Moon v Tanilba Bay Shopping Centre
[2011] NSWADT 221
•15 September 2011
Administrative Decisions Tribunal
New South Wales
Medium Neutral Citation: Moon v Tanilba Bay Shopping Centre [2011] NSWADT 221 Hearing dates: 12 August 2011 Decision date: 15 September 2011 Jurisdiction: Retail Leases Division Before: D Bluth, Judicial member Decision: 1. The application is dismissed.
2. No order as to costs
Catchwords: Unconscionable conduct Legislation Cited: Retail Leases Act, 1994 Cases Cited: New South Wales v World Best Holdings Ltd (2005) 63 NSWLR 557
Armstrong Management Pty Ltd v Saies -Bond & Associates Pty Limited (2002) NSW ADTAP at 47
Horwood v Memocorp Australia Pty Limited (2000) NSWADT 69Category: Principal judgment Parties: Christine Moon (Applicant)
Tanilba Bay Shopping Centre Pty Limited (Respondent)Representation: Counsel
S Maybury (Respondent)
C Moon (Applicant in person)
O'Sullivan Saddington (Respondent)
File Number(s): 095162
REasons for decision
This is an application for Original Decision by the Applicant Christine Moon being an amended retail tenancy claim and unconscionable conduct claim under Sections 71 and 71A of the Retail Leases Act , 1994 ( RLA ). The Respondent is Tanilba Bay Shopping Centre Pty Limited.
Background
Tanilba Bay Shopping Centre is a small subregional shopping centre north of Newcastle which comprises 10 shops and a Coles Supermarket. It is common ground that the Respondent as part of a group of companies owned by the GWH Group ( GWH ) construct and subsequently operate shopping centres. GWH constructed this shopping centre at Tanilba Bay, now owned and operated by the Respondent.
Bean Coffee Pty Limited owned by GWH operated within three GWH shopping centres. GWH coffee shops called ( Bean Coffee ).
In September 2008 GWH advertised for a manager of the Bean Coffee shop at Tanilba Bay Shopping Centre.
The Applicant responded to the advertisement and started employment with Bean Coffee as manager of the shop.
On or about 9 March 2009 the Applicant was approached by the personnel manager of GWH, Mr Albert Pipan and was asked whether she was interested in taking over Bean Coffee Tanilba Bay.
After some discussion, agreement was reached and the Applicant signed a lease ( the lease ) for a term of five years with the Respondent for Shop 4 Tanilba Bay Shopping Centre ( the Premises ) and took over the business.
Bean Coffee Tanilba Bay proved not successful and after interlocutory proceedings before this Tribunal, the Applicant vacated the Premises on 18 December 2009.
Subsequently the Respondent relet the Premises to a lessee who now operates a dress shop.
The Applicant's claim is that as a result of taking over the business of Bean Coffee Tanilba Bay and leasing the Premises under the Lease, the Applicant suffered significant financial loss and damages.
Amended Application for original decision
The Applicant under the Amended Application sought the following orders including a monetary claim:
a) an order that the Respondent pay the Applicant the sum of $70,000.00 plus any future costs in relation to the loss of business due to the unconscionable conduct claim dealing with the tenancy and takeover of Bean Coffee on 13 March 2009, and
b) an order that compensation be awarded to the Applicant for mental stress due to the constant abuse and threats by Jonathan Craig and the Respondent.
In the grounds for Application (including particulars) the Applicant asserted:
11.1on or around 12 March 2009 the Respondent approached me in regards to taking over the business that I was managing on a 12 month employment contract and was told that if I did not sign a lease and take over the business that they would close the doors within a week and I would be out of work.
11.2the lease was brought to me during working hours on 11 March 2009 and I was told that it had to be signed the following day.
11.3I was given false information regarding the outgoings of the business.
Ground two related to assault and intimidation and the particulars are:
12.1after getting notice to vacate the premises in September 2009 Jonathan Craig rang me about 5:10 pm and said to me the words: "I have had you watched all day and it doesn't look like you are moving out". I took this as a threat and being bullied.
