Mharina Rossi Pty Ltd v Perpetual Nominees Ltd
[2011] QCAT 585
•22 November 2011
| CITATION: | Mharina Rossi Pty Ltd v Perpetual Nominees Ltd [2011] QCAT 585 |
| PARTIES: | Mharina Rossi Pty Ltd t/as Mhar’s Hair Salons |
| v | |
| Perpetual Nominees Ltd |
| APPLICATION NUMBER: | RSL011-10 |
| MATTER TYPE: | Retail shop leases matters |
| HEARING DATE: | 8 and 9 November 2011 |
| HEARD AT: | Brisbane |
| DECISION OF: | Peta Stilgoe, Presiding Member Jody Gosling, Member Michael Conrad, Member |
| DELIVERED ON: | 22 November 2011 |
| DELIVERED AT: | Brisbane |
ORDERS MADE: | 1. The application by Mharina Rossi Pty Ltd for compensation is dismissed. 2. Mharina Rossi Pty Ltd will pay Perpetual Nominees Ltd $96,064.79 on or before 25 February 2012. |
| CATCHWORDS: | RETAIL SHOP LEASE – where issues with air conditioning of tenancy – where tenant alleged tenancy air conditioning problems caused by Centre air conditioning – whether Centre air conditioning capable of being a defect under Retails Shop Leases Act 1994 – whether in fact defective – measure of compensation Retail Shop Leases Act 1994, ss 43(1)(d)(ii), 103(2)(d) Meacham & Leyland Pty Ltd v Vennik [1987] QRSLT 1 N & C Pty Ltd v Hillhouse [2008] RSLT 17 Schnitzel World Pty Ltd v Yung Chon Pty Ltd [2010] QCAT 474 |
APPEARANCES and REPRESENTATION:
APPLICANT: | Mr R Lloyd, director of Mharina Rossi Pty Ltd |
| RESPONDENT: | Ms J Chapple, instructed by Flower & Hart |
This matter was heard on the papers in accordance with section 32 of the Queensland Civil and Administrative Tribunal Act 2009.
REASONS FOR DECISION
Mharina Rossi Pty Ltd is a tenant of the Calamvale Central Shopping Centre. Perpetual Nominees Ltd is the lessor of that centre. Mharina Rossi operates a hair salon in the western mall of the centre, close to the entry doors. The entry doors are orientated to the east. Mharina Rossi complains that, every summer, the temperature in the common area of the western mall is so high that the air conditioning unit in the salon cannot cope and, therefore, the temperatures in the salon exceed what are reasonable working conditions.
Mharina Rossi says that: the design of the common area air conditioning is inadequate for the conditions; that this is a defect for which Perpetual is responsible; Perpetual has failed to rectify the defect; and, therefore, it is liable to compensate Mharina Rossi.
Perpetual say that the condition of the Centre air conditioning is not a defect; there is no evidence that the system is defective; any “problems” (to use a neutral term) in the system were rectified as soon as practicable; and there is no evidence that Mharina Rossi has suffered loss. Perpetual has filed a response claiming unpaid rental, outgoings and interest. At the date of the hearing, unpaid rental and outgoings were $97,026.59. Interest on the outstanding amount was $9,070.63.
The questions for determination by the tribunal are:
a.Is the operation of the Centre air conditioning capable of being a “defect” within the meaning of s 43(1)(d)(ii) of the Retail Shop Leases Act 1994?
b.If it is capable of being a defect:
i.Was it, in fact, defective?
ii.Did Perpetual have the defect rectified as soon as is practicable?
c.If it did not have the defect rectified as soon as is practicable, what compensation is payable to Mharina Rossi?
d.What amount is payable to Perpetual for unpaid rent, outgoings and interest?
Preliminary issues – the evidence
Both parties made submissions that material before the tribunal should not be admitted into evidence on two grounds:
a.That the material was provided late; or
b.That statements from witnesses were unsigned and/or that the witnesses were not called for cross examination so that their evidence could not be tested.
Mharina Rossi’s evidence was not paginated or indexed and it was often difficult to find documents. This is in direct contravention of directions given by the tribunal. In particular, on 21 June 2010, a member of the tribunal gave a direction to Mharina Rossi to deliver all material on which it relies by 2 August 2010 and took care to explain what was required: statements of all witnesses on whom Mharina Rossi relied; each witnesses statement must have attached to it all relevant documents, with an explanation of why they are relevant; all attachments had to be numbered and referred to in the statements; the amount sought and the basis on which it is claimed; details of how the amount is calculated; profit and loss statements with detailed financial records; and the accountant’s report. The learned member’s direction also contained this note: FAILURE TO SUBMIT MAY RESULT IN THE CLAIM BEING DISMISSED.
