Andrews Property Investments Pty Ltd v Aquesta Pathology Pty Ltd [2017] QDC 290

DISTRICT COURT OF QUEENSLAND CITATION: Andrews Property Investments Pty Ltd v Aquesta Pathology Pty Ltd [2017] QDC 290 PARTIES: ANDREWS PROPERTY INVESTMENTS PTY LTD (ACN 097 051 762) (plaintiff) and AQUESTA PATHOLOGY PTY LTD (ACN 131 685 704) (defendant/respondent) v EMILY YAU (first third party applicant) and WF YAU PTY LTD (ACN 149 854 857) (second third party applicant) and MICHAEL QUINN (third third party) and QS LAW PTY LTD (ACN 151 393 654) (fourth third party) FILE NO/S: B1659/15 DIVISION: PROCEEDING: Application ORIGINATING COURT: District Court of Queensland DELIVERED ON: 5 December 2017 DELIVERED AT: Brisbane HEARING DATE: 4 December 2017 JUDGE: Andrews SC DCJ ORDER: 1. Pursuant to r. 293 of the Uniform Civil Procedure Rules 1999, judgment for the first and second third parties on the defendant’s third party claim. -- 1 of 8 -- 2 2. The defendant pay the first and second third parties’ costs of the application and their costs of the proceeding. CATCHWORDS: Application for summary judgment COUNSEL: G. Handran for the applicant, first and second third parties SOLICITORS: Hyland Law for the applicant, first and second third parties AJ & Co Lawyers for the defendant Application [1] The first and second third parties (applicants) apply for: 1. Summary judgment against the defendant in the third party claim brought by the defendant against them; 2. Alternatively, that the third party claim be struck out pursuant to r. 171(a) of the UCPR; 3. Further or alternatively, that the defendant provide security for costs of and incidental to the third party claim in the sum of $60,000 within 14 days and failing that that the third party claim against them be dismissed or stayed until the security is provided. [2] The plaintiff lessor (lessor) leased premises being unit 2/52 Douglas Street, Milton to the defendant lessee (lessee) for a term of five years commencing on 1 November 2008, expiring 31 October 2013. The unit is a two-storey property comprising a lower level with an upper mezzanine. The mezzanine is 60 square metres and the lower level is 98 square metres. The permitted use was as commercial office and/or pathology laboratory. The landlord appointed CB Richard Ellis (CBRE) as its manager and agent to provide management services and leasing services. [3] The third party proceeding between the lessee and the first and second third parties is a proceeding between the lessee and solicitors who acted for the lessee for a short time. I will call the first and second third parties the applicant solicitors. Repair obligations [4] An issue arose on this application about the repair obligations arising under the lease: which repair obligations fell upon the plaintiff lessor and which repair obligations fell upon the defendant lessee? The applicant solicitors conceded that generally the plaintiff lessor was responsible for keeping the building in repair. By clause 10.13 of the lease the lessee was obliged to immediately inform the lessor of any repair required for which the lessor was responsible. By clause 10.14 the lessor had at all reasonable times, subject first to giving the lessee 48 hours’ notice, liberty to enter the premises to view the state of repair and condition. By clause 10.16 the lessor was at liberty, at all reasonable times upon giving the lessee reasonable notice, to enter the premises and carry out any of the repairs, provided that the lessor shall endeavour not to cause undue inconvenience to the lessee and the use of the premises by the lessee. [5] But the lessee also had obligations. Among them, the lessee, by clause 21.2, had an obligation to procure the completion of Lessee’s Works and, on completion of those, the lessee was obliged to obtain final clearance certificates from the Local Authority -- 2 of 8 -- 3 and from any other relevant Statutory Authority. As well, by clause 12.1(d), the lessee was obliged, at its cost, to comply with all laws and legal requirements concerning the premises, the permitted use and the use and occupation of the premises and to comply with all occupational health and safety legislation and to keep the premises in a manner which complies with that legislation, it being agreed that for the purposes of that legislation the lessee is the occupier of the premises and has responsibility for control of the premises. [6] The lease gave the lessor rights to enter and repair on no less than three bases: 1. By clause 10.16 the lessor had a right to carry out necessary repairs which the lessor was obliged to do under the lease, and certain other repairs “at all reasonable times upon giving to the Lessee reasonable