Jurisdiction : DISTRICT COURT OF WESTERN AUSTRALIA

Citation : SANDBANK HOLDINGS PTY LTD -v- DURKAN (as Administrator of the Estate of MARTIN DURKAN) & ANOR [2009] WADC 11

Commercial lease - Failure to pay rent - Clause prohibiting set off or deduction - Proper construction - Whether contra proferentum rule applicable - Whether tenant entitled to set off payments alleged to be void or made by mistake - Onus of proof on tenant to prove conversion of tenant's fixtures - Award of nominal damages - Insufficient evidence to support finding - Award of nominal damages overturned - Turns on own facts

Commercial Tenancy (Retail Shops) Agreements Act 1985 (WA), s 12(1)(d), s 12(1f), s 15(2)

Commercial Tenancy (Retail Shops) Agreements Amendment Act 1998 (WA), s 14

Appeal allowed in part, on one of eight grounds, in relation to nominal damages claim for $10

Australia & New Zealand Banking Group Ltd v Westpac Banking Corporation [1988] HCA 17; (1988) 164 CLR 662

Batiste v Lenin [2002] NSWCA 316; (2002) 11 BPR 20,403

Batiste v Lenin [2002] NSWSC 233; (2002) 10 BPR 19,441

Becklay Pty Ltd v ARJ Freight Pty Ltd [2003] NSWSC 155

Citibank Pty Ltd v Simon Fredericks Pty Ltd [1993] VicRp 66; [1993] 2 VR 168

Connaught Restaurants Ltd v Indoor Leisure Ltd [1994] 1 WLR 501

Darlington Futures Ltd v Delco Australia Pty Ltd [1986] HCA 82; (1986) 161 CLR 500

Debonair Nominees Pty Ltd v J & K Berry Nominees Pty Ltd [2000] SASC 244; (2000) 77 SASR 261

Equuscorp Pty Ltd v Glengallan Investments Pty Ltd [2004] HCA 55; (2004) 218 CLR 471

GL Nederland (Asia) Pty Ltd v Expertise Events Pty Ltd [1999] NSWCA 62

Grant v NZMC Ltd [1988] NZCA 135; [1989] 1 NZLR 8

Heggies Bulkhaul Ltd v Global Minerals Australia Pty Ltd [2003] NSWSC 851; (2003) 59 NSWLR 312

Parker v Director of Public Prosecutions (1992) 28 NSWLR 282

R & J Lyons Family Settlement Pty Ltd v 155 Macquarie Street Pty Ltd [2008] NSWSC 310; (2008) 13 BPR 25,161

Re Partnership Pacific Securities Ltd [1994] 1 Qd R 410

Roxborough v Rothmans of Pall Mall Australia Ltd [2001] HCA 68; (2001) 208 CLR 516

Webster v Banning Holdings Pty Ltd [2001] WASC 11

3 This is an appeal from a decision of O'Brien DCJ in proceedings in which the appellant was the plaintiff. The appellant had entered into an agreement to purchase a restaurant business in November 1999, settlement of which occurred on 29 February 2000. The second respondent and her late husband (who I will refer to collectively as the respondents), were the owners of the premises from which the business operated. The appellant entered into possession of the business premises in November 1999, but did not take a formal assignment of the lease of the premises until 1 March 2000. Prior to the formal assignment, the appellant had executed an 'Application for Lease' and provided it to the respondents in December 1999. The appellant operated the business until late 2001. In November 2001 the appellant ceased paying rent. On 24 December 2001, the respondents issued a notice of default for non-payment of rent for December 2001. In reliance on the default notice, on 11 January 2002, the respondents terminated the lease and repossessed the premises.

4 In the proceedings below, the appellant claimed, in effect, that the respondents had engaged in misleading and deceptive conduct; that they were in breach of contractual terms of the lease as a result of which the lease had not been properly terminated; and that they were liable in conversion for having retained tenant's fixtures after the termination of the lease. The respondents, in the proceedings below, counterclaimed for various items of alleged loss and damage including unpaid rent. The judge dismissed the appellant's claims and found that the lease was properly terminated. In relation to the respondents' counterclaim, she allowed the claim for unpaid rent subject to certain deductions, and allowed one other claim in respect of which she awarded $10 as nominal damages.

