Auspods Holding Pty Ltd v MJ HQ Pty Ltd

[2025] NSWDC 197

District Court

New South Wales

Medium Neutral Citation:

Auspods Holding Pty Ltd v MJ HQ Pty Ltd [2025] NSWDC 197

Hearing dates:

14-15 May 2025

Date of orders:

15 May 2025

Decision date:

15 May 2025

Jurisdiction:

Civil

Before:

Newlinds SC DCJ

Decision:

(1) The Plaintiff’s claim is dismissed.

(2) The Plaintiff is to pay the Defendant’s costs of the proceedings as agreed or assessed.

Catchwords:

LEASES AND TENANCIES – Failure to make good – Necessary to compare condition of premises at time of handover date of the sublease and the date of termination of the sublease – That comparison is different to the similar claim made by the landlord on the plaintiff in relation to the head lease

DAMAGES – Proof of damages by reference to a settled claim – Where settled claim a different claim to that being made by the plaintiff

Cases Cited:

BNB Paribas v Pacific Carriers Pty Ltd [2005] NSWCA 72

Hadley v Baxendale (1854) 156 ER 145

Port of Melbourne Authority v Anshun Pty Ltd [1981] HCA 45; 147 CLR 589

Unity Insurance Brokers Pty Ltd v Rocco Pezzano Pty Ltd [1998] HCA 38

Category:

Principal judgment

Parties:

Auspods Holding Pty Ltd (Plaintiff)
MJ HQ Pty Ltd (Defendant)

Representation:

Counsel:
B Hemsworth (Solicitor) (Plaintiff)
T Di Bello (Solicitor) (Defendant)

Solicitors:
Somerville Legal (Plaintiff)
Nelson McKinnon Lawyers (Defendant)

File Number(s):

2023/335786

Publication restriction:

Nil

JUDGMENT; ex tempore (Revised)

1. By Statement of Claim filed 23 October 2023, the Plaintiff claims damages from the Defendant based on a series of alleged breaches of a sublease ("the Sublease"). The Plaintiff granted the Sublease to the Defendant on 12 April 2019, it relates to part of the property known as 495 Victoria Street, Wetherill Park.

2. The Plaintiff was entitled to grant the Sublease because it, in turn, was granted a lease to the whole of that property, ("the Head Lease") by the registered proprietor of the property ("the Landlord") dated 4 May 2018.

3. Both the Head Lease and the Sublease had terms that expired on 11 January 2023. In the usual way, the Sublease replicated most, but not all, of the provisions of the Head Lease including, importantly for the purpose of this litigation, the "make good" obligation on the tenant upon termination of the lease and the rent payment provisions.

4. During the term of the Sublease, the COVID pandemic caused considerable disruption of the Defendant's business. In accordance with emergency legislation put in place, there was a mediation between the parties which resulted in a “Deed of Rental Concession” entered into sometime in mid-2020, the details of which do not matter. Up to the entry into that deed, the Defendant was in default of the Sublease because it was not paying rent when due. The deed effectively rectified that default and rewrote the Sublease in the sense of waiving and/or deferring various rental payments. I also consider that the proper construction of that deed is that it waived any entitlement that the Plaintiff had to claim legal costs in relation to the defaults that were dealt with by the Deed. It also waived any claim for legal costs connected to negotiating and entering into the Deed.

5. Towards the end of the term in late 2022, the Defendant had in place arrangements to take alternative accommodation, but they fell through. By the end of 2022, the Plaintiff and the Defendant were having discussions as to when it would be possible for the Defendant to vacate the premises, and as time ran short it became clear that the Defendant would not be able to vacate by 11 January 2023 and needed an extension of time. Ultimately, the Plaintiff agreed to an extension but did so without waiving any of its rights.

6. At the same time, there were discussions between the parties as to what was required by the Defendant to comply with the make good obligations under the Sublease. These discussions were entirely driven by similar discussions between the Landlord and the Plaintiff in relation to the Plaintiff's obligations to make good pursuant to the Head Lease.

