CLAMBAKE PTY LTD -v- TIPPERARY PROJECTS PTY LTD [No 3] [2009] WASC 52 | Case summary

CLAMBAKE PTY LTD -v- TIPPERARY PROJECTS PTY LTD [No 3] [2009] WASC 52 | Case summary | Zoe

[281]

'Outgoings' are the total amount expended or expendable by the Lessor (including provisions and adjustments) appropriate for the Lease Year in respect of the whole of the Building (and not otherwise the direct responsibility of the Lessee) and being:

(1) Cleaning of the Common Areas and Signs;

(2) Gardening, Landscaping and Maintenance of the Common Areas reasonably incurred by the Lessor;

(3) Insurance including insurance on all buildings, structures of the Centre for their replacement value (which value shall be reviewed from year to year) against fire, fusion, earthquake, lightning, storm, tempest, rainwater and other damage including flood, explosion, malicious damage, riots, civil commotion and strikes, impact by vehicles including the insured's own vehicles, impact by aircraft and articles dropped therefrom, leakage, removal of rubble and debris and Public Risk Insurance with crossed liabilities effected by the Lessor on behalf of itself and all other Lessees or occupiers of the Centre: Workers' Compensation, Common Law and Statutory Liability Insurance in respect of employees of the Lessor employed on, in or about the Common Areas and Loss of Rent insurance and any other insurance relating to the Lessor's ownership or interest in the Centre;

(4) The maintenance, repair and replacement of all fire equipment, which expression shall extend to and include all stop-cocks, hydrants, alarms, drench curtains, fire sprinkler systems, hoses, extinguishers or other fire prevention equipment in Common Areas of the Centre;

(5) Lighting of Common Areas and Signs;

(6) Caretaking and Security expenses (if any) reasonably incurred by the Lessor including the cost of the installation and maintenance of all devices and equipment used for the purposes of caretaking and security;

(7) Garbage and waste disposal from areas external to the Leased Premises;

(8) Air Conditioning Running Costs;

(9) Management fees;

(10) All disbursements or costs of the same nature as those mentioned in the preceding paragraphs (1) to (9) which are incurred by the Lessor in the running of the Centre or any extension thereto and which are not separately assessed against a Lessee of the Centre.

[284]

65 This brings me immediately to the issue of the proper construction of the holding over clause, 13.08. Clambake contends for a construction to the effect that the clause converts a lease for a term of years to a monthly tenancy terminable on notice, and converts an obligation for the payment of an annual rent to an obligation to pay monthly rent, being 1/12th of the 'annual rent' payable at the date of the expiration of the term. The monthly rent payable is not merely 1/12th of the annual rental but 1/12th of the aggregate of the annual rent, rates and taxes and insurance premiums payable so that in the holding over tenancy the actual monthly rent is greater than 1/12th of the annual rent payable before because it includes those further components. The reason for this, submitted by Clambake, is that rates and taxes and insurance premiums are generally payable annually and, if not brought to account in a calculation of the monthly rent, there would be a prospect that a holding over tenant continuing in possession for less than a year might escape an obligation to make contributions to those particular outgoings if the tenancy ended before arrangements had been made to estimate the forthcoming year's outgoings and include components of them in the charges for outgoings as was the practice during the term of the lease. Clambake, by its submissions, stresses that the provision, in cl 13.08, that the holding over tenancy should be 'otherwise on the same covenants, conditions and stipulations mutatis mutandis' as are contained or implied in the lease means that all the other covenants in cl 3 in relation to liability to pay for, or contribute to, the various classes of outgoings, and for that matter all other terms in the lease, are adopted and applied with only the modifications necessary to render them applicable to a monthly tenancy rather than to a lease for a term of years. On this approach the rent and other moneys payable under the holding over tenancy would include all the components of outgoings which had been payable by the tenant during the term and those obligations would be subject to the other provisions of the lease, including the power of rent review which, as already noted, was expressly recognised as being applicable during the holding over period; see the Second Schedule to the lease, exhibit 4.

[387]

148 The position of Tipperary and Mr Anderson in relation to this part of the rent claim is to submit that, upon its proper construction, cl 3.08 only permits the recovery of proper costs both in quantum and in character. So far as concerns quantum, Tipperary and Mr Anderson submit that the costs may not exceed an amount recoverable upon taxation under the provisions of the Legal Profession Act 2008 because, if they were required to pay or contribute to those costs, each would each be a 'party charged' entitled to have the costs taxed pursuant to s 228(2)(a) of the Legal Profession Act 2008. They submit that they were not, until an advanced stage of this trial, provided with any indication of the quantum of the costs sought to be recovered and have been precluded from exercising their asserted right to have the costs taxed. So far as concerns the character of the costs claimed, Tipperary and Mr Anderson submit that, for two reasons, there is nothing to demonstrate that the costs claimed relate to legal advice or services rendered in relation to the action for the recovery of rent and other moneys due under the lease for established defaults. The first is that they assert that a significant part of the costs may be related to the pursuit of unjustifiable claims which, when determined by this trial, will be revealed to show that Tipperary was not in breach. Into this category Tipperary consigns: the claims for the recovery of the outgoings which it maintains are not chargeable in view of its asserted construction of cl 13.08; the claims for the increased rent said to be payable by the September and October 2008 purported exercise of the rent review power; the claims for GST; and penalty interest. The second reason asserted by Tipperary is that a significant proportion of the costs claimed may relate to fees charged for Clambake's defence of the fire claim which, even if the fire claim were to fail, would not be costs incurred for the purposes contemplated by cl 3.08 of the lease.

