Nostin Pty Limited v Suzy Georges and Zena Georges
[2014] NSWCATCD 158
•07 August 2014
NSW Civil and Administrative Tribunal
New South Wales
Medium Neutral Citation: Nostin Pty Limited v Suzy Georges and Zena Georges [2014] NSWCATCD 158 Hearing dates: 1 May 2014 Decision date: 07 August 2014 Before: D Patten, Principal Member Decision: 1Declare that the respondents since 8 December 2009 have been liable to pay to the applicant rent at the rate of $2,833.53 inclusive of GST per calendar month.
2Declare that the respondents are liable to pay to the applicant interest on overdue rent in accordance with cl 5.1.5 of the lease at the rate of 15% p.a.
3Order that the total of the sums payable by the respondents to the applicant in accordance with 1 and 2 be abated by $7,500.00.
4Order that the parties file with the Registrar within 21 days minutes of order reflecting declarations and order 1, 2 and 3.
5Liberty to each party to apply for re-list on 7 days' notice to the Registrar and to the other party.
6Subject to para 54 of the reasons, no order as to costs.
Catchwords: Lessee holding over under expired lease - rent payable - innocent misrepresentation as to area - loss recoverable Legislation Cited: Retail Leases Act 1994 Cases Cited: Legione v Hateley 152 CLR 406
Casquash Pty Ltd v NSW Squash Ltd (No 2) [2012] NSW SC 522
Taylor v Johnson 151 CLR 422Category: Principal judgment Parties: Nostin Pty Limited (applicant)
Suzy Georges and Zena Georges (respondents)Representation: B Fogarty
V Gray
Barker Lawyers
Bob Damcevski Corporate & Civil Legal
File Number(s): COM 14/00486 Publication restriction: Unrestricted
reasons for decision
INTRODUCTION
These proceedings concern premises known as Shop 6/54-58 Hill Road, Lurnea (the premises) which at all relevant times were owned by Nostin Pty Ltd (the applicant) and came to be occupied by Suzy Georges and Zena Georges (the respondents). The premises were used and occupied by the respondents as a Hairdressing and Beauty Salon and it was not disputed that they constituted a retail shop as defined in the Retail Leases Act (the Act).
From 8 December 2006 to 7 December 2009 the premises were subject to a written lease executed by the applicant and respondents (the lease) which, so I was informed, was registered. The lease contained an option for renewal for a further term of 3 years but it was common ground that the option was not exercised.
Nonetheless the respondents remained in occupation after the lease expired with the consent of the applicant and remain in occupation to this day. Clause 12.4 deals with that situation.
12.4 "If the lessor allows the lessee to continue to occupy the property after the end of the lease period (other than under a new lease) then -
12.4.1 the lessee becomes a monthly lessee and must go on paying, the same rent and other money in the same way that the lessee had to do under this lease just before the lease period ended (apportioned and payable monthly);
12.4.2 the monthly tenancy will be on the same terms as this lease, except for -
□ clause 4;
□ clause 5.4 to 5.21 inclusive; and
□ clause 6.2 unless consent has previously been given;
12.4.3 either the lessor or the lessee can end the monthly tenancy by giving, at any time, one month's written notice to the other expiring on any date; and
12.4.4 anything that the lessee must do by the end of this lease must be done by the end of the month's tenancy."
Clauses 4, 5.4 to 5.21 and 6.2 are irrelevant to the issues which arise in this case referring respectively to the lease period, rent reviews and changes of user.
The Issues
In its application the applicant seeks $87,647.80 as arrears of rent plus interest at 12% pa said to be in accordance with clause 5.1.5 of the lease. Although it seems to be conceded by the respondents that some money is due by them there is an issue as to the quantum.
The other issue to be resolved is the respondents' claim that the applicant engaged in misleading or deceptive conduct within s 62D of the Act and that they are entitled to damages as a consequence pursuant to section 62E.
