Denis Isler v Damien John Toon and Kylie Joy Peterson
[2015] NSWCATCD 29
•13 February 2015
Civil and Administrative Tribunal
New South Wales
Medium Neutral Citation: Denis Isler v Damien John Toon and Kylie Joy Peterson [2015] NSWCATCD 29 Hearing dates: 27 January 2015 Decision date: 13 February 2015 Jurisdiction: Consumer and Commercial Division Before: D Bluth Senior Member Decision: The bond filed by the Department of Trade & Investment no. 4471 for $3,336.68 plus interest relating to premises 80 Hutton Road, The Entrance North be paid to Denis Isler.
Damien John Toon and Kylie Joy Peterson are to pay to Denis Isler the balance of monies owing under Lease A1223572 after deduction of the monies received under Order 1.Catchwords: Law Society Commercial Lease, order to do work by an Authority Category: Principal judgment Parties: Denis Isler (applicant)
Damien John Toon and Kylie Joy Peterson (respondent)Representation: George Brand Real Estate (applicant)
Panwar Legal (respondent)
File Number(s): COM 14/46175 Publication restriction: Unrestricted
REASONS FOR DECISION
Entry into the lease
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The Applicant Dennis Isler (Mr Isler) is the owner of a property at 80 Hutton Road, The Entrance North, being lock-up shop (the premises).
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The Respondents are Damien John Toon and Kylie Joyce Petersen (the lessees). The parties entered into a lease, based on the form of commercial lease of the Law Society of New South Wales, for 3 years over the premises (the lease). The commencing date of the lease was 23 September 2013. The annual rent was $18,200.00 and the lessees were to pay 50% of the shared outgoings of local council rates and water, sewerage and drainage charges and a 100% of the trade waste. The default interest rate under the lease is 15%.
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The lessees paid a bond equal to 2 months rent and outgoings in the sum of $3,336.68. The lease was registered under dealing number A1223572.
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On 19 September 2014 Mr Isler filed an Application for an Original Decision stating that the lessees terminated the lease pursuant to rights under clause 8.24 on the grounds of 'non-repair of damage to the property'. As this matter came for hearing on the papers the orders sought by Mr Isler varied slightly from those sought in the original application. As this ultimately was a dispute over the interpretation of clauses in the lease no hearing was required and the matter was to be adjudicated based on the papers and submissions.
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The submissions were the correspondence between the lessees, originally represented by lawyers Panwar Legal and subsequently by Richardson Legal, and the agent George Brand Real Estate, representing Mr Isler.
Terms of the lease
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Clause 7 deals with condition and repairs of the premises under the heading “Who was to Repair the Property?” Clause 7.1 states as follows:
7.1 The lessor must -
7.1.1 maintain in a state of good condition and serviceable repair the roof, the ceiling, the external walls and external doors and associated door jambs, and the floors of the property and must fix structural defects;
7.1.2 maintain the property in a structurally sound condition; and
7.1.3 maintain essential services.
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Notably, clause 7.4 states as follows:
7.4 If an authority requires work to be done on the property and it is structural work or work needed to make the property safe to use then the Lessor must do the work unless it is required only because of the way the Lessee uses the property. But if it is any other work or is required only because of the way the Lessee uses the property then the Lessee must do the work.
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Clause 8.2 under the heading “What Happens if the Property is Damaged?” states as follows:
8.2 If the property or the building of which it is part is damaged (a term which includes destroyed), -
8.2.1 the lessee is not liable to pay rent, or any amount payable to the lessor in respect of outgoings and other charges, that is attributable to any period during which the property cannot be used under this lease or is inaccessible due to that damage;
8.2.2 if the property is still usable under this lease but its useability is diminished due to the damage, the lessee's liability for rent and any amount in respect of outgoings attributable to any period during which useability is diminished is reduced in proportion to the reduction in useability caused by the damage;
8.2.4 if the lessor fails to repair the damage within a reasonable time after the lessee requests the lessor to do so the lessee can terminate this Lease by giving not less than 7 days notice in writing of termination to the lessor;
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In addition to the printed terms of the form of commercial lease of the Law Society of New South Wales, there are additional lease terms relevant to the dispute between the parties. They are covenants inserted as “Miscellaneous Provisions” Items 27 and 34 as follows:
Item 27 That the Lessee will from time to time forthwith comply with and relieve the Lessor from all liability in respect of all statutes, ordinances, proclamations, orders or regulations present or future affecting or relating to the use of the premises by the Lessee and will comply with all requirements (including the carrying out of alterations or additions) relating to those of the premises by the Lessee which may be made or noticed or orders which may be given by any Government, semi-governmental, city, municipal, health licensing, civic or other authority having jurisdiction or authority over or in respect of the use of the premises by the Lessee provided that all notices or orders received by the Lessor from any such authority shall within a reasonable time after receipt by the Lessor be served on the Lessee.
Item 34 Notwithstanding any provision to the contrary in this Lease:
(c) the Lessee shall be responsible for:
(i) all electrical repairs but not the replacement of electrical wiring required through age.
Ausgrid defect notice
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The disputation between the parties arises out of a defect notice from Ausgrid dated 19 February 2014 in relation to the property and in particular the premises (Ausgrid defect notice). The Ausgrid defect notice states as follows in summary:
At a recent visit to your property the following defects were found within the installation:
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The 3 phase 10kw hotplate was not installed to the manufacturer's instructions, where the internal wiring was modified for the connection to single phase of supply.
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The 40ampere single phase circuit breaker controlling and protecting the hotplate circuit did not adequately protect the 6mm two core insulated cable enclosed in air.
