Harlow and Herring Enterprises Pty Ltd v Ralph

[2018] QCAT 247

QUEENSLAND CIVIL AND
ADMINISTRATIVE TRIBUNAL

CITATION:

Harlow and Herring Enterprises Pty Ltd v Ralph & Anor [2018] QCAT 247

PARTIES:

HARLOW AND HERRING ENTERPRISES PTY LTD
(applicant)

v

GARY RALPH
and
WENDY CHILD

(respondent)

APPLICATION NO/S:

RSL107-17

MATTER TYPE:

Retail shop leases matter

DELIVERED ON:

23 July 2018

HEARING DATE:

18 June 2018

HEARD AT:

Brisbane

DECISION OF:

Member I Hanger AM QC, Presiding Member
Member McBride
Member Judge

ORDERS:

1.   Harlow and Herring Enterprises Pty Ltd’s claim is dismissed.

2.   Application by Gary Ralph and Wendy Child is dismissed.

CATCHWORDS:

LANDLORD AND TENANT – RETAIL AND COMMERCIAL TENANCIES LEGISLATION – OTHER MATTERS – Retail Shop Leases – whether lessee entitled to reimbursement for monies expended in respect of the property

Retail Shop Leases Act 1994 (Qld)

APPEARANCES & REPRESENTATION:

Applicant:

Self-represented

Respondent:

Self-represented

REASONS FOR DECISION

1. This is an application by a lessee against a lessor for compensation. The lessee complains that a formal lease was not executed as had been agreed in an original agreement entered into by the parties. The lessee also complains that the property was not split into two properties as had been discussed which would allow the lessee to purchase the property. The lessee seeks compensation in respect of monies     expended in respect of the property including the cost they paid to have a formal lease prepared.

2. The applicants Ms Harlow and Mr Herring (of Herring Enterprises) were the lessees of the property which contained a chapel, a restaurant and function centre and a home. Gary Ralph and Wendy Child (the respondents) are the owners of the property. The property was listed for sale by the respondents with Mr Osmond, a real estate agent. The applicants as potential purchasers were taken by the agent to inspect the property in December 2015. They were interested and shortly thereafter they advised that they would have trouble obtaining finance for the purchase and enquired as to the possibility of leasing the property for a short time to enable them to obtain finance on a going concern. They said they intended to purchase the property within 12 to 18 months. They also raised the possibility of subdividing the house off from the rest of the property because they did not want the house. Their interest was confined to the chapel restaurant and function centre. They wanted to conduct a business utilising those facilities. Discussions were held with respect to the possibility of the applicants leasing the restaurant, chapel, function centre and stable and surrounding area while the respondents remained in the residence. They also discussed the ramifications of subdividing the property with one portion containing the chapel restaurant and function centre and the other portion containing the homestead in which the respondents lived.

3. On 29 January 2016, an initial lease agreement was drafted by the applicants. That agreement was for a two-year period with three two-year options. The applicants say that having a two-year agreement with three two-year options gave them confidence that, even if the property was not split, at least they would have a lease in place. The document that was prepared was signed by all parties. It was a very loose document it did not include any list of equipment that was provided in the premises but it was acceptable to the parties. The lease commenced on first of May 2016 with access being permitted to the site from first of April 2016. A liquor licence was transferred and a trade waste licence put into place. The applicants say that there was an agreement at this time that the respondents would prepare a formal lease document and this was contained in the general leasing terms forming part of the agreement. The respondents deny that and say that the issue of a formal lease was only raised some 11 months after the commencement of the lease when there was a dispute about cracked tiles in the kitchen. That is supported by the evidence. No one had any regard for any obligations under the Retail Shop Leases Act 1994 (Qld) until lawyers became involved at a later point.

4. Believing that they had least at an eight-year term if they exercised the options, the applicants proceeded to upgrade and operate the property for functions as intended.

5. The original lease agreement identified the parties, the property location, the area of the lease, the term, the option terms, the commencement date, and an option to purchase during the lease period. It set out the rent and provided ‘Rent will be increased annually by CPI, however no greater than 3.5%.’  It contained a number of special terms which included:

   ·   lessee intends to purchase the property from the lessor when title becomes available;

   ·   Lessee will be responsible for all repairs and maintenance of property, air-conditioning, plant and equipment;

   ·   Lessee will provide a copy of the building insurance undertaken to the lessor;

6. The terms contain a provision that the lessee can only carry out fitout, alterations, and installations subject to the lessor’s prior written approval; it also provides that the lessee acknowledges and accepts the condition of the demised premises and agrees with the lessor to make any necessary repairs or upgrade at their own expense and with the prior written consent of the lessor.

7. The applicants carried out some work on the premises and operated their business. They expended money on carpets, curtains, floors, a toilet door and repairs to such items as a dishwasher, air-conditioning, a cool room etc. The necessary written lessor approvals were not always obtained but no argument was raised about that by the respondents.

8. In March 2017 a major weather event impacted the operation of the business and an insurance claim was made. Part of the insurance claim included a ride on lawn mower and various tools. The applicants paid to the respondent $7,941 in relation to his losses that they had claimed on insurance for him.

9. In or about March 2017 solicitors became involved.

10. In March 2017 the applicants sought advice from their solicitor about the state of the kitchen floor and it was only when the solicitor for the applicant and the solicitor for the respondents raised the issue of the documentation that anything was done. The applicant in her evidence said:

    Gary Ralph sought advice from his lawyer… Who agreed with our lawyer that the existing contract did form a lease agreement however a more official lease document was advised to be put in place to clarify any issues over responsibilities and renewal terms as issues were already starting to arise.

