Nam v Commonwealth Funds Management - [2002] NSWADT 80

No judgment structure available for this case.

CITATION: Nam & anor -v- Commonwealth Funds Management Limited & anor [2002] NSWADT 80 revised - 16/05/2002

DIVISION: Retail Leases Division

PARTIES: APPLICANTS
Ki Sung Nam
Moon Hwi Nam
FIRST RESPONDENT
Commonwealth Funds Management Limited
SECOND RESPONDENT
Mirvac Funds Limited

FILE NUMBER: 025043

HEARING DATES: 30/04/2002, 01/05/2002, 08/05/2002

SUBMISSIONS CLOSED: 05/08/2002

DATE OF DECISION:
05/15/2002

BEFORE: O'Connor K - DCJ (President); Griffiths G - Member

APPLICATION: Interim order

MATTER FOR DECISION: Preliminary matter

LEGISLATION CITED: Administrative Decisions Tribunal Act 1997
Retail Leases Act 1994

CASES CITED: Beecham Group Ltd v Bristol Laboratories Pty Ltd (1968) 118 CLR 618
Townsend v Chief Executive, State Rail Authority [1999] NSWADT 56
Dein v Bailey [1960] NSWR 385; Szentessy v Woo Ran (Australia) Pty Ltd (No 1) (1985) 64 ACTR 98
Allen & ors v Jambo Holdings Ltd & ors [1980] 2 All ER 502
Commercial Bank of South Australia v Insurance Brokers Association of Australia (1977) 16 ALR 161
Ross v State Rail Authority of New South Wales (1987) 70 LGRA 91

REPRESENTATION: APPLICANTS
A Tonking, barrister
RESPONDENTS
C Hodgson, barrister

ORDERS: 1) That orders be made reflecting the conclusions of the Tribunal as set out in paras 100, 101, 107 and 108 of the reasons for decision; 2) The parties are requested within two days to prepare minutes of the orders for endorsement by the Tribunal; 3) The matter be relisted for urgent directions when requested by either party.

1 The applicant has applied for an urgent interim order under the Retail Leases Act 1994 (the Act). The applicant is the operator of a food outlet in the food court of a retail shopping centre. The respondents are the owners of the shopping centre. The applicant leases the premises comprising the food outlet from the respondents.

2 The shopping centre is located on levels 4 and 5 of the office tower situated on the corner of George Street and Margaret Street in the financial district of the Sydney CBD. Until recently the shopping centre was known as Westpac Plaza. It is now known as Metcentre. The shopping centre is presently undergoing redevelopment. The redevelopment works commenced in November 2001, with the centre remaining open for business. The redevelopment has given rise to the dispute underlying the present application.

Claims

3 The applicant lodged an application under the Act in the Tribunal on 11 April 2002. The applicant made a retail tenancy claim and an unconscionable conduct claim. A retail tenancy claim is defined by s 70 of the Act. An unconscionable conduct claim is defined by s 62B of the Act.

4 Where a retail tenancy claim and an unconscionable conduct claim are made in the one application the Tribunal is constituted in accordance with the provisions found in Schedule 2, Division 3B, cl 4 of the Administrative Decisions Tribunal Act 1997.

5 Clause 4 prescribes special rules for the hearing of unconscionable conduct claims. Under cl 4(1)The presiding member must satisfy cl 1(a) and be a member who is a retired judge of the Supreme Court or the Federal Court or who has equivalent experience or qualifications. The President sits in that capacity, as a member who has equivalent experience or qualifications. In addition where there is an unconscionable conduct claim the panel must include a member has experience as a lessor, or working on behalf of lessors, under retail shop leases (cl 1(b)), and a member who has experience as a lessee, or working on behalf of lessees, under retail shop leases (cl 1(c)). The role of the specialist members and other matters are dealt with in cl 4. The whole of cl 4 follows:

4 Retail Leases Act (unconscionable conduct)

6 In the present case two specialist members were appointed, but one was unavailable at the commencement of the interim order application, and accordingly the interim order application was heard, as permitted by cl 4(4)(a) by the President and Mr Garth Griffiths, a person appointed under cl 1(c).

7 Retail Tenancy Claim: In the principal application the applicant under the heading 'retail tenancy claim' the applicant claimed that his business had been adversely affected by activities undertaken by the owners, or on their behalf, in connection with the redevelopment. The application listed the following alleged adverse affects:

: Under the heading 'unconscionable conduct claim' in the application, the applicant claimed that he had been subject of a series of misrepresentation is misleading and deceptive conduct made by the respondents or the respondents agents during periods of 1994 and 2001 to 2002. He claimed the lessor used its far greater bargaining power to attempt to have the lessee surrender the current lease and take up a new lease a different position within the shopping centre on less favourable terms. There were a number of further allegations relating to the conduct of the respondents or their agents under this heading.

9 Alleged Losses: The applicant claimed that as a result of the conduct referred to in the retail tenancy claim and in the unconscionable conduct he had suffered:

: In the principal application the applicant seeks the following orders:

11 At the same time as the application was lodged, the applicant lodged an application for urgent interim order. Under the Retail Leases Act the Tribunal's powers in respect to the orders that it may make in respected retail tenancy claim extends to the making of such interim orders pending final determination of the claim has appeared to the tribunal to be desirable: section 72(4). Similarly the Tribunal's powers to make orders in respect unconscionable conduct claims also extends to the making of such interim orders as the tribunal considers desirable: section 72AA(4).

12 The interim order application was first listed for hearing on 15 April 2002. After a short hearing on that occasion the respondents gave an undertaking in relation to the Jamison Street entry to realign the hoarding as close as possible to the original property line; and to put up signage of the type referred to in item 1(c)(ii) of the then proposed orders along the passageway. The respondents also gave an undertaking to provide the applicant with information as to where the Jamison Street entrance was to be moved; and a copy of the plans, within two days. The Tribunal noted that the application was not accompanied by a certificate from the Retail Tenancy Unit that attempts at mediation had been unsuccessful. The parties agreed to go to the Unit to undertake mediation. In the event that mediation failed, dates were provisionally set for hearing for 30 April and 1 May 2002.

