Cugg Pty. Ltd. v. Gibo Pty. Ltd. [2001] NSWSC 297

Cugg Pty. Ltd. v. Gibo Pty. Ltd. [2001] NSWSC 297 - NSWSC 2000 case summary — Zoe

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JUDGMENT 1 On 16th February 1982, the plaintiff Cugg entered into a registered lease No.T122643 with State Rail Authority of New South Wales (which I will call "the SRA"), by which Cugg became lessee, for a term of twenty years commencing 1st January 1981 plus three options of ten years each, over property described as part of the land in Certificate of Title Volume 11864 Folio 66, being premises described in cl.16 of Schedule 2 to the lease. 2 I will set out cl.16 later, but note here that in essence the premises comprise an office building known as Wembley House, in George Street, Sydney, near Central Railway Station. A railway tunnel passes under the building, and part of the building is built over a slab which forms the ceiling of the railway tunnel. The slab, but not the tunnel, is included in Cugg's lease. 3 On 18th January 1995, Deposited Plan No.654926 was created for the stated purpose of identifying the land comprised in Certificate of Title Volume 11864 Folio 66; and on 15th June 1998, Deposited Plan No.876785 was registered, being a subdivision of land in Lot 1 Deposited Plan No.654926 into two lots. Lot 2 in that deposited plan appears to include the land the subject of the lease, and it also includes the railway tunnel. 4 Lot 2 of Deposited Plan No.876785 was transferred by the SRA to the defendant Gibo by Transfer No.5340828R dated 9th October 1998 and registered 4th November 1998, reserving an easement over the tunnel in favour of the SRA. 5 During 1999, disputes developed between Cugg and Gibo, resulting in the commencement of these proceedings on 11th November 1999. The originating process is now an Amended Summons dated 3rd March 2000, and there is an Amended Cross-claim dated 17th February 2000 joining additional parties. 6 On 26th to 28th June 2000, I conducted a hearing of issues between Cugg and Gibo, which excluded issues involving the additional parties: essentially, these issues concern the obligation to repair the slab over the railway tunnel, and the question of Cugg's liability for Council rates and land taxes. 7 At the end of that hearing, I reserved my decision, and there was shortly afterwards an application by Gibo to re-open the case by calling further evidence. That application was granted, and there was a further hearing on 5th February 2001. I again reserved my decision, and this is the decision arising out of those hearings.

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OUTLINE OF FACTS 8 I will commence by outlining the history of the matter, mainly as it relates to the general relationship of the parties and the question of repair to the slab. 9 The lease to Cugg was granted following a tender process. There is some evidence before me as to the negotiations between Cugg and the Public Transport Commission of New South Wales, the predecessor to the SRA, but neither party has submitted it has any relevance. 10 Cugg's tender for the lease, dated 21st February 1979 and accepted on 3rd July 1979, noted as a condition that "any works ... required to the building as a result of the operation ... of the railway track ... under the building will be undertaken by, and at the cost of, the Commission". 11 On about 14th January 1980, there was a meeting between Dennis O'Brien and Peter Howarth, on behalf of Cugg, and representatives of the SRA. Mr. O'Brien received from the SRA a report of an inspection of the building by the SRA's Acting General Manager, made on 3rd October 1979. That report included the following paragraph: 3. The inspection of the roof of the tunnel under the building revealed some spalling of encasing concrete of the floor beams and exposure of some reinforcement. This should be repaired with some gunite or epoxy concrete process. 12 On 18th March 1980, Deposited Plan No.260046, relating to Wembley House and the land on which it was erected, was registered, for the stated purpose of the proposed lease. The part of that deposited plan which was subject to the lease appears to have been Lots 1 to 3. Lot 5 of that deposited plan seems to include the tunnel and strata of land below the tunnel. 13 Cugg, through Peter Howarth & Associates, arranged for a consulting engineer Alexander Wargon to inspect the building. Mr. Wargon reported to Mr. O'Brien, on behalf of Peter Howarth & Associates and Cugg, by a letter dated 17th July 1980. That letter was in the following terms: This confirms our several inspections of the above premises followed by the perusal of some drawings presently held by the Council of the City of Sydney.

