Alamdo Holdings Pty Ltd v Australian Window Furnishings

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION COMMERCIAL LIST

50135/99 - ALAMDO HOLDINGS PTY LIMITED v AUSTRALIAN WINDOW FURNISHINGS (NSW) PTY LIMITED & ANOR JUDGMENT

The proceedings and the referee's report 1 These proceedings were commenced by a summons filed on 4 November 1999. By that summons, the plaintiff (which I shall call "Alamdo") sought damages as against the first defendant ("AWF") for breach of covenants contained in a lease dated 28 April 1989 between Alamdo as lessor and AWF as lessee. The covenants in question concern the lessee's obligations in relation to repair and related matters. The issues in contention between the parties centre upon the state of the premises at the expiry of the lease and, in broad terms, whether AWF, as lessee, was required to attend to certain matters requiring attention. 2 Orders for discovery and the filing of evidence were made after the filing of the summons. On 5 September 2000, an order was made under Part 72 rule 2(1) of the Supreme Court Rules referring out to a referee for enquiry and report the whole of the proceedings. There was a requirement that the referee report by 2 February 2001. 3 The referee conducted hearings in November and December 2000 and again in March and May 2001. Almost two and a half years after conclusion of the hearings, the referee delivered an interim report dated 16 October 2003 the scope and content of which were explained by him as follows: "In the course of the hearing of the reference, the parties agreed that I should initially report on the question of liability and thereafter, if necessary, after a further hearing, report on quantum. This report is confined to questions of liability but, of necessity addresses damages generally as distinct from quantum." The parties' attitudes to the referee's report 4 In the interim report, the referee dealt with a number of questions of liability under the repair and maintenance provisions of the lease but, as the parties agree, failed to deal with some of them. By amended notices of motion filed on 29 March 2004, Alamdo and AWF sought orders in respect of the interim report. The parties are agreed that certain aspects have been left unresolved and require determination. They are agreed as to the identity of these aspects, being the claims the subject of items 72, 89, 143, 164, 392, 239, 260, 407, 408, 409, 229 and 390. 5 The matters thus identified by numbers are set out in a closely typed annexure to the summons. The annexure runs to some 200 numbered items. The items are listed in groups referable to different parts of the premises so that the numbers do not run sequentially. Anyone unfortunate enough to have to find a particular item in this list is forced to start at the top and go through the 200 items one by one until the one sought is found. This is both time wasting and exasperating. 6 The items 72, 89, 143, 164, 392, 260, 407, 408, 409, 229 and 390 with which the referee did not deal in any way fall into two categories. The first category (items 407, 408, 409 and 229) relates to asphalt paving of what are described as Areas 4 to 7. The second category (items 72, 89, 143, 164, 392, 239, 260 and 390) consists of the so-called "plumbing claims". 7 Although largely agreed on the areas requiring further attention, the parties differ as to the procedure that should be adopted in relation to them. Alamdo says that they should be determined by the court on the evidence taken before the referee. AWF says that they should be remitted to the referee for further consideration and report. 8 Beyond that, each party seeks the rejection of certain parts of the interim report. Not unnaturally, each seeks the rejection of different portions. Alamdo also seeks variation of the report in three respects. 9 Subject to the foregoing, each party is content for the referee's interim report to be adopted. The claims the referee failed to address 10 I should deal, at this early stage, with the question whether the issues of liability with which the referee did not deal should be remitted to him for further consideration and report, or whether they should be determined by the court on the evidence taken before the referee - a course made available by Part 72 rule 13(1)(d). In my view, the latter course is appropriate. There are two reasons for this. 11 The first reason is that, despite the willingness of AWF to have the referee act further, I am firmly of the opinion that the parties should not be compelled to persist in a process in which both of them have been badly treated. The referee took an inordinately long time to produce a report on liability and even then he failed to deal with some matters. Over the years, the parties repeatedly asked the referee to bring his report to a conclusion. Several indications of likely completion dates were received but not honoured. The only means available to the parties of alleviating the frustration that must have grown as the years passed was to ask the court to terminate the reference - a course that would have seen them lose the investment of time and resources they had made. The matter obviously failed to engage the attention and interest of the referee. There is no reason to think that things would improve if the remaining matters were remitted. The prospects of what Part 1 rule 3(1) of the Supreme Court Rules calls "just, quick and cheap resolution" would not be enhanced by any procedure that saw the referee involved again or required the parties to run the risk of being subjected to the same highly unsatisfactory treatment. 12 The second reason for preferring the course that involves the court's determining the liability questions left outstanding by the referee is that, on the assessment I have made after a full consideration of the materials, the evidence adduced before the referee and available to me is sufficient to enable the court to make the decisions on liability that the referee failed to make. The principles to be applied 13 Before embarking upon a consideration of the parties' claims, I should refer to the guiding principles that apply to applications to adopt, vary or reject a referee's report. Those principles are, in large measure, stated in the judgment of Gleeson J in Super Pty Ltd v SJP Formwork (Aust) Pty Ltd (1992) 29 NSWLR 549. A convenient list of relevant considerations extracted from that source is provided in the judgment of Hunter J in Walter Construction Group Ltd v Walker Corporation Ltd (2001) 47 ATR 48. The substance of that list is as follows: 1. The hearing of a reference should not be equated with a hearing at first instance in this Court. So much may be extracted from the fact that a referee may be appointed by reason of his or her technical expertise (not necessarily in legal matters) and from the provisions of Part 72 rule 8. 2. It is untenable to construe the power of the Court under Part 72 rule 13 as falling within the umbrella of a proposition that all litigants are entitled to have a judge decide all issues of fact and law that arise in any litigation. The procedure that Part 72 rule 13 establishes is not that of an appeal from a referee to a judge. The concept of "a re-hearing" which is itself ambiguous, at best provides an imperfect analogy. 3. Part 72 rule 13 does not require a judge to reconsider and determine afresh all issues, whether of fact or law which a party desires to contest before the judge. It would be a radical departure from the history of the rules to treat them as giving a dissatisfied party an automatic right to a hearing de novo . What is involved in an application under Part 72 rule 13 is not an appeal, whether by way of a hearing de novo , or a more limited re-hearing.

4. In so far as the subject matter of dissatisfaction with a referee's report is a question of law, or the application of legal standards to established facts, then a proper exercise of discretion would require a judge to consider and determine the matter afresh. 5. If the referee's report reveals some error of principle, some absence or excess of jurisdiction, or some patent misapprehension of the evidence, that would ordinarily be a reason for rejecting it. So also would perversity or manifest unreasonableness. 6. In the case of findings of fact by the referee, where there is evidence to support such findings and the court is satisfied that those issues have been carefully considered by the referee it will not normally engage in a re-examination of the referee's findings. The relevant questions and their context 14 The parties are agreed that the matters raised by their respective notices of motion turn very largely on the answers to seven questions: 1. The question of law as to whether damage caused directly by AWF's sub-lessee falls within clause 5.1 of the lease. 2. The question of law as to whether the paving work was structural, and the construction of "reasonable wear and tear" concerning the paving work. 3. The question of law as to whether repainting of the roof was "usual" within the meaning of cl 5.2 of the lease. 4. The question whether there was any evidence that work was required to ensure that the cranes complied with WorkCover requirements. 5. The question whether the referee's findings as to the claim for loss of rent were manifestly unreasonable. 6. The question of the resolution of the claims in relation to plumbing, as to which the referee did not provide any opinion. 7. The question whether certain findings as to the credit of Mr Maurici should be rejected as having been irrelevant to the referee's reasons for the opinions which he expressed. 15 These questions will be better understood in the light of the referee's statement of background facts: "4. The Lease was dated 28 April 1989. The term commenced on 1 March 1989. It was for a term of 10 years.

