Jude Trading Pty Ltd v Mosszan Pty Ltd; Mosszan Pty Ltd v Jude Trading Pty Ltd

[2022] NSWCATCD 21

Civil and Administrative Tribunal

New South Wales

Medium Neutral Citation:

Jude Trading Pty Ltd v Mosszan Pty Ltd; Mosszan Pty Ltd v Jude Trading Pty Ltd [2022] NSWCATCD 21

Hearing dates:

25 and 26 August, 29 October and 4 November 2021

Date of orders:

28 February 2022

Decision date:

28 February 2022

Jurisdiction:

Consumer and Commercial Division

Before:

G Ulman Senior Member

Decision:

1 In application COM 20/49850

(a) Pursuant to section 72(1)(f)(iii) of the Retail Leases Act 1994, a declaration that:

(i) the respondents waived the applicant’s late exercise of the option to renew the lease of the subject premises;   

(ii) the applicant validly exercised the option to renew the lease of the subject premises;

(iii) the respondents repudiated the lease; and

(iv) the applicant accepted the respondents’ repudiation and validly terminated the lease.

(b) Pursuant to section 72(1)(a) of the Retail Leases Act 1994, the respondents are to pay the applicant damages in the sum of $196,392.31 within 14 days.

(c) Pursuant to section 72(1)(f)(iii) of the Retail Leases Act 1994, a declaration that the applicant is entitled to the return of the $41,375.10 bank guarantee held by the respondents as security for the applicant’s obligations under the lease of the subject premises.

(d) Pursuant to section 72(1)(g) of the Retail Leases Act 1994, the respondents forthwith deliver up to the applicant the $41,375.10 bank guarantee held by them as security for the applicant’s obligations under the lease of the subject premises.

(e) In the event a party wishes to make a costs application it must file and serve written submissions within 14 days, any party opposing the application is to file and serve its written submission within a further 14 days, and the Tribunal will make a decision on the papers as permitted by section 50(2) of the Civil and Administrative Tribunal Act 2013 unless persuaded that there should be oral submissions.

(f) If after 14 days no written submissions are filed, then pursuant to Rule 38(2)(b) of the Civil and Administrative Tribunal Rules 2014,the respondents are to pay the applicant’s costs of and incidental to these proceedings as agreed or assessed.

2 In application COM 20/32703

(a) Pursuant to Rule 38(2)(b) of the Civil and Administrative Tribunal Rules 2014, the applicants are ordered to pay the respondent’s costs of and incidental to the proceedings as agreed or assessed.

Catchwords:

LEASES AND TENANCIES — Retail leases —Whether an option has been validly exercised —Whether there was an agreement for lease or statutory lease — Estoppel — Repudiation of lease — Damages for wasted expenditure — Adequacy of the evidence of loss — COVID-19 rent relief — Award of costs where proceedings discontinued without consent

Legislation Cited:

Retail Leases Act 1994 (NSW)
Civil and Administrative Tribunal Act 2013 (NSW)
Civil and Administrative Tribunal Rules 2014 (NSW)
Retail and Other Commercial Leases (COVID-19) Regulation 2020 (NSW)

Cases Cited:

Ausko Cooperation Pty Ltd v Junapa Pty Ltd [2021] NSWSC 615

Arambewela v Castle Projects Pty Ltd [2018] NSWCATAP 14

Helou & ors v Bong Bong Pty Limited & anor trading as Regional Retail Properties [2006] NSWADT 128

Piazza Trevi v Cromwell BT Pty Ltd as custodian for the Cromwell Symantec House Trust [2017] NSWSC 794

Progressive Mailing House Pty Ltd v Tabali Pty Ltd (1985) 157 CLR 17

The Commonwealth of Australia v Amman Aviation Pty Ltd (1991) 174 CLR 64

Walton Stores (Interstate) Ltd v Maher 164 CLR 387

Texts Cited:

Prof B Edgeworth, Butt’s Land Law (7th ed)

Category:

Principal judgment

Parties:

In COM 20/49850:
Jude Trading Pty Ltd (Applicant)
Mosszan Pty Ltd (First Respondent)
Montano Corp Pty Ltd (Second Respondent)
Ronald Montano (Third Respondent)
Fulvia Montano (Fourth Respondent)

In COM 20/32703:
Mosszan Pty Ltd (First Applicant)
Montano Corp Pty Ltd (Second Applicant)
Ronald Montano (Third Applicant)
Fulvia Montano (Fourth Applicant)
Jude Trading Pty Ltd (Respondent)

Representation:

Counsel:
Mr J Doyle (Jude Trading Pty Ltd)
Mr H El-Hage (Mosszan Pty Ltd, Montano Corp Pty Ltd & Ronald Montano and Fulvia Montano)

Solicitors:
Shad Partners (Mosszan Pty Ltd, Montano Corp Pty Ltd & Ronald Montano and Fulvia Montano)
H Soltan (Jude Trading Pty Ltd)

File Number(s):

COM 20/49850 and COM 20/32703

Publication restriction:

Nil

REASONS FOR DECISION

Introduction

1. There are two applications to be determined in these proceedings. They arise out of a dispute concerning a registered lease (the lease) of premises, a convenience store located in the Sydney CBD (the premises). 

2. COM 20/49850  is an application by Jude Trading Pty Ltd. It is the former lessee of the premises and seeks damages from Mosszan Pty Ltd, Montano Corp Pty Ltd, Ronald Montano and Fulvia Montano, the owners of the premises, for their alleged repudiation and of the lease, and the return of a $41,375.10 bank guarantee (bank guarantee). Jude Trading Pty Ltd also claims an amount which is the difference between rent that remains owing under the lease adjusted or reduced for rent relief due to the financial impact to it of COVID-19 pandemic (the pandemic), and a rent credit to which it claims to be entitled as a result of the determination of the market rent by a specialist retail valuer.

3. Central to this dispute is whether the applicant validly exercised the option under the lease.

4. COM 20/32703 is an application by Mosszan Pty Ltd, Montano Corp Pty Ltd, Ronald Montano and Fulvia Montano against Jude Trading Pty Ltd. They were seeking certain declarations regarding the exercise of an option under the lease, an order for possession of the premises and for payment of outstanding rent. The application was discontinued, without consent, and the only remaining issue is whether a costs order should be made in favour of Jude Trading Pty Ltd.

5. For convenience, and unless the context otherwise requires, I will from now on refer to Jude Trading Pty Ltd as “the applicant” and Mosszan Pty Ltd, Montano Corp Pty Ltd, Ronald Montano and Fulvia Montano as “the respondents” in both proceedings.

