Botts v Grimme (RLD)

[2001] NSWADTAP 15

Appeal Panel

CITATION:	Botts -v- Grimme (RLD) [2001] NSWADTAP 15
PARTIES:	APPLICANT Gertrude Evans Botts RESPONDENT Heindrich Willhelm Torsten Grimme
FILE NUMBER:	019008
HEARING DATES:	30/04/2001
SUBMISSIONS CLOSED:	04/30/2001
DATE OF DECISION:	05/30/2001
DECISION UNDER APPEAL:	Botts -v- Grimme [2001] NSWADT 14
BEFORE:	O'Connor K - DCJ (President); Molloy GB - Judicial Member; O'Neill A - Member
CATCHWORDS:	no question of law identified
MATTER FOR DECISION:	Principal matter
FILE NUMBER UNDER APPEAL:	005033
DATE OF DECISION UNDER APPEAL:	02/05/2001
LEGISLATION CITED:	Administrative Decisions Tribunal Act 1997 Retail Leases Act 1994
CASES CITED:	Botts v Grimme [2001] NSWADT 14 Woodside & anor v Director General, Department of Community Services [2000] NSWADTAP 8
REPRESENTATION:	APPELLANT In person RESPONDENT In person
ORDERS:	1 By agreement of the parties, the Appeal Panel directs that the orders made by the Tribunal below be amended as set out in para [10] of these reasons.; 2 The orders (as amended) under appeal are affirmed.

Background


1 The appellant is the lessee of certain premises at 249 Riley Street, Surry Hills, where she conducts the business of an art gallery and coffee shop. She has conducted business at this location since 1992, with a formal lease first being executed in 1994, commencing 1 April 1994. In an application filed on 3 July 2000 under the Retail Leases Act 1994 she sought various orders against the lessor. That application was met by a counter application from the lessor filed on 16 August 2000. The lessor is the respondent to the appeal.

2 After a hearing that took place over three days the Retail Leases Division of the Tribunal (the Tribunal) made the following orders in its decision delivered on 5 February 2001(Botts v Grimme [2001] NSWADT 14):

‘1. Applicant entitled to Lease of the premises known as 249 Riley Street, being art gallery, coffee shop and residential rooms at rear and above, with common use of the rear courtyard, for a term commencing 1st April 1999 and ending 30 March 2001, with a three year option of renewal, at a monthly rental of $2,200.00, 5% increase on first 1st April 2000, market review on exercise of option, and 5% annual increases thereafter, contribution to outgoing, 50% of water and sewerage rates, all other terms as per the Law Society Lease;

2. The Applicant is to, within 28 days of this date, serve on Respondents a notice in writing either exercising the option of renewal or stating that she will vacate no later than 30th March 2001;

3. If Applicant exercises option, Lease document, in compliance with these orders, signed by Respondent, to be submitted to Applicant within 21 days of rent being agreed or established by valuation Applicant to sign and return it. Respondent within 28 days of her receipt of it, together with payment of agreed costs of drawing Lease ($800.00) and stamp duty;

4. Applicant and Respondent, within 28 days of today to jointly apply to the South Sydney Council, in writing, seeking review of fire compliance order under Section 121B-6, dated 23 December 1999, seeking further formal inspection to establish Council's requirement in view of current use of the premises as art gallery, coffee shop, and private residence;

5. Respondent not to proceed with building work which interferes in any way with the commercial or residential use of 249 Riley Street.’

3 The orders derived from various findings of fact: see further para [5] below. The most significant of these from the viewpoint of the lessee was that the present relationship between the parties was governed by a new lease created commencing 1 February 2000 constituted by an offer made by the respondent through his solicitor by facsimile 9 December 1999 which was accepted by the appellant through her solicitor 8 January 2000.

