Fair Dinkum Mowers Pty Ltd v McDonald; McDonald v Fair Dinkum Mowers Pty Ltd; Fair Dinkum Mowers Pty Ltd v McDonald

[2022] NSWCATCD 175

Civil and Administrative Tribunal

New South Wales

• Amendment notes

Medium Neutral Citation:

Fair Dinkum Mowers Pty Ltd v McDonald; McDonald v Fair Dinkum Mowers Pty Ltd; Fair Dinkum Mowers Pty Ltd v McDonald [2022] NSWCATCD 175

Hearing dates:

10 October 2022

Date of orders:

17 October 2022

Decision date:

17 October 2022

Jurisdiction:

Consumer and Commercial Division

Before:

G Ellis SC, Senior Member

Decision:

In COM 22/17026:

1.   The application is dismissed.

2.   The applicant is to pay the respondent’s costs of this application, on the ordinary basis, as agreed or assessed.

In COM 22/23229:

1. Pursuant to s 72(1)(a) of the Retail Leases Act 1994 (NSW), the respondent, Fair Dinkum Mowers Pty Ltd, is to pay the applicant, Graham Burns McDonald, $69,452.88 forthwith.

2. Pursuant to s 72(1)(f)(iii) of the Retail Leases Act 1974 (NSW), declare that the lease between the applicant and the respondent was validly terminated by notice dated 7 April 2022.

3. Pursuant to s 72(1)(c)(ii) of the Retail Leases Act 1974 (NSW), order the respondent to surrender possession of the premises the subject of the lease by 31 October 2022.

4.   The respondent is to pay the applicant’s costs of this application, on the ordinary basis, as agreed or assessed.

In COM 22/35933:

1.   The application is dismissed.

2.   The applicant is to pay the respondent’s costs of this application, on the ordinary basis, as agreed or assessed.

3.   In accordance with order 2 made on 26 August 2022, those costs are to include the costs of the related interim application (COM 22/35931).

Catchwords:

RETAIL LEASE – Whether termination valid – arrears of rent – order for roof repairs sought

Legislation Cited:

Civil and Administrative Tribunal Rules 2014 (NSW), r 38

Retail and Other Commercial Leases (COVID-19) Regulation 2022 (NSW), cl 4, cl 9

Retail Leases Act 1994 (NSW), s 72

Category:

Principal judgment

Parties:

In COM 22/17026:
Fair Dinkum Mowers Pty Ltd (Applicant)
Graham Burns McDonald (Respondent)

In COM 22/23229:
Graham Burns McDonald (Applicant)
Fair Dinkum Mowers Pty Ltd (Respondent)

In COM 22/35933:
Fair Dinkum Mowers Pty Ltd (Applicant)
Graham Burns McDonald (Respondent)

Representation:

Counsel:
M Bennett – Graham Burns McDonald

Solicitors:
Colman Greg – Graham Burns McDonald

B Seiden, M Seiden – Fair Dinkum Mowers Pty Ltd

File Number(s):

COM 22/17026, COM 22/23229, COM 22/35933

Publication restriction:

Nil

Reasons for decision

Outline

1. The lessee challenged termination of the lease (COM 22/17026). In a cross-application (COM 22/23229), the lessor sought arrears of rent and an order for the lessee to surrender possession. The lessee also sought an order for roof repairs to be carried out (COM 22/35933).

2. Having considered the evidence and submissions, the Tribunal determined that the termination was valid, with the result that the lessor was entitled to possession of the leased premises, that the arrears of rent were $59,267.55 and that interest of $10,185.33 was also payable, giving a total of $69,452.88. The claim for roof repairs was dismissed by reason of those repairs having been completed and the lease having been validly terminated.

History of the proceedings

3. A total of five applications have been lodged in relation to a retail lease of premises at Lindfield which comprise a ground floor shop and residential/office space on the first floor, above that shop, with a separate entrance.

4. An interim application by the lessee (COM 22/17028) was finalised on 13 May 2022 when orders were made for the lease to continue, pending the final hearing, after the leak was repaired, conditional on the lessee paying $5,000 on or before 3 June 2022. It was expressly stated that those orders did not create a new lease and it was noted that there was an issue as to whether the lease had been validly terminated.

