Gencturk v Laziko Enterprises Pty Ltd
[2011] NSWADT 218
•13 September 2011
Administrative Decisions Tribunal
New South Wales
Medium Neutral Citation: Gencturk v Laziko Enterprises Pty Ltd [2011] NSWADT 218 Hearing dates: 2 September 2011 Decision date: 13 September 2011 Jurisdiction: Retail Leases Division Before: P R Callaghan SC Deputy President,
B Harrison, Non-Judicial Member
M Lonie, Non-Judicial MemberDecision: 1.Order that the Respondents pay to the Applicant the sum of $199,481.97 (for rent and damages).
2.Order that the Respondents pay to the Applicant (in addition to the sum referred to in the first Order) the sum of $6,309.32 (for interest).
3.Dismiss the Cross-Claim.
4.Order the Respondents to pay the Applicant's costs as agreed or assessed on a party and party basis.
5.Note that the Respondents' liability under these orders is joint and several.
Catchwords: Retail Lease - re-taking of possession - rent - damages - interest - costs Legislation Cited: Administrative Decisions Tribunal Act 1997
Retail Leases Act 1994Cases Cited: Jonamill Pty Ltd v Alramon Pty Ltd (No.2) (RLD) [2010] NSWADTAP 3
Progressive Mailing House Pty Ltd v Tabali Pty Ltd (1985) 157 CLR 17
Spuds Surf Chatswood Pty Ltd v P.T. Ltd (No.3) [2011] NSWADT 186Category: Principal judgment Parties: Hasan Gencturk (Applicant)
Laziko Enterprises Pty Ltd (Respondent)
Bircan Karaman (Respondent)
Yildiray Odemis (Respondent)File Number(s): 105165
REASONS FOR DECISION
Background
Retail Leases Division: P.R. Callaghan S.C. Deputy President, B. Harrison Non-Judicial Member (Advisory) and M. Lonie Non-Judicial Member (Advisory).
The Applicant, Mr Hasan Gencturk ("the Applicant"), his wife, Mrs Fatma Gencturk, and his brother, Mr Mehmet Gencturk, purchased the three properties at 245-249 Abercrombie Street, Darlington ("the three properties"), in about December 2005. They became the registered proprietors of the three properties as tenants in common, Mr Mehmet Gencturk in a half share and Mr Hasan Gencturk and Ms Fatma Gencturk in a quarter share each. At that time the three properties were used as office spaces and the purchasers, after application to the Council, converted one of the three properties into a take-away coffee shop and the other two into a food shop. From about August 2007 to about August 2009 those shops were operated by a partnership comprising Messrs Hasan Gencturk and Mehmet Gencturk, and their brother-in-law, Mr Engin Sanli. Following negotiations between Mr Hasan Gencturk and Mr Yildiray Odemis ("the Third Respondent") and Mr Bircan Karaman ("the Second Respondent") and the involvement of Solicitors acting respectively for the Applicant and the Respondents, a lease of the three premises was entered into on or about 22 September 2009 between the three owners as Lessor, the First Respondent as Lessee and the Second and Third Respondents as Guarantors ("the subject lease"). It appears that no Lessor's or Lessee's disclosure statements were made. The subject lease was for a term of 5 years with two options to renew for 5 years each. The yearly rent was $94,380.00 inclusive of GST. The first two months of the term were rent-free. The Lessee was to provide a security deposit of $23,595.00 by 22 October 2009. Interest at the rate of 8% per annum was payable on all payments to be made by the Lessee when payment was more than 14 days overdue, calculated from the due date to the date of payment.
The Lessee changed the three properties into a restaurant. The only money paid to the Lessor in respect of the subject lease was $5,000.00 which was paid on or about 22 February 2010. On or about 30 June 2010, following notice asserting breach of the covenants to pay the security deposit, the monthly rent and outgoings, possession of the three properties was retaken in the name of the Applicant.
On or about 23 August 2010 part of the three properties was leased to others for use as a take-away food and coffee shop at an annual rent of $48,620.00 inclusive of GST. On or about 1 September 2010 the remainder of the premises was leased to others for use as a coffee shop at an annual rent of $37,180.00 inclusive of GST.
The Applicant seeks orders for the payment of money by the Respondents in respect of the subject lease.
