Lewkovitz v Dover

[2012] NSWADT 227

Administrative Decisions Tribunal

New South Wales

Medium Neutral Citation:

Lewkovitz v Dover [2012] NSWADT 227

Hearing dates:

27, 28 and 29 August 2012

Decision date:

05 November 2012

Jurisdiction:

Retail Leases Division

Before:

PR Callaghan SC, Deputy President
G Pinter, Non-Judicial Member
M Lonie, Non-Judicial Member

Decision:

1.In proceedings 115138, ORDER that the respondent pay to the applicant $109,967.64, and interest thereon of $8,247.57, totalling $118,215.21.

2.In proceedings 115138, NOTE that the sum of $109,967.64 referred to in paragraph 1 has been calculated to include a credit due by the applicant to the respondent for the sum of $28,445.22 referred to in paragraphs 3 and 4 below.

3.In proceedings 115180, DECLARE that the applicant (in those proceedings) does not owe to the respondent (in those proceedings) the sum of $28,445.42.

4.In proceedings 115180, NOTE that the said sum of $28,445.42 has been accounted for in the sum of $109,967.64 referred to in paragraph 1 above as referred to in paragraph 2 above.

5.In each of proceedings 115138 and 115180, NO ORDER as to costs and NOTE that each party is to pay his own costs thereof.

Catchwords:

Retail tenancy claim - unconscionable conduct claim - arrangements for reductions of rent and outgoings - estoppel - termination of lease - repudiation of lease - accounting - lessor's loss on re-letting - lessees' fit-out - sale of premises - assignment of debts and causes of action - interest - costs

Legislation Cited:

Administrative Decisions Tribunal Act 1997
Civil Procedure Act 2005
Conveyancing Act 1919
Corporations Act 2004(Cth)
Retail Leases Act 1994
Trade Practices Act 1974 (Cth)
Uniform Civil Procedure Rules 2005

Cases Cited:

A & J Verdi Pty Ltd v Uckan (RLD) (No.2) [2011] NSWADTAP 6
Arnold v Maun (1957) 99 CLR 462
A.G. v World Best Holdings Ltd (2005) 63 NSWLR 557;
Armstrong Management Pty Ltd v Saies- Bond & Associates Pty Ltd [2007] NSWADTAP 47
Austotel Pty Ltd v Franklins Self Serve Pty Ltd (1989) 16 NSWLR 582
Campbell's Cash & Carry Ltd v Fostif Pty Ltd (2006) 229 CLR 386
Dykes & Wildie v Heatherway Pty Ltd (RLD) [2007] NSWADTAP 7
Holt v Heatherfield Trust Ltd [1942] 2 K.B.1
Karacominakis v Big Country Development Pty Ltd [2000] NSWCA 313
Kumaragamage v Rallis [2001] NSWSC 466
Monk v Australian and New Zealand Banking Group Ltd (1994) 34 NSWLR 148
National Mutual Property Services (Australia) Pty Ltd v Citibank Savings Ltd (1995) 132 ALR 514
Rickard Constructions Pty Ltd v Rickard Hails Moretti Pty Ltd (2004) 220 ALR 267
Trendtex Trading Corporation v Credit Suisse [1982] A.C. 679
Vimblue Pty Ltd v Toweel [2009] NSWSC 494
Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387

Texts Cited:

Carter on Contract
Young, Croft, Smith, On Equity

Category:

Principal judgment

Parties:

George Lewkovitz (Applicant in 115138 and Respondent in 115180)
Tom Dover (Respondent in 115138 and Applicant in 115180)

Representation:

Counsel
B Oliak for George Lewkovitz
C Stomo for Tom Dover
Norbert Lipton & Co for George Lewkovitz
Klonis & Co for Tom Dover

File Number(s):

115138, 115180

REASONS FOR DECISION

1. Retail Leases Division: P.R. Callaghan S.C. (Deputy President), G. Pinter (Non-Judicial Member, Advisory) and M. Lonie (Non-Judicial Member, Advisory).

1. Contents Paragraph

Background 3

Proceedings 8

Arrangements for Reductions - Evidence 13

Relinquishment of Possession - Evidence 19

Accounting - Evidence 26

Re-letting - Evidence 30

Fittings - Evidence 35

Assignment - Evidence 39

Arrangements for Reductions - Consideration

and Conclusions 46

Relinquishment of Possession - Consideration

and Conclusions 61

Accounting - Consideration and Conclusions 64

Re-letting - Consideration and Conclusions 66

Fittings - Consideration and Conclusions 71

Assignment - Consideration and Conclusions 75

Overall Conclusions and Orders 88

Background

1. The premises 227 Coogee Bay Road, Coogee are located at the corner of Vicar Street and comprise a retail shop ("the shop"). The shop is part of an old low rise building comprising the shop and three other shops along Coogee Bay Road and residential apartments above the shops ("the building"). The building is adjacent to the Coogee Bay Hotel.

1. The shop was the subject of a lease dated 5 July 2005 from the then owner of the building, Tolicar Pty Limited ("the lessor") to Tom Dover ("the respondent" or "Mr Dover"), Huseyin Gazi Manay and Fatma Erel ("the lessees") for a term of five years commencing on 24 August 2005 with an option for a further term of five years thereafter ("the lease"). The lease was the subject of a Variation of Lease dated 20 January 2006 decreasing the monthly rent from $12,784.53 to $12,407.09 and increasing the lessees' liability of outgoings from 28% of 71% to 36.55% of 71%.

1. Immediately prior to the lease, the shop had been operated as a newsagency but had been stripped out before the lessees took it over. The lessees changed the shop into, as specified in the lease as the permitted use, "an eat-in and take away Turkish restaurant". The name "Dervish Turkish Restaurant" was used in relation to the shop. A few years or so into the lease, at an actual time which is not clear in the evidence, apparently with the agreement of the lessor, the shop was changed into what seems to have been an Italian presentation using the name "Portofino Café Restaurant". On 22 September 2009, the lessees left the shop and the lessor re-entered into possession of it.

1. In about November 2009 the lessor sold the building to interests associated with the Coogee Bay Hotel and that sale was settled on 10 May 2010. The shop was leased to Cordeaux Creek Pty Ltd on a short term basis from 19 November 2009, with a rent free period until 24 December 2009, and was operated as a Berkelow book shop. By a Deed dated 20 June 2011 in consideration of the payment of $1.00 by George Lewkovitz ("the Assignee", "the applicant" or "Dr Lewkovitz") to the lessor, the lessor ("the Assignor") assigned to the applicant all its right, title and interest in debts and causes of action including "all moneys jointly and severally owed to the Assignor by Tom Dover, Huseyin-Gazi Manay and Fatma Erel ('Debtors') for rent, outgoings and damages pursuant to a lease entered between the Debtors and the Assignor dated 5 July 2005." Tolicar Pty Ltd was de-registered on 16 February 2012.

1. At all relevant times from October 2003 Steven Krulis Real Estate Agency of Bondi Junction ("the agents") managed the shop and the rest of building on behalf of the lessor. Also, at all relevant times the respondent was, on the evidence in these proceedings, the only one of the three lessees involved in operating the shop.

Proceedings

1. In the Application in proceedings 115138 the applicant seeks orders:

(a) that the respondent pay the applicant an amount of $168,232.12 for outstanding rent, outgoings, liquidated damages, costs and interest (exclusive of GST) with interest accruing at a daily rate of $36.78 from 1 October 2011 until payment;

(b) that the respondent pay the applicant's costs of this application.

