Schlecht v EPM Operations Pty Ltd (No 2)
[2025] QDC 156
•28 October 2025
DISTRICT COURT OF QUEENSLAND
CITATION:
Schlecht v EPM Operations Pty Ltd (No 2) [2025] QDC 156
PARTIES:
JOHN JOSEPH SCHLECHT & LOUELLA JANE SCHLECHT AS TRUSTEES OF THE SCHLECHT SUPER FUND
(Plaintiff)v EPM OPERATIONS PTY LTD ACN 638 154 613 AS TRUSTEE FOR THE EPM OPERATIONS
(First Defendant)
MATTHEW CHADWICK
(Second Defendant)
WENDY JANE CHADWICK
(Third Defendant)
FILE NO/S:
BD 3058/2022
DIVISION:
Civil
DELIVERED ON:
28 October 2025
DELIVERED AT:
Brisbane
HEARING DATE:
6-7, 10-14, 24-25 February 2025
JUDGE:
Barlow KC, DCJ
ORDERS:
1. Judgment for the plaintiffs against the first and second defendants in the sum of $44,072.82, including interest of $8,724.66.
2. Further judgment for the plaintiffs against the first defendant in the sum of $85,900.18, including interest of $17,252.42.
3. The plaintiffs’ claim against the third defendant be dismissed.
4. The first and second defendants pay the plaintiffs’ costs of the application filed on 7 August 2025.
5. The first and second defendants otherwise pay 50% of the plaintiffs’ costs of the proceeding, including any reserved costs.
6. The first defendant otherwise pay a further 20% of the plaintiffs’ costs of the proceeding, including any reserved costs.
7. There be no order as to the third defendant’s costs of the proceeding.
8. The sum of $8,736.00 be paid to the plaintiffs out of the funds held in trust by their solicitors, Spire Law, in part payment of the judgment against the first defendant and the balance of those funds and of the funds held in trust by the defendants’ solicitors, JHK Legal, be paid to the first defendant or at its direction.
CATCHWORDS:
PROCEDURE – CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS – COSTS – COSTS OF PROCEEDING IN WRONG COURT – BY REFERENCE TO AMOUNT OR VALUE CLAIMED OR RECOVERED – in a claim brought in the District Court, the plaintiff’s damages awarded fell within the Magistrates Court’s jurisdiction – whether the plaintiffs are entitled to any greater costs than they would have recovered had the action been brought in the Magistrates Court
PROCEDURE – CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS – COSTS – OFFERS OF COMPROMISE, PAYMENTS INTO COURT AND SETTLEMENTS – OFFER OF COMPROMISE OR OFFER TO SETTLE OR CONSENT TO JUDGMENT PURSUANT TO RULES – GENERALLY – the defendants made three offers to settle the proceeding – whether acceptance of the offers would been more beneficial to the plaintiffs than the ultimate judgments – whether the plaintiffs should pay the defendants’ costs since the date of any of the offers
LEGISLATION:
Civil Proceedings Act 2011, s 58
Uniform Civil Procedure Rules 1999, r 150(1)(h), (r), r 159(3), r 681, r 697CASES:
Batchelor v Burke (1981) 148 CLR 448, applied
Bulsey v State of Queensland [2016] QCA 158, applied
Hussey v Page [1973] Qd R 509, considered
Interchase Corporation Ltd v Grosvenor Hill (Queensland) Pty Ltd (No 3) [2003] 1 Qd R 26, applied
O’Doherty v McMahon [1971] VR 625, considered
Pinehurst Nominees Pty Ltd v Coeur de Lion Investments Pty Ltd [2015] QSC 122, cited
Principal Properties Pty Ltd v Broncos Leagues Club Ltd [2018] QCA 91, considered
Stanley v Phillips (1966) 115 CLR 470, appliedSweeney v Attwood Marshall [2002] QSC 294, considered
OTHER MATERIALS:
Dal Pont, Law of Costs (LexisNexis, 5th ed, 2021)
Quick on Costs (Thomson Reuters, Westlaw Precision Australia)COUNSEL:
A Morris KC & I Erskine for the plaintiffs
L Copley for the defendants
SOLICITORS:
Spire Law for the plaintiffs
JHK Legal for the defendants
Contents
Introduction
Interest
Costs of the proceeding
Scale of costs
Offers to settle
Two counsel
Mrs Chadwick’s costs
Differing orders between EPM and Mr Chadwick?
