1. Panagiotis Theodosiou is the registered proprietor ('the landlord') of premises leased to Oasis Bakery Pty Ltd ('the tenant') in Murrumbeena, Victoria. The tenant operates a bakery and retail outlet from the premises.
2. On 21 August 2009, the landlord leased the premises to Makool Pty Ltd ('the former tenant') for a term of five years commencing on 1 September 2010 with five options for further terms of five years each ('the first lease').
3. By Transfer of Lease dated 10 October 2014, the former tenant transferred its interest under the first lease to the tenant.
4. By Renewal of Lease the first lease was renewed in around 2015 for the term commencing on 1 September 2015 until 31 August 2020 ('the first renewed lease').
5. It is not in dispute that in around August to October 2016, the tenant carried out the following works to the premises:

(a) cutting of the slab and chasing services into the slab of the premises;

(b) drilling, penetrating and cutting through the dividing precast wall between unit 8 and the premises;

(c) drilling of holes into the roof for the tethering of a marketing balloon on the roof of the premises;

(d) installing refrigeration and air-conditioning equipment on the roof of the premises; and

(e) installing a marketing balloon on the roof of the premises

1. In or about April 2020, the tenant exercised its option to renew the lease for the term commencing on 1 September 2020 and ending on 31 August 2025 ('the second renewed lease').
2. On 30 April 2021, the landlord's solicitors served a s 146 notice of default[2] on the tenant alleging a breach of lease because the tenant:-

(a) made structural alterations, additions and/or repairs to the premises without the written consent of the landlord; and

(b) brought articles of weight or nature onto the premises which may damage the premises

1. The Notice of Default was based upon the 2016 works.
2. On 26 May 2021, I granted an interim injunction restraining the landlord from terminating the lease in reliance upon the Notice of Default. At the time, the tenant disputed the validity of the Notice of Default and denied it was in breach of the lease as alleged. The tenant maintained this position throughout the final hearing but abandoned it in closing written submissions filed after the hearing concluded.
3. The tenant now accepts that in carrying out the 2016 works it was in breach of the covenant in the lease not to alter the premises without the landlord's written consent.
4. Notwithstanding the breach, the tenant claims that the issuing of the Notice of Default was unconscionable conduct by the landlord in contravention of s 77 of the Retail Leases Act 2003 (Vic) ('the RLA'). The tenant says the issuing of the Notice of Default was in retaliation for the tenant seeking a rent determination.
5. The tenant seeks damages for unconscionable conduct being an amount equivalent to its legal costs.
6. The landlord filed a counterclaim against the tenant and Ms Marwa Makool, the guarantor under the lease, seeking damages for the breaches of lease set out in the Notice of Default. The landlord no longer seeks to recover possession of the premises.
7. It is not in dispute that if the tenant is liable to pay any amounts, Ms Makool will be liable as guarantor.
8. The proceeding was heard at the same time as a related proceeding, BP93/2023. In the related proceedings, commenced by the landlord, I found that a rent determination setting the rent payable for the second renewed term of lease was vitiated by error and I ordered that it be set aside.

(a) By issuing the Notice of Default, did the landlord engage in unconscionable conduct in breach of s 77 of the RLA? If yes, is the tenant entitled to damages? and

(b) Is the landlord entitled to damages from the tenant because of the breaches of lease identified in the Notice of Default and if so what amount?

ISSUE 1 - DID THE LANDLORD ENGAGE IN UNCONSCIONABLE CONDUCT IN BREACH OF S 77 OF THE RLA BY ISSUING THE NOTICE OF DEFAULT?

1. The tenant claims that by serving the Notice of Default consequent upon the tenant's legitimate exercise of its contractual right to a rent determination, the landlord engaged in conduct that is in all the circumstances unconscionable having regard to s 77(2)(l) of the RLA. Section 77(2)(l) refers to the extent to which the landlord was not reasonably willing to negotiate the rent under the lease.

1. Section 77(1) of the RLA provides that a landlord must not, in connection with the lease engage in conduct that is, in all the circumstances, unconscionable.
2. The RLA does not define unconscionable conduct.
3. Section 77(2) of the RLA lists matters that I may have regard to in considering whether conduct is unconscionable. One of those matters which is relied upon by the tenant is

(l) the extent to which the landlord was not reasonably willing to negotiate the rent under the lease.

4. It is well established that in deciding whether conduct was unconscionable I should consider:

(a) the language of s 77 of the RLA;

(b) the remedial and beneficial objects of the RLA;

(c) the surrounding conduct; and

1. the evaluation of conduct by reference to a normative standard of conscience which may develop and change over time and which must be understood and applied in the context with which it arose. Usually, serious misconduct or actions showing no regard for conscience must be demonstrated.[3]

(a) In April 2009 he was approached by Ely Makool to approve two openings in the interparty wall between units 9 and 10. He gave approval subject to conditions and the works were carried out sometime in 2010/2011;

(b) He first became aware of the 2016 works when his wife was shopping at the premises and saw the concrete slab being cut;

(c) He contacted his managing agent who was unaware of the works being undertaken;

(d) He inspected the premises with his managing agent on 2 September 2016. George Makool was present and he expressed his concerns about the works to Mr Makool. He asked for copies of engineering drawings but never received them. He said Mr Makool laughed at him and would not engage meaningfully during the inspection;

(e) He instructed his agent to email the tenant which he did on 5 September 2016 requesting engineers' computations and drawings and photographs of steel work prior to any pouring;

