Polyaire Pty Ltd v 167 Prospect Highway Pty Ltd

1. [1]

   LEEMING JA: I agree with Payne JA.

2. [2]

   PAYNE JA: This is an appeal from a decision of Ward P, sitting in the Equity Division: 167 Prospect Highway Pty Ltd v Polyaire Pty Ltd [2025] NSWSC 1144.

Overview

1. [3]

   On or around 1 August 2014, the appellant, Polyaire Pty Ltd, and the respondent, 167 Prospect Highway Pty Ltd, entered into a lease for warehouse premises at Unit 2, 167 Prospect Highway, Seven Hills NSW 2147. On 3 November 2018, a fire destroyed those premises and an adjoining warehouse, Lot 17, owned by the respondent.

2. [4]

   On 23 November 2022, the respondent commenced proceedings against the appellant in the Equity Division seeking damages in the sum of $13,134,974.25, plus interest and costs. Shortly put, the respondent’s case was that the appellant was responsible under the lease for damages for the destruction of the leased premises and the adjoining warehouse as a result of the fire.

3. [5]

   The matter was heard by the primary judge on 18 and 19 August 2025. By the time of the hearing, only two issues remained to be determined, being first, the proper construction of the lease and, secondly, the quantum of lost rent and outgoings. That second issue is no longer pressed on appeal.

4. [6]

   The primary judge summarised her Honour’s conclusions as follows:

5. [7]

   There was ultimately no dispute before the primary judge about the mechanism by which the fire originated. The appellant stored air conditioning unit components on pallets, which were placed on a hardstand in the open air outside the warehouse. The air conditioning units were packed with corrugated cardboard and covered by transparent plastic sheets. When it rained, water pooled in depressions in the plastic, creating an “aqua lens”. When the sun shone on the aqua lens at the right angle, the light rays were concentrated on the cardboard, and that coupled with there being a sufficient breeze caused the cardboard to ignite.

6. [8]

   The fire started by the ignited cardboard destroyed both the warehouse leased by the appellant as well as the adjacent warehouse which was also owned by the respondent (Lot 17), occupied by another lessee (Blessington Pty Ltd).

The terms of the Lease

1. [9]

   Clause 1 of the Lease (headed “Exclusion of Statutory Provisions”) provided:

2. [10]

   Clause 2.1, the definitions clause, included the following definitions:

3. [11]

   Clause 2.3 provided that headings are inserted for convenience and do not affect the interpretation of the Lease.

4. [12]

   Clause 5 (headed “Damage to Premises”) provided:

5. [13]

   Clause 6.1 provided that the Lessee must use the Premises only for the use stated in the Reference Schedule. The use stated in the Reference Schedule was “Manufacturing of sheet metal, insulation and ductwork for air conditioning installations and the manufacture, assembly, distribution and storage of air-conditioning components and other products that the Lessee may own or have an interest in and associated offices”.

6. [14]

   Clauses 7.1 and 7.2, under the heading “Repairs and Maintenance and Compliance with Laws”, relevantly provided:

7. [15]

   Clause 9 (under the heading “Insurances”) provided, relevantly:

8. [16]

   Clause 10.3 (under the heading “Indemnities and Release”) relevantly provided:

9. [17]

   Clause 12.1(a) (under the heading “Additional Covenants and Acknowledgements by the Lessee”) provided:

10. [18]

    Clause 12.5, under the same heading, provided:

The primary judgment

1. [19]

   There was no dispute between the parties about the principles of contractual interpretation which applied to commercial leases such as this one. It was also accepted that the meaning of terms in a commercial contract should be determined by reference to what a “reasonable businessperson” would think: Royal Botanic Gardens and Domain Trust v South Sydney City Council (2002) 240 CLR 45; [2002] HCA 5; Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640; [2014] HCA 7 at [35].

