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Kiddle Investments Pty Ltd v YAJM Vegan Pantry Pty Ltd[2022] QDC 82

Kiddle Investments Pty Ltd v YAJM Vegan Pantry Pty Ltd[2022] QDC 82

DISTRICT COURT OF QUEENSLAND

CITATION:

Kiddle Investments Pty Ltd v YAJM Vegan Pantry Pty Ltd & Ors [2022] QDC 082

PARTIES:

KIDDLE INVESTMENTS PTY LTD

ACN 600950721 as trustee under instrument 716040998

v

YAJM VEGAN PANTRY PTY LTD

ACN 612495557

(first defendant)

and

MELHAM TABET

(second defendant)

and

JOHN TABET

(third defendant)

and

YAHYA HASHAM

(fourth defendant)

and

ABDUL KARIM SACUR

(fifth defendant)

and

RAW SQUEEZE ONE PTY LTD

ACN 611478258

(sixth defendant)

FILE NO:

4177/18

DIVISION:

Civil

PROCEEDING:

Trial

ORIGINATING COURT:

Brisbane District Court

DELIVERED ON:

22 April 2022

DELIVERED AT:

Mount Isa

HEARING DATE:

3 February 2022

JUDGES:

Byrne QC DCJ

ORDERS:

  1. Within 14 days of the date of delivery of this judgment, the parties are to file an agreed form of order consistent with these reasons.
  2. If agreement cannot be reached as to the form of order, the parties are to each file and serve written submissions as to the appropriate form of orders, limited to 10 pages, within 14 days of the date of delivery of this judgment.
  3. If agreement is reached as to the form of orders, the parties are each to file and serve written submissions as to costs, limited to five pages in addition to any necessary annexures and affidavits, within 14 days of the date of delivery of this judgment with a view to that issue being decided on the papers unless determined otherwise.
  4. Liberty to apply.

CASES:

Apriaden Pty Ltd v Seacrest Pty Ltd [2005] 12 VR 319

De Landgrafft v Brown (1993) 9 SR (WA) 236

Fresh Express Australia Pty Ltd v Larridren Pty Ltd [2002] FCA 1312

Jones v Dunkel (1959) 101 CLR 298

Konica Business Machines Australia Pty Ltd v Tizine Pty Ltd (1992) 26 NSWLR 687

Luxer Holdings Pty Ltd v Glentham Pty Ltd [2007] 35 WAR 254

Platinum United II Pty Ltd & Anor v Secured Mortgage Ltd (in liq) [2011] QCA 229

Vickers v Stichtenoth Investments Pty Ltd (1989) 52 SASR 90

CATCHWORDS:

RETAIL AND COMMERCIAL LEASE – LANDLORD AND TENANT – BREACH OF LEASE – where the first defendant entered into a commercial lease and where the second to sixth defendants were guarantors under that lease – where the first defendant did not pay rent – where the plaintiff seeks monies owing for rent and outgoings under the lease to the time of termination and damages for breach of the lease  thereafter – where the defendants assert the plaintiff was under a duty to mitigate the accrual of monies owing prior to termination of the lease – whether there is such a duty

RETAIL AND COMMERCIAL LEASE – LANDLORD AND TENANT – BREACH OF LEASE – where the parties entered into a lease in which there were two clauses relating to the recovery of costs flowing from the first defendant’s beach – where one clause capped the amount to be recovered as that which was reasonable and one which provided for an indemnification of all costs – where the plaintiff relies only on the indemnification clause to include all costs up to the filing of the Further Amended Statement of Claim too be included in the judgment amount – whether the Court will allow reliance on the more onerous provision.

COUNSEL:

Mr B. Strangman for the plaintiff

Mr N. Shaw for the defendants

SOLICITORS:

Active Law for the plaintiff

MSP Lawyers for the defendants

Introduction

  1. [1]
    On 21 November 2018 the plaintiff commenced proceedings against the defendants by way of a Claim seeking monies owed under a lease and damages for breach of a lease.  The lease in question was of commercial premises at North Lakes.
  2. [2]
    There were a number of parts of the Claim. The parties have resolved their differences on all but two of these parts.  These two disputes will be referred to as “the mitigation issue” and “the costs claim under the lease issue”.
  3. [3]
    The second to sixth defendants inclusive were each guarantors under the subject lease. Liability for these defendants is not denied to the extent that liability is established against the first defendant.[1] 
  4. [4]
    The parties are agreed that I should only consider the two issues in dispute, at least at this stage.  Given that my findings may affect the quantum of nearly all aspects of the Claim, it is appropriate that I make the necessary findings and invite submissions as to the appropriate form of orders in light of those findings.[2]

The pleadings – the issues remaining in dispute

  1. [5]
    By its Further Amended Statement of Claim (“FASOC”), the plaintiff alleged that the first defendant failed to pay rent in accordance with the express terms of the lease for the period 1 December 2017 to 2 April 2018[3] and also failed, refused or neglected to pay monthly outgoings in accordance with the express terms of the lease for the period 1 December 2017 to 2 April 2018.[4] Its claim for monies owing under the lease is in respect of those matters.
  2. [6]
    The plaintiff also claims damages from the date of termination, namely 3 April 2018 for the difference in rent it was entitled to receive under the lease, less that received under other leases subsequently entered into for the property,[5] damages for outgoings not paid from the termination of the lease to the commencement of the subsequent leases,[6] and other damages which are not in issue and therefore need not be considered herein.
  3. [7]
    In relation to the costs claim under the lease issue, the plaintiff claims damages for “legal and administration costs” comprising legal costs incurred by the plaintiff and a real estate agency acting on its behalf[7] and damages for “reasonable real estate commissions, charges and fees”, incurred for reletting the premises.[8]  Other claims for damages are not in dispute and need not be further considered herein.
  4. [8]
    In relation to the mitigation issue, the defendants’ pleading at paragraph 6 of the Amended Defence (“AD”) is central to its overall defence:

“… the Defendants deny that the First Defendant was required to pay the rent stipulated and further state:

  1. the First Defendant:
  1. did not occupy the premises;
  2. notified the Plaintiff in December 2016 through its agent Ms Natasha Grima that:
  1. it had not taken possession of the Premises and did not intend to do so;
  2. it was terminating the Lease; and
  3. advised the Plaintiff to mitigate its loss.

Particulars

In December 2016, the First Defendant contacted Ms Natasha Grima, the agent acting on behalf of the Plaintiff (“The Agent”) via telephone and said words to the effect as those pleaded in paragraph 6(a) above.

  1. had agreed to pay rent for a reasonable amount of time to allow the Plaintiff to mitigate its loss;
  1. The Plaintiff was obliged to take reasonable steps to mitigate its loss and to endeavour to lease the Premises at reasonable rent on reasonable terms;
  2. The plaintiff’s entitlement to recover rent or damages ought to be assessed on whether it had taken any action to mitigate its loss;
  3. by 1 December 2017, the Plaintiff ought to have mitigated its loss;
  4. the Plaintiff failed to discharge its duty to mitigate its loss; and
  5. had the Plaintiff discharged its duty appropriately it wouldn’t have suffered any loss or damage.[9]
  1. [9]
    The defendants also admit that the first defendant paid both rent and outgoings up to and including 30 November 2017.[10]
  2. [10]
    In so far as the mitigation issue includes a claim for outgoings, the defendants also pleaded that the first defendant was not provided with an annual estimate of apportionable outgoings.[11] This allegation was ultimately not pursued.[12]
  3. [11]
    The first defendant further pleaded a counterclaim against the plaintiff based in essence on the pleaded notification by the first defendant that it was not taking possession of the premises and it did not intend to do so, a notification of a termination of the lease, and the plaintiff’s duty to mitigate its loss.
  4. [12]
    The plaintiff in its Amended Reply and Answer (“ARA”) took issue with paragraph 6 of the AD by way of denials and non-admissions, sometimes qualified by statements of fact.  It specifically denied a failure in its duty to mitigate loss and effectively pleaded a denial of the counterclaim.[13] It specifically pleaded that the first defendant was given notice of the annual estimate of apportionable outgoings by the provision of a disclosure statement.[14]  The plaintiff made no relevant concessions in the ARA.

Factual summary – the mitigation issue

  1. [13]
    It is convenient to outline a number of facts derived from written material tendered by consent at the hearing, most but not all of which was marked Exhibit 1, before considering aspects of the oral testimony of the witnesses.
  2. [14]
    On 22 August 2016 the previous tenants of the premises authorised Ray White Commercial Brisbane Northside (“Ray White Commercial”) to locate a suitable tenant to re-lease or sublet the tenancy.[15]  It is common ground that Ms Natasha Grima was the agent with whom primary contact was made.[16]
  3. [15]
    On 14 November 2016 the plaintiff signed a Disclosure Statement which, amongst other things, outlined the total estimated outgoings.  The notice was also signed by the fifth defendant, on behalf of the first defendant, and dated 1 February 2016.[17]
  4. [16]
    On 7 December 2016 the third defendant signed the lease on behalf of the first defendant. The second to sixth defendants inclusive signed the schedule to that lease as guarantors on various dates between 2 December 2016 and 7 December 2016.  The plaintiff signed the lease on 16 December 2016.  The initial term of the lease was for five years and required the first defendant to obtain a bank guarantee equivalent to four months’ rent plus GST, as well as hold current public risk insurance to a stated value.[18]  That insurance policy was taken out, effective from 19 December 2016.[19]
  5. [17]
    On or about 7 March 2017 the plaintiff gave notice to Ray White Commercial that the management rights were to be taken over by Raine & Horne Commercial Brisbane North (“Raine & Horne”).  This change was apparently to be effective from 5 April 2017, but that date was subject to arrangement between the agencies.  The contact person at Raine & Horne was Mr Shaun Baxter.[20]
  6. [18]
    On 15 March 2017 the plaintiff’s then solicitors received the bank guarantee required under the lease.[21]  Efforts had been made by the first defendant to have that bank guarantee granted at least since early February 2017.[22]
  7. [19]
    On 4 April 2017 Mr Baxter sent the plaintiff an extract from an email he had received on behalf of the first defendant.[23] In that email extract, the first defendant was seeking access to a grease trap and refers to an intention to use a deep fryer, an oven, a dough mixer, fridges and freezers.
  8. [20]
    On 12 April 2017 emergency contact details for the first defendant were emailed to Raine & Horne.[24]
  9. [21]
    On 5 May 2017 Mr Baxter wrote an email to other agents wherein he referred to a phone call with the third defendant[25] about the subject premises.  He wrote that the third defendant had told him that “they are not doing so well in North Lakes and are looking to assign or sublease the tenancy.  He says he does not want to open it and run it at a loss.”.[26]
  10. [22]
    On 8 May 2017 the first defendant appointed the same agency, Raine & Horne, as its agent for the purposes of letting the subject premises.[27] 
  11. [23]
    On 16 May 2017 a Notice to Remedy Breach of Covenant was issued to the first defendant seeking payment of $5,795.16.  Accompanying invoices evidence the periods of rent and outgoings said to relate to the Notice.[28]
  12. [24]
    On 23 May 2017 Mr Baxter emailed the third defendant about the outstanding payment.  On the same day the third defendant replied by email “we’ll sort it out by the end week [sic]”.[29]
  13. [25]
    On 26 July 2017 a Notice to Remedy Breach of Covenant was issued to the first defendant seeking payment of $12,684.92.  Accompanying invoices evidence that the payments said to be outstanding referred to different periods to those the subject of the earlier notice.[30]
  14. [26]
    On 8 August 2017 Mr Baxter emailed the third defendant about the outstanding payments.  The third defendant’s emailed reply included the following:

