[40] In a letter to the council dated 6 September 1999 Mr Ylitalo confirmed that he had been required to repair and upgrade the exhaust system over the kitchen hot plates and had engaged Mr Hickmott to perform that work. According to the letter, Mr Hickmott had also been engaged to replace the septic system. Even though the septic system was replaced the work was never finished. The old system was not removed as it was required to be and the cleaning up was never completed. In particular the effluent and the food and grease residues were not emptied from the old grease trap. This resulted in offensive odours in the kitchen and was probably a health risk. According to Mr Hickmott the work was not finished because he was not paid. Neither Mr Hickmott nor Mr Ylitalo did anything about the exhaust fan or ventilation hood.
[41] Mrs Gotze gave evidence that with the amount of cooking being done by early 2000 oil was dripping from the exhaust onto the cook top notwithstanding that she cleaned up oil drips even while cooking was being undertaken. The other serious problem caused by the condition of the exhaust system was the attraction of flies. The vent in the roof was not properly screened and flies were attracted to the kitchen in alarming numbers.
[42] Even the council, which had largely ignored all entreaties by the Gotzes for action to be taken, finally pursued the issue of the kitchen exhaust. On 20 January 2000, following Mr Manley's inspection the council issued a requisition requiring Mr Ylitalo to provide a compliant exhaust system by 18 February 2000. The CEO of the council telephoned Mr Ylitalo on 3 March 2000 to enquire as to the progress in this regard. On 12 May 2000, the council wrote to Mr Ylitalo noting that the requisition had not been complied with and requiring compliance within 14 days. Again, nothing was done. It was now eight months since Mr Ylitalo had written to the council advising that he had engaged Mr Hickmott to rectify the problem.
[43] In January 2000 the Gotzes ceased paying the rent to Mr Ylitalo and instead paid the money into a separate bank account to create a fund from which they could finance the necessary repairs or upgrades. The Gotzes by that time had expended all their own capital. By this time, I am satisfied that the Gotzes had been worn down by Mr Ylitalo's failure to rectify the negligent construction of the premises and the landlord's fixtures and fittings and by the council's apparent indifference to Mr Ylitalo's failure to comply with council requirements in that regard.
[44] When the Food Hygiene Licence under which the kitchen was operated came up for renewal in June 2000, the Gotzes refused to renew it on the basis that the premises were unfit for the preparation of food. While they were criticised for this stance at the trial, I am satisfied that this was a proper position for them to adopt. Even though the council was prepared to renew the licence despite knowing its requisitions concerning health matters had not been complied with, the Gotzes knew, as was the case, that the premises were not in fact fit for the safe preparation of food for sale to the public. The Gotzes had erected signs in the kiosk warning patrons about the health risks and railing against the council's inactivity. I accept that the Gotzes determination to continue the business had effectively gone by this time although financially they were unable to extricate themselves. I am satisfied, however, that this was entirely due to the acts and omissions of Mr Ylitalo. In particular, it was due to his failure to properly construct the premises in the first place and then to rectify the problems when they became apparent.
[45] A notice to remedy breach of covenant was served on the Gotzes by post on 4 July 2000. The breach complained of was the non-payment of rent. On 28 July 2000, Mr Hewitt, Mr Ylitalo's solicitor posted a notice terminating the lease to the Gotzes and requiring them to deliver up possession on 30 July, a Sunday. On Sunday 30 July, Mr Ylitalo broke into the shop and retook possession. In my view, serving a notice by post on a Friday requiring delivery up of possession on a Sunday knowing the notice could not be received by the addressee until at least Monday bears the hallmarks of sharp practice. It does Mr Hewitt little credit. According to his evidence Mr Hewitt advised Mr Ylitalo that on the basis of this notice he was entitled to break into the premises on the Sunday when the Gotzes were absent.
[46] If the above history was not sufficient, on 21 July 2000, the Broadsound Shire Council, having done virtually nothing to enforce the requisition to Mr Ylitalo of January 2000, issued a complaint and summons against Mr & Mrs Gotze for operating the kiosk with a non-complying exhaust system in breach of the Food Hygiene Regulations.
[47] I am satisfied that the Clairview Creek Driveway business failed because of the negligence of the defendant Mr Ylitalo. Mr Ylitalo was aware of the problems with the septic system and with the kitchen exhaust and ventilation hood. The problems arose because he had not constructed them either in accordance with the approvals granted by the Broadsound Shire Council or in a manner which met acceptable standards of quality and utility. It was foreseeable that persons, such as Mr and Mrs Gotze, who leased the premises for the purpose, inter alia, of operating a roadside retail food business would suffer loss in the circumstances. The toilets did not operate adequately, the business required the daily manual disposal of raw sewage, the kitchen smelt of faeces and the extractor fan and ventilation hood in the kitchen were such that food could not be prepared in an acceptably hygienic way. Grease dripped from the stove hood onto cooking food on the hotplates. These matters were the responsibility of the landlord under clause 1(f) of the lease. They were therefore matters within the landlord's control.