5 In this appeal, the appellant alleges, in substance, that the learned judge erred in making findings adverse to the appellant with respect to the appellant's claims for breach of contract and conversion, and in the finding for the respondents on the counterclaim sounding in nominal damages.

6 In relation to the claim for breach of contract, it was accepted by the appellant in this appeal that in order to show that the lease was not properly terminated, it would need to establish not only that the respondents were in breach of the lease, but further, that the appellant was entitled to set off its claims arising from the alleged breaches against the liability to pay rent in December 2001.

To pay the Rent without set-off (whether arising at law or in equity) and free and clear of all deduction whatsoever at the times mentioned in the Schedule to the Landlord at its address or as the Landlord may direct in writing from time to time PROVIDED THAT AND IT IS HEREBY DECLARED THAT the Rent shall be subject to review and variation as hereinafter set out.

Upon the expiration or sooner determination of the Term BUT SUBJECT TO the provisions of sub-clause 3.17(b), to peaceably surrender and yield up to the Landlord the Leased Premises clean and free from rubbish and in good and substantial repair and safe condition in accordance with the Tenant's Covenants or in the event of any part thereof having been replaced or renewed during the Term as nearly as possible in the same condition as at the date of such replacement or renewal having regard to the age thereof damage by earthquake, aircraft, riot, civil commotion, fire, flood, lightening, storm, tempest, reasonable wear and tear, war, damage and act of God only excepted.

At or prior to the determination or termination of the Term, to take, remove and carry away from the Leased Premises all signs, fixtures, fittings, plant, machinery, equipment or other articles upon the Leased Premises in the nature of trade or tenant's fixtures brought upon the Leased Premises by the Tenant, and the Tenant shall in such removal forthwith make good to the satisfaction of the Landlord any damage (including and without limitation to fill in, consolidate, level off and repair any excavation, hole or unevenness in or to the surface of the Leased Premises thereby caused) which may be occasioned to the Leased Premises by such removal.

Any signs, fixtures, fittings, plant, equipment or other articles not removed in accordance with sub-clause 3.17(b) shall be deemed absolutely abandoned by the Tenant and shall become the absolute property of the Landlord without compensation to the Tenant (without prejudice however to the other rights, remedies and interests of the Landlord contained or implied in this Lease) and may be sold or stored in the absolute discretion of the Landlord at the cost in all respects of the Tenant.

8 In the court below, the breach of contract claim relevantly involved, in substance, allegations to the effect that the appellant was not in breach of the lease when the default notice was issued for non-payment of rent in December 2001 because:

(a) the appellant had paid rent and other money in the period December 1999 to March 2000 which it had not been obliged to pay, because the assignment of the lease only took effect from 1 March 2000 and because the appellant was effectively prevented from operating the business prior to 13 April 2000, when it obtained its liquor licence approval for the restaurant (statement of claim pars 22 - 23);

(b) the appellant had overpaid the respondents a sum exceeding the amount of the unpaid rent in December 2001, for variable outgoings (statement of claim par 24); and

(c) the payments in (a) and (b) should have been credited, so as to extinguish, the liability for rent in December 2001 (statement of claim pars 22 - 23);

9 In relation to these claims, the judge found, in effect, that the appellant was liable to make the payments it made in the period December 1999 to March 2000 in that:

(a) the appellant was liable for the rent and other obligations provided for in the lease prior to the execution of the deed of assignment on 1 March 2000 by reason of the terms of the Application for Lease, and, or alternatively, by reason of the appellant being a short-term tenant (reasons [56] - [57], [121]); and

(b) pursuant to the deed of assignment of the lease, the appellant was liable under the lease with effect from 1 March 2000 and there was no implied term of the lease that the appellant's obligations under the lease would not commence until it had obtained liquor licence approval (reasons [23] - [25], [121]).

