Blandino & Ors v Giardini & Ors (RLD) - [2008] NSWADTAP 55

No judgment structure available for this case.

Appeal Panel - Internal

CITATION: Blandino & Ors v Giardini & Ors (RLD) [2008] NSWADTAP 55

PARTIES:
APPELLANTS
Giuseppe Blandino
Berenice Blandino
Paul Blandino
RESPONDENTS
Robert Guy Giardini
Danielle Simone Giardini
Gabriele Giardini
Gemma Giardini

FILE NUMBER: 089026

HEARING DATES: 16 July 2008

SUBMISSIONS CLOSED: 16 July 2008

DATE OF DECISION:
21 August 2008

BEFORE: Chesterman M - Deputy President; ;

CATCHWORDS: Retail shop lease - disturbance of trading - assessment of damages for loss of rent

DECISION UNDER APPEAL: Giardini and ors v Blandino and ors [2008] NSWADT 66

FILE NUMBER UNDER APPEAL: 075023, 075086

DATE OF DECISION UNDER APPEAL: 03/04/2008

LEGISLATION CITED: Administrative Decisions Tribunal Act 1997
Retail Leases Act 1994

CASES CITED: Daverich Pty Ltd v Oxford Square Investments Pty Ltd [2005] NSWADT 54
Duarte v Mitchell [2007] NSWADT 276
Giardini and ors v Blandino and ors [2008] NSWADT 66
Hondroyiannis & Anor v Adwell Holdings Pty Ltd [2007] NSWADT 252
Karacominakis v Big Country Developments Pty Ltd and Anor [2000] NSWCA 313
Young v Lamb (No 2) [2001] NSWSC 1014

REPRESENTATION:
APPLICANT
J Reimer, barrister
RESPONDENT
S Walsh, barrister

ORDERS: 1. Leave is granted for the appeal to extend to a review of the merits2. The Tribunal’s decision of 4 March 2008 is varied by setting aside Order
2 and substituting the following order: ‘In proceedings number 075023, order that the Respondents pay to the Applicants the sum of $12,932.87’
3. Any application for costs in these appeal proceedings must be filed and served, with supporting submissions, within 28 days of the date of this decision. The opposing party must file and serve submissions in reply within a further 28 days. Unless reasons are advanced for a hearing to be conducted, the matter will be resolved ‘on the papers’, pursuant to section 76 of the Administrative Decisions Tribunal Act 1997.

Introduction

1 In this appeal, there were two areas of dispute, relating respectively to liability and to the assessment of damages. The first was whether the lessees of premises under a lease governed by the Retail Leases Act 1994 (‘the RL Act’) were entitled to terminate the lease on the ground that the lessors had made an unreasonable allocation of parking spaces between these lessees and the lessees of other premises also owned by the lessors. The second involved two questions: whether the lessors had taken adequate steps to mitigate their loss of rent following the termination of the lease by the lessees and, if not, how damages to be paid by the lessees should be assessed.

2 In the decision under appeal, Giardini and ors v Blandino and ors [2008] NSWADT 66, the Tribunal held that the lessees were not entitled to terminate the lease in question and awarded damages to the lessors for loss of rent. The lessees filed an appeal under Part 1 of Chapter 7 of the Administrative Decisions Tribunal Act 1997 (‘the ADT Act’), claiming that the Tribunal had erred both in holding them liable for damages and in its assessment of the damages. At the hearing, their counsel applied under section 113(2)(b) of this Act for leave for the appeal to extend to the merits. Counsel for the lessors did not oppose this application in relation to the appeal on assessment of damages and opposed it only formally in relation to the appeal on liability.

Relevant facts

3 As outlined in affidavits tendered by the parties and in the Tribunal’s decision at [1 – 25], the relevant facts are as follows.

4 The Respondents to this appeal (Robert Giardini, Danielle Giardini, Gabriele Giardini and Gemma Giardini) – hereafter ‘the Lessors’ – were the owners of a property known as 560 and 562 Box Road, Jannali (‘the building’). It comprised two separate shops, with provision for vehicular entry, toilets and three tenants’ car parking spaces at the rear.

5 Following an unregistered transfer of a pre-existing lease (‘the earlier lease’), the premises at 560 Box Road (‘the Premises’) were occupied under this lease by Mr and Mrs Bugiotis (‘the Bugiotis’). They carried on the business of fruit and vegetable retailing under the name ‘Jannali Fruit Market’. The transfer of the earlier lease to them occurred in August 2002, shortly before the Lessors purchased the building.

6 The shop premises at 562 Box Road Jannali were leased to a Mr and Mrs Hickey (‘the Hickeys’) for use as a pharmacy. This lease also commenced before the purchase of the building by the Lessors.

