Herbert v Lee; Lee v Hemphill

[2023] NSWCATCD 177

Civil and Administrative Tribunal

New South Wales

Medium Neutral Citation:

Herbert v Lee; Lee v Hemphill [2023] NSWCATCD 177

Hearing dates:

03 October 2023

Date of orders:

17 October 2023

Decision date:

17 October 2023

Jurisdiction:

Consumer and Commercial Division

Before:

G Blake AM SC, Senior Member

Decision:

1.   The respondents in proceedings COM 23/24375 are to repay $11,325.61 to the applicants immediately.

2.   Proceedings COM 23/30593 are dismissed.

Catchwords:

LEASES AND TENANCIES — Retail leases — Misleading or deceptive conduct

LEASES AND TENANCIES — Retail leases — Repairs — Lessor’s duty – whether the duty extends to part of the common property - whether the lessee is not liable to pay rent where complaint about the condition of the common property

Legislation Cited:

Civil and Administrative Tribunal Act 2013 (NSW), ss 28, 29, 36, Sch 4, cl 3

Conveyancing (Strata Titles) Act 1961 (NSW)

Retail Leases Act 1994 (NSW), ss 7, 36, 62D, 63, 70, 71, 72

Retail Leases Regulation 2022 (NSW), Sch 1, cl 4

Strata Schemes (Freehold Development) Act 1973 (NSW), Sch 4, cl 3

Strata Schemes Management Act 2015 (NSW), s 142

Cases Cited:

Cominos v Di Rico [2016] NSWCATAP 5

Larsen v The Owners - Strata Plan No. 3573 [2022] NSWCATCD 43

Lekhwar v Singh [2022] NSWCATCD 108

Texts Cited:

None cited

Category:

Principal judgment

Parties:

COM 23/24375:
Cara Stella Bianchetto Herbert and Lachlan Heathcote Hemphill (Applicants)
Yuen Ha Lee and Ronan Delaney (Respondents)

COM 23/30593:
Yuen Ha Lee and Ronan Delaney (Applicants)
Lachlan Heathcote Hemphill and Cara Stella Bianchetto Herbert (Respondents)

Representation:

Cara Stella Bianchetto Herbert and Lachlan Heathcote Hemphill (self-represented)
Yuen Ha Lee and Ronan Delaney (self-represented)

File Number(s):

COM 23/24375; COM 23/30593

Publication restriction:

Nil

REASONS FOR DECISION

Overview

1. These two proceedings involve disputes arising out of a retail shop lease between the lessors, Ronan Delaney (Mr Delaney) and Yuen Ha Lee (Mr Lee), and the lessees, Lachlan Heathcote Hemphill (Mr Hemphill) and Cara Stella Bianchetto Herbert (Ms Herbert), in which they each make claims against the other under the Retail Leases Act 1994 (NSW) (RL Act). I have referred to the parties as the lessors and lessees as appropriate except where it has been necessary to refer to one of them.

2. The key issue in the two proceedings was whether the lessees are liable under a retail shop lease in circumstances the lessors made the misleading representation that they had the right to occupy common property in connection with their use of the retail shop. I have found in favour of the lessees on this key issue.

3. I have decided to make a money order for $11,325.61 in favour of the lessees, and to dismiss the claims of the lessors.

Introduction

4. As the facts were largely not in dispute, I have set out the factual background. I have then briefly set out the history of the two proceedings and the details of the hearing. After identifying the issues for determination, I have summarised the evidence of the parties which has not been set out in the factual background and their submissions, and set out the applicable statutory provisions. I have then dealt with the issues in turn before setting out my orders disposing of the two proceedings.

The factual background

5. The strata scheme created by strata plan 3573 (strata scheme 3573), which was registered on 11 October 1968 (as recorded on the Service NSW website), consists of 16 commercial and residential lots, with residential lots 1 to 10 situated on levels 1 and 2 and commercial lots 11 to 16 situated at ground level, and common property at Maroubra in New South Wales, and is managed by O’Neill Strata Management: Larsen v The Owners - Strata Plan No. 3573 [2022] NSWCATCD 43 at [13]-[14].

