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[2009] NSWADT 270
plaintiff. The Tribunal ordered the respondent to pay the applicant $5,060.00. In the absence of any application within 28 days there would be no order as to costs.
A stamp shop tenant painted a ceiling that had never been painted before, even though the lease only required painting of surfaces that were usually painted. When the tenant left, the landlord got a quote to rip out and replace the ruined ceiling and fix the walls. The tenant refused to do the work. A new restaurant tenant wanted a completely different solid ceiling to satisfy council health rules. The landlord paid its builder $5,060 for the original rectification work. The tenant argued the new tenant had paid for everything so the landlord lost nothing. The Tribunal rejected that argument because the tenant produced no solid proof. The tenant had to pay the landlord $5,060.
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Alramon Pty Limited owned the retail premises at 144-148 Cox's Road, North Ryde. It had granted Lifuli Pty Limited a three-year lease of Shop 4, registered as AC118076F, which expired on 7 July 2008. The lease had been taken by exercise of an option. Lifuli operated an “Art Stamps” business from the shop. The premises contained a suspended ceiling installed in about 1999 for an earlier computer-shop tenant. That ceiling consisted of tiles supported in a white colour-bond grid; it had never been painted.
No linked legislation citations have been extracted yet.
In the weeks before the lease ended the directors of Lifuli caused both the ceiling tiles and the supporting grid to be painted. They also left the walls patched in an amateur fashion. On 5 July 2008 Papallo Constructions Pty Limited, the builder retained by the lessor, prepared an exit report. That report recorded “noticeable defects/imperfections in the walls”, holes not properly patched, unsanded filler, and non-professional paintwork. In relation to the ceiling it noted that all ceilings had been painted white, only one coat appeared to have been applied, some tiles had not been painted at all, the grid had been painted, there were finger marks, drilled holes and patchy work. The balance of the premises was otherwise in good condition.
On 22 July 2008 Alramon wrote to Lifuli enclosing Papallo’s quotation dated 18 July 2008 for “remove and replace grid ceiling 60m2” together with patching and painting of walls, totalling $5,060 inclusive of GST. The letter gave Lifuli until 8 August 2008 to carry out the works itself. Lifuli did not do so. By early August 2008 Alramon had agreed to lease the shop to Ausko Development Pty Limited, which intended to operate a Japanese restaurant. Ausko’s willingness to take the premises was conditional on the commercial roof being replaced because the painted grid ceiling was unacceptable.
Papallo rendered an invoice to Alramon on 3 August 2008 for $7,200 to replace the ceiling in the dining area (not the kitchen) with 32 mm plasterboard and grid. On 21 August 2008 Papallo quoted Ausko $96,000 for a full restaurant fit-out that included stripping the entire ceiling and re-sheeting in 13 mm gyprock. Alramon drew a cheque for $7,200 on 30 August 2008 (not presented) and later paid $8,200 on 26 September 2008, which sum on the Tribunal’s findings included the original $5,060. Development consent and a construction certificate were issued to permit the change of use to a restaurant, with conditions requiring impervious ceilings over food-preparation and serving areas; drop-in panel ceilings were prohibited in those zones.
Alramon commenced proceedings in the Retail Leases Division of the NSW Administrative Decisions Tribunal seeking recovery of the $5,060. Both parties filed affidavits but neither cross-examined the other’s witnesses. Lifuli tendered six bundles of documents produced on subpoena from Papallo, the Council and other sources. After hearing on 4 September 2009, Judicial Member Molloy delivered reasons on 16 October 2009. He found that Lifuli had breached clauses 5.1 and 5.3 of the lease, that Alramon had incurred the $5,060 cost, and that Lifuli had not discharged the onus of proving that Alramon suffered no loss. Orders were made for payment of $5,060 with the usual 28-day invitation for costs applications (none eventuated).
The Tribunal’s reasoning followed a conventional contractual analysis grounded in the text of the lease and the High Court’s recent decision in Tabcorp Holdings Ltd v Bowen Investments Pty Ltd [2009] HCA 8 (applied at [12]). Clause 5.3 obliged the lessee to “paint, repaint … or otherwise appropriately treat in a proper and workmanlike manner such part of the Demised Premises usually so treated”. The words “usually so treated” were decisive. The ceiling had never been painted; therefore painting it was not treatment of a surface “usually so treated”. The painting was conceded. The exit report of 5 July 2008 provided contemporaneous corroboration that the work was unprofessional and covered defects. That constituted breach of both clause 5.3 and the more general repair obligation in clause 5.1.
Once breach was established, the measure of loss was the reasonable cost of rectification. The quotation of 18 July 2008 was limited to removal and replacement of the 60 m² grid ceiling plus wall rectification. Quantum was never challenged. Alramon proved it had paid Papallo that sum (included within the later $8,200 cheque). Judicial Member Molloy found as a fact that the payment had been made and that the work the subject of the make-good obligation had been required because of Lifuli’s breach.
