Despot v Dublin Group Pty Ltd
[2014] NSWCATCD 39
•27 March 2014
NSW Civil and Administrative Tribunal
New South Wales
Medium Neutral Citation: Despot v Dublin Group Pty Ltd [2014] NSWCATCD 39 Hearing dates: 17 December 2013 Decision date: 27 March 2014 Jurisdiction: Consumer and Commercial Division Before: G Mullane, Senior Member Decision: 1. The respondents must pay the applicant a sum of $54,266.56 for unpaid rent.
2. In addition, the respondents must pay the applicant interest on the unpaid rent calculated in accordance with Clause 5.1.5 of Annexure B and item 15 of annexure A to the Lease between the applicant landlord and the respondents in respect of the property known as 215 Oxford Street, Darlinghurst.
3. If the applicant landlord wishes to seek costs, he must within 14 days file in the Registry and serve on the respondents any other evidence and any submissions he relies upon in relation to costs.
4. The respondents will have 14 days from the date of service of any evidence and submissions relied upon by the applicant under order 3 to file and serve on the applicant any other evidence or submissions relied upon by the respondents in opposing a costs order.
5. If the applicant fails to file or serve any material under order 3 within 14 days, the application filed 24 July 2013, so far as it seeks costs, is dismissed.
Catchwords: Retail Lease- rental claim
- Outgoings claim - not payable because no request for payment as required by lease.
- Rental arrears
- InterestLegislation Cited: Retail Leases Act 1994
Administrative Decisions Tribunal Act 1997Category: Principal judgment Parties: Ranko Despot (Applicant Landlord)
Dublin Group Pty Ltd (Respondent Tenant)
Jenny Banic (Respondent Guarantor for Tenant)File Number(s): COM 14/15381
REASONS FOR DECISION
INTRODUCTION
By a written lease executed in May 2012 the applicant landlord leased a retail shop at Oxford Street, Darlinghurst to the first respondent Dublin Group Pty Ltd as tenant for use as a licenced restaurant. The second respondent Jenny Banic, was guarantor for the tenant and the guarantee formed part of the lease.
The lease was for a period of 5 years from 1 April 2012 to 31 March 2017, with options to renew for 2 further terms of 5 years each.
The applicant claims from the respondents $60,866.56 for unpaid rental and $5,300.00 for the period 1 July 2012 to 28 February 2013 for unpaid outgoings (council rates and charges and, water, sewerage and drainage charges). The applicant also claims interest on the rental and outgoings unpaid.
The applicant sold the property and the sale was completed on 28 February 2013. The applicant was therefore the landlord under the lease for the period 11 months from 1 April 2012 to 28 February 2013.
The landlord concedes that the tenant paid a total of $15,400.00 in that period and has allowed a credit for that in his calculation of the rental claim of $60,866.56.
REPRESENTATION
Neither of the parties was represented by a lawyer at the hearing and the matter was particularly complicated because of that. This resulted in the agents for the parties having difficulty focussing on the real issues and reliance upon a considerable volume of material that was irrelevant.
Mr Banic appeared as agent for the respondents and at times during the hearing sought to rely on defences that were not raised in the reply and therefore were not entertained. In his written submissions after the hearing Mr Banic also raised defences not raised in the respondents' reply and not entertained at the hearing. While doing this Mr Banic did not make submissions on some grounds that were raised in the reply.