Appeal

4 On 2 March 2001 the applicant in the original matter, Ms Botts, lodged an appeal.

5 The findings of fact relevant to this appeal are as follows:-


A. The appellant occupied various parts of the premises at 249 Riley Street as and from 21 July 1992.
B. By 1994 the appellant occupied those premises pursuant to a lease commencing 1 April 1994, being a four year lease with two successive three year option periods.
C. During the course of the term of the lease the appellant fell into arrears on numerous occasions but continued to make payments such that the arrears were regularly reduced. In this regard the Tribunal relied upon a schedule attached to an affidavit of the respondent’s then solicitor.
D. The appellant exercised the first option by letter dated 31 October 1997 handed to the respondent personally on 1 November 1997, but at the time of exercise of that option the appellant was in arrears in her payment of rent.
E. At no time did the respondent give any notice pursuant to Conveyancing Act 1919, s ection 133E.
F. In September 1998 the appellant vacated the part of the premises at the rear of 249 Riley Street which was also known as 16 Little Riley Street but continued to occupy the main front part of the premises.
G. After the appellant vacated the part known as 16 Little Riley Street the parties agreed that there would be a reduction of rent commencing 1 September 1998 but the appellant again fell into rent arrears and by 14 October 1998 the respondent forwarded to the appellant a Notice alleging arrears of $6,200.00 and purporting to terminate the occupancy on 31 October 1998.
H. Thereafter there were negotiations and the respondent through his solicitor forwarded to the appellant’s then solicitor a detailed facsimile 9 December 1998 which was accepted by the appellant’s then solicitor by letter 8 January 2000, and that exercise operated as an offer and acceptance thereby creating a new Lease on the terms set out in the Judicial Member’s decision, paras [13] and [14], which terms including the standard terms of the Law Society lease. Otherwise no formal lease was entered into.

6 In the notice of appeal the appellant, who was unrepresented, raised several objections to particular conclusions of the Tribunal. She explained at the appeal hearing that her primary concern was to obtain an outcome in relation to these objections which led to the conclusion that the leases that remained in force was the original lease of 1994, not the fresh lease found by the Tribunal to have been made between the parties, commencing 1 February 1999.

7 While the decision of the Tribunal had been generally favourable to the appellant (in that the respondent’s application for a declaration that she was in breach of the lease and for an order of termination was unsuccessful), she explained at hearing that she was concerned that the new lease disadvantaged her commercially and financially as compared to the original lease. She wished to continue to have the relationship governed by the old lease.

8 In her careful submissions she raised a number of points which she suggested disadvantaged her if in fact she was not entitled to rely on the 1994 lease. She contended:

(i) The 1994 lease entitled her to sub-lease without consent whereas the new lease found to exist by the Tribunal (incorporating the terms of the Law Society standard form of lease) did not.

(ii) The 1994 lease she felt gave her certain relief from having to comply with fire orders and various local government orders, as well as matters relating to water rates and so on which might otherwise be her obligation pursuant to the Law Society form of lease.

(iii) The original 1994 lease (being one entered into before 2 December 1998) did not contain a review opportunity with the result that there was no requirement on her to make any payment for Goods and Services Tax.

9 Once these concerns were identified, the lessor indicated that he was happy to clarify the position in relation to the first two matters. He had no objection to the lessee having a power to sub-let in similar terms to the original lease. He had no objection to there being an appropriate clause in respect of compliance with regulatory notices.

Clarification of Tribunal Orders

10 As a result, the parties agreed to the Appeal Panel making the following orders that clarified the operation of the original orders 1-5 of the Tribunal as to those matters. The following orders were made:

‘1. The Appeal Panel makes, with the agreement of the parties, the following additional orders in relation to the decision under appeal so as to clarify the operation of the original decision:


‘6. As to the terms of the Law Society Lease referred to in Order 1, delete clause 10.7 from that Lease and substitute cl 38(b) of the 1994 Lease between the parties, subject to the last three words of cl 38(b) - “in Clause 28”, being replaced by the words - “in this Lease”.
7. As to the terms of the Law Society Lease referred to in Order 1, confirm that cl 7.4 remains applicable, but with the following additional term:
‘7.5 If there is an order in existence as at 1 April 1994 compliance with that term will be the obligation of the lessor.’
2. Decision in respect of appeal reserved.’

11 We indicated that these additional orders would stand regardless of the outcome of the appeal. We then reserved our decision in relation to the grounds of appeal.

12 As to the Goods and Services Tax issue, while we recognise the significance to the appellant of a finding that a new lease came into effect in a GST-affected period of time, that is not a matter capable of being addressed by making orders in clarification of the decision under appeal.

