Beyond Furniture (Australia) Pty Limited v Virk [2000] FCA 185 | Case summary

REASONS FOR DECISION 1 The Application in these proceedings is made in respect of premises located on part of the Ground Floor and level 1 at 2 David Street Crows Nest ("the Premises"). The Premises are known as lot 53 in strata plan 71227 being part of lot 1 DP 1046538 ("the Building"). 2 It seems that the Applicant entered the Premises in about July 2003. On 20 August 2003, the Applicant (then known as Coozey Furniture Pty Limited) entered registered lease AA32511S ("the Lease") of the Premises as lessee. It is common ground that the Lease is governed by the Retail Leases Act 1994 ("the Act"). The lessor was identified in the Lease as Philbreak Pty Limited ("Philbreak"). 3 The Lease provides for: (a) an initial term of 5 years with 2 option terms of 5 years; (b) commencing rent of $390,000 plus GST; (c) rent increases at 3 percent per annum on 1 November 2004 and 2005; (d) a current market review on 1 November 2006; (e) security deposit bank guarantee of $214,500 4 The Premises were part of a new residential and retail complex of which Philbreak was the owner and site developer. At the time the Lease was negotiated there was no Strata Plan. The cover page of the Lease refers to a 'proposed Strata Plan'. The inaugural general meeting of the owners of the strata plan was held on 20 October 2003. Linders Strata Management Pty Ltd ("Linders") was subsequently appointed as the managing agent for the Strata Plan. 5 The Applicant commenced trading at the Premises in about November 2003. 6 The Respondent purchased the Premises from Philbreak in about March 2004. Since then, Doran Commercial Real Estate ("Doran") has managed the Premises on behalf of the Respondent. Philbreak is not a party to these proceedings. It was deregistered under 601M of the Corporations Act 2001 on 7 August 2005. The claim 7 Beyond contends that since 2004 there has been water leaking into the Premises whenever there was substantial rain. Despite its complaints about the leaks, the problem has not been rectified. Beyond contends that the leaks have impacted upon its business and caused it loss and damage and prevented Beyond from enjoying the full and maximum benefit of the Lease. 8 Beyond seeks compensation under sections 34 and 36 of the Act and for breach of the implied covenant for quiet enjoyment. Sections 34 and 36 of the Act 9 Section 34 of the Act provides: 34 Lessee to be compensated for disturbance (1) A retail shop lease is taken to provide that if the lessor: (a) inhibits access of the lessee to the shop in any substantial manner, or (b) takes any action that would inhibit or alter, to a substantial extent, the flow of customers to the shop, or (c) unreasonably takes any action that causes significant disruption of, or has a significant adverse effect on, trading of the lessee in the shop, or (d) fails to take all reasonable steps to prevent or put a stop to anything that causes significant disruption of, or which has a significant adverse effect on, trading of the lessee in the shop and that is attributable to causes within the lessor's control, or (e) fails to rectify any breakdown of plant or equipment under the lessor's care or maintenance, or (f) in the case of a shop within a retail shopping centre, fails to adequately clean, maintain or repair the retail shopping centre (including common areas), and the lessor does not rectify the matter as soon as reasonably practicable after being requested in writing by the lessee to do so, the lessor is liable to pay the lessee reasonable compensation for any loss or damage (other than nominal damage) suffered by the lessee as a consequence. (2) In determining whether a lessor has acted unreasonably for the purposes of subsection (1)(c), due consideration is to be given to whether the lessor has acted in accordance with recognised shopping centre management practices. (3) A retail shop lease may include a provision preventing or limiting a claim for compensation under the provisions implied by this section in respect of any particular disturbance if a written statement specifically drawing the attention of the lessee to details of the anticipated disturbance was given to the lessee before the lease was entered into, and the statement included the following: (a) a specific description of the nature of the disturbance, (b) a statement assessing the likelihood of the disturbance occurring, including an indication of the basis on which the assessment was reached, (c) a statement of the timing, duration and effect of the disturbance, so far as they can be predicted. (3A) A general statement to the effect that disturbances may occur during the term of the lease without setting out the matters referred to in subsection (3) is not a statement to which that subsection applies. (4) The provisions implied by this