Becker v Cariste [2001] NSWSC 663

New South Wales Supreme Court

CITATION : Becker v Cariste [2001] NSWSC 663 CURRENT JURISDICTION: Equity FILE NUMBER(S) : SC 2673/01 HEARING DATE(S) : 3 August 2001 JUDGMENT DATE : 7 August 2001

PARTIES : RA & K Becker Pty Ltd (P) Cariste Pty Ltd (D) JUDGMENT OF : Austin J

COUNSEL : R J Webb (P) C J Leggat (D) SOLICITORS : Eakin McCaffery Cox (P) Hunt & Hunt (D) CATCHWORDS : CONTRACTS - proper construction of lease - whether underground tanks and pipes were 'plant and equipment' for which lessee responsible - LANDLORD & TENANT - construction of covenant for quiet enjoyment - whether covenant obliged lessor to repair tanks and pipes which were used by lessee for conduct of service station business. Booth v Thomas [1926] 1 Ch 109 CASES CITED : Martin's Camera Corner v Hotel Mayfair [1976] 2 NSWLR 15 Burns Philp Trust Co Ltd v Kwikasair Freightlines Ltd [1964] NSWR 63 DECISION : Lessee's summons for declaratory and other relief dismissed

THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

AUSTIN J

TUESDAY 7 AUGUST 2001

2673/01 R A & K BECKER PTY LTD V CARISTE PTY LTD

JUDGMENT

1 HIS HONOUR: The defendant (one of the directors of which is Mr Peter Roach) is the owner of a small suburban shopping centre at Galston. The plaintiff (a company whose directors are Mr Russell Becker and his wife) is the lessee of a service station at the shopping centre. The point of these proceedings is to determine whether the plaintiff or the defendant, or neither of them, is obliged to repair underground fuel tanks and pipes which supply petrol and diesel fuel to bowsers at the service station. 2 The shopping centre comprises eight shops, the drive-through area of the service station, which is covered by an awning, and parking areas. The plaintiff is the lessee of two of the shops as well as the drive-through area, using one as a retail shop and the other as a workshop. The fuel tanks are located in the shopping centre but they are not part of the demised premises. The tanks are underground, surrounded by fill, and pipes run underground from the tanks to the bowsers in the drive-through area of the service station. Concrete covers the land under which the tanks and pipes are located. 3 The plaintiff has been in occupation of the service station since April 1991. There appears to be a dispute between the parties as to whether an option to renew the first lease was ever properly exercised, but the question does not need to be considered now because it is agreed by both parties that the plaintiff's occupation has been continuous since 1991, and that the underground tanks and pipes were installed before the plaintiff entered into possession. The current lease is dated 8 July 1998. 4 On 3 March 1998 the plaintiff's solicitors wrote to the defendant's solicitors commenting on a draft of the lease which had been submitted for execution. The letter asked for a list of equipment to be included in Item 13 in the Schedule to the draft lease. The defendant's solicitors replied on 23 March 1998 saying 'no equipment is to be provided by the Lessor for use by the Lessee'. After further correspondence on other issues, the lease was executed by both parties. 5 During the period from January to June 1999 Mr Roach and Mr Becker had several telephone conversations about the underground tanks and pipes. Mr Roach informed Mr Becker in January 1999 that according to his legal advice, Mr Becker's company was responsible for the tanks and pipes. 6 On about 9 June 1999 Mr Becker became aware of what he described as a water problem in super bowsers numbers 1 and 2. He wrote to Mr Roach on that day, drawing attention to the problem and expressing his belief that, as there was no evidence of water in the tank, the problem was leakage in the supply line. 7 Initially Mr Becker's intention was to repair the leak, but on 15 June 1999 he wrote to Mr Roach again, saying that according to his legal advice, the defendant as the owner and landlord of the property was responsible for the repair and maintenance of underground tanks, pipes and equipment. Mr Roach responded on 20 June 1999, saying that according to his legal advice, confirmed in writing, the lessee was responsible for the items mentioned. 8 Mr Becker shut down the two super bowsers as soon as the problem was detected, and they have remained shut down until the hearing. The plaintiff undertook repairs at its own cost to customers' cars, to remove contaminated fuel from vehicle petrol tanks. Mr Becker gave evidence that it was difficult to calculate the loss resulting from the non-use of the super bowsers, as there were still three working super bowsers at the service station. 9 On about 20 April 2000 Mr Becker became aware that water was contaminating the fuel being dispensed from the only diesel bowser at the service station. He shut that bowser down, and arranged for an employee to inspect the diesel tank and the diesel fuel supplied from the bowser hose. On 26 April 2000 he wrote again to Mr Roach, referring to a problem with water contaminating the diesel supply. He expressed his belief that the water was entering via a broken pipe, because there was no sign of excess water in the diesel storage tank. He said he was unable to sell any diesel fuel until the problem was corrected, and asserted that it was the defendant's responsibility to have repairs carried out. Mr Roach replied on 27 April 2000, confirming the view that he had expressed in the letter of 20 June 1999, that it was the lessee's responsibility to carry out repairs to the tanks and pipes. 10 The plaintiff engaged a contractor to carry out further testing to determine the cause of the water contamination in the supply of diesel fuel. When the pipes were uncovered, it was found that part of a pipe had been laid in clay rather than sand and had become rusty, and there were two rust holes in it. Mr Becker says that from his experience as a service station proprietor, it is necessary to lay pipes in sand rather than clay to prevent them from rusting. A leaking water pipe was also found. Mr Becker wrote to Mr Roach on 28 April 2000 drawing attention to the leaking water pipe, and Mr Roach arranged for the repair of the water pipe shortly afterwards. 11 The plaintiff repaired the diesel fuel pipe at a total cost of $2180, and on 15 May 2000 Mr Becker wrote again to Mr Roach, demanding payment. On 20 May 2000 Mr Roach replied saying that the lessor would pay amounts due to be paid under the lease but, on the legal advice he had received, the lessor was not responsible for underground tanks, pipes or any other equipment. 12 The plaintiff commenced the present proceedings by summons filed on 17 May 2001, claiming declarations that upon the true construction of the lease, the defendant is obliged to repair the fuel tanks and pipes which supply petrol to bowsers Nos 1 and 2, and that the defendant was obliged to repair the pipes supplying fuel to the diesel bowser. The summons seeks a mandatory injunction requiring the defendant to repair the tanks and pipes which supply petrol to bowsers Nos 1 and 2, to prevent water contamination of the fuel in them. The summons also seeks damages for breach of clauses 12.1 and 12.2 of the lease. However, at the hearing counsel for the plaintiff informed me that if a mandatory injunction is granted with respect to the super bowsers, the claim for damages will be confined to the expenditure of $2180 for repair of the diesel fuel pipe. He said his client did not wish to pursue any claim for damages for the cost of repairing damage to motor vehicles caused by contaminated fuel, or for loss of profits.