Illawarra Retirement Trust v Colliers International (Wollongong) Pty Ltd

[2021] NSWCATCD 113

Civil and Administrative Tribunal

New South Wales

Medium Neutral Citation:

Illawarra Retirement Trust v Colliers International (Wollongong) Pty Ltd [2021] NSWCATCD 113

Hearing dates:

13 September 2021

Date of orders:

30 December 2021

Decision date:

30 December 2021

Jurisdiction:

Consumer and Commercial Division

Before:

L Wilson, Senior Member

Decision:

1. The application is dismissed.

Catchwords:

COMMERCIAL – Agency Agreement – Reasonable fees

Legislation Cited:

Civil and Administrative Tribunal Act 2013 (NSW)

Fair Trading Act 1987 (NSW)

Property and Stock Agents Act 2002 (NSW)

Cases Cited:

Beyond 2000 Investments Pty Ltd v Ben Boyd Real Estate Pty Ltd [2015] NSWCATAP 220

Evans v Baystate Pty Ltd t/as Domaine Plus Real Estate [2020] NSWCATAP 275

Investmentsource v Knox [2002] NSWSC 710

Lam v Steve Jarvin Motors Pty Ltd [2016] NSWCATAP 186

Mary Anne Bernadette And Joseph Michael Dalli V Bos Holdings Pty Ltd [2018] NSWCATCD 15

McGrath and Ors v Y Corp Developments Pty Ltd [2018] NSWCATCD 68

Raymond and Rebecca Fraser v Aspect Marketing Pty Ltd atf ASAP Family Trust [2014] NSWCATCD 98

Reid v David Gilmour Real Estate Pty Ltd [2019] NSWCATCD 70

Remuneration Data Base Pty Ltd v Pauline Goodyer Real Estate Pty Ltd & Anor [2007] NSWSC 59

Remuneration Data Base Pty Ltd v Pauline Goodyer Real Estate Pty Ltd & Anor [2007] NSWSC 59

Texts Cited:

Nil

Category:

Principal judgment

Parties:

Illawarra Retirement Trust (applicant)
Colliers International (Wollongong) Pty Ltd (respondent)

Representation:

Duncan Mackay – in house counsel (applicant)
Simon Kersten - director (respondent)

File Number(s):

COM 21/20627

Publication restriction:

Nil

REASONS FOR DECISION

1. This is an application lodged on 11 May 2021 by Illawarra Retirement Trust who shall be referred to as the lessor. The application is for a determination of reasonable fees that the lessor should pay its former agent, the respondent. The respondent is Colliers International (Wollongong) Pty Ltd and shall be referred to as the agent.

Evidence

2. The hearing took place on 13 September 2021 for three hours.

3. The agent cross examined Duncan Mackay who is the in house counsel for the lessor. The lessor did not cross examine any of the agent’s witnesses.

4. The lessor relied upon the documents it filed with the application and the statement made as “Reasons for Orders” in the application as its evidence in chief: Direction 2 made on 7 June 2021 by SM Boyce. The lessor also relied upon a bundle of documents numbered A to J plus submissions in reply, which were filed on 5 July 2021 pursuant to Direction 4 of SM Boyce made on 7 June 2021.

5. The agent relied upon 65 pages of evidence plus submissions it filed on 21 June 2021 pursuant to Direction 3 of SM Boyce made on 7 June 2021.

6. The Tribunal took account of the evidence the parties drew its attention to in their oral and written submissions.

Facts

7. The facts were largely agreed between the parties, however, for the reasons that follow, the most relevant fact is the lease was renewed in November 2019 whilst the agency agreement between the parties was on foot. That, along with Item 2.4 of Annexure A, is really the beginning and end of this case.

8. In January 2012 the parties executed an exclusive management and agency agreement (Agency Agreement).

9. On 16 January 2012 the Agency Agreement commenced.

10. The premises the subject of the Agency Agreement were described as ‘“Harbourside Brighton” tenancy, and any divisions thereof, ground floor 4 -6 Terralong St KIAMA NSW’.

11. Clause 6 of the Agency Agreement was:

At the end of each tenancy, the Agent is authorised to:

i. Re-lease the Premises at market rent for a term not exceeding:

As agreed between the parties [box next to yes was ticked]

…

12. The fees payable under the Agency Agreement were set out in Annexure A to the Agreement. In addition to the monthly management fee, there were extra fees the agent could charge for doing certain work.

