Nicvira Nominees Pty Ltd v Subramaniam
[2006] WADC 136
•1 SEPTEMBER 2006
JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CIVIL
LOCATION: PERTH
CITATION: NICVIRA NOMINEES PTY LTD -v- SUBRAMANIAM [2006] WADC 136
CORAM: MAZZA DCJ
HEARD: 14-16 AUGUST 2006
DELIVERED : 1 SEPTEMBER 2006
FILE NO/S: CIV 2730 of 2004
BETWEEN: NICVIRA NOMINEES PTY LTD (ACN 008 782 401)
Plaintiff
AND
SINNATHURAI SUBRAMANIAM
Defendant
Catchwords:
Landlord and tenant - Abandonment by tenant - Assessment of damages - Turns on own facts
Legislation:
A New Tax System (Goods and Services) Tax Act 1999 (Cth)
A New Tax System (Goods and Services Transition) Act 1999 (Cth)
Supreme Court Act (WA), s 32
Result:
Judgment for plaintiff
Damages awarded
Representation:
Counsel:
Plaintiff: Mr P A Kyle
Defendant: Mr H Kremer
Solicitors:
Plaintiff: Kyle & Company
Defendant: H Kremer & Co
Case(s) referred to in judgment(s):
Commonwealth Bank of Australia v Figgins Holdings Pty Ltd [1994] 2 VR 505
Copperart Pty Ltd v Bayside Developments Pty Ltd (1996) 16 WAR 396
Glentham Pty Ltd v Luxer Holdings Pty Ltd & Anor [2006] WASC 132
Jones v Dunkel (1959) 101 CLR 298
Shevill v Builders Licensing Board (1982) 149 CLR 620
Case(s) also cited:
Alliswell Pty Ltd v Macdav Pty Ltd [2002] VSC 87
Anderson v Bowles (1951) 84 CLR 310
Barnes v Department of Housing [2000] NSWRT 132
Coles Supermarkets Pty Ltd v Westley Nominees Pty Ltd [2005] FCA 839
Glentham Pty Ltd v Luxer Holdings Pty Ltd [2002] WASC 80
Kyabram Property Investments Pty Ltd & Anor v Murray [2005] NSWCA 87
Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd (1989) 166 CLR 623
Leda Commercial Properties Pty Ltd v DHK Retailers Pty Ltd (1992) 111 FLR 81
Progressive Mailing House Pty Ltd v Tabali Pty Ltd (1985) 157 CLR 17
Yankee Doodles Pty Ltd v Blemvale Pty Ltd [1999] QSC 134
Young v Lamb (No 2) [2001] NSWSC 1014
MAZZA DCJ:
Introduction
This action came to this Court as the result of an order to remit two Local Court actions brought by the plaintiff against the defendant.
The defendant leased from the plaintiff shop premises situated within the Bentley Centre known as the Kuhlua Café. In this case the plaintiff alleged that the defendant failed to pay monies due under the lease and then on 11 July 2001 abandoned the premises. The plaintiff contended that this conduct amounted to a repudiation of the lease. As a result of the defendant's alleged repudiation the plaintiff elected to end the lease and took possession of the premises on 11 July 2001. The plaintiff seeks payment of unpaid monies due to it at the date of abandonment and damages.
The defendant conceded that the lease was terminated on 11 July 2001 and that on that day he owed the plaintiff certain monies. However, he denied that he abandoned the premises and alleged that the plaintiff unlawfully re‑entered them. As a result he denies any liability to pay damages.
The defendant counterclaimed against the plaintiff by alleging two misrepresentations which it was said induced him into becoming a lessee of the premises. That counterclaim was abandoned on the first morning of the trial. The irony of this is that it was the counterclaim which caused the matter to be tried in the District Court.
The landlord and tenant relationship
There is no dispute that the plaintiff and the defendant were in a landlord and tenant relationship. Neither the plaintiff nor the defendant were the original lessor/lessee but it is not in dispute that the parties were bound by a lease agreement dated 14 February 1996 (the lease) and subsequent deeds of extension and assignment. The defendant became the lessee of the premises by virtue of a deed of assignment (the deed of assignment) undated but stamped 25 August 1999 (exhibit 3) for a term commencing on 20 July 1999 to 31 December 2005.
The pleadings
The plaintiff's claim
The plaintiff's claim as set out in its amended statement of claim is relevantly as follows:
"9.The Defendant occupied shop 48A pursuant to the lease for a period commencing on 20 July 1999 and ending on or about 2 July 2001 when the Defendant failed to pay monies due under the lease and abandoned shop 48A in breach of his obligations under the lease.
PARTICULARS OF UNPAID MONIES
Rent in respect of period 01/04/01 to 31/07/01 $4,779.36
Electricity for period 0/03/01 to 14/06/01 $1,355.67
Variable outgoings in respect of period 01/05/01 to
31/07/01$953.70
MerchantsAssociation Subscription for period
01/05/0 to 31/07/01 $380.81
GST$607.56
less annual adjusted outgoings $(210.32)
TOTAL$7,866.78
10.On 11 July 2001 by reason of the breaches of the lease by the Defendant the Plaintiff determined the lease and took possession of shop 48A.
11.It was a term of the lease that in the event that the lease was determined by reason of a breach of the terms of the lease by the Defendant the Defendant would be obliged to pay to the Plaintiff upon demand all monies payable pursuant to the lease for the unexpired balance of the term of the lease.
12.In breach of the lease and despite demand the Defendant has failed to pay rent, electricity, general outgoings, merchant levies and GST payable pursuant to the lease following the termination thereof for the periods 01/08/01 to 28 February 2002 and 1 October 2003 to 1 April 2004.
PARTICULARS
Rent$8,254.79
Electricity $572.96
Variable outgoings $2,373.98
Merchant levies $802.25
GST$1,526.16
Total$13,530.14
13.The Plaintiff has incurred legal costs and expenses in attempting to remedy the Defendant's breaches of the lease for the period 27 March 2003 to 1 June 2005 in the sum of $10,933.65 and will continue to incur legal costs and expenses.
14.In the alternative the Plaintiff is entitled to the amount particularised in paragraph 12 and 13 as mesne profits arising by reason of the Defendant's breaches of the lease.
15.It was a term of the lease that the Defendant would pay interest on all arrears of money payable pursuant to the lease at the rate of 3% in excess of the general overdraft rate charged on unsecured borrowings by the Commonwealth Bank of Australia on amounts not exceeding $100,000.00 for the period during which the relevant payments were in arrears."