5. The subject of the Lease is industrial land at Chester Hill, Sydney. There are two factory buildings on the land. The Lessee occupied one of the factories (in the evidence and in this Report referred to as Unit 1) from the commencement of the Lease until about July 1997. The Lessee then sublet the Unit to Quad Distribution Pty Ltd (' Quad '). 6. The Lessee never occupied the other building referred to as Unit 2. It was sublet to successive sub-tenants. From February 1997, the subtenant was Kreuger Transport Equipment Pty Limited (' Kreuger '). 7. The Lease ended by effluxion of time on 28 February 1999. 8. Thereafter, some of the work, which the Lessor claims was the responsibility of the Lessee, has been carried out on the instructions of the Lessor. Other work of the same description remained outstanding at the date of hearing. As well as the cost of the repairs, actual and estimated, the Lessor claims for alleged loss of rental. 9. For its part, the Lessee claims that it carried out almost all the repair work required under the Lease prior to the expiration of the Lease. In respect of a relatively small number of items, it claims that it ran out of time to complete the work that it had planned to do. 10. It is common ground between the parties, that the Lessor has carried [out] a great deal of work on the premises. However, an issue between the parties arises from the contention by the Lessee that the bulk of the work, the subject to the Lessor's claim, is not required of it by the terms of the Lease." 16 I should also set out the relevant provisions of the lease: Clause 5.1: 'The Lessee will during the whole of the Term and otherwise so long as the Lessee may remain in possession or occupation when where and so often as need shall be maintain replace repair and keep the whole of the Demised Premises in good and substantial repair order and condition damage by explosion, earthquake, aircraft, riot, civil commotion, fire, flood, lightning, storm, tempest and reasonable wear and tear, Act of God and war damage only excepted save where any insurance monies are irrecoverable through the neglect, default or misconduct of the Lessee provided that this covenant shall not impose on the Lessee any obligation in respect of any structural maintenance replacement or repair except when the same is rendered necessary by any act or omission or default on the part of the Lessee or by the Lessee's use or occupancy of the Demised Premises.' Clause 5.2: 'Without prejudice to the provisions of Clauses 5.1 and 10.4 hereof, the Lessee will in the last year of the term and from time to time if necessary or reasonably required by the Lessor paint, repaint, clean or otherwise appropriately treat in a proper and workmanlike manner such part of the Demised Premises usually so treated.' Clauses 5.3(a) and (b): '(a) The Lessee will during the term cause the Demised Premises to be kept free from dirt and rubbish and particularly shall store and keep all trade waste trash and garbage in proper receptables [sic] and the Lessee shall arrange for the regular removal thereof from the Demised Premises and the Lessee shall arrange for the normal office cleaning of the Demised Premises. (b) All covenants contained or implied in this Lease regarding repairs to be carried out by the Lessee shall be deemed to include the cleaning and keeping free from chokage of all drain and water pipes and sewerage pipes and the maintaining of all gas and electrical fittings and pipes.' Clause 5.4: 'The Lessee will at all times during the Term keep and maintain clean and in good and substantial repair working order and condition all machinery plant equipment fixtures fittings and furnishings of the Lessor located in the Demised Premises.' Clause 5.6: 'The Lessee will without delay repair and replace all broken glass including exterior windows with glass of the same or similar quality and all damaged or broken heating lighting or electrical equipment and plumbing installed upon the Demised Premises provided that such breakage is cause or contributed to by the Lessee or by any invitee or trespasser.' Clause 6.5: 'The Lessee will not do nor permit nor suffer to be done upon the Demised Premises anything in the nature of overloading any floor of the Demised Premises whereby the Demised Premises may be strained or any walls or floors caused to sag or deflect from the right line or the Demised Premises may be otherwise damaged.' Clause 7.1(c): 'Without limiting the generality of paragraphs (a) and (b) of this Clause the Lessee will and does hereby indemnify the Lessor from and against all actions, claims, demands, losses, damages, costs and expenses for which the Lessor may become liable in respect of or arising from:- (i) the negligent or careless use, misuse, waste or abuse by the Lessee or any contractor, sub-contractor, licensee, invitee, client, customer or visitor or the Lessee or any other person claiming through or under the Lessee of the water, gas, electricity, lighting or other services and facilities of the Demised Premises or arising from any faulty fitting or fixture of the Lessee; (ii) overflow or leakage of water (including rain-water) into in or from the Demised Premises PROVIDED THAT such overflow or leakage is not caused by the negligence of the Lessor its employees servants agents or contractors; (iii) loss, damage or injury from any cause whatsoever to property or person caused or contributed to by the use of the Demised Premises by the Lessee or any contractor, sub-contractor, licensee, invitee, client, customer or visitor of the Lessee; and (iv) loss, damage or injury from any cause whatsoever to the Demised Premises or to any property or person within or without the Demised Premises occasioned or contributed to by any act, omission, neglect, breach or default of the Lessee or any contractor, sub-contractor, licensee, invitee, client, customer or visitor of the Lessee.'

Clause 8.2: 'The Lessee shall at and may prior to the determination of this Lease (and will if so required by the Lessor) take remove and carry away from the Demised Premises all fixtures fittings plant equipment or other articles upon the Demised Premises in the nature of trade or tenant's fixtures brought upon the Demised Premises by the Lessee, but the Lessee shall in such removal do no damage to the Demised Premises or shall forthwith make good any damage which the Lessee may occasion thereto.' Clause 8.3: 'If the Lessee does not remove and carry away any of such fixtures fittings plant equipment and other articles at or immediately prior to the determination of the Lease the Lessor may at the expense of the Lessee remove and dispose of the same and any of such fixtures fittings plant equipment and other articles not removed by the Lessee as aforesaid shall become the property of the Lessor.' Clause 9.4: 'If the Lessee omits or neglects to pay any money or to do or effect anything which the Lessee has herein covenanted to pay do or effect then on each and every such occasion it shall be lawful for but not obligatory upon the Lessor and without prejudice to any rights or powers arising from such default to pay such money or to do or effect such thing by itself as if it were the Lessee and for that purpose the Lessor may enter upon the Demised Premises and there remain for the purpose of doing or effecting any such thing and without prejudice to the rights powers and remedies of the lessor otherwise under this Lease the Lessee will pay to the Lessor interest at the rate of twenty percentum (20%) per annum on any moneys due by the Lessee to the Lessor on any account whatsoever pursuant to this Lease but unpaid for seven (7) days such interest to be computed from the due date for the payment of the moneys in respect of which the interest is chargeable until payment of such moneys in full and be recoverable in like manner as rent in arrears.' Clause 9.5: 'The Lessee will forthwith upon the expiration of the Term or sooner determination of this Lease peaceably surrender and yield up to the Lessor the Demised Premises clean and free from rubbish and in all respects in the state of repair and condition in or to which the Lessee is obliged to have maintained, kept or restored the Demised Premises under this Lease.' Clause 11.13: "Without limiting the other provisions of this Lease, the Lessee at its own expense will at all times during the term hereof maintain (and replace or replant plants, trees and shrubs as necessary) and water the gardens and lawns and regularly mow the said lawns on the Land.' 17 The main repair covenant is clause 5.1. For reasons which will become apparent, it is useful to set out a short analysis of the way in which that clause works, leaving aside elements obviously not relevant to the circumstances at hand. First, the repair obligation cast upon the lessee extends to the "Demised Premises", with the result that repair of something not included in the "Demised Premises" is not the responsibility of the lessee. Second, the responsibility of the lessee does not extend to repair of "reasonable wear and tear". Third, the lessee has no responsibility for "structural maintenance replacement or repair" unless that maintenance replacement or repair is "rendered necessary by" the lessee's "use" of the "Demised Premises". 18 These elements of clause 5.1 give rise to many of the issues identified in the foregoing questions. But, as will be seen, clause 5.1 is not the only relevant clause. Whether repairs attributable to sub-lessee's activities is within clause 5.1 19 The first question (being Question 1 at paragraph 14 above) is whether, as a matter of law, damage necessitating structural repair caused directly by AWF's sub-tenant falls within the provision concerning structural repair "rendered necessary by … the Lessee's use … of the Demised Premises". AWF did not dispute that, despite the sub-letting, AWF alone was "the Lessee" as defined by the lease (although, in that connection, there is a question, to be considered presently, whether the terms upon which sub-letting was consented to by Alamdo caused a modified concept of "Lessee" to prevail). That being so, the obligation to repair fell upon AWF, subject to the exceptions, including that in the proviso excluding responsibility for "structural" maintenance, replacement or repair not "rendered necessary" by an act, omission or default of the lessee or by "the Lessee's use or occupancy of the Demised Premises". That raises the question whether repair arising from activities of AWF's sub-tenant upon the premises was "rendered necessary … by the Lessee's use or occupancy of the Demised Premises". 20 The referee took the view that, on its proper construction, the lease did not make the lessee liable for the acts or omissions of a sub-lessee where the sub-lease had been expressly consented to by the lessor. Alamdo submits that this conclusion of law reached by the referee should not be accepted and that, as a matter of construction, repair of matters resulting from acts and omissions of the sub-tenant was "rendered necessary … by the Lessee's use … of the Demised Premises", the relevant "use" by AWF, as "the Lessee", being the "use" of turning the premises to account by sub-letting them. That particular argument was not put to the referee but is open upon the present applications, given that it goes to a question of law as to the proper construction of the lease. 21 Mr Jackman SC, who appeared for Alamdo, referred to the decision of the High Court in Ryde Municipal Council v Macquarie University (1978) 139 CLR 633 in support of the proposition that a person having an estate in land may be taken to "use" the land by leasing it to another. The reasoning in that case and in earlier analogous cases was discussed in the joint judgment of Gallop, Lockhart and Neaves JJ in Re Attorney-General for the Australian Capital Territory (1990) 26 FCR 82: "It is trite that the words of a statute must be read in their context. The verb 'to use' and its derivatives are words whose meaning will depend, to a very great extent, upon the context in which they are employed. The wide variety of contexts in which the verb appears is graphically illustrated by a perusal of Stroud's Judicial Dictionary (5th ed, 1986), and Words and Phrases Legally Defined (3rd ed). However, most of the decided cases which have considered the verb 'to use' or its derivatives have done so in a context very different from the context of s 27(2) of the Planning and Land Management Act and are, in consequence, of limited assistance in the present case.

