Shi v Zhong

[2021] NSWDC 419

District Court

New South Wales

Medium Neutral Citation:

Shi v Zhong [2021] NSWDC 419

Hearing dates:

11 August 2021

Date of orders:

17 August 2021

Decision date:

17 August 2021

Jurisdiction:

Civil

Before:

Gibson DCJ

Decision:

Order:

(1)   Judgment for the plaintiff for $224,247.78 with liberty to apply in relation to the calculation of interest on the judgment sum.

(2) Defendant pay plaintiff’s costs, with liberty to apply in relation to the calculation of the sum sought by way of gross sum costs order pursuant to s 98 of the Civil Procedure Act 2005 (NSW).

(3)   Exhibits retained until further order.

Catchwords:

CONTRACT – guarantee – no issue of principle

Legislation Cited:

Civil Procedure Act2005 (NSW) s 98

Conveyancing Act 1919 (NSW) ss 23C and 54A

Cases Cited:

Nash v Council of the New South Wales Bar Association [2013] NSWCA 466

Watson v Foxman (1995) 49 NSWLR 315

Category:

Principal judgment

Parties:

Plaintiff:
Mr Yongcheng Shi

Defendant:
Mr Chen Zhong

Representation:

Solicitors:
Plaintiff:
Juris Chamber Lawyers

File Number(s):

2020/00253476

Publication restriction:

nil

Judgment

The plaintiff’s claim

1. The plaintiff is the owner of leased premises in Wollongong. The defendant is a director of a company which, in or about October 2017, entered into a written lease for annual rent of $121,000 payable by monthly instalments of $10,083.33 per month. The defendant was the guarantor for the lease.

2. The lessee began failing to meet its rental commitments in or about August 2018. On 16 August 2018, the defendant and another director of the company met the plaintiff and his mother at a shop in Hurstville New South Wales, where they informed the plaintiff that they would stop running their business and terminate the lease. In or about mid-September 2018, the lessee ceased to trade. The shop was closed and the lessee left the premises without paying rent and outgoings.

3. The plaintiff, by statement of claim filed on 31 August 2020, brings proceedings against the defendant pursuant to the guarantee, for recovery for arrears of rent, outgoings costs and damages and loss of rent and legal expenses.

4. The defendant, in a defence filed on 16 October 2020, did not deny signing the guarantee but made the following assertions:

1. He sought to deny the guarantee on the basis that it “did not comply with legal procedures” (paragraph 2(a));

2. He stated that his lack of English meant that he did not know or understand “the guarantor issue” without “full explanation and assistance” (paragraph 2(c));

3. He complained that the rent was too high (paragraph 2(e)) and was fraudulent;

4. He denied any breach of the lease (paragraph 3);

5. He asserted that the lessor, at the meeting in Hurstville, had orally agreed to terminate the business on 8 September and not to hold the defendant liable for any loss, as well as giving up all rights under the lease and at common law to claim any damages or loss. In other words, the termination of the lease was at the will of both parties and there were no issues in dispute and thus no breach (paragraph 3(a)). This was the main defence at the hearing;

6. He asserted that the plaintiff had agreed to return the bank guarantee of $30,250 but had failed to do so and additionally had not accounted to him for $100,000 for the chattels in the store; and

7. He stated that the plaintiff had failed to mitigate his loss and damage.

The issues in dispute

5. The main factual issue in dispute was what occurred during a meeting on 16 August 2018 between the plaintiff and his mother (for the lessor), and the defendant and his fellow director, Mr Feng (for the lessee). According to the plaintiff, the defendant said that he wanted to stop running the business and terminate the lease; the parties were unable to agree on terms and, after further rental default, the plaintiff’s solicitors served a Notice of Default on 17 September 2018. According to the defendant, the plaintiff’s mother told him that the lessee could simply leave the shop premises and that no claim for rent or other compensation would be made.

