1. Within 14 days the parties must bring in short minutes to give effect to these reasons.
2. Adjourned to directions hearing 9.30 am 17 January 2008.
3. Costs reserved.

1. This proceeding raises an issue which on its face seems straight forward. It is a matter which one imagines has arisen many times before and which arises under a standard form lease, hence the incidence of a particular liability as between landlord and tenant should be clearly and confidently ascertainable. As it is however, the apparently simple question is found upon examination to teem with uncertainty and obscurity.
2. Ms Chen executed a lease in the Law Institute standard form (May 2003 revision) letting premises known as the Panmure Hotel, 8801 Princes Highway, Panmure, to Panmure Hotel Pty Ltd for a term of five years commencing 18 August 2003. Ms Chen is the applicant in this proceeding and Panmure Hotel is the respondent.
3. Mr Keen, the Municipal Building Surveyor of the Moyne Shire (the local government authority for Panmure) wrote to Ms Chen as owner of the hotel building drawing her attention to provisions of the Building Regulations 2006 requiring the installation of 'hard wired smoke detectors in certain existing residential buildings' which included buildings designated as Class C which included the residential parts of hotels. Mr Keen said:

Regulation 709 [dealing with hard wired smoke detectors] must be complied with by the owner of the building and Council staff will shortly be undertaking random audits to confirm that such work has indeed been carried out.

1. The letter also referred to a requirement effective from 14 June 2009 for buildings constructed prior to 1 July 2003 to be fitted with 'a fire sprinkler system'. The letter referred to certain exemptions and referred the recipient to Mr Keen or Mr Lucas for further information. According to the agreed statement of facts in this proceeding:

On the advice of the Moyne Shire Council the applicant [that is Ms Chen] engaged Neil Povey Pty Ltd to prepare an Essential Safety Measures (ESM) Maintenance Determination ('the report') for the premises.

1. There was nothing in the letter of 24 July which either required or recommended that Ms Chen take this action and presumably the recommendation to her was made during the subsequent consultations with Shire officers. According to Mr Povey's report:

According to the requirements of the Building Act 2006, there are three items which are mandatory for alteration and these are:

He referred to hard wired smoke alarms, required exits and emergency procedures. He then went on to recommend a number of other items.

1. Following an unsuccessful mediation convened by the Small Business Commissioner on 20 July 2007 Ms Chen filed the application commencing this proceeding. She sought determinations that the tenant be obliged to carry out the works referred to by Mr Povey in his report and that the tenant bear the cost of the report prepared by Mr Povey. The application also sought a determination:

That the tenant [that is Panmure] bear the costs of the repair works done to the wooden floor at the bar in the leased premises.

1. At the hearing of the proceeding nothing was said with respect to that matter and so I will put it to one side. On 9 August solicitors acting for Panmure filed a counterclaim seeking a determination that Ms Chen was responsible for carrying out the works detailed in Mr Povey's report. The counterclaim also sought compensation from Ms Chen in the sum of $6,000

for her failure to take reasonable steps to prevent or stop significant disruption within the landlord's control to the tenants trading at the retail premises.

Waremac Refrigeration and Electrical Contractors tax invoice in the sum of $1,508.10 and desist from attempting to pass liability to the tenant.

1. Again nothing was said as to these two latter matters in the course of the hearing and there is no evidence relative to them and no mention of them in the statement of agreed facts, hence I will put those matters to one side as well.

1. Mr Lim, Solicitor for the applicant relied upon a number of provisions in the lease which he said placed responsibility upon Panmure to comply with the matters raised in Mr Povey's report. First, he noted that Clause 2.1.13 of the lease provided:

2.1.13 Comply with all laws relating to the use or occupation of the premises.

1. He also referred to Clause 3.4.2 of the lease which provides:

3.4.2 To carry out structural repairs or make payments of a capital nature unless the need for them results from -

(a) negligence by the tenant or the tenant's agents, or

(b) failure by the tenant to perform its obligations under this lease, or

1. He also referred to Clause 2.2.7 which provided:

2.2 The tenant must not, and must not let anyone else -

2.2.7 Do anything which might affect any insurance policy relating to the premises by causing -

1. According to Mr Lim the provisions of Clause 2.2.7 prohibited not only positive acts by the tenants but also omissions which had the results described. He submitted that for the tenant to fail to carry out the recommendations in the Povey report would prejudice the insurance of the premises in one or more of the ways referred to in Clause 2.2.7.
2. Mr Lim also referred to and relied upon special additional provision 1 of the relevant lease which in fairly lengthy provisions required the tenant to comply with the requirement of a number of statutes including the Health Act 1958, the Lotteries, Gaming and Betting Act 1966, the Police Offences Act 1958 and the Summary Offences Act 1966 'and also any other Acts of Parliament and also any rules, by-laws and regulations affecting or relating to the premises ...'. He noted the proviso to that clause which stated:

Provided that the tenant shall not be required to carry out structural repairs or make payments of a capital nature in any circumstances other than those described in Clause 3.4.2 of the Conditions.

1. Once again Mr Lim emphasised that the matters dealt with in the Povey report only became relevant to these premises because they were used as a hotel; hence he submitted that in accordance with the scheme laid down by Special Condition 1 and Clause 3.4.2 the obligation to carry out these works even although they were capital works rested upon the tenant.

1. Mr Collopy, Solicitor for Panmure submitted first, that aside from the obligation apparently imposed by Regulation 709 of the Building Regulations to install hard wired smoke detectors, all other elements of the Povey report should be regarded as purely advisory. He referred to Regulations 1201 to 1218 of the Building Regulations and contended that the other matters became mandatory only if there was a 'maintenance determination' and in the present case there had been none. Mr Collopy noted that Item 15 of the schedule of the lease stated the permitted use for the premises under the lease to be as a hotel. This was clearly what the parties contemplated. He submitted that insofar as any works were mandated by the Povey report, those works were necessitated by the Building Regulations and not by any use made of the premises by his client. He submitted that Section 41 of the Retail Leases Act 2003 would avoid any provision of the lease which had the effect contended for by Mr Lim. He relied on Section 251 of the Building Act 1993:
   1. Occupier or registered mortgagee may carry out work

(1) If the owner of a building or land is required under this Act or the regulations to carry out any work or do any other thing and the owner does not carry out the work or do the thing, the occupier of that building or land or any registered mortgagee of the land or the land on which the building is situated, may carry out the work or do the thing.

(a) recover any expenses necessarily incurred under subsection (1) from the owner as a debt due to the occupier; or

(b) deduct those expenses from or set them off against any rent due or to become due to the owner.

(a) recover any expenses necessarily incurred under subsection (1) from the owner as a debt due to the mortgagee; or

(b) give notice in writing of those expenses to the mortgagor.

(4) On the giving of notice under subsection (3)(b), the expenses are deemed to be added to the principal sum owing under the mortgage.

(5) If the mortgagor is not the owner the mortgagor may recover the amount deemed under subsection (4) to be added to the principal sum from the owner as a debt due to the mortgagor.

(6) This section applies despite any covenant or agreement to the contrary.

1. The effect of this provision, he said, was to place the ultimate liability for any necessary works as between landlord and tenant upon the landlord and not upon his client.
2. Mr Collopy submitted that since there was no evidence on the subject of insurance so no reliance could be placed on Clause 2.2.7.

1. Mr Lim contended that Section 41 of the Retail Leases Act only prohibited a landlord from requiring a tenant to pay for capital works carried out by the landlord. Sub-section (2) made clear that it did not prohibit or diminish the effect of a requirement in a lease that the tenant carry out capital works. He submitted that there was no obligation upon the landlord absent and express covenant in the lease to provide premises which were fit for the permitted use. He referred to Carbure Pty Ltd v Brile Pty Ltd [2002] VSC 272 per Balmford J.

