Armstrong v Partridge
[2011] NSWADT 232
•05 October 2011
Administrative Decisions Tribunal
New South Wales
Medium Neutral Citation: Armstrong v Partridge [2011] NSWADT 232 Hearing dates: 24 June 2011 Decision date: 05 October 2011 Jurisdiction: Retail Leases Division Before: Deputy President Patten
M Lonie, Non judicial member
G Pinter, Non judicial memberDecision: In matter 115010:
1. The Applicant declared entitled to an abatement of rent of 40% in respect of period 26 October 2010 to 19 January 2011, otherwise application is dismissed.
In matter 115049:
1.The Applicant (in matter 115010) to pay the Respondents damages in the sum of $20,291.
2. The Rental Bond Board to pay to the Respondents the sum of $8,750 held in respect of the subject lease such sum to be applied in part satisfaction of order 2.
3. The Applicant (in matter 115010) to pay the Respondents' costs as agreed or assessed.
Catchwords: Abatement of Rent - Damages for repudiation of lease Legislation Cited: Retail Leases Act 1994
Administrative Decisions Tribunal Act 1997Cases Cited: Attorney General (NSW) v World Best Holdings Ltd (2005) 63 NSWLR 557 Category: Principal judgment Parties: Helen Maree Armstrong (Applicant)
Brian Cameron Partridge (1st Respondent)
Margaret Anne Partridge (2nd Respondent)-Representation: H Armstrong (Applicant in person)
Kent McCrae Lawyers (Respondents)
File Number(s): 115010 115049
REasons for decision
( Deputy President D. Patten)
This matter was heard at Wagga Wagga on 24 June. The evidence was completed that day and the parties were given the opportunity to make written submissions.
I constituted the Tribunal but pursuant to clause 4 of Division 3 in Schedule 2 to the Administrative Decisions Tribunal Act, I was assisted by two members in an advisory capacity, Mr Michael Lonie and Mr Gary Pinter.
The proceedings were commenced by Ms Helen Armstrong (the Applicant) on 7 February last. She sought an interim order against Brian and Margaret Partridge (the Respondents) seeking to gain access to her shop at 190 Baylis Street, Wagga Wagga (the premises). Although the application is extremely difficult to read and comprehend, the gravamen of the complaint seems to be that the Applicant on 19 January 2011 was unlawfully locked out of the premises leased from the Respondents. She sought orders that she have access to the premises for the purpose of removing her goods and fittings, and damages which included alleged loss arising from the failure of the air conditioning unit in the premises to operate during the period after 26 October 2010.
In reply to the application the Respondents denied that the premises had no effective air-conditioner after 26 October 2010 and denied that the Applicant otherwise suffered damage. They admitted that the Applicant was locked out of the premises on 19 January 2011 but asserted that this resulted from breach by the Respondents of an essential term of the lease, namely the covenant to pay rent.
The Respondents, on 11 April this year, initiated their own proceedings in the Tribunal seeking an order for payment of $35,108 damages and an order that the amount of the rental bond $8,750 held by the Rental Bond Board be released to them.
By the time the earlier matter was listed for directions on 10 February 2011, the Applicant had been granted access to the premises and no longer required interlocutory relief. Her claim for damages was, however, maintained.
At the hearing in Wagga Wagga on 24 June, the Applicant appeared in person and Mr S Daly, solicitor, appeared for the Respondents.
The Applicant relied on two statements respectively dated 1 June 2011 and 17 June 2011 (Exhibits A1 and A2). She gave oral evidence and was cross-examined.
She stated that in September 2009 she was desirous of relocating her clothing shop at 102 Baylis Street, Wagga Wagga to smaller and more suitable premises. The premises were available for lease at the time and she entered into a lease of them for a term of 3 years, commencing 12 November 2009 on which date she entered into possession. She then spent about $20,000 in rendering the premises suitable for her purposes. A report prepared by PCI Commercial dated 12 November 2009 which she signed noted a substantial number of items in disrepair or requiring attention, including "Toilet stained - constantly leaking. Hand basin leaking underneath cabinet, smelly, dirty and mildew smell. Toilet bowl stained and water constantly running". The Respondents do not seem to have obliged themselves to attend to those particular items despite the disclosure of them.
At this stage it is convenient to refer to the lease, which, while not part of the Applicant's case, was annexed to the statement of Mrs Margaret Partridge. It was registered AF 147163W and contained an option for renewal for a further term of 3 years. The rent reserved was $35,000 pa (subject to annual review), payable by monthly instalments in advance. A security bond described as "Guarantee $8,750 (No GST) was stipulated.
The following provisions of the lease have particular relevance to this case:
"2. The lessee is responsible for servicing and maintaining the air conditioning unit. Services should be carried out every three (3) to six (6) months. The lessor is responsible for any items of capital expenditure (i.e. burnt out motors or fans etc) other than those occasioned by the neglect or default of the lessee.
3. It is agreed that there will be a rent-free period for two (2) months for the period 12 November 2009 to 11 January 2010. This clause will not apply in any further Lease.
During this time the lessor will:-
(a) Paint ceilings though out.
(b) Fit solid core rear door and security door.
(c) Patch/paint damaged awning lining.
(d) Remove/repair fluorescent and loose electrical wiring under awning.
During this time the lessee will:-
(a) Paint internal walls in a neutral colour.
(b) Supply and fir floor coverings.
(c) Remove one of the existing signs."
From the annexure to the lease the following clauses are also relevant:
"CLAUSE 5 MONEY
What money must the lessee pay?
