North Eastern Travelstops Pty Ltd v Bradley & Ors (RLD)

[2005] NSWADTAP 6

Appeal Panel - Internal

CITATION:	North Eastern Travelstops Pty Ltd v Bradley & Ors (RLD) [2005] NSWADTAP 6
PARTIES:	APPELLANT North Eastern Travelstops Pty Ltd RESPONDENTS Seamus Bradley, Margie Howarth and Peta Hunter
FILE NUMBER:	049030
HEARING DATES:	15/12/2004
SUBMISSIONS CLOSED:	12/15/2004
DATE OF DECISION:	02/25/2005
DECISION UNDER APPEAL:	Bradley & Ors v North Eastern Travelstops Pty Ltd [2004] NSWADT 145
BEFORE:	Chesterman M - ADCJ (Deputy President); Rickards K - Judicial Member; Fairweather R - (Advisory) Non Judicial Member
CATCHWORDS:	fail to correctly construe documents - leave to extend to the merits - omit to deal with line of argument in decision
MATTER FOR DECISION:	Principal matter
FILE NUMBER UNDER APPEAL:	035012
DATE OF DECISION UNDER APPEAL:	07/21/2004
LEGISLATION CITED:	Administrative Decisions Tribunal Act 1997 Retail Leases Act 1994
CASES CITED:	Collector of Customs v Agfa-Gevaert Ltd (1996) 186 CLR 389 LMI Australasia Pty Ltd v Boulderstone Hornibrook Pty Ltd [2001] NSWSC 886 Bradley & Ors v North Eastern Travelstops Pty Ltd [2004] NSWADT 145 Stanoevski v Council of the Law Society of New South Wales [2003] NSWADTAP 33 Thomas National Transport (Melbourne) Pty Ltd v May & Baker (Australia) Pty Ltd (1966) 115 CLR 353
REPRESENTATION:	APPELLANT M Campbell, barrister RESPONDENTS S Woodward, solicitor
ORDERS:	1. The appeal is dismissed; 2. Each party has 28 days in which to file and serve an application for the costs of this appeal, with supporting submissions. Any submissions in response must be filed and served within a further 28 days. Unless an application is made for a hearing, the matter of costs will be decided on the papers. If no application is filed, there will be no order for costs.

1 In this appeal, the Appellant, North Eastern Travelstops Pty Ltd, challenges a decision of the Tribunal awarding compensation to the Respondents, Seamus Bradley, Margie Howarth and Peta Hunter, for loss of profits of their restaurant business known as Café Portofino. This loss of profits resulted from their being compelled to move out of the restaurant premises before the end of the period stipulated in a ‘Permit to Occupy’ granted to them by the Appellant.

2 In this decision (Bradley & Ors v North Eastern Travelstops Pty Ltd [2004] NSWADT 145) Mr P Boyce, Judicial Member, ordered that the Appellant pay $17,982.00 by way of compensation to the Respondents, together with interest at 9% from 1 November 2003 to the date of payment.

Outline of relevant facts

3 A restaurant called Café Portofino, together with a service station, was situated on land at 1 Coast Road, Hastings Point (‘the property’), which was owned by Ladehai Pty Ltd (‘Ladehai’). On 2 November 1997 Ladehai leased the property to Caltex Australia Petroleum Pty Ltd (‘Caltex’) for a term of five years ending on 1 November 2002. The lease, which was registered, conferred two options for renewal, for five years in each instance, on Caltex.

4 Caltex subsequently entered into a franchise agreement and sublease of the property with Quality Travel Stops Pty Ltd. This was for a term of five years between 1 November 1998 and 30 October 2003. On 23 March 2000, Quality Travel Stops Pty Ltd assigned its interest under the franchise agreement and sublease to the Appellant, with the consent of Ladehai and Caltex.

5 Subsequently, a separate licence agreement between Caltex and the Appellant (‘the Licence Agreement’) was concluded, granting the Appellant a licence to occupy the property between 1 September 2000 and 30 October 2003. The Licence Agreement referred to this period as the ‘first term’.

6 At some time before 12 December 2000, the Respondents entered into a contract with the Appellant to purchase the business known as Café Portofino for a price of $22,000.00 plus stock. This contract was completed on 12 December 2000.