Grounds of Appeal

13 The issues raised by the notice of appeal and the appellant’s submissions identified two grounds of appeal involving alleged errors of law. She did not seek to challenge the findings of fact, with one limited exception.

14 She challenged the finding as to the amount of the arrears as at the date of exercise of option (see Fact D set out at [4] above). But at hearing she conceded that there were in fact rent arrears as at the relevant date. In the present case the objection to the Tribunal’s conclusions as to the amount of arrears was not supported by any material adduced by the appellant. Her admission that there were in fact arrears at the date of exercise of option made any such submission unsustainable.

15 In any case a high threshold must be passed before an appeal as to a finding of fact should be entertained. Section 113(2) of the Administrative Decisions Tribunal Act 1977 (the Tribunal Act) provides that an appeal:


‘(a) may be made on any question of law, and
(b) with the leave of the Appeal Panel, may extend to a review of the merits of the appealable decision.’

16 The discretion given by para (b) of s 113(2) must be exercised cautiously. An appellant must, in our view, firstly demonstrate that a finding of fact is manifestly unreasonable or is not supported by logically probative evidence before any consideration should be given to reopening the fact-finding process. (For a more detailed discussion, in the context of a General Division appeal, see Woodside & anor v Director General, Department of Community Services [2000] NSWADTAP 8.)

17 Were it otherwise then the Appeal Panel would simply be acting as a first instance tribunal and any party aggrieved with a decision of the Tribunal at first instance could automatically appeal to the Appeal Panel. In our view that was not the intention of the legislature; rather it was its intention that first instance decisions would be final except where there was a demonstrable error of law that materially affected the final decision, or the findings of fact were unsupportable in the sense already mentioned.

(1) Tribunal’s Ruling in Respect of s 133 Conveyancing Act

18 As noted earlier, the appellant was most concerned to establish that the original lease remained in force. Her first ground of appeal, as she saw it, went to that point.

19 The first ground of appeal was that the Tribunal was in error in its application of section 133 of the Conveyancing Act 1919 to the facts.

20 She submitted that the option to renew the original lease (see Finding D) had been validly exercised as the respondent had not, within 14 days next succeeding the exercise of option, served her with the prescribed Notice pursuant to s 133E. Consequently, a lease of the then occupied premises commenced 1 April 1998 for a term of three years with a further three year option and otherwise upon the same terms and conditions as were contained in the original lease commencing 1 April 1994.

21 Section 133E provides:

‘133E. Breach of certain obligations not to preclude lessee from exercising option except in certain circumstances

(1) In this Division “prescribed notice” means a notice in writing that:

(a) specifies an act or omission, and
(b) states that, subject to any order of the court under section 133F, a lessor giving the notice proposes to treat that act or omission as having precluded a lessee on whom the notice is served from exercising an option contained in the lease.
(2) Where an act or omission that constituted a breach by a lessee of the lessee’s obligations under a lease containing an option would, but for this section, have had the effect of precluding the lessee from exercising the option, the act or omission shall be deemed not to have had that effect where the lessee purports to exercise the option unless, during the period of fourteen days next succeeding the purported exercise of the option, the lessor serves on the lessee prescribed notice of the act or omission and:

(a) an order for relief against the effect of the breach in relation to the purported exercise of the option is not sought from the court before the expiration of the period of one month next succeeding service of the notice, or
(b) where such relief is so sought:

(i) the proceedings in which the relief is sought are disposed of, in so far as they relate to that relief, otherwise than by granting relief, or
(ii) where relief is granted upon terms to be complied with by the lessee before compliance by the lessor with the order granting relief, the lessee fails to comply with those terms within the time stipulated by the court for the purpose.’
22 Having regard to the finding that the appellant was in arrears, we agree with the Tribunal below that it was open to the respondent/lessor to issue a s 133E notice.

23 We note that s 133E was inserted into the Conveyancing Act by the Conveyancing (Amendment) Act 1972 to overcome the common provision in commercial leases providing that in order validly to exercise an option for renewal a lessee must not be in default in any respect under the terms of the lease.

24 In circumstances where the lessee is in default and the lessor does not give the Notice under s 133E the position now is that the default does not bar the lessee from exercising the option.

