Geoffrey Clifford Gibbons and Anne Declan Gibbons v Edward Lionel Bruce Whittem [1988] ACTSC 63 (10 November 1988)

SUPREME COURT OF THE ACT

GEOFFREY CLIFFORD GIBBONS and ANNE DECLAN GIBBONS v. EDWARD LIONEL BRUCE
WHITTEM
S.C. No. 629 of 1986
Contract - Damages

COURT

IN THE SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
Miles C.J.(1)

CATCHWORDS

Contract - alleged breach of sublease of premises - plaintiff sublet veterinary practice premises and leased practice to defendant - failure to pay rent and maintain goodwill of practice - whether sublease wrongly repudiated or defendant entitled to terminate because of special lease conditions.

Damages - breach of sublease - applicability of general principles regarding assessment of damages for breach of contract - questions of causation and mitigation of loss - whether failure of plaintiff to personally conduct practice after defendant left constitutes failure to mitigate loss - quantification of loss of goodwill.

Shevill and Another v. The Builders Licensing Board [1982] HCA 47; (1982) 149 CLR 620

The Progressive Mailing House Proprietary Limited v. Tabali Proprietary Limited [1985] HCA 14; (1985) 157 CLR 17 per Brennan J. at p 41.)

HEARING

CANBERRA
10:11:1988

ORDER

1. There be judgment for the plaintiff in the sum of $9,378.

2. The defendant pay the plaintiffs' costs.

DECISION

This is an action for damages for breach of the provisions of a sublease of premises used partly for residential purposes and partly for the purposes of a veterinary practice and for breach of an ancilliary agreement for lease of the veterinary practice. The plaintiffs were the lessees from the Commonwealth of premises at 145 Kingsford Smith Drive, Melba, where the male plaintiff (Mr. Gibbons) and his family resided and where he conducted the veterinary practice. It was called the Melba Veterinary Hospital. The purposes clause of the lease from the Commonwealth provided that the land be used for residential purposes only, but Mr. Gibbons had obtained permission of the Minister under s.10 of the City Area Leases Ordinance 1936 to carry on the veterinary practice there. The plaintiffs took over the lease and Mr. Gibbons began practice from the premises in 1978. He built up the practice substantially, bearing in mind that the location was not a particularly good one. He had a large personal following amongst his clientele, partly because he conducted a talk-back programme on veterinary topics from a local radio station.

2. In April 1985 Mr. Gibbons decided that he wanted to go to the United States in order to gain further post-graduate qualifications. However, he did not want to abandon the practice that he had built up and he wanted to reserve for himself the choice whether to resume the practice at the end of his intended stay abroad. So he began negotiations with the defendant (Mr. Whittem) who had purchased a veterinary practice at 1 Belconnen Way, Weetangera, about seven or eight kilometres distant from Mr. Gibbons's premises.

3. As a result of those negotiations the plaintiffs subleased the premises to Mr. Whittem from 21 June 1985 to 21 March 1988. The parties also entered into an agreement for the lease of the practice for the same period. A total rental of $1,600 per month was agreed upon,one half was assigned to the lease of the premises and the other half to the lease of the practice. In addition, the parties entered into an option agreement whereby Mr. Whittem was entitled to purchase the premises and practice, such entitlement to be exercised in writing by 21 December 1987. The purchase price for the premises was the subject of a formula. The purchase price for the practice was agreed at $26,600, of which $23,000 was agreed to represent the price of the goodwill and $3,600 the price of plant and equipment.

4. The sublease was dated 21 June 1985. It was in the standard form of a printed Landlord & Tenant's Agreement. It provided that the rent was payable in advance by monthly instalments on the 21st day of each month. Among the tenant's covenants were the following:
"12. Not to assign the benefit of this Agreement

or sublet or part with possession of the premises
or any part thereof other than to a registered
veterinary surgeon in the Territory.
13. To ensure that the premises are used only as
a residence and veterinary practice and not for
any other purpose."

