Graham v Markets Hotel Pty Ltd [1943] HCA 8

Graham v Markets Hotel Pty Ltd [1943] HCA 8 - HCA 1943 case summary — Zoe

[38]

Hore, l™inimum requirements of that Court must be complied with. The Pry. Lrp. question whether the lavatory on the premises when demised would ~ have required to be repaired is irrelevant; the important point is that the respondent yielded up the demised licensed premises without lavatory accommodation. The only question, therefore, is either (a) as to so much as directly affected repair, or (6) as to the balance which was imposed by way of condition to consent, the amount necessarily spent to repair having regard to the necessity for the making of an application to the Licensing Court and complying with its demands. A tenant who is in breach of his covenant to repair is liable for such amount as may be necessary to put the demised premises into a proper state of repair even though this may necessitate renewals and replacements (Howe v. Botwood (1) ). Repair includes replacement (Lurcott v. Wakely & Wheeler (2) ). On the facts, the renewal of the lavatory entailed substantial altera- tions except, possibly, to the saloon bar. The covenant to repair required the tenant to repair and maintain the lavatory. There was not any exception from this obligation even if the lavatory constituted an inherent defect. The lavatory was not inherently defective, therefore Lister v. Lane & Nesham (3) is not applicable to this case. At most the lavatory was only faulty in design. The damages claimed by the appellant come within the scope of the rule enunciated in Hadley v. Baxendale (4). The general way in which the measure of damages has been applied to the relevant facts is shown in various cases, of which Joyner v. Weeks (5) is typical. There is not any evidence of nuisance. The extent of the covenant must be determined having regard, inter alia, to the user of the premises (Lurcott v. Wakely & Wheeler (6)). The extent of the repair therefore must be such as will enable the maintenance of the licence. The cases of Wright v. Lawson (7) and Pembery v. Lamdin (8) do not establish any principle; each case was decided on the basis of its own facts. Even assuming, but not admitting, that the lavatory was inherently defective the tenant was not for that reason entitled to demolish or remove it. Its demolition or removal by the tenant would nevertheless constitute a breach of the

[115]

defendant and that the defendant is accordingly liable to pay damages to the plaintiffs in respect of that breach. The breach of covenant consisted in failing to yield up the hotel premises with sanitary accommodation thereon. As a direct consequence of that breach it was necessary to instal such accommodation upon the demised land. Certain consequential alterations to the building upon the ground floor and other floors were unavoidable because of the neces- sity of providing an external wall for the lavatory abutting upon a space which was at least ten feet square. The defendant is liable for the cost of all such work, if it is found to have been reasonably necessary for the purpose. The defendant, however, is not liable for the cost of what may be found upon an investigation of the facts to be improvements to the hotel unconnected with the re-estab- lishment of sanitary accommodation of the same capacity and quality as that which originally existed. The general rule for assessing damages for breach of a covenant by a lessee to deliver up the demised premises in repair was settled in Joyner v. Weeks (1), where it was held that the damages were the cost of putting the premises into the state of repair required by the covenant. In my opinion the covenant in this case required the defendant to yield up the premises with sanitary accommodation of a certain capacity and quality upon them. The cost of providing such accommodation is the measure of damages. for this breach of covenant. It should be realized that it is the action of the defendant himself in removing the lavatory from the demised premises that has placed him in the position of being required to pay such damages. If during the term of the sub-lease the lavatory had been condemned by the health authorities, or if the Licensing Court had refused to renew the licence of the hotel unless the lavatory were remodelled, then, as Halse Rogers J. said in his dissenting judgment, the matter could have been fought out between the parties concerned upon an application under s. 40a of the Liquor Act (inserted by the amending Act of 1923). Under that section the Licensing Court is authorized to order the owner of premises to carry out work which, in the opinion of the Court, is necessary because public convenience requires the renovation, structural alteration or rebuilding of premises. The defendant, however, did not attempt to take advantage of this provision but destroyed the existing sanitary accommodation without providing any other accommodation upon the demised premises. In order to provide any sanitary accommodation upon the premises it was necessary to prepare plans and to obtain the approval of the Licensing Court (Liquor Act 1912, s. 40). The necessity for this expenditure (1) (1891) 2 Q.B. 31.