This aspect of the case is complicated by the fact that there is no formal application for damages by the respondents but their counsel Mr V Gray submitted in effect that despite the absence of such an application the Tribunal is entitled under the broad terms of s 72 to make an allowance or set off against any sum found to be due to the applicant.
The applicant's evidence
The principal witness in support of the applicant's claim was Mr V R Stevens, Partner Principal and Licensee of Dunn & Horne Commercial Pty Ltd (Dunn & Horne) Real Estate Agents. In about May 2006 the firm was retained to advertise and lease the premises which constitute a shop being one of 6 shops in the Shopping Centre at 54-58 Hill Road, Lurnea. At the time and continuing Mr Barry Waugh and his wife Diane Waugh were the directors of the applicant. Mr Steven's co director at Dunn & Horne was a Mr Bruce Schell.
Prior to May 2006 the premises were occupied by the TAB. Following their retainer, about June 2006 Dunn & Horne commenced to advertise the premises for lease. Mr Stevens in his Statement dated 13 November 2013 (Exhibit D) describes his negotiations with the respondents:
"16. In July 2006 the respondents contacted Dunn & Horne and expressed an interest in taking up a lease for the Shop to run a hairdressing salon. At about that time I did an inspection of the Shop with both of the respondents, Suzy and Zena Georges.
17. Other than the inspection, when Zena Georges was present, I dealt only with Suzy Georges in negotiations about the lease of the Shop. She was the person who contacted me about the lease. I sent all correspondence to her and telephoned her about the Shop and the lease negotiations.
18. In about August 2006, I advised Suzy Georges that the Respondents needed to submit a Development Application (DA) to Liverpool Local Council for a "change of use" to operate their hairdressing business at the Shop. To assist them with that:
I let them inspect the Shop premises. I recall attending the premises with them to let them inspect the Shop approximately 2-3 occasions between August and October 2006. Those inspections lasted about 30-45 minutes. As they had not at these times paid their deposit or finalised their Lessee's Letter of Intent, I had to accompany them to the premises with the keys and remain there while they were there and then lock up. I was in attendance when they made these inspections, and
I provided them with a, to scale, floor plan which I myself drew up, the scale being 1:100, to assist them with the DA application and inspection of the Shop (Scale Diagram). I based the plan on my initial sketch of the premises in or around May 2006. I am not aware whether they had the Shop formally surveyed as part of their DA process. I attach a copy of the to Scale Diagram provided to the Respondents by me between August and October 2006 and mark it 'VS5'.
19. I am aware that DAs require details, such as floor space, location of drainage points and fixtures and fitting within the premises, such as locations of toilets, basins, cutting stations and front counter. The location of these fixtures had to be measured and outlined on the plan to see what position they would occupy within the premises and how many would fit. This task was undertaken by both the respondents, Suzy and Zena, while I was present.
20. By the end of August 2006 the offer for a lease of the Shop put to us by the respondents, for a hair dressing/beautician business, was:
$500.00 per week plus GST;
$28,600.00 per annum
3 years, for the Term of Lease;
3 years, for the Option;
4 months' rent free, and
Commencement of the lease in October 2006"
Following these negotiations the lease was executed. The lease reserved a rent of $28,600.00 pa payable by monthly instalments of $2,383.33 plus GST. There was no provision in the lease for the respondents to pay a share of outgoings but there was provision for the rent to be reviewed annually during the term. By the time the lease expired the respondents were paying $2,833.53 inclusive of GST per calendar month.
So far as the evidence relates the respondents punctually paid the rent reserved by the lease until it expired.
According to Mr Stevens notwithstanding that the Option had not been exercised, by September 2009 the respondents had indicated that they wished to remain in occupation and execute a fresh lease. Apparently there were discussions and in the second half of November 2009, Dunn & Horne sent to the respondents a document headed "Lessees Letter of Intent". In the body of the document it was provided:
"The purpose of this letter of intent is to confirm that I have agreed on behalf of the lessee to accept the lease of the abovementioned premises from the Lessor for the term and subject to the conditions set out in the schedule below.