7 The earlier lease identified the ‘property leased’ on page 1 as ‘the lock-up shop known as 560 Box Road, Jannali’ and contained the following relevant clauses:-

Clause 3.1

Clause 3.4 - If the property has facilities and service connections shared in common with other persons, clause 11.3.2 applies to those common facilities. The tenant shares the common facilities with the landlord, and with other tenants of the landlord. The landlord can set reasonable rules for sharing these common facilities.

Clause 11.3 - If the property is part of a building owned or controlled by the landlord…

the right for the tenant’s customers to park vehicles in any area set aside for customer parking, subject to any reasonable rules made by the landlord…

Special Condition 1(c)

Special Condition 1(e) - The rights to use the toilets, loading space and loading ramp and rear yard are acknowledged by the tenant to be in common with those of the tenant of the adjoining lock up shop, No. 562 Box Road, Jannali”.

8 In May 2004, the Appellants (Giuseppe Blandino, Berenice Blandino and Paul Blandino) – hereafter ‘the Lessees’ – agreed to buy from the Bugiotis the fruit and vegetable retailing business conducted at the Premises.

9 The solicitor then acting for the Lessees, Mr Vincent Margiotta, contacted the Lessors’ solicitor, Mr Dan Simpson, about a proposed assignment of the earlier lease. In a letter to Mr Margiotta dated 13 May 2004, Mr Simpson wrote:-

We have recommended to our clients that this dispute be sorted out prior to our issuing any consent to the assignment of the existing lease.

10 In a letter to Mr Simpson dated 17 May 2004, Mr Margiotta asked:-

… are you able to advise us as to whether any rights, easements, etc have been given to the neighbour to park a vehicle on your clients’ property?

11 This letter also stated that the Lessees intended to invest money in improving the business conducted at the Premises and that they would be willing to take a new lease on the same or similar terms, as opposed to an assignment or transfer of the earlier lease.

12 The first-named Appellant, Mr Robert Giardini, was found by the Tribunal to have acted at all times in this matter on behalf of all the Lessors. During May 2004, he became aware of the existence of a dispute concerning parking. On or shortly before 19 May 2004, he accepted a recommendation by the Lessors’ managing agent, LJ Hooker Commercial Sutherland Shire (‘L J Hooker’), as to how the dispute should be resolved. In a letter dated 19 May 2004 to Mr Simpson, L J Hooker set out this determination as follows:-

The space behind Jannali Fruit Market closest to Hickey’s Pharmacy to Hickey’s Pharmacy.

The second space behind the fruit shop to Jannali Fruit Market.

13 This determination was forwarded to the solicitors for the Bugiotis, who in turn forwarded it to Mr Margiotta.

14 In a letter to Mr Simpson dated 24 May 2004, Mr Margiotta advised that unless the Lessors reconsidered the issue in relation to the car parking the Lessees could not purchase the business. The letter pointed out that one single car space at the rear of the fruit shop was ‘specifically for the loading and unloading of the truck’ and that it was ‘too narrow to have a car and truck parked in those two carspaces’, since the Lessees would not be able to load or unload the truck nor open the truck door. It suggested that a meeting be held between the parties.

15 Mr Simpson replied in a letter dated 24 May 2004, which included the following passages:-

If the matter cannot be resolved between our clients’ agent and the various tenants in the building, then our clients do not see any point in attending a meeting personally.

You have, no doubt, read the existing lease document and are aware of our clients’ position.

16 As found by the Tribunal in its judgment (Giardini and ors v Blandino and ors [2008] NSWADT 66) at [13], between 24 May 2004 and 9 June 2004 there was no indication by the Lessors there they were changing their stance in relation to the determination about parking. Nevertheless, the Lessees purchased the business from the Bugiotis. They also executed a new lease that had been prepared by Mr Simpson. Mr Margiotta returned the executed lease (hereafter ‘the Lease’) to Mr Simpson in a letter dated 9 June 2004.

17 The Lease commenced on 11 June 2004 and was for a period of three years and one day, with an option to renew for five years. So far as relevant here, it was on the same terms as the earlier lease. It contained the clauses and Special Conditions set out above at [7].

18 The issue of parking space remained in dispute. According to the third-named Appellant, Mr Paul Blandino, during an argument about it late in April 2005 with Mr Ray Miller, a representative of L J Hooker, Mr Miller said words to the effect of ‘If you want to walk, walk as we can get more money for the shop’.

19 In a letter dated 28 April 2005 to the Lessees, L J Hooker stated that the Lessors were exercising their rights under the Lease to ‘resolve the continual disputes over the parking’. Having pointed out that Special Condition 1(c) entitled the Lessors to make a ‘final’ decision on the matter and required the Lessees to comply with it, L J Hooker advised that the Lessors would be ‘organising for definite lines to be painted and car-spaces numbered’, according to the same allocation as had previously been determined – i.e. the allocation set out above at [12].

20 In a letter dated 5 May 2005 to Mr Simpson, Mr Margiotta asserted as follows:-

Our clients have attempted on a number of occasions to negotiate all matters with the agent all to no avail. If our clients are forced to remove their bin from its present position it will mean that there will be no place for them to park their vehicle and nowhere for them to unload.