12.2on Wednesday 16 December 2009 I was assaulted by three men at the shop and the coffee machine was forcibly removed. The Lemon Tree Police were called to the shop and after investigation it was found to be that the Respondent contacted Bean Alliance and told them to remove the coffee machine that day this was done without my knowledge or permission. I am still having problems with that assault.
12.3since surrendering the shop on 18 December 2009 Jonathan Craig has constantly being trying to scare me into dropping this case under threats.
At the hearing in Newcastle on 12 August 2011 the Applicant was self represented and the Respondent was represented by Counsel Mr S Maybury, instructed by O'Sullivan Saddington.
The Applicant gave evidence. On behalf of the Respondent the Managing Director, Jonathan Robert Craig and Mr Albert David Pipan formerly the Human Resources and Training Manager for the GWH Group, gave evidence.
The Applicant's case is that, the Applicant:
a) answered the advertisement and had entered into an employment contract with the Respondent to manage the coffee shop. She believed that it was a 12 month employment contract;
b) acknowledged that at the interview with Mr Pipan discussion took place about taking over the running of the business and the Applicant says that she informed Mr Pipan that she had some personal matter that had to be sorted out and she would not be in a position to do so until the expiry of 12 months;
c) after 6 months the Applicant was approached by Mr Pipan on the basis that GHW intended to close down the 3 Bean Coffee shops in Tanilba Bay Shopping Centre, Gunnedah and Rutherford and that GWH wanted to get out of the coffee shop business and they were looking for parties to take over the running of the Bean Coffee shops;
d) understood this as a threat to her employment and she had no choice but to take over the business to secure her livelihood;
e) asked for operational figures for the business from Mr Pipan, in particular the payment of electricity and coffee as whilst she was the shop manager the majority of these accounts were paid by Head Office and she was not involved in the payment of the substantial accounts but only in relation to petty cash matters;
f) was presented a lease for execution and she asked to see a lawyer to get advice on the lease;
g) had a meeting with the lawyer, who advised her that the lease was a standard lease not requiring alteration and she signed the lease and took over the business;
h) discovered that the cost of the coffee purchased for the business was far in excess of what she had understood to be the cost of coffee (her previous experience as it came out in evidence was that while managing a caf sandwich bar in Caloundra she would buy the coffee from the supermarket which was at a much cheaper price than the coffee supplied to Bean Coffee);
i) discovered that the, cost of electricity was far more substantial than she had anticipated or was lead to believe; and
j) alleges that these financial figures and facts were either not made available to her upon request or she was deceived by the Respondent in relation to these matters.
k) She struggled on managing the Bean Coffee shop and sought financial relief from the Respondent about continuing on in possession and there were some preliminary matters before the Tribunal, but ultimately as she was not making any money, and rather losing further money she vacated the Premises.
The Respondent says that:
a) the Applicant was employed to manage the Bean Coffee in Tanilba Bay shop and it was intimated to her in the initial interview that there may be an opportunity to take over that business,
b) they had thought that she, due to her experience of 24 years in the catering hospitality business would have the requisite experience to run the coffee shop and understand its operation and the 6 month period while she was manager would have given her sufficient time to familiarise herself with that business.
c) they did not approach her on the basis that they were going to close the business but rather they wanted to extricate themselves from running the Bean Coffee shops and were looking for people to take over the management of the business. There were no threats in relation to her position.
d) they allowed her to see a lawyer to have the Lease explained to her. She signed the Lease voluntarily and took over the business voluntarily. There was no unconscionable conduct in relation to any of these matters.
e) there was no pressure put on her in relation to any discussions taking over the business of Bean Coffee, Tanilba Bay and entering into the Lease.
The Applicant's Evidence
The Applicant provided two affidavits. She was cross-examined on those affidavits and matters generally. She confirmed that she had 24 years experience in the hospitality industry and had owned/managed a cafe/sandwich bar in Caloundra for some 6 months and then she quit the lease there due to the fact that that cafe shop was not successful.
She says that she was forced into running the Caloundra cafe by her previous husband and that she had done so at his request against her better judgement.
