Transpacific Cleanaway Limited v Foyer

EX TEMPORE Judgment 1Yoram and Miriam Foyer own a site in Botany that was approved ("Original Consent") as a waste reception recycling and transfer station. Transpacific Cleanaway Ltd ("Transpacific") was the tenant of the site pursuant to an assignment of a lease terminating on 12 November 2011. The lease contained a further three-year option exercisable by notice by 12 August 2011. In accordance with the lease, Transpacific provided Mr and Mrs Foyer with a bank guarantee for $66,000 as a security deposit. The rental was $240,000 per annum exclusive of GST. 2From 2009 and perhaps earlier, Transpacific were using the site not as a processing facility, but only as a storage site for their containers and other equipment. 3In 2008, without the knowledge of Mr and Mrs Foyer and without the consent of the local council ("Council"), Transpacific installed a weighbridge on the site. In January 2009, the Council issued a "Notice of Intention to Issue an Order for the Removal of the Weighbridge" and Mr and Mrs Foyer issued a "Notice of Breach of the Lease" to Transpacific. 4Rather than remove the weighbridge, Transpacific desired to seek approval from the Council for its use. Mr and Mrs Foyer consented to this course. An application was lodged with the Council in 2009 for consent to the continued use of the weighbridge and also an amendment to a condition of the Original Consent for the use of the site as a waste disposal facility. Applications to this effect were lodged in March and August 2009. 5By February 2010, the applications remained undetermined. Transpacific was considering subleasing the site or assigning its lease. A company known as Watts Waste on 4 February 2010 offered rent of $17,000 per month, apparently on a month-to-month sublease. 6On 17 February 2010, Council consented to the development applications approving the use of the weighbridge. However, the consent was granted on terms that restricted larger vehicles from accessing the site. Similarly, the Council approved the amendments to the Original Consent on terms that larger vehicles were precluded from accessing the site. The imposition of these conditions would have an impact on the use of the site as a waste disposal facility. 7Watts Waste decided not to proceed with the sublease because of the larger vehicle restrictions. Further, Transpacific's lawyers stated in August 2010 that the consents meant that, "Our client is unable to use the site for its permitted use, being a recycling and waste transfer station." 8Understandably, Mr and Mrs Foyer were concerned. It was not in contest that Transpacific had acted in breach of the lease in installing the weighbridge. Transpacific's attempt to remedy this by obtaining consent had resulted in a greater problem, depriving Mr and Mrs Foyer of the benefit, or the full benefit, of the Original Consent. 9Later in 2010, Transpacific repeatedly requested that Mr and Mrs Foyer apply to Council to delete the conditions of the consents on terms that the weighbridge was removed. Transpacific agreed to meet the cost of such an application. 10Transpacific also, on 13 October 2010, notified Mr and Mrs Foyer that it did not wish to renew the lease and would vacate the premises by 12 November 2011. 11Mr and Mrs Foyer agreed to the proposal for a further development application for removal of the weighbridge and the withdrawal of the consents that were related to its approval, including the removal of the vehicle restrictions. That "modification application" was lodged on 8 or 9 November 2010 on behalf of Mr and Mrs Foyer, and it appears that the associated costs were met by Transpacific. 12On 10 June 2011, Mr and Mrs Foyer retained agents to market the site for sale or lease and Internet advertising commenced. The site was advertised as a "Fantastic Waste Management Facility" and included reference to the waste management facility being "approved". At this stage, Council had not determined the modification application. 13In late August 2011, Transpacific's lawyers sought approval from Mr and Mrs Foyer to appeal against the refusal of Council (by reason if its failure timeously to determine the application) and to seek expedition to have the matter heard and determined by 12 November 2011, the termination date of the lease. 14Mr and Mrs Foyer consented to this course in late August 2011 but it became unnecessary because on 1 September 2011, Council consented to the modification application. By this consent, the vehicle restrictions were removed on terms that the weighbridge be removed. The weighbridge was removed by Transpacific on about 10 October 2011. In September and October 2011, Mr and Mrs Foyer undertook an intensive six-week marketing campaign to sell the property at auction on 27 October 2011. The property was passed in at auction. On 10 November 2011 Transpacific vacated the premises, shortly prior to expiration of the lease. 15The lease provided that the bank guarantee was to be refunded to the lessee on termination of the lease, although the lessor was entitled to deduct, "any amount that may be payable...as a result of any default under this Lease." Mr and Mrs Foyer retained the bank guarantee. There was no suggestion in the evidence that its return was requested on termination. 