2. [20]

   It was also common ground that the proper construction of the contract should be determined objectively by reference to text, context and purpose: Mount Bruce Mining Pty Ltd v Wright Prospecting [2015] 256 CLR 104; [2015] HCA 37 at [46]-[52] per French CJ, Nettle and Gordon JJ; Simic v New South Wales Land and Housing Corp (2016) 260 CLR 85; [2016] HCA 47 at [78] per Gageler, Nettle and Gordon JJ. It was agreed that like terms should be construed consistently or, in the event they cannot be, in a natural or commonsense way: Fitzgerald v Masters (1956) 95 CLR 420 at 437 and Bowen Investments Pty Ltd v Tabcorp Holdings Pty Ltd (2008) 166 FCR 494; [2008] FCAFC 38 at [50].

3. [21]

   Whilst the primary judge addressed the claims in the order presented by the parties at trial, claims relating to cl 7, cl 12 and, finally, cl 10, on appeal that order was reversed. As will become apparent, that was the correct order in which to address the issues.

4. [22]

   In relation to each way that the respondent alleged it was entitled to succeed, cl 10.3 and cl 12, the critical question before the primary judge was causation. The appellant submitted that on its true construction the Lease (including cll 10.3, 12 and 7) provided that the appellant’s relevant act, storing the air-conditioning parts wrapped as they were in cardboard and covered in plastic on the hardstand outside the warehouse, was required to be shown to be the immediate, true or proximate cause of the destruction of the warehouses whilst the respondent submitted that it was sufficient that it be a material cause. The primary judge concluded that this question made no difference in the present case as the stricter requirement was satisfied:

5. [23]

   The claim under cl 10.3 was the only one that extended to the damage suffered in relation to the Lot 17 premises owned by the respondent and leased by Blessington Pty Ltd.

6. [24]

   The respondent contended the indemnity in cl 10.3 was sufficiently broad to capture the loss in question, submitting that the loss was suffered or incurred by the act or omission of the appellant and was loss in respect of or arising from one or more of the events described in (a), (c), (d) and/or (h) of cl 10.3.

7. [25]

   The parties were agreed that the words “whether by” in the chapeau to cl 10.3 introduced a requirement of causation. Her Honour was not convinced, but ultimately accepted the construction of cl 10.3 offered by the parties that:

8. [26]

   Her Honour’s acceptance of “whether by” in the chapeau to cl 10.3 introducing a requirement of causation to cl 10.3(a) led to an obvious repetition as cl 10.3(a) contains its own causation requirement: loss damage or injury “caused or contributed to by the act, omission, neglect or default of the Lessee”. This led to a submission below that cl 10.3 was void for uncertainty (a submission not pressed on appeal). The primary judge concluded:

9. [27]

   The primary judge found that cl 10.3(c) was clearly satisfied. There was an escape of fire in and from the appellant’s leased premises which encroached on the neighbouring lot and it was caused in the relevant sense by an act of the appellant.

10. [28]

    Clause 10.3(d) was also satisfied. Her Honour concluded that the question of whether the loss was caused or contributed to by the use of the premises was settled by the findings of causation I have set out above. Clause 10.3(h) was also satisfied due to the finding “as to cause of the damage by the act of the Lessee and the accident not being caused or contributed to by the Lessor.” Her Honour considered that the indemnity in cl 10.3(h) would negative the implied covenant in s 84 of the Conveyancing Act 1919 (NSW) and did so here.

11. [29]

    As to cl 12.1(a)(i), the appellant maintained that it was not possible to “yield up” the premises given that renewal of the whole was required. In the context of the cl 12.1 claim in particular, the appellant attached significance to s 84(1)(b) of the Conveyancing Act.

12. [30]

    The appellant argued that s 84(1)(b) “negative[d]” or “extinguishe[d]” the obligation to yield up the premises in good and tenantable repair in the event of an accident or damage by fire.

