DISTRICT COURT OF QUEENSLAND
CITATION:
Ant Projects Pty Ltd v Morgan Brooks Direct Pty Ltd & Ors [2019] QDC 81
PARTIES:
ANT PROJECTS PTY LTD ACN 089 585 642 AS TRUSTEE FOR THE YEUNG INVESTMENTS TRUST
(Plaintiff)v
MORGAN BROOKS DIRECT PTY LTD ACN 112 625 288
(First Defendant)and
RICHARD WILLIAM AULSEBROOK
(Second Defendant)and
MORGAN ASHLEIGH BROOKS
(Third Defendant)FILE NO/S:
BD 767/17
DIVISION:
PROCEEDING:
Civil Trial
ORIGINATING COURT:
District Court of Queensland
DELIVERED ON:
27 May 2019
DELIVERED AT:
Brisbane
HEARING DATE:
19, 20 and 21 September, 29, 30 and 31 October 2018 and written submissions to 25 November 2018.
JUDGE:
Andrews SC DCJ
ORDER:
Judgment for the plaintiff against the defendants in the sum of $635,478.74.
The defendants’ counterclaims are dismissed.
CATCHWORDS:
LEASES – where a notice to remedy breach was served by email – whether the notice was not served
LEASES – where a notice to remedy breach – where breach remediable by payment of $18,353.64 – whether 11 and 14 days were reasonable times to remedy
LEASES – where a notice to remedy breach specified one amount claimed in respect of five covenants – where it failed to specify an amount claimed in respect of each covenant – whether it failed to comply with s 124(1) of the Property Law Act 1974
LEASES – where the lessor had access to the lessee’s security deposit – where the lessee was in arrears – whether there was no breach if the security deposit exceeded the arrears – whether the lessee was obliged to use the security deposit before providing a notice to remedy breach
LEASES – INTERPRETATION – where the lease referred to a plan attached – where the plan was marked “Cancelled” – whether the lease is interpreted by reference to the plan
LEASES – whether the lessee repudiated or the lessor
LEASES – quantum of damages for repudiation – whether the lessor mitigated its loss
Property Law Act 1974 sections 117, 118 and 124(1).
Residential Tenancies and Rooming Accommodation Act 2008 (Qld)
Residential Tenancies and Rooming Accommodation Regulation 2009 (Qld)
COUNSEL:
Hogg for the Plaintiff
First Defendant by its Director, the Second Defendant
Second Defendant for himself
Third Defendant for herself
SOLICITORS:
Anderssen Lawyers Pty Ltd for the Plaintiff
The claim and counterclaims
When there were about 32 months left in the term of a commercial lease for 5 years, the lessor alleges that its lessee repudiated the lease. The lessor purported to terminate and changed the lock. The lessor alleges that there were two months arrears owing when the lease was terminated and that since termination it has been unable to relet most of the space and will continue to be unable until the end of the term. It claims substantial damages arising from that. The lessee alleges that it did not repudiate but that the lessor did.
The plaintiff, as lessor, claims against the first defendant, as lessee pursuant to a lease (lease) which is registered and claims against the second and third defendants as sureties for the lessee. The plaintiff’s claim, abandoning any excess above $750,000,[1] is for:
[1]T1-20.
1. $36,707.28 as moneys due and payable pursuant to the terms of the lease and/or a guarantee;
2. Damages in the sum of $670,809.97;
3. Advertising costs in the sum of $7,928.40;
4. Legal costs on an indemnity basis;
5. Interest to the date of judgment pursuant to s 58 of the Civil Proceedings Act.
The first defendant (lessee) counterclaims for:
1. A declaration that the lease is void and unenforceable as between the plaintiff and the lessee; alternatively
2. A declaration that the lease was terminated by the lessee by notice in writing to the plaintiff on 10 February 2017 amounting to repudiation by the plaintiff; and
3. An order that the plaintiff pay to the lessee the sum of $67,439.84 as a debt due pursuant to clause 4.4 of the lease or alternatively as damages for breach thereof;
4. A declaration that the lessee has no liability to the plaintiff under the lease that the plaintiff has failed to mitigate any loss that would reasonably be expected of it;
5. An order that the plaintiff pay the lessee $67,439.84 as moneys had and received to the use of the lessee (as an alternative to 3.);
6. An order that the plaintiff pay to the lessee $6,763.11 being an Overpayment as moneys had and received to the use of the lessee;
7. An order that the plaintiff pay the defendants associated legal costs up until 15 December 2017 on the standard basis.
The second and third defendants counterclaim for similar relief in favour of the lessee and for declarations that:
1. The Guarantee is void and unenforceable as between the plaintiff and the second and third defendants;
2. The second and third defendants have no liability to the plaintiff under the guarantee;
3. The first and second defendants are entitled to set off the Security Amount of $67,439.84 and Overpayment of $6,763.11 against any liability they may have to the plaintiff.
The relevant pleadings
The relevant pleadings are:
1. Amended statement of claim filed 19 September 2018 (further amended 21 September 2018 by the addition of the words “as trustee of the Yeung Investments Trust”);
2. Amended defence (of the first defendant);[2]
[2]Tendered 21 September 2018 and marked exhibit 29.
3. Amended defence (of the second defendant);[3]
[3]Tendered 21 September 2018 and marked exhibit 30.
4. Amended defence (of the third defendant);[4]
[4]Tendered 21 September 2018 and marked exhibit 31
5. Further amended reply and answer (to the defence of the first defendant);[5]
[5]Filed by leave 21 September 2018.
6. Further amended reply and answer (to the defence of the second defendant);[6]
7. Further amended reply and answer (to the defence of the third defendant).[7]
Each amended defence includes a counterclaim.
[6]Filed by leave 30 October 2018.
[7]Filed by leave 30 October 2018.
The relevant written submissions
The written submissions are the:
1. “Amended Defendants Closing Submissions”, dated 15 November 2018 (defendants’ submissions);
2. Plaintiff’s Submissions Following Trial, dated 23 November 2018 (plaintiff’s submissions); and
3. The third defendant’s email of 25 November 2018 submitting, in essence, that “the responsibility remains with Plaintiffs’ Counsel to prove to the Court, the Plaintiff is a legal entity in the eyes of the law, that can sue and be sued and be held responsible for its actions”.
Definitions
Various entities, persons and property referred to in the reasons are described as follows:
1. The plaintiff is Ant Projects Pty Ltd ACN 089 585 642 as trustee for the Yeung Investments Trust. The plaintiff did not include in the title of its court documents that it sues in its capacity as trustee for the Yeung Investments Trust. The plaintiff omitted to allege in its pleadings that it sues as trustee. The plaintiff obtained leave[8] to amend the title of its documents and to prove that it acted in the capacity of trustee for the Yeung Investments Trust.[9] The defendants did not oppose leave. The plaintiff has not made the amendments for which it obtained leave. That creates no practical difficulty. There is no dispute about the capacity in which the plaintiff became the registered proprietor of the land at 8 Byers Street, Newstead (the land) on 8 September 2016. Each defendant alleged in the respective defences that the plaintiff’s capacity was as trustee for the Yeung Investments Trust.[10] The allegation of the plaintiff’s capacity as trustee of that trust was not disputed by the plaintiff in its respective replies to those defences. Though the plaintiff’s capacity was not in issue, the plaintiff’s identity became the subject of submissions by the defendants. The plaintiff’s director, Mr Yeung, gave evidence that the plaintiff acted in its capacity as trustee.[11] The plaintiff is registered for goods and services tax and was so registered as a trustee.
