Klooster v Sticky Fingers (Qld) Pty Ltd
[2011] QCATA 282
•8 September 2011
| CITATION: | Klooster v Sticky Fingers (Qld) Pty Ltd [2011] QCATA 282 |
| PARTIES: | Frank Mark Klooster (Applicant/Appellant) |
| v | |
| Sticky Fingers (Qld) Pty Ltd (Respondent) |
APPLICATION NUMBER: APL001-11
| MATTER TYPE: | Appeals |
HEARING DATE: On the papers
HEARD AT: Brisbane
| DECISION OF: | Justice Alan Wilson, President Michelle Howard, Member |
DELIVERED ON: 8 September 2011
DELIVERED AT: Brisbane
ORDERS MADE: 1. That the appeal be allowed, but only to the extent that the Order number 1 of the Orders of 3 November 2010 be set aside;
2. That the claim for compensation and/or payment for unconscionable conduct be returned to the Tribunal for reconsideration according to law; and
3. That, in reconsidering the matter, the Tribunal allow such further evidence, cross-examination and submissions as may be necessary to consider the claims relating to compensation and/or unconscionable conduct.
| CATCHWORDS: | APPEAL – LEAVE TO APPEAL – RETAIL SHOP LEASE – where the respondent operated a cafe at premises which it leased from the applicant under a Deed of Extension and Variation of lease – where the respondent entered into an agreement to sell the café but the applicant refused an assignment of the lease, and informed the respondent that it was in breach of a covenant of the lease – where the respondent sought compensation for the loss of the sale of the café, for unconscionable conduct, and other expenses – where the Tribunal ordered that the applicant pay compensation to the respondent in the amount of $31,133.50 – where the applicant seeks leave to appeal that decision on the grounds that the Tribunal erred in law and fact – whether leave to appeal should be granted for alleged errors of fact – whether appeal should be granted for alleged errors of law Queensland Civil and Administrative Tribunal Act2009, s 142 Attorney General (NSW) v World Best Holdings Ltd (2005) 63 NSWLR 557, cited Canon Australia Pty Ltd v Patton [2007] NSWCA 246, cited |
APPEARANCES and REPRESENTATION (if any):
This proceeding was heard on the papers in the absence of the parties pursuant to s 32(2) of the Queensland Civil and Administrative Tribunal Act 2009 (QCAT Act).
REASONS FOR DECISION
PRESIDENT
I have had the benefit of reading the Reasons of QCAT Member Ms Michelle Howard, in draft. I agree with her Reasons, and her conclusions, and the orders she proposes.
MEMBER MICHELLE HOWARD
Sticky Fingers Pty Ltd leased premises from Mr Klooster under a Deed of Extension and Variation of lease dated 20 June 2007, having originally become the lessee under an assignment of lease in February 2004.
During the lease term Sticky Fingers operated a café at the premises. It seems the premises had been closed for some time due to staffing issues when, on 2 December 2009, Sticky Fingers entered into an agreement to sell the business operated at those premises to a Mr Ross Taylor. Settlement of the sale was due on 16 December 2009.
On 15 December 2009 Mr Klooster advised Sticky Fingers that he refused to assign the lease to Mr Taylor. The sale of the business did not proceed. The lease was due to expire in April 2010. On 16 December Sticky Fingers advised Mr Klooster that it would not be renewing the lease.
On 4 January 2010, Mr Klooster then notified Sticky Fingers that it was in breach of the covenant to keep the premises open for trade or business. On 11 January Sticky Fingers advised that it needed to strip out the fixtures and fittings, unless Mr Klooster was interested in purchasing them, but that it had a couple of parties interested in buying the business. Mr Klooster responded that he had no problems with a lease assignment, so long as the buyer was qualified to support the terms of the lease.
Then, on 27 January, Mr Klooster advised a representative of Sticky Fingers in a telephone call that he had changed the locks at the premises.
Sticky Fingers denies that it was ever in breach of the lease, and asserts that it continued to pay the rent until the lease expired in April 2010, despite not having access to the premises.