5.1 The lessee must pay to the lessor or as the lessor directs -
5.1.1 the rent stated in item 13A in the schedule;
5.1.2 the share stated in item 14A in the schedule of those outgoings stated in item 14B in the schedule;
5.1.3 the reasonable cost to the lessor of remedying a default by the lessee;
5.1.4 the reasonable cost to the lessor of dealing with any application by the lessee for the lessor's consent under this lease (whether or not it is given);
5.1.5 interest on these moneys at the rate stated in item 15 in the schedule when payment is more than 14
days overdue, calculated from the due date to the date of payment;
5.1.6 registration fee for registration of this lease at Land and Property Information NSW (payable on delivery to the lessor's solicitor of the executed lease);
5.1.7 stamp duty on this lease (payable on delivery to the lessor's solicitor of the executed lease) if not previously paid by the lessee to the Office of State Revenue;
5.1.8 if the lessee defaults, the lessor's reasonable legal costs relating to the default."
CLAUSE 7 CONDITION AND REPAIRS
Who is to repair the property?
7.1 The lessor must -
7.1.1 maintain in a state of good condition and serviceable repair the roof, the ceiling, the external walls and external doors and associated door jambs, and the floors of the property and must fix structural defects;
7.1.2 maintain the property in a structurally sound condition; and
7.1.3 maintain essential services.
7.2 The lessee must otherwise maintain the property in its condition at the commencement date and promptly do repairs needed to keep it in that condition but the lessee does not have to
7.2.1 alter or improve the property; or
7.2.2 fix structural defects; or
7.2.3 repair fair wear and tear.
....................................................
8.2 If the property or the building of which it is part is damaged (a term which includes destroyed) -
8.2.1 the lessee is not liable to pay rent, or any amount payable to the lessor in respect of outgoings and other charges, that is attributable to any period during which the property cannot be used under this lease or is inaccessible due to that damage;
8.2.2 if the property is still useable under this lease but its useability is diminished due to the damage, the lessee's liability for rent and any amount in respect of outgoings attributable to any period during which useability is diminished is reduced in proportion to the reduction in useability caused by the damage;
8.2.3 if the lessor notifies the lessee in writing that the lessor considers that the damage is such as to make its repair impracticable or undesirable, the lessor or the lessee can terminate this lease by giving not less than 7 days notice in writing of termination to the other and no compensation is payable in respect of that termination;
8.2.4 if the lessor fails to repair the damage within a reasonable time after the lessee requests the lessor to do so the lessee can terminate this lease by giving not less than 7 days notice in writing of termination to the lessor; and
8.2.5 nothing in clause 8.2 affects any right of the lessor to recover damages from the lessee in respect of any damage or destruction to which the clause applies.
............................................................
12.1 This lease ends-
12.1.1 on the date stated in item 3 in the schedule; or
12.1.2 if the lessor lawfully enters and takes possession of any part of the property; or
12.1.3 if the lessor lawfully demands possession of the property.
12.2 The lessor can enter and take possession of the property or demand possession of the property if-
12.2.1 the lessee has repudiated this lease; or
12.2.2 rent or any other money due under this lease is 14 days overdue for payment; or
12.2.3 the lessee has failed to comply with a lessor's notice under section 129 of the Conveyancing Act 1919; or
12.2.4 the lessee has not complied with any term of this lease where a lessor's notice is not required under
section 129 of the Conveyancing Act 1919 and the lessor has given at least 14 days written notice of the lessor's intention to end this lease.
12.3 When this lease ends, unless the lessee becomes a lessee of the property under a new lease the lessee must -
12.3.1 return the property to the lessor in the state and condition that this lease requires the lessee to keep it in; and
12.3.2 have removed any goods and anything that the lessee fixed to the property and have made good any damage caused by the removal.
Anything not removed becomes the property of the lessor who can keep it or remove and dispose of it and charge to the lessee the cost of removal making good and disposal.
..........................................
12.5 Essential terms of this lease include
12.5.1 the obligation to pay rent not later than 14 days after the due date for payment of each periodic installment (and this obligation stays essential even if the lessor, from time to time, accepted late payment);
12.5.2 the obligations of the lessee in clause 5.1.2 (dealing with outgoings);
12.5.3 the obligations of the lessee in clause 6.1 (dealing with use);
12.5.4 the obligations of the lessee in clause 7 (dealing with repairs);
12.5.5 the obligations of the lessee in clause 10 (dealing with transfer and sub-lease); and
12.5.6 the obligations of the lessee in clause 15 (dealing with GST).
12.6 If there is a breach of an essential term the lessor can recover damages for losses over the entire period of this
lease but must do every reasonable thing to mitigate those losses and try to lease the property to another lessee
on reasonable terms.
12.7 The lessor can recover damages even if-
12.7.1 the lessor accepts the lessee's repudiation of this lease; or
12.7.2 the lessor ends this lease by entering and taking possession of any part of the property or by demanding the property; or
12.7.3 the lessee abandons possession of the property; or
12.7.4 a surrender of this lease occurs.
.................................................................
CLAUSE 17 SECURITY DEPOSIT
17.1 If an amount or a number of months appears in item 20 in the schedule, clauses 17.2 to 17.6 apply.
17.2 On or before the commencement date of this lease the lessee will deliver the security deposit to the lessor.
17.3 The lessor is entitled to deduct from the security deposit an amount equal to any monies due but unpaid by the lessee to the lessor under this lease.
17.4 Where the property is a retail shop, the security deposit will be held in accordance with Section 16C of the Retail Leases Act 1994. The lessee will not make an application to the Director General seeking the return of the security deposit (or so much of it as is then held by the Director General) until the later of:
17.4.1 the terminating date of this lease;
17.4.2 the expiry date of any holding over under this lease; and
17.4.3 the date that the lessee has no further obligations under this lease or at law."
I return to the contents of the Applicant's statements. In early January 2010, the Applicant received by hand from Mr Tim West an invoice for monthly rent payable. The invoice, on the letterhead of Professional Commercial and Industrial Real Estate (PCI), directed that the rent be paid to the firms trust account. According to Mrs Armstrong she was told by Mr West, known to her as a principal of PCI, that he was not managing the property but collecting rent as a favour to the Respondents.