Schedule
Term of Lease 5 years 2. Option *
Commencement 08.12.09 4. Gross Annual Rental $34,002.36 +GST
Gross Monthly Rental $2,833.53 + GST 6. Outgoings Nil Contributions Nil
Area Leased: 97.55m²
Rent Reviews: CPI Annually
Permitted usage: Hairdressing & Beauty Salon
(subject to DA approved by council)
Amount of Public liability insurance: $10,000.00
Amount of Bond: $495.22 ($2,621.66 Already held)
Special Conditions: Nil"
The document contained a space for signature by the respondents but immediately before it there was stipulated in block print:
"IT HAS BEEN MADE CLEAR TO ME THAT THIS LETTER OF INTENT WILL NOT BIND THE LESSEE TO TAKE UP THE LEASE IF THE LEASE DOCUMENTATION IS NOT FINALLY APPROVED BY THE LESSEE OR THE LESSEE'S SOLICITORS."
On 3 December 2009 Mr Stevens received an email from Ms Suzy Georges:
"Shop 6, 54-58 Hill Road Lurnea NSW 2170
Dear Vincent
As per our recent discussions regarding exercising our 3 year option for our small business lease at Shop 6, 54-58 Hill Road Lurnea NSW 2170.
We believe and have been advised that a 10% increase for exercising our 3 year option on our existing lease is unsubstantiated.
Taking aboard advice from Minister Tripodi of the Department of State and Regional Development as we are a small business with support of our State Government, we have been advised to engage in reasonable negotiation for exercising our 3 year option with an increase of what may be deemed reasonable.
As I have highlighted below in 'red' from the State Retail Tenancy Act NSW, We should have been given written notice 6 months prior to our lease ending to exercise our option.
44 Notice to lessee of lessor's intentions at end of lease
Not less than 6 months and not more than 12 months before the expiry of a lease, the lessor must by written notification to the lessee either:
offer the lessee a renewal or extension of the lease on terms specified in the notification (including terms as to rent), or
inform the lessee that the lessor does not propose to offer the lessee a renewal or extension of the lease.
Note. A notice under paragraph (b) may include other information as to the lessor's intentions (for example, that the lessor intends to allow the lessee to remain in possession of the shop as a periodic tenant under any provisions of the lease as to holding over, or as a tenant at will).
Because such a statement is only a statement of intention, a lessee should be aware that it may not of itself bind the lessor.
As I believe that we have been model tenants paying our rent 'on time' each and every month, maintaining the premises to the best possible standard (Passing Health inspections twice a year,) and considering that CPI Index for 2008 - 2009 is no more than 2.5%.
I would like you to put forward our offer to exercise our Lease Option for the extended 3 years at a rental increase of no more than 3% PA.
I hope you understand that we are two female small business owners trying to contribute to our local community whilst trying very hard to provide our families with an honest income.
I look forward to your favourable and timely response.
Regards
Suzy Georges"
Mr Stevens replied with a letter of 4 December 2009:
"Dear Suzy & Zena,
Shop 6, 54-56 Hill Road, Lurnea NSW 2170
We refer to your email of 3 December 2009. In relation to Clause 44 of the Retail Tenancies Act as outlined in your correspondence, in accordance with Clause 5, Clause 1 does not apply. In any case the Lessor is willing to negotiate a new three (3) year lease on existing terms, subject to rental.
If the option was exercised in accordance with your lease conditions, you would be subject to a rent increase to market.
The current rent for similar shops suggest a rate of $400 per m², being an increase of over $25%. The Lessor has taken into account your continuity in rental payments and tenure, and considers the 10% to be a fair adjustment in light of the current market conditions.
If you require any further information please do not hesitate to contact me".
Ms Suzy Georges replied on 8 December 2009:
"Vincent
Attached is a copy of the 'Lessee's Letter of Intent that sent out to us from the Manager Dunn & Horne Liverpool.