Mharina Rossi provided the tribunal with a USB stick that, apparently, contained information about the temperature readings within the salon. This, too, is in contravention of the tribunal’s previous directions. As the tribunal observed on 17 February 2011, in deciding an application to strike out the claim by Mharina Rossi:
Mr Lloyd is not a lawyer but he is a member of a learned profession and can hardly claim to be an unsophisticated litigant. He has chosen not to seek legal assistance… Mr Nicolaides forwarded a letter to him early in the proceedings advising him what further evidence was required. There have been several directions hearings since then, all directed to encouraging to Tenant to complete its evidence.
It is unreasonable to expect the tribunal to print out three copies of a large volume of material and then sift through it to ascertain what is relevant, particularly in light of such a specific direction from the tribunal. At the hearing, Mr Lloyd sought to tender a summary of the temperature readings. That is the type of evidence contemplated by the learned member in the directions of 17 February 2011.
Mharina Rossi provided a number of letters from customers, employees and co-tenants but none of those people was called to give evidence. On 17 February 2011 the learned member found, and we adopt:
The letters from clients, employees or co-tenants are admissible as corroboration. They are not required to be sworn. Their weight is a matter for the Tribunal panel…[1]
[1] Unreported at page 6.
Perpetual had the opportunity to apply for a notice to attend for each of these witnesses. It chose not to do so.
Perpetual provided an unsigned copy of a report from Mr Eijbergen of Johnson Controls as an exhibit to the affidavit of Ms Macrae. Mr Eijbergen did give evidence at the hearing and Mharina Rossi had the opportunity to ask him questions. However, it does no credit to Perpetual that: the tribunal had no summary of Mr Eijbergen’s qualifications; relevant documents in Mr Eijbergen’s control were served on the first morning of the hearing; and Mr Eijbergen was not able to provide the tribunal with any cogent evidence about the temperature inside the salon on the day of his inspection.
The member determining the application to strike out Mharina Rossi’s claim also observed[2]:
The Tenant has presented its evidence on quantum of loss as simply a reduction in gross takings on any day when the temperature in the premises becomes excessive. However, this is not a true measure of loss to the business. The Tribunal will require evidence of nett profit margins…or will need to have sufficient evidence to be able to calculate this for itself.
[2] Supra at page 7.
The learned member directed both parties to file and serve the details of the financial records that Mharina Rossi was required to provide to Perpetual under the lease, with “an appropriate severance of the records of the other businesses…if possible.” Mharina Rossi did not provide any cogent evidence of its losses. Instead, it chose to claim that the appropriate measure of compensation is that it should be able to occupy the tenancy “rent free”.
Section 28(3)(b) of the Queensland Civil and Administrative Tribunal Act 2009 provides that the tribunal is not bound by the rules of evidence. Section 95(4) makes it clear that evidence before the tribunal does not have to be sworn. In light of these two sections, the tribunal determined that all the evidence provided in this proceeding would be admitted and we would, then, determine what weight should be given to that evidence.
It was apparent to us during the hearing that Mr Lloyd was often frustrated by procedural aspects of the tribunal and, in particular, the hearing.
The tribunal has obligations under s 29 of the QCAT Act to take all reasonable steps to ensure a party understands the practices and procedures of the tribunal, the nature of assertions made and the legal implications of those assertions. Mharina Rossi was given every opportunity by the tribunal to present its case in the best possible light. The tribunal cannot take responsibility for a party’s failure to respond to the guidance offered by the tribunal. At some point, there must be an end to the indulgences the tribunal will extend, even to self-represented parties. We are satisfied that the tribunal has met its obligations under s 29 and that Mharina Rossi was given ample opportunity to understand, and prepare for, the case it wanted to present.
Is the operation of the Centre air conditioning capable of being a “defect” within the meaning of s43(1)(d)(ii) of the Retail Shop Leases Act 1994?
Counsel for Perpetual argued that “defect” within s 43(1)(d)(ii) does not encompass a design defect but only a defect that is capable of being remedied by a landlord. The example of such a defect given to the tribunal was “a crack in the structure”.
The only case discussed at the hearing that bears on this point is the decision of Judge Skoien in Meacham & Leyland Pty Ltd v Vennik[3], a case decided under the 1984-85 predecessor of the current Act. His Honour said:
At common law, a tenant who enters into a lease takes the premises as they are. He must be taken to have considered its good and bad features in deciding whether or not to enter into the lease. He cannot sue if the premises turn out to be less suitable than he had hoped or expected. Any statutory alteration to that situation would have to be clearly stated.
[3] [1987] QRSLT 1.
The Judge’s comments were made with reference to the equivalent to s46(1)(c). He did not deal with whether the same principle would apply under s 43(1)(d)(ii), of which there was an equivalent in the 1984-85 Act.
