GJA Kalra Pty Ltd v Amgade Pty Ltd and Anor

Waste water system and lease

1. The property is not connected to town water supplies. The incoming water is supplied by a bore. The property is not connected to town sewerage, and the waste water must be pumped out by waste disposal service providers.
2. Shortly after taking possession of the site pursuant to the lease in January 2010, Mr Rana and Mr Singh complained to the first defendant about issues on the site, including the high pump out costs.
3. The lease includes various clauses concerning the responsibility of the parties for the maintenance of the property. Clause 5 of the lease imposes obligations on the lessee concerning repairs and maintenance of the premises. Clause 5 is defined as an essential term of the lease in clause 11.1(d).
4. Clause 5 provides: 5.1 Repair of Premises (a) The Lessee must: (i) Keep the premises clean and tidy well maintained and in good working order; (ii) Make good any damage caused to the Premises by the Lessee, its employees or others under its control; (iii) ensure that the septic system is pumped out on a regular basis (having regard to their condition at the commencement of the Lease), damage by explosion, earthquake, aircraft, riot, civil commotion, fire, flood, lightning, storm, tempest and reasonable wear and tear (excluding the Lessor's property), act of God and war damage only excepted, unless any insurance moneys are irrecoverable through the neglect default or misconduct of the Lessee. (b) More specifically the Lessee must maintain the Lessor's Property in good and substantial repair and in accordance with all Environmental Laws at the time. (c) The Lessor must carry out any work of a structural nature at its cost and in a proper and workmanlike manner. (d) If during the Term the Lessor's Property becomes worn out, obsolete or incapable of economical repair (not due to any negligence, act or omission by the Lessee or the Lessee's employees and agents) then the Lessee must, at its expense, promptly attend to replacement of the Lessor's Property with items which perform the same function in accordance with all Environmental Laws, and which are installed in a proper and workmanlike manner. (e) Notwithstanding clause 5.1(c), if the Lessee requires the Petrol Tanks to be altered or replaced due to changes by the Lessee in relation to the underground petrol tanks configuration, storage capacity or being required to comply with any Environmental Law or any law relating to permitted use, then the Lessee will be responsible for the cost of any such alteration or replacement of the Petrol Tanks.
5. Clause 8.2 preserves to the lessor certain powers to enter and repair: 8.2 Lessor may enter to repair and comply with Regulations The Lessor shall have the right to enter upon the Premises with all necessary materials and equipment at all reasonable times and on reasonable notice (but at any time and without notice in the case of an emergency): (a) to enter and view the state of repair of the Premises and to ascertain whether or not there has been any breach of the terms of this Lease; (b) to carry out repairs or other works to the Premises or to the Building or to any adjacent building; […] (d) for the purpose of complying with the terms of any present or future legislation affecting the Premises or the Building or of any notice served on the Lessor or Lessee by any competent authority for which the Lessee is not responsible under this Lease; […] (f) for the purpose of carrying out any repairs alterations additions or other works to the utility or other services provided to the Lessee and/or other tenants of the Building;
6. Clause 12.4 requires the lessee to comply with all orders and legislation in respect of use of the premises, but excluding any obligation to carry out "structural alteration required by such authority".
7. By clause 14.1 the lessee acknowledged that no promise, representation, warranty or undertaking was given by the lessor about the suitability of the premises, including any facilities and amenities of the premises. Clause 14.2 contained an entire agreement clause.

Would replacing the waste water system be 'work of a structural nature'?

1. One of the plaintiff's submissions to justify an order requiring one of the defendants to replace the waste water system was that clause 5.1(c) of the lease imposed an obligation on the lessor to do so because the system ought to be categorised as "structural". The plaintiff submitted that as work involved in the replacement of the septic tank system included plumbing, piping and re-routing water, it ought to be caught as 'work of a structural nature'. I do not accept that submission.
2. Applying the principles of contractual construction set out in Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104, 116-117 (French CJ, Nettle and Gordon JJ), the only reasonably available commercial construction of the lease tells against the submission.
3. The lease does not contain any definition of 'work of a structural nature'. However, it provides express obligations on the lessee to: 1. Maintain the Lessor's Property - clause 5.1(b); 2. Replace the Lessor's Property if it becomes worn out, obsolete or incapable of economical repair - clause 5.1(d); and 3. Comply with all requirements of public authorities - clause 12.4.
4. The definition of "Lessor's Property" in annexure B includes "Waste water unit - kiwkflow, model: D15, Serial No: 255740, with piping and pump". Therefore, the definition is not limited to the waste water unit alone but extends to 'piping and pump.'
5. Every provision of a contract should be construed to render them harmonious with each other: Fitzgerald v Masters (1956) 95 CLR 420, 437 (McTiernan, Webb and Taylor JJ). An internally harmonious construction of the lease and clause 5.1 would exclude the waste water system from "work of a structural nature", as it is instead expressly dealt with in clauses 5.1(b) and 5.1(d). That is the end of the matter. The plaintiff has not relied on any lay or expert evidence or authorities concerning the meaning of "work of a structural nature" to demonstrate a different construction is appropriate: cf Alamdo Holdings Pty Ltd v Australian Window Furnishings (NSW) Pty Ltd [2006] NSWCA 224, [40] (Hodgson JA); Advance Fitness Corporation v Bondi Diggers Memorial [1999] NSWSC 264, [108] (Austin J).
6. As accepted by the plaintiff, without the Court adopting the plaintiff's construction of clause 5.1(c), or any other agreement or operative estoppel, the plaintiff, as lessee, is responsible for all the costs of pumping out waste water and the replacement of the septic system and grey water system, if it "becomes worn out, obsolete or incapable of economical repair" pursuant to clause 5.1(d).

