AXL Trading Pty Ltd v Prosha Pty Ltd
[2010] NSWADT 301
•17 December 2010
CITATION: AXL Trading Pty Ltd v Prosha Pty Ltd [2010] NSWADT 301 DIVISION: Retail Leases Division PARTIES: APPLICANT
RESPONDENT
AXL Trading Pty Limited
Prosha Pty Limited and Stateland East Pty LimitedFILE NUMBER: 085172 and 085222 HEARING DATES: 23, 24, 25, 26 November 2009;28, 29 April; 21, 28 May and 19 June 2010 SUBMISSIONS CLOSED: 5 October 2010
DATE OF DECISION:
17 December 2010BEFORE: Molloy G - Judicial Member CATCHWORDS: Statutory Lease s. 16 - wrongful termination - damages LEGISLATION CITED: Retail Leases Act 1994
Surveillance Devices Act 2007CASES CITED: Bowden v. Lo [9802121]
Dean v. Stockland Property Management Pty Limited [2010] NSWCA 66
Ferrcom Pty Limited v. Inbush (NSW) Pty Limited (unreported) [1996] NSWCA 184
Holden Tourism and Hospitality Pty Limited v. Baldock [2001] NSWADT 123
O’Neill v. Henry [2010] NSWADTAP 40
Martin v. King [BC 9602847]
Parallel Lines International Pty Limited v. Video-Drama Pty Limited [2007] NSWADT 84
Prasad v. Fairfield City Council [2000] NSWADT 164
Symonds v Vass [2009] NSWCA 139
Tate v. Unanderra Heights Pty Limited [2005] NSWADTAP 5
Webb v. Clifton [2008] NSWADT 132REPRESENTATION: APPLICANT
RESPONDENT
A. Fernon, instructed by Peter M. Wayne
T. Anderson instructed by Fraser Clancy LawyersORDERS: 1 The Respondent pay to the Applicant $108,707.47 by way of damages
2 The Applicant collect forthwith, and in any event, within fourteen days of the date of this decision, all its goods and chattels and cash of $120.00, held at the warehouse of RestorX, Wetherill Park; the Respondent to make immediate arrangements with RestorX to enable the Applicant to comply with this order; the collection of goods to be at the cost of the Applicant (ie. no charge to be made by the Respondent nor by RestorX against the Applicant)
3 Liberty to apply in relation only to any monetary calculations and/or the implementation of Order 2
4 Should either party seek to move the Tribunal for an order for costs, that party must file and serve any such Application, with support submissions, within twenty-eight (28) days of the date of this Decision. Should no such Application be so filed and served the order of the Tribunal will be that there is no order for costs. Should there be such an Application so filed and served the opposing party must file and serve submissions in reply within a further twenty-eight (28) days. Unless reasons are advanced for a hearing to be conducted, the issue of costs will be resolved.
REASONS FOR DECISION
The Lease
1 The Applicant was the Lessee of premises Shop 31, BKK East Lake Shopping Centre, Evans Avenue, Eastlakes pursuant to a registered Lease AD622105P (the “Lease”). The parties had previously signed a short term lease for Shop 31 commencing 1 April 2007 and expiring 31 August 2007.
2 The Lease was for a term of one year, commencing 1 August 2007 and terminating 31 July 2008. There was no option for renewal.
3 At the outset it is important, in my opinion, to decide precisely what was the term of this Lease. Although stated to be for a term of one year, it is plain from Retail Leases Act 1994 (the “RL Act”), s.16(1) that the term of the lease is thereby extended to five years.
4 S.16(1) is in the following terms:
“(1) The term for which a retail shop lease is entered into, together with any further term or terms provided for by any agreement or option for the acquisition by the lessee of a further term as an extension or renewal of the lease, must not be less than 5 years. An agreement or option is not taken into account if it was entered into or conferred after the lease was entered into.”
5 Then one moves on to s.16(2) which is in the following terms:
“(2) If a lease is entered into in contravention of this section, the validity of the lease is not thereby affected but the term of the lease is extended by such period as maybe necessary to prevent the lease contravening this section.”
6 Subject to the other sub-sections of s.16 (which are, for the purposes of this decision and the facts before the Tribunal, not relevant) it is plain from the above that a one year term is extended to five years such that, notwithstanding the words of the lease itself, the statute extends the term of the lease (see s.7). Section 6A (which deals with “short-term leases”) does not apply – however, it is plain from s.6A that the Parliament intended s.6A only to apply to leases “for a term of less than 6 months without any right for the lessee to extend the lease”; such that any lease with a term in excess of six months, even by one day, is caught by the statutory extension in s.16.
7 This interpretation of the term of this lease (one year) as overlaid and extended by s.16 was clearly dealt with in Tate v. Unanderra Heights Pty Limited [2005] NSWADTAP 5.
8 So, this Lease was in fact for a term of five years, commencing 1 August 2007 and terminating 31 July 2012. It may well be that the parties thereto were not aware of the statutory extension (again, see Tate at [17-19; 50-51]) although both parties were in business and the Respondent was in the business of conducting a retail shopping centre (within the terms of RL Act) and I very much doubt whether the Respondent was not aware of the provisions of the RL Act.
9 There is no need for me to explore that further – the plain fact is that the Lease did not expire until 31 July 2012. It is upon that very basic fact, and legal conclusion, that the arguments before me need to be considered.
Lease Term Arguments
10 Both parties conducted the hearing, and their cross-examinations and submissions, on the basis that the Lease was for a term of one year. I refer below to the pleadings in which this was asserted by the Applicant and not denied by the Respondent. During the course of the hearing (Day 3) I raised with the parties whether or not s.16 applied and I invited submissions. No submissions were forthcoming; probably because of the length of the hearing the s.16 issue was lost among the arguments relating to damages; and probably also because both parties appeared to be of the view that the Lease contained a certificate under s.16(3).
11 No party referred to s.16 in their subsequent written submissions made after the conclusion of the hearing. In those circumstances, and because of my concern that s.16 may well apply, I requested, through the Registrar, the parties to address this issue by further written submissions. Both parties have so done by additional written submissions. The Applicant, through its counsel, has now agreed that there was no certificate provided under s.16(3) and thus the Lease is a s.16 five year lease. I am clearly of that view. As I have noted above [1] the Applicant initially occupied Shop 31 pursuant to a document styled “Lease” for a term of five months commencing 1 April 2007 and terminating 31 August 2007. This contract was clearly a lease to which s.6A applied (which generally excludes from the RL Act “a lease of a retail shop for a term of less than 6 months without any right for the lessee to extend the lease …”). Although this lease expired on 31 August 2007, it contained a provision that “either party can give one month (sic) notice to cancel this lease” and, to all intents and purposes this is exactly what the parties did by entering into the lease commencing 1 August 2007. This latter document did not contain any certificate under s.16(3) and thus it is, by statute, a five year lease.
12 The Respondent submitted that no evidence had been filed by the parties in relation to the s.16(3) Certificate. I reject this submission. The lease itself was in evidence, and led in chief by the Respondent. No s.16(3) Certificate appears in that document. The Respondent submitted that “as evidence that a s.16 Certificate was not given would not have been favourable to the Applicant, the Tribunal should infer that a s.16(3) Certificate was given from the Applicant’s omission to file evidence to establish the contrary”. This submission was based on an observation by Cole JA in Ferrcom Pty Limited v. Inbush (NSW) Pty Limited (unreported) [1996] NSWCA 184 at pp 2-3. It was perhaps a Jones v. Dunkel point; but, quite frankly, I do not see it in that light. It was part of the Respondent’s own case that the lease was a 12 month lease; the lease itself was put in evidence by the Respondent; that document does not contain a s.16(3) Certificate; and it is plain to me that there is no Jones v. Dunkel point. It is not a question of any inference; rather, it is a question of the evidence that was put before the Tribunal.
13 The Respondent has, in my view, correctly, conceded that “once s.16 is applied the further consequence (is) that the (Respondent’s) termination of the Shop 31 Lease on 31 August 2008 may have been unlawful. Other factors may also have been relevant to whether the (Respondent’s) termination was in fact unlawful, such as the parties’ agreement to (the) lease ending on 31 August 2008”. I agree with that concession. Independently, I should say that I have formed the same opinion. It seems to me that the conduct of the Respondent was such as to cause a substantial breach of the lease in the circumstances to which I make reference later in this decision, and this is so notwithstanding the fact that the Applicant, on a number of occasions, informed the Tribunal that this was not an unconscionable conduct case.
Pleadings
14 The Applicant, in proceedings 085172, commenced proceedings in this Tribunal on 4 September 2008 seeking:
2. Costs.”“1. Damages in the sum of $268,000.00 or such other sum as is appropriate.
15 The Applicant pleaded its case by asserting that it was the lessee of Shop 31 that the lease was for a term of one year expiring 31 July 2008; that the Applicant “operated a shoe and fashion accessory business from the Shop”; that the Applicant “remained in occupation of the Shop after 31 August 2008 pursuant to the holding over provisions of the lease” with the consent of the Respondents; that it was a term of the lease that “the holding over period could only be terminated by one month’s notice in writing” and that in breach of the lease the Respondents “locked the Applicant out of the Shop without giving one month’s written notice, took possession of the Shop together with all of the Applicant’s stock, shop fittings and fixtures and documents”. It was asserted that the actions of the Respondents “fundamentally breached the Lease which the Applicant accepted and the Lease is thereby terminated”. There were other pleadings relating to damages, to which I shall make further reference below.
16 The Respondent, by a “cross application” (matter 085222) sought the following orders (I have retained, for ease of understanding, the reference to AXL Trading Pty Ltd as the Applicant and Prosha Pty Limited and Stateland East Pty Limited as the Respondents):
“1. The Applicant pay to the Respondent the sum of $3,813.00 on account of unpaid rent.
2. The Applicant pay to the Respondent the sum of $400.00 on account of removal costs.
3. The Applicant pay to the Respondent that sum as is determined by the Tribunal to be the Respondent’s damages arising from the Applicant’s goods being stored in Shop 67, BKK, Eastlakes Shopping Centre.
5. The Applicant pay the Respondents’ costs of this Application”.4. The Applicant pay to the Respondent the sum of $6,630.00 on account of damages suffered by the Respondent in consequence of the Applicant’s failure to vacate Shop 31, BKK, Eastlakes Shopping Centre, before the end of 31 August 2008, and in failing to deliver up that shop in the condition required by clause 7.1.3 of the Lease.
17 The Respondent pleaded its case in the following fashion: it asserted that on 1 April 2007 the Respondent granted a licence to the Applicant of Shop 31; that on 1 August 2007 the Respondent leased the Shop to the Applicant for a term of one (1) year commencing 1 August 2007 and terminating 31 July 2008; that in or about early July the parties “agreed (verbally) to extend the Terminating Date of the Lease from 31 July 2008 until 31 August 2008; yet in breach of the lease as so varied the Applicant “failed to vacate (the Shop) on 31 August 2008” (and as a) consequence the Respondent has “suffered loss and damage, including removal costs, storage costs and has incurred a liability to a third party …”. Again, there are further pleadings relating to particulars of asserted damages.
18 Thus it can be seen from the pleadings that both parties regarded the Lease as being a one year Lease terminating on 31 August 2008, not a s.16 five year Lease as required by the RL Act. This misappreciation of the legal status of the Lease continued throughout the whole of the hearing. It is my view, for reasons that I seek to set out later in this decision, that misappreciation had a seriously negative impact on many of the arguments as advanced.
Evidence on Liability
19 There is really no need for the Tribunal to set out in detail the evidence led by the parties relating to liability. The written and oral evidence generally supported the pleadings in so far as both parties, through their respective company officers, were clearly of the view that the lease was for a term of one year and that there was an agreement, verbally reached, to extend the lease for a further period of one month.