13 In the interim order application as filed, the applicant stated that 'in direct contravention to the lease... and despite section 34 notice under R. L. A., the renovations continue to harm and disrupt the applicant's business, which... may force the applicant to close the business prematurely'. In the original interim order application, the interim order sought was:

'an injunction restraining the respondents from continuing renovations and refurbishments at 60 Margaret Street Westpac Plaza until 30 November 2002 (the expiry date of the applicant's lease)'.

14 The Act does not confer general equitable jurisdiction on the tribunal. There is no power to issue an injunction, but the Act does confer similar statutory powers. In the case of retail tenancy claims, the power relevant to the present application is found in s 72(c)(iv) whereby the Tribunal may make an order if that a party to the proceedings 'do or perform, or refrain from doing or performing, any specified act or thing.' There was an issue as to whether any relevant interim relief was available if a prima facie case of unconscionable conduct was established. See further paras [25-26] below.

15 Interim Orders Sought: In the course of the proceedings the applicant has revised his initial application, and the interim orders now sought are:

16 The respondents have indicated their preparedness to enter into an order by consent in relation to proposed order 2.

17 Proposed orders 1(a), (b), (c) and (d) are contested by the respondents.

Submissions

18 At the close of the hearing counsel for the applicant and the respondent made oral submissions in elaboration of written submissions.

19 The applicant relies on the provisions of the lease and of the Act to found its claims. In the case of the lease the applicant referred in particular to four of the lessor’s covenants in cl 10 (quiet enjoyment, maintenance of common areas, use of common areas within the centre, compensation to lessee and the lessor’s warranty as to notice in relation to matters likely to substantially affect customer flow), one of the lessee’s covenant in cl 11 (not to obstruct passageways), two of the lessor’s reservations in cl 12 (signage on roof and external walls, control of use of kiosks or structures in common areas subject to not unreasonably interfering with conduct of lessee’s trade), the rules for service of notices on lessor and lessee (cl 16) and noted that the clause headed ‘redevelopment and relocation’ was deleted from the lease.

20 The applicant also relied on the Act, in particular s 33, s 34 and s 34A. These provisions are non-excludable (s 7). They belong to Part 4 of the Act headed ‘Alterations and other interferences with the shop.’ Section 33 requires lessors to give two months notice in writing of ‘any alteration or refurbishment of the … retail shopping centre.’ Section 34 (set out later in these reasons) provides for a lessee to be compensated for various forms of interference or disturbance for which the lessor is or should be responsible. These proceedings focussed on the circumstances referred to in s 34(1)(a) (inhibition of access in any substantial manner), s 34(1)(b) (action inhibiting or altering the flow of customers to any substantial extent), s 34(1)(c) (unreasonably taking action that causes significant disruption, or has a significant adverse effect on the trading of the lessee). Section 34A deals with the requirements applicable to relocation of tenants.

21 The applicant made several submissions as to the inadequacy of the procedures adopted by the respondents in informing the tenants of the proposed redevelopment. The applicant submitted that there was a prima facie case that the respondents had not observed the requirements of s 33. The applicant contended that it was not enough merely to make a general announcement, invite tenants to presentations and make available plans and staff to discuss them. So far as s 34 was concerned, the applicant referred to the extent of the works to date (Stage 1) and to the works proposed (Stages 2 and 3) and contended that the past and future works contravened s 34 and founded a case for compensation. Section 34A has been given less attention at this stage, but it is said to be relevant to the negotiations that took place between the respondents and the applicant over relocation of his shop so as to enable works to be pursued now affecting the area he currently occupies.

22 It is helpful to set out ss 33 and 34. Section 33 provides:

33. Lessee to be given notice of alterations and refurbishment

23 Section 34 of provides:

34. Lessee to be compensated for disturbance

(1)

and the lessor does not rectify the matter as soon as reasonably practicable after being requested in writing by the lessee to do so, the lessor is liable to pay the lessee reasonable compensation for any loss or damage (other than nominal damage) suffered by the lessee as a consequence.

24 The applicant agreed with the respondent that the principles enunciated in relation to the grant of interim relief in Beecham Group Ltd v Bristol Laboratories Pty Ltd (1968) 118 CLR 618 (Beecham) were relevant. The applicant submitted that these principles should not be strictly applied in relation to the undertaking for damages. The applicant was not prepared to give such an undertaking. The applicant contended that this requirement should not be applied strictly in cases such as the present involving a small tenant seeking to challenge the conduct of major works. The respondent submitted that the principles should be strictly applied, and no interim relief should be granted even if a prima facie case of breach is shown, if the tenant was unwilling to indemnify the respondents against loss by way of an undertaking as to damages.

25 We note that while the interim order application initially proceeded on the basis that interim relief of the kind sought could be sought in relation to both a retail tenancy claim and an unconscionable conduct claim. As it proceeded counsel for the applicant, Mr Tonking, concentrated on alleged contraventions by the respondents that might support a retail tenancy claim (e.g. breaches of s 33 and s 34).

26 Counsel for the respondents, Mr Hodgson, contended that interim relief by way of conduct orders was not available under the Act in respect of unconscionable conduct claims. Section 72A(1) permits the Tribunal only to make money orders in respect of unconscionable conduct claims. Mr Hodgson submitted that the power to grant interim relief given by sub-section (4) must be read down to the same effect. While the matter has not been fully argued in this case, the Tribunal considers that the submission has merit. The position in relation to retail tenancy claim orders is that a wide range of money and conduct orders can be made (s72(1)) and, consequently, the power to grant interim relief (s72(4) is correspondingly wide.

Evidence

27 The hearing took place on 30 April, 1 May and 8 May 2002. At the commencement of the hearing the parties informed the Tribunal that mediation had been unsuccessful. The Tribunal conducted a view on 30 April.