Sticky Fingers claimed compensation for the loss of the sale and for unconscionable conduct relating to the re-entry which, it asserted, placed it in a position of being unable to sell the business; expenses it incurred for rent, rates and body corporate fees, and a claim for legal costs by Mr Klooster relating to the re-entry; and for fixtures which it could not remove because access to the leased premises was denied. Sticky Fingers also sought relief from payment of monies claimed by Mr Klooster for ‘de-fitting and making good’ of the premises.
The Tribunal made orders that Mr Klooster pay compensation to Sticky Fingers totalling $31,133.50 and declared that Sticky Fingers was not liable to pay for the ‘de-fit’ or the legal expenses claimed by Mr Klooster relating to the re-entry. The award of compensation comprised $24,332.50 for the lost sale; $6,023 for rent; $494 for rates and $284 for body corporate fees. The Tribunal declined to make orders regarding the fixtures, which it accepted had since been removed by Sticky Fingers.
Mr Klooster has filed an application for leave to appeal or appeal.
Applications for leave to appeal and appeal
An appeal on a question of law may be made from a final decision of the Tribunal.[1] However, an appeal on a question of fact, or on questions of mixed law and fact, may only be made with the leave of the Tribunal.[2]
[1] QCAT Act, s 142.
[2] QCAT Act, s 142(3)(b).
Leave to appeal will ordinarily only be granted where there is some question of general importance upon which further argument, and a decision of the Appeal Tribunal, would be to the public advantage; or, there is a reasonably arguable case of error in the primary decision and a reasonable prospect that the applicant would obtain further substantive relief. Another question sometimes asked is: is leave necessary to correct a substantial injustice to the applicant, caused by some error?
Finality in litigation is highly desirable because any further action beyond the hearing can be costly and unnecessarily burdensome on the parties.[3]
[3] See Fox v Percy (2003) 214 CLR 118 at 128 per Gleeson CJ, Kirby and Gummow JJ.
Findings of fact by a Tribunal will not usually be disturbed on appeal if the facts inferred by the Tribunal, upon which the finding is based, are capable of supporting its conclusions, and there is evidence capable of supporting any inferences underlining it.[4]
[4]Dearman v Dearman (1908) 7 CLR 549 at 561; Fox v Percy (2003) 214 CLR 118 at 125-126.
Mr Klooster’s specified grounds of appeal are wordy, and more in the nature of submissions, rather than specifying the grounds of appeal. However, the grounds appear to be essentially fourfold and each of them is dealt with separately.
The Tribunal erred in law because compensation is not an available remedy if a lessor wrongfully refuses to consent to the assignment of a lease
Mr Klooster submits that it is well established law that damages are not a remedy available to a lessee where a lessor has unreasonably refused to consent to an assignment. Instead, he argues that it is established law that the sale and assignment can proceed, and a court or tribunal may later determine whether the refusal to consent was reasonable.
Therefore, he says, the award of compensation to Sticky Fingers was made in error. He also argues that the award as made was misconceived in any event as it was for lost sale of the business, ignoring the fact that Sticky Fingers still had the asset and could have sold it to another purchaser.
Sticky Fingers submits that compensation is an available remedy because s 83 of the Retail Shop Leases Act 1994 (the RSL Act) provides a wide discretion to the Tribunal to make orders it considers just and reasonable to resolve a retail tenancy dispute, including an order for compensation. It argues that the compensation order could be considered valid for the invalid notice of breach of covenant and the subsequent unlawful lockout.
It further argues, in essence, that the Tribunal was entitled to consider Mr Klooster had engaged in unconscionable conduct within the meaning of s 46B of the RSL Act and, as a result, the Tribunal was entitled to make orders pursuant to s 83(3) of the RSL Act requiring him to pay an amount to Sticky Fingers.
Sticky Fingers submits that Mr Klooster’s conduct was unconscionable in a variety of respects. It refers to the following:
(a) Unreasonably issuing a notice of breach of covenant for failure to keep the premises open for trade or business when there was no definition of customary business hours;
(b) Mr Klooster’s actions were calculated to prevent Sticky Fingers from any future opportunity of selling the business and exercising its rights under the lease to remove its fixtures from the shop;
(c) Demanding an unreasonable degree of documentation from the proposed assignee and failing to disclose the depth of information he had received during a telephone call on 15 December 2009 with a Sticky Fingers representative, and failing to disclose during that call that he had already instructed his solicitors to refuse to assign the lease;
(d) Mr Klooster’s unwillingness to negotiate the terms and conditions of the assignment of the lease; and
(e) Commencing proceedings in the Magistrates Court when the same issues were before the Tribunal and obtaining default judgment although he knew it was proposed that the proceedings be amalgamated.
