Hondroyiannis v Adwell Holdings Pty Ltd

[2007] NSWADT 252

CITATION:	Hondroyiannis & Anor v Adwell Holdings Pty Ltd [2007] NSWADT 252
DIVISION:	Retail Leases Division
PARTIES:	APPLICANT Dimitrios Hondroyiannis and Eugenia Hondroyiannis RESPONDENT Adwell Holdings Pty Ltd
FILE NUMBER:	065137
HEARING DATES:	18 and 19 June 2007
SUBMISSIONS CLOSED:	13 September 2007
DATE OF DECISION:	18 October 2007
BEFORE:	Chesterman M - ADCJ (Deputy President); Fairweather R - (Advisory) Non Judicial Member ; Harrison B - (Advisory) Non Judicial Member
CATCHWORDS:	Claim for compensation for pre lease misrepresentations - Claim for declaration of rights, obligations and liabilities under a lease - Unconscionability
MATTER FOR DECISION:	Principal matter
LEGISLATION CITED:	Australian Road Rules Conveyancing Act 1919 Retail Leases Act 1994
CASES CITED:	Attorney General of New South Wales v World Best Holdings Ltd (2005) 63 NSWLR 557
REPRESENTATION:	APPLICANT R Quickenden, barrister RESPONDENT B Sharpe, barrister
ORDERS:	1. Declare that the Lease between the parties dated 3 March 2003 was not validly determined by the Respondent’s purported Notice of Determination dated 21 August 2006.; 2. Declare that during the period of currency of this Lease (including any period covered by the exercise of an option to renew) the Applicants are entitled under the Lease to load and unload stock for the purpose of the business carried on in the leased premises at a site adjacent to the rear door of the premises (on the eastern side), so long as their mode of doing so remains substantially the same as at present. ; 3. Order that during this period the Respondent is not to interfere directly or indirectly with the loading and unloading of stock by the Applicants at this location, so long as their mode of doing so remains substantially the same as at present.; 4. Order that during his period the Respondent is not to oppose any application by the Applicants to the Gosford City Council for a loading zone to facilitate the conduct of these loading and unloading operations according to the mode currently utilised.; 5. Discharge the Tribunal’s order made on 1 September 2006 restraining the Respondent from interfering with the Applicants’ possession and enjoyment of their interest under the Lease.; 6. Order that the matter of the costs of these proceedings is to be resolved as follows:-; (a) Any application for costs must be filed and served, with supporting submissions, within 28 days of the date of this decision. ; (b) The opposing party must file and serve submissions in reply within a further 28 days. ; (c) Unless reasons are advanced for a hearing to be conducted, the matter will be resolved ‘on the papers’, pursuant to s 76 of the Administrative Decisions Tribunal Act 1997.

Introduction

1 The principal issue raised in this case was whether the practices adopted by the lessees of retail shop premises in conveying fruit and vegetables between vehicles parked on a nearby public road and the shop entitled the lessor to terminate the lease.

2 The lease in question (‘the Lease’) was governed by the Retail Leases Act 1994 (‘the RL Act’). It related to premises (‘the Premises’) in the West Gosford Shopping Centre (‘the Centre’). The address of the Premises was Shop 25, West Gosford Shopping Centre, 299 Brisbane Water Drive, West Gosford.

3 The Respondent, Adwell Holdings Pty Ltd, was the owner of the Centre. It granted the Lease to the Applicants, Mr Dimitrios Hondroyiannis and Mrs Eugenia Hondroyiannis, in March 2003. The Lease was stipulated to commence on 1 March 2003 and terminate on 29 February 2008, with an option to renew for a further five years. The annual rent at commencement was stated to be $51,318.00 and the permitted use to be ‘fruit and vegetable retail’.

4 On 21 August 2006, having previously served on the Applicants a notice under s. 129 of the Conveyancing Act 1919 specifying alleged breaches by them of various covenants in the Lease, the Respondent served a notice purporting to terminate the Lease and requiring them to vacate the Premises on or before 31 August 2006.

5 The Applicants commenced the present proceedings on 29 August 2006. In their Application, they sought (a) orders restraining the Respondent from acting on its notice of termination and from interfering with their possession of the Premises and their ‘customary unloading procedures’; (b) declarations that the notice of termination was unlawful and in breach of the lessor’s covenant for quiet enjoyment, and that the Respondent had engaged in unconscionable conduct and misleading or deceptive conduct; (c) an award of $100,000 as ‘compensation’; and (d) an order for costs.

6 On 1 September 2006, the Tribunal made interim orders by consent restraining the Respondent, until further order, from acting on its notice of termination or interfering with the Applicants’ possession of the Premises. Those interim orders have not been discharged and the Applicants have remained in possession.

7 In a Notice of Reply filed on 17 November 2006, the Respondent denied that the Applicants were entitled to the orders sought.

8 Because the claims made by the Applicants included an allegation of unconscionable conduct on the part of the Respondents, the Tribunal is constituted in accordance with Clauses 1 and 4 of Part 3B of Schedule 2 of the Administrative Decisions Tribunal Act 1997 (‘the ADT Act’). It is constituted by a Deputy President who is a member of the Retail Leases Division, assisted by two other appropriately qualified members acting in an advisory capacity only.

9 At the hearing of the application at Gosford on 18 and 19 June 2007, in addition to receiving the parties’ evidence, the Tribunal conducted a view of the Premises and of other relevant parts of the Centre. Pursuant to directions given at the hearing, Mr Quickenden, counsel for the Applicants, and Mr Sharpe, counsel for the Respondent, subsequently prepared and filed written submissions.