[582]

300 During the time Clambake was negotiating with Sectam for the purchase of the Claremont property in 1988, a stage was reached where Clambake decided that, before completion, a number of alterations should be made to the premises and particularly to the interior area which had been occupied by Hearnsteads. It is possible that this may have coincided with the arrangements negotiated by Clambake for Actus to take a lease of part of the former Hearnsteads area but, for whatever reason, demolition of a number of the walls, partitions, offices and other dividing walls in the Hearnsteads area was desired. This led to a collateral agreement being reached between Mr Cohen, presumably on behalf of Clambake, although this does not really matter, and Mr Bacich on behalf of another one of his companies, Consolidated Midland Pty Ltd (Consolidated Midland). The agreement was apparently reached at a meeting between Mr Cohen, Mr A Gianotti and Mr Miles Glenville for Consolidated Midland and was followed by a letter from Consolidated Midland, signed by Mr Bacich, to Mr Cohen dated 6 June 1988 (exhibit 368). For this additional work Consolidated wished to be paid $24,500 simultaneously with the settlement of the purchase of the property by Clambake. The work to be done included demolition and removal of all the new brick partitioning with the exception of the dividing wall between the storeroom and the showroom, removal and reinstating of the ceiling at one continuous level, reinstating electrical work and airconditioning, repainting, and relaying of carpets. The only reason that exhibit 368 was introduced into evidence was to explain the charge of $24,500 included in the payments made by Clambake at settlement and no attention was given to which was the new brick partitioning that was to be demolished or removed or which was the dividing wall between the storeroom and the showroom which was to remain. Nothing of consequence would appear to turn on this as, by that time, in view of Mr McNamara's evidence, it is obvious that the apertures in the north-south wall already existed and no thought seems to have been given to their potential significance or to whether they should be bricked up.

[732]

383 The question of what may have happened in the event of discovery of the non-compliant wall and the unauthorised apertures arises not just in relation to the situation as it existed in 1988, but it is a continuing question which hovers, little addressed, for all periods from 1988 up until the fire in December 2002. Despite the absence of evidence on the topic, I consider that I may reasonably infer that, if the discovery of the unauthorised apertures in the north-south wall, and the deficient roller doors, had come to the attention of the authorities and their implication for the inadequacy of the fire protection system had been appreciated, the authorities would have insisted that the situation be remedied. What remedies would have been available? Again, there is no evidence on the subject but, also as a matter of inference, it seems logical to infer that the authorities would have insisted either that the integrity of the fire wall be restored by blocking up the apertures in some adequate way or, otherwise, that a fire sprinkler system be installed as the UBBLs required for floor areas greater than 3,500 sqm. Faced with such alternatives, and the large expenditure and disruption which would be expected to follow if a new sprinkler system were to be installed, it seems very probable that the result would have been that the apertures would have been sealed up. That this could be done by them being bricked up is an obvious possibility because, indeed, the post fire photographs show that that is what was subsequently done. Although I have some hesitation in making any findings on an aspect of the case which was little, if at all, canvassed in the evidence, it seems to me that the probabilities are very much in favour of the response to the discovery of the non-compliance of the fire protection systems being orders from the authorities leading to the bricking up of the apertures in the north-south wall and the restoration of that wall (apart from the door at the carpark end) to a four hour fire resistant state.

[792]

Important to me was that the showroom, I thought, had air-conditioning to ensure that the collection was kept at a reasonable temperature and humidity, had fire protection, was carpeted, was waterproof, was safe and secure.
As we were inspecting the premises I said to Mr Ivor Cohen words to the effect that 'I am going to be storing valuable antiques and furniture in here. It's got to be air-conditioned, waterproof and secure'. I said nothing about fire protection as, for reasons I will explain, I thought it obvious that the premises had an operating fire sprinkler system. Mr Cohen said to me words to the effect 'It's got all those'. I said words to the effect that 'I'll want to put a partition across the front so that the antiques can't be seen from the road. I will probably put someone in front as a subtenant'. Mr Cohen said 'Yes, okay'. I then said words to the effect 'I'll also put a security system in and have it monitored'.
I noticed during my inspection of the showroom that there were sprinkler heads along a bulkhead as I walked into the showroom. When Mr Cohen and I walked into the showroom we entered from the only entrance which could be used, which faced Stirling Highway. Along the whole Stirling Highway front of the building was a low bulkhead, not far above head height. I was not specifically looking for sprinkler heads as I walked in but, due to the low bulkhead, saw the sprinkler heads.
I saw nothing which indicated to me that the sprinkler system was not operating.
I did not comment on or ask about the sprinkler system. I was not looking for the system as I expected that a commercial building, used for retail shops, would have an operating fire sprinkler system.
That expectation came from my experience in building and leasing commercial premises. At the time I had about 21 years experience in developing commercial properties, particularly shopping centres. My practice had been to develop, obtain leases for and then sell the shopping centres, and not to own the building as a landlord. My belief is that all of those developments had fire sprinkler systems. I was astonished when I learned, after the fire, that the sprinkler system was disconnected.