Your proposal in this letter is for a 5 year lease renewal at the following rate:
$34,002.36 + GST Annual Gross Rental
97.55m²
$348.56 m² per annum
Can you confirm that the m² rate in your letter is correct?
Your letter dated 4-12-09 in response to my email states that the market rate is $400m² for similar shops, Can you please advise me where you obtained your data as your web site shows retail shops in Liverpool and Macquarie Fields with rates of $281m², $311m² and $243m².
I look forward to your response on my questions above and again remind you that we are in 'Lurnea' not a high profile area, and that your timely attention to closure on the renew of our lease would be appreciated as our lease has officially expired.
Once I have received your reply I will then go to my Solicitors for advice.
Suzy"
In spite of their emails of protest the respondents signed the Letter of Intent referred to above on or about 19 February 2010. The original document sent to them was amended in the version they signed by adding after the expressed Gross Annual Rental viz $34,002.36 + GST "(Approx $348.56 p/m²). In fact an annual rent of $34,002.36 does represent an area leased of $97.55 m² at $348.56 m².
Upon receipt of the Letter of Intent signed by the respondents Dunn & Horne instructed the applicant's Solicitors Barker Lawyers to prepare a lease.
A draft lease was duly prepared by the Solicitors but as is common ground was never executed. It provided for a term of 5 years with an option for renewal of 3 years. It also provided for an annual rent of $34,002.36 pa plus GST reviewable annually in accordance with the CPI.
According to Mr Stevens the respondents commenced paying rent at the rate of $2,833.53 + GST per month on 9 March 2010 and continued until the payment they made on 11 December 2010 which covered the period to 8 November 2010. There is some confusion as to what occurred subsequently in relation to the payment of rent. It appears that for a time money was paid by the respondents to the trust account of their solicitors Marsdens where it presumably remains. Later the respondents paid to the applicant what they claimed was the proper rent calculated by reference to the correct area of the premises. The sum claimed in these proceedings is calculated by the applicant on the basis of a commencement rent in December 2009 of $34,002.36 p.a. plus GST with annual adjustments according to movements in the CPI.
The balance of Mr Stevens' statement refers to the dispute concerning the floor area of the premises and the significance of that dispute in determining the amount payable by the respondents. I will refer to this part of Mr Stevens' evidence and to the evidence of other witnesses in the applicants case dealing with the same subject matter after I have referred to the evidence in the respondents case.
The respondents' case
Ms Suzy Georges testified in her affidavit sworn 17 February 2014 that she was personally involved in all negotiations and decision making relating to the occupation by her sister in law Zena Georges and herself of the premises. To avoid confusion and without meaning any disrespect I shall hereafter refer to Ms Suzy Georges as Suzy and Ms Zena Georges as Zena.
In relation to the taking of a lease of the premises Suzy said:
"In or about August-September 2006 I investigated the availability of retail premises in and around the Lurnea area for the purpose of establishing a ladies' hairdressing salon to be operated by Zena and me. I inspected several different premises (including Shop 6 at 54-58 Hill Road, Lurnea, "the Premises") and compared their advantages and disadvantages and the respective rentals sought. During the same period I inspected other retail shop premises at Bankstown, Miller and Liverpool. I had never been involved in any such investigations and negotiations prior to 2006. I discovered that retail shop premises rentals were calculated with reference to the area of the premises and I mentally related the rents sought to the areas of the respective premises which I inspected. On the second occasion Zena and I inspected the Premises with Vincent, Vincent gave us the diagram of the shopping centre at 54-58 Hill Road, Lurnea, a copy of which is attached and marked "A" (materially identical to annexure BW10/6 to the affidavit of Barry Waugh). In all my dealings over the Premises in 2006 I acted on the basis that the statement on this diagram as the area of Shop 6 (97.55 sq mtrs) was accurate.
