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- Unreported Judgment
DISTRICT COURT OF QUEENSLAND
Surfrider Investments Pty Ltd v Todd & Anor  QDC 167
SURFRIDER INVESTMENTS PTY LTD
CHRISTY LEIGH CONETTA
District Court at Brisbane
5 September 2019
23 April 2019
McGill SC DCJ
Judgment that the defendants pay the plaintiff $243,264.59. Order the defendants to pay the plaintiff’s costs of the proceeding, assessed on the indemnity basis.
LANDLORD AND TENANT – Termination of lease – damages – property remaining vacant – liability of guarantors.
PRACTICE – Pleading – defendant not appearing at trial – application to amend statement of claim – whether allowed – whether plaintiff able to recover amounts not claimed in pleading even if proved to be owing.
Banque Commerciale SA v Akhil Holdings Ltd  169 CLR 279 – considered.
Chan v Cresdon Pty Ltd  168 CLR 242 - distinguished.
Holli Managed Investments Pty Ltd v Australian Securities Commission  90 FCR 341 – cited.
Platinum United II Pty Ltd v Secured Mortgage Management Ltd  QCA 229 – applied.
Robertson Street Properties Pty Ltd v RPM Promotions Pty Ltd  QCA 389 – applied.
Sandtara Pty Ltd v Abigroup Ltd  42 NSWLR 491 – cited.
Sunbird Plaza Pty Ltd v Maloney  166 CLR 245 – considered.
The Union Bank of Australia Ltd v Puddy  VLR 242 – cited.
Wharf St Pty Ltd v Amstar Learning Pty Ltd  QCA 256 – considered.
White v Baycorp Advantage Business Information Services Ltd  200 FLR 125 – cited.
Xiao Hui Ying v Perpetual Trustees Victoria Ltd  VSCA 316 – applied.
M Doyle for the plaintiff
No appearance for the defendants
Shand Taylor Lawyers for the plaintiff
The defendants were not represented
- This is an action on a guarantee by the defendants of the obligations under a lease of a company which has since been dissolved. The proceeding was commenced by a claim and statement of claim filed on 18 May 2015. A notice of intention to defend and defence and counterclaim were filed by the defendants on 1 July 2015, and a reply and answer filed on 28 July 2015. At that stage the defendants had legal representation, but each of them subsequently filed a notice that the party is acting in person. On 4 July 2018 an application to strike out the defendants’ counterclaim came before me, but was dismissed with no order as to costs; however, on 4 December 2018 another judge did make such an order. The defendants’ signature on the request for trial date was dispensed with, by consent, by another judge on 9 March 2016. Nevertheless, it was not until 21 December 2018 that a request for trial date, signed only on behalf of the plaintiff, was filed. When the trial came on before me for hearing, the defendants did not appear, and the hearing proceeded under r 476.
- The plaintiff is the owner of a shopping centre situated at Coolangatta, once known as ‘Showcase on the Beach’. It entered into an agreement dated 21 February 2007 to lease that part of the shopping centre known as shop 47 to a company, Substance Clothing Pty Ltd, which had been registered the previous year. On the same day, a leave for a term of 7 years in registrable form was also executed by the plaintiff, but it was never registered. As a consequence it did not take effect as a lease at law, but the company, being in possession and paying rent, was in law a tenant from month to month, on the terms of the lease. Evidently the company was already in possession.
- The lease provided that the term commenced on 9 November 2006, and ended on 8 November 2013. Under the lease rent was payable each month at a specified annual amount, which increased by 4% each year during the term: clause 2. In addition, the company was liable to pay for water, electricity, gas, telephone and other utility services, and ambulance levies, in respect of services supplied to the premises: clause 10.1(1), (g). There was also an obligation to pay GST on all payments, interest at a rate determined by a formula (clause 6.8), and legal costs, on an indemnity basis, in connection with any breach of the lease and the termination of the lease: clause 18.3.
- The statement of claim alleged a failure by the company to pay rent, outgoings or GST and interest under the lease from 1 August 2010: para 5A. Schedule 1 to the statement of claim shows that before November 2010 sometimes rent was only paid in part; thereafter rent and outgoings were not paid. It was alleged that on or about 11 November 2011 the plaintiff terminated the lease and re-entered the premises: para 9. That the company ceased trading was admitted, but not the abandonment of the premises: defence para 7. The last amount received was on 25 November 2011 when a bank security guarantee given by the company was called on.
- There is the complication that the company was deregistered by the Australian Securities Investment Commission on 15 April 2011. The effect of the deregistration of the company was that the lease, as property of the company, vested in ASIC pursuant to the Corporations Act 2001 (Cth) s 601AD(2). The liability of the company under the lease did then cease; however, I accept that this did not affect the defendants’ obligations under the guarantee. The guarantee also provided for an indemnity (clause 25.3) so that the defendants were liable as principal debtors, and in addition the guarantee provided expressly that it was unaffected by either the determination of the lease or by an “insolvency event” (clause 25.4(k)), which was defined to include the dissolution of the corporate lessee. The practical effect is that the defendants remain liable for amounts which would have been payable under the lease by the company had it remained in existence.
