Café Cinnamon v O'Brien

[2013] QCAT 364

CITATION: Café Cinnamon v O’Brien [2013] QCAT 364

PARTIES:	Theresa Maria Kellas trading as Café Cinnamon (Applicant)
v
Alan O’Brien (Respondent)

APPLICATION NUMBER: RSL044-12

MATTER TYPE: Retail shop leases matters

HEARING DATE: 8 May 2013

HEARD AT: Brisbane

DECISION OF: Michelle Howard, Presiding Member
Sandra Kairl, Member
Malcolm Macrae, Member

DELIVERED ON: 13 May 2013

DELIVERED AT: Brisbane

ORDERS MADE:

1.     That Alan O’Brien pay to Theresa Maria Kellas the sum of $979.18 within 14 days of these orders.

2.     The claims and counter-claims are otherwise dismissed.

CATCHWORDS:

RETAIL SHOP LEASE MATTERS - where claim for compensation relating to proposed sale of business - where no contract of sale with proposed purchasers - where no allegations amounting to unconscionable conduct - where lessor entered into lease with another person introduced by lessee and as agreed with lessee

Retail Shop Lease Act 1994 ss 42, 43, 46A, 46B, 50, 83.

Klooster v Sticky Fingers (Qld) Pty Ltd [2011] QCATA 282

APPEARANCES and REPRESENTATION (if any):

APPLICANT: Ms Theresa Kellas

RESPONDENT: Mr Alan O’Brien

REASONS FOR DECISION

1. Ms Kellas briefly operated a coffee shop called the Café Cinnamon. She leased premises, in which she ran the business, from Mr O’Brien. Although she purchased the coffee shop business as an ongoing concern, she and Mr O’Brien entered into a new lease at the time she bought the business. The lease commenced on 20 December 2011 and was to terminate on 19 September 2013, subject to an option for a further 3 years. However, after a very brief period of some 42 days in the business, Ms Kellas advised Mr O’Brien that the business was not going well.

2. Shortly afterwards, she advised him that she had two parties interested in leasing the premises, one who may be interested in purchasing the business from her and operating the coffee shop, and the other who wanted to turn the premises into a book shop.

3. Ultimately, the sale of the coffee shop business did not proceed. By agreement between Ms Kellas and Mr O’Brien, Ms Kellas was released from the obligations of the lease and Mr O’Brien entered into a new lease for the premises with the bookshop owner. The Agreement to cancel the lease was executed on 15 March 2012.

4. The parties acknowledge that the bond monies of $2,136 held under the lease by Mr O’Brien have not been repaid. Further they agree that Ms Kellas owes to Mr O’Brien for rates in the amount of $273.40; and that Mr O’Brien owes Ms Kellas a credit for water charges in the amount of $291.58. Mr O’Brien has retained the full amount of the bond on account of these amounts, less the cost ($1,175) of replacing a plate-glass window which was broken during Ms Kellas’ tenancy and the costs ($1,054.50) of sealing off a grease trap in the tenancy after the coffee shop ceased to operate which he has paid. On his calculation, Ms Kellas owes him $75.32.

5. Ms Kellas filed a notice alleging retail tenancy disputes relating to a number of issues, namely, details being withheld when the lease was entered into; responsibility for the costs of replacing the plate-glass window; compensation for loss of the proposed sale of the business; and liability regarding the new lease (with the book shop owner). She sought orders granting her compensation and for return of her bond monies.

6. Mr O’Brien, who counter-claimed in relation to the costs of plugging the grease trap, disputed Ms Kellas’ claims.

7. At hearing, Ms Kellas told the Tribunal that she no longer proceeded with some of her claims, as did Mr O’Brien.

Details alleged to have been withheld at time of entry into lease

1. In respect of the details which Ms Kellas claims were withheld at the time the lease was entered into between her and Mr O’Brien, she advised that no damage had occurred as a result and that she did not allege that there were any consequences. No orders are sought by Ms Kellas relating to it. We record that Mr O’Brien disputed that details were withheld and he provided documents in support of his assertions.

