Global Hospitality Acquisitions Pty Ltd v Owners Corporation SP31748
[2009] NSWADT 130
•2 June 2009
CITATION: Global Hospitality Acquisitions Pty Ltd v Owners Corporation SP31748 [2009] NSWADT 130 DIVISION: Retail Leases Division PARTIES: APPLICANT
Global Hospitality Acquisitions Pty LtdFIRST REPSONDENT
SECOND RESPONDENT
Owners Corporation SP31748
Rousso Nominees Pty LtdFILE NUMBER: 085263 HEARING DATES: 6 February 2009, 25 February 2009 SUBMISSIONS CLOSED: 25 February 2009
DATE OF DECISION:
2 June 2009BEFORE: Callaghan P, SC, Deputy President; Griffiths G - Non-Judicial Member ; Tyler T - Non-Judicial Member CATCHWORDS: Definitions of “retail shop” and “retail shop lease” – use of additional premises for purposes of restaurant – whether agreements for such use of such premises constituted retail shop leases – licences for additional facilities for restaurant – estoppel – unconscionable conduct LEGISLATION CITED: Retail Leases Act 1994 CASES CITED: AG v World Best Holdings Ltd (2005) 63 NSWLR 557
Browne v Flower [1911] 1 Ch 219
Manly City Council v Malouf [2004] 61 NSWLR 394
Moweno Pty Ltd v Stratis Promotions Pty Ltd [2002] NSWSC 1151
Moweno Pty Ltd v Stratis Promotions Pty Ltd [2003] NSWCA 376
Nelson v Walker (1910) 10 CLR 560
Thompson v Easterbrook (1951) 83 CLR 467REPRESENTATION: APPLICANT
RESPONDENT
I R Pike, barrister
DH Murr SC (6 February 2009), C Hanson, solicitor (25 February 2009)ORDERS: To be made in accordance with Short Minutes to be brought in and to be agreed or settled by Tribunal
CONTENTS
Background Shop Kitchen Car Park Storage Area Principal Events 2006-2008 Proceedings Other Factual Matters Legal Consideration Conclusions Orders
BACKGROUND
1 The property 77-79 Hall Street, Bondi (“the property”) is a four storey brick building comprising fourteen strata title lots. Strata Plan 31748 was registered in respect of the property on 4 November 1987. The ground floor is occupied by commercial premises (“the shop”), various areas of common property and eight car parking spaces. The other three floors contain thirteen residential lots. The car parking spaces are designated in the strata plan respectively as parts of eight of the residential lots.
2 The property faces south onto Hall Street and north to O’Brien Street at the rear. Access to the car parking spaces and the rear of the property generally is from O’Brien Street. To the east some distance down Hall Street from the property are Campbell Parade and Bondi Beach. Two buildings away to the east of the property is the Hakoah Club.
3 The shop on the ground floor of the property comprises Lot 14 in the strata plan. Various areas of common property at the back or northern section of the shop have over a number of years (since at least 2002) been occupied with the shop, namely, a hallway centrally located with hand washing facilities at its northern end, two toilets opening to the east off that hallway and another hallway running to the west from that hallway and leading to common property outside. More recently, a storeroom and a car parking area to the north of those areas of common property have also been occupied by the Applicant (in this Decision they are referred to as “the kitchen” and “the car park storage area” respectively). These proceedings concern the kitchen and the car park storage area.
4 In about 1990 the Second Respondent, Rousso Nominees Pty Ltd, purchased eleven of the residential lots in the property and in 2006 purchased another such lot. Mr Lazare Roussos is a director of the Second Respondent and owns 50% of the issued shares in it; there are three other directors – his wife, his brother and his brother’s wife. Lot 14 is owned by Mrs Hetty Goldstein, Mr Roussos’ mother in law. Mrs Goldstein owned that property jointly with her late husband, Mr Alex Goldstein, who died in about 2005. Mr Roussos has a General Power of Attorney from Mrs Goldstein dated 21 March 2005. One residential lot in the property is owned by Mr Benjamin David and his wife. Mr Roussos was at all relevant times the Chairman and the Secretary of the owners corporation for the strata scheme, that is, the First Respondent.
5 The Toga Property Group (“Toga”) by about early 2008 acquired ownership or options to purchase the Hakoah Club and the buildings between the property and the Hakoah Club. The Second Respondent around that time granted an option to Toga to purchase the lots which the Second Respondent owned within the property for some millions of dollars and that option was to be exercised on 27 February 2009, a couple of days after the hearing of these proceedings concluded.
SHOP
6 The shop has been used over the years for various purposes: a book shop, a vegetarian cafe and an internet café. By about 2003 a liquor licence was obtained in respect of the shop which then came to be used as it now is, as a restaurant and bar known as “Bungabar” (and in this Decision I refer to the shop after this time also as “the Bungabar”). A sign reading “Bungabar” was installed by about 2003 on the top of the shopfront extending horizontally over the footpath. On 12 April 2002, Lot 14 was leased by Mr and Mrs Goldstein to YSY International Pty Ltd for a term of 3 years commencing on 10 April 2002 with options to renew for periods of 3 years and a further 3 years. YSY International Pty Ltd was owned by Mr Yossi Zamir; the permitted use was specified in the lease as “internet café or any other use as approved by Waverley Council”. The Bungabar business was sold by YSY International Pty Ltd in November 2004 to another company owned by Mr Zamir, Bungabar International Pty Ltd. By lease dated 1 February 2005, Mr and Mrs Goldstein leased Lot 14 to Bungabar International Pty Ltd for a term of 3 years commencing on 10 November 2004 with options to renew for periods of 3 years plus 3 years plus 3 years; the lease specifies as the permitted use “coffee shop and bar”. There is no dispute in these proceedings that the lease was renewed in November 2007.
7 In July 2005, the Bungabar business was sold to the Applicant, Global Hospitality Acquisitions Pty Ltd. The Applicant is a wholly owned subsidiary of GHA Holdings Pty Ltd of which Mr Tristan Lo is a shareholder and director. A transfer of the lease to the Applicant was executed and registered but further details of that are not in evidence. Mr Zamir continued working in the Bungabar business in a management role.
8 As previously mentioned, at all relevant times, some common property toilets and hallways have been occupied with the shop. Mr Zamir described in an affidavit those areas and their use as follows:
- “Prior to the sale of the business to Global in July 2005, the L-shaped hallway at the back of the restaurant and adjacent to what is now the kitchen, and the toilets, was being used exclusively by the restaurant. There is and was a basin in the hallway, in its present location. The area of the long part of the hallway, adjacent to the toilets and including the basin, was decorated in accordance with the theme of the restaurant. There was a lockable door and gate between this part of the building and the car park area. The door and gate were both lockable. I had a key and the Bungabar staff had keys. Other residents of the building did not have keys, save that some employees of Bungabar lived in the building and they had keys by reason of their employment. When Bungabar was open the door and gate were normally open, for staff to use, but we would lock them when the business closed for the evening. Roussos, who parked his car in the car parking area at the back of the building, would from time to time walk through this area to check that it was clean and tidy.”
KITCHEN
9 Towards the end of 2005 the Applicant undertook conversion of the storage area into a kitchen for Bungabar and the removal of the food preparation facilities from the bar area in the Bungabar. For the kitchen, a doorway was opened in the wall between that area and the second hallway. That work was done in accordance with structural requirements specified by Alba & Associates, Consulting Engineers, of Bondi Junction in a letter dated 21 November 2005 and following inspection by those engineers of the work on 28 November 2005, in a letter dated 1 December 2005, they certified it to have been installed in accordance with their requirements. Mr Roussos had requested that engineers be involved. Within the kitchen, other work was done including closing up a doorway to the common property on the western side, installation of a sink and plumbing and a cold room which included a beer system with pipes running out through the eastern wall, along the ground on the common property outside and beside the eastern wall, past an unused toilet with a door facing east (next to the two toilets occupied with the shop) through the back wall of the shop and thence into the bar within the Bungabar. The kitchen since then has been used as such for the Bungabar. A lease was executed in respect of the area on 23 December 2005 between the Second Respondent and the Applicant for a term of 3 years commencing on 12 December 2005, at a monthly rental for the first year of $866.67, of $910.00 for the second year and $955.50 for the third year, and with a specified use of the premises as “a kitchen and food preparation area”; a Deed of Guarantee in respect of the Applicant’s obligations under the lease was entered into on the same date by Messrs Adam Leibrandt, Tristan Lo and Basil Miranda, being directors of the Applicant. There is contention between the parties concerning some circumstances surrounding the above matters, including whether this lease also included other common property being the two hallways and the two toilets occupied with the shop. These contentions will be dealt with below.
