Nam v Commonwealth Funds Management Limited (No. 2)
[2002] NSWADT 120
•07/11/2002
CITATION: Nam & anor -v- Commonwealth Funds Management Limited & anor (No. 2) [2002] NSWADT 120 DIVISION: Retail Leases Division PARTIES: APPLICANTS
Ki Sung Nam and Moon Hwi Nam (trading as C'est La Vie)
FIRST RESPONDENT
Commonwealth Funds Management Limited
SECOND RESPONDENT
Mirvac Funds LimitedFILE NUMBER: 025043 HEARING DATES: 19/06/2002 SUBMISSIONS CLOSED: 06/19/2002 DATE OF DECISION:
07/11/2002BEFORE: O'Connor K - DCJ (President); Griffiths G - Member APPLICATION: Interim order MATTER FOR DECISION: Preliminary matter LEGISLATION CITED: Retail Leases Act 1994
Retail Leases Amendment Act 1998CASES CITED: Nam & anor -v- Commonwealth Funds Management Limited & anor [2002] NSWADT 80
Aussie Traveller Pty Ltd v Marklea Pty Ltd [1998] 1 Qd R 1 (QCA)
Gordon v Lidcombe Developments Pty Ltd [1966] 2 NSWR 9REPRESENTATION: APPLICANTS
A I Tonking, barrister
RESPONDENTS
C F Hodgson, barristerORDERS: That the respondents, and each of them, by themselves, their respective servants and agents until 1 December 2002 or further order:; 1. Refrain from demolition or construction work within the area on Level 5 of the Food Court in the Metcentre previously occupied by common seating area and now hoarded up at any time between 7 am and 3 pm on weekdays;; 2. Immediately realign and maintain until no longer required the hoarding constructed around the former common seating area on Level 5 so that it does not intrude into the common area and so that the line of sight from the main circular area of the Food Court is restored to the position before the hoarding was erected on or about 1 June 2002.; 3. Conduct all works on Level 5 in a manner which complies with section 34(1) of the Retail Leases Act 1994, in particular paragraphs (a) (no inhibition of access of the applicants to their shop in any substantial manner), (b) (no inhibition or alteration, to a substantial extent, of the flow of customers to the applicants’ shop), (c) (no unreasonable action that causes significant disruption, or has a significant adverse effect on, trading of the applicants).
1 The applicants lease from the respondents retail shop premises on the mezzanine level food court, Level 5, of the Metcentre shopping centre at 60 George Street, Sydney. They have made retail tenancy and unconscionable conduct claims against the respondents pursuant to the Retail Leases Act 1974 (the Act). The dispute relates to refurbishment and redevelopment works being undertaken by the respondents; and their impact on the applicants’ ability to trade. The principal claims remain to be determined.
2 This decision deals with the application for further relief. There is also an application for costs in respect of the earlier proceedings. The costs application will be the subject of a separate decision to be issued soon.
3 This is the second occasion that the applicants have sought urgent interlocutory relief pursuant to s 72(1)(g) pending determination of the principal claims. The applicants’ first application for urgent interlocutory relief was substantially successful: see decision made 15 May 2002 in Nam & anor -v- Commonwealth Funds Management Limited & anor [2002] NSWADT 80. The general background to the dispute was given in the previous decision. The Tribunal’s made these interlocutory orders:
4 It will be seen that the specific orders gathered under item 1, above, deal with activities that affect the entrance nearest to the applicants’ food outlet, the Jamison Street entrance.
‘The Tribunal orders, with effect from 15 May 2002, as follows:
1. The respondents, and each of them by themselves, their respective servants and agents pending determination of the application or other order:
2. The respondents shall within 24 hours of the lodgement provide to the applicants a copy of any modification application lodged by them pursuant to section 96 of the Environmental Planning and Assessment Act 1979 together with written details of the likely duration of the works the subject of the application.
(a) maintain in place in the vicinity of the Jamison Street frontage of the building known as Metcentre, 60 George Street, Sydney (the ‘Centre’) 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;
(b) maintain in place hoardings connected with works in the vicinity of the Jamison Street frontage of the Centre so that they are aligned as close as possible to the property line of the Centre;
(c) shall refrain from any work that obstructs the Jamison Street entrance between the hours of 7 am and 3 pm;
(d) ensure that the schedule for works affecting the Jamison Street entrance to the mezzanine level of the Centre shall be completed in as few days as practicable, and in such manner as minimises, as far as practicable, restriction of the use of the entrance by members of the public.
3. The matter be relisted for urgent directions when required by either party.’
5 The Tribunal did not accede to the applicants’ request for additional orders that would have a wider impact on the works. The Tribunal did, however, acknowledge that there was a reasonable basis for the applicants’ case in those regards.
6 Those additional proposed orders had sought to delay work on the escalators between Level 4 and Level 5, and to restrain all works affecting Level 5 during trading hours.