(f) On 13 September 2016 the tenant was notified that it must cease works and reinstate the unauthorised works;

(g) George Makool responded on 21 September 2016 saying the family was away overseas and he would talk when back the following week;

(h) By emails dated 21 September 2016 and 4 October 2016 the agent requested an update from the tenant and reminded the tenant of the stop work request;

(i) George Makool responded on 4 October 2016 saying he was waiting for the engineer to prepare the documentation;

(j) On 5 October 2016 the landlord received a letter from Lindsay Patone of Vert Engineering Pty Ltd stating that the works appeared to be within the requirements of Australian Standards;

(k) Despite continued requests no structural or engineering drawings were provided;

(l) On 11 November 2016 he discovered the unauthorised installation of a balloon and airconditioning units on the roof;

(m) On 13 February 2017 the agent wrote to the tenant requesting cessation of works;

(n) Further requests for information about the works were made in November and December 2017.

1. The landlord deposed that he did not agitate the issue of the unauthorised works at the time because of personal extenuating circumstances being the death of a close cousin in 2016 and the death of his mother-in-law and grandmother in 2018.
2. It is not in dispute that on about 22 April 2020 the tenant exercised an option for the renewed lease commencing on 1 September 2020. The tenant was informed that the landlord agreed to the renewal noting that the rent was to be reviewed in accordance with the market rate and proposed the rent remain the same as under the previous lease. The current rent was $102,257.40 per annum plus GST.
3. On 22 April 2020 the tenant informed the managing agent that it did not agree to the rent suggested by the landlord and proposed that the rent be $39,000.00 per annum.
4. By email of 15 January 2021 the tenant's solicitors informed the landlord that the tenant intended to make an application for the appointment of a specialist retail valuer to determine the market rent. The email recorded that the 'parties are unable to reach agreement as to the commencing market rent for the first year of the further term...'.
5. The landlord responded on 18 January 2021 stating that the tenant was in default of the lease for making unauthorised structural changes and he invited the tenant to suggest how it would rectify the defaults. The unauthorised changes were a breach of an essential term of the lease. The landlord also stated that he wanted the breaches resolved before continuing with the completion of the option to exercise the renewed lease and the appointment of the specialist valuer.
6. By letter dated 3 February 2021 the tenant's solicitors responded to the landlord denying any breach of the lease and alleging amongst other matters that the landlord and managing agent were aware of the alterations at the time they were undertaken. No mention was made of the rent determination.
7. On 22 February 2021, the landlord responded by email disputing the accuracy of some matters in the 3 February letter and sought the tenant's response about how the defaults would be remedied.
8. On or about 24 March 2021 John Forsyth of Scriviner Forsyth Pty Ltd was appointed as the specialist retail valuer to independently determine the current market rent.
9. Five weeks later the landlord issued the Notice of Default.

1. The landlord took no action against the tenant in relation to the 2016 works since December 2017 until issuing the Notice of Default. The landlord says he had various telephone calls with Mr George Makool in relation to roof leaks in December 2019 and January 2020 in which he reminded the tenant of its breach of lease in relation to the 2016 works.
2. The unconscionable conduct claim as pleaded is based upon the landlord issuing the Notice of Default consequent upon the tenant seeking a rent determination having regard to the extent to which the landlord was not willing to negotiate the rent under the new lease. That is the only basis relied upon to maintain the unconscionable conduct claim.
3. The tenant says I should have regard to the extent to which the landlord was not reasonably willing to negotiate the rent under the lease to make a finding of unconscionable conduct.
4. The landlord gave uncontradicted evidence that he had discussions with George Makool for the tenant regarding the rent for the new term. He says different numbers were discussed. This is the extent of the evidence of negotiations.
5. The tenant provided no evidence to substantiate the claim that the landlord was not reasonably willing to negotiate the rent. The allegation is not supported by the correspondence passing between the parties in relation to the rent payable.
6. I am satisfied on the evidence that there were some negotiations between the parties in relation to the rent for the renewed term. The tenant's solicitor's letter of 15 January 2021 refers to negotiations failing. This suggests there were negotiations. The landlord's evidence was that different figures were discussed. This suggest there were negotiations.
7. There is no evidence before me to warrant a finding that the landlord was not reasonably willing to negotiate the rent.
8. The tenant's solicitor's email of 15 January 2021 made it clear that from the tenant's perspective, negotiations about the rent were over and the tenant would seek a rent determination.
9. The landlord's response on 18 January 2021 that he wanted the breaches resolved before continuing with the appointment of the specialist valuer did not prevent the tenant from exercising the right to a rent determination. The response cannot be said to be unconscionable conduct in all the circumstances.
10. The Notice of Default was issued more than three months after the 15 January 2021 email and after the specialist retail valuer had been appointed. It was issued after the tenant denied liability to the landlord for having breached essential terms of the lease.
11. The landlord's evidence in cross-examination was that he instructed his solicitors to serve the Notice of Default because the tenant in its solicitor's letter of 3 February 2021 had refused to acknowledge its breaches of the lease and work with him towards resolving the breaches.
12. I accept the landlord's evidence of his motivation for issuing the Notice of Default. This is the more logical motivation considering the timing of the Notice of Default. Had the motivation been retaliation against the tenant for seeking a rent determination, I would have expected the Notice of Default to have been issued soon after the 15 January 2021 email.
13. The fact that the landlord wanted to resolve the breaches before continuing with the rent determination was not unconscionable conduct. It was not evidence of a landlord being unreasonably willing to negotiate rent under s 77(2)(1). That time had already passed. The tenant still had the right, which it exercised, to appoint a specialist retail valuer under the lease.
14. The tenant ceased rent negotiations in its solicitors' letter of 15 January 2021. The tenant has not demonstrated that the landlord was not willing to negotiate the rent under the new lease. This is the only conduct relied upon to ground the unconscionable conduct claim.
15. For conduct to be unconscionable it must be more than wrong or unfair. It requires a high level of moral obloquy.
16. In the circumstances, I find that the landlord did not breach s 77 of the RLA and the tenant's claim must fail.
17. The tenant raised in its closing written submissions, an alternate ground to support its unconscionability claim based on another provision in s 77(2) of the RLA. The ground was not pleaded in the Points of Claim, nor was it raised at any time during the hearing. No application to a reopen the case was made. Accordingly, the new ground has not been considered by me.
18. For the reasons stated, I find that the landlord did not engage in unconscionable conduct in breach of s 77 of the RLA by issuing the Notice of Default. The tenant's claim fails.

