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[2005] VCAT 1647
General information, not legal advice.
Victorian Civil and Administrative Tribunal
2005-08-12
Original judgment source is linked above.
Retail Tenancies List; Retail tenancy fish and chip shop; Tenant claims roof, floor and evaporative cooler not maintained in good repair as required by lease term implied by Section 25 Retail Tenancies Reform Act (as amended); Items in need of repair as alleged; Declaration made; Proceeding adjourned for hearing as to damages
1 The Tribunal declares that pursuant to the term implied into the lease between the parties with respect to the premises at 71 Pier Street, Altona, by virtue of Section 25 of the Retail Tenancies Reform Act 1998 as amended, the respondent is responsible for maintaining in good repair;
(a)
The roof of the premises;
(b)
The floor of the premises;
(c)
The door frames and walls in the men's and ladies' toilets of the premises;
(d)
The water evaporative cooler located on the roof of the premises.
2 Costs reserved.
3 Adjourned to directions hearing 9.30 am, 25 August 2005.
Mr Hanak of Counsel, instructed by Pryles and Co, lawyers
Mr C. Northrop of Counsel, instructed by Rigby Cooke, Lawyers
1 Westgate Battery Company Pty Ltd does not manufacture or sell batteries. It has no connection with artillery or with the crushing of rock or the recovery of ore from rock. In fact, it conducts a fish and fish and chip shop known as 'Krills Catch' at premises at 71 Pier Street, Altona. The company name seems to have little to do with its activities except that Altona is a western suburb of Melbourne. Westgate is tenant under a lease with a term of three years commencing 30 September 2002 and therefore concluding 29 September 2005. The landlord under the lease is the respondent in these proceedings, GCA Pty Ltd.
2 No. 71 Pier Street has operated as a fish and chip shop since January 1997. On 20 January 1997 GCA signed a lease for the premises with Sdregas Bros Pty Ltd. GCA had purchased No. 71 in 1996. At that time it was operated as a fruit shop. The tenant vacated and when Sdregas Bros took over, it stripped the shop and re-fitted it as a fish and chip shop. The lease with Sdregas was for a term of three years commencing 30 September 1996 with options for some five further terms of three years each. Sdregas Bros transferred its leasehold interest to Kiang Tcheng Fung and Lin Nhong Lay on 13 January 1999. These lessees entered into a further lease on 30 November 2002 which is the one under which Westgate is now in possession. The lessees transferred the lease to Felicks Nominees Pty Ltd with effect from 18 November 2002 and Felicks Nominees Pty Ltd transferred the lease to Westgate with effect from 14 July 2003. The 2002 lease was in the Law Institute form of Lease of Real Estate for Commercial Property, 2000 Revision. The lease itself bore date 10 November 2002. Clause 3.2 provided:
Except for fair wear and tear and subject to clause 3.4, the tenant must keep the premises in the same condition as at the start of the lease and properly cleaned, repaired and maintained. The tenant must also comply with all notices or orders affecting the premises which are issued during the term.
maintain in working order all plumbing, drainage, gas, electric, solar and sewerage installations and fire protection apparatus.
4 Clause 3.4.2 excused the tenant from carrying out any 'structural repairs' or make any payments 'of a capital nature' unless the need for them arose out of:
(a) negligence by the tenant or the tenant's employees, agents, contractors, customers or visitors; or
(b) failure by the tenant to perform its obligations under this lease; or
In this clause, [scil Clause 3] if this lease is a renewal under an option in an earlier lease (whether or not the renewal is, or an earlier renewal was, on terms substantially different to those of the option), 'start of the lease' means the starting date of the first lease to contain an option for renewal.
5.1.1. return possession of the premises to the landlord in clean and repaired condition as required by this lease, and
5.1.2 remove the tenant's installations and other property from the premises and make good any damage caused in removing it.
If the tenant leaves any of its installations or other property on the premises after the end of the lease, unless the landlord and tenant agree otherwise, that property will be considered abandoned and will become the property of the landlord.
7 Clause 1.1 included the following definitions: 'landlord's installations' meant:
the installations listed in item 5 and those installed by the landlord after the lease starts
the installations listed in item 7 and those installed by the tenant after the lease starts
8 Mr Michael McGettigan is the sole director of Westgate. He said that in early August 2003 shortly after Westgate took over the business, he noted:
That one of the floor tiles started to sink. The floor tile was at the front of the shop next to the window.
9 He made complaint to GCA's managing agent, Mr Talia without result. Mr McGettigan said that one of Westgate's staff members Linda Pupollo stood on the tile and her foot went through the floor. Mr McGettigan said that the hole disclosed that the ceramic floor tiles had been placed over a chipboard base which had rotted away. Apart from the sub-floor framework of bearers and joists there is no other floor. He said 'there was fungus growing in the chipboard'. Westgate bought some metal sheets and placed them over the hole. Eventually Mr Talia attended to inspect the premises. When he arrived Mr McGettigan raised with him problems that Westgate was having with the rear roller doors which were sticking on both sides and the roof which Mr McGettigan said was 'leaking and water was coming into the premises'. Mr McGettigan said that the guttering had rusted out in many areas. There were water marks visible on the ceiling and water had come into the premises. He showed these things to Mr Talia. He says:
The areas where the water was coming in included in the kitchen south wall over the sink, and over the coolroom and freezers, in the shop area above the hot plates and from the downpipe at the south-east corner of the premises.