5. A second interim application by the lessee (COM 22/35931) was dismissed on 26 August 2022 as the lessee had failed to provide documents in response to directions made by the Tribunal in a letter dated 12 August 2022. The costs of that interim application were ordered to be part of the costs of the associated substantive application (COM 22/35933).

6. The remaining three applications were listed for hearing together so that all issues relating to the lease would be considered and determined at the same time. Accordingly, these reasons address each of those three applications.

Hearing

7. Documents which became exhibits were as follows:

Exhibit A   Lessee’s documents, received on 5 May 2022,

Exhibit B   Lessee’s documents, received on 27 June 2022,

Exhibit C   Lessee’s documents, received on 9 August 2022,

Exhibit D   Lessee’s documents, received on 17 August 2022,

Exhibit 1   Lessor’s documents, received on 24 June 2022,

Exhibit 2   Lessor’s documents, received on 8 August 2022,

Exhibit 3   Lessor’s documents, received on 24 August 2022, and

Exhibit 4   Lessor’s documents, received on 15 September 2022

8. Documents marked for identification were:

MFI 1      Schedule of lessee’s documents headed “Evidence List”.

MFI 2      Intended tender bundle, prepared by lessor’s solicitors.

MFI 3      Lessor’s statement of reduced rent arrears at 31 March 2022.

9. After the relevant documents were identified, an opportunity was provided for cross-examination of witnesses and what was said, so far as is relevant to the issues requiring determination, is set out below.

10. Following cross-examination, oral submissions were made by both parties. The lessor was asked to make submissions first, so that the lessee knew the nature of the case being made against it. After submissions were made for the lessee, submissions in reply were made for the lessor.

11. As a result, each party had an opportunity to speak in support of their own case and in response to the case of the other party. Those submissions are also summarised below.

Jurisdiction

12. It is clear there is a retail lease in relation to premises the subject of these proceedings, with the result that the Retail Leases Act 1994 (NSW) (the RLA) applies and the Tribunal has jurisdiction in relation to these proceedings.

Relevant law

13. The Tribunal’s powers in relation to retail leases are set out in s 72 of the RLA which is set out below.

1. In proceedings for a retail tenancy claim lodged with the Tribunal under this Part, the Tribunal is empowered to make any one or more of the following orders that it considers appropriate-

   (a)   an order that a party to the proceedings pay money to a person specified in the order, whether by way of debt, damages or restitution, or refund any money paid by a specified person,

   (b)   an order that a specified amount of money is not due or owing by a party to the proceedings to a specified person, or that a party to the proceedings is not entitled to a refund of any money paid to another party to the proceedings,

   (c)   an order that a party to the proceedings-

   (i)   do any specified work or perform any specified service or any obligation arising under this Act or the terms of a lease, or

   (ii)   surrender possession of specified premises to another person, or

   (iii)   assign his or her or its rights under a lease to a specified person, or

   (iv)   do or perform, or refrain from doing or performing, any specified act, matter or thing,

   (d)   an order granting a party to the proceedings relief against forfeiture,

   (e) an order (as permitted by section 72AB) requiring the rectification of the lease or the lessor’s disclosure statement,

   (e1) an order (as permitted by section 72AB) deeming a disclosure statement given by the lessor after the lease is entered into (with or without amendments specified by the Tribunal) to have been given in compliance with section 11 before the lease was entered into,

   (f)   an order-

   (i)   declaring any provision made by a lease to be void for being inconsistent with this Act or the regulations, or

   (ii)   declaring that a lessor is not entitled to withhold consent to an assignment of the rights of a lessee, or

   (iii)   declaring the rights and liabilities of the parties under law, whether any consequential relief is or could be claimed or not, or

   (iv)   declaring that a party is or is not entitled to receive payment of the whole or a part of a security bond,

   (g)   such other order, in the nature of an interlocutory order of a kind referred to in paragraphs (a)–(f), as the Tribunal considers proper to be made in order to resolve or assist resolution of the dispute between the parties.

2. The Tribunal may make such ancillary orders as it considers necessary for the purpose of enabling an order under this section to have full effect.

