IPL Medical Pty Ltd v Charmen Pty Ltd

1. [1]

   HIS HONOUR: A landlord and its former tenant are in dispute. The tenant claims:

2. [2]

   The total of the tenant’s money claims (exclusive of GST and interest) is $393,901, well within the jurisdiction of the District Court. The largest of them is $181,965, the smallest is $358. The hearing of this dispute occupied three Court days.

3. [3]

   The only concession which the landlord was prepared to make was that it wrongly took $4950 from the bank guarantee for lift maintenance work which was not needed and not done. The landlord waited until the Friday before the hearing before attempting to pay some (not all) of this money back. The tenant justifiably rebuffed the attempt. The landlord, over the tenant’s objections, took various other amounts from the bank guarantee to which it was not entitled. I think it is apt to describe its conduct as rapacious.

4. [4]

   The landlord cross-claims, relying on a clause which provides that the tenant will pay its costs (including legal costs as between solicitor and client) in relation to any litigation involving the landlord commenced by or against the tenant in which no judgment is recorded against the landlord. This provision has no application, not least of all because the tenant is entitled to judgment against the landlord. The cross-claim will be dismissed.

5. [5]

   Unless otherwise stated, all amounts referred to in this judgment are exclusive of GST and cents are omitted.

6. [6]

   I shall refer to the plaintiff as IPL, the Lessee or the Tenant. IPL operates a cosmetic surgery medical practice.

7. [7]

   The defendant owns the four-story building which stands at 263 George Street Sydney (the Building). I shall refer to the defendant as Charmen, the Lessee or the Landlord.

8. [8]

   The ground floor is conventional retail space. The three upper levels consist of commercial suites.

9. [9]

   From 1 July 2008 to 30 June 2018, IPL was Charmen’s tenant of the Building. For that period, IPL operated under the business name “Facial Rejuvenation Clinic”.

10. [10]

    On 13 December 2007, the parties entered into an Agreement for Lease which contemplated the entry into two formal leases, one covering the ground floor and one covering the remainder of the space to be let.

11. [11]

    The Agreement for Lease was superseded by two ten-year leases, each commencing on 1 July 2008, entered into on 29 February 2008. The leases contained extension options which were not exercised. They terminated on 30 June 2018 and IPL vacated the Building.

12. [12]

    One lease, which the parties referred to as the Retail Lease, covered the ground floor. It provided for a starting rent of $540,000 per annum. The other lease, which the parties referred to as the Commercial Lease, covered the commercial suites. It provided for a starting rent of $342,930 per annum. The total starting annual rental was thus nearly $900,000.

13. [13]

    As well as the leases, the parties entered into a deed (the Deed) to which a builder (BBR) was a party. It recorded that BBR would renovate and upgrade the façade and construct a basement fire exit and awning. It recorded that the total contract sum payable by IPL was $530,636 including GST. In the Deed, IPL was referred to as FJC. The Deed recorded that:

14. [14]

    In their mutual dealings, IPL was represented principally by Dr Garry Cussell. Charmen was represented by Mr Charles Mendel. Both swore affidavits and both were cross-examined, Mr Mendel briefly.

15. [15]

    Charmen also had Colliers International Pty Ltd (Colliers) acting as its agent.

The Agreement for Lease

1. [16]

   The Agreement for Lease stated that “[o]nce accepted the parties agree that they are bound by the terms of this agreement and will enter into formal leases reflecting this agreement as soon as practical.”

2. [17]

   The Agreement for Lease recorded that the rental was inclusive of all outgoings, but the Lessee was required to pay all consumption charges including but not limited to relevant utilities such as electricity, gas, water and telephone. It recorded that:

3. [18]

   The Agreement for Lease provided that the Lessee would arrange, implement and manage the design and build of the façade and fitout depicted in identified plans.

4. [19]

   Clause 14 of the Agreement for Lease provided, relevantly:

The Retail Lease

1. [20]

   Clause 1.1 of the Retail Lease contains the following definitions:

2. [21]

   Clause 3, entitled “The Costs of Preparation”. Clause 3.2 provides:

3. [22]

   Clause 6, entitled “Services and Other Charges”, provides:

4. [23]

   Clause 8.5, entitled “Make Good Damage”, provides:

5. [24]

   Clause 18, entitled “Lessee’s Works, Lessor’s Works and Lessor’s Contribution to Lessee’s Works, provides, relevantly:

The Commercial Lease

1. [25]

   Clause 1.1 of the Commercial Lease contains the following definitions:

2. [26]

   Clause 3.6 is entitled “Outgoings Increases”. Clause 3.6.1 provides:

3. [27]

   Clause 5 is entitled “Other Costs”, within which Clause 5.1 is entitled “Stamp Duty and Landlord’s Costs”. Clause 5.1.1 provides, relevantly:

4. [28]

   Clause 11 is entitled “Works and Overloading”. Clause 11.1.3 relevantly provides:

5. [29]

   Clause 5 of the Retail Lease required IPL to provide a security deposit for the due and punctual observance and performance of its obligations. [1] It provides:

6. [30]

   IPL duly established a bank guarantee with the Commonwealth Bank of Australia (CBA).

