Leap Legal Software Pty Limited and Anor v ADC Buildings Pty Limited [2009] NSWSC 1434

New South Wales Supreme Court

CITATION : Leap Legal Software Pty Limited and Anor v ADC Buildings Pty Limited [2009] NSWSC 1434

HEARING DATE(S) : 11 December 2009

JUDGMENT DATE : 18 December 2009

JUDGMENT OF : Schmidt J

CATCHWORDS : APPEAL - landlord and tenant - surrender of sublease - increase in operating expenses - notified after surrender - whether right to payment of those expenses had accrued before surrender of lease - sublease - construction - appeal dismissed

CATEGORY : Principal judgment

CASES CITED : Torminster Properties v Green (1983) 1 WLR 676 Westralia Farmers Ltd v Commonwealth Agricultural Service Engineer Ltd (1936) 54 CLR 361

First Plaintiff - Leap Legal Software Pty Limited PARTIES : Second Plaintiff - Leap Disbursement Management Pty Limited Defendant - ADC Buildings Pty Limited

FILE NUMBER(S) : SC 13549/2009

COUNSEL : Plaintiffs - Mr GW McGrath, counsel Defendant - Mr B Adam, counsel

SOLICITORS : Plaintiffs - Teece Hodgson & Ward Defendant - Graham Nicholls

LOWER COURT JURISDICTION : Local Court

LOWER COURT FILE NUMBER(S) : 5918 of 2008; 5919 of 2008

LOWER COURT JUDICIAL OFFICER : Magistrate Bradd

LOWER COURT DATE OF DECISION : 18 June 2009

LOWER COURT MEDIUM NEUTRAL CITATION : A.D.C Buildings Pty Limited v Leap Legal Software Pty Limited

- 10 - IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION

SCHMIDT J Friday, 18 December 2009

13549/2009 LEAP LEGAL SOFTWARE PTY LIMITED AND ANOR v ADC BUILDINGS PTY LIMITED

JUDGMENT 1 Her Honour: The plaintiffs appeal a judgment of Magistrate Bradd, given on 18 June 2009. His Honour gave verdict for the plaintiffs in two matters in which he concluded that the surrender of a sublease did not release the defendants from an obligation to pay an increase in operating expenses, relating to a period before the subleases were surrendered. 2 The facts were not in issue. The defendant owned leasehold in a multi-story commercial building in Kent St, Sydney. The plaintiffs leased office space in the building. The first sublease was surrendered in September 2004, by agreement. The defendant gave a credit for certain outgoings paid in advance. The second sublease then commenced. The defendant sold its leasehold in October 2007 and the second sublease was surrendered in December 2007, by agreement before completion of the sale. In May 2008, the defendant claimed further outgoings in respect of the 2004 and 2005 financial years. 3 It was common ground that the plaintiffs had paid all outgoings notified, during the currency of the subleases. The defendant annually notified the plaintiffs of its total estimate of increases in outgoings, above the base year. Outgoings included rent, cleaning and GST. The plaintiffs then made monthly payments in respect of that estimate. Once actual outgoings were determined, the lease provided for an adjustment mechanism. No advice in relation to increased outgoings was given during the currency of the subleases. 4 The issue between the parties turned on the relevant provisions of the subleases. 5 The plaintiffs' case was that the surrender of the subleases had relieved them from all liability in respect of continuing or future obligations under the subleases. The claimed outgoings were not due and payable at the time of surrender and so could not be recovered from the plaintiffs, there having been no agreement at the time of the surrender of either sublease, that it did not extinguish any entitlement of operation of the relevant clause of the sublease. 6 The defendant's case was that his Honour had correctly applied the applicable principles in construing the subleases; that no error of law was shown and that the appeal should be dismissed. The question turned on whether the operating expenses had accrued before the termination of the subleases. There was no provision limiting the time at which a notice as to increases in outgoings could be given under the subleases. The surrender of the subleases had no impact on the obligation to pay increases in outgoings advised subsequently, the defendant having done all that it was obliged to do under the subleases. Its rights were accrued and required no agreement that they were not extinguished by surrender of the subleases.