Steel & Stuff Pty Ltd v Fallon Street Properties Pty Ltd [2005] NSWSC 1148

New South Wales Supreme Court

CITATION : Steel & Stuff Pty Ltd v Fallon Street Properties Pty Ltd [2005] NSWSC 1148

HEARING DATE(S) : 3 and 4 November 2005

JUDGMENT DATE : 4 November 2005

JURISDICTION : Equity Division

JUDGMENT OF : Palmer J

DECISION : Plaintiff's claim for damages upheld; Defendant's claim for possession refused.

CATCHWORDS : LANDLORD AND TENANT – Whether oral agreement that half stipulated rent would be payable until building work completed – whether the lessor, in failing to complete building work, breached implied term of lease.

Steel & Stuff Pty Ltd – Plaintiff/Cross Defendant PARTIES : Fallon Street Properties Pty Ltd – Defendant/Cross Claimant

FILE NUMBER(S) : SC 4998/04

H.J.A. Neal – Plaintiff/Cross Defendant COUNSEL : B.J. Sharpe – Defendant/Cross Claimant

Dick & Williams – Plaintiff/Cross Defendant SOLICITORS : JL & Sons – Defendant/Cross Claimant

LOWER COURT JURISDICTION :

Ex tempore

Introduction

1 By a lease dated 1 May 2003 the Defendant leased to the Plaintiff factory and office premises known as 49 Fallon Street, Albury ("the Premises"). At the time of the lease all building work on the Premises had not been completed. The Plaintiff says that its Managing Director, Mr Atkinson, made on oral agreement with the Plaintiff's Managing Director, Mr Colquhoun, shortly before the lease was executed to the effect that the rent stated in the lease, namely, $55,000 per year by instalments of $4,583 per month, would not be payable in full because of the unfinished state of the Premises, and that only half of the rent stipulated would be payable until the building work was completed. 2 The Defendant denies that such an agreement was made. The Defendant says that at some time after the lease was signed there was an agreement that the Defendant would accept half of the rent stipulated in the lease until such time as the Plaintiff established itself in the Premises and became operational. 3 The Plaintiff says that building work on the Premises has never been completed, so that the full amount of the stipulated rent has never become payable. Further, it says that because the Premises remained in an uncompleted and unsatisfactory state in breach of the covenants in the lease it was compelled to seek alternative premises in which to carry on its operations. 4 In September 2004 the Defendant gave the Plaintiff a demand for possession of the Premises on the ground that it had terminated the lease for the Plaintiff's breach of the covenant to pay the rent in full. The Plaintiff then commenced proceedings seeking an order restraining the Defendant from retaking possession of the Premises. 5 The relief which the Plaintiff now claims includes a declaration that there is a binding agreement between the parties that the Defendant would accept half of the rent stipulated in the lease until such time as the Defendant had completed all construction work on the Premises, or a declaration that the Defendant is estopped from resiling from representations to that effect. Further, the Plaintiff seeks damages for breach of express and implied covenants in the lease which, the Plaintiff says, required the Defendant to complete the building work required to make the Premises fit for occupation and use within a reasonable time. The Plaintiff says that because such work was not carried out the Premises remained entirely unsuitable for the Plaintiff's business so that in June 2004 it was compelled to transfer the major part of its business operations to new premises which it leased for that purpose. The Plaintiff claims by way of damages the cost of transferring its business to the new premises and the rent payable in respect of the new premises, subject to certain deductions, on the grounds that such expenses would not have been incurred had the Defendant not breached the covenants in the lease. 6 The Defendant cross claims, seeking an order for possession of the Premises and outstanding rent in the sum of $132,131.46. 7 There are a number of subsidiary issues relating to various items disputed between the parties, to which I will come in due course. The first question is: was there an oral agreement between the parties to accept half of the stipulated rent, as the Plaintiff alleges?