7. [31]

   On 4 July 2013, Charmen called on the bank guarantee to effect payment to it of $18,254 for fees paid by it to its own architects to supervise the fitout. IPL denies Charmen’s entitlement to this payment.

8. [32]

   On 15 October 2018, Charmen made a further call on the bank guarantee for $270,115. At the time, the bank guarantee was for $706,833. Charmen required a new guarantee in the amount of $436,717, which was established on 17 October 2018. IPL seeks delivery up of this guarantee.

9. [33]

   As detailed below, IPL claims $13,430 being an alleged short payment by Charmen of the $470,000 contribution under the Deed. It also claims repayment of $20,700 said to be an overpayment of outgoings. Its other claims are for damages representing amounts demanded by Charmen and paid by CBA under the bank guarantee in circumstances where IPL asserts that Charmen had no entitlement to payment.

10. [34]

    There was a question as to which party bears the general onus with respect to the question of entitlement or non-entitlement on Charmen’s part to the monies received by it. A claimant generally bears the onus to make out the elements of its claim. An element of IPL’s claims for damages is that Charmen had no right to call on the bank guarantee. Although clause 5.1(b) of the Retail Lease gave Charmen the entitlement to appropriate and apply the deposit only as was necessary to compensate it for loss or damage suffered because of the lessee’s breach, it is IPL that is asserting the lack of entitlement.

11. [35]

    I have approached the matter on the footing that it is IPL’s onus to establish its case. In considering whether IPL has discharged this onus, it is of course appropriate to assess the evidence according to the ability of each party to bring it. Although a plaintiff is not relieved of offering evidence to support the findings it seeks, slight evidence may be enough where material circumstances are peculiarly within the knowledge of the defendant and the defendant does not explain the evidence away: see Hampton Court Ltd v Crooks (1957) 97 CLR 367 at 371-2 per Dixon CJ.

12. [36]

    IPL claims $181,965.

13. [37]

    IPL affixed a sign to the upper façade of the Building, which stated “Facial Rejuvenation Clinic”. It consisted of separate metal letters, each bolted into the surface. It also installed two lighting boxes on the façade, just above the ground floor, to light up the face of the Building. The façade is finished with a screed which one of the parties referred to as “pebblecrete”.

14. [38]

    When IPL left, it removed the sign and the lighting boxes. The sign was removed by abseilers who descended over the top of the Building.

15. [39]

    The bolt-holes were filled in and sealed and the section of the façade, where the sign was, was high-pressure-cleaned and acid-washed. The lighting boxes were also removed and the surface repaired.

16. [40]

    Charmen claims that IPL was obliged to re-screed the whole façade. In effect, it wants a new façade at IPL’s cost. IPL says that it has repaired the damage.

17. [41]

    Charmen took $181,965 from the bank guarantee for this claim on the footing that this is the cost of re-screeding. However, it failed to lead admissible evidence proving that this is the cost of that exercise. Its alleged quantum is based on a document purporting to be a quote.

18. [42]

    On 22 November 2019, the last business day before the hearing, Charmen served an affidavit sworn that day by Mr Mendel (the 22 November affidavit), which it sought to read at the hearing to rectify this and other deficiencies in its evidence. The case had been set down for trial on 24 May 2019. Orders had been made for Charmen to serve its evidence by 18 April 2019. I rejected significant parts of the affidavit, having regard to the plain prejudice its admission would have caused IPL. Also, no satisfactory explanation for Charmen’s failure to adduce evidence, which was available a lot earlier, was provided. The time, if ever there was one, when it was permissible for a well-resourced party to conduct litigation in this fashion, has passed.

19. [43]

    A number of provisions in the leases make IPL responsible for repairing damage to the Building. The principal one relied upon by Charmen is clause 8.5 of the Retail Lease.

20. [44]

    It is common cause that IPL was obliged to repair the damage. However, IPL argued that its obligation did not stem from any provision in the leases, but was a common law obligation. If this were correct, it would be arguable that its liability to repair would not be secured by the bank guarantee which only secures its contractual obligations. It is not necessary to determine this question because if Charmen’s claim was valid, but it had wrongly called on the guarantee to cover it, IPL would have a claim for damages against Charmen but Charmen would have a co-extensive claim for damages against IPL, which claims I consider would, in equity, be set off against each other.