1. Included in the matters pleaded in the Application in proceedings 115138 are:

• The assignment by the lessor to the applicant under the Deed of Assignment of 20 June 2011, of the debts and causes of action previously owed to and held by the lessor under the Lease. The respondent disputes this in the Amended Reply.

• The joint and several liability of the lessees under the Lease. The respondent admits this.

• The liability of the lessors under the Lease to pay monthly rent of $12,407.09 during the first year, increasing annually thereafter to $13,847.64 in the fifth year, and 36.55% of 71% of the lessor's outgoings in relation to the shop. This is admitted by the respondent although the respondent puts in issue details of rent and outgoings presented in a schedule to the Application. The Amended Reply also pleads that the applicant is estopped from claiming the amounts in the schedule and that "the respondent and lessor agreed to reduction of the rent for the period of March-June 2007 pursuant to agreement and the applicant (if he is entitled to make the claim which is denied) has not claimed in accordance with the agreement".

• The vacation by the lessees of the premises on 22 September 2009, which the respondent admits. The applicant contends that the vacation constituted an abandonment by the lessees of the shop. The respondent disputes that, asserting that the lessor had terminated the lease by Notice of Termination of Lease dated 23 July 2009, that there is an estoppel against the applicant from making its claims, that the date for vacation of the shop was by mutual agreement, and that the Notice of Termination of Lease was a repudiation of the lease by the lessor which was accepted by the respondent on 22 September 2009 following a failure to negotiate a new agreement.

• The provision in the lease whereby interest accrued on all outstanding moneys at the rate of 10% per annum (clause 17). The respondent admits this.

• Liability of the lessees at 22 September 2009 for $75,132.57 and for interest of $7,055.46, with a balance owing by the lessees of $36,778.90 for rent and outgoings, with a daily rate of $10.08 accruing interest. All that is disputed by the respondent.

• The receipt by the lessor on or about 6 October 2009 of $38,353.67 consequent upon the lessor calling on the Bank Guarantee submitted by the lessees under the lease. This is admitted by the respondent.

• Acceptance of the lessees' repudiation of the lease by a letter from the agents on 25 September 2009. The respondent disputes that apart from the fact that the letter was sent.

• The provision in the lease whereby if the lessor terminates the lease, it may claim from the lessees by way of liquidated damages the reasonable costs of re-letting, together with the difference between the aggregate of the rent and outgoings that would have been payable by the lessees for the unexpired resident of the term, less any monies received from reletting the premised (clause 19). The respondent admits this.

• Sale by the lessor of the shop on 10 May 2010. The respondent admits this. The respondent also says that the lessor failed to re-lease the shop at market rent.

• Liability of the lessees for liquidated damages for the period from 23 September 2009 to 10 May 2010 in an amount of $97,442.46 together with interest of $14,918.04 (all exclusive of GST), with interest accruing at a daily rate of $26.70. All that is disputed by the respondent. The respondent also asserts that the lessor agreed to a reduction for rent for the period March-June 2007 and that the claims by applicant are not in accordance with that agreement.

• The provision in the lease to the effect that the lessees are obliged to pay the lessor's cost incurred by reason of any breach by the lessees (clause 9), and claims by the applicant for $4,752.00 for costs paid by the lessor to its solicitors pursuant to a tax invoice dated 5 April 2011 and for "the costs the applicant will be obliged to pay to his solicitors, when known." The respondent admits the provision but disputes the claims.

1. In the Amended Application in proceedings 115180 the following orders are sought:

(a) a declaration that the lessees do not owe the sum of $28,445.22;

(b) that Dr Lewkovitz pay to Mr Dover the cost of fixtures as at 22 September 2009;

(c) that Dr Lewkovitz pay to Mr Dover the cost of the additional resale value obtained when the leased premises were sold; and

(d) costs.

1. Included in the matters pleaded in that Application are assertions that:

• On or about 4 December 2006 the lessor (through the agents), agreed to reduce the lessees' year end outgoings adjustment by 75%. The Reply asserts that by letter dated 1 December 2006 from the agents lessor offered to reduce the lessees' year end outgoings adjustment of $8,916.66 by 75%, the reduced amount being $2,229.17, upon conditions that all outstanding outgoings were paid in full by 1 March 2007 and that the lessees paid the monthly rent amounts on time; and that if the lessees fail to comply with those conditions whereby the lessor was not bound by the offer that was made. (It might be noted at this stage, as mentioned above, the Amended Reply to the Application in proceedings 115138 pleads an agreement for reduction of rent for the period March - June 2007 and also that, as I will explain below, the evidence suggests that an arrangement was made on or about 26 April 2007 whereby the lessor, through the agents, agreed to reduce the rent and outgoings for the period April-August 2007 by 25%).

• The lessor engaged in unconscionable conduct in making that agreement "when the lessor had no intention of honouring such an agreement and in doing so was in breach of section 62B of the Retail Leases Act 1994"; and that the lessor claimed the amount of $28,445.22 "after the relationship between the lessor and the applicant had broken down and the issues between the parties were due to be mediated". Those allegations are denied by the Reply.

• Further or in the alternative, the lessors were estopped from claiming the amount of $28,445.22 with particulars that the lessor did not claim that money until 18 August 2009 and that Mr Dover acted in the belief which was known to Dr Lewkovitz, that the lessor would not be requesting that money and that upon that basis Mr Dover remained in occupation of the shop. The Reply denies this.

• At the time the lessor sold the property on or about 10 May 2010, the building was worth more than what it was prior to the lease being entered due to the renovations of the shop carried out at the expense of the lessees and the lessor obtained a benefit from the renovations. The Reply asserts that such expenditure was for the benefit of the lessees' business and did not benefit the lessor and that the lessor allowed the lessees a rent-free period from the date of commencement of the lease being the date of grant of development consent by the local Council (24 August 2005) until 31 October 2005.

• The lessor refused to allow Mr Dover entry into the shop to remove the fixtures that he had installed. The Reply denies that and says that the lessees at no time sought access to the premises; and that the fixtures comprised tiling, a shop front, a grease pit and an exhaust hood that the lessees could not have removed and maintained in a condition that would have enabled them to receive any moneys for the sale thereof once removed, or to receive any moneys in excess of the costs of removing the fixtures.

1. The respective positions of the parties were developed to some extent, but substantially confirmed, in Statements of Fact and Contentions. I think that it is not necessary to recount that material and that it suffices to present the issues between the parties arising from their respective positions in the form of an overall summary. Thus, the principal issues which emerge in both proceedings might appropriately be dealt with by considering each of the following seven matters:

(a) The alleged agreement said by Mr Dover to have been made on or about 4 December 2006 for reduction of the lessees' outgoings adjustment by 75%, the alleged agreement for reduction of rent for the period March-June 2007 and an arrangement suggested in the evidence to have been made on or about 26 April 2007 for a reduction of the rent and outgoings for the period May to August 2007 by 25% ("Arrangements for Reductions");

(b) The circumstances in which the lessees relinquished possession of the shop on 22 September 2009 ("Relinquishment of Possession");

(c) The overall accounting between the lessor and lessees in respect of rent and outgoings payable under the lease up to and including 22 September 2009 ("Accounting");

(d) The applicant's claim for damages in respect of the re-letting of the shop ("Re-letting").

(e) Mr Dover's claims in respect of renovation and fixtures ("Fittings");

(f) The operation of the Deed of Assignment of 20 June 2011 between the lessor as assignor and Dr Lewkovitz as assignee of the debts and causes of an action previously owed to and held by the lessor under the lease ("Assignment").

(g) Costs in both proceedings ("Costs").

In respect of each of those issues, apart from Costs, there is warranted some initial detailing of the basic evidence relating to it.

