Sporco Investments Pty Ltd v Le Messurier (No 2)
[2023] ACTMC 46
•30 November 2023
MAGISTRATES COURT OF THE AUSTRALIAN CAPITAL TERRITORY
| Case Title: | Sporco Investments Pty Ltd v Le Messurier (No 2) |
| Citation: | [2023] ACTMC 46 |
| Decision date: | 30 November 2023 |
| Before: | Magistrate Theakston |
| Decision: | 1. The interest on the unpaid and lost rent described in the judgment of 24 April 2023 is $43,416. 2. The defendant is to pay the plaintiff’s costs of the proceedings on a party party basis. |
Catchwords: . | DAMAGES – Interest PROCEDURE – Costs and indemnity costs in proceedings under the “Leases (Commercial and Retail) Act 2001” s 154 |
| Legislation Cited: | Court Procedures Rules 2006 Leases (Retail and Commercial) Act 2001 |
| Cases Cited: | Calderbank v Calderbank [1975] 3 All ER 333 |
| Parties: | Sporco Investments Pty Ltd (Plaintiff) |
| Representation: | Counsel |
| Solicitors | |
| File Number: | CS 21 of 2023 |
MAGISTRATE THEAKSTON:
Introduction
1․In an earlier decision I ordered judgment be entered for the plaintiff in the amount of $1,460,976 plus interest on unpaid and lost rent to be determined, and reserved the questions of costs and legal costs available under the lease. I have since received written submissions and evidence in relation to those outstanding matters.
Interest
2․In relation to units 1 and 2, I ordered damages for the lost opportunity to obtain rent on those premises between and including 1 August 2019 and 30 June 2021, a period of 23 months. The rent could have been paid the first day of each month, and I accepted the amount of $6,940.25 each month. That order for damages should be distinguished from a judgment to pay a debt of unpaid rent. That is because the lease had been terminated before that period, and rather than rent being due under the lease, the plaintiffs received compensation for not being able to rent the units during that period.
3․The plaintiff claimed pre-judgment interest based on the terms of the written lease agreement. The defendant disputed that. In the alternative, the plaintiff claimed interest on the basis of pre-judgment interest provided under the Court Procedures Rules 2006. The defendant did not respond to that alternative claim.
4․Clause 15 of the lease agreement provided for interest on overdue payments. It also provided a method of computing the amount and a restriction on enforcing payment before 14 days after it was due and before a notice is given to the tenant indicating the amount that is due and how it was calculated. The relevant provision that deals with the application of those provisions reads:
Interest on overdue payments
(2) In the event of the Lessee being in default for a period of more than seven (7) days (whether any demand has been made or not) with the payment of rent, GST, operating expenses, costs or any other liability to or on behalf of the Lessor under this lease, the Lessee must pay interest to the Lessor in accordance with this clause.
5․I was not persuaded that an award for damages for the lost opportunity to receive rent, fell within what was contemplated by that provision. That is, while the damages were awarded in the context of the lease, they were not a liability automatically arising under the lease per se. Accordingly, it is more appropriate for pre-judgment interest to be calculated by reference to the rate provided in Schedule 2, Part 2.1 of the Court Procedures Rules.
6․In relation to Unit 3, the plaintiff claimed pre-judgment interest based on that provided in the Court Procedures Rules. The defendant’s submissions did not address this claim, but instead argued that the contractual provisions of the lease should not apply.
7․The judgment in relation to Unit 3 included unpaid rent and damages for the lost opportunity to receive rent. Those periods are adjacent and sit either side of the termination of the lease. However, both amounts are the same and should be calculated on the first day of each calendar month. Similar to the damages due for Units 1 and 2, I am satisfied under r 1619 of the Court Procedures Rules that it is appropriate to award interest on the unpaid rent and lost opportunity to receive rent. As the principal amounts increases each month, I am also satisfied that it is convenient and appropriate to calculate the interest on those amounts monthly. The Court Procedures Rules do not provide for compound interest.
8․The combined interest amounts to $43,416. My calculations are provided in the schedule to these reasons.
Costs
9․The successful plaintiff claims costs, including indemnity costs – for a period following the making of an offer. The defendant disputes that claim, principally on the basis that this is usually a no costs jurisdiction.
10․The proceedings were conducted under the Leases (Retail and Commercial) Act 2001. Section 154 of that Act provides:
The parties in a proceeding under this Act must bear their own costs unless the Magistrates Court or Supreme Court makes an order about costs.
