Kao v Lim

[2003] NSWADT 85

CITATION:	Kao -v- Lim [2003] NSWADT 85
DIVISION:	Retail Leases Division
PARTIES:	APPLICANT Peter Kao RESPONDENT Ai Hwa Lim
FILE NUMBER:	015115; 025048; 025091
HEARING DATES:	27/08/2002, 26/09/2002
SUBMISSIONS CLOSED:	11/28/2002
DATE OF DECISION:	04/23/2003
BEFORE:	Montgomery S - Judicial Member
APPLICATION:	Claim for payment of money
MATTER FOR DECISION:	Principal matter
LEGISLATION CITED:	Administrative Decisions Tribunal Act 1997 Legal Profession Act 1987 Retail Leases Act 1994
CASES CITED:	Buchanan v Byrnes (1906) 3 CLR 704 Progressive Mailing House v Tabali Pty Ltd (1985) 157 CLR 17 Smith v Pisani (2000-2001) 78 SASR 548 Sacher Investments Pty Ltd -v- Forma Stereo Consultants Pty Ltd and Ors [1976] 1 NSWLR 5 Munce v Vinidex Tubemakers Pty Ltd [1974] 2 NSWLR 235
REPRESENTATION:	APPLICANT G Hoeben, barrister RESPONDENT D Flaherty, barrister
ORDERS:	1. Ms Ai Hwa Lim is to pay to Mr Peter Kao the amount of $43,512.67. This amount is to be paid within 21 days of these reasons; 2. Each party is invited to file written submissions parties in relation to the issues of interest or costs within 28 days of the date of these reasons.

1 These proceedings relate the 'Dragon Inn' restaurant (“the business”) located in the Tuncurry Plaza, 27-29 Manning Street, Tuncurry (“the Premises”). Mr. Peter Kao (“the Applicant”) is executor of the late Mr. Ping Kao. Ping Kao died on 12 December 2000. It is not disputed that Ping Kao left a Will naming the Applicant, his son, as executor.

2 Two separate agreements form the basis of the matters before the Tribunal: a lease agreement (“the Lease”) and a Sale of Business Agreement (“the Sale of Business Agreement”). The Applicant and Ping Kao entered into the Lease and the Sale of Business Agreement with Ms. Ai Hwa Lim (“the Respondent”). These agreements are the basis of the dispute between the parties. It is common ground that the Lease is governed by the Retail Leases Act 1994 (“the Act”).

3 Three matters have been consolidated for determination by the Tribunal. The matters were originally commenced before the Local Court at Forster and the District Court in Taree. They were transferred by consent to this Tribunal. The Applicant’s Application, as amended, sought orders that the Respondent pay to him an amount of at least $90,437.26. In addition the Applicant claims $2,736.03 for "outgoings of rates and land tax for the years 2000/2001, and 2001/2002. The Applicant seeks orders in the following terms:

“a. An order that the Respondent pay money to the Applicant, being at least $90,437.26 as rent from 1 May 2001 until the end of the lease on 30 September 2003, or until the premises are re-let, whichever first occurs (the premises are still vacant), or in the alternative, if it is held by the Tribunal that the lessee repudiated the lease by abandonment, and non-payment of rent, then in the alternative -

b. An order that the Respondent pay money to the Applicant, being at least $90,437.26 comprised of rent from 1 May 2001 to 18 October 2001, and thereafter damages at the amount which the Applicant would otherwise have received as rent from 19 October 2001 until the end of the lease on 30 September 2003, or until the premises are re-let, whichever first occurs."

4 The Respondent has filed two Applications (“cross-claims”). The first cross-claim seeks certain orders and declarations against the Applicant. The second cross-claim seeks orders against the "estate of the late Ping Kao". The second cross-claim was filed to ensure that all relevant parties are before the Tribunal.

5 The first cross-claim seeks orders and declarations in the following terms:

“1. An order that the Applicant pay the Respondent reasonable compensation for damage suffered by Applicant attributable to the Respondent's entering into the lease between the parties as a result of false or misleading statements or representations made by Applicant with knowledge that those statements were false or misleading (Sections 10, 11, 27, 28, 29, 72 Retail Leases Act 1994 (“RLA”).

2. An order that the Applicant pay to the Respondent the sum of $25,000 being a payment made by the Respondent to the Applicant in contravention of section 14(2)(b) of the RLA.

3. A declaration that the Respondent is entitled to rescind and has (by her conduct) rescinded the lease, mortgage of lease and Bill of Sale between the Applicant and the Respondent. (Section 72(f) RLA).

4. An order that all monies claimed by the Applicant from the Respondent pursuant to the terms of the lease, mortgage of lease and Bill of Sale between the Applicant and the Respondent are not due or owing by the Respondent to the Applicant. (Section 72(1)(b) RLA.)”

6 The second cross-claim seeks orders against the Applicant as executor of the estate of the late Ping Kao in the same terms as the first and second orders sought in the first cross-claim.