- That the plaintiff terminated the lease and re-entered the premises on 11 November 2011 was not admitted in the defence. Nevertheless, the evidence led for the plaintiff established that that did occur. The effect of this was to put an end to the lease, and hence to put an end to the hypothetical obligation of the now dissolved company to pay rent under it. Thereafter the defendants’ obligations to make payments in respect of rent, and indeed outgoings, for the demised premises also came to an end.
Consequences of termination
- Because the company had been dissolved, the plaintiff had a right to terminate the lease by notice or by re-entry. Accordingly the termination of the lease by the plaintiff was effected in accordance with clause 18.2. Clause 18.3 provided:
“If this lease is terminated under this clause 18, the tenant indemnifies the landlord against any liability or loss arising and any cost incurred (whether before or after termination of this lease) in connection with the tenant’s breach of this lease (including legal costs on an indemnity basis) and the termination of this lease (including legal costs on an indemnity basis) including the landlord’s loss of the benefit of the tenant performing its obligations under this lease from the date of that termination until the expiry date.”
- Strictly speaking, what this clause provides is not that the amount the plaintiff would have received under the lease is payable anyway notwithstanding the termination of the lease; what it provides is that the plaintiff is entitled to be indemnified in respect of the loss suffered as a result of the termination of the lease, including the loss of the benefit of the performance by the tenant of its obligations under the lease until the expiry date. In effect, this is a claim for damages for loss of the benefit of the lease, a familiar claim which the landlord has anyway at common law if there has been a repudiatory breach of the lease prior to termination. It is not that rent is payable whether or not the lease is terminated, but the plaintiff is entitled to damages for the breach of the lease by the tenant which, if the leased property remains vacant although it is available to be re-leased during that period, will be the same, since the practical effect of the tenant’s breach will be that the plaintiff has lost the benefit of the receipt of rent from the tenant for the balance of the term of the lease.
- There was in the present case evidence that the particular premises were not in fact relet by the plaintiff, though they were available for reletting. One of the consequences of the plaintiff’s claim being characterised as one for damages rather than for debt under the contract is that the plaintiff came under a duty to take reasonable steps to mitigate its loss. In the defence filed by the defendants, it was alleged that the plaintiff had failed to comply with that duty, as it did not take any steps to find a replacement tenant because it intended to demolish, renovate or reconstruct the premises. Any allegation of breach of the duty to mitigate loss is an issue where the onus is on the defendant. Accordingly it is necessary for the defendant to plead and prove that there has been such a failure to mitigate, otherwise what matters is the loss the plaintiff has in fact suffered as a result of the tenant’s breach. Under r 476 the plaintiff need only prove those matters alleged by the plaintiff in its pleading which are not admitted by the defendants in their pleading. It was unnecessary for the plaintiff to lead evidence in relation to issues on which the defendants carried the onus, such as a failure to mitigate loss.
- As it happened, the affidavit relied on by the plaintiff as showing that the premises had remained vacant throughout the balance of the term also contained information about attempts to re-lease the premises. The material did show that attempts were made to interest potential lessees in the premises, without success. It was the case, according to that affidavit, that the premises were ultimately demolished as part of the redevelopment of part of the ground floor of the shopping centre, but not until 2014, after the end of the term of the lease. Indeed the plaintiff’s witness gave evidence that, if it had been able to secure a tenant for the premises they would not have been included in the redevelopment in 2014. Exhibited to the affidavit is a leasing report dated 6 October 2011 which lists a number of “vacancies” including, among retail, one “budgeted vacancy”, 21 development affected vacancies (including commercial vacancies) and 15 “virtual vacancies”, one of which was the premises the subject of the lease to the company.
- Since, according to the statement of claim, by this time it had been almost 12 months since the company had paid any rent to the plaintiff, it may be that there were in the shopping centre a lot of tenants who were experiencing difficulties, and would have liked to vacate their premises, even apart from those which were vacant because of the proposed redevelopment. On the face of it, that seems to be a lot of tenants having difficulties paying their rent, which in turn suggests that the rent being sought by the plaintiff was too high, a matter which may have been of some relevance had I been considering whether there was any failure to mitigate loss. That however is not a matter which I can consider, in view of the basis on which I am proceeding.
Scope of Guarantee
- The next issue is as to the scope of the guarantee. Another consequence of the fact that what the plaintiff is seeking to recover is strictly speaking damages rather than payment of rent is that it becomes relevant to consider whether the guarantee extends to the liability for payment of damages or just the liability of the company for payment of rent. In Sunbird Plaza Pty Ltd v Maloney, Mason CJ, with whose reasons three other members of the court agreed, said:
“There are, however, two common classes of guarantee of the payment of instalments by the principal debtor. The first is an undertaking by the guarantor that if the debtor fails to pay an instalment he will pay. This is a conditional agreement. The guarantor’s obligation to pay arises on the debtor’s failure to pay. The second is an undertaking by the guarantor that the debtor will carry out his contract. Then a failure by the debtor to perform his contract puts the guarantor in breach of his.”