28 July 2010 meeting

1. As the foundation of its estoppel claim, the plaintiff asserts that on 28 July 2010 at an onsite meeting, Mr Todarello made an unequivocal representation to Mr Rana, Mr Singh and Mr Kumar, who was an employee of the plaintiff, that the first defendant would "get the septic system fixed" and "get the [grey water system] fixed", and that until the system was rectified, a rebate of $2000 per month would be offset against the rent for the increased costs incurred by the plaintiff for the pump out costs.
2. The plaintiff claims that this representation was consistent with the first defendant's later conduct and correspondence. The plaintiff claims it relied on the representation in deciding to sign the Deed of Consent to Assignment and the Transfer of Lease in early 2012.
3. The defendants accept that Mr Todarello, or his agents, had been notified by Mr Rana about issues to do with the waste water system in early 2010 and they considered it appropriate to investigate remedying those issues, however, they do not accept that the representations were made as alleged by the plaintiff, or that they were unconditional.
4. All witnesses agreed that there was at least one conversation between Mr Todarello and Mr Rana in the presence of Mr Joseph Grassi, the defendants' solicitor, about the high cost of the pump out costs and the possibility of a rebate and a replacement of the waste water system. However, there are differences in the accounts given.
5. Mr Rana's evidence is that Mr Todarello said in or around June 2010: "I will get the septic system fixed. I'm not sure how we will do this, but if Joe [Sgro] can give me the details of someone who can give a quote, we can get it fixed… we can pay 50% [of the pump out costs of $4000-$5000 per month]…Whatever needs to be done, get it done. … We will get [the greywater system] fixed." Mr Rana was not cross examined about this evidence.
6. Mr Kalra's evidence is that Mr Rana reported the conversation from the meeting to him: "Tony is ready to fix the issues. He will pay $2000 per month of the septic tank pump out costs until it is fixed or replaced. Joe said to fix the grey water system will be very expensive, so it will be cheaper to install a new system. …Tony told Joe to start work on getting a DA for the new system." He was not cross-examined about this evidence.
7. Mr Joseph Sgro or "Joe" did not give evidence, but was known to all the witnesses who did give evidence as a developer of service stations. The first defendant engaged him to assist with assessing the functionality of the waste water system and possible changes to improve its functionality. Neither party seeks a Jones v Dunkel inference about Mr Sgro's absence.
8. Mr Todarello could not recall any real detail of conversations or meetings or events. He could not recall the onsite meeting in July 2010 and in his affidavit he denied attending any meeting on site in 2010. However, in cross-examination he accepted that a meeting must have happened, because his lawyer, Mr Grassi, said it did. The only meeting he recalled with Mr Rana and Mr Singh was at a time he could not identify in Mr Grassi's office. The only detail of that meeting he recalled was that he was shocked when Mr Rana told him the pump out costs were $7-9000 per month. He could not recall any other words spoken at the meeting by any other person, including himself, in reaction to that information, or about any other topic. He did accept that at some point in time he agreed to provide a $2000 rebate to assist the lessee with the pump out costs, and to replace the waste water system if he was able to obtain funding.
9. There are documents that also bear on the likely timing and contents of the 28 July 2010 meeting. First, the cost of pumping out the system appears to have been something discussed between Messrs Rana, Singh and Kalra, because special condition 42 of the 2010 Contract for the Sale of Business provides that Mr Rana and Mr Singh warranted that the costs of pump out per month payable by the plaintiff will be the lesser of $1000 and 60% of the total pump out costs. It would have been in Mr Rana and Mr Kalra's interests to have the first defendant agree to assist with the pump out costs and replace or improve the waste water system to reduce or eliminate those costs. It is therefore something that is likely to have been raised with the first defendant by Mr Rana during the middle of 2010.
10. Secondly, Mr Grassi's evidence was that there were two meetings, one at the site and the other at the managing agent's office at Raine & Horne. He accepted that before the onsite meeting the issue of a rebate for the costs of the pump out had been raised by Mr Rana and Mr Singh, because he had received a letter from their solicitor dated 13 July 2010 asking him to obtain instructions about whether the first defendant was prepared to contribute $2000 per month towards the water waste removal fees.
11. In response, on 15 July 2010, Mr Grassi had sent a letter to the lawyers for Mr Rana and Mr Singh: "In relation to the waste water management system we are instructed that our client is prepared to consider the options available in relation to the waste water management system. In accordance with the terms of the lease your client is to pay for the removal of waste water. We are instructed that our clients will further consider the matter once a proposal has been put to it in relation to the installation of waste water management system."
12. Thirdly, and significantly, on 4 August 2010, Mr Grassi wrote another letter to Messrs Rana and Singh's lawyers referring to a meeting on site on 28 July 2010, at which Mr Todarello, Mr Grassi, Mr Sgro, representatives from council and Mr Rana were present "with other persons" to discuss the waste water management system. The letter states: "It was decided that Mr Sgro would proceed to co-ordinate the putting together of a proposal for consideration by our client and your client in relation to the installation of an alternative waste management system. In the meantime, Mr Sgro asked our client if he was prepared to contribute to the monthly costs your client is currently incurring to pump out the waste water management system. We are instructed that our client is prepared to rebate to your client the sum of $2000.00 per month to a nominated bank account provided that all rent is up to date." The letter also contains a complaint about the rent not being up to date.
13. Counsel for the defendants submitted that oral evidence of witnesses ought be treated with caution unless supported by contemporaneous documentary evidence.
14. In addressing the evidence, I note that the events said to give rise to representations for the purpose of an estoppel occurred almost 12 years ago in circumstances where all the witnesses' evidence was imprecise and there is an incomplete documentary trail. As the defendants submit, and I accept, there is a need for caution in circumstances where the passage of time may render witness memory fallible: Watson v Foxman (1995) 49 NSWLR 315, 319 (McClelland CJ in Eq). Consistent with the parties' submissions, I have relied on primarily documentary evidence rather than vague oral evidence.
15. Ultimately, both parties agreed that the 4 August 2010 letter is the best evidence of what occurred at the 28 July 2010 meeting which I accept also having regard to the oral evidence, which was reasonably consistent with that letter.
16. The 4 August 2010 letter includes a representation that the first defendant would: 1. "proceed to coordinate the putting together" of a proposal for consideration in relation to the installation of an alternative waste management system; and 2. provide a rebate on terms.
17. Both are discussed below.

