"OK, as long as I can stay for another term."
24
Miss Williams could not remember the actual conversation which took place. She said that she would not have said that because options were not being granted and she would not have been able and had no authority to commit the lessor to any longer term than 25 years. She accordingly denied the terms of the conversation alleged by Mr Hodgson. She gave evidence of her invariable practice as follows:
15. I recall it was invariably my practice that if a prospective tenant asked me whether their lease could be renewed after expiry of the initial lease term during my employment with the FAC, I would say " FAC policy permits the granting of a further lease term. If you're a good tenant, we don't see why you wouldn't be granted a further term, but that will be a matter for the management at the time and it is not known who that might be."
25
Whatever the effect of the conversation, even as claimed by Mr Hodgson, it could not have amounted to an agreement to enter into a further lease for 25 years at the conclusion of the lease term in consideration of the plaintiff entering into the first lease. An amended defence was filed raising a defence of lack of writing. This amendment was probably made as a result of a comment made by me and must be a good defence in absence of part performance. While there was no pleaded reply, I allowed an oral reply to be put forward based on part performance, the part performance stated to be the entry into the first lease. That entry could not be said to be properly referrable only to the claimed contract. In any event I can see no basis for the collateral agreement claim, even leaving aside the defence of lack of writing. Accepting the exchange took place as Mr Hodgson claimed it gave rise to no concluded agreement. It would have been quite uncertain as to term, rent or other conditions.
Representation claim
26
The only evidence of inducement and reliance is Mr Hodgson's evidence of the conversation with Miss Williams. In circumstances where a request for an option has been refused but a lessee was told that if the lease were renewed prior to its termination, then a new lease would be granted, whatever that might mean, it is just unreasonable to think that this was some serious representation that whatever the circumstances at the time, a new lease would be entered into. In those circumstances it is not necessary to consider whether the defendant became liable for any liability which the Federal Airports Corporation would have had for misleading and deceptive conduct.
27
The estoppel claim as an alternative to the collateral agreement claim must fail for the same reason. In any event so far as misrepresentation is concerned the plaintiff by electing to treat the claimed wrongful re-entry as repudiation prevented any chance of the claimed representation being made good. And finally, while clause 28.3 of the memorandum is not determinative, in my opinion having regard to the time involved this clause, in spite of its inappropriate heading, is strongly against any finding of inducement or reliance.
Termination by entry after notice
28
As I have said, the plaintiff's claim is that the notice was not a proper notice because: (a) it was not served in accordance with the requirements of the lease; (b) it was not given by an authorised officer of the defendant as required by clause 23.1(a) of the memorandum; and (c) it required the plaintiff to complete works, which was not a requirement in clause 30.4 of the lease.
Failure to send the notice to the required address - clause 23.1(c)
29
Item 9 of the reference schedule did not set out an address of the lessee. There is no basis upon which the letter which preceded the lease could in some way be incorporated into the lease so as to bring about the position that the address in that letter, which was not initialled by Mr Hodgson, was the address to which the notice had to be sent. The notice was served on the plaintiff company in accordance with the requirements of s 170 of the Conveyancing Act 1919 and s 109X of the Corporations Act 2001 (Cth). Pursuant to the latter provision, together with ss 29 and 160 of the Acts Interpretation Act 1901 (Cth), the notice was received on 6 September 2002. It was received by the company and by Mr Hodgson. The fact that it may not have come into the hands of Mr Hodgson until 16 September 2002 is irrelevant.
Requirement to complete the works
30
Clause 34.4 required the plaintiff to commence the works within a reasonable time and to proceed to completion of the works actively and continuously in a workmanlike manner. The notice required the lessee to remedy the breaches by recommencing the works and completing the works in a workmanlike manner in accordance with the plans and specifications. There was no requirement to complete the works by a specified date. The notice is not defective on that count.
Was the notice properly signed?