7 The remedies sought by the Respondent were clarified and quantified in the following terms:

“a An order to recover “the key-money" paid, pursuant to Section 14 (2) (b) RLA in the sum of $25,000.00.

b. A compensation order pursuant to Section 10 of the RLA for the damage suffered by the Respondent attributable to the pre-lease misrepresentations by the Applicant. The Respondent has expressly abandoned any claim for lost profits that she would have made if the representations were true. However, the Respondent is still out of pocket to the extent of the $5,000.00 paid (by way of deposit).

c. A further compensation order pursuant to Section 10 that the Applicant pay to the Respondent all the amounts paid by her pursuant to the terms of the Traders Bill of Sale. That is $3,000.00 per month or the difference between the amount secured by the Traders Bill of Sale (Exhibit R3) ($60,450) and the amount now said to be now owing by her (Exhibit R7) ($43,018.11). That is a further sum of $17,431.89.

… there should be an order that the Applicant repay the amounts already paid to the Respondent with interest (Section 72A RLA).

d. The Respondent also seeks that the ADT exercise its declaratory powers pursuant to Section 72 and make orders to the effect that all monies claimed by the Applicant … are not due and owing and/or declaring that the Respondent is entitled to rescind and has rescinded those agreements. (see 8.4 above).”

8 The Respondent concedes that, subject to her claims against the Applicant, she is liable to the Applicant for rent for the period 1 October 2000 until 6 November 2001. She conceded that she owed an amount of $27,126.64 for unpaid rent for that period. It is not in dispute that the Respondent paid rent for the period 1 October 2000 until 30 April 2001. Allowing for the amount conceded, the Respondent seeks a net payment of $20,305.25 to her by the Applicant.

Background

9 It is common ground that the Applicant’s family had conducted the business on the premises for some 22 years prior to 2000. They ceased trading in July 2000 as a result of family circumstances. The Respondent approached the Applicant in relation to the business in about August 2000. An agreement was reached between the parties whereby the Applicant would sell the business to the Respondent. There is some dispute as to the terms of that agreement and with respect to the representations made by the Applicant to the Respondent prior to that agreement. Agreement was also reached between the parties whereby the Applicant would lease the premises to the Respondent.

10 A document headed Lease and Sales of Business, dated 19 September 2000 and signed by each of the parties, sets out terms relating to the sale of the business and the lease of the premises. The term of the Lease is stated to be for a period of 3 years with an option for a further three years. The purchase price is stated to be $50,000 with a requirement that $5,000 be paid on signing of the contract. With the exception of the deposit, the purchase price was to be advanced by the Applicant and was to be repaid by instalments over a period of 12 months. The Lease and Sales of Business document provides for loan repayment as “$45,000 + stock value as loan repayment within 12 months at $3,000 per month minimum”.

11 A receipt issued by the Applicant to the Respondent, also dated 19 September 2000, evidences the Respondent’s payment of an amount of $25,000. There is dispute regarding the purpose for which this amount was paid. A further receipt also dated 19 September 2000, evidences the Respondent’s payment of an amount of $5,000 which is stated to be “Deposit for sale of business “Dragon Inn restaurant 29 Manning Street, Tuncurry” of total sale price $50,000”.

12 A further document dated 26 September 2000 and signed by each party provides for an extension of the loan term to 15 months instead of 12 months. This document refers to “sales agreement $50,000” comprising “Goodwill $40,000” and “plants and equipment $10,000”.

13 The lease is dated 20 October 2000 and is stated to be for a period of 3 years with an option for a further three years. In addition, the Respondent’s solicitor provided a certificate under section l6 of the Act. A lessor’s disclosure statement and a lessee’s disclosure statement were provided. The lessee’s disclosure statement is dated 20 October 2000. The Sale of Business Agreement and the Mortgage of Lease are also dated 20 October 2000.

14 It is apparent that discussions between the parties in relation to the Sale of Business Agreement settlement figures continued after the signing of documents on 20 October 2000.

15 The Respondent’s solicitors provided the Applicant’s solicitors with a document dated 12 December 2000 and headed “Settlement statement”. The Applicant’s solicitors responded by way of an annexure to a letter of 15 December 2000 and disputed the Respondent’s figures. The Applicant’s solicitors document, also headed “Settlement statement”, refers to an amount of $15,450 in relation to business stock leading to a total sale price $65,450.

16 On 18 December 2000 the Respondent’s solicitors wrote to the Applicant’s solicitors and referred to the payment of the sum of $25,000 and noted that they were “instructed by our client that these monies were paid as part of the purchase price”.

17 On 20 December 2000 the Applicant’s solicitors wrote to the Respondent’s solicitors and advised their instructions that “the payment of $25,000 (receipted on 19 September 2000) was not associated with the sale. Rather, that sum was an additional, separate contract agreed upon between the parties, being the consideration payable for the grant by Messrs P & P Kao to Mrs A Lim, to allow her to take early possession of the restaurant, before she has signed any purchase contract, before she had signed any lease document, and before she had signed any mortgage or Trader’s Bill of Sale. Mrs Lim was allowed into the business from 19th September 2000, and she retained all profits thereafter, by virtue of that payment.”

18 Discussions between the respective solicitors followed and it was agreed that the correct sale price of the business was to be recorded as $75,000, comprising $65,000 goodwill and $10,000 plant. The Sale of Business Agreement was subsequently amended to reflect the higher price and stamp duty paid accordingly.