10 He also complained that the door jambs near the ladies and men's toilets were rotting from the bottom up. Mr McGettigan also says he showed Mr Talia the guttering at the front of the shop 'which had rusted'. In September or October Mr Peter Abate of GCA visited No. 71 with a plumber 'to install new toilet systems in the means and ladies' toilets'. Mr McGettigan sought to raise with Mr Peter Abate the things we had complained of to Mr Talia. Mr Abate apparently said he did not understand much English and 'he would talk to his son who would come and have a look at the problems'.
11 Attached to the roof and housed in corrugated iron are two pumps which service the fridge and freezer at No. 71. Mr McGettigan says that in September 2003 'a corrugated iron sheet on top of the compressor pump came loose and cut the belts to the pump'. The freezer was rendered inoperative. Westgate engaged O'Brien refrigeration to repair the problem. New bolts had to be installed. Meanwhile the food in the freezer was spoiled. Mr Talia denied liability for the repairs on behalf of GCA. Mr Talia arranged for a plumber to carry out works on the guttering. Mr McGettigan remained dissatisfied. He said that the work which was done in early December entailed removal of guttering only on one side of the building. At the front a plate was attached over holes. According to Mr McGettigan 'this does not fix the problem and the guttering still leaks'. Shortly after the plumber completed his work the fridges in the premises ceased working. An electrical contractor engaged by Westgate inspected and he and Mr McGettigan went on the roof. According to Mr McGettigan:
There was a big pile of dirt which had been cleaned out by the plumber from the gutter next to the pump ... the dirt was causing water to pool on the roof near the pump'.
Mr McGettigan said that when the switch gear for the fridges was opened up it was evident that 'water had come down the cables from the roof into the switch gear ... the water stopped the fridge gear from working'. The electrician cleared the water and the fridges began working. Mr McGettigan and the electrician left No. 71 at 11 pm. The following morning the fridge and freezer were not working. Westgate's electrician found that water had got into the switch gear again. O'Brien Refrigeration which had also been called found that 'the compressor had burnt out during the night as a result of the stormwater entering the compressor'. It was replaced by O'Brien. Mr McGettigan said 'we lost all the stock that was in the freezer and fridge and has affected our trading for the next three days'. Around the same time, namely on 3 December 2003, Mr McGettigan said that one of Westgate's casual employees stood on the floor next to the fridge and 'fell straight through the floor'. He said 'once again, there is chipboard in this area underneath the tiles which had rotted away'. Mr McGettigan made further complaints to Mr Talia. According to Mr McGettigan 'he told me to go and see a lawyer to get legal advice'. A handyman attended to inspect the floor and according to Mr McGettigan 'said that the job was out of his league and he would have to speak to Talia'. The handyman put some rivets in the front door fixing that problem. In the same month the problem with the rear roller door was rectified.
12 The premises also have an evaporative water cooler. According to Mr McGettigan it has never functioned during Westgate's occupancy 'it blows air but does not blow out cool air'. Westgate had Evaporative Maintenance Services inspect. It reported on 15 November 2002 that the cooler 'needs four new filters and dump valve to be operational'. A number of different tradesmen came and carried out inspections. According to Mr McGettigan on 9 February 2005 Mr John Burnside of Burnside Plumbing mounted the roof and inspected. According to Mr McGettigan, Mr Burnside told Mr McGettigan 'that the gutter needs to be replaced and that the roof was sagging in the middle where the area of the canopy was leaking'. He said that water sitting in the gutter was too deep and when it rains it fills up quickly and spills over the edge onto the roof and runs into the shop. Mr McGettigan says that Mr Burnside told him that his instructions were to 'patch it'.
13 Mr McGettigan says that his company has not installed any fixtures or fittings in the premises and the evaporative cooler was not one of the assets sold to Westgate when it purchased the business.
14 On 12 November 2004 solicitors acting for Westgate filed an application commencing the present proceeding. This application and points of claim annexed sought a declaration that GCA was required to carry out repairs to No. 71, an order requiring GCA to carry out those repairs or alternatively damages. In addition to the matters described by Mr McGettigan the applicant sought repairs to rotting door jambs and rising damp in the vicinity of the toilets.
15 At a directions hearing on 21 January 2005 some seven parties were added as joined parties upon the application of GCA. Mr Antonio Abate swore an affidavit on behalf of GCA to the effect that if the premises and their fixtures and fittings exhibited the faults complained of by Westgate (which GCA denies) then those problems were the result of the actions and omissions of previous tenants, hence those previous tenants including Sdregas Bros Pty Ltd and the guarantors of all those previous tenants were joined as parties to the proceeding.