11․The Act provides no further assistance in relation to the exercise of that discretion, for example it does not list relevant considerations or principles that may guide the Court. The parties agreed that the principles distilled by Magistrate Temby in Saddler v Wakim [2023] ACTMC 11 at [82(e)] were applicable, namely:
(e)the considerations that are relevant to whether it is appropriate to make some other order include:
(i) the interests of justice and fairness to the parties, which are the overriding considerations;
(ii) the policy that parties, especially tenants, with genuine grievances and an arguable evidentiary and legal basis for them, should not be deterred from asserting their rights because of the risks of an adverse costs order (noting that this policy does not justify a differential approach to costs based on whether the successful party is the landlord or the tenant);
(iii) whether a party’s case (either a claim or a defence) is misconceived, frivolous or vexatious;
(iv) the conduct of the parties to the proceedings, including whether a party has delayed the progression of proceedings, conducted their case with a lack of diligence or competence, or has abused the prima facie no costs jurisdiction;
(v) the complexity of the factual and legal issues raised by the proceedings; and
(vi) the success of each party in relation to each of the issues raised by the proceedings.
12․I note that Tuggeranong Town Centre Pty Limited v Brenda Hungerford Pty Limited (No 3) [2017] ACTSC 301 described additional principles, which were also included in Saddler at [82], namely:
(a)the court is to give primacy to the consideration that each party should pay its or their own costs unless the Court considers that some other order is appropriate – that is, the usual rule is that each party pay their own costs;
(b)it is not necessary to show that special or exceptional circumstances exist, but there must exist some factor or factors sufficient to justify a departure from the normal rule. To put it another way, there must be cogent reasons to depart from the usual rule;
(c)the fact that a party is successful in the litigation is not, in itself, a good reason to depart from the usual rule;
(d)a party, or parties, cannot choose to depart from the usual rule; and
13․The second of those additional principles is consistent with what was said in Liangis v IPEX ITG Pty Limited [2005] ACTCA 28 at [5]:
Whilst the discretion implicit in this provision is not constrained by any requirement that special or exceptional circumstances be demonstrated, there must be some identifiable factor or factors sufficient to justify a departure from the normal rule.
14․More recently, Leda Commercial Properties Pty Ltd v Brenda Hungerford Pty Ltd [2018] ACTCA 17 at [121] noted:
It would seem apparent from the starting position in s 154 that a factor in exercising the discretion must be to promote affordable litigation between landlords and tenants, perhaps in particular in favour of the latter.
15․It is surprising that there is a suggestion that the Act may be designed to be particularly favourable to providing tenants with affordable litigation. While there would be cases involving vulnerable tenants and well-resourced lessors, that would not always be the case. In the world of commercial real estate, it is entirely possible that the reverse may be true. The provisions of the Act and the principles described above are more consistent with the general policy of encouraging affordable access to appropriate litigation for all parties and facilitating the courts doing justice between them.
16․This is not simply a case where the plaintiff was almost wholly successful. It is a case involving a significant and patent loss to the lessor, and where the defendant, as a director and guarantor of the tenant company, was an active participant in the circumstances leading to that loss. The facts involved considerable damage to the premises and the abandonment of hundreds of tonnes of hazardous glass waste within the premises. During the pre-hearing litigation, the defendant made few concessions and put the plaintiff to proof. At the hearing, the defendant led no evidence, did not cross examine any witness and did not even attend the proceedings in person. The plaintiff made a settlement offer that, if accepted and the waste removed by the defendant, would have amounted to a significant concession on its part.
17․This is a case where not exercising the discretion to award costs against the Defendant would be counter-productive to the policy of affordable access to litigation. It could embolden defendants to give no quarter and make no admissions or concessions, and put plaintiffs to proof in circumstances where there was little hope of defending a claim; and doing so, with the comfort of believing, that even in such circumstances the Court would be unlikely to order costs against them. Such a counter-productive incentive could not be consistent with doing justice between the parties and encouraging affordable access to litigation. Further, the ordering of costs in the circumstances of this case would not necessarily deter parties from asserting their legitimate rights because of a risk of an adverse costs order.
18․For the above reasons I am satisfied that there is a clear, logical and compelling basis to depart from the usual rule that parties should bear their own costs, and that the defendant should pay the costs of the plaintiff.