Outline of evidence

10 Both of the Applicants gave evidence, but they called no other witnesses. The only witness for the Respondent was Mr Stephen Whalan, who at all material times was employed by the Respondent as the manager of the Centre.

11 Description of the Centre. The Centre comprises three linked single-storey buildings (each of which contains about ten small shops), a large Coles supermarket and a tavern. The single-storey buildings stand end to end and close together, on a north-south alignment. The Premises are in the building at the southern end of these three buildings. The tavern is just south of this building. The customer entrance into the Premises is on the western side of the building and there is another entrance, not used by customers, on the eastern side.

12 On the western side of the building containing the Premises is a car park. On the eastern side, there is a road, Brisbane Water Drive, which has spaces for angle-parking by vehicles. Both the car park and the road are separated from the building by a footpath, which customers use to gain access to shops. The Centre has other car parks, including one to the south of the tavern. At the time when the Lease was executed (if not also subsequently) an area adjoining the tavern was used as a loading zone.

13 The Gosford City Council (‘the Council’) and the Road Transport Authority own the roads adjacent to the Centre. They control the terms on which vehicles may be parked on these roads and determine which areas may be used as loading zones. The Respondent is the owner of the footpaths and the car parks, but at all material times the Council has controlled the footpaths and since June 2004 it has controlled the car parks.

14 The negotiations for the Lease. These were conducted early in 2003 between Mr Hondroyiannis and Mr Whalan. Both parties engaged solicitors.

15 At the time when the negotiations commenced, the Premises were used as a fruit and vegetable retail shop under a one-year lease expiring on 30 September 2003. The Applicants arranged to buy this business, which according to them was in poor condition and, indeed, under threat of being closed down by health inspectors. Mr Whalan described the lessee as ‘not the greatest’.

16 At this time, the produce sold in the Premises was unloaded on the western side and transported across the pavement into the Premises through the front entrance. There was a loading bay in front of the Premises and a sloped section of the pavement, which facilitated moving the produce.

17 Both Mr and Mrs Hondroyiannis testified that during the negotiations for the Lease Mr Whalan acknowledged that these were not satisfactory arrangements for delivering produce to a fruit and vegetable retail shop.

18 According to Mr Whalan, in a conversation around the middle of January 2003, he told Mr Hondroyiannis that if the business expanded the Applicants would need off-site premises at which they could unload their bulk produce and from which they could bring smaller loads into the Premises. He said also that the Respondent owned other premises near the Centre, in Jusfrute Drive, which it would, he thought, be prepared to lease to the Applicants at a competitive rate. Mr Hondroyiannis then agreed that the Applicants would need off-site premises and a ‘distribution set-up’, since they would be supplying fruit and vegetables to other sites in the region operated by his nephew.

19 Mr Hondroyiannis denied that a conversation along these lines occurred. He said that at about this time he asked Mr Whalan if he could have the use of a storage area nearby in the Centre. Mr Whalan replied that the area was too small, but that the Applicants could rent a place ‘across the road’. Mr Hondroyiannis then said that if their business grew bigger, he would look into this possibility. He added that his nephew had shops in the region and had thought of setting up a distribution centre and that he (Mr Hondroyiannis) might ‘do something with’ his nephew.

20 In a letter to Mr Hondroyiannis dated 22 January 2003, written on the Centre’s letterhead, Mr Whalan set out two ‘lease proposals’. One, relating to the Premises, was for a five-year lease with a five-year option and was stated to be ‘subject to vacant possession’. The other, relating to a unit in Jusfrute Drive, was also for a five-year lease with a five-year option, with dates coinciding with those set out in the former proposal. It was stated to be subject to the Respondent’s approval, which in Mr Whalan’s opinion was certain to be granted.

21 Mr Whalan testified that on 28 January 2003 Mr Hondroyiannis advised him of having reached agreement with the existing lessee to buy the business being carried on at the Premises. Mr Whalan then asked him whether he had thought any more about the premises at Jusfrute Drive, adding that the Applicants would need other premises for unloading their bulk produce and that there was no available space at the Centre. Mr Hondroyiannis replied that he was ‘looking for a suitable site on the main road’ and ‘would need to operate a retail business there to offset the extra rental cost’.

22 Mr Hondroyiannis denied that this discussion about premises for storage occurred. At most, he said, Mr Whalan may have asked him whether he had thought any more about the premises in Jusfrute Drive.

23 In a letter to Mr Hondroyiannis dated 29 January 2003, Mr Whalan referred to their conversation on the previous day, noting that he had been told of the Applicants’ agreement to buy the business from the existing lessee and that he had indicated the Respondent’s willingness to grant a new five-year lease, ‘subject to a complete redevelopment of the site’. He confirmed that the Respondent did not have any additional area that it could lease ‘for cool rooms, storage and work area etc’. He said that the factory site in Jusfrute Drive was still available and quoted a figure for rent. He referred also to a possibility that the Applicants might be able to lease a tobacconist shop at 26B Brisbane Water Drive, if it became available. Finally, he said that if the Applicants proceeded with the new five-year lease of the Premises, the Respondent would grant a rent-free period of three months, to assist them with redevelopment costs.

24 According to Mr Hondroyiannis, he was not concerned at this time about additional storage, as it would only become necessary if the business at the Premises grew substantially.

25 Early in February 2003, the parties or their solicitors prepared a lessor’s and a lessee’s disclosure statement. The lessor’s statement indicated that the Respondent planned ‘changes or development’ for the surrounding roads, but not for the Centre. Accompanying plans set out planned changes to the southern car park, but these changes did not appear to affect the car park adjacent to the western side of the Premises.

