Refalo Pty Ltd v Donald Balfour Scott

APPLICANT'S SUBMISSIONS 10Mr Cornish, on behalf of the applicant noted that the applicant was the registered proprietor of the property known as "Sherbrooke Farm" and that Mr Don Scott was the licensee of the farm pursuant to a licence agreement made on 1 June 2009. The license was for a period of 5 years expiring on 31 May 2014 and the rental or licence fee was the sum of $4,766.66 per month. It was noted that Mr Scott had paid a bond representing one month's rental which was held by the applicant. 11It was alleged that Mr Scott terminated the licence and gave up possession on 30 July 2013 and at the time the farm was left in a damaged and untidy state contrary to the terms of the agreement. 12In summary the claim by the applicant was a total of $30,721.98 in respect of unpaid rent, industrial cleaning and refuse removal, building repair and repair to facilities. The applicant thereafter claimed interest of $990.50 in relation to unpaid rent and monies paid as a consequence of alleged breaches of the licence agreement. Allowing for a set off of the available bond in the sum of $4,766.66, the applicant's total claim was a sum of $26,945.72. 13Unpaid rent was claimed from 1 June 2013 to 30 July 2013 representing the rent for the month of June together with 30 days of rent for the month of July. Mr Cornish submitted that the applicant was entitled to an award of interest on unpaid rent and he referred to a decision of the Supreme Court in Hexiva Pty Ltd ors v Lederer ors (2007) NSWSC 49. He sought to apply interest at the applicable Local Court rates being 6.75% from 1 July 2013 and 6.5% from 1 January 2014. 14Mr Cornish detailed the claims for rectification of the property and referred to a number of clauses of the licence agreement dated 1 June 2009. He claimed that the respondent had; (a)failed to keep both houses and the flat on the farm clean at all times and to leave both houses and the flat in the same condition set out in the Residential Condition report in breach of clause 6. (b) failed to maintain the lawns and gardens at all times to the Licensor's satisfaction in breach of clause 9. (c) failed to be responsible for the upkeep of lawns and gardens in the stable block and shed area and maintain them to the applicant's satisfaction in breach of clause 10. (d) failed to be responsible for the upkeep of all existing laneways and roadside boundary areas and failed to mow/slash the grass at all times to the licensor's satisfaction in breach of clause 11. (e)failed to maintain all existing farm equipment as required by clause 12. (f)stored derelict or unregistered vehicles including tyres and vehicle parts on the farm in breach of clause 34. (g)failed to take responsibility for the day to day running of the property and to bear the cost of any "breakdowns of pumps/water lines/broken gates/broken rails etc along with household breakdowns" as required by clause 42. 15In relation to general cleaning costs it was claimed that the respondent left the farm including the houses and flat in an untidy condition which was not consistent with the incoming condition reports. The respondent was required to engage Adclean to remove the refuse abandoned on the property, undertake gardening work and clean farm buildings. The claimed cost for that work was $4,550.00 which was paid in full on 18 August 2013. The applicant referred to a statement of Adam Webster in support of this claim. 16It was claimed that the stables were left in an unclean state and old bedding material was not removed from the stables, contrary to Mr Scott's obligation in relation to the day to day running of the farm and his obligation to deliver up the farm up in a reasonable condition. 17The applicant engaged Redhawk Contracting to clean the stables at a total cost of $3,500.00, as evidenced by an invoice dated 19 December 2013. 18The applicant claimed for what was described as "heavy refuse removal". It was submitted by Mr Cornish that the applicant had been required to hire a bobcat with a driver to assist in the rubbish removal from the farm and that Vinstone Bulk Haulage had been engaged for that purpose at a cost of $1,012.00. 19The applicant made claims for electrical maintenance and repair works as detailed in various tax invoices from Black Marlin. The works included the replacement of broken lights, repairs to wiring, rectification of "unworking" lights and repairs to switchboards. It was claimed that the responsibility for repair work arose pursuant to clauses 6, 21 and 42 of the licence agreement and that it was necessary to effect repairs to all farm buildings to a greater or lesser extent. The total cost of repairs claimed was $3,748.20 which included a sum of $376.20 to identify necessary repair works and three other quotes which in fact totalled $3,102.00 making a total of $3,478.20. 20Building repairs were claimed in a total sum of $3,228.50 comprising a quote from Guido Vella to replace missing or broken doors at a cost of $875.00 and $2,403.50 for what was described as "other miscellaneous works". 21The applicant made a further claim for a sum of $2,035.00 being the cost of servicing and repairs to a David Brown tractor which is described as "comprising part of the farm equipment at Sherbrooke Farm." The applicant submitted that there had been a failure to maintain the vehicle in accordance with the provisions of clause 21 of the agreement, although it is noted that in a letter from the applicant's agent, Mr Maxwell, to the respondent dated 8 August 2013 the David Brown tractor was described as "goods left in shed" along with items such as a spirit level, a hand saw and a long red lead and an old chainsaw." 22The final claim by the applicant related to a sum of $2,696.00 being the cost of purchasing a new supply pump together with ancilliary piping and a pressure tank. This claim was made on the basis that the applicant was responsible for pump, pipe work and pressure tank repair or pursuant to clause 42 and it was claimed that the pump was not working when the licence agreement came to an end. 23The applicant produced copies of the relevant licence agreement dated 1 June 2009 although it should be noted that two signed copies of the agreement were produced and in a second copy of the agreement produced clause 42 had been amended by adding a final sentence to it to that clause in the following terms; "Any form of replacement of pumps - water lines due to wear to be shared on a 50/50 basis." It is not known which of the two agreements produced is the later nor is there any evidence as to whether consideration was paid by one party or the other for the inclusion or exclusion of that sentence. 24Letters written by the applicant's agent to the respondent dated respectively 31 July 2013, 8 August 2013 and 26 August 2013 were included in the evidence for the applicant along with all of the quotes and tax invoices which have been referred to previously. 25A list of repairs required to electrical works was provided by Black Marlin Electrical along with copies of a Residential Premises Condition report prepared on 16 October 1998 in respect of premises described as the main house and cottage 2 at Sherbrooke Farm. Photographs were also provided detailing what was claimed to be various breaches of the licence agreement. A number of photographs were referred to during the course of submissions.