With respect to par 12, the claim for the period between 1 October 2003 and 1 April 2004 was not pursued. Nor was the claim for mesne profits in par 14. It was agreed at trial that the question of costs raised in par 13 would be addressed following my judgment as to the plaintiff's claims pleaded in pars 9 to 12.
At trial, without objection, the plaintiff tendered two schedules which quantified the plaintiff's claim. The first schedule, exhibit 23, particularised the plaintiff's alleged loss for the period prior to 11 July 2001 and exhibit 24 particularised the alleged loss for the period from 1 August 2001 to 28 February 2002. The amounts in these schedules vary slightly from the amounts pleaded.
Exhibit 23 – period prior to 11 July 2001
| "RENT | |||
| 01-04-2004 | $1,194.84 | plus GST $119.48 | Total $1,314.32 |
| 01-05-2001 | $1,194.84 | plus GST $119.48 | Total $1,314.32 |
| 01-06-2001 | $1,194.84 | plus GST $119.48 | Total $1,314.32 |
| 01-07-2001 | $1,194.84 | plus GST $119.48 | Total $1,314.32 |
| Total Rent | $5,257.28 | ||
| OUTGOINGS | |||
| 01-05-2001 | $307.28 | plus GST $30.73 | Total $338.01 |
| 01-06-2001 | $307.28 | plus GST $30.73 | Total $338.01 |
| 01-07-2001 | $339.14 | plus GST $33.91 | Total $373.05 |
| TOTAL FOR GENERAL OUTGOINGS | $1,049.07 | ||
| EXPENSES ELECTRICITY | |||
| 08-03-2001 | $395.09 | plus GST $39.51 | Total $434.60 |
| 12-04-2001 | $403.35 | plus GST $40.34 | Total $443.69 |
| 10-05-2001 | $557.23 | plus GST $44.72 | Total $612.95 |
| MERCHANTS ASSOCIATION FEES | |||
| 01-05-2001 | $99.49 | $99.49 | |
| 01-06-2001 | $99.49 | $99.49 | |
| 01-07-2991 | Special Levy $80.00 | plus GST $8.00 | Total $88.00 |
| 01-07-2001 | $101.83 | plus GST $10.18 | Total $112.01 |
TOTAL EXPENSES $1,890.23
TOTAL OWING UNDER THE LEASE $8,196.50
Exhibit 24 – Period 1 August 2001 – 28 February 2002
| RENT | |||
| 01-08-2001 | $1,194.84 | plus GST $119.48 | Total $1,314.32 |
| 01-09-2001 | $1,194.84 | plus GST $119.48 | Total $1,314.32 |
| 01-10-2001 | $1,194.84 | plus GST $119.48 | Total $1,314.32 |
| 01-11-2001 | $1,194.84 | plus GST $119.48 | Total $1,314.32 |
| 01-12-2001 | $1,194.84 | plus GST $119.48 | Total $1,314.32 |
| 01-01-2002 | $1,194.84 | plus GST $119.48 | Total $1,314.32 |
| 01-02-2002 | $1,194.84 | plus GST $119.48 | Total $1,314.32 |
| Total Rent | $9,200.24 | ||
| GENERAL OUTGOINGS | |||
| 01-08-2001 | $339.14 | plus GST $33.91 | Total $373.05 |
| 01-09-2001 | $339.14 | plus GST $33.91 | Total $373.05 |
| 01-10-2001 | $339.14 | plus GST $33.91 | Total $373.05 |
| 01-11-2001 | $339.14 | plus GST $33.91 | Total $373.05 |
| 01-12-2001 | $339.14 | plus GST $33.91 | Total $373.05 |
| 01-01-2002 | $339.14 | plus GST $33.91 | Total $373.05 |
| 01-02-2002 | $339.14 | plus GST $33.91 | Total $373.05 |
| TOTAL FOR GENERAL OUTGOINGS | $2,611.35 |
| EXPENSES ELECTRICITY | |||
| 14-06-2001 | $354.44 | plus GST $35.44 | Total $389.88 |
| 12-07-2001 | $117.67 | plus GST $11.77 | Total $129.44 |
| 09-08-2001 | $100.85 | plus GST $10.99 | Total $110.94 |
| TOTAL ELECTRICITY CHARGES | $630.26 | ||
| MERCHANTS ASSOCIATION FEES | |||
| 01-08-2001 | $$101.83 | plus GST $10.18 | Total $112.01 |
| 01-09-2001 | $101.83 | plus GST $10.18 | Total $112.01 |
| 01-10-2001 | $101.83 | plus GST $10.18 | Total $112.01 |
| 01-11-2001 | $101.83 | plus GST $10.18 | Total $112.01 |
| 01-12-2001 | $101.83 | plus GST $10.18 | Total $112.01 |
| 01-01-2002 | $101.83 | plus GST $10.18 | Total $112.01 |
| 01-02-2002 | $101.83 | plus GST $10.18 | Total $112.01 |
TOTAL MERCHANTS ASSOCIATION FEES $784.07
TOTAL OWING AFTER TERMINATION
OF LEASE $13,225.92"
The defendant's defence was re‑amended at trial by consent. The material paragraphs dealing with pars 9 to 12 of the amended statement of claim are as follows:
"4A.The Defendant denies that he has any liability under the lease after 11 July 2001 and further and in any event as to paragraphs 9, 12 and 13 of the claim the Defendant:
a)Admits that the Plaintiff incurred the expenses as particularised but denies liability for merchant levies and G.S.T. and costs on a solicitor client basis.
b)Says that the Plaintiff has avoided losses in the sum of $7,127.85 in that it was able to lease the premises at a higher rent to another tenant for the period 1 March 2002 to 30 September 2003.
c)Says that the Plaintiff could have re‑let the premises earlier than 1 March 2002 and for a fixed term if it could have come to a decision as to ownership of the Defendant's plant and equipment and the Plaintiff has thereby failed to mitigate its loss.
4B.The Defendant denies paragraphs 9 and 10 of the claim and further, says that, on or about 4 July 2001 the Plaintiff by its agent, Mr. T. Perrin unlawfully and in breach of the covenant allowing the Defendant uninterrupted and quiet possession of the leased premises, nevertheless entered into possession of the leased premises."
As to the items set out in exhibit 23, the defendant's counsel conceded that the defendant had not paid rent, variable outgoings, electricity and Merchants Association fees as claimed. He admitted that the defendant is indebted to the plaintiff with respect to the rent and the variable outgoings and the electricity. He disputed that the defendant was obliged to pay the Merchants Association fees, GST and interest at the rate specified in the lease. As to exhibit 24, the defendant's position was that if he is liable to pay damages he concedes the sums sought by the plaintiff save for Merchants Association fees GST and interest pursuant to the lease.