28 The applicant filed a statement, gave sworn evidence and was cross examined.

29 The respondent relied principally on sworn statements and oral evidence given by Mr Tony Richards, who is employed by Jones Lang LaSalle, who are retained by the respondents to manage the centre. Mr Richards is the general manager of the centre. He gave oral evidence and was cross examined.

30 Mr Richards' principal affidavit annexed numerous documents relating to the lease, the steps taken by the respondents to inform tenants of the proposed redevelopment, negotiations with the applicant in relation to relocating elsewhere on the mezzanine level during the building works, the schedule of works and the handling of complaints by tenants in relation to the works. Mr Richards was cross examined.

31 The respondent also called the assistant centre manager, Mr Jamie Barclay, assistant development manager with the second respondent, Mirvac, who gave brief evidence; Mr Matthew Gralton, the project manager for the redevelopment employed by Cadence Australia Pty Ltd, superintendent of works, the head contractor being AW Edwards Pty Ltd; and a quantity surveyor, Mr Phil McColl of Napier & Blakeley Pty Ltd.

The Circumstances

32 The applicant took over the food outlet known as C'est La Vie on or about 10 March 1995 under an assignment of lease from the original lessor, Restidol Pty Ltd following purchase of the business.

33 The date of commencement of the original lease was 1 December 1994 with a term of 8 years due to expire on 30 November 2002. There was no option for renewal. The rent payable under the lease was set initially at $29,140 p.a. with provision for two yearly market reviews. Under the deed of assignment the rent review periods were amended to annual, and the permitted trade was varied to the following: frozen yoghurt, milk shakes freshly squeezed juices, fruit salad, bottled health drinks, fruit yoghurts, fruit smoothies, health muffins and fruit pieces. The sale of coffee was specifically excluded. The current rent is approximately $5,600 per month, $67,200 p.a.

34 The premises occupy the area marked 'MG7' in the food hall situated on the mezzanine level of the shopping centre. There are six other food outlets on the mezzanine level, and the area includes tables and chairs in a common area, in the manner typical of modern food courts.

35 The mezzanine level is Level 5 of the tower. The ground level, Level 4, is mainly given over to retail shops. The ground level has a number of points of direct access from the surrounding streets. The most prominent point of access faces George Street, and there is another point of access from the southerly side street, Margaret Street. Margaret Street rises from George Street as does the street on the northerly boundary of the tower, Jamison Street. The Jamison Street entry is so arranged that one can proceed directly from it into the mezzanine level, or walk down steps to an entry on the ground level.

36 The proposed orders refer specifically to the Jamison Street entry. The significance of this entry for the applicant is the closest outlet to the Jamison Street entry. On the left of the Jamison Street entrance is a vacated shop (formerly John Burton Shoes). Beyond the shop window the passage leads to the food court. The applicant's outlet is the first and only shop to the left as one enters that area. The other outlets are in a semi-circular formation to the right. All of the outlets face towards a central point reached by escalators. The escalators provide up and down access between the ground level (Level 4) and the mezzanine level (Level 5). The escalators in turn rise from an open area on Level 4. That area is the hub of Level 4, and it is the point at which the entry ways from George Street and Margaret Street meet. Most significantly the hub lies at the end of an underground concourse linked to Wynyard Station.

37 The respondents first advised tenants of its intention to undertake a redevelopment of the shopping centre in May 2001. They conducted a formal presentation for tenants in July 2001. A second presentation was conducted in October 2001. The building contract was executed on 23 October 2001. Though there was some dispute over this matter at hearing, the Tribunal is satisfied that works commenced in November 2001, with the workers coming on site on Melbourne Cup Day, 6 November 2001. Significant works commenced later in the month, on or about 22 November 2001.

38 The applicant along with the operators of five of the other six outlets was a signatory to a letter to the development manager dated 2 October 2001 expressing several concerns about the proposed redevelopment, about their economic situation and other matters.

39 The event of significance that had led the respondents to consider redevelopment had been the decision of Westpac Banking Corporation (Westpac) to vacate the building. Westpac originally owned the building, built in 1980. It had sold the building to the first respondent in 1983. The second respondent acquired a half share in 1998.

40 Westpac had conducted a major branch on the ground level in a portion of the building close to the corner of George and Margaret Streets. It had an appearance which distinguished it from the shopping centre and the main tower, involving continuous glass walls. It was described in the proceedings as the Banking Chamber. The Banking Chamber covered part of the ground level (Level 4) and the mezzanine level (Level 5). In addition Westpac occupied two of the ordinary floors of the tower. In total there were 350 Westpac employees in the building. The respondents' evidence was that Westpac provided 11.5% of the occupancy of the building.

41 The redevelopment works are divided into stages. Stage 1 is now complete. That stage has mainly involved work redesigning the Banking Chamber area, and work affecting Level 4 (the ground level) of the shopping centre. The next stage is Stage 2, a 6 week stage due to commence 15 May 2002, following by the final stage, Stage 3 scheduled to be completed by the end of August 2002.

42 The aspects of the Stage 1 work about which the applicant has expressed the most concern relate to noise (for example drilling on the ground level), the impact of the works on customer traffic through the food court, and most importantly the placement of hoardings at the Jamison Street entrance and around the old John Burton Shoes shop. He is more apprehensive about Stages 2 and 3. During Stages 2 and 3 it is intended to undertake significant work in relation to the hub area of the concourse off which the escalators run. There is to be an escalator installed connecting Level 4 to Level 3, and the escalators connecting Level 4 and Level 5 are to be redesigned so that they are closer together than at present. According to the respondents, it will be necessary for a period to have only one of the two escalators operating with a temporary staircase being built to accommodate people moving in the direction opposite to the way the single escalator is running. The respondents intend that the escalator will be set in whatever is the busy direction at the relevant time of day. The escalator work is scheduled for the period 8 July to 15 August 2002.