Mr West continued to call monthly and personally present a rent invoice to the Applicant. In April, when he called she told him of water leaks in the toilet and basin. However, it seems that from May, the Applicant paid the rent directly into the Respondents' bank account.
By June, according to the Applicant, the water leaks had not been fixed despite her several conversations with Mr West. She said a bad odour in the rear of the premises seemed to be associated with the defective plumbing and this was likely to have a deleterious impact upon her health. She employed a manager, Ms Bryant who complained to her about the leaks and bad odour.
In late August, the Applicant went to Queensland for two weeks. While she was away some plumbing work was attended to but during the course of this work some of her stock was damaged. At about this time the rent fell into arrears and the Applicant negotiated with Mr West regarding payment of those arrears. She also spoke to Mr West about what she regarded as a lack of maintenance affecting her health and asked him to find a new tenant so that she could move to other premises.
On 26 October, when Ms Bryant switched on the air-conditioning for the first time, there was a "switch explosion" which rendered the unit inoperable. Ms Bryant threatened to resign as a result of the plumbing leaks; bad odour; moisture seepage through brickwork adjacent to the shop's counter; and a continuing hole in the roof since plumbing work a month or so earlier.
In early November, according to the statement, the Applicant spoke to Mr West who, she said, was her only point of contact with the Respondents. She asked him to have the air-conditioner repaired as lack of air- conditioning was beginning to affect her trade. She brought in a portable fan but found it did not provide much relief. She said heat and humidity in the shop affected the health of both herself and Ms Bryant.
On 15 November, the plumber, Mr Shepherd returned to carry out further work at the premises. She gave him a letter which she had written and which he agreed to deliver to the Respondents:
"Dear Mr & Mrs Partidge
I refer to my lease at the above premises and wish to point out there seems to have been some sort of miscommunication between Tim West at PCI Commercial real estate and myself as well as you both in regards to maintenance that urgently is needed to be carried out and which I believe you are unaware of.
Since my tenancy commenced 12 months ago I have been complaining about the toilet continually running and a very bad water leak underneath the hand basin which is creating a rotten smell and mould not to mention destroying the hand basin itself.
I would like to let you both know that I suffer from a disease called Lupus that affects my red blood cells (the opposite to Leukemia) and can be fatal if an infection goes to my internal organs. (My twin sister died from this disease when I was eight). The mould from the bathroom can therefore prove to be fatal to my health and wellbeing. I have had to employ a full time employee due to my deteriorating health, which also puts pressure on my financial position.
I have advised Tim that I have placed my rent (current & arrears) into a trust account and will pay the full balance of rental owing upon completion of these urgent repairs - I have done this as it seems to be the only way I can have anything done as Tim has said he has passed on to you both the plumbing problems however nothing has been done to fix the problem. Future weekly rental payments (once outstanding balance is paid) will be direct debit into your bank account. I realize that I am in breach of my tenancy agreement by not paying rent, but also as landlords, urgent repairs are required to be carried out within a certain time frame, therefore as landlords you are also in breach of the tenancy agreement. If this matter can be resolved between us it eliminates the cost of legal representation by both parties.
Since talking to the plumber who is carrying out work to water repairs in the flat upstairs he has informed me that you are unaware of these problems we are experiencing, hence my letter to you. The other problems we are having is the front door is continually difficult to open and shut even though the tracks are cleaned on a daily basis. Also the front shop air conditioner does not work and is affecting my business trade with clients walking out due to the humidity and don't want to try on outfits either because of the heat. The final item which was listed in my tenancy agreement was the front awning was to be repainted after the removal of old signage. However I have advised Tim West that I am trying to find another tenant to take over my lease as soon as possible and relocate so I don't mind if it is not done. The move to this end of town was unfortunately a poor business decision as my trade has decreased by more than half, as many people do not shop down this end of town and only two other businesses trade on a Saturday afternoon or Sunday.
To ensure the success of my business I need to relocate to a busier area of the main street. When I do vacate all rent will be paid up to date. When I leased these premises I spent close to $20,000 in painting, floor coverings and improvements which will be to your benefit when I do move out. If I could also have your telephone number in future I can deal direct with you both if any problems arise.
Yours sincerely
Helen Armstrong "
Following this letter, the Applicant said that the downstairs plumbing was repaired by Mr Shepherd and the front roller door screen repaired. However, nothing was done about the air-conditioning unit. She blamed lack of air-conditioning on the fact that her business activity had decreased by more than one half.
On 15 December the Respondents came to the premises to discuss with the Applicant the fact that she had altogether ceased to pay rent. Ms Partridge told her that the air-conditioning unit would be replaced by 24 December and the Applicant in turn promised that all outstanding rent would be paid by 20 December. She said that the Respondents did not mention any rent increase.
On 17 December the Applicant said she paid $5,000, one half of the arrears, and told Mrs Partridge that the remainder would be paid when outstanding maintenance had been completed and the air conditioning operational.
Later that day Mr Sheperd came and temporarily covered the hole in the roof, which had been a nuisance since it was created early in September. She was told that the hole would be permanently repaired by the end of January.
On the same day the Applicant sent to the Respondents the following letter:
Dear Mr & Mrs Partridge,
I refer to our meeting this week on Wednesday 15" December regarding urgent repairs to the rented premises at the above address and also in regards to outstanding rent which has been withheld until such repairs were carried out.
Following discussions with my mother, Shirley Armstrong, who manages my financial affairs due to a brain injury from an accident and having Lupus, an auto immune disease which can be fatal, she has advised that I pay half the amount owing until such time as the repairs are completed due to the affect on my health.
Today I am depositing $5000 into your nominated bank account and will pay weekly rental from 24 December, with the rent arrears to be paid in full once repairs carried out.