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The main building (excluding external steel fire escape stairs), appears in general to be structurally in good condition and, if maintained properly, there is no apparent reason why the building should not perform satisfactorily for the duration of the lease. 14 On 20th August 1980, Cugg wrote to the Public Transport Commission stating that it had received a satisfactory report from a structural engineer. 15 It was a condition of the proposed lease that Cugg undertake extensive improvements to the property. Cugg lodged a development application with Sydney City Council for alterations and additions to the existing building, at an estimated cost of $1 million. Consent was granted on 21st August 1981, and a copy of this consent was sent to the SRA on 17th November 1981. 16 The subject lease is dated 16th February 1982. The land is described in it as "all those premises as defined in cl.16 of Schedule 2". That schedule is in the following terms: The terms "premises" and "demised premises" where used in this lease, shall include where the context shall admit any building, structure, fixture or improvement and all other things thereto belonging (including the building known as "Wembley House", 839-847 George Street, Sydney) which are at the commencement of or made during the term be erected, placed or made by the Lessor or the Lessee on Lots 1-3 inclusive in Deposited Plan 260046 and shall include any part thereof and also such parts of the stratum below the said Lots are the sites of columns, piles, footings, the slab constructed above the railway tracks, or other means of support of the buildings or structures which are erected upon the demised premises during the life of the survivor of the issue now living of Her Majesty Queen Elizabeth II and twenty-one (21) years after the death of such survivor and during such further period (if any) as shall be lawful however such term shall not include the services of the Lessor referred to in this lease and/or Memorandum No.S78957. 17 The lease is expressed as including the terms of that memorandum, with amendments to it specified by the lease. The relevant clauses, incorporating the amendments, are as follows: 2. To the full effect of the covenants next hereinafter shortly noted as the same are set forth in words at length in the second column of Part 2 of the Fourth Schedule to the Conveyancing Act 1919 except where any addition to exception from qualification of or omission from the same hereinafter appears namely: ... 3. And to pay taxes and all impositions and outgoings of whatsoever nature which are at any time during the term payable in respect of the demised premises or the user or occupation thereof or any service or supply thereto. 6. And that the Lessor may at all reasonable times enter and view state of repair and that the Lessee will repair according to notice in writing and that in default the Lessor may repair at the Lessee's expense. ...

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GOOD FAITH Submissions 56 During the initial hearing of this case in June last year, Mr. Conti QC, who then appeared for Cugg, submitted that Dr. Abeshouse's approach to the Council was made after this litigation commenced, and for the purposes of the litigation: he had no intention that Gibo should be subject to the burden of any order, but rather proposed that Gibo use the mechanism of the Council order in order to shift the obligation of undertaking repairs to the slab on to Cugg. 57 Mr. Slattery QC, who appeared for Cugg on 5th February this year, submitted that Dr. Abeshouse went to the Council with the dominant purpose of triggering cl.10, rather than any legitimate purpose; and that his doing so contributed to the issue of the Council notice; and that accordingly, Gibo could not rely on the notice. 58 Mr. Slattery submitted that I should not accept Dr. Abeshouse's evidence that he was concerned for public safety and concerned to ensure that the building complied with Council requirements: if that had been the case, he would have approached the Council much earlier. Dr. Abeshouse admitted that he was aware that the issue of a notice by the Council could shift the burden of repair from Gibo to Cugg. Mr. Slattery submitted that Dr. Abeshouse was not frank in his affidavit concerning discussions with Council officers as to the content of the notice, and that Dr. Abeshouse must have raised with the Council the question of the Council's "on-going requirements" as set out in his solicitor's letter of 7th April 2000. Paragraphs 12 and 13 of his affidavit were, Mr. Slattery submitted, intended to convey the impression that the Council could not have been influenced by material supplied by Dr. Abeshouse, because that material was supplied too late: that was an impression that Dr. Abeshouse must have realised was misleading. 59 Mr. Slattery submitted that the notice that was issued did issue as a result of Dr. Abeshouse's intervention. It was not to the point that some other notice may have issued at some other time. 60 Mr. Feller for Gibo submitted that I should accept Dr. Abeshouse's denial that he sought the issue of an order by the Council in order to take advantage of cl.10 of the lease memorandum. He submitted that Dr. Abeshouse had made an honest mistake as to the date of the document sent to the Council, resulting in his affidavit conveying an unintentionally misleading impression. He submitted that I should accept that Dr. Abeshouse's approach to the Council was for the legitimate purpose of protecting Gibo's commercial interests, namely to ensure that the building complied with the requirements of the Council and of other relevant authorities. For this purpose, Dr. Abeshouse needed to ascertain the Council's involvement and attitude. There was no suggestion of improper pressure on the Council, or misleading information, leading to the making of an unjustified order. 61 In any event, Mr. Feller submitted, Gibo's involvement did not cause the making of the order. It merely brought back to the Council's attention issues that the Council had considered important, but of which the Council had lost sight due to administrative matters including the ill-health of a relevant officer, and also the Council's assumption that Cugg was going to go ahead and do the work as previously proposed by Cugg.