ISSUE 2 - IS THE LANDLORD ENTITLED TO DAMAGES BECAUSE OF THE TENANT'S BREACHES SET OUT IN THE NOTICE OF DEFAULT?

1. As the tenant acknowledges the 2016 works were carried out in breach of cl 1(j) of the lease, the only issue remaining on the counterclaim is the quantum of the damages.[4]
2. The landlord seeks damages of $393,800.00 for breach of cl 1(j).
3. Clause 1(j) of the Lease provides:

The Lessee covenants and agrees with the Lessor as follows:

Clause 1(j) - Alterations and Additions - not to make or permit any structural alterations, additions or repairs to the Premises and not without prior written consent of the Lessor or the Agent (which consent may be given to conditions including, without limitation, the type of materials to be used) to install any partitions, fixtures or fittings or to alter or remove any existing partitions, fixtures or fittings or to redecorate the Premises.

1. The landlord relies upon the expert report of Justin Zumpe, quantity surveyor of Zinc Cost Management, in support of his claim. Mr Zumpe provided estimates of the rectification works necessary to remedy the 2016 works.

Is the landlord entitled to nominal damages only?

1. Both parties relied upon the principles set out by the High Court in Tabcorp Holdings Pty Ltd v Bowen Investments Pty Ltd [5] ('Tabcorp') with the tenant seeking to distinguish the result in Tabcorp from the present case.
2. Tabcorp also concerned an express negative covenant in a lease on a tenant not to make any substantial alteration to premises without landlord consent.
3. A question for determination in Tabcorp was whether in an action for breach of a covenant not to alter the demised premises, a plaintiff can obtain an order that the premises be reinstated or that the defendant pay by way of damages what it would cost to reinstate the premises.
4. In Tabcorp, the tenant knowing that the landlord had not given consent, destroyed the original foyer of the premises and substituted a new foyer. The tenant was required to pay damages to the landlord equal to the cost of restoring the foyer to its original condition and lost rent while the works were taking place. Damages were assessed at $1.38 million.
5. Tabcorp confirmed the position at common law that where a party sustains a loss by reason of a breach of contract that party so far as money can do it, is to be placed in the same position with respect to damages as if the contract had been performed.[6]

1. The tenant denies the landlord is entitled to anything other than nominal damages. It says no loss has been caused by the tenant's breach of the covenant in cl 1(j). Alternatively, it says if there is loss, then the landlord is entitled to significantly less than the $393,800.00 claimed.
2. The tenant submits that the landlord is unable to identify a loss apart from nominal damages. It says that during the term of the lease the landlord will continue to receive all the benefits to which he is entitled including rent and outgoings. At the expiration or termination of the lease, the tenant will be obliged to reinstate the premises to their original condition and make good any damage.
3. The make good obligation arises by reason of cl 1(m) of the lease which requires the tenant to:

At the expiration or earlier termination of the Term, to remove any Lessee's partitions, fixtures and fittings and to reinstate the Premises to their original condition as at the commencement of the Lessee's occupancy of the Premises and to make good any damage to the premises to the reasonable satisfaction of the Lessor. The Lessee must also deliver a possession of the premises to the lessor together with all Lessor's fixtures and chattels in accordance with the Lessee's covenants contained in this Lease.

1. The tenant says the landlord will suffer no loss arising from the need to spend money now or in the future because of the 2016 works having been carried out by the tenant.
2. The tenant submits that the landlord could have accelerated his entitlement to reinstatement or reinstatement damages in lieu by terminating the lease. Instead, the landlord elected to affirm the lease and so the entitlement is deferred by operation of cl 1(m) pending the expiration or earlier termination of the lease.
3. The tenant seeks to distinguish Tabcorp on the basis that the lease in Tabcorp did not contain a make good clause like cl 1(m) and it is for that reason that the High Court made an order for reinstatement damages against the tenant for breach of the express negative covenant.
4. The tenant says the benefit of the express negative covenant in cl 1(j) is secured to the landlord at the end of the lease being the time for performance of the make good obligation in cl 1(m). It would, it says, be unreasonable for the landlord to insist on the payment of reinstatement damages in the circumstances.
5. The tenant says it should pay $1,000.00 by way of nominal damages only.

