Supreme Court New South Wales Medium Neutral Citation: Rothnere Pty Limited v Magic Markets Pty Limited [2015] NSWSC 1785 Hearing dates: 24 November 2015 Date of orders: 24 November 2015 Decision date: 24 November 2015 Jurisdiction: Common Law Before: Harrison AsJ Decision: JUDGMENT (1) The defendants jointly and severally are to pay the plaintiff the sum of $837,856.06 such sum being comprised of the principal amount of $802,910 and interest in the amount of $34,946.06. THE COURT ORDERS THAT: (2) The cross claim filed 22 February 2014 is dismissed. (3) The defendants are to pay the plaintiff's costs on an ordinary basis up to and including 5 February 2015 and on an indemnity basis from 5 February 2015. (4) The defendants are to pay the plaintiff interest on costs pursuant to s 101(4) of the Civil Procedure Act 2005 (NSW). Catchwords: DEBT RECOVERY – lessor seeks recovery from lessee for amounts payable under registered lease in respect of retail premises – defendants absent at hearing – procedure under rule 29.7 Uniform Civil Procedure Rules 2005 (NSW) – COSTS – offer of compromise made Legislation Cited: Civil Procedure Act 2005 (NSW) Uniform Civil Procedure Rules 2005 (NSW) Category: Principal judgment Parties: Rothnere Pty Limited (Plaintiff/Cross Defendant) Magic Markets Pty Limited (First Defendant/First Cross Claimant) Liang Tsu Tsai (Second Defendant/Second Cross Claimant) Representation: Counsel: L Livingston (Plaintiff) Solicitors: Norton Rose Fulbright (Plaintiff) File Number(s): 2014/233943 Publication restriction: Nil EX TEMPORE Judgment 1. HER HONOUR: On 12 November 2015, this matter was listed for a three day trial commencing today. Leave was also granted for Brighton Lawyers to file and serve a notice of ceasing to act in relation to both defendants. 2. By affidavit affirmed 5 November 2015, Jeremy Wong a solicitor of Brighton Lawyers, deposed that since 14 September 2015, he had made various attempt to obtain instructions from the defendants in relation to the conduct of these proceedings. 3. Between 15 September 2015 and 29 October 2015, Mr Wong had contacted Mr Tsai who was the director of the first plaintiff Magic Markets Pty Ltd and is also the guarantor to the lease. Mr Wong deposed that he was unable to obtain payment for barristers fee and also his fees. On 4 November 2015, Mr Wong informed Mr Tsai of the hearing date and warned him that the plaintiff would obtain judgment against him (meaning both defendants) if he did not attend the hearing on 24 November 2015, which is today. 4. Mr Tsai told Mr Wong that "I [and the first defendant] do not want to defend these proceedings anymore, I will just ignore everything from now on." 5. At 10.00 am this morning both defendants were called three times outside court. They did not appear. At 10.15 am they were called outside court and there was still no appearance. I take it that the defendants do not intend to appear today. 6. Rule 29.7 of the Uniform Civil Procedure Rules 2005 (NSW) provides the procedure to be followed if a party is absent, which is the case here. It relevantly reads: "29.7 Procedure to be followed if party is absent (1) This rule applies when a trial is called on. (2) If any party is absent, the court: … (3) If, in relation to a liquidated claim, the plaintiff appears, but a defendant does not appear, the court may, without proceeding to trial, give judgment against that defendant on evidence of: (a) the amount then due to the plaintiff in respect of the cause of action for which the proceedings were commenced, and (b) any payments made or credits accrued since the commencement of the proceedings in reduction of the amount of the plaintiff's claim or costs. …" 1. Mr Livingston of counsel appeared for the plaintiff at Court today. As previously stated, the defendants did not appear. There have been no payments made by the defendants since the commencement of these proceedings. I have been taken through all the evidence and I am satisfied that the plaintiff has proved its case. I do not intend to go through it in great detail, but I will give a brief outline as to what the case is about. 2. On 13 November 2014, the plaintiff, as lessor, sought recovery from the first defendant Magic Markets as lessee, and the second defendant, Mr Tsai, as guarantor of the amounts payable under a registered lease in respect of retail premises, known as "Shop B" at Wyoming Shopping Centre. Magic Markets conducted an Asian supermarket business at these premises. Mr Tsai is the sole director of Magic Markets. 3. On 3 February 2014, the plaintiff terminated the lease for non-payment of rent and GST payable under the lease. 