Tabcorp Holdings Ltd v Bowen Investments Pty Ltd

What happened?

Tabcorp's lease of an office building contained a covenant not to make substantial alterations without the landlord's consent. It demolished and rebuilt the foyer anyway. The landlord, Bowen Investments, sued. The trial judge awarded $34,820 in total, principally the small reduction in the building's value, together with $1,000 in nominal damages.

What did the Court decide?

Tabcorp's appeal was dismissed with costs, leaving standing the Full Court's award of roughly $1.38 million — the cost of restoring the foyer, together with lost rent during the works.

Why does this case matter?

The numbers are the lesson: $34,820 against $1.38 million, on the same facts, turning entirely on how the loss was characterised. Few cases show so plainly that the measure of damages is an argument in its own right rather than an arithmetic step after liability.

It is also the case to reach for when drafting is at issue. A covenant of this kind is worth something precisely because breaching it is expensive, and a landlord's willingness to enforce is what gives it force.

On the limit: the Court considered the English suggestion in Ruxley that rectification is refused where the cost is out of all proportion to the benefit, questioned how well it sits with the governing principle, and distinguished it on the facts. The qualification it endorsed is narrower — the work must be necessary to produce conformity and a reasonable course to take.

Exam and application relevance

Identify precisely what performance the contract promised, then ask what it would cost to obtain it now. Diminution in value remains an appropriate measure in many cases — what this case denies is that it operates as an automatic ceiling. A script that opens with "the property was worth about the same" has assumed the question rather than answered it.

Check your understanding

The demolition barely moved the building's market value. Why was that not the end of the landlord's claim?