1. The landlord contends that the make good covenant under cl 1(m) is a separate covenant to the negative covenant in cl 1(j) of the lease preventing the tenant from performing alterations without the landlord's written consent.
2. The landlord submits that if the tenant's construction was accepted, it would deprive the negative covenant of any meaning. It would effectively allow a tenant to change the premises as it saw fit with no consequence until the end of the term or termination. It submits that a landlord is entitled to have its property preserved.
3. In response to the tenant's argument that the landlord should wait until the make good obligation arises, the landlord relies upon the following passage in Tabcorp where the High Court said (at 12 with citations omitted):-

At trial, the Landlord's only claim for damages for breach of contract was based on an alleged breach of cl 2.13. Accordingly, damages are to be assessed on that basis. Clause 2.13 is an express negative covenant. It serves a function of considerable practical utility in relation to the Landlord's capacity to protect its legitimate interest in preserving the physical character of the premises leased. That function is: provided the Landlord learned of a threat to make a substantial alteration to the premises without its written consent, a speedy application could be made for an interlocutory negative injunction, an appeal could be made to the modern understanding of the principles classically stated by Lord Cairns LC in Doherty v Allman, and the status quo could readily be preserved. The clandestine conduct of the Tenant made it impossible for the Landlord to apply for an interlocutory negative injunction, but that does not detract from that aspect of cl 2.13 in assessing damages for its breach.

4. For the same reason the landlord says the tenant's argument should be rejected. To restrict the negative covenant to any consequence other than allowing a landlord to seek an injunction to restrain unauthorised works would provide an incentive to a tenant to covertly finish unauthorised works.

1. Like the landlord in Tabcorp, here the landlord is also entitled to the preservation of the premises without unauthorised alterations.
2. The measure of damages to be applied is the common law measure confirmed by Tabcorp. That is an amount so far as money can do, to put the landlord in the same position with respect to damages as if the contract had been performed.
3. The High Court in Tabcorp highlighted a qualification to the general common law rule of damages that 'not only must the work undertaken be necessary to produce conformity, but that also, it must be a reasonable course to adopt.'[7] Using a technical breach to gain an uncovenanted profit has been said to be unreasonable.
4. Here, the tenant undertook unauthorised works which included cutting into a concrete slab, removing sections of the slab and making penetrations to a fire wall and roof decking. The works were done without the benefit of any structural engineering supervision.
5. The tenant's breach is far from a mere technical breach. It was a blatant disregard for the landlord's rights under the lease. Like the position in Tabcorp, there is nothing to suggest that it would be unreasonable for the landlord to benefit from the common law measure of damages in the circumstances.
6. It is not an answer to the breach that the landlord has the benefit of a make good clause. To deprive the landlord of the damages remedy because of the make good clause, is to deprive the negative covenant in cl 1(j) of any consequence once the works are undertaken.
7. Clause 1(m) does not prevent the landlord claiming compensatory damages for breach of the negative covenant. There is no 'double-dip' as submitted by the tenant.
8. For the reason stated, the landlord is entitled to an award of damages so far as money can do, to put him in the same position as if the contract had been performed.

1. The High Court in Tabcorp at [15] identified the loss in this way:

... Its measure of damages is the loss sustained by the failure of the tenant to perform that obligation; and that loss is the cost of restoring the premises to the condition in which they would have been if the obligation had not been breached.

2. The landlord claims $393,800.00 as damages for the rectification of the unauthorised works from the tenant.

1. The landlord relies upon the following experts who prepared reports in support of his claim: -

(a) Mr Ian Flanders, registered building practitioner and structural engineer of Clive Steel Partners

(b) Mr Wayne Liddy, registered building practitioner, surveyor and inspector of Gardener Group

(c) Mr Justin Zumpe, registered building practitioner and quantity surveyor of Zinc Cost Management

1. Mr Zumpe provided an estimate of costs for rectifying and reinstating the unauthorised works.[8] A summary of his estimate follows:

Holes drilled in roof decking for hooks required for tethering marketing balloons

Penetrations through roof decking for Refrigeration and Mechanical Services

1. Mr Zumpe's calculations are based on the scope of works prepared by Mr Flanders.

1. The tenant relied upon the following expert reports:

(a) Nicholas Warton, building consultant of Buildspect

(b) Shane Leonard, registered building practitioner, building surveyor and building inspector of Philip Chun

