Nguyen v Durcinovic
[2004] NSWADT 291
•12/17/2004
CITATION: Nguyen v Durcinovic [2004] NSWADT 291 DIVISION: Retail Leases Division PARTIES: APPLICANT
Thai Ha Nguyen t/as Newtown Wash House
RESPONDENT
George & Cveta DurcinovicFILE NUMBER: 045013 HEARING DATES: 07/09/2004 SUBMISSIONS CLOSED: 10/05/2004 DATE OF DECISION:
12/17/2004BEFORE: Boyce P - Judicial Member APPLICATION: Claim for declaration of rights, obligations and liabilities under a lease - Claim for payment of money MATTER FOR DECISION: Principal matter LEGISLATION CITED: Retail Leases Act 1994 CASES CITED: REPRESENTATION: APPLICANT
K Vo, solicitor
RESPONDENT
G Traikovitch, solicitorORDERS: 1. That the proportion of Municipal rates, water service, sewerage service and drainage service charges payable in respect of the retail shop premises payable by the Applicant is 78% of the levy for the whole of the premises; 2. The Applicant pay to the Respondents an amount being 78% of the Municipal rates paid by the Respondents for Municipal rates for the whole of the land in Folio Identifier A/435954 from 24 September 2001 to date; 3. The Respondents pay to the Applicant the amount of water usage charges paid by the Applicant for the usage by the residential tenancy of $653.74 being charges up to 30 September 2004 ; 4.The Respondents pay to the Applicant 22% of the amount of water sewerage and drainage services paid by the Applicant for the services to the residential tenancy up until 30 September 2004 being $2,179.53; 5. After 30 September 2004, the Respondents pay all Municipal, Council water service, sewerage service and drainage service charges and water usage charges levied in respect of the whole of the premises as they fall due ; 6. After 30 September 2004, that the Applicant reimburse the Respondents for 78% of the Municipal, Council, water service, sewerage service and drainage service charges and the whole of the water usage determined by water meter number GDSB0055 within fourteen (14) days after service of the relevant rate notice and receipt for payment; 7. Either party shall have liberty to make a written submission in respect of costs within 28 days, if no submissions are received, then no order as to costs.
REASONS FOR DECISION BACKGROUND
1 The Applicant, Thi Ha Nguyen and his mother Tinh Thi Pham own a business called the “Newtown Wash House”. They operate the business from premises at 317 King Street, Newtown. They lease the premises from the Respondent, George and Cveta Durcinovic, the owners of the premises. The lease is a retail shop lease under the provisions of the Retail Leases Act 1994.
2 Nguyen and Pham purchased the business from Quang Thanh Nguyen on 24 September 2001.
3 Quang Thanh Nguyen held the lease of the premises pursuant to lease entered into by him with the Durcinovics on 2 June 2001 for a term of 4 years. The lease terminates on 1 June 2005.
4 The Durcinovics consented to the lease being assigned to Ngyuen and Pham and the lease was assigned to them at the time that they purchased the business.
5 The retail shop premises are the ground floor level of a two storey building. The second floor is used for residential purposes and is known as 317A King Street, Newtown. The second floor is leased to another tenant pursuant to a residential tenancy agreement.
6 The Durcinovics claim that Nguyen and Pham are responsible for the whole of the Municipal rates which are levied for the whole of the land upon which the retail shop premises and the residential premises are constructed. Nguyen and Pham say that they are not responsible for the Municipal rates.
7 Nguyen and Pham have been paying the water services, sewerage services and drainage services rates levied against the whole of the property by Sydney Water. They say that those rates should be apportioned between their premises and the residential premises.
8 The lease dated 2 June 2001 describes the premises as “Folio Identifier A/435954 being all that lock-up shop known as No 317 King Street, Newtown”.
9 Clause 7 of the lease provides:-
It is hereby agreed and declared;
“7 Rates and Taxes
10 The parties are seeking orders under Section 72(1) of the Retail Leases Act 1994 for a declaration of their rights and liabilities under the lease and orders for payment of monies.