16 At a further directions hearing on 1 April 2005 Senior Member Walker gave GCA leave to withdraw its proceedings against three of the joined parties. Mr Walker set the proceeding down:
To determine the question whether the respondent [GCA] is obliged to carry out any, and if so, what, repairs to the demised premises and the responsibility for the costs of those repairs as between the respondent [GCA] and the joined parties.
The hearing originally scheduled for 21 June 2005 was adjourned. The day before it came on for hearing before me GCA withdrew its claim against the balance of the joined parties. The matter stands now solely as a dispute between Westgate and GCA.
17 It is common ground between the parties that No. 71 Pier Street constitutes retail premises within the meaning of the relevant retail tenancies legislation and that the 2002 lease which now exists between the parties is governed by the Retail Tenancies Reform Act 1998. This lease was entered into prior to 1 May 2003. (Retail Leases Act Section 119(1)) Westgate's claim depends upon Section 25 of the Retail Tenancies Reform Act 1998 as amended by the Retail Leases Act 2003. The new Section 25 is in the following terms:
25 (1) A retail premises lease is taken to provide as set out in this section.
(2) The landlord is responsible for maintaining in good repair -
(a) the structure of, or fixtures in, the retail premises; and
(c) the appliances, fittings or fixtures provided under the lease by the landlord relating to the gas, electricity, water, drainage or other services.
(3) However, the landlord is not responsible for maintaining those things in good repair if -
(a) the need for the repair arises out of misuse by the tenant; or
(b) the tenant is entitled or required to remove the thing at the end of the lease.
(4) The tenant may arrange for urgent repairs (for which the landlord is responsible) to be carried out to those things if -
(a) the repairs are necessary to fix or remedy a fault or damage that has or causes a substantial effect on or to the tenant's business at the premises; and
(b) the tenant is unable to get the landlord or the landlord's agent to carry out the repairs despite having taken reasonable steps to arrange for the landlord or agent to do so.
(a) the tenant must give the landlord written notice of the repairs and the cost within 14 days after the repairs are carried out; and
(b) the landlord is liable to reimburse the tenant for the reasonable cost of the repairs.
(6) This section only has effect from 1 November 2003
It will be seen that this provision is expressed to have effect only from 1 November 2003.
18 Mr Hanak, Counsel for Westgate, submitted that Section 25 applied effectively in a retrospective manner by modifying the meaning and operation of the 2002 lease with effect from 1 November 2003. He referred to a number of my decisions which supported that view, namely: Barfly's Nominees Pty Ltd v Manthos [2003] VCAT 1941 at [11]; Agean Food Import Export Pty Ltd v R. & C. Mazzei Nominees Pty Ltd [2004] VCAT 1450 [51] and Mega Byte Baby Pty Ltd v W.J.H. Pty Ltd [2005] VCAT 1391. He continued:
The nature of the obligation imposed on the landlord by S.25 also indicates that it is intended to apply to defects which may have first occurred prior to 1 November 2003. It is the obligation which provides that the landlord must maintain the premises in a particular state, namely in good repair. It is well established that liability under a covenant to repair will arise where the subject matter of the covenant is in disrepair.
19 He referred to Woodfall Landlord and Tenant paragraph [13.030] (Release 34). Lurcott Wakely v Wheeler [1911] 1 KB 905, 916-7; Credit Suisse v BeeGas Nominees Limited [1994] 4 All ER 803, 821 per Lindsay J and Proudfoot v Hart (1890) 25 QBD 42. Therefore, he said, GCA came under an obligation to keep the structure and premises in good repair as from 1 November. He said Section 25 should be given this construction because:
The 1998 Act and the 2003 Act are ameliorating or remedial legislation. It is generally accepted that such legislation is to be given a beneficial construction so as to provide the most complete remedy for the situation with which it is intended to deal, and is only to be restrained by the confines of the actual language used.
20 He referred to the explanatory memorandum going with the legislation by which the new Section 25 was introduced indicating that the purport was to achieve a uniform repair obligation with respect to retail tenancies leases whether governed by the 1998 Act or the 2003 Retail Leases Act, therefore, Section 25 should be interpreted as extending to defects and premises 'which occurred pre-November 2003'.
21 According to Mr Hanak the evidence disclosed breaches of the obligation implied upon GCA by Section 25 in that it shows:
That the roof continues to leak particularly in the shop area above the hotplates and from the downpipe at the south-east corner of the premises'.
22 He said the evidence showed that these leaks 'occurs whenever there is more than light rain'. This leaking, he said, was
A combination of rusting gutters, water ponding, downpipe and gutter connections being inadequate, roof sheets rusting, penetrations to fans being poorly flashed, ill fitting upstand between roof 1 and roof 2, rusting of the roof and the roof running at an inadequate angle.