31
It is clear from its form that the notice was adapted from the form of notice of breach of covenant which appears in It is clear from its form that the notice was adapted from the form of notice of breach of covenant which appears in Lang's Commercial Leasing in Australia , para [32-110]. The letter which was forwarded with the notice was quite clearly adapted from paragraph [32-120] of the same work. The main difference is that in the precedent to which I have referred, it is clear that the notice is given by the lessor itself, rather than by a solicitor who gives "notice that the lessor requires you to remedy the breaches by …". The form in Schedule 5 to the Conveyancing Act 1919 and the precedent form both imply that the notice will be signed by the lessor. The question then is whether or not the notice can be signed by the solicitor for the lessor in a case where the lessor is not even named or whether the notice was invalid through lack of proper signature.
32
It was argued, rather faintly, that signature was not necessary. I reject that, as without it the notice would be just a piece of paper. I have set out the terms of clause 23.1(a). It is in rather strange language. "Corporation" must mean "Lessor" as if that were not the position the corporation could not be an individual as nobody would be thinking about a corporation sole. The solicitor was not an authorised officer within the definition of the term under Schedule 1 to the memorandum. It is not suggested that the solicitor was appointed by the Corporation to act as an authorised officer for the purposes of the lease. The question arises then as to whether the methods of giving notice under clause 23.1(a) are mandatory and exclusive or non-exclusive. It would be very strange if the clause were read in such a way as to mean that a notice were not valid if it were executed under the common seal of a corporation or in any way authorised by the Corporations Act 2001 for execution of documents by a company. This points to the mode of execution not being mandatory and I consider that to be correct.
33
In my view the ordinary authority of a solicitor would not extend to signing a notice on behalf of a lessor client nor would the solicitor, without other authorisation, be the agent of the client, in this case lessor, for that purpose. As I have pointed out the lessor is not mentioned by name in the notice and the solicitor is not claiming to sign as agent for the lessor.
34
Paragraph 24 of the third further amended statement of claim reads as follows:
24. Furthermore, the Notice was not given by an authorised officer of the defendant, as required by clause 23.1(a) of the Memorandum.
The defence includes a denial of that paragraph. This was, perhaps, not a perfect pleading raising the issue, but there can be no doubt that the question as to whether or not the notice was invalid as not properly signed was an issue in the proceedings before me. I should add that at the end of the hearing it seemed to me that counsel should have the opportunity to make further written submissions on the question of the signature and further submissions were received which did not take the matter much further.
35
The defendant has referred to two cases, namely McRae v Coulton (1986) 7 NSWLR 644 and O'Reilly v The State Bank of Victoria Commissioner (1983) 153 CLR 1, which determine so far as statutory construction is concerned that where legislation requires signature by a person, then unless the legislation is clearly to the contrary, the signature of a person on a document can be made by an authorised agent if that agent signs in the form of X by his agent Y or Y as agent for X. The cases do not really assist the defendant in absence of proof of authority.
36
Clause 13.1 of the memorandum, which I have set out, authorises the corporation to appoint agents to exercise some or all of its rights and perform some or all of its duties under the lease. It is not suggested there was any such appointment and there is no evidence of any such appointment. There is no evidence of actual authority in Mr Pritchard. No submissions were addressed as to possible ratification and I pass this by other than to say that as property rights are affected it appears ratification of an invalid notice cannot take place after the time allowed by the notice has expired and in this case the only possible act of ratification would have to be by implication by re-entry which could only take place after a reasonable time elapsed or expired: See Bowstead & Reynolds on Agency 18th ed 2-089. In any event re-entry would not necessarily be ratification. No argument has been addressed to apparent or ostensible authority; the defendant did not hold out its solicitor as its agent to the plaintiff.