[8]T3-32 line 5.
[9]T3-31 line 20.
[10]At paragraph 1 (c).
[11]T1-72.
2. At all material times the land has had a building (the building) erected on it. The building has a ground floor, first floor and second floor.
3. Morgan Brookes Direct Pty Ltd ACN 112 625 288 (the lessee) is the first defendant and at material times was the lessee of part of the land. The lessee operated a mortgage broking business at all material times.
4. The lessee is to be distinguished from Ashleigh Morgan Pty Ltd ACN 086 173 462 as trustee (the seller) which sold the land to the plaintiff by a Contract for Commercial Land and Buildings dated 1 July 2016.[12]
[12]A copy is Exhibit 1.
5. Mr Aulsebrook is Richard William Aulsebrook, the second defendant and a surety for the lessee’s liability to the plaintiff and was at all material times a director of the lessee. Mr Aulsebrook was able to conduct the lessee’s mortgage broking business by telephone and by computer connected to the internet and he did so from the building;
6. Ms Brooks is Morgan Ashleigh Brooks, the third defendant and a surety for the lessee’s liability to the plaintiff and was at all material times a director of the lessee until her directorship ceased on 30 November 2016;[13]
[13]T1-7 line 18.
7. Mr Yeung is David Yeung, at all material times the director of the plaintiff. Mr Yeung had the day to day control of the plaintiff;
8. Mr Deane is Andrew Edward Deane, a property agent and property developer;
9. Mr O’Brien is Matthew James O’Brien, a commercial real estate agent and a sales and leasing executive, employed at all material times by Elders Commercial Brisbane.
Issues
The submissions raised some issues not adequately raised in the pleadings. The questions raised in submissions for resolution and which are also issues adequately appearing in the pleadings, are:
1. Is the plaintiff a legal entity and the correct party to enforce the lease?[14] (Yes)
[14]Defendants’ submissions paragraphs 1-3.
2. Did the plaintiff acquire the right to enforce the lease against the lessee? (Yes)
3. Was the lessee in credit because of overpayment of a security deposit? (No)
4. Is the lease void for uncertainty because a plan in the lease of the caretaker’s residence was marked “cancelled”? (No)
5. Is the lease void for uncertainty about carparks? (No)
6. Did the lessee repudiate the lease by breach of clause 5.2 of the lease? (No)
7. Did the notice to remedy breach fail to comply with s124 of the Property Law Act 1974? (No)
8. Were 11 days or 14 days a reasonable time within which to remedy a breach by payment of $18,353.64? (Yes)
9. Did the lessee repudiate the lease by failing to remedy breach of covenant to pay rent etcetera before the plaintiff purported to terminate the lease on 10 February 2017? (Yes)
10. If the plaintiff validly terminated the lease, did the plaintiff fail to mitigate its loss? (No)
11. What is the quantum of the plaintiff’s loss?
The defendants did not make submissions about some legal arguments appearing in their amended defences. As a result, I need not set them out, analyse them, speculate as to what the submissions would have been and rule upon them. The defendants raised in their submissions some issues which did not meet the precondition of having been adequately raised in their pleadings. The defendants may not have a determination of those issues which were not pleaded against the plaintiff. I must pass over the defendants’ submissions that:
1. The plaintiff did not supply toilet requisites;
2. The plaintiff failed to prove that it paid for electricity supplied to the lessee;
3. The plaintiff failed to audit outgoings accounts and its agents’ invoices;
4. The plaintiff failed to demonstrate authority to appoint two agents or claim management fees for duplicate management work (implying that the plaintiff was charged for and has claimed for unnecessary work by a managing agent);
5. The plaintiff failed to insure the premises until 26 October 2016 and billed the lessee for premiums the plaintiff did not pay;
6. The plaintiff required the lessee to pay for insurance for contents overvalued at $250,000;
7. The plaintiff requested the lessee to pay 87% of an insurance premium for the cost to replace another tenant’s sign;
8. The lease was not amended on 17 August 2016;
9. The lessee overpaid for outgoings and is entitled to a reimbursement for the overpayment;
10. The plaintiff offered the tenant, 1300 Loveit, a carpark for $500 per month.
Facts
Ms Brooks, Mr Aulsebrook and their daughter resided in the building from 2008. In 2008 their daughter was about 17 years of age. Ms Brooks and Mr Aulsebrook are married but were estranged at the time of the hearing.
Ms Brooks and Mr Aulsebrook were operating the lessee’s business together in September 2016. Ms Brooks stood down from the business on medical grounds soon after. Ms Brooks was mentally unfit to operate as a director of the lessee’s business.
On about 29 September 2015 first defendant as lessee entered into the lease of a part of the land with the seller as lessor for a term commencing 26 September 2015 and expiring 25 September 2020. Mr Aulsebrook and Ms Brooks each signed the lease as guarantors.[15] As guarantors, Mr Aulsebrook and Ms Brooks agreed to clause 14 in the schedule to the lease. Clause 14 provides, so far as is relevant:
[15]Exhibit 5 p 394.
14.2 Terms of guarantee and indemnity
In consideration of the Landlord agreeing to grant this Lease to the Tenant at the request of the Guarantor, the Guarantor agrees:
(a)to guarantee the observance and performance of the Tenant’s obligations under the Lease throughout the Term…
…
(f)this guarantee is not discharged and the Guarantor is liable under this Guarantee:
…
(vi) even if the Lease is varied;
…
14.3 Assignment by Landlord
The Landlord may assign the benefit of the Guarantor’s obligations under this clause 14 if it sells the Building…
The Landlord, within the meaning of the lease, was identified as the seller.
The schedule to the lease[16] also provides, so far as is relevant to the issues:
[16]Exhibit 5.
1.1 Definitions
…
Car Park means 4 onsite car parks …3.1Outgoings Expenditure Statement
On or before the Commencement Date and before the start of each Financial Year, the Landlord may give the Tenant an estimate of the Outgoings for that Financial Year and an estimate of the Outgoings Contribution and the monthly instalments payable by the Tenant on account of the Outgoings Contribution. … The Landlord may revise an estimate at any time giving the Tenant written notice …
3.2 Payment of Outgoings Contribution
… the Tenant must pay the estimated Outgoings Contribution for each Financial Year to the Landlord by equal monthly instalments, in advance, on each Rent Day.
…
3.4 Statement of Outgoings
After the end of each Financial Year, the Landlord must give the Tenant a statement detailing the actual Outgoings and the actual Outgoings Contribution for that Financial Year.
3.5 Yearly Adjustment
If the Outgoings Contribution exceeds amounts paid by the Tenant on account, the Tenant must pay the deficiency on the next Rent Day after the Tenant receives the statement under clause 3.4. If it is less, the Landlord must refund the excess or credit the excess against future payments on account of the Outgoings Contribution.
…
3.10 Costs of Lease
The Tenant must pay the Landlord or its solicitors when asked:
…(e)the Landlord’s reasonable legal costs for considering, approving and supervising anything requiring the Landlord’s consent, any dealing arising out of this Lease, preparing and negotiating any document required under clause 12.5(b)(ii) any default by the Tenant, any termination of this Lease, the re-entry by the Landlord to the Premises, the surrender of this Lease (including any stamp duty and registration fees), the enforcement of any term or condition or the exercise of any power, and any litigation commenced by or against the Tenant concerning the Tenant’s occupation of the Premises.