notice (except in the case of emergency when no notice shall be required)… provided that the Lessor shall endeavour not to cause undue inconvenience… to the Lessee and the use of the Premises by the Lessee”; 2. Clause 15.2(b) gave the lessor liberty, upon giving reasonable notice (except in the case of emergency when no notice is required) to enter the Premises at all reasonable times to… install, maintain or repair the Building or the Building Services provided that the Lessor uses reasonable endeavours not to materially interfere with the Lessor’s use or occupation of the Premises; 3. By clause 15.2(d) the lessor was given liberty, upon giving reasonable notice (except in the case of emergency when no notice is required) to enter the Premises at all reasonable times to carry out any maintenance, repair or building works to the Building… and the Building Services provided that the Lessor uses reasonable endeavours not the materially interfere with the Lessee’s use or occupation of the Premises. Lease clause 16.1 (b) [7] A clause of the lease at the heart of the proceeding is 16.1(b) which provides: 16.1 Damage to of destruction of Building/Premises If the Premises, the Building and/or the Land or any part of them shall at any time be damaged or destroyed so as to render the Premises or any part of them wholly or substantially unfit for the occupation and use of the Lessee or (having regard to the nature and location of the Premises and the normal means of access) wholly or substantially inaccessible then – … (b) If the Lessor does not within a reasonable time (having regard to the nature and extent of the damage or destruction and in any event being a period of not less than 1 month) commence to (as appropriate) reinstate the Premises or make them fit for the occupation and use of, or render them accessible to the Lessee, the Lessee may serve on the Lessor notice in writing of intention to terminate this Lease, and unless the Lessor shall within 4 months of that notice reinstate the Premises or make them fit for the occupation and use of, or render them accessible to the Lessee, the Lessee may terminate this Lease by giving a further written notice to the Lessor terminating this Lease; immediately on the giving of such further notice, this Lease shall be at an end;… [8] On 11 January 2011 the premises sustained flood damage. The ground floor of the premises was inundated with flood water. It was wholly or substantially unfit for use or occupation. Walls, floors, doors, cabinets and part of the lessee’s fitout were damaged. Before the flood, the lessee moved all business stock and equipment to the mezzanine level. -- 3 of 8 -- 4 [9] On 17 and 18 January contractors, at the request of Ms Barrett of CBRE attended at the premises and gained access to quote on repairs. [10] The first argument for the applicant solicitors is that sending contractors into the premises for the purpose of quoting was, within the meaning of those words in clause 16.1(b) to “commence to (as appropriate) reinstate the Premises or make them fit for the occupation and use of, or render them accessible to the Lessee” and that the lessor complied with that obligation “within a reasonable time”. [11] I reject that argument on the basis that the objective intention of the clause in this commercial document was more likely to compel the lessor to commence work than to compel it to get a quote. The obligation to “commence to (as appropriate) reinstate the Premises” can be distinguished from an obligation to “commence to (as appropriate) take steps to reinstate the Premises”. Had the words “take steps to” been inserted, they would have indicated that necessary preparatory steps like obtaining a quote would have been sufficient to discharge the lessor’s obligation. But there were no such words. If the obligation had been no more than to obtain a quote within a reasonable time it would have freed the lessor from an obligation to commence reinstatement in a reasonable time. [12] By 28 January 2011 the lessee was in occupation and working. Bearing in mind that it had moved all its stock and valuable equipment upstairs to the mezzanine floor, I infer that such work as it did at the premises was done on the mezzanine floor. [13] On 4 February 2011 a different firm of solicitors advising the lessee, Quinn & Scattini Lawyers, wrote with several pieces of advice. One was that clause 16.1(b) was the lessee’s best chance to terminate the lease. The advice explained that the criteria the lessee would need for a successful termination were:– a. The Landlord does not within one (1) month of the flood event commence to reinstate the premises and make them fit for occupation