37
I should add that I have done some research on this matter as it is technical and because until after the event Mr Hodgson did not contend the notice was invalid except perhaps in general terms. Thus I have considered authorities in relation to signature of notices to quit particularly those that quote Ex parte Fuller; Re Taylor (1945) 62 WN(NSW) 158. The question in that case was whether regulation 15 of the National Security (Landlord and Tenant) Regulations 1941 (Cth) required a notice to quit to be personally signed. The judgment of the Chief Justice, Jordan CJ, with whom the other judges agreed was very short and as follows:
I can see nothing in reg. 15 of the National Security (Landlord and Tenant) Regulations to indicate an intention to alter the rules of the law of the State with respect to the manner of giving notices to quit. That regulation is not directed to the form in which the notice to quit may be given but to the circumstances in which it may be given. I respectfully agree with the reasons of Mr Justice Macfarlan in Heyward v Miles [1944] VLR 155, in this respect. For these reasons I am of opinion that the rule nisi should be made absolute.
38
A similar point was dealt with in a decision of Street J, Ex parte Clews; Re Schache & Anor (1946) 63 WN(NSW) 127 the relevant paragraph of which is at page 128 as follows:
One other point was taken with regard to the exercise of discretion, namely that the information was bad because it was not laid by the informant or by an agent as prescribed by the section of the Landlord and Tenant Act. In point of fact the information was laid by the applicant's solicitor, and with proper instructions he is a person who is authorised to lay that information. there is nothing before me to suggest that he had not proper instructions, and I do not think that I should infer that he had not those instructions so as to defeat the present application.
39
Both of these cases were referred to by Isaacs J in Commowealth of Australia v K W Harris Pty Limited [1965] NSWR 63 where an issue arose about a notice to quit signed by the Acting Crown Solicitor. There were claims as to delegation which was found proper and another claim as to authority to sign which was answered by saying "that a solicitor has general authority to sign a notice to quit on behalf of the landlord unless there is some statutory provision to the contrary".
40
None of these decisions is directly referable to s129 notices and all seem to me, if carefully read, to be dependent upon authority. Finally in None of these decisions is directly referable to s129 notices and all seem to me, if carefully read, to be dependent upon authority. Finally in Hawkins Constructions (Australia) Pty Ltd v Mac's Industrial Pipeworks Pty Ltd [2002] NSWCA 136 the Court of Appeal dismissed an appeal from a decision of mine holding that a statutory demand served on a debtor signed by an employed solicitor as "solicitor for the creditor" was valid. The thrust of the argument in that case was directed to s 459E(2)(f) of the Corporations Law 2001 and the note to form 509H. The decision held that solicitors with general authority to carry out work for winding up a company had authority to sign a demand and to use admitted employee lawyers to so sign. This followed Metropolitan Waste Disposal Authority v Willoughby Waste Disposals Pty Ltd (1987) 9 NSWLR 7. In the Court of Appeal, Davies AJA held at [17] that where a solicitor signs a statutory demand on behalf of a creditor, then absent evidence to show lack of authority, the court will proceed on the basis of authorisation.
41
The last case really went to whether an employee of a firm of solicitors could be authorised to sign. It could not, I think, determine that, when the question of authority is put into issue, albeit not in a well pleaded way, then it is for the party challenging authority to adduce evidence of lack of authority. Agency depends upon authority, and only the agent or the principal is able to adduce the evidence necessary to establish this. In this case no evidence was given; no leave to re-open was sought.
42
I therefore conclude on this technical ground that the notice under s129 was not a valid notice; that re-entry for failure to comply with that notice was therefore unauthorised and amounted to a repudiation upon which the tenant could rely to terminate the contract and claim damages. I should say that this is a decision that in modern days courts may be reluctant to embrace. Nevertheless, by the letter from Messrs Deacons, dated 20 November 2002 it was claimed that the notice of breach was defective in that it was not given by an authorised officer as required by the terms of the lease. That at least must, or should, have flagged to the defendant lessor the question of proper signature. There would have been no difficulty in issuing a new notice of breach at that stage. Although this conclusion determines the matter apart from damages, I should deal with the other arguments about the notice.
