27 Shields Street Pty Ltd v Peter Pan’s Backpacker Adventure Travel Pty Ltd [2021] QDC 281

DISTRICT COURT OF QUEENSLAND CITATION: 27 Shields Street Pty Ltd v Peter Pan’s Backpacker Adventure Travel Pty Ltd [2021] QDC 281 PARTIES: 27 SHIELDS STREET PTY LTD ACN 612 715 410 (Plaintiff) v PETER PAN’S BACKPACKER ADVENTURE TRAVEL PTY LTD ACN 097 725 329 (Defendant) FILE NO: 73 of 2021 DIVISION: Civil PROCEEDING: Application pursuant to rule 292 Uniform Civil Procedure Rules ORIGINATING COURT: DELIVERED ON: District Court at Cairns 4 August 2021 ex tempore DELIVERED AT: Cairns HEARING DATE: 4 August 2021 JUDGE: Fantin DCJ ORDER: 1. Summary judgment be given for the plaintiff against the defendant in the sum of $175,823.00. 2. The defendant pay the plaintiff’s costs of and incidental to this action (including the plaintiff’s costs of and incidental to this application), to be assessed on the indemnity basis. CATCHWORDS: CIVIL PROCEDURE – ENDING PROCEEDINGS EARLY – APPLICATION FOR SUMMARY JUDGMENT FOR PLAINTIFF OR APPLICANT - whether the defendant has no real prospect of successfully defending all or part of the plaintiff’s claim – whether there is no need for a trial of the claim or part of the claim – where the defendant company did not appear on the application or file any material in response to it – where the plaintiff and the defendant are lessor and lessee respectively under a lease of premises – where the plaintiff claims against the defendant for amounts payable – where the defendant’s pleading raises no triable issue in -- 1 of 11 -- 2 response to the plaintiff’s claim - Retail Shop Leases and Other Commercial Leases (COVID-19 Emergency Response) legislation LEGISLATION: Uniform Civil Procedure Rules 1999 (Qld) r 292, r 385(3), r 681, r 703 COVID-19 Emergency Response Act 2020 (Qld) s 23(1), s 23(6) Retail Shop Leases and Other Commercial Leases (COVID-19 Emergency Response) Regulation 2020 (Qld) Retail Shop Leases and Other Commercial Leases (COVID-19 Emergency Response) Amendment Regulation 2020 (Qld) CASES: Deputy Commissioner of Taxation v Salcedo [2005] 2 Qd R 232 UI International Pty Ltd v Interworks Architects Pty Ltd [2008] 2 Qd R COUNSEL: M Jonsson QC for the plaintiff No appearance by the defendant SOLICITORS: Preston Law for the plaintiff The defendant was self represented [1] FANTIN DCJ: The plaintiff applies for summary judgment for monies payable under the terms of a lease, totalling $175,823.00, and costs. The defendant company did not appear on the application and did not file any material in response to it. On the day before the hearing of the application, the defendant’s solicitor filed a notice that the defendant was acting in person. I requested that the defendant’s solicitor appear at the hearing to confirm they were no longer acting. They did so, and advised that their client did not appear. [2] I am satisfied on the basis of the material before the court that the application and the supporting affidavits relied upon by the plaintiff were properly served on the defendant’s legal representatives within the relevant time, and that the defendant was aware of them and the hearing. The hearing proceeded. I have heard and considered the oral and written submissions of Queen’s Counsel for the applicant plaintiff, and the material read and relied upon. Summary judgment [3] The application is made pursuant to the Uniform Civil Procedure Rules 1999 (Qld) (UCPR), rule 292. It provides that: “(2) If the court is satisfied – (a) the defendant has no real prospect of successfully defending all or a part of the plaintiff’s claim; and (b) that there is no need for a trial of the claim or the part of the claim; -- 2 of 11 -- 3 the court may give judgment for the plaintiff against the defendant for all or the part of the plaintiff’s claim and may make any other order the court considers appropriate.” [4] The test to be applied in relation to such an application is well settled and need not be repeated. See, in particular, Deputy Commissioner of Taxation v Salcedo [2005] QCA 227, paragraphs 10 to 17, in which the Court of Appeal reviewed the cases and emphasised, in particular, the clear wording of the rule. Issues [5] The issues in the application are whether the defendant has no real prospect of successfully defending all or a part of the plaintiff’s claim, and whether there is no need for a trial of the claim or the part of the claim. [6] The answer to those questions must be answered having regard to the caution exercised by the court before granting summary judgment, but recognising that the “no real prospect” requirement of the current rule 292 is not to simply be equated to the standard under prior rules of the court. [7] The application must, of course, be approached with appropriate caution. That is, caution to ensure that the defendant is not denied its opportunity to place its case before the court in the ordinary way, and with the benefit of the usual interlocutory processes. Summary judgment should only be granted in the clearest of cases. Nevertheless, the discretion conferred by rule 292 is there to be exercised, and summary judgment may well be appropriate in cases where there is unanswerable evidence before the court of matters that prove fatal to a pleaded case. The plaintiff particularly emphasised the observations of Keane JA in UI International Pty Ltd v Interworks Architects