Lifuli’s central defence was that Ausko had paid Papallo for a completely new gyprock ceiling as part of the restaurant fit-out, so Alramon had suffered no loss. The Tribunal treated this as a failure-to-mitigate or no-loss argument. It held that the onus lay on the tenant to prove, with “very, very serious persuasive evidence”, that the lessor had suffered no loss because another party had paid for the exact work required by the make-good covenant ([42]). Lifuli tendered subpoenaed invoices and council documents but called neither Ausko nor Papallo. No photographs were produced. The Tribunal accepted Mr Cerreto’s evidence that only approximately 5-6 m² over the food-preparation area was required by the council consent and that the original grid ceiling had been replaced because of the painted state left by Lifuli. The balance of the ceiling replacement was therefore attributable to the breach.
The Tribunal rejected a series of evidentiary and forensic attacks on the invoices, letterheads, cheque butts and the timing of the quotation relative to the exit report. These were characterised as misconceived or based on inadmissible material. Because the lessor had actually paid the rectification sum and the tenant had failed to prove otherwise, contractual liability was made out. The decision was expressly confined to the evidence before the Tribunal and was not intended to lay down a universal rule for cases in which an incoming tenant funds the entirety of the relevant works.
Prior to this decision the law on tenant make-good obligations in New South Wales retail leases was informed by the general law of landlord and tenant and, after 1994, by the Retail Leases Act 1994. Clauses requiring premises to be kept in repair “having regard to their condition at commencement” and to paint surfaces “usually so treated” were commonplace. The High Court’s decision in Tabcorp (delivered only months earlier) had clarified that damages for breach of a covenant not to alter premises without consent, or to make good, are measured by the cost of rectification where that is reasonable, rather than by diminution in value. The Tribunal expressly invoked Tabcorp at [12] to underpin the lessor’s entitlement to the cost of removing the painted grid.
This Tribunal decision did not change the underlying legal principles. It applied them to a factual dispute about whether payment by an incoming tenant for a broader fit-out could extinguish the outgoing tenant’s liability. The outcome confirmed that the outgoing tenant’s contractual obligation to the lessor is not automatically discharged by collateral arrangements between the lessor, the builder and the new tenant unless the outgoing tenant proves the lessor has suffered no loss. The decision reinforced the practical importance of clear exit reports, timely quotations limited to make-good scope, and the evidentiary burden on a tenant who asserts “no loss”.
After the decision, lessors in the ADT (and later NCAT) continued to rely on Tabcorp for the prima-facie entitlement to rectification cost. Tenants learned that generalised assertions about incoming tenants’ fit-outs are insufficient; direct evidence is required. The case illustrates the forensic difficulty a tenant faces when it elects not to cross-examine or call the builder or incoming tenant. No statutory amendment was prompted by the decision; the Retail Leases Act make-good provisions (ss 36–38) were left untouched.
Paragraph [4] quotes clauses 5.1 and 5.3 in full. The critical phrase “usually so treated” is not defined in the lease; the Tribunal read it literally. Translation: you only have to repaint things that are normally painted. Because this ceiling had never been painted, painting it was a breach, not performance.
Paragraph [8] rejects the tenant’s sworn assertion that it painted to “make good the accumulation of marks”. The Tribunal states “I categorically accept the evidence on behalf of the Applicant that the actions of the Respondent were in fact in breach.” Translation: the Tribunal believed the landlord’s witnesses and the exit report, not the tenant.
Paragraph [12] simply says “The principles are clearly set out in Tabcorp”. Translation: the High Court has told us how to calculate the landlord’s loss—reasonable cost of putting the premises back, not some abstract drop in property value.
Paragraph [30] analyses the area of ceiling replaced: “the area of the shop to the front of the premises seems to be some five/sixths of the total area … resulting in a ceiling area of 50 m²”. This reconciled the 60 m² quotation with the 50 m² dining-area invoice and the 5–6 m² food-preparation area required by council. Translation: most of the ceiling replacement was needed to fix the tenant’s painting, not just to satisfy the new restaurant’s layout.
Paragraph [42] contains the clearest statement of principle: “A tenant is in breach of its make-good obligations cannot claim, without very, very serious persuasive evidence, that another has paid for the work and therefore it, the tenant, should be relieved from its obligation.” Translation: if you damage the premises you must pay unless you bring powerful proof that the landlord did not lose anything. Mere suspicion or subpoenaed invoices are not enough.
The decision is triggered when four elements coincide. First, a retail lease contains repair and make-good clauses in substantially the same form as clauses 5.1 and 5.3, especially the qualifier “usually so treated”. Second, the outgoing tenant alters a surface that has never previously been treated in that way—classically, painting an unpainted suspended ceiling or grid. Third, the lessor obtains a quotation limited to rectification of the tenant’s damage, gives the tenant the opportunity to perform the works, and actually pays the quoted sum. Fourth, the incoming tenant requires a different ceiling or fit-out to meet its own needs or council conditions, prompting the tenant to argue that the lessor suffered no loss.