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Decision 62 I accept Dr. Abeshouse's explanation for the misdating of the copy of the document submitted to the Council: plainly, in my opinion, it was not fabricated for the purpose of giving a misleading impression. However, Dr. Abeshouse's affidavit and the solicitor's letter of 7th April did give a misleading impression to the effect that the Council could not have been influenced by information supplied by Dr. Abseshouse, because it was supplied too late; and Dr. Abeshouse should have been aware that that misleading impression was given. His evidence in relation to that matter was not convincing, and it leads me to have less than full confidence in his evidence. On the other hand, I am not satisfied he deliberately gave false evidence. 63 I accept the evidence of the Council officers, and in particular their evidence to the effect that the state of this concrete slab was a matter of concern from late 1998, and that the Council considered that an order would be required unless the work proceeded without the making of an order. In that sense, in my opinion, the Council's decision to issue an order was not the result of Dr. Abeshouse' s intervention, except to the extent that Dr. Abeshouse brought the matter back to the Council's attention. I accept that there was no prompting by Dr. Abeshouse as to the actual content of the notice or the order. 64 Dr. Abeshouse admitted that he knew that the issue of a Council order could assist his case by shifting the liability to repair the slab from Gibo to Cugg, and in my opinion it was part of his motivation in contacting the Council to see if that contact could result in the issue of an order and thus improve his position in the litigation that had been commenced. However, in my opinion he did also have legitimate purposes, namely to ensure that Gibo's building did comply with the requirements of the Council and other authorities, and to that end to clarify what those requirements were; and to ascertain the nature and extent of the Council's previous involvement. I am not satisfied that his other purpose was predominant over those legitimate purposes. 65 On the question of causation, I accept that, but for Dr. Abeshouse's intervention, the Council would not have issued the notice and order when it did; but only because the Council had lost sight of the matter. This in turn was partly because Cugg had represented to the Council that it would repair the slab, but then did not proceed with this and did not alert the Council to this circumstance. Even without Dr. Abeshouse's intervention, this would probably have come to the Council's attention reasonably soon, and the action would have ensued. Indeed, having regard to its earlier involvement, as a matter of proper business practice, Cugg should have drawn its change of position to the Council's attention.

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CONDITION OF SLAB Submissions 66 In written submissions, Mr. Ogborne for Cugg submitted that the slab was relevantly in the same condition in 2000 as it had been at the commencement of the lease. He submitted that I should accept the evidence of the plaintiff's expert Mr. Mahaffey, which was in substance accepted by Gibo's engineer Mr. B. Smith, as to the process by which the slab came to be in its present condition and the probable timing of that process. He submitted that I should accept Mr. Mahaffey's evidence to the effect that at all times there had been low concrete cover to the lower reinforcement of the slab, limited to 10mm or less, that carbonation of the concrete had penetrated to 15-20mm, and that there were high levels of sulphide ions throughout the slab caused by the use of the tunnel by steam trains from 1927 to 1971 and by diesel trains from 1954 to 1984; and that the spalling of the concrete had been caused by the resultant corrosion of this lower reinforcement, and as a consequence concrete had fallen away from about 10% of the underside of the slab. He submitted that I should accept Mr. Mahaffey's evidence to the effect that of that 10%, probably 80% had fallen before about 1982, the time when a footway was installed; and that even in respect of that 80%, the actual falling away of the concrete was only the last stage of a process which had been proceeding for very many years. 67 It was submitted by Mr. Feller for Gibo in written submissions that the current condition of the slab had arisen largely since the commencement of the lease. It was submitted that in 1979, Messrs. Howarth and O'Brien, representing Cugg, had been concerned to ensure that the condition of the building was satisfactory. A report dated 17th October 1979 made available to them at that time disclosed spalling on the underside of the slab. As a result, they had had the property inspected by an engineer Mr. Wargon, and had received a satisfactory report from him. It was submitted for Gibo that the onus of proof was on the plaintiff to establish the condition of the slab at the commencement of the lease. Mr. Mahaffey conceded that, if the damage at the commencement was minor and localised, as suggested by the events just referred to, it was feasible that the deterioration now in evidence could have occurred since.