7 Escalators Issue: The applicants had sought an order seeking to restrain the respondents from taking out of operation during normal business hours either of the two escalators that link the ordinary pedestrian level of the shopping centre, Level 4, to the food court area, Level 5. There is a continuous up escalator and a continuous down escalator. The Tribunal declined to grant the order, noting that the proposed works affecting the escalator were not due to commence until 8 July.
8 The Tribunal did, however, state that it was satisfied that there was substance in the applicants’ apprehension that having only one of the two escalators operating at any time, with a temporary staircase as the alternative for those moving against the flow of the escalator (as was envisaged) would have an adverse impact on their trading position. It concluded that therefore there was a prima facie contravention of s 34(1)(a) of the Act. The Tribunal did not consider it necessary yet to make any interim order in that regard. It stated that:
9 Works affecting Level 5 : The applicants had also sought an order that the respondents not carry out during normal business hours any works in the common areas or the tenanted areas of Level 5 (with one exception). The Tribunal said that it regarded the applicant’s application for a restriction of work to non-trading times as reasonable on its face. The Tribunal stated that:
‘It would be preferable to have the respondents provide more precise economic impact evidence and [provide] any plan that might ameliorate resulting inconvenience.’
Further Orders Sought
‘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.’
10 The applicant now seeks the following further orders in respect of works on Level 5; the escalators issue no longer being pursued for reasons given below.
11 The reference in the substantive orders to 1 December 2002 is connected to the terms of the lease. The expiry date of the lease is 30 November 2002. There is no option to renew; and the respondents have advised the applicants that they do not intend to offer them a lease in the redeveloped centre.
‘Order that the respondents, and each of them, by themselves, their respective servants and agents until 1 December 2002 or further order:
1. refrain from demolition or construction work within the area on Level 5 of the Food Court in the Metcentre previously occupied by common seating area and now hoarded up at any time between 7 am and 3 pm on weekdays;
2. refrain from and not permit any other demolition or construction work on Level 5 of the Food Court at any time between 7 am and 3 pm on weekdays which causes any undue noise, dust or disturbance;
3. immediately realign and maintain until no longer required the hoarding constructed around the former common seating area on Level 5 so that it does not intrude into the common area and so that the line of sight from the main circular area of the Food Court is restored to the position before the hoarding was erected on or about 1 June 2002.’
View
12 The present application was heard on 19 June 2002. Prior to the hearing a view was conducted. As the works are ongoing, there had been changes in the shopping centre since the previous view on 30 April 2002 referred to in the previous decision.
13 At the view the respondents’ representative, Mr Gralton, project manager, advised that the orders of the Tribunal made 15 May 2002 had been complied with. The new signage and hoardings were pointed out.
14 Mr Gralton said a solution had been found to the escalators issue. It was now proposed to relocate the right hand side escalator (as viewed from the Wynyard station underground entrance to Level 4) to be placed immediately alongside the left hand escalator. This work would be done over a weekend, with the result that there would be no disruption in the availability of these escalators during trading hours. The applicants have stated that they are satisfied by this proposal; and no longer press any application in that regard.
15 In the Level 5 food court area there had been changes since the last view. Works had commenced affecting that area. Entering from the Jamison Street walkway the applicants’ food outlet (‘C’est La Vie’) is immediately to the left. The food court has an oval mezzanine shape with a central core of open airspace, with the escalators linking to the food court via the open airspace at the end near the food outlets.
16 To the left of the applicants’ food outlet, there is another outlet (formerly ‘Café Primavera), which has closed down, and is shuttered. Beyond that continuing around the oval there is now a hoarding which protrudes beyond the line of the wall. On the right hand side of oval (as viewed from the point mentioned) there are a series of outlets which are continuing to operate. At the view, there was little sign of works in their immediate area. The area on the left side of the oval, now hoarded up, had previously contained seating for patrons of the food court. A new seating area has been created in substitution. It is located in an area that lies off the walkway close to the Jamison Street entrance, and is not within the immediate environment of the food court. There is some signage pointing towards it. Photographs taken in early June have been received into evidence. They illustrate the situation as observed on 19 June.
17 Mr Gralton explained the nature of the works proposed for levels adjacent to Level 5.
18 The closed works areas in the food court area and along the walkway are protected by high quality ‘Bondor’ hoarding. These hoardings are in the nature of fixtures. They afford a complete floor to ceiling enclosure of the protected area. It was said that they have a high acoustic rating, so that works noise occurring behind the hoarding is muffled.
19 Works are continuing to turn the Jamison Street walkway into a straight line of access to the Street rather than the present angled line. This is occurring in keeping with the overall pattern of the redevelopment which seeks to simplify the flow of all walkways. New shops 12, 13 and 14 are being built on the right hand side of the walkway (being the side to the right as one walks in from Jamison Street to the food court). There are works going on behind the ‘Bondor’ hoardings that enclose shops 12, 13 and 14. Later when giving evidence, Mr Gralton said that the ‘shells’ that constituted the new shops 12, 13 and 14 had been handed over to incoming tenants and were the subject of fit-out works being undertaken by them. From his point of view they were no longer under the control of the tenant.