Pty Ltd [2008] 2 Qd R 158 at 188, paragraph 78, that the court need not entertain such an application: “… on the footing that some unpleaded facts might emerge unheralded at trial as a deus ex machina to breathe life into a moribund claim”. [8] The court is entitled to assume that the case pleaded by a litigant is reflective of the litigant’s case and contentions presented at their highest. [9] Once a plaintiff establishes a prima facie entitlement to summary judgment, the evidentiary onus will shift to the defendant to bring evidence in support of the claim or other need for a trial. No such evidence has been filed in this application. Therefore, the court must consider the disputed legal and factual issues to the extent they are pleaded in the defence. Claim [10] Following the filing of the statement of claim and the defence, the plaintiff filed and served an amended statement of claim. The defendant has failed to plead in response to the amended statement of claim. In those circumstances, the defence in its original form is deemed to be relied upon by the defendant in answer to the amended statement of claim. See UCPR rule 385(3). -- 3 of 11 -- 4 [11] It is not in dispute that the plaintiff and the defendant are the lessor and lessee respectively under a lease of premises in the Cairns CBD. It is also accepted, as is alleged by the defendant, that the term of the lease will not expire until 31 July 2022. Therefore, the lease remains on foot. However, it is also not in dispute that the defendant company ceased to trade from the premises leased in about April 2020, which coincided broadly with the consequences of the COVID-19 pandemic. [12] In summary, the plaintiff claims against the defendant for two categories of amounts payable. The first are unpaid amounts on account of rent and contributions towards cleaning costs accrued for, and with respect to, the period from April 2020 to June 2021 inclusive. The second, for refund of a conditional rent concession which the plaintiff claims is payable by the defendant under the terms of the lease. Grounds raised in defence [13] Summarising, there are four grounds raised in the defence: 1. the first is the alleged compromise ground raised in paragraph 5 of the pleadings; 2. the second is the statutory constraint ground raised in paragraph 9 of the pleadings; 3. the third is the proper construction of special condition 3 ground raised in paragraph 3 of the pleadings; and 4. the fourth, broadly described, is the failure to give valid notices ground raised in paragraphs 7 and 8 of the pleadings. [14] Those broad descriptions are mine. I will deal with each ground in turn, starting with the alleged compromise ground raised in paragraph 5 of the defence. The alleged compromise ground [15] In paragraph 5 of the amended statement of claim, the plaintiff pleads that the defendant has failed to make payments to it totalling some $128,523 pursuant to the lease. Those are for rental payments and recovery of cleaning charges. Paragraph 5 of the defence pleads that there was an agreement entered into between the plaintiff and the defendant on or about 21 December 2020 pursuant to which 50 per cent of the rent for the period 29 March 2020 and 30 September 2020 was to be waived entirely under the Retail Shop Leases and Other Commercial Leases (COVID-19 Emergency Response) Regulation 2020 (Qld) and the Retail Shop Leases and Other Commercial Leases (COVID-19 Emergency Response) Amendment Regulation 2020 (Qld) (together, “the Regulations”). In support of that pleading, it particularises an email from Mr Dobinson on behalf of the plaintiff sent on 12 December 2020 and an email from Mr Bycroft on behalf of the defendant sent on 21 December 2020. [16] In order to properly understand the pleading, it is necessary to say something briefly about the statutory context. [17] The COVID-19 Emergency Response Act 2020 (Qld) (the Act), which received assent on 23 April 2020, was an Act intended, amongst other things, to facilitate -- 4 of 11 -- 5 the continuance of small business activities disrupted by the COVID-19 emergency, including by establishing an Office of Small Business Commissioner, to provide for matters relating to prescribed leases affected by the COVID-19 emergency, and to support the Queensland rental sector during the COVID-19 emergency period. [18] Section 23(1) of that Act created or provided for a regulation making power under this Act for responding to the COVID-19 emergency. A regulation could, under that power, prohibit the recovery or possession of premises or prohibit the termination of a relevant lease, or regulate or prevent the exercise or enforcement of another right relating to the premises, as well as provide for a dispute resolution process. Subsection (6) of section 23 provided: “A regulation under this section expires on 31 December 2020.” [19] I will return to that provision because it forms the basis of the statutory constraint ground. The effect of it is said by the plaintiff to be that any regulation promulgated pursuant to that regulation making power in any event ceased to have effect and expired on 31 December 2020. [20] The relevant regulation – that is, the Retail Shop Leases and Other Commercial Leases (COVID-19 Emergency Response) Regulation 2020 – created a mechanism for reaching agreement about rental waivers or deferrals during