Belmed Pty Ltd t/as Belmont Medical Centre v Nichols Construction Pty Ltd
[2013] QCAT 158
CITATION: Belmed Pty Ltd t/as Belmont Medical Centre v Nichols Construction Pty Ltd [2013] QCAT 158
PARTIES: Belmed Pty Ltd t/as Belmont Medical Centre (Applicant)
v
Nichols Construction Pty Ltd
(Respondent)
APPLICATION NUMBER: RSL086-11
MATTER TYPE: Retail shop leases matters
HEARING DATE: 13 - 14 December 2012
HEARD AT: Brisbane
DECISION OF: Mr James White, Presiding Member
Mr Malcolm McRae, Member
Mr Neil Judge, Member
DELIVERED ON: 20 March 2013
DELIVERED AT: Brisbane
ORDERS MADE: 1. The payment of the $20 000.00 constitutes “key money”, which is prohibited under s 39 of Retail Shop Leases Act 1994;
2. Nichols Constructions Pty Ltd behaved unconscionably as defined in s 46A and s 46B of Retail Shop Leases Act 1994.
3. Within 28 days of the date of these orders, Nichols Constructions Pty Ltd pay Belmed Pty Ltd t/as Belmont Medical Centre the amount of $20 000.00.
4. Belmed Pty Ltd t/as Belmont Medical Centre’s claim for compensation be dismissed.
5. No order as to costs.
CATCHWORDS: RETAIL TENANCY DISPUTE - KEY MONEY – UNCONSCIONABLE CONDUCT – COMPENSATION.
Retail Shop Leases Act 1994, s 39(1), s 39(3), s 46A, s 46B
Baglatzis v Mondial Stone (Australia) Pty Ltd [2004] RSLT 17, followed
Cole v Kelly [1920] 2 K.B. 106, 132, citedDon Webb v Dia Kensetsu Company Ltd [1998] QRSLT 27 (18 December 1998)
Erlington v Judd (1964) 64 SR(NSW) 150 at 153), cited
F & G Nominees Pty Ltd v Verdell Pty Ltd [2003] WASCA 290, followed
Gillett v Burke [1997] 1 VR 81; cited
Laybutt v Amoco Australia Pty Ltd (1974) 134 CLR 57, cited
Gorton v Vaggelas [1993] QRSLT 2, citedJ K Corporation Pty Ltd v Dileum Pty Ltd, unreported; SCt of WA; Library No 8901159; 5 April 1989, cited
Ocean Square Pty Ltd v Duranzo Holding Pty Ltd [1998] 2 Qd R 410, cited
O F Gamble Pty Ltd v Whitemore Pty Ltd (1990) 2 WAR 327, cited
Temptress Nominees Pty Ltd –v- Constantinou, 2001 VCAT 1443, citedWedd v Porter [1916] 2 K.B. 98), cited
Whitmore Pty Ltd v O.F. Gamble Pty Ltd (1991) 6 WAR 110, cited
APPEARANCES and REPRESENTATION (if any):
For the Applicant: Mr. P. Travis of Counsel instructed by Fitz-Walter Lawyers
For the Respondent: Mr. M. McDonald of Counsel instructed by Parker Simmonds
REASONS FOR DECISION
Factual Background
[1]The Applicant/Lessee, Belmed Pty Ltd trading as Belmont Medical Centre (“Belmed”) leased premises from the Respondent/Lessor, Nichols Construction Pty Ltd (“Nichols”).
[2]The premises the subject to the lease are situated at 185 Belmont Road, Belmont in the State of Queensland (”the premises”).
[3]The lease commenced on 1 June 2006 and was due to expire on 31 May 2011 (“the lease”). Nichols had purchased the premises in October 2009. Prior to that time, there was no legal relationship between Belmed and Nichols. Under the lease, there was an option period of five years which was not exercised by Belmed.