…
3.11 Supply of Electricity
The Landlord may supply electricity to the Tenant but it may not charge the Tenant more than the Tenant would have paid a supplier for a direct supply. The Landlord must give the Tenant an account and the Tenant must pay the account within seven days of receiving it. If the Tenant does not pay on time, the Landlord may disconnect the electricity supplied to the Premises. The Tenant must pay the cost of any disconnection or reconnection of electricity supply.
3.12 Goods and Services Tax
(a)If GST is payable by a supplier (or by the representative member for a GST group of which the supplier is a member) on any supply made under or in relation to this document, the recipient will pay to the supplier an amount (GST Amount) equal to the GST payable on the supply. The GST Amount is payable by the recipient in addition to and at the same time as the net consideration for the supply, subject to receipt of a tax invoice.
…
4.1Tenant to Provide Security
On the Commencement Date, the Tenant must provide the amount in item 3 as security for the performance of the Tenant’s obligations under this Lease. The security must be in the form of …:
…(b)a cash deposit paid to the Landlord’s nominated account or Managing Agent’s trust account.
4.2Right to apply security
If the Tenant does not comply with its obligations under this Lease the Landlord may use this security to compensate the Landlord for loss or damage due to the Tenant’s breach. The Landlord does not waive the Tenant’s breach by using the security and no other rights of the Landlord arising from that breach are affected.
4.4 Return of security
If the Tenant complies with its obligations under this Lease, the security must be returned to the Tenant when the Tenant vacates the Premises.
…
5.1 Permitted Use
The Tenant may only use the Premises for the purpose in item 4.
5.2 Tenant’s ObligationsThe Tenant must at its cost, during the term:
(a)Business Standard operate its business competently, efficiently and in a reputable manner and ensure that no material adverse change occurs to the Tenant’s financial position or the financial position of the Tenant’s business;
…
5.3 Restrictions on use
The Tenant must not:
…(g) Living in Premises use the Premises as a residence, other than that area to be shaded blue on the plan attached in Annexure “A” and otherwise referred to as the “Caretakers Residence”, or for any unlawful purpose;
…
8.1 Car Park and Common Area
(a) The Tenant has the exclusive right to occupy the Car Park …
8.2 Alterations and Additions to the Building
(a)The Landlord may, subject to clause 8.1 … vary, modify, alter ... redesign … the Building and may, for example:
…
(vi) … move or change the … number or location of the … car park on the Land;
(vii)vary the number or composition of car parking spaces in the car park on the Land;
…
13.1 Default
The Tenant is in default under this Lease if:
(a)Failure to Pay Money any money payable by the Tenant to the Landlord is not paid within 30 days of the due date;
…
17.6 Notice to Tenant
An invoice, notice, demand or other communication given by the Landlord to the Tenant under the Lease must be in writing and may be left for the Tenant at the Premises or may be sent by post or facsimile transmission to the Tenant at Premises or the Tenant’s registered office or last known address.”
Clause 5.1 of the schedule to the lease refers to “item 4.” Item 4 of the schedule to the lease provides that the permitted use is: “Shop/Office, Commercial Office, Warehouse/Showroom, Caretakers Residence”.
Mr Yeung saw the land on 9 and 10 May 2016. The plaintiff expressed its interest in purchasing the land. It did so to the seller’s agent on 11 May 2016.
The lease between the seller and the lessee was registered on 23 June 2016. A copy of the registered lease in the form in which it is now registered is exhibit 5.
The plaintiff purchased the land from the seller on 1 July 2016. The Contract for Commercial Land and Buildings was in writing and a copy is in evidence.[17] The description of the plaintiff in the reference schedule to the contract was “Ant Projects Pty Ltd ACN 189 585 642 as trustee for The Yeung Investments Trust”. The purchase price was $2,410,000. The land was sold subject to leases described in annexure 1 to the contract.[18] The plaintiff would not have purchased if there had not been a lease between the seller and the lessee. The tenants described in annexure 1 to the Contract are as follows:
[17]Exhibit 1.
[18]Exhibit 1 p 558.
1. 1300 Love It Pty Ltd ACN 154 538 851 Trading as Renaissance Cosmetic Clinics;
2. Morgan Brooks Direct Pty Ltd ACN 112 625 288; and
3. Sublease to Alchemy Recruitment Consulting Pty Ltd IOR & ATF Alchemy Recruitment Consulting Unit Trust. (Alchemy)
Alchemy was subletting some or all of the second floor of the building from the lessee.
The seller assigned to the plaintiff the benefit of the guarantee and indemnity it held from Ms Brooks and Mr Aulsebrook. The assignment was agreed by clause 16.3 of the Standard Commercial Terms of the Contract for Commercial Land and Buildings.[19] The clause is set out below.
[19]Exhibit 1.
The lease registered on 23 June was, on 5 July 2016, the subject of requisition by the Department of Natural resources and Mines.[20] The requisition asserted that the lease did not meet Land Registry requirements for registration and that to meet the requirement “The description of the area being leased must be fully described and agree with that shown on the lease sketch, including the relevant floor level and any lease identifiers). The minimum outline of the building must be shown on the sketch to enable unambiguous location of the leased area. Measured connections from the corner of the building to a corner of the base parcel to locate the building and clarify that the lease does not encroach onto adjoining land must be shown. The leased area is to be connected to a corner of the building by measured connections.” The requisition noted that “When a sketch is deficient it should be replaced by a new one, with the original sketch marked as ‘cancelled’ and initialled by all parties. The new sketch should be signed by all parties and both sketches re-lodged with the dealing.” The Department advised that the lease was liable to be rejected if the requisition notice was not complied with by 30 August 2016.
[20]Exhibit 35.
The requisition was practical and predictable. The three plans which showed each of the three floors were not drawn to scale, did not show any measurements, were for illustration purposes only and were not related to any boundary of the parcel of land.
The requisition contemplated that any sketch which was marked “cancelled” because of a deficiency was nevertheless to be re-lodged. Five plans in the registered lease were subsequently marked “cancelled” and were re-lodged.
The schedule to the lease which was the subject of the Department’s requisition on 5 July 2016, subsequently had four pages inserted.[21] Each of the four pages contained a plan drawn by Cardno (Qld)Pty Ltd (Cardno). They are respectively a Locality Plan, a Ground Floor Plan, a First Floor Plan and a Second Floor Plan. Cardno certified on each plan on 18 July 2016 that it was correct.
[21]Exhibit 5 the four pages marked in the bottom left hand corner, respectively, 430, 431, 432 and 433.
The four new pages containing Cardno’s plans each carries signatures of Ms Brooks and Mr Aulsebrook, which is consistent with compliance with the Department’s request that all parties sign the new sketch.
Five plans in the schedule to the lease[22] were marked “CANCELLED” above parallel lines drawn diagonally across each of the five plans. The five plans were respectively marked “GROUND FLOOR”, “FIRST FLOOR”, “SECOND FLOOR”, “BUILDING CARPARK PLAN” and “Annexure “A” [Caretaker’s Residence]”. Each of these five plans was initialled in two places, one of the initials being that of Ms Brooks and the other of Mr Auslebrook. That is consistent with compliance by the seller and the lessee with the Department’s request that all parties initial any sketch marked as “cancelled”. This happened at the Department.
[22]Exhibit 5 the five pages marked in the bottom left hand corner, respectively, 435, 436, 437 438 and 439.
