Bretair Pty Ltd v Cave

Bretair Pty Ltd v Cave - [2013] VCAT 1808 - VCAT 2013 case summary — Zoe

[20]

Further evidence was given by Alexander Micevski, the Tenant's National Operations Manager, that the condition of the Pavement materially and adversely affected the running of the Tenant's business. That evidence was also not challenged.
Mr Northrup, of counsel, appeared on behalf of the Tenant. He submitted that the Pavement was a structural element of the Premises and that Clause 6.4 of the Lease placed a positive obligation on the Landlord to maintain or repair the Pavement so that it remained in a sound structural and watertight condition.
Mr Northrop further contended that s 52 of the Retail Leases Act 2003 imposed an obligation on the Landlord to maintain the Pavement in at least the same condition as it was at the commencement of the Lease in April 2010.
By contrast, Mr Antill of counsel, who appeared on behalf of the Landlord, submitted that Clause 6.4 did not apply to the Pavement. In that regard, it was said that on a proper construction of the term, it only applied to the physical buildings within the Premises and not the Pavement and surrounding land also forming part of the demise. In that sense, it was argued that the term made no commercial sense when applied to the Pavement, given that it was an unsealed gravel surface without any of the structural elements usually associated with three dimensional buildings.
In addition, Mr Antill argued that the expenses incurred by the Tenant in repairing the Pavement were expenses fairly incurred pursuant to the Tenant's maintenance obligations under Clauses 3.2, 3.3.5 and 3.3.18 of the Lease. Mr Antill further submitted that to the extent that the Pavement required remedial work, such work resulted from a failure on the part of the Tenant to fulfil those maintenance obligations or alternatively, because of the Tenant's use of the Premises.
In answering the Tenant's claim based on s 52 of the Act, Mr Antill submitted that the Tenant can only rely upon s 52 of the Act in relation to those expenses incurred during the current term of the Lease, which commenced on 1 April 2010. In addition, he contended that any assessment of the condition of the Premises was to be by reference to the condition of the Premises at the time of the renewal, being 1 April 2010 and not at some earlier date, even though the Tenant had enjoyed continuous possession since 2000.
Mr Antill argued that the evidence clearly establishes that the condition of the Pavement as at the time of the commencement of the Lease was not perfect and was in need of remedial work. Therefore, he submitted that the Landlord was under no obligation to effectively improve the condition of the Pavement from the condition that it was in at the time of the renewal.
Mr Antill submitted that this equally applied to the operation of Clause 6.4. Therefore, he argued that Clause 6.4 did not require the Landlord to undertake work of 'improving' the condition of the Premises from what existed at the time of the lease renewal. At best, the clause merely imposed an obligation to maintain the Pavement in a structurally sound condition consistent with the condition at the time of renewal.
Mr Antill further contended that even if it was found that the condition of Pavement had deteriorated since the date of renewal that did not necessarily make the Pavement structurally unsound. He submitted that vehicles were still able to travel across the Pavement, albeit at a slower speed and with greater caution.

[29]

Clause 3.2 of the Lease requires the Tenant to keep the Premises in the same condition as at the start of the Lease unless its condition deteriorates as a result of fair wear and tear. Consequently, Mr Northrop submitted that Clause 3.2 specifically excluded from its scope damage caused by fair wear and tear.
Clause 3.2 also is subject to Clause 3.4. Clause 3.4 is expressed in the negative, in that it does not specifically direct the Tenant to do anything but rather, operates to exclude liability to make good the Premises, subject to the three exceptions set out in sub-clauses 3.4 (a), (b) and (c).
Therefore, Clauses 3.2 and 3.4, when read together, require the Tenant to repair the Premises so as to ensure that they are kept in the same condition as at the start of the Lease unless:
- (a) the deterioration results from fair wear and tear; or
- (b) the making good of the Premises would result in the Tenant carrying out structural repairs or making payments of a capital nature unless those structural repairs or capital payments arise because of:
  - (i) negligence by the Tenant;
  - (ii) failure by the Tenant to perform its obligations under the Lease; or
  - (iii) the Tenant's use of the premises.
Mr Antill submitted that the effect of Clause 3.4 is that if the damage is caused by the Tenant's use of the Premises, irrespective of fair wear and tear, the Tenant is nevertheless required to restore the Premises to a condition commensurate with the condition as at the commencement of the Lease. In that sense, he argued that Clause 3.4 limits the breadth of the fair wear and tear exception found in Clause 3.2.
I do not accept that submission. In my view, the phrase tenants use of the premises is to be read in context such that it means use other than use resulting from fair wear and tear. For example, where a tenant affixes installations to the demised premises, which then requires some form of structural work or repair. In that example, the repair cannot be said to have arisen due to negligence or a breach of the lease covenants on the part of the tenant, nor can it be said that the repair results from fair wear and tear. However, the repair clearly arises because of the tenant's use of the premises.[5]
Therefore, I accept Mr Northrop's submission that, in the present case, if the damage to the Pavement is due to fair wear and tear, the obligation under Clause 3.2 to restore the Pavement to its pre-lease condition does not apply. Two questions then arise for consideration:
- (a) Is the deterioration of the pavement due to fair wear and tear?
- (b) If the Tenant is under no obligation to repair, does that obligation fall to the Landlord?

