Davis v Sydney Harbour Foreshore Authority (No 2)

[2009] NSWADT 276

CITATION:	Davis v Sydney Harbour Foreshore Authority (No 2) [2009] NSWADT 276
DIVISION:	Retail Leases Division
PARTIES:	APPLICANT Evan Davis RESPONDENT Sydney Harbour Foreshore Authority
FILE NUMBER:	075019
HEARING DATES:	8 December 2008
SUBMISSIONS CLOSED:	19 December 2008
DATE OF DECISION:	4 November 2009
BEFORE:	Olsson E, SC - Deputy President; Fagg N - Non-Judicial Member
CATCHWORDS:	Holding-over, misleading and deceptive conduct, unconscionable conduct
LEGISLATION CITED:	Retail Leases Act 1994
CASES CITED:	Hornsby Building Information Centre Pty Ltd v Sydney Building Information Centre Ltd (1978) 140 CLR 216; Attorney General of NSW v World Best Holding Ltd (2005) 63 NSWLR 557
REPRESENTATION:	APPLICANT J Armfield, barrister RESPONDENT M Sneddon, barrister
ORDERS:	1.Application dismissed 2.Applicant to pay Respondents costs 3.Order as to costs stayed for a period of 14 days to permit parties to address Tribunal on costs.

REASONS FOR DECISION

The application

1 The application concerns premises known as Shop 4, 86-88 George Street The Rocks, Sydney (“the premises”).

2 It was agreed that the premises comprise a retail shop to which the provisions of the Retail Leases Act 1994 (“the RLA”) apply.

3 The Applicant at the time of the hearing was a teacher at Katoomba High School but the evidence disclosed that he was an established ceramicist and in 2000 was desirous of having a location in which to display and sell his ceramic works.

4 It was for this purpose that he had entered into a written lease, registered number 7623136W (“the registered lease”) with the Respondent by which the Respondent leased to him all of that land which formed part of the premises for a term of 5 years commencing on 1 November 2000 and terminating on 31 October 2005.

5 The Applicant continued in possession of the premises after 31 October 2005 and vacated them on 30 September 2006. It is the circumstances leading to his vacation of the premises and the way in which his occupation between October 2005 and 2006 is properly characterized which is at the centre of the present dispute.

6 The application was amended once prior to the hearing but at the hearing, the Applicant sought and obtained leave to file a Further Amended Application in which the following was contended:

(i) On or about 17 March 2005 the parties agreed that at the expiration of the registered lease the applicant would be entitled to occupy the premises until the Respondent commenced to carry out [anticipate] refurbishment works to the building in which they were located and that the Applicant would pay the Respondent rent in the same amount and on the same terms and conditions as required by the registered lease at the time it expired.

(ii)That a lease was thereby created for a term in excess of six months (the building works not envisaged to commence until September or October 2006)

(iii)Alternatively the agreement together with continue possession and payment of rent reserved annually and payable by monthly instalments created an express periodical lease from year to year which falls outside the provisions of section 127 of the Conveyancing Act 1919

(iv)That as a result the lease thereby created by either vehicle is a lease to which the RLA applies and its term is by virtue of section 16(2) of the RLA extended to a term of five years commencing 1 November 2005 and expiring 31 October 2010

(v)That the Applicant commenced proceedings against he Respondent (No. 500 of 2006) alleging inter alia that he was entitled to a lease for a term of five years and that during an interlocutory hearing the Respondent made certain representations concerning the commencement date of the proposed building works (being October 2006) and the situation of every other tenant in the building (to the effect that they either had or would vacate the building by 30 September 2006) and that the Respondent was not able to provide the Applicant with occupation of an alternate site as a result of a contractual arrangement which was binding upon the Respondent.