Applicants’ Concerns
20 In light of the view, the applicants’ objectives in connection with the proposed substantive orders are clear. Two of the orders deal with the situation in the immediate vicinity of the applicants’ shop. The first order seeks to have all works cease during the trading day in the immediate vicinity of his shop. The third order calls for the hoardings to be retracted so that the previous line of sight to his shop is restored. The second order deals with the works more generally. It does not seek to stop them, but to constrain them so that there is no ‘undue noise, dust or disturbance’. The applicants’ major concern, as we understood it from their counsel’s submissions, relates to the degree of activity affecting the Jamison Street walkway in the area occupied by the new shops 12, 13 and 14. There is no demand that the seating removed from the food court area be restored. This action is accepted as a fait accompli.
21 In a fax dated 5 June 2002 the applicants’ solicitors listed the impacts caused to their clients by the erection of hoardings on 31 May/1 June as follows:
22 Attitude of Respondents : The respondents indicated that their attitude to the new proposed orders was as follows.
1. Denying the applicants’ customers the convenience and amenity of an adjacent seating area.
2. Closing off a significant portion of the common areas of Level 5.
3. Obstructing the view and the width of the passageway from the top of the escalators towards our clients’ shop front. Between one third and half of the frontage of the shop is no longer visible from this point.
4. Removing access through, and line of sight via, the now barricaded common seating area between Margaret Street entrance and the tenancy.
5. Further emphasising the isolation of the tenancy when compared with other Food Court operations, there being no other tenancies operating between it and the Jamison Street entrance.
6. Restricting the entrance from the central area of the Food Court to the tenancy by the width of approximately one metre, which is the distance by which the new barricade encroaches on the common area outside the area occupied by common seating.
23 As to the proposed order 1 (relating to works in the hoarded up area of the common seating area), the respondents would accept the order if the restriction on demolition or construction work was not absolute, but confined to works that were ‘undue’, ‘significant’ or ‘substantial’.
24 As to proposed order 2 (relating to works in the food court generally), the respondents noted that a complete cessation of works during the trading day was not sought, but rather the prevention of works that cause ‘undue’ noise, dust or disturbance. The respondents would accede to such an order if what was meant by ‘undue’ was meant to reflect the standard set by the Act in s 34. Section 34 provides that a retail shop lessor is obliged to compensate the lessee for disturbance for, among other things, action that causes ‘significant disruption’ to trading (s 34(1)(c)). They were also concerned to ensure that reference to ‘Level 5’ did not include the area known as the ‘Banking Chamber’ and the area external to the premises.
25 As to proposed order 3 (relating to the degree of intrusiveness of the Level 5 hoarding), the respondents said that this was not able to be acceded to.
26 In summary the respondents said that the main dispute is limited to proposed order 3, with smaller differences in relation to orders 1 and 2.
27 The respondents said that the completion date for all works was 1 September 2002.
Evidence relating to Proposed Substantive Orders
28 Notice: The respondents gave notice on 31 May 2002 of their intention to remove the seating area on Level 5 on the left hand side as viewed from the applicants’ food outlet. The notice to the applicants was accompanied by a second notice formally advising them that their lease would not be renewed. The general notice was as follows:
29 Removal of Seating and Erection of Hoardings : Mr Gralton said that the hoardings were fixed in place on the night of 31 May 2002. The hoardings took the form of ‘Bondor’ hoardings which, as noted earlier, are in the nature of relatively permanent fixtures. He agreed that moveable hoardings could have been installed instead of the ‘Bondor’ hoardings. He said that this type of fixed hoarding had been chosen so as to provide a higher level of protection than was given by moveable hoardings in relation to noise and dust. He acknowledged that the work to be done behind the hoardings in the food court area were not so significant as to necessitate this type of hoarding. Mr Gralton said no works were currently occurring behind these hoardings but they had value in preventing the entry of dust and the like into the food court.
‘To: All Food Court Retailers
From: Alan Baynash
Date: 31 May 2002
Subject: Notice of Alterations to the Food Court
As you are aware, on Wednesday 29 May 2002, Café Primavera was closed to facilitate the alterations to the Food Court.
On Thursday 30 May 2002, all of the loose tables and chairs previously set up around Café Primavera were relocated to the new Jamison Street entrance.
Please note that this Saturday, 1 June 2002, the raised seating area between C’est La Vie and Café Primavera will be hoarded off as part of the building works.
All of the available tables and chairs from this area will be relocated to the walkway between the Food Court and Jamison Street entrance and around the entrance to Jamison Street in a manner which does not obstruct traffic flow.
On 3 June 2002, clear signs will be erected informing customers that additional seating is available in this area.
We expect this area to remain hoarded until approximately 18 July 2002. Should there be any changes to this date, we will inform you as soon as practical.
If you require any further information, please call me on 9221 0844.
