Kindful (Australia) Pty Ltd v Country Villa Holdings Pty Ltd

CITATION: Kindful (Australia) Pty Limited v Country Villa Holdings Pty Limited [2006] NSWADT 224
This decision has been amended. Please see the end of the decision for a list of the amendments.

DIVISION: Retail Leases Division

PARTIES: FIRST APPLICANT AND SECOND RESPONDENT
Kindful (Australia) Pty Limited
FIRST RESPONDENT AND SECOND APPLICANT
Country Villa Holdings Pty Limited

FILE NUMBER: 055066 & 055104

HEARING DATES: 8, 10-11, 14, 29/11/2005, 15-16/02/2006 and 26/05/2006

SUBMISSIONS CLOSED: 05/26/2006

DATE OF DECISION:
08/01/2006

BEFORE: Molloy GB - Judicial Member

CATCHWORDS: Claim for compensation for pre lease misrepresentations - Claim for payment of money - Claim for relief from payment of money - Claim re invalidity of a lease for inconsistency with Retail Leases Act

MATTER FOR DECISION: Principal matter

LEGISLATION CITED: Conveyancing Act 1919
Retail Leases Act 1994

CASES CITED: Aussie Traveller Pty Limited v. Marklea Pty Limited [1998] 1 Qd.R 1Galazy Catering Pty Ltd v. Trust Company of Australia Ltd [2006] NSWADT 182 at [40]Gray v. Haig [1855] 20 Beav.219Harrison, Ainslie & Co v. Lord Muncaster [1891] 2QB680Hawkesbury Nominees Pty Ltd v. Battick Pty Ltd [2000] FCA 185Heyman v. Darwins Ltd [1942] AC356 per Lord Wright at 378-379Kohura Pty Limited v. Tai Ping Trading Pty Limited 3 BPR 97240Step Footwear Pty Limited v. Accord Pacific Land Pty Limited [2005] NSWADT 191The Ophelia [1916] 2AC206 at 229-230Toller v. Law Accident Insurance Society Limited [1936] All ER 952 per Greene LJ at 956Volley Investments Pty Ltd v. Coles Myer Ltd [BC 200409531]Zouk v. Lyons Road Pty Limited [2005] NSWADT 143

REPRESENTATION:
FIRST APPLICANT AND SECOND RESPONDENT
DKL Raphael with J O'Sullivan, barristers
FIRST RESPONDENT AND SECOND APPLICANT
A Fernon, barrister

ORDERS: 1.The First Applicant’s application is dismissed.; 2.The First Applicant pay the First Respondent $400,000.00.; 3.I list this matter for further directions before me; at 2-00pm on Thursday 17 August 2006.

1 In short compass the First Applicant and Second Respondent (Applicant) claims damages, asserting that the First Respondent and Second Applicant (Respondent) was in breach of its covenant for quiet enjoyment to the extent that the Applicant was entitled to repudiate its lease contract with the Respondent entitling it to abandon the leased premises. The Applicant also asserts a substantial breach or breaches of Retail Leases Act 1994 Section34. On the other hand, the Respondent asserts that there was no breach by it of the covenant, nor of Section 34, and that the abandonment of the leased premises by the Applicant was such that the Respondent was entitled itself to damages as against the Applicant.

2 The above is really a very, very short summary of the assertions one against the other, the details of which are more fully set out below, but the purpose of the recitation is to set the scene for the range of arguments that were presented

Background

3 The Respondent was the lessor of premises described as “Part Folio Identifier 100/1036194 being Shop E, 653 George Street, Haymarket” (“the premises”) which by lease dated 20 December 2002 it leased to the Applicant for a term of 5 years commencing 15 November 2002, terminating 14 November 2007, with a five year option for renewal. The lease was duly stamped and registered 9705239 (“the Lease”).

4 The Lease contained many of what might be described as “the usual clauses”; it contained a guarantee clause binding the Applicant’s sole director (Mr Kam Chuen Chu) as unlimited guarantor; provided for a not insubstantial rent (first year $144,000.00, second year $155,000.00, third, fourth and fifth years 5% annual increase). There was a rent free period (cl 29) to 30 June 2003.

5 It is important at this point to refer to a number of relevant clauses in the Lease which pertain to the issues debated before the Tribunal. These clauses are as follows:

“‘Premises’ means that part of the Building described in item 7 as Premises the boundaries of which are:

(a) The inside surface of the walls (under any paint or wall covering); and

(b) The outside surface of the shop front and any windows; and

(c) The lower surface of the ceiling (above any false or suspended ceiling); and

(d) The upper surface of the floor (under any floor covering), and including the Lessor’s Property.”

A. Clause 10.2, which reads: “The Lessee releases the Lessor from, and agrees that the Lessor is not liable for, liability or loss arising from, and costs incurred in connection with:

(a) damage, loss, injury or death to person or property from any cause whatsoever other than the wilful misconduct of the Lessor; and

(b) anything the Lessor is permitted or required to do under this Lease; and

(c) subject to clauses 16.5:

(ii) the Lessor’s plant and equipment not working properly; and

(iii) the Common Areas not being clean”.

“16.1 While the Lessee complies with the Lessee’s obligations under this Lease, the Lessee, subject to the Lessor’s rights reserved by the Lease, may occupy the Premises during the Term without interference by the Lessor.

16.2 The Lessor shall use reasonable endeavours to keep the Services provided by the Lessor available to the Premises during the Core Trading Hours. The Lessee may not terminate this Lease, stop or reduce payments under it or make a claim for compensation because a Service is not available or is interrupted or fails or the Lessor’s plant or equipment breaks down or the Common Areas are not clean.

16.3 The Lessor or the Owners Corporation may:

(b) carry out any repairs or other works in the Building or the Premises…. or limit access or close the Common Areas, if the Lessor takes reasonable steps (except in emergencies) to minimise interference with the Lessee’s Business;

(c) exclude or remove any person from the Building …

(d) ...

(e) ...

(f) …

(g) change the direction or flow of pedestrian or vehicular traffic into, out of or through the Building;

D. By Clause 19.2, the lessor was empowered to “terminate this Lease by giving the Lessee notice or by re-entry if the Lessee:

(b) does not comply with an essential term of this Lease; or

(c) fails to pay rent or other moneys payable by the Lessee to the Lessor under this Lease (although no formal or legal demand has been made); or …

(d) ...

(e) …

(f) does not comply with an obligation under this Lease (which is not an essential term) and, in the Lessor’s reasonable opinion:

(i) The non-compliance can be remedied, but the Lessee does not remedy it with reasonable time after the Lessor gives the Lessee gives a notice to remedy it,

…”

6 One final and important observation is this: the “Permitted Use” (cl 1.1, Item 6) of the premises was stated to be “Restaurant”. Relevant to that use the Rules (to be found in Annexure “B” of the Lease) are stated to be Monday to Friday 8.30 am to 5.30 pm and Saturday 8.30 am to 12.30 pm. These are stated to be “Core Trading Hours” and are said to be “for the purposes of the Clause 7.3” – clearly this is an error because firstly, there is no clause 7.3 and secondly, the Lease terms refer to “Core Trading Hours” or “Core Hours” in clauses 1.1, 11.7,11.8 and 11.9. By those clauses the Applicant as lessee “must” carry on his business during those “Core Hours” and may, with the Respondent’s approval, “carry on business outside the Core Hours”. It is further interesting that Clause 11.3 enjoins the Applicant to “only trade from the Premises during such hours as it is authorised to do so pursuant to any Act, Regulation, By-law or any other requirement of any authority and in accordance with Item 3 in the schedule”. There is a question mark after “3” – this seems to be a typographical error. Item 3 of the Reference Schedule refers to “ Core Hours” as being:” Monday to Sunday – 10.00 am to 5.00 pm”(!)

Initial Observations

7 Pausing at this point it is worthwhile making a few initial observations. The reason for this is that there was considerable and detailed argument on whether the premises constituted strata title or whether some other form of title applied to the premises and the relationship between the parties. I expressed the view then, and it was later conceded by counsel for the Applicant, that there was no doubt that the premises were under strata title legislation (the details of which I refer to later in this judgment). It is also plain that the Applicant was occupying premises, not only under strata title but also the subject of the rights and entitlements of the owners corporation pertaining to the building in which the strata was situate. Not only is there reference to the owners corporation throughout the lease (see, for example, clauses 1.1, 11.5 (d), 16.3, and 16.5) and also reference to common areas (see for example clauses 1.1,10.2 (c) (iii), 16.2, 16.3 (f), and (i), 16.14, 16.15, and Rule 1) but is also plain from the definition of “Premises” (set out above) that the leased premises were strata title. There is also reference to the “Building Service Committee of the Building” (Rule 3). It is not uncommon in leases of this nature to effectively utilise a precedent and adapt the precedent to the particular premises being let – in this fashion, however, drafting sometimes falls between the cracks because the lease itself does not entirely deal with the control of the premises when the premises are part only of a strata development. For example in Rule 3 there is a reference to “the operations of the Lessor’s security for the Building” whereas in fact the responsibility for the security rests with the owners corporation. No submission was made to me that somehow or other this Lessee was misled by that type of drafting although there was a robust submission made in relation to misleading conduct in that it was submitted that the Respondent at the time of granting the Lease knew that the owners corporation had the right to control the right of entry did not so inform the Applicant and therefore that failure amounted to a misrepresentation.

8 However, it is plain to me that whatever way one looks at this Lease it was a lease of a strata unit within a strata building. This is an important finding. I shall refer to it later, and in more detail, when dealing with the submissions robustly put on behalf of the Applicant. It was conceded by counsel for the Applicant, but not at the commencement of the hearing, that the premises were in fact strata title.

Pleadings

9 Before proceeding further with this judgment it is important to make reference to the pleadings. Pleadings serve a more than useful purpose in Court and Tribunal proceedings simply because they identify and crystallise the issues upon which the Court or Tribunal is required to adjudicate and (importantly) they identify and crystallise the facts and assertions that the other party to the proceedings is called upon to answer. Unfortunately, these proceedings tended to drift away from the original issues as pleaded – this can be sometimes the nature of litigation – and unless there is some true prejudice to the opposing party then no point should be taken. It was only on the last day of hearing that attention was directed to the original pleadings, primarily because of concern expressed by the Tribunal that the case for the Applicant had drifted away from the issues as pleaded.

10 The proceedings on behalf of the Applicant were commenced in the Supreme Court, Equity Division, by Statement of Claim Number 2665 of 2005 filed 28 April 2005. Pursuant to Application filed on behalf of the Applicant the Supreme Court ordered, on 29 April 2005, that the proceedings be transferred to this Tribunal.

11 The Statement of Claim, which formed the basis of the Applicant’s case, and was not amended, pleaded the Applicant’s case in this fashion:

B. That it was an implied term of the lease that if the lessor took any action that would inhibit or alter, to a substantial extent, the flow of customers to the premises, or failed to take all reasonable steps to prevent or to put a stop to anything that causes significant disruption of, or which has a significant adverse effect on, trading of the lessee in its restaurant business and that is attributable to causes within the lessor’s control, and fails to rectify any breakdown of plant or equipment under the lessor’s care or maintenance, and the lessor does not rectify the matter as soon as reasonably practicable after being requested in writing by the lessee so to do, the lessor is liable to pay the lessee reasonable compensation for any loss or damage suffered by the lessee as a consequence.

C. The particulars supplied in relation to B above were stated to be implied terms pursuant to Retail Leases Act Section 34 (1), implied terms as a matter of law “to give business efficacy to the Lease” and implied by the other terms of the lease.