21. [45]

    Leaving aside Charmen’s failure to establish the quantum of this claim in circumstances where it had the ability to bring the evidence to establish it, I find that IPL has repaired the façade in any event.

22. [46]

    I have seen the façade in its repaired state.

23. [47]

    On the joint application of the parties, I inspected it on 10 September 2019. The façade appears as undamaged, albeit generally grubby. The repairs are invisible to the naked eye from street level.

24. [48]

    Charmen produced high resolution telephoto photographs on which some dots, where the bolt-holes were, can be seen, and some minimal “shadowing” is discernible where the sign shielded the façade from the sun. Such shadowing as there is will undoubtedly disappear in time in any event. These imperfections are de minimis.

25. [49]

    Charmen is seeking perfection, not repair. Its position is not that of a reasonable owner. It is not entitled to a new and perfect thing at IPL’s expense. It is not entitled to renewal of the whole: see Graham v Markets Hotel Pty Ltd (1943) 67 CLR 567.

26. [50]

    Charmen wrongly demanded and received $181,965 under the bank guarantee. IPL is entitled to a verdict for damages against Charmen for this amount.

27. [51]

    IPL claims $4950.

28. [52]

    Colliers wrote to IPL on 11 October 2018 (the Colliers letter). They described this claim as “Fire Services – Rassco Services – Makegood of outstanding items to meet compliance requirements”.

29. [53]

    Charmen demanded and received this amount from the bank guarantee on 15 October 2018.

30. [54]

    To establish fire services compliance (and displace any suggestion of non-compliance), IPL produced a Fire Contractor Final Safety Certificate, under the Environmental Planning and Assessment Regulation 2000 (NSW), issued on 1 June 2018, certifying the effectiveness of the fire protection system. The certificate recorded that date as the date of the fire protection assessment. The certificate establishes that the fire services met compliance requirements.

31. [55]

    An earlier certificate, dated 5 May 2018, had been issued which referred to a fire protection assessment of 1 June 2018. This was a plain error. Colliers took the point in the Colliers letter, which led to the issue of a corrected certificate showing 1 June 2018, which IPL gave Charmen on 25 October 2018. Nevertheless, Charmen kept the money.

32. [56]

    Charmen tried unsuccessfully to support this claim (indeed increase it by $1001) by the 22 November affidavit. The consequence is that IPL provided evidence of compliance and Charmen led no evidence supporting its entitlement.

33. [57]

    I find that Charmen was not entitled to this money.

34. [58]

    IPL is entitled to a verdict for damages against Charmen for $4950.

35. [59]

    IPL claims $6610.

36. [60]

    The Colliers letter described this claim as “Lift Services – Electra Lift Co. – Rebalancing following make good of lift car interior and cleaning lift shaft”.

37. [61]

    Charmen took this amount, avowedly for lift services. As mentioned earlier, Charmen concedes that $4950 was wrongly taken.

38. [62]

    Dr Cussell gave evidence, which I accept, of observing that the lift was working properly when IPL left the Building and that a routine service was carried out on 13 June 2018. The only fault noted was that the equipment was dirty due to renovation work.

39. [63]

    On the other hand, leaving aside its concession, Charmen led no admissible evidence supporting its entitlement.

40. [64]

    Again, it tried support this claim by its late evidence, which was rejected. It also sought to argue that it was entitled to reduce the amount wrongly taken by an asserted but unproved increase of $1001 for fire services. This explains why it offered to repay IPL only $3949.

41. [65]

    I find that Charmen was not entitled to this money.

42. [66]

    IPL is entitled to a verdict for damages against Charmen for $6610.

43. [67]

    IPL claims $4500.

44. [68]

    The Colliers letter described this claim as “Automatic entry doors, Ground Floor – Assa Abloy – Repairs to door controller due to lack of regular maintenance”.

45. [69]

    Dr Cussell gave evidence, which I accept, that on 29 June 2018, he observed the doors being tested by the builder and that they were in good working order when IPL vacated.

46. [70]

    Charmen led no admissible evidence supporting its entitlement. Again, it attempted to do so by its late evidence which was rejected.

47. [71]

    I find that Charmen was not entitled to this money.

48. [72]

    IPL is entitled to a verdict for damages against Charmen for $4500.

49. [73]

    IPL claims $27,700.