I infer that Ms Brooks applied her signatures to the four new plans and her initials to the five plans marked “CANCELLED” on the same date. It was on about 18 July 2016.[23]
[23]T30 Oct p 35.
It is notable that:
1. The five plans marked “CANCELLED” were marked that way by the seller and lessee in response to a request of the Department;
2. The plans of the ground floor, first floor and second floor which were the subject of requisitions and which later were marked as cancelled, each carried before and after the requisition, the warning “ILLUSTRATION PURPOSES ONLY Not to scale” and the plans had no dimensions marked on them.
3. The plan which identified the “Caretaker’s Residence” incorporates on one page, side by side, the miniaturised plans of the first and second floors which carry the miniaturised warning about “ILLUSTRATION PURPOSES ONLY Not to scale” and which have no measurements.
4. The plan which identified the “Caretaker’s Residence” marked the boundaries of the “Caretaker’s Residence” on each floor by reference to the sketches of the first and second floors in a way which was objectively obvious, notwithstanding that the floor plans were not to scale and have no measurements;
5. The substitution of two plans, being of the first and second floors, drawn to scale and with dimensions, for the two plans which had not been drawn to scale causes no objective doubt about the boundaries of the “Caretaker’s Residence”;
6. There was no evidence led that the lessee agreed with either the seller or the plaintiff that the plans marked “CANCELLED” were to be irrelevant to the terms of the lease and there is no express term of the lease that plans marked “CANCELLED” are irrelevant for the purpose of interpretation of the lease;
7. By a comparison of the plan marked “CANCELLED” which identified the “Caretaker’s Residence” with the two plans to scale for the ground floor and first floor, one can objectively identify the parts of the first and second floors which the parties to the lease originally intended as capable of use for a “Caretaker’s Residence”;
8. The plan which identified the “Caretaker’s Residence” was marked “CANCELLED” but not replaced by and other plan purporting to identify the area of a “Caretaker’s Residence”.
Ms Brooks and Mr Aulsebrook had resided in the area designated “Caretaker’s Residence” in the sketch plan before it was marked cancelled and continued to reside there after it was marked cancelled. Ms Brooks was regularly sleeping on a couch in the area designated “Caretaker’s Residence” until she left the building for Melbourne in February 2017.
Mr Aulsebrook gave evidence that the caretaker’s residence at 8 Byers Street occupied less space than the commercial tenancies and that it was represented by the rectangles marked on Annexure “A”[24] in the schedule to the lease. Mr Aulsebrook accepted that the plans on Annexure “A” showing the caretaker’s residence accurately reflected where the caretaker’s residence was. I accept this evidence.
[24]Exhibit 5 p 439.
Mr Yeung wanted some amendments made to other parts of the lease to include certain expenses as outgoings. A Form 13 containing amendments to the lease was prepared by Gadens Solicitors (Gadens). The Form 13 containing amendments was executed by the seller and by the lessee on 17 August 2016 and sent by Gadens to Shand Taylor Solicitors (Shand Taylor) for the plaintiff. The person who signed for the seller was Ms Brooks. The person who signed for the lessee was Mr Aulsebrook. A copy of that Form 13 was identified by Mr Yeung.[25] That copy was then tendered by Ms Brooks and became exhibit 28. The Form 13 and a Form 20 together became exhibit 28. They contain the terms of amendments to the lease with effect from 30 August 2016. The security amount was varied from the original “$41,250” and became “an amount equivalent to four months’ rent plus outgoings plus GST”. Another consequence of the amendment was to expand the definition of outgoings to include “reasonable management fees”. The original Form 13 was executed again on 26 August 2016 by Ms Brooks in her capacity as a director of the lessee. A copy[26] of the first page of the original Form 13 showing that Ms Brooks signed on 17 and 26 August was tendered by the defendants[27] but not as evidence that there were further negotiations between the parties after 17 August 2016.[28]
[25]T1-87 line 45.
[26]Exhibit 34.
[27]T29 Oct p14 line 40.
[28]T29 Oct p13 lines 14-20.
Settlement of the Contract for Commercial Land and Buildings took place on either 1 or 8 September 2016.
The Contract for Commercial Land and Buildings incorporated terms entitled “Standard Commercial Terms”. Clause 16.3 of the Standard Commercial Terms provided, so far as is relevant:
“16.3 The Seller assigns to the Buyer…:
…
(c)the benefit of all Guarantees… held by the Seller in respect of the Leases which are capable of assignment…”
By that clause, the seller assigned to the plaintiff the benefit of guarantees held by the seller in respect of leases set out in annexure 1 of the contract.[29] Included among the leases identified by annexure 1 is a lease naming the first defendant as tenant for a term commencing 26 September 2015 expiring 25 September 2020. That is the lease[30] and is the lease upon which the plaintiff brings its claims in this proceeding.
[29]Annexure 1 is at p 558 of exhibit 1.
[30]Exhibit 5.
The plaintiff appointed Beacon Property (Beacon) as its agent in respect of the land on 19 September 2016.[31]
[31]T1-90 line 26.
On 29 September 2016 the seller gave notice[32] to the lessee that the property which contained the premises leased to the lessee had been transferred to the plaintiff with effect from 30 August 2016 and that all rent, contributions to outgoings and other amounts owing from time to time under the lease were from that date payable to or as directed by the plaintiff. The notice is dated 29 September 2015. The year “2015” was obviously an error in drafting.
[32]Exhibit 62.
Beacon provided a tax invoice dated 1 October 2016 for $18,353.64 to the lessee. The components of the amount claimed were $14,162.50 for rent, $1,146.25 for GST on rent, $2,522.63 for outgoings and $252.26 for GST on outgoings for the period 26/09/16 to 25/10/16.[33]
[33]Exhibit 19.
Ms Brooks and Mr Aulsebrook were estranged from October 2016. At material times, at least from that date, Mr Aulsebrook had an apartment which is a couple of blocks away from 8 Byers Street and on the river near and which he occupied with his father. He had lived, on and off, at 8 Byers Street. I infer that since his estrangement from Ms Brooks, Mr Aulsebrook had resided at his apartment until 10 February 2017 when the plaintiff gave notice to quit to the lessee.
On 6 October 2016, Rouse Lawyers for the plaintiff wrote[34] to Mr Aulsebrook about three issues being car parking, the property manager and its fees and the quantum of outgoings.
[34]Exhibit 27 and exhibit 60.
Beacon provided a tax invoice dated 1 November 2016 for $18,353.64 to the lessee. The components of the amount claimed were $14,162.50 for rent, $1,146.25 for GST on rent, $2,522.63 for outgoings and $252.26 for GST on outgoings for the period 26/10/16 to 25/11/16.[35] Those were the components for rent and outgoings which were owing for that period.
[35]Exhibit 20.
Ms Brooks had been a director of the seller and of the lessee. Her directorship of the seller ceased on 23 November 2016. Her directorship of the lessee ceased on 30 November 2016.
The plaintiff appointed Retailspace Pty Ltd (Retailspace) as its property manager in respect of the land on 2 December 2016.[36] When Retailspace took over the management it adopted the budget for outgoings which had been set by the previous managing agent, Beacon. It is possible that the plaintiff had not terminated the agency of Beacon at that date and it is possible that Beacon’s agency may have endured for another six weeks.
[36]T1-91 line 34.
