Armstrong Jones Management Pty Ltd v Saies-Bond & Associates Pty Ltd (No 2) (RLD)

[2007] NSWADTAP 52

Appeal Panel - Internal

CITATION:	Armstrong Jones Management Pty Ltd v Saies-Bond & Associates Pty Ltd (No 2) (RLD) [2007] NSWADTAP 52
PARTIES:	APPELLANT Armstrong Jones Management Pty ltd RESPONDENT Saies-Bond & Associates Pty Ltd
FILE NUMBER:	069075
HEARING DATES:	On the papers
SUBMISSIONS CLOSED:	20 September 2007
DATE OF DECISION:	27 September 2007
BEFORE:	O'Connor K - DCJ (President); Molloy GB - Judicial Member; O'Neill A - Non Judicial Member
CATCHWORDS:	Retail Leases - damages
MATTER FOR DECISION:	Damages
FILE NUMBER UNDER APPEAL:	055169 and 065015
DATE OF DECISION UNDER APPEAL:	11/13/2006
LEGISLATION CITED:	Administrative Decisions Tribunal Act 1997 Retail Leases Act 1994
CASES CITED:	Armstrong Jones Management Pty Ltd v Saies-Bond & Associates Pty Ltd (RLD) [2007] NSWADTAP 47
REPRESENTATION:	APPELLANT M Henry of counsel instructed by C Pagent, solicitor, Corrs Chambers Westgarth RESPONDENT In person
ORDERS:	1. The Lessee/Respondent to pay the Lessor/Applicant $224,588.60 by way of damages (being an amount of $284,588.60 less an amount of $60,000 for failing to mitigate that loss).; 2. Interest is payable from the date of this order in accordance with s 72A(3) of the Retail Leases Act 1994

1 In its decision delivered 6 September 2007 in these proceedings the Appeal Panel upheld an appeal by the lessor/appellant. It decided that the lessor was entitled to an award of damages against the lessee/respondent. See Armstrong Jones Management Pty Ltd v Saies-Bond & Associates Pty Ltd (RLD) [2007] NSWADTAP 47.

2 The main primary order was Order 3(A)(2):

‘Lessee to pay the Lessor damages in an amount to be determined.’

3 The Appeal Panel made the following further orders:

‘4. Damages . As to the determination of the amount of damages under Order 3(A)(2), the Applicant/Lessor to file and serve draft minutes of order and any submissions within 7 days. The Respondent/Lessee to file any submissions in reply within 7 days. Tribunal to proceed to make the order on the papers under s 76 of the Administrative Decisions Tribunal Act 1997 unless Tribunal decides otherwise following application by a party.

5. Costs. Applicant/Lessor shall file and serve any submissions within 14 days after entry of the final order under Order 3(A)(2). The Respondent/Lessee shall file any submissions within a further 14 days. Tribunal to make any order on the papers under s 76 of the Administrative Decisions Tribunal Act 1997 unless Tribunal decides otherwise following application by a party. If there be no application for costs filed in accordance with this Order, no order for costs.’

4 This decision deals with the submissions made under Order 4 as to the amount of damages.

5 Errors in First Decision. Before turning to that matter, the opportunity of this further decision in the proceedings enables the Appeal Panel to note some unintended errors in the first decision. At paras [71]-[82] the Panel referred to the provisions of the Retail Leases Act as it presently stands when expressing its view as to the role and purpose of the pre-lease disclosure regime (Part 2), and the remedies provided for in s 10 and s 11. We should have made it clear that not all of the provisions of Part 2, as it now stands, were in force at the time of the pre-lease negotiations in this case, which occurred in July and August 2004.

6 The following requirements were not in force at that time: the lessor’s obligation to supply a retail tenancy guide (s 9) and the lessor’s obligation to provide a tenancy fit-out statement or guide (s 13A). We also note that the changes effected by the recent amendments mean that more detail is required in the lessor’s and lessee’s disclosure statements. At paras [76]–[78] of the judgment, reference is made to the ‘Appendix to Part 1 of Schedule 2’. The Appendix was inserted by the amending Act.

