Han and Wang v Kaggelis
[2006] QMC 3
•13 October 2006
MAGISTRATES COURTS OF QUEENSLAND
CITATION:
Han & Wang v Kaggelis [2006] QMC 3
PARTIES:
YOK YAA HAN
(claimant)
CHIA LIM WANG
(claimant)
v
JOHN STEVE KAGGELIS
(defendant)
FILE NO/S:
M50716/05
DIVISION:
Magistrates Courts
PROCEEDING:
Claim
ORIGINATING COURT:
Magistrates Court at Brisbane
DELIVERED ON:
13 October 2006
DELIVERED AT:
Brisbane
HEARING DATE:
11 May 2006, 28 July 2006
MAGISTRATE:
Previtera T
ORDER:
1. That judgement be entered for the Plaintiffs in the sum of $16 044.66.
2. That the Defendant pay the Plaintiffs’ costs of the action in accordance with the Magistrates Court Scale of Costs Scale F as agreed.
3. In the event of the parties failing to agree in relation to costs, each party is to file and exchange written submissions in relation to the issue of costs within 21 days of the date hereof.CATCHWORDS:
LANDLORD AND TENANT – agreements for lease – covenants – guarantor – compensation for loss of rent – mitigation of loss
COUNSEL:
Fisher (solicitor) for claimant
RI Copp for defendant
SOLICITORS:
S J Gurnsey & Co for claimant
Chais Law Practice for defendant
The Pleadings
By Amended Statement of Claim filed with the leave of the court on 11 May 2006, the Plaintiff claims from the Defendant, pursuant to an agreement in writing dated 21 January 2000, the sum of $42,258.11, as rent of $40 206.88 and interest thereon of $2 243.95 for the period from 1 September 2004 to 9 December 2005; plus interest and costs.
The Defendant had no objection to the filing of the Amended Claim, stating the minor nature of the amendment, and relied upon the Amended Defence filed 2 March 2006. The Plaintiff relied on an Amended Reply filed 3 March 2006.
The Defendant did not seek, despite the court’s invitation, to make application in relation to the Plaintiff’s failure to plead, amongst other matters, that the agreement was a commercial lease, that the Plaintiff was the Lessor, that there was an assignment of the lease and that the Defendant, pursuant to a Deed of Guarantee and Indemnity of Lease, had guaranteed the performance of the assignee under the Lease. Neither did the Statement of Claim plead a holding over by the assignee (lessee) under the Lease or otherwise, or a failure by the assignee or Defendant to return the premises to the possession of the Plaintiffs.
The Defendant was satisfied that, as those matters were either referenced in the Amended Defence of the Defendant filed on 2 March 2006, or otherwise known to and accepted by the Defendant; and the solicitors for the parties had agreed the matters in issue, there was no need for requests for amendments of pleadings or further and better particulars or to enable same to occur, an adjournment of the hearing.
Following a successful application by the Defendant to withdraw admissions 4 and 5 of the Notice to Admit Facts filed by the Plaintiff on 7 April 2006 and the Defendant’s submission that, despite the pleadings, there was no disadvantage to the Defendant if the matter proceeded, the Court, having regard to Rule 5 of the Uniform Civil Procedure Rules, reluctantly proceeded to hear the Claim.
The Evidence
The Plaintiff called only one witness, Mr Peter Weiss, a principal of LJ Hooker, Coorparoo and the authorised agent of the plaintiffs for the period commencing in early April 2005.
The Defendant gave evidence and called his son Steven Kaggelis as a witness.
By reference to submissions made from the bar table and the exhibits tendered, the following matters would appear not to be disputed:
1. On 21 January 2000, the plaintiffs, as Lessors, entered into a lease of premises at Shop 6A Coorparoo Shopping Mall, 264 Old Cleveland Road Coorparoo (“the subject premises”) with an entity known as Jody’s Bakeries Pty Ltd ACN 053 214 725 (“Jody’s Bakeries”).[1]
[1] Exhibit 1
2. The term of the lease was from 1 February 2000 to 31 January 2005.
3. The rental in respect of the lease was $24 000.00 per annum for the first year of the term of the lease with the rental for the second and subsequent years to be calculated as provided for in Clause 4 of the lease.
4. The Guarantors for the lease were the Defendant John Steve Kaggelis and his mother Poala Kaggelis (who has since passed away).
5. In 2001, the plaintiffs consented to an assignment of the lease from Jody’s Bakeries to Mr Brett Letizia. The Defendant and his mother signed a Deed of Guarantee and Indemnity of Lease in relation to that assignment,[2] as Guarantors.
[2] Exhibit 2
6. Mr Brett Letizia defaulted in relation to the payment of his rent under the lease as at 30 September 2004, as a result of which, according to the invoice[3] of Barnes and Commercial (the previous agents of the Plaintiffs) an amount of $11 313.71 became due and payable by the Defendant, as Guarantor, to the Plaintiffs for the period from 30 September 2004 to the date of expiration of the Term of the lease on 31 January 2005.