20 It is important to observe that neither the Applicant nor the Respondent asserted any unconscionable conduct nor any misleading or deceptive conduct. Indeed, counsel for the Applicant specifically disavowed any such assertions. That being the case it is difficult to understand how it was that both parties sought to lead written and oral evidence relating to negotiations or relating to any asserted new lease of other premises. When the Tribunal is called upon to consider the terms of a lease it is really an exercise in legal construction; and this is so bearing in mind the terms of the lease itself as read in conjunction with the legislative overlay required by the RL Act. It is now well known that pre-contractual negotiations and post-contractual conduct are essentially (but not always) irrelevant as aids to contractual construction. Therefore, it is only necessary for me to look at what may, or may not, have been said by the parties in relation to what happened before and after 31 July 2008 with reference to their respective claims.
21 The importance of the observations in [19-20] above is that the case was conducted on the basis that the Lease was for a term of 12 months. Consequently, a considerable amount of time and energy was expended in cross-examination and submissions relating to that aspect and relating to the effect of RL Act s.44. I shall touch upon this later in my decision; but what appeared clear to me, during the course of the hearing, was that the Respondent was not au fait with the relevant provisions of the RL Act. Even on the Respondent’s case (ie that the lease was for 12 months) the Respondent did not seem to understand the provisions of the RL Act with regard to the legal requirements that apply to retail shop leases and retail shopping centres. If one proposes to venture into the field of drafting superannuation deeds then one should make sure that one is up-to-date with the law relating to superannuation. Similarly, if one is to conduct the commercial operations of a retail shopping centre one should – directors and managers – be absolutely clear as to the requirements of the relevant legislation that apply to, and overlay, the lease contracts and the relationship between the lessor and lessee. This, so it seems to me, is a daily requirement, simply because in the day-to-day operations of a retail shopping centre management deals with, more often than not, unsophisticated small business owners who, although they ought properly to obtain legal advice, often do not, often have commercial “stars in their eyes” and, although in business, often do not have the business acumen of the retail shopping centre owner/manager. That is not an excuse for the small business proprietor but rather demonstrates, as is often the case, the disparity in bargaining power and knowledge between the contracting parties. Thus, in my opinion, the owner and manager of a retail shopping centre must understand the terms and effect of the RL Act – after all, the Act governs, to a very large extent, the operations of the retail shopping centre.
22 The evidence disclosed that in or about June 2008 negotiations took place between the sole director and shareholder of the Applicant (Ms Yue Ming Xie – known as “Sophie”) and Mr Kham Ma (known as “Andrew Ma”) an employee of Ma Consortium Pty Limited, engaged by the Respondents to manage “BKK Eastlakes Shopping Centre” (the “Centre”). Mr Ma was in fact the manager of the Centre. The Centre consisted of about 65 shops (T.26/11/09 at 13). There was a dispute between Sophie and Mr Ma as to precisely what words were spoken – there is no need for me to review or decide on whose evidence is to be preferred in this respect, simply because the result was the same.
23 Sophie wanted a new lease of the Shop 31. The Lease was about to expire on 31 July 2008. Mr Ma said to Sophie words in or to the effect: “If you want a new lease, the new monthly payment for rent and outgoings will be increased … here is a schedule recording payment required”, and he handed to Sophie a Tenancy Schedule.
24 There was also a discussion about upgrading the shop and the necessity to “spend $30,000.00 and we will give you a three year lease with three months rent free” and Sophie’s evidence was that she “agreed to the increased rent because I wanted to secure the longer term lease for the Shop”.
25 Her evidence was that she told Mr Ma on 27 June 2008 and she wanted Mr Ma to put the agreement in writing. He, apparently, refused and an argument ensued.
Mr Ma’s evidence (Ex.3, para 23) was that he said to Sophie:
“I am giving you notice that you have to be out by 31 July 2008. We have a new tenant moving in”.
There was then some discussion about remaining in occupation, but Mr Ma said:-
- “It’s too late. We have a new tenant moving in on 1 August and you will have to move out by 31 July”.
Sophie’s evidence was that: “a few minutes later a letter giving notice to vacate the Shop was delivered to the Shop”. This letter was dated 27 June 2008, addressed to the Applicant, headed “Re: Shop 31 – Option Not to New” (sic) and was in these terms:
“As you are aware, your lease will terminate on 31 July 2008. We would like to inform you that we will not renew your lease thus would ask you to vacate by the 1 st August 2008”
and was signed by Mr Ma, “Centre Management”.
I pause here to note that Mr Ma’s administrative assistant/secretary Ms Bin Dong (known as “Betty”) confirmed (at T.26/11/09 at 56) that Mr Ma had, before 31 July 2008, “already had agreement with the new tenant, who will start the lease when the lease with Sophie is finished”.
26 There were further discussions between the parties – there was a reference to another proposed tenant of the Shop who had “changed their mind” and Sophie stated, not unreasonably, “what am I going to do with all my stock and my shop fittings?” Sophie’s evidence was that Mr Ma told her that “you can stay in the meantime”, that she said, “I would like to stay on a long term lease” and that Mr Ma replied, “If you’re the best offer you can stay”.
27 Mr Ma’s evidence was that Sophie approached him asking whether she could “move out by 31 August rather than by 31 July?” and that ultimately he told Sophie: “You can stay until 31 August but you must have vacated by that date. We have a new lease commencing on 1 September”. And Sophie replied: “Ok”.
28 The Applicant continued to occupy the Shop after 31 July 2008; but the evidence disclosed that there was an “agreement” to enable the Applicant to move out of Shop 31 and into a smaller shop, being Shop 67 (“Shop 67”) that is currently selling CDs”. Mr Ma’s evidence was that the Applicant could move to Shop 64 (“Shop 64”) and use part of it “as a storage area”, and into Shop 67 “temporarily” and that “the security guard will have the keys for you to gain access this weekend”; and that he had agreed with the casual lessee of Shop 67 to remove it’s stock “on or before Sunday” (31 August), the casual lessee stating that it would have its stock out “by Sunday”.
29 I shall deal with what actually happened on Sunday 31 August 2008 later in this decision. But pausing here: it is plain to me that both parties were under the mis-apprehension lease that the lease terminated on 31 July 2008. This mis-reading of the law resulted in the letter from the Centre Management to the Applicant 27 June 2008, which was clearly a massive breach of the lease contract with the Applicant. Effectively, it amounted to a termination of the lease only one year into its five year term; for no reason whatsoever (as a matter of law), all rent being up to date and, if properly advised, the Applicant would have been entitled to have remained in occupation of the Shop until 31 July 2012.
30 By the Lease itself, by the statements by Mr Ma and Betty, and by the terms of the letter Sophie was misled and deceived into believing that her entitlement to occupy Shop 31 did not extend past 31 July 2008; and it is out of all of that the parties ended up with the issues that are now the subject of debate before the Tribunal.
31 In my opinion the letter operated to wrongly terminate the Lease; thus, if it was argued that Sophie (for the Applicant) agreed to “extend” the lease to 31 August 2008 and/or to vacate and move her goods and fittings by, or at, 31 August 2008, and that such constituted an agreement to that (those) effect(s), then I reject that submission. Any such submission would be contrary to the facts and the law; such that in my view the Applicant was wrongly evicted from the Shop and wrongly obliged to move her stock and fittings into Shop 64 and Shop 67. I seek to make more detailed reference to this aspect of the submissions later in this decision.
The Events on 31 August 2008
32 The Respondent, through Mr Ma, had arranged for a new lessee to occupy Shop 31 as and from 1 September 2008. The position was that as at that date the Applicant had not removed itself from the Shop. It “was still full of stock and not vacant” such that the incoming lessee’s builder/shopfitter was not able to get access in order to carry out the work that was required in order for the incoming tenant to open for business.
33 Mr Ma’s evidence in chief was that “on 31 August 2008 I was advised by … the tenant (of) Shop 64 that the Applicant had commenced moving stock from (the Shop) to Shop 64 on Sunday 31 August 2008”. Sophie’s evidence was that on that day she visited Shop 67 and “observed that half the store was empty” but the remainder of the CD stock and fitout was in the process of being removed such that she thereafter commenced moving some shop fittings into Shop 67. She moved some shelves and approximately 1,000 pairs of shoes and stopped working at about 6-00pm on that day. The evidence (to which I shall make more detailed reference below) seems to be that the casual tenant of Shop 67 had not removed all the stock and fittings until about 5-00pm.
34 There were then some unfortunate discussions between Mr Ma and Sophie and Mr Ma, “on the evening of 1 September 2008 … caused the stock in Shop 31 to be moved to Shop 67”. Later, on 14 November 2008 he “caused the remaining stock in Shop 67 to be moved out of the Centre to a storage warehouse “RestorX”, at Wetherill Park”.
35 The evidence shows that on 1 September 2008 Mr Ma’s secretary, Betty, telephoned Sophie and asked her, “When can you move out?” and Sophie responded that she could not move out because she could not move the stock because she had “no place to go”; Betty replied: “Andrew (Ma) said you have to move out today” and Sophie replied, “You can’t just suddenly ask me to move out. You didn’t give me an empty shop. You didn’t give (me) the key. How can I move my stock? It is not my fault. Now you want me to leave the shopping centre …” (her evidence being that Mr Ma told her to “get out of my shopping centre – I don’t want you here”).
36 Sophie’s evidence was that she went to Shop 67 with her Shop assistant Xie Yu and the “shop was locked and the roller shutters were pulled down”. However, there was a shop assistant called “Seymour” who was standing outside Shop 67 selling CD’s. “Seymour” was not called but Sophie says that she told her that she had “left the key at home”.
37 Sophie then returned to the Shop. All the remaining stock and fittings were there. She told her shop assistant “to call the customers to collect the lay-by goods and … call the suppliers to pick up their stock”. She then left her shop assistant there but returned soon after and found the shop assistant sitting outside the shop, the roller door having been pulled down and locked. The shop assistant told her: “They asked me to leave the shop. They then locked the door”. Sophie then spoke to Betty, who was apparently walking past the shop, and said to her, “You have no right to lock this door. You have to give me one month’s written notice” and Betty replied, “Talk to Andrew”.
38 Seymour was not called, but Betty was. Her full name is Bin Dong. She is an administrative assistant at the Centre employed by Ma Consortium Pty Limited. It was she who delivered the 27 June 2008 letter to the Applicant by delivering it to Ms Ling Du (known as “Joy”), the Applicant’s shop manager at Shop 31. Betty’s evidence was generally in the same vein, save that the Applicant’s shop assistant was said to have “left the shop” and after she had left the centre the security guard closed and locked the shop.
39 Evidence was given by the casual tenant of Shop 67. His evidence was that he had fully vacated Shop 67 by about 6.00pm on Saturday 30 August 2008 and then handed the key to the Centre security guard. The security guard was not called. The evidence of the casual tenant is not supported by the evidence of Betty (see Ex.A, para 34 cf. Ex 9). Neither was it supported by the evidence of Mr Ma. It is plain from his oral evidence (T.26/11/09 at 90) that the casual tenant gave the key to Shop 67 to the security guard on Sunday 31 August. There was a discussion between myself and Mr Ma, at pp 95-96 and it is plain from his evidence that, on 31 August Mr Ma was not at the Centre, that at some unclear point of time on 31 August the security guard received the key from the casual tenant of Shop 67, and on Monday 1 September Mr Ma collected the key from the security guard. At p.97 this exchange took place:
“Judicial Member: I’m still having difficulty understanding why she (referring to Sophie) couldn’t get a key for shop 67.
- Mr Ma: If I gave her the key, all the key for shop 67, how am I going to move her stock into shop 67?
