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Representation: Counsel:
A Schatz (Defendant)
Solicitors:
Chedid Storey Legal (Plaintiff)
HWL Ebsworth Lawyers (Defendant)

File Number(s): 2024/00422396

Publication restriction: Nil

JUDGMENT

1. I delivered judgment in these proceedings on 3 July 2026: see Hoang v Hungry Jack*’*s Pty Ltd [2026] NSWSC 775 (Primary Judgment or PJ).

2. These reasons assume familiarity with and maintain the same definitions and abbreviations as contained in the Primary Judgment.

3. At [177] of the Primary Judgment, I directed the parties to confer to seek to agree orders.

4. The parties conferred and reached agreement on a number of the proposed orders, although not all issues were resolved. The remaining areas of dispute may be broadly grouped into four areas:

(a) whether the rent-review and payment relief should be made by order, as the plaintiff proposes, or reduced to notations, as the defendant proposes; (b) the machinery for the appointment of the valuer; (c) interest; and (d) the basis of costs.

5. These reasons determine those remaining issues.

6. I have had the benefit of concise written submissions from the parties both in chief and in reply. Neither party requested an oral hearing.

The agreed orders

7. The parties agreed that declarations should be made concerning the ownership of the Leased Premises, that the Lease is not a ground lease, that the RLA applies, and that an order should be made rectifying the Second Variation of Lease.

8. In relation to this last point, the parties were slightly apart as to the form of the proposed order. The plaintiff proposed an order including a separate order that “the parties to execute and register with New South Wales Land Registry any appropriate form to rectify the Second Variation of Lease in accordance with Order 5”.

9. Conversely, the defendant proposed an order requiring the parties “do all acts and things necessary to execute and register the Third Lease Variation annexed to these orders and marked “A” within 14 days of these orders”. However, no proposed Third Lease Variation was provided by the defendant, and as such no submissions were directed by the parties as to the proposed document.

10. The preferred course in these circumstances is to make the order proposed by the plaintiff. If any issue arises in relation to the form of the document to be executed, liberty to apply can be granted and the matter can be relisted to be dealt with by the Court.

11. The parties also agreed that a declaration should be made to the effect that the Paxinos Valuation is not binding on the parties. There was some minor differences in wording proposed by the parties.

12. The plaintiff proposed an order that:

The valuation of the Leased Premises carried out by Mr Jim Paxinos of CBRE Valuation Services dated 5 March 2019 was not carried out in accordance with clause 3.2 of the Lease and is not binding on the parties.

13. The declaration proposed by the defendant was:

The Valuation of the Leased Premises carried out by Mr Jim Paxinos of CBRE Valuation Services on 5 March 2019 is not valid and binding on the parties.

14. No submissions were directed by the parties to the minor difference in wording. The form proposed by the plaintiff reflects the finding made in the judgment – see [162] and [175], and thus I will make a declaration in those terms.

15. I now turn to deal with the disputed issues.

Costs

16. The plaintiff sought an order that:

The defendant to pay the plaintiff’s costs of the proceedings, including the cross-claim, on an indemnity basis as agreed or assessed in accordance with clause 28.2 of the Lease and clause 5.1(f) of the Registered Variation of Lease AI 706126 and clause 5.1(e) of the Second Variation of Lease.

17. The defendant proposed:

The defendant to pay the plaintiff’s costs on the ordinary basis as agreed or assessed.

18. It is convenient to first set out the relevant contractual provisions.

19. Clause 28.2 of the Lease provides:

The Lessee shall pay to the Lessor upon demand all reasonable costs and expenses including Solicitor’s costs on a solicitor-own client basis incurred by the Lessor in relation to any termination of the Lease, re-entry by the Lessor of the Premises, the surrender of the Lease (including any stamp duties and registration fees), the enforcement of any covenant or the exercise of any power and any litigation commenced by or against the Lessor without any fault on the Lessor’s part arising directly or indirectly from the Lessee’s occupation of the Premises.

20. Clause 5.1(f) of the First Variation, and cl 5.1(e) of the Second Variation are in the same terms as follows:

The Tenant must pay on demand the Landlord’s reasonable costs in relation to: […]

(e) the lawful exercise or attempted exercise of any right, power, privilege, authority or remedy of the Landlord under or by virtue of this deed (on a full indemnity basis).

21. It is clear that costs are in the discretion of the Court and may be awarded on the ordinary basis or on an indemnity basis: see s 98 of the Civil Procedure Act 2005 (NSW). In circumstances where there is a contractual entitlement for the payment of costs on an indemnity basis which is valid and enforceable, the Court will ordinarily exercise its discretion in accordance with the contractual entitlement: see Gomba Holdings UK Limited & Ors v Minories Finance Limited (No 2) [1993] Chancery 171 at 194; Kyabram Property Investments v Murray [2005] NSWCA 87 at [12]-[14]; Kyabram Property Investments Pty Ltd v Murray [2006] NSWSC 54 at [17]-[18]; Dee-Tech Pty Ltd & Anor v Neddam Holdings Pty Ltd (No 2) [2012] NSWSC 517 at [44].