3. The Tribunal may impose such conditions as it considers appropriate when making an order under this section.

4. The Tribunal may make an interim order under this section pending final determination of a claim, if it appears to the Tribunal desirable to do so.

   14. Of course, the fact that the Tribunal has the power to make an order is not sufficient since it is also necessary to establish a basis for an order to be made. While the Tribunal does not have the power to make an order for termination, the Tribunal is able to determine whether a retail lease was validly terminated.

   15. As both parties referred to the Retail and Other Commercial Leases (COVID-19) Regulation 2022 (NSW) (the Regulations), a copy of the regulation is Appendix 1 to these reasons.

Documentary evidence of the lessee

16. Documents in Exhibit A that are relevant to the issue in these proceedings are:

1. Small Business Commissioner’s certificate dated 1 April 2022.

2. Termination letter from the lessor’s solicitors dated 7 April 2022.

3. Disclosure Statement signed by the lessor on 13 February 2013.

4. Registered lease with commencing date of 1 February 2013.

5. Unsigned “Water Report” by Stephen Boreham dated 31 March 2022.

6. Emails exchanged between 30 March and 14 April in 2022.

7. Schedule suggesting rent arrears based on deferrals and waivers.

17. Exhibit B contained a page suggesting a cause of action based on cl 9 of the Regulations and a statement of Mr Seiden, a director of the lessee company, attaching six pages of documents, including:

1. A 7 February 2022 Service NSW email confirming that the lessee had received the “2021 COVID-19 NSW Business Grant & Job Saver payment”.

2. A 1 April 2022 email from the lessee to the lessor.

3. A 13 April 2022 email from the lessor’s solicitors to the lessee.

18. The contents of Exhibit C may be summarised as follows:

1. Points of Defence relating to the lessor’s application (COM 22/23229).

2. Three pages suggesting payments from an ANZ bank account.

3. Rent invoices for March, April, May, and June in 2020 plus a statement dated 16 June 2020 showing a balance owing of $22,547.64.

4. Three pages of emails exchanged in 2018.

5. A statement of Mrs Seiden, also a director of the lessee company, indicating that her family lived in the upstairs premises for about two years from 2013 and expressing her belief that the lessor was aware that the lessee intended to sublet the upstairs premises when they were no longer living there.

19. Exhibit D comprised sections A to J. Omitting documents already referred to, relevant documents in this exhibit are:

1. An unsigned, undated document suggesting incidents of water ingress between 6 December 2014 and 12 January 2022.

2. A report from iScope Consultants Pty Ltd dated 17 March 2022, titled “Roofing – Causation Report”.

3. A report from mould consultant dated 8 June 2022.

Documentary evidence of the lessor

20. Exhibit 1 comprised four documents, each dated 24 June 2022: Points of Claim for the lessor’s application (COM 22/23229), and affidavits of Sharon Wilson, David Wilson, and Graham McDonald (the lessor).

21. Exhibit 2 contained two documents, both dated 5 August 2022: Points of Defence to the lessee’s application COM 22/17028 and an affidavit of Sharon Wilson.

22. Exhibit 3 comprised two documents, both dated 24 August 2022, being further affidavits of Sharon Wilson and David Wilson.

23. Exhibit 4 contained an affidavit of David Wilson dated 12 September 2022.

Oral evidence

24. There was no cross-examination of either Mr Seiden or Mrs Seiden. Mrs Wilson and Mr Wilson and the lessor, Mr McDonald, were questioned.

25. Mrs Wilson said her understanding was that the upstairs premises would be used for storage or offices. She indicated that rent for the full month of January 2018 was credited and that she understood that was due to water ingress. Her evidence was that it was not until late in 2021 or early in 2022 that she and her husband became familiar with matters pertaining to the lease and that she only became involved to pursue arrears of rent. Mrs Wilson said she had only then found out that the Seiden family had lived upstairs for a period, until they found somewhere else to live.