7. Ultimately, the Defendant overstayed the term of the Sublease and did not vacate the premises until the end of January 2023. Part of the Plaintiff's claim is for daily rental provided for under the Sublease in those circumstances: see cl 14.2(b)(ii). The Defendant's answer to this aspect of the claim is that there came a point in time when it was not in the premises because it was overstaying the Sublease but, rather, it was in there effectively as a guest of the new tenant. This is disputed by the Plaintiff, but I do not think the resolution of that issue really matters because cl 14.2(b)(ii) provides for the daily rent component of the Plaintiff's claim to be payable for any period under which the make good obligations of the Defendant had not been complied with. For reasons I will come to, it is accepted by the Defendant that in relation to one aspect of the make good obligations, albeit it is a de minimis aspect known as "the roller door issue", there was a failure to make good in late January, early February 2022, thus entitling the Landlord to make the claim for daily rent.

8. For those reasons, there is no real issue that the Defendant did not vacate the premises by the due date in the sense that there were outstanding make good obligations after the date the Sublease came to an end.

9. The significant issue between the parties is to what extent the Defendant failed to comply with the make good obligation provided for by the Sublease, and if it did breach that term, for what period that breach remained unremedied, and whether the damages claimed by the Plaintiff in consequence of any such breach by the Plaintiff have been proved. This last question is not straightforward because the Plaintiff does not claim what it says is the actual cost incurred as a result of such breach; rather, it claims the amount it negotiated to pay the Landlord so as to remedy the defaults that the Landlord was then alleging against the Defendant but which the Defendant was disputing. In this regard, the Plaintiff relies on the principles contained in cases such as BNB Paribas v Pacific Carriers Pty Ltd [2005] NSWCA 72 at [17] and Unity Insurance Brokers Pty Ltd v Rocco Pezzano Pty Ltd [1998] HCA 38 (“Unity Insurance”) at [6].

10. Those cases stand for the proposition that where a party is claiming loss as a result, for example, of a breach of contract by another party, if the first party can prove that it settled a claim that was caused by the breach by the other party, then it does not need to prove anything more than the settlement of that claim so long as there is also proof that the negotiations were conducted with proper care and skill, and that the settlement reflected the party's true prospects of success, or to put it as Brennan CJ did in Unity Insurance at [6], " The plaintiff must show that the sum accepted in settlement was reasonable."

11. The Plaintiff also claims an amount for legal fees it says that it is entitled to recoup under a provision of the Sublease (Clause 18, as amended by the Sublease), together with interest and costs paid in relation to a bank guarantee it put in place in relation to the Head Lease which costs, it says, would not have been incurred other than the breach of the Sublease it asserts against the Defendant.

12. Before turning to the relevant terms of the Sublease and to try and identify the issues in the case, it is important to record that it is common ground that the Defendant provided a cash bond of $56,588.50 pursuant to a term of the Sublease, which money was held by the Plaintiff's solicitor, which bond has been paid to the Plaintiff. It is accepted by the Plaintiff that this amount must be credited or set off against any proven damage against the Defendant relating to the Sublease.

13. The relevant provisions of the Sublease are as follows:

“Make Good means (in each case, having regard to the condition of the Premises as at the Handover Date) to:

(a) without limiting the Tenant's obligations under paragraphs (b) to (p), remove (regardless of ownership) all walls, carpet, partitions, alterations, additions, fixtures, joinery, racking, furniture, services fittings, furnishings, signage, cables, conduits and wires existing in the Premises at the Handover Date (other than the Landlord's Works) and whether installed by the Tenant, the Tenant's Employees and Agents, the Landlord or any other person, so that the Premises are in an open plan base building condition and configuration; and

(b) remove all Tenant's Property from the Premises; and

(c) properly repair any damage caused by the removal of things referred to in paragraphs (a) and (b) of this definition; and

(d) reinstate any part of the Premises which has been penetrated or altered by the Tenant or the Tenant's Employees and Agents; and

…

(i) thoroughly clean the interior of the Premises, professionally clean the carpet or other floor coverings (including the warehouse floor or any uncovered floor), clean all light fittings, replace all non-functioning light globes/tubes and remove all rubbish, waste and materials brought onto or left in or about the Premises or the Building by the Tenant or the Tenant's Employees and Agents; and

(j) if the Tenant has caused the painted interior surfaces of the Premises to be in worse condition than such interior surfaces were in as at the Handover Date (fair wear and tear excepted) and if required by the Landlord to wash down, properly prepare and paint (with at least 2 coats in a colour specified by the Landlord), stain, wallpaper or otherwise treat all surfaces inside the Premises (but excluding the exterior) as directed by the Landlord so that they are reinstated to the condition they were in as at the Handover Date or are in base building condition, as required by the Landlord; and

