Joanne Baxter Fifties Food Pty Ltd atf the Ninja Bear Trust v Subway Realty Pty Ltd - [2013] QCAT 163

CITATION:

Joanne Baxter Fifties Food Pty Ltd atf The Ninja Bear Trust v Subway Realty Pty Ltd & Anor
[2013] QCAT 163

PARTIES:	Joanne Baxter Fifties Food Pty Ltd atf The Ninja Bear Trust t/as Subway Wynnum Central (Applicants)
V
Subway Realty Pty Ltd (First Respondent) Kennion (Trustees) Pty Ltd (Second Respondent)

APPLICATION NUMBER:

RSL053-12

MATTER TYPE:

Retail shop leases matters

HEARING DATE:

18 February 2013

HEARD AT:

Brisbane

DECISION OF:

Sandra G Deane, Presiding Member
Neil Judge, Member
Don McBryde, Member

DELIVERED ON:

28 March 2013

DELIVERED AT:

Brisbane

ORDERS MADE:

1. Ms Baxter’s application for directions to file further evidence is refused.

2. Consequently Ms Baxter’s application for an adjournment is also refused.

3. Under the terms of the sublease the Applicant, Ms Baxter, is responsible for complying with the Trade Waste Approval and its conditions at the Applicant’s cost.

4. The application that the First and Second Respondents engaged in unconscionable conduct is dismissed.

5. The First Respondent and the Second Respondent must make any application for costs by filing in the Tribunal four (4) copies and providing to the Applicants one (1) copy of written submissions by: 4pm 25 February 2013.

6. The Applicants must file in the Tribunal four (4) copies and provide to the First Respondent and the Second Respondent one (1) copy of any written submissions in response by: 4pm 27 March 2013.

7. Any application for costs will be determined on the papers not before 27 March 2013.

CATCHWORDS:

RETAIL SHOP LEASE DISPUTE – trade waste approval – whether sub-lessee obliged to comply with approval at her cost under the terms of the sub-lease – whether conduct of the lessor and the sub-lessor unconscionable

Retail Shop Leases Act 1994 (Qld), s 46A, s 46B, s 83
Queensland Civil and Administrative Tribunal Act 2009 (Qld), s 3(b)

Water Supply (Safety and Reliability) Act 2008 (Qld), s 180, s 181, s 193

Trade Practices Act 1974 (Cth), s 51A(C)

Attorney General (NSW) v World Best Holdings Ltd [2005] NSWCA 261

Susanna and John Pty Ltd v Trident Ashgrove JV Pty Ltd as Trustee and Tribune Properties Pty Ltd [2011] QCAT 101
Hurley v McDonald’s Australia Ltd [1999] FCA 1728

APPEARANCES and REPRESENTATION (if any):

APPLICANT:

Joanne Baxter and Fifties Food Pty Ltd
(Ms Baxter in person)

RESPONDENT:

Subway Realty Pty Ltd represented by Ms JK Chapple of Counsel instructed by Holding Redlich, lawyers (First Respondent)

Kennion (Trustees) Pty Ltd represented by Mr PK O’Higgins of Counsel instructed by McCullough Robertson, lawyers (Second Respondent)

REASONS FOR DECISION

Ms Baxter subleases premises at Wynnum from Subway Realty Pty Ltd. In turn Subway leases the premises from Kennion (Trustees) Pty Ltd, which owns the shopping centre. Fifties Food Pty Ltd operates a Subway business from the premises. Ms Baxter is the sole director of Fifties Food.
Ms Baxter and Fifties Food applied to the Tribunal for various final orders under the Retail Shop Leases Act1994 (the Act) and applied for an interim order to prevent Subway and Kennion from issuing breach notices until the dispute could be decided. An interim order was made and was effective to 18 February 2013.
The interim order related to one issue in the dispute. That issue was set down for urgent hearing on 18 February 2013 with the other issues to be heard at a later time. The issue relates to a Trade Waste Approval issued by Queensland Urban Utilities in respect of the premises. The Approval was made subject to certain conditions, which require drawings to be prepared and the installation of a grease trap at the premises by particular dates.[1] Ms Baxter has sought and obtained some extensions of time from QUU for the satisfying of those conditions. Satisfying the conditions will cost a substantial sum of money.[2]
[1] Statement of Gregory Louis Baker dated 14 February 2013, Exhibit GLB-32.
[2] Ms Baxter estimates more than $20,000.
The issues for determination are whether Ms Baxter is responsible for satisfying the terms of the Approval under the terms of the sublease at her cost and whether conduct by Subway and Kennion was such that they should be responsible.
The Tribunal gave its decision on 18 February 2013 without giving reasons. Ms Baxter sought written reasons.
At the commencement of the hearing Ms Baxter requested directions for the filing of further evidence. The natural consequence of such a request was that the final hearing of this issue would be deferred to another date. Both Subway and Kennion opposed the requested directions and the adjournment.
Ms Baxter also sought orders that Kennion comply with the Approval including the installation of the grease trap on the proviso that costs of installation should be met by Kennion on a without prejudice basis to any claims that Kennion may have under the lease pending a final hearing. Subway and Kennion opposed the Tribunal making such an order.