5. The sublease also contained a number of Special Conditions. These were as follows:

"32. The landlord and or the landlords' family
may remain in occupation of the premises free of
rent licence fee or other charge until 30th
September 1985.
33. The tenant proposes to carry on the veterinary
practice at the property currently being
carried on by Geoffrey Clifford Gibbons.
In the event that:-
(a) the tenant or any veterinary surgeon
employed or engaged by the tenant is unable
to obtain the consent of the Minister of the
Capital Territory to carry on the practice
at the property or is prevented from continuing
to carry on the practice
or
(b) is prevented by the Building Controller from
using the rooms currently used in connection
with the practice for that purpose
or
(c) is prevented for any other reason outside
the control of the tenant from carrying on
the practice
the tenant shall be entitled to rescind or terminate
this Agreement but shall not make any claim
for compensation against the Landlord arising out
of the inability to carry on the practice.
34. The tenant shall at his own expense either
make himself or ensure any veterinary surgeon
employed or engaged by the tenant makes and
diligently pursues an application for approval
under Section 10 of the City Area Leases
Ordinance to continue the activity of Veterinary
Surgeon from the subject residence and do all
things and sign all such documents as may be
required to obtain such approval as aforesaid.
35. Once approval has been granted as contemplated
in paragraph 34 the tenant shall ensure
there is full compliance with the conditions of
that approval and do all such things and ensure
that all such documents are signed as are
reasonably necessary for the renewal of the
approval and shall not as a result of neglect or
a deliberate or careless act put such approval at
risk of forfeiture withdrawal or non-renewal.
36. Notwithstanding anything herein contained
continuation of this Agreement is conditional and
dependant upon continuation of the Lease of
Business between the parties hereto contained in
a separate Agreement dated the same date as hereinbefore
written."

6. The lease of the veterinary practice was also dated 21 June 1985. Some of its provisions were as follows:

"8. The Lessee shall:-
(a) Faithfully and diligently run the business as
a going concern and protect the goodwill of
the business;
(b) Observe and conform to the rules and customs
and ethics of the Veterinary profession;
(c) Observe all relevant statutes, statutory
regulations and by-laws with respect to the
continued conduct of the business;
(d) Keep secret all confidential matters relating
to the business from all except the lessor;
(e) Pay all accounts promptly and keep properly
posted all account books of the business;
(f) Employ a locum tenens should the lessee or
any veterinary surgeon employed by the lessee
be ill, go on holidays or be absent from the
business for any other reason for a period of
more than seven (7) days.
.....
12. Notwithstanding anything herein contained
continuation of this Agreement is conditional and
dependant upon continuation of the Landlord &
Tenant's Agreement dated the same date as hereinbefore
written."

7. It is common ground that Mr. Whittem failed to pay the instalment of rent due on the sublease and the instalment due on the lease of the practice due and payable on 21 November 1985 and thereafter. The plaintiffs allege that Mr. Whittem by such failure and otherwise wrongly repudiated the sublease and the lease of the practice and the plaintiffs claim the whole of the loss of rent due from 21 November 1985 and loss of goodwill, together with interest pursuant to s.53A of the Australian Capital Territory Supreme Court Act.

8. The defence filed raises two matters by way of defence. The first is that the defendant has exercised his entitlement to rescind or terminate the agreement pursuant to clause 3 of the sublease. In this respect paragraph 6 of the defence makes the following claim:

"6 (a) In accordance with the said tenancy agreement
the defendant engaged a veterinary
surgeon to reside at the property and to
carry on the practice. That veterinary
surgeon became injured and unable to reside
at the property and carry on the practice
whereby the defendant was unable to maintain
the consent of the Minister of the Capital
Territory to carry on the practice and
whereby the defendant was prevented from
continuing to carry on the practice.
(b) The defendant was prevented by a reason outside
the control of the defendant from carrying on the practice.
PARTICULARS
The defendant was unable to employ or engage
a veterinary surgeon who would reside at the
property in accordance with Section 10 City
Area Leases Ordinance. Further the takings
of the practice differed so significantly
from what each party reasonably contemplated
at the time of execution that the defendant
was prevented from carrying on the
practice."