7 On 12 December 2000 the Appellant and the Respondents also executed an agreement called a ‘Permit to Occupy’. It provided that the Appellant granted to the Respondents permission to occupy a ‘Licensed Area’, forming part of the property. This area was defined by reference to a plan annexed to the agreement, which identified ‘the Premises, Common Use Areas, car parking ingress and egress’.

8 During the negotiations preceding this agreement, the Respondents’ solicitor, Ms Elizabeth Ellis, expressed concern to them that particulars of the Licence Agreement had not been provided. She advised them to not sign the Permit to Occupy until these particulars had been received. Then on 12 December 2000, the date of execution of the agreement, the Appellant’s solicitors sent a fax to Ms Ellis containing the following passage:-

I confirm that my client North Eastern Travelstops Pty Limited operates the Caltex Service Station at Hasting Point under a Franchise Agreement with Caltex. The Franchise Agreement contains within it, a Licence to occupy the site. To allow the sale of the restaurant to proceed, Caltex has effectively carved out the area taken up by the restaurant for the licence and the Franchise Agreement and granted my client a separate licence of that state. The terms of that licence were attached to the permit to occupy. Although my client would prefer not to disclose the commercial arrangements between itself and Caltex, I have been instructed to inform you that the licence agreement between Caltex and my client grants my client a three year licence of the restaurant area. The term of the licence expires on 31 October 2003 therefore, the expiry date of the permit to occupy will be 30 October 2003 to avoid any suggestion that the licence has been assigned.

9 Shortly before the Permit to Occupy was executed, two handwritten clauses were added. Clause 22 stated that if the Appellant sold the franchise, the Respondents should have the option to ‘continue under’ the Permit to Occupy, subject to the continuing approval of Caltex, as set out in the Licence Agreement. Clause 23 gave to the Respondents ‘a further five year option in the event that Caltex exercise its option and that the [Appellant] exercise its option’.

10 Also entered in handwriting were the commencement and expiry dates. These were, respectively, 13 December 2000 and ‘Midnight on 30th day of October 2003’. A copy of the Licence Agreement, initialled by all the parties, was annexed to the Permit to Occupy.

11 After execution of the Permit to Occupy, the Respondents entered into possession of Café Portofino and took over the restaurant business.

12 Caltex did not exercise the option of renewal contained in its lease from Ladehai. This lease therefore expired on 1 November 2002. Caltex thereupon terminated the licence to occupy granted to the Appellant under the Licence Agreement.

13 As indicated in the Tribunal’s judgment (Bradley & Ors v North Eastern Travelstops Pty Ltd [2004] NSWADT 145) at [35], on 14 February 2003 the Respondents received from Caltex’s solicitors a letter stating that they were no longer entitled to occupy the restaurant and requiring them to vacate it by 28 February 2003. This letter was dated 7 February 2003. As Mr Woodward, appearing for the Respondents, pointed out to us during the hearing, a letter to similar effect, dated 10 February 2003, was sent to them by the Appellant’s solicitors.

14 The Respondents then commenced these proceedings in the Tribunal, initially joining Ladehai and Caltex as co-defendants with the Appellant. An attempt to resolve the dispute by mediation was unsuccessful. The Respondents then agreed to vacate Café Portofino on 27 July 2003. They maintained the proceedings against the Appellant, claiming damages for loss of profits from 27 July 2003, the day on which they ceased trading, until 30 October 2003, the expiry date stipulated in the Permit to Occupy.

The Tribunal’s decision

15 In its judgment at [30], the Tribunal noted an acknowledgment by the parties on both sides that the Permit to Occupy was a retail shop lease to which the Retail Leases Act 1994 (‘the Act’) applied.

16 The Tribunal held, however, at [44 – 46] that the Permit to Occupy was not affected by s 16(1) of the Act, which provides that the term of any such lease must be not less than five years. The reason for this was that subsection (5) of s 16 makes the section inapplicable to a lease ‘to the extent that its application would be inconsistent with the terms of any Head Lease under which the Lessor holds the Head Lease’. The Tribunal recorded its finding at [49] that the Appellant ‘held its tenure under the terms of a Licence granted by the Lessee (Caltex) under a Head Lease from Ladehai Pty Limited’.

17 The Tribunal also rejected, at [42 – 47], the Respondents’ claim under s 10 of the Act for damages on the ground of pre-lease misrepresentations by or on behalf of the Appellant. It stated, at [47], that there was ‘no evidence’ that the Appellant ‘gave false or misleading representations as to its tenure’.