[48] The negligence of Mr Ylitalo in relation to the septic system and the kitchen exhaust was not confined to the installation of these defective items. The failure to rectify the defects when they were or ought to have been known to Mr Ylitalo constituted further ongoing negligence. Had Mr Ylitalo acknowledged that the septic system and the kitchen exhaust were defective when the problems first became apparent and had he then brought them into compliance with the building approvals and proper standards, I am satisfied that things would have been very different. The difficulties in the relationship between landlord and tenants would not have arisen. The ongoing expense of dealing with the problems to which the defects gave rise would not have occurred. As a result the business would not have failed.
[49] I am also satisfied that without the negligence, the Gotzes would either still be running the business or would have sold it as a going concern. It was readily foreseeable that if the premises were not built to a proper standard in such fundamental respects and if, when the problems to which this gave rise became manifest nothing was done about the defects, persons using the premises would suffer loss. The Gotzes had no capacity to protect themselves from the harm caused by Mr Ylitalo's negligence. By the time the septic system was replaced the Gotzes lacked the financial capacity to replace the extractor fan themselves otherwise than by withholding the rent and accumulating the amounts withheld. They tried to cover the cost in this way but it resulted in the landlord treating the non-payment of rent as a breach of the lease which entitled him to re-enter and take possession.
[50] The defects in the septic system and in the exhaust fan and ventilation hood were latent defects about which an incoming lessee would not have the means of knowledge. In my view, this additional features make it easy to take this case outside the general proposition that a landlord does not warrant the fitness of the premises for any particular use even if the lease is limited to that use.[3]
[51] Here the claim is in negligence for the landlord's own acts rather than in contract. In any event, clause 1(t) of the lease imposes a positive obligation on the landlord to carry out repairs of a structural nature. The particular deficiencies in relation to the septic system and the exhaust fan/ventilation hood fall into that category.
[52] It is not necessary for me to look in detail at the myriad of lesser complaints made by the Gotzes because of the findings I have made in relation to the septic system and the exhaust fan/ventilation hood. Apart from the need to install tanks of the approved size to which I have referred, the other complaints did not relate to matters which themselves caused material damage to the business.
[53] Having found Mr Ylitalo liable to the Gotzes for damages it remains to assess those damages.
[54] The most recent claim by the Gotzes has been quantified by them in the sum of $958,181.26. This sum is made up of eight separate components. $262,000 is claimed for loss of the business, stock and income and other related losses. The particulars of this claim can be found in the schedule attached to the original statement of claim. The second component is for recovery of the sum of $88,550 being the lease payments made throughout the lease. This is claimed on the basis that the Gotzes occupation of the premises was illegal because no certificate of classification had been issued. $50,000 is claimed for harassment and false accusations. This appears to relate to the claim made by Mr Ylitalo throughout the lease period that many of the complaints made by the Gotzes were their own responsibility because they were for matters which were either covered by the tenants' contractual obligation to maintain or were caused by customers of the business. Another $50,000 is claimed for loss of reputation. $500,000 is claimed stress. $7,088.06 is the cost of the Gotzes acquiring the business. $543.20 seems to be properly categorized as costs of the action.
[55] I am not satisfied that the Gotzes have made out a case for compensation for either harassment or loss of reputation. The particulars of the former claim in paragraph 15 of the current pleading disclose that the damages are sought for asserting that some of the problems were caused by abuse of the septic system by customers of the business and abuse of the bore water pump by Mr Gotze. I accept that although the problems with the septic system were caused by the negligent construction of the system Mr Ylitalo, at least for a substantial part of the period genuinely did not accept that this was the fact. There remains a genuine dispute between the parties as to the cause of the failure of the bore pump. Whether or not harassment can give rise to a tortious claim, the assertion of a genuinely held belief as to the cause of a problem is not in itself actionable. There is no evidence that Mr Ylitalo went out of his way to deliberately cause annoyance to the Gotzes.
[56] The defamation claim is particularised in paragraph 18 of the current pleading. As framed the claim is that because the Gotzes stopped paying the rent and eventually lost the business people erroneously thought they "went broke". Although there is reliance in paragraph 2 of the pleading on the Defamation Act 1889 a claim cannot arise from the facts pleaded. Section 7 of the Act makes the publication of defamatory matter an actionable wrong. Section 5 of the Act requires publication to be by "spoken words or audible sounds, or by words intended to be read either by sight or touch, or by any signs, signals, gestures, or visible representations." In other words, the damaging imputation must arise by reason of some positive act of communication by the alleged defamer. No such act is alleged or proven.