Principles

43 The Tribunal has indicated in the past that it is appropriate to be guided by the equitable principles as to interim relief, though it has doubted whether it should be strictly bound by them: Townsend v Chief Executive, State Rail Authority [1999] NSWADT 56. The principles are well known, are seen as relevant by the parties and were itemised in the leading case, Beecham, as follows:

Preston v. Luck

Challender v. Royle

Attorney-General v. Wigan Corporation

Linfield Linen Pty. Ltd. v. Nejain

Plimpton v. Spiller

5. This is generally true, but in a particular case it may be that although the plaintiff has shown a probability of success other considerations make it unjust to grant an injunction, especially if another form of interlocutory relief is possible. The second inquiry is directed to this aspect of the matter. It is whether the inconvenience or injury which the plaintiff would be likely to suffer if an injunction were refused outweighs or is outweighed by the injury which the defendant would suffer if an injunction were granted. It is of course to be remembered that if an injunction be granted it will be upon terms of the plaintiff submitting, in the event of his ultimately failing, to such order as to damages as the Court may make in order to compensate the defendant for any injury caused by the injunction ; and likewise it is to be remembered that if the injunction be refused the defendant may be required to keep an account of the profits he makes from the course of conduct of which the plaintiff complains, so that ... the quantum will be readily ascertainable. (at p623)'

44 Prima Facie Case. The applicant gave evidence as to his history as a tenant, receipt of the letter informing him of the proposed redevelopment, his attendance at two presentations (July and October 2001). He said that the main matter he had been concerned about was where he would be located in the refurbished centre. He had learnt at the presentations that he would not remain in an area marked ‘MG 7’ but instead would be placed in an area marked ‘MG 18’. He said that he supported the respondents in their judgment that the centre should be modernised. The letter that he had co-signed in October from tenants to management had, he agreed, raised a number of concerns including a perceived shift of customers to recently modernised food courts in nearby buildings such as the Australia Square tower. The applicant gave evidence as to the respondents’ offer to relocate him immediately and to grant him a lease in the refurbished centre in return for obtaining clear access to his current premises ahead of 30 November 2002. These negotiations are recorded in annexures to the affidavit of Mr Richards (Ex B).

45 The applicant referred to the noise that had affected the amenity of his shop resulting from the building works on level 4 and near the Jamison Street entrance. He referred to the erection of hoardings around the Jamison Street entrance. He produced photographs showing the hoardings around January 2002. He complained of the way in which they had intruded on to the footpath of Jamison Street, thereby affecting access to the Jamison Street entrance.

46 The applicant’s first 'request in writing' for the purposes of s 34 was given in the notice of 25 March 2002. The respondents’ undertakings given at the first hearing on 15 April 2002 covered the applicant’s concern over protrusion of the hoardings. They have now been brought into close alignment with the side of the building.

47 As to the future, he expressed concern over the potential impact on his trading position of the further works proposed around the Jamison Street passageway, the closure of one of the two escalators and the disruption likely to be caused by work in the common areas and in neighbouring tenancies.

48 He was cross examined closely on the notice issue. His evidence was that his only concern initially was as to where he stood in relation to obtaining a new lease, and why he was not shown as continuing to occupy ‘MG 7’ on the new plans. He acknowledged that he had not initially appreciated the nature of the works, in particular the variation to the alignment of the passageway to and from Jamison Street, and the reconfiguration of the escalators.

49 The principal evidence for the respondents was given by Mr Richards, centre manager. Mr Richards' evidence was in addition to a detailed affidavit which had attached to it numerous documents dealing with the history of the redevelopment project, plans and the plan of works. The contract price for the project is $6.8 million.

50 The respondents' current leases with the operators of the food court outlets, including the applicant, do not include an option for renewal. No commitments have been made to the current operators in relation to renewal. The lessees have been held strictly to the terms of their lease. There has been no rent adjustment or other financial concession made to the tenants, including the applicant, as compensation for any disturbance that might be said to flow from the current works or in respect of any downturn in trade that might be said to flow from the withdrawal of the building's major tenant, Westpac which had been completed in September 2001.

51 The applicant presented evidence as to his downturn in trade since July 2001. He provided a schedule setting out his gross turnover on a monthly basis since January 1997. The trendline is one of steady, and sometimes, significant improvement in all calendar years to the end of 2000. In the first 7 months of 2001 the receipts are about the same (sometimes a little higher, sometimes a little lower) than they were for the comparable months of 2000. The first sign of a possibly significant downturn in trade is found in the August 2001 figures, which are 17% below the comparable figures for August 2000. This trend worsens in September 2001 with the figures being 26% below. That difference is repeated in October 2001. The comparable position worsens to 30% in November 2002, and worsens further to a 42% fall in December 2002. The comparable fall for January 2002 is 44%, it is 42% for February 2002 and out to 47% for March 2002 (the last figure supplied).

52 The warmer months are the peak demand months for the applicant's products. The applicant's October 1999 to March 2000 gross receipts were (rounded down) $166,000; for 2000-01, $197,000; and for 2001-02, $147,000. His receipts have fallen by 26% as compared to 2000-01 and by 12% as compared to 1999-2000.

53 The applicant's evidence is that he is trading at a loss. The figures are consistent with his evidence.

54 Counsel for the respondents, Mr Hodgson, submitted that the Tribunal should not give any significant weight to this material in relation to possible losses. He pointed to the absence of more detailed particulars in the material presented. On the other hand counsel for the applicant, Mr Tonking, suggested that if the respondents had a problem they could exercise their powers under the lease to audit his client's books. Mr Hodgson responded that it was the applicant's case to make. The figures are the best evidence available at this stage of the proceedings. The Tribunal is satisfied as to the applicant's credibility in this regard, and they can in our view be given weight.

55 Clearly the applicant is of the view that the current works at the site are having an adverse impact on his ability to trade profitably. Mr Hodgson pointed to the fact that a downturn had commenced to occur before Westpac vacated, when the building was still fully occupied. He also referred to the contents of the tenants' letter of 2 October 2001 which referred to a range of factors of concern to them regarding the economic and trading environment of the centre. The letter mainly focused on concerns over the general retail trading environment in that part of the city, as well as the wider economy.