25 The Tribunal referred at para [8] of its reasons for decision to the condition precedent in the option clause of the original lease, i.e. the option to renew was exerciseable ‘[P]rovided that the rent is not in arrears, and that the Lessee is not in breach of the covenants and conditions of this Lease at the date of the Notice’. The Tribunal expressed the view at [9] that it was not satisfied that this proviso is affected by s 133E.

26 With respect, we do not agree. Our provisional view is that s 133E is of general application and displaces a condition precedent of the kind found here in the body of a commercial lease. In our view it is to conditions of this kind that s 133E is directed.

27 However, this appeal is not the appropriate vehicle in which to express a final view upon the operation of s 133E, simply because there was no challenge to the factual finding of the Tribunal that, by the offer and acceptance referred to previously, there was in fact created a new lease commencing 1 April 2000.

28 Even if the option was validly exercised in late 1997 (as the appellant contends and as we are inclined to agree) it does not necessarily follow that the original lease is now the operative lease. It is clear that the Tribunal below was of the same view, i.e. that any finding it made as to what occurred in late 1997 did not necessarily govern the matter today (see for example final sentence of para [9] of the reasons for decision).

29 There was further conduct on the part of both parties significantly affecting the operation of the lease. For example, the extent of the appellant’s occupation of the site changed. Part of the premises covered by the lease were vacated and returned to the lessor. The parties negotiated a new rent for that part retained by the lessee. So far as the Appeal Panel is aware these changes were not documented.

30 It was these circumstances that led the Tribunal to observe at [11] that “in all probability this partial surrender created a new letting”.

31 Even if that were not the legal effect of the events referred to, it is plain that after these events, the appellant again fell into arrears. Negotiations took place between the solicitors for both parties and the Tribunal found that a new lease was created commencing 1 April 1999.

32 Once that is accepted then in our view it really does not matter whether or not the option was exercised effectively in November 1997. Accordingly it is not necessary to reach any concluded view on the interpretation of s 133E and its application to this case by the Tribunal.

(2) Law applicable to that part of the premises used as a residence

33 The second ground of appeal did not relate directly to the question of whether the 1994 lease continued to be operative. The appellant submitted that the Tribunal was in error in concluding that the whole of the premises were governed by the Retail LeasesAct.

34 Part of the premises (the upstairs rooms) are occupied by her as a residence. The Tribunal ruled that the whole of the premises were governed by the Retail Leases Act 1994 including the residential element. See paras [25] and following of the reasons.

35 At the hearing of the appeal, the parties agreed with the view of the Tribunal below that the only access to the residential portion (the upper rooms) was via the portion of the premises used for retail purposes as defined by the Retail Leases Act.

36 The Tribunal stated at [25]:

‘It has always been clear that these premises are partly residential and partly retail shop (as the 1993 zoning required), and that raises the question whether I have jurisdiction over the whole of the letting. Section 79 [Retail Leases Act] reads:

“If a retail shop lease applies to a retail shop as well as to other separate or adjoining premises that are not a retail shop, this Act applies to the lease only to the extent that the lease is a lease of a retail shop”.”
37 The consideration of the issue of whether a retail lease purports to apply to ‘separate or adjoining premises’ involves two questions. Do the terms of the lease purport to apply to premises that include the part said to be residential? That was clearly the case here. Secondly, is the residential element ‘separate’ from or ‘adjoining’ the commercial element.

38 The Tribunal analysed this Section and its affect in relation to these particular premises and said at [30]

‘Although it does not necessary follow that Section 79 has no application, because it may be feasible as a matter of law to create a separation between the residential part and the retail part, the Valuer’s evidence is that there is no commercial value in the residential part because of the fact that no practical separate access can be achieved. I am satisfied that the property now occupied by Miss Botts, despite its residential rooms, falls entirely within the definition of “retail shop” found in Section 3 of the Act, in that they are used “wholly or predominantly for the carrying on” of a business.’

39 Whether premises are ‘separate’ or ‘adjoining’ is a matter to be decided having regard to the particular facts and circumstances. The Tribunal considered a range of relevant facts. There is in our view no question of law raised. It was open to the Tribunal to conclude as it did on the facts before it.

Orders

40 By agreement of the parties, the Appeal Panel directs that the orders made by the Tribunal below be amended as set out in para [10] of these reasons.

41 The orders (as amended) under appeal are affirmed.