The issues to be determined
There are five issues for me to decide. First, as to the monies owed to the plaintiff by the defendant prior to 11 July 2001 is the defendant liable to pay GST and Merchants Association fees? Second, did the lease come to an end as a result of the defendant's abandonment or as a result of the plaintiff's breach of the covenant of quiet enjoyment? Third, if the defendant abandoned the premises and is liable to pay damages to the plaintiff, has the plaintiff mitigated its loss? Fourth, if the defendant is liable to pay damages to the plaintiff, should those damages include an allowance for GST and Merchants Association fees? Fifth, if the defendant is obliged to pay interest, what is the proper interest rate?
The evidence at trial
The plaintiff called the only witness to give oral evidence at trial, namely The Bentley Centre manager, Mr Anthony Perrin. Through him both the plaintiff and the defendant tendered a total of 22 exhibits. After Mr Perrin completed his evidence the plaintiff's counsel tendered four schedules two of which comprise exhibits 23 and 24.
The defendant declined to give evidence or adduce any other evidence apart from the documents tendered through Mr Perrin. The defendant was present throughout the plaintiff's case.
Mr Perrin's evidence
Mr Perrin was, at all material times, the centre manager of The Bentley Centre. His duties included the general and financial management of the centre. Mr Perrin testified that the defendant failed to pay rent, outgoings and other amounts for the period between April and July 2001 inclusive. On 20 April 2001 Mr Perrin wrote to the defendant informing him that as at the date of the letter he was in arrears of rent in an amount of $1,200. The letter sought payment of that sum by return mail. The letter advised the defendant that failure to comply may result in the lease being terminated and in the event that occurred the plaintiff reserved the right to recover "legal costs incurred to recover the debt including interest plus damages under the terms and conditions of the lease" (exhibit 4).
Mr Perrin said that the defendant did not pay any monies as a result of receiving this letter.
The plaintiff's then solicitors, Costantino & Co, later wrote to the defendant by a letter dated 7 May 2001 (exhibit 11) demanding payment of $3,386.42 for "outstanding rent and charges pursuant to your lease". The plaintiff's solicitors demanded payment of that sum within seven days and that the solicitors had received instructions to issue proceedings for recovery of that sum without further notice if payment was not received from the defendant. Evidently payment was not received and, as a result, the plaintiff issued proceedings in the Perth Local Court against the defendant to recover the sum of $3,386.42.
Mr Perrin testified that as of early July 2001 the defendant was further in default of his obligations to pay rent. Mr Perrin said that on a Monday early in July 2001 (which by reference to a calendar is most likely 2 July 2001) he inspected the defendant's premises and found them to be unsecured, that is, unlocked. The keys to the premises were in the lock. He found that food was still in the café's refrigerator and freezer and that the fixtures and fittings of the café were still present. No‑one was in attendance at the café nor did anybody associated with the defendant ever return to the premises. Mr Perrin said that he tried to ring the defendant at his home and at his place of work but he was unable to speak with him. In cross‑examination, Mr Perrin agreed that the defendant was an accountant who did not operate the café on a day‑to‑day basis, rather, he relied upon a series of managers to do so. He was aware that the defendant had some difficulties with a previous manager which had caused the café to be closed for a period of some days towards the end of March 2001. The defendant wrote to the plaintiff at the time advising it of this temporary closure. However, no such letter was received from the defendant to explain the state of the premises in July 2001.
Mr Perrin discussed the situation with the plaintiff's representatives by which time the food in the premises was beginning to go mouldy. Mr Perrin was instructed to enter and take possession of the premises on behalf of the plaintiff.
Mr Perrin prepared a notice which he sent by registered mail to the defendant's home address and affixed a notice to the premises at about 11.30 am on 11 July 2001. The letter which was sent to the plaintiff's home address had attached to it the notice affixed to the premises. The letter, exhibit 6, is, omitting the formal parts in the following terms:
"The Bentley Centre – Shop 48A – Breach of Lease
Please be advised that as of Wednesday 11 July 2001 the Landlord has terminated the Lease.
Take Notice:
The Landlord retains their right pursuant to the provision of the Lease to recover rental and other monies plus damages.
Please find attached Notice which has been placed on the Leased Premises being Shop 48A for your information.
Whilst writing, we would ask that you please contact the writer to arrange a convenient time to remove all perishable food items from the Premises.
Should we fail to hear from you within seven (7) days of the date of this letter we will proceed to remove all perishable food items from the Premises.
Yours faithfully"
The notice is exhibit 5 and its terms are as follows:
"NOTICE
TERMINATION OF LEASE
LESSOR : NICVIRA NOMINEES Pty Ltd
THE BENTLEY CENTRE
1140 ALBANY HIGHWAY
BENTLEY WA 6102VS
LESSEE : SINNATHURAI SUBRAMANIAM
51 ALBACORE DRIVE
SORRENTO WA 6020LEASED PREMISES :SHOP 48A THE BENTLEY CENTRE
BREACH OF LEASE:RENTAL ARREARS AND OTHER
MONIES $8,082.26
TAKE NOTICE :THE LESSOR HAS TERMINATED
THE LEASE EFFECTIVEWEDNESDAY 11 JULY 2001
LESSOR RE-TAKE
POSSESSION : REPOSSESSION OCCURREDWEDNESDAY 11 JULY 2001
DAMAGES FOR BREACH OF ESSSENTIAL TERM
The Lessor does not waive their right pursuant to the provisions of the Lease to recover rental and other monies plus damages.
Notification placed on Shop 48A on Wednesday 11 July 2001 at 11.30am."
The address to which the letter was sent was 51 Albacore Drive, Sorrento. Mr Perrin agreed in cross‑examination that the defendant had written to him by a letter dated 6 April 2001 advising that all future invoices and correspondence in connection with the premises was to be sent to PO Box 212, Cannington 6107. Mr Perrin agreed that he must have received that letter because his letter to the defendant dated 20 April 2001 was sent to that address. Mr Perrin said that the letter of 11 July 2001 was sent to the defendant at 51 Albacore Drive as a result of an oversight.
Mr Perrin testified that apart from a vague recollection of speaking to him in the early hours one morning by telephone he did not hear or speak to the defendant about repossession of the premises nor did he speak to the defendant's solicitor. Subsequently, he has not become aware of any explanation for the apparent abandonment of the premises.