[118]

the amount of damages recoverable for breach of a covenant to keep or put premises in repair during the currency of a lease, or to leave or put premises in repair at the termination of a lease. The section provides that the damages shall in no case exceed the amount by which the value of the reversion (whether immediate or not) in the premises is diminished owing to the breach of covenant. In the present case it is, I think, clear that the value of the reversion in this is hotel was diminished by the breach of covenant to an amount equivalent to the cost of providing sanitary accommodation on the premises equal to that originally existing if it had been duly repaired from time to time - accommodation without which the premises could not be licensed as a hotel (Liquor Act 1912, s. 25). The section further provides, however, that " no damage shall be recovered for a breach of any such covenant or agreement to leave or put premises in repair at the termination of a lease, if it is shown that the premises, in whatever state of repair they might be, would at or shortly after the termination of the lease have been or be pulled down, or such structural alterations made therein as would render valueless the repairs covered by the covenant or agreement." It was held by the learned trial judge and by the majority in the Full Court that in the present case the structural alterations which were in fact made by the plaintiffs after the termination of the sub-lease were such as to render valueless any repairs which might have been made to the old lavatory in the basement; that is, that whatever had been done in the way of repair to the old lavatory, the plaintiffs would still have made the changes in the structure of the hotel which in fact have been made at a cost of £3,000 or more. In my opinion the words in the Conveyancing Act "in whatever state of repair they might be " do not have the effect of relieving the coven- antee from liability in this case. The section prevents recovery of damages if it is shown " that the premises, in whatever state of repair they might be, would at or shortly after the termination of the lease have been . . . pulled down" &c. These words, in my opinion, are intended to cover a case where, even if the covenant had been fully observed, the premises would have been pulled down or struc- tural alterations would have been made which would have rendered the repairs valueless. That is to say, the words "in whatever state of repair they might be" mean "irrespectively of the state of repair in which the premises might be." In the present case the relevant structural alterations made by the plaintiffs were not made

[142]

1940 the sub-lease was executed. This agreement and sub-lease provided that the appellants should apply to the appropriate Court to have the portion of the hotel premises known as the annexe delicensed so that the licensed premises should consist only of the premises the subject of the new sub-lease; that the appellants should take all necessary steps to sever such portion of the premises as were over the land known as the annexe by erecting a new or completing any existing wall between the premises on which the annexe was erected and the premises the subject of the new sub-lease and carrying out such structural alterations to the premises demised as they might deem necessary for the proper and efficient. conduct of the premises as a hotel or such further or other alterations as the appropriate court would approve. Pursuant to this arrange- ment the appellants remodelled the hotel premises and obtained the approval of the licensing and other necessary authorities to the alterations to the hotel premises. On the ground floor the public bar was retained, the position of the staircase was changed, and what had been the staircase well was used as a ventilation shaft. A lavatory and conveniences for the public bar were provided on the ground floor. A private bar was installed on the first floor with lavatory and conveniences on the same floor. The kitchen was transferred from the third floor to the first. Sitting-rooms were substituted for some of the bedrooms on the second floor, and on the third floor two bedrooms took the place of the former kitchen. The cost exceeded £3,000. It was suggested, on the authority of Hadley vy. Bawendale (1), that the appellants were entitled to recover this sum. The argument was as ill-founded as it was audacious. It would give the appellants practically a new hotel, or a hotel so altered and changed in character that it would be substantially different from the premises demised. The true measure is that stated in Joyner v. Weeks (2) though, no doubt, the repairs must be effected in manner allowed by law. But, if it be established that lawful authority will not permit the respondent to put the hotel premises into the state of repair in which they ought to have been left according to the terms of the covenant, then the inquiry must be for the sum which it would have taken to put the premises into that state of repair, but so that the damages shall not exceed the amount (if any) by which the value of the reversion in the premises is diminished owing to the breach of the covenant.

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The declaration contained two counts, but it is only necessary to refer to the first count, because the learned trial judge gave a verdict for the defendant on the second count and against that verdict there has been no appeal. The first count alleged that the defendant during the currency of the term created by the indenture of sub-lease caused the premises to be altered and connected with certain adjoin- ing premises of the defendant as one building for occupation as a hotel, inn or public house by abolishing and destroying the existing lavatory serving the public bar of the licensed premises constructing new lavatories and opening doorways through the walls of the licensed premises by removing the existing staircase giving access to the first floor and by erecting a new staircase in place thereof and a wall through to the licensed premises by re-arranging the existing counter of the bar on the ground floor of the licensed premises by erecting a partition wall through one of the bedrooms of the licensed premises and by converting a lumber room on the first floor into a bathroom and lavatory ; that the defendant did not at the end and expiration of the term created by the indenture of sub-lease yield and deliver up to the plaintiffs the building and messuages and all fixtures upon the land thereby demised and all internal and external walls, sewers, drains and appurtenances with all necessary reparations, cleansings and amendments duly licensed as a hotel in such a con- dition that the said premises could be used for the business of a licensed victualler or publican and kept open for the sale of permitted liquors therein during all lawful hours as an inn or public house; and that the defendant omitted and neglected to restore the premises comprised in the indenture of sub-lease separated and enclosed from the adjoining premises duly licensed as a hotel and in such condition that the same might be kept open for the sale of permitted liquors therein during all lawful hours as and for an inn or public house whereby the plaintiffs were put to great trouble and expense in and about converting and enclosing the premises and separating the same from the adjoining premises so that the premises might be

At a glance

Court

Decision date

Before

Source

Judgment (203 paragraphs)

Cited By (2)