RESPONDENT'S SUBMISSIONS 26No submissions were provided by or on behalf of the respondent.

DECISION 27Section 4 of the Agricultural Tenancies Act 1990 defines, among other things, agricultural purposes, tenancy and tenant. It is clear that the subject property comprised an area of not less than one hectare which was occupied by the tenant and wholly or mostly used or intended to be used for agricultural purposes. It is noted further that in the present case the tenancy was created by means of a licence. 28The objects of the Act defined in s 3 include the provision of a mechanism for settling disputes between parties to agricultural tenancies through applications to the Civil and Administrative Tribunal. I am satisfied the present proceedings relate to a dispute between parties to an agricultural tenancy and that the Tribunal has jurisdiction to hear and determine that dispute. 29Section 22 of the Act requires matters to be dealt with by alternative dispute resolution in the first instance. I am satisfied that no settlement or agreement has been reached through that process and it is appropriate for the matter to be determined in accordance with the provisions of s 21 of the Act. 30The applicant's claim is based upon the assertion that the farm was left in a damaged and untidy state contrary to the terms of the agreement. 31s 19A of the Agricultural Tenancies Act provides as follows; 19A Compensation for Deterioration (1) It is a term of the tenancy that the tenant must pay the owner fair compensation for any deterioration of the farm during the tenancy owing to the failure of the tenant to manage the farm in accordance with good farm management or the provisions of any agreement creating the tenancy, or both. (2) For the purposes of determining compensation payable for deterioration of the farm, the amount of compensation is the amount representing the decrease in the value of the farm as a result of the deterioration. (3) The compensation is payable when the deterioration is evident. (4) The rights of an owner under this section are displaced by an agreement; (a) to the extent that those rights are expressly waived by the agreement, or (b) to the extent that the management of the farm (being management that is material to any claim for compensation under this section) is expressly authorised by the agreement. 32The relevant parts of the licence agreement dated 1 June 2009 are as follows; Clause 6 - the licensee will keep both houses and flat clean at all times and will not intentionally or negligently cause or permit this and damage to such houses/flat and at the conclusion of this agreement will leave both houses and flat in the same condition's set out in the Residential Condition Reports which forms part of this agreement. Clause 8 - at the conclusion of this agreement and upon vacating the property, the licensee will have the carpets in both houses professionally steam cleaned to the licensor's satisfaction at the cost of the licensee. Clause 9 - the licensee will maintain the lawns and gardens at both homes at all times to the licensor's satisfaction. Clause 10 - the licensee is responsible for the upkeep of the lawns and gardens in the stable block area and shed area and will maintain same to the licensor satisfaction at all times. Clause 11 - the licensee is responsible for the upkeep of all existing laneways and roadside/boundary areas and will mow/slash the grass at all times to the licensor's satisfaction. Clause 21 - the licensee has full use of all existing farm equipment and agrees to maintain same with regular services to the licensor's satisfaction. Any and all repairs to such equipment will be at the licensees cost. Clause 34 - no derelict vehicles or unregistered vehicles including tyres and other vehicle parts are to be stored on the property at any time. Clause 42 - the licensee is responsible for the day to day running of the property and any breakdowns of pumps/water lines/broken gates/broken rails etc along with household breakdowns are at the licensee's cost, however, damages caused by storms/lightening/wind etc and other acts of nature are at the cost of the licensor. 33An alternate copy of the licence agreement which was also signed by the parties contained the following additional sentence in clause 42; "any full replacements of pumps/water lines due to wear to be shared on a 50/50 basis." There is however no evidence as to how the additional sentence came to be included in a further copy of the signed agreement. The sharing of the replacement costs is not referred to in the written submissions prepared on behalf of the applicant. 