26. Mr Wilson said he had not seen the iScope report until it was provided as part of the lessee’s documents in these proceedings. He said he was unaware of any claims relating to roof damage prior to January 2022 and described the upstairs premises as having a separate entrance, a number of rooms, two toilets, a bathroom and a kitchenette. His evidence was that a number of causes of water ingress had been recently identified, namely a box gutter having failed in two locations and a leak from another tenancy that was being investigated. While he was unable to be specific, was Mr Wilson’s recollection that he first became aware of water ingress in February or March of this year.

27. In re-examination, it was said that he believed the difference between the amount of $24,800 referred to in the termination letter and the amount of $59,267.55 (as shown in the Points of Claim (in Exhibit 1, at [11]) was that the lower amount was based on an offer to reduce rent due to the pandemic, which offer he suggested was never accepted.

28. Mr McDonald was said to be aged 79. Further, he was said to have recently suffered a stroke. He was available by telephone. With a view to limiting his questioning, the Tribunal asked questions limited to the relevant issues after which Mr Seiden asked him questions. There was no re-examination.

29. As to the use of the upstairs premises, Mr McDonald said the Seiden family wished to live there temporarily at the commencement of the lease. He was also aware that when they moved out, the premises were used by one or two of his staff, again as temporary accommodation. However, he was unaware that a real estate agent had been used and denied being aware there was a tenant living in the upstairs premises. He said he did not think he had seen the iScope report. His evidence was that the telecommunications towers on the roof were a cause of one water problem.

30. When questioned by Mr Seiden, Mr McDonald said no insurance claim had been made and that the back lane section of the roof had been replaced prior to the subject lease. He also said several plumbers had looked at the roof, that he had initiated repairs, and that on one occasion a gutter blockage was fixed by removing leaves. There were also questions relating to access to the roof.

Submissions for the lessor

31. Mr Bennett relied on written submissions which commenced at page 377 of MFI 2. Those submissions may be summarised as follows:

1. There are arrears of rent totalling $59,267.55 and interest of $9,107.38 and the costs of these proceedings are also payable.

2. The lease was validly terminated after an unsuccessful mediation conducted by the Small Business Commissioner on 29 March 2022.

3. The upstairs premises have been sub-let by the lessee, in breach of the lease, which has provided the lessee with income.

4. There is no evidence that the lessee is an impacted lessee.

5. There lessor was not prevented from terminating by the Regulations.

6. “The [lessor] graciously gave the [lessee] a 30% reduction from 1 April 2020 to 31 March 2021 and 1 July 2021 o 31 March 2022 when the prescribed period is only 13 July 2021 to 13 March 2022. Therefore, the [lessor] gave the [lessee] relief it was not entitled to.”

Submissions for the lessee

32. Submissions made by Mr Seiden were often phrased as being his understanding but there was no supporting evidence to provide a basis for such a submission. For example, he began by saying it was his understanding that renting the upstairs premises had been “verbally agreed” with the lessor but there is no evidence of any such conversation.

33. Mr Seiden said it was his understanding that a request was made for a second mediation, that the lessee was allowed to do that, but that the lessor had not agreed to a second mediation. He maintained that Exhibit B, tab B, page 2 was proof the lessee was an impacted lessee and said his understanding was that there had been agreement on rental reductions due to the pandemic, but that agreement could not be reached as to how that would apply in view of the roof damage. He suggested it was unclear why the roof had not been repaired.

34. There was also a suggestion that there was an understanding reached with Mr McDonald as to rent arrears due to the seasonality of the lessee’s business but there was no evidence that could provide a basis for such a finding by the Tribunal. It was also suggested that he Small Business Commissioner had advised that the mediation could continue.

35. The lessee’s case was that the termination notice, although dated 7 April 2022, was not received until 13 April 2022 and that the shop had been shut on 30 March 2022 due to the report from Mr Boreham (Exhibit D, tab G, page 1). Further, that the lessee was seeking renegotiation in relation to the rent, referring to clause 9 of the regulation which was set out in a 14 April 2022 email from the Mr Seiden to the lessor’s solicitor (Exhibit A, tab D, page 1).

36. It was also suggested that it was Mr Seiden’s understanding that when permission was given for the lessee’s mechanic to reside in the upstairs premises, that permission would “carry over”.