- This decision was considered by McPherson JA, with whom the other members of the court agreed, in Wharf St Pty Ltd v Amstar Learning Pty Ltd, where at  his Honour said that the effect of this analysis was that a straightforward guarantee of a debt will ordinarily be construed as a simple undertaking to pay if the debtor does not, so that the guarantor’s obligation is conditional upon the debtor not paying an existing indebtedness. His Honour went on to note that in Sunbird Plaza Mason CJ held that the promise fell within the second class referred to in the passage quoted, except insofar as it related specifically for the payment of all monies payable, in respect of which the promise may well fall into the first category, a point that the High Court did not decide on that occasion because there was no question of whether there was a liability for damages before it. Nevertheless, in the matter then before the Court of Appeal the court held that the guarantee did not extend beyond the obligation to pay rent, and hence did not extend to an obligation to pay damages in respect of a period after the lease had been terminated: . In that particular agreement, which was somewhat informal, the relevant guarantee consisted simply of a statement that the directors “guarantee the payment of the rent”: .
- By contrast the guarantee in the present case is lengthy and detailed, and very broadly drafted. Clause 25.2 provides that the guarantor “guarantees payment to the landlord of guaranteed money and the performance and observance of all guaranteed obligations”. The terms “guaranteed money” and “guaranteed obligations” are themselves defined in clause 25.1, the former includes “all amounts which for any reason whatsoever are payable or owing by the tenant to the landlord under or in connection with the lease, including under clause 18…” The latter extended to “all express or implied obligations, covenants, warranties, terms, conditions, provisions, stipulations and work to be observed, performed or fulfilled by or on the part of the tenant in connection with the lease or the occupancy of the premises by the tenant, apart from those comprised in the guaranteed money”. Clause 18 is the clause which provides for the tenant to pay the damages arising from the loss of the benefit of the tenant’s performance of its obligations during the balance of the term, so it is in my view clear enough that the guarantee extends to a guarantee of payment of the tenant’s obligations to pay such damages.
- Apart from that, under clause 25.3 the guarantor indemnified the landlord against any loss the landlord suffers because of various things, including an “insolvency event”, which, as defined in clause 25.1, includes dissolution. As well, under clause 25.3(c) the indemnity applies if the guaranteed money is not recoverable from or enforceable against the tenant because of any other circumstance whatsoever including any transaction relating to the guaranteed money being void, voidable or unenforceable. The effect of the dissolution of the company was that the obligation to pay under the lease became unenforceable, and that would trigger the operation of clause 25.3. It follows that under the terms of this guarantee the guarantors are liable to pay the amount which would be properly recoverable from the company as damages for breach of the lease had it not been dissolved.
Amendment to statement of claim
- On the day of the trial I gave leave to the plaintiff to amend the statement of claim, on the basis that the proposed draft amended statement of claim had been provided by email to both defendants prior to the trial date. Later while considering the matter I was reminded of the decision of the High Court in Banque Commerciale SA v Akhil Holdings Ltd  169 CLR 279. In that case Brennan J observed at p 288:
“Non-appearance of a defendant at the trial does not allow the plaintiff a free rein to amend the pleadings to raise issues of which the absent defendant has had no notice or to obtain relief not founded on the pleadings… The reason why the court does not allow substantive amendments to pleadings so as to allow the plaintiff further or other relief against an absent defendant can be gleaned from analogous cases where the court has not allowed substantive amendments of the writ against a defendant who has failed to enter an appearance unless the writ is re-served… the reason is that the risk of injustice to the absent defendant must be avoided…”
- In that case a defendant who had pleaded a limitation period had not appeared at the trial, where the claim was found to be statute barred and was dismissed; on appeal it was found that there was fraud on the part of the defendant which overcame the limitation defence, notwithstanding that fraud had not been pleaded or particularised against that defendant, and no issue of amendment arose. The High Court allowed an appeal. The remarks of Brennan J were dicta, but they were quoted and applied in Robertson Street Properties Pty Ltd v RPM Promotions Pty Ltd  QCA 389 at . In that paragraph Keane JA, with whom the other members of the court agreed, said that in the absence of a particular defendant the plaintiff “could obtain against him only such a judgment as was strictly supported by its pleading against him”. It followed that a finding made against that defendant at the trial was held not to be open, so that the finding of liability of that defendant as a party knowingly concerned in a contravention of s 52 of the Trade Practices Act was wrongly made, and the judgment was set aside. I therefore invited further submissions from counsel for the plaintiff as to why the leave granted at the trial ought not to be revoked.
- In response counsel for the plaintiff pointed out that notice had been given to the defendants of the proposed amendments prior to the date of the trial. At the trial the plaintiff had read an affidavit from a solicitor having conduct of the matter which deposed to a copy of the draft amended statement of claim being emailed with a covering letter to each of the defendants on 5 April 2019. The defendants were asked to advise urgently whether they objected to any amendment, in which case an application for leave to amend would be made in advance of the trial; otherwise “the matter can be dealt with on the first day of the trial commencing on 23 April 2019”. That letter elicited no response. On 22 April 2019 a further letter and revised draft amended statement of claim was sent by email to each of the defendants, again asking them to advise whether they objected to the proposed amendment, and stating that “we intend to deal with the amendments on the first day of the trial, which commences tomorrow…”. Again, no response was received to that letter.