I hope you can1 understand the situation with that store as we aren’t trading the funds aren’t there, I am trying to get some funds injected into that company so I can clear the account and fix up the marketing invoice so we can get the ball rolling to rent this property and not be in this situation.

I understand if you guys had [sic] enough of chasing the invoice and the frustration you are in.

I am hoping next week or the week after to get some funds into that company.”[31]

  1. [27]
    In cross-examination, the third defendant accepted that the last paragraph was intended to suggest that some rent would be paid shortly.[32]
  2. [28]
    The next day, 9 August 2017, Mr Baxter wrote an email to a legal firm, briefing them on behalf of the plaintiff.  In it he wrote:

“● Do not want to take the lock out option, want to hold them to account as there is still over four years left on the lease.

  • Do not want to carry out any action that could compromise the above.
  • Is just wanting payment and for tenants to meet their obligations.”[33]
  1. [29]
    Mrs Kiddle, a director of the plaintiff, accepted those comments were reflective of the instructions provided to Mr Baxter.[34]
  2. [30]
    On 4 October 2017 the third defendant sent an email to Mr Baxter which said, in part:

I have a friend that would like to take on the store at 106/53 Endeavour Blvd, North Lakes and try to lease it for us as you are aware of our situation.

Just wanted to let you know, Hayley Williams from LJ Hooker I will be assigning her to find someone.”[35]

  1. [31]
    On 2 November 2017 the legal firm emailed the third defendant – clearly on behalf of the first defendant – with a proposed payment plan.  The third defendant accepted that payment plan the next day.  The email outlined specific amounts and dates for payment, commencing 3 November 2017, and also referred to the whole of the bank guarantee having previously been called on and a failure to replenish it.  The payment plan required the provision of another bank guarantee or cash bond in the sum of $17,735.82 within three weeks.[36]
  2. [32]
    The ledger for Raine & Horne records a payment of $1,630.53 being received on 6 November 2017.[37]  That is the precise amount required under the payment plan to be paid by midnight 3 November 2017 (a Friday).  No witness was called to explain the ledger entries, although one of the directors of the plaintiff was taken to them in cross-examination and in effect asked to interpret them.  I will return to a consideration of the ledger entries later in these reasons.
  3. [33]
    On 4 December 2017 the legal firm emailed the third defendant in terms that indicated that certain payments were required by 8 December 2017, and that the replacement bank guarantee was still outstanding. The third defendant replied on 8 December 2017 to the effect that he had paid the instalment for the previous week and would make a further payment that night. (There is in fact an entry in the real estate agency ledger dated 6 December 2017 referring to a payment in the amount of $1630.00 as required under the payment plan). The third defendant sought an extension of time for the provision of the bank guarantee.[38] A draft of the bank guarantee was received by 13 December 2017.  It seems it was never provided in final form.[39]
  4. [34]
    On 29 January 2018 the plaintiff issued a Notice to Remedy Breach of Covenant seeking payment of $19,618.65.[40]  On 30 January 2018 the third defendant sent an email to the plaintiff’s lawyers stating:

Can you please request from landlord a six Months waive rent [sic] as at the moment the company isn’t in the best shape financially, we have closed 3 Stores already, this is the last one.

Even if the landlord can find a tenant would be much appreciated.”[41]

  1. [35]
    On 9 March 2018 the plaintiff issued a Notice to Remedy Breach of Covenant seeking payment of $30,601.09.[42]  A reply by way of a letter from lawyers on behalf of the first defendant asserted that any loss suffered by the plaintiff had to be seen in the context of a failure to mitigate the loss.[43]
  2. [36]
    A notice of termination was issued which became effective from midnight on 2 April 2018.  The proceedings have been conducted on the basis that that became effective on 3 April 2018.  The defendants accept that the plaintiff satisfied its duty to mitigate the loss from that date and the plaintiff concedes that no steps were taken to mitigate its loss prior to that date.
  3. [37]
    On 4 April 2018 the plaintiff’s real estate agent gained entry to the premises, and took photos.[44]  She observed there were 38 chairs,[45] two fire extinguishers, three wooden crates and a “data coms rack cupboard” in the shop.  She also noted some damage to the walls and that some cleaning, particularly of the floor, was required.[46]
  4. [38]
    On 5 July 2018 a short term four-week lease was entered into for the subject premises.
  5. [39]
    On 1 March 2019 a three-year lease was signed in respect of the subject premises, to commence 1 May 2019.
  6. [40]
    In the context of that chronology taken from the written material tendered  by consent at trial, it is now convenient to consider aspects of other testimony adduced at the trial.