13. [31]

    Her Honour concluded that “repairs” could be structural but would not extend to complete reconstruction. This conclusion disposed of the claim under cl 12.1(a)(i). The primary judge found that, if that was not correct, in any event cl 7.2(b) would operate to negative or vary the implied covenant in s 84(1)(b) and would then also apply to exclude its operation from cl 12.1(a)(i).

14. [32]

    Clause 12.1(a)(ii), however, was different. Her Honour summarised her conclusions under cl 12.1(a)(ii) as follows:

15. [33]

    Her Honour concluded:

16. [34]

    The primary judge concluded that there are a number of cases dealing with repair or maintenance covenants where a distinction is drawn between “repair” and “reconstruction” or “rebuilding” of the whole: Lurcott v Wakely and Wheeler [1911] 1 KB 905; Crédit Suisse v Beegas Nominees Ltd [1994] 1 EGLR 76; [1994] 4 All ER 803.

17. [35]

    Her Honour concluded that this long-recognised distinction strongly pointed against cl 7.1 being the source of an obligation by the defendant to rebuild the warehouse. Her Honour found that cl 7.1 was an ongoing obligation, and that fact “points against the clause extending to complete reconstruction of the structure on the Premises”.

18. [36]

    Her Honour concluded:

19. [37]

    As to cl 7.2(a) of the Lease, the primary judge said:

20. [38]

    As to cl 7.2(b), the primary judge found:

21. [39]

    The primary judge determined that damages and interest in the sum of $15,180,146.68 should be awarded. The appellant was also ordered to pay interest on the judgment sum at the rate provided under cl 12.1(e) of the Lease. As I have noted, the details no longer matter as this issue was not raised on appeal.

Issues on appeal

1. [40]

   On 29 October 2025, the appellant filed a Notice of Appeal. The grounds of appeal advanced by the appellant were:

2. [41]

   In its written submissions filed on 13 February 2026, the appellant stated that it would seek leave to file an amended Notice of Appeal containing the following ground:

3. [42]

   On 25 March 2026, at the commencement of the hearing of this appeal, the Court granted leave for the appellant to file the amended Notice of Appeal containing this ground.

4. [43]

   On 20 February 2026, the respondent filed a Notice of Contention. In it, the respondent advanced the following ground:

Consideration

1. [44]

   The logical starting point is cl 10.3, which is the only clause capable of extending to the loss suffered at Lot 17, and Mr Hutley SC, who appeared for the appellant in this Court, proceeded accordingly. Clause 10.3 is set out at [16] above.

2. [45]

   The starting point is the text. It was common ground that it was infelicitous. That does not mean that when ascribing legal meaning to it, no regard is to be paid to it.

3. [46]

   First, in form, cl 10.3 is expressed to be an indemnity. That is consistent with the heading cl 10 (“indemnities & release”). The verb which imposes an obligation upon the tenant, “indemnifies”, bears its ordinary meaning of subjecting the tenant to an obligation to make whole the landlord for specified classes of loss. That is a typical class of indemnity. It is common for an indemnifying party to indemnify the indemnified party for liability that party incurs to a third party. In Bofinger v Kingsway Group Limited (2009) 239 CLR 269; [2009] HCA 44 at [7], an indemnity in its widest sense was described as including a contract obliging one person to make good the loss suffered by another. Indeed, an indemnity can extend to the indemnified party’s own liability to the indemnifier. Buss JA described this as a “reflexive indemnity”, observing by reference to academic writing in this area that it operates as both an indemnity and a release: Westina Corporation Pty Ltd v BGC Contracting Pty Ltd (2009) 41 WAR 263; [2009] WASCA 213 at [51]. An indemnity where Party A indemnifies Party B against losses except those incurred as a result of Party B’s own acts or omissions has been described as a “proportionate” indemnity: Nuncio D’Angelo, “The Indemnity: It’s all in the drafting” (2007) 35 Australian Business Law Review 93 at 95. There is no reason in principle why a party cannot, by contract, promise to make whole another party for any loss suffered by that other party, including loss caused directly by the indemnifier itself. Doing so does not take the obligation outside the ordinary scope of an indemnity; instead, it means that in some cases, the person may be directly liable both as a matter of tort or contract and also pursuant to the indemnity.