the relevant period. [21] Section 3 of that regulation provided that the main purposes of the regulation were to mitigate the effects of the COVID-19 emergency on lessors and lessees under affected leases by giving effect to the good faith leasing principles set out in the “National Code”. [22] The National Code was a reference to the National Cabinet Mandatory Code of Conduct SME Commercial Leasing Principles During COVID-19. The purpose of that code was to impose a set of good faith leasing principles for application to commercial tenancies. Under “Overarching Principles”, the objective of the code was to share “in a proportionate common measured manner, the financial risk and cashflow impact during the COVID-19 period whilst seeking to appropriately balance the interests of tenants and landlords”. [23] Under “Leasing Principles”, principle 2 was that: “Tenants must remain committed to the terms of their lease, subject to any amendments to their rental agreement negotiated under this Code. Material failure to abide by substantive terms of their lease will forfeit any protections provided to the tenant under this Code.” [24] Principle 3 stated: “Landlords must offer tenants proportionate reductions in rent payable in the form of waivers and deferrals (as outlined under “definitions” below) of up to 100% of the amount ordinarily payable, on a case-by-case basis, -- 5 of 11 -- 6 based on the reduction in the tenant’s trade during the COVID-19 pandemic period and the subsequent reasonable recovery period.” [25] Returning to the Regulation, section 12(1) provided that: “A lessor under an affected lease must not, during or after the response period or extension period, take a prescribed action on any of the following grounds…” [26] It is not in dispute that the lease in question was a relevant lease under the regulation. A “prescribed action” was defined in the section 9 as: “an action under a lease… proceeding in a court or tribunal for any of the following in relation to the lease..: (a) recovery of possession; (b) termination of the lease;…” and relevantly – “(j) the performance of an obligation by the lessee or another person under a guarantee under the lease; and (k) exercising or enforcing another right by the lessor under the lease.” [27] The “response period” was defined in schedule 1 as “the period from 29 March 2020 to 30 September 2020”. The “extension period” was also defined as “the period from 1 October 2020 ending 31 December 2020”. [28] With respect to the allegation in the defence that there was an agreement between the plaintiff and the defendant to waive 50 per cent of the rent for the period from 29 March 2020 to 30 September 2020, it is necessary to consider the emails particularised. [29] Those are exhibited to the affidavit of Mr Dobinson at pages 101 and 102 of the relevant exhibit. I have considered those emails in detail. It is clear on the face of the emails that there was no concluded agreement. It is not in dispute that the emails were exchanged between the parties in the course of negotiations undertaken relevantly with section 25 of the Retail Shop Leases and Other Commercial Leases (COVID-19 Emergency Response) Regulation 2020. [30] I accept the plaintiff’s submission that the emails essentially involved an offer on the part of the plaintiff to concede to the defendant a 100 per cent reduction of rental for the period from 1 April 2020 to 30 September 2020, involving 50 per cent of that rent to be waived entirely and 50 per cent of that rent to be deferred and repaid over two years in equal instalments commencing on 1 January 2021, as well as a 100 per cent reduction in rental for the period from 1 October 2020 to 31 December 2020, involving 100 per cent of the rent to be deferred and repaid over two years in equal instalments commencing 1 January 2021. That offer was expressly rejected in the email from Mr Bycroft on behalf -- 6 of 11 -- 7 of the defendant and Mr Dobinson on behalf of the plaintiff, sent on 21 December 2020. The email states: “I am instructed the tenant does not agree to the landlord’s current offer.” [31] The email contained what was, in effect, a counter-offer. That counter-offer was rejected by the plaintiff and that can also be seen in the exhibited material. [32] The plaintiff further suggested to the defendant that if the reinstated offer was not acceptable, the defendant should refer the matter to the Queensland Small Business Commissioner. [33] I am satisfied on the basis of the material before the court that the matter was, in fact, referred to the Small Business Commissioner by lodging a notice of dispute. That occurred on 23 December 2020. I am also satisfied that a mediation was convened by the Queensland Small Business Commissioner and held on 22 February 2021, and that no agreement was reached at the mediation. See pages 113 and 121 of the exhibit to Mr Dobinson’s affidavit. [34] The evidence prima facie establishes that no agreement was reached on or around 21 December 2020 as pleaded in paragraph 5(a) of the defence. Therefore, the alleged compromise ground of the defence has no merit. [35] As the plaintiff points out, the court is entitled to consider admissions against interest and evidence of subsequent conduct of the parties in the court’s assessment of whether or not two parties have reached a concluded agreement with respect to some