Costs thrown away – adjournment of trial
Application to re-open trial
Appropriate orders for costs
Trust monies
Introduction
On 19 August 2025, I delivered reasons for judgment in this proceeding,[1] but I adjourned the proceeding without giving judgment, to enable the parties to provide submissions on interest, costs and how moneys held in trust ought be dealt with. I have since received submissions from both parties on those topics.
[1]Schlecht v EPM Operations Pty Ltd [2015] QDC 105 (RJ).
In my reasons for judgment, I determined that the plaintiff should be awarded damages in the sum of $103,995.92 against the first defendant (EPM) and $35,348.16 against the second defendant (Mr Chadwick), while EPM’s claim against the third defendant (Mrs Chadwick) should be dismissed. The amounts referred to comprised (as against EPM) a sum of $68,647.76 for unpaid Landlord’s Works and $35,348.16 for breaches of the lease. Mr Chadwick is also liable for the latter sum.
These are my reasons for the final judgment on all issues.
Interest
Mr and Mrs Schlecht contend that they should be awarded damages at the rate of 2% per month (or part month) on the Landlord’s Works component. That rate derives from clause 2.4 of the lease, which provided:
If the Tenant is late in paying the Landlord any money, the Landlord may charge the Tenant late payment rent calculated on any late payments at the rate of two percent (2%) per month or any part of a month. All late payment rent charged must be paid on demand.
Mr and Mrs Schlecht contend that, as the amount due by EPM for the Landlord’s Works was a debt due under the lease, clause 2.4 applies and the court should order interest in accordance with that entitlement. Mr and Mrs Schlecht issued an invoice to EPM for its share of the Landlord’s Works on 30 May 2022 (TB214) and therefore interest should be awarded from that date to judgment.
Mr and Mrs Schlecht also submit that they should be awarded interest at the contractual rate on the damages for breach of the lease, apparently contending that that sum is also a debt due under the lease. That interest should be awarded for the period from the assignment of the lease (3 August 2022) to judgment or from the commencement of the proceeding (14 December 2022) to judgment. A third alternative commencement date they propose is from the date of expiry of the lease (31 March 2025) to judgment.
Alternatively, Mr and Mrs Schlecht submit that they should be awarded interest on the respective sums pursuant to s 58 of the Civil Proceedings Act 2011, calculated in accordance with the interest calculator on the Queensland Courts website, for one of those three periods.
The defendants contend that Mr and Mrs Schlecht did not specifically plead any claim for interest (including the rate of interest and method of calculation), as required under UCPR r 150(1)(h) and r 159(3). They should not be awarded any interest on any part of the principal judgment sum.
The defendants alternatively contend that Mr and Mrs Schlecht made no claim, in their claim or statement of claim, for contractual interest and it should not be awarded. Also, I found that the agreement about the Landlord’s Works was not under the lease but a separate agreement: RJ [440]. Therefore the contractual clause does not apply to the sum awarded for Landlord’s Works.
As for the claims for breaches of the lease, it is not clear to me that they are payable under the lease. But in any event, both as to those claims and as to the claim for interest on the Landlord’s Works, Mr and Mrs Schlecht did not claim, nor even mention, the interest clause under the lease as part of their claim. They sought only interest pursuant to the Civil Proceedings Act. It is within my discretion under s 58 to have regard to any contractual rate of interest in exercising my discretion as to the rate and period of any interest I award. However, where the contractual clause has not been the subject of the claim, I do not consider it appropriate to take it into account. Therefore I shall not award such interest on either sum.
The defendants also contend that the court should not order any interest because there is no evidence that Mr and Mrs Schlecht have actually paid any amounts in the respect of the Landlord’s Works (referring to RJ[131]), nor that they expended any money for the make good works. That, however, was part of their defence to the claim which I dismissed: see RJ[133] and [407]-[414]. The plaintiffs have been kept out of the amounts owed for both the Landlord’s Works and the breaches of the lease: as to the first, since the due date after the invoice was served on the defendants; as to the latter, from at least the date of assignment of the lease, by when EPM ought to have remedied its breaches. One of the purposes of an award of interest is to compensate the plaintiff for being kept out of the money represented by the judgment sum in the period between accrual of the cause of action and judgment.[2]
[2]Batchelor v Burke (1981) 148 CLR 448, per Gibbs CJ at 455; Interchase Corporation Ltd v Grosvenor Hill (Queensland) Pty Ltd (No 3) [2003] 1 Qd R 26, [59].
