BOSHUGO PTY LTD and LEND LEASE FUNDS MANAGEMENT LIMITED
[2012] WASAT 94
•8 MAY 2012
JURISDICTION : STATE ADMINISTRATIVE TRIBUNAL
STREAM: COMMERCIAL & CIVIL
ACT: COMMERCIAL TENANCY (RETAIL SHOPS) AGREEMENTS ACT 1985 (WA)
CITATION: BOSHUGO PTY LTD and LEND LEASE FUNDS MANAGEMENT LIMITED [2012] WASAT 94
MEMBER: MS L WARD (MEMBER)
HEARD: 18 OCTOBER 2011, 14 NOVEMBER 2011, 21 DECEMBER 2011 (FINAL SUBMISSIONS FILED 6 FEBRUARY 2012)
DELIVERED : 8 MAY 2012
FILE NO/S: CC 657 of 2011
BETWEEN: BOSHUGO PTY LTD
Applicant
AND
LEND LEASE FUNDS MANAGEMENT LIMITED
Respondent
Catchwords:
Commercial tenancies Turns on own facts Disclosure statement Does the disclosure statement contain false or misleading information contrary to s 6(1)(b) of the Commercial Tenancy (Retail Shops) Agreements Act 1985 (WA)? Unconscionable conduct Does the conduct of the landlord in the various aspects relied upon by the tenant amount to unconscionable conduct for the purposes of s 15C of the Commercial Tenancy (Retail Shops) Agreements Act 1985 (WA)? Application dismissed
Legislation:
Commercial Tenancy (Retail Shops) Agreements Act 1985 (WA), s 4(4), s 3(4), s 6(1), s 6(1)(a), s 6(1)(b), s 10, s 10(1), s 15C, s 15C(1), s 15F(1)
Commercial Tenancy (Retail Shops) Agreements Regulations 1985 (WA), reg 4
State Administrative Tribunal Act 2004 (WA), s 55, s 87(1)
Result:
Application unsuccessful
Category: B
Representation:
Counsel:
Applicant: Mr D McAskil (Acting as Agent)
Respondent: Mr M Hawkins
Solicitors:
Applicant: Retail Pace Lease Negotiators
Respondent: Downings Legal
Case(s) referred to in decision(s):
AWPF Management Pty Ltd v Red Roll Pty Ltd & Ors (RLD) [2009] NSWADTAP 3
Gill & Ors and Wildnight Pty Ltd [2008] WASAT 135
Head and Zimmermann Investments Pty Ltd [2010] WASAT 75
Head and Zimmermann Investments Pty Ltd [2010] WASAT 95
Murphy and Fremantle Markets Pty Ltd [2009] WASAT 84
Pearce & Anor and Germain [2007] WASAT 291 (S)
Taj Coffee Company Pty Ltd and Plaza Arcade [2009] WASAT 107
REASONS FOR DECISION OF THE TRIBUNAL:
Summary of Tribunal's decision
The applicant applied to the Tribunal on 31 May 2011 for compensation and, what it termed as, a release from a commercial tenancy lease. The grounds for the application were, broadly, that firstly, the disclosure statement provided by the former landlord contained false or misleading information contrary to s 6(1) of the Commercial Tenancy (Retail Shops) Agreements Act 1985 (WA) and secondly, the applicant claimed it had based its decision to enter into the commercial tenancy lease on certain verbal advice from the former landlord's leasing agent. That advice was claimed to be about two other possible tenants in the shopping centre.
On 23 September 2011, the tenant's application was amended to add a claim that the landlord engaged in certain conduct which was, in all the circumstances, unconscionable and contrary to s 15C(1) of the Commercial Tenancy (Retail Shops) Agreements Act 1985 (WA). The unconscionable conduct was alleged to arise from certain events relating to the landlord ultimately reentering the premises and then serving letters of demand for outstanding monies under the lease.
In relation to the disclosure statement claim, the Tribunal was not satisfied, on the evidence available to it, that the disclosure statement was, in fact, false or misleading in the manner claimed by the applicant. In relation to the verbal advice which the applicant claims was given to it before it entered the lease, the Tribunal was not satisfied that such statements were communications that were material to the terms and conditions under the lease. Accordingly, this aspect of the application was dismissed.
The Tribunal then considered whether the landlord had engaged in conduct which was, in all the circumstances, unconscionable, as that term is used in s 15C of the Commercial Tenancy (Retail Shops) Agreements Act 1985 (WA). The Tribunal has had regard to the meaning of 'unconscionable conduct' as it has been applied in other decisions of the Tribunal and in the courts. However, based on the evidence available to it, the Tribunal was not satisfied that the landlord had engaged in conduct which was, in all the circumstances, unconscionable. Rather, the landlord acted to protect its legitimate business interests by reentering the applicant's leased premises on 1 June 2011. The reentry by the landlord was preceded by discussions between the parties, an exchange of emails on 14 April 2011 and a notice of default being served on the applicant and its directors dated 17 May 2011. The re-entry by the landlord occurred after the parties had unsuccessfully tried to resolve the outstanding issues between them. The unconscionable conduct application was therefore dismissed.
Accordingly, the application before the Tribunal was dismissed in all aspects.
The Tribunal refused the landlord's application for costs on the basis that the application was not entirely without merit. The applicant raised genuine issues in the Tribunal which, although they arguably may have been articulated better, the Tribunal is mindful of the objectives of the Tribunal and, in particular, its accessibility to parties. Further, the landlord could possibly have acted more fairly than it did by communicating with the applicant with greater clarity the steps it would take to enforce the lease agreement. Accordingly, in the Tribunal's view, there is not a sufficient basis to move from the presumption in s 87(1) of the State Administrative Tribunal Act 2004 (WA) that each party should bear its own costs in a proceeding before the Tribunal.