The evidence in the proceedings

6. The plaintiff relied upon the following affidavits:

1. Affidavit of the plaintiff affirmed 4 February 2021.

2. Affidavit of Qingxiu Lin affirmed 4 February 2021.

3. Affidavit of Yuhong Shi affirmed 4 February 2021.

4. Affidavit of Qingxiu Lin affirmed 21 April 2021.

7. The plaintiff and his witnesses, who all gave evidence in Chinese, were cross-examined by the defendant. The plaintiff and his mother (Ms Lin) gave evidence by AVL from Fujian Province in China. Ms Yuhong Shi gave evidence from her office in Sydney.

8. The defendant relied upon his own affidavit of 5 April 2021 and an affidavit of Junhao Feng, affirmed on 31 March 2021.

9. Mr Feng was not available for cross-examination. Mr Chen, the solicitor for the plaintiff, challenged the tender of his evidence, both on this basis and because his affidavit was, in most of its contents, literally a “cut and paste” of the defendant’s affidavit. Mr Zhong said that Mr Feng was not available because of connection problems from China, and that the apparent “cut and paste” nature of his evidence arose because he had seen and heard the same events described by Mr Zhong in his own evidence.

10. I accept that there are difficulties in arranging for the cross-examination of witnesses in China, and consider this to be an adequate explanation, particularly in light of the ongoing difficulties of international travel during the pandemic.

11. “Cut and paste” affidavits are, however, a more telling basis for complaint. Fortunately, these are a rarity in modern litigation, but the damage that such evidence does to the credit of the witnesses concerned may be seen in Nash v Council of the New South Wales Bar Association [2013] NSWCA 466 at [31] - [32].

12. I do not accept Mr Zhong’s explanation of the identical nature of the contents as arising from the similarity of their shared recollection of events. While I do not propose to exclude the affidavit on that basis, the value of Mr Feng’s evidence is greatly diminished by reason of the generous degree of “cut and paste” in his affidavit.

13. Ultimately, however, little turns on the credit of the witnesses, as the parties’ transactions are recorded in correspondence between their respective legal representatives and in text messages. These documents paint a clear picture of what in fact occurred at the meeting in Hurstville on 16 August 2018. That is an important factor, given the defendant’s inability to recall many of the other events of this time. In Watson v Foxman (1995) 49 NSWLR 315 McLelland CJ in Eq., describing the need for certainty where words are asserted to be spoken (in the context of misleading or deceptive conduct), said at [318]-[319]:

“In many cases (but not all) the question whether spoken words were misleading may depend upon what, if examined at the time, may have been seen to be relatively subtle nuances flowing from the use of one word, phrase or grammatical construction rather than another, or the presence or absence of some qualifying word or phrase, or condition. Furthermore, human memory of what was said in a conversation is fallible for a variety of reasons, and ordinarily the degree of fallibility increases with the passage of time, particularly where disputes or litigation intervene, and the processes of memory are overlaid, often subconsciously, by perceptions or self-interest as well as conscious consideration of what should have been said or could have been said. All too often what is actually remembered is little more than an impression from which plausible details are then, again often subconsciously, constructed. All this is a matter of ordinary human experience.”

14. In circumstances where the defendant’s own recollection of many of the events is uncertain, the consistency of these documents demonstrates what in fact occurred.

The documentary evidence

15. The documents recording the parties’ discussions fall into the following categories:

1. Bank documents evidencing the lessee, with the defendant’s knowledge, continuing to attempt to make payments after 16 August 2018.

2. Text messages between the defendant and the plaintiff’s mother, Ms Lin recording the discussion of these payments.

3. Correspondence between the solicitors for the plaintiff and the lessee (and the defendant) when the lessee defaulted. This includes correspondence about the deposit of $30,250.

Bank payments

16. The first point to note is that, contrary to the claim in the defence that the parties had arrived an agreement where the plaintiff would give up all his rights under “the lease and common law”, the lessee in fact made three further payments very shortly after the meeting, as is noted in paragraph 25 of the plaintiff’s affidavit. These were:

a.   On 8 August 2018. $2,000, with particulars as “boho".

b.   On 20 August 2018, $2,500, with particulars as "boho".

c.   On 28 August 2018, $5,583, with particulars as “Feng J".