While the plaintiffs did not comply with rules 150 and 159 and made no mention of interest in their principal submissions, that is not unusual. They did refer to interest as part of the relief sought in their claim and statement of claim. The defendants did not seek any particulars of the period or rate claimed, nor seek to have that part of the relief struck out. That too is not unusual. I do not consider that it precludes or makes inappropriate an order for the payment of pre-judgment interest.
I shall order that EPM pay interest on the Landlord’s Works component from the due date for payment which, according to the invoice, was “Net 30 after OEM.” There was no evidence as to the meaning of that term. I shall construe it as meaning the invoice was payable 30 days after its issue. Thus the payment was due on 29 June 2022. EPM should pay interest, calculated in accordance with Practice Direction 6 of 2013 and the online calculator, from 30 June 2022 to the date of this judgment.
I shall also order that EPM and Mr Chadwick pay interest on the amount ordered for breach of the lease from the date of assignment of the lease (3 August 2022) to the date of this judgment. I consider this start date to be appropriate as, at the least, the breaches should have been remedied by then.
The results are that both EPM and Mr Chadwick are liable for the damages for make good works, including interest of $8,724.66 and EPM is also liable for the Landlord’s Works debt, including interest in the sum of $17,252.42.
Costs of the proceeding
Mr and Mrs Schlecht claim that EPM should pay their costs of the proceeding on the standard basis, in accordance with the usual principle that costs follow the event unless the court orders otherwise: r 681. Mr Chadwick should pay their costs of the proceeding limited to the breach of lease issues.
The defendants submit that the plaintiffs have had limited success, as:
(a)they originally sought a total of $551,580;
(b)they opened their case as claiming $369,084;
(c)in their final submissions, they claimed only $276,461; and
(d)ultimately they succeeded in recovering only $103,995 – less than 19% of their original claim.
The defendants’ counsel raised a number of issues in seeking to limit the costs payable to the plaintiffs.
Scale of costs
The amount that EPM has recovered falls well within the jurisdiction of the Magistrates Court. Rule 697 requires that, in such a case, costs be assessed as if the proceeding had been in that court unless this court orders otherwise. The defendants submit that any costs orders in favour of the plaintiffs should be on that basis: on the Magistrates Court scale of costs. They submit that there is no reason to order otherwise as the plaintiffs were represented by highly experienced counsel and solicitors and none of the claims was outside the jurisdiction of the Magistrates Court.
The plaintiffs’ claim was well outside the Magistrates Courts’ jurisdiction. It is only the ultimate judgment amount that is within that jurisdiction. The plaintiffs submit that they based their claim for damages for breaches of the lease on the report of an expert whom they had briefed and who ultimately gave evidence. A report by the defendants’ expert also responded to the plaintiffs’ claims for individual breaches based on that report. The defendants did not object to any part of that report until two days before trial. Many of the objections succeeded at trial. Had they taken those objections in a timely manner, the plaintiffs may well have called other expert evidence and succeeded in recovering a sum greater than the limit of the Magistrates Court’s jurisdiction. By leaving their objections until so late, the defendants were clearly intending to take the plaintiffs by surprise and to prejudice their ability to call other evidence to support the conclusions in that report.
The plaintiffs submit that, even though there is no express time for giving notice of objections to evidence, there is a broad obligation on parties’ solicitors to give reasonable notice of objections to avoid unfairly surprising their opponents with late objections that could prejudice the other parties’ ability to prepare their evidence and to present their case.
Unfortunately, I have not been assisted by the citation of principles supported by cases concerning the exercise of the discretion under r 697. There have, not surprisingly, been numerous decisions considering this and similar provisions in other jurisdictions in Australia. It serves to summarise the principles and their application.
The author of Law of Costs,[3] Professor Dal Pont, helpfully identifies -
[3]Dal Pont, Law of Costs (LexisNexis, 5th ed, 2021), [12.15] (citations excluded).
several factors relevant to determining whether to exercise the discretion to deny or curb the costs sanction, including
·the amount claimed, and the reasons for this;
·the amount actually recovered, and the reasons for this;
·the difficulty or otherwise of assessing the likely damages awarded;
·the complexity or otherwise of the case, factually and/or legally;
·the nature of the proceedings in question, and how this impacts, if at all, upon the need to proceed in the higher or specialist court;
·the conduct and attitude of the litigating parties; and
·the importance of the legal principle involved in the case as a matter of precedent.