Introduction
Boshugo Pty Ltd (referred to below as the tenant or applicant) owned a business which traded as Bears 'N' Gifts in Shop T99 at Lakeside Joondalup Shopping City (Centre). The Centre is a retail shopping centre as defined by the Commercial Tenancy (Retail Shops) Agreements Act 1985(WA) (CT(RS)A Act). Therefore, leases of retail shops within the Centre are governed by the provisions of that Act.
Bears 'N' Gifts traded in the Centre from 1 February 2009 to 1 June 2011.
The tenant's financial position is summarised in a letter in evidence before the Tribunal, which was written on behalf of the tenant by Retail Pace to the landlord, dated 4 May 2011. The letter of 4 May 2011 acknowledged that the tenant had:
… been struggling to meet [its] commitments since the business commenced operating in February 2009.
…
… the Lessee has received over thirteen months of rent abatement … however[,] … you will not agree to any further rent abatement but may allow a Surrender of Lease if a settlement amount can be agreed.
… the Lessee does not have any funds available to pay for a Surrender of Lease. The Lessee cannot borrow any more money and [it has] no equity at all in [its] home. With occupancy costs up around 50% this business cannot survive and I can see little point in continuing with any rental abatements.
…
The tenant relied on the directors' private money to pay the rent or to purchase stock while the business operated.
A dispute has now arisen between the landlord and the tenant as a result of the provision of an allegedly false or misleading disclosure statement by the former landlord on 3 November 2008. The tenant also alleges that the landlord has engaged in conduct which is, in all the circumstances, unconscionable. The applicant claims compensation on various grounds and a release from the lease.
Questions for determination
In relation to the question for determination by the Tribunal, the Tribunal notes that s 3(c) of the CT(RS)A Act relevantly provides that:
A reference in this Act to a question arising under a retail shop lease includes a reference to
…
(c)a question arising
(i)in relation to any communication, including a disclosure statement under section 6, between the parties to the retail shop lease, prior to their entry into the retail shop lease, which communication was material to the terms and conditions of the retail shop lease; or
(ii)in relation to the retail shop lease under a provision of this Act
Accordingly, the questions for determination by the Tribunal in this application are:
1)Does the disclosure statement contain false or misleading information contrary to s 6(1)(b) of the CT(RS)A Act?
2)Does the conduct of the landlord in the various aspects relied upon by the tenant amount to unconscionable conduct for the purposes of s 15C of the CT(RS)A Act?
The parties
The tenant is trustee for The Warren Trust, which traded as Bears 'N' Gifts. Mrs Marilyn Warren and Mr Trevor Warren are the directors of Boshugo Pty Ltd.
Mr Warren described himself at the hearing as the sales manager for an international oil and gas company, a position he had held at that time for two and a half years.
Mrs Warren was formerly a manager with Avon. Mrs Warren had no experience owning and operating a retail shop prior to owning and operating Bears 'N' Gifts. Mrs Warren said that it had been a lifelong ambition to have a card and gift shop. Mrs Warren says that she worked in the business for up to seven days a week. However, Mrs Warren now has some health issues and, on 20 December 2012, she provided a medical certificate to the Tribunal from a general practitioner which stated that Mrs Warren was unfit to work from 14 December 2012 to 14 March 2012.
Turning now to the shopping centre owners, until 7 April 2010, Armstrong Jones Management Pty Ltd ACN 008 947 840, as trustee for the Armstrong Jones Retail Fund and ING Retail and ING Real Estate Joondalup BV (referred to below as the former landlord), was the landlord at the Centre. The former landlord was the landlord at the time the tenant took possession of the shop (s 4(4) of the CT(RS)A Act).
The current owner of the Centre is Lend Lease Funds Management Limited (landlord) in its capacity as trustee for the Joondalup Trust ABN 24 915 7563 642. The landlord took an assignment of the leases in place at the Centre at the time of purchase on 7 April 2010.
The tenant was assisted throughout the application by representatives of a company which assists parties in commercial lease negotiations. The landlord was legally represented throughout the application.
The application
On 31 May 2011, the tenant lodged an application with the Tribunal under s 6(1)(b) of the CT(RS)A Act. The tenant claims in its application before the Tribunal that:
•it based its decision to enter into the lease on certain verbal advice from the former landlord's leasing agent; and
•the disclosure statement provided to it on 3 November 2008 did not include Anna's Cards and Gifts in Shop T106.
The tenant also claims compensation for the losses incurred in the business, and also seeks a release from the lease.
On 25 August 2011, the former landlord was joined as second respondent to the proceedings.
On 23 September 2011, the tenant's application was amended to add a claim that the landlord's actions, listed below, were unconscionable and contrary to s 15C(1) of the CT(RS)A Act:
•the lack of instructions obtained by the landlord's solicitor for the purpose of the three mediations in the Tribunal on 25 August 2011, 14 September 2011 and 22 September 2011 (referred to below as the 'lack of instructions claim');
•the landlord allowing a contractor for a prospective tenant, Cotton On Clothing, to measure up the shop on 14 April 2011 (referred to below as the 'Cotton On claim');
•the landlord's refusal to consent to the assignment of the tenant's lease on 23 April 2010 (referred to below as the 'unreasonable refusal claim');
•the landlord terminating the lease on 31 May 2011 and reentering the premises on 1 June 2011 with only one month of rental arrears of $16,687.69, while holding a bank guarantee in the amount of $11,983, is not consistent with its normal conduct in similar transactions (referred to below as the 'lease termination claim');
•the landlord leasing the shop to Rubi Shoes on 9 July 2011 at a lower rent than the tenant was paying (referred to below as the 'Rubi Shoes claim'); and
•the landlord issuing a letter of demand dated 2 September 2011 for the outstanding amount of $295,241.06 under the lease (referred to below as the letter of demand claim').
The tenant claims that the above actions by the landlord were not reasonably necessary for the protection of its legitimate interests, and that the actions affected the health of Mrs Warren (a director of the tenant). In brief, the tenant seeks compensation in various amounts from the landlord.