17. In cross-examination, the defendant was asked why the company had made these payments if there was an agreement not to hold the defendant or the company liable for any loss. The defendant said that he was “just being kind” and that he did not want the company to owe so much money to the plaintiff. He also sought to argue that these were for payments for the previous month. However, this is contrary to paragraph 2(b) of the defence, which states that, as the plaintiff had orally agreed with the termination from the date of 8 September.

18. The circumstances of the continued bank payments confirm that the parties had not entered into an agreement that the lessee could just walk away from its liabilities.

Continued requests for rent from the plaintiff

19. Contrary to the defendant’s claim that everything had been settled at the 16 August 2018 meeting, on 8 September 2018 the plaintiff sent an invoice for the September 2018 rent:

“Sat, 8 Sep 2018 at 11:59 am, yongcheng shi [redacted]

Dear BOHO International Pty Ltd (ACN: 621 673 7381.

We've attached invoice 477944 for $10,083.33. Payment is due by 09/09/2018.

Please get in touch if you've got any questions.

Regards,

YONGCHENG SHI [redacted]”

20. There was a telephone call between the plaintiff and the lessee. Following default by the lessee, the plaintiff sent the following message to the lessee on 10 September 2018:

“Forwarded message   

From: yongcheng shi [redacted]

Date: Mon, 10 Sep 2018 at 5:35 pm

Subject: Re: Tax Invoice for September To: [redacted]

Dear BOHO international Pty Ltd {ACN: 621 673 738),

As we discussed over the mobile phone, if the rent for September ($10,083.33) could not be paid on Friday (14 September), I shall put the matter in the hands of my solicitor.

Regards,

YONGCHENG SHI

21. These messages, like the bank payments, confirm that there was no agreement entered into on 16 August 2021.

22. The defendant submits that the plaintiff did enter into the agreement and that this conduct was a breach of that agreement. However, if there were such an agreement, that would have been the first matter that the solicitors for the lessee would have raised in their correspondence with the plaintiff’s solicitors. As that correspondence shows, no such claim was ever raised.

Correspondence between the solicitors

23. It is necessary to set out the correspondence between the solicitors in full to understand the basis upon which the termination of the lease was challenged. The plaintiff consulted Juris Chamber Lawyers, instructing them to send a reply to the termination of the lease set out in the letter from the solicitors for the defendant, KH legal, on 17 September 2018:

“KH Legal

Dear Sir or Madam,

Re: Yongcheng Shi lease to BOHO International Pty Ltd (ACN 621 673 738) Premise: [redacted] Title: 3/SP93922

We act for the Lessor in the above matter.

Please find enclosed, by way of service. Notice of Default pursuant to clause 10(a) of the registered lease AM912143P.

Please kindly confirm whether you still act for the Lessee in the above matter or not.

We look forward to hearing from you.

Yours faithfully.

Juris Chamber Lawyers Jason Chen | Solicitor

Notice of Default

To:

KH Legal (“Lessee’s solicitor”) And

BOHO International Pty Ltd (ACN 621 673 738) (“Lessee”)

And

Chen Zhong [redacted] (“Guarantor”) And

Yuntao Shi of [redacted] (“Guarantor”) And

Weibo Wang of [redacted] (“Guarantor”) And

Junhao Feng of [redacted] (“Guarantor”)

Re: Yongcheng Shi lease to BOHO International Pty Ltd (ACN 621 673 738) Premise: [redacted] Title: 3/SP93922

The Lessor gives notice to the Lessee that:

(1)   The Lessee has breached the obligation under the lease to make the payment of rent that is due on 8*** September 2018;

(2)   The Lessee is required to make the payment of $15,733.00 in total being:

a.   $10,088.33 - the monthly instalment rent;

b.   $4,000 - the outgoings; and

c.   $1,650 - legal costs

(3)   The payment mentioned above must be made by 21st September 2018;

(4)   If the Lessee fails to make such payment, the Lessor will give notice to terminate the lease.