Terms of rebate promise

1. The plaintiff submits that the 4 August 2010 letter documented the first defendant's oral promise to pay a rebate of $2000 from the time the rent was up to date until there was no longer any requirement to pump out the waste water, because the first defendant had replaced the system as it had promised.
2. I note the 4 August 2010 letter: 1. did not provide an end-date for the payment of a rebate and so logically it would continue as long as pump out costs were paid; 2. did not make the payment of the rebate conditional upon proof of the pump out costs; 3. did not specify whether the rebate would be suspended during any period when rent was not up to date; 4. did not refer to payment of outgoings being relevant to the rebate.
3. The defendants accept that the letter included a promise to provide a rebate to Mr Rana and Mr Singh, but submitted that properly construed, it required rent and outgoings to be paid on time. The defendants also accept that later the rebate was promised to the plaintiff on the same terms following the assignment of the lease.
4. Counsel for the defendants stated in opening that this rebate arrangement was in fact a contract, which is consistent with the language used by Mr Grassi in correspondence and in his evidence, "It was an offer which was accepted. To that extent if it's a verbal contract, it's a verbal contract". However, the plaintiff submits, and it appears likely, that there was no consideration for such a contract. However, it is not necessary for the plaintiff's case for the Court to find the arrangement was a contract.
5. Mr Grassi wrote to the joint lawyers for Mr Rana and Mr Singh and the plaintiff in subsequent years, consistently referencing the defendants' promise to provide a $2000 per month rebate, but with different terms.
6. On 22 June 2011 Mr Grassi wrote to Mr Rana and Mr Singh's lawyer: "Subject to the payment being made by your client [of arrears in rent] and your client continuing to make rent and outgoing payments in accordance with the terms of the lease our client will commence to rebate to your clients nominated account the sum of $2000.00 within 7 days of relevant payment being made by your client. We will instruct our client's managing agent to pay the rebate from moneys received by them from your client before accounting to our client for the balance of the payment." This letter required rent and outgoings to be paid in accordance with the lease, which is different to the 4 August 2010 letter that only expressly required rent to be paid on time.
7. Later correspondence was consistent with this requirement that all financial obligations were paid on time. On 14 July 2014 Mr Grassi wrote to Messrs Rana and Singh and the plaintiff's joint lawyer: "In relation to our client's monthly contribution of $2000.00 towards the costs of removing waste from the Premises ("the Agreement"), we note that: … (b) It was a condition of the Agreement that the rebate would only apply in the event your client was not in arrears as regards to its financial obligations to our client."
8. Mr Kalra did not accept that he had seen the 14 July 2014 letter or that it accurately represented the terms of the rebate promise actually made in 2010. The plaintiff's case was always that the precondition to the rebate was that rent (rather than rent and outgoings) was paid on time.
9. However, that position ignores the 22 June 2011 letter, which was known to the plaintiff before it entered into the Transfer of Lease. That letter is therefore the appropriate focus for any alleged reliance by the plaintiff in agreeing to the transfer of the lease.
10. I find that on its proper construction the relevant rebate promise taken from the 22 June 2011 letter was in the following terms: 1. If the lessee paid its rent and outgoings on time for a particular month, then the lessor promised to rebate $2000.00. 2. If in a particular month the lessee had not made those payments on time, and the condition was not satisfied, then no rebate would be applied by the lessor for that month. 3. The rebate payments would continue as long as there were pump out costs being paid by the lessee. It is likely that, at the time of the 4 August 2010 and 22 June 2011 letters, all the parties considered it likely that the costs would cease when the system was replaced. As detailed below, that never occurred.

Could landlord cease paying the rebate because of a misrepresentation?

1. There are two misrepresentations raised by the defendants as reasons to cease the rebates and, in fact, reverse part of the rebates allocated. The first alleged misrepresentation was made by Mr Rana, the second by the plaintiff.

