New South Wales Supreme Court CITATION : Pel Air Aviation Pty Limited v Rossi & Anor [2007] NSWSC 1056 This decision has been amended. Please see the end of the judgment for a list of the amendments. HEARING DATE(S) : 19/09/2007 JUDGMENT DATE : 27 September 2007 JUDGMENT OF : Associate Justice Malpass DECISION : The appeal and the cross-appeal both fail. The Summons is dismissed. The plaintiff is to pay the costs of the Summons. The Cross-Summons is dismissed. The defendants are to pay the costs of the Cross-Summons. CATCHWORDS : One proceedings - two separate claims - two judgments - bond moneys and credit - no set-off on cross-claim - costs decision - no error in point of law or mixed question of law and fact CASES CITED : Browne v Dunn (1893) 6 R 67 Pel Air Aviation Pty Limited (Pl) PARTIES : Robert Rossi (1st Def) Anthony Rossi (2nd Def) FILE NUMBER(S) : SC 15214/06 COUNSEL : Mr R. Scruby (Pl) Ms N. Obrart (Def's) SOLICITORS : David Hand, Solicitor (Pl) C P White & Hetherington (Def's) LOWER COURT JURISDICTION : Local Court LOWER COURT FILE NUMBER(S) : 1357/05 LOWER COURT JUDICIAL OFFICER : Dillon LCM LOWER COURT DATE OF DECISION : 24/04/2006, 28/09/2006 - 1 - IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION ASSOCIATE JUSTICE MALPASS 27 SEPTEMBER 2007 15214/06 Pel Air Aviation Pty Limited v Rossi & Anor JUDGMENT 1 HIS HONOUR: By lease dated 8 November 2002, Robert Rossi (RR) leased premises known as Unit 3, 26 Kent Road, Mascot to Pel Air Aviation (Pel Air). 2 By lease dated 30 November 2002, Anthony Rossi (AR) leased premises known as Unit 4, 26 Kent Road, Mascot to Pel Air. 3 Pel Air provided a bond in relation to both Units. It was held by the real estate agent acting for the lessors (Mr Taylor) in an interest bearing account. The bond had been provided as security for the performance by Pel Air of its obligations under the leases. 4 Pel Air vacated Unit 3 on or about 27 October 2004. It vacated Unit 4 on or about 12 January 2005. 5 Disputes arose concerning unpaid rent, outgoings, repair and rectification costs (these repair and rectification costs came to be generally referred to as rectification costs). Mr Taylor purported to apply the bond moneys (then in the amount of $18,185.22) in reduction of what was alleged to be due in respect of Unit 3. 6 There seems to have been some confusion in what was done by RR and AR in respect of the bond moneys. Initially, it had been asserted that they had been applied in respect of rectification costs. It later emerged (in evidence adduced in the Local Court) that the purported application related both to rectification costs and other claims in respect of Unit 3. 7 RR and AR brought one proceeding in the Local Court. What was claimed came to be presented in an amended form. It was separated into two claims. Ultimately, the amount claimed in respect of Unit 3 was as follows:- "$9402.31 for rent and outgoings on Unit 3 $10,812.80 for repairs and rectification on Unit 3 less: $18,185.22 (the amount of the bond) Total: $2,029.89" (this calculation was made on the basis that a credit had been allowed in the sum of the bond moneys) Ultimately, the amount claimed in respect of Unit 4 was as follows:- "$16,594.44 for rent and outgoings $27,400 for repairs and rectification Total: $43,994.44" 8 These amounts for rent, outgoings and rectification costs (as calculated by Counsel for Pel Air) were the totals of each category, which comprised various smaller items. I will deal with the individual items in due course. 9 The matter went to a hearing. There came to be three judgments delivered. The first of them is of no consequence for present purposes. 10 On 24 April 2006, Dillon LCM delivered his principal judgment. RR recovered judgment in the sum of $5,828.53 (which was later reduced to $5,464.34 by application of the slip rule). AR recovered judgment in the sum of $14,281.90. On 28 September 2006, Dillon LCM delivered a further judgment. In that judgment, he dealt with the slip rule matter and ordered, inter alia, that Pel Air pay 50% of the costs of RR and AR. 11 Pel Air has brought an appeal to this Court. It now proceeds on an Amended Summons. It contains four grounds of appeal. RR and AR have responded with a Cross-Summons. They now proceed on what is referred to as an Amended [First] Cross-Claim. What is described therein as a Cross-Appeal has been brought out of time and an extension for the bringing of the same is sought. It contains one appeal ground, which does not identify any alleged error in point of law. No claim is made therein for leave. 12 The hearing took place on 19 September 2007. The parties were represented by Counsel. There have been written submissions, supplemented by oral argument. 13 Before proceeding further, I should mention certain of the unusual features about this case. These presented the Magistrate with a number of difficulties. 14 One set of proceedings was used to advance two independent claims. In the Ordinary Statement of Claim, the plaintiffs made a joint claim in the sum of $61,625.00. After the commencement of the proceedings, the presentation of the claim came to be in the form earlier mentioned in this judgment (as two separate claims, one being brought by RR in the sum of $2,029.89 and the other being brought by AR in the sum of $43,994.44). In dealing with the claims presented in this form, the Magistrate came to consider them separately and to enter two judgments. By the time of the hearing of this appeal, Pel Air had abandoned any complaint about the taking of this course by the Magistrate. 