16On 13 February 2012, without notice to Transpacific, Mr and Mrs Foyer called upon the bank guarantee and $66,000 was debited from Transpacific's bank account on 23 March 2012. Transpacific commenced proceedings in the Local Court for the $66,000. Mr and Mrs Foyer defended those proceedings and cross-claimed for damages arising from the breach of the lease. The claimed sum is $120,628.30 after credit for the bank guarantee sum of $66,000. It comprises unpaid outgoings, legal costs and a lost opportunity to market the premises. 17Initially the claim by Mr and Mrs Foyer was pleaded as a lost opportunity to relet the premises in the period 13 September 2010 to 10 November 2011, but the claim was modified in a schedule of damages exchanged prior to the trial. In substance Mr and Mrs Foyer claim they lost the opportunity to successfully market the premises in the period October 2010 to 1 September 2011. The premises were not relet until January 2013, and Mr and Mrs Foyer claim approximately $170,000 under this head of damage. 18Because of the size of the cross-claim, the proceedings were transferred to this court. The claim for legal costs and unpaid outgoings was not disputed by Transpacific. Deducting those amounts from the bank guarantee would leave the sum of $47,341, which Transpacific says is owed plus interest and costs. 19Accordingly, the issue before me, as the parties agree, is: "What is the measure of damages to which [Mr and Mrs Foyer] are entitled by reason of [Transpacific's] conduct in installing an unauthorised weighbridge at the leased premises, in admitted breach of the lease?" 20Mr and Mrs Foyer claim, as damages for Transpacific's breach of installing the weighbridge, a sum equivalent to ten months' rent at the monthly rental rate achieved in the January 2013 lease. 21The argument that this rent (or this amount) was lost as a result of the weighbridge installation seems to be as follows. 22First, installation of the weighbridge caused the vehicle restrictions to be imposed. 23Second, the vehicle restrictions impacted adversely on the value of the property and its attractiveness for rental as a waste facility. 24Thirdly, that adverse impact continued for the period October 2010 until September 2011. The selection of these dates appears to be based on the two circumstances. First, that on 13 October 2010, Transpacific informed Mr and Mrs Foyer that it would not be renewing the lease but would be vacating the premises by the terminating date of 12 November 2011, and secondly, that on 1 September 2011 Council removed the vehicle restrictions. 25Fourthly, Mr and Mrs Foyer would have actively marketed the premises for lease from late October 2010. 26Fifthly, the period Transpacific took to obtain a lease after 1 September 2011 (16 months, to January 2013) was the period it would have taken Mr and Mrs Foyer to obtain a lease had they commenced marketing the premises - without any vehicle restrictions - in October 2010. Mr and Mrs Foyer are said to have lost the chance to market a waste facility unaffected by the vehicle restrictions. This chance is valued at ten months' rent on the basis that a tenant would have been secured 16 months after October 2010, namely, March 2012. So rent for a period of ten months (from March 2012 to January 2013 when a tenant was secured) was said to have been lost. 27Another simpler way of expressing this proposition is that there was approximately a ten-month delay in advertising from October 2010 to September 2011, so it is said, which cost Mr and Mrs Foyer ten months' rent from March 2012 to January 2013. 28Sixthly, the market rental at all times was approximately $208,000 per annum, the rent obtained by Mr and Mrs Foyer under the new lease commencing 20 January 2013. 29Seventhly, thus, "but for" the breach of the lease and the installation of the weighbridge, or alternatively, had the lease been performed, Mr and Mrs Foyer would have secured an additional ten-twelfths times $208,000, or $173,333. 30Of these seven propositions, I readily accept the second and the third. 31Transpacific appeared to challenge whether the property was significantly adversely affected by the vehicle restrictions, but this challenge must fail. There was evidence that waste disposal facilities commonly use trucks in excess of the limit imposed by the Council, that Watts Waste decided not to proceed with a sublease because of the vehicle restrictions and, most significantly, Transpacific itself stated that the Council's action precluded the site being used as a waste station. 32The events giving rise to the dates in the third proposition were not in dispute. 33The other propositions are not so obvious. As to the first, it was not the unauthorised weighbridge that was the immediate cause of the vehicle restrictions, but the applications to Council. Absent the applications, no vehicle restrictions would have been imposed, at least so far as the evidence discloses. The installation of an unauthorised weighbridge did not compel an application to Council. An alternative was to remove the weighbridge in accordance with the notice from Council in January 2009. This would have ended the problem. 