Misrepresentation by Mr Rana

1. Mr Todarello's evidence was that he originally agreed to provide a rebate based on the information provided by Mr Rana about the costs of the pump out per month, which he recalled as being $7-9000.00 per month as detailed above.
2. Mr Todarello did not expressly make the rebate promise linked in any way to the actual costs of the pump out costs. Counsel for the defendants accepted that the amount of the rebate was not going to fluctuate if the actual costs fluctuated. Mr Todarello's evidence was that he instructed his agent to stop paying the rebate when he learned through his son, who did not give evidence, that a third party waste removal company asserted that the maximum fee payable for pump out per month was between $1,200.00 and $1,800.00 in peak period.
3. I am not persuaded that in 2010 Mr Rana told Mr Todarello that pump out costs were $7-9000.00 per month. There is no suggestion that the plaintiff gave that information to Mr Todarello. To the extent it is relevant, on balance I consider that in mid 2010 Mr Rana stated that costs were around $4-5000.00 per month. I have reached that conclusion for the following reasons: 1. The pump out costs paid and receipted in June 2010 were $5,134.80, which makes that sum a likely reference point for a discussion around that time. 2. This is consistent with Mr Rana and Mr Kalra's evidence that the pump out costs discussed were $4-5000.00 per month. 3. This is also more consistent with clause 42 of the June 2010 Contract for the Sale of Business, which anticipated the plaintiff only paying $1000.00 per month and the lessor paying the rest, but much less than $6-8000.00. 4. While, on 24 June 2011, Mr Rana did send an email to the first defendant seeking payment of the rebate, in which he stated "at the moment we are paying more than $7000-$9000/month. Please release the rebate below…", this email does not state what the payment of "$7000-$9000" is for and there is no objective evidence of whether this solely concerned pump out costs. Even if the statement concerned the pump out costs, this email came after the 2010 promise of the rebate. 5. Mr Todarello had a very poor memory of details and times and is likely to have mis-remembered when he was informed of the figure of $7-9000.00, which was contained in the email from Mr Rana in 2011, well after the rebate promise had been made.
4. I am not persuaded the first defendant was misled into agreeing to pay a rebate based on actual costs or misrepresented costs. This is consistent with the first defendant not requiring actual invoices when the promise was made and not calculating the amount of the rebate based on actual costs.
5. It is not suggested an estoppel bound the first defendant to provide a rebate to Mr Rana and Mr Singh. Instead, the 28 July 2010 conversation and the 4 August 2010 letter contained a conditional promise of a rebate, which was paid for some period of time. It was open to the first defendant to cease paying it at any time without reference to any misrepresentation.

Misrepresentation by the plaintiff

1. Mr Kalra openly accepted that when the second defendant asked for actual figures of pump out costs in December 2012 the plaintiff's staff provided some doctored or inflated invoices to the second defendant, and that, for a period of time, he deducted the total of the pump out costs from the rent paid to the second defendant, before in fact accepting liability for those amounts less the rebate.
2. However, that conduct again came after the promise of a rebate had been made to the plaintiff and after the rebate had been paid from time to time. It was not open to the defendants to alter the promise, if it otherwise formed the basis of an estoppel. If there was no estoppel, then it was open to the defendants to alter the promise at any time.

Could defendants reverse rebates?

1. Both parties relied on a ledger created by Raine & Horne detailing payments by Messrs Rana and Singh and the plaintiff and the charges raised against them.
2. Based on the ledger the rebate was paid at the following times to Mr Rana and Mr Singh until March 2012 and thereafter, as submitted by the plaintiff, to the plaintiff: Period of rebate Date rebate paid Ledger balance immediately preceding rebate entry Amount of rebate Who received benefit of rebate August 2011 5 August 2011 $0.00 $2,000 Rana/Singh September - November 2011 13 December 2011 $0.00 $6,000 Rana/Singh December 2011 13 December 2011 $0.00 $2,000 Rana/Singh January 2012 13 January 2012 $841.52 $2,000 Rana/Singh February 2012 9 February 2012 $0.00 $2,000 Rana/Singh March 2012 12 March 2012 $0.00 $2,000 Rana/Singh April 2012 12 April 2012 $1.68 $2,000 Plaintiff May 2012 15 May 2012 $6565.35 $2,000 Plaintiff June 2012 14 June 2012 $3265.35 $2,000 Plaintiff July 2012 - January 2013 13 February 2013 $62,767.93 $14,000 Plaintiff

1. The plaintiff relied on the ledger to show that the defendants: 1. had only ever rebated $20,000 to the plaintiff; 2. had allocated the rebate even when the plaintiff was in arrears with rent and outgoings (ie not in accordance with the condition asserted by the defendants); 3. reversed $20,000 of the rebate in the ledger on 15 April 2013.
2. The defendants relied on the ledger to demonstrate that Mr Rana and Mr Singh, and then the plaintiff, were, as a generalisation, never up to date with outgoings and rent.
3. The defendants did not seek to recover the rebate paid to Mr Rana and Mr Singh, whether by reason of the alleged misrepresentation or otherwise.
4. However, the defendants did reverse $20,000 of the rebate to the plaintiff on the ledger. The reversal was applied to months where the ledger showed that the plaintiff was not up to date on rent and outgoings. The plaintiff did not suggest that the reversal gave rise to any restitutionary remedy, nor did it argue that the rebate constituted a gift that could not be reversed. The only claim concerning the rebate was seeking a declaration as to an estoppel. Because the representation I have found required the plaintiff to be up to date with rent and outgoings, the plaintiff has not been able to demonstrate on the evidence that it was entitled to the rebate allocated on the ledger.

