Chauhan v Demertjis

[2008] NSWADT 41

Set aside by Appeal:

CITATION:	Chauhan v Demertjis and anor [2008] NSWADT 41
DIVISION:	Retail Leases Division
PARTIES:	APPLICANT Champavati Chauhan aka Champa Chauhan RESPONDENTS Charles Demertjis and David Demertjis
FILE NUMBER:	075042
HEARING DATES:	19 November 2007
SUBMISSIONS CLOSED:	19 November 2007
DATE OF DECISION:	4 February 2008
BEFORE:	Fox R - Judicial Member
CATCHWORDS:	Costs - Damages
MATTER FOR DECISION:	Principal matter
LEGISLATION CITED:	Retail Leases Act 1994
CASES CITED:	Glasshouse Industries v MPJ Holdings [2005] NSWSC456 Cripps v Dawson [2006] NSWCA81
REPRESENTATION:	APPLICANT K Ramrakha, solicitor RESPONDENT B Pluznyk, barrister
ORDERS:	1. The Respondent landlord is to pay the Applicant tenant, by way of damages for breach of right of quiet enjoyment, the sum of $25,000.00. 2. By consent, the Respondent landlord acknowledges obligation to keep “Cash Wise” bike rack located in the area identified in a plan, a copy of which has been identified and signed by me and filed with the Tribunal papers. 3. Applicant Lessee has liberty to apply on 7 days notice in relation to location of bike rack. 4. Either party may file submissions regarding costs within 21 days, and if so filed, the other party is to file any submissions in response within a further 21 days, and then to be decided on the papers. If no submission made then the order is “Respondent to pay Applicant’s costs of preparing for and attending at directions of 31 May 2007, 14 June 2007, 21 June 2007, 19 July 2007 and 16 August 2007, otherwise no order for costs”.

REASONS FOR DECISION

1 This application concerns the Lease of a lock up shop in Liverpool. The Applicant is the Lessee of the shop from which she sells homewares and gifts. It contains approximately 90 square metres. The Applicant’s Lease is for a period of three years from 1 December 2005 to 30 June 2008, with a three year option. The rent at commencement was $641.00 (including GST) per week, and there has been one CPI increase.

2 The address of the shop appears to be Shop 1, 185 Northumberland Street, and is immediately adjacent to the Cash Wise Second Hand Goods/Pawn Shop, which is on the corner of Northumberland Street and Moore Street. Both of these shops (and the dance studio on the first floor above them) belong to the Respondents.

3 The initial application was filed on 9 March 2007 and sought:

a) Access to toilet and water facilities,

b) Repair of crack in door,

c) Access to rear of shop for loading and unloading,

d) Light switches at entrance of shop (for internal lights),

e) Key for the rubbish storage area,

f) Costs.

4 As the matter developed, an issue arose about the location of a rack displaying second hand bicycles for sale, on what is possibly best described as a street forecourt area shared by the Applicant and Cash Wise. It was alleged that the placement of this rack obscured the entry to the Applicant’s shop. This aspect was resolved at the directions hearing of 16 August 2007, and I was asked to make orders in accordance with the consent of the parties as part of this decision.

5 Again, as part of the interlocutory proceedings, toilet access was resolved. The Applicant had access to the toilets, which were conceded to be part of the shared facilities of the premises, from 22 August 2007 onward, but of course that is some 90 weeks after she first took occupation. This was some 6 days after I relieved the Applicant Lessee from the obligation to pay rent until unrestricted toilet access was available.

6 The “live” issues before me were:

a) Compensation for lack of toilet access over the 90 week period.

b) Compensation for the cracked door.

c) Compensation for absence of rear unloading access.

d) Compensation for the “misplacement” of the light switches.

The Common Facilities

7 The major issue before me was the denial of access to the toilet. Access to the unloading area appeared to me to be a less important consideration.

8 I had in evidence before me the Affidavits of the Applicant dated 4 May 2007 and 14 August 2007 together with, some financial and similar records of the Applicant’s obtained by the Respondent pursuant to a Notice to Produce. The Applicant gave some oral evidence, and then was cross-examined. The Respondent’s evidence was limited to the Affidavit of Charles Demertjis dated 24 May 2007, upon which he was cross-examined. As is requisite, a copy of the Lease between the parties had also been filed and was in evidence before me.

9 The toilet and unloading area appear to fall within the description of:

“Facilities...shared in common with other persons.”
and so it is appropriate to consider the provisions of the Lease in that regard, in full:

Clause 11 - What are the landlord’s other obligations?

11.3 If the property is part of a building owned or controlled by the landlord:

11.3.1 the landlord must maintain in reasonable structural condition all parts of the building that the tenant can use under this lease and;

11.3.2 if the property has facilities and service connections shared in common with other persons the landlord must:

11.3.2.1 allow reasonable use of the facilities and service connections including:

the right for the tenant and other persons to come and go to and from the property over the areas provided for access.