D. It was a further implied term the lessee is not liable to pay rent, or any amount payable to the lessor in respect of outgoings or other charges, that is attributable to any period during which the restaurant business of the lessee cannot be used under the lease or made inaccessible due to that damage; and the particulars supplied were the same as stated in C above.

E. It was then asserted that there were a number of breaches of the lease in breach of the express and implied terms of the lease, as follows:

b) In about May 2003 the Respondent failed to take all reasonable steps to prevent damage to the premises caused by water leakage.

c) From June to September 2004 the Respondent failed to rectify problems and breakdowns in the air conditioning service provided to the premises

d) During the period February to December 2004 the Respondent failed on more than 50 occasions to take all reasonable steps to rectify interruptions to the gas supply, air conditioning and kitchen exhaust facility caused by activation of the fire alarm in the hotel.

e) The Respondent failed to rectify substantial cracks in the glass ceiling of the premises caused by objects thrown on to the ceiling from above by guests of the hotel, in support of which it was asserted that substantial damage was caused to the ceiling by thrown objects on or about 23 June 2003 and 18 January 2005.

G. Importantly, the pleadings asserted in paragraph 12 that by reason of the substantial cracks in the glass ceiling (and only by that reason), “from about 18 January 2005 the Restaurant cannot be used under the Lease and the (the Applicant) is thereby not liable to pay any rent or any amount in respect of outgoings or other charges from about 18 January 2005 to date”.

H. It was then asserted that on 26 April 2005 the Respondent wrongfully gave to the Applicant notice of its intention to terminate the lease and draw down the bank guarantee and that by reason of the asserted breaches and the wrongful notice of intention to terminate the Respondent “has evinced an intention no longer to be bound by the Lease and the (Applicant) accepts the (Respondent’s) repudiation of the Lease.”

12 The Applicant as Plaintiff claimed damages and compensation as a consequence of the asserted breaches. The Applicant also pleaded unconscionable conduct. This assertion was dealt with on the very first day of the hearing when the assertion of unconscionable conduct was abandoned by the Applicant through its counsel.

13 I have been to some trouble to set out the Applicant’s case as pleaded. It identified the issues that the Tribunal was asked to determine and to which the Respondent was asked to answer. The reason I have identified the pleadings is because, in his careful written and oral submissions, counsel for the Applicant (in my view) tended (understandably) to stray from the pleaded issues. In particular, in oral submissions he opened with the statement that the Respondent was not in a position to give a covenant for quiet enjoyment, particularly relating to ingress and egress and rights of entry to the premises and the restaurant business because the Respondent did not control the common property and the entry and exit doorways – it was stated that this was the Applicant’s principal submission - and as a consequence there was a misrepresentation by the Respondent from which, presumably, damages flowed. Indeed, the Applicant’s counsel went further: he submitted that there was no certainty that there was a strata scheme at the commencement of the lease, that the Respondent did not provide all appropriate factual material to the Applicant, that the Respondent acted recklessly and did not disclose that it could not provide an assurance that it could not provide access and that that submission was “a key aspect of the Applicant’s case” such that, it was submitted, there was a clear breach of Retail Leases Act Section 34. I shall deal with these various matters later in my judgment.

14 Before passing from this issue of the pleadings it is useful to make two further observations:

A. The Respondent, in its filed Reply, admits, traverses and/or confesses and avoids, the paragraphs in the Statement of Claim. This reinforces my observation that the Statement of Claim formed the basis of the Applicant’s case before the Tribunal and the case the Respondent came here to meet.

B. Pursuant to Directions of Judicial Member Fox made 9 June 2005 the Applicant filed in this Tribunal on 23 June 2005 a formal Application in matter No. 055066. The Grounds of Application are stated as follows:

“The Applicant ... will rely on the Statement of Claim ... And the affidavit of Edwin Wah Sing Mok sworn 28 April 2005, in relation to the reasons for making the application”.

15 The said affidavit was not read.

16 The balance of this document sought to particularise the Applicant’s losses and then sought a number of orders, as follows:

(2) an order that the Applicant is entitled to terminate the lease;

(3) an order that the Applicant is not liable to pay rent or any other amount in respect of outgoings or other charges pursuant to the lease for the period 18 January 2005 to date;

(4) an order that the Respondent is to pay damages or alternatively compensation to the Applicant in the sum of $285,000.00 for breach of the lease;

(5) interest; and

(6) costs.

17 It constitutes a pleading. It sets out the particulars of the damages claimed and sets out the relief then sought by the Applicant outside or additional to the relief sought in the Statement of Claim. It was not relied upon, or even referred to, by either party, all parties focusing on the Statement of Claim. But it is important to bear it in mind on the issue of whether the Respondent was prejudiced by the breadth of the Applicant’s submissions.

The Conduct of the Case

18 The Tribunal was informed at the outset that the bulk of the evidence was by documentation. A bundle of correspondence, some 493 pages, was in evidence as Exhibit “A”. In addition there were numerous affidavits filed and witnesses were cross-examined. However, at the end of it all it was plain to me that the basic facts were not in dispute. The basic assertions relating to breakdown of equipment, gas supply, interference with the flow of customers and the cracks in the glass ceiling were really not in dispute. Indeed, in oral submissions counsel for the Applicant conceded, in my view correctly, that the Respondent’s managing agent (represented in the person of Mr Blazek) tried his best to rectify the various problems, that he acted bona fide but all of that notwithstanding the submission was that the Respondent had not satisfied its obligations in terms of Retail Leases Act 1994 Section 34.

The Premises and the Building

19 As set out above, the premises are situated within a large building. The Respondent owns (as I understand it) a number of units within the building (I shall deal with the title details later in my decision). The building is a strata title building owned by an owners corporation. Individual apartment owners lease their apartments to Pacific International Apartments Sydney (“the hotel”) who manages the building as a hotel for local and international guests. The Respondent owned six retail shops on the ground, basement and mezzanine levels of the building, one of which was the demised premises. The Respondent appointed as its managing agent Country State Property Services Pty Limited (“the Respondent’s manager”) of which, at most material times, Mr Peter Blazek was the commercial property manager.

20 The location of the premises was somewhat peculiar. It was situated within the building but with no direct access to a street frontage. The building itself had two street frontages, one to George Street and the other to Sussex Street, Sydney. One would enter the building from either street, moving through a passageway, which provided through access from one street to the other and also direct access to the reception desk for the hotel apartments. Directly opposite the reception desk, internally, was the demised premises, entry to which was up several stairs. Members of the public wishing to go to the premises would have to enter from either street and have to walk through part of the common property and then up stairs to the demised premises. There was some evidence to the effect that members of public used the common property to walk from one street to the other (presumably as a short cut) via the premises and the reception desk for the hotel. To that extent the premises had exposure to passing traffic and also, of course, to guests and visitors to the hotel.

21 The premises themselves are situate on two levels, both accessed by a short flight of steps. The premises were air conditioned, presented attractively, contained a commercial kitchen with a gas supply and, importantly, a significant portion of the premises were exposed to the daylight, not because of street frontage but rather because of a glass ceiling. This was semi circular and consisted of glass panels radiating out attractively from a central hub. The ceiling was situate in an open portion of the common property and was overlooked by many of the leased apartments in the high-rise portion of the common property situate to the south and operated as the hotel.

22 From the premises the Applicant operated a Chinese style café/restaurant called “Café 21”, provided Chinese style fare, provided breakfast, lunch and dinner to hotel guests and members of the public and operated what Mr Chu (the sole director and guarantor of the Applicant) described as a “VIP Room” which was a special room that could be booked by groups and presumably business persons. The building and the premises are situate in a popular part of Sydney and, all things being equal, I have little hesitation in concluding that the Applicant would have otherwise been successful in the conduct of its restaurant business.

23 The Applicant commenced the conduct of its restaurant business in about April 2003. The Applicant encountered a number of problems which, he asserts, impacted negatively upon the conduct and profitability of its restaurant business. These problems I shall set out in summary form below – however, there is no need for me to deal with the evidence in too much detail simply because the basic factual material is in reality not in dispute.

Access Disruption

24 On or about 17 June 2003 the hotel had the “idea of trying to install additional entry doors on both sides of the main entrances, to (A) create an air lock to improve air conditioning conditions, and (B) hopefully minimise the flow of people that keep walking through the lobby as a short cut.” By letter 11 February 2005 the Respondent’s manager referred to “the recent engagement of static security personnel engaged by (the hotel) to control the thoroughfare traffic between George and Sussex Streets.” The manager acknowledged the “attempt to minimise public traffic congestion through the main foyer area that affects hotel guests upon arrival, during their stay and when concluding their accounts.” The manager went on to state that it “would like to confirm the retailers (in the building) need to be satisfied that their passing trade is not affected by this security control procedure. Please instruct your security people to vet the public courteously and allow retail clientele access between George and Sussex Streets should they desire to shop at one of the retail outlets”. The manager trusted that “this will not be an issue to the retail trade ... (and the hotel) will co-operate with onsite retailers beneficially.” A copy of that letter was sent to the Applicant.

25 The evidence demonstrated that the hotel placed security personnel at one or both of the street entrances and also placed notices at each street entry point. The notices, on the evidence, appeared to be partially in English, but mainly in Chinese – the evidence is not precisely clear but on the Sussex Street entry on one of the glass panels the notice said “no public access” – the balance of the notice is not clear from the photograph but the prohibition appears to except hotel and “Divinity Day Spa guests only!” and I deduce from Exhibit “A”, page 237, that “Divinity Day Spa” was in fact one of the retail tenants. There was evidence (Exhibit “C”, para 5, and to similar effect Exhibit “E”) to the effect that the Chinese writing was in or to the following effect:

“Unless you are a patron or staff of the hotel and Café 21, please do not use this walkway”.

26 The Applicant complained to the Respondent’s manager under cover of letter 29 March 2004 stating:

“With the introduction of stopping people from using the passage from Sussex Street to George Street, we had received complaints from our customers that they were stopped by the Receptionist and Security of the (hotel) to check if they were going to the restaurant or stopped them after finishing meals at our restaurant. Please note it is important to have a free flow of passage for our customers and if not it will affect our customer’s intention from entering into our restaurant.”

27 By letter 29 March 2004 the Respondent’s manager advised the Applicant that the hotel was:

“controlling thoroughfare traffic between George and Sussex Streets fervently because of the congestion this area accumulates from locals using passageway for easy access between the two street areas. As you can imagine a security risk exists and must be controlled. (The hotel staff) evaluates each person using the access to discourage unwarranted public use but do not prohibit any retail customer from accessing these areas once they have identified themselves. Perhaps it may be prudent to make your customers aware of why these measures have been placed (by the hotel). Furthermore, it would also encourage them to volunteer early notice of the patronage of the retail trade to (the hotel staff) whom control this area. This would also be of benefit to retail tenants because there would be less congestion, noise, better security and fewer disturbances.”

28 They forwarded a copy of the Applicant’s letter to the hotel with a view to “a rapid resolution to your concerns”.

29 It appears that a meeting took place on 5 April 2004 between the Applicant and the Respondent’s manager and Mr John Nicols (the building manager) (curiously without the attendance of other retail tenants) and certain agreements were reached. The hotel was to “carry out urgent frosting of Sussex Street glass doors to prevent appearance of the line of sight through the foyer centre … (this will) ... assist in restricting public access usage through this main foyer.” It was also agreed that the Respondent would “provide a professional portable signage on their behalf to be positioned at the Sussex Street main entry door advertising their business” and that the hotel would “continue selective screening of public accessing this thoroughfare to restrict indiscriminate usage” on the basis that the hotel would instruct “their management staff to carry out this screening so that the retail clientele is not unduly affected.” The evidence also discloses that there were access barriers put up by the hotel at least “vertical poles with horizontal plastic or similar ties or straps directing (pedestrian) traffic like going into a theatre … (such that) you have to follow them and keep turning a few turns before you can get in” (T 11/11/05 at 17). In any event, the evidence from Mr Chu was to the effect that many of his customers could not speak English.