1. I can deal immediately with a number of short matters. First, no reliance or effect can be given to Clause 2.2.7 of the lease in the absence of any evidence whatsoever as to the insurance status of the hotel. Secondly, insofar as the applicant seeks to recover the cost of the Povey report which is said to be $1,387.32 paid by her in October last year, no basis has been shown for this amount to be paid by the tenant. Whilst reference has been made to a number of regulations which require certain works to be carried out, my attention has been drawn to no regulation which obliges either a lessor or lessee to obtain a report, hence the claim for the cost of the report must fail.
2. The overall shape of the lease appears to be to require the tenant to attend to a variety of statutory compliance matters but to relieve the tenant of any obligation to carry out structural repair or make payments of a capital nature. Here, what is sought is a determination that the tenant carry out certain works and so the issue of payments of a capital nature need not detain us.
3. This was the pattern of the lease considered by the English Court of Appeal in Granada Theatres Limited v Freehold Investment (Leytonstone) Ltd [1959] Ch 592. The lease in this case went further not merely exonerating the tenant from carrying out structural repairs but directly imposing the obligation to carry out any such necessary repairs upon the landlord. The lease in question there was entered into as long ago as 1941. So in the context of public health and under the New South Wales Public Health Act when Brereton J asked in 1967 what the phrase 'defect of a structural character' meant in that statute he said:

Having regard to the whole tenor of the legislation, it seems to me that what the legislature is having regard to in making the owner responsible for defects of this nature are things for which the owner of a building, as distinct from a new occupier or perhaps a stranger, is responsible.

Hampson v Clyne (1967) 14 LGRA 125, 127

1. The principle then that tenants should not be liable for making structural alterations or carrying out structural repairs seems to be long established and well recognised. Nevertheless, if Mr Lim's submissions as to the true operation of the present lease are correct, the apparent exoneration of a tenant under the standard form lease and the obligation to carry out structural repairs is illusory. After all, repairs and alterations to demised premises are always required by the fact that the premises are being put to some kind of use by the tenant. If they were simply standing empty the sort of statutes which require alterations and repairs to be carried out would simply be inapplicable.
2. I cannot accept the submission put by Mr Collopy that in the present case any need for works flows from the statutes or the regulations rather than from the use of the building. In any event which occurs one will be able to find a number of causes. In a broad sense, anything which happens in the course of an individual's day can be said to have been 'caused' by the fact that he or she elected to get up in the morning rather than merely lie in bed. The law adopts a 'commonsense' approach to determine which causes are to be regarded as legally significant. The fact that a particular event can be regarded as caused by that event A does not prevent it also being regarded as having been caused by event B Medlin v State Insurance Commission (1995) 184 CLR 495. So in the old days of Common Law running down litigation the jury was asked as its first question 'was there any negligence on behalf of the defendant which was a cause of the plaintiff's injury' (emphasis added).
3. What then are 'structural repairs'? Jenkins LJ in the Granada Theatres case commented upon the lack of an authoritative judicial exposition of this expression as at 1959. Little has changed since. Reference to standard works such as Strouds Judicial Dictionary and the 'words and phrases' section of the Australian Digest provides little enlightenment as to the expression 'structural repairs'. In Arlone Pty Ltd v Teller Properties Pty Ltd BC9507530 an unreported decision of Lockhart J sitting in the Federal Court of Australia (7 February 1995) His Honour considered a situation to some degree similar to the one which confronts us here. The lessor of a motel received a notice to carry out certain works pursuant to Section 317D of the New South Wales Local Government Act for the prevention and suppression of fire. The relevant lease made the tenant liable to comply with statutory notices except where they required 'structural alterations' to be carried out. The tenant formed the view that the works in question were structural alterations and went on rent strike when the landlord did not carry out the work. Lockhart J concluded that the works did require structural alterations. He carried out a lengthy review of the authorities but concentrated mainly upon distinguishing between alterations and repairs, a line of analysis which is of limited assistance here where the works which the lease exonerates the tenant from carry out are themselves described as 'repairs'.
4. In Reilly v Liangis Investments Pty Ltd [2000] NSWSC 47 Young J (as he then was) considered the operation of a covenant to repair which included a proviso stating:

Nothing herein shall impose any obligation upon the lessee to do any work of a structural nature except such as may be occasioned by the act, neglect or default of the lessee or by its use or occupancy of the demised premises.

