(a) The lease provisions
347 Mr Simpkins emphasised the need to construe the permitted use provision in the lease in context which included the provisions of special conditions 6 and 9. On that approach, he submitted that the central issue is whether the nature and extent of CTH's operations were within the scope of a reasonable use conforming to the very general description "Warehousing, Storage & Distribution" and the permitted activities as described in special condition 6.
348 Alternatively, CTH relied upon the existence of an implied term to similar effect. CTH's use of the large forklift for container handling, he argued, constituted a reasonable manner of performing an authorised activity. Toyo was, accordingly, required as at the lease commencement to ensure that the premises were in a reasonably fit condition for such use.
349 The submission as to the implied term, it was contended, drew support from the judgment in Steel & Stuff Pty Limited v Fallon Street Properties Pty Limited [2005] NSWSC 1148 (Palmer J) and the judgment of the Court of Appeal in that case [2006] NSWCA 296.
350 Reliance was also placed upon a number of other authorities in support of the implication of the terms: Plaintiff's Outline of Submissions, paragraph 18.
351 On the issue as to whether the premises were, as at the commencement of the lease on 15 August 2004, "reasonably fit for use" and "reasonably fit for the purpose of loading and unloading containers in the hardstand area …", I accept, as Mr Simpkins SC submitted, that the premises had to be sufficiently suitable at the lease commencement to permit the authorised use to be carried on for the duration of the lease: CTH's Submissions in Reply, paragraph 44.
352 Plainly, the loading and unloading of shipping containers could only be achieved through the use of mechanical equipment. The evidence established that the types of equipment conventionally employed for the purpose of undertaking container handling includes side loaders, straddle carriers, limited capacity forklifts and large forklifts such as the Clark Y650D forklift.
353 It was submitted for CTH that it was entitled to carry on the use in any reasonable manner and that use of the Clark forklift was reasonable. This was said to be so, firstly, upon the basis that the evidence disclosed that similar businesses to the plaintiff used that type of equipment and, secondly, mechanical lifting by means of side loaders were reasonably regarded by CTH as being unsuitable.
354 CTH, alternatively, argued that even if the use of the Clark forklift was not a reasonable method for the purpose of loading and unloading containers, the premises nonetheless were not fit for the purpose of loading and unloading containers in the hardstand yard area. In this respect, it was contended that the evidence established that the concrete pavement had "failed" prior to the commencement of the lease and required replacement. In that condition, no forklift could have been used to lift loaded containers without further or progressive damage occurring.
355 As to whether or not the pavement damage was caused by a breach by CTH, it was contended for the plaintiff, inter alia, that there was no failure by it to take care of the premises in circumstances in which CTH used them "… for the reasonable conduct of the permitted use": Plaintiff's Outline of Submissions, paragraph 34.
356 The plaintiff also submitted, if the use was not a reasonable one, then "a reasonable use" would, in any event, have caused the same damage. This, it was argued, was by reason of the premises' unsuitability at the time of the commencement of the lease and the consequential and additional deterioration of the sub-grade thereafter.
357 On the questions as to whether or not a Clark forklift could be regarded as an authorised manner of effecting the loading and unloading of containers on the hardstand area and the suitability for that purpose of the premises, CTH contended that the evidence established that the premises were not suitable for such use. In this respect Mr Simpkins submitted:-
"At one level it is a very simple case. It is simple because the lease permitted a use involving container handling. A reasonable use for container handling purposes could involve a large forklift like the Clark forklift and these premises were totally unfit for that use. It's only if your Honour is against us on that particular proposition that we need to get to further refinements of the arguments about use and about breach. As I say, at one level it is a very simple case." (t.502)
358 On the "use" question, CTH pointed to the business as operated by it at 50 Airds Road as a relevant matter in determining whether or not the use on the leased premises was reasonable or not. The evidence, it was contended, indicated the need at those premises for containers to be stacked and that the use of mechanical equipment for container handling was clearly required for that to be done. The agents acting on the lease negotiations, Mr Miracola and Mr Steinhour, it was noted, had actually observed stacked containers when attending CTH's premises at 50 Airds Road. That evidence, it was contended, established that CTH's operational methods included both the transportation, loading and unloading containers and standing or storing them in the open area of the premises.
359 The fact that CTH used a Heister forklift at 50 Airds Road was, in the plaintiff's submission, evidence that the use of a large forklift had been an ordinary incident of the conduct of its business for a substantial period. Even if the Heister forklift was not on site at the time Mr Miracola and Mr Steinhour attended, that went only to the issue of Toyo's knowledge and consent to the actual use of the Clark forklift. It still remained relevant to what was reasonable in the use of equipment to handle containers for the purposes of loading and unloading.