23 He said Section 25 obliged GCA to repair the roof because it 'constitutes part of the structure of the premises in that it forms part of the same roof of the building'. The roof he said was clearly part of the structure. He referred to Granada Theatres v Freehold Investments (Leytonstone) Limited [1959] 1 Ch 592, 603 per Jenkins LJ. He said that to distinguish between structural and non-structural repairs required a practical judgment as to whether the work having regard to its nature and extent interferes with or alters the framework or structure of the premises. He referred to Advance Fitness Corporation Pty Ltd v The Bondi Diggers Memorial and Sporting Club Limited [1999] NSWSC 264 at [108]; Carbure Pty Ltd v Brile Pty Ltd [2002] VSC 272; (2002) V Conv R 54-663 [48] and [49]. He referred to the dictum of Barrett J of the Supreme Court of New South Wales in Alambo Holdings Pty Ltd v Australian Window Furnishings (NSW) Pty Ltd [2004] NSWSC 487; (2004) ANZ Conv R 351, 357 where His Honour says:
Maintenance, replacement or repair is 'structural' when its purpose and effect are the remedy some 'failure on the part of the structure to remain satisfactorily put together'.
24 He also referred to a judgement of Payne J of the New South Wales Land and Environment Court in Di Francesco v Blantrix Pty Ltd [2004] NSW LEC 669 at [38] - [47]. He said repairs to the roof were repairs to the structure of the premises and that the roof was not according to the evidence, in good repair. He referred to a series of demands for repair by Westgate.
25 As to the floor, he said the evidence showed that the floor 'has fallen into disrepair'. There are two instances where employees have gone through holes in the floor 'in the area of the sink, the water is ponding and the floor has been bouncy'. He contended that the floor forms part of the structure of the premises and therefore work upon the floor fell within Section 25.
26 As to the complaints with regard to the timber frames around the doors in the toilet, he said this was caused by a breakdown in damp proof course in so far as Mr Phyland, the respondent's building consultant suggested that this was as a result of the greengrocer who had been tenant before Sdregas Bros hosing down the toilets. This should be rejected. The door frames were he said akin to the walls of the premises or toilet cubicle doors in the Aegean Foods' case (supra) which I found to be part of the structure and therefore governed as to repair and replacement by Section 25.
27 He said there was also evidence that the walls around the toilets were affected by rising damp. He continued: 'it is significant there are to the walls which are necessary are also part of GCA's obligations to maintain in good repair the structure of the premises under S.25 of the 1998 Act'.
28 Mr Hanak said that the compressor pumps attached to the roof were fixtures. He referred to Belgrave Nominees Pty Ltd v Barlin-Scott Air-conditioning (Aust) Pty Ltd [1984] VicRp 75; [1984] VR 947, 950-1 per Kaye J; Australian Provincial Assurance Co Ltd v Coroneo [1938] NSWStRp 35; (1938) 38 SR (NSW) 700, 712-13; Kay's Leasing Corporation v CSR Provident Funds Nominees Pty Ltd [1962] VicRp 62; [1962] VR 429, 432-3. Alternatively, he said, the pump could be regarded as plant and equipment for the purposes of Section 25. He referred to Federal Commissioner of Taxation v Broken Hill Proprietary Co Ltd [1968] HCA 16; (1969) 120 CLR 240, 247 per Kitto J. Similarly he submitted that the evaporative cooler was a fixture of plant and equipment at the premises and therefore should be repaired under Section 25 by GCA. He said that the cooler was likely installed by Sdregas Bros and by virtue of Clause 5.1 of the lease between GCA and Sdregas Bros (which is in the same form as the corresponding clause in the lease between the present parties) the cooler became the property of GCA at the end of the lease. He said the cooler was a 'landlord's installation' under the lease. It is therefore an appliance provided by the landlord under the lease and therefore covered by the Section 25 obligation.
29 Mr Hanak said there has been no misuse by the tenant whether the present applicant or other tenant and GCA would bear the onus of proving any such misuse which they failed to do. Mr Hanak rejected the submission that any of the present problems complained of by Westgate were caused by some breaches of the lease. Mr Hanak sought the following relief:
(a) A declaration made pursuant to S.25 of the 1998 Act and/or the terms of the lease implied by S.25, GCA is responsible for maintaining in good repair:
(iii) the door frames and walls in the men's and ladies' toilets of the premises;
(iv) the compressor pumps located on the roof of the premises; and
(v) the water evaporated cooler located on the roof of the premises; and
(b) A declaration that GCA has breached S.25 of the 1998 Act and/or the terms of the lease implied by S.25 of that Act, by it:
(i) failing to maintain in good repair the roof of the premises;
(ii) failing to maintain in good repair the floor of the premises;
(iii) failing to maintain in good repair the door frames and walls in the men's and ladies' toilets of the premises;
(iv) failing to maintain in good repair the compressor pumps located on the roof of the premises; and
(v) failing to maintain in good repair the water evaporated cooler on the roof of the premises.
30 Mr Hanak said that Westgate sought an order that the proceedings be adjourned 'for further hearing on the question of damages'.
31 On behalf of the respondent landlord GCA, Mr Northrop opposed the making of any declarations with regard to 'past breaches'. He said:
They are beyond the scope of the prescribed question. The relevant order is confined to the existing state of affairs, not past events.'