As previously mentioned the plumbing problems can be fatal to my well being with the mould and smell from the bathroom cabinet a serious issue with my health, I have also since been advised since Wednesday that there is serious plumbing problems with 190 Baylis Street (mainly in the flat above the shop) and it has been like this for a long time, which concerns me with my health.
As the plumbing problems have been outstanding for such a long time and also the lack of air-conditioning which has affected my weekly trade by around 50 per cent, if these are not fixed by no later than Friday 24 December 2010, including the holes in the ceiling out the back (dirt & debris has resulted in having to have several items of clothing dry cleaned) I will be giving four weeks notice from that date to vacate the premises, which under my lease can be done due to mitigating circumstances. The air conditioner also needs to be replaced outside of working hours due to the disruptions it would cause to my business. If I vacate the premises all outstanding rent will be paid in full, and the shop will be left in a better condition than when I moved in.
I also need to discuss further with you (if the above is carried out in time) the risks to my health with the/ongoing plumbing problems at 190 Baylis Street, and will be giving two months notice to vacate (again due to health reasons 1 am able to break the lease agreement).
Yours sincerely,
Helen Armstrong "
What followed is described by the Applicant in paragraphs 22 and 23 of her statement:
"22. At 5.30pm on December 20 I received a telephone call from Mrs Partridge, with her mannerism much more pleasant compared to our previous conversation. She said she had received the letter I had sent her (Copy I) and that I should now be happy that the plumber had temporarily patched the ceiling hole and repaired the water leaks in the back bathroom area of the shop and that all should now be "beautiful". She promised that the air conditioner would definitely be replaced before December 24, as she had spoken to Climate House, the contractor who was to replace the unit and that I had no need to worry as all the work would be carried out from the roof and the rear of the shop, therefore not interrupting my trade. I told Mrs Partridge I appreciated the effort she had made to repair the water leaks and replace the air conditioning unit, however I was still concerned about the number of major water leaks occurring in the walls and ceilings, especially around the light fittings, throughout the premises, which was a result of water leaks from upstairs. Mrs Partridge expressed her "surprise" at the water problems upstairs, but since they had been going on for years according to the plumber and past and current tenants, I couldn't see them being fixed in the foreseeable future. Mrs Partridge said she wouldn't be able to have the upstairs water problems attended to before Christmas to which I replied I didn't expect them to be, given that many plumbers and contractors took extended leave over Christmas and were busy finalizing last minute jobs. Mrs Partridge then asked if we could start anew (as in make a fresh start) as she claimed she had not been aware of the maintenance issues we had experienced since tenancy commenced as Tim West from PCI had not passed them on to her (which I thought a little strange given Mrs Partridge was in contact with Mr West, I presume on a monthly basis, regarding rent up until October 2010 as I was receiving monthly tenant tax invoices from PCI real estate). She then said that in future to call her if I had any further problems with maintenance so she could have them fixed for me.
23. On December 24 at 4pm Mrs Partridge telephoned me on my mobile phone to enquire as to why the balance of the outstanding rent had not been paid as agreed. I informed her that we still had no air-conditioner despite her agreement to me on December 20 that it would be installed prior to Christmas, which now meant we had not had any form of air-conditioning in the front of our store for two months. I reiterated to Mrs Partridge that as per my agreement all outstanding rental would be paid once the air conditioning unit had been replaced. Mrs Partridge said to me "she thought it would have been already replaced" and suggested I ring Climate House to enquire what was happening. I replied that no-one would still be at work after 4pm on Christmas Eve and that it was not my responsibility as the tenant to chase up outstanding work, but in fact she should have been following them up throughout the week leading up to Christmas to ensure the work was carried out. At this stage I told Mrs Partridge that due to so many maintenance issues, including ones that breached OH & S, had not been done (water leaks around light fittings, no air conditioning) that I was now left with no alternative than to give notice to vacate the premises at 190 Baylis Street, under clauses 7 & 8 of my lease. I advised Mrs Partridge that I was only required to give seven days notice to vacate the premises, however as a matter of courtesy I would give her 28 days notice as I wanted to leave on good terms. Mrs Partridge said to me that she would be claiming interest on the rental arrears to which I replied that was her decision but as I was giving her an extra three weeks notice, that included an extra three weeks in rental, the amount being paid to her would far surpass any interest she wished to claim on the outstanding rent, and if she wanted to go down that path then I was happy to give seven days notice, which I was legally able to do. I informed Mrs Partridge that I would place in writing my notice to vacate and also attach photographs of the serious water leaks around the light areas for her information. I also said I could produce medical documentation regarding the impact these maintenance issue were having to my health, to the point they could prove to be fatal. Mrs Partridge replied that she wasn't a contractor herself so she couldn't get up on a ladder and fix these things herself, to which I replied neither was I, but as the landlord it
was her responsibility to follow up these issues to ensure they were completed satisfactorily within a reasonable time frame, and she should have stayed in contact with Climate House regarding the installation of a new air conditioning unit given the fact she had given a date it would be replaced by. The conversation concluded with me advising Mrs Partridge my intention to vacate the premises within 28 days, with the 24 th of January 2011 being the date I would return keys, with the written notice being placed in writing as required (along with a medical certificate being obtained), with my notice being forwarded to her as a matter of urgency."
On 29 December, the Applicant hand delivered to the Respondents' home the following letter:
"Dear Mr & Mrs Partidge
1 refer to your telephone call last Friday afternoon, the 24 th of December 2010, and the lease at the above premises, at which time I verbally gave you one months notice to vacate the premises (on Friday the 24 th of January 2011, although legally I was only obligated to give you one weeks notice) due to serious repairs not being carried out. At the time you told me you weren't aware that Climate House hadn't been to replace the air conditioner and suggested I call them myself to which I replied that it was not up to me as the tenant to chase up outstanding maintenance work and that no one would still be at work at 4,pni, given it was Christmas eve. You also said you were too old to get up a ladder and do the work yourself but I explained to you that as the lessor that was not necessary, but it was up to yourself to ensure any repairs had been carried out within a given time frame. I also said that you would certainly be aware of the major water problems both upstairs and downstairs at 190 Baylis Street, as advice we had been given is that it has been a huge issue for a number of years.
