Gold Coast Seafood and Steak Pty Ltd v F.H.G.D Pty Ltd - [2022] QCAT 390

QUEENSLAND CIVIL AND
ADMINISTRATIVE TRIBUNAL

CITATION:

Gold Coast Seafood and Steak Pty Ltd v F.H.G.D Pty Ltd [2022] QCAT 390

PARTIES:

Gold Coast Seafood and Steak pty ltd

(applicant)

v

F.H.G.D Pty Ltd

(respondent)

APPLICATION NO/S:

RSL139–21

MATTER TYPE:

Retail shop leases matter

DELIVERED ON:

22 November 2022

HEARING DATE:

19 October 2022

HEARD AT:

Brisbane

DECISION OF:

Member Howe, Presiding
Member McBryde
Member Judge

ORDERS:

The respondent pay the applicant the sum of $16,015 within 14 days of receipt of order

CATCHWORDS:

LANDLORD AND TENANT – ASSIGNMENT, SEVERANCE AND SUBLEASE – where the tenant sought the lessor’s consent to assignment of the tenancy – where consent was given subject to formalising assignment through solicitors – where the assignment was by way of transfer of shareholding and directorship in the lessee company – where the less or purported to terminate the tenancy for failure to obtain consent – where the purported termination was repudiation of the retail shop lease – where the tenant sought recovery of its bond and other damages – where in respect of some items of claim there was limited evidence of loss put in evidence before the tribunal

Retail Shop Leases Act 1994 (Qld), s 39(1)

Reef Health Pty Limited & Ors v Ian Vines & Ors [2014] NSWSC 70

APPEARANCES & REPRESENTATION:

Applicant:

Self-represented

Respondent:

Self-represented

REASONS FOR DECISION

The applicant company leased restaurant premises at the Gold Coast from the respondent company.
The lease commenced on 1 August 2019 for a term of five years with options to renew.
Mr Ahn was a director and shareholder of the applicant company and ran the restaurant business with his wife. Both are elderly and around early 2020 Mr Ahn entered into negotiations with a younger couple (Damon Seo) with a view to assigning his (or their) interest in the restaurant to the younger couple.
He discussed the matter with Ms Lei of F.H.G.D Pty Ltd. Initially Ms Lei agreed to change of owners of the restaurant business. Subsequently she disagreed. Solicitors for F.H.G.D Pty Ltd served a Notice to Remedy Breach of Covenant on the applicant company on or about 11 December 2020. The Notice claimed payment of arrears of rent of $4,297.16 and it also listed a number of claimed breaches of the terms of lease.
Mr and Mrs Ahn say they (the applicant company) were evicted from the premises on 31 December 2020. On 13 January 2021 solicitors acting for the respondent gave them notice of termination of the lease on the grounds the Notice to Remedy Breach of Covenant issued on 11 December 2020 remained unremedied.
The applicant filed this application in the Tribunal on 15 June 2021 claiming return of the bond of $15,015, compensation of $5,000, payment of $4,730 legal fees and “return all the kitchen equipment in the restaurant.”
The applicant subsequently increased its claim as noted in a statement of evidence filed 11 May 2022. The recovery of the bond of $15,015 remained the same but the damage claim was increased to $7,000, the claim for legal fees increased to $5,045, and a claim for “QSBC (‘Queensland Small Business Commissioner’) non-fulfilment refund $2,502.50” added.
The case presented by the applicant was hard to follow and certain obvious relevant supporting material was missing. The respondent failed to file any meaningful evidence at all despite being directed to do so prior to hearing. The only response made by the respondent in that regard were two emails forwarded to the Tribunal both saying simply that Mr Ahn had defaulted first, he had left her without rent for 10 months and had taken her “stainless steel door and my branded cabinet”.
Mr Ahn’s first language is Korean and he asked for a Korean interpreter to assist him at hearing.
Ms Lei’s first language is Chinese and she asked for a Mandarin interpreter. In the course of the hearing it became clear Ms Lei did understand spoken English, though she continued to use the services of the interpreter throughout.