[825]

458 So far as Mr Anderson is concerned, I am quite satisfied that he was making every effort to tell the truth and was not in the least way inclined to prevaricate. He was forthright to a fault and I have no doubt that he genuinely believes that the events unfolded as he described them. Nevertheless, the question is whether or not he may be mistaken, or that his recollection has been distorted by the passage of time. There are some examples of where Mr Anderson made emphatic statements which he later found necessary to modify or correct such as, for example, that Ms Jacquie McPhee had never paid any rent to the Anderson interests for her sub-tenancy after it was pointed out to him that there were records of payments and he then remembered that they had been made to his wife. In addition, I am satisfied that Mr Anderson was, at least in 1992, only concerned with what he regarded as major decisions and, having reached such a decision, would leave the details of its working out and implementation in the hands of his staff or advisers and, as a consequence, had less familiarity with the detail and the sequences of developments leading to such a decision, than others. An example of his broad brush approach and rather dismissive attitude to matters of such detail, is exemplified by the difference between his account of meetings with Mr Cohen, and Mr Cohen's accounts of those meetings in West Perth in connection with arrears of rent. Mr Cohen indicated that he had frequent meetings with Mr Anderson, including meetings at coffee houses, to discuss the problem of the rental arrears, but Mr Anderson, while not denying that some such meetings occurred, plainly asserted that they were far less frequent or significant than Mr Cohen had described. I had the impression that Mr Anderson had an attitude of impatience about being bothered with details or grievances, and recognised in his own mind only the dominant interest or preoccupation which he was addressing at the time. Accordingly, it is possible that he was mistaken and had forgotten a meeting with Mr Aldo Gianotti to discuss the proposed lease as Mr Gianotti has described. The state of the evidence, although I regard it to be rather unsatisfactory, suggests that Mr Aldo Gianotti's evidence in this respect should generally be accepted but I cannot regard it as being the whole of the story. It is inconceivable that Mr Anderson did not personally inspect the premises before deciding upon the lease and I have already indicated how the probabilities point to such an inspection having occurred in company with Mr Cohen, whose recollection on this aspect of the detail is probably also flawed.

[831]

464 I do not consider that any material conclusions can be drawn from the dispute about what was said, who was present or the significance of what was said at the Bondi Hotel meeting. It was after the fire, there had been no prior communications between Mr Cohen and Mr Anderson with respect to addressing the problems which arose from the destruction of the premises and there was clearly a degree of feeling, if not animosity, between the two men by then. Nothing said or done at that meeting can in any way affect the nature or extent of Clambake's entitlement to rent or other monies under the lease due by Tipperary and by Mr Anderson by his guarantee. Nor can it affect any question of liability or damages in relation to the fire claim. An attempt was made by the Clambake parties to rely upon this as a means of impeaching the credit of Mr Anderson by the alleged implication that he was inviting Mr Cohen to collude with him in making a dubious claim to the insurers but I do not consider that anything said or alleged to have been said could justify drawing an inference of serious, indeed fraudulent, conduct. In my view the dispute over exactly what transpired at that meeting at the hotel in Bondi is a dispute about a collateral issue and, after Mr Anderson had given his version of what had happened, and rejected the version of events put to him based on Mr Cohen's statement (exhibit 333) I refused to allow Mr Cohen to give further evidence attempting to refute Mr Anderson's denials and explanations - again because I regarded that as a collateral issue: Piddington v Bennett & Wood Pty Ltd [1940] HCA 2; (1940) 63 CLR 533, 546. That rule also applies to answers given by a party witness: Kurgiel v Mitsubishi Motors Australia Ltd (1990) 54 SASR 125, 130. As nothing about what was said or alleged to have been said at the Bondi meeting related to any fact in issue nor was relevant to any fact in issue the evidence could only go at the most to the credibility of a witness, that is to Mr Anderson or, potentially, to Mr Cohen. Such an issue of credibility is an example of a collateral fact: Goldsmith v Sandilands [2002] HCA 31; 76 ALJR 1024 [3]. The most that can be said about the episode at the hotel in Bondi is that a meeting occurred between Mr Anderson and Mr Cohen at which there were discussions about the cause of the fire, the availability of insurance to cover Mr Anderson's losses, and Tipperary's liability for arrears of rent, but there was disagreement between the two men and it ended inconclusively. I am not prepared to treat that exchange as having any other significance.