Regards,
Alan Baynash
Retail Manager’
30 The applicants submitted that the removal of seating from the food court was a significant matter. The amount of available seating had been seriously reduced. The Tribunal asked for information as to the number of seats affected. The respondents advised that the overall number of seats in the food court area was 329. They did not give a precise figure as to the number affected by the closure. There are seats still available in the food court area, in the nature of bar-stool seats alongside a fixed counter on the right side of the airwell looking down to Level 4 (as viewed from the applicant’s outlet).
31 The respondents pointed out at the view (and as advised in the memorandum of 31 May) that a replacement seating area now existed (with signage directing patrons towards it) off the Jamison Street walkway near the Jamison Street end.
32 The applicants submitted that the removal of seating from the food court was a significant matter. The amount of available seating had been seriously reduced. The respondents denied that the action constituted any breach of the lease. They said that the action was irreversible, and the seating could not be reinstated. As to the works that were now occurring in this area, the respondents described these as shopfitting preparatory to new tenants entering into occupation.
33 The Tribunal is satisfied that the reduction in seating, though not quantified, has been substantial; and that the seating which remains is likely to be less congenial to patrons than the seating that was previously available in that area.
34 Other Information: In consequence of an undertaking given to the Tribunal on 15 April 2002, the respondents did provide the applicants with plans of ‘anticipated construction works’ affecting Level 5 on 17 April 2002 under cover of a letter from Mr Baynash, the retail manager (Ex M).
35 The plans are the size of two A4 pages and took the form of an overhead depiction of the food court area and nearby areas. There are special textacoloured markings on the plan with the words ‘existing line of the arcade’ and ‘new line of the arcade’. These show the change from what has been described above as the ‘angled’ walkway to the ‘straight line’ walkway. They also identify the new opening to Jamison Street as compared to the existing opening that is to flow from these changes.
36 That area of the plan is marked by printed shaded lines. Over these lines are printed words that read as short-form building instructions. In the plan as given to Mr Nam the building instructions are not easily able to be read, and they do not deal with such matters as to the erection of further hoardings.
37 Mr Gralton acknowledged under cross-examination that there is nothing in the plan which showed where any hoardings were supposed to go. The works described as required in the shaded area related to the demolition of timber flooring and the laying of terrazzo tiles. Mr Gralton was queried as to why that work needed to proceed now. He said that it was dependent on the removal of a stairway to Level 3, and needed to be done in his experience when that work was completed.
38 The Tribunal is satisfied that there is nothing on the plan which might reasonably have signified to Mr Nam that hoardings would be erected in the area now in issue or that the food court seating near his premises was about to be removed.
39 The respondents also gave evidence (mainly via Mr Riddell, solicitor, who attended the meeting and took notes) in relation to a presentation given to tenants on the evening of 13 May 2002. Mr Riddell’s affidavit filed 17 June 2002 annexed various documents connected with the meeting – the circular invitation to tenants (he could not say who had received it), typewritten record of his handwritten notes of the meeting, a copy of the Power Point presentation graphics presented by Mr Langford, and a copy of the plans displayed at the meeting.
40 The respondents sought to attach significance to the fact that the record of attendance does not show any attendance by the applicants. This matter might have had some significance were there evidence that on that occasion Level 5 retailers were given specific information as to the proposed closure of the main seating area on Level 5. But there is no evidence to that effect. Mr Riddell was unable to state whether any notification had been given prior to 31 May as to the withdrawal of the seating area in the food court.
41 The Tribunal is satisfied that the first notice of any reasonable kind given to tenants on Level 5 of the proposed closure of the seating area was that given by Mr Baynash within hours of the works taking place. The lateness of provision of this notice is a matter of concern, which reflects adversely on the respondents’ preparedness to deal in a reasonable way with the likely concerns of tenants. (In cross examination the applicants drew attention, appropriately in the view of the Tribunal, to an earlier incident (the notice of 25 February 2002) where Mr Baynash had similarly given advice of works as they were about to commence.)
42 Noise Issues near Jamison Street: As to noise associated with shop fitting works going on behind the Jamison Street walkway hoardings, Mr Gralton asserted in his affidavit that these were tenants works ‘not within the scope of the works being managed by me.’ He said ‘such work is nothing more than the usual fit out.’ He conceded under cross examination that these statements did not cover works that involved the creation of a new shop space in a location where none had previously existed, as was the case with the new shops 12, 13 and 14. He said that the ‘usual shell’ was handed over on 15 May 2002, and the current shopfitting activity was not his responsibility.
43 The Line of Sight: As to the line of the hoardings on Level 5 Mr Gralton said in his affidavit of 17 June that the original line of hoardings is to be found in an annexure to the construction contract. He said that the hoarding line had been brought in much closer to the line of that side of the food court as compared to the original so as ‘to accommodate the applicants’ concerns’. He reiterated this evidence under cross-examination.
44 Out of Hours Work: There was a good deal more reference at this hearing than had been the case at the earlier hearing to the extent to which the respondents were engaging in out of hours work (other than that necessitated by the previous orders).