(vi)As a result of the representations, upon which the Applicant relied, he vacated the premises

(vii)In fact the representations were untrue and misleading and deceptive and likely to mislead and deceive and in the circumstances amounted to unconscionable conduct and unfair tactics contrary to sections 62B and 62D of the RLA

(viii)The Applicant had been forced out of his shop and lost the sales of and around the Christmas period as well as the benefit of section 6A(2) of the RLA

7 The Respondent contended that the Applicant

(i)Repeatedly breached his lease by (inter alia) failing to pay rent on time and failing to deliver sales figures to the Respondent,

(ii)Had not been offered a new lease but had been permitted to continue in occupation on a monthly holding over basis

(iii)Notice to quit was given on 3 July 2006

(iv)No lease was created but even if it had been, it was void for want of consideration and uncertainty

(v)The Applicant is estopped from denying that his continued occupation was on a holding over basis

(vi)The Applicant failed to mitigate his loss

The evidence

8 The Applicant gave evidence by affidavit and he was cross-examined. He said that Richard Peachey (the Respondent’s senior property manager) had said to him, in a conversation which took place on or about 17 March 2005 and in the presence of Andrew Peters (also a property manager for the Respondent) that “We are going to refurbish the building, and you can stay until the building works commence which is around September or October of 2006. The rent will stay the same.” The Applicant said, “I am happy with that, it will give us plenty of time to negotiate a new location” and “Can you send me a letter confirming what has been agreed?”

9 The Respondent forwarded a letter dated 21 March 2005. It provided (inter alia) that “due to current proposals for redevelopment/refurbishment of 86-88 George Street, The Rocks, which may involve the demolition of your premises, the Authority will not be offering a new lease to you on the above premises at the term of your current lease, being 31 October 2005. As works to the building are not anticipated to commence until September 2006, the Authority advises that you may exercise the holdover provisions as provided for under your lease at your discretion. The Authority is prepared to enter into short-term lease discussions with you, subject to any such offer complying with section 16(3) of the Retail Leases Act and being approved by the Authority’s delegated officer. This letter is served as notice under section 44 of the Retail Leases Act as notice that the lessor does NOT propose to offer the lessee a renewal of the lease.”

10 The holding over provision in the registered lease is found at clause 3.5:

(a)Subject to clause 3.7, if the Lessee holds over after the expiration of the Term with the consent of the Lessor, it will be as a monthly tenant at a monthly rental equivalent to a monthly proportion of the Rent and other payments payable by the Lessee at the expiration or sooner determination of the Term multiplied by 110% but otherwise on the same terms and conditions as the Lease.
(b)The monthly tenancy created in accordance with clause 3.5(a) is terminable by either party on one month’s prior written notice, provided that if the Lessee is in default of its obligations under this clause, then the Lessor may determine such tenancy on 72 hours’ prior written notice”

11 The Applicant argued that the holding over provisions do not apply to the Applicant’s occupation of the premises because the rent provided for by the March 2005 agreement was the same as the rent under the registered lease and different from that prescribed by the holding over provisions and a right to remain in possession for a period in excess of six months was agreed.

12 The significance of the period of six months is that the RLA does not apply to leases of less than six months duration. The Applicant argued that since the rent differed from that provided in clause 3.5 and because the lease period was in excess of six months, the proper construction of the agreement was not one of a holding over but a lease within the provisions of the RLA.

13 Alternatively, the Applicant said the agreement was an express periodical lease from year to year because the rent was reserved annually and the conversation that occurred on 17 March made it clear that the right to possession was for a term.

14 If this analysis is correct, section 16 of the RLA applies and the Applicant is entitled to a lease for a period of five years.

15 Mr Davis said that he did not understand that the agreement that he had reached was a holding over of the registered lease but a short-term lease.

16 The Respondent relied on the correspondence of 21 March 2005, an email from Mr Davis dated 6 July 2005 and its correspondence of 8 July 2005.

Findings as to lease

17 To my mind, the written evidence is compelling. The letter of 21 March expressly provided that the Applicant’s continued occupation would be on the basis of a holding over of the registered lease and suggested no more than that the Respondent would be prepared to enter into discussions regarding a short term lease. The Applicant’s email of 6 July 2005 is even more compelling: he said, “I have been offered a hold over until the end of September 2006 which I have agreed.”