Should further directions be made? Should an adjournment be granted? Should the Tribunal order that Kennion comply with the Approval on a without prejudice basis pending a final hearing?

Ms Baxter submitted that she had become aware of new relevant information on Friday 15 February 2013 and tendered an email from Russell Miller of QUU.[3] She requested time to be able to file a written statement by Mr Miller expanding upon the matters in Exhibit 1. She also sought further disclosure of documents or statements of evidence by Subway and Kennion relating to the grease trap issue.
[3] Exhibit 1.
We are not satisfied that additional directions should be made and consequently refuse the application for directions and the adjournment. It is therefore not necessary to make the order sought pending final hearing as this is the final hearing in relation to this issue. We note that there is some doubt as to whether the Tribunal has jurisdiction to make such an order given that our powers are limited by the Act.[4]
[4] Retail Shop Leases Act1994 (Qld) s 83.
Ms Baxter commenced these proceedings on 24 April 2012; filed an amended claim on 3 October 2012 which included claims relating to the trade waste issue and raised issues of unconscionable conduct and filed an amended points of claim dated 8 February 2013. Ms Baxter was the party seeking to have the Trade Waste issue determined by the Tribunal urgently so as to not prejudice her rights to exercise an option to extend the sub-lease, exercisable shortly after this hearing. The Tribunal made directions on 5 February 2013 to facilitate such a determination. The directions contemplate that this preliminary hearing would be a final hearing on the Trade Waste issue.
Ms Baxter did not give the other parties notice that she would seek these orders nor had she provided them with a copy of Exhibit 1 prior to the hearing.
We are not satisfied that the ‘new’ relevant information is in fact ‘new’ requiring the matter to be further investigated prior to a final hearing being held. Ms Baxter has for some time contended in these proceedings that the requirement for a grease trap has existed for some time prior to her entering into the sublease. The Tribunal’s directions of 5 February 2013 required Ms Baxter’s witness statements to be filed by 8 February 2013.
Even if we accept that a grease trap has been required by law to be installed at the premises since before she entered into the sublease we do not consider that Ms Baxter is entitled to be relieved of the obligation to comply with the Approval and its conditions for the reasons set out below.
In those circumstances the making of further directions to put before the Tribunal additional evidence on this point would not advance Ms Baxter’s case. The Tribunal is required to deal with matters in a way that is accessible, fair, just, economical, informal and quick.[5] Adjourning the final hearing on this issue would cause the other parties to incur significant additional costs and would cause delay in resolving this issue.
[5] Queensland Civil and Administrative Tribunal Act 2009 (Qld) s 3(b).
In relation to the request for additional disclosure or witness statements we note that the Tribunal ordered witness statements and disclosure by directions dated 5 February 2013.
A sizeable quantity of documents were disclosed in response to the direction and Mr Baker, a director of Kennion, gave a lengthy statement.
In seeking this direction Ms Baxter has not pointed out to us any evidence that the witness statements or disclosure made is not complete e.g. by reference to the documents disclosed by Subway or Kennion that there are particular documents which have not been disclosed to which reference is made in the documents which have been disclosed. To the contrary Ms Baxter informed us that she had not yet had the chance to thoroughly review the documents delivered and so was not in a position to point to any such specific failure.
In the absence of any specific evidence that the previous directions have not been complied with we are not satisfied that further directions ought to be made and for the determination to be delayed by granting an adjournment.

Is Ms Baxter responsible for satisfying the terms of the Approval under the terms of the sublease at her cost?