10 Also, in relation to the payments in the period December 1999 to March 2000, and in relation to the overpayment of outgoings, the judge further found that these payments or overpayments did not provide a justification for the non-payment of rent in December 2001 by virtue of cl 3.1 of the lease, on the basis that cl 3.1 required the payment of the rent without any set off or deduction in any event (reasons [132] - [136]).

11 In the claim for conversion, the appellant alleged, in a very general way and without any relevant particularisation, that the respondents wrongfully converted or had been unjustly enriched by retaining the appellant's goods and the benefit of certain renovations and alterations which it had carried out (statement of claim par 29).

12 In relation to the claim in conversion, the judge found:

(a) the appellant was locked out of the premises on 11 January 2002, and sought the retrieval of various items on 18 January 2002, at which point a dispute arose as to the entitlement to certain items of property and there occurred an exchange between the respondents and the appellant, in which the latter's conduct or words were interpreted by the respondents as being threatening (reasons [169] - [171]);

(b) it was reasonable for the respondents to refuse access on 18 January 2002 and to leave the scene to prevent an escalation of the dispute (reasons [171]);

(c) the respondents obtained an interim restraining order against the representative of the appellant on 21 January 2002 (reasons [170]);

(d) there was an exchange of correspondence between the parties' solicitors regarding the appellant's claims to the relevant property on 21 and 31 January 2002 (reasons [172] - [173]);

(e) in their letter of 31 January 2002 the respondents' solicitors advised that specified items could be collected between 4 and 8 February 2002, but the appellant did not attend in that period to collect the items (reasons [173] - [175]);

(f) the dispute went to the Commercial Tribunal, which made orders in June and July 2002 giving the appellant the right to remove specified items, following which the appellant removed various items but not all of the items contemplated in the Tribunal's orders (reasons [176] - [183]); and

(g) the appellant's failure to remove all the items meant that the remaining items were deemed to be abandoned by cl 3.17(c) of the lease (reasons [191] - [195]).

13 The judge further found that insofar as the appellant claimed a conversion of the goods and materials the subject of the renovations undertaken by the appellant:

(a) if they formed fixtures to the freehold, the appellant would have no right to remove them and the appellant had not proved that the items were tenant's fixtures as opposed to fixtures annexed to the realty (reasons [209] - [213]); and

(b) if they were tenant's fixtures, and did not form part of the realty, they would be deemed to have been abandoned under cl 3.17(c) of the lease in any event (reasons [212] - [213]).

14 Grounds 1 to 3, in effect, challenge the judge's findings that the appellant was liable for rent and other financial obligations in the period December 1999 to March 2000 (the 'pre-assignment liability'). The appellant contends that these payments were made by the appellant in the absence of any liability therefor, and by mistake. A consideration of these grounds requires some further explanation of the judge's findings. The judge had found the appellant liable on two bases. One was that the appellant was a short term tenant. The other was that the appellant was bound by the terms of the Application for Lease. Ground 1 and the submissions in support of it present a variety of unconnected arguments which do not address in terms either of the two bases upon which the judge made her findings of pre-assignment liability.

15 Ground 2 challenges the first basis of the judge's finding of pre-assignment liability. The appellant, by this ground, contends that the judge erred in finding that the appellant was liable under a short-term tenancy prior to the assignment of the lease. Ground 3 challenges the alternative basis for the judge's finding of pre-assignment liability. The appellant contends by ground 3 that the appellant was not bound by the terms of the Application for Lease.

16 The appellant's counsel conceded that even if the appellant succeeded on grounds 1 to 3, the appellant's success in establishing that the respondents were not entitled to terminate the lease depended upon its success in ground 4. It is unnecessary to deal with grounds 1 to 3 in light of the conclusion reached with respect to ground 4. As explained later, in my view, the judge was correct in finding that no right of set off existed, and ground 4 has not been made out.