9. An alternative defence is raised that by letter dated 22 November 1985 the plaintiffs repudiated the lease and the defendant accepted that repudiation.

10. There was a considerable body of evidence relating to the facts, and not all of it turned out to have much bearing on the essential issues. Both parties relied essentially on the express terms of the sublease and the lease of the practice. It was suggested on behalf of Mr. Whittem that the arrangement between the parties was such that it was founded upon the assumption that Mr. Whittem would conduct the practice through another veterinary surgeon. In this regard, Special Conditions 33 and 34 of the sublease took account of the requirement that the conduct of the practice was subject to the provisions of s.10 of the City Area Leases Ordinance 1936. That section provides as follows:

"Use of residential land for professional and
other purposes
10(1) Where in any lease the lessee covenants to
use the land included in the lease for
residential purposes only, the land shall not be
deemed to be used for any other purpose by reason
only of any person, bona fide resident on the
land, carrying on, with the subject to the
approval of the Minister, and in accordance with
such conditions relating to the use of the land
as the Minister specifies, his profession, trade,
occupation or calling on the land.
(2) Upon application being made to the
Minister and payment of the determined fee, the
Minister may approve in writing of any person
bona fide residing on any such land, carrying on
his profession, trade, occupation or calling on
the land for such period as the Minister
specifies, and may in the instrument of approval
or any subsequent instrument specify the
conditions relating to the use of the land to be
observed by that person in so carrying on his
profession, trade, occupation or calling:
Provided that the Minister shall not approve -
(a) of the carrying on of any offensive trade on
the land;
(b) of the doing of any act or thing in
connexion with the carrying on of any
profession, trade, occupation or calling on
the land which may become a danger or
nuisance to the tenants or occupiers of
adjoining lands; or
(c) of the carrying on of any profession, trade,
occupation or calling on the land if he is
satisfied that it is not in the public
interest so to do.
(3) Any instrument approving of the carrying
on of any profession, trade, occupation or
calling on any such land, or specifying the con-
ditions under which the profession, trade,
occupation or calling may be so carried on, shall
be forthwith published in the Gazette."

11. Special Condition 33 gives rise to some difficulties in construction. The words "the tenant or any veterinary surgeon employed or engaged by the tenant" should, in my view, be read into paragraphs (b) and (c) so as to appear at the beginning of each of those paragraphs. That much is clear and was not contested. However, the relationship between paragraphs (a) and (c) is difficult to determine. On the face of it, it is difficult to see why paragraph (c) is necessary if paragraph (a) applies to all circumstances in which the tenant or any veterinary surgeon employed or engaged "is prevented from continuing to carry on the practice". However, if the clause is read as a whole, I think that what is intended is that paragraph (a) is directed to the situation where the tenant is unable by reason of ministerial decision to continue to carry on the practice, so that words to the effect of "by the Minister" should be read into paragraph (a) following the words "is prevented". That interpretation leaves full scope for the operation of paragraph (c) which will apply in the case of any reason, other than those stipulated in paragraphs (a) and (b), which is outside the control of the tenant and prevents the tenant from carrying on the practice.

12. It is possible to state my findings of fact relatively briefly. Prior to the date of commencement of the sublease and lease of the practice, Mr. Gibbons and Mr. Whittem spoke to each other about the possibility of Mr. Whittem engaging a veterinary surgeon named Janet Stumbo. Mr. Whittem told Mr. Gibbons that Ms. Stumbo had been injured in a motor vehicle collision and had not regained her full capacity to carry on practice. Mr. Gibbons raised no objection, his attitude being that the responsibility of engaging a competent practitioner to carry on practice from the premises was the responsibility of Mr. Whittem. Ms. Stumbo was engaged. On 19 June 1985 the Department of Territories granted approval under s.10 of the City Area Leases Ordinance 1936 for Ms. Stumbo to carry on practice from the premises. During the first two weeks after the commencement of the sublease Mr. Whittem employed a second veterinary practitioner as a locum tenens, Ms. Sandra O'Brien, to live and work at the premises in addition to Ms. Stumbo. Although Mr. Gibbons and his family had the right under Special Condition 32 of the sublease to remain in occupation free of rent or other charge until 30 September 1985, they in fact moved out within days of the signing of the sublease and lease of the practice and Ms. Stumbo and Ms. O'Brien moved in. Mr. Gibbons and his family left for the United States on 4 July 1985.