According to Mr Northrop the fact that Westgate became tenant by assignment after the commencement of the Retail Leases Act 2003 did not constitute entry into a new lease for the purposes of the 2003 Act. He noted that the transfer of lease document 'does not vary the terms of the lease, render the simple continuation of the 2002 lease'. He referred to Section 3(4) of the Retail Tenancies Reform Act 1998 (as amended by the 2003 Act), Section 7, 8 and 119(1) of the Retail Leases Act 2003, Happy Century Pty Ltd v Nezville Pty Ltd (2000) V Conv R 58-546; HEIM Nominees Pty Ltd v Yossifidis (2001) V Conv R 58-556 and Foong v Greater Union Pty Ltd (2002) V Conv R 58-566.
32 According to Mr Northrop the new Section 25 has affect only from 1 November 2003. He continued:
Prior to that date, the obligations of the parties concerning repairs are those contained in the lease document.
33 He referred to Clause 3.2 of the 2002 lease quoted above noting that the expression 'start of the lease' bears a special definition in Clause 3.1. He said 'in the present case, that is 30 September 1996, the commencement of the lease dated 20 July 1997'. He referred to Clause 3.3.5 of the lease quoted above. He said there was nothing in the lease to impose an obligation to repair on the landlord. Accordingly, 'there can be no breach of the lease in respect of any period prior to 1 November 2003'. As to the new Section 25 he said it was important to note the section's operation. He said it did not 'in its terms impose statutory obligations upon any party', rather sub-section (1) states 'A retail premises lease is taken to provide as set out in this section'.
34 The right of a party therefore is to enforce the lease, he said, not to enforce obligations created by statute. He noted however that Section 47(1) of the 1998 Act rendered a provision in a lease void:
Insofar as it is contrary to or inconsistent with anything in this Act or with anything that by this Act the lease is taken to provide.
Section 25 relates only to the state of repair of specific aspects of the premises. Clause 3.2 of the lease, by contrast, requires the tenant to maintain the premises in the same condition as they were originally and it remains in force except as effected by s.47(2). It continues to bind the tenant.
35 According to Mr Northrop, the landlord was not obliged to keep the premises in near perfect condition, rather the requirement was 'to keep the premises in good repair to allow the tenant to occupy and use the premises'. The construction of the obligations entailed the application of contractual rules of interpretation not the rules of statutory interpretation. The concept of 'good repair' was he said, 'not universal and the content of the requirement must depend on the lease as a whole'. He referred to Brew Bros Limited v Snax (Ross) Ltd [1970] 1 QB 612, 640 per Sachs LJ and Holding and Management Limited v Property and Investment Trust PLC [1990] 1 All ER 938, 945 per Nicholls LJ. According to Mr Northrop:
The initial condition of the premises did not include the items described in paragraph 7 of Mr Abate's affidavit sworn on 12 January 2005. If there is any departure from the original condition of the premises in their current condition, the tenant is in breach of Clause 3.2.
Trite law that a court will not grant specific performance of a covenant to repair, although there are exceptions in relation to items outside the premises. The remedy of the covenantee lies in damages.
37 He referred to Granada Theatres v Freehold Investments (Leytonstone) Ltd [1959] 1 Ch 592, 608 and Greetings Oxford Koala Hotel Pty Ltd v Oxford Square Investments Pty Ltd (1989) 18 NSWLR 33, 37. According to Mr Northrop no order should be made that the respondent perform work because:
(a) The condition of the premises is not interfering with the applicant's use of the premises;
(b) The immediate problems of the floor have been alleviated by the use of checker-plate sheet [the metal sheets referred to as Mr McGettigan];
(e) No damages are claimed to flow from the breach apart from specific incidents.
38 Mr Northrop said that the premises 'are in an adequate state of repair for the purposes of any term founded on S.25 of the 1998 Act'. In construing the lease:
It must be borne in mind that the lease will expire in less than two months time. The scope be limited the tenant's interest in the premises. It has occupied the premises for over two years with few problems. It cannot now require the premises to be put in a better condition for the final two months of the term of the lease.
39 As to the condition of the roof, Mr Northrop said there are only two specific occasions when leaks had interfered with the tenant's business since November 2003, once in December 2003 and the other in February 2004 'the lease does not oblige the respondent to repair the lease simply because it looks bad'. He made similar submissions as to the floor saying that the problems described came down to only two incidents, one in August 2003 which was prior to Section 25's coming into effect and the other in December 2003. Neither of those incidents he said interfered with the tenant's use and occupation of the premises or the conduct of its business. Damage to the floor was restricted to a few areas which are adjacent to sources of water and they continue to be used. As to the door frames and the toilet walls, Mr Northrop said that these problems existed prior to 2003 and were the responsibility of the tenant. As to the compressor pump, there was no evidence of the currently existing need for repairs. The evaporative cooler never worked. He said it was installed by a tenant and was an item which Westgate must remove prior to the end of its lease by virtue of Clause 5.1. Since the tenant was, he said, responsible for maintaining the evaporative cooler prior to 2003 'it cannot now seek to make the landlord responsible for its own breach'.