11.3.2.2 maintain the facilities and service connections in reasonable condition.

10 I note in passing that, although the Lease for the premises was in evidence before me, the disclosure statement was not. The Lease simply describes the premises as part of a certain folio identifier, “ground floor shop 1/185 Northumberland Street, Liverpool”. Nothing in the evidence before me identifies those parts of the building encompassed by the shared facilities concept.

11 The evidence before me did not establish that the Lessor’s agent ever held out that there was a toilet available to the Lessee. I am satisfied however, from the general aspect of the premises, including the fact that there was a locked internal rear door that the tenant was entitled to assume that that door opened, and gave out a common area where the toilets were found. I am satisfied that the tenant was entitled to assume, at minimum that there would be running water and toilet facilities available. I am further satisfied that if those facilities were not to be available so, that was a matter for the managing agent to point out at the time of the commencement of the letting.

12 I think the toilet access is a little different to the situation in relation to rear loading and garbage storage, the latter are matters which are not quite so obvious and essential to the occupancy, and so the failure by the agent to make any observation in that regard seems to me to be entirely equivocal. Had I, in evidence, been given the Lease for Cash Wise, or some other evidence to give an indication of the situation of the common areas and associated facilities, then my finding might well have been different because it seems to me, no matter what may not have been held out to the Applicant, if there are common areas within the building, then the Lease applies.

13 The Applicant’s frank evidence was that, at the time of her decision to enter into the Lease, the agent had not held out to her that she would have access for loading from the rear of the premises, or that she would have access to a separate rubbish storage area. Her claims in regard to these (perhaps less obvious) shared facilities must fail.

14 The Applicant’s evidence was that, almost right from the start, she sought key to the rear door of the premises, which would give access to the toilets and the rubbish storage and loading facilities. The Defendant’s agent refused to do so. The reason for that refusal was not made clear to me in evidence at the hearing, but it is certainly the case that the Respondent, at one or other of the interlocutory proceedings, indicated that, for reasons of security, there had been walls or security screens or bars installed by Cash Wise which were so located that it was impossible for the Applicant to gain access to the toilets. That situation obtained from 1 December 2005 until 22 August 2007.

15 In this context I was somewhat surprised to have Mr Pluznyk suggest to me that, pursuant to Clause 11.1 of the Lease, the tenant had a simple right of self help, and as part of her duty to mitigate her loss, it was her obligation, the landlord having failed to supply keys to the locks, for her to obtain her own locksmith to give her keys so that she could then herself use the rear doors to gain access to the toilet. Mr Pluznyk argued from Fleming; The Law of Torts – 9th Edition page 415ff, but I am not satisfied that that applies, because that concept relates to a situation where there is tortious nuisance, it does not seem to me to apply in circumstances where the right arises from contractual relations between the parties.

16 Mr Pluznyk also proposed that the landlord had done everything they could, because, the moment they became aware of the matter, it was resolved. That seems to me to be disingenuous; there is strong evidence to indicate that, during the 90 weeks or so previous, the matter had been raised with the managing agent on several occasions, as well as on 3 or 4 occasions in directions hearings before me. The landlord’s agents (being the landlord’s rental managing agent, and the landlord’s solicitor) were both well enough aware of the problem long before it was fixed. It cannot be said that they rectified it the moment that they became aware of it.

17 It seems to me that a hint of the truth of the matter is found in the evidence of Charles Demertjis, when he indicated that there was trouble with the occupant of the Cash Wise premises, and that that occupant, apparently without the approval of the Respondent had built walls which prevented access, both to the rear loading area, and apparently the toilet.

18 I think it is plain that the landlord was in breach of his obligation under the Lease in failing to make arrangements for access to the toilet.

19 Mr Pluznyk argued that the landlord had no obligation to provide the relevant access because the landlord was not the party who denied the access, the real party at fault was the other tenant. In that regard Mr Pluznyk sought to rely on Clause 11.1 of the Lease, which states and limits the right of quiet enjoyment.

Clause 11.1

So long as the tenant does all the things that must be done by the tenant under this lease the landlord must allow the tenant to possess and use the property in any way permitted under this lease without interference from the landlord, or any person claiming under the landlord or having superior title to the title of the landlord.

20 That is a misconstruction of the simple plain English words of the clause, the words “any person claiming under landlord” refer not only to the landlord’s agent, but also the landlord’s tenant of adjacent premises. It is the landlord’s obligation to ensure that no one else under his control, or claiming title from him, interferes with the occupation of the tenant.

21 By way of further illustration, it seems to me that the situation would have been no different had it actually been proven that the occupant of Cash Wise had simply, without the landlord’s permission or direction, mechanically barred the back door of the premises so as to prevent the Applicant exit.