Arguments as to essential term and repudiation
43
Clause 16, as printed, of the memorandum relates to default. It is not very well expressed but at least sets out certain terms of the lease which are essential terms. Clause 30.4 is not one of these. Clause 16.1 however states that it does not prevent any other obligation under the lease from being an essential term. Clause 16.2 provides that an event of default occurs if the tenant repudiates the lease or fails to comply with an essential term or the tenant does not comply with any obligation under the lease which is not an essential term and if non-compliance can be remedied, the non-compliance is not remedied within seven days after the corporation notifies the tenant of its occurrence. Clause 16.5 provides that if an event of default or a termination event occurs the corporation may terminate the lease by re-entry without notice or if required by law, with notice, or terminate the lease by notice to the tenant.
44
It was sought to argue that there had been breach of an essential term giving a right to terminate without notice; or that even if clause 30.4 were not an essential term, the breach was so significant as to amount to a repudiation.
45
When these arguments were first raised I stated that the issue before the court on the pleadings was whether the lease had been brought to an end by re-entry through failure to comply with the terms of a s129 notice. I stated that the arguments outlined were not raised in any pleading and were not the subject of issues before the court. I said that again towards the end of the closing submissions. No application was made to amend nor was any leave sought to bring a cross-claim. Counsel for the defendant endeavoured to raise these matters again in a written outline for oral submissions and again by further written submissions which I allowed to be sent to me. Each of these matters would require a specific pleading. I do not intend to deal with them further and I always indicated that to be my position.
Whether re-entry invalid as insufficient time given to remedy breach
46
The time given to remedy the breach was not the time indicated in the letter but a reasonable time. In fact the time between notice and re-entry was almost two months. Even accepting that Mr Hodgson did not know of the notice of breach until 16 September, there was still a period of six weeks in which to recommence the work. The question is whether or not the time was reasonable.
47
It is claimed by the plaintiff that the time was not reasonable, first because the defendant having stood by allowing the breach and making no complaint about it was estopped from relying on the breach. There is nothing in that argument. It does not accord with the evidence of either the plaintiff or Mr Ellis of the meeting in July 2001 and in any event there is no evidence of reliance. The second argument was that the time was insufficient for recommencement of the works because, first it was necessary to have the plans which had previously been approved, re-approved; and second because it was necessary then to arrange for contractors to come to the site and recommence the work. The statement by Mr Hodgson that he had done some work as he had mown the grass can be disregarded.
Was re-approval of the plans required?
48
The original plans were approved by the original lessor, Federal Airports Corporation. This was a term of the lease and was complied with within the given time. The more difficult question is whether or not that approval continued to operate after transfer of the airport to the defendant.
49 This requires a consideration of the Airports Act 1996 and the Airports (Building Control) Regulations 1996. Division 5 of the Act relates to building control. Section 98 which is the interpretation section defines "building activities" as follows:
(a) constructing buildings or other structures;
(b) altering the structure of buildings or other structures;
(c) undertaking, constructing or altering earthworks (whether or not in relation to buildings or other structures);
(d) undertaking, constructing or altering engineering works, electrical works or hydraulic works (whether or not in relation to buildings or other structures);
(e) demolishing, destroying, dismantling or removing:
(i) buildings or other structures; or
(ii) earthworks; or
(iii) engineering works; or
(iv) electrical works; or
(v) hydraulic works;
(f) undertaking land clearing.
The work required to be done by the notice would fall within sub-clause (a).
50
Section 99 is headed "building activities not to be carried out without approval". For the purposes of this section the plaintiff is a person other than an airport lessee company, the airport lessee company being the defendant although it is fair to say this was not established by evidence.