6. The following persons have each had a part to play in the proceedings:

1. Mr Bassam Hallak, the sole director of the applicant (Mr Hallak);

2. Mr Peter Montano, a director of Montano Corp Pty Ltd (Mr Montano). Mr Montano is a real estate agent;

3. Mr Andrew Blenkinsopp, a Senior Commercial Portfolio Manager with MainStreet Real Estate, the respondents’ agent (Mr Blenkinsopp);

4. Mr Jeng Juan Tan, a solicitor and former employee of Shad Partners, the respondents’ solicitors (Mr Tan);

5. Mr Nabil Ajaje, the principal at ANB Lawyers, the applicant’s former solicitors (Mr Ajaje);

6. David Shad, the Principal at Shad Partners, the respondents’ solicitors (Mr Shad);

7. Mr James Whealing, independent valuer with Brady Whealing (Mr Whealing);

8. Mr Zoran Sarabaca from Xcllusive Business Sales Pty, the applicant’s expert (Mr Sarabaca); and

9. Mr David White, from Bisval Pty Ltd, the respondents’ expert (Mr White)

Background

7. The lease of the premises commenced on 15 November 2015. G.C.S. Retail Corp Pty Ltd (GCS) was the lessee at that time. The lease was for a term of four years. The usage of the premises was described as “convenience store.” The lease contained two options to renew, each for five years. If the lessee wished to exercise the option, Part IV of the lease required that it give the lessor not less than six months previous written notice during the last year of the term.

8. It is also relevant to note that the market rent review provisions of the lease provide that where there is a market rent review “the Rent from and including the relevant Review Date is to be the highest of the Rent payable during the year immediately preceding the Review Date or determined under this clause.” This is commonly known as a “ratchet clause.” The clause is prohibited by section 18(4) of the Retail Leases Act (the Act).

9. On 19 June 2018, the applicant entered into a contract for sale of business with GCS acquiring the business it conducted from the premises for $136,000. The was made up of $86,000 for goodwill, $25,000 for the equipment and $25,000 for trading stock.

10. A copy of the original disclosure statement (disclosure statement) that had been provided by the respondents to GCS was sent to the applicant on 2 July 2018.

11. Relevantly, page 3, item 6, of the disclosure statement describes the date for exercise of the option as “00/00/00 to 00/00/00”.

12. The respondents consented to the assignment of the lease and the settlement of the sale of the business and assignment of the lease took place on 3 August 2018. The applicant then proceeded to undertake a fresh fit out of the premises at a cost, it says, of $88,470. In order to expand the services available in the premises, the applicant entered into a licence agreement with Western Union to operate a foreign currency exchange under a franchise agreement. For security purposes this required specific security fixtures and fittings to be installed by the applicant.

13. On 8 July 2019, Mr Ajaje, the applicant’s then solicitor, wrote to Shad Partners, the respondents’ solicitors, purporting to give written notice on behalf of the applicant of the exercise of its option to renew the lease for a further term of five years. Mr Ajaje also requested that the respondents’ lawyers advise him of the proposed market rent in due course.

14. Mr Tan, at Shad Partners, replied by email to Mr Ajaje on 9 July 2019 informing him that he would seek instructions. The next day he informed Mr Ajaje, by email, that the last date for the applicant to exercise the option was 14 May 2019, and the respondent was considering the request to renew the lease.

15. On 25 September 2019, Mr Tan sent the following email to Mr Ajaje on 25 September 2019. It reads:

Hi Nabil,

I have just obtained instructions from the Lessor.

The Lessor agrees to accept the Lessee's late notice to renew the lease, provided that the Lessee agrees to the followings:

1) The annual rent for the 1st anniversary of the option term (from 15 November 2019 to 14 November 2020) is $157,977.60 plus GST; and

2) All terms and conditions in the current Lease remain as are (except for the rent, number of option remaining, commencing, terminating date and clause 25).

Let me know whether or not the Lessee agrees to the above so that l can prepare the lease documents.

Thank you.

16. Clause 25 of the lease provided for the works to be undertaken by the respondents in 2015, when the lease commenced.

17. Mr Tan followed up with another email to Mr Ajaje on 8 October 2019. It reads:

Hi Nabil,

I refer to my email below.

Kindly let me know whether or not your client agrees to the annual market rent of $157,977.60 plus GST (for the 1^st anniversary of the option term, from 15 November 2019 to 14 November 2020).

If I do not hear from you by 16 October 2019 (21 days from the date the Lessee is notified of the market rent), the Lessor will assume that the Lessee agrees to the market rent proposed by the Lessor.

Thank you.

18. Mr Ajaje replied to Mr Tan on 16 October 2019. His email reads:

Dear Colleagues

We refer to your email below.

We have difficulty understanding your comments as to the exercise of the option, in view of the executed Lessor disclosure statement (attached — see page 3, item 6). We note that the lessor has now accepted the exercise of the option.

The lease calls for the rental to be the market rental.

Our client does not consider the amount of $157,977.60 plus GST to be the annual market rental.

We are instructed that our respective clients are engaging in direct discussions in relation to negotiating the annual market rental, and we await the outcome as to the same.

Kind Regards

19. On 5 November 2019, Mr Tan sent Mr Ajaje an email informing him that the market rent in his 15 November 2019 email had been miscalculated. He said the revised market rent on 15 November 2019 should be $162,717.02 plus GST annually. He asked Mr Ajaje to confirm that the lessee agrees to the revised market rent so that he could issue the lease documentation.

20. Mr Ajaje replied by email the same day. Referring to Mr Tan’s email he said this:

The above email represents a proposed increase in rental.

We are instructed to notify that our client does not consider the amount of $162,717.02 (plus GST) to represent market rental for the shop premises. Our client considers the market rental to be a lesser amount.

We note that leasing agent has not been in contact with our client in relation to this matter.

21. On 7 November 2019, Mr Hallak and Mr Blenkinsopp had a conversation (7 November conversation), the details of which are in dispute.

22. This is Mr Blenkinsopp’s version of the conversation:

Hallak:

My solicitor has told me to contact you as he thinks I might have more of a chance to resolve this dispute than through the lawyers."

Blenkinsopp:

You have lost the option because you did not exercise it on time. The landlord's Solicitors have sent correspondence outlining the position.

Hallak:

No, I don't agree. I have exercised the option. I want to negotiate the rent. Can we agree on frozen rent or a fixed amount?

23. Mr Hallak denies Mr Blenkinsopp’s version of the conversation. He says the conversation was in the following terms:

Hallak:

Let us negotiate the market rent of the option and renew the lease. I likely (sic) to request an independent valuation to determine the market rent review if we do not agree on what the market rent is.

Blenkinsopp:

The independent valuation will not help you to drop the rent. We have a clause in the lease that says rent cannot be lower at market review. I can however work with the landlord and convince him that the market has dropped.

24. On 7 November 2019, the following email exchange took place between Mr Blenkinsopp and Mr Hallak:

1. Blenkinsopp to Hallak

Hello Bassam,

I hope you are well.

Further to our conversation and prior correspondence we note that you have requested a change to the market review increase of 5%.

In light of the increased costs for the property we have consulted the landlord party and we are willing to reduce our expectation to close the matter and finalise the new lease.

We will agree to a market review of 4%. You have mentioned that you are likely to request an independent valuation to determine the market review.

Can you please confirm whether you agree to the revised market review for rent to increase by 4% or whether you wish to proceed with a different course of action.

Please advise.

If you require more information please reply to this email or call me in the office on [number provided].