50. [74]

    As referred to earlier, Charmen provided a breakdown of the base year outgoings as at 30 June 2008. [2]

51. [75]

    The breakdown provided was an estimation. It was provided earlier than the Agreement for Lease, and long before final figures were known.

52. [76]

    On 27 October 2009, Colliers wrote to Dr Cussell setting out the total outgoings figure for the financial year ending 30 June 2008 totalling $161,628 (being the breakdown figure) and providing details of the 2009 increase in outgoings over the 2008 year. The amount payable by IPL was stated to be $28,628.

53. [77]

    On 13 January 2010, Ron Dixon of Colliers sent an email to IPL, which stated: “The attached 2008 Base Year Summary I understand reflect the figures provided at the time of the Lease Negotiations with the Leasing Agent.” However, this email apparently did not attach the summary. The summary was provided on 22 January 2010.

54. [78]

    IPL made payment in accordance with the information provided by Colliers, on behalf of Charmen.

55. [79]

    IPL contends that the base year figure of $161,628 was an understatement by $2770, so that for each year of the lease, the increase in outgoings claimed by Charmen was excessive to this extent. Over ten years, this would yield $27,700. IPL’s claim is for moneys had and received.

56. [80]

    IPL says that the alleged understatement was caused by Charmen not including in the Base Year Outgoings certain amounts that were incurred by it in the year ended 30 June 2008. They are:

57. [81]

    Charmen’s primary answer to this claim is that the 2008 breakdown provided (as recorded in the Agreement for Lease) was an agreed figure which binds IPL and from which it cannot depart, even if it is wrong. This contention was made for the first time by an amendment to Charmen’s List Response, which I allowed during the hearing because it involved no new evidence or prejudice to IPL. The agreement is said to arise from the provision of the breakdown and its use between the parties in calculating amounts which were claimed by Charmen and paid by IPL.

58. [82]

    At the hearing, Charmen also sought leave to amend to plead an estoppel. I refused leave. To have granted it would have necessitated IPL making unpredicted factual inquiries and no satisfactory explanation for the delay in bringing it forward was given.

59. [83]

    To the extent that IPL overpaid because the base year figure is wrong, it relied on wrong information given by Charmen.

60. [84]

    Charmen’s contention that there is an agreement precluding IPL from reclaiming money to which Charmen was not entitled, is rejected.

61. [85]

    The Agreement for Lease was superseded by the Retail Lease and the Commercial Lease. The obligation of the tenant under the express terms of those instruments was to pay actual increases over actual outgoings incurred in the Base Year. Neither of the instruments refers to the earlier breakdown. When Charmen came to claim increases in outgoings, its entitlement depended on a comparison between the 2008 reality and subsequent years’ reality, not on a comparison between an estimation for 2008 provided by it before the Agreement for Lease and the reality in subsequent years.

62. [86]

    Charmen had no entitlement to receive and keep more than the actual increase in outgoings. The dealings between the parties do not disclose any outward manifestation that the breakdown would bind their relationship under the leases.

63. [87]

    As to the Electra Lift Co. invoice, Charmen made the point that the invoice related to lift maintenance after 30 June 2008, and should not be included in the base figure, although it was paid before 30 June 2008. I uphold this contention. This amount should properly have been included in the outgoings for the 2009 financial year.

64. [88]

    In relation to the Sydney Fire Protection tax invoices, Charmen argued that they were properly excluded from the breakdown because they were paid after 30 June 2008, although the services and the invoice pertained to a date earlier than that. I reject this contention. Under the definition of Building Outgoings, items of expense are included if they are properly incurred. These expenses were properly incurred. It was not open to Charmen to affect the Base Year Outgoings by paying an invoice rendered well before the end of the financial year, after the financial year and not in accordance with the terms of payment. The invoices provide that payment terms are 7 Days from Invoice Date.

65. [89]

    The result is that the base year figure was, on my calculation, effectively understated by $1698, which, over ten years, would reflect an overpayment by IPL of $16,980.

66. [90]

    IPL is entitled to judgment accordingly.

67. [91]

    IPL claims $18,254.

68. [92]

    Blainey North & Associates Pty Ltd (the Architects) were engaged by Charmen as project manager to supervise and approve IPL’s fitout.

69. [93]

    On 26 August 2008 and 22 April 2009, the Architects issued invoices to Charmen for amounts of $15,400 and $2,590. Charmen paid these invoices and claimed reimbursement from IPL, which declined to pay. On 4 July 2013, Charmen called on the bank guarantee and was paid, amongst others, $18,254 in respect of the Architects’ fees carried forward. The precise relationship between the total of the invoices and the amount drawn down is not clear.