On 17 October 2011, the tenant and former landlord executed and exchanged a confidential deed of settlement. On 18 October 2011, the Tribunal dismissed the application against the former landlord and it took no further part in the proceedings.
Procedural history in the Tribunal
The application was lodged on 31 May 2011. The dispute was referred for mediation on 25 August 2011, 14 September 2011 and 22 September 2011. The mediations were unsuccessful insofar as the tenant's application against the landlord was concerned. On 26 September 2011, programming orders were made for a compulsory conference on 12 October 2011, and the final hearing was set down for one day on 18 October 2011.
On 12 October 2011, the tenant was ordered to provide, by 14 October 2011, a list of witnesses it intended to call to give evidence at the final hearing, including the title/position of that witness at the relevant time, and the issue to which each witness' evidence may be relevant. The tenant complied with this order and listed the following four witnesses that it intended to call at the final hearing:
•Mr Trevor Warren (director of the tenant);
•Ms Jackie Merriman of Metier Consulting (former landlord's leasing agent);
•Ms Kim Tyler Lees (wife of the tenancy fit out designer); and
•Mr Brett Vaughan of Prime Realty (the tenant's agent in the proposed sale of business negotiations).
Ultimately, the hearing took place over three days on 18 October 2011, 14 November 2011 and 21 December 2011.
The hearing commenced on 18 October 2011 and both parties gave brief opening statements. On 18 October 2011, Ms Tyler Lees and Mr Warren gave evidence, while Mrs Warren left the hearing room. However, as the matter was not completed on 18 October 2011, it was listed for a second hearing day on 14 November 2011.
On 14 November 2011, Mr Warren continued to be crossexamined by the landlord's counsel. Mr Marco Ettore, the landlord's commercial property manager, was interposed as a witness, as he is based in New South Wales and was only available to give evidence in person in Perth on that day.
On 21 December 2011, the tenant's case was completed with Mrs Warren giving evidence. The tenant's representative then advised that, although Ms Merriman and Mr Vaughan had been served with witness summonses to attend and give evidence at the hearing, they would no longer be called by the tenant to give evidence. Neither Ms Merriman nor Mr Vaughan provided a witness statement to the Tribunal.
Ms Gemma Hannigan, who was the Centre Manager until February 2011 when she commenced maternity leave, was then called by the landlord on 21 December 2011.
The tenant's representative elected not to give any oral submissions at the conclusion of the final hearing on 21 December 2011. The landlord's counsel did make oral closing submissions. At the conclusion of the hearing on 21 December 2011, the parties were given an opportunity to make written closing submissions in writing. On 6 February 2012, after receipt of the final submissions, the decision was reserved.
Statutory framework
The CT(RS)A Act relevantly provides that:
6. Disclosure
(1)Where a retail shop lease is entered into and the tenant has not, at least 7 days before the entering into of the lease, been given a disclosure statement in accordance with subsection (4) or the disclosure statement given contains false or misleading information, the tenant may, in addition to exercising any other right, do either or both of the following
(a)within 60 days after the lease was entered into, give to the landlord written notice of termination of the lease;
(b)apply in writing to the Tribunal for an order that the landlord pay compensation to the tenant in respect of pecuniary loss suffered by the tenant as a result of the omission of the landlord to give a disclosure statement in accordance with subsection (4) or of the giving of false or misleading information by the landlord in the disclosure statement.
15C.Unconscionable conduct of landlords
(1)A landlord under a retail shop lease shall not, in connection with the lease, engage in conduct that is, in all the circumstances, unconscionable.
(2)Without in any way limiting the matters to which the Tribunal may have regard for the purpose of determining whether a landlord has contravened subsection (1), the Tribunal may have regard to
(a)the relative strengths of the bargaining positions of the landlord and tenant;
(b)whether, as a result of conduct engaged in by the landlord, the tenant was required to comply with conditions that were not reasonably necessary for the protection of the legitimate interests of the landlord[.]
…
15E. Certain conduct not unconscionable
A person is not to be taken for the purposes of section 15C or 15D to engage in unconscionable conduct in connection with a retail shop lease only because
(a)the person institutes legal proceedings in relation to the lease or refers a dispute or claim in relation to the lease to arbitration;
(b)the person fails to renew the lease or enter into a new lease; or
(c)the person does not agree to having an independent valuation of current market rent carried out.
15F. Powers of Tribunal relating to unconscionable conduct
(1)A landlord or tenant, or former landlord or tenant, under a retail shop lease or former retail shop lease who suffers loss or damage because of unconscionable conduct of another person that contravenes section 15C or 15D may recover that loss or damage by applying in writing to the Tribunal.
…
Consideration
The Tribunal will now consider both of the questions for determination based on all of the evidence before it.
Does the disclosure statement contain false or misleading information contrary to s 6(1)(b) of the CT(RS)A Act?
The Tribunal will firstly summarise the relevant facts in relation to the disclosure statement question.
On 3 November 2008, the tenant was provided with the disclosure statement by the former landlord's leasing agent, Ms Merriman of Metier Consulting.
The disclosure statement included the following relevant details:
•Alterations to the Centre/building submitted to or approved by statutory and local authorities and proposed to be commenced within the term of the lease or any statutory or contractual option
The landlord must be able to make changes to the proposed works as the landlord sees fit. It is the landlord's intention to review the tenancy mix throughout the Centre, and this tenancy may or may not be affected and the businesses surrounding this tenancy may or may not alter. The landlord does not warrant that a department store will trade in the Centre during the term of this lease.
•Current tenant mix with retail classifications
However, note that the tenancy mix may necessarily change and the tenant cannot place any reliance on the plans attached being the actual tenancy mix at any time, or any representation that the particular uses will be in the Centre (either in the locations shown or in any other locations) or that other uses will not be in the Centre.
The landlord must be free to alter the tenancy mix from time to time.
•Proposed tenancy details:
Permitted Use of Premises
NOTE: The landlord does not grant the tenant any exclusive rights and the landlord may grant rights to other tenants to carry out the right same or similar uses.