21 The letter went on to convey an offer that the Lessees surrender the Lease and that the parties forego any claim against each other for damages or loss.

22 At [18], the Tribunal commented that this letter identified the ‘main cause of the parking dispute’ as the placement by the Lessees of a large bin within the area designated for parking by the Hickeys. It did not, however, refer to allegations, made in affidavits by the first-named and third-named Appellants (Giuseppe and Paul Blandino), that the business of the Lessees and of their predecessors, the Bugiotis, suffered because of a lack of adequate parking space. The Lessors did not adduce evidence to dispute these allegations.

23 In his affidavit, Mr Giardini asserted that the Lessors’ determination about parking was ‘reasonable’ because (a) while the shop leased to the Hickeys was about the same size as the Premises, the rent paid by the Hickeys was double the Lessees’ rent, and (b) the Hickeys, like the Lessees, ‘felt that they had a need to use the parking area’. He said that the determination was made ‘in an attempt to arrive at a solution which was satisfactory to all parties’. These statements were not challenged in cross-examination before the Tribunal.

24 In a letter to Mr Margiotta dated 11 May 2005, Mr Simpson advised that the Lessors were prepared to assist the Lessees by ‘re-marketing the premises’ or consenting to an assignment of the Lease. As the Tribunal pointed out at [19], this letter implicitly rejected the Lessees’ offer.

25 On 11 May 2005, Mr Margiotta sent to Mr Simpson a ‘Notice of Termination of Lease’. On the ground of three alleged breaches of the Lease by the Lessors, the Notice purported to terminate the Lease forthwith. The first ground stated in it (the remaining two were abandoned at the Tribunal hearing) was as follows

… by a letter dated 28th April 2005 from L. J. Hooker Commercial addressed to the Lessees you allocated a carspace which was part of a common area for the exclusive use by the Lessee of Hickey’s Pharmacy thereby precluding the Lessees from the use of the common area which in essence inhibits the Lessees’ ability to load and unload the Lessees’ truck and the Lessees’ access to the rear of the premises.

26 By a letter dated 13 May 2005, Mr Simpson advised Mr Margiotta that the Lessors did not accept the purported termination of the Lease by the Lessees.

27 By a letter bearing the same date, Mr Margiotta advised Mr Simpson that the Lessees had terminated the Lease and that the Lessors now had possession of the Premises.

28 The annual rental payable for the first year of the Lease, which was still current at the date of the purported termination, was $35,285.76 per annum. This equates to $678.57 per week. As from 12 June 2005, the rent was adjusted by reference to the CPI to an annual amount of $36,134.56, which equates to $694.90 per week. Since no contrary indication appeared in the Lease, the Lessees, by virtue of Clause 15, were required to pay GST in addition. Rent was payable by monthly instalments in advance, with the first payment due on 11 June 2004, the date of commencement.

29 Mr Giardini instructed L J Hooker to ‘market’ the Premises ‘aggressively’ as being available for lease, since the Lessors needed to meet mortgage repayments. On and from 17 May 2005, L J Hooker advertised them on the internet, in the local newspaper and on a signboard placed outside the Premises.

30 The annual rental initially stated in this advertising was $46,800.00, which equates to $900.00 per week. According to Mr Giardini, this figure, distinctly higher than the rent due under the Lease, was advertised because L J Hooker advised him that ‘the amount of rent which we should attempt to get was $900.00 per week plus GST’. After about two months of advertising, however, the advertised rent was reduced to $44,200.00 per annum, which equates to $850.00 per week.

31 A new tenant for the Premises was eventually secured in a lease commencing on 1 September 2006. The rent payable was $36,000 per annum (which equates to $692.30 per week) plus GST. The Lessors gave the new tenants a three-month rent-free period.

The respective claims of the parties

32 The Lessors initiated proceedings in the Local Court at Kogarah, which were later transferred to the Tribunal (file 075023). Their claim, as modified at the hearing was for damages, amounting to $47,592.02 plus interest, for arrears of rent and loss of rent. This amount was made up as follows: $3,234.58 for rent outstanding at the date of termination of the Lease; $36,134.56 for lost rent between 12 June 2005 and 11 June 2006; and $8,222.88 for lost rent between 12 June and 31 August 2006.

33 In a cross claim filed in the Tribunal (file 075086), the Lessees, in addition to making two claims not pressed at the hearing, sought declarations or orders to the effect that the Lessors had breached section 34 of the RL Act and that the Lessees’ notice of termination was valid. They also claimed damages ‘in the amount of $400,000’ (which is the maximum that the Tribunal can award) or ‘such other amount as the Tribunal orders’.