CAR PARK STORAGE AREA
10 By the latter part of 2005, the car park area immediately behind the storage area which became the kitchen, was being used as a repository for material from the Bungabar such as empty beer kegs and also as the location of a freezer cabinet for the storage of bags of ice for use in the Bungabar. That section of the car park comprised part of Lot 5 in the Strata Plan and was owned by the Second Respondent. By a document labelled “Car Parking Licence Agreement”, expressed to be a Deed and bearing date 23 December 2005, the Second Respondent granted to the Applicant a licence to park two motor vehicles in the space for 24 hours of each and every day of each and every week during the term of the licence. The Deed recited the lease of the kitchen and the term of the licence was expressed with reference to that lease as follows:
“The Licence will take effect on the date of commencement of the term of the Lease and subject to the following will continue so long as the Licensee remains the lessee of the premises under the Lease.”
The Deed provided for an annual licence fee of $1.00 payable in advance. It also incorporated guarantees by Messrs Lo, Leibrandt and Miranda.
11 In or about December 2005 the Applicant had the car park storage area enclosed by the erection from ground level to the underside of the slab above, on three sides, of walls constructed of light pressed metal sheets between two columns at the northern end of the area, and on the eastern and western sides between the columns and the back wall of the kitchen, with a door constructed within the western wall. The back wall of the kitchen formed the southern wall of this enclosure. The area was, and continues to be, used, as well as for other storage for the Bungabar, for a pre-mix supply and cooling facility of soft drink cylinders with pipes running out through the eastern wall, along the ground on the common property outside and beside the eastern wall, joining with the pipes from the kitchen, through the back wall of the shop and thence into the bar within the Bungabar.
12 There is contention between the parties concerning some circumstances surrounding the above matters and these contentions will be dealt with below.
PRINCIPAL EVENTS 2006-2008
13 On 16 February 2006 Joseph Roussos, Solicitor, of Botany, wrote to the Applicant on behalf of the First Respondent:
- “Lease of storeroom at 77-79 Hall St, Bondi Beach
It has come to our attention that one of the glass panels below the roof in the storeroom has been removed.
We ask that you please take steps to ensure that the panel is replaced immediately. A failure to do so will constitute a breach of the above-mentioned Lease (‘Lease’), which states that the tenant must immediately ‘make good’ any damage to the Premises caused by the tenant: see clause 7.4(b).
Furthermore, can you please ensure that all rubbish in the common areas adjacent to the storeroom, including the areas beside the two car spaces rented to Global Hospitality Acquisitions Pty Ltd, is cleared without delay. This includes beer kegs, empty bottles and all other garbage situated there.
Finally, we have received complaints from residents that the staff working at Bungabar Australia have been deliberately leaving open the front and back doors to the building. This compromises the security of residents, and also allows strangers to enter the building unimpeded.
We ask that you please inform your staff not to place doorstoppers, such as phone books, milk-crates and bricks at the foot of either the front or back doors.”
The storeroom referred to had then become the kitchen. The matters complained of were apparently resolved between the parties without further written communication involving them. The only written material, apart from, I imagine, documentation concerning rent payments, exchanged between the parties until 19 August 2008, appears to have been a Development Application dated 1 June 2007 by the Applicant to the Council for the installation of a retractable awning on the shop, this Application having been consented to under common seal by the Second Respondent.
14 In March or April 2008 there was a meeting at the offices of Raine & Horne, Real Estate Agents of Bondi Beach, involving Messrs Lo and Zamir on behalf of the Applicant, Mr Roussos, Messrs Fabrizio Perilli and Scott Gregg of Toga and Mr Andrew Kemeny of Raine & Horne. There is some dispute in the evidence about that meeting but it is clear that there were then raised Toga’s proposed development of the site comprising the Hakoah Club, the buildings between the Hakoah Club and the property and the property itself; an offer by Toga of assistance to the Applicant to relocate the Bungabar to other premises; an expression of intention of the part of Toga and Mr Roussos that the Applicant’s occupation of the kitchen and the car park storage area would not continue beyond December 2008; and a suggestion on behalf of the Applicant that Toga should pay money to the Applicant for the Applicant to vacate the premises. Matters in dispute on the evidence in relation to this meeting involve, I have concluded, only points of detail and emphasis and I do not see that it is relevant to these proceedings to resolve those.
15 There were no further communications between the parties concerning the matters discussed at that meeting. A.L. Dart & Co, Solicitors, of Rose Bay, then forwarded to the Applicant on 19 August 2008 notices from the First and Second Respondents. The notice from the First Respondent required the removal of allegedly unauthorised works on the common property:
“It has come to the attention of the owners corporation that you have carried out the following unauthorised works on the common property in the areas shown:
1) removal of part of the common wall (for access to the kitchen);
2) storage of equipment and other goods in common property;
3) works adjacent to the toilets preventing unrestricted use of the toilets by other occupiers of the building;
4) removal of boundary separating shop from corridor common areas;
5) installation of pipes and services to common property;
6) installation of signage and lighting to the Hall Street façade of the common property.”
The notice from the Second Respondent was drawn as a Notice of Default alleging breaches of the car parking licence.
“The Car Parking Area is being used for a purpose other than parking cars, in breach of clause 2.1 of the Licence, in the following ways:
- a cool room has been installed on the Car Parking Area;
- the Car Parking Area is not being used for the purpose of parking cars;
- the Car Parking Area is being used for the storage of alcohol;”
16 Those notices were responded to by the Applicant’s solicitors and correspondence between the solicitors continued until the time these proceedings were instituted. That correspondence included contentions by the Applicant’s solicitors that both the kitchen and car park storage area were occupied by the Applicant under retail shop leases.
PROCEEDINGS
17 By Application for Original Decision, filed on 18 December 2008 and stated to be a combined retail tenancy claim and unconscionable conduct claim, the Applicant seeks the following orders:
1) “As against the 1st Respondent
An order declaring that the lease between the 1st Respondent and the Applicant dated 12 December 2005 (‘the Kitchen Area Lease’), in respect of the part of the common property in Strata Plan 31746 situated at 77-79 Hall Street Bondi (‘the Kitchen Premises’) is a retail shop lease within the meaning of the Retail Leases Act 1994 (‘the Act’).
2) An order declaring that the term of the Kitchen Area Lease is, by operation of s 16 of the Act, extended so as to terminate on 11 December 2010.
3) An order restraining the 1st Respondent, by its servants agents and employees, from re-entering or taking possession of the Kitchen Premises, or otherwise interfering with the Applicant’s lawful possession of such premises, other than in accordance with the Kitchen Area Lease as extended by order 2.
4) An order restraining the 1st Respondent, by its servants, agents or employees, for the duration of the Kitchen Area Lease, from taking any action with respect to the reinstatement or removal of the works alleged in the notice from the 1st Respondent to the Applicant dated 19 August 2008.
As against the 2nd Respondent
5) An order declaring that the agreement between, inter alia, the 2nd Respondent and the Applicant, dated 23 December 2005 and headed ‘Car Parking Licence Agreement’ (‘the Licence Agreement’) in respect of part of Lot 5 in Strata Plan 31746 situated at 77-79 Hall Street Bondi (‘the Licence Area’) is a retail shop lease within the meaning of the Act.