18 The reasoning according to which the Tribunal held the Appellant liable to pay damages to the Respondents was as follows:-

1. The Appellant represented to the Respondents that it had tenure of the property until midnight on 30 October 2003.

2. The term of the Permit to Occupy expired on this same day.

3. ‘By the termination of the Head Lease an essential term of the Permit to Occupy was breached constituting repudiation of it’ (see [37]).

4. The Respondents agreed to vacate the premises on 27 July 2003 as a result of the Appellant’s repudiation of the Permit to Occupy (see [50]).

5. The Respondents were therefore entitled to ‘damages for the loss suffered by them as a result of their being unable to trade from the premises from 27 July 2003 to 30 October 2003’ (see [52]).

19 The Tribunal assessed these damages at $17,982.00.

The grounds of appeal

20 Mr Campbell, counsel for the Appellant, described as ‘the essence of the appeal’ a submission that the Tribunal erred in law in failing to construe the Permit to Occupy correctly. The error lay, he said, in failing to take account of two provisions (clauses 3 and 5) of the Permit to Occupy and a further provision (clause 20) of the Licence Agreement. As we have said, at the time when the Permit to Occupy was executed, the Licence Agreement, bearing the initials of all the parties to the Permit, was annexed to it.

21 Clauses 3 and 5 of the Permit to Occupy (in which the Appellant was described as ‘the Company’ and the Respondents as ‘the Permit Holders’) provided as follows:-

3. Permit to occupy

3.1 For as long as the Permit Holders comply with their obligations under this Agreement, the Company grants the Permit Holders a non-exclusive right to occupy the Licensed Area.

5. Acknowledgment of Licence

5.1 The Permit Holders acknowledge having received and read a copy of the terms of the Licence Agreement.

5.2 The Permit Holders agree that they will comply with the terms of the Licence Agreement as if they were the Licensee named in it.

22 Clause 20 of the Licence Agreement (in which Caltex was described as ‘the Company’ and the Appellant as ‘the Licensee’) provided as follows:-

20. In the event that the Company is the lessee under a lease of the Land (“Lease”) then this agreement is subject to all the terms and conditions of the Lease and the Licensee will not do or allow anything which if done or allowed by the Company would breach that Lease. If the Company’s tenure of the Premises is terminated, this Agreement will at the same time terminate without any liability on the part of the Company.

23 Mr Campbell contended that the effect of these clauses of the Permit to Occupy, notably clause 5.2, was that with regard to any relevant action taken by Caltex the Respondents were to be treated as if they were the Licensee under the Licence Agreement. This meant that, as stipulated in the second sentence of clause 20 of this Agreement, any termination of Caltex’s tenure would terminate both the Licence Agreement and the Permit to Occupy, without any liability arising against either Caltex or the Appellant.

24 In support of this approach to interpreting these clauses of the Permit to Occupy and the Licence Agreement, Mr Campbell cited a number of authorities (for example, LMI Australasia Pty Ltd v Boulderstone Hornibrook Pty Ltd [2001] NSWSC 886 at [71 – 72]) which emphasise the need to construe commercial contracts in a practical and realistic way, avoiding artificial and technical interpretations.

25 Mr Campbell argued that the question whether these clauses had the effect for which he contended was a question of law. He referred us to the High Court’s discussion of the distinction between questions of law and questions of fact in Collector of Customs v Agfa-Gevaert Ltd (1996) 186 CLR 389 at 394-398. It followed, he said, that the Tribunal’s failure to interpret the clauses along these lines was an error of law, calling for our intervention as provided for by s 113(2) of the Administrative Decisions Tribunal Act 1997.

26 Mr Campbell stated that this line of argument was included in the submissions that he put before the Tribunal. Mr Woodward agreed that this was the case. The Tribunal’s judgment did not, however, make any reference to it.

27 In our judgment, the fact that the Tribunal omitted to deal with this line of argument in its judgment amounts of itself to an error of law. In the words used by the Appeal Panel in Stanoevski v Council of the Law Society of New South Wales [2003] NSWADTAP 33 at [17], the Tribunal has ‘made it appear that it has not heard and determined the actual case that the appellant was putting forward’.