26 In cross-examination, however, Mr Whalan acknowledged that at this time he knew that according to the plans for changing the car parking arrangements, the parking spaces on the western side would be incorporated into a new car park. In consequence, it was likely that the Applicants would no longer be able to unload their produce from these spaces. He did not, however, advise them of this possibility.

27 The Lease. Early in March 2003, the parties signed the Lease. It contained the following lessee’s covenants of relevance to these proceedings:-

5.1(a) Not to use the Premises for any purpose other than the permitted use (this being stipulated in Item 8 of the Reference Schedule to be ‘fruit and vegetable retail’).

5.1(d) Not to do or permit anything in the Premises or the Centre that in the lessor’s opinion might become a nuisance, a disturbance, an obstruction or a cause of damage to the lessor or to other occupants or users of the Centre or neighbouring properties.

5.4.7(a) Not to display any sign or notice on any part of the Premises or the Centre without the prior written consent of the lessor.

11.2.1 Not to park any motor vehicle in the parking areas provided for the public.

11.2.3 To use for the receipt, delivery or other movement of stock or produce only such parts of the Premises and the Common Areas designed for such purpose and at such times as the lessor might from time to time direct.

11.2.9 Not to obstruct or permit the obstruction of any part of the Common Areas including walkways.

28 In clause 1.1, the Common Areas were defined as ‘all those parts of the Centre (including any car park) not leased to any person and designed or intended for common use by the lessee and the other occupiers and visitors to the Centre’.

29 Clause 16.1(c) provided that any failure by the lessee to observe any covenant should constitute ‘default under this Lease’, entitling the lessor to terminate the Lease by repossession or by written notice, pursuant to clause 16.2.

30 A lessor’s covenant for quiet enjoyment was set out in clause 8.

31 Item 19, headed ‘Special Conditions’, of the Reference Schedule contained the following paragraph:-

3. The Lessee acknowledges that the Loading Bay at the front of Shop 25 is NOT for the exclusive use of the Lessee, and furthermore will not cause any forklift truck or similar device to be parked in front of the shop or the Loading Bay or to obstruct the Loading Bay in any way (apart from reasonable use for the purposes of quickly loading and unloading the Lessee’s stock).

32 The change in arrangements for delivering produce. The Applicants took possession during March 2003, cleaned the Premises, installed new fitout and commenced business. They were granted a rent-free period of four months.

33 Until June 2004, the method adopted by Mr Hondroyiannis for delivering produce involved parking a contracted ten-tonne truck in two or three car parking spaces on the western side of the Premises for about 30 minutes on two or three days each week. He used a forklift to transfer pallets from the truck onto the footpath. He then spent a further hour carrying them into a cool room near the rear of the Premises, using a pallet jack.

34 Mr Hondroyiannis testified that when using this method of unloading he felt that he had to use considerable care to avoid injuring people nearby. But he received no complaints about it from Mr Whalan or from anyone else. After another representative of the Respondent expressed some concern to him about insurance cover, he adopted the practice of putting witches’ hats around the unloading area.

35 The spaces used included or constituted the loading bay contemplated in the Lease. This was not designated for the exclusive use of the Applicants but was available for use by other tenants of the Centre.

36 Mr Whalan said however that he made a number of oral complaints on this issue to Mr Hondroyiannis and sent him ‘many letters’. The Respondent’s evidence did not, however, include copies of any such letters or of file notes or diary entries recording such complaints.

37 On 3 June 2004, in a letter to the Applicants, Mr Whalan indicated that, ‘as previously advised’, work had commenced on upgrading the car park on the western side of the Centre. In consequence, the letter stated, the entry height level on a new gate to be erected would, like an existing gate be set at 2.2 metres. The letter continued as follows:-

There will be a need for you to use a smaller vehicle to deliver your produce to your store.

It may be advantageous for you to load into your coolroom from the Brisbane Water side.

38 There then ensued some discussions between Mr Hondroyiannis and Mr Whalan. Mr Whalan alleged that he raised again the matter of off-site storage. Mr Hondroyiannis denied this. Mr Hondroyiannis alleged, but Mr Whalan denied, that Mr Whalan agreed to organise the installation of a ramp between the pavement and the road and to arrange a loading zone.

39 In consequence of these discussions, Mr Hondroyiannis agreed to transfer his unloading operations from the western to the eastern side of the Premises. Soon after, the Applicants purchased a three-tonne truck for $50,000.

40 Since then, Mr Hondroyiannis has used this truck to bring produce from markets, which he or an employee of the Applicants unloads on the eastern side of the Premises. A forklift is used to transport pallets from the truck across the footpath and into the rear entrance of the Premises. There is no sloping pavement, so until August or September 2006, when the Applicants purchased a portable ramp, the forklift has sometimes been driven some 20 metres to and from a point where it can proceed between the footpath and the road.

41 The truck has occupied three or four of the angle-parking spaces near to the Premises and sometimes has stayed there for as much as three hours, substantially exceeding the time limit of 30 minutes permitted by parking regulations. On average, the unloading operations have taken place twice per week during winter and three times per week during summer.

42 Mr Hondroyiannis testified that although this method of unloading has created more work for him and his employees, he has found it more satisfactory because on the eastern side there is considerably less pedestrian traffic and less pressure on parking than on the western side. An unsatisfactory feature is, however, is that the Applicants have been booked on occasions for infringing parking regulations.

43 The evidence tendered by the Respondent included diary entries by Mr Whalan summarising his observations of the Applicants’ unloading and loading operations on a number of days within the period from 10 July 2006 to 22 February 2007. These were supplemented by photographs of these operations taken by him on 10 July, 7 August, 28 August and 26 October 2006.