Replacement of waste water system

1. In 2010 and 2011 the first defendant took various steps to investigate the waste water management system and its possible replacement. Mr Todarello accepted that at some stage he promised to replace the system if he could obtain funding, and this was consistent with Mr Grassi's evidence and later correspondence.
2. In May 2011 the defendants obtained a "Site Investigation Report" from Service Station Developments, which concluded that the greywater system was not operational and was not installed correctly. The report further recommended that the quantity of water being processed be reduced so that the septic system could work more efficiently.
3. On about 22 June 2011 an on-site wastewater management study report was prepared by Envirowest Consulting for the first defendant. It proposed a solution of recycling all the waste water on the property and avoiding the need for pumping it out. The system recommended was the "Ecomax" system.
4. In the same month the first defendant submitted a development application to Bathurst Council for works to rectify the greywater and septic system, and this was notified to Mr Rana by Mr Sgro.
5. On 7 November 2011 Bathurst Regional Council granted approval for the installation of the Ecomax system on the site.
6. One of the steps in the development approval was the disconnecting of the grey water system. The first defendant had in fact disconnected the greywater system in about June 2011.
7. While in the June 2010 Contract for Sale of Business Mr Rana and Mr Singh had agreed to seek the consent of the first defendant to the assignment of the lease to the plaintiff, Mr Kalra's evidence was that he was not prepared to agree to the transfer of the lease until the issues with the site and the waste water system were resolved or the first defendant had agreed to remedy the situation.
8. However, the correspondence from the plaintiff's solicitor only ever referenced the hope of some rebate, rather than the replacement of the waste water system. For example, on 16 May 2011 the plaintiff's solicitor wrote to Mr Rana and Mr Singh's solicitor noting that the plaintiff was ready to settle, but stating: "The delay in completion is attributable to the failure of the Vendor to procure the consent of the Landlord to the Assignment of Lease and a variation of the lease as regards the monthly rental reduction of $2000.00 to offset the tenants costs incurred as a result of the defective septic system. Whilst the Purchaser would prefer that the rent reduction provision be incorporated in the Deed of Assignment, he will accept a letter from the Landlord granting the concession."
9. Again, on 23 December 2011 the plaintiff's solicitor wrote to Mr Rana and Mr Singh's solicitor. The letter referred to an understanding that the parties had agreed to settle upon the basis that the "Landlord to confirm that Tenant shall make no further contribution to the septic pump out costs from 1 January 2013". This proposed variation of the lease was different to the $2000.00 per month rebate.
10. No letter or confirmation from the first defendant or amended lease was received concerning any form of the rebate prior to the execution of the Transfer of Lease. However, on 22 March 2012 the first defendant, through its solicitors, wrote to Mr Rana and Mr Singh's solicitor in the following terms: "In relation to the DA for the working of the pump out system our client is currently renegotiating some of its finances. The prospective cost of these works is in excess of $200,000.00 and is a major cost which will require funding by our client's bank. Once this funding has been secured our client will then authorise the works to proceed."
11. This letter is relied upon by the plaintiff as evidencing an oral promise by the first defendant said to have been made at the 28 July 2010 meeting to replace the system, upon which it says it relied in entering into the assignment of the lease.
12. Following the assignment of the lease, the defendants' real estate agent also wrote to the plaintiff to the effect that waste water system would be "fixed" and the DA works would be done, if and when finance was obtained. However, it is not suggested that such statements were relied upon, as they arrived after execution of the Transfer of Lease and therefore were too late.

Estoppel

1. The representations made at the 28 July 2010 meeting are set out earlier at [41]. The plaintiff has further hurdles in order to establish an actionable estoppel.

Were the representations made to the plaintiff?

