Coogee Bay Village Pty Ltd v Profilio (RLD)

[2011] NSWADTAP 39

Administrative Decisions Tribunal

New South Wales

Medium Neutral Citation:

Coogee Bay Village Pty Ltd v Profilio (RLD) [2011] NSWADTAP 39

Hearing dates:

29 June 2011

Decision date:

07 September 2011

Jurisdiction:

Appeal Panel - Internal

Before:

D Patten, Deputy President
P Molony, Judicial Member
M Lonie, Non-judicial Member

Decision:

1. Appeal allowed.

2. Orders made by Tribunal set aside.

3. In lieu, order that the application be dismissed.

4. Subject to 5, no order as to costs.

5. Leave to the appellant to apply for an order for costs within 21 days accompanied by written submissions. Respondents to reply within 21 days, thereafter matter of costs to be decided on the papers.

Catchwords:

Whether lease breached - No breach established

Cases Cited:

B & B Constructions v Cheeseman (1994) 35 NSWLR 227
Codelfa Construction Pty Ltd v State Rail Authority of NSW [1981-1982] 149 CLR 337

Category:

Principal judgment

Parties:

Coogee Bay Village Pty Ltd (Appellant)
Joe Profilio (First Respondent)
Rozi Sajko (Second Respondent)

Representation:

A G Rogers (Appellant)
Klonis & Co. Lawyers (Appellant)
Mr J Profilio (First Respondent in person and agent for Second Respondent)

File Number(s):

119006

 Decision under appeal 

Citation:

Profilio v Coogee Bay Village Pty Ltd [2009] NSWADT 211

Date of Decision:

2009-08-10 00:00:00

Before:

Retail Leases Division

File Number(s):

085127

REASONS FOR DECISION

1. APPEAL PANEL (D PATTEN (DEPUTY PRESIDENT), P MOLONY (JUDICIAL MEMBER), M LONIE (NON-JUDICIAL MEMBER)): In this matter the Tribunal conducted separate hearings on liability and damages. This appeal concerns the decision published by the Tribunal on 10 August 2009 regarding liability, a decision which is encapsulated in para 184 of its reasons:

184 The Applicants are entitled to a declaration to the following effect: (a) that CBV, in granting to BWT a lease of Shop 194 on terms that permitted BWT to use this Shop for the provision of internet and email services, was in breach of its obligation under the 2004 Lease to ensure that the Applicants had exclusive use of Shop 192 as an Internet Caf; and (b) that CBV is liable to compensate for the economic harm resulting from this breach.

1. We take the relevant facts from the findings of the Tribunal to be as follows:

• In 1996 the respondents to this appeal purchased a video store business hitherto conducted at the two adjoining shops - 192 and 194 Coogee Bay Road, Coogee.
• The two shops comprised part of a complex known as the Coogee Bay Shopping Centre owned by Randwick City Council.
• The vendor to the respondents of the business operated under a lease from the Council.
• At the time of their purchase of the business the respondents obtained a fresh lease from the Council for a term which commenced on 8 March 1996 and expired on 28 February 2001. The lease contained an option for renewal for a further term of 5 years. It stipulated the permitted use as "video hiring outlet and retail shop" and inter alia prohibited subletting without consent of the lessor.
• During 1999 with the consent of the Council as lessor the respondents changed the use of shop 192 to one providing internet services to members of the public on a commercial basis.
• On 16 July 2000 the respondents subleased shop 194 to Dial a Coach Group Pty Ltd (DAC) for a term commencing 21 August 2000 and expiring 28 February 2001. The sublease contained an option to renew for 5 years and stipulated the permitted use as "travel agency" subject to "the Head Lessors Consent and that of the local Council". Clause 6 of the sublease provided that the sublessee "shall not provide internet access to the public from the demised premises".
• During August 2000 DAC established a travel agency business in shop 194.
• On 8 September 2000 the respondents exercised the option for renewal of the lease granted to them in 1996.
• In or about November 2000 the Council sold to the present appellant 8 shops including shops 192 and 194 within the Coogee Bay Village Shopping Centre such shops being subject to separate strata titles.
• The sale was not completed until September 2001.
• Between January and September 2001 there were negotiations between the appellant and the respondents as to the rent payable on renewal of the lease.
• Following negotiations the respondents agreed to surrender their interest in shop 194 and took from the appellant a lease of shop 192 only for a term commencing 1 March 2001 and expiring 27 February 2006. The lease contained a covenant: "The Lessee shall not use the premises other than for the purposes of the provision of internet and email services to members of the public".
• In or about September 2002 the appellant granted a lease to DAC of shop 194 which commenced on 1 February 2002 and expired on 31 January 2012 with an option for renewal for 5 years. The lease contained the following covenant as to permitted use:

(A) The lessee will not use or permit to be used the demised premises other than for the purposes of the provision of a Travel Agency and associated administration office and the sale of travel goods and associated services and as a retail shop, and use as a Travel Agency shall be exclusive to the Lessee throughout the centre known as "Coogee Bay Village Shopping Centre" as owned by the Lessor.

(B) The Lessor further agrees to allow the Lessee to use the demised Premises for the purposes of the provision of internet and email services, such use to be exclusive to the Lessee throughout the centre known as "Coogee Bay Village Shopping Centre" as owned by the Lessor only upon expiration of the lease granted to Mr Joseph Profilio and Ms Rozi Sajko over shop 192 Coogee Bay Road Coogee, registration number 8215442.

• The reference to the lease of shop 192 was a reference to the lease expiring on 27 February 2006 referred to above.
• Early in 2002 or late in 2001 DAC installed about 10 computers in shop 194 which were made available upon payment of a fee for members of the public to access the internet.
• Upon observing the installation of computers in shop 194 and their use by the public, the respondents complained to the appellant that this constituted a breach of the appellant's obligations towards them. The appellant denied any such breach.
• In or about August 2004 Base Backpackers Pty Ltd, under its business name Backpacker World Travel (BWT), assumed the operation of the business conducted in shop 194, DAC having gone into liquidation.
• During 2004 there were negotiations between the appellant and the respondents regarding the grant of a fresh lease of shop 192. In those negotiations the respondents were represented by a solicitor.
• Following negotiations a lease of shop 192 was granted by the appellant to the respondents for a term which commenced on 1 November 2004 and expired on 31 October 2009 with an option for renewal for a further term of 5 years.
• The lease reflecting the negotiations between the parties contained this clause regarding use:

4.1 The Lessee shall not use the Premises otherwise than for the purposes of an Internet Caf and related services and activities to the Lessees customers including but not limited to providing all computer services via the internet including online booking services for hotel and travel, online games, online job search general computer services, Internet services provider and the sale of phone cards, faxing services, postage web design, photocopying, printing, typing services, incoming phone services, photo processing, digital cards, mailbox rental, mobile phones, scanning, laminating, USB ports, office software, network installations, computer training, selling products and services online, and new services and products as computer as computer ( sic ) technology is developed, snacks, coffee, drinks, confectionery and sandwiches.

4.2 The lessee acknowledges that he will not use the premises during the term of the Lease and any further term or holding over period for any activity as a Licensed Travel Agency, Pizza or Kebab Shop, Tobacconist or Delicatessen without the prior written consent of the Lessor.

4.3 The Lessor acknowledges that the Lessee shall have exclusive use of the Premises as an Internet Caf relating only to the land owned by the Lessor and known as Lot 17 in Strata Plan 22899 attached hereto and marked as Annexure B.

4.4 Notwithstanding clause 4.3 the Lessee acknowledges and accepts that the Lessee and or its heirs, successors or assigns of the Lessors Land known as Shop 194 Coogee Bay Road, Coogee allows access to the Internet for the Lessees customers, however, the primary use of the land is a Licensed Travel agent.

