T & L Alexandria Pty Ltd v Sharvain Facades Pty Ltd

LR 1; [2019] HCA 32 Miller Heiman Pty Ltd v Sales Principles Pty Ltd (2017) 94 NSWLR 500; [2017] NSWCA 106 Moratic Pty Ltd v Gordon (2007) 13 BPR 24,713; [2007] ANZ ConvR 198; [2007] NSW ConvR 56-172; [2007] NSWSC 5 P & A Swift Investments v Combined English Stores Group Plc [1989] AC 632; [1988] 2 All ER 885; [1988] 3 WLR 313; (1989) 57 P & CR 42; [1988] 43 EG 73 Perri v Coolangatta Investments Pty Ltd (1982) 149 CLR 537; (1982) 56 ALJR 445; (1982) 41 ALR 441; [1982] HCA 29 Placer (GrannySmith) Pty Ltd v Thiess Contractors Pty Ltd (2003) 77 ALJR 768; (2003) 196 ALR 257; (2003) 19 BCL 431; [2003] HCA 10 Retirement Services Australia (RSA) Pty Ltd v 3143 Victoria St Doncaster Pty Ltd (2012) 37 VR 486; [2012] VSCA 134 Ryledar Pty Ltd v Euphoric Pty Ltd (2007) 69 NSWLR 603; [2007] Aust Contract Reports 90-254; [2007] NSWCA 65 Shimden Pty Ltd v Park Pty Ltd [2022] NSWSC 267 Strategic Communications Management Pty Ltd v Techfront Australia Pty Ltd [2020] NSWSC 847 TMA Australia Pty Ltd v Indect Electronics & Distribution GmbH [2015] NSWCA 343 Troulis v Vamvoukakis [1998] NSWCA 237 Vopak Terminal Darwin Pty Ltd v Natural Fuels Darwin Pty Ltd (2009) 258 ALR 89; [2009] FCA 742 Texts Cited: B Edgeworth, Butt's Land Law (7th ed, 2017, Thomson Reuters) J D Heydon, Heydon on Contract: The General Part (2019, Lawbook Co) Category: Principal judgment Parties: T & L Alexandria Pty Ltd (ACN 624 661 776) as trustee for the T & L Alexandria Family Trust (First Plaintiff/First Cross-Defendant) T & L Reich Investments Pty Ltd (ACN 081 629 156) (Second Plaintiff/Second Cross-Defendant) Sharvain Facades Pty Ltd (ACN 116 437 462) (First Defendant/Cross-Claimant) Bernard Matthew McSorley (Second Defendant) Representation: Counsel: J K Mee (Plaintiffs/Cross-Defendants) S Reuben (Defendants/Cross-Claimant)

Solicitors: Holding Redlich (Plaintiffs/Cross-Defendants) ALC Legal (Defendants/Cross-Claimant) File Number(s): 2020/150432 Publication restriction: N/A

Introduction

1. These proceedings arise out of a series of leases pursuant to which the first defendant and cross-claimant, Sharvain Facades Pty Ltd (ACN 116 437 462) (Sharvain), occupied premises known as Unit 6 and Unit 7 at 119-133 McEvoy Street, Alexandria in New South Wales during the period from February 2006 until 29 August 2019.
2. The premises were owned by the second plaintiff and second cross-defendant, T & L Reich Investments Pty Ltd (ACN 081 629 156) (TLR), at all material times until about 15 October 2018, when they were transferred to the first plaintiff and first cross-defendant, T & L Alexandria Pty Ltd (ACN 624 661 776) as trustee for the T & L Alexandria Family Trust (TLA).
3. The last of the series of leases was between TLA (as landlord) and Sharvain (as tenant) for a term of three years commencing on 1 March 2019 (the 2019 lease).
4. Sharvain's performance of its obligations under each of the leases was guaranteed by one of its directors, Mr Bernard McSorley. Mr McSorley is the second defendant.
5. During the period from February 2006 to June 2019, Sharvain paid the monthly rent stipulated by the successive leases, together with a monthly amount on account of outgoings. The leases required Sharvain to pay 100 per cent of outgoings, and made provision for the landlord to recover additional amounts in respect of outgoings at the conclusion of each "outgoings year" if actual outgoings exceeded the total monthly payments, or to pay a refund to Sharvain if its payments exceeded actual outgoings. With the exception of one occasion in 2009, no such adjustments were made under any of the successive leases until TLR and TLA sought to recover amounts totalling $310,847.00 in respect of past outgoings in July 2019. Sharvain denied liability to pay that sum, and TLA asserted a right to terminate the 2019 lease if it was not paid. TLA maintained that assertion in subsequent correspondence, which Sharvain treated as a repudiation of the lease that it then accepted by giving notice terminating the lease on 29 August 2019. Immediately thereafter, Sharvain delivered up vacant possession and returned the keys to TLA.
6. In these proceedings, TLR and TLA claim to recover amounts allegedly owing by Sharvain in respect of past outgoings, loss of bargain damages for Sharvain's alleged repudiation of the 2019 lease on 29 August 2019, and damages for Sharvain's alleged breached of its obligations under the 2019 lease in relation to landlord's fixtures and make good. TLA claims that Mr McSorley is also liable for these alleged losses under the guarantee and indemnity given in favour of the landlord under each lease.

Salient evidence and findings of fact

1. TLR and TLA adduced evidence from the following witnesses: 1. Mr Hong Liu, who was married to the sole director of TLR and TLA - Ms Monika Tu - and who gave evidence that he was responsible for making key commercial decisions about the premises under delegated authority from Ms Tu; 2. Ms Sabrina Lam, who was employed by a related company of TLR, and whose responsibilities included arranging the leasing of the premises in the period up to and including about August 2018 (reporting to Mr Liu and acting in accordance with his instructions) and issuing invoices to Sharvain for moneys payable to TLR under the leases; and 3. Mr Lung Pun (also known as Luke), who was employed by Black Diamondz Group in the position of Legal Counsel during the period in which TLR and TLA engaged that company as the managing agent for the premises, and during the events of 2018 and 2019 that gave rise to these proceedings.
2. Sharvain and Mr McSorley adduced evidence from the following witnesses: 1. Mr Boris Kostura, one of Sharvain's three directors; 2. Mr McSorley; 3. Mr Rowan Sands, who was involved in the design and construction of pallet racking that Sharvain installed in the premises; and 4. Mr Constantine Mandadakis, an information technology consultant who gave evidence concerning Sharvain's email systems.
3. Sharvain also adduced expert evidence from Mr Michael Binskin, an experienced commercial property agent, and from Mr Matthew Gwynne, a forensic accountant.
4. This section of these reasons for judgment summarises the relevant evidence given by the witnesses, together with the documentary evidence tendered by the parties, and records my findings of fact in relation to disputed matters that are material to the issues to be determined in these proceedings.
5. It is appropriate to make the following observation at the outset about the documentary evidence. As will become apparent below, many communications between the parties concerning the leases were conducted by email. Each of Ms Lam and Mr Kostura adduced evidence of emails that they exchanged with one another during the period from about 2006 until about 2018. Mr Kostura also adduced evidence of emails that he exchanged with Mr Jack Fontana of Black Diamondz Group during 2018 in the course of negotiating the terms of the 2019 lease. For understandable reasons, it was plain from the evidence given by Ms Lam and Mr Kostura in cross-examination that they do not now recall the emails that they exchanged at various times during the period stretching from 2006 to 2018, or the various schedules and other documents that were attached to the emails that they sent and received. In giving evidence about their communications in these proceedings, each of them was reliant on their own record of that email correspondence. To a large extent, each of Ms Lam and Mr Kostura had reconstructed the evidence of their communications assuming that her or his own records constituted a complete collection of all relevant email communications. There are certain discrepancies between their respective records.

The 2006/2007 leases

1. Sharvain is in the business of the integrated design and construction of building façades and glazing for building projects. At all times relevant to these proceedings, the directors of Sharvain were Mr Bernard McSorley, Mr Boris Kostura, and Ms Shangyun Zhao.
2. In February 2006, Sharvain leased Unit 7 from TLR for a three-year term expiring on 12 February 2009. In February 2007, Sharvain leased Unit 6 from TLR for a three-year term commencing on 1 March 2007 and expiring on 28 February 2010. The term of the Unit 6 lease was then extended to 28 February 2010 (the 2006/2007 leases).
3. As I have already mentioned, Ms Sabrina Lam was employed by TLR, or one of its related companies. Her responsibilities included arranging the leasing of Unit 6 and Unit 7, and managing invoices issued to the tenant. Mr Hong Liu was responsible for making key commercial decisions about the premises under delegated authority from TLR's sole director, Ms Monika Tu. Ms Lam reported to Mr Liu and acted on his instructions in relation to matters concerning the leases.
4. Sharvain leased Unit 6 and Unit 7 for storage and distribution, and as a space in which to fabricate prototype façades. According to the evidence of Mr McSorley and Mr Kostura, both units were in a poor and run-down condition at the commencement of Sharvain's leases in February 2006 and March 2007. This was not disputed by Ms Lam or Mr Liu. On the contrary, Ms Lam acknowledged that Sharvain had refurbished each of the units before moving in. Ms Lam describes the refurbishment as involving fixing lights, replacing ceiling tiles, cleaning blinds, and removing old signage. There is no evidence that either of the units were freshly painted, either by Sharvain or by TLR, before Sharvain moved in. Ms Lam could not recall whether Sharvain's refurbishment extended to replacing the pallet racking in Unit 7, or to replacing any pallet racking in Unit 6.
5. It is common ground that Unit 7 contained pallet racking before Sharvain moved into the premises in February 2006. Ms Lam's evidence suggests that the pallet racking had been in place since at least 2001. Mr McSorley and Mr Kostura gave evidence to the effect that the pallet racking was old and unsafe, and that it was unsuitable for storing Sharvain's materials. Mr McSorley described it as "rusted" and "falling apart".