17 By ground 4, the appellant alleges that the judge erred in finding that the respondents were entitled, under cl 3.1 of the lease, to demand the payment of rent without any set off. It says, in substance, that it was entitled to set off the payments it (allegedly) made by mistake in the period December 1999 to March 2000, and that it was entitled to recover payments made for variable outgoings and management fees, on the basis that they were paid pursuant to provisions of the lease which, the appellant said, were void by reason of s 12(1)(d)(i), s 12(1f) and s 15(2) of the Commercial Tenancy (Retail Shops) Agreements Act 1985 (WA) (the Act). Such claims are in restitution for money had and received: Roxborough v Rothmans of Pall Mall Australia Ltd [2001] HCA 68; (2001) 208 CLR 516; Australia & New Zealand Banking Group Ltd v Westpac Banking Corporation [1988] HCA 17; (1988) 164 CLR 662, 673.

(a) ... the Respondents did not rely upon the exclusion clause in the lease in their Defence to such payments, which denied making the same and contended they were payable pursuant to the lease;

(b) Clause 3.1 in the lease was an exclusion clause to which the contra proferentum rule applied;

(c) the parties did not intend the clause to apply when the Appellant made the first payment of $4,767.62 on 2 December 1999 in that:

(i) the parties had agreed on 2 or 3 November 1999 to a new 3-year lease with two 3-year options;

(ii) the lease containing the clause could not take effect until the Director of Liquor Licensing approved the transfer of the liquor licence to the Appellant, which did not occur until 28 February 2000;

(d) the Appellant had no knowledge of Clause 3.1 of the lease until about 30 August 2000, when it was provided with a copy of the lease;

(e) ... the Appellant was unable to use the premises for the purposes specified in the lease as the liquor licence had been suspended;

(f) ... such a finding was contrary to the earlier finding of the learned Judge that the Appellant became a short-term tenant pending the assignment of the lease;

(g) the exclusion of set offs for rent did not entitle the Respondents to retain operating expenses and management fees recovered from the Appellant exceeding the amount of the Default Notice, which were prohibited and rendered void by Sections 12(1d) [sic - presumably s 12(1)(d)(i)], (1f) and 15(2) of the Commercial Tenancy (Retail Shops) Agreements Act 1985.

19 In relation to the seventh point (subpar (g)) in ground 4, s 12(1)(d)(i), s 12(1f) and s 15(2) of the Act provide:

(1) If provision is made in a retail shop lease for payment by the tenant, in addition to rent, of all or any of the operating expenses of the landlord -

...

(d) the retail shop lease shall be taken to provide that -

(i) the tenant is not required to make any payment of, and the landlord is not entitled to recover, any such operating expenses in respect of a year or part of a year until at least one month after the landlord has given to the tenant annual estimates of expenditure under each item of operating expenses in respect of the year; ...

...

(1f) If there is a provision in a retail shop lease in respect of any premises to the effect that the tenant is obliged to make a payment to or for the benefit of the landlord for management fees, the landlord is not entitled to recover, and the tenant is not obliged to make, that payment.

...

(2) A provision of a retail shop lease, to the extent that it is contrary to or inconsistent with anything in this Act or with anything that by this Act the lease is taken to provide, is void.

20 The seventh point (subpar (g)) relied upon by the appellant in ground 4 was not the subject of a pleaded claim against the respondents (nor, at the time of termination, had the appellant sought relief against forfeiture on this or any other basis). The judge made no findings of fact relevant to these matters. Questions of fact relating to whether annual estimates were provided (cf s 12(1)(d)(i)), and whether and if so in what quantum management fees were charged (cf s 12(1f)), were not, accordingly, explored at trial, although the appellant's counsel urged in the appeal that the latter matter, but not the former, could be discerned from certain evidence adduced in the trial. For reasons which appear later, it is not necessary to decide whether it is appropriate to allow these matters to be raised on appeal for the first time.

21 By ground 5, the appellant alleges that the 'judge erred ... in finding that the Respondents' refusal to permit the Appellant to remove its tenant's fixtures was reasonable'. The appellant's counsel said that this ground related to the finding referred to in subpar (b) in [12] above, concerning the events of 18 January 2002. He said that this was not a pleaded issue.