19 A Trader’s Bill of Sale secured an amount of $60,450. It appears that a Trader’s Bill of Sale was negotiated and agreed in October 2000 but was never registered. A Trader's Ordinary Bill of Sale dated 23 January 2001 is registered.

20 The Respondent was in possession of the premises from 19 September 2000 and commenced trading in the business on 1 October 2000. Shortly thereafter the Respondent sought to recover the $25,000 that she had paid on 19 September 2000 and this request was refused. The Respondent was unable to achieve the turnover that she had anticipated and she was unable to maintain the payments to the Applicant that she was required to meet under the various agreements. The matter came to a head on 18 October 2001 the Applicant seized the Respondent’s plant and equipment. The Respondent gave up possession of the premises on 6 November 2001.

Relevant legislation

21 As noted above, this matter is governed by the Act. The provisions of the Act which are most relevant to these proceedings are as follows:

“Section 10 Right to compensation for pre-lease misrepresentations
(1) A party to a retail shop lease is liable to pay another party to the lease (the injured party ) reasonable compensation for damage suffered by the injured party that is attributable to the injured party’s entering into the lease as a result of a false or misleading statement or representation made by the party, or any person acting under the party’s authority, with knowledge that it was false or misleading.
(2) The giving of a lessor’s disclosure statement to a prospective lessee under a retail shop lease is considered to be the making of a representation by the lessor to the lessee as to the information in the disclosure statement.
(2A) The making of a representation by a prospective lessee in a lessee’s disclosure statement given to a prospective lessor under a retail shop lease that the prospective lessee has sought independent advice, or as to statements or representations relied on by the prospective lessee in entering the lease, is considered to be the making of a representation by a lessee to the lessor.
(3) This section extends to apply to a statement or representation made before the commencement of this section.

Section 14 Key-money prohibited
(1) A person must not, as lessor or on behalf of the lessor, seek or accept the payment of key-money in connection with the granting of a retail shop lease and any provision of a retail shop lease is void to the extent that it requires or has the effect of requiring the payment of key-money in connection with the granting of the lease.
(2) If a person contravenes this section:

(a) the person is guilty of an offence and liable to a penalty not exceeding 100 penalty units, and
(b) (whether or not the person is convicted of an offence under paragraph (a)) the lessee is entitled to recover from the lessor as a debt any payment made or the value of any benefit conferred by the lessee and accepted by or on behalf of the lessor in contravention of this section.
(3) This section does not prevent a lessor:
(a) from requiring payment by the lessee of a reasonable sum in respect of any legal or other expenses incurred in connection with the preparation and entering into of the lease, or
(b) from receiving payment of rent in advance, or
(c) from securing performance of the lessee’s obligations under the lease by requiring the provision of a bond or security deposit or a guarantee from the lessee or any other person (such as a requirement that the directors of a company that is the lessee guarantee performance of the company’s obligations under the lease), or
(d) from seeking and accepting payment for goodwill of a business from a purchaser of the business, but only to the extent that the goodwill is attributable to the conduct of the business by the lessor, or
(e) from seeking and accepting payment for plant, equipment, fixtures or fittings that are sold by the lessor to the lessee in connection with the granting of the lease, or
(f) from seeking and accepting payment for the grant of a franchise in connection with the granting of the lease.
Section 63 Interpretation
(1) In this Part:
retail tenancy dispute means any dispute concerning the liabilities or obligations (including any obligation to pay money) of a party or former party to a retail shop lease or former lease, being liabilities or obligations which arose under the lease or former lease or which arose in connection with the use or occupation of the retail shop to which the lease or former lease relates.

Section 70 Definitions
In this Division:
retail tenancy claim means any of the following:
(a) a claim in connection with a liability or obligation with which a retail tenancy dispute is concerned, being:

(i) a claim for the payment of a specified sum of money,
(ii) a claim for relief from payment of a specified sum of money,
(iii) a claim for the doing of specified work or the provision of specified services,
(iv) a claim for the surrender of possession of specified premises,
(v) a claim for assignment of rights under a lease or for a declaration that a lessor is not entitled to withhold consent to an assignment of the rights of a lessee,
(vi) a claim for relief against forfeiture,
(vii) a claim regarding the rectification of the lease,
(viii) a claim regarding the invalidity of a lease for inconsistency with this Act or the regulations,
(ix) a claim for a declaration of the rights, obligations and liabilities of the parties under a lease,
(x) without limiting the generality of subparagraph
(i), a claim for compensation under section 10,
(b) an application under section 19 (3) or 31 (3) by a specialist retail valuer,
(c) a claim against a specialist retail valuer under section 19A (3) or 31A (3) for compensation for loss or damage suffered as a consequence of the use or communication or divulging of information.

