Helou & ors v Bong Bong Pty Limited & anor trading as Regsional Retail Properties (No 2)

[2006] NSWADT 162

CITATION:	Helou & ors v Bong Bong Pty Limited & anor trading as Regsional Retail Properties (No 2) [2006] NSWADT 162
DIVISION:	Retail Leases Division
PARTIES:	APPLICANTS George Helou George Mhanna Toni Mhanna RESPONDENTS Bong Bong Pty Limited & Gowing Bros Limited trading as Regional Retail Properties
FILE NUMBER:	055130
HEARING DATES:	24/05/06
SUBMISSIONS CLOSED:	05/24/2006
DATE OF DECISION:	05/31/2006
BEFORE:	Chesterman M - ADCJ (Deputy President)
CATCHWORDS:	Claim for declaration of rights, obligations and liabilities under a lease - Damages - Unconscionability
MATTER FOR DECISION:	Preliminary matter
LEGISLATION CITED:	Administrative Decisions Tribunal Act 1997 Retail Leases Act 1994
CASES CITED:	Helou & Ors v Bong Bong Pty Limited & Anor t/a Regional Retail Properties [2006] NSWADT 128
REPRESENTATION:	APPLICANTS D Maddox, barrister RESPONDENTS D Ronzani, barrister
ORDERS:	1 (a) As soon as reasonably practicable, the Respondents are to provide to the Appellants for execution a lease in terms of the draft lease handed up at the directions hearing on 15 May 2006, but with the plan that was annexed to the letter of 22 February 2005 from the respondents to the Appellants substituted for the plan that was annexed to that draft lease; (b) As soon as reasonably practicable thereafter, the parties are to execute the lease so provided; 2. The matter is set down for further directions at 9.30 a.m. on Friday 9 June 2006.

Introduction

1 In these proceedings, the Applicants are Mr George Helou, Mr George Mhanna and Ms Toni Mhanna. The two Respondent companies, Bong Bong Properties Pty Ltd and Gowing Bros Pty Ltd, carried out the transactions involved in this matter under the guise of Regional Retail Properties Joint Venture, which they formed in November 2004. Their agent throughout was Mr Paul Berkelouw, a director of Bong Bong Properties Pty Ltd.

2 The premises to which these proceedings relate formed part of a property known as Gibraltar Square, Bowral (‘the property’), which the Respondents own. In September 2004, the Applicants purchased a fruit and vegetable retailing business from prior lessees, who were occupying the premises on a monthly tenancy. They vacated the premises on 27 October 2005, pursuant to a notice to quit from the Respondents dated 31 August 2005.

3 In circumstances outlined in an earlier Tribunal decision in the proceedings (Helou & Ors v Bong Bong Pty Limited & Anor t/a Regional Retail Properties [2006] NSWADT 128 – ‘the decision on jurisdiction’), the Applicants claimed that the Respondents had granted to them a five-year lease of a shop forming part of the property for the purposes of fruit and vegetable retailing. They alleged that a lease of this nature was created by dealings between the parties between September 2004 and March 2005 and that this lease was governed by the Retail Leases Act 1994 (‘the Act’). They sought declarations to this effect, coupled with an order that the Respondents pay compensation to them under s 10 of the Act for pre-lease misrepresentations. In the alternative, they sought a finding that the Respondents had engaged in unconscionable conduct as defined in s 62B(3) of the Act, together with appropriate relief under s 72AA.

4 Because all relevant events occurred before 1 January 2006, the Applicant’s claims fall to be determined by the Act in the form that it took before the commencement of the Retail Leases Amendment Act 2005.

5 A hearing confined to such matters as would determine whether the Tribunal had jurisdiction in this case took place on 20 February 2006. Written submissions were filed subsequently. In the decision on jurisdiction, handed down on 1 May 2006, Order 1 of the Tribunal comprised a declaration in the following terms: -

(a) A lease of retail shop premises by the Respondents to the Applicants, governed by the provisions of the Retail Leases Act 1994, commenced on 8 March 2005 for a term of five years.

(b) This lease relates to premises constituting part of the ground floor of 328 – 332 Bong Bong Street, Bowral and delineated in a plan attached to a letter dated 22 February 2005 from the Respondents to the Applicants.

(c) The terms and conditions of the lease are those contained in the letter of 22 February 2005.

(d) The Tribunal has jurisdiction under the Retail Leases Act 1994 to determine the matters in dispute between the parties.

6 Further aspects of the dispute between the parties were held over for future determination.

7 Since the Applicants’ claims include an allegation of unconscionable conduct by the Respondents, the Tribunal must be constituted in accordance with Clauses 1 and 4 of Part 3B of Schedule 2 of the Administrative Decisions Tribunal Act 1997. The matter dealt with in the present decision concerns a question of law only. The Tribunal is accordingly constituted by a Deputy President who is a member of the Retail Leases Division, sitting alone, pursuant to subparagraph (4) of Clause 4.

The applications now brought by the parties

8 On 15 May 2006, at a directions hearing, Mr Ronzani, counsel for the Respondents, applied to the Tribunal for an order that the Applicants should execute a lease pursuant to Order 1 of the decision on jurisdiction. He handed up a draft document of lease accompanied by a disclosure statement and a plan of the property designating the premises to be leased. He submitted that these documents complied with the terms of this Order.

9 When this application came on for hearing on 24 May 2006, Mr Maddox, counsel for the Applicants, applied also for an order implementing Order 1 of the decision on jurisdiction. He argued that the draft handed up by Mr Ronzani was at variance with the lease described in the Order. This lease, he said, should be in the terms of the letter of 22 February 2005 to which the Order refers, and should relate to the premises delineated in the plan that was attached to that letter.