7 However, the provisions to which we gave the most emphasis remain the same – s 11 and points 3, 5 and 6 of the Part 2 statement (the lessee’s disclosure statement), though there is a section heading change in respect of s 11. The Part 2 disclosure statement contains the same six points for the lessee to consider and acknowledge.

8 The comment at para [118] stands, referring to the decision of Palmer J in Samaha, but should be read as a reference to the position as it stood in relation to the giving of warnings as at July-August 2004.

9 These oversights do not affect the Appeal Panel’s views in relation to the fundamental point it was making about the importance of the discipline imposed by the Act in respect of exchanges of information, and with respect to the significance of s 11 in relation to the relief afforded to a lessee in respect of a pre-lease misrepresentation.

10 Damages. Ms Bond, the principal of the respondent/lessee (S-B) has informed the Tribunal that, on behalf of S-B, she does ‘not intend to dispute the amount of damages [AJM] has submitted in its short minutes’ (letter, 20 September 2007). The amount is $224,588.60.

11 It is helpful, we think, to set out briefly the reasons given by the appellant in its submissions for coming to that figure, and its responses to some matters raised by the Appeal Panel in the last part of its reasons.

12 As to period 1, the period of occupation (for this purpose 5 October 2004, date of commencement of lease to 5 September 2005). The amount is $53,181.30 made up of rent due following expiry of the four month introductory rent-free period, contribution towards outgoings (1.46% of the total outgoings of the Style at Home centre) and a promotion levy (2% of the prevailing rent under the lease). The bank guarantee provided at the time of entering the lease was $40,695.00 being the equivalent of three months’ rent, outgoings and the promotion levy. The principal amount due, free of any interest (see further below), after taking account of the draw-down of the guarantee, is $53,181.30.

13 As to period 2 (5 September 2005 to 15 May 2006, the date of the first day of hearing before the Tribunal below). Using the same method of calculation the principal amount forgone not having found a tenant is $94,389.32.

14 As to period 3 (16 May 2006 to 4 October 2009, the end of the five year term of the lease). The claim, accepted by the Appeal Panel, was based on the difference between the rent under the lease, $118,000, and estimated future rent of $80,000 per annum. The principal amount therefore is $94,389.32.

15 In the first decision the Appeal Panel raised two issues – how interest might be assessed (on a ‘stepped’ basis from the beginning of the defaults or simply on a fixed basis in respect of the whole amount starting from a more recent date) and whether any allowance should be made for the acceleration of the amount covered by period 3.

16 AJM advised in its submissions that it did not press the ‘stepped’ basis for calculation. Instead it submitted that ‘interest should attach to the final judgment sum and apply henceforth.’ It added: ‘To that end, AJM submits that no order is necessary in respect of interest.’

17 The Appeal Panel understands the submission to be that there be an order for interest on the judgment of the usual kind.

18 While not agreeing with the concern raised by the Appeal Panel that evidence might need to be adduced in support of the claim to costs of reletting, AJM did not press its claim for reletting costs. AJM expressed concern that by not entitling a lessor to recover likely reletting costs mitigation might be discouraged. It was not the intention of the Appeal Panel to inhibit in any way the taking of steps to relet. The Appeal Panel accepts that reletting fees are a usual head of damages where a lessee has unlawfully repudiated the lease.

19 The Appeal Panel raised the issue of a discount for accelerated compensation. In response AJM noted that it had acknowledged this matter at the hearing. It explained that it had taken the view that, in place of a complex ‘net present value’ calculation, that a more practical solution would be for AJM to forego the Consumer Price Index increases to which the rent under the lease had been subject. The Appeal Panel accepts that this is a sensible approach in a case of this scale.

20 The submissions attach a Table setting out the amounts above, reduced by the amount allowed by the Tribunal in favour of the respondent/lessee for failure to mitigate ($60,000).

21 In accordance with the short minutes of order proposed by AJM and which is not opposed by S-B, the following order is entered. The order includes, in addition, the usual order for interest on judgment.

Order

1. The Lessee/Respondent to pay the Lessor/Applicant $224,588.60 by way of damages (being an amount of $284,588.60 less an amount of $60,000 for failing to mitigate that loss).

2. Interest is payable from the date of this order in accordance with s 72A(3) of the Retail Leases Act 1994.