11. In an email at dated 14 March 2017 the solicitor for the applicant wrote:

    …our clients do wish to record and codify the occupancy with a properly drawn lease. Given the use of the premises is cafe and restaurant and given that the offer to lease sets out that the lessor is to make disclosure under the Retail Shop Leases act RSLA, we submit that this is a retail shop pursuant to the RSLA, and that requires the provision of disclosure by the parties under RSLA, and adherence to RSLA as regards incurrence of costs. It may be that our clients will see value in making an offer to buy the land, but that is a step that they may take in the future. Please advise that you will be preparing the lease and disclosure as required by RSLA.

12. In late March 2017, the respondents took legal advice about the effectiveness of their informal lease agreement and were advised that although the written agreement that they had was not perfect, it was a legal document and the fact that both parties had been working with it for a year indicated, in this solicitors opinion, that it would be upheld by a court if it ever came to that.

13. Subsequently, the applicants on 27 June 2017 provided to the respondent a more formal lease but, according to the respondent, the terms were substantially different and it was not executed. A mediation conference in QCAT in September resulted in the dispute about whether or not the formal lease should be signed was referred to the tribunal, but that matter subsequently became academic because of subsequent events.

14. In June 2017 the respondents were approached by the agent Osmond who said he had clients who would be interested in purchasing the property. The potential purchasers represented a church. Mr Ralph advised them that there was a current lease on the property. The potential buyers advised Mr Ralph that, if they purchased, they would be willing to allow the existing lessees to continue because only the larger reception room was needed for church services on Sundays. They asked Mr Ralph to approach Mr Herring and Ms Harlow to see if they would be interested in carrying on their business subject to that restriction if the property were to be sold to these potential buyers. Evidence was given before this tribunal of different versions of what conversations occurred between the parties and the possible purchaser. The issues could have been handled better but there is common ground that the proposition was unacceptable to the applicants.

15. In view of the applicant’s perfectly legitimate attitude, the representative of the potential buyer, Mr Kujawa of the Apostolic Church, said that the Church was therefore only interested in the site if it was unencumbered by a lease. Mr Ralph advised that he would be honouring that lease. Mr Kujawa said that if the property subsequently became available his church would be interested in buying it.

    
    

    Mr Kujawa gave evidence verifying the above assertions of Mr Ralph which we accept.

16. Since the matter before this tribunal in September had not been resolved at the conference the applicants gave verbal notice on 25 September 2017 that they would cease to trade as of 31 December 2017 and would vacate the premises on 15 January 2018. The respondents say that they did not agree to end the lease. The applicants then gave a notice by email on 13 November 17 advising that they would be vacating on 15 January 2018. They did so.

17. The applicants seek compensation for the money outlaid to commence the business, bring the buildings up to code, renovations to improve the building and legal fees because they had to leave the premises before expiration of the agreed term. (It was established during the hearing that the applicants voluntarily made their decision to terminate the lease.)

18. The reality of the situation is that the applicants did not have to leave the premises. The respondents had not indicated that they were not prepared to honour the terms of the somewhat informal lease. The lease had, as at the end of 2017, been in operation for 19 months. There were still a further five months to run plus there were three two year options available for negotiation. The lessor had declined an offer to purchase the whole property because of his commitment to honouring the deal that he had entered into with the applicants. At the time of the termination there were proceedings before the tribunal about whether or not the respondents should sign the formal lease that had been prepared by the lessee’s solicitor. Regardless of the outcome of those proceedings, there was an enforceable agreement in existence.

19. The parties had both correctly assumed at this point that they had a valid agreement and as no new agreement was executed we must proceed on the basis of the original agreement drafted by the lessees.

20. One of the special terms of the agreement executed by the parties is that the lessee will be responsible for all repairs and maintenance of the property air-conditioning plant and equipment. A further condition is that the lessee will pay 75% of total property water rates and council rates and will pay all gas electricity telephone licenses insurance and grease trap charges.

21. The parties included in their agreement a document which is headed ‘general lease terms’. One of those terms provides:

    …the lessee acknowledges and accepts the condition of the demised premises and agrees with the lessor to make any necessary repairs or upgrade at their own expense and with the prior written consent of the lessor.

22. A further term is:

    …the lessee acknowledges that no promise, representation, warranty or undertaking has been given by or in behalf of the lessor in respect to the suitability of the demised premises for any purpose or for any business to be carried on therein. As to the finished facilities and amenities of the demised premises, no warranties are provided.

23. Each of the items claimed by the applicant as having been expended falls within one or other of the special terms set out above and are not matters payable by the lessor rather than the lessee.

24. We dismiss the claim by the applicant.

25. The respondent has claimed against the applicant. The respondent asserts that the applicant made claims on an insurance policy that it was obliged to take out in respect of an adverse weather event. The respondent tendered a list of items that it said was covered by the insurance policy. Ms Harlow swore that not one of the items on the list was the subject of an insurance claim and that no compensation was received from the insurer in respect thereof. She gave evidence that there was under the premises a lot of old equipment that had been abandoned, was of no use and was subjected to the inundation. She also said that the insurance company paid a global sum in respect of their claim and that it could not be apportioned to particular items.

26. We did not see a breakdown of items in respect of which the claim was paid and the respondent asked for this information. We did not direct that it be provided. It seems to us, that, whether the applicants have received insurance monies to which the respondents are entitled, has nothing to do with these proceedings. The respondents can bring an action elsewhere for money had and received should they so desire.

27. The respondents’ claim is dismissed.