section do not apply to any action taken by the lessor: (a) as a reasonable response to an emergency situation, or (b) in compliance with any duty imposed by or under an Act or resulting from a requirement imposed by a public or local authority acting under the authority of an Act. 10 Section 36 of the Act provides: 36 Damaged premises (1) A retail shop lease is taken to provide for the following if the shop or the building of which the shop forms part is damaged: (a) The lessee is not liable to pay rent, or any amount payable to the lessor in respect of outgoings or other charges, that is attributable to any period during which the shop cannot be used under the lease or is inaccessible due to that damage. (b) If the shop is still useable under the lease but its useability is diminished due to the damage, the lessee's liability for rent and any amount in respect of outgoings attributable to any period during which useability is diminished is reduced in proportion to the reduction in useability caused by the damage. (c) If the lessor notifies the lessee in writing that the lessor considers that the damage is such as to make its repair impracticable or undesirable, the lessor or the lessee may terminate the lease by giving not less than 7 days notice in writing to the other and no compensation is payable in respect of that termination. (d) If the lessor fails to repair the damage within a reasonable time after the lessee requests the lessor in writing to do so, the lessee may terminate the lease by giving not less than 7 days notice in writing of termination to the lessor. (e) Paragraphs (a)-(d) do not affect any right of the lessor to recover damages from the lessee in respect of any damage or destruction to which those paragraphs apply. (2) A retail shop lease must not contain any provision the effect of which is to limit any liability of a party to the lease to pay compensation to another party to the lease in respect of damage to the shop or the building of which the shop forms part. (3) Nothing in this section prevents the parties to a lease from terminating the lease by agreement if the shop or the building of which it forms part is damaged or destroyed. 11 Judicial Member Molloy examined section 34 of the Act in considerable detail in the decision of Kindful (Australia) Pty Ltd v. Country Villa Holdings Pty Ltd [2006] NSWADT 224 ("the Kindful decision"). The relevant paragraphs of his judgment are found at [114] -[119]. 114 ... The Applicant's case effectively revolved around Retail Leases Act 1994 Section 34. This section (set out above) imposes certain obligations on lessors notwithstanding the terms of any lease. But the obligations are on lessors, not on persons who are not lessors. Again, there is no need for me to examine in detail section 34 because once one accepts that whatever may have been the various incidents that affected the Applicant's business (and I accept unreservedly that the incidents did in fact take place) the incidents were not caused by the Respondent. The evidence is clear. It is also clear that whenever the Applicant complained to the Respondent's manager the manager (in the person of Mr Blazak) did his absolute level best to sort the matter out as quickly as possible. In oral submissions made on the last day of the hearing I think counsel for the Applicant conceded that Mr Blazak did his best to resolve the problems. The problems were not caused by the Respondent nor the Respondent's manager but rather were problems that arose as a result of the conduct of other persons or were repairs/maintenance to common property and common services. The Respondent had no control at all over those aspects - all it could do was refer the problems on to the hotel and push for rectification. This is what the Respondent did. 115 On the first day of the hearing in opening counsel for the Applicant submitted that the Respondent had suffered others to impede the Applicant's enjoyment of the premises; that the Respondent had a duty to seek to prevent such impediment; that there was no attempt by the Respondent to diminish the various incidents; and that the Respondent as lessor simply could not stand by but must make an effort to prevent or diminish the affectation and could not sit back and suffer someone else to do nothing such that it was just not a matter of doing nothing but rather the Respondent must do something and that in all the factual circumstances in this it was up to the Respondent to enforce whatever arrangement it had with the hotel. The submission (as I understood it) went even further - in the circumstances of this case the Respondent did not do its best, alternatively the circumstances were such that there was a breach of the covenant for quiet enjoyment and therefore the Applicant should succeed. 