4. [47]

   Secondly, cl 10.4 qualifies the indemnity by providing that it does not apply “to the extent that the loss, damage or injury was caused by the wilful act omission or neglect of the Lessor, its employees or agents.” (To an extent, cl 10.4 duplicates the concluding words of cl 10.2, but nothing turns on that save that it is another instance of duplicative drafting.)

5. [48]

   Thirdly, there is accordingly applicable the principle stated in many places including Bofinger v Kingsway Group Limited at [53] that doubt as to the construction is to be resolved in favour of the indemnifying party. But that principle does not mean that whenever a litigant can construct a potential construction of a provision that reduces the legal operation of the words, such a construction is preferred. The doubt which is referred to in the statement of principle is a doubt that remains after the ordinary principles of construction of commercial contracts have been deployed. That makes this principle no different from other principles of construction of contracts which resolve ambiguity in a particular way, such as contra proferentem. As it is put in P Herzfeld and T Prince, Interpretation (3rd ed, 2024, Lawbook Co) at 666, by reference to authorities many of which are collected in Nashco Pty Ltd v Yang [2022] NSWCA 137 at [29]-[32]:

6. [49]

   Fourthly, there are obvious difficulties with cl 10.3. One is the expanded definition of “Lessee” is presumably displaced in the opening words, which expressly refer to contractors, sub-Lessees etc. but subsequently in the clause, “Lessee” is used seven times without elaboration. It seems likely that in those later references it bears its expanded meaning as per the definition, else the breadth of the opening words would have no work to do. Happily, nothing turns on that, save to conclude that the clause is imperfectly drafted.

7. [50]

   The structure of cl 10.3 may be summarised thus:

   1. (1)

      The clause first identifies the matters which are the subject of the indemnity: “liability, loss, damage, expense, costs or claim suffered or incurred by the Lessor”;

   2. (2)

      Secondly, it identifies a range of conduct and a range of legal persons following the words “whether by”, to which it will be necessary to return;

   3. (3)

      Thirdly, the clause identifies words of connection “in respect of or arising from”; and

   4. (4)

      Fourthly, the clause specifies eight paragraphs identifying types of loss or conduct causing loss.

8. [51]

   The natural meaning of the second component is that they are words of expansion, rather than requirement. What other meaning is to be given to the word “whether”? Mr Hutley’s suggestion that it means “either” is unlikely — that would be to replace the open-ended words by a binary requirement. A natural meaning of these words is that they make it plain that it does not matter whether the liability etc. in respect of or arising from the eight specified paragraphs is characterised as an act or omission or neglect by the Lessee or any contractor, sub-Lessee etc. On this construction, the confining words are “in respect of or arising from” and those found in the particular paragraphs (a)–(h).

9. [52]

   Not only is that the ordinary meaning of “whether by …”, but it is consistent with language used in the same clause. In cl 10.3(b), the natural meaning of the words “whether by act or omission by the Lessee” is that they are plainly expansionary, rather than by themselves connoting a requirement. There is no good reason to construe the materially identical words in the opening portion of the same clause differently.

10. [53]

    Another reason that the common ground is improbable is that it leads to a substantial overlap between the introductory words of cl 10.3 and the first nominated paragraph (a) which refers to loss, damage, or injury to property or person, caused or contributed to by the act, omission, neglect or default of the lessee. Why, it may be asked, would one construe the words “whether by” in the introductory words to impose a causal connection in relation to the specified paragraph, which explicitly has a broad causal test of “caused or contributed to”? It is likely that the words “the act, omission, neglect or default” refer to the “act, omission or neglect” in the opening words and the fact that paragraph (a) extends to default is simply another example of the looseness of the language used by the drafter.