34But Mr and Mrs Foyer submit that but for the weighbridge, there would be no application, and thus no vehicle restrictions. This is far from certain. If Transpacific wanted a weighbridge and Mr and Mrs Foyer were prepared to consent to an ex post facto application for its approval, it is not clear why I should infer that no application would have been lodged in the hypothetical circumstance where the contract was performed because no weighbridge was installed. 35Further, it could also be said that Mr and Mrs Foyer's consent to the development applications caused the vehicle restrictions. But for the consent of Mr and Mrs Foyer, the applications would not have proceeded and the vehicle restrictions would not have been imposed. The consent of Mr and Mrs Foyer to the development applications was more immediately connected to the vehicle restrictions (imposed under the Council's approval of those applications) than was the unauthorised construction of the weighbridge. The defendants' submissions rely on evidence that the vehicle restrictions "were as a direct result of the application to regularise weighbridge" (my emphasis) which rather underlines the significance of the application as a cause of the restrictions. 36The High Court in Wallace v Kam [2013] HCA 19 have recently criticised the use of "traditional expressions of causation" such as "in the conclusory language of 'directness', 'reality', 'effectiveness' and 'proximity'" (at [11] and [23]) at least in respect of liability in negligence. The term "immediate" that I have used above may well be similarly inappropriate in a contractual context. Nevertheless, it is apparent that the application of a "but for" test appears to render both Transpacific's breach and Mr and Mrs Foyer's consent as causative of the vehicle restrictions. This raises questions about the utility or sufficiency of a "but for" test in this context. 37The "but for" test has never been and is not sufficient to establish causation in negligence: see Wallace v Kam at [11] to [16] and s 5D of the Civil Liability Act 2002. Nor is it sufficient to establish causation in contract. The general principle is that the innocent party is to be put in the same position as he or she would have been in had the contract been performed. See Robinson v Harman (1848) 1 Exch 850 and Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64. But this general principle is limited by the rule in Hadley v Baxendale (1854) 9 Exch 341; (1854) 156 ER 145, see European Bank Ltd v Robb Evans of Robb Evans & Associates [2010] HCA 6 at [11]-[13]. 38European Bank v Evans at [13] summarises the two limbs of Hadley v Baxendale as allowing "damages as arise naturally, that is, according to the usual course of things, from the breach of contract" and "such damages as may reasonably be supposed to have been in the contemplation of both parties concerned at the time they made the contract as the probable result of the breach". There the HighHighHig Court endorsed the view expressed by Mason CJ and Dawson J in Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64 at p 92; [1991] HCA 54, that the two limbs may represent a single principle, the application of which depends "on the degree of knowledge possessed by the defendant". As Lord Reid said in Koufos v C Czarnikow Ltd (The Heron II) [1969] 1 AC 350 at p 385, reasonable foreseeability in tort allows "a much wider liability" than does the Hadley v Baxendale test for recoverability of damages in contract. 39In the present case, it cannot be supposed that Transpacific or indeed any party, contemplated that the unauthorised construction of a weighbridge would result in a limitation on vehicles entering the site. Nor do I think it is reasonable to suppose that an unauthorised construction that was removed some months prior to the end of the lease might reasonably cause a postponement in the obtaining of a further tenant or impact adversely on the prospect of obtaining one. 40The usual damage for a case such as this is for the cost of removing the unauthorised structure. As the High Court held in Tabcorp Holdings Ltd v Bowen Investments Pty Ltd [2009] HCA 8 at [15]: "So here, the Landlord was contractually entitled to the preservation of the premises without alterations not consented to; its measure of damages is the loss sustained by the failure of the Tenant to perform that obligation; and that loss is the cost of restoring the premises to the condition in which they would have been if the obligation had not been breached." 41It follows that the vehicle restrictions, do not ordinarily flow from the unauthorised weighbridge, and thus are not damage caused by the admitted breach of contract. 42As to the fourth proposition, Mr Foyer gave evidence that he would have actively marketed the property from October 2010 had the vehicle restrictions not been in place. Initially, I was minded to reject this evidence, but it was ultimately allowed in accordance with the decisions in La Trobe Capital & Mortgage Corporation Ltd v Hay Property Consultants Pty Ltd [2011] FCAFC 4 at [51]-[60] and Seltsam Pty Ltd v McNeill [2006] NSWCA 158 at [115]-[117]. Whilst I have some doubt about whether evidence of what a witness would do in a hypothetical situation is properly to be described as evidence of the person's state of mind, as the authorities appear to state, (other than the person's state of mind while in the witness box or when swearing or affirming the affidavit) the authorities bind me and so the evidence was admitted (compare s 5D(3) of the Civil Liability Act 2002). 