THE EVIDENCE
The evidence relied upon at the hearing comprised:
1) Application for Original Decision filed 24 July 2013 in the Administrative Decisions Tribunal;
2) Reply of the respondents filed 13 August 2013;
3) Affidavit of Ranko Despot sworn 27 September 2013;
4) Paragraphs 1 and 5(ii) and annexure of Affidavit of Mirjana Despot-Maric sworn 27 September 2013;
5) Respondent's document headed "Cross Claim Case File 135090 - Despot, listing paragraphs of Paragraphs of the Affidavit of Zvonko Banic sworn 9 September 2013 relied upon by respondents and paras 9-13, 17, 22, 25-27, 29-35, 38-39, 41-44, 46, 48-49, 52, 54, 57-58, 62, 65-70, 72-73, 75-78, 81-82, 92-93, 96, 109, 111, 116, 118-119, 128, 131-132, 136-139, 141-142,144-147, 155, 162, 173, 226 (a and d) of that affidavit (and photographs relating to these paragraphs on accompanying memory stick);
6) Affidavit of Zvonko Banic sworn 11 November 2013;
7) Exhibit A1 - bank statements from National Australia Bank for account of landlord;
8) Exhibit A2 - copy of lease;
9) Exhibit A3 - bank statement of Mr Djorde Damjanac showing eftpos withdrawals at restaurant on 8 March;
10) Exhibit R1 - correspondence and documents in relation to liquor licence;
11) Oral evidence of Ranko Despot and cross-examination;
12) Oral evidence of Ms Despot-Maric and cross-examination;
13) Oral evidence and cross-examination of Mr Zvonko Banic.
THREE MONTHS RENT FREE
Although the lease provides that the commencement date is 1 April 2012, and the rental is payable from the commencement date, it is common ground between the parties that in fact the parties agreed that no rent would be payable for the first 3 months. Accordingly, the claim of the landlord for rental relates to the 8 months from 1 July 2012 to 28 February 2013.
RENTAL FOR THE 8 MONTHS
The rental for the first year was $104,000.00 plus GST of $10,400.00, giving a total of $114,400.00 and that was payable by equal monthly instalments of $9,533.32 on the first day of each month. The period in which rental was payable was 8 months, so the total rental payable is $76,266.56.
DEFENCES OF THE TENANT AND THE GUARANTOR
The reply filed by the respondent raises the following defences:
(1) There was an agreement with the landlord that varied the date of commencement for payment of rent till the date that the restaurant and bar commenced trading, which the Respondents say was 10 November 2012;
(2) The payments of rent made by the tenants total $22,000.00, $6,600.00 more than the $15,400.00 admitted by the landlord;
(3) The landlord failed to provide the first respondent with a Lessor's Disclosure Statement then by virtue of Section 28A of the Retail Leases Act, 1994, the respondents are not liable to pay for outgoings for Council rates and charges and, water, sewer and drainage charges for the period of 1 July 2012 to 28 February 2013; and
(4) The tenant paid the landlord all amount the tenant was required to pay under the lease.
DEFENCE 1 - DID THE PARTIES AGREE THAT NO RENTAL WAS PAYABLE UNTIL THE RESTAURANT AND BAR STARTED TRADING? IF SO, DID THAT VARY THE TERMS OF THE LEASE? IF SO, WHEN DID THE RESTAURANT AND BAR START TRADING?
In the reply the tenant stated this defence as follows:
"The Respondents each say that the agreed commencement date for paying rent was and from the date the Konova Restaurant and Bar commenced trading. Kanova Restaurant and Bar commenced trading on 10 November 2012 and the first Respondent commenced paying rent as and from that date."
Clearly even the rental payment particulars provided by the respondents in their reply indicate that they do not allege that any payment of rental was made until 20 November 2012, 10 days after they say that the restaurant and bar commenced trading. In addition, monthly rental, if rental was not payable until 10 November 2012, was $9,533.32 payable on the first day of each month. The payments alleged by the respondents did not equal or exceed a month's rental until the payment of 18 December 2012. By that time rental had been due on 10 November for the remaining 20 days of November ($6,355.55), and on 1 December a further $9,533.32 had fallen due.
Accordingly, once the payment of $2,200.00 paid on 18 December 2012 was paid, the tenant had paid only $11,000.00 of $15,888.87 in rental that had already fallen due. The payment of $8,800.00 in cash was not then paid, according to the tenant's figures, until 21 January 2013, by which time rental to a total of $25,422.19 had fallen due, but only $19,800.00 had been paid and the tenant was then $5,622.19 in arrears.
The tenant had access to the premises from well before 1 July 2012 and it is inherently unlikely that the landlord would have considered, even at July 2012, an open-ended agreement deferring payment of rental until such time as the restaurant and bar commenced trading.