34The statutory remedy for a breach of the various clauses of the agreement above referred to is payment of compensation for deterioration assessed in accordance with the provisions of s 19A of the Act. Counsel for the applicant submitted that such compensation could be properly determined by reference to the cost of making good any deficiencies which arise as a result of the failure of the tenant to manage the farm in accordance with good farm management principals or in a way which breached the licence agreement and it is on this basis that the various quotes and tax invoices were relied upon. 35In discussing the measure of damages in action at the determination of a tenancy the noted author of McGregor on Damages (15th edition) observed; "Nevertheless, even though the cost of reinstatement may be an available measure of damages, the normal measure remains the diminution in the value of the reversion which, it is true, will in many cases be properly assessed by taking the cost of reinstatement." As Denning J. rightly said in Westminster v Swinton (1948) 1K.B.524; "in cases in which there are breaches of covenant to deliver up in repair, the law has always been and still is that there is no rigid rule that damages are the cost of reinstating the premises. It depends on the particular case (See Tito v Waddell (no. 2) (1977) Ch.106)." 36In Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64 the Court held; "in the context of remedies for breach of contract, the objective is that the plaintiff should recover what would have been received under the contract or an equivalent. When damages are awarded in contract the plaintiff is, so far as money can do it, to be placed in the same situation with respect to damages as if the contract had been performed." 37The material produced on behalf of the applicant includes Residential Premises Condition Reports in respect of the main house and cottage no. 2. Those reports were prepared almost 15 years before the respondent delivered up possession of the property. There is evidence in those condition reports that the house properties were in some instances showing signs of age. Walls in the lounge area of the main house were showing signs of pain peeling, the taps in the kitchen showed signs of enamel being chipped, light bulbs were missing and a pipe at the back of the dishwasher was shown as broken. There were surface cracks throughout the home due to movement, carpets were described as worn or marked and the gas heater in bedroom 1 was shown as not working. 38In the second cottage, floor coverings in the dining area were shown as stained, walls in a room off the dining area were shown as marked, as were the floor coverings. Ceiling paint was cracked in the bathroom and in the kitchen as well as in bedroom 1. A blind in bedroom 2 was shown as not working and there were various cracks in the cornice of the lounge. It can properly be said that the house properties were showing signs of reasonable wear and tear in 1998 when the tenancy commenced. 39There has been no inventory produced to show particular items of farm equipment which came with the property although it is reasonable to assume, in the absence of evidence to the contrary that some farming equipment was provided. 40The onus of proving that a loss was suffered and the amount of that loss rests with the party seeking to recover the loss (Commonwealth v Amann Aviation Pty Ltd (1991) 174CLR 64 at 128) Generally speaking, where a person sustains a loss by breach of another, that party is, so far as money can do it, to be placed in the same situation that party would have been in had the contract been performed (Wenham v Ella (1972) 127 CLR 454 at 471) Difficulty in assessing damages is not generally a bar to recovery of damages (Howe v Teefy (1927) 27SR (NSW) 301 at 306 and Fink v Fink (1946) 74CLR 127). The general rule is however subject to the proviso that the difficulty must not arise from the fact that the plaintiff has produced no evidence of loss or damage, or because the Court has rejected evidence which was put forward on loss caused by the breach. (Ho v Powell (2000) 51 NSWLR 572) In such cases, assuming breach is otherwise established, the applicant will be restricted to a nominal sum. It is appropriate that these principles should be applied in considering each of the heads of damage in the claim brought by the applicant.