70. [94]

    IPL argues that Charmen had no contractual entitlement to be paid fees charged by its own architects. Charmen argued that one or more of clause 14 of the Agreement for Lease, clauses 3.2, 18.4 and 18.5 of the Retail Lease and clause 11.1.3(b) of the Commercial Lease give it that entitlement.

71. [95]

    I do not think that clause 14 of the Agreement for Lease applies. Save where the Leases make express provision for the Agreement for Lease to apply (such as clause 18.6 of the Retail Lease), the formal leases now embody the rights and obligations of the parties. Clause 15.6(a) of the Retail Lease provides that “[t]his document embodies the whole transaction of leasing made by this Lease…”

72. [96]

    But even if it does apply, Clause 14 of the Agreement for Lease does not provide for any such entitlement. It provides for the design to be approved in writing by the Lessor acting through its architect and is silent on the question of who bears the cost of the Architects. Absent express provision, this cost is the Lessor’s.

73. [97]

    Clause 3.2 of the Retail Lease has no application either. The costs which the clause contemplates concern the Lessor dealing with an application for consent. These costs were not incurred in connection with any such application. They were paid to supervise a fitout for which consent had already been given. They were spent to monitor performance.

74. [98]

    Clause 18.4 also does not provide for any such entitlement. It merely provides for approval by the Lessor’s architect.

75. [99]

    I do not think that clause 18.5 provides for it either. Clause 18.5 contains an indemnity as part of a larger clause dealing with a specific situation where the Lessor incurs liability because of the conduct of others. I do not think that the clause concerns the situation where the Lessor, of its own volition, incurs a contractual liability in respect of services it obtained for its own benefit.

76. [100]

    Finally, I also do not consider that the Architects’ fees fall within 11.1.3(b) of the Commercial Lease. They do not represent costs and expenses incurred in connection with the approval of the Works but in connection with the carrying out of the approved Works.

77. [101]

    The parties are sophisticated and the Leases legislate for their relationship comprehensively.

78. [102]

    If they had intended that the Lessee should be liable for this expense, they could and would have said so.

79. [103]

    IPL has established that Charmen wrongly demanded and received $18,254 under the bank guarantee. IPL is entitled to a verdict for damages against Charmen for this amount.

80. [104]

    IPL claims $14,774. [3]

81. [105]

    Under clause 14 of the Agreement for Lease and clauses 18.6, 18.7 and 18.8 of the Retail Lease, Charmen was to contribute $470,000 to IPL’s fitout costs. It is common cause that Charmen has short paid IPL. IPL claims this amount. IPL rendered an invoice for it to Charmen on 18 July 2013.

82. [106]

    Read in combination with each other, the Agreement for Lease and the Retail Lease with respect to this item are infelicitous documents. On the one hand, the Agreement for Lease, read with Clause 18.6 of the Retail Lease, appear to contemplate that this amount will be paid in advance. On the other hand, Clause 18.8 says that the amount is to be paid on presentation of invoices from the Lessee’s contractors, within 14 days. Clause 18 of the Retail Lease must have primacy over the Agreement for Lease. IPL has not complied with the invoice condition in relation to the outstanding balance claimed. The 18 July 2013 invoice does not suffice.

83. [107]

    It follows that IPL has not made out an entitlement to this claim, and it fails.

84. [108]

    IPL seeks to recover a series of charges claimed by, and paid to, Charmen as Building Outgoings under the Retail Lease or as Operating Expenses under the Commercial Lease. IPL disputes that these charges come within the definitions of Outgoings and Operating Expenses. The items in question total $136,489.

Air conditioning cooling tower – $35,056

1. [109]

   In June 2014, Charmen replaced the cooling tower for the air conditioning system, reflected in three invoices from Inter-Chillers Pty Ltd (Inter-Chillers) at a cost of $35,056.

2. [110]

   Charmen recovered this amount from the bank guarantee as an Operating Expense.

3. [111]

   It was not entitled to do so. The definition of Operating Expenses excludes structural or capital works. I take this to mean the, or a significant part of the, structure or capital asset which generates the rent as opposed to a cost of running it, which includes maintaining it.

4. [112]

   The cooling tower, as the below photographs (Figures 1 and 2) reveal, is a significant part of the air conditioning system, which is a significant part of the structure of the Building. I find it to be structural or capital works. The expense in installing it is not of the nature of a running cost. It is not an Operating Expense.

5. [113]

   Charmen’s written submissions articulate the issue as being “whether an upgrade to a cooling tower is capital works”. These works may have represented an upgrade, but it was achieved by replacement.

6. [114]

   IPL has established that Charmen wrongly demanded and received $35,056 under the bank guarantee. IPL is entitled to a verdict for damages against Charmen for this amount.