Diane Kiddle

  1. [41]
    Mrs Kiddle is one of two directors of the plaintiff.  She testified that the rent for the first six months of the first defendant’s lease was paid by a rental incentive provided by the previous tenant.  After that, rent was received from the first defendant and by calling on the bank guarantee.  She said there was no rent paid after December 2017.[47]  She believed that during the first six-month period, outgoings were paid by the first defendant.[48]  In the second six-month period rent and outgoings were covered by both the first defendant and the bank guarantee.[49]
  2. [42]
    Once the Notice of Termination took effect, the real estate agent entered the property, changed the locks, inspected the property and took photos.[50]  Rubbish and items were in the property which were not there prior to letting the property to the first defendant.  Similarly, there was damage to the wall and the floor was dirty; both of which conditions did not exist at the commencement of the first defendant’s lease.[51]
  3. [43]
    In cross-examination, Mrs Kiddle accepted that the first defendant had never traded from the premises, had never fitted out the premises for trading and that the real estate sign on the front window after the termination of the lease was the same one that had been there prior to the commencement of the lease.[52]
  4. [44]
    Mrs Kiddle did not accept a suggestion that the first defendant did not pay any outgoings during the first six months of the lease, relying on attachments to the first Notice to Remedy Breach of Covenant[53] to demonstrate that part payments were received for the period 23 November 2016 to 20 December 2016 and all were paid from 23 December 2016 to 22 February 2017.[54]  She however accepted that she did not have the information before her (i.e. in Exhibit 1) to discern which if any payments were by the first defendant and which if any were received by drawing on the bank guarantee.[55]
  5. [45]
    For the period after the six-month rent-free period, Mrs Kiddle accepted she could not presently identify which payments were made by the first defendant and which were received by drawing on the bank guarantee.[56]  She agreed that by the time the payment plan was offered, the bank guarantee had been exhausted,[57] and that any payments received by the real estate agency would have been applied to the oldest debts first.[58]
  6. [46]
    As to payments appearing in the real estate agency ledger as paid on 6 November 2017 and 13 November 2017, Mrs Kiddle considered it likely that they were paid by the first defendant as they were in accordance with the accepted payment plan, but she accepted she could not be certain.[59]
  7. [47]
    She confirmed that the email from Mr Baxter of 9 August 2017 reflected the attitude of the two directors, namely her and her husband, and that they would have discussed their position around that date.[60]

John Tabet

  1. [48]
    Mr Tabet, the third defendant, was also a director of the first and sixth defendants.  He was aware that the first defendant entered into the lease for the subject premises, but said that the intended business never traded, nor was it ever fitted out to trade.  The signage from the previous tenant remained on the premises throughout the first defendant’s lease.
  2. [49]
    He said that he did not want to go ahead with the shop, but he could not make contact with the landlord so he spoke with its agent, Ms Natasha Grima. He said he told her he did not want to go ahead with the shop, that the businesses he had before were closing down and there was no point in opening a shop knowing it would not go ahead.[61]  When asked what words he used, he testified “The most conversation with Natasha at the end was trying for me to get out and get someone else.”[62] and “I was the one saying to Natasha ‘I want to get out’.”[63]
  3. [50]
    He said that he held these conversations in “probably January” (2017).[64]
  4. [51]
    In evidence-in-chief he testified that, in relation to payments made under the payment plan, “from what I remember, (there was) probably one payment”.  He cannot remember when it was paid.[65]
  5. [52]
    In cross-examination he accepted that he had held the keys to the subject premises and that some boxes were stored in the premises.[66] 
  6. [53]
    The actual words he used when speaking with Ms Grima were said to be either, “I want to get out of the lease.  I don’t want the shop anymore”[67] and “I want to break the lease.  Can we get out of the shop”.  He could not recall using the word “terminate” at any time.[68]
  7. [54]
    Importantly, he gave the following evidence:

And when you said in your evidence before that you wanted to find a new tenant, you meant that you - as in the first defendant YAJM – would try and locate a tenant to take over the lease for you? --- Correct.

It wasn’t that you expected the plaintiff, the landlord, to go and find a replacement tenant for you? --- I couldn’t get in touch with the landlord … to get someone.

But you understood it was your obligation to find a new tenant to take over the lease if you wanted to assign it to someone? --- If I wanted to assign it, yes, it was my obligation to get someone.”

He later said he was trying to sublease and lease the premises, or to try and get out of it (the lease).[69]

  1. [55]
    He accepted that the certificate of currency of insurance was supplied as a requirement of the lease on 12 April 2017.[70]

Stuart Cameron

  1. [56]
    The defendants tendered at trial an expert report under the hand of Mr Cameron, touching on issues of valuation as relevant to the mitigation issue.  The first defendant contended that the report was only relevant if I found in favour of the defendants that the plaintiff had failed to mitigate its losses, as required by common law, and expressly by clause 9.3(2) of the lease. 
  2. [57]
    In that respect Mr Cameron had opined that a reasonable timeframe to find a new tenant for the subject premises would be nine to 12 months. The parties agreed for the purposes of the trial, that that was not an exact estimation and that it should be approached on the basis of a reasonable timeframe being seven to 14 months. With that agreement, Mr Cameron was not called to testify at the trial. It is appropriate to act on that agreed position.
  3. [58]
    For completeness, I note that there were other passages of this report which were both clearly not admissible, and expressly not relied on by the defendants.