•Representations made by the Landlord
a)The landlord does not agree to any exclusivity of use in favour of the prospective tenant and the landlord is free to lease or licence any premises in the Centre for the same or similar permitted use as the prospective tenant's proposed business.
b)The landlord makes no representation that the centre will or will not be redeveloped.
•Tenant's reliance
The tenant is deemed to enter into any agreement to take a lease in relation to the Centre in reliance solely upon the information provided in this disclosure statement and the landlord's standard agreement for lease and lease. All references to an agreement for lease extend to and include any offer to lease.
On 1 February 2009, the tenant commenced paying rent for Shop T99 in the Centre. Between 1 February 2009 and around 10 February 2009, while its shop fit out was completed, the tenant traded from an empty shop and then from a casual mall site opposite the food court in the Centre. On 11 February 2009, the tenant officially occupied Shop T99 and commenced trading.
The agreement to lease and the lease were signed by the former landlord and the tenant and dated 5 May 2009. The term of the lease was for a period of six years.
Tenant's claims re: disclosure statement and material communication before entering the shop lease
The tenant claims in its application that the disclosure statement provided to it by the former landlord on 3 November 2008 was incorrect and misleading because it did not include Anna's Cards and Gifts in Shop T106.
The tenant also claims in its application that it based its decision to enter into the lease on verbal advice from the former landlord's leasing agent, Ms Merriman of Metier Consulting, to the effect that a coffee lounge would be trading opposite Shop T99 and that Myer would open in the Centre within the term of the lease.
The Tribunal will deal with the Anna's Cards and Gifts claim firstly, and then with the verbal advice regarding the coffee shop and Myer.
Anna's Cards and Gifts
The disclosure statement is required to be in the form prescribed in reg 4 of the Commercial Tenancy (Retail Shops) Agreements Regulations 1985 (WA). The Tribunal notes that the there is no statutory requirement for a landlord to update a disclosure statement at regular intervals or to include prospective tenants in the document, or to update disclosure statements in the period between when they are provided to prospective tenants and when the retail shop lease is entered into. Rather, the disclosure statement must merely meet the statutory requirements, which include identifying the current number of shops which are leased and the current number of shops which are not leased. The current tenant mix with retail classifications is also provided. The Tribunal notes the use of the word 'current' throughout the disclosure statement, rather than the word 'prospective' or 'possible' tenants, and considers that it is only those leases which have actually been entered into at the time the disclosure statement is provided which are to be identified in the disclosure statement.
Section 3(4) of the CT(RS)A Act provides the point where a lease is entered into as follows:
For the purposes of this Act a retail shop lease is entered into when
(a)under the retail shop lease, the tenant enters into possession of, or commences to pay rent in respect of, the premises the subject thereof; or
(b)where the retail shop lease is in writing, all of the parties thereto have signed the retail shop lease,
whichever first occurs.
In this application, Ms Hannigan gave evidence on behalf of the landlord, and her evidence included that she was responsible for actually preparing the disclosure statements for the former landlord and that it was updated every few months.
The tenant claims that Anna's Cards and Gifts opened in the Centre around 3 December 2008. The tenant then claims that, therefore, an offer to lease must have been entered into between Anna's Cards and Gifts and the former landlord some weeks beforehand, and the shop should have been included in the disclosure statement provided to it on 3 November 2008.
However, there is no evidence before the Tribunal about the date on which Anna's Cards and Gifts did actually open in the Centre. Under crossexamination, Mr Warren said that he 'wouldn't have a clue when they opened'. Further, there is also no evidence before the Tribunal that the owners of Anna's Cards and Gifts had entered into the retail shop lease, as set out in s 3(4) of the CT(RS)A Act, before 3 November 2008.
Mr Warren's evidence before the Tribunal was that he could not remember exactly when he became aware of Anna's Cards and Gifts being located in the Centre. Mr Warren said that it could have been when it traded in a temporary location, or not long after it physically moved into Shop T99. Based on Mr Warren's evidence, he became aware of Anna's Cards and Gifts trading in the Centre sometime between 1 February 2009 and around 11 February 2009.
This period fits chronologically with other relevant evidence before the Tribunal, particularly given Mr Warren's evidence that he did not visit Shop T99 between sometime before 24 October 2008 and 1 February 2009. The site visit which occurred sometime before 24 October 2008 was made by Mr Warren on behalf of Kenny's Cardiology on an unknown date. The site visit must have occurred before 24 October 2008, because Mr Warren said in evidence that this was the date that Kenny's Cardiology advised him that it was pulling out of its proposal to lease Shop T99 in the Centre. Mr Warren's evidence was that the tenant commenced trading in the Centre and paying rent on 1 February 2009.
Mr Warren also gave evidence to the effect that he did discuss the presence of Anna's Cards and Gifts in the Centre with the former landlord. Mr Warren said that these discussions are referred to in an email he received from Mr Rick Perez, who was the retail manager of the Centre at the time. It then became apparent to the Tribunal that the email referred to by Mr Warren was dated 16 November 2009 that is, just over 12 months since the disclosure statement was provided. No other documentary evidence has been provided to the Tribunal which evidences Mr Warren raising concerns about the presence of Anna's Cards and Gifts in the Centre at a date earlier than 16 November 2009. Therefore, the Tribunal accepts that any concerns raised with the former landlord about the presence of Anna's Cards and Gifts did not occur until almost 11 months after the business started trading in the Centre on 1 February 2009. The delay in the tenant making any complaint about the presence of Anna's Cards and Gifts in the Centre, or the alleged failure of the former landlord to advise the tenant about the presence of Anna's Cards and gifts in the Centre, tends to diminish the veracity of Mr Warren's evidence that the alleged presence of Anna's Cards and Gifts in the Centre as a tenant as of 3 November 2008 made the disclosure statement provided false or misleading.