28 Having decided that this error of omission is an error of law, we grant leave under s 113(2)(b) of the Administrative Decisions Tribunal Act 1997 for the appeal to extend to the merits, if this is necessary to warrant our proceeding to determine whether the Appellant’s argument is well founded. We do not need to decide whether Mr Campbell is correct in submitting that the issue raised in this argument is one of law.

29 This now brings us to determining whether the interpretation urged upon is by Mr Campbell should be accepted. In our opinion, it is not correct. It goes beyond what the words of the relevant clauses provide, even allowing for the need to interpret commercial agreements in a practical, realistic and non-technical way.

30 The principal flaw in Mr Campbell’s argument, as Mr Woodward pointed out, is that it treats the second sentence of clause 20 of the Licence Agreement as protecting the Appellant, as well as Caltex, from liability in the event of Caltex’s tenure being terminated. The sentence cannot, in our opinion, be extended in this way, even when the Agreement is read in conjunction with the Permit to Occupy.

31 Although, as Mr Woodward pointed out, several provisions of the Permit to Occupy made reference to the Licence Agreement, the only provision that brought the Respondents within the scope of the obligations set out in the Agreement was clause 5.2. In this clause, the Respondents promised to ‘comply with the terms of the Licence Agreement as if they were the Licensee named in it’. They thereby agreed, in particular, that they would refrain from conduct that might expose the Appellant to liability to Caltex under any of the clauses of the Licence Agreement imposing obligations on the Appellant in its role as licensee (for example, the obligation, set out in clause 16 of the Licence Agreement, to ‘ensure that no activities are carried on at the Premises which cause any nuisance or undue disturbance to others…’).

32 The agreement between the Appellant and the Respondents constituted by clause 5.2 of the Permit to Occupy went no further than this. It fell well short of an agreement exempting the Appellant from liability to the Respondents in the circumstances in which, as provided in clause 20 of the Licence Agreement, Caltex was to be exempt from liability to the Appellant.

33 In support of his argument, Mr Woodward reminded us, appropriately, of the established principle that an exemption clause, such as clause 20 of the Licence Agreement, must be construed strictly against the party for whose benefit it is inserted. He referred us to the judgment of Windeyer J in Thomas National Transport (Melbourne) Pty Ltd v May & Baker (Australia) Pty Ltd (1966) 115 CLR 353 at 376-377.

34 Mr Campbell also referred to parts of the evidence indicating that (a) the lease from Ladehai to Caltex had been registered and (b) the Respondents had been warned by their solicitor not to execute the Permit to Occupy until they had received particulars of the Licence Agreement. He suggested that the Respondents were therefore on notice of the limits on Caltex’s tenure from Ladehai and were bound to ‘defer’ to these limits.

35 We would agree that the Respondents knew that Caltex’s tenure was limited by the terms of its lease from Ladehai and indeed that it had an option to renew this lease, which it might decide not to exercise. But as the Tribunal found, the expiry date appearing in both the Permit to Occupy and the Licence Agreement was 30 October 2003. The contractual promise given by the Appellant to the Respondents, reinforced by the terms of the fax sent by its solicitors on 12 December 2000, was that the Respondents would have the right to occupy Café Portofino until that date. Furthermore, the fax expressly conveyed unwillingness on the Appellant’s part to ‘disclose the commercial arrangements between itself and Caltex’.

36 In these circumstances, the Respondents’ claim that the Appellant repudiated the Permit to Occupy by requiring them to vacate the premises in February 2003 cannot be answered by asserting that they were in some sense ‘on notice’ of the possibility that Caltex, and therefore the Appellant, might cease to have tenure of the property at the end of November 2002.

37 As Mr Woodward pointed out, it was always open to the Appellant to protect itself by inserting in the Permit to Occupy a clause in similar terms to clause 20 of the Licence Agreement. It did not do so. Had it insisted during negotiations on the inclusion of such a clause, the Respondents might have adopted a different stance in the negotiations. They might even have decided that it was too risky, financially speaking, for them to take over Café Portofino.

Our orders

38 For the foregoing reasons, we dismiss the appeal.

39 Each party has 28 days in which to file and serve an application for the costs of this appeal, with supporting submissions. Any submissions in response must be filed and served within a further 28 days. Unless an application is made for a hearing, the matter of costs will be decided on the papers. If no application is filed, there will be no order for costs.