1. After referring to Hampson v Clyne His Honour said:

[24] That what Clause 9(a) contemplates is that the tenants have the use of the building, but that the wholeness of the building is a matter for the landlord alone. Anything that interferes with the stability of the whole or involves interference with structural members is something for the landlord. Other work is for the tenants.

1. Regulation 709 under the Building Regulations 2006 (SR No. 68/2006) appears to be the basis of the alleged obligation to provide hardwired smoke alarms. It is referred to in the letter from Mr Keen from Moyne Shire to the applicant. The regulation refers to certain Australian standards. I was given no explanation as to precisely what was entailed in the installation of hard wired smoke alarms. As best I can understand what makes a smoke alarm 'hard wired' is the requirement in Regulation 709(2)(a) that it be 'powered from the mains electricity power supply, if there is such a supply to the building'. The effect then seems to be to attach in various places certain pieces of apparatus which are connected to the mains power supply. Applying the formulation adopted by Young J. in Reilly's case and quoted above, there would appear to be no impingement on the stability of the building structure or anything entailing interference with the structural members in the building. The work in question does not appear to constitute either structural repairs or to be of a structural nature.
2. The second class of work referred to in Mr Povey's report and designated by him as mandatory in accordance with Regulation 1218 which requires the occupier of inter alia, a Class 3 building (it is common ground that the hotel in question is a Class 3 building )to:

(c) Any paths that travel on the allotment from the exits to a road

are required to be provided in relation to that building or place are maintained in an efficient condition and kept readily accessible, functional and clear of obstruction so that egress from the building or place is maintained.