I would therefore like to draw your attention to the signed lease agreement, which states the clauses allowing me to terminate the lease prior to the three year agreement:
Clause 7 - Condition & Repairs. Who is to repair the property?
7.1 The lessor must.... (Refer points) 7.1.1, 7.1.2, 7.1.3, 7.4
Clause 8 - What happens if the property is damaged?
8.2 If the property or the building of which it is part is damaged
(Refer points) 8.2.1, 8.2.2,8.2.3 and 8.2.4 - 1 the lessor fails to repair the damage within a reasonable time after the lessee requests the lessor to do so the lessee can terminate this lease by
giving not less than seven (&) days notice in writing of termination to the lessor; and 8.2.5 nothing in clause 8.2 affects and right of the lessor to recover damages from the lessee in respect of any damage or destruction to which the clause applies.
As you are aware we have had major plumbing problems from the commencement of my tenancy, and further enquiries have revealed that the whole building, especially the upstairs residence, has had major water problems for a number of years (with 'some' major repairs being done in between residential tenants). You, as the building owner would be aware of these problems, and I am disappointed that this was not mentioned to me prior to my lease being signed.
To again list the problems, which are resulting in me terminating my lease, are as follows (although some things have now been repaired) and, also after speaking with you in November regarding me withholding rent, some of the problems then started to be fixed.
(Hand written note on letter) - "Hand delivered to Mrs Partridge 16 Lakeside Dr - Thursday 30/12/10 along with photos of water problems and highlighted copy of lease - Not home left under front door."
Toilet continually running since tenancy commenced. New cistern installed November
Hand-basin leaking causing mould and rotten smell underneath vanity - like this at commencement of tenancy and as I have Lupus, a life threatening immune disease, the subsequent mould could prove fatal if it was to go to my lungs from breathing in the fumes. Work was done of the pipes under the basin in November and the taps replaced in December, however the vanity remains and is full of mould and has a strong odour (should have been replaced)
Front door extremely difficult to open & shut - now repaired
Two large holes in ceiling in back clothing storage area - holes made to repair water leaks upstairs end of August. My manager, Thel Bryant, was informed that they would be fixed within a maximum of three weeks. These were temporarily patched by the plumber in early December (Plasterer unable to do it until end of January 2011 due to an accident) using tin, which is considered a fire hazard. During the three months white dust and debris (who knows what it could contain...asbestos??? being an old building) fell through the holes resulting in damage and clothing having to be dry cleaned prior to sale. This powder substance also went into the carpet and could still be present unless professionally cleaned.
Front air conditioner "blew up" the end of October and we were promised it would be replaced no later than the 24 th of December (I also advised you the final rent arrears would be paid once this was complete) As this was Spring, leading into summer and the weather hot we have lost quite a lot of business, with clients either leaving the shop due to the heat or not trying on clothing due to the heat (we have a no refund policy; exchange or credit note only) therefore clients weren't willing to take garments home to try on in case they weren't right. Also a number of pieces of clothing tried on had to be cleaned afterwards due to clients "sweating" and making the clothing dirty and smelly.
ALSO: Annexure A of the tenancy agreement stated the lessor was to re-paint the front awning in January 2010 or when a painter was available after the Christmas break (not done) and replace the rear solid core door and security door (repaired, not replaced.
When we did an inspection prior to writing this letter other major problems have came to our attention. These include the fluro light to the right of my desk in the back part of the building detaching from the ceiling, again due to water leaks from upstairs, and all around this light as well as the back air conditioner there is evidence of new water leaks (the ceilings were sanded and repainted prior to me moving in so these have developed over the past 12 months.
There are water leaks showing in the front ceiling of the shop and water is seeping through the brickwork to the side of the front counter, staining the area yellow, with the concrete between the bricks falling out and lifting the floating flooring and skirting, which I had put down at my own cost.
Since the Christmas break there is a really bad sewerage smell coming from the back of the building and at the drain (which has no cover) near the laneway, but just inside the driveway and hopefully there is no major sewerage overflow in the flat upstairs since the tenant is away.
I have attached photographs of all the items I have listed above and can provide medical documentation should you require it regarding the danger to my health in staying at 190 Baylis Street, Wagga Wagga. Again, as previously mentioned I have had to employee a full time employee due to my declining health, which my Doctor can confirm in writing has been exasperated by the mould, water and dust particles (contents of which are unknown) since I moved into these premises
As mentioned to you in our last phone call on the 24 th December, I am required to only give seven (7) days notice, however to give you time to look to re-lease the premises or repair them which probably needs to be done with both upstairs and downstairs vacant, I will give four weeks notice meaning I will vacate the premises on the Friday, 24 th of January 2011. You mentioned that you could also claim interest on the rent arrears which I said was your choice, but the fact I was giving four weeks notice means an additional three weeks rent, which I am sure would total more than any interest owing to you, and also I said that I wanted to leave on good terms with you and your husband, so if this is the case, I will be seeking further legal advise and rebuking the extra three weeks rental owing to the 24th. I informed you I was going to pay rent by the end of this week (the 30 th of December) however I need to determine exactly what the amount owing is when the lease terminates and the keys are returned on the 24 th of January, 2011 (either to yourself or PCI real estate), if you are required to pay compensation for loss of income and dry-cleaning costs. Based on the paperwork you gave me on the 15 th of December, the amount of $10,500.01 was owing by the 12 th of December (to pay me up until the 12 th of January 2011). A further two weeks will be owed until the 24 th of January 2011, when I am vacating, which totals $1346.14, giving an overall total of $11,846.15 less the $5000 I paid direct into your bank account on the 17 th of December 2010, meaning $6,848.15 is the total outstanding rent. You were advised only half the rental arrears were paid on the 17 th of December as not all the agreed upon repairs had been carried out, including the replacement of the air-conditioner. At the time of the tenancy commencing I paid a bond of $8750, which was forwarded to the rental bond board. I would like to discuss the arrears being taken from the bond once we have agreed upon the amount owing, with the remainder being paid back into my nominated bank account.
