Ashutosh Industries Pty Ltd v Giriftin (RLD)

[2005] NSWADTAP 34

Appeal Panel - Internal

CITATION:	Ashutosh Industries Pty Ltd v Giriftin (RLD) [2005] NSWADTAP 34
PARTIES:	APPELLANT Ashutosh Industries Pty Ltd RESPONDENT Sara Giriftin
FILE NUMBER:	059009
HEARING DATES:	30/05/2005
SUBMISSIONS CLOSED:	06/08/2005
DATE OF DECISION:	06/29/2005
DECISION UNDER APPEAL:	Giriftin v Ashutosh Industries Pty Ltd, Unreported, 30 November 2004
BEFORE:	Chesterman M - ADCJ (Deputy President); Donald BG - Judicial Member; Griffiths G - Non Judicial Member
CATCHWORDS:	statutory interpretation
MATTER FOR DECISION:	Principal matter
FILE NUMBER UNDER APPEAL:	045061
DATE OF DECISION UNDER APPEAL:	11/30/2004
LEGISLATION CITED:	Administrative Decisions Tribunal Act 1997 Retail Leases Act 1994
CASES CITED:	Giriftin v Ashutosh Industries Pty Ltd, Unreported, Administrative Decisions Tribunal, 30 November 2004
REPRESENTATION:	APPELLANT N K Singh, agent RESPONDENT W Carney, barrister
ORDERS:	1. The appeal is dismissed; 2. Any application for costs relating to this appeal, together with supporting submissions, must be filed and served within 28 days. Any submissions in response must be filed and served within a further 28 days. Unless a hearing is requested, the matter of costs will be decided on the papers. If no application is filed within the time specified, there will be no order for costs

Decision

1 In this judgment, we dismiss an appeal brought against the decision of the Tribunal in Giriftin v Ashutosh Industries Pty Ltd, Unreported, 30 November 2004. This was an ex tempore decision, in which the Tribunal was constituted by Mr R Fox, Judicial Member. Our reasons for dismissing the appeal are set out below.

Issues raised

2 The principal issue arising in this case is whether the Appellant, a lessee of retail shop premises, was entitled to terminate its lease on account of two representations in the lessor’s disclosure statement that it claimed to have been misleading.

3 In the appeal, the principal question to be determined by the Appeal Panel was whether the Tribunal had correctly applied the provisions of s 11(2) and (3) of the Retail Leases Act 1994 (‘the RL Act’) in reaching its conclusion that, on the facts as found by it, the lessee was not entitled to terminate the lease.

Factual background

4 The lease was of retail shop premises at Liverpool and was governed by the RL Act. The lessor and owner of the premises was Ms Sara Giriftin, the Respondent in this appeal. The lessee was the Appellant, Ashutosh Industries Pty Ltd (‘Ashutosh’). This was a company owned and managed by Mr Nawal Kishor Singh, who acted as its agent in these proceedings.

5 On 14 May 2004, Ms Giriftin filed in the Tribunal an application under the RL Act, claiming entitlement to unpaid rent. At the hearing, she quantified this claim at $6,914.04, abandoning prior claims for a larger principal sum and for interest.

6 The lease, which was for one year, was signed on 29 July 2003. Occupancy was made available to Ashutosh on 11 August 2003, the date stipulated for commencement of the lease. Ashutosh’s obligation to pay rent commenced on 18 August. The permitted use was that of selling various categories of clothing, footwear, luggage, handbags and fashion accessories.

7 The lessor’s disclosure statement, which was undated and was apparently shown to Mr Singh before he signed the lease, contained two representations which he alleged to have been misleading. These were as follows:-

FINISHES, FIXTURES, FITTINGS, EQUIPMENT AND SERVICES TO BE PROVIDED BY THE LESSOR : Nil

CAR SPACES: Two

8 Ashutosh took possession of the premises on 11 August 2003 and commenced trading. It paid rent up to 17 October 2003. It terminated the lease and vacated the premises in the middle of November 2003.

9 In the proceedings before the Tribunal, Ashutosh maintained that it was entitled to terminate the lease under s 11(2) of the RL Act because these two representations in the disclosure statement were ‘materially false or misleading’ within the meaning of this subsection. The Tribunal rejected this contention and gave judgment for Ms Giriftin for the claimed amount of $6,914.04.