As to the third and fourth of these factors, the author goes on:[4]
That the litigation raises issues of difficulty does not by itself justify bringing proceedings in a higher court, and thus a costs order commensurate with that court. After all, difficulty surrounds a great deal of law, and lower and intermediate courts constantly deal with legal difficulties not greatly different from those superior court judges face.
[4]Dal Pont, [12.17].
The rationale for this and equivalent rules was explained long ago (although considering a somewhat differently worded rule) in this manner:[5]
The object of the rule is to protect the defendant against the unnecessary expense of higher costs in a court which is not appropriate for the case. The plaintiff, however, is left free to select his court. If he fails, no protection of the defendant is necessary because he receives costs applicable in the court to which he is taken. If he succeeds, the defendant is liable for costs appropriate to the court to which he is taken, provided, however, that the plaintiff obtains more than half of the amount which the lower court has jurisdiction to award. If the plaintiff recovers less than that amount the defendant is liable only for costs applicable in the lower court, in the absence of a special order.
[5]O’Doherty v McMahon [1971] VR 625, 628 (Menhenitt J, delivering the judgment of the Full Court).
It will be noted that, in the rule being considered in that case, a successful plaintiff was entitled to costs on a lower court’s jurisdiction only if the plaintiff recovered less than half of the lower court’s jurisdiction. That proviso is not a feature of the current Queensland rule: if it were, then the fact that the judgment exceeds half of the Magistrates Court’s jurisdiction would mean the rule did not apply. However, in my view the extent to which a judgment is below the maximum jurisdiction of the lower court is a relevant factor to the exercise of the discretion.
In Hussey v Page,[6] in considering a similar rule Williams J accepted a submission by counsel that a plaintiff should elect the court in which to commence a proceeding based on a proper evaluation of the plaintiff’s chances on the questions of liability and damages. What is required from a plaintiff is an honesty of approach. In a later case,[7] Ambrose J in effect agreed with these propositions, although adding that, whatever may be the explanation for the sum which the plaintiff received judgment, the recovered judgment in the case before his Honour could have been recovered in the Magistrates Court. His Honour ordered costs on the appropriate Magistrates Court scale.
[6][1973] Qd R 509, 513-514, 515.
[7]Sweeney v Attwood Marshall [2002] QSC 294, [11].
In Principal Properties Pty Ltd v Broncos Leagues Club Ltd,[8] the appellant obtained judgment of $250,000 in a proceeding commenced in the Supreme Court. McMurdo JA noted that the appellant was awarded only one third of the District Court’s jurisdiction. His Honour said:
There was no single correct figure which represented the appellant's loss, but on the findings which were ultimately made, the appellant ought not to have expected to recover a loss of more than that monetary limit. In my view, r 697 should be applied and the appellant should have its costs of its proceeding in the Trial Division, but assessed as if the proceeding had been in the District Court.
[8][2018] QCA 91, [3]-[6] (McMurdo JA, with whom Philippides JA and Boddice J agreed).
Good reason will need to be shown by a plaintiff to justify obtaining costs on a higher scale that that of the lowest court with jurisdiction to consider a claim in the amount sought or a judgment in the amount recovered. Generally, in order to recover costs on a higher scale, the case should involve some unusual feature or complexity in the evidence or the assessment of damages.[9]
[9]Bulsey v State of Queensland [2016] QCA 158, [59].
Here, the appellants recovered a little over two thirds of the Magistrates Court’s jurisdiction. However, on commencement and through most, if not all, of the proceeding, they might reasonably have expected, on a proper evaluation of their prospects on the questions of liability and damages, to have recovered more than $150,000. Their reasonable view of the appropriateness of proceeding in this court would also be affected by the absence, until very late, of any objection to their expert’s report, and that in the context that the proceeding was on this court’s Commercial List. Furthermore, the issues raised, the evidence and addresses took a considerable amount of the court’s time – a total of nine days of trial.
In my view, although the proceeding was not overly complicated, it was reasonable for the plaintiffs to have conducted it in this court and, having succeeded (even though for a sum within the jurisdiction of the Magistrates Court), their costs should not be restricted to a Magistrates Court scale.
Offers to settle
The parties have informed the court that the defendants made three offers to settle the proceeding, all of which were inclusive of interest and costs:
(a)on 25 November 2024 - $125,000;
(b)on 29 January 2025 - $175,000; and
(c)on 20 February 2025 - $250,000.