30 By letter 19 April 2004 the Applicant complained to the Respondent’s manager that it “would like to stress the importance of keeping the free flow of entrances between George Street and Sussex Street. Please understand that when we decided to take up the lease of this restaurant, we considered with the free flow of passages between George Street and Sussex Street then we will have enough customers even our restaurant is situate inside (the hotel). Therefore since the introduction of stopping outside people using the entrances, it had affected our business greatly with 30% down.” The Respondent’s manager replied 23 April 2004 rejecting the Applicant’s claim that “a condition of your lease terms prior to acceptance of above premises were for an unimpeded traffic flow through the main ground floor foyer between George and Sussex Streets. This area is used primarily for (the hotel) as their main entry point for guests arriving, staying and departing purposes the hotel. Having an unimpeded access facility for the public to us as a thoroughfare was completely untenable and required some form of control.” The manager confirmed that public traffic was not opposed by the hotel “but vetted so that real customers are encouraged to use it and regular abusers of this access are discouraged because of the overcrowding it causes.” The manager noted that the restaurant clientele “are allowed access from either streetscape once they confirm this with (the hotel) staff on duty.”

31 Nothing further seems to have transpired until a site meeting on 20 August 2004 between the Applicant, the hotel and the Respondent’s manager, confirmed by letter 25 August 2004 when the Respondent’s manager wrote to the Applicant noting that the hotel would install a masking film/tinting on the Sussex Street main entry door the purpose being “to restrict public thoroughfare between Sussex and George Streets through the main hotel foyer affecting clientele. At the same time this allows restaurant and retail clients access to the building from both entry points.”

32 The evidence was clear: the security staff was not engaged by the Respondent neither were they engaged by the Respondent’s manager. They were engaged by the hotel, which seemed to have the controlling interest and voting power in the building (as to which see later in this Judgment). The evidence also showed that the guard was on duty only between 9.00 am and 4.00 pm on weekdays and all parties appear to agree that the security guard “was removed after about three months” because the hotel “was satisfied that at the end of three months this was no longer a necessity and could be managed by house staff.” The Respondent’s manager admitted that some of the Applicant’s customers “did not speak English and may not have been able to communicate their wish to go to the restaurant to the security guard” (Exhibit “2”, para 70).

33 Considering this issue in isolation it is plain to me that the Applicant would have reasonably thought, at the time it signed the lease, that there would be full and free unimpeded access to the public through the lobby and the common property between George and Sussex Streets. After all, he was conducting a restaurant, a public restaurant, not a restaurant connected with the hotel (although he may well have received custom from that source) but rather an independent privately owned and operated restaurant available to the public but without a street frontage –in those circumstances it seems to me that he would have reasonably anticipated that the public would not be impeded or hindered in walking between George and Sussex Streets and, but avoiding for the moment the issue of the strata plan, the Applicant was correct in its submission that a hindering or impediment to the free flow of pedestrian traffic by the Respondent would have been a breach of Retail Leases Act 1994 Section 34, the covenant for quiet enjoyment and the Tribunal, even if all of that was incorrect, would have implied an appropriate term in the particular circumstances of this case.

34 Before moving on from this aspect it is worth noting a letter from the Respondent’s manager to the Applicant 1 April 2003. This was a letter confirming that the Respondent had completed the building works that it and the Applicant had agreed by way of assistance at its cost with the Applicant’s fit-out works. The letter set out these in detail and then confirmed that it had instructed the hotel to “re-programme operational parameters to both ground floor main entry doors from 8-00am to 11-00pm 7 days per week until further notice following future appraisals of your operational needs”. No party addressed me on what that was supposed to mean or whether it was something that had been drawn to the Applicant’s attention in relation to this particular issue. I make no further comment relating to this.

Gas Supply

35 The Applicant conducted from the premises a restaurant. Forming part of the premises was a portion thereof devoted to the kitchen and appropriate support. In the kitchen was a large gas stove. The evidence from Mr Blazek was to the effect that the kitchen equipment fit out had been installed by the original developers and was designed to be used by the hotel operator. There was apparently a discussion with Applicant and it was agreed that the kitchen equipment would be supplied and title transferred to the Applicant on the basis that all future repairs and maintenance were to be at the Applicant’s cost.

36 Considerable time was spent on debating who in fact was the owner of the stove. There was some evidence that tended towards ownership by the Respondent (Exhibit “6”). In my opinion there is no need to make a particular finding relating to this because whoever used the stove it formed part of the operations of the restaurant and there was no argument to the effect that the gas supply was part of the common gas supply to the building. Mr Blazek was of the opinion that the Applicant was responsible for the gas service but that the Respondent and the hotel operators would pay for what was required in order to upgrade the gas service in compliance with the law. At the time of the entry into contractual arrangements the stove and the gas service (as I understood it) in fact complied with gas and safety requirements. However, in February 2002 new regulations came into effect which required the gas to shut off when automatic fire equipment operated. These regulations are set out in Standards Australia code AS 5601 –2002 and AG 601-2002 which relevantly provided that a gas installation “shall be fitted with a system that will shut-off the gas supply when the fire extinguishing operates.”

37 The evidence demonstrated that on numerous occasions (the Applicant said 55 times) the fire alarm at the hotel operated such that the gas service to its restaurant was shut off. There is no need to make a determination on exactly how many times this took place; suffice it to say that I am satisfied that it took place on many occasions and was often disruptive (to say the least) to the operations of the restaurant.

38 The Respondent notified the Applicant by letter 19 November 2003 that it was in receipt of non-compliance order (from AGL dated 13 November 2003) and that the Applicant’s kitchen equipment was in breach of the gas fitting rules. The Respondent stated that the Applicant’s “Salamander Range and Combination Unit must be installed with either a flame safeguard system or an automatic disconnection system for shutting-off the gas supply to these kitchen appliances as soon as there is a fire trip activated at (the hotel)”. The work was stated as being mandatory and was also required to satisfy the Respondent’s insurance policies regarding repairs/rectification to non-complying equipment. The Respondent stated that it would carry out the works by its contractor following due notice. Notice was given and arrangements were made for the Respondent’s contracted plumbers to attend at the premises. There followed some correspondence between the parties consequent upon the installation of the safety equipment and that in the view of the Respondent “compensation payment is not an option as we have the right under the lease to arrange such works following due notice…”.

39 There was cross examination and argument about whether the Applicant lost custom/income as a result of the automatic shutting-off of the gas supply and how long it took or should have taken to re-start/re-heat the various items of stove equipment. In my view all of that is irrelevant simply because on any view the gas stove safety equipment had to be installed as a matter of law, the Applicant knew that but didn’t realise that the fire alarm in the hotel would go off so often, and in those circumstances it seems to me firstly, it is irrelevant as to who in fact owned the stove because whoever owned it had an absolute statutory obligation and occupational health and safety obligation to install the automatic safety equipment, secondly because the premises were situate in a strata titled building the same safety requirements would apply to all gas appliances wherever situate in the building and thirdly, and as a consequence, no damages could possibly be said to have flowed from the installation of automatic safety equipment as required by law.

40 I do understand the frustration of the Applicant and the disruption to its restaurant business. However, that is an inevitable consequence of the premises being situate in a building with overhead automatic fire extinguishing equipment, wherever the building is situated and whether or not it is situate in a strata title building. The Applicant’s claim in relation to this aspect is therefore dismissed.

Water Leakages

41 The Applicant complained that its business was significantly disrupted by various incidents of water leaking into the premises arising out of, inter alia, air-conditioning difficulties. These complaints generally started in about March 2003 when there was a problem with a timer control for the air-conditioning at the front portion of the premises. It will be remembered the lease commenced 15 November 2002 and the Applicant opened its restaurant business in April 2003. The evidence seems to show that the Respondent assisted the Applicant with various fit-out works including repairing leaks from the main stormwater PVC pipe joint in the ceiling space, repairing leaks and installing a “tundish” for water removal in the ceiling space below the riser at the back of the kitchen area and adjacent to the air-conditioning room, repairing the air-conditioning system and re-programming its operational times as requested by the Applicant.

42 In or around 22 July 2003 the Respondent ordered the “urgent supply and installation of condensate tray complete with electric pump to catch and pump away to a waste drain the chilled water condensate water that collects at the bottom of the riser because of unlagged chilled water pipes”. The insurance claim relating to this incident indicated “suspected leak from service riser”. By 23 July 2003 the Respondent made a claim against the hotel manager confirming that “water has been detected and reported to us by (the Applicant) yesterday emanating from the ceiling in the northwestern of the restaurant area in their VIP room (service pipe riser) … it was ascertained water was in fact coming down the service pipe riser (common area of the strata scheme) installed in this position of the building and ending at the ceiling space of the restaurant area … water is emanating from a leaking service pipe installed in this riser and tracks down to the top of the restaurant ceiling in the VIP room” The Applicant conducted its restaurant in two parts: a restaurant in the ordinary sense of the word offering breakfast, lunch and dinner and a VIP room which could be booked by parties wishing to celebrate, personally confer and so on. The Applicant took special bookings for the VIP room and by letter 24 July 2003 notified the Respondent that “we need to know when and how long will this problem be fixed as we often have bookings at the VIP room such as the current bookings of every Wednesday and Thursday night this month”. The Applicant also asserted that this problem arose in the same position as it had previously apparently arisen prior to the lease being granted and the Applicant occupying the premises.

43 There followed an argument between the parties as to whether the air-conditioning call out service calls were “unwarranted/unnecessary” and “frivolous and unnecessary”, with the Respondent indicating that it would hold the Applicant liable for any additional costs incurred having regard to the fact that the Respondent had entered into a annual air-conditioning maintenance and service contract in relation to the air-conditioning units in the premises. However, the impression I obtained during the hearing (and from an on-site view) was clearly that the complaints of the Applicant were neither unnecessary, frivolous, unwarranted or unnecessary. Indeed, this view is supported by the Respondent itself which through its Manager wrote to the hotel 21 August 2003 noting that “during our inspection yesterday we both (referring to the Respondent’s manager and the hotel representative) witnessed water was still emanating from this service riser in the VIP room and agreed further investigative work should be required towards a final identification of the problem and propose rectification works to continue this event” and noting that the Respondent has “lease obligations with the tenant and would like to confirm their status as early as possible to prevent future concerns.” This letter also makes it plain that the Respondent identified firstly, “water damage repairs to the VIP room at the conclusion of water ceiling rectification works by (the hotel’s) contractors, including ceiling repairs, carpet replacement and painting of walls and ceiling” and secondly, “cover for loss of business due to the VIP room in the restaurant being unavailable for bookings.”

44 An argument then ensued between the Respondent and the hotel, the hotel manager asserting (4 September 2003) that “an invoice for repairs to the air-conditioning in the restaurant cannot be paid by the owners corporation as it is not part of the strata.”

45 By letter 21 November 2003 the Applicant again complained that water was leaking from the openings into the restaurant area from the air-conditioning. The Respondent on the same day instructed its air-conditioning people to deal with this. What precisely then happened is not clear from the evidence but by letter 1 December 2003 the Applicant again complained that there was “no air-conditioning after the technician came to fix the water vapour problem” – again the Respondent instructed its air-conditioning repair people on the same day – however the Applicant on 8 December 2003 complained that the water vapour problem from the air-conditioning “still has not been solved”. There was a further complaint 5 January 2004. By letter 7 January 2004 the Respondent stated that the “air-conditioning set point is set at the lowest possible temperature to achieve your desired cold room climate control” but although that was acceptable during most of the year it had “an adverse effect when outside temperatures and humidity levels are high as one experienced during our recent hot weather pattern. The extreme low supply emanating from your room air grills is mixed with hot and humid outside air entering via main entry doors of the building and condensates, producing water vapour and thus the resultant water droplets falling to the floor” such that “to overcome this phenomenon we have recommended you either raise the set point temperature of current system or install additional air-conditioning capacity to overcome any extreme hot weather cycles.”