6) An order declaring that the 2nd Respondent is estopped from:
(a) denying that the permitted use of the Licence Area includes storage for the purposes of the Bungabar Restaurant; and
(b) asserting any right, for the duration of the Licence Agreement, to remove, or demand the removal of, the cool room.
7) An order restraining the 2nd Respondent, by its servants, agents or employees, for the duration of the Kitchen Area Lease, from taking any action with respect to the removal of the cool room from the Licence Area.
8) An order declaring that the Licence Agreement is, by operation of s 16 of the Retail Leases Act 1994, extended so as to terminate on 22 December 2010.
9)Alternatively, an order declaring that, on its proper construction and in the events that have occurred, the term of the licence agreement is coextensive with the Kitchen Area Lease, subject only to the intermediate occurrence of an event provided for in clause 3.2(b) or 3.2(c) of the Licence Agreement.
10) An order restraining the 2nd Respondent, by its servants agents and employees, from re-entering or taking possession of the Licence Area, or otherwise interfering with the Applicant’s lawful possession of such premises, other than in accordance with the Licence Agreement as varied and extended as set out in orders 5, 6 and 7.”
18 The Applicant subscribed grounds and particulars including assertions that the kitchen is “used wholly or predominantly for the carrying on of a business of type prescribed for the purposes of the definition of a retail shop, namely, a restaurant/café”; that the car park storage area is similarly used; and further in relation to the car park storage area that:
“(a) Prior to entry into the Licence Agreement the applicant purchased the business known as the Bungabar Restaurant.
(b) At the time of such purchase the Kitchen Area was being used for storage.
(c) subsequent to such purchase of the said restaurant the Applicant by its director Tristan Lo sought from the 1st and 2nd Respondents, by their servant agent or officer Reno Rousso, permission to use the Kitchen Area for a kitchen and further advised that the Applicant would require additional storage space for its restaurant.
(d) In response the said Reno Rousso, advised the said Tristan Lo that
- The Kitchen Area could be used for a kitchen area, and that he would have a lease prepared for this purpose; and
- The Licence Area could be used as storage space and a separate agreement would be put in place for this purpose.
- The Applicant could carry out alterations to the Kitchen Area and the Licence Area provided that engineering/construction reports were obtained and, further, that the said Reno Rousso must be involved in inspecting such works.
(e) The Applicant entered into the Kitchen Area Lease and the Licence Agreement in reliance on the said representations.
(f) Subsequently, with the consent, knowledge and acquiescence of the 2nd Respondent the Applicant did proceed with the installation of a cool room in the Licence Area and did proceed to use the Licence Area for storage for the purpose of the restaurant.
(g) It would in the circumstances be unconscionable for the 2nd Respondent to be allowed to deny that the permitted use of the Licence Area includes storage for the purpose of the restaurant, and the 2nd Respondent is estopped from doing so.
(h) Further, it would in the circumstances be unconscionable for the 2nd Respondent to be allowed to assert any right, for the duration of the Licence Agreement, to remove, or demand the removal of, the cool room, and the 2nd Respondent is estopped from doing so.”
19 The Applicant also filed at the same time an Application for Urgent Interim Order. On 23 December 2008 this Tribunal made interim orders:
- “An order pending determination of these proceedings or further Order of the Tribunal, restraining the First Respondent from taking any action in respect of the works referred to in its notice to the Applicant dated 19 August 2008 until 7 February 2009 or further order”
- An order, pending determination of these proceedings or further order of the Tribunal, to restrain the Second Respondent, by its servants, agents and employees, from taking any action in respect of the works referred to in its notice to the Applicant dated 19 August 2008 until 7 February 2009 or further order.”
20 The Application was heard on 6 February 2009 and 25 February 2009 and the above interim orders have been extended “until further order”.
21 No relief directly concerning the lease of the Bungabar is sought by the Applicant in these proceedings.
22 In the Reply, the Respondents, apart from responding to the Application, seek relief which I set out with some rephrasing as follows:
“1. A declaration that the Kitchen Area Lease is not a retail shop lease,
2. In the alternative to par.1:
(a) a declaration that the premises the subject of the Kitchen Area Lease are limited to the kitchen;
(b) an order that the Applicant remove the equipment and other goods stored in the hallway adjacent to the kitchen;
(c) an order that the Applicant remove the beer (and soft drink) pipes and restore the wall of the kitchen through which the beer pipes pass; and
(d) an order that the Applicant remove the “Bungabar” sign.
3. A declaration that the Licence Agreement is not a retail shop lease.
4. In the alternative to par.3:
(a) an order that the Applicant remove the cool room from the car park storage area;
(b) an order that the Applicant not use the car park storage area other than for the purpose of parking two cars; and
(c) an order that the Applicant not store equipment, other goods and rubbish in the car parking space adjacent to the car park storage area on the north.”
23 The evidence discloses that there is an agreement between Toga and the Respondents to the effect that Toga is responsible for the Respondents’ costs of these proceedings. Toga’s solicitors are acting for the Respondents in the proceedings and they assisted A.L. Dart & Co in relation to the notices of 19 August 2008 and the ensuing correspondence.
24 On 23 December 2008, an order was also made that “the Tribunal dispenses with the requirement first to attempt mediation before the Registrar Retail Tenancy Disputes”. During the hearing on 6 February 2009, it was clear that the matter would not conclude that day (apart from other matters there was to be a view) and the Tribunal recommended to the parties that they (and Toga) give serious consideration to having the matter mediated privately during the adjournment. On resumption of the hearing on 25 February 2009 the parties reported to the Tribunal to the effect that the recommendation had been followed up but that the proceedings would have to go to a decision by the Tribunal.
25 On account of the unconscionable conduct aspect of the Application and in accordance with clause 4 of Division 3 of Part 3B of Schedule 2 to the Administrative Decisions Tribunal Act 1997 (“the ADT Act”), I was assisted during the hearing by Messrs G. Griffiths and T. Tyler, non-judicial members. The assistance given by them has been significant and I am most grateful to have had it, but the decisions herein, while made in consultation with them, are mine alone.
OTHER FACTUAL MATTERS
26 There are numerous matters of fact to be now dealt with. As to some of those, the material before the Tribunal contains conflicts, particularly between the evidence of Mr Roussos and other evidence, including that from Messrs Zamir and Lo. Some issues of credit are involved.
27 Mr Roussos had a significant measure of control over both the Second Respondent and the First Respondent. As previously noted (par. 4), Mr Roussos has a 50% ownership of the Second Respondent and there are four directors, Mr Roussos himself, his wife, his brother and his brother’s wife. In cross-examination he accepted that “But for all intents and purposes (he is) the person who has, who carries out the dealings on behalf of that company in relation to this property” and “and that includes providing instructions to solicitors for example” As to the First Respondent, he was, also as noted previously, the Chairman and the Secretary and he was questioned in cross-examination about whether he had asked the owners of the shop whether they consented to the construction of the doorway for the new kitchen area and parts of his responses were:
“They didn’t have to because they asked because I was chairman of the body corp.”
“…I told them that we were going to open a door there and they were happy with it whatever I, I decided they were happy…even if they weren’t happy I had the right to do it if I decided, I had 80% of the rights in the building.”
28 Mr Roussos visited the property from time to time and it is appropriate to refer to his evidence concerning such visits. In chief, Mr Roussos said in an affidavit:
“Since 2004, I have visited the Hall Street Property on an ad hoc basis as required, for example, when I was required to deal with an issue raised by a tenant of one of the Lots owned by the Second Respondent, or when major repairs and works were being performed on the property (such as the installation of the side fence and electric gate). During those visits I did not inspect all of the Hall Street Property.”
He was cross-examined on the issue:
“Q. Can I ask you some questions, Mr Roussos, in relation to how frequently you visit the property?