If Anna's Cards and Gifts was a current tenant in the Centre as of 3 November 2008, which is not a finding open on the evidence before the Tribunal, and if the presence of Anna's Cards and Gifts was of such importance to the tenant, then it is reasonable to consider that this would have been a documented source of complaint to the Centre management. Further, there is no evidence before the Tribunal of the tenant giving any consideration to the possible termination of the lease under s 6(1)(a) of the CT(RS)A Act.
In summary, there is no evidence before the Tribunal that the disclosure statement prepared by the former landlord was false or misleading when the applicant received it on 3 November 2008 by omitting any reference to Anna's Cards and Gifts. Mr Warren was not able to give evidence as to when Anna's Cards and Gifts opened in the Centre, beyond him becoming aware of its existence sometime during February 2009. Accordingly, the Tribunal is not satisfied, on the evidence before it, that Anna's Cards and Gifts was a current tenant of the Centre as of 3 November 2008.
Myer
In support of the tenant's claim regarding Myer opening in the Centre, the tenant has provided a copy of an email dated 24 July 2008 from the leasing agent, Ms Merriman of Metier Consulting, to another prospective tenant, Ms Kathryn Salisbury, which states, in part, 'Myer are now confirmed'.
The Tribunal notes that the email to Ms Salisbury is dated some three months before the tenant received its disclosure statement on 3 November 2008. The Tribunal attaches little weight to a copy of an email sent between two people who are not parties to this application and who did not give evidence before the Tribunal, and who were therefore not available for crossexamination.
Mr Warren's evidence in crossexamination was that he was told by Ms Merriman, in the first meeting with her, that Myer would commence sometime in the term of the lease.
Ms Hannigan's evidence was that the former landlord was in negotiations with Myer, but that it was not a confirmed deal. Further, the disclosure statement expressly provides that:
The landlord does not warrant that a department store will trade in the Centre during the term of this lease.
The wording in the disclosure statement is clear and unambiguous. It states that the former landlord did not warrant that a store would open during the term of the lease.
In addition, the disclosure statement is required to record the representations made by the landlord. No reference is made, under the heading 'Representations' in the disclosure statement, to Myer opening in the Centre or to a coffee lounge being opposite Shop T99. Further, under the heading 'Tenant's reliance', the tenant is deemed to have relied solely on the information in the disclosure statement and the standard agreement for lease and lease.
Coffee lounge
Mr Warren's evidence before the Tribunal was that he was told by Ms Merriman that a coffee shop, called Cup n Cake, would be opening opposite Shop T99. There is no independent evidence to support this claim. As set out above, the disclosure statement sets out the representations made by the landlord which the tenant could rely on. It does not include a reference to a coffee shop being opposite Shop T99. Such a matter should have, and could have easily, been included in the disclosure statement. No reason was proffered by Mr Warren as to why the representations about Myer and the coffee lounge, if they were in fact made and relied upon by the tenant, were not included in the disclosure statement.
The evidence before the Tribunal in relation to both the Myer and the coffee shop representations is that given orally by Mr Warren. Mrs Warren did not give any oral evidence on this issue.
Consideration of the Myer and coffee shop representations
The Tribunal will now consider if the alleged misleading representations concerning Myer and the coffee shop were made for and on behalf of the former landlord
If the Myer and the coffee shop representations were made and were of such importance to the tenant, then it is reasonable to consider that they would have been included in the disclosure statement and, further, that the tenant would have made a complaint about the representations to the Centre as soon as it became aware that they were not fulfilled.
Further, the Tribunal notes that there is no evidence before it of the tenant making any complaint about the Myer and the coffee shop representations to the Centre. This tends to indicate that, even if such representations were made, which is not open on the evidence before the Tribunal, they were not relied upon by the tenant at the time of entering into the lease.
Having heard the evidence of Mr Warren in this regard and in relation to Anna's Cards and Gifts, the Tribunal is of the view that these issues were first mentioned some nine months after the business commenced trading in the Centre that is, around 16 November 2009, when the business was by that time not trading to the tenant's expectations. The claims regarding Anna's Cards and Gifts, Myer and the coffee shop then assumed far greater importance for the tenant when it appointed Retail Pace to assist it with negotiations with the landlord on or about 4 May 2011.
In these circumstances, the Tribunal does not accept, based on the evidence before it, that any representation was made by the former landlord in relation to Myer and the proposed coffee shop, such that they were communications that were material to the terms and conditions of the retail shop lease.
Tribunal's answer to question 1
For the reasons set out above, the Tribunal's answer to question 1ִ does the disclosure statement contain false or misleading information contrary to s 6(1)(b) of the CT(RS)A Act? is 'no'.
In relation to question 1, as the Tribunal is not satisfied that the disclosure statement does contain false or misleading information, it is not necessary for it to consider two further issues. Firstly, did the tenant suffer pecuniary loss as a result of the false or misleading information and, secondly, is the landlord the correct respondent in circumstances where the former landlord provided the disclosure statement?
In particular, in order to resolve the issues currently before it, the Tribunal is not required to determine if the decision of the Administrative Decisions Tribunal Appeal Panel of New South Wales in AWPF Management Pty Ltd v Red Roll Pty Ltd & Ors (RLD) [2009] NSWADTAP 3 is applicable to the CT(RS)A Act.
As the Tribunal is not satisfied that the disclosure statement contains false or misleading information, the above two subsidiary issues do not arise on the facts in this application for final determination.
The Tribunal will now consider the second question for determination below.
Does the conduct of the landlord in the various aspects relied upon by the tenant amount to unconscionable conduct for the purposes of s 15C of the CT(RS)A Act?
The Tribunal understands the tenant's claim in relation to unconscionability, based on the way it was claimed in the application and was put at the final hearing, to be that certain specified conduct engaged in by the landlord is unconscionable. Further, if the landlord is found to have engaged in unconscionable conduct, then the remedy sought is compensation.
