Mid Australia Pty Ltd v Around Australia Pty Ltd
[2005] QSC 91
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- Notable Unreported Decision
- Mid Australia Pty Ltd v Around Australia Pty Ltd[2005] QSC 91
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Mid Australia Pty Ltd v Around Australia Pty Ltd[2005] QSC 91
Mid Australia Pty Ltd v Around Australia Pty Ltd[2005] QSC 91
SUPREME COURT OF QUEENSLAND
CIVIL JURISDICTION
McMURDO J
No 10828 of 2003
MID AUSTRALIA PTY LTD ACN 010 670 925 | Plaintiff |
and |
|
AROUND AUSTRALIA PTY LTD (FORMERLY THE | First Defendant |
HARVARD SHOPPE PTY LTD) ACN 071 096 734 |
|
and |
|
PURELY AUSTRALIAN CLOTHING PTY LTD ACN 072 516 164 | Second Defendant |
and |
|
ALAN MICHAEL PITT BOYD | Third Defendant |
and |
|
JOHN IVAN HANRAHAN | Fourth Defendant |
BRISBANE
DATE 07/04/2005
JUDGMENT
HIS HONOUR: In these proceedings the plaintiff makes various claims in reliance upon two leases relating to certain premises at the corner of Gold Coast Highway and Elkorn Avenue in central Surfers Paradise. The plaintiff is the landlord.
The first of those leases was granted in 1991, initially for a term of six years but it was extended under what the pleadings refer to as an extension agreement. It was originally granted to a third party but the first defendant became the lessee by an assignment. The third defendant is a guarantor of the first defendant's obligations under that lease as extended. That lease has been referred to in the pleadings and at the hearing as the “Australian Made lease”. The second lease is one granted in 2003 by the plaintiff to the second defendant. It has been described as the “Purely Australian lease”. The third and fourth defendants are guarantors of the lessee's obligations under that lease.
The Purely Australian lease came to be granted in these circumstances, which are uncontroversial: the first defendant had decided that it did not need all of the area which was the subject of the Around Australia lease and through its representative, the fourth defendant, sought to renegotiate its position with the plaintiff, represented by Mr Walters. An agreement was reached whereby the Around Australia lease would be surrendered and another company, that is to say the second defendant, relevantly under the same control as the first defendant, would take a lease of part of the premises demised under the Around Australia lease. The remainder would be reconstructed as, in effect, two shops and would be able to be relet by the plaintiff.
In due course the plaintiff succeeded in letting those other areas under leases which I shall describe shortly. But it was a term of the Purely Australian lease that the second defendant would pay to the plaintiff any difference between what the plaintiff received in total for the areas that had been leased to Around Australia and what the plaintiff would have received had the Around Australia lease not been surrendered. There was a time limit in that the shortfall which was to be made good by the second defendant was only up to the 18th of November 2003.
I come then to summarise the various claims that are made by the plaintiff. There is a claim by the plaintiff against the first defendant for what are described as “make good” costs which, broadly speaking, are costs involved in bringing the premises leased to the first defendant to a condition of being in good and tenantable repair. The plaintiff claims that an amount of slightly in excess of $26,000 had to be spent by it to bring the premises to that condition when the Around Australia lease was surrendered. So there is a claim for that sum together with interest on it against the first defendant and against the third defendant as the guarantor of the lessee's obligations.
The remaining claims are against the second, third and fourth defendants in reliance upon the Purely Australian lease. The second defendant defaulted in making payments due under its lease and, for the most part, those defaults are not in contest. Consequently, the Purely Australian lease was determined by the plaintiff on the 13th of June 2003. There is a claim then for monies which had accrued due and owing but which were unpaid representing rent and other outgoings payable by the second defendant as lessee and representing also debts due under the provision for the payment of a shortfall which I have mentioned.
There are further claims which in substance involve a claim for damages for breach of contract, the contract being the lease and the damages which are claimed are for the loss of that bargain; in essence, the claim which is made is for the difference between what would have been received had the Purely Australian lease run its course until its expiry in 2010 and the amounts which have and which are likely to be received by the plaintiff from letting the premises to someone else.