In relation to running Bean Coffee Tanilba Bay she acknowledged that she was totally responsible for staffing rosters in relation to casuals and that she had understood what the casuals were being paid and she would have been aware of the daily sales for the coffee shop business as there were computer print outs and she took these daily sale figures and entered them into the system at GWH. She took them off the cash sales computer and entered them into the system for sales at the end of the day. She also paid out of pocket petty expenses.
Mr Maybury asked her questions in relation to the contract for employment. Nowhere in that contract is there mentioned a 12 month period but rather the employment was on a month to month basis with a one months' notice. The Applicant said that she was under the impression that she had negotiated a 12 month employment contract.
In relation to the signing of the lease the Applicant agreed that she took advice from Mr Leddingham and Mr Leddingham had reviewed the lease and had said that it was a standard lease and there was nothing untoward about it.
In respect to the discussions with Mr Pipan she alleges that Mr Pipan had suggested to her that the coffee shops were being closed and that this had put in her mind an anxiety about her employment and there was a total rush to have her sign the lease and deal with these matters. However in her evidence, she said that when presented with a draft lease by Mr Pipan she had mentioned that the agreed rent is $400.00 a week and not the $23,000.00 p.a that had appeared on the lease and that this was a mistake. It appears from her evidence as it came out through the cross-examination by Mr Maybury that she had been in discussions with Mr Pipan and the Respondent for a period of a couple of weeks regarding the taking over of the business and entering into a new lease and in relation to the terms of that lease in particular the rent.
The Applicant confirmed that upon her request in pointing out that the rent in the draft lease presented to her was not correct the Respondent had its lawyers issue a fresh lease with the rent as agreed.
The Applicant also acknowledged in cross-examination that she did not read the lease and signed it in the presence of Mr Leddingham. There was no affidavit from Mr Leddingham about any advice he may have provided.
In the affidavit sworn on 23 February 2011 the Applicant sets out her trading losses resulting from the conduct of the business from 13 March 2009 to 18 December 2009. The Applicant was cross-examined by Mr Maybury as to how these figures were arrived at as there were no accounts or invoices attached to the Affidavit to justify these figures. The Applicant responded that these figures were calculated by her using the account information that she had at home and these were guestimates by her of her significant losses.
I advised the parties that I accepted the figures in the Affidavit without the benefit of supporting documentary evidence. I note for the 9 month period that the Applicant occupied the Premises, the rent paid to the Respondent was $3,760.00 (there was a three month rent free period).
The Applicant was also asked about the bond that was due and payable under the lease and the Applicant noted that it was agreed with Mr Jonathan Craig of the Respondent that the bond would not be payable for some period of time because she did not have the requisite money to pay the bond.
The Respondent's Evidence
Mr Albert Pipan gave evidence. He was formerly the Human Resources Manager at the GWH Group and is now with the Rural Fire Services.
He confirmed that he had a conversation with the Applicant around March about GWH Group wishing to extradite from the Coffee Shop business and for the applicant to take over the premises and the business. No monetary payment was required only to execute a lease and take on the responsibility for the business. He did not put pressure on the Applicant to enter into the lease and afforded the Applicant time to seek legal advice. He acknowledges that originally the rent in the lease was expressed at $23,000.00 per annum but upon representation by the Applicant it was reduced to $21,000.00 as per earlier discussions and he obtained approval to this from Mr Craig the Managing Director of the Respondent.
He denied that he had withheld any information from the Respondent and says that they did not discuss electricity or the price of coffee. He said that he could not have discussed the price of coffee or electricity as he was not involved in the running of the financial side of the Bean Coffee businesses at all as he was the Human Resources Manager.
He said that there were negotiations with the Applicant about taking over the business and it was not a situation where undue pressure was put upon the Applicant to take over the business and sign the Lease.
The next witness was Mr Jonathan Craig, the Managing Director of the Respondent. He was cross-examined by the Applicant. He was asked about the terms of the Coles lease and it became apparent that within the terms of the Coles lease (which was not produced in evidence) there was a provision in that lease that should a certain number of specialty shops in the Tanilba Bay Shopping Centre become vacant then the Coles rent would reduce significantly.