40 Westgate engaged consultant architect, Mr Alasdair Macleod of BSS Design Group Pty Ltd to inspect and report upon the state of the premises including the roof. He found many faults in the existing roof and in a report dated 2 May 2005 said:
The summary situation in relation to this roof is that it is, in at least part, at the end of its economic life. Roofs like this have a life of about forty years and we suspect that in many ways "... the time is up". This coupled with poor workmanship at the original time of construction and as a result of various patching and part replacements over the years, poor execution of penetration probably by tenants past etc. have all contributed to what, now is a very poor and unserviceable roof.
He drew attention to rusting gutters, gutters without proper fall which therefore held approximately 30mm of water and inadequate pitch on the roof and in places the roof which fell in the wrong direction. He observed a number of loose sheets and rusting in various places.
41 GCA called evidence from Mr Phyland, a Consulting Engineer. In a report dated 13 July 2005, he said:
Roofs in this location close to the sea are subject to the effects of salt, one of which is premature rusting.
Whilst rust looks bad, it is not indicative of a leaking roof. The basic roof metal is still intact and sound.
Lack of maintenance cleaning gutters did contribute initially to a leakage problem as did an unsatisfactory roof structure erected over the compressor.
I understand these items have been rectified and I see no problem that general plumbing and maintenance cannot rectify.
42 I do not read this report, particularly in light of Mr Phyland's viva voce evidence as giving the roof a clean bill of health, rather his opinion was that a roofing plumber could rectify the problems which are exhibited in the roof. In particular Mr Phyland did not deny the specific findings of current defects made by Mr MacLeod in his report. He did not deny that the pitch of the roof was inadequate. He did not deny that at one point it actually slopes in the wrong direction. He did not deny that the guttering on one side did not have appropriate fall and so held 30mm of water on a long-term basis. It follows that not even upon the evidence of the respondent's expert can the finding urged by Mr Northrop, namely, that the roof (inter alia) 'is in an adequate state of repair for the purposes of any term founded on S.25 of the 1998 Act' be sustained.
43 I accept that Section 25 operates by implying a term into the lease and that the implied term like all other terms in the lease must be interpreted and applied in light of various surrounding circumstances. The photographs which I have seen demonstrate that this roof is not visible to the customers who might come to No. 71 along Pier Street. Therefore, the roof is required to perform only a purely utilitarian purpose, namely, to keep No. 71 water tight. The roof has no aesthetic function. Implicitly in stating that the roof needs only maintenance by a plumber, Mr Phyland concedes that it has not been properly maintained and the term implied by Section 25 of the 1998 Act requires the landlord to maintain the roof in good repair.
44 The roof is clearly part of the structure of the demised premises. An orthodox building structure consists of four walls, a roof and a floor and therefore the roof is as much part of the structure as are the walls. The uncontradicted evidence of Mr McGettigan is that the roof leaks when there is significant rainfall. It therefore does not adequately perform its primary function, namely to keep the shop water tight from rainfall. It cannot therefore be regarded as having been maintained in good repair. Its integrity has been compromised in a number of respects. GCA was therefore obliged to make good its default. The matter at present before me for determination does not require me to make any findings as to whether merely patching work as distinct from a complete roof replacement are required to perform GCA's obligations with regard to the roof as they now exist.
45 Nor can the unpleaded assertion by GCA that the roof should have been repaired by Westgate prior to 1 November 2003 avail GCA. The tenant's repair covenant under Clause 3.2 is subject to a proviso in Clause 3.4.2 of the lease that the tenant is not obliged to carry out structural repairs. In my view, what would have been required to be done to the roof in October 2003 to render it in good repair would, whether the solution was a complete replacement of the roof or merely patching work be within the proviso in Clause 3.4.2 as being structural repairs. As previously noted the roof is part of the structure of the premises. That does not mean however that any repair to it as part of the structure would necessarily be regarded as 'structural'. To repack with plaster an area of scoring on a plaster wall would not be a structural repair even although the wall would be part of the building's structure. Nor I think would the replacement of a single cracked roofing tile be regarded as a structural repair even although the roof was part of the structure of the building. To translate this approach to a decking or corrugated iron roof, one would not be carrying out a structural repair in merely refastening a loose corrugated sheet or replacing a missing galvanised nail. On the other hand, based on Mr MacLeod's uncontradicted finding this roof needed to be re-pitched. We also have to consider the views attributed to Mr Burnside, a plumber engaged by GCA by Mr McGettigan, and unchallenged either in evidence for Mr Burnside or in cross-examination that the roof had sagged and that its rectification was beyond his capacity as a plumber.
46 The evidence showed that at least two holes had developed in the floor and that elsewhere it was bouncy. The floor apparently consists of chipboard laid on a frame of joists and bearers. Mr Phyland observed:
The tiles on the shop floor are non-porous. The grout and water under the tiles had been subject to movement over the years as the tiles and associated mortar are of rigid form whereas the floor they were laid on is of non rigid form and consists of particle board which is subject to movement and the effects of water.
The grout and water has cracked and washing of the floor with water and detergent has inevitably resulted in moisture reaching the particle board sub base causing it to break down.