The precedent is most potent where the tenant relies only on subpoenaed documents and affidavit assertions but does not call the incoming tenant or the builder, produces no photographs, and cannot prove that the precise work covered by the make-good quotation was wholly funded by the new tenant. It is not triggered where the tenant itself performs the make-good, where quantum is genuinely disputed, or where the lessor has not paid the rectification cost. The decision is confined to situations in which the lessor’s payment is proved and the tenant fails to discharge the onus of showing the lessor suffered no loss.
The judgment is a single-member tribunal decision and has not been the subject of appellate consideration. It has been cited in subsequent NCAT Retail Leases decisions for the uncontroversial propositions that (a) painting an unpainted surface can breach a “usually so treated” covenant, and (b) the tenant bears the evidentiary onus of proving that the lessor suffered no loss where an incoming tenant funds a broader fit-out. Later decisions have followed the Tabcorp principles applied here without needing to cite this case directly. The factual analysis of cheque butts, invoice timing and letterhead discrepancies has not been revisited; those passages are treated as illustrations of the Tribunal’s willingness to prefer corroborated lessor evidence over speculative tenant submissions. No court has overruled or distinguished the central holding on onus. The decision is generally regarded as an orthodox application of Tabcorp to a common “painted ceiling” dispute.
The judgment itself notes at [43] that it does not establish precedent for every case in which an incoming tenant pays for works. The still-open question is what degree of direct evidence is required before a tribunal will be satisfied that the lessor has suffered no loss. Must the tenant call the incoming tenant and the builder, or will carefully correlated invoices, payment records and photographic evidence suffice? The decision leaves unanswered whether a lessor who receives a cash contribution from the new tenant towards the make-good sum must give credit for that contribution. It also leaves open the interaction with Retail Leases Act s 36 (which requires a condition report at the end of the lease) where the lessor fails to serve a timely outgoing condition report. Finally, the precise boundary between work required by the outgoing tenant’s breach and work required solely by the new tenant’s change of use remains fact-sensitive and was not exhaustively defined. These questions continue to generate disputes in the Tribunal.
CITATION: Alramon Pty Limited v Lifuli Pty Limited [2009] NSWADT 270
APPLICANT Alramon Pty Limited PARTIES: RESPONDENT Lifuli Pty Limited
CASES CITED: Tabcorp Holdings Ltd v Bowen Investments Pty Ltd [2009] HCA 8
APPLICANT S Ahmed, barrister REPRESENTATION: RESPONDENT B Wakeham, agent
ORDERS: 1. The Respondent pay the Applicant $5060.00 2. Unless either party moves the Tribunal within 28 days of the date of this Decision in or to the effect that a costs order should be made, the order of the Tribunal will be that there be no order as to costs.
1 The Applicant is the owner and lessor of the property situate at 144-148 Cox's Road North Ryde, of which part known as Shop 4 was leased to the Respondent pursuant to lease registered AC118076F. The lease was for a term of 3 years commencing 8 July 2005 and terminating 7 July 2008, with no option to purchase. The lease was entered into pursuant to an exercise of option by the Respondent.
2 From those premises the Respondent operated a business known as "Art Stamps".
3 Upon, or close to, the date of expiry of the lease 7 July 2008 the Respondent vacated the premises.
4 The Applicant asserts that the Respondent was in breach of two clauses of the lease, namely clauses 5.1 and 5.3, which are in the following terms: "5.1 To keep in repair: The Lessee will at all times during the term and during any period of holding over maintain and keep the Demised Premises in good and substantial repair order and condition to the satisfaction of the Lessor having regard to their condition on the earlier of the commencement of this Lease or the date of initial occupation … reasonable wear and tear only excepted … 5.3 To Paint etc.: Without prejudice to the provisions of Clause 5.1 hereof the lessee will in the last year of the Term and at intervals of not more than the period of years specified in Item 4 and from time to time necessary or reasonably required by the Lessor paint, repaint, clean wallpaper, stain or otherwise appropriately treat in a proper and workmanlike manner such part of the Demised Premises usually so treated."
5 The Applicant asserted that, upon vacation, the Respondent had not left the walls of the premises "in a satisfactory condition". On that aspect, there was no issue as to quantum (save that quantum was subsumed in the ceiling argument below) and no serious argument was put that the Tribunal should make any orders in relation to this specific item, save that the quotation for the work the subject of the Applicant's claim included repair to the walls.
6 The primary item, in which quantum was not challenged and on which the actions of the Respondent were not in issue, related to the suspended ceiling. It was asserted that in or about 1999 the premises were leased to a tenant who operated a computer shop. As part of the fit-out of the premises a commercial office tiled roof was installed consisting of a "tiled roof which was supported by a white colour bond grid in which each tile would fit into and be supported". This roof was "in good condition and did not require any repair".