- In each case the letter and proposed amended statement of claim sent by email to the email address given by the particular defendant in the notice that that defendant was acting in person. It was submitted for the plaintiff that the true rule was that, if the relief claimed by a plaintiff does not arise on the pleadings, a court is not entitled to grant that relief unless amendment is sought and grant, and notice is first given to the defendant whether or not the defendant appears at the trial, a proposition said to be established by the decision of the Victorian Court of Appeal in Xiao Hui Ying v Perpetual Trustees Victoria Ltd  VSCA 316 at . It is true that notice was given of two proposed amended statements of claim, though the second was given only on the day before trial, which is really very little notice. Under the rules, an application in a proceeding would ordinarily require a minimum of two clear business days’ notice prior to the hearing of the application: UCPR r 31(5).
- It was further submitted for the plaintiff that the changes between the first and second draft amended statement of claim were not substantial, and did not affect the basis of the plaintiff’s claim or the quantum sought. They introduced no new issues, and merely provided a more efficient way of pleading the same claim for the same relief. There were a number of differences between the original statement of claim, and the proposed pleading of which notice was given on 5 April 2019. The original paragraph 3(e) referring to clause 18.3 of the lease and an entitlement to legal costs on an indemnity basis was deleted, but a new paragraph 3A was inserted which included in paragraph (b) reliance on clause 18.3 in relation to, relevantly, legal costs on an indemnity basis. Paragraph 3A added a pleading that by clause 18.2 the plaintiff was entitled to terminate the lease if the lessee was deregistered, and relied on the provisions of clause 18.3 which contained an indemnity by the lessee of the plaintiff for any loss arising and costs incurred in connection with the termination of the lease, including the plaintiff’s loss of benefit of the lessee’s performing its obligations under the lease for the unexpired term. There was also a pleading relying on clause 20.2 of the lease for notice to the lessee to be able to be given to its solicitor.
- Paragraph 5 of the old pleading, referring to a clause of the lease which required that lessee to trade from the premises during the term, was deleted. A new paragraph 5A was inserted alleging that the tenant did not pay any amount in respect of rent outgoings or GST on an from 1 August 2010, and the allegation in paragraph 6 that a particular amount was outstanding as at 22 September 2011, was amended so as to allege that a different, and smaller, amount was outstanding as at 15 April 2011, with particulars set out in a modified schedule 1 to the statement of claim. Paragraph 7, alleging a breach of clause 9.2 of the lease, was deleted, as was paragraph 8, alleging that notice to remedy breach of covenant was sent on or about 22 September 2011. A new paragraph 8A was inserted, alleging that between 15 April and 11 November 2011 further amounts by way of rent outgoings and GST were not paid.
- The allegation in paragraph 9 of the statement of claim was amended so as to allege termination of the lease by re-entry under clause 18.2 on about 11 November 2011. There was then inserted a new paragraph 9A alleging a particular amount of loss as a result of the termination, in the form of rent outgoings and GST otherwise payable under the lease for the balance of its term in a particular amount, of which particulars were given, and legal costs, of which particulars were not given. Paragraph 10 then alleged that these amounts had not been paid by the lessee to the plaintiff. Paragraph 11, claiming interest, was reformulated, I suspect in a way which just expressed with greater precision the previous claim as to interest, and there was then inserted a new paragraph 11A alleging that the plaintiff suffered loss as a result of the lessee’s deregistration, in the amounts of the arrears, non-payment and the loss of the interest.
- Paragraph 12 of the former pleading was deleted. The allegations in relation to the guarantee and indemnity of the defendants in clause 13 were amended, essentially just by clarifying the allegations, and paragraphs 14, 15 and 16 were amended, largely to remove reference to the particular amounts claimed. The paragraphs claiming relief were amended but only by increasing the amounts claimed, except for the amount claimed as interest on part of the amount claimed in the second paragraph of the claim for relief.
- The changes between the version of the proposed amended pleaded forwarded on 5 April and the one forwarded on 22 April were not as extensive. The new paragraph 3A(b) now inserted a reference to costs incurred in connection with the lessee’s breach of the lease as well as the termination of the lease. Paragraph 8A, instead of referring to the amounts not paid by the lessee between 15 April and 11 November 2011, referred to the amounts not paid between 15 April and 8 November 2013. A reference to schedule 2 indicates that the first date should have been 15 April 2011. Because the period is much longer, the amount involved is much larger. Because this period was now included in the proposed paragraph 8A, the proposal to include paragraph 9A was omitted. All of paragraph 10 was now also omitted while the proposed amendment to paragraph 11 was changed so as to claim interest as particularised in schedule 4, together with continuing interest at the former rate of $40.37 per day. Paragraph 11A was widened to allege loss caused by the lessee’s breach and deregistration, and the termination of the lease.