However, there is no evidence that the landlord demanded payment of arrears of rental, prompt payment of rental, or threatened the tenant for non-payment of rent, even when the tenant by 1 November 2012 had failed to pay nearly $50,000.00 in rental that had fallen due on the first day of each of the months from July to November inclusive. It could be argued that that absence of any demand or threat, or expression of concern to the tenant was more consistent with the tenants' case that there was an agreement to defer the payment of rental until the business started trading.
The Tribunal has looked very carefully at the evidence regarding the alleged agreement. In his Affidavit of 27 September 2013, the applicant landlord gave sworn evidence:
"There was no agreement that that no rent would be payable until the premises were fit for occupation. I say that the premises were fit for occupation when I agreed to give Dublin Group a lease."
He also gave evidence as to the premises being occupied and used as a "busy restaurant" until the previous tenants left without notice. He said:
"All that Dublin Group needed to do was to clean the premises. I regard the rent-free period until 1 July which I agreed to as generous. Had it been me, I could have the premises cleaned from top to bottom in a matter of days."
His oral evidence in cross examination is that the tenant was given the keys and had access to the premises from 1 April 2012 "or earlier, maybe 30 or 31 March".
The lease clearly provides that rental is payable monthly in advance from 1 July 2012. The paragraphs of the voluminous Affidavit of Mr Banic of 9 September 2013 relied upon by the respondents in the hearing do not contain any evidence of any such agreement between the landlord and the tenant. In the material relied upon by the respondents in that affidavit there is evidence in paragraph 137 where Mr Banic swore that on 2 February 2013 after very heavy rain and water leaking into the premises, he had a conversation with the landlord at the premises where he asked for repairs to be done and the landlord rejected the request out of hand. Mr Banic says that he then said to the landlord: "I am not paying you rent now until it's done." However, there is no evidence that the landlord agreed to that arrangement and, in any event, that is not evidence of the agreement alleged by the respondents in the reply. There is no evidence of the alleged agreement in the material relied upon in that affidavit.
In his Affidavit of 27 September 2013 the landlord gave sworn evidence that: "There was no agreement that no rent would be payable until the premises were fit for occupation". The Affidavit of his daughter did not address this issue. It was put by Mr Banic to the landlord in cross-examination that he agreed to defer the rent "until the premises were wholly fit to occupy". It is noted that this is not the allegation that was raised in the reply. But, in any event, the landlord's oral evidence under oath (elicited by Mr Banic in cross examination) was that he denied that there was any such agreement.
In his Affidavit sworn 11 November 2013, Mr Banic, the Manager of Dublin Group Pty Ltd, did not give direct evidence of any agreement but swore:
"The Applicant never demanded or even invoiced the Respondents for any rent or outgoings for the entire period to 28 February 2012, nor did they get a request or demand for a bond or Bank guarantee. There was no rent or outgoings payable for the period 25.05.12 to 20.11.12 until the restaurant and bar were fully operational as per our agreement."
It was important to any critical consideration of the evidence on this issue that the respondents did not provide any detail of the alleged agreement such as where, when, who was present and who said what. There was no suggestion that there was any written confirmation or written reference to the agreement alleged, notwithstanding that the tenant's position is that the agreement had the effect of waiving rental of about $44,500.00 from 1 July 2012 to 20 November 2012.
Furthermore, Mr Banic, it appears, did all the negotiations with the landlord on behalf of the respondents and had the conduct of the proceedings on behalf of the respondents. But the terms of the agreement alleged in the respondent's reply (no rent until restaurant and bar start trading) is inconsistent with what he put to the landlord in cross examination (no rent till premises "wholly fit to occupy").
Considering all the relevant evidence the finding of the Tribunal on the balance of probabilities is that there was no agreement to defer the liability for rental until the restaurant and bar started trading on the premises.
The second issue is that if there were such an oral agreement (there is no suggestion that it was in writing), it generally would not be effective to vary the terms of the written agreement (the lease) between the parties.
In some limited situations an oral agreement may be effective in equity to vary a written agreement, such as misrepresentation or fraud or unconscionability, but no such ground has been raised by the respondents in their reply.
