In these proceedings the plaintiff, who is a lessee from the defendant of premises in Parramatta Road, Lewisham, seeks relief against for forfeiture. The forfeiture occurred on 1 August 2016 following the failure of the plaintiff to pay the monthly rental payment (of $13,880.90) which was due on 16 July 2016. The defendant re-entered the premises and took possession. The plaintiff paid the outstanding rent on 2 August 2016.
In the course of negotiations, on 3 August 2016 the defendant offered to allow the plaintiff to re-enter the premises and resume possession subject to various conditions. The conditions included the payment of the defendant's legal costs, payment of a lockout fee, payment of the costs of securing possession, payment of interest on the overdue rent, and agreeing to pay rent two months in advance rather than one month in advance for the remaining term of the lease (which expires in June 2017). The conditions were acceptable for the plaintiff save that the plaintiff did not agree to the last condition and that, whilst the plaintiff was agreeable to paying the legal costs, it did not agree to pay them prior to going back into possession.
On 5 August 2016 the plaintiff proposed a compromise that involved its agreement to pay rent two months in advance on and from 16 September 2016 (the August rental payment having already been made) and payment of the legal costs within ten days after the submission of a tax invoice. The defendant rejected the proposal. Negotiations continued but no agreement could be reached.
The plaintiff commenced the proceedings on 16 August 2016. Orders were made on that day for short service. When the matter returned to Court on 19 August 2016, consent orders were made that included an order that the defendant give possession of the premises to the plaintiff, and an order that the plaintiff provide a response to a request for information made by the defendant. By that time the plaintiff had paid all of the lockout costs and legal costs claimed by the defendant. The proceedings were adjourned to 9 September 2016. On that occasion the matter was set down for hearing today.
The defendant does not dispute that the plaintiff should have relief against forfeiture. However, it presses for the imposition of certain conditions upon the giving of relief. Principally, the defendant seeks a condition that the plaintiff pay the rent two months in advance rather than the one month in advance provided under the lease. This condition is said to ensure that the plaintiff does not fall into arrears again. The defendant says that it would not seek the condition if the plaintiff confirmed that it was the beneficial owner of any property. The plaintiff has not given any such confirmation.
The defendant submits that the condition sought is appropriate having regard to the number of times the plaintiff has been late with the rent, and the manner in which the July rent was paid late despite the giving of a number of reminders. The defendant also points to evidence to the effect that the plaintiff requires authorisation from another company in its group for the making of payments. The defendant submits that the plaintiff would not be prejudiced by the imposition of the condition sought.
The plaintiff submits that the condition sought by the defendant constitutes a demand to vary the lease to better his position and obtain rights over and above the rights he currently enjoys. It is put that as the plaintiff has undertaken to ensure that rent is paid on time for the remainder of the lease, and as the defendant holds a security deposit equivalent to three months' rent, the condition exceeds what is necessary to secure the payment of the rent.
Despite the fact that in the past two years the plaintiff has been late in the payment of rent on eight occasions, most of these defaults have been of only about two to four days duration. I do not think that the plaintiff's record in this regard warrants the imposition of the condition sought by the defendant, particularly bearing in mind that the defendant does have the benefit of the security deposit.
The defendant is concerned that the security deposit is inadequate in amount considering the possible extent of the plaintiff's make good obligation upon the termination of the lease. That may be so, but that is the product of the outcome of the negotiations when the lease was entered into. It is not appropriate for a lessor to use an occasion when relief is sought against a forfeiture brought about by a late payment of rent to seek benefits over and above the main objects of the bargain (see Re Hi-Fi Sydney Pty Ltd [2015] NSWSC 1312 at [28] and [50]).
Similarly, I do not consider it appropriate to impose the alternative conditions advanced by the defendant that the plaintiff's parent company provide a guarantee for the rent, or that the security deposit be increased to reflect likely make good costs.
That leaves the question of costs of these proceedings. The plaintiff seeks its costs on the indemnity basis. The defendant seeks an order that the plaintiff pay his costs on the indemnity basis as a condition of the grant of relief against forfeiture.
The defendant submits that is a standard condition. He submits that the defendant has not acted unreasonably in seeking the condition as to payment of rent in advance and in seeking information from the plaintiff as to its wherewithal, and that ultimately the need for the proceedings arose from the plaintiff's breach of the lease.
The plaintiff on the other hand submits that the proceedings were solely the result of the defendant's insistence upon the imposition of a condition for the payment of rent two months in advance. The plaintiff further submits that the defendant made no attempt to seek to avoid the litigation.
It is true that the litigation stems from the plaintiff's breach of the lease. Moreover, the plaintiff is seeking the aid of the Court to overcome the forfeiture which the defendant legitimately effected based upon that breach. Nonetheless, there is force in the plaintiff's submission that in reality the proceedings were brought about by the defendant's insistence upon the two month rent in advance condition. This is perhaps best illustrated by the communications between the parties on 5 August 2016 (to which I have already referred). The plaintiff's solicitor sent an e-mail on that day to the defendant's solicitor which included a proposal that the plaintiff be permitted to re-enter as soon as agreement was reached on two matters. The plaintiff offered:
1. to pay rent two months in advance on and from 16 September 2016 (the August rent having already been paid); and
2. to pay all the claimed legal and other costs within ten days following submission of a tax invoice.
About half an hour later the defendant's solicitor responded stating that his instructions were to press the conditions set out in his earlier letters.
It seems to me that a chance to avoid proceeding to litigation was effectively missed at that point and, as I have mentioned, no agreement was subsequently achieved. Had the defendant accepted the proposal put forward on 5 August 2016, or even if it accepted it save for not permitting re-entry until the legal and other costs had been paid, it is unlikely that proceedings would have been necessary and it is unlikely that proceedings would have been instituted. Instead, proceedings were commenced and have continued until today - when the Court, for the reasons I have given, declined to impose any of the conditions sought by the defendant upon the plaintiff's relief against forfeiture.
In my opinion the appropriate order for costs is that the defendant pay the plaintiff's costs of the proceedings on the ordinary basis. The defendant's stance on 5 August 2016 effectively caused the litigation in which it has not been successful. I consider that the defendant acted unreasonably in that regard. However, I do not think his conduct, viewed overall, is so unreasonable as to justify an award of indemnity costs as sought by the plaintiff. The conduct (including the seeking of information about the plaintiff's financial position) must be seen in the context of the plaintiff's numerous breaches of the lease in respect of the payment of rent and the defendant's legitimate desire to protect his own position in relation to the payment of rent for the balance of the lease term.
I have taken into account clause 14.5 of the lease, which obliges the lessee to pay certain legal and other costs incurred by the lessor. However, in circumstances where I have found that the defendant's own unreasonable conduct effectively caused the litigation, I do not think that the defendant's costs of these proceedings (as distinct from the costs which the plaintiff has already paid in relation to its breach) should be regarded as reasonable legal costs incurred in connection with any breach of the terms of the lease within the meaning of clause 14.5.
Accordingly, the Court makes orders for relief against forfeiture in accordance with paragraphs 3(b) and 3(c) of the Summons. The Court further orders that the defendant pay the plaintiff's costs of the proceedings.
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Decision last updated: 23 September 2016
Parties
Applicant/Plaintiff:
Greenland (Sydney) George Street Development Pty Ltd