10 It is convenient to deal separately with each of these two representations in the disclosure statement.

The representation regarding finishes, fixtures etc

11 The treatment of this issue by the Tribunal. In its judgment, the Tribunal found that Mr Singh inspected the shop only once before signing the lease. It was then full of ladies’ dress shop stock, so he relied on the disclosure statement to indicate what its condition would be when vacant. When he returned on 11 August 2003 to take possession, he discovered that there was a ‘very solid counter’ in the middle of the shop and there were partitions at the rear, creating fitting rooms and an office. These were depicted in photographs tendered to the Tribunal.

12 The shop also contained a refrigerator, a table, a lounge and a shelf cupboard. According to Ms Giriftin, she told Mr Singh that he could use or discard these items. While denying this, Mr Singh admitted that some time in September 2003 they were taken away, except for the cupboard, by a dealer acting on Ms Giriftin’s instructions.

13 According to Mr Singh, he complained to Ms Giriftin’s agent about all the items in the shop as soon as he found them and he demanded the return of his deposit and the first month’s rent. The agent, he said, told him that if this happened he would have to pay the costs of the lease. Mr Singh said that since he could not afford this he returned to the shop and continued with installing his fitout. The agent was not called as a witness to confirm these events. The Tribunal made no finding as to whether they occurred.

14 The Tribunal was of the opinion that the counter and the partitions, as shown in the photographs, were ‘part of the structural fabric of the shop, usually called fixtures’, and indeed were ‘almost as clearly an integral part of the shop as the floors and the walls’. Apparently for this reason, it did not accept Mr Singh’s claim to have believed that they would be removed before the commencement of the lease.

15 Mr Singh alleged that these items prevented Ashutosh from displaying its stock and therefore reduced its capacity to trade. The Tribunal said that this ‘clearly cannot be seriously proposed in relation to the counter’, but that it ‘just as clearly could be so in relation to the dressing rooms’. It added that Ashutosh had tendered no evidence to show that these ‘fixtures’, as it called them, actually interfered with the trading or performance of the shop.

16 The Tribunal, as we have said, rejected Ashutosh’s argument that under s 11(2) of the RL Act it was entitled on account of these matters to terminate the lease. As far as is relevant, s 11 provides as follows:-

11 Lessee to be given disclosure statement

(1) At least 7 days before a retail shop lease is entered into, the lessee must be given a disclosure statement for the lease. A disclosure statement is a statement in writing that contains the information, and is accompanied by the material, that is contained in or required to complete or accompany the form of disclosure statement set out in Part 1 of the form contained in Schedule 2 (but only to the extent that is relevant to the lease concerned)….

(2) If a lessee was not given a disclosure statement as required by subsection (1) or if the disclosure statement that was given to the lessee was incomplete or contained information that at the time it was given was materially false or misleading, the lessee may terminate the lease by notice in writing to the lessor at any time within 6 months after the lease was entered into, unless subsection (3) prevents termination.

(3) The lessee cannot terminate the lease under this section on the ground that the disclosure statement is incomplete or contains information that is materially false or misleading if:

(a) the lessor has acted honestly and reasonably and ought reasonably to be excused for the failure concerned, and

(b) the lessee is in substantially as good a position as the lessee would have been if the failure had not occurred.

….

17 The Tribunal held that there might not have been any misrepresentation in the disclosure statement, but that if there was, Ashutosh could not invoke s 11(2), despite having purported to terminate the lease within six months of its commencement. This was because the case fell within s 11(3).

18 In more detail, the Tribunal’s reasons were along the following lines. The prescribed item in the disclosure statement relating to ‘finishes, fittings, fixtures’ etc (prescribed, that is, in the form contained in Schedule 2 to the RL Act) was intended, it believed, to refer only to ‘the things that the lessor proposed to install’, not to ‘the things that were already installed’. But if this was not correct, any misrepresentation relating to the ‘existence of the fixtures and fittings’ that the disclosure statement contained was ‘innocent’, and s 11(3) removed any right of termination that Ashutosh may have had.

19 The Tribunal’s judgment contains two further observations regarding this aspect of the disclosure statement. One is that any misrepresentation involved was ‘very obvious when Mr Singh took possession of the shop and he abandoned most of the rights he may have had by accepting the premises in that condition’. The other is that the appropriate remedy for him was not that of ‘simply walking away from the premises’ but claiming damages for a pre-lease misrepresentation.