[3] Exhibit 3
7. Mr Letizia gave no formal notification, or indeed any notification at all to any person/entity, of his departure from the premises between August 2004 and the expiration of the Lease on 31 January 2005 or at any time thereafter. Nor was there any formal notification or otherwise of Termination of the Lease to Mr Letizia or the Defendant, by the Plaintiffs.
8. The Defendants were not notified of the default of Mr Letizia in either August 2004 or upon the expiration of the Term of the Lease on 31 January 2005.
9. Neither Mr Letizia or the Defendant exercised the option to renew the lease beyond the Term of the Lease[4] for the Further Term of the Lease[5] as provided in Clause 17 of the Lease. There was, therefore, no grant of a further executed lease.
[4] 1 February 2000 to 31 January 2005
[5] Five (5) years from 1 February 2005
10. Nor did either Mr Letizia or the Defendant seek, pursuant to Clause 3.2 of the Lease[6], the Plaintiff’s consent in writing to their continued occupation of the Premises beyond the Termination Date of the Lease[7].
[6] Holding over provisions Schedule Page 13 of 45
[7] “The holding over” provision of the lease.
11. In February 2005, the Plaintiff’s agent at the time, Barnes Commercial, changed the locks on the premises and erected a “To Lease” sign.
12. There is no evidence of either the Plaintiffs or the agents Barnes Commercial or any other agents on behalf of the Plaintiffs doing anything further between February 2005 and early April 2005 when the Plaintiffs appointed Mr Weiss of LJ Hooker as their agent. He then commenced to advertise to let the property. (Mr Weiss states that he only saw the previous “To Lease” sign erected by Barnes Commercial for a week in February 2005 and then it was removed).
13. The premises remained vacant from the expiration of the Term of the Lease on 31 January 2005.
14. By letter dated 4 May 2005[8], Alliance Interiors submitted to Mr Peter Weiss a quotation for the demolition and making good of finishes to the premises, in the amount of $28 200.00.
[8] Exhibit 4
15. It was not until later in May 2005 (when correspondence was forwarded by the Plaintiff’s solicitors to the Defendant’s solicitors),[9] that the Defendant was informed, amongst other things, of the default of Mr Letizia in paying rent after 30 August 2004, the Plaintiff’s request that the Defendant pay $2 674.11 per month rental, the request to make good the premises, the Plaintiff’s demand that the Defendant meet the cost of doing so (pursuant to the quotation from Alliance Interiors), and the fact that the Plaintiff considered rent to be accruing, and payable by the Defendant, in the above-stated amount.
[9] Exhibits 6, 7 and 9.
16. Thereafter, still in May 2005, the Defendant advised Mr Weiss that he would himself make good the premises at a cost less than that quoted by Alliance Interiors. The Plaintiffs consented to the Defendant undertaking the work himself, allowing him access to the premises to view the extent of the work required.
17. The work required included levelling the floor, removing a baking oven and extraction hoods, repairing the ceiling, undertaking plumbing and removing the roller door to the front of the premises.
18. By letter from the Defendant’s solicitors to the Plaintiff’s solicitors dated 29 June 2005,[10] the Defendant’s solicitors advised that the Defendant was in negotiations with a potential tenant for the premises; that if those negotiations proceeded the Defendant will have “sufficient funds from the sale of the equipment within the premises to satisfy the amount claimed against him in respect of rent in full.” The letter goes on to say “In the alternative, if the incoming Tenant does not wish to take over the premises, then our client instructs that he shall arrange for the premises to be reconverted to a bare tenancy in accordance with the plans for the premises, which he notes he maintains from when the premises were originally first modified to house the baker and arrange for the removal of all internal fixtures and their sale and subsequent thereto put a proposal in respect of repayment of the amount claimed by your client to your client.
[10] Exhibit 13
We note that our client is proceeding with this matter as expeditiously as possible and note again that our client is an innocent party in respect of the breach of the Lease by its assignees.
In the circumstances, we hope that your client will agree to the granting some leeway to our client to negotiate the best possible outcome in respect of all parties regarding the Lease.”
19. By letter dated 4 July 2005 to the Defendant’s solicitors,[11] the Plaintiff’s solicitors note the outstanding balance of the rent as at 31 January 2005 and of the further rental for the additional 5 month period to that date.
[11] Exhibit 11
20. Mr Weiss, thereafter, by facsimile letter dated 9 July 2005[12] to the Defendant, advised the Defendant that, despite the “make good” having been brought to the Defendant’s attention nearly two (2) months prior, and the keys to the premises having been provided “some weeks” prior, that nothing had happened to progress the matter. Mr Weiss indicated that his recommendation to the plaintiffs was that unless the shop was handed over in the condition in which it was at the commencement of the tenancy, by Monday 18 July, the owners would attend to the make good themselves. “We are happy to assist in any way we can, however with out any real progress being made, we do not see a satisfactory conclusion being imminent.”
