Glasshouse Investments Pty Ltd v MPJ Holdings Pty Ltd

Arndale (Kilkenny) Pty Ltd v Gaetjens (1970) 44 ALJR 434 Birmingham Dudley & District Banking Company v Ross (1888) 38 Ch D 295 Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337 Cooper v Woolley (1867) LR 2 Ex 88 Errington v Metropolitan District Railway (1882) 19 Ch D 559 Grattan v Simpson (1998) 9 BPR 16,649 Greetings Oxford Koala Hotel Pty Ltd v Oxford Square Investments Pty Ltd (1989) 18 NSWLR 33 Hydraulic Engineering Co Ltd v McHaffie, Goslett & Co (1878) 4 QBD 670 JC Berndt Pty Ltd v Walsh [1969] SASR 34 Kohua Pty Ltd v Tai Ping Trading Pty Ltd (1985) 3 BPR 9705 Lurcott v Wakely [1911] 1 KB 905 Manchester, Sheffield & Lincolnshire Railway Co v Anderson [1898] 2 Ch 394 CASES CITED : Martins Camera Corner Pty Ltd v Hotel Mayfair Ltd [1976] 2 NSWLR 15 Miller v Emcer Products Ltd [1956] Ch 304 Owen v Gadd [1956] 2 QB 99 Penn v Gatenex Co Ltd [1958] 2 QB 210 Peppers Hotel Management Pty Ltd v Hotel Capital Partners Ltd [2004] NSWCA 114 Re Peat Resources of Australia Pty Ltd; Ex parte Pollock (2004) 181 FLR 454 Southwark LBC v Tanner [2001] 1 AC 1 Spathis v Hanave Investment Co Pty Ltd [2002] NSWSC 304 Stanford v Roberts [1901] 1 Ch 440 The Fina Samco [1995] 2 Lloyd's Rep 344 Todburn Pty Ltd v Taormina International Pty Ltd (1990) 5 BPR 11,173 Woodland v Manly Municipal Council (2003) 11 BPR 20,903

Glasshouse Investments Pty Limited (P) PARTIES : MPJ Holdings Pty Limited (D)

N Cotman SC and A Hourigan (P) COUNSEL : P W Taylor SC and G Gregg (D)

Curwood & Partners (P) SOLICITORS : Landerer & Company (D)

THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

2796/00 - GLASSHOUSE INVESTMENTS PTY LTD v MPJ HOLDINGS PTY LIMITED JUDGMENT 1 HIS HONOUR: The defendant is the registered proprietor of land and premises known as 21 Knox Street, Double Bay. On or about 6 November 1995, the defendant granted the plaintiff a lease registered O892229J over Shops 1, 3 and 5 on the ground floor and Room 2 on the first floor of 21 Knox Street for 10 years with no option to renew. The lease will terminate on 30 June 2005. The plaintiff operates a café on the leased premises. 2 The lease contains, as clause 3(21) a short form covenant: "The said Lessor covenants with the said Lessee for quiet enjoyment." 3 In April 1999, the roof of the building comprising the leased premises was severely damaged in a hail storm. The defendant did remedial building work commencing in late November 1999. The plaintiff says that that building work breached clause 3(21) of the lease and disrupted its business. It also sues in negligence and nuisance. 4 Clause 8 of the lease is as follows: "(a) The Lessor shall have the right at all times to carry out such alterations improvements and additions to the building as may be reasonably necessary for the safety of persons and property therein and for the preservation thereof provided that the Lessor shall cause as little inconvenience and disturbance as possible to the Lessee during the course of any such works or such alterations improvements and additions which will not interfere with the use of the premises by the Lessee." 5 The proceedings came on for hearing before me on 14, 15, 16 and 17 February 2005, Mr N Cotman SC and Mr A Hourigan appearing for the plaintiff and Mr P W Taylor SC and Mr G Gregg appearing for the defendant. 6 By directions given by consent on 14 December 2004, each party was directed to serve a statement of agreed issues or if no agreement, a list of issues each barrister considered would arise. I assume that there was no agreement. In any event, no agreed statement of issues was filed. Nor did any statement of issues arrive from the defendant's counsel until 4.40 pm on the working day before the hearing and 8.30 am on the third day of hearing by the plaintiff. This was not in accordance with good practice. However, although the Court was inconvenienced I will not mention the matter again. 7 In order to understand what I have to try, it is necessary to look briefly at the layout of No 21 Knox Street. Looking from the street towards the building the west side is on the left and the east side is on the right. The property has two wings, in- between there is an arcade. The front shop on the west wing at street level is Shop 2 which is branded as "Double Bay Argentum" in the photographs tendered. The east wing is branded "Twenty One". The leased premises, Shops 1, 3 and 5 occupy the whole of the east wing on the ground floor. The plaintiff's restaurant has room for 52 customers. The plaintiff also has a number of tables, I think nine, in the arcade which allows seating for another 24 customers. The arcade has a yellow line painted along its length and the plaintiff's tables occupy the eastern side of that line allowing ingress, egress and regress on the western side of the line. The arcade is normally open to the elements but can be closed off. The plaintiff has erected gates to close the arcade from the street and from the rear. 8 In order to repair the roof, the contractors engaged to do the work erected scaffolding and steel planking over the whole of the roof including over the arcade. There was also scaffolding at the rear of the building which is accessed from Knox Lane. This was in place from 10 May 2000 to 27 June 2000, though the scaffolding in Knox Lane was not removed until 14 July 2000. Asbestos was removed from the building between 6 am and 8.30 am on 21 May 2000. 9 The plaintiff particularises its damages as follows:

"(a) Electricity to the premises being cut off; and the consequent inability of the plaintiff to enjoy the Premises and to carry on its business;