Once repossession of the premises was effected leasing agents, Colliers Jardine, were appointed to re‑let the premises. Mr Perrin testified that advertisements were placed in the Western Australian and that "For lease" signs were affixed to the premises and the outside of the shopping centre. He said that the signs produced some enquiries but nothing more. He recalled that Colliers Jardine brought a number of prospective tenants to the premises but none of those visits resulted in the shop being let.
In cross‑examination, Mr Perrin agreed that there were ongoing problems concerning the re‑letting of the premises because the defendant's plant and equipment had been left in the café and Mr Perrin was unaware of how the plaintiff was going to treat these items.
Mr Perrin explained that prospective tenants asked if the plant and equipment was included with the premises but he was unable to give any firm advice of this question because the plaintiff had not decided what to do with the items.
Without objection, the defendant's counsel showed Mr Perrin an internal memo written by a retail leasing manager at Colliers International on 27 March 2002 in which it was stated:
"Since 15 November 2001 Colliers International have constantly provided prospective lessees with the details of this tenancy. One of the main issues that has always been pending in leasing this space was the plant and equipment and the ownership of such. As we were not advised of exactly what position the landlord would take, ie assume that the plant and equipment had been abandoned and would take possession or offer a nominal amount for the equipment to the tenant we were not allowed to offer any prospective tenant a fixed term."
Mr Perrin testified that he entered into negotiations with Mr Warren Lock and Mr Cameron Stephen over the lease of the premises. As I understood Mr Perrin's evidence both these men had formerly managed the café. By a letter dated 22 November 2001 Mr Perrin requested Costantino & Co to prepare an offer to lease for a fixed term in favour of Messrs Lock and Stephen (exhibit 19). In that letter Costantino & Co were instructed that the plaintiff had agreed to sell the shop fit‑out including the plant and equipment left by the defendant to the prospective lessees. Costantino & Co wrote to Mr Perrin by a letter dated 4 December 2001 (exhibit 20) advising that the landlord could not sell the shop fit‑out to the prospective tenants.
Further negotiations with Messrs Lock and Stephen followed over a period of about six weeks in early 2002. Eventually, the premises were re‑let to Messrs Lock and Stephen on a monthly tenancy commencing on 1 March 2002. Mr Perrin said that the new tenants paid a lower rental than the defendant. Mr Perrin said that the rental paid by Messrs Lock and Stephen was what he referred to as "gross rental" which meant that whereas the defendant paid rental plus variable outgoings, Messrs Lock and Stephen paid one amount of rent which included the variable outgoings.
Findings as to Mr Perrin's credibility
I found Mr Perrin to be an honest witness who at all times tried to provide accurate evidence to the court. His recollection was stretched on occasion because of the time that has elapsed since the events that I am concerned with took place but, on the whole, I regarded his evidence as accurate. Certainly, the defendant's counsel did not make any submission to the contrary and sought to rely on Mr Perrin's testimony in his closing submissions.
The defendants' conduct after 11 July 2001
The defendant did not respond to any attempt to contact him. Moreover, it appears from Mr Perrin's evidence that the defendant did not after the plaintiff re‑entered the premises, make any attempt to protest or explain the apparent abandonment of the premises. The defendant took no legal action in response to the plaintiff re‑entering the premises.
On 18 July 2001 Costantino & Co wrote to the defendant's solicitors advising the defendant of what had occurred between 2 and 11 July 2001. The letter asserted that the premises had been deserted by the defendant and advised that the plaintiff had determined the lease (exhibit 18). Evidently, there was no response to this letter, indeed, the next step that the defendant took was to instruct his solicitors to write to Costantino & Co by a letter dated 11 June 2002 concerning the new tenants using his plant and equipment. The letter makes no mention of the plaintiff's re‑entry and does not suggest that such re‑entry was unlawful.
The failure of the defendant to give evidence
There is no doubt that the issue of abandonment was raised in the plaintiff's original statement of claim and its amended statement of claim and would be central to the determination of this case. In my view the evidence concerning the apparent abandonment of the premises required the defendant to give an explanation as to what occurred. Although the defendant was not the day to day manager of the business, I am satisfied that he took a close interest in it. For example, he was corresponding with the centre manager or the plaintiff's solicitors in March, April and May 2001 over a number of issues in connection with the premises and the business that was being conducted there. In my opinion the defendant knew of the circumstances leading to the desertion of the premises or, if he did not personally know of the circumstances, he knew those who could explain the circumstances under which the premises were vacated. Either way, this is a case where the defendant or someone else would have been expected to have given evidence on the question of the alleged abandonment.
In all the circumstances I infer that the evidence of the defendant or any person associated with him in a position to shed light on the circumstances of the alleged abandonment would not have assisted the defendant: Jones v Dunkel (1959) 101 CLR 298. I go no further than the drawing of this inference. I do not infer that any evidence called on behalf of the defendant would have damaged his case nor does the failure to call evidence fill any gaps that I perceive exist in the evidence.
I now return to the issues raised by me earlier.
First issue – GST and Merchants Association fees prior to 11 July 2001
The plaintiff asserts and the defendant admits that the plaintiff paid the sums of GST set out in exhibit 23. Those amounts total $727.04.
Initially I was unclear as to how the lessor was liable to pay GST given that the lease was entered into in 1996. But under the provisions of A New Tax System (Goods and Services) Tax Act 1999 (Cth) s 9‑5 and s 9‑10(2)(g), GST is payable by a lessor on rent and outgoings it receives from a lessee. However, pursuant to A New Tax System (Goods and Services Transition) Act 1999 (Cth), GST is not payable by a lessor with respect to leases entered into prior to 8 July 1999 until the occurrence of the first rent review opportunity after 8 July 1999 or 30 June 2005 whichever is the earliest. The first rent review after 8 July 1999 according to cl 5 of the second schedule of the lease occurred on 1 January 2000. Therefore I am satisfied that the lessor was liable to pay GST on rent and outgoings received from the defendant after 1 July 2000.
Was the GST then recoverable from the defendant? The lease and the assignment to the defendant do not specifically refer to GST but the plaintiff relies on cl 3.10(a)(v) of the lease which is in the following terms.
"The Lessee must pay or reimburse the Lessor on demand for:
(v)stamp duty, taxes and fees (including, without limitation, registration fees) and fines and penalties in respect of stamp duty, taxes and fees, which may be payable or determined to be payable in connection with this Lease or any Transaction Document or a payment or receipt or any other transaction under any Transaction Document."
The assignment of lease is plainly a transaction document.