[12] Exhibit 10
21. By letter dated 16 August 2005, [13]the Plaintiff’s solicitors wrote to the Defendant’s solicitors advising that the matter having transpired so long, with the project still not completed and no effort having been made by the Defendant to pay the arrears of rent, the Plaintiff required payment of $29 718.77 by close of business on Friday 19 August 2005 or “we will have no option but to issue proceedings without further notice. This amount is represented by the original $11 000.00 outstanding as at 31 January 2005 and seven (7) months of rental up to and including 31 August 2005.”
[13] Exhibit 12
22. On the 13 September 2005, the Plaintiffs filed the original Claim and Statement of Claim seeking rent for the period 1 September 2004 to the 13 September 2005.
23. On the 16 November 2005, the Defendant filed a Notice of Intention to Defend and Defence and paid to the Plaintiffs a sum of money representing the rental to the expiration of the Term of the Lease on 31 January 2005 and interest thereon. This payment was pleaded by the Defendant, as was a re-entry to possession of the premises by the Plaintiffs, after the date of expiration of the lease, and a re-instatement of the premises by agreement between the Plaintiffs and the Defendant.
24. The Amended Defence was filed on 3 March 2006 in which it was pleaded that the plaintiffs would only grant the defendant access to the premises on the weekends; the defendant did not have possession during the week; that the defendant is not therefore liable for the Plaintiff’s loss and that had the Plaintiff’s made alternative arrangements and thereby mitigated their loss, they would have been able to rent the premises.
25. In the Amended Reply filed 3 March 2006, the Plaintiffs pleaded that the Defendant remained in occupation of the premises until such time as the property is handed back; that that had not occurred as at that date; that the Plaintiff denied only providing access to the premises by the Defendant on week-ends only and that the Plaintiff was unable to make any other alternative arrangements.
26. In relation to the amount of $42,258.11 claimed in the Amended Statement of Claim, the amount of $11 825.00 paid by the Defendant in November 2005 for rent for the period 1 September 2004- 31 January 2005, and interest, is included in that sum.
27. As at the date of the hearing, it was agreed that the Defendant had made good the damage to the premises although the completion date of works remained in dispute. It was agreed that the plumbing work was the final work done on the premises. The plumber was not, however, called to give evidence. Nor was any documentation in confirmation or otherwise of any plumbing work discovered by the Defendant or otherwise produced to the court.
28. The relevant terms of the Lease include the following:
“Term” means the period of time specified in Item (6) of the Form 7 in this Lease from and including the commencement Date to and including the Termination Date, or such shorter duration of this Lease as shall be relevant if this Lease is determined earlier than the Termination Date;[14]…
[14] Item (6) of the Form 7 states the commencement date to be 01/02/2000 and the Expiry date to be 31/01/05
3.2 Holding over
Subject to any contrary provision in this Lease, the Lessee shall vacate the Premises on the Termination Date. However, if the Lessor consents in writing to the Lessee’s continuing to occupy the Premises beyond the Termination Date (otherwise than under the grant of a further executed lease ) then…. And the clause then states what kind of tenancy will be in place, the amount of rental, the terms and conditions of the tenancy and the determination of the tenancy. As previously stated, Mr Letizia vacated the premises prior to the Termination Date; the Defendant did not seek, nor did the Plaintiff provide, the Plaintiff’s consent in writing to either Mr Letizia or the Defendant continuing to occupy the Premises beyond the Termination Date.
“The Lessee shall Redecorate the Premises to the reasonable satisfaction of the Lessor whenever reasonably required and within the period of three (3) months before the Termination Date.”
7.6 “The Lessor may –
serve upon the Lessee a notice of any failure by the Lessee to carry out any repair, replacement, cleaning or Redecoration of the Premises which is the Lessee’s obligation under this Lease; and/or
require the Lessee to carry out that repair, replacement, cleaning or Redecoration within a reasonable time, and in default of the Lessee doing so, the Lessor may elect to carry out that repair, replacement, cleaning or Redecoration and any costs whether incidental or otherwise shall be payable on demand by the Lessee to the Lessor.
…
14.1 “the Lessee shall at the expiration or sooner determination of the Term yield up the premises in the order and condition in which this Lease requires them to be maintained during the Term”.
14.2 (a) Subject to the following paragraph, the Lessee shall, on or immediately before the Termination Date (or, if the Lease is determined earlier than the Termination Date, within 48 hours of such earlier determination of this Lease) remove all the Lessee’s Equipment from the Premises and any other relevant part of the Centre (including the removal of signs).