6. At material times, the lessors have been the owners of lot 14 in strata scheme 3573 (the premises).

7. Prior to entry into the retails shop lease, the premises had been used as a barber shop, and had timber landings adjacent to the two front bay windows which are separated by a central front door, three cabinets adjacent to the side wall and rear wall with mirrors above them, and three fluorescent lights suspended from the ceiling (as depicted in coloured photographs of the parties).

8. On 24 October 2022, in negotiations with respect to the lease of the premises to be used as a coffee shop, Ms Herbert sent to the lessors’ agent an email attaching a proposed concept floorplan of the premises of studio gemma which relevantly involved the removal of the timber landings adjacent to the two front bay windows (the studio gemma floorplan).

9. On 15 December 2022, the parties entered into the retail shop lease for the term of three years commencing on 15 December 2022 and ending on 14 December 2024 with an option to renew for a period of three years. The parties agreed that the undated and unsigned form of lease in evidence had been dated 15 December 2022 and signed by the parties. The retail shop lease relevantly contained the following terms:

1. clause 1 relevantly provided:

CLAUSE 1 INTERPRETATION

About this lease.

…

1.8 In this lease, "property" means the Property leased in item 1 in the schedule.

…

1.14 In the event of any inconsistency between Annexure A of this lease and any other part of this lease, Annexure A will prevail.

2. clause 5.1.1 when read with item 10 of the schedule provided that the lessees would pay rent of $2,607.14 per month plus GST commencing on 15 February 2023;

3. clause 7 relevantly provided:

“CLAUSE 7 CONDITION AND REPAIRS

Who is to repair the property?

7.1 The lessor must -

7.1.1 maintain in a state of good condition and serviceable repair the roof, the ceiling, the external walls and external doors and associated doorjambs, and the floors of the property and must fix structural defects;

…

7.2 The lessee must otherwise maintain the property in its condition at the commencement date and promptly do repairs needed to keep it in that condition but the lessee does not have to -

7.2.1 alter or improve the property;

7.2.2 fix structural defects; or

7.2.3 repair fair wear and tear.

…

7.6 The lessee must not make any structural alterations to the property. Any other alterations require the lessor's consent in writing (but the lessor cannot withhold consent unreasonably).”

4. clause 8 relevantly provided:

“CLAUSE 8 INSURANCE AND DAMAGE

…

What happens if the property is damaged?

8.2 If the property or the building of which it is part is damaged (a term which includes destroyed) -

8.2.1 the lessee is not liable to pay rent, or any amount payable to the lessor in respect of outgoings and other charges, that is attributable to any period during which the properly cannot be used under this lease or is inaccessible due to that damage;

…

8.2.4 if the lessor fails to repair the damage within a reasonable time after the lessee requests the lessor to do so the lessee can terminate this lease by giving not less than 7 days' notice in writing of termination to the lessor; and

…”

5. clauses 17.1 and 17.2 when read with item 17 of the schedule provided that the lessees would pay a security deposit of three months rent plus GST on or before the commencement date of the lease;

6. clause 18 relevantly provided:

“CLAUSE 18 STRATA

18.1 "Strata Acts" means the Straw Schemes Management Act 2015 and the Strata Schemes Development Act 2015, and includes any amending Acts, rules, regulations, ordinances, by-laws, statutory instruments, orders or notices made under those Acts.

18.2 "Owners corporation", "owner", "strata scheme", "lot" and "parcel" where used in this lease have the meanings given under the Strata Acts.

…

18.7 Use

18.7.1 Where the property is a lot in a strata scheme the lessee must:

…

18.7.1.4 meet the cost of all damage to the common property caused by the lessee or any invitee or licensee of the lessee;

…

18.7.2 Where the property is a lot in a strata scheme the lessor must use its reasonable endeavours to:

18.7.2.1 assist the lessee, at the expense of the lessee, to obtain the consent of the owners corporation to the lessee's fit out of the property (as approved by the lessor) and the lodgment of any development application in relation to the lessee's use of the property; and

18.7.2.2 cause the owners corporation to maintain and repair the common property, to the extent of any obligation of the lessor to maintain the building.”

7. clause 19 which is located in Annexure A provided:

“CLAUSE 19 LESSOR'S ALTERATIONS

The lessor shall have the right at all times to carry out such alterations, improvements and additions to the building as he may think fit provided that the lessor shall cause as little inconvenience and disturbance as possible to the lessee during the course of any such works.”