A. I don’t have any standard time, I could visit once a year, I could visit ten times a year.
Q. Well, let’s just take the period up to 2005. How regularly do you say you visited the property?
A. From 2005 till?
Q. No, up until 2005. Let’s take the period 2002 to 2005.
A. I visited maybe twenty times, could be five times.
Q. What is your recollection, Mr Roussos, how often do you do it?
A. I can’t remember how many, exactly how many times.
Q. Well, why did you go to the property during that period?
A. If there was a problem, a leak or whatever the tenants was complaining about something or a repairman was coming to fix something.
Q. You were the person that had to let them in or supervise the works?
A. No, not let them in just the agent used to come and show me exactly what was the problem.
Q. Given that you owned prior to 2007 eleven of the fourteen lots you took a keen interest did you not in what was going on at the property, would you agree with that?
A. Yes, sure.
Q. For that purpose you visited the property, correct?
A. Yes.
Q. From time to time, what was going on, correct?
A. What was going on, if there was complaint, yes.
Q. You went there did you not to have a look around yourself?
A. Sure.
Q. And when you went there you had a look around didn’t you?
A. Yeah.
Q. And when you went there you would park at the rear of the property, correct?
A. Yes, the rear on the right-hand side, yeah.”
Mr Roussos was there referring to a part of the common property, not a designated parking space, on the western side of the property, being an area outside the kitchen and adjacent hallway. The cross-examination continued:
“Q. Okay. Did you ever park back in the car parking spaces which are closer to O’Brien Street?
A. Maybe, could be, but usually was there, I used to park always there.
Q. Okay. And when you parked there you’d get out and have a look around, correct?
A. Have a look around or go upstairs or whatever.”
It is also pertinent to note that in cross-examination Mr Roussos said that he owned nearly twenty properties and he accepted that he was an experienced landlord.
29 Mr Zamir gave evidence in an affidavit that:
- “Further, since July 2005, I say that Mr Roussos has regularly attended the Hall Street property. I estimate that, on average, to my observation Mr Roussos attended the property as frequently as twice a week and as infrequently as once a fortnight. On the occasions that I observed Mr Roussos attending the Hall Street property, he would park his car in one of the car spaces at the rear of the Hall Street property and then proceed to walk past the enclosed storage to the area of common property immediately behind Lot 14, which enables access to the units above.”
30 On the whole of the material before the Tribunal, I have formed the view that Mr Roussos was less than forthcoming in his above evidence. I am satisfied on the balance of probabilities that at all relevant times Mr Roussos visited the property on a regular, roughly weekly, basis and that on each of those visits regardless of where precisely he may have parked his car, he was reasonably alert to the overall state of the property and happenings on it.
31 One of the other matters where there is conflict in the evidence relates to the prior use of the kitchen. There is a paragraph in an affidavit by Mr Roussos dealing with a discussion he had with Mr Zamir in late 2005 in the following terms:
“Mr Zamir stated that the Applicant was looking to expand the ‘Bungabar Café’ business and required more space in the Hall Street Property. Mr Zamir asked whether I could provide the Applicant with such a space. I agreed with Mr Zamir that the Applicant could use an area of common property (namely the area marked ‘G’ on the Ground Floor Plan) in the Hall Street Property (‘Kitchen Area’) as a kitchen. Prior to this time:
a. the Applicant, like the previous operators of the Bungabar Café business, had used part of Lot 14 to prepare food; and
b. the Kitchen Area was being used as a storage area exclusively by the First Respondent and was not in any way being used by the Applicant.”
In oral evidence in chief Mr Roussos, with reference to oral evidence which had been given by Mr Zamir, then disclosed that from late 2002 to 2005 Mr Zamir had paid to the Second Respondent $100.00 per week for that storage area. A bond of $400 was paid on 24 December 2002 in respect of the arrangement. Mr Roussos accepted in cross-examination that the statement quoted above in his affidavit “…the kitchen area was being used as a storage area exclusively by the First Respondent…” is not correct. Also in oral evidence in chief Mr Roussos said that Mr Zamir was using the area only ever as a storeroom for fridges, beds, mattresses and suchlike for use in several units in the property which Mr Zamir was leasing and sub-letting to backpackers, and that it was not used for the purposes of the Bungabar restaurant. In cross-examination Mr Roussos was reminded that Mr Zamir had, in Mr Roussos’ presence at the hearing, given evidence to the effect that the space was being used as a storage area for Bungabar. Mr Roussos said that he disagreed with that evidence. He was shown some video footage of the Bungabar which included scenes of the area which became the kitchen which he agreed showed soft drink, mineral water bottles and a refrigerator and constituted storage for the purposes of the Bungabar. Mr Roussos asserted that the video could not have been taken between 2002 and 2005 and must have been taken after 2005. Unchallenged evidence was later given by Mr Zamir that the video was filmed on 10 March 2003, being his 29th birthday. This evidence by Mr Roussos insisting that this area had not, prior to December 2005, been used for storage for the purposes of the Bungabar, was also incorrect. Incorrect evidence by Mr Roussos of the order of these matters detrimentally affects his credit.
32 In relation to the setting up of the kitchen, it is not in dispute that Mr Roussos undertook a role in relation to the construction of the doorway into it, as dealt with in par. 9 above. I note that in his affidavit the doorway is inaccurately and inappropriately referred to as a “service hatch” and Mr Roussos accepted in cross-examination that it was a “door opening”. Obviously, he was also aware that the former storage room was being turned into a kitchen. There is dispute, however, as to what more he knew about the construction and functioning of the kitchen. Messrs Zamir and Lo contended in their evidence to the effect that Mr Roussos inspected the work that was going on and for example, Mr Lo said in an affidavit:
- “The works were carried out between November and December 2005. I was present at the restaurant most days when the work was being carried out. The restaurant was shut down for a few weeks during this work. I observed Mr Roussos at the premises frequently during this period, and he would look at what we were doing and talk to us about what was going on. I observed him in the kitchen area while the work in that area was being carried out. I also observed him in the car park area, before and after it was enclosed. I also observed him at the general car park area at the back of the building where the post-mix and beer pipes were located. At no time did he ever suggest to me or in my presence that any aspect of the works which were being done or had been carried out were unauthorised.
…Further, I have on a number of occasions since the renovations seen him in the general car park area at the back of the building. He has raised with me a few times his concerns about rubbish left in that area by homeless people and other tenants and he would ask that we clean it up. Our business is the only occupant of the ground floor part of the building. The area in which rubbish tended to be placed was the area where the post-mix and beer pipes ran. Mr Roussos never suggested that there was any problem with those pipes being there.”
On the other hand, Mr Roussos said in cross-examination with reference to the kitchen that he “didn’t know what was in it” and when asked whether there was a cool room there, he said “I wouldn’t have a clue”. Again, I formed the view that Mr Roussos was less than forthcoming in this evidence. On the whole of the evidence, my conclusion on the balance of the probabilities, is that contrary to his assertions, Mr Roussos had at least a reasonable appreciation of how the kitchen was fitted out and was functioning.
33 A further conclusion I have come to is that, contrary to his assertions, Mr Roussos’ appreciation of the works extended to the existence of the beer delivery pipes running out of the kitchen into the back of the shop, and also to the soft drink delivery pipes from the car park storage area. The pipes are quite obvious: they are black in colour and thick in size, being several centimetres, or more, in diameter; Mr Zamir gave evidence of showing Mr Roussos, and discussing with him, what fittings were going into the kitchen including the cool room with beer storage and pipes running outside to the bar, and also of Mr Roussos inspecting, and approving, the works. They run for up to several metres besides the building wall along the common property. In his affidavit, Mr Roussos said that:
“I did not see the pipe works before 2007, although they may have been installed some time before that, as they were installed in a part of the common property that I would not generally see on my visits to the Hall Street property.”