Relevant legislation

34 The only statutory provision of major importance in this case is section 34 of the RL Act. So far as relevant, it states:-

34 Lessee to be compensated for disturbance

(1) A retail shop lease is taken to provide that if the lessor:

(b) takes any action that would inhibit or alter, to a substantial extent, the flow of customers to the shop, or

(c) unreasonably takes any action that causes significant disruption of, or has a significant adverse effect on, trading of the lessee in the shop, or

(d) fails to take all reasonable steps to prevent or put a stop to anything that causes significant disruption of, or which has a significant adverse effect on, trading of the lessee in the shop and that is attributable to causes within the lessor’s control, or…

(2) ….

(3) A retail shop lease may include a provision preventing or limiting a claim for compensation under the provisions implied by this section in respect of any particular disturbance if a written statement specifically drawing the attention of the lessee to details of the anticipated disturbance was given to the lessee before the lease was entered into, and the statement included the following:

(b) a statement assessing the likelihood of the disturbance occurring, including an indication of the basis on which the assessment was reached,

(c) a statement of the timing, duration and effect of the disturbance, so far as they can be predicted.

(4) ….

35 In its judgment at [29], the Tribunal stated that the Lessees’ claim for damages, contained in their cross claim, had not been supported by evidence and must therefore fail. This ruling by the Tribunal was not challenged on appeal.

36 At [30 – 36], the Tribunal dealt with the Lessees’ claim that they were not liable to pay any damages for loss of rent because they had validly terminated the Lease.

37 Having noted that the Lessees sought to justify their purported termination by relying on clause 11 of the Lease and section 34 of the RL Act, the Tribunal observed as follows at [31]:-

31 The situation concerning allocation of parking within the area at the rear of the premises was well known to the [Lessees] prior to the time that they entered into the lease. Indeed, this was an issue that was expressly raised by the [Lessees] during the course of their negotiations to purchase the business, which was being operated at the premises, and a clear determination was subsequently made by the [Lessors] and communicated to the [Lessees] prior to the time that the lease was entered into. As indicated previously, there is no apparent reason as to why such determination was not incorporated into the new lease instead of the continuation of Special Condition 1(c)… but it is clear that in simply reaffirming again in April 2005 that the [Lessees] were only entitled to the use of one car parking space, there was no new event or action which had taken place and which was inhibiting access or disrupting the [Lessees’] business such as to require action upon the part of the [Lessors] pursuant to the provisions of section 34 of the RL Act.

38 At [32 – 33], the Tribunal expressed the opinion that section 34 clearly contemplates actions or events arising after the date of commencement of a lease, as opposed to the prevailing situation at the time of commencement. It also stated that section 34(3) was relevant to the proceedings and that the requirement under section 34(1) that a lessee make written request for rectification had not been fulfilled by the Lessees.

39 The Tribunal then set out the following ruling at [34]:-

34 The situation which emerges from the evidence is that the [Lessees] chose to enter into a lease knowing that there had been a previous determination as to allocation of parking spaces at the rear of the premises and having presumably satisfied themselves as to the compatibility of such arrangement with the profitable operation of the business which they were proposing to purchase and operate within the premises. Neither the provisions of section 34 of the RL Act nor paragraph 11 of the Lease assist the [Lessees] in their argument that they validly terminated the lease.

40 At [35], the Tribunal rejected an argument that the statement by a representative of L J Hooker described above at [18] amounted to an agreement by the Lessors to release the Lessees from their obligations under the Lease. It based this conclusion on the following matters: (a) the ‘context’ of the conversation; (b) the fact that it was not referred to in any subsequent communications between the parties; (c) and the firm advice by Mr Simpson on 13 May 2005 that the Lessees’ purported termination of the Lease was not accepted.

41 At [36], the Tribunal concluded that the Lessees had wrongfully repudiated the Lease by purporting to terminate it and by vacating the Premises, and that they were therefore liable in damages to the Lessors.

The Lessees’ submissions on liability

42 In the Lessees’ written submissions and in oral submissions advanced on their behalf by Mr Reimer of counsel, it was argued that the Tribunal had erred in not concluding (a) that the Lessors’ allocation of parking spaces had been unreasonable and (b) that the Lessors had accordingly contravened both section 34 of the RL Act and their obligations under clauses 3.4 and 11.3 of the Lease.

43 Mr Reimer’s principal submission in support of this contention was that it was incorrect for the Tribunal to rule that the Lessors acted reasonably in adopting, for the purposes of the Lease granted to the Lessees, the determination regarding parking space that they had made (on or about 19 May 2004) with reference to the earlier lease to the Bugiotis. He argued that this was unreasonable behaviour because (a) the determination had been shown to be unsatisfactory, with the consequence that both the Bugiotis and the Lessees suffered financial loss, and (b) the Lease was a new lease, in preparation for which the Lessees had invested money in improving the business.

44 Implicit in Mr Reimer’s submissions was the claim that a finding that the Lessors’ conduct was unreasonable would lead to the further conclusion that they had repudiated the Lease, or at least had breached it in a manner that entitled the Lessees to treat themselves as freed from the obligations that it imposed on them.