(b) The Lessee shall not be required to remove the Lessee’s Equipment on the Termination Date;
(i) where the Term is extended by a further lease granted to the Lessee or a holding over by the Lessee in accordance with this Lease (in which case, the obligation to remove the Lessee’s Equipment under the preceding paragraph shall be postponed to the last day of that further lease or holding over); or
(ii) to the extent that the Lessee’s Equipment has been sold, transferred or disposed of with the consent of the Lessor to a subsequent tenant which has signed a lease with the Lessor, or to a recognised financial institution which has financed such a tenant and signed the Lessor’s usual documentation in that regard.”
It is not disputed that there was a failure by the Lessee to comply with Clause 14.2(a). Clause 14.2(b) does not apply.
29. The relevant terms of the Guarantee as between the Plaintiffs and the Defendant include the following:
“3. GUARANTEE
3.1. In this clause 3, unless necessarily excluded by the context:
(a) a reference to the Lease includes a reference to;
….
(iii) an extension or renewal of the Term and a period of holding over allowed after the expiry of the Term or after an extension or renewal of the Term;..”
It is not disputed that a period of holding over was not “allowed” pursuant to clause 3.1(a)(iii). It is also not disputed that there was no extension or renewal of the Term of the Lease.
The Guarantor guarantees to the Lessor throughout the term and any extension or renewal of the lease:
payment for each amount payable by the Lessee under the Lease (including the rent reserved by the Lease); and
the Lessee’s observing each Lessee’s Covenant; and
payment of each amount payable by the Lessee for a breach of the Lease (including an award of compensation, costs and damages.
3.3 The Guarantors jointly and severally indemnify the Lessor against:
….
(b) all loss costs and expense (including consequential loss and damages for loss of bargain) suffered by the Lessor from:
(i) the Lessee not observing a Lessee’s covenant;
(ii) the Lease not being fully enforceable against the Lessee; and
(iii) the Lease being disclaimed.
3.4 Each Guarantor’s Covenant is absolute, irrevocable and unconditional.
3.5 The Guarantors remain liable under this Deed:
if the Lessor:
does not enforce a Covenant expressed or implied in this Deed or the Lease; or
…
grants any concession, credit, indulgence or time to the Lessee or the Guarantor; or
abandons, defers, does not enforce, releases or waives any right or remedy against the Lessee or the Guarantors; or
…
does a thing contrary to or does not do a thing where the omission is contrary to the interests of the Lessee or the Guarantors; or
partly or wholly in each case, abandons, breaches, compromises, does not enforce, does not obtain, does not perfect, does not register, does not renew, takes, transfers, releases, varies or waives a security for the observing of the Lessee’s Covenant or a Guarantor’s Covenant; or
breaches this Deed or the Lease; or
may not enforce the Lease against the Lessee; or
(b) if:
the Lessor re-enters the Premises, determines the Lease or a period of holding over or accepts the Lessee’s repudiating the Lease; or
the Lease or Period of holding over terminates; or
………………….
(c) If, by any person’s act, default latches (sic) mistake or omission, the Guarantors’ liability under this Deed may be discharged.
The Lessor may bring proceedings against the Guarantors under this Deed without first making demand on or proceeding against the Lessee.
3.10 Each guarantee and indemnity in this clause 3 continue during and after the determination, expiration, surrender (including a surrender by operation of law) or termination of:
(a) the Term; and
(b) a period of holding over; and
(c) an extension or renewal of the Term.
……………”
8. COSTS AND EXPENSES
The Guarantors upon demand by the Lessor must pay all costs (including legal costs as between solicitor and client) expenses and other amounts incurred or paid by the Lessor in respect of this Guarantee and the documents (including those arising in consequence or on account of the exercise or purported or attempted exercise of any of the Lessors’ rights or for the preservation of or in any manner in reference to this Guarantee and/or the Lease) and any stamp duty or other duty including duties and taxes on receipts or payments and any fines or penalties arising directly or indirectly in respect of this Guarantee and/or the Lease.
.”
Given the wide terms of the Guarantee, it is remarkable to this Court that any person would sign or be advised to sign such a document. Nonetheless, it was signed by the Defendant. Nonetheless, that does not determine the matter at all.
30. The Plaintiffs have never applied for summary judgement.
Issues in Dispute
At the conclusion of the evidence, the Plaintiff’s solicitor made oral submissions in support of the Plaintiff’s case. The Defendant’s counsel provided a Chronology of Events document, together with written submissions, a list of cases upon which the Defendant relied and a list of texts upon which the Defendant relied.
As a result of a request from the Court thereafter, the Defendant’s counsel provided further and detailed written submissions and also provided copies of relevant case law argued in support of the contentions contained in the written submissions.