Submissions in reply

37. The Tribunal’s attention was directed to clause 29 of the lease agreement, which provided that the entire agreement of the parties was contained in that document. As to the suggestion that there had been an alteration to the lease after it was signed, it was noted that the lessee had solicitors at the time when the lease was registered, reflected by a copy of that document being provided to them (Exhibit A, tab B, page 17) and it was submitted, if there had been any alteration, that was time the time it would have been raised.

38. It was submitted that the initial use of the upstairs premises by the lessor was only a licence for that to occur on a temporary basis and was very different to using a real estate agent to sub-let a portion of the leased premises, contrary to an express term of the agreement. Further, it was submitted that the failure to pay rent meant that the termination was valid which prevailed over any claim in relation to the roof and water damage, and that there was no explanation as to how the problem with the roof impacted the lessee’s business.

39. The orders sought by the lessor were said to be (1) for the payment of outstanding rent, (2) interest, based on a provision of the lease, (3) costs, also referred to in the lease, and (4) a declaration that the termination notice was valid.

40. Any suggestion that cl 9 of the Regulation applied was disputed on the basis that the relevant period expired on 13 March 2022. It was said that the lessor had offered a rent reduction for the periods from 1 April 2020 to 31 March 2021 and from 1 July 2021 to 31 March 2022 and that the lessor had been chasing the lessee for evidence of an impact from the pandemic, that a mediation lasting more than six hours had occurred, and that the roof problem was first raised at mediation. In short, after a discount of around 50% of arrears of rent had been offered but not accepted, a termination notice was issued.

41. Submissions in relation to what may be termed the roof claim of the lessee were that there were significant arrears of rent when it was first raised and that there was no evidence as to how that issue in relation to the roof had impacted on the lessee’s business. It was said this was not a case where a lessor had taken advantage of a lessee, that about ten requests for information had been made, and an offer had been made but not accepted.

Consideration

42. Following the parties’ submissions, the Tribunal clarified the following matters:

1. On 13 May 2022, order 2 was made conditional on $5,000 being paid by 3 June. That payment was made on 4 June 2022.

2. As to the current position in relation to roof repairs, the required work had been done and no further work was needed apart from work on the front awning, which was to be completed soon, but no date for completion was available.

3. The lessee currently had access to the downstairs premises, but was not using those premises, and the upstairs premises were not being used.

43. At the outset of the hearing, it was accepted by the lessee that they had retained a real estate agent in relation to the upstairs premises. That removed the need to tender documents produced in response to a summons to that real estate agent, although the evidence established those premises were advertised as being a large four-bedroom unit, available for rent.

44. It is also noted that, at a directions hearing on 26 August 2021, the lessee was directed to provide, by 23 September 2022, a statement which set out the orders sought in the application relating to roof repairs (COM 22/35933) but that was not done.

45. The issues requiring determination are: (1) what arrears the arrears of rent, (2) was there sub-letting of the upstairs premises in breach of the lease, (3) was the termination notice valid, and (4) what is the position in relation to the roof?

46. Before considering each of those issues, based on the evidence that is before the Tribunal and having regard to the submissions of the parties, the Tribunal makes the following findings, noting that Mr and Mrs Wilson were representatives of the lessor while Mr and Mrs Seiden were representatives of the lessee:

1. In 2013 Mr and Mrs Seiden and their three children lived in the upstairs premises, for about two years, with the knowledge and oral consent of the lessor, being a period prior to the lease now under consideration.

2. The lessor and the lessee executed a lease in relation to retail premises in Lindfield for a term of five years, commencing on 1 February 2018.

3. The permitted use of those premises was agreed in that lease to be “Retail sale, repair and service of lawnmowers, line trimmers, chainsaws, blowers, edgers, brushcutters, hedge trimmers, both petrol and electric and other domestic outdoor power equipment.”

4. Under clause 6.3.2 of the lease, the lessee was not permitted to “use the property as a residence …”.

5. Under clause 10.7 of the lease, the lessee was only permitted to sub-let all of part of the premises “with the written consent of the lessor which can be refused in the lessor’s absolute discretion.”

6. Under clause 5.1.1 of the lease, the lessee was required to pay rent to the lessor in monthly instalments on the first day of each calendar month.