Proceedings
In May 2010 the Applicant as Plaintiff commenced proceedings in the District Court against the three Respondents as Defendants seeking, ultimately, monetary relief as now sought in this Tribunal. The Applicant moved for summary judgment and this was resisted by the Respondents who asserted that the proceedings involved a retail tenancy dispute within the Retail Leases Act 1994 ("the RL Act"), that no mediation under s68 of the RL Act had taken place and, with reference to ss 10, 61B, 62D and 62E of the RL Act, that there had been misrepresentation and unconscionable, misleading and deceptive conduct by the Applicant in respect of the subject lease. The Respondents' allegations of misconduct particularised an alleged pre-lease assertion by Messrs Hasan and Mehmet Gencturk to the Second Respondent as to the turn-over of the previous businesses conducted in the three premises. The proceedings were transferred from the District Court to this Tribunal.
On 18 January 2011 the Registrar, Retail Tenancy Disputes, certified that mediation under Part 8 of the RL Act had failed to resolve the dispute between the Lessee and the Lessor in respect of the three properties for the reason that mediation "did not take place because the Lessee declined the Registrar's offer of mediation".
On behalf of the Applicant Points of Claim were filed on 15 February 2011 in the following terms:
"1. On or about 22 Septembr 2009 Hasam Gencturk and Laziko Enterprises Pty Ltd (Laziko) entered into a lease agreement whereby Laziko would make monthly payments in return Hasan Gencturk would let the premises known as shops 245-249 Abercrombie Street Darlington NSW (The Premises) to Laziko.
2. It was a term of the lease that the monthly rent would be $7,865.00 inclusive of GST.
3. The term of the lease was for 60 months, commencing on 22 September 2009 and ending on 21 September 2014.
4. Bircan Karaman and Yildiray Odemis executed the lease as Guarantors.
5. It was a term of the lease agreement Laziko pay a security bond of $23,595.00 on or before 22 October 2009.
6. In breach of the lease agreement Laziko failed to make payment of the security deposit.
7. Further, Laziko has failed to pay the rent since the commencement of the lease with the exception of a $5,000.00 payment.
8. On or about 30 June 2010, Hasan Gencturk terminated the lease agreement due to Laziko's breach and entered into possession.
9. On 23 August 2010 part of the premises was leased to a new tenant for a term of 3 years. The monthly rent is $3,683.33 plus GST.
10. On 1 September 2010 the remainder of the premises was leased for a term of 3 years to a new tenant. The monthly rent is $2,816.67 plus GST.
11. As a result of Laziko's breach of the lease agreement the Plaintiff has suffered loss and Damage.
Particulars of Damage
Lease term: 5 years
Yearly rent: $94,380.00
Total rent during term of lease: $471,900.00
Less
Rental income from new tenants: ($257,400.00)
Loss of Rental income: ($214,500.00)
Less rent paid: ($5,000.00)
Total Loss of Rent $209,500.00
Plus
Cost of making good the premises: $200,000.00
Total Loss: $409,500.00"
12. Further and/or in the alternative, Yildiray Odemis and Bircan Karaman guaranteed the performance of Laziko's obligations under the lease agreement.
13. Hasan Gencturk claims:
(a) the sum of $409,500.00 in damages;
(b) Interest, and
(c) Costs."
At a directions hearing in the Tribunal on 27 January 2011, apparently in anticipation of lodgement of the Points of Claim, there was a direction made to the effect that the Respondents were to file Points of Defence and Points of Cross Claim by 10 February 2011 and the proceedings were set down for hearing on 27 April 2011.
Points of Defence and Points of Cross Claim were not filed until 14 April 2011. On 19 April 2011 the Tribunal directed that, among other things, the hearing date of 27 April 2011 be vacated, that Points of Defence to Cross Claim be filed by 17 May 2011, and that further evidence by filed by 14 June 2011.
At a directions hearing on 20 June 2011 the proceedings were set down for hearing on 2 September 2011. It was noted that as there was a claim by the Respondents of unconscionable conduct, two assessors would be required to sit on the hearing (Administrative Decisions Tribunal Act 1997 ("the ADT Act") Schedule 2 Part 3B Division 3 clause 4).
Hearing
When the proceedings came on for hearing on 2 September 2011, the Applicant was represented by Counsel but there was no appearance by or on behalf of the Respondents. The Respondents had at all previous stages been legally represented. In the Tribunal file was a letter of 14 August 2011 to the Registrar of the Tribunal from the solicitor who had acted for the Respondents in relation to the execution of the subject lease and these proceedings, both in the District Court and this Tribunal, at least up to and including the directions hearing on 20 June 2011. The substance of the letter was as follows:
"...we advise that we no longer act for the Respondents. Please amend your records accordingly.
Notice of our ceasing to act was given to the Respondents on 8 July 2011.
We believe all mail can be directed to 20 Romana Square Prestons NSW 2170 (in relation to Laziko Enterprises Pty Ltd and Bircan Karaman) and 11 Zoric Close Prestons NSW 2170 (for Yildiray Odemis)."
