Nicholas Georgouras v Bombardier Investments No. 2 Pty Ltd

The plaintiff's essential contentions 5The plaintiff alleges that the defendant was in breach of the lease in that at the time the lease was entered into, the defendant misrepresented to the plaintiff that the leased premises were council compliant. 6As will be apparent from what follows the tenant took umbrage to the Warringah Council without prior warning arriving at the premises seeking to ascertain whether or not sections of the leased premises were council compliant. 7Ultimately this attitude appears to have forced the Council to take drastic measures. 8Warringah Council served on both the plaintiff and the defendant a notice of intention to give an order dated 17 May 2010 in respect to the leased premises. 9Thereafter the council served on both the plaintiff and the defendant an order pursuant to section 121B of the Environment Planning and Assessment Act 1979 (NSW) in respect to the leased premises to remove and carry out certain works said to have been in contravention of Development Consent 86/414 dated nine October 1986. 10The evidence before the Court is that the tenant was at all material times a sculptor and that at the material point in time was engaged in preparing an exhibition for his sculptures as part of the Greek Festival of Sydney exhibition. 11In general terms the tenant's contention is that he refused for a considerable time to accept the councils entitlement to make the above described orders : (1)Initially because he required what he termed as " due process" to be observed by the Council; (2)Finally when faced with the 3 June 2010 Warringah Shire Council Orders he sustained considerable loss not only by reason of not having been able to exhibit his sculptures as part of the festival exhibition but also by reason of the fact that many of his clients came to believe that he may have been no longer able for whatever reason to continue his former profession as he no longer had any alternate studio. 12The tenant in the circumstances seeks equitable damages and a declaration that the lease is void ab initio.

The defendant's contentions 13The defendant does not deny that it was in breach of the lease at the time the lease was entered into nor that it misrepresented to the plaintiff that the leased premises were council compliant. 14The defendant's cross-claim contends that the plaintiff was in breach of the lease by not allowing the defendant access to inspect or rectify the defects in title which made the premises non-compliant with the development consent. 15The evidence before the Court discloses that over a particular period there was substantial correspondence and e-mails and the like passing : (1)between the tenant; (2)the landlord; (3)the Council. 16The essential case put forward by the defendant is that notwithstanding its own conduct at the commencement of the giving of the lease, the plaintiff by its head in the sand approach to neither permit the defendant nor the Council to properly inspect the premises, effectively brought upon itself the ultimate decision by the Council to issue the notice with respect to respect to the leased premises to remove and carry out certain works said to have been in contravention of Development Consent 86/414 dated 9 October 1986.

More about the manner in which the hearing was conducted 17The plaintiff's wife, Mrs Georgouars was granted leave to represent her husband as a McKenzie friend. She had no legal training. 18She accepted that any submissions she may have put to the Court and any of the limited cross-examination she may be permitted to treat with was always and only to be regarded as put on behalf of her husband and not on her own behalf.

The witnesses 19The affidavit evidence adduced by the plaintiff consisted of his affidavits sworn on 9 November 2010, 9 December 2010, and 23 March 2011. 20The affidavit evidence adduced by the defendants were as follows : Affidavit of Rebecca Harper sworn 8 September 2010 Affidavit of Vincent West sworn 17 November 2010 Affidavit of Lucas Kearney sworn 17 November 2010 Affidavit of Daryl Bombardier Town sworn 17 November 2010 Affidavit of Belinda Bombardier sworn 26 November 2010 Affidavit of Jennifer Bombardier sworn 26 November 2010 Affidavit of Paul Haran sworn 26 November 2010 Affidavit of Matthew Haran sworn 26 November 2010 Affidavit of Salvatore Bombardier sworn 26 November 2010 Affidavit of Andreas Timm sworn 26 November 2010 Affidavit of Tony Smithyman sworn 2 December 2010 Affidavit of Karlie Samantha Bombardier sworn 26 November 2010 Affidavit of Amber Michelle Bernauer sworn 11 February 2011 Affidavit of Jennifer Bombardier sworn 11 February 2011 Affidavit of Karlie Samantha Bombardier sworn 11 February 2011 Affidavit of Karlie Samantha Bombardier Sworn 6 April 2011 21Additionally, the defendant relied upon expert affidavits made by Mr Guest on 22 February 2011 and made by Mr Scheffers sworn on 22 February 2011. 22The defendant also placed before the Court a number of Warringah Council Notices and called the Development and Compliance officer from that Council who gave oral evidence in the witness box.