Arrangements for Reductions - Evidence

1. On 4 December 2006 the agents, through their then property manager Ms Amy Edwards, wrote to the respondent's Solicitors concerning the "reconciliation of outgoings" for the financial year ended 30 June 2005 in respect of the shop:

"We refer to your correspondence dated 8 November in respect of the above.

We are well aware and confirm that the outgoings have increased excessively due to the State Government heavily increasing Land Tax across NSW.

227-233 Coogee Bay Rd incurred a 43% Increase (approx.) which we were unable to forecast in our budget.

Due to this fact the Lessor's and Lessee's operating expenses costs have increased considerably, impacting on their businesses.

However, as a gesture of goodwill the landlord is willing to absorb the majority of this increase by reducing the Lessee's year end outgoings adjustment of $8,916.66 by 75%, the reduced amount being $2,229.17.

This is subject to all the outstanding outgoings being paid in full by 1 March 2007. Secondly as a condition of this offer the Lessees must continue to pay their normal monthly rent of net rent and outgoings on time as per the conditions of the lease agreement.

We trust that this relief will assist you in your business and await payment in order to bring your account up to date."

1. That situation was supplemented by a letter dated 19 February 2007 from the agents, through Ms Edwards, to the respondent:

"Further to previous discussions and our letter dated the 4th December 2006, we confirm we have not yet received payment of the year end outgoings for the above mentioned premises.

We confirm the Lessor as a gesture of goodwill is willing to absorb the majority of this increase by reducing the Lessee's year and outgoings adjustment of $8,916.66 by 75%, the reduced amount being $2,229.17. This is the subject to all the outstanding outgoings being paid in full by 1st March 2007.

In previous discussions we agreed that your outgoings would be paid to date prior to Steven Krullis Real Estate seeking further reductions from the Lessor.

We await final payment as agreed."

1. Further supplementation of the situation occurred by way of discussions between Ms Edwards and Mr Dover prior to and on 26 April 2007. During those discussions Ms Edwards, on behalf of the agents, wrote to Mr Dover on 24 April 2007:

"We confirm our recent discussions regarding rental abatement for the above premises.

This lessor has agreed to a rental abatement of 25% reduction from 1st April 2007 for a period of five (5) months. This rental abatement is offered at the complete discretion of the lessor and the full rental can be reinstated at any time.

It is also offered on the condition that all current arrears are paid prior to the rent abatement."

Ms Edwards also prepared a spreadsheet which she gave to Mr Dover on 26 April 2007 with an attached "with compliments" note. The spreadsheet included figures indicating:

• Arrears due by the lessees under the lease as at 26 April 2007 of $16,614.73 (including GST).

• Payments to be made by the lessees of $4,153.68 (including GST) each for the months of May, June, July and August 2007 in respect of those arrears.

• Payments due for each of the months of April, May, June, July and August 2007 in the sum of $17,045.78 for rent and outgoings plus GST, totalling $85,228.88.

• A 25% reduction in respect of those monthly payments for rent and outgoings by way of a $4,261.44 credit per month with a total credit for the five months of $21,307.22.

The schedule concluded with a note:

"Note the credit of $21,307.22 will be credited to your account once we have received these payments according to the terms of our discussions."

1. In an affidavit, Mr Dover refers to much of the above material and says:

"On 4 December 2006 an agreement was reached for the reduction of the payment of outgoings for the financial year 1 July 2005 to 30 June 2006. ...Relying on the above agreement payment was made in accordance with the agreement.

Because of difficulty trading, payment for the outgoings fell in arrears and on 19 February 2007 (the agents) required all outstanding outgoings to be paid by 1 March 2007 ... The amount was paid in accordance with the terms of the letter (of 19 February 2007). A further reduction in the rent was agreed for the period of May through to August 2007. The reduction was for a further reduction in the amount of 25%. ...Relying on that arrangement further payments were made in accordance with the arrangement as in the note of 26 April 2007."

1. The Accounts Administrator currently employed by the agents, Ms Glenys Faulkner, however, says in an affidavit:

"From my examination of the (agents') records, I am able to say that the outgoings which were outstanding as at 4 December 2006, were not paid in full by 1 March 2007. Further, the lessees remained in arrears in respect of outgoings during the period from 4 December 2006 to 24 May 2007 and thereafter they were in arrears in respect of both rent and outgoings during the balance of the term of the Lease.

The ledger records that as at 4 December 2006, the outstanding outgoings were $20,447.84 plus GST and that as at 1 March 2007, the amount outstanding in respect of those outgoings was $17,226.85 plus GST. Accordingly, the tenant had not paid all outstanding outgoings in full by 1 March 2007, as required in the letter dated 4 December 2006 if the reduction of the adjusted outgoings was to take place.

The ledger further records that as from 1 March 2007 until 22 September 2009, the lessees at all times owed amounts in respect of outgoings. As at 24 April 2007, the only arrears owed by the lessee was in respect of outgoings. However, as at 23 May 2007, the lessee fell into arrears in respect of rent. Thereafter, until the lessee vacated the property, the lessee was always in arrears in respect of both rental and outgoings. In particular by 31 August 2007, the lessee had not made payment of the arrears due at 1 April 2007."

1. Within the accounting records which they maintained in respect of the lease, the agents, in 2007, gave credit to the lessees in accordance with these arrangements but on 26 August 2009, they debited to the lessees $19,370.20 for "25% rent reduction" and $1,973.02 for GST in respect of that item (totalling $21,307.22) and $6,489.09 for "O/GS reduction 05/06" and $648.91 for GST in respect of that item (totalling $7,138.00). Those four items totalled $28,445.22 which is the same as the sum referred to in the first order sought in proceedings 115180. According to particulars in the Amended Application in proceedings 115180 the agents had included that sum in an invoice to the lessees on 18 August 2009. That sum was also included in an invoice to the lessees on 10 September 2009.

Relinquishment of Possession - Evidence

1. There was served on Mr Dover a Notice of Termination of Lease addressed to the lessees dated 23 July 2009, signed by Mr Peter O'Donnell, a director of the agents, on behalf of the lessor:

"WHEREAS

Clause 38 of the Lease obligates you to pay outgoings to Tolicar Pty Limited.

Clause 7(b)(i) of the Lease provides that, if the rent or any other moneys payable under the Lease shall be unpaid for a period of fourteen days after any of the days on which same ought to have been paid, Tolicar Pty Limited shall be entitled to terminate the Lease.

Outgoings in respect of the Lease ought to have been paid on 24 September 2008 and on the 24th of each succeeding month up to and including 24 June 2009 and remain unpaid.

NOW Tolicar Pty Limited hereby gives you notice of termination of the Lease effective forthwith and requires you to vacate the premises forthwith."

1. Mr Dover's solicitors responded to the Notice of 23 July 2009 by a letter to the agents dated 24 July 2009 which said:

"We respectfully submit that notwithstanding clause 7 of the Lease, the Notice is invalid on the basis that at no time has the Lessor or their agents served notice on the Lessee specifying the particular breach and requiring the Lessee to remedy the breach and specifying in clear terms the amount claimed in relation to the breach.

Further the terms of the Lease does not expressly negative Section 129 of the Conveyancing Act 1919."

The letter set out the provisions of s129(1) and (2) of the Conveyancing Act and concluded:

"We place you on notice that if any steps are taken by the Lessor to re-enter the leased premise without proper and reasonable notice to the Lessee we are instructed to immediately apply to the Supreme Court for the appropriate relief and also claim any damages which the Lessee may suffer from the Lessor's forfeiture of the Lease and all the Lessee's rights pursuant to the Lease and at law are expressly reserved."