Regards

2. Hallak to Blenkinsopp

Hi Andrew,

Thanks for your email and follow up. As you are aware the market, in general, is down. That is why the interest rate is at its lowest level ever. Which is 0.75. And my shop and my business is no exception. Right now it is very tough for me with the current annual rent is $157K+GST. It will be much better if we request an independent valuer to set the right and actual rent for [the premises]. If the independent valuer confirms the current rent, or even add 6 percent increase, I will accept it. On the other hand, if he find out that the current rent is too high and should go down then a new lease should be issued to reflect the new rent.

For peace in mind, and great business relations, I strongly prefer an independent valuer to decide the current market review of the lease.

Best Regards.

3. Blenkinsopp to Hallak

Thank you Bassam,

I will liase (sic) with the landlord and look to get a suggested independent valuer. Once I have a person to nominate I will send you an email so you can see if you are happy to proceed with that valuer.

If you require more information please reply to this email or call me in the office on [number provided].

Regards

25. Mr Blenkinsopp, the same day, that is 7 November 2019, sent this email to Mr Montano:

Hi Peter,

The lessee has requested an independent valuation to determine rent. Did you have anyone that you would like to suggest so we can look to get the matter completed as soon as possible. I have cced their response below.

Please advise.

26. On 15 November 2019, Mr Blenkinsopp sent this email to Mr Hallak:

Hello Bassam,

Further to our correspondence please see attached.

1. Copy of Original Presidential Appointment Application Form from REINSW

2. Copy of scanned form signed by agent requiring your signature to complete,

The form notes that the fee for the application will be $990.

As per the act (sic) we agree to share costs equally. Once costs are required we will likely issue you an invoice against your ledger for your equal share.

Can you please organise to read and sign page 5 of the application to complete the form so we can submit to commence the market review process?

Should you have any questions feel free to call me.

If you require more information please reply to this email or call me in the office on [number provided].

Regards

27. The application form attached to Mr Blenkinsopp’s email was filled in and signed by Mr Montano. In the section “Type of Expert” a cross has been inserted adjacent to the word “Valuer”. A few lines down in the same section are the printed words: “Other (please specify)”. In the box adjacent to those words the following has been handwritten in uppercase:

VALUER FOR RETAIL LEASE IN SYDNEY CBD

The section below is headed “Purpose of the appointment”. A cross has been inserted in the box adjacent to the words: “To determine current market rent for the property”. A few lines down adjacent to the box “Other (please specify)” the following has been handwritten in uppercase:

LEASE OPTION, REVIEW CURRENT MARKET RENT

28. It was Mr Montano’s evidence that in early November 2019 he had a conversation with Mr Blenkinsopp who said to him:

“The tenant wants a new lease. I’ve suggested we should get an independent valuation for the market value to facilitate the negotiations.”

29. Following that conversation, Mr Montano said he thought the best course to take was to have the Real Estate Institute of New South Wales appoint an independent valuer and so he obtained the Presidential appointment form, inserted the relevant details and provided a copy to Mr Blenkinsopp. Mr Montana denies there was ever any discussion or agreement that the respondents will be bound by the valuation. He says the respondents always indicated both through their solicitor and agent that the option had not been exercised and the purpose of the valuation was to engage in further discussions and negotiations for a new lease.

30. Mr Hallak and Mr Blenkinsopp had a conversion on 15 November 2019 (15 November conversation). What was said during this conversation is also in dispute.

31. Mr Hallak’s version of the conversation is as follows:

Hallak:

Thank you for your email earlier today. So Peter [Montano] agreed to renew the lease for 5 years plus 5 years option with the initial rent to be determined by a valuer as per the lease?"

Blenkinsopp:

Yes. I emailed you the form for you to sign so that a valuer can be appointed.

Hallak:

But the valuation needs to be carried out by the Office of the Small Business Commissioner. This is a retail lease.

Blenkinsopp:

OK I understand

Hallak:

I will fill the Small Business Commissioner form then email it for you to sign.

Blenkinsopp:

That will be good. Please send me the form to sign.

32. Mr Blenkinsopp denies saying the respondent agreed to a five year lease with a five year option. The following is his version of the 15 November conversation:

Hallak:

I want the valuation to be undertaken by the small business commissioner as it's the correct way advised by them.

Blenkinsopp:

That's fine as long as it's for the purposes of bringing the retail valuation into the mix so that further discussions can take place to attempt to come to an agreement.

33. On 18 November 2019, Mr Hallak sent Mr Blenkinsopp, by email, a signed Office of Small Business Commissioner (OSBC) application form for the appointment of a specialist retail valuer for a current market rent review (OSBC form). Mr Blenkinsopp emailed the OSBC form, signed by Mr Montano, to Mr Hallak on 27 November 2019. In his covering email he provided the email address for the OSBC and a template email for Mr Hallak to use when lodging the form.

33. The OSBC form was lodged by Mr Hallak on 28 November 2019. The OSBC acknowledged receipt the next day.

34. It is to be noted that the OSBC form is a standard form used by the OSBC and contains information for the benefit of both retail landlords and tenants including the following:

1. On page 1:

Under Section 31 of the Retail Leases Act 1994 (the Act) the OSBC can assist parties by appointing a specialist retail valuer (SRV).

You can only have current market rent determined if your lease says your rent changes to current market rent or if there is an option that rent changes to current market rent.

2. On page 2:

What if one party doesn't agree with the valuation?

The Act allows parties to seek a review within 21 days of receiving the original valuation.

3. On page 5:

Under the heading “Valuation” are three questions requiring a yes or no answer to be circled. The questions are:

Are the parties unable to agree on the current market rent?

Are the parties unable to agree on a SRV?

Does your lease require a current market rent review or provide an option to renew or extend your lease at current market rent?

Each question was answered “yes”.

4. On page 6:

The following question is asked:

What is the date from which the reviewed rent should begin?

The answer typed in is “15 November 2019”.

36. Section 31(1) of the Act, referred to in the appointment form, prescribes the process for having the market rent of retail premises determined by an independent valuer if the parties to the lease are unable to agree the rent. In relevant part the section reads as follows:

1. A retail shop lease that provides for rent to be changed to current market rent or that provides an option to renew or extend the lease at current market rent is taken to include provision to the following effect:

….

(b) if the lessor and the lessee do not agree as to what the actual amount of that rent is to be, the amount of the rent is to be determined by valuation carried out by a specialist retail valuer appointed by agreement of the parties to the lease, or failing agreement by the Registrar.

37. An OSBC officer sent an email to Mr Hallak and Mr Blenkinsopp on 2 December 2019. In relevant part it reads:

I am writing to each of you to confirm our receipt of the attached joint application for the appointment of a Specialist Retail Valuer under section 31(1)(b) of the Retail Leases Act, 1994. The application nominates you as the appropriate contact for your party.

38. On 12 December 2019, Mr Montano gave written instructions to Mr Blenkinsopp to “Charge old rent until re-valuation. Fix figures on November and December statements. RENT: $12,914.05 G.S.T. $1,291.40”. I take this to be Mr Montano’s instructions for the rent from 15 November 2019, when the lease term ended, to continue to be charged at the same rate pending the outcome of the rent review.