Submissions on the mitigation issue

  1. [59]
    In essence, the plaintiff submits that the totality of the third defendant’s conversations, and the other conduct of the first defendant, lead to a conclusion that the first defendant had not in fact repudiated the lease but, if I find that the first defendant did repudiate, in any event the plaintiff did not elect to terminate the lease until the termination notice took effect on 3 April 2018.  It is that date that the duty to mitigate arose and, the defendants accept that, the plaintiff fulfilled its duty from that date.
  2. [60]
    The defendants submit that the first defendant was at all times in breach of two essential terms of the lease,[71] namely the requirement to pay rent and outgoings and the requirement to trade during core hours. However, the defendants’ case is not based on repudiation.[72] Although the first defendant had not abandoned the premises as a matter of law,[73] those matters together with the statements by the third defendant to the plaintiff’s agent meant that the plaintiff was aware that the first defendant was not going to take up the lease from early 2017.
  3. [61]
    Relying on observations in Vickers v Stichtenoth Investments Pty Ltd,[74] the defendants submit that the plaintiff was obliged to mitigate the accrual of what would be considered debts due under the lease, even though the lease had not then been terminated. It is submitted that the duty to mitigate are both under the common law and as a result of the operation of clause 9.3(1) of the lease.
  4. [62]
    The defendants submit that the failure to mitigate disentitles the plaintiff to any loss of bargain damages, depending on the time at which the duty is found to have arisen.