7 However, just prior to vacation the Respondent, for reasons not entirely explained, painted "not only the roof tiles but the actual grid holding the roof tiles" in circumstances where the roof tiles had not previously been painted. All of this was not challenged, indeed conceded, by the Respondent.
8 The Respondent asserted that "the ceiling and the grid were painted in accordance with the Respondent's obligations under clause 5.3 of the lease to make good the accumulation of marks over the period of 9 years during which the Respondent had occupied the premises". That assertion, although made under oath, I reject. It was, effectively, not pressed. It was not really an issue in the proceedings. I categorically accept the evidence on behalf of the Applicant that the actions of the Respondent were in fact in breach.
9 The result was that the Respondent had failed to rectify its damage to the premises and the Applicant engaged Papallo Constructions Pty Limited ("Papallo") to remove and replace the grid ceiling.
10 At the outset it is important to make this observation: although both parties put on evidence no party saw fit to challenge, either by objection or cross examination, the evidence of the other. The Applicant relied upon its sworn evidence and annexed documentation; the Respondent relied on its sworn evidence and tendered all the documents that were the subject of subpoena, and argued that the ceiling had not in fact been replaced by the Applicant, or by Papallo, but rather the Applicant had paid Papallo in circumstances where the incoming tenant had in fact replaced the whole of the ceiling in the premises, at its expense, pursuant to a contract between the incoming tenant and Papallo. In other words, the Applicant had paid Papallo for work that had not been done and thus, and notwithstanding its admitted breach of the lease, it should not be obliged to reimburse the Applicant simply because (so it was asserted) the ceiling had not in fact been replaced but rather a new ceiling had been installed throughout the whole of the premises of a different type to suit the requirements of the incoming tenant, a restaurant, at its expense.
11 The evidence of the Applicant was unchallenged. On 22 July 2008 the Applicant wrote to the Respondent observing that the lease had expired 7 July 2008, that, "a new ceiling needs to be installed and the walls to be patched and re-painted by a professional contractor" and enclosing a quotation "to undertake the works", extending an "offer .. to organise your (the Respondent's) own professional contractors to do the works" and giving the Respondent until 8 August 2008 "to undertake (the repairs) as you are aware we have another tenant moving into the premises". The quotation is dated 18 July 2008 from Papallo to "remove and replace grid ceiling 60m2" and to paint "premises including all walls to be patched up where necessary" and the price, inclusive of GST, was "$5060.00". No challenge was made to the quantum as therein specified and claimed by the Applicant.
12 The Respondent failed to rectify the premises. The principles are clearly set out in Tabcorp Holdings Ltd v Bowen Investments Pty Ltd [2009] HCA 8. The premises were advertised for lease and on or about 8 August 2008 "a (new) lease agreement was agreed to on the basis that the commercial roof be replaced as it was unacceptable to the new tenant". (The Applicant) then arranged for the roof to be replaced with a new ceiling because of the state of the commercial roof left by the Respondent".
13 There was some debate over the various invoices and a cheque that had not been presented - however I am clearly of the view that, although subsequent invoices exceeded the $5,060.00 they in fact included the $5,060.00, such that I am satisfied that the Applicant paid to Papallo $5,060.00.
14 The real issue was not the payment, nor the quantum of the damage; but rather whether the Tribunal should conclude that Papallo did not in fact carry out the work but rather replaced the whole of the ceiling in the leased premises to meet the asserted specified requirements of the incoming tenant, and the Council, and all at the expense of the incoming tenant, not the Applicant.
15 This chronology is drawn from the material in evidence, including the tender by the Respondent of documents produced under subpoena. These documents were tendered in bulk, without objection, and I indicated to the Respondent that I was not prepared to trawl through the six bundles tendered but required the Respondent to direct my attention to specific portions of that material that pertained to the matters in issue. Indeed, and in fairness to the Respondent, this is exactly what it did by its careful written submissions with references, and indeed, copies of documents extracted from the various tendered bundles.
16 I have, also in fairness, scanned the bundles in an endeavour to ensure, as best I can, all the material that is in fact relevant has in fact come to my attention. There are quite a number of documents in the bundles to which no party made reference and which impact upon the issues. It is surprising that, notwithstanding the issues to be debated and the availability of the subpoenaed material, many documents were not referred to although clearly relevant. I have scanned the bundles and have set out in this Decision the documents that I have thought relevant to the issues before the Tribunal.
a) 8 July 2005: new lease entered into, pursuant to exercise of option, between Applicant as lessor and respondent as lessee, registered AC118076F.