Section 72 Powers of Tribunal relating to retail tenancy claims
(1) In proceedings for a retail tenancy claim lodged with the Tribunal under this Part, the Tribunal is empowered to make any one or more of the following orders that it considers appropriate:

(a) an order that a party to the proceedings pay money to a person specified in the order, whether by way of debt, damages or restitution, or refund any money paid by a specified person,
(b) an order that a specified amount of money is not due or owing by a party to the proceedings to a specified person, or that a party to the proceedings is not entitled to a refund of any money paid to another party to the proceedings,
(c) an order that a party to the proceedings:
(i) do any specified work or perform any specified service or any obligation arising under this Act or the terms of a lease, or
(ii) surrender possession of specified premises to another person, or
(iii) assign his or her or its rights under a lease to a specified person, or
(iv) do or perform, or refrain from doing or performing, any specified act, matter or thing,
(d) an order granting a party to the proceedings relief against forfeiture,
(e) an order, by consent of the parties, requiring the parties to the proceedings to rectify a lease,
(f) an order:
(i) declaring any provision made by a lease to be void for being inconsistent with this Act or the regulations, or
(ii) declaring that a lessor is not entitled to withhold consent to an assignment of the rights of a lessee, or
(iii) declaring the rights and liabilities of the parties under law, whether any consequential relief is or could be claimed or not,
(g) such other order, in the nature of an interlocutory order of a kind referred to in paragraphs (a)’(f), as the Tribunal considers proper to be made in order to resolve or assist resolution of the dispute between the parties.
(2) The Tribunal may make such ancillary orders as it considers necessary for the purpose of enabling an order under this section to have full effect.
(3) The Tribunal may impose such conditions as it considers appropriate when making an order under this section.
(4) The Tribunal may make an interim order under this section pending final determination of a claim, if it appears to the Tribunal desirable to do so.

Section 72A Power of Tribunal to award interest
(1) When the Tribunal orders on a retail tenancy claim or an unconscionable conduct claim that a person pay money to another person, the Tribunal may order that there is to be included, in the amount ordered to be paid, interest at a specified rate on the whole or any part of that amount for the whole or any part of the period between when the cause of action arose and when the order takes effect.

…
(3) The rate of interest specified by the Tribunal under this section must not exceed the rate at which interest is payable on a judgment debt of the District Court.
(4) This section does not:

(a) authorise the giving of interest on interest, or
(b) apply in relation to any debt on which interest is payable as of right whether by virtue of any agreement or otherwise, or
(c) affect the damages recoverable for the dishonour of a bill of exchange. …
Section 77A Tribunal may award costs
The Tribunal may award costs under section 88 of the Administrative Decisions Tribunal Act 1997 in respect of proceedings commenced by an application made under this Part”.

22 Section 88 of the Administrative Decisions Tribunal Act 1997 (“the ADT Act”) provides:

“Section 88 Costs
(1) Subject to the rules of the Tribunal and any other Act or law, the Tribunal may award costs in relation to proceedings before it, but only if it is satisfied that there are special circumstances warranting an award of costs.
(2) The Tribunal may:
(a) determine by whom and to what extent costs are to be paid, and
(b) order costs to be assessed on the basis set out in Division 6 of Part 11 of the Legal Profession Act 1987 or on any other basis.
(3) However, the Tribunal may not award costs in relation to proceedings for an original decision unless the enactment under which the Tribunal has jurisdiction to make the decision provides for the awarding of costs.
(4) In this section, costs includes:
(a) costs of or incidental to proceedings in the Tribunal, and
(b) the costs of or incidental to the proceedings giving rise to the application, as well as the costs of or incidental to the application.”

23 The issues raised by the Applicant’s application and the Respondent’s cross-claims are intertwined. For convenience, I propose to address the issues raised by cross-claims first as much of the Applicant’s claim will depend on the findings reached in relation to those issues. The details of the various cross-claims are set out above. As noted, there are two principal documents that form the basis of this matter – the Lease and the Sale of Business Agreement. The Respondent’s cross-claims address both documents and give rise to a jurisdictional argument.

(a) Jurisdiction

24 The Applicant has argued that the third and fourth orders sought by the Respondent relate not only to the Lease but also to the Sale of Business Agreement and the Mortgage of the Lease. The Applicant has submitted that the Tribunal does not have jurisdiction to make orders in relation to the Sale of Business Agreement, the Traders Bill of Sale and the Mortgage of the Lease.

25 Ms Hoeben for the Applicant argues that the Tribunal’s jurisdiction under the Act is limited to those matters properly coming within the meaning of a retail tenancy claim. There is no part of the legislation that brings the sale of businesses into its scope. Substantive jurisdiction cannot be imputed where it does not exist.

26 Mr. Flaherty for the Respondent argues that the general principle is that retail tenancy disputes should be dealt with by the Tribunal rather than by a court. A retail tenancy claim is defined in Section 70 of the Act as set out above. It involves “a claim in connection with a liability or obligation with which a retail tenancy dispute is concerned”. Section 75 (3) of the Act, which concerns the transfer of court proceedings to this Tribunal, provides that “Proceedings are taken to involve a retail tenancy dispute if any issue in dispute in the proceedings involves a liability or obligation with which a retail tenancy dispute is concerned”.

27 Mr. Flaherty submitted that the liabilities of the parties pursuant to the terms of the Lease, the Sale of Business Agreement, the Traders Bill of Sale and the Mortgage of the Lease are all so intertwined that they fall within the definition of a retail tenancy claim.