22. The first question that divided the parties is whether the contractual provisions are enlivened in the circumstances of the present case.

23. The plaintiff contended that cl 28.2 of the Lease obliges the Lessee to pay the Lessor, on a solicitor-client basis, the costs of “any litigation by or against the Lessor without any fault on the Lessor’s part arising directly or indirectly out of the Lessee’s occupation of the Premises”. Clause 28.2 also extends to the costs incurred in “the enforcement of any covenant” and “the exercise of any power”. In addition, cll 5.1(f) and 5.1(e) entitle the Landlord, on a full indemnity basis, to recover the costs of the “lawful exercise or attempted exercise of any right, power, privilege, authority or remedy of the Landlord under or by virtue of this deed”.

24. The plaintiff contended that each such limb was engaged in the circumstances of the present case: the proceedings were commenced by the plaintiff, as Lessor, to enforce her entitlement under cl 3.2 to have the market rent assessed by reference to the Premises, as defined, including the Building. Accordingly, the enforcement of a covenant and the exercise of a power within cl 28.2, entitles the Lessor to the exercise of right and remedy within cl 5.1(f)/(e).

25. The plaintiff further submitted that the proceedings constituted litigation arising directly from the Lessee’s occupation of the Premises, and the Court has found no fault on the plaintiff’s part.

26. The only submission advanced by the defendant suggesting that the provisions were not enlivened was that the commercial purpose of a clause such as cl 28.2 of the Lease is to make provision for a special costs order to be visited upon a tenant which is in default of its lease obligations. An order avoids the lessor being out of pocket, in respect of its solicitor-client costs by the actions of a tenant in default. It was contended that this is not the present case in that the defendant has not been in default of any of its obligations under the Lease. Rather, the present proceedings is a dispute about the correct construction of the Lease.

27. In my view, the provisions are engaged in the present case for the reasons advanced by the plaintiff.

28. I do not accept that the commercial purpose of a clause such as clause 28.2 of the Lease is to the effect contended for by the defendant. As Bell CJ observed in The J&P Marlow (No 2) Pty Ltd v Hayes & McCabe (2023) 112 NSWLR 29; [2023] NSWCA 117 (J&P Marlow) at [76]-[80], caution should be exercised by courts in attributing a particular commercial intent or understanding of commercial common sense to parties. Commercial purpose is to be determined objectively with the contract itself supplying the best source for the ascertainment of that objectively determined purpose: J&P Marlow at [75] per Bell CJ. It is not for a court to impute purposes to contractual parties where that purpose is not found in the text or context: J&P Marlow at [91] per Meagher and Kirk JJA. The words used in cl 28.2 do not suggest the purpose contended for. The reference to fault in the clause is to there being no fault on the part of the Lessor.

29. The remainder of the submissions advanced by the defendant proceeded on the basis that there is nothing in the circumstances of the present case to warrant an indemnity costs order. For example, it was not suggested that the construction that the defendant’s advanced was not a reasonably open construction.

30. Such submissions may be relevant and have some force if there were no contractual provisions like the ones relied on by the plaintiff. In my view, however, there is no reason in the circumstances of the present case not to give effect to the contractually agreed bargain between the parties.

31. Accordingly, in my view, the costs should be awarded on an indemnity basis in the manner contended for by the plaintiff.

Appointment of valuer

32. This section deals with the first two of the four matters in dispute between the parties as identified above.

33. The parties were apart on whether orders were required to be made by the Court in relation to the market rent valuations that are now to occur in light of my determination as to the proper construction of the Lease.

34. The plaintiff proposed, relevantly, three orders:

7 An independent valuer is to be appointed by the parties within 14 days of these orders in accordance with clause 3.2(c) of the Lease. If the parties cannot agree on the identity of the valuer within that time, a specialist retail valuer is to be appointed, on the application of either party, by the Registrar pursuant to ss 31.1(b) and 32B of the Retail Leases Act 1994 (NSW).

8 The independent valuer appointed pursuant to Order 7 is to comply with clause 3.2 of the Lease to determine the market rent for the Leased Premises as at:

(a) 1 July 2019;

(b) 1 July 2024.

9 The defendant pay the amount of any underpayment of rent, being the difference between the amount of rent actually paid by the defendant and the market rent determined by the independent valuer pursuant to Orders 7 and 8, as adjusted by clause 3.3 of the Lease, in respect of the period from 1 July 2019 to 30 June 2024 and the period from 1 July 2024 to the date of the determination, within 28 days of the valuer’s determination, together with interest pursuant to s 100 of the Civil Procedure Act 2005 (NSW) on each payment as and when it fell due.