It also argues that the case law relied upon by Mr Klooster predates the RSL Act and is, therefore, irrelevant.
The Tribunal’s power to award compensation as expressed in s 83 of the RSL Act is a broad one, but is not at large: it must be based on established law, or express statutory provision.[5]
[5]See, eg, the discussion in Logan City Shopping Centre Pty Ltd v Retail Shop Leases Tribunal & Anor [2006] QSC 172; Krysnev Nominees Pty Ltd v Osterley Pty Ltd and Ors [1998] QRSLT 14.
The objects of the RSL Act include establishing minimum mandatory standards for retail shop leases.[6] In particular, pt 6 contains minimum lease standards. Division 7 of pt 6 sets out provisions for compensation to be generally implied into leases,[7] subject to exceptions which are not relevant in this proceeding.[8]
[6] RSL Act, s 4.
[7] RSL Act, 42-44.
[8] RSL Act, s 42(2).
As these are minimum lease standards, there is scope for a particular lease to provide for additional covenants in respect of which compensation may be available, in the case of a breach. Also, under s 83(3), if the Tribunal finds a party has engaged in unconscionable conduct, it may make an order for payment of money; such a payment is not referred to, however, as ‘compensation’.[9]
[9] RSL Act, s 83(3)(a).
Subdivision 3 of pt 6 of the RSL Act makes some specific provision about retail tenancy disputes arising around the assignment of leases.[10] Compensation is not referred to as a remedy for failure to assign, either in these sections or elsewhere in the compensation provisions. The Supreme Court of Queensland[11] has, as recently as 2010, confirmed the common law position that a landlord does not have a positive obligation to consent to an assignment of a lease in circumstances when its consent could not be unreasonably withheld, and that the consequence is not to expose a landlord to a compensation claim. Rather, the effect is that the assignment may proceed without the landlord’s consent.[12] The decision followed a 1946 decision of the High Court of Australia.[13] I accept that Mr Klooster is correct that damages were not an available remedy for failure to consent to the assignment of the lease.
[10] RSL Act, s 50-50A.
[11]Maclag (No 11) Pty Ltd as Trustee for the Burns Family Trust v Chantay Too Pty Ltd as Trustee for the Chantay Trust [2010] QSC 299.
[12]Maclag (No 11) Pty Ltd as Trustee for the Burns Family Trust v Chantay Too Pty Ltd as Trustee for the Chantay Trust [2010] QSC 299, [132].
[13] Harvey v Walker (1945) 46 SR (NSW) 180.
Compensation is, however, available under the RSL Act for loss or damage suffered by the lessee because the lessor substantially restricted the lessee’s access to the leased shop.[14] This provision has been in effect since before the parties to this proceeding entered into lease arrangements and is, therefore, potentially applicable.[15]
[14] RSL Act, s 43(1)(a).
[15]Note provisions regarding operation of the RSL Act in pt 4, especially s 13 and discussion in Re Malsons Pty Ltd [1991] 2 Qd R 61. See discussion also in Logan City Shopping Centre Pty Ltd v Retail Shop Leases Tribunal & Anor [2006] QSC 172.
There are specific provisions in the RSL Act about unconscionable conduct, in Division 8A of Part 6. Section 46A(1) provides that a lessor must not, in connection with a retail shop lease, engage in unconscionable conduct. Section 46B sets out matters to which the Tribunal may have regard in deciding whether a party to a retail tenancy dispute has engaged in conduct of that kind. These include whether any unfair tactics were used against the other party;[16] the extent to which the party unreasonably failed to disclose to the other party any intended conduct of the party that might affect the other party’s interests;[17] and, the extent to which the party and the other party acted in good faith.[18] These provisions do not limit the matters to which the Tribunal may have regard.[19] However, the Tribunal must not take into account any circumstances that were not reasonably foreseeable at the time of the alleged contravention.[20]
[16] RSL Act, s 46B(1)(d).