45 As to the Level 5 works, Mr Gralton referred to the builders’ intention to do certain work (trimming of a perforation in a boundary wall) outside of business hours. He said in cross-examination that this work involved breaking concrete; and would always have been done out of hours. He referred to the flooring work to be done behind the hoardings. It is now proposed to be done by small tools and crowbars, with the demolished debris removed after hours. As to the other work proposed for Level 5 he said in his affidavit: ‘This work is not particularly noisy, but any work likely to disturb the tenants or their customers will be scheduled after hours (for example the removal of floor tiles).’ He said in evidence that these actions had been taken as a concession to the applicant’s objections.
46 He acknowledged that noisy concrete pouring from concrete trucks was occurring during trading hours near the Jamison Street entrance (an event observed during the view). He said that this had to be done during the day because of Council restrictions on the overnight pouring of concrete.
47 Other than in relation to the concession regarding the flooring work, he denied that decisions to do other works mentioned in his affidavit out of hours had been caused by this case (installation of new automatic doors, renewal of ceilings and installation of lights, laying of City of Sydney style pavers on pavement of Jamison Street). He asserted that it was always be intended that these works would be done out of hours.
48 The Escalators: Mr Gralton was queried as to the change that had occurred since the last hearing in relation to the work proposed in respect of the escalators. In the affidavit of 4 June, Mr Gralton stated that ‘in the second half of May 2002’, the head contractor (AW Edwards Pty Ltd) had proposed the new way to do the works, as previously described. He denied that the proceedings were an influence, saying they were ‘definitely not’.
49 He said that the new solution was a better way, building wise and costs wise. He said under cross-examination that the previous approach (closing down one escalator completely during the trading day) was a ‘terrible solution’ from a builder and user point of view. He said that he had first raised concerns as early as April 2001 in relation to the escalator works as originally proposed, and referred to a document (Ex II) – ‘Buildability report’ at p 16 where under ‘risks’ his company (Cadence) notes that the activity of escalator removal and relocation ‘needs to be reevaluated as the works have potential to cause major disruptions to [the shopping centre] due to the ‘breakdown’ in access between L4 and L5.'
50 Our conclusion is that this concern was not being seriously pursued at the time of the last hearing. Had it been, it is likely that it would have been mentioned.
51 Financial Position of the Applicants: The accountant for the applicants provided a further affidavit attaching trading figures in addition to those before the previous hearing, covering April and May 2002. The April gross figure is similar to the March figure. There is another fall in May. The May 2002 figure is the lowest for May in the five year history given, and about 55% of the figure for May 2001. The May 2001 appears to be an aberrantly high figure for that year when compared to the surrounding months of March 2001and April 2001. But making allowance for that possibility, there has clearly been a substantial fall in trade on a comparative basis.
52 The respondents continue to press their concern as to the need to test this information by reference to substantiating documents. While substantiating documents have yet to be produced, some progress has been achieved in that the applicants have furnished tax returns, and the principal applicant, Mr Nam, agreed to be cross examined.
53 Mr Nam said that he had a financial interest in two businesses, the business at Metcentre, and the ‘C’est La Vie Pavilion’ at Town Hall station. He and his wife owned outright the Metcentre business and had a 51% share in the second business (with two persons who worked at that business, who held the remaining 49%). He produced his tax returns, and was cross examined on them. He said he had no other business interests, and no other sources of income than those shown in the tax return. The second business returned no income, and he and his wife each recorded $17,000 income from the partnership in C’est La Vie; plus a small amount of dividend income from a small share portfolio.
Principal Interim Findings
54 Section 34(1)(c) provides that a retail shop lease is taken to provide that if the lessor ‘unreasonably takes any action that causes significant disruption of, or has a significant adverse effect on, trading of the lessee in the shop’ the lessor is liable to compensate the lessor for any loss or damage. Sections 34(1)(a) (inhibition of access in a substantial manner) and (b) (inhibition to a substantial extent of a flow of customers) are also relevant.
55 The question in relation to this application is whether interim relief limiting the respondents’ works in the ways proposed should be made; or is any relief granted at the final hearing by way of damages an adequate remedy.
56 The Tribunal remains of the view previously expressed that an undertaking as to damages should not be insisted upon; though close regard must always be given to the economic impact on the respondents of any orders.
57 Mr Tonking for the applicants submitted that the commencement of the works on Level 5 involved a serious breach of the applicants’ rights. Counsel referred to the scope of the proposed orders, in particular the issue of whether a lessor could be called upon to take action which affected the rights of other tenants.
58 The Tribunal is satisfied that at common law it is now permissible for orders to be so cast that they may require action from a lessor to restrain conduct by other lessees which bear on the quiet enjoyment of a tenancy by a lessee aggrieved by the conduct of other lessees. The Tribunal accepts the submission that so much is established by Aussie Traveller Pty Ltd v Marklea Pty Ltd [1998] 1 Qd R 1 (QCA). The power conferred on the Tribunal by s 72(1)(g) is to be interpreted as, at least, co-extensive with the common law position.