(b) Rubbish skip used to collect waste was placed in a position which obstructed the entrance to the rear of the premises with the result of restricting access to the premises by customers and the delivery of goods and services to the business;

(c) Dust, gravel and building waste being blown or falling onto the tables occupied by the plaintiff for the use by its customers, affecting the amenity and quiet enjoyment of the outdoor area of the Premises the subject of the Lease and thereby caused and continues to cause a reduction in the level of customer and patronage to the plaintiff's business;

(d) Erection of scaffolding, further restricting access to the premises by customers and the delivery of goods and services to the business;

(e) Loud noise from the use of jack hammers and electric saws; affecting the amenity and quiet enjoyment of the premises by the plaintiff;

(f) Asbestos dust being removed without proper precaution, causing some to fall on the plaintiff's furniture." 10 As I have noted, the parties could not agree on the issues for trial. Eventually both counsel forwarded separate issues which overlapped to a degree. I have endeavoured to put these together in a logical sequence and will deal with the questions arising under the following heads:

A. Questions of law and construction (1) (a) What is the scope of the covenant for quiet enjoyment? (b) In particular, does it apply to the arcade section of the building having regard to the definition of the "premises" and clause 16 of the lease? (2) Does the implied covenant against derogation from the grant operate in any relevantly significant way differently to the covenant for quiet enjoyment?

(3) On the true construction of clause 8 of the lease - (a) (i) whether the works referred to must be reasonably necessary for both safety and preservation of the premises in order to be authorised; or

(ii) whether either will suffice; (b) whether works that are not in fact necessary in the sense that alternative means exist to achieve the outcome, can be within clause 8; (c) what qualification does "reasonably" make to "necessary" in the operation of clause 8; (d) does clause 8 and in particular its first limb permit work to be done which would otherwise involve a breach of covenant of quiet enjoyment contained in clause 3(21); (e) whether the proviso to the first limb of clause 8 operates by reference to absolute standards of physical possibility or alternatively by reference to a relative standard requiring consideration of the nature and scope of the work and ordinary reasonable work practices; (f) whether the proviso to the first limb of clause 8 of the lease operated, in relation to the plaintiff's limited right to use of the arcade seating area, subject to the lessor's prior use right conferred by clause 16 of the lease. (4) whether the defendant caused work to be performed on the building containing the premises let to the plaintiff between about November 1999 and July 2000 such that the defendant is responsible under the lease for the consequences of the work so conducted;

B. Questions requiring findings of fact (5) whether the work that was done in May, June and July 2000 was reasonably necessary within the meaning of clause 8 of the lease having regard both to the hail damage suffered in April 1999 and the nature, condition and use of the building; (6) whether any work additional to that falling within the first limb of clause 8 of the lease or within the lawful use permitted by clause 16 was carried out in May, June and July 2000; (7) whether any, and if so which, parts of the work carried out in May, June and July 2000 caused inconvenience or disturbance to the plaintiff and if so, the nature of the same; (8) whether the works conducted between November 1999 and July 2000 either breached the covenant for quiet enjoyment or derogated from the grant of the lease; (9) whether the works in fact done or any of them were reasonably necessary for - (i) the safety of persons or property in the premises and/or

(ii) the preservation of the premises. (10) If the answer to 9 is yes, whether as little inconvenience and disturbance to the plaintiff as was possible was occasioned in the manner effecting the works; (11) whether the work of removing the entire existing roof structure and replacing it with a new roof was work within clause 8 at all or in its execution; (12) whether damage to an asbestos cement roof occasioned by hail in the circumstances of the roof as at April 1999 required the total replacement of all the roof structure of the building, realignment of the roof and construction of extended walls and a new shop front; (13) whether methods of repair and re-establishment of the roof damaged by hail were available in and after April 1999 that did not involve removal of the existing roof and all structures, realignment of the roof and ancillary building works; (14) whether the said works were authorised by clause 8 or breached the proviso to the first limb thereof;

C. Matters going to damages (15) whether any actionable disturbance resulted in loss to the plaintiff in May and June 2000; (16) whether any such actionable disturbance caused loss to the plaintiff after 27 June 2000 when the arcade scaffolding was removed; (17) whether any such disturbance caused loss to the plaintiff after 1 July 2000, and if so, for what period; (18) whether the plaintiff suffered loss of custom in its restaurant by reason of the conduct of the works for which the defendant is liable; (19) whether the plaintiff suffered damage by loss of profits during the conduct of the works and thereafter;

(20) what was the amount of any loss of the plaintiff;

(22) what is the result of the proceedings. 11 I will deal with each of these matters in turn, but before I do so I should set out some further background material. 12 Clause 16 of the lease referred to in the questions is in the following terms: "The Lessors confirm the existing right (if any) of the Lessee to use an area of the arcade 1.2 metres wide parallel and immediately adjacent to that part of the demised premises formerly identified and identifiable as Shops 1 and 3 for the seating of patrons or customers of the restaurant business conducted by the Lessee provided that such use of the arcade, any tables and chairs used for this purpose, any patrons or customers of the Lessee using such tables and chairs or animals or persons with or talking to them, and any waiters or waitresses of the Lessee serving at or going to or from such tables - (i) shall not obstruct or impede in any manner the use of the arcade by any person for ingress or egress or for any legitimate purpose; (ii) shall not be or could not reasonably be regarded as a nuisance by or to the Lessors or adjoining or neighbouring occupiers; (iii) is not illegal. The Lessee acknowledges and agrees that the foregoing provisions of this clause are subject always to the Lessee complying with and satisfying all requirements, notices, objections, prohibitions or limitations issued or made by any government, municipal or other competent authority whether statutory or otherwise and that the Lessee will immediately cease using any part of the arcade for any purpose other than ingress or egress should any such government, municipal or other statutory authority so require." 13 The short form covenant as to quiet enjoyment is by Schedule 4 to the Conveyancing Act 1919 expanded to read as follows: "And the lessor doth hereby covenant with the lessee that he or she paying the rent hereby reserved, and performing the covenants hereinbefore on his or her part contained, shall and may peaceably possess and enjoy the demised premises for the term hereby granted, without any interruption or disturbance from the lessor or any other person or persons lawfully claiming by, from, or under him or her."