43The weight to be given to this evidence is another issue, however. It is, at least in the form it was given, a self-serving conclusion of what Mr Foyer would have done in circumstances he did not face. And there is other evidence to the contrary. Mr Foyer gave evidence that in November 2011, "I needed Transpacific completely out of the property to market it", suggesting the unsurprising proposition that vacant possession may be necessary to effectively market this property and that he could not market the property in 2010 and 2011 whilst Transpacific were in occupation. 44Further, I think I can infer that advertising for a tenant when the property is not available for a lengthy time, in this case about 12 months from October 2010 to September 2011, might not be productive, and there is no evidence to suggest that it would be. 45But Mr and Mrs Foyer submitted that the property was effectively available for lease in 2010 immediately. It is true that Transpacific was considering a sublease or assignment, but it remains uncertain whether, if they were not in breach, Transpacific would have agreed to depart the property on demand, especially if it remained obligated to pay the likely gap between the rent under its lease and the lower rent paid by any alternative tenant or subtenant. 46I would also suppose, in the absence of evidence, that Mr Foyer would act prudently on the advice of experts in the field, and there is no suggestion that any expert did or would advise Mr Foyer to expend resources marketing the property when a long period remained before it was certainly available. 47Further, the contract did not even guarantee Mr Foyer would have the property available for lease in November 2011, as Transpacific had a three-year option exercisable by notice by 12 August 2011. 48The significance of this option provision may be diminished by the written indication given by Transpacific in October 2010 that it would not renew the lease. Whether this same notice would have issued in the hypothetical context of the lease being performed with no weighbridge being installed or no vehicle restriction in place, as Mr and Mrs Foyer contend, remains uncertain. 49The fifth proposition, that if advertising had commenced in October 2010, a new lease would have been obtained earlier, in about March 2012, is said by Mr and Mrs Foyer to be supported by two matters: first, that a lease took 16 months to obtain after the vehicle restrictions were removed; and secondly, because Watts Waste was interested in the property in February 2010. 50As to the latter matter, the interest of Watts Waste, Mr and Mrs Foyer have now secured a three-year lease from January 2013. They also had a tenant, Transpacific, from October 2010 to 12 November 2011. The evidence indicates that Watts Waste were only interested in a month-to-month arrangement ending, at the latest, in November 2011. As the rental was a lesser sum than that paid by Transpacific, there can be no suggestion that a lease to Watts Waste would have generated a greater rental for the period up to 2013. 51That leaves the matter of the 16-month period after the vehicle restrictions were removed until a new lease was obtained. 52There was no evidence that this period was needed to obtain a tenant or a delay of this length after commencing advertising was to be expected. 53Mr and Mrs Foyer obtained a prospective tenant almost immediately after the expiry of the lease, but Mr Foyer rejected the tenant as a "civil" company who would not properly manage the site. The tenant that ultimately leased the property in January 2013 became aware of the site in late 2012. Neither of these matters supports the suggestion that a 16-month advertising period from October 2010 was necessary or would have secured a tenant earlier (and offset the additional advertising expense). That a tenant was not found until about 16 months after advertising commenced in September 2011 is not evidence that an equivalent tenant would have been found 10 months earlier had advertising been commenced in October 2010. 54Mr and Mrs Foyer quoted an asking figure of $249,000 per annum to one prospective tenant that did not result in a lease. I was otherwise not provided with any details of the marketing during late 2011 and 2012. Whether no tenant was obtained in late 2011 through 2012 because too high a rental was being sought, or because the property was not effectively marketed, or because the market for the lease of waste disposal sites was slow, or because of the need for a 16-month advertising period, or because satisfactory prospective tenants were rejected, to me remains a matter of speculation. The tenant that ultimately leased the property was looking for a property from 2011 but, as I said, did not become aware of Mr and Mrs Foyer's site until late 2012. 55The other proposition relied upon was that the market rental for the property during the period it was vacant was $208,000 per annum. This amount seems reasonable, given that the annual rental of $240,000 for the lease entered in November 2006 and $208,000 for the lease entered in January 2013. 