[4]Leading up to the end of the lease Belmed then sought an extension of the lease for a further two months as its new premises were not available. Initially Nichols was only agreeable to a one month extension however after further negotiations the parties agreed to a two month extension of the lease on the following conditions:
(a)that Belmed pay two months rent and outgoings;
(b)that Belmed’s plant and equipment (fitout and chattels) would remain;
(c)that Belmed pay the respondent $20 000.00 due to loss over new tenants; and
(d)that Belmed would pay all outstanding invoices which included outstanding rental, levies and electricity.
(“the agreement”)
[5]The parties reached the agreement on 23 May 2011 via an email sent by Nichols’ agent, Philip Black of My Core Properties Pty Ltd, to Belmed’s solicitor Mark Fitz-Walter. Belmed paid the requested payments on 25 May 2011. Belmed vacated the premises as agreed at the expiration of the two month extension period.
Notice of Claim
[6]Belmed filed a Notice of Dispute on 13 July 2012 and seeks orders as follows:
(a)that the payment of the $20 000.00 constitutes “key money”, which is prohibited under s 39 of Retail Shop Leases Act 1994 (“RSLA”); and
(b)that Nichols behaved unconscionably as defined in s 46A and s 46B of RSLA.[1]
(c)that Nichols refund not only the $20 000.00 but also the value of the fitout and equipment which was left when the premises were vacated in the sum of $39 336.45
[1] Part C, Paragraph 3 of Notice of Dispute dated 13 July 2012 (Main Points).
[7]Belmed seeks that Nichols refund the $20 000.00 and damages of $39 336.45 being compensation for the fitout and chattels which were retained by the respondent.[2]
[2] Part C, Paragraph 3 of Notice of Dispute dated 13 July 2012 (Remedy).
[8]Nichols responded and seeks orders that Belmed’s application be dismissed. Nichols submits that the $20 000.00 was not “key money” and that the monies represented compensation for loss of new tenants.
Belmed’s Submission
[9]Belmed submits that the $20 000.00 which was paid constitutes key money because the payment was made in exchange for Nichols leasing the premises to Belmed for a two month period and was classified by Nichols as “goodwill rent” or compensation for loss of a new tenant.[3]
[3] Email of 23 May 2011.
[10]Belmed further submits that even if the $20 000.00 did not constitute “key money”, then Nichols’ conduct in demanding the $20 000.00 and fitout, chattels and equipment, Nichols acted unconscionably because the respondent refused to allow the applicant to remain in the premises for an additional two months unless it agreed to the terms of the agreement. Belmed submits that relative strengths of the parties bargaining positions were unequal.
Nichols’ Submission
[11]The respondent submits that the applicant is not entitled to a refund of the $20 000.00 or compensation because, in a nutshell, the applicant is bound by the agreement entered into between the parties which both parties acted upon and complied with.
Witnesses
[12]The evidence relied upon by both parties comprised affidavits, exhibits and oral testimony.
Belmed’s witnesses were:
Jason Heffernan, Director of Belmed;
Marina Sideris, a tenant at Belmont Shopping Centre; andTina Bayar, Loss Adjuster.
Nichols’ witnesses were:
Phillip Black, CEO (Asset Management), My Core Properties; andTerence Knight; Valuer, Lloyds Asset Services Pty Ltd.
Consideration of the evidence
Key Money
[13]Mr Heffernan gave evidence that in March 2010, he saw an opportunity to expand the medical centre and approached Mr Black about the possibility of the medical centre and adjoining pharmacy expanding into some extra space which was becoming available at the shopping centre. He gave evidence of the progress of these negotiations, which broke down over the issue of the amount of new rental which would be payable in respect to the new lease.
[14]He described a meeting at Mr Black’s office at Yatala on 4 February 2011, attended by Mr Heffernan, his father Colin, Mr Black and a Director of Nichols, Mr Nichols. He said that the discussions became heated and that Mr Nichols said to Colin Heffernan,
I will punch your fucking head in if you make any more disparaging remarks about my shopping centre.
[15]At the end of the meeting, Mr Black presented an amended Offer to Lease and said words to the effect that:
if you don’t sign this now, the conditions of the new offer will be withdrawn.