[17] RSL Act, s 46B(1)(i)(i).
[18] RSL Act, s 46B(1)(k).
[19] RSL Act, s 46B(3).
[20] RSL Act, s 46B(4).
Unconscionable conduct will usually only be found in circumstances of a high degree of moral impropriety, having no regard to conscience, rather than behaviour which appears merely unfair.[21]
[21]For example, Hurley v McDonald’s Australia [1999] FCA 1728; Attorney General (NSW) v World Best Holdings Ltd (2005) 63 NSWLR 557; Canon Australia Pty Ltd v Patton [2007] NSWCA 246; and M & H Noble v Paulmarg Pty Ltd [2009] QSC 265; and Susanna and John Pty Ltd v Trident Ashgrove JV Pty Ltd as Trustee and Tribune Properties Pty Ltd [2011] QCAT 101.
At the commencement of the hearing the Tribunal clarified the remedy sought by Sticky Fingers, namely compensation.[22] The Tribunal’s Reasons for its decision characterise the dispute as essentially relating to a claim by Sticky Fingers for compensation for loss sustained as a result of the unreasonable withholding of consent to the assignment of the lease.[23]
[22] Transcript RSL009/10, pages 2-4.
[23] Sticky Fingers (QLD) Pty Ltd v Klooster [2010] QCAT 611, [4].
The Tribunal’s Reasons devote considerable space to determining whether the respondent unreasonably withheld consent to the assignment of the lease.[24] It also gave consideration to whether the re-entry of Mr Klooster was reasonable, and determined that it was not.[25] It then assessed and awarded compensation for what it describes, in the Reasons, as the lost sale and, separately, other expenses incurred because Mr Klooster unreasonably withheld his consent to the assignment of the lease. The Tribunal does not specifically articulate that it is awarding the damages relating to the lost sale because of its finding that the refusal to assign was unreasonable but, reading the Reasons as a whole and noting the way in which the Tribunal characterises the dispute in them, it is reasonable to conclude that it did so.
[24] Sticky Fingers (QLD) Pty Ltd v Klooster [2010] QCAT 611, [32]-[47].
[25] Sticky Fingers (QLD) Pty Ltd v Klooster [2010] QCAT 611, [48]-[58].
It is apparent from the transcript of the proceedings that Sticky Fingers made submissions at the hearing that Mr Klooster’s actions were unreasonable in refusing the assignment, but more particularly that his actions to opportunistically gain entry to the premises were unconscionable.[26] This is consistent with the notice of dispute filed by Sticky Fingers in the Tribunal. It is also consistent with the submissions made by Sticky Fingers in response to this ground of appeal. Its claim was not, as the learned Tribunal characterised it, essentially for compensation for the withholding of consent to assign the lease. The claim was broadly for compensation, and for unconscionable conduct.
[26] Transcript RSL009/10, page 46.
However, it is apparent from its Reasons for decision that the Tribunal did not determine that claim, as made. It misunderstood the assertions it made. It determined the matter on another basis and in doing so, made an error of law.
Specifically, the learned Tribunal Members did not consider the bases upon which compensation may be awarded under the RSL Act. It did not consider whether there had been unconscionable conduct for which it may order a payment to Sticky Fingers under the RSL Act. It did not consider what provisions were in effect, and the effect of any later amendments to the RSL Act, having regard to the dates of the assignment and deed of variation between the parties.[27] The Tribunal made no findings about the application of these provisions to the circumstances of the parties.
[27]See, eg, Re Malsons Pty Ltd [1991] 2 Qd R 61. See discussion also in Logan City Shopping Centre Pty Ltd v Retails Shop Leases Tribunal & Anor [2006] QSC 172.
The Tribunal made limited findings in its decision directed to whether Mr Klooster unreasonably withheld his consent to the assignment of the lease; also, to some limited extent, the re-entry; and the claim relating to the de-fit.
It has not more broadly considered the evidence and I do not consider that it made findings upon which this Appeal Tribunal could rely to make a determination about any entitlement to compensation Sticky Fingers may have, or whether Mr Klooster has engaged in unconscionable conduct in contravention of the RSL Act.