The words “Municipal,” shown in italics in the quote from the lease were added to the lease and the initials “TN” were written on the lease adjacent to those words. Mrs Durcinovic’s evidence is that the initials are those of Quang Thanh Nguyen, the original tenant who put those initials on the lease at the time of entering into it. The lease is for a further term after the exercise of an option contained in an earlier lease registered number 7195604 between the Durcinovics and Quang Thanh Nguyen. The inclusion of the words “Municipal, Council,” were added so that it conformed with the earlier lease number 7195604 to ensure that the renewed lease was in the same terms as the lease for the original term.
a) The lessee shall be liable for and pay for all the ( Municipal Council ,) water rate and charges that may be levied during the currency of the term hereof or during any holding over period. Such water rates and charges shall be deter mined (sic) by reference to such rates and charges current at the commencement of the initial term. The Lessee shall reimburse the Lessor for the aforementioned water rates and charges as and when they issue within fourteen (14) days after service upon the Lessee of either the original or photostatic copy of the relevant rate notice duly receipted.”
ISSUES
A Is the Applicant liable to pay the municipal rates in respect of the premises
11 Nguyen and Pham say that they are not responsible for the payment of the Municipal rates in respect of the whole of the premises. They say that they thought at the time of purchasing the business that they were to have a new lease.
12 Nguyen says that he was not aware that an existing lease had been assigned to he and Pham until four (4) months after they began operating the business.
13 In evidence given at the hearing Nguyen said “as long as the contract reflected what they wanted they were happy with it”. He acknowledged that he and Pham had signed a contract for the purchase of the business from Quang Than Nguyen and a copy of the lease was attached to the contract. He also acknowledged that their Solicitor had explained the contract and lease to Nguyen.
14 Nguyen’s evidence is that the initials “TN” made against the amendment to paragraph 7(a) of the lease were not his initials.
15 I am satisfied that the words “Municipal rates” were in the lease at the time of the assignment of the lease to Nguyen and Pham.
16 The evidence shows that there was correspondence between the Durcinovics’ Solicitors and Nguyen and Pham Solicitors in the pre-contractual negotiations in respect of the business that the Lessee has a liability to pay Municipal rates. In particular a letter of 10 September 2001 from Durcinovics’ Solicitors to Nguyen to Pham Solicitors attached to Exhibit 7 states that the Council rates are to be paid by the Lessee. There is no evidence of a reply challenging the statement that Council rates are paid by the Lessee.
17 The covenants contained in annexure “A” of the lease refer only to the property that has been leased by the Lessor to the Lessee. This property is described in the lease as the lock-up shop premises known as 317 King Street, Newtown. Clause 7 of annexure “A” says that the Lessee is liable to pay all Municipal, Council and water rates and charges that may be levied during the currency of the term or during any holding over period.
18 I find that Nguyen and Pham are responsible for the Municipal rates payable in respect of the leased premises during the currency of the term and during any holding over period.
B. If Municipal and water rates are payable, then how should they be apportioned between the Lessor and the Lessee
19 The Durcinovics say that Nguyen and Pham are responsible for the whole of the Municipal rates and the water service, sewerage service and drainage service charges levied in respect of the leased premises. The two lettable areas contained in the building are not separately rated for Municipal rates, water service, sewerage service and drainage services. They have a separate water meter servicing the lock-up shop premises and the residential tenancy.
20 If Nguyen and Pham are responsible for the Municipal rates and the water service, sewerage service and drainage service charges for the whole of the property then those rates and charges should be apportioned between the Lessor and the Lessee. The floor area of the retail shop premises they lease from the Lessor are approximately the same as the floor area of the residential tenancy above those shop premises. If so, Nguyen & Pham say that the rates and charges should be apportioned on the basis that 50% of those charges are for the lock-up retail shop premises and the remaining 50% for the residential tenancy.
21 I have found that Municipal rates are payable by Nguyen and Pham. They have been paying the water service, sewerage service, drainage service, charges and usage for all of the premises the subject of the rate notices. I must now find upon what basis, if any, such rates, charges and usage should be apportioned. In their submissions, the parties did not direct the Tribunal to any authority or practice to assist to make a determination as to the apportionment. To apply an apportionment based on the floor area of each of the retail premises and the residential premises would result in an inequitable apportionment of the liabilities to pay the rates. It is the permitted use of the premises that determines the rental value to the Durcinovics of the whole of the building.