44 In addition, the Tribunal viewed DVD footage of these procedures taken on 12 April 2007. The Applicants agreed that what it depicted was typical of what occurred. This viewing occurred during the cross-examination of Mr Hondroyiannis, who answered questions relating to the footage. Exhibited to Mr Whalan’s affidavit were nine other discs containing similar footage, recorded between 12 April and 14 May 2007.

45 The tenor of this evidentiary material was to substantiate the assertions made on the Respondent’s behalf that ever since the Applicants commenced unloading and loading their produce on the eastern side of the Centre, their procedures have involved (a) parking their truck for periods of some hours across two or three parking spaces, (b) placing pallets containing fruit and vegetables on the roadway and the footpath and (c) driving a forklift across and (sometimes) along the footpath.

46 Changes in the scale and nature of the Applicants’ business. While no precise details were furnished in the evidence, the Applicants acknowledged that one of the reasons why the unloading operations took longer following the change to the eastern side was that their business became distinctly more successful. They claimed that the rate of expansion was slow at first, but became faster from mid-2004 onwards.

47 Another change of significance was that some time in 2005 or 2006 the Applicants started to make regular deliveries of fruit and vegetables, using a small van, to restaurants, hotels and a nursing home in the vicinity. According to the Applicants, loading this van – which has also been done across the footpath on the eastern side of the Premises – has taken about 30 minutes and has occurred on six days each week. They estimated that these sales have come to account for between 15% and 20% of the turnover of their business.

48 Concerns about unloading procedures expressed by the Respondent. According to Mr Whalan, he became concerned that because the Applicants’ truck was parked parallel to the kerb during the unloading operations it occupied too many parking spaces, that these operations lasted for too long and that even after they were completed the truck was left parked illegally for lengthy periods. Mr Whalan alleged that he complained many times to Mr Hondroyiannis about these matters, but that the Applicants took no notice of him and did not change their procedures. Mr Hondroyiannis denied that Mr Whalan made any complaint until he raised the issue of the truck being left in the parking area in a memorandum written on the Respondent’s letterhead early in 2005.

49 This memorandum, dated 11 January 2005, was in the following terms:-

I noticed yesterday a possible problem that may develop with your delivery/unloading procedure.

I observed that the unloading of your vehicle had been completed by approx 11am.

Your unloaded vehicle was still in a parallel to kerb parking position in a ½ hour parking limit angle parking area at approx 2.30pm, occupying several car park spaces, at least 3 hours after it had been unloaded.

Perhaps you should consider moving the vehicle to the back street area, immediately after the unloading work has been completed.

Lengthy delays that I observed yesterday could “excite” Council Rangers, Parking Police, Police or RTA Officers.

The possible involvement of these “forces” could present you with problems in the future.

The matter is entirely in your hands.

50 The Applicants did not reply to this memorandum. Mr Hondroyiannis testified that after receiving it, he made sure that the truck was moved as soon as the unloading was finished. He said also that in the ensuing weeks Mr Whalan would ‘occasionally’ watch the unloading, either offering no comment or making observations such as ‘get that stuff off here - you have been here two hours already’ or ‘how much longer are you going to be’.

51 In a conversation on 17 October 2005, Mr Whalan told Mr Hondroyiannis that the unloading procedures were creating problems for other tenants and for customers and would have to be changed immediately. Mr Hondroyiannis replied that he would seek the Council’s approval for a loading zone for his business.

52 According to Mr Hondroyiannis, in this conversation Mr Whalan said: ‘You are taking too long to unload. You should do it earlier in the day, so as not to take up parking spaces.’ Mr Hondroyiannis’s evidence also included a statement that the Applicants had never received any complaints about their unloading procedures from tenants or customers.

53 On 17 October 2005, Mr Whalan wrote to Mr Hondroyiannis in the following terms:-

This letter confirms our discussion earlier today, wherein I advised that your regular Stock unloading is unacceptable.

You are taking up too much footpath space – with too much stock, over too much time.

There is a need for you to sort out your own shop stock and your other wholesale stock off site.

You may avail yourself of the bottom car park area to do this job, providing again, that you are in and out of the car park area within 3 hours or you may incur the displeasure of the Parking Police.

I look forward to your comments and suggestions.

54 Mr Whalan testified that on a few subsequent occasions he again observed the same problems with the Applicants’ loading procedures. He accordingly wrote to the Applicants in the following terms on 28 November 2005:-

It has come to my attention that you have had your delivery vehicle parked outside your premises for some 4-5 hours today.

We please ask that you have consideration to the customers of the Centre & please park your vehicle outside the Centre, when your delivery has been finalised.

55 The Applicants did not reply to either of these letters.

56 Mr Whalan alleged that between November 2005 and June 2006 he continued to complain to Mr Hondroyiannis about (a) the truck being parked for too long and taking up too many spaces, (b) the volume of produce being placed on the roadway and the footpath and (c) the use of a forklift on the footpath. According to Mr Hondroyiannis, Mr Whalan raised these matters on only two occasions during this period.

57 In a letter to the Applicants’ solicitors dated 9 January 2006 (a copy of which was not in the evidence tendered to the Tribunal) the Respondent’s solicitors asserted that the Applicants’ unloading procedures involved breaches of the lease. In a letter of reply dated 1 February 2006 (this letter was included in the Applicants’ evidence), the Applicants’ solicitors rejected this claim, setting out a number of reasons why it could not be sustained. It referred amongst other things to Special Condition 3 in Item 19 of the Lease (see [31] above) and to the changes that occurred in June 2004.

58 Mr Whalan testified also that in August 2006, having seen Mr Hondroyiannis drive the forklift for some distance along the footpath, he discovered that the forklift was not registered or insured. He then telephoned Gosford Police who (he understood) raised this matter with Mr Hondroyiannis. He observed that thereafter Mr Hondroyiannis carried produce on the forklift across the footpath, but not along it.