I have detailed some of the contrary evidence from Messrs Zamir and Lo in this paragraph and the preceding paragraph.
34 There is, what I find to be, reasonably clear evidence from Messrs Zamir and Lo to the effect that the work on the kitchen and the car park storage area had been carried out by about the end of December 2005. There is some corroborative evidence of that timing to be found in the engineers’ certification on 1 December 2005 of the kitchen doorway, referred to in par. 9 above.
35 The letter from Joseph Roussos, Solicitor, of Botany, set out in par. 13 above is, in my opinion, significant. Clearly, in my opinion, it was written with reference to the work which had been carried out in the kitchen and car park storage area and to a state of affairs then existing in and around those places. Some evidence as to that letter by Mr Roussos in cross-examination, I assess, is important (I interpolate that the alphabetical references to areas on the ground floor of the property came to be used in evidence and submissions – area A is the Bungabar, area B is the hallway from which the doorway into the kitchen was constructed, area C is the hallway centrally located with handwashing facilities at its northern end, area D and E are the toilets occupied with the Bungabar, area F is the third and unused toilet with a door facing east and not occupied with the Bungabar, area G is the kitchen and area H is the car park storage area):
“Q. I just want to show you now, Mr Roussos, I’m going to show you now, Mr Roussos, a copy of a letter dated 16 February 2006 and for the record this is annexure I to Mr Lo’s affidavit of 18 December 2008 which I think is exhibit 3A. Can you have a look at that please?
A. Yeah.
Q. Did you provide instructions to send that?
A. Yes, Yes.
Q. Can I direct your attention please to the paragraph that begins, ‘furthermore’, which is the fourth paragraph, can you see that?
A Yep.
Q. The area that you are referring to was, was it not the area if you look at exhibit 1A which is the plan the area you’re referring to there is the area to the right of G and H, do you see that?
A. The area I’m referring is outside B and G.
Q. I want to suggest to you that the area you’re referring to is on the other side. What do you say to that?
A. It could’ve been too.
Q. And indeed in order to have sent this letter you made an inspection of the property, correct?
A. No, the agent rang us up and complained that they had a broken glass and all the smoke of the kitchen when they used to use the deep fry used to go into their kitchen area and they couldn’t take it anymore.
Q. What about in relation to the rubbish, Mr Roussos?
A. And rubbish again, the agent rang me up and everyone is complaining in the building what a lot of rubbish left at night when they come, it’s really dangerous when they pass and park there.
Q. But you went and had a look for yourself didn’t you, Mr Roussos?
A. Maybe, yeah.
Q. You did didn’t you?
A. Yeah.
Q. And what you saw, you’ve had a good look around to see what was going on didn’t you?
A. Yeah.
Q. And what you observed was rubbish in the areas G and H to the right of that area, didn’t you?
A. No, no, the rubbish was outside B and G.
Q. I think you agreed with me earlier, Mr Roussos, that it could’ve been on the other side that you were referring to, couldn’t it?
A. It could’ve been on the two side like mainly was there because everyone enter the building from B and G, it doesn’t enter the building from F, E or G.
Q. But you agree with me do you not that there is no complaint in this letter about the pipe works, correct?
A. That’s right.
Q. And I want to suggest to you that the pipe works had been done by this time?
A. That’s right.
Q. And you didn’t complain because you had no problem with it?
A. I didn’t complain, no.
Q. Because you had no problem with it did you?
A. I didn’t complain like I said before I knew the lease will expire soon and everything will get out.”
This letter was, prior to the notices of 19 August 2008, the only written complaint by the Respondents concerning matters relating to the occupancy by the Applicant of the kitchen and car park storage space. When this letter was written, the work in and around those areas, including the pipes, had been completed. I confirm that I am satisfied on the material before the Tribunal, on the balance of probabilities, that what had been seen by Mr Roussos of that work included the pipes. The letter complains neither about the enclosure of the car park storage area nor about the pipes nor indeed about any of the matters raised in the notices of 19 August 2008, that is, two and a half years later. I add that as to the car park storage area, Mr Roussos accepted in cross-examination that he was aware that the parking of cars was not going on inside the enclosure on the car park storage area, and that he did nothing about that until 19 August 2008. He sought to explain:
- “Yeah, because at one time I was happy the rubbish was at least inside and not outside hanging around”
and
- “I was aware it was used for storage but I didn’t care any more because the mess they used to leave around was really upsetting me.”
36 The circumstances preceding the Agreement in respect of the car park storage area warrant additional consideration. Messrs Lo and Zamir gave evidence of discussions with Mr Roussos to the effect that the area was to be used for the purpose of storage for the Bungabar. Mr Roussos has disputed that and said that the discussions related to overcoming a problem situation wherein Bungabar employees were leaving vehicles in other persons’ parking spaces. There is also evidence from Mr Zamir that the latter situation had previously been dealt with by Mr Zamir taking a couple of licences over other parking spaces on the property. While in cross-examination Mr Roussos did not appear to me to dispute that such earlier licences had been granted, he maintained that the discussions were about the car park storage area being used for car parking. On instructions from Mr Roussos, A.L. Dart & Co., Solicitors, forwarded to the Applicant a letter dated 14 December 2005 relating to occupancy of what became the car park storage area:
- “PREMISES: COMMON PROPERTY STORE ROOM AT
77-79 HALL STREET, BONDI
- “Reference is made to our telephone conversation on 13 December 2005 and we are instructed that Rousso Nominees Pty Ltd is prepared to grant you a Licence Agreement over car space 5 which adjoins the storeroom to be leased by you from the Owners Corporation SP31748. Please note, however, that you will not be granted exclusive use of the toilet as this is situated on the common property and must be available for the use of all residents.
It is understood that there will be no consideration payable in respect of the car space but there will be additional legal costs of $132.00 inclusive of GST for preparation of the Licence Agreement.
Please confirm in writing that the above is acceptable and that you will accept responsibility for payment of our additional costs and the Licence Agreement will be prepared and submitted to you immediately.”
The letter does not explicitly refer to use for cars and to some extent is suggestive rather of a use for storage. The reference in the letter to the toilet is to the third, and outside opening, toilet and in cross-examination, evidence was given by Mr Roussos concerning that reference, which to my mind has significance:
“Q. Can you also tell me why you needed to put that sentence in this letter?
A. Because he wanted to have the toilet as a storeroom too.
Q. So, but this letter is dealing with is it not a licence over a car space area?
A. Car spaces and he wanted the toilet too and we said ‘No, just the car space.”
The link between the respective terms of the Applicant’s occupancies of the kitchen (a former storage area) and the car park storage area also raises some suggestion of a storage, not parking, use of the latter area.
37 When this evidence is considered in conjunction with the evidence already referred to including that concerning the enclosure of the area and its use thereafter, without complaint, as a storage area for Bungabar, it is clear to my mind that the arrangement made concerning the car park storage area was for its use as a storage area and not as specified in the car parking licence agreement on 23 December 2005. The Applicant, through its directors, and the Second Respondent, through Mr Roussos and Mr Sebastian Roussos, apparently Mr Roussos’ brother, executed the document produced by A.L. Dart & Co. without, it seems, giving any attention to that situation.
38 As previously explained in this Decision (par. 2), areas of common property, namely, two hallways and two toilets (“the extra occupied areas”) have been occupied as part of the shop since at least 2002, and probably for some years before that. The respective states of knowledge of relevant parties as to the status of the extra occupied areas is not particularly clear on some of the evidence as it unfolded in the hearing and indeed, some of that evidence is perplexing. At one extremity of that evidence is an account by Mr Zamir of discussions by him with Mr Goldstein when Mr Zamir acquired the then shop business in 2002 and later with Mr Roussos to the effect that the extra occupied areas were parts of the common property; that they agreed to, and he subsequently obtained, a “tenancy agreement” in respect of them; and that he did not keep a copy of that document which was held by a former business partner, who is not now in Australia. At another extremity is evidence from Mr Roussos to the effect that he had always thought that the extra occupied areas were part of the shop until, it seems, he had dealings in about early 2008 with Toga in relation to the property.