7. The rent payable per month from 1 February 2018, when the lease commenced, was $4,830.31 exclusive of GST with annual increases in accordance with the Consumer Price Index (CPI).

8. Under clause 12.2.2 of the lease the lessor was entitled to “enter and take possession of the property or demand possession of the property” in circumstances which included if “rent or any other money due under the lease is 14 days overdue for payment”.

9. Under clause 5.1.5 the lessee was obliged to pay interest, at a rate of 12% per annum, on any such amount that was 14 days overdue.

10. Under clause 5.1.8 the lessee was also obliged to pay “if the lessee defaults, the lessor’s reasonable legal costs relating to the default”.

11. On or around 1 March 2019 the monthly rent payable under the lease was $5,472.73.

12. On 18 June 2020 Mr Seiden advised Mrs Wilson, by email, that the lessee had been granted a “jobseeker payment” but no supporting document was provided.

13. On 30 June 2020 Mrs Wilson sought profit and loss statements and BAS statements to substantiate any claim for rent relief.

14. On 18 July 2020 the lessee sought a 30% rent reduction but did not provide any supporting documents.

15. Despite at least 10 requests from Mrs Wilson for supporting documents, no such documents were provided for more than 18 months.

16. On or around 3 February 2022 the lessor filed a mediation request with the Small Business Commissioner.

17. Under cover of an email dated 14 February 2022, the lessee provided the lessor with a copy of a 7 February 2022 email from Service NSW which confirmed that the lessee had received the “2021 COVID-19 NSW Business Grant & Job Saver payment” and a schedule which was said to show the extent of the downturn in the lessee’s business due to the pandemic.

18. By email dated 17 February 2022, Mrs Wilson replied, proposing rent relief of 30% for the periods 1 April 2020 to 31 March 2021 and 1 July 2021 to 31 March 2022, with half that reduction waived, the other half deferred, and the deferred component repaid over a period of 24 months, the effect of which would be to reduce the arrears of rent at the end of February 2022 to $24,316.62.

19. That form of that offer was in conformity with what the Regulations define as the National Code of Conduct.

20. On 1 March 2022 Mrs Wilson sent an email which sought a response to the lessor’s offer.

21. That offer, if accepted, would have resulted in rent arrears at the end of March 2022 of $28,147.53, with $18,060.01 waived and $18,060.01 deferred, instead of arrears of $64,267.55.

22. On 10 March 2022 Mr Stephen of iScope Consultants Pty Ltd inspected the premises and provided a report dated 17 March 2022 to the lessee but there is no evidence that report was provided to the lessor prior to these proceedings.

23. It was not until 24 March 2022 that the lessee provided documents, namely copies of BAS statements for the third and fourth quarters of 2020 and the first, third, and fourth quarters of 2021.

24. On 29 March 2022 a mediation conducted by the Small Business Commissioner over a period of 6.25 hours did not resolve the dispute.

25. On 30 March 2022 Mr Seiden’s email to Mr and Mrs Wilson advised that the shop had been closed pending a safe work certification and seeking to “continue the mediation process”.

26. On 31 March 2022 the lessor’s representative, namely Mrs Wilson, sent an email to Mr Seiden replying to his request to continue the mediation, saying “From where we stand the mediation resulted in a verbal agreement and we are just waiting on you to agree to the outcome, however [Mrs Seiden] has indicated that you are still not happy with the outcome”.

27. There is no evidence that the lessor’s offer, made on 17 February 2022, was ever accepted by the lessee and the evidence suggests the lessee was seeking a better outcome.

28. In a report dated 31 March 2022 obtained by the lessee, Stephen Boreham noted water penetration and mould on the ceiling and walls of the premises and suggested it was unsafe for staff to enter the premises without wearing a mask.

29. On 1 April 2022 the lessee sent an email to the lessor’s daughter, Mrs Wilson, suggesting the premises could not be opened until found to be safe, due to mould.

30. On 2 April 2022 Mr and Mrs Wilson learned that the upstairs premises were being offered for rent by a real estate agent.   

31. By letter dated 7 April 2022, sent to the lessee by registered post and by an email sent at 9.35am on 12 April 2022, the lessor’s solicitor advised the lessee that the lease was terminated with immediate effect due to non-payment of rent and provided 14 days for the removal of the lessee’s goods and property.