7. [115]

   Charmen sought to rely on clause 7.1.1(f) of the Commercial Lease, which provides that “the Tenant will ensure that any airconditioning equipment in the Premises including, but not limited to, the Landlord’s Airconditioning Equipment is used to its best advantage and that unconditioned air does not filter into any airconditioned part of the Premises”. This provision does not entitle Charmen to recover the cost of structural or capital works.

Replacing electrical switchboards and replacing other air conditioning equipment

1. [116]

   IPL claims $10,854 and $25,080 respectively.

2. [117]

   In January 2016, Colliers on behalf of Charmen obtained from Inter-Chillers a Mechanical Services Condition Report. The introductory section of the report refers to Inter-Chillers’ engagement in October 2015 to commence a maintenance programme which included a full site assessment and condition report of all heating, ventilation and air conditioning plant (HVAC) to ascertain the remaining life, condition and outstanding issues.

3. [118]

   The section then states:

4. [119]

   The report goes on to deal with the economic life expectancy of the HVAC.

5. [120]

   Colliers provided the report to IPL on 28 January 2016. The report identified that what are referred to as “package” or “PAC” units, had reached their life expectancy, and recommended replacement. These are water cooled units located on each floor. The report also identified poor and dangerous internal wiring in switchboards.

6. [121]

   Charmen also obtained a report from CJ Air Pty Ltd (CJ Air) which included costings.

7. [122]

   Charmen engaged a firm called Micron to do work on the electrical switchboards. Micron rendered an invoice on 9 June 2016 for $11,940 for “After hours work to make good of 3 x mechanical switchboards".

8. [123]

   It is not in dispute that Colliers (on behalf of Charmen) invoiced IPL in an amount of $25,080 in respect of replacement of PAC units.

9. [124]

   Charmen argued that this work is best characterised as “routine repairs” and included inspection and testing and is recoverable as outgoings.

10. [125]

    However, the Inter-Chiller and CJ Air reports reveal that the air conditioning system as a whole (except for the cooling tower, which had recently been replaced) had reached the end of its life expectancy and needed to be replaced. The PAC units and mechanical switchboards were part of this process. This replacement of significant air conditioning plant, which had reached its economic life expectancy, was capital or structural works.

11. [126]

    Charmen was not entitled to recover from IPL the cost of, in effect, replacing the air conditioning system for the whole Building.

12. [127]

    On 1 September 2016, Colliers wrote to IPL informing it that if it did not pay for these charges, Charmen would make demand under the bank guarantee. Charmen made such a demand and was paid.

13. [128]

    I find that Charmen wrongly demanded and received sums of $10,854 and $25,080 under the bank guarantee. IPL is entitled to a verdict for damages against Charmen for these amounts.

Building supervisor’s wages

1. [129]

   IPL claims $35,038.

2. [130]

   On about 5 September 2016, for the first time during the life of the leases, Colliers on behalf of Charmen rendered an invoice of expense details for the previous financial year which claimed as an outgoing, payable by IPL, “Building Supervisors Wages”, totalling $11,660. The invoice detailed a monthly amount, apparently calculated at an hourly rate. Colliers went on to charge $13,780 for the year ending 30 June 2017 and $13,102 for the year ending 30 June 2018 for this head. [4]

3. [131]

   Unsurprisingly, Dr Cussell queried this charge. He wrote as follows to Julia Batterly of Colliers:

4. [132]

   Julia Batterly responded:

5. [133]

   Mr Mendel gave the following affidavit evidence:

6. [134]

   This evidence paints an incomplete picture.

7. [135]

   There had been earlier correspondence between Mr Mendel and Colliers about this charge. On 27 May 2015, Julia Batterly had written to Mr Mendel as follows:

8. [136]

   The same day, Mr Mendel replied:

9. [137]

   Ms Batterly responded:

10. [138]

    Mr Mendel responded:

11. [139]

    The facts and circumstances giving rise to this alleged outgoing are peculiarly within the knowledge of Charmen and its agent Colliers.

12. [140]

    IPL correctly challenged this new impost, pointing out that it was already paying a significant amount of money for Colliers’ management.

13. [141]

    Beyond asserting an agreement with its own agent, Charmen did not adduce evidence justifying it. It made no attempt to show that the services were necessary and were provided or to establish how the amount was arrived at and that it was reasonable. The invoice refers to a salary. It did not explain why salaries paid by it were not simply part of its own overhead. It did not identify the beneficiary of the salary. These are matters peculiarly within the knowledge of its own camp.

14. [142]

    Part of the justification for the charge was an asserted increase in the work required to deal with IPL itself, no doubt as a result of the antagonistic relationship which then existed.