39. The OSBC appointed Mr Whealing on 30 January 2020 to determine the market rent of the premises. On 12 February 2020, Mr Whealing invited the parties to provide their written submissions by 12 March 2020.

40. The applicant engaged Mr Fonteyn, a valuer with Leaseinfo Advisory to provide a market rental valuation submission to Mr Whealing. Mr Fonteyn’s fee for this service was $2750. The applicant also engaged Mr Shoebridge to survey the gross lettable area of the premises. His fee was $990. The survey was included as part of Mr Fonteyn’s submission.

41. In his valuation, Mr Fonteyn submitted that the market rent for the premises as at 15 November 2019 should be $96,000 excluding GST.

42. Mr Montano also provided a written submission to Mr Whealing. The one page document is undated but I understand it was sent to Mr Whealing on 11 March 2020. Mr Montano’s submission relevantly said this:

Lease commencement:    15/11/2015 TO 15/11/2019

Current rent:          15/10/2019 TO 15/11/2019 $12,914.05 PLUS G.S.T.

Options:          2 option of five years

Exercise of option.       15/11/2019 had expired when renewal notice was received

….

In view of increase in outgoings and the prime location of the shop, the annual increase for the market review should be 10% and then 3% annually.

I would like to confirm that the rent determination as at 15th November 2019. The start of the five year option.

In my opinion the market review of option rent should be $14,205.45 per month plus G.S.T.

43. On 2 April 2020, Mr Whealing issued his rent determination (the rent determination). In summary, he said this:

1. his appointment was a result of the parties being unable to agree on the market rent as at the market review date of 15 November 2019;

2. the tenant was of the opinion that the market rent is $96,000 p.a. plus GST, while the lessor contended that it was $170,465 p.a. plus GST;

3. the passing rent payable immediately prior to the lease renewal date was $154,967 p.a. plus GST;

4. the lease has two option terms each of five years;

5. the ratchet clause in the lease contravened the Act;

6. he had regard to the provisions of the lease and Section 31 of the Retail Leases Act in arriving at the determination;

7. there were a number of leases (identified in the rent determination) that were considered in determining the rent; and

8. the effective market rent for the premises was $110,515.00.

44. The day after he received the rent determination, Mr Blenkinsopp informed Mr Montano by email that he would look at it and “implement the review accordingly”. Mr Montano replied by email the same day instructing Mr Blenkinsopp not to do anything yet because he was “objecting to the conclusion of the valuer”. Mr Blenkinsopp did as he was instructed but informed Mr Montano in a text message sent on 17 April 2020 that he suspected the applicant would not pay the rent Mr Montano was seeking “where according to the market review the balance of advance rent past 15/4/20 would be approx. $22,000 + GST.” This was an approximation of the difference between the old rent being paid by the applicant since 15 November 2019 and the new, lower rent determined by Mr Whealing.

45. On 24 April 2020, Mr Tan sent an email to Me Ajaje. Mr Tan said he was instructed to inform the applicant it was late in exercising the option to renew the lease, the respondents offered to accept the applicant’s late exercise of the option if the applicant agreed to an annual rent of $162,717.02 plus GST for the first anniversary of the option term. He went on to say that the applicant’s late exercise of the option remained invalid, it was now a monthly tenant and the offer remained open for 14 days.

46. Mr Ajaje replied by email on 28 April 2020. He referred to what he described as discrepancies between the date for exercise of the option specified in the disclosure statement (a reference to the “00/00/00” option date) and what was contained in the lease. He maintained that the applicant had exercised the option and referred to the parties having made a joint application to the OSBC for a market rent determination which was determined by Mr Whealing to be $110,000 exclusive of GST. Mr Ajaje said the applicant was estopped from making the assertions in Mr Tan’s 24 April 2020 email, requested an option lease be provided and threatened proceedings in the Tribunal if it was not received within 14 days.

47. On 28 April 2020, an application under section 32A of the Act for the review of the rent determination signed by Mr Montano and dated 17 April 2020 was lodged with the OSBC. Prior to lodging the application Mr Montano says he contacted the OSBC and had the following conversation with a phone operator:

Montano:

I have received the valuation prepared by Mr Whealing. There is no lease as the tenant did not exercise the option on time. I'm not happy with the figure. I know the review needs to be lodged within 21 days. Do I still need to lodge it if there is no lease?"

Phone operator:

You should still lodge the application to review to prevent time from running out and in the meantime obtain legal advice. I will put the application on hold once received to allow you to get that advice.

48. On 6 May 2020, Mr Ajaje wrote to the OSBC. In his letter he said that section 32A(2) of the Act required the review application to be made within 21 days after receipt of the determination. Having been filed on 28 April 2020, the review application was out of time. The OSBC responded on 1 June 2020. The officer dealing with the matter agreed that the review application was received outside of the 21 day period and accordingly closed the OSBC file.

49. Mr Shad applied to the OSBC on 6 May 2020, on behalf of the respondents, for the mediation of a dispute with the applicant in relation to the exercise of the option. There was no mention in the application of the rent determination or rent relief. The mediation took place on 10 June 2020. Mr Anthony Herro was the mediator. It was unsuccessful and a certificate under section 68 of the Act was issued by the Deputy Registrar on 20 July 2020.

50. On 29 June 2020, Mr Blenkinsopp delivered a notice of termination of the lease to the premises (first termination notice). It states that the respondent gives the applicant one month’s notice to terminate the lease “in line with clause 4.2 of the lease…”. Clause 4.2 was the holding over provision. Where the applicant remained in occupation of the lease at the expiration of the term, under that clause it does so as a monthly tenant and the lease could be terminated by either party on one month’s written notice.

51. Mr Ajaje emailed a letter to Mr Shad on 13 July 2020 enclosing a copy of another application for mediation that had been filed with the OSBC. The application describes the dispute as being about the respondents’ service of the termination notice contrary to the National Cabinet Mandatory Code of Conduct (the Code). In his letter, Mr Ajaje said that at the 10 June 2020 mediation, the parties agreed to refrain from any adverse action for a period of 21 days and the notice of termination had been received 19 days after that agreement had been reached. He also foreshadowed proceedings in the Tribunal, enclosed applications for both interim and final relief to be filed, and invited the respondents to withdraw the notice.

52. Later that day Mr Shad sent an email to Mr Ajaje. He said that it was his understanding that the moratorium was in relation to legal proceedings as distinct from a notice of termination but, to avoid unnecessary expense and to preserve the without prejudice nature of the mediation, the respondent withdrew the first termination notice.

53. Mr Ajaje replied to Mr Shad the same day. He maintained that the option to renew “was indeed properly exercised”. He also flagged that the applicant was suffering loss of goodwill while the respondent was advertising the premises as “available” and “for lease”, and the Retail and Other Commercial Leases (COVID-19) Regulation 2020 (the COVID Regulation) and the Code required the respondent to negotiate in good faith with the applicant.