(c) Mark Janus, civil engineer of MRM Group Pty Ltd

(d) Allen Milner of Alpine Cost Research

1. Before considering the various damages claims, it is necessary to say something about the tenant's expert Mr Janus.
2. The landlord submits that the evidence of Mr Janus should be disallowed in its entirety because of his serious breaches of the expert code of conduct.
3. Mr Janus authored two expert reports for these proceedings. In both reports he stated that he read and understood the Expert Evidence Practice Note PNVCAT 2. He also confirmed that he had made all inquiries which he believed are desirable and appropriate and that no matter of significance which he regards as relevant, has to his knowledge being withheld from the Tribunal.
4. By way of background, in 2016 Mr Janus was employed by Vert Engineering. He worked with Mr Lindsay Patone.
5. Mr Patone, before his retirement, was the director of Structural and Civil Services of Vert Engineering. Mr Patone provided a witness statement in these proceedings and gave evidence at the hearing on behalf of the tenant.
6. Vert Engineering was engaged by the tenant in 2016 to advise on the design of the supporting framework for two air conditioning units on the roof of the premises and to inspect and structurally assess new core holes in the dividing unit walls and new drainage trenches to the slab. These works form part of the 2016 unauthorised works. Mr Janus was an employee of Vert Engineering at the time.
7. Mr Patone was the signatory on two letters from Vert Engineering to the tenant providing advice on the unauthorised works.
8. The first letter dated 20 April 2016 provides advice in relation to the supporting framework for two roof air conditioning units at the premises.
9. The second letter dated 5 October 2016 gives an opinion that as far as can be ascertained the wall core and slab trench works (both part of the unauthorised work claims) appear to have been carried out in accordance with fit out documents and within the requirements of the Australian Standards.
10. Mr Janus' evidence in cross-examination was that he worked at Vert Engineering starting as a graduate from mid 2014 until late 2019. He was a senior engineer with the firm at the time he left.
11. Mr Janus said he worked with Mr Patone on the design for the freezing condenser units on the roof of the premises. He was instructed to check the adequacy of the supports. He prepared the 20 April 2016 letter for Mr Patone to sign.
12. Mr Janus said he was not involved with the 5 October 2016 letter.
13. Mr Janus was subsequently engaged by the tenant as an expert to provide advice in relation to the unauthorised works. He was engaged to review the expert report of Mr Liddy filed by the landlord. The documentation he was provided with included the two Vert Engineering letters referred to above.
14. It is not in dispute that Mr Janus' expert reports failed to disclose:

(a) that he was previously employed by Vert Engineering. Mr Janus' Curriculum Vitae ('CV') attached to his reports did not include a work history;

(b) whilst employed by Vert Engineering he was directly involved in the advice to the tenant in April 2016 regarding the installation of the refrigeration condensing units on the roof of the premises. He drafted the April 2016 letter and the plan which led to the installation of that equipment;

(c) he previously worked on a significant project for the tenant's directors. The project is referenced in his CV as 'Makool's Food Distribution Centre'.

1. When cross-examined about why he did not disclose his connection with the tenant's directors through the Makool's Food Distribution Centre job, Mr Janus responded that it was disclosed in the sense that it was part of his CV. The implication being that he had done all that he was required to do by way of disclosure.
2. Mr Janus was at times evasive and cagey about his past connection with the tenant or its directors during cross examination. He said his involvement was as an employee of Vert Engineering and he was not aware of who the dealing entity was. He said he 'obviously knew it was the same family'.
3. When pressed further, Mr Janus finally accepted that some of these matters ought to have been disclosed to the Tribunal. He appeared to have only come to this realisation 'from the discussion that we've had today, yes'.
4. Mr Janus eventually accepted that he ought to have disclosed his role in the April 2016 airconditioning equipment advice provided by Vert Engineering to the tenant and that it was a material matter.
5. Mr Janus accepted that the Tribunal might be concerned about his expressing an opinion on the works which were based on the opinion he contributed to in the April 2016 letter.
6. Notwithstanding these shortfalls, Mr Janus refuted the suggestion that he was not impartial.
7. Mr Janus on his own admission did not comply with the Expert Evidence Practice Note PNVCAT 2. His lack of candour and clear position of conflict concerning the April 2016 letter undermines the very basis of his reports. He appeared to have little understanding of the obligations imposed upon him as an expert and did not appear to readily understand the conflict in his position. For example, he stated that he did not turn his mind to his business relationship with the Makools when preparing his expert report.
8. I accept the submission of the landlord that Mr Janus' lack of disclosure which was only discovered through cross examination is incompatible with an expert's paramount duty to the Tribunal. His evidence is compromised.
9. While I will not exclude Mr Janus' evidence outright, it carries little weight.