The plaintiff argued that GST is a tax payable "in connection with" the lease and the assignment of lease and is a receipt under the assignment of lease. The defendant argued that the GST cannot be accommodated within the terms of the clause.
I accept the plaintiff's argument with respect to the rent and variable outgoings and other expenses paid by the defendant prior to 11 July 2001. GST is clearly a tax. In my opinion the words "in connection with this lease or any transaction document or a … receipt … under any transaction document" should be given their ordinary meaning and are wide enough to accommodate the GST. Accordingly, the defendant should reimburse the plaintiff for GST paid by it prior to 11 July 2001.
With respect to the Merchants Association fees, it is not disputed that there existed at all relevant times at The Bentley Centre an incorporated tenants' association known as The Bentley Centre Merchants Association Incorporated.
Pursuant to cl 13.1 and cl 13.2 of the lease the defendant was obliged to join and remain a financial member of the Merchants Association and to pay subscriptions, levies or other sums of money payable to the Association from time to time. Implicitly this obligation remained on foot for as long as the defendant was a tenant at the Centre.
The defendant admitted that the defendant did not pay the Merchants Association fees and a special levy raised by the Association but submitted that the plaintiff had no right to recover those sums from him, rather, it was for the Association to recover those sums.
The plaintiff's counsel submitted that the plaintiff was entitled to recover the Merchants Association fees from the defendant by virtue of cl 11.2 of the lease. This clause provides:
"The Lessor may but shall not be obliged to remedy at any time without notice any default by the Lessee under this Lease including (but without limiting the generality of the foregoing) the payment of any moneys payable by the Lessee pursuant to the provisions of this Lease and whenever the Lessor so elects all debts costs and expenses incurred by the Lessor including (but without limiting the generality of the foregoing) legal costs and expenses in remedying the default shall be paid by the Lessee to the Lessor on demand."
It is not denied by the defendant that the plaintiff has, in fact, paid to the Merchants Association the amounts that the defendant should have paid to the Association. Accordingly, and as the defendant is in admitted breach of his obligation to the Merchants Association fees and levy, the lessee is obliged pursuant to cl 11.2 to pay to the lessor those amounts. I allow this part of the plaintiff's claim.
In relation then to the plaintiff's claim for rent, outgoings and expenses owing to it by the defendant up to 11 July 2001; the defendant is obliged to pay the plaintiff the sums claimed in exhibit 23 which total $8,196.50.
Second issue – the termination of the lease
The plaintiff claimed that the defendant repudiated the lease by refusing to pay rent and abandoning the premises. As a result, it determined the lease and took possession of them. The defendant admitted that he did not pay rent but denied that he abandoned the premises.
The ordinary principles of contract with respect to repudiation apply to leases: Shevill v Builders Licensing Board (1982) 149 CLR 620 at 625 per Gibbs CJ. It is upon these principles that the plaintiff now relies. Therefore if the defendant repudiated the lease and that repudiation was accepted by the plaintiff, the lease is at an end and the plaintiff may sue for damages: Copperart Pty Ltd v Bayside Developments Pty Ltd (1996) 16 WAR 396 at 401 per Kennedy J.
The question of fact for me to decide is whether the defendant abandoned the premises. In order for there to be an abandonment the lessee's absence from the premises must be permanent and not temporary. The lessee's conduct must evince an intention to no longer be bound by the contract. I acknowledge that in analysing the evidence I should not lightly infer that the defendant has abandoned the premises and that I should do so only where the evidence clearly indicates that an abandonment has occurred.
In my view the defendant abandoned the premises on or about 2 July 2001 so as to evince an intention to no longer be bound by the lease. I have come to this conclusion based on the combination of the following facts drawn from the documents tendered at trial and the testimony of Mr Perrin.
1.The premises were being used as a café in a suburban shopping centre and would ordinarily be open for business doing the centre's trading hours.
2.Although the defendant was not the day to day manager of the café, nevertheless, he was aware of what was going on in the business and he was particularly involved in its financial affairs. In my opinion it is inconceivable that the defendant did not give instructions to his manager to cease trading and leave the premises.
3.The defendant was aware of the importance of keeping the business open and ensuring that if, for some temporary reason, the business closed the plaintiff was informed of this fact. This is exemplified by the letter that the defendant's solicitors sent to Mr Perrin dated 23 March 2001 (exhibit 8).
4.As at 2 July 2001 the defendant was in breach of the lease for failure to pay rent, outgoings, electricity and Merchants Association fees.
5.On 2 July 2001 the premises were unoccupied and unsecured. Further, the keys had been left in the lock.
6.No explanation has been given by the defendant or anyone representing him either at the time or later.
7.No reply was evidently ever received to Costantino & Co's letter to the defendant's solicitor dated 18 July 2001 which plainly set out what had occurred between 2 and 11 July 2001.
One fact which arguably does not evince an intention to no longer be bound by the lease is that the defendant's plant and equipment were left on the premises. I was provided during the trial with a list of this plant and equipment in the form of exhibit 15. The list is fairly long and contains a considerable amount of equipment which would have some value. At no point has the defendant ever tried to remove this property. In Commonwealth Bank of Australia v Figgins Holdings Pty Ltd [1994] 2 VR 505, the fact that the lessee of shop premises left plant and equipment in the shop was found to indicate that the lessee had not abandoned the premises. But in that case, unlike the present case, although the lessee vacated the premises and left plant and equipment behind, it continued to pay a nominal rent and checked up on the equipment from time to time. Of course each case must be decided on its own facts. In the present case the defendant's conduct of leaving behind plant and equipment without explanation in my opinion reinforces the notion that the premises were abandoned.
As I observed earlier in these reasons, the defendant has chosen not to give evidence. As a result, in the absence of some reasonable competing inference, the conclusion that the defendant abandoned the premises is strengthened.
The defendant's abandonment does not automatically bring the lease to an end. It is for the lessor to elect to accept the abandonment as a repudiation of the lease by the lessee: W D Duncan, "Commercial Leases in Australia" 4th ed Thomson Law Book Co at p 372 – 373. In this case, the plaintiff elected to accept the abandonment as a repudiation of the lease and thereby brought the lease to an end. I have come to this conclusion based on the following facts:
1.The plaintiff re‑entered and (presumably) secured the premises.
2.Notices were sent to the defendant (albeit to an old address) and affixed to the premises.
3.The plaintiff's solicitors wrote to the defendant's solicitors on 18 July 2001 advising them that the lease had been determined and the reasons for the determination.
4.The plaintiff took steps to re‑let the premises.