We are satisfied that under the terms of the sublease Ms Baxter is required to satisfy the terms of the Approval at her cost.
It is not disputed that:
a)a grease trap is not currently installed on the premises;
b)the Approval has been issued to Kennion, as owner of the premises;
c)a condition of the Approval is the installation of a grease trap within a stated period of time.[6]
[6] Water Supply (Safety and Reliability) Act 2008 (Qld) s 181.
The Approval replaces any previous permit or approval for the discharge of trade waste which did not require the conditions imposed by the Approval. To the extent there was a pre-existing approval it has now been set aside.
The issue is whether under the terms of the lease and sublease the obligation to comply and the costs of complying is able to be passed along through the contractual chain to Ms Baxter.
The legislative scheme is such that a party may only discharge trade waste if it has the benefit of a trade waste approval. A party who discharges trade waste without an approval commits an offence and is subject to a penalty.[7] Although the Approval has been issued to Kennion, as owner, it is not the party discharging trade waste as part of its business.
[7] Ibid ss 180, 193.
The terms of head lease between Kennion and Subway provides that:
a)“The lessee must ensure strict compliance with all laws ...affecting the business carried on by the lessee and satisfy the terms of any lawful requisition or order affecting the premises if issued for any reason connected with the use of the premises by the lessee..” [8]
b)“the lessee must obtain and maintain at its expense all ... approvals (including if necessary the prescribed approvals) required for the conduct of the permitted use.”[9]
c)“the lease is not conditional upon the premises being suitable for the conduct of the permitted use....and the lessor makes no warranties in those respects.”[10]
d)“any covenant in this lease is deemed (unless otherwise stipulated) to require performance at the expense of the lessee”.[11]
[8]        Clause 8.5.
[9]        Clause 9.2.
[10]        Clause 11.1.
[11]        Clause 2.10.
Ms Baxter contends that clause 9.2 is not applicable because the Approval is not a prescribed approval as defined. The term ’approval’ is not otherwise defined except that it includes if necessary prescribed approvals. It is clear from its plain words that ‘approval’ includes not only ‘prescribed approvals’ but other approvals.
The Tribunal finds that the Approval is an approval for the purposes of clause 9.2.
Having regard to the plain language of clause 8.5 the Tribunal finds that the laws governing the issuing of the Approval are laws affecting the business carried on or affecting the premises and is connected with the use of the premises.
The terms of the sub-lease between Subway and Ms Baxter provides that:
a)“the Sub-lessee has inspected the Premises and accepts the same as is”[12]
b)“the Sub-lessee agrees to perform and observe all of the obligations of the Sub-lessor as tenant under the Head Lease...”[13]
c)“the Sub-lessee acknowledges that he has read...the Head Lease..”[14]
d)‘the Sub-lessor shall have the same rights, powers, privileges, remedies and indemnities regarding the Sub-lessee as are held by the Landlord in relation to the Sub-lessor, according to the terms of the Head Lease”[15]
[12]        Clause 2.
[13]        Clause 4.
[14]        Clause 8.
[15]        Clause 14.
We find that the Approval is issued under a law that affects the premises and the business carried out at the premises and is connected with the use of the premises. The Approval is linked to Ms Baxter’s business. It is not disputed that the business carried out in the subleased premises is the only business carried on at the complex which discharges trade waste. We find the obligations under the lease are passed on to Ms Baxter pursuant to clause 4 of the sub-lease.
Ms Baxter is obliged under the terms of the Sub-lease to comply with the Approval at her cost.

Did Subway or Kennion engage in unconscionable conduct?