1. Mr Dover says in his affidavit:

"Following the receipt of the Notice of Termination Of Lease negotiations were entered into between myself and the landlord to try to resolve our differences but as these did not come to any concluded agreement, I left the premises on 22 September 2009.

On 22 September 2009 the landlord took possession of the premises."

1. Mr Danny Sankey, the applicant's solicitor, says in an affidavit:

"Between 27 July 2009 and 21 August 2009 certain 'Without Prejudice' communications passed between the parties.

On 21 August 2009, the lessor's agent served on the lessees a Notice of Breach of Covenant..."

That Notice of Breach of Covenant stated:

"TOLICAR PTY LIMITED ("the Lessor") refers to the above Lease and in particular to the following:

Schedule One to the Lease contains a covenant by you to pay rent to the Lessor.

Clause 38 of the Lease contains an agreement by you to pay outgoings (as therein defined) to the Lessor.

Clause 17 of the Lease contains an agreement by you to pay to the Lessor interest on unpaid moneys as provided in such Clause.

The Lessor notes that you have breached the above covenant and each of the above agreements in that you have failed to pay to the Lessor the undermentioned moneys:-

Outgoings from 24.10.08 to 18.8.09 $26,065.24

Rent from 8.7.09 to 18.8.09 $18,937.10

Interest on Late Payments 24.10.08 to 23.7.09 $ 1,051.64

Outgoings for period 2005-2006 (previously

credited in your favour but reversed due to your

failure to adhere to the relevant agreement with

the Lessor) $ 6,489.09

Rent for period 24.4.07 to 23.9.07 (previously

credited in your favour but reversed due to your

failure to adhere to the relevant agreement with

the Lessor) $19,370.20

$71,913.27

GST $ 7,191.33

$79,104.60

The Lessor hereby gives you notice and requires you to remedy the said breaches within twenty-one days of the date hereof which the Lessor considers to be a reasonable time."

1. On 10 September 2009 the agents forwarded to Mr Dover a tax invoice/statement itemising an amount of $74,304.27 claimed as a balance due under the lease.

1. Mr O'Donnell says in an affidavit that on 22 September 2009, having been told something by an employee of the agents, he telephoned Mr Dover and had a conversation with him to the following effect:

"I: 'I've been told your premises are closed and have been stripped out.'

Mr Dover: 'That's right. We've left.'

I: 'You'll need to return the keys if you've vacated.'

Mr Dover: 'I'll bring them in today.'"

He says that the keys to the shop were returned later that day.

1. On behalf of the agents, Mr O'Donnell wrote to Mr Dover's solicitors on 25 September 2009:

"We refer to our brief conversation with both yourself and Tom Dover on the 22nd September and confirm that the keys for the abovementioned premises were returned to our office on that date. The Lessees' conduct in abandoning the premises is a repudiation of the Lease and the Lessor accepts such repudiation and terminates the Lease forthwith.

The Lessor holds your clients liable for all damages sustained by it as a result of your clients' breach of the Lease. When the Lessor is in a position to quantify such damages the Lessor will make a claim against your clients.

As at 22nd September 2009, your clients are indebted to the Lessor in the sum of $81,558.79 and the Lessor seeks payment of such sum.

We have inspected the abandoned premises and see that only part of the Lessees' Fitout has been removed and a substantial part has been left behind.

If you have any queries in regard to this please do not hesitate to contact myself."

Mr Dover's solicitors responded by letter dated 1 October 2009:

"Thank you for your letter dated 25 September 2009.

We are instructed that the Lessee refutes your clients claim that the Lessee is indebted to your client in the amount of $81,558.79 and any claim for damages will be defended.

We are also instructed that the Lessee does not agree that a 'substantial part' of the Lessees fittings have been left behind. Kindly advise whether you wish the Lessee to remove the rest of the fittings.

We look forward to hearing from you."

Accounting - Evidence

1. Ms Glenys Faulkner, the agents' Accounts Administrator, gave evidence, in affidavits and orally, on behalf of the applicant in relation to the quantum of the applicant's claim and the respondent called Mr Steven Vlahos, a chartered accountant, to give evidence on that issue, by a report verified by affidavit and orally. Ms Faulkner worked from the agents' accounting records, including a ledger, in respect of the lease and Mr Vlahos worked from the lease document and shop's bank and cheque records. There is common ground in that evidence that credit should be given to the Respondent for the amount of the lessee's bank guarantee given under the lease, which was in the sum of $42,188.94. Subject to that there is significant divergence in that evidence.

1. Ms Finlayson's ultimate position in part was that as at 23 September 2009, $73,415.12 was outstanding for rent and outgoings and that after offsetting $42,188.94 received from the called in bank guarantee, the balance outstanding was $31,226.12 (if my subtraction be correct, that figure should be $31,226.18). Mr Vlahos' report contended for a figure of $16,776.47 for outstanding rent and outgoings at 22 September 2009.

1. An important area of difference between Mr Vlahos and Ms Faulkner related to a number of payments which the respondent told Mr Vlahos were made to the agents and which Ms Finlayson said were not received by the agents:

2 December 2005 $1,680.00

6 January 2006 1,680.00

1 February 2006 1,680.00

6 March 2006 1,680.00

4 April 2006 1,680.00

3 March 2009 15,000.00

$23,400.00

1. It is convenient to note at this point the provisions of clause 17 of the lease dealing with interest:

"Without prejudice to the rights powers and remedies of the Lessor hereunder the Lessee will pay to the Lessor interest at the rate of ten percent (10%) per annum on any monies due but unpaid for fourteen (14) days by the Lessee to the Lessor such interest to be computed from the due date for the payment of the monies in respect of which interest is chargeable until payment of such monies in full and to be recoverable in like manner as rent in arrears. The payment and acceptance of such interest shall not be construed as a waiver or acceptance or release of the breach involved in non-payment of the monies on the due date."

Re-letting - Evidence

1. Clause 19 of the lease provides in part:

"Should the Lessor terminate this Lease following any such fundamental breach or otherwise then without prejudice to any other right or remedy of the Lessor herein contained or implied IT IS EXPRESSLY AGREED AND DECLARED that the Lessor shall be entitled to recover from the Lessee (or the Guarantor as the case may be) as and by way of liquidated damages for such breach the Lessor's reasonable costs of re-letting together with the difference between the aggregate of the annual rent, the Lessee's proportion of the outgoings of the building or increases in outgoings of the building, the cleaning charge, and other monies which would have been payable by the Lessee for the unexpired residue of the term but for such determination, calculated from the date of such determination to the due date of termination of this Lease LESS the aggregate of the several rentals outgoings and other monies which the Lessor by taking proper steps to re-let the premises shall obtain or could reasonably be expected to obtain by re-letting the premises for the unexpired residue of the term (if any) PROVIDED THAT in so doing the Lessor shall not be required or be obliged to offer or accept in respect of such re-letting terms covenants conditions or stipulations which are the same or similar to the terms covenants conditions or stipulations herein contained or implied."

1. After vacation of the shop the agents endeavoured to re-let it. They placed a sign board in the shop and engaged in a campaign described by them in a report to the applicant:

"The property was marketed over a four week campaign through three internet sites, newspaper ads and direct mail asking for expressions of interest by 22 October 2009. Major franchises and businesses were also contacted directly offering the property for lease."

Dr Lewkovitz says in an affidavit that he did not instruct Mr O'Donnell to restrict any offers to lease to short term leases or in any other way.