Many of the authorities describe the verb 'to use' as one of wide import: see, for example, Newcastle City Council v Royal Newcastle Hospital (1957) 96 CLR 493 , per Taylor J (at 515); Ryde Municipal Council v Macquarie University (supra), per Gibbs ACJ (at 637); see also what was said by Lord Evershed MR, speaking for the Court of Appeal, in Shell-Mex and BP Ltd v Clayton [1955] 1 WLR 982 at 1004; [1955] 3 All ER 102 at 117. His Lordship referred, with obvious approval, to the following statement by Stirling J in British Motor Syndicate Ltd v Taylor & Son [1900] 1 Ch 577 at 583: 'The first meaning assigned to the word "use" in Johnson's Dictionary is "to employ to any purpose"; it is, therefore a word of wide signification'. This is probably as close as one can get to an accurate, albeit broad, definition of the word for presently relevant purposes. Land may be said to be 'used' within the meaning of s 27(2) if it is held or possessed so as to derive revenue, profit or other benefit from it: Shorter Oxford English Dictionary.

Not only is 'use' a word of wide signification, it is also a word which does not have a precise meaning: Arbuckle Smith & Co Ltd v Greenock Corporation [1960] AC 813 , per Lord Radcliffe (at 828). His Lordship added that 'in general it conveys the idea of enjoyment derived by the user from the corpus of the object enjoyed'. A decision which is of assistance in determining the meaning to be ascribed to the word 'used' in the context in which it appears in s 27(2) is Ryde Municipal Council v Macquarie University (supra). That case concerned s 132(1) of the Local Government Act 1919 (NSW) whereby all land in a municipality was declared to be rateable, the section, however, containing a number of exceptions including: '(fii) Land which is vested in the Macquarie University, or in a college thereof, and is used or occupied by the University or college, as the case may be, solely for the purposes thereof.' Parts of a building erected in the grounds of the University were let to tenants who conducted therein with a view to profit retail shops, a travel centre and branches of two banks. The shops and the banks principally served the convenience of the staff and students of the University, but they were also open to the general public. It was held by Gibbs ACJ, Stephen and Murphy JJ, Jacobs and Aickin JJ dissenting, that the land on which the shops and commercial facilities were conducted was 'used' by the University 'solely for the purposes thereof' within s 132(1)(fii). Gibbs ACJ, after reference to authority, said (at 643) that land vested in the University may be 'used ... solely for the purposes thereof' within par (fii) 'notwithstanding that it is occupied by a tenant holding under a lease'. His Honour said (at 638-639): 'A person who owns land may be said to use it for his own purposes notwithstanding that he permits someone else to occupy it, even under a lease. That is almost beyond argument when the owner's purpose is to acquire income. In the ordinarily accepted meaning of the word a building is `used' for the purposes of acquiring income if rents are derived from it, and an owner of premises who leases them is making use of those premises by employing or applying them for the purpose of letting: Commissioner of Income Tax v Hanover Agencies Ltd [1967] 1 AC 681 at 689. But that is not the only way in which an owner of land may use it by letting it to someone else. An employer who provides premises in which he requires an employee to live so that the employee may perform more efficiently the duties of his position is in my opinion himself using those premises ... Where use, and not occupation, is in question, I can see no reason to disregard the indirect use which an employer makes of a house by providing it as a residence for the use of his employees. If, for example, a university considered it desirable in its own interests that the vice-chancellor should live in particular premises which the university owned, the university would, in my opinion, use those premises if it made them available as a residence for the vice-chancellor, and this would be so whether the premises were let or occupied under licence.' Stephen J, in whose judgment Murphy J agreed (at 647) concluded that the word 'used' in the phrase 'used ... by the university ... solely for the purposes thereof' referred not to the active, personal use of the land by the University as the owner of it but to its use by being made available by the University for use by others for a particular purpose." 22 I am satisfied that it is possible to refer, in ordinary parlance, to a lessee who grants a sub-lease as thereby "using" the demised premises by subjecting them to and turning them to account through the sub-lease. But it is equally valid to refer to the sub-lessee who lives or carries on some business or other pursuit in the premises as also "using" them. The respective "uses" are of different kinds, with only the latter involving possession of and physical deployment of the premises: indeed, the sub-lease, of its nature, would exclude entry and physical deployment by the sub-lessor. 23 Accepting that sub-letting by AWF constituted "use" of the part of the leased property by AWF and that the actual activities of a sub-lessee from AWF upon the part of the leased property the subject of its sub-lease constituted, quite separately, "use" of the premises by the sub-lessee, it becomes necessary to consider whether structural maintenance, replacement or repair that became necessary during the term of one of the sub-lessee's sub-lease were "rendered necessary by" the "use" by AWF. 24 It is true that, but for the sub-lease granted by AWF, such requirements for structural repair as may have flowed from activities of AWF's sub-lessee would not have arisen. Had it not been for the sub-lease and the right of exclusive possession it conferred on the sub-lessee, the activities of the sub-lessee upon the premises giving rise to the need for structural repair would not have occurred. At the same time the grant of the sub-lease could in no sense be seen as producing any such requirement independently of the activities of the sub-tenant. Had the sub-lease been granted and the premises either been left vacant by the sub-lessee or made the scene of activities not leading to any such requirement, the "use" by AWF represented by its having granted the sub-lease would not have been the source of any need for structural repair. Where the sub-lessee makes the premises the scene of activities and those activities have such an effect upon and in relation to the premises that a need for repairs arises, the source of the need is the sub-lessee's activities - that is, its "use" - even though the occasion for that "use" would not have existed but for the "use" consisting of AWF's granting of the sub-lease. In these circumstances, the necessity for structural repairs of the kind under discussion must be seen as having arisen from the sub-tenant's "use", not from AWF's "use"; and the repairs must be seen as "rendered necessary by" the sub-tenant's "use", as distinct from AWF's "use". 25 For these reasons, I consider that (subject to the argument as to a possibly broader meaning of "Lessee" having emerged by reason of events at the time of consent to sub-letting) the referee was correct, as a matter of law, in proceeding on the basis that he did, namely, that any repairs to put right matters occurring by reason of activities of AWF's sub-lessee upon part of the leased property sub-let to it by AWF were not "rendered necessary … by the Lessee's use or occupancy of the Demised Premises". I accept, in this respect, the submission of Mr Meagher SC on behalf of AWF that AWF's "use" by sub-letting was not, in any way, causative of the need for repairs. That "use" was confined to making the property available to the sub-lessee. It was the independent activity (or "use") of the sub-lessee that rendered repairs necessary. Whether consent to sub-letting varied meaning of "Lessee" 26 The additional argument of Alamdo based on events at the time of consent to sub-letting focuses on a letter of 30 May 1997 by which Alamdo conveyed to AWF consent to sub-letting. That letter is as follows: "I refer to your requests for consent from Alamdo Holdings Pty Ltd to allow Australian Window Furnishings (NSW) Pty Ltd to sub-let the above premises. I confirm my conversation with Jim Mayo yesterday and previously, that Alamdo Holdings Pty Ltd grants consent to the sub-leases on the understanding that Alamdo Holdings Pty Ltd retains all its rights and remedies under the Lease, and that Australian Window Furnishings (NSW) Pty Ltd and the Guarantors continue to be bound by their obligations under the Lease. Furthermore, consent is conditional on Alamdo Holdings Pty Ltd receiving consent from its mortgagee should there ever be a requirement for the sub-leases to be registered on Title."