- Accordingly it does seem to me that there is substance in the argument that the revised proposed amended statement of claim contained nothing which was different in substance from the version of which notice had been given earlier. The proposed changes did not greatly change the basis of the plaintiff’s claim; rather it was refined somewhat, and the amounts claimed to be owing were also refined and calculated I suppose with greater precision in the second version of the pleadings. But the basic claims, that the lessee had been deregistered, that the lease was subsequently terminated, and that the plaintiff was entitled to amounts payable but not paid prior to the termination, and amounts lost as a result of the termination on the failure of the tenant to continue to perform the lessee’s obligations under the lease for the balance of the term, together with legal costs and interest. For practical purposes, these proposed amendments did not really amount to a new or additional claim. Perhaps the most significant change was that in the original pleading no amount was alleged to have been unpaid prior to 9 November 2010, whereas in the replacement version amounts were alleged to have been unpaid dating back to 1 August 2010.
- I accept that the relevant principle is as stated by the Victorian Court of Appeal, which is not inconsistent with the decision in Robertson Street Properties (supra): the position is essentially one of the application of the rules of natural justice, and as long as the defendants have had reasonable notice of the proposed amendments, the pleadings can be amended at the trial even if the defendants do not turn up. Accordingly I accept that it would not be necessary or appropriate for me to revoke the leave granted to amend the statement of claim at the trial. Although very little notice of the second proposed amended pleading was given, the difference between it and the earlier version was not significant.
- Incidentally, I should mention that the proposition that leave was required to amend the pleading under r 470 was challenged on behalf of the plaintiff, on the basis that a trial date had obviously been set by the time the trial date arrived, and the effect of r 465 was that r 470 did not apply. That appears to be correct, but as counsel for the plaintiff pointed out, r 380 which is not subject to any such limitation still required leave to make an amendment after the filing of the request for trial date, so leave was required at the trial. There appears to be some duplication between rr 380 and 470.
Failure to register lease
- In Chan (supra) the High Court held that the effect of failing to register the lease was that liabilities did not arise under it, and accordingly a guarantee of the tenant’s obligations “under the lease” did not cover the obligations under a common law tenancy at will on the terms of the lease as an equitable lease. In the present case however I accept that there were provisions included in the guarantee which prevent a similar outcome from arising. The term “guaranteed money” in clause 25.1 is very broadly drawn and was not by any means confined to money payable under the lease. Further the guarantors under clause 25.3 indemnified the landlord against loss because the liability to pay the guaranteed money was unenforceable for various reasons. In addition, under clause 25.4, the liabilities under the guarantee and indemnity were not to be adversely affected by anything which might otherwise have effect in law or equity, including a number of specific things, one of which is: “(u) the non-registration of the lease…” In those circumstances, the failure to register the lease cannot afford the defendants any defence in this case.
- I was initially concerned during the trial about whether the pleading was adequate as a claim in respect of unpaid rent during the balance of the term after the termination of the lease. My concern was that, although there was a pleading that the lessee had not paid the rent, nor had the defendants, there was no plea that the plaintiff had suffered a loss as a result of that. On reflection however it seems to me that the plea in paragraph 11A is wide enough to cover an allegation that the amount of the “non-payments” identified in paragraph 8A, so far as they arose in respect of the period after termination of the lease, amounted to a loss suffered by the plaintiff in connection with the termination of the lease. Alleging that the full amount payable for the balance of the term is a loss suffered by the plaintiff as a result of the termination of the lease necessarily involves the proposition that the plaintiff has not received any income from the leased premises in substitution for the amount which would have been payable by the lessee in respect of the balance of the term of the lease. Hence I consider that the plaintiff’s claim, based on the proposition that the premises remained vacant for that period, is for practical purposes covered by the pleading. Accordingly it was simply a matter of the plaintiff leading evidence to confirm that the premises had remained vacant, as the plaintiff did.
Calculation of amounts owing
- The plaintiff’s evidence was that the plaintiff’s agent maintained ledgers in an electronic financial record-keeping system of the amounts payable as rent but unpaid, which showed various amounts of arrears of rent at different dates; as at 15 April 2011, rent including GST on the rent in the amount of $24,678.49 was shown as outstanding, and further arrears of rent including GST in the amount of $17,714.49 accrued between then and 11 November 2011. The affidavit went on to point out, as appears to be correct, that the amount of the rent recorded as unpaid in the ledgers was less than the amount of rent in fact payable under the terms of the lease, and indeed the rent had been underpaid from the beginning of the lease.
- Under the lease rent was payable in the first year at the rate of $35,000 per annum, monthly on the first day of the month, with increases in each subsequent year of the lease of 4 per cent per annum: clause 1.1, clause 2.3. The amounts payable per annum were pleaded in paragraph 3(a) of the statement of claim, and this paragraph was admitted in the defence at para 3. As a result, in the year of the lease beginning on 9 November 2010, the amount payable as rent including GST was $3,753.29 per month. But in that year, the ledger showed the amount of rent payable inclusive of GST as $2,826.76 per month. The plaintiff’s evidence set out the amount properly owing, which involved a recalculation of rent from the commencement of the lease, and claimed the amount probably outstanding as rent if the amount payable under the lease had been treated as the amount of the rent rather than the amount recorded as payable in the ledger.