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Submissions 72 In Cugg's written submissions, it was submitted that any deterioration of the slab since the commencement of the lease was due to an inherent defect, namely the level of sulphide ions throughout the slab, the depth of carbonation in the slab, and the insufficient coverage of the lower reinforcement. Accordingly, cl.8 did not require the plaintiff to repair: Lister v. Lane (1893) 2 QB 212 at 216; Graham v. Markets Hotel Pty. Ltd. (1942) 43 SR(NSW) 98 at 103. 73 In any event, any deterioration was due to fair wear and tear: as stated by Mr. Mahaffey, any progression of corrosion and any resultant deterioration of the slab was due to moisture, that is, the ordinary operation of natural forces: cf. Haskell v. Marlow (1928) 2 KB 45 at 59. 74 It was submitted for Cugg that the repairs which the engineers agreed were now required, namely additional steel beams to support the slab, were no different from those which were actually required at the commencement of the lease; and would constitute improvements to the premises: see Sotheby v. Grundy (1942) 2 AllER 761; ACT Construction Ltd. v. Customs & Excise Commissioners (1982) 1 AllER 84 at 88. 75 In any event, no basis was shown for an award of damages: there was no evidence of the cost of that work, and no evidence of any diminution of value of the reversion: see Salsbury (Marquess) v. Gilmour (1942) 2 KB 38 at 48-9. 76 In Gibo's written submissions, it was submitted that, while a covenant to repair does not oblige the lessee to make improvements, nevertheless if the covenant to repair cannot be performed without causing improvements, then to that extent the lessee is obliged to make improvements: see Graham v. The Markets Hotel Pty. Ltd. (1943) 67 CLR 579. 77 It was submitted that in relation to the exception of fair wear and tear, the onus of proof was on the lessee: Brown v. Davies (1957) 3 AllER 401. In any event, this does not excuse the lessee from taking steps to avoid further damage from lack of repair of a problem which was originally due to fair wear and tear: see Regis Property Co. Ltd. v. Dudley (1959) AC 370 at 393-4, where the House of Lords approved a passage in Haskell v. Marlow (1928) 2 KB 45, which gives the example of a tile falling from a roof, and the tenant's liability for damage done to the house by reason of the tile not being replaced. 78 It was submitted for Gibo that on the evidence, putting a protective barrier under the slab in 1980 would have prevented the penetration of moisture and thus prevented further corrosion. On the principle approved in Regis Property, this should have been done. 79 In this case, it was submitted, the only effective way of fulfilling the covenant to repair was by strategies that may lead to some improvement, but this did not affect the lessee's liability.