Assignment

Mr Ahn maintained Ms Lei had consented to an assignment of the lease. He said he paid rent he did not have to pay during the COVID period which had been the subject of award by a mediator from QSBC.
Ms Lei said at hearing that the parties had had a discussion about assignment of the lease, but nothing had been agreed. She had asked for the contact details of the proposed assignee, Dasom Leo. She contacted the proposed assignee and the assignee had no money to pay rent. Therefore she decided to refuse permission to assign the lease.
Neither party called the proposed assignee, Dasom Leo, to give evidence.
Whilst Ms Lei offered no documentary evidence in support of her case Mr Ahn tendered a series of emails exchanged between the parties as evidence of consent to assignment.
In an email dated 29 September 2020, Mr Ahn wrote to the respondent mentioning a rent increase of 4% and enclosing a receipt for the October 2020 rent just paid. The email continued:
This payment was made by the new chef and her name is Dasom Seo. As I mentioned earlier, Dasom and her family will take over the restaurant and they promised to make a full rent payment on time.
They are very honest people and I am happy for them to take over the restaurant even though I have no benefit and no money left. But I feel much more comfortable because I can keep the promise with you. We will pay half of the June rent as earliest as possible.
Once Dasom and her family take over the restaurant, they request to change the name (to Dasom) on the existing lease contract and she wants to change the Guarantor name to her husband as well. Should I discuss this matter with your solicitor?
Dasom and her family will be very good people to do business with, will be much better than me.
Please let us know your thought as earliest as possible?
The respondent replied on 1 October 2020 thanking Mr Ahn for his payment and adding:
I consulted my lawyer. It is okay to sign the contract again, but you are required to pay my lawyer’s fees. My lawyers fee is 1500 + GST. If you agree, we can move on to the next step. Thank you very much!
That is followed by an email from Mr Ahn on 1 October 2020 to the respondent saying:
Thank you for accepting sign the contract with Dasom.
I think the lawyer fee is too expensive. The contents of the contract will be same, and we just need to change the name. I believe that $1500 is for a new contract when the lawyer has to spend a significant amount of time to prepare a contract with the specific conditions.
Could you please ask your lawyer to give an affordable price as the contract already exists?
I will discuss with Dasom and we will find a new lawyer to start the process.
Not receiving an immediate reply, Mr Ahn wrote again on 3 October 2020:
I am waiting for your reply to the email I sent you on 1 October.
It will be great, if your lawyer gives us a discount fee. If not, we will still proceed with the fee that initially requested by your lawyer. We appreciated for your cooperation with new tenants.
Here is contact details for our lawyer. Please pass this information to your lawyer
…
Please ask your lawyer to begin the process of signing the contract with new tenants.
Ms Lei responded by return saying her lawyers fee would not change.
Mr Ahn responded that same day to say it was not a problem and could Ms Lei tell her lawyer to proceed.
Ms Lei responded that evening “OK”.
Ms Lei sent an email on 6 October 2020 asking Mr Ahn for the email address of Dasom Seo, the proposed new tenant.
On 13 October 2020 Ms Lei sent this email:
Dear Joseph
First, I bought the kitchen equipment, cabinets, and underground coal storage of this restaurant, so if he want to rent this house, you must give me an additional $20,000 in binding money.
Second, if he want to use this house you will have to pay for the future property management fees.
Third, he need to buy a comprehensive insurance, which will help future operations.
If you think the above requirements are possible, we will proceed to the next step.
Last, you lawyer should connect my lawyer, then you pay for the lawyers fee….
It is unclear what “additional $20,000 in binding money” means. Mr Ahn said he didn’t know what it was or what it was for. He said the applicant’s bond of $15,015 was to be retained by the respondent as a bond for the new tenant.
Mr Ahn filed a copy of a letter from his solicitors to Ms Lei’s solicitors dated 8 January 2020 responding to correspondence from the latter concerning the Form 7 Notice to Remedy Breach of Covenant of 11 December 2020. Mr Ahn’s solicitors talk about Ms Lei’s consent to assignment given on 1 October 2020 and in result Mr Ahn transferring his shares in the applicant company to the proposed new tenant, Ms Dasom Seo. They go on to say that on 7 October 2020 Ms Lei also turned to Ms Seo asking her to pay “a bond and an amount of $20,000”.
That would suggest the demand for an additional $20,000 was simply an added demand for payment of key money. A lessor cannot claim key money in exchange for consent given a tenant to assign a lease.[1]
[1]s 39(1) Retail Shop Leases Act 1994 (Qld) Act.
Mr Ahn said he refused to pay the additional money demanded by Ms Lei. It seems Ms Seo did not pay additional money to Ms Lei either.
No copy of the Notice to Remedy Breach of Covenant has been put in evidence. The information about it is to be derived from the letter from Mr Ahn’s solicitors to Ms Lei’s solicitors of 8 January 2021 abovementioned.
We find that Ms Lei was not entitled to terminate the tenancy as she did. We find Ms Lei gave consent in writing to the assignment by her email of 1 October 2020. It was not subject to the involvement of the solicitors. That involvement was no more than a formality. The assignment was to be effected through change of director and shareholding in the applicant company. All that was required to be done by the solicitors was perhaps draw a fresh guarantee for the new director/shareholder to sign. Even that was perhaps unnecessary, given Mr Ahn’s existing guarantee (no copy of the guarantee was in evidence) remained extant protecting the respondent’s interests pending execution of a fresh guarantee by the new director/shareholder.
We note the letter from the solicitors mentions that the Notice to Remedy Breach of Covenant was also directed to Mr Ahn as guarantor of the obligations of the applicant company.
The solicitors for the applicant had indicated in their letter of 8 January 2021 that the only matters outstanding as at date of their letter was execution of a fresh guarantee by Ms Seo and assignment of the bond of $15,015 from the applicant to Ms Seo.
Assignment by transfer of shareholding and directorship by a corporate tenant was provided for in the conditions of lease. Assignment by such means was also subject to prior consent by the lessor.[2]
[2]Clause 8.5.
Mr Ahn alluded to assignment by transfer of shareholding in the applicant company in his email to Ms Lei of 1 October 2020 when he asked for a reduction in her solicitor’s costs given the “contents of the contract will be same and we just need to change the name.” He made similar comment in his earlier email of 29 September 2020 saying all that was required was to change the name in the existing lease, and change of guarantor.
Given her consent to assignment advised to Mr Ahn, Ms Lei was not entitled to instruct the respondent’s solicitors to issue the Form 7 Notice to Remedy Breach of Covenant when she did, nor thereafter terminate the lease for failure to remedy the Form 7. The purported termination by the respondent was in fact a repudiation of the lease by the respondent. The current proceedings in the Tribunal by the applicant make clear that that repudiation of the lease has been accepted by the applicant.
There is no evidence that there are monies outstanding and owed to the respondent by the applicant. The applicant company is therefore entitled to recover its bond of $15,015.