To sum up the issue I find that the defendant's vacation of the premises was not temporary and constituted an abandonment of them. As a result, the defendant repudiated the lease which the plaintiff elected to accept. The plaintiff did not breach the covenant of quiet enjoyment. The plaintiff's acceptance of the repudiation determined the lease which gives rise to an entitlement on the part of the plaintiff to damages.
Third issue – Damages and mitigation of loss
The plaintiff's claim for damages is particularised in exhibit 24. It is conceded that the plaintiff actually incurred the outgoings, electricity expenses, Merchants fees and GST as claimed.
The damages sought by the plaintiff have been calculated as a past loss incurred by it for the period between the date of the repudiation and the date the premises were re‑let. This was the approach taken by Le Miere J in Glentham Pty Ltd v Luxer Holdings Pty Ltd & Anor [2006] WASC 132 at [33] and [34]. I regard this as a proper way to assess damages in this case, indeed, both parties have proceeded assuming that I will assess damages on this basis.
The lessor is bound by the principle that it must act to mitigate its loss flowing from the lessee's breach by actively seeking another lessee. The defendant's counsel submitted that the plaintiff has not mitigated its loss, and consequently, at least so far as loss of rent and outgoings is concerned, the award should be reduced.
The defendant's counsel's submissions with respect the plaintiff's alleged failure to mitigate its loss relate to Mr Peron's evidence concerning the plaintiff's inability to determine who owned the plant and equipment left in the premises by the defendant. The defendant's counsel referred me to cl 10.1 of the lease the terms of which are:
"Lessor's right to carry out works
The Lessee's obligation to observe or perform the covenants contained in Clauses 9.7 and 9.8 shall survive the expiry or other determination of the Term and if the Lessee shall not have performed the obligations of the Lessees pursuant to the provisions of Clauses 9.7 and 9.8 the Lessor may in addition to any of its rights of action at common law or under statute at its option itself cause all or some of such partitions fixtures fittings equipment and furnishings referred to in Clause 9.8 to be removed from the Leased Premises and the damage of the kind referred to in Clause 9.8 to be made good and the alterations of the kind referred to in Clause 9.8 to be so re‑altered and the Lessee shall pay and the Lessor may recover the costs of such removal making good and re‑alteration from the Lessee as a liquidated debt payable on demand PROVIDED ALWAYS that any of such partitions fittings fixtures equipment furnishings not removed by the Lessee either as of right or by requirement of the Lessor as aforesaid and any stock or other property found upon the Lease Premises after such expiry or other determination of the Term shall at the option of the Lessor become the property of the Lessor unless the Lessor shall elect to deposit the same in a public warehouse or elsewhere pursuant to Clause 10.2."
The submission of the defendant's counsel was that cl 10.1 made it clear that the plaintiff had an election to either keep the plant and equipment as its own or place it in storage. He went on to submit that the plaintiff unduly delayed making an election which in turn delayed re‑letting of the premises. Further, that the plaintiff's leasing agents were only able to offer prospective tenants a monthly tenancy as opposed to a fixed term.
The plaintiff's counsel's submissions were that the plaintiff took all reasonable steps to re‑let the premises promptly. As to the issue of the plant and equipment, it was said that the plaintiff understandably proceeded cautiously and sought legal advice as to the ownership of the items.
As I understood the plaintiff's position, it did not dispute the contention that what to do with the plant and equipment was an issue which concerned prospective lessees, but its counsel's submission was that the evidence did not go so far as to demonstrate that the premises would have been re‑let earlier had the question with respect to the plant and equipment been resolved by the plaintiff.
In my opinion, the plaintiff took reasonable steps to re‑let the premises and there should be no reduction of the award of damages on account of any failure on the part of the plaintiff to mitigate its loss. As to Mr Perrin's evidence, I accept that the plaintiff acted promptly and appropriately to erect signs and publish advertisements. The premises were ultimately re‑let to persons who were directly approached by Mr Perrin on behalf of the plaintiff. The Colliers International memo (exhibit 22) states that the issue of the plant and equipment had caused some degree of difficulty from 15 November 2001. Having said this, negotiations with Messrs Lock and Stephens over a monthly tenancy of the premises commenced, according to Mr Perrin, in early 2002 and concluded in time for them to commence their tenancy on 1 March 2002. No evidence was put before me from Messrs Lock and Stephens or any other prospective tenant concerning the effect that the issues of the plant and equipment or the term had on the re‑letting of the premises. Certainly, the plaintiff took some time to decide what to do with the plant and equipment. The primary reason for this was the need to obtain legal advice. This was an issue that required careful consideration. While the plaintiff could have made the decision sooner the delay was not so significant as to amount to a failure to mitigate its loss. The defendant bears the onus of proving that the plaintiff did not mitigate its loss. In my view the defendant has not discharged his onus and I will not reduce the damages to be awarded to the plaintiff for this reason.
Fourth issue – GST and Merchants Association fees after 11 July 2001
Is the plaintiff entitled to GST and Merchants Association fees after 11 July 2001?
As to GST, it must be borne in mind that the plaintiff is recovering damages from the defendant following upon the defendant's repudiation. While the damages have been calculated in large part by reference to the rent and variable outgoings that the plaintiff would have received had the lease been on foot during the period 1 August 2001 to 28 February 2002, it must be remembered that the lease was in fact terminated on 11 July 2001. Thereafter, the defendant did not pay rent, variable outgoings and other costs. I am not sure why then the plaintiff paid GST. It may be that on any award of damages that I make the plaintiff is obliged to pay GST. Neither counsel addressed me on this issue. However, I am prepared, before I make any final orders to hear further from counsel on this point.
As to Merchants Association fees, I am at a loss to understand how the plaintiff was obliged to pay these fees once the defendant had repudiated the lease and that repudiation was accepted by the plaintiff. It seems to me that once these events had occurred, the defendant was no longer a tenant at the Centre and was not eligible for membership to the Merchants Association. Although I accept that the plaintiff paid Merchants Association fees on behalf of the defendant between 1 August 2001 and 28 February 2002, I am not satisfied that it was obliged to. In my view, the damages payable by the defendant to the plaintiff should not include an allowance for Merchants Association fees.
Assessment of damages
In my opinion the defendant is obliged to pay damages to the plaintiff (leaving aside the issue of GST for the moment) as a result of his repudiation calculated as follows:
Rent
Between 1 August 2001 and 1 February 2002
$1,194.84 per month x 7 $8,263.88
Outgoings
1 August 2001 to 1 February 2002
$239.14 x 7$2,373.98
Electricity
$630.26
$11,268.12
Fifth issue - Interest
The plaintiff has claimed interest on all amounts unpaid before the repudiation and on the damages awarded by me as a result of the repudiation pursuant to cl 3.11 of the lease.