116 In my view, Section 34 is quite clear. The onus/duty is on the lessor. It is the lessor's conduct that is the subject of this section. So, for example, in Section 34(1)(a) it is the lessor who must "inhibit access of the lessee to the shop in any substantial manner". If it is not the lessor, but rather somebody else, whose conduct is outside the control of the lessor, then in my view there is no infringement of this sub-section. In this particular case it cannot be remotely suggested that it was the lessor who placed security guards and impeded the flow of people to and from George and Sussex Street through the common area passageway and past the premises. A similar observation applies to Section 34(1)(b). 117 There is no need to trawl through the balance of the sub-section. In all cases the obligation is on the lessor - the lease includes that obligation as a matter of statute - and where there would otherwise be an infringement of Section 34 there is no infringement if the actions taken are those of someone other than the lessor. 118 It may be (and I express no concluded view on this) that where a lessor does not act with promptitude to correct a problem which is not within its capacity to correct, the lessor may well be in breach of Section 34. There is no need to explore that further simply because the evidence in this case demonstrates adequately, and it was so conceded by counsel for the Applicant, that the Respondent as lessee acted with promptitude and did its best to rectify the problems as and when they arose. 119 In my view it was unfortunate that so many problems appeared to bedevil this tenancy. I have considerable sympathy for the Applicant. But it was not suggested, and was not part of the Applicant's case, that the problems were such that he could not, to a reasonable degree, conduct his restaurant business - after all, he did in fact conduct his restaurant business for over 3 years until on or about 2 April 2005 when the Applicant ceased trading from the premises. The unchallenged evidence of the Respondent (Exhibit "3", annexure "WZ1", page 25) seems to show that the Applicant first fell into arrears on 1 April 2005. It is not unreasonable to conclude that until that point of time the Applicant was in fact paying all rent under the lease (although it is true that it would seem that the Applicant had not paid electricity charges since 19 July 2004). I note that the Applicant conceded the cross claim quantum such that in all those circumstances it is not unreasonable to conclude that the Applicant could conduct its restaurant business from the premises, albeit with interruptions and probable financial loss, at a profit sufficient to pay at least the rent. 12 A summary of the principles enunciated therein are as follows: (a) the obligations imposed by section 34 of the Act are imposed on lessors, not on persons who are not lessors; (b) the onus/duty in section 34 of the Act is on the lessor. It is the lessor's conduct that is the subject of the section; (c) where there would otherwise be infringement of section 34 of the Act there is no infringement if the actions taken are those of someone other than the lessor; (d) it may be that a lessor may well be in breach of section 34 of the Act where the lessor does not act with promptitude to correct a problem which is not within its capacity to correct. Beyond's case 13 The Applicant relies on the evidence of its director, Mr Bill Zheng, who provided affidavits deposed on 27 November 2006, 31 January 2007, 2 February 2007, 8 May 2007, 14 June 2007 and 21 June 2007 and also provided oral evidence at the hearing and was subjected to cross-examination. 14 Mr Zheng's evidence is that in about August 2003 he noticed water leaking and dripping into the Premises whenever it rained. The leaks were confined to the corner window area and lift well, but sufficient to soak the carpet. Sometime thereafter he observed that more leaks occurred. He identified about 81 days between May 2004 and December 2006 on which there had been rain that was enough to be disruptive and cause inconvenience. 15 Mr Zheng's evidence is that since Doran took over the management of the Premises he complained to Doran about water leaking into the Premises whenever there was substantial rain. However, the leaks have not been rectified. He said that sometimes he phoned Doran to complain and sometimes he sent emails. He said that the evidence from both parties confirms that he has continued his complaints about water leaking for more than 3 years. He concedes that there was no water-leaking problem unless it rained and he also conceded that he did not raise the issue on every occasion that leaking occurred as there were too many occasions. However, he said that although intermittent in nature, intensity and location within the Premises, water leaks have been a consistent worry and hindrance at the Premises and have impacted upon Beyond's business and caused it loss and damage and prevented Beyond from enjoying the full and maximum benefit of the lease. Mr Zheng says that Beyond paid the rent and should have been entitled to watertight premises. While the Respondent receives the rent he should provide quiet enjoyment and keep the Premises in a good state of repair and condition in accordance with the lease and that includes being free of leaks. He says that if the Respondent cannot fulfil that obligation, he must pay compensation or reduce the rent in a fair manner. 