Aussie Traveller P/L v Marklea P/L [1997] QCA 2

There are two possible bases for the implication of such a promise; one is an implication by law arising from the nature of the contract between Aussie Traveller and Marklea, i.e., a lease agreement; the other is an implication of fact, based on the presumed intention of the parties because it was necessary to give business efficacy to their contract.[2] Even if the cases, a number of which are referred to by the other members of the Court, leave it open to question whether such a promise should be implied as a matter of law, I am of opinion that its implication as a matter of fact is warranted.[3] I therefore agree that Marklea is liable to Aussie Traveller for damages for breach of the lease agreement.

I also agree with the reasons of the other members of the Court for concluding that the respective appeals in relation to the amounts awarded should be dismissed except to the limited extent which they have indicated. Nothing was pointed to in the lease agreement or the Property Law Act 1974 which entitled Marklea to any amount in respect of Aussie Traveller's occupation of the premises after 31 March 1995 in excess of the rent which would have been payable for that period had the lease agreement continued until Aussie Traveller vacated the premises.

I therefore agree with the orders proposed, save that I can see no sufficient reason to justify an order that Aussie Traveller pay Marklea's costs of Aussie Traveller's appeal, which enjoyed limited success. However, in the circumstances, there is no purpose in discussing that further.

These appeals arise out of an action heard in the District Court at Brisbane in which the plaintiff recovered $18,018.00 as damages and interest against the defendant for breach of covenant as lessor, and the defendant on its counterclaim recovered rent, electricity charges and interest amounting to $16,485.46 due by the plaintiff as lessee. Inclusive of a further amount of $1,500 awarded to the plaintiff as damages for loss of an option to renew, the result was a judgment in favour of the plaintiff for a balance of $3,032.04. Because separate appeals were filed by each party, there are two appeals rather than an appeal and a cross-appeal; but the appeals were heard together and may be disposed of in that way.

The facts. The business of the plaintiff Aussie Traveller Pty. Ltd. is the manufacture and sale of new and repaired canvas goods such as awnings and camping equipment. It commenced trading in 1988 in Fortitude Valley. On 8 March 1992 it signed an agreement for a lease of part (unit 5) of a building on land known as the Enoggera Industrial Centre at 51 Prospect Road, Enoggera. By cl. 4 of the agreement, the plaintiff undertook not to use the premises for any purpose other than the "manufacturing or sale of new/repaired canvas awnings/annexes and camping equipment". The lease, which was for a term of three years commencing on 1 April 1992 with an option for a further three years, was for a monthly rent of $2,200 payable in advance. At the date of the agreement the lessor was Shonafield Pty. Ltd., but on 1 April 1992 it sold and assigned its reversion in the land to the defendant Marklea Pty. Ltd. In April 1992 the plaintiff entered into possession of the premises, which was one of a number of leased premises in the "centre" or complex on the site, and it carried on its business there until March or April 1995, when it moved to other premises at Eagle Farm. It did so, or so it alleged, because of the condition of the leased premises at Enoggera, which it claimed was brought about by the activities of another tenant identified as Top Flight, which occupied adjoining premises (unit 15), of which it became the tenant in December 1992.

The business of Top Flight, a firm comprising Mr & Mrs F.B. Hyatt, was making timber staircases, for which it used power saws, sanders and one or more spindle planers. The cutting, planing and sanding of timber on the premises it occupied created dust, sawdust and noise which, according to the plaintiff, interfered with the conduct of its business. The two sets of premises were separated by a covered way some 3m to 3.5m. in width; but the partitions or walls between them, which were only 10 or 12 ft. high, did not reach to the common roof of the building, and there were roller doors in both premises that were kept open to facilitate ventilation during working hours. In consequence, particles of sawdust passed into or over and on to the plaintiff's premises and its canvas products, as well as blowing in under closed doors. A hopper bin outside Top Flight's premises was used to collect sawdust preparatory to its removal from the site. Until the base of the bin was covered with shade cloth in mid 1994, sawdust from that source was also blown into the plaintiff's premises; and, even after that precaution was taken, sawdust continued to emanate from the bin particularly on windy days, or when the hopper was being emptied into trucks.

The sawdust made working conditions difficult. It collected on the floor, on the machinery, and on raw or finished materials, where it tended to soil or stain the plaintiff's canvas products, with the consequence that, in selling its goods, the plaintiff found it necessary to discount its normal retail prices. In addition, the noise of the spindle planer was so loud as to make ordinary speech inaudible in the plaintiff's premises. The planer was operated, at a minimum, every second day, often from early morning until lunch time. It was impossible to conduct telephone conversations or speak to customers except in the office or outside the premises. To shut out the sound, employees wore earmuffs, and some customers who could not stand the noise left the premises without making purchases. The sawdust and the noise resulted in a high turnover in the workforce employed by the plaintiff, as well as increased absences from work through headaches and respiratory illnesses.