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The 3 phase 10kw hotplate was not connected and supplied from a suitable electricity supply to prevent overload and damage to the single phase supply conductors and associated circuit protective device.
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The socket outlet located behind the deep fryer was not adequately fixed to the wall.
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The double socket outlet located on the right side of the oven requires replacement due to the damage contacts within the power point and the damaged isolation switch.
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The various corrugated conduits enclosed in the final sub circuits were not fixed in position to prevent mechanical damage to the enclosure and associated cabling.
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The connection of the rear storerooms power and lighting outlets with an extension lead is not permitted.
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The wiring installed within 50mm of the roof sheeting of the rear storeroom was not provided with adequate protection from damage.
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There was correspondence between the parties about the Ausgrid defect notice and how best to deal with it. George Brand acting on behalf of Mr Isler obtained two quotes from a local electrician, one quote for work to be done to upgrade the electrical works to 3 phase with a new point attachment pole mainly electrical work outside the premises, and a second quote for electrical work inside the premises. These quotations are dated 7 March 2014.
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On 21 March 2014 George Brand Real Estate wrote to solicitors Warren Richardson representing the lessees indicating that the property had been sold and that Mr Isler had agreed to attend to the Ausgrid defect notice for the outside of the property and the buyer of the property had agreed to attend to the Ausgrid defect notice for the inside of the property, namely the premises.
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Subsequently Panwar Legal on behalf of the lessees wrote on 10 April 2014 to Mr Isler care of George Brand Real Estate setting out a short history of the matter from receipt of the Ausgrid defect notice to date and stating at the end of the letter the following:
'Notice is hereby given under clause 8.2.4 of the Lease that the Lessor having failed to repair damage within a reasonable time after the Lessee has requested the Lessor to do so, hereby terminates the Lease by giving 7 days notice of the date hereof.'
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The lessees vacated the premises on 15 April 2014. Mr Isler now seeks the following orders:
the bond held by the Department of Trade & Investment be released to him, and
the lessees pay to him the balance of monies owing after deduction of the bond.
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The Tribunal grants permission to the applicant to amend the Orders sought in the Application for an Original Decision to seek the orders referred to in paragraph 14 of these Reasons.
Analysis of the lease
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The lessees are correct that pursuant to clause 7.1.2 of the lease Mr Isler as lessor is obliged to maintain the property in a structurally sound condition and pursuant to clause 7.1.3 maintain essential services. Electricity supply is considered an essential service.
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However, clause 8.2.4 giving a right to the lessees to terminate the lease is not the operable clause for this situation. There is a great deal of uncertainty that the premises are in fact damaged, as a prerequisite of clause 8. Damage must mean physical damage. Whilst electricity supply is a necessary element of occupation of a property, there is no suggestion by the lessees that there has been any physical damage to the premises, nor that the supply of electricity has ceased. Clause 8 in the lease is the clause whereby a lessee can seek a rebate of rent for the loss of use of part or all of the premises when damaged. The Tribunal notes that the lessees traded right up to the date of vacation of the premises on 15 April 2014, so the occupation and use of the premises does not appear impaired.
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Clause 7.4 is the relevant clause of the lease for the situation where an authority requires work on the property and Ausgrid is an authority under this clause. The clause states the lessor must do the work, unless it is required only because of the way the lessee uses the property. Items 27 and 34 of the lease become relevant because pursuant to such clauses the lessees are to undertake any work required by an authority and be responsible for all electrical repairs. These further covenants override clause 7.4 because the further covenants are like “special conditions” and should be interpreted as overriding the printed terms of the form of commercial lease of the Law Society of New South Wales, especially Item 34 which commences with the words "notwithstanding any provision to the contrary"..
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It is noticeable that the Ausgrid defect notice identifies a number of defects, the majority being related to the internal wiring and connections within the premises and the storeroom, which is ostensibly the responsibility of the lessees under the lease. The two quotes obtained by Mr Isler separate the costs for internal works and external works required.
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However, even if the lessees could argue that pursuant to clause 7.4 Mr Isler, as lessor, was required to attend to the Ausgrid defect notice in total, he in fact was undertaking the responsibility for all of the repairs in any event. He agreed to attend to the external defeats to the property, and arranged for the incoming buyer of the property to attend to the defects internally within the premises. The lessees were not asked to attend to repairs, even though arguably they were responsible for the repairs internally.
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A breach of clause 7.4 by the lessor does not give rise to a right of termination of the lease by the lessees. There was no breach in any event as Mr Isler was going to do the repairs notwithstanding that the lessees had covenanted to do the internal repairs. Clause 8.2.4 is not the appropriate clause regarding a work order from an authority. Even if the Tribunal is wrong on this point and the lessees had the right under clause 8.2.4 to terminate the lease, in the Tribunal's opinion Mr Isler was acting reasonably in obtaining quotations and arranging for repair of the defects. There was no entitlement for the lessees to exercise the purported right under clause 8.2.4.
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Consequently, the vacation of the premises on 15 April 2014 was repudiatory conduct by the lessees in breach of their obligations under the lease. Mr Isler has accepted the repudiatory conduct and the lease is terminated and Mr Isler is entitled to damages and to the bond paid by the lessees.
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The Tribunal orders:
The bond no. 4471 for $3,336.68 plus interest relating to premises 80 Hutton Road, the Entrance North held by the Department of Trade & Investment be paid to Denis Isler.
Damien John Toon and Kylie Joy Paterson are to pay to Denis Isler the balance of monies owing under Lease A1223572 after deduction of the monies received under Order 1.
D Bluth
Senior Member
Civil and Administrative Tribunal of New South Wales
13 February 2015
I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales.
Registrar
Decision last updated: 12 May 2015
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