[16]It is clear that the negotiations over a reasonably lengthy period had reached a point where there were significant tensions between the parties. Notwithstanding that Belmed signed an Offer to Lease, Mr Heffernan said that he had decided to explore relocation options for the medical centre. This decision came about as a result of an email sent by Mr Heffernan to Mr Black on 5 March 2011, requesting a copy of the proposal signed at the Yatala meeting. Instead of receiving a copy of the proposal from Mr Black, Mr Heffernan received a typed document purporting to accurately reflect the original offer document. Mr Heffernan says that the document which was received omitted a reference to, “Laboratory” in the “Use” section of the proposal. Mr Heffernan says that as a result of this omission, on 8 March 2011, he emailed Mr Black withdrawing Belmed’s acceptance of the Offer to Lease.
[17]This evidence is important as it sets the stage for the ongoing negotiations between the parties.
[18]Mr Heffernan sought from Nichols consent for Belmed to be allowed to continue occupation of the premises on a month-to-month tenancy until Belmed could move into alternative premises. Mr Heffernan says that as there was no response from Mr Black, Mr Heffernan emailed Mr Black on 28 April 2011 stating:
I previously requested to go on a month to month tenancy at the end of this formal lease period until approximately the end of September 2011. Our departure date may fluctuate a little depending on construction times. Can you confirm the landlord is happy with this arrangement?
[19]During May 2011, on a date unknown, Mr Heffernan telephoned Mr Black from his home phone and told Mr Black that he was concerned about the welfare of his patients that might result from any disruption to the medical centre. In response, Mr Heffernan says that Mr Black said words to the effect that,
I don’t care about your patients; I only care about the landlord. Nichols is worth $100 million and he wants to make life difficult for the medical centre.
[20]On 11 May 2011, Mr Black emailed a response:
Hi Jason, In reply to your question below; You have chosen not to renew your lease at Belmont Village therefore you are required to vacate at the end of your term, 31st May 2011 and to ‘Yield Up’ your Tenancy as per your current Lease, or we could grant you a further month, i.e. Tenancy to the 30th June 2011, and this will be on a walk in walk out basis, excluding your personal business equipment and moveable chattels and you will not be required to ‘Yield Up’ your lease. Please let me know by Friday 4pm what you plan to do otherwise we will assume you are vacating at the end of this month as you have originally requested.
[21]On 12 May 2011, Mr Heffernan conveyed to Mr Black that the matter was with a solicitor and that he would respond once he had received solicitor’s advice. Mr Heffernan stated that given the urgent need to secure the grant of a right to occupy the shop for a period of time following the end of the fixed term lease. Mr Heffernan retained a solicitor, Mr Fitz-Walter.
[22]By 16 May 2011, Dr Ali Issapour, a Director of Belmed, (“Dr Ali”) had become involved in the negotiations as on this date, Mr Black telephoned Dr Ali to follow-up a discussion between he and Dr Ali concerning the lease of the shop. According to Mr Black, Dr Ali was very concerned that the extra two months needed at the shop had not been negotiated and the tenancy at the new premises was not ready.
[23]According to Mr Black, Dr Ali asked Mr Black on 19 May 2011, that Nichols,
not charge them an outrageous rental amount for the next 2 months so that they could stay there until their new rooms were ready.
[24]Mr Black said that he would,
discuss this internally and come back to him and Fitz-Walter.
[25]Mr Black in his evidence agreed that there was a sense of desperation on the part of both parties at that time.
[26]On 18 May 2011, Mr Fitz-Walter, Belmed’s Solicitor wrote to Mr Black and confirmed an agreement reached over the telephone between Mr Fitz-Walter and Mr Black. It is unclear as to the date of the phone call. Mr Fitz-Walker in his letter referred to an agreement whereby:
… the landlord will allow the lessee to hold over in terms of the present lease between them until 31st July 2011. At the end of July the lessee will deliver up the premises to the landlord and will leave all the office fittings and fixtures inside the leased premises by the lessee which will be deemed abandoned in favour of the landlord for the landlord’s sole use and benefit. On this basis the tenant will be relieved of any make good, repair or repainting obligations it has under the lease and the lease and or any licenses running with it shall be at an end and neither party shall have any further claim against the other.