b) Prior to 7 July 2008 Respondent informs Applicant that it does not wish to enter into a new lease. c) Prior to expiry of lease the Respondent carries out works to the premises, including (in particular) work to repair walls and painting the roof tiles and grid holding the roof tiles on the suspended ceiling. d) 5 June 2008: a Mr Jagit (also written "Gagjit") Gill applies to City of Ryde Council by way of Development Application (378/08) to change the use of the demised premises to an eat-in/take away restaurant. e) 5 July 2008: End of lease inspection by Papallo. Papallo prepares a report (called an "Exit Report") which showed "noticeable defects/imperfections in the walls … walls have holes in them not patched, where the walls have been patched they look like they have not been sanded before painting and/or the filling compound has sunk back into the board. Painted walls are not of a professional finish, there has been no cutting in between the ceiling and the wall"; and "all ceilings have been painted as well in a white colour finish. Painted ceiling are also of a poor professional finish, it looks like only one coat has been applied, in some areas certain ceiling tiles have not ever been painted, the grid has also been painted. There are some defects/ imperfections in the ceiling and ceiling grid. Holes which have not been patched but painted over, looks like there is finger markings on some ceiling tiles, drilled holes in the ceiling grid, paint work very patchy … 5 light diffusers have been painted on …". Generally speaking the balance of the "Exit Report" showed the property to be in good condition. No complaint has otherwise been made.
g) 15 July 2008: Development Consent 378/2008 granted to Mr Gill. h) 22 July 2008: Respondent sends letter to Applicant dated 18 July 2008 noting "that a new ceiling needs to be installed and the walls to be patched and re-painted by a professional contractor. The ceiling was a suspended grid ceiling which was not previously painted. Walls have not been left in a satisfactory condition". A quote from Papallo dated 18 July 2008 was enclosed. This quotation was in the following terms: "Ceiling: remove and replace grid ceiling 60m2 . Painting: of premises including all walls to be patched up where necessary. Price including GST $5060.00." The letter offered the Applicant "the opportunity to organise your own professional contractors to do the works once they have been inducted by Mr Papallo and shown relevant insurances. We shall give you to 8 August 2008 to undertake the above as you are aware we have another tenant moving into the premises". i) Shortly after 22 July 2008 the Respondent engaged its own builder to inspect the premises. No copy of any report obtained from that builder has been provided to the Applicant, nor to this Tribunal. Neither party, in any event, relied upon it, or even referred to it. j) In August 2008 a new lease agreement was entered into with a new tenant, Ausko Development Pty Limited ("Ausko"), the operator of a restaurant. Ausko agreed to the new lease "on the basis that the commercial roof be replaced as it was unacceptable to (Ausko)" . k) 3 August 2008: Papallo renders invoice to Applicant in these terms: "Replace ceiling in dining area not including kitchen area for a total of 50m2 with the following: 32mm plasterboard with grid; cart away old ceiling" for a total price inclusive of GST in $7,200.00. l) 21 August 2008: Papallo submits quotation to Ausko. The job description is: "construct new Japanese Restaurant …" , the price being $96,000.00 inclusive of GST. The scope of works included this relevant item: "Strip ceiling to whole shop and re-sheet in 13mm gyprock". The quotation was accepted 8 September 2008. A contract was entered into between Ausko and Papallo to "Fit out Japanese Restaurant". The description of the work was: "Cut concrete for drainage, create wall, install a coolroom, sushi bar, tiling to kitchen, new gyprock ceiling, electrical, a/c unit, hood and ducting to roof". The contract referred to conditions in a Development Application dated 15 July 2008. m) 28 August 2008 Ausko applies for a liquor licence - an on-premises licence for a restaurant - under the trading name "Taiyoh Japanese Restaurant". n) 30 August 2008 Applicant draws cheque in favour of Papallo in $7,200.00. This cheque is not presented. o) 2 September 2008: Ryde City Council issues a Construction Certificate (225/08) to Ausko showing "change of use to restaurant", based on the previous development consent granted to Mr Gill. (The Tribunal will infer the appropriate legalities as between Mr Gill and Ausko, there being no evidence, nor any assertion, that the Construction Certificate was not properly issued). The plan annexed to the Construction Certificate shows a coolroom, a kitchen (with freezer), sink, bench preparation and so on and to the front of the shop four tables with seating, a food bar and hand basin. p) 20 September 2008 letter from Papallo to Applicant: "Could you please arrange payment (of the $7,200.00 invoice) at your convenience". q) 23 September 2008 letter from Applicant to Papallo: "According to our records a cheque was sent out on 30 August 2008 for the amount of $7,200.00. As discussed … we shall re-issue another cheque for $8,200.00 to include (additional work relating to installation of "concrete bollards at rear car park as discussed" for $1,000.00) (in) $8,200.00 which will be made payable to cash so there is no misplacement of the cheque this time". u) 26 September 2008 cheque for $8,200.00 drawn. Cheque butt shows it being made up as to $7,200.00 (previous invoice) and the $1,000.00 for the concrete bollards. r) 26 September 2008 cheque for $8,200.00 "cash" presented against Applicant's account. s) 5 November 2008: Ryde Council issues Occupation Certificate (OC/183/2008) to Ausko. Somewhere along the way, but not relevant to the issues, the restaurant changed from an Indian Take-Away Restaurant to a Japanese Restaurant.