It is not disputed that a Subway business has been operating from the premises since mid 2003 and that Ms Baxter only became the sub-lessee in February 2011 when she or her company purchased the business.
A lessor must not in connection with a retail shop lease engage in conduct that is in all the circumstances conscionable.[16] The Tribunal may have regard to matters set out in section 46B of the Act in deciding whether a party engaged in unconscionable conduct.
[16] Section 46A(1).
Ms Baxter claims that:
a)Subway and Kennion ought to have installed a grease trap prior to her entering into the sublease and failing to do so was unconscionable.
b)because Subway knew or should have known that the Brisbane City Council approved drainage plans without a grease trap it is improper for Subway to rely upon the lease and sublease provisions.
c)Subway and Kennion were obliged to inform Ms Baxter that the drainage plans had been approved without a grease trap and that in failing to do so they acted in bad faith and unconscionably.
Ms Baxter claims bad faith and unconscionable conduct and bears the onus of proving that on the balance of probabilities. A finding of unconscionability requires evidence of a ‘high level of moral obloquy’ and not merely evidence that conduct is unfair or unjust.[17]
[17]Attorney General (NSW) v World Best Holdings Ltd [2005] NSWCA 261 at [121] per Spigelman CJ.
The Tribunal has previously accepted that unconscionability in the Act is analogous to the concept in s 51A(C) of the old Trade Practices Act.[18]
[18] Susanna and John Pty Ltd v Trident Ashgrove JV Pty Ltd as Trustee and Tribune Properties Pty Ltd [2011] QCAT 101.
There is no evidence that prior to Ms Baxter entering into the sub-lease that she was provided with a copy of the letter from Subway to Kennion that a grease trap was not required.[19]
[19] A copy of which appears in the Statement of Gregory Louis Baker dated 14 February 2013, Exhibit GLB-12.
Ms Williamson, a hydraulic engineer, who has worked with Subway franchises since 1998 gives evidence[20] that:
a)she was involved in obtaining approval for the original plans for the premises in 2003 for the original franchisees and that at that time there was no requirement to obtain a trade waste approval.
b)she did not inform any person at Subway that there was a requirement for the installation of a grease trap because her understanding was that it was not required.
[20] Statement dated 18 February 2013.
Ms Baxter submits that the Tribunal should place little weight on Ms Williamson’s evidence because she is not independent from Subway given their long term relationship. Ms Baxter submits we should prefer the evidence of Mr Miller in Exhibit 1.
Even if we accept that a trade waste approval was required prior to Ms Baxter entering into the sub-lease Mr Miller’s evidence does not directly contradict:
a)Ms Williamson’s evidence that she did not inform any person at Subway that there was a requirement to install a grease trap;
b)the evidence of Mr Wells, Operations Manager of Subway Systems Australia Pty Ltd, that at no time prior to 2012 does he recollect being informed by their preferred hydraulic engineering firm that a trade waste approval was required for the Wynnum Subway Store;
c)the evidence of Ms Williamson and Mr Wells that the first franchisees applied for the requisite approvals rather than Subway.
Brisbane City Council approved the drainage plans on 1 April 2003 and certified the plumbing works and issued a plumbing approval in respect of the premises. Those plans did not provide for a grease trap.
There is no evidence before the Tribunal of any positive representation to Ms Baxter by Subway in relation to the existence of or the necessity for a grease trap to lawfully carry out the business. The terms of the sublease expressly provides that there is no warranty as to the suitability of the premises for the permitted use.
The Federal Court[21] has found that there is nothing unfair or unreasonable or immoral or wrong in merely relying on contractual terms.
[21] Hurley v McDonald’s Australia Ltd [1999] FCA 1728 at [28].
Ms Baxter conceded during the hearing that she was not in a position to say whether the failure to obtain a trade waste approval in 2003 was done deliberately, inadvertently or through ignorance.
We find no evidence of oppressive or deceptive conduct on Subway’s part, let alone misconduct of such gravity to warrant a finding of bad faith or unconscionability.
Ms Baxter claims that the terms of the lease is a misrepresentation by Kennion because the leased premises are defined to include a grease trap. The premises were also defined by reference to a sketch which shows no grease trap.
Ms Baxter submits that the sketch also fails to shows other parts of the premises, such as pipes and conduits, which in fact exist. Ms Baxter also relies upon the term of the lease which provides that the lessee is required to clean the grease trap from which she inferred that the grease trap existed.
Given the inconsistency between the sketch and the words of the definition and the obligation to clean we find that the terms of the lease did not clearly represent that a grease trap had been installed and that this inconsistency together with the express clause that there was no warranty as to the suitability of the premises for the permitted use ought to have put Ms Baxter on enquiry as to whether a grease trap existed or was required. There is no evidence before the Tribunal as to what, if any steps, Ms Baxter took. In this regard clause 2 of the sub-lease is relevant that Ms Baxter had inspected the Premises and accepted them ‘as is’.
There is no evidence before the Tribunal of any positive representation to Ms Baxter by Kennion in relation to the existence of or the necessity for a grease trap to lawfully carry out the business. This is unsurprising given the terms of the lease which expressly provides that there is no warranty as to the suitability of the premises for the permitted use.
Ms Baxter contends that Subway or Kennion ought to have informed her that a grease trap had not been installed because of the difficulties she would have experienced in ascertaining that the business as it was operating was not approved. This is again directly inconsistent with the express term of the lease and sub-lease that there is no warranty as to the suitability of the premises for the permitted use.

We find no evidence of oppressive or deceptive conduct on Kennion’s part, let alone misconduct of such gravity to warrant a finding of bad faith or unconscionability.
Ms Baxter sought an order that should the Tribunal find the responsibility does lie with her that such a finding will not precipitate a breach notice under the lease and Ms Baxter will be given 90 days to meet the conditions of the Approval.
This is a similar order to the interim order sought by Ms Baxter.
By making the order sought by Ms Baxter the Tribunal would effectively be sanctioning the discharge of trade waste by Ms Baxter without an approval in circumstances where the Tribunal had found that Ms Baxter was responsible for complying with the Approval at her cost.
The Tribunal is not authorised to make orders under the Water Supply (Safety and Reliability) Act 2008. We are not satisfied that we have power to make such an order or that it is appropriate to make it where we have found that Ms Baxter is responsible under the terms of the sub-lease for complying with the Approval at her cost.
Subway and Kennion have sought costs. It is appropriate to make directions for the delivery of submissions and for the issue to be determined on the papers.