LOSS OF RENT
84 In relation to Alamdo's claim for loss of rent, the primary judge found adversely to this claim, for the following reasons:
81 The referee rejected this claim. He observed that, to succeed in the claim, Alamdo would have to show that, absent any failure of AWF to observe the repair covenants, it would have started to receive rent from a new tenant in mid-March 1999. He did not regard Alamdo as having discharged that onus. The evidence showed that discussions between Alamdo and FLF had been on foot as early as December 1998 and that a rent free period at the start of any lease to FLF had always been part of the negotiations. The referee also found that the basis of agreement reached between Alamdo and FLF involved an undertaking by Alamdo to carry out works in relation to the property before any lease to FLF commenced. This was in addition to work required under the covenants in the lease to AWF and "involved a great deal of additional work which necessarily called for time to be carried out". The final list of work items was agreed on 12 March 1999. There was also the point that Alamdo had not advertised for new tenants or taken other active steps beyond engaging in negotiations with FLF.
82 Bearing these matters in mind, the referee found that, at best, rent payments under a new lease would not have commenced until the end of April or beginning of May, 1999. The referee continued:
"On the other hand, if doing the work required by the new Lessee commenced only after 12 March 1999 when the final list was agreed on, and the rent free period kicked in after completion of that work, once again the time for loss of rental would be postponed by whatever period of time was required for the doing of that work. That has not been precisely identified in the evidence."
83 The referee's conclusions were then stated:
"It appears to me that the proper conclusion to be drawn is first, that the rent free period has nothing to do with the failure on the part of Lessee to satisfy the covenants to repair and was simply a fact of the new tenant exerting its market power to insist on favourable terms. Second, that the rental payment would not have commenced during the period when the works insisted upon by the Lessee were being carried out. Third, that the loss has to be calculated at the rate payable under the new lease."
In all the circumstances, I am not satisfied that even if everything had been done that was required to be done by the defendant, the Lessor would have obtained more favourable terms from Fantastic than it did under the new lease."
84 Alamdo accepts that any recovery under this heading must be calculated according to the rental rate under the new lease to FLF. But it contends that the other reasons stated in the referee's conclusions reveal a patent misapprehension of the evidence or manifest unreasonableness in fact-finding. As is observed in submissions made on behalf of AWF, Alamdo cannot succeed under this heading unless it clearly shows that no reasonable tribunal of fact could have made the decision made by the referee. AWF submits that the complaints made by Alamdo do not rise to the high standard required.
85 In support of the case it seeks to make, Alamdo traces the course of negotiations between itself and FLF. It identifies four ways in which the finding that the rent free period under the FLF lease had nothing to do with any breach of repair covenants by AWF and was attributable simply to "the new tenant exerting its market power to insist on favourable terms" is defective. The finding is said to be inconsistent with:
"(a) the unchallenged evidence of Mr Maurici that Mr Draper of FLF said to him in late 1998 and early 1999 that FLW would not pay rent until the interior was ready for occupation and all the work was finished;
(b) the fact that the only reason put forward by FLF for a delayed commencement date and a rent-free period was the need for substantial work to be carried out to make the premises ready for occupation;
(c) the lack of any evidence (or even a suggestion put in cross-examination) that FLF's insistence on having 'a clean building in which we can make sofas etc' before paying rent was merely a bluff; and
(d) the lack of any evidence that FLF had any 'market power' (which in any event is a most attenuated proposition)."
86 Mr Draper of FLF sent Mr Maurici of Alamdo a memorandum dated 5 December 1998 in which the commencement date of the proposed lease was described as:
"1st March 1999 or 14 days after the date that the Lessor advises the Lessee in writing that the premises will be ready for occupation (no later than 15th April 1999)."
87 The memorandum also imposed requirements (or expressed wishes) as to completion of "lessor's works" in three stages - some before the commencement date of the lease, others within 14 days after the commencement date and the rest within 30 days of the commencement date. These works obviously involved many items of improvement and alteration well beyond the scope of the repair covenants binding on AWF.
88 Discussion about the "lessor's works" continued between Alamdo and FLF. A memorandum from Mr Draper to Mr Maurici dated 16 January 1999 referred to further items clearly beyond the repair covenants, including replacement of a ceiling, removal of partitions, removal of raised floors and windows and installation of a kitchenette. The memorandum also said that there were other items of work to be discussed.
