Mirvac Funds Limited v Frost

[2009] NSWADT 94

CITATION:	Mirvac Funds Limited and anor v Frost [2009] NSWADT 94
DIVISION:	Retail Leases Division
PARTIES:	APPLICANT Mirvac Funds Limited and BNY Trust Company of Australia Limited
FILE NUMBER:	085157, 085175
HEARING DATES:	29 April 2009
SUBMISSIONS CLOSED:	1 May 2009
DATE OF DECISION:	4 May 2009
BEFORE:	Higgins S - Judicial Member
LEGISLATION CITED:	Administrative Decisions Tribunal Act 1997 Retail Leases Act 1994
CASES CITED:	Progressive Mailing House Pty Ltd v Tabali Pty Ltd (1985) 157 CLR 17
REPRESENTATION:	APPLICANT S B Adams, solicitor RESPONDENT No appearance
ORDERS:	1.Within 14 days of the publication of this decision the applicants to file and serve evidence and written submissions in regard to: (a) their respective standing to bring this application; (b)mitigation of loss; and (c) any cost application they wish to make. 2.Within 14 days of being served with the applicants’ evidence and submissions, the respondent is to file and serve any material in reply. 3.The matter is listed for further hearing on 19 June 2009 at 2:00pm.

Introduction

1 On 13 August 2008, the solicitor for Mirvac Funds Limited (ACN 002 561 640) (‘Mirvac’) lodged an application (‘file no 085157’) seeking payment of rent and other charges allegedly owed to it by Mitchell Frost (‘Mr Frost’) pursuant to the terms of a lease in respect to Shop 3 of the Moonee Beach Shopping Centre (‘the premises’).

2 The lease the subject of this application is Registered Lease No AC316890X. The lessor is described as ‘Moonee Beach Properties Pty Limited (ACN 105 751 746)’ and the lessee is described as ‘Mr Frost’. The commencement date of the lease is 21 December 2005 and the termination date is 20 December 2012. The permitted use of the premises is ‘Hair and Beauty Salon and associated products and services.’

3 Mr Frost appears to have vacated the premises on 3 May 2008 and the lessor took possession shortly thereafter. At the time Mr Frost vacated the premises and the lessor resumed occupation, Mr Frost was in arrears in rent and other charges he was obliged to pay under the terms of the lease. The premises have remained unoccupied since the lessor regained possession.

Background

4 It is necessary to give some background to the applications to which this decision relates.

5 Mirvac originally commenced proceedings against Mr Frost on 30 May 2008. These proceedings were commenced in the Local Court at Sydney by way of Statement of Claim. The claim was for outstanding rent and charges as at the date Mr Frost vacated the premises (i.e. a sum of $22,017.41 and interest). Pursuant to consent orders, dated 7 July 2008, the Local Court made orders transferring the proceedings to the Tribunal pursuant to section 75 of the Retail Leases Act 1994 (‘the RL Act’).

6 Prior to the lodging of the application with the Tribunal, on 7 August 2008, the Retail Tenancy Unit issued a certificate, pursuant to section 68(1) of the RL Act that mediation had failed between the parties. The parties named in this certificate were Mirvac and ‘Mullet Hair’. I have assumed the name ‘Mullett Hair’ is the trading name of Mr Frost’s business.

7 On 4 September 2008, the Registry of the Tribunal created a new file application (‘file no 085175’) upon receipt from the Local Court of the original application made in that Court. This file was opened in error. However, both files have been dealt with together and the evidence in one is evidence in the other.

8 On 15 September 2008, the solicitor for Mirvac filed an amended application in which BNY Trust Company of Australia Limited (ACN 050 561 640) (‘BNY Trust Company’) was added as an applicant. The substance of the amended application did not alter and the amount claimed remained the same.

9 The matters came before me at an ex-parte hearing on 19 February 2009.

10 The solicitor for Mirvac and BNY Trust Company appeared on this date and tendered into evidence three affidavits of service, a copy of the lease, an affidavit of Debbie Grimley the centre manager of the Moonee Beach Shopping Centre (sworn on 6 February 2009) and the undated affidavit of Andrew Eagleston, of Mirvac Real Estate Services (filed on 9 October 2008).

11 The solicitor also relied on a further amended application that he had filed two days before the hearing date. This further amended application increased the amount of the applicants’ claim from $22,017.41 to approximately $84,000.00. The evidence to support this additional amount was contained in the affidavit of Debbie Grimley.

12 The Tribunal’s file contained no record of Mr Frost having filed any evidence even though orders had been made to this effect.