The 2010 leases

1. With the 2006/2007 leases due to expire on 28 February 2010, TLR and Sharvain negotiated during January 2010 and February 2010 for new leases for Unit 6 and Unit 7 for further terms of three years. Those negotiations were conducted by Ms Lam on behalf of TLR (acting on Mr Liu's instructions) and Mr Kostura on behalf of Sharvain. According to their contemporaneous email correspondence, there was some discussion between them about whether TLR was looking to sell the premises and, if so, the price that it was looking for. The annual rent to be payable under the proposed new leases was otherwise the sole subject of the negotiations recorded in that email correspondence. During the course of the negotiations, Mr Kostura prepared various schedules calculating the rent payable under both proposed leases on the basis of TLR's proposed rent increases, and on the alternative basis of Sharvain's more modest proposed rent increases.
2. On 12 February 2010, Ms Lam sent an email to Mr Kostura attaching a "proposal from my boss" and requesting Mr Kostura to "give me a call so I can further explain to you". Mr Kostura gave evidence that he had been unable to locate the attachment to Ms Lam's email. Mr Liu has given evidence identifying the proposal that he had prepared at that time, being a spreadsheet setting out two alternative rental proposals for the proposed three-year term from March 2010 to February 2013. Sharvain would pay the same total rental under both alternatives, but the second alternative (entitled "New proposal") provided for higher monthly rental payments in the first 33 months, followed by a rent-free period in the last three months of the three-year term. I infer that this spreadsheet was the "proposal from my boss" attached to the email that Ms Lam sent to Mr Kostura at 2:46pm on 12 February 2010.
3. Mr Liu gave evidence that he explained his "New proposal" to Mr Kostura in a conversation in February 2010. According to Mr Liu's evidence, he explained to Mr Kostura that he wanted the monthly rent to be increased in line with what he considered to be the market rate so as to increase the valuation and potential sale price of the premises, but that he was prepared to offer a three month rent-free period at the end of the three year term so that Sharvain's total rent under the proposed 2010 leases was the same as under the 2006/2007 leases. Mr Kostura has no recollection of any such conversation.

The 2013 leases

1. The negotiations for new leases to commence on the expiry of the 2010 leases were again conducted by Ms Lam on behalf of TLR (acting in accordance with Mr Liu's instructions) and Mr Kostura on behalf of Sharvain. According to Ms Lam, there was no specific discussion or negotiation concerning outgoings. Ms Lam could not recall Mr Kostura ever having asked for information about outgoings in any of the lease negotiations. Mr Kostura's affidavit evidence did not refer to any discussion concerning outgoings during the negotiation of the 2013 leases, and the contemporaneous email correspondence recording those negotiations makes no mention of outgoings. When the email correspondence was put to him in cross-examination, Mr Kostura suggested that there had been some separate discussion with Ms Lam concerning outgoings during the negotiation of the 2013 leases. When asked to give an account of those discussions, Mr Kostura said he would need to check his affidavit. As I have said, none of Mr Kostura's affidavits mention any such discussions.
2. The contemporaneous email correspondence includes a schedule that Ms Lam sent to Mr Kostura by email at 4:04pm on 12 February 2013 setting out the rent proposed by TLR for each year of the proposed new three-year leases. Ms Lam's email asked Mr Kostura to indicate whether Sharvain accepted TLR's proposal. Ms Lam's evidence identified an email that she appears to have received from Mr Kostura at 3:48pm on 15 February 2013, stating "please proceed with preparation of lease agreement reflecting your latest figures as soon as possible". Mr Kostura gave evidence that he had no record or recollection of having sent any such email. In cross-examination, however, Mr Kostura acknowledged that "[s]omething like this has been sent out, yes". I find that Mr Kostura did send an email to Ms Lam at 3:48pm on 15 February 2013 communicating Sharvain's agreement to enter into new leases of Unit 6 and Unit 7 at the rents set out in the schedule attached to Ms Lam's email sent to Mr Kostura at 4:04pm on 12 February 2013, in circumstances where there had been no negotiation or discussion in relation to outgoings.
3. Mr Kostura gave evidence that he sent an email to Ms Lam at 4:35pm on 15 February 2013 attaching a copy of the schedule that had been attached to Ms Lam's 12 February 2013 email sent at 4:04pm, in which Mr Kostura had inserted immediately below Ms Lam's calculation of the total rent for the three year term an amount of $117,972.00 for outgoings, which was then added to the total rent figure to calculate an amount described in the schedule as "Total 3 years - all costs". Mr Kostura's email to Ms Lam stated: "Once more, I have attached agreed lease break up figures. Please proceed with lease preparation to match our total agreed amounts. Please call if any questions."

The 2016 lease

1. The negotiations for a new lease to commence on the expiry of the 2013 leases were again conducted by Ms Lam on behalf of TLR (acting under instructions from Mr Liu) and Mr Kostura on behalf of Sharvain. The parties adduced evidence of email correspondence between Ms Lam and Mr Kostura between December 2015 and February 2016 concerning the annual rent under the proposed new lease. That correspondence makes no reference to outgoings, although an email sent by Mr Kostura to Ms Lam at the commencement of the negotiations on 16 December 2015 stated that Sharvain needed to "understand incremental rent increase, all costs included" and that "overall costs of premises (total amount paid) is relevant since they are high at the best of times". Ms Lam denied receiving that email. It is understandable that Ms Lam may no longer recall receiving the email. However, the documentary evidence indicates that it was sent, and I so find.
2. The email correspondence after 16 December 2015 concerned the rent that would be payable under the proposed new lease, and Sharvain's request for a rent-free period, which TLR declined. Email correspondence exchanged between Ms Lam and Mr Kostura on 23 February 2016 records that, on that date, they reached agreement as to the rent and Mr Kostura requested that Ms Lam prepare the new lease for Sharvain's execution as soon as possible. Mr Kostura gave evidence that he had no recollection, and no record, of this email exchange. I find on the basis of the documentary evidence that these emails were exchanged, and that Mr Kostura did request that Ms Lam prepare a new lease based on the rent agreed as at 23 February 2016. There is no evidence that there had been any negotiation or discussion of outgoings, notwithstanding that Mr Kostura had expressed a desire to understand the "overall costs or premises (total amount paid)" in his 16 December 2015 email referred to above.
3. Later, at 5:19pm on 23 February 2016, Mr Kostura sent an email to Ms Lam attaching a document entitled "Rental Proposal 2016-2019". According to Mr Kostura's evidence, the attached document was a schedule in which he set out the calculation of rent payable in each year of the three-year term, and the total rent payable over that three-year period. The schedule then included a figure of $117,972.00 for outgoings, which was added to the total rent figure to calculate an amount described as "Total 3 years - all costs". Mr Kostura's email to Ms Lam stated: "We have put the table / schedule together as before, see attached. It shows how rental would be increased over the next 3 years. I assume, as before, invoices will match these values"

The 2019 lease

1. Mr Kostura gave evidence that Mr Jack Fontana of Black Diamondz Group telephoned him on about 1 August 2018 enquiring about Sharvain's interest in taking a further lease of Unit 6 and Unit 7. According to Mr Kostura, he told Mr Fontana that Sharvain would "like to stay on provided we can negotiate an appropriate figure for the new rental and to fix all costs".
2. Mr Kostura then sent Mr Fontana an email later that day in the following terms: "We would like to re-confirm our phone discussion that Sharvain Projects would like to extend our current lease for another 3 years plus 3 year (or 2 year) option. Our current lease is expiring in January 2019. We assume that would be OK with you guys but please kindly confirm it in writing and arrange for the Lease accordingly. Also, a while back, we have discussed with Sabrina if there was a possibility of getting some rental free periods at some stage, considering we have been here over 12 years and I assume the Landlord was generally satisfied with our payment discipline and the fact we have been looking well after the property. We look forward to hearing from you ASAP, thank you."
3. Mr Fontana replied, indicating that TLA proposed a rental arrangement calculated at the rate of $250.00 per square metre, meaning that "the annual income will be $299,500." Mr Fontana asked Mr Kostura to "advise your position and intentions moving forward".
4. Mr Kostura replied to Mr Fontana later that afternoon, stating: "I am pretty confident that we would be able to agree on lease terms, I believe that there is a benefit to both parties (for commercial reasons and for convenience) if the relationship continues. May I suggest you email us proposal on how the rate is calculated and terms of lease etc.?"
5. Mr Fontana replied on 2 August 2018, advising that his calculation was "based on a fee of $250 per square metre for the total area i.e. 1198sqm".
6. Irrespective of whether Mr Kostura expressed a desire to "fix all costs" in his discussion with Mr Fontana on 1 August 2018, there was no mention of either outgoings or of fixing the amount of outgoings in their subsequent communications referred to above.
7. Mr Kostura and Mr Fontana met in person on 6 August 2018. Mr Kostura gave evidence that, during that meeting, he said to Mr Fontana: "We have been operating on a basis where the outgoings remain the same and they have been fixed since 2010 and rent is set so that the total payable represents around market value on a $ per square metre basis. The landlord wants the rent to be kept high so that if they were to sell, the higher rent would help to increase the sale price. I'm mentioning this because I want to ensure transparency in the negotiations. Every time there's been a rent negotiation, I prepare a table with a break up of the figures including the outgoings which remain the same for the whole term. I will first send you the rent figures we propose. … In the past, on the lease negotiations we have not been prepared to give the landlord an open cheque book on the outgoings which have not been reviewed and we will only enter into a new lease if the outgoings amounts stay the same."

