De Luca & Anor v Scuccimarra & Anor

[2007] NSWADT 63

CITATION:	De Luca & Anor v Scuccimarra & Anor [2007] NSWADT 63
DIVISION:	Retail Leases Division
PARTIES:	APPLICANTS Luigi De Luca Gavina de Luca RESPONDENTS Francesco Scuccimarra Rosa Scuccimarra
FILE NUMBER:	055162
HEARING DATES:	6 November 2006 15 December 2006
SUBMISSIONS CLOSED:	15 December 2006
DATE OF DECISION:	22 March 2007
BEFORE:	Chesterman M - ADCJ (Deputy President); Fairweather R - (Advisory) Non Judicial Member ; Tyler T - Non Judicial Member
CATCHWORDS:	Claim for compensation for pre lease misrepresentations - Claim for declaration of rights, obligations and liabilities under a lease - Claim for the doing of work or provision of services - Damages - Interest - Unconscionability
MATTER FOR DECISION:	Principal matter
LEGISLATION CITED:	Administrative Decisions Tribunal Act 1997 Real Property Act 1900
CASES CITED:	Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64 Cripps v G & M Dawson Pty Ltd [2006] NSWCA 81 G & M Dawson Pty Ltd v Cripps & Ors (No 3) [2005] NSWADTAP 24 G & M Dawson Pty Ltd v Cripps & Ors [2004] NSWADTAP 38Hadley v Baxendale (1854) 9 Exch 341; 156 ER 145Mattana Coiffure Pty Ltd v Sotiropoulos (No 2) [2004] NSWADT 80 Sellars v Adelaide Petroleum NL (1994) 179 CLR 332
REPRESENTATION:	APPLICANTS S Taylor, barrister RESPONDENTS R Czinner, solicitor
ORDERS:	1. The Respondents are jointly and severally liable to the Applicants in the amount of $60,645.17, comprising a principal sum of $52,146.50 and interest totalling $8,499.17; 2. The Respondents are to arrange at their expense for the tiles on the floor of Suite C, 106 Norton Street, Leichhardt to be replaced, within six weeks of the date of this decision, by one or more appropriately qualified tradespeople, in a manner that will render the premises reasonably fit for the gelataria business currently conducted in those premises by the Applicants; 3. Both parties have liberty to apply for variation of Order 2, but only on the ground that compliance with its terms is not practicable and the parties cannot reach agreement on any appropriate variation. Any such application must be filed and served, with supporting submissions, within 14 days of the date of this decision. The opposing party must file and serve submissions in reply within a further 7 days. Unless reasons are advanced for a hearing to be conducted, the matter will be resolved ‘on the papers’, pursuant to s. 76 of the Administrative Decisions Tribunal Act 1997; 4. It is declared that under the lease between the parties executed on 31 December 2004, the monthly rent of $4,333.33 required to be paid by the Applicants to the Respondents is inclusive of Goods and Services Tax payable at the rate of 10%; 5. Any application for the costs of these proceedings must be filed and served, with supporting submissions, within 28 days of the date of this decision. The opposing party must file and serve submissions in reply within a further 28 days. Unless reasons are advanced for a hearing to be conducted, the matter will be resolved ‘on the papers’.

REASONS FOR DECISION

The leases signed by the parties

1 In this case, the Applicant Lessees, Mr Luigi De Luca and Ms Gavina de Luca, have raised a number of claims against the Respondent Lessors, Mr Francesco Scuccimarra and Ms Rosa Scuccimarra, arising out of the letting of retail premises (‘the premises’) at Suites B and C, 106 Norton Street, Leichhardt.

2 The parties executed successive written leases of the premises dated 1 January 1999, 31 December 2001 and 31 December 2004 (hereafter called ‘the first lease’, the ‘second lease’ and the ‘the third lease’ respectively). The evidence did not reveal precisely when these leases were executed. Each of them was expressed to last for three years, with no option of renewal. The monthly rentals payable under the three leases were, respectively, $3,683.33, $3,900.00 and $4,333.33.

3 Since the commencement of the first lease, the Applicants have carried on the business of a gelataria, known as Cremeria Sorbetteria, in the premises. The permitted use stated in each of the leases is ‘gelateria and sandwich bar’. The parties agree that the Retail Leases Act 1994 (‘the RL Act’) is or was applicable to each of the three leases.

4 In each lease, however, a form headed ‘Commercial Lease’ was employed. Under the heading, the following words appeared: ‘Suitable for small office buildings, factories and any shop premises which are not the subject of the Retail Leases Act (1994) where the term of lease (including the period of any option) does not exceed three years.’ The leases were not in registrable form and none of them has been registered under the Real Property Act 1900.

Outline of the dispute

5 The three matters in dispute between the parties were as follows.

6 First, the Applicants alleged that because the Respondents insisted throughout, despite opposition from the Applicants, that the form of written lease just described be used, the Applicants in April 2005 lost the opportunity to sell their business to a prospective purchaser at an advantageous price. The purchaser, they said, withdrew from negotiations on realising that the lease to be assigned to him was defective. The Applicants claimed that they told the Respondents about this prospective sale, but that the Respondents persisted in refusing to execute a lease of the appropriate kind.

7 The Respondents’ contentions on this matter were (a) that a form of lease that was appropriate for leases governed by the RL Act was not used because during 1998 the Applicants refused to pay the legal costs and stamp duty associated with the preparation of a registrable form of lease by their own solicitors, and (b) that the Applicants did not tell them about the opportunity to sell the business until after the purchaser had withdrawn.

8 Secondly, according to the Applicants, the Respondents promised during 2004 that in return for receiving an increased rent under the third lease they would pay for the tiles on the floor in the part of the premises described as Suite C (hereafter ‘the shop floor’) to be replaced and the bathroom and a workshop to be refurbished. When they were asked in August 2005 to fulfil these promises, however, the Respondents themselves undertook the replacement of the tiles. The tiles used were inappropriate and/or were not laid properly, with the consequences that they lifted off the floor and became unsafe to walk on, unsightly and unduly difficult to clean. The Respondents, moreover, did not refurbish the bathroom or the workshop, with the result that Mr De Luca carried out some repairs to the bathroom in his own time and at his own expense.

9 The Respondents’ version of these matters was as follows. They never promised to refurbish the bathroom or the workshop. They did promise to replace the shop floor, but did not make this promise until after the execution of the third lease. They carried out the necessary work satisfactorily. The reasons why the tiles lifted were that the Applicants (a) allowed water to flow over them too soon after they were laid, despite being warned not to do so, and (b) wheeled an unduly heavy ice cream trolley over them.