2. However, in light of Ms Kellas concession, there is no issue for the Tribunal to decide about this alleged issue.

Costs of replacing the plate-glass window

1. At hearing, Ms Kellas told the Tribunal that she was no longer proceeding with this claim and conceded that she was now aware that it was her responsibility to pay for replacement cost of the plate-glass, which is in any event recoverable under her insurance policy. She accepts that she is responsible for the costs of $1,175 which were paid by Mr O’Brien.

Release from liability following new lease with bookshop owner

1. Ms Kellas advised the Tribunal that she does not pursue this issue. She seeks no orders about it.

Plugging of grease trap

1. At hearing, Mr O’Brien abandoned his counter-claim that Ms Kellas was responsible under the lease for the costs of plugging the grease-trap.

Claim for compensation arising from the loss of the proposed sale of the coffee shop business 

1. The amount claimed has several components. Firstly, the sum of $20,000 which Ms Kellas alleges is the agreed proposed sale price; and secondly, costs of stripping out the shop, removing counters, fittings, plumbing and electricals in the amount of $2,000.

2. As discussed earlier, Ms Kellas gave evidence that she had two people interested: one interested in buying and operating the coffee shop business, and the other interested in leasing the premises only and turning it into a book shop. Ms Kellas blames Mr O’Brien for the loss of the sale of the coffee shop business. Her evidence is that there was no contract of sale signed by the parties concerned, although she asserts that a draft contract was being prepared.

3. There was no evidence presented by the proposed purchasers. The evidence we have about their intentions are contained only in hearsay comments reported by Ms Kellas and Mr O’Brien. Ms Kellas says over several weeks they looked at the details of the business and she says they had agreed upon a price of $20,000. She says that she had the impression that Mr O’Brien required everything to be finalised before he went away on 16 March 2012 (he had advised her in email of his intention to be away from 16 to 30 March). She was not able to point to anything that had happened or had been said by Mr O’Brien which gave that impression. The documents she relies upon do not support the assertion.

4. She says that the proposed purchasers did not proceed because Mr O’Brien would not assign the lease for the balance of her term of lease, instead insisting on a new lease for a longer term. She also says that the time frame allowed was inadequate for the proposed purchasers to work with. Apparently, the proposed purchasers made these comments to her by text message. She also argued that there was an imbalance of power which led to the sale falling over.

5. Ms Kellas says that as a result of the sale falling through, she had to de-fit the shop and reinstate it as required by the lease. She says this cost approximately $2,000 which she wouldn’t have incurred if the sale had not fallen through.

6. Mr O’Brien acknowledges that there were two people interested, and says he gave Ms Kellas the opportunity to have whichever one of them she preferred take over the lease. A statutory declaration from the bookshop owner, Maree Troyon, supports this. Indeed, Ms Kellas does not appear to deny that this was so. He acknowledges that he was going away on 16 March, but was returning on 30 March. He met with both of the proposed new tenants on about 14 March. Following the meetings, he says he had a draft lease prepared for consideration of the proposed coffee shop buyers as discussed with them and on the terms they preferred. That is, a lease (a new lease, rather than an assignment) for the remainder of Ms Kellas lease term, with a 3 x 3 option.

7. However, he says that the next morning he received a telephone call from the proposed purchasers who advised him that they would not be going through with the purchase, indicating to Mr O’Brien that this was because Ms Kellas was being difficult and kept changing her mind. The draft lease was not collected from Mr O’Brien. Mr O’Brien asked that the proposed purchaser advise Ms Kellas of their decision.

8. Ms Kellas subsequently telephoned Mr O’Brien and advised that her only option was to the bookshop lease. By agreement, Mr O’Brien and Ms Kellas then executed an agreement to cancel their lease and Mr O’Brien entered into a new lease with Ms Troyon.

9. Clause 14 of the lease between the parties provides in essence that the lessee must not enter into any dealing with the tenancy without the landlord’s consent. Clause 11.2 provides among other things that upon termination, the tenant must reinstate the premises to their condition at commencement of the lease. That is, the tenant is responsible for the defit.