[833]

465 Counsel for Clambake and Mr Cohen submit that a telling point is that neither Owston nor Tipperary attempted to call Mr Bert Gianotti to give evidence to support Mr Anderson's assertion that there was such a meeting with Mr Cohen or that Bert Gianotti had driven Mr Anderson to the premises where he says that he met Mr Cohen. Implicit in this submission are other features, namely that it was Mr Bert Gianotti whom Mr Anderson instructed to make all the arrangements to see to the preparation of the necessary lease or other arrangements for Tipperary to take the premises and that it was indeed Mr Bert Gianotti who communicated with Mr Cohen in this regard. These features, in the submissions of the Clambake parties, strongly reinforced the significance of the absence of any pre-trial denial by Mr Anderson of the witness statement of Mr Aldo Gianotti (exhibit 13(3)) to the effect that he had had a pre-lease meeting with Mr Anderson at Gino's Café in Fremantle at which all the essential terms of the lease were discussed and the decision by counsel for Tipperary and Owston not to require Mr Aldo Gianotti to be available for cross-examination on that statement. In such circumstances, the submission is that, in accordance with the doctrine in Jones v Dunkel [1959] HCA 8; (1959) 101 CLR 278 I should infer that the failure by Owston or Tipperary to call Mr Bert Gianotti as a witness to support their cases signifies an appreciation that, if called, this witness would not assist them. There does not seem to be any doubt that Mr Bert Gianotti was present in Perth at various times during this lengthy trial and would have been available to give evidence had he been called. No attempt was made to explain away the failure to call Mr Bert Gianotti by Tipperary or Owston, by reasons of lack of co-operation, hostility, impaired relationships or any other factor. In such circumstances the possibility of drawing such an inference clearly exists but ultimately it is a question for judgment in all the particular circumstances whether any such inference should be drawn and, if so, to what effect.

[852]

480 Counsel for Tipperary and Mr Anderson opposed the amendments on the basis that they were very late, that they would introduce a major new cause of action into the proceedings which would require further investigation, preparation by counsel and solicitors and potentially additional evidence which was practically impossible to accommodate in the short time available. There was further opposition on grounds that until investigations had been completed, it was not possible to tell whether there might be a good limitation defence to the proposed cause of action. Counsel for Clambake immediately conceded that the causes of action proposed by the amendments would raise issues of fact and law which could not reasonably be determined at the trial due to commence on 13 October 2008, but that the amendments were important and may be essential to preserve the proposed causes of action for Clambake because, seeing as counsel for Tipperary had raised the possibility of a limitation period expiring, if the issue were not then introduced there would be a risk that if Clambake were attempt to raise it later, or in a separate action, it would be faced with an allegation that because the issue was not raised in the present actions, when it could have been, Clambake should be prevented from raising it at all. Counsel for Clambake submitted that the preferred course to follow should be to permit the amendment and, at some later convenient time, make an order that additional issues arising out of the amendment should be tried separately and at a different time, that is after the completion of the forthcoming trial and after there had been sufficient opportunity for Tipperary and Mr Anderson to prepare for, and deal with, the issues arising. There was also a submission that, depending upon the eventual outcome of the trial of the actions due to commence the following week, there was a possibility that it may not eventually be necessary to deal with the causes of action sought to be raised by the amendments.

[871]

The Lessee shall:

Clause 4.01 - Third Party Indemnity

Except to the extent that the same is caused or contributed to by the negligence of the Lessor or its employees, agents or contractors indemnify and hold indemnified the Lessor from and against all claims, demands, proceedings, judgments, damages, costs and losses of any nature whatsoever which the Lessor may suffer or incur in connection with the loss of life of and/or personal injury to any person and/or damage to any property (wheresoever occurring) arising from or out of any occurrence at the Leased Premises or the use by the Lessee of the Leased Premises or any part thereof or occasioned wholly or in part by any act, neglect, default or omission by the Lessee or by the employees, agents, contractors, invitees, licensees or sub-tenants of the Lessee or by any other person or persons using or upon the Leased Premises with the consent or approval of the Lessee.

Clause 4.02 - General Indemnity

Except to the extent that the same is caused or contributed to by the negligence of the Lessor or its employees, agents or contractors indemnify and hold indemnified the Lessor from all loss and damage to the Leased Premises caused by the negligent use or misuse, waste or abuse by the Lessee or by the employees, agents, contractors, invitees, licensees or subtenants of the Lessee or by any other person or persons using or upon the Leased Premises with the consent or approval of the Lessee of the airconditioning equipment, the Fire Equipment or water, gas or electricity equipment supplied to the Leased Premises or the Lessee in connection with the Leased Premises or the use and occupation thereof or by faulty sanitary, water or electric pipes or wires or fittings or fixtures fixed or installed in the Leased Premises by the Lessee or by the employees, agents, contractors, invitees, licensees or subtenants of the Lessee or by reason of the Lessee carrying out any works, repair, alterations or additions to the Leased Premises or installing any fixtures or fittings therein, whether or not with the consent or under the supervision of the Lessor.