1. It appears that Mr Liu did not provide instructions about this proposal for some time. On 19 October 2018, Mr Fontana re-forwarded his 4 September 2018 email to Mr Liu and asked him to "confirm if you agree to the tenant's proposal".
2. In light of the evidence of the email correspondence between Mr Fontana and Mr Liu on 4 September and 19 October 2018, it is highly improbable that Mr Fontana told Mr Kostura on 4 September 2018 that they had "a deal" on the basis of Mr Kostura's 3 September 2018 spreadsheet. I reject Mr Kostura's evidence to that effect and find that no such conversation occurred. I find that the position as at 4 September 2018 was that Mr Kostura had communicated a willingness to agree to the rents set out in Mr Fontana's email to Mr Liu, and that Mr Fontana was awaiting instructions from Mr Liu.
3. It was not until 23 January 2019 that Mr Pun sent an email to Mr Kostura and Mr David Clear of Sharvain attaching the proposed new lease for Unit 6 and Unit 7 for their review and consideration. There followed correspondence between the parties in relation to the provision of certificates of currency for the insurance policies that the lease required Sharvain to take out, the return of the bank guarantee that Sharvain had provided under the 2016 lease, and the provision of a new bank guarantee for the 2019 lease. The lease was ultimately executed in late March 2019. It was for a term of three years commencing on 1 March 2019 and expiring on 28 February 2022 (the 2019 lease).
4. As Mr Pun identified in his affidavit sworn on 28 May 2021, the rent payable under the 2019 lease was consistent with Mr Fontana's 4 September 2018 email to Mr Liu, not with Mr Kostura's document referred to at [88]-[89] above about which he claimed to have concluded "a deal" with Mr Fontana. That provides further support for my finding that Mr Fontana did not tell Mr Kostura that they had a deal on the terms of Mr Kostura's "attached lease break up" referred to at [89] above. The rent payable in the first year of the 2019 lease was $290,217.00 (plus GST), which equates to $242.00 per square metre on the basis that the total area of the premises was 1198 square metres. [1] The provisions of the 2019 lease concerning outgoings were in the same terms as the 2010 leases, the 2013 leases, and the 2016 lease referred to above.
5. Clause 25.01 of the 2019 lease contained a guarantee and indemnity by Mr McSorley in favour of the landlord in the same terms as the 2010, 2013, and 2016 leases referred to above

June - August 2019: Dispute about past and future outgoings culminating in termination of the 2019 lease

1. On 25 June 2019, Mr Pun of Black Diamondz Group sent an email to Sharvain providing an estimate of $117,851.61 for outgoings for the forthcoming period from 1 July 2019 to 30 June 2020, and stating that the monthly outgoings instalments payable by Sharvain for Unit 6 and Unit 7 would therefore increase to $9,820,97. Mr Pun's email also contained a demand for Sharvain to pay outgoings adjustments in respect of the periods from 1 July 2018 to 30 June 2019 and from 1 July 2017 to 30 June 2018. Mr Pun acknowledged that there had not been a review of actual outgoings against estimated outgoings "for many previous years (maybe none at all since the Tenant's first lease year)" and stated that TLA and TLR reserved their rights to claim outgoings adjustments for periods prior to 1 July 2017. Mr Pun's email attached invoices for rent and the increased monthly amount for estimated outgoings for July 2019, together with invoices for outgoings adjustments for the periods from 1 July 2018 to 30 June 2019 and from 1 July 2017 to 30 June 2018.
2. Mr Kostura replied to Mr Pun's email later that same day, stating: "Thanks Luke - we will review this but just as I see it, the Land Tax should not be included in the outgoings … please check it at your end. Also please provide us copies of Council Rates and Strata Levies etc for our records. Thank you."
3. Mr Pun replied to Mr Kostura by email a short time later that date with a Dropbox link to all outgoings records that he had relied on in calculating the adjustments for the 2018/2019 and 2017/2018 periods. Mr Pun's email also noted that the terms of the lease had always defined outgoings as including land taxes.
4. Mr Kostura replied to Mr Pun by email on 27 June 2019, stating: "Luke As Sabrina has said, we have been a 'dream tenant' for almost 15 years so please respect this and be reasonable, perhaps consult with Sabrina on the past dealings. OK?"
5. Mr Kostura gave evidence that he telephoned Mr Pun at about the time that he sent the email referred to immediately above, and that they had a conversation to the following effect: [Mr Kostura] "We have been paying the agreed amounts. There is 13 years of precedence about how we did business with the Landlord and how the leases were set up, interpreted and invoices paid for. We pre-determined and agreed the rent and outgoings as a total cost for each lease period and both parties complied with what was agreed. We budget for business costs and if we had known the arrangements would change and outgoings would be increased like this, the total amount of payments under the lease would be well above the market value and we would not have proceeded with the lease - it's as simple as that. [Mr Pun] That's not what the lease says. It's your fault that you were not paying the correct amounts. You should have enquired. [Mr Kostura] We relied upon what was said in our lease negotiations for each term, including showing the amounts for outgoings that would be payable in a table. You should have told us after the change of ownership and before the lease started. You're acting as an extortionist. How can you claim $300,000 for all these previous expired leases? It's both commercial and morally wrong and simply unacceptable. [Mr Pun] I don't care and if it comes to it, unless you pay what we ask you to, we will remove you from the premises and take legal action to recover all due moneys no matter what."

The Landlords reserve their rights to all other unadjusted Outgoings years."

1. The total amount of the invoices attached to Mr Pun's email was $310,847.00 (including GST). Mr Pun's email also included Dropbox links to what he described as the outgoings records for the 2016/2017 and 2015/2016 years.
2. I note that the period described as the 2018/2019 "Outgoings Year" in the list of outgoings adjustments invoices in Mr Pun's email in fact comprised the final outgoings year under the 2016 lease (being the period from 1 July 2018 to 28 February 2019) and the first outgoings year under the 2019 lease (being the period from 1 March 2019 to 30 June 2019). The 2017/2018 and 2016/2017 periods referred to in Mr Pun's email refer to outgoings years that fell wholly within the term of the 2016 lease between TLR and Sharvain, and that each of those years expired before TLR transferred the premises to TLA. The 2015/2016 "Outgoings Year" referred to Mr Pun's email comprised the final outgoings year under the 2013 leases between TLR and Sharvain (being the period from 1 July 2015 to 28 February 2016) and the first outgoings year under the 2016 lease between TLR and Sharvain (being the period from 1 March 2016 to 30 June 2016).
3. Referring to clause 20.04(c) of "the lease", Mr Pun's email stated (emphasis in original): "The Landlord treats your email dated 2 July 2019 as an anticipated breach of the lease. You have 14 days under the lease to rectify the Tenant's outstanding monetary obligations to the Landlord, failing which the Tenant will be in a fundamental breach of the lease entitling the Landlord to a suite of rights, including termination of the lease. I suggest that you treat this issue seriously and urgently. Your previous email indicated that you require 30 days to be able to discuss with the Landlord on a legal basis. You do so at your own risk. … I suggest that you go back to all my previous emails on this issue and read them properly to understand the Landlords' position. If you want to go on a frolic of your own, disregarding commercial leases, disregarding the Landlords' rights, disregarding the law, then the Landlords will not hesitate to pursue all their rights. As a Tenant in the Landlord's property, I suggest you start talking in terms of the lease which governs the Tenant's obligations and show some respect to the same. How the Tenant deals with this matter moving forward will determine how the Landlords will exercise their rights. … For avoidance of doubt, all correspondences to the Tenant concerning the Outgoings adjustments are (where applicable) on behalf of both the current Landlord T & L Alexandria Pty Ltd and the former Landlord T & L Reich Investments Pty Ltd. For convenience, T & L Alexandria Pty Ltd is authorised by T & L Reich Investments Pty Ltd to collect all outstanding Outgoings under the previous leases."