16 Mr Zheng says that the use of the Premises has been physically diminished, the image of the business as a quality showroom and high-class operation has been compromised, the water has damaged Beyond's fixtures and he has been unable to upgrade the Premises. Beyond seeks compensation under sections 34 and 36 of the Act and for breach of the implied covenant for quiet enjoyment. 17 Mr Zheng estimate the loss and damage at about $270,119 plus GST. This comprises water damaged stock; the replacement cost of water damaged carpet; and the estimated loss of gross margin associated with the diminution of use of about 25 square meters of the Premises and total loss of use of the Premises for the period when the Premises are emptied and closed to be re-carpeted. 18 It is Beyond's case that under the Lease, the Respondent had a clear responsibility to know about the leaks in the first place, and ought to have forced the Owners Corporation to rectify the water leaks; to provide remedial assistance; and at the same time provide damages and/or vary the rent until the leaks are fixed. Beyond argues that it is unreasonable that it has had to wait so long for the leaks to be fixed. It argues that the Respondent has shown no willingness to forthrightly take these matters head on and fix them. Thus far, all the mechanisms designed to protect Beyond, or to have its rent adjusted until full use of the Premises are restored, have failed it. 19 Beyond argues that it is doubtful that it has any remedy other than that under the Lease as Beyond has no contract with the Owners Corporation and only owners of the lots have right to obtain orders before an Adjudicator or the Consumer, Trader and Tenancy Tribunal ("the CTTT"). Beyond's case with respect to the Kindful decision 20 Mr Spring appeared as an agent for Beyond. He sought to distinguish the Kindful decision on its facts. He argues that in Kindful the premises were defined to exclude the Common Property. However, in this matter the strata plan did not exist when Beyond negotiated the Lease. The Lease does not delineate external walls, outside surfaces, floors or anything similar. Nowhere in the Lease does the strata plan or disclosure statement reference walls, floors and ceilings. Unlike Kindful, in Beyond's case, the developer and the lessor were one and the same, placing a positive obligation on the Lessor. 21 Mr Spring argues that neither the Respondent nor his managing agent did their best to avoid the water problems in the first place, or properly and promptly correct them when they arose. 22 When purchasing the Premises, the Respondent failed to engage a building professional to conduct even a simple property inspection and failed to interview the sitting tenant. If he had done so he would have been alerted to the problems with the water leaks. 23 Mr. Zheng complained directly to Doran. When the leaks were made known to him, the Respondent took the advice of Doran that it wasn't his responsibility to attend to the water leaks. Mr Spring argues that the Respondent simply waited for the Owners Corporation to do something about the water leaks, directing his agent to send a few emails. He did not instigate legal action against the Owner's Corporation to seek orders to correct the problem. 24 Mr Spring further argues that a key difference between this matter and Kindful is in the way the Lease deals with Common Property. The Lease is structured differently to that in Kindful. When Beyond entered into the Lease, it was dealing with the owner and developer of the entire building. When problems occurred prior to the Respondent purchasing the Premises, the developer simply fixed them. The Respondent simply chose largely to ignore them. 25 Mr Spring submits that the Respondent, in conjunction with the Owners Corporation, could have employed suitable persons to attend to the leaks at the earliest possible opportunity, as it was the only person who had the power to communicate directly with the Owners Corporation and take immediate legal action if necessary. 26 Mr Spring further submits that a covenant for quiet enjoyment is implied into the Lease. He says that it is not necessary to show that the Respondent's breach of quiet enjoyment occurred through him or his agent as the Respondent's failure to act is enough. The Respondent did not do what he has covenanted to do, nor did he vary the rent due under the Lease. 