- The difficulty with this claim, however, is that there is nothing in the pleadings to support it. Indeed the pleadings claim unpaid rent and GST on unpaid rent by reference to the amounts shown as outstanding in the ledger. This was the case even with the version of the proposed amended statement of claim delivered the day before the trial, and the version I gave leave to file. That document when giving particulars the allegation in paragraph 6 of the statement of claim of unpaid rent and outgoings and GST as at 25 April 2011, as set out in Schedule 1 to the statement of claim, begins with an amount unpaid which became payable on 1 August 2010. It is apparent from that Schedule that some credit has been given for some amounts of rent in some months, but in the latter part of that period the rent said to be unpaid was $2,569.80 per month plus GST of $256.98, a total of $2,826.78, the amount said to be shown as unpaid rent in the plaintiff’s ledger. There is nothing in the pleadings to indicate or foreshadow a claim that the rent in fact charged from time to time by the plaintiff was less than the amount actually payable under the lease.
- Counsel for the plaintiff referred to provisions in the lease which were to the effect that charging and acceptance of payment of particular amounts by way of rent did not involve any waiver of any additional entitlement under the lease, and I accept that that is what the lease provided. Nevertheless, the plaintiff cannot pursue an additional claim, in effect rent payable but not charged, without giving notice of this in the pleadings. Apart from anything else, if it were alleged in the original statement of claim that the plaintiff was entitled to amounts in respect of undercharged rent dating back to November 2006, that may well have prompted a plea that those amounts, to the extent that the entitlements arose more than six years before the filing of the claim and statement of claim, were statute barred. The authorities referred to above clearly show that a claim of this nature cannot be pursued at the trial when it is outside the pleadings, as this claim is, and when no notice of it has been given to the absent party. What matters is not whether the ledger is wrong, but what has been claimed in the pleading. If that proves to be wrong as well, that is the plaintiff’s problem.
- The amounts claimed for rent in Schedule 1 to the statement of claim generally match the amounts shown as rent charged in the receivables ledger exhibited to Mr Gowers’ affidavit at p 134, although in a number of months the amounts shown in Schedule 1 are lower, I assume because credit has been given for receipts. I regard these as proving the amounts of rent and GST on rent, which follows from my calculation, in respect of the period covered by Schedule 1.
- Schedule 2 is said to cover the period from 15 April 2011 to 8 November 2013, the end of the term, although it provides a total as at 1 November 2011, and it remains in effect two Schedules, 2 and 3, before and after this point. The ledger records further amounts debited in respect of rent up to 9 November 2011, which so far as they go are reflected in Schedule 2. The amounts referred to as rent plus GST in Schedule 3 after 9 November 2011 do however appear to match the amounts payable under the lease as alleged in paragraph 3 of the pleading, divided by 12, so in respect of the period after possession of the premises was retaken by the plaintiff rent and GST on rent are claimed by reference to the amount in fact payable under the lease, rather than by reference to the amount recorded in the ledger from time to time. In respect of this period therefore there can be no issue about the defendants’ not having notice of the claim by reference to the amount actually payable under the lease.
- I must say that I suspect that, if the plaintiff was in fact charging and accepting rent at a rate in the amount provided for under the lease from the time when the lease was first entered into, with the appropriate 4 per cent adjustment being made each year, and if the company had actually been paying its rent and otherwise meeting its obligations under the lease, what the plaintiff would in fact have received was rent at the rates recorded in the ledger, adjusted by 4 per cent per annum each year, rather than the amounts actually payable under the lease. If so, that represents the limit on the plaintiff’s loss as a result of the failure of the company to remain in occupation of the premises throughout the lease and pay the rent demanded of it. There is however the consideration that apparently the plaintiff, at any time while this process was continuing, could have changed its approach and begun to charge rent at the higher rate. In those circumstances, it seems to me to be appropriate to approach the matter on the basis that the plaintiff is entitled to pursue the claim set out in the pleading if it can show that there was a legal right to payment of that amount, despite my suspicions. Accordingly I will allow the amounts of unpaid rent and GST on rent as claimed in Schedules 2 and 3 to the statement of claim.
- The position with regard to outgoings is that the only relevant outgoings referred to in the plaintiff’s evidence were electricity charges and an ambulance levy imposed by the state government. The premises were separately metered for electricity and the company was charged based on its usage, though there was a delay between the time when the electricity was actually used and when the plaintiff charged the company, with the result that charges were passed on to the company some months after the relevant usage. Schedule 1 to the statement of claim sets out various amounts said to be unpaid in respect of outgoings and GST on outgoings between September 2010 and 1 April 2011. There is no reference to outgoings that I can detect in the ledger which begins on p 132, but outgoings are referred to in the ledger which begins on p 130, though the earliest entry there is dated 1 December 2010.