28 He argues that the words "in connection with" in Section 70(a) of the Act provide the necessary bridge between the Lease, the Sale of Business Agreement, the Bill of Sale and the Mortgage of Lease to bring all documents within the definition in this case. To hold otherwise would be contrary to "the general principle" referred to above. It would also invite a duplicity of proceedings where the issue of the Applicant’s representations will again be ventilated and determined by another judicial officer in separate proceedings at great cost to both parties.

Finding as to Jurisdiction

29 I agree with Ms Hoeben’s argument that the Tribunal is limited to dealing with retail tenancy claims. That is, claims in connection with a liability or obligation with which a retail tenancy dispute is concerned. A retail tenancy dispute concerns the liabilities or obligations which arose under a lease or former lease or which arose in connection with the use or occupation of a retail shop to which the lease or former lease relates.

30 In my view, the issues with which the sale of business and related matters are concerned do not arise in connection with the use or occupation of a retail shop. The words "in connection with" in Section 70(a) of the Act relate to the liabilities or obligations under a lease. I do not accept that they provide a bridge between the Lease, the Sale of Business Agreement, Bill of Sale and Mortgage of Lease that is sufficient to bring issues arising in relation to those documents within the definition of a retail tenancy claim.

31 While I agree with Mr. Flaherty that the consequence of this finding is that issues may be re-ventilated in separate proceedings, the Tribunal is a creature of statute and it cannot assume jurisdiction where it does not exist.

32 It follows that the Respondent’s cross-claims must be restricted to claims relating to the Lease and must be dismissed insofar as they relate to the Sale of Business Agreement, the Bill of Sale and the Mortgage of Lease.

33 Of the cross-claims, this leaves to be resolved: (a) the application for compensation for damage suffered by the Respondent in entering into the Lease as a result of false or misleading statements or representations made by the Applicant; (b) the application to recover the sum of $25,000 under section 14(2)(b) of the Act; (c) the application for a declaration of the Respondent’s entitlements regarding rescission of the Lease; and (d) the application for an order that all monies claimed by the Applicant pursuant to the terms of the Lease are not due or owing.

(b) The false or misleading statements or representations issue

34 I note that the Respondent has sought an order pursuant to section 10 of the Act for compensation for the damage alleged to have been suffered by the Respondent attributable to pre-lease misrepresentations by the Applicant. The claim has been quantified as being limited to the $5,000 deposit paid by the Respondent. In my view, this claim is related to the Sale of Business Agreement and therefore does not fall within the Tribunal’s jurisdiction.

35 The Respondent alleges that the Applicant made oral representations as to the income that the business had generated in the past and would generate in the future. Her evidence is that prior to entering into the Lease, the Applicant made representations that the premises had a weekly turnover of $6,500. She asserts that she relied on those representations in entering the Lease.

36 The Respondent argues that the Applicant made the representations lacking belief in the truth of those representations or not caring whether they were true or false. The Applicant had intimate knowledge of both the business and its past income over many years. He was and is a licensed real estate agent. He must have known that his representations were false or alternatively he was recklessly indifferent to their truth or falsity.

37 The Respondent also alleges that the disclosure statements prepared by the Applicant's solicitors and attached to the Lease are inaccurate. The Lessor’s Disclosure statement is inaccurate under the heading "Details as to Agreements or Representation" in that it does not disclose the existence of the Sale of Business Agreement, the Traders Bill of Sale or the Mortgage of Lease. Further the Respondent asserts that the Disclosure Statements do not disclose the Applicant's representations as to the takings that could be expected from the business.

38 The Applicant denies the Respondent’s claim. He asserts that the only reference that the he made in relation to an amount of $6,500 is in the context of the business takings in the high season some 5 years prior to signing the Lease. At that time the business employed some 15 staff. That was prior to it becoming a mainly family business employing only 1 or 2 part time staff.

39 The Applicant referred to the lessor and lessee's Disclosure Statements attached to the Lease. He argued that the Respondent instructed solicitors some time before she entered into the Lease and signed the Disclosure Statement. At the time she signed both the Lease and the Disclosure Statement she had received independent legal advice. The Applicant further argued that a letter dated 17 October 2000 from the Respondent’s solicitors to the Applicant's solicitors provides evidence that the Respondent was in the process of receiving advice from her accountants at that time.

Finding as to the representations issue

40 On the evidence before me find that it is probable that the parties discussed the history of the business and the income that the business had generated in the past. It is also probable that as part of these discussions the Applicant would have told the Respondent about the changes in the manner which the business had operated over the years and how the changes impacted on the turnover of the business. Nevertheless, I cannot be satisfied that the Applicant made representations as to the income that the business would generate in the future.

41 Section 10 of the Act requires that that the alleged representation was made 'with knowledge that it was false and misleading'. Even if I was satisfied that the Applicant made such representations, I have no evidence on which I could conclude that he knew it was false and misleading. The income that any business generates is governed by many factors and many of these would be influenced by the approach taken by the Respondent in managing the business.