10 Thirdly, while the parties agreed, before the hearing commenced, on the replacement of the third lease by a five-year registrable lease (‘the new lease’) in a form appropriate for leases governed by the RL Act (and also on how the costs of preparation of this lease were to be met), they were in dispute as to whether on a proper interpretation of the agreement recorded in the third lease the rent payable was exclusive or inclusive of GST.

11 The relief sought by the Applicants comprised (a) an order that the Respondents arrange for replacement of the damaged shop floor and refurbishment of the bathroom by qualified tradespeople, (b) a declaration that the rent under the third lease was inclusive of GST and (c) damages under various heads.

12 Since the grounds put forward for these various forms of relief included an allegation of unconscionable conduct by the Respondents falling within s 62B of the RL Act, the Tribunal must be constituted in these proceedings in accordance with Clauses 1 and 4 of Part 3B of Schedule 2 of the Administrative Decisions Tribunal Act 1997. It is constituted by a Deputy President who is a member of the Retail Leases Division, assisted by two other appropriately qualified members acting in an advisory capacity only.

The witnesses called at the hearing

13 All of the witnesses in this case provided one or more written affidavits or statements and were cross-examined.

14 The three witnesses for the Applicants were Mr De Luca (the first Applicant), Mr Lucciano Zoccolan (the prospective purchaser of the Applicants’ business) and Mr Adrian Staltari (a registered real estate valuer, who testified as to the value of this business).

15 The two Respondents gave evidence, but no-one else was called on their behalf. Most of their evidence came from Mr Scuccimarra.

16 The resolution of many of the issues in this case has depended on which of the two principal witnesses – Mr De Luca and Mr Scuccimarra – is the more credible.

17 The Tribunal, having given this question careful consideration, has concluded that the testimony of Mr De Luca is to be preferred. He is of Italian origin and at times displayed difficulty in understanding English or in appreciating precisely what he was being asked. But except on one topic, he appeared to be a reasonably reliable and truthful witness and to have a reasonably sound recollection of the matters in dispute.

18 The topic on which his evidence was clearly unsatisfactory was that of the expenses that he claimed to have incurred in refurbishing the bathroom and the workshop. Annexed to his affidavit were copies of receipts from suppliers that he said were for the price of materials that he had bought for these purposes. In cross-examination, however, he admitted that a number of the items on these receipts did not relate to these tasks. Whether or not those acting for him should bear some of the responsibility for his affidavit being misleading in this way, the fact remains that he swore the affidavit without having ensured that it was wholly accurate on this topic to the best of his knowledge and belief.

19 By contrast, Mr Scuccimarra, who is also of Italian origin, was consistently either unable or unwilling to provide answers to the questions put to him. He repeated several times the same allegations irrespective of whether they were responsive to these questions. Although provided with an interpreter, he frequently spoke in not very fluent English without waiting for a question to be translated. Moreover, he indicated during examination in chief that the content of his affidavits – some of which had a distinctly legalistic flavour – had not been communicated to him before he signed them.

20 No doubt, the unsatisfactory nature of his distinctly confused oral testimony was in part attributable, as his counsel suggested, to his being over 80 years of age and to his unfamiliarity with English. But the fact remains that his evidence on a number of important questions was of little assistance to the Tribunal.

21 The same must be said of the small quantity of evidence provided by Ms Scuccimarra. Her command of English was also limited. Although her short affidavit purported to have been sworn in response to Mr De Luca’s principal affidavit she said that she had never read Mr De Luca’s affidavit. A number of her answers during a short cross-examination were confused and unsatisfactory.

22 The three matters in dispute between the parties will now be separately discussed.

The alleged loss of an opportunity to sell the Applicants’ business

23 Relevant evidence. During 1998, Pelosi & Associates, Solicitors, on the Applicants’ instructions, prepared a draft lease of the premises from the Respondents to the Applicants, specifying a term of three years from 1 January 1999 to 1 January 2002, with an option to renew for three years. The lease was in a form approved by the Law Society of New South Wales and was registrable under the Real Property Act 1900.

24 Mr De Luca testified that he had instructed Pelosi & Associates to prepare a lease that would be appropriate for the circumstances. When questioned as to his instructions regarding the duration of the lease, he was somewhat confused, saying that he might have requested either a five-year lease (with or without an option to renew) or a three-year lease with an option to renew. He claimed that he definitely did not want a three-year lease without an option to renew. He said also that he had been willing to pay any legal costs and stamp duty that would be chargeable. But when he asked Mr Scuccimarra to sign the draft lease, Mr Scuccimarra replied to the following effect:-

You don’t need a lease prepared by your solicitor. I will do the right thing by you. You can trust me. You will be treated like family.
25 According to Mr De Luca, Mr Scuccimarra made it clear (a) that he was only willing to sign a commercial lease form such as was in fact used for the first lease and the two subsequent leases and (b) that any lease that he granted would not exceed three years and would not contain an option to renew. Mr Scuccimarra also said that when the three-year lease had terminated, another lease would be granted.

26 The lease prepared by Pelosi & Associates was never signed. According to Mr De Luca, the forms of lease ultimately signed were prepared by Mr Scuccimarra. The Applicants signed them because they believed that they had no choice in the matter.

27 Mr Scuccimarra’s principal affidavit gave a wholly different reason for the use of the commercial lease form for the first lease, and indeed for the subsequent leases. This was that ‘the Applicants refused to pay the legal fees and stamp duty in respect of a Real Property Act lease’ prepared by their solicitors. He made the same assertion several times during cross-examination. His affidavit also contained the statement that ‘at no stage’ did he wish to grant a lease of the premises for more than three years.

28 In response to questions asked in correspondence before the hearing by Mr Czinner, solicitor for the Respondents, Pelosi & Associates indicated that they had never issued a memorandum of costs to the Applicants for the preparation of the draft lease in 1998 and that their file contained no correspondence showing why this lease was never signed.

29 On 9 July 1999, both the Respondents and the Applicants signed a one-page typed document setting out various arrangements regarding car-parking near the premises and the payment of water and sewerage charges. It also contained a statement that ‘the Landlord gives permission to the tenants to transfer the lease… to another person’ so long as they ‘guaranteed payment of the rent for the duration of the current lease’.

30 Early in 2005, after signing the third lease, Mr De Luca took some steps to find a purchaser of the Applicants’ business. He commenced negotiations with Mr Zoccolan, whom he had met previously. He did not at any stage try to sell the business to anyone else.

31 On 21 April 2005, pursuant to instructions from Mr De Luca, Pelosi & Associates sent to Mr Zoccolan a draft contract for the sale of a business, in which the purchase price was specified as $169,300. On the same day, they sent to the Applicants a letter enclosing a copy of this contract, in which they referred to a telephone call from Mr Zoccolan advising that ‘he should be in a position to exchange contracts some time next week’. In this letter, they also pointed out that the current lease of the premises (i.e., the third lease) ‘could be found defective by the purchaser’s solicitor’ because the signatures had not been witnessed, it had not been stamped and it was not in registrable form.