[27]On 20 May 2011, Belmed sent the plant and equipment list to Mr Black. Mr Heffernan expressed in evidence that by 20 May 2011, there was an incredible sense of urgency and felt,
Nichols didn’t care. Our plight was hopeless.
[28]On 23 May 2011, Mr Black took photographs of chattels of the medical centre. Belmed had had also agreed to provide a list of plant and equipment to Mr Black.
[29]During his evidence, Mr Black accepted that Belmed did not come to him to complain about an inability to yield up under the lease. He confirmed that Belmed’s concern was always to secure the grant of an extension of time in which they could occupy the shop while their new premises were being completed.
[30]On Monday, 23 May 2011, Mr Black sent an email to Mr Fitz-Walter advising that Nichols would grant a two-month extension of the lease for June and July 2011, on the following conditions:
We accept the P&E list sent through by Tiffany of Belmed last week and the Invoice attached; which includes the 2 months rent, outgoings, marketing levy, ambulance levy, averaged electricity which will be balanced at the end of the term once the meters have been read, a figure of $20,000 due to our loss over new tenants and all outstanding invoices to date which have not been paid.
[31]The email also sought payment in full by 25 May 2011 and if not paid Belmed was to make good on their lease obligations prior to 1 June 2011. This meant that Belmed would have to vacate on the last day of the lease, being 31 May 2011.
[32]Attached to the email was an invoice for $43 670.10, which included “monthly rent” for June 2011 and July 2011, licensed area rent for each month, and an item for what is described as “Goodwill Rent” in the amount of $20 000. Belmed agreed to the terms of the extension of the lease[4] , because Heffernan considered there was no other option.
[4] Email of 23 May 2011.
[33]On 25 May 2011, Mr Black accepted three cheques dated 25 May, 8 June, 25 June 2011, for three total amount of $47 412, pursuant to the agreement of 23 May 2011.
[34]Belmed vacated the shop by 31 July 2011, leaving the fit out and chattels. The shop was subsequently leased to another medical centre who took over the fit out and chattels.
[35]The Tribunal takes the view that by 23 May 2011, the date of Nichols’ email offer, Nichols was aware of Belmed’s desperate position to secure a leasing arrangement for an additional two months whilst Belmed’s new premises were being fitted out and completed. It is especially noted that Nichols gave Belmed until 25 May 2011, 6 days prior to the expiration of the lease, to accept its offer.
[36]In regard to Nichols seeking from Belmed a payment over and above the rental, in the sum of $20 000.00, it was only under cross examination by the Counsel for Belmed, that Mr Black raised the issue of the casual rental rate. Up until then the justification for seeking Belmed to pay the $20 000.00 was for “loss over new tenants”, which meant compensation for loss of rental for not finding a new tenant as a result of granting an extension of the current lease.
[37]During his evidence, Mr Black asserted that the agreement between the parties concerning the payment of the $20 000.00 and yielding up possession on a walk in and walk out basis, “was agreed upon”; the “parties had struck a deal”; “it was a good deal”; “it was a “goodwill gesture”; and “this was a pretty good deal for both parties”. This was the thrust of Mr Black’s evidence, that is, if the parties had reached agreement, then the agreement should not be revisited, notwithstanding that there appears to be no evidence by Nichols as to the calculation of the payment of $20 000.00. Mr Black said in evidence that he had simply “thought up $20 000.00” The $20 000.00 was also not recorded in Nichols accounts as compensation but an unusual term called “goodwill rent”.
[38]The Tribunal takes the view that the payment of $20 000.00 was some form of ex gratia payment whereby Nichols received a benefit over and above the usual tenancy rate. There was an attempt to explain it by reference to a casual rental rate; however the evidence doesn’t reflect this type of justification. The $20 000.00 was sought at a time, when Nichols was aware of the desperate and urgent position that Belmed was under.