…

(I) make good any damage caused to all surfaces inside the Premises, so that they are reinstated to the condition they were in as at the Handover Date; and

(m) dispose of waste resulting from removal of existing fitout in an environmentally sensitive manner where possible; and

(n) if required by the Landlord, leave, repair, and make good, part or all of the fitout in the Premises as directed by the Landlord so as to permit the re-use of the fitout by a future tenant; and

…

for the purpose of this Lease, the parties acknowledge and agree that the condition of the Premises on the Handover Date is set out in the Condition Report. For the purposes of this definition, the Tenant shall not be required to perform or undertake any repairs or works of a capital or structural nature, unless such repairs are required due to (a) the Tenant's use or occupation of the Premises; or (b) the Tenant's or the Tenant's Employees and Agents acts or omissions.”

14. There was no Condition Report prepared for the purpose of the Sublease. The only Condition Report that exists is one prepared for the Head Lease. I do not think it is a sensible construction of the Sublease to read the reference to a Condition Report in the Sublease to the one obtained for the Head Lease. Apart from anything else, the Condition Report referred to in the definition is a Condition Report as to the condition of the premises on the “Handover Date," yet the Handover Date of the Head Lease and the Sublease were different dates.

15. No argument to the contrary was made on behalf of the Plaintiff and I proceed upon the basis that the parties to the Sublease did not obtain any Condition Report.

16. Returning then to the relevant provisions of the Sublease:

”7.2    Indemnities

The Tenant is liable for and indemnifies the Landlord against liability, loss or damage arising from, and cost incurred in connection with, any of the following:

…

(b) the Landlord doing anything which the Tenant must do under this Lease but has not done or which the Landlord considers the Tenant has not done properly; and

…

except to the extent caused by or contributed (to the extent of the contribution only) to by the negligent act or negligent omission or by the default of the Landlord or any of the Landlord's Agents.

11.4    Repair and replacement

The Tenant must:

(a) keep the Premises and the Tenant's Property in good repair and condition, excluding fair wear and tear and having regard to their condition at the Handover Date and excluding any repairs of a capital or structural nature unless such repairs are required due to (a) the Tenant's use or occupation of the Premises; or (b) the Tenant's or the Tenant's Employees and Agents acts or omissions; and

(b) promptly replace worn or damaged items in or attached to the Premises (including any glass, Tenant's Property and those floor coverings and furnishings which are part of the Landlord's Property) with items of similar quality as at the Handover Date (or earlier occupation date, if applicable), subject to fair wear and tear; and

(c) promptly make good any damage caused by the Tenant or the Tenant's Employees and Agents to the Premises, the Land or the Building.

14.1    Tenant to vacate

The Tenant must vacate the Premises on the earlier of the Expiry Date and the date on which this Lease is terminated and, before vacating the Premises, unless otherwise required by the Landlord in its discretion, the Tenant must have completed the Make Good of the Premises prior to the day which is the earlier of the Expiry Date or the date on which the Premises are vacated by the Tenant, having regard to the condition of the Premises as at the Handover Date (fair wear and tear excepted).

14.2    If Tenant's Property not removed

(a) If the Tenant does not Make Good as required under clause 14.1 then, without affecting any of its other rights, the Landlord may remove and store any fixtures, fittings, furnishings, cables, conduits, wires and other Tenant's Property and the Landlord may also Make Good.

(b) The Tenant must pay the Landlord on demand:

(i) all costs and expenses incurred in doing the works detailed in clause 14.2(a); and

(ii) a fee equivalent to the aggregate of the Rent and Outgoings divided by 365 for each day that it does not Make Good (calculated at the rate provided for in clause 15.1(b)).

18.    Costs, Charges and Expenses

(a) The Landlord and the Tenant must each pay their own costs of and incidental to the negotiation, preparation and execution of this Lease.

(b) The Landlord and the Tenant must each pay their own costs of and incidental to the dealings of Land under Clauses 13.8 and 13.10.