59 On the question of the degree of disturbance Mr Hodgson for the respondents referred to the case of Gordon v Lidcombe Developments Pty Ltd [1966] 2 NSWR 9 (SC, Street J). The case related to the erection of a wall by the lessor which was said to interfere with access to the lessee’s restaurant and coffee lounge. The lessees had agreed to open a restaurant in the arcade then nearing completion; and entered into a lease in August 1965. The arcade opened in November 1965. The wall in issue was erected in February 1966. The restaurant was located back from Elizabeth Street in the Sydney CBD about half way along the arcade. The wall was at the front of the arcade near the Elizabeth Street entrance. Its purpose was to seclude the arcade from escalators that went to a lower arcade. The impact on the lessee was described in the decision as ‘to deprive the … shop of its quality of being visible to persons on the escalators, to persons entering or leaving the lobby, and to persons standing or passing in the portion of Elizabeth Street opposite the escalators and lobby. With the wall in the present position it is only persons actually opposite to the open end of the arcade who are able to look down [the walkway of the arcade] and see the …shop’. (at 10)
60 The decision focuses on the question of what is the degree of interference that must occur to justify a finding that the lessor has derogated from the grant by breaching the covenant of quiet enjoyment. Street J concluded at 15-16 that ‘premises will be regarded as having been rendered unfit for the demised purpose if the facts … are sufficient to enable the Court to conclude that the premises are for practical purposes to be fairly regarded as having being rendered unfit [for the demised purpose].’
61 In that case the Court concluded that this position had not been reached (at 17) and an injunction should not issue: ‘[T]he effect of the wall is not so great as to render it uneconomic to use the shop for the purpose of a coffee lounge and restaurant; it is still practicable to carry on this business profitably, but the profit will not be so great nor will the business be so readily saleable not so valuable as it would be if the wall were not there. This state of facts fall short of constituting a breach by the defendant of its obligation not to derogate from the grant.’
62 It is apparent that the conclusions in that case were affected by the circumstance that the lessees had agreed to take up a lease before the arcade was completed. The lessees had inspected plans of a general kind. The erection of the wall occurred soon after opening of the arcade. The Court referred to the failure to incorporate any building works specifications into the deed of lease, which might have afforded the lessees contractual protection against the works put in issue.
63 Mr Hodgson also referred to the observation of McPherson JA in Aussie Traveller (at 10) that the strict view reflected in the decision in Gordon may have been influenced by the fact that the plaintiffs were seeking interim relief in relation to a matter where damages might have afforded adequate relief.
64 In the Tribunal’s opinion, care must be taken in using these cases as providing firm guidance in relation to the present dispute, one relating to alteration of the premises long after entry into occupation. There is also now a statutory code in place providing minimum protections for tenants which is more than merely an attempt to replicate the common law position. Moreover the Act reflects at a number of points the concern of the Parliament that active steps be taken to resolve retail tenancy disputes at the earliest opportunity: see Hansard, Retail Leases Act 1994, Second Reading Speech, LA, 20 April 1994; and Second Reading Speech, Retail Leases Amendment Act 1998, LA, 28 October 1998. Proceedings of the present kind are seen as ones to be avoided. For example the Act establishes a specialist mediation service. The usual rule is that applicants can only bring disputes to the Tribunal where mediation has proven unsuccessful (Part 8, Div 2). The power conferred on the Tribunal by s 72(1)(g) is expressed (emphasis added) as:
65 One of the purposes of the 1998 Amendment Act, giving rise to the above provision was seen as “changing the culture from one of confrontation and disputation to one of communication and commercially advantageous co-operation” (ibid, at 9170).
‘(g) such other order, in the nature of an interlocutory order of the kind referred to in paragraphs (a)-(b), as the Tribunal considers proper to be made in order to resolve or assist resolution of the dispute between the parties .’
66 As to the extent of disruption to trading activity likely to flow from the current works, Mr Gralton said in his affidavit of 17 June 2002 that there is no part of stage 2 that requires any demolition or construction work of the extent that occurred during stage 1 (now completed). He focussed on the issue of noise. He said that there is no ‘significantly noisy work to be undertaken during normal business hours that is likely to cause substantial disturbance to the tenants, their customers or will substantially interfere with the flow of pedestrian traffic on level 5 of Metcentre.’ In his view an impact could only be regarded as ‘substantial’ when people ‘don’t want to be there’ and when it is affecting trading. He also said that acoustic loggers were secreted in the building, and the builder desisted from work in light of monthly reports of these records. He agreed that the acoustic loggers were not in evidence in the case. He accepted that there had been particular incidents in the history of project where unacceptable noise levels had occurred. As Mr Hodgson noted, there has been no evidence in this case from the applicants as to the extent of the noise they have experienced.
67 Mr Gralton also referred to various special conditions in the construction contract and the house rules going to the issue of disruptive work. The Tribunal has perused this material. These provisions do not reflect any special concern for the impact of the works on tenants in terms that acknowledge the requirements of the Act. For example the standard specified by house rules pertaining to out-of-hours work only limits activity to those times which ‘would interfere with the ordinary running of the building services to any area of the building.’