15. [143]

    More importantly, however, it is plain that Colliers suggested the levy and Charmen agreed to it on the assumption that it was IPL that would have to pay for it. This further calls into question justification for the charges. The inference is plainly available that had the view not been taken that IPL was liable for it, the charge would not have been agreed.

16. [144]

    I am satisfied that IPL has sufficiently proved a lack of entitlement on Charmen’s part to have levied these charges.

17. [145]

    I find that Charmen wrongly demanded and received $35,038 under the bank guarantee. IPL is entitled to a verdict for damages against Charmen for this amount.

18. [146]

    There are 16 other charges, each the subject of an invoice, most of which IPL contends are capital works or otherwise not Building Outgoings or Operating Expenses.

19. [147]

    The extent of Charmen’s final written submissions on this aspect was:

Servo motor

1. [148]

   Apparently in April 2009, Liftronic Pty Limited rendered an invoice to Charmen in the following terms:

2. [149]

   The invoice is for $665.

3. [150]

   The invoice is the only evidence justifying the charge. But it does not explain what a servo motor is, what it was to be used for and why it was needed. These are matters within the knowledge of Charmen and its agent.

4. [151]

   There is thus evidence of a payment for reasons which on their face are not shown to be recoverable against IPL under the lease, with no explanation from those having actual knowledge. Charmen has chosen to rely only on onus.

5. [152]

   In the circumstances, IPL has sufficiently proved that Charmen was not entitled to this money.

6. [153]

   IPL is entitled to a verdict for damages against Charmen for this amount.

Water leak

1. [154]

   IPL claims $1995.

2. [155]

   On 5 June 2009, CBD Building Services Pty Ltd rendered an invoice to Charmen for locating and repairing a water leak. The invoice provides details of the work done and goods supplied. Part of it is clearly Operating Expenses. But it includes “supplying and installing waterproof ductwork over end of fresh air intake”, which I think is of the nature of capital works. The invoice, however, does not apportion amounts to various items. In the circumstances I am not satisfied that IPL has established an entitlement to be repaid a particular amount. The claim fails.

Replacement of cooling tower fan

1. [156]

   IPL claims $1500.

2. [157]

   On 15 March 2010, Johnson Controls Pty Ltd (Johnson Controls) rendered an invoice for “replacement of cooling tower fan”.

3. [158]

   This is part of the replacement of the cooling tower, which I have found is capital or structural works. Charmen was not entitled to recover this amount from IPL, and IPL is entitled to judgment for $1500 accordingly.

Replace condenser water pump

1. [159]

   IPL claims $4000.

2. [160]

   On 15 March 2010, Johnson Controls rendered an invoice for “replace condenser water pump”.

3. [161]

   This is part of the replacement of the air conditioning system, which I have found is capital or structural works. Charmen was not entitled to recover this amount from IPL, and IPL is entitled to judgment for $4000 accordingly.

Replacement of faulty probe on conductivity controller

1. [162]

   IPL claims $358.

2. [163]

   On 2 June 2010, John Controls rendered an invoice for “replacement of faulty probe on conductivity controller”.

3. [164]

   There is insufficient to conclude that this account, which concerns rectification of a single fault, is not appropriately to be viewed as an Operating Expense. I am not satisfied that IPL has established an entitlement to a refund.

Replacement of mechanical isolation

1. [165]

   On 28 March 2012, Johnson Controls rendered an invoice for $2250 for “replacement of main mechanical isolation”.

2. [166]

   The invoice itself does not provide information to explain the nature of the claim. IPL justifiably questioned this charge.

3. [167]

   The invoice appears to be for the replacement of a significant piece of capital works equipment. Charmen did not produce evidence of the basis for the charge.

4. [168]

   In the circumstances, IPL has sufficiently proved, on the probabilities, that Charmen was not entitled to this money. IPL is entitled to judgment for $2250 accordingly.

Replacement of cooling tower fan controller, replacement cooling tower fan motor, installation of new condenser water strainer and replacement of faulty isolator for mechanical board

1. [169]

   Johson Controls rendered invoices for these items on 28 August 2013 ($1281), 25 September 2013 ($2670), 1 May 2014 ($1156) and 16 October 2014 ($941) respectively.

2. [170]

   IPL submits that these amounts are capital or structural works.

3. [171]

   On their face, the invoices may reflect legitimate Operating Expenses. There is insufficient to conclude that they are not appropriately to be so viewed.

4. [172]

   These claims fail.