13 On the basis of the evidence contained in the affidavits of service I was satisfied that Mr Frost had been served with the relevant material, however as he had only been served with the further amended application and the affidavit of Debbie Grimley the day prior to the hearing (see affidavit of service sworn on 18 February 2009), I formed the view that he had not been provided with adequate time to respond to this new material. I was also concerned that the manner in which Mr Frost had been notified of the hearing may have misled him into believing that he should not attend the hearing. Accordingly, I made an order giving Mr Frost an opportunity to file and serve evidence in reply (if any) by 2 March 2009. On the basis that the material provided by the solicitor for the applicants dealt with all relevant issues I directed that it was appropriate to deal with the application on the papers after 9 March 2009 and directed the Registry was to advise the parties, in writing, by close of business the following day, of the orders that were made.

14 I note that the Registry sent a letter, by express post on 23 February 2009, to Mr Frost at his Woolgoolga address. There is no record of this letter having been returned, or of any material having been filed by Mr Frost subsequent thereto.

15 Accordingly, I have dealt with this application on the papers as tendered, on 19 February 2009, by the solicitor for Mirvac and BNY Trust Company. For the reasons set out below this material failed to address two important issues: namely the applicants’ standing to bring the application and the applicants’ duty to mitigate its loss. If not addressed the applicants’ application would fail. However, as they were issues not previously raised at the 19 February hearing I have determined that the applicants should be given an opportunity to address these issues and for Mr Frost to be given an opportunity to respond thereto.

Issues

16 As mentioned above, the issues for determination in this application are:

(a) whether the applicants (individually or together) have standing to bring this application for original decision under section 71(1) of the RL Act. As noted above neither applicant is named as the lessor on the lease; and

(b) whether Mr Frost is liable for rent, promotional fund allowance, outgoings, make good costs, legal costs and the cost of mediation as particularised in the claim. The application describes the amounts claimed as being a ‘liquidated claim’.

Standing of the applicants to make a claim under s71 of the RL Act

17 It is appropriate to first deal with the standing issue as it relates to a ‘jurisdictional fact’ of which the Tribunal must be satisfied in order to hear and determine this application.

18 Section 71(1) of the RL Act provides that:

‘ a party or former party to a retail shop lease or former retail shop lease may lodge a retail tenancy claim in respect of the lease with the Tribunal for determination of the claim.’ (emphasis added)

19 There is no dispute that the lease the subject of this application is a ‘retail shop lease’ as defined in section 3 of the RL Act and that it is not excluded by reason of section 5. Nor is it disputed that the substance of the application is a ‘retail lease claim’ under section 70(a)(i) of the Act.

20 The question is whether the applicants are, or were, a party to the lease in question.

21 The term ‘party’ is defined in section 3 of the RL Act to mean the ‘lessor or the lessee under a retail shop lease.’

22 The starting point is of course the person named as lessor on the lease, which is neither applicant. It is an entity by the name of Moonee Beach Properties Pty Limited. The lease having been registered, prima facie this entity is the person who is given standing under section 71 to lodge this application. There may of course have been a transfer of the ownership of shopping centre to the applicants and if this is correct they become the lessor under the lease.

23 Mr Eagleston and Ms Grimley both make reference to an entity, Mirvac Real Estate Pty Ltd, in their respective affidavits. This entity they say is the leasing agent for the Shopping Centre. I assume that Mirvac Real Estate Pty Ltd is an entity related in some way to the applicant Mirvac. But this is not sufficient to make a finding that Mirvac is in fact the current owner of the shopping centre and hence the lessor of the premises for the purpose of section 71 of the RL Act to lodge this application.

24 In regard to BNY Trust Company, Mr Eagleston in his affidavit said that this entity ‘… through its predecessor in title leased to the respondent [Mr Frost] shop 3 …’. In her affidavit, Ms Grimley said that the Moonee Beach Shopping Centre was ‘owned’ by the BNY Trust Company.

25 While the Tribunal is not bound by the rules of evidence and it is to proceed with little formality and without regard to technicalities or legal forms (see section 73 of the Administrative Decisions Tribunal Act 1997), in my opinion this evidence is not a sufficient basis on which to make a finding on an important jurisdictional fact; namely that BNY Trust Company has standing under section 71 of the RL Act to lodge this application.

26 The onus is on the applicant(s) to establish its right to lodge the application under the RL Act. In this application the applicants have at all times been legally represented and it is surprising that this was not addressed in the material provided. As this is an issue that would finally dispose of the application and it is one that was not raised at the 19 February hearing it is appropriate for the applicants to be given an opportunity to file and serve the necessary material and for Mr Frost to respond thereto.