32. By email dated 14 April 2022 the lessee sought renegotiation of the lease, based on clause 9 of the Regulations.

33. On or about 25 May 2022, when Mr Wilson inspected the upstairs premises, he saw five beds in five rooms in that area.

34. On 28 May 2022, when the lessor, accompanied by Mr and Mrs Wilson, inspected the upstairs premises, the refrigerator was on and contained milk which had expired in March 2022 and there was evidence that animals had been kept there.

35. The lessee was invoiced monthly for the rent due under the lease and made various payments in response to those invoices and the amounts invoiced and paid are as set out in the Rent Schedule which is Appendix 2 to these reasons.

36. Between late May 2022 to early August 2022 Mr Wilson sought to have roof repairs undertaken by 12 contractors, without success.

37. During that period, Mrs Wilson kept the lessee updated with the position in relation to the roof repairs.

38. The lessee obtained a report from a mould consultant dated 8 June 2022 but there is no evidence that report was provided to the lessor prior to these proceedings.

39. At no stage did the lessee seek or obtain written consent to sub-let the upstairs premises and at no stage did the lessee advise the lessor of the intention to sub-let the upstairs premises.

40. The roof repairs sought by the lessee have now been completed.

47. Arrears. The evidence of the lessor as to the amount owing under the terms of the lease was not challenged and the Tribunal is satisfied that the amount owing, based on rent only being sought by the lessor up to and including March 2022, is $59,267.55.

48. There was an offer made by the lessor which would, if accepted, have reduced the amount owing by a waived amount of $18,060.01 but that offer was never accepted by the lessee.

49. That failure to pay rent when it was due was a breach of an essential term of the lease, namely clause 5.1.1, and that would be the case even if that offer had been accepted.

50. Sub-letting. It is clear the upstairs premises were sub-let by the lessee and that no written consent was obtained. That was a breach of the terms of the lease, namely clause 6.3.2 and clause 10.7.

51. Any suggestion that permitting an employee of the lessee to live in the upstairs premises would “carry over” is rejected for three reasons. First, the fact that permission was needed for the employee to live there supports the need for the lessor’s consent. Secondly, sub-letting to a tenant is of a different character to permission for an employee to live there on a temporary basis. Thirdly, the provisions of the lease not only required written consent of the lessor but clause 29 of that lease operated to not only render it “the entire agreement between the parties on the subject matter of the lease” but also make it supersede “each prior agreement and understanding between the parties”.

52. Termination. Clause 9 of the Regulations prohibits termination in limited circumstances: (1) only between 13 July 2021 and 30 June 2022, (2) only if the lessee is an impacted lessee, and (3) only if there has been mediation and it has been certified in writing that the mediation failed to resolve the dispute. Thus, a lessor cannot terminate a retail lease during that period, if the lessee is an impacted lessee, unless there has been mediation and there is a certificate to show that mediation failed to resolve the dispute.

53. In this case, the lessee provided evidence that it had received a grant which satisfied clause 4(a) of the Regulations. Although evidence of turnover to satisfy clause 4(b) was not provided, it is reasonable to assume that the lessee did not have turnover of $5 million or more in the 2020-2021 financial year.

54. However, a finding that the lessee was an impacted lessee does not assist the lessee because the Tribunal was provided with a copy of the relevant mediation certificate. The request for renegotiation was not covered by clause 9(1)(b) because the breach upon which the lessor relied occurred after 13 March 2022. Accordingly, the lessor was entitled to terminate the lease by reason of the arrears of rent and it is not necessary to consider the sub-letting breach.

55. It is noted that sub-letting the upstairs premises would have provided the lessee with additional income, but the evidence does not enable the Tribunal to find (1) during what period the upstairs premises were sub-let, (2) what income was derived from that sub-letting, or (3) whether that income was included in the financial information disclosed by the lessee to the lessor.

56. As to that disclosure, it is noted (1) there is no evidence that the lessee ever provided any profit and loss statement(s), (2) only a limited number of BAS statements were provided, and (3) it was not until more than 18 months after the first request for supporting documents, during which period the request was renewed at least 10 times.