This letter, according to submissions made on behalf of Alamdo, had the effect of varying the lease itself by broadening the meaning to be given to "the Lessee", as used in the lease. 27 AWF made two submissions in relation to this aspect: first, that Alamdo should not be allowed to raise for the first time upon the hearing of the present notices of motion a matter that was not argued before the referee; and, second, that the letter in question simply does not bear the construction for which Alamdo contends. Because of the conclusion I have reached on the latter aspect, I do not pause to consider the former. As Mr Meagher submitted, not one word of the letter of 30 May 1997 can possibly be regarded as amounting to any form of variation of the lease. The substantive message conveyed by the letter is one of consent to sub-letting "on the understanding" stated. The "understanding" is that Alamdo "retains all its rights and remedies under the Lease" and that AWF and the guarantors "continue to be bound by their obligations under the Lease". The "understanding", in both its branches, entails no more than the ongoing existence and applicability of matters already in existence. This is the force of the words "retains" and "continue to be bound". There is not, expressly or by implication, any attempt to introduce new and additional content into the whole of the contractual compact existing between lessor and lessee. Matters relevant to paving 28 There next arises for consideration a group of questions concerning paving work dealt with in the interim report of the referee. The questions relate to different paved parts of the leased property and it is necessary to refer briefly to the circumstances pertaining to those different parts. The first part is that referred to as Areas 1 to 3, being open space which, before sub-letting, had been used for the parking of light vehicles but, thereafter, became a site for storing heavy containers, equipment and machines that could be moved only by forklift. Areas 1 to 3 were also prone to inundation during heavy rain. The main question seen by the parties to be relevant to Areas 1 to 3 is whether the necessary paving work was properly regarded as "structural maintenance replacement or repair". For separate consideration in due course are Areas 4 to 7, which are also open space in the sense of not being within any building. There was not, in relation to Areas 4 to 7, any suggestion of overloading by the sub-lessee and the principal issue goes to "reasonable wear and tear". 29 It is also necessary to refer, at this preliminary stage, to the nature of the paving (which was the same in all relevant areas) and the referee's findings in relation to it. The referee's interim report - which did not distinguish between Areas 1 to 3 and Areas 4 to 7 - proceeded on the basis that the relaying of pavement that had become unserviceable was within "structural maintenance, replacement or repair". The view was taken that pavement consisting of an asphalt layer or skin laid upon soil that has been rolled and compacted and then covered with a layer of aggregate or blue metal (known as the "basecourse") is properly regarded as a "structure" so that the installation of a new asphalt layer or skin of the same kind in place of one that has become cracked and holed and, as necessary, installation of new basecourse material in place of that lost or removed involves work of a "structural" nature. 30 Alamdo contends that such an approach proceeds on an erroneous view of the meaning of "structural", being the adjective derived from "structure". According to the submissions advanced on Alamdo's behalf, an object other than a building as such may be a "structure" but only if there is a set of interconnecting parts of a complex thing sufficient to make it analogous to a building. AWF submits that "structure" does not import any notion of a complex thing or of something analogous to a building. 31 The parties are agreed that the referee did not deal with the question actually arising in relation to Areas 4 to 7 (where there was no finding of overloading or inundation), being the question as to the applicability of the "fair wear and tear" exception, and that this matter needs to be determined. As I have said, it is appropriate that the court determine it on the evidence taken before the referee. Meaning of "Demised Premises" 32 The various issues concerning the pavements centre mainly on clause 5.1 and other provisions allied with it. Before addressing those issues directly, I must deal with an important matter of construction going to the scope of the repair covenants. 33 The clause 5.1 covenant and its various qualifications and exceptions relate solely to the "Demised Premises". The lease contains, in clause 1.1, a definition of "Demised Premises" as follows: "' Demised Premises' includes where the context so admits such of the fixtures fittings furnishings plant machinery and equipment (if any) from time to time installed therein and owned by the Lessor and also any fences or gates at or around the Land to the extent that the Lessor has any interest in the same."

The reference here to "the Land" must be construed in the light of another definition in the same clause: "' Land ' means the land referred to in the Schedule on the first page of this Lease." 34 This, in turn, takes one back to the operative part of the lease on its first page by which Alamdo "hereby leases to" AWF "the land / and premises above described". This is, clearly enough, a reference to the material appearing in the schedule earlier on the first page against the marginal indicator "Description of Land" and under the heading "Land of which Lessor is registered proprietor". That schedule consists of three columns. The first is labelled "Torrens Title Reference" and contains "Folio Identifier 21/702060"; the second is headed "If Part of Premises, see note (a)(ii)" and contains the word "Whole"; and the third headed "Location" contains "of Chester Hill". 35 The definitions of "Land" and "Demised Premises", taken together, seem to me to recognise the principle of land law quicquid plantatur solo solo cedit - that things placed in or upon the soil with an intention that they should remain permanently or indefinitely are part of the land. The unqualified reference in the lease to the whole of the land in Folio Identifier 21/702060 must, it seems to me, be a reference to everything within the boundaries of that identified parcel that, having regard to the law of fixtures, constitutes land. Buildings and pavements are, on this basis, part of the "Land" as defined in the lease. 36 The expression "Demised Premises", as defined, refers to a part of the totality that constitutes the "Land". The definition of "Demised Premises" is not exhaustive. It uses the word "includes", not "means". The definition does not refer to buildings but there can be no doubt that buildings on the "Land" are part of the "Demised Premises". In the law of landlord and tenant, the expression "demised premises" generally refers to a house or building together with its land and outbuildings: Natural Gas & Oil Corporation Pty Ltd v Byrne (1951) 68 WN (NSW) 207; Cram v Bellambi Coal Co Ltd (1964) 82 WN (NSW) (Pt 1) 18. The basic meaning of "premises" refers to buildings: Beacon Life and Fire Assurance Co v Gibb (1862) 1 Moo (NS) 73; Turner v York Motors Pty Ltd (1951) 85 CLR 55. In the present case, where there is a distinction between the "Land" and the "Demised Premises", it seems to me that the latter expression must be taken to comprehend the buildings on or forming part of the "Land", together with the particularly identified items specifically brought within the "Demised Premises" concept, being (subject to any contrary indication in the particular context) fixtures, fittings, furnishings, plant, machinery, and equipment from time to time "installed therein", plus any fences and gates "at or around the Land", subject, in each case to the lessor's having "an interest" in the particular item. 37 Two aspects of this definition call for attention. First, it is to be noted that the specific inclusion not referring to fences and gates is concerned with items "installed therein". The word used is "therein", not "thereon". It refers to an undefined concept of "Demised Premises". The use of "therein" rather than "thereon" seems to me to indicate that this part of the definition proceeds on the implicit footing that the "Demised Premises" consist primarily of buildings inside which fixtures and the like are capable of being installed - hence, "therein". The second aspect calling for attention confirms this. There is separate reference to "fences or gates at or around the Land". In the ordinary course of events, a fence (with or without gates) would be a "fixture" and thus caught by "fixtures fittings furnishings plant machinery and equipment … installed" upon land. If "therein" were meant to catch all fixtures and other installations upon the land the subject of the lease, there would be no need for the separate treatment of fences and gates. This, to my mind, confirms that "therein" refers to things within buildings and that the only items not forming part of or within buildings that are covered by the "Demised Premises" definition are the fences and gates specifically mentioned. 38 On the basis of this definition, paved areas outside the buildings do not constitute part of the "Demised Premises". They are not, in relation to buildings, "therein". And they are not caught by the specific part of the definition of "Demised Premises" dealing with fences and gates. The repair covenant in clause 5.1 therefore does not apply to them, with the result that the lease does not oblige AWF to repair those outside paved areas.

"Structural" repairs 39 This conclusion as to the scope of clause 5.1, construed in light of the definition of "Demised Premises", makes unnecessary to the resolution of the proceedings consideration of the question whether restoration of cracked and holed pavements in Areas 1 to 3 would be within the words "structural maintenance replacement or repair". I proceed nevertheless to address that question as if those pavements did form part of the "Demised Premises". The first thing to be said is that, as I view matters, maintenance, replacement or repair that is "structural" can be undertaken only in relation to something that is a "structure" although, of course, not everything done by way of maintenance, replacement or repair in relation to a "structure" is properly classified as "structural". I regard as apposite, in this connection, a passage in the judgment of Brereton J in Hampson v Clyne (1967) 86 WN (NSW) 321: "'Structure' of course is a word of which the meaning varies considerably according to the context, and the phrase 'structural character' or 'defect of a structural character' varies correspondingly. Literally 'structure' means something which has been constructed and 'defect of a structural character' means either a fault in putting the structure together or some subsequent failure on the part of the structure to remain satisfactorily put together. With particular reference to buildings in common parlance we refer to the bare building as the structure. We refer to fixtures and fittings attached to the structure although these may themselves as individual units be technically 'structures'. We refer also to installations, such as gas and water piping and electrical circuits. Each of these may, however, independently be in certain contexts regarded as a 'structure' in that it is something which has been constructed within another structure." 40 Applying the same concepts, maintenance, replacement or repair is "structural" when its purpose and effect are to remedy some "failure on the part of the structure to remain satisfactorily put together". This is, I think, consistent with the approach taken to the meaning of "structural repairs" in relation to buildings as such in cases such as Granada Theatres Ltd v Freehold Investment (Leytonstone) Ltd [1959] 1 Ch 592 and Advance Fitness Corporation Pty Ltd v Bondi Diggers Memorial & Sporting Club Ltd [1999] NSWSC 264 to which counsel for both parties referred. Reference may also be made to what was said by Balmford J - again in relation to a building - in Carbure Pty Ltd v Brile Pty Ltd [2002] VSC 272: "'the structure' is that part of the total building that supports the loads and stops the building falling down. It should be emphasised that a building may be structurally sound notwithstanding that it shows signs of movement; as by the opening of cracks. Unless such cracks indicate a real and present threat to load bearing integrity, of building failure or collapse, they may be treated as simply cosmetic defect - susceptible of patching, painting or other straight-forward repair." 