DATE; 17 September 2019”

24. The lessee consulted Juris Cor Legal and the directors of the lessee (namely the defendant and Mr Feng) would have played a role in the sending of the following reply to Juris Chamber Lawyers dated 21 September 2018:

“BY EMAIL: [redacted]

Dear Colleagues,

RE: BOHO INTERNATIONAL PTY LTD ACN 621 673 738 - LEASE OF [redacted]

We act for Boho International Pty Ltd in relation to the above matter and refer to your letter dated 17 September 2018 (“Your Letter”) and the notice enclosed therein. Please direct all your further correspondence to us.

The notice enclosed in Your Letter is defective and not a valid notice of default pursuant to the lease for the following reasons;

1. no particular was given to specify the alleged breach;

2. no particular was given to itemise the alleged “outgoings” and “legal costs”; and

3. pursuant to clause 10(a)(iii) of the lease, the four (4) days given to our client to rectify the alleged ‘breach’ is wholly unreasonable, especially in the circumstance that our client has not been provided with any of the above mentioned particulars.

In relation to the outgoings, we are instructed that our client had repeatedly requested your client to provide itemised hills setting out the particulars to no avail.

In light of the above, we request you to;

1. withdraw the notice of default by reply on or before 28 September 2018;

2. provide us with itemised bills particularising all outgoings paid by our client since September 2017 on or before 12 October 2018; and

3. provide us with itemised bills particularising the ‘legal costs’ alleged in the notice on or before 5 October 2018.

Failing to do any of the the above. Your Letter will be deemed as a repudiation of the lease. We are instructed that our client may elect to terminate the lease in light of such repudiation.

Please note that the above matters are expressed without prejudice to our client’s rights, all of which are expressly reserved.

Yours faithfully

JURIS COR LEGAL

Xiang Li . Associate”

25. It is self-evident from this letter that there is no suggestion of there being an agreement of any kind between the parties concerning the termination of the lease, and certainly not on the basis that the plaintiff had agreed not to hold the defendant or the lessee liable for any loss.

26. A reply was sent from Juris Chamber Lawyers to Juris Cor Legal dated 22 September 2018:

“Dear Sir or Madam,

Re; Yongcheng Shi lease to BOHO International Pty Ltd (ACN 621 673 738) Premise; [redacted]Title; 3/SP93922

We refer to the above matter and your letter dated 21 September 2018.

Please find enclosed, by way of service. Notice of Intention to Terminate pursuant to clause 10(b) of the registered lease AM912143P.

In relation to your letter dated 21 September 2018, we reply as follows:

1. The notice is valid;

2. Particular was given to specify the alleged breach - failed to pay the rent;

3. Particular to itemise the outgoings is not necessary, which is to be explained later.

4. Particular to itemise the legal costs - Please see attached our tax invoice for your information. It’s not necessary to provide such tax invoice in the notice and this does not make the notice defective or invalid.

5. 4 days’ notice of paying the rent is far more reasonable. The monthly rent is due on the 8th September 2018. Before the issuing of the notice, our client sent the invoice to your client on 8th September 2018 and another email on 10th September 2018 to request the immediate payment. Your client replied email confirming that your client will make the payment by 14th September 2018, but didn’t. The payment of rent is the essential term of the lease and must be paid without delay but it has now been 2 weeks delayed.

In relation to the outgoings, please be advised:

1. According to the lease, your client is liable for all the outgoings payable.

2. All outgoings bills including council rates, water rates and strata levy are mailed to the shop’s address. Usually your client makes the payment of these bills directly to the authorities without going through our client. Therefore your client have access to all the details of the outgoings.

3. In relation to the strata levy, we are instructed that the quarterly levy is $5800 and out of good faith, our client allows your client to pay $4000 only so that our client pays the balance of $1800. According to the lease, our client could have asked your client to make the full payment without discount.

In relation to the rent, please be advised that the tax invoice of each monthly rent has been provided to your client in due course.

We look forward to hearing from you.

Yours faithfully.

Juris Chamber Lawyers”

27. There was no reply to this email. Once again, if there had been an agreement of the kind asserted by the defendant and his witness Mr Feng, it would be expected to be set out in reply.