Damages claim

Mr Ahn claims damages of $7,000 associated with water damage which occurred from about November 2019 through to early 2020. Mr Ahn offers no evidence about this other than to say there was a problem with both the interior and exterior of the restaurant and whenever it rained the interior was soaked by rainwater and the ceiling leaked “with grey water as well as rainwater” which forced the restaurant to close on a number of occasions. He says despite numerous telephone calls and emails to Ms Lei about the problem, she failed to address it until April 2020, when some simple repairs were effected.
How the claim to $7,000 damages is made up is unexplained. Ms Lei conceded at hearing that there was a problem with water entry and the rental premises were affected but she said she allowed a rent reduction of $1,350 for that, which Mr Ahn accepted as compensation for closures and rain affected premises.
Apart from those comments by the parties, there is no evidence to support the claim for damages, either the circumstances of loss or its quantification. The claim is not made out and not allowed.

Legal fees

Similarly there is no documentary evidence to support the applicant’s claim for legal costs of $5,045. There are no invoices for work done or anything else to establish those costs were incurred; if incurred that they related to the issues in dispute leading up to the purported termination; or the reasonableness of those costs.
Having said that, there is in evidence the long detailed letter from the applicant’s solicitors challenging the Notice to Remedy Breach of Covenant dated 8 January 2020. There is also the letter from the respondent’s solicitors of 13 January 2021 purporting to terminate the tenancy addressed to the applicant, a copy of which is addressed to the applicant’s solicitors. There is also an email exchanged between solicitors about the matter dated 22 December 2020.
We must do the best we can on the material to hand, and the material to hand clearly shows work done by the applicant’s solicitors addressing assignment and disputing termination based on lack of consent by the lessor. A conservative estimate of the charges the solicitors would make for that work would be at least $1,000, covering taking instructions, drawing and forwarding correspondence and advising the applicant as to result.
The costs have been occurred in result of the breach of contract of lease by the lessor and are reasonably claimed as damages by the applicant.
The amount of $1,000 is allowed the applicant under this head of claim.

QSBC refund

The applicant claims $2,502.50 associated with a mediation conducted between the parties by the Queensland Small Business Commissioner. We assume (Mr Ahn was far from clear about the matter) that the amount claimed is rent paid by the applicant which the mediator found need not be paid. The applicant’s evidence about this was poor.
Mr Ahn said in evidence that sometime well before the problem about assignment of the lease arose, the parties had attended mediation before the Queensland Small Business Commissioner, and he had been granted two month’s rent relief due to Covid downturn.
Subsequently, in negotiating the assignment of the lease, he had offered and paid the half of those two months’ rent in consideration of assignment. Ms Lei disputed that.
Mr Ahn provided no supporting evidence in support of his claim, not even a copy of the award.
Mr Ahn has failed to make out his case about this claim, and it is refused.