42 In any event, I am satisfied that the Respondent undertook her own estimates of the potential takings from the premises. I am not satisfied that she relied on any representations by the Applicant in entering the Lease. It follows that any claim in relation to damages that the Respondent asserts that she suffered attributable to the pre-lease misrepresentations by the Applicant must fail. Accordingly, that aspect of the Respondent’s claim is dismissed.

(c) The key-money issue

43 As noted above, the Respondent seeks an order to recover the sum of $25,000 that she paid to the Applicant on 19 September 2000. The claim is brought on the basis that the Applicant demanded and the Respondent paid that amount as “key-money" in breach of section 14(2)(b) of the Act.

44 The full text of section 14 is set out above. The Respondent asserts that the amount in issue was a payment accepted by the Applicant in connection with the granting of a retail shop lease and the agreement between the parties concerning the payment is therefore void. She further asserts that she is entitled to recover the amount paid pursuant to section 14(2)(b) of the Act.

45 The Respondent asserts that the payment was "by way of a premium, non-refundable bond or otherwise" and was a benefit paid to the Applicant in connection with the granting of a lease. In support of this argument the Respondent referred to the letter from the Applicant’s solicitor dated 20 December 2000 which is quoted above; to the Respondent’s own evidence of discussions leading to the payment of the amount and to statements made by the Applicant both in his affidavit sworn 22 August 2002 and in his evidence before the Tribunal. The effect of this evidence is that the $25,000 was paid so that the Respondent could take early possession of the premises, before she has signed either the Lease or the Sale of Business Agreement.

46 The Applicant asserts that the $25,000 represented payment in relation to the sale of the business. He states that the letter from the Applicant’s solicitor dated 20 December 2000 accurately sets out the arrangement that was agreed by both parties.

47 The Applicant's evidence was that he told the Respondent that he could not let her into the business without a commitment, such as signed legal documents. His further evidence was that as she told him she only had $30,000, he suggested she pay $25,000 and $5,000 when she signed the contract. The remainder he would lend her. She paid the money on 19 September 2000.

48 He argues that this agreement is further evidenced by the Respondent’s conduct. On 8 December 2000 the Applicant wrote to the Respondent regarding arrears and complained that not 'all legal papers' had been finalised. He argued that this was an opportunity for the Respondent to terminate her purchase of the property. She did not do so. In reply, the Respondent's solicitors threatened to seek injunctive relief if there was action to remove the Respondent from the premises.

49 The Respondent did not instruct her solicitors to seek the return of the $25,000. In contrast, she formally instructed her solicitors to amend the Sale of Business Agreement to account for the $25,000. The Respondent’s solicitors amended the document on her instructions and she paid the additional stamp duty for the proper amount of $75,000 being the agreed purchase price of the business.

50 Ms Hoeben submitted that while section 14 of the Act sets out the prohibition against key money, section 14(3)(d) of the Act provides for an exception that is relevant to the Applicant's case. She argued that the payment is consistent with section 14(3)(d) in that the goodwill component of the Sale of Business Agreement was attributable to the conduct of the business by the Applicant.

51 Ms Hoeben further submitted that in order for the Tribunal to find that the $25,000 was key-money and prohibited by section 14 of the Act, it would need to also find on the general law that the purchase of the business was a sham. She asserted that no evidence has been led by the Respondent to indicate that the purchase of the business was not authentic, nor is there any evidence by either party or in any of the Lease documents that the purchase of the business was part of the Lease agreement.

Finding in regard to the key-money issue

52 In my view, the actions of the Applicant, in relation to the acceptance of the $25,000, were most unorthodox. The fact that the Applicant is an experienced real estate agent makes his actions even more unusual. While I find that his conduct is curious, I doubt that he was motivated to accept the payment as a benefit conferred “in connection with the granting, renewal, extension or assignment of a lease”. In any event, it is my view that any irregularity associated with the payment has been rectified by the fact that the Sale of Business Agreement has been amended to reflect the amount in issue and the fact of the payment of additional stamp duty to reflect the higher sale price of the business. These facts suggest to me that it was the intentions of the parties that the payment of the $25,000 was in relation to the sale of the business and not in connection with the granting of the Lease.

53 It follows, in my view, that the payment falls within the exception provided for by section 14(3)(d) of the Act. It also follows that the Respondent’s application for an order that the Applicant pays to the Respondent the sum of $25,000 pursuant to section 14(2)(b) of the Act must also fail.

(d) The Respondent’s entitlements regarding rescission of the Lease and resisting the Applicant’s claims

54 The Respondent seeks a declaration that she is entitled to rescind the Lease and that by her conduct she has rescinded it. She also seeks orders that she is not liable for the amounts sought by the Applicant. I propose to deal with each of these issues along with the Applicant’s claims.

55 As noted above, the Applicant seeks an order that the Respondent is liable to pay him an amount of at least $90,437.26. As also noted above, the Respondent concedes that she is liable to the Applicant for rent for the period 1 October 2000 until at 6 November 2001. She conceded that she owed an amount of $27,126.64 for unpaid rent for that period. There are two issues in dispute with respect to this item. The first issue is the status of the Lease after 6 November 2001. The second issue is whether the Respondent is liable to the Applicant for either rent or damages for the period from 6 November 2001 until the end of the Lease on 30 September 2003, or until the premises are re-let.