13. Item 2.4 of Annexure A was:

2.4 Fees for the negotiation of a renewal of option and/or negotiation of a market review and/or rent variation

Where a lease may have an option to renew within their lease or where a market review may be due for negotiation.

Where the lessee has reached the end of its lease and any subsequent option periods and/or if the agent is required to renegotiate a new lease (despite the current leave being in place), the fee for acting on behalf of a lessor or lessee of real estate in New South Wales in either the negotiation, variation or terms, renewal.

For negotiation of the renewal of option 5.5% of the “rent” as defined in 2.1.

For the negotiation of a market review 9.9% of the increase in “rent” as defined in 2.1, but not less than $550.00. This fee applies only if the above fee for renewal of an option is not charged.

14. In 2013 the lessor entered a lease with El Corazon restaurant for the premises. The restaurant was owned by Our Corazon Pty Ltd (lessee). This lease included a lease renewal in 2016 with a further term of 3 years. The sole director of the lessee is Trent Conkey. Previously Deborah Langton was also a director from 28 November 2016 to 1 June 2018.

15. Neither party tendered the lease between the lessor and the lessee however there were agreed facts about the terms of the lease. For example after the first three year option was exercised by the lessee in 2016 a further 5 year term was exercised commencing 25 November 2019 for 5 years: see lessor’s submissions, paragraph 59, and supporting documents referred to below.

16. Importantly, on 13 September 2017, the agent invoiced the lessor $5,406 for the exercise of the lessee’s option to renew for a further three years (from 2016 to 2019). There is no explanation for the agent taking approximately 12 months to issue the invoice for that lease renewal, just as it took approximately 12 months to issue the invoice for the November 2019 lease renewal.

17. From 2019 Deborah Langton tried to remove herself as the guarantor of the lease.

18. On 5 March 2019 the sole director of the lessee, Trent Conkey, sent an email directly to the lessor in which he asked “Would it be acceptable now for you to change the lease so as to remove Deb Langton and leave myself as sole director?”: page 11, agent’s evidence. The lessor forwarded this email to the agent the same day and wrote “Please see below Trent Conkey’s request to have Deb Langton removed from the El Corazon lease. As mentioned, [the lessor is] happy to do this as part of the lease option period November 2019. We will need to go through a due diligence process. Could you also confirm the bank guarantee for the site”: page 9, agent’s evidence.

19. By letter dated 4 July 2019 the lessee wrote a letter to the lessor that gave notice that it wished to exercise its 5 year option when the current lease expired on 24 November 2019: page 12, agent’s evidence.

20. On 23 July 2019 the lessor emailed the agent that the lessor would not accept the rent renewal and wanted to terminate the lease: page 14, agent’s email.

21. On 30 Jul 2019 the lessee followed up the lessor about the lease renewal and the lessor forwarded it to the agent who suggested they would remind the lessee to send correspondence to them: pages 17 and 18, agent’s evidence.

22. On 14 October 2019 the lessor and agent had a meeting to discuss matters concerning the lease of the premises. The meeting notes record that “New lease to be arranged – please confirm if you are agreeable to having another 5 year option in the new lease”: page 23, agents evidence. Also in the meeting notes “Lease: Deed of variation to remove the Guarantor, we will instruct the Tenants Solicitors to contact [lessor’s] solicitor.”

23. Later on 14 October 2019 the lessor’s executive general manager sent an internal email to colleagues in which he wrote “In any event I would not support an additional term nor change of guarantor/ operator”: Annexure A to lessor’s evidence, page 9. The property manager replied “Once we have all in writing, [we] can also respond in writing ie rejecting another 5 year term, not supporting a change in guarantor etc”: Annexure A to lessor’s evidence, page 9.

24. On 31 October the lessor and agent had a meeting. The notes from that meeting were sent in an email which is Annexure B to the lessor’s evidence, pages 11 and 12. The notes include:

Lease cannot be terminated for minor breaches – non-essential terns

5 year option has been exercised by Tenant Trent Conkey

Bank guarantee is against Deb Langton’s house

If [lessor] refuse removing Deb Langton as guarantor, she will take back the business and operate herself

…

[Lessor] has refused a further 5 year term beyond current 5 year option up to 24/11/2024

…

Next steps:

Lease will be renewed for a further 5 year term. Colliers [agent] are preparing lease

[Agent] will conduct due diligence on Trent Conkey to advise whether he is as strong an operator as Deb Langton and advise [lessor] on the outcome

…

Request for further 5 year term – [agent] will encourage tenant to seek another site for restaurant as no security of tenancy beyond 5 years at Harbourside.