89 The matter of lessor's works was referred to in correspondence of February 1999. FLF sought to make the new lease conditional on completion of the works. Alamdo resisted that and made a counter proposal that was not acceptable to FLF. The final arrangement in relation to the lessor's works was recorded in a letter of 17 March 1999 from Alamdo to FLF. Alamdo agreed that
· it would carry out "interior" works by 15 May 1999 "except if delayed by your works";
· it would carry out "external" works by 30 June 1999 "weather permitting".
90 The descriptions of the two classes of work included items clearly outside the scope of the repair covenants binding on AWF. Items of "interior" work not covered by the repair covenants were spraying for pests, removing partitions, building a tea room, installing a new ceiling and lowering sprinklers, laying carpet tiles, building a chain wire fence within the factory, removing vinyl flooring, demolishing internal offices, installing a water cooler, tiling a toilet floor and removing two crane access platforms. External items not within AMF's repair covenants were removal of window air conditions, removal of certain bitumen and the removal of security gates.
91 It is significant that the negotiation about the scope of the lessor's works, as between Alamdo and FLF, continued virtually up to the signing of their lease on 18 March 1999 (with the term commencing on 15 May 1999) and that, as late as 18 February 1999, Mr Draper had written to Mr Maurici:
"Tony, as I said at the outset of this letter, we all feel this is getting too hard and think that it may be better for both parties if we all call it quits."
92 The commencement date of the FLF lease was also the subject of ongoing negotiation. By letter dated 13 February 1999 - just 15 days before the expiry of AWF's lease - Mr Maurici proposed to Mr Draper a lease start date of 6 April 1999, with rent commencing on 6 June 1999. Mr Draper's memorandum of 18 February 1999 agreed to the idea of a fixed start date, adding "but the premises must be ready on that date". Mr Draper also said:
"Perhaps the start date should be set at say 1st May or 1st June 1999 and you will then have two to three months to get everything done."
93 Mr Draper's memorandum of 7 March 1999 proposed a start date of 1 May 1999 "provided that the Landlord's works on the interior of the premises are completed".
94 The referee found, as I have said, that Alamdo had not discharged the onus of showing that, absent any failure of AWF to observe the repair covenants, it would have started receiving rent from a new tenant in mid-March. I consider that conclusion to be fully supported by the evidence. It may be inferred that the schedule of lessor's works included with Alamdo's letter of 17 March 1999 included only items which, at that point, still required attention. Matters already attended to (if any) would not logically have been mentioned in it. It follows that the several specific items of lessor's works to which I have referred as being beyond the scope of AWF's repair covenants remained outstanding and that, with those (whether with or without others) not having been attended to, FLF's position was that it would not start paying rent.
95 There is then the question of the rent free period. Mr Draper's memorandum of 5 December 1998 proposed a rent free period of 60 days from the commencement of the lease, at the same time nominating a commencement date of 1 March 1999 or 14 days after the lessor's notification that the premises were ready for occupation (no later than 15 April 1999). Draft heads of agreement sent by Alamdo on 14 December 1999 included a reference to the rent free period of 60 days while proposing a lease start date of 14 days after notice by the lessor of readiness for occupation but no later than 15 April 1999. There was no reference to a rent free period in correspondence again until such a reference appeared in Mr Draper's memorandum of 7 March 1999. It referred to a lease commencement of 1 May 1999 (subject to completion of the lessor's interior works) and rent commencement on 1 July 1999.
96 This evidence about the rent free period is quite sufficient, to my mind, to justify a finding that there was no connection between the inclusion of that feature and the completion or performance of any of the lessor's works. The issue of completion of the works played a part in the various proposals regarding the commencement of the lease and in deferrals of that commencement. But the concept of a rent free period of two months (or 60 days) immediately after commencement had been introduced into the negotiations by Mr Draper at the relatively early point of 5 December 1998. It thereafter remained a constant, not being re-visited or questioned by either party. The inclusion of the rent free period at the start of the lease term was a product of the ordinary processes of negotiation (which the referee chose to label "market power" of the lessee) unrelated to and isolated from the discussions about the time of lease commencement and the impact of the timing of the lessor's works.
97 I am satisfied that the referee's findings in relation to the loss of rent claim do not reflect any patent misapprehension of the evidence or any perversity or manifest unreasonableness.