"Letter of Demand We refer to the lease (commencing 1 March 2019) between you as Tenant and T & L Alexandria Pty Ltd (ACN 624 661 776) as Landlord, as well as a series of expired leases between you as Tenant and T & L Reich Investments Pty Ltd (ACN 081 629 156) as Landlord (hereby the "Leases"), you agreed to occupy Units 6 & 7/119-133 McEvoy Street, Alexandria, NSW 2015 ("Premises") subject to the terms and conditions of the Leases since the commencement of your occupation on or about February 2006. Clause 21.01 of the Leases provide that the payment of Outgoings pursuant to clause 4 is a fundamental term of the Leases. In my emails to you dated, 25 June 2019, 2 July 2019 & 5 July 2019, the Landlords have set out the particulars of their demand for the outstanding Outgoings accrued. You had 14 days from 5 July 2019 (being until 19 July 2019) to pay the outstanding Outgoings demanded by the Landlords. To date, you have failed and refused to reimburse to the Landlords the outstanding Outgoings accrued. You also engaged ALC Legal Solicitors to propose baseless propositions as to why you should not be bound by the terms of the Leases. The Landlords demand that the sum of $310,847 (for the Outgoings Years set out in my email dated 5 July 2019) be paid to the Landlords by 5:00PM Monday 12 August 2019 with time being of the essence, failing which the Landlords may exercise their rights to re-enter the premises, terminate the current lease and commence legal proceedings without further notice. The Landlords reserve all their rights, including the right to claim for outstanding Outgoings accrued in all previous lease years to the extent allowed by law. The Landlords also reserve their rights to claim indemnity costs against the Tenant."

1. On 5 August 2019, Sharvain paid TLA's invoice for the August 2019 rent and for the increased monthly amount for outgoings. Notwithstanding Ms Cordwell's 23 July 2019 letter referred to above, that payment was not expressed to be subject to any reservation of rights. Mr Pun gave evidence that Sharvain did not raise any issue with him about those invoices at the time that they were paid. Mr Kostura gave evidence that the invoices were paid because he "considered that Sharvain should not risk being found to have been in breach of the lease". I infer from this that Sharvain was ready, willing, and able to comply with the 2019 lease, and that it had not formed a concluded view at that time that the landlord was estopped from increasing the estimated outgoings monthly payments going forward, as Ms Cordwell's 23 July 2019 letter had suggested.

Sharvain's relocation of its business

1. Mr McSorley and Mr Kostura gave evidence that, after vacating Unit 6 and Unit 7 at the end of August 2019, Sharvain relocated to premises at Silverwater in February 2020. Mr Kostura gave evidence that, in the intervening period, Sharvain had to relocate its materials and personnel into what he described as "temporary locations" at 302/60 Pitt Street, Sydney, 2/4a Huntley Street, Alexandria, 49-51 Riverside Road, Chipping Norton, and 56 Fitzroy Street, Marrickville. Sharvain's claim for loss of bargain damages includes a sum of $839,127.99 in respect of costs allegedly incurred in leasing or occupying these "temporary locations", and associated costs.
2. In his affidavit affirmed on 4 December 2020, as supplemented by his affidavit affirmed on 6 February 2023, Mr Kostura grouped those costs into the following seven categories.
3. The first category was described by Mr Kostura as rent and outgoings paid for premises at 302/60 Pitt Street, Sydney for a period of 12 months, totalling $221,026.00. In his 4 December 2020 affidavit, Mr Kostura deposed that Sharvain entered into that lease "to accommodate our office staff", and that Sharvain had been unable to negotiate a term of less than 12 months given the urgency with which it had required those premises.
4. A rather different picture emerged from Mr Kostura's evidence in cross-examination and from the lease document, which was tendered by the plaintiffs after Sharvain produced it in response to a call made during Mr Kostura's cross-examination. In short, Sharvain had entered into a lease of office premises at 301/60 Pitt Street for a term of three years commencing on 1 May 2019 and expiring on 30 April 2022. Sharvain had entered into a separate lease of the adjacent office premises - 302/60 Pitt Street - for a term of one year commencing on 2 August 2019 and terminating on 1 August 2020, with an option to renew for a further period thereafter expiring on 1 May 2022. Sharvain had taken up the lease of Suite 301 as a field project office for three projects that it was undertaking in the city. The term of the lease of Suite 302 commenced on 2 August 2019, and Mr Kostura could not recall how long prior to that commencement date Sharvain began negotiating that lease. Mr Kostura gave evidence in cross-examination that the period of the option to renew the Suite 302 lease was designed to coincide with the duration of the three city projects. Even after it moved into its Silverwater premises in February 2020, Sharvain continued to occupy Suite 302. Indeed, Sharvain exercised its option to extend the term of its lease of Suite 302 to 1 May 2022.

TLA's efforts to re-let Unit 6 and Unit 7

1. TLA leased Unit 6 to a new tenant on 1 November 2020, more than a year after Sharvain vacated the premises. Mr Pun has given evidence setting out his calculations that, if Sharvain had not terminated the lease, it would have paid a total amount of rent and outgoings of $614,002.71 in respect of Unit 6 for the period from 1 September 2019 to 28 February 2022. The total amount of rent and outgoings paid by the new tenant during the period from 1 November 2020 to 28 February 2022 was $267,531.73. On that basis, TLA claims loss of bargain damages in respect of Unit 6 in the amount of $346,470.98.
2. TLA leased Unit 7 to a new tenant with effect from 1 June 2021, almost two years after Sharvain vacated the premises. Mr Pun has given evidence setting out his calculations that, if Sharvain had not terminated the lease, it would have paid a total amount of rent and outgoings of $603,773.40 in respect of Unit 7 for the period from 1 September 2019 to 28 February 2022. The total amount of rent and outgoings paid by the new tenant during the period from 1 June 2021 to 28 February 2022 was $148,500.00. On that basis, TLA claims loss of bargain damages in respect of Unit 6 in the amount of $455,273.40, plus $21,925.20 in commission that TLA paid to a property agent for introducing the new tenant.
3. TLA initially relied on its existing agent, Black Diamondz Group, to market the premises to prospective new tenants. It is not in dispute that, at the time, Black Diamondz Group was predominantly a residential agency, and Unit 6 and Unit 7 were its only commercial listings. Mr Pun gave evidence that Black Diamondz Group listed the premises on its own website and on two other websites in September 2019, and also erected a leasing advertising signboard at the premises. Mr Michael Binskin, an experienced commercial property sales and leasing agent called by Sharvain, gave evidence to the effect that listings on the two other websites appeared to be basic listings rather than "elite" or "elite plus" listings. Basic listings appear further down the search results and are far less likely to be seen by prospective tenants. Mr Binskin was not challenged on these aspects of his evidence in cross-examination.
4. On 22 November 2019, Black Diamondz Group entered into a conjunction agency agreement with Savills (NSW) Pty Ltd. That agreement records the direction issued by Black Diamondz Group to Savills to market the premises for lease for a term of three years with an option for a further three years at a gross rent of $210,000.00 per annum (plus GST) for each unit. That equates to $350.00 per square metre (including outgoings). [3] Mr Binskin gave evidence that market rental for the premises as at September 2019 was in the range of between $260.00 and $300.00 per square metre, based on the gross rent payable for five comparable properties in the same area that were leased at various times during the period from October 2018 to February 2021, including one unit that leased in July 2019 within the same complex as Unit 6 and Unit 7 for a term of three years at a gross rent of $291.00 per square metre. Mr Binskin was not challenged in cross-examination about his evidence concerning the market rent.

Claims for determination

1. There are four groups of claims to be determined.

Claims to recover outgoings

1. TLA and TLR claim that Sharvain (as tenant) and Mr McSorley (as guarantor) are liable to pay to them amounts totalling $361,665.54, being the difference between the total amount of outgoings paid by Sharvain under the 2013, 2016, and 2019 leases, and the amount of the actual outgoings that TLR and TLA claim to have incurred, and for which they now claim to be entitled to reimbursement under clauses 4 and 21.01 of those leases and in accordance with the demands made on 27 July 2019 and 8 January 2020. During the course of the hearing, TLR abandoned its claim in respect of adjustments to outgoings under 2010 lease, accepting that a limitation period of six years applies under s 14(1) of the Limitation Act 1969 (NSW).
2. TLA and TLR claim that Sharvain (as tenant) and Mr McSorley (as guarantor) are liable to pay interest under clause 20.02 of each lease on the monies allegedly due to each of them in respect of outgoings.
3. There are three elements to Sharvain's defence to the outgoings claims.
4. First, Sharvain contends that clause 4 of the leases, properly construed, did not entitle TLR and TLA to make the demand in its letter dated 27 July 2019, or to make the further demands made on 8 January 2020 in respect of adjustments to outgoings for previous years. Sharvain contends that the 27 July 2019 demand did not even purport to be a demand for adjustment payments in respect of past outgoings years.
5. Second, and in the alternative, Sharvain contends that TLR and TLA had waived any right that they might otherwise be found to have had to make the demands purportedly made on 27 July 2019 and 8 January 2020.
6. Third, and in the further alternative, Sharvain contends that the doctrine of conventional estoppel operated to preclude TLR and TLA from making the demands purportedly made on 27 July 2019 and 8 January 2020. Sharvain's cross-claim includes a claim for a declaration that TLR and TLA are estopped from claiming a retrospective adjustment of outgoings in respect of previous leases. [4]
7. Mr McSorley also relies on those matters in his defence. In addition, Mr McSorley does not admit having executed the 2013 lease in respect of Unit 6. As I have recorded earlier in these reasons, neither party tendered an executed copy of the 2013 lease for Unit 6. The copy of the 2013 lease for Unit 7 that was tendered in evidence was not signed by TLR. It was submitted on behalf of Mr McSorley that he cannot be bound as guarantor to a document that has not been executed by the landlord. In response, it was submitted on behalf of TLR that the lease was clearly on foot during the three-year term from 1 March 2013, and it was likely that counterpart lease documents were executed and exchanged by the parties. It was submitted that Mr McSorley's guarantee is effective and enforceable against him in these proceedings notwithstanding the absence of evidence of a copy of the counterpart signed by the lessor.