Mr Craig was asked whether the Tanilba Bay Shopping Centre was for sale and such circumstances was it good commercial practice to have empty shops during the sale process. Whilst Mr Craig cavilled with some aspects of this line of cross-examination, ultimately he agreed that the shopping centre was for sale during the period of the Lease and that yes Coles did have a clause in its lease to reduce rent when 3 or more speciality shops were vacant but at no stage was Coles going to invoke that clause and there was no risk that Coles would do such a thing in particular during the time that the Applicant was involved with Bean Coffee.
Mr Craig was vigorously cross-examined about the circumstances surrounding the discussions between the Applicant and Mr Pipan concerning the alleged proposed closing of the business and under what instructions Mr Pipan was operating. Mr Craig initially sought to distance himself from any suggestion that in fact what the Respondent was doing was closing down the business and thus forcing the Applicant ultimately to be unemployed. Ultimately Mr Craig agreed that yes the directors had decided that the GWH Group no longer wanted to run coffee shops and wished to extricate themselves from that business but he drew a distinction between closing the business down and looking for other operators. He asserted that this was a business opportunity available to the Applicant which had been discussed initially at the Applicant's employment conference. Therefore it was not a new proposition to the Applicant and further as the Applicant had the requisite experience in running businesses and appeared to be keen to take on a business, he did not believe that the Respondent had done anything wrong in its negotiations with the Applicant.
In relation to the conversation alleged to have taken place on the day that the Applicant vacated the Premises, Mr Craig could not recall that conversation. Upon presentation of his mobile telephone records indicating that such a call was made he admitted that it was possible that a call was made, at that time by him but denied the words attributed to him in relation to any threatening behaviour. When asked by the Applicant as to why he the Managing Director would make a call to a tenant at that time, given that there was in place a Shopping Centre Manager who would normally deal with these matters, Mr Craig proffered the suggestion that he had to make the call because the Shopping Centre Manager did not want to deal with the Applicant.
Unconscionable conduct
Section 62B of the RLA at subsection 3 sets out what the Tribunal may have regard to in relation to determining whether a lessor has contravened subsection 1 which is not to " engage in conduct that is, in all the circumstances, unconscionable ".
Those matters are as follows:
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.
Guidance to the interpretation of unconscionable conduct under section 62B may be found from the Chief Justice Spigelman in Attorney-General of New South Wales v World Best Holdings Ltd (2005) 63 NSWLR 557 as follows:
"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 will be transformed into the first and easiest port of call when any dispute about a retail lease arises."
And similarly in the decision of Armstrong Management Pty Ltd v Saies -Bond & Associates Pty Limited (2002) NSW ADTAP at 47
"The section requires, ultimately, a holistic examination of all the circumstances of the lease relationship. While no case is likely to involve all of the categories of misconduct enumerated in the non-exclusive check-list, one would normally expect to see an unconscionable conduct finding supported by a range of considerations. It would be unusual, but not impossible ... for one instance of egregious conduct to be enough to give rise to a finding of unconscionable conduct."
In the case of Horwood v Memocorp Australia Pty Limited (2000) NSWADT 69, the Tribunal comprising Deputy President Chesterman and two non judicial members Griffiths and Fagg examined conduct on the landlord alleged to have been unconscionable by a tenant. There at paragraph 154 the Tribunal stated:
"After taking particular account of the provisions of Section 62B quoted above ..., it has concluded that Memocorp's conduct, although very unsympathetic to Mr Horwood (having regard particularly to the difficulties that he had sustained and to his good record as a long-term tenant) and displaying an unhelpful reluctance to seeking to reach a compromise with him on disputed questions, was not "highly unethical" and did not involve a "high degree of moral obloquy". It therefore did not satisfy the criteria of unconscionability stated by Spigelman CJ in the World Best Holdings case (para 154)."
The Applicant's case established through cross-examination of Mr Craig was that it was imperative for the Respondent to ensure that shops within the shopping centres were not vacant and consequently that is why they had set up the Coffee Bean business to self occupy these shops. Once set up, the Respondent would then seek to have people take over these shops by way of running the businesses and paying rent and if in its dealings with the Applicant in relation to Bean Coffee Tanilba Bay the Respondent's conduct fell with section 62(B) of the RLA.