I return then to the first of these claims, which is the clairr under the Around Australia lease. The relevant provisions of that lease are clauses 5.07, 13.01 and 14.01. Clause 5.07 provided as follows:
“MAINTENANCE OF PREMISES - The Tenant shall at its own cost and expense keep and maintain the demised premises and all appurtenances therein in clean condition and in good and tenantable repair and condition as at the date of commencement hereof fair wear and tear alone excepted provided always that the exception in respect of fair wear and tear shall apply only if the Tenant shall have taken all reasonable measures and precautions to ensure that any damage defect or dilapidation which at any time shall be occasioned by fair wear and tear shall not give rise to or cause or contribute to any damage to the demised premises.”
Clause 14.01 provided that the tenant was to “at the expiration or sooner termination of the lease hereof yield up the premises of the order and in the condition described in clause 5.07”.
In clause 13.01 it was provided, in effect, that if the tenant failed to perform any obligation under the lease, the landlord might do all such things as where necessary to have the covenant performed in which event the landlord would be entitled to the cost of that work.
The plaintiff's case then is that upon the surrender of the Around Australia lease the first defendant was obliged pursuant to clause 5.07 to bring the premises to “good and tenantable repair and condition” so as to correspond with their condition at the commencement of the lease, fair wear and tear excepted.
The case in this respect is complicated by the fact that much work which was done coinciding with the surrender of the lease was in preparation for the letting of what became three shops rather than one. This has led to a difficulty in identifying costs which are referable only to what has been described as “making good” the premises; that is, bringing them to a condition as required by clause 5.07. As I will mention, much and probably most of the works for which there is a claim are not works which involve bringing the premises to a condition in compliance with clause 5.07; rather they involve either the performance of works necessary to let parts of what had been the one shop as several shops or they involve works by which some fixtures were removed so as to make the new premises more attractive.
For example, there is a claim for the cost of constructing a wall between two areas which became the separate shops described respectively as G18 and G18A. That is clearly work required for the separate letting of those areas rather than, to bring the premises to the condition required by clause 5.07.
Again, there is a claim for the cost of removing stairs which had served the purpose of linking part of premises demised to the first defendant to another part of the demised premises. Those stairs had to be removed when those two parts were severed and were to be let separately. But, clearly, that is not work of a kind within clause 5.07.
In my view, with the exception of certain items which I will describe shortly, each of the amounts claimed under this Around Australia lease is not and was never recoverable pursuant to clauses 5.07, 13 and 14 because the expenditure was not in relation to works of a kind which is within clause 5.07.
The exceptions to that conclusion are as follows. There is an item for the patching of walls and there is an item for the repair of ceilings. I am satisfied from Mr Walters' evidence that they are expenditures of a kind within clause 5.07. The difficulty, however, with them, as it is with another item which is described as “removal of rubbish”, is that the evidence does not permit me to quantify the cost of the work. On any view it was not great and I was invited by counsel for the plaintiff to adopt a practical approach, that is to do the best I could from the evidence. But it is not clear that evidence could not have been adduced as to the cost of those items and absent evidence of that kind, I am not prepared to allow them.
There are other items of work within this claim about which I am satisfied that they do involve at least to some extent expenditure within the relevant category. There is a claim in relation to power and lighting, the cost of which was $2,431.25 and I would accept Mr Walters' evidence that about 50 per cent of that was referable to so-called make good work, ie. an amount of $1,215.62. I would accept also that the work involved on the supply of carpet and painting respectively quantified at $2,650 and $1,081.25 is work of the relevant kind.
But for the consideration which I will mention in a moment, I would be satisfied that the plaintiff has proved a case within this first component in the sum of the three amounts I have mentioned, which is a total of $4,946.87, and I would be satisfied that the plaintiff would be entitled to interest at nine per cent on that sum as from the date of the surrender of the lease. However, I have concluded that no amount should be recovered for this component because in substance I have accepted the defendants' submission that plaintiff's right to recover those monies was compromised by the agreement reached for the surrender of this lease and the grant of the new lease, that is, the Purely Australian lease.
The Purely Australian lease required the plaintiff to effect certain works at the plaintiff's cost. Clause 21.1 provided that the landlord would carry out at its own cost the following work, “(c) supply and lay carpet”, “(d) paint walls in premises”, “(f) replace damaged ceiling tiles and supply adequate lighting in ceiling and power points” as well as certain other items for which there is a claim within this component but about which I am not satisfied that the item is a make good item.