25. On 3 December 2019 the lessor emailed the agent and wrote “We’re not comfortable removing Deb as guarantor as we don’t have any due diligence on her to compare with Trent. On that, we don’t know whether he is the more experienced adequate operator. Can you advise feedback on this?”: page 2, agent’s evidence.

26. The agent attempted to have Ms Langton removed as the guarantor but the lessor never agreed to this and she remains the guarantor. In the agent’s attempts to have Ms Langton removed as guarantor, the agent repeated an assertion that Ms Langton said if she was not removed she “intends to take it [the lease] on solely”: Annexure E to the lessor’s evidence. In the same email the agent wrote, on 26 February 2020 “I also think it would be a good idea to ask them to sort it out between them of who is going to take on the lease, as technically El Corazon is the tenant and its an internal issue between them on who is the director”. This is a reference to Mr Conkey and Ms Langton who were formerly both directors of the lessee but had divorced, and were sorting out their business arrangements as a result.

27. On 27 March 2020 the lessor emailed the agent (Annexure G, page 35 of the lessor’s evidence):

We have received a request Via Coliers International from Deb Langton who is the guarantor on the El Corazon lease – to terminate the lease.

…

Please note that this request has not come from the current El Corazon operator Trent Conkey. Colliers believe that he may not have been informed that Deb Langtonis making this request.

28. The email from Ms Langton referred to above is page 37 of the lessor’s evidence:

I note this had been dragging on for a long time. Given the circumstances I think we need to terminate the lease. As we are in hold over I understand this requires 30 days notice. Is this correct?

29. On 21 April 2020 the lessor emailed the agent “As mentioned… [the lessor] has refused to have Deb Langton removed as guarantor. Thanks for getting Trent to sign and return the rent relief proposal letter”: Annexure H, page 39.

30. On 15 July 2020 the lessor and agent had a meeting. Beforehand the agent sent the following email to the lessor (Annexure I, page 41):

Just before we chat I wanted to send you an email so you can look review [sic] the below information that has come to light over the last few days:

The BG [bank guarantee] that is currently held by your solicitor for $22,000 has been requested to be swapped for a new BG in Trent’s name. We do not see an issue with this, please confirm we can arrange a swap of the Bank Guarantee’s [sic].

The guarantor has been previously rejected to be removed from the Lease by [lessor], Deb Langton who is Guarantor has been quite firm in her stance that she is to be removed. Considering that Trent has run the restaurant for the past 2 years without her aid/ assistance both financially and physically and has not been in arrears (Covid not included in this) we feel Deb may take this to court and would most likely win as she would be able to prove that Trent is financially viable and also capable of running the restaurant. Our advice is to remove Deb from the lease as guarantor…

… I will give you a call this afternoon so that we can discuss the above points. Colliers do feel that Deb Langton is very keen to be removed and will most likely take a legal avenue to have this occur, so we need to consider the position of [lessor] in that event.

31. On 21 July 2020 the lessor and agent had a meeting to discuss the El Corazon lease. The lessor’s legal counsel sent an internal email summarising the outcome of the meeting as follows (Annexure J, pages 43 -44):

Recommended Actions

…

5. [Lessor] to accept new bank guarantee in Trent’s name only, provided the guarantee is otherwise on the same terms as the existing bank guarantee. Trent to send scanned copy of guarantee for review. If approved, original bank guarantee to be delivered to [lessor or agent]. Once received, the old bank guarantee can be released.

…

In addition to the above, I advised that [lessor] would discuss and consider whether Trent could offer additional security (and if so, how much) in lieu of Deb Langton being a guarantor. Please see comments below regarding this position. I have advised [agent] not to discuss this with Trent until we have formed a view internally. Ms Langton is otherwise to remain as guarantor.

The key points from the meeting are as follows:

Guarantor

[Agent] advised that Ms Langton wants to be removed as Guarantor and they believe that she will be successful as Trent has been running the business for 2 years without her and is financially viable.

I asked [agent] for the basis of this legal advice and whether they could show us any court authority to this effect.

