CJ in Equity agreed on this point), stated as follows at paragraphs [115]-[117]: "[115] In Moratic Pty Ltd v Gordon [2007] NSWSC 5; 13 BPR 24,713 at [32], in a passage adopted by this court in Ryledar Pty Ltd v Euphoric Pty Ltd [2007] NSWCA 65; 69 NSWLR 603 at [200] and Franklins Pty Ltd v Metcash Trading Ltd [2009] NSWCA 407; 76 NSWLR 603 at [573], Brereton J described the matters necessary to establish an estoppel by convention as being: … (1) that [the plaintiff] has adopted an assumption as to the terms of its legal relationship with the defendant; (2) that the defendant has adopted the same assumption; (3) that both parties have conducted their relationship on the basis of that mutual assumption; (4) that each party knew or intended that the other act on that basis; and (5) that departure from the assumption will occasion detriment to the plaintiff. [116] As Campbell JA observed in Franklins v Metcash at [574], the need for the one assumption to be adopted by both parties, and for it to be the conventional basis of their relationship, is established by High Court authority including Con-Stan Industries of Australia Pty Ltd v Norwich Winterthur Insurance (Australia) Ltd [1986] HCA 14; 160 CLR 226 at 244 and Grundt v Great Boulder Pty Gold Mines Ltd [1937] HCA 58; 59 CLR 641 at 676-677. [117] In Queensland Independent Wholesalers Ltd v Coutts Townsville Pty Ltd [1989] 2 Qd R 40 at 46 (in a passage applied and approved by the court (Moore, Stone and Dowsett JJ) in Attorney-General (ACT) v Eastman [2008] ACTCA 6; 163 ACTR 46 at [45]), McPherson J (Andrews CJ and Demack J agreeing) emphasised the need for the evidence to establish clearly the assumption adopted as to the terms of the relevant legal relationship: … the principle invoked first requires that evidence be identified which establishes the conventional basis for the assumption relied upon. The word "conventional" in this context carries connotations of agreement, not necessarily express but to be inferred, or at least a demonstrable acceptance of a particular state of things, as the foundation for the dealings of the parties. There must, as the passage from Lord Denning's judgment [in Amalgamated Investment & Property Co Ltd v Texas Commerce International Bank Ltd [1982] QB 84 at 120-121] acknowledges, be at least a "course of dealing between the parties"; that is to say acts or conduct which impinge upon what his Lordship described as "their mutual affairs" … To produce that consequence the acts or conduct relied upon must point plainly, if not unequivocally, to the assumption put forward as the conventional basis of relations. A course of dealing that is explicable by reference to some other equally plausible assumption inevitably falls short of establishing that the parties accept as the basis of their relations the particular assumption contended for."
6. The following requirements are clear from the above authorities: 1. That the plaintiff has adopted an assumption as to the terms of its legal relationship with the defendant; 2. That the defendant has adopted the same assumption; 3. There is a need for evidence to establish clearly (whether expressly or by inference) the assumption adopted as to the terms of the relevant legal relationship; 4. That both parties have conducted their relationship on the basis of that mutual assumption; 5. That each party knew or intended that the other act on that basis; 6. That departure from the assumption will occasion detriment to the plaintiff.
7. It is submitted on behalf of the plaintiff that the facts of the case fall squarely within estoppel by convention and that the defendant is estopped from denying liability to the plaintiff for payments made by the plaintiff to the proper authorities for electricity and water to the Premises. It is submitted that the defendant providing monthly instalments when requested to the plaintiff for electricity charges paid by the plaintiff to the proper authorities for electricity supplied to the Premises without complaint by the defendant, amounted to an assumption by both parties that liability existed for the defendant to reimburse the plaintiff for charges paid to the proper authorities for electricity and water consumed at the Premises irrespective of the proper meaning under Clause 6.4 of the Lease. It is submitted that the assumption adopted by both parties was that the defendant was liable to or should otherwise reimburse the plaintiff for payment by the plaintiff of the charges to the proper Authorities for electricity and water as measured by the electricity sub-meter installed by the plaintiff and the water meter for the building which related to water supplied including to the Premises.
8. The defendant first submits that it cannot be accepted that the plaintiff itself had the assumption alleged as no evidence was given by anyone such as a director who is the directing mind and will of the company. It is said that the assumption claimed by the plaintiff is inconsistent with Exhibit 2 which suggests an agreement in April 2009, well before the current agreement alleged which was said to have occurred in 2012-13. The defendant also says that the moneys were only paid by it under protest in circumstances where the defendant never accepted that it was liable to pay the moneys and where it was placed in a threatened position that electricity would be cut off by the plaintiff's director unless the moneys were paid. Accordingly, the defendant never adopted the same assumption as alleged by the plaintiff. It is also submitted that reliance and detriment have not been established by the plaintiff.
9. The matters relied upon factually by the plaintiff are set out in paragraphs 50-57 of the plaintiff's submissions in chief. See also paragraph 9 of the plaintiff's reply submissions.
10. The defendant relies upon in particular the conversations with Mr Straker, the then Financial Controller of the plaintiff, at paragraphs [35]-[38] of Mr Williams' affidavit. The defendant says this evidence was unchallenged in cross-examination and no witness gave contrary evidence. It is submitted that this negatives the assumption alleged by the plaintiff.