32 Mr Zoccolan gave the draft sale contract to his mother-in-law, who was to provide most of the price. She paid a deposit of $1,600 to Mr De Luca and sought legal advice about the draft contract. On the basis of the advice received by his mother-in-law and communicated to him, Mr Zoccolan then said words to the following effect to Mr De Luca:-

I need a lease which complies with the Retail Leases Act. Ask your landlord for the same and I will proceed with the purchase.
33 Mr De Luca agreed to do this. Soon afterwards, he had a conversation with the two Respondents, which according to his affidavit was to the following effect: -
Mr De Luca: We need a proper lease that complies with the Retail Leases Act in order to sell my business. I have a buyer and I am worried I will lose the sale.

Ms Scuccimarra: No, take the lease you have. If you want to stay, then stay; otherwise go.

34 In cross-examination, Mr De Luca gave answers suggesting, however, that while he asked the Respondents for a ‘proper lease’ at about this time he may not have mentioned that he had a prospective purchaser for the business.

35 According to the affidavit evidence of both Respondents, a conversation in these terms never occurred. They testified instead that on one occasion (which Ms Scuccimarra seemed to say was in August or September 2005), when they were both in their car near the premises, Mr De Luca approached them and there was a conversation along the following lines:-

Mr De Luca: You gotta see Pelosi and sign the lease.

Ms Scuccimarra: You’ve got a lease. When it finishes we will talk again.

36 Mr Zoccolan testified that soon after he had told Mr De Luca that he needed a lease that complied with the Retail Leases Act, Mr De Luca told him that Mr Scuccimarra refused to give him one. Mr Zoccolan testified further in his affidavit that because of this refusal he did not proceed with the purchase. In cross-examination, he stated that he was not prepared to purchase the Respondents’ business unless he had a lease for at least five years that was registrable.

37 As a result of Mr Zoccolan’s decision not to proceed, Mr De Luca refunded the deposit to Mr Zoccolan’s mother-in-law. He also paid to Pelosi & Associates costs totalling $346.50 relating to the negotiations for the sale of the business and the preparation of the draft contract.

38 A letter dated 3 May 2005 from Pelosi & Associates to the Applicants commenced as follows: ‘We refer to the above matter and as you are aware, your purchaser has decided not to proceed with the transaction as your current lease does not comply with the registration of leasing requirements.’ It went on to point out that Pelosi & Associates had ‘repeatedly’ alerted the Applicants to this requirement and that any prospective purchaser was bound to reject the lease document that they currently had.

39 Mr Zoccolan said in his affidavit that (a) if he had gone ahead with the purchase he would not have wanted to change the use of the business; and (b) he did not believe that the assignment of the lease could have been refused on the basis of his financial resources or his retailing skills.

40 In cross-examination, he said that if the purchase had gone through, the business would have been conducted as a ‘family business’ by himself, his wife, his brother-in-law and his mother-in-law. He said that his mother-in-law had run ‘a business in hospitality’ for a few years and he had had experience in serving gelato. He added that he had had no experience or training in manufacturing gelato, but that Mr De Luca had agreed to provide training over a period of at least two weeks. (Mr De Luca said during cross-examination that it was not difficult to manufacture gelato.) Mr Zoccolan also said that he did not try to purchase any business other than that of the Respondents and that he was now studying full-time in order to become a real estate agent.

41 Mr De Luca testified that immediately after the proposed sale fell through he went overseas for some weeks.

42 He testified that soon after his return he delivered to the Respondents’ mailbox a letter which was written in Italian and dated 24 August 2005. Both the Italian text and a translation were annexed to his affidavit. The letter mentioned a recent conversation in which the Respondents had allegedly consented to the preparation of a ‘proper’ agreement of lease. It stated that Pelosi & Associates would send them a copy to be signed by them, which could then be registered. It alleged that the Respondents previously had failed to keep their word, referring to ‘our conversation with both of you in the car’. In a postscript, it alleged that due to the Respondents’ ‘obstinacy’ in not wanting to enter into a ‘registered commercial contract’, the Applicants had lost a sale of their business to ‘seriously interested people’.

43 The Respondents claimed that they never received this letter.

44 In a letter dated 23 September 2005 to the Respondents, Pelosi & Associates asserted (a) that the third lease constituted a ‘serious breach of the Retail Leases Act for which there are severe penalties’; (b) that ‘despite our clients’ previous requests to have you prepare and register a proper lease’, the Respondents had failed do so; and (c) that the Applicants were ‘convinced’ that this failure had caused a prospective purchaser of the Applicants’ business to withdraw from the purchase, with the result that the Applicants had lost ‘a substantial sum of money’. They also raised a further matter, described below.

45 On the same day, Russo & Co, solicitors, who had been retained by the Respondents, wrote to the Applicants, saying that the Respondents had ‘given some thought to’ the Applicants’ request for a new lease for three years with a three-year option to renew, but had decided that they ‘did not wish to implement such a lease’. The letter also conveyed certain complaints by the Respondents regarding the payment of rent by the Applicants and their conduct in allowing rubbish to build up in parking spaces.

46 In a letter dated 6 October 2005 to Russo & Co, Pelosi & Associates repeated the assertions that they had made in their letter of 23 September to the Respondents.

47 In a reply dated 12 October 2005, Russo & Co stated (a) that the Respondents denied having promised any new lease; (b) that the Applicants were well aware of the Respondents’ determination to grant leases for three years only, without any option of renewal; (c) that it was the Applicants who had refused to pay the costs of preparation of a lease in registrable form and had suggested ‘that the current form of lease be used as it had been on the previous two occasions’; and (d) that the Respondents had never received any correspondence regarding the proposed sale of the business, had never been introduced to any proposed new tenant and had not heard about the failure of any proposed sale until they received the letter of 23 September from Pelosi & Associates. They made some further assertions, which are noted below.

48 It is sufficient here to record the following aspects of further correspondence during October 2005 between the two firms of solicitors regarding the preparation of a registrable lease. Pelosi & Associates pointed out that the Respondents had not provided a disclosure statement as required by s 11 of the RL Act. Russo & Co sent a draft lease in registrable form that they had prepared, providing for a term of three years from 31 December 2004 with no option to renew. They reiterated that the Respondents would not give a five-year lease and contended that, in order that the term of the lease being prepared should be three years only, Pelosi & Associates should provide to the Applicants a certificate under s. 16(3) of the Act. Pelosi & Associates indicated that their clients continued to insist on a term of five years or on an option to renew and therefore would not sign such a certificate.

49 It appears that the parties remained in deadlock over the duration of the new lease until, as indicated above, the Respondents agreed shortly before the commencement of the hearing that it should have a term of five years, commencing on 31 December 2004.