[39]The issue for determination by the Tribunal is whether the payment of $20 000.00 constitutes “key money”.
[40]The relevant provisions under the RSLA are found in:
39Payment of key money and amount for goodwill prohibited
(1)A person must not, as lessor or for the lessor, under or in relation to a retail shop lease, seek or accept the payment of key money or any amount for the goodwill of the lessee’s business carried on in or from the leased shop.
…
(3) If an amount is paid to, or a benefit accepted by, a person in contravention of subsection (1), the person who paid or conferred the benefit may recover the amount or value of the benefit as a debt.
[41]In the Schedule to the RSLA which comprise the Dictionary, key money is defined as:
an amount to be paid to, or at the direction of, the lessor by way of a premium, non-repayable bond or otherwise, for the granting, renewing, or assigning of the lease; or any benefit to be conferred on, or at the direction of the lessor for the granting, renewing, or assigning of the lease.
[42]The relevant clauses of the lease are:
16.01 Tenant to Yield up -- The Tenant shall at the expiration or sooner determination of the Term Yield up the Demised Premises in the order and condition described in Part 7;
…
16.08 Holding Over -- If the Tenant shall, with the consent of the Landlord, remain in occupation of the Demised Premises after the expiration of the Term, the Tenant shall, (in the absence of any express agreement in writing to the contrary), be deemed to hold the Demised Premises as Tenant, from month-to-month, at a monthly rental equal to the aggregate of one month's proportion of the percentage rental (if any) payable at the expiration of the Term and the monthly instalments on account of the base rent the Outgoings and the Air-Conditioning Costs Advertising Levy and other monies payable hereunder at the date of the expiration of the Term (such rent being payable monthly in advance) but otherwise on the terms and conditions of this lease so far as they can be applied to a monthly tenancy.
[43]Counsel for Belmed submits, “the key money prohibition is not concerned with whether the grant of a ‘lease’ (i.e. grant of right to occupy in return for valuable consideration) for which a benefit is conferred on the landlord is a (a) pre-existing lease with an extended term; (b) pre-existing lease with a hold-over appended on the end of it; (c) new lease incorporating the terms of an old lease to the extent applicable; or (d) completely new lease. The key money provision is relevantly concerned with whether there has been a conferral of a benefit on the landlord for the grant of a ‘lease’ as defined in the Dictionary to the Act.”[5] It was submitted that Baglatzis v Mondial Stone (Australia) Pty Ltd [2004] RSLT 17 at *22-23 (12 March 2004, A Forbes) was relevant to the broad reach of the definition of “key money”, particularly to the term, “or otherwise”, in that the term captures the breadth of possible characterisations that may property be attributed to a payment. The Tribunal agrees.
[5] Paragraph 94 of the Applicant’s Submissions, 21 January 2013
[44]The Tribunal also notes the other cases cited by Counsel for Belmed in support of its submission, namely, Baglatzis v Mondial Stone (Australia) Pty Ltd [2004] RSLT 17; Gorton v Vaggelas [1993] QRSLT 2; Ocean Square Pty Ltd v Duranzo Holding Pty Ltd [1998] 2 Qd R 410 (Court of Appeal); Henningsen at [25] (quoting Erlington v Judd (1964) 64 SR(NSW) 150 at 153); Cole v Kelly [1920] 2 K.B. 106, 132 per Atkin LJ and Wedd v Porter [1916] 2 K.B. 98).
[45]Counsel for Nichols submits, ”when the 1994 legislation was promulgated, it can be seen that the reference to "extension" of a lease was omitted, and, by implication, extensions of lease periods are not intended to be covered by the current legislation, so far as it relates to "key money". There was no granting, renewing or assigning of the Belmed lease. It was a negotiation with respect to an extension of the existing lease, pursuant to the "Holding Over" clause of the lease.”[6]
[6] Paragraph 8 of the Respondent’s Submissions, 22 January 2013.