This description of the conditions prevailing in the plaintiff's leased premises from December 1993 until the plaintiff departed in March or April 1995 has been adopted in summary from the reasons for judgment of the learned judge of District Courts who heard the action from which these appeals are brought. Her Honour accepted as "honest and reliable" evidence to the foregoing effect given at the trial by witnesses for the plaintiff, who included some 12 or so employees, as well as a customer Ms. Urquhart; a management consultant Mr Hobson; a workplace health and safety adviser Mr Groothoff from a government department; and the plaintiff's managing director Mr Freney. Of Mr Freney, her Honour said she found him to be "an honest intelligent man, who was not prone to exaggeration". None of these assessments of the credibility of witnesses has been challenged by the defendant on appeal. The defendant does, however, take issue with inferences derived from their evidence and also with her Honour's statement and application of the law to the facts found in holding the defendant liable for damages for breach of covenant.

Lessor's implied obligation. The law governing the relevant obligations of a landlord to a tenant is less certain than might perhaps be hoped. It is, however, well settled that under a lease of land, whether it is a formal demise or a mere tenancy agreement, there is on the part of the lessor an implied covenant or agreement not to derogate from the grant, and a further such covenant or agreement for quiet enjoyment by the lessee. In some of the older decisions the liability of the landlord was treated as depending on the presence in the lease of words like "grant" or "demise"; but in Australia it was settled by O'Keefe v. Williams [1910] HCA 40; (1910) 11 C.L.R. 171, by which we are bound, that the matter is properly one of implication of terms in order to give business efficacy to the contract. Speaking in that case of a lease by the crown, Griffith C.J. said (at 191) that, where the lessor contracted to give exclusive occupation of land, "there is to be implied an obligation in the nature of a promise not to disturb him in that occupation"; and (at 192) that the obligation so implied was "that the lessor shall neither disturb the possession himself nor authorise its disturbance by others". See also the reasons of Barton J., in the report of that case at 199-200; and of Isaacs J., at 211, who said that granting an exclusive right of possession "connotes that the grantor will not attempt to interfere with it".

It is sometimes said that the agreement for quiet possession is directed primarily to acts of the lessor done on the leased premises, whereas the obligation not to derogate from the grant is directed to acts done off the premises on other land retained by the lessor. Having regard to the way in which the matter was approached in O'Keefe v. Williams, it is perhaps doubtful whether the distinction has much practical significance, the question always being whether the effect of the acts in question is such as to disturb or interfere with the lessee's occupation irrespective of the place where those acts originated. In the present case, the lessee's occupation was disturbed, or so the plaintiff claims, by the penetration or entry on and into the leased premises of particles of sawdust and waves of sound. Both were acts or effects for which the adjoining tenant was responsible and could have been sued in nuisance or, in the case of sawdust, in trespass; but the question here is not whether Top Flight itself was or might have been made liable, but whether those acts or their consequences were such as to disturb the plaintiff's occupation of the premises in a way that involved the defendant landlord in legal responsibility for the loss alleged to have ensued.

Extent of disturbance. Two inquiries are involved. The first is whether the extent of the disturbance or disruption suffered by the plaintiff was such as to amount to a breach of the lessor's implied obligation; the second is whether, although brought about by the actions of Top Flight, the defendant lessor can be held liable for it. As regards the first question, a frequent starting point is the statement of Parker J. in Browne v. Flower [1911] 1 Ch. 219, at 226:

"... if the grant or demise be made for a particular purpose, the grantor or lessor comes under an obligation not to use the land retained by him in such a way as to render the land granted or demised unfit or materially less fit for the particular purpose for which the grant or demise was made."

In the present case the purpose of the lease to the plaintiff was evident from cl.4 of the agreement, which limited the use of the premises to the manufacture and sale of canvas goods.

In Gordon v. Lidcombe Development Pty. Ltd. [1966] 2 N.S.W.R. 9, at 15, Street J.. held that Parker J. in Browne v. Flower had used the expressions "unfit" and "materially less fit" as synonyms, adding that "if the degree to which the premises are rendered less fit is so extreme as in the practical sense to render them unfit" then the test was satisfied and the grantor's conduct was in breach of the implied obligation. So, in the case before him, the learned judge held that, although the erection of a wall by the defendant lessor had obscured the visibility of the lessees' coffee lounge to some of the persons entering or using the building in which the shop was situated and so reduced its profitability, it had nevertheless remained practicable to carry on the business profitably in the leased shop; the effect of the wall was, his Honour found, not so great as to render the business "uneconomic" ([1966] N.S.W.R. 9, at 13-15. Approached in that way, the plaintiff lessees were held in that case to have established no equity entitling them to relief by way of injunction to restrain the defendant lessor from continuing by means of the wall to obstruct the view of the shop.

The decision in Gordon v. Lidcombe Developments Pty. Ltd., or some of what was said by Street J. in his judgment, is not easy to reconcile with the decision of the English Court of Appeal in Owen v. Gadd [1956] 2 Q.B. 99, where the erection of scaffolding in front of a "lock-up" retail shop was held to constitute a substantial interference with access to the shop amounting to a breach of the covenant for quiet enjoyment. The lease in that instance was for a term of 10 years, and, no special damage having been proved, the plaintiff lessee was awarded nominal damages of 40 shillings for a disturbance which lasted only 11 days. Owen v. Gadd was applied in J.C. Berndt Pty. Ltd. v. Walsh [1969] S.A.S.R. 34, where Walters J. awarded damages in the sum of $2,400 for interference caused by the erection by the lessor of a hoarding in front of the lessee's retail jeweller's shop in a city centre, which obstructed the view of the shop frontage and had an adverse effect on the plaintiff's business. The lease was for a term of five years and the disturbance lasted for four or five months. Likewise, in Martin's Camera Corner Pty. Ltd. v. Hotel Mayfair Ltd. [1976] 2 N.S.W.L.R. 14, at 27, Yeldham J. held a lessor liable in damages or breach of covenant for quiet enjoyment arising from the entry on to the demised premises of rainwater caused by the failure of the lessor to keep roof gratings and downpipes clear of rubbish. In none of these cases could it be said that the interference complained of had rendered it impracticable or uneconomic to carry on the lessee's business. Cf. also Kalmac Property Consultants Ltd. v. Delicious Foods Ltd. [1974] 2 N.Z.L.R. 631.