On or about 15 September 2006 Vincent from Dunn Horne, the Lessor's agent provided to me a form headed "Lessee's Letter of Intent. When I received form VS8 (the Lessees Letter of Intent) the form contained no handwriting: the fields opposite the printed words were blank. I telephoned Vincent and discussed with him what I should write in the various fields. As Vincent and I were speaking by telephone, I wrote in the responses to the various fields. In the field for clause 13 I wrote "4months". When I had completed the fields on the form there were no crossings out or other over-written changes. Zena and I then signed the form and I then faxed the form back to Vincent.. At the time I had and signed the document - there was no other hand-written changes which now appear on VS8 (including the words "+G.S.T." which did not appear on VS8 when I signed it). Zena and I signed the document and faxed it back to Vincent. I recall having a subsequent telephone conversation with Vincent as a result of which I emphasized that I did not agree to any further alteration to the document after I had signed it. All other alterations to VS8 were made after I had signed it and without my knowledge or consent. At the time I signed the letter of intent and returned it to Vincent I had compared the rent for the Premises with the rents payable for other alternative available retail premises on the basis of a cost per square metre of the various properties - in the case of the Premises by reference to annexure A. If VS8 in its original form stated that the area of the Premises was 120 sq. mtrs. I nonetheless relied upon and worked off annexure A. Vincent never gave us a hand-written diagram of the Premises like VS1 or VS5.
I compared the rent for the Premises on VS8 ($2,388 pcm) (with no reference to GST) with the rents sought for other alternatives available retail premises on the basis of a cost per square metre of the various properties. (I realized that different locations would have advantages and disadvantages and took these into account in making my comparison but the main consideration was the respective rents because this was a cash expense we would be liable to pay no matter what the financial results of the business.) I thought that the Premises would be a suitable site for our hairdressing business and that the rent was reasonable for a shop of that stated size shop (i.e. 97.55 sq mtrs) in that location.
About four weeks later Vincent telephoned me and said words to the effect:
Vincent: The landlord will not agree to a 4-month rent-free period. He will only agree to 3 months. You will have to change the form to three months and sign/initial it and fax me the new form. (I cannot now remember whether Vincent said to sign or initial the change to the form)."
At this stage I should digress to make reference to statements as to the area of the premises in various documents referred to. As indicated the plan annexed marked A to Suzy's Affidavit which she said was given to her by Mr Stevens at the second inspection of the premises showed the area as 97.55m². The plan attached to Mr Stevens statement marked VS5 which he said he drew to scale left the area to be calculated as none was specified. Attached to Mr Steven's statement, respectively VS8 and VS9 were two slightly different versions of "Lessees Letter of Intent". Both documents bear Suzy's signature. The earlier is dated 15 September 2006 and the later 10 October 2006. Both documents provide for disclosure of the area leased. In the earlier "120 sqm approx." has been ruled through and "82.5 sqm" substituted. Although the later document is not a photocopy of the earlier, the same alteration has been made. Suzy deposed in her affidavit that when she signed the "Lessees Letter of Intent" it showed an area of "120 sqm" without alteration.
A further document referring to the area of the premises is "Lessors Disclosure Statement" required by S 11 of the Act. According to Mr Stevens, such statement was sent by the applicant's solicitor to the respondents' solicitor. In evidence is an undated, unsigned document headed "Lessors Disclosure Statement". It states the area of the premises to be "82.5 sqm". Suzy denies ever seeing such a document and there is no evidence from which it could be inferred that she did.
In relation to events which occurred when the lease expired, Suzy testified:
"In 2009-10 I was unfamiliar with retail shop leases and we did not renew the original lease in accordance with the right of renewal contained in it.
In late November 2009 the Lessor's agent, Joseph Ripepi from Dunn & Horne called at the Premises unannounced and (whilst I attending to a client) said to me words to the effect:
Joseph: You have missed your opportunity to exercise the right of renewal of the lease. If you want to remain in the Premises you will have to sign this."