• At about the same time as the 2004 lease to the respondents was being negotiated the appellant negotiated with BWT for the grant to it of a fresh lease of shop 194. Such a lease was executed on either 3 December or 5 December 2004 for a term which commenced on 1 October 2004 and expired on 30 September 2012. It contained an option for renewal for a term of 5 years and contained the following covenant regarding usage:

4.1 The Lessee shall not use the Premises otherwise than for the purposes of a Travel Agency and associated administration office and the sale of travel goods and associated services and as a use of a retail shop and for the provision of internet and email services.

• Within a few months the respondents complained to the appellant that BWT had erected signs inside and outside shop 194 advertising the availability of internet access and had displayed a price list of products and services above each of its computers. The respondents asserted in effect that this constituted a breach by the appellant of its contractual obligations towards them.
• Thereafter the dispute escalated as appears from paragraphs 96 to 104 of the Tribunal's reasons:

96 On or about 5 July 2007, Mr Profilio observed that BWT had changed their computers in Shop 194 and had attached webcams and headsets to the new computers. About two weeks later, he observed that the signs outside the shop advertised 'Global Gossip' and that the new computers all displayed 'Global Gossip' as their login page. He stated that this association with Global Gossip at Shop 194 was still continuing. 97 Mr Profilio testified (a) that to his knowledge the company known as Global Gossip is a very large operator and owner of internet cafes, (b) that it sells access cards for internet use at any location where it provides services (including Shop 194 and the other agencies maintained by BWT), (c) that these cards can be used at any Global Gossip location and (d) that users of Global Gossip's services can earn and redeem 'Gossip Points' at any of its locations. 98 According to Mr Profilio's evidence, the services provided at Shop 194 by BWT, in conjunction with Global Gossip, amount to '90% of the same services that the Chat Site provides'. The only services not available at Shop 194 are photocopying, scanning and laminating. 99 Following a number of complaints about Global Gossip's involvement made by Mr Profilio to Mr Dover (an officer of the appellant) during July and August 2007, Ms Klonis (solicitor for the appellant) wrote on 23 August 2007 to BWT. Her letter included the following passage:-

We are instructed that our client has received notification that you may have breached your lease as follows:

1. Subleased your premises to Global Gossip.

2. Providing Internet services to the general public.

We note your use of the premises is for a Travel Agency and associated administration office and the sale of travel goods and associated services and as a use of a retail shop and for the provision of Internet and email services to your customers only.

Could you kindly provide response to our correspondence within 7 days.

If you fail to remedy the breach and or not reply our client will pursue any damages they suffer from any breach of the lease.

100 In a reply to Ms Klonis dated 30 August 2007, Mr Timmins wrote that BWT had not entered into a sublease with Global Gossip and that Global Gossip was an internet service provider to BWT. He added that BWT 'provide internet and email services as a marketing tool to encourage customers into our travel shops and to service the needs of our customers already travelling within our travel network'. 101 Ms Klonis sent a copy of this letter to Mr Profilio. In a reply to her dated 3 September 2007, he maintained that BWT were in breach of their lease in providing internet services both to the general public and to Global Gossip customers. He pointed out (a) that Global Gossip had 114 locations in Australia, New Zealand, Vanuatu and Fiji; (b) that one of these locations, shown on its website, was identified as BWT's travel agency at Shop 194; and (c) that BWT had 33 locations in Australia and New Zealand. He claimed that BWT's breaches of their lease were diverting his customers to Shop 194, with the result that both the takings and the value of his business were reduced. 102 Mr Dover said in cross-examination that he did not know what sort of enterprise Global Gossip was, because he had no relevant technical expertise. He said also that he had not seen the correspondence between Ms Klonis, Mr Profilio and Mr Timmins during July, August and September 2007 because Ms Klonis, being CBV's solicitor, was 'supposed to handle' such matters. 103 Mr Timmins testified that BWT had decided to outsource their internet services because maintenance of these services by their own staff was unsatisfactory. BWT had engaged Global Gossip to act as its internet service provider. Allowing Global Gossip's internet access cards, as well as BWT cards, to be used in BWT premises meant that BWT could 'attract more backpacker/adventure tour persons into the premises', with a view to selling travel services or products to them. BWT did not earn any revenue directly from the use of Global Gossip cards in BWT's shops because the cards were purchased from Global Gossip. 104 Mr Timmins estimated that the revenue obtained from providing internet access represents only 4% of the turnover of Shop 194. He did not produce any financial documents to support this estimate. During cross-examination, he indicated that the turnover to which he referred comprised the gross amounts received from customers. It included, for example, the total airfare paid by a customer even though most of this fare would be paid to the airline concerned. Mr Timmins was not able to say how the profitability of BWT's internet services compared with that of its travel services and products.