(c) The Tenant must promptly pay in connection with this Lease and any document or matter in connection with it:

(i) for everything it must do; and

(ii) all stamp duty and registration fees; and (iii) on demand, the Landlord's reasonable costs, charges and expenses (including legal costs) including those for:

(A) negotiating, preparing, executing, stamping and registering any actual or proposed transfer, sublease, licence or surrender or termination of this Lease; and

(B) obtaining any consents which the Landlord must obtain before giving approvals, considering requests for approvals and considering any information provided with respect to any proposed dealing permitted by this Lease (even if the proposed dealing for which approval is requested does not proceed); and

(d) all costs, charges and expenses in connection with works which the Tenant carries out, including those incurred by the Landlord and the Landlord's consultants in considering, approving and supervising the works and those of modifying or varying the Premises, the Land or the Building because of the works (including under clause 11); and

(e) all costs, charges and expenses in connection with the construction and subsequent removal and Make Good of any works requested by the Tenant in connection with any transfer, sublease or licence of the whole or any part of the Premises, including those incurred by the Landlord and the Landlord's consultants in considering, approving and supervising the works and those of modifying or varying the Premises, the Land or the Building because of the works (including under clause 11); and

(f) on demand, the Landlord's reasonable costs in relation to any event specified in clause 17.2 occurring, the actual or contemplated enforcement of, or actual or contemplated exercise, preservation or consideration of any rights, powers or remedies under this Lease.”

17. Turning then to what I consider to be the real issues in the case by reference to the heads of damages claimed by the Plaintiff, those heads of damages are as follows:

HEADS OF DAMAGE	Amount (incl GST)
Make Good	$82,060.01
Legal fees paid by the plaintiff pursuant to clauses 7.2 (b), 7(e) and 18 of the lease.	$74,925.83
Interest paid by the plaintiff to the silent investor for the period 1 February 2023 to 15 September 2023.	$21,450.00
Quantity Surveyor fees	$6,050.00
Glass repairs	$2,500.00
Bank Guarantee Fee	$11,415.14
Sub Total	$198,400.98
Less bank guarantee paid by the defendant	$56,588.50
Total Claim	$141,812.48

18. Dealing with each of those claims in turn.

Make good

19. As I have said, the Plaintiff does not seek to demonstrate the direct loss it may have suffered as a result of what it says was a breach of this provision by the Defendant; rather, it has proved that the Landlord made a claim against it for various matters, including a failure to make good under the Head Lease in an amount of $134,713.87. The Plaintiff disputed that amount and after some negotiations, with the advice from quantity surveyors and lawyers, settled the Landlord's claim for the amount of $82,000. This amount is largely made up of a claim for failure to make good but also contains a component apportioned between the Plaintiff and the Landlord as $22,156.25 under the heading "Additional rent paid".

20. The balance of that settlement ($52,443.76), as apportioned by the Landlord and the Plaintiff at the time of the settlement was allocated to a failure to make good by the Plaintiff.

21. That figure was agreed by the parties, that is the Landlord and the Plaintiff, to be made up as follows, although it does not necessarily follow that the agreement as to the individual components making up the total settlement sum represented anything other than a notional figure arrived at between the parties. What really matters in relation to the settlement is the ultimate settlement figure.

22. Be that as it may, the $82,060.01 was agreed to be made up as follows:

“a. Painting the defendants side of the warehouse - $30,580.00

b. Damage to Roller door - $800.00

c. Mechanical system repairs - agreed amount of $4,602.00

d. Dyna bolts rectification work - agreed amount $6,672.00

e. Cost of preparation and site meetings and negotiations - $2,240.00

f. Preliminaries charged by the landlord - $4,265.40

g. OH and Profit charged by the landlord - $3,284.36

h. Total = $52,443.76 plus GST

i. An additional amount for rent charged to Auspods for the overstay by the defendant - $22,156.25 (plus GST of $2,215.63).

Final total = $82,060.01 inclusive of GST for make good rectifications.”

23. Subparagraphs (a) to (h) are all components of the alleged failure to make good allegations the Landlord was making against the Plaintiff. Item (i) was what represents the settlement of the breach of the "overstay" breach and was based on a daily rate of interest chargeable under both the Head Lease and the Sublease.

24. Dealing with each of those items in turn.

Painting the Defendant's side of the warehouse

25. The significance of the different commencement dates between the Head Lease and the Sublease is that, self-evidently, the condition of the premises at the commencement, or more accurately the Handover Date, of each contract was different.