ITEMS A & B - Chasing of Hydraulic Services and Refrigeration services

1. It is not contentions that in about August to October 2016 the tenant undertook certain works to the slab at the premises by cutting the concrete slab and removing sections to install services for drainage for refrigeration and a waste trap.
2. The tenant did not obtain any engineering or structural plans for the works before they were undertaken. A building permit was not obtained although there are differing opinions about whether one was required.
3. It is accepted that when Vert Engineering inspected the slab works after completion, the extent of the works were partially covered by the tenant's installations. Vert Engineering issued its letter of 5 October 2016 after the inspection.
4. The main point of contention between the parties concerns the size of the area of the slab requiring rectification.
5. Mr Flanders concluded in his reports that where there are no plans of the work undertaken, it is not possible to be certain of the full extent of the works that had been done. Making an allowance for that uncertainty and other factors an area of 80 square metres was selected as requiring rectification.
6. Mr Zumpe based his costing on Mr Flander's estimate of an area of 80 m2.
7. The tenant says the area is excessive. The tenant says the area requiring rectification is only 5.62 m2. The tenant relies upon the reports of Mr Janus for this calculation.
8. Mr Janus' first report relies upon the Vert Engineering letter of 5 October 2016 to conclude that the reinstatement works were conventional and structurally adequate and did not adversely affect the structural integrity of the slab. Mr Janus did not exercise his own judgment on this aspect.
9. Mr Janus' second report notes that through his letter of instruction, he was advised that the rectification works for the chasing and cutting of the slab were significantly less than the area nominated by Mr Flanders.
10. Mr Janus said in his second report and again in cross-examination that his assessment of the area was based on visible drainage and slab reinstatement extents as well as direction from Mr Eli Makool as to the extent of the obscured cuts.
11. Mr Janus opined in his second report that the extent of works should be confined to the area where the hydraulic and refrigeration services were installed.
12. In undertaking his calculations, Mr Janus prepared two schematic sketches and undertook measurements. His sketches which are attached to his second report purported to identify the works that had been carried out. On that basis he concluded that 5.62 m2 of the existing slab was cut out for drainage and refrigeration service works.
13. Mr Janus accepted in cross-examination that his sketches did not in fact include all areas of the works undertaken in 2016.
14. Mr Janus did not accept that the aesthetics of the slab should be considered in calculating the area to be reinstated because in his opinion, it is not relevant to the structural integrity.
15. Mr Janus accepted in cross-examination that the statement in his report that there was no impact to the slab by the unauthorised works was not accurate.
16. It became apparent for the first time during the re-examination of Mr Ely Makool that there were some pre-existing cuts in the slab at the time of the 2016 unauthorised works. These cuts are not referenced or distinguished from the 2016 unauthorised works in any of the reports or in Mr Makool's witness statement.
17. Mr Makool was taken to several photographs in Mr Zumpe's report[9] of the slab. Mr Makool's evidence, which I accept, was that the photographs included works to the slab undertaken by the previous tenant under a previous lease.
18. On the evidence before me it is not clear what cuts in the slab were made during an earlier lease and what cuts were made by the tenant in 2016.
19. Mr Flanders' reports set out the instructions provided to him and reference his site inspections on two occasions. The instructions provided did not identify the locations of any cuts. He includes photographs of examples of where the slab has been cut and re-instated.
20. Mr Flanders notes in his first report that due to existing equipment/shelving within the premises only certain areas of slab removal/replacement were visible. He notes that the detailing of the reinstatement is important to be able to maintain the load carrying capacity of this lab. He also states that it is important that any saw cutting of the slab does not extend beyond the area being removed to ensure the reinforcing mesh beyond has not been cut. He says instances of over cutting are evident at the slab reinstatement areas.
21. Mr Flanders notes that because he has not been provided with any slab reinstatement details, he must assume the slab has been weakened by the works although the magnitude of loss of capacity is not known without slab rectification details.
22. For his second report, Mr Flanders was provided with the expert reports of Mr Warton and Mr Liddy, the Vert Engineering letters dated 5 October 2016 and 14 December 2017 and the fitout documentation referenced by Vert Engineering.
23. Mr Flanders allowed an area of 80 m2 of slab removal/replacement to rectify the cuts to the slab.
24. In cross examination, Mr Flanders agreed that there was an assumption in his reports that all the slab cuts in the floor were made by the tenant.
25. Mr Flanders accepted in cross-examination that 80 m2 was an area using his engineering judgment on what he could see but may be revised once the area is exposed.
26. Mr Flanders' opinion was that large sections of slab needed to be removed to avoid a patchwork type slab primarily for appearance but also to avoid thin slivers in the slab being open to breaking up over time and causing a failure.
27. Mr Flanders was of the opinion that where there was a slab cut at least half if not the full panel ought to be removed.
28. Mr Flanders was taken to the sketches prepared by Mr Janus. He was asked to accept that the sketches showed the cuts by the tenant and asked on that basis if he would accept reinstatement of that area would be sufficient to remediate the tenant's works. He did not make that admission as in his opinion it depended upon the pattern of the cuts.
29. Mr Flanders agreed that it the slab was left as a patchwork less than 80 m2 was required to be remediated.
30. Mr Flanders agreed that if the total area of slab cuts undertaken in 2016 was 5.62 m2 as claimed by the tenant then he would at least double the size to allow for overcutting. In his opinion when considering the trenches only, a further allowance was still required when cuts were close to the joints. He identified that most trenches were overcut and on that basis the area should be at least doubled. He said that until the area was opened up and one could see where the cuts started and finished, his opinion, based on what he could see, was that most seemed overcut with a saw.
31. I accept Mr Flanders evidence that replacement of the slab should be done in large sections so as to maintain the full capacity of the floor.
32. Where the evidence of Mr Janus and Mr Flanders conflicts, I prefer the evidence of Mr Flanders unless stated otherwise. As set out below, on occasions Mr Janus conceded in cross-examination that conclusions and statements made by him in his report were inaccurate. As also explained previously, Mr Janus did not present as an expert who fully understood his obligations as an expert to the Tribunal.
33. I do not accept the estimate of 5.6 m2 provided by Mr Janus for the following reasons:-

(a) His estimate was based on his assumption that there was no impact to the slab by the works. He accepted in cross-examination that the statement in his report that there was no impact to the slab by the unauthorised works was not accurate;

(b) He based his estimate on the sketches he drew (a refrigeration drain plan and a deli plan). He confirmed that all visible cuts were included in the drawings. The sketches were however questionable as to their accuracy. For example, he was taken to a photograph in his report where a cut in the slab near the deli cabinet was visible but not shown in his drawings. He said he did not include it in his drawings as he was guided by Mr Ely Makool as to the location of the pipes and cuts. He was questioned about why the pump drain did not lead anywhere on the drawing. He said the drawings were based upon what Mr Ely Makool told him and what he could see;

(c) Mr Janus acknowledged in cross-examination that without plans of the work done, some of the area requiring rectification may have been missed. He also acknowledged that the structural integrity of the floor could be less than adequate if certain areas requiring repair were not rectified;

(d) Mr Janus acknowledged that statements made by him in his report were inaccurate. He accepted that there could be issues around the structure related to the existence or absence of a water barrier and the ingress of water through core holes;

(e) He agreed that he had relied entirely upon the Vert Engineering letter of 5 October 2016 which concluded that the works were compliant with Australian Standards.

