Papago Pty Limited v Smiths OM Pty Limited [2015] NSWDC 435

District Court New South Wales

Medium Neutral Citation: Papago Pty Limited v Smiths OM Pty Limited [2015] NSWDC 435 Hearing dates: 15 December 2015 Date of orders: 15 December 2015 Decision date: 15 December 2015 Jurisdiction: Civil Before: P Taylor SC DCJ Decision: (1) Judgment in favour of the plaintiff against the first and second defendants for damages in the sum of $65,687.52. (2) Defendants to pay the plaintiff's costs. Catchwords: LEASES AND TENANCIES – breach of lease – termination - assessment of damages – lost rent – unpaid outgoings – Good and Services Tax Cases Cited: Gagner Pty Ltd trading as Indochine Cafe v Canturi Corporation Pty Ltd (2009) 262 ALR 691; [2009] NSWCA 413 The Barrington Services Group Pty Ltd v Bossy [2012] NSWDC 82 Category: Principal judgment Parties: Papago Pty Limited (plaintiff) Smiths OM Pty Limited (first defendant) Nathan Scott Smith (second defendant) Representation: Solicitors: Lloyd & Lloyd Solicitors (plaintiff) File Number(s): 2015/194131 Publication restriction: None

Judgment 1. The plaintiff, Papago Pty Limited, seeks judgment as landlord against the first and second defendants, Smiths OM Pty Limited and Nathan Smith, for damages arising out of breach of a lease and a guarantee by the second defendant of the lessee's (the first defendant's) obligations. The plaintiff has obtained default judgment with damages to be assessed and judgment for an amount of liquidated damages of unpaid rent during the period of the lease. 2. Smiths paid some rent in March 2015 but not the full amount of the rent and outgoings and made no payment in respect of rent, Goods and Services Tax ("GST") and outgoings in April, May or June 2015. Smiths vacated the premises on 13 June 2015. Under the lease, Papago was entitled to terminate the lease if the rent was unpaid for more than 14 days, which was the case. On 17 June 2015 Papago entered and took possession of the premises and thereby, both pursuant to cl 12.1.2 of the lease and at common law, validly terminated the lease. 3. Papago then sought to find a new tenant and arranged from 18 June 2015 for the premises to be advertised for rent and engaged a real estate agent to find a new tenant. A new tenant was secured pursuant to a lease commencing on 1 December 2015. Papago claims, as damages, the amount of the rent that would have been paid had the lease continued for the period from the termination of the lease until 1 December 2015, when the premises remained vacant. 4. Papago makes no claim for the advertising costs or other costs incurred in engaging a real estate agent to find a new tenant. The new lease has a rental amount of $11,666.67 per month plus outgoings. The old lease, which commenced in 2013, had a slightly lower rental of $11,416.67 including outgoings and GST but was subject to an uplift clause which after one year would have increased the rent to an amount above the level of rent in the new lease. Papago neither charged that additional higher amount of rent, nor claimed it in these proceedings. However, it follows that Papago had an entitlement to a higher rent from the defendants than was paid by the new tenant, at least for the period from the commencement of the new tenancy until the end of the five-year period from the commencement of the original tenancy. There is thus no benefit to Papago from the new tenancy so as to create credit in favour of Smiths. 5. Accordingly, Papago has suffered the damages claimed, namely the amount equal to the rent otherwise payable for the period from termination until the date of the new lease, at the monthly rental of $11,416.67. 6. Papago also claims the sum of $8,604.17 for outgoings for that same period, being the relevant proportion of the estimated outgoings of $20,650 shown on the old lease. The outgoings included council rates, water rates, land tax and insurance. There is no reason to suppose that those figures were any less because Smiths was not in occupation. I am not favoured with any information as to whether the water rates include water usage, but I would infer that it does not. Further, it would be unsurprising if insurance was levied at a greater level because of the property being vacant rather than occupied. I propose to accept the per annum estimate of outgoings of $20,650 as disclosed in 2013 when the lease commenced. 7. Papago claimed GST somewhat faintly. In accordance with my decision in The Barrington Services Group Pty Ltd v Bossy [2012] NSWDC 82, relying upon the authority of Gagner Pty Ltd trading as Indochine Cafe v Canturi Corporation Pty Ltd (2009) 262 ALR 691; [2009] NSWCA 413 at [147]‑[159], the amount of damages for unpaid rent after the termination of a lease does not involve the supply of a service and therefore does not attract GST. So no GST should be awarded. 8. I think judicial notice allows me to conclude that rates and taxes are GST-free. The outgoings appear to include some amount for insurance. However the small component of GST on that amount for five months is likely to be outweighed by the increases in outgoings over the period of the lease. So I propose not to make any reduction to the claimed amount for outgoings. 9. As I indicated earlier, the lease was terminated on 17 June 2015. The rent for June was already due and was the subject of the earlier judgment for liquidated damages. This claim relates to the five months from July 2015 to November 2015 inclusive, the period following the termination of the lease. Therefore, the claimant is entitled to damages equivalent to the lost rent for those five months, being $57,083.35 (the amount that would have been payable by Smiths under the lease had it not been terminated for breach), and unpaid outgoings of $8,604.17 (being five months of the annual figure of outgoings of $20,650.00 referred to above). The sum of these two amounts is $65,687.52, which is the amount of the judgment. 10. No claim is made in respect of interest for those five months. 11. Therefore, the orders of the Court are: 1. Judgment in favour of the plaintiff against the first and second defendants for damages in the sum of $65,687.52. 2. Defendants to pay the plaintiff's costs.