An important clause in the lease 23It is common ground that clause 10.3 of the lease was in the following terms : (1)On the giving of two days notice to the Tenant, the Landlord May at reasonable times entity Premises for the purposes of : (a)reviewing the State of repair of the Premises; (b)performing any building and other repair work in accordance with Clause 10 .2 (2) and 10.2 or those works that the Tenant has failed to complete in accordance with clause 8. 1 (4); (c)carrying out requirements of State, local or other competent authorities.

The evidence adduced from the plaintiff 24The plaintiff under cross-examination gave evidence broadly to the following effect: (1)that he had signed the lease sometime in January 2009; (2)that he had moved into the premises on or about 1 March 2009; (3)that he had dealt with the managing agent Mr West as the marketing agent for the premises. (4)that there had been no difficulties which he recalled up to and including the occasion when his granddaughter [granddaughter who was a company director and office manager] had apparently received notice from Warringah Council. 25The balance of his cross-examination to a large extent was concerned with how it had come about that the plaintiff and his wife had been approached by an officer at Warringah Council who had sought to access the premises. The plaintiff had rejected the request for such access on the basis that due process had not been observed. 26This area concerning the due process contention is dealt with later in the judgment. 27For the time being it may be accepted that the plaintiff exhibited a disinclination to permit the Council to enter his premises in order to access and most particularly to inspect a mezzanine floor section which was apparently outside Warringah councils guidelines. 28His evidence was that his loss occasioned by the councils final notice was very difficult to assess. His situation was that his studio included many very valuable pieces and that when the final notice was received he had had no option but to as quickly and carefully as possible remove all his work to place it into storage. It was not as I understood his evidence, an option to allow either the Council or the general public into his studio this being because he had to be very careful not to alienate his insurer. Indeed as soon as his insurer learned of his difficulties in relation to having to placate the premises, the insurer temporarily refused further cover. 29The plaintiff also gave evidence of his hesitance to enter into a new lease or take any steps to mitigate his loss before a decision of this Court clarified his position.

Mr Salvatore Bombardier 30The first defence witness required for cross examination was Mr Bombadier, a director of the defendant company Bombardier Investments No 2 Pty Limited for approximately 40 years. 31Ms Georgouras' cross-examination focused on what she deemed the fraud committed by Bombadier investments. Q. Well Mr Bombardier, being a developer of industrial and commercial properties, you developed number 27 Dale Street, the industrial complex at number 27 Dale Street didn't you? A. I had it developed yes. Q. And being a builder and a developer on the Northern Beaches, you would have a lot of business with the Warringah Council wouldn't you? A. I have had a lot of dealings. Q. And you'd be really aware because you're a developer of the local environment plan, all of the particulars relating to the Warringah Council local environment plan, what you're allowed to build, what you're allowed to do with a premises, is that so? A. Yes. Q. You must be fully aware of the complex's building plans and the development consent and the building approval in number 27 Dale Street because you built it, you were fully aware of the building plans and the development consent and the building approval, yes? A. Yes. Q. You stated in your affidavit that you were aware of the mezzanine and the plumbing connections before you signed the lease with the plaintiff is that so? A. Which mezzanine are you talking about? Q. The wooden mezzanine Mr Bombardier? A. Which one? Q. The wooden-- Q. The illegal wooden mezzanine? A. The legal? Q. The illegal one, the one that they wanted to demolish, you know the wooden mezzanine inside the premises at unit 10? A. That was put there by one of the tenants who used to be a screen printer and therefore he partitioned where he washed his screens. Q. So the plumbing was on and the mezzanine was there when you leased the premises, when you-- A. No. When I leased it to you. Q. Yes, that's what I mean? A. But not to the previous tenant. Q. Yes, I understand, I understand. So you left that mezzanine in place because of the fact that somebody else had built it did you? A. Yes. Q. But you didn't want to pull it down? A. I thought it may be of use as it was to some new tenant. 32The defendant's counsel frankly admitted that the building was not council compliant at the time of the lease and therefore this issue was no longer of central importance to the plaintiff's case.