Judicial Member: You’ve got two keys, a minute ago you told me.
Mr Ma: Yes, but if I gave her all the keys, because I don’t keep one and then the other. It will be conflicting. Because if I move her stock and then she is moving it herself, she might blame it on me and that.”
I accept the evidence of Sophie on this issue. It is plain to me that Shop 67 was not vacant “by Sunday”, but rather was vacant at some unspecified time “on” Sunday; such that the Applicant, on balance, could not have physically moved its stock from Shop 31 into Shop 67 on Sunday 31 August. It was also unexplained why the security guard, upon receipt of the key from the casual tenant of Shop 67, did not seek to deliver that key to Sophie at Shop 31. And Mr Ma seemed to have scant interest or regard to his “agreement” to permit Sophie to occupy Shop 67 from close of business on 30 August.
40 So, and pausing at this point, it is plain to me that as at 1 September 2008 the Applicant had moved about 1000 pairs of shoes and some shop fittings from Shop 31 to Shop 67, but could not move the balance simply because the casual tenant of Shop 67 had not vacated that shop. It may well be, if I accept Mr Ma’s evidence on this aspect, that he had arranged for that casual tenant to have fully vacated, on or before Sunday 31 August 2008, but that in fact the tenant had not so vacated such that, on whatever view one takes, the Applicant was not able to move all of her stock and fittings into Shop 67. If this is a correct conclusion on the evidence then the Applicant was unable, as a matter of sheer mechanics, to move out on or before 31 August 2008 notwithstanding whatever agreement Mr Ma may have reached with an incoming tenant of Shop 31. One would have thought, with respect, that with the tight timetable that was clearly agreed to, the Respondent and its manager would have been keen to ensure that Shop 67 was absolutely vacant before 31 August 2008 to enable the Applicant to move from Shop 31 into Shop 67, thus freeing up Shop 31 to the incoming tenant and its builder/shopfitters. The fact that it was a Sunday, in the context of the management of a large retail shopping centre, is to my mind utterly irrelevant bearing in mind the commercial consequences and ripple effect that would happen, and did happen, if Shop 67 was not vacant.
41 The failure to ensure vacant possession of Shop 67 was a failure, not only of the casual tenant, but also of the Respondent and the centre management. The lock-out of the Applicant from Shop 31 was, in all the circumstances, unwarranted, even on the asserted 12 month lease, let alone on the s.16 extended five year lease.
42 As a general rule I think it not unfair to say that an unwarranted lock out and an unwarranted failure to give access to a lessee thereafter to remove its stock, fittings and belongings, would constitute unconscionable conduct (see O’Neill v. Henry [2010] NSWADTAP 40) and, although unconscionable conduct was not argued before me, it is plain to me that the conduct of the Respondent would fit quite clearly within that concept.
Events subsequent to 1 September 2008
43 Sophie’s evidence is that remaining in Shop 31 were “approximately 5000 pairs of shoes … in their original boxes and another 1000 shoes in plastic bags”. In addition, the stock records for the shoes were also in Shop 31. Other items also remained in Shop 31. These items included “a glass counter … 10 wooden tables for shoe displays, a long wooden display cabinet with draws and doors underneath … 5 or 6 single chairs for customers …. wood and metal shelving around two more walls … 5 mirrors … and Ethos machine, a telephone, two cash registers … with a daily float of $225.00 … a radio/cassette player … a large wooden storage cupboard … a large metal shelf … some kitchenware … a sunglass stand with about 200 sunglasses on it … a hat stand … with hats and scarves … about 300 hats in stock and about 100 silk scarves … in excess of 100 T-shirts … about 20-30 soccer uniforms … about 20 bags in stock, about 20-30 belts in stock, about 100 ties, in excess of 500 socks and small items of jewellery including rings and earrings … stock records, bank records, sales records, stationery, GST records, fashion magazines, employee records, purchase and delivery records, invoices, lay-by records and other accounts and documents relating to (Shop 31) … a tool box with a drill … a vacuum cleaner and a fan”.
44 On 2 September 2008 Sophie and Joy went to Shop 31, noted that the locks had been changed and the windows covered up. Her evidence was that she had been told that “four or five big men were moving the stock out last night”; that she went to Mr Ma and said to him:
“You have no right to do this. A lot of the stock belongs to customers or belongs to the suppliers. I have got $225.00 in my cash register. One box in the back of (the) shop has 3 days takings, about $2,000.00”
and Mr Ma apparently replied (although he denied this):
“I don’t care. You find a solicitor”.
45 Joy’s evidence was that Sophie went to Shop 31 on 2 September 2008, was denied access to the premises, was later allowed to look inside but not go inside, that two builders (were) removing shoes from the back storage room to the front of the shop (and that) most of the shoes from the front of the shop had already been removed; that Sophie said to the persons removing the shoes: “Can you please stop what you are doing” but the person replied, “No, I need to finish the job and get paid”; that eventually Mr Ma came, told Sophie “I don’t want to talk to you”, and went around the shop saying to the person(s) moving the shoes “throw this into the rubbish bin” etc pointing to various items, including shop fittings, shoe boxes and shoes, in the shop.
46 Evidence was provided by Mr Alex Smith, a managing director of the shopfitting company which was employed by the incoming tenant of Shop 31 to undertake it shop fit-out. His evidence that on 1 September 2008 the roller door was closed and locked, that he obtained a key from Centre Management; that “after unlocking the shop I noticed that the shop was not vacant or clean was full of stock, furniture, various fittings and fixtures and large amounts of rubbish”. He could not carry out any shopfitting work.
47 On the following day, 2 September 2008, he “noticed that the shop was still not vacant or clean” and was “unable to commence work”. He complained to Mr Ma who asked him: “Can you move the stock and empty the shop? You can move everything to Shop 67, which is just around the corner”, and Mr Smith agreed. Mr Ma then provided “a few shopping trolleys and a furniture trolley for us to use to move the smallest shoeboxes” and then Mr Smith removed “the remaining stock from Shop 31 to Shop 67” and “moved the larger furniture items in the same way or, as instructed, demolished them and remove them to large bins outside”. Mr Smith (for reasons not explained) took some photographs of inside Shop 31 – in my opinion those photographs show a relatively neat/tidy set-up within Shop 31, not set out like David Jones or Myers, but shoes on display, boxes stacked in an orderly fashion, T-shirts hung on display, and relatively organised having regard to Sophie’s activities on 31 August 2008 and compared to the photographs subsequently taken of the inside of Shop 67.
48 Then, on 3 September 2008, after having “completed the removal of all stock and other items from the shop previous day … we now removed the racks and shelves from each of the walls … (and) also removed all of the rubbish from the shop, which included empty shoe boxes, plastic bags, furniture, general things; but at no stage did we throw out any stock”.
49 In my view the evidence demonstrates clearly that not only was the Applicant locked out of Shop 31 as and from 1 September 2008 but also the Applicant was not permitted to re-enter the Shop at any time thereafter; and that the Respondent took it upon itself to remove the Applicant’s belongings (and also belongings of its employed staff) and make good the premises.
50 So, and pausing here, it is plain that by the end of 2 September 2008 all the goods, fittings and belongings of the Applicant had been removed from Shop 31 to Shop 67. A serious issue arose thereafter, and was agitated before me, regarding the method of removal and the damage (if any) to the goods and chattels; and thereafter to the removal of those goods from Shop 67 to the RestorX warehouse at Wetherill Park. These issues I shall deal with later.
Stock at Shop 67
51 Sophie’s evidence was that on 2 September 2008 she went, with Joy, to Shop 31, an arrangement having been reached between the lawyers for the parties in or to the effect that she could look at Shop 31 but she was “not allowed to remove anything”. Her evidence relating to the state of the stock and fittings I shall deal with later; but she then went to Shop 67. She made certain observations (I shall also deal with these later) and then stated that “an Asian man” arrived at Shop 67 and “pointed a finger at me, within a centimetre of my face, and said “You will definitely loose. Don’t waste your time in coming to count the shoes” and then said to the security officer, “Shut the door”.” As I understood the evidence, nothing further happened with regard to Shop 67 until 7 October 2008 when Sophie attended with Mr George Nour (a valuation expert and to whose evidence I shall refer later) to carry out “a brief inspection, and take some photos”.
52 Ultimately on 16, 29 and 30 October 2008 Sophie carried out a stocktake with Joy (in particular) and others, and she “not only counted the number of shoes present, we also determined what stock we could take to on-sell in my other shops and what could not be on-sold. Those that could be on-sold were removed from Shop 67, placed in a van and taken away. Those shoes that could not be on-sold were left in Shop 67”. Her evidence was “to determine what stock could be on-sold, we looked at the quality of the shoes, whether they were in pairs, the quality of the box or other container they were in (eg plastic bags)”. Apparently, in Shop 31, “shoes were mostly sold in boxes or plastic bags. Only very few shoes were sold without a container of some sort. These were rubber thongs, slippers and gum boots”. Her evidence was that “those shoes where the box was in good condition and the pair of shoes still existed in good condition were taken to be on-sold. Those shoes where the bag was in good condition and the pair of shoes still existed in good condition were taken to be on-sold. If there were other pairs of shoes that were still clean (and) in good condition (ie not squashed, dirty, scratched or split) these were also taken to be on-sold … these included the thongs, slippers and gum boots previously sold without packaging and other shoes that were previously sold with packaging”.
53 Sophie recorded shoes that were taken and in good condition and other stock and equipment moved from Shop 67, including “sunglasses, black t-shirts, socks, laces, bags and shoes” such that “the total number of pair of shoes removed was 4,399” (Exhibits YMX 1 and YMX 2).
54 There was a dispute regarding the shoes and items that were left in Shop 67 and other items that were not in Shop 67, and these matters I shall refer to later.
55 Thus, at this point, it is plain that whatever was left behind in Shop 67 was, like the John West sardines, rejected by Sophie as being stock so damaged as to be unsaleable and therefore the subject of the instant claim.
Removal of Stock to Warehouse
56 The stock remaining in Shop 67 was removed, at the request and or the instructions of the Respondent, to the RestorX storage warehouse at Wetherill Park on 14 September 2008.
Directions and Interlocutory Aspects
57 Under this heading I propose to set out and refer to a number of Directions Hearings, and the Directions and Orders that were made at the relevant times. The purpose is to highlight a number of events in order to provide greater clarity to some of the submissions that were made after the close of the evidence.
58 The Applicant commenced proceedings in this Tribunal on 4 September 2008.
59 The Applicant’s Application was first listed for directions on 9 September 2008. It was listed at 3-00pm for the purpose of agitating relief sought in an Application for Urgent Interim Order. Both parties were represented by counsel; both parties made submissions; but the parties could not agree on what steps should be taken. There was argument relating to access to Shop 67, such access being denied by the Respondent to the Applicant. In order to move the matter forward I took it upon myself, in the absence of agreement, to draft and float a number of suggested directions and these were agreed to by both counsel and the following directions and orders were made:
1. The Respondent permit the Applicant and its representatives to inspect, count and record all stock, items, fittings, equipment, furniture, documents, tools, and kitchen equipment, removed by the Respondent from Shop 31, Eastlakes Shopping Centre, by Wednesday 24 September 2008.
2. The Applicant to provide a copy of such record to the Respondent by 5.00pm 24 September 2008.
3. Order 1 to be carried out jointly by the Applicant and Respondents, both parties to sign such list.
4. Matter listed for further directions/hearing at 9-30am Thursday 25 September 2008 before Molloy JM.
6. Application for Urgent Interim Order and Application for Original Decision stood over to 9.30am Thursday 25 September 2008”.5. The Registrar is requested to take out a copy of these Orders and provide a copy thereof to the parties.
A copy of those directions/orders was engrossed by the Registry and sent to the parties 10 September 2008.