28. As there was no reply, the following email was sent from Juris Chamber Lawyers to Juris Cor Legal dated 9 October 2018:

“Dear Sir or Madam,

Re: Yongcheng Shi lease to BOHO International Pty Ltd (ACN 621 673 738) Premise: [redacted] Title: 3/SP93922

We refer to the above matter.

Please find enclosed, by way of service, Notice of Termination dated 9 October 2018.

Since the lease has been terminated by our client, your client is asked to do the followings immediately:

1.   Return all keys and swipe cards to the premise to our client;

2.   Must not access the premise from date of the notice.

Our client holds your client liable for all the loss our client has suffered because of your client’s breach of the contract and reserves the right under the lease and common law to claim the damages against your client.

Yours faithfully,

Juris Chamber Lawyers”

29. Not only did the defendant not reply to correspondence, but he failed to follow up on the asserted reimbursement of the bank guarantee of $30,250 referred to in paragraph 3(c) of the defence. That sum was in fact claimed by the plaintiff as is set out in the following email from Juris Chamber Lawyers to Australia and New Zealand Banking Group Limited dated 11 October 2018:

“Dear Sir or Madam,

Re: Yongcheng Shi lease to BOHO International Pty Ltd (ACN 621 673 738) Premise: [redacted]

Principal/Lessor: Yongcheng Shi

Customer/Lessee: BOHO International Pty Ltd (AGN 621 673 738)    

We act for the Principal/Lessor Yongcheng Shi in the above matter.

Please find enclosed following documents for your attention:

1.   Demand to Pay;

2.   Original Bank Guarantee No: 217509

We look forward to receiving the payment within 2 business days as guaranteed. Should you have any query, please feel free to contact us.

Yours faithfully.

Juris Chamber Lawyers”

30. Neither the defendant nor the lessee took any steps to finalise the lease for the refrigerators in the shop, as the following correspondence shows:

“From: Allan Macpherson [redacted]

Date; Mon, 4 Mar 2019 at 12:08 pm

Subject: Coca Cola Cooler signed proof of ownership form

To: [email protected] [redacted]

Cc; David Buchanan (NSW) [redacted]

Hi Yvonne,

As discussed today. The two Coca Cola coolers at your property are the property of Coca Cola Amatil and not your previous renters. Provided is a signed EPA form verifying ownership to us the 3rd party and we are requesting the cooler to be removed from your shop.

I have attempted to remove this cooler with you before, and was advised by you that you were hoping for someone to rent the premises and wanted them to remain. This did not happen, and we are trying to get our equipment back now because an U.N.-acceptable amount of time has passed.

As we have a signed form of proof of ownership, we are wanting to remove the equipment as fast as possible. Our pick up days are Wednesday for wollongong and we need access to the site.

The payment arrears of the renter does not have anything to do with Coca Cola Amatil. Can you please review this form and let me know when we can pick up our equipment.

Please let me know your response to this. If there is an issue I'll need to report it to our legal division.

My equipment department will call you this Friday, or Monday to book in.

Thank you very much”

31. This is further corroboration of the plaintiff’s version of events. The defendant and the company of which he was a director simply walked away from the premises, leaving the plaintiff to deal with all these matters.

WeChat messages

32. The defendant said that, while he could not remember many details, he did not think that he played any significant role in this subsequent correspondence. However, there can be little doubt as to the defendant’s significant role in these transactions, as the following Wechat messages dated 20 August 2018, 10 September 2018, and 15 September 2018 demonstrate.

33. These messages were sent by the defendant (whose wechat name was “WinoForever”) on behalf of the company to the plaintiff’s mother, who was at plaintiff’s agent at the time, as the plaintiff had returned to China.

34. The defendant was cross-examined about these messages. He repeated that he was only being kind in sending further sums of money, and asserted that the sums in question were “Korean dollars”, although the relevance of the currency is unexplained.