1. Four offers were made to lease the shop on long term bases with annual rents ranging from $140,000 gross per annum plus GST to $160,000 gross per annum plus GST. All those offers included significant rent-free periods, two of six months and others of three months and four months respectively with the latter periods commencing following six weeks notice of the completion of specified upgrading of the shop by the Lessor. As mentioned above, the shop was leased to Cordeaux Creek Pty Ltd on a short term basis from 19 November 2009 with a rent-free period until 24 December 2009 and was operated as a Berkelow book shop until (and after) the sale of the building which was settled on 10 May 2010. The monthly rent under that lease was $8,666.70 plus GST.

1. Evidence by way of report and orally was given by Mr Theodore Stamoulis, a registered valuer, on behalf of Mr Dover. His basic opinion was to the effect that the rent payable under the lease of the shop to the lessees was the market rent.

1. The applicant's claim for damages in respect of the re-letting as specified in a Schedule to the Amended Application in proceedings 115138 appears to be made up as follows:

Rental ($3,642.12) outgoings ($694.32) balance

30 September 2009 plus rental ($13,847.64 per

month) outgoings ($2,639.88 per month)

1 October 2009 to 10 May 2010 125,169.64

Plus liquidated damages for electrical

and advertising 554.55

Plus interest 11 May 2010 to 30 September

2011 13,561.85

Plus 10% GST 13,928.60

$153,214.64

Less rent received (plus GST) 31,109.90

$122,104.74

Fittings - Evidence

1. On 22 September 2009, Mr Dover left behind in the shop parts of the fitout that the lessees had installed there, such as wall and floor tiles, a grease trap, and three phase electrical panel, and a fireproof ceiling with in-built light fittings ("the fittings"). Photos of the shop and its then stripped condition taken by the agents are in evidence.

1. Included in the correspondence from the agents to Mr Dover's solicitors of 25 September 2009 and the reply thereto of 1 October 2009 (set out above in the Relinquishment of Possession - Evidence section of this Decision) was an exchange in relation to the fitout. The agents said in their letter:

"We have inspected the abandoned premises and see that only part of the Lessees' Fitout has been removed and a substantial part has been left behind."

Mr Dover's solicitors' response was:

"We are also instructed that the Lessee does not agree that a 'substantial part' of the Lessees' fittings have been left behind. Kindly advise whether you wish the Lessee to remove the rest of the fittings."

The agents responded on 8 October 2009:

"We refer to your letter dated 1st October 2009 and advise that as the Lessee has abandoned the premises the Lessor will not allow the Lessee access to the premises to cause further damage. As previously advised the Lessor will make a claim for damages against your clients once it is in a position to quantify such damages.

Please advise whether you have instructions to accept service of process."

1. Mr O'Donnell says in an affidavit that Cordeaux Creek Pty Ltd removed some of the fittings after taking the shop over.

1. Mr Dover's solicitors gave to Mr Vlahos, chartered accountant, a letter to them of 16 April 2012 from "Otto Does Interiors":

"Our estimated cost of materials at the time we were engaged to design the interior renovations in 2005 are as follows:

A.   The kitchen area $56,000.00

B.   The floor tiles $120/sqm

C.   The grease trap $10,000.00

D.   The installation of the three phase power $ 4,500.00

E.   The installation of fire proof ceilings $ 9,000.00

F.   The installation of the new shop front $18,000.00"

Mr Vlahos applied to those figures a depreciation rate of 2.5% per annum over the 8 years from 2005 to 2012 to calculate current written down values of those items, which he referred to in his affidavit as "the current market value":

Kitchen $45,150.00

Floor tiles 10,923.08

Grease trap 8,062.50

3 phase power 3,628.13

Fire-proof ceiling 7,200.00

Shop front 14,400.00

$89,363.71

Assignment - Evidence

1. The relevant provisions of the Deed of Assignment of 20 June 2011 are set out above in the Background section of this Decision. As is noted in that section, there was a sale of the building by Tolicar Pty Limited, the lessor, which was settled on 10 May 2010, and Tolicar Pty Limited was de-registered on 16 February 2012.

1. The shareholders in Tolicar Pty Limited at all relevant times were Solrose Investments Pty Ltd, Lewkovitz Nominees Pty Ltd and Mr David Stern. Solrose Investments Pty Ltd held, beneficially, 2 ordinary shares, Lewkovitz Nominees Pty Ltd held, not beneficially, one R1 preference share, Lewkovitz Nominees Pty Ltd held, not beneficially, one R2 preference share and David Stern held, beneficially, three R3 preference shares. The directors of Tolicar Pty Ltd were Dr Lewkovitz, his wife, and his sister, Ms Caroline Lieberman.

1. There are two ordinary shares issued in Lewkovitz Nominees Pty Ltd, one which is held beneficially, by each of Mr Norbert Lipton and Mr David Stern. Messrs Lipton and Stern are the directors.

1. Lewkovitz Nominees Pty Ltd is the trustee of the Solomon Lewkovitz Testamentary Trust ("the Trust"). The late Solomon Lewkovitz, who was the father of the applicant, died on 4 January 1999 and by his Will dated 23 February 1996, after some specific devises and bequests, he gave the balance of his estate to the Trust. Under the Trust the Principal Beneficiaries are the applicant and his sister and the Beneficiaries include the Principal Beneficiaries and a wide range of their relatives, and subject to any earlier discretionary applications by the Trustee for the benefit of Beneficiaries of parts of the income or capital, the income and capital of the Trust are to be held at the ultimate Vesting Day for the Principal Beneficiaries or the survivor of them or the children of the deceased Principal Beneficiaries.

1. The shareholding in Solrose Pty Ltd is held:

10 R1 preference shares, beneficially by Barak Pty Ltd

10 R2 preference shares, beneficially by Barak Pty Ltd

10 R3 preference shares, beneficially by Barak Pty Ltd

10 R4 preference shares, beneficially by Barak Pty Ltd

1 R1 preference share, beneficially by Lewkovitz Nominees Pty Ltd

1 R2 preference share, beneficially by Lewkovitz Nominees Pty Ltd

2000 unclassified shares, beneficially by Lewkovitz Nominees Pty Ltd

The directors of Solrose Pty Ltd are Dr Lewkovitz, his wife and his sister.

1. Barak Pty Ltd was deregistered on 16 February 2012. The issued shares in Barak Pty Ltd were 12 A Group 1 shares and 8 Group 2 shares, held beneficially by Lewkovitz Nominees Pty Ltd. The directors of Barak Pty Ltd were Dr Lewkovitz, his wife and his sister.

1. There is affidavit evidence from Dr Lewkovitz as follows:

"...the shareholders in Solrose Investments Pty Ltd were Barak Pty Ltd and Lewkovitz Nominees Pty Ltd... the shareholder of Barak Pty Ltd was Lewkovitz Nominees Pty Ltd. Lewkovitz Nominees remained a shareholder of Barak Pty Ltd as at 22 June 2011 and until the company was deregistered on 16 February 2012. ... the ultimate holding company of Tolicar Pty Ltd was Lewkovitz Nominees Pty Ltd. ... Lewkovitz Nominees Pty Ltd was at all times the trustee of the Solomon Lewkovitz Testamentary Trust ('Trust') in respect of which my sister Caroline Libermann and I were the sole Principal Beneficiaries as at 22 June 2011. ...Since the establishment of the Trust, the net income earned by Tolicar Pty Ltd has been distributed to Solrose Investments Pty Ltd which distributed its income to my sister and me as the Principal Beneficiaries. ...It is my intention to disburse any moneys found to be payable by the respondent, less any costs not recovered from the respondent, to my sister and me in equal amounts."