He handed me a document headed "Letter of Intent" VS31. This document stated that the area of the Premises was 97.55 square metres approximately and provided for rent at the rate of $34,002.36 plus G.S.T at the rate of $348.56 p/m² - which calculates to an area 97.55 m² which is the area of the Premises stated in VS31.) This represented an increase in rent of about 10% on our then current rent.
Joseph: The rent will go up by 10%.
Me: Is this because we did not exercise our option?
Joseph: No. The Lessor is free to put up the rent even if you did exercise the option.
Me: Please leave this with me so I can look over it and discuss it with my solicitor."
As indicated earlier up, to that point Suzy's evidence was that she believed the area of the premises to be 97.55m². On that basis she said that she thought the rent being sought was reasonable.
However following subsequent conversations with Mr Stevens in which Suzy unsuccessfully sought to negotiate a lesser rent she and Zena retained surveyors John Lowe & Associates Pty Ltd to determine the area of the premises. That firm reported on 14 December 2009:
In accordance with your instructions we have taken the internal measurements of the subject building situated at Shop 6, 54-58, Hill Road, Lurnea.
The floor area of the subject building is 77.8m² as shown on the sketch overleaf.
There has been no challenge to that report in this case.
According to Suzy on 19 December 2009 Mr Ripepi called and pressed her to sign the Letter of Intent. In so doing he said:
"This is only a letter to state your intentions. It is not the legal lease. You can take the lease to your solicitor later but I need a signature to take back to the office."
Suzy said that she and Zena thereafter signed the Letter of Intent but they also consulted solicitors Messrs Marsdens who exchanged correspondence with the applicant. On the advice of Marsdens she said that she and Zena paid rent for a time into their trust account. Later she said that rent at what she regarded as the appropriate rate was paid to the applicant.
In the period May to June 2010 there was an exchange of correspondence between Marsdens and Barker Lawyers which I regard as relevant to the issues in this case. Marsdens wrote on 28 May:
"We act on behalf of Suzy and Zena Georges.
Our clients have recently approached us in regard to a number of matters including the new lease for the abovementioned property. We note that you act on behalf of the lessor and have provided documentation to our client under cover of letter dated 28th April 2010.
As you may well be aware our clients have occupied the premises now for a number of years. There appears to have been a generally good relationship between our respective clients.
Before our clients can proceed further with this lease they require to know the dollar value per sqm for the premises.
Would you please obtain instructions and provide us with your early written reply."
This brought forth a reply from Barker Lawyers:
"We refer to your letter dated 28 May 2010.
According to our calculations based on the area and the annual rental the dollar value would be $348.56 per square metre.
Please arrange for the execution of the documents forwarded under cover of our letter dated 28 April 2010 to your clients at your earliest convenience."
In one sense Barker Lawyers had fallen into a trap set for them by Marsdens who were then able to reply:
"We are in receipt of your letter of 10th June 2010.
We have now received instructions from our clients that we write to the lessor, care of your Office, to advise that our clients have now become aware of a mistake in the area being leased for the abovementioned property.
Under cover of this letter we provide you with a copy of a Plan from a surveyor, John Lowe & Associates Pty Ltd. That identifies the relevant premises and that the shop area, as surveyed, is 77.8sqm. In the lease documentation that you (lessor) have provided it identifies the lettable area of 98sqm. If 98sqm is correct then our clients require prompt and detailed advice on how that area is calculated.
If 77.8sqm is the correct area then on the strength of your advice that the dollar value rental is $348.56 per square metre then the annual rent should be no more than $27,117.97. It is understood that our client has been paying, since 8th December 2009 an annual rental of $34,158.37.
This mistake now causes some considerable concerns to our client. Not only will our clients be seeking a reimbursement of the overpayment but they will also require amended lease documentation be provided identifying the correct annual and monthly rental payments and lettable area. To date there have been 7 monthly payments made at the incorrect higher amount.