59 The Respondent’s claims regarding alleged wholesale trading by the Applicants. This matter appears to have been raised between the parties’ solicitors in the correspondence in early 2006 that has just been mentioned. The Applicants’ solicitors claimed in their letter of 1 February 2006 that the use of the word ‘wholesale’ in signage at the Premises was ‘mere puffery to encourage the belief that wholesale prices might be got there’. They asserted that no produce was ‘sold for resale’.

60 During May 2006, the Applicants organised for the Premises to be refurbished. They had the signage repainted, using the same wording as had appeared when they entered into the Lease. The term ‘wholesaling’ was one of the words used.

61 Following a conversation with Mr Hondroyiannis regarding this aspect of the signage and the problems associated with unloading, Mr Whalan wrote to Mr Hondroyiannis on 23 June 2006. The letter required the Applicants to remove the word ‘wholesaling’ from the ‘unauthorised signage’, since the Lease did not provide for this usage.

62 Subsequently, the Applicants removed the sign from the Premises. According to Mr Whalan, it was not until after the purported termination of the Lease, which occurred on 21 August 2006.

63 The letter of 23 June 2006 also claimed that the Applicants’ small van was ‘continually’ parked in the 30-minute parking area in front of the Centre and that sometimes a traffic cone was placed in this area ‘while the vehicle is off doing deliveries – wholesale?’ It indicated that this ‘illegal practice’ had become an ‘embarrassment’ to Mr Whalan and requested the Applicants to cease parking this vehicle in the Centre’s restricted parking area.

64 In cross-examination, Mr Whalan said that he had raised this matter of the Applicants’ ‘illegal practice’ in parking their van for excessive periods because some of the Centre’s tenants had complained to him about it

65 The steps taken by the Respondent with a view to determining the Lease. On 3 July 2006, Mr Whalan served on Mr Hondroyiannis a Notice of Breach of Covenant under s. 129 of the Conveyancing Act 1929. This Notice, which was drafted by the Respondent’s solicitors, alleged breaches by the Applicants of clauses 5.1(a), 5.1(d), 5.4.7, 11.2.1, 11.2.3 and 11.2.9 of the Lease (for a summary of each of these clauses, see [27] above). It required that these breaches be remedied by cessation of the following: (a) selling of fruit and vegetables on a wholesale basis; (b) maintaining a sign advertising wholesaling; (c) loading and unloading produce across public footpaths and thoroughfares, except in designated loading zones, or in any areas near the Premises other than those provided by the Respondent; and (d) parking motor vehicles ‘outside the premises in the parking areas provided for the public’. The Notice stipulated a period of 21 days for compliance.

66 The parties’ solicitors then exchanged a deal of correspondence, of which it is sufficient for present purposes to note four aspects.

67 First, the Respondents’ solicitors pointed out in a letter dated 19 July 2006 that a loading zone adjoining the tavern at the southern end of the Centre had existed since 2001 and claimed that the Applicants had been instructed more than once to use this zone and/or another zone at the northern end. In cross-examination, however, Mr Whalan said that he believed the southern zone to be unsuitable for use by the Applicants. Mr Hondroyiannis confirmed this in his testimony. He pointed out that there was a ‘hump’ in the footpath on the eastern side between this zone and the Premises, rendering it unsafe for the transport of pallet containing produce on a motorised forklift and, indeed, impossible to use a manual forklift for this purpose. This aspect of the footpath was apparent to the Tribunal when it conducted its view of the Premises and the Centre.

68 By way of sequel, the Respondents’ solicitors, in a letter dated 24 August 2006, claimed that Mr Hondroyiannis had used the southern zone to unload produce but had then driven a laden forklift along the footpath to the Premises. This would appear to have been the incident to which Mr Whalan referred in his testimony (see [58] above). The letter described this conduct as ‘extremely dangerous to members of the public’ and required that Mr Hondroyiannis should cease immediately this method of operation. It added: ‘Common sense would indicate that your client should drive on the road surface and not the public footpath.’ In his evidence, Mr Hondroyiannis said that because of one-way traffic requirements this would entail driving the forklift all the way around the Centre every time a load of produce was delivered to the Premises.

69 Secondly, in the letter of 19 July 2006, the Respondents’ solicitors referred to a request recently made by the Applicants to the Council for the creation of a loading zone near the eastern entrance to the Premises and stated that the Respondent did not support this request. In letters sent subsequently by Council members to the Applicants and their solicitors, it was indicated that this request was in fact rejected on account of opposition from Mr Whalan.

70 Thirdly, the Respondents’ solicitors revived the suggestion that the Applicants should lease premises for storage in Jusfrute Drive.

71 Fourthly, the Respondents’ solicitors rejected a request for removal of the barrier preventing the Applicants from bringing their truck into the parking area on the western side of the Centre.

72 On 22 August 2006, a Notice of Determination of the Lease, dated 21 August 2006 and requiring the Premises to be vacated by 31 August 2006, was served on the Applicants.

73 As indicated above, the Applicants lodged their Application in the Tribunal on 29 August 2006. They have remained in the Premises pursuant to interim orders made by consent on 1 September 2006

Assessment of the evidence

74 In the Tribunal’s opinion, Mr Whalan was a less credible witness than either of the Applicants. In cross-examination, he displayed a reluctance to give direct answers to some of the questions put to him regarding the relatively few factual matters that were in dispute. On a couple of occasions, he claimed to have prepared contemporaneous file notes or diary entries recording relevant conversations with Mr Hondroyiannis, but no notes or diaries were produced.

75 While some inconsistencies can be identified in the evidence of the Applicants, they appeared to the Tribunal to be generally reliable and truthful witnesses.