Rent 41The applicant claims rent from 1 June 2013 to 30 July 2013. Although this was calculated for the purposes of the claim on a daily basis it is appropriate to calculate the claim as representing 2 months' rent less one day. The daily rate for the month of July is $153.76 and the total rental claim is 2 months of rent namely $9,533.32 less $153.76 namely $9,379.56. It is appropriate to allow that sum for loss of rent.

Cleaning costs and rubbish removal 42The applicant claims the sum of $4,550.00 paid to Adclean for removal of all furniture and rubbish from both houses, the sheds and the yards as well as a general clean of the houses and the stable flat, removal of rubbish from the sheds, replacement of broken tiles in the bath, shower and laundry areas and slashing and mowing of the grass and gardens around both houses. Having viewed the photographs which form part of the evidence I am satisfied that it is appropriate to allow the full cost of this claim without any deduction. The sum of $4,550.00 is accordingly payable by the respondent to the applicant.

Cleaning of stables and removal of sawdust bedding 43The applicant claims a sum of $3,500.00 paid to Redhawk Contracting for cleaning of the stables, removal of sawdust and bedding to another place on the farm and to water jetting of the stable complex inside and out. The respondent clearly has an obligation under s 19A of the Act to pay fair compensation for any deterioration of the farm due to the tenancy owing to the failure of the tenant to manage the farm in accordance with the farm management. I am satisfied that the failure to regularly remove and dispose of used stable bedding constituted a failure to manage in accordance with good farm management and I am persuaded that the sum of $3,500.00 represents fair compensation for the deterioration of the stable areas as a result of the respondent's failure to manage the farm in accordance with good farm management principles.

Bobcat hire 44The applicant claims a sum of $1,012.00 based upon a tax invoice from Vinstone Bulk Haulage dated 29 December 2013 for 8 hours of bob cat hire at $90.00 per hour together with a freight charge of $200.00 and GST. The only evidence in support of this claim appears to be a note in the Applicant's Submissions suggesting that it was necessary to hire a bob cat with a driver to assist with rubbish removal from the farm owing to heavy refuse abandoned on the farm. Photographs showing heavy material on the farm are not of any assistance because it is impossible to determine whether the pile of timber shown in the photograph on the property was there when the licence was entered into in 1998 or whether it was put there at some later time. There is no evidence that the presence of specific rubbish as a result of failure of the respondent to manage the farm in accordance with good farm management and accordingly, as the applicant bears the onus of establishing the claim, it will not be allowed.