41 Also instructive, in this connection, is the decision of the Full Court of the Supreme Court of South Australia in J F Hillam Pty Ltd v Mooney (1988) 48 SASR 381. That case concerned an indoor swimming centre which included two heated pools built into the ground but inside a building. They had on their inside surfaces a particular coating akin to concrete (described as "marblesheen") to "make them safe and acceptable to swimmers". The marblesheen deteriorated and one of the issues for determination was whether its replacement was "a major repair of a structural nature to the premises". King CJ (with whom Jacobs and von Doussa JJ agreed on this aspect) answered the question in the affirmative: "The swimming pools were undoubtedly part of the structure of the premises. The marblesheen which rendered them usable as swimming pools by providing an appropriate surface must be regarded, to my mind, as part of the structure. The repair or replacement of that marblesheen is therefore a repair of a structural nature." 42 Returning to the particular case of the pavements, I am satisfied that they are properly to be regarded as "structures". They were put upon the land by a process of construction. Their character, as consisting of a skin or coating of asphalt placed upon a prepared land surface to which a basecourse of aggregate or blue metal had first been added, makes them similar to, although lesser in degree than, the "low attractive brick fence" considered in Durkin v Commonwealth Savings Bank of Australia (unreported, Full Court of the Supreme Court of South Australia, 30 November 1990) where a fence "in which the bricks are cemented to a cement base and to one another by mortar" was held to be a "permanent domestic improvement of a structural nature". In the same way pavements constructed in the way I have described should be characterised as being improvements "of a structural nature". Furthermore, the replacement of the asphalt skin and any missing basecourse that, to adapt the words in the JF Hillam case, made them usable as pavements by providing the necessary hard surface and its support, and, as stated in Hampson v Clyne, was necessary for them to "remain satisfactorily put together", must, in my judgment, amount to maintenance, replacement or repair that is "structural". Clause 5.3(b) 43 I consider next the contention of Alamdo that AWF was liable to repair the paving on Areas 1 to 3 because of 5.3(b). That clause is seen as relevant because of the referee's finding that damage to that paving was caused by a combination of excessive weight on the surface and water penetration of that surface. There were also findings that the entry of water was not sufficient to constituted "flood" and was caused, or contributed to, by blockage of drainage pipes on land owned by the local authority lying a short distance outside the boundary of the land the subject of the lease. 44 I am satisfied that clause 5.3(b) imposed no relevant obligation on Alamdo referable to the water penetration that played a part in the damage to the pavement on Areas 1 to 3. The terms of clause 5.3(b) are set out in paragraph 15 above. The clause does not impose any obligation. Its effect is to give added meaning and content to the separately existing provisions with respect to repair. It does so by identifying or defining a specific aspect of the relevant concept of "repair". That concept is stated by clause 5.3(b) to include, in addition to whatever it includes according to the ordinary meaning of "repair", certain specific activities. One of these is "the cleaning and keeping free from chokage of all drain and water pipes and sewerage pipes". 45 Read alone and in isolation, this specification refers to all drain, water and sewerage pipes in the world. But, as I have said, clause 5.3(b) is not to be read alone and in isolation. It is to be read as injecting further or additional meaning into the provisions dealing with repair - specifically, for present purposes, clause 5.1. This means that the activities making up "repair", for the purposes of clause 5.1, are to be understood as extending to the activities of cleaning drainage, water and sewerage pipes and keeping them unchoked. The relevant pipes thus in contemplation for the purposes of clause 5.1 are, of necessity, those forming part of the "Demised Premises", since the clause 5.1 covenant is concerned only with repair of the "Demised Premises". The specifically injected ingredient of the "repair" concept concerning cleaning and unchoking pipes that results from clause 5.3(b) is not made, by that clause or otherwise, to operate beyond the scope of clause 5.1. There is therefore no available construction that causes the lessee to be under an obligation to deal with blockages of pipes on land outside the parcel on which the "Demised Premises" are positioned. 46 I therefore accept AWF's submission that the repair covenants did not require it to deal with such blockages of pipes on the local authority's land as were found by the referee to have caused or contributed to the damage to the pavement on Areas 1 and 3. Clause 7.1(c) 47 Alamdo seeks to rely on clause 7.1(c) in relation to the damage to the pavement in Areas 1 to 3 to the extent that that damage arose from the placing of excessive weight on the pavements by AWF's sub-lessee. AWF resists that claim, in the first place, because it was not raised before the referee and cannot be pursued without amendment of the summons. I leave that argument to one side because I am firmly of the opinion that, having regard to AWF's alternative argument, the claim is not sustainable in any event. 48 By clause 7.1(c), AWF indemnifies Alamdo "from and against" certain "actions, claims, demands, losses, damages, costs and expenses for which the Lessor may become liable in respect of or arising from" certain defined matters. Even if it is accepted that the placing of excessive weight on the pavement is such a defined matter, the circumstance that the pavement is thereby damaged so as to be in need of repair does not mean that the indemnity operates in favour of Alamdo. For the indemnity to operate, it must be found that the defined matter in question is one producing (or capable of producing) a liability on the part of Alamdo. The actions, claims, damages and the like in respect of which the indemnity clause provides protection to Alamdo are those for which Alamdo "may become liable" by reason of any of the defined matters. 49 If property of mine falls into disrepair, no liability results for me unless and until someone else validly asserts some legally enforceable right against me referable to that state of affairs. In the absence of such a legally enforceable right in a third party, I am free to leave the property in its state of disrepair or to repair it if I see fit. The choice is entirely mine. And if I do choose to make repairs, my decision is in no way referable to any liability to which the need for repair has subjected me. 50 In the present case, Alamdo does not point to any legally enforceable obligation to which it became subject (or to any legally enforceable right that accrued against it and in favour of someone else) because of the state of the pavements in Areas 1 to 3. There is nothing to suggest that Alamdo was compelled (or could have been compelled) to restore the damaged pavement and thereby to incur any liability for the expense of restoration or otherwise. It follows that no occasion for the operation of clause 7.1(c) has been shown to have arisen. 51 Thus, even though AWF's sub-lessee is a person "claiming through or under the Lessee" and the pavements are no doubt "facilities of the Demised Premises", clause 7.1(c) is not the source of obligation on the part of AWF and in favour of Alamdo with respect to the repair of pavements or the cost of their repair. Areas 4 to 7 - "reasonable wear and tear" 52 The damage to the pavements in Areas 4 to 7 is not, in its nature, different from that in Areas 1 to 3. There is, however, a difference in the cause of deterioration, in that placing of heavy weights played no part in Areas 4 to 7. 53 AWF's primary submission in relation to Areas 4 to 7 is that, because the referee did not deal with them at all, consideration of them should be remitted to the referee. Alamdo says that the court has sufficient before it to enable it to determine the questions relevant to Areas 4 to 7. As I have already indicated, I agree with the latter submission and proceed to the issues. 54 The first thing to say is that, on the basis of what I have already said, the repairs to Areas 4 to 7 were within the description "structural maintenance replacement or repair" and were not "rendered necessary by … the Lessee's use … of the Demised Premises". The proviso to clause 5.1 therefore operates to the benefit of AWF. 55 I nevertheless proceed to consider whether the "reasonable wear and tear" exception in clause 5.1 also operated to AWF's benefit, that being the matter raised by Question 2 at paragraph 14 above. The evidence of the respective experts indicates that the deterioration of the pavements in Areas 4 to 7 began in the form of cracking and became more pronounced when the cracking was not treated, so that water ran in under the asphalt skin and undermined both it and the basecourse. This led to greater deterioration in the form of "crocodile cracking" and potholes. 56 Alamdo says that this deterioration is not put beyond the lessee's responsibility by the "reasonable wear and tear" exception. Its contention, in summary, is that a tenant having the benefit of such an exception is not free simply to stand by and see the demised premises reduced to rack and ruin by the compounded effects of normal wear and tear - that there is a point at which the tenant must step in and put an end to the downwards slide. In this respect, Alamdo relies on a passage in the judgment of Talbot J in Haskell v Marlow [1928] 2 KB 45 which was first rejected by the Court of Appeal in Taylor v Webb [1937] 2 KB 283 but later reinstated as authoritative by the House of Lords in Regis Property Co Ltd v Dudley [1959] AC 370. The passage is as follows: "The meaning is that the tenant (for life or years) is bound to keep the house in good repair and condition, but is not liable for what is due to reasonable wear and tear. That is to say, his obligation to keep in good repair is subject to that exception. If any want of repair is alleged and proved in fact, it lies on the tenant to show that it comes within the exception. Reasonable wear and tear means the reasonable use of the house by the tenant and the ordinary operation of natural forces. The exception of want to repair due to wear and tear must be construed as limited to what is directly due to wear and tear, reasonable conduct on the part of the tenant being assumed. It does not mean that if there is a defect originally proceeding from reasonable wear and tear the tenant is released from his obligation to keep in good repair and condition everything which it may be possible to trace ultimately to that defect. He is bound to do such repairs as may be required to prevent the consequences flowing originally from wear and tear from producing others which wear and tear would not directly 'produce'." 57 Talbot J then gave examples: "For example, if a tile falls off the roof, the tenant is not liable for the immediate consequences; but, if he does nothing and in the result more and more water gets in, the roof and walls decay and ultimately the top floor, or the whole house, becomes uninhabitable, he cannot say that it is due to reasonable wear and tear, and that therefore he is not liable under his obligation to keep the house in good repair and condition. In such a case the want of repair is not in truth caused by wear and tear. Far the greater part of it is caused by the failure of the tenant to prevent what was originally caused by wear and tear from producing results altogether beyond what was so caused. On the other hand, take the gradual wearing away of a stone floor or staircase by ordinary use. This may in time produce a considerable defect in condition, but the whole of the defect is caused by reasonable wear and tear, and the tenant is not liable in respect of it." 58 I am not persuaded that the situation with the pavement in Areas 4 to 7 is in any way analogous with the example of the broken roof tile. The evidence is that the pavement was at the end of its useful and expected life. It had, over time, got to a state where "crocodile cracking" occurred. This is symptomatic of decomposition or deterioration inherent in asphalt paving and to be expected in the ordinary course. It leads on to rutting and potholing. The expert evidence shows, in my view, that the process by which this pavement fell into a holed and rutted state was no more or less than a working out of the forces of nature upon the kind of material concerned. 