[46]The Tribunal is of the view that the current legislation should be interpreted as set out today and the history of the amendments to the legislation should only be reviewed if the current legislation is not clear or is ambiguous. The Tribunal sees no ambiguity with the current legislation.
[47]Counsel for Nichols also cited and relied upon the following cases to support its submission, Ocean Square Pty Ltd v Duranza Holdings Pty Ltd[7] (Ocean Square), which was a determined on the 1984 legislation; Gillett v Burke[8]; Laybutt v Amoco Australia Pty Ltd (1974) 134 CLR 57; Whitmore Pty Ltd v O.F. Gamble Pty Ltd (1991) 6 WAR 110 and Temptress Nominees Pty Ltd v Constantinou, 2001 VCAT 1443. These cases have been noted by the Tribunal.
[7] 1998 QdR 448.
[8] [1997] 1 VR 81.
[48]In F & G Nominees Pty Ltd v Verdell Pty Ltd [2003] WASCA 290, the Full Court of the Western Australian Supreme Court found that a deed of extension confers a right of occupancy for extensions of leases and was therefore sufficient to satisfy the definition of "lease" under the Western Australian Retail Shop Leases legislation[9]. The Full Court cited J K Corporation Pty Ltd v Dileum Pty Ltd, unreported; SCt of WA; Library No 8901159; 5 April 1989; O F Gamble Pty Ltd v Whitemore Pty Ltd (1990) 2 WAR 327; in support of its conclusion. The Tribunal takes a similar view to that which is referred to in F & G Nominees.
[9] Commercial Tenancy (Retail Shops) Agreements Act 1985 (WA).
[49]Was there an agreement under which a person gives or agrees to give to someone else for valuable consideration a right to occupy premises? Yes. Nichols agreed to grant to Belmed in exchange for payment of monies a right to occupy the premises, albeit that this right has been referred to as an “extension of lease” or “holding over”. Therefore this transaction falls within the definition of a lease under the Act. It follows that as a result of the Tribunal determination that, “the payment of $20 000.00 was some form of ex gratia payment whereby Nichols received a benefit over and above the usual tenancy rate”[10], the payment constitutes “key money” under the Act. The payment was a prerequisite and/or conditional on the granting of the right to occupy. It matters not whether it was classified by the parties as “an extension”, or a “holding over”. This transaction has all the hallmarks of “key money”.
[10] Paragraph 36 of Reasons.
Unconscionable Conduct
[50]Counsel for Belmed submits that the parties bargaining positions were unequal and from the evidence adduced by Belmed, sets out those differences, namely[11]:
[11] Paragraph 126 of Applicant’s Submission, 21 January 2013.
(a)the landlord’s business involved the negotiation of retail shop leases;
(b)the landlord had retained an external property management specialist to assist the landlord in relation to the negotiation of retail shop leases, among other things;
(c)the shop had special significance to the tenant because of the goodwill that the tenant had built up at the specific location and the investments that the tenant had made in the fit out and refurbishment of the centre;
(d)once the option exercise deadline had passed, the tenant’s choices were limited, either renegotiate a new lease with the landlord, or relocate;
(e)by 11 May 2011, there was only three weeks left on the fixed term lease;
(f)the tenant had made it clear to the landlord that its new premises would not be available by the end of the lease term, which ended on 31 May 2011;
(g)the tenant, therefore, to the knowledge of the landlord would either have to renegotiate a further right of occupancy with the landlord, or face a disruption to the continuity of the tenant’s medical operations (and accept the consequences that such an interruption would have on vulnerable medical patients);
(h)in mid-May 2011, the landlord admits that the desperation of the tenant’s situation was made clear to it through discussions between Mr Black and Dr Ali;
(i)By 23 May 2011, the landlord knew that the tenant’s ability to relocate had almost completely collapsed because of the nature of its business, the lack of readiness of alternative facilities, and the fact that there were only 8 days left of the fixed-term lease.