50 One final issue dealt with in the evidence relating to this part of the case was the value of the Applicants’ business. A report prepared at the Applicants’ request by Mr Adrian Staltari, a registered real estate valuer employed by Meadows Real Estate Services, arrived at an estimated figure $117,500. The date of valuation was 17 May 2006 and the components were as follows: equipment and stock, $27,500; location and goodwill, $10,000; and income stream $79,630. The Applicants also tendered copies of tax returns for 2003 and 2004.

51 Mr Staltari attended for cross-examination, during which he answered a number of questions put by Tribunal members as well as by counsel. The tenor of these questions was to suggest that his estimate of the value of the business was unduly high.

52 Findings. For reasons already given, the Tribunal prefers the evidence of Mr De Luca to that of Mr or Ms Scuccimarra on matters in which they are in conflict. It observes also that Mr De Luca’s evidence is compatible in virtually all respects with the evidence given by Mr Zoccolan (which was not significantly challenged in cross-examination) and is corroborated to some extent in the letters written on the Applicants’ behalf by Pelosi & Associates.

53 On the other hand, the Respondents made a number of implausible assertions, both in their own evidence (for example, in denying receipt of Mr De Luca’s letter of 24 August 2005) and in instructing Russo & Co (one consequence being that this firm alleged in their letter of 12 October 2005 to Pelosi & Associates that the Applicants, not the Respondents, had wanted to use the commercial lease form for all three leases).

54 The Tribunal accordingly makes the following findings relating to the forms that were used for the first, second and third leases and the circumstances in which the proposed sale of the Applicants’ business to Mr Zoccolan fell through.

55 First, the reason why the form used for these leases was a commercial lease form, not appropriate for registration under the Real Property Act 1900, was that the Respondents refused to use any other form. The Tribunal does not accept the assertion by Mr Scuccimarra that the Applicants refused to pay the legal costs and stamp duty that would have been payable if a form appropriate for registration had been used.

56 Secondly, the reason why the term of each of these leases was stipulated to be three years, without any option of renewal, was that the Respondents refused to grant either a lease for any longer period or an option of renewal.

57 Thirdly, Ms Scuccimarra, on behalf of the Respondents, reiterated to Mr De Luca during April 2005 that they would not give the Applicants a ‘proper lease’ in substitution for the third lease.

58 Fourthly, because of these refusals by the Respondents the Applicants could not assign to Mr Zoccolan a lease that was satisfactory to him.

59 Fifth and finally, it was for this reason, and no other, that Mr Zoccolan withdrew from his proposed purchase of the Applicants’ business.

60 In making this last finding, the Tribunal has considered but rejected an argument by Mr Czinner that because Mr Zoccolan appeared to have little past experience in property transactions and had not (so far as the evidence showed) instructed a solicitor during the negotiations for the purchase, the reason for his withdrawal must have been something other than the nature of the lease agreement. The grounds for the Tribunal’s conclusion on this point are, first, that this proposition was not put to Mr Zoccolan in cross-examination in order to cast doubt on his evidence on the matter and, secondly, that in view particularly of the statement appearing at the top of the commercial lease form that was used for the third lease (see [4] above), even a relatively inexperienced purchaser, through engaging in ‘due diligence’, could readily have taken account of it and realised that the form was inappropriate.

61 In the Tribunal’s opinion, it has not however been established by the Applicants (on whom the onus of proof lies) that during the conversation between Mr De Luca and the Respondents in April 2005 he informed them that he had a prospective purchaser for the business and that this was why he was requesting a ‘proper lease’. The Tribunal finds instead that the Respondents first heard about the failure of the proposed sale of the business when they received the Applicants’ letter dated 24 August 2005.

62 For the purpose of resolving the Applicants’ claims based on these events, findings on two other matters are required. The Tribunal finds as follows: (a) that to a very limited extent, doubts may be raised about Mr Zoccolan’s assertion that the contemplated assignment of the third lease to him could have been refused on the basis of his financial resources or his retailing skills; and (b) that Mr Staltari’s estimate of the value of the Applicants business was excessive to a material extent. These two issues are considered further below.

63 Whether the Respondents should be held liable for this loss. As is often apparent in cases heard by this Division of the Tribunal, a factor that significantly influenced the course of the dispute in this case was the apparent failure of both sides to understand the impact of the RL Act on the leases that they had executed. Some of the letters written by their solicitors suggested that they too did not understand fully how some of the Act’s provisions affected the rights of the parties.

64 The parties clearly believed that by signing the form of lease appropriate for certain types of commercial lease and agreeing to a period of lease of three years only, with no option to renew, they were on each occasion creating a three-year lease, even though the lease did (as they realised) relate to a retail shop. But the effect of s. 16(1) of the RL Act on a retail shop lease is, subject to certain exceptions, to convert any period of lease that is expressed to be less than five years (including the period stipulated for any subsequent lease granted under an option to renew) into a period of five years. Under s. 7, this statutory provision overrides the relevant provision or provisions of the lease itself.

65 The only exception of potential relevance in this case is that if the parties follow procedures set out in s. 16(3), involving the provision of a certificate by a lawyer or conveyancer, there will be no extension of the term to five years. But no such certificate was issued with respect to the first, second or third lease and indeed neither the parties nor their solicitors appeared to take any account of this exception until October 2005.

66 It follows therefore, despite what the parties believed, that the statutory terms of the first, second and third leases were in each case five years.

67 It does not follow also, however, that Mr Zoccolan’s objections to the third lease had no legal basis. As Mr Taylor, counsel for the Applicants, pointed out in his opening address to the Tribunal (though not in his closing submissions), s. 81(3)(a) of the RL Act imposes an obligation on lessors that is of direct relevance to this case. The relevant subsections of s. 81 ((1) and (3)) are as follows: -

(1) The extension of the term of a retail shop lease by operation of a provision of this Act is of no effect for the purposes of the Real Property Act 1900 unless and until a lease is registered under that Act which gives effect to the extension of term, or the variation of a lease that is already registered under that Act is registered to give effect to the extension of term.

(3) The lessor under a retail shop lease the term of which is extended by operation of a provision of this Act is bound, at the request of the lessee:

(a) to execute a lease in the approved form for the purposes of the Real Property Act 1900 to enable registration of the lease under that Act (with its term so extended) if the lease is not already so registered, and

(b) to enter into such variation of the lease as may be necessary to give effect to the extension of term if the lease is already registered under that Act, and to obtain all necessary consents, for the purposes of the registration under that Act of the variation of lease.

