Supreme Court New South Wales Medium Neutral Citation: Ko v CKAS Enterprises Pty Ltd (No 2) [2019] NSWSC 209 Hearing dates: On the papers Decision date: 07 March 2019 Jurisdiction: Equity Before: Emmett AJA Decision: 1. Declaration that the plaintiff/cross-defendant did not validly exercise the option to renew the lease (being Registered Lease xx) as assigned to the plaintiff pursuant to Transfer of Lease xx ("the Lease") of the property being Lot 11 in DP xx 31 known as xx xx Street Lidcombe NSW ("the Property") and consequently occupies the Property as a monthly tenant pursuant to cl 12.4 of Annexure B to the Lease. 2. Declaration that the defendant/cross-claimant is estopped from exercising its rights to give notice under cl 12.4 of the Lease terminating the monthly tenancy of the plaintiff/cross-defendant unless it first pays to the plaintiff/cross-defendant reasonable compensation for the costs incurred in obtaining the Complying Development Certificate and filing the summons in these proceedings, which is agreed and assessed at $47,661.00. 3. Order each party otherwise to bear its own costs of both the summons and the cross-claim. 4. Order that the cross-claim is otherwise dismissed. Catchwords: COSTS – costs of cross-claim – offer of compromise made one day before hearing due to commence – offer of compromise rejected – better outcome than offer achieved – result of cross-claim not that which either party sought – result of cross-claim reasonably characterised as a "draw" Cases Cited: Ko v CKAS Enterprises Pty Ltd [2018] NSWSC 1876 Category: Costs Parties: Kristen Yoon Sun Ko (Plaintiff/Cross Defendant) CKAS Enterprises Pty Ltd (Defendant/Cross Claimant) Representation: Counsel: S J Philips (Plaintiff/Cross Defendant) D P O'Connor (Defendant/Cross Claimant) Solicitors: PSK Legal (Plaintiff/Cross Defendant) HIS Lawyers (Defendant/Cross Claimant) File Number(s): 2016/240977 Judgment 1. On 12 December 2018, I published my reasons for the conclusions that I had reached in these proceedings (the Principal Reasons) [1] , which are concerned with a dispute between Ms Kristen Ko and CKAS Enterprises Pty Ltd in relation to a lease of premises in Lidcombe. A further dispute has arisen in relation to the costs of the proceedings and I have received further submissions from the parties on the question of costs. In these reasons, I shall use terms as they were defined in the Principal Reasons. 2. In the Principal Reasons, I concluded that the Landlord is entitled to a declaration that the Tenant did not exercise an option to renew and occupies the Demised Premises as a monthly tenant. I also concluded that it was appropriate to declare that the Landlord was estopped from exercising its rights to give notice terminating the monthly tenancy unless it first pays to the Tenant reasonable compensation for certain costs incurred by the Tenant. I gave the Landlord the opportunity of considering my conclusions and deciding whether to offer to pay such compensation. 3. At a directions hearing on 5 February 2019, the Landlord indicated that it is prepared to pay compensation and accepted the quantum of compensation claimed by the Tenant of $47,661.00. That left outstanding the question of the costs of the proceedings. 4. The Tenant claims that, by reason of a compromise offer made by her, the Landlord should pay the Tenant's costs of the proceedings on and from 21 November 2018 on the indemnity basis. Alternatively, the Tenant contends, there should be no order as to the costs of the proceedings. The Landlord, on the other hand, contends that the Tenant should pay its costs of the proceedings from the time of filing its cross-claim. The effect of the Landlord's agreement to pay equitable compensation to the Tenant is that the Landlord will bear the Tenant's costs of the summons. The remaining issue, therefore, concerns the costs of the Landlord's cross-claim. 5. The proceedings were prompted by the service on the Tenant of the Termination Notice, when the Tenant sought interlocutory relief and a final order declaring that the s 129 Notice and the Termination Notice were invalid. The Landlord filed its cross-claim on 2 September 2016, by which it sought a declaration that the Tenant failed to exercise the option to renew the Lease. The Tenant asserted in her defence to the cross-claim that the option was exercised by a letter of 11 September 2015 or that the Landlord was estopped from departing from a common understanding or an agreed assumption that the Tenant had validly exercised the option. 