22 By ground 6, the appellant alleges that the judge erred in finding that the appellant had abandoned its tenant's fixtures pursuant to cl 3.17(c) of the lease.

23 By ground 7, the appellant alleges that the judge erred in finding that the appellant had not established its claim for the alleged detention of its renovations and alterations because 'this issue was not pleaded or put as part of the Respondent[s'] case'.

24 Ground 8 concerns the judge awarding nominal damages on the respondents' counterclaim in relation to the appellant's alleged failure to surrender the premises, under cl 3.17(a) of the lease, in good and substantial repair in that the appellant allegedly failed to restore the premises with a bar, slate flooring and a fireplace which had been on the premises at the start of the lease.

25 The appellant alleges that the 'evidence did not establish the Respondents' ownership of these items'.

26 By ground 9, the appellant alleges that the judge erred in giving judgment on the counterclaim for rent 'when the Respondents were not entitled to terminate the lease between the parties as the Appellant was not in default of payments to the Respondents'. The appellant's counsel indicated that this ground was consequential upon success on the earlier grounds for breach of contract.

27 As noted above, the first three grounds of appeal relate to the judge's finding that the appellant was liable to the respondents in respect of rent and other financial obligations provided for in the lease, in the period December 1999 to March 2000. Unless the appellant succeeds on ground 4, success on grounds 1 to 3 is irrelevant.

28 In relation to ground 4, the appellant's first point (subpar (a)) is to the effect that the respondents did not rely on cl 3.1 at trial and that the judge construed that provision without hearing the parties on its proper construction or application. In my view this point lacks merit.

29 It was common cause, on the pleadings, that cl 3.1 operated to deny the appellant a right of set off (statement of claim pars 9(a), 15 - 16, and defence pars 7(a), 15(c)), and the respondents pleaded the operation of the lease in response to the breach of contract claim (defence pars 22(a), 23(a)). In my view, the appellant has not established that the judge found that cl 3.1 operated differently from the way that the parties had conducted their respective cases at trial: cf Parker v Director of Public Prosecutions (1992) 28 NSWLR 282, 294, 300. In any event, the judge's construction of cl 3.1 was in my view correct, for the reasons explained below.

30 The appellant's second point (subpar (b)) alleges an error in construction by reference to the contra proferentum rule. In this regard, the appellant's counsel referred to the following statements in Lewison K, The Interpretation of Contracts (2007) 486 - 487:

Some contractual provisions seek to prevent parties from relying upon what would otherwise be their legal rights at common law. In general, parties are permitted to do so. However:

'in construing such a contract one starts with the presumption that neither party intends to abandon any remedies for its breach arising by operation of law, and clear express words must be used in order to rebut this presumption.'

...

Thus in most cases, a right of set-off will only be excluded where the clause refers to set-off expressly. Thus a clause in a lease which required the rent to be paid 'without deduction' did not exclude a right of equitable set-off. A provision requirement payment 'without any deduction or set off whatsoever' has been held sufficient to exclude any right of deduction or set-off. The omission of the word 'whatsoever' makes no difference (footnotes omitted).

31 Allied to this point is the appellant's seventh point (subpar (g)). The appellant contends, in effect, that cl 3.1, properly construed, does not prevent the tenant from deducting from, or setting off against, the obligation to pay rent, claims it may have to recover payments made to the landlord in pursuance of terms rendered void by the provisions of the Act referred to earlier.

32 The respondents contend that the provisions of the Act relied upon by the appellant were amendments to the Act in 1998 and have no relevant effect. The respondents say that the provisions have no application to the lease in question by reason of transitional provisions which accompanied the introduction of those provisions. The respondents rely on s 14(2) of the Commercial Tenancy (Retail Shops) Agreements Amendment Act 1998 (WA) and contend that the lease is an 'existing lease' within the meaning of s 14. The appellant's rejoinder is that the lease is a 'new lease' within the meaning of s 14 because the lease was assigned to it after the relevant amendments were enacted. Again, it is unnecessary to explore or deal with these particular arguments because even if the provisions of the Act apply to render terms of the lease void in respect of payments for management fees and variable outgoings, the appellant had no right of set off having regard to the proper construction of cl 3.1, referred to below.