68 In the Tribunal’s opinion, the request for ‘a proper lease that complies with the Retail Leases Act’ made by Mr De Luca to the Respondents during April 2005, when considered against the background of the Applicants’ unsuccessful attempts during 1998 to persuade the Respondents to execute a lease that was appropriate under both the RL Act and the Real Property Act , constituted a ‘request’ within the meaning of s. 81(3)(a). The Respondents knew well what were the Applicants’ wishes in this regard. In consequence of their refusal, the third lease, like its two predecessors, was not ‘a lease in the approved form for the purposes of the Real Property Act 1900 ’.

69 In so ruling, the Tribunal has considered whether the word ‘request’ in s. 81(3) should be interpreted to mean ‘request in writing’. It sees no reason for this. In other provisions of the Act (for example, s. 41(a), relating to requests for a lessor’s consent to the assignment of a lease), it is expressly stated that a ‘request’ must be in writing. This is not the case with s. 81(3).

70 The Tribunal reaches this conclusion even though it has not accepted Mr De Luca’s allegation that when he spoke to the Respondents during April 2005 he told them about the prospective purchase. It accepts a submission by Mr Taylor that a request by a lessee to a lessor under s. 81(3) need not explain why a registrable lease is being sought.

71 The Act does not state what remedies are available to a lessee in the event of a breach of s. 81(3)(a) by the lessor. No decisions on this point were cited to the Tribunal and its own researches have not unearthed any. Taking account particularly, however, of the phrase ‘the lessor… is bound’ in the opening words of s. 81(3), the Tribunal is of the opinion that a lessee in this situation is implicitly entitled under the Act to claim damages for any loss that it sustains in consequence of the breach. The obligation imposed by s. 81(3)(a) should in this respect be treated as if it formed part of the agreement for lease.

72 In their Defence to Points of Claim and Cross Claim, filed on 21 July 2006, the Respondents pleaded that the Applicants were estopped from seeking any remedy based on the fact that the statutory term of each of the three leases was five years. The basis of this contention was, it seems, as follows: (a) the Applicants, but not the Respondents, had the benefit of legal advice during the period of negotiations leading to the execution of the first lease; (b) they refused to pay the costs that could be charged for the preparation of a registrable lease pursuant to s. 13 of the RL Act as it then stood; and (c) they instead executed a non-registrable lease knowing that its term was in fact five years and that the Respondents believed it to be only three years.

73 In his submissions at the hearing, Mr Czinner did not elaborate on this line of argument.

74 The Tribunal is satisfied that no estoppel arose from the Appellants’ conduct prior to the execution of the first lease. There are two reasons for this conclusion. First, the Tribunal has rejected the Respondents’ allegation that the Applicants refused to pay the preparation costs for a registrable lease. Secondly, far from realising that the statutory term of each of the three leases was five years, the Applicants, like the Respondents, believed that it was only three years.

75 The Applicants’ case was that the Respondents’ breach of their obligation to provide a registrable lease when so requested in April 2005 was the immediate cause of Mr Zoccolan’s withdrawal from the proposed purchase of the business. This is the last of the five findings of the Tribunal outlined above at [55 – 59].

76 The Applicants accordingly claimed that they should receive compensation for the loss that they thereby suffered.

77 In assessing the merits of this claim, the Tribunal has obtained useful guidance from the Court of Appeal’s decision in Cripps v G & M Dawson Pty Ltd [2006] NSWCA 81. Here the owners of land who had bought it from a mortgagee exercising its power of sale failed, in breach of contractual obligations, to register a lease that the mortgagee had granted by way of renewal to a pre-existing lessee. The owners also refused, in breach of s. 39 of the RL Act, to give consent to an assignment of the lease that the lessee wished to make to a purchaser of its business. In consequence, the purchaser rescinded the contract of sale. The sale price exceeded by a significant sum ($102,000) the amount for which the lessee was able to sell the business about ten months later (a mere $28,000). The reason for the sale price being substantially lower after a relatively short period of time was that the market value of the equipment included in the sale fell very sharply during this period.

78 Upholding a decision of an Appeal Panel of this Tribunal (G & M Dawson Pty Ltd v Cripps & Ors [2004] NSWADTAP 38), the Court of Appeal held that the lessee was entitled to recover from the owners an award of damages that included this amount of $102,000. In so concluding, it took account of the principles governing recovery of damages for breach of contract laid down in the leading case of Hadley v Baxendale (1854) 9 Exch 341; 156 ER 145.

79 This case established (see 156 ER 145 at 151) that the damages to be awarded for breach of a contract are to be confined to two categories of loss. They are first, losses of a type that ‘may fairly and reasonably be considered as arising naturally, i.e., according to the usual course of things from such breach of contract itself’, and secondly, such losses ‘as may reasonably be supposed to have been in the contemplation of both parties at the time they made the contract as a probable result of the breach of it’.

80 In its judgment at [34] and [39], the Court of Appeal held that the amount of $102,000, representing the diminution in the value of the lessee’s business, fell within both of these categories of loss. It was accordingly recoverable even though the scale of this loss was not reasonably foreseeable to the parties at the time when the contract between them was concluded or at the time of the breach of s. 39 by the owners.

81 In the Tribunal’s opinion, the loss claimed by the Applicants on account of the Respondents’ breach of their obligation under s. 81(3) of the RL Act to provide them with a registrable lease similarly falls within both ‘limbs’ of Hadley v Baxendale and is accordingly recoverable by them from the Respondents.

82 So far as the first limb is concerned, the following aspects of the case lead to this conclusion. It is to be expected that a purchaser of a retail business who wishes also to take an assignment of the lease of the business premises will want to have a leasehold interest enjoying the full protection of the Real Property Act. The lessor’s unlawful refusal to provide such a lease to the current lessee is therefore likely to constitute an obstacle to any prospective sale and to deprive the lessee of any benefit that it might thereby obtain. It follows that the loss of such a benefit is a category of loss that might ‘fairly and reasonably be considered as arising naturally, i.e., according to the usual course of things’ from the lessor’s conduct.

83 With regard to the second limb, it is pertinent to note a further matter disclosed in the evidence. In July 1999, as outlined above at [29], both the Applicants and the Respondents signed a document which referred expressly to the possibility that at some future time the Applicants might wish to sell their business and assign their lease to the purchaser. At the times when both the second and the third leases were subsequently executed, the possibility that the Applicants might suffer loss because the defects in the lease documents caused a prospective purchaser to withdraw from the proposed sale could therefore ‘reasonably be supposed to have been in the contemplation of both parties… as a probable result’ of this breach of their obligations by the Respondents.

84 By virtue of this reasoning, the Tribunal’s conclusion on this matter is not affected by the fact that, as explained above at [61], the Applicants have not proved that when in April 2005 they asked the Respondents for a registrable lease they did not actually mention that a sale of the business was in the offing.