Clause 4.03 - Indemnity Policy

Take out and at all times keep in force to the satisfaction of the Lessor with a public insurance office approved the Lessor (such approval not to be unreasonably withheld) on behalf of the Lessee and the Lessor and for their respective rights and interests:-

(a) a Public Liability policy with a cover of not less than the amount specified in item 7 of the Second Schedule or such greater amount as the Lessor may from time to time reasonably require on written notice to the Lessee in respect of any one occurrence to cover such risks as are referred to in clause 4.01;

(b) a policy with a cover of such amount as the Lessor may from time to time direct to cover such of the risks referred to in clause 4.02 as are nominated by the Lessor from time to time and such other risks as the Lessor may from time to time nominate.

Clause 4.04 - Insurance against fire etc

(a) Take out and at all times keep in force to the complete satisfaction of the Lessor with a public insurance office approved by the Lessor (such approval not to be unreasonably withheld) and in the joint names of the Lessor and the Lessee and any mortgagee of the Lessor for their respective rights and interests:

[889]

any loss or damage alleged to have been suffered by Clambake as a result of the failure to insure has not been pleaded or particularised;
on the facts there is a sound basis to conclude that by the convention adopted by Clambake and Tipperary Clambake assumed responsibility for arranging all insurances required by the lease;
the proposed cause of action is irrelevant unless Tipperary or Owston succeed in the fire claim in negligence, contract or nuisance;
there is no allegation or evidence to support a finding that the fire and damage to the premises were caused or contributed to in any way by negligence or breach of duty by Tipperary or Owston and, accordingly, the failure to obtain liability insurance by Clambake could not possibly result in any loss of a right to indemnity;
Clambake has been indemnified for loss suffered as a consequence of a policy of fire insurance held by it, but the premiums of which were paid for by the tenants, so, at the most, Clambake might have a claim for Tipperary's aliquot share of the premiums paid for that cover;
the lease imposes two obligations to insure, the first imposed on Clambake being an obligation to contribute to outgoings including insurance which would therefore have been obtained by Clambake (cl 1.01 and cl 3.03), the second, the obligation upon Tipperary to insure created by cl 4. Consequently, the amended plea requires a proper construction of those two obligations which should be approached on the basis of avoiding a conclusion that the parties intended to create double insurance;
liability insurance contemplated by cl 4 of the lease would not have resulted in any entitlement to an indemnity in the circumstances arising in this case because:
- there is no suggestion that Tipperary or any person for which it is responsible negligently or otherwise caused the fire;
- if negligence or other breach of duty by Clambake caused or contributed to the fire (as Tipperary and Owston allege) then because of the terms of cl 4.02 and cl 4.03 of the lease the policies contemplated would not have provided any indemnity for Clambake;
- if the fire was not caused by the liability of Clambake the liability policies would not have responded either;
turning to the requirement for a general fire policy (that is one which did not require any proof of negligence or breach of duty by some third party) the insurer would, in the circumstances alleged by Tipperary, be subrogated to Tipperary's rights to claim damages against Clambake for negligence or breach of duty in causing or contributing to the fire and damage;
in relation to cl 4.03(a) the risks to be insured against set out in cl 4.01 did not require insurance for risk of loss caused or contributed to by the negligence of Clambake, its employees, agents or contractors;
in relation to cl 4.03(b) Clambake was required to 'nominate' the risks which required cover but never did;
clause 4.04(a)(i) requiring insurance to cover 'building structures' overlaps with the insurance to be arranged by Clambake under the outgoings contributions and, properly construed, is limited to fire occurring as a consequence of the negligence of Tipperary;
the insurance required by cl 4.04(a)(ii) is also irrelevant because, in the present case, the antiques, collectables and paintings stored at the premises were not 'fixtures, fittings, equipment, furnishings and stock' of Tipperary, and there is no evidence that Clambake formed a 'reasonable opinion' or any opinion as to the risks for which insurance was required or notified Tipperary of that opinion.