1. Mr Povey required a large number of works to be carried out to meet this requirement. These entailed the replacement of one entire staircase, the provision of fire resistant linings in various places and so forth. As previously noted the distinction between structural repairs and non-structural repairs is difficult to draw. In accordance with the principle enunciated by Young J (as he then was) in Reilly I believe that these works are so extensive as to be regarded as structural. In particular I believe a staircase, even though not part of the four walls and roof, should properly be regarded as part of the structure of a building.
2. The final mandatory matter raised by Mr Povey is a requirement that 'suitable emergency procedures are to be developed for the building'. Mr Povey does not in this part of his report refer to a particular section in the Building Act or the regulations. Neither Mr Lim nor Mr Collopy said anything as to what regulation or section could render these procedures mandatory as Mr Povey asserts or not. I am in the circumstances unable to make a determination as to whether Mr Povey is correct in asserting that these matters are mandatory. Whatever they are however, it is clear that they do not involve structural repairs. If Mr Povey is correctly recording the effect of the building regulations in this part of his report then in my view the effect of the various covenants referred to by Mr Lim in support of his client's application render the respondent tenant liable to comply with those requirements.
3. I should note a submission made by Mr Collopy that no part of Mr Povey's report should be regarded as 'mandatory' because the report as a whole does not constitute a 'maintenance determination' for the purposes of Regulation 1202 of the Building Regulations 2006. I accept that to the extent that Mr Povey's report is regarded as the source of an obligation to carry out works then it is only if the Povey report enjoys this status that its requirements are mandatory; however the regulations themselves and of their own force independently create obligation. For instance Regulation 1218 imposes an obligation on the occupier to retain certain standards with regard to exits from the hotel.
4. The balance of the contents of the Povey report are recommendations. No material was placed before me that would indicate any obligation to implement these recommendations by force of any statute or regulation. Hence the covenants relied upon by Mr Lim did not in my view have the effect of requiring to be done any of the recommendations (that is the matters not stated to be mandatory) in the Povey report.
5. To sum up my reasoning so far, the provision of hard wired smoke detectors appears to be a mandatory requirement imposed by the Building Regulations. The covenants in the lease would appear to impose the obligation of compliance with this requirement upon the respondent tenant unless the compliance entailed the carrying out of structural repairs. For reasons previously given the necessary works would not amount to structural repairs.
6. The works with respect to exits to comply with Regulation 1218 of the Building Regulations 2006 are a mandatory requirement but do entail the carrying out of structural works or repairs, hence on the true construction of the lease, the tenant is exonerated as between itself and the lessor from liability to comply unless the requirements arise from the 'use' of the building by the tenant.
7. Finally, the requirement for emergency procedures if it is imposed by statute or regulations, is as between lessor and lessee, the responsibility of the lessee. In accordance with the terms of the lease there is no question of compliance with these procedural requirements constituting structural repairs.
8. The balance of the Povey report being mere recommendations do not identify steps which the tenant is obliged at the suit of the lessor to carry out.
9. With respect to the hard wired smoke detectors the result seems to be that the lease places the responsibility for compliance as between lessor and lessee upon the lessee. This is a matter of compliance with statutes and regulations and the works are not structural works. Nevertheless, Section 251 of the Building Act 1993 appears to be relevant. The section is quoted above.
10. Regulation 709(8) of the Building Regulations imposes the obligation of compliance relative to the smoke alarms upon the 'owner of the building'. Regulation 706 defines owner in a manner which identifies for present purposes Ms Chen to the exclusion of the respondent lessee. The effect of Section 251 of the Act is that the lessee can carry out the work and recover its outlays as a debt from Ms Chen. The section is said to apply 'despite any covenant or agreement to the contrary' (Section 251(6)). The result would appear to be that if Panmure Hotel were obliged by a determination of this Tribunal to carry out the works relative to the hard wired smoke alarms it could recover its outlays from Ms Chen. There is nothing in Section 251 which would preclude its operation where an occupier carried out the works in question under the compulsion of a Tribunal determination. It would in my view be inconsistent with the law's abhorrence of circuity for me to make an order which purports to impose the obligation of carrying out these works upon the lessee when the Building Act itself has clearly imposed the obligation upon the lessor and given the lessee the right to recover the cost of carrying out the works as against the lessor despite any provision in the lease to the contrary. Hence no determination should be made against the lessee with respect to the smoke detectors.
11. The matters relevant to the emergency exits raise even more perplexing questions. The Building Regulations impose this obligation not upon the lessor but upon the lessee as occupier, hence Section 251 of the Building Act would not be available to trump the provisions of the lease. The works required are as previously noted 'structural' works. The requirement for these works derives from the use of the premises by the tenant. As I noted above the breadth of this provision as a proviso to the exoneration of the tenant from the requirement to carry out structural works bids fair to make the exoneration entirely illusory. Nearly every piece of work that needs to be done needs to be done because the premises in question are being used at all or used for a particular purpose.
12. With some hesitation I conclude nevertheless that the exoneration of the tenant from the obligation to carry out structural works was not intended to be illusory and that the reference to the tenant's 'use' of the building was not intended to contemplate the tenant's ordinary usage in accordance with the permitted use covenant in the lease. What is contemplated rather is that the tenant would be responsible for capital works necessitated by some special or excessive use of the premises by the tenant. I accept as was submitted by Mr Lim that there is no obligation on a landlord absent special statutory provision or express covenant to provide premises that are fit for the permitted use; but it is another thing altogether to say that the tenant is obliged to undertake capital works to render the premises fit for a particular purpose in accordance with regulations. It follows therefore that in my view the tenant is not obliged at the suit of the lessor to undertake work with respect to the exits; nevertheless, the regulations appear to impose a public law duty upon the tenant to carry out those works.
13. I reject any suggestion that matters in the Povey report which are mere recommendations can in accordance with the terms of the lease or any other legal principle constitute an obligation on the tenant to carry out or implement the recommendations.
14. As to the issue of emergency procedures, subject to it being demonstrated that they are rendered mandatory by a statute or by regulations the lessor is entitled under the terms of the lease to require the tenant to make compliance.

1. In view of the complexity of this determination I will leave it to the parties to formulate the orders which they say will give effect to my reasons.

1. I have heard no submissions on the question of costs and so I will reserve them.