59 Even allowing for the fullest effect of the principles stated by the House of Lords, it cannot be the case that, despite an exception for reasonable wear and tear, a tenant must continually scan an asphalt pavement for the first signs of any crack and then immediately act to repair it in case it becomes larger or lets water through into the basecourse. That would set at nought the exception for reasonable wear and tear. The pavement must, in my view, be seen as a whole and as subject to the ordinary processes of deterioration to which such a pavement, viewed as a whole, is susceptible. I view it as akin to the stone step referred to in Haskell v Marlow. 60 The exception for reasonable wear and tear in clause 5 therefore operates in relation to the repairs to the Areas 4 to 7 pavements as described in the evidence of the two experts. Painting of the roof 61 Alamdo contends that AWF was obliged to repaint the roof of the premises. This matter arises in the context of clause 5.2 of the lease which is set out in paragraph 15 above and raises issues quite distinct from those already considered in relation to clause 5.1. The central issue here is that posed by Question 3 at paragraph 14 above, namely, how one determines what is "usual" within the meaning of clause 5.2. 62 The referee found that the roof was of galvanised steel of a type expected to be maintenance free during its expected serviceable life. He also found that it was coated in the course of manufacture and is not usually painted during its normal service life; also that, because it was not designed to be painted on a periodic basis and was supposed to be a paint-free product, it did not fall within clause 5.2. The referee noted that some previous owners had sought to extend the life of the roof beyond its normal service life by overcoating. He then referred to competing submissions: viz, the submission of AWF that, in view of the matters mentioned and the fact that the roof was beyond painting, the surface was not one that was "usually" painted or otherwise coated; and the submission of Alamdo that the test to be applied is an objective one. The matter appears to have been disposed of by the referee in accordance with AWF's submissions, so far as clause 5.2 is concerned. The referee also referred to "the structural maintenance exception" and the exception for "reasonable wear and tear", but as they are relevant to clause 5.1 and not to clause 5.2, his findings on them may be disregarded. The real issue in this context is as to the operation of clause 5.2 alone. 63 Alamdo submits and I accept that the only real issue under clause 5.2, so far as the roof is concerned, is that arising from the words "usually so treated". This is because the question at hand relates to the last year of the term where the liability the clause imposes is otherwise strict. 64 Provisions generally similar to clause 5.2 are common in leases. The covenants in items 9 and 10 of Part II of Schedule IV to the Conveyancing Act 1919 are in some respects similar to clause 5.2, although each uses the words "now or usually painted". Submissions do not refer to any decided cases in which words such as "usually so treated" in covenants of this kind have been considered. Nor have my researches found any. On the basis that - surprisingly, I think - there is no guidance to be had from case law, I proceed to construe the clause by reference to its words and its context. 65 The parties have made competing submissions as to the meaning of "such part of the Demised Premises usually so treated", noting that "so treated" refers back to the words "paint, repaint, clean or otherwise appropriately treat". Both "paint" and "repaint" appear here. 66 The controversy is whether "usually so treated" directs attention to what has historically been done at the particular premises under consideration or whether the relevant standard is one that has regard to the generality of premises and what people habitually do at or in relation to premises of the relevant kind. If the first possibility represents the correct construction, the scope of "usually so treated" will be fixed by what was in fact done to these particular premises at inception. Nothing will be "usual" that was not done originally. The second possibility, by contrast, imports an objective standard that has regard to the treatment of buildings generally. 67 One factor in particular persuades me that the latter construction is to be preferred so far as this particular provision is concerned. I refer to the inclusion of both "paint" and "repaint". If the first meaning were accepted, there would be no work to be done by the word "paint", as distinct from "repaint". The latter word must be taken to refer to the process of applying new paint to something previously painted. It cannot refer to the application of paint for the first time. "Paint" (as a verb), on the other hand, encompasses the application of paint to either a surface that has been painted before or to one that has never been painted. It is this last aspect that, to my mind, rules out the history of treatment of the particular premises as the determinant of what is "usual". If that standard applied and everything were judged according to what was done to the particular premises at their inception, the only parts to which paint was to be applied in conformity with clause 5.2 would be those painted at inception. And that would, in every case, be properly described as "repainting", so that the concept of "paint" - encompassing the application of paint for the first time - would never be capable of coming into play. 68 Accepting, as I do (and as did the referee), the objective test of what is "usual" for the purposes of clause 5.2, I turn to the referee's conclusion on the application of clause 5.2 to the repainting of the roof. The referee appears to have taken the relevant question to be whether someone responsible for a building with a roof of the particular material in question (galvanised steel coated during manufacture and expected to be maintenance free during its serviceable life without painting) would, as a matter of upkeep according to the generally applicable objective standard, either "paint" or "repaint" that roof. He answered that question in the negative. 69 There is an argument that, once the material in question reaches the end of its life, painting becomes "usual" because the hypothetical building owner or manager following generally adopted procedures would then resort to painting in order to secure some extension of the roof's life. I do not accept that argument. Given the inclusion in clause 5.2 of the words "or otherwise appropriately treat", acceptance of the argument would mean that, once the roof reached the end of its serviceable life or was about to do so, clause 5.2 caused to come into play an obligation not only to paint so as to postpone renewal but also to effect other treatments to that end - perhaps to the extent of applying some bituminous coating or sticking on some form of plastic sheeting, assuming one could find examples of other cases in the ordinary run of building management where those steps were taken in order to extend the life of the roofing metal or, at all events, the effectiveness of the roof made of the old and worn out metal. 70 In my judgment, the relevant criterion of what is "usual", for the purposes of clause 5.2, is to be approached by reference to what is habitually done by way of painting and other "treatment" of the particular material in the ordinary course as that material proceeds towards the end of its useful life. A clause such as clause 5.2 does not have in contemplation the taking of steps of a new and different kind with a specific purpose of prolonging life beyond the conclusion it would have in the ordinary course of deterioration. 71 I therefore do not accept the contention of Alamdo that the referee wrongly construed clause 5.2 in concluding that AWF was not required to repaint the roof during the last year of the term. Crane services 72 This aspect of the referee's report relates to a sum of $7,375 for work done by Southern Cross Crane Service on the cranes on the property. Question 4 at paragraph 14 above refers to this. The sum of $7,375 is said by Alamdo to be recoverable by it under one or both of clauses 5.4 and 9.5 of the lease on the basis that the work was done to bring the cranes up to WorkCover Authority standards. 73 The referee took the view that work to bring the cranes up to WorkCover standards would be "a true item of repair" (and thus within the lease provisions), as distinct from mere maintenance. I do not understand either party to disagree with this. The referee's conclusion was that, on the evidence, he could not say whether the work accounting for $7,375 was to achieve WorkCover standards, with the result that Alamdo's claims based on breach of the lease provisions failed. 74 The referee referred to various parts of the evidence. He noted that Mr Bollard said the cranes had been serviced during the term of the lease and were in working order at its expiration. He said that this was "supported by Mr Krueger" - a puzzling statement as no one called Krueger gave evidence and no such statement can be found by the parties in the evidence of any other witness. It appears likely that the referee misunderstood a reference in written submissions to "Krueger" (being Krueger Transport Equipment Pty Limited, a sub-lessee) having given certain contractual promises in relation to cranes. The referee also said: "No one gave evidence that the work [ie, the work costing $7,375] was required to cranes which, on the evidence, were in working order." 75 Alamdo says that the referee appears to have overlooked the evidence of Mr Maurici, its principal, in this context. Alamdo points to the following passage in Mr Maurici's evidence: "I asked them to come in, inspect the cranes, and bring them up to WorkCover Authority requirements. So they inspected the cranes, determined what wasn't complying and what was broken and carried out repairs. I'm not a specialist in crane operations; these people are. There was no servicing taken out. There was repairs taken out." 76 Alamdo also points to two relevant invoices from Southern Cross Crane Service, each of which refers to "service and repairs" and to items which include stop button, realigned brake shoes, repaired fluid coupling, brake spline, brake linings and bottom block hook. These descriptions are said to confirm the nature of the work as concerned with safety matters. 77 AWF says that the passage from Mr Maurici's evidence set out above on which Alamdo relies occurred in a context which must be specially noted because it affects the meaning of the particular answer. AWF says, and accept, that the context was not such as to indicate an acceptance implicit in the cross-examiner's questioning of the purposes for which the work was sought. Of particular significance, in my view, is the following exchange between Mr Maurici and the referee upon which AWF now relies: "THE REFEREE: Q. Putting aside the crane that was not working properly, you have just told us a few minutes ago that you are not really equipped to determine whether a crane is or is not performing in accordance with WorkCover Authority requirements; right? A. That's correct. Q. Then, how can you say that the cranes were in that condition when you purchased the premises? A. When I purchased the premises? Q. Yes. A. I can't. Q. So they may not have been conforming with WorkCover requirements right through the period of the lease? A. I can't comment on that. I wasn't in charge of them." 78 The statement of Mr Maurici on which Alamdo places particular reliance and the other matters in the evidence to which Alamdo points cannot, in my view, be regarded as warranting a conclusion other than that reached by the referee. The invoice descriptions are equivocal. The submission based on the context in which the selected statement appears is valid. And the exchange between the referee and Mr Maurici cements the result the referee reached, namely, that the evidence did not allow a conclusion to be drawn that the $7,375 related to work to bring the cranes up to WorkCover standards. 79 I do not consider the referee's findings and decision on the matter of crane services to warrant rejection or variation of any part of the interim report dealing with that subject.