1. The defendants submit that at the 28 July 2010 meeting no representation was made to the plaintiff, and therefore the plaintiff could not rely on them, nor could the defendants have induced such reliance.
2. Mr Kalra admitted in cross-examination that Mr Todarello had not made any representation to him before the transfer of the lease. He relied on what Mr Rana had told him and correspondence from the first defendant's lawyers to Mr Rana's lawyers, including in particular the 22 March 2012 letter, which is dealt with below.
3. Mr Kumar, the plaintiff's employee, whom the plaintiff places at the 28 July 2010 meeting, did not give evidence in the trial and is no longer employed by the plaintiff. Mr Kalra's evidence was that Mr Kumar reported to him about the onsite meeting that day. Mr Kalra was not cross-examined further on this point. Mr Rana also gave evidence that Mr Kumar was at the meeting and was not cross-examined on that evidence. No witness for the defendants could recall Mr Kumar at the meeting, but Mr Grassi accepted that there were other people at the meeting and one of them could have been Mr Kumar. Mr Todarello did not know a person named Mr Kumar.
4. Overall the evidence favours the conclusion that Mr Kumar was at the meeting. However, there is no evidence that he was known to the first defendant or others as a representative of the plaintiff and that he attended in that capacity. There was no evidence that the plaintiff or Mr Kumar had informed the first defendant that he was representing the plaintiff at the meeting. At that time, the plaintiff was running the site pursuant to a licence from Mr Rana and Mr Singh, and others may well have understood that Mr Kumar was an employee or associate of Mr Rana.
5. The defendants have not sought a Jones v Dunkel inference to be drawn concerning Mr Kumar's absence. However, they do seek such an inference in relation to Mr Singh and Mr Ian Sheriff, who was the plaintiff's former solicitor from at least 2010 to 2014.
6. For a Jones v Dunkel inference to be drawn, the first requirement is that it might reasonably have been expected that the party would call the absent witness. Further, the strength, or weakness, of the case made out by the evidence actually presented in the case bears on whether inferences should be drawn from other evidence not having been presented: see JPQS P/L v Cosmarnan Constructions P/L [2003] NSWCA 66 at [24] per Meagher JA (with whom Mason P and Beazley JA agreed).
7. It does not appear contested that Mr Singh was present at the 28 July 2010 meeting. However, there is no evidentiary basis for concluding that he was "in the plaintiff's camp". Mr Kalra was not challenged on his evidence that "I was not dealing with Satvender Singh. I'm dealing with Riswan Rana". Further, it is not necessary for a party to call every person who attended a meeting.
8. I do not draw any inference about the plaintiff's failure to call Mr Singh, but note that even if an inference was drawn that Mr Singh's evidence would not have assisted the plaintiff, such inference would do little to assist the defendants, particularly where the defendants submit documentary evidence ought to prevail over any witness' contrary evidence.
9. Mr Sheriff was not present at the 28 July 2010 meeting and at most could have given evidence about meetings with Mr Kalra and the instructions he had received prior to preparing letters or documents for the plaintiff. This again does not mean he was in the "plaintiff's camp" or that there was a reasonable expectation he would be called. I decline to draw an inference. In any event his possible evidence would not impact on what representations were made by the defendants at the relevant meetings, and issues of reliance by the plaintiff are best demonstrated by the evidence of Mr Kalra and the documents themselves. It was not suggested by the plaintiff that Mr Sheriff sent correspondence without Mr Kalra's instructions. Therefore, any inference would do little to assist the defendants' position.
10. Neither does the documentary evidence establish that the first defendant knew any representation it made at the 28 July 2010 meeting was being made to the plaintiff. Mr Rana and Mr Singh first raised with the first defendant their desire to assign the lease on about 5 August 2010 (referred to in a letter dated 30 November 2011 from Mr Grassi to Mr Rana and Mr Singh's solicitor). No letter dated 5 August 2010 is in evidence, neither is there any evidence of Mr Rana and Mr Singh chasing an answer to the request. Mr Grassi's 2011 letter does not demonstrate that the first defendant knew at the 28 July 2010 meeting that Mr Kumar was the representative of the plaintiff, or that the plaintiff was an intended assignee of the lease, to whom a representation would be passed and upon which reliance would be placed.
11. The plaintiff submits that the first defendant's knowledge can be inferred. While it can be accepted that the first defendant would understand that communication between Mr Rana and the plaintiff was necessary to organise the transfer of the lease, there is no evidence of what information the first defendant understood was being communicated about discussions concerning the waste water system. There are no letters or emails directly between the first defendant and the plaintiff before the assignment of the lease, neither was there a request from the first defendant that information be passed on to the plaintiff.
12. Further, letters from the plaintiff's lawyer to Mr Rana and Mr Singh's lawyers sought confirmation about the rent rebate. However, there is no evidence the plaintiff's request was communicated to the first defendant by Mr Rana and Mr Singh.
13. The plaintiff submitted that it was entitled to the benefit of an estoppel as the assignee of the lease, citing Brikom Investments Ltd v Carr [1979] 1 QB 467, and in particular, Lord Denning MR's judgment.
14. In Brikom a landlord gave assurances, in some cases written and in some cases oral, prior to the grant of lease that it would repair several roofs at its own expense and would not seek contribution from tenants pursuant to a covenant in the lease. Later the landlord sought contribution from any tenant who did not have a written confirmation of the assurance. Some of the tenants defending the landlord's claim were, firstly, an original lessee who had relied on the oral assurance before entering the lease. Secondly, some were the assignees of the tenants who had been told of the landlord's assurance before taking the assignment, and thirdly, another was the assignee from the first assignee, whose predecessor had known of the promise before taking the assignment.
15. The Court of Appeal found that the landlord was bound by a collateral contract that it would not pursue the tenants for contribution. Lord Denning MR considered that the same result could be achieved by way of "promissory estoppel" because the benefit of the promise passes to the assignee: "The burden and the benefit run down the line of assignor and assignee on each side … when the landlords made this promise they intended it to be for the benefit of all those from time to time holding the leases, realising that each in turn would tell his successor … The landlords, having made a representation of that kind, knowing that it would be passed on, cannot escape from it by simply saying 'These people are assignees'.": at 484-5.
16. Roskill LJ did not agree with Lord Denning MR, holding: "With great respect, I would not go as far as Lord Denning MR in saying it is now the law that the benefits and burdens arising from a promise made in circumstances such as those presently found by the [trial] judge, to quote the phrase he used a few moments ago, "run down both sides".": at 486.
17. Cumming-Bruce LJ reached the conclusion that the assignees were not liable because the landlords had waived the obligation of the original tenants to make a contribution and their obligation did not revive upon the event of an assignment.
18. The obvious difference between Brikom and the present case is that Mr Rana and Mr Singh did not rely upon any representations of the first defendant by taking steps that proved detrimental upon the first defendant resiling from the representation. In any case, even if Mr Rana and Mr Singh had remained tenants, there has been no suggestion of an estoppel operating for their benefit that could be "passed" to the plaintiff. The Brikom case therefore does not assist the plaintiff. It is unnecessary to decide the correctness of Lord Denning's reasoning in Brikom here. It suffices to note that it has not been adopted in Australian courts and whether an estoppel can be an assignable right is subject to several qualifications: see Handley, Estoppel by Conduct and Election (Sweet & Maxwell, 2016) at 13-046-13-050; Zugic v Vesuvius Australia Pty Ltd [2020] NSWSC 106 at [234]-[247] (Ward J).
19. I find that the first defendant did not make any representation to the plaintiff at the 28 July 2010 meeting, nor following that meeting in correspondence.
20. Nevertheless, the other elements of estoppel are considered below.

Reasonable reliance by plaintiff?