56 The Tribunal agrees with the respondents that on the present evidence it is difficult to attribute the downturn reflected in the August and September figures to building-specific factors. But there is a further dramatic fall in the figures in December 2001 which has continued. This decline belongs to the time when the redevelopment works have been occurring, and to a time when a major shop on the Jamison Street entry has been vacated, with hoardings subsequently erected. Mr Richards said that John Burton Shoes had vacated in August 2001 and he had been unavailable to find a suitable tenant on a month to month basis.

57 As to the general effect of the works on customer flow, Mr Richards said that the centre was mainly used by regular customers. On a number of occasions he spoke of the centre being a well known ‘ant track’ for people going to and from Wynyard station. He was sceptical that the works had had any significant effect on customers’ use of the centre. He was inclined to the view that other factors affecting that part of the city were more significant such as those referred to in the tenants’ letter of 2 October 2001.

58 In support of these views, the respondents placed in evidence charts that showed the number of events of movement recorded by light beam monitors placed at various locations around the centre. They show a relatively small downward decline in movements over the building period including in the Jamison entry area. The Tribunal has given little weight to this material, in circumstances where the devices may record a tightly bunched group of people as a single movement, and record tangible objects such as strollers and trolleys as single movements. There is also likely to be movements recorded wholly connected with the current building works. There were also periods when the beams were not in service, and no count recorded.

59 The Tribunal is satisfied on the evidence presently available (this is an interlocutory hearing) that the building works have had an impact on the applicant's ability to trade profitably. The degree of that impact has yet to be assessed. We acknowledge the respondents' observation that there may prove to be an issue as to how significant or substantial that impact is. The present evidence points to the possibility that 20 to 25 per cent of the applicant's trading downturn is attributable to a combination of the redevelopment work, its deterrent effect on customers and the lower number of occupants of the building as a result of the non-letting of the old Westpac space.

60 Accordingly in relation to the question of whether the applicant has an arguable case that the lessors have caused disruptions through their works, the Tribunal is satisfied that there is an arguable case for relief in relation to the disruption that has occurred so far.

61 There is on the present evidence substance in the applicant's concern that as the works more closely involve the mezzanine level, in particular the closing off of areas close to the escalators, the reduction of the escalators to one, with a stair as the alternative, that there will be a further adverse impact on an already very difficult situation.

62 We do not accept the respondents' contention that works of the kind that have occurred (Stage 1) and works of the kind due to commence on 15 May 2002 (Stage 2 and Stage 3) will cause no appreciable disruption to trading conditions or to the profitability of food court businesses.

63 Mr Richards explained in evidence why the decision was taken to keep the shopping centre operating, rather than to seek to have all tenants vacate, obtain a clear site and then reopen. Mr Richards' evidence was that it was preferable, wherever possible, to keep a centre operating rather than to close it down completely. The Tribunal acknowledges that continuity of operation may be important in retaining customer support, and that the position in relation to rebuilding support may be even more difficult if the centre has been out of action for a significant period.

64 As already noted, this is a case in our view where the evidence so far received points to a diminution in profitability. The downturn commenced in August 2001. The first downturn that could reasonably be attributed to the state of occupancy of the building and to the building works are those of November and December.

65 Lateness of Complaint: A discretionary consideration negative to the applicant’s application is the lateness of any action taken by him to register his concerns with the respondents. It was not until 25 March 2002, after the new lease negotiations had broken down, that the applicant made a formal claim under s 34 of the Act on the lessors.

66 The applicant's evidence was that he could not afford to pay a higher rent connected with the proposed new location (MG 18), or to absorb the costs of a complete refit (as to which his uncontested evidence was that the costs, largely because of the refrigeration requirements affecting his products, would be of the order of $180,000).

67 The circumstances of that negotiation form part of the grounds for the unconscionable conduct claim.

68 While our present interpretation may be displaced at a full hearing, it would seem that during the period October 2001 to February 2002, the applicant, having regard to his commercial interests, desisted from pressing any claim that he might have had in relation to the adverse impact of disturbance. While again this interpretation may be displaced at a full hearing, we also attach some significance to the fact that there is no complaint from the applicant recorded in the complaint log as to disturbance during this period or at any time. As we see it at this point, the applicant did not act at the earliest opportunity once he formed the view that the site works were having a direct impact on his business.

69 This is a factor that counts against the grant of interim relief.

70 Damages as an Adequate Remedy: The kind of complaint made in this case is not one that can, the Tribunal considers, be adequately met by an award of damages if contravention is shown. The parties are in a continuing relationship. One party complains that the other is continuously breaching the terms of that relationship. The tenant is entitled to quiet enjoyment of the premises, and to be able to undertake trade in circumstances that are attractive and convenient to customers. A tenant is clearly better served by orders that restrain disruptive activities on the part of the lessor, rather than having to bear the financial consequences in the short term, and deal with them by a money order. The Tribunal is satisfied that damages are not an adequate alternative remedy in a case of this kind.

71 Undertaking as to Damages: As noted earlier, the respondents submit that the requirement of an undertaking as to damages should be strictly applied.

72 The respondents’ evidence is that it would cost an additional $10,000 per day, or $1.21 million for the 121 days of work still to come. This evidence was given by quantity surveyor, Mr McColl, who had regard in turn to the evidence of Mr Gralton, works manager for the site superintendent, Cadence Australia.

73 The evidence of Mr McColl appeared to relate to a general closure of the works during the ordinary trading day. As reformulated, the applicant’s application does not go that far. He has asked for the escalator work to be done out of hours, and for the Level 5 work to be done out of hours. The Tribunal is not satisfied that alterations in work arrangements to meet those orders would give rise to as high a cost as has been estimated by Mr McColl.