26. As between the Landlord and the Plaintiff, the Landlord was asserting at the conclusion of the Head Lease that the Plaintiff had not made good the premises back to the condition they were in at the commencement of the Head Lease, being 4 May 2018. The Plaintiff was disputing that claim. It was that disputed claim that was settled.

25. The Plaintiff is seeking to pass on that obligation as if it was precisely the same obligation to the Defendant without, it seems, attention being paid to any deterioration in the condition of the premises between the start of the two contracts. That lack of attention continued into the evidence that was put before me, which all, it seems to me, has embedded in it the suppressed premise that the condition of the premises at the commencement of the Head Lease was exactly the same as a year later when the Sublease commenced. Yet, there is no evidence at all to make good that fundamental assumption.

26. There is, in fact, a paucity of evidence as to the condition the premises were in at the commencement of the Sublease. The only witness called on behalf of the Plaintiff was Mr Harrington who, whilst I accept he was an entirely honest and reliable witness, has never actually seen the premises. The various statements made by him, to the effect that he considers there has been a failure by the Defendant to make good, are necessarily based on hearsay opinions provided to him by other people who could have been, but were not, called by the Plaintiff, who, in any event, were all involved in the dispute with the Landlord. The Plaintiff also relies on business record type evidence by tendering emails and the like of various assertions and claims made by the Landlord to the Plaintiff, and various quantity surveyors retained by the Landlord and the Plaintiff to prove the fact that there was a failure to make good by the Defendant under the Sublease.

27. Those quantity surveyors, of course, do no more than assume the state of the premises at the commencement of the Sublease. The assertions and claims made by the Landlord at the time were all assertions made in the context of a comparison between the condition of the property between the start of the Head Lease and the termination date. In other words, they were about a different topic than a comparison between the condition of the premises at the Handover date of the Sublease and its termination date. In any event, I would not give such assertions made by the Landlord very much weight because they were made at a time when there was a dispute between the Landlord and the Plaintiff that was at least brewing and thus were made when the Landlord had an incentive to improve its negotiating position.

28. Against that evidence, the Defendant relies on the evidence of Mr Scarano, who is intimately familiar with the premises at the commencement and cessation of the Sublease. Mr Scarano took photos at the relevant commencement date of the state of the premises, which on any analysis demonstrate that the condition of the premises at the time of the Sublease was extremely poor. This is particularly so in relation to painting but extends overall to allow me to make a finding that the premises were certainly not in anything that might be described as a good state at the commencement of the Sublease. He also gave direct evidence as to what make good obligations he considered necessary after he had compared the condition of the premises between that condition at the commencement date of the Sublease and the termination date and why and what work was done and when.

29. Returning then to the claim for painting. The amount claimed is $30,580.00.

30. I am not satisfied that the Plaintiff has demonstrated on the balance of probabilities that the Defendant did not comply with its make good obligation in relation to painting. My reasons are as follows.

1. The photos demonstrate that the premises most definitely needed painting and for that matter cleaning, at the commencement of the Sublease.

2. The demands by the Landlord any other evidence is largely irrelevant to the question at hand because it is all directed to a comparison between the commencement date of the Head Lease and the date of vacation.

3. I accept the evidence of Mr Scarano when he says that he did not consider it was necessary to paint the premises so as to bring them back to the condition they were at the commencement of the Sublease. I accept his evidence that the premises were left in no worse condition than they were in at the commencement of the Sublease. I found him to be an entirely credible witness, and his evidence on the topic is by far the best evidence as it is the only direct evidence I have on these important questions.

33. For these reasons, I reject this aspect of the Plaintiff's claim.

Damage to roller door

34. The amount claimed is $800. Mr Scarano's evidence was that the roller door never worked despite his request that the Plaintiff rectify this. He says that as a consequence of that, was that the roller door was never shut properly and that therefore the identified damage (dent) to the roller door which was caused by one of his forklift trucks during his occupation was a consequence of the roller door not being properly opened. I have no reason not to accept Mr Scarano's evidence in that regard; indeed, he was not challenged.

35. However, that does not change the fact that the dent to the roller door cannot properly be ascribed as fair wear and tear and, therefore, under the provisions of the Sublease there was a requirement to make good the relevant dent. Mr Di Bello, solicitor, who has appeared for the Defendant accepts that the Plaintiff has made out a claim in relation to the roller door in an amount of $800 and I accept that aspect of the claim.