54. On 14 July 2020, a number of emails passed between the parties solicitors and also an officer of the OSBC. In summary, the OSBC officer, noting that the parties had already participated in a mediation on 10 June 2020 with Mr Herro, asked Mr Ajaje and Mr Shad if they wished to have another mediation scheduled with Mr Herro or a section 68 certificate issued. Mr Shad requested a section 68 certificate. Mr Ajaje responded saying that the application sent to the OSBC was specifically in relation to COVID rental relief and not the subject matter of the earlier mediation. Mr Shad then asserted in an email to Mr Ajaje and the OSBC officer that the mediation in relation to rent relief was flawed because the Code did not prevent the respondents from terminating by reason of the lease coming to an end. Mr Ajaje responded with an email to the OSBC officer and Mr Shad taking issue with Mr Shad’s contention. He stated that the Code required the respondents to act in good faith and asked that the mediation be scheduled with Mr Herro.

55. The final correspondence on 14 July 2020 was a letter Mr Shad emailed to Mr Ajaje. He said that on behalf of the respondent he was giving the applicant one month’s notice in writing terminating the lease pursuant to clause 4.2, and the applicant was required to vacate the premises by 15 August 2020 (second termination notice).

56. On 20 July 2020, the Deputy Registrar issued another section 68 certificate.

57. The respondent commenced proceedings COM 20/32703 against the applicant on 3 August 2020. It sought:

1. A declaration that the applicant failed to exercise the option to renew by 14 May 2019;

2. A declaration that the applicant’s purported exercise of option to renew on 8 July 2019 was not a valid exercise of the option;

3. A declaration that the applicant occupies the retail premises as a monthly tenant pursuant to clause 4.2 of the Lease;

4. An order that the applicant vacate the retail premises by 15 August 2020 or forthwith in the event the order is made after 15 August 2020;

5. An order that the applicant pay all outstanding rent until the date it vacates the retail premises, as sought in order 4, with rent calculated by reference to the rent payable immediately prior to the lease terminating date being $154,967 per annum plus GST; and

6. Costs

58. Mr Ajaje wrote to Mr Blenkinsopp on 11 August 2020. His letter enclosed the applicant’s April to June Business Activity Statements for 2019 and 2020. Mr Ajaje said a comparison of the statements showed a turnover decline of 71.48% and under the Code the applicant was entitled to a rent reduction of 71.48%. He went on to say that the applicant was an impacted lessee in receipt of jobkeeper under the Coronavirus Economic Response Package (Payments and Benefits) Rules 2020 (Cth). Mr Ajaje then set out calculations for the rent relief the applicant claimed to be entitled. He said the rent relief was to be taken wholly in the form of rental waiver and not deferred, and calculated by reference to the rent determination of Mr Whealing.

59. Mr Ajaje, in a lengthy letter to Mr Shad dated 14 August 2020, referred to the two termination notices and the commencement of proceedings COM 20/32703. He said the two notices of termination constituted a repudiation of the lease, the applicant accepted the respondents’ repudiation and terminated the lease. He also reserved the applicant’s right to claim damages and to commence recovery proceedings. The keys to the premises, said Mr Ajaje, would be handed over to Mr Blenkinsopp on 16 August 2020.

60. The applicant vacated the premises on 16 August 2020 having made good the premises.

61. On 17 August 2020, Mr Shad wrote to the Tribunal seeking to withdraw their application COM 20/32703 because the respondent had vacated the premises. He asked that the proceedings be dismissed with no order as to costs. The Tribunal dismissed the application on 18 August 2020.

62. On 19 August 2020, Mr Ajaje informed the Tribunal that the applicant did not consent to the orders made on 18 August 2020 and it did not agree to “no order as to costs.

63. Principal Member Rosser, on 25 August 2020, dismissed the application in accordance with section 55(1)(a) of Civil and Administrative Tribunal Act 2013 (CAT Act) noting that the respondents had withdrawn their application. The Principle Member added these reasons:

The [earlier] orders contain an error in that they were not made upon receipt of signed terms of agreement, but at the request of the Applicant only. The Applicant does not require the other party's consent to withdraw the proceedings, however either party is at liberty to apply for a costs order."

64. On 1 July 2021, the applicant applied to the Tribunal for a costs order in COM 20/32703. That application is considered later in these reasons.

65. In the meantime, on 17 August 2020 Mr Ajaje lodged a further mediation application with the OSBC. In his covering email he said the mediation was “solely in relation to the COVID-19 rental relief matter”. Mr Blenkinsopp insisted that additional information be provided regarding the applicant’s turnover loss before the respondents would agree to participate in a mediation. The mediation did not take place.

66. The applicant commenced the present proceedings on 27 November 2020. By its points of claim subsequently filed, the applicant sought the following relief:

1. A declaration under s72(1)(f)(iii) of the Act that the respondents are estopped from denying that the applicant has validly exercised its option to renew the lease for a further five years commencing from 15 November 2019 with the Market Rent payable as rent and other terms substantially the same as that of the lease.

2. Further or in an alternative, a declaration under s.72(1)(f)(iii) of the Act that an agreement for lease within the meaning of the Act was concluded between the applicant and the respondents as to the subject premises.

3. Further or in an alternative, a declaration under s.72(1)(f)(iii) of the Act that a lease within the meaning of the Act was entered into under its section 8 between the applicant as lessee and the respondents as lessor.

4. A declaration under s72(1)(f)(iii) of the Act that the respondents repudiated the lease and/or the agreement of lease referred to in 1-3 above with the applicant.

5. An order under s72(1)(a) of the Act that the respondents are to pay the applicant damages for its losses.

6. An order under s16BA of the Act that the respondents are to return the bank guarantee held under the lease to the applicant even if the Tribunal finds the applicant is not entitled to relief set out above.

7. An order under section 60 of the Civil and Administrative Tribunal Act 2013 (CAT Act) that the respondents pay the applicant's costs of and incidental to these proceedings.

67. It is also relevant in the context of this dispute to note that through to late November 2020 the parties had continued to conduct negotiations over the rent relief the applicant was seeking as a consequence of the pandemic.

68. In addition, during the months of May and June 2020, Mr Hallak was engaged in negotiations for the sale to a Mr Bader of part of the applicant’s business conducted from the premises. According to Mr Hallak’s evidence, Mr Bader was prepared to acquire 75% of the business and take control of the applicant for $195,000. However, on 13 July 2020, Mr Bader’s solicitor informed Mr Hallak that his client was only prepared to pay $138,750 for the business. According to Mr Hallak, Mr Bader informed him that the respondents were advertising the premises for lease and wanted $170,000 and that he could go to the respondents’ and lease the premises directly from them without having to pay anything to the applicant. The sale to Mr Bader did not proceed.