Electrical repairs 45Claims totaling $3,313.20 are made for electrical repairs based upon quotes provided by Black Marlin Electrical. It is appropriate to note that the final inspection report appears to be contained in a letter of 8 August 2013 from John Maxwell of Maxwell & Maxwell to the respondent. The only references to electrical matters appear to be as follows;

House 1 (a)light at entrance gate is broken. (b)kitchen stove to be cleaned (probably replaced). (c)cover missing from ceiling light in kitchen. (d)3 lights on road to stable need fixing.

House 2 (a) stove needs cleaning (possibly needs replacing). (b) globes and lights not working. 46On 4 February 2014, some 7 months after the licence agreement came to an end and inspection was apparently undertaken of both houses as well as the stable area and stable flat so that electrical problems could be noted. At about the same time an investigation of the power supply feed and the fittings was undertaken for the rear stables to ascertain whether power could be restored. 47Marlin Electrical produced a quote dated 5 November 2013 described as an "estimation for two front houses" involving the carrying out of repairs to lights, power outlets, stoves and other electrical equipment with approximate costs for parts and labour. On 27 November 2013 a further estimate was prepared for all buildings at the rear of the property which included the replacement of broken lights in stables, the carrying out of repairs or replacement of lights not working in stables and the flat as well as tidying up of wiring in the stables and the flat. 48These quotes appear to represent the extent of the evidence filed in support of the claim for electrical works and it is noted that although the Condition Reports in respect of the houses showed lighting and power points to be generally clean and undamaged there is no indication in either of the reports as to whether all the items were working correctly or not. In the circumstances I am not satisfied that the applicant has discharged its onus in making out any part of the claim for electrical repairs. It is appropriate to observe that the documents produced were merely estimates and there was little to assist the Tribunal in determining the extent of any compensation which may be recoverable in the circumstances. 49Although it was submitted on behalf of the applicant that the respondent had an obligation to maintain the property and return it to the respondent in a fully maintained state, I am not satisfied that an estimate or quote for repairs which totally disregards the question of depreciation constitutes appropriate or sufficient evidence. The quotes or estimates involve replacement of old with new and no allowance has been made for depreciation. Although I am satisfied that the Residential Tenancies Act 2010 does not apply to the dwellings because they comprise part of a farm in the meaning of the Agricultural Tenancies Act. Depreciation and an allowance for reasonable wear and tear are matters which must be taken into account in assessment of damages at Common Law. See McGregor on Damages (15th edition) at paragraph 1007 where the author refers to Smiley v Townsend (1950) 2KB 311 at 322 per Denning L.J. 50The Agricultural Tenancies Act requires compensation for deterioration to be assessed as a decrease in the value of the property as a result of a failure to manage the farm in accordance with good farm management principles. On this basis it is appropriate to take into account reasonable wear and tear and the condition of the particular fixtures, fittings or property at the commencement of the tenancy or licence.

Building repairs 51The applicant claims the cost of building repairs set out in two Tax Invoices from Guido Vella dated respectively 28 January 2014 and 12 February 2014. The first invoice for a total sum of $2,315.50 relates to repairs to a wooden gate near the carport, replacement of a clothesline, repairs to two broken windows, supply a new screen door in bedroom 2, repairs to holes in the sunroom wall, supply one shower rose and a timber strip over the fireplace. The letter of the 8 August 2013 detailing matters requiring attention refers to the clothesline being broken, windows being broken, screens requiring replacement and holes in the sunroom wall. References are also made to a broken shower rose in house number 2 and a strip missing over the fireplace. It is noted that the incoming Condition Report for the main house describes two holes in the gybrock wall of the sunroom area at the commencement of the Tenancy. Photographs produced show damage to the two windows and accordingly it is appropriate to those items be allowed at a cost of $165.00 and $275.00 including GST. 52For reasons outlined earlier it is appropriate to have regard to wear and tear and depreciation and, given the length of the tenancy, it is not appropriate to allow for replacement of the clothesline or the screen doors. There is no evidence to support the claim of gate repairs in the sum of $280.00 plus GST or the replacement of the shower rose. 53There is no evidence that there were additional holes in the sunroom walls as a result of the tenancy and it is not appropriate to allow for the repair of holes in the sunroom wall. The missing timber strip over the fireplace should however be replaced. The cost of items in the tax invoice of 28 January 2014 including the shower rose which has been made out is a sum of $544.50 inclusive of GST. 54From the invoice dated 12 February 2014 which relates to the supply and installation of three doors it is appropriate, on viewing the photograph, to allow for the cost of repairs or replacement of to the barn door but there is insufficient evidence to justify an allowance for the solid door or for the screen door for the flat. The solid door for the flat was not referred to as a matter requiring attention in the letter of 8 August 2013 and the screen door has not been shown to have deteriorated to an extent beyond normal wear and tear over a 15 year period. Assuming that the cost of each of the doors is equal (as no breakdown has been given) it is appropriate to allow $275.00 for the replacement of doors on the other invoice of Guido Vella. The total allowance for repairs which have been established on the invoices of Guido Vella is the sum of $819.50.