Mr Deane was the licensee for Retailspace. Mr Yeung asked Mr Deane to act as agent for the plaintiff with respect to the property. Mr Yeung signed a letter advising that Retailspace was appointed to act as agent as at 7 December 2016. A copy of that was forwarded by Mr Deane to Mr Aulsebrook by email on 8 December 2016.[37]
[37]Exhibit 44.
Mr Deane emailed Mr Aulsebrook on 8 December 2016 to advise that Retailspace had been appointed to manage 8 Byres Street and to express his understanding that there were a number of issues relating to the tenancy including “1. Outgoings unpaid and in dispute. 2. Car parking allocation …” There is no evidence to establish that the outgoings were unpaid or that Mr Deane’s understanding about unpaid outgoings was correct.
Mr Deane met with Mr Aulsebrook on 12 December 2016 when Mr Deane told Mr Aulsebrook that he would look further into the car parking arrangement for the premises.
On 14 December 2016, by email,[38] Mr Deane invited comment on what Mr Deane understood to be the car parking arrangement for the premises.
[38]Exhibit 27.
A written document appointing Retailspace was prepared and the document provided for Retailspace’s agency to commence on 1 December 2016. Mr Deane later altered the document to show 9 January 2017 as the commencement date of Retailspace’s agency.[39] Mr Deane made the amendment because he believed that the agency of Beacons did not expire until 8 January 2017. Notwithstanding Mr Deane’s concern for the possibility that Beacon was also the plaintiff’s agent, the fact is that Retailspace, was an agent for the plaintiff on and from 2 December 2016 and in that capacity issued a tax invoice[40] to the lessee on 19 December 2016.
[39]Exhibit 26 p 2.
[40]Exhibit 2.
Beacon provided Mr Deane with the outgoings budget Beacon had prepared for the property. On 19 December 2016 Retailspace issued a tax invoice to the lessee for $18,353.64. Mr Aulsebrook accepted that the demand for $18,353.64 which was made in December was for an amount identical with the amounts which had been demanded by Beacons in November and October.
The components of the amount claimed were $14,162.50 for rent, $1,146.25 for GST on rent, $2,522.63 for outgoings and $252.26 for GST on outgoings for the period 26/12/16 to 25/01/17.[41] Those components were unchanged from the components of the invoices rendered for the two preceding months.
[41]Exhibit 2.
Rent was payable pursuant to clause 2.1 of the schedule to the lease, monthly in advance. The amount included for outgoings and for GST on outgoings was adopted from the budget of Beacon Property. The sum demanded by the invoice has not been paid. The tax invoice was sent by email to Mr Aulsebrook. The email which attached the tax invoice also provided:
Thanks for your recent emails.
1.Tax Invoice. We have attached our invoice for the next rent period. Please ensure payment is made on or before the due date.
2.Outgoings. Your recent comments are noted, and we had also had a handover meeting from Beacon in the last few days. We are more fully briefed and I believe there may be a resolution.
3.Car parking. Again, your recent comments are noted. It appears the parties have widely differing opinions.
I am suggesting that you and I have a further meeting with a view to resolve the outgoings and car parking issues. I am about to go on leave, and will then be available the w/c 9 January. Would you let me know if such a meeting is of interest to you, and possible dates.
On 20 December 2016 Mr Aulsebrook emailed Mr Deane.[42] The email provided:
WITHOUT PREJUDICE
Andrew,Just to be clear, I understand there is still confusion as to what the quantum of the alleged outgoings are to date. Kindly confirm you and the landlord are not seeking demand on said alleged outgoings before we mutually resolve them in the new year.
Alternatively, and as previously requested, define them and let’s resolve them and the Christmas break or; absent either your/the landlord’s agreement; as sought above; or a pre-Christmas mutual agreement on the quantum, we entirely rely on Johnathon Tett’s verbal assurances “we could continue paying outgoings as we have noting there would be an accounting in or about May/June 2017”.
[42]Exhibit 57.
On 22 December 2016 Mr Deane emailed Mr Aulsebrook[43] writing:
[43]Exhibit 59.
Morning Richard,
Regarding the outgoings, I agree there is still confusion.
I understand that you have been paying the majority of the outgoings as charged, however you have deduced an amount each month.
For December, I expect that you will continue this practice when you make your payment on or before 26th.
In respect to a potential meeting in January, I await your response on dates. …
On 29 December 2016 Mr Tett of Beacon emailed Mr Aulsebrook at 9.13am attaching a tax invoice[44] (Beacon invoice) addressed to the lessee and dated 26 December 2016. It was in substantially the same terms as the invoice sent by Retail Space on 19 December 2016. That is, it was for the same rent, the same GST on rent, the same outgoings and the same GST on outgoings for the same period being 26 December 2016 to 25 January 2017. One difference was that it requested payment to the bank account of Beacon Real Estate while the tax invoice issued 10 days before by Retail Space requested payment to the bank account of Retail Space.
[44]Exhibit 56.
In his email Mr Tett asked Mr Aulsebrook to give him ‘an update in relation to your rent that was due on the 26/12/2016”.
The lessee did not pay the $18,353.64 demanded for the plaintiff by Beacon, or any of it on.
Retailspace sent a letter of demand dated 5 January 2017.[45] It provided:
The following monies are overdue and are payable in full within seven (7) days to avoid legal action.
Rent and other charges in relation to your lease at 8 Byres Street, Newstead - $21,905.95.
This matter is serious and requires your urgent attention.
[45]Exhibit 46.
The amount demanded on 5 January 2017 exceeded the amount demanded by Retailspace by its tax invoice dated 19 December. The letter of 5 January 2017 attached a demand under the heading “Sundry” for $18,353.64 and under the heading “Rent” for $3,552.31. Mr Aulsebrook gave evidence that he was very confused by those figures. I do not accept that he was very confused by the demand for $18,353.64, notwithstanding the agent’s error in putting that amount in a column headed “Sundry”. Mr Aulsebrook had seen the plaintiff’s agents’ tax invoices demanding an identical monthly sum in the months of October, November and December 2016. Mr Aulsebrook had charge of the lessee’s payments. For the lessee, Mr Aulsebrook had paid an identical amount demanded in October and in November 2016 and had seen an identical amount demanded for the month commencing 26 December 2017.
Mr Deane met Mr Aulsebrook again in early January 2017 to talk about payment of rent and outgoings. Mr Deane then saw that the premises were well furnished and that Mr Aulsebrook was trading from them.[46]
[46]T2-96 line 24.
On 13 January 2017 Mr Aulsebrook demonstrated an interest on behalf of the lessee in determining the cost to make some information technology upgrades at the lessee’s premises and obtained an estimate[47] of a cost of between four and six thousand dollars.
[47]Exhibit 53.
On 26 January 2017 the next payment for rent, outgoings and GST became due and owing. The amount was not paid.
Mr Grealy of Anderssen Lawyers, was acting at material times in 2017 for the plaintiff. Mr Grealy caused to be sent two letters signed by another solicitor, Ms Huggins, dated 27 January 2017. One was to the lessee[48] and the other to Mr Aulsebrook and Ms Brooks.[49] Mr Grealy caused them to be posted by express post on 27 January. He also emailed both to ‘[email protected]’. That was then an email address then in use by Mr Aulsebrook. The defendants admit[50] receipt on 30 January 2017 of the paper letters addressed to them but the defendants deny that either of the two emails were received at Mr Aulsebrook’s email address at any date.
[48]See a copy of an email copy at exhibit 32.
[49]Exhibit 4.
[50]Defendants’ submissions page 7 at (xi) and (xii).