Ms Karlie Bombardier 33Ms Bombardier is the grand daughter of Mr Bombardier and is also a director of the defendant company. 34The first part of the plaintiff's cross-examination focused on conversations that led up to the signing of the lease and what those discussions were: Q. I put it to you that it couldn't have been so because Mr West was dealing with the plaintiff as your agent at that stage and also the lease had not even begun in January 2009, so it couldn't have been true? A. The lease began in 2009. Q. The lease began in February 2009, didn't it? A. Yes and the keys were given to Mr Georgouras prior to the actual lease commencement date. Q. I put it to you that quite a few conversations that you purport to remember with the plaintiff are not true? SALAMA: I object. 35The remainder of the cross-examination focused on the correspondence between the parties subsequent to the signing of the lease and what actions Ms Bombardier took to access the plaintiff's property. On the whole Ms Bombardier's evidence was not of much assistance to the Court as she did not appear to have been closely involved with the plaintiff's lease.

Mr Martinuzzo 36Mr Martinuzzo gave evidence of his recollection in regard to the Council's dealings with the tenant. 37His evidence was that he was aware of the letter that was sent from the Council to the defendant relating to the premises, his understanding being that the council initially requested from the landlord access to the premises. His evidence was that upon that request being made in writing by the council to the landlord there were difficulties in having access to those premises. 38His further evidence was that the complaint which activated the Council had come from a member of the public in relation to persons living at the premises that were occupied by the tenant. He had arrived unannounced at the premises. He was directed to the tenant but left after the tenant complained at the fact that he had not given prior notice of his intent to attend at the premises. 39He gave further evidence of being aware of a number of relevant communications sent by the council to the defendant. He accepted that on many occasions Kylie [the landlord's granddaughter who was also a company director and office manager] either contacted him by e-mail or in writing to request an extension to get access to the premises. Ultimately his evidence included the following : (1)that it was frustrating that there was difficulty with the tenants obtaining access; (2)that ultimately the council served a notice of intention to give an order on both the tenant and the landlord; (3)that had the Council been given much earlier access to the premises there was every change that the Council may have signed of on the premises as being deemed compliant.

Turning to the plaintiff's claim that the defendant was guilty of fraud 40Whilst the defendant conceded in these proceedings that the lease had made a misrepresentation there was no evidence that the landlord had consciously set out to mislead the tenant. In the circumstances the many authorities put to the Court by the plaintiffs wife need to be carefully treated with. 41It is trite that the term "fraud" appears in modern equity in various guises. Hence whilst the concession made by the defendant was clearly appropriate the badge of fraud was far too often utilised. I put this down to the plaintiff's wife in her capacity as a McKenzie friend not being able to discern the differences between knowing fraud and equitable fraud. 42In Magill v Magill [2006] 226 CLR 551 Gleeson C J adopted the principle at (17) that a false representation is fraudulently made if the defendant made it knowing it to be false, or recklessly, neither knowing nor caring whether it was false or true. To his Honour that was fraud in the strict sense. 43It is well settled that an allegation of fraud calls for strict proof . 44There was no evidence whatever that the defendant at the inception of the lease [or at any other time] the landlord had knowingly set out to defraud the plaintiff.

The duty of the parties to each other to act reasonably 45It is well settled that the parties to a lease are under a duty to each other to act reasonably. 46Hence it behoves the landlord, if in breach of his covenant, to be diligent in the remedying of such breach. For his part the tenant must not act unreasonably by obstructing the landlord in the exercise of his rights of entry for the purpose of doing particular work, or take out or take the matter out of the landlord's hands by doing the work himself before the landlord has had a reasonable opportunity of doing so. [ cf Granada Theatres Pty Ltd v Freehold (Leytonstone) Investment [1959] Ch 592].