On behalf of the Applicant, Counsel sought to have the hearing proceed in the absence of the Respondents.
The history of the matter, as recounted above, was such that I was satisfied that the Respondents had been given sufficient opportunity to participate in the hearing and had not availed themselves of it. Accordingly, I determined that it was appropriate for the hearing to proceed ex parte, as the Applicant requested.
Counsel for the Applicant tendered two affidavits by the Applicant and made submissions. He advised that the Applicant was not pressing the claim for the cost of making good the premises. Pending the lodgment on behalf of the Applicant of a schedule detailing the quantification of the monetary claims, this Decision was reserved.
Issues and Conclusions on Liability
The Points of Defence admitted the assertions of the first five paragraphs of the Point of Claim. The evidence before me establishes those facts in any event and the evidence also establishes the other facts asserted in the Points of Claim. In the circumstances, I think that only three issues arise for particular consideration: first, the appropriateness of the Applicant's status as the sole claimant; secondly, the Applicant's claim for interest which while included in paragraph 13 of the Points of Claim was not particularised; and thirdly, the damages aspect of the claim for lost rent.
The Lessor was named in the subject lease as Mehmet Gencturk, Hasan Gencturk and Fatma Gencturk, who were the owners of these three properties. These proceedings are brought only in the name of the Applicant. Nevertheless, the Points of Claim substantially allege that the Applicant was the Lessor and that allegation is admitted in the Points of Defence. I think that it is appropriate, and it suffices, for the Tribunal to note, as I now do, that the moneys ordered to be paid by the Respondents to the Applicant are to be received by him on behalf of himself and the other two owners of the three properties according to their respective entitlements. That is to my mind preferable to delaying the proceedings further by reconstituting them to add the other two owners as Applicants; I see no necessity for such a course.
The Applicant's claim for interest as raised at the hearing is for interest under the covenant referred to in the Background section of these Reasons (cf s72A of the RL Act, as to which see Spuds Surf Chatswood Pty Ltd v PT Ltd (No.3) [2011] NSWADT 186 at [3] to [17]). While no particulars were given in respect of the claim for interest made in the Points of Claim, a claim on the basis propounded at the hearing is within the ambit of the claim as pleaded.
The Applicant claims as damages rent that would have been payable under the lease from when the Applicant re-took possession of the three properties until they were re-let and the differential between the rent that would have been payable under the subject lease for the term thereof, and the amount that became payable under the two new leases. I see no legal embargo on such a claim. To the extent that it could be said that the Applicant was exercising his rights given by the subject lease by claiming a contractual right of re-entry when he re-took possession of the three properties and by suing under the covenant in the subject lease to pay rent, the Applicant also had concurrent common law rights which included the right to recover damages for loss of the benefit of the covenant to pay rent (Progressive Mailing House Pty Ltd v Tabali Pty Ltd (1985) 157 CLR 17, particularly at 30-31). The breach of the covenant to pay rent was serious: $5,000.00 only was paid, and belatedly, out of rent of $57,123.56 up to 30 June 2010; the subject lease stipulated that obligation to pay rent was an essential term; there was also failure by the Lessee to pay the security deposit of $23,595.00; and, the evidence of the Applicant discloses, there were repeated email and text messages from the Applicant to the Second Respondent regarding the amounts in arrears, as to which "he always asked for more time and promised to pay". The seriousness of the breach amounted to a fundamental breach and repudiation of the subject lease. I am of the opinion that the Applicant is entitled to damages for breach of the covenant to pay rent as he has claimed.
Quantum
The Applicant's claim for the payment of rent under the subject lease to 30 June 2010 is quantified in a schedule lodged with the Tribunal as totalling $52,123.56, made up as follows:
"Unpaid rent from lease commencement date to re-entry by Applicant
Lease Commencement: 22 September 2009
Rent free period: 2 months
Rent Commencement : 22 November 2009
Lease terminated: 30 June 2010
Period Rent Due: 7 months and 8 days
Rent Amounts: $94,380.00 p.a., $7,865 p.m., $258.57 p.d.
Total rent due: (7 x $7,865) + (8 x $258.57) = $57,123.56
Less payments received: ($5,000.00)
Total outstanding rent: $52,123.56"
On the evidence tendered at the hearing I accept that quantification.
In respect of lost rent until the terminal date of the term provided for in the subject lease, the Applicant claims, first, the amount of rent under the subject lease from 1 July 2010 to 15 September 2010 when rent was first paid (after rent-free periods) under the new leases. That amount is claimed in the schedule to be $19,349.98, made up as follows:
"Lost rent after re-entry
Period from 1/07/10 - 15/09/10 2 months, 14 days
Total Lost Rent this period (2 x $7,865) + (14 x $258.57) = $19,349.98"
On the evidence tendered at the hearing, I accept that quantification.
