Cobram Laundry Services Pty Ltd v Murray Goulburn Co-operative Co Ltd [2000] VSC 353

Cobram Laundry Services Pty Ltd v Murray Goulburn Co-operative Co Ltd [2000] VSC 353 - VSC 2000 case summary — Zoe

[47]

" ... The question of construction comes down to this: The words of clause 2 are wide and general and clear and on their reading alone, without regard to any other circumstances or context, they are wide enough to include all the covenants in the previous lease, including the covenant for renewal. The principle which ought to be applied in construing this sort of covenant was laid down long ago by Lord Ellenborough CJ in Iggulden v May [1806] EngR 82; (1806) 7 East 237 where he says, at p.241: 'The rules of construction applicable to the covenants are so well know, that it is hardly necessary to cite authorities to show that every covenant is to be expounded with a regard to its context; that such exposition must be upon the whole instrument, ex antecedentibus et consequentibus, and according to the reasonable sense and construction of the words ... In conformity to which rules, and in support of the apparent intent of the parties, covenants in large and general terms have been frequently narrowed and restrained.' It has been pointed out to me that in that case the narrow construction was put upon it because otherwise one would find a perpetually renewable lease. In my judgment, that case illustrates the principle of construction that wide words can be cut down if the context leads the court to conclude that the words must be construed more narrowly. What, then, are the circumstances and the context at which I am entitled to look to decide whether they should be cut down or whether their wide meaning should remain? It is common ground that I can look at the whole of the words used in the 1963 lease. It is also common ground that I can look at the 1957 lease because of the word 'supplemental' in the first recital, which has the effect of bringing in the whole of the 1957 lease by way of recital into the 1963 lease. It has been submitted on behalf of the tenants that I cannot look at the letters to which I have referred, those of June 21, 1963, and July 3, 1963, but in my judgment they are clearly part of the surrounding circumstances and it is permissible for me to look at them. The effect of the letter of June 21, 1963, was to exercise the option which had been granted to the tenants by the 1957 lease, and that option was for seven years only, but a request was made that instead of taking it for seven years, as the option required, the term should only be for four years and that was agreed to by the then landlords. When I turn to the 1963 lease, and particularly recital (b), I find these words again ' ... in satisfaction of the tenant's rights of renewal which the landlords have agreed to do.' The only right of renewal which the tenants had was once and once only, for seven years, and it was that option which they were exercising by the letter although they were asking for something less than that to which they were entitled under clause 4 (D) of the 1957 lease. Taking all these things into consideration, that is to say, the former lease, the exercise of the option and the 1963 lease, I am constrained to hold that the covenants in clause 2 must be given a narrow construction so as not to include the covenant for renewal. I therefore propose to dismiss the action and, as rectification does not arise, to make no order on the counterclaim."

[71]

Third, the amendments proposed were in any event bad in law. For the reasons already stated it was not open to the defendant under the terms of the contract to purport to make the demands contemplated in the amended pleading. Notwithstanding the broad statement of principles as to the rights of parties to seek to amend pleadings the courts will not allow an amendment if it is obviously bad in law: see The Commonwealth v Verwayen (1990) 170 CLR 394, 456 per Dawson J; Ginson v Victoria Work Cover Authority [1995] VicRp 14; (1995) 1 VR 209, 215-216. The defendant relied upon the principle stated by the High Court in Commonwealth v Amann Aviation Pty Ltd [1991] HCA 54; (1991) 174 CLR 64 in support of its application for leave to amend. In my view the present matter can be distinguished from the circumstances in Amann because in that case the claimant had a contractual right that would have been exercised if a particular set of circumstances had come into play. Here, for the reasons already stated no such contractual right existed. Furthermore, it is to be noted that Gaudron J in Commonwealth v Amann observed (at 152): "It is fundamental that in an action on a contract a defendant is not liable for damages for failing to do that which he or she has not promised". Of course, in the present proceeding if there had been a contractual right on the part of the defendant to insist that the plaintiff provide $200,000 worth of new uniforms and if there was evidence that the plaintiff did not have and could not obtain the financial capacity with which to provide the $200,000 to purchase such uniforms I might have been able to take into account the probability of the incapacity issue as a fact in the reduction of damages claimed by the plaintiff. However, where there is no right in the defendant to ask for $200,000 worth of new uniforms and where there is no contractual obligation on the part of the defendant to provide such uniforms there cannot be any possibility of a breach giving rise to reduction of entitlement to damages, alternatively, an entitlement of the defendant to repudiate the contract on that basis.