[910]

516 First, Clambake relies on cl 1.02(e) of the lease (exhibit 4) the substance of which has already been described. This is the provision which stipulates that the lessee expressly acknowledges and agrees that where the lessor has entered into this lease as trustee and in no other capacity the lessor will not be personally liable to the lessee for any breach of the covenants, conditions and stipulations contained or implied and that in respect of any such breach the lessee will only be able to be reimbursed from the net assets of the trust and further that no officers of the lessor shall be personally liable to the lessee. Tipperary and Owston submit that, apart from this subclause there is no other indication that Clambake entered into this lease as a trustee and in no other capacity and that therefore the clause does not operate. I do not accept that submission. There would be no purpose to be served by cl 1.02(e) unless Clambake were a trustee and had entered into the lease in that capacity and I consider that this clause constitutes an acknowledgement that Clambake did enter into the lease as the legal, but not the beneficial, owner of the property. Nothing in this clause, however, excludes liability by Clambake but rather, it is an attempt to preserve assets of Clambake which are owned by it both legally and beneficially from any claim for execution or satisfaction of a judgment in favour of Clambake. No evidence was led to establish that Clambake held, or was entitled to, any assets other than as a trustee, or in any other way held or was entitled to property which it asserted would be immune from any claim for satisfaction of a judgment in favour of Tipperary. The evidence, in this regard, was that the only business of Clambake was that of trustee and, therefore, by inference, it would seem to follow that its only assets are held subject to the terms of the trust. There has been no basis laid in the evidence for Clambake to assert that any of its property is immune from demands for enforcement or satisfaction of any judgment in favour of Tipperary.

[936]

536 Turning to cl 13.07, the exclusion of liability which it provides is in respect 'of any act or omission of the Lessor to do any act or thing to or in respect of the Leased Premises which (as between the Lessor and the Lessee) the Lessor might be legally liable to do' unless prior written notice is given by Tipperary and the lessor unreasonably fails to comply with that notice. The first observation to make is that the exclusion of liability in respect of any loss suffered by the lessee relates to loss by Tipperary. It does not expressly or by implication extend to losses incurred by third parties. That construction is strengthened by the realisation that it could not reasonably be expected that a third party could, or would, give the written notice to Clambake contemplated. The clause also contemplates that the tenant must have been aware of the necessity to remedy the act or omission, and that the obligation to perform the act or to remedy the omission, arises from the relationship between the lessor and lessee, that is pursuant to or incidental to the terms of the lease and/or possession of the rented premises. As previously canvassed the necessity, if there was one, for a compliant operating fire sprinkler system for the entire building arose, not because of any express provision in the lease, but because of the requirements of the UBBLs given the defective condition of the north-south wall. The requirements of reasonable care having regard to the fire loading of various tenancies in the entire building and particularly in the pine warehouse - as noticed by the insurance assessor in September 2002 - also may give rise to that obligation. Tipperary was not aware of the unauthorised apertures in the fire wall, or that the presence of an effective fire wall was the condition on which the absence of an operating fire sprinkler system depended. It could not, therefore, have been aware of the matters necessary to be included in any notice to be given under cl 13.07. Accordingly the failure by Clambake, if it was a failure, to provide a compliant fire sprinkler system as required by the UBBLs and consistent with the exercise of reasonable care, was not a matter which was, or could have been, known to Tipperary. This being the case the exclusion of liability contained in cl 13.07 of the qualified and conditional kind does not apply to the claims brought by Tipperary, or for that matter by Owston.

[941]

540 The second issue, namely the ownership of the goods, as opposed to their possession, arises only in relation to those causes of action to which the principle in The Winkfield is not applicable. For reasons which I have given earlier [225] - [226] at page 10) I shall proceed on the basis that actual proof of ownership, as opposed to lawful possession on behalf of another, is a necessary element in the claims for damages for misleading or deceptive conduct whether under the TPA or the FTA. I proceed on that basis because of the concession made by counsel for Owston and Tipperary that this approach follows from the principles examined in Boston Commercial Services Pty Ltd v GE Capital Finance Australasia Pty Ltd but I wish to record that I have some reservations about full acceptance of that proposition in all circumstances. I am by no means satisfied that if, a modern day chimney sweep, who had come by a valuable jewel in circumstances similar to the experience of the plaintiff in Armory v Delamire (1722) 1 Stra 505; [1722] EWHC KB J94; (1722) 93 ER 664 and later was deprived of it because of misleading or deceptive conduct, he could not sue in an action like this - see also Parker v British Airways Board [1982] QB 1004, where it was confirmed, after extensive examination of the authorities, that even a dishonest or unlawful possessor could maintain an action against anyone else but the true owner or another with a better right to possession - per Donaldson LJ at 1009 - 1010). It seems, therefore, that it is arguable that a person in possession of chattels, with a better right to possession than can be asserted by the defendant whom he sues, may by analogy be entitled to maintain an action for damages under s 82 of the TPA and its statutory equivalents, his possession being treated as being equivalent to ownership. For this case, it means that the controversy over whether or not Owston is the owner of the goods destroyed is relevant only to the claims for damages pursuant to the TPA and the FTA.