22 Mr Pluznyk also drew attention to Glasshouse Industries v MPJ Holdings (2005) NSWSC456 which Young J states that a breach of quiet enjoyment is not actionable unless the interference is substantial. In that case (which involved building noise and dust interfering with an outside restaurant) the interference was held not to be substantial. Having considered the facts of that matter, I am satisfied that the interference presented by the Lessor’s failure to give access to the toilet facilities, in the circumstances of a small shop likely to be operated by one person only, is an interference with the right of quiet enjoyment sufficiently substantial to warrant compensation.

The Calculation of damages

23 It was the evidence of the Applicant that the shop was open for 50 hours a week. She had an employee called “Sunita” who attended at the shop for 29 hours a week. The Applicant attended at the shop for the other 21 hours. The only toilet facilities available were the public toilets in a building quite close by called Liverpool Plaza. The walk from the shop to Liverpool Plaza would occupy 5 or 6 minutes, and of course sometimes there was a wait within the public toilets depending on crowding; the return walk took another 5 or 6 minutes. Because the shop had to be left unattended, and because there were goods on display outside the shop, the whole exercise, as well as the walk back and forth, involved taking those goods in, locking the shop, and reopening it on return. I accept that this means that each toilet break amounted to a need to close the shop for 20 minutes or so.

24 Apart from whatever might occur in the lunch break, the shop would have to be closed on average for 2 toilet breaks, every day, together with another break for Thursday late opening. So the total claim over a week was for 8 x 20 minute breaks taken by Sunita, 4 by the Applicant, and 1 further late evening break on Thursday evening taken by her. To quantify her damage, the Applicant calculated hourly pay for Sunita, and for herself, and then extrapolated that to $5.37 in wages paid to Sunita for each unproductive 20 minute period, and $11.66 for herself on the same basis. This meant that the total amount of wages paid out for “shut” times amounted to $101.28 per week, and, over the 90 week period that the toilet facilities were not available, that amounted to a loss of $9,038.70.

25 Mr Pluznyk drew my attention to the fact that in the immediately past financial year the Applicant had suffered a loss of some $7,000.00 so she could not claim that she had actually earned $35.00 an hour for her attendance in the shop. That is a proper observation, the truth of it is that on the figures before me the Applicant’s hourly rate amounts to $28.00 per hour to reach the break-even point. It follows that for every 20 minute break for the Applicant represented a loss of $9.33 instead of $11.66. This reduces the total amount of wages paid out for “shut” times to $89.61 and brings the 90 week total down to $8,064.90.

26 Further, such a calculation would also have to take into account the fact that, even with a toilet close by, the shop would have to be closed for a couple of 5 minute breaks per day for the same personal comfort reasons, and so the amount actually claimed in this calculation should be reduced by 25 percent to give a total of $6,048.00.

27 Over and above that, the Applicant did calculate out, based on her gross takings, and the net profit from those takings, that, had the shop not been closed for the identified periods she would have made weekly profit on sales of $19.35 and that meant that, over the 90 week period, she suffered a loss of approximately $1,728.00. Of course, this figure should also be reduced by 25 percent to allow for short normal toilet breaks that brings about a figure of $1,296.00.

28 In addition the Applicant claimed $60.00 per week expended in the purchase of take away tea and coffee, which, for the same period, an amount of just over $2,000.00. Of course, the Applicant’s argument was that, if she had access to water, she would not have had that expenditure. On the other hand, I must consider the fact that, if she did have access to water, there would have been some expenditure for the materials to make the beverage. Further, I have to take account of the fact that, despite the availability of cheaper alternatives, there are those who prefer to have their beverage made in the coffee shop, for take away.

29 In addition, the Applicant claimed that both she and her employee suffered stress levels as a result of the inability to answer the call of nature, and she sought to quantify that by taking 17.5 percent of what might be regarded as an hourly wage figure. She put a figure of $81.60 as the stress levels suffered by Sunita, and put a figure of $306.25 on that same concept for herself, on the basis that the Applicant attended in one way or another to the workings of the shop for about 50 hours a week, indicating that she felt stress about it even when she was not actually within the shop, but was elsewhere buying the shop or, doing the books. So her personal claim was 17.5 percent of $35.00 an hour for 50 hours a week, to come to the figure of $306.25. That came to a total weekly “stress” claim of $387.85(Applicant and Sunita), which, multiplied by 90 weeks, came to $34,906.50.

30 In a perfect world the claim made by the Applicant for the damage done to the business would be calculated by extrapolation from pre and post event trading results. I suppose that could have been done by delaying the hearing of the matter for a year, observing results of a year’s trade on what might be termed an unrestricted basis, making a reduction for inflation, and then comparing that years results with the similar period of August 2006 to August 2007. However such an exercise would be time consuming and represents a forensic accounting expense quite out of proportion with the possible loss suffered.