There were tendered with that affidavit documents including:

• A memorandum of resolutions of members of Tolicar Pty Ltd, and a dividend statement of Tolicar Pty Ltd, in respect of a dividend declared and paid on 30 June 2011 by Tolicar Pty Ltd to Solrose Investments Pty Ltd totalling $4,611,373.00 in respect of 2 ordinary fully paid shares.
• A memorandum of resolutions of members of Solrose Investments Pty Ltd, and a dividend statement of Solrose Investment Pty Ltd, in respect of a dividend declared and paid on 30 June 2011 by Solrose Investments Pty Ltd to Lewkovitz Nominees Pty Ltd totalling $7,021,373.00 in respect of 2,000 unclassified fully paid shares.
• Minutes of a meeting of the Solomon Lewkovitz Testamentary Trust on 30 June 2011 resolving that all the income of the trust for the year ended 30 June 2011 be appropriated, set aside and applied to the beneficiaries Dr Lewkovitz and his sister in the proportions of 50% each.

Arrangements for Reduction - Consideration and Conclusions

1. I am satisfied on the balance of probabilities that arrangements for the reduction of the lessee's liability for rent and outgoings were made in late 2006 and 2007 between the lessor, through the agents, and Mr Dover on behalf of the lessees. More particularly, those arrangements were:

(a) made partly orally and partly in writing in December 2006 and February 2007 for the reduction of a then outstanding 2006 outgoings adjustment from $8,916.66 to $2,229.17, subject to payment of the latter sum being made by 1 March 2007 and subject to the payment of the lessees' normal rent and outgoings on time; the arrangement arose out of discussions between Ms Edwards, of the agents, and Mr Dover, between December 2006 and February 2007 and the letters from the agents to Mr Dover of 4 December 2006 and 19 February 2007, which are set out above in the Arrangements for Reduction - Evidence section of this Decision ("the first arrangement"); and

(b) made partly orally and partly in writing in February 2007 for the reduction by 25% of the rent and outgoings for the period March-June 2007; the arrangement arose out of discussions between Ms Edwards and Mr Dover in or about February 2007 and the letter from the agents to Mr Dover of 24 April 2007 which is set out above in the Arrangements for Reduction - Evidence section of this Decision ("the second arrangement").

1. It is difficult to discern from the print out from the agents' ledger in respect of the lease precisely how, and in what amounts, credit was given to the lessees in respect of the arranged reductions. Examples, however, appear to be entries on 24 August 2007 by way of credits to the lessees, not noted as arising from any payment, of $12,881.72 for rent and $1,288.17 for GST, totalling $14,169.89 and entries on 29 August 2007 by way of credits to the lessees of $6,489.09 for outgoings and $648.91 for GST, totalling $7,138.00. Nevertheless, there was no significant issue raised during the hearing about the giving of such credit and the parties appear to accept that such credit was given.

1. As noted above in the Arrangements of Reduction - Evidence section of this Decision, the agents, on 26 August 2009, debited to the lessees $19,370.20 for "25% rent reduction" and $1,973.02 for GST in respect of that item (totalling $21,307.22) and $6,489.09 for "O/GS reduction for 05/06" and $648.91 for GST in respect of that item (totalling $7,138.00). That total of $21,307.22 is the same figure set out in the spreadsheet given by Ms Edwards to Mr Dover on 26 April 2007 as the total of the 25% reduction for the months of April, May, June, July and August 2007, in respect of the second arrangement. The $7,138.00 figure does not precisely correspond with the figures referred to in the first arrangement, being $8,916.66 for the original outgoings adjustment and $2,229.17 for the reduced outgoings adjustment, the difference between such figures is $6,687.49; nevertheless it is the same as the $7,138.00 apparently credited to the lessees in respect of GST and outgoings on 29 August 2007. I am satisfied, and it is not in issue, that the debits raised against the lessees on 26 August 2009 totalling $28,445.22 related to the attempted retrieval (referred to in the applicant's closing submissions as a "clawback") of credits previously allowed to the lessees under the first arrangement and the second arrangement ("the August 2009 debits").

1. In my opinion, there was no entitlement in the lessor to impose the August 2009 debits. I have formed that opinion for two reasons: first, the first and second arrangements constituted enforceable agreements under which the lessor had no such entitlement; and secondly, and in any event, any such entitlement should not be permitted, by reason of estoppel and/or application of the Retail Leases Act 1994 ("the RLA").

1. By a Management Agency Agreement dated 22 October 2003 agents were appointed by the lessor as Principal to manage the building for the Principal and in respect of any lease the agents were authorised and directed by the Principal to do various specified things on behalf of the Principal, one of which was to exercise the Principal's rights to vary the lease. I see no issue with the authority of the agents to have negotiated the first and second arrangements on behalf of the lessor and with the exception of consideration, the indicia of binding agreements or contracts constituted by those arrangements are clearly present. The applicant submits that there was no consideration. I am of the view, however, that the lease being a mutually continuing, or executory, relationship, there was a sufficient consideration within each of the first and second arrangements constituted by the negotiation by the parties of that arrangement to accommodate their then respective commercial interests by variation of the terms, or of the application of the terms, of the lease and by the parties' respective commitments to performance of the varied situation brought about by the arrangement (see e.g. Carter on Contract [06-180], [06-270], [06-440], [07-170] and [09-290]). These arrangements were, I am satisfied, conscientiously made by the lessor through the agents and by the lessees through Mr Dover, by mutual effort in the commercial interests of both parties, in an endeavour to keep the shop functioning. Particularly in the event that there were, as I conclude there was, a contract between the lessor and the lessees in respect of each of the first arrangement and the second arrangement, some of the terms of each arrangement need to be considered.

1. In the first arrangement, the contract included a condition in the language of the agents' letters of 4 December 2006 and 19 February 2007, that it was "subject to all the outstanding outgoings being paid in full by 1 March 2007"; there was also a condition stipulated in the letter of 4 December 2006 that "the Lessees must continue to pay their normal rent of set rent and outgoings on time". Set out above at the end of the Arrangements for Reduction - Evidence section of this Decision are somewhat conflicting assertions in the evidence of Ms Finlayson and of Mr Dover, with the latter contending in effect that these conditions were met and the former disputing that they were met. There was considerable cross-examination of Ms Finlayson, particularly as to the amounts and timing of payments made by Mr Dover. Ms Finlayson was assessing the agents' accounting records for a period before she became responsible for the bookkeeping. While I accept that Ms Finlayson was doing her honest best, she was having to cope with a difficult task and I feel that there is substance in closing written submissions on behalf of Mr Dover that:

"The accounts are somewhat difficult because of the nature of their operation. Accounts appear to have an automatic charge which is generated by the computer each month and credited to the account of the relevant party. As payments are made they credited against the charge which the computer generates. The latter sum is entered manually. A running balance is then maintained. However, on what is on the one hand confusing and on the other of assistance is that the credit dates are also recorded.

The confusion is created because charges generated which are paid months later have the credit listed in a subsequent date yet the running balance takes into account the credit at a subsequent date so that particular balances on any given date take into account credits after that date."

1. There are entries in the printout form of the ledger in evidence which suggest to me that Ms Finlayson's assertions as to continuing indebtedness by Mr Dover in 2007, especially in March 2007, may not be completely correct; for example, there was entered on 26 February 2007 a credit to the lessees for $2,229.16 in respect of cheque 359 and that figure appears to relate to the $2,229.17 referred to in the agents' letters to Mr Dover of 4 December 2006 and 19 February 2007. Those letters were, as has been noted, written by Ms Amy Edwards who appears to also have been doing the bookkeeping for the agents at the time. The subsequent crediting to the lessees of the agreed reduction in outgoings is consistent with the conditions for payment of outgoings by 1 March 2007 and otherwise having been met. I am satisfied on the balance of probabilities that the lessees complied or complied at least substantially (as to the principle of substantial performance, see e.g. Carter on Contract [29-280]-[29-310]) with these conditions such that the lessor was not entitled to rely on those conditions to retrieve the credit for outgoings.