Points of claim and points of defence

69. By its points of claim, the applicant relevantly asserted that:

1. it exercised the option in accordance with the terms of the lease;

2. the lodging of the jointly executed application for the appointment of a specialist retail valuer with the OSBC on 27 November 2019, the parties recorded their binding agreement to proceed with a valuation and the respondents accepted the applicant’s offer for a market review of the rent;

3. the respondents were therefore obliged to renew the lease for a further period of 5 years from 15 November 2019 at a rent to be determined by the specialist retail valuer;

4. the applicant became entitled to a new 5 year lease of the premises with the rent payable for the first year being the market rent as determined by the specialist retail valuer and subject to other amendments in accordance with the terms of the lease;

5. alternatively the applicant notionally entered into possession of the premises as lessee under a consensus or an agreement for lease within the meaning of the Act;

6. the parties acted on the common assumption that they had agreed to renew the Lease for a five year period and that the market rent for the first year of that renewed lease would be the Market Rent as determined by the specialist retail valuer.

1. the respondents are estopped by their words and actions from denying that common assumption, the exercise of the option, and the agreement to renew;

2. each of the respondents’ termination notices and the commencement of proceedings COM 20/32703 constituted a repudiation of the lease by the respondents;

3. the applicant accepted the respondents’ repudiation of the lease; and

4. the respondents twice declined to participate in a mediation for the purposes of agreeing COVID 19 rent relief and the applicant is entitled to rent relief pursuant to the COVID Regulation and the Code.

70. By their points of defence the respondents:

1. deny that the applicant validly exercised the option on 8 July 2019;

2. deny that they made an offer for a market review of the rent or that either party intended to be bound by any market determination;

3. while admitting that they signed an application to dispute the market rent pursuant to section 32A of the Act, say that the applications under sections 31 and 32A were to facilitate the parties negotiations in good faith as to the market rent and that neither agreed to be bound by the determination;

4. deny that the parties acted on the common assumption that they had agreed to renew the lease for a five year period and that the market rent for the first year of that renewed lease would be the market rent determined by Mr Whealing;

5. deny that the applicant entered into possession of the premises as lessee under a consensus or an agreement for lease within the meaning of the Act;

6. deny that the respondents are estopped from refusing to renew the lease with effect from 15 November 2019;

7. deny that the first termination notice, the second termination notice or the commencement of proceedings COM 20/32703 constituted the respondents’ repudiation of the lease;

8. say that having given the respondents possession of the premises on or about 16 August 2020, the applicant capitulated in proceedings COM 20/32703, there was no hearing on the merits in those proceedings and the applicant would not be entitled to any costs;

9. by not defending proceedings COM 20/32703, the applicant is estopped from asserting that the option had been validly exercised and from claiming damages;

10. deny that in breach of the Code, the respondents failed to negotiate in good faith with the applicant and failed to provide it with rent relief; and

11. admit they have not returned the bank guarantee to the applicant

Amounts claimed by the applicant

71. The applicant claims wasted expenditure and stock loss totalling $267,301. This amount consists of the following:

1. Wasted expenditure

Purchase of goodwill: $86,000

Purchase of equipment: $25,000

Business improvement expenditure: $88,470

James Whealing’s determination fee:$3,575

Simon Fotayn’s submission fee: $2,750

David Shoebridge’s surveying fee: $990

De-fit costs: $15,516.60

Disposed trading stock:  $10,000

TOTAL: $232,301.60

2. Stock said to be worth $35,000 that was transferred to the applicant’s other business but could not be liquidated.

72. In the alternative it claims the amount Mr Sarabaca values the business. It was Mr Sarabaca’s opinion that based upon direct market data, the value of the business as at November 2019 would be $168,500 plus stock at valuation and $123,000 plus stock at valuation when the business closed in August 2020. Mr Sarabaca attributed the decline in value over that period to the decline in sales.

73. The applicant also claims

1. A rent credit of $22,000 plus GST which is an adjustment required by the lease as a consequence of having continued to pay rent at the old and higher rate while the determination was being conducted; and

2. the return of the bank guarantee.

74. The applicant accepts that it owes rent for the period 15 April to 15 August 2020 but there is a dispute as to what that rent should be after taking into account the application of rent relief under the COVID Regulation and the rent credit.

Jurisdiction

75. Subject to one particular aspect of this matter, it is not in dispute that the Tribunal has jurisdiction under the Act to make the declarations and orders sought by the applicant in its application and determine the cost issue in the respondents’ application, COM 20/32703.

76. One jurisdictional issue which has been raised by the respondents and that is in relation to the rent relief claimed by the applicant. They contend that COVID-19 rent relief negotiations need to take place before the Tribunal can exercise any powers under the Act and those negotiations have not yet taken place. I will deal with this issue later in these reasons.

Hearing and evidence

77. At the hearing, Mr Doyle of counsel appeared for the applicant and Mr El-Hage of counsel appeared for the respondents.

78. The applicant’s evidence consists of three affidavits sworn by Mr Hallak and an expert report by Mr Sarabaca. The respondents’ evidence consists of an affidavit sworn by each of Mr Montano, Mr Blenkinsopp and Mr Tan, and an expert report by Mr White. Mr Sarabaca also provided a response to Mr White’s report and both experts, at my request, provided a joint statement. The parties’ witnesses were cross-examined.

79. Both counsel made oral submissions at the hearing. Written submissions have been provided by Mr Doyle. The respondents’ written submissions are signed by Mr Shad.

Issues

80. In my opinion, these are the are the issues to be determined by the Tribunal in these proceedings:

1. Did the applicant, by its solicitor’s letter dated 8 July 2019, exercise the option to renew the lease?

2. If the answer to the preceding question is “no”, did the respondents waive the late exercise of the option and the parties treat it as having been validly exercised?

3. Alternatively to issue (2), did the parties enter into a new lease on the same terms of the lease renewed under the option clause with the rent determined in accordance with section 31 of the Act?

4. Are the respondents estopped from denying that the applicant validly exercised the option to renew the lease or that the parties entered into an agreement for lease as provided for by the option?

5. Are the parties deemed to have entered into a statutory lease on or after 15 November 2019 by operation of section 8 of the Act.

6. Did the respondents repudiate the lease entitling the applicant to accept the repudiation and terminate the lease?

7. Is the applicant entitled to damages, and if so, what is the quantification of those damages?

8. What, if any, rent adjustments need to be made having regard to the rent determination, and the COVID Regulation?

9. Is the applicant entitled to the return of the bank guarantee?

10. Is the applicant entitled to a costs order in COM 20/32703?

Applicant’s Submissions

81. The following is a summary of the submissions made on behalf of the applicant:

1. The Tribunal does not have to decide whether the applicant validly exercised the option by Mr Ajaje’s 8 July 2019 letter. This is because the parties’ subsequently, by their words and conduct, agreed to either treat the option as having been exercised, that is, they agreed to waive the late exercise of the option or, alternatively, they agreed to enter into a new lease on the same terms as the lease renewed under the option clause with the rent determined by the process prescribed in section 31 of the Act.