When, looking at the criteria set out in section 62(B) taking into account the evidence, I make the following observations:
a) paragraph (a) calls for an assessment of the relative strengths of the bargaining positions of the lessor and the lessee and in this case it is clear that the Respondent was in the much stronger position and the Applicant was in a weaker position.
b) in relation to paragraph (b) it is open that on the facts the Applicant was asked to comply with conditions that were not reasonably necessary for the protection of the legitimate interests of the lessor.
c) with respect to subparagraph (c) the Applicant did have an opportunity to review the Lease and had sought legal advice. The fact that the Applicant said that she did not read the Lease is not a matter on which the Applicant can say that the Respondent engaged in unconscionable conduct.
d) in paragraph (d) the issue in relation to any "pressure" or "unfair tactics used against" the Applicant, is most relevant for the case mounted by the Applicant, that the Respondent withheld vital economic information that should have been available to the Applicant to enable the Applicant to make an informed decision about taking on the business and taking over the Lease. However, the Applicant was in a position as managing Bean Coffee and should have been able during that time to understand the nature of the business and make due enquiry with a view as expressed by both the Applicant and the Respondent that at some stage the opportunity was there for the Applicant to take over the business. The fact that the Applicant did not avail itself of this opportunity or failed to necessarily acquaint herself with the business of Bean Coffee is not a matter that should necessarily mean that the conduct of the Respondent should be viewed as unconscionable.
e) the next relevant subparagraph is (j) relating to negotiations with respect to the terms of the Lease and from the evidence it is clear that in fact the Applicant and the Respondent did negotiate the terms of the Lease as the Applicant has stated that when the Lease was produced to her she queried the rent and this was further negotiated between the parties in the Applicant's favour.
f) the last relevant matter for consideration is subparagraph (k) which relates to both parties acting in good faith and whilst a negative view could be taken regarding the actions of the Respondent through its officers Messrs Pipan and Craig I believe on balance regarding the evidence before this Tribunal that in fact the Applicant was treated by the Respondent as a party that the Respondent could negotiate with in respect of taking over the business of Bean Coffee and the Lease of the premises given that the Applicant was experienced in the hospitality industry and had an opportunity to review the business for some six months and make due enquiry.
g) it was not a case as the Applicant wishes to put that she was forced to sign in a short period but rather it would appear that negotiations had taken place over some days and that she had the opportunity to seek independent legal advice. The fact that the Applicant perceived that her employment opportunity was to evaporate notwithstanding that she was of the view that she had a 12 month contract is a matter of some inconsistency in the Applicant's position and no doubt if she were certain of a 12 month contract she would have sought legal advice regarding the ability to enforce that contract or seek compensation for early termination if that had occurred. The Respondents position was that they had signed an employment contract of engagement with the Applicant on a month to month basis and the Respondent was providing to the Applicant an opportunity to take on the business without paying for any goodwill.
Further I am mindful of the small amount of rent that the Applicant paid to the Respondent. As noted this was $3,760.00 for a nine month period which does not appear onerous. I understand that the Respondent has not sought to recover any further rent from the Respondent. The Respondent's position is that this was a business opportunity that failed and the Respondent did not wish to pursue the Applicant for any costs or damages. The Applicant in turn has been pursuing the Respondent for loss as the result of alleged unconscionable conduct of the Respondent.
Decision
In all the circumstances after giving careful consideration to the evidence and the submissions the Tribunal does not believe that the conduct of the Respondent amounts to unconscionable conduct within the terms as identified by the Tribunal in Horwood v Memocorp Australia Pty Limited. Whilst some of the conduct of the Respondent through Mr Craig could be viewed as unsympathetic, and in some circumstances a little hard on the Applicant in relation to the phone call, the conduct was nevertheless not "highly unethical" and did not involve a "high degree of moral obloquy" to satisfy the criteria of unconscionability as stated by Spigelman CJ in the World Best Case.
Costs
I note in relation to costs that Mr Maybury on behalf of the Respondent proffered the statement from the bar table that should the Respondent be successful the Respondent would not seek a costs order. In these circumstances I make no order as to costs.
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Decision last updated: 15 September 2011
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