The plaintiff's response to clause 21.1 is to point out correctly that the Around Australia lease was granted to the first defendant whereas the Purely Australian lease was granted to the second defendant. However, the agreement to surrender the first lease and for the grant of the second was clearly either the one agreement or involved agreements each conditional upon the other. The agreement or agreements were negotiated at the same time and between the same representatives. It cannot be suggested that one agreement was to have operated absent the other one. By clause 21.1, it has not only been agreed that certain works would be done and at the landlord's cost but it has been agreed that the landlord - that is, the plaintiff - would carry them out. This is to be compared with the provisions of the Around Australia lease which I have mentioned. By those provisions, the primary obligation was upon the first defendant to carry out the works, that is, to put the premises in a good and tenantable repair and condition.
The plaintiff's right to payment was dependent upon a failure by the first defendant to carry out such works. I am unable to see how the plaintiff's obligation to carry out the relevant works could be reconciled with the continuing obligation of the first defendant to itself perform those works. I am satisfied that by necessary implication, the plaintiff and the first defendant have agreed that on the surrender, of the Around Australia lease, the first defendant would not perform any works otherwise required at the termination of its lease if they were works which the landlord was to perform pursuant to clause 21.1 of the Purely Australian lease.
The consequence of that is that the plaintiff fails to establish the first of its claims, which is its only claim against the first defendant.
Coming to the claims in reliance upon the Purely Australian lease, which are made against the second, third and fourth defendants, the first of those, as I have outlined, is not a damages claim but it is a claim for debts which had accrued due and owing by the time of the termination of the lease in June 2003.
The monies which are claimed comprise unpaid rent and other amounts due by the second defendant in relation to the second defendant's promises. They also include amounts pursuant to that provision for the payment of a shortfall as I have described it. That provision is clause 21.4 of the Purely Australian lease, which is in these terms:
“Purely Australian Clothing Co Pty Ltd is to pay the balance of the current lease on shops G18 and F11 after the deduction of rent acquired from the tenants in shops G18A and F11 (including rent incentives to other tenants) up to 18 November 2003.”
After the grant of the Purely Australian lease tenants were found for those other premises, ie. shops G18A and F11. There were rent free periods allowed to each of those tenants and the extent of those periods became the subject of an issue affecting the quantification of this claim.
Apart from an argument as to the significance of rent free periods, there was no challenge to the recover ability of the amounts claimed within this component. There was no controversy as to what amounts had been or had not been paid by any of the defendants. Nor was there a controversy as to the amounts which had been payable by the defendants in relation to the lease of the shop occupied by the second defendant.
And on the pleadings it is my view that there is no issue as to what rental had or had not been received from the tenants of shops G18A and F11.
The pleadings raised but one issue which was a legal argument to the effect that the shortfalls should in some sense be brought into account in the calculation of any damages claimed by the plaintiff. Before going to that legal point it is necessary, however, to discuss a factual question, which is whether the plaintiff has established, if it needs to, that the other tenants paid only the amounts as set out in the statement of claim.
To explain that, the leases to those new tenants, whom I shall call Starts and Boost Juice, are in evidence and they show certain rent free periods. According to those leases, it would be, expected that Starts would have commenced to have paid rent and other relevant amounts on and from 1 May 2003 and that Boost Juice would have commenced to do so as and from 1 June 2003.
According to the amounts pleaded and still claimed by the plaintiff, nothing was received from either of those tenants until some later time. However, as I have said, the pleadings do not put in issue the relevant amounts. They do not contest that there was, in fact, a shortfall in the receipts as claimed.
There was some indication yesterday morning and before there was oral evidence for the plaintiff that some factual challenge of this kind might be made. In my view, however, if it was going to be made it should have been made by an amendment to the defence. It is significant that at the commencement of yesterday's hearing an amended defence was filed and the amendments specifically related to the paragraphs of the statement of claim which pleads this part of the case. However, the amendment did not put these matters of fact in issue.
In any case, the affidavit of Mr Walters, which was sworn in related proceedings but which was tendered as an exhibit at this trial, is evidence that the amounts claimed are properly quantified and that the new tenants did not pay rent until after 1 June 2003, and there was no challenge to that evidence in the cross-examination of Mr Walters. In particular it was not suggested to him that the claim was excessive in this way.
I am satisfied, then, that the shortfall according to clause 21.4 is as the plaintiff has claimed, save that the plaintiff now concedes there should be deleted from its claim certain amounts totalling $6,442.24 because they have in fact been paid by the defendants or one of them. That would leave a balance of $47,589.98 as the amount owing.