68 The first and third proposed orders relate to the work in the old seating area. The Tribunal is satisfied that there would be noise, dust and disturbance affecting the applicants food outlet to the extent that works are carried on in that area during trading hours; and that the erection of the hoarding has a direct effect on the sight line to the applicants’ shop, one which is a unique impact on them.
69 Even though hand tools are proposed to be used for the flooring work, the amenity of the food court will be disturbed. It is difficult at this stage to assess the degree. The proximity of this work area to the applicant’s shop is such that it is likely to have a greater impact on his situation than that of the other traders on the opposite side of the airwell.
70 The applicants will also be affected by the works in the general food court area; and the tenants’ works behind the hoardings in the Jamison Street walkway.
71 The applicants’ solicitor’s list of impacts referred to in para [21] of this decision represents, in the Tribunal’s opinion, a fair statement of the situation confronting the applicants.
72 While each of these impacts viewed separately might not amount to a ‘significant’ or ‘substantial’ disruption, in combination they may well do. We are satisfied that the applicants have reasonable grounds for apprehending that, unless restrained, works in breach of the covenant of quiet enjoyment and in breach of s 34 of the Act may occur.
73 The respondents gave further evidence on the financial impact on them of the orders proposed. This aspect of the case was again affected by the difficulty that arose in the earlier proceedings. Mr McColl, the respondents’ expert, gave his assessment (see Ex HH) on the version of the orders to be sought by the applicants that was available to the respondents at the time.
74 The original draft version of the orders sought to limit all work in all areas of Level 5 to out of hours. Now that proposal is only made in relation to the old seating area. The compromise offered by the respondents is that the work will be done quietly (hand tools, no power tools) and significant work (debris removal etc) done out of hours. This compromise offer was not before Mr McColl.
75 In light of the more limited orders now sought, the only evidence of Mr McColl that remains in our view relevant is that affecting implementation of proposed order 1. Mr McColl did not give any oral evidence on this occasion. His evidence took the form of a letter dated 18 June 2002. His operating assumption is Mr Gralton’s advice that ‘if works are carried on out of normal working hours they will take twice as long to complete.’ His calculation is that the labour cost in respect of compliance with proposed order 1 would be $147,600 greater (double time rates, twice as many workers needed as compared to normal hours, additional overhead factors, all multiplied by the project time of 6 weeks).
76 As we understood Mr Gralton’s evidence it is already intended that significant aspects of the works will take place out of hours. The works to be done in-normal-hours are relatively light works, it is said so as to meet the applicants’ concerns. This information was not placed before Mr McColl. We are not persuaded that the figure of $147,600 is a reasonable estimate of the impact of the proposed order 1, in these circumstances, on the position of the respondents. Our present view is that the economic impact would be considerably lower, though we acknowledge there is some impact.
77 Mr Hodgson points out that the economic position of the applicants remains less than fully clear. The accountant has made a statement as to the material on which he has based his calculations. On their face the turnover figures as reported over the years seem credible. They show levels of turnover that would cover input costs, rental and other outgoings, and leave a modest profit. The low level of income reported by the applicants in their tax return for 2000-2001 (a year unaffected by the present works) is consistent with the turnover figures. It remains desirable that the applicants submit to the respondents for inspection any underlying documentation from which the accountant has derived his figures. At this point we are reasonably satisfied that the applicants’ claims in respect of their economic position is credible. In dollar terms the impact of the interim orders previously made, and now in contemplation, is, the Tribunal accepts, likely to be greater on the respondents than the applicants; but this can not be the determining factor.
78 There are also factors relating to the respondents’ conduct in relation to the applicants which weigh in favour of granting the relief sought.
79 The works that occurred on the night of 31 May/1 June 2002 were first notified to the applicants on the day of 31 May. There was no effective opportunity given for negotiation or discussion. A reasonable manager, especially one with the awareness of the applicants’ concerns as revealed by these proceedings, would have sought to give more generous notice. The respondents sought to contend at the hearing that notice of these works was given to those tenants who attended the presentation on 13 May 2002. The evidence did not substantiate that contention. The information given on 17 April 2002 was not sufficiently clear to alert the applicants to what was envisaged for the seated area, and its timing.
80 The Tribunal also views with concern the respondents’ omission in not advising the Tribunal at the previous hearing about its attempts to find a solution to the escalator problem, a major focus of those proceedings. The Tribunal and the applicants have now learnt that the respondents were at the time actively considering the need for a different approach to the works envisaged for the escalator area, and have said – a statement the Tribunal doubts - they were doing so independently of any pressure that may have been generated by these proceedings. In his evidence at the present hearing Mr Gralton acknowledged in strong language the undesirability of undertaking the escalator works in the way that had been asserted as necessary at the previous hearing. Such an acknowledgment was not forthcoming on the last occasion. In disputes of this kind, it is vital that lessors be candid as to their plans and intentions.