85 In the Applicants’ Amended Points of Claim, filed on 13 December 2006, and in Mr Taylor’s submissions at the hearing, it was argued that the continued refusal by the Respondents to execute registrable forms of lease constituted unconscionable conduct within s. 62B of the RL Act. But in view of the foregoing ruling that the Respondents are liable under s. 81(3)(a) for the consequent losses sustained by the Appellants, it is not necessary to determine this matter.

86 Assessment of the damages payable by the Respondents. Mr Taylor submitted that the amount of compensation properly payable on account of the loss of the proposed sale to Mr Zoccolan should be quantified as the aggregate of (a) the difference between the purchase price of $169,300 offered by Mr Zoccolan and the value of the Applicants’ business, estimated by Mr Staltari to have been $117,500, (b) the costs, totalling $346.50, that the Applicants paid to Pelosi & Associates for acting for them during the negotiations for the sale and for preparing the draft contract and (c) interest. The total of the first two of these two components is $52,146.50.

87 As indicated above, the Tribunal is of the opinion that Mr Staltari significantly overestimated the value of the Applicants’ business. It believes that if more satisfactory evidence had been provided on this issue, it would have exposed a larger gap between the price offered by Mr Zoccolan and the actual value of the business, thereby increasing the amount of damages due to the Applicants.

88 The Respondents did not tender any expert evidence on this issue.

89 In these circumstances, Mr Taylor submitted that the Tribunal, in assessing damages, should in fact take into account the estimate provided by Mr Staltari. He acknowledged, in effect, that the Applicants could not rely on what the Tribunal might consider to be deficiencies in the report provided by their own expert witness in order to press for a higher award of damages. Mr Czinner raised no objection to this approach being taken to this particular aspect of the case.

90 The Tribunal agrees that, subject to one question which will now be addressed, the evidence before it justifies a finding that the amount of loss suffered by the Applicants was no less than the amount suggested by Mr Taylor.

91 In Cripps v G & M Dawson Pty Ltd, the Court of Appeal noted (see [2006] NSWCA 81 at [47]) that the lessee’s loss on account of the owners’ refusal to consent to the assignment could be characterised as the loss of an ‘opportunity’ to sell the lessee’s business. This characterisation was also employed by the Appeal Panel (see G & M Dawson Pty Ltd v Cripps & Ors [2004] NSWADTAP 38 at [66]).

92 The Appeal Panel referred to the well-known decisions of the High Court in Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64 and Sellars v Adelaide Petroleum NL (1994) 179 CLR 332. In these two cases, the High Court held that in assessing the damages to be awarded to a plaintiff for the loss of the opportunity to enter into a commercial transaction, it may be necessary to take account of the possibility that for reasons unconnected with the conduct of the defendant the transaction may never have been completed. This, the Court said, can properly be done by determining an amount that properly reflects the value of the transaction to the plaintiff and then applying a discount to this amount.

93 In the Tribunal’s opinion, this approach needs to be considered in the present case in order to deal fully with some contentions raised by Mr Czinner. He argued that Mr Zoccolan’s claim in his affidavit to have possessed financial resources and retailing skills that were not inferior to those of the Applicants was open to question. In so arguing, Mr Czinner relied on the evidence showing that the proposed purchase of the business was not by Mr Zoccolan but by Mr Zoccolan’s mother-in-law, that the business was to be run as a ‘family business’, that Mr Zoccolan had not tried at any time to buy any other business and that he had no significant experience in managing or selling gelato.

94 The reason why this issue is relevant in the present context is that, under s. 39(1)(b) of the RL Act, one of the limited range of grounds on which a lessor can refuse to grant consent to an assignment of the lease is that ‘the proposed assignee has financial resources or retailing skills that are inferior to those of the proposed assignor’.

95 As indicated earlier (see [62]), the Tribunal has found that, to a very limited extent, doubts may be raised about Mr Zoccolan’s assertion that the contemplated assignment of the third lease to him could not have legitimately been refused on the ground of his possessing insufficient financial resources and/or retailing skills.

96 Following the principles that the High Court has laid down, it would therefore in the ordinary course be appropriate, in assessing the damages to be awarded under this head, to reduce by a small percentage the amount that has been calculated as reflecting the difference between the price intended to be paid.

97 In view, however, of the Tribunal’s conclusion that the loss actually suffered by the Applicants is likely to have been greater, to a material extent, than the loss that can be substantiated on the evidence, its conclusion is that no discount should be applied to take account of this contingency.

98 The principal sum that the Tribunal awards as damages under this part of the Applicants’ case is accordingly $52,146.50, as claimed on their behalf by Mr Taylor.

99 Interest on damages. As will appear below, this is the only award of damages that the Tribunal makes in this decision. It is accordingly convenient here to consider the question of interest.

100 Under s 72A of the RL Act, the Tribunal may award interest on the whole or any part of any sum ordered to be paid for the whole or any part of the period between the date on which the relevant cause of action arose and the date of the order for payment. The rate of interest must not exceed the rate at which interest is payable on a judgment debt of the District Court.

101 The Tribunal sees no reason to depart from its normal practice of awarding interest under this section (as illustrated, for instance, in G & M Dawson Pty Ltd v Cripps & Ors (No 3) [2005] NSWADTAP 24).

102 The Applicants’ right to damages for the loss of its prospective sale to Mr Zoccolan arose at some time during May 2005. It is during that month that the sale, if it had not fallen through, would probably have been finalised. An appropriate notional date for this event is 31 May 2005. Between that date and the date of this judgment the rate of interest on judgment debts of the District Court has been 9% per annum.

103 The Tribunal accordingly awards $8,499.17 as interest, calculated at 9% per annum, on the principal sum of $52,146.50 between 31 May 2005 and the date of these reasons.

The alleged failures by the Respondents with regard to repair and refurbishment of the premises

104 Evidence from the Applicants. Mr De Luca’s evidence on this matter was to the following effect.

105 Late in 2004, in the course of negotiations leading to the preparation and execution of the third lease, Mr Scuccimarra promised orally to arrange for replacement of the shop floor and refurbishment of the bathroom and of a workroom, in return for an agreement by the Applicants to pay increased rent under the third lease. The monthly rent was in fact increased under the third lease from $3,900.00 to $4,333.33.

106 During August 2005, Mr De Luca reminded Mr Scuccimarra of this promise. In a conversation on 23 August, Mr Scuccimarra said then that he himself would carry out the task or retiling the shop floor. Mr De Luca agreed, under some pressure, that the tiles to be used on the shop floor could be vinyl tiles, not (as had previously been laid) ceramic tiles.