Indemnity costs
19․There is now evidence before me that in late October 2022, the plaintiff made an offer in writing to the defendant to settle the matter. It proposed a consent judgment in favour of the plaintiff in the amount claimed in the Originating Claim and Statement of Claim, but with enforcement of the same stayed, if the defendant affected the removal of all the e-waste within 30 days. Reference was made within the offer to the Part 2.10 of the Court Procedures Rules 2006 and the principles in Calderbank v Calderbank [1975] 3 All ER 333. Incidentally, there is also evidence before me that the defendant did not have the means to affect that removal within that time and it would have taken some considerable time and resources to remove the e-waste.
20․The plaintiff argued that the offer represented a significant compromise in that the consent judgment would be in the order of $700,000 compared to the approximately $1.5M awarded in my judgment.
21․However, there are a number of issues with the offer. The first is the precise terms of the proposed consent judgment were not expressed clearly. It only suggested:
… consent judgment for this matter in favour of our client, which awards it the amounts claimed in the Originating Claim and Statement of Claim albeit with no order as to costs …
22․That is significant because those documents did not succinctly quantify the claim. In fact, they appeared to claim inconsistent amounts between the two documents.
23․Further the total of the amount claimed within the Statement of Claim of February 2022, excluding the legal costs, appears to exceed $1.5M, rather than approximate the $700,000 suggested in the plaintiff’s submissions.
24․In the above circumstances, I am not satisfied that a clear and unambiguous offer was put to the defendant or that it was unreasonable for the defendant not to have accepted that offer. Accordingly, I will not award indemnity costs.
Orders
25․The Court orders:
1. The interest on the unpaid and lost rent described in the judgment of 24 April 2023 is $43,416.
2. The defendant is to pay the plaintiff’s costs of the proceedings on a party party basis.
| I certify that the preceding twenty-five [25] numbered paragraphs are a true copy of the Reasons for Decision of his Honour Magistrate Theakston. Associate: Alyssa Zanardo Date: 30 November 2023 |
Schedule
The interest was calculated using the following principles:
Principal amounts are added the first day of each calendar month:
a.for Units 1 and 2, that amount is $6,940.25 per month from 1 August 2019 – 1 June 2021 inclusive; and
b.for Unit 3, that amount is $5,300.35 per month from 1 August 2019 to 1 April 2023 inclusive.
Interest is calculated the first day of each subsequent calendar month.
The monthly rate of interest is 1/12 the annual rate.
The rate of interest for the final 23 days before judgment is 23/365 the annual rate.
The annual interest rates are in accordance with s 2.1 of Schedule 2, of the Court Procedures Rules 2006, namely:
a. 1 July – 31 December 2019 – 5.25%
b. 1 January – 30 June 2020 – 4.75%
c. 1 July – 31 December 2020 – 4.25%
d. 1 January 2021 – 30 June 2022 – 4:10%
e. 1 July – 31 December 2022 – 4.85%
f. 1 January – 30 June 2023 – 7.10 %
| Date | Interest per annum | Interest per month (or part thereof) | Units 1 & 2 | Unit 3 | ||
| Principal | Interest | Principal | Interest | |||
| 01-Sep-19 | 5.25% | 0.44% | $6,940.25 | $30.36 | $5,300.35 | $23.19 |
| 01-Oct-19 | 5.25% | 0.44% | $13,880.50 | $60.73 | $10,600.70 | $46.38 |