[Agent] advised that they were not providing legal advice, but thought that it was likely that this would happen.

I advised that I was not aware of any situation where a guarantor, who was a solicitor that freely and voluntarily provided a guarantee, had gone to Court and been removed because they didn’t want to be guarantor anymore.

I advised that [lessor] entered into the lease in reliance on the guarantee. Ms Langton’s experience in running Mexican restaurants (Amigos) is well known and she is financially viable.

[Agent] argued that this was like an assignment of lease and the assignment provision in the lease provides for consent where the person has experience and financial viability.

I advised this was not an assignment of lease. If they want to assign the lease, we would need to consent and that would be based on having sufficient security.

[Agent] believes there might be an issue as Trent exercised the option when she was no longer a director. I advised that it was her decision to resign as a director.

I suggested that if Trent was financially viable, then Ms Langton could seek an indemnity from him. [Lessor] does not want to be involved in their personal affairs.

I suggest that if additional security was offered, we might be able to consider the request provided that [lessor] is adequately secured. [Lessor] does not intend to be unreasonable, but we are currently being asked to release guarantor without any additional security.

…

Other

…

3. [Agent] noted that a new lease had not been signed for the option term and that they believe [lessor] likes to handle this process.

32. As already explained, the lessee exercised an option to renew the lease for 5 years with the further term commencing on 25 November 2019. The option was apparently exercised by the lessee in July 2019: see email dated 16 April 2021 from agent to lessor. However in the meeting held in July 2020 the meeting minutes record “[Agent] noted that a new lease had not been signed for the option term and that they believe [lessor] likes to handle this process.”

33. The terms of the lease continued after the option was exercised. The lessor argued a new lease was not negotiated or prepared or executed when the lessee exercised its option to extend for a further five years.

34. The lessor submitted that upon commencement of the new term the agent should have conducted a market rent review. The lessor pointed to item 12B and cl.5 in Annexure B to the lease. Neither party tendered the lease or any of its terms.

35. The lessor submitted that the agent “failed to conduct the market review in accordance with the lease and the Agency Agreement”: paragraph 60. The Tribunal was not taken to the clauses of the lease or Agreement which supported this submission, however it is agreed a market review was not conducted.

36. On 3 September 2020 the lessor emailed the lessee proposing that Ms Langton could be released as guarantor if the bank guarantee was increased from $22,000 to $55,000: page 44, agent’s evidence.

37. On 19 October 2020 the lessor gave the agent 90 days written notice to terminate the Agency Agreement. The Agency Agreement ended on 17 January 2021.

38. On 30 November 2020 the agent emailed the lessor an invoice – 20201130 – for $6,056.85 including GST which the agent deducted from monies held in trust on the same day. The description in the invoice was “Lease Fee as per attached calculation”. On the back of the invoice was a lease fee calculation: these documents are attached to the application. The lessee is referred to as El Corazon. The lease term is 5 years and lease fee is 5% exclusive of GST. There is a list of 5 years with $100,113.16 rent excl GST and no outgoings. Then there is an average of the five years, obviously $100,113.16 because the rent did not change, and 5.0% of that was $5,506.22 plus GST it became $6,056.85.

39. There followed a series of emails between the parties, sometimes including the lessor’s new agent, in which the lessor requested a refund of this lease fee and the agent justified the lease fee and refused to refund it.

40. The 22 April 2021 email from the lessor to the agent became the basis of their application to the Tribunal. It was responded to in detail by the agent and that response is essentially the agent’s submissions.

Legislative framework

41. The sole order sought by the lessor in these proceedings is set out in their application:

Under section 36 of the Property and Stock Agents Act 2002, the applicant seeks a determination of reasonable fees.

42. While it is not expressly stated, it appears from the email correspondence tendered in these proceedings, that the lessor considers the Tribunal should determine that no fees are payable by it to the agent for the lease fee. The agent argues it should keep all of the lease fee it took on 30 November 2020 from the funds held on trust.

43. The lessor referred to “breaches of the principal and agent relationship” in their submissions but the Tribunal was not asked to make findings of fact about such alleged breaches as the basis of the application was only the determination of reasonable fees.

44. Section 36 of the Property and Stock Agents Act 2002 (Act) is (emphasis added):

36 Review of commission and fees

(1) An action or other proceedings cannot be commenced by a licensee for the recovery of remuneration or any sum as reimbursement for expenses until the expiration of 28 days after a statement of claim has been served personally or by post on the person to be charged with the remuneration or expenses.