1. Mr Flanders presented as an impartial candid witness. He accepted that the area requiring rectification may be less than 80 m2 but that 80 m2 is the figure chosen using his engineering judgment on what he could see.
2. Given the existence of previous cuts, it seems likely that the area requiring rectification because of the tenant's unauthorised works is less than 80 m2.
3. While the landlord bears the onus of proof, the nature and circumstances of the tenant's conduct, being the wrongdoer, can shift the evidentiary burden.[10]
4. The uncertainty about the area requiring rectification has been brought about by the tenant's own actions. The tenant carried out unauthorised works in 2016 in breach of the lease. The tenant failed to obtain any plans before carrying out the works, then installed equipment over part of the works which prevents the full extent of the works been known.
5. I allow for the assessment of damages purposes an area of 50 m2 of slab removal/replacement. This figure considers the following matters:

(a) It was the tenant's own unlawful actions that has brought about the uncertainty of the size of the area;

(b) I have favoured the landlord to a certain degree because the tenant's unlawful actions have made an accurate determination so problematic;[11]

(c) The absence of plans which ought to have been obtained by the tenant before the works were carried out have led to confusion over what works were carried out to the slab in 2016 and what works may have been done by a previous tenant;

(d) The uncertainty about the actual area requiring reinstatement without the removal of the tenant's installations;

(e) I have discounted Mr Janus' estimates for reasons already given;

(f) Given the works affected structural matters Mr Flanders' approach is preferred;

(g) The opinion of Mr Flanders about the need to avoid a patchwork slab and to replace in large sections instead of localised repairs so as to reinstate to full capacity;

(h) Mr Flanders' comments on the Janus' estimate and Mr Janus' acknowledgement that the Janus sketches were not completely accurate; and

(i) A discount of the area identified by Mr Flanders to account for pre-existing unidentified cuts in the slab.

1. Another area of contention between the parties is how the slab is to be reinstated.
2. Mr Flanders challenged the statement in the Vert Engineering letter of 5 October 2016 that the services trenches cut into the floor slab were 'reinstated on crushed rock bed with 125 mm thick N25 concrete, with N12 dowels at 400 mm centres chemset 125 mm into existing slab.' He also identified that there was no mention of a vapour barrier being reinstated under the slab and that no construction details or photographs of the dowell installation had been provided. He thought the reinstatement details were structurally sufficient to support the existing tenant's use but would limit future use. Reinstatement with N25 concrete would limit the future use of the building by light vehicles which required N32 concrete.
3. I accept Mr Flanders' opinion that reinstatement should be assessed using 150 mm thick (N32) concrete and not 125 mm thick (N25) concrete for the following reasons: -

(a) there is no evidence of the composition of the original slab;

(b) there are no technical documents for the 2016 unauthorised works;

(c) Mr Flanders said in re-examination that:-

(i) He recalled seeing a large roller door 4 to 5 meters wide at the rear of the premises which would allow access for a truck;

(ii) If the premises when constructed had access for a truck it could be assumed that N32 concrete was used so as to be compliant;

(iii) There were signs at the warehouse that forklifts were in use which is consistent with a minimum slab constructed from N32 concrete.

(d) Mr Flanders' unchallenged comment in his second report that the premises were originally intended as a showroom/warehouse. Based on the load required for that purpose, floors subject to traffic required a minimum strength of N32 concrete.

ITEM C - Penetration through dividing precast wall

1. It is not in contention that in about August to October 2016 the tenant made four penetrations to the interparty concrete fire wall between unit 8 and the premises.
2. Mr Zumpe estimated the cost of rectification to be $4,800.00.
3. The tenant admitted liability for this amount in closing submissions.

ITEM D - Holes drilled in roof decking for hooks required for tethering marketing balloons $29,100.00

1. In 2016 the tenant made penetrations to the roof sheeting and affixed hooks for the purposes of tethering a marketing balloon.
2. Mr Flanders reported that while the roof anchors had been sealed around with a silicone type sealant, there remained a potential leak risk.
3. Mr Flanders recommended removal of the anchors and sealing penetrations and possible replacement of roof sheets.
4. Mr Janus was of the opinion that the hooks caused no adverse structural concerns. He agreed with the Vert Engineering letter of 16 June 2021 to the same effect.
5. In cross examination Mr Janus conceded it was possible for the works to impact the roof but that it was unlikely.
6. Mr Zumpe estimated that the cost of rectifying the holes drilled into existing roof sheeting due to installation of the hooks for the purposes of tethering of a marketing balloon to be $29,100.00 with a 10% allowance for contingency. His estimate is based upon a replacement of roof sheeting.
7. The tenant submits the claim is excessive for the following reasons:

(a) Mr Flanders accepted in cross-examination that the roof was about 30 to 40 years old;

(b) replacement of areas of the roof would give the landlord a windfall gain given the age of the roof;

(c) given the age of the roof, localised patching and sealing as suggested by Mr Janus and as agreed to by the tenant's building expert Mr Liddy, would be acceptable.