Tractor repair 55The applicant claims a sum of $2,030.00 for servicing and repair to a David Brown tractor on the basis that Mr Scott had the use of the tractor during the tenancy and he had the responsibility to maintain and service it pursuant to clause 21 of the agreement. The claim is based upon a quote from WesternTractor and Truck Repairs dated 24 January 2014 for "service and repair to David Brown tractor". 56This quote is dated almost 6 months after the respondent left the farm and it provides no detail of the work which was to be carried out for that price. It is noted that the final inspection report dated 8 August 2013 lists the David Brown tractor is as "goods left in shed" which apparently required removal. There is no evidence produced by the applicant to indicate that the David Brown tractor was to be used as equipment owned by the applicant during the course of the licence agreement. In these circumstances the applicant has not made out any claim for service or repair to the David Brown tractor.

Pump, piping and pressure tank repair/replacement 57The applicant claims that when the farm was delivered up, the water pump, related pipe work and pressure tank were all broken down and in need of maintenance or repair or replacement. The claim is made pursuant to clause 42 of the agreement noting that Mr Scott was responsible for the pump, pipe work and the pressure tank. A claim is made for $2,696.00 being the cost of supply of a new pump, axillary piping and pressure tank. The applicant relies on an invoice from Steve Mariga Irrigation but the quote is dated 12 February 2014 and although it is described as an invoice it is clearly a quote as it refers to a proposal to supply a Lowara Multi stage pump with similar pressure and flow characteristics to the existing Grundfos pump. 58The quote describes the Grundfos pump as already corroded and the quote also includes the installation of a loss of prime switch to protect the pump in case of dry running. There is no evidence as to the age or state of the Grundfos pump at the commencement of the initial licence agreement in 1998 and it appears that the pump and equipment has aged for a further 15 years since 1998. There is no evidence to establish whether or not the pump could have been made operational with minor repairs or maintenance. On the face of it, the claim it appears to be a capital replacement cost which would be the responsibility of the applicant. It is noted that two different versions of clause 42 have been provided in signed agreements. The applicant bears the onus of establishing, on the evidence produced, that the respondent is liable for the whole replacement cost or 50% of the replacement cost of new pumping equipment. The evidence does not establish that the applicant is entitled to be reimbursed for the cost of new pumping equipment. 59The monies payable by the respondent to the applicant are as follows; (a) Rent $9,379.56 (b) Cleaning and rubbish removal $4,550.00 (c) Cleaning of stables $3,500.00 (d) Building repairs $819.50 (e) Total $18,249.06 (f) Less Bond $4,766.66 (g) Total owing $13,482.40 60A claim has been made for interest on part of the monies owing. There is no specific provision for payment of interest under the licence agreement and it is noted that the applicant has had the benefit of interest accruing on the bond which it has held, at least since 2009. In the circumstances it is not appropriate to allow any claim for interest. 61The respondent is to pay the applicant the sum of $13,482.40 and I allow a period of one month from the date of these Orders for payment to be made. J A Ringrose General Member Civil and Administrative Tribunal of New South Wales 9 September 2014 I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales. Registrar 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: 13 November 2014