27 Mr Spring contends that prior to purchasing the Premises, the Respondent should have inspected the Premises thoroughly and sought information from Beyond as to the Premises' condition. The Respondent knew, or ought to have known, about the leaking Premises through the agent and solicitor acting for him. He further contends that upon purchase of the Premises, the Respondent should have immediately sealed the Premises against water penetration using any appropriate experts and field leak detection and rectification methods used in the building industry; checked the envelope of the Premises against applicable building codes to protect his investment and the quiet enjoyment of Beyond; and re-negotiated the rent and varied it by agreement for the entire time the Premises are not certified as fully sealed. Alternatively, if he could not repair those leaks, the Respondent should have acted urgently and diligently and sued the Owners Corporation and sought orders in the CTTT to have the leaks repaired. He says that Beyond had only one real choice and that is to prosecute its claim under its Lease in this Tribunal. 28 Beyond asserts the Tribunal should grant an order for damages in its favour. If the Tribunal is of a view that damages are an adequate remedy but further inquiry is needed as to the quantum, leave is sought for the filing of an independent assessment based on Beyond's accounting records. The Respondent's case 29 The Respondent contends that Beyond's claim cannot be sustained. He argues that section 34 has no application because the cause of the water ingress is the Common Property rather than any of the property owned by the Respondent. The Owners Corporation and not the Respondent was responsible for the ingress of water. Further, the Respondent says that he has done everything in his power to attempt to get the Owners Corporation to fix the leaks in the slab. Insofar as the Applicant attempts to make any suggestion that the Respondent has failed to take all reasonable steps to prevent any disruption, the Respondent denies that any disruption was significant and contends that the disruption must be attributable to causes within the lessor's control. He says that accordingly, section 34 of the Act has no application. Further, he submits that rectification of property that is not owned by the lessor would constitute a trespass, and is beyond the ambit of section 34 of the Act. 30 The Respondent contends that at all times the Premises have remained "useable" and the only claim possibly available to Beyond under section 36 of the Act is pursuant to subsection 36(1)(b). The elements that must be satisfied are that the Premises' usability is 'diminished'; such diminution must be causally connected to 'the damage'; the reduction in rent is limited only to 'any period during which the usability is diminished; and the rent is reduced only in proportion to the reduction in usability caused by the damage. The Respondent submits that Beyond's evidence fails to make out any proper claim for breach of subsection 36(1)(b). There is no evidence of the specific periods during which usability was diminished or the proportion in reduction in usability caused by the damage. 31 Insofar as the Applicant asserts a breach of the covenant of quiet enjoyment the Respondent argues that fundamental to any claim for a breach of quiet enjoyment is that the interruption must be by the lessor or those claiming through the lessor: See Hawkesbury Nominees Pty Ltd v Battick Pty Ltd [2000] FCA 185 especially at [36] -[40], and Volley Investments Pty Ltd v Coles Myer Ltd [BC 200409531]. The Respondent submits that this claim must also fail as the Owners Corporation caused the interruption. 32 The Respondent further argues that there is no ability for the Applicant to assert any breach of subclause 10.1(c) of the Lease. Subclause 10.1(c) provides: "The Landlord must keep the Property in a good state of repair and condition except to the extent of the Tenant's obligations in this clause". 33 The term "Property" is defined in the definition section to mean: "the Premises, the Building, the Common Property, the Land and any car parking areas unless the context excludes anyone of them;" 34 The Respondent says that it is plain that the Lease was for a strata lot. The obligation to properly maintain and keep the Common Property in a state of good and serviceable repair is imposed upon the Owners Corporation pursuant to section 62 of the Strata Schemes Management Act 1996. Therefore the Respondent has no entitlement to keep the "Property", as that term is defined, in a good state of repair and condition. Accordingly, the definition of "property", as applied to subclause 10.1(c), must be restricted to mean only the "Premises". Otherwise, subclause 10.1(c) becomes unworkable. Read down in this way there is no ability for the Applicant to assert any breach of subclause 10.1(c). 