13. According to the defendant's case, there was a decided downturn in the number of clients and the takings of the practice soon after the commencement of the sublease and lease of the practice. However, upon closer analysis it appears that the figures for July and August were about average, but there was a substantial drop in September and October. Mr. Whittem ran into difficulties with regard to the professional assistance he needed to run the practice. He also ran into financial difficulties because of a rise in interest rates.

14. There was written correspondence between the parties and also a number of telephone conversations. There were also conversations between Mr. Whittem and Mr. Gibbons' father, Dr Claude Gibbons, who had been appointed the agent of the plaintiffs whilst they were in the United States. There is some conflict between the accounts given as to the content of these conversations. Where there is a conflict between the evidence of Mr. Gibbons or Dr Claude Gibbons and that of Mr. Whittem, I prefer the evidence of Mr. Whittem. The first of these conversations between Mr. Gibbons and Mr. Whittem was, as I find, in the second week of November 1985, after Mr. Whittem had written a letter to Mr. Gibbons dated 27 October, but which had not at that stage reached Mr. Gibbons. That telephone conversation occurred when Mr. Gibbons was woken up in the middle of the night, quite unprepared for what he was about to hear, and I gained the clear impression from him that he did not want to hear it. I shall return in a moment to what was said.

15. Janet Stumbo proved to be incapable of running the practice efficiently and she left "fairly precipitously" on about 10 October 1985. Mr. Whittem then employed another assistant, at that stage as a locum tenens, namely Andrew Moss. He stayed for two weeks. Then another locum, Phillip Dudarec, was engaged and stayed for a period of four weeks, until he was dismissed. Dudarec was followed by Andrew Moss, who returned on a temporary basis, as he had commitments to take up employment elsewhere in the new year. He remained until Mr. Whittem regarded the arrangement as terminated on or about 6 December 1985.

16. Neither Dudarec nor Moss lived on the premises, and there was, therefore, a noncompliance with s.10 of the City Area Lease Ordinance 1936. Mr. Whittem played an increasingly active part in the running of the practice at Melba, in the latter stages visiting three to four times a week to assist in surgery and to carry out managerial tasks. He cleared the cash register once a week and entered up the records accordingly. From May 1985 to November 1985 Mr. Whittem advertised for an assistant to run the practice as an employee on a regular basis. There were only four applicants and the only one considered suitable for the position withdrew her application. At first the position was advertised with a "salary package of $23,000 per annum", but later it was advertised on the basis of $18,500 per annum salary together with free accommodation. The later advertisements were intended by Mr. Whittem to attract a wider range of applicants. Mr. Whittem made other unsuccessful efforts to obtain a suitable assistant. I find as a fact that there were none available in the Canberra area on the salary he was offering, except practitioners prepared to work on a locum tenens basis only, which involved living away from the premises.

17. The original engagement of Phillip Dudarec for a period of four weeks was not extended because Mr. Whittem was quite dissatisfied with his performance, particularly with regard to his failure to charge adequate fees for his services to the customers. Mr. Whittem's attitude was, in my view, a reasonable one and was, initially at least, shared by Dr Claude Gibbons.

18. I reject the suggestion made on behalf of the plaintiffs that Mr. Whittem did not take proper and reasonable steps to maintain the Melba practice. It was submitted that the salary he offered was too low and the conditions not attractive enough. The evidence, however, in my view, establishes that what was offered amounted more or less to market rates and conditions. In my view, Mr. Whittem took reasonable steps to find a suitable assistant but in practical terms none were available during the period in question. It must be remembered that in order to comply with the conditions of the lease of the practice, it was essential to find an assistant who was prepared to live on the premises so that approval under s.10 of the City Area Leases Ordinance 1936 could be obtained.