The rate of break down of the sub floor would depend on the degree and frequency of floor washing but under daily wash conditions would begin to deteriorate within one to two years of initial laying.
47 In a later report (13 July 2005) Mr Phyland said:
The sub strata of the floor has partly failed in the south-east corner of the floor in the western end. In my opinion the failure is due to water penetration associated with the cleaning practices of past tenants.
The break down of the floor is in isolated spots. If ventilation (lack of) was the cause then the effect would be uniform. The present situation is the result of poor workmanship by previous tenants.
48 Mr MacLeod's view was that breakdown in the floor was caused by poor sub-floor ventilation. He drew attention to the requirements of the current Building Code of Australia that there be a clearance of at least 450mm under a wooden floor. By reference to the photographic material he showed that the shop floor was virtually at grade with Pier Street rendering it impossible for the required clearance to be present. Mr MacLeod said that the solution was to replace the existing floor with a concrete slab.
49 Mr Phyland said that alternative remedial work could be done and that adequate ventilation could be provided with horizontal ventilators at the front of the shop. He conceded that the 450mm clearance required by the Building Code was likely not present. Nevertheless, he said that since this structure dated from previous decades, he believed any necessary building permit could be obtained without compliance with the current standards. Mr Abate had apparently told Mr Phyland that the greengrocer who was tenant of these premises before Sdregas Bros Pty Ltd, had been in the habit of hosing out the premises frequently. In the end, for present purposes, the causation of the problems with the floor seem to be beside the point. The greengrocer was neither a predecessor in title of Westgate in the sense of holder of the current lease or if it matters, so far as one can make out, a holder of any lease containing an option which led to the grant of the current lease. In no way therefore, could the actions of the greengrocer prior to 1996 be attributed to Westgate. Again, the evidence is clear that the floor is not properly performing its primary function, namely to provide a secure basis for the building. Employees of Westgate are at peril with the floor breaking down. Mr McGettigan was cross-examined as to the frequency of the floors being mopped given that the present use of the premises is a fish and chip shop is within the permitted use in the lease. Viewing the term implied by Section 25 in its contractual context as Mr Northrop correctly suggests it should be maintained to the extent that it can withstand necessary hygienic measures. I was not taken to the health regulations which would govern the operation of a fish and chip shop. It is reasonable to assume however that these regulations would require frequent mopping of the floors for hygienic reasons. A floor is part of the structure of the building and it is not in good repair if it is not in a state where it can cope with these necessary hygienic measures. As Mr Phyland's evidence shows the substrata of the floor are breaking down. The suggestion that the use of metal plates known as 'checker' plates is an adequate response to the problem with the failing floor is to my mind akin to a landlord meeting a complaint about a leaking roof by suggesting to the tenant that buckets be placed at strategic points in the demised premises. Once again, I am not required at this stage to find what measures GCA must take to comply with its obligations under the implied term. I do find however that GCA is currently in breach of its obligation under the term implied by Section 25 in relation to the floor.
50 Again, the contention that the tenant should have fixed the floor prior to November 2003 does not avail GCA. Whatever extent of work might be necessary to put the floor in good repair would in my view clearly constitute structural repairs from which the tenant is excused by Clause 3.4.2 of the lease.
51 I accept Mr Northrop's submission that the evidence does not disclose any current repair or maintenance work needed for the compressors.
52 I accept that the authority relied upon by Mr Hanak demonstrate that the evaporative cooler is either a fixture or an item of plant and equipment at the retail premises. I do not accept that the evaporative cooler is an item which the tenant was entitled or required to remove at the end of its lease. Clause 5.1 of the lease to Sdregas Bros and the corresponding provision in the current lease provide that if an item is not removed it becomes the property of the landlord. This accords with the operation of Section 28(2) of the Landlord and Tenant Act 1958. It is of course competent for the parties to arrange a different set of rules between themselves by appropriate clauses in the lease. Mr Northrop relied upon the definition of 'start of the lease' in Clause 3.1 which I have quoted above. He contended that the start of the lease for purposes of Clause 5.1 of the existing lease was the date of commencement of the lease to Sdregas Bros. I reject that submission. The extended definition of the phrase 'start of the lease' extending to earlier leases where the current lease was granted under an option applies only 'in this clause' viz. Clause 3. It does not in its term appear to apply to Clause 5.1.
53 I may pass over as unnecessary to determine for present purposes whether a tenant who at the end of his lease sells to an incoming leaseholder items which are fixtures, can be regarded as having notionally severed them from the realty so that remaining in place at the end of the lease, they do not become the property of the landlord either under Clause 5.1 or Section 28(2) of the Landlord and Tenant Act 1958. This question does not arise in the current dispute because the evaporative cooler was not one of the items which the previous tenants purported to sell to Westgate.
54 Since the evaporative cooler is not operative and requires major repair it is clear that it has not been maintained in good repair and prima facie GCA is obliged under the implied term to repair it.
55 Repairs and maintenance to this evaporative cooler would not be structural repairs and so in this instance it may be that GCA has a defence to this claim under the implied term based upon the view that it was incumbent upon Westgate prior to 1 November 2003 to repair the evaporative cooler which seems to have been defective throughout Westgate's occupancy.