11. [54]

    However, Mr Hutley SC insisted that no assistance whatsoever would be gained from having regard to paragraph (a). That submission is difficult to reconcile with the ordinary approach to construction, involving reading the language as a whole, and especially where there is overlap between the opening words and the paragraph in two respects — the words “act, omission or neglect” as well as the posited causal connection posed by “by” with the undoubted causal connection posed by “caused or contributed to”.

12. [55]

    Instead, it was common ground at the bar table that the word “by” in the opening words of cl 10.3 itself imposed a causal connection analogous to the causal connection held to apply to (the former) s 82 of the Trade Practices Act 1974 (Cth) (Elna Australia Pty Ltd v International Computers (Australia) Pty Ltd [No 2] (1987) 16 FCR 410 and Marks v GIO (1998) 196 CLR 494; [1998] HCA 69). No submissions were directed to how the double causation, applicable in the cases where paragraphs (a)–(g) were engaged, would be resolved. Seemingly what drove the parties’ agreement as to the force of “whether by” in the opening words was paragraph (h) which did not on its face contain any words connecting the conduct of the Lessee to the accident. In part the submission was based on the improbability that an indemnity would extend to losses for which the Lessee was in no way responsible. That submission confronts the difficulty that commercial parties may choose to contract on such a basis. There may be perfectly good commercial reasons for such an approach (for example, to make it quite plain which party’s insurer will be liable), particularly having regard to the breadth of the Lessee’s insurance obligation in cl 9.1. The common ground also faces the difficulty that it is unlikely that in this poorly worded lease paragraph (h) drives the operation of the rest of the clause.

13. [56]

    Although this Court is not bound on a question of construction by what is agreed between the parties, it is not necessary to take the point any further. Let it be assumed that “by” in the opening words of the clause imposes the causal connection. The appellant submitted, and I am prepared to accept, that the question of causation is to be determined by applying common sense to the facts, whilst appreciating that the purpose of the enquiry is to attribute legal responsibility: Royall v The Queen (1991) 172 CLR 378.

14. [57]

    The gravamen of the appellant’s submission was that the “true” or “real” cause of the fire was the combination of water, sunshine, and a breeze in 2018. The appellant submitted that the “innocent bystander or the ‘man in the street’ (to deploy the expression in [Lasermax Engineering Pty Limited v QBE Insurance (Australia) Limited [2005] NSWCA 66]) would not conclude that mere storage, being the very conduct sanctioned by the Lease, caused the fire”. The “common man”, so it was said, would think the cause was “the elements operating through the aqua lens”. In oral address, Mr Hutley SC presented a more nuanced approach to causation under cl 10.3:

15. [58]

    Applying this suggested test of causation to the various relevant sub-paragraphs of cl 10.3, I would conclude that the appellant’s act of leaving the parts, wrapped as they were, outside and exposed to the elements, was sufficiently close to the process to be described as a cause of the loss or damage within the meaning of each of sub-paragraphs 10.3 (c), (d) and (h). As a matter of common sense, leaving transparent plastic-wrapped articles outside is apt to expose them to rain and sunshine and wind. That is the foreseeable and indeed certain consequence of the decision to do so. There is nothing at all artificial in ascribing the real cause of the fire to the fact that these pallets were left outside, exposed to the elements, rather than placed within the warehouse.

16. [59]

    I will next deal briefly with the appellant’s challenge to the conclusions of the primary judge about cll 10.3(c), (d) and (h).

17. [60]

    As to cl 10.3(c), I reject the appellant’s submission that the clause does not apply. Mr Hutley said of 10.3(c):

18. [61]

    As can be seen, the appellant thus accepted that in so far as the fire had spread to Lot 17, it “maybe” fell within paragraph (c) (subject to the overall question of causation dealt with above). However, the appellant said that in so far as the fire destroyed the demised premises themselves, it could not be said to be an escape of fire “in” the premises. That seems most improbable. The clear wording of the clause states that the escape of fire can be “in or from the Premises” (italics added). It is an ordinary use of language to describe a fire which has started in one part of a leased premises to escape in the premises, when that fire spreads throughout the rest of the leased premises.