20 Submissions made in the appeal. On behalf of Ashutosh, Mr Singh made the following submissions of a factual nature regarding the items left in the shop. First, contrary to the Tribunal’s finding, the counter and the partitions were clearly shown in the photographs to be removable. Secondly, in addition to complaining about them orally to the agent soon after he took possession (being then told by the agent that Ms Giriftin was away on holidays), he had included a complaint to the agent and to Ms Giriftin in a letter dated 10 November 2003. Thirdly, Ms Giriftin’s husband had told him in a threatening manner not to remove the so-called fixtures. Fourthly, the subsequent lessee of the premises had in fact removed them, but when Mr Singh had tried to inform the Tribunal of this, the Tribunal had stopped him, indicating that in its view this matter was irrelevant.

21 With particular reference to the terms of s 11(3)(a) of the RL Act, Mr Singh submitted that, having regard particularly to the threat conveyed on her behalf by her husband, Ms Giriftin had not acted ‘honestly and reasonably’. With reference to s 11(3)(b), he submitted that, though no evidence was forthcoming, it was ‘common sense’ that the counter and the partitions, through reducing the display area, would have damaged the shop’s trade.

22 Mr Carney, counsel for Ms Giriftin, drew our attention to several passages in the transcript suggesting that the Tribunal did not regard Mr Singh as a credible witness. In consequence, he said, even if we held that the Tribunal had not made explicit findings on each of the matters set out in s 11(3), we should conclude for ourselves that Ms Giriftin’s evidence overall must be preferred to that of Mr Singh. An important allegation contained in her evidence, though not mentioned by the Tribunal, was that she had drawn his attention to all the disputed items in the shop when he first visited it, and that he had requested that they be left there.

23 Mr Carney also submitted that if Mr Singh wished to assert that the so-called fixtures in the shop were capable of removal, it was for him to establish this. He had brought forward no evidence to this effect, nor indeed to support his claim that the subsequent lessee had removed them.

24 Our conclusions. It is clear to us that, with reference specifically to what the disclosure statement said about items to be left in the shop, the Tribunal reached its decision that the requirements of s 11(3) of the RL Act were satisfied without making express findings on each of the matters set out in the subsection. Mr Carney effectively conceded this.

25 The Tribunal’s finding that any misrepresentation by Ms Giriftin was ‘innocent’ may be treated as a finding that she acted ‘honestly’ as required by s 11(3)(a). But it made no finding relating to the other requirements of this paragraph, viz, that she, the lessor, acted ‘reasonably’ and ‘ought reasonably to be excused’.

26 The Tribunal also made no express finding under s 11(3)(b) to the effect that Ashutosh, the lessee, was ‘in substantially as good a position’ as it would have been if the misrepresentation had not occurred.

27 In our judgment, these omissions in the Tribunal’s reasons constituted an error of law. But we believe that this is a case in which we should grant leave under s 113(2)(b) of the Administrative Decisions Tribunal Act 1997 for the appeal to extend to the merits. A particularly compelling reason for so doing is that a very small amount (less than $7,000) is at stake. If it is open to us to do so, we should ourselves determine the issues in dispute in the proceedings rather than remitting them for further consideration at first instance.

28 Our conclusion, in the light of the Tribunal’s findings of fact, the evidence available to us and the submissions advanced, is that we can indeed fully dispose of the issues relating to the items left in the shop.

29 We do so on the following lines: (i) that there was in fact no ‘materially false or misleading’ representation on this topic in the disclosure statement, and/or (ii) that if there was a representation of this nature, Ms Giriftin was in any event entitled to invoke the protection of s 11(3) of the RL Act. Our reasons, in more detail, are as follows.

30 In the absence of any evidence to the contrary, there is no ground on which we are prepared to overturn the Tribunal’s finding that the partitions, at least, were part of the ‘structural fabric’ of the shop. With rather less conviction, we reach the same conclusion regarding the counter. For these reasons, or on the separate ground (to which the Tribunal gave consideration) that fixtures of this nature that are already in the premises at the commencement of the lease are not covered by the phrase ‘fixtures … to be provided by the lessor’ in the form of disclosure statement prescribed under the RL Act, we think that there was not, after all, a ‘materially false or misleading’ representation in the statement.