- This ledger extends to 1 February 2012, but records rent, electricity, the government levy, interest and GST separately. The amounts shown as in arrears as at 1 February 2012 by this document are $2,491.32 in respect of electricity and $72.72 in respect of “government levy”, which together with GST at 10 per cent on these amounts produces a total of $2,820.44. By contrast the amount referred to in paragraph 34 of the plaintiff’s affidavit is an amount of $3,279.65. The difference corresponds to the total of the amounts listed in Schedule 1 which fall before 1 December 2010. In those circumstances, I am prepared to accept that the evidence proves the amount of the claim, although it does strike me as odd that the ledgers exhibited to the affidavit do not support the full amount said to be shown as owing by the ledgers.
- The amounts claimed in Schedule 1 for outgoings by way of electricity and government levy on and from 1 December 2010 match the amounts as set out in that ledger, up to 1 April 2011. Again GST is a matter of calculation. Accordingly I am satisfied that the plaintiff has proved that the amount set out in Schedule 1 to the statement of claim is recoverable, in the sum of $26,315.71. Further, amounts from May 2011 until February 2012 in the ledger at page 130-1 of the affidavit match the entries for electricity and government levy in Schedule 2 to the statement of claim. Those amounts were also properly proved.
- The amount claimed in Schedule 2 is unpaid amounts payable under the lease up to the time it was terminated, and that in Schedule 3 reflects what is strictly speaking damages for loss of the benefit of the balance of the term of the lease, but in the circumstances the amount can be calculated the same way. Accordingly the total amount claimed in Schedule 2 and 3 is also recoverable by the plaintiff from the defendants. This amount is $104,099.94.
- Interest is claimed under clause 6.8 at a rate of 2 per cent above the standard contract default interest rate published by the Queensland Law Society and in force on the due date for payment. There is evidence from the Queensland Law Society website of the standard contract default rate from February 2005 up to the rate effective from 1 March 2019. The plaintiff’s witness set out in a Schedule to his affidavit a calculation of interest. This is based on money unpaid and recoverable from 1 April 2007 as set out in his affidavit, not as claimed in the Schedules to the statement of claim, and is therefore useless. Schedule 4 to the amended statement of claim sets out a calculation of a claim for interest which has the virtue of being based on the amounts claimed in the earlier schedules to the pleading.
- It starts with the amounts claimed in Schedule 1 to the amended statement of claim, unpaid rent from 1 August 2010, at which time the Law Society rate was 11.45 per cent, so that the contractual rate was 13.45 per cent. The figures in Schedule 4 to the statement of claim match the amounts claimed in Schedule 1 - 3, as do the dates, and Schedule 4 correctly reflects the credit on 25 November 2011 of the amount of the bank guarantee. The ledger at pages 130-1 to the affidavit shows various amounts as “interest recd”. I was initially concerned that this meant “interest received,” but the amounts are not shown as credits in the other ledger, and on the whole I think that the true position is that this stands for interest “recorded,” as part of the total amount outstanding over that period.
- The interest rates in Schedule 4 match the evidence of the Queensland Law Society’s standard contract for default interest rates, so that on the face of it the calculations in the Schedule appear to be correct by reference to the amounts claimed in the statement of claim. I have not checked all the calculations in Schedule 4, but I checked some of them and the figures appear to be correct. That Schedule has a calculation for interest owing in accordance with the terms of the lease calculated on the amounts claimed in the statement of claim up to 6 April 2019. That needs to be brought up to date. Interest at 11.3 per cent per annum on $130,415.67 from 6 April 2019 to 5 September 2019, 152 days, comes to $6,137.04, which when added to the total of the amount of interest calculated in Schedule 4, $106,711.90, comes to $112,848.94.
- The next issue was the question of legal costs. Under the lease the plaintiff was entitled to recover legal costs on an indemnity basis, as alleged in paragraph 3A(h) of the amended statement of claim. Paragraph 11A alleges that the plaintiff has suffered loss in the amount of the arrears, that is the amount in Schedule 1, the non-payments (the amounts in Schedules 2 and 3) and interest (the amount in Schedule 4), as well as “legal costs”. There is however no allegation of any particular amount incurred by way of legal costs. Paragraph 9A(b) in the earlier version of the proposed amended statement of claim did refer separately to legal costs, and said that particulars of them would be provided closer to trial. In fact what happened before trial was that a fresh version of the proposed amended statement of claim was served which did not include that paragraph 9A. All that was said in the final version of the statement of claim was that the plaintiff claimed “costs on the indemnity basis”. Accordingly, what has been claimed in the pleadings is costs, that is the costs of and incidental to the proceeding, assessed on the indemnity basis. Given the terms of the lease, it is appropriate for costs to be assessed on the indemnity basis.