Consideration – the mitigation issue

  1. [63]
    Assuming that Vickers stands for the principle asserted by the defendants, the question is raised as to what level of satisfaction is required before it can be accepted that the plaintiff or a reasonable person in the position of the plaintiff was aware that the first defendant was unable to perform its obligations under the lease.  Vickers is silent on that issue, but it seems to me that just as a Court will not readily find that conduct amounts to repudiation,[75] so too should it not readily find that the lessor is aware that the lessee is unable to perform its obligations.
  2. [64]
    Further, and while bearing in mind that the defendants’ case is not that the first defendant had abandoned the property as a surrender at law, just as abandonment as an act of surrender is a question of fact based on objective criteria and not the subjective intention of the lessee,[76] so too must the same criteria be applied to this issue in the present case.
  3. [65]
    I accept that the third defendant had conversations with the plaintiff’s agent, Ms Grima, and probably in January 2017.  It is the content of the conversations which is difficult to determine.
  4. [66]
    The third defendant gave differing testimony as to precisely what he said to Ms Grima.  It appeared that English is not his primary language.  If I am wrong about that, it was clear in any event from the course of his testimony that he does not put a premium on precise utilisation of language.  Given those features, I am unable to be satisfied as to the precise words used and the meaning objectively conveyed by the words alone.
  5. [67]
    In reaching this conclusion I am cognisant of the fact that Ms Grima has not been called to challenge the third defendant’s account in any respect.  In the absence of any evidence about her availability, or otherwise, to testify I am not prepared to infer that there was either a deliberate choice not to call her or that if called she would not have advanced the plaintiff’s case.[77]
  6. [68]
    In any event, the conduct of the first defendant was so ambiguous as to exclude a finding that the plaintiff, or a reasonable person in the position of the plaintiff, was aware that it was unable to take up the lease.
  7. [69]
    True it is that there was no such conduct until the bank guarantee was provided on or about 15 March 2017, but that was at a time when Ms Grima was still the agent and it was towards “the end” of her principal’s appointment.[78] The bank guarantee was provided to satisfy a condition of the lease, and equated to four months’ rent plus GST.[79]
  8. [70]
    I accept Mrs Kiddle’s evidence that, at the time of the first notice of demand, some outgoings were paid between November 2016 and February 2017,[80] although I also accept it may be that they were in fact paid by resort to the bank guarantee.  While no one was called to explain the invoices on which Mrs Kiddle based her opinion, they were tendered by consent and are prima facie admissible as books of account, and are therefore admitted as to the proof of the contents.
  9. [71]
    The rental relief under the subject lease expired on 22 May 2017, and so the bank guarantee would have been exhausted by 22 September 2017; earlier if outgoings had at any time been drawn against it.
  10. [72]
    The defendants admitted in the pleadings that the first defendant had paid all rent and outgoings up to 30 November 2017.[81] While it may be that some of those payments were made by drawing on the bank guarantee, up to the date of the proposed payment plan, 2 November 2017, the first defendant had retained the keys to the premises, provided the bank guarantee required under the lease, indicated an intention to fit out the premises requiring, in part, access to the grease trap, provided emergency contact details to the then newly appointed real estate agency, made comments to the effect that it was looked to assign or sublease the tenancy and appointed an agent, presumably for that purpose.
  11. [73]
    For the following reasons, I also accept that the third defendant arranged for payment on behalf of the first defendant of certain payments under the proposed payment plan which he had himself accepted.
  12. [74]
    First, there is the admission that rent and outgoings were paid by the first defendant up to 30 November 2017. The third defendant accepted that he had made “probably one payment” under the payment plan. It appears that he was speaking of personally making a payment. That he would do so is consistent with earlier payments having been made to keep the lease on foot. 
  13. [75]
    Second, the total of the payment entries on the ledger under the “details” number 132907[82] total $9,000.21, the precise amount required to be paid under the first instalment of the payment plan.[83]  Those payments were required to be paid by midnight on Friday, 3 November 2017, and appear to be entered into the ledger on 6 November 2017, a Monday.
  14. [76]
    Thirdly, the amount of $1,630.00 is recorded as entered into the ledger on 13 November 2017, consistent with the second required payment under the payment plan.[84]
  15. [77]
    Fourthly, there is the third defendant’s email of 8 December 2017 (a Friday) to the effect he had already made a payment.[85]  The ledger records a payment on 6 December 2017 in the required amount of $1,630.00.[86]
  16. [78]
    Bearing in mind that the replacement bank guarantee had not been produced at this time, these communications and payments lead me to accept that the payments were made on behalf of the first defendant under the payment plan, and were very likely to have been made by the third defendant.  To the extent that his evidence suggests otherwise, it cannot be accepted.
  17. [79]
    There are other payments recorded as received in the real estate agency ledger since the inception of the payment plan and before 6 December 2017,[87] but given the various amounts recorded it is not possible to directly attribute them to the third defendant.  However, they are obviously paid on behalf of the first defendant and could not have been paid from the bank guarantee.
  18. [80]
    Although there were no further payments received after 6 December 2017, a draft replacement bank guarantee had been provided at some time prior to 13 December 2017.
  19. [81]
    Then in late January 2018, the third defendant wrote an email which, in part, requested another six months’ moratorium on rent.
  20. [82]
    From the foregoing it can be seen that the first defendant did not clearly convey an inability to fulfill its obligations under the lease.  In fact, I consider that, overall, the first defendant was conveying an intention to keep the lease on foot, or at least an acceptance that it was bound by it.  Therefore, a reasonable person in the position of the plaintiff would not, in my view, have the state of knowledge that the defendants now attribute to it.  Nor did the first defendant’s conduct amount to a repudiation of the lease.
  21. [83]
    It is notable that each of the Notices to Remedy Breach of Covenant and the proposed payment plan contained an option of termination.  In each instance there was a specific response by the first defendant which was inconsistent with an acceptance of the termination option, and in each instance it sought to keep the lease on foot.[88]
  22. [84]
    The usual rule is that until the lease is terminated a claim can only be made for monies due under the contractual terms, but that after termination the cause of action is for damages for breach of a contract.  Where the claim is for damages, the plaintiff is under a duty to mitigate those damages.
  23. [85]
    The defendants do not challenge that usual rule but contend that a duty to mitigate the loss arises in the present circumstances even though the lease has not been abandoned as a matter of law, nor terminated.  They rely on Vickers. Notwithstanding the use of the word “abandonment” in the relevant passage of that judgment, they submit that a duty to mitigate the accrual of monies owing applies where there has been no termination of the lease. 
  24. [86]
    I accept that, upon a close reading of the judgment, Bollen J in Vickers is probably asserting a duty to mitigate the accrual of future monies owed under the lease; that is, a duty to mitigate the accrual of losses prior to the termination of the lease.  His Honour’s use of the word “abandonment” seems to refer to abandonment in fact rather than an abandonment or surrender at law.
  25. [87]
    However, that is not how the principle appears to have been understood in Luxer Holdings Pty Ltd v Glentham Pty Ltd[89] where a reading of the whole relevant passage[90] shows that it was being referred to in the context of an assessment of loss of bargain damages, not assessment of monies owing under the lease. 
  26. [88]
    I am unable to identify any other occasion where Vickers has been referred to by an intermediate appellate court. However, Vickers was doubted and not followed in De Landgrafft v Brown.[91]  While I recognise that this is a decision of an interstate District Court, I prefer the reasoning therein.[92]
  27. [89]
    In any event, if the decision in Vickers is correct, it should be limited to situations where the lessee has abandoned the property as a matter of fact but where the lease is not repudiated.[93]  In the present case there was no abandonment; in fact as late as January 2018 the first defendant sought the benefit of a further six-month rent-free period. 
  28. [90]
    The defendants’ submission that clause 9.3(2) provides an obligation to mitigate the loss in addition to the obligation required under common law, and hence an obligation to mitigate future monies owed under the lease, cannot be accepted.  While I accept that the bold heading of the clause cannot be used in its interpretation,[94] the sub-clause must still be read sensibly with the rest of the clause.  When that is done, it is clear that clause 9.3(2) imposes a contractual obligation following termination of the lease.
  29. [91]
    It follows from the foregoing that I consider that the plaintiff is entitled to claim monies owing under the lease to and including 2 April 2018, and loss of bargain damages thereafter.  Although the first defendant was in breach of the lease at an earlier time, the duty to mitigate arose only on and from the date of termination.
  30. [92]
    It also follows I need not consider the impact of Mr Cameron’s expert report, as varied by agreement between the parties.

Submissions – costs claim under the lease issue

  1. [93]
    By its FASOC, the plaintiff claims “legal and administration costs pursuant to clause 8.3 and/or 9.3(c) arising as a consequence of the breaches … and/or the termination”. The plaintiff no longer relies on clause 9.3(c).[95]
  2. [94]
    The plaintiff submits that as the first defendant was in breach of the requirements to pay rent and outgoings and to operate during core trading hours, it has by dint of clause 8.3 indemnified the plaintiff for all costs incurred as a result. It submits the discretion to award costs will usually be exercised in a manner such as to give effect to contractual agreements,[96] and the claim for costs as part of the judgment debt is authorised thereby.  The plaintiff submits that judgment should be given for the costs pleaded at paragraph 20(f) of the FASOC, and also seeks costs on the indemnity basis from 28 April 2021, the date the FASOC was filed.
  3. [95]
    The defendants submit that clause 8.3 is a general indemnity clause covering loss following a lessee’s default.  In contrast, clause 2.1(f) is specifically concerned with the recovery of reasonable costs and expenses incurred in relation to proceedings brought to enforce the lessee’s obligation under the lease.  Courts will recognise contractual agreements as to costs where the provision is plain and unambiguous only.  It is submitted that is not the case in the present matter.
  4. [96]
    The defendants submit:[97]
    1. (a)
      An indemnity for loss or damage does not extend to legal costs;
    2. (b)
      Costs always remain in the discretion of the Court, as a contract ousting the jurisdiction of the Court is void for public policy reasons;
    3. (c)
      The plaintiff’s pleaded case for an absolute indemnity must be rejected for the reasons outlined above and because such a basis for taxation is entirely unprecedented.
  5. [97]
    The defendants further submit that there are features of the conduct of the proceeding by the plaintiff which would disentitle them to some costs which form part of the claim.