The defendants submit that each of those offers, if accepted, would have resulted in the plaintiff being better off than they are under the judgment against them, taking into account interest and costs on the Magistrates Court scale. The plaintiffs’ rejection of them, but particularly of the second and third offers, was unreasonable given the stage at which the proceeding had reached. This applies especially to the third offer, which was made after a proper evaluation of the evidence given to that time would have indicated that the plaintiffs had not proved substantial amounts of their claim. Therefore, it would be appropriate for the court to order that the defendants pay the plaintiffs’ costs up to the date of one or other offer and thereafter the plaintiffs pay the defendants’ costs on the indemnity basis, as provided in r 361(2).
By the time each of those offers was made, this proceeding had been on foot for two years or more and clearly the parties had expended considerable sums in costs. On an application by the defendants, on 23 October 2024 the trial was adjourned from 28 October 2024 to commence on 6 February 2025, so the second offer was made a week or so before the trial commenced. The third offer was made after the plaintiffs had closed their case and Mr Chadwick was under cross-examination.
The defendants submit that the second and third offers, in particular, each allowed substantial amounts for interest and costs, taking into account the ultimate results in the proceeding. Had the plaintiffs accepted either offer, they would have been better off than they will be now, even with interest and costs.
Interest on the principal award against EPM is about $26,000 and, on the principal award against Mr Chadwick, is about $8,700, resulting in judgment debts respectively of about $130,000 and $44,000. That allows for costs of $45,000 in the offer of $175,000 and $120,000 in the offer of $250,000.
The defendants’ problem with each of these offers is that it was for a lump sum, which did not distinguish between the amount offered in respect of the claim and any amounts for interest or costs. That makes it very difficult to demonstrate that each offer was more favourable to the plaintiffs than the ultimate result and that it was unreasonable for the plaintiffs not to accept the offer. Additionally, there is no evidence before me of a reasonable estimate of such costs, although it is doubtful that sufficient was allowed for costs of a District Court proceeding to the date of each offer.
I am not satisfied that acceptance of the offers would been more beneficial to the plaintiffs than the ultimate judgment in their favour. Therefore, I do not consider that the offers should affect the usual rule that costs follow the event.
Two counsel
The defendants submit to the effect that the court should direct that the plaintiffs not be entitled to the costs of being represented by two counsel. They submit that the issues were not overly complex in a legal or factual sense, there was not a large number of documents to manage and the cross-examination of the defendants’ witnesses (other than as to credit) was not lengthy.
The plaintiffs submit that it was appropriate for two counsel to represent them at trial, for reasons that I need not traverse. Whether the plaintiffs should recover costs for two counsel is a matter for a costs assessor, rather than the court, to determine in the first instance.[10] Matters relevant to the issue would be well known to such an assessor.[11] The court might only consider the question in reviewing a decision of a costs assessor.
[10]Quick on Costs (Thomson Reuters, Westlaw Precision Australia), [280.140].
[11]Stanley v Phillips (1966) 115 CLR 470, 479-480; Pinehurst Nominees Pty Ltd v Coeur de Lion Investments Pty Ltd [2015] QSC 122, [16]-[21].
Therefore I decline to make an order or finding concerning the engagement of two counsel.
Mrs Chadwick’s costs
Mr and Mrs Schlecht submit that there should be no order as to Mrs Chadwick’s costs, as her defence was conducted entirely coincidentally with those of the other defendants; there was substantial factual and legal overlap with issues on which the plaintiffs succeeded; and her attendance and participation were, in any event, as a director and in defence of EPM and in defence of the claim against Mr Chadwick. It is unlikely in the extreme that she has incurred any costs separately from those incurred by EPM and Mr Chadwick.
Alternatively, the plaintiffs submit, any order for costs in favour of Mrs Chadwick should be confined to costs exclusively and distinctly referable to the discrete claim against her.
The defendants submit that it is inevitable that the plaintiffs be ordered to pay Mrs Chadwick’s costs of the claim against her. The asserted inevitability appears to arise from the usual rule that costs follow the event. The claim against her was separate to the claims against EPM. The order should be that the plaintiffs pay her costs referable to the claims against her.