1. The letter of 24 April 2007 from the agents to Mr Dover, part of the second arrangement, included these stipulations:

"...This rental statement is offered at the complete discretion of the lessor and the full rental can be reinstated at any time.

It is also offered on the condition that all current arrears are paid prior to the rent abatement."

As to the last-mentioned condition, there is again conflict between the respective evidence from Ms Finlayson and Mr Dover as to payment of the then current arrears. As noted above, there seems to have been the crediting to the lessees of $14,169.89, being a substantial part of the reduction provided for in the second arrangement, on 24 August 2007, which was at the end of the five month period the subject of that reduction. To my mind, that constitutes confirmation that the lessees had complied with or substantially complied with that condition. To adopt the language used in the stipulation of the condition in the letter, the "rent abatement" had been "offered on the condition that all current arrears are paid prior to the rent abatement" and the "rent abatement" was given; so the conclusion should follow that the "condition" had been met and that the agents assessed the position that way at that time. That situation, I feel, carries greater weight than Ms Finlayson's endeavours to cope with the difficult task of retrospectively assessing the position from the agents' accounting records. I am satisfied on the balance of probabilities that the lessees complied, or substantially complied, with the condition of payment of current arrears such that it constituted no justification for the August 2009 debits. The purported reservation in that letter of a discretionary power of reinstatement in the lessor of "full rental" could not, in my view, be reasonably construed as permitting the later withdrawal by the lessor of an already credited reduction as opposed to the withdrawal of a reduction by the lessor yet to be credited. That purported reservation of a discretionary power of reinstatement did not, in my view, permit any part of the August 2009 debits to be made.

1. If contrary to my opinion, there were no contracts in respect of the first arrangement or the second arrangement, the relevance to the arrangements of estoppel and the RLA needs to be considered.

1. In its Amended Reply in proceedings 115038 the respondent pleads that the applicant is estopped from claiming the amount sought by the applicant in those proceedings. The Amended Application in proceedings 115180 includes a claim that the lessor is estopped from claiming the amount of $28,495.22 (which is the sum the subject of the August 2009 debits).

1. The principle of promissory estoppel can conveniently be explained by quoting from [12.230] of Young, Croft, Smith, On Equity:

"Promissory estoppel in its present incarnation can be traced back to Central London Property Trust Ltd v High Trees House Ltd ([1947] 1 KB 130), a case which resulted in a doctrine referred to as 'High Trees' estoppel. In High Trees, a landlord told a tenant that, during the course of the war, his rent would be reduced. The landlord company later went into receivership, and the receiver, noting that reduced rent had been paid for about five years, demanded the arrears. The landlord was found to be estopped from claiming the arrears. Typically, High Trees promissory estoppel was applied when a person who made the promise or representation, contrary to their contractual rights, later tried to insist on contractual performance, and the other party said 'but you assured me that I did not have to' ..."

1. In Austotel Pty Ltd v Franklins Self Serve Pty Ltd (1989) 16 NSWLR 582 at 610 Priestley JA (albeit in dissent, but with the agreement on this point of Kirby P at 585, and with reference to, among other decisions, Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387) said of promissory estoppel:

"For equitable estoppel to operate there must be the creation or encouragement by the defendant in the plaintiff of an assumption that a contract will come into existence or a promise be performed or an interest granted to the plaintiff by the defendant, and reliance on that by the plaintiff in circumstances where departure from the assumption by the defendant would be unconscionable."

1. The August 2009 debits occurred two years after credits had been given to the lessees under the first arrangement and the second arrangement. They also occurred while the parties and/or their advisors were in negotiations as to the future of the shop, as detailed to an extent above in the Relinquishment of Possession - Evidence section of this Decision. Complaint on behalf of Mr Dover is made in the particulars that this was when "the issues between the parties were due to be mediated". The first arrangement and the second arrangement were made at a time when the shop was struggling financially; as Mr Dover said in his affidavit there was "difficulty trading". Obviously, that plight of the shop business continued, if not increased, up to September 2009.

1. While I can see no estoppel arising in respect of the whole of the lessor's claims, in my opinion there was an effective promissory estoppel against the lessor preventing the August 2009 debits. The latter situation would fall squarely within the account of "High Trees estoppel" that is contained in the quotation above from Young, Croft, Smith, On Equity. The concept of unconscionability referred to by Priestley JA in the quotation from his judgment which I have set out above, seems to me to be satisfied in the circumstances that I have outlined; it would, for example, meet the test referred to by Mason CJ and Wilson J in Walton Stores (Interstate) Ltd v Maher (1988) 164 CLR 387 at 404 where (using in part language taken from previous High Court authority) their Honours said:

"One may therefore discern in the cases a common thread which links them together, namely, the principle that equity will come to the relief of a plaintiff who has acted to his detriment on the basis of a basic assumption in relation to which the other party to the transaction has 'played such a part in the adoption of the assumption that it would be unfair or unjust if he were left free to ignore it'. ... Equity comes to the relief of such a plaintiff on the footing that it would be unconscionable conduct on the part of the other party to ignore the assumption."

1. The unconscionability in the imposition of the August 2009 debits is, in my opinion, also of an order which constituted that "unconscionable conduct" under s62B of the RLA. Sub-sections (1) and (3) of that section are as follows:

"(1) A lessor must not, in connection with a retail shop lease, engage in conduct that is, in all the circumstances, unconscionable.

...

(3) Without in any way limiting the matters to which the Tribunal may have regard for the purpose of determining whether a lessor has contravened subsection (1) in connection with a retail shop lease, the Tribunal may have regard to:

(a) the relative strengths of the bargaining positions of the lessor and the lessee, and

(b) whether, as a result of conduct engaged in by the lessor, the lessee was required to comply with conditions that were not reasonably necessary for the protection of the legitimate interests of the lessor, and

(c) whether the lessee was able to understand any documents relating to the lease, and

(d) whether any undue influence or pressure was exerted on, or any unfair tactics were used against the lessee or a person acting on behalf of the lessee by the lessor or a person acting on behalf of the lessor in relation to the lease, and

(e) the amount for which, and the circumstances under which, the lessee could have acquired an identical or equivalent lease from a person other than the lessor, and

(f) the extent to which the lessor's conduct towards the lessee was consistent with the lessor's conduct in similar transactions between the lessor and other like lessees, and

(g) the requirements of any applicable industry code, and

(h) the requirements of any other industry code, if the lessee acted on the reasonable belief that the lessor would comply with that code, and

(i) the extent to which the lessor unreasonably failed to disclose to the lessee:

(i) any intended conduct of the lessor that might affect the interests of the lessee, and

(ii) any risks to the lessee arising from the lessor's intended conduct (being risks that the lessor should have foreseen would not be apparent to the lessee), and

(j) the extent to which the lessor was willing to negotiate the terms and conditions of any lease with the lessee, and

(k) the extent to which the lessor and the lessee acted in good faith.

..."