Consideration – costs claim under the lease issue

  1. [98]
    Clause 2.1(f) provides:

The Lessee must pay the Lessor:

(f) all reasonable costs and expenses incurred by the Lessor in relation to any notice given to the Lessee in accordance with this lease, lawful determination or attempted determination of this Lease, the surrender of the Lease, the granting of any consents, proceedings lawfully brought by the Lessor to enforce the Lessee’s performance and obligations under this Lease.

  1. [99]
    Clause 8.3 relevantly provides:

Without limiting the generality of Clause 8.2 the Lessee indemnifies and holds indemnified the Lessor and its agents, employees and contractors from and against all actions, claims, losses, damages and costs for or in respect of which the Lessor may sustain or incur or for which the Lessor or its agents, employees or contractors shall or may become liable whether during or after the term in respect of or arising from:

  1. (a)
    Breach of Covenant – Loss, damage or injury to property or person from or contributed to by the neglect or default of the Lessee to observe or perform any of the covenants, conditions and restrictions on the part of the Lessee whether positive or negative express or implied.”
  1. [100]
    The plaintiff does not rely on clause 2.1(f).  It can immediately be seen that clause 9.3 does not place a cap of reasonableness on the costs which can be recovered under it, while clause 2.1(f) does.  The costs being sought are particularised at paragraph 20(f) of the FASOC and are evidenced by invoices dated between 16 May 2017 and 23 April 2021. The present proceedings were initially commenced on 21 November 2018 and the FASOC was filed on 28 April 2021.
  2. [101]
    It is not disputed that the costs were incurred, and the defendants make no complaint about the reasonableness of them when considered in isolation. However, the defendants assert there is an issue as to whether the plaintiff would be entitled to all of them if they were determined as an exercise of discretion in the making of a costs order.
  3. [102]
    It is well established that a plain and unambiguous contractual provision for the payment of costs on the indemnity basis is a relevant consideration, but it is not binding on a Court in determining costs.  However, the manner in which clause 8.3 is sought to be applied is not as a matter relevant to the exercise of discretion on a costs order, but rather as part of the judgment amount. Accordingly, that principle is of no application.
  4. [103]
    I do not accept that the provision is being used to oust the jurisdiction of the Court. The provision was voluntarily entered into by the first defendant. It provides for an indemnity for, inter alia, losses and costs arising from a breach of covenant by the first defendant. It is not to the point that there is another, less onerous, provision that could have been relied on to recover these costs. It is not a matter of the Court only enforcing the less onerous provision.
  5. [104]
    The choice was made by the first defendant to enter into a contractual arrangement which allowed for the present claim to be made under clause 8.3 as part of the judgment amount, rather than deferring the issue to a costs order. That it will have the effect of the plaintiff claiming the whole of those costs is the result of the first defendant agreeing to such a provision and then breaching the covenants. The costs sought are properly pleaded and itemised in the FASOC, and the whole of that part of the Claim should be allowed.
  6. [105]
    As the issue of the other costs of the proceedings has not yet been argued, it is inappropriate to consider that part of the plaintiff’s submission which seeks costs on the indemnity basis on and from 28 April 2021.

Disposition

  1. [106]
    As earlier noted, the appropriate course is that I make my findings on the two issues the subject of these reasons and allow the parties to ascertain the impact of those findings on the assessment of the judgment amount. The issue of costs can then be considered.
  2. [107]
    Accordingly, my orders are:
  1. Within 14 days of the date of delivery of this judgment, the parties are to file an agreed form of order consistent with these reasons.
  2. If agreement cannot be reached as to the form of order, the parties are to each file and serve written submissions as to the appropriate form of orders, limited to 10 pages, within 14 days of the date of delivery of this judgment.
  3. If agreement is reached as to the form of orders, the parties are each to file and serve written submissions as to costs, limited to five pages in addition to any necessary annexures and affidavits, within 14 days of the date of delivery of this judgment with a view to that issue being decided on the papers unless determined otherwise.
  4. Liberty to apply.

Footnotes

[1]  Ts 1-63, ll 10-12.

[2]  Ts 1-64, ll 5-8; email received from the parties on 4 March 2022.

[3]  FASOC, paras 8 - 11.

[4]  FASOC, paras 13 and 13A.

[5]  FASOC, para 20(b) and 20(j).

[6]  FASOC, paras 20(ba) and 20(j).

[7]  FASOC, para 20(f).

[8]  FASOC, para 20(g).

[9]  Underlining omitted

[10]  AD, paras 7 and 9.

[11]  AD, para 9(a).

[12]  See paragraph 15 herein.

[13]  ARA, para 4.