In Gordon v. Lidcombe Investment Pty. Ltd., Street J. also placed reliance on statements in various English authorities that, for the lessor's obligation to be broken, there must be "substantial" disturbance or disruption, which his Honour tended to construe as requiring that the interference must have reached a level at which it practically frustrated the purpose for which the lease was granted ([1966] 2 N.S.W.R. 9, at 14-16). The word "substantial" is unfortunately susceptible of more than one meaning, ranging from not empheral or not merely nominal, to considerable, weighty or big: cf. Tillmanns Butcheries Pty. Ltd. v. Australasian Meat Industry Employees' Union [1979] FCA 85; (1979) 42 F.L.R. 331, at 348; see also Arnotts Limited v. Trade Practice Commission [1990] FCA 473; (1989) 24 F.C.R. 313, at 342-343. Nowadays it is more commonly given the latter meaning, but, particularly in England, that has not always been the case in the past. However, in Newman v. Real Estate Debenture Corporation Ltd. [1940] 1 All E.R. 131, Atkinson J. held that the lessor was in breach of its implied obligation when it converted the upper floors of a block of residential flats into a shop, which resulted in noise from the frequent banging of lift doors and from people running up and down stairs, as well as sporadic obstruction of access to the building caused by vehicles parking in the highway outside the building. Applying the standard applied to cases of nuisance, his Lordship held that there was "an inconvenience materially interfering with the ordinary physical comfort according to plain and simple and sober notions" ([1940] 1 All E.R. 13, at 146), and hence a breach of the implied covenant not to derogate from the grant to the lessee ([1940] 1 All E.R. 131, at 147-148). The decision was distinguished by the Court of Appeal in Kelly v. Battershell [1949] 2 All E.R. 830; but (as regards the present point) essentially on the ground that the question whether particular circumstances amount to a derogation from a grant, as distinct from mere interference with amenities, is one of fact which in Newman the county court judge had decided in favour of the lessee.

For my part, I do not consider that, in order to establish a breach of the lessor's implied obligation recognised in O'Keefe v. Williams [1910] HCA 40; (1910) 11 C.L.R. 171, the law insists on "practical frustration" of the purpose of the lease. At least that is so where, as here, the claim is for damages and not, as in Gordon v. Lidcombe Investments, for an injunction to restrain the alleged disturbance in circumstances in which damages would be an adequate remedy for the breach. It was ultimately on this ground that relief was refused in that case, Street J. holding that the plaintiffs there had "failed to establish any equity entitling them to relief". See [1968] N.S.W.R. 9, at 19. Whether they would have succeeded in a claim for damages may have raised considerations of a different kind. The further proposition in Browne v. Flower [1911] 1 Ch. 219, at 228, that to constitute a breach of the obligation there must be physical interference with enjoyment of the premises ceased to be tenable after the decision in Harmer v. Jumbil (Nigeria) Tin Areas Ltd. [1921] 1 C.A. 200. See Port v. Griffith [1938] 1 All E.R. 295, at 298; and Megarry & Wade, Law of Real Property (4th ed.), at 679 n.1. Owen v. Gadd, J.C. Berndt Pty. Ltd. v. Walsh and Newman v. Real Estate Debenture Corporation Ltd. are all cases in which there was no direct physical impact on the premises. See also Haig v. Chesney [1925] SAStRp 9; [1925] S.A.S.R. 82, which was an interference with light. In any event the penetration into the leased premises of sawdust, if not of the sound of the planer, was, on any view of it, a physical interference with the enjoyment of the premises.

Breach of obligation. The question remains whether, considered in the context of the law laid down in O'Keefe v. Williams, the learned judge was correct in finding that there had been a disturbance or interference with the plaintiff's occupation of the leased premises amounting to a breach of the defendant landlord's implied obligation not to derogate from its grant. The question is one of fact (Kelly v. Battershell [1949] 2 All E.R. 830, at 837), depending on inferences to be drawn by this Court from the evidence accepted in the court below, giving due respect and weight to the conclusion of the trial judge. As to that, her Honour found that there had been "a substantial interference" with the right of occupation granted by the defendant rendering the premises "substantially less fit" for the purpose for which they were let. In doing so, she accepted the evidence of Mr Freney that, by the end of 1993 when he discussed the problems with Mr Bendall on behalf of the defendant, the premises had become unsuitable, rather than simply "less than ideal". The learned judge based her conclusion primarily on the evidence of the plaintiff's witnesses, but particularly on that of the Departmental workplace health and safety adviser Mr B. Groothoff. In her reasons she said she accepted the results of the noise and dust tests he had conducted at the premises on 27 January 1995 and of further noise tests on 31 January and 8 February 1995. He measured the ambient noise level in the plaintiff's premises at 68.5dB(A). When Top Flight's spindle planer was operating on 27 January dressing softwood, the noise level was an average of 90dB(A); when it was dressing hardwood on 8 February 1995, it was an average of 93dB(A). The noise level when the planer was operating, but not dressing timber, was 71.8dB(A). As the difference between ambient noise levels and source levels was greater than 5dB(A), Top Flight was in breach of the Noise Abatement Act 1979 in relation to industrial or commercial premises.