81 It is also plain that the intrusion into the amenity of the food court and into customers’ sight line of the applicants’ premises is a real one. The respondents’ evidence is that they cannot retract the hoardings any further. In our view, as they have done now in relation to the escalator issue, they should actively explore a solution that restores the sight line. That may mean that more moveable hoardings will have to be installed.
82 The Tribunal also views with concern the respondents’ failure to respond to its recommendation made as a way of assisting an amicable resolution of the dispute, that they:
83 No evidence was put before the Tribunal of any such action. Mr Gralton’s position was that it was always the case that certain works would be done out of hours, and the only specific response to the issues raised by the applicants is to use hand tools behind the hoarding near their shop.
‘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.’ (at [118])
84 The Tribunal is disposed to grant proposed orders 1 and 3 which are clear in their terms; and do not admit of the potential for further dispute. It is in our view reasonable to extend the restraint on during-trading-hours work reflected in the earlier orders to the old seating area, as envisaged by order 1.
85 Accordingly the Tribunal grants proposed orders 1 and 3 in the terms proposed (renumbered now 1 and 2).
86 Proposed order 2 is less satisfactory. It allows work to go on across level 5 including the Jamison Street walkway provided it is not the cause of ‘undue’ noise, dust or disturbance. The potential for continuing dispute over the implementation of such an order remains real. The respondents’ concern is that it sets a standard lower than the legal requirement.
87 Had the respondent not conducted itself in the way that it did over the closure of the food court seating area, it may well be that these further proceedings would not have ensued and the Tribunal would not have been called on to consider the possibility of making an order in such subjective terms.
88 The Tribunal is concerned that an order which refers to ‘undue’ effects is a recipe for continuing contention between the applicants, the builders and the respondents. On the other hand because of the events giving rise to these proceedings, the Tribunal sees value in reminding the builders and the respondents of their obligations under the Act by way of an order.
89 The order the Tribunal has in mind will not avoid the possibility of continuing contention but it is contention that at least will not involve a standard of conduct which the respondents consider to be lower than that required of them by the Act. It is a standard which the respondents must observe. The terms of the order are drafted so as to focus specifically on the applicants. This has been done to deal with the possible perception of the respondents, as reflected in the comments of Mr Gralton, that generalised compliance with the Act is good enough, as distinct from compliance lease by lease and lessee by lessee. While many impacts of a major project of the present kind will be felt relatively equally by tenants, others will be felt differentially. There has been little acknowledgment of this obvious point by the respondents as far as the situation of the applicants is concerned.
90 Accordingly proposed order 2 will be granted in terms that reiterate the requirements of cl 34(1) (to be numbered 3):
91 The opening words of the proposed orders were drawn by counsel for the applicants so as to emphasise the obligation of lessors to ensure that works done by lessees do not themselves impact on other lessees’ enjoyment of their rights under their leases. The Tribunal is satisfied that the common law, as stated in the Aussie Traveller case, recognises the possibility that a breach may arise from a lessor’s omission in that regard. Accordingly we retain those words. It is for the respondents in the first instance to assess whether the tenant works being undertaken in connection with shops 12, 13 and 14 infringe any duty to the applicants. There is little evidence before the Tribunal on that matter at this time.
Conduct all works on Level 5 in a manner which complies strictly with section 34(1) of the Retail Leases Act 1994, and in particular paragraphs (a) (no inhibition of access of the applicants to their shop in any substantial manner), (b) (no inhibition or alteration, to a substantial extent, of the flow of customers to the applicants’ shop), (c) (no unreasonable action that causes significant disruption, or has a significant adverse effect on, trading of the applicants).
92 As noted earlier the respondents were concerned to ensure that reference to ‘Level 5’ did not include the area known as the ‘Banking Chamber’ and the area external to the premises. The Tribunal considers that the terms of Orders 1 and 2, below, are clear in that regard; and do not involve those areas. Order 3 is not so confined. It reflects the respondents’ duty. The works likely to affect the applicant are unlikely to occur in the adjacent areas mentioned, but that possibility can not be ruled out.
Orders
93 That the respondents, and each of them, by themselves, their respective servants and agents until 1 December 2002 or further order:
1. Refrain from demolition or construction work within the area on Level 5 of the Food Court in the Metcentre previously occupied by common seating area and now hoarded up at any time between 7 am and 3 pm on weekdays;
2. Immediately realign and maintain until no longer required the hoarding constructed around the former common seating area on Level 5 so that it does not intrude into the common area and so that the line of sight from the main circular area of the Food Court is restored to the position before the hoarding was erected on or about 1 June 2002.
3. Conduct all works on Level 5 in a manner which complies with section 34(1) of the Retail Leases Act 1994, in particular paragraphs (a) (no inhibition of access of the applicants to their shop in any substantial manner), (b) (no inhibition or alteration, to a substantial extent, of the flow of customers to the applicants’ shop), (c) (no unreasonable action that causes significant disruption, or has a significant adverse effect on, trading of the applicants).
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