31 If this conclusion is not correct, the Tribunal’s findings and the evidence sufficiently show, in our opinion, that the requirements of s 11(3) were satisfied in any event. Whether or not Ms Giriftin drew Mr Singh’s attention to the partitions and the counter when he first visited the shop, and whether or not he requested that they be left there, there is no basis for us to overturn the Tribunal’s finding that Mr Singh did not actually believe that they would be removed before the commencement of the lease.

32 This finding, taken along with (i) the Tribunal’s finding of ‘innocence’ on Ms Giriftin’s part and (ii) the doubts shared by us and the Tribunal as to whether items such as the partitions and the counter really did fall within the scope of the relevant component of the disclosure statement, provide a sufficient basis for concluding, with reference to s 11(3)(a), that Ms Giriftin did act ‘reasonably’ as well as honestly and that she ‘ought reasonably to be excused’. If it was a mistake on her part not to ensure that these items were mentioned, within the category of ‘fixtures’, in the disclosure statement, it was not an unreasonable mistake.

33 This same finding regarding Mr Singh’s beliefs also provides a sufficient basis for concluding, with reference to s 11(3)(b), that Ashutosh was in ‘substantially as good a position’ as it would have been if the relevant representation had not been made. If Mr Singh was not in fact misled by this representation, Ashutosh cannot claim to have been put by it into a substantially worse position.

34 This conclusion holds good irrespective of whether the presence of the disputed items in the shop actually caused, or might have caused, damage to Ashutosh’s business. It will be recalled that while no evidence was tendered to show such damage, the Tribunal left open the possibility that it might have resulted from the presence of the partitions, though not of the counter.

35 It will be noted that we have not accepted Mr Carney’s submission that, in the light of statements made by the Tribunal during the hearing and in its judgment, Ms Giriftin’s evidence overall must be preferred to that of Mr Singh. We have arrived at our conclusions without reaching any such broad finding regarding the credibility of these two key witnesses. Findings of this nature are for the Tribunal at first instance to make, not for an Appeal Panel.

36 For the foregoing reasons, we hold that Ashutosh’s appeal must fail in so far as it is based on Ms Giriftin’s failure to refer to the partitions and the counter in the disclosure statement.

The representation regarding car spaces

37 The treatment of this issue by the Tribunal. The evidence on this matter, which again included photographs, showed that two of a number of car-parking spaces at the rear of the shop bore notices suggesting that they formed part of the leased premises. But during the short period of Ashutosh’s occupation under the lease, one of these spaces was used consistently by one of the three other tenants who occupied the building.

38 The Tribunal found, however, that ‘by custom or usage of the four occupants’, each of them could park another car behind the rear door of the premises that they occupied. But this ‘customary use space’ was ‘subject to some interference from time to time by other shop owners or delivery trucks’. Also, on occasions ‘a parked vehicle had to be moved to allow others to pass’. In consequence, ‘it was not always possible or convenient for Mr Singh or his wife to leave the car there for the whole day’.

39 There was conflicting testimony as to whether this arrangement was explained to Mr Singh before the commencement of the lease. He asserted that he was shown the parking area by an agent of Ms Giriftin and given to believe that he would have unrestricted use of the two ‘titled spaces’. She claimed that she herself explained to him that one of these spaces had been let to the other tenant, but that he could park in the ‘customary use space’ instead. The Tribunal made no explicit finding on this issue

40 The Tribunal described Mr Singh’s ‘main objection’ as being that ‘there was no legal title’ to one of the two car-parking spaces that were available to him, with the consequence that he could not advertise the second space as available for customer parking. It pointed out, however, that there was ‘absolutely no evidence to indicate that this in any way affected trade from within the shop’.

41 The Tribunal gave the following reasons for rejecting Ashutosh’s case in relation to the car-parking spaces:-

If Mr Singh had a legitimate complaint at all – and I do not think for a moment that this has been proven – it was that there had been a misrepresentation made by the disclosure statement. In this regard, as in relation to the fixtures, I am satisfied that Section 11(3) operates to preclude any right of termination. There were two (2) actual car-parking spaces available, and I have no evidence to show any effect on trade arising from the fact that one of those two (2) spaces was sometimes used by delivery trucks or that a parked vehicle had to be moved to allow others to pass.