The evidence of the experts 47The evidence given by Mr Brent Guest was as follows : Inspection and Comments A site inspection of the existing timber framed mezzanine structure was carried out on Tuesday 21 st September, 2010, in the presence of Mr Graham Scheffers of GRS Building Reports Pty Ltd (Building code of Australia (BCA) consultant), Ms Karlie Bombardier of Bombardier Real Estate, Mr Dale Martinuzzo of Warringah Council, and the existing tenants. The existing timber framed mezzanine (Photo No. 1) has been checked and we advise that the existing timber joists (190 x 45 Oregon spaced at 450mm centres) are structurally adequate to support a live load of approximately 5 kPa (500 kg per square metre) which is equivalent to a storage loading as detailed in the SAA Loading Code AS1170.1. However, the supporting timber bearers (190 x 45 Oregon) are only adequate to support a live load of 1.5 kPa (150 kg per square metre) which is equivalent to the loading for a domestic floor as detailed in the SAA Loading Code AS 1170.1. Should the timber mezzanine be retained and used for storage then the existing timber bearers will need to be strengthened or replaced and upgraded to larger member sizes to suit any storage loadings greater than 1.5 kPa (150kg per square metre). The connection of the existing timber wall plates (supporting the timber floor joists) into the masonry walls could not be accurately determined on site. As such, we would recommend the installation of new connections - M12 masonry anchors installed at approximately 500mm centres with 80 mm minimum embedment. This will ensure all timber wall plates are structurally adequate to support the required floor loadings of between 1.5 and 5 kPa. The existing timber framed mezzanine structure in its current state does not have a fire resistance level (FRL). The BCA Consultant would need to confirm the required fire resistance level of the mezzanine to satisfy the provisions of the BCA. If an FRL of 60/-/- for the columns and 60/60/60 to the underside of the mezzanine was specified, then the timber columns and underside of the mezzanine floor would need to be clad with a suitable proprietary fire rated cladding that meets the specified FRLs. The existing mezzanine balustrade (Photo No. 2) was measured by the BCA Consultant and found to be less than 1 metre in height. We also checked the existing upper level balustrade and found it to be poorly constructed and structurally unsound. We advise that the existing balustrade needs to be removed and replaced with new either a new BCA (Building Code of Australia) compliant balustrade or a full height timber stud wall connected to the existing ceiling structure. This work needs to be carried out in order for the mezzanine to be considered structurally adequate. Conclusion The existing timber framed mezzanine is considered structurally adequate to support a superimposed Live Load of only 150 kg per square metre. If heavier loads are required to be imposed upon the structure, then the existing timber bearers need to be replaced and upgraded. The existing mezzanine balustrade is structurally unsound and needs to be replaced with a BCA complaint balustrade in order for the mezzanine to be considered structurally adequate. The installation of proprietary fire rated cladding is required in order to achieve a fire resistance level (FCL) to satisfy the provisions of the BCA. This will ensure the mezzanine is structurally adequate and complies with the fire provisions of the BCA. 48The evidence of Mr Graham Scheffers was as follows: 3. Options 3.1 The Orders requires actions in relation to the use of the subject premises in addition to the demolition of the subject mezzanine and removal of the kitchen facilities. The primarily purpose of this Statement is to provide comments and assessment in relation to the construction of the Mezzanine as I understand that the removal of kitchen facilities and use of the premises are being dealt with separately by the parties involved. 3.2 In relation to demolition of the subject mezzanine, I consider that an alternative option is to use the provisions of Section 149A to 149E of the Environmental Planning & Assessment Act, 1979 (NSW). These provisions enable the owner to lodge an application for a Building Certificate and for Council to issue a Building Certificate for the mezzanine. The effect of a Building Certificate as stated in Section 149E is that: (1)A building certificate operates to prevent the council: (a)From making an order (or taking proceedings for the making of an order or injunction) under this Act or the Local Government Act 1993 requiring the building to be repaired, demolished, altered, added to or rebuilt", 3.3 The provisions of Section 149A to 149E allow for the mezzanine to be accepted by Council, subject to any upgrading that may be required. I am of the opinion that this is an appropriate alternative action to the mezzanine being demolished. On that basis, in July 2010, I requested that a joint meeting be arranged on site with Council's Development Compliance Officer (Dale Martinuzzo), the owners representative (Karlie Bombardier), a structural engineer (Brent Guest) and BCA Consultant (Graham Scheffers) to enable a detailed inspection of the mezzanine for the purposes of determining if it was feasible for the mezzanine structure to be retained and a Building Certificate issued. 4. BCA Compliance 4.1 I carried out an inspection of the mezzanine, the subject of Council's order on 21 September 2010 to enable an assessment of the structure against the relevant provisions of the Building Code of Australia. 4.2 A photograph of the mezzanine that was identified by Council's Development Compliance officer is included as Figure 1 below. I took this photograph of the mezzanine at the time of the inspection on 21 September 2010. 4.3 I am of the opinion that if the following items at paragraphs 4.4 to 4.7 are addressed, the timber mezzanine would be acceptable to remain, subject to a Building Certificate being issued by Warringah Council. 4.4 To address the BCA Part B (Structural Adequacy) provisions a separate report is to be provided from Brent Guest (Structural Engineer) to confirm the structural adequacy of the existing mezzanine and provide recommendations where necessary on upgrading works that may be necessary. Once upgrading works are complete a follow-up inspection and verification must then be obtained to confirm the structural adequacy of the mezzanine structure. 