19. In my view, the decline of the practice was due mainly to two reasons. The first was the inability of Ms. Stumbo to cope with running the practice even with the substantial assistance of Mr. Whittem. The second reason was the extent to which the practice of Mr. Gibbons depended upon his own personal exertions and not to other factors such as location. It is likely that his talk-back radio programme contributed substantially to Mr. Gibbons' appeal to customers and prospective customers. As it happened, Mr. Whittem later conducted the same talk-back radio programme in the place of Mr. Gibbons, but that was no part of the contractual arrangements between the parties and did not provide any guarantee that there would not be a fall off in clientele after the departure of Mr. Gibbons for the United States.

20. Mr. Whittem's letter to Mr. Gibbons of 27 October 1985 drew attention to the decline of the practice "due to loss of personal following", with the consequence that the number of clients were "simply too low to generate a reasonable cash flow". Mr. Whittem anticipated that the trend of the figures suggested that he would make a loss of about $20,000, presumably for the financial year. When Mr. Whittem spoke to Mr. Gibbons in the second week of November, he explained those difficulties. He put to Mr. Gibbons a proposal for mutual rescission of the sublease and lease of the practice and proposed an alternative arrangement whereby Mr. Gibbons would continue to be financially responsible for the expense of running the practice at Melba but would be entitled to the takings. In return Mr. Whittem offered to manage the practice on behalf of Mr. Gibbons and to exchange certain stock-in-trade which he had placed at Melba for certain items of equipment belong to Mr. Gibbons. Mr. Whittem said in his evidence, and I accept, that Mr. Gibbons' reply to the proposal was along the following lines:

"Well Ted, I guess you're the man on the spot and
probably best able to know what to do."

21. Mr. Whittem then proposed that there be an exchange of letters mutually rescinding the leases to which Mr. Gibbons replied, "I suppose that will be necessary".

22. On 19 November 1985 Dr Gibbons, who lived in Sydney, paid a visit to Canberra. He met Mr. Whittem, who sought to formalize what he considered to be the arrangement between himself and Mr. Gibbons, but Dr Gibbons insisted that the agreements should stand as they were, and that Mr. Whittem was under a moral and legal obligation to keep his side of the bargain to maintain the Melba practice. Mr. Whittem phoned Mr. Gibbons again stating that Dr Gibbons would not accept the arrangements entered into and that he, Mr. Whittem, needed "to know who to deal with". Mr. Gibbons replied to the effect that Mr. Whittem should negotiate or deal with his representatives in Australia.

23. Mr. Whittem once again contacted Dr Claude Gibbons, who stated that he could not be responsible for administering a veterinary practice, not being himself a veterinary surgeon. Dr Gibbons proposed that the way out of the problem was for the obligation to pay rent to be postponed, not waived, for a period of three months. There were several other discussions between Mr. Whittem and Dr Gibbons in one or some of which Dr Gibbons stated that the practice could not be placed on the market as Mr. Whittem suggested, because Mr. Whittem held an option to purchase. Mr. Whittem offered to waive his rights to the option. These discussions did not end in any firm agreement.

24. I have not discussed at length the evidence as to all these conversations, because it is not alleged on behalf of the defendant that any arrangement was ever made whereby the parties mutually agreed to discharge each other from their obligations. Throughout these discussions, Mr. Whittem put various alternatives to both Mr. Gibbons and Dr Gibbons. The attitude of both grew less conciliatory as time went by.