360 Submissions were made in relation to communications said to have existed between the parties to the lease as to the nature and conduct of the CTH business before the lease was entered into.
361 Mr Simpkins commenced his submissions on this aspect by contending that, regardless of the findings made as to those communications, the construction of the lease terms was to be determined by the meaning and ambit of ordinary English words used to describe the business use in the lease and by a determination as to whether CTH's activities on the premises fell within the reasonable confines of the ordinary conduct of such business use.
362 It was submitted that findings favourable to CTH should be made on the pre-lease communications, namely, that the defendant knew or reasonably should have known that CTH employed heavy equipment such as the Clark forklift. Even the absence of findings to that effect, it was argued, would not undermine CTH's case based on the lease terms.
363 CTH submitted that Mr William's evidence, that he had been advised by Mr Steinhour that CTH would use side loaders to handle containers should be rejected. Mr Williams made a note of the conversation. Whilst it referred to a number of minor matters, it contained no reference at all to the equipment CTH would employ in handling containers. I have previously recorded my conclusion on this point that I do not accept that such advice was given to Mr Williams.
364 CTH placed particular reliance upon the evidence of Mr Steinhour who said that he observed containers stacked at 50 Airds Road.
365 The fact that Mr Williams' evidence was to the effect that he inquired of Mr Steinhour as to the method of container handling to be used, it was contended was significant as it demonstrated a real and conscious appreciation by him "… that it was fundamental to focus on how the containers would be handled … namely, his understanding that if the containers were to be handled using a forklift, the concrete would disintegrate to the extent that you couldn't conduct a business …" (t.501).
366 CTH also relied upon what it claimed was Mr Williams' complete indifference as to how the containers were to be handled. This was said to be so both prior to the lease being entered into, and during its term. In this latter respect, it was submitted that he became aware of the use of the large forklift and of the fact that it was causing damage for several months. His inaction in the face of knowledge of such matters, it was contended, was significant on the issues as to reasonable use and the methods employed by CTH for handling containers. It was further contended that the evidence revealed that Mr Williams appreciated the fact that a large forklift was at least an available means of handling containers.
367 On the issue of reasonable use, CTH relied upon Mr Howes' evidence as to the use of various sized container forklifts in businesses similar to that of CTH. These involved a range of weights from a 25 tonne forklift (Trojan Transport), an Omega forklift with a lifting weight of 28 tonnes (Quantum Transport Pty Limited), a Mitsubishi forklift with a lifting capacity of 40 tonnes (Beechy Transport) and a Stacker forklift with a weight 75 tonnes (Trojan Transport). Reliance was also placed upon a calculation which Mr Simpkins requested Dr Redman to undertake (recorded in Exhibit U) which is said to support the conclusion that a forklift with a 20 tonne load on the axle would still have resulted in pavement failure, even assuming that the pavement was new and properly constructed within a usage ranging between 100 to 1,000 movements. The submission in this respect was:-
"… so nothing in this case is going to turn on whether instead of a Clark forklift we should have got the Omega forklift having a lifting weight of 28 tonnes. Once we are in the area of big forklifts, it makes no difference because this concrete was just inadequate for any big forklift." (t.507)
368 It was also submitted that the use by CTH of the Clark forklift was not an act of "neglect" (in the sense of an omission to act), nor was it a "deliberate" act (in the sense of an act engaged with the intention of causing damage). Further it was submitted that it was not "careless" if it represented a reasonable means of carrying on the permitted use.
369 CTH submitted that there was no need for Toyo's consent to be obtained for the use of the Clark forklift. Consent was only required under the Rules and Regulations in the lease, it observed, for "installing" and "positioning" in accordance with Rule 4. Neither expression, it was submitted, was apt to cover the use of heavy equipment on the concrete pavement.
370 Alternatively, the plaintiff submitted that the defendant, in any event, had consented to the use of the Clark forklift. Such consent, it was argued, could be inferred from actual knowledge in Toyo's employees of the use and lack of complaint or requirement for removal.
371 The fact that any consent was not "in writing" was said to be a very technical breach if any and no damage could be demonstrated to have arisen from such a technical omission.
372 In relation to Toyo's obligation to repair the pavement damage, CTH submitted that the damage that occurred to the pavement after the commencement of the lease required Toyo to repair or restore it to a condition that permitted the ordinary use and occupation of the premises by CTH. This it failed to do.