19. [62]

    As to cl 10.3(d), the damage to property must be caused or contributed to by the appellant and arise out of the use of the Premises. Mr Hutley said of cl 10.3(d):

20. [63]

    I reject that submission. Applying the test for causation advanced by the appellant, I would conclude that the real cause of the fire was the act of leaving these pallets outside, exposed to the elements, rather than being placed within the warehouse. This was the relevant cause of the loss or damage within the meaning of cl 10.3(d).

21. [64]

    As to cl 10.3(h), the appellant submitted in writing:

22. [65]

    Mr Hutley said of cl 10.3(h):

23. [66]

    I would reject the appellant’s submission regarding cl 10.3(h). I do not read the clause as responding only to a case where there is an accident and something the appellant does in response causes loss. A reasonable businessperson would understand the obligation as relating to the events here, properly described as an accident on or about the premises, requiring the lessee to indemnify the lessor, unless it could be proved that the loss or damage was caused or contributed to by the Lessor.

24. [67]

    Two remaining matters need be addressed. First, the appellant submitted in writing but not orally, that cl 10.3 should be read as “subject to” cll 7.2(a) and (b) of the Lease. I do not accept that submission. The express terms of the two clauses do not support this construction. I agree with the primary judge’s observation that:

25. [68]

    Secondly, the appellant suggested that the operation of s 84(1)(b) of the Conveyancing Act affected the proper construction of cl 10.3. The primary judge was correct that there is a clear inconsistency between cl 10.3(h) and the implied covenant in s 84(1)(b) of the Conveyancing Act such that the implied covenant is excluded. They cover the same ground in terms of liability for damage occasioned by reason of accident caused by an act or omission of the Lessee.

26. [69]

    Assuming the appellant’s construction of cl 10.3 to be correct, the primary judge was correct to conclude that the storage of the pallets (packaged and in the location as they were) was both a material and, if it be necessary, proximate cause of the fire. Put in the language of senior counsel for the appellant on the appeal, the storage of the pallets by the appellant in the open air was “material to the outcome of the event”. Making the “judgment call” required about the “closeness” of the cause to the loss suffered, the real cause of the fire was that these pallets were left outside, exposed to the elements, rather than placed within the warehouse.

27. [70]

    This conclusion is sufficient to dispose of this appeal, which should be dismissed with costs. As I noted at the outset, cl 10.3 was the only clause which applied to Lot 17. In deference to the careful submissions of the parties, however, I will briefly address the remaining issues.

Clause 12.1(a)(ii) — yield up/ reinstatement

1. [71]

   The respondent also succeeded in relation to cl 12.1(a)(ii). The appellant advanced two challenges to her Honour’s conclusions under this clause:

   1. (1)

      the appellant submitted that “[c]lause 12.1(a)(ii) should be read subject to cl 7.1”. The language in the clause of “that part of the Premises”, is that of reinstatement. It was submitted that it strongly suggests and is consistent with the concept of repairs of a subsidiary part of the warehouse, but not of the whole;

   2. (2)

      the appellant was granted leave to file an amended notice of appeal containing an additional ground of appeal that explicitly addressed their position on the interaction between cl 12.1(a) and s 84 of the Conveyancing Act.

2. [72]

   The appellant submitted the primary judge erroneously equated reinstatement with reconstruction in finding that the obligation to reinstate the Premises goes beyond repair and encompasses reconstruction. The appellant submitted the “proper interpretation” was that:

   1. (1)

      the “fair wear and tear” carve-out in cl 12.1(a)(i) does not apply; and

   2. (2)

      structural repairs are not required unless the qualification in cl 7.2(a) applies.