A. Questions of law and construction 14 (1)(a) The law was summarised by Powell J in Todburn Pty Ltd v Taormina International Pty Ltd (1990) 5 BPR 11,173 at 11,177 as follows: "The covenant for quiet enjoyment operates to secure the tenant, not merely in the possession, but in the enjoyment, of the subject premises and any rights appurtenant thereto, for all usual purposes; and where the ordinary and lawful enjoyment of the premises or of the rights appurtenant thereto is substantially interfered with by the acts or omissions of the landlord or those lawfully claiming under him, the covenant is broken, even if neither title to, nor the possession of, the demised premises, or of those rights, is otherwise affected. Whether or not any interference is substantial is a question of fact." [I have omitted his Honour's reference to authority] 15 Courts approach questions of construction of commercial leases so that they have a sensible commercial operation. Attention is paid to the words the parties have chosen to use in their document, to the genesis of the transaction, the background and context and the market in which the parties are operating. No hard and fast rules can be set: the exercise of construction is neither to be uncompromisingly literal nor unswervingly purposive: Peppers Hotel Management Pty Ltd v Hotel Capital Partners Ltd [2004] NSWCA 114 at [66]-[73] summarizing leading cases such as Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337 at 352 and The Fina Samco [1995] 2 Lloyd's Rep 344 at 350. 16 I have already quoted what Powell J said in the Todburn case, that for a breach of the covenant there must be substantial interference by the acts of the landlord or those lawfully claiming under him. What is substantial is a question of fact. See also Martins Camera Corner Pty Ltd v Hotel Mayfair Ltd [1976] 2 NSWLR 15 and Kohua Pty Ltd v Tai Ping Trading Pty Ltd (1985) 3 BPR 9705. Disturbance of enjoyment which is merely temporary and which does not interfere with title or possession, is generally not a breach of the covenant; see eg Manchester, Sheffield & Lincolnshire Railway Co v Anderson [1898] 2 Ch 394 at 401. However, each case is a question of fact and in Owen v Gadd [1956] 2 QB 99, the erection of scaffolding outside a retail shop for a fortnight was held to be a breach of the covenant and the English Court of Appeal upheld the county court's judgment for nominal damages for the tenant. See also JC Berndt Pty Ltd v Walsh [1969] SASR 34. 17 However, whilst each case involves a question of fact the authorities show that the covenant may not be broken by not supplying electricity to a refrigerator: Penn v Gatenex Co Ltd [1958] 2 QB 210, though the decision in that case may not now be in accordance with current thinking. 18 In Southwark LBC v Tanner [2001] 1 AC 1 esp at 7 and 10 the House of Lords reviewed the authorities and held that a breach of a covenant of quiet enjoyment is not limited to direct and physical injury to the land or premises. 19 The authorities were comprehensively considered by Campbell J in Spathis v Hanave Investment Co Pty Ltd [2002] NSWSC 304. In that case, apart from questions of principle his Honour dealt with individual complaints and held that some complaints being inconveniences of short duration did not breach the covenant, but other, more enduring inconveniences, did breach it (see [153]-[160]). 20 (b) As clearly appears from the expanded version of the covenant for quiet enjoyment the lessor's promise relates solely to "the demised premises". A box at the top of page 1 of the lease describes the premises as "All those premises known as Shops 1, 3 and 5 on the Ground Floor and Room 2 on the First Floor of the building known as 21 Knox Street Double Bay …". Clause 16 of the lease refers to the arcade or the part of the arcade which the tenant may use as property "immediately adjacent to that part of the demised premises …". 21 Semantically, accordingly, the arcade does not fall within the term "demised premises" on the natural and ordinary meaning of the words. 22 However, the cases tend to show that that is not the way in which courts have approached the construction of commercial leases. In Miller v Emcer Products Ltd [1956] Ch 304, the premises were described as four rooms or offices on the ground floor of Groveland House. After that description the lease said "together also with the right for the tenant to use in common with the landlords … the lavatories on the first and second floors". The tenants were denied access to the lavatories and sued. They lost the proceedings for reasons not relevant to the present discussion. However, the landlords' argument that the lavatories did not come within the term "demised premises" failed. Romer LJ said that in effect the right to use the lavatories was an easement attached to the lease and despite the definition of "the said premises" the premises included the whole of the subject matter of the demise including the easement; see p 316. 23 The same approach was taken by the High Court of Australia in Arndale (Kilkenny) Pty Ltd v Gaetjens (1970) 44 ALJR 434, where the tenant's right to use a pedestrian mall contained within a shopping centre was held to be able to be protected by injunction. See also Todburn Pty Ltd v Taormina International Pty Ltd (supra). 24 Accordingly, I answer question 1 "Yes". However, the width of the question may, when all is said and done, mean that I have not progressed very far along the lines of solving the real dispute between the parties. 25 (2) This matter became relevant when the statement of claim was sought to be amended by inserting a new paragraph 10A to rely on a breach of the landlord's obligation not to derogate from the grant as an alternative to quiet enjoyment. The reason for the amendment was in case I ruled otherwise with respect to question 1. As I have not done this, the present question is rather otiose. 26 I gave leave to amend on 17 February in accordance with the document which I initialled which included 10A, subject to it being verified. As far as I can see from the file that has never occurred. Accordingly, I should be justified in treating it as a nullity. It must always be remembered that when leave to amend is given that merely means permission to file an amended document, and if an amended document is not properly filed promptly then the leave may lapse or be rescinded. 