(2) The statement of claim must be in writing, set out the amount claimed and contain details of the services performed by the licensee in respect of which the remuneration or expenses are claimed.

(3) If money has been paid to or is or has been retained by a licensee (out of money received by or paid to the licensee) in respect of any transaction by or with the licensee as a licensee and has been so paid or retained as remuneration or as reimbursement for expenses in connection with the transaction, the person paying the money or the person who would be entitled to the money had the money not been retained, may require the licensee to furnish the person with an itemised account of the transaction in accordance with the regulations.

(3A) A requirement by a person under subsection (3) must be in writing.

(4) A person who is served with a statement of claim under this section or is provided with an itemised account of a transaction as provided by this section may apply to the Tribunal for the determination of a consumer claim within the meaning of Part 6A of the Fair Trading Act 1987 in relation to—

(a) the entitlement of the licensee to the whole or any part of the amount specified in the statement of claim or the itemised account, or

(b) whether the whole or any part of the amount is reasonable,

or both.

(5) For the purpose of the application of Part 6A of the Fair Trading Act 1987 to that person, a reference in that Part to a consumer is taken to include a reference to that person.

(6) The Tribunal has jurisdiction to hear and determine any such consumer claim despite—

(a) the terms or conditions of any agreement or contract entered into between the licensee and the applicant, and

(b) the amount being more or less than the maximum amount (if any) of remuneration to which a licensee is entitled under this Act.

(7) This section does not limit Part 6A of the Fair Trading Act 1987.

(8) In this section—

expenses means expenses or charges incurred in connection with services performed by a licensee in his or her capacity as a licensee.

remuneration means remuneration by way of commission, fee, gain or reward for services performed by a licensee in his or her capacity as a licensee.

45. There is no question in these proceedings that tax invoice 20201130 emailed to the lessor on 30 November 2020 is a statement of claim in accordance with, or ‘under’ section 36 of the Act. The invoice does not need to claim it is served pursuant to s.36, it must just comply with s.36 in particular s.36(2): Beyond 2000 Investments Pty Ltd v Ben Boyd Real Estate Pty Ltd [2015] NSWCATAP 220 at [11]-[12]. As Barrett J explained in Investmentsource v Knox [2002] NSWSC 710 at [44]:

The section is a means by which a licensee’s claim for commission or other remuneration is so particularised as to be sufficiently clear to the other party to enable that party to consider whether or not to resort to the s.42A(4) “consumer claim” procedure. This is the purpose which was accepted in Oades v Ewart (1960) 61 SR (NSW) 89. Reference may also be made to the observation of Einfeld J in Raine & Horne Commercial Pty Ltd v Capital Concepts & Development Pty Ltd (unreported, FCA, 14 December 1993) made at a time when another body played the role now taken by the Consumer, Trader and Tenancy Tribunal [now NCAT]:

“The purpose of s.42A [now s.36] is to provide a client or principal with an itemised bill of the commission claimed, so that an application for review of whether the commission is reasonable can be made to the Real Estate Services Council (the Council) within 28 days after service of the statement of the claim under s.42A(4).”

46. While the basis for the lessor’s claim arises from s.36 of the Act, a claim in respect of the entitlement of the agent to any fees or commission for services provided with respect to the lease, is a consumer claim: Evans v Baystate Pty Ltd t/as Domaine Plus Real Estate [2020] NSWCATAP 275. Section 36 is not an order making power. The orders would be made pursuant to s.79N of the Fair Trading Act as this is a consumer claim, by virtue of s.36 of the Act.

47. For the Tribunal to have jurisdiction to determine the claim it must be lodged within 3 years of the cause of action accruing. This application was filed on 11 May 2021, well within time, given the contested invoice was issued, and monies deducted, on 30 November 2020.

48. Neither party provided any authorities which had considered s.36. There have been first instance decisions which have considered that section such as: Reid v David Gilmour Real Estate Pty Ltd [2019] NSWCATCD 70; McGrath and Ors v Y Corp Developments Pty Ltd [2018] NSWCATCD 68; Raymond and Rebecca Fraser v Aspect Marketing Pty Ltd atf ASAP Family Trust [2014] NSWCATCD 98; Mary Anne Bernadette And Joseph Michael Dalli V Bos Holdings Pty Ltd [2018] NSWCATCD 15. None of these first instance decisions are binding upon the Tribunal but may inform a reader of some of the considerations applied by the Tribunal when deciding whether the amount specified in the invoice is reasonable.