[47]

In my view, that statement makes no sense when one considers the type of Pavement in question. In particular, the Pavement will never be watertight, given that it is an unsealed, porous, gravel surface. Moreover, although it forms part of the 'structure' of the Premises, there is no suggestion of any risk that it will collapse or subside to a point where its structural purpose; namely to support the carriage of vehicles, is compromised to a point where that can no longer occur.
Therefore, I do not accept Mr Carlin-Smith's evidence that the Pavement is not structurally sound. In particular, I am of the view that even if the Pavement is 'littered' with potholes, those potholes do not make the Pavement structurally unsound, albeit, that customers may have to adjust their driving habits to accommodate the poor condition of the Pavement. In fact, given that the Pavement has no structural elements, in the sense that would ordinarily be associated with a three dimensional building, it is hard to imagine how the words sound structural condition really apply to the Pavement. The situation would certainly be different if the word structural was not included in the clause, so that the obligation was to keep the Pavement in a sound condition. In that case, the presence of potholes or other imperfections might trigger an obligation on the part of the Landlord to repair. However, the words of Clause 6.4 are confined to issues concerning the structural integrity and watertightness of the Premises and not its aesthetic or useable qualities outside of those two parameters.
In my view, there is merit in the argument advanced by Mr Antill that Clause 6.4 was never intended to apply to the Pavement and its purpose was only concerned with the condition of the physical buildings forming part of the Premises. This conclusion is reinforced by the fact that the clause, insofar as it purports to relate to the Pavement, is unworkable if it is to be construed to require the Pavement to be kept watertight. In particular, it was never watertight, nor could it ever have been intended to be watertight, given the material used in its construction.
This begs the question: How can you keep the Pavement watertight when it never was nor could have been, watertight? The definition of watertight implies keeping water out (or in) of something.[10] For example, a watertight structure or vessel. This seems to be consistent with the use of the word in the context of a building. On the other hand, the word waterproof is defined as not penetrable by water, which I consider to be a more appropriate word when used in the context of the Pavement.[11]
In Tillmans & Co v SS Knutsford Ltd,[12] Farwell LJ said:

[52]

That then leaves the claim based on s 52 of the Act. In order to determine this aspect of the Tenant's claim, one must consider what the condition of the Pavement was at the time when the parties entered into the Lease. In that respect, Mr Antill referred me to Ross-Hunt Pty Ltd v Cianjan Pty Ltd,[16] where Deputy President Macnamara (as he then was) confirmed that the comparator for the purposes of s 52, is the most recent renewal of the Lease and not the original lease. That proposition was not challenged. Accordingly, I will proceed on that basis.
The Lease was renewed on 1 April 2010. Mr Antill submitted that the clearest indication as to what was the condition of the Pavement as at that date is the evidence of Alexander Micesvski concerning his site visit in June 2010. In his witness statement dated 12 March 2013, he states:
1. By about June 2010 the situation at the Premises had worsened and further potholes had developed in the Pavement (including the entry to the Premises).
2. The situation concerning potholes in the Pavement was a serious enough issue for me to personally visit the Premises to inspect them for myself and otherwise observed their impact on the operation of the service station and roadhouse which I did on 7 June 2010. When I visited the Premises and observed the situation for myself I was sufficiently concerned to take some photographs and to immediately send e-mails advising of the seriousness of the problem. I also distinctly remember while I was on the site that day fielding verbal complaints from customers (car and truck drivers) of the service station about the poor condition of the Pavement and in particular the potholes. There were so many potholes that were impacting upon the operation of the service station and roadhouse that I took it upon myself to personally count them all and in total I counted 57. Emails dated 7 June 2010 that I had sent attaching some photographs of potholes is in the Bundle at pages 65-70. In particular, in my email sent at approximately 12:17pm I noted:

At a glance

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Decision date

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Judgment (75 paragraphs)

Parties

Legislation Cited (2)

Cases Cited (2)

Bretair Pty Ltd v Cave (No 2) (Retail Tenancies) [2013] VCAT 1808 (24 October 2013)