WRIGHT J The plaintiffs are, and at all material times were, the owners of three shops situated at 60 Franmaree Road, Newnham in Tasmania which were referred to in evidence as "Shop 1", "Shop 2" and "Shop 3" respectively. In October 1988 Shop 1 had been in existence for a number of years and was occupied by Peter Tucker and Sharyn his wife as lessees. The Tuckers operated a small milk bar and general food store at that location. Shops 2 and 3 were in the process of erection but had not been completed at that time. Mr Jones, the first-named plaintiff was building those two shops as his time and financial circumstances allowed. The plaintiffs, as owners of the property agreed with the defendants that they would complete Shops 2 and 3 and that the defendants would enter into possession thereof as lessees for a term of years. Shop 2 was to be operated as a video rental store and Mrs Edwards, the second-named defendant was to conduct a printing business in Shop 3. To enable the speedy completion of the necessary building work Mr Jones borrowed $30,000 from the Westpac Bank. The parties entered into a written agreement for lease dated 7 October 1988. The plaintiffs agreed to let and the defendants agreed to take Shops 2 and 3 for a term of six years, it being agreed that the said term would commence on 1 November 1988 or on the date of completion of the two shops if they had not been completed by the 1 November.

2. The shops were completed on or about 3 December 1988 and the defendants entered into possession. Approximately eleven months later, as the defendants businesses had fallen short of expectations, especially in respect of the video hire shop, they decided to remove their stock and equipment from both shops. The two businesses ceased trading at Franmaree Road on or about the 1 November 1989. The defendants, who were naturally anxious to avoid or minimise their liability to pay rent in respect of shop premises which they no longer required for their business purposes initiated negotiations with the plaintiffs and Mr Tucker. There is a dispute in the evidence as to the order in which the negotiations took place as well as the content of those negotiations. Mr Jones gave evidence that in about February 1990 the male defendant and Mr Tucker arranged to meet him for the purpose of discussing a proposal. During the course of the meeting, which took place at the plaintiffs' home, the male defendant and Mr Tucker, jointly proposed to Mr Jones that the defendants should be released from their obligations in respect of Shops 2 and 3 and that Mr Tucker should relinquish his lease in respect of Shop 1 and take over Shops 2 and 3 for the balance of the defendants' term. Mr Jones said that he was concerned that this proposal would leave Shop 1 vacant and when he enquired of the male defendant and Mr Tucker as to what they were going to do with Shop 1 Mr Edwards said "Well you will be free to let Shop 1". Mr Jones said that he explained to the two visitors that he would be losing a lot of money if he accepted this proposal and he was unable to relet Shop 1. He said that he made it clear that the offer was not acceptable to him in the terms in which it had been made. In their evidence both the male plaintiff and Mr Tucker claimed that the proposal was in terms different from those recounted by Mr Jones. They both said that the proposal was that the defendants would simply swap leases with Mr and Mrs Tucker, that is the defendants would become the lessees of Shop 1 and Mr Tucker and his wife would become the lessees of Shops 2 and 3. They also said that Mr Jones was agreeable to this proposal. When this version of events was put to Mr Jones in cross-examination he strenuously denied it, maintaining that if such a proposition had been forthcoming he would have readily accepted it. He said no proposal was put that the defendants would take over Shop 1. He made no point of the fact that the two defendants had simply ceased trading in Shops 2 and 3 without notification to him, or that a proposed changeover in the tenancies may possibly involve him, as well as the tenants, in substantial unforeseen expense. Nor did he complain that the terms of the lease swap described by the male plaintiff would have left Shop 1 vacant for the remainder of the term applicable thereto (about 15 months) albeit that the defendants may have been paying rent in respect of that shop. These were all matters which may well have provided a very good and substantial reason for Mr Jones and his wife to reject the proposal made by the defendants if it had been put to the plaintiffs in the form in which Mr Edwards and Mr Tucker claimed, but they were not raised by the plaintiffs as objections, either at the time or during the trial.