[990]

580 There is also a tabulation of accruing amounts of interest on loans due by Leanheath to the Warren Anderson Trust over the period June 1985 to May 1986 in the accounts to 30 June 1986 (exhibit 324(10)) including a payment of $28,350 to Angus & Robertson for Cayley prints on 4 September 1985 listed under Leanheath Ltd. Interest payments by Leanheath were also credited in the Warren Anderson General Ledger on 30 June 1986 (exhibit 324(11)) and further interest payments (exhibit 324(12)) from Leanheath. In the trial balance as at 30 June 1986 (exhibit 324(13)) the carrying balance for antiques is shown as $13.48 million as against the entry for the preceding year of $4.65 million (which had been recorded in the name of Leanheath - see also exhibit 324(16)). In the trust general ledger for the year ended 30 June 1987 (exhibit 324(17)) the antiques are shown under code (793) with an opening balance of $13.48 million and a closing balance of $19.39 million. That is the same code number as had been used for Leanheath in these computerised accounts until 30 June 1986 . In the trial balance for the trust as at 30 June 1987 (exhibit 324(18)) there is shown a balance for antiques of $6.053 million (code 792) with no corresponding balance for the previous year and a balance for Leanheath Ltd (code 793) of $14.476 million with the same balance as for the preceding year. In the trial balance as at 30 June 1987 (exhibit 324(19)), the balance for antiques is shown as $19.387 million compared with $13.480 million for the preceding year both under code 793. Those figures (after noting manuscript adjustments on the previous exhibit 324(18)) appear to show a consolidation or a combination of the accounts for Leanheath antiques in the account still coded 793 for the year ended 30 June 1987. The trust accounts for the year ended 30 June 1988 and subsequently show antiques with an opening value of $19.387 million and a closing value of $24.594 million and are recorded as assets of the trust under the accounting code 793 with no reference to Leanheath. For subsequent years this total increases steadily by increments until by 30 June 1989 the carrying balance for antiques is $28.603 million (exhibit 324(24)) and by 30 June 1989 the antiques at cost are shown as an asset of the trust in the amount of $28.603 million (exhibit 324(25)).

[1014]

the relative importance and significance of the works of Neville W Cayley in contrast to the works of his father the painter, Neville Cayley;
Neville W Cayley's apparent lack of prominence in major Australian public collections - except for about 50 paintings in the National Library of Australia;
relatively low prices being fetched for individual Neville W Cayley watercolours when coming onto the local auction market;
the fact that each of the experts called for Clambake, Land Capital and Mr Cohen, disregarded the sale of the collection of Neville W Cayley paintings disposed of by the Royal Zoological Society of New South Wales in 1994;
the absence of works by Neville W Cayley in international exhibitions or collections;
alleged inaccuracies, particularly in colouring, in the Neville W Cayley paintings which, so it was alleged, have been superseded by more modern and more accurate paintings, photographs and depictions;
alleged lack of comprehensiveness of the collection of Australian birds in 1931 and again in 1984 leading to a submission that scientific accuracy was defective;
alleged lack of artistic merit;
alleged gross discrepancy between the values attributed to the paintings in 2002 and the price at which the collection was purchased by Mr Anderson, on behalf of Owston, from Angus & Robertson, the original publishers in 1985;
the alleged lack of interest in the collection by any public, national or institutional purchaser;
the alleged lack of a market for a collection claimed to be worth $7.5 million to $8 million in 2002, especially by ornithologists;
the potential significance of the charitable gifts programme by which a donor could receive a tax deduction for the full value of a collection if donated to and accepted by a public institution;
alleged lack of comparability in quality, output and market demand for Neville W Cayley's works in contrast to the demand for artists in the United Kingdom, America and New Zealand, with whom the Owston valuers favourably compared his works.

[1101]

675 It is true, of course, that Tipperary was Clambake's tenant, and that Owston's property in the Tipperary premises, bailed to Tipperary, was there because of the rights of possession which Tipperary enjoyed under the tenancy. But I am far from satisfied that this case can be determined simply by identifying the responsibilities which Clambake had to Tipperary as a landlord. Most obviously this becomes apparent because the hazard, that is the alleged inadequate fire protection system, was not confined to the premises let to Tipperary but extended to all facets of the Claremont building, including other tenancies and common areas. It was not physically possible for Tipperary to install and maintain a fire sprinkler system because, if that were to be done, all considerations of practicality, meant that it would need to be done for the entire building; indeed that is what the UBBLs contemplated for areas aggregating more than 3,500 sqm. Secondly, the hazard which eventuated, namely the ignition of an accidental fire, which then grew to unmanageable and destructive intensity, did not occur within the premises let by Tipperary, but in adjacent premises. It is the spread of that fire which Owston and Tipperary contend was due to the negligent failure of Clambake to take reasonably necessary precautions to control or extinguish fires before damage was caused to Tipperary's premises and their contents. Consequently, the alleged duty of care and the content of the ensuing standard of care must, so submit Tipperary and Owston, have regard to these additional facets of the relationships between Clambake and Land Capital on the one hand and Tipperary and Owston on the other. For example, it is accepted that an occupier of premises is under a duty to take reasonable care to prevent damage to persons and property on adjoining premises: Hughes v Percival (1883) 8 App Cas 443; and see the cases noted at Halsbury's Laws of England (4th ed), vol 33 [639]. The view that a landlord is not liable for dangers on parts of the premises which he retained, if the dangers existed at the time the tenancy was taken must, I think, be regarded as having been abrogated in this country by the rejection of the doctrine in Cavalier v Pope [1906] UKHL 1; [1906] AC 428 in Northern Sandblasting Pty Ltd.