4.5 To satisfy the provision of BCA Part C for Fire Resistance Level (FRL), the mezzanine is required to be provided with the following FRL's to satisfy Table 3 of the BCA Specification C1.1: Columns - FRL of 240/-/-, and Floor - FRL of 240/240/240. Notwithstanding this, the provisions Clause 2.6 of Specification C1.1 of the BCA provides a concession to small mezzanines that are less than 1/3 of the floor area of the room in which it is located, subject to the walls and columns within 6m of the mezzanine achieving an FRL of 240/240/240. The concession is to enable the mezzanine and its supports so that they need not have an FRL or be non-combustible. I offer the following comments in consideration of the FRL's. 4.5.1 The purpose of these provisions of the BCA is to increase the FRL's surrounding a mezzanine that is combustible to recognize the increase in the fire load that may exist within both the mezzanine and storey as a whole. The structural walls adjoining the subject mezzanine, are of masonry construction and were required to be provided with a 4 hour Fire Resistance Rating as a result of Condition 15 of the Building Approval No 3199/86 dated 15 December 1986 that states that: "The building being constructed in Type 1 construction in accordance with the provisions of Part 16.7 of Ordinance 70". This equates to the current FRL of 240/240/240. the construction of the existing walls to achieve the Fire Resistance Rating required at the time of construction has been assumed only and has not been verified. 4.5.2 The timber mezzanine has a floor area of approximately 16m and the room in which the mezzanine is located has a floor area of approximately 160m . On the basis that the mezzanine is approximately 1/10 the floor area of the room it is located, which is substantially less than 1/3, the mezzanine is unlikely to significantly contribute to the fuel load of the space. 4.5.3 In order to minimise this impact and having regard to the surrounding wall construction being masonry, I considered it is reasonable for the mezzanine to remain subject to the columns and underside of the flooring being provided with an FRL of 60/-- and 60/60/60 respectively. This will result in the critical elements of the mezzanine structure to not contribute to the fire load for at least a period of 60 minutes that is equivalent to the current provisions of BCA Specification C1.1, Clause 3.7 for walls and columns located in the storey below the roof where the building has a rise in storeys of more than 3. 4.6 To satisfy the BCA Part D (Balustrade Construction) provisions, a floor must have a balustrade at least 1.0m in height. The existing balustrades have a height of approximately 960/ 970mm above floor level. I consider it appropriate that the height of the balustrades be increased to at least 1.0m to satisfy the provisions of BCA Clause D2.16. The existing balustrade has a solid plywood balustrade so that there are no gaps and this satisfies the provisions of BCA Part D - Balustrade construction. 4.7 To satisfy the BCA Part F (Ceiling Height) provisions, the mezzanine must have a ceiling height of at least 2.4m if used as an office or workspace and at least 2.1m if used for storage. The mezzanine has a ceiling height ranging from approximately 2.33m to 2.38m to the ceiling above and approximately 2.5m to the underside of the mezzanine. I consider that the area below the mezzanine satisfies the provisions of BCA part F (Ceiling Height). Subject to the floor of the mezzanine being used for storage only, this satisfies the ceiling height provisions of BCA Clause F3.1. 5. Conclusion 5.1 I am of the opinion that an alternative option to demolition of the timber mezzanine is for the structure to remain subject to the actions in paragraphs 5.2.1 to 5.2.5 being carried out to satisfy the relevant provision of BCA in relation to structure adequacy, minimising the risk of falls, providing an FRL to the degree necessary and permit ceiling heights suitable for the use of the space concerned. 5.2 The lodgement of the application for a Building Certificate will seek to address the status of the mezzanine as an unlawful structure and seek to have the mezzanine retained. The other issues in Council's Order dated 3 June 2010 in relation to the kitchen and use of the premises with the exception of paragraph 5.2.5 below has not been included in this statement as I understand these issues are being dealt with separately. Actions to be undertaken are: 5.2.1 Lodge a Building Certificate (S149A) application with Warringah Council to seek to have the timber mezzanine retained and the Order rescinded. 5.2.2 Obtain a separate report from a Structural Engineer to confirm the structural adequacy of the existing timber mezzanine and provide recommendations where necessary on upgrading works that may be necessary. Once upgrading works are complete a follow-up inspection and verification must then be obtained to confirm the structural adequacy of the mezzanine structure. 5.2.3 The columns and underside of the flooring being provided with an FRL of 60/-/- and 60/60/60 respectively. 5.2.4 The height of the mezzanine balustrade must be increased to at least 1.0m. The existing balustrade infill panels are to be retained and if modified must satisfy the requirements of BCA Clause D2.16 in relation to any gaps. 5.2.5 The floor of the mezzanine being used for storage only. The Building Certificate is to specify this as a limitation on the use of the space. This report is limited to addressing the existing timber mezzanine only and is not intended to provide a BCA assessment of Unit 10 or the remainder of the building. 49Somewhat curiously the defendant did not take the Court in detail to these reports but left it for the Court to understand matters of some complexity. 50I was left by both reports with the view that notwithstanding the reports, there could not be said to be a certainty that the mezzanine would not have had to be torn down anyway. This is clear from Mr Scheffer's evidence, that the primary order was for demolition and to avoid this result required an application for a building certificate. The granting of this certificate was by no means a certainty.