There is as well conflict as to the extent of the demised property in the kitchen lease which refers to the area leased as:
“PART of the common property being the shaded area as shown in copy of Strata Plan 31746 annexed hereto and marked “A” situated at 77-79 Hall Street, Bondi.”
The First Respondent’s copy of the Lease has an annexure “A” (being a copy of Strata Plan 31748 – I do not see that the mistake in the number of the Strata Plan in the Lease is of any significance and I note a similar discrepancy in the orders sought by the Applicant set out in par. 17 above) whereon the kitchen area is hatched and the words “LEASED AREA” and an arrow pointing thence to the hatching appear, whereas the Applicant’s copy of the lease also has hatching covering the two hallways, the two toilets and also the third toilet, and additional words and figures “2 car space” and “Area 5” and two other arrows. The two copies of the lease, evidently with those differences, were both signed on 23 December 2005 on behalf of the Applicant by the three directors and on behalf the First Respondent by Mr Roussos and Mr Sebastian Roussos, without, it seems, any of those persons giving any attention to the discrepancy between the two annexures. The evidence of Messrs Lo and Zamir is to the effect that the additional endorsements on the annexure on the Applicant’s copy of the lease were made by Mr Zamir and were put there during discussions between them to reflect the agreement for the lease, as Mr Zamir understood it to have been intended. There is reference to the third toilet being common property in the letter A.L. Dart & Co. wrote on 14 December 2005 evidently on Mr Roussos’ instructions, (see par. 36 above) and this suggests knowledge by Mr Roussos, at that time, of the common property status of at least the toilets. Considering all the evidence, however, and without reciting further details of it, I am not persuaded on the balance of probabilities that the lease document for the kitchen was agreed by the First Respondent to include the hatching of the extra occupied areas.
As to the other evidence set out at the start of this paragraph, it is not in contest that the extra occupied areas had at all relevant times been, and continued to be, occupied with the Bungabar and the only conclusion that can be added is that Mr Roussos has always been aware of that situation.
39 The “Bungabar” sign on the front of the property was another of the matters complained of in the First Respondent’s notice of 19 August 2008. Mr Roussos’ evidence was that he did not become aware of the sign until 2008. I have concluded that this evidence by Mr Roussos is unacceptable. Not only was the sign, by its nature, obvious, it had been there for about five years prior to 2008. Further, in June 2007, Mr Roussos on behalf of the First Respondent executed a consent to the Development Applicant for the installation of a retractable awning on the front of the shop and I would think it unlikely that Mr Roussos, at least then, did not turn his attention to the state of the façade of the property.
40 It should also be added that Mr Roussos gave evidence in cross-examination that the purpose of the notice of 19 August 2008 to the Applicant was “to try to get them out…of the kitchen and car park”.
41 My consideration of the material before the Tribunal, and I think I have sufficiently explained it above, has led me to the conclusions which I have expressed above and the principal of which I now collect:
(a) The extra occupied areas are, and have at all relevant times been, occupied as part of the Bungabar.
(b) Since about December 2005, the kitchen has been occupied as part of the Bungabar and operated as such, with facilities including a beer supply in a cool room within the kitchen, connected by pipes running outside along common property into the bar of the Bungabar.
(c) Since about December 2005, the car park storage area has been physically enclosed and occupied as a storage area for the Bungabar, with facilities including a pre-mix soft drink supply connected by pipes running outside along common property into the bar of the Bungabar.
(d) The “Bungabar” sign on the façade of the Bungabar has been present since about 2003.
(e) All the above situations have subsisted at all relevant times with the awareness of Mr Roussos and, through him, of the First and Second Respondents.
(f) All the above situations subsisted with the approval of Mr Roussos and, through him, of the First and Second Respondents, until the notices of 19 August 2008.
LEGAL CONSIDERATION
42 Relevant provisions of the Retail Leases Act 1994 (“the Act”) are:
- “ Section 3 Definitions
…
- retail shop means premises that:
(a) are used, or proposed to be used, wholly or predominantly for the carrying on of one or more of the businesses prescribed for the purposes of this paragraph (whether or not in a retail shopping centre), or
(b) are used, or proposed to be used, for the carrying on of any business (whether or not a business prescribed for the purposes of paragraph (a) in a retail shopping centre…
- retail shop lease or lease means any agreement under which a person grants or agrees to grant to another person for value a right of occupation of premises for the purpose of the use of the premises as a retail shop:
(a) whether or not the right is a right of exclusive occupation, and
(b) whether the agreement is express or implied, and
(c) whether the agreement is oral or in writing, or partly oral and partly in writing…”
- “ Section 16 - Minimum 5 year term
- (1) The term for which a retail shop lease is entered into, together with any further term or terms provide for by any agreement or option for the acquisition by the lessee of a further term as an extension or renewal of the lease, must not be less than 5 years. An agreement or option is not taken into account if it was entered into or conferred after the lease was entered into.
- (2) If a lease is entered into in contravention of this section, the validity of the lease is not thereby affected but the term of the lease is extended by such period as may be necessary to prevent the lease contravening this section…
Schedule 1 in the Act now includes in its list of Retail Shop businesses “Restaurants, cafeterias, coffee lounges, food courts and other eating places”.
43 Two decisions feature in the submissions made in those proceedings. The first is Manly Council v Malouf [2004] 61 NSWLR 394. The Court of Appeal there held in respect of a licence granted by deed by the Council to a restauranter to use public space adjoining his restaurant for the purposes of his restaurant business, that the word “premises” used within the definition of “retail shop” and “retail shop lease” in the Act means a building or similar structure with any associated land and does not include vacant or bare land. Accordingly, the deed, in granting the licence to use vacant land without more was not a “retail shop lease” and the Administrative Decisions Tribunal had no jurisdiction under the Act. At first instance, the Tribunal had ruled that the deed was such a lease, an Appeal Panel reversed that ruling and the Supreme Court at first instance reinstated it. The ruling was ultimately lost in the Court of Appeal.
44 In the course of his decision in Moweno Pty Ltd v Stratis Promotions Pty Ltd [2002] NSWSC 1151, Barrett J at [7] formulated an amalgamation of relevant words in the definitions in the Act of “retail shop” and “retail shop lease” and then proffered a paraphrase of that amalgamation:
- “any agreement under which a person grants or agrees to grant to another person for value a right of occupation of premises for the purpose of the use of the premises wholly or predominantly for the carrying on of one or more of the businesses specified in Schedule 1.”
45 Barrett J. referred particularly to Thompson v Easterbrook (1951) 83 CLR 467. He said at [8] and [9] after presenting those formulations:
“The focus is thus upon two things: the content of the right of occupation granted or agreed to be granted ‘under’ the parties’ agreement; and the question whether the occupation the subject of the right is ‘for the purpose of’ the use of the premises in the way described.