As regards dust, Mr Groothoff noticed wood dust on floors and canvas materials. Three samples, which were collected and analysed by a Mr Lynch, contained O.1 mg/m³ inspirable dust concentration. This was well below the criterion for dust liable to affect health, which is 10 mg/m³. That result may be thought to go some way to undermining the plaintiff's complaint about dust; but it must be weighed with several other factors, including the circumstance that the equipment used to collect the dust would not admit particles of more than 185 microns (.185 mm), so that larger particles of dust would not be detected; and also that 27 January 1995 was a still day on which there was little or no wind. The plaintiff's complaint was directed mainly to dust that had settled on floors, machinery, and material, rather than inspirable dust particles suspended in the atmosphere, which was the focus of the industrial health concern.

The measurements made of dust at the premises on that occasion are susceptible of the interpretation that, by that date, the entry of sawdust on to the premises perhaps less of a problem than the plaintiff claimed. The plaintiff had, however, to put up with sawdust being blown in from the defendant's hopper bin both before that problem was partly remedied in mid-1994 and even after that date. Mr Groothoff considered that the operations being conducted in the two sets of premises were incompatible. His opinion was that this was so on the basis of noise alone. The incompatibility resulted from the proximity of the premises and the fact that they were separated only by walls or partitions which did not reach all the way to the roof above. The gap allowed noise and dust to penetrate into the plaintiff's premises. If the premises had been sealed off from each other, the two operations would not have been incompatible; but there was other evidence that the premises were already unbearably hot because of the character and condition of the asbestos roof sheeting. Mr Max Winders, a consulting engineer, testified that full height partitions of a particular sound transmission rating would have been required to reduce the noise to the maximum level of 70d B(A) recommended in the relevant Australian standard for operations of the kind conducted in the plaintiff's premises. However, this would also have reduced the natural ventilation of the plaintiff's work space, which would then have contravened the workplace code of practice.

When all these matters are brought into account, they justify the conclusion of the trial judge that the plaintiff's occupation of the leased premises was substantially interfered with by the activities of Top Flight conducted on the adjoining premises.

The lessor's liability. It is another matter whether the defendant can in law be held liable for that interference or disturbance. The acts that produced it were not those of the lessor but of Top Flight, which was another tenant of the lessor. The older authorities suggest that in those circumstances the lessor is not liable for breach unless the acts in question were authorised by the lessor, or at least were reasonably foreseeable: see Harrison Ainslie & Co. v. Muncaster [1891] 2 Q.B. 680, at 686, 689. In Malzy v. Eicholz [1916] 2 K.B. 308, the landlord was acquitted of liability because it was not foreseeable that the other tenant would engage in an activity that not only constituted a nuisance but was also illegal. On the other hand, the lessor in Haig v. Chesney [1925] SAStRp 9; [1925] S.A.S.R. 82, and, at least to some extent, the landlord in Newman v. Real Estate Debenture Corporation Ltd. [1940] 1 All E.R. 131, were held liable for disturbance that was the reasonably foreseeable consequence of the reasonable foreseeable actions of another tenant.

Some of the older decisions insist on proof of "authorisation" or "active participation" by the landlord in the act giving rise to the consequences complained of. The law, however, has moved some way since those decisions were given. A person may now be liable for acts done on his land creating a nuisance, even though they were done by the trespasser or resulted from natural causes, if he fails to take steps to eliminate or prevent them. See Sedleigh-Denfield v. O'Callaghan [1940] UKHL 2; [1940] A.C. 880, applied in Hargrave v. Goldman [1963] HCA 56; (1963) 110 C.L.R. 40; Wilkinson v. Joyceman [1985] 1 Qd.R. 567; and R. v. Shorrock [1994] Q.B. 279. In each of the first three cases liability depended on the defendant's continued occupation and control of the land at the relevant time. In R. v. Shorrock the defendant parted with possession or occupation of land knowing that there was a real risk that the activities (a rock concert) that were going to be conducted there by others would constitute a nuisance. His conviction of the misdemeanour of public nuisance was affirmed by the Court of Appeal in a judgment that applied the principle in Sedleigh-Denfield v. O'Callaghan [1940] UKHL 2; [1940] A.C. 880. See R. v. Shorrock [1994] Q.B. 279, at 289. The result is that although, apart from any provision in the lease, a lessor generally loses control over premises once they are let to a tenant, he may nevertheless remain legally responsible for tortious acts done on the land by a tenant at least if at the time he agreed to part with possession and control, it was reasonably foreseeable that the tenant was likely to do those acts.