1. The Tribunal devoted considerable attention to the meaning of the expression "internet caf" and heard evidence from persons it accepted as experts on the subject. It was in our opinion perfectly appropriate for it to do so - the words "internet caf" not being words having an ordinary meaning.

1. It accepted the evidence of a Mr Bruce Arnold to the effect that in 2004 an internet caf had these essential characteristics, namely the provision of access to the internet in commercial premises to members of the public for reward to the proprietor. There has been no challenge to that finding.

1. However, we respectfully doubt the correctness of the proposition in para 159 of its reasons that because of uncertainty as to the meaning of the phrases "internet caf" and "lessees' customers", it is appropriate to take into account relevant conduct of the parties and their agents, both before and after the execution of the lease. Relevant authorities are discussed in B & B Constructions v Cheeseman (1994) 35 NSWLR 227 especially per Kirby P. There must be an ambiguity before resort can be had to extrinsic evidence. See also Codelfa Construction Pty Ltd v State Rail Authority of NSW [1981-1982] 149 CLR 337, particularly the observations of Mason J at 352:

The true rule is that evidence of surrounding circumstances is admissible to assist in the interpretation of the contract if the language is ambiguous or susceptible of more than one meaning. But it is not admissible to contradict the language of the contract when it has a plain meaning. Generally speaking facts existing when the contract was made will not be receivable as part of the surrounding circumstances as an aid to construction, unless they were known to both parties, although, as we have seen, if the facts are notorious knowledge of them will be presumed.

It is here that a difficulty arises with respect to the evidence of prior negotiations. Obviously the prior negotiations will tend to establish objective background facts which were known to both parties and the subject matter of the contract. To the extent to which they have this tendency they are admissible. But in so far as they consist of statements and actions of the parties which are reflective of their actual intentions and expectations they are not receivable. The point is that such statements and actions reveal the terms of the contract which the parties intended or hoped to make. They are superseded by, and merged in, the contract itself. The object of the parol evidence rule is to exclude them, the prior oral agreement of the parties being inadmissible in aid of construction, though admissible in an action for rectification.

Consequently when the issue is which of two or more possible meanings is to be given to a contractual provision we look, not to the actual intentions, aspirations or expectations of the parties before or at the time of the contract, except in so far as they are expressed in the contract, but to the objective framework of facts within which the contract came into existence, and to the parties' presumed intention in this setting. We do not take into account the actual intentions of the parties and for the very good reason that an investigation of those matters would not only be time consuming but it would also be unrewarding as it would tend to give too much weight to these factors at the expense of the actual language of the written contract.

1. In its reasons the Tribunal recorded that the applicants before it, the respondents in the appeal, put their case on 6 bases viz (1) a breach by the appellant of its obligations to the respondents arising out of cl 4.3 of the lease of shop 192 which commenced on 1 November 2004; (2) conduct derogating from the grant made to the respondents in that lease; (3) pre-lease misrepresentations contrary to s 10 of the Act; (4) unconscionable conduct within s 62B; (5) misleading or deceptive conduct under s 62D of the Act; and (6) failure to comply with s 11 in relation to the contents of "lessors disclosure statements".

1. In the result the Tribunal upheld basis (1) of the respondents' claim as set forth above and rejected the remaining 5. The respondent's did not argue on appeal that the Tribunal erred in so doing but sought to uphold the Tribunal's finding upon the first basis. We shall confine our attention accordingly.