15 Certain background material may assist in explaining the confused state of affairs. Both units came to be acquired by Giuseppe and Filomena Rossi in 1990. Mr Rossi died in 2001. Some time thereafter, Mrs Rossi came to be the registered proprietor. She gave a power of attorney to her children RR and AR. In her absence, the leases came to be executed pursuant to the power of attorney. RR executed one of the leases and AR executed the other. 16 The joint claim as presented in the Ordinary Statement of Claim made no mention of the bond. Also, the bond was not mentioned in the Amended Notice of Grounds of Defence. As a consequence, no set off or cross-claim was raised in respect of it. 17 I shall now deal with the findings made in respect of the items and amounts claimed for each of the two units. 18 In respect of Unit 3, The Magistrate allowed an amount in the sum of $3,016.71 for rental, an amount of $2,183.81 for strata levies, an amount of $78.54 for insurance, an amount of $9.47 for water rates and amount of $540.00 for cleaning. He disallowed an amount of $4,113.78 for loss of rent, an amount of $8,780.00 for painting and amounts of $984.50 and $454.30 for repairs. The total of the amounts allowed was $5,828.53. It was subsequently reduced to $5,465.34 by the disallowance of the amounts of $78.54 and $9.47 pursuant to the slip rule. The total amount was not reached by the taking into account of the bond moneys. In so doing, the Magistrate appreciated that he had disallowed amounts claimed, which had been the subject of the purported application of bond moneys, and that it was no longer appropriate to treat the sum of the bond moneys as a credit. 19 In respect of Unit 4, he allowed most of a claim for rental in the sum of $11,358.41, an amount of $1,118.95 for strata levies, an amount of $928.90 for council rates and an amount of $172.68 for land tax. The total of the allowed items was $14,281.90. He disallowed an amount of $4,936.43 for loss of rent, an amount of $15,060.00 for painting, a further amount of $8,740.00 for painting and an amount of $3,600.00 for repair works. An amount for $108.95 in respect of water rates was not pressed. 20 In the principal judgment, the Magistrate observed as follows:- "52. … Indeed, it would have been open to the defendant to claim a set-off but that was not pleaded in its defence. It remains open, in my view, for the defendant, as it was apparently not consulted about the application of the security deposit to the rectification of the premises, to bring proceedings to reclaim its deposit either in full or in part. That is, however, an issue not before this court." 21 Largely, the submissions made in this Court on behalf of Pel Air concerned an alleged error of law in failing to give it a deduction in respect of the bond moneys against both claims. There was an additional minor matter, which concerned the sum of $540.00 (which was allowed for cleaning costs). 22 In my view, those submissions were misconceived. I do not consider that the Magistrate was required to take the bond moneys into account in his calculation of the judgment debts. Accordingly, I see no error in what was done by him in respect of that matter. He allowed the amounts that had been made out by RR and AR and left Pel Air to pursue its rights in respect of the bond moneys. In so doing, he dealt with the issues as they had been raised in the pleadings. He left it open to the parties to resolve in the future what should happen to the bond moneys. One possibility is to see them applied in part payment of the judgment debts. Another is to litigate any issues had between them concerning those moneys. For these reasons also, I am not satisfied that Pel Air is entitled to relief in respect of the small sum of $540.00. 23 Pel Air also challenged the decision made as to costs. This was a challenge that was only open if leave was granted. 24 What was said as to the relevant order made as to costs was in the following form:- "33. In relation to the rest of the proceedings, the defendant is to pay 50 per cent of the plaintiffs' costs in a sum agreed or assessed on the party and party basis." 25 There was some debate as to whether or not what was said could be construed as making one order only or two orders in respect of costs (it was being said by Pel Air that there should be two costs orders because there were two judgments). It seems to me that such a matter does not need to be pursued. There did not seem to be dispute concerning the proposition that whether there be one or two orders, the amount payable in respect thereof would be the same. 26 The challenge to costs depended on the success of the other grounds of appeal. As these have failed, there is no manifest error in what was done by the Magistrate in respect of costs. 27 For this reason alone, no case for the granting of leave could have been made out. Leaving that matter aside, the question of costs does not engage any question of policy or public interest. 28 I now turn to the Cross-Summons. It concerns solely the items disallowed for rectification costs. 29 The Magistrate dealt with the claim for rectification costs in paragraphs 30-39 of his principal judgment. 