(e) The end of the Lease

56 It is not in dispute that the Respondent ceased paying rent as from 1 May 2001. Nor is it in dispute that on 18 October 2001 the Applicant seized goods and chattels from the premises under the Bills of Sale Act 1898. The Respondent remained in occupation of the premises until 6 November 2001.

57 Given my findings in relation to the representations issue I am unable to agree that the Respondent was entitled to rescind the Lease. On the contrary, it is clear from the evidence before me that the Respondent breached an essential term of the Lease in failing to pay rent “not later than 14 days after the due date for payment of each periodic instalment”. This is a clear breach of subclause 12.5.1 of the Lease. In addition, the abandonment of the premises is clear evidence of the Respondent’s repudiation of the Lease. She thereby entitled the Applicant to accept the repudiation and terminate the Lease. It is equally clear that the Applicant made the election to terminate the Lease on 6 November 2001. This election was conveyed to the Respondent by way of a letter dated 6 November 2001 from the Applicant’s solicitors to the Respondent’s solicitors. Having made that election he is committed to it. Therefore he cannot maintain a claim for rent after that date. In the present circumstances he is limited to a claim for damages. The Applicant became entitled to damages as at 6 November 2001 on his election to terminate the Lease.

58 I am satisfied that the amount to which the Applicant is entitled for unpaid rent is the amount conceded by the Respondent. That is, an amount of $27,126.64.

(f) The Claim for Damages

59 Clause 12 of the Lease makes specific provision for forfeiture and the end of the Lease. Subclauses 12.6 and 12.7 of the Lease are relevant. Subclause 12.6 provides:

“If there is a breach of an essential term the landlord can recover damages for losses over the entire period of this lease but must do every reasonable thing to mitigate those losses and try to lease the property to another tenant on reasonable terms.”

60 Subclause 12.7 provides:

“12.7 The landlord can recover damages even if --

12.7.1 the landlord accepts the tenant's repudiation of this lease; or

12.7.2 the landlord ends this lease by entering and taking possession of any part of the property or by demanding possession of the property; or

12.7.3 the tenant abandons possession of the property; or

12.7.4 a surrender of this lease occurs.”

61 Where a lease has been validly repudiated and the innocent party accepts the repudiation, that party has a right to recover damages, assessed in accordance with ordinary contractual principles. Those principles include the principles with respect to mitigation of damages: Buchanan v Byrnes (1906) 3 CLR 704. Where the lessee has repudiated, damages are awarded to the lessor to compensate him for loss of the benefit of the lessee's covenants to pay rent and outgoings: Progressive Mailing House v Tabali Pty Ltd (1985) 157 CLR 17 at 55 per Deane J and 47 per Brennan J.

62 The Applicant has a duty to take all reasonable steps to mitigate his loss. The obligation to mitigate loss is based on the principle "that a victim of a breach of contract is required to respond reasonably to a defendant's wrong." Smith v Pisani (2000-2001) 78 SASR 548 per Gray J. at 25. The question now becomes one of whether the Applicant’s mitigating actions reasonable.

63 This onus of proof as to the reasonableness of the Applicant’s conduct lies on the Respondent. In Sacher Investments Pty Ltd -v- Forma Stereo Consultants Pty Ltd and Ors [1976] 1 NSWLR 5, Yeldham J observed at page 9:

“Although a plaintiff cannot recover for loss consequent upon a defendant's breach of contract, where he could have avoided such loss by taking reasonable steps, nonetheless a defendant who seeks to rely upon a failure to mitigate must show that the plaintiff ought, as a reasonable man, to have taken certain steps for the purpose of doing so. The plaintiff is not under any obligation to do anything other than in the ordinary course of business, and the standard is not a high one, since the defendant is a wrongdoer. See generally Chitty on Contracts , 23rd ed, vol 1, par 1482 et seq p691 et seq. See Waterlow and Sons Ltd [1932] AC 452 at p506): 'The law is satisfied if the party placed in a difficult situation by reason of the breach of a duty owed to him has acted reasonably in the adoption of remedial measures, and he will not be held disentitled to recover the cost of such measures merely because the party in breach can suggest that other measures less burdensome to him might have been taken.”

64 In Munce v Vinidex Tubemakers Pty Ltd [1974] 2 NSWLR 235 at 239 Glass JA, with whom Moffitt P and Hutley JA agreed said:

"There is authority of long standing which establishes an exception to the principle that the plaintiff bears the onus of proving all matters relating to damages. The exception relates to any disputed question which is truly a matter of mitigation of damages. In relation to matters properly so classified the defendant is subject to both burdens. He must not only introduce evidence that the plaintiff has failed to minimise his loss, but also persuade the jury that the balance of testimony favours this conclusion."

65 The Applicant was under a duty to take reasonable steps to turn the premises to a profitable use. This is generally achieved by making reasonable efforts to find a reasonable tenant at a reasonable rent within a reasonable time. The ultimate burden of proving his loss lies with the Applicant.