76 The most significant implications of these observations about the witnesses are twofold.

77 First, the Tribunal prefers the evidence of Mr Hondroyiannis to that of Mr Whalan in relation to their discussions, during negotiations for the Lease, of Mr Whalan’s proposal for the Applicants to lease premises in Jusfrute Drive from the Respondent for the purposes. The Tribunal accordingly finds that Mr Hondroyiannis did not at any stage indicate to Mr Whalan that the Applicants would be prepared to lease off-site premises and ‘a distribution set-up’, whether in Jusfrute Drive or anywhere else in the vicinity. The leasing of premises in Jusfrute Drive was encouraged by Mr Whalan, not sought by Mr Hondroyiannis.

78 Secondly, these observations about these two witnesses support findings by the Tribunal that it would in any event be inclined to make on reviewing the relevant correspondence. These are to the effect that the Respondent did not complain about the Applicants’ unloading and loading operations on the western side during the period from June 2004 to July 2006 as frequently or as vigorously as Mr Whalan alleged. Furthermore, the Tribunal makes the important finding, based on Mr Hondroyiannis’s evidence, that Mr Whalan made no adverse comment at all until the memorandum of 11 January 2005.

79 The correspondence which provides the basis for these findings comprises the memoranda and letters dated 11 January, 17 October and 28 November 2005 from Mr Whalan to the Applicants. A noteworthy feature of this correspondence is that it does not refer, expressly or by implication, to vigorous complaints having been made by Mr Whalan in conversations with Mr Hondroyiannis. Instead, Mr Whalan employed phrases such as (a) ‘I noticed yesterday a possible problem…’ and ‘Perhaps you should consider moving the vehicle…’ in the first of these letters; (b) ‘This letter confirms our discussion earlier today, wherein I advised that your regular Stock unloading is unacceptable’, in the second letter; and (c) ‘We please ask that you have consideration to the customers of the Centre…’ in the third letter (emphasis added).

Whether the Respondent had grounds justifying termination of the Lease

80 The issues arising under this heading fall to be resolved by reference to the terms on which the parties reached agreement at key stages of their relationship.

81 Special Condition 3 in Item 19 of the Lease (see [31] above) contained a promise by the Respondent to permit the Applicants to unload and load produce at a space on the road on the western side of the Premises, while also imposing conditions on the use of this space. In June 2004, by agreement between the parties, the Respondent granted permission to the Applicants to use space for these purposes on the eastern side instead of the western side. Between June 2004 and January 2005, the Respondent raised no objection to the way in which the Applicants carried out these activities on the eastern side. In January 2005, it objected only to the Applicants’ truck being parked outside the Premises for excessive periods of time. Not until October 2005 did it object in writing to the manner in which unloading and loading occurred and the length of time for which these activities continued.

82 The important point emerging from these aspects of the evidence is that over a significant period of time the Respondent implicitly acknowledged that the terms on which it agreed that the Applicants might unload and load produce – first on the western side, then on the eastern side – included the granting of permission to the Applicants to depart, to the extent required, from strict adherence to the terms of the covenants in the Lease prohibiting the creation of any obstruction, disturbance or nuisance in the Common Areas (including the walkways) or in any other part of the Centre. The scope of these covenants, which are set out in clauses 5.1(d) and 11.2.9 of the Lease, was accordingly curtailed to the extent required to allow the Applicants to enjoy the benefits thereby conferred.

83 The same line of reasoning applies to the covenant, in clause 11.2.1, prohibiting the parking of motor vehicles in the parking areas provided for the public. It also dispels any claim that the Applicants breached the provision in clause 11.2.3 that they might ‘only use for the receipt, delivery or other movement of stock or produce such parts of the Premises and the Common Areas designed for such purpose and at such times as the Lessor might from time to time direct’.

84 Underlying this line of reasoning is the consideration that relatively frequent unloading and loading of stock is an inevitable and well-recognised feature of businesses within the category defined by the permitted use in the Lease – fruit and vegetable retail. It is necessitated by the simple fact that the stock is perishable. It is an accepted practice within this industry, to which the Tribunal is required to have regard under s. 78 of the RL Act.

85 The Respondent’s objections to the Applicants’ unloading and loading operations from October 2005 onwards stemmed largely from two perceptions on its part. These were (a) that the scale of the unloading operations had increased significantly and (b) that the Applicants were also loading produce into their small van in order to conduct what the Respondent claims to be wholesale trade.

86 As to the first of these matters, the Tribunal’s view is that the terms on which the Respondent permitted unloading and loading were not subject to any condition, express or implied, limiting the scale of these operations to a level below that which might be reasonably expected in a successful fruit and vegetable retail business being conducted at the Premises. Through granting to the Applicants a lease of the Premises in which the Permitted Use was ‘fruit and vegetable retail’ and stipulating on two different occasions where unloading and loading of fruit and vegetables should take place, the Respondent must be taken to have implicitly agreed that the Applicants could engage in these operations to the extent necessary to service a growing and increasingly successful business, conducted in accordance with accepted industry practices. The permission granted by the Respondent was not limited to unloading and loading at the level that the Applicants found to be sufficient when at the commencement of the Lease they took over what was acknowledged by both parties to have been a comparatively unsuccessful fruit and vegetable shop.

87 In seeking to rebut this reasoning, Mr Sharpe, in his written submissions, claimed that in the negotiations preceding the entry into the Lease, Mr Hondroyiannis agreed with Mr Whalan that if the Applicants’ business expanded they would obtain off-site storage premises from which they would deliver produce to the Premises in small loads. Mr Sharpe pointed out that if the Applicants had abided by this agreement any produce that they sold to a customer outside the Centre, such as a restaurant or a hotel, need never at any stage be brought to the Premises.

