Tallina Pty Ltd v Haines (No 2)

[2024] NSWSC 928

Supreme Court

New South Wales

• Amendment notes

Medium Neutral Citation:

Tallina Pty Ltd v Haines (No 2) [2024] NSWSC 928

Hearing dates:

On the papers

Date of orders:

31 July 2024

Decision date:

31 July 2024

Jurisdiction:

Equity - Real Property List

Before:

Peden J

Decision:

At [38]

Catchwords:

COSTS — Where amount recovered within jurisdictional limit of Local Court — Where proceedings commenced and continued in Supreme Court — Whether Court satisfied that commencement and continuation of proceedings in Supreme Court was warranted in circumstances where substance of plaintiff’s claim was for unpaid rent and damages — Whether Court ought to deviate from starting position that costs follow the event

Legislation Cited:

Civil Procedure Act 2005 (NSW) ss 92, 98, 146

District Court Act 1973 (NSW) s 133

Supreme Court Act 1970 (NSW) s 75

Uniform Civil Procedure Rules 2005 (NSW) rr 16.6, 16.7, 42.1, 42.34

Cases Cited:

Gladio Pty Ltd v Buckworth [2016] NSWCA 321

Lewis v Australian Capital Territory (2020) 271 CLR 192

Malec v JC Hutton Pty Ltd (1990) 169 CLR 638

Sydney Local Health District v Macquarie International Health Clinic Pty Ltd (2020) 105 NSWLR 325.

State of New South Wales v Quirk [2012] NSWCA 216

Category:

Costs

Parties:

Tallina Pty Ltd (Plaintiff)
Matthew David Haines (First Defendant)
Lunatiques Renewed Pty Ltd (Second Defendant)

Representation:

Counsel:
H Grace (Plaintiff)

Solicitors:
Clayton Utz (Plaintiff)

File Number(s):

2024/00094403

Publication restriction:

Nil

JUDGMENT

1. These proceedings concern a dispute over the lease of a warehouse in Mascot. The plaintiff leased the warehouse to the second defendant, Lunatiques Renewed Pty Ltd, and the first defendant, Mr Matthew Haines, was guarantor. The defendants have taken no active role in these proceedings.

2. On 22 February 2024, a Notice of Termination of Lease was issued to Lunatiques and Mr Haines, in circumstances where Lunatiques had been in rental arrears for a period of more than thirty days. Also on 22 February 2024, the plaintiff issued a Notice of Trespass; the plaintiff asserted that the lease had come to an end, and that failure to vacate the premises amounted to a trespass.

3. The defendants remained in the premises. The plaintiff appointed BNP Securities Pty Ltd to lock the gates and access points to the warehouse and, between 22 February and 7 March 2024, to monitor the warehouse to prevent access by any third parties, and to ensure that the defendants could not re-enter the premises once they left. BNP prepared daily reports.

4. On 12 March 2024, the plaintiff commenced these proceedings and sought an order for possession. On 13 March 2024, the defendants vacated the warehouse.

5. On 18 March 2024, the plaintiff amended its pleading, removing the order for possession. The amended statement of claim only sought a declaration that the lease had been terminated, and unpaid rent and unquantified other “damages”.

6. On 12 July 2024, the plaintiff moved on a notice of motion for default judgment pursuant to rr 16.6 and 16.7 Uniform Civil Procedure Rules 2005 (NSW) (UCPR). Judgment was entered for the plaintiff in the amount of $319,694.50, being the amount of unpaid rent up to the date the lease was terminated on 22 February 2024, plus pre-judgment interest in the amount of $12,195.88.

7. Judgment was also entered for the plaintiff for damages in trespass for the period between 22 February 2024 and 13 March 2024, to be assessed. Timetabling orders were then made with respect to the plaintiff’s application for those unliquidated damages and costs. This judgment concerns those applications.

Application for unliquidated damages

8. The plaintiff claims the following amounts for unliquidated damages in the period between 22 February 2024 and 13 March 2024:

1. Costs of security guards in the amount of $42,050.80; and

2. Lost opportunity to rent the premises to a new tenant in the amount of $63,123.28 (plus GST).

9. I will deal with each head of loss separately.

Security service

10. From 22 February 2024, the date the Notices of Termination and Trespass were issued, the plaintiff might have sought a writ for possession. The plaintiff did not approach the Court to obtain an order for possession until 12 March 2024. Instead, for the period of 22 February 2024 to 7 March 2024, the plaintiff employed a security guard service to monitor the warehouse and prepare daily reports of the status of the defendants’ occupancy, which cost a total amount of $42,050.80.

11. On the hearing for default judgment, the plaintiff’s counsel abandoned a claim for any damages for breach of the lease, and instead limited the plaintiff’s application to damages in tort for trespass. Even if damages for breach of contract were claimed, I do not consider that the cost incurred to employ a security guard to monitor the premises naturally arose from the defendants’ breach of lease, nor that it was a reasonably foreseeable loss flowing from the relevant breach.