60 On 25 September 2008 the matter came back before me for further directions and orders. The following notations/directions/orders were made:
1. Note: Respondent has not touched the Applicant’s stock.
2. Orders 1 and 2 made 9 September 2008 are varied by extending the time to 1 October 2008.
3. Applicant is permitted to take its stock and other items that it agrees are not damaged, and leave behind stock and items alleged to be damaged for inspection by experts appointed by the parties.
4. Matter adjourned to 9 October 2008 at 9.30am for hearing on the Application for Urgent Interim Order or for directions if a monitor is not required.
6. Otherwise, Orders 1, 2 and 3 made 09 September 2008 are confirmed”.5. Applicant to notify the Tribunal in writing no later than 07 October 2008 if it alleges that these orders have not been complied with. Absent such advice no monitor will be required on 9/10/08.
Pausing here, I make particular reference to Order 3 above – it is plain there from that whatever items were to be removed from Shop 67 by the Applicant are items that the Applicant agreed and conceded were not damaged.
61 On 9 October 2008 the Tribunal made the following Orders/Directions by consent:
1. That the Applicant, within 7 days, remove from the premises known as Shop 67, BKK Eastlakes Shopping Centre, Evans Avenue, Eastlakes (“Shop 67”), all of the fittings, furniture, equipment, stock and any other goods therein with the exception only of those goods which the Applicant alleges were damaged by the Respondent in the course of their relocation by or at the request of the Respondent from the premises known as Shop 31, BKK Eastlakes Shopping Centre, Evans Avenue, Eastlakes.
2. Prior to their removal from BKK Eastlakes Shopping Centre, Evans Avenue, Eastlakes (“the Centre”), the Applicant is to do all things necessary on its part to facilitate and/or allow the Respondent to:
(a) Take a photocopy of any paper records within Shop 67; and
(b) Produce reports from the cash register/s.
3. The Respondent be allowed to relocate the stock left at Shop 67 pursuant to Order 1 to another location whether at the Centre or at such external location as may be nominated by the Respondent.
5. That the matter be listed for further directions on 6 November 2008.4. That within 14 days the parties and their representatives jointly inspect the goods, whether left at Shop 67 pursuant to Order 1 or at another location pursuant to Order 3, for the purpose of attempting to reach agreement on those goods which have been damaged and their original and residual values.
62 The next relevant Directions were made on 16 November 2008. Again, there was dispute between the parties and the Tribunal was obliged to create a regime to move the proceedings forward. The following notations/orders/directions were made:
1A The Tribunal noted:
a) Order 1 made 9 October 2008 had been complied with.
b) Order 2 had been resolved by the intervention of the Police.
c) Order 3: the stock had been removed.
1. Respondent to re-assemble the goods to enable orderly inspection; such to be done by 5pm 17 November 2008.
2. Parties’ experts to inspect the remaining goods and:
a) determine the condition of the stock
b) determine whether it is saleable or otherwise
c) determine its original value
d) determine its present value.
3. Respondent to supply Applicant with an unedited copy of all videos taken 16, 29 and 30 October 2008.
4. Reserve costs; including the costs of Respondent of compliance with Direction 1.
5. Applicant to supply Respondent with copies of all purchase dockets/invoices showing the purchase price of remaining goods, by 17 November 2008.
7. Stood over to 12 noon 18 December 2008.6. Compliance with Direction 2 by 15 December 2008, including provision of expert reports.
63 The next relevant Directions were made on 18 December 2008 as follows:
1. The Applicant to file and serve its lay evidence by 9 February 2009.
2. The Applicant to provide to the Respondent by 9 February 2009 copies of the consignment terms for that stock which the Applicant claims is consignment stock.
3. The Respondent to file and serve its lay evidence by 23 February 2009.
5. The parties’ experts to inspect the Applicant’s remaining goods which are still in the Respondent’s custody, and determine:4. The Applicant to file and serve any lay evidence in reply by 9 March 2009.
(a) The condition of the stock;
(b) What damage, if any, there is to the stock;
(c) Whether the stock is saleable or otherwise;
(d) The original value of the stock; and
(e) The present value of the stock
6. The matter listed for further directions on 26 March 2009.by 23 March 2009, including provision of expert reports.
64 And the final relevant Directions/Orders were made on 5 March 2009 in the following terms:
1. The Respondent to file and serve its evidence by 27 March 2009.
2. The Applicant to file and serve any evidence in reply by 9 April 2009.
3. The parties’ expert to inspect the applicant’s remaining goods which are still in the Respondent’s custody, and determine:
(a) The condition of the stock;
(b) What damage, if any, there is to the stock;
4. The matter listed for further directions on 28 May 2009.(c) Whether the stock is saleable or otherwise;
(d) The original value of the stock; and
(e) The present value of the stock.
and provide his/her expert report by 22 May 2009.
65 As part of its submissions at the conclusion of the evidence, the Respondent submitted that there was nothing that could have stopped the Applicant from removing from Shop 31 all of its goods and belongings. That submission is, with respect, not only avoids the s.16 issue but is also not only contrary to the evidence but also contrary to the arguments that were advanced at the various Directions Hearings which resulted in the Directions/Orders that I have set out above. It is plain to me, and has been plain from the very beginning, that the Respondent was totally opposed to the Applicant removing its stock from Shop 31 (after 31 August 2008) and from Shop 67, even to the extent, albeit for two days only, claiming a lien over that stock on account of asserted unpaid rent. It required the intervention of the Tribunal to permit the Applicant to remove its stock that it agreed/conceded was not damaged and for the evidence to be obtained in an orderly fashion. And even then the expert evidence was not available in a timely manner as was anticipated by the parties; and even when available that evidence was altered/varied as I make reference below.
Surveillance Devices Act
66 On 2 September 2008 Mr Ma took certain photographs of two cash registers in Shop 31. It is plain from those photographs, from the angle from which the photographs were taken, that Mr Ma must have entered into that Shop.
67 On 7 October 2008 he again took photographs of “3 cash registers while they were in Shop 67”. He went to some trouble to explain that only one of the cash registers was connected to the power supply.
68 On 2 September 2008 he took numerous photographs of boxes, goods and chattels in Shop 67.
69 On 7, 16, 29 and 30 October 2008 he caused his video camera to be fixed on a tripod stand on a ramp outside Shop 67 and pointing into that shop. “The camera was on occasion removed from the tripod and was then hand held by myself or another person”.
70 In circumstances set out below, police attended on 29 October 2008 and, as a consequence, Mr Ma arranged for the camera to not be focused “into” Shop 67 but rather “on the stock as it was being removed from Shop 67”.
71 Evidence was given by Joy in or to the effect that on 2 September 2008 Sophie asked the persons moving the stock from Shop 31 to Shop 67: “Please stop moving the stock. We have to count it” and one of the persons moving the stock said: “This is not your shop any more. Your shop is over there”. Sophie then said: “Our solicitor has said to come back to count our stock and take photos”, and then a security guard “came with a camera … (and) took some pictures in the shop”. Joy, Sophie and other person went to Shop 67 and about five minutes after they arrived an “Asian man” arrived and said to the security guard: “Are they finished? Can you close the shop?”; the Asian man pointed his finger into Sophie’s face and said: “You will definitely loose the case”; to which Sophie replied: “Don’t point your finger in my face or I will call the police” and the Asian man shouted (at her) and said: “Just call the police. I am waiting here”.
72 The reason for the taking of all these photographs, in particular the video recordings, was really not explained, at least to my satisfaction. From the point of view of the Respondent I suspect that it was intended to demonstrate that, at early September 2008 the premises, Shop 31 were left in a messy state by the Applicant and that the goods and chattels were, at that point, damaged. Similarly, presumably, the video evidence taken in October.
73 Mr Ma’s evidence (Exhibit 3) was firstly, that he regarded the lease of Shop 31 to have expired on 31 July 2008 and that it was necessary to open negotiations with the Applicant “regarding renewal of (the) lease of Shop 31”; and when that failed he “wanted to record (the Applicant’s) inspection of the goods and record any conversations between (the Applicant’s) staff and staff of the (Respondents) so as to minimise the possibility of a dispute as to what in fact occurred or was said during the course of the inspection”.
74 Quite frankly, and in all the circumstances, and even if one accepts (and I do not) that the lease was for a term of 12 months only, extended by one month by agreement, the plain fact is that the Applicant had been in occupation of Shop 1 since 1 April 2007 (or perhaps March 2007) [Exhibit 3, para 15(a)], effectively without complaint. There was some evidence about the Applicant failing to pay $1,000.00, part of the “bond of $4,000.00”, but this deficiency was simply not pressed by the Respondent. Consequently, I conclude that there was really nothing that would have caused any concern to the Respondent relating to the occupation of Shop 31 that would have encouraged the Respondent to take all the photographs and videos; rather, what seems to have happened is that both the Applicant and the Respondent, through Sophie and Mr Ma, had a serious falling out over the Respondent’s requirement that the Applicant remove itself from Shop 31 by 31 August 2008. If it be suggested that the business of the Applicant (about which I shall make reference below) was not in keeping with the style/ standard in the Centre, then one might ask rhetorically: “Why was the Applicant granted a new lease commencing 1 August 2007 and allowed to continue to occupy and trade out of Shop 31 in the first place?”
75 The Respondent sought to put into evidence the video recordings. Objection was taken in reliance upon the Surveillance Devices Act 2007 (“SD Act”).
76 The SD Act is intended to create a regime to protect persons from unwarranted intrusion into their lives. In certain circumstances permission can be granted for various types of warrants to be issued which would permit surveillance but, absent those, the privacy of persons against the use and maintenance of surveillance devices is prohibited, absent consent.
77 S.7 creates an offence for knowingly installing, using or causing to be used or maintained a listening device to overhear, record, monitor or listen to a private conversation to which the person is not a party, or to record a private conversation to which the person is a party. A “listening device” is relevantly defined as meaning “any device (which itself includes “instrument, apparatus and equipment”) capable of being used to overhear, record, monitor or listen to a conversation or words spoken to or by any person in a conversation …”. “Record” includes: “an audio, visual or audio visual record, a record in digital form, a documentary record prepared from a record …”. S.7(3) permits the use of listening device by a party to a private conversation if “all of the principal parties to the conversation consent, expressly or impliedly, to the listening device being so used, or a principal party to the conversation consents to the listening device being so used and (to) the recording of the conversation (where it) is reasonably necessary for the protection of the lawful interests of that principal party, or is not made for the purpose of communicating or publishing the conversation, or a report of the conversation, to persons who are not party to the conversations”.
78 S.8 generally prohibits the “installation, use and maintenance of optical surveillance devices without consent”. Sub-section (1) relevantly states:
a) entry onto or into the premises … without the express or implied consent of the owner or occupier of the premises ..”“A person must not knowingly install, use or maintain an optical surveillance device on or within premises … to record visually or observe the carrying on of an activity if the installation, use or maintenance of the device involves:
79 S.11 is a very important section. Relevantly, it provides as follows:
“(1) A person must not publish, or communicate to any person, a private conversation or a record of the carrying on of an activity, or a report of a private conversation or carrying on of an activity, that has come to the person’s knowledge as a direct or indirect result of the use of a listening device, an optical surveillance device … in contravention of a provision of this Part.