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CLAUSE10 Submissions 84 In Cugg's written submissions, it was put that any obligations imposed by cl.10 did not extend to a requirement to improve the premises, inconsistently with cls.8 and 9: plainly cl.10 had to be read down, because in its terms, it was not even limited to the demised premises; and the limitations to cl.8 and especially cl.9 were added by way of cl.13 of the lease itself, a term specific to the lease, so that they should be given greater weight than the general provision of cl.10 in the lease memorandum. I was referred to Bunyip Buildings v. Gestetner (1969) SASR 87 at 89: in that case, there was an obligation in a lease to keep the premises in good tenantable repair, and also a covenant to yield up the premises in good repair, reasonable wear and tear excepted. It was held that the exception of reasonable wear and tear should be implied into the ongoing obligation of repair. 85 In any event, it was submitted for Cugg that for various reasons the Council order was ineffectual to bring about any obligation on the plaintiff or any breach of the lease. In the first place, time for compliance with the order had been extended, and there was no evidence that the extended time had expired, so that there could be no breach of the order and thus no breach of the lease. Next, on its proper construction, the order only required Gibo to submit plans within 28 days. The Notice of Intention to Issue the Order had only foreshadowed an order for submission of plans, and there was no power to modify what was notified except pursuant to representations: see s.121I to 121K of the Environmental Planning & Assessment Act. Furthermore, s.121M of the Act requires reasonable time for compliance, and while 28 days was a reasonable time for plans, it was plainly not a reasonable time for completion of the works. Alternatively, the order was invalid because it did not conform to the Notice of Intention and because the time limit was unreasonable: see Re Moe (1994) 30 ALD 288 at 291. 86 Furthermore, it was submitted for Cugg that there was implied in the lease a promise by Gibo of good faith and fair dealing: see Rennard Constructions (ME) Pty. Limited v. Minister for Public Works (1992) 26 NSWLR 234; Alcatel Australia Ltd. v. Scarcella (1998) 44 NSWLR 349; Hungry Jacks Pty. Ltd. v. Burger King Corporation (1999) NSWSC 1029; Backler v. Felpure Pty. Ltd. (1999) NSWSC 958; Gary Rogers Motors (Australia) Pty. Ltd. v. Subaru Australia Pty. Ltd. (1999) FCA 903; Aston Australia Pty. Ltd. v. Transfield Pty. Ltd. (1999) NSWSC 996. As submitted on the facts, Gibo had breached that duty of good faith, and could not rely on the Council order. 87 In Gibo's written submissions, it was put that there was no inconsistency between cl.10 and cls.8 and 9, and no reason to read cl.10 down from its natural meaning. 88 In relation to the order, it was submitted that Cugg had not excluded the possibility that the order was one which required immediate compliance, under s.121M of the Environmental Planning & Assessment Act. Alternatively, the order could be construed as a two-stage order, requiring as a first stage the submission of the documents and plans. The second stage then required the performance of rectification work after approval of the submitted documents. 89 Furthermore, it was submitted, any such problem with the notice should be dealt with pursuant to s.121N of the Act, which confers a right of appeal. Cugg did not seek to have any appeal brought against this order. 90 Although Cugg has now provided the plans required by the order, it was submitted that this could not defeat Gibo's entitlement to enforce compliance with its obligation under cl.10. At worst, the Court should determine, as foreshadowed during the hearing, the situation which would ensue if the Council did issue a valid order requiring the actual carrying out of the work. Indeed, it was submitted for Gibo that the submission of the plans irrevocably bound Cugg to an acceptance of an obligation to comply with the Council's order, because it must be taken to have submitted the information on behalf of Gibo with full knowledge of its contractual obligation to do so. It was also submitted that the evidence showed that the order had in fact only been extended to 31st March 2001.