That clause provides:
"The Lessee shall pay to the Lessor on demand by it interest at the Rate of Interest on all moneys owing by the Lessee but unpaid in breach of the provisions of this Lease for more than 7 days from and including the due date the said interest to be calculated on a daily basis on the total of the moneys owing from time to time and computed from and including the due date."
Clause 1.1 contains the definition of the expression "Rate of Interest" as meaning "the rate which is 3% in excess of the general overdraft rate charged on unsecured borrowings by the Commonwealth Bank of Australia on amounts not exceeding $100,000.00."
Section 32 of the Supreme Court Act is in the following terms:
(1)In any proceedings for the recovery of any money (including any debt or damages or the value of any goods), the Court may order that there shall be included, in the sum for which judgment is given, interest at such rate as it thinks fit on the whole or any part of the money for the whole or any part of the period between the date when the cause of action arose and the date when the judgment takes effect.
(2)This section does not —
(a)authorise the giving of interest upon interest;
(aa)apply in relation to any general damages in respect of pain and suffering or the loss of the enjoyment or of the amenities of life awarded in relation to personal injury or the death of a person;
(b)apply in relation to any debt upon which interest is payable as of right whether by virtue of any agreement or otherwise; or
(c)affect the damages recoverable for the dishonour of a bill of exchange.
(2a)In subsection (2)(aa) 'personal injury' includes any disease and any impairment of a person's physical or mental condition."
The plaintiff specifically pleaded interest pursuant to the lease in par 14 of its initial statement of claim filed in this Court on the 23rd day of December 2004. Prior to that, both the plaintiff's actions in the Local Court contained a prayer for interest pursuant to s 32 of the Supreme Court Act. In my opinion it would not be appropriate for the defendant to have to pay interest under the lease (which is payable at a higher rate than interest awarded under s 32 of the Supreme Court Act) up to the date of filing the initial statement of claim. This is because the defendant chose, for whatever reason, in the Local Court to seek interest, not based on the lease, but instead pursuant to s 32 of the Supreme Court Act.
Further, the plea, in par 14 (and later in par 15 of the amended statement of claim) is expressed as follows:
"It was a term of the lease that the Defendant would pay interest on all arrears of money payable pursuant to the lease at the rate of 3% in excess of the general overdraft rate charged on unsecured borrowings by the Commonwealth Bank of Australia on amounts not exceeding $100,000.00 for the period during which the relevant payments were in arrears."
The plea speaks of sums of money which were in arrears. In my view that plea is directed towards the defendant's liability prior to repudiation. It is not a plea directed to interest on damages as a consequence of the repudiation. I am prepared to allow an award of interest pursuant to the lease for the sums owed by the defendant to the plaintiff prior to 11 July 2001 but only from the date the statement of claim was filed. I am not prepared to allow interest on the damages which I have found flowed from the defendant's repudiation other than at the rate pursuant to s 32 of the Supreme Court Act.
Conclusion
I order that the defendant pay the plaintiff $8,196.50 being monies owed by him to the plaintiff up to 11 July 2001 and a further sum (subject to further argument about GST) of $11,268.12 being damages payable as a result of the defendant's repudiation of his contract with the plaintiff. I order that interest up to the 23rd day of December 2004 is payable pursuant to s 32 of the Supreme Court Act. After that day the plaintiff is entitled to interest pursuant to the terms of the contract but only in respect of the sum owed to it by the defendant as at 11 July 2001. Interest on the damages that I have awarded as a result of the defendant's repudiation is payable pursuant to s 32 of the Supreme Court Act.
I will hear the parties further as to costs.
JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CIVIL
LOCATION: PERTH
CITATION: NICVIRA NOMINEES PTY LTD -v- SUBRAMANIAM [2006] WADC 136 (S)
CORAM: MAZZA DCJ
HEARD: 14-16 AUGUST 2006
DELIVERED : 1 SEPTEMBER 2006
SUPPLEMENTARY
DECISION :27 SEPTEMBER 2006
FILE NO/S: CIV 2730 of 2004
BETWEEN: NICVIRA NOMINEES PTY LTD (ACN 008 782 401)
Plaintiff
AND
SINNATHURAI SUBRAMANIAM
Defendant
Catchwords:
Costs - Discretion to order indemnity costs - Effect of contractual term - Failure to specifically plead prayer for indemnity costs
Legislation:
District Court of Western Australia Act s 64
Rules of the Supreme Court O 20 r 1(b), O 66 r 1
Supreme Court Act 1935 (WA) s 37
Result:
Costs order in favour of plaintiff on party/party basis
Representation:
Counsel:
Plaintiff: Mr P A Kyle
Defendant: Mr H Kremer
Solicitors:
Plaintiff: Kyle & Company
Defendant: H Kremer & Co
Case(s) referred to in judgment(s):
Gomba Holdings (Vic) Ltd v Minories Finance Ltd (No 2) [1993] Ch 171
Kyabram Property Investments Pty Ltd v Murray [2005] NSWCA 87
Rumball & Ors v Mortimore [2000] WASC 126
Case(s) also cited:
Nil
MAZZA DCJ: On 1 September 2006 I delivered my judgment as to the substantive dispute between the parties. This decision concerns the issue of costs following upon my judgment.
Upon judgment being entered in favour of the plaintiff, the plaintiff sought an order that the defendant pay the plaintiff's costs on an indemnity basis. The plaintiff's submission is that such an order is justified because it succeeded in its claim and it had an entitlement to indemnity costs based on cl 3.10(a)(iii) of the lease which is in the following terms:
"(a)The Lessee must pay or reimburse the Lessor on demand for:
(iii)the costs, charges and expenses of the Lessor in connection with the contemplated or actual enforcement or preservation or exercise of rights under this Lease, including, without limitation, all costs, charges and expenses of a notice under section 81 of the Property Law Act 1969;
including in each case, without limitation, legal costs and expenses on a full indemnity basis or solicitor and own client basis, whichever is the higher."
The defendant opposed the cost orders sought by the plaintiff and submitted that the plaintiff should be ordered to pay the defendant's costs up to the making of the order remitting the original Local Court proceedings to the District Court and thereafter, the defendant should pay the plaintiff's costs but on the appropriate Local Court scale. As the defendant was unsuccessful in his litigation with the plaintiff the costs orders sought by him are unusual. Mr Kremer, counsel for the defendant, sought to justify the making of the orders sought by him by reference to the history of the litigation.