No ground of unconscionability was raised in respect of this aspect. Indeed, it is hard to comprehend how it could be unconscionable for the landlord to rely upon the provisions of the lease requiring payment of rental because of some oral agreement between the parties to allow the tenant a further rent-free period where there was no consideration flowing to the landlord for allowing that latitude to the tenant.
In addition, because there is not alleged to be consideration by the tenant to the landlord in respect of the alleged indulgence to allow the tenant an additional rent free period, at law, even if the alleged agreement were in writing, it would not be enforceable unless the agreement were by deed.
The Tribunal's finding therefore is that there was no agreement of the type alleged by the tenant between the parties to extend the rent-free period beyond 30 June 2012. The Tribunal also finds that if there was such an oral agreement, then it was not effective to vary the terms of the lease requiring payment of rental monthly in advance from 1 July 2012.
The first defence fails.
DEFENCE 2: WHAT IS THE TOTAL RENTAL THE TENANT PAID?
From the application and the reply, there are the following acknowledgments by the landlord of payment and claims by the tenant of payment:
Date
Payment
Landlord
Tenant
20/11/12
Cash
$2,200.00
27/11/12
Cash
$2,200.00
4/12/12
Cash
$2,200.00
11/12/12
Cheque
$2,200.00
12/12/12
Cheque
$2,200.00
18/12/12
Cheque
$2,200.00
19/12/12
Cheque
$2,200.00
21/1/13
Cash
$8,800.00
31/1/13
Cheque
$2,200.00
1/2/13
Cheque
$2,200.00
Feb 2013
Cash
$4,400.00
Feb 2013
Cash
$2,200.00
Feb 2013
Cash
$2,200.00
________
TOTAL
$15,400.00
$22,000.00
Exhibit A1 and other evidence establishes that the cheque for $8,800.00 was not met on presentation on 29 January and cash was then paid in lieu. It appears that the last 3 payments acknowledged by the landlord comprise that $8,800.00 in cash. The difference between the $22,000.00 that the tenant alleges was paid and the $15.400.00 the landlord concedes was paid is that the landlord does not admit receiving three cash payments of $2,200.00 each which the tenant alleges were paid prior to 12 December 2012. They account for the difference of $6,600.00.
The respondents' reply alleging those 3 payments was filed on 13 August 2013 and presumably served on the applicant that day or soon after.
Exhibit A1 is copies of bank statements of the landlord tendered in evidence in his case. The landlord has not put in evidence any bank statements for the period prior to 4 December 2012. Unfortunately, the statements tendered cover only the period from 4 December, 2012 to 26 February 2013. A comparison of the deposits for that account with the payments of rent alleged by the landlord is as follows:
Date
Payment
Per Landlord
Per Bank Statement
12/12/12
Cheque
$2,200.00
$2,200.00
19/12/12
Cheque
$2,200.00
$2,200.00
29/1/13
Cheque
(dishonoured) $8,800.00
1/2/13
Cheque
$2,200.00
Feb 2013
Cash
$8,800.00
$2,200.00
The affidavit of the applicant Ranko Despot did not provide evidence of what rental was or was not paid. Nor did the paragraphs of the affidavit of Mirjana Despot-Maric relied upon by the applicant. The application is not signed by the applicant and the statements in it (including particulars of rental payments) are not verified by affidavit.
Mr Banic's affidavit of 9 September 2013 was filed after the issue about the first 3 payments alleged by the respondents raised by the application in July. But the parts of that affidavit that were relied upon by the respondents did not include any evidence of those 3 payments. The second affidavit of Mr Banic was filed and served on behalf of the respondent in November 2013, well after the respondents were served with the application filed 24 July disclosing that the landlord did not acknowledge the first 3 payments alleged by the tenant. But those parts of his affidavit, however, do not give evidence of any rental payments.
However, in cross examination of Mr Banic, the manager of the tenant company, Ms Despot-Maric elicited evidence of the first 3 payments. Mr Banic gave evidence that the three payments of rent had been paid in cash to the landlord personally. He said: "We asked for a tax invoice. He refused." He said Mr Despot did not provide receipts for the rental payments and so, in future, payments were paid by cheques. He said that the landlord still did not provide tax invoices.