3. [73]

   It was put thus in oral submissions on behalf of the appellant:

4. [74]

   I am unable to accept this submission. As the primary judge correctly concluded about the claim under cl 12.1(a)(ii), the Lease makes express provision for the reinstatement of the warehouse at the end of the lease to its original form. I agree with her Honour that had the parties intended the reinstatement obligation to be limited to that of repair, there would have been no need to use the word “reinstatement”. The concept of “reinstatement” goes beyond repair and encompasses reconstruction of the warehouse. The fact that the parties have carefully identified the warehouse as the subject of the reinstatement obligation indicates that it is to be treated in a category of its own.

5. [75]

   The appellant submitted that the primary judge erred by “[overlooking] the fact that cl 12.1(a)(ii) is concerned with reinstatement of the part of the Premises” — rather than the whole. As such, it was submitted, s 84(1) was not expressly negatived. The appellant cited Saviane v Stauffer Chemical Co (Australia) Pty Ltd [1974] 1 NSWLR 665 at 670–671 as establishing that:

   1. (1)

      an “accident” was to be interpreted as being limited to an event causing damage to the premises for which the lessee was not responsible;

   2. (2)

      section 84 applies if it can be shown that the event that caused the damage was unintentional and unexpected; and

   3. (3)

      whether damage caused by an event can be said to be unexpected is determined by an objective test. The damage will be unexpected only if a reasonable person in the position of the lessee would not have expected it.

6. [76]

   The appellant also relied on:

   1. (1)

      Esanda Ltd v Clark (1985) 159 CLR 543 at 548, in which the High Court held that a clause of a hire-purchase agreement did not comply with s 5(3) of the Hire-Purchase Act 1960 (NSW) as it did not “unequivocally state that all conditions and warranties of fitness and suitability are expressly negatived”;

   2. (2)

      Waterhouse v Waugh [2003] NSWCA 139 at [33], in which this Court held that a clause of a lease agreement was clearly inconsistent with the term that might be implied by s 84(1)(a) of the Conveyancing Act, which was therefore excluded; and

   3. (3)

      Greer v Pickering [2015] NSWSC 1131, in which Adamson J held that as a standard residential tenancy agreement contained no express declaration that negatived, varied or extended the terms implied by ss 84 and 85 of the Conveyancing Act, they continued to form part of the agreement.

7. [77]

   Section 74(2) of the Conveyancing Act provides for the variation of any implied covenant (such as s 84(1)(b)) by “an express declaration in the deed wherein it is implied”. An implied covenant which is inconsistent with an express covenant is excluded. The primary judge was correct to conclude that cl 12.1(a)(ii), by requiring reinstatement, separately from the obligation to yield up that appears in cl 12.2(i), operates to vary or negative the s 84(1)(b) implied covenant (even if that were not otherwise excluded by cl 7.2(b) — which her Honour also found).

8. [78]

   The principal cases relied upon by the appellant, Saviane v Stauffer Chemical Co and Esanda Ltd v Clark are clearly distinguishable and give rise to no different conclusion. Saviane was in substance a construction summons where a declaration was sought based on agreed facts. It was accepted that the s 84 Conveyancing Act covenant was implied in the lease. Helsham J found that to say, as asserted by the agreed facts, that the lessee did not intend its contractor to cause damage to the building or expect that it would do so, was not sufficient to establish that the damage was caused by an accident. The lessee in Saviane was liable to make good the loss. Esanda was a case about a different statute and the construction of a consumer protection provision, some distance from this commercial arrangement. Neither Waterhouse v Waugh nor Greer v Pickering assist the appellant, the former being a case where an express covenant excluded the implied covenant and the latter being a case where no such express covenant was found.

9. [79]

   No error has been shown in the decision of the primary judge regarding cl 12.1(a)(ii).

Clauses 7.1 and 7.2

1. [80]

   Perhaps the lengthiest part of the written submissions exchanged by the parties on the appeal and the notice of contention concerned clauses 7.1 and 7.2. Given my conclusions above, nothing now turns on the resolution of these claims, so I will address them only briefly.

