711 Hogben Pty Ltd v Tadros - Variation and Slip Rule Application

Rental

1. As appears from [39]-[43] and [78] of the quantum judgment, the Tenants accepted that rental was payable from 8 October 2020 to 10 September 2021.
2. As appears from [173] of the quantum judgment, once I had derived the profit that would have been earned for the damages period, I applied a 50% discount.
3. The Landlord argues that by applying that discount to profit, I consequentially and incorrectly applied a 50% discount to the admitted liability of the Tenants for rent, so that they should be credited in the verdict with half the rental for the period 8 October 2020 to 10 September 2021, amounting to $413,179 plus interest of $130,272, on the assumption that the premises will be re-let by 1 January 2023. [1]
4. This argument is insupportable and lacking in merit.
5. The starting point is that the Landlord was in breach from 2015, the consequence of which was, and has been so found, that the Tenants are entitled to damages referable to the entire period they would have traded, including the period of the admitted rental obligation.
6. As appears from Figure 1 (quantum judgment at [79]), the Landlord was credited for rental for the entire period over which damages were calculated (quantum judgment at [173]).
7. A "hefty" discount, to take account of vicissitudes, of 50% was applied to the net profit after giving the Landlord full credit. Application of that discount to the net result does not entail a reduction in the revenue used to reach the figure to which the discount was applied.
8. Moreover, because of the Landlord's breach, the Tenants never had the use of the premises to trade and probably never will. Any amount for which they might otherwise have been liable to the Landlord for rent (including the admitted liability) is money lost by reason of the Landlord's breach and is therefore a component of the Tenants' damages.
9. To accede to the Landlord's argument would be to reduce its liability for an amount for which the quantum judgment clearly holds it liable and which has been taken into account in reaching the maximum value of the Tenants' lost commercial opportunity, to which value a discount favouring the Landlord has been applied.
10. To accept this argument would be tantamount to allowing the Landlord to take advantage of its own wrong.

Outgoings

1. As is said above, this is a claim for outgoings in respect of both a period during which the lease was on foot and a period after it had been terminated. As its causes of action, the Landlord claims the component referable to when the lease was on foot as a debt due under the lease and the component referable after the lease was terminated as damages or mesne profits.
2. Senior counsel for the Landlord candidly informed the Court that this claim was overlooked at the time of the hearing and did not form part of the submissions put before the Court.
3. However, the Landlord did not make any application to reopen. It relies on [179] of the quantum judgment in which I said that I would "give the parties an opportunity to draw to my attention any issues that remain to be dealt with". The Landlord argues that this claim is an issue that remains to be dealt with. I do not consider that this aspect falls within what is contemplated in [179]. That paragraph deals with issues properly raised in the proceedings with which the quantum judgment did not deal.
4. I will nevertheless deal with this claim because I accept that its being overlooked was inadvertent.
5. I reject the submission that the Landlord is entitled to credit for these amounts. By the Landlord's breach, the Tenants were held out of trading from the premises, and therefore did not get the benefit of the use of the premises to which they were entitled, for the entire period concerned. If these claims were allowed, the Tenants would be entitled to an equivalent increase in the quantum of their verdict.
6. I interpolate that there is no evidence that the Landlord would have been able to lease the premises after termination or at what rental. I observe, as I referred to in the quantum judgment at [167], that the Landlord put that the rent under the lease was way above the odds in the industry and agreed that the lease was a bad bargain for the Tenants.

Expenses

1. I made no inadvertent slip.
2. The Landlord's primary and insupportable contention is that even though the Tenants would not have traded from 15 July to 18 November 2015, the full expenses that would have been incurred had they traded should have been deducted from revenue.
3. However, if the Tenants had not traded, their expenses would have been significantly lowered. For example, neither food nor nappies would have been supplied, cleaning would not have been required, and staff would not have had to have been there. Conceivably, there would still have been some fixed costs and there might have been other variable costs that would have reduced but not been eliminated, such as electricity and water.
4. The material as presented did not enable the Court to make any accurate assessment of the reduction.
5. The non-trading period was about 90 working days out of a total of 262 working days in the financial year 2016. In the calculation, expenses (apart from rent) were removed for that period.
6. First, as the Court recorded in the quantum judgment at [172], the benefit of rounding down figures was given to the Landlord in the calculations.
7. For financial year 2016, revenue was proportionally reduced by 90 working days out of a total of 262 working days. The reduced financial year's revenue figure is $817,171 down from $1,244,760, which has the effect of reducing total revenue for the damages period from $13,853,690 (see Figure 1, column 9) to $13,426,101.
8. Using that reduced revenue figure and eliminating 90 working days' worth of expenses (other than rent) results in profit for the damages period of $2,240,107.
9. I adopted a profit figure of $2,160,000, which is a rounding down in favour of the Landlord of $80,107.
10. Prior to this application, there was (as is inevitable in this case) a contentious exchange of correspondence between the lawyers. It is not necessary to deal with it, save to observe that both erroneously adopted a profit figure of $2,260,000 whereas the Court's figure is $2,160,000.
11. Second, the assessment of damages in a case like the present is not an exact science and will always be an approximation. The figure reached by the Court represents the Court doing the best it can on the material presented by the parties in the manner in which it was presented. The large discount applied takes into account precisely the type of contingency with respect to expenses which the Landlord now seeks to raise afresh.

Final observation

1. I make one final observation.
2. In [3] of the quantum judgment, I mentioned the fact that there had been no less than seven judgments in these proceedings, all of which have been adverse to the Landlord.
3. In fact, at the time of the quantum judgment, there had been eight judgments adverse to the Landlord. I overlooked the Landlord's unsuccessful application to Beech-Jones J (as the Chief Judge at Common Law then was) to reopen: see 711 Hogben Pty Ltd v Tadros (No 2) [2016] NSWSC 1754. The quantum judgment was the ninth.
4. Now there are ten.

Conclusion

1. The motion is dismissed with costs.
2. There remains to be dealt with the questions of interest and costs, and any application by the Tenants for relief against forfeiture.

Endnote

1. Damages have been calculated up to 31 December 2022 - see Figure 1 in the quantum judgment. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 17 November 2022