51
Section 99(3) is as follows:
99(3) A person other than an airportlessee company must not:
(a) carry out a building activity on an airport site; or
(b) cause or permit to be carried out on an airport site a building activity;
unless:
(c) carrying out the activity is in accordance with an approval granted under regulations made for the purposes of this Subdivision; or
(d) all of the following conditions are satisfied:
(i) the activity is of a kind declared by the regulations to be exempt from this Subdivision;
(ii) in a case where a final master plan is in force for the airport - the activity is consistent with the plan;
(iii) in a case where the building activity is an element of a major airport development - the activity is consistent with a major development plan approved under Division 4 for the development.
52
Section 100 is the regulation making power about building approvals and provides that regulations may be made making provision for grant of approvals, authorising building activities, conditions of approval and the like.
53
Part 2 of the Airport (Building Control) Regulations relates to building activity approvals. Regulation 2.02 is as follows:
2.02. (1) A person requiring a building approval must
(a) apply in writing to the airport building controller for the airport site; and
(b) pay a fee of:
(i) if the proposed building activity is the demolition of a structure - $400; or
(ii) in any other case - the amount, according to the total estimated cost of the proposed building or works, set out in Schedule 1 for the airport site.
(2) An application may be for an approval of any of the following kinds:
(a) if the proposed building activity is the construction or alteration of a building-a building permit;
(b) if the proposed building activity is the construction or alteration of works-a works permit;
(c) if the proposed building activity is the demolition, destruction, dismantling or removal of a building, or works-a demolition authorisation.
1.
(3) The applicant for a building approval may be:
(a) the airport-lessee company for the airport site, or a person on behalf of the airport-lessee company;
(b) the sub-lessee, or a person on behalf of the sub-lessee, of the building or of the land in or on which the building work is to be carried out.
54
This regulation would appear to envisage the airport lessee company holding the head lease and a lessee from that company holding a sub-lease. In the present case, although there is no evidence apart from evidence of the sub-lease of a different area to Mr Hodgson, it is possible that there may have been a lease which would then have been a concurrent lease from the Commonwealth to the defendant. There is no evidence of that and it cannot be assumed and it may not have been the fact so far as the premises, the subject of the lease here were concerned. Nevertheless, there is no doubt that s99(3) of the Act would apply to building works so far as it was relevant. The difficulty, however, is that regulation 2.02 provides that the applicant for building approval may be either the airport lessee company or the sub-lessee of a building or land in or on which the building work is to be carried out. On that basis the regulation may not apply in its terms to the plaintiff. However, both parties proceeded on the basis it did and I will do the same.
55
Regulations 2.19 and 2.25 are follows:
Duration of approval
2.19. (1) A building approval has effect from the time it is granted:
(a) until the end of 3 years after the grant; or
(b) if it specifies a period shorter than 3 years-until the end of the specified period; or
(c) if it is extended under this regulation-until the end of the extended period; or
(d) if, under regulation 2.20, it is revoked before it would otherwise cease to be in force-until the time it is revoked.
1.
(2) On application by the person carrying out the building activity, an airport building controller may extend the period for which the approval has effect for an additional period of 1 year.
(3) The application is ineffective unless made before the approval ceases to be in force, but may be granted after the approval has ceased to be in force.
(4) Application may be made, and granted, whether or not the period during which an approval has effect has already been extended, but an approval may be extended no more than twice.
(5) A building approval does not cease to have effect for the reason only that the person to whom it was granted has given up all, or any, of its interest in the proposed building, structure or works or the land on which it is to be constructed.
(6) Building activity that is commenced to be carried out on an airport site only after an approval for the building activity has ceased to be in force is a contravention of subsection 99 (1) or (3) of the Act, as the case may be.
1. …
2.
Transitional-existing building entitlement
Transitional-existing building entitlement
2.25. (1) A building activity on an airport site, that, before an airport lease for the airport is granted by the Commonwealth, is the subject of a written permission, or approval, however described, granted by the FAC, has, for section 99 of the Act, approval:
(a) until the end of 3 years after the date on which the building permit was granted; or
(b) if the permit is expressed to be in force for a period shorter than 3 years-until the end of the specified period; or
(c) if the term for which the building permit is expressed to be in force has been extended, in writing, by the FAC-until the end of the earlier of:
(i) the extended period; and
(ii) 3 years after the date the extension was granted.