[72]

The fourth matter to be considered on the basis of the authorities is the prejudice to the defendant if the amendment was allowed in any event: Commonwealth v Verwayen, supra; Queensland v JL Holdings Pty Ltd [1997] HCA 1; (1997) 189 CLR 146; Howarth v Adey [1996] VICSC 4; (1996) 2 VR 535. On the basis of the pleadings, without the defendant's foreshadowed amendment, and the witness statements it was apparent that if the amendment was allowed it would require the plaintiff to re-visit its case. In all likelihood, this would have lead to a substantial adjournment with no prospect of a fresh trial date earlier than March 2001. In my view, it would be undesirable for the plaintiff to proceed to lead the evidence it had and thereafter be granted leave to recall witnesses later in time. All this would be entirely disruptive not just to the discrete proceeding itself but to the overall conduct and management of the Commercial List. Far too often parties come before this court at the commencement or during a trial in the Commercial List and seek leave to amend a pleading by citing Verwayen, JL Holdings and Howarth as some kind of mantra. In my view this is not the principle contemplated by those cases. It is necessary for the court to whom the application for leave is made to be satisfied that there will not be prejudice to a party that cannot be satisfied by an appropriate order for costs and/or an adjournment. In my view in the present proceeding the disruption to the presentation of the plaintiff's case in the overall circumstances of the matter would be of such prejudice that the discretion ought not be exercised in favour of the defendant in any event. The plaintiff would be at risk of losing its place in the Commercial List and the high risk of its trial date going off for some time. The plaintiff would lose the entire advantage contemplated by the expeditious management applied by the List. Moreso, the defendant had ample opportunity to make the amendment as is apparent from the history of this matter in the Commercial List including the time made available by the vacation of a previous trial date. To these observations the further comment must be made that when a proceeding is in the Commercial List it is in a different category to other litigation. It has been observed that amendments to pleadings are discouraged in the Commercial List. In particular, the observations of Tadgell JA in Geelong Building Society (in liq) v Encell [1996] VicRp 44; (1996) 1 VR 594 at 608 are pertinent:

[84]

Another explanation for the divergence between the outcome calculated by Mr Miller and that calculated by Mr Wong lay with the initial approach of Mr Wong to excise from costs items that were properly classified as fixed costs but to treat such costs as variable costs. The calculation prepared by Mr Miller was based upon figures contained in an item described as "Schedule K". The matters contained in Schedule K were prepared by a bookkeeper employed by the plaintiff, Ms Robyn Wilson. Her evidence was produced from the computer records of the plaintiff in accordance with s.55B of the Evidence Act 1958. The evidence was not challenged. Following consideration of the fixed costs and variable costs submitted by the respective accountants I am satisfied that the appropriate approach is that adopted by Mr Miller. Each of the items identified by Mr Miller are properly categorised as fixed costs as is apparent from the nature of the costs. I accept the analysis and the basis upon which he reached the analysis, namely, his own knowledge of the business of the plaintiff and also the information he received from the principal of the plaintiff, Mr Startari. It is to be observed that in the course of the cross-examination of Mr Miller the only serious attack levied against him was with respect to his reliance upon the information contained in Schedule K. However, as already stated the evidence of the bookkeeper of the company, Ms Wilson, upon which Schedule K was based was not the subject of any challenge. The only other area of substantial challenge against Mr Miller was his calculation of working hours of employees of the plaintiff that changed as a result of the loss of the Murray Goulburn contract. Having heard the evidence of Mr Startari I am satisfied that Mr Miller made the proper calculation. Ultimately, on the basis of the expert witness reports and the cross-examination of the respective experts most of the evidence of Mr Miller stood unchallenged. Furthermore, it was unsatisfactory in my view that Mr Wong initially prepared the report of 7 July 2000 that was significantly more favourable to the plaintiff but after the intervention of the legal advisers of the defendant he altered his opinion to cause a deterioration in his projection of the position of the plaintiff. It is to be observed that as a result of the intervention of the defendant's legal representatives Mr Wong altered items that he previously categorised as fixed costs and categorised them thereafter in his final witness statement as variable costs. In this respect it is to be observed, further, that in the course of cross-examination Mr Wong conceded that items he ultimately treated as variable costs ought be treated as fixed costs (those costs being items relating to advertising, fuel and oil, registration and insurance, repairs and maintenance, tyres and tubes, discounts, charitable donations, freight and cartage, fuel reductions, superannuation and Workcover, labelling, legal costs and travelling expenses). Indeed, Mr Wong further discounted the calculation of damages of the plaintiff by reducing the rental allowance claimed by the plaintiff. In my view the basis for his rejection was misconceived as he failed to comprehend the role of the trustee company that owned the premises leased to the plaintiff. I was satisfied, as calculated by Mr Miller, that the rental allowance in the calculation of the plaintiff's damages should stand at $169,321.86 for the purposes of calculating fixed costs.

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Cases Cited (16)