There are significant issues of credit to be considered in determining whether Mr Klooster engaged in unconscionable conduct, which may give rise to an order for payment of money. On the face of it, Mr Klooster’s actions in restricting access to the leased premises by changing the locks may give rise to an award of compensation if it was unlawful, since it resulted in Sticky Fingers losing the opportunity to sell the business and incur rent and other expenses until the expiry of the lease although it had no access to the premises. Whereas the Tribunal concluded that Sticky Fingers was not in breach of the lease,[28] and that it had not abandoned the premises,[29] it did not make findings about Mr Klooster’s actions relating to the re-entry.
[28] Sticky Fingers (QLD) Pty Ltd v Klooster [2010] QCAT 611, [57].
[29] Sticky Fingers (QLD) Pty Ltd v Klooster [2010] QCAT 611, [48]-[51].
In the circumstances, it is appropriate to allow the appeal in respect of this ground, and to set aside the decision of the Tribunal as far as it relates to the claim for compensation and/or unconscionable conduct and to refer the proceeding back to the Tribunal for reconsideration according to law. The Tribunal is directed to allow such further evidence, cross-examination and submissions as necessary to consider the claim relating to compensation and or unconscionable conduct.
The Tribunal erred in fact and law in concluding that Mr Klooster had behaved inconsistently by refusing to consent to the assignment notwithstanding that his solicitors had already provided the assignment documents for execution (paragraph 30 of Reasons for decision)
Given that the Tribunal’s decision is set aside and returned to the Tribunal for reconsideration, I do not need to further deal with this point.
The Tribunal erred in fact in holding that Mr Klooster unreasonably withheld his consent to the assignment of the lease
Given that the Tribunal’s decision is set aside and returned to the Tribunal for reconsideration, I do not need to further deal with this point.
The Tribunal erred in fact and law in concluding that Mr Klooster’s right to pursue Magistrates Court proceedings was not preserved by section 94 of the RSL Act
The Tribunal discussed, in its Reasons, the Magistrates Court proceedings initiated by Mr Klooster on 4 June 2010 for breach of lease against Sticky Fingers, and breach of guarantee against the directors of Sticky Fingers.[30] The substantial part of that claim related to the ‘de-fit’ of the premises.
[30] Sticky Fingers (QLD) Pty Ltd v Klooster [2010] QCAT 611, [69]-[77].
The Tribunal expressed its opinion that the jurisdiction of the Magistrates Court was excluded in respect of the claim for the ‘de-fit’ pursuant to s 94(1) of the RSL Act because the claims were already the subject of a Notice of Dispute under the Act and were before the Tribunal, when the Magistrates Court proceedings were filed.[31]
[31] Sticky Fingers (QLD) Pty Ltd v Klooster [2010] QCAT 611, [82].
In its orders, the Tribunal then declared that Sticky Fingers was not liable for the sum of $7,370 for the ‘de-fit’ as well as legal costs of $564 for the Notice to Remedy Breach.
Mr Klooster complains that, effectively, the Tribunal has determined the Magistrates Court proceedings. Sticky Fingers argues that the Tribunal was correct to determine as it did. At the hearing, its representative pointed to its correspondence to the Tribunal dated 25 February 2010, amending its Dispute Notice to include the issue of the claim received by Sticky Fingers for $7,370 for the de-fit and making good of the leased premises.[32] The issue of the legal costs had been included in the original notice of dispute.
[32] Transcript RSL009/10, page 19.
Section 94(1) effectively provides that after lodgement of a Dispute Notice for a retail tenancy dispute, the dispute must not be heard by any court.
The Tribunal could not determine proceedings in the Magistrates Court. It expressed an opinion about the effect of s 94 of the RSL Act in the proceedings before it. Given that some of the issues before it were also the subject of the Magistrates Court proceedings, it was prudent for it to do so in as part of its discussion to reach a conclusion that it was entitled to proceed to make orders about this aspect of the dispute.
It went on to declare that Sticky Fingers was not liable to pay for the de-fit and legal costs relating to the alleged breach of lease. It was careful to limit its declaration to those claims which were actually the subject of the notice of dispute, as amended.[33] It was entitled to make this declaration, because the issues were before it.
[33] Sticky Fingers (QLD) Pty Ltd v Klooster [2010] QCAT 611, [75]-[76].
This aspect of the appeal must fail.
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