(2) A condition, subject to which the building permit was granted, has effect as if it were a condition imposed by the building controller for the airport, and, to the extent that it is inconsistent with a duty under regulation 2.17, prevails over the duty.
(3) If:
(a) before commencement of the Act, the FAC consented to a building activity under a lease of land that, under the Act, is on an airport site; and
(b) had not, immediately before commencement of the airport lease of the airport site, issued a permit to commence work on the building activity; and
(c) under the Airports (Transitional) Act 1996, the airport-lessee company for the airport site has acquired the rights and obligations of the FAC in relation to the person to whom the consent was given;
the airport-lessee company must not withdraw the consent for the purpose only of avoiding a contractual obligation touching on, or concerning, the lease.
(4) In sub regulation (1), "airport lease" means:
(a) an airport lease under the Airports (Transitional) Act 1996; or
(b) if an airport lease for the airport site is not granted under that Act-under the Act.
56
The reason why it is necessary to give consideration to the proper interpretation and meaning of these sections is that the plaintiff has argued one of the reasons why re-entry was not justified when it took place was that it was necessary for it to have its plans re-approved by the defendant company as the original approval had expired. The argument was that the plans for what were described as the stage one works were approved in October 1997, and for the stage two and three works in June 1998, so that the approvals expired in October 2000 and June 2001 respectively in accordance with regulation 2.19. The argument of the defendant company is that no new approval was necessary as the work had commenced within three years of the original approval and therefore, in accordance with regulation 2.25 read in conjunction with regulation 2.19(6), regulation 2.19 meant that the approval was still in force.
57
I conclude that new approval was not required for the reasons which follow. Construction of a building is a building activity under s98 of the Airports Act . Leaving aside approvals given prior to the Act coming into force, subject to any extension, the building approval has effect and lasts for a period of three years. Approval is however approval to carry out building activity. Pursuant to regulation 2.19(6) building activity which has been approved, which is commenced only after the expiration of three years or any extension given, contravenes s 99(1) or s 99(3) of the Act. The word commenced must be given its ordinary meaning and not be construed to mean continued. As there could perhaps be some doubt about this, recourse may be made to the explanatory statement to the Regulation which states:
Regulation 2.19 provides that, unless extended or revoked, a building approval has effect for 3 years or such shorter period as is specified in the building approval. This provision also makes it clear that while building activity must be commenced during the currency of a building approval, there is no requirement that it must be completed during this period.
58
Regulation 2.25 when read in accordance with such construction then reads sensibly in that the same three year period applies from the date of the approval. Section 2.19(6) then applies so that no new consent is required. The result of this is that I consider that the question of reasonable notice is not affected by any requirement and time which would be taken to obtain a new approval. I should add that it is perfectly clear the plaintiff did not ever raise as an objection, at the time notice was given, the fact that a new approval would be required and no doubt this argument has been thought of later. That perhaps does not matter as the test is an objective test, but in any event the contention is not sound.
59
I expressed a preliminary view during the hearing that the time given prior to forfeiture by re-entry was probably reasonable unless new consent was required. I have given this further consideration and I adhere to this preliminary view. Arguments about the time which the solicitors gave in their letter as their view of a reasonable time for completion of the work seem to me to be irrelevant. The breach of covenant could be remedied by proceeding with the work and bringing the works to completion, actively and continuously from the time of recommencement. I add that the notice makes it perfectly clear that so far as the lessor is concerned, there was no requirement for re-approval. An eight week period or at worst a six week period to get builders onto the site is not shown to have been unreasonable. Shortage of labour on some general basis is not in itself a sound reason for failure to recommence.