The letter addressed to Mr Aulsebrook and Ms Brooks provided, so far as is relevant:
Please find enclosed, by way of service upon you, Notice to Remedy Breach of Covenant pursuant to Section 124 of the Property Law Act 1974.
Under the Guarantee that you signed in respect of the obligations of Morgan Brooks Direct Pty Ltd, you must rectify the breaches specified in the notice in a reasonable period of time. We consider a period of 14 days from the date of the notice to be reasonable.
Therefore, you have until close of business on 10 February 2017 to make a payment of the amount specified in the Notice to Remedy Breach of Covenant, failing which, the Landlord will be able to terminate Morgan Brooks Direct Pty Ltd’s Lease without any further notice to you.
Should the Landlord be compelled to terminate the lease due to your failure to rectify the breaches in the Notice, we confirm that you will be liable for payment of all outstanding rental charges, along with damages for the premature termination of the Lease, any legal costs incurred and default interest.
…
The letter addressed to the lessee provided, so far as is relevant:
Please find enclosed, by way of service upon you, Notice to Remedy Breach of Covenant pursuant to Section 124 of the Property Law Act 1974.
To comply with the Property Law Act 1974 you must rectify the breaches specified in the notice in a reasonable period of time. We consider a period of 14 days from the date of the notice to be reasonable.
Therefore, you have until close of business on 10 February 2017 to make a payment of the amount specified in the Notice to Remedy Breach of Covenant, failing which, the Landlord will be able to terminate Morgan Brooks Direct Pty Ltd’s Lease without any further notice to you.
Should the Landlord be compelled to terminate the lease due to your failure to rectify the breaches in the Notice, we confirm that you will be liable for payment of all outstanding rental charges, along with damages for the premature termination of the Lease, any legal costs incurred and default interest.
…
A notice to remedy breach of covenant dated 27 January 2017 was prepared for enclosure with each letter. Each notice was in slightly different terms to take account of whether it was for the lessee or for the sureties. The notice to Mr Aulsebrook and Ms Brooks as sureties was attached to the letter addressed to them. The notice to the lessee was attached to the letter addressed to it.
The notice to the lessee was dated 27 January 2017 and provided, so far as is relevant:
Property Law Act Form 7
Notice to Remedy Breach of Covenant
Property Law Act1974, Section 124To: Morgan Brooks Direct Pty Ltd (Lessee) of 8 Byres Street, Newstead in the State of Queensland.
Being the Lessee of premises described as part of the ground floor, first floor and second floor of the building (the Building) situated at 8 Byres Street, Newstead in the State of Queensland (the Premises).
With reference to the lease of the Premises between Ashleigh Morgan Pty Ltd (ACN 086 173 462) and the Lessee for a term of 5 years commencing on 26 September 2015 and expiring on 25 September 2020 (the Lease), and the Amendment of Lease dated 17 August 2016, and the transfer of the Building to ANT Projects Pty Ltd (ACN 089 586 642) as trustee for the Yeung Investments Trust (the Lessor) (whereby all right, title and interest in the Lease and Guarantee passed to the Lessor with the reversionary estate) and the covenants by the Lessee to:
1.pay the monthly rental for the Premises on the first day of each month in advance pursuant to clause 2.1 of the Lease;
2. pay outgoings pursuant to clause 3.2 of the Lease;
3. pay electricity charges pursuant to clause 3.1 of the Lease;
4. pay legal costs in accordance with clause 3.10 of the Lease; and
5. pay goods and services tax in accordance with clause 3.12 of the Lease,
and for the breach by the Lessee of the aforesaid covenants, and the consequent breach of the Guarantee by the Guarantor, insofar as the Guarantor has failed to ensure the payment of a totality of the amounts due, owing and payable under the terms and conditions of the Lease as and when they became due and payable, the Lessor hereby provides notice and requires the Guarantor to meet the payment of the sum of $18,353.64 within a reasonable period of time from the date of this Notice.Dated this 27th day of January 2017.
…
Note: The Lessor will be entitled to re-enter or forfeit the lease in the event of the lessee failing to comply with this notice within a reasonable time – see Section 124 of the Property Law Act 1974.
The notice to Mr Aulsebrook and to Ms Brooks provided, so far as is relevant:
Property Law Act Form 7
Notice to Remedy Breach of Covenant
Property Law Act1974, Section 124To: Richard William Aulsebrook and Morgan Ashleigh Brooks (Guarantors) of 8 Byres Street, Newstead in the State of Queensland.
Being the Guarantors of the obligations of Morgan Brooks Direct Pty Ltd (Lessee) under its lease of premises described as part of the ground floor, first floor and second floor of the building (the Building) situated at 8 Byres Street, Newstead in the State of Queensland (Premises).
With reference to the lease of the Premises by the Lessee for a term of 5 years commencing on 26 September 2015 and expiring on 25 September 2020 (the Lease), the Guarantee signed by the Guarantors (the Guarantee), the Amendment of Lease dated 17 August 2016, and the transfer of the Building to Ant Projects Pty Ltd (ACN 089 586 642) as trustee for the Yeung Investments Trust (the Lessor) (whereby all right, title and interest in the Lease and Guarantee passed to the Lessor with the reversionary estate) and the covenants by the Lessee to:
1.pay the monthly rental for the Premises on the first day of each month in advance pursuant to clause 2.1 of the Lease;
2. pay outgoings pursuant to clause 3.2 of the Lease;
3. pay electricity charges pursuant to clause 3.1 of the Lease;
4. pay legal costs in accordance with clause 3.10 of the Lease; and
5. pay goods and services tax in accordance with clause 3.12 of the Lease,
and for the breach by the Lessee of the aforesaid covenants, and the consequent breach of the Guarantee by the Guarantor, insofar as the Guarantor has failed to ensure the payment of a totality of the amounts due, owing and payable under the terms and conditions of the Lease as and when they became due and payable, the Lessor hereby provides notice and requires the Guarantor to meet the payment of the sum of $18,353.64 within a reasonable period of time from the date of this Notice.Dated this 27th day of January 2017.
…
Note: The Lessor will be entitled to re-enter or forfeit the lease in the event of the lessee failing to comply with this notice within a reasonable time – see Section 124 of the Property Law Act 1974.
Five features of the letters and notices were noted by the defendants and became the subject of submissions. They were:
1. The description of the plaintiff as lessor in each of the notices to remedy breach of covenant includes the Australian Corporation Number 089 586 642. That can be contrasted with the ACN used to identify the plaintiff in the pleadings and in the Contract for Commercial Land and Buildings which is 089 585 642. The sixth integer in one number differs from the sixth integer in the other. The plaintiff, identified by ACN 089 585 642, is admitted to exist. There is no evidence that a corporation of the same name but with an ACN 089 586 642 exists. The defendants’ solicitor saw that the number was in error.[51]
[51]T 30 Oct 2018 page 38 ln 27.
2. The letters, in their third paragraphs advised “you have until close of business on 10 February 2017 to make a payment” while the letters in their second paragraphs advised “you must rectify the breaches specified in the notice in a reasonable period of time. We consider a period of 14 days from the date of the notice to be reasonable.” The date marked on the notices was 27 January. The date the paper copies of the notices was received was 30 January. 14 days from 27 January 2017 was 10 February 2017.