1. Mr Leonard in his expert report filed on behalf of the tenant, was of the opinion that there is no structural affect caused by the roof penetrations and no evidence of water ingress. He said no rectification work was necessary. His report relies upon the structural advice of Vert Engineering as does the expert report of Mr Liddy.
2. The landlord says it is unfair to impose a remedy which does not involve replacement of sections of the roof sheets. It says the landlord will be forced to undertake an ongoing maintenance regime and the silicone penetrations monitored for rust to ensure they are weather proof.
3. Based on the evidence before me it is unlikely that the hooks installed to tether the marketing balloon caused any adverse structural concerns. While there is a possibility of leaks in the future the evidence does not support the replacement of roof sheeting.
4. The solution to the landlord's concern of having an ongoing maintenance regime imposed on it is to require the tenant to undertake the ongoing maintenance regime and monitor the silicone penetrations for rust to ensure they are weather proof. This solution does not conflict with s 52 of the RLA as that provision relates to the obligation to maintain the premises in the condition they were in at the start of the lease.
5. I accept the estimate of Mr Zumpe that the cost of removing existing hooks and localised patching is $8,030.00. I prefer this slightly more generous estimate over Mr Milner's estimate of $6,836.00. The landlord is only in his current position by reason of the tenant's breach of lease and there is no distinction between the estimates other than the estimate of how long it would take to remove the hooks.
6. In addition to payment of damages, the tenant will be required to establish a maintenance regime to regularly monitor the effectiveness of the rectification works. The parties are required to submit a form of order reflecting this obligation.

ITEM E - Penetrations through roof decking for refrigeration and mechanical services $70,400.00

1. The tenant penetrated the roof decking to install refrigeration and mechanical services.
2. Mr Flanders reported that each additional penetration of services through the roof is a potential risk leak.
3. Mr Flanders noted that some of the items of equipment have overflow or condensation drains directly to the sheeting which may reduce the corrosion protection and life span of the sheeting.
4. Mr Flanders suggested possible replacement of roof sheet if deteriorated by equipment drains or if the number and or size of penetrations to be sealed is excessive.
5. When asked what was required to reinstate the building to its structural condition prior to the tenants works, Mr Flanders required the removal of all roof mounted equipment and sealing penetrations.
6. There is no evidence before me of roof leaks, excessive penetrations or that the roof sheets where penetrations were made require replacement because of structural issues. While there is a hint of the possibility of roof leaks there is nothing more before me to warrant a replacement of multiple roof sheets.
7. Mr Janus provided a supplementary report dated 2 May 2023 which further addresses rectification costs to the roof. His instructions were that two refrigeration units were installed on the roof and each unit passed through one roof sheet so that only one roof sheet required replacement if at all for each unit.
8. Mr Janus' supplementary report was issued after Mr Flanders' reports.
9. Mr Janus is very much conflicted in his position of expert when considering whether the units had any structural impact given his historic involvement in this issue.
10. In cross examination he acknowledged that the works may lead to water ingress with potential rusting to rafters.
11. Mr Flanders and Mr Janus were consistent on this point. There was a possibility of water issues in the future.
12. There was no evidence to support the replacement of roof sheets other than because of the possibility of future water ingress and rusting issues.
13. Accordingly, in the absence of compelling evidence to the contrary, I accept Mr Janus' recommendation that localised patching and sealing of penetrations is an effective remediation especially given the age of the roof.
14. Mr Zumpe estimates the cost of rectification work based on localised patching to be $10,450.00. Mr Milner estimates the cost to be $9,196.00.
15. I accept the estimate of Mr Zumpe for this item of $10,450.00. I prefer this slightly more generous estimate over Mr Milner's estimate given the landlord has been put in this position by reason of the tenant's breach of lease and there otherwise not being any real point of distinction.
16. In addition to payment of damages, the tenant will be required to establish a maintenance regime is to regularly monitor the effectiveness of the rectification works. The parties are required to submit a form of order reflecting this obligation.

1. The tenant in closing submissions accepted a builder's margin of 20% on any items and amounts which I allow, and I adopt this figure.

1. The tenant in closing submissions accepted a consultant fee of 5% on any items and amounts which I allow, and I adopt this figure.

1. For the reasons stated, the tenant must pay the damages assessed in these reasons and provide ongoing maintenance of area around the roof penetrations made as part of the 2016 unauthorised works.

[1] The parties ran cases based on additional claims. The additional claims were either abandoned at the start of the hearing or in closing submissions.

[2] This is a notice issued pursuant to s 146 of the Property Law Act 1958 (Vic).

1. [3] See for example Finetea Pty Ltd v Block Arcade Melbourne Pty Ltd (Building and Property) [2019] VCAT 1529 at 266 and Lismore Hotels Pty Ltd v Barwon Heads Resort Pty Ltd (Building and Property) [2022] VCAT 1465 at [63]; Hall v Kennards Storage Management Pty Ltd (Civil Claims) [2009] VCAT 1531 at [142]- [146].

[4] The landlord abandoned his claims in relation to the mezzanine floor in opening submissions and in relation to the 2021 refrigeration works in closing submissions.

[5] [2009] HCA 8; (2009) 236 CLR 272.

[6] See Robinson v Harman [1848] EngR 135; (1848) 1 Exch 850 at 855 [154 ER 363 at 365] which was cited in Tabcorp Holdings Ltd v Bowen Investments Pty Ltd [2009] HCA 8; [2009] 236 CLR 272 at [13].

[8] Mr Zumpe's expert reports are dated 22 November 2022 and 26 April 2024.

[9] At page 391 of Mr Zumpe's report dated 26 April 2024.

[10] Berry v CCL Secure Pty Ltd [2020] HCA 27 at [29].

[11] See Pitcher Partners Consulting Pty Ltd v Nevilles' Bus Service Pty Ltd (2019) 281 FCR 392 at 417.