[51]The Tribunal accepts Belmed’s submission that by the time that Nichols sent its 23 May 2011 email to Belmed, which included for the first time a demand for $20,000.00. Nichols knew that it had a much stronger bargaining position than Belmed. Given that Belmed only had 8 days before the expiry of its lease to accept, it was left with no other alternative, than to accept Nichols’ terms. This is consistent with the Tribunal’s earlier finding concerning Belmed’s desperate position at this time.[12]
[12] Paragraph 33 and 36 of Reasons.
[52]The Tribunal doesn’t accept the submission of Counsel for Nichols that it was relevant that Mr Heffernan unreasonably failed to disclose to the respondent that it had no intention to proceed with the agreement to lease, as from 4 February 2011. It was submitted that Mr Heffernan was not acting in good faith in his dealings with Nichols. The Tribunal accepts the evidence of Mr Heffernan’s explanation that the specifics of the agreement had changed.[13]
[13] Paragraph 16 of Reasons.
[53]The Tribunal also rejects Nichols’ submission that Belmed, in effect, did not flag its intention to institute legal proceedings to recover the $20 000.00 and seek compensation for the loss of fitout, equipment and chattels. This in no way reflects a party’s lack of good faith dealings and possibly note being aware of the unconscionable conduct provision of the RSLA and its remedies at the relevant time. Parties to disputes have a right to seek legal redress for what they see as a genuine cause of action. There is no obligation on a party to inform the other party of its intention to take legal action against the other, particularly in the circumstances of this case.
[54]Nichols through Mr Black’s evidence did not provide a convincing justification for demanding the payment of the $20 000.00. Various terms were used to describe the payment: “goodwill rent” and payment for “loss over new tenants”. There were also attempts to rationalize the reason for the payment through comparing the amount to “usual tenancy rates” or “casual rental rate”[14]. The tribunal rejects evidence adduced by Nichols to persuade it to accept that this payment was in some way compensation for the loss of the lost opportunity to find a suitable tenant. Nichols was probably in a better position after the extension of lease was granted, as it had a further two months to find a new tenant.
[14] Paragraph 32 & 36 of Reasons.
[55]The relevant provisions of the RSLA are:
46AUnconscionable conduct
(1)A lessor must not, in connection with a retail shop lease, engage in conduct that is, in all the circumstances, unconscionable.
(2)A lessee must not, in connection with a retail shop lease, engage in conduct that is, in all the circumstances, unconscionable.
(3)For this section, a person is not to be taken to engage in unconscionable conduct in connection with a retail shop lease only because the person—
(a)starts legal proceedings relating to the lease; or
(b)refers to arbitration a dispute or claim relating to the lease; or
(c)fails to issue or renew the lease.
(4)This section does not apply to conduct that occurred before the commencement of this section.
46B Matters QCAT may consider in deciding if a party’s conduct is unconscionable
(1)In deciding whether a party to a retail tenancy dispute has engaged in unconscionable conduct in connection with the retail shop lease, QCAT may have regard to the following matters—
(a)the relative strengths of the bargaining positions of each of the parties;
(b)whether, as a result of conduct engaged in by the party, the other party was required to comply with conditions that were not reasonably necessary for the protection of the other party’s legitimate interests;
(c)whether the other party was able to understand any documents relating to the lease;
(d)whether any undue influence or pressure was exerted on, or any unfair tactics were used against, the other party or a person acting for the other party by the party or a person acting for the party in relation to the lease;
(e)the amount for which, and the circumstances under which, the other party could have acquired an identical or equivalent lease from a person other than the party;
(f)the extent to which the party’s conduct towards the other party was consistent with the party’s conduct in similar transactions between the party and parties like the other party;
(g)the requirements of any applicable industry code;
(h)the requirements of any other industry code, if the other party acted on the reasonable belief that the party would comply with the code;
(i)the extent to which the party unreasonably failed to disclose to the other party—
i)any intended conduct of the party that might affect the other party’s interests; and
ii)any risks to the other party arising from the party’s intended conduct (being risks that the party should have foreseen would not be apparent to the other party);
(j)the extent to which the party was willing to negotiate the terms and conditions of any lease with the other party;
(k)the extent to which the party and the other party acted in good faith.