[1105]

679 However, if the inquiry had been more thorough, or been conducted by some person who wished to be satisfied that the existing system did in fact comply with the UBBLs and the terms of the approval given by the Town of Claremont in 1986 a more detailed investigation would have been needed. This would, of necessity, have involved a recognition that an approved fire sprinkler system was required if the overall aggregate area of the premises exceeded 3,500 sqm, as the lettable area at Claremont did, so leading to the question of why that prima facie obligation was not insisted upon for this building. To satisfy that inquiry it would have been necessary to go through the correspondence on record at the Town of Claremont and/or at the WAFB and to scrutinise the approved plans in order to appreciate that the requirement for a operating sprinkler system was regarded as unnecessary for this building in 1988 because the north-south wall was designed and approved as an effective fire wall dividing the premises in two separate fire compartments. To complete the inquiry it would have been necessary to consider whether, as it stood in fact, the north-south wall did fulfil that design purpose. Knowledge or discovery of the two large unapproved apertures and the steel roller doors would then have demonstrated that it did not. That inquiry could have been conducted by someone on behalf of Clambake making persistent inquiries, which could be expected to have taken some time, at the Town of Claremont or at the WAFB. I consider that a similar discovery of the non-compliance with the fire precaution requirements could have been ascertained if a person familiar with the UBBLs, particularly with regard to fire precautions, had been engaged to investigate and report on the position. Someone like Mr Welsh, I am satisfied, would have discovered the shortcomings. I also consider that the inadequacy of the fire protection system would have been discovered had a senior officer, familiar with the terms and conditions of the grant of approval for the Sectam renovations, either from the Town of Claremont or the WAFB, been called in to inspect the premises and report on the adequacy of fire precautions. I say a senior officer because I am satisfied that unless the officer concerned was familiar with, or had an appreciation of, the significance and purpose of the north-south wall as designed, there is a degree of probability that the defects might have passed unrecognised.

[1110]

684 Different reasons were given by the several members of the court in Jones v Bartlett for rejecting the appellant's claim. Gleeson CJ concluded that there was no want of reasonable care by the landlord for failing to have the premises inspected by a suitably qualified expert who might have detected the thin panel of annealed glass in the door which broke and cut the appellant's leg: [54], [57]. Gaudron J took the view that the duty owned by a landlord is a duty to take reasonable care for the safety of those using the premises by putting and keeping them in a safe state of repair. That duty is not confined to defects existing at the commencement of the tenancy [88]. What is reasonable would vary according to whether or not the tenants were in possession. So before the tenancy commenced, it is reasonable both to inspect the premises and to remedy existing defects that give rise to a foreseeable risk of injury. And in the case of defects or potential defects which posed special dangers (eg, electrical wiring and gas connections), it is reasonable to have an inspection carried out by persons skilled or expert in that regard. So far as concerns defects which were not present at the commencement of the lease, reasonable care required only the remedying of those defects of which the landlord 'was, or ought to have been, aware'. McHugh J (who was in dissent) took the view that one of the factors relevant to the generation of the standard of care owed by the landlord is the right or capacity of the landlord to inspect the premises [101] - [103]. His Honour also concluded that the age and condition of the premises, and the attributes of those who use them are also relevant. In this regard relevant circumstances include both those which the landlord knew about and those which he ought reasonably to have known. In that regard McHugh J considered that the knowledge of experts would often be relevant because the exercise of reasonable care would often require the landlord to obtain the services of experts to inspect the premises. Gummow and Hayne JJ undertook a comprehensive examination of the factors [168] - [198] and, in the process observed:

CLAMBAKE PTY LTD -v- TIPPERARY PROJECTS PTY LTD [No 3] [2009] WASC 52 (9 March 2009)

At a glance

Court

Decision date

Before

Catchwords

Source

Catchwords

Judgment (1259 paragraphs)

(b) Other exclusion clauses: cl 13.05, cl 13.06 and cl 13.07

(b) Should Clambake have investigated the adequacy of the fire systems?

(b) Silence as misleading or deceptive conduct

(e) Effect of demands by Clambake's insurer to install sprinkler systems

Legislation Cited (15)

Cases Cited (80)

CLAMBAKE PTY LTD -v- TIPPERARY PROJECTS PTY LTD [No 3] [2009] WASC 52 (9 March 2009)