The conduct complained of by the tenant is listed in its application and set out above under the heading 'The application'.
Firstly, the Tribunal will briefly consider the law in relation to unconscionable conduct under the CT(RS)A Act. Secondly, the Tribunal will consider if there is a factual basis of the claims of unconscionable conduct made by the tenant and if the conduct complained of is unconscionable as alleged. Then, the Tribunal will consider if the cumulative total of the various claims of unconscionable conduct, when considered in combination, are unconscionable.
Unconscionablitity under the CT(RS)A Act
A tenant who suffers loss or damage because of unconscionable conduct of a landlord, in contravention of s 15C of the CT(RS)A Act, may recover that loss or damage by applying in writing to the Tribunal: s 15F(1) of the CT(RS)A Act.
What constitutes unconscionable conduct, as that term is used in s 15C(1) of the CT(RS)A Act, was the subject of consideration by Senior Member Raymond in Murphy and Fremantle Markets Pty Ltd [2009] WASAT 84 (Murphy) and applied by Member Carey in Head and Zimmermann Investments Pty Ltd [2010] WASAT 95.
Paragraph [85] of the Murphy case is particularly relevant, where Senior Member Raymond stated that:
In my view, the determination of whether or not unconscionable conduct has occurred must be assessed having regard to the views expressed in World Best Holdings; unconscionability will be established where what has occurred attracts a high standard of moral obloquy. As stated in Barbcraft at para 87, it is a concept which cannot be simply and exhaustively defined but which will be easily recognised when it presents itself. The example referred to by the court in that case was the conduct in Simply NoKnead in which it was held that the Commission had established an overwhelming case of unreasonable, unfair, bullying and thuggish behaviour by the respondent with respect to its franchisee. Similarly, in Automasters, also a franchise case, Hasluck J found that the franchisor had acted capriciously and unreasonably in circumstances where there was not a sufficient basis to terminate the contract. Further, that there was an element of oppression in the franchisors conduct, referrable to a conscious determination to bring the franchise agreement to an end, notwithstanding an awareness that there was a degree of ambiguity surrounding the allegations of default to be relied upon [at para 396]. His Honour also specifically noted that for conduct to be regarded as unconscionable, serious misconduct or something clearly unfair or unreasonable must be demonstrated; that it is not necessarily unconscionable to terminate a relationship where trust and confidence has been undermined and that a number of the decided cases suggest that a party to a contract is entitled to insist upon strict enforcement of the relevant obligations and to drive a hard bargain [395]. [emphasis added]
The Tribunal will now consider if there is a factual basis for the claims of unconscionable conduct as made by the tenant.
'Lack of instructions claim'
The lack of instructions claim is one made by the tenant in its application and its closing submissions. The tenant submits in its written submissions that the landlord's failure to attend the mediations in this Tribunal, and simultaneously commencing new legal action, was an attempt to use undue influence and pressure.
There is no evidence before the Tribunal in relation to this claim. In the absence of the consent of all parties to admit such evidence, the lack of evidence accords with the terms of s 55 of the State Administrative Tribunal Act 2004 (WA) (SAT Act), which is headed 'Evidence of certain things inadmissible'. Section 55 of the SAT Act has been held to unambiguously exclude evidence of anything said or done in mediation: see Ampezzo Pty Ltd and Franken [2009] WASAT 109 (S) and Head and Zimmermann Investments Pty Ltd [2010] WASAT 75. Arguably, anything said or done at a mediation would include the attendance of a party either in person or, for example, by telephone.
Further, the Tribunal is not satisfied in any case that the attendance or otherwise of a party at a mediation is in connection with the lease under the CT(RS)A Act.
In any case, there is no factual basis on which the Tribunal is able to make any such finding of unconscionability on the lack of instructions claim.
'Cotton On claim'
It is not in dispute between the parties that a contractor entered Shop T99 on 14 April 2011 with the landlord's permission and measured the shop up on behalf of Cotton On Clothing.
By this time, the tenant had tried to sell its business in April 2010 and had been in detailed negotiations with the landlord regarding the surrender of the lease. This conduct by the landlord is not, in the Tribunal's view, serious misconduct or something clearly unfair or unreasonable. A landlord is entitled to act to protect its legitimate business interests. Accordingly, the tenant has failed to satisfy the Tribunal that the landlord acted unconscionably in relation to the 'Cotton On claim' as that term has been interpreted in s 15C of the CT(RS)A Act and as set out above.
'Unreasonable refusal claim'
The tenant proposed that its lease be assigned to Tedibare Holdings Pty Ltd. The landlord refused to consent to the assignment of the tenant's lease on 23 April 2010.
Section 10(1) of the CT(RS)A Act states that a landlord may only withhold consent to an assignment on 'reasonable grounds'. The CT(RS)A Act does not define 'reasonable grounds'. However, this Tribunal has dealt with several cases involving whether there are reasonable grounds for withholding consent: see Taj Coffee Company Pty Ltd and Plaza Arcade [2009] WASAT 107 (Taj Coffee), per Member De Villiers at [28]. Further, it is well established that it is reasonable for a landlord to withhold consent if there are reasonable grounds for it to believe that the prospective assignee would, or may, be unable to meet its financial obligations to the lessor: see Taj Coffee, perִMember De Villiers at [39] [40].
Turning to the evidence before this Tribunal, Ms Hannigan, the Centre Manager at the time of the assignment request, gave detailed evidence of her decisionmaking process. Her evidence was unchallenged by the tenant, and was to the effect that the only matters she considered in determining whether the landlord's consent would be given to the assignment of the lease were the proposed assignee's inadequate financial resources in combination with her unsustainable occupancy costs. Mr Marco Etorre's evidence was that Ms Hannigan had the relevant experience and authority to deal with the lease assignment application on behalf of the landlord. Mr Etorre said that the standard assignment of lease application included the proposed assignee's history, experience in retail and personal financial circumstances.