60
Mr Markovic is an experienced builder and developer and friend of Mr Hodgson. He said he was contacted by Mr Hodgson in mid October 2002 and asked to give his opinion on how long it would take to finish the building and the cost. He told Mr Hodgson it would take six to eight months to finish, but he would not be prepared to work on the building if the lease was to be terminated at the end of the year. In a second statement dated 15 July 2008, he said that in 2002 he was involved in several construction projects; that he had regular contractors he could call upon; that it took between two and three weeks to obtain quotations and on acceptance of a quotation a further one to two weeks for work to start. Taking the longer periods and allowing five weeks it was reasonable to re-enter if nothing was done for eight weeks. There was no evidence to the contrary.
61
The plaintiff company through Mr Hodgson was given by the follow up letters every opportunity to negotiate and although the defendant company did threaten to terminate after 16 October 2002, it did not do so until two weeks after that date in spite of a meeting with Mr Hodgson on 15 October 2002. Had there been a definite time stated for completion of the work the matter could have been different, but there was not.
62
The result of all of this is that so far as the validity of the s129 notice of the re-entry is concerned, the plaintiff has failed on all grounds other than the defect in signature. It is now necessary to turn to the question of damages.
Damages
63
The main claim is for the value of the lease based upon the income return over the period of the lease from the time construction was complete, which is accepted would be a period of 18 years as both parties proceeded on the basis of income commencing on 1 January 2004. It is now, I think, accepted that the cost of construction would have to be determined and I turn to that. It was agreed that the improvements would comprise approximately 800 square metres of warehouse type accommodation and 400 square metres of office space or accommodation units.
Construction costs
64
For the plaintiff the only evidence of construction cost was given orally by Mr Markovic. He said the total construction cost would be $500 per square metre for factory and $700 to $800 for office space. He had not considered the requirements of the particular approved plans and did not take into account the fitting out cost. His evidence was not really satisfactory as it was presented on the basis he was explaining how he came to a figure in his statement which particular piece of evidence was rejected. In any event his figures per square metre would add up to about $720,000 from which the cost of building that was then there would have to be deducted. There is no real evidence of that figure. I conclude that the evidence of Mr Markovic provided nothing more than a rough guide to building costs and cannot be relied upon.
65 Mr Meredith is a well qualified quantity surveyor called by the defendant. In a report of July 2008 he assessed the value or cost of the completed works at $107,800 and in oral evidence changed this to $115,000. He estimated that the cost to complete the work in June 2004 was $1,105,000. He said that because recommencement was required and certain remedial work was also required an additional sum of $55,000 would be involved but in cross-examination he agreed that this should be reduced to approximately $44,000. In addition to that he stated that a figure of approximately $215,000 would be required to complete works that were not shown on the approved plans but which were obviously required, such as flooring and end walls.
66
I accept the evidence of Mr Meredith. It was carefully prepared and carefully given.
Damages for lost income
67
I turn now to the claim for damage on the basis of income foregone. Again there is competing evidence, this time of accepted experts, Mr Mannix for the plaintiff and Mr Phippen for the defendant. Those experts agreed on a number of matters and both based their figures on the income from 1 January 2004 until the end of the lease. They ultimately agreed that net rent, that is gross rent less outgoings, was the relevant figure. They agreed that outgoings were usually about 18.5% of gross rent, if that included land tax. Mr Mannix said that land tax was about one third of outgoings. They agreed that opportunity cost should be calculated at 7% of construction cost and that the development finance cost should be calculated at 8%. It is accepted of course that both opportunity cost and development finance cost cannot be taken into account and it must be one or the other or a combination of both. Probably 7.5% across the whole would be reasonable.
68 Mr Mannix considered the gross rent for the premises would be $132,000 per annum which appears to be based on a figure of $110 per square metre. Mr Phippen on the other hand, considered that the gross rent would be $114,000, based on a figure of $80 per square metre for the warehouse accommodation and $125 per square metre for the office or residential accommodation. It was very difficult to understand the oral evidence of Mr Mannix as to this, as at one stage it seemed to be accepted by him that $114,000 was the appropriate figure.