This raises the question of how one is to determine the purpose (as regards use) for which one person grants to another a right of occupation. The matter must, of necessity, be approached by reference to the terms of the parties’ agreement. The relevant grant of a right of occupation is a grant sourced in the parties’ agreement. This is the force of the words ‘under which’. The purpose for which the right of occupation is granted must therefore be sought in the terms of the grant as embodied in the agreement…”
46 In the course of his consideration of Thompson v Easterbrook Barret J said at [11]:
- “The members of the High Court thus placed strong emphasis upon the parties’ agreement (if any) as to user as the determinant of the purpose for which premises are let, this being the prime indicator of their intention. It must follow that where the agreement expressly defines the scope of use, that statement will be conclusive unless there is compelling evidence that the parties did not mean what they said. It is, of course, possible that the parties’ original contemplation will change, in the sense that they adopt some new and different mutual intention. The members of the High Court dealt with that possibility as follows (at 482-483):
- ‘But, though the time of the letting is initially the time as at which the purposes must be ascertained, it is apparent that the parties may afterwards change the nature of the purposes. They may do this by a contract express or implied, or by conduct giving rise to an estoppel or a general waiver. Passages in the judgments in Wolfe v Hogan and Court v Robinson support the view that where premises are initially let for business purposes and the tenant converts them into a dwelling, then, even though the lease contained a prohibition against use as a dwelling, the premises should be held to be leased for the purposes of a dwelling if a contract varying the lease to permit of the new mode of user is to be inferred. But, though we think that the same conclusion should be reached if the conduct of the parties, while not justifying the inference of a contract, effects an estoppel or a waiver as to the use of the premises as a dwelling, we do not think that a change of the purposes for which the letting was originally made can be brought about by an alteration in the mode of actual user, if that alteration is unaccompanied by anything constituting a variation of the legal relations of the parties upon the subject of the purposes for which the premises are in lease. Denning L.J. in Wolfe v Hogan expressed the view that a house originally let for business purposes does not become let for dwelling purposes unless it can be inferred from the acceptance of rent that the landlord has affirmatively consented to the change of user. We would not adopt, as applying to the Act we have to consider, the qualification contained in this proposition. In our opinion even an affirmative consent by the landlord will not suffice unless it is given by a contract between the parties, express or implied, or the circumstances lead to the conclusion that the landlord has waived any provisions of the lease inconsistent with the change of user or is estopped from objecting to the change.”
47 The Plaintiff sought in Moweno Pty Ltd v Stratis Promotions Pty Ltd a declaration that a lease of premises for permitted use “as a Reception Lounge/Function Centre (licensed)” was not a retail shop lease within the meaning of the Act. Barrett J. found that there had been a subsequent variation of the lease to change the permitted use to one as “a licensed restaurant with ancillary Function and Reception facilities”, such as to bring it within the “Restaurant, cafeterias, coffee lounges and other eating places” item within “Retail shop business” in Schedule 1 of the Act. The Plaintiff was accordingly found not to be entitled to the declaration sought and the summons was dismissed with costs.
48 An appeal from that decision was dismissed – [2003] NSWCA 376 – but the appeal decision did not feature in submissions. There is a suggestion in that decision of a role of other provisions in the Act (e.g. the definitions of “lessor” and “lessee”) in requiring greater focus on the factual situation obtaining in respect of the use of the premises, particularly at the time of the lease, e.g. per Hodgson JA at [8] to [19], Ipp JA at [22] to [23] and Young CJ in Eq at [55] to [94]. Nevertheless, the Court of Appeal was of the opinion that Barrett J. was correct in how he dealt with the issue that had been prosecuted before him. At [51] Young CJ in Eq said:
“Of course there may be cases where the circumstances of the actual user of the premises with the acquiescence of the lessor may show that there has been some variation of the lease and that the purpose of the letting has changed. There may even be an oral arrangement which operates by way of estoppel, see Thompson v Easterbrook (supra) at pp 482-3.”
49 The Respondents’ submissions concerning Manly Council v Malouf centre on Handley JA’s judgment at [22] to [24]:
“Prior to the deed the respondent’s restaurant business was conducted within his freehold shop situated in the adjoining building. This, although not leased, was a retail shop as defined in the Act. The effect of the deed was to extend the area in which the respondent’s restaurant business was conducted. Accordingly, during the permitted trading hours of 7 am to midnight, the restaurant comprised the whole area including that licensed under the deed.
In my judgment this fact does not convert into a retail shop lease what, on its own, would not be such a lease. Such a lease is defined as an agreement to grant ‘a right of occupation of premises for the purpose of the use of the premises as a retail shop’ (my emphasis).
The fair meaning of this language is that the leased premises must themselves be a retail shop, but even if this were thought to be debatable the subject matter of the lease must be premises and in this Act that expression does not include vacant or bare land. In my judgment this deed was not a retail shop lease merely because the licensed area was to be used in conjunction with a retail shop as defined.”
The Respondents submit that “there is no authority for a proposition that a lease over an area to be used in conjunction with a retail lease is itself a retail lease”.
These positions in particular are contended for on behalf of the Respondents.
“The kitchen lease permits the cooking and preparation of food in the leased premises. It does not permit food or drinks to be served in that area. No sale of goods takes place in the premises the subject of the kitchen lease. The lease therefore does not permit use of the premises as a restaurant, coffee shop or bar. Having regard to the terms of the lease, therefore, it must be concluded that the kitchen lease is not a retail shop lease within the meaning of the Act.
The permitted use of the area subject to the licence is to ‘park two motor vehicles’. There is nothing unclear or uncertain about this permitted use. The Applicant contends that the permitted use has been varied by agreement, express or implied, to ‘storage’. For present purposes, nothing turns on this. The Applicant does not contend that the permitted use of the licensed area includes service of food or drinks. The licence is therefore not a retail shop lease.”
Issue is taken by the Respondents with the relevance to the present case of what Tobias JA discussed in that case at [67] to [69]:
“Before dealing with this issue, I should say something about the Council’s submission that even if the licensed areas are ‘premises’, they are not used wholly or predominantly for the carrying on of one of the businesses specified in Sch 1. It will be recollected that the submission was that the relevant business (restaurant) was carried on in the restaurant itself and that the licensed areas were merely ancillary to that business so that ‘the business’ was not relevantly carried on upon those areas.
In my opinion this submission should be rejected for the following reasons. Firstly, there can be no doubt that the licensed areas are predominantly used for the purpose of the restaurant. Although the deed provides in cl 15(q) that chairs, tables and other equipment are not to be placed within the licensed areas after 12 midnight and before 7 am during which time those items are to be removed therefrom, it is clearly contemplated that the period between those hours would be when the restaurant business was not open to the public for service. Clearly, in terms of the predominant use of the licensed areas, it is for the purpose of Mr Malouf’s business.
Secondly, I do not consider that the licensed areas are used merely for purposes ancillary to the restaurant. In its written submissions, the Council exemplified ancillary activities such as parking, the loading or unloading of delivery vehicles, storage of refuse bins and other forms of storage, as the type of the ancillary activities which were not intended by the legislature to be part of the premises, the subject of a retail shop. In my view, the uses of the licensed areas contemplated by the deed are of an entirely different nature to those so exemplified by the Council. The recital to the deed makes it clear that the licensed areas are to be used for the purpose of the establishment of outdoor eating areas for the restaurant and to which table service from the restaurant is to be extended. In these circumstances, the licensed areas are to be used for the purpose, and as an integral part, of the restaurant business. That business is, therefore, to be carried on, at least in part, upon the licensed areas and that, in my view, is sufficient satisfaction of sub-par (a) of the definition of ‘retail shop’.”
It is put on behalf of the Respondents that:
- “Nothing in the reasons of Tobias JA in Malouf provides any assistance to the Applicant’s contention that the areas subject to the kitchen lease and the car park licence are retail shops. The patrons of ‘Bungabar’ do not enter upon either of these areas. As such, it cannot be said that the business of ‘Bungabar’ is carried on, even in part, upon these areas. At most, those areas are ancillary to the business of the retail shop, which Tobias JA (at [69]) accepted was not sufficient.”
50 The business of the Bungabar is that of a restaurant selling food and beverages, including alcohol. The food is stored and prepared in the Bungabar kitchen and transferred thence into the Bungabar. Beer dispensed in the Bungabar is piped there from the cooling and holding facility within the kitchen. Soft drinks dispensed in the Bungabar are piped there from the pre-mix cooling and holding facility in the car park storage area and ice for use in drinks sold in the Bungabar is stored in a freezer within that area. Both the kitchen and the car park storage area would have other storage functions but there is nothing in the evidence to suggest that any such storage is of material other than that for, or from, the Bungabar. Those factual situations have subsisted since about the end of 2005.