2. The words and conduct consisted of the following::

1. Mr Hallak’s version of the 7 November 2019 conversation with Mr Blenkinsopp;

2. Mr Hallak’s 7 November 2019 email to Mr Blenkinsopp;

3. Mr Hallak’s version of the 15 November 2019 conversation with Mr Blenkinsopp;

4. the REINSW form for the presidential appointment of a valuer, and the OSBC form for the appointment of specialist retail valuer under section 31 of the Act;

5. Mr Montano’s 11 March 2020 submission to Mr Whealing;

6. Mr Blenkinsop’s email of 3 April 2020 to Mr Montano,

7. Mr Blenkinsopp’s text message to Mr Montano of 17 April 2021; and

8. Mr Montano lodging an application for the review of Mr Whealing’s determination under section 32A of the Act.

3. Mr Hallak’s evidence of the conversations fits neatly with the facts as they emerged from the correspondence.

4. There was agreement on all necessary terms because the parties agreed to a renewal of the lease with reference to the exercise of the option under the expired lease with the commencing rent to be determined by a specialist retail valuer, and the terms otherwise in accordance with the expired lease. The deal was determined entirely by the option clause in the lease and included all of the relevant terms.

5. If it is found that the respondents did not waive the late exercise of the option, nevertheless there was an agreement for lease, all of the terms of the lease having been agreed.

6. Alternatively, there was a retail shop lease as defined by the Act, which only requires an agreement to grant a right of occupation and does not require agreement on all of the essential terms. By the applicant’s continued occupation of the premises and payment of rent after the parties had committed to the agreement to lease, they are deemed to have entered into a statutory lease on or after 15 November 2019 by operation of section 8 of the Act

7. The respondents are estopped from denying that the applicant exercised the option for a renewed lease or the grant of a new lease as provided for by the option, with the rent to be determined by the independent valuer appointed by the OSBC. This is because their agent, Mr Blenkinsopp, repeatedly encouraged the applicant to assume that the process of an independent valuation would be binding and determinative of a new rental to apply under a renewed lease. The applicant relied on that encouragement and committed to pay rent under the new lease even if the section 31 determination resulted in an increased rent as sought by the respondents. The applicant also continued to occupy the premises after the lease expired and paid rent on time, it participated in the review process incurring costs, it did not seek alternative premises in late 2019 and did not pursue negotiations of over the rent at the time the review process was initiated. It was also unconscionable for the respondents to allow and encourage the applicant to persist in its assumptions.

8. As a consequence of having served the two termination notices and commenced proceedings COM 20/32703, the respondents represented that the lease was at an end. These acts represented a clear repudiation of the lease. The applicant was entitled to accept the respondents’ repudiation, terminate the lease and sue for damages.

9. The applicant’s damages claim is advanced on two bases; wasted expenditure incurred by the applicant or, in the alternative, the value Mr Sarabaca attributes to the applicant’s business.

10. Mr Sarabaca’s valuations are only relied upon as a fallback, the applicant’s primary contention being that it is entitled to recover wasted expenditure.

11. The applicant’s wasted expenditure is the best and appropriate method for quantifying its damages. This is because:

1. the applicant traded for approximately two years which included at least six months of reduced trading during the pandemic;

2. the applicant may have chosen to continue trading for the entire duration of the lease, which had two options each of five years, and not sell its business;

3. as acknowledged by Mr Sarabaca, the applicant’s financials were basic and did not contain enough detail in order to make appropriate adjustments and determine actual earnings;

4. there is evidence of the applicant having negotiated a partial sale of its business to Mr Bader during the pandemic which valued it at $260,000, an amount similar to the wasted expenditure; and

5. Mr Sarabaca’s valuation assumes the applicant will sell its trading stock at a fair market value but the evidence is that $10,000 worth of stock was disposed of due to spoilage and short shelf life, and a further $35,000 worth of stock was yet to be liquidated.

12. The Tribunal should disregard the evidence of Mr White who valued the applicant’s business at $21,000 The “Net Asset Backing Method” he used did not take into account the goodwill the applicant paid when purchasing the business and business improvement expenditures incurred after purchasing the business. The evidence of Mr Sarabaca, a business broker and licence business valuer, should be preferred over Mr White’s evidence, a chartered accountant with no particular qualifications as to the valuation of small businesses. Mr Sarabaca had access to a database of reported business managed by the Australian Institute of Business Brokers which Mr White did not.

13. The applicant continued to pay rent at the previous rate while Mr Whealing was conducting the market rent review. As a consequence of the rental determination, the applicant is entitled to a rent credit of $22,000 plus GST, calculated from 15 November 2019.

14. The COVID Regulation requires that part of the rent payable by the applicant for the period 15 April 2020 until the lease was terminated on 15 August 2020, is to be adjusted because of the impact of the pandemic on the applicant.

15. The lease having been terminated, the respondents are not entitled to any of the deferred rent.

16. The respondents are required by section 16BA of the Act to return the bank guarantee to the applicant.

Respondents’ submissions

82. There are three specific submissions made on behalf of the respondent that I should address at the outset.

83. In his initial written submissions Mr Shad contended, at some length, that the applicant’s claim was an abuse of process and Anshun estoppel operated to prevent the applicant pursuing its claim. The basis for these contentions was that the exercise of the option and possession of the premises were issues in the applicant’s proceedings, they arose from the same substratum of facts that lead to the respondents’ earlier proceedings and could have been brought in those proceedings if the applicant had not capitulated and given possession of the premises without contesting the declarations and orders sought by the respondents.

84. These contentions were not repeated in later submissions. Mr Doyle submitted that they were without merit. I agree. Leaving aside the question whether the respondents repudiated the lease, the respondents unilaterally discontinued the proceedings 14 days after they were commenced. The applicant had no opportunity to pursue any cross claim in relation to the exercise of the option even if it wanted to. In those circumstances, there was no Anshun estoppel and no abuse of process by the applicant seeking a declaration regarding the exercise of the option.

85. Mr Shad’s initial written submissions also went to some length in contending why the applicant’s solicitor’s 8 July 2019 letter was not a valid exercise of the option. While the applicant continued to maintain for some time that the option had been validly exercised by that letter, it was a contention that was not pursued at the hearing or advanced in Mr Doyle’s written submissions. That is understandable considering that the basis for it was that the disclosure notice specified that the date for exercise of the option was “00/00/00”. I am not sure how it could have been seriously suggested that what was an obvious error justified the contention that the option had been validly exercised when the lease made abundantly clear when it was required to be exercised.

86. In case it might later be relevant, I find that the mistake in the disclosure statement did not affect the provisions of the lease and, specifically, when it was that the applicant was required to exercise the option. The option exercise date in the disclosure statement was an obvious mistake and meaningless. No cogent reasons were advanced as to how it could be said that the option was validly exercised on 8 July 2019 when the disclosure statement specified “00/00/00” as the option exercise date. Furthermore, and as submitted by Mr Shad, the decision of Sackar J in Piazza Trevi v Cromwell BT Pty Ltd as custodian for the Cromwell Symantec House Trust [2017] NSWSC 794 at [340]-[351],makes plain that the disclosure statement does not have contractual force. If the applicant wished to exercise the option for a further five year term, under Part IV of the lease it was required to give to the respondents during the last year of this lease not less than six months written notice prior to the expiration of the lease term, The lease term ended on 14 November 2019 which meant the applicant was required to give that notice by no later than 14 May 2019. It did not do so which meant that the applicant’s purported exercise of the option was out of time when the 8 July 2019 notice was given by its solicitor.