31 Ultimately, it is the Applicant’s decision how she would wish to quantify her loss, and she having put that to me, I have to find the just and proper result. The Applicant has simply rolled up a number of bases of calculations and then claimed the total. I think that the calculations, which she put to me, are proper to use as a guide, but I cannot simply add them all up to a total. I think the only way of fairly assessing it all is to take a global approach, which makes allowance not only for the wasted expenditure (being the wages paid during the toilet breaks) and also seeks to take into account the imponderables such as the loss of sales opportunity. The Applicant referred to these on the basis that, whilst ever the shop is not open, there is not the opportunity of having someone walk in who will, on impulse, buy. It seems to me that is partly sought to be encompassed by the calculation of the net profit minute by minute and partly by the calculation of the stress level.

32 Mr Pluznyk suggested to me that the only proper claim was in respect of the net loss, which the Applicant quantified upon $1,728.00 for the period. I suppose, as a matter of general observation that is so in circumstances where a claimant has been able to take steps to mitigate the loss. So, should premises through fire or otherwise be unfit for occupation for many months, then a shop keeper may well be obliged to retrench staff and in other ways minimise the usual business outgoings, and having done all that, the claim for damages would be limited to the net profit which the shop keeper would have expected to have received during the period, together with whatever redundancy payments or other arrangements would have been made in relation to the staff laid off. On much the same basis, should premises be unfit for use for, say, a fortnight, then a shop keeper would not be expected to lay off staff, but, on proving that the staff were not prepared to take the fortnight’s break as part of their holidays, would be entitled to claim both the calculated net profit lost for the fortnight and the payment of wages during that fortnight, despite the fact that the staff were not occupied within the business. On that basis the claim for the unproductive wages, and the net profit is appropriate.

33 The claim for stress in the employee, as Mr Pluznyk rightly pointed out, is not proper, in the absence of evidence of extra payment to the employee. However the same does not apply to the Applicant, and her claim for stress must be seriously considered under the heading of Solatium.

34 Taking all of the above into account, I think a global sum of $25,000.00 is appropriate as the total compensation to be paid as damages.

The Cracked Door

35 The cracked door turned out to be a crack in one of the lower glass panels of one of the two conventionally hinged doors, which are the only entry to the shop. One might describe those as the public entry doors. I accept the Applicant’s evidence that within days of taking occupation she became aware of the crack and requested that something be done about it. I accept that this was all in December 2005. I also accept her evidence that, because of the way the door opens, completely out of the way of any traffic, it is unlikely that the damage was done in her initial moving in. I also have to accept that it is possible that it was damaged before she took occupation. The Applicant said that the shop was very dirty and that the crack only became obvious once it had all been cleaned up. However the fact remains that the Applicant was not able to say positively that the glass panel was sound when she took occupation, and that, of itself, is probably fatal to her claim.

36 As the evidence developed it became clear that the panel remained cracked until July 2006, when there was a break-in to the shop. The thieves apparently gained entry through the same cracked glass panel. The claim for compensation before me appears to be limited to an amount of $150.00, in respect of which I was shown the invoice for the repair by AAA Aussie Emergency Glass Pty Limited:

“Insurance excess on glazing job 12 July 2007, $300.00, less our contribution $150.00, balance due $150.00.”
If the glass panel was damaged prior to the Applicant taking occupation, then that particular panel cannot have been at her risk and was not part of that which is covered by the plate glass insurance which was her obligation pursuant to the standard requirements of such a shop Lease. Because the evidence strongly suggests that she made the insurance claim, it follows, as a matter of law and logic that the Applicant accepted that, as at 1 December 2005, the panel was not damaged.
Order

37 The Respondent landlord is to pay the Applicant tenant, by way of damages for breach of right of quiet enjoyment the sum of $25,000.00 being the approximate total of the amounts I have indicated above for loss of wages during unproductive time, profit costs, expenditure on beverages and solatium.

38 In relation to the question of costs, I make the preliminary observation that, in my view, the Respondents’ behaviour in firstly refusing to attend at mediation and secondly in failing after 3 direction hearings (31 May 2007, 14 June 2007 and 21 June 2007) to take adequate steps to address the matter, necessitating further directions on 19 July 2007 and 16 August 2007 fell entirely within the observations of Justice Santo in Cripps Cripps v Dawson [2006] NSWCA81 at paragraph 60. It follows that my preliminary view is that the Respondent should pay the Applicant’s costs of those directions. However I stress that I have not concluded my view in that regard. Both parties have leave to make submissions in relation to costs, if no submissions, the Costs Order is Respondent to pay Applicant’s costs of preparing for and attending at directions of 31 May 2007, 14 June 2007, 21 June 2007, 19 July 2007 and 16 August 2007, otherwise no order for costs.