74 While the Tribunal accepts generally Mr Gralton’s evidence based on his experience that construction projects undertaken out of hours have a number of additional cost factors not associated with ordinary hours work, it is not possible to reach any close estimate of the potential cost at this stage. Mr Gralton said that the consultations that were necessarily required as works proceeded could often not be contacted overnight as the people who might need to be consulted (structural engineer, architects, for example) might not be available. He also said that site supervision was in his experience more difficult at night. His experience was that work proceeded more slowly, and that the job cost 'twice as much'. The evidence was that of a supervisor of experience, and to that extent it has value. On the other hand he was not able to precisely quantify the cost, and there was no evidence given as to offsetting positive factors that might be involved with night work, such as having a site clear of pedestrian traffic.

75 The Tribunal accepts, nonetheless, that additional costs of some magnitude would be incurred if the out of hours work sought by the orders was required.

76 Measured in thousands of dollars, it may well be that any interference with the works by way of an interim order may cost the respondents far more than the amount of any losses to the tenant.

77 On the evidence presently available, the most likely starting point for measuring the applicant's loss might reasonably be the 20 per cent fall as against last year that was experienced in November and has continued. If, as would seem likely, there is a further impact on trade due to the works to occur in Stages 2 and 3, that would have to be taken into account. Using the 20 per cent figure, the annualised effect on turnover would be of the order of $70,000. If the ultimate figure were to be say 30 per cent (i.e. say a fall of a further 20 per cent over the remaining months of the lease) the turnover loss could be as high as $100,000. From that loss would need to be deducted input costs not incurred. For the sake of the present discussion, any damages on this aspect of his claim that might ultimately be awarded could possibly be in the range of $50,000 to $100,000.

78 Mere comparison of the dollar sums of losses does not, of course, measure their impact on the overall economic position of the parties. The trading losses that the applicant is experiencing and facing may well be catastrophic or, at least, significant. The Tribunal has no detail of the applicant's overall economic position, apart from his evidence that he conducts another similar type of food outlet at Town Hall Station. The economic position of the respondents is not at risk. The first respondent is a wholly owned subsidiary of the Commonwealth Bank. The second respondent is controlled by a major public company.

79 This discussion highlights some of the difficulties connected with a strict insistence on the law of equity's requirement that the applicant for interim relief be required to give an undertaking as to damages.

80 As to whether the application should fail solely on the grounds of a failure to give an undertaking as to damages the Tribunal makes the following observations.

81 The Retail Leases Act 1994 was, as Mr Tonking submitted and Mr Hodgson agreed, remedial legislation. Its primary focus is the relationship between lessors and lessees in retail shopping centres. The original Act addressed the problems connected with disruption, refurbishment and demolition.

82 The 1998 amendments (the Retail Leases Amendment Act 1998) introduced into the Act provisions under which lessees may sue lessors for unconscionable conduct, reflecting the Parliament's concern over the conduct of some lessors in their management of shopping centres. (The unconscionable conduct provisions commenced on 12 October 2001; and the provisions do not apply to conduct occurring before that date: Act, s 62A.) The 1998 amendments also extended the range of orders that the Tribunal could make in relation to retail tenancy claims, and introduced the power to grant interim relief.

83 If it become a rule in retail lease disputes where interim relief was sought that the applicant for relief be required to give an undertaking as to damages, a lessee of limited means and economic resources would rarely, if ever, be able to obtain interim relief so as to preserve the status quo and prevent any further deterioration of their position, pending final resolution of the issues.

84 The principle to which the requirement that there be an undertaking is addressed is, of course, an important one. It is to protect defendants against suffering irretrievable financial loss (in this instance through not being able to proceed with a substantial program of works).

85 Meagher, Gummow & Lehane, Equity: Doctrines and Remedies (3rd ed. 1992) states at para 21.81: 'The importance of an undertaking is immense, as in the absence of an undertaking a defendant who is ultimately victorious at the final hearing has no recourse to recover the damages he may have incurred from complying with an interlocutory injunction …'. The learned authors refer to some cases where an undertaking has not been required.

86 They refer to two cases where a plaintiff's poverty was seen as justifying non-requirement of the undertaking: Dein v Bailey [1960] NSWR 385; Szentessy v Woo Ran (Australia) Pty Ltd (No 1) (1985) 64 ACTR 98. At n 152 on p 603 they criticise this exception 'as it would mean that the res publica would be held to ransom by paupers.'

87 In contrast, Lord Denning MR in Allen & ors v Jambo Holdings Ltd & ors [1980] 2 All ER 502 (Court of Appeal) commented in the context of an application for a Mareva injunction to restrain a defendant from taking assets (an aircraft) out of the jurisdiction and where the plaintiff was unable to give an undertaking as to damages (at 503):

‘I do not see why a poor plaintiff should be denied a Mareva injunction just because he is poor, whereas a rich plaintiff would get it. One has to look at these matters broadly. As a matter of convenience, balancing one side against the other, it seems to me that an injunction should go to restrain the removal of this aircraft.’

88 Shaw and Templeman LJJ agreed with Lord Denning’s observations.

89 Meagher, Gummow and Lehane also criticise cases dealing with the question of whether private individuals seeing a statutory injunction 'in the public interest' (for example under trade practices or environmental laws) where the court has raised the possibility of or allowed the person to be absolved from providing the undertaking: Commercial Bank of South Australia v Insurance Brokers Association of Australia (1977) 16 ALR 161; Ross v State Rail Authority of New South Wales (1987) 70 LGRA 91.

90 In the latter case, Ross, the landowner was seeking to restrain the defendant from having access to her property in order to undertake works in connection with the construction of a communications tower on neighbouring land. She had not been consulted in relation to the development consent given by the local council, and now wished to challenge it in the Land and Environment Court. She sought an interim order restraining works until final hearing of her claim. The Court considered that landowner had a good arguable case for the relief sought.

91 She was unable to give an undertaking as to damages. The Court considered that to be one of the many factors to be taken into account in the exercise of the Court’s discretion (at 93). The Court said (at 93): ‘On the material before me, I conclude that the [defendant] has been less than compassionate and frank in their dealing with [the plaintiff].’ The Court examined a wide range of authorities including authorities dealing with the role of the private citizen in securing compliance with environmental statutes. The Court (Cripps CJ) said at 100:

‘It would seem to me, therefore, that where a strong prima facie case has been made out that a significant breach of environmental law has occurred, the circumstances that an applicant is not prepared to give the usual undertaking as to damages is but a factor to be taken into account when considering the balance of convenience.’