That amount would be recoverable subject to the defendant's argument that in some way the amount owing would be, as it was put, “amortised” in the calculation of the damages claim to which I will come shortly.
The thrust of the argument is that if the plaintiff is in fact better off after the termination of this lease, by being able to rent the premises at a higher rent than was to be paid by the second defendant, then the amount owing as at the termination of the lease ought to be set off against that benefit in calculating the final sum to be paid to the plaintiff.
I am unable to accept that submission. It is necessary, in my view, to distinguish between the claims for debts which had accrued due at the time of the termination of the contract and the claim for damages for breach of contract representing the plaintiff's loss of its bargain. The proper quantification of one is unaffected by the quantification of the other.
The plaintiff has established its right to the sum of $47,589.98. It is not in issue that sum, if it is recoverable against the second defendant, is recoverable also against the third and fourth defendants.
There should also be interest awarded on that sum at the rate of 9 per cent calculated from the respective dates on which the amounts making up that total fell due.
According to the schedule handed up by the plaintiff's counsel in his submissions, that interest on this component totals $8,256.97. The result, is that the plaintiff will recover within this component the sum of $55,846.95 inclusive of interest.
I come, then, to the damages claim. As I have mentioned, the lease was terminated on the 13th of June 2003. The premises which had been occupied by the second defendant have been relet. The new tenant is a business described as “Cold Rock”. Its lease is for five years from 1 December 2003. The second defendant's lease was for a term which would have expired on 31 January 2010; that is, 14 months after the expiry of the Cold Rock lease.
The amounts which would have been received under the Purely Australian lease, had it remained on foot and had the defendants met their obligations, can be estimated with reasonable precision and the amounts which have been put forward by the plaintiff have not been the subject of any argument.
The Purely Australian lease contained a provision for the increase of the minimum rent on an annual basis by 3 per cent. There was potential for the rent to be higher according to the market, but the plaintiff's case is put upon the premise that what would have been received was the minimum rent; that is, that the rent would increase by 3 per cent each year through to 2010.
Those amounts necessarily include amounts under the shortfall provision, that is clause 21.4, because that provision was to have operated until 18 November 2003. Again the amounts which would have been received under the shortfall provision, between 13 June and 18 November 2003, are not controversial.
The plaintiff's claim has been broken up into two parts. The plaintiff has claimed damages calculated by reference to the period 13 June 2003 till the date of commencement of these proceedings. It has distinctly claimed damages calculated by reference to the period from 27 November 2003 until 31 January 2010.
However, the entitlement to damages is the one entitlement, which is the loss from the termination of the lease on 13 June 2003. As at that date the plaintiff suffered its loss. The quantification or evaluation of that loss is by reference in some respects to events which have occurred between then and now but the assessment of the loss is the assessment of but one loss and so the appropriate course, at least in this case, is to look at on one side the amounts which would have been recovered from the second defendant under its lease from 13 June 2003 through to 31 January 2010 and to compare those with amounts received and likely to be received from another tenant or tenants within the same period.
Going then to what would have been received from the second defendant the relevant sums are as follows. These sums come from the plaintiff's schedules but in all respects I have used the sums which would have been paid as inclusive of GST.
From 13 June 2003 until the end of November 2003 an amount of $3 0,433.33 would have been paid had the second defendant performed its contract. On the premise of increases annually of three per cent, a total of $485,277.89 inclusive of GST would have been paid from the end of November 2003 until the expiry of this lease. In addition, the plaintiff would have received shortfall payments pursuant to clause 21.4 of $15,204.95. In total its receipts would have been $530,916.17.
Turning then to what it has received or might receive from another tenant or tenants, the Cold Rock lease is expected to involve receipts by the plaintiff over the entirety of its five year term which total 422,943.75, again inclusive of GST. It should be noted that the Cold Rock lease contains a like provision for reviews of rental such that the minimum rent will be increased from year to year by 3 per cent. The result is that the premises have been relet at a significantly higher rental than was payable under the Purely Australian lease.
The debate largely concerned the proper approach in this assessment to the possibilities for the letting of these premises during the 14 months between the end of the Cold Rock lease, and the 31st of January 2010, which was the scheduled expiry of the Purely Australian lease.
The Cold Rock lease contains options to renew. It is possible but of course by no means certain that Cold Rock would exercise its option to renew and that it would remain in occupation during those 14 months.