45 With reference specifically to the requirements of section 34, Mr Reimer made four more submissions, the first three of which related specifically to propositions stated in the Tribunal’s judgment at [32 – 33].

46 The first of these was that the Tribunal erred in suggesting that because the determination of May 2004 preceded the commencement of the Lease it was not an action or event to which section 34 could apply. Mr Reimer’s argument here was that the relevant determination regarding parking space was the later one, made on or soon before 28 April 2005.

47 Secondly, Mr Reimer submitted that the Tribunal should not have referred at all to section 34(3) because the Lease contained no clause ‘preventing or limiting a claim for compensation under the provisions implied by this section’.

48 His third submission was that, contrary to the Tribunal’s ruling, the Lessees, in the letter dated 5 May 2005 from Mr Margiotta to Mr Simpson, did convey a written request for rectification as required by section 34(1).

49 Finally, Mr Reimer argued that under section 34 the Lessors bore the onus of demonstrating that they had acted reasonably. He added, in response to a question from the Appeal Panel, that if on the other hand the Lessees were required to prove unreasonableness, they had discharged the onus.

Our conclusions on liability

50 In our opinion, the matter just mentioned – that of onus of proof – is a crucial one in resolving this appeal.

51 As was argued by Mr Walsh, counsel for the Lessors, we consider that the onus lay on the Lessees to prove unreasonableness, both under section 34 of the RL Act and under clauses 3.4 and 11.3 of the Lease. So far as section 34 is concerned, a ruling to this effect is to be found in Duarte v Mitchell [2007] NSWADT 276 at [90]. Here the Tribunal held that, in the absence of prior authority dealing specifically with the question, this followed from the ‘familiar’ principle that ‘those who assert must prove’.

52 We recognise that where a retail business, such as a fruit and vegetable shop, needs to bring in substantial quantities of perishable stock at regular intervals, significant interference by the lessor of the shop premises with parking facilities on which the business relies may constitute a breach of the lease. A Tribunal decision to this effect is Hondroyiannis & Anor v Adwell Holdings Pty Ltd [2007] NSWADT 252. But in that case the relevant conduct of the lessor was at odds with a covenant in the lease (varied subsequently by agreement) granting permission to the lessee to park vehicles in certain spaces for the purpose of unloading and loading stock.

53 In the present case, the Lessors, in exercising their right to determine the allocation of parking spaces conferred by Special Condition 1 (c) of the Lease, had the task of resolving competing claims put forward by the Lessees and by the Hickeys. We agree with Mr Reimer that, having regard particularly to the final sentence of clause 3.4, the Lessors were obliged to act reasonably in performing this task.

54 In order to establish, however, that the determinations made by the Lessors in May 2004 and April 2005 were unreasonable, it was incumbent on the Lessees to provide some evidence regarding the claims for parking space made by the Hickeys. This question of reasonableness depended not only on the Lessees’ legitimate needs and expectations regarding parking but also on those of the Hickeys. This issue received no attention at all in the evidence adduced by the Lessees. On the other hand, as indicated above at [23], it was an issue to which Mr Giardini had regard when making the determinations on behalf of the Lessors.

55 A further weakness in the Lessees’ claim that the Lessors’ determination in April 2005 was unreasonable is that, as the Tribunal pointed out in its judgment at [34] and Mr Walsh strongly emphasised, the Lessees entered into the Lease in June 2004 even though they knew what had been determined about parking in May 2004. At that time, they had the benefit of legal advice. Furthermore, as Mr Walsh pointed out, there was no evidence that the scale or nature of the separate businesses conducted by the Lessees and the Hickeys changed materially between June 2004 and April 2005.

56 For these reasons, we conclude that no error has been established in relation to the Tribunal’s ruling, at [34], that ‘neither the provisions of section 34 of the RL Act nor paragraph 11 of the Lease assist the [Lessees] in their argument that they validly terminated the lease’.

57 In these circumstances, it is not necessary for us to reach a conclusion regarding Mr Reimer’s three submissions relating to section 34 that we have outlined above at [46 – 48]. We will say only that the second and third of them (which concerned respectively the terms of section 34(3) and the requirement of a written request for rectification in section 34(1)) appear to us to be well founded.

58 In connection with the third of these submissions, Mr Walsh put forward an argument that we have not yet mentioned. This was that even if Mr Margiotta’s letter of 5 May 2005 to Mr Simpson conveyed a written request for rectification as required by section 34(1), the Lessees still could not claim damages under section 34 because they were bound to give the Lessors reasonable time to comply with it. Mr Walsh cited Daverich Pty Ltd v Oxford Square Investments Pty Ltd [2005] NSWADT 54 at [54] for this proposition. According to him, since the Lessees vacated the Premises a mere six days later, they failed in this regard.