10. The Retail Shop Lease Act 1994 (RSL Act) also contains provisions about retail tenancy disputes about assignment of leases. The provisions apply when assignment may only occur with the landlord’s consent[1] (as is the case here); the lessee has given full particulars of a proposed assignment and asked the landlord in writing to consent to it;[2] and the lessor has not given an answer to the tenant within 1 month after the request and the particulars are given to the lessor.[3]

    [1]        RSL Act s 50(1)(a).

    [2]        RSL Act s 50(1)(b).

    [3]        RSL Act s 50(1)(c).

11. However, the situation provided for, is not one in which applies here since there was no contract for the sale of the business, and no written request for consent accompanied by the requisite particulars by Ms Kellas for assignment. In any event, in such circumstances, compensation is not payable: Klooster v Sticky Fingers (Qld) Pty Ltd.[4]

    [4] [2011] QCATA 282, [22-25].

12. There is no provision in the lease terms which would entitle Ms Kellas to compensation in the circumstances she has outlined. The RSL Act provides for some additional implied compensation provisions in leases: s 42 RSL Act. The circumstances alleged by Ms Kellas do not fall within the implied provisions for compensation by a lessor which include, for example, the lessor causing significant disruption to the lessee’s trading in the leased shop; or substantially restricting the lessee’s access to the leased shop.[5]

    [5]        RSL Act s 43.

13. Finally, the Tribunal can order that an amount of money be paid when a lessor has engaged in unconscionable conduct: RSL Act ss 46A, 46B, and 83, especially 83(3). Relative bargaining positions of the parties may be considered, among other things, in deciding whether unconscionable conduct has been engaged in by a party: s46B(1)(a) RSL Act.

14. On the evidence before us, we do not accept that Mr O’Brien engaged in unconscionable conduct. There was no contract for the sale of the business. There is no compelling evidence that the proposed purchasers intended to enter into a contract but decided not to proceed because of the actions of Mr O’Brien. At best, Ms Kellas makes vague unsupported assertions about statements alleged to have been made by the proposed purchasers.

15. Indeed, contrary to Mr Kellas assertions, Mr O’Brien says he was prepared to give them a lease for the term they preferred and says the proposed purchasers told him they were not proceeding because of Ms Kellas own actions. We accept Mr O’Brien’s evidence that he was prepared to give them their desired term, as this is in keeping with the accommodating manner in which we accept he behaved generally in relation to the events. We place little weight on the vague hearsay assertions made against him.

16. Despite the impressions of Ms Kellas that Mr O’Brien required everything to be done by 16 March, she could not point to anything which was said or done by Mr O’Brien which supported it. Indeed, Mr O’Brien was, we consider, very accommodating in trying to assist Ms Kellas to secure a replacement tenant in circumstances when she was struggling financially. In our view, the pressure Ms Kellas considered she was under was more likely than not caused by her financial situation, not the actions of Mr O’Brien.

17. Ms Kellas has the onus of establishing her claim to our reasonable satisfaction. She has not done so.

18. We do not consider that there is any basis upon which Ms Kellas can succeed in her claim for a sum of money by way of either compensation or damages relating to the alleged loss of sale of the business.

19. For completeness, we note that she was responsible under the lease for the de-fit costs.

Division of bond

1. Orders need to be made to adjust the bond monies between the parties in light of the concessions made by them at the hearing.

   a)    Bond held by Mr O’Brien  $2,136.00

   b)    Less rates owing by Ms Kellas $273.40=                 $1,862.60

   c)    Plus credit water charges to Ms Kellas $291.58=    $2,154.18

   d)    Less cost plate glass owing by Ms Kellas $1,175=     $979.18

Orders

1. Therefore, we make orders requiring Mr O’Brien to pay to Ms Kellas the sum of $979.18. The claims made by Ms Kellas and the counter claims of Mr O’Brien are otherwise dismissed.