particular subject matter. On the basis of the pleadings and the evidence before the court, there is no triable issue as to the making of any concluded and binding compromise, whether by way of correspondence relied upon by the defendant or otherwise. The statutory constraint ground [36] I turn then to consider the second substantive ground, which is the statutory constraint ground raised in paragraph 9(b) of the defence. Paragraph 9 of the amended statement of claim pleads that given the payment breaches and the defendant’s failure to remedy them, the defendant is obliged to pay the amount equal to the rent concession received during the relevant period. [37] The defendant denies the allegation in part because it says the plaintiff is prohibited under section 12(1) of the Regulation from taking prescribed action on the ground of a failure to pay rent for a period occurring wholly or partly during the response period or the extension period as defined in the Regulation, or for being a business not being open for business during the relevant hours. [38] I have already referred to section 12(1) of the Regulation which precludes a lessor from bringing an action seeking performance of an obligation under a lease on account of a failure to pay rent or an outgoing for a period occurring wholly or partly during the response period or the extension period. -- 7 of 11 -- 8 [39] Pursuant to section 23(6) of the Act, a regulation made under this section expired on 31 December 2020. Therefore, the plaintiff contends that on the face of that provision, the regulation ceased to operate after 31 December 2020. The protection in section 12(1) of the Regulation preventing a lessor taking prescribed action ceased to operate at that time and, in effect, has expired. [40] I am informed that the Regulation has not been extended, nor has the Act been amended to extend the operation of the Regulation. [41] I am satisfied on the basis of the express statutory provisions that that is the proper construction of those provisions. That is, the protection afforded under section 12(1) of the Regulation to a tenant from a lessor taking a prescribed action ceased to operate after 31 December 2020. This proceeding commenced in May 2021. By the time of the commencement of the action, the plaintiff was no longer constrained by the Regulation. In my view, therefore, the pleading raises no triable issue in answer to the plaintiff’s claim for the relevant amount of unpaid rent and contributions towards cleaning costs which accrued during the relevant period. The construction of special condition 3 ground [42] I turn to the third ground, which is the effect of special condition 3 of the lease and the rent concession. By special condition 3 of the lease, a new clause 33 was inserted into the terms of the lease. The lease is exhibited to Mr Dobinson’s affidavit. Clause 33.1 stated, heading Base Rent Commencement Date: “If the tenant complies with all of its obligations under the lease, and notwithstanding clause 4.1 of the lease, the base rent payable by the tenant for the period 1 August 2017 to 31 July 2018 (inclusive) is 50 per cent of base rent plus GST (“rent concession”).” [43] Clause 33.4, headed “No obligation if breach”, stated: “If the tenant is in breach or fails to perform any of its obligations under the lease, then the landlord has no obligation to make any payment or allow any concession to the tenant under this clause.” [44] The base rent for the first year of the lease was $86,000 plus GST per annum. See schedule 1 at page 2 of the exhibit to the affidavit. The amount of the rent concession thereby claimed by the plaintiff against the defendant was $47,300 inclusive of GST. [45] The plaintiff submits that the effect of the express wording of those two clauses when read together is that the defendant having fallen into arrears and therefore breach, the suspensive effect of clause 33.1 was lost to the defendant, and the defendant must be taken to be and remain indebted to the plaintiff in the full concession amount of $47,300, inclusive of GST. That is because the defendant was in breach and failed to perform its obligations under the lease, which engaged clause 33.4. It had the effect then that the landlord had no obligation to allow any concession, including the 50 per cent base rent concession under clause 33.1. -- 8 of 11 -- 9 [46] As a matter of construction, it is said that the rent concession is contingent on the tenant’s compliance with its obligations under the lease. In circumstances where the obligations were breached, clause 33.4 expressly provides that the landlord is then under no obligation to allow any concession and is therefore entitled to recover the balance of the rent concession. [47] No explicit pleading is made about this in the defence. All the defence pleads, in effect, is that the defendant will otherwise rely upon the lease for its true meaning and effect at trial. [48] I am satisfied on the basis of the material before me and the submissions that the construction of those clauses of the lease submitted for by the plaintiff should be accepted. I am further satisfied that there is no real triable issue therefore with respect to the plaintiff claiming the pecuniary entitlement pleaded in paragraph 9 of the amended statement of claim. The failure to give valid notices ground [49] The final ground