88 The Tribunal has found, however, that no such agreement or understanding was ever reached (see [72] above), by virtue of its conclusion that on contested matters Mr Hondroyiannis’s testimony should be preferred to that of Mr Whalan. In addition, the Tribunal is of the opinion that the procedure that according to Mr Whalan the Applicants should have adopted – involving unloading produce into storage premises off-site, then transporting it in small loads to the Premises – was not reasonably practicable for a business such as the Applicants conducted.

89 Mr Sharpe also contended that the driving (by Mr Hondroyiannis or an employee of the Applicants) of the motorised forklift along or across the footpath on the eastern side of the Premises amounted to an offence under rule 288(1) of the Australian Road Rules and for this reason fell ‘outside the agreement between the parties constituted by the Lease’.

90 In the Tribunal’s opinion, however, any such illegality does not of itself provide a justification for the Respondent to terminate the Lease, since it forms part of the operation of unloading produce implicitly contemplated by the Respondent when it requested the Applicants in June 2004 to carry out this operation on the eastern side of the Premises. The Tribunal notes, but does not rule on, a submission by Mr Quickenden that the Respondent, as owner of the footpath, is entitled to close it at any time to members of the public, thereby rendering rule 288(1) inapplicable.

91 The Respondent claimed that the Applicants’ sales to restaurants, hotels and a nursing home both contributed to their excessive use of parking spaces beside the Premises and constituted in their own right breaches of clause 5.1(a) of the Lease. These sales, according to the Applicants, had come to account for about 20% of their turnover.

92 In support of this claim, Mr Sharpe cited in his written submissions the following phrases contained in dictionary definitions of ‘wholesale’ and ‘retail’:-

Wholesale : ‘the sale of commodities in large quantities, as to retailers or jobbers rather than to consumers directly (distinguished from retail)’ – Macquarie Dictionary (revised 3rd edition); ‘the selling of things in large quantities to be retailed by others (cf retail)’ – Australian Concise Oxford Dictionary (4th edition).

Retail: ‘the sale of commodities to household or ultimate consumers usually in small quantities (opposed to wholesale)’ – Macquarie Dictionary (revised 3rd edition); ‘the sale of goods in relatively small quantities to the public, and usually not for resale (cf wholesale)’ – Australian Concise Oxford Dictionary (4th edition).

93 Mr Quickenden agreed that these definitions should be accepted, but argued that according to them the Applicants’ sales to restaurants, hotels and a nursing home were in fact retail sales. The reason, he contended, was that none of the customers resold the produce. Instead, they consumed it. He pointed also to the words ‘usually not for resale’ in the Oxford definition of ‘retail’ and he raised the argument that Special Condition 3, by referring to ‘loading’, implicitly permitted deliveries of the Applicants’ produce.

94 Save for this last argument (which in the Tribunal’s opinion does not relate to the question at hand), the Tribunal accepts Mr Quickenden’s submissions. Even though in some instances a restaurant, hotel or nursing home might provide to their clientele a piece of fresh fruit or a raw vegetable which it had purchased from a shop such as that of the Applicants, this does not make such an institution a ‘retailer’ of fruit or vegetables. Most of the items of produce sold by the Applicants to these institutions would not reach their clientele as unchanged commodities being resold, but as part of a prepared meal. Accordingly, these sales by the Applicants did not, in the Tribunal’s judgment, constitute wholesale trade in breach of clause 5.1(a) of the Lease.

95 In the preceding paragraphs, the Tribunal has discussed and rejected the Respondent’s claim that its Notice of Breach of Covenant was justifiably based on breaches by the Applicants of clauses 5.1(a), 5.1(d), 11.2.1, 11.2.3 and 11.2.9 of the Lease. The only other breach alleged in the Notice was of clause 5.4.7(a).

96 Clause 5.4.7(a) prohibited the display of any sign or notice without the prior written consent of the lessor. The Tribunal finds that merely by repainting a pre-existing sign in May 2006 the Applicants did not breach this covenant. It notes that clause 5.4.7(c) required the Applicants to ‘maintain any Approved signs in a state of good repair and condition’

97 For the foregoing reasons, the Tribunal concludes that the Notice of Breach of Covenant alleged breaches by the Applicants that did not in fact occur. Accordingly, the Lease was not effectively terminated by the Notice of Termination dated 21 August 2006.

The Applicants’ claim of unconscionable conduct

98 In his written submissions, Mr Quickenden argued that the following aspects of the Respondent’s behaviour constituted unconscionable conduct within s. 62B(1) of the RL Act; (a) failing to disclose before the commencement of the Lease the likelihood of alteration of the Applicants’ unloading and loading procedures; (b) moving these procedures from the western to the eastern side of the Premises, primarily for the Respondent’s purposes; (c) encouraging this change without ‘formalising’ it (in a written agreement) or ‘legalising’ it (by applying to the Council for the creation of a loading zone); (d) conducting a ‘campaign’ to prevent the Applicants from unloading and loading in the current manner; (e) taking steps through its solicitors to determine the Lease; and (f) not conceding until Mr Whalan’s cross-examination that the southern loading zone was unsuitable for the Applicants’ purposes.

99 Mr Quickenden relied specifically on the provisions in s. 62B(3) that the Tribunal, in determining whether a lessor has engaged in unconscionable conduct, may have regard to the following: whether the lessor has exerted undue influence or undue pressure or used unfair tactics (subparagraph (d)); whether the lessor has unreasonably failed to disclose intended conduct that might affect the lessee’s interests and any risks to the lessee arising from the lessor’s conduct (subparagraph (i)); and the extent to which the lessor acted in good faith (subparagraph (k)).