8. clause 20 which is located in Annexure A relevantly provided:

“CLAUSE 20 EXCLUSION OF WARRANTIES

…

20.1.5 the lessee agrees and acknowledges that

a. Prior to execution of this lease the lessee conducted a thorough examination and inspection of the premises, its structures, fixtures, plant and equipment and relied on its own skill, judgment and enquiries and also the skills and judgments of its consultants and representatives in entering into this lease; and”

10. On 22 December 2022, the lessees paid rent of $2,867.85 for the period from 15 February 2023 to 14 March 2023 and the security bond of $8,603.55 to the lessor’s agent.

11. On 29 December 2022, the lessees removed the three cabinets and mirrors, the three fluorescent lights, and the two timber landings, and discovered that there were no floorboards and a void for most of the area beneath the two timber landings.

12. On 29 December 2022, Matthew Shaw of Airsafe Laboratories Pty Ltd carried out an analysis of a vinyl floor tile which had been found beneath the timber landings adjacent to the two front bay windows, detected chrysotile asbestos in the tile fragments and black adhesive and prepared a test report dated 29 December 2022 (the Airsafe report).

13. Between 5 January 2023 and 27 February 2023, there were communications between the lessees and their solicitor and the lessors’ agent and solicitor culminating in the email of Ms Herbert to the lessors’ agent and solicitor sent on 27 February 2023 which attached the Airsafe report and two coloured photographs of the floor beneath the timber landings adjacent to the two front bay windows, and relevantly provided:

“…

As you are aware, there are two large holes in the floor of the premises. This was not brought to the attention of the lessee prior to entering into the lease, and was only able to be ascertained after the premises was cleared, and the false landings were removed. Further, an inspection by an independent contractor has confirmed that asbestos has been detected in the vinyl floor tiles around the holes, A copy of photographs of the damage to the floor, and the Airsafe Laboratories Pty Ltd Report is attached.

In light of the above, the premises is damaged and is not able to be used in accordance with the lease as a result of that damage.

Pursuant to clause 7.1 of the lease, the lessor is required to maintain the floors of the property in a state of good condition and serviceable repair. As is apparent from the photographs, the floors of the property are plainly not in a state of good condition and serviceable repair.

Further, pursuant to clause 8.2.1 of the lease, the lessee is not liable to pay rent that is attributable to any period during which the property cannot be used under the lease due to damage to the property; and pursuant to clause 8,2.4 of the lease, the lessee is entitled to terminate the lease by giving not less than 7 days' notice in writing where the lessor fails to repair the damage within a reasonable time after the lessee requests the lessor to do so. As stated above, the damage to the floor and the presence of asbestos in the floor means that the premises is damaged and is not able to be used in accordance with the lease as a result of that damage.

Repeated requests have now been made for the lessor to repair the damage to the floor; which, to date, has not occurred. In particular:

1. On 5 January 2023,1 emailed you to inform you of the holes in the floor and the detection of asbestos.

2. On 13 January 2023, the lessor's solicitor, Mr King, wrote to my solicitor, Ms Hughes, 5tating that the lessor was not required to remove or replace the floor. For the reasons outlined above, this is not correct.

3. On 13 January 2023, Ms Hughes responded to Mr King, referring him to clause 7 of the lease; and observing that there are large holes in the floor and asbestos present which is hampering any repairs; and that this is not part of a normal fitout and is the landlords' responsibility.

4. On 19 January 2023, Mr King responded to Ms Hughes, indicating that:

a. The lessees inspected the premises prior to executing the lease and were therefore aware of the presence of any holes in the floors at that time. For the reasons outlined above, this is not correct.

b. Pursuant to item 6 of Annexure A to the lease, the lessees relied on their own inspections and investigations as to the structural integrity of the premises. For the reasons outlined above, the lessees do not accept that item 6 of Annexure A applies in the present case; or relieves the landlords of their obligations pursuant to clauses 7 and 8. It was not possible to examine arid inspect the state of the floors in that area of the premises until the premises was cleared, and the false landings were removed. In any event, clauses 7 and B oblige the lessor to maintain the floor in good condition and serviceable repair.

c. The mere presence of asbestos of itself within the floor structure of the premises does not render the premises structurally unsound. As outlined above, both the holes in the floor and the presence of asbestos means that the premises is damaged and is not able to be used in accordance with the lease as a result of that damage.

d. The release of asbestos fibres has come about solely as a result of the lessees' fit-out works. This is denied.

e. The lessors are not required to remove or replace the floor; and the lessees are not entitled to any extension of the rent-free period. For the reasons outlined above, this is not correct.