Recover cookware

Finally there is the issue of cookware. Mr Ahn’s evidence is that the respondent evicted the applicant from the restaurant premises and the applicant’s kitchen equipment remains on the premises but is being used by the present tenant. The equipment is listed by Mr Ahn in the following terms:
2 big standing pizza ovens
1 deep fryer
1 gas burner (six top)
One big stainless steel deep freezer (four-door)
electric hot wok pot (7 big and 10 medium sizes)
1 white freezer
2 rice cookers
2 microwaves
1 big coffee machine
79 hot stones (meat cooking)
79 hot stones stands
2 wheel stock trolleys
298 plates and bowls
11 stainless steel food containers (five big and six medium sizes)
25 tables
89 chairs
All music box (new computer and speaker)
All electric menu board and “sings”
It is not made clear whether some of the items were fixed in place as fixtures. The only items that might possibly be within that category are the pizza ovens and the gas burner.
In the email of 13 October 2020 Ms Lei states she had purchased “kitchen equipment, cabinets and underground cold storage of the restaurant” but there is no evidence to suggest the cookware listed was included in the kitchen equipment referred to in the email.
At hearing she said she had given the applicant time to remove his equipment, but he had failed to do so, which we accept was a reference to the cookware concerned.
Mr Ahn agreed the applicant was given time after the purported termination of the tenancy to remove the equipment but he considered that if he did that, he would receive nothing more from the respondent, such as his bond.
By emails dated 26 and 27 January 2020, Mr Ahn warned Ms Lei not to deal with the kitchen equipment pending resolution of the matters in dispute.
We find the respondent became bailee of the goods left on site in result of the wrongful removal of the applicant from the leased premises. As bailee, the respondent was obliged to exercise due care not to lose or damage the goods or convert them to the respondent’s own use or give them away, as explained by Slattery J in Reef Health Pty Limited & Ors v Ian Vines & Ors [2014] NSWSC 70:
A lessor taking possession of leased premises, where the lessee leaves goods on the premises after vacation, becomes a voluntary bailee of those goods: Chesworth v Farrar (1967) 1 QB 407 and Bowden v Lo (1998) 9 BPR 16,317. I accept the plaintiffs' submission that once Mr Vines re-entered the premises on behalf of Mr McWilliam he became a voluntary bailee of the goods that the plaintiffs left behind.
Voluntary bailees are obliged to exercise reasonable care in relation to bailed goods, and if the goods are lost or damaged the onus lies upon the bailees to prove that the loss or damage was not caused by the bailees' own negligence or that of their servants or agents: Glebe Island Terminals Pty Ltd v Continental Seagram Pty Ltd (1993) 40 NSWLR 206, at 228. This appears to be true for gratuitous bailees, as for bailees for reward, although the application for the standard of care may vary according to circumstances: see Mitchell v Earling Londonderry Council [1979] 1 QB 1. Here, even if a bailment to Mr Vines occurred on 27 October, the plaintiffs' main problem in this case is proving first what goods were bailed to Mr Vines and secondly, that the goods actually bailed were not returned.[3]
[3][70]-[71].
We accept that the goods claimed to have been left behind at the restaurant premises in January 2021 as set out in the list composed by the applicant were left behind and have never been returned to the applicant. Ms Lei made no challenge to the items listed nor the numbers.
Mr Ahn wants the cookware and other equipment returned to him. The evidence suggests Ms Lei does not have it in her possession however. Mr Ahn says Ms Lei gave it to the new tenant to use.
If that is the case, Ms Lei has wrongfully dealt with the applicant’s goods and the applicant appears to have a claim for restitution for unjust enrichment, given the respondent has breached the duty owed the applicant as bailee of the goods. However, what the applicant seeks is specific restitution of the cookware, and here, that is not possible because on the evidence available, the respondent no longer has possession of the cookware to return it.
The cookware is apparently being used by the new tenant, and the new tenant is not a party to the matter at hand and has not been heard from.
The usual order in such circumstances would be an award of damages against the respondent. To make such award however there needs be some evidence offered of market value of the goods. There is none. We are not prepared to make an estimate of value without some basis for such laid. We are unable to grant the relief claimed.

The applicant may well have a claim against the lessor or the new tenant or both for conversion of the goods. That claim must be pursued elsewhere however in the Magistrates Court, hopefully with evidence in support of the claim.

Conclusion

The applicant is entitled to recover its bond of $15,015 and solicitor costs of $1,000.
The name of the applicant is corrected to read Gold Coast Seafood and Steak Pty Ltd as noted on the lease document.