While the plaintiffs failed in their claim against Mrs Chadwick, it is clear that she would have attended and participated in the trial whether or not she was joined as a defendant. The claim against her was the same as the claim against Mr Chadwick, as alleged guarantor of EPM’s obligations. It failed because I found that she was not in fact an “Existing Guarantor” and therefore only guaranteed EPM’s future obligations after she signed a guarantee as part of the assignment of the lease to the new tenant. Notably, that was not a basis on which she defended the claim.
No additional or separate facts or law were raised, in the plaintiffs’ claim against Mrs Chadwick or in her defence, to those raised in the claims against EPM and Mr Chadwick. It would be close to impossible to identify any separate costs incurred by her to those of the other defendants.
In the circumstances, I do not consider it appropriate to make any costs order in favour of Mrs Chadwick. I shall expressly order that there be no order as to her costs.
Differing orders between EPM and Mr Chadwick?
The plaintiffs submit that costs should follow the event of the plaintiffs having achieved substantial success against EPM and Mr Chadwick. They concede, however, that there should be some differentiation between them, as Mr Chadwick was found not to be liable for the cost of the Landlord’s Works. They submit that EPM should pay their costs of the proceeding and Mr Chadwick should pay their costs referable to the issues other than the Landlord’s Works.
The defendants submit that the plaintiffs have had limited success. That limited success should be reflected in the orders for costs. As I understood counsel’s submissions, that description of the plaintiffs’ limited success applies particularly to the breach of lease (or make good) claims, in which they sought a substantially greater sum than they will recover under the judgment.
A substantial part of the trial concerned the make good part of the plaintiffs’ claims, but a lot of the evidence at trial had relevance to both the Landlord’s Works claim and the make good claims. It is unnecessary for me to review the daily progress of the trial to produce an estimate of the time taken by each claim. The plaintiffs succeeded on the Landlord’s Works claim against EPM, even though I reduced it by the amount of GST claimed by them. They succeeded on five of the six claims concerning alterations to the premises, although recovering substantially lower amounts than they had claimed for three of those items. They succeeded on 12 of the 20 claims for breach of the maintenance obligations, although again for substantially less than the amounts they claimed for several of those items.
The defendants’ counsel submitted that the plaintiffs will recover only 8% of the total amount for the make good items that they had originally claimed. That is correct, but the total amount recovered constitutes about 37% of the amount ultimately sought at the conclusion of the trial. While counsel did not expressly say what effect those facts should have on an award of costs, they are relevant to the exercise of my discretion.
An important factor, in my view, is that, had a timely objection to the plaintiffs’ expert’s report been made, they may well have called additional evidence and have succeeded in proving additional make good items, bring judgment up to more than the Magistrates Court’s jurisdiction.
Taking a broad brush approach, to reflect the respective success of the parties I consider it appropriate to order that EPM pay 70% of the plaintiffs’ costs of the proceeding and that Mr Chadwick pay half their costs of the proceeding. Of course, under these orders, the plaintiffs cannot recover more than a total of 70% of their costs.
Costs thrown away – adjournment of trial
On 28 October 2024 I adjourned the trial on the application of the defendants and I ordered that the defendants pay the plaintiffs’ costs thrown away by reason of the adjournment.
The defendants now submit that I should vary that order to limit the plaintiffs’ costs to the Magistrates Court scale.
As I have declined to limit the plaintiffs’ costs of the proceeding to the Magistrates Court scale, it is not appropriate to vary that order in the manner propounded.
Application to re-open trial
In early August 2025, shortly before I was due to deliver my reasons for judgment, the defendants indicated that they wished to apply to re-open the trial and to adduce further evidence about some of the items claimed by the plaintiffs. In essence, the defendants wanted to attempt to demonstrate that the new tenant had remedied some of the breaches at its own expense, thus reducing the plaintiffs’ loss. I gave the defendants leave to make such an application, which was filed on 7 August 2025 with a supporting affidavit. On 18 August 2025, the defendants withdrew their application.
The defendants submit that there should be no order as to the costs of their application, as the plaintiffs did not respond to the defendants’ solicitors’ proposal to apply to re-open the trial, I found that the plaintiffs would be given a windfall if I were to order damages for items that had been rectified and a number of the items about which further evidence would have been given were not allowed by me or the amounts allowed were minimal.
The defendants made an application that they abandoned shortly afterwards. There is no doubt that the plaintiffs would have incurred costs in considering the application and preparing for its hearing.
In my view there is no reason why the plaintiffs ought not have their costs of the application. However, that liability should not extend to Mrs Chadwick, given that she was ultimately successful in her defence.