I am sorry that I have been forced to break my lease, but as I have said on numerous occasions, my health is far more important than anything else, and the problems being experienced here (especially no air conditioning) is having a dramatic affect on my bottom line, meaning the last four weeks my weekly takings have dropped to not even cover rent or wages, given that December/January has always been the busiest and most profitable months in retail business, something had to be done to sort this problem out.
Yours sincerely
Helen Armstrong"
The letter was accompanied by a number of photographs. Following it the Applicant arranged to lease a shop in the Sturt Mall where she relocated her business on 17 January.
On 4 January 2011, the Applicant was informed that Ms Jill Toohey of Knight Frank had taken over the management of the premises. The Applicant met Ms Toohey who assured her that in effect all her complaints were being attended to. The Applicant said that she replied that it was too late and that she intended to vacate the premises in accordance with her letter of 29 December 2010.
On 19 January the Applicant was informed that the Respondents had re-entered the premises and changed the locks. She received a notice of that date stating that the Respondents had terminated the lease effective immediately due to her breach of an essential term of the lease, namely failure to pay rent.
Following this there were unsuccessful attempts by the parties to resolve their differences, leading to the commencement of the earlier proceedings in the Tribunal. As indicated, those proceedings were listed for directions on 10 February. On 9 February further negotiations between the parties seem to have led to resolution of the dispute regarding the Applicants stock and other property left at the premises and outstanding rent to 19 January 2011 was paid. The Applicant said that her new store Shop 35, Sturt Mall opened for full time trading on 23 February.
No witness other than the Applicant gave evidence in her case. Her second statement was in reply to material relied upon in the Respondents' case but only formally put in issue matters which were, plainly, already in issue. I need make no further reference to it.
Mrs Partridge, in her statement of 17 May 2011, said that she and her husband own the premises as joint tenants. She denied that prior to 16 November 2011 either her husband or herself had received notice form the Applicants of any problems or maintenance issues relating to the premises.
In respect of the matters raised in the Applicant's letter of 15 November 2010, she said that she arranged to obtain quotes from Craig Stewart Electrical and Climate House regarding the air-conditioning; arranged for plumbing and maintenance repairs to be carried out by Mr L Shepherd; and contacted Hilly's Home Maintenance regarding the sliding door.
A quotation was received from Craig Stewart Electrical about 22 November but the quotation from Climate House was delayed until 15 November by local flooding from 8 to 10 December.
Mr Sheperd, according to Mrs Partridge, did all he could by about 15 December. The quotation from Climate House was $3,986 to install a wall hung split system. That work was completed on 10 January.
As to the relationship of the Respondents with Mr West of PCI, paragraph 8 of Mrs Partridge's statement reads:
" In her letter of 15 November 2010 Helen refers to communication she had with Tim West of PCI Commercial Real Estate (PCI). PCI was not responsible for the management of the Premises. Brian and I only engaged PCI to find a tenant for the Premises and to have the Lease drawn up. Brian and I did not engage PCI to be property managers for the Premises. Once the lease was entered into all dealings in relation to, and management of, the Premises was undertaken by Brian and myself. Helen paid rent directly into our nominated bank account."
Mrs Partridge's second statement dated 17 June 2011 was substantially in reply to the Applicants' statement of 1 June. She amplified slightly what she had previously said about the Respondents' relationship with Mr West:
"We did not at any time however engage Tim West to manage the Premises. There were some occasions when Brian and I spoke to Tim West about the Applicant's failure to pay rent on time. Most often when we spoke to Tim West, Brian and I were away on holidays and we would telephone him to see if he could assist us by chasing up the Applicant's rent because we were away and not able to do it ourselves. We certainly did not ask Tim West to visit the Applicant on regular dates or at regular times and when the rent was being paid, we understood it was being paid directly into our personal bank account by the Applicant."
I note that Mr West did not give evidence and there was no explanation for this. I infer that his evidence would not have assisted the Respondents' case. Moreover, the evidence of the Applicant as to her dealings with Mr West may more readily be accepted.
It is also perhaps significant that in the second statement Mrs Partridge said that she and her husband were on holidays away from Wagga Wagga for a period totaling 12 weeks from 5 July 2010 to 28 August 2010 and again from 22 September 2010 to 13 October 2010.
As to water leakage, which the applicant claimed emanated from the upstairs residential unit, Mrs Partridge said this was managed by a Mr Wes Russell, Real Estate agent. She added:
"Brian and I were aware that there were water issues in the upstairs Unit and that Wes Russell; had arranged for Lew Shepheard to undertake the required work. At the time of signing this statement Lew Shepheard had not provided a Tax Invoice to Wes Russell for the work that he had done in the Unit during 2010."
It is also, I think, significant that in the second statement Mrs Partridge says:
"The applicant's letter of 15 November 2010 was the first written notification that Brian and I had received suggesting that there were maintenance issues in the Premises that needed attention. We had only returned from holidays about 4 weeks earlier on 13 October 2010."