Amounts claimed by the applicant’s pursuant to the lease

27 I have considered the various aspects of the applicants’ claim on the basis they are able to satisfy the Tribunal as to their standing to make this application. In doing so I have not examined closely the specific amounts that have been claimed as these have not been challenged by Mr Frost. I have instead considered whether each of the various classes or items of claim are or are not recoverable by the lessor under the lease. In this regard the claim is for the following items:

Rent

Promotional fund allowance

Outgoings

Make good costs

Legal cost

Costs of mediation

28 As mentioned above, the lease was terminated on or about 3 May 2008 when the lessor took possession of the premises pursuant to clause 29.2(a) of the lease.

29 Clause 29.3 of the lease sets out Mr Frost’s obligations in the event of a termination under that clause. It relevantly provides as follows:

(a) the Lessee indemnifies the Lessor against any liability or loss arising and any cost incurred (whether before or after termination of this lease) in connection with the Lessee’s breach of this lease and the termination of lease including the Lessor’s loss of the benefit of the Lessee performing its obligations under this lease from the date of that termination until the Terminating Date; and

(b) the Lessor must take reasonable steps to mitigate its loss.

30 This clause is consistent with the principles set out in Progressive Mailing House Pty Ltd v Tabali Pty Ltd (1985) 157 CLR 17 in that any amounts the lessee was obliged to pay under the terms of the lease that remained unpaid as at the termination date can be recovered by the lessor as a liquidated amount. After termination the lessor can only seek damages for the loss of the benefits he would have derived under the terms of the lease had it not terminated. However, from the date of termination there is a duty on the lessor to mitigate its loss and damage. That is, there is an onus on the lessor to prove that it has taken reasonable steps to mitigate.

31 In the material that has been filed and relied on by the solicitor of the applicants there is no evidence of steps taken (if any) to re-let the premises since Mr Frost vacated them in May 2008. The mere statement that the premises remained empty up until 8 February 2009 is, without further explanation, arguably indicative of no steps having been taken. For the same reasons set out above in regard to the issue of standing, in my view it is appropriate for the applicants to be given an opportunity to provide that material and for Mr Frost to respond thereto.

32 I have nevertheless considered each of the items for which a claim has been made, but conclusive findings as to the amounts for which Mr Frost is liable under the lease cannot be made until such time as the issue of mitigation has been determined.

33 Rent The applicants have claimed rent that was due and payable for each month from 1 May 2008 to 1 February 2009 and an outstanding amount that was due and payable as at 1 May 2008. The amount claimed is $53,798.71 (exclusive of GST) and the period for which the claim is made includes a rent increase.

34 Clause 4 of the lease makes provision for the payment of the annual rent (see item 15 of the reference schedule to the lease) in equal monthly proportions. Clause 5 of the lease also provided for a fixed annual review date of the rent. That annual rent review date was stated to be ‘each anniversary of the Commencing Date’ – see item 11 of the reference schedule to the lease. Under clause 5 the annual rent increase is a fixed percentage amount of 5% increase each year on the previous annual rent.

35 Having regard to the material filed I am satisfied that the amounts claimed are in accordance with the abovementioned terms of the lease. As mentioned above, whether Mr Frost is liable for the whole amount will depend on my findings in regard to the issue of mitigation.

36 Outgoings The applicant(s) have claimed $5,637.02 (exclusive of GST) in respect of outgoings. The claim is in respect to the same period as the rent.

37 Clause 9 of the lease and item 17 of the reference schedule to the lease sets out Mr Frost’s obligations in regard to outgoings. These obligations are consistent with the requirements of section 27 of the RL Act and a copy of the audited statement of recoverable outgoings for the Shopping Centre as at 30 June 2008 were attached to the affidavit of Mr Eagleston. With the exception of the amounts claimed for December 2008 and January 2008, the amounts claimed are consistent with the relevant terms of the lease and the audited accounts. There is an increased amount that is alleged to be payable in regard to the latter months but no evidence has been provided as to the basis on which that increase was made (see section 27 of the RL Act and clause 9.2 of the lease which require the lessor to provide an estimate of outgoings for each year). Accordingly the increased amount is not claimable in this application. As mentioned above, whether Mr Frost is liable for the whole amount will depend on my findings in regard to the issue of mitigation.

38 Promotion levy The applicants have claimed $2,566.58 (exclusive of GST) respect of promotion publicity of the Shopping Centre for the benefit of Mr Frost and the Centre as a whole. This claim is also in respect to the same period as the rent.