(2) Subsection (1) does not apply to the following:…
(a) if the communication or publication is made:
(ii) with the consent, express or implied, of all the principal parties to the private conversation or activity, or(i) to a party to the private conversation or activity, or
…
80 “Private conversation” is defined in s.4(1) as meaning:
“any words spoken by one person to another person or to other persons in circumstances that may reasonably be taken to indicate that any of those persons desires the words to be listened to only:
but does not include a conversation made in any circumstances in which the parties to it ought reasonably to expect that it might be overhead by someone else”.(a) by themselves, or
(b) by themselves and by some other person who has the consent, express or implied, of all of those persons to do so
81 The Respondent on 29 April 2010 sought to put into evidence certain videos, or a compilation of various videos said to have been taken on 16 October 2008. The Respondent had succeeded, on 25 November 2009, in putting into evidence part of a video apparently taken on 7 October 2008, counsel for the Applicant conceding that such a video could have been allowed in evidence “if the camera was outside the (leased) premises” (T.25/11/09 at 55) and, at p.56 it was clear that both counsel were in agreement that the video could be shown to the Tribunal.
82 On 29 April 2010 the issue was re-agitated. At that time I referred to s.11, a section to which reference had not been made on 25 November 2009. At (T.29/04/10 at 79) I rejected the tender. I expressed the opinion that s.11 applied in that it “prohibits the communication or publication of a record of a carrying out of an activity without the expressed or implied consent of the principal parties to the private conversation or activity. There is no provision in section 11 which seems to permit this Tribunal, or indeed a court, to look at a video of an activity other than as specified in sub section (2) and which, relevantly, deals with offences against the section; offences against the Act or the regulations, serious violence to persons or a substantial damage to property or commission of a serious narcotic offence. In my opinion there’s not enough material before this Tribunal to form an opinion that the video, that is sought to be tendered, is one that is not prohibited under the Surveillance Devices Act (2007) …”. I adhere to those views.
83 There was not the slightest evidence that would lead me to conclude that the Applicant or Sophie consented to the use of the video equipment by Mr Ma. It clearly recorded “the carrying out of an activity”. The video equipment was clearly a “listening device” and an “optical surveillance device” (there is no need for me to determine whether an “optical surveillance device” includes a simple camera, although (at least at first glance) the definition would seem to so include). Plainly, however, the video equipment used by Mr Ma met the definition.
84 If it is suggested that by siting the video camera outside the relevant shop, such that the “installation”, or perhaps more correctly “use”, was not “within premises” (“premises” including “land, a building, a part of a building, any place, whether built on or not” - see s.4) then I would reject that proposition, simply because a tenant in a shopping centre is an occupier of, not only the premises demised under the lease but also a person who is entitled to use the common areas to pass and repass, and deliver goods and chattels to the demised premises; but even if I am wrong in that appreciation it seems to me that the prohibition in s.7 must be accorded its full force and effect, having regard to the definition of “listening device” referred to above and the evidence of Mr Ma set out above. There was no suggestion by Mr Ma, not could there be, that the recordings were made with the consent of the Applicant or Sophie.
85 I am unable to read down or otherwise interpret the prohibitions in the SD Act that would have permitted me to have admitted into evidence the video recordings. I rejected their tender. In any event, in all the circumstances, and having regard to the wealth of other material tendered before the Tribunal by both parties, it is unlikely that the video material would have added significantly to the value of evidence.
Retail Leases Act Section 44
86 The Applicant placed considerable store on its argument that there was a breach by the Respondent of the notice requirements under this Section. In particular, considerable reliance was placed upon Sub-section (6). Similarly, there was an argument advanced that the Respondent was in breach of s.44A.
87 Much of the argument relating to these sections was based upon the presumption that the Lease was for a term of 12 months only; thus it was argued that s.44(6) applied. Counsel for the Applicant spent some time in cross-examination on this aspect.
88 There is no need to quote these sections in full. Relevantly, the sections are in the following terms:
Section 44(1)
Not less than 6 months or more than 12 months before the expiry of a lease, the lessor must by written notification to the lessee either:
a) offer the lessee a renewal or extension of the lease on terms specified in the notification (including terms as to rent), or
b) inform the lessee that the lessor does not propose to offer the lessee a renewal or extension of the lease.
….
(2) An offer made for the purposes of sub-section (1)(a) is not capable of revocation for 1 month after it is made.
….
(3) If the lessor fails to give a notification to the lessee as required by this section, the term of the lease is extended until the end of 6 months after the lessor gives the notification required by this section, but only if the lessee requests that extension by notice in writing to the lessor given before the lease would otherwise have expired.
(4) ….
(5) ….
(6) If a retail shop lease is for a term of 12 months or less the periods of 12 months and 6 months in this section are shortened to 6 months and 3 months respectively.”
Section 44A
(1) A lessor of a retail shop must not, by written or broadcast advertisement, indicate the availability of the shop for lease or invite tenders or expressions of interest for tendering, during the term of the lease unless:
a) the lessor has offered the lessee a renewal or extension of the lease under section 44(1)(a), the offer has not been accepted and (not earlier that one month after the offer was made) the lessor by written notice informs the lessee that negotiations are concluded without result, or
b) the lessor by written notice informs the lessee that the lessor does not propose to offer the lessee a renewal or extension of the lease and there are no arrangements to allow the lessee to remain in possession of the shop or,
c) the lessee by written notice informs the lessor that the lessee does not wish to enter into negotiations for renewal or extension of the lease or that the lessee wishes to withdraw from the negotiations, or
d) the lessee has vacated or agrees in writing to vacate the shop, or
e) the lessee consents in writing to publication of the advertisement.
Maximum penalty: 50 penalty units.
(3) ….(2) ….
89 It was argued that the Respondent was obliged under s.44 to give to the Applicant notice under s.44(1) not less than 3 months nor more than 6 months before the expiry of the term of the Lease (31 July 2008). Clearly, on that argument, such a notice was not given. In those circumstances ss.(3) then applied, but only if the Applicant requested the extension by notice in writing, and that did not take place. So, on one view (being the basis upon which the hearing was conducted) the Respondent should have given notice not less than 3 months or more than 6 months before 31 July 2008 but, no notice having been given, and the Applicant not requesting an extension in writing, the lease would have expired (on that argument) on 31 July 2008. However, the parties did extend the term by the Respondent permitting the Applicant to remain in occupation until 31 August 2008; thus, in my view, and on the arguments then advanced, the Applicant should have removed itself from Shop 31 no later than 31 August 2008.
90 If it was argued that the failure to give the Applicant vacant possession of Shop 67 was a breach of the arrangement reached between the parties, I think there is some force in that argument simply because it would seem that the parties did in fact “agree” that the Applicant could move into Shop 67 on 31 August 2008 and that could not have taken place as a matter of practicality because the casual tenant had not vacated Shop 67.
91 However, all these arguments pale into insignificance for two primary reasons: firstly, there was no informed consent to vacate, or even extend the term of the lease by one month to 31 August 2009, simply because both parties seemed to be of the view that the lease expired 31 July 2008, whereas it clearly did not expire until 31 July 2012; consequently, the Applicant (in particular) was (having regard to the conversations to which I have referred above) under the clear impression (given to Sophie repeatedly by Mr Ma) that on no account could she continue to occupy Shop 31 after 31 July 2008 and clearly on that (false) basis she “agreed” to the “extension” to 31 August 2008; secondly,
RL Act s.16. Once that section is given full force and effect (which in my view it should be and I so do) then s.44 and s.44A are irrelevant. Thus, the basis upon which the Applicant thought applied, and the basis upon which the Respondent thought applied, was totally incorrect and the Respondent was in serious breach of the Lease by requiring the Applicant to vacate Shop 31 at any time prior to 30 July 2012.
Consent to Vacate
92 I accept that the parties to a lease may, at any time during its term, vary the conditions of the lease and, in particular, vary its term. It was submitted by the Respondent that the evidence supported the conclusion that the parties did in fact consent/agree to vary the Lease by its extension to 31 August 2008, alternatively (presumably) that the parties agreed that the lease term would terminate/conclude on 31 August 2008.
93 In my opinion no such conclusion can be reached. No party seemed to be aware that the Lease did not expire until 31 July 2012. Thus, no party was aware of an essential term that, it was submitted, they were going to vary. It seems to me that absent informed knowledge and informed consent there could never be a consent to vary as submitted.
94 It is my clear view that there was no consent to vacate as at 31 July 2008, alternatively 31 August 2008, simply because no party, and, in particular, the Applicant, was aware that the tenancy did not expire until 31 July 2012. Therefore, there was no agreement/contract to vary that term.
95 In any event nothing much hangs upon this argument for the reasons I endeavour to express later in this decision. The real issue that occupied the bulk of the hearing time was that pertaining to the issue of damages and it is to that issue I shall now turn. I pause to observe that, in my opinion and notwithstanding the volume of material and the extent of the oral evidence, the issue of damages could easily have been resolved with some goodwill and was (in my respectful view) capable of resolution utilising relevant legal principles.
Damages
96 Before embarking upon this exercise it is worthwhile reflecting on two aspects. Firstly, it was not argued that this Tribunal did not have power to make an award of damages. The dispute between the parties is clearly “a retail tenancy dispute” under RL Act s.63(1). If authority is required for that observation, reference can be made to Prasad v. Fairfield City Council [2000] NSWADT 164; Holden Tourism and Hospitality Pty Limited v. Baldock [2001] NSWADT 123; Parallel Lines International Pty Limited v. Video-Drama Pty Limited [2007] NSWADT 84; Webb v. Clifton [2008] NSWADT 132 at (9-20); and finally O’Neill v. Henry (RLD) [2010] NSWADTAP 40. In addition, there are there are numerous cases relating to the operation of RL Act s.72; and reference can be made to 72(2)(e) that gives to the Tribunal “in proceedings for a retail tenancy claim” the power to “order the party to a proceedings pay money to a person specified in the order, whether by way of debt, damages or restitution, or refund any money paid by a specified person …”.
97 Secondly, in dealing with the issue of damages, I have borne in mind the observations of the Court of Appeal in Dean v. Stockland Property Management Pty Limited [2010] NSWCA 66 where the Court said at [3]:
“It is the fundamental duty of the Trial Judge where there is a complex of arguably contradictory evidence undermining the resolution of a critical issue at trial, to analyse, evaluate and carefully weigh up the evidence, including any inconsistencies, before deciding the outcome of the issue”.
In that case the Court was concerned with an argument that the trial judge did not give adequate reasons. The Court summarised the principles at [52] and the Court observed at [62] that it was “important … for the trial judge to engage with the very point at issue” and to “analyse the factual situation before coming to a finding”.
98 I do not read those words as requiring me to examine, in finite detail, all of the cross-examination and all of the intricate material that was put before me. Indeed, to some extent, both experts, although cross examined vigorously, adopted a reasonably broad-brush approach – in the words of Mr Nour, one of the experts, to have attempted to carry out a complete analysis would have taken a life time (T.29/04/10 at 35; Ex.1 (the time involved would have been excessive”); and Ex.O at p.8).
99 The cross-examination of the two experts was extensive and intensive, involving a line-by-line dissection of the various schedules of stock and detailed analysis of brands and types and styles of (in particular) ladies’ shoes. To attempt to set all that out in detail would be tedious. Here I respectfully make reference to the observations of Ipp JA in Symonds v Vass [2009] NSWCA 139 at 135-140. I have endeavoured to follow those dictates.
100 Thus, what I have attempted to do is look at the material led by the various individuals, then look at the expressions of valuation opinion, and then (hopefully) come to a conclusion. The volume of evidence on the issue of damages was more than considerable, to say the least, and in relation to the experts, there were in fact numerous sworn expert reports placed into evidence, all of which varied to some extent. In the circumstances that I set out below, that was understandable because there were significant differences of opinion which encouraged the experts to vary their original appreciations. That is to be lauded, rather than criticised, because I am clearly of the opinion that both experts tried their very best to “get it right” in rather messy circumstances and in difficult physical conditions.