Claim for loss of rent 80 The next matter for consideration concerns question 5 at paragraph 14 above. Alamdo made a claim for loss of four months' rent caused by breaches of the covenants to repair. The lease to AWF expired on 28 February 1999. A new lease to another party (Fantastic Lounge Factory Pty Limited, or "FLF") commenced on 15 May 1999 with a rent free period of two months (i.e. up to 15 July 1999). 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 disciussed. 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. The plumbing claims 98 The parties are agreed that the referee failed to deal with several claims grouped together under a "plumbing" heading. These are the claims referred to in Question 6 at paragraph 14 above. AWF says that these should be remitted to the referee for further consideration and report - Alamdo says that the court should deal with them itself. For reasons I have already stated, I accept Alamdo's submission as to the appropriate means of disposing of these claims. 99 I begin by describing briefly each of the claims: · Item 260 - "Repair any damaged fixtures and fittings" - was conceded by AWF before the referee, as AWF now accepts. It requires no further comment. · Item 390 - "Replace appliances not operating" - refers to an instant hot water boiler in a kitchen. This is now conceded and requires no further comment. · Item 164 - "Repair and recommission hot water heaters" - relates to four linked water heaters supplying the washrooms. Alamdo says that two of these were not working at the end of the lease. · Item 72 - "Replace broken drainage grates" - self-explanatory. · Item 89 - "Muck out and clean all stormwater drains and pits" - relates to pits in the front driveway, rear driveway sumps and pits and stormwater line. · Item 143 - "Clean and repair blocked downpipe near office" - concerns a downpipe said to be blocked to be causing flooding to the factory. · Item 239 - "Muck out and clean all stormwater drains and pits, gutters" - relates to Building 2 and is self-explanatory. · Item 392 - "Temporary relocate and replace all wet services attached to brickwork - preparation for bricklayer" - relates to an independent claim regarding bricklaying work the outcome of which is determined by the decision concerning the scope and meaning of "the Lessee's use … of the Demised Premises" in clause 5.1. That is dealt with above, so that the matter requires no further comment. 100 The claim in relation to item 164 is supported by two plumber's invoices, No 86 and No 87. The first refers to supply and installation of a Rheem heater in "gents' WC" and associated work accounting for $858.60 The second refers to supply and installation of two Rheem heaters and associated work at a cost of $3,722. AWF contends that invoice No 86 does not relate to item 164. That item refers to four linked heaters. A photograph (No 189 at page 399 of Exhibit A) shows four heaters standing side by side. Mr Maurici in his evidence before the referee (page 389 of Exhibit A) identified invoice No 86 as relating to replacement of a water heater on the first floor and invoice No 87 as relating to heaters in the washrooms on the ground floor adjacent to the factory. It follows that both invoices cannot relate to the cluster of four heaters standing together. It is sufficiently clear, however, that invoice No 87 relates to the four heaters because, although it refers to replacement of only two, it also refers to the supply of four "safe trays", from which is to be inferred that there was one tray for each new heater and one tray for each not replaced. These matters sufficiently support Mr Maurici's otherwise unsubstantiated claim that invoice No 87 relates to item 164 to justify a finding that the sum of $3,722 in that invoice (but not the $858.60 in invoice No 86) is recoverable by Alamdo by reference to the repair and maintenance covenants. 101 The next matter for consideration concerns items 72, 89 and 143, all of which related to drains and drainage and are said to be covered by invoice No 84. That invoice refers to eleven items of work. One is said by Alamdo to cover item 72, five are said to cover item 89 and five are said to cover item 143. 102 Item 72 - "Replace broken drainage grates" - is said to be supported by photographs 32, 115 and 125 at pages 396, 397 and 398 of Exhibit A. Photograph 32 shows a section of shallow concrete gutter or channel covered with separate but contiguous sections of iron grating. One section is missing and some of the others seem to be broken. Photograph 115 shows a part of such a channel with grating missing and pieces of broken iron resting on the bottom. Photograph 125 shows a short section of grating in which some of the cross members are missing and two appear to be bent. AWF makes the point that there is no evidence of when the photographs were taken but one cannot imagine that someone goes about photographing drains except with a purpose, being, in this case Alamdo's purpose of pursuing the present claims. There is also the point that the damage does not appear to be of a kind that would occur suddenly, at least to the extent that it is depicted in the photographs. I am also satisfied that the damage appearing in the photographs is consistent with the description of one of the work items in invoice No 84, being "Replace broken cast iron grates". AWF makes the point that it replaced some broken grates but the fact remains that there were still broken grates that were dealt with by the plumbing firm that issued invoice No 84. I am satisfied that the item 72 "Replace broken drainage grates" is recoverable by Alamdo under the general repair and maintenance covenants. I am not able, however, to assess damages for the breach as invoice No 84 gives only a total of $2,375.00, with a break-up for "pressure wash", "material" and labour (by hours), and does not provide any means of ascribing a separate figure to the replacement of the broken grates. 103 Item 89 is "Muck out and clean all stormwater drains and pits". Alamdo says that this is covered by the parts of invoice No 84 referring to "clean out pits front driveway", "clean out rear driveway sumps to drain to rear canal", "clean out rear pits" and "pressure wash stormwater drain". AWF points to the lack of correspondence between the description in item 89 and the descriptions in invoice No 84. Some light is thrown on this by part of Mr Maurici's cross-examination before the referee which begins by referring to the narrative in invoice No 84: "Q. That part of the narrative does not relate to any of items 72, 89 or 143; do you agree? A. No. I think its included in 89. Again, as I said before, the description is only an approximation of the work. The intent was to make sure that all the drains are working correctly. Q. You say that the description to item 89 requires correction, do you? A. Yes. More precisely to muck out, clean, ensure that all drains and stormwater are installations are clear." 104 Based on this cross-examination, AWF makes two submissions. First, it says that Alamdo has not shown that any of the work done in relation to the stormwater drains and pits and covered by invoice No 84 was the subject of the claim in item 89. Second, it points to Mr Maurici's statement that the work done was "to make sure the drains are working properly" - in other words, a testing or checking exercise rather than repair. 105 I am satisfied that certain of the work in invoice No 84 related to cleaning and rectification of drains and pits. The particular work items are "clean out box gutter", "clean out rear driveway sumps to drain to rear canal", "clean out rear pits" and "pressure wash stormwater line". These descriptions go beyond mere testing or checking. They are within the repair and maintenance covenants but, as with item 72, the court cannot assess damages for breach because there is no allocation of the total cost in invoice No 84 among the several components. 106 Item 143 - "Clean and repair blocked downpipe near office which causes flooding in factory" - is said by Alamdo to be covered by the items in invoice No 84 "cut inspection into downpipe in factory" and "flush out stormwater lines". AWF contends that the description in the invoice and that in item 143 do not correspond. In my view, there is sufficient correspondence to warrant the conclusion that the work referred to in the invoice is that the subject of the item 143 claim. I am also of the opinion that the repair and maintenance covenants extended to this work but again the narration in invoice No 84 provides no means of assessing the damages flowing from the breach. 107 The problem of dissection arising in relation to invoice No 84 would not exist if, in the final analysis, every element of the work covered by the invoice was within items 72, 89 and 143. But that is not the case. There are two elements of invoice No 84 that remain unaccounted for. One is "replace section of broken 150mm e/ware pipe to pick up downpipe". The other is "excavate collapsed footpath rear of building". It is conceivable that the former may have something to do with item 143 but it must be said at once that it is not clearly within the description "clean and repair blocked downpipe", added to which it is widely separated within the invoice from the two items which I have found to be covered by item 143. As to the excavation of the collapsed footpath, there is no basis shown for connecting it with any of items 72, 89 and 143. These unaccounted for aspects mean that the need to apportion the overall cost within invoice No 84 remains and has not at this point been met. It is not possible to say how much of the total of $2,375.00 relates to items 72, 89 and 143. 108 I turn next to item 239 - "Muck out and clean all stormwater drains, pits and gutters". This is said to be supported by invoice No 89. There is an immediate issue about a separately quantified item of $429 in that invoice for taps and related matters "to replace bodgy work". Mr Maurici conceded in cross-examination that this was not part of item 239. I therefore approach the matter by reference to the balance of the invoice totalling $2,156. 109 As to that balance, AWF submits that it has not been shown that the work done in May 1999 by way of flushing, unblocking and cleaning out was referable to the state of affairs existing when it vacated in January 1999. Against that, however, it must be said that the description of the work is indicative of rectification of the results of a build-up of deposits over an appreciable period. I am satisfied that that work was within the repair and maintenance covenants of the lease. 110 Apart from the part of invoice No 84 dealing with taps and associated matters to which I have already referred, there is another aspect of invoice No 84 that is not within item 239. I refer to the part of the narrative concerning grates. I am not satisfied that the item 239 claim extends to this. As a result and since the cost of $2,156 cannot be apportioned between that aspect and the flushing, unblocking and cleaning out work that is within item 239, it is not possible at this point to assess damages for the breach of covenant referable to item 239. 