27 The difference between a covenant for quiet enjoyment and an obligation not to derogate from the grant essentially is that the former springs from the relevant instrument, but the latter from "the duty imposed on the grantor in consequence of the relation which he has taken upon himself towards the grantee"; per Cotton LJ in Birmingham Dudley & District Banking Company v Ross (1888) 38 Ch D 295 at 308. 28 However recent authorities, such as Southwark LBC v Tanner [2001] 1 AC 1 show that there are really minimal differences between the two. 29 The essential result, whether one applies the covenant for quiet enjoyment or the principle against derogation from the grant is virtually the same and accordingly I will not further overburden these reasons with a fuller discussion of the matter. 30 (3) This brings me to clause 8. I will deal with the six discrete matters that I have set out above, and then state general conclusions. 31 (a) The phrase that I must focus upon is "additions … reasonably necessary for the safety of persons and property … and for the preservation thereof." Does the clause only apply if there is both a need for safety and preservation of the property or does either suffice? 32 This is really a minor point in view of the case as a whole. The matter is one of impression. It is sometimes permissible to read "and" in a disjunctive way; see eg Re Peat Resources of Australia Pty Ltd; Ex parte Pollock (2004) 181 FLR 454, 460 and note thereon in (2005) 79 ALJ 212. This may be done if the purposive construction of the clause requires it. I do not consider one has to go that far with the present clause. I would read the second word "and" almost with the meaning of "including" so that the landlord's action must be reasonably necessary for the safety of the property including preservation of the property. 33 (b) The question here is whether if a reasonable alternative exists to what the landlord did, it could be said that what the landlord did was reasonably necessary. 34 This question really focuses on the matter as to who is to judge what is reasonably necessary. The natural meaning of the clause is that it is the lessor, subject probably to the restriction that if no reasonable person in the situation of the lessor could have considered the works that the landlord intended to be reasonably necessary then they would not come within the phrase. It is the landlord who is to carry out alterations, improvements and additions. It is the landlord who is to choose what those alterations, improvements and additions are. So long as they do not encroach on the area I have referred to above and are considered by the landlord to be reasonably necessary for the safety of property etc, then it seems to me that it matters not that some other landlord or some building expert might have gone about the purpose of making the building safe in some other way. 35 (c) It seems to me that the defendant is correct in its submissions that one reads the words "reasonably necessary" as one phrase and relying on cases like those decided under s 88K of the Conveyancing Act 1919 such as Woodland v Manly Municipal Council (2003) 11 BPR 20,903, the expression means a necessity which goes beyond mere desirability but is not a matter of absolute necessity; see also Grattan v Simpson (1998) 9 BPR 16,649 at 16,651. 36 The same result is reached if one looks to some of the cases about reasonably necessary repairs by a life tenant with settled property; see eg Stanford v Roberts [1901] 1 Ch 440 at 444 where Buckley J said that what is reasonably necessary or proper for a life tenant to do is "what a reasonable and prudent owner would do if he were absolutely entitled to the property" and it was not for the life tenant to show that the repairs were absolutely necessary. 37 (d) The answer to this sub-question must, in my view, be "Yes". It is a principle of construction of leases that where one has specific provisions they override general provisions or implied provisions. Clause 8 is such a specific provision and to my mind operates as an exception to quiet enjoyment. As an example of this approach, see Miller v Emcer referred to earlier. 38 (e) This sub-question directs one's mind to the proviso to the first limb of clause 8 and the words "cause as little … disturbance as possible". Whenever this sort of phrase has been construed by a court the result has been that the words "reasonably consistent with normal practice" have been read into the expression; see eg Hydraulic Engineering Co Ltd v McHaffie, Goslett & Co (1878) 4 QBD 670 and Cooper v Woolley (1867) LR 2 Ex 88. As Bramwell LJ said in the former case at 673, "A tailor who accepts an order to make a coat 'as soon as possible' need not put down a half-made vest in order to begin the coat". Likewise under the present clause it is not necessary for the party who bears the onus of proof to show that there were no other means by which disturbance could have been minimised than that used. 39 An analogous situation came before Brett LJ in Errington v Metropolitan District Railway (1882) 19 Ch D 559 at 576. There a railway company was empowered to compulsorily acquire the minerals under its railway if reasonably required. His Lordship said, "I cannot think that 'required' means 'absolutely necessary'. 'Required' means where the company bona fide think that they are desirable, and are bona fide of opinion that they are desirable." 40 (f) I cannot see how clause 16 can affect this matter. The lessee's rights to use the arcade are to be considered as a kind of easement. The words "lessor or" have been struck out at the end of clause 16 which seems to suggest that the lessor cannot require the lessee to cease using the arcade and in any event it would not appear that it did so. 41 (4) The lessor has never sought to avoid liability for work that may have been done by its contractors and others being the work about which the plaintiff says is the cause of its loss. It is thus unnecessary to consider this matter further.