66 The Applicant asserts that he placed a notice in the premises' window shortly after 6 November 2001 and advertised the premises on a 'TO LET' basis. He had personally put advertisements in Chinese newspapers on about four occasions and that he let his friends in Sydney know.

67 Ms Hoeben argued that the figure stated by the Applicant might well have been under-stated. She submitted that there was in fact a serious commitment by the Applicant to re-let the premises.

68 The Respondent referred to the obligation imposed by sub-clause 12.6 of the Lease and argued that the Applicant has not done "every reasonable thing to mitigate those losses". He has placed a small sign in the window of the premises. There is no evidence as to when that sign was placed there. There has been no general advertising of the premises as being available for rent as one may reasonably expect. The extent of the advertising was placing "about four" advertisements in the Chinese newspapers.

69 The Applicant did not list the premises with any real estate agency so that they could be advertised to the world at large. Rather the availability of the premises was restricted to those friends of the Applicant in Sydney with whom he had private conversations. The Respondent argued that in those circumstances the Applicant could not succeed in his claim for damages or for any claim beyond 6 November 2001.

Findings as to the Claim for Damages

70 With respect to the Applicant’s claim for damages, I am satisfied that the provisions of subclause 12.6 of the Lease were intended to survive termination of the Lease. The issue is clouded in that it is not clear whether, in acting to bring the Lease to an end, the Applicant relied solely on the Respondent’s repudiation of the Lease or on the Respondent’s breach of an essential term of the Lease, or both. Notwithstanding that lack of clarity, I am satisfied that he Applicant was entitled to terminate the Lease and did so by notice to the Respondent on 6 November 2001. I am also satisfied that the Applicant was under a duty to mitigate his losses. I accept that in doing so, the Applicant is not under any obligation to do anything other than in the ordinary course of business, and the standard is not a high one. However, the steps that he is required to take must amount to a serious effort to turn the premises to a profitable use. In my view, subclause 12.6 of the Lease and the general law standards are comparable.

71 In the circumstances I am not satisfied that the Applicant has done every reasonable thing to mitigate his losses. I do not accept that he has complied with the obligation imposed by either subclause 12.6 of the Lease or by the general law.

72 I accept that the Applicant has taken some steps to turn the premises to a profitable use. However, given the resources available to the Applicant as a practising real estate agent and the knowledge that he would possess from that role, he could have been expected to make considerably greater effort to relet the premises. At best, his efforts could be regarded as unremarkable. He has failed to do every reasonable thing to mitigate his losses. In my view, the damages to which the Applicant is entitled must be significantly reduced as a consequence of this failure.

73 There is evidence before the Tribunal of the high influx of tourists within the local area over the summer months and the consequential increased demand on local amenities. In my view it is likely that active marketing of the premises could have resulted in reletting at least for that period. It is clear from the evidence that the Applicant did not actively market the premises either as a Chinese restaurant or for any other purpose. In the circumstances, it is my view that the Applicant is limited to recovering damages for a period of three months. The Applicant is therefore entitled to recover from the Respondent damages in the amount of $13,650.

74 In addition the Applicant claims $2,736.03 for "outgoings of rates and land tax for the years 2000/2001, and 2001/2002. In my view, the Applicant is entitled to recover this amount from the Respondent.

75 I note that the Respondent asserted that she paid for electricity not used by the premises for a substantial period of her occupancy. The evidence shows that the Applicant took approximately nine months to rectify the problem despite repeated requests from the Respondent. Notwithstanding that the evidence supports this assertion, the Respondent has not brought a claim in relation to the issue nor has she sought to have the amounts involved offset against the Applicant’s claim. I accept the Applicant’s submission that in the circumstances the Tribunal does not have jurisdiction to otherwise deal with the matter.

Summary of findings

76 From the findings set out above, the amount that is payable by the Respondent to the Applicant is therefore $43,512.67, comprising an amount of $27,126.64 for unpaid rent; damages in the amount of $13,650; and $2,736.03 for outgoings.

77 It follows that the Respondent is liable to pay the Applicant a total of $43,512.67. This amount is to be paid within 21 days.

Interest and Costs

78 Section 72A of the Act provides that the Tribunal may order that interest be paid on the whole or any part of an amount ordered to be paid on a retail tenancy claim. The rate of interest must not exceed the rate at which interest is payable on a judgment debt of the District Court.

79 The Tribunal’s power to award costs is governed by section 88 of the ADT Act. Under section 88, the Tribunal may award costs only "if it is satisfied that there are special circumstances warranting an award of costs". The usual rule in this Tribunal is that the parties must each pay their own costs.

80 I note that the Applicant has indicated a desire to address the Tribunal on these issues when the decision is published. I am prepared to accede to that request. In the absence of any agreement between the parties in relation to the issues of interest or costs, each party is invited to file written submissions within 28 days of the date of these reasons.

Orders

81 Ms. Ai Hwa Lim is to pay to Mr. Peter Kao the amount of $43,512.67. This amount is to be paid within 21 days of these reasons.

82 Each party is invited to file written submissions parties in relation to the issues of interest or costs within 28 days of the date of these reasons.