Torcaso v Papaleo & Anor [2001] NSWSC 314

New South Wales Supreme Court

CITATION : Torcaso v Papaleo & Anor [2001] NSWSC 314 CURRENT JURISDICTION: Common Law FILE NUMBER(S) : SC 15398/90 HEARING DATE(S) : 26-28 February, 1 March, 5-6 March 2001 JUDGMENT DATE : 27 April 2001

Michael Angelo Torcaso (Plaintiff/Cross Defendant) PARTIES : Virgilio Papaleo (1st Defendant/1st Cross Claimant) Marien Papaleo (2nd Defendant/2nd Cross Claimant) JUDGMENT OF : Studdert J

COUNSEL : Dr R.J. Desiatnik (Plaintiff/Cross Defendant) D.H. Murr SC/J.C. Thompson (Defendants/Cross Claimants) SOLICITORS : Maurice Marshan (Plaintiff/Cross Defendant) Rodney Lewis & Co (Defendants/Cross Claimants) CATCHWORDS : Contract - deed of agreement for lease - commencement date provided - whether time of commencement essential - agreement to erect building to lock-up stage by certain date, subject to contingencies - whether promisor in breach. Spunwill Pty Ltd v BAB Pty Ltd (1994) 36 NSWLR 290 Harrington v Browne (1917) 23 CLR 297 CASES CITED : Bernard v Williams (1928) AER 698 Commercial Financial Corp v Dunlop Tyre & Rubber Goods (1942) 3 DLR 150 Williams v Greatrex (1957) 1 WLR 31 Honner v Ashton (1979) 1 BPR 9478 DECISION : See para 97

IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION

STUDDERT J

Friday 27 April 2001 15398/90 MICHAEL ANGELO TORCASO v VIRGILIO PAPALEA & ANOR

JUDGMENT

1 HIS HONOUR: The plaintiff, Michael Angelo Torcaso, has sued the defendants seeking damages for the alleged repudiation of an agreement. The defendants have denied that there was any repudiation by them; on the contrary, they have resisted the plaintiff's claim for a number of reasons and it is their case that they became entitled to, and did, rescind. The defendants have a cross claim against the plaintiff seeking damages for the plaintiff's alleged failure to fulfil his obligations under the same agreement, and the plaintiff has denied liability in respect of that claim. 2 A separate trial of the issue of liability on both the plaintiff's claim and the defendants' cross claim having previously been ordered, the hearing proceeded before me for the determination of these issues only. The hearing went into a sixth day. In the plaintiff's case evidence was given by the plaintiff, by Mr Pantaleo, whose evidence I will address shortly, and, in his case in reply, by Mr King, a building consultant. The defendants each gave evidence and Mr Brincat, who is an engineer and builder, was called in their case. It will be necessary to refer to some of the evidence given by these witnesses in the course of this judgment. 3 This unhappy litigation arises following the execution of a deed bearing date 30 September 1987. The execution of the document by the parties was not in issue, but the effect of the document most certainly was. Under the deed, the plaintiff, who owned a block of land at 560 Hume Highway, Casula, agreed to a lease of the property to the defendants for a term of ten years. 4 At the time that the deed was executed the land was vacant, but the Liverpool City Council had approved the erection of a building and carpark there, with the building to be used as a restaurant. It was in the contemplation of the parties that the defendants would occupy the building and the deed contemplated a long term lease of ten years with an option of renewal. 5 The deed (Exhibit A) contained these recitals: "1. The lessor is the registered proprietor of property 560 Hume Highway, Casula in the said State (herein called 'the property') being the whole of the land in Folio Identifier 101/747318. 2. Liverpool City Council has approved the erection on the property of a restaurant building and car park. 3. The lessor has agreed to grant and the lessee has agreed to accept a lease of the property for the term of ten (10) years and on certain conditions. 4. This deed constitutes an agreement for lease." 6 The deed recorded the agreement of the parties including the following provisions: "1. The lessor shall grant and the lessee shall accept a lease of the property for the term of ten (10) years at the rent and on the terms and conditions set out and contained in the form of lease attached to this deed. 2. Subject to delays that may be caused by: (i) weather (ii) on the part of the lessor's builder, works supervisor, works manager, subcontractors and employees or servants (iii) strikes and lockouts (iv) the supply of building materials and/or their availability (v) on account of delay of any local and/or other authority in giving any necessary approval or doing any necessary inspections; (vi) on account of delay of the lessor's lending institution doing inspections necessary to be done before funding of loan or part of loan to build; (vii) by any other matter cause or thing beyond the control of the lessor or his builder. The lessor will on or prior to 1st April 1988 erect on the property to lock-up stage ready to be fitted out and decorated by the lessee the building approved by Liverpool City Council pursuant to Building Permit No. 341/87 3. The lessee will at its cost and expense decorate, paint, carpet, tile and fit out the building and install Kitchen and any cool rooms or cooling chambers and freezer which the lessee will do to the satisfaction of Liverpool City Council and in compliance with all Statutes, Ordinances and Regulations including the Pure Food Act and its Regulations. The lessor will permit the lessee and its workmen access to go onto the property during the construction of the building to take measurements and do such works when and so often as the lessor permits but as that the lessee and its workmen not interfere with the construction work by the lessor or its builder and subcontracts. 4. At lock-up stage the term of the lease shall commence and on the commencement of its term the lessee shall pay the first month's rent. The term of the Lease shall commence on 1st April, 1988. ………….. 10. For the purpose of this deed lock-up stage shall mean when the building is erected and ready to be carpeted, tiled, painted and fitted out with light fittings, furnishings and fittings and ready for installing kitchen." 7 The second sentence of para 4 of the deed above set out was in different type from that of the balance of that clause and from the balance of the deed. The initials of the parties to the deed appear in the margin of the document beside that sentence. Plainly the sentence was added before the deed was executed, but the circumstances in which this happened did not emerge in evidence. The evidence satisfies me that the plaintiff and the defendants consulted their separate solicitors before execution. 8 The building was not completed by 1 April 1988 and I shall shortly consider the evidence concerning the delays that occurred. One problem that occurred was that defective concrete was delivered to the site and poured and this pour was followed by lengthy delay. On 27 June 1988 the plaintiff's solicitors wrote a letter (Exhibit P) to the defendants' solicitors in the terms following: "As your clients are aware certain problems have arisen in connection with the construction of building at the premises 560 Hume Highway, Casula because of low strength concrete supplied for slab. As a result of that certain tests had to be carried out on the slab and Engineer's advices obtained to ascertain whether or not slab had to be removed and another concrete slab constructed or whether same could remain and rectification works be done to put the problem resulting from low strength concrete in order. It appears that the Engineers have now decided on remedial work necessary to be done to the slab. We are, on behalf of our client, liaising with the Assessor for the concrete supplier in connection with claim being made by our client on it for damages and loss he has suffered by reason of delay caused by low grade concrete and in that connection we have furnished to Assessor what our client estimates his loss and damages at. Under the Agreement to Lease, subject to certain matters contained in it, our client was on or prior to 1st April 1988 to give to your client the property at lock-up stage ready for installation of plant equipment etc., and furnishings. Because of low grade concrete problem that naturally was not possible. It is our view that the matter was one beyond our client's control and beyond his builder's control and because of that our client is not responsible to your client under the Leasing Agreement. However, notwithstanding our view, if your clients claim our client under the Agreement for Lease is in any way liable to them because of the delay, it would be appreciated if you could immediately let us have details of what your clients consider or allege is their loss and the basis on what your clients claim that from our client. We are, as indicated above, presently liaising with the concrete supplier's Insurer claiming damage on behalf of our client and we would, if your clients have a legally justifiable claim against ours, make an additional claim on the assessor for that. If your clients alleged any loss by reason of delay it should be, as indicated, quantified and the basis of loss stated and the legal basis on which your clients rely also stated. In no way is this letter in any way an acknowledgement or indication that our client considers your clients have any claim for the delay. As stated any delay was one outside the control of our client and outside the control of his builder." 9 On 1 July the defendants' solicitors replied and their reply was received by the plaintiff's solicitors on 6 July 1988. This letter (part of Exhibit Q) was in the following terms: "We refer to your letter of 27th June, 1988. Our clients have incurred considerable losses as the result of your client's repudiation of the terms of their agreement. We will let you have an assessment of damages in due course. In view of the contents of your letter, our clients have no option but to treat the agreement for lease as at an end and hereby give notice of its rescission." 10 The letter of 1 July prompted the plaintiff's solicitors to respond on 19 July 1988 (part of Exhibit R): "We refer to your letter of the 1st instant and have now been able to obtain our client's instructions in relation to it. That letter is a clear indication that your clients no longer consider themselves bound by the Deed of Lease Agreement herein dated 30th September 1987 and it is considered it is a wrongful repudiation of that Deed of Lease Agreement. Please be advised that we are instructed to respond to such wrongful repudiation by rescinding the contract between our clients. If and when damages that flow from your clients wrongful repudiation are ascertained damages will be claimed from your clients." 11 I now turn to consider the course of construction.