2. [81]

   Shortly put, I agree with the primary judge that the obligation in cl 7.1(a) to, during the term of the Lease, “keep and maintain” the Premises in the same condition and state of repair as they were at the commencement of the Lease, does not encompass an obligation to “reconstruct” the Premises. Her Honour’s construction was consistent with long-standing authority, including Lurcott v Wakely and Wheeler [1911] 1 KB 905 at 918–9.

3. [82]

   I agree with the primary judge that the cases relied upon by the respondent can be distinguished:

   1. (1)

      Norwich Union Life Insurance Society v British Railways Board [1987] 2 EGLR 137; (1987) 283 EG 846, was a case where Hoffman J considered that an obligation to “keep the demised premises in good and substantial repair and condition and when necessary to rebuild, reconstruct or replace the same in such repair and condition to yield up the same at the expiration or sooner determination of the said lease” could encompass an obligation to rebuild the house in question. As the primary judge observed, the clause being construed expressly included an obligation to “rebuild, reconstruct or replace”; and

   2. (2)

      Crédit Suisse v Beegas Nominees Ltd [1994] 1 EGLR 76; [1994] 4 All ER 803, where Lindsay J concluded that an obligation to “maintain repair amend renew … and otherwise keep in good and tenantable condition: … the structure of the Building and in particular the roof’s foundations and walls” included the obligation to replace the façade entirely with a watertight structure. As the primary judge observed the clause being construed expressly included an obligation to renew the structure.

4. [83]

   As to cl 7.2(b), the appellant submitted (in writing) that cl 7.2(b) is incoherent. It was submitted that the notion that the appellant could have substantially contributed to the damage if the fire was beyond the appellant’s control “makes no sense”. As I have earlier explained, I reject that characterisation of the appellant’s conduct.

5. [84]

   In writing, the appellant submitted that to the extent that any provision in the Lease “collides with clause 7 as a whole, clause 7 should prevail”. Clauses 7.1 and 7.2 are “central” and “qualify the entire Lease”. This contention was not addressed by the appellant in oral submissions. I need say no more than I do not agree with the appellant’s written submissions. I agree with the primary judge that:

6. [85]

   No error has been shown in the decision of the primary judge about cl 7 of the Lease.

Notice of Contention

1. [86]

   As I have explained at the outset there was a notice of contention. The debate about the notice of contention roamed widely and involved a close consideration of long-standing authority including Graham v Markets Hotel Pty Ltd (1943) 67 CLR 567 at 585; Lurcott v Wakely and Wheeler [1911] 1 KB 905 at 912 per Cozens-Hardy MR, 915–6, 919, per Fletcher Moulton LJ; Percy E Cadle and Co Ltd v Jacmarch Properties Ltd [1957] 1 QB 323 at 329; Torrens v Walker [1906] 2 Ch 166; Weatherhead v Deka New Zealand Ltd (No 2) (1998) 1 NZLR 453; LCA Marrickville Pty Ltd v Swiss Re International SE (2022) 290 FCR 435; [2022] FCAFC 17 at [111]; Anstruther-Gough-Calthorpe v McOscar [1924] 1 KB 716 at 734, per Atkin LJ.

2. [87]

   Having considered the obligation of this Court (see Boensch v Pascoe (2019) 268 CLR 593; [2019] HCA 49 at [8]), I have decided that it is undesirable to attempt to resolve these issues about the understanding of long-standing authorities if it is unnecessary to do so. Given my conclusion about the notice of appeal, it is unnecessary to address the notice of contention further.

Conclusion and proposed orders

1. [88]

   For the foregoing reasons I propose the following orders:

   1. (1)

      Appeal dismissed;

   2. (2)

      Appellant to pay the respondent’s costs.

2. [89]

   MITCHELMORE JA: I agree with Payne JA.