35. The text of 15 September 2018 from the defendant is the first clear statement of termination. Ms Lin’s response that “you did not notify me to terminate the contract”, and her reference to the email and telephone calls where the defendant had promised to pay, are accepted by me as being an accurate account of what in fact happened.

36. I am satisfied that on 15 September 2018 the defendant, on behalf of the lessee, wrongfully terminated the lease and was the moving party behind the payments and legal correspondence. I do not accept his evidence as to what he says was the agreement reached on 16 August 2018. While it is a serious statement to make to say that a witness is lying on oath, all of the evidence in these proceedings supports such a finding.

37. I am supported in this finding by the denials, in cross-examination, of the plaintiff and his mother of the evidence given by the defendant. Their evidence was at all times consistent with the documentary evidence.

The parties’ submissions

38. Mr Chen made the following six points in his submissions:

1. There is no documentary evidence whatsoever to support the version of events given by the defendant. This is relevant for two reasons. First, any oral contract alleged by the plaintiff would be unenforceable for non-compliance with ss 23C and 54A of the Conveyancing Act 1919 (NSW). Second, the documentary evidence is in fact consistent with the events described by the plaintiff and his witnesses.

2. The defendant claimed that he only entered into the lease and guarantee because it is put under pressure by the plaintiff’s sister, who was a former girlfriend. At all relevant times the company and the defendant (in his position as guarantor) had been represented by an experienced solicitor who acted on their behalf for the whole of the transaction. The defendant’s allegations about the plaintiff’s sister being in a relation with him were denied by her in cross-examination as were the allegation that she put pressure on him, and it is not to the credit of the defendant that he made this personal attack on her.

3. Even if there had been an oral promise at the meeting, it would not have been binding, because it was clear from the subsequent correspondence and payments that the parties were, at best, continuing to negotiate. It was only a matter of four days after the meeting that a further rental payment was sent and the Wechat messages between the defendant and the plaintiff’s mother clearly indicate what the respective parties’ positions were.

4. The defendant’s affidavit evidence was silent as to what was to happen to the bank guarantee, although the defendant sought to argue that the plaintiff had agreed to return this to him personally (as opposed to the lessee). In addition, if the defendant really believed that he was entitled to seek the return of this money, he would have asked the ANZ bank to pay it to him (or alternatively to the lessee). In fact, as the correspondence demonstrates, it was the plaintiff who sought this money from the ANZ bank, not the defendant.

5. It was evident from the plaintiff’s mother’s affidavit and evidence that she was an experienced businesswoman. She would never have given such ridiculous advice to his son as to abandon any entitlement to the rent over the premises in the manner claimed by the defendant. Although the defendant challenged the plaintiff’s mother’s authority to speak on his behalf, the fact that the plaintiff was sitting next to her during the discussion and that he left the negotiating to her made it clear that she was negotiating on his behalf.

6. During the hearing, many if not most, of the defendant’s answers in cross-examination and to questions concerning the factual events were met with a claim that he was unable to remember. At the very least he had a bad memory; at the worst, there should be doubts about his credit. His recollection of the events at the meeting on 16 August 2018 could not be accepted.

39. The defendant made the following submissions:

1. When he signed the contract, he was never given any explanation by the plaintiff or by the company’s solicitor as to what the liability of a guarantor would be. The defendant had no business experience or legal qualifications and in those circumstances entered into a contract which was unconscionable and unfair. He now wanted to sue the company’s solicitor for negligence.

2. The plaintiff’s mother was “overwhelming” during negotiations at the meeting on 16 August 2018 because of her business experience. Nevertheless, she told the defendant that her son would release me from any liability. The defendant wanted to update his affidavit evidence to reflect this additional material.

3. The defendant objected to adverse conclusions being drawn from his inability to remember the events. This included his inability to remember who had been a director of the company at the time, even when shown their names. While he admitted “it looks like I don’t want to answer”, the events occurred a long time ago.