5. On 25 January 2023, Ms Hughes responded:

a. Advising that the lessees were not aware of the holes in the floor as they were covered by a false landing.

b. Indicating that the issue of the asbestos is a serious one as no trades will carry out any works there without the asbestos being professionally contained and removed.

c. Advising that Council has indicated that the property is about to be listed as a heritage building and Council will be made aware of the asbestos contamination.

d. Proposing that the parties and the agents meet in an attempt to reach a suitable resolution.

6. On 30 January 2023, you contacted me to ask for access on 1 February 2023 in order for someone to look at the asbestos.

7. On 1 February 2023, access was given. However, the person did not show up. You rescheduled for the person to come back on the 2 February 2023 to inspect the premises.

8. On 2 February 2023, the premises was attended by your clients' representative. Whilst he visually inspected the tiles and verbally indicated that, in his view (from a visual inspection only), it was not asbestos, this is not indicative. A visual inspection is not sufficient to determine whether asbestos is present. In contrast, the Airsafe report referred to above, confirms via reliable testing on samples of the floor that asbestos is present.

9. On 2 February 2023, I informed you that I wanted to terminate the lease privately and wanted my deposit and security bond back as the conditions had changed and the owners were not prepared to fix the floor.

10. On 8 February 2023, 1 telephoned you. You did not answer and sent me an SMS to say that you would call me back.

11. To date, I have received no further communications from you, your clients or your clients' solicitors; and no steps

have been taken by the lessor to repair the damage to the floor.

In these circumstances: (a) pursuant to clause 8.2.4 of the lease, the lessees have no obligation to pay rent while the floor remains unrepaired and the asbestos has not been contained; and (b) the lessor has failed to repair the damage within a reasonable time after the lessees' requests in accordance with clauses 7 and 8.2.4 of the lease. As a consequence, the lessees provide written notice of the lessees' intention to terminate the lease, with effect from 7 days of the date of this email, pursuant to clause 8.2.4 of the lease.

…”

14. On 14 June 2023, the retail shop lease was terminated by agreement when the lessees returned the keys to the premises to the lessors’ agent.

The history of the two proceedings

15. On 29 May 2023, Ms Herbert as the applicant commenced proceedings COM 23/24375 against Mr Lee as the respondent by filing a retail leases application in which she claimed a money order for $11,317.85 for the rent and security bond paid under the retail shop lease.

16. On 13 June 2023, the Tribunal made orders joining Mr Hemphill and Mr Delaney as an applicant and respondent respectively and procedural orders for the provision of evidence by the parties.

17. On 4 July 2023, the lessors as the applicants commenced proceedings COM 23/30593 against the lessees as the respondents by filing a retail leases application in which they claimed a money order for $19,210.00, being the total of $8,603.00 for the rent owing under the retail shop lease until 14 June 2023, $2,867.00 for the agent’s fee and $7,740.00 for the cost of essential repairs of the premises.

The hearing

18. The hearing took place on 3 October 2023. Ms Herbert represented Mr Hemphill and herself. Mr Delaney represented Mr Lee and himself.

19. The lessees relied on the following documents which were admitted into evidence subject to relevance in the case of the document in subpar (2) below and otherwise without objection:

1. the bundle of documents attached to the retail leases application in proceedings COM 23/24375 which was marked as exhibit A1;

2. the statutory declaration of Ellis James McMahon (Mr McMahon) made on 28 June 2023 which was marked as exhibit A2 (the McMahon declaration);

3. the statutory declaration of Daniel Dunne (Mr Dunne) made on 27 June 2023 which was marked as exhibit A3 (the Dunne declaration);

4. the statutory declaration of Leanne Kathryn Hughes (Ms Hughes) made on 27 June 2023 which was marked as exhibit A4 (the Hughes declaration);

5. the balance of the documents filed on 28 June 2023 which were marked as exhibit A5;

6. ten coloured photographs with captions on the reverse side filed on 28 June 2023 which were marked as exhibit A6;

7. the bundle of documents filed on 24 July 2023 which was marked as exhibit A7;

8. five coloured photographs with captions on the reverse side filed on 24 July 2023 which were marked as exhibit A8.