46 During the course of all this there was a “common area equipment failure” (not a good event during January!) and by letter 27 January 2004 the Applicant stated to the Respondent: “please note that there is no air-conditioning at our restaurant since some technician came last week. No more water leaking problem as the temperature between the inside and outside is not big difference.” There was a dispute about the former statement by response from the Respondent’s manager 29 January 2004 who stated that they were told “the chillers tripped one day last week but this was rectified within an hour”.

47 On 15 February 2004 there was a main fuse failure on the building’s main electrical switchboard, the emergency mechanic apparently “incorrectly reset (the) separate air-conditioning system (to the restaurant) and the regular air-conditioning mechanic was engaged “to re-instate/reset your air-conditioning systems correctly and this was achieved”.

48 There was also a further “electrical power failure (which occurred at the local) electrical sub-station servicing the (the whole of the building)” on 1 March 2004.

49 There were further air-conditioning problems and a “broken fan noise” as at 28 June 2004 which was apparently caused by “faulty fan belts or fan motor bearings… producing noises that can be audible to clients seating at (the restaurant)” and the Respondent communicated with the hotel manager. It seemed that the problem was with the air-conditioning unit mounted in the ceiling and the hotel manager arranged for a contractor to supply a ladder to enable access to be obtained to the ceiling area. By letter 9 August 2004 the Applicant stated that the noise had been in existence since “the second week of June” and that “the air-conditioning cannot be switched on during the business hours”. Difficulties arose between the parties as to a reasonable time for which to enable the repair person to come onto the premises to rectify the problem. By letter 21 August 2004 the Applicant indicated effectively that the only day available would be “any Sunday to repair the air-conditioning” – a meeting took place and it was agreed that the hotel manager would organise the repair person to attend on Sunday 29 August 2004 to install the ladder and once that was installed the hotel manager would arrange repair works. By letter 30 August 2004 the hotel manager observed that it was “envisaged that the initial installation of the attic ladder (to comply with OHS requirements) will require a full day’s work and will also require the installation of scaffolding to be erected at the entrance to (the restaurant)”. Inspection found that one of the air-conditioning belts was badly worn as was a pulley.

50 The evidence thereafter is somewhat sparse but it would seem that the repairs were carried out, the ladder and scaffolding removed and matters returned to “normal”; except that I should note that at the view taken on the first day of the hearing at the request of counsel for the Applicant, I observed (as did all legal representatives) that there were droplets of water around a number of the air-conditioning vents in the premises.

51 The difficulty with the Applicant’s case in this regard is that it is plain from the documentation that whenever the Applicant complained about the state of the air-conditioning the Respondent immediately put in train efforts to rectify the various problems. It is also plain to me that the Respondent did its very best in order to rectify the problems within its capacity. However, the air-conditioning problems were those relating to body corporate air-conditioning, not air-conditioning within control/power of the Respondent as owner of the premises. No complaint has been made against the body corporate not against the hotel nor the hotel manager but rather the complaint/claim is levelled against the Respondent as the owner of the premises and the lessor. This is to some degree understandable in this Tribunal and I also understand the frustration and annoyance that the Applicant must have had, and continued to have, as a result of the air-conditioning failures/incidents and the obvious disruption to its restaurant, its clients and the general overall ambiance of the restaurant. However, I am clearly of the view that the Respondent did its best to rectify the problems, the Respondent did its best to ensure that the hotel acted promptly in dealing with the problems and it was ultimately conceded by counsel for the Applicant that the Respondent and its manager had done their best. The control over the air-conditioning however did not rest in them but rather in the owners corporation. I shall deal with this aspect later in this Judgment.

52 Before I pass from the air-conditioning issue I should make reference to what I regarded as some confused evidence of Mr Blazek. This appears in the Transcript 14 November 2005 at page 19 commencing at line 27. He was asked who he regarded “as the party responsible for the quality and standard of the air-conditioning in this building (and) the air-conditioning provided to (the Applicant)” and he answered that: “It was a joint obligation (of the Respondent and the hotel), simply because the air-conditioning system in that ground floor mezzanine area was designed initially for an open plan area where there are four units or five units supplying that whole area. (It was the joint responsibility of the hotel and the Respondent) basically, (the Respondent was) responsible for the air-conditioning units installed inside the restaurant area and (the hotel) was obligated to control the units that were on their area and also in a stairwell leading up to the restaurant area, which is above the stairwell from George Street leading into the restaurant area. So (the Respondent was) responsible for two units (and the hotel was) responsible for three units”.

53 As I point out in more detail later in this Judgment the retail section of the building was under the control of the Retail Owners Corporation; the retail section is identifier as Lot 100 on the strata scheme and the “premises” as defined in the lease commence on “the lower surface of the ceiling (above any false or suspended ceiling)” such that the air-conditioning ducting and outlets are situate between the lower surface of the ceiling and the lowest part of any false or suspended ceiling. (see the principles set out in Step Footwear Pty Limited v. Accord Pacific Land Pty Limited [2005] NSWADT 191). I regarded this evidence of Mr Blazek as not clear because, on one view it was only Mr Blazek’s personal opinion and in any event it was plain that the air-conditioning was not air-conditioning owned by the Respondent but rather by the owners corporation. No submission was made to me to the contrary. It may well have been that in the early days of the building development when there were problems identifying the correct legal roles of the developer, the owners corporation, the Respondent and the hotel the Respondent assumed de facto liability for what would otherwise have been regarded as strata property while the responsibilities of the parties were being sorted out and clarified but the evidence seems to demonstrate by about August/September 2003 the problems between the developer and the hotel were sorted out, there was a building management committee formed and at some stage or other there was a taking and balancing of accounts as between the Respondent and the hotel in relation to the maintenance/repairs – see Transcript 14 November 2005 pp 2, 3, 12 and 25.

54 The purpose of the last two paragraphs is to indicate that I have proceeded on the unchallenged basis that the air-conditioning formed part of the common property and no submission was made to me to the contrary. Indeed, there was no challenge to this in the correspondence, nor in the sworn evidence (except the confused exchange above) nor in the conduct of the parties and how they dealt with the air-conditioning problems.

The Glass Ceiling

55 The premises, although situate inside the building of which the premises form part, are situate on the low-rise portion of the building. Behind this low-rise portion is the hotel high-rise portion. The low rise portion, situate to the north of the high rise, consists of a separate strata lot owned by the Respondent and leased in various portions, one of which is to the Applicant. Part of the ceiling to the part strata lot leased to the Applicant consists of a rather attractive semi circular glass ceiling splayed out from a central hub with glass panels separated by opaque supports. The glass ceiling is a very attractive portion of the premises and would not have been an unreasonable attraction to the Applicant when considering leasing the premises. Part of the restaurant area is situate under this glass ceiling – understandably so.

56 In his affidavit Mr Blazek described the area as follows:

“in the mezzanine restaurant main eating area there was an architectural natural light ceiling erected providing additional natural light from an outside atrium. This ceiling was constructed of aluminium/steel frame supporting glass panels to allow natural light to enter and create an ambience within the restaurant area.”

57 By letter of 27 April 2003 the Applicant complained to the Respondent’s manager that “water is still leaking very heavily at the top of glass ceiling at northern end and main entry level today. It affects our business and please send someone to fix it urgently.” On the following day the Respondent’s manager requested a plumber to deal with the matter, observing that water leaking “emanating from glass ceiling in (the restaurant area) was one of the jobs carried out by (the plumber) some four weeks ago on our behalf” and requesting the plumber to rectify the problem as soon as possible. The plumber advised 29 April that “the work should be carried out by a glazier or glass contractor.” On the same day the Respondent’s manager requested a glass service to quote for waterproofing the glass ceiling panels, requesting the glass service to “arrange a early site visit ... to check the leaking glass ceiling with a view to quoting (the manager) repair works necessary to rectify water leaks emanating from outside influences” and asking the glass service to contact the Applicant and to “carry out extensive inspection of this problem as we would like to finalise repairs once and for all.” A quote was provided (8 May) and by letter 13 May 2003 the Respondent’s manager accepted the quote, wanted confirmation that the “rectification works will firmly remedy leaking water currently experienced”, would “be guaranteed to stop water leaks for a least five years as is the industry standard” and observed that “the glass ceiling inside Café 21 restaurant is open to atmosphere and leaks water into the restaurant whenever it rains or during regular cleaning routines”.

58 By subsequent letter (undated but about 15 May) the Applicant complained that “due to these rainy days over the week please note (that the leaking problems) had affected our business seriously. As we are newly open it gave our customer very bad impression. Table(s) number 5,8,9 and 10 were all closed at the lower floor over this week”. The Applicant also requested a “painter to paint the water stain at those areas as it will peel off soon.” There is a note that on that day the Respondent’s manager spoke to the Applicant informing an employee (Iris) that it had given a works order to the glazer on 13 May 2003.

59 By letter 19 May 2003 the Respondent’s manager noted that “unfortunately (the water leaks are far more serious than first believed” and that it assumed that the repairs “may well occur sometime this week” and that once the manager was “confident all leaks have been identified and corrected then we will repair your painting concerns”.

60 There is a paucity of evidence as to when in fact the manager’s engaged glazier repaired the leak in the glass ceiling. However, I am content to find that in fact the water leakage was repaired in or about May 2003.

61 However, further problems arose with respect to the glass ceiling caused by objects being thrown on to the ceiling by hotel guests. Indeed, it was plain from the evidence that the problems created by hotel guests were not rare – by letter 16 October 2003 there was a complaint by the Respondent’s manager arising out of complaints from another tenant of the Respondent “regarding water entering their (Shop C) during wet rainy periods”. The complaint can be found in Exhibit “A”, page 173. It was asserted that “the problem lies in the blockages caused to the awning drain and waste pipes that are frequently blocked by foreign objects thrown service apartment guests from their rooms. These foreign objects eventually block water passage to the storm water drains via installed water pipes and create an overflow affect that allows water to trek down the most suitable path to shop fronts below and eventually into the shop premises.” The Respondent’s manager requested, in short, that the hotel should arrange periodical service to clear the drains and waste pipes and implement a three monthly routine service. The point of this observation is that it is plain from this document that there were continuing problems with hotel guests and that it was the hotel’s job to sort them out.

62 By letter 23 June 2003 the Applicant complained that one of the hotel guests “threw a cup over the top of our glass ceiling last Friday 20/6/03 at around 7.45 pm and it (was) reported to (the) hotel manager on duty.” The Applicant alleged that the glass ceiling required repair. The Respondent’s manager, in his affidavit 8 September 2005, paragraph 18, admitted (correctly) that “the glass ceiling was fractured after items were dropped on to it from the balconies that overlooked it”.

63 After the complaint, on 23 June 2003 the Respondent’s manager confirmed that the damage was by a guest in the hotel and as such the complaint should be directed to the hotel general manager. The Respondent (through its manager) expressed confidence that the hotel and its general manager “will repair any defects brought about by this act promptly.”

64 Unfortunately, there is a paucity of evidence to indicate when the crack in the glass ceiling was repaired. The evidence of the Applicant’s director (Mr Chu) is silent on this aspect as is the evidence of the Respondent’s manager and I am unable to find anything in Exhibit “A” that would assist me. However, I have formed the view that on balance the crack in the glass ceiling was in fact repaired by the hotel.