(2)QCAT may also have regard to circumstances existing before the commencement of section 46A.
(3)Subsections (1) and (2) do not limit the matters to which QCAT may have regard in making its decision.
(4)However, QCAT must not have regard to the following—
(a)any circumstances that were not reasonably foreseeable at the time of the alleged contravention of section 46A(1) or (2);
(b)conduct engaged in before the commencement of section 46A.
(5)In this section—
applicable industry code has the meaning given under the Competition and Consumer Act 2010 (Cwlth), section 51ACA.
industry code has the meaning given under the Competition and Consumer Act 2010 (Cwlth), section 51ACA.
[56]As a result of the Tribunal’s findings in respect to this issue[15], the Tribunal takes the view that Nichols did act unconscionably, as a result of the unequal bargaining position between the parties. The Tribunal finds that Nichols took advantage of Belmed’s predicament and sought the payment of $20 000.00 over and above the usual rental payable.
[15] Paragraph 52 to 55 of Reasons.
Compensation
[57]Counsel for Nichols relied upon the case, Don Webb v Dia Kensetsu Company Ltd[16] (the Webb case), which sets out the standard and degree of proof required in respect of alleged loss and damage in claims made to the then Retail Shop Leases Tribunal, under the RSLA. The Tribunal agrees that the standard and degree of proof is that there must, at least, be some evidence to support a claim for loss and that, bare allegations, without supporting evidence, are not sufficient.
[16] [1998] QRSLT 27 (18 December 1998)
[58]Both parties derived benefit from Belmed leaving the fitout, equipment and chattels on the premises, following Belmed vacating the premises. Both parties had the opportunity of weighing up their respective options. This part of the negotiations was not one sided. Belmed was relieved of the make good provisions under the lease. This would have saved Belmed significant costs. Nichols secured plant and equipment which were later used to secure a future tenant. The fitout which was left would have assisted in the reletting negotiations. The premises would have been very marketable to a potential new medical practice tenancy. This in fact happened. The premises were relet to a medical practice after a short period of time.
[59]The valuation evidence adduced by both parties was unsatisfactory. Both valuers came up short in providing the Tribunal with clear and appropriate methodology for their respective valuations. Ms Bayar called by Belmed never inspected the premises and simply used the depreciation schedule to assess replacement value of plant and equipment. She also relied solely on the information provided to her by Belmed, which included depreciation schedules and photographs. She was unable to verify the accuracy of the photographs. That is who took the photographs, when they were taken and whether all the plant and equipment was depicted. She wasn’t able to verify the purchase price and the age of the plant and equipment. All of these factors affect the credibility of her evidence.
[60]Mr Knight called by Nichols valued the fitout as if there was no lease in place. Had there been a lease in place, he accepted that his valuation may have been different. This is significant as Mr Black gave evidence and it was not contested that another medical practice had taken up possession of the premises[17]. Therefore Mr Knight’s valuation is questionable, on his own admission.
[17] Paragraph 61 of Reasons.
[61]Notwithstanding the Tribunal’s findings that the payment of $20 000.00 was “key money”, it doesn’t accept the submission of Belmed that it should be entitled to the compensation for the value of the fitout, equipment and chattels which were left on the premises. Belmed derived a financial benefit from leaving the plant and equipment on the premises. There was no evidence adduced as to the savings to Belmed as a result of not having to make good, but both parties accepted that it would not be insubstantial.
[62]Taking all of the above into account, the Tribunal makes the following order:
1. The payment of the $20 000.00 constitutes “key money”, which is prohibited under s 39 of Retail Shop Leases Act 1994;
2. Nichols Constructions Pty Ltd behaved unconscionably as defined in s 46A and s 46B of Retail Shop Leases Act 1994.
3. Within 28 days of the date of these orders, Nichols Constructions Pty Ltd pay the Applicant the amount of $20 000.00.
4. Belmed Pty Ltd t/as Belmont Medical Centre’s claim for compensation be dismissed.
5. No order as to costs.
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