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121R(1) A person who gives an order must, within 28 days after particulars of work are submitted to the person in accordance with section 121P (2): (a) accept the particulars without modification or with such modifications as the person thinks fit, or (b) reject the particulars. (2) If a person accepts the particulars of work without modification, the person must forthwith order the owner to carry out that work. (3) If a person accepts the particulars of work with modifications or rejects the particulars, or if an owner fails to submit particulars of work in accordance with section 121P (2), the person must: (a) prepare, within 3 months after the acceptance, rejection or failure, particulars of the work that the person considers necessary to make provision for the matters specified in the order given to the owner under section 121P, and (b) order the owner to carry out that work. (4) An order under this section is not invalid merely because of the failure of the person to accept or reject any particulars of work or prepare particulars of any work, as the case may be, within the period it is required to do so by this section. (5) A person may recover from an owner as a debt the person's expenses of preparing particulars of work under this section. (6) Except for the purposes of section 121ZK (3), an order under this section forms part of the order under section 121B to which it relates. 95 In my opinion, the order made in this case to carry out works was invalid, because no notice was given of any intention to make that order: the only notice of intention that was given was a notice of intention to require the submission of plans and associated material, presumably pursuant to s.121P(2). In my opinion, it cannot be suggested that the addition of the requirement to effect the works was justified by s.121K(2), because that provision only applies to modifications made to an order arising out of the hearing and consideration of representations made pursuant to s.121I and s.121J. There were no such representations made in this case. In my opinion, the question of validity can be raised at this hearing, and does not require an appeal under s.121N. 96 In my opinion also, there is a further reason why the requirement in the order that works be carried out was invalid, namely that the time limit of 28 days was plainly not a reasonable time for the carrying out of the works, although I accept that it was a reasonable time for the submission of plans. 97 I see no reason why the order should not be considered as severable, and thus be valid in relation to its requirement that plans and associated material be submitted. I accept that the time for compliance with the order was extended by the Council to 31st March 2000, and I see no reason for supposing that it was extended any longer. The order was accordingly breached once 31st March 2000 had passed. It would appear that the breach was rectified when plans were submitted by Cugg on 23rd June 2000. I would not regard that submission of plans as any kind of election by Cugg, binding it to carry out the works. 98 Plans having been submitted, s.121R in effect required the Council to respond with an order for the carrying out of the work, either in accordance with the plans or in accordance with other plans prepared by the Council. So far as I am aware, there is no evidence whether this was done. In any event, I indicated during the hearing that I would proceed to decide whether, if the Council did issue a valid order for the carrying out of this work, either Cugg or Gibo would be obliged to carry it out; and this was not objected to by Cugg. 99 In my opinion, cl.10 of the memorandum is not restricted in its effect by either cl.8 or cl.9. The two latter clauses in effect require the lessee to repair, and they limit this requirement to the condition of the property at the commencement of the lease. However, consistently with Graham v. The Markets Hotel Pty. Ltd., if a lessee cannot perform a covenant without improving the condition of the premises beyond their condition at the commencement of the lease, the absence of a requirement otherwise to improve the premises will not exempt the lessee from performing this covenant. If there were an inconsistency between cl.8 and/or cl.9 and cl.10, I would prefer cl.8 or cl.9, because the relevant parts of those clauses were inserted by a provision specific to this lease. However, I do not consider there is any inconsistency. 100 The result of this approach is that the lessee would not be under an obligation to repair the slab in the absence of a Council order that the slab be repaired, but would be obliged to repair it if a Council order is made. That view brings into consideration the question of good faith. I think there is an obligation of good faith on Gibo in relation to this lease, and I accept that, if a Council order was procured dishonestly by Gibo, then Gibo could not rely on it. What is contended is that Gibo approached the Council with the predominant purpose of procuring an order, thereby causing an order to be made; and that since the approach with this predominant purpose was a breach of an obligation of good faith, then Gibo cannot rely on the order. 101 It is not necessary for me to decide if the obligation of good faith goes this far. I have already found that, although the purpose of procuring an order was one of Dr. Abeshouse's purposes, it was not the predominant purpose. I have found that Dr. Abeshouse also had the legitimate purposes of ascertaining the Council's requirements and ascertaining what had happened. 102 In my opinion also, Dr. Abeshouse's approach should not be regarded as in substance the cause of the Council's order. The Council had refrained from making an order previously because of Cugg's conduct in representing to the Council that it would do the work, and then failing to notify the Council that it was not going to do so. Dr. Abeshouse's approach triggered the Council's renewed interest in the matter, but in the light of the whole history, I do not think it can in a substantial way be considered as the cause of the Council issuing the order. 103 For those reasons, in my opinion Gibo is entitled to rely on cl.10, and if the Council now issued a valid order requiring the repair of the slab, Cugg would be bound to carry it out at its expense.