3. The first matter to consider is whether the Edwards/Tucker proposal was made in the terms deposed to by Mr Jones or the terms deposed to by Mr Edwards and Mr Tucker. Normally one would be inclined to place considerable reliance upon the evidence of Mr Tucker who, in the context of the present litigation, is virtually an independent witness. It was not contended that he had any interest in the outcome of the proceedings nor was it contended that he had animosity towards the plaintiffs. Nonetheless it was plain from his evidence that he has only the vaguest of recollections of the meeting in question and that in 1989 when the meeting took place, his principal concern was to gain possession of Shops 2 and 3 rather than to ensure that Mr and Mrs Edwards took over the balance of the term relating to Shop 1. Moreover, it was apparent to me that he had discussed the content of his evidence with one or other or perhaps both of the defendants and that such memory as he did have was probably contaminated by those discussions. This became evident from the way in which he responded to questions by Mr Hart at 175 of the transcript:

"Mr Hart I am not going to ask you to perform a miracle Mr

Tucker but just simply if you have any recollection as to

the length of the lease that was being discussed at that

meeting, can you describe that to the court?

Mr Tucker Well, from what I can remember there was nine

years or something on a lease left and I wanted more

apparently, Paul was going to try and organise that for me".

Mr Hart Well not 'apparently can you ...'?

Mr Tucker Well are you trying to ask me. No I can't recall

exactly saying that. What I am saying is that its a

condition obviously that I would have gone through."

4. This impression, which I received whilst the witness was still giving evidence-in-chief, was fortified when he was cross-examined by Mr Moore. He then agreed that Mrs Edwards "had mentioned to me that she wanted to have a chat about it. I said yes and we didn't really go into any great details about the case at all so - ".

5. I do not accuse Mr Tucker of mendacity but in light of the matters I have referred to, together with his repeated claims that his memory was poor after a lapse of about five years and his general demeanour in the witness box, I am quite unable to regard him as a reliable corroborative witness of Mr Edwards' evidence. In my opinion Mr Jones was by far the most impressive witness to give evidence during the course of the trial. Indeed, I would say that he was patently honest and, as to those things of which he claimed to be certain or fairly sure, he was also reliable. He freely conceded that he was unsure of several dates and I reject Mr Hart's submission that he was evasive. Whilst Mr Jones was inclined to be argumentative under cross-examination I interpret this, in the circumstances, as being no more than the reaction of a plain speaking man to suggestions which he regarded as unnecessarily repetitive or as reflecting false instructions being put to him by cross-examining counsel.

6. On the other hand Mr Edwards was a glib and well-rehearsed witness. I regret to say that neither he nor his wife impressed me favourably at all. They were at pains throughout their evidence to place their conduct in the most favourable possible light and to portray Mr Jones as hard hearted and unhelpful. I prefer the evidence of Mr Jones to that of Mr and Mrs Edwards and Mr Tucker in all respects where there is a conflict between them. The defendants were plainly facing severe financial embarrassment as a result of restructuring their business commitments in late 1989 and they were doing their best to extricate themselves from obligations which they had unwisely undertaken. The reasons for their wishing to do so need not be explored in detail. No one would blame them for seeking to terminate or modify their obligations under their agreement with the plaintiffs and, plainly, some of their proposals, including those involving Mr Tucker, were worth pursuing, but equally clearly the plaintiffs were not obliged to accept those proposals and, I find, did not do so. It is of some significance that in Bishop Gunton and Rae's letter to Mr and Mrs Jones dated 30 July 1990 (exhibit P6) there was no suggestion that Mr Jones had consented to the tenancy swapping proposal as claimed by Mr Edwards. If any such agreement had been struck I would have expected it to be at the forefront of the Edwards' complaints at that time. Mr Edwards specifically agreed that the letter reflected his instructions and was prepared in accordance with his instructions. The allegations of illegality which formed the basis for the decision to cease paying rent as expressed in that letter have not been pursued in the present proceedings. It is plain from the terms of the letter that the defendants repudiated the lease, and it is equally plain from the plaintiffs' reply thereto that they accepted that repudiation.

7. The plaintiffs sue the defendants for the sum of $700 per month calculated from 3 July 1990, being the first date upon which the defendants actually defaulted in paying the rental of $700 per month due pursuant to the terms of the lease. The claim is for $26,600 representing the rental due for a period of thirty-eight months up to 31 August 1993, the date upon which the premises were relet to the present tenants. In addition, the plaintiffs claim unpaid rates in respect of the years ending 30 June 1991, 30 June 1992, and 30 June 1993. This claim is made pursuant to cl3(u) of the agreement for lease. The defendants do not dispute that rent was not paid during the period specified nor is it contested that the rates were unpaid during that period. The quantum of such rates was agreed at $3,851.55. Whilst there was no agreement as to the quantum of the unpaid rental there can be, and was, no dispute that if the plaintiffs are entirely successful in their claim they should recover the amounts claimed. A claim by the plaintiffs for consequential loss under the Hungerford v Walker principle was abandoned at the commencement of the trial.