The relief sought by the parties 51The plaintiff sought: (1)a declaration that the lease agreement be held avoid ab initio; and (2)Equitable compensation. 52The defendant sought : (1)A declaration that the plaintiff is in breach of the lease; (2)A declaration that the plaintiff had at all material times unreasonably refused and was held consent to the defendant and all its servants and/or its agents to attend the least premises in accordance with the lease to inspect and rectify any defects in title such as to make the least premises compliant with development consent 86/414 dated 9 October 1986; (3)Indemnity costs; and (4)Further and in addition, equitable damages. 53Both parties sought costs and interest.

Declaration 54In my view the appropriate declaration is to declare that the lease be held void as and from the occasion when the Warringah Council served on both the plaintiff and the defendant the first notice of intention to give an order in respect to the leased premises.

Equitable compensation 55It is unfortunate that the plaintiff was unable to adduce evidence as to the amounts which he claimed to have lost due to the sorry state of affairs which led to the necessity to leave the premises. However the law requires that a party discharge the onus of making good such monetary amounts and the parties forensic steps taken in the litigation [or the lack of such steps as here] is not able to be treated with by the Court. The Court is in a position only to order that nominal damages be paid to the plaintiff in the sum of $5.00.

Dealing with the defendant's claim to relief 56Clearly the plaintiff in all of the circumstances is shown to have unreasonably refused and withheld consent to the defendant or its servants or its agents to attend the leased premises in accordance with the lease to inspect and rectify any defects in title. 57The declaration sought that the plaintiff is in breach of the lease is appropriately made and also that the plaintiff unreasonably withheld consent. 58In the unusual circumstances that obtain, no damages are to be awarded in respect of these breaches. 59As already indicated, the defendant was clearly in the wrong in relation to its misrepresentation that the premises were council compliant. At the same time, the plaintiff acted unreasonably in the fashion already outlined above. The case results in the Court having to balance the respective wrongs of the parties. For these reasons, the principled exercise of the material discretion is to make no substantive damages order in favour or against either party.

Orders 60The parties to bring in short minutes of order on which occasion they will be permitted to argue costs.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 18 July 2011