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Decision 111 In my opinion, rates and land taxes are payable by Gibo "in respect of the demised premises" within cl.2(3), although those rates and land taxes are not necessarily the same as those payable in respect of Gibo's Lot 2. 112 Dealing with the first difference, concerning Lot 4 and the fire escape, in my opinion this difference is de minimis. In my opinion, the demised premises are not deemed to include the whole of Lot 4, but only so much of it as is burdened by the rights of user and footway, that is essentially the fire escape. The difference between the 926.7sq.metres of Lots 1, 2 and 3 of Deposited Plan 260046, and the 953sq.metres of Lot 2 of Deposited Plan 876785, arises broadly from the inclusion of the area of the fire escape into the latter. The discrepancies between the area of the fire escape and the area added to constitute Lot 2, namely dimensions of the order of 0.04 metres and 0.095 metres, are in my opinion de minimis. 113 This means that in substance the whole of the demised premises is included in Lot 2 of Deposited Plan 876785; and in my opinion the principle in Tooth applies, so that at least part of the rates and land tax payable by Gibo on Lot 2 are payable in respect of the demised premises. 114 The exclusion of the tunnel and strata below the building from the demised premises is a matter which is not obviously de minimis. Mr. Ferdinand gave evidence that it made no difference to the highest and best use of the relevant property, and also that, on the basis of the Valuer-General's working papers, it did not make any difference to the Valuer-General's valuation. Those papers do show that, on the balance of probabilities, the Valuer-General did not in fact attribute any additional value to the tunnel or the underlying strata. 115 In a case where the Valuer-General has, in respect of the relevant years, made no valuation of the demised premises, but only a valuation of different premises owned by the lessor, I do not think the principle in the Tooth case depends upon the actual approach of the Valuer-General to the valuation of the lessor's land, but rather depends upon ratios of actual values. That is, if the demised premises, not having been valued for relevant years by the Valuer-General, are in fact of lower value than Gibo's land on which rates and land tax have been levied, that should be taken into account even if the Valuer-General did not in the event itself take note of that difference. I accept, consistently with the evidence of Mr. Norris, that the exclusion of the tunnel and of strata below the building would make a difference to value, by restricting the potential for redevelopment and excluding whatever value the tunnel itself (subject to the easement over it) might have. I do not think Mr. Ferninand gave any cogent reasons to the contrary. 116 There is no valuation evidence before me as to the quantum of this difference. The onus is on Gibo to show the liability of Cugg. I am not affirmatively satisfied by Gibo that there is no appreciable difference; although on the other hand, the difference cannot be great, and it would be absurd to refuse the landlord relief entirely on that basis, because it has not proved the quantum of that difference. Doing the best I can, and having regard to the circumstance that the problem is due to absence of evidence on a matter on which Gibo bears the onus, I would assess the difference at 10%, and decide that Cugg is liable for 90% of the rates and land taxes payable on Lot 2 of Deposited Plan 876785.

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RESIDUAL ISSUES 117 In the Amended Summons, Cugg also sought declarations and orders relating to Gibo's withholding of consent to the affixation of signs to the exterior of the demised premises. Gibo had previously indicated that it would consent to the affixation of such signs only on the payment of a licence fee. 118 Almost immediately after the commencement of proceedings, Gibo informed Cugg that it would not pursue its claim for a licence fee and would consent to the relevant signs, but Gibo has not conceded that its demand for a licence fee amounted to an unreasonable withholding of consent. 119 Cugg now submits that I should grant a declaration that Gibo unreasonably withheld its consent, and also an injunction against that kind of conduct in future. 120 However, as pointed out in Gibo's written submissions, the only injunction sought in the Amended Summons on this question was an injunction relating to the withholding of consent to the particular signs originally in question, and that consent has been given. The question of Cugg's entitlement to a permanent injunction relating to future hypothetical circumstances was not litigated. For that reason, I would not grant the injunction now sought by Cugg. Furthermore, in the circumstances, a declaration as to the past withholding of consent has no present utility. 121 For those reasons, I will not grant the declarations and orders sought on this matter. However, these circumstances may be relevant to the costs orders that I ultimately make. 122 Cugg also seeks costs in relation to two other matters, in respect of which Gibo abandoned its position shortly after the commencement of proceedings. I will consider these matters when I consider the question of costs generally. 123 For the reasons I have given, I propose to make orders along the following lines: 1. A declaration that Cugg has not at material times been in breach of the covenant in cl.8 of the memorandum. 2. A declaration that Cugg was bound by cl.10 of the memorandum to comply with the Sydney City Council order of 9th December 1999, and that this order validly required the submission of plans and associated material but not the carrying out of work. 3. A declaration that Cugg would be bound by cl.10 of the memorandum to comply with a valid order of the Sydney City Council to repair the concrete slab over the railway tunnel. 4. A declaration that Cugg is obliged to pay 90% of the land tax and rates levied on Lot 2 in Deposited Plan No.876785. 124 I will hear argument about costs.

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Judgment (127 paragraphs)

Cases Cited (6)

Cited By (1)