111 The last item under the plumbing heading is item 392. The parties are agreed that the outcome on this will be governed by the decision on the "Lessee's use" aspect of clause 5.1 with which I have already dealt. I therefore say no more about it. Credit of Mr Maurici 112 Alamdo refers to a number of passages in the referee's interim report concerning the credit of Mr Maurici. Alamdo says that these should be rejected because they do not form any part of the referee's reasons for his opinion. The passages in question are: Paragraph 43, last sentence: "I have to say that the evidence as to the claim against the Council emerged from the Lessor's side with what appeared, in contrast with other evidence, to be some considerable reluctance." Paragraph 56, last sentence: "I am bound to say that I do not believe that the distinction between the cause and aggravating and or contributing factors drawn by Counsel was the basis on which Mr Maurici's initial denial rested." Paragraph 57: "Equally I do not accept the explanation given for Mr Maurici's initial denial as to flooding as being based on the different senses in which that word was being used. It is said that in the Statement of Claim 'flooding' referred to the overflowing of water from the channel. Mr Maurici had to know that the Lessee was making a claim of flooding and there was no reason for him to think that the cross-examiner was using the word in any different sense." Paragraph 59: "I am bound to say that my impression, on a consideration of the whole of Mr Maurici's evidence on the question of flooding, is that it was dictated by the balancing act required to maintain, for the purpose of the claim against the Council, that the Council was at fault in relation to the damage claimed as a result of the ponding of the water and that the ponding occurred as a result of blockage to the Council drains, whilst as against the Lessee it was claiming that the ponding occurred by the reason of the break-up of the paving as a result of improper use of the paving area." Paragraph 60: "A great deal of the Lessee's written submissions in chief were devoted to criticism of Mr Maurici's evidence and it was submitted that it was appropriate to disregard all the evidence he gave unless that evidence was corroborated by other independent and reliable evidence. Consistently with the character that I ascribed to Mr Maurici, there is no doubt that throughout his evidence, he was anxious to paint a picture which best redounded to the Lessor's advantage. He was determined to seek the utmost recovery both from the Council and the Lessor for the cost of the work of re-paving carried out by Boral. In order to achieve this he went to considerable lengths in the evidence before me to minimise the impact on the paving of the water which had ponded as a result of the escape of water from the blocked council drain. His efforts in this regard were only thwarted by the access the cross-examiner had to the Council's papers and records." Paragraph 61: "It was apparent to Mr Maurici prior to the termination of the Lease that the Lessor was going to have a serious dispute with the Lessee arising from the covenants in the Lease. It was obvious to him that it was desirable to make a record of the defects at the end of the Lease. He was undoubtedly experienced in matters of landlord and tenant relations. It was the Lessor's own submission that he was ' highly meticulous and thorough ' yet for many items there is no evidence of the alleged defect, many photographs are said to be representative only and do not reflect the entirety of the damage." Paragraph 65, third and fourth sentences: "That having been said it is nonetheless appropriate to look critically at the evidence propounded by the Lessor where it rests solely upon Mr Maurici's evidence. I was unfavourably impressed by his whole approach to the role of Council in the matter of the damage to the paving." Paragraph 67: "It will become apparent as I come to individual items of claim that there are other instances where Mr Maurici's evidence lent itself to stringent criticism quite apart from the claim for cost of paving." Paragraph 107: "It is nonetheless fair to point out that although a liability does, in my opinion, arise in respect of this item of damage Mr Maurici's discomfort in the cross-examination on this point was one of the reasons that I felt it necessary to be guarded in my acceptance of him as a witness (cf supra par 65)." Paragraph 121: "Notwithstanding that the Lessor's claim is rejected, it is appropriate to point to a feature of this claim that again impacts on the reliability of the Lessor's case. Initially the amount claimed was $7,579. Subsequently the amount was dropped to $6,737. The Lessor relies on an invoice APM7. The invoice is rendered by Simons Carpets to Fantastic Furniture in the sum of $7,579. Endorsed on the invoice is a note 'Pd Fantastic Furniture'. Mr Maurici said that payment had been made by journal entry in the sum of $6,737. In fact the journal entry was for $7,529 and the discrepancy has not been explained or made clear." Paragraph 129, first sentence: "Again these items give some cause for concern in relation to Mr Maurici's evidence." Paragraph 132, fourth, fifth, seventh and eighth sentences: "It is necessary to point out that considerable attention was devoted by the Lessor in its case to arguing that a pre-existing condition was not exculpatory of the Lessee. It does really seem that, in the colloquial phrase, the Lessor wants to 'have its cake and eat it as well'. … I mention this claim as another instance where the claim made by the Lessor induces me to approach its case with a degree of scepticism. These comments on this feature of the claim are made in addition to the overall approach that I have delineated in the earlier paragraphs under this heading." Paragraph 159: "It is a matter for comment that the Lessor is now claiming for a brand new 2,500 kilowatt generator at a cost of $68,920 in replacement for what was at best a generator predating 1982." Paragraph 199, first and last sentences: "A comment has to be made that this seems to be a fairly clear instance where the Lessor seems ready to receive a windfall from a breach that has not resulted in any damage suffered by it by reason of the need for the expenditure of any money. … This approach again does not engender confidence in the Lessor's claims." Paragraph 221: "Even though the claim should be allowed, once again, if Mr Bollard's evidence be accepted, it calls for a rigorous examination of Mr Maurici's claims. Whilst there is nothing which would render Mr Maurici's approach a breach of contract it would demonstrate a readiness to take advantage of any and all provisions of a lease even if to do so may be unmeritorious. Even though Mr Maurice denied Mr Bollard's version of the conversation I would accept it. There was no incentive for Mr Bollard to conjure up such an unusual approach to the reason for doing work as Mr Maurici's alleged statement represented." Paragraph 275, last sentence: "The episode certainly does, in my view, impact unfavourably on Mr Maurici's credit." 113 The contentions of Alamdo in relation to these passages are based on Part 72 rule 11 of the Supreme Court Rules: " Report The referee shall, unless the Court otherwise orders, make a report to the Court, in writing, on the matter referred to the referee annexing the statements given under rule 8 (5) and stating: (a) the referee's opinion on the matter, and (b) the reasons for the opinion."

Alamdo says that this provision does not permit the referee to express a view on any matter beyond the opinion and what can fairly be described as reasons for the opinion. Alamdo goes on to point to a number of places in the interim report where the referee had to deal with the relative credibility of witnesses. There is reference to several instances in which the evidence of Mr Maurici was preferred to that of another witness. In other instances, the evidence of another witness was preferred to that of Mr Maurici. The point Alamdo makes is that, in each of these instances, in contradistinction to those with which it takes issue, the contest between two versions was resolved by reference to the whole of the evidence relevant to the particular issue - whereas, in the instances the subject of complaint, no such balancing exercise was undertaken. On this basis, Alamdo submits, the findings as to credit about which complaint is made do not form any part of the referee's reasons for his opinion being, in reality, gratuitous criticism lacking any connection with those reasons. 114 To the extent that the complaint is based on Part 72 rule 11, it directs attention to the "matter" that is referred to the referee. That matter was "the whole of the proceedings". 115 I do not accept the proposition that, in including in his report the passages complained of, the referee went beyond the function prescribed by Part 72 rule 11 of making a report stating his opinion on the matter (that is, the whole of the proceedings) and the reasons for the opinion. Mr Maurici was a key witness before the referee. It is clear, and I do not understand Alamdo to dispute, that his credibility properly played a part in the determination of a number of matters relevant to the formation of the referee's opinion on the proper disposition of the question of liability addressed by him in the interim report. The same issues of credibility played a part in the formation and expression of reasons for the opinion. The findings on that matter were therefore an integral part of the overall decision making process, whether approached in a context where it was Mr Maurici's word against someone else's or in a more general context in which it became necessary or appropriate to consider, in a more general way, questions about the inherent reliability of what Mr Maurici said. 116 I must say that I see no basis in Part 72 rule 11 or otherwise for a conclusion that some of the statements about Maurici's credibility are acceptable but others are not when, as I have said, he was a key witness whose reliability in a general sense was a material consideration in the decision making process as whole that resulted in the formation of the opinion and reasons incorporated into the interim report in accordance with Part 72 rule 11. 117 I do not accept that any part of the interim report should be rejected because of the matters canvassed under this heading. Disposition 118 I direct that, within 21 days, the parties bring in short minutes of orders under Part 72 rule 13(1)(a) and (d) of the Supreme Court Rules giving effect to these reasons, as well as orders and directions for the determination of such questions of quantification as need to be determined in the light of the findings on liability. **********

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