Tabcorp Holdings Ltd v Bowen Investments Pty Ltd [2009] HCA 8

HIGH COURT OF AUSTRALIA

FRENCH CJ,

GUMMOW, HEYDON, CRENNAN AND KIEFEL JJ

TABCORP HOLDINGS LTD APPELLANT

AND

BOWEN INVESTMENTS PTY LTD RESPONDENT

Tabcorp Holdings Ltd v Bowen Investments Pty Ltd

[2009] HCA 8

12 February 2009

M63/2008

ORDER

Appeal dismissed with costs.

On appeal from the Federal Court of Australia

Representation

N J Young QC with C C Macaulay SC and E W Woodward for the appellant (instructed by Mallesons Stephen Jaques)

D M J Bennett QC with M J Colbran QC, I W D Upjohn and T D Best for the respondent (instructed by Scanlan Carroll Business Lawyers)

Notice: This copy of the Court's Reasons for Judgment is subject to formal revision prior to publication in the Commonwealth Law Reports.

CATCHWORDS

Tabcorp Holdings Ltd v Bowen Investments Pty Ltd

Contract – Damages – Lease – Tenant's covenant – Covenant not to make any substantial alteration to premises without consent – Appropriate measure of damages for tenant's breach.

Contract – Damages – Lease – Principle in Robinson v Harman (1848) 1 Ex 850 [154 ER 363] – Whether costs of rectification available – Whether rectification must be reasonable – Relevance of commercial character of premises – Whether landlord entitled only to damages for diminution in value of reversion.

Words and phrases – "costs of repair", "rectification costs".

1. FRENCH CJ, GUMMOW, HEYDON, CRENNAN AND KIEFEL JJ. On Monday 14 July 1997, Mrs Maria Bergamin arrived at an office building at 5 Bowen Crescent, Melbourne. There she found that the foyer of the building had been badly damaged. A glass and stone partition, timber panelling and stone floor tiles had been removed. She was shocked and dismayed to see what remained of the floor stone work being jack hammered. A large bin was filled with the debris of the foyer. This destruction had been carried out by a tenant, Tabcorp Holdings Ltd ("the Tenant"), the appellant in this appeal. 2. Why was Mrs Bergamin shocked and dismayed? She was a director of the respondent, Bowen Investments Pty Ltd ("the Landlord"), a company which owned the building. She had taken particular care over and interest in the construction of the foyer. It was of high quality. It was made of special materials – San Francisco Green granite, Canberra York Grey granite, and sequence-matched crown-cut American cherry. The construction of the foyer had been completed less than six months earlier. The Tenant had taken possession under a lease granted by the Landlord less than six months earlier. The lease contained a covenant, cl 2.13, forbidding the Tenant to alter the premises without the prior written approval of the Landlord. Mrs Bergamin had on Thursday 10 July 1997 arranged for the Tenant to be told that the Landlord did not consent to any alteration to the foyer. Mrs Bergamin had informed the Tenant in writing on Friday 11 July 1997 that the Landlord could not consent until the Tenant's proposed alterations were examined at a site meeting at 11am on Monday 14 July 1997. It was when Mrs Bergamin arrived at 10.45am on 14 July 1997 in order to attend that site meeting that she observed the destruction which had taken place and which was continuing to take place. The trial judge specifically found that the Tenant was well aware that written consent from the Landlord to do what the Tenant had done was needed, and that that consent did not exist. 3. Mrs Bergamin protested about what had happened, but the Tenant continued to alter the foyer and substitute a new foyer until the process was complete on 31 August 1997. 4. The trial judge's description of the Tenant's conduct as involving "contumelious disregard" for the Landlord's rights was not hyperbolic. Nor has it been challenged. 5. The Landlord pursued claims against the Tenant in the Federal Court of Australia based on many causes of action. Most of them were rejected by the trial judge (Tracey J) for reasons with which the Landlord does not now cavil. The only claim which the trial judge upheld was a claim for common law damages in relation to two breaches by the Tenant of cl 2.13: the destruction of the old foyer up to 14 July 1997, and the construction of a new foyer up to 31 August 1997. He gave judgment for the Landlord in the sum of $34,820: most of that figure was made up of the difference between the value of the property with the old foyer and the value of the property with the new foyer constructed by the Tenant[1]. The Full Court of the Federal Court of Australia increased the judgment sum to $1.38m. That sum comprised $580,000 as the cost of restoring the foyer to its original condition and $800,000 for loss of rent while that restoration was taking place[2]. In this appeal the Tenant seeks restoration of the trial judge's figure. The appeal should be dismissed for the following reasons.