92 Retail leases law also has a public policy setting, though no doubt not seen by many as being as significant as the place occupied by environmental protection laws. The relationship between retail shop tenants and lessors is no longer a matter of private contract. The Act introduces binding, minimum standards. The Tribunal is not prepared to endorse as a precondition to the grant of interim statutory relief under the Act the giving of an undertaking as to damages.

93 Other Factors: Mr Hodgson submitted that account should also be taken in exercising any discretion of the impact that grant of the orders proposed would have on the workers and firms involved in undertaking the building works. He referred to the possibility that losses may be incurred by the parties to the various contracts that interconnect with the main redevelopment contract. I do not regard this as a significant consideration. If the Tribunal considers that the orders are justified, it is for the respondents to address their practical consequences including the issue of where contractual liabilities for late completion may fall.

94 On the other hand the Tribunal should give some regard to the interests of other tenants and of the community value in having shopping centres upgraded periodically. It is, in my view, of some relevance that other food court tenants have not brought action. The position of the applicant would be somewhat strengthened if all or most tenants were making the same complaint.

95 The orders as proposed by the applicant in their final form are not extreme. Mr Gralton acknowledged that it was common in CBD redevelopment and rebuilding projects for work to be confined to night time or out of normal trading hours.

Consideration of Proposed Orders

96 As noted earlier, there are four proposed orders.

97 Activities connected with the Jamison Street Entry: Orders (a) and (d) focus on the applicant's specific concern over works around the Jamison Street entry.

98 The Tribunal can see no practical difficulty, for the respondents in meeting the terms of order (d)(ii), i.e that there is maintained in the vicinity appropriate signage indicating the location of the Jamison Street entrance to the centre and the names of the food outlets located on the mezzanine level of the centre. There has been no suggestion in the proceedings that compliance with order (d)(ii) would impose any significant cost on the respondents.

99 The order sought is consistent with what the Tribunal sees as good practice in connection with undertaking of a shopping centre redevelopment while it continues to trade.

100 The Tribunal is prepared to grant the proposed order (d)(ii) in the following or similar terms, i.e.

That the respondents maintain in place in the vicinity of the Jamison Street frontage appropriate signage indicating the location of the Jamison Street entrance to the Centre and the names of the food outlets located on the mezzanine level of the Centre.

101 As to proposed order (d)(i), the Tribunal makes the same observations, and is accordingly prepared to grant the substance of that order in the following or similar terms, i.e.

That the respondents maintain in place hoardings connected with works in the vicinity of the Jamison Street frontage so that they are aligned as close as possible to the property line of the Centre.

102 We see the above order as continuing to deal with the situation that was the subject of undertakings by the respondents on 15 April 2002. The applicant is concerned, understandably giving his trading location, to ensure that there is no or minimal impact on the ability of people to walk on that side of Jamison Street and enter through the Jamison Street entry. That concern is expressed in the last part of the applicant’s proposed order, but we do not see a need to include it the terms of the order.

103 Proposed order 1(a) also relates to the Jamison Street entry. The order sought is that:

the respondents be restrained from altering the location or dimensions of or finishes to the Jamison Street entry to the Metcentre Food Hall.

104 The respondents' evidence is that the plans as now being implemented involve a variation to the location of the Jamison Street entrance. The respondents will at some point need to undertake works that involve reorienting the passageway. It is intended to shift the entry point, and ultimately that will, as we understand the plans, track across the area occupied by the site presently occupied by the applicant. The applicant as the proposed order reflects is also concerned that the dimensions, most importantly the width, of the entry will be not be altered in a way that affects the degree to which it is accessed by the public.

105 In light of the material presently before the Tribunal, there is substance to the concern. The plans provide for such changes. The date for the completion of works is well ahead of the contract date for completion.

106 In the Tribunal's view it would be appropriate for the respondent to adjust its plan of works so as to provide for the work on the Jamison Street entry to be undertaken at times that do not overlap with the time in which the food centre is busy. According to the respondents the applicant ceases trading at around 2.30 pm and this is true of most traders in the food court. As the Tribunal understood the evidence, the food court is busy during the morning and, especially at lunch time, but is much quieter after that. There will be some cost impact on the respondents but, in our view on the material presently available, it is not likely to be significant.

107 An appropriate order would be -

to require the respondent to refrain from any work that obstructs the Jamison Street entrance between the hours of 7 am and 3 pm.

108 The Tribunal is not disposed on the present material to prevent the overall concept reflected in the plans for the Jamison Street entry (i.e. dimensions, finishes) being delayed until the expiry of the tenancy, but is prepared to make an order to the following effect:

The respondents should ensure that the schedule for works affecting the Jamison Street entry arranges for any work to be completed in as few days as practicable restriction of and in a manner that minimises as far as practicable the use of the entrance by members of the public.

109 The Tribunal does not regard the above orders as having any significant economic impact on the ability of the respondents to progress the works pending final hearing of the application. All of the matters so far addressed are of a kind which should have been capable of resolution through good site management practices or mediation.

110 Activities connected with the Escalators and the Food Court Area: Proposed orders (b) and (c) involve more significant interferences with the proposed works and the schedule of works and would have some significant economic impact on the respondents.

111 To reiterate, proposed order (b) is to require the respondents to take out of operation during normal business hours on weekdays (7:30 am to 4:30 pm) (save for urgent repairs) either escalator between the mezzanine and ground levels (levels 5 and 4) of the centre.

112 Proposed order (c) is to require the respondents to carry out during normal business hours on weekdays any redevelopment all refurbishment works: (i) on the common areas on level 5; and (ii) on any of the tenancy is all proposed tenancy areas comprised in the mezzanine level of the centre, with the exception of those contained within the area previously occupied by Westpac Banking Corporation.