18 The letter of 8 July 2005 from the Respondent confirmed that it would not offer a new lease.

19 Accordingly, I do not accept that Mr Davis could have held the view that the arrangement he was being offered was a lease. His own correspondence makes it abundantly clear that he knew what he was being offered (and which he accepted) was a holding over of the expiring lease.

20 That he had sufficient understanding of the meaning of the term ‘lease’ and ‘holding over’ is clear from the evidence of his prior dealings with the Respondent which included the lease relationship from 2000 and a mediation over a dispute regarding the lease in 2004.

21 I note that section 6A of the RLA did not commence operation until 1 January 2006 and therefore does not apply to the present application. Even if that were not the case, I am satisfied in the light of the entirety of the evidence that the parties agreed to a holding over of the registered lease, that both knew that the premises would not be available after the end of September 2006 and that the Applicant would have to find alternative premises by that time. Further, I regard it of significance that the Applicant, having asked for written confirmation of the discussion on 17 March and having received in reply the Respondent’s letter of 21 March 2005, did not dispute its accuracy or answer it in any way. His silence can only be construed as his concurrence with its contents.

22 Accordingly I reject the Applicant’s argument that a lease was created either by the parties or by the operation of the RLA.

Findings as to misleading and deceptive conduct

23 The next argument by the Applicant related to his allegations that the Respondent’s 2006 conduct was misleading and deceptive or likely to mislead or deceive.

24 The Respondent served a Notice to Quit on 3 July 2006 requiring vacation of the premises by 30 September 2006.

25 The Applicant vacated the premises by that date but not before entering into negotiations with the Respondent for alternative accommodation. There was evidence for example that the parties attended mediation with respect to alternate accommodation and considered Shop 4, the Rocks Centre as well as Shop 25 Playfair Street, The Rocks. The Respondent offered to assist the tenants in finding alternative accommodation. In my view, it had no obligation to do so but to the extent that it undertook to do so, I am satisfied on the evidence that it discharged that undertaking. In the case of the Applicant, it was unsuccessful in finding accommodation but that fact alone does not amount to proof of the Respondent’s failure to make reasonable efforts to do so.

26 However the Applicant contended that the representations made by the Respondent and its representatives at, inter alia, a directions hearing at the Tribunal amounted to conduct which breach section 62D of the RLA. He said that he was told that building work and demolition work would be commencing in October 2006, that other tenants had or would be moving out by then and that he would or might be forced out of his shop. He said that after he vacated the premises he had occasion to return to collect some items and observed that some other tenants were trading and that the works had not commenced in October or November. He said that he later discovered that building approvals were not finalized at the time the representations were made and that the Respondent had misled him in relation to the occupancy of other tenants.

27 The Respondent acknowledged that the works did not start at the time that had been anticipated (that is, October 2006) but that Mr Davis had only ever been told he could stay until the end of September 2006 and that he had no right to possession after that time.

28 The test as to whether conduct is misleading or deceptive or likely to mislead or deceive is an objective one: Hornsby Building Information Centre Pty Limited v Sydney Building Information Centre (1978) 140 CLR 216.

29 The transcript of the proceedings before the Tribunal of the alleged representations was in evidence in Folder 1 of the Bundle of Documents filed by the Respondent. At page 220 the Respondent’s representative said: “To seek an order to stay in the premises would, you know, have a devastating effect on the authority (sic) because it has an enormous two year building project about to commence.”

30 At page 222 she said, “Every other tenant in the premises has vacated or will vacate by the 30th [of September].” At page 226 she said: “We have every other tenant out.”

31 Mr Peters gave evidence about these representations. Dealing with the allegations seriatim, he said (paragraph 28 ff of his affidavit of 10 July 2007) that each of the representations (to the extent that he could find them in the transcript) were true. In most cases, his comments were supported by reference to documents. He was not shaken in his testimony in cross-examination and I accept his evidence. Although I accept that in the context of a hearing before the Tribunal the comments might have had some emotional force in the ear of the listener, they were not, in my view representations were not misleading or likely to mislead within the meaning of section 62D of the RLA.