59 According to the precise terms of section 34(1), the question arising here is not whether the Lessees ‘gave’ the Lessors a reasonable time to comply with the written request for rectification, but whether in fact the Lessors rectified the matter ‘as soon as reasonably practicable’ after the request was received. Nevertheless, we think that the point has merit. It was clearly arguable by the Lessors that it would not have been ‘reasonably practicable’ for them to rectify this matter within such a short time.

60 If this is the case, the Lessees, by vacating the Premises on or about 11 May 2005, made rectification by the Lessors impossible before the point in time at which any claim for damages under section 34 was maintainable. Their conduct would accordingly have stifled any such claim.

61 For reasons already given, and because we did not receive submissions regarding what in the circumstances was ‘reasonably practicable’, we do not propose to reach a firm conclusion on this particular matter.

62 A further question that we do not need to resolve is whether, if the Lessors’ conduct in relation to the allocation of car parking spaces was unreasonable, it would follow that they should be held to have repudiated the Lease, or at least to have breached it in a manner that entitled the Lessees to treat themselves as freed from the obligations that it imposed on them. We will simply say that in our opinion this does not necessarily follow.

63 For the foregoing reasons, we dismiss this appeal in so far as it challenged the Tribunal’s decision on liability. We must therefore consider the issues raised in connection with the assessment of damages.

The Tribunal’s decision regarding damages

64 The reasoning adopted by the Tribunal (at [37 – 51]) in assessing the damages payable by the Lessees to the Lessors was along the following lines.

65 At [37 – 39], it identified the primary issue to be resolved as whether or not the Lessors had acted unreasonably in failing to minimise their loss arising from the Lessees’ wrongful repudiation of the lease. It referred to and quoted from relevant authorities (notably the judgment of Giles JA in Karacominakis v Big Country Developments Pty Ltd and Anor [2000] NSWCA 313 at [187] and the judgment of Austin J in Young v Lamb (No 2) [2001] NSWSC 1014 at [31]), establishing the following propositions: (a) where it is alleged that a plaintiff has acted unreasonably in failing to minimise his or her loss from the defendant’s breach of contract, the onus lies on the defendant, who is a wrongdoer, to establish this; (b) a high standard of conduct is not required; (c) the plaintiff will not be held to have acted unreasonably simply because the defendant can suggest other and more beneficial conduct, so long as it was reasonable for the plaintiff to do what he or she did; and (d) where the assessment of damages relates to a commercial operation, the question to be determined is what a person in the plaintiff’s situation would do ‘in the ordinary course of business’.

66 At [40 – 43], the Tribunal referred to the evidence, outlined above at [28 – 31], showing as follows: (a) the weekly rent under the Lease at the time of termination was $678.57; (b) shortly afterwards, the Lessors advertised the Premises at $900.00 per week; (c) some two months later, the advertised rent was reduced to $850.00; and (d) some fifteen months after the termination of the Lease, the Lessors granted a lease at a rent just under $700.00. The Tribunal then summarised the Lessees’ contention as being that it was ‘inherently unreasonable’ for the Lessors to seek such a significantly increased rent, and the Lessors’ argument in response, namely, that they had acted reasonably in relying on ‘the expert advice of their managing agent’.

67 At [44 – 45], the Tribunal gave the following reasons for accepting the Lessees’ arguments on this question:-

45 It would have been in accord with ordinary commercial operation as a landlord of commercial premises for the [Lessors] to make reasonable enquiries concerning the basis for a decision to drastically increase the amount of rent sought for the premises. Mere reliance upon a proffered rental figure of this amount given by the managing agents, and without any further justification given or explanation sought for such figure, constitutes an unreasonable failure on the part of the [Lessors] to minimise their loss arising from the [Lessees’] breach of the lease.

68 At [46 – 48], the Tribunal held that it should therefore assess the loss that the Lessors would have been likely to sustain if they had acted reasonably. It pointed out that if they had advertised the Premises at the rent which they ultimately obtained ($692.00 per week), they would probably have attracted greater interest than in fact was demonstrated. But it added that some period of delay before any new lease commenced would still have been likely.

69 At [49], the Tribunal set out in the following terms its approach to assessing damages in these circumstances:-

b) In relation to the remaining period of 63 weeks between 12 June 2005 and 31 August 2006, to deduct 8 weeks for the period over which the rent figure of $900.00 was sought and to then deduct a further 13 weeks representing approximately 23 percent of the remaining period of 55 weeks over which the reduced figure of $850.00 was sought without successfully attracting a tenant.

70 The Tribunal then assessed the principal amount of damages as follows:-

a.	Rent due and payable as at 11 June 2005	$3,234.58
b.	Rent payable from 12 June 2005 to 2 April 2006 (42 weeks) at $694.90	$29,185.80
Total	$32,420.38

71 At [51], the Tribunal awarded an additional sum of $2,272.38 as interest. In the appeal, the approach that it adopted in calculating interest was not challenged.