[14]  ARA, para 6(b)

[15]  Exhibit 1, p 38

[16]  Ts 1-20, ll 1-7

[17]  Exhibit 1, page 46. Given the lease was signed by the same director of the first defendant on 2 December 2016, the disclosure statement was likely signed that day or the day before but, in any event, clearly there is a wrong date on the document.

[18] Exhibit 1, p 49 and following.

[19]  Exhibit 1, p 646

[20]  Exhibit 1, p 313; TS 1-20, 1 36.

[21]  Exhibit 1, p 442.

[22]  Exhibit 1, p 304.

[23]  It is unclear precisely when this email was sent to the agent, but given the chronology of events, including the appointment of this agent, it must have been close to 4 April 2017 and no more than a few weeks before.

[24]  Exhibit 1, pp 444-445.

[25] Also a director of the first defendant.

[26]  Exhibit 1, p 452.

[27]  Exhibit 1, p 454.

[28]  Exhibit 1, pp 317-323.

[29]  Exhibit 1, p 324.

[30]  Exhibit 1, pp 326-331.

[31]  Exhibit 1, p 474.

[32]  Ts 1-44, l 24.

[33]  Exhibit 2A.

[34]  Ts 1-29, ll 40-45.

[35]  Exhibit 1, p 476.

[36]  Exhibit 1, pp 341-342.

[37]  Exhibit 1, p 483.

[38]  Exhibit 1, pp 480-481.

[39]  Exhibit 1, pp 477-478.

[40]  Exhibit 1, pp 343 and 375.

[41]  Exhibit 1, pp 357 and 477.

[42]  Exhibit 1, pp 107-115.

[43]  Exhibit 1, p 116.

[44]  Exhibit 1, pp 76-79.

[45]  From other material in the exhibit, it seems that these chairs are the property of the body corporate.

[46]  Exhibit 1, p 75.

[47]  Ts 1-11 to 1-12.

[48]  Ts 1-18, l 42 to 1-19, l 2.

[49]  Ts 1-19, ll 17-19.

[50]  Exhibit 1, pp 76-79.

[51]  Ts 1-13, l 35 to 1-14, l 21.

[52]  Ts 1-19, ll 29-37.

[53]  Specifically, Exhibit 1, p 319

[54]  Ts 1-21, l 37 to 1-22, l 6.

[55]  Ts 1-22, ll 36-39.

[56]  Ts 1-23, ll 44 to 1-24, l 22.

[57]  Ts 1-34, ll 28-29.

[58]  Ts 1-25, ll 21-24.

[59]  Ts 1-26, l 43 to 1-27, l 47.

[60]  Ts 1-29, l 20 to 1-30, l 8.

[61]  Ts 1-35, ll 7-23.

[62]  Ts 1-35, ll 33-35. Underlining added.

[63]  Ts 1-35, ll 37-39.

[64]  Ts 1-36, ll 1-5.

[65]  Ts 1-37, ll 37-43.

[66]  Ts 1-39, ll 12-15.

[67]  Ts 1-39, ll 42-46.

[68]  Ts 1-40, ll 3-10.

[69]  Ts 1-42, ll 31-32.

[70]  Ts 1-41, ll 15-33.

[71]  Exhibit 1, p 63, clause 9.1

[72]  Ts 1-79, l 15.

[73]  Defendants’ outline of opening at paragraph 10(c)(i); TS1-54, l 15.

[74]  (1989) 52 SASR 90, 100.

[75] Apriaden Pty Ltd v Seacrest Pty Ltd [2005] 12 VR 319, [69].

[76] Konica Business Machines Australia Pty Ltd v Tizine Pty Ltd (1992) 26 NSWLR 687, 697.

[77] Jones v Dunkel (1959) 101 CLR 298

[78]  Note the words used by the third defendant at [47] herein.

[79]  Exhibit 1, p 50, lease item 8.

[80]  See [44] herein.

[81]  See paragraph 9 herein.

[82]  Exhibit 1, p 483.

[83]  Ex. 1, p 342, entries 2a and 3.

[84]  Ex. 1, p 483, details No. 132908.

[85]  See [33] herein.

[86]  Ex. 1, p 483, details No. 133388.

[87]  Exhibit 1, p 483, details Nos. 132966, 132988 and 133120.

[88]  I note the possibility that the notices prior to that of 26 July 2017 were satisfied by drawing on the bank guarantee, nonetheless the fact remains that the option was not taken up in respect of the later Notices to Remedy and the proposed payment plan.

[89]  [2007] 35 WAR 254.

[90]  supra at [35]– [39].

[91]  (1993) 9 SR (WA) 236.

[92] supra at 240–242.

[93] Fresh Express Australia Pty Ltd v Larridren Pty Ltd [2002] FCA 1312, [124].

[94]  Exhibit 1, p 53, clause 1.3(3).

[95]  Plaintiff’s written opening, footnote 8.

[96] Platinum United II Pty Ltd & Anor v Secured Mortgage Ltd (in liq) [2011] QCA 229, [6].

[97]  Defendant’s closing submissions at para 17.

Close

Editorial Notes

  • Published Case Name:

    Kiddle Investments Pty Ltd v YAJM Vegan Pantry Pty Ltd & Ors

  • Shortened Case Name:

    Kiddle Investments Pty Ltd v YAJM Vegan Pantry Pty Ltd

  • MNC:

    [2022] QDC 82

  • Court:

    QDC

  • Judge(s):

    Byrne QC DCJ

  • Date:

    22 Apr 2022

Appeal Status

Please note, appeal data is presently unavailable for this judgment. This judgment may have been the subject of an appeal.

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