4. The defendant was entitled to claim back the sum of $100,000 for goods that had been left in the premises, even though these were the property of the company and not his own personal property. He was also entitled to the return of the $30,250 bond, even though that had been lodged on behalf of the company. Alternatively these sums should be offset against the sum claimed. Although his claims about the value of refrigerators left on the premises had been answered by the plaintiff producing correspondence demonstrating these were leased, there were still goods left on the shelves, shelving and other equipment of value, although he acknowledged that their value was not the subject of evidence.

40. The documentary and oral evidence provided on behalf of the plaintiff paints a clear picture of what occurred. I am satisfied that there was no agreement entered into at the meeting on 16 August 2018 of any kind, let alone the agreement asserted to have occurred by the defendant.

41. Liability is therefore established.

Quantum

42. Evidence was led about the outstanding outgoing as well as mitigation.

Outgoings

43. The plaintiff discovered that there were a number of unpaid outgoings remaining at the time that the tenant left. For the period from the commencement date of the Lease to the termination date 9 October 2018, the Lessee only paid the strata levy from 25 September 2017 to 31 July 2018 on two occasions:

$9,330 for strata levy 25/09/2017 - 30/04/2018; and

$4,000 for strata levy 1/05/2018-31/07/2018.

44. This is confirmed by the relevant pages of the NAB bank statement (Court Book, pp 96-99)

45. There were also shortfalls in relation to the strata levy. While the actual strata levy for this period including special levy is $26,012.62, the plaintiff only seeks payment for outstanding strata levy of $17,928.77 at a discount rate of $16,000 per year in accordance with the Lease and the Lessor’s Disclosure Statement (Court Book, pp 100-103).

46. After the termination of the Lease, the plaintiff also found that the lessee did not pay water rates, council rates or land tax during occupancy in full. He received tax invoices of water rates and council rates which indicated the payment arrears. The water rates are $48.73 per quarter. The council rates are $3,705.09 per annum. The land tax is $5,294 per annum (Court Book, pp 104-106). The plaintiff calculates that total outstanding outgoing including water rates, council rates, strata levies and land tax are $13,974.90 for the period from 25 September 2017 to 8 October 2018.

Mitigation of Damage

47. After the termination of the Lease, the plaintiff asked his sister Ms Yuhong (“Yvonne”) Shi's help to find a new tenant to lease the Shop in order to mitigate losses. She engaged an agent called WHK Rentals Pty Ltd t/a WHK Commercial Property (“WHK”) to list the Shop for lease in the market. On 7 January 2019, the plaintiff signed an Exclusive Management and/or Leasing Agency Agreement with WHK. The proposed rent was $110,000 plus GST and outgoings. From February 2019 onwards, there were enquiries, but no long term tease agreement obtained. The plaintiff then suggested reducing the rent to $87,500.

48. On 16 April 2019, WHK placed advertisements with a rent reduced to $87,500 plus GST and outgoings on their website at commercialproperty2sell.com.au.

49. On 20 April 2019, the plaintiff signed a Short Term Premises Hire Agreement with the Australian Electoral Commission for a period from 24 April 2019 to 22 May 2019 with a rent of $19,800 (GST inclusive). This resulted in a bill from WHK for the agency service fee of $567.50.

50. On 26 June 2019, the plaintiff was informed by Yvonne that there was a potential tenant who offered to lease at a rent of $85,000. He accepted the offer but the deal fell though.

51. In July 2019, Yvonne changed the exclusive agency agreement with WHK to an open contract and also engaged other two agents, Raine & Horne (“R&H”) and TheRealEstate to list the Shop. Considering the market at that time, he instructed Yvonne to lease the Shop at a rent of $90,000 to $95,000. There were negotiations but no concluded lease was entered into.

52. On 28 October 2019, Yvonne that there was a potential tenant who offered to lease the Shop at a rent of $92,000. He accepted this but the deal fell through.

53. In December 2019, the plaintiff signed a short-term lease agreement with Come Alive Productions Pty Ltd, for a period from 16 December 2019 to 28 December 2019, with the rent of $7,500.