35 The Respondent further submitted that Beyond's claim for damages ought be dismissed owing to a failure to properly articulate, by reference to the balance of probabilities, any such damages. 36 The Respondent relies on his own evidence in the form of an affidavit of 30 April 2007 and he also attended the hearing and was subjected to cross-examination. He also relies on affidavits of Mr John Pronti and Ms Wendy Doran who also attended the hearing and was subjected to cross-examination. 37 The Respondent provided evidence as to the complaints that he received from Mr Zheng regarding the leaks, his observations of the state of the Premises and the attempts that he made to have the Owners Corporation attend to the repairs. He says that he first became aware of the leaks in about October 2004. Thereafter he visited the Premises on numerous occasions, at least 20 times, and he observed some evidence of the leaks. He asked Doran to investigate the problem and do what was necessary in order to have the problem fixed. Doran advised him that the leaks emanated from a failure of the waterproofing membrane from the balconies attached to the residential units above the Premises and that it was the Owners Corporation responsibility to fix the Leaks. He was also informed that there were a number of other defects with the Building and that the Owners Corporation was pursing the builder as some of the defects were covered by the Home Owner Warranty Insurance Scheme. He subsequently learnt that the builder had been placed in Liquidation and that the builder's insurer was Allianz Australia Insurance Limited ("Allianz"). 38 Doran subsequently contacted the Owners Corporation via Linders on numerous occasions and attempted to have the Owners Corporation arrange for the leaks to be fixed. Notwithstanding the numerous requests to Linders, no action had been taken to attend to the Common Property defects by July 2005. At that time the Respondent instructed his solicitor to write to the Owners Corporation requesting that they attend a round-table meeting with the view to seeking out a solution to the Common Property defects. Linders advised that his complaint would be addressed at the Extraordinary General Meeting of the Owners Corporation being held on 9 August 2005. 39 In early August 2005 Doran engaged a plumber, Chris Parry, to investigate and to prepare a report on the water leak and carry out such repairs as were possible given the limitations of a Strata Plan. Mr Parry undertook some repairs and he reported that other leaks were most likely caused by Common Property defects. The Respondent instructed Doran to bring the problem to the notice of the Owners Corporation. This was done on 10 August 2005. 40 On the Respondent's instructions Doran made arrangements for the replacement of all damaged and stained ceiling tiles in the Premises and this was done in September 2005. 41 In about late September 2005 the Owners Corporation sent a plumber to attend to the repair of the box gutter that were overflowing and causing leaks near the entrance to the perimeter of the showroom, particularly on the Day Street side. The Respondent said that after those repairs, he did not receive any further complaints in relation to water leaks from the perimeter of the Property until September 2006. 42 The Respondent received further complaints in relation to leaks in the body of the showroom in May 2006. He attended at the Premises to inspect the leaks. He instructed Doran to immediately contact the Owners Corporation to organise rectification. Linders sent out a plumber to investigate the complaint. The Plumber advised that there was a burst pipe in the slab above the Premises and this was rectified. 43 In July 2006 Doran again wrote to the Owners Corporation requesting urgent action in relation to the leaks and advised of the Respondent's intention to seek legal advice in relation to the Owners Corporation's responsibilities if this was not done. Shortly thereafter the Respondent instructed his solicitors to write to the Owners Corporation requiring them to convene a meeting with the view of passing a motion that the Owners Corporation engage the services of a trades person to rectify the leaks to the Premises. The Owner's Corporation did not respond to that letter but it instructed G.L. Zacos & Associates, Building Consultants to attend at the property with the view of preparing a comprehensive report on the cause of the Leaks and advise on a method of rectification. Linders subsequently advised the Respondent's solicitors that the Owners Corporation solicitors were in the process of pursuing a claim against Allianz in an attempt to resolve the defects with the Building. The Respondent offered to carry out the repairs to the Common Property at his own expense on the basis that he be reimbursed when the claim against Allianz was settled. The Owners Corporation declined the offer, as there were access and insurance issues, which made it impractical. 