| 01-Nov-19 | 5.25% | 0.44% | $20,820.75 | $91.09 | $15,901.05 | $69.57 |
| 01-Dec-19 | 5.25% | 0.44% | $27,761.00 | $121.45 | $21,201.40 | $92.76 |
| 01-Jan-20 | 4.75% | 0.40% | $34,701.25 | $137.36 | $26,501.75 | $104.90 |
| 01-Feb-20 | 4.75% | 0.40% | $41,641.50 | $164.83 | $31,802.10 | $125.88 |
| 01-Mar-20 | 4.75% | 0.40% | $48,581.75 | $192.30 | $37,102.45 | $146.86 |
| 01-Apr-20 | 4.75% | 0.40% | $55,522.00 | $219.77 | $42,402.80 | $167.84 |
| 01-May-20 | 4.75% | 0.40% | $62,462.25 | $247.25 | $47,703.15 | $188.82 |
| 01-Jun-20 | 4.75% | 0.40% | $69,402.50 | $274.72 | $53,003.50 | $209.81 |
| 01-Jul-20 | 4.25% | 0.35% | $76,342.75 | $270.38 | $58,303.85 | $206.49 |
| 01-Aug-20 | 4.25% | 0.35% | $83,283.00 | $294.96 | $63,604.20 | $225.26 |
| 01-Sep-20 | 4.25% | 0.35% | $90,223.25 | $319.54 | $68,904.55 | $244.04 |
| 01-Oct-20 | 4.25% | 0.35% | $97,163.50 | $344.12 | $74,204.90 | $262.81 |
| 01-Nov-20 | 4.25% | 0.35% | $104,103.75 | $368.70 | $79,505.25 | $281.58 |
| 01-Dec-20 | 4.25% | 0.35% | $111,044.00 | $393.28 | $84,805.60 | $300.35 |
| 01-Jan-21 | 4.10% | 0.34% | $117,984.25 | $403.11 | $90,105.95 | $307.86 |
| 01-Feb-21 | 4.10% | 0.34% | $124,924.50 | $426.83 | $95,406.30 | $325.97 |
| 01-Mar-21 | 4.10% | 0.34% | $131,864.75 | $450.54 | $100,706.65 | $344.08 |
| 01-Apr-21 | 4.10% | 0.34% | $138,805.00 | $474.25 | $106,007.00 | $362.19 |
| 01-May-21 | 4.10% | 0.34% | $145,745.25 | $497.96 | $111,307.35 | $380.30 |
| 01-Jun-21 | 4.10% | 0.34% | $152,685.50 | $521.68 | $116,607.70 | $398.41 |
| 01-Jul-21 | 4.10% | 0.34% | $159,625.75 | $545.39 | $121,908.05 | $416.52 |
| 01-Aug-21 | 4.10% | 0.34% | $159,625.75 | $545.39 | $127,208.40 | $434.63 |
| 01-Sep-21 | 4.10% | 0.34% | $159,625.75 | $545.39 | $132,508.75 | $452.74 |
| 01-Oct-21 | 4.10% | 0.34% | $159,625.75 | $545.39 | $137,809.10 | $470.85 |
| 01-Nov-21 | 4.10% | 0.34% | $159,625.75 | $545.39 | $143,109.45 | $488.96 |
| 01-Dec-21 | 4.10% | 0.34% | $159,625.75 | $545.39 | $148,409.80 | $507.07 |
| 01-Jan-22 | 4.10% | 0.34% | $159,625.75 | $545.39 | $153,710.15 | $525.18 |
| 01-Feb-22 | 4.10% | 0.34% | $159,625.75 | $545.39 | $159,010.50 | $543.29 |
| 01-Mar-22 | 4.10% | 0.34% | $159,625.75 | $545.39 | $164,310.85 | $561.40 |
| 01-Apr-22 | 4.10% | 0.34% | $159,625.75 | $545.39 | $169,611.20 | $579.50 |
| 01-May-22 | 4.10% | 0.34% | $159,625.75 | $545.39 | $174,911.55 | $597.61 |
| 01-Jun-22 | 4.10% | 0.34% | $159,625.75 | $545.39 | $180,211.90 | $615.72 |
| 01-Jul-22 | 4.85% | 0.40% | $159,625.75 | $645.15 | $185,512.25 | $749.78 |
| 01-Aug-22 | 4.85% | 0.40% | $159,625.75 | $645.15 | $190,812.60 | $771.20 |
| 01-Sep-22 | 4.85% | 0.40% | $159,625.75 | $645.15 | $196,112.95 | $792.62 |
| 01-Oct-22 | 4.85% | 0.40% | $159,625.75 | $645.15 | $201,413.30 | $814.05 |
| 01-Nov-22 | 4.85% | 0.40% | $159,625.75 | $645.15 | $206,713.65 | $835.47 |
| 01-Dec-22 | 4.85% | 0.40% | $159,625.75 | $645.15 | $212,014.00 | $856.89 |
| 01-Jan-23 | 7.10% | 0.59% | $159,625.75 | $944.45 | $217,314.35 | $1,285.78 |
| 01-Feb-23 | 7.10% | 0.59% | $159,625.75 | $944.45 | $222,614.70 | $1,317.14 |
| 01-Mar-23 | 7.10% | 0.59% | $159,625.75 | $944.45 | $227,915.05 | $1,348.50 |
| 01-Apr-23 | 7.10% | 0.59% | $159,625.75 | $944.45 | $233,215.40 | $1,379.86 |
| 23-Apr-23 | 7.10% | 0.45% | $159,625.75 | $714.16 | $233,215.40 | $1,043.40 |
| Totals | $21,212.77 | $22,203.50 | ||||
| Combined total | $43,416.27 | |||||
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