35. By contrast, the defendant contended that orders were not required or necessary, but rather a notation should be made to the following effect:

The Court notes that:

(a) the parties are to comply with clause 3.2 of the Lease to return a market rent for the Leased Premises as at:

(i) 1 July 2019; and

(ii) 1 July 2024;

(b) the defendant will pay the plaintiff the amount of any underpayment of rent, being the difference between the rent actually paid by the defendant and the market rent determined in accordance with the Lease, in respect of the period from 1 July 2019 to 30 June 2024 and the period from 1 July 2024 to the date of the determination, within 28 days of the valuer’s determination.

36. Clause 3.2 of the Lease provides:

3.2 Market Review of Base Rent

(a) Not less than 3 months prior to each Market Review Date or the commencement of any further term, either the Lessee or the Lessor may give the other Party a written notice (“clause 3.2(a) notice”****) stating the Party’s assessment of the current annual market rent of the Premises as at the Market Review Date having regard to the directions contained in clause 3.2(c)(iv).

(b) If the Party receiving the clause 3.2(a) notice considers the assessment of Base Rent not to be the current annual market rent of the Premises, and the Parties otherwise fail to agree upon the current annual market rent to apply, the Party receiving the clause 3.2(a) notice may give the other Party notice that it disagrees with the Party’s assessment of the current annual market rent within one month after the receipt of the clause 3.2(a) notice. Thereafter the Base Rent to apply from the Market Review Date shall be determined in accordance with clause 3.2(c).

(c) If the Parties do not agree on the current annual market rent of the Premises to apply from the relevant Market Review Date, it must be decided by a valuer who:

(1) is appointed by the Parties (if, however, they do not agree on who to appoint within 6 weeks after the notice under clause 3.2(b) is given, the valuer is to be nominated at either Party’s request by the president of the Institute);

(2) is a full member of at least 5 years standing of the Institute;

(3) at the time of appointment is both experienced and actively engaged in valuing similar retail premises;

(4) must:

(A) decide what is the current annual market rent for the Premises, excluding rental values which have been escalated to a predetermined amount in accordance with movements in the CPI or any other index, that would reasonably be expected to be paid for the Premises on the relevant Market Review Date if they were unoccupied and offered for renting for the Permitted Use and having regard to other matters relevant to the assessment of the current annual market rent;

(B) have regard to the terms of this Lease and assume that all the terms, covenants and conditions imposed upon the Lessee have been complied with;

(C) assume a letting for a term equivalent to the balance of the Term remaining unexpired from the relevant Market Review Date;

(D) take into account rental concessions and other benefits being frequently and normally offered to prospective lessees of similar unoccupied retail premises;

(E) have regard to any improvements, alterations or fit out works made in the Premises at the request of the Lessee;

(F) disregard any value attached to goodwill created by the Lessee’s occupation of and business conducted from the Premises;

(G) disregard the value attached to the Lessee’s fixtures and fittings on the Premises;

(H) have regard to the Lessor’s interest in the receipt of rent and the accepted fact that as between the Parties the Lessor’s interest in the observance by the Lessee of its Lease obligations are better protected than under a lease with an average lessee due to the stability, standing and responsibility of the Lessee;

(I) disregard any rent free periods, rental fees or moneys received pursuant to any sub-lease or other sub-tenancy agreement or occupational arrangements;

(5) give a “speaking valuation” (that is, the valuer must give to each of the Parties detailed written reasons for his or her determination and must specify the matters to which he or she had regard for the purposes of making his or her determination); and

(6) act as an expert (and not as an arbitrator) whose decision is final and binding on the Parties.

(d) The amount decided by the valuer shall be the Base Rent from and including the relevant Market Review Date.

(e) The costs incurred in the determination of the current annual market rent by the valuer pursuant to this clause 3.2 shall be borne by the Parties equally.

(f) The Lessee shall continue to pay the Base Rent payable immediately prior to the relevant Market Review Date until a determination of the new Base Rent is made pursuant to this clause 3.2, following which any necessary adjustment, or any underpayment or overpayment on account of the new Base Rent shall be made on the next monthly date for the payment of an instalment of Base Rent under this Lease.

(g) If either Party fails to give notice of the current annual market rent pursuant to clause 3.2(a) within the time period specified, the Lessor shall forfeit its right to review the Base Rent as at the relevant Market Review Date.