B. Questions requiring findings of fact 42 I merely consider that the questions of law and construction which I have dealt with relatively summarily are not likely to make any difference to the result of the case. The vital matters in this case are questions of fact which will be dealt with in paragraphs (5) to (14) hereunder. 43 (5) Was the work done in May, June and July 2000 reasonably necessary within the meaning of clause 8 having regard both to the hail damage suffered in April 1999 and the nature, condition and use of the building? 44 For this, one needs to go to the evidence. 45 Mr Martin Border, a director of the defendant, gave evidence. He says that the defendant purchased the building in November 1993. At the time of purchase there had been virtually no refurbishment work carried out to the building since the 1950s. On 5 December 1994, the defendant received development approval from the Woollahra Council for additions and alterations to the building. There were negotiations with the plaintiff, but these came to nought, Mr Border considering the plaintiff was asking an excessive amount of money for its consent. On the evening of 14 April 1999, the building was damaged during a severe hail storm. Mr Border arrived at work the next day. His office is Suite 22 on the second floor and he found that the ceilings, carpet and walls were soaking wet, as were the furnishing and some of the windows were smashed. An insurance claim was made with the help of Joshua Farkash & Associates Pty Ltd, Architects. By mid-June 1999, there had been temporary repairs, but there were still some leaks and the plaintiff complained about a leak in its kitchen ceiling. 46 Mr Farkash retained engineers, MPN Group Pty Ltd which advised that the timber roof and ceiling structure in the building needed replacing and noted that on inspection there were holes from hail stones in the roof sheeting. In August 1999 the architects advised that the roof structure needed to be replaced. 47 Even by November 1999, water was still leaking into the building when rain fell. 48 The insurer approved the work to be done by a company, C J Duncan Pty Ltd. This company was quite independent of the defendant. 49 Work started on about 25 November 1999. No work was done between 17 December 1999 and 18 January 2000 because of holidays in the building trade. There were problems between the builder and the insurer which delayed work on the subject property from about April to May. On or about 10 May scaffolding was installed over the arcade between 3 am and 5 am. On 17 May the roof steel was delivered and lifted by crane to the balcony of Suite 21 on the second floor at 6 am and the crane left at 7 am. On 19 May the roof sheets were laid out; on 21 May asbestos was removed from the building between 6.30 am and 8.30 am, this being a Sunday. On 15 June the roof sheets were lifted to the roof between 5 am and 7 am and the builders then commenced to install the roof sheeting. On 27 June, at 5 am the scaffolding above the arcade into the western elevation of the building was removed. 50 On 27, 28 and 29 June 2000 the builders drilled wall ties to the Knox Lane side of the building. This was carried out between 7 am and 9.30 am and thus had to be spread over three days instead of one full day. On 29 June the ceiling at the top of the second floor stairs was removed between 5 am and 7 am. The scaffolding to the Knox Lane façade was removed on 14 July. The work was virtually finished by 26 July. 51 Although Mr Border was cross-examined, the main thrust of the cross-examination went to his observation as to what was happening in the plaintiff's restaurant, it being clear that Mr Border himself had an office in the building and attended almost every working day. 52 Mr Ratcliff, a building consultant, was an expert witness for the defendant. He inspected the roof after the hail storm on 19 April. He noted numerous holes had been punched through the asbestos roof and there were chips evident at the end of some of the roof sheets which had the effect of reducing the effective overlap of the sheeting. There was no safety mesh laid under the asbestos roof sheeting. He considered that because of the age of the asbestos roofing it would have been brittle and hazardous to walk on as the sheets broke easily. His view was the asbestos cement roof was damaged beyond the point of repair. Part of the reason for this was that the structural integrity of the roof frame was questionable given some of the roof framing was stained and showing obvious signs of fungal decay due to long term water penetration and the roof frame did not meet current national timber framing code standards. He also considered that under modern standards there was insufficient restraint to prevent uplift of the roof. 53 Mr Ratcliff said it was necessary to obtain Woollahra Council's approval to replace a roof and his experience with Woollahra Council meant that this could have taken many months. He says that using the development application approved in April 1994 and still current at April 1999 was a reasonable and necessary way to proceed given the degree of urgency and it was more expeditious than going about the matter in any other way. 54 He noted that the tenant's complaint was that the landlord had used the need to repair the roof to carry out major refurbishment work. Mr Ratcliff replied that if this had been the case there would have been 13 other matters of improvement to the building within the development approval which could have been done at the same time, but which were not. He opined that had the roof not been replaced it would have been a safety hazard. 55 Mr Ratcliff was cross-examined. He was asked to agree that the roof line that existed after the replacement was different to that that existed beforehand. He agreed but said that "the development application that we were working to showed the roof line at the roof line depicted in section 5 Drawing WD01 … . So we were working to changing the roof pitch to suit the development application. Consideration was given to using the existing roof frame but it was determined that that couldn't occur because … we couldn't work with it. It was undersized. It didn't work to the DA. The engineer had already done design plans that had been submitted to council with the roof frame configuration and the timbers didn't comply with that." 56 Mr Ratcliff was asked whether the roof could be patched or a liquid or plastic membrane spread on top of it, but said that this was impractical one reason being that the range-hood from the café had been spewing out oil onto the roof for 25 to 30 years and that this would prevent any acrylic membrane system adhering to the surface of the roof sheets. He was asked whether the oil could be removed by water blasting and said that if that happened the fibres in the asbestos roof would be loosened and that would create other problems. In any event he said this would be a second rate solution, the cement roofs that have acrylic membranes placed over them require regular maintenance because they delaminate, that is, they bubble up. 57 Mr Snell gave evidence that he was a specialist in the removal of asbestos. He had inspected the roof of the building. He said that first of all there would have been no contractor interested in merely repairing the roof at the relevant time because there was so much work to be done repairing hail damage throughout the Double Bay/Kensington area. In any event, he said replacing all of the asbestos cement sheeting with new asbestos-free fibrous compressed sheeting would not have been an option because of the lack of suppliers of accessories. In his view it was necessary to remove and replace the roof sheeting. 58 Mr Snell was cross-examined, but not to any detrimental effect. He maintained that merely coating the top of the roof with a membrane might make it waterproof, but would not give it structural integrity. 59 On the other side, Mr Fransen gave evidence. Mr Fransen is a licensed builder and was Zone Manager with the Southern Sydney Recovery Taskforce following the hail storm. He says that Double Bay was on the fringe of the storm and few properties in the area suffered more than low level damage. He thought that the only work that needed to be done would be repair and replace roof cladding, repair or replace ceilings as necessary, replace some carpet, check and attend to any problems with electrical services, repair cappings on parapet walls, replace broken skylights etc and paint and wallpaper. He considered that had that sort of work been done rather than the work that actually was done, it would only have taken about a third of the time and effort that was in fact occupied. 60 Mr Fransen also opined that the refurbishment and upgrading of the building was carried out by choice and was not reasonably or necessarily required for the protection of persons or property within the building and that had the works been restricted to repairs necessary following the hail storm, that could have happened over two weeks not ten months. 61 Mr Fransen was cross-examined. He did not come across during that cross-examination in a way to give me much confidence in his evidence. He in fact never saw the damage, never saw the roof before it was repaired, never saw any of the internal parts of the building before the work was carried out and his opinion to a great extent was formulated on what he considered would be the general nature of what was required in the district. 62 I will take an example. In para 6.1.2 of Mr Fransen's first report, he commented that Mr Farkash's scope of works was more extensive than the GAB Robin's scope of works and was the Farkash scope of works which was in fact carried out. GAB Robin were loss adjusters employed by the insurer and Mr Ratcliff project managed roof replacement for those loss adjusters. 63 Mr Fransen said at 6.3 that he formed the opinion that the only essential building work required for the protection and safety of persons and property in the building was the building works set out in the GAB Robin's scope of work. Mr Fransen was obviously rattled when that was put to him in cross-examination at T58. The following occurs at T60. Mr Taylor asked:

"Q. Your report in paragraph 6.3 says the essential work is that in the GAB Robin scope of work doesn't it?

Q. Take as long as you like. It is recorded in the transcript.

A. My apologies for the delay. The way that comes across in my report is not the full intention of what I said, that I believe considerably less could have been done than was specified in the GAB Robin's report.

Q. You believe that now or when you wrote the report?

Q. Let us turn to page 23. Paragraph number 3 at the top of the page the item 'roof cladding 14,616' is itemised as the Duncan cost isn't it?

Q. You know that the Duncan quote was based upon the replacement of the roof with metal cladding don't you?

Q. You've allowed that item in full as an essential work?

A. No, I've not allowed that item as essential work." 64 There was further cross-examination which went on for some pages on the same point. It was also put to Mr Fransen that his opinion went contrary to that of a qualified engineer on the other side whom he had chosen, to use Mr Taylor's words, "to simply disbelieve". Mr Fransen agreed that he had done that on the basis that he was involved with the construction of 1800 properties after the hailstorm and he did not think that the engineer's report was consistent with them. 65 I cannot say that I would feel at all comfortable, having seen Mr Fransen in the witness box and having reread his report of the cross-examination, in accepting his evidence as opposed to the evidence on the other side. 66 Mr King also gave evidence for the plaintiff. He is a building consultant and was basically asked whether a circa 1950 super six asbestos fibre corrugated roof could be repaired. 67 Mr King was not cross-examined, but his report really doesn't go very far. Of course it is possible to replace a roof by putting a membrane over it, but he does not address the various problems that were thrown up by Mr Ratcliff and others. 68 There is little doubt that the landlord did use the opportunity to install the new roof that it was wanting to install in 1994. The plaintiff complains that that decision meant that what occurred was more than merely replacing the roof or doing repairs which are reasonably necessary or work which was reasonably necessary to protect the safety of people and property. As against that it is put that (a) there was no other feasible way of doing the work; (b) that even if there were some other method of doing the work, it would have taken a long time to get council approval during which time there would have been water penetration problems, particularly to the upper floors; (c) the work that was done was done with an eye to the tenant's convenience by doing much of the major work before 7.30 am. 69 The plaintiff's major complaint is that more work was done than would be necessary if the only thing that the landlord attended to was the repair of the hail damage. That, however, is not the vital question. When the hail damage occurred, the experts retained not only by the landlord but by the independent insurer who, of course, was trying to minimise its payout in any proper way it could, saw that there were such problems with the underlying infrastructure that more than a simple plastic sheet over the roof was required. Having looked at the expert evidence, the evidence of people like Mr Ratcliff is quite convincing and with great respect to him, Mr Fransen has had too superficial a view of the problem. In my view the work done in May, June and July 2000 was reasonably necessary having regard both to the hail damage and the nature, condition and use of the building. 70 It is to be noted that clause 8 is not limited to repairs or reinstatements. It specially mentions alterations, improvements and additions which come within the necessity for the safety of persons and property and included within that term is preservation. 71 In any event it has always been realised that a repair may involve some sort of renewal. As Buckley LJ said in Lurcott v Wakely [1911] 1 KB 905 at 924, "A roof falls out of repair; the necessary work is to replace the decayed timbers by sound wood; to substitute sound tiles or slates for those which are cracked, broken, or missing; to make good the flashings and the like." Of course, the work in the instant case goes beyond that, but the principle is the same. 72 I considered the problem in Greetings Oxford Koala Hotel Pty Ltd v Oxford Square Investments Pty Ltd (1989) 18 NSWLR 33. The central part of that case was what was the ambit of the landlord's duty to maintain lifts and I held that that duty meant that the landlord must not only attend to cases where there had been a malfunction of the lift and take preventative measures to ensure lifts would not malfunction, but also that the lifts would be replaced when a reasonable observer would be of the opinion that they had reached the end of their useful life. 73 Question 5 must thus be answered Yes, such work was reasonably necessary. 74 (6) It is very difficult to answer this question as such. I am not satisfied on the balance of probabilities that the question should be answered "Yes". Accordingly, I must answer it "No." I am not at all sure whether it is a relevant question in any event. That is because what appears to have happened is that had there been no extant development application and had the defendant's architects and other experts had to work from scratch, it may very well be that they would have designed a system which would have protected the building but did not involve all the work that was in fact done. 75 However, that was not the situation. The evidence, which I accept, is that in order to do the work relatively quickly it was appropriate to proceed with installing a new roof for which approval had already been obtained. 76 In fact, this may not have saved time as, because there was no safety net under the roof sheeting and there was a very questionable capacity of that sheeting to hold up a man or woman working on the roof, there were delays in erecting a safety net and scaffolding. However, at the time when the decision was made it was reasonable to approach the repairs in the way which was carried out. 77 I am not convinced to the appropriate level that any individual items of work were, strictly speaking, additional to those falling within the first limb of clause 8 of the lease. However, if any individual items were I would have thought it was irrelevant because one is looking at the total package as a reasonable method of coming to the appropriate result in as quick a way as possible. 78 (7) It would seem that there was some disturbance to the plaintiff by the work, but in order to examine the question properly one must look at the matters particularised in para 17 of the statement of claim and at the evidence given in respect of each one. 79 (a) Mr Anthony Liberiou swore that electricity had been cut off at various times including between 2 pm and 9.15 pm on 8 December 1999 and 8.15 am and 11 am on Saturday 18 December 1999. The tenant's then solicitors complained to the landlord about this in their letter of 21 December 1999. Mr Border admitted that electricity was cut twice, but on those occasions only to a single power point solely utilised for the restaurant's coffee machine. The disconnection was caused by the cutting of a wire which ran from the first floor distribution board through to the second floor roof and down the cavity wall to that power point. There was a delay in repairing it because the electrician couldn't find the wire that had broken but Mr Border believed temporary power was restored. Mr Liberiou says he cannot recall temporary power being provided by the landlord's electrician. 80 I accept that the power loss was only to one power point, the preponderance of the evidence, considering that Mr Liberiou cannot recollect, is that there was temporary power and accordingly this matter of itself is of little consequence. 81 (b) A rubbish skip was placed in position which obstructed the entrance to the rear of the premises causing difficulty to customers and persons delivering goods. I have stated the essence of the allegation particularised and para 13(b) of Mr Liberiou's affidavit really just repeats those words. Mr Border says that there was a skip located at the rear of the building for a few days early in the work before the scaffolding was erected. The purpose of this was to allow rubbish to be removed from the second floor minimising dust, noise and disturbance to the arcade. The skip was not obstructing the entrance and photographs were placed in evidence as to where the skip was located and it shows it to the east of the Knox Lane entrance to the arcade. Mr Border also says that more obstruction to the entrance is caused by the plaintiff's deliveries and the parking of Mr Liberiou's car than by the presence of the skip. Whether this is so or not does not really matter. I am not convinced on the evidence that there was any obstruction to the entrance which would prevent customers from entering and deliveries from being effected in any substantial way. Again, this of itself would not be sufficient to show a breach of the covenant. 