33 In Darlington Futures Ltd v Delco Australia Pty Ltd [1986] HCA 82; (1986) 161 CLR 500, 510 the High Court said:

[I]n Thomas National Transport (Melbourne) Pty Ltd v May & Baker (Australia) Pty Ltd [(1966) [1966] HCA 46; 115 CLR 353], Windeyer J, though dissenting in result, stated [at 376] that the effect of an exclusion clause must be 'resolved by construing the language that the parties used, read in its context and with any necessary implications based upon their presumed intention'. And later, in H & E Van Der Sterren v Cibernetics (Holdings) Pty Ltd [(1970) 44 ALJR 157], Walsh J, with whom Barwick CJ and Kitto J agreed, said [at 158]:

'The terms of exception clauses must sometimes be read down if they cannot be applied literally without creating an absurdity or defeating the main object of the contract ... But such a modification by implication of the language which the parties have used in an exception clause is not to be made unless it is necessary to give effect to what the parties must be understood to have intended'

(see also Port Jackson Stevedoring Pty Ltd v Salmond & Spraggon (Aust) Pty Ltd [(1978) [1978] HCA 8; 139 CLR 231 at 238]).

These decisions clearly establish that the interpretation of an exclusion clause is to be determined by construing the clause according to its natural and ordinary meaning, read in the light of the contract as a whole, thereby giving due weight to the context in which the clause appears including the nature and object of the contract, and, where appropriate, construing the clause contra proferentem in case of ambiguity (emphasis added).

34 The contra proferentum rule applies 'only when, having applied all other aids to construction, ambiguity remains': GL Nederland (Asia) Pty Ltd v Expertise Events Pty Ltd [1999] NSWCA 62 [27] (Giles JA) (Spigelman CJ & Beazley JA concurring).

35 There is a line of authority to the effect that the words 'clear of all deductions' and cognate phrases such as 'without deductions' are to be given their literal and ordinary meaning, and that they exclude any right of set off recoupment: Batiste v Lenin [2002] NSWSC 233; (2002) 10 BPR 19,441 [103] - [105]; cf Batiste v Lenin [2002] NSWCA 316; (2002) 11 BPR 20,403 [49]; R & J Lyons Family Settlement Pty Ltd v 155 Macquarie Street Pty Ltd [2008] NSWSC 310; (2008) 13 BPR 25,161 [72] - [73]; Becklay Pty Ltd v ARJ Freight Pty Ltd [2003] NSWSC 155 [25]; Webster v Banning Holdings Pty Ltd [2001] WASC 11 [29]; Debonair Nominees Pty Ltd v J & K Berry Nominees Pty Ltd [2000] SASC 244; (2000) 77 SASR 261 [43]; Citibank Pty Ltd v Simon Fredericks Pty Ltd [1993] VicRp 66; [1993] 2 VR 168, 175; Heggies Bulkhaul Ltd v Global Minerals Australia Pty Ltd [2003] NSWSC 851; (2003) 59 NSWLR 312 [196] - [198]. There is, on the other hand, authority to the effect that the word 'deduction' does not, on its own, embrace equitable set off: Connaught Restaurants Ltd v Indoor Leisure Ltd [1994] 1 WLR 501; Grant v NZMC Ltd [1988] NZCA 135; [1989] 1 NZLR 8; Re Partnership Pacific Securities Ltd [1994] 1 Qd R 410, 424 - 425. See also Derham R, The Law of Set-Off (3rd ed, 2003) [5.83] - [5.86].

36 It is unnecessary, in this appeal, to attempt to resolve the divergence of authority or to express a preference for one line of authority over the other, as cl 3.1 in this case expressly uses the words 'without set off (whether arising at law or in equity)', in addition to the words 'free and clear of all deduction whatsoever'. Clause 3.1 is unambiguous and the natural and ordinary meaning of the words preclude any potential for setting off or deducting claims for money had and received against the liability to pay rent.