Ms Hannigan gave evidence in a straightforward and credible manner. Accordingly, the Tribunal attaches great weight to Ms Hannigan's evidence in regard to the proposed assignment of the lease. Ms Hannigan's decisionmaking for and on behalf of the landlord was, on the evidence before this Tribunal, entirely reasonable. Ms Hannigan was entitled to, and did, base the landlord's refusal to consent to the assignment on the poor financial situation of the proposed assignee.
As a result, the Tribunal finds that the landlord's conduct in relation to the 'unreasonable refusal claim' was within the terms permitted by s 10 of the CT(RS)A Act. It follows that such conduct is not, in this case, unconscionable within the terms of s 15C of the CT(RS)A Act.
'Lease termination claim'
The tenant claims that the landlord conducted itself unconscionably by terminating the lease on 31 May 2011 and reentering the premises on 1 June 2011 with only one month of rental arrears of $16,687.69, while the landlord held a bank guarantee in the amount of $11,983. The tenant claims that this action is not consistent with its normal conduct in similar transactions.
The tenant's position in this regard appeared to the Tribunal to be that the landlord should have allowed it to remain in the centre for a further month, or give it more time to pay the rental arrears. However the landlord's position was that the shop was continuing to trade poorly, and that the landlord had taken all reasonable steps to assist the tenant. The landlord's closing submissions summarised the evidence of the reasonable steps it took to assist the tenant and the steps are reproduced as follows:
…
d)Each of the respondents subsidised the applicant's tenancy with rent rebates, which totalled over 13 out of the of 26, months, or over half total tenancy, and amounts to a total rent reduction in that period of $52,500 of which $35,000 was contributed by the first named respondent; (T:59 and T:60; 18.10.11)
e)Each of the respondent's attempted to assist the applicant achieve sales income by providing free Causal Mall Licences: (T:54 and T:70 and T:71 and T:75; 18.10.11)
f)At no time during its operation was the applicant's business profitable or sustainable; (T:67; 18.11.11 T:53; 14.11.11)
g)The applicant was not able to achieve turnover in sales even when it reduced the price of its stock or used Casual Mall Licensing; (T:54 and T:70 and T:71 and T:75; 18.10.11; T:4; 21.12.11)
h)The applicant was not able to increase sales with Sunday trading, even though like businesses achieved increases in trading performance and the Centre overall achieve double digit increases in trading figures; (T:63; 18.10.11; T: 51; 14.11.11)
i)Prior to the first named respondent acquiring the Centre in April 2010, the applicant was seeking to sell its business because the business was unsustainable; (T:51; 18.10.11)
j)Proposals by the first named respondent for possible surrender of the Lease were made at least by June 2010; (T:51; 18.10.11)
k)Detailed negotiations over the terms and timing of surrender of the Lease continued over a period of almost 3 months in 2011 and involved meeting not just with Centre Management but with the divisional asset Manager, Mr Ettore; (T:52; 10.10.11; T:40; 14.11.11)
l)The applicant wanted to be released from the obligations of its lease; (T:52 and T:53; 18.10.11 PB 643644)
m)The applicant was well aware that the first respondent was looking for alternative tenants to lease the premises by April 2011; (T:56 and T:66; 14.11.11; T:56; 14.11.11 PB466)
n)The applicant's negotiating position during surrender negotiations was that it could not compensate the landlord for losses it would sustain as a result of early termination of the lease; … (T:52 and T:60 and T:65; 18.10.11 and T:57 and T:58; 14.11.11)
…
Mr Ettore's evidence in relation to the manner in which tenants are treated in the Centre when they are behind in rent was to the effect that the treatment was on a case by case basis at the discretion of the Centre management. Mr Ettore said that there were a range of factors which would decide the appropriate debt recovery process. For example, if the tenant was part of a national company, then the head office of the tenant may be involved. In 2011, the landlord locked out two to three other shop owners, in addition to the tenants. There is no evidence before the Tribunal that the landlord's conduct towards the tenant was not consistent with its conduct in similar transactions and with similar tenants. Mr Ettore's evidence, which is accepted in its entirety by this Tribunal, was to the effect that the tenant was not the only tenant locked out of its leased premises by the landlord in 2011.
The landlord submits, and the Tribunal accepts, that the 'evidence is overwhelmingly of a landlord who exhausted every reasonable course of action to assist the tenant to trade out of its difficulties before terminating the Lease'. The tenant has not demonstrated to the Tribunal that the landlord acted in a manner even approaching serious misconduct or something clearly unfair or unreasonable.
The tenant has failed to satisfy the Tribunal that, in the context of a business which never turned a profit since it commenced on 1 February 2009, and which relied on significant levels of rent abatement from the landlord and private funding to pay the rent or purchase stock, the landlord acted unconscionably as that term has been interpreted in s 15C of the CT(RS)A Act and as set out above.
'Rubi Shoes claim'
The tenant claims that the landlord's conduct in leasing Shop T99 to Rubi Shoes on 9 July 2011 at a lower rent than the tenant was paying under a lease entered into in February 2009 is unconscionable. The tenant submits, in effect, that the lower rent offered to Rubi Shoes ought to have been offered to it in early 2011.
Mr Ettore's evidence is clear that, following the maximum period of rental abatement to the tenant, the tenant was still having difficulty paying its rent. Therefore, by at least April 2011, the landlord was looking for a new tenant for Shop T99, the terms of the new lease being a matter for the landlord and the new tenant. It is very difficult to find a legal basis for a claim that the landlord ought to have offered a tenant, who was in rental arrears and trading poorly, a lower rent, especially in circumstances where it had already had the maximum amount of rental abatement. Further, the fact that a new lessee is able to negotiate a lower rental in July 2011 when compared to a rental in February 2009 does not make the landlord's conduct in accepting a lower rent from a different tenant unconscionable insofar as the former tenant is concerned. The landlord has not acted in relation to the tenant such that serious misconduct, or something clearly unfair or unreasonable, has been demonstrated. The tenant knew, or ought to have known, that, given its poor financial position, the landlord was seeking a new tenant for the shop.