(My underlining)
The only other witness in the Respondents' case was Ms Toohey. However, she and her firm did not become involved until 1 January 2011 and I do not regard her evidence as relevant to the issues which I have to decide, except to the extent that paragraph 21 of her statement says that she has been instructed to seek a new lessee of the premises and that although she has been able to negotiate a 1 month lease at a rental of $3,000 she has no prospective lessees for a long term lease. There is nothing in the evidence which warrants the slightest criticism of Ms Toohey for anything she did after Knight Frank Real Estate was appointed manager.
I should make reference however, to the Applicant's concession in cross-examination that she did not, while she was in occupation of the premises, arrange for the air-conditioning unit to be serviced.
Although all witnesses were cross-examined, I found them to be frank and credible, three women doing their best to assist the Tribunal.
Before coming to a consideration of the issues in the case, I should refer to certain provisions of the Retail Leases Act which are relevant:
" 34 Lessee to be compensated for disturbance
(1) A retail shop lease is taken to provide that if the lessor:
(a) inhibits access of the lessee to the shop in any substantial manner, or
(b) takes any action that would inhibit or alter, to a substantial extent, the flow of customers to the shop, or
(c) unreasonably takes any action that causes significant disruption of, or has a significant adverse effect on, trading of the lessee in the shop, or
(d) fails to take all reasonable steps to prevent or put a stop to anything that causes significant disruption of, or which has a significant adverse effect on, trading of the lessee in the shop and that is attributable to causes within the lessor's control, or
(e) fails to rectify any breakdown of plant or equipment under the lessor's care or maintenance, or
(f) in the case of a shop within a retail shopping centre, fails to adequately clean, maintain or repair the retail shopping centre (including common areas),
and the lessor does not rectify the matter as soon as reasonably practicable after being requested in writing by the lessee to do so, the lessor is liable to pay the lessee reasonable compensation for any loss or damage (other than nominal damage) suffered by the lessee as a consequence.
................................................................
36 Damaged premises
(1) A retail shop lease is taken to provide for the following if the shop or the building of which the shop forms part is damaged:
(a) The lessee is not liable to pay rent, or any amount payable to the lessor in respect of outgoings or other charges, that is attributable to any period during which the shop cannot be used under the lease or is inaccessible due to that damage.
(b) If the shop is still useable under the lease but its useability is diminished due to the damage, the lessee's liability for rent and any amount in respect of outgoings attributable to any period during which useability is diminished is reduced in proportion to the reduction in useability caused by the damage.
(c) If the lessor notifies the lessee in writing that the lessor considers that the damage is such as to make its repair impracticable or undesirable, the lessor or the lessee may terminate the lease by giving not less than 7 days notice in writing to the other and no compensation is payable in respect of that termination.
(d) If the lessor fails to repair the damage within a reasonable time after the lessee requests the lessor in writing to do so, the lessee may terminate the lease by giving not less than 7 days notice in writing of termination to the lessor.
(e) Paragraphs (a)-(d) do not affect any right of the lessor to recover damages from the lessee in respect of any damage or destruction to which those paragraphs apply.
(2) A retail shop lease must not contain any provision the effect of which is to limit any liability of a party to the lease to pay compensation to another party to the lease in respect of damage to the shop or the building of which the shop forms part.
(3) Nothing in this section prevents the parties to a lease from terminating the lease by agreement if the shop or the building of which it forms part is damaged or destroyed. "
On the evidence, I accept that the air-conditioner did not operate from 26 October 2010 when it was switched on until the Applicant vacated the premises. I also accept that this was promptly and verbally notified to Mr West who was held out by the Respondents as their agent. The Respondents themselves seem to have taken little interest in the premises until after the Applicant's letter of 15 November was presumably delivered to them by Mr Shepherd.
At the conclusion of the evidence on 24 June, I directed the parties to make written submission within specified periods. The Applicant in a timely way provided the document which I have treated as her submissions but it did not in truth do more than re-present some of the evidence. However, the issues can be gleaned from the evidence and from the helpful submission of the Respondents.
I should say at once that, in my opinion, there is no evidence that the Respondents engaged in unconscionable conduct and to the extent the Applicant relies on such conduct her application must be dismissed. There is nothing alleged against the Respondents which seems to me to approach the "high standard of moral obloquy" referred to by Spigelman CJ in Attorney General (NSW) v World Best Holdings Ltd (2005) 63 NSWLR 557 at 124.
There being no unconscionable conduct, I note that the Applicant seeks no damages or relief, other than relief which she had already received, namely access to the premises and the right to remove her property.
It thus becomes necessary to consider whether the Applicant was entitled to terminate the lease as she did on 19 January or alternatively whether, as the Respondents submit, the termination constituted an unlawful repudiation entitling the Respondents to damages.
I agree with the Respondents' submission that s34 of the Act can have no application as there is no evidence of a written complaint as required by s34 (1) until the letter of 15 November 2010. As the evidence indicated, whatever their lack of interest earlier, the Respondents seem to have acted quickly and responsibly to attend to the plumbing and air-conditioning problems identified in the letter. The plumbing matters seem to have been attended to by about the middle of December and, although the replacement of the air-conditioner seems to have taken until January 2011, I would not be willing to find that the Respondents did not play their part in the rectification "as soon as reasonably practicable". In saying this I take into account that there were delays due to flooding in Wagga Wagga during December 2010 and that, then there was the usual difficulty in securing tradesmen during the Christmas season.
There is more than a suggestion in the Applicant's letter of 15 November that she was desirous of terminating the lease for business reasons as opposed to those pertaining to the state of the premises. Nonetheless there is evidence which needs to be considered in relation to the claim for relief under s36 of the Act which is substantially in the same terms as clause 7 of the lease. The section provides:
"(1) A retail shop lease is taken to provide for the following if the shop or the building of which the shop forms part is damaged:
(a) The lessee is not liable to pay rent, or any amount payable to the lessor in respect of outgoings or other charges, that is attributable to any period during which the shop cannot be used under the lease or is inaccessible due to that damage.