37 The appellant's third, fourth and fifth points (subpars (c), (d) and (e)) in ground 4 raise arguments which have no bearing upon the proper construction or operation of cl 3.1. The appellant was bound by the terms of the lease, including cl 3.1 properly construed, whatever the appellant's subjective intentions may have been, or its knowledge or otherwise of the terms of the lease, or its inability to sell liquor pending the grant of the liquor licence: Equuscorp Pty Ltd v Glengallan Investments Pty Ltd [2004] HCA 55; (2004) 218 CLR 471 [33] - [35].

38 In relation to the appellant's sixth point (subpar (f)), whether or not the appellant was a short term tenant prior to March 2000, the appellant thereafter became bound by the terms of the lease, including cl 3.1 properly construed, after entering into the assignment of lease.

39 Accordingly, the appellant has not made out ground 4.

40 In relation to ground 5, the appellant submitted that cl 3.17(b) of the lease conferred a right to recover tenant's fixtures. In my view, cl 3.17(b) recognises a right of retrieval, but imposes an obligation on the appellant to retrieve items within a specified time. Further, the judge's finding of reasonableness was an intermediate finding relevant to the ultimate question of whether the appellant had abandoned its tenant's fixtures within the meaning of cl 3.17(c). There was no need for the respondents to plead, as a fact, a characterisation of the events the subject of that intermediate finding. The appellant had not, itself, pleaded that the events of 18 January 2002 constituted conversion. Moreover, the underlying findings of fact upon which the judge inferred the reasonableness of the respondents' conduct on 18 January 2002 are not challenged in the notice of appeal. Ground 5 in my view has no merit.

41 Ground 6 also lacks merit. The detailed findings of fact (see [12] above) upon which the judge concluded that there was an abandonment pursuant to cl 3.17(c) have not been shown to be erroneous. In any event, the judge held that the appellant had failed to establish its ownership of any items that were left (see [13(a)] above). This points leads to ground 7.

42 As to ground 7, no specific pleading by the respondents was required. On the contrary, the burden was on the appellant to prove its case in conversion. That required the appellant to prove what were, in fact, tenant's fixtures and to prove a conversion of them. The appellant failed to do so. In this appeal the appellant's counsel submitted that the appellant's lack of evidence 'arose from the suggestion of [the judge] to file an affidavit ... setting out the renovations' (emphasis added). The submission is without foundation. The judge's suggestion was to the effect that rather than the appellant giving lengthy oral evidence about each item of work and renovation said to have been carried out, a likely more convenient course would be for the matters to be sworn in an affidavit. The judge made it clear, however, that it was up to the appellant's counsel as to how he wished to run the case. There was, moreover, nothing at all in the judge's remarks to indicate, or from which it could reasonably be inferred, that the appellant was relieved of showing what items were contended to be tenant's fixtures for the purposes of its conversion claim. Ground 7 is unmeritorious.

43 In relation to ground 8, the appellant contended that there was uncontradicted evidence that the appellant owned the items in question and that there was no evidence that the respondents owned the items at the start of the lease. The respondents' counsel conceded, in effect, that there was no evidence that the items belonged to the respondents. Accordingly, the foundation for the respondents' claim was not established. The appellant is entitled to succeed on this ground.

44 Ground 9 must fail as it depends, ultimately, on the success of ground 4 which lacks substance.

45 For these reasons I would dismiss the appeal, save in respect of ground 8, concerning the award of $10 nominal damages. The orders should be:

1. The appeal is allowed in relation to ground 8.
2. Order 2 of the orders of O'Brien DCJ be varied so that the words 'the sum of $47,811.40' be deleted and substituted by the words 'the sum of $47,801.40'.
3. The appeal is otherwise dismissed.

46 I should mention, for counsels' consideration, my preliminary view on costs. It is mentioned only for the purposes of stimulating debate. My provisional view is that notwithstanding the appellant's limited success, on ground 8 to the extent of $10, as the respondents have almost wholly been successful on the appeal, they should have the costs of the appeal, and the trial judge's order for costs of the action should not be disturbed.