Mechanical system repairs

36. The amount claimed is $4,602.00.

37. There is no evidence that I am aware of to explain what this aspect of the claim is, let alone to justify it.

38. This aspect of the Plaintiff's claim has not been made out.

Dynabolt rectification work

39. The amount claimed is $6,672.00.

40. A disproportionately large amount of the evidence in the case was directed to this topic. I find as a matter of fact that the Defendant did install about 800 Dynabolts into the floor of the warehouse. It originally tried to make good the removal of those bolts by a certain method which the Landlord rejected. I am satisfied that the Defendant then adopted the method required by the Landlord and removed in the way that the Landlord ought to have found acceptable by about the middle of February, not only the 800 odd bolts it had installed but also about another 200 which it had not installed.

41. Again, I accept Mr Scarano's evidence on this topic. It was credible but more importantly, the only direct evidence.

42. I am satisfied that, albeit late, the Defendant did comply with its make good obligations regarding the Dynabolt rectification work, and that had happened by about 13 February, and this aspect of the Plaintiff's claim has not been made out.

Cost of preparation and site meeting and negotiations

43. The amount claimed is $2,240.00.

44. It seems to me that, absent any significant finding in relation to the make good claim, this aspect of the Plaintiff's claim falls away. In any event, I do not think there is any evidence to justify it.

Preliminaries charged by the Landlord

45. The amount claimed is $4,265.40.

46. The same observations as I have just made in relation to site meetings are applicable here.

Overheads and profit charged by the Landlord

47. The amount claimed is $3,284.36.

48. Again, I think this stands or falls depending on a significant finding of a failure of make good by the Defendant. I do not think there has been any such significant finding, and so this falls away.

Overall Settlement amount

49. I have not lost sight of the fact that the Plaintiff is not seeking to prove its case by proving each of those individual heads of damage as apportioned between the Plaintiff and the Landlord; rather, it seeks to prove the component of the claim being the $52,443.73 by saying that the claim made by the Landlord against it was a legitimate claim, and that the resolution of that claim by a settlement in that sum was based on advice and was reasonable and therefore that loss is a direct consequence of the Defendant's default.

50. I do not accept that submission because on the findings I have just made, the only breach which I have found was in existence at the time was the breach for the dented roller door which I consider was de minimis. On that finding, any settlement of $50,000 odd could not possibly be reasonable.

51. The fundamental problem with comparing that settlement with the Plaintiff's claim against the Defendant is the one that I have already identified, and that is they are different claims because they cover different alleged contractual breaches when one takes into account the different terms of the two contracts. The settlement with the Landlord may well have been reasonable as between the Plaintiff and the Landlord, but that is beside the point.

Additional amount of rent charged

52. The amount claimed is $22,156.25 (plus GST of $2,215.63).

53. The Head Lease between the Plaintiff and the Landlord provided for daily interest to be paid on a failure by the Plaintiff to vacate the premises on the due date and if there is a failure by the due date to make good. The same provision (14.2(b)(ii)) finds its way into the Sublease. I am satisfied that the Defendant did fail to vacate on the due date. I do not think it matters whether the Defendant's physical presence in the property was with the permission of the new tenants. The fact remained that, on my findings, make good had not been completed by the due date, and in any event, the roller door has never been the subject of any rectification. On that basis, the settlement that the Plaintiff achieved with the Landlord of $22,156.25 was a reasonable reaction by the Plaintiff to the exposure it had to the Landlord as a result of those breaches by the Defendant. Indeed, it resulted in a significant discount in what the Landlord might have been entitled to claim. Accordingly, I am satisfied that the Defendant did cause, as a result of its breaches of the Sublease, the Plaintiff to lose $22,156.25.

54. Turning then to the other heads of damages.

Legal fees

55. I have already set out cl 18 of the Head Lease, but I also need to record that this is one of the provisions which was not mirrored in the Sublease. The Sublease contains a provision amending cl 18, which is as follows:

“4.9.    Clause 18(a): Delete details and replace with the following "Notwithstanding anything in this Sublease, each party shall be liable for the payment of their own legal costs associated with the preparation and drafting of this Sublease and will share equally the Head Lessor's legal costs. However, the Sublessee is responsible for payment of stamping and registration of this Sublease (including any exercise of option) and the Sublessor is responsible for payment of mortgagee's consent."