In the absence of evidence denying those payments the Tribunal finds that the 3 alleged payments of $2,200.00 on each of 20 & 27 November 2012 and 4 December 2012 were made and the total of the rental payments by the tenant to the landlord under the lease is $22,000.00.
DEFENCE 3: WHAT IS THE LIABILITY OF THE TENANTS FOR OUTGOINGS IN RESPECT OF THE PERIOD 1 JULY 2012 TO 28 FEBRUARY 2013?
The respondents deny any liability to pay outgoings for that period. They rely on Section 28A of the Retail Leases Act 1994.
The lease provides in subclause 5.1.2 and clause 5 of Annexure B and item 14A of the Schedule that the lessee must pay the lessor the outgoings in respect of the leased property. A payment for the outgoings is by clause 5.3 required to be paid: "on the next rent day after a request for payment is made by the lessor".
Sections 27 and 28A of the Retail Leases Act, 1994, provide:
27 Outgoings estimates
A retail shop lease is taken to include provision to the following effect:
(a) the lessor must give the lessee a written estimate of the outgoings to which the lessee contributes under the lease, itemising those outgoings under the item descriptions used in the list of outgoings in the form of lessor's disclosure statement prescribed for the purposes of section 11,
(b) the estimate of outgoings must be given to the lessee in respect of each accounting period of the lessor during the term of the lease and must be given before the lease is entered into and thereafter during the term of the lease at least 1 month before the commencement of the accounting period concerned,
(c) if the shop is in a retail shopping centre, the estimate of outgoings is to include:
(i) a statement of management fees, broken down into the fees to be paid by the lessee towards the administration costs of running the centre and other fees paid to the management company, and
(ii) a statement of cleaning costs to be paid by the lessee, broken down into the costs of consumables and other costs, and
(iii) any other particulars prescribed by the regulations.
28A Non-provision of outgoings estimate or statement
(1) A lessee is entitled to withhold payment of contributions for outgoings if:
(a) the lessor has failed to give the lessee a written estimate of outgoings required under section 27 or an outgoings statement required under section 28, and
(b) the lessee has, at or after the expiry of the time when the estimate or statement was required to be given to the lessee, requested the lessor in writing to furnish the estimate or statement to the lessee, and
(c) the lessor's failure has continued for 10 business days after the request was made.
(2) The lessee must pay the withheld contributions within 28 days after the lessor furnishes the estimate or statement.
(3) The lessor is not entitled to recover interest or late payment charges in respect of contributions withheld in accordance with this section.
(4) The lessee is not in breach of the retail shop lease for acting in accordance with this section.
(5) This section does not affect any other rights that the lessee has in connection with the lessor's failure to provide the estimate or statement.
The Lessor's Disclosure Statement, which is annexed to the Affidavit of Mijana Despot-Maric does not include any statement or estimate of outgoings. The landlord has not provided any evidence that any estimate, invoice or statement of outgoings was ever given to the tenant.
In submissions Mr Banic claimed that the tenant requested by mail or e-mail an estimate of the outgoings or a statement of outgoings. No copy of any such document was put in evidence and there was no reference to it in evidence or evidence as to its contents. Accordingly, the Tribunal does not accept Mr Banic's submission that there was such a request. Accordingly, there was no evidence that the landlord ever provided an estimate of outgoings or a statement of outgoings under paragraph 28A(1)(a) and no evidence that the tenant ever requested one under paragraph 28A(1)(b).
Accordingly the tenant is not entitled to withhold payment of his contribution to outgoings under subsection 28A(1) because he has not requested a statement or estimate of outgoings under para 28A(1)(b).
But there is no evidence of a request by the landlord to the tenant for payment of the outgoings claimed. Accordingly, under clause 5.3 of Annexure B to the lease, the outgoings are not yet payable by the tenant.