10 Both counsel indicated that the only substantial issue between the parties concerned a notation on the plan annexed to the Respondents’ draft lease. This indicated that an area outside the building and directly adjacent to the premises to be leased was for ‘pedestrian access’. No such notation appears on the plan annexed to the letter of 22 February 2005. Other minor differences between the two plans – for example, as to the precise dimensions of the shop premises to be leased – did not create any difficulties for the Appellants. They raised no objection to the terms of the draft lease (as distinct from the accompanying plan) put forward by the Respondents.

The Respondents’ submissions

11 In Mr Ronzani’s submission, it was essential that the notation ‘pedestrian access’ should appear on the plan accompanying the lease that was to be executed by the parties. This was in order to avoid contravening a determination made by the Wingecarribee Shire Council (‘the Council’) regarding loading, unloading and the use of delivery vehicles at the property. If this notation was not present, he said, the Council would not give its consent to the lease and the lease documentation would indeed be misleading.

12 Mr Ronzani relied on evidence, principally given at the hearing on 20 February 2006, to the following effect: (a) that since the letter of 22 February 2005 had been sent to the Applicants the building then existing on the property had been demolished as part of the Respondents’ plans for redevelopment; (b) that the Applicants themselves recognised throughout the negotiations surrounding this letter that there would be physical changes in the premises ultimately leased to them; (c) that in a determination, dated 16 November 2005, of a development application made by another potential lessee of premises within the proposed new building, the Council had for the first time imposed strict conditions regarding loading, unloading and the use of delivery vehicles at the property; and (d) that the Applicants themselves had made no inquiries on these matters to the Council before or after agreeing to the terms of the letter of 22 February 2005.

13 Mr Ronzani also referred the Tribunal to the following provisions forming part of clause 13b, which was headed ‘Lessee Fit out Works (Lessee cost)’, in the letter of 22 February 2005:-

The lessee’s works shall comprise…
All permits, approvals and consents necessary to carry out its building and fit out works relating to the premises.

All permits and approvals necessary to enable the lessee to use the premises…

14 A further matter relied on by Mr Ronzani was a statement at paragraph [85] of the decision on jurisdiction that the lease that had between the parties ‘substantially’ incorporated the terms of the letter of 22 February 2005. He argued that this left scope for changes such as the Respondent now sought.

Submissions by the Applicants

15 Mr Maddox argued that in the decision on jurisdiction the Tribunal had declared that the lease between the parties should incorporate the terms of the letter dated 22 February 2005 from the Respondents to the Applicants and should relate to the premises delineated in the plan attached to that letter. The Tribunal did not contemplate any change such as the Respondents now sought.

16 He pointed out that neither this letter nor the accompanying plan referred to any restrictions on loading, unloading and the use of delivery vehicles. Furthermore, the Applicants did not know at that time that the Council might in the future impose such restrictions. They were only imposed, he said, because of the nature of the plans for demolition and reconstruction that the Respondents had put before the Council.

17 Mr Maddox indicated that these restrictions, if maintained, would make it impossible for the Applicants to carry on their business at the premises designated in the letter of 22 February 2005. This was because they would have to devote excessive time and resources to delivering fruit and vegetables to their shop. He added that on 17 May 2006 the Applicants had submitted to the Council an application requesting more liberal conditions of access, but that they considered it unlikely that the application would be successful

The Tribunal’s decision

18 In the opinion of the Tribunal, the lease to be executed by the parties should designate the premises leased by reference to the plan annexed to the letter of 22 February 2005, without any additions such as the notation ‘pedestrian access’ appearing on the plan handed up by the Respondents.

19 As a matter of principle, this ruling follows directly from the terms of Order 1 of the decision on jurisdiction. In subparagraph (b), this Order defined the premises covered by the five-year lease commencing on 8 March 2005 as those ‘delineated in a plan attached to a letter dated 22 February 2005 from the Respondents to the Applicants’. It made no allowance for changes to this plan.

20 The documents now to be executed by the parties should, in the Tribunal’s view, embody the terms of the lease that, for reasons set out in the decision on jurisdiction, arose between the parties on 8 March 2005 on account of the Applicants’ occupation of premises within the property and the operation of s 8 of the Act. The Council’s determination of 16 November 2005 regarding loading, unloading and the use of delivery vehicles at the property, and any further determinations by the Council on this or any other matter relating to use of the property, will bind the parties without it being in any way necessary for their lease documentation to reflect such determinations. Indeed, a notation such as the Respondents seek could have the effect of implicitly making the Council’s restriction on access part of the agreement between the parties. This outcome would be at odds with the declaration contained in Order 1 of the decision on jurisdiction.

21 The Tribunal notes that clause 3.1 of the draft lease handed up states: ‘The Lessee must at its own cost obtain and maintain all permits and approvals necessary to use the leased premises for the purposes permitted…’ This subclause conforms with the provisions of the letter of 22 February 2005 quoted above at [13]. As Mr Ronzani argued, those provisions might give scope for the Respondents to resist any claim by the Appellants based on the impediments to their business caused by the Council’s restrictions. The Tribunal does not rule on this issue in the present decision. But this consideration goes some way to deflect Mr Ronzani’s contention that the Respondents would suffer detriment if they were required to execute lease documentation in which a current Council determination, significant restricting modes of access to the leased premises, was not expressly noted.

22 Order 1 of the Tribunal pursuant to the present decision is to the following effect:

(a) As soon as reasonably practicable, the Respondents are to provide to the Appellants for execution a lease in terms of the draft lease handed up at the hearing of these applications, but with the plan annexed to the letter of 22 February 2005 substituted for the plan that was annexed to that draft lease.

(b) As soon as reasonably practicable thereafter, the parties are to execute the lease so provided.

23 In addition, the proceedings are set down for further directions as indicated in Order 2.