Repudiation of the 2019 lease and claims for loss of bargain damages

TLA's claim

1. TLA claims that Sharvain repudiated the 2019 lease on or about 29 August 2019 by vacating the premises, returning the keys to TLA's managing agent, and ceasing to pay rent and outgoings thereafter. TLA claims that it accepted Sharvain's alleged repudiation, and thereby validly terminated the 2019 lease, on or about 19 September 2019 or 8 November 2019.
2. TLA claims loss of bargain damages comprising: 1. TLA's costs of re-leasing the premises; 2. the outgoings that TLA paid for the period after 31 August 2019 during which the premises were vacant, which TLA contends it would have recovered from Sharvain if the 2019 lease had remained on foot; and 3. the shortfall between the rent that would have been paid by Sharvain under the 2019 lease from 1 September 2019 had it remained on foot, and the rent that TLA in fact received during part of that period after it re-let the premises to new tenants.
3. TLA claims that Mr McSorley is liable to pay the amount of those loss of bargain damages under the terms of his guarantee and indemnity contained in the 2019 lease.
4. Sharvain denies that it repudiated the 2019 lease. As will be seen below, Sharvain contends that TLA repudiated the lease, and that Sharvain accepted that repudiation and validly terminated the lease on 29 August 2019.
5. In the event that Sharvain is found to have repudiated the 2019 lease, and TLA is found to have validly terminated it, Sharvain contends that TLA has failed to take reasonable steps to mitigate its loss.
6. Mr McSorley disputes that he is liable as guarantor, essentially for the same reasons that Sharvain denies the alleged repudiation and liability for the claimed loss of bargain damages.

Sharvain's claim

1. Sharvain claims that TLA repudiated the 2019 lease by asserting and threatening to exercise a right to re-enter the premises in the event that Sharvain did not pay the sum of $310,847.00 stipulated in the 27 July 2019 letter of demand, and by maintaining that assertion and threat even after being given an opportunity to withdraw it. Sharvain denies that TLR and/or TLA had made any valid demand under clause 4 of any of the leases for outgoings adjustment payments. I have identified the bases of that denial above. Sharvain therefore denies that its failure to pay the sum of $310,847.00 constituted a breach of the 2019 lease conferring on TLA a right to terminate that lease by re-entry, as Sharvain contends TLA threatened to do.
2. Sharvain claims to have accepted TLA's alleged repudiation and to have validly terminated the 2019 lease by written notice on 29 August 2019. In its cross-claim, Sharvain claims declarations to the effect that the 2019 lease was repudiated by TLA and validly terminated by Sharvain, and a declaration that it is entitled to the return of the bank guarantee provided pursuant to clause 26.01 of the 2019 lease.
3. Sharvain also claims damages for losses that it allegedly suffered by reason of TLA's repudiation of the lease, being relocation expenses and the value of its directors' time allegedly diverted from its ordinary business by reason of TLA's repudiation. [5]
4. TLA denies that its 27 July 2019 letter of demand and the associated correspondence communicated a threat to terminate the 2019 lease by re-entry unless Sharvain paid the sum of $310,847.00. TLA contends that the correspondence merely sought payment of that sum in respect of past outgoings, and reserved TLA's rights. TLA denies that this constituted a repudiation of the 2019 lease.
5. In the event that TLA is found to have repudiated, and Sharvain is found to have validly terminated the 2019 lease, TLA denies that the costs characterised by Sharvain as relocation costs were incurred as a consequence of Sharvain's termination of the 2019 lease.

Pallet racking and make good claims

1. TLA claims damages of $29,005.00, being the alleged cost of replacing pallet racking that TLA alleges had been installed by TLR in Unit 6 and Unit 7 prior to the commencement of the 2006/20007 leases, and that Sharvain removed without TLR's consent and failed to reinstate on termination of the 2019 lease.
2. TLA also claims damages of $27,700.00 for Sharvain's alleged breaches of its make good obligations under the 2019 lease in failing to carry out painting and gyprock repair works, and in failing to replace globes and repair power trays.
3. Sharvain contends that it was entitled to remove its own pallet racking, denies that it was required to reinstate any previous racking, and denies that it failed to comply with its make good obligations.
4. Mr McSorley denies any liability to TLA in respect of these claims, essentially on the same bases that Sharvain denies the claims.

Misleading or deceptive conduct claim

1. Sharvain claims to have entered into the 2019 lease in reliance on representations allegedly made by Mr Fontana as agent for TLR during the August and September 2018 negotiations to the effect that total outgoings payable by Sharvain over the three year term of the lease would be the same as the total sum of $117,972.00 that Sharvain had paid under the previous leases, and that TLR would not seek payment for outgoings adjustments in respect of previous leases and would not seek to revise its estimated outgoings for the 2019 lease that were payable by Sharvain in monthly instalments. Sharvain contends that TLA retained Mr Fontana of Black Diamondz Group as its agent after it acquired the premises in October 2018, that the true amount of actual outgoings for the premises was known or ought to have been known to TLA from that time, and that TLA did not advise Sharvain of the true amount of actual outgoings at any time before Sharvain entered into the 2019 lease. Sharvain claims that, in those circumstances, TLA's silence about the true amount of actual outgoings "allowed the rental and outgoings representations to stand unabated as a continuing representation held out to Sharvain as an inducement for it to enter into the 2019 Lease". Sharvain alleges that the alleged representations were misleading or deceptive in contravention of s 18 of the Australian Consumer Law. [6] Sharvain makes a suite of claims for relief, including a declaration pursuant to s 87 of the Competition and Consumer Act 2010 (Cth) that the 2019 lease was void ab initio, and a claim for damages in the sum of $14,396.74 (being the amount by which the July and August 2019 estimated outgoings paid by Sharvain exceeded the previous monthly outgoings invoiced amounts of $3,604.70).
2. TLA denies the alleged representations, and also contends that it did not know the true amount of the actual outgoings when it acquired the premises in October 2018.

Consideration and determination

1. After considering the evidence and all of the parties' submissions, I have determined that clause 4 of the leases, properly construed, did not entitle TLR and TLA to issue the demands made on 27 July 2019 and 8 January 2020, and that TLR and TLA are not entitled to recover the amount claimed in these proceedings in respect of outgoings. Sharvain has failed to establish the alleged misleading or deceptive conduct on which it claims to have relied in entering into the 2019 lease. TLA repudiated the 2019 lease by maintaining its assertion that it was entitled to terminate the 2019 lease by re-entry at any time after 12 August 2019 by reason of Sharvain's failure to pay the $310,847.00 sum demanded on 27 July 2019. Sharvain accepted that repudiation and validly terminated the 2019 lease on 29 August 2019. The Court should make a declaration to that effect, but Sharvain has failed to prove the losses that it claimed to have suffered as a result of TLA's repudiation and termination of the 2019 lease. TLA and Sharvain were discharged from further performance of their obligations under the 2019 lease, including Sharvain's make good obligations. Sharvain was entitled to remove the pallet racking.
2. Although I have considered all of the parties' written and oral submissions, I have not found it necessary to refer to every detail of those submissions in order to explain my reasons for those decisions.