Accordingly, the tenant has failed to satisfy the Tribunal that the landlord acted unconscionably as that term has been interpreted in s 15C of the CT(RS)A Act and as set out above.
'Letter of demand claim'
The tenant claims that the landlord's conduct in issuing a letter of demand dated 2 September 2011 for the outstanding amount of $295,241.06 under the lease was unconscionable.
The landlord was legally entitled to seek the outstanding amounts under the lease entered into by the tenants, and which lease still had just under three years to run. It is clear that a party to a contract, like the landlord in this case, is entitled to insist upon strict enforcement of the relevant obligations and to drive a hard bargain, without such insistence being unconscionable conduct. The landlord was merely doing what it was legally entitled to do under the terms of the lease which were agreed to by the tenant. The fact that the letter was issued by solicitors other than those appearing in this Tribunal is entirely irrelevant, as is the timing of the letters being issued.
There is no evidence before the Tribunal that the issuing of the letters of demand was anything other than a routine step following the termination of a tenant's lease. There is no evidence before the Tribunal that the landlord agreed with the tenant to forego its legal entitlements under the remainder of the term of the lease. The strict enforcement of legal rights under a lease falls well short of unconscionable conduct within the terms of the CTRSA Act, and the Tribunal is not satisfied that it was such conduct.
Conclusion totatility of the tenant's claim of unconscionable conduct
The tenant has not demonstrated that the landlord acted with any ulterior motive to terminate the tenant's lease. Overwhelmingly, the evidence before the Tribunal is that, unfortunately, the tenant's business was never profitable in the Centre. The landlord acted to support the tenant financially with significant rental abatement for over half of the period of its tenancy, and offered other support services. However, it appears that it was obvious to all concerned by April 2010, when the business was for sale, that it was not profitable in the Centre. The tenant was only able to continue trading until May 2011 due to the private financing it received from Mr Warren's employment outside the business.
In the context of the whole of the evidence before the Tribunal and having considered the individual indicia of what the tenant claims was unconscionable conduct, the Tribunal is not satisfied that the individual claims, when considered both individually and cumulatively, amount to unconscionable conduct.
Accordingly, the application fails insofar as it was based on claims of unconscionable conduct.
Remedy
It follows from these findings that the tenant is not entitled to any remedy and, therefore, the Tribunal is not required to consider if there is any legal entitlement to compensation to the tenant and its directors.
Landlord's claim for a costs order against the tenant's representatives in the Tribunal
The landlord seeks an order for costs against the tenant's representatives in the Tribunal.
The issues for determination in this regard are:
•is a costs award appropriate in these proceedings; and
•if so, should the order be made against the tenant's representatives in the Tribunal personally?
In Pearce & Anor and Germain [2007] WASAT 291 (S) (Pearce) Chaney J set out an overview of the costs regime applied by the Tribunal and the criteria to be considered prior to awarding costs. In Gill & Ors and Wildnight Pty Ltd [2008] WASAT 135, the criteria identified by Chaney J in Pearce were summarised, at [20], as follows:
…
(i)The starting point of the Tribunal is that it is a 'no cost' jurisdiction ([8]).
(ii)The cost regime that was applicable to the previous Commercial Tribunal does not apply to the State Administrative Tribunal ([11]).
(iii)The objectives of the State Administrative Tribunal are furthered by its being essentially a 'no cost' jurisdiction ([17]).
(iv)Where there is a genuine dispute and the respective rights are unclear and parties seek a determination, the 'starting point remains that each party should expect to pay their own costs' ([24]).
(v)The Tribunal does have the power to award costs, and it is not appropriate to 'delineate the particular circumstances' in which the discretion to award costs would be exercised favourably ([22]).
(vi)Some of the factors (not an exhaustive list) that may contribute to the Tribunal making a cost order are for example -
a.A party has conducted itself unreasonably, particularly where the conduct leads to unnecessary costs to the other party.
b.A party has conducted itself inappropriately, particularly where the conduct leads to unnecessary costs to the other party.
c.Where credibility of evidence is at the heart of a matter.
d.Where the application undermine the integrity of proceedings under the relevant Act.
e.The relative weakness of a case, it being incredible or implausible or 'obviously unmeritorious'.
f.If a party has to embark in proceedings to 'vindicate its clear contractual entitlements' ([22] [24]).
As set out in Pearce, the starting point of the Tribunal is that it is a no costs jurisdiction and that each party should expect to pay its own costs.
In this case, the claims made by the tenant are not obviously unmeritorious. While arguably the claims could have been better articulated and formulated by the tenant, this does not mean that the claims were wholly without substance. The claims made by the tenant had some basis and were not obviously unmeritorious. The tenant in this case failed to meet the evidentiary basis required to support the claims. Arguably, the landlord could possibly have acted more fairly than it did by communicating with the tenant with greater clarity the steps it could, and ultimately did, take to reenter the shop and seek its entitlements under the lease.
In the Tribunal's view, there is insufficient reason to move from the starting point of s 87(1) of the SAT Act, that being that each party bear its own costs. Accordingly, it is not necessary for the Tribunal to consider the landlord's submission that costs ought to be awarded against the tenant's representatives personally.
Orders
The Tribunal orders that:
1.The application is dismissed.
2.The answers to the questions referred to the Tribunal in the following substantive terms are:
1)Does the disclosure statement contain false or misleading information contrary to s 6(1)(b) of the Commercial Tenancy (Retail Shops) Agreements Act 1985 (WA)? No.
2)Does the conduct of the landlord in the various aspects relied upon by the tenant amount to unconscionable conduct for the purposes of s 15C of the Commercial Tenancy (Retail Shops) Agreements Act 1985 (WA)? No.
I certify that this and the preceding [111] paragraphs comprise the reasons for decision of the State Administrative Tribunal.
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MS L WARD, MEMBER
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