Damages: the Lay Evidence
101 On behalf of the Applicant the primary lay evidence was given by Sophie. Her evidence was that she removed 1000 shoes from Shop 31 into Shop 67; there was remaining “approximately 5000 pairs of shoes in (Shop 31) in their original boxes and another 1000 shoes in plastic bags”. There were other items of stock and equipment which I have endeavoured to set out above at [43]. When she went to Shop 31 on 2 September 2008 she saw “three men demolishing the shop fittings. I saw broken shelves, broken glass, some broken mirrors, a large number (about 100) of shoes scattered over the floor (some were out of the box and some were in loose), a number of loose shoes and squashed boxes in about 5 Woolworths shopping trolleys. All of the shoes had been squashed into the trolley. I saw the men carrying out the stock … I saw the two cash registers in the front of the shop on top of the shelf with the front cover opened … the EFTPOS machine, radio/cassette player and the kitchen equipment was gone …. there were no records or documents there … I saw many sunglasses missing from the stand. I saw a few hats on the floor but nowhere else. I saw no scarves. I saw no bags, ties, jewellery or t/shirts. I saw some socks … the fan had fallen on the floor … a drill and the saw were missing from the tool box … the vacuum cleaner had been pulled apart. The glass counter was broken. There was a box on the floor with broken glass in it. The long cabinet was still there, only about 3 display tables were there but all the chairs were missing. The whole of the shop was very messy. There was dust and dirt everywhere”.
102 She then went to Shop 67. Her evidence was that she “saw a large number of shoes in there. About half of the room was full of shoes. The shoes were all squashed together. They were all piled on top of each (sic). The boxes were damaged or squashed. There were a large number of loose shoes over the floor or piled in the corner on top of each other. There were 2 or 3 shopping trolleys full of squashed shoes in there.
103 There was also evidence from Joy on this aspect. She went to Shop 31 on 2 September 2008. She and Sophie were told that “they could only look but cannot go in”. The roller door to the shop was then opened and she observed “two builders removing shoes from the back storage room to the front of the shop. Most of the shoes from the front of the shop had already been removed. I saw about 100-200 pairs of shoes in the front …” In July 2008 she had carried out a stocktake and “I counted approximately 7000 pairs of shoes. The stocktake records were retained in the shop. Of the 7000 pairs, about 1000-2000 pairs were retained in a storage room at the back of the shop. The rest were stored in the front of the shop. From what I could see from outside the shop I only saw about 100-200 pairs of shoes”.
104 There was then some discussion between the incoming tenant’s builder, Sophie and Mr Ma, as I have set out above, and then Mr Ma agreed to re-open Shop 31 to check and count the stock. Joy’s evidence was that Mr Ma agreed to this and said: “I will call a security guard to open up. He will have eyes on you when you do this … you can count but you can’t remove anything. If you want your stock back you will have to pay me … about $400.00 … which I paid for removal which I did last night”. She then went to Shop 31 and “saw three builders already there moving the stock and moving it from (Shop 31) to Shop 67”. A security guard then turned up with a camera. She and Sophie then went into the shop, noted that the storage room was empty and then stated that the shop was “very messy and dirty. There were loose shoes and squashed boxes on the floor. There was broken glass in the box. There were broken mirrors … there were at least 4 shopping trolleys with loose shoes and squashed boxes in them. There were broken shop fittings, including a broken shelf now bent and lying on the floor. The sunglasses stand had a lot of sunglasses missing. Previously there were about 80-100 sunglasses … now it was only 20-30% full. I saw no black t/shirts, hats, the hat stand, ties. The sock stand was still there but only (had on it) a few socks, about 20 pairs left. I did not see any jewellery there. I saw the glass counter and broken glass around it. I did not see the EFTPOS machine or any of the shop’s records that were held in the shop. The two cash registers had been moved from the glass counter to the shelf with the front cover open. The shop’s vacuum cleaner had the pipe removed and lying on the floor. The cleaner itself was on one of the display tables. There were only about 2 of 10 tables still there. There were no chairs there. The tool box from the storage room was in the front of the shop. It was opened and there were tools lying out of it … I could not count the shoes as they had almost all been moved out. All that was left was some loose pairs and rubbish”.
105 Joy then said that she, Sophie and another person, went to Shop 67. The door was open. She “saw the shop was full of shoes, stacked up to the roof. Many of the shoes were squashed. It was very messy. In the corner there was a pile of loose shoes and shoes in plastic. It looked like rubbish. I formed the view that it was difficult to count”. Then her evidence was that “the Asian man” arrived and, after the confrontation referred to above, they then left.
106 Mr Ma gave evidence that on 2 September 2008 he took photographs of two cash registers. He also tendered 9 photographs said to have been taken on 2 September 2008, which, in my opinion, tended to support the evidence of Sophie and Joy. For example, Exhibit 3, Annexure AM-1, tab N2, photograph 2, clearly shows “trolleys filled with stock which was relocated to Shop 67”.
107 I have been unable to find any photographic evidence that would assist me in the state of Shop 31 as at close of business on 31 August 2008 or early 1 September 2008, except perhaps those taken by Mr Smith (see [114] below) and Exhibit AM-1, Tab R2, to Ex.3; see also [47] above). Similarly, save as to [114 ] below, I have been unable to find any photographic evidence of the state of Shop 67 as at 2 September 2008 and thereafter. However, I am satisfied that the Applicant was conducting her commercial business from Shop 31 in an orderly fashion as at 30 August 2008 such that it must follow, by way of direct inference and absent evidence to the contrary, that I should assume that the Shop and its appearance was such that the Applicant could, and did, conduct its commercial activities in an attractive and profitable manner. Again, see also [47] above.
108 What happened after 2/3 September 2008? As indicated above the Applicant commenced proceedings in this Tribunal on 4 September 2008. The Applicant also sought various urgent interim orders. The application for these orders pleaded the 1 year term, pleaded a “holding over provision”, pleaded that “the holding over period could only be terminated by one month’s notice in writing”; pleaded the lockout and the taking possession of Shop 31 “together with all of the Applicant’s stock, shop fittings, fixtures, documents”; pleaded conversion by the Respondent’s and asserted that the Respondents were the “bailee of the Applicant’s stock, fittings and fixtures and documents located in the shop”; asserted that the Respondents have destroyed and/or damaged the Applicant’s stock etc. whereby the Applicant has “suffered loss and damage” and was “entitled to possession of the stock etc”. The Tribunal made various interlocutory orders as I have indicated above.
109 Sophie, with Joy and another lady, attended Shop 67 on 16, 29 and 30 October 2008 “for the purpose of carrying out a stocktake of shoes and other goods and equipment that have been taken from Shop 31”. She gave detailed evidence in chief about the stocktake, the counting of the shoes, what stock she would take that could be on-sold and asserted that the stock that could not be on-sold were left in Shop 67. In assessing the quality of the stock which could be on-sold “we looked at the quality of the shoes, whether they were in pairs, the quality of the box or other container they were in (eg plastic bags)”; she gave evidence about shoes that were not in a container of some sort, she recorded the shoes that were “in good condition” and these were removed; she recorded other stock and equipment (including “sunglasses, black t/shirts, socks, laces, bags and shoes”) that were removed; asserted that “the total number of pairs of shoes removed was 4399”; from her records, and deducting the quality removable shoes from the shop inventory, she concluded that “the total number of pair of shoes in (Shop 31) on 31 August 2008 and which should therefore be in Shop 67 was 7548 (and that following the removal of the quality shoes) the total pairs of shoes in Shop 67 or were otherwise missing following their removal from (Shop 31) was 3149 pairs. Joy prepared a detailed Schedule (“YMX -5”) of “stock taken from Shop 67” and a detailed schedule (“YMX -6”) of “remained stock in Shop 67”.
110 Sophie’s evidence was also that at Shop 67 “there were no silk scarves, wallets, ties, leather belts, jewellery (and) souvenirs; (that) other non-shoe stock was missing or damaged; (that) many of the shop fittings and fixtures … (were) also missing or damaged”; and she “prepared a summary of the stock and fixtures and fittings that were missing or otherwise damaged” as Exhibit “YMX-10”. I pause here to observe that, as the evidence unfolded, there were quite a number of deletions from this Exhibit (see T 24/11/09 at 30-31).
111 The evidence demonstrates, from photographs taken on 7, 16, 19 and 30 October 2008, that the goods and chattels stored in Shop 67 were simply piled up everywhere. Although there was clearly some attempt to stack shoe boxes care was not taken and there were heaps of shoe boxes, loose shoes and numerous items scattered all over the place. Indeed, I find it very difficult to believe that any real effort was made in order to preserve the stock etc. It is clear to me, from the evidence, that the Respondents were very keen to obtain vacant possession of Shop 31 as quickly as possible so that the new tenant could move in and start paying rent. In my view a lack of care in dealing with the Applicant’s property was clearly demonstrated on the evidence.
112 Evidence was given on behalf of the Respondent by Mr Vitale, a “warehouse manager” employed by a company which, itself, was employed to relocate the stock from Shop 31 to Shop 67. His evidence was that he commenced work at “approximately 5.00pm” on 1 September 2008 and worked until 11-00pm that evening; that he “used shopping trolleys to remove the stock (and that he) would stack the shoe boxes in a trolley, close the door to Shop 31 and then push(ed) the trolley around the corner to Shop 67, where I would unload the boxes … I would then close Shop 67 and return to Shop 31”. Some time after 7.00pm that day his wife and parents arrived “to assist me” and he continued to use the shopping trolley method.
162 Mr Nour estimated “that only about half of the shoes in (Shop 67) were in their original boxes.” He expressed the view that “before these shoes (could) be sold they needed to be separated and stored according to brands, styles, colours and sizes” such that “as a result of the condition of the shoes and the way in which they were stored I was unable to conduct any proper valuation of the shoes on 7 October 2008”.
163 In my mind, and having regard to the clear evidence that was placed before the Tribunal in relation to Shop 67, it was a pretty poor approach by the Respondent to its undoubted obligations to the Applicant relating to is removal and storage of the goods in Shop 67. And, 7 October 2008 is more than one month after 1 September 2008, such that the Applicant’s goods had been stacked and lying in Shop 67 for well over one month.
164 Mr Nour’s evidence was that he went to the Applicant’s warehouse on 5 and 7 November 2008. His purpose was “to inspect and evaluate some of the shoes which were taken from Shop 67 at the Centre” by the Applicant. Sophie provided him with a document styled “Stock Taken from Shop 67” , which was the said Exhibit YMX-5. Mr Nour “inspected all the shoes in the warehouse and provided (his) assessment of the current wholesale market value of each pair of shoes (which he did) by recording a dollar figure next to the individual shoe type (by reference to the brand and style) in the column marked “Present Unit” in the Schedule. What has happened in that he has taken the Schedule Exhibit YMX-5, altered the second last column from “present unit price” to “present unit” and deleted any value on the far right column titled “present value”. His evidence was that the goods in the Applicant’s warehouse were not damaged in any way (and his) assessment of the value of these shoes was mainly based on whether there was a full range of sizes and the time of year in which the shoes were being sold.
165 He attended at the Wetherill Park warehouse on 28 and 29 January 2009. A representative of RestorX provided him with a goods/equipment inventory which “provided a list of all the shoes kept at the warehouse”. That inventory listed “43 boxes of shoes” which he counted on 28 January and “found four missing”.
166 Mr Nour then examined all the shoes at the warehouse. He “evaluated those shoes which were capable of being sold to the public and in those cases gave the present market value”. He observed that many “of the shoes were damaged or missing (either one or both shoes) in which case (he) could not give any value on those shoes”. He made notes of all this and prepared a spreadsheet document titled “Expert Determination of Remaining Stock”, he made notes on this document where a pair of shoes “was in poor condition as a result of something independent of the way they were stored and treated … for example the condition of the shoe was adversely affected because of the deterioration of the leather”; and he took various photographs.