100 As both Mr Quickenden and Mr Sharpe pointed out, however, a finding of unconscionable conduct against a lessor under s. 62B(1) can only be made if the conduct can be described as ‘highly unethical’ and involves ‘a high degree of moral obloquy’ (Attorney General of New South Wales v World Best Holdings Ltd (2005) 63 NSWLR 557 at 583).

101 In the Tribunal’s opinion, the only instance of conduct identified by Mr Quickenden that might answer this description is Mr Whalan’s opposition to the Applicants’ application to the Council for a loading zone on the eastern side of the Premises. But the evidence on this matter failed to rule out the possibility that Mr Whalan acted bona fide, albeit unreasonably. He expressed concern for the safety of pedestrians, which as he saw it would remain in jeopardy irrespective of whether the Applicants’ unloaded their produce from a designated parking space or from a loading zone. His opposition to the creation of a loading zone was arguably consistent with this belief.

102 The Tribunal considers that Mr Whalan’s continued refusal to try to cater for the Applicants’ legitimate need for proper unloading and loading facilities (save on the basis that they rented off-site storage premises and used a procedure that the Tribunal considers to be impractical) fell not far short of the form of unethical conduct that s. 62B contemplates. But its conclusion is that the Applicants’ claim of unconscionable conduct is not made out.

103 There is a further reason why this claim fails. This stems from the fact that the only remedies obtainable for unconscionable conduct under the RL Act are orders for the payment of money (whether by way of debt, damages or restitution) and orders that a specified amount of money is not due or owing by a party to the proceedings (see s. 72AA). For this reason alone, the Tribunal would be bound to reject the Applicants’ claim in their Application to the Tribunal (see [5]) for a declaration that the Respondent had engaged in unconscionable conduct.

104 The Application did include a claim for ‘compensation’ as well. In his submissions, Mr Quickenden identified as heads of damage the expenses incurred by the Applicants in purchasing a truck in June 2004 and a ramp in August 2006. Invoices for the purchase of these two items were included in the Applicants’ evidence. But Mr Quickenden acknowledged that the whole purchase-price of the truck could not be claimed because (a) it remained an asset of the Applicants and (b) since June 2004 the Applicants had no longer had to pay for the use of the larger vehicle that they had previously hired. The first of these reasons applies also to the Applicants’ claim for damages flowing from their purchase of the ramp.

105 Mr Quickenden’s submissions included the statement that the amounts of damages payable under these heads were ‘speculative’. He sought leave to adduce further evidence on this matter.

106 The Tribunal is not prepared, however, to grant such leave. Its reasons are (a) that any damages awarded would not be substantial and (b) that the Applicants, who have been legally represented throughout, have had ample opportunity to obtain the requisite evidence.

107 It follows that on this separate ground also – the failure to adduce evidence that would permit quantification of the damage allegedly suffered – the Applicants’ unconscionable conduct claim must be dismissed.

The Applicants’ claim of pre-lease misrepresentations

108 Although the Application filed in these proceedings referred to ‘misleading or deceptive conduct’, Mr Quickenden in his submissions substituted a claim that during the negotiations for the Lease the Respondent made a false and misleading statement or representation under s. 10 of the RL Act. He relied on Mr Whalan’s failure to disclose the likelihood of alteration of the Applicants’ unloading and loading procedures.

109 The Tribunal rejects this claim for two reasons.

110 First, the evidence did not sufficiently establish that the Applicants would have declined to take up the Lease if they had known in advance that the site for unloading and loading their produce would or might change.

111 Secondly, for reasons just outlined the Applicants did not adduce evidence that would permit quantification of the alleged damage suffered on account of this misrepresentation had not been sufficiently proved.

The Tribunal’s orders

112 The orders sought by the Applicants included a declaration that the Respondent’s service of a Notice of Determination of the Lease, dated 21 August 2006, on the Applicants constituted a breach of the covenant for quiet enjoyment in clause 8 of the Lease. In view of the fact, however, that the Tribunal has held this Notice to be invalid, no such breach occurred.

113 At the hearing, Mr Quickenden indicated that the claim for an order restraining the Respondent from interfering with the Applicants’ possession and enjoyment of their leasehold interest was no longer pressed.

114 In the light of the foregoing reasons, the following orders are appropriate:-

1. Declare that the Lease between the parties dated 3 March 2003 was not validly determined by the Respondent’s purported Notice of Determination dated 21 August 2006.

2. Declare that during the period of currency of this Lease (including any period covered by the exercise of an option to renew) the Applicants are entitled under the Lease to load and unload stock for the purpose of the business carried on in the leased premises at a site adjacent to the rear door of the premises (on the eastern side), so long as their mode of doing so remains substantially the same as at present.

3. Order that during this period the Respondent is not to interfere directly or indirectly with the loading and unloading of stock by the Applicants at this location, so long as their mode of doing so remains substantially the same as at present.

4. Order that during his period the Respondent is not to oppose any application by the Applicants to the Gosford City Council for a loading zone to facilitate the conduct of these loading and unloading operations according to the mode currently utilised.

5. Discharge the Tribunal’s order made on 1 September 2006 restraining the Respondent from interfering with the Applicants’ possession and enjoyment of their interest under the Lease.

6. Order that the matter of the costs of these proceedings is to be resolved as follows:-

(a) Any application for costs must be filed and served, with supporting submissions, within 28 days of the date of this decision.

(b) The opposing party must file and serve submissions in reply within a further 28 days.

(c) Unless reasons are advanced for a hearing to be conducted, the matter will be resolved ‘on the papers’, pursuant to s 76 of the Administrative Decisions Tribunal Act 1997.