The parties’ submissions on damages

72 The principal contention advanced on this topic by Mr Reimer was that since the Tribunal had concluded that the Lessors, by advertising the Premises for about fifteen months at weekly rentals of $900.00 or $850.00, had failed to act reasonably in minimising their loss, they should be held entitled either to (a) no damages at all, or (b) damages for a period not exceeding three months. His explanation for including the latter alternative was that it was reasonable to assume that, following the termination of a lease, the lessor would experience a delay of up to three months in re-letting the premises even if it acted reasonably.

73 The written submissions filed on the Lessees’ behalf also contained criticisms of the ‘percentage approach’ adopted in the Tribunal’s judgment at [50]. They also claimed that the Tribunal had not dealt correctly with the issue of liability to pay GST when comparing the rent payable under the Lease with the rent stipulated in the advertisements seeking new tenants. These arguments regarding GST were not, however, advanced at the hearing. As indicated above at [28], the Lessees were liable for GST on the rent stipulated. As indicated by the Tribunal at [43], the rent sought in the advertisements was also exclusive of GST.

74 On behalf of the Lessors, Mr Walsh submitted that the Lessors’ approach to the task of finding a new tenant had not been shown by the Lessees to have been unreasonable. He relied on the following matters: (a) the fact that according to the authorities relied on by the Tribunal (see [65] above), the standard required of the Lessors was not high; (b) the failure of the Lessees to adduce any evidence, expert or otherwise, indicating what at the time was a reasonable market rent for the Premises; (c) the provision in the Lease that as from 12 June 2005 the weekly rent would increase from $678.57 to $694.90; (d) the fact that the rent paid by the Hickeys for their premises within the same building was about twice the rent payable under the Lease; and (e) the evidence from Mr Giardini that he relied on the advice of L J Hooker, a local estate agent with relevant expertise.

75 Mr Walsh also made submissions designed to rebut the Lessees’ criticisms of the ‘percentage approach’ adopted by the Tribunal.

Our conclusions on damages

76 In our opinion, the Tribunal was correct in holding, for the reasons explained in its judgment at [44 – 45], that the Lessors had failed to take reasonable steps to minimise their loss. Although the nature and scale of their advertising of the Premises may have been adequate (it seems not to have been alleged otherwise), their decision to increase the rent substantially in reliance only on what the Tribunal described as ‘the expertise’ of an ‘anonymous person or persons within L J Hooker Commercial Sutherland’ was not reasonable. In advertising the weekly rent to be paid as $900.00, the Lessors increased the existing rent (including the CPI adjustment taking effect on 12 June 2004) by the substantial margin of 29.5%.

77 We part company with the Tribunal, however, when deciding what follows from this ruling. As we view the matter, what is significant is that, in the absence of any factor tending to increase significantly the market rent obtainable for the Premises, the natural and probable consequence of the Lessors’ decision to advertise them at this increased rent was that no tenant would be found. This in fact happened, and the Lessors’ lack of success continued even after they lowered the advertised weekly rent from $900.00 to $850.00. It was only after they lowered it further to almost exactly the same amount as the CPI-adjusted rent provided for in the Lease – and indeed gave a ‘rent holiday’ of three months – that they secured new tenants.

78 Having regard to these matters, we are of the opinion that the Tribunal erred in awarding the sum indicated in its judgment at [50] ($32,420.38) on account of lost rent between the date of termination of the Lease and the date when the new lease commenced. In order to reflect appropriately the Lessors’ failure to take reasonable steps to minimise their loss, it was not enough to deduct from the rent lost on account of the Lessees’ premature termination of the Lease a percentage (23%) roughly representing the differences between the two advertised rents and the rent that would have been payable under the Lease. This approach to assessment did not take sufficient account of the consideration that, on the balance of probabilities, the Lessors, for so long as they insisted on an unreasonably high rent, debarred themselves from obtaining a new tenant.

79 Instead, the question that the Tribunal should have considered was, in our opinion, as follows: if the Lessors had advertised the Premises as available for lease at a rent approximating the rent that they ultimately obtained, what loss of rent would they probably have suffered? An appropriate answer is, as Mr Reimer effectively conceded, about three months’ worth of rent. This was the rent during what might be called a ‘turnover period’. It is lost rent for which the Lessees, having terminated the Lease prematurely without due cause, must compensate the Lessors.

80 For these reasons, Order 2 made by the Tribunal on 4 March 2008 must be set aside. Under this order, damages amounting to $39,692.76 (comprising $32,420.38 as principal and $7,272.38 as interest) were awarded to the Lessors.

81 By virtue of this error of the Tribunal relating to the assessment of damages, we grant leave, as sought by the Lessees (see [2] above), for this appeal to extend to the merits. Our task in consequence is to determine ‘the correct and preferable decision’ having regard to the material before us: ADT Act, section 115(1).

82 The principal amount of the damages award should be calculated as follows:-

a.

Rent due and payable on 11 June 2005 (1 month) at annual rent of $35,285.76 plus GST $3,234.53

b.