1. The plaintiff claims it relied on the 28 July 2010 representations about both the rebate and replacement of the system when signing the Deed of Consent to Assignment of Lease and the Transfer of Lease. As noted above, the plaintiff was legally represented when negotiating and executing those documents. Mr Kalra said he left legal documents to his lawyer.
2. Counsel for the plaintiff accepted that a significant issue for the plaintiff's case is that the Deed did not contain any provision concerning the replacement of the septic system or the rebate. Instead, by clause 4.1 of that Deed, the plaintiff promised the first defendant that it would, from the date of the assignment, "perform all of the provisions on the part of the Lessee expressed or implied in the Lease". The plaintiff also did not receive any written confirmation about the rebate or the replacement of the waste water system from the first defendant, despite asking Mr Rana and Mr Singh to obtain such an assurance from the first defendant.
3. It appears plain that the plaintiff expected the defendants to remedy the waste water system and pay a rebate as evidenced by the emails it sent after the assignment of the lease. However, the issue is whether the defendants were responsible for that expectation and whether it is actionable as an estoppel. The defendants' case is that any representations about the waste water system and rebate were made by Mr Rana to the plaintiff and not by the defendants.
4. Mr Kalra's evidence in cross-examination was that the important issue upon which he placed most hope was the replacement of the system rather than the rebate: Q. You said earlier today that the issue of the rebate was very important to you? A. The rebate is not important for me. Q. The rebate is not important for you? A. No. Septic system need to fix is the very important to me. Inconsistently with this position, the plaintiff's solicitor's letters only detailed the issue of the rebate. However, in circumstances where no written confirmation of the rebate was ever received, there is no reasonable basis to suggest the plaintiff reasonably relied on the 28 July 2010 promise concerning the rebate.
5. In relation to the promise to replace the system, the 4 August 2010 letter did not include any promise beyond one to "proceed to coordinate" a proposal to replace the system for consideration. It was not an absolute promise to replace.
6. To the extent that the plaintiff sought to rely on the 22 March 2012 letter from the first defendant's lawyer to Mr Rana's lawyer, the defendants submitted that the letter was received after the plaintiff had already committed to the lease transfer.
7. Mr Grassi's 22 March 2012 letter stated: "In relation to the DA for the working of the pump out system our client is currently renegotiating some of its finances. The prospective cost of these works is in excess of $200,000.00 and is a major cost which will require funding by our client's bank. Once this funding has been secured our client will then authorise the works to proceed."
8. However, that 22 March 2012 letter suggests the deed had already been signed by the plaintiff as it commences with: "We confirm we now hold the Deed of Consent to Assignment of Lease in triplicate".
9. Further, it appears that by 5 March 2012 the plaintiff's lawyer had completed all the paperwork needed for the transfer of the lease, including having it signed. The Electronic Notice of Sale (eNOS) document 241220 held by the Land and Property Management Authority and completed by the plaintiff's lawyer, identifies the "acquisition date" as 5 March 2012. This, together with the signed Transfer of Lease, was sent by the plaintiff's lawyer to Mr Rana's lawyer on 5 March 2012 also. Therefore, I find that before 22 March 2012 the plaintiff had committed to the completion of the purchase and the transfer of the lease and could not have relied on the 22 March 2012 letter concerning the replacement of the system. Even if there was such reliance, the promise was conditional on the first defendant obtaining finance as detailed below.
10. Based on the above and, in particular, clause 4.1 of the Deed of Consent to Assignment of Lease, I do not consider that the plaintiff relied on any representation by the defendants made to the plaintiff in executing the transfer documents.

Detriment

1. The plaintiff must show that it suffered detriment by the defendants resiling from the promises that they had made. However, there is a question as to whether the defendants have in fact departed from the terms of those promises.

Rebate

1. The terms of the rebate promise are set out earlier at [41]. The defendants assert that the plaintiff never qualified for the payment of the rebate, because it never paid its rent and outgoings on time. There are multiple letters sent from the defendants' lawyer and real estate agent to Mr Rana and the plaintiff outlining the arrears in rent and outgoings and demanding rectification of that state of affairs.
2. The plaintiff bore the onus of proving that the rebate ought to have been allocated more often than it was. However, the only evidence before the Court is the Raine & Horne ledger, which demonstrates that at no other time after the assignment of the lease was the plaintiff up to date with rent and outgoings. It appears that there were a few months where the balance was only overdue by less than $10,000, and had the rebate been applied consistently throughout the whole period without regard to the balance from time to time, then the ledger would have been positive in those few instances. However, it is impossible to carry out precise calculations based on the ledger alone.
3. The only witness who could speak to the ledger was Ms Katie Matosa (formerly Katie Radcliffe), who had been the Raine & Horne managing agent for the site for the defendants from February 2011 for about 4 years. It was not suggested to Ms Matosa that the ledger was inaccurate. She was not able to explain all the charges in it during cross-examination, which is not surprising, as they were historical charges and she had not been asked to review or investigate the document previously.
4. Based on the only substantive evidence, being the ledger, the plaintiff has failed to prove that the defendants have resiled from the promise of the rebate, or that it has suffered any detriment by reason of the second defendant's refusal to rebate rent in accordance with the terms of the promise.