54. On 8 May 2020, the plaintiff received an Agency Agreement from R&H with a proposed rent of $110,000 plus GST and outgoings. He signed this Agency Agreement and returned to the agent R&H. In June 2020, he entered into a lease agreement with EASI Wollongong Pty Ltd, with a term of 5 years commencing on 1 June 2020 and terminating on 31 May 2025. The rent is $110,000 plus GST. The rent-free period is 12 months from the commencement date.

55. On 24 June 2020, the plaintiff received a tax invoice from R&H tor the letting fee for EASI Wollongong Pty Ltd in the amount of $9,166.66. On 10 August 2020, the plaintiff received a tax invoice from R&H for the letting fee for Come Alive Productions Pty Ltd in the amount of $750. On 18 August 2020, the received a tax invoice for $1,194.50 from his solicitors, CVC Law, for preparing and drafting the lease agreement between me and EASI Wollongong Pty Ltd.

56. Having noted this history concerning the outgoings and attempts to find a new tenant, I set out the schedule of damages claimed by the plaintiff:

Schedule of damages

Description	Amount		Comments
Unpaid rent up to termination of lease on 8 October 2018	$10,083.33		From 8 September 2018 to 8 October 2018 One month’s rent from 9 September 2018 to 8 October 2018
Unpaid outgoings up to termination of lease on 8 October 2018	$13,974.90		From 25 September 2017 to 8 October 2018 Water rates - $218.42 ($48.73 per quarter) Council Rates - $4,151.73 ($3,705.09 per annum) Strata levies - $17,928.77 ($16,000 per annum) Land tax - $5,932.18 ($5,294 per annum) Total: $28,231.10 Less: ($14,256.20) paid by tenant Balance: $13,974.90
Loss of rent from 8 October 2018 to 31 May 2020	$199,567.12		From 8 October 2018 to 31 May 2020 $121,000.00 per annum for 602 days, not including 3% annual rent increase.
Loss of reimbursement of outgoings from 8 October 2018 to 31 May 2020	$41,873.77		From 8 October 2018 to 31 May 2020 (602 days) Water rates - $321.48 ($48.73 per quarter) Council Rates - $6,431.78 ($3,899.67 per annum) Strata levies - $26,389.04 ($16,000 per annum) Land tax - $8,731.47 ($5,294 per annum)
Legal costs and agent’s commission	$16,298.66		Termination Notice - $1,650.00 Leasing Fee - $1,194.50 WHK Agent commission - $3,537.50 Raine & Horne commission - $9,916.66
Less Bank Guarantee Payment		($30,250)
Less short-term lease		($27,300)
Total:		$224,247.78

57. I am satisfied that the plaintiff, assisted by his sister (who is an accountant) to all steps necessary in order to mitigate his loss and that the outgoings he claims are supported by documentary evidence. Accordingly the sum to be awarded is $224,247.78.

Interest and costs

58. The plaintiff is entitled to interest and I have granted liberty to apply in relation to the calculation of the interest which will be payable.

59. The plaintiff foreshadowed an oral application for a gross sum costs order pursuant to s 98 of the Civil Procedure Act2005 (NSW). Mr Chen acknowledged that it was unlikely that the defendant had any assets of significance, in which case an assessment of costs would be a time-consuming and perhaps pointless task. His client had already spent approximately $20,000 in legal costs in relation to these proceedings, and he would be prepared to accept some reasonable proportion of that sum (on a party/party basis and taking into account the “rule of thumb” deduction commonly made in gross sum costs orders), which would result in a figure between $12,000 and $15,000.

60. As this application may take the defendant by surprise, I propose to make an order for costs but grant liberty to apply to enable Mr Chen to prepare documentation in support of his application, which I will then determine in chambers after hearing from the defendant. I have similarly granted liberty to apply in relation to the interest calculation, which will be considered and entered in the same way.

Order:

1. Judgment for the plaintiff for $224,247.78 with liberty to apply in relation to the calculation of interest on the judgment sum.

2. Defendant pay plaintiff’s costs, with liberty to apply in relation to the calculation of the sum sought by way of gross sum costs order pursuant to s 98 of the Civil Procedure Act 2005 (NSW).

3. Exhibits retained until further order.

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Decision last updated: 30 August 2021