87. Mr Shad also submits that the applicant did not plead in its points of claim the 15 November conversation that took place between Mr Hallak and Mr Blenkinsopp, and there should be an inference drawn that the conversation did not occur because it would have been pleaded if it had occurred.

88. I reject the submission. There is no doubt the conversation occurred. This is because in their respective affidavits, Mr Hallak and Mr Blenkinsopp each set out their recollection of the conversation. In addition, the absence of any mention of the conversation in the points of claim is not fatal. Strict pleadings are not a feature of proceedings in the Tribunal. In any event, there is no suggestion that the respondents have not been taken by surprise or prejudiced in any way.

89. The other submissions made by Mr El-Hage and Mr Shad are summarised as follows:

1. There was never a meeting of the minds to give rise to any agreement for lease, there being no agreement as to start date, term, rent, use or any other essential terms.

2. There are fundamental difficulties with the contention that Mr Hallak’s 7 November 2019 email was an offer accepted by the lodging of the application for the appointment of a specialist retail valuer. This is because the email is silent as to the essential terms of the lease and whether the applicant would be bound if the valuation resulted in a rental increase of more than 6%.

3. On the evidence a finding cannot be made that there was an intention on the part of the parties to make a concluded bargain as the parties never agreed to be bound by the rental figure produced by Mr Whealing, neither party signed up to the proposition that they would be bound by the outcome of the valuation and there is nothing in the evidence that would allow for the finding that the respondents would be bound by the outcome. There is also no evidence from which it can be said that there was even an implied inference that the respondents agreed to be bound by the outcome.

4. In regard to the estoppel claim:

1. the respondents have impermissibly sought to use estoppel as a sword rather than as a shield.

2. no assumption could reasonably be made by the applicant having regard to the correspondence between the parties;

3. the purpose of the valuation was to assist the parties with negotiations of a possible new lease, as asserted by Mr Montano and Mr Blenkinsopp;

4. there was no clear and unequivocal representation giving rise to the assumption that the lease will come into existence. Instead, and at best, the only assumption that could be made is that the parties would obtain an independent valuation and engage in further good faith negotiations over the rent;

5. the respondents never agreed nor did they conduct themselves in a manner which indicated that they would be bound by the valuation, and they did not agree to be bound by it; and

6. even if the assumption is established, the applicant has not suffered significant detriment if there was a departure from the assumption nor would it be unconscientious that the promise not to be kept.

5. The Tribunal should reject the contention the 14 July 2020 notice was a repudiation of any asserted new lease or agreement to lease. This is because the notice was given pursuant to the lease and not a new lease or agreement to lease.

1. It is, in my view, wrong to view the applicant as having capitulated in the face of the proceedings by surrendering possession of the premises on 16 August 2020. As my findings in COM 20/49850 show, the commencement of proceedings by the respondents was repudiatory conduct on their part entitling the applicant to accept the repudiation, terminate the lease and vacate the premises. It was not an act of capitulation. In any event the respondents’ claim for rent was very much alive and there is no suggestion of any capitulation by the applicant in respect of that claim..

2. While mindful of the guiding principle found in section 36 of the CAT Act, and the obligation it imposes upon parties and their legal representatives, I do not consider those provisions to operate so as to preclude a party from seeking a costs order where the right to do so has been expressly reserved by the Tribunal and without limit as to time.

217. The following factors are, in my view, also relevant here in the context of the exercise of the Tribunal’s discretion to award costs to the applicant:

1. The second termination notice was served by the respondents’ solicitors on the applicant’s solicitors on 14 July 2020 giving one month’s notice of termination of the lease and informing the applicant to vacate the premises by 15 August 2020. The application to commence the proceedings was filed with the Tribunal on 3 August 2020. In other words, it was filed before the time specified in the notice for the applicant to vacate the premises. The application was clearly premature.

2. It cannot be said that by the applicant vacating the premises, the respondents obtain substantially what they had sought. There still remained a substantive rent claim which the respondents abandoned in withdrawing the proceedings.

3. There is no suggestion from the evidence that Mr Shad contacted Mr Ajaje prior to his email of 17 August 2020 to the Tribunal either seeking his consent to the proposed orders or his consent to communicating with the Tribunal about the matter. That would have been the appropriate thing to do rather than making a unilateral application for orders which on any view were relevant to the applicant.

218. Having regard to the matters to which I have referred, the applicant is entitled to an order for costs of and incidental to the proceedings.

219. I will add this in case it might be of relevance in the event the applicant’s costs have to be assessed. There is no evidence of what costs were actually incurred by the applicant between the time it was served with the respondents’ application commencing proceedings and when they were dismissed. Based on the number of submissions filed and the length of the submissions, and the number of affidavits that have been filed, it seems likely that more costs were spent arguing the costs application than were incurred prior to the dismissal of the proceedings. It would be quite inappropriate if that were the case particularly given the guiding principle found in 36 of the CAT Act. Whether all of those costs were reasonably incurred will no doubt be a matter for a costs assessor if the parties are unable to reach agreement on the quantification of the costs.

Orders

220. These are the orders of the Tribunal:

1. In application COM 20/49850

1. Pursuant to section 72(1)(f)(iii) of the Retail Leases Act 1994, a declaration that:

1. the respondents waived the applicant’s late exercise of the option to renew the lease of the subject premises;   

2. the applicant validly exercised the option to renew the lease of the subject premises;

3. the respondents repudiated the lease; and

4. the applicant accepted the respondents’ repudiation and validly terminated the lease.

2. Pursuant to section 72(1)(a) of the Retail Leases Act 1994, the respondents are to pay the applicant damages in the sum of $196,392.31 within 14 days.

3. Pursuant to section 72(1)(f)(iii) of the Retail Leases Act 1994 , a declaration that the applicant is entitled to the return of the $41,375.10 bank guarantee held by the respondents as security for the applicant’s obligations under the lease of the subject premises

4. Pursuant to section 72(1)(g) of the Retail Leases Act 1994, the respondents forthwith deliver up to the applicant the $41,375.10 bank guarantee held by them as security for the applicant’s obligations under the lease of the subject premises.

5. In the event a party wishes to make a costs application it must file and serve written submissions within 14 days, any party opposing the application is to file and serve its written submission within a further 14 days, and the Tribunal will make a decision on the papers as permitted by section 50(2) of the Civil and Administrative Tribunal Act 2013 unless persuaded that there should be oral submissions.

6. If after 14 days no written submissions are filed, then pursuant to Rule 38(2)(b) of the Civil and Administrative Tribunal Rules 2014, the respondents are to pay the applicant’s costs of and incidental to these proceedings as agreed or assessed.

2. In application COM 20/32703

1. Pursuant to Rule 38(2)(b) of the Civil and Administrative Tribunal Rules 2014, the applicants are ordered to pay the respondent’s costs of and incidental to the proceedings as agreed or assessed.

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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: 21 March 2022