56. The Plaintiff's claim has been revised downwards as the proceedings developed and now takes into account the variation between the Sublease and the lease but still makes a claim for an amount quantified at $55,162.95.

57. The difficulty with the proof of this aspect of the claim is that the Plaintiff has done no more than put into evidence a raft of invoices between the Plaintiff's solicitor and it which invoices have been paid and which total that amount.

58. The only basis upon which one can identify the work done and therefore seek to connect that work with any breach of contract by the Defendant, or that might otherwise be recoverable under the indemnity in the Sublease, is by a process of inference based on very short-form, generic descriptions of work.

59. It is quite clear that within the claim various aspects of the negotiations which led up to the COVID Variation Deed, which I have already referred to, are being claimed for, and that the consent of the Landlord to the original granting of the Sublease is also the subject of the claim. I do not think either of those items are properly recoverable under either a combination of the proper construction of the Sublease and/or the proper construction of the COVID Deed.

60. Against that, it is obvious that I have found that there have been some breaches by the Defendant in relation to its obligations under the Sublease, and it is equally obvious that some of the amount claimed for legal fees do relate to those breaches. There was very vague, high-level evidence that there may well have been other breaches during the life of the lease which may well have caused some legal fees to be incurred.

61. Accordingly, I am in the situation where I am satisfied in relation to this head of damages that some damage has been occasioned as a consequence of the Defendant's wrongdoing. I think the law requires in circumstances having made that finding on the balance of probabilities, that thereafter I do the best I can on the evidence that has been tendered to quantify that damage.

62. However, in this case the only person with any ability to prove the matter is the Plaintiff. It is after all its solicitor who did the work, its solicitor who drafted the invoices, and it could have, but chose not to, proved the matter in a significantly more direct and compelling way. For that reason, I am minded to be very cautious in drawing inferences in favour of the Plaintiff in this regard.

63. Doing the best I can in relation to the matter of legal fees, I have decided to allow an amount of $15,000 as reasonable legal fees, the subject of an entitlement to recover under the Sublease.

Interest paid to silent investor/bank guarantee fee

64. These two topics fall into the same category so I will deal with them together.

65. The situation is this. The Plaintiff was required to have in place a bank guarantee in relation to the Head Lease. It says that it was required to put up a further bank guarantee because of the delay in it coming to be able to terminate or bring to an end the Head Lease.

66. The timeframe is very tight. The bank guarantee that was in place expired on 30 April 2023. It was a term of the Head Lease (cl 21.4(a)(ii)) that the Landlord would return the bank guarantee to the Plaintiff on the date which is three months after the Head Lease ended.

67. The Plaintiff's case is that as at 1 February 2023 the Defendant was in breach of the Sublease causing the Plaintiff to be in breach of the Head Lease. As a result, the bank guarantee could not be returned until after 1 May 2023. It was in fact returned on 15 August 2023, all of which resulted in a fee of $11,415.14.

68. This is a Hadley v Baxendale (1854) 156 ER 145 type claim for consequential economic loss as a result of breach of contract.

69. As I understand the law, if it was within the party's contemplation that such type of damage might be incurred, if there be a breach of contract, then it does not matter if the particulars of the actual damages were not foreseeable, such damages are recoverable.

70. Having found that there was a breach of lease continuing into the middle of February, I consider that the extra fee paid by the Plaintiff is damages properly recoverable as a result of the Defendant's breach of contract, and I allow that amount in the sum of $11,415.14.

71. As to investor interest, I think this falls into a separate category.

72. The Plaintiff had entered into an agreement with some investors in the Plaintiff. Those investors had agreed to indemnify the guarantors of the bank guarantee for any extra interest. It was a term of that Deed that the Plaintiff would pay those investors 8% compounded daily on the bank guarantee. It was also a term of the Deed that the Plaintiff pay interest until the bank guarantee ceased to have effect. So, the argument goes that as the bank guarantee was not returned until 15 August 2022, the amount of interest therefore payable is recoverable.

73. I think this claim is a bridge too far and is too remote in a contractual sense from the breaches I have identified by the Defendant to be recoverable, and I do not allow it.