20. The lessors relied on the following documents which were admitted into evidence without objection:

1. the bundle of documents attached to the retail leases application in proceedings COM 23/30593 which was marked as exhibit R1;

2. the bundle of documents filed on 22 August 2023 which was marked as exhibit R2.

21. Mr McMahon and Ms Herbert gave oral evidence.

22. Ms Herbert and Mr Delaney made oral submissions.

23. At the conclusion of the hearing, I reserved my decision.

The issues

24. In Cominos v Di Rico [2016] NSWCATAP 5 (Cominos), the Appeal Panel at [13] stated that it may be difficult for self-represented appellants to clearly express their grounds of appeal. In such circumstances and having regard to the guiding principle to facilitate the just, quick and cheap resolution of the real issues in the appeal in s 36(1) of the Civil and Administrative Tribunal Act2013 (NSW) (NCAT Act), it is appropriate for the Appeal Panel to review an appellant’s stated grounds of appeal, the material provided and the decision of the Tribunal at first instance to examine whether it is possible to discern grounds that may either raise a question of law or a basis for leave to appeal.

24. As the parties were self-represented, I have applied the principles in Cominos at [13] as adapted to proceedings in the Tribunal at first instance to discern the relief under RL Act available to the parties in accordance with the approach in Lekhwar v Singh [2022] NSWCATCD 108 at [68].

25. The following issues arise for decision:

1. issue 1: whether the Tribunal has jurisdiction to determine the two proceedings;

2. issue 2: whether the lessees are entitled to relief under RL Act against the lessors;

3. issue 3: whether the lessors are entitled to relief under RL Act against the lessees.

27. After considering issue 1, it is convenient to consider issues 2 and 3 together.

The evidence of the parties

The evidence of the lessees

Mr McMahon

The McMahon declaration

28. In the McMahon declaration, Mr McMahon gave evidence that on 17 December 2022 a group including Ms Herbert removed the three cabinets and mirrors, the three fluorescent lights, and the two timber landings, and he observed “holes associated with the flooring” under the landings.

The oral evidence of Mr McMahon

29. In cross-examination, Mr McMahon gave evidence that the landings were screwed into the wall.

Mr Dunne

30. In the Dunne declaration, Mr Dunne gave evidence that on 17 December 2022 he helped to Ms Herbert to remove the old shop fit-out within the premises. When the timber landings were removed, he found deep holes where there was no existing flooring.

Ms Hughes

31. In the Hughes declaration, Ms Hughes gave evidence that on 17 December 2022 she helped to Ms Herbert and others to remove the old shop from the premises. When the timber steps at the front of the premises were removed, there was no existing floor.

Ms Herbert

32. In cross-examination, Ms Herbert gave evidence that the premises could not restored to their pre-existing condition because of the presence of asbestos.

The evidence of the lessors

33. The evidence of the lessors included the following documents:

1. a tenant ledger of the lessors’ agent created on 14 June 2023 which recorded a balance for outstanding rent of $8,603.55 for the period from 15 March 2023 to 14 June 2023;

2. a quotation of TCYP Electrical Pty Ltd 23 June 2023 for $4,290.00 for electrical work to the premises (the TCYP quotation);

3. an undated quotation of TD & S Constructions Pty Ltd for $3,450.00 for fixing the timber floor, installing a vanity and fixing the wall and paint of the premises (the TD & S quotation);

4. a completed, undated and unsigned renovation application form for an owner of a lot in strata scheme 3573 addressed to O’Neill Strata Management with the following details of the proposed works (renovation application form):

“minor renovation and soft refurbishments to convert the barber into cafe including a sitting area”

The submissions of the parties

The submissions of the lessees

34. In her oral submissions, Ms Herbert submitted that the lessees were entitled to the amount of $11,325.61 being the total of $8,457.76 for the security bond and $2,867.85 for rent paid for the period from 15 February 2023 to 14 March 2023 on account of the breach by the lessors of cl 7.1 of the lease.