107 Shortly after this conversation on 23 August 2005, Mr and Ms Scuccimarra, instead of employing qualified tradespeople, took upon themselves the task of laying new vinyl tiles on the shop floor. The Applicants were compelled to close the shop for two days to permit this. But the job was not done properly, with the result that a number of the tiles lifted after a display case, containing gelato, that the Applicants regularly used in their shop had been pushed over them. They were dangerous to walk over, they became dirty very quickly and they were difficult to clean. Photographs annexed to Mr De Luca’s affidavit showed some of the raised tiles.

108 In response to a claim by Mr Scuccimarra that the tiles lifted because the Applicants, contrary to instructions imparted to them by the Respondents, spilled water over them before they had dried properly, Mr De Luca said that an area on which water was indeed spilt was quite distinct from the areas where tiles lifted.

109 In a letter dated 23 September 2005 to the Respondents (mentioned above), Pelosi & Associates referred to their ‘unsatisfactory effort’ to replace the tiles and claimed that ‘the state of repair and condition of the premises are both a health hazard and an injury risk to the occupants and customers’.

110 As to the bathroom and workshop, Mr De Luca’s evidence was that Mr Scuccimarra took no steps to fulfil his promise. In consequence, Mr De Luca did the work on the bathroom himself, incurring expenses totalling $940. Annexed to his affidavit were copies of a number of receipts from suppliers that he claimed to be for the price of materials that he had bought for the purpose of refurbishing the bathroom and the workshop. In cross-examination, however, he admitted that a number of the items on these receipts did not relate to these tasks.

111 Evidence from the Respondents. Mr Scuccimarra denied having made any promise on these matters before the signing of the third lease. He agreed that during August 2005 he undertook to replace the tiles on the shop floor and that soon afterwards he and Ms Scuccimarra laid new vinyl tiles. When he visited the shop about a day later, he saw that the Applicants had allowed water to flow over the floor, causing some of the tiles to lift. He alleged that he had expressly instructed them to prevent this happening, in order to allow sufficient time for the tiles to dry.

112 In a letter dated 12 October 2005, replying to the letter dated 23 September from Pelosi & Associates to the Respondents, Russo & Co asserted that the premises, ‘if kept clean, are not a hazard to the staff or visitors’ and that the Respondents had ‘carried out at their expense tiling to the front of the shop and went to a great deal of trouble to ensure matching tiles’. They did not mention Mr Scuccimarra’s claim that the Applicants had allowed water to spill on the newly-laid tiles before they were fully dry.

113 The Tribunal’s conclusions regarding the shop floor. For reasons indicated earlier, the Tribunal prefers the evidence of Mr De Luca to that given by Mr Scuccimarra.

114 It accordingly finds that Mr Scuccimarra did promise that in return for an increase in the rent the Respondents would arrange for the relevant works to be carried out.

115 In this context, the Tribunal does not place significant weight on the consideration, raised by Mr Czinner, that when differential treatment of GST within the second and third leases is taken into account, it becomes clear that there was from the Respondents’ perspective no significant increase in the rent. The Tribunal’s reason for taking this view is that in their evidence the parties themselves gave no indication that they had taken account of the different wordings of the clauses relating to GST.

116 The Tribunal is also not inclined to believe Mr Scuccimarra’s assertion that the reason why the tiles lifted was that water was spilt on them before they had dried fully. This assertion was not included in a letter written by the Respondents’ solicitors in reply to the Applicants’ claim that the tiles had been not been properly laid. There was, moreover, no expert evidence before the Tribunal to support it.

117 In his submissions as finally formulated, Mr Taylor argued that the Applicants were entitled to remedies for the Respondents’ failure to replace the shop floor in a proper fashion on the following two grounds: (a) that Mr Scuccimarra’s promise during 2004 to do this in return for there being an increase in the rent in the lease being negotiated was a ‘collateral contract’, in consideration for which the Applicants entered into the third lease; and (b) that this promise was a material misrepresentation under s. 10 of the RL Act. He abandoned a third ground based on s 62D of the RL Act (which provides remedies for misleading and deceptive conduct) because, as was pointed out at the hearing, this comparatively new provision is not applicable to conduct occurring before 1 January 2006.

118 The Tribunal is satisfied that this promise did indeed operate as a collateral contract. It finds also that the tiles were either of an inappropriate kind to be used on a floor where equipment such as the Applicants possessed was being moved around, or were not laid in a satisfactory manner so as to permit this activity to take place.

119 The Tribunal notes that an obligation to effect appropriate repairs to the shop floor may also have arisen under clause 21(b) of the third lease, which provides that ‘the landlord shall carry out without delay all reasonable repairs necessary for the tenant’s ordinary use and occupation of the premises, having regard to the condition of the premises at the commencement of the lease’. But since no argument was made to this effect, the Tribunal expresses no conclusion on this matter.

120 The Tribunal rejects the Mr Taylor’s submission based on s. 10 of the RL Act. An essential ingredient of a claim under this section is that the relevant misrepresentation was known to be false by the maker of it at the time when it was made. There was no evidence to show that at the time when Mr Scuccimarra made the promise of retiling the floor he had no present intention of carrying it out. He did in fact carry it out, though not in a satisfactory manner.

121 The first of two orders sought by the Applicants with regard to the shop floor was that the Respondents arrange at their expense for the tiles to be replaced in a satisfactory and workmanlike fashion.

122 In proceedings for a retail tenancy claim, such as the Applicants’ claim that the Respondents breached a collateral contract associated with the granting of the third lease, the Tribunal has power under s. 72(1)(c)(i) of the RL Act, to order that a party to the proceedings ‘do any specified work or perform any specified service or any obligation arising under this Act or the terms of a lease’. Under s. 72(1)(c)(iv), it may order a party to ‘do or perform, or refrain from doing or performing, any specified act, matter or thing’. Under both provisions, the range of ‘acts’ that it may order to be performed includes the procuring of repairs to premises that are the subject of a retail shop lease (see for example Mattana Coiffure Pty Ltd v Sotiropoulos (No 2) [2004] NSWADT 80).

123 The Tribunal is satisfied that an order of this nature is appropriate in the present case. It orders that the Respondents arrange at their expense for the tiles on the shop floor within the premises to be replaced, within six weeks of the date of this decision, by one or more appropriately qualified tradespeople, in a manner that will render the premises reasonably fit for the gelataria business currently conducted by the Applicants.

124 There will be liberty for the parties to apply for variation of this order, but only on the ground that compliance with its terms is not practicable in the circumstances.

125 The second of the two orders sought by the Applicants with regard to the shop floor was that the Respondents compensate the Applicants for the loss of profits occasioned by their being compelled to close their business for two days in late August or early September 2005, in order to permit the Respondents to retile the floor.

126 The Tribunal accepts that the Applicants have good grounds for claiming this compensation. They closed their business and in consequence can be presumed to have lost some profit, yet did not obtain the benefits that a properly retiled floor would have conferred.