51 I see problems with the acceptability of these submissions by the Respondents. It seems to me that Handley JA at [22] to [24] in Manly Council v Malouf may have been considering the definition of “retail shop lease” alone and not also that of “retail shop”. The two definitions when amalgamated and read together, as explained by Barrett J in Moweno Pty Ltd v Stratis Promotions Pty Ltd, require an occupation of the premises for “the purpose of the use of the premises wholly or predominantly for the carrying on of one or more of the businesses specified in Schedule 1”. Further, the respective uses of the kitchen and the car park storage areas are, to my mind, on the facts as I have sought to explain them, wholly for the purposes of the Bungabar. Those areas are not used for purposes ancillary to the restaurant but as integral parts of it, as discussed by Tobias JA and not merely used in conjunction with it, to repeat an expressed used by Handley JA. I cannot accept these submissions by the Respondents.
52 Counsel for the both sides seem to have made their submissions on the basis that there was some relevant difference of principle between what Handley JA and Tobias JA said in Manly Council v Malouf as quoted above. I am not persuaded that such was the case. The judges were discussing aspects of the Act and submissions made to the Court, in the context of the case then before the Court and there was no dissension between them as to the actual reason for the Court’s decision, as I have explained above. The concept of a relevantly insufficient use as described by Handley JA – “in conjunction with a retail shop” – should not, to my mind, exclude the concept of a relevantly sufficient use as described by Tobias JA – “as an integral part of the restaurant business”. The latter would involve a use with a stronger connection with the business than the former and as I have indicated above, my opinion is that the latter has at all relevant times obtained in the case of each of the kitchen and the car park storage area. I add that President Mason apparently perceived no difference of principle between the judgments of the two judges because he agreed with the reasons of both of them (at [1]).
53 A submission is made by the Respondents to the effect that the kitchen lease does not expressly confine the specified use of the premises as “a kitchen and food preparation area” to such a use for the purposes of the Bungabar and that, therefore, such use was not agreed to be for such purposes. The lease was entered into in a context where the then storage area was being set up for use as a kitchen for the Bungabar (see, for example, par. 31 above). The lease permitted such a use and such a use was clearly the mutual intention of the parties and has been implemented at all relevant times. I see no merit in this submission.
54 The car parking licence agreement in respect of the car park storage area raises additional considerations. To the extent that it is submitted by the Respondents to the effect that the specified use was not expressly limited to one for the purposes of the Bungabar, I do not accept that submission for reasons as referred to in the immediately preceding paragraph (and see also par. 36 above). To the extent that it is submitted by the Respondents that the car park storage area was vacant or bare land as referred to in Manly Council v Malouf, I do not accept that submission for the reasons that even before about December 2005 it was a paved area and roofed over by a slab above supported by columns and abutting the wall of the kitchen on the south, and from about December 2005 it has been also a fully enclosed area. The submission is also made that the licence, as expressed, was only to park two motor vehicles in the area. As I have said in par. 37 above it is clear to my mind that the arrangement made concerning the car park storage area was for its use as a storage area and not as specified in the car park licence agreement. In my opinion there is here, to use Barrett J’s words in Moweno (quoted in par. 46 above) “compelling evidence that the parties did not mean what they said”. Further, in conjunction with the acts detailed in par. 11 above, the factual situation obtaining was such that an estoppel would in any event exist against the Second Respondent as contended for by the Applicant in the particulars given in its Application and set out in par. 18 above.
55 The Respondents seek, among other relief, orders that the Applicant remove the beer and soft drink pipes and the “Bungabar” sign. In relation to the pipes, see in particular par. 33 above, and as to the sign, see in particular par. 39 above. As I have said in par. 41 above I have concluded that at all material times the First Respondent, through Mr Roussos, was aware of, and until 19 August 2008, approved, (among other situations) these installations. It follows, in my opinion, that there has arisen a licence from the First Respondent permitting the use by the Applicant of the common property for the purposes of the pipes and the sign, in the former case for the duration of the kitchen lease and the car parking licence agreement, and in the latter case for the duration of the Bungabar lease.
56 As I have noted (par. 21 above) the Applicant seeks in these proceedings no relief directly concerning the Bungabar lease. The First Respondent seeks, however, an order that the Applicant remove the equipment and other goods stored in the hallway adjacent to the kitchen. The First Respondent does not, it seems, seek any similar relief concerning the central hallway or the two toilets. The lessor in the Bungabar lease is not party to these proceedings. For the purposes of these proceedings I repeat my findings that at all relevant times the two hallways and two toilets, part of the common property, have been occupied as part of the Bungabar and that at all relevant times the First Respondent, through Mr Roussos, was aware of, and until 19 August 2008 approved, that situation.
57 I should add that consequent upon the kitchen lease, the two hallways have also been used for the purposes of access by Bungabar staff to the kitchen. It is submitted by the Applicant that the kitchen lease may thus give the Applicant additional rights over those areas under the principle of non-derogation from grant (and Browne v Flower [1911] 1 Ch 219 at 226 is cited) or the principle of implied grant (and Nelson v Walker (1910) 10 CLR 560 at 582-587 is cited). This submission has not been further developed before the Tribunal but I note also what is said in Duncan, Commercial Leases in Australia 5th edn at [8.70] and [8.100] concerning the non-derogation from grant principle and at [3.60] concerning the implied grant principle. Nevertheless, because of the situation of the First Respondent’s awareness and approval, through Mr Roussos, of the previous and continuing use of these areas, I am of the opinion that the Applicant, in any event, has, and has had at all relevant times, a licence from the First Respondent to use them for the purposes of the Bungabar. Therefore it is not necessary for me to come to a concluded view on any application of such principles to the kitchen lease. In these circumstances, the First Respondent has not made out a case in these proceedings for any such relief in respect of the hallway adjacent to the kitchen.
58 The Applicant alleges also unconscionable conduct against the Respondents under s62B of the Act. The unconscionable conduct alleged relates to the actions and threats of actions concerning the kitchen and the car park storage area from 19 August 2008 and continuing. In AG v World Best Holdings Ltd (2005) 63 NSWLR 557 at [121] Spigelman CJ said:
- “Unconscionability is a concept which requires a high level of moral obloquy. If it were to be applied as if it were equivalent to what was ‘fair’ or ‘just’, it could transform commercial relationships in a manner which the Minister expressly stated was not the intention of the legislation. The principle of ‘unconscionability’ would not be a doctrine of occasional application, when the circumstances are highly unethical, it would be transformed into the first and easiest port of call when any dispute about a retail lease arises.”
Section 62B(5) of the Act provides:
“A person is not to be taken for the purposes of this section to engage in unconscionable conduct in connection with a retail shop lease by reason only that the first-mentioned person institutes legal proceedings in relation to that lease or refers to arbitration a dispute or claim in relation to that lease.”
The actions which the Respondents have taken and threatened since 19 August 2008 in relation to the kitchen and the car park storage area clearly have been taken on legal advice and in an endeavour to enforce perceived legal rights. While those actions were not, in my opinion, well founded, they fall short of unconscionable conduct under s62B, having regarded to the considerations which I have quoted above.
CONCLUSIONS
59 In result, it seems to me that the Applicant is entitled to orders as, or to the effect, claimed against the First Respondent and quoted in par. 17 above, in pars 1, 2, 3 and 4 and is entitled to orders as, or to the effect, claimed against the Second Respondent and quoted in par. 17 above, in pars 5, 6, 9 and 10 of the Application for Original Decision. It also seems to me that the First Respondent is entitled to relief in terms of or to the effect of, par. 2(a) set out in par. 22 above.
ORDERS
60 I direct the parties, within 10 days after the date of publication of these Reasons, to bring in, by filing with the Registry and serving, Short Minutes of Orders to give effect to these conclusions and these reasons. I further direct that those Short Minutes will be agreed, or settled by myself, and orders made accordingly, at a directions hearing before me to be appointed by the Registry shortly thereafter.
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