The submissions of the lessors

35. In his oral submissions, Ms Delaney submitted that the lessors:

1. were not pressing the claim for their agent’s management fee;

2. accepted the studio gemma floorplan subject to development approval or a complying development certificate;

3. agreed that they had received $8,457.76 for the security bond and $2,867.85 for rent paid for the period from 15 February 2023 to 14 March 2023;

4. were asking for the premises to be reinstated to their pre-existing condition;

5. relied on cl 20.1.5(a) of the lease.

The applicable provisions of the RL Act

RL Act

36. Part 1 (ss 1-8) contains provisions dealing with preliminary matters. Section 7 deals with the relationship between a lease and the RL Act, and provides:

This Act overrides leases

This Act operates despite the provisions of a lease. A provision of a lease is void to the extent that the provision is inconsistent with a provision of this Act. A provision of any agreement or arrangement between the parties to a lease is void to the extent that the provision would be void if it were in the lease.

37. Part 4 (ss 33-38) contains provisions dealing with alterations and other interference with the retail shop. Section 36 deals with damaged premises, and relevantly provides:

36 Damaged premises

(1) A retail shop lease is taken to provide for the following if the shop or the building of which the shop forms part is damaged—

(a) The lessee is not liable to pay rent, or any amount payable to the lessor in respect of outgoings or other charges, that is attributable to any period during which the shop cannot be used under the lease or is inaccessible due to that damage.

…

(d) If the lessor fails to repair the damage within a reasonable time after the lessee requests the lessor in writing to do so, the lessee may terminate the lease by giving not less than 7 days notice in writing of termination to the lessor.

(e) Paragraphs (a)–(d) do not affect any right of the lessor to recover damages from the lessee in respect of any damage or destruction to which those paragraphs apply.

(2) A retail shop lease must not contain any provision the effect of which is to limit any liability of a party to the lease to pay compensation to another party to the lease in respect of damage to the shop or the building of which the shop forms part.

…

38. Part 7A Division 2 (ss 62C-62E) contains provisions dealing with misleading or deceptive conduct. Section 62D deals with misleading or deceptive conduct in connection with retail leases, and provides:

62D Misleading or deceptive conduct in connection with retail leases

A party to a retail shop lease must not, in connection with the lease, engage in conduct that it is misleading or deceptive to another party to the lease or that it is likely to mislead or deceive another party to the lease.

39. Part 8 Division 3 (ss 70-76A) contains provisions dealing with the determination of claims by the Tribunal. Section 72 deals with the powers of the Tribunal relating to retail tenancy claims, and relevantly provides:

72 Powers of Tribunal relating to retail tenancy claims

(1) In proceedings for a retail tenancy claim lodged with the Tribunal under this Part, the Tribunal is empowered to make any one or more of the following orders that it considers appropriate—

(a) an order that a party to the proceedings pay money to a person specified in the order, whether by way of debt, damages or restitution, or refund any money paid by a specified person,

…

SSM Act

40. Part 7 Division 3 (ss 142-145) of the Strata Schemes Management Act 2015 (NSW) (SSM Act) contains provisions dealing with by-laws conferring rights or privileges over common property. Section 142 deals with the nature of a common property rights by-law, and provides:

142 Common property rights by-law

For the purposes of this Act, a common property rights by-law is a by-law that confers on the owner or owners of a specified lot or lots in the strata scheme—

(a) a right of exclusive use and enjoyment of the whole or any specified part of the common property, or

(b) special privileges in respect of the whole or any specified part of the common property (including, for example, a licence to use the whole or any specified part of the common property in a particular manner or for particular purposes),

or that changes such a by-law.

Issue 1: whether the Tribunal has jurisdiction to determine the two proceedings

41. Neither party addressed the issue of whether the Tribunal has jurisdiction to determine the two proceedings.

42. Having regard to the definitions of “retail shop” and “retail shop lease” in s 3, and “party” in s 63, of the RL Act, the list of retail shop businesses in cl 4 of Sch 1 of the Retail Leases Regulation 2022 (NSW) as including “coffee, tea and other non-alcoholic beverage shops”, I am satisfied that the lessees and the lessors were parties to a retail shop lease within the RL Act.

43. I am satisfied that each of the two proceedings is a “retail tenancy claim” within s 70 of the RL Act. The relief claimed in each of the two proceedings is within para (a)(i) of the definition of retail tenancy claim. I am satisfied that each of the two proceedings was lodged within three years after the liability or obligation that is the subject of the retail tenancy claim arose as required by s 71 of the RL Act.