82 (c) The next allegation is that dust, gravel and building waste was blown or fell onto tables, especially in the arcade. Again, the affidavit of Mr A Liberiou merely repeats the words. Mr Border denies the allegation and says that "The insurer, through its builder, went to extraordinary cost and effort to minimise dust and disruption from the building works. The suspended scaffolding was installed over the arcade with layers of builders' ply, forticon and carpet. All edges of the scaffolding were silicone sealed to ensure that the arcade could operate with minimal dust and disturbance." He further says that he was present in the building virtually every working day and never observed any disturbance to the restaurant. Furthermore he says there was other building work going on in the vicinity at what is known as the JAG site where the construction was protracted, dirty, noisy and encountered a number of problems. Mr Border and his evidence is reinforced from Mr Ratcliff who says that the work on the JAG building may well have produced dust, noise and disturbance to the plaintiff's café. 83 Mr Liberiou's reply to Mr Border's affidavit was primarily that the shadow created by the scaffold in the arcade blocked the sun and made the arcade tables cold and unattractive. He says that there was considerable noise from December 1999 to July 2000. Most of the complaints were a lack of light and noise. However, Mr Liberiou also said that there was dust on the outdoor tables, that is the arcade tables of a white colour and on a number of occasions the dust on the arcade floor was sufficiently thick that one could see footprints in the dust. Mr Liberiou concedes that there was also dust and noise from the JAG site, but says that the impact of the building work being done by the landlord was in his view greater. However, his affidavit is so framed that it is lack of the penetration of sunlight and noise which were the principal problems. 84 A Mr Dalton, a waiter, also gave evidence. He also said that he saw a lot of dust. However, during cross-examination Mr Dalton's powers of observation became extremely questionable when he could not even identify photographs of the scaffolding of which he complained in his affidavit. 85 Mr Liberiou's normal working hours at the restaurant were from 5 pm until midnight and he would attend the restaurant at least three times a week during the day. He certainly was not at the restaurant when a lot of the alleged problems with noise and dust were being caused. 86 Mr Liberiou did not fare too badly under cross-examination, but some of the photographs which were taken showing shadows of people in the day-time make one wonder whether his evidence about lack of sunlight was overstated. In any event, it was not the main complaint particularised. 87 Evidence was also given by Mr John Liberiou, another director of the plaintiff. He used to work from May 2000 until the present time from 6 am until 4 pm in the restaurant. He says that pieces of cement or sand fell on outdoor tables. They were quite small, but they were the subject of complaints by customers. Significantly he does not say very much more. Mr John Liberiou is the father of Mr Anthony Liberiou. He did not come across during cross-examination as a man with a very good memory, or indeed any close knowledge of what was happening around him. It may well be that he was concentrating more on the administration and finance side of the business. 88 Undoubtedly the building works did produce some dust and noise. However, I am not able to say on the evidence that it was sufficient to come within the range of being a substantial interference or disturbance. 89 (d) The next complaint is that there was an erection of scaffolding further restricting access to the premises by customers and delivery persons. 90 There is no evidence that any scaffolding blocked the entrance. Mr Anthony Liberiou's initial complaint was that the scaffolding restricted parking in Knox Lane. That of itself would not be a substantial interference with the demised premises or its appurtenances. This matter of itself is insufficient. 91 (e) The next complaint is loud noise from the use of jackhammers and electric saws. There was obviously noise. The affidavit talks about drills, jackhammers and workmen's mechanical instruments. The particulars, however, focus on jackhammers and electric saws. There were no jackhammers on the site though there were jackhammers on the JAG site. I am also satisfied that whilst there may have been one or two occasions after 4 pm when there was noise from the works, that work almost always finished at 4 pm and there was no appreciable noise after then. That was the peak trading time of the restaurant, though the evidence shows that it also did a steady trade during the day with people coming in for coffee and snacks and lunch. 92 Mr Anthony Liberiou's first affidavit referred to intermittent noise in para 14 and he affirmed this in cross-examination. 93 The more drastic evidence as to noise was given by Mr John Liberiou who only swore an affidavit late in the piece and as I say, it was based on memory, his memory was poor and I find it difficult to accept his evidence. I do not consider there is sufficient material to show that the noise was substantial interference. 94 (f) Finally there is the complaint about asbestos dust removed without proper precaution causing some to fall on the plaintiff's furniture. Apart from the evidence to which I have already referred about white dust, there is no acceptable evidence of this. 95 It would be a mistake to say that just because I am not satisfied of any of the matters particularised (a) to (f) that therefore there was no substantial interference with the lessee's enjoyment, one must look at the whole package. It seems to me that even looking at the whole package the plaintiff has exaggerated its problems. There was noise; there was dust, but nowhere to the extent asserted by the plaintiff and I do not consider that, even putting all the matters together, there was substantial disturbance of the tenant. 96 The question should thus be answered that there was inconvenience or disturbance to the lessee, but this does not constitute substantial disturbance so as to make out a breach of the covenant of quiet enjoyment. 97 (8) For the reasons given in (7), this should be answered "No". There is no breach of the covenant of quiet enjoyment. 98 (9) and (10) In view of my decision in (8), it is really unnecessary to look at clause 8 of the lease. This question asks whether the works in fact done were reasonably necessary for the safety of persons or property in the premises, and if so, whether as little inconvenience and disturbance to the plaintiff as was possible was occasioned in the manner of effecting the works. Because it is really not necessary to deal with the matter I will not expand on my reasons at length. It follows from what I have already said and what is implicit in what I have already said, that, although had there not been an existing development application the work might have been done in a different way, the work that was in fact done was reasonably necessary for the safety of persons or property in question and there was as little inconvenience and disturbance as was possible in the circumstances. 99 Accordingly, had I found that there was otherwise a breach of the covenant for quiet enjoyment I would have found for the landlord under clause 8. 100 (11) It follows that the answer to this question is "Yes". 101 (12) This question asked whether the hail damage required the total replacement of all the roof structure. With respect, this is not a question the answer to which would resolve the present dispute. No matter what the answer to this question, the work done by the landlord was not a breach of covenant and it fell within clause 8. Accordingly, I do not answer the question. 102 (13) This question is in the same plight as that dealt with in (12). 103 (14) For the reasons given above, it follows that the works were within the authority conferred on the landlord by clause 8. 104 I should note here that the same result follows if I were to apply the principle of derogation from the grant and indeed the way the case was argued the matter of what might be termed "breach" was argued as one whole. 105 So far as the counts in nuisance and negligence were concerned, no separate arguments were placed before the Court so that I do not need to consider these matters further.