The present assessment then is affected by a number of contingencies in respect of that 14 months, including whether Cold Rock would renew its lease and also whether if it did not, someone else would be found to promptly take its place. There is also an unknown as to what rental that tenant would pay or indeed what Cold Rock would pay if and when it exercised its right of renewal.
There is also a realistic possibility that a new tenant, even if found straight away, would have a rent free period. On Mr Walters' evidence there is at least a strong chance that a rent free period would be offered.
However, as to the relevance of that chance, it must also be remembered that had the second defendant performed its lease, the plaintiff would have been in a similar position at the end of that lease as it is likely to be at the end of the Cold Rock lease: that is, a position of uncertainty as to whether the tenant would remain, as to what rental would be received, as to whether the premises would be vacant for any significant time and as to whether the further leasing of the premises would be subject to a rent free period.
It is clear also that a rent free period for a few months might well accompany a comparatively higher rental for the next so many years so that it could be unfair to consider only what might be received by the plaintiff in that period of 14 months if there is a corresponding likelihood of a much greater rental beyond then.
The fact that the premises have been relet to Cold Rock but at a much higher rental than was being paid by the second defendant provides some indication that the market rental may be higher than was being paid by the second defendant. Taking into account the various possibilities and assessing as best I can what is likely to occur, it seems to me to be appropriate to assess damages on the premise that during this period of 14 months the same rental would be received as would be paid under the last year of the Cold Rock lease.
Upon that premise there would be an amount of $85,538.67 plus GST received in that 14 months; that is a total of $94,092.53. I have adopted that figure, although it represents rental for a period of a year rather than 14 months, because it allows for the possibility that there might not be such a smooth transition to a new lease as some might expect.
Upon that premise and then having regard to the amounts which are expected to be received under the Cold Rock lease and which have been received under that lease, there is a difference between those amounts on the one hand and the amounts which it is expected the second defendant would have paid on the other hand, which gives a resultant loss to the plaintiff of $13,879.89. To that there should be added the amount of the agent's fee for the Cold Rock lease, which is $11,400 plus GST; that is a total of $12,540.
I have concluded, therefore, that the plaintiff has proved damages for breach of contract in the sum of $26,330. There should be interest on that sum of nine per cent from the date that loss accrued which is the 13th of June 2003 and I calculate that interest involves a further sum of $4,305.
The result in relation to the damages case is that the plaintiff will recover, inclusive of interest, an amount of $30,635.
Added to the amount on the debt claim and interest on that debt claim, as I have mentioned, totalling $55,846.95, the plaintiff has established an entitlement to judgment against the second, third and fourth defendants in the sum of $86,481.95.
There will be judgment for the plaintiff against the second, third and fourth defendants for that sum.
There will be judgment for the first defendant against the plaintiff.
There will be judgment for the plaintiff against the second, third and fourth defendants upon their counterclaim, which was abandoned at the commencement of the hearing.
There remains the question of costs which has been already fully argued save, perhaps, in this respect: I have not yet been addressed on the appropriate order, if any, between the plaintiff and the first defendant. It may assist however if I indicate my preliminary view about that which of course is subject to any submissions which the parties wish to make.
It seems to me that the appropriate order between the plaintiff and the first defendant and also between the plaintiff and the third defendant in relation to the claim under the Around Australia lease is that there be no order for costs. The defendants have at all times been represented by the same lawyers and it does not seem to me that there has been any significant addition to the costs of these proceedings on the defendants' side from having to defend this so-called “make good” claim. That is the present view I have in relation to the costs between those parties.
The costs between the plaintiff and the second, third and fourth defendants in relation to the plaintiff's claims under the Purely Australian lease must follow the event.
The issues then, which have already been fully argued, are whether those costs should be awarded on an indemnity basis and whether it is appropriate to limit them to the relevant District Court scale. At one stage the plaintiffs advanced a claim to recover monies as debts under the provisions of its leases which entitle it to be indemnified by the lessee at the guarantors for certain legal costs. The relevant provision in the Purely Australian lease is clause 6.5, which is in these terms:
“6.5 Costs of Lease, Stamp Duty, Costs of Re-entry Notices and Consents and Legal Fees
- The Tenant shall pay for the survey fees associated with registration of the Lease, the reasonable expenses incurred by the Landlord in obtaining the consent of the Landlord's mortgagee to the Lease (or any assignment of the Lease) and for registration of the Lease.