The issues for determination, as far as this Court is concerned, are as follows:
1. What did the Defendant guarantee?
2. Was there a “holding over” of the premises by the Defendant?
3. If not, should the Plaintiff’s claim, for the period beyond 31 January 2005, be a claim for damages for alleged breaches of Clauses 7.5,[15] 14.1[16] and 14.2(a)[17]of the Lease; rather than the pleaded Claim for rent?
[15] “7.5 The Lessee shall Redecorate the Premises to the reasonable satisfaction of the Lessor whenever reasonably required and within the period of three (3) months before the Termination Date.”
[16] “14.1 The Lessee shall at the expiration or sooner determination of the Term yield up the premises in the order and condition in which this Lease requires them to be maintained during the Term”.
[17] 14.2 (a) Subject to the following paragraph, the Lessee shall, on or immediately before the Termination Date (or, if the Lease is determined earlier than the Termination Date, within 48 hours of such earlier determination of this Lease) remove all the Lessee’s Equipment from the Premises and any other relevant part of the Centre (including the removal of signs).
4. If the Plaintiff’s Claim for the period beyond 31 January 2005, is more properly a claim in damages against the Defendant rather than the pleaded claim for rent, should the court dismiss the claim or does the court’s duty nonetheless extend to determining the claim, by reference to the evidence, however it might be described in the Pleadings?
5. If the court continues to determine the matter according to the evidence, on the basis of a damages claim for the period beyond 31 January 2005, were the Plaintiffs under a duty to mitigate their loss?
6. In otherwise determining the period over which the Defendant is liable for damages, the court is required to make findings about the following:
(a) the date upon which the Defendant should have commenced to make good the premises;
(b) how long it took for the Defendant to make good the premises;
(c) whether the Defendant’s access to the premises to make good the premises was restricted by the Plaintiff to entry only on weekends;
(d) the date upon which the Premises were returned to the possession of the Plaintiffs.
Credibility
Mr Weiss gave his evidence in a consistent manner. He demonstrated a clear recollection of events and was not successfully challenged under cross-examination. He had and has no personal interest in the outcome of these proceedings. He took photos of the premises,[18] which he states were taken on each of 13 September 2005 (the day of the filing of the Original Statement of Claim) and again on 9 November 2005. Again, he was not successfully challenged in relation to this evidence. The court finds him to be a reliable witness in relation to events of which he was himself witness.
[18] Exhibit 5
The Defendant gave his evidence in a vague and inconsistent manner. He was confused about whether he had been told of certain events by his solicitor or not, or had seen certain correspondence or not. He gave evidence that he did not know that rent was accruing during the period following termination of the lease but in later evidence admitted that he had seen the letters from the Plaintiff’s solicitors dated 4 July 2005[19] and 9 July 2005,[20] the first of which refers to the accrual of rent.
[19] Exhibit 11
[20] Exhibit 10
He disputed that the photos could have been taken on the alleged dates but was unable to give evidence as to the likely dates at which the premises were in the state as depicted in the photos.
The Defendant gave evidence on one hand that the key was handed back at the end of August (by his son Steve) but that he inspected the premises at the end of September 2005 after his return from a trip to North Queensland.
The Defendant’s son Steven Kaggelis also gave evidence in a vague and confusing manner in relation to a number of issues. Added to this was his presence in court, unknown to the court, while his father the Defendant completed his evidence on the second day of the hearing.
Steve Kaggelis gave evidence that he was supervising the work in the premises while his father was in North Queensland and that he had obtained the key to the premises from his father for that purpose. He admitted that he had been contacted by Mr Weiss to return the key a number of times and that he did so at the conclusion of the works, he says in September, by handing it over to a staff member at the LJ Hooker premises where Mr Weiss works.
He was not quite sure of a number of things when challenged under cross-examination, including the positioning of the sink in the premises at the date of completion, the date or manner of removal of the roller door, the knowledge of any invoice from the plumber. He nonetheless maintained that the premises were finished by the end of August and he returned the key at the end of August. In other evidence, he stated, however, that Mr Weiss did not ask him for the key until November but that once he returned the key, he did not hear from Mr Weiss again.
This court considers that wherever there is conflict between the evidence of Mr Weiss and that of either the Defendant or Steve Kaggelis, the evidence of Mr Weiss is more reliable and to be preferred. The one exception is in relation to the return of the key. The court accepts that Steve Kaggelis did return the key to a staff member at the office of LJ Hooker, despite Mr Weiss’ evidence of having no knowledge of any return of the key and consequently no possession of the key, resulting in the need to re-key the premises in any event.
The court therefore finds, on the balance of probabilities, as follows:-
1. The Defendant became aware of the Lessee’s breach and his liability thereby to make good the premises as a result of the letter of 4 May 2005.
2. The Defendant was provided with a key to the shop and to the building for the purposes of making good the premises after delivery of the letter dated 4 May 2005.
