Hookey v Whitelaw (No 4)[2020] QSC 298

SUPREME COURT OF QUEENSLAND

1. [1]
   In Reasons published on 16 September 2020,^[1] the Court granted the defendants’ application for the payment of $138,297.25 from the balance of the Trust Security held by the solicitors for the plaintiffs pursuant to the order of Mullins J (as her Honour then was) made 12 September 2018.  The plaintiffs’ application filed 25 June 2020, which was heard concurrently, was dismissed. 
2. [2]
   The Court further ordered that it would hear the parties as to costs.  The parties have filed written submissions in relation to the issue of costs.
3. [3]
   The defendants seek their costs of both applications on the indemnity basis.  The plaintiffs accept that costs should follow the event, but submit that costs should only be awarded on the standard basis. 
4. [4]
   In seeking costs on the indemnity basis, the defendants rely on the Court’s reasons as to conditions for relief against forfeiture and costs following the primary proceedings.^[2]  The Court ordered that the plaintiffs pay the defendants’ costs of the proceeding on the Originating Application, and ordered that the plaintiffs pay the defendants’ costs of the counterclaim to be assessed on the indemnity basis.  Costs were ordered on the indemnity basis in relation to the counterclaim because it raised issues concerning the validity of the s 124 notices, termination of the lease, recovery of possession and relief against forfeiture.  Clause 14.1.2 of the lease required the lessee to pay the lessor’s reasonable costs incurred in connection with –

6. “(f)
   the surrender or termination of this Lease (otherwise than by the effluxion of time); or

7. (g)
   any breach of the Lessee of any obligation on its part contained in this Lease (including in connection with the exercise or attempted exercise by the Lessor of its rights which accrue in consequence of that breach).” 

Clause 1.1 of the lease defined “Reasonable Costs” to include the lessor’s external legal costs on a solicitor and own client basis.

5. [5]
   The Court determined that the issues raised by the counterclaim were “in connection with” the second defendant (as lessor) seeking to enforce its rights under the lease.^[3]  This is to be contrasted with costs in respect of the present applications.  The legal costs incurred by the defendants related to a dispute as to how the balance of the Trust Security held by the solicitors for the plaintiffs pursuant to consent orders made by Mullins J should be distributed.^[4]  While the consent orders sought to maintain the status quo until various issues had been determined, including whether the lease had been lawfully terminated by the second defendant on 11 September 2018, a dispute as to how the balance of the Trust Security should be distributed is not, in my view, an issue “in connection with” the surrender or termination of the lease.  Further, failure to pay the whole of the rent for April, May and June 2020 does not constitute a breach of an obligation under the lease.  The lease was lawfully terminated on 11 September 2018.  Any right to recourse from the Trust Security for unpaid rent arises under the terms of the consent orders which established the Trust Security, rather than the terms of the terminated lease.  As correctly submitted by the plaintiffs:

“The issue was whether there was an obligation under the undertakings.  The plaintiff argued, unsuccessfully, that the orders for relief against forfeiture gave rise to a period of uncertainty about the status of the lease, such that the COVID Regulation applied, but there was no issue that the lease had been terminated on 11 September 2018.”^[5]

6. [6]
   It follows that I do not accept that the second defendant’s costs in recovering a shortfall in rent from the Trust Security are costs incurred “in connection with the lease”.^[6]
7. [7]
   The defendants have therefore not established any proper basis for an award of indemnity costs.

Disposition

The plaintiffs pay the defendants’ costs of the plaintiffs’ application filed 25 June 2020 and the defendants’ application filed 26 June 2020.