18 As I observed above at [10] both parties elected not to challenge by cross-examination the evidence of the other. Rather, the Applicant put into evidence sworn affidavit material, the Respondent put into evidence sworn affidavit material and then elected to tender the material that was the subject of subpoena.
19 The difficulty confronting the Tribunal is that the Applicant's evidence raises a clear prima facie case which would normally entitle it to Judgment in the amount claimed, $5,060.00. That puts the Respondent in a difficult position, and bearing in mind (again) that no party elected to cross-examine the witnesses for the other party, a prima facie case having been raised the burden then falls upon the Respondent to meet that case. The Applicant's case was clearly supported by corroborative material such that the burden facing the Respondent was perhaps a greater burden than had there not been produced by the Applicant corroborative material.
20 The Respondent sought to meet that challenge by tendering documents produced on subpoena which, in its submission, not only successfully traversed the Applicant's material but demonstrated that the Applicant had not paid the money to Papallo and the work had not been done. In short, the Respondent submitted that the work had, not only not been done but, in addition, the whole of the ceiling in the demised premises had in fact been replaced by the incoming tenant at its expense.
21 One of the problems that faced the Respondent was that the incoming tenant was not called, neither was there any photographic evidence that would have supported the Respondent's case.
22 It is against this background that the Respondent advanced a number of assertions and presented a number of arguments. It is convenient to deal with each of these in the order in which they were advanced.
23 The first submission agitated by the Respondent was, effectively, that the Respondent's director Mr Wakeham carried out the work "as per lease requirement - s.5.3". I have set out this clause above at [4]. The primary argument related to the ceiling and the submissions of the Respondent, in my opinion, make no reference at all to the words "usually so treated". It is plain to me that the ceiling tiles and the grid were never painted; the Respondent admits that it did so paint them; and consequently there was a clear breach of the lease by the Respondent's failure to comply with clause 5.3. Furthermore, and in order to "cover the field", it was plain from the Exit Report of Papallo, and the other material of the Applicant, that the walls were patched in a very amateur manner and clearly that required rectification also.
24 The second primary submission is that the Tax Invoice issued by Papallo 18 July 2008 pre-dated by six days their Inspection Report (the Exit Report) and four days prior to the letter from the Applicant to the Respondent 22 July 2008 drawing the Respondent's attention to the problems that required rectification and giving the Respondent until 8 August 2008 to carry out the rectification.
25 I confess I do not quite understand this submission. The Exit Report (Exhibit "D") is dated 5 July 2008. The Tax Invoice is dated 18 July 2008 and the letter requesting rectification is dated 22 July 2008. If this submission is made to encourage this Tribunal to form an adverse view of the Applicant's case then it fails utterly.
26 I pause at this point to observe that in the Respondent's Written Submissions there are numerous observations that are not supported by evidence. For example, on page 2, the Respondent states baldly certain advice provided by his solicitor, the obtaining of a building report by the Respondent, the assertion that the building report shows that "any problems were trivial"; but at no stage was the building report tendered and consequently that observation must be disregarded. There were other submissions asserting matters that other persons had allegedly told the Respondent's directors, and so on. I have disregarded this inadmissable material.
27 The next submission was to the effect that on 21 August 2008 Papallo submitted a quotation to Ausko for the fitout of the premises in which the scope of works included "strip ceiling to whole of shop and re-sheet in 13mm gyprock". It was submitted that the total ceiling area of the premises was 60 sq.m (see Invoice 18 July 2008) and therefore any argument (raised by the Applicant) to the effect that it was only portion of the ceiling that was re-sheeted in gyprock must fail.
28 This assessment of area is supported by the documentation produced by the Ryde City Council - on page 2 of the Development Application of Mr Gill, Item 5, the proposed floor area is said to be 60sqm. This is also supported by the Statement of Environmental Effects, Item 2.1 which states 'the shop has an area of 60sq.m (approx)".
29 It was submitted from the bar table by counsel for the Applicant, upon instructions, that the grid ceiling was only required for the front portion of the shop and not required for the back portion (the kitchen area) which correctly required a gyprock ceiling. This submission was clearly at variance with the 18 July 2008 Tax Invoice and certainly confusing as against the 3 August 2008 Invoice from Papallo. However, it is perhaps consistent with paragraph 11 of the Environmental Health Officer's Report to the Council which states: "Ceilings in food preparation and storage areas must be constructed of painted plaster board or other suitable impervious material finished to a smooth even surface free of holes, open joints, cracks and crevasses" - and paragraph 12 which states: "Drop-in panel ceilings are not permitted over food preparation areas and areas where open food is displayed or served". The difficulty is that clearly food was to be served in the front portion of the shop, where tables and chairs are set out in the plan attached to the Development Application. Conditions of consent 378/2008 15 July 2008, Items 19 and 20, are to similar effect. Furthermore, the plan attached to the Construction Certificate 225/08 shows clearly four tables with appropriate chairs, a food bar and a hand basin in the front portion of the premises.