57. For the sake of completeness, it is noted that a submission was made that the front page of the lease was altered after it was signed, by replacing “27” and “Annexure A” in relation to an option to purchase with “N/A” in each case. However, since no supporting evidence was provided in the lessee’s case, and since that claim was not put to any of the lessor’s witnesses when they were cross-examined, it rises no higher than an unsubstantiated allegation.

58. Roof. The lessee lodged an application which sought an order for the roof to be repaired but there no was indication of what order/s was/were sought or the basis upon which it was suggested any such order/s should be made.

59. There are two reasons why there is now no basis for any such order/s. First, it appears the roof has been repaired. Secondly, the lease has been validly terminated.

60. Since (1) the lessee first raised water ingress at the end of March 2022, (2) no rent has been charged since the rent due on 1 March 2022, (3) the lessee appears to have had little or no use of the premises since the end of March 2022, the Tribunal is unable to see a basis for any order in relation to the roof.

Interest

61. The lease entitles the lessor to interest at the rate of 12% per annum for the period from the due date for payments that were more than 14 days overdue. A table submitted by the lessor calculated interest based on the amount owing at the end of each month which is less than what the lessor would be entitled to claim under the lease. As an interest rate of 12% per annum is conveniently equivalent to 1% per month, that table takes the amount owing at the end of each month and divides by 100. The total of the amounts so obtained, namely $9,107.38 was claimed for interest. However, that table has calculation errors for January, March, April, and May in 2021 and omits the months of April, May, August, and September in 2022.

62. As that approach claims less than what the lessor would be entitled to claim, an amount of $10,185.33 (as set out in the last column of Appendix 2) is awarded for interest. It is convenient to here note that the total of rent arears ($59,267.55) and interest ($10,185.33) is $69,452.88.

Costs

63. There are two reasons why the lessor is entitled to an order for costs. First, the claim for rent arears exceeded $30,000. The costs of these proceedings are thus governed by rule 38 of the Civil and Administrative Tribunal Rules 2014. It is thus not necessary to establish there are special circumstances warranting an order for costs and the usual rule, that costs follow the event, applies.

64. Secondly, clause 5.1.8 of the lease requires the lessee to pay the lessor’s reasonable legal costs if the lessee defaults, which is the case here.

65. As there is nothing before the Tribunal to suggest any disentitling conduct on the part of the lessee, the lessor appears to be entitled to an order for costs. Costs were sought both in the application of the lessor and in the lessor’s written submissions. No argument against an order for costs was put by the lessee. Accordingly, orders for costs are warranted in relation to each of the three applications that were listed for hearing, and the interim application that was the subject of an order made on 26 August 2022.

Orders

66. For the reasons set out above, the orders that will be made are as follows:

In COM 22/17026:

1. The application is dismissed.

2. The applicant is to pay the respondent’s costs of this application, on the ordinary basis, as agreed or assessed.

In COM 22/23229:

3. Pursuant to s 72(1)(a) of the Retail Leases Act 1994 (NSW), the respondent, Fair Dinkum Mowers Pty Ltd, is to pay the applicant, Graham Burns McDonald, $69,452.88 forthwith.

4. Pursuant to s 72(1)(f)(iii) of the Retail Leases Act 1974 (NSW), declare that the lease between the applicant and the respondent was validly terminated by notice dated 7 April 2022.

5. Pursuant to s 72(1)(c)(ii) of the Retail Leases Act 1974 (NSW), order the respondent to surrender possession of the premises the subject of the lease by 31 October 2022.

6. The respondent is to pay the applicant’s costs of this application, on the ordinary basis, as agreed or assessed.

In COM 22/35933:

7. The application is dismissed.

8. The applicant is to pay the respondent’s costs of this application, on the ordinary basis, as agreed or assessed.

9. In accordance with order 2 made on 26 August 2022, those costs are to include the costs of the related interim application (COM 22/35931)

Appendix 1 (22301, docx)

Appendix 2 (17610, docx)

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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

Amendments

07 February 2023 - Grammatical errors

14 September 2023 - Formatting amendments.

Decision last updated: 14 September 2023