Proper construction of clause 4

1. It is convenient to set out again the terms of clause 4, which were included in each of the leases: "4.01 YEARLY OUTGOINGS It is hereby expressly agreed by and between the parties hereto (and notwithstanding anything to the contrary herein contained) that in addition to the Yearly Rent hereby reserved the Tenant will in respect of each outgoings year pay to the Landlord in the manner herein mentioned on demand by way of reimbursement the Tenant's proportion of the yearly outgoings as set forth in item 17 of the reference schedule and a statement signed by the Landlord or the Landlord's managing agent or any duly authorised officer of the Landlord shall be prima facie evidence of the amount of such yearly outgoings PROVIDED ALWAYS where any outgoings year is less than twelve months the amount of the yearly outgoings for that outgoings year shall be the appropriate proportion on a daily basis of the yearly outgoings for that outgoings year of less than twelve (12) months. 4.02 ESTIMATE Prior to the commencement of each outgoings year the Landlord may estimate the yearly outgoings for that outgoings year and advise the Tenant of such estimated yearly outgoings payable by it and the Tenant shall pay the Tenants proportion of such yearly outgoings by equal monthly instalments on the days fixed for payment of instalments of the yearly rent. As soon after the expiration of each outgoings year as the necessary information is available to calculate the actual yearly outgoings in respect of that outgoings year the Landlord shall calculate such yearly outgoings and the amount of yearly outgoings actually payable by the Tenant in pursuance of this clause and the difference between the amount so paid by the Tenant and the amount paid by it in respect of instalments paid by the Tenant during such outgoings year shall be paid by the Tenant to the landlord or by the Landlord to the Tenant as the case may be to the intent that the Tenant shall have paid its proportion of the actual yearly outgoings for the outgoings year in question. Such payment by the Landlord or the Tenant shall be payable notwithstanding the fact that this Lease has in the meantime expired or been determined prior to such payment having been demanded or made. 4.03 SEPARATE RATES, TAXES AND SERVICES TO PREMISES The Tenant shall promptly pay any other charges, outgoings or assessments which may at any time during the term, or at any time thereafter in respect of the term, be separately levied or imposed on the land or any part thereof."

The substance of the demand made by "the Landlords" in July 2019

1. As stated earlier in these reasons, Mr Pun was employed by Black Diamondz Group, which was the property managing agent for TLR from about August 2018 and for TLA from about October 2018.
2. The letter of demand dated 27 July 2019, read together with Mr Pun's emails dated 25 June 2 July and 5 July 2019 (which were expressly referred to in the letter of demand), was for payment of the amount said to represent the shortfall between outgoings paid by Sharvain and actual outgoings in respect of: [10] 1. the final outgoings year under the 2013 leases between TLR and Sharvain (being the period from 1 July 2015 to 28 February 2016); 2. the first outgoings year under the 2016 lease between TLR and Sharvain (being the period from 1 March 2016 to 30 June 2016); 3. the second outgoings year under the 2016 lease between TLR and Sharvain (being the period from 1 July 2016 to 30 June 2017); 4. the third outgoings year under the 2016 lease between TLR and Sharvain (being the period from 1 July 2017 to 30 June 2018); 5. the final outgoings year under the 2016 lease between TLR and Sharvain, under which TLA became the landlord when it acquired the premises on or about 15 October 2018 (being the period from 1 July 2018 to 28 February 2019); and 6. the first outgoings year under the 2019 lease between TLA and Sharvain (being the period from 1 March 2019 to 30 June 2019).
3. However, the periods referred to in (1) and (2) above were described in Mr Pun's 5 July 2019 email, incorporated by reference into the 27 July 2019 letter of demand, as a single period - the 2015/2016 "Outgoings Year". The periods referred to in (5) and (6) above were also described as a single period - the 2018/2019 "Outgoings Year". Neither the 27 July 2019 letter of demand, nor the earlier correspondence referred to in the letter of demand, specified the amount demanded in respect of the separate periods in (1), (2), (5), and (6) above.
4. The demand set out in the 27 July 2019 letter was expressly stated to be made by TLR (through TLA as its agent, presumably in respect of the period up to 15 October 2018) and by TLA (presumably in respect of the period after 15 October 2018).
5. To the extent that it concerned the periods referred to in (1), (2), (5), and (6) above, the 27 July 2019 letter of demand was not issued in accordance with clause 4 of each relevant lease, properly construed, because it failed to identify the amount demanded by the landlord in respect of outgoings for a particular outgoings year under that lease. I reject the submission made on behalf of TLA and TLR that it was sufficient that Sharvain could have calculated the amounts demanded by the landlord in respect of each of the outgoings years referred to in (1), (2), (5), and (6) above. TLA and TLR did not adduce evidence identifying the contents of the Dropbox files to which links were provided in Mr Pun's 25 June 2019 and 5 July 2019 emails to Mr Kostura. Assuming (without deciding) that those Dropbox links gave Sharvain access to all of the documents that it would have required to undertake such calculations, clause 4.01 of each relevant lease entitled the landlord to make a demand for payment from the tenant. That clause did not entitle the landlord to require the tenant to formulate the demand.

The demands made by TLR and TLA in January 2020

1. I have referred at [134]-[137] to the signed demands issued by TLR and TLA in respect of outgoings on 8 January 2020.
2. For the reasons explained at [216] above, TLR was not entitled as at 8 January 2020 to issue those demands in respect of outgoings years under the previous leases up to and including 30 June 2018.
3. It remains to consider whether clause 4 of the 2019 lease entitled TLA to issue the demand on 8 January 2020 for any outgoings shortfall in respect of the outgoings year from 1 March to 30 June 2019, and in respect of the months of July and August 2019.
4. I have reviewed Mr Pun's evidence identifying the invoices issued to, and paid by, TLA in respect of outgoings for those periods. That documentary evidence reveals that all of those invoices had been issued to TLA by the relevant authority or supplier by 3 July 2019. There is no evidence suggesting that TLA required any information other than the invoices in order to calculate the total outgoings for the premises in respect of the outgoings year from 1 March to 30 June 2019. There is no evidence that the calculation of the actual outgoings for the premises for that outgoings year involved any difficulty or complexity once TLA had those invoices to hand. I accept that it was reasonable for TLA to wait for a period after the end of the months of July and August 2019 to ensure that all outgoings in respect of those months were known. The nature of the outgoings and the pattern of invoicing reveals that the outgoings were charges that invoiced to TLA as the landowner in advance (such as council rates and strata levies) or within a very short time after the relevant charges had been incurred or had been assessed (such as water rates, land tax, and repair bills).
5. On the basis of the evidence referred to above, I find that that the reasonable time within which TLA was entitled to make a demand for payment of any shortfall in respect of the outgoings year from 1 March to 30 June 2019 under clause 4 of the 2019 lease, construed as set out at [206]-[209] above, had expired by three months after the end of that outgoings year (i.e. by 30 September 2019). I further find that the reasonable time within which TLA was entitled to make a demand for payment of any shortfall in respect of the period between July and August 2019 expired within three months after 31 August 2019. It follows that the reasonable time for TLA to demand reimbursement for the outgoings set out in the signed statement and demand provided to Sharvain on 8 January 2020 had expired prior to that date, and the demand was not validly issued under clause 4 of the 2019 lease.

Conclusion in relation to landlords' claims to recover outgoings

1. For all of the reasons explained at [196]-[227] above, neither the 27 July 2019 letter of demand nor the 8 January 2020 demands were valid and effective demands under the leases, and TLA and TLR have failed in their claims to recover outgoings totalling $361,665.54 under the 2013, 2016, and 2019 leases.

Conventional estoppel and waiver

1. In view of my conclusions that neither the 27 July 2019 letter of demand nor the 8 January 2020 demands were valid and effective demands under the leases, it is not strictly necessary to address Sharvain's contentions in relation to conventional estoppel and waiver. I shall nevertheless record my views in relation to those contentions as briefly as possible, in case of any appeal.
2. The elements of conventional estoppel were articulated by Brereton J (as his Honour then was) in the following terms in Moratic Pty Ltd v Gordon, [12] which has been approved and applied by the Court of Appeal in many subsequent cases: [13] " … In common law conventional estoppel, it is necessary for a plaintiff to establish (1) that it has adopted an assumption as to the terms of its legal relationship with the defendant; (2) that the defendant has adopted the same assumption; (3) that both parties have conducted their relationship on the basis of that mutual assumption; (4) that each party knew or intended that the other act on that basis; and (5) that departure from the assumption will occasion detriment to the plaintiff …"
3. If the first four elements are established, the fifth element requires the plaintiff (or the party relying on the estoppel) to demonstrate that it would have acted differently but for the alleged common assumption. [14]
4. As formulated in closing submissions, Sharvain's conventional estoppel defence and cross-claim relied on the conduct of the 2010 lease negotiation and each subsequent lease negotiation, including TLR's failure to make any response to the tables prepared by Mr Kostura at the conclusion of each lease negotiation stipulating an amount in respect of outgoings over the three year term of the relevant lease, or setting out figures for what were described as "all inclusive" costs of the lease to Sharvain, and the fact that TLR invoiced Sharvain for the same monthly amount of outgoings throughout the terms of the 2010, 2013, 2016, and 2019 leases, and took no steps to calculate and adjust outgoings under clause 4 of those leases prior to June 2019.
5. Sharvain submitted that the matters referred to above demonstrate that it assumed at all times from and including the time of the negotiation of the 2010 leases that the terms of its legal relationship with TLR and TLA were that the amount payable to the landlord in respect of outgoings under the 2010, 2013, 2016, and 2019 leases was fixed in a sum equivalent to the monthly payments that Sharvain in fact made on account of outgoings, and that this amount paid for each outgoings year would not be reviewed or reconciled against actual outgoings for that year as contemplated by clause 4.02 of each lease. It is convenient to refer to this as the fixed outgoings assumption.