37. Clause 3.3, which was referred to in the plaintiff’s proposed orders, provides for CPI adjustment of base rent.

38. I deal separately with the question of interest below.

39. The position advanced by the plaintiff appears to be premised on a concern that the defendant now needs to be ordered to comply with the contractual mechanism in cl 3.2. It also seeks a modification of the cl 3.2 regime in relation to the appointment of a specialist valuer in circumstances where in 2024, the Australian Property Institute, NSW Division did not nominate a specialist valuer because the Lease falls under the R**LA.

40. In my view, neither the orders proposed by the plaintiff, or the defendant’s notation, need be made.

41. There is no suggestion that the defendant will not comply with its contractual obligations. The issue between the parties has always been the proper construction of the relevant clauses.

42. If any problem emerges in terms of either party complying with their obligations under cl 3.2 of the Lease, then either party can relist the matter pursuant to the liberty to apply which I will grant.

43. I am not satisfied that an order needs to be made for the appointment of a specialist retail valuer under the relevant provisions of the RLA. Clause 3.2 of the Lease requires the parties to first agree a valuer. If a valuer cannot be agreed, then the plaintiff has her statutory rights which she can invoke. There is no dispute between the parties in relation to these matters.

44. Again, if something does arise which requires the intervention of the Court, the liberty to apply can be exercised.

Interest

45. I have set out above order 9 proposed by the plaintiff which includes a requirement for the defendant to pay interest pursuant to s 100 of the Civil Procedure Act on each payment of rent as and when it fell due.

46. The underlying contention is that the plaintiff has been deprived of the use of the additional rent payable since the 2019 Market Rent Review Date, and subsequently the 2024 Market Rent Review Date. It is contended that interest at court rates should be paid so as to compensate the plaintiff.

47. The defendant contends that no interest is payable pursuant to s 100 of the Civil Procedure Act.

48. In circumstances where I am not satisfied that any orders should be made requiring the parties to give effect to cl 3.2, including any orders requiring any underpayment found on the completion of a valuation in accordance with cl 3.2 in respect of the 2019 Market Rent Review Date or the 2024 Market Rent Review Date, there is no “judgment” against which s 100 could attach to provide a basis to award interest.

49. In any event, in my view, this is not a case where interest should be awarded pursuant to s 100.

50. The bargain struck between the parties, reflected in cl 3.2(f) requires the old Base Rent to continue to be paid until a determination of the new Base Rent is made pursuant to cl 3.2, following which any necessary adjustment, or any underpayment or overpayment on account of the new Base Rent shall be made on the next monthly date for the payment of an instalment of Base Rent under the Lease. The parties also expressly dealt with the circumstances in which interest would be payable under the Lease in cl 22.2 of the Lease. The plaintiff expressly eschews any reliance on that clause in the present case.

51. The bargain struck between the parties is not one which provided for, in effect, any “underpayment” which is the result of a decision by a valuer appointed under cl 3.2, being notionally backdated to the date or dates on which the payments should have been made, together with interest. The bargain was that any adjustment would occur on the next date for payment of rent. This time has not yet arrived.

52. The underlying premise of the plaintiff’s position – namely that she has been kept out of her money for seven years – is also open to question. No issue was raised at the time of the 2019 Market Rent Review Date as to the Paxinos Valuation. Payments were made in accordance with it. The issue of the proper construction of cl 3.2 was not raised until late 2024. It is difficult to see how the plaintiff could contend that she has been kept out of her money for up to seven years in circumstances where the point that she has succeeded on which is said to justify the payment of interest, was not raised until late 2024.

Conclusion and orders

53. For the reasons set out above, the Court makes the following declarations and orders.

The Court declares that:

1. The Plaintiff is the owner of Lot X Section A Deposited Plan X and Lot A Deposited Plan X (Auto-Consol X-X), also known as X-X Manning Street, Taree NSW 2430 (Leased Premises), including the Building and other structures (but excluding air conditioning installed by the Defendant).
2. Registered lease AB X (Lease) as varied, is not a ground lease.
3. The Retail Leases Act 1994 (NSW) applies to the Lease.
4. The valuation of the Leased Premises carried out by Mr Jim Paxinos of CBRE Valuation Services dated 5 March 2019 was not carried out in accordance with clause 3.2 of the Lease and is not binding on the parties.

The Court orders that:

5. Registered Variation of Lease X (Second Variation of Lease) be rectified by deleting the words “10 years” at Item G.2 on page 1 and replacing them with the words “5 years”.
6. The parties execute and register with NSW Land Registry any appropriate form to rectify the Second Variation of Lease in accordance with Order 5.
7. The Defendant pay the Plaintiff’s costs of the proceedings, including the cross-claim, on an indemnity basis as agreed or assessed in accordance with clause 28.2 of the Lease and clause 5.1(f) of the Registered Variation of Lease X and clause 5.1(e) of the Second Variation of Lease.
8. Liberty to apply on three days’ notice, setting out the relief sought.

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