3. There were delays in the Defendant commencing work on the premises as he was attempting to negotiate another tenancy.[21]
[21] See Exhibit 13 – letter dated 29th June 2005
4. When that was unsuccessful, the Defendant arranged tradespersons to commence work in July 2005. Some work was done over a period of approximately one month and then there was little or no activity for a number of weeks.
5. From July 2005, Mr Weiss commenced to advertise the property for rent every three weeks.
6. Mr Weiss advised the Defendant that he could not jackhammer during the day as it disturbed other tenants in the building, but did not restrict the Defendant’s ability to access the premises at all hours otherwise. Whilst working during evenings and on weekends to do the jack-hammering was discussed, Mr Weiss did not restrict the Defendant’s access to the premises during the week to undertake all other work required.
7. Mr Weiss took photos of the premises on 13 September 2005 depicting the roller door laying on the floor of the premises, together with a wheelie bin of rubbish, a tarpaulin, strips of wood, a bucket, trolley, brooms and a cassette player.[22] He, nonetheless gave evidence that the premises were tenantable in September 2005 and that he tried to rent them for $28 800 without success. He did not try to rent it for less to test the market.
8. The plumber completed the works on 9 November 2005, the date upon which Mr Weiss took further photographs of the premises.[23]
9. The key was returned by Steve Kaggelis to LJ Hooker on a date thereafter.
[22] Exhibit 5
[23] Exhibit 5
The Guarantee
The court accepts the submissions by the Defendant that the Defendant guaranteed a breach of the Terms of the Lease by the Assignee, Mr Letizia and that the legal liability of the Defendant as guarantor derives from the legal liability of the assignee. It is submitted by the Defendant, and accepted by the court, that for liability to arise under the guarantee, it must arise under the lease and that the Defendant can only be liable under the Guarantee for that which Mr Letizia would have been liable under the lease.
“The liability of a guarantor of a tenant’s obligations under a lease will end on the termination of the lease, whether by ending the term, forfeiture, service and expiration of a notice to quit or whatever…He or she will not be liable for matters arising after the termination of the lease…, but may be liable for breach of the covenant to yield up possession on the termination of the lease.”[24]
[24] Australian Encyclopaedia of Forms & Precedents Abridged/Landlord and Tenant/Introductory Notes/Guarantees page 8 of 12 citing Associated Dairies v. Pierce (1981) 259 EG 562.
The Defendant accepts his liability for payment of the rent for the period up to the termination of the lease on the 31 January 2005 and has indeed paid the sum of $11 825.00 on account of rent and interest for that period.
In relation to the period subsequent to the 31 January 2005, the Defendant accepts that he is only liable for that which Mr Letizia would have been liable after the expiration of the Term of the Lease on 31 January 2005; and that such liability is limited to a claim in damages for the period it took the Defendant to return possession of the premises to the Plaintiffs..
The Plaintiff’s pleaded claim is, however, a claim for rent only. Despite Clause 3.10 of the Guarantee, the Defendant is only liable for rent subsequent to the 31 January 2005 if there was a holding over under either the Lease or otherwise.
Holding Over
If a lease contains a holding-over provision, the liability of a guarantor to the Lease may, and in this case, would extend the liability of the Defendant to obligations, for example, to pay rent, incurred if there was indeed a holding over. [25]
[25]2005 Lawbook Co. a part of Thomson Legal & Regulatory Limited ABN 64 058 914 668. Court Practice/Qld Civil Practice – B. McPherson, P McQuade and B Cairns page 6.
“Holding over” is defined as “keeping possession of land by a lessee after the expiration of his term, whereby…if he remains with the consent of the landlord, he becomes a tenant at will, or he may simply remain on sufferance.[26]
[26] per the Defendant’s submissions - Hyatt v. Griffith (1851 17 QB 505 as cited in Jowitt’s Dictionary of English Law, p. 916.
There was no holding over pursuant to the terms of the Lease or otherwise for the following reasons:-
1. Paragraph 3.2 of the Lease requires the consent in writing by the Lessor to the Lessee’s continuing occupation of the Premises beyond the Termination Date. No such consent was requested by the Defendant or Mr Letizia. There is no evidence written or any other consent was given by the Plaintiffs.
2. Neither Mr Letizia nor Mr Kaggelis exercised the option to renew the lease at the expiration of the Term of the Lease.
3. The Plaintiffs did not grant a further Lease of the premises.
4. The Plaintiffs re-entered the premises and acted to change the locks, erect a “For Lease” sign and list the property for let.