- The plaintiff has not pleaded any claim for any particular amount by way of costs, or any claim for any costs other than costs of and incidental to this proceeding, and, for the reasons given earlier, the plaintiff is limited to the claims in the current version of the pleading. It is however by no means clear that the plaintiff is actually seeking anything other than costs on the indemnity basis. Amounts payable by way of legal costs under the lease are within the definition of guaranteed money, or alternatively a loss suffered because of the company’s deregistration or failure to comply with its obligations under the lease, or the inability of the plaintiff to enforce those obligations under the lease against the company, and accordingly within the scope of the indemnity in clause 25.3. Accordingly it is appropriate to order that the defendants pay the plaintiff’s costs assessed on the indemnity basis, but it is not appropriate to include any particular amount in respect of legal costs to the judgment.
- Finally the plaintiff relied on a certificate which under clause 25.23 of the lease was prima facie evidence of the amount payable in connection with the guarantee and indemnity, and other factual matters stated in it. The certificate, which is the last document in the affidavit of Mr Gowers, verifies amounts payable as set out in his affidavit, on the basis set out there. As evidence of the amounts actually payable in accordance with the lease, the certificate may be unexceptional, but the difficulty is that the plaintiff is limited to the amounts payable in accordance with the claims made in the pleadings, and accordingly the certificate is in the same position as the other evidence; it does not overcome the limitation inherent in the scope of the pleadings.
- There will therefore be judgment that the defendants pay the plaintiff the sum of $243,264.59, made up of the amount unpaid by the company and owing to the plaintiff at the time of its dissolution (as claimed in Schedule 1 to the statement of claim), $26,315.71, the amount which would have been payable by the company to the plaintiff pursuant to the lease during the balance of the period prior to termination of the lease had the company remained in existence, but was unpaid (as claimed in Schedule 2 to the statement of claim), $19,019.67, the amount of loss suffered by the plaintiff as a result of the termination of the lease (as claimed in Schedule 3 to the statement of claim), $85,080.27, and interest on those three amounts as claimed in Schedule 4 of the statement of claim, brought up-to-date, an amount of $112,848.94. I also order the defendants to pay the plaintiff’s costs of the proceeding, to be assessed on the indemnity basis.
 By the second defendant on 25 August 2016; by the first defendant on 25 September 2017, though on 29 March 2017 a notice of change of solicitors had first been filed.
 Facts from the statement of claim as admitted by the defence, except as stated.
 Affidavit of Gowers sworn 23 April 2019 Exhibit PE1 page 7.
 Ibid, page 77; the leave had already been executed by the company, on 19 December 2006.
 Conceded by counsel for the plaintiff at p 11.
 Chan v Cresdon Pty Ltd  168 CLR 242.
 The defendants did not admit the dates, but they are written in the executed leave.
 There was also in clause 5 an obligation to pay Percentage Rent, which appears to have been 5% of any amount by which the gross sales of the company at the site in a Percentage Period exceeded $700,000. Presumably the company never qualified for any such liability.
 Affidavit of Gowers paras 14-16.
 Statement of Claim para 1(b)(ii), admitted defence para 1.
 Holli Managed Investments Pty Ltd v Australian Securities Commission  90 FCR 341 at 350; White v Baycorp Advantage Business Information Services Ltd  200 FLR 125.
 The Union Bank of Australia Ltd v Puddy  VLR 242 at 248; see also Sandtara Pty Ltd v Abigroup Ltd  42 NSWLR 491.
 Clause 25.1, definition of “Insolvency Event” para (d).
 Affidavit of Gowers para 13.
 Wharf St Pty Ltd v Amstar Learning Pty Ltd  QCA 256 at .
 Affidavit of Lopez sworn 29 April 2019 para 6. The affidavit also deposed to approaches having been made to a number of retail businesses to take the space.
 Cairns Australian Civil Procedure (11th Edition 2016) at para 16.190.
 Affidavit of Lopez para 8.
 Ibid para 9.
  166 CLR 245.
  QCA 256.
 Affidavit of Forman sworn 23 April 2019.
 Such a correction was made to the document filed in court.
 Clause 25 of the lease is the guarantee and indemnity: affidavit of Gowers, exhibit PG1 p 105.
 Affidavit of Lopez sworn 23 April 2019, in particular para 6.
 Affidavit of Gowers, para 22 - 25.
 Ibid para 26 – 28.
 Ibid para 28.
 The ledger also records some amounts as “receipt” or “credit applied”, but as credit amounts in a running account rather than by reference to particular amounts payable.
 There may have been defences available had it claimed to do so. I have the impression I do not have the full story here.
 Affidavit of Gowers, para 32.
 Schedule 3 correctly reflects the credit on 25 November 2011 of the amount of the bank guarantee.
 There is a minor error in addition, in that the amounts in Schedule 3 add to $85,080.27.
 Affidavit of Gowers, Exhibit PG1 pp 136-142.
 Platinum United II Pty Ltd v Secured Mortgage Management Ltd  QCA 229.
- Published Case Name:
Surfrider Investments Pty Ltd v Todd & Anor
- Shortened Case Name:
Surfrider Investments Pty Ltd v Todd
 QDC 167
McGill SC DCJ
05 Sep 2019