32 Even if this were not my view, a breach of section 62D gives rise to a right to damages pursuant to section 62E for loss sustained as a result oaf the misleading conduct. In my view, the Applicant had not suffered loss at the time of the representations. As early as March 2005 he was told that the lease would not be renewed and that he could only stay in the premises until the end of September 2006. He appeared to accept that situation and acted in accordance with it. The proceedings appear to have been precipitated by reason of the difficulty in finding him alternative accommodation.

33 Accordingly I decline to make any order pursuant to section 62E of the RLA.

Findings as to unconscionable conduct

34 The Application was also framed as a claim of unconscionable conduct. For the conduct to be unconscionable requires a high degree of moral obloquy (Attorney General of NSW v World Best Holding Ltd (2005) 63 NSWLR 557) and the section is not to be used as a panacea for adjusting any contract which offends concepts of what is fair or just. The section requires an examination of all the circumstances of the lease relationship. The registered lease was due to expire on 31 October 2005. During the currency of that lease, the Respondent made it clear that it was proposing to undertake refurbishment of the premises and that the lease would not be renewed. It advised that it was prepared to consider a holding over of the lease or a short-term lease. In either case, it made it abundantly clear that vacant possession would be required to be given by the end of September 2006 because it anticipated that building works would commence then.

35 It seems reasonable to infer that the Respondent nominated that date because (i) it believed the works would commence or about that date and (ii) it needed some certainty about the vacation of the building of its tenants so as to be able to entertain contracts for the possession of the site to the refurbishing builders.

36 By 21 September 2006, when the first Application was before the Tribunal (and as already noted, it was a complaint not about the fact of vacating the premises but about the lack of alternative accommodation) the evidence disclosed that the Applicant was already in the process of packing up the shop and preparing to vacate.

37 In my view the conduct in the circumstances falls short of being unconscionable within the meaning of section 62B. The representations were not untrue and at the time they were made, the Applicant had had more than 12 months to contemplate alternative premises. The parties were not in the process of bargaining or negotiating a renewal of the lease or a new lease in the same premises. The relationship was at an end and unequivocally so, on all the evidence. That this was so was known to both parties as well as the reason why it was so. This was not a case where the Respondent was in a position to bargain any more than the Applicant. It wanted vacant possession to refurbish the building and it had given notice in respect of the same.

38 In making that finding I observe that at page 221 of Folder 1 of the Bundle of Documents, Mr Davis made it clear that he did not expect to be in the premises after the end of September. He said: “I was offered a continuation of the lease until the end of this month, there was never a hold over period, which I accepted.”

39 I take this to mean that he knew that whether his continued occupation after the expiration of the registered lease was a holding over or a lease, he well understood it was only until the end of September and that he would have to vacate the premises at that time.

40 The Applicant argued that because of the representations and conduct, he lost the ability to remain in possession of the premises and suffered lost sales and profit opportunity. I reject this argument. The Respondent was consistent, from March 2005 onwards, in its categorization of the circumstances in which it was prepared to permit the Applicant to continue to occupy the premises after the expiration of the registered lease as a holding over of the lease at the discretion of the lessee and lessor. Whilst the Respondent’s opinion of the proper categorization of the lease is not determinative of the issue before the Tribunal, it is relevant when it is an opinion with which the Applicant concurs and in relation to which the Applicant conducts himself.

41 It follows that I find that the arrangement by which the Applicant continue in possession for the premises after 31 October 2005 was a holding over of the registered lease, determinable on 1 months notice by either party in their discretion and that to the extent that the payment of rent differed from that provided in clause 3.5 of the registered lease, it was agreed by the parties. I find that at all material times the Applicant knew and acquiesced in the fact that he would be required to vacate the premises by the end of September 2006 and that he did so, not because of any representations which were made during an interlocutory hearing in the Tribunal in a related matter but because he accepted that his right to occupy terminated at that time.

42 The Application is dismissed. The question of costs were reserved and unless the parties wish to make any application for costs, I order that the Applicant pay the Respondent’s costs. In case the parties wish to be heard on the question of costs, I formally STAY the order for costs for a period of fourteen days after which it will become an order of the Tribunal.