42 Submissions made in the appeal. On behalf of Ashutosh, Mr Singh urged us to accept his assertion, in his evidence to the Tribunal, that before he signed the lease he was led to believe that he would have unrestricted use of the two titled parking spaces. He said that this evidence also included an account of one or more complaints by neighbouring tenants about his wife’s use of the ‘customary use space’. He reiterated that Ashutosh was left unable to advertise two spaces as being available for customers and submitted that, as a matter of ‘common sense’, this would diminish the profitability of its business.

43 Mr Carney submitted again that the Tribunal did not regard Mr Singh as a credible witness, that we should therefore prefer Ms Giriftin’s evidence to that of Mr Singh and that we should accordingly accept her claim to have explained the car-parking arrangements to Mr Singh before the commencement of the lease. This would mean, he said, that there was no misrepresentation in the disclosure statement. He relied on the Tribunal’s statement, at the beginning of the passage quoted above from its judgment, that it did not ‘think for a moment’ that Mr Singh had been proven to have had ‘a legitimate complaint’.

44 He argued further that, even if we held that there was a misrepresentation and that the Tribunal had not made explicit findings on each of the matters set out in s 11(3) of the RL Act, we should conclude for ourselves that the requirements of this subsection had been satisfied. This followed, he said, from the simple fact that the two spaces that were available to Ashutosh were for all practical purposes unencumbered.

45 Our conclusions. We agree with Mr Carney that the Tribunal’s finding that no ‘legitimate complaint’ by Mr Singh had been established is of some importance, even though its precise meaning is difficult to determine.

46 If it signified that, in the Tribunal’s view, Mr Singh was told at the outset about the actual car-parking arrangements, it must follow that the relevant item in the disclosure statement was not ‘materially false or misleading’ within the meaning of s 11(1) of the RL Act and Ashutosh had no right under s 11(2) to terminate the lease.

47 The more likely meaning, having regard to the context in which the finding appears, is that from a practical point of view the difference between what the disclosure statement promised – an unrestricted right to use two parking spaces – and what Ashutosh actually obtained was insignificant. On this interpretation, as the Tribunal pointed out, the disclosure statement did contain a misrepresentation.

48 The Tribunal’s reasoning in deciding, however, that s 11(3) precluded Ashutosh from validly terminating the lease on account of any such misrepresentation suffers from the same defects as the reasoning that led to the same decision regarding the items left in the shop. The Tribunal seems implicitly to have found that Ms Giriftin was ‘innocent’ – this can be inferred from the phrase ‘as in relation to the fixtures’ in the second sentence of the paragraph reproduced above – but it made no other finding relating specifically to the requirements of s 11(3).

49 In these circumstances, we apply the same approach as we applied to the Tribunal’s decision regarding the items left in the shop (see [27 – 28] above). We hold that the Tribunal erred in law and that leave should be granted for the appeal to extend to the merits.

50 In relation to any misrepresentation about parking spaces (if such existed) in the disclosure statement, our conclusion on a review of the merits is again that each of the requirements of s 11(3) was satisfied. We will explain our reasons briefly.

51 As regards s 11(3)(a), the Tribunal’s finding that Ms Giriftin was ‘innocent’ in allowing any such misrepresentation to occur provides a sufficient basis for our ruling that she acted ‘honestly’. Its finding that there was no evidence of any material harm suffered by Ashutosh since the limitations on its use of the ‘customary use space’ were of little or no practical significance provides a sufficient basis for our ruling that the other elements of this paragraph were satisfied – viz, that she ‘acted reasonably’ and that she ‘ought reasonably to be excused’.

52 As regards s 11(3)(b), the latter finding by the Tribunal also provides a sufficient basis for our ruling that Ashutosh was ‘in substantially as good a position’ as it would have been if the misrepresentation had not occurred.

53 We have again reached our conclusions without making any broad finding that Ms Giriftin’s evidence overall must be preferred to that of Mr Singh.

54 For the foregoing reasons, we hold that Ashutosh’s appeal must fail in so far as it is based on the representation regarding car spaces in the disclosure statement.

Concluding observations

55 Mr Singh put before us a number of other submissions, relying on other provisions of the RL Act and on some provisions of strata titles legislation. He agreed at the hearing, however, that they did not assist his case in this appeal.

56 The appeal must accordingly be dismissed.

57 Any application for costs relating to this appeal, together with supporting submissions, must be filed and served within 28 days. Any submissions in response must be filed and served within a further 28 days. Unless a hearing is requested, the matter of costs will be decided on the papers. If no application is filed within the time specified, there will be no order for costs.