- The Tenant shall on demand pay all stamp duties from time to time properly assessed on this Lease and all other duties which may from time to time be properly assessed, whether generally or against the Landlord or against the Tenant in respect of the demise granted by this Lease. If the Commissioner of Stamp Duties at any time makes enquiries with a view to assessing or determining the amount of stamp duty payable with respect to this Lease, the Tenant agrees to pay the costs of the Landlord and/or the Landlord's solicitors, providing all information requested by the Commissioner of Stamp Duties and the costs of all other associated attendances and correspondence relating to the enquiries by the Commissioner of Stamp Duties and any subsequent assessment of duty.
- The Tenant will indemnify and does hereby indemnify and hold indemnified the Landlord for the costs as between solicitor and client and all expenses incurred by the Landlord in relation to any notice lawfully given to the Tenant pursuant to this Lease, the lawful determination or attempted determination of this Lease, the lawful re-entry or attempted re-entry by the Landlord into the Lease Premises, and of any proceedings lawfully brought by the Landlord to enforce the performance by the Tenant of the covenants and obligations on its part under this Lease. The Tenant shall pay the Landlord's reasonable costs in investigating a proposed assignee of the Tenant and reasonable expenses of and incidental to an assignment of this Lease (including any necessary consents) whether or not the assignment proceeds or is consented to by the Landlord.
- If the Landlord shall without default on its part be made a party to any litigation commenced by or against the Tenant other than litigation between the Landlord and the Tenant and arising directly or indirectly out of the Tenant's occupancy or use of the Lease Premises, the Tenant indemnifies the Landlord from all legal fees and disbursements as between solicitor and client incurred by the Landlord in connection therewith.”
Ultimately, however, the plaintiff chose not to seek payment by way of indemnity, that is as a debt forming part of its judgment, but instead seeks an order for costs in the exercise of the Court's discretionary power but heavily relies upon the contractual right to indemnity costs as going to the Court's discretion. The plaintiff has taken that course because of the practical difficulty in distinguishing, at least according to the present evidence, between those costs referable to one lease from the other.
The plaintiff is right to submit that the existence of an obligation such as clause 6.5(c) of the Purely Australian lease is an important consideration in the exercise of the discretion as to whether to order indemnity costs. In Gomba Holdings Limited v Minories Finance (1993) Ch 171 at 194 the Court of Appeal said that where there is such a contractual right to costs, the discretion should ordinarily be exercised so as to reflect that contractual right.
I am persuaded that the costs ought to be awarded on an indemnity basis. The further issue is whether they should be awarded only upon the District Court scale.
The ordinary consequence of recovering a sum which could have been sued for in the District Court is that the successful party is awarded costs but on the District Court scale. The amount which has been recovered here, of course, is well within the District Court Court's jurisdictional limit. It is pointed out for the plaintiff that there were associated proceedings brought by the second defendant against the plaintiff, it appears for relief from forfeiture of the lease.
In that context, it may have been reasonable for the plaintiff to have commenced these proceedings in this Court but very early in these proceedings the forfeiture case was dismissed. I see no reason why the present matter remained in this Court rather than being transferred to the District Court.
In the circumstances, the plaintiff should have its costs against the second, third and fourth defendants on an indemnity basis but in accordance with the relevant District Court scale.
Is there any further submission then, gentlemen, as to the costs between the plaintiff and the first defendant?
…
HIS HONOUR: Mr Handran, for the defendants, tells me that there may have been some indication prior to the amendment to his clients' pleading at the commencement of yesterday that the defendants would rely upon the point raised by that amendment and upon which they have ultimately succeeded. I am unable to determine whether that is so. The position is that, on the pleadings, the relevant point was not raised until the commencement of the trial.
I remain of the view that the appropriate outcome between the plaintiff and the first defendant and between the plaintiff and the third defendant in relation to the plaintiff's claim against the first defendant is that there should be no order as to costs.
The orders for costs then shall be as follows: the second, third and fourth defendants will be ordered to pay the plaintiff's costs of the proceedings against them in reliance upon the lease to the second defendant and the guarantee of that lease and also the plaintiff's costs of defending the counterclaim, such costs to be assessed upon an indemnity basis but on the appropriate District Court scale. Otherwise, there will be no order as to costs.