113 The Tribunal is satisfied on the material presently available to use that there is substance in the applicant's apprehension that having only one of the two escalators operating will have an adverse impact on his trading position, and therefore there is prima facie a contravention of, at least, s 34(1)(a) of the Act. There is also substance in the applicant's apprehension regarding the effect of works on the mezzanine level.

114 The applicant's proposal for the relevant work to be undertaken in a manner that preserves availability of both escalators during the ordinary trading day is reasonable on its face. The proposal that there be no disruption to trading activities during the ordinary trading days on the mezzanine level also seems reasonable on its face.

115 It has not been possible at this stage to obtain from the respondents a clear assessment of the economic impact on them on fitting in with these requests. They understandably prepared their reply to the applicant’s case on earlier versions of the proposed interim orders.

116 The Tribunal notes that the work on the escalators is not scheduled until 8 July. At this stage it does not seem to be necessary to make an interim order in that regard. It would be preferable to have the respondents provide more precise economic impact evidence and any plan that might ameliorate the inconvenience that might result from there only being one escalator in use before considering the application any further.

117 As to work on the mezzanine level, again it would be preferable for there to be fuller economic impact evidence and evidence as to any plan that might ameliorate resulting inconvenience. The Tribunal understands that the work schedule for Stage 2 does involve from the outset works affecting the mezzanine level. Nonetheless it is not proposed to make any order at this stage.

118 The Tribunal's recommendation to the respondents is that they seek to devise a work schedule that limits activity that is likely to affect the amenity of the food court from the point of view of customers and traders to times when it is not in active operation. In that regard in light of the evidence to date it may be that such work can be confined to times before 7.30 am and after 2.30 pm.

119 It is highly desirable that the liability issues raised by these proceedings be determined quickly. If there are findings of liability then it may be appropriate to enter conduct orders covering the remainder of the term of the lease that go to the issue of the escalators and disruptive work on the mezzanine level. The Tribunal recognises the difficulty that the applicant might have of quantifying losses until such time as he leaves the premises. It may be possible in any proceedings, if there is a finding of liability against the respondents, to quantify losses to that point, and in that way provide a guide as to how future losses might be quantified. But that assumes that any contraventions remain of the same in degree in the future period.

120 To that end directions will need to be given to bring the case on for hearing quickly, preferably in June before any escalator work is to commence.

Other Issues

121 As noted earlier, a number of issues were canvassed in the hearing which have not been the subject of detailed consideration in these reasons, including some pressed as relevant to the exercise of discretion in respect of the interim order application.

122 As is evident from the reasons above, the Tribunal has not given them all close account on this occasion. At this point the Tribunal has mainly focussed on the question of whether there is an arguable claim under s 34 and the relative economic impact on the parties of the proposed orders. The issues raised by the evidence to date which are yet to receive close consideration are these:

(2) Various issues that arise under s 34. The respondents question whether they have contravened this provision on the basis that any inhibition to access to the applicant's premises caused by the redevelopment works is not 'substantial' (s 34(1)(a)), that the works have not inhibited the flow of customers to the shop to any 'substantial extent' ((b)), that it has not 'unreasonably' taken any action 'that causes significant disruption' ((c)), that its action has not had a 'significant adverse effect' on the applicant's trade ((d)). In those regards it is necessary for the Tribunal to have regard (s 34(2)) to whether the lessor 'has acted in accordance with recognised shopping centre management practices'. There is little evidence on the latter matter at this stage.

(3) The relevance of s 34A provisions dealing with lessor's obligations in respect of notices of relocation.

(4) The extent to which conduct by the respondents occurring after their commencement date is relevant to the considerations that the Tribunal may take into account in determining an unconscionable conduct claim (see s 62B).

123 The parties are requested to prepare minutes of order reflecting the Tribunal's decision.

Order

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Citations

Nam v Commonwealth Funds Management Limited [2002] NSWADT 80

Most Recent Citation

Nam v Commonwealth Funds Management Limited (No. 2) [2002] NSWADT 120

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Townsend v Chief Executive, State Rail Authority [1999] NSWADT 56

CITATION:	Nam & anor -v- Commonwealth Funds Management Limited & anor [2002] NSWADT 80 revised - 16/05/2002
DIVISION:	Retail Leases Division
PARTIES:	APPLICANTS Ki Sung Nam Moon Hwi Nam FIRST RESPONDENT Commonwealth Funds Management Limited SECOND RESPONDENT Mirvac Funds Limited
FILE NUMBER:	025043
HEARING DATES:	30/04/2002, 01/05/2002, 08/05/2002
SUBMISSIONS CLOSED:	05/08/2002
DATE OF DECISION:	05/15/2002
BEFORE:	O'Connor K - DCJ (President); Griffiths G - Member
APPLICATION:	Interim order
MATTER FOR DECISION:	Preliminary matter
LEGISLATION CITED:	Administrative Decisions Tribunal Act 1997 Retail Leases Act 1994
CASES CITED:	Beecham Group Ltd v Bristol Laboratories Pty Ltd (1968) 118 CLR 618 Townsend v Chief Executive, State Rail Authority [1999] NSWADT 56 Dein v Bailey [1960] NSWR 385; Szentessy v Woo Ran (Australia) Pty Ltd (No 1) (1985) 64 ACTR 98 Allen & ors v Jambo Holdings Ltd & ors [1980] 2 All ER 502 Commercial Bank of South Australia v Insurance Brokers Association of Australia (1977) 16 ALR 161 Ross v State Rail Authority of New South Wales (1987) 70 LGRA 91
REPRESENTATION:	APPLICANTS A Tonking, barrister RESPONDENTS C Hodgson, barrister
ORDERS:	1) That orders be made reflecting the conclusions of the Tribunal as set out in paras 100, 101, 107 and 108 of the reasons for decision; 2) The parties are requested within two days to prepare minutes of the orders for endorsement by the Tribunal; 3) The matter be relisted for urgent directions when requested by either party.