12. Further, the plaintiff has not demonstrated why the security costs were reasonably incurred during the trespass period. No submission is advanced as to the plaintiff’s entitlement to recover these costs as damages arising from trespass.

13. I do not consider it appropriate to make an award of damages for recovery of the costs of employing the security guard service from 22 February 2024 to 7 March 2024.

Lost rent

14. The plaintiff was entitled to possession of the property from the date the lease was terminated, being 22 February 2024. It claims $63,123.28, which has been calculated as follows:

Under the Lease, rent was payable at a rate of $1,152,000 (plus GST) per annum, which equates to $3,156.16 (plus GST) per day. The evidence is that there was strong demand for warehouses in Mascot at this time and it is likely that the Plaintiff could have been able to re-let the Premises at the same rate if it had vacant possession. In the 20 days between 22 February 2024 and 13 March 2024, the Plaintiff lost the chance to lease the Premises for $63,123.28 (plus GST).

15. The plaintiff submits that the Court would award this full amount but refers to no authority to guide the appropriate calculation of the value of damages that should be awarded.

16. The claim is framed as one for lost opportunity, which is not a measure of damages known in tort law. As noted above, the claim for contractual damages was abandoned. In trespass, the basic measure of damages is the use value of the land: Lewis v Australian Capital Territory (2020) 271 CLR 192 (Lewis v ACT) at [82]-[83] (Gordon J); [148]-[149] (Edelman J). Usually, market rent value will be awarded: see eg Sydney Local Health District v Macquarie International Health Clinic Pty Ltd (2020) 105 NSWLR 325.

17. The plaintiff relied on evidence of a Portfolio Manager employed by the plaintiff’s managing agent, that “there was strong demand for warehouses in Mascot” and “that the Plaintiff would have been able to re-let the Premises for the same rent that it was charging under the Lease if it had vacant possession”. I consider that the lease provides sufficient evidence of the market value of the warehouse for the trespass period, particularly in circumstances where there is no contradictory evidence.

18. The plaintiff does submit that if the Court was minded to discount the amount claimed, it would only allow a modest adjustment. As authority for this proposition, the plaintiff cites a passage in Malec v JC Hutton Pty Ltd (1990) 169 CLR 638, which sets out that, when assessing future economic loss, the court must assess the degree of probability that an event would have occurred and adjusts its award of damages to reflect the degree of probability of that event occurring. This is the only authority referred to by the plaintiff and I do not consider it relevant to the application currently before me, because the proprietor’s intention to exploit property is not relevant to the damages assessment: see eg Lewis v ACT at [82]-[83] (Gordon J); [148]-[149] (Edelman J).

19. Despite the plaintiff’s submissions, I consider it appropriate to make an order that the plaintiff is entitled to the whole amount of $63,123.28 (plus GST).

Costs

20. The plaintiff seeks a costs order in relation to the default judgment for the liquidated sum of $5,488.00, which is comprised of the following fixed amounts:

$1,596 – application for default judgment

$3,652 – filing fees

$240 – service fees

21. I accept that it is appropriate for the plaintiff to receive those costs for that application.

22. In addition, the plaintiff seeks a costs order in relation to the unliquidated damages claim.

23. The Court has a broad discretion as to costs: s 98 Civil Procedure Act 2005 (NSW). However, in circumstances where the plaintiff has obtained judgment for an amount less than $500,000.00 in this Court, the Court must be satisfied that it need not depart from the starting position that costs follow the event contained in r 42.1 UCPR, by reason of r 42.34. As noted above, I consider it appropriate to award a damages sum of $63,123.28 (plus GST). That amount is within the jurisdiction of the Local Court.

24. Rule 42.34 UCPR provides:

(1) This rule applies if—

(a) in proceedings in the Supreme Court, other than defamation proceedings, a plaintiff has obtained a judgment against the defendant or, if more than one defendant, against all the defendants, in an amount of less than $500,000, and

(b) the plaintiff would, apart from this rule, be entitled to an order for costs against the defendant or defendants.

(2) An order for costs may be made, but will not ordinarily be made, unless the Supreme Court is satisfied that—

(a) for proceedings that could have been commenced in the District Court—the commencement and continuation of the proceedings in the Supreme Court, rather than the District Court, was warranted, or

(b) for proceedings under Part 2 of Chapter 7 of the Industrial Relations Act 1996—the commencement and continuation of the proceedings in the Supreme Court, rather than the Local Court, was warranted.

25. The plaintiff submits that in this case, rule 42.34 is not properly enlivened, because when the proceedings commenced, the plaintiff sought an order for possession pursuant to s 92 Civil Procedure Act and the District Court did not have power to make such an order: see s 133 District Court Act 1973 (NSW).