127 There was however no satisfactory evidence before the Tribunal as to what the amount of these lost profits might have been. The Tribunal accordingly rejects this part of the Applicants’ case.

128 The Tribunal’s conclusions regarding the bathroom. The Tribunal accepts Mr De Luca’s assertions that (a) before the granting of the third lease Mr Scuccimarra promised to attend to the refurbishment of the bathroom and (b) Mr De Luca did some work on the bathroom himself because the Respondents did not adhere to this promise.

129 The Applicants’ documentary evidence as to the expenses that they incurred in doing this work comprised copies of a number of invoices from suppliers, for amounts totalling $940. As pointed out earlier, however, Mr De Luca admitted in cross-examination that a number of the items on these receipts did not relate to the refurbishment of the bathroom.

130 Except as regards a few low-cost purchases, the Tribunal was left without any indication, either from Mr De Luca or in the submissions made by Mr Taylor, as to which items of expenditure shown on the receipts were in fact claimed to relate to the bathroom. The defects in the Applicant’s evidence on this aspect of the case became apparent during the examination-in-chief of Mr De Luca, which occurred early on the first day of the two-day hearing. But even though more than a month elapsed before the second day, nothing was done to remedy these defects.

131 Since the evidence on this question of quantification was shown to be unsatisfactory early in the hearing, but the Applicants did not avail themselves of what the Tribunal would regard as an entirely adequate opportunity to rectify it, the Tribunal’s decision is that their claim for a relatively small amount of compensation under this head should be rejected.

132 The Tribunal also cannot accede to the Applicants’ claim for an order that the Respondents arrange at their own expense for the bathroom to be refurbished. The reasons are (a) that the promise made on this matter by Mr Scuccimarra, as described in Mr De Luca’s evidence, did not define with sufficient precision the nature of the promised refurbishment and (b) that no other evidence in the case provided worthwhile guidance as to what features of the bathroom could reasonably be said to have been in need of refurbishment.

Whether or not the rent payable under the third lease includes GST

133 As mentioned above, the parties agreed, before the hearing of this case commenced, on the replacement of the third lease by a five-year registrable lease in a form appropriate for leases governed by the RL Act. The Tribunal understands that according to the agreement reached, this new lease is to incorporate all the terms of the third lease, except that it is to be expressed to last for five, not three, years as from 31 December 2004.

134 The parties are, however, in dispute as to whether their true agreement as recorded in the third lease is that the rent payable - $4,333.33 per month – is exclusive or inclusive of GST.

135 The text of the third lease, on which Mr Taylor relied, provides a clear answer to this question. Clause 24 states as follows: -

Any amounts, including rent and outgoings, referred to in this lease which are payable by the Tenant to the Landlord, or on behalf of the Landlord, under this lease, are expressed inclusive of the Goods and Services Tax (“GST”), (if any) at the rate of 10% (the current rate). In the event of the current rate being increased or decreased by legislation, the parties agree that any amounts referred to in this agreement will be varied accordingly.
136 Mr Czinner argued however that the parties could not have intended the rent to be inclusive of GST. His grounds were as follows. Clause 19(a) of the second lease, in which the monthly rent was $3,900.00, required the tenant to ‘reimburse the landlord such amount in respect of goods and services tax from time to time incurred or payable by the landlord’. It followed that although the rent under the third lease was expressed to be significantly larger (by an amount of $433.33 per month) than the rent under the second lease, the increase in the amounts actually received by the Respondents was very small. This was entirely at odds with the Applicants’ allegation that the Respondents promised to repair or refurbish the shop floor, the bathroom and the workshop in return for an increase in rent under the third lease.

137 Mr Czinner sought to cross-examine Mr De Luca as to how he understood these clauses in the two leases. As part of a challenge to Mr De Luca’s credit, he sought to show that Mr De Luca knew that under the second lease GST was payable in addition to the rent, but nonetheless claimed that the increase in rent under the third lease was significant.

138 Mr Czinner also submitted that in view of a recognised practice within retail leasing for rents to rise more or less in line with the CPI, it would not be appropriate to deprive the Respondents of an entirely justifiable increase in rent by reading and applying clause 24 of the third lease according to its terms.

139 No evidence was tendered, however, as to how in fact GST liability had been dealt with by the parties. Moreover, as pointed out earlier in this judgment, the Tribunal considers it very likely that none of the parties in this case were conscious of the different treatment of GST liability under the two leases until their respective legal advisers drew it to their attention in the course of these proceedings.

140 In these circumstances, the Tribunal considers that there are no grounds for departing from the basic rule of contract law that the parties to a written and signed contract should be taken to have reached agreement in accordance with the terms set out in the contract. This rule applies even if, as may have been the case here, they misunderstood, or did not take the trouble to ascertain, the legal effect of one or more of those express terms.

141 In the exercise of the power conferred by s. 72(1)(f)(iii) of the RL Act to declare ‘the rights and liabilities’ of the parties to a retail tenancy claim ‘under law’, the Tribunal accordingly declares that under the lease between the parties to this case executed on 31 December 2004, the monthly rent of $4,333.33 required to be paid by the tenant is inclusive of Goods and Services Tax payable at the rate of 10%.

The Tribunal’s orders

142 As mentioned earlier, the parties signified their wish to be heard on costs. This matter is dealt with in the Tribunal’s orders.

143 The Tribunal’s orders are as follows: -

1. The Respondents are jointly and severally liable to the Applicants in the amount of $60,645.67, comprising a principal sum of $52,146.50 and interest totalling $8,499.17, being calculated at 9% per annum for the period between 31 May 2005 and the date of this decision.

2. The Respondents are to arrange at their expense for the tiles on the floor of Suite C, 106 Norton Street, Leichhardt to be replaced, within six weeks of the date of this decision, by one or more appropriately qualified tradespeople, in a manner that will render the premises reasonably fit for the gelataria business currently conducted in those premises by the Applicants.

3. Both parties have liberty to apply for variation of Order 2, but only on the ground that compliance with its terms is not practicable and the parties cannot reach agreement on any appropriate variation. Any such application must be filed and served, with supporting submissions, within 14 days of the date of this decision. The opposing party must file and serve submissions in reply within a further 7 days. Unless reasons are advanced for a hearing to be conducted, the matter will be resolved ‘on the papers’, pursuant to s. 76 of the Administrative Decisions Tribunal Act 1997.

4. It is declared that under the lease between the parties executed on 31 December 2004, the monthly rent of $4,333.33 required to be paid by the Applicants to the Respondents is inclusive of Goods and Services Tax payable at the rate of 10%.

5. Any application for the costs of these proceedings must be filed and served, with supporting submissions, within 28 days of the date of this decision. The opposing party must file and serve submissions in reply within a further 28 days. Unless reasons are advanced for a hearing to be conducted, the matter will be resolved ‘on the papers’.