5. There was no other agreement, express or implied, by which the parties could be said to have agreed to extend the term or create another tenancy. “.a landlord must do something to approve the holding over; mere delay …to recover possession, or accepting rent payable after the lease has expired for a period, before that expiry, is not sufficient.[27]
6. There was no payment or acceptance of rent for the period post 31 January 2005. ( The sum of $4000 which presumably was paid by Letzia on 8 March 2005 was regarded by the plaintiffs as payment of arrears of rent.)[28]
[27] Clare v. Grant (1950) 1 KB 104 as referred to in Lexis Nexis; Australian Tenancy Practice & Precedents/Part 1 Commentary/Commentary on Precedents (Chapters Nineteen to Thirty Six) Chapter Thirty Mutual Covenants/Holding over.
[28] Exhibit 3. Not unusually for this case, no real explanation as to what exhibit 3 represents was explored.
Liability of the defendant given no holding over
In general terms, the liability of a guarantor of a tenant’s obligations under a lease will end on the termination of the lease.[29] The guarantor may not be liable for matters arising after the termination of the lease, but may be liable for breach of the covenant to yield up possession on the termination of the lease.[30]
[29] Lexisnexis Australian Encyclopaedia of Forms & Precedents Abridged/Landlord and Tenant/Introductory Notes/Commentary/Guarantees at page 2.
[30] Associated Dairies v. Pierce (1981) 259 EG 562 as cited in Lexisnexis Australian Encyclopaedia of Forms & Precedents Abridged/Landlord and Tenant/Introductory Notes/Commentary/Guarantees at page 2.
This is clearly what happened here. It is not disputed that Mr Letizia left the premises and the premises were not put back into the possession of the Landlord pursuant to the terms of the lease. The Plaintiffs, by their conduct in re-entering the Premises, elected not to hold the Defendant to the lease and sue for the whole of the rent, and so their claim is properly one for damages rather than rent.[31]
[31] Harding v. Crethorn (1793) 1 Esp 57; 170 ER 278 as cited in Lexisnexis Australian Tenancy Practice & Precedents/Part 1 Commentary/commentary on Precedents(Chapters Nineteen to Thirty Six) Chapter Twenty-Six Tenants’ Covenants Other Obligations/Delivery Up at page 2.
Should the court determine the claim as a damages claim when a different claim is pleaded?
This court has already referred to the poor state of the Plaintiff’s pleadings and the Defendant’s indication that the court should, nonetheless, proceed to hear the Claim. The Defendant now, understandably, makes application for the court to dismiss the claim on the basis that it is incorrectly constructed as a claim for monies due and owing (a debt or sum certain) rather than the damages claim which the court agrees with the Defendant is the proper construction of the Plaintiff’s claim, on the evidence.
As stated by Mason CJ and Gaudron J in Banque Commerciale SA (In Liq) v. Akhil Holdings Pty Ltd at 286-287:
“The function of pleadings is to state with sufficient clarity the case that must be met: Gould & Birbeck & Bacon v. Mt. Oxide Mines Ltd (In Liq) (1916) 22 CLR 490, per Isaacs and Rich JJ at 517. In this way, pleadings serve to ensure the basic requirement of procedural fairness that a party should have the opportunity of meeting the case against him or her and, incidentally, to define the issues for decision. The rule that, in general, relief is contained to that available on the pleadings secures a party’s right to this basic requirement of procedural fairness. Accordingly, the circumstances in which a case may be decided on a basis different from that disclosed by the pleading are limited to those in which the parties have deliberately chosen some different basis for the determination of their respective rights and liabilities. ..”
Whilst the primary rule is that a court will confine a party to the pleadings if there would otherwise be injustice to the other party,[32] the Defendants clearly indicated that there would arise no disadvantage to the Defendant if the matter proceeded and indeed consented to the matter proceeding.[33] On that basis and by reference to the Defendant’s own failure to respond to the Notice to Admit Facts; and Rule 5 of the Uniform Civil Procedure Rules, this court is not prepared to dismiss the claim but will determine the claim for the period beyond 31 January 2005 as a claim for damages as should properly have been pleaded.
[32] Miller v. Cameron (1936) 54 CLR 572; Vlasic v. Federal Capital Press of Australia Pty Ltd (1976) 9 ACTR 1; Fooked v. Slaytor (1979) 1 All ER 137; Water Board v. Moustakas (1988) 77 ALR
[33] O’Keefe v. Australian Trencher Co Pty Ltd (1991) 56 SASR 370; Buzzacott v. Morgan (unreported,SA Sup Ct, Nyland J, 14 April 1999). Where a defect in the pleadings is not raised by a party adversely affected it may be taken to have consented to the trial being conducted other than in accordance with proper pleadings on that point.
Duty to mitigate loss
Prior to 31 January 2005, the Plaintiffs were not under a duty to mitigate their loss. “Even if the breach consists of the abandonment of the premises the landlord is not, in the absence of some special provision in the lease, bound to re-enter or to find another tenant.[34]The landlord may simply keep the premises vacant and sue the tenant for the rent as it falls due for the full duration of the term and proceed to enforce compliance with the other tenant’s covenants, such as those relating to repairs and insurance.”[35] The claim of the Plaintiffs was, at that stage, one for rent[36]. The claim for rent for the period from August 2004 to 31 January 2005 has not only been admitted by the Defendant but satisfied by its payment of the monies owing for that period.