11. The plaintiff relies on the fact that at no time did Mr Williams, or anyone else on behalf of the defendant, complain in writing to the plaintiff, whether in an email or in a letter, or reserve its rights to recover the amounts paid: T106.12-.23. It is also noted by the plaintiff that the defendant continued making payments amounting to about $110,000 for 2 ½ years after the Lease expired and it was holding over. The plaintiff submitted that the evidence shows the only concerns of the defendant were about the quantum of the utility charges not the liability of the defendant to pay the charges.
12. In his oral evidence, Mr Williams maintained the position in his affidavit (paragraphs 35-36 and 38) that he only paid the moneys because he felt threatened that the electricity would be cut off and he had 30 employees' jobs at risk: T100.5; T103.24; T105.30. The defendant also places weight on Mr Williams' evidence of the amount spent on the Premises in the initial 2007 renovation and other fitting out and the ultimate cost to the defendant of moving premises in circumstances where alternative premises were not immediately available to it in 2013 if it refused to pay: T116.9-.20.
13. It was put to Mr Williams several times in cross-examination by counsel for the plaintiff that he accepted that the defendant had a liability to the plaintiff for the electricity and water consumption by the defendant and that was the reason why the moneys were paid without complaint or reservation. Mr Williams denied this: for example T101.20.
14. It is noted that no affidavit evidence was provided by Mr Straker disputing the conversations. However, he no longer works for the plaintiff. The plaintiff also noted that no affidavit was put on by Mr Robinson, the accountant for the defendant, to dispute the conversations set out in Mr Steyn's affidavits.
15. Although the evidence relating to a failure to complain by Mr Robinson is relevant, in my opinion of more central importance is the conduct of Mr Williams, the director of the defendant.
16. In assessing this matter I take into account the following: 1. Mr Williams' affidavit and oral evidence as to his reasons for making the payments which the defendant did to the plaintiff; 2. The evidence of Mr Steyn; 3. The fact that there was no written complaint or reservation of rights by Mr Williams or Mr Robinson; 4. The period in which the money was paid which was extensive; 5. The quantum of the amount paid; 6. The alternatives available to the defendant if the payments were not commenced.
17. I also take into account the attack on Mr Williams' credit by the plaintiff as to his reasons for making the payments and whether he thought he was liable to make the payments or chose to do it anyway: see submissions in paragraph 57 of the plaintiff's revised submissions in chief. The inconsistencies relied upon by the plaintiff do not in my opinion relate to the central issue in dispute concerning his reasons for making the payments although they must be considered on the credit issue.
18. I observed Mr Williams carefully in giving his evidence, particularly his evidence at T103.18-.33 and T105.17-106.47. At the end of the day, I have formed the view that I should accept his evidence on this issue. This is for the following reasons: 1. The claim made for payment by the plaintiff was made first by the plaintiff in 2012, several years after the commencement of the Lease; 2. The amounts claimed included amounts going back to when the electricity sub-meter was first installed in relation to electricity in 2009; 3. It seems clear that the defendant was operating a substantial business at the Premises employing some 30 people at the time; 4. I accept that in the event that electricity was cut off to the Premises as mentioned by Mr Straker that this would have been highly damaging to the defendant and could have affected its ability to undertake work through its employees; 5. The conversations set out in paragraphs [35]-[36] of the affidavit of Mr Williams have not been disputed including by any affidavit from Mr Straker; 6. The cost and difficulties of finding alternative premises to undertake the defendant's business as referred to by Mr Williams in his oral evidence are believable; 7. Whilst I have some doubts that Mr Williams was only thinking about his employees as opposed to the effect on his overall business, I accept that this was an important factor to him. At the end of the day, Mr Williams and the defendant were placed in a difficult position by claims for amounts for several years previously for electricity. In the end, on balance, I accept Mr Williams' evidence and find that he did not believe the defendant was liable for these amounts as the services were not separately metered and that he effectively paid them under protest to avoid the risk of the electricity to his business being cut off; 8. Accordingly, one of the requirements for establishing conventional estoppel being that both parties had conducted their relationship on the basis of a mutual assumption which they had both adopted is, in my view, not established in the present case. As a result, the plaintiff's claim in conventional estoppel is rejected.
19. In relation to the first element, that the plaintiff adopted the assumption, I believe this is established on the evidence. Exhibit 2 was a letter written by solicitors before affidavits were prepared. It is inconsistent with the contemporaneous material. The correspondence in evidence suggests Mr Straker adopted the assumption and he was the person negotiating on the issue and represented the company even though he was not a director.
20. In relation to the assertion by the defendant that reliance and detriment have not been established, it is noted that the plaintiff did not serve a notice to quit while the payments were being made by the defendant or pursue the payment issue further at that stage. If the assumption issue was established, in my view, reliance and detriment are satisfied. If the defendant had remained in possession and ceased making payments it is likely that a notice to quit would have been issued and/or proceedings taken or steps taken to limit electricity supply to the defendant's premises.

