Background
Allied Pinnacle Pty Ltd (Allied) was a tenant that vacated commercial premises on 14 August 2025 at the end of its lease with G R Mailman & Associates Pty Ltd (GR Mailman), the landlord. Allied left without completing outstanding redecoration works and exterior painting required under the lease. GR Mailman had already arranged a new tenant, Wilrich, who was ready and able to take possession of the premises immediately after Allied vacated, but could not do so until the remedial works were completed. GR Mailman engaged a contractor, S&S Services, to carry out the works from 8 September 2025; Wilrich ultimately took possession on 1 October 2025, before all works were finished.
This was the third judgment in the proceedings. Earlier judgments ([2026] NSWSC 87 and [2026] NSWSC 504) had established Allied’s liability for the cost of the outstanding works and for lost rent caused by its breach, and had referred questions of quantum to an experienced quantity surveyor, Stephen Bolt, as referee. Mr Bolt produced two reports (31 March 2026 and 30 April 2026) estimating the cost of the works at $150,512.21 (excl. GST) and the time reasonably required to complete them at 4.2 weeks, noting the painting could be done concurrently with the redecoration.
The central disputes before Muston J were: (1) whether Mr Bolt’s reports should be adopted without variation; and (2) for how long Allied’s breach had caused GR Mailman to lose rent and outgoings — GR Mailman claimed 6.2 weeks (15 August to 1 October 2025), Allied contended only 3.2 weeks (8 September to 1 October 2025), and Mr Bolt’s estimate of 4.2 weeks fell between the two positions.
The Court’s Holding
Muston J adopted both of Mr Bolt’s referee reports without variation. Allied had proposed reducing the 4.2-week time estimate to 3.2 weeks on the basis that S&S Services completed the work within that shorter window, and further to 2.2 weeks by applying a three-worker crew assumption — but the latter variation was abandoned and the former was rejected. The court held that Mr Bolt’s estimate addressed the time that ought reasonably have taken to complete the works, and the actual duration of S&S Services’ engagement did not displace that assessment, particularly as S&S Services had only performed part of the total works during that period.
On the lost rent claim, the court held that the “but for” causation test was satisfied for the full 6.2-week period from 15 August 2025 to 1 October 2025. Wilrich was ready to take possession as soon as Allied vacated, and would have done so on 15 August 2025 had Allied performed its lease obligations. The gap between Allied’s departure and S&S Services commencing work (15 August to 8 September 2025) was characterised not as a failure to prove causation but as a mitigation question — and Allied bore the onus of proving that GR Mailman had acted unreasonably in not engaging contractors sooner. Allied failed to discharge that onus: it adduced no evidence that S&S Services or any other contractor was actually available to start work before 8 September 2025, and the delay was not objectively unreasonable given the need for post-vacation assessment and trade organisation.
Judgment was entered for GR Mailman on its cross-claim in the sum of $327,868.93, comprising $150,512.21 for the cost of remedial works, $9,952.80 in pre-judgment interest on that sum, and $167,403.62 for lost rent and outgoings (6.2 × $25,547.36 per week, inclusive of agreed pre-judgment interest).
Key Takeaways
- A landlord need only establish “but for” causation to recover lost rent attributable to a tenant’s failure to complete make-good works — it does not need to explain every step taken in the period between vacation and commencement of remedial works.
- The onus of proving a failure to mitigate rests on the party in breach: a tenant alleging the landlord unreasonably delayed engaging contractors must adduce evidence of actual contractor availability and objective unreasonableness, not merely point to an unexplained gap.
- When a court refers a question of quantum to a referee under UCPR r 20.24, the referee’s estimate of the time reasonably required to complete works will not be varied merely because the work was actually done in a shorter period, especially where only part of the total scope was completed in that time.
- The compensatory principle (Robinson v Harman, confirmed in Cessnock City Council v 123 259 932 Pty Ltd (2024) 281 CLR 39) cuts both ways: it prevents over-compensation but equally requires full recovery of the rent the landlord would have received had the tenant performed.
Why It Matters
This decision provides useful practical guidance on how Australian courts apportion the burden of proof where a commercial tenant’s breach of make-good obligations causes a gap between leases. It confirms that landlords are not required to explain every day of delay in organising remedial works as a precondition to recovering lost rent for that period; rather, it is for the defaulting tenant to prove, with actual evidence, that faster action was feasible and the landlord acted unreasonably. This allocation of onus reflects the broader principle that a party in breach should not benefit from the other party’s inability to prove a negative.
The case also illustrates the referee process under the UCPR operating as intended: once an expert is appointed to resolve technical quantum disputes, the court will adopt the report unless there is a demonstrated error, not merely because the actual works happened to be completed in a shorter period under different conditions.