Quantity surveyor’s fees

74. It is common ground between the parties that the quantity surveyor fee part of the claim will stand or fall with the failure to make good aspect of the claim.

75. As I have found a failure to make good, but only in relation to the dented roller door, for obvious reasons I do not allow the quantity surveyor's fees of $6,050.

Glass repairs

76. The amount claimed is $2,500.

77. The competing positions here, and I have to say that the evidence left me in a state of confusion which is no criticism to anyone because the amount in issue is so small, no doubt very little attention was paid to it in the preparation of the case but it seems to me the position is that it is accepted by the Defendant that there were some broken windows at the end of the term, but Mr Scarano gave evidence that those windows were broken at the time of the commencement of the Sublease and so, therefore, he does not consider that there is any requirement to make good those windows.

78. There is evidence perhaps to suggest that there were more than two broken windows at some point, and that some of the broken windows were fixed perhaps prior to or around the time of the Sublease at the cost of either the Plaintiff or the Landlord, but as I say, I am left little bit confused about all this.

79. In cross examination, Mr Scarano agreed that the Defendant was liable for one out of the four glass panes, and the Plaintiff has submitted that, on that concession, the claim being for $2,500 for two windows, an amount of $1,000 should be allowed and I think that is a reasonable resolution of this aspect of the claim.

Conclusion

80. I am satisfied that the breaches of the Sublease by the Defendant which I have identified, being the failure to make good in relation to the roller door of $800, the rent for "overstaying" of $22,156.25, legal fees of $15,000, the bank guarantee fee of $11,415.14, and windows quantified at $1,000 have all been proved by the Plaintiff to being damages that it would be entitled to against the Defendant for breach of the Sublease if not for the concession by the Plaintiff that the cash bond that it has retained of $56,888.50 needs to be brought to account against those figures.

81. The total of that amount, $50,371.39, is less than $56,588.50 for which it is accepted that the Defendant is entitled to a credit.

82. The Defendant has not made any claim by way of cross claim for refund of the cash bond paid by way of restitution or otherwise, and as I made clear to Mr Di Bello in the course of argument, that failure to do so, if the findings identified that some money would be repayable, will almost certainly be that his client has no entitlement in any subsequent proceedings to claim the damages. That is because, in my opinion, it is almost self-evident that the Plaintiff reasonably could and should have brought such a claim in these proceedings and therefore the principles in cases, such as Port of Melbourne Authority v Anshun Pty Ltd [1981] HCA 45; 147 CLR 589, would provide that there is a res judicata in relation to that claim.

83. For those reasons, the result of the case is that the Plaintiff's claim is dismissed.

84. Ordinarily, costs would follow the event unless someone wants to say something or make an application for something other than that.

MR HEMSWORTH: “Your Honour, the matter was subject to argument on a number of topics. The Plaintiff has succeeded on some of those topics. I acknowledge that it has fallen just short of the bank guarantee amount but I would submit that the Defendant does get a costs order that in some way reduced considering the findings that you have made in relation to the merits of some of our claims, and we would say that be reduced to we pay 50% of the Defendant's costs.”

85. Mr Hemsworth has suggested that the appropriate order for costs is that there be some discount on any costs his client might be ordered to pay the Plaintiff because, as he rightly points out, the Plaintiff has had success on a number of the sub-issues in the case. That is true. However, the event against which costs are ordinarily judged is the outcome of the case, and by reference to that touchstone, the fact is the Plaintiff's case failed in that the Plaintiff sued for money and has not received any money.

85. Whilst sometimes it is appropriate to apportion costs by reference to issues, I do not think this is that sort of case. In any event, if one was to assess the matter by adding up by reference to sub-issues, success or failure on the part of the parties, probably the Defendant would come out on top, but I do not think that is the proper way to look at things.

86. Moreover, on my finding, the end result, as a matter of fact, is it is the Defendant who is owed money by the Plaintiff after the Agreed Set Off. I consider this to be a significant factor relevant to the question of costs.

87. I am not persuaded that I should depart from the usual position, and therefore my order as to costs is that the Plaintiff pay the Defendant's costs of the proceeding as agreed or assessed.

Orders

89. For those reasons, my orders are:

1. The Plaintiff’s claim is dismissed.

2. The Plaintiff is to pay the Defendant’s costs of the proceedings as agreed or assessed.

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Decision last updated: 30 May 2025