25. On 22 November 1985 solicitors acting for the plaintiff wrote to solicitors for Mr. Whittem in the following terms:

"We are instructed by our client's attorney,
Dr Claude Gibbons, that Ms. Stumbo is no longer
the resident veterinarian at 145 Kingsford Smith
Drive and that there is presently another
veterinarian employed and living at the premises
and operating the veterinary practice without
section 10 approval. We are further instructed
that the payments due under the leases on
21st November 1985 have not been made.
We are advised by Dr Gibbons Senior that he has
had a number of conversations with Mr. Whittem
concerning Mr. Whittem's compliance with his
obligations under the leases. We are informed
that Mr. Whittem has stated that he has no
intention of continuing with his contractual
obligations because of difficulties he is
experiencing in his other business affairs. We
formally notify you that our client is unable and
unwilling to allow the present default by your
client to continue and unless your client acts
immediately to comply with his obligations under
the leases our client will have no alternative
but to consider your client's acts as a repud-
iation of his lease obligations for which our
client will seek a remedy in damages."

26. The solicitor for Mr. Whittem replied by letter of 6 December 1985 in the following terms:

"I have advised my client that your letter
clearly manifests the intention of your clients
no longer to be bound by the tenancy agreement.
Accordingly, my client accepts that repudiation
and on that ground hereby terminates the tenancy
agreement forthwith.
Further and in the alternative, my client advises
that an event as provided in clause 33 of the
tenancy agreement has happened inasmuch as the
veterinary surgeon employed by my client is
prevented from continuing to carry on the
practice by virtue of the injuries she has
received in a motor car accident. Accordingly,
on this ground, my client terminates the tenancy
agreement forthwith.
Further and in the alternative, my client advises
that an event as provided in clause 33 of the
tenancy agreement has happened inasmuch as he is
prevented for a reason outside his control from
carrying on the practice, namely that the takings
of the practice differ so significantly from what
each party reasonably contemplated at the time of
execution that it would be unjust to insist on
further compliance. Accordingly, on this ground
my client terminates the tenancy agreement
forthwith.
Unless arrangements are made direct with my
client no later than 10 a.m., 10th December 1985
to accept a handover of the premises, he will
return the keys to your office and accept no
further responsibility."
I note that clause 12 of the lease of the
business provides that that lease is conditional
and dependant upon the continuation of the
tenancy agreement. As that tenancy agreement is
now at an end, so is the lease of the business."

27. Mr. Whittem arranged for the discontinuance of the electricity supply and the telephone service and vacated the premises and the practice on 13 December 1985. On 16 December 1985 the keys were handed over to Mr. Gibbons' solicitor. Two days later Dr Gibbons took possession of the premises and began to make arrangements for Mr. Dudarec to move back and take over the practice from 31 December 1985. In fact Dr Gibbons had first approached Mr. Dudarec with a view to his leasing or buying the practice as early as November 1985. The arrangement whereby Mr. Dudarec worked at the practice from 31 December 1985 was somewhat unusual. Mr. Dudarec, like Ms. Stumbo, had been injured in a motor vehicle accident and was reluctant to engage in paid employment for fear of prejudicing his claim for loss of earning capacity in an action for damages for his injuries. Accordingly, he was allowed to live on the premises without charge and permitted to deduct his living expenses before banking the takings from the practice. Dr Gibbons immediately set in train efforts to sell the premises together with the veterinary practice, but such efforts were unsuccessful. In August 1986 the client cards and records were sold to another veterinary surgeon for $5,000 and the premises were then let solely for residential purposes.

28. The first matter raised by way of defence is that the "veterinary surgeon engaged by the defendant to reside at the premises and carry on the practice became injured and unable to reside at the property and carry on the practice whereby the defendant was unable to maintain the consent of the Minister of the Capital Territory to carry on the practice and whereby the defendant was prevented from continuing to carry on the practice". The defendant must fail in this regard because the veterinary surgeon referred to, Ms. Stumbo, had been injured long before the sublease and lease of the practice were entered into. Neither the sublease nor the lease of the practice provided that Ms. Stumbo was the only veterinary surgeon who could be engaged and the contention that the defendant "was unable to maintain the consent of the Minister", is quite beside the point. The defendant was under a duty to carry on the practice himself or through some other veterinary surgeon.