[34] As cited in Australian Tenancy Practice & Precedents/Part 1 Commentary Chapter Thirty Mutual covenants/Mitigation of Damages at page 2 of 4.
[35] As cited in Australian Tenancy Practice & Precedents/Part 1 Commentary Chapter Thirty Mutual covenants/Mitigation of Damages at page 2 of 4.
[36] Supplementary submissions of the Defendant “Ordinarily, there is no obligation to mitigate a debt or sum certain; White and Carter (Councils) Ltd v. McGregor (1962) AC 413.
Subsequent to the Termination of the lease on 31 January 2005, however, the Plaintiffs were under a duty to “take reasonable steps to mitigate their loss”[37] because the claim was one for damages in contract, of which mitigation of loss is a principle.[38]
[37] Gibbons v. Whitlam (SC(ACT) Miles CJ, 10 November 1988, unreported quoted in Australian Tenancy Practice & Precedents para 17160
[38] Vickers & Vickers v. Stichtenoth Investments Pty Ltd (1989) 52 SASR 90.
On the evidence, the Plaintiff’s failed to mitigate their loss between the 31 January 2005 and the 4 May 2005 by reason of their failure to seek another tenant throughout that period. The Defendant is not, therefore, liable for damages during that period.
The Defendant concedes that he may well be liable for damages, being an amount of rent for the period during which it took to make good the premises. On the facts found by the court, that period is the period between receipt of the letter dated 4 May 2005 and 9 November 2005, a period of six (6) calendar months.
The damages to be awarded are to be compensatory, that is “they will be designed to put the landlord in the same position as if the tenant had observed the terms of the lease.”[39]
[39] Australian Tenancy Practice & Precedents para 17160
As to the quantum of damages it has been suggested, and I accept as a matter of law that “for a straight out failure to restore the premises to the possession of the landlord the prima facie measure of damages is the letting value of the premises for the time required to obtain vacant possession.” [40]
[40] Australian Tenancy Practice & Precedents para 26 365
Exhibit 3[41] indicates rental due for the period to the end of January 2005 in the sum of $11 313.71. A sum of only $617.27 appears due as at 30 September 2005, a payment of $4000.00 having been made, presumably by the Lessee on 8 March 2005. There is, of course, no other evidence about this payment or by whom it was actually made, consistent with the court having to sort out the evidence.
[41] Invoice Barnes Commercial Pty Ltd dated 6th April 2005
A sum of $11 825.00 has been paid by the Defendant upon the filing of his Notice of Intention to Defend, which would seem to represent the sum of $11 313.71 plus interest, presumably up to the date of payment. Again there is no evidence as to the precise calculation and the court has had to again try and work it out but it would seem about right and is accepted as such.
Neither is there any evidence as to how the entire claim of the Plaintiffs is comprised.
The court can only presume that it is a claim for monthly rental at the rate of $2674.11 for the period ending 31 January 2005. As the payment of $11 313.71 plus interest was not made until after the commencement of the proceedings, it was entirely appropriate for the Plaintiff to include this sum in the Claim.
For the period after 31 January 2005 the plaintiff is entitled to damages but only after 4 May 2005 and to the period up to 9 November 2005 which I round off to 6 months.
On that basis, the court orders that judgement be entered for the Plaintiffs in the sum of $16 044.66 plus interest at 9% from 4 May 2005 to the date of judgement being 13 October 2006 which is calculated at $2 085.00 rounded off to the nearest dollar. ($3.956 x 527 days), that is a total judgement amount of $18 129.66.
The court does not accept the Plaintiff’s submission that Clause 8 of the Guarantee and Indemnity entitles the Plaintiff to its costs of the Claim. There has been no demand by the Plaintiffs upon the Defendant. Rather the Plaintiffs have instituted proceedings. The Plaintiffs costs are therefore governed by the rules as to payment of costs in civil actions.
The court is of the view that the Plaintiffs are entitled to their costs of commencing the action, at Scale G Item 1, for the sum of $27 869.66 (the paid sum of $11 313.71 plus the awarded $16 044.66) and thereafter at Scale F for the amount of $16 044.66. As the costs of instructing to sue are the same under each of Scale F and G, the Defendant is to pay the Plaintiffs’ costs of the action at Scale F.
Formal Orders
1. That judgement be entered for the Plaintiffs in the sum of $16 044.66.
2. That the Defendant pay the Plaintiffs’ costs of the action in accordance with the Magistrates Court Scale of Costs Scale F as agreed.
3. In the event of the parties failing to agree in relation to costs, each party is to file and exchange written submissions in relation to the issue of costs within 21 days of the date hereof.
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