[57] I will now turn to what I consider to be the most substantial of the claims made. This relates to what might be described as the damages flowing directly or indirectly from the negligence I have found and which makes up the sum of $262,000.
[58] The schedule of particulars to which I made reference earlier includes under this head the capital cost of acquiring the business, various amounts spent on repairs and on obtaining reports from tradesmen as well as capital expenses that the Gotzes expected would have passed to the ultimate purchaser of the business. It also includes a total of $18,298.22 which the Gotzes spent on legal costs. These costs included costs arising from the disputed retaking of possession by Mr Ylitalo, costs in relation to the summons issued by the council and costs for the renewal of the lease.
[59] The conventional method of assessing damages in tort is to calculate how much better off the victim of the tort would have been if the tort had not occurred.[4] More recently, in _HTW Valuers (Central Qld) Pty Ltd v Astonland Pty Ltd[5]_the High Court adopted a different approach in relation to assessing damages under the Trade Practices Act 1974. The approach was to determine the "real" as opposed to "market" value of the asset acquired as a result of the misleading or deceptive conduct. In assessing the "real" value the Court was entitled to take advantage of hindsight and take into account things that in fact happened that would not have been ascertainable by the market at the time of acquisition. In that case the outcome was the same whichever method was adopted. In this case the outcome would also be materially the same.
[60] In this case, if the premises had been properly constructed, the Gotzes would have had a saleable asset the value of which would depend on the degree of success they had had in operating the business. The asset would in my view have included all those things which are identified in the schedule as "Should have gone with business."
[61] The evidence as to what the business would have been worth if the septic and kitchen exhaust problems had not occurred is scant. There is evidence from the Gotzes that the business had built up over the time they operated it. This evidence was not disputed. There is evidence of the original purchase price of $82,000 plus stock of $19,472.07. There is also evidence of additions and improvements made over the term of the Gotzes operation and the cost to the Gotzes of those additions and alterations. The cost of the additions or alterations do not, of course, have any necessary correlation to any overall increases in the overall value of the business.
[62] Little assistance is provided by the profit and loss statements. This is because a substantial part of the profit of the business was spent on repairs and maintenance necessitated by the condition of the premises. The profitability of the business was also affected by the problems, particularly in the 1999/2000 financial year. The profit and loss statements do show an increase in turnover in the food side of the business and a reduction in the less profitable petrol side. This is consistent with the evidence given by the Gotzes as to the way the business was progressing.
[63] I am satisfied that the business would have been worth more in 2000 than it was in 1997 if the problems with the septic system and the kitchen exhaust had not arisen. How much more is impossible to calculate on the evidence before me.
[64] Having regard to the evidence to which I have referred I assess the value the business would have had as at July 2000 when Mr Ylitalo retook possession at $90,200. While this is necessarily arbitrary for the reasons I have given, it seems to me conservative to estimate the increase in value at 10% having regard to what was spent on it. In addition, it seems to me that the Gotzes are entitled to recover the money spent on the repairs to the septic system and toilets on the basis that the problem was caused by the defects and not properly to be categorised as maintenance or, alternatively, those expenses fall within the "fair wear and tear" exception. Those expeses comprise the payments to Mr Hagedorn of $1,050 on 08 June 1999 and of $550 on 22 June 1999. The sum of $160 paid to Mr Hagedorn on 22 June 1999 to deal with the sewerage smell in the kitchen was also a direct consequence of improperly connecting the grey water to the septic system.
[65] As I have indicated above, one of the deficiencies in the premises was the failure of Mr Ylitalo to install the rain water tanks of the capacity required by the approved plans. As a result the council required those tanks to be installed by Mr and Mrs Gotze. Appropriately sized tanks were acquired from Betatanks. One of those tanks was removed by the Gotzes when they left the premises. The other was left behind and in my view the Gotzes are entitled to the cost of that tank and pump in the sum of $2,550 and of the installation of that tank being $1,000 or half the cost of installing both tanks. Those amounts were paid to Mr Hagedorn. KC's Dingo Hire were also paid $525 for a hole to place the amenities block tank into. The building was not otherwise high enough for the tank to be effective. There is a claim for the cost of water haulage. Since this postdates the installation of proper sized tanks, I am not satisfied that this amount can properly be charged against Mr Ylitalo. I am not satisfied that the cost of various reports obtained by the Gotzes can properly be categorised as damages. They may or may not be recoverable as costs depending on the nature of the report and the timing. I am not satisfied that the payment of $15,000 to Mr Mylrea in May 1999 for upgrading the caravan park is chargeable against Mr Ylitalo. This seems to me to be an optional expenditure which may have been reflected in the value of the business to a degree. Since the lease contains no express or implied warranty as to the fitness of the premises for the purpose of a caravan park[6] and as no attempt has been made to establish that the caravan park was negligently constructed so as to cause damage to the Gotzes, this sum is not recoverable as a discrete item.