65 The evidence was also clear in that when it rained water entered the premises through the cracks and dripped on to the tables, the carpet and/or into a bucket. There can be absolutely no doubt in my mind that the Applicant was seriously inconvenienced and no doubt suffered loss of custom on those occasions and was quite likely seriously inconvenienced (at least) by the wet carpet and the water stains.

66 There was a second incident relating to the glass ceiling. This took place on 18 January 2005 – on that day the Applicant had a meeting with the Respondent’s manager and a representative of the hotel. By letter 19 January 2005 the Respondent’s manager observed:

“regrettably damage to your glass ceiling situate at the lower level dining area of your restaurant was noticeable and probably instigated by a foreign object falling on top of this roof causing cracking of several glass partitions.”

67 The hotel was to arrange repair quotes, it was likely to be an insurance claim through the hotel and efforts were made “to accelerate repairs and limit any operational restrictions” to the Applicant’s business. An estimate of two weeks was provided and it observed that the “restaurant area underneath this glass ceiling would have to be cordoned off during repair works and should be completed successfully within 4-6 hours.” The Applicant was assured that “this matter is being treated with upmost urgency (by the hotel and the Respondent’s manager) and repairs will be activated as soon as humanly possible.” The hotel and the manager were to give “long-term consideration” to the problem with a view to “prevention of future identical damages.”

68 There followed an unfortunate argument between the Respondent and the hotel, the hotel expressing “the opinion that the glass roof is not part of the strata plan ... and therefore not the responsibility of the owners corporation to have it repaired.” The Applicant was still complaining 14 February 2005 stating that the damage was “so obvious that really damage our restaurant’s image and atmosphere”.

69 The issue then deteriorated. By letter 23 March 2005 the Applicant’s solicitor wrote to the Respondent’s manager pleading a breach of the covenant for quiet enjoyment (Conveyancing Act 1919, Part 2, Schedule4), asserting that no action had been taken by the Respondent to remedy the damage to the glass ceiling, that the Respondent “should have taken steps to prevent the recurrence of such incident by providing covers above the glass panels/roof but no preventive action was taken”, asserting that the most recent damage was “therefore attributable to the negligence of (the Respondent)” and stating:

“In view of the serious breaches of the lessor, we are instructed to give the lessor notice through you that our client intends to close the business until the glass ceiling is repaired and until our client can be given quiet enjoyment of the demised premises by your client. If such repair work cannot be finished within seven (7) days from the date of this letter, our client will seriously consider closing the business to mitigate their losses by reason of the fundamental breaches committed by the lessor under the lease”.

70 This letter encouraged some activity: the Respondent’s manager wrote to the hotel 24 March 2005 asking to be informed about progress of the repair and noting the threat of termination of the lease. The hotel then seemed to form the view that it accepted no liability for the cracked glass but was prepared to “roof and gyprock the affected area at its cost” and that if that was not satisfactory then the matter should by referred to the strata manager because the hotel “is not the lessee nor does it has any interest in the restaurant area.” This observation arose as a result of a facsimile sent by the Respondent’s manager to the hotel 29 March 2005 which referred to an approach to the Applicant to replace the glass roof of the restaurant with a “more conventional gyprock type ceiling” and it was observed that “as suspected, Henry (Chu) has asked that we replace the broken glass, as he prefers the atrium affect. Henry is now threatening legal action, my recommendation, is that we proceed asap with the repair.”

71 Nothing appeared to have taken place by the end of March 2005. By letter 31 March 2005 the Applicant’s solicitors wrote to the Respondent’s manager noting that they had been instructed “that repair work has not taken place nor any action was taken by the lessor to remedy the situation”. The solicitor asserted that the Respondent was “on notice that it has breached the covenant of quiet and peaceful enjoyment”, had breached Retail Leases Act 1994 Section 34 and asserted, by way of pleading, the particulars of the various breaches. It is worthwhile having a look at the pleaded particulars. Firstly, the complaint was that from February to November 2004 the passageway from Sussex Street to George Street was blocked. Secondly, in May 2003 rainwater found its way to the VIP room and was not repaired for over 4 months. Thirdly, from June to September 2004 the air-conditioning system of the hotel failed. Fourthly, from February to December 2004 the fire alarm of the hotel was activated “nearly every day” thereby cutting off “the electricity and gas supply”. Fifthly, there was a complaint that the Respondent had “let the adjacent premises to another tenant to trade and sell “pearl milk tea” (which) had resulted in “unnecessary fierce competition to our client’s business as a restaurant and as a result of which our client has suffered loss of profit”. (No complaint was made at the hearing about this aspect). In relation to Retail Leases Act 1994 section 34 the particulars were breach of section 34(1)(b) by inhibiting or altering, to a substantial extent, the flow of customers to the shop; section 34(1)(c) by unreasonably taking any action that cause significant disruption of or has a significant adverse effect on trading in the shop; section 34(1)(d) by failing to take all reasonable steps to prevent or put a stop to anything that causes significant disruption of, or which as a significant adverse effect on, trading of the lessee in the shop and that is attributable to causes within the lessor’s control; and section 34(1)(e) by failing “to rectify any breakdown of plant or equipment under the lessor’s care or maintenance.” A compliant was also made regarding a breach of Trade Practices Act 1974 Section 52, asserting misleading and deceptive conduct (not particularised).

72 The solicitor’s letter then asserted that the various breaches were “serious breaches” and the Respondent’s “failure and/or refusal to remedy the breaches” resulted in notice being given to the Respondent “that (the Applicant) will close the restaurant business on Saturday, 2 April 2005 for seven (7) days, during which period our client demands that repairs should be made to the glass ceiling and the cover/sheet under the glass pane/roof be re-instated.”

73 By letter of the same date to the Respondent’s manager the hotel denied liability for the cracked glass. However, it repeated its suggestion to replace the glass ceiling with “a solid roof with an internal gyprock ceiling” and with “appropriate lighting installed therein” and that it was prepared, “in the interests of our continued good working relationship” to share the cost 50/50 with the Respondent “to roof and gyprock the affected area.”

74 If the matter stopped at this point, in my opinion that offer was wholly unresponsive to a very reasonable request by the Applicant to repair the glass ceiling. There is no doubt in my mind that the glass ceiling was a significant feature of the premises and to suggest that somehow that it could be “repaired” by the use of gyprock and a solid roof does not answer the Applicant’s complaint and could not be properly regarded as a repair.

75 In any event, by letter 18 April 2005 the Respondent’s manager told the hotel that “in our opinion, this is a simple insurance claim matter. The glass roof is part of the common property in the building. It is insured under the current insurance policy.” By this time the Applicant had vacated the premises on 2 April 2005. The hotel was also given notice that the Applicant’s restaurant “had temporarily closed due to this issue” and that the Applicant may “try to claim compensation from us through his solicitor” and that in order “to minimise the loss we are all suffering, we suggest to conduct the repair as soon as possible. We also suggest that this should be done through insurance claim to avoid further complication.”

76 Thereafter the situation the situation quickly deteriorated. By letter 20 April 2005 the Applicant’s solicitors wrote to the Respondent’s solicitors alleging “incessant breaches” of the lease, repeating that the “principal breaches” were impeding access to the premises, water leakage, interruption of air-conditioning services, interruption of gas supply, air-conditioning and kitchen exhaust facility and the broken glass ceiling. Understandably, the solicitors made this observation:

“No one indicated when our client entered into the lease that it would have to stop cooking meals for customers in its restaurant because of a false fire alarm in the adjacent premises. It does not take much imagination to visualise the impact upon patrons who have placed an order for a meal, only to find that it cannot be served because the cooking equipment in the kitchen has become inoperable and there is no air-conditioning supply.”

77 The letter asserted that “by force of S36 of the Retail Leases Act 1994, rent has abated and our client has become entitled to terminate the lease.” And the Respondent was given until 22 April 2005 to provide certain undertakings. By reply 26 April 2005 the solicitor for the Respondent asserted that the claims raised by the Applicant were quite spurious” and did “not permit or warrant (the Applicant) to lawfully take the action it has (ie “in breach of the lease terms, unlawfully abandoned the premises and has failed to pay the rental due and owing”)” demand was made to “recommence business from the premises forthwith”, to observe the Core Hours, and to pay outstanding rental and if these demands were not meet then the Respondent would “treat the lease as having being repudiated” by the Applicant, “ such breaches being essential terms of the lease.” A warning was issued in relation to the director (Mr Chu) in his position as guarantor and the personal liability that he assumed in the event of the default of the Applicant.

78 Proceedings were then commenced by the Applicant in the Supreme Court. Those proceedings were (correctly) transferred to this Tribunal, and undertaking as to damages was provided and interlocutory orders were made restraining the Respondent from taking steps to terminate the lease and from taking steps to draw down on the bank guarantee provided by the Applicant. In the middle of all this, the Respondent was seeking access to the premises “for the repair of the glass roof” by facsimile 4 May 2005.

79 By letter 9 May 2005 the solicitors for the Respondent noted they were instructed that the Applicant “has effectively abandoned the property and that it no longer trades and has removed all chattels and tenant’s fixtures from the leased premises”. Indeed by letter 13 May 2005 the Applicant’s solicitors advised the Respondent’s solicitors that “we have delivered the keys to the premises to your client’s property manager on 13 May 2005.”

80 There is no need in particular to refer to subsequent correspondence which includes various assertions made by the parties through their legal representatives. It is plain however that the Applicant ceased trading from the premises on 2 April 2005 – its lawyer’s letter 11 May 2005 asserts that because the Respondent had “repeatedly failed to honour its obligations as lessor pursuant to the lease ... (it had) thereby repudiated the lease. Our client accepts your client’s repudiation of the lease and hereby terminates the lease effective 5.00 pm today.” The cessation of trading was stated to be because of the Respondent’s “failure, despite our client’s repeated requests, to repair damage to the glass ceiling of the premises.” Cutting through all this and whatever may have been the assertions to and fro, Exhibit “A” at 478 shows clearly that the glass ceiling was not repaired until sometime after 8 June 2005 (some six months after the breakage) – that exhibit shows that a quotation of that day “to supply servicemen’s time to replace large broken glass panel to roof areas above dining room” - the quote was not accepted until 30 June 2005.

Preliminary Observations

81 I have to some trouble above to set out the various incidents about which the Applicant has complained and from which it asserts that it was entitled to cease payment rent, entitled to vacate the premises and from which it asserts that the constant failure by the Respondent as lessee to remedy the various problems amounted to a repudiation of the lease by the Respondent thereby entitling the Applicant to accept that repudiation and terminate the lease effective 5.00 pm 11 May 2005 (Exhibit “A” page 425). The Respondent on the other hand, contends that the failure to pay rental and the “unlawful” abandonment of the premises and the failure to recommence business and pay outstanding rental amounted to breaches of essential terms of the lease by the Applicant, repudiation of the lease by the Applicant, with consequent termination by the Respondent (Exhibit “A” page 398, 414, 416, 417, 460).

82 There is absolutely no doubt in my mind that the Applicant feels gravely wronged in that the constant interference and disruption to its legitimate business, a business that requires for its success confidence in the public to be able to attend the restaurant without interference and disruption, is something considerably less than for which it bargained. Indeed, and taken in isolation, the Applicant feels justly wronged and justly entitled to damages for interference with its legitimate restaurant business. After all, when it signed up for the lease it did not expect, and could not have reasonably expected, the sort of incidents the details of which I have attempted to set out above.