The claims in the Amended Cross-Claim

1. Based on the reasoning of the Court of Appeal in paragraph [114] in the Caringbah Investments Pty Ltd case, in my view the defendant is entitled to a return of the $110,000 paid towards the electricity bills with appropriate interest. The money was not paid on the basis of any mutual assumption of either a liability to contribute or a mutual acceptance of a moral or other obligation to contribute. The parties should bring in short minutes of order to reflect that amount together with appropriate interest.
2. In addition, it does not appear to be in issue that between September 2010 and April 2012 the plaintiff made requests for the defendant to do construction work for it. I refer to paragraphs 19-23 of Mr Williams' affidavit. There is no evidence from the plaintiff to dispute that the work was requested by it or completed.
3. Counsel for the plaintiff confirmed at the oral submissions on 19 May 2017 that the defendant's invoice number 00035269 dated 15 March 2012 in the sum of $13,000 was no longer in issue.
4. In the light of the evidence, it would appear that the plaintiff should not have made deductions totalling $39,739.51 from the amount owed to the defendant for work completed on the basis that money was owed by the defendant for electricity. When this sum is added to the $13,000 referred to above, it appears that the defendant is entitled to a payment under the cross-claim as sought in the amount of $52,739.51. Interest will need to be added to this amount. I will leave it to the parties to bring in short minutes of order reflecting this.
5. The defendant also made a claim under Section 18 of the Australian Consumer Law for misleading or deceptive conduct. The defendant alleges in the Amended First Cross-Claim that by making the demand in writing in about October 2012 for $101,782.59 for electricity from 30 April 2009 and in subsequent demands, the plaintiff represented that: 1. The proper Authority had issued charges for electricity services connected to the Premises; and 2. The Premises were separately metered.
6. The plaintiff concedes that these representations were in fact made: Defence to First Cross-Claim, paragraph 10.
7. The defendant pleads that the representations admitted were misleading or deceptive in breach of Section 18 which the plaintiff denies. It is pleaded that the representations are misleading or deceptive as Origin Energy had not issued the charges for electricity services connected to the Premises and the bills invoiced covered the whole of the defendant's property including areas occupied only by the plaintiff.
8. Reliance on the representations is also pleaded: Amended First Cross-Claim, paragraph 15.
9. It seems to me that this allegation of a breach of Section 18 in the Amended First Cross-Claim should be rejected. This is because, on Mr Williams' evidence, who was the directing mind and will of the defendant, he did not rely on the representation admitted but rather did not believe that the defendant was obliged to pay the money for the electricity but only did so as he was obliged to do so to avoid the risk of the electricity being cut off. Although the representation need only be a cause of the defendant's actions (Henville v Walker (2001) 206 CLR 459) it must materially contribute to the damage. The material in paragraphs 35-38, 44 and 49 of Mr Williams' affidavit in my view establishes that there was no reliance by the defendant on the representation. I agree with AAP's submissions in the second sentence of paragraph 10 of its reply submissions.
10. Further, there is a real issue whether the representation was misleading or deceptive. It appears that the representation that the Premises were "separately metered" for electricity can be seen as a statement of opinion based on the plaintiff's view of the Lease which was a reasonable (but ultimately wrong) view in the circumstances. See Global Sportsman Pty Ltd v Mirror Newspapers Ltd (1984) 2 FCR 82 at 88.