It is important to read the whole of s 43(1)(d)(ii) when determining whether “defect” can include the operation of an air conditioning system. A landlord is not liable for a defect due to a condition that would have been reasonably apparent to the lessee when the lessee entered into the lease. The use of the word “condition” must contemplate more than, say, a crack in the wall that manifests itself during the course of the tenancy. The proper construction of “condition” in s 43(1)(d)(ii) must include a design defect in the air conditioning system for the Centre, unless the defect was reasonably apparent to Mharina Rossi at the time of entering into the lease.
There was no discussion at the hearing about whether the condition of the air conditioning system should have been apparent to Mharina Rossi when it entered into the lease. Given that the Centre was reasonably new, Mharina Rossi took up the lease in winter and the tenancy air conditioning unit was not connected until three months after it commenced trade, we can see no basis for an argument that Mharina Rossi should have known about any air conditioning issues at the time it entered into the lease.
We have concluded that the operation of the Centre air conditioning could be a defect within s 43(1)(d)(ii). That conclusion should come as no surprise to either of the parties. In her decision of 17 February 2011, the learned member said:
The statistical data … provide prima facie evidence that on certain summer days the air conditioning supplied by the Lessor was, and is, grossly inadequate. … It is implicit in the lease that the air conditioning equipment must be adequate for the permitted use of the premises.”[4]
[4] Supra at page 6.
Was the air conditioning defective?
Mr Lloyd gave evidence that, in the summer of 2008/09, the temperature in the salon became “very hot” and that staff collapsed on the floor. He told the tribunal that he installed data loggers in the salon in October 2009. Mr Lloyd told the tribunal that the temperature in the salon over that summer was so hot, Mharina Rossi had to provide rest periods for the staff. The summer of 2010/11 was no better.
Perpetual does not deny that there was some instances of a high temperature being recorded but Counsel specifically reserved Perpetual’s position in relation to the actual temperature, the frequency and the cause.
A review of Mharina Rossi’s material reveals these statements:
a. On 17 January 2009 “the walkway was in the high 30s and we could not get the salon below 30 degrees. … Sunday morning was similar.”[5]
b. “We lost business as we had to put staff on 25% work, 75% rest on a number of days.”[6]
c. A reference to a photograph of the recorded temperature at the entrance to the salon at 36 degrees on 31 December.[7]
d. A copy of the photograph of the recorded temperature at the entrance to the salon at 36 degrees on 31 December (2008).[8]
e. Temperatures in the salon were above 35 degrees on 25 days between 29 September 2008 and 20 February 2009.[9]
f. “Excessive temperature in our section of the centre. 27 degrees in the salon on 3 November; 29 degrees in the salon on 4 November; 28 degrees on 5 November.[10]
g. High temperatures on 4, 30 and 31 December 2008.[11]
h. On 8 December 2008 an employee fainted due to the high temperature.[12]
[5] Email Lloyd to Brown 19/01/09.
[6] Email Lloyd to Brown 02/03/09.
[7] Email Lloyd to Cuda 29/07/09.
[8] Letter Morrison Lawyers to Colliers International 27/08/09.
[9] Letter Morrison Lawyers to Colliers International 27/08/09.
[10] Email Lloyd to Macrae 06/11/09.
[11] Email Lloyd to Brown 02/01/09.
[12] Statement Simone Mann 24/11/10.
The other statements from employees and co-tenants are of limited value as they are non-specific as to dates and temperature.
We are prepared to find, as a fact, that the salon experienced high temperatures on a number of days each summer. That finding, in itself, however, is not enough to establish that the Centre air conditioning is defective.
Mr Eijbergen gave evidence that the high temperatures in the salon were due to a combination of factors. In his report of 4 February 2010, he identified:
a. The large main door to the Centre which would allow warm moist air to enter the Centre when northerly winds were blowing.
b. The bakery tenancy allows warm moist air into the mall area.
c. The open design of the salon.
d. The salon air conditioning, although normally adequate, was unable to cope with this combination of conditions.
Mr Eijbergen told the tribunal that the Centre air conditioning system was sufficient for a normal design day (31 degrees dry bulb and 25 degrees wet bulb). He told the tribunal that the design of the building meant that it created a negative pressure which caused external air to enter the mall. He was of the view that the main problem was the prevailing winds and that the solution was to pressurise the salon. Mr Eijbergen did not consider an air curtain would solve the problem, nor did he consider that the solution was to pressurise the Centre.
Mr Lloyd did not question Mr Eijbergen about the bakery and its significance was not raised until closing submissions. If, as Mr Lloyd asserted in his closing submissions, the main problem was the bakery air and not the northerly air, Mr Eijbergen is correct in his assertion that the best solution is to pressurise the salon. Pressurising the Centre would not address the warm moist air from the bakery.