In respect of lost rent during what would have been the remainder of the term of the subject lease, that is, until 21 September 2014, the Applicant details in the schedule its claim as follows:
"Lost Rent from 15/09/10 - 21/09/14 (lease termination date pursuant to lease with First Respondent)
Period: 4 years, 6 days
Rent due from First Respondent: (4 x $94,380) + $6 x $258.57) = $379,071
Rent that will be received from first current tenant (23/09/10-22/08/2013)
No of days: 1065 days
Yearly rent: $48,620.00
Daily rent: $133.21
Total rent: 1065 x $133.21 = $141,868.65
Rent that will be received from second current tenant (23/09/10-31/08/13)
No of days: 1072 days
Yearly rent: $37,180.00
Daily rent: $101.86
Total rent: 1072 x $101.86 = $109,193.92
Total rent from current tenants: $141,868.65 + $109,193.92 = $251,062.57
Summary of ongoing loss
Rent payable by First Respondent: $379,071
Less rent from new tenants: ($251,062.57)
Ongoing rental loss: $128,008.43"
On the evidence tendered at the hearing, I accept this quantification.
In the result, as claimed in the schedule, the Applicant has established a total loss of $199,481.97 made up, as follows:
"Loss for Period First Respondent in Premises $52,123.56
Loss whilst finding tenants and new rent free
periods $19,349.98
Ongoing rental loss $128,008.43
Total Rental Loss $199,481.97"
The Tribunal should order that the Respondents pay that sum of $199,481.97 to the Applicant.
As to interest, the Applicant, in the schedule, claims:
"Rent commenced 22/11/09 - 22/12/09
Monthly rent: $7,865.00
Rent received: ($0.00)
Rent outstanding: $7,865.00
Days outstanding: 22/11/09 - 2/09/11 is 649 days
Interest: 649 x 8% x 7865.00
36500
= $1,118.77
Rent for 22/12/09 - 22/01/10
Outstanding: $15,730.00
Rent received: $0.00
Days outstanding: 619 days
Interest: 619 x 8% x $15,730.00
36500
= $2,134.11
Rent for 22/01/10 - 22/02/10
Outstanding: $23,595.00
Rent received: $5000.00
Current outstanding: $18,595.00
Days outstanding: 589 days
Interest: 589 x 8% x $18595.00
36500
=$2,400.54
Rent for 22/02/10 - 22/03/10
Outstanding: $26,460.00
Rent received: $0.00
Days outstanding: 559 days
Interest: 559 x 8% x $26460.00
36500
=$3241.89
Rent for 22/03/10 - 22/04/10
Outstanding: $34,325.00
Rent received: $0.00
Days outstanding: 529 days
Interest: 529 x 8% x 34325.00
36500
= $3,979.82
Rent for 22/04/10 - 22/05/10
Outstanding: $42,190.00
Rent receive: $0.00
Days outstanding: 499 days
Interest: 499 x 8% x $42,190.00
36500
= $4,614.31
Rent for 22/05/10 - 22/06/10
Rent outstanding: $50,055.00
Rent received: $0.00
Days outstanding: 469 days
Interest: 469 x 8% x $50,055.00
36500
= $5,145.38
Rent for 23/06/10 - 30/06/10
Monthly rent: $7865.00
Daily amount: $258.58
Outstanding for the period $258.58 x 8
= $2068.64
Total outstanding: $52,123.64
Days outstanding: 462 days
Interest: 462 x 8% x $52,123.64
36500
= $5,278.05
Total interest: $1,118.77 + $2,134.11 + $2,400.54 + $3,241.89 + $3,979.82 + $4,614.31 + $5,145.38 + $5,278.05
= $27,912.87"
Unfortunately, I cannot see that the calculation of interest proffered on behalf of the Applicant as set forth above is correct. It accumulates monthly the then total rent indebtedness and calculates the interest in respect of each month's rent, not on the rent for that month, but on the then accumulated rent indebtedness. In my opinion, that method involves multiple accounting for interest on each month's unpaid rent and the following is an appropriate re-calculation of interest.