Title to the Premises

83 Although there was some dispute at the commencement of the hearing it is plain in my view that the premises are a lot in a strata plan. The premises form part of folio identifier 1/1036194. The building at 653 George Street Haymarket is part hotel (serviced apartments) and part (being the ground and mezzanine levels) retail space. The hotel part of building has been sub-divided by strata plan SP67007 and the retail part of the building has not been sub-divided into strata units and is in fact the said lot 100 in DP1036194.

84 SP67007 is described as “Citivilla” at 653-659 George Street Sydney. The whole of the strata plan is described (on page 2) as a “multi-storey brick and concrete building at No.653-659 “Citivilla” and occupies the whole of the land between George Street and Sussex Streets Sydney. Lot 100 consists of property at pages 4, 5, 6 and 23 of the strata plan – the plans on those pages (basement B2, basement B1, ground, and Level 18 floor plans) contain only lot 100 and common property areas. The plans of basement B2 and B1 are not relevant but the plan for the ground floor (page 6 of the strata plan) is relevant and shows lot 100 as comprising almost all of the ground floor except items of common property (primarily the entry and walkways between George and Sussex Streets and the lifts, stairs and a fire control room. Lot 100 itself on the ground floor is situate both north and south of the common property walkway between the two streets and is also a semicircular area in front of the lifts and two larger lots and a smaller lot to the south of the common property walkway.

85 The balance of the sheets of the strata plan (sheets 8-23 inclusive – levels 1 to 18 inclusive) show the high rise portion of the building. These plans make it plain that the balance of the building (with the exception of the top floor) is strata and the top floor also contains part of lot 100 in DP 1036194 and common property.

86 The dimensions of the building shown in sheets 8 – 23 inclusive demonstrate a different floor plan configuration from the dimensions below in that there is a clear light well going up the north side of the building from level 18 to level 1, which ceases at the lower portion of level 1 such that it is plain that the glass ceiling in shop E is situate at the foot of that light well.

87 DP1036194 forms the basis of the strata plan. That DP occupies the same dimensions as the strata plan in the same location. Each lot on the ground is the same in area. Lot 101 is in fact the strata property which was itself subdivided into strata lots in SP 67007. Lot 100, on the other hand, remained as a separate lot and has not being subdivided.

88 The Respondent is the owner of lot 100 and also the owner of 22 lots in the strata plan (the balance of the 160 lots being owned by individual investors). Because both the strata plan and lot 100 are in the same building a strata management statement was prepared and forms part of SP 67007. This Statement sets out, inter-alia, the conduct of the building and its management.

89 Although I was not taken through the Statement in detail I think it was conceded by the Applicant that the Statement applied, not only to the conduct of the building but also, and more importantly, to the conduct of lot 100 in DP 1036194 which included the premises. In addition, the strata plan contains a set of By- Laws. These By-Laws make it plain that the hotel, not only forms part of the building which has two components, the apartment scheme (called “Pacific International Apartments – Sydney City”) and the retail strata scheme (which as I understand it is lot 100 in DP 1036194), but also entitled the hotel to appoint a manager, to enter into a Management Services Agreement and created certain rights and duties as between the owners each of the lots in the strata plan and hotel. In addition, and as I understand the evidence, each of the owners in the strata plan has an individual lease with the hotel for each of their lots. Each lease appoints the hotel as attorney of the owner to vote at meetings of the owners corporation and also requires the hotel (specified in each lease as the “tenant”) to keep each lot “in good repair and condition”. Furthermore, there is a common property lease and management agreement which relates to the whole building and that, as a result of all of the above documents, it is the responsibility of the hotel to rectify any faults and problems within the common areas of both the strata plan and lot 100.

90 This evidence was all set out, and unchallenged, in the affidavit of Mr Zhang (Exhibit “4”) who is an associate director of the manager of the Respondent. Although it is true that portions of that affidavit were rejected on the basis that they were conclusions reached from the documents annexed (as I have itemised above) the documents speak for themselves and it was not challenged that the conclusions were in fact correct and that at all material times it was the hotel that was responsible for all repairs to the common property and to lot 100 in DP 1036194.

114 Nextly, there is the lease itself. The lease contains a number of covenants which I have set out in detail above and there is little doubt that the lease obligations are affected by the overriding statutory requirements of the Retail Leases Act 1994. Section 7 of that Act (set out above) is quite clear. There is no need for me to review the law relating to section 7. The section is quite clear. The Applicant’s case effectively revolved around Retail Leases Act 1994 Section 34. This section (set out above) imposes certain obligations on lessors notwithstanding the terms of any lease. But the obligations are on lessors, not on persons who are not lessors. Again, there is no need for me to examine in detail section 34 because once one accepts that whatever may have been the various incidents that affected the Applicant’s business (and I accept unreservedly that the incidents did in fact take place) the incidents were not caused by the Respondent. The evidence is clear. It is also clear that whenever the Applicant complained to the Respondent’s manager the manager (in the person of Mr Blazak) did his absolute level best to sort the matter out as quickly as possible. In oral submissions made on the last day of the hearing I think counsel for the Applicant conceded that Mr Blazak did his best to resolve the problems. The problems were not caused by the Respondent nor the Respondent’s manager but rather were problems that arose as a result of the conduct of other persons or were repairs/maintenance to common property and common services. The Respondent had no control at all over those aspects – all it could do was refer the problems on to the hotel and push for rectification. This is what the Respondent did.

115 On the first day of the hearing in opening counsel for the Applicant submitted that the Respondent had suffered others to impede the Applicant’s enjoyment of the premises; that the Respondent had a duty to seek to prevent such impediment; that there was no attempt by the Respondent to diminish the various incidents; and that the Respondent as lessor simply could not stand by but must make an effort to prevent or diminish the affectation and could not sit back and suffer someone else to do nothing such that it was just not a matter of doing nothing but rather the Respondent must do something and that in all the factual circumstances in this it was up to the Respondent to enforce whatever arrangement it had with the hotel. The submission (as I understood it) went even further – in the circumstances of this case the Respondent did not do its best, alternatively the circumstances were such that there was a breach of the covenant for quiet enjoyment and therefore the Applicant should succeed.

116 In my view, Section 34 is quite clear. The onus/duty is on the lessor. It is the lessor’s conduct that is the subject of this section. So, for example, in Section 34(1)(a) it is the lessor who must “inhibit access of the lessee to the shop in any substantial manner”. If it is not the lessor, but rather somebody else, whose conduct is outside the control of the lessor, then in my view there is no infringement of this sub-section. In this particular case it cannot be remotely suggested that it was the lessor who placed security guards and impeded the flow of people to and from George and Sussex Street through the common area passageway and past the premises. A similar observation applies to Section 34(1)(b).

117 There is no need to trawl through the balance of the sub-section. In all cases the obligation is on the lessor – the lease includes that obligation as a matter of statute – and where there would otherwise be an infringement of Section 34 there is no infringement if the actions taken are those of someone other than the lessor.

118 It may be (and I express no concluded view on this) that where a lessor does not act with promptitude to correct a problem which is not within its capacity to correct, the lessor may well be in breach of Section 34. There is no need to explore that further simply because the evidence in this case demonstrates adequately, and it was so conceded by counsel for the Applicant, that the Respondent as lessee acted with promptitude and did its best to rectify the problems as and when they arose.

119 In my view it was unfortunate that so many problems appeared to bedevil this tenancy. I have considerable sympathy for the Applicant. But it was not suggested, and was not part of the Applicant’s case, that the problems were such that he could not, to a reasonable degree, conduct his restaurant business – after all, he did in fact conduct his restaurant business for over 3 years until on or about 2 April 2005 when the Applicant ceased trading from the premises. The unchallenged evidence of the Respondent (Exhibit “3”, annexure “WZ1”, page 25) seems to show that the Applicant first fell into arrears on 1 April 2005. It is not unreasonable to conclude that until that point of time the Applicant was in fact paying all rent under the lease (although it is true that it would seem that the Applicant had not paid electricity charges since 19 July 2004). I note that the Applicant conceded the cross claim quantum such that in all those circumstances it is not unreasonable to conclude that the Applicant could conduct its restaurant business from the premises, albeit with interruptions and probable financial loss, at a profit sufficient to pay at least the rent.

Quiet Enjoyment

120 Firstly, the Applicant complained that there was no disclosure statement provided to it as required by Retail Leases Act 1994 Section 11. I have averred to this above at para 95. This assertion was not part of the pleadings and it was not part of the Applicant’s evidence. Consequently, in my view that submission is a non sequitur.

121 There was no reference in argument to Section 11(2) which states clearly that if a lessee is not given a disclosure statement (as submitted in this case but not supported by the evidence) the lessee my terminate the lease by notice in writing “at any time within 6 months after the lease was entered into ...”. Clearly this did not happen. This is yet another reason why I am not prepared to conclude that a disclosure statement was not given. In any event, there was a clear submission that all relevant times the Applicant was legally represented, but even if that is not correct the rights given to the Applicant under Section 11(2) were not exercised – in my view they are the statutory rights that apply in the absence of the provision of a disclosure statement and once the time for exercise of those rights passes then the lease continues as a contract subject to the usual contractual obligations and remedies.

122 Nextly, the concept/principle of quiet enjoyment is not one of wide interpretation but must be looked at in the context of the lease and the Retail Leases Act 1994. For example, a disclosure statement provided under Section 11 may include “details of any anticipated disturbance to trading” - see also Section 34(3). There is even a warning in the disclosure form itself that “lessees should have to be aware that it is not always possible to predict the timing and the duration of disturbances with certainty.” The point is this: quiet enjoyment can be limited by contract – it is not something considered in a vacuum without regard to the contractual arrangements reached between the parties. If this is correct then the Applicant’s submissions to the effect that “the applicant was promised quiet enjoyment when, to the respondent’s actual (as opposed to constructive) notice it could not and had no means to ensure this”, is simply too wide. The example given is that the fact that the Respondent had not control over rights of ingress and the like, because they were vested in another party, it thus it could not ensure that patrons of the Applicant’s restaurant could enter and depart with “appropriate ease”. Therefore, is was submitted, “the grant of the lease making a promise which it knew it could not keep, the grant of the lease constituted a fundamental misrepresentation and also a breach of a fundamental condition. It was against conscience for (the Respondent) so to do. It was an unconscionable act and the lease ought to be set aside, the obligation of the applicant to pay rent for the balance of the term set aside and damages ought to be ordered”.

123 No unconscionable case was argued in this Tribunal for the reasons I have set out early in this Judgment. It was not part of the Applicant’s case as pleaded that there was any misrepresentation – rather the Applicant pleaded its case by way of breaches of the lease, either in its express terms or implied by the Retail Leases Act 1994, or implied “as a matter of law to give business efficacy” to the lease or “implied by the other terms” of the lease and because of the Respondent’s breaches of the express and implied terms of the lease then damages flowed. It was said that the Respondent’s conduct amounted to a repudiation of the lease. The submissions drifted away from the pleadings to this question of “quiet enjoyment” and the asserted “fundamental misrepresentation” and “breach of a fundamental condition” by making the promise of quiet enjoyment.

124 I am unable to see this submission made out. Firstly, for the reasons set out above, this was a lease under strata title. Secondly, because of the terms the lease it being plain that, having regard to the title of the Respondent, the duty to maintain and repair rested not in the Respondent (in relation to common property and common services) but rather in the owners corporation/the hotel. Thirdly, the terms of the lease are indicative of the powers of the Respondent as lessor. In particular, this can be found in clause 16. Clause 16.2 required the Respondent to “use reasonable endeavours” to keep the common services available. More importantly, this clause made it plain that the Applicant “may not terminate this Lease, stop or reduce payments under it or make a claim for compensation because a Service is not available or is interrupted or fails or the Lessor’s plant or equipment breaks down or the Common Areas are not clean.” Clause 16.3 continues this regime – I have set it out above – and the proviso is that the Respondent “does not interfere with the (Applicant’s) use and occupation of the Premises more than is reasonably necessary” and it was never suggested that the Respondent had infringed that provision. It is also interesting to note Clause 16.3(g) which permitted the Respondent or the owners corporation to “change the direction or flow of pedestrian or vehicular traffic into, out of or through the Building”.