4. The defendants' in their defence and cross-claim seek to avoid or reduce their liability under the lease and guarantee on the grounds that firstly, the Asian supermarket business was allegedly conducted as a partnership between the plaintiff and Magic Markets; or secondly, that the plaintiff has allegedly failed to mitigate its loss. There is a third and distinct claim that the plaintiff breached clause 17.4(b) of the lease in connection with the collection or removal of the stock in the premises following the termination of the lease. 5. I read the affidavits of both parties. Basically, the evidence of the defendants is that there was a partnership, which was by oral conversations; and that there was no partnership deed. This is disputed by the plaintiff. The defendants are not here to be cross examined so I have accepted the plaintiff's evidence as being correct. 6. I have been taken to the provisions of the lease. It was signed by Mr Tsai both as director and guarantor. The lease is for a period commencing on 3 November 2011 and concludes five years later on 2 November 2016. The relevant clauses of the lease so far as termination and damages is clause 20.2, which I need not set out; and clauses 26.2 and 26.3 which refer to the obligations of Mr Tsai as guarantor. There were complaints about the running of the business, the shop, by Magic Markets in that it was understocked; and there were also complaints about the manager and that there was failure to pay rent. The lease was terminated, as I said, on 3 February 2014. 7. I will deal with the discrete issue, so far as the collection and removal of stock is concerned. Offers were made for Mr Tsai to collect his stock on certain dates but he had to be supervised. He did not turn up in accordance with those offers to collect the stock. To mitigate the loss between the termination of the lease on 3 February 2014 and to the end of the lease period in 2016, an advertisement was place in the Central Coast Express newspaper that ran for five weeks, but there was no response. The premises have not been relet to a new lessee. 8. From 28 June 2014, the plaintiff commenced to operate an Asian grocery business from Shop B on its own account. It was a new business. For that purpose the plaintiff entered into an agency agreement with a related entity, Modaci Pty Limited, pursuant to which the plaintiff agreed to appoint Modaci as its agent to coordinate and control the operation of the new business, and Modaci agreed to accept that appointment. 9. The plaintiff does not receive any rent or any other payment for the occupation of Shop B in respect of the new business. The plaintiff has not derived any net profits from the operation of the new business. On the contrary, it has incurred net losses from the conduct of the new business. It appears very unlikely that between now, 24 November 2015 and 2 November 2016 that the plaintiff will derive any profit from the new business. 10. Accordingly, I am satisfied that judgment should be entered in favour of the plaintiff. I enter judgment in favour of the plaintiff against the first defendant and second defendant jointly and severally in the sum of $837,856.06, being comprised of the principle amount of $802,910.00 and interest in the amount of $34,946.06. I also dismiss the first cross claim filed by the defendants on 22 February 2014. 11. On 5 February 2015, an offer of compromise was made by the plaintiff's solicitors, Norton Rose Fulbright, to the defendants' solicitors (when they were still acting) at a time when the pleadings were closed but the principle affidavits had not been served. 12. However, I have read all of the principle affidavits and they only depose to the matters already pleaded in the statement of claim, defence and cross claim. The offer of compromise was for the sum of $650,000 inclusive of GST; that the cross claim be dismissed with no orders as to costs and all previous costs orders and reserved costs be vacated. 13. The amount of judgment exceeds the amount offered in the offer of compromise. The offer of compromise was not accepted and it was unreasonable of the defendants not to accept it. 14. I make an order for costs that the defendants are to pay the plaintiff's costs of the proceedings on an ordinary basis up to and including 5 February 2015 and on an indemnity basis from 5 February 2015 to date. 15. The defendants are to pay interests on the costs pursuant to s 101(4) of the Civil Procedure Act 2005 (NSW). JUDGMENT (1) The defendants jointly and severally are to pay the plaintiff the sum of $837,856.06 such sum being comprised of the principal amount of $802,910 and interest in the amount of $34,946.06. THE COURT ORDERS THAT: (2) The cross claim filed 22 February 2014 is dismissed. (3) The defendants are to pay the plaintiff's costs on an ordinary basis up to and including 5 February 2015 and on an indemnity basis from 5 February 2015. (4) The defendants are to pay the plaintiff interest on costs pursuant to s 101(4) of the Civil Procedure Act 2005 (NSW). ********** 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: 30 November 2015