Project management fee for cooling tower replacement

1. [173]

   On 27 August 2014, Colliers rendered an invoice to Charmen for $4000 in the following terms:

2. [174]

   I have already found that the replacement of the cooling tower was not properly for IPL’s account. A fortiori, a fee of $4000 agreed between Charmen and Colliers (also presumably on the footing that IPL would pay for it) to manage that project was not a legitimate charge.

3. [175]

   IPL is entitled to judgment for this amount.

Property risk assessment

1. [176]

   IPL claims $925.

2. [177]

   On 9 October 2014, an organisation called Australian Essential Services Compliance rendered an invoice to Charmen, care of Colliers, for the above amount for “Property Risk Assessment conducted on 12/09/2014 and provision of report as per your work order: PO87836”.

3. [178]

   On its face, this charge appears to relate to a report assessing risks in connection with Charmen’s ownership of the Building, for its own benefit or protection, which is not a Building Outgoing or Operating Expense.

4. [179]

   Charmen led no evidence to justify this charge.

5. [180]

   The Court was not taken to the work order, or to the report.

6. [181]

   IPL is entitled to judgment for this amount.

Essential safety measures audit

1. [182]

   IPL claims $500.

2. [183]

   On 24 February 2015, Australian Essential Services Compliance rendered an invoice to Charmen, care of Colliers, for:

3. [184]

   On its face, this charge appears to relate to an audit of safety for Charmen in connection with its ownership of the Building, for its own protection, which is not a Building Outgoing or Operating Expense.

4. [185]

   Charmen led no evidence to justify this charge.

5. [186]

   The Court was not taken to any Status Report. What compliance certification was required or provided was not explained.

6. [187]

   IPL is entitled to judgment for this amount.

Replacement of box gutter

1. [188]

   IPL claims $2180.

2. [189]

   On 29 February 2016, John Neil Plumbing rendered an invoice to Charmen, care of Colliers, for “Replaced approx 4 metres of box gutter, as per quotation”.

3. [190]

   Charmen lead no evidence to justify this charge.

4. [191]

   In my view, gutters are an essential part of the structure of the Building, and replacement of metres of it is structural.

5. [192]

   IPL is entitled to judgment for this amount.

Make good report

1. [193]

   IPL claims $3200.

2. [194]

   On 31 July 2016, Colliers rendered an invoice to Charmen for the above amount for “263 George St Commercial Make Good Report”.

3. [195]

   The report is in evidence. It records that the report “is analysing the two leases that capture the four floors of 263 George St.” It records that Colliers had reviewed the relevant portion of the lease for reference and have identified and had regard to the comprehensive clauses and provisions which require make good and the associated obligations. It records that the report is based on assumptions, which seek to detail the level of works, compliance and adherence to typical industry standards for commercial/fitout works. It includes as Appendix A a cost estimate, and as Appendix B a comprehensive set of plans.

4. [196]

   The cost of this report is not a cost legitimately for the account of IPL. IPL’s obligations to make good are set out in the leases. Charmen’s cost of advice and counsel obtained from its agent as to the extent of these obligations and the cost of complying with them is its own.

5. [197]

   IPL is entitled to judgment for this amount.

Removal and disposal of redundant duct

1. [198]

   IPL claims $2840.

2. [199]

   On 10 March 2017, CJ Air invoiced Charmen, care of Colliers, for: “Removed and disposed of redundant duct from side of building.”

3. [200]

   This is not a repair or maintenance. It is structural.

4. [201]

   This is not a cost legitimately for the account of IPL.

5. [202]

   IPL is entitled to judgment for this amount.

6. [203]

   The leases have not been on foot for some 18 months and IPL has vacated the Building. There is no evidence that persuades me that IPL is in any way in breach of them or has not complied with its obligations. To the contrary, it is Charmen who has breached the leases by calling on the bank guarantee to effect payment to itself of amounts to which it was and is not entitled.

7. [204]

   The only defence to delivery up of the bank guarantee is a contention by Charmen that it is entitled to hold on to it pending it being compensated for its costs under the indemnity contained in clause 5.1.1(c) of the Commercial Lease. I have already dealt with why it has no such claim.

8. [205]

   There will accordingly be an order that Charmen forthwith deliver up to IPL the bank guarantee.

9. [206]

   Subject to any arithmetical adjustments to correct any errors, including ones I am revealed to have made, and the calculation of pre-judgment interest, IPL is entitled to judgment against Charmen for $361,347 made up as follows:

10. [207]

    I will stand the matter over to enable the parties to bring in short minutes, to draw to my attention any arithmetical errors and to draw to my attention any further issue that requires to be dealt with, including costs and how GST is to be dealt with.

11. [208]

    The exhibits are to be returned.