373 The plaintiff contended that there was no implication of a duty as contended for in paragraph 6 of the amended cross-claim. It submitted that there was no liability for damages if what CTH did was permitted by the lease.
374 As to the alleged loss and damage suffered by Toyo, as noted earlier, reliance was placed upon the proposition that a "use" that was in accordance with any duty of care would nonetheless have produced physical damage and it had not been demonstrated to have been likely to be any less extensive than that which in fact occurred.
375 In his oral submissions, Mr Simpkins correctly contended that the ultimate determination of the proceedings would, apart from the terms of the lease, otherwise largely turn on the various factual findings made as to the state of the premises at the commencement of the lease and the circumstances in which they deteriorated.
376 The plaintiff relied upon the lay evidence which it contended established that at the lease commencement, the concrete pavement and the leasehold area had been significantly fractured or cracked from prior use over the 24 years or so since its original construction. The lay and expert evidence together, it was submitted, supported the making of a finding that, prior to occupation of the premises by CTH, the pavement "… was in a state of significant deterioration with large and substantial cracking throughout those slabs in the area leased to CTH" (t.495).
377 Mr Simpkins correctly observed that there was no evidence that established with any precision what loading the pavement had been subjected to prior to the commencement of the lease. The evidence indicated that the area that eventually "collapsed" during CTH's use had been used by the prior owner, Pirelli, for many years as a cabling despatch area, with rolls of cabling being loaded onto semi-trailers using small forklifts.
"So whilst no-one knows how many forklifts or how many semi-trailers or how many rolls of cabling, the inference your Honour would be entitled to draw from the evidence is that, over a period of 25 years, this particular area was put to substantial use involving the application of quite heavy loads being loaded, significantly more than just the mere weight of semi-trailers, and that large cables were being lifted by forklifts onto and off semi-trailers that were regularly moving in and out of the area and standing upon it." (t.496-497)
378 A finding, it was submitted, should be made to the effect that the relevant area was cracked generally as depicted in photo 1.4 in the tender bundle, Exhibit B, and that such damage had resulted from the use of the site by Pirelli being a substantial use involving the application of repeated heavy loads.
379 Submissions were made as to Toyo's knowledge of the Clark forklift. It was submitted that the evidence established that it came on site in November 2002. Mr Gregory's evidence that he spoke to Mr Monahan about a month after it was introduced to the premises, was relied upon as supporting the inference or conclusion as to Toyo's consent for its use. On the assumption (which CTH did not concede) that consent was required, it argued it could, as previously noted, be readily inferred from the knowledge of Toyo's employees of the use of the forklift and the absence of any complaint or any requirement for its use to stop.
380 Accordingly, Toyo's response to the use of the Clark forklift or the lack of response (in particular that of Mr Monahan and Mr Gregory) was relied upon as establishing its consent. It was observed in this respect that such lack of action operated from an early point in time when the damage was occurring and about which Toyo had full knowledge. The only response, it was contended, was to instruct staff to keep an eye on the damage. The absence of complaint and what was said to be the total inactivity by Toyo for several months prior to September 2003 was, accordingly, relied upon as consistently demonstrating Toyo's consent.
381 Mr Monahan's evidence that he did not regard the stacking of containers as an unauthorised use and Mr Williams' conclusion that it was logical for CTH to have such a forklift were also relied upon by CTH. The large Heister forklift used by CTH at 50 Airds Road was a 26 tonne forklift. The Clark Y650D forklift had a weight of approximately 39 tonnes. They were both in the category of "large" forklifts. Both were said to be accepted means for handling containers. The use of the large forklift was, accordingly, said to have constituted the use of the premises by CTH that was a reasonable one.
382 Submissions were made in relation to the "water episodes", referring to the escape of water across and under the concrete pavement. The first of such episodes was said to have occurred on 4 June 2001 followed by an incident on 31 August 2001. The occurrence of such leaking was linked to expert evidence, in particular, that of Dr Wiesner as to the impact that moisture can have upon the state of sub-grade and the likely condition of the sub-grade at the time of the lease commencement.
383 Reliance was also placed upon the escape of water on other occasions, in particular, on 6 December 2002 and subsequently on 28 February 2003 and 11 March 2003 and the blocking of a drain in the presence of heavy rain on 16 May 2003.
384 It was submitted that Mr Howes' evidence as to the break-up of the concrete after December 2002 could be causally linked to the water episode of 6 December 2002. The general submission, however, was that the concrete had actually fractured and deteriorated well prior to the commencement of the lease and continued to deteriorated thereafter.