22 The Municipal, Council and water rates and charges ought to be apportioned on the basis that the rent received for the premises let for retail purposes compares to the rent received for the whole of the building. At the commencement of the lease the rent for the retail shop premises was $4,916.67 excluding GST per calender month. The rent for the residential premises at the same time was $1,386.66. That is, the Durcinovics received a total rent for the whole of the building at the commencement of Pham and Nguyen occupancy of the retail premises of $6,303.32. Nguyen and Pham’s rent represents 78% of the total rent received by the Durcinovics for the whole of the premises.
23 I find that Nguyen and Pham have a responsibility for payment of 78% of the total Municipal Council rates levied in respect of the whole of the building which includes both the residential tenancy and the retail shop premises.
24 I find that Nguyen and Pham are also responsible for 78% of the water, sewerage and drainage service charges levied in respect of the whole of the building which includes both the residential tenancy and the retail tenancy.
C. Repayment of water usage charges paid by Lessee for residential tenancy
25 Nguyen and Pham’s evidence is that during the term of their tenancy they received accounts from Sydney Water for 317 King Street, Newtown. They have paid these accounts. The accounts show that there are two water meters connected to the property and a statement of account included in Exhibit 5 from Sydney Water sets out the apportionment of the water usage charges paid by Nguyen and Pham since the start of their tenancy and until 29 October 2003 attributable to water meter CDPK0466 servicing the residential premises. The total amount of water usage for those residential premises paid for by Nguyen and Pham is $653.74.
26 It is undisputed by the Durcinovics that there is a separate water meter for the residential premises and that Nguyen and Pham have paid all water usage charge for both the shop premises and the residential premises.
27 I find that Nguyen and Pham are entitled to be reimbursed by the Durcinovics for the water usage they have paid in respect of the residential premises.
D. When are the Municipal, water rates and charge payable by the Lessee
28 Clause 7(a) of the lease provides that the Lessee will reimburse the Lessor for Municipal and water rates and charges payable in respect of the premises within fourteen (14) days of the Lessor giving to the Lessee evidence of the rates and charges and evidence of their payment by the Lessor.
29 During the term of the lease for the water charges the practice has been for the rate notice to be issued directly to Nguyen and Pham and they have paid it in full.
30 I find that the Durcinovics must pay the Municipal, water rate and charges in respect of the whole of the premises when they fall due and give Nguyen and Pham evidence that the rates and charges have been levied and produce a receipt that they have been paid by the Durcinovics.
31 When the Durcinovics provide Nguyen and Pham with evidence of the rates and charges and receipts for their payment Nguyen and Pham must pay their proportion of those rates and charges within 14 days of receiving that evidence.
ORDERS
COSTS
A. That the proportion of Municipal rates, water service, sewerage service and drainage service charges payable in respect of the retail shop premises payable by the Applicant is 78% of the levy for the whole of the premises
B. The Applicant pay to the Respondents an amount being 78% of the Municipal rates paid by the Respondents for Municipal rates for the whole of the land in Folio Identifier A/435954 from 24 September 2001 to date
C. The Respondents pay to the Applicant the amount of water usage charges paid by the Applicant for the usage by the residential tenancy of $653.74 being charges up to 30 September 2004
D. The Respondents pay to the Applicant 22% of the amount of water sewerage and drainage services paid by the Applicant for the services to the residential tenancy up until 30 September 2004 being $2,179.53
E. After 30 September 2004, the Respondents pay all Municipal, Council water service, sewerage service and drainage service charges and water usage charges levied in respect of the whole of the premises as they fall due
F. After 30 September 2004, that the Applicant reimburse the Respondents for 78% of the Municipal, Council, water service, sewerage service and drainage service charges and the whole of the water usage determined by water meter number GDSB0055 within fourteen (14) days after service of the relevant rate notice and receipt for payment.
Either party shall have liberty to make a written submission in respect of costs within 28 days, if no submissions are received, then no order as to costs.
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