44 After consultation with his solicitor the Respondent came to the conclusion that the time and expense involved in pursuing the Owners Corporation legally would not necessarily produce a quicker result than continuing to apply pressure on the Owners Corporation. He instructed both Doran and his solicitors to keep applying pressure on the Owners Corporation and for Doran to keep Mr Zheng informed as to the progress. 45 In September2006 Beyond asserted that it had a right to withhold rent because the problems had never been fixed and advised that it was going to cease paying rent until a fair arrangement was reached. Correspondence continued between the parties. Beyond asserted that it had a right to set-off it's alleged losses against the rent and relied on Section 34 of the Act. The Respondent rejected Beyond's assertions and maintained that he had taken all reasonable steps to rectify the leaks and that in any event, the leaks were caused by matters outside his control. 46 Vision Building Pty Limited ("Vision") was subsequently retained by the Owners Corporation to carry out the repairs to the Common Property to fix the leaks. Rectification work in relation to the leaks were carried out in February/March 2007. 47 Ms Wendy Doran is the Commercial Property Manager of Doran. He evidence is that on each occasion that Beyond made a complaint in relation to the water leaks to the Premises, Doran immediately took action to report the complaints to the Owners Corporation and where appropriate and necessary, arranged tradespeople to carry out rectification works. Ms Doran provided a summary of the correspondence that passed between Doran, the Respondent and Linders in relation to the issue, setting out the nature of Beyond's complaints in relation to water leaks, Doran's responses to Beyond and the action taken by Doran, Linders or others in relation to rectifying or addressing Beyond's complaints. 48 Ms Doran also provided evidence in regard to her observations when she attended at the Premises. She stated that she has attended the Premises on numerous occasions and that she has never seen any part of the showroom cordoned off or with buckets placed in the showroom to collect water. Nor has she ever seen the furniture displayed in the showroom in any manner other than an appealing or impressive display. She observed that the carpets in the Premises are in reasonable order and condition given its age and the wear and tear that it has undergone since 2004. She stated that there are no obvious marks or signs of the carpet being damaged by water staining or leaks. 49 Mr John Pronti's evidence is that Allianz awarded Vision the contract to carry out remedial work to the Building. Mr Pronti is employed by J.P Building Pty Limited, which subcontracted to Vision for the work. He stated that he attended the Premises on about 5 February 2007. He observed the staining of a number of ceiling tiles consistent with water penetrating from above. The water stains evident in the office area at the rear of the showroom were more serious in nature than any of the other areas. 50 Mr Pronti set out the work that he undertook at the Premises and the residential area above the Premises. He located the cause of the leaks to the Premises and applied a membrane and sealant to make the area watertight and to thereby address the problems. 51 Mr John Pronti's evidence is that the water leaks could not have been fixed by applying sealant to the underside of the slab as the membrane needed to be fixed from the balcony above so as to prevent water entering the penetrations in the slab. 52 He attended the Premises on a number of occasions and was informed that no further water penetration has occurred from the areas that he had waterproofed. However he is aware of a complaint that water was entering the Premises from the windows and an area outside the Office in the showroom. He has observed that there are minor leaks on the glass windows but have not been able to locate the source. It is his opinion that the water penetration is due to a defect in the flashing in the box gutter or alternatively from water penetration due to a defective membrane applied to the Common Property slab above the windows. Mr Pronti's evidence is that the water leaks to the windows cannot be fixed by measures within the Premises. 