In the lease (ex 30) of unit 15 from the defendant to Top Flight the permitted use of these premises was defined as "Manufacture of staircases and associated products". By cl.7.1, headed Nuisance or Injurious Conduct, the lessee undertook not to do or permit any act or thing which might be a nuisance or cause damage or disturbance to any other tenant or to the lessor. By enforcing that provision of the lease, it would have been possible for the defendant to control the nuisance-making activities of Top Flight. In fact, repeated representations by the plaintiff to the defendant about Top Flight's activities or their consequences elicited little improvement in the state of affairs complained of, although it was through the efforts of Mr Boyle, who was the defendant's site manager, that Top Flight was prevailed on to cover the base of the hopper with shade cloth. Although there were letters of complaint from the plaintiff to the defendant about the sawdust from Top Flight's operations coming into the plaintiff's premises, Mr Boyle was never instructed by the defendant to conduct an inspection of the plaintiff's premises nor to persuade Top Flight to remedy the problem.

Mr Rebbechi, who is the defendant's development manager, had been employed by Shonafield, which assigned the reversion to the defendant. Through him, the defendant knew the nature of the business of Top Flight, which had previously occupied other premises in the complex on the same site before it moved into unit 15. The defendant was aware of the sawdust problem and knew that Top Flight intended to expand its production, which was the reason why it moved into unit 15. According to Mr Rebbechi, it was because of this that a dust extractor was required and a more detailed lease in registrable form containing the "nuisance" clause 7.1 was insisted upon by the defendant.

It is evident that the defendant was aware of the problem with dust or saw dust even before Top Flight moved into unit 15 in early December 1992, and it must or ought reasonably to have foreseen that, unless controlled, it was likely to affect the plaintiff's business of manufacturing and selling canvas goods. On the other hand, the spindle planer, which was responsible for the excessive noise, was not acquired or used by Top Flight until early 1993. Until then, the defendant did not know of the intention of Top Flight to use that equipment on the premises. Complaints about dust and other matters were made by the plaintiff to Mr Boyle, but noise was not among the matters mentioned in a letter dated 27 January 1993 from the plaintiff to Mr Bendall, a director of the defendant, which has its principal place of business in Victoria. However, at a meeting at the Enoggera site in November 1993, Mr Freney complained to Mr Bendall about the noise coming from the Top Flight premises, where, by that time, the planer was being used much more often than it previously had been. Mr Bendall's response was that the defendant could not fix the plaintiff's problem, and had no intention of fixing it unless the plaintiff paid a higher rent.

Mr Bendall did not give evidence, and Mr Freney's testimony on the point was therefore uncontradicted. As the trial judge accepted Freney as a reliable witness, it must be accepted that at least by November 1993, the defendant was made aware of the noise coming from the Top Flight premises. Having regard to the "nuisance" provision in cl.7.1 of the Top Flight lease, it would have been open to the defendant as landlord to put a stop to the noise if necessary by evicting Top Flight for breach of that condition or undertaking. Instead, it declined or failed to do anything about it. It may be that the underlying reason for its inactivity was that the area leased to Top Flight was larger and that it therefore represented a more valuable tenant than the plaintiff. In any event, nothing was done by the defendant to redress the noise problem created by Top Flight.

In these circumstances, it seems to me that the defendant adopted the noise nuisance created by Top Flight, and that it did so at least after the time of the meeting in November 1993. The learned trial judge did not make any precise finding to that effect in her reasons; but she found that the plaintiff "gave the defendant many opportunities to remedy the situation but the defendant chose not to do so, not even conducting a thorough inspection of the problems"; and she went on to hold that the defendant was responsible for the acts of its tenant Top Flight, with the result that it was in breach of its implied obligation not to derogate from its grant.

Having regard to the control that was capable of being exercised by the defendant over its tenant through the medium of cl.7(a) of the lease, her Honour's conclusion on this point was justified and should not be disturbed. It is consistent both with the decision in R. v. Shorrock [1994] Q.B. 279, and with recent appellate decisions on the subject in the United States in Blackett v. Olanoff 358 N.E. 2d 817 (Mass. 1997) and Bocchini v. Gorn Management Co. 515 A.2d 1179 (Md. 1986). In the leases of the other tenants in both of the American cases there were provisions prohibiting them from making excessive noise. There is a passage in the opinion of Wilner J. in giving judgment for the Maryland Special Court of Appeals which merits quotation at length (515 A.2d 1179, at 1185):

"The traditional view rests essentially upon the notion that a landlord should not be responsible for the actions of persons over whom he has no control. In the older cases, tenants were treated much the same as trespassers or other strangers in that regard; unless the landlord in some way authorised or sanctioned the offensive conduct, he would not be held liable for it.

Our concern is not with the underlying principle but rather with its application. The more recent cases dwell not so much on whether the landlord has approved the conduct of the tenant as whether he is in a position to correct or terminate it. Where, through lease provisions or otherwise, he has that ability, the thought is that he would not to be able to escape his obligation under a covenant of quiet enjoyment by steadfastly refusing to exercise his authority.

We adopt that view. It is fair and it is reasonable. The insertion in a lease of a restriction against excessive noise or other offensive conduct is precisely for the purpose of enabling the landlord to control that conduct."