29. The next matter raised in defence is that "the defendant was prevented by a reason outside the control of the defendant from carrying on the practice" and in this respect relies upon his alleged inability to employ or engage a competent veterinary surgeon who would reside at the property and relies further on what he alleges to be the significant difference between the takings of the practice as they turned out to be and from what the parties at the time of executing the sublease and the lease of the practice reasonably contemplated that they would be.

30. I reject the submission made on behalf of the plaintiff that the defendant could have employed or engaged a competent resident veterinary surgeon if he had been prepared to offer sufficient money or sufficiently attractive conditions or both. In my view, the defendant made genuine and reasonable efforts to engage a resident practitioner and was unsuccessful. However, that is not enough to enable the defendant to terminate the sublease in accordance with Special Condition 33. That Special Condition and also Special Condition 34 contemplate that the practice is to be carried on either by the tenant himself or by a veterinary surgeon employed or engaged by the tenant. Furthermore, there is a clear duty under clause 8 of the lease of the practice to faithfully and diligently run the business as a going concern and to protect the goodwill of the business and to employ a locum tenens in the event of illness or absence of the lessee or any veterinary surgeon employed by the lessee. It was put on behalf of the defendant that the parties contemplated that Mr. Whittem would at all times remain in residence at the practice he had conducted at Belconnen Way, and hence was precluded from personally conducting the practice at Melba. The contention, however, is simply in the face of what the parties have provided in their written agreements.

31. Similarly, I reject the contention of the defendant that the takings of the practice differed significantly from what the parties reasonably contemplated at the time of execution. That there was a difference, I think, has been established but the exact extent of the difference is difficult if not impossible to determine on the somewhat confused state of the evidence on this aspect. Whatever the difference was, it was not, in my view, a factor which within the terms of Special Condition 33 "prevented" the defendant from carrying on the practice. It is also necessary to consider the application of the words "outside the control of the tenant" insofar as they relate to the reason upon which the defendant seeks to rely. Again it can hardly be said that the decrease in the takings of the practice was something which was outside the control of the defendant. Had he chosen to do so, he could have abandoned his practice at Belconnen Way and devoted all his efforts to the practice at Melba. It was simply not part of the agreement between the parties that Mr. Whittem's capacity to run his practice at Belconnen Way should continue unaffected. It may well have been that if the defendant himself had applied for s.10 approval and had been refused, he may have been entitled to terminate the agreement, but that is not what happened and it is not what he sought to happen.

32. The next matter raised by way of defence is that the plaintiffs repudiated the tenancy agreement and the defendant accepted that repudiation. This contention is, however, completely in the face of my findings of fact. By their solicitors' letter of 22 November 1985 the plaintiffs did not seek to repudiate the agreements but indeed insisted upon compliance. It may be that in certain circumstances mere failure to pay rent does not amount to a repudiation of a lease, but in this case the plaintiffs are able to rely not simply on the failure to pay the rent, but upon the delivering up of possession on 13 December 1985 or soon after and the conduct of the defendant leading to it. It is true that the defendant made efforts, and genuine and reasonable efforts, to come to some arrangement with Mr. Gibbons and Dr Gibbons whereby he could continue to play a part in the running of the practice, but when it became clear to him that those efforts would not bear fruit, he simply abandoned his obligations under the sublease and the lease of the practice. Onerous as those obligations turned out to be, he was bound to comply with them.

33. As I have already indicated, the defendant has not pleaded any termination of the sublease and lease of the practice by mutual agreement, and the plaintiffs must succeed in their claim for damages.

34. I turn now to the question of the assessment of damages. The plaintiffs claim the whole of the loss of rent for the complete term of the sublease and lease of the practice together with a claim for loss of goodwill. I take it to be the law now that the general principles of law relating to the assessment of damages for breach of contract apply to leases (see in particular Shevill and Another v. The Builders Licensing Board [1982] HCA 47; (1982) 149 CLR 620 and The Progressive Mailing House Proprietary Limited v. Tabali Proprietary Limited [1985] HCA 14; (1985) 157 CLR 17 per Brennan J. at p 41.)