30 It is odd, to say the least, that no party thought it appropriate to put before the Tribunal a photograph of the premises after fitout. But the terms of Papallo's Tax Invoice 3 July 2008 is relevantly in these terms: "Replace gyprock ceiling in dining area not including kitchen area for a total of 50m2 with the following 32mm plasterboard with grid". Clearly, when looking at the Construction Certificate and the plan attached thereto, the area of the shop to the front of the premises seems to be some five/sixths of the total area of the shop, resulting in a ceiling area of 50m2 . This conclusion is at variance with the Respondent's unsupported contention that one-third of the shop was used by the restaurant "for the kitchen and food preparation", but is consistent with the sworn evidence of Mr Cerreto, a director of the Applicant, to the effect that "the ceiling area over the food preparation area … (is) an area of approximately 5-6 square meters".
31 The difficulty with the Respondent's argument is twofold: firstly, in its written submissions it accepted that the Council consent did not allow "a grid ceiling over the kitchen and food preparation areas", secondly, that whatever may have been the situation with Ausko the fact is that the Applicant paid Papallo $8,200.00 which, as I have pointed out above, at [13], included the $5,060.00 which was the cost of rectification arising out of the activities of the Respondent and consistent with the terms of the lease contract and about which there was no debate regarding quantum. Once one accepts, as I do, that the work was required to be done, was consistent with the terms of the lease contract and where quantum was not in issue, then it must follow that the Respondent is liable to the Applicant in the amount claimed. If it be the case that Papallo has doubled charged (which seems to be the argument advanced by the Respondent) then there is little or no evidence to that effect. In order to properly conduct that argument the Respondent would certainly need to put into effect vastly more material than is currently before the Tribunal, including direct evidence, properly corroborated in or to the effect that the new tenant Ausko in fact, not only paid for all renovations but also paid for a new ceiling throughout the whole of the premises, including the suspended ceiling in issue. Even then the Respondent would need to prove that Papallo did not carry out the works at all as specified in the various tax invoices 18 July, 3 August, and 5 September 2008 (on the basis that the two latter invoices incorporated the first invoice).
32 There was some evidence from the daughter of Mr & Mrs Wakeham, the directors and shareholders of the Respondent, to the effect that "no work was carried out in the premises prior to September 2008 and in particular the grid ceiling was not replaced until at least September 2008". This was supported by Mr Wakeham's evidence as well to the effect that "no work was carried out on the premises prior to September 2008 … I say that the original grid ceiling was in place until late in September or early in October when the incoming tenant's plaster board ceiling was put in place".
33 The difficulty confronting the Tribunal is that firstly, these assertions were not traversed by any evidence on behalf of the Applicant save that in its evidence in chief (Exhibit "A") the Applicant (through its director Mr Cerreto) stated that "the roof was replaced with a new ceiling because of the state of the commercial roof left by the Respondent … (and that he) arranged for the roof to be replaced … (and that prospective tenants advised) that they would not accept the premises due to the painted commercial roof and required the Applicant to replace the roof".
34 Secondly, and even if it was made out that somehow the work was not done but rather payment was made by the Applicant to Papallo yet Papallo invoiced Ausko for the whole of the ceiling and never replaced the grid ceiling, the plain fact is that as between the Applicant and Papallo the damage caused by the breach of contract by the Respondent was in fact paid by the Applicant to Papallo such that the Respondent cannot avoid its contractual liability to make good or pay the appropriate damages for its failure to make good. However, there is no requirement on this Tribunal to make a finding one way or the other firstly, for the reason that it is irrelevant to the case as between the Applicant and the Respondent, and secondly, because Mr Cerreto in his second affidavit (Exhibit "B") made it plain that the Conditions of Consent 378/2008 (referred to above at [29 ]) required the new tenant Ausko to "replace the ceiling over the food preparation area, this being an area of approximately 5-6 square metres". Thus, if this evidence is accepted, then the only portion of the premises that required a new ceiling that was not required as a result of breach of contract by the Respondent was in fact "the ceiling over the food preparation area this being an area of approximately 5-6 square metres". This is consistent with the submission made by counsel for the Applicant and consistent with paragraph [30] above such that, in my view, the evidentiary hurdle faced by the Respondent has not been overcome.
35 The fourth submission relied upon certain statements made at mediation. As such that submission must be rejected; however, its content has been dealt with elsewhere adversely to the Respondent.