8. Mr Hart, counsel for the defendants, submitted that on or about 1 November 1989 when the defendants ceased trading at Franmaree Road, by virtue of cl8(d) of the lease the plaintiffs were obliged to take steps to find new tenants for the premises and that their failure to do so and their failure to accept the lease swap proposal made by the defendants now disentitles the plaintiffs to sue for damages in these proceedings. Clause 8(d) provides as follows:

"18(d) In the event of the Lessee vacating the demised

premises whether with or without the consent of the Lessor

the Lessor shall take all reasonable steps to mitigate any

loss or damage suffered by the Lessor and to lease the

demised premises at a reasonable rental and on reasonable

terms and the entitlement of the Lessor to damages shall be

assessed on the basis that the Lessor should have observed

the obligation to mitigate damages set forth in this

clause."

9. As I have already made findings in the plaintiffs' favour in respect of the matters discussed at the meeting between Mr Jones, Mr Edwards and Mr Tucker there is no need to explore that aspect of Mr Hart's submission further. It is however necessary to consider whether he is correct in his contention that by removing their stock-in-trade and equipment from the premises the defendants had "vacated" the premises. Mr Moore, counsel for the plaintiffs, submitted that the reference in cl8(d) to the lessees "vacating the demised premises" could not apply to a situation in which the lessees simply removed their plant and equipment and ceased trading from the relevant shops. He submitted that unless the vacating of the premises amounted to an abandonment of the lease and a surrender by operation of law, there could be no right or obligation on the part of the lessor to take steps to mitigate any loss or damage or to relet the demised premises. He submitted that the phrase "the Lessor shall take all reasonable steps to mitigate any loss or damage suffered by the Lessor and to lease the demised premises at a reasonable rental ..." could not be interpreted as casting two separate and independent obligations upon the lessor in the event that the premises were vacated. His submission was that the words "and" should be read as "including". In my opinion Mr Moore is correct in both respects and this view is fortified by the provisions of cl8(e) which is in the following terms:

"18(e) No act of the Lessor taken in pursuance of the duty

to mitigate damages shall by itself constitute acceptance of

any breach or repudiation on the part of the Lessee or a

surrender by operation of law."

10. The fact that a term such as "vacate" must take its meaning from the context in which it occurs is amply demonstrated by cases such as McDonald v Jane [1960] VicRp 30; (1960) VR 184 at 187 and McLean v Grace (1953) NZLR 566. In considering whether or not the defendants had vacated the premises it must be remembered that after removing their stock-in-trade and equipment from the premises in November 1989 they continued paying their rent for the period up to and including 2 July 1990. They had not repudiated the lease at that time and they had not abandoned the premises. Furthermore, there was no loss or damage to the plaintiffs which, as lessors, they were required to mitigate under cl8(d).

11. I doubt whether cl8(d) does more than restate the general common law rule applicable to all cases of breach of contract and breach of lease. See The Progressing Mailing House Pty Ltd v Tabali Pty Ltd (1984)-1985 [1985] HCA 14; 157 CLR 17. But even if I am wrong as to this, that clause had no capacity, in the circumstances of this case, to operate to the defendants advantage until their default began to occasion loss to the plaintiffs ie on and after 3 July 1990 when they failed to pay rent. I am also of the opinion that it could not be said that the defendants had "vacated" the premises in a legal sense before that date. They were still in possession. They were paying rent. According to Mr Jones they still retained the keys. This fact was confirmed by Mr Edwards during the course of cross-examination when he agreed that he had retained the keys until after he and his wife ceased paying rent and that he surrendered them to Mr Jones only upon Mr Jones making a request for their return.