The judgments in both cases repay study. In the circumstances prevailing here the defendant was rightly held liable for the sawdust and noise nuisance created by Top Flight which, although not shown to have been authorised or encouraged by the defendant, was capable of being corrected or terminated by active intervention on its part.

Damages. On appeal, both the plaintiff and the defendant challenged the trial judge's assessment of damages awarded to the plaintiff for breach of the defendant's implied obligation. The amount awarded was $16,500 calculated at the rate of $1,100 per month from January 1994 to the end of March 1995, when the plaintiff vacated the premises. Together with interest at 4% for 2.3 years to the date of trial, the total awarded was $18,018.00.

January 1994 was a reasonable starting point from which to calculate the award. In adopting it her Honour accepted the evidence of Freney that it was then that the premises became unsuitable rather than "less than ideal". It also allowed some margin of time for the defendant to take steps to put a stop to the nuisance created by the activities of Top Flight after the occasion on which the plaintiff complained to Mr Bendall at the meeting in November 1993.

Precise calculation of the loss sustained by the plaintiff proved to be practically impossible. There were several reasons for this. The plaintiff's complaints falling within the ambit of the defendant's implied obligation were intermingled with other matters that fell outside it, such as leaking of the roof, lack of ventilation, the intolerable heat of the premises, and perhaps also an earlier problem of dust blowing into the plaintiff's premises from the initially unsealed area outside. These complaints were attributable to the condition or quality of the premises as they were from the outset known to be, or were ascertainable when or before the plaintiff's tenancy commenced, with respect to which there is no general implied obligation resting on the defendant landlord at least in the case of a lease of industrial premises like these.

The assessment was further complicated by the action of the plaintiff, taken on the advice of a business consultant, in stockpiling manufactured or partly manufactured canvas products on the premises after it entered into possession. The learned judge held that at the time the tenancy agreement was entered into the parties knew or ought to have known that, having regard to the state of the partitions and the operations of the other tenants in the complex, the premises were not suitable for such a purpose. Mr Amerena for the plaintiff submitted that "stockpiling" was not an accurate description of what the plaintiff had been engaged in doing. The fact remains, however, that knowing the existing condition of the premises, the plaintiff brought into them and kept there canvas goods exceeding in quantity what the judge considered was reasonable having regard to the purpose for which the plaintiff's premises were expected to be used. To that extent, the defendant cannot be held liable for the plaintiff's losses, which in a pecuniary sense were or would have been reflected mainly in additional discounts to customers to whom soiled or stained good were sold.

The difficulty in these circumstances of quantifying the plaintiff's loss was acknowledged by the trial judge in her reasons, and it must be recognised in this Court. Her Honour accepted that general discounts were given on sales by the plaintiff of soiled goods, and that such losses were to some extent compensable by the defendant in consequence of the breach of obligation. She also accepted that the incidence of sick leave and absences on the part of employees must have reduced the efficiency of the plaintiff's business and its profitability, while adding that this state of affairs was also partly attributable to factors such as heat and lack of ventilation that were not compensable. It was therefore not possible simply to accept the plaintiff's claim or assessment of its loss under this head. In the end, the learned judge adopted what she described as the "modest" sum already referred to of $1,100 per month for 15 months from January 1994 to the end of March 1995.

The approach to the assessment of damages adopted by her Honour accords with the principles laid down in decisions of this Court in other cases in which precise calculation has proved impossible. The authorities were reviewed by Pincus J.A. in his reasons, with which Thomas J. agreed, in Syntex Australia Limited v. Ray Teese Pty. Ltd. (C.A. 259/1996, delivered 6 Aug. 1996). In the proof of damages as much certainty and particularity must be insisted on as is reasonable in the circumstances: Ratcliffe v. Evans [1892] 2 Q.B. 524, at 532-533, referred to with approval by Pincus J.A. in Syntex v. Ray Teese. The case now before us was one in which, because of the conjunction of compensable and non-compensable factors contributing to the loss, precise proof was not practicable or possible. However, the plaintiff was not, for that reason, restricted to recovering only nominal damages. There was evidence, which the trial judge accepted, that prospective customers were dissuaded by the noise from remaining on the premises to make purchases; that discounts were given for goods soiled or stained by sawdust; and that staff absences and inefficiency were at least partly attributable to conditions on the plaintiff's premises for which the defendant was legally liable. In that state of affairs the judge was bound to do the best that could be done to make an assessment, and, subject to one qualification to be mentioned, the amount awarded was in the circumstances neither unduly niggardly nor over generous.

The matter deferred for mention is the trading results and profits of the plaintiff's business during the period under review. They are calculated to excite the envy of other entrepreneurs. Sales for the financial years ending 30 June 1991 to 30 June 1995 rose from $394,143 to $1,154,866. During the critical months from January 1994 until March 1995 sales progressed from $609,338 at June 1993 to $920,728 at June 1994, and then to the figure already mentioned of $1,154,866 at June 1995. The increase in expenses did not keep pace with this performance except perhaps from the time when the plaintiff moved its business away from the premises at Enoggera leased from the defendant to more salubrious quarters at Eagle Farm, where it now conducts its trade. Wages as a percentage of sales were, as her Honour noticed, in fact lower at 16.9% in 1994 than they proved to be (17.4%) in 1995. The plaintiff's monthly expenses, rent and outgoings at the new premises are or at trial were $53,000, compared with only $14,600 at the Enoggera premises leased from the defendant.