26. I accept the District Court cannot make an order for possession. However, the plaintiff amended its claim in March 2024, abandoning the possession claim, which had become redundant. The only relief then sought was a declaration that the lease had been terminated and damages. I do not accept the submission that, because an order for possession was originally sought, the rule is not engaged.

27. The plaintiff also relies on the terms of s 146(1) Civil Procedure Act to justify it continuing to seek relief in this Court. That section relevantly provides:

If the Supreme Court is satisfied, in relation to proceedings before it—

(a) that the proceedings could properly have been commenced in the District Court or the Local Court …

the Supreme Court may order that the proceedings, including any such cross-claim, be transferred to the District Court or to the Local Court, as the case requires.

28. The plaintiff submits that the section concerns the transfer of proceedings that “could properly have been commenced” in a lower court, and not proceedings that were originally commenced in this Court, but later amended removing relief only available in this Court. I reject that submission.

29. The construction advanced by the plaintiff would have the absurd result that a plaintiff could include a dubious claim for equitable relief in Supreme Court proceedings, then appropriately amend the pleading to remove the claim for equitable relief, and nevertheless ensure the continuation of the proceedings in the Supreme Court (and without any costs consequence). I do not consider this is the intended effect of s 146.

30. Instead, the obvious intention of the section is that the focus is on the appropriate court determining the “proceedings” being agitated at the hearing. Here, the proceedings being litigated on the amended statement of claim ought to have been commenced in the District or Local Court.

31. The plaintiff submits that the continuation of the proceedings in the Supreme Court was warranted, even after the pleading was amended, as it then sought declaratory relief, which it submitted could not be granted by the District Court: see s 75 Supreme Court Act 1970 (NSW).

32. I do not accept that submission. Even if the District Court did not have jurisdiction to grant the declaratory relief sought, I do not consider that the declaratory relief was necessary. The remarks of McColl JA, Sackville AJA and Emmett AJA in Gladio Pty Ltd v Buckworth [2016] NSWCA 321 at [26] are apposite in this respect:

While a declaration that a contract has been rescinded may be a common prayer for relief in a vendor/purchaser suit, it is by no means essential that a declaration be made. Moreover, the mere fact that Gladio sought a type of relief, being a declaration, that could only be granted by the Supreme Court does not for the purposes of r 42.34, of itself, make the commencement and continuation of the proceedings in the Supreme Court warranted. The real relief sought by Gladio was return of the deposit. Whether it was entitled to that relief depended on the proper construction of the Sale Agreement. There is no reason why the District Court could not have granted that relief. …

33. Here, the plaintiff’s termination of the lease did not require any Court intervention; termination is a self-help remedy, and there was no challenge that the termination was invalid. Instead, the substance of the plaintiff’s remaining claim was for unpaid rent and damages. Those were remedies that could have been provided by the Local Court or District Court. I note that the plaintiff apparently accepted that position, as it did not seek any declaration as part of the default judgment application. That tells against the plaintiff now relying on that part of the pleading purely for the purposes of costs.

34. Nor do I consider that the continuation in this Court of the plaintiff’s claims was warranted, because the case involved any complex legal or factual issues, or because there was a possibility that damages on the pleaded case had the potential to exceed $500,000: see eg State of New South Wales v Quirk [2012] NSWCA 216 at [171] (Tobias AJA, Beazley and Hoeben JJA agreeing). In this regard, counsel for the plaintiff accepted that there was no currently pleaded case for loss of bargain damages in relation to the lease.

35. The purpose of r 42.34 UCPR is to ensure that hearing dates in the Supreme Court are allocated to those litigants that seek relief falling within the Court’s jurisdiction, rather than another courts’ jurisdiction. The costs consequence ought to dissuade litigants from attempting to obtain hearing dates and resolution of proceedings in this Court, where the Court’s jurisdiction is not engaged. Other litigants waiting for hearing dates are prejudiced by proceedings being inappropriately continued in this Court.

36. I also reject the plaintiff’s submission that, because I determined to hear the default judgment application, rather than transfer the proceedings to the District Court, the plaintiff is now entitled to all its costs of the application paid by the defendant as agreed or assessed. I consider the proper application of “just quick and cheap” is not to allow the plaintiff to obtain its costs of proceedings, that ought to have been litigated in another court.

37. I am therefore not satisfied that the continuation of the proceedings in this Court was warranted and therefore the plaintiff is not entitled to its costs of the unliquidated damages claim in addition to those for the liquidated default judgment.

Orders

38. With regard to the foregoing, the appropriate orders are:

1. Order the defendants to pay to the plaintiff by way of damages for trespass the sum of $63,123.28 (plus GST).

2. The defendants are to pay the plaintiff’s costs of the default judgment application in the amount of $5,488.00.

3. I direct the solicitors on the record for the plaintiff to forthwith provide a copy of this judgment to the plaintiff.

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Amendments

07 August 2024 - Orders (1) and (2) amended pursuant to slip rule.

Decision last updated: 07 August 2024