In addition to seeking reimbursement for the overpayment on the current lease arrangement our clients are also concerned that there was an error and therefore a demand for an incorrect payment for the previous lease occupation of the premises by our clients. Our clients also seek reimbursement of the difference between what should have been the correct rental for the correct area instead of the higher incorrect square meterage and therefore paid rent.
We reserve our clients rights in relation to the obligations under the current lease terms as well as the prior lease.
We look forward to your early written response."
A letter from Solicitors Mosca and Scott then acting for the applicant dated 15 November 2010 revealed that the parties were still in discussion although the letter foreshadowed the possibility of re-entry for non-payment of rent.
Suzy maintained under cross examination that the plan annexed to her affidavit marked "A" was given to her by Mr Stevens about August 2006.
Zena swore an affidavit on 16 February 2014. She testified that she was present when Mr Stevens gave Suzy and herself the plan which showed the area of the premises as 97.55 m². She said that she relied on this in all her dealings and was unshaken in cross examination.
Applicants evidence in reply regarding area discrepancy dispute
Of the witnesses who gave evidence on this aspect of the applicants case it is in my view necessary only to refer to Mr Stevens Mr Barker and Mr Waugh.
Mr Stevens in his statement denied that he gave the plan which depicted the area of the premises at 97.55m2 to Suzy and Zena at their second meeting or at all. He said that he did not become aware of the existence of the plan until early in 2010. He stated that negotiations regarding rent were always in dollar terms and denied that in relation to the 2006 lease there was ever a discussion in which rent was related to area a proposition which he said is supported by his handwritten notes of 31 August 2006 which make this reference in relation to rent: "$550 pw + GST".
As to the provenance of the plan annexed to Suzy's affidavit the Statement of Mr Robert Barker, Solicitor said:
1. In relation to paragraph 2 of the affidavit of Suzy Georges dated 17 February 2014, I say that the diagram attached to the affidavit of Suzy Georges, marked "A" in her Affidavit was drawn by me and figures attached to the plan is my handwriting with the exception of the words "DRIVEWAY IN" and "DRIVEWAY OUT", which is the handwriting of Barry Leslie Waugh.
2. The diagram was prepared by me using a plan and areas provided to me by Barry Leslie Waugh.
3. The diagram was attached to a Disclosure Statement, which was prepared by me on or about 28 April 2010 and submitted to the Defendants' former solicitors, Marsdens, under cover of my letter dated 28 April 2010.
4. To my knowledge this would have been the first time that the Defendants would have obtained possession of this diagram.
Mr Waugh in his statement said in about May 1992 he commissioned a valuation of the property at 54 Hill Road Lurnea which includes the premises from a Mr Rex McDonald. In the body of his report dated 1 June 1992 Mr McDonald describes the area of the premises as 97.55 m². Mr Waugh said that he relied on the valuation as specifying the correct area of the premises but his statement is silent as to how and when the areas in the valuation came to be translated into the plan annexed to Suzy's affidavit. Moreover Mr Barker was clearly in error in implying that the plan or one similar to it did not come into existence until 2010. Exhibit 2 a copy of the plan has a fax date stamp 26 October 2006 which seems to indicate that it emanated on that date from Mr Waugh.
Conclusions
I was impressed with Suzy as a careful witness doing her best to assist the Tribunal. I accept her as a witness of truth and in particular accept that she was given the plan annexed to her affidavit before the lease was signed by the lessor or its agent. I also accept that throughout her subsequent dealings she believed and relied on the statement that the area of the premises was 97.55 m² until she received the Lowe report. That conclusion I think is supported by her order of floor tiles covering 90 m² on 22 December 2006 Ex 3.
I also accept that Mr Stevens was a credible witness and that possibly be was not personally the source of the plan annexed to Suzy's affidavit. However as indicated in my opinion Mr Barker's evidence on the subject of the plan was clearly mistaken and as already stated I infer that on the probabilities Suzy received the plan if not from Mr Stevens then from the applicant or its agent before the lease was signed.