Counsel for Perpetual says, with some justification, that Mharina Rossi must bear some of the responsibility for ensuring that the salon maintains a reasonable temperature. Clause 10.9 of the lease states:
If Air Conditioning Equipment is installed in the Premises which services only the Premises, the Lessee must ensure that the Air Conditioning Equipment operates to maintain the internal temperature of the Premises between 20 and 25 degrees Celsius whenever the Premises are open for trading.
Mharina Rossi says that it cannot comply with that requirement if the temperature in the common areas is too high. Because Mharina Rossi never took any of the remedial action suggested by Mr Eijbergen, we cannot assess the accuracy of that assertion.
The obligation to prove there is a defect in the Centre’s air conditioning system rests with Mharina Rossi. That obligation is not discharged by simply saying that the temperature in the Centre’s common areas is sometimes high and that there are a number of ways that Perpetual can rectify the problem. Although we accept that the salon was experiencing difficulty in maintaining an acceptable temperature, we are not persuaded that the Centre air conditioning was defective within the meaning of s 43(1)(d)(ii).
Remaining issues under s43(1)(d)(ii)
Because we were unable to find, as a matter of fact, that the Centre air conditioning was defective, we are not required to determine whether Perpetual remedied the defect as soon as was practicable. Further, we are not required to determine what compensation is payable to Mharina Rossi.
It is appropriate, however, to say something about the amount of Mharina Rossi’s claim. Despite the detailed directions of 21 June 2010 and the learned member’s comments in her decision of 17 February 2011, Mharina Rossi provided no evidence that would enable the tribunal to assess compensation.
It was never open to the tribunal to allow Mharina Rossi to occupy the salon rent free for the whole period of the lease when the clear evidence from Mr Rossi was that the problem of excessive temperature was limited to the summer months. At best, the tribunal may have been prepared to allow compensation for four months per year. In her decision of 17 February 2011, the learned member did not give Mharina Rossi leave to amend its claim to add the summer of 2010/11. Therefore, the maximum claim was only $32,800 for 2008/09 and 2009/10.
Perpetual’s claim for unpaid rent, outgoings and interest
Section 103(2)(d) of the Retails Shops Leases Act 1994 gives the tribunal jurisdiction to hear a retail tenancy dispute about arrears of rent payable under a lease if the dispute is also about the payment of compensation by the lessor to the lessee. The tribunal, therefore, does have jurisdiction to hear Perpetual’s claim for unpaid rent.
Counsel for Perpetual properly pointed out that her client’s claim includes outgoings and interest whereas the terms of s 103 limit the tribunal’s jurisdiction to “arrears of rent”. The Retail Shop Leases Tribunal, predecessor of this tribunal, did allow recovery of rent and outgoings[13] and this tribunal has contemplated an order for recovery of rent and outgoings[14]. We can see no reason why Perpetual should not be entitled to an order that Mharina Rossi pay outstanding rent and outgoings.
[13]See, for example N & C Pty Ltd v Hillhouse [2008] RSLT 17.
[14] Schnitzel World Pty Ltd v Yung Chon Pty Ltd [2010] QCAT 474.
Clause 8.3 of the lease requires Mharina Rossi to pay “late fees” at the Default Rate on amounts outstanding to Perpetual. “Default Rate” is defined as 2% per annum above the rate charged by Perpetual’s bank on unsecured overdraft accommodation over $100,000.
The tribunal was given a schedule of interest calculations at 12.69%. It was not given any details about the calculation of the default rate with reference to a bank’s overdraft rate. The tribunal is not prepared to find that Mharina Rossi is liable to pay interest in the absence of this corroborating information.
The legal fees of $961.80 identified in Perpetual’s schedule are not an operating cost within the meaning of the lease. We are not inclined to order that Mharina Rossi pay those costs.
Conclusion
Although the operation of the Centre air conditioning is capable of being a “defect” within the meaning of s 43(1)(d)(ii) of the Retail Shop Leases Act 1994, we were unable to find that it was, in fact, defective.
Because we were unable to find that the Centre air conditioning was defective, Mharina Rossi is not entitled to any compensation under s 43(1)(d)(ii).
If the air conditioning had been defective, and Perpetual had not rectified the defect as soon as was practicable, Mharina Rossi’s right to compensation would have been no more than $32,800, being one third of the rent payable for each of the first two years.
Perpetual is entitled to payment of its rent and outgoings in the amount of $96,064.79.
It is unfortunate that this dispute could not be resolved by negotiation between the parties. The ongoing issues of the salon’s air conditioning have not been addressed and Mharina Rossi must now find a substantial sum to pay for arrears in rent. It was obvious to the tribunal that Perpetual did not want Mharina Rossi to vacate the Centre. We hope that the parties will now be able to meet and address the issues that confront them in a cooperative way.
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