In forming that opinion, I have borne in mind the counsel of caution given in cases such as A.G. v World Best Holdings Ltd (2005) 63 NSWLR 557 and Armstrong Management Pty Ltd v Saies-Bond & Associates Pty Ltd [2007] NSWADTAP 47. In the former case at [121] Spigelman CJ said:

"The Ministerial second reading speech ... indicates a similar concern to distinguish what is unconscionable from what is merely unfair or unjust. Even if the concept of unconscionability in s62B of the Retail Leases Act is not confined by equitable doctrine, as the decisions under s51AC of the Trade Practices Act (Cth) suggest, restraint in decision-making remains appropriate. Unconscionability is a concept which requires a high level of moral obloquy. If it were to be applied as if it were equivalent to what was 'fair' or 'just', it could transform commercial relationships in a manner which the Minister expressly stated was not the intention of the legislation. The principle of 'unconscionability' would not be a doctrine of occasional application, when the circumstances are highly unethical, it would be transformed into the first and easiest port of call when any dispute about a retail lease arises."

Overall Conclusions and Orders

1. The ultimate result in financial terms that flows from the conclusions that I have covered thus far is that Dr Lewkowitz should recover from Mr Dover $109,967.64 made up as follows:

Balance owing for rent, outgoings etc at 23 September 2009

(paragraph 65 above) $140,467.54

Advertising and electricity charges (paragraph 70) 610.00

$141,077.54

Less rent received (paragraph 70) 31,109.90

$109,967.64

1. In proceedings 115138, Dr Lewkovitz sought interest on the monetary sum claimed. Within the Application there is a particular that "pursuant to the lease accrued on all outstanding monies at a rate of 10% per annum" and the schedules to the Application detailing the monetary claims contain calculations based on 10%. Those references to 10% appear to be to clause 17 of the lease which is set out in paragraph 29 above. There is also a discretionary power in the Tribunal to award interest specified in s72A of the RLA at a rate that "must not exceed the rate at which interest is payable on a judgment debt of the District Court" (s72A(3)); and such interest may be awarded "on the whole or part of the amount ordered to be paid ... for the whole or any part of the period between when the cause of action arose and when the order takes effect" (s72A(1)); and that rate is currently, by virtue of s101 of the Civil Procedure Act 2005 and Uniform Civil Procedure Rule 36.7, 9.5%.

1. While there was no formulation or calculation of the applicant's position on interest in submissions, the issue of interest, having been pleaded, has to be dealt with. In the absence of any developed submissions on the issue, the following to my mind are dominant considerations:

(a) Clause 12 of the lease relates to moneys due under the lease where there is a due date for the payment of the moneys. It is not apparent that there is any such due date in respect of the applicant's monetary claims here.

(b) So far as Dr Lewkovitz could be the claimant for the moneys, rather than the lessor, the "cause of action" may not have arisen until the Deed of Assignment of 20 June 2011.

(c) Proceedings 115138 were not instituted until 11 October 2011 although they were preceded by a mediation in accordance with Part 8 Division 2 of the RLA.

(d) While s72A(3) prescribes the maximum pre-order rate of interest with reference to a post-judgment interest rate now under the Uniform Civil Procedure legislation, pre-judgment interest under that legislation is 2% per annum lower (s100 Civil Procedure Act 2005 and UCPR 6.12(8)) than post-judgment interest. The current rate for post-judgment interest is, as I have said, 9.5%, and the current rate for pre-judgment interest is 7.5%.

(e) In Dykes & Wildie v Heatherway Pty Ltd (RLD) [2007] NSWADTAP 7, an appeal panel said at [7]:

"The primary function of compensation by way of interest, whether deriving from the contract or by way of judgment interest, is to protect the creditor against the erosion in value of the amount owing. Insofar as the rate is set above the inflation rate, it builds in a profit element to the creditor; and acts as a deterrent against slow payment. In ordinary circumstances the creditor should be entitled to interest for the whole period between the time of first default and the time of the order."

(f) Proceedings 115138 were instituted by Dr Lewkovitz to recover money for the benefit of himself and his sister out of the denouement of a situation involving termination of the lease, the re-letting of the shop, the sale by the lessor of the building containing the shop, and the corporate demise of the lessor. The proceedings were essentially a debt collection exercise. Nevertheless, they involved issues which, it should reasonably have been anticipated, could give rise to serious and complex litigation, as has been the case.

1. My conclusions, in the context outlined above, in relation to interest are that:

(a) I am not persuaded that clause 12 of the lease is applicable to interest on the sum of $109,967.64.

(b) Under s72A of the RLA I should exercise my discretion to order that there be included in the amount ordered to be paid by the respondent to the applicant interest at the rate of 7.5% for one year, which I calculate to be $8,247.57. To my mind, that constitutes sufficient protection for Dr Lewkovitz (and his sister) against the erosion in value of the sum due.

Thus the total amount ordered to be paid by the respondent to the applicant will be $118,215.21.

1. The parties, in closing addresses, agreed to have the issue of costs determined in this decision. Neither party, however, placed any developed position or submissions as to costs before the Tribunal. Sub-sections (1) and (1A) of s88 of the Administrative Decisions Tribunal Act 1997 provide as follows:

"(1) Each party to proceedings before the Tribunal is to bear the party's own costs in the proceedings, except as provided by this section.

(1A) Subject to the rules of the Tribunal and any other Act or law, the Tribunal may award costs in relation to proceedings before it, but only if it is satisfied that it is fair to do so having regard to the following:

(a) whether a party has conducted the proceedings in a way that unnecessarily disadvantaged another party to the proceedings by conduct such as:

(i) failing to comply with an order or direction of the Tribunal without reasonable excuse, or

(ii) failing to comply with this Act, the regulations, the rules of the Tribunal or any relevant provision of the enactment under which the Tribunal has jurisdiction in relation to the proceedings, or

(iii) asking for an adjournment as a result of a failure referred to in subparagraph (i) or (ii), or

(iv) causing an adjournment, or

(v) attempting to deceive another party or the Tribunal, or

(vi) vexatiously conducting the proceedings,

(b) whether a party has been responsible for prolonging unreasonably the time taken to complete the proceedings,

(c) the relative strengths of the claims made by each of the parties, including whether a party has made a claim that has no tenable basis in fact or law,

(d) the nature and complexity of the proceedings,

(e) any other matter that the Tribunal considers relevant."

I acknowledge decisions of this Tribunal dealing with a possible disposition in the Retail Leases division of this Tribunal to award costs on account of the commercial nature of the disputes here (e.g. A & J Verdi Pty Ltd v Uckan (RLD) (No.2) [2011] NSWADTAP 6 at [11] and [12]). Nevertheless, as I have said, I see proceedings 115138 as having originated as a debt collection exercise; I do not see them as an application seeking the resolution of a commercial dispute. Having regard to the matters which I have canvassed in paragraph 90 of this Decision, I am not satisfied that it is fair to award costs in favour of Dr Lewkovitz against Mr Dover and my finding is that in both proceedings there should be no order as to costs such that each party should bear his own costs.

1. In the result, the Tribunal makes the following orders and notes the following matters:

1) In proceedings 115138, ORDER that the respondent pay to the applicant $109,967.64, and interest thereon of $8,247.57, totalling $118,215.21.

2) In proceedings 115138, NOTE that the sum of $109,967.64 referred to in paragraph 1 has been calculated to include a credit due by the applicant to the respondent for the sum of $28,445.22 referred to in paragraphs 3 and 4 below.

3) In proceedings 115180, DECLARE that the applicant (in those proceedings) does not owe to the respondent (in those proceedings) the sum of $28,445.42.

4) In proceedings 115180, NOTE that the said sum of $28,445.42 has been accounted for in the sum of $109,967.64 referred to in paragraph 1 above as referred to in paragraph 2 above.

5) In each of proceedings 115138 and 115180, NO ORDER as to costs and NOTE that each party is to pay his own costs thereof.

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Decision last updated: 05 November 2012