56Mr and Mrs Foyer contended that it is sufficient to establish their entitlement to damages equivalent to the lost rent if I am satisfied that the vehicle restrictions were a contemplated result of the unauthorised weighbridge. I do not accept this proposition. They must also show that the vehicle restrictions caused the lost rent. Even if the proposition were correct, it would not assist them because I am not persuaded that the vehicle restrictions were a contemplated result of the unauthorised weighbridge. 57Further, it seems to me that once the approval of the weighbridge occurred in February 2010, the breach by Transpacific was remedied. At that time, there were no unauthorised structures and no other breach was identified. 58Further, it might be doubted whether Transpacific had any legal (as distinct from perhaps an ethical) obligation to take steps to remove the vehicle restrictions. Those restrictions were imposed by the Council in response to an agreed approach by Transpacific and Mr and Mrs Foyer in lodging the development applications. 59As I have noted, advertising did commence in June 2011. There was no evidence that it was because of the vehicle restrictions in place until 1 September 2011 that the marketing of the property was unsuccessful until January 2013. The advertising, whether before or after 1 September 2011, so far as the evidence revealed, made no reference to the ability or lack of it for large trucks to access the property. 60In the result, I do not think the vehicle restrictions were caused by the breach in the legal sense explained in Robinson v Harman and Hadley v Baxendale, even if the unauthorised weighbridge was a necessary condition of the vehicle restrictions, of which I am not persuaded. 61Further, I am not satisfied that the lost rent during the vacancy period from November 2011 to January 2013, or any part of it, was caused by the vehicle restrictions or by the asserted inability to advertise during the year prior to November 2011. 62Nor am I persuaded that Mr and Mrs Foyer were deprived of any opportunity of value by reason of the vehicle restrictions, given the existing lease and the time those restrictions were removed. 63Transpacific raised a further argument. It is submitted that lost opportunity damages are not recoverable unless specifically adverted to in the lease. No authority was cited for this proposition, and it is contrary to cases that allow damages where a breach of contract resulted from a lost chance to sell at a favourable time (see Cadoks Pty Ltd v Wallace Westley & Vigar Pty Ltd [2000] VSC 167 at [279]), to make a new contract (McCrohon v Harith [2010] NSWCA 67 at [113]) or to obtain better terms (Cade & Anor v Thomson Simmons & Anor [1998] SASC 6912 at [28]). Damages can be awarded for a lost commercial opportunity, which arises from a breach of contract (see Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64 at pp 92, 102-104, 118-119). Accordingly, I do not accept this argument of Transpacific. 64Mr and Mrs Foyer also argued that Hadley v Baxendale was a test governing remoteness of damage in contract, and remoteness was not pleaded. I can accept the first proposition, but I do not accept that a failure to mention "remoteness" in a defence to a cross-claim is any defect. Transpacific denied that the damages claimed by Mr and Mrs Foyer were recoverable. There was no surprise occasioned to Mr and Mrs Foyer by the argument of Transpacific. I am unaware of any authority that suggests that remoteness of damages is one of those matters that needs to be expressly and specifically pleaded before it can be maintained or that there is any bright line between causation and remoteness of damage. 65Accordingly, the plaintiff is entitled to judgment for the sum of $47,341 plus interest. The interest calculation at the pre-judgment statutory rates is almost exactly $5,000 for the period from 23 March 2012 to today. The date of 23 March 2012 was when the funds were withdrawn from Transpacific's account. Subject to one final matter, that is the amount of interest I propose to award. 66It is possible that some of the credited outgoings may have been paid earlier than 23 March 2012 and thus a small offset in this interest amount should perhaps be allowed. I have some evidence of invoices in relatively small amounts being paid by late 2011, but I received no submissions or evidence as to the date or dates the substantial outgoings were paid and, not knowing the date the outgoings were paid, it is difficult to calculate the appropriate setoff, although I would infer that the outgoings were presumably paid by or soon after the conclusion of the lease. At most, interest on $18,659 in outgoings for four months from November 2011 to March 2012 is about $435. I propose to reduce the interest by $341 and accordingly, the judgment sum is $52,000. 67As to costs, the parties, when asked, gave no reason why the usual rule in Uniform Civil Procedure Rule 42.1, that costs follow the event, would not apply. Accordingly, for these reasons the orders of the Court are: (1) Judgment for the plaintiff against the defendants for the sum of $52,000. (2) Cross-claim dismissed. (3) Defendants to pay the plaintiff's costs including the costs of the cross-claim. (4) Exhibits to be returned after 28 days.