Replacement of system

1. The new system approved by Bathurst Council was not implemented by the defendants. Mr Todarello's evidence was that he was unable to obtain finance for the system in 2012-2013. This is consistent with correspondence sent to Mr Kalra. On 6 February 2013 his solicitor, Mr Sheriff, wrote to him: "The problem is lack of funding for the project. The landlord can't afford $300,000."
2. There were also discussions between the plaintiff and the second defendant about the plaintiff funding the necessary repairs, as noted in minutes of a meeting at the Raine & Horne office on 12 February 2013. This is also consistent with the plaintiff's lawyer's letter dated 9 September 2013 including: "The landlord has indicated to the tenant that the landlord does not have the financial resources to meet construction costs."
3. In the witness box Mr Todarello did say he would "look at" replacing the system today if he could obtain funding. However, there was no evidence that the second defendant currently has such funding, and there was no suggestion that Mr Todarello's attempts had not been honest and reasonable (to the extent that a Meehan v Jones (1982) 149 CLR 571 analysis ought to apply, not that it was suggested by the plaintiff). Therefore, there is no evidence of a failure to fulfil the promise and therefore no detriment can be established.
4. I note that the defendants submitted that there was no evidence that the system was in fact currently in need of replacement. A report completed in July 2014 concluded that the system was working and there was no leaking into the tanks or cross-connection with the storm water. There is no more recent report in evidence concerning any defects in the system. However, that matter is neutral, as the promise made in 2010 was that the system would be replaced without the need for another investigation of its efficacy.
5. Counsel for the plaintiff gave an open offer on instructions, that the plaintiff is prepared to fund the replacement of the system on a number of terms, including that the money be "repaid" by way of cash or rental waiver before the exercise of the option. This offer was not accepted, and therefore nothing turns on it for the purposes of this judgment.

Unconscionable conduct?

1. The final element of the estoppel claim is whether the defendants acted unconscionably in standing by knowing of the plaintiff's reliance and then resiling from the representations.
2. I do not consider that the defendants induced or intended to induce the plaintiff into executing the Deed of Consent to Assignment or the Transfer of Lease. Contrary to the defendants' submissions, there was a benefit to the defendants in agreeing to the transfer in the form of additional guarantees by both Mr Rana and Mr Singh and the plaintiff. However, I do not consider this amounts to any inducement, as opposed to a commercial step taken when accepting an unknown entity as the new lessee. I do not consider the defendants acted unconscionably.
3. While it does not matter, in relation to the rebate the defendants submit that it was not unconscionable of them to refuse to rebate because the plaintiff provided some 'fraudulent' invoices, when asked by the second defendant to demonstrate the pump out costs. However, Mr Kalra admitted frankly that the invoices were false and that someone within his company prepared them.
4. The defendants in effect rely on the so-called 'unclean hands' defence (while not specifically pleaded), which is based on the idea that equity will not aid a person to derive an advantage from their own wrong. It has been said that there are two necessary but not sufficient conditions for the application of the defence. First, the alleged impropriety must be a depravity in a legal as well as moral sense and second, the impropriety must display an immediate and necessary relation to the equity sued for, that is the plaintiff's conduct must be directly related to the defendants' wrongful action: see eg Bullhead Pty Ltd v Brickmakers Place Pty Ltd (in liq) [2018] VSCA 316 at [118]; Official Trustee in Bankruptcy v Tooheys (1993) 29 NSWLR 641, 650 (Gleeson JA). These requirements should not be given a narrow or technical construction: Kation Pty Ltd v Lamru Pty Ltd [2009] NSWCA 145 at [28] (Hodgson JA).
5. The defence does not apply to behaviour of a plaintiff that has no relevant connection with the equity they seek to invoke. Also, it cannot be assumed that a plaintiff who comes to equity lacking clean hands will necessarily be denied relief even if their misconduct relates directly to the subject matter of the relief, because it remains discretionary: Black Uhlans Inc v New South Wales Crime Commission [2002] NSWSC 1060 at [181] (Campbell J).
6. The unclean hands maxim directs the Court to look at the conduct of the litigant who seeks the assistance of equity, rather than the conduct of the defendant: Black Uhlans at [159] (Campbell J). Here, there is no evidence of the outcome of a police investigation about the invoices. Furthermore, it is not as if the plaintiff needs to prove his own bad conduct to establish its equity in this case: Black Uhlans at [179] (Campbell J). I am not persuaded that the doctored invoices amounted to "disentitling conduct" on the part of the plaintiff.
7. I note for completeness that in relation to laches, counsel for the defendants submitted that there was no explanation for the 7-year gap between the assignment of the lease in 2012 and the commencement of proceedings, and this gap had the consequence of emphasising the uncertainty surrounding the defendants' current financial position.
8. To determine whether the delay attracts the defence of laches in these circumstances, the Court should have regard to the length of the delay, the nature of the acts done during the interval, the nature of the right claimed and the property in which it was claimed: Boyns v Lackey (1958) SR (NSW) 395, 402 (Hardie J).
9. There is evidence from 2012 that Mr Kalra was concerned with the fact that no rebate was being provided and he considered this an "urgent matter" to be resolved. Despite these concerns, the plaintiff did not commence proceedings until 2019. However, there is no evidence to suggest that the defendants changed their position or did anything in reliance on the plaintiff's failure to bring proceedings earlier. There was also no evidence, one way or the other, about the current financial position of the defendants. A bare delay without more evidence concerning prejudice to the defendants cannot establish laches: Lamshed v Lamshed (1963) 109 CLR 440, 452-453 (Kitto J, with whom Windeyer J agreed).
10. Ultimately, on the evidence before the Court, I do not consider the plaintiff abandoned its rights and the defence of laches must fail.

Conclusion

1. For the reasons above the appropriate orders are: 1. Plaintiff's claim is dismissed; 2. Plaintiff to pay the defendants' costs on the ordinary basis as agreed or assessed. 3. Grant leave to approach my Associate within 7 days by email if either party wishes to seek a different costs order.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 29 April 2022