1. The success of the respondents on the first of the 6 bases propounded by them predicated a breach of cl 4.3 of the lease to the respondents by the insertion of cl 4.1 in the lease to BWT.

1. It was argued by the respondents and apparently accepted by the Tribunal that the reference to the "lessees customers" in cl 4.4 of the lease to the respondents meant persons who already were customers of the travel agency business in shop 194 in the sense that they had contracted for travel products or were intending to so contract. It was also argued and apparently accepted by the Tribunal that the provision of computers and internet access in shop 194 constituted it an "internet caf" in accordance with the evidence of Mr Arnold which it had accepted. We use the word "apparently" because there is unfortunately a typographical error in para 158 of the Tribunal's reasons which tends to obscure the basis of its conclusions. Nonetheless it is clear from para 184 of the reasons that the Tribunal held that the appellant's lease of shop 194 to BWT upon terms which permitted BWT to use the shop for the provision of internet and email services was a breach of the obligation arising under cl 4.3 of the lease.

1. However the Tribunal did in para 149 of its reasons make the finding which we regard as important that BWT's primary business was that of a travel agency:

149 Thirdly, the fact that BWT's 'primary' business - whether assessed by reference to revenue received, prominence in advertising or any other measure - was that of a travel agency did not mean that in the same premises it was not also carrying on the business of an internet caf. In this connection, Mr Arnold's observations regarding multiple businesses within the same premises and indeed a concession made by Mr Corrigan on this matter provide important support.

1. In the appeal, counsel for the appellant, Mr Rogers, correctly in our opinion characterised the proper construction of cl 4 of the lease to the respondents as a question of law. He submitted that the Tribunal appeared to have concluded that cl 4 precluded the appellant from permitting BWT to expand its internet services beyond a particular point, a point which so Mr Rogers submitted was not identified. The clause itself in Mr Rogers' contention identified the only limitation, namely that the premises leased to BWT must primarily be used as a travel agency thereby giving proper value to the expression "primary use" in cl 4.4.

1. With regret we find ourselves in disagreement with the conclusion of the learned member who constituted the Tribunal below. It is unfortunate that cl 4 in the lease to the respondents which clearly was the subject of considerable negotiation remains as unclear as it is. Indeed the critical provision, cl 4.4, read literally, simply does not make sense and probably should be read as if the words "the lease to the" were inserted before the word "lessee" where it secondly appears. But even if it is so construed the clause has at least two deficiencies. It imposes no particular obligation on the appellant and places no restriction on the unambiguous reference to "lessees customers". Even if we were permitted to have regard to extrinsic circumstances we would find it impossible to construe the clause as (in combination with cl 4.3) not only imposing a positive obligation upon the appellant but as conveying a meaning for the word "customers" which transforms it from a word with an unambiguous meaning i.e. persons doing or seeking to do business with BWT, to a word of very uncertain application. For instance, does it encompass only persons who have contracted for the appellant's travel services, does it encompass those intending to contract, does it encompass those simply making an enquiry about travel services etc. That dilemma is impossible to resolve.

1. It is not for the Tribunal to rewrite the contract between the parties. If cl 4.3 and cl 4.4 of the lease to the respondents have any meaning, they do, in our opinion, as submitted by the appellant, no more than oblige the appellant to ensure that the primary use of shop 194 be for the purposes of a travel agency. The Tribunal found that to be the case.

1. We conclude that the respondents failed to establish a breach of any contractual obligation entered into by the appellant and the appeal must be upheld.

1. We make these orders:

1. Appeal allowed.

2. Orders made by Tribunal set aside.

3. In lieu, order that the application be dismissed.

4. Subject to 5, no order as to costs.

5. Leave to the appellant to apply for an order for costs within 21 days accompanied by written submissions. Respondents to reply within 21 days, thereafter matter of costs to be decided on the papers.

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Decision last updated: 07 September 2011