and use (relevant date 11 February 2011); b. After that first month has passed; you serve Notice on the Landlord of your intention to terminate the Lease; requiring the Landlord to reinstate the premises within four (4) months of your Notice; c. The Landlord does not reinstate the premises within four (4) months from the date of your Notice; d. You give a further Notice to terminating the Lease immediately. [14] On 4 February 2011 building contractors (TBM) provided a quote for repairs to the lessee’s property but also a quote for “Tenant Work” at the premises. The quote was on the basis that the tenant move out so that the work could be done in a timely way. The quote for the tenant work included replacing “cabinet benchtops for the following. All cabinets and benchtops in sink area, benchtop in storage area… replace vinyl floor edging only, 150mm on floor and 100mm wrapped up wall. All plumbing and electrical included”. There was also a quotation received from MRM Services (MRM). Significantly, with respect to “Tenant Work” MRM also referred to replacing all cabinets and benchtops in “sink area” and referred to replacing vinyl floor edging. [15] The significance of the quotes is the identification of Tenant Work as including benchtops in sink area and vinyl floor edging wrapping up the wall. One cannot insert -- 4 of 8 -- 5 a sink into a benchtop unless the benchtop has been constructed. One cannot plumb a sink until it is in the benchtop. Without a 150 mm vinyl floor edge wrapping 100 mm up a wall, the floor and wall would give the appearance of being unfinished. Photographs at Exhibit DJA6 to the affidavit of Mr Andrews were relied upon by Mr Moriarty for the lessee. He submitted that the photographs were taken on 6 June 2011. I accept that. He submitted that they show two sinks on the floor. I accept that. They also show where the two sinks rest on the floor and that the floor covering ends before it reaches the wall. The unfinished floor covering is consistent with the floor covering ending where cabinets were to be installed including benches which might have held sinks. It was submitted by Mr Moriarty that the photographs also showed some missing skirting. They are more consistent with revealing the absence of vinyl floor edging. [16] On February 2011 the applicant solicitors wrote on behalf of the lessee to the lessor: Please take notice that pursuant to clause 16 of the Lease, our client gives notice of intention to terminate this Lease unless your client within 4 months of this notice reinstates the premises or make them fit for the occupation and use of our client as a pathology or to enable our client to meet the clause 12 of the Lease. It is strongly arguable that the notice was given by the applicant solicitors five days too early to be a notice contemplated by clause 16.1(b) and, it follows, too early to create a potential right in the lessee to terminate the lease four months after service on the lessor. Prima facie, service of the notice by the applicant solicitors five days too early constituted a failure to take reasonable care for their client, the lessee. The lessee contends that the applicant solicitors should have served the notice on the lessor on or about 11 February but not earlier. The lessee contends that, but for the breach of care, the lessee would have served on the lessor a written notice terminating the lease on or about 11 June 2011. The ability to terminate the lease on 11 June 2011 presupposes that the premises had not been reinstated by the lessor by 11 June 2011 so as to be fit for occupation by the lessee. That factual premise is put in issue by the lessee’s solicitor, Mr Moriarty, in argument. The lessee has pleaded at paragraph 12 of its statement of claim against the third parties that the premises were not reinstated fully nor fit for use as a pathology laboratory or the occupation and use of the lessee by 11 June 2011. [17] By 9 February 2011 the lessee was in occupation of the premises with staff working. [18] On 15 February 2011 solicitors for the lessor wrote to the applicant solicitors, replying to their letter of 6 February, asserting that a significant amount of the lessee’s fitout would need to be removed to allow the lessor to access the premises which it was obliged to repair. The letter also suggested the appointment of one contractor to do the rectification works required by both parties and had other suggestions for compromise. The letter ended noting that, absent agreement, “in order that it may comply with its repair obligations under the Lease, our client will require access to and control of the premises for a period of seven (7) days … it would be our client’s intention