36 Similarly, a detailed submission was made relating to the various invoices, it being asserted that "the first cheque butt (is) false" on the basis that the cheque of $7,200.00 was not presented. It will be remembered that the first invoice was for $5,020.00. The second invoice incorporating the first but including additional work was for $7,200.00. A cheque was written by the Applicant in favour of Papallo for $7,200.00 30 August 2008. This cheque was not presented. The Respondent sought to argue that because cheques numbered on each side of the $7,200.00 cheque were presented then somehow or other the $7,200.00 cheque butt was said to be "false" when a new cheque was issued for $8,200.00 26 September 2008. The Respondent asked rhetorically "Why wasn't the lost cheque for $7,200.00 cancelled?" One might ask in reply: "So what?" It was never argued, nor could it be, that the $8,200.00 cheque did not incorporate the $5,060.00 the subject of the original tax invoice 18 July 2008. How the Applicant conducts its business is a matter for it - the plain fact is that the $7,200.00 cheque was not presented and that is the end of that.
37 The next submission related to what was alleged to be "different design and different type faces" used on letterheads of Papallo. It was submitted that the Tax Invoice 18 July 2008 was a false invoice because it showed a different box number and the word "licence" was mis-spelt "license". It was asserted that the box number was not the correct box number for Papallo, it being different from the box number shown on the Invoice to Ausko 9 September 2008, and subsequent Invoices to Ausko. It was also different from the box number used on the facing page to the Exit Report. What the Tribunal was meant to make of all of this is a mystery. If it was suggested that somehow Papallo was guilty of some form of fraud in issuing a letterhead with a different post box number then firstly, fraud was not pleaded and the argument must thereby be rejected, and secondly, and in any event, the PO box was the same as on the original Exit Report but taped over that PO box was a sticker which showed the different PO box as appeared in the later invoices. A careful study of the Exit Report would have revealed that to the Respondent. Clearly this submission is totally misconceived and ought not to be entertained because it is plain from the documentation that the earlier Invoices were using an earlier letterhead. In any event, the Tribunal is unable to draw any conclusion at all from the mis-spelling of a word on a letterhead. Indeed, on all the documents the name, licence number, ABN and facsimile number are all the same. I reject this submission.
38 It was also complained that none of the correspondence had been signed by or on behalf of Papallo, except an original quotation to the new tenants 21 August 2008. So what? There was no challenge to quantum and in any event Papallo himself gave sworn evidence (Exhibit "C"), although (curiously) his affidavit provided the "previous" address.
39 Complaint was made that various items the subject of a Summons to Produce addressed to Papallo had not been answered. A hearing is not the time to agitate that sort of argument - it should have been argued at directions, alternatively listed for argument on that point (if seriously advanced). In addition, all sorts of suggestions were made about the size of the Papallo quotation for Ausko, asserting that to prepare such a quotation "would have taken at least two weeks or more"; but there is nothing in this argument. Complaint was also made that no application was made by the Applicant to the Rental Bond Board, thus if there was an issue relating to the ceiling the Applicant could have stopped the bond from being returned to the Respondent - again, there is nothing in this argument that impinges upon the issues, nor, even if true, it does not effect the claim raised in these proceedings.
40 There is no need for me to deal with any of the other matters raised by the Respondents - these dealt with administrative matters relating to invoice numbers and assertions made from the bar table. The plain fact of this matter is, unarguably, the Respondent was in breach of its contractual obligations under the lease, effectively (in fact) admitted such, had an obligation to make good, failed so to do (even though an opportunity was given to it by the Applicant), the Applicant obtained a quotation to make good, the quotation is limited to the amount required to make good, and the Applicant has paid the builder in accordance with that quotation, quantum of which was not in issue.
41 In my opinion there is no substantial evidence which would lead me to conclude that the job was not done, alternatively was paid for by the incoming tenant Ausko. In any event, that would not alter the position: the Respondent is obligated to make the payment for the damage it caused.
42 If it turns out that I am wrong and that the builder has somehow pocketed the money without carrying out the work and has obtained payment from the incoming tenant for the work, then that is a matter not for this Tribunal but for another place. A tenant is in breach of its make-good obligations cannot claim, without very, very serious persuasive evidence, that another has paid for the work and therefore it, the tenant, should be relieved from its obligation. Obviously, if another had paid for the work then the work has been done and there is no loss to the Applicant. However, the onus is on the Respondent tenant to satisfy the Tribunal to that effect; and in this case it is plain that the Applicant in fact paid Papallo the $5,060.00 and, as far as the relationship is between the Applicant and the Respondent is concerned that is the end of that.
43 This Decision is based upon the facts that were put before the Tribunal by the parties. It is not intended to establish some precedent because it may well be, in a suitable case, evidence can be led that would persuade a Tribunal that the work had been done by the builder at the expense of the incoming tenant and therefore there was no loss to the Applicant/lessor. But that is not the case here: the Applicant/lessor in fact paid the builder, and that is the loss to the Applicant as a result of the Respondent's breach of contract. The Applicant is therefore entitled to recover against the Respondent its loss.
DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.
Alramon Pty Limited
Lifuli Pty Limited
The Tribunal ordered the respondent to pay the applicant $5,060.00. In the absence of any application within 28 days there would be no order as to costs.