49. In Reid v Gilmour for example, Senior Member Boyce went through the fees and expenses claimed by the agent, and determined if each was reasonable. The Senior Member held, at [59] and [72]:

The Tribunal’s power is limited to a review of whether the disbursements charged, as marketing expenses, by the respondent in performance of its duties under the Agency Agreement are reasonable and if found not to be reasonable then the Tribunal may order the repayment of part or all of those expenses. No sale was achieved, so the Tribunal has no review function of an event that has not occurred. Section 79N of the FTA provides that in determining a consumer claim wholly or partly in favour of a claimant, the Tribunal may, subject to this Division, make an order that requires a respondent to pay to the claimant a specified amount of money.

…

The only remedy available to the applicant in these proceedings before the Tribunal is for the Tribunal to review the marketing costs pursuant to section 36(4)(a) and (b).

50. Unlike decisions of Members at first instance, the Tribunal is bound to follow Appeal Panel or Supreme Court decisions, at least on questions of law: Lam v Steve Jarvin Motors Pty Ltd [2016] NSWCATAP 186 at [189] – [196]. The relevant considerations when deciding whether the amount is reasonable is a question of law, or put another way, the meaning of s.36(4)(b) is a question of law. The parties did not take the Tribunal to any authorities in this matter, whether binding or otherwise.

51. The Tribunal therefore proposes to deal with the question of reasonableness in the same manner as Senior Member Boyce in Reid v Gilmour. The applicant bears the onus of proving, on the balance of probabilities, that the amount claimed by the agent is not reasonable, and on that basis, that it is entitled to a refund of the monies taken pursuant to s.79N of the Fair Trading Act 1987.

Consideration of the ‘Lease Fee’ charged by the respondent

52. While the application was filed as one pursuant to s.36 of the Act, as explained this is actually a consumer claim and could have been filed as a consumer claim, given the lessor is a consumer in relation to services provided by the agent to it. Whether lodged as a s.36 claim or as a straight consumer claim, the basis for the fees charged by the agent is the Lease Fee in Item 2.4 in Annexure A to the Agency Agreement. If the fees were deducted in breach of Item 2.4 the agent is not entitled to those fees and should repay them. If the fees were deducted in accordance with Item 2.4 the Tribunal should uphold the payment.

53. Item 2.4 covered the fees for the renegotiation of a renewal of option and/or the negotiation of a market review and/or rent variation.

54. The parties agree, and the Tribunal finds, the agent did not negotiate a market review or make a rent variation.

55. The only basis for the $6,056.85 must be fees for negotiation of a renewal of option or when a lease has an option to renew.

56. Item 2.4 described the circumstances in which fees could be charged for negotiation of a renewal of option as (emphasis added):

[first paragraph] Where a lease may have an option to renew within their lease or where a market review may be due for negotiation.

[second paragraph] Where the lessee has reached the end of its lease and any subsequent option periods and/or if the agent is required to renegotiate a new lease (despite the current lease being in place), the fee for acting on behalf of a lessor or lessee of real estate in New South Wales in either the negotiation, variation or terms, renewal.

57. The agent charged “For negotiation of the renewal of option 5.5% of the “rent” as defined in 2.1”.

58. Both parties focussed on the second paragraph set out above however it is unclear why they did not focus on the first paragraph. This first paragraph clearly covers the situation in these proceedings. The lessee had an option to renew within their lease and did indeed renew.

59. While Item 2.4 is poorly written, The Tribunal finds the circumstances giving rise to the agent’s ability to charge the fee described therein is either under the first or second paragraphs.

60. As the agent submitted at 54 mins, the fee can be charged on renewal. “It doesn’t matter if the respondent negotiated or didn’t negotiate, it [the exercise of the option to renew] is a trigger for a fee to be paid”: 54 mins. The agent made similar submissions at 1 hour 16 mins.

61. The Tribunal finds the Agency Agreement allowed the agent to charge the prescribed fee once the lessee exercised its option to renew, and did renew. There was no need for the agent to prove anything other than the lease was renewed. This is the effect of the first paragraph which stands alone to the second paragraph in Item 2.4.