As I observed in my earlier judgment this matter originated in two actions filed in what was then the Local Court of Western Australia at Perth. The first, Plaint 11139 of 2001 was filed on 23 May 2001 and was a claim by the plaintiff for $3,386.42 for arrears of rent and Merchants Association fees. The second summons, Plaint 16728 of 2003 was filed on 10 September 2003 by the plaintiff and sought damages in the sum of $13,103.16 by reason of the defendant's abandonment of the premises. In both matters the defendant filed a notice of intention to defend and, ultimately, a defence and counterclaim. I note that the defendant's counterclaim was particularised on 18 January 2002 in the sum of $59,525 and that amount was, in effect confirmed, in the defendant's counterclaim in Plaint 16728 of 2003 filed 13 August 2004. Various other interlocutory steps were taken and at one point the plaintiff sought summary judgment against the defendant on Plaint 16728 of 2003. That application was dismissed and the plaintiff was ordered to pay the defendant's costs.
Shortly after the defendant filed its defence and counterclaim in Summons No 16728 of 2003 the plaintiff filed an application to remit both Local Court plaints to the District Court. According to Deane DCJ's fiat, on 1 October 2004 orders in terms of the plaintiff's application were made by consent. As a result, both Local Court plaints were consolidated and remitted to this Court. The affidavit filed in support of the application to remit the plaints to this Court was sworn by Mr Perrin on behalf of the plaintiff. He deposed at par 20 "that the amounts in issue in these actions are in excess of the jurisdiction of the Local Court". At the time the jurisdiction of the Local Court was $50,000. Mr Perrin went on to depose in par 21 of the affidavit that it was in the interests of reducing costs and making the most efficient use of court time for the order to be made.
The defendant's counsel submitted before me that in effect the order made by Deane DCJ was of the plaintiff's making and was unnecessary. He submitted that the actions (including the defendant's counterclaim) could have and should have stayed in the Local Court. He further submitted that as a result of the plaintiff obtaining the order from Deane DCJ the plaintiff had wasted the costs expended by the defendant in the Local Court proceedings. Accordingly, he urged me to order the plaintiff to pay the defendant's costs in the Local Court and that the plaintiff's costs in this Court should be taxed on the Local Court scale.
The order to remit the Local Court proceedings to this Court was made, according to Deane DCJ's fiat, by consent. Even if it was not made by consent it was made without opposition from the defendant. In these circumstances the defendant cannot protest that the order was not of his making or unnecessary. I am not prepared to order the plaintiff to pay the defendant's costs in the Local Court.
It cannot be overlooked that the plaintiff has very substantially succeeded in its action against the defendant and that the defendant abandoned his counterclaim on the first day of trial. In accordance with the general principles relating to costs, the plaintiff, as the successful party, is entitled to a costs order in its favour. I can see no reason why a costs order should not be made in favour of the plaintiff in the proceedings before the Local Court and this Court. Further, as the defendant was content for the case to be heard in this Court, he cannot now, in my opinion, assert that costs should be assessed on the Local Court scale.
I am aware that costs orders against the plaintiff were made during the course of the proceedings in the Local Court. Out of an abundance of caution I wish to make it clear that those orders stand and the amounts due to the defendant should be set off against the amounts due to the plaintiff.
With respect to the plaintiff's claim for indemnity costs, that prayer is based wholly on the provisions of the lease to which I have already referred. The defendant opposes the making of an order for indemnity costs. The defendant's counsel submitted that where a successful party seeks costs on an indemnity basis pursuant to a contractual term that contractual term should be specifically pleaded. If it is not, and absent any other reason for ordering indemnity costs, the costs should be awarded on a party/party basis.
At no time in the Local Court and indeed in this Court has the plaintiff specifically pleaded that it was entitled to costs pursuant to cl 3.10(a)(iii) of the lease. The closest one gets to such a plea is in the plaintiff's amended statement of claim filed in this Court on 8 July 2005 which contains the concluding words, "and the plaintiff claims the sum of $32,330.57 and further legal costs and expenses plus interest thereon pursuant to the terms of the lease" (emphasis added). The plaintiff's counsel submitted that the words "pursuant to the terms of the lease" refer indirectly to cl 3.10(a)(iii).
The making of an order for costs is in the discretion of the court; Supreme Court Act s 37(1), District Court of Western Australia Act s 64 and O 66 r 1 of the Rules of the Supreme Court. In exercising this discretion I recognise that where there is a contractual right to costs the discretion should ordinarily be exercised so as to reflect that contractual right: Gomba Holdings (UK) Ltd v Minories Finance Ltd (No 2) [1993] Ch 171, Scott J at 194, followed by Owen J in Rumball & Ors v Mortimore [2000] WASC 126 at [15].
In support of his submission opposing the making of an indemnity costs order, the defendant's counsel referred me to Kyabram Property Investments Pty Ltd v Murray [2005] NSWCA 87. That case involved a mortgagee action but nothing turns on this distinction. The appellant maintained that it was entitled to its costs on an indemnity basis because of a provision in the mortgage between it and the respondent. Beazley JA, with whom Hodgson and Ipp JJA agreed, was of the view that where the pleadings do not indicate that the claim for costs was other than a conventional claim for costs that claim should be specifically pleaded in order to comply with the requirement of the Rules of the Supreme Court that the plaintiff shall plead any matter which, if not pleaded specifically, may take the defendant by surprise: see Beazley JA at [16]. I note that the Rules of the Supreme Court of this State, specifically O 20 r 1(b) contain a very similar provision. In my opinion, the plaintiff was required to put the defendant on notice that it would seek an indemnity costs order pursuant to the lease by specifically pleading such an intention. The plaintiff failed to do so at least up until the filing of the amended statement of claim. Accordingly, costs up to this point should be paid by the defendant on a party/party basis.
What of the costs incurred by the plaintiff after the filing of the amended statement of claim? Were the words "further legal costs and expenses … pursuant to the terms of the lease" sufficient to notify the defendant of a claim for indemnity costs. In my view, the wording is insufficient to properly put the defendant on notice of the intention to claim indemnity costs. In my opinion, a party in the position of the plaintiff in this case is obliged to state unambiguously that it claims indemnity costs from the defendants and state with precision the term or terms of the lease or other contract pursuant to which the order is sought.
In summary I propose to make the following order:
The defendant pay the plaintiff's costs of the proceedings on a party/party basis, up to 1 October 2004 on the relevant Local Court scale or scales for Division 2 non‑routine matters and thereafter on the scale applicable to District Court proceedings.
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