39 It is noted that the note to section 52 of the RL Act states that it is good leasing practice for a lessor to require all lessees in a shopping centre to contribute towards advertising and promotion costs of the centre.

40 Clause 10 of the lease and item 18 of the reference schedule set out the obligations in regard to this levy. The levy in the lease is stated to be 5% of the rent plus GST. The clauses of the lease must however be read in conjunction with sections 53 to 56A of the RL Act. As indicated in the lease the lessor is required to provide the lessee with:

(a)a marketing plan at least one month before the promotion period, which is usually an annual period. Section 53(a) of the RL Act provides that the plan is to set out details of the proposed expenditure of the plan;

(b)a promotion levy statement for examination by the lessee every 6 months and the details of what is to be contained in that statement is contained in section 54(2) of the RL Act;

(c)a promotion levy report within 3 months after the end of the promotions report. Section 55 of the RL Act describes this report as an ‘annual advertising and promotion expenditure statement’.

Provision of this statement within the 3 month period is mandatory and what is to be contained in this statement is also specified.

41 Section 55A of the RL Act enables the lessee to withhold payment of the contributions if any of the abovementioned documents have not been provided.

42 In this application there is no evidence to support Mr Frost having been provided with the relevant plan or statements prior to the termination. Nor is there any material to establish that such plans and statements have been prepared and provided to the other lessees in the Shopping Centre after the termination of the lease. Accordingly, I find that the applicants’ claim in regard to the promotion levy has not been established.

43 Make good costs The applicants have claimed $2,976.00 (exclusive of GST) in regard to make good costs. The claim is in respect of the following:

(a)$349.09 for services provided by Coffs City Lockmart on 5 May 2008 in regard to changing the locks on the premises, which Ms Grimley were the costs involved in the lessor re-entering the premises after Mr Frosts breach of the lease;

(b)$76.92 for services provided by Frank Murphy Plumbing on 8 May 2008 to cap off drainage points and seal off waste lines in the premises; and

(c) $2,550.00 for services provided by X-Corp Building Services on 18 May 2008 to patch and re-plaster internal plasterboard in the premises, which Ms Grimley said was work undertaken to make good the premises as a result of Mr Frost having failed to do so as at the date of termination.

44 Clause 20 of the lease required Mr Frost, subject to any fair wear and tear, to maintain and repair the premises in their condition as at the commencement date of the lease. On the basis of the above material I am satisfied that the work carried out in (c) above is work the lessor was required to do as a result of Mr Frost’s breach of this term and is therefore claimable by the lessor.

45 I am also satisfied that the work in (a) above is a cost that was incurred by the lessor in connection with Mr Frost’s breach of the lease and is claimable under clause 29.3 of the lease.

46 No evidence was put before the Tribunal as to why the plumbing costs were costs for which Mr Frost was liable under the terms of the lease. Accordingly I find that this cost is not a cost that is claimable by the lessor.

47 Legal costs The applicant has claimed its legal costs in regard to the following invoices of its solicitor:

(a) invoice dated 3 June 2008 for the sum of $4,348.90

(b) invoice dated 13 October 2008 for a sum of $3,761.71

(c) invoice dated 4 February 2009 for a sum of $2,709.07

48 In my opinion, the costs as identified in the above invoices are not costs that fall within the terms of the abovementioned clause 29.3 of the lease. That is, they are not costs that arise from Mr Frost’s repudiation of the lease or the loss of the benefit to the lessor of Mr Frost performing his obligations under the lease. They are primarily costs incurred by the lessor in order to enforce its rights under the lease.

49 This does not mean that these are costs for which a claim cannot be made. The appropriate claim is of course a cost application. That application should be made in the usual way and determined after the applicants’ claim has been determined.

50 Mediation cost The applicant has claimed $725.00 that was paid in respect of the mediation. In my opinion this amount falls into the same category as the claim for legal costs and is not claimable under clause 29.3 of the lease.

Conclusion

51 It is regrettable that the material filed in this application was not such that a final determination could be made without the need for the filing of further evidence. In light of this further evidence it is also appropriate to list the matter for further hearing. That hearing will be limited to the specific issues of standing, mitigation and cost applications (if any).

Orders

1.Within 14 days of the publication of this decision the applicants to file and serve evidence and written submissions in regard to:

their respective standing to bring this application; mitigation of loss; and any cost application they wish to make

2. Within 14 days of being served with the applicants’ evidence and submissions, the respondent is to file and serve any material in reply

3. The matter is listed for further hearing on 19 June 2009 at 2:00pm.