44. I am satisfied that the Tribunal has jurisdiction to determine each of the two proceedings pursuant to ss 28(1) and (2)(a) and 29(1)(a) of the NCAT Act as s 72(1) when read with para (a)(i) of the definition of “retail tenancy claim” in s 70 of the RL Act enables the Tribunal to make decisions in relation to each of the proceedings. It follows that the functions of the Tribunal in relation to the RL Act have been allocated to the Consumer and Commercial Division pursuant to cl 3(1) of Sch 4 of the NCAT Act.

Issue 2: whether the lessees are entitled to relief under RL Act against the lessors

Issue 3: whether the lessors are entitled to relief under RL Act against the lessees

45. A difficulty in determining these issues has been the lack of evidence as to strata scheme 3573, and in particular the strata plan.

46. I have inferred from the coloured photographs depicting the floorboards beneath the timber landings that these landings were constructed at the time of the laying of the floorboards which never abutted the front bay windows but protruded a short distance beneath the landings leaving a void between the end of the floorboards and the brick wall immediately below the bay windows.

47. Strata scheme 3573 was registered under the Conveyancing (Strata Titles) Act 1961 (NSW) which provided that the boundary between separate lots or between lots and common property was the centreline of the dividing structures being walls, floors or ceilings. Upon its commencement on 1 July 1974, cl 3 of Sch 4 of the Strata Schemes (Freehold Development) Act 1973 (NSW) provided that the boundaries for previously registered plans moved to the inner face of the walls, the upper surface of the floors and the lower surface of the ceilings, and the structure became common property.

48. The premises did not include the area immediately below the upper surface of the timber landings. It follows that:

1. the lessors were not in breach of cl 7.1 when read with item 1 of the schedule of the retail shop lease by the absence of floorboards beneath the timber landings;

2. the lessees were not excused from paying rent pursuant to cl 8.2.1 of the retail shop lease because neither the premises nor the building of which the premises are part were damaged;

3. the lessees were not excused from paying rent pursuant to s 36(1)(a) of the RL Act because the premises were not damaged;

4. clause 20.1.5(a) of the retail shop lease has not relevance to the question of the liability of the lessees.

49. I am satisfied that by the terms of cl 19 of the retail shop lease and their conditional approval of the studio gemma floorplan the lessors impliedly represented to the lessees that they had the right to permit them to occupy the area beneath the timber landings as part of the premises. Contrary to this implied representation the lessors had no such right as this area was common property and the lessors could only obtain such a right if a common property rights by-law as provided in s 142 of the SSM Act was made by the owners corporation of strata scheme 3573. I infer from the details of the proposed works on the renovation application form that the lessors failed to disclose to the lessees the necessity of the making of a common property rights by-law. By failing to disclose the necessity of making a common property rights by-law to enable use of the common property beneath the timber landings the lessors engaged in misleading or deceptive conduct in connection with the retail shop lease within s 62D of the RL Act. I infer that the lessees would not have entered into the retail shop lease if they had known that they had no right to fit out the premises by removal of the timber landings.

50. In these circumstances, I am satisfied that it is appropriate to order the lessors to repay $11,325.61 being the total of $8,457.76 for the security bond and $2,867.85 for rent paid for the period from 15 February 2023 to 14 March 2023 to the lessees pursuant to s 72(1)(a) of the RL Act subject to any liability of the lessees to them. Further, rent of $8,603.55 for the period from 15 March 2023 to until 14 June 2023 is not owing by the lessees to the lessors.

51. I am not satisfied that the lessees have any obligation under the retail shop lease to reinstate the premises to their condition before the removal of the timber landing. They had the right to carry out alterations to the building pursuant to cl 19 which by reason of its location in Annexure A prevailed to the extent of any inconsistent obligation in cll 7 or 18. It follows that $7,740.00 being the total of the TCYP quotation and the TD & S quotation is not owing by the lessees to the lessors pursuant.

Orders

52. I make the following orders:

1. the respondents in proceedings COM 23/24375 are to repay $11,325.61 to the applicants immediately;

2. proceedings COM 23/30593 are dismissed.

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I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales.

Registrar

Decision last updated: 13 August 2024