167 He assessed the value of the 4399 shoes at the Applicant’s warehouse “as having a total value of $32,710”. He expressed the view that they were “generally in good condition and were housed in boxes” but he did discount the resale price of shoes for various reasons, namely that the “brand or style of shoe did not come in a full range of sizes” and thus would be “worth significantly less than those which are part of a complete size range”; and also because of the time of year he provided his assessment (November 2008) that was “typically a time when wholesalers reduce the price of their shoes” because they “have clearance sales so as to clear their stock prior to Christmas which is typically a very slow period for wholesalers”, thus the “sale price of shoes in October and November would typically result in the reduction in the price of the shoe by 10% to 50%”.
168 With regard to the Wetherill Park inspection his evidence was that he examined 1475 shoes which he “assessed as having a total vale of $550.50”; and he noted that there were shoes of such disrepair that “the only places in which the shoes could be sold would be at a market, by auction (where shoes are typically sold together in bulk quantities) and in bargain shoe stores”. He provided detailed evidence regarding how he assessed “the present wholesale market value of the shoes”, and clearly took into account matters relating to “the general condition of and damage to the shoe”; “the presence or absence of a shoe box with the pair of shoes”; the state of a display shoe and the distortion of the insole of the shoe or its affectation by light; the fact that some shoes were “not in their original boxes”; and he took into account the purchase of new shoe boxes; and “the forces of fashion”, noting that “certain shoes will only have a shelf life expectancy of one season. If the shoes cannot be sold in that season the sale price in subsequent seasons will drop dramatically. This is particularly so for boots and winter stock. A pair of shoes can lose 30% to 80% of its original value if it is no longer in fashion” and he referred to a number of shoe brands “which fall into this category”.
169 Mr Nour provided a further affidavit (Exhibit “Q”) in which he referred to the supplementary report of Mr McHugh dated 19 May 2010. He criticised that report, criticised various of his conclusions, and challenged his assessment of various shoes. He also provided an additional statement (Exhibit “O”) dated 28 April 2010, which was the result of the joint inspection with Mr McHugh at the Wetherill Park warehouse in January 2010. He noted that he and Mr McHugh “inspected 165 cartons, total 3998 pairs of shoes. I evaluated and gave a total shoe value of $6,401.30. Rod McHugh evaluated and gave a total shoe value of $7,402.30”.
170 He repeated many of the observations to which I have made reference above, noted that some of the damaged shoes could not be found in the inventory list provided by the Applicant, the Applicant’s list showing 3149 pairs and he and Mr McHugh inspected 3988 pairs.
171 He noted that the 4399 pairs of shoes at the Applicant’s warehouse, taken from Shop 67, had an invoice value of $87,369.79 and to which he gave a “present wholesale market value” of $32,710.00.
172 He gave detailed evidence about what exactly happened at the Wetherill Park warehouse on 20 January and 3 February 2010. There is no need to review that evidence in detail – it was effectively not challenged. He and Mr McHugh apparently “reviewed all the shoes in about 3-5 cartons”. Some of these cartons “contain shoe boxes and others contained shoes in plastic bags” and Mr Nour “grouped all the same style of shoes together”. His evidence was that “it soon became apparent … that to continue in this manner would take weeks (literally) to sort, review and value”. Mr McHugh observed that he had “all the pairs of shoes already in the database”. Mr Nour said:
“I am very familiar with the brands and styles. I can value on the basis of that information. I don’t think it will be necessary for us to physically review each pair of shoes in the box. If the shoes are in the correct box and in their correct original condition, then I can value it on that basis and on the basis of their name”.
and Mr McHugh said:
“I went through each pair of shoes on the last occasion. They are in their correct boxes. I am happy to proceed on that basis”.
“I hope they are not all like this. I have already seen in a number of the bags that there are a lot of single shoes. I hope that there are no singles in the boxes as the other singles from these pairs must be somewhere”.He and Mr McHugh opened a couple of boxes, discussed the value of the shoes and their values “were very similar if not equal”. They then opened another box and “observed two different shoes in it – they did not form part of a pair”. Mr Nour said:
and Mr McHugh said:
“If we are going to check every box and find all the separate halves, it will take forever”.
and Mr Nour said:
“Let’s just value the ones in the bags. The boxes we will just have to value off the information in your database. As the plastic bags are not branded and have been damaged in the absence of a box, we will have to look at these differently”.
173 Mr Nour had been told by the warehouse manager:
“We spent seven days with five staff to try and put all of the single shoes together. We found a lot of singles but no matching pair. We put all of these shoes in plastic bags.
The Schedule provided to Mr Nour shows “hundreds of single shoes” and Mr Nour’s observation was that:
“Given the hundreds of single shoes recorded in the schedule and appearing in the bags, I believed it was very likely that those single shoes could be in the boxes. However, given the time needed to review each box it was impractical to check for this. I therefore assumed each box contained a completed pair of shoes in original condition”.
174 His evidence was that he said to Mr McHugh:
“If the have had remained in the original box and the original box had not been damaged, then it is unlikely that the shoes would have been damaged”.
175 His evidence was that there were 848 single shoes, which represented approximately 11% of the total shoes recorded in the Applicant’s stocktake. In his view this was “a very large percentage of single shoes. In my experience, a maximum of 20 single shoes may be found (although this would derive from sloppy management). However, this number of single shoes in extraordinary”.
176 He noted that many of the shoes he valued at between 50cents and $5.00, and that this “very low value reflects that the shoes had been damaged, in that they were misshapen, marked, the socks (the innersole) had lifted and (some) of the heels had become dry and broken”. He expressed the opinion that “the damage caused to almost all of the shoes was caused by the moving of the shoes and their subsequent storage both at Shop 67 and the Wetherill Park warehouse”. He referred to the conditions of storage at the warehouse, the heat, shoes being “without the normal protection of a box … and in plastic bags will deteriorate quickly in hot, humid conditions” and that they “had been stored in this manner for over one year … (which in his opinion) is more than sufficient to cause cracks on polyurethane material used to make heels and in action leather (a poor or cheap form of leather) which is a common ingredient in shoes, especially cheaper shoes. The heat would also affect the glue used in shoes”. He also noted that “not only was the storage “very poor for shoes” but that a number of shoes “had been placed on top of each other, squashing boxes and the shoes themselves so that they were misshapen; some shoe boxes were not strong enough to withstand a large number of boxes on top. A very strong box could only cope with a 10 box pile. An average would be put in a 5-6 box pile. If odd size boxes are placed on top of each other, this could also cause damage as a large box would be too heavy for a small box underneath”.
177 He was quite critical of Mr McHugh’s valuation of the stock at 31 August 2008 at $8,720.00. This valuation was “said to be the value of the 3998 shoes of which approximately 3149 pairs were on the inventory list”. He concluded that “presumably the value of these shoes is therefore less than the $8,720.00 recorded by Mr McHugh. Given there were 7548 shoes on the (Applicant’s) inventory this represents approximately 42% of the stock. 3998 pairs of shoes is more than one half of the inventory list of shoes. The inventory price of the 3149 shoes was $64,744.35. To suggest that the value of this stock was reduced on 31 August 2009 to a figure of 13.5% of that inventory price (he considered) to be highly unrealistic”. He noted (as Mr McHugh conceded in oral evidence) that Mr McHugh “had no experience in selling or buying lady’s shoes since 1976 and since 1984 (had) been involved with John Karadonis shoes which is a men’s shoe store only. As such it is highly unlikely that he has had any exposure to the women’s shoe market since (1984).”
178 The significance of the evidence of Mr Nour is this: in his view (Exhibit “O” at [36(ff)]: “the only reasonable way of determining the market value for the shoes is to refer to the invoice price as recorded in the inventory. In (his) experience this is the usual practice of insurance companies when assessing claims for lost shoes”. His experience “in making insurance claims for my stores and in dealing with insurers (and their solicitors) (is that claims) were paid based on the invoiced value”. His view was “given the importance of boxes, size, ranges, styles, (and) fashion changes, the invoices provide the only clear record of the value”.
179 Mr Nour went further: in his view the “discounting of shoes for close of business sales does not affect the value of the shoes. Shoe sales are a normal part of any retailer’s business. ‘Closing Down” sales often occur to attract more customers and to clear stock”.
180 He was critical of Mr McHugh analysis of the various sizes in the range of ladies’ shoes and noted that “it was common for shoe stores to replace sold sizes from new stock orders or from stock held in other stores”, noting that the Applicant “had two stores other than (Shop 31) in August 2008. Accordingly, the loss of one or two shoe sizes which can be replaced, (and) does not reduce the value of the remaining shoes held”.
The Cross-Examination
181 Both experts were the subject of detailed, searching cross examination. Both experts approached their respective cross-examinations with equanimity and humour. Both experts knew each other well and both experts approached the task with fairness and expertise.
182 To review all of the cross-examination in detail would tedious and unhelpful. Suffice it to say that it ranged over the details so carefully set out in the numerous spreadsheets that were in evidence, incorporated detailed analysis of various shoe types and shoe brands, examined in finite detail the correlation between various shoes and their asserted invoices, demonstrated in a number of cases that the values were not supported by invoices or, the invoices did simply not relate to the particular shoes in question.
183 I express the opinion, having reviewed the evidence in chief and the cross-examination, that, except for some relatively minor issues neither witness moved a great deal from their originally expressed views. This was understandable having regard to their different approaches to valuation and the physical difficulties encountered by them both in carrying out their tasks.
Discussion
184 Counsel have submitted that the primary difference between the two experts is that Mr Nour commences his analysis from the original invoice price. I think that must be correct. The Applicant was conducting a business – indeed, she was conducting a business from three shops in different locations – and there was not the slightest suggestion that the invoice prices were not correct or that the Schedules and invoices produced were other than correct. Although the Respondent, through its counsel, made some quite disparaging submissions relating to the invoices, in my opinion those submissions cannot be supported on the evidence. The business records of the Applicant were clearly business records that should be accepted, but subject to any inconsistencies that may have been demonstrated in the evidence.
185 The invoice price is “the price that (the Applicant) paid for the stock in its shop … the price (the Applicant) had on the invoice from the supplier (the Applicant) brought from … the amount (the Applicant) paid …” (T. 29/04/10 at 8). If the aim of an award of damages is to restore (as best reasonably possible) the injured party to its position prior to the injury, then it seems to me that the price paid for the goods now damaged is an excellent starting point.
186 There is no need for me to review all the material in detail. There were missing invoices – that is to be expected in normal business activities where one is dealing with numerous small items or product. The fact that the Applicant could not locate some invoices during cross-examination is not a basis to raise doubts about her evidence. It is plain that the vast majority of invoices were produced and it is a reasonable inference to conclude that any missing invoices may well have been lost in the move from Shop 31 when the Respondent took possession of that Shop and its contents.
187 In my view there should be an appropriate discounting against the claim of the Applicant. Valuation is not exact science – that is always the case and has been demonstrated almost since time began – experts can hardly ever agree – notwithstanding the earnest and mis-placed attempts by judges to encourage agreement – and one has to do one’s best with the evidence provided and the legitimate but differing views of experts.
188 The Applicant’s case relating to the quantum of damages moved, as the case progressed, from its original claim of $268,000.00 to $138,964.04. As finally articulated the claim for lost or damaged shoes was $113,003.04 and the claim for lost or damaged other stock was $25,961.00.