Alleged misleading or deceptive conduct in relation to the 2019 lease

1. Sharvain has failed to prove that Mr Fontana made the alleged representations on which its misleading or deceptive conduct claim is founded. For the reasons explained at [78]-[96] above, I have found that there was no discussion of outgoings between Mr Kostura and Mr Fontana during their August 2018 negotiations leading up to their meeting on 6 August 2018, that Mr Kostura did not say to Mr Fontana during that meeting that they had been operating on the basis that the outgoings remained the same and that outgoings had been fixed since 2010, that Mr Kostura did not say to Mr Fontana that Sharvain would only enter into a new lease if the outgoings amounts stay the same, and that Mr Fontana did not say to Mr Kostura that they had "a deal" on the terms of Mr Kostura's 3 September 2018 table. [24] Thus, the express representations pleaded by Sharvain were not made expressly.
2. I do not consider that the evidence supports a finding that representations to that effect were made impliedly, including by TLA not disclosing any revised amount of estimated outgoings to Sharvain before it entered into the 2019 lease.
3. Mr Kostura's June and July 2019 email correspondence with Mr Pun is inconsistent with the contentions that the alleged representations were made (expressly, or impliedly by non-disclosure), that Sharvain had relied on those representations in entering into the 2019 lease, and that Sharvain would not have entered into that lease if it had known the likely amount of outgoings. [25] I reject Sharvain's submission that Mr Kostura's evidence was "uncontradicted". His evidence was contradicted by his own contemporaneous correspondence.
4. The failure of TLR and TLA to adduce evidence from Mr Fontana does not assist Sharvain. The "rule" in Jones v Dunkel [26] does not operate to fill gaps in a party's evidence [27] or to permit the Court to accept evidence that is inherently improbable, even assuming that the absent witness would have given evidence that did not assist the party who failed to call that witness.
5. Sharvain bears the onus of proving the alleged conduct, and its alleged misleading or deceptive character. For the reasons explained above, Sharvain has not discharged that onus and it is not entitled to the declarations, damages, restitution, and other relief sought in its cross-claim in respect of the alleged misleading or deceptive conduct.

Repudiation of 2019 lease

1. The submissions made on behalf of TLA accepted that it was not entitled to terminate the 2019 lease on account of a failure by Sharvain to pay amounts said to be due for outgoings adjustments under previous leases. Contrary to TLA's submissions, that is precisely what TLA claimed to be entitled to do in July and August 2019, and threatened to do in clear and unambiguous terms, as I have explained at [217]-[222] above. TLA asserted that right, and made that threat, on 27 July 2019, [28] re-asserted that position on 26 August 2019, [29] and failed to withdraw the threat by close of business on 28 August 2019 notwithstanding the clear and succinct explanation set out in Ms Cordwell's 27 August 2019 email of the reasons why TLA had no entitlement to terminate the 2019 lease. [30]
2. I reject TLA's submissions that it was not obliged to respond to Ms Cordwell's 27 August 2019 email, and that Sharvain should have "let the issue go" and sought relief against forfeiture if and when TLA later terminated the 2019 lease in circumstances that Sharvain considered unlawful. In the context of TLA's earlier communications, TLA's failure to respond to Ms Cordwell's 27 August 2019 email would have conveyed to a reasonable person in Sharvain's position that TLA continued to assert that it was entitled to terminate the 2019 lease by re-entry on account of Sharvain's non-payment of the whole of the $310,847.00 sum demanded on 27 July 2019, and that TLA's threat to do so remained very much alive. The reasonable person would have understood that TLA's willingness to allow Sharvain to continue in possession of the premises was conditional upon TLA not deciding to exercise its asserted rights by re-entering the premises and terminating the lease, which TLA claimed to be entitled to do at any time without further notice to Sharvain. In my opinion, TLA thereby demonstrated its willingness to perform the 2019 lease only in a manner that was substantially inconsistent with TLA's grant of a lease of the premises to Sharvain for a term of three years, together with a warranty under clause 19.01 that Sharvain may "peaceably hold and enjoy the demised premises during the term … without interruption by the Landlord". That constituted a repudiation of the 2019 lease. [31] Sharvain was entitled to accept that repudiation and terminate the 2019 lease, which it promptly did on 29 August 2019 by the written notice referred to at [126] above. It is appropriate to make the declaration sought by Sharvain in prayer 8 of the cross-claim that it validly terminated the 2019 lease by written notice to TLA dated 29 August 2019. That declaration is likely to be of utility to Sharvain in demonstrating to its bank that Sharvain has no remaining obligations under the 2019 lease, and that there will therefore be no demand for payment made by TLA under the bank guarantee issued in respect of the 2019 lease.

Sharvain's claim for loss of bargain damages

1. I have discussed the evidence adduced by Sharvain in support of its claim for loss of bargain damages at [140]-[157] above. For the reasons there explained, Sharvain failed to discharge its onus of proving a causal connection between any component of that claim and its termination of the lease following its acceptance of TLA's repudiation on 29 August 2019. Further, Sharvain failed to adduce evidence that would provide a rational foundation for the Court to assess damages in respect of the claimed issues. Justice does not dictate that a figure be "plucked out of the air". [32]

Pallet racking

1. Clause 1.10 of the 2019 lease provided: "The 'Landlord's Fixtures and Fittings' means all the Landlord's fittings, fixtures, furnishings and chattels at the demised premises at the commencement of this Lease and includes but is not limited to the items mentioned in Item 20 of the Reference Schedule."
2. Item 20 of the Reference Schedule described the Landlord's Fixtures and Fittings as "partitioning and pallet racking".
3. I have found that Sharvain disposed of existing pallet racking and installed its own pallet racking in Unit 7 in about February 2006, with TLR's consent. I have also found that Unit 6 was devoid of any pallet racking before Sharvain installed its own custom-designed and custom-built racking in March 2007. Contrary to TLA's submissions, clause 11.06 of the 2019 lease did not require Sharvain to maintain the old pallet racking that TLR had installed in Unit 7 at some time prior to 2001 and that Sharvain had removed in February 2006 with TLR's consent. The pallet racking in Unit 6 and Unit 7 at the commencement of the 2019 lease, and upon termination of that lease, had been designed, built, and installed by Sharvain for the purposes of its trade conducted from the leased premises. It was a tenant's fixture, and so not did not come within the definition of "Landlord's Fixtures and Fittings" referred to above. The inclusion of "partitioning and pallet racking" in Item 20 of the Reference Schedule is an error. Sharvain was entitled to remove its racking on termination of the 2019 lease in accordance with clauses 20.07 and 22.02 of the lease and with established general law principles. [33]
4. If I had been persuaded that Sharvain had breached an obligation to maintain pre-2001 pallet racking during the term of the 2019 lease, and to reinstate that racking immediately prior to terminating the lease for TLA's repudiation, TLA's claim for damages would have failed because it adduced no evidence of the quantum of any loss suffered as a result of the alleged breach. TLA's evidence was limited to a quotation issued in November 2019 for $29,005.00 for the installation of a new pallet racking system in Unit 6 and Unit 7. As counsel for TLA properly conceded in closing submissions, there is no evidence that this quote was for pallet racking of a similar kind and quality to that which TLA alleged was in place in Unit 6 and Unit 7 prior to the 2006/2007 leases.

Make good

1. Upon Sharvain's election made on 29 August 2019 to accept TLA's repudiation and to terminate the 2019 lease, both parties were released from further performance of their obligations under the lease, although any rights that had accrued prior to that date remained enforceable. [34]
2. TLA submitted that Sharvain was nevertheless required to comply with clause 11.03 of the 2019 lease, which requires the tenant to redecorate the premises, including by painting, "prior to the end of the term or sooner determination of the Lease". It was submitted on behalf of TLA, without reference to authority and without any analysis of the proper construction of clause 11.03, that there are "various exceptions" to the established principle to which I have referred above "in relation to survival of necessary things that are required to be done", and that redecoration under clause 11.03 "will be one example".
3. I reject that submission. In my opinion, the words "sooner determination of the Lease" in clause 11.03 of the 2019 lease would not be understood by a reasonable businessperson to include termination of the lease in any and all circumstances prior to the expiry of the three-year term. Whilst such a construction is literally available, it would result in commercially absurd consequences. For example, it would require a tenant whose default has entitled the landlord to terminate by re-entry under clause 20.06 to redecorate before the landlord's termination, notwithstanding that the tenant is not entitled to prior notice of the landlord's intention to re-enter. More relevantly to the present case, it would require a tenant who elects to terminate the lease for the landlord's repudiation to pause and redecorate the premises before making or giving effect to that election, risking the redecoration and/or the delay being relied on by the landlord as an election by the tenant to affirm the lease. For those reasons, it is my opinion that the tenant's obligation to redecorate under clause 11.03 "prior to the end of the term or sooner determination of the Lease" applies in circumstances where the lease comes to an end by effluxion of time, or by the landlord exercising the right under clause 31.01 to determine the lease earlier by giving the tenant six months' notice during the final year of the three-year term.
4. It follows that Sharvain was not required by clause 11.03 of the 2019 lease to redecorate the premises before it gave effect to its election to accept TLA's repudiation and terminate the lease. On termination, both TLA and Sharvain were released from performance of executory obligations under the lease. In my opinion, Sharvain's obligation under clause 12.02 to make good the premises, including redecorating as described in clause 11.03, was one such executory obligation. I see no reason in principle for treating it otherwise, and no such reason was identified in TLA's submissions. The fact that Sharvain did not redecorate is one matter that would have needed to be taken into account in assessing Sharvain's loss of bargain damages as part of comparing the position that it was in following TLA's repudiation with the position that it would have been in the lease had been performed in accordance with its terms. No such comparison has been undertaken because, for the reasons that I have already explained, Sharvain has not proved any loss of bargain damages.