Make good claim

1. The make good claim in the pleadings has been resolved between the parties.

Damages if the plaintiff succeeds

1. If I am wrong in my conclusions, I accept that the plaintiff's calculations of the amount owed for electricity are reasonable in the light of Mr Grantham's evidence: T75.23.
2. The defendant submits that little weight should be given to the plaintiff's spreadsheets setting out the defendant's alleged electricity usage: defendant's submissions paragraph 30. However, I am satisfied that the spreadsheets are reasonably accurate having regard to: 1. Mr Grantham's report at paragraphs [3], [15], [20, [25], [45]; 2. Mr Steyn's affidavit affirmed 3 February 2017; 3. The affidavits of Mr Whitney and Mr Sarapuu affirmed 3 February 2017; 4. The absence of any evidence suggesting relevant changes to the electricity supply in the relevant period; 5. Exhibit BS30 to Mr Steyn's 2 August 2016 affidavit (page 341) does not suggest to me changes which would be relevant to the electricity usage calculations. Further, Dr Grantham's report shows no substantial and obvious changes in usage in the period 2013-15: see Exhibit A volume 3 page 29.
3. I accept the submissions made by the plaintiff's counsel in his reply submissions in paragraphs 12-13 on this issue. I accept in particular, the submission based on the comments of Austin J in ASIC v Rich [2005] NSWSC 417 at [196]-[199] that the inference can properly be made that the schedules were prepared by, or on the basis of information supplied by, someone (not necessarily identified) falling within one of the alternative descriptions in Section 69(2) of the Evidence Act.
4. In my view, the evidence of Mr Williams as to the plaintiff's use of the taps and fire hoses does not allow me accurately to calculate the defendant's liability for water usage. Doing the best I can on the evidence, I would award only 95% of the amount sought for water charges having regard to the evidence of water usage by the plaintiff given by Mr Williams. I would not allow for water rates as these are related to the connection of the water service to the property generally and this was required also for the fire hoses located on the plaintiff's side. I would only allow for 95% of the water usage itself which was agreed (as to 100%) at $15,475.05.

Conclusion

1. I thank counsel for the parties for their comprehensive and helpful submissions.
2. In the light of the above I make the following orders: 1. Judgment for the defendant in relation to the Statement of Claim; 2. Judgment on the Amended First Cross-Claim for the defendant/cross-claimant; 3. The parties are to bring in Short Minutes of Order within 7 days to reflect the amounts found to be owed under the Cross-Claim; 4. The plaintiff is to pay the defendant's costs as agreed or assessed of the proceedings including the Amended First Cross-Claim; 5. The parties have liberty to apply to vary the order made in paragraph (4) above; 6. Exhibits to be returned after 28 days.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 09 June 2017