Appropriate orders for costs
In summary, the orders for costs will be that:
(a)EPM and Mr Chadwick pay 50% of the plaintiffs’ costs of the proceeding;
(b)EPM pay a further 20% of the plaintiffs’ costs of the proceeding;
(c)EPM and Mr Chadwick pay the plaintiffs’ costs of the defendants’ application filed on 7 August 2025; and
(d)there be no order as to Mrs Chadwick’s costs of the proceeding.
Trust monies
As part of the arrangements for the assignment of the lease, Mr and Mrs Schlecht, EPM and their respective solicitors entered into a deed of undertaking (TB325).
In its recitals, the deed recorded to the effect that the lessor had issued certain identified notices to remedy breach of covenant to the assignor (EPM), which EPM disputed. In consideration of the withdrawal of the notices to remedy breach of covenant (which I construe to refer to the identified notices), the lessor and the assignor had agreed to deposit monies into the trust accounts of their solicitors “as security for payment of the amounts claimed by the Lessor for the alleged breaches of covenant.”
Under the operative clauses of the deed, Mr and Mrs Schlecht paid $55,000 (which they had held as a security bond under the lease) into the trust account of their solicitors and EPM paid $95,000 into the trust account of their solicitors. The solicitors undertook to hold the monies in their trust accounts -
pending receipt of a direction in writing given by or on behalf of the Lessor and the Assignee [sic] or alternatively, an order of a court of competent jurisdiction directing JHK Legal and Barclay Beirne to disburse the monies held by them in trust.
The first thing to be said is that the reference to the Assignee in that undertaking is clearly in error. It should have been to the Assignor and I shall construe it in that manner.
Since the trial, the plaintiffs’ solicitors changed from Barclay Beirne to Spire Law. I am told that the parties to the deed of undertaking varied the deed whereby assumed the undertakings given by Barclay Beirne. I assume that the funds held in trust by Barclay Beirne are now held in trust by Spire Law.
The plaintiffs submit that I should direct the respective solicitors to pay to the plaintiffs the amount of the judgment in their favour, with the balance to be held by Spire Law pending assessment of costs.
The defendants submit that the undertakings were given in consideration for the plaintiffs withdrawing the three notices to remedy breach issued on 27 and 28 July 2022 and referred to in the deed (only two of which are in evidence). One of those in evidence (TB303) related to the costs of the Landlord’s Works, asserting that the costs were payable under the lease. I have found that the agreement to pay those costs and EPM’s liability for them was not made under the lease, but under a separate agreement. Therefore, the defendants submit, the plaintiffs did not obtain a resolution in their favour of the matters the subject of that notice and there is no basis for the plaintiffs to be paid any of the funds held in trust for this part of the judgment.
The defendants also submit that the other notice in evidence (TB305) set out nine of the items for which the plaintiffs made claims in this proceeding, in some of which they have failed and in others of which they recovered less than the amount claimed. They submit that the plaintiffs should only be entitled to recover from the trust funds the amounts held by me to be due as damages for breach of the items referred to in that notice. Counsel for the defendants calculated that sum to be $8,736.
Alternatively, counsel submitted, the only amount that should be paid to the plaintiffs from the trust funds is the sum of $35,348.16, comprising the damages I have awarded for the make good items. The balance should be returned to the defendants.
As I have recorded above, the deed was expressly recorded as being in consideration of the withdrawal of the particular notices to remedy breach and the funds were to be held as security for payment of the amounts claimed in those notices. The funds are not held as security for any other liability that EPM may have had to the plaintiffs. I agree with the defendants’ submission that the funds are not security for items not referred to in the notices, nor for any liability other than under the lease.
The result is that I agree with the defendants that the only liability for which the funds are held in trust is that arising from the breaches that I have held occurred in respect of the items listed in the notices. As the notice concerning the Landlord’s Works claimed that EPM’s failure to pay was a breach of the lease, which I have found it not to be, the trust funds are not held on account of that claim. The amount for which the funds are security is therefore only the amount calculated by the defendants’ counsel. The deed expressly provides that the solicitors need not invest the sums held in trust and did not provide that interest be paid out of the trust funds on any of the amounts claimed. There is therefore no basis on which to order that any interest be paid out of the trust fund.
I shall therefore order that $8,736 be paid to the plaintiffs out of the funds held in trust by their solicitors and the balance of those funds and of the funds held by the defendants’ solicitors be paid to EPM or at its direction.
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