to commence the relevant works on 21 February 2011 … urgently confirm whether or not your client is prepared to accept our client’s terms.” [19] The applicant solicitors ceased acting for the lessee by 2 March 2011. [20] On 18 March 2011 Quinn & Scattini, solicitors advised the lessee that the letter from the applicant solicitors of 6 February 2011 should have been given no earlier than 11 February 2011. -- 5 of 8 -- 6 [21] On 4 April 2011 TBM provided an amended quotation for flood repair works to CBRE omitting the repairs to the lessee’s works. [22] On 5 April 2011 CBRE notified the lessee that the lessor had instructed CBRE to repair the property without any further delay; that TBM had been engaged to do the lessor’s repairs; that TBM would commence on 11 April 2011 and that the works would take between 14 to 21 days when the premises would need to be closed. Quinn & Scattini replied for the lessee that the pathology equipment was expensive and delicate, would need to be removed from the premises prior to any works being undertaken, that the lessee was not able to do that by 11 April and that access would not be given to the contractor. They advised that the lessee would let CBRE know when alternative arrangements for access could be given. [23] On 8 April solicitors for the lessor wrote to solicitors for the lessee that absent agreement by 15 April the lessor would have no alternative but to arrange for its contractors to attend the premises on 27 April to effect works. [24] On 15 April solicitors for the lessee replied that the lessee had alternative premises but it would take time to move the equipment out and that the lessee estimated that it would be at least three weeks “before it can move out”. I calculate that to be at least 6 May 2011. [25] On 20 April 2011 the lessor’s solicitors wrote to the lessee’s solicitors requesting that the lessee advise when the lessor could have access to reinstate the premises and absent a satisfactory response by 21 April that the lessor would access the premises on 3 May to attend to the works. [26] On 29 April 2011 solicitors for the lessor confirmed that it would access the premises on 3 May to commence relevant repair works. The lessee’s solicitors replied on 29 April that the lessee had difficulty getting tradesmen to make alternative premises fit to receive the pathology equipment and advised that access could be given by the end of May, not on 3 May. [27] On 4 May the lessor made another demand for access to the premises forthwith for the purpose of effecting rectification works and threatening the commencement of proceedings. [28] On 16 May the lessee’s solicitors advised that the lessee had been able to move pathology equipment earlier than expected and that the lessor could “now have access to carry out its works” and that “the most delicate equipment has been offsite for months and there is only minimal use of the premises”. [29] The lessee has an arguable claim against the applicant solicitors that they breached a duty of care by sending a clause 16 letter to the lessor prior to 11 February 2011. The causes of action against the applicant solicitors are not complete without proof that the lessee lost the right to terminate the lease and that the loss of the right was caused by the applicant solicitors. [30] The lessee does not argue that the works should have been performed by the lessor before 11 June 2011. Would the lessee have had a right to terminate the lease on 11 June 2011 if the applicant solicitors had written their letter to the lessor on 11 February 2011? -- 6 of 8 -- 7 [31] There is evidence that a part of the premises was rendered substantially unfit for the occupation and use of the lessee on 11 January 2011; that not less than one month later, on 11 February 2011, the lessor had not commenced to reinstate the Premises; that on 11 February 2011, but not before that date, the lessee had liberty to serve a notice under clause 16.1 on the lessor of intention to terminate the lease; that if it had done so, unless the lessor within four months of 11 February 2011 had reinstated the premises or made them fit for the occupation and use of, or rendered them accessible to the lessee, the lessee would have been at liberty to terminate the lease by giving a further written notice to the lessor terminating the lease; that the lease would thereupon have terminated. [32] The lessee’s liberty to terminate was arguably conditional upon the lessor’s failure to reinstate the Premises or make them fit for the occupation and use of the lessee by 11 June 2011. There is no issue that the premises were not accessible to the lessee. [33] Is there is an issue fit to be tried about whether the lessor had by 11 June done sufficient to reinstate the Premises or make them fit for the occupation and use of the lessee. [34] The lessee’s arguments on this issue are that: 1. Contractors were still onsite on 7 June 2011 and further works were to be undertaken (p 308 of affidavit of Andrews); 2. Photos taken on 6 June (Exhibit DJA6 of affidavit of Andrews) show that repair works were not finished and a trial is required to determine if the premises were therefore reinstated; 3. Invoices from TBM dated 8 June 2011 are not reliable evidence of completion of works because they do not list what works were undertaken on 7 June 2011. 