(b) If the shop is still useable under the lease but its useability is diminished due to the damage, the lessee's liability for rent and any amount in respect of outgoings attributable to any period during which useability is diminished is reduced in proportion to the reduction in useability caused by the damage.
(c) If the lessor notifies the lessee in writing that the lessor considers that the damage is such as to make its repair impracticable or undesirable, the lessor or the lessee may terminate the lease by giving not less than 7 days notice in writing to the other and no compensation is payable in respect of that termination.
(d) If the lessor fails to repair the damage within a reasonable time after the lessee requests the lessor in writing to do so, the lessee may terminate the lease by giving not less than 7 days notice in writing of termination to the lessor.
(e) Paragraphs (a)-(d) do not affect any right of the lessor to recover damages from the lessee in respect of any damage or destruction to which those paragraphs apply.
(2) A retail shop lease must not contain any provision the effect of which is to limit any liability of a party to the lease to pay compensation to another party to the lease in respect of damage to the shop or the building of which the shop forms part.
(3) Nothing in this section prevents the parties to a lease from terminating the lease by agreement if the shop or the building of which it forms part is damaged or destroyed."
The opening words of the section refer to a situation where the shop "is damaged". That to my mind suggests a condition which arises during the course of the lease as opposed to a condition affecting the use of the premises which was present at the onset. As the evidence in the case suggests that what might loosely be called the "plumbing" problems were present from the outset they do not fall, in my opinion, within the scope of s36.
However, the fact that the air-conditioning became inoperable is, in my opinion, in a different category. On the Applicant's evidence, in my view, this constituted damage to the premises within s36 which diminished the useability of the premises within s36 (1)(b). It is obviously impossible to quantify mathematically the proportion by which the useability of the premises was diminished by the lack of air-conditioning but given the Applicant's evidence which was not challenged as to the impact upon her business and the fact that the air-conditioning broke down as summer was about to begin, I think it would be appropriate to reduce the rent by 40% for the period from 26 October 2010 to the date the Applicant vacated the premises namely 19 January 2011
Even if the Applicant's letter of 15 November constituted a notice in writing within s36 (1)(d) it was not, in my opinion, established that the air-conditioning was not repaired within a reasonable time, having regard to the evidence and the factors already mentioned.
I should indicate that although the Applicant admittedly did not arrange for the servicing of the air-conditioning unit as required by clause 2 of the lease, there was no evidence that her breach was causative of the failure of the unit when Ms Bryant sought to operate it on 26 October 2010. Annexure C to Mrs Partridge's affidavit of 13 May 2011 suggests that the unit was old.
The letter of 15 November does not in terms require the air-conditioning unit to be repaired and is therefore not a notice within s36 (1)(d). The letter of 17 December 2010 may be construed as a notice requiring the Respondents to repair the air-conditioning service but failure to comply within the time of seven days allowed would not, in my view, constitute a failure by the Respondents to repair within a reasonable time.
It follows that the Applicant's letter of 29 December 2009 indicating that she would vacate the premises on 24 January 2011 and, in effect, would regard the lease as no longer binding upon her, constituted an unlawful repudiation. This repudiation was not overtly accepted by the Respondents but it was, in any event, overtaken by the letter from their solicitors to the Applicant dated 19 January 2011 terminating the lease for breach of an essential term, namely the covenant to pay rent.
In relation to damages, the Respondents rely on the evidence of Ms Toohey that as at the date of hearing a new lessee had not been found. According to her affidavit sworn 13 May 2011 as at that date she had only been able to negotiate a lease for a fixed term of 1 month at a rental of $3,000 and that there were no prospective tenants for a long term lease.
The damages sought by the Respondents amounted to $24,448 made up of $17,985 equivalent to 6 months rent payable under the lease together with $4,400 agent's fee re-leasing and legal fees $2,090. The claim of $17,985 representing lost rent for a period of 6 months seems reasonable in light of the evidence of Ms Toohey and I would allow it. I would also allow the agent's fee of $4,400. No details were given as to how the sum or $2,090 claimed for legal costs is made up and I would decline to allow that amount.
Accordingly, I would award damages of $22,385. That sum should be reduced by the abatement of rent which I calculate at $2094 for a period of 85 days, thereby entitling the Respondents to an order that the Applicant pay them the sum of $20,291.
The Respondents seek an order that the sum of $8,750 held by the Rental Bond Board be released to them. As the money was held as security for the Applicant's obligations under the lease, I see no reason why that order should not be made.
Finally, there is the question of costs. The Respondents seek an order for costs under s88 of the Administrative Decisions Tribunal Act. There are factors in this case which, in my opinion, render it fair to make an order for costs against the Applicant, including that the proceedings were commercial in nature and that the Applicant's position, except to the extent that she was given limited relief under s36 (a circumstance which she did not raise on the pleadings) was not, in my opinion, tenable in law. It is apparent that her position would have been entirely different if she had, at an early point of time, exercised the right to give written notice under both section 34 and section 36. I think an order for costs should be made in the Respondents' favour.
I have been much assisted by the knowledge and experience in retail leasing of Mr Lonie and Mr Pinter. I express my grateful thanks.
I make these orders:
In proceedings 115010:
1. The Applicant declared entitled to an abatement of rent of 40% in respect of period 26 October 2010 to 19 January 2011, otherwise application is dismissed.
In proceedings 115049:
1. The Applicant (in matter 115010) to pay the Respondents damages in the sum of $20,291.
2. The Rental Bond Board to pay to the Respondents the sum of $8,750 held in respect of the subject lease such sum to be applied in part satisfaction of order 1.
3. The Applicant (in matter 115010) to pay the Respondents' costs as agreed or assessed.
I hereby certify that this is a true and accurate record of the reasons for decision of the Administrative Decisions Tribunal.
Registrar
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Decision last updated: 05 October 2011
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