The High Court in Tabcorp Holdings Pty Ltd v Bowen Investments
Pty Ltd, has upheld a decision of the Federal Court to order a
tenant who breached a covenant of a lease to pay damages to the
Landlord of $1.38 million.
Bowen Investments Pty Ltd (Bowen) leased to Tabcorp Holdings Pty
Ltd (Tabcorp) office premises in Melbourne. The parties entered
into a 10 year lease. The lease contained a covenant to the effect
that Tabcorp were not to make or permit any substantial alteration
or addition to the premises without the approval of Bowen. Tabcorp
also covenanted to keep the premises in good repair to yield up the
premises on the determination of the lease in good repair and, to
make good any breakage or damage.
Before Tabcorp took possession of the property, it undertook a
refurbishment of the building for which it obtained Bowen's
consent. Tabcorp did not however, obtain consent to refurbish the
main foyer of the building despite knowing that it needed
The trial judge described Tabcorp's conduct as involving
"contumelious disregard" for Bowen's rights, however,
only awarded nominal damages to Bowen for the amount of $34,820.00.
This figure was made up of the difference between the value of the
property with the old foyer and the value of the property with the
new foyer constructed by Tabcorp.
On appeal to the Full Court of the Federal Court, it was held
that the trial judge had not calculated the amount of damages
correctly and, ordered Tabcorp to pay damages to the sum of $1.38
million for the breach of the repair covenant. This amount was to
account for the repair costs, as well as the loss of rental while
the repairs were undertaken.
The High Court decision
On appeal to the High Court, Tabcorp sought to restore the trial
Judge's original damages figure of $34,820.00. The High Court
unanimously held that if the benefit of the covenant relating to
substantial alteration or addition to the premises, was to be
secured to Bowen, it was necessary that reinstatement damages be
paid, and it was not unreasonable for Bowen to insist on that
payment. The High Court reasoned that Bowen was entitled to the
damages that would cover the cost of reinstating the foyer as it
had been prior to the refurbishment, and the loss of work while
that was being done, rather than to damages that would only cover
the reduction in value of the premises arising out of the
The High Court held that Tabcorp had breached its contractual
obligations to Bowen, by failing to abide by the covenants in the
lease. Tabcorp was therefore under obligation to restore the
premises as it was before it took possession. The High Court
dismissed the appeal and retained the order for damages at $1.38
Key messages from this case
This case serves as a reminder to both landlords and tenants, to
be acutely aware of all obligations contained under your lease. The
key messages include:
From a lessor's perspective, it is vitally important that
your lease contains covenants to the effect that you are covered
from activity such as that shown by the tenant in this case.
Lessees should clearly take note of any clauses in their lease
that restrict them from doing works without the lessor's prior
Lessees should ensure that their leases expressly provide for
what will happen if a covenant is breached and what compensation or
damages they are likely to pay should a breach occur.
The Council announced planning policies to encourage more inner suburban retirement village and aged care development.
Some comments from our readers… “The articles are extremely timely and highly applicable” “I often find critical information not available elsewhere” “As in-house counsel, Mondaq’s service is of great value”
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).