30 Pel Air had been in occupation of Units 3 and 4 for a considerable period of time prior to the commencement of the leases. Largely, the evidence relied on by RR and AR was inspection reports from Mr Taylor relating to the time at which possession was given up under each of the leases. 31 Two general submissions were advanced on behalf of Pel Air before the Magistrate. One concerned the entitlement of RR and AR to maintain the claim for rectification costs (it was being said that they could not prove that they, rather than Mrs Rossi, had suffered the loss claimed). The other was that it was incumbent upon RR and AR to prove that the damage claimed by them was caused during the period of the leases (as opposed to prior thereto) and that there was no evidence as to the state of the premises at the time of the commencement of the leases. 32 In his principal judgment, the Magistrate observed as follows:- "34. In my view, the rule in Browne v Dunn (1893 6 R 67) was not breached by the defendant. The rule requires a cross-examiner to put fairly and squarely to the witness being cross-examined those matters in relation to which the cross-examining party proposes to contradict the witness by evidence or where the cross-examining party intends to submit that the facts are contrary to those asserted by the witness. That is, if a party intends to put a positive proposition to the contrary of that asserted by the witness being cross-examined, the cross-examiner must raise those issues with the witness (unless, of course, those matters have previously been raised, for example, in witness statements or affidavits served by the cross-examining party upon the other side). 35. In this case, however, the plaintiff bears the onus of proving the breach of contract by the defendant. The defendant's submission, when distilled, is simply that the plaintiffs have not discharged their onus of proof. The defendant has not positively asserted that the damage done to the premises was done outside the period of the lease; it simply says that the plaintiff has not proved that its assertion that the damage was occasioned during that period. In my view, the onus remains upon the plaintiff to prove its assertion." 33 The Magistrate considered the evidence (inter alia, he noticed the absence of inspection reports as contemplated by Clause 21 of the lease agreements). Clause 21 is as follows:- "Both Parties Agree That … 21. The landlord or his agent shall inspect the premises at the commencement of the lease and on its termination and take note of their condition including state of cleanliness, state or repair, and working order of appliances." 34 The submissions made on behalf of RR and AR in this appeal were inconsistent with the performance of such obligations by the lessors at the commencement of the leases. It appears to be the position that there was no evidence as to the condition of the premises at the time of the commencement of the leases. 35 Save for the allowing of the sums of $540.00 and $594.00 for cleaning costs, he came to the view that the onus had not been discharged. 36 In his principal judgment he further observed as follows:- "37. … It is therefore reasonable to infer that at least some of the damage done or dirt and rubbish seen in the photographs accumulated during the period of the lease. For example, the photographs show abandoned furniture, bits of rubbish on unswept floors, and dirty bathrooms. It is, in my view, a matter of commonsense that the furniture, rubbish and dirt in the bathrooms is likely to have been left there in the usual hurry by vacating tenants to leave and move to their new premises." 37 It appears to me that it was these observations that led him to the allowing of the two sums for cleaning costs. 38 On behalf of RR and AR, Counsel put a number of arguments suggesting that there had been error on the part of the Magistrate. It is unnecessary to expressly deal with all of them. All were without substance. Largely, the arguments were directed to demonstrating that there was evidence that should have led the Magistrate to a different view (it is unclear whether or not all or any of these arguments were ever ventilated during the hearing before him). It was suggested that his finding of it being reasonable to make the inference as to some damage or dirt and rubbish (which appears in paragraph 37) was inconsistent with what was ultimately decided by him. It was also said that he erred in dealing with the rule in Browne v Dunn. 39 I do not accept any of these arguments. It might be added that it was never really explained how it was said that he erred in relation to the rule in Browne v Dunn. 40 In substance, what Counsel was seeking to do was to bring a challenge on the merits. The Magistrate's decision was reached by findings of fact. There was no error of law. There was no question of mixed law and fact that could have been the subject of a leave application. The question of extension of time was left untouched. 41 The appeal and the cross-appeal both fail. The Summons is dismissed. The plaintiff is to pay the costs of the Summons. The Cross-Summons is dismissed. The defendants are to pay the costs of the Cross-Summons. The exhibits may be returned. ********** 28/09/2007 - Duplication of words in heading of judgment - Paragraph(s) heading of the judgment in the imported text DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.