Also, the landlord has not provided evidence in the hearing substantiating the amount claimed for the outgoings or identifying how much is claimed for council rates and charges and how much is water sewerage and drainage charges. For example, no assessments, receipts or records of payment of the outgoings are in evidence. Accordingly, the alleged outgoings have not been proved and the claim for outgoings against the tenant cannot succeed.
It is not sufficient for the landlord, in the absence of having provided the tenant with details of what the outgoings are, to seek in these proceedings to recover outgoings of: "$5,300.00 for the period 1 July 2012 to 28 February 2013 plus water usage to be determined", without particularising what the amounts are for local Council rates and charges and, for water, sewerage and drainage charge charges, and for water usage, and without proving that the amounts were in fact assessed and paid or payable by the landlord. The evidence does not establish that $5,300.00 was paid or is payable or that any other particular amount was paid or is payable.
Accordingly the landlord has failed to establish any liability of the tenant to pay the landlord any outgoings.
DEFENCE 4: THAT THE TENANT HAS PAID ALL AMOUNTS PAYABLE TO THE LANDLORD BY THE TENANT UNDER THE LEASE
As held above there are no outgoings payable as yet by the tenant because the landlord has not complied with his obligations in that regard under the lease. The total rental payable for the period of 8 months to 28 February 2013 is $76,266.56. The total paid by the tenant is only $22,000.00, leaving a balance of $54,266.56 in rent for which the tenant and the guarantor are still liable.
INTEREST PAYABLE
Clause 5.1.5 of Annexure B to the lease provides that the tenant must pay the landlord rental and various other amounts and also: "interest on these moneys at the rate stated in Item 15 in the Schedule when payment is more than 14 days overdue, calculated from the due date to the date of payment."
Item 15 in the Schedule provides that the interest rate is:
"The rate equivalent to the maximum overdraft rate applied by the Commonwealth Bank of Australia plus two per cent (2%) per annum calculated on a day to day basis on any moneys due but unpaid by the lessee to the lessor on any amount whatsoever pursuant to this lease, such interest to be computed from the due date for payment of the moneys in respect of which the interest is chargeable until payment of such moneys in full."
The Applicant did not provide any evidence of the prevailing maximum overdraft rate of the Commonwealth Bank of Australia from time to time since 1 July 2012. Attempts by the Tribunal to ascertain those rates from the Commonwealth Bank website were not successful.
While it is clear there is interest payable, the evidence available to the Tribunal does not enable the Tribunal to determine the amount of the interest to date. There should be an order for the tenant to pay the landlord interest calculated in accordance with the relevant provisions of the lease.
COSTS
The landlord sought an order for costs in his application. The Respondents did not seek costs in their reply. Although the applicant landlord did not have legal representation, it may be that his daughter, who was his agent, incurred travel expenses or loss of wages to attend the Tribunal for the hearing and for other reasons in connection with the proceedings.
The applicant should therefore have 14 days to file and serve any evidence and submissions he seeks to rely upon in relation to the costs application.
The respondents would then have 14 days to file any evidence and submissions in response.
If the applicant files no evidence or submissions in support of the costs application, the costs application should stand dismissed.
ORDERS
The orders of the Tribunal therefore are:
1) The respondents must pay the applicant a sum of $54,266.56 for unpaid rent.
2) In addition, the respondents must pay the applicant interest on the unpaid rent calculated in accordance with Clause 5.1.5 of Annexure B and item 15 of annexure A to the Lease between the applicant landlord and the respondents in respect of the property known as 215 Oxford Street, Darlinghurst.
3) If the applicant landlord wishes to seek costs, he must within 14 days file in the Registry and serve on the respondents any other evidence and any submissions he relies upon in relation to costs.
4) The respondents will have 14 days from the date of service of any evidence and submissions relied upon by the applicant under order 3 to file and serve on the applicant any other evidence or submissions relied upon by the respondents in opposing a costs order.
5) If the applicant fails to file or serve any material under order 3 within 14 days, the application filed 24 July 2013, so far as it seeks costs, is dismissed.
(signed)
G Mullane
Senior Member
Civil and Administrative Tribunal of New South Wales
27 March 2014
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: 20 June 2014
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