Results such as these naturally prompt speculation about whether conditions at Enoggera were in fact as bad or the losses sustained there as serious as the plaintiff maintained. The objective evidence does, however, establish the plaintiff's case at least to the extent accepted by the trial judge. Conversely, it also discourages adventurous assumptions that the amount of damages awarded was seriously underestimated. In circumstances like these in which precise calculation is admittedly not possible, any hypothetical mistake in assessment falls fairly within the principle of the decision of this Court in Elford v. F.A.I. General Insurance Co. Ltd.. [1994] 1 Qd.R. 258 concerning the limits of reviewable quantum errors on appeal. In my opinion, neither the plaintiff nor the defendant has succeeded in establishing such error in the amounts awarded as to attract the intervention of this Court.

Option. The original lease or tenancy agreement in favour of the plaintiff contained an option for a further three years on the expiration of the original term, subject to a rental increase equivalent to the yearly average of CPI increases over the previous three years. According to the option all other terms and conditions were to remain the same. The plaintiff exercised the option by notice given on 24 March 1995; but, for reasons that no longer matter, the defendant refused to recognise the right to the further term. The plaintiff did not seek specific performance of the contract resulting from exercise of the option, but instead claimed damages for the defendant's repudiation of that contract. It was awarded an amount of $1,500, which on appeal was challenged as inadequate.

It may seem surprising that the plaintiff should have exercised an option to review a lease of premises about which it had complained so vigorously. The trial judge held, however, that, in exercising the option, the plaintiff had not done so with the intention of occupying the premises itself for a further period of three years. To this finding the plaintiff objected on appeal that, if that was so, it was the defendant's breach of its implied obligation that had compelled the plaintiff to go to other premises which it now occupies at Eagle Farm. But it was correct to say that the sawdust and noise at Enoggera was not the only factor contributing to the plaintiff's move to new premises. The premises at Enoggera were poorly ventilated, intolerably hot, and, it might be thought, not well suited to a business like that of the plaintiff that was expanding so fast and so successfully. In any event, whatever the real reason why the plaintiff moved elsewhere, the damages recoverable for breach of the contract to renew fall to be assessed primarily by reference to the difference between: (a) the amount that would have been payable by the plaintiff to the defendant under the contract for the further three year term, and (b) the market value of the premises at the date of the repudiation; or, in other words, according to what some other ready and willing tenant would have been prepared to pay for the exclusive right to occupy the same premises during that period: cf. Spedding v. Nevell (1869) L.R. 4 C.P. 212 and Wright v. Dean [1948] Ch.686, to both of which the plaintiff referred to on appeal.

As regards the first element (a), it may be accepted, as indeed it was at the trial, that under the original tenancy agreement dated 8 March 1992 the plaintiff secured what was described as a "rent bargain". The agreement apparently was entered into at a time when Shonafield Pty. Ltd. was in a precarious financial position, and it provided for payment of a monthly rent of only $2,200 together with outgoings. The capitalised value of that rental, allowing for the CPI increase stipulated in the option, would not be difficult to calculate. It is, however, with the proof of the element (b) that the principal difficulty arises. As an indication of market value, the plaintiff relied squarely on the fact that in August 1995 the premises (unit 5) were re-let by the defendant to a firm of shopfitters for a period of 12 months at a monthly rent of $4,291.10 (together with outgoings), with an option to renew for a further 12 months at the same rent increased by CPI or 5%.

It is, however, not possible to adopt the capitalised value of this letting as establishing element (b) for the purpose of arriving at the measure of damages. Even if differences in duration of the term and its commencing point are disregarded as insignificant, the principal problem is the divergence in the condition applicable to the plaintiff's tenancy. It was subject in cl.4 of the original agreement to the condition that the premises should not be used for any purpose other than manufacturing or sale of canvas awnings, annexes and camping equipment. Those looking to become tenants of premises subject to a restriction on use to that effect must necessarily have been exceedingly few in number. The likely outcome would almost certainly therefore have been to leave the plaintiff with a continuing liability to the defendant for rent but with little or no prospect of any compensating income from any assignee or sublessee of its own.

To this the plaintiff's response was that the restrictive provisions of cl.4 would not necessarily have been carried over to any assignment or sublease by the plaintiff. It is, however, difficult to conceive how they could have been avoided. The option for a further three year term expressly provided that, apart from the CPI increase in rent, all other terms and conditions (which included cl.4 of the tenancy) were to be the same. In cl.2 the plaintiff agreed not to sublet, lease or assign the premises without the prior written consent of the landlord; and cl.11 conferred a right of re-entry for breach of the agreement. It is true that, by virtue both cl.2 itself and s.121(1)(a) of the Property Law Act 1974, an agreement against assigning, underletting or parting with possession is subject to the proviso that such consent not be unreasonably withheld. However, authorities in England, New South Wales and Queensland are uniform in holding that such a proviso does not apply to refusing consent to an assignment or subletting that would result in contravention of a restrictive user agreement like that in cl.4. See Killick v. Second Convent Garden Property Co. Ltd. [1973] 1 W.L.R. 657, and Barina Properties Pty. Ltd. v. Bernard Hastie (Australia) Pty. Ltd. 1 N.S.W.L.R. 480, followed by Thomas J. in Re Archos [1994] 1 Qd.R. 223.