35. In this case questions of mitigation and causation need to be considered. As early as the second week of November 1985 Mr. Gibbons was aware that Mr. Whittem was in difficulty in complying with his obligations under the sublease and lease of the practice. When first notified, Mr. Gibbons' attitude was that the parties through their solicitors should consider mutual rescission of their contractual arrangements. Why the attitude of Mr. Gibbons should have hardened is not entirely clear but, as I have ruled, that did not prevent the plaintiffs from successfully relying upon their legal rights. However, as far as mitigation of loss is concerned, I think that reasonableness demanded of Mr. Gibbons what the contractual obligations demanded of Mr. Whittem, namely that if he was not able to get a competent veterinary surgeon to carry on the practice in his absence, then he was under an obligation to carry it on himself. Mr. Whittem was under no obligation to assist Mr. Gibbons in the successful completion of his postgraduate studies in the United States and, whilst the expected absence of Mr. Gibbons, his wife and family was a necessary "factual matrix" upon which the parties conducted the negotiations leading to their written agreements, those agreements did not give Mr. Gibbons a right to stay there. Any decision to remain in the United States in the event of early termination was entirely a matter for Mr. Gibbons and had absolutely nothing to do with the contractual arrangements between the parties. Mr. Gibbons failed to take the very step that he demanded of Mr. Whittem, namely to offer a salary and conditions sufficiently attractive to engage a veterinary surgeon who would carry on the practice satisfactorily and preserve it for his return. In failing to take that step and in engaging Mr. Dudarec, I think that Mr. Gibbons failed in his duty to mitigate his loss. Mr. Dudarec was clearly a practitioner of dubious competence and value, and the method of recompensing him was one which could hardly be expected to attract a practitioner of even average competence. In my view, the reasonable course which a person in Mr. Gibbons' position should have pursued if he wished to mitigate his loss was to seek to obtain a competent practitioner, at whatever reasonable cost that entailed, and if he was unable to do that within a reasonable time, which I would fix at three months, then he ought resume the conduct of the practice himself. This leads to the result that the assessment of damage in respect of the loss of the tenancy is to be fixed by reference to three months rental, namely $4,800.

36. As far as the loss of goodwill is concerned, whilst there was undoubtedly some loss of goodwill, the question arises of how it was caused. The plaintiffs must rely upon the breach or breaches which they have proved. In my view, clause 8(a) of the lease of the practice did not provide a guarantee to the plaintiffs that the defendant would protect the goodwill of the business but simply that the defendant would faithfully and diligently seek to do so. In my view, the evidence establishes that he did comply with that obligation until the letter written by his solicitor on 6 December 1985 indicating that he intended then to repudiate the agreements. No causative connection has been shown between the failure to pay rent and the loss of goodwill, and any loss of goodwill which occurred from 13 December 1985 onwards was not due to the fault of the defendant. The onus is on the plaintiffs to prove their loss and I am not convinced that it was the repudiation of the agreements on or immediately before 13 December 1985 which caused any loss of goodwill thereafter. The evidence is at least equally consistent with the hypothesis that the conduct of the plaintiffs thereafter (which I have found to amount to a failure to mitigate loss) was the causative factor. However, I find that the run down of the practice between 6 December and 13 December made some small contribution to the loss of goodwill. It is extremely difficult to quantify that loss. The parties themselves estimated that the goodwill of the business was worth $23,000, and the customer cards and records were later sold for $5,000, which is some evidence that the loss was in the region of $18,000. However, as I say, the onus is on the plaintiff to establish their loss and its quantification, and in the circumstances I am not prepared to quantify the loss of goodwill caused by the defendant's breach at more than $2,000.

37. Damages will be assessed at $6,800. Interest has been claimed and will be allowed and calculated on $6,800 from 21 February 1986 to 10 November 1988 at fourteen percent, giving a sum of $2,578. That will be added to the damages and the plaintiffs are to have judgment for $9,378. Unless the parties wish to be heard I propose to order that the defendant pay the plaintiffs' costs.