Furthermore I accept her evidence that she did not see a Lessors Disclosure Statement and that when she signed the Lessees Notice of Intent prior to execution of the 2006 lease there were no items which had been crossed out.
In my opinion the provision of a plan to the respondents in about August 2006 which misdescribed the area of the premises in a material way constituted misleading or deceptive conduct within s 62D of the Act and entitled the respondents to the rights created by s 62E. Mr Fogarty in his submission referred to cases such as Casquash Pty Ltd v NSW Squash Ltd (No 2) [2012] NSWSC 522. However that case and the authorities cited by Pembroke J such as Taylor v Johnson 151 CLR 422 were concerned with the setting aside of contracts for mutual mistake. That is not the case here. S 62D of the Act in my opinion encompasses conduct which is not intentionally misleading or deceptive if in fact it does mislead or deceive and there is a reasonable basis for it so doing. However in my opinion having regard to the provisions of S 62E breach of S 62D creates rights which are limited to compensation for proved loss or damage.
I accept Mr Gray's submission that proof of an entitlement under s 62E may permit the Tribunal to take that entitlement into account when making orders under s 72 without a formal application provided the other party has adequate notice but I reject any suggestion that the respondents are entitled to compensation above that provided by s 62E. In my opinion there must be an identifiable legal basis for any monetary order or adjustment under s 72.
Moreover s 71 requires that a claim under s 62E may not be lodged more than 3 years after it arose. In my opinion the respondents in seeking to have what is in effect a cross claim taken into account must be limited by S 71 although I note that S 71B ameliorates the effect of S 71 to some extent. In this case it would I think be just and reasonable to consider the respondents position as at the expiration of the lease in December 2009 in order to determine whether thereafter loss or damage has been caused contrary to S 62D.
The first issue to be decided is whether the respondents by signing the Lessees Letter of Intent in February 2010 and subsequently paying for a period the rent specified in that document are to be taken as having agreed to such rent. In my opinion that question should be answered in the negative. I am satisfied that as at February 2010 there was still an issue between the parties as to the rent payable under a renewed lease. That this was so is made manifest in my view by the subsequent correspondence between solicitors. Moreover there seems to be no reason not to give full force and effect to the block letters at the foot of the Letter of Intent to the effect that the statements in it do not bind the lessee.
It was submitted by Mr Fogarty that the payment of rent at the rate specified in the Letter of Intent albeit for a limited time estopped the respondents from thereafter denying that they had agreed to such rent. I do not agree with that proposition. It seems to me in the circumstances that the payments fell well short of the "clear and unequivocal conduct" required to create an estoppel (Legione v Hateley 152 CLR 406). Moreover there is no evidence that the applicant understood that the respondents were agreeing to pay the rent stipulated in the Letter of Intent, still less that they acted upon it to their disadvantage. The matter was in the hands of the solicitors.
It follows in my opinion that the liability of the respondents is to be derived from cl 12.4 of the lease. In respect of arrears of rent the applicant in my opinion is entitled to no more than a declaration that the respondents are obliged to pay rent since 7 December 2009 at the rate they were paying as at that date viz $2,833.53 inclusive of GST per calendar month. On amounts overdue by more than 14 days they are liable to pay interest as provided by cl 5.1.5 and item 15 in the schedule at 15% p.a. I would allow interest at that rate although I note that in its application the applicant seeks interest at only 12% p.a.
As indicated above I am satisfied that the applicant innocently misrepresented the area of the premises to a substantial degree and indeed maintained that misrepresentation in the Letter of Intent which the respondents signed in February 2010. Although there is much force in Mr Fogarty's submission that the parties confined their negotiations to dollar amounts I am unable to reject the evidence of Suzy that she regarded area as significant and in her own mind related the rent sought to what she believed was the area of the premises.
There was no express evidence of any loss or damage and I do not think the matter should be approached in the arithmetical manner suggested in Marsden's letter of 17 June 2010 reproduced above