125 In any event, and even if one accepted that the interruption to the flow of customers and possible passing trade was somehow caused by the Respondent, the plain fact is that this situation was resolved by about November 2004, the Applicant continued to trade thereafter up to 2 April 2006 – in my view it is far too late to now assert that this event could itself, or combined with other events, amount to conduct of a repudiatory character.

126 It is difficult to see, in my view, how it could be submitted that somehow or other the Applicant was under an impression that its occupation of the premises was going to be without interruption or that somehow or other the Respondent had promised perfect “quiet enjoyment” in all of the circumstances surrounding the lease contract and the title. For what it is worth I reject absolutely the submission that there was any misleading or deceptive conduct by the Respondent, or that it granted the lease making a promise which it knew it could not keep, or that the grant of a lease “constituted a fundamental misrepresentation and also a breach of fundamental condition”. I also reject the submission that “it was against conscience for (the Respondent) so to do” or that it was “an unconscionable act” or that somehow “the lease ought to be set aside”.

127 In any event, I agree with the written submission of Counsel for the Respondent at paragraph 123(c) when he states that “fundamental to any claim for a breach of quiet enjoyment is that the interruption must be by the lessor or those claiming through the lessor.” (See Hawkesbury Nominees Pty Ltd v. Battick Pty Ltd [2000] FCA 185, especially at [36]-[40], and Volley Investments Pty Ltd v. Coles Myer Ltd [BC 200409531]) There was no interruption by the lessor and no interruption by any person claiming through the lessor. If it is suggested that the owners corporation or the hotel was a person “claiming through the lessor” then I simply reject that as being totally unsupported by the evidence and unsupported as a matter of law. Counsel for the Applicant sought to call in aid Conveyancing Act Section 70A. This section deals with the burden of covenants relating to land being “deemed to be made by the covenantor on behalf of himself or herself and the covenantor’s successors in title, and the persons deriving title under the covenantor or the covenantor’s successors in title, and, subject to aforesaid, shall have effect as if such successors and other persons were expressed”. The section also provided that “in connection with covenants restrictive of the user of land “successors in title” shall be deemed to include the owners and occupiers for the time being of such land.” I confess that I am unable to see the relevance of Section 70A (or even Section 70) to this submission. If it is suggested that the owners corporation and/or the hotel were somehow “successors in title” and should be bound by the covenant for quiet enjoyment asserted on behalf of the Respondent, then I reject that submission. The purpose of Section 70A is not to bind other persons who are not parties to the contract and who do not take title subsequently – the purpose is to bind subsequent owners and occupiers even though they were not parties to the original grant of the covenant.

Respondent’s Repudiation of the Lease

128 The Applicant contended that the Respondent’s conduct repudiated the lease thus entitling the Applicant to terminate the lease. This was made plain in the Applicant’s solicitor’s letter 11 May 2005 (Exhibit “A” page 425). It was asserted that the Respondent “has repeatedly failed to honour its obligations as lessor pursuant to the lease … and had thereby repudiated the Lease. Our client accepts your client’s repudiation of the lease and hereby terminates the Lease effective 5.00 pm today.” The letter goes on to assert that the Applicant’s business “has not been trading from the premises since 2 April 2005 because of your client’s failure, despite our client’s repeated requests, to repair damage to the glass ceiling of the premises.”

129 Pausing at this point, this assertion appears to be at variance with the evidence. In his affidavit Exhibit “C” at para 12 Mr Chu, the Applicant’s sole director, made this statements:

“Like June 2003, I had to close off approximately 10 tables underneath the ceiling cracks from customers by putting “reserve” signs on the tables”.

130 Firstly, that evidence equates the damage and its consequences to the Applicant to the class ceiling cracks in June 2003. Secondly, and consistent therewith, and having regard to the facts that the cracking took place about 18 January 2005, the evidence indicates a clear disruption to the restaurant business but not such a severe disruption that would have required closure of the premises (the premises were not closed in or after June 2003) but rather a loss of business. Thirdly, the evidence demonstrated paragraphs 120 and 121 below) that the cracking presented no immediate danger to anyone, that the glass was laminated and there was no safety issue – this assertion was provided by the Respondent’s manager to Mr Chu direct under cover of letter 18 February 2005. This assertion has never been challenged by the Applicant and is consistent with the June 2003 position such that, on the evidence, it cannot be said that the Applicant could not have continued to trade (on both occasions) but rather, at best, the Applicant may have had a compensatory claim for loss of business. In other words, it was not suggested (by evidence) that the Applicant could not operate the restaurant at all but rather that he suffered loss of profits.

131 The assertion in the Applicant’s solicitor’s letter 11 May 2005 is consistent with the matters pleaded in the Statement of Claim. In paragraph 11 of that document the Applicant stated that the Respondent did not rectify the various pleaded breaches “as soon as reasonably practicable after being requested in writing by the (Applicant) to do so or, in the case of the breaches pleaded in paragraphs 8(d) and (e), at all.” I think this is a typographical and the reference should be to paragraphs 9(d) and (e) which refer to the asserted failure “on more than 50 occasions to take all reasonable steps to rectify interruptions to the gas supply, air-conditioning and kitchen exhaust facility caused by activation of the hotel’s fire alarm system” and nextly the asserted failure “to rectify substantial cracks in the glass ceiling of the Restaurant caused by objects thrown onto the ceiling from above by guests of the hotel.”

132 Importantly, the Statement of Claim, paragraph 12, asserts that because of the failure to “rectify substantial cracks in the glass ceiling “ from about 18 January 2005 “the Restaurant cannot be used under the Lease and the (Applicant) is thereby not liable to pay rent or any amount in respect of outgoings or other charges from about 18 January 2005 to date.”

133 It was then asserted (paragraph 13) that on 26 April 2005 the Respondent “wrongfully gave to the (Applicant) notice of its intention to terminate the lease and draw down on the bank guarantee provided by the (Applicant) pursuant to clause 24.1 of the Lease.”

134 The evidence demonstrates that on 18 January 2005 the Applicant reported to the Respondent’s manager “damage to (the) glass ceiling situated at the lower level dining area of (the) restaurant … (which was) probably instigated by a foreign object falling on top of this roof causing cracking of several glass partitions” (Exhibit “A” page 346). A meeting took place between Mr Chu, Mr Blazek and Mr Dwyer of the hotel. It was suggested that it would be “a likely insurance claim” through the hotel. The evidence also showed, on the same page, that “whilst these glass ceiling partitions are damaged they represent no immediate danger to any personnel seated in (the) restaurant underneath this glass because it is a specially developed material that is both toughened and laminated”. All parties agreed to “accelerate repairs and limit any operational restrictions” to the Applicant’s business. A two week period was anticipated for repairs and the restaurant area “underneath this glass ceiling would have to be cordoned off during repair works (which) should be completed successfully within 4-6 hours.” Mr Chu was assured that “this matter is being treated with utmost urgency” by the hotel and the Respondent’s manager “and repairs will be activated as soon as humanly possible.”

135 There was further evidence (at page 354) that the glass was laminated and that there did “not appear to a safety issue as the glass is structurally sound”. As I have pointed out above there was then an argument on whether the glass roof was part of the strata plan and not the responsibility of the owners corporation/ hotel to have it repaired. Furthermore, there was some evidence (also page 354 and 355) that at least part of the damage was “old damage” – the Applicant itself in its letter 14 February 2005 observed that the “first damage was not so obvious that the current one was noticed straight away by my customers” and that the “marks were large and small and are so obvious that really damage our restaurant’s image and atmosphere” because “the glass ceiling dining area is so near to the entrance of the restaurant and was usually welcomed by most of the customers”.

136 This letter is significant for this observation by the Applicant itself: “Under the circumstances I do not think that we should be charged the full rent during the questioned period.” This is not a statement, and far from it, that the restaurant was uninhabitable or could not operate as a restaurant, but rather that it could operate but its operations would be disrupted such that the full rent should not be charged. That is a far cry from the assertion pleaded in paragraph 12 of the Statement of Claim to the effect that the restaurant “cannot be used” and therefore the Applicant is “not liable to pay rent or amount in respect of outgoings or other charges from about 18 January 2005 to date.” Indeed, this assertion is at variance with the facts – on 8 March 2005 the Applicant was in occupation and complaining about the air-conditioning and on 23 March 2005 its solicitors stated that their client “intends to close the business until the glass ceiling is repaired and until our client can be given quiet enjoyment of the demised premises by (the Respondent)”. Curiously, and somewhat in contradiction, the letter goes on to say that if the repair work could not be finished within 7 days the Applicant “will seriously consider closing the business to mitigate their losses by reason of the fundamental breaches committed by the lessor under the lease”. A “serious consideration” as at 23 March 2005 is a far cry from an assertion that the restaurant “cannot be used” as at 18 January 2005.

137 It will be remembered from my recitation of the facts above that there was a dispute as to who should fix up the cracked glass, that the hotel was “prepared to roof and gyprock the effected area”, that the Applicant had (understandably) “asked that we replace the broken glass, as he prefers the atrium effect” and then by letter 31 March 2005 the Applicant’s solicitor notifies the Respondent’s manager that the Applicant “will close the restaurant business on Sunday 2 April 2005 for seven (7) days, during which period our client demands that repairs should be made to the glass ceiling and the cover/sheet underneath the glass pane/roof be reinstated.”

138 There was a continued debate between the Respondent’s manager and the hotel about whether the glass roof was part of the common property but it was not until 20 April 2005 that the Applicant (through its solicitor) asserted that “by force of section 36 of the Retail Leases Act 1994, rent has abated and our client has become entitled to terminate the lease”.

139 By letter 26 April 2005 the Respondent, through its solicitors made plain that unless the Applicant “immediately notifies our client that it will recommence business from the premises forthwith and will observe the “Core Hours” as required by the lease and such notice is received by close of business on 28 April 2005 together with outstanding rental, our client will treat the lease as having been repudiated (by the Applicant), such breaches being essential terms of the lease. It will be remembered that the Applicant not only vacated the premises on 2 April 2005, but also purported to terminate the lease effective 5.00 pm 11 May 2005 and returned the keys on 13 May 2005.

140 The Applicant took those steps because it was of the opinion that the Respondent had repudiated the lease.

141 The word “repudiation” is an ambiguous word (Heyman v. Darwins Ltd [1942] AC356 per Lord Wright at 378-379 – see also Toller v. Law Accident Insurance Society Limited [1936] All ER 952 per Greene LJ at 956).

142 I think it is fair to say that the right to terminate for actual breach of contract is a question of construction of the terms of the contract itself, in this case the lease. There is an excellent summary of the law in an article by Professor Doug Jones in The Arbitrator and Mediator for December 2005 at 15ff. The relevant summary appears at pages 21-23. There is no argument that, taken alone, the breaches of the Applicant were breaches of fundamental contractual terms going to the root of the contract and that (again taken alone) would have entitled the Respondent to terminate for actual breach of contract (see paragraphs 137-138 below). However, this is a primary case conducted by the Applicant who asserts that the Respondent repudiated the lease contract because, by its conduct or its actual inability to perform the Respondent proved not to be ready and willing to perform its obligations under the lease. In order to succeed in this argument one needs to examine the seriousness of the conduct of the Respondent to determine whether the magnitude of that conduct entitles the Applicant to treat the contract at an end.