189 The claim for “lost or damaged shoes” was made up as follows:-
“Invoiced value of shoes at 31 August 2008 $152,114.34
Less: value of shoes retained (by Applicant) $ 32,710.00
Total loss on shoes: $113,003.04”Less: value of other shoes in storage $ 6,401.30
190 In my opinion the basics of that claim are supported by Mr Nour’s evidence save that in my view there should be a discount, simply because it is difficult to be “certain” of the ultimate conclusions having regard to various missing and/or unconnected invoices and the understandable generality of the approach taken by both experts. However, in all the circumstances, I do not believe that the discount should be more than 10%, such that on this head of damage the loss should be $113,003.04, less 10% at $11,300.30; total loss therefore $101,702.74.
191 At the risk of again pointing out the obvious, as at 31 August 2008 the Applicant was operating a business, trading, dealing with customers, keeping business records, and so on; and it is plain to me that whatever happened on 31 August 2008 and thereafter resulted in a substantial loss to the Applicant. There was no suggestion that when Sophie took various shoes from Shop 67 she removed the shoes which, in her opinion as an experienced business person, she could on-sell, thus leaving in Shop 67 those shoes that, in her view, had little or no value. This conclusion is supported by the fact that the original invoice value of the shoes at Wetherill Park was in the order of $60,000.00 but they were reduced in value to $6,401.30 (or thereabouts).
192 The other claim agitated was for lost or damaged stock other than shoes. The Applicant asserted its claim as follows:
“1. Lost T Shirts (279) $ 2,975.00
2. Lost Hand bags (22) 470.00
3. Lost Suitcases (7) 320.00
4. Lost Wallets (43) 774.00
5. Lost Silk Scarves (105) 2,625.00
6. Lost Sun/reading glasses (192) 960.00
7. Lost Glass cases (438) 876.00
8. Lost Socks (620) 1,240.00
9. Lost Ties (122) 2,196.00
10. Lost Leather belts (76) 684.00
11. Lost Jewellery (286) 5,076.00
12. Lost Souvenirs (169) 3,380.00
13. Lost Sunglasses stands (2) 440.00
14. Lost Sock stands (2) 400.00
15. Lost Sock moulds (50) 600.00
16. Lost Belt stand (1) 180.00
17. Lost Jewellery displayers (2) 140.00
18. Lost Metal baskets (8) 400.00
19. Lost cash float 225.00
Total: $25,961.00”20. Lost Shop sales income 2,000.00
193 The primary evidence in support of this claim was that of Sophie. Her evidence was supported by that of Joy (Exhibit F) and the various Exhibits to her affidavit.
194 Putting all this together the position would seem to be that Joy recorded a shoe stocktake on 28 August 2008, then prepared a Schedule “Recording the Loss and Damaged Stock and Fixtures and Fittings” as Exhibit LD-6. Joy carried out a stocktake on 30 August 2008 – Exhibit LD-7. Her evidence was that “many of the Shop’s fixtures and fittings were either damaged or missing. I recall that racks were bent or broken. A ladder was broken and hooks were missing. A sun and reading glasses stand was not working. A table was missing. Only a few chairs were present. A wooden shelf was broken. Of the stock that was present, I observed many socks on the floor with shoe prints on them . I saw hats that had been squashed on the floor under the shoe boxes. Some of the sunglasses were still on the floor … some of them were broken. Others were lying dirty on the floor. The black t-shirts (were) on the top of a pile of shoe boxes. However, I only saw 5-6 pieces. The shirts were all squashed together”. Her evidence was that she “prepared a list of non-shoe stock, fixtures and fittings that was either missing or damaged … (as Exhibit LD-7 …) and the quantity of stock etc in this document “was based upon the inventory less that which was removed from Shop 67”.
195 The claim for lost or damaged stock, other than shoe stock was based upon a document styled “Loss and Damage Stock Report” which was Exhibit YMX-10, and Exhibit LD-6. These Exhibits (both the same) set out in detail the factual situation in support of this head of damage. So, for example, in relation to the lost t/shirts, the evidence was that the Applicant’s inventory record showed it holding 316 t/shirts but, upon relocation the Applicant’s officers/employees could only find 37 t/shirts, all being dirty and creased. The original unit price was $10.00, the re-saleable unit price was $5.00, such that the loss claimed is $2,975.00 There was, effectively, no expert evidence regarding the value of the t./shirts, but I am unable to conclude that Sophie does not know her business and was not able to reasonably estimate the re-saleable value and the consequent loss.
196 This Exhibit YMX-10 was varied at the hearing to accommodate the inability of the Applicant to produce original purchase invoices. Most of what was deleted related to administrative/office equipment; other items were deleted (eg shoehorns, shop decorations, shop assistants’ personal belongings and various items for labour costs associated with inspections, cleaning, repacking and so on after 31 August 2008).
197 However, it seems to me, from looking at the evidence of Sophie and Joy, considering the various photographs tendered, observing the witnesses giving evidence and appreciating the documentation tendered, and bearing in mind the various problems of corroboration faced by Joy regarding Exhibit LD-7, in my opinion the claim under this head is properly made and should be allowed, but properly discounted. A discount should be applied because the proof of loss was, although clear as to items was not so clear as to quantities, and not so clear as to quantum, such that, although there was evidence it was subject to doubts. An appropriate discount is 20%.
198 On this aspect I should observe in relation to all of these items the Respondent effectively submitted there was no evidence of loss and no evidence of damage and no evidence of quantum of damage. But, and with respect, that is plainly wrong. The standard of proof is to the balance of probabilities. The evidence of Sophie and Joy was quite clear. Sophie is a person experienced in business. There was no evidence contrary to that of Sophie and Joy in relation to the existence of the various items, nor as to their loss or damage. In addition, there was clear photographic evidence. Once one accepts that the items were in Shop 31, as I do, then the rest follows as night follows day. It would be unreasonable to suggest that somehow the Applicant was not telling the truth about the existence of the items and not telling the truth about their loss and/or damage. It is unreasonable to suggest that the Applicant was offering for sale damaged stock.
199 With regard to the claim for the loss of the daily float of $225.00 cash left in the cash register the evidence is consistent with the Applicant’s claim; but RestorX have apparently found $120.00 – that fact itself is supportive of the presence of the float – the cash remains available at RestorX and thus this amount should be reduced accordingly to $105.00. That reduction is on the basis that the $120.00 held at RestorX is returned to the Applicant in accordance with the undermentioned orders.
200 With regard to the claim for lost shop sales income in $2,000.00, the evidence shows that the Applicant stored three days income in cash “in one of the shoe boxes in the back storage room in … Shop 31” and they could not find this shoebox in Shop 67. The Respondent has observed that the Applicant’s records of cash received over those three days was $2,256.00. There was no contrary evidence led by the Respondent, and the evidence of Sophie and Joy was effectively the same (although, as with most evidence there were some variations) the gravamen of the evidence showed that the cash received was placed into a shoebox or an envelope and it was not there. Thus, it seems to me, that the claim of $2,000.00 is well and truly made out and should be allowed.
GST
201 The Respondent submitted that the claim of the Applicant should not include GST, that it currently includes GST for which the Applicant “already has or would be entitled to claim and input tax credit” and thus its claim should be reduced accordingly. Obviously, although there was no challenge to that by the Applicant, it is plain that the lost cash float, being a cash amount, should be ignored and as to the $2,000.00 this was income actually received and as such, would have included a GST component and therefore should be included without a GST deduction. In those circumstances, it seems to me that the quantum for GST purposes is:
a) Lost or damaged shoes: $101,702.74b) Lost or damaged stock other than
shoes $ 23,736.00
Less: 20% discount 4,747.20 18,988.80Total: $120,691.54
Less GST component 13,276.07
Total loss excluding GST $107,415.47
Add cash float (now $105.00 per
[198] above and lost Shop sales
Total allowed claim: $109,520.47Income ($2,000.00) $2,105.00
202 In relation to these calculations I propose to grant liberty to apply.
203 In my opinion the Applicant is entitled to an award of damages in $109,520.47. In addition, the Applicant is entitled to its goods currently in the RestorX Wetherill Park warehouse and the Applicant should be ordered to collect those goods, and the $120.00 cash, within fourteen days of the date of this decision. What it does with those goods is a matter for it – the loss has been calculated and the goods, in their current state, are owned by the Applicant.
Cross-Application
204 The Respondent by its own Application filed 6 November 2008, File 085222 sought various orders as I have set out above at [16] . One of the prayers for relief sought an order that the Applicant pay to the Respondent $3,813.00 “on account of unpaid rent for Shop 31”, said to be in relation to a tax invoice issued 1 August 2008 in that sum, being the monthly instalment of rent, outgoings and a promotion fund levy. There is no doubt that the invoice was issued and remains unpaid. The evidence demonstrates, however, that the Applicant has deposited with the Respondent the sum of $3,000.00 in respect of a security deposit/bond. This should be taken into account such that it should be set off against the unpaid rent resulting in a notional award in favour of the Respondent in $813.00 which, it self, should be set off against the award in favour of the Applicant, thus resulting in a nett award that the Respondent pay to the Applicant $108,707.47.
205 The Respondent also seeks other orders that I have set out above. These prayers for relief cannot be substantiated having regard to what was clearly unwarranted and, quite clearly, atrocious conduct by the Respondent in its actions causing the Applicant to vacate Shop 31 in the face of what was clearly a five year lease not terminating until 31 July 2012. Whatever “losses” the Respondent has incurred must be borne by it and not visited upon the innocent Applicant. Those prayers for relief are dismissed.
206 I shall hear the parties on costs, if they are so minded, but subject to compliance with Order 4 below.
207 Although I have endeavoured to address the evidence and the arguments raised, it seems to me that most of the issues agitated turned out to be otiose. The reason for this observation is that neither party appeared to have a firm grip on their legal entitlements nor on the most basic requirements for the smooth conduct of a shopping centre. If the parties had taken a deep breath and sat down together with a cup of tea, they would have realised:
1. The lease term did not expire until 31 July 2012.
2. The Applicant had been in occupation of Shop 31 since 1 April 2007.
3. The Applicant had conducted its commercial business from that Shop and had paid all its rent and was entitled to remain in occupation and to continue to trade until 31 July 2012, subject, of course, to future compliance with the terms of the Lease.
5. Its failure to negotiate, its heavy-handed approach, its extraordinary use of surveillance devices (quite unnecessary, potentially illegal, and clearly embarrassing), its failure to understand the effect of the RL Act, and its failure to permit the Applicant to remove is goods and chattels, has resulted in a totally unnecessary and wasteful exercise in bad public relations, in legal costs being incurred and in an unnecessary court/tribunal case. That is not to say that the Applicant is itself without blame; but, or so it seems to me, the owner/manager of a large commercial shopping centre is in a unique position of power and authority, should know the law relating to shopping centres and retail leases, and should not behave in the manner I have sought to set out in this decision4. If the Respondent seriously wanted to move the Applicant to another shop within the Centre, or (for whatever reason) did not want the Applicant within the Centre, then it would have had to negotiate appropriate terms with the Applicant.
1. The Respondent pay to the Applicant $108,707.47 by way of damages.
2. The Applicant collect forthwith, and in any event, within fourteen days of the date of this decision, all its goods and chattels and cash of $120.00, held at the warehouse of RestorX, Wetherill Park; the Respondent to make immediate arrangements with RestorX to enable the Applicant to comply with this order; the collection of goods to be at the cost of the Applicant (ie. no charge to be made by the Respondent nor by RestorX against the Applicant).
4. Should either party seek to move the Tribunal for an order for costs, that party must file and serve any such Application, with support submissions, within twenty-eight (28) days of the date of this Decision. Should no such Application be so filed and served the order of the Tribunal will be that there is no order for costs. Should there be such an Application so filed and served the opposing party must file and serve submissions in reply within a further twenty-eight (28) days. Unless reasons are advanced for a hearing to be conducted, the issue of costs will be resolved.3. Liberty to apply in relation only to any monetary calculations and/or the implementation of Order 2.
9
2