62. As to the second paragraph, the Tribunal accepts the lessor’s submission that “the lessee has reached the end of its lease and any subsequent option periods” is one circumstance in which the agent can charge the fee, which is separate to another circumstance which is “if the agent is required to renegotiate a new lease”. However there is no requirement to engage in a certain level of negotiation or hours of negotiation to charge the fee under the second paragraph. This is clear from the end of the second paragraph which stated that the fee for acting can be charged when the agent either negotiated, varied the terms or renewed the lease. Once the lease is renewed the fee is payable.

63. It may be there is a typographical error at the end of the second paragraph namely that it should read “variation of terms” rather than “variation or terms”. In any event, there was no variation of any terms in the subject lease.

64. The agent was not required to renegotiate a new lease in order to claim the Lease Fee pursuant to Item 2.4.

65. Even if I am wrong about this, and there was a requirement for the agent to conduct a certain amount or level of negotiation to charge the fee, the Tribunal finds that enough “negotiation” about the option took place.

66. The agent submitted it did negotiate the renewal. It submitted on pages 4-5 “Changes to guarantors were requested, and additional option was requested… most of our negotiation was with [the lessor] around honouring their obligations under the lease. Furthermore we requested the new lease to be issued many times, without this we were unable to apply rental reviews.”

67. The Tribunal finds the negotiation which occurred about the renewal was largely in the form of communication between the agent and lessor that the lessor was under an obligation to allow the lessee to renew despite the lessee wanting to terminate the lessee’s lease for some minor breaches. The Tribunal does not accept the lessor’s submissions that no negotiation about the renewal took place.

68. The parties engaged in much argument, and the Tribunal spent much time considering, whether the removal of the guarantor or the substitution of a bank guarantee, constituted negotiation of the option to renew. Ultimately this argument proved to be a distraction. As the lessor submitted at 54 mins and 1 hr 16 mins in oral submissions, the renewal of the lease is a trigger to charging the fee. As the lessor submitted, it is a flat fee in the Agency Agreement which they were entitled to charge upon renewal of the lease. It could not have been on the basis of negotiations about removing a guarantor which took place before but mostly after the lease was renewed in November 2019. Further the fee could not have been on the basis of swapping the bank guarantee which the lessor largely took care of directly with the lessee, and in any event happened after the lessee had already renewed the lease.

69. As to the administrative task of changing the bank guarantee, this is not covered by Item 2.4. This was discussed by the lessor and agent in the 21 July 2020 meeting, almost 8 months after the renewed lease commenced. A lessee substituting its bank guarantee during the term of its lease could not be said to justify a “fee for the negotiation of a renewal”.

70. The agent’s justification for the Lease Fees is in paragraph 6 of the it’s submissions, page 1: “negotiation of a new lease for the option period was required as a result of the tenant’s need to remove Deb Langton as a guarantor under the lease and to replace the bank guarantee”. These two matters – request to remove guarantor and replacement of bank guarantee – were not part of a negotiation of the renewed lease. This is obvious from the notice of the lessee to renew: page 12 agent’s evidence. The renewal was not contingent on anything happening. As already explained, the removal of the guarantor was not requested on behalf of the lessor; the agent was advocating on behalf of the guarantor to the potential detriment of the lessor. The arguments about this became a distraction in what should have been a straightforward case.

71. The Tribunal finds the renewed lease term which commenced on 24 November 2019 pursuant to a letter from the lessee that it wished to renew was the trigger for the agent to be able to charge, and retain, the Lease Fee set out in Item 2.4, which it did on 30 November 2020.

72. The Tribunal finds that if the fees are only reasonable if the lessor actually spent time negotiating the renewed lease, which is not the Tribunal’s view but if it is wrong on that point, there was such negotiation to justify the Lease Fee.

73. The lessor did not want to accept the renewal and instead wanted to terminate the lease, and the agent had to tell it that was not possible and the lease would be renewed, and this is negotiation.

74. Accordingly the lessor’s application must be dismissed. The agent is entitled to the Lease Fee and the fee is reasonable as it is the amount prescribed by Item 2.4 of Annexure A of the Agency Agreement.

Costs

75. Neither party applied for costs. There is therefore no order as to costs.

76. In any event, this matter concerned less than $30,000 so each party was to pay their own costs, pursuant to s.60(1) of the Civil and Administrative Tribunal Act 2013.

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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: 10 February 2022