3. The notice referred to breach of covenant to pay rent, outgoings, electricity;
4. The notice referred to breach of covenant to pay GST;
5. The notice referred to breach of covenant to pay legal costs.
I am satisfied that Mr Grealy emailed both letters and their attachments on 27 January 2018. I accept the evidence of Mr Grealy that he did so. I am fortified in my finding by the fact that exhibits 32 and 33 each are marked as having been sent from Mr Grealy to ‘[email protected]’ and are marked as having been sent on Friday, 27 January 2017 at 4:17PM. The factual issue agitated by the parties is not whether they were sent but whether they were received at Mr Aulsebrook’s email address on 27 January 2017.
Mr Grealy received no notification that either email was not received or that it was sent to the wrong address. Mr Grealy did not request or receive a ‘read receipt’ notice.
The email address to which Mr Grealy sent the two emails was an address which Mr Aulsebrook had long used for personal and professional email correspondence. It was the only address he used. Mr Aulsebrook received on 10 February the notice to quit sent by Mr Grealy by email to that same address on 10 February 2017.[52]
[52]Exhibit 39.
Mr Aulsebrook’s habit was to check for emails regularly and at least ten times every day. Mr Aulsebrook did not give evidence that there was any malfunction on 27 January 2017 with respect to receipt of emails to his address. I infer that there was no appearance of a malfunction on 27 January 2017.
Mr Aulsebrook did not give evidence about his habits in January 2017 with respect to deleting emails and emptying the folder which holds deleted emails. Mr Aulsebrook gave evidence that he searched extensively for the two emails of 27 January 2017 in his Outlook records, junk and spam and looked for the various folders in which he would file such things. Having made such searches, Mr Aulsebrook gave evidence that “I swear on the Bible that I did never, ever, ever receive the email”.
Litigation has revealed regularly that even honest witnesses may be convinced that their memories are accurate and yet be mistaken. The fact that Mr Aulsebrook searched his electronic files is consistent with his having a concern that he may have received such emails. The lessee admits receipt of the letter of demand to it on 30 January. Having received the letters dated 27 January by express post on 30 January 2017, Mr Aulsebrook emailed them to his solicitor. I assume that he first scanned them, making electronic copies and emailed those copies. If copies had been received 3 days before, any need to retain those earlier electronic copies would lessen. The imperative to retain or to file electronic copies received on 27 January would not have been so great after receipt and scanning and retention of paper and scanned versions on 30 January. A methodical person might deliberately delete one set or the other.
Mr Aulsebrook did not say when he searched for the two emails which ought to have been received by him on 27 January 2017. There would have been no point in searching for them before litigation was in prospect. The search for emails was probably done after the building was locked on 10 February 2017. It was probably done after the proceeding was commenced by the plaintiff in March 2017. It was probably done during the period when the defendants considered what defences existed against the case pleaded in the statement of claim. There was ample time to forget the deletion of two electronic messages which were repeated in paper form scanned into electronic form three days later.
Mr Aulsebrook’s evidence on this issue is consistent with an honest mistake caused by inability to remember. That mistake is more plausible than the failure of two emails to arrive on 27 January 2017, despite being directed to the correct address and in the absence of any evidence of malfunction.
I am satisfied on the balance of probabilities that the two emails sent by Mr Grealy on 27 January 2017 to Mr Aulsebrook’s email address were received at Mr Aulsebrook’s email address on 27 January 2017 and that Mr Aulsebrook saw them on that date. He saw them as agent for the lessee and in his personal capacity. I am satisfied that he promptly drew them to the attention of Ms Brooks.
On 30 January 2017 the two letters dated 27 January 2017 and their respective attached notices were received by the defendants. Ms Brooks gave evidence that she was not in a fit mental state on that date to consider documents, legal or otherwise. I infer that she did not concern herself with the letters. I reject the evidence that she was not in a fit mental state to consider documents. In the absence of more compelling evidence, that evidence is not sufficient to satisfy me.
The defendants each admit that they did not pay the sum of $18,353.64 demanded in the attached notices by the time for payment stipulated in them.[53] The notices required the payment “within a reasonable time” and the defendants thereby appear to have admitted that they did not make payment within a reasonable time. However, the ambiguity of that admission is obvious from the defendants’ denial that the time stipulated in each notice was a reasonable time.[54] The defendants’ case is that the time stipulated in the covering letter enclosing the notice, namely by close of business on 10 February 2017, was not a reasonable time within which the lessee should pay arrears.
[53]Amended defences paragraph 41.
[54]Amended defences par 41(c) and 41(iii).
On 30 January 2017 at 3.10 pm Mr Aulsebrook emailed[55] his former solicitor attaching electronic copies of the plaintiff’s solicitors’ two letters letter of 27 January 2017 and their respective attachments.
[55]Exhibit 47.
On 31 January 2017, Anderssen Lawyers provided a tax invoice[56] to the plaintiff for $837.35 in respect of its debt recovery services for sending notices to remedy to the defendants. The plaintiff paid it.
[56]Exhibit 16.
On 7 February 2017 Mr Deane visited the premises. He saw a removal van there. He took a photograph of it at about 11.27am. He saw people moving items into the back of the van. It was being loaded. Mr Deane saw that the items were coming from the lessee’s part of the building. He took and emailed a photograph to Mr Yeung at 11.27am. at 2.33pm Mr Deane emailed the plaintiff’s solicitor saying “the gutless wonder is doing a runner” and asked when he could change the locks. It was a large removal van. It was reasonable for Mr Deane to suspect that the lessee was proposing to remove its chattels from the building. I accept as a correct generalisation for what was occurring, Mr Aulsebrook’s evidence that Ms Brooks wanted everything out.
Ms Brooks gave evidence that she was at the premises at some time on 6 or 7 February 2017, that she was not there on 9 February but that a dog carrier from a dog courier company was at the premises that day to collect her daughter’s dog; that the dog was to accompany her daughter and herself while they had to deal with; that before 9 February Ms Brooks was removing out of the premises all of the furniture owned by her, by Mr Aulsebrook and various other entities or persons for whom Ms Brooks voluntarily held furniture and items. Ms Brooks did not accept that she removed items belonging to the lessee. Desks were removed, but Ms Brooks asserted that other desks were brought in, and ceiling and wall paint. I make no finding about whether desks were brought in. If furniture belonging to persons other than the lessee was removed, I am satisfied that it had been in the portion of the building occupied by the lessee and with the consent of the lessee. In this respect I treat the caretaker’s residence as a portion of the building occupied by the lessee.
Origin Energy provided a demand[57] issued on 9 February 2017 to the seller relating to the Byres Street property. It was entitled “your final natural gas bill” and was for the period 2 December 16 - 7 Feb 17. Mr Aulsebrook did not request a final account for gas but gave evidence that he believed it was either his daughter, Ms Brooks or one of the staff of the lessee.
[57]Exhibit 54.
Mr Aulsebrook explained that the removal van had been present on either 6, 7 or 8 February 2017. I accept that it was there on 7 February 2016. He said it was there because Ms Brooks wanted “all the stuff removed because of her phobia about this airborne bacteria thingy in her mouth, and the fact that Renaissance…were impinging on our space downstairs and Brooks,’ phobia or otherwise, believed…some sort of bacteria in her mouth and an aerobic bacteria…because it’s airborne came into contact with what these Renaissance guys were doing, mixing blood and injecting Botox…that’s why she said “Get everything out” much of which was…my daughter’s… But…none of it was required by Morgan Brooks Direct to conduct its day-to-day business.” Mr Aulsebrook agreed that one could run the business off a laptop computer and a mobile phone but explained “we didn’t but – but you could…Wouldn’t be very professional.”