6. As I have indicated, I concluded that the Tenant did not exercise the option to renew and that the Landlord is not estopped from denying that the Tenant had exercised the option to renew. However, I concluded that the Landlord is estopped from exercising its rights to give notice terminating the monthly tenancy arising from the Tenant's holding over unless it first pays equitable compensation. In a sense, the result was not one for which either party contended. That is to say, the Tenant contended that the Landlord was estopped from denying that the option to renew had been exercised. The Landlord, on the other hand, contended that it was entitled, without restriction, to terminate the holding over by giving notice to quit. To that extent, it is fair to say that the Landlord did not achieve any clear or unequivocal success on its cross-claim. The Tenant characterises the result as "a draw", such that the appropriate conclusion would be that there be no order as to the costs of the cross-claim. 7. The Landlord responds that, in substance, it was successful in its cross-claim. That is to say, the Landlord succeeded in obtaining the declaration sought in the cross-claim that the Tenant failed to exercise the option to renew the Lease. However, that ignores the fact that I also concluded that the Landlord was estopped from exercising its rights to give notice terminating the Tenant's monthly tenancy. But for the Landlord's willingness to pay equitable compensation, it would have been estopped from exercising the rights that arose as a consequence of the conclusion that the option to renew had not been exercised. On that basis, I would be disposed to conclude that "a draw" was not an unreasonable way of characterising the result. 8. The Tenant's offer of compromise must be considered in that context. On 19 November 2018, the Tenant's solicitors wrote to the Landlord's solicitors saying that the Tenant was prepared to settle the whole proceedings on the following basis: 1. The interlocutory order made that the Landlord be restrained from taking any steps to re-enter or prevent entry or use by the Tenant of the Demised Premises or otherwise to terminate or forfeit the Lease be dissolved with effect from 1 January 2019; 2. The Tenant agree and undertake to vacate the Demised Premises no later than 31 January 2019; 3. The summons and cross-claim be otherwise dismissed; and 4. Each party bear its own costs of the proceedings. 1. The offer of compromise is a relevant consideration in the exercise of the discretion as to costs. It is clear that, in the result, the Tenant achieved a better outcome than would have been the result of acceptance of the offer of compromise. That is to say, the Tenant has remained in possession of the Demised Premises and is entitled to remain in possession until a valid notice to quit is given. No such notice may be given until equitable compensation has been paid. While the equitable compensation agreed between the parties has in fact been paid into the trust account of the Landlord's solicitors, the amount has not yet been paid to the Tenant. The consequence is that the Tenant has remained in possession for some weeks after it would have delivered up vacant possession with effect from 31 January 2019 under the offer of compromise. 2. The offer was open for acceptance until 10 am on 20 November 2018, after which time, it was withdrawn. 3. In that regard, it is significant that the hearing of the proceedings was fixed for 20 November 2018. That is to say, the offer was made on the day before the hearing was due to commence. In the circumstances, I do not consider that it was unreasonable for the Landlord not to accept the compromise offer made by that letter. In all of the circumstances, I consider that the appropriate result is that there be no order as to the costs of the proceedings. 4. I therefore propose to make the following orders: 1. The plaintiff/cross-defendant did not validly exercise the option to renew the lease (being Registered Lease xx) as assigned to the plaintiff pursuant to Transfer of Lease xx ("the Lease") of the property being Lot 11 in DP xx31 known as xx xx Street Lidcombe NSW ("the Property") and consequently occupies the Property as a monthly tenant pursuant to cl 12.4 of Annexure B to the Lease. 2. The defendant/cross-claimant is estopped from exercising its rights to give notice under cl 12.4 of the Lease terminating the monthly tenancy of the plaintiff/cross-defendant unless it first pays to the plaintiff/cross-defendant reasonable compensation for the costs incurred in obtaining the Complying Development Certificate and filing the summons in these proceedings, which is agreed and assessed at $47,661.00. 3. Each party is otherwise to bear its own costs of the proceedings, with respect to both the summons and the cross-claim. 4. The cross-claim is otherwise dismissed (noting that the summons was otherwise dismissed on 20 November 2018). ********** Endnote 1. See [2018] NSWSC 1876. 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: 07 March 2019