56 Mr Hanak submitted that such a finding could not be made because it was only in November 2004 that Mr McGettigan realised that the evaporative cooler was not operating property. There is nothing however in the lease covenants to render a tenant's obligation to repair conditional upon his knowledge of the need for the repair. A more difficult question is whether the evaporative cooler would fall within the repair obligations in the lease. The general obligation is to keep the premises repaired 'in the same condition as at the start of the lease'. Clause 3.1 as previously noted, according to Mr Northrop requires the start of the lease to be treated as the start of the Sdregas Bros lease. That lease, according to its schedule, commenced on 30 September 1996. In his affidavit dated 12 January 2004, Mr Antonio Abate said that he believed that the items, including the evaporative cooler, were installed during a rent free period from 30 September 1996 to 31 December 1996, that is, the evaporative cooler was installed after the commencement of the Sdregas Bros lease. An obligation to repair and maintain as at 30 September 1996 therefore could not oblige Westgate to repair a cooler that was not installed as at 30 January 1996. Clause 3.3.4 of the lease imposes a repair obligation with respect to windows, lights, doors, locks and fastenings, light globes, fluorescent tubes, keys and keycards. Again this would not seem to cover the evaporative cooler. Clause 3.3.5 requires repair and maintenance for 'all plumbing, drainage, gas, electric, solar and sewerage installations and fire protection apparatus'. There is no definition of 'installations'. In my view that expression is in context more likely to refer to the infrastructure by means of which the various utility services described are connected to the premises and not to relate to individual appliances such as the evaporative cooler. I do not accept therefore that Westgate was under an obligation prior to 1 November 2003 to repair and maintain the evaporative cooler. It follows that as at the present, that obligation falls on GCA.
RISING DAMP AND ROTTEN DOOR JAMBS IN VICINITY OF TOILET
57 Both Mr MacLeod and Mr Phyland agreed that there was evidence of rising damp and that the door jambs in the vicinity of the men's and women's toilets at the rear of the premises were rotting. Mr Phyland was inclined to the view that all these damp problems were caused by action in the past such as hosing out and that these phenomena represented the result of past activity and that there was no present existing moisture problem.
58 Mr Macleod on the other hand said that he used a damp meter and found damp in the wall. A photograph of the toilet area appeared to disclosure salts or other efflorescent about 1m above floor level. Given that Mr MacLeod on behalf of the applicant used a damp meter and found the persistence of dampness, I prefer his interpretation of the state of affairs to that of Mr Phyland. Mr MacLeod was of the view that there had been a breakdown in the damp proof course in the walls at this point. This inference seems difficult to escape and would seem to require significant work upon the walls which are part of the structure of the premises. Again, this is not a mere surface or cosmetic matter and would clearly constitute a structural repair. Therefore CGA would seem to be obliged to carry out this work under the term implied by Section 25 and Westgate would seem not to have been obliged to deal with it prior to the implied terms becoming operative on 1 November 2003.
59 The rotting door jambs raise somewhat more complex problems with some hesitation however I believe that action taken to replace door jambs and door frames ought to be characterised as a structural repair. The door jambs and wall frames are part of the structure of the building, they are part of the walls, therefore, under the implied term GCA is obliged to fix them. Westgate was not prior to 1 November obliged to deal with this problem because it would have required it to carry out structural repairs from which it is excused by Clause 3.4.2 of the lease.
60 Mr Northrop submitted that no relief in mandatory form should be granted because the present lease was about to expire. Mr Hanak said that his client sought to exercise its option to renew for a further term. Mr Northrop produced correspondence in which GCA asserted that Westgate was precluded by subsisting breaches of covenant from effective exercise of the option. Mr Northrop said that if I were guided by the evidence before me I could conclude only that the existing lease was about to expire.
61 In my view the evidence before me also discloses that the present lease reserves a number of options for renewal to the tenant and that the parties are in dispute as to the validity of a purported exercise of option. Since in the circumstances I am not required to make any order having mandatory force, the respondent's submission now under consideration does not strictly arise. I observe however that it is an unpalatable submission from a respondent that upon the findings that I have made has been in clear breach of its obligations under the lease since 1 November 2003 and has been stoutly defending the proceeding denying that liability since the proceeding was commenced on 12 November 2004.
62 I will make an order to the effect the first of the declarations requested by Mr Hanak. I will not make the second declaration because a finding of breach of covenant whilst logically flowing from the findings which I have made is not the matter which the present hearing was fixed to determine. Senior Member Walker's order was a mere direction or at best an interlocutory order. It would have been open to me to vary or revoke it had I been persuaded to do so. As it is, there is no application for me to take any such step and therefore my determination should be in accordance with the direction given by Senior Member Walker.
63 I have heard no submissions as to costs and so I will reserve them.
64 I will set this matter down for directions to make arrangements for a hearing as to damages if that proves necessary.
Westgate Battery Company Pty Ltd
GCA Pty Ltd
(1969) 120 CLR 240
(1989) 18 NSWLR 33