143 The Applicant’s case is that the Respondent, by its conduct, declared unequivocally that it would not perform the contract by its persistent breaches and thereby broke the contract in such a way that it intended not to proceed with it. I am of the clear opinion that there is nothing in the evidence that would support that legal conclusion. Rather, in my view the actions of the Respondent demonstrated, not only promptitude but also a concern that the Applicant was not unnecessarily or unduly affected by the various incidents/problems that arose such that the Applicant would continue to pay rent and otherwise comply with its obligations under the lease. As the learned President said in Galazy Catering Pty Ltd v. Trust Company of Australia Ltd [2006] NSWADT 182 at [40] “(t)he respondent’s interest, understandably, is an economic one. It wants the rent paid on time and in an orderly way”. On the facts in evidence I cannot see what else the Respondent could have reasonably done to meet the concerns/complaints of the Applicant.

144 Counsel for the Applicant conceded that if the Applicant correctly and rightfully abandoned the premises then no damages flowed to the Respondent; but if to the contrary the Applicant wrongly abandoned the premises then the Respondent must succeed in its cross claim in which quantum was not in dispute. In my opinion the Applicant had no right to terminate the contract and in the factual circumstances as described above the Respondent was correct in treating the lease as having been repudiated by the Applicant, thus entitling the Respondent to the damages as it has claimed.

Final Observations

145 Neither the most diligent searching by myself nor by counsel for either party has been able to throw up any decisions of the obligations of a lessor when the leased premises are subject to strata title. Zouk v. Lyons Road Pty Limited [2005] NSWADT 143 touched upon this issue but did not make any determination. Step Footwear Pty Limited v. Accord Pacific Land Pty Limited [2005] NSWADT 191 dealt with the obligations of the lessor with respect to the leased premises with regard to a suspended tile ceiling and air-conditioning unit and ducting within that ceiling. Judicial Member Donald had to define what was meant by the leased “premises” because if the premises were the area only beneath the suspended ceiling then the ceiling and its contents were the responsibility of the lessor in circumstances where there was a fire in a common ceiling void which ran between various shops in a single storey strip of shops. No other cases seem to refer to this unusual situation as in the case now before me. This is probably because that whenever a problem arose it was dealt with by the lessor as soon as it could with the assistance of the owners corporation. There is nothing in the case before me which would indicate that any of the incidents/problems was caused by the Respondent or the incidents/problems could have been foreseen or ought to have been foreseen (Harrison, Ainslie & Co v. Lord Muncaster [1891] 2QB680) and it could not be said that the lessee through the lease provisions was capable itself of correcting the problems but failed so to do (Aussie Traveller Pty Limited v. Marklea Pty Limited [1998] 1 Qd.R 1). See also Kohura Pty Limited v. Tai Ping Trading Pty Limited 3 BPR 97240), where the lessor terminated a sprinkler system by discontinuance and this was held to be a breach of the covenant of quiet enjoyment.

146 Secondly, Retail Leases Act 1994 section 36 was called in aid by both parties. There is no need for me to trawl through this section. Suffice it to say that it is clear from my findings that section 36(1)(a) does not apply to the Applicant’s case, neither does sub-section (c) and neither does sub-section (d) because not less than 7 days notice in writing was given but rather the lease was terminated immediately.

147 Thirdly, it is appropriate to deal briefly with the question of damages as asserted by the Applicant. The Applicant conducted a restaurant. The income was derived from credit cards and cash payments. The credit card evidence was reasonably solid but the cash payments evidence was almost non-existent. Indeed, no cash register records were kept at all. Furthermore, no customer records were kept except as written on a calendar. Most of the damages claim for lost income was for lost cash sales due to access disruption. No (or few) primary records were ever sent to its accountant. The evidence showed that any support for cash sales would have been recorded in the order records, or kept by hand. A carbon copy of the order records of customers was given to the kitchen and subsequently destroyed, the original was kept in a box which was probably left in the premises or thrown away.

148 It goes without saying this is a highly unsatisfactory situation, to say the least, when one is seeking to claim substantial damages for loss of customers/income. Clearly the Applicant did not comply with its legal obligations in respect of the creation and retention of financial records that would enable true and fair financial statements to be prepared and audited. I am not prepared to conclude that the Applicant destroyed the documents by some deliberate act (The Ophelia [1916] 2AC206 at 229-230) with a view to destroying evidence (either from a tax point of view or otherwise) but the fact is that, whether left behind or thrown away, the documentation in support of cash receipts was in fact destroyed thereby making it impossible to verify or challenge the assertions of cash losses: (Gray v. Haig [1855] 20 Beav.219) where the headnote states that a court “will not send to be tried by a jury a question which is supported by competent evidence, and which, if untrue, could have been disproved by evidence in the possession of one party, who has taken means to prevent it being made available for the determination of the question by the Court”. In my view the claim for damages which depends for its success on the acceptance of cash losses is not “supported by competent evidence” and because of the loss of the primary records cannot be put to the test. It is not to the point that cash receipts may have been or were included in business activity statements and income tax statements because even in those circumstances those cash receipts as declared were not corroborated.

149 Finally, on this point of cash sales and cash losses, I entirely agree with the observations of the Respondent’s counsel in his written submissions at paragraph 78 where he says:

“There was no justifiable reason for the destruction of these documents. By law, (the Applicant) was required to keep them. They were destroyed at a time when (the Applicant) was making claims for losses against (the Respondent). The relevant presumption must be made against (the Applicant), that such records could not support its case for damages.”

150 It is important to observe that as early as June 2003 the Applicant asserted income losses. And even if the presumption submitted by the Respondent’s counsel cannot be made, the plain fact is that the onus in proving cash losses rests upon the Applicant and in my opinion its failure to produce corroborative material, thus allowing the Respondent to test the assertions, is fatal to that part of the Applicant’s claim for damages.

151 Similarly, there was no corroborative material available to demonstrate or corroborate the assertions by the Applicant regarding diminution in customers caused by the various interruptions/incidents. No records were kept relating to customers by number and the only viable method of establishing loss of custom is by reviewing the financial records. The oral evidence was less then persuasive but in any event the financial records were, as I pointed out above, almost totally absent.

152 However, having regard to my findings, there is not need for me to make any further comment about the cash portion of the damages. As regards to the evidence relating to credit card receipts, whilst they formed only a small portion of overall sales the evidence seemed to show that credit card sales were unaffected by the interruptions/incidents. In addition, I was not satisfied of the quality of the evidence pertaining to lost customer numbers. There was some evidence about a lost purchaser of the business but in my opinion the evidence on this aspect was marginal (to put it at its highest), was clearly (in the words of the Respondent’s counsel in his written submission at paragraph 86, “of hearsay, inconclusive and of a very limited nature ... (and did) not go to the price of the business… (did) not go to the issue of a lost potential purchaser (for the price as asserted….) and has virtually no weight”.

Claim by the Respondent

153 The obligation to pay rent, to pay outgoings and trade during the core trading hours are essential terms of the lease (clauses 3, 4, 11.7 and 19.1). The Respondent has the right to terminate the lease by re-entry for a breach of an essential term or failure to pay money (clause 19.2). That clause also gives the Respondent a right to terminate if the Applicant repudiates its obligations under the lease.

154 The Applicant clearly abandoned the premises and improperly purported to terminate the lease. It has failed to pay rent since March 2005. It has repudiated the lease. The lease was terminated by the Applicant on 1 June 2005 (at the latest – see Exhibit “A” page 460) and the Applicant has conceded through its counsel that the amount claimed by the Respondent is correct and in accordance with the terms of the lease contract and the law. I have no hesitation in accepting the submissions of counsel for the Respondent at paragraphs 90 – 106 inclusive, all of which are not traversed but rather accepted and admitted by counsel for the Applicant. The damages claimed are in the sum of $449,343.29 exclusive of interest on rent from December 2005 – June 2006. But the jurisdictional limit of this Tribunal is $400,000.00 (Retail Leases Act 1994 section 73(1)) and in those circumstances the full claim of the Respondent must be allowed in that sum.

Additional Matters

155 Interlocutory Orders were made by the Supreme Court. The nature and extent of those orders is not clear from the evidence. What is clear however is that that the interlocutory orders were “extended until further order of the Tribunal” and the Applicant continued “the usual undertaking as to damages.”

156 In these circumstances I am not prepared to make any further or other order in relation to the interlocutory orders thus extended nor am I prepared to make any order with regard to the undertaking as to damages nor in relation to any costs incurred in this Tribunal and in the Supreme Court by the parties, pending further submissions.

157 What I propose is that the matter be brought back before me at a convenient time with a view to dealing with those matters and other outstanding matters as a result of this decision.

Orders

2. The First Applicant pay the First Respondent $400,000.00.

3. I list this matter for further directions before me at 2-00 pm on Thursday 17 August 2006.

02/08/2006 - To clarify orders - Paragraph(s) Orders 1 and 2

02/08/2006 - To further clarify orders - Paragraph(s) Order 2

CITATION:	Kindful (Australia) Pty Limited v Country Villa Holdings Pty Limited [2006] NSWADT 224 This decision has been amended. Please see the end of the decision for a list of the amendments.
DIVISION:	Retail Leases Division
PARTIES:	FIRST APPLICANT AND SECOND RESPONDENT Kindful (Australia) Pty Limited FIRST RESPONDENT AND SECOND APPLICANT Country Villa Holdings Pty Limited
FILE NUMBER:	055066 & 055104
HEARING DATES:	8, 10-11, 14, 29/11/2005, 15-16/02/2006 and 26/05/2006
SUBMISSIONS CLOSED:	05/26/2006
DATE OF DECISION:	08/01/2006
BEFORE:	Molloy GB - Judicial Member
CATCHWORDS:	Claim for compensation for pre lease misrepresentations - Claim for payment of money - Claim for relief from payment of money - Claim re invalidity of a lease for inconsistency with Retail Leases Act
MATTER FOR DECISION:	Principal matter
LEGISLATION CITED:	Conveyancing Act 1919 Retail Leases Act 1994
CASES CITED:	Aussie Traveller Pty Limited v. Marklea Pty Limited [1998] 1 Qd.R 1Galazy Catering Pty Ltd v. Trust Company of Australia Ltd [2006] NSWADT 182 at [40]Gray v. Haig [1855] 20 Beav.219Harrison, Ainslie & Co v. Lord Muncaster [1891] 2QB680Hawkesbury Nominees Pty Ltd v. Battick Pty Ltd [2000] FCA 185Heyman v. Darwins Ltd [1942] AC356 per Lord Wright at 378-379Kohura Pty Limited v. Tai Ping Trading Pty Limited 3 BPR 97240Step Footwear Pty Limited v. Accord Pacific Land Pty Limited [2005] NSWADT 191The Ophelia [1916] 2AC206 at 229-230Toller v. Law Accident Insurance Society Limited [1936] All ER 952 per Greene LJ at 956Volley Investments Pty Ltd v. Coles Myer Ltd [BC 200409531]Zouk v. Lyons Road Pty Limited [2005] NSWADT 143
REPRESENTATION:	FIRST APPLICANT AND SECOND RESPONDENT DKL Raphael with J O'Sullivan, barristers FIRST RESPONDENT AND SECOND APPLICANT A Fernon, barrister
ORDERS:	1.The First Applicant’s application is dismissed.; 2.The First Applicant pay the First Respondent $400,000.00.; 3.I list this matter for further directions before me; at 2-00pm on Thursday 17 August 2006.

[2006] NSWADT 224

01/08/2006