4. The proper deponent of the affidavit of Mr Andrews ought to be Ms Barrett given she took photos and liaised with contractors. [35] I note that the lessee read and relied upon the affidavit of Andrews. From within that affidavit, Mr Moriarty relied upon the email from Ms Barrett of CBRE admitting that contractors were still onsite on 7 June. The email advised that there was a power point found to be faulty on 6 June, that an electrician was engaged and that that repair was completed that morning of 7 June. Ms Barrett expressed the view that a strip of skirting for the toilets would be completed that afternoon and would take 20 minutes. [36] No objection was taken by the lessee to the affidavit’s contents or the admissibility of photos taken by or emails sent by Ms Barrett. The lessee relied upon Ms Barrett’s email of 7 June 2011 (Andrews at page 308) as evidence of the truth of one of Ms Barrett’s assertions. I regard submission 4 in the paragraph above as a warning to be careful about the weight to be given to secondary evidence of what Ms Barrett saw and heard on 6 and 7 June 2011. It was not submitted that there was any reason to doubt what Ms Barret stated in her email. [37] I am satisfied that there is no issue fit to be tried about whether the electrical repair and strip of skirting were attended to before 8 June 2011. [38] It was not expressly submitted by Mr Moriarty that a missing strip of skirting for the toilets would prevent the Premises from being reinstated. I infer that he sought to show that skirting was missing as support for an argument that I could not be satisfied that even further items were unattended to; that Ms Barrett’s opinion and contractor’s invoices were insufficient evidence of the completion of necessary works. Mr -- 7 of 8 -- 8 Moriarty referred to the photographs described by me earlier in these reasons. They do not appear to have been photographs of skirting for toilets but appear, where wall edging appears to have been missing, to have been more like images of vinyl edging the responsibility of the lessee. I am not satisfied by the material to which Mr Moriarty referred that there were any electrical or skirting deficiencies. Mr Moriarty relied on the appearance of sinks on the floor and the failure to plumb them. That does not assist the lessee. If the sinks were the lessor’s responsibility, I am not satisfied that the lessor was obliged to install the sinks before the lessee had installed the lessee’s benches. I accept the submission for the applicant solicitors that the lessor’s obligation to reinstate the premises or make them fit for the occupation and use of the lessee is to be considered in the context of the lessee’s obligation to be responsible for its own lessee’s works. It is not clear that the plumbing of the sinks was the lessor’s responsibility. If it had been the lessor’s responsibility to plumb the sinks I do not accept that it would have been a breach for the lessor of the obligations set out in clause 16.1(b), for the lessor to postpone that plumbing until the lessee had done its works. Mr Moriarty stressed a photograph of what may have been a fire extinguisher unattached to a wall and standing on a shelf. Assuming that to be so, he submitted that there was legislation requiring it to be attached. Bearing in mind clause 12.1(d) of the lease imposes any such obligations on the lessee, I am not satisfied that this raises an issue fit for trial. [39] The issue is whether a right for the lessee to terminate the lease would have arisen, with the consequence that the applicant solicitors’ breach of duty to the lessee caused the lessee to lose the right to terminate. I am satisfied there is no real prospect of the lessee succeeding against the solicitor applicants on the issue and thus there is no real prospect of succeeding on its claim against them and there is no need for a trial of the third party claim by the lessee against the applicant solicitors. [40] I infer that the applicant solicitors do not seek the alternative relief. -- 8 of 8 --