69
Mr Mannix had not inspected the lease. His figures were given without reference to the use provisions of the lease. He had not looked at other leased sites at the airport to see what rents were being obtained for those sites or if he did he did not take those into account. The comparable properties which he relied upon to aid him in coming to his conclusions were away from the airport, away from airport noise, were unlikely to have had such limited use restrictions and generally were of superior construction. As I have said, Mr Mannix calculated the value of the rent over 18 years at $1,300,000. With respect to him there is considerable confusion in his reports between gross and net returns. His final figure appears to be calculated on a gross rent of $125 per square metre for 1,200 square metres. On any basis it seems that must be incorrect as net return is what matters. In addition, his valuation took no account of the cost of building the premises for lease. I accept that this was cleared up in oral evidence but nevertheless it was never properly explained.
70
Mr Phippen, on the other hand, took into account rents which were being obtained for other leased premises on the airport land, rather than from building away from that land. He considered that the restrictions on use were of some significance and he considered that the airport noise was significant in determining what rentals could be obtained. I prefer his evidence and accept it. There was discussion, but no evidence as to whether or not land tax was payable on the land the subject of the lease. In the long term it will make no difference but it was for the plaintiff to prove.
71
There has been introduced into evidence in Exhibit 9 calculations based on a rent assessment of $132,000 gross per annum as perhaps put forward by Mr Mannix and on a rent assessment of $114,000 gross per annum put forward by Mr Phippen. It does not matter which gross rent figure is accepted because either will result in an annual loss, after allowing for construction costs. Both those calculations have outgoings assessed at 18.5% per annum of gross rent. Even if that figure is reduced by one third there would still be an annual loss after allowing for the accepted opportunity cost or the accepted loan cost. On that basis the evidence is that whichever valuer is accepted if the lease remained in place there would an increasing loss to the plaintiff each year. As I accept the figures of Mr Phippen, then the loss is greater than it would be if the figure of Mr Mannix were correct and on either figure there would be a loss.
72
There has been an argument put forward on the basis of Commonwealth v Amann Aviation Pty Limited (1991) 174 CLR 64 that reliance damages should be awarded so that at least the amount expended by the plaintiff on the building up to termination (which was not established) and the amount of the rent paid up to that date should be recoverable. I do not think that argument could succeed. The evidence is that had the contract been performed those costs would not have been recovered. Neither could it be said, in my view, that there was anything other than a hope of a new lease on completely uncertain terms. The lease in Amann was for a term of three years. In the instant action the time from termination to the original expiry date was nearly 20 years. It is not easy to assume in such circumstances any percentage of chance of the lease continuing in existence till expiry or chance of extension for any further term at least without some evidence to support this. As I understand Amann for a claim of reliance damages to succeed it is necessary to show that whether or not a profit would be made the expenditure would be recovered over the term of the lease granted and any reasonable prospect of renewal. That was not established. It may be it is for the defendant to establish there would not be recovery but if so that is established. I did relist the matter for some further submissions on reliance damages. Counsel for the plaintiff suggested that it was for the defendant to establish the moneys expended would not have been recovered had the premises been put to the plaintiff's intended use for aerial surveys and accommodation for helicopter pilots. That could not be correct. The plaintiff put nothing forward about this and did not suggest any claim for loss of profits based upon such use.
73
It follows from all this that the plaintiff has proved no damage. As a matter of law, once breach of contract is established, nominal damages should be awarded. While it seems that is not always done, if that remains the position then I would fix those damages at $20, but in any event as the plaintiff's real claim has failed I propose to order that the plaintiff pay the defendant's costs.
74
The defendant has made a claim for indemnity costs. Clauses 16.6 and 16.7 are as follows:
Damages for breach