[66] After retaking possession of the premises Mr Ylitalo became gratuitous bailee of the stock in the various fridges. Mr Ylitalo stayed in the premises for some time to prevent the Gotzes themselves going back into possession. During this period he failed to maintain the refrigeration units with the result that stock was lost. In my view that loss was caused by the negligence of Mr Ylitalo in failing to maintain the refrigeration. As well, at least part of the goods seem to have been consumed by Mr Ylitalo while he was in the premises. In any case the perishables were not returned to the Gotzes. The Gotzes have claimed $10,000 without particularisation. When they took over the business stock was valued at just over $19,000. The Gotzes estimate seems reasonable. Since it includes some souvenirs as well as perishable stock I propose to discount the sum to $8,000.
[67] A part of the claim for $262,000, $85,000 was claimed as lost income. This is claimed at $100 per day. There is no support for this quantification although some income was undoubtedly lost. The amount seems to be a gross figure which fails to take into account the cost of goods sold. The profit and loss accounts for the business show gross profit ranging between 12% and 15% of sales. This would mean the loss of sales claimed would translate to a loss of between $10,000 and $12,000 in gross profit. This is probably low because the lost income would be principally in relation to the more profitable food side of the business. As it is impossible to calculate the extent of this loss on the evidence, I propose to allow a relatively nominal sum of $10,000.
[68] As I said earlier, even if I adopted the approach used in the Astonland case here the outcome would be similar. This approach is appropriate if it is claimed that but for the negligence the plaintiff would have acquired the asset. That is not the case. The business acquired by the Gotzes had a "real" value. Its "real" value was the present value of the net income earned over the three years the Gotzes operated the business. Applying 5% tables this would be about $35,000. The damages using this method would have been the difference between the amount paid by the business and its "real" value. In addition consequential losses would be the amounts actually expended during the currency of the lease less the proceeds of any items later sold by the Gotzes and the value of any items retained by them. The loss of profit claim would not have been sustainable at all under this method of assessment of damages. The end result is a figure very similar to the figure I have assessed using what I consider to be the proper method having regard to the particular facts of this case.
[69] In relation to the claim of $262,000 I therefore allow damages in the sum of $112,435.50.
[70] I do not propose to order the repayment of any of the lease payments. The Gotzes occupied the premises throughout the period they paid rent and derived an income thereby. I do not consider that the absence of a certificate of classification has resulted in any loss.
[71] Amounts properly identifiable as costs are not recoverable as damages.
[72] This leaves the claim for stress. In essence this is a claim for personal injury. The medical evidence is sparse. There is no such evidence in relation to Mrs Gotze. In relation to Mr Gotze I have been provided with a short statement from a general practitioner stating that he has been treating Mr Gotze for depression since 2000 and stating that Mr Gotze always attributed his problems to his business concerns. Mr Gotze gave evidence that he suffered from stomach pains, vomiting and loss of sleep. He was prescribed the antidepressant Aropax. He identified the cause as stress from being evicted from the premises and the loss of all his money. Mrs Gotze gave evidence that at around the time of the eviction Mr Gotze became violent towards her. She said this was entirely out of character. I am satisfied that Mr Gotze did suffer from a depressive condition for which he required treatment. I cannot conclude on the evidence that it was a severe condition or that it will not resolve. I am satisfied that having regard to problems Mr Gotze went through and which were entirely brought about by Mr Ylitalo's negligence, it was foreseeable that a person of ordinary fortitude would be likely to suffer a depressive illness. Mr Gotze's presentation throughout the proceedings before me was consistent with a person suffering a significant depressive condition. This includes the occasion I referred to above where he became tearful recounting the history of the matter. I assess the damages for the pain and suffering component of this illness at $7,500.
[73] No point was taken concerning any deficiency by the plaintiffs in complying with the provisions of the Personal Injuries Proceedings Act 2002. The failure to raise the issue would in any event constitute an implied waiver of the requirements of the Act under s18(b).
[74] In the absence of any evidence that Mrs Gotze suffered a similar depression I am not persuaded that any distress she may have felt was such as to constitute an illness. She presented throughout the trial as a woman of considerable strength and stoicism. There was no evidence of any physical symptoms or treatment she received. I am not satisfied that she has made out a case for compensation.