Claims against the guarantor

1. For all of the foregoing reasons, TLR and TLA have not established any liability on the part of Sharvain under any of the leases. It follows that their claims against Mr McSorley, as the guarantor, fail.

Sharvain's claim for return of bank guarantee

1. Clause 26.01 of the 2019 lease required Sharvain to furnish to TLA an irrevocable bank guarantee in favour of TLA issued by a Sydney trading bank in a form satisfactory to TLA, expressed to be enforceable against the bank without reference to Sharvain and notwithstanding any notice issued by Sharvain to the bank not to pay against the guarantee.
2. Contemporaneous email correspondence establishes that Sharvain provided to TLA on 17 May 2019 a guarantee issued by the Commonwealth Bank. The guarantee bears the date 14 May 2020. On the basis of the email correspondence, and given that Sharvain had terminated the lease on 29 August 2019, I assume that the reference to 2020 is an error and that the guarantee was in fact issued on 14 May 2019. The guarantee is expressed as an unconditional undertaking by the bank to pay on written demand any sum that may from time to time be demanded by TLA up to the maximum aggregate amount of $53,206.32, until such time as the bank receives written notice from TLA that the guarantee is no longer required, until TLA returns the guarantee to the bank, or until the bank pays TLA the whole of the guaranteed sum or such lesser amount as TLA may require.
3. Sharvain's submissions did not articulate a legal or equitable basis for its claim to an order (which it characterised as a mandatory injunction) requiring TLA to return the bank guarantee to the Commonwealth Bank. I decline to make that order. As I have already said, it will be open to Sharvain to rely on these reasons for judgment and the declaration that it validly terminated the 2019 lease in order to persuade the Commonwealth Bank that there is no longer any prospect of TLA making a demand for payment under the guarantee. If TLA were to make such a demand, notwithstanding the dismissal of its claims in these proceedings, Sharvain would have a claim for damages against TLA.

Observations in relation to matters not determined

1. As I have determined that TLA repudiated the lease, its claim for loss of bargain damages does not arise for determination. In case it may become relevant in any subsequent appeal, I record that the submissions made on behalf of Sharvain did not dispute the accuracy of Mr Pun's calculations referred to at [158]-[159] above. However, it was submitted that TLA had unreasonably failed to mitigate its loss by taking more than one year (in the case of Unit 6) and almost two years (in the case of Unit 7) to lease the premises to new tenants. It was submitted that, if Sharvain were found to have repudiated the 2019 lease (which it denies), then any loss of bargain damages in favour of TLA should be calculated as an amount equal to four months' lost rent and outgoings on the basis that the premises could reasonably have been leased to new tenants within four months.
2. If I had concluded that Sharvain repudiated the lease, I would have held on the basis of the evidence and my findings referred to at [158]-[168] above that TLA unreasonably failed to mitigate its losses by failing to engage an experienced commercial property leasing agent to market the premises from September 2019. On the basis of my findings at [168] above, I would have assessed TLA's loss of bargain damages as an amount equivalent to the rent and outgoings that Sharvain would have been paid under the 2019 lease during the period from September 2019 to January 2020, plus any difference (if there were any) between: 1. the amount of rent and outgoings that Sharvain would have paid under the 2019 lease from February 2020 to February 2022, on the one hand; and 2. the total of the following amounts, on the other hand: 1. a gross rent of $280.00 per square metre [35] that would have been paid by a tenant for Unit 6 from February 2020 to October 2020 in the counterfactual in which there was no unreasonable failure to mitigate; plus 2. the actual rent and outgoings paid by the new tenant of Unit 6 from November 2020 to February 2022; less 3. the value of any incentives provided by TLA to that new tenant of Unit 6 during the period from November 2020 to February 2022; plus 4. a gross rent of $280.00 per square metre [36] that would have been paid by a tenant for Unit 7 from February 2020 to May 2021 in the counterfactual in which there was no unreasonable failure to mitigate; plus 5. the actual rent and outgoings paid by the new tenant of Unit 7 from June 2021 to February 2022; less 6. the value of any incentives provided by TLA to that new tenant of Unit 7 during the period from June 2021 to February 2022.

Conclusion and orders

1. The orders of the Court are as follows: 1. Dismiss the plaintiffs' claims for relief against the defendants. 2. Declare that the cross-claimant validly terminated the lease between the first cross-defendant (as landlord) and the cross-claimant (as tenant) dated on or about 1 March 2019 of the premises known as Unit 6 and Unit 7, 119-133 McEvoy Street, Alexandria, by notice in writing given to the first cross-defendant on 29 August 2019. 3. Order that the cross-claimant's claims against the cross-defendants are otherwise dismissed.
2. I will hear the parties in relation to the costs of the proceedings.

Endnotes

1. See [82] above.
2. See [102]-[106] above.
3. Total rent of $420,000.00 (plus GST) for Unit 6 and Unit 7 divided by total area of 1198 square metres.
4. During the course of the hearing, Sharvain abandoned its pleaded defence and cross-claim relying on promissory estoppel: Tcpt, 20 February 2023, p 432(23-39).
5. During the course of the hearing, Sharvain abandoned its claim for damages in respect of loss of profits allegedly suffered as a result of TLA's repudiation of the 2019 lease and Sharvain's relocation: Tcpt, 20 February 2023, p 441(22-25).
6. Competition and Consumer Act 2010 (Cth), sch 2 - Australian Consumer Law, s 60.
7. Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640; (2014) 88 ALJR 447; (2014) 306 ALR 25; (2014) 7 ARLR 361; [2014] HCA 7 at [35] (French CJ, Hayne, Crennan, and Kiefel JJ) (citations omitted). See also Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd (2017) 261 CLR 544; (2017) 91 ALJR 486; (2017) 343 ALR 58; [2017] NSW ConvR 56-377; [2017] V ConvR 54-888; [2017] HCA 12 at [16]-[17] (Kiefel, Bell, and Gordon JJ).
8. Perri v Coolangatta Investments Pty Ltd (1982) 149 CLR 537; (1982) 56 ALJR 445; (1982) 41 ALR 441; [1982] HCA 29 at 149 CLR 543 (Gibbs CJ), 554 (Mason J), and 567-568 (Brennan J, Stephen J agreeing); Donau Pty Ltd v ASC AWD Shipbuilder Pty Ltd (2019) 101 NSWLR 679; [2019] NSWCA 185 at [99]-[111] (Bell P, Emmett AJA agreeing on that issue at [218]), and the authorities there referred to.
9. [2022] NSWSC 267.
10. See [113] above.
11. Gumland Property Holdings Pty Limited v Duffy Bros Fruit Market (Campbelltown) Pty Limited and Others (2008) 234 CLR 237; (2008) 82 ALJR 576; (2008) 244 ALR 1; (2008) 2 BFRA 865; [2008] ANZ ConvR 8-017; [2008] NSW ConvR 56-212; [2008] Q ConvR 54-691; [2008] HCA 10 at [67] and [74] (Gleeson CJ, Kirby, Heydon, Crennan, and Kiefel JJ), citing and quoting from P & A Swift Investments v Combined English Stores Group Plc [1989] AC 632; [1988] 2 All ER 885; [1988] 3 WLR 313; (1989) 57 P & CR 42; [1988] 43 EG 73; at AC 642 (Oliver LJ).
12. (2007) 13 BPR 24,713; [2007] ANZ ConvR 198; [2007] NSW ConvR 56-172; [2007] NSWSC 5 at [32].
13. Ryledar Pty Ltd v Euphoric Pty Ltd (2007) 69 NSWLR 603; [2007] Aust Contract Reports 90-254; [2007] NSWCA 65 at [200] (Tobias JA, Mason P and Campbell JA agreeing) (Ryledar); Franklins Pty Ltd v Metcash Trading Ltd (2009) 76 NSWLR 603; (2009) 264 ALR 15; (2009) 4 BFRA 351; [2009] NSWCA 407 at [572] (Campbell JA) (Franklins); TMA Australia Pty Ltd v Indect Electronics & Distribution GmbH [2015] NSWCA 343 at [115] (Meagher JA, Macfarlan JA and Bergin CJ in Eq agreeing); Miller Heiman Pty Ltd v Sales Principles Pty Ltd (2017) 94 NSWLR 500; [2017] NSWCA 106 at [42]-[44] (Macfarlan JA, McColl JA and Sackville AJA agreeing) (Miller Heiman).