53 Mr Pronti stated that he has attended the Premises on approximately 12 occasions and that he has never seen any part of the showroom cordoned off or observed the furniture display to be anything other than professional and appealing. He did not notice obvious water stains to the carpet but there were some minor stains, which are consistent with normal wear and tear. He stated that from his observation the leaks were minor in nature and on the occasions that he attended the Premises the water penetration caused no disruption to the trading of the business. The Respondent's case with respect to the Kindful decision 54 In the Respondent's submission the Kindful decision is on all fours with the facts of the present case. He submits that comity dictates that it ought be applied and the application must be dismissed. Findings 55 I agree with the Respondent's submission that Beyond's application pursuant to section 36 of the Act must fail. The only claim possibly available to Beyond under section 36 is pursuant to subsection 36(1)(b). While I am satisfied that the Premises' usability is diminished, I am not satisfied that Beyond's evidence makes out any proper claim for breach of subsection 36(1)(b). In my view the claim is not supported by competent evidence. There is no evidence of the specific periods during which usability was diminished or the proportion in reduction in usability caused by the damage. 56 I agree with the Respondent's submission that Beyond's application also fails insofar as it asserts a breach of the covenant of quiet enjoyment. Fundamental to any claim for a breach of quiet enjoyment is that the interruption must be by the lessor or those claiming through the lessor: see the discussion of this issue in the Kindful decision at [127]. In my view the evidence clearly establishes that the interruption was caused by defects to the Common Property which is the responsibility of the Owners Corporation. The Respondent did not cause the interruption. 57 As noted above, section 34 has been examined in considerable detail in the Kindful decision. I agree with the Respondent's submission that the Kindful decision is on all fours with the facts of the present case. 58 In my view there is no doubt that the cause of the water ingress to the Premises was a defect in the Common Property rather than in any of the property owned by the Respondent. 59 While I am satisfied that the leaks have caused some disruption to Beyond's business, I am not satisfied that the disruption was significant. In any event the disruption is not attributable to causes within the Respondent's control. I accept the evidence presented on behalf of the Respondent with respect to the attempts he made to have the leaks rectified. In my opinion the Owners Corporation and not the Respondent was responsible for the ingress of water and the Respondent did everything in his power to attempt to get the Owners Corporation to fix the leaks. The Respondent had no control at all over the rectification of the leaks - all he could do was refer the problems on to the Owners Corporation and push for rectification. This is what he did. 60 As was the case in the Kindful decision, the evidence demonstrates adequately that the Respondent acted with promptitude and did his best to rectify the problems as and when they arose. It follows, in my view, that Beyond's claim under section 34 cannot be sustained. I do not need to express a view on whether a lessor who does not act with promptitude to correct a problem, that is not within its capacity to correct, may be in breach of Section 34. 61 For completeness I note that I agree with the Respondent's submission that the definition of "property", as applied to clause 10.1(c) of the Lease, must be restricted to mean only the "Premises". Accordingly, any assertion by Beyond with respect to a breach of clause 10.1(c) of the Lease cannot be sustained. 62 Finally, even if Beyond were able to show that the Respondent's is liable under any of these claims, I agree with the Respondent's submission that Beyond's claim for damages ought be dismissed owing to a failure to properly articulate any such damages. Beyond has done nothing more than make bare assertion as to its losses. There is no evidence that may have provided some methodology for calculating potentially lost sales; no comparative data demonstrating sales during periods where there was no interruption by rain, as compared to days where the Premises were said to be rain affected; and no evidence of any employees or comments from customers to support the assertion as to lost sales. 63 In my view, Beyond's application should be dismissed. Costs 64 I note that each of the parties has sought an order for costs. I invite the parties to make further submissions in relation to that issue. Those submissions are to be filed and served by 18 April 2008. I will determine the matter of costs on the basis of any written material filed without the need for further attendance by the parties. Orders 1. The application is dismissed 2. Any further submissions in relation to the issue of costs are to be filed and served by 18 April 2008.

Beyond Furniture (Australia) Pty Limited v Virk

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