The reason why the subsequent lease by the defendant to the shopfitters cannot be used as a reliable guide to the measure of the plaintiff's damages for breach of the option agreement therefore is simply that, as a tenant, the plaintiff was subject to the restriction on use imposed by cl.4, whereas as owner of the reversion the defendant was not. The range of potential tenants who, as assignees or sublessees from the plaintiff, would have been willing to submit to the user restriction in cl.4 or to the risk of re-entry by the defendant for breach of it, was potentially so limited that for all practical purposes the plaintiff's damages were confined to loss of the prospect it might have had of finding someone of that description, and of doing so reasonably soon after the expiration in March 1995 of the original tenancy agreement. There being no objective evidence of the likelihood of locating such a tenant, the court was left with the task of making an estimate as best it could of the value of the chance that was lost: Chaplin v. Hicks [1911] 2 K.B. 786. In these circumstances the amount awarded to the plaintiff of $1,500, although not negligible, is neither so large nor so small as to be susceptible of rational criticism or liable to revision on appeal.

Other matters. The option in the tenancy agreement was not in the form considered in Gilbert J. McCaul (Aust.) Pty. Ltd. v. Pitt Club Ltd. [1959] S.R. (N.S.W.) 122, making due and punctual payment of the rent a condition precedent to exercise of the option. For the plaintiff it was as well that it was not in that form because it did not pay the rent from or after 1 October 1994. It seems to have been assumed by the plaintiff that its claim for damages for breach of the defendant's implied obligation in some way relieved it of its duty to do so. The defendant's counterclaim for rent due was confined to the six months from October 1994 to March 1995; but her Honour treated the claim as "ongoing" and gave judgment for seven months including April at the agreed monthly rental of $2,200.

The counterclaim was never formally "updated" to include a claim for rent due in April. Having regard to the way in which this aspect of the trial was conducted, it may not be correct to treat that point as decisive; but, although rent was due on the first day of each month, the tenancy agreement was for three years (or 36 months) commencing from 1 April 1992, so that the term expired not on 1 April 1995, as seems to have been supposed, but on 31 March 1995. The position was confused by the competing assertions on either side about the right to renew the lease; but, on any view of it, the plaintiff incurred some liability for use and occupation of the premises on and after 1 April 1995: see Waring v. King [1841] EngR 760; (1841) M. & W. 571; 151 E.R. 1166. The precise date on which it vacated the premises is unclear, but was found to have been "mid-April" 1995. It was not until the counterclaim, which was dated 13 April 1995, was delivered or served that the defendant unequivocally communicated its election to treat the defendant as a trespasser, after which the claim would have been for mesne profits or damages (for which no claim was made) rather than for rent or use and occupation: James v. Carter [1846] EngR 856; (1846) 15 M. & W. 718; 153 E.R. 1040. In the overall context, the point seems a highly technical one; but, taken with the failure to seek such relief, it is right to say that the defendant's claim for use and occupation ought to have been limited to, at most, the period extending to mid-April 1995. An amount equivalent to compensation for use and occupation at the rental rate for half a month ($1,100) ought therefore to be deducted from the total allowed to the defendant on this account.

The remaining matter raised by the plaintiff concerned an amount for which it was held liable of $152.32 for unpaid contribution to electricity charges. The tenancy agreement expressly provides that "the landlord hereby agrees to pay all rates and taxes which may become due and payable during this tenancy ...". The word "landlord" was at first crossed out and replaced by the word "tenant", and then reinstated. There is nothing in the agreement or any other source to make the tenant liable for a share of the electricity charges, which it may be inferred were those attributable to the whole centre. The sum of $152.32 must therefore be excluded from the calculation.

Result. The trial judge awarded the plaintiff a total of $18,018 for damages and interest for breach of the defendant's implied obligation. For the reasons given here, that amount should stand, together with the further amount of $1,500 awarded as damages for loss of the option to renew, giving a total of $19,518. The sum of $15,400 awarded to the defendant for seven months rent must be reduced by $1,100 to $14,300. With interest, fixed by the judge at 4% for the 18 month period from October 1995 to the date of judgment in March 1996, the ensuing total on that account is $15,158, which at judgment was set off against the $18,018 portion of the plaintiff's claim. Adopting the same course here, the balance is $4,360.

The defendant's appeal should be dismissed with costs. The plaintiff's appeal should be allowed by varying the judgment in its favour by increasing it from $3,032.54 to $4,360. Having regard to the limited extent of its success, the plaintiff should be ordered to pay to the defendant costs of its own appeal against the judgment below.

I agree with the reasons of McPherson JA in this matter.

[1] cf. cl. 20 of sch. 3 to the Property Law Act.

[2] See Breen v. Williams (1996) 186 C.L.R. 71, 80, 90-91, 102-103, 123-124.

[3] cf. O'Keefe v. Williams [1910] HCA 40; (1910) 11 C.L.R. 171.