Rent commenced 22/11/09 - 22/12/09
Monthly rent: $7,865.00
Rent received: ($0.00)
Rent outstanding: $7,865.00
Days outstanding: 22/11/09 - 2/09/11 is 649 days
Interest: 649 x 8 x 7865.00
36500
= $1,118.77
Rent for 22/12/09 - 22/01/10
Outstanding: $7,865.00
Rent received: $0.00
Days outstanding: 619 days
Interest: 619 x 8 x $7,865.00
36500
= $1,067.05
Rent for 22/01/10 - 22/02/10
Outstanding: $7,865.00
Rent received: $5,000.00
Current outstanding: $2,865.00
Days outstanding: 589 days
Interest: 589 x 8 x $2,865.00
36500
=$369.85
Rent for 22/02/10 - 22/03/10
Outstanding: $7,865.00
Rent received: $0.00
Days outstanding: 559 days
Interest: 559 x 8 x $7,865.00
36500
=$963.62
Rent for 22/03/10 - 22/04/10
Outstanding: $7,865.00
Rent received: $0.00
Days outstanding: 529 days
Interest: 529 x 8 x $7,865.00
36500
= $911.90
Rent for 22/04/10 - 22/05/10
Outstanding: $7,865.00
Rent receive: $0.00
Days outstanding: 499 days
Interest: 499 x 8 x $7,865.00
36500
= $860.19
Rent for 22/05/10 - 22/06/10
Rent outstanding: $7,865.00
Rent received: $0.00
Days outstanding: 469 days
Interest: 469 x 8 x $7,865.00
36500
= $808.47
Rent for 23/06/10 - 30/06/10
Monthly rent: $7865.00
Daily amount: $258.58
Outstanding for the period $258.58 x 8
= $2068.64
Total outstanding: $52,123.64
Days outstanding: 462 days
Interest: 462 x 8 x $2,068.64
36500
= $209.47
Total interest: $1,118.77 + $1,067.05 + $369.85 + $963.62 + $911.90 + $860.19 + $808.47 + $209.47
= $6,309.32
On the evidence tendered at the hearing I am satisfied that this is the appropriate calculation of interest. The Tribunal should order the Respondents pay to the Applicant the above sum of $6,309.32.
Cross-Claim
The Respondents, have not appeared at the hearing and have not prosecuted their Cross-Claim. The Cross-Claim should be dismissed.
Costs
The Applicant seeks its costs. Section 88 of the ADT Act provides, so far as is relevant, as follows:
(1) Each party to proceedings before the Tribunal is to bear the party's own costs in the proceedings, except as provided by this section.
(1A) Subject to the rules of the Tribunal and any other Act or law, the Tribunal may award costs in relation to proceedings before it, but only if it is satisfied that it is fair to do so having regard to the following:
(a) whether a party has conducted the proceedings in a way that unnecessarily disadvantaged another party to the proceedings by conduct such as:
(i) failing to comply with an order or direction of the Tribunal without reasonable excuse, or
(ii) failing to comply with this Act, the regulations, the rules of the Tribunal or any relevant provision of the enactment under which the Tribunal has jurisdiction in relation to the proceedings, or
(iii) asking for an adjournment as a result of a failure referred to in subparagraph (i) or (ii), or
(iv) causing an adjournment, or
(v) attempting to deceive another party or the Tribunal, or
(vi) vexatiously conducting the proceedings.
(b) whether a party has been responsible for prolonging unreasonably the time taken to complete the proceedings.
(c) the relative strengths of the claims made by each of the parties, including whether a party has made a claim that has no tenable basis in fact or law,
(d) the nature and complexity of the proceedings,
(e) any other matter that the Tribunal considers relevant."
The Applicant draws attention in particular to the delays arising from the Respondents' failure to take part in a mediation and belatedly filing the Points of Claim and Points of Cross-Claim such as to cause the hearing scheduled for 27 April 2011 to be vacated on 19 April 2011 - see s88(1A)(a)(iv) and s88(1A)(b); to an inference to be drawn especially from the Respondents' failure to attend the hearing, of weakness of the defence and cross-claim - see s88(1A)(c); and to the nature of the proceedings (s88(1A)(d)) being a claim within the Retail Leases Division where in particular the commercial nature of disputes may suggest that a costs order is fair (e.g. Jonamill Pty Ltd v Alramon Pty Ltd (No.2) (RLD) [2010] NSWADTAP 3 at [26] to [28]). In my opinion, those submissions are well-founded and it is fair that the Respondents should be ordered to pay the Applicant's costs.
Orders
1. Order that the Respondents pay to the Applicant the sum of $199,481.97 (for rent and damages).
2. Order that the Respondents pay to the Applicant (in addition to the sum referred to in the first Order) the sum of $6,309.32 (for interest).
3. Dismiss the Cross-Claim.
4. Order the Respondents to pay the Applicant's costs as agreed or assessed on a party and party basis.
5. Note that the Respondents' liability under these orders is joint and several.
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Decision last updated: 13 September 2011
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