C. Matters going to damages 106 (15) to (20) In view of my finding on liability, there is no need to consider the question of damages. Nor is there any utility in providing some assessment because if an appellate court were to consider I have made appealable error in the above reasons, there is no way of knowing which, if any, of the plaintiff's claims might be allowed. 107 I should, however, make a few general comments on damages.

1. Mr Taylor submitted that in view of the clear indication that this case would be vigorously defended, it is surprising just how lightweight the plaintiff's evidence is as to the damages. The claim is based almost entirely on the report of a so-called forensic accountant, but he does not seem to have had the material to make an informed assessment or give a detailed opinion, and indeed, he does not purport to express a considered opinion as to whether loss had in fact occurred.

2. Whilst there may have been a fall-off in trade, the reason for that fall-off is not at all clear. There is a fair suggestion that it may have been because some of the figures presented to the Court are in the period of 1 July 2000 when the Sydney Olympic Games distorted the restaurant market.

3. The defendant's valuer during his investigations found some rather odd discrepancies in the figures comparing weekend trading figures for corresponding periods in the previous year and the fact that there seemed to be an increase in credit card sales and a decrease in cash sales or vice versa. It would have been extremely difficult to be comfortably satisfied with any assessment of damages on the material presented by the plaintiff. However, as I have said, I have been spared that task.

D. Miscellaneous 108 (21) Costs. There is no reason why the plaintiff should not pay the defendant's costs and that is the order I make. 109 (22) The result of the case is that I make the following orders:

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