Mr Aulsebrook took photographs on 9 February 2017 of internal spaces in the lessee’s portion of the building. It was put to him by the plaintiff’s counsel that the photos were taken to provide evidence to demonstrate for the purposes of potential litigation that there were still items on the premises. Mr Aulsebrook denied that and explained that Mr Brooks wanted him to do certain jobs, including painting inside the building and that his relationship with Ms Brooks at that time was acrimonious and that he wanted to avoid arguments with her so he did what he was directed by Ms Brooks and he took photographs to prove to her that he had done what she had directed. Among the requests from Ms Brooks had been requests to decontaminate areas. He took a photograph of the inside of cupboards to demonstrate his compliance. He explained that telephones which were wrapped with cords around them had previously, occasionally been used by the lessee. He explained that they were in their stored state because Ms Brooks and her helpers had cleaned them with sterile wipes, wrapped cords around them and that he and others put the telephones away. I accept Mr Aulsebrook’s evidence about why he took the photos on 9 February 2017.
2. rent and outgoings which the plaintiff will receive if it lets the space in future;
3. the accelerated receipt of sums payable in respect of the period from 27 May 2019 to 25 September 2020.
The lessee had been subletting part of its space on the second floor of the building to Alchemy. The plaintiff has received rent and outgoings from Alchemy for its use of space which the lessee was entitled to occupy under the lease.
The plaintiff received money for rent and outgoings from Alchemy from 11 February 2017 and was still doing so at the time of trial. The rent and outgoings received from Alchemy until the hearing were at the rate of no more than about $1,658.33 per month. The number of months between 11 February 2017 and 25 September 2020 is 43.5. At $1,658.33 per month the plaintiff may receive as much as $72,137.35 by 25 September 2020. The plaintiff submitted that that the damages should be assessed on the assumption that the plaintiff would receive rent and outgoings from Alchemy at the same rate for 43 months but that the amount notionally to be received from Alchemy should be discounted by 30% for vicissitudes. Such a discount would increase the plaintiff’s damages. I assume the submission implies that there is a risk that Alchemy will leave. There are also the possibilities that Alchemy will stay for the entire term or that another tenant will take its space or the vacant space on the first floor or rent the entire building. I call those matters possibilities because past history and the opinion of Mr Deane each support the probability that the space unlet at trial will remain unlet until September 2020. I propose to reduce damages on the assumption that the space let at the date of the hearing will continue to be let at much the same rates. The plaintiff also received, after expenses, $1,000 from using space for Airbnb letting. It follows that in calculating the amount of rent and outgoings which the plaintiff has failed to receive and will fail to receive because of the lessee’s repudiation, the total will be reduced by $73,137.35 to an amount of $628,573.97.
The parties made no submissions in respect of the discounting on account of early receipt of 16 months of future losses. The component of $701,711.32 for rent and outgoings which relates to the sixteen month period from 27 May 2019 to 25 September 2020 is about $276,080.52. Hypothetical future earnings on account of the possibility of continuing to receive rent and outgoings for 16 months at about $1,658.33 per months is about $26,533.28. $276,080.52 future rent and outgoings from the lessee foregone less $26,533.28 future rent and outgoings to be received results in about $250,000 for future losses.
It is appropriate when assessing a lump sum as damages to compensate for the plaintiff’s future losses that the sum be discounted to account for its being received up to 16 months early. Projections for the monies which would have been received in respect of the period from 27 May 2019 to 25 September 2020 should be discounted to account for the receipt of $250,000 in June 2019 rather than over the course of the next 16 months.
To account for early receipt of $250,000 of damages on account of future losses I reduce the component for damages for future losses by $10,000.
I assess the plaintiff’s damage on account of lost rent and outgoings past and future ($628,573.97-$10,000=$618,573.97) at $618,573.97.
The plaintiff claims its legal fees of $837.35 and $8,588.98 being a total of $9,426.33 incurred in January and February 2017 in connection with the lessee’s breach of the lease and the termination of the lease. They claim is justified under the special conditions of the lease at clause 13.4 against the lessee and at clause 14 against Mr Aulsebrook and Ms Brooks.
The plaintiff paid advertising and promotion fees recoverable as damages being $3,468 comprised of:
1. To Baker Property of $2,995;[94]and
2. Elders of $473.[95]
[94]Exhibit 11.
[95]Exhibit 15.
The plaintiff incurred expenses to Twin Tech Electrical for cleaning up cables, removing the server cabinet and other work at Mr O’Brien’s suggestion to make the premises easier to let. They were $5,743 which was a loss caused by the lessee and is recoverable as damages.
The plaintiff has the benefit of a security deposit of $67,439.84.
The plaintiff is entitled to damages in the sum of $606,478.74 comprised of:
1. $36,707.28 as money owing pursuant to the lease;
2. $618,573.97 damages for lost rent and outgoings;
3. $9,426.33 owing pursuant to the lease for legal fees or alternatively as damages for breach of lease;
4. $3,468 as advertising and promotion fees as damages for breach of lease;
5. $5,743 as damages for breach of lease; less
6. ($67,439.84) security deposit.
The plaintiff incurred capital costs incurred in its attempts to mitigate loss. An example was the construction of a skylight. Capital costs were not claimed by the plaintiff and are not included in the damages.
The counterclaims are premised upon a finding that the plaintiff repudiated the lease. It did not. The counterclaims fail.
The plaintiff also claims interest and costs.
There were no submissions about interest. The claim in respect of interest is in the amended statement of claim at paragraph 17. It is a claim pursuant to section 58 of the Civil Proceedings Act from 2 March 2017. The court may order that there be included in the amount for which judgment is given interest at the rate the court considers appropriate for all or part of the amount and for all or part of the period between the date when the cause of action arose and the date of judgment. I abide by the plaintiff’s election to seek interest only from 2 March 2017.
The damages include a sum on account of future losses. Interest should not be allowed on damages for future losses. Excluding future losses, damages comprise about $366,000. It is appropriate to allow interest on past losses on the basis that about 7.5%pa interest is appropriate but that the rate should be halved to account for the fact that the losses were not all accrued when the claim was filed but accrued generally continuously over a period of almost 26 months since the claim was filed. I assess interest in the sum of $29,000. (3.75%pa x $366,000 x 26/12 = $29,737.50)
Apart from the defendants’ submissions for the benefit of all defendants that the lessee has defences against the plaintiff’s claims the defendants did not submit that Mr Aulsebrook or Ms Brooks have defences to the claim against each of them that each of them is liable to the plaintiff as sureties for the lessee for any judgment which the plaintiff obtains against the lessee.
They are liable as sureties.
The plaintiff is entitled to judgment against the defendants in the sum of $635,478.74 inclusive of interest.
I will hear the parties in respect of costs. Ordinarily, the costs should follow the event and be assessed on the standard basis. That would mean that the defendants should pay the plaintiff’s costs of the proceeding on the standard basis. The plaintiff’s submissions contain a submission that the plaintiff reserves its right to make submissions on costs pending the outcome of the trial and a submission that the plaintiff is entitled to indemnity costs because the lessee vacated the premises without good reason and relied upon legal arguments doomed to fail.
I have not found that the lessee vacated the premises.
The defendants’ arguments were generally weak. Some of the defendants’ arguments were plausible. I am not yet satisfied by the plaintiff’s submissions that indemnity costs are appropriate.