to be dealt with is a ground broadly raising an issue about whether certain notices were valid or given. The statement of claim pleaded at paragraph 7 that the plaintiff had issued the defendant with a notice to remedy breach pursuant to the Property Law Act 1974 (Qld). It also pleaded in paragraph 8 of the statement of claim that the defendant had failed or refused to remedy the lease breaches. [50] In the original statement of claim, the prayers for relief also originally sought specific performance of the lease or, in the alternative, termination of the lease and damages to be assessed. That relief was deleted or omitted by the amended statement of claim. On that basis, the plaintiff submits that paragraphs 7 and 8 are now effectively redundant. [51] For completeness, I record that in the defence in paragraph 7, the defendant pleaded that the notices to remedy breach were not issued pursuant to the lease because they referred to a lease commencing on a different date. In paragraph 8 of the defence, the defendant pleaded that the notices were not valid or effective, and that no notice of an event of default under the lease had been served by the plaintiff in accordance with the Property Law Act 1974 (Qld), section 124. [52] In the amended statement of claim, the plaintiff inserted a new paragraph 7A to the effect that the plaintiff had issued, on 16 June 2021, a form 7 Notice to Remedy Breach under that Act. It also amended paragraph 7 to plead that the earlier notices to remedy breach were included for the payment breaches. [53] By the amendments to the statement of claim, the plaintiff deleted the prayers for relief relating to specific performance and termination. Therefore, given the narrowing of the relief sought, notices to remedy breach were not required to be given. The lease remains on foot. It is no longer sought to be terminated. Therefore, I am satisfied that there is no merit in this ground and no triable issue arises in relation to the validity or service of the notices. -- 9 of 11 -- 10 Relief sought [54] In terms of the relief sought, the primary relief is for summary judgment for the whole of the claim. It comprises $128,523 arrears of rental and contribution to cleaning costs, and $47,300 by way of refund of rent concession. Those amounts total the $175,823 ultimately claimed. [55] There is evidence before the court in the affidavit of Mr Dobinson with respect to the amount of base rent in schedule 1 of the lease and the relevant rental concession. See page 2 of the exhibit. There is also evidence before the court in the affidavit of the invoices that were sent to the defendant over the relevant period which have not been paid. See pages 130 to 160 of the exhibit to the affidavit, and paragraph 12 of the affidavit. In that paragraph, the author deposes that those invoices were issued and that no payment of any amount has been made by or on behalf of the defendant in respect of or reduction of any of the relevant invoices for the period between 1 April 2020 and 30 June 2021. [56] Therefore, I am satisfied that those amounts are owing and payable, and have not been paid. Conclusion [57] The defendant has not established that it has any real prospect of succeeding in the proposed defence by obtaining relief avoiding those terms of the lease agreement on the grounds alleged in the defence. [58] I am satisfied that the defendant has no real prospect of successfully defending all or a part of the plaintiff’s claim, and there is no need for a trial of the claim or the part of the claim. [59] As to costs, the plaintiff seeks an order that the defendant pay its costs of and incidental to the action, including the costs of the application, to be assessed on the indemnity basis. It relies upon clause 11.1 of the lease, at page 21 of the exhibit to the affidavit, which provides: “In connection with this lease and any document or matter in connection with it, the tenant must pay promptly: . . . (3) on demand, the landlord’s reasonable costs, charges and expenses in connection with the tenant’s default.” [60] Because the plaintiff has succeeded on the application for summary judgment, it would ordinarily follow that the defendant should be ordered to pay the plaintiff’s costs of the proceeding, including the application for summary judgment, on the basis that the costs should follow the event: UCPR r 681. [61] Further, I am satisfied that the lease provides in clause 11.1(3) that the landlord’s reasonable costs be paid in connection with the tenant’s default. That is a reason to order that the costs of the proceeding should be assessed on the indemnity basis as a matter of discretion under rule 703(1) of the UCPR, because it is well accepted that the discretion should ordinarily be exercised in a way which -- 10 of 11 -- 2 corresponds with the plaintiff’s contractual entitlement (in this case, under the lease). Orders [62] For these reasons, the application for summary judgment is allowed, and I make the following orders in accordance with the draft handed up, signed by me, and placed with the papers. 1. Summary judgment be given for the plaintiff against the defendant in the sum of $175,823. 2. The defendant pay the plaintiff’s costs of and incidental to this action (including the plaintiff’s costs of and incidental to this application), to be assessed on the indemnity basis. -- 11 of 11 --