12. The defendants could have moved their stock and equipment back into the premises at any time prior to 3 July 1990 without let or hindrance from the plaintiffs. Though the shops were empty, in my view they had not been vacated within the meaning of cl8(d) so as to oblige the plaintiffs to take action to mitigate some as yet undefined prospective loss. It is also inconceivable to me that the plaintiffs could have legitimately leased the demised premises to new tenants at any time before 3 July 1990. The defendants had not repudiated the lease at that time. They were in possession and they could have elected to return and recommence business at any time up until the repudiation occurred. Moreover, as submitted by Mr Moore, and supported by Diplock J (as he then was) in Shindler v Northern Raincoat Co Ltd (1960) 1 WLR at 1048 there can be no obligation on the part of a plaintiff to mitigate his damages before there has been any breach of contract which he has accepted as a breach. See also Jamal v Moolla Dawood Sons and Co (1916) AC 175 at 179 where Lord Wrenbury said:

"It is undoubted law that a plaintiff who sues for damages

owes the duty of taking all reasonable steps to mitigate the

loss consequent upon the breach and cannot claim as damages

any sum which is due to his own neglect. But the loss to be

ascertained is the loss at the date of the breach. If at

that date the plaintiff could do something or did something

which mitigated the damage, the defendant is entitled to the

benefit of it."

13. Accordingly, as submitted by Mr Moore, any offer made by the defendants and accepted by the plaintiffs in respect of a tenancy swap which occurred earlier than the date of repudiation in July 1990 and was not honoured by the plaintiffs prior to that date, could not constitute conduct upon which the defendants could rely for the purpose of establishing that the plaintiffs were in breach of cl8(d) of the agreement for lease.

14. Mr Moore also submitted that the plaintiffs could not be required to sacrifice their rights or embark upon substantial expenditure in order to mitigate their loss. He pointed out that substantial works may well have been required had the plaintiffs accepted the proposal that the Tuckers should take over the lease in respect of Shops 2 and 3. It was not claimed in evidence by any witness that there had been any discussion or agreement as to who should pay for the transfer and other costs associated with that proposal. A somewhat similar exercise undertaken in 1993 when Shops 2 and 3 were effectively amalgamated to form a mini-market cost the plaintiffs some $10,000. Although, on either version of events, the Edwards/Tucker proposal to Mr Jones was a basically simple one, it left unresolved the question of payment of any costs such as these. Mr Moore referred to Sacher Investments Pty Ltd v Forma Stereo Consultants Pty Ltd (1976) 1 NSWLR 5 per Yeldham J at 9 in support of his submission:

"Although a plaintiff cannot recover for loss consequent

upon a defendant's breach of contract, where he could have

avoided such loss by taking reasonable steps, nonetheless a

defendant who seeks to rely upon a failure to mitigate must

show that the plaintiff ought, as a reasonable man, to have

taken certain steps for the purpose of doing so. The

plaintiff is not under any obligation to do anything other

than in the ordinary course of business, and the standard is

not a high one, since the defendant is a wrongdoer. See

generally Chitty on Contracts, 23rd ed, vol 1, par1482 et

seq 691 et seq. See also Banco de Portugal v Waterlow and

Sons Ltd [1932] UKHL 1; (1932) AC 452 at 506: 'The law is satisfied if the

party placed in a difficult situation by reason of the

breach of a duty owed to him has acted reasonably in the

adoption of remedial measures, and he will not be held

disentitled to recover the cost of such measures merely

because the party in breach can suggest that other measures

less burdensome to him might have been taken'.

It is clear that the plaintiff is not required to sacrifice

or risk any of his property or rights in order to mitigate

his loss. See generally also McGregor on Damages, 13th ed,

par209 et seq, 148 et seq and Cheshire and Fifoot, Law of

Contract, 3rd ed (Aust) 733 et seq."

15. There is much substance to Mr Moore's submission in this respect but I do not need to base any part of my judgment upon it.

16. Despite having rejected the defendant's evidence and that of Mr Tucker in respect of the discussions which they had with Mr Jones it is nonetheless necessary for me to consider whether or not the plaintiffs took reasonable steps to mitigate their loss after July 1993. Of course the onus of establishing a failure to mitigate loss lies upon the defendants. See Watts v Rake [1960] HCA 58; (1960) 108 CLR 158 per Dixon CJ at 159 and Metal Fabrications (Vic) Pty Ltd v Kelcey (1986) VR 507-514 per Murphy J. In my opinion it has not been shown that the plaintiffs failed to take all reasonable steps to mitigate their loss once the defendants ceased paying rent and repudiated the agreement. The plaintiffs engaged the services of estate agents and the property was advertised as being available for lease both by the plaintiffs and their agents. The plaintiffs also placed large signs in each shop window. Some prospective tenants made enquiries but these came to naught through no fault of the plaintiffs or their agents until the existing tenants entered into occupation of the two shops in 1993.

17. I find that the plaintiffs have established their case and their damages as claimed. There will accordingly be judgment for the plaintiffs for the sum of $30,451.55.