Rent payable from 12 June 2005 to 11 August 2005 (2 months) at annual rent of $36,134.56 plus GST $6,624.67

Total $9,859.20

83 The interest due on this sum of $9,859.20 should be calculated as follows:-

a.

For the period 12 June 2005 to 11 August 2005 (.167 years) at half statutory rate (5 percent) $82.39

b.

For the period 12 August 2005 to 21 August 2008 (3.034 years) at statutory rate (10 percent) $2,991.28

Total $3,073.67

84 The total amount payable by way of damages should therefore be $12,932.87.

Costs

85 Section 77A of the RL Act stipulates that costs in Tribunal proceedings under the Act may only be awarded if there are ‘special circumstances warranting an award of costs’ under section 88(1) of the ADT Act.

86 Our preliminary view on this question of costs is that, since neither party has been wholly successful in the appeal, there would appear to be no ‘special circumstances’. We recognise, however, that there may be grounds for an award of which we are not aware.

87 Accordingly, our orders make provision for the parties to apply for the costs of the appeal.

Our orders

88 We order as follows:-

2. The Tribunal’s decision of 4 March 2008 is varied by setting aside Order 2 and substituting the following order: ‘In proceedings number 075023, order that the Respondents pay to the Applicants the sum of $12,932.87.’

3. Any application for costs in these appeal proceedings must be filed and served, with supporting submissions, within 28 days of the date of this decision. The opposing party must file and serve submissions in reply within a further 28 days. Unless reasons are advanced for a hearing to be conducted, the matter will be resolved ‘on the papers’, pursuant to section 76 of the Administrative Decisions Tribunal Act 1997.

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Citations

Blandino & Ors v Giardini & Ors (RLD) [2008] NSWADTAP 55

Most Recent Citation

The Daily Pty Limited v Wallis [2013] NSWADT 152

Cases Citing This Decision

1

The Daily Pty Limited v Wallis [2013] NSWADT 152

Cases Cited

6

Statutory Material Cited

2

Giardini v Blandino [2008] NSWADT 66

Duarte and Ors v Mitchell and Ors [2007] NSWADT 276

Hondroyiannis v Adwell Holdings Pty Ltd [2007] NSWADT 252

CITATION:	Blandino & Ors v Giardini & Ors (RLD) [2008] NSWADTAP 55
PARTIES:	APPELLANTS Giuseppe Blandino Berenice Blandino Paul Blandino RESPONDENTS Robert Guy Giardini Danielle Simone Giardini Gabriele Giardini Gemma Giardini
FILE NUMBER:	089026
HEARING DATES:	16 July 2008
SUBMISSIONS CLOSED:	16 July 2008
DATE OF DECISION:	21 August 2008
BEFORE:	Chesterman M - Deputy President; ;
CATCHWORDS:	Retail shop lease - disturbance of trading - assessment of damages for loss of rent
DECISION UNDER APPEAL:	Giardini and ors v Blandino and ors [2008] NSWADT 66
FILE NUMBER UNDER APPEAL:	075023, 075086
DATE OF DECISION UNDER APPEAL:	03/04/2008
LEGISLATION CITED:	Administrative Decisions Tribunal Act 1997 Retail Leases Act 1994
CASES CITED:	Daverich Pty Ltd v Oxford Square Investments Pty Ltd [2005] NSWADT 54 Duarte v Mitchell [2007] NSWADT 276 Giardini and ors v Blandino and ors [2008] NSWADT 66 Hondroyiannis & Anor v Adwell Holdings Pty Ltd [2007] NSWADT 252 Karacominakis v Big Country Developments Pty Ltd and Anor [2000] NSWCA 313 Young v Lamb (No 2) [2001] NSWSC 1014
REPRESENTATION:	APPLICANT J Reimer, barrister RESPONDENT S Walsh, barrister
ORDERS:	1. Leave is granted for the appeal to extend to a review of the merits2. The Tribunal’s decision of 4 March 2008 is varied by setting aside Order 2 and substituting the following order: ‘In proceedings number 075023, order that the Respondents pay to the Applicants the sum of $12,932.87’ 3. Any application for costs in these appeal proceedings must be filed and served, with supporting submissions, within 28 days of the date of this decision. The opposing party must file and serve submissions in reply within a further 28 days. Unless reasons are advanced for a hearing to be conducted, the matter will be resolved ‘on the papers’, pursuant to section 76 of the Administrative Decisions Tribunal Act 1997.

a.	Rent due and payable on 11 June 2005 (1 month) at annual rent of $35,285.76 plus GST	$3,234.53
b.	Rent payable from 12 June 2005 to 11 August 2005 (2 months) at annual rent of $36,134.56 plus GST	$6,624.67
Total	$9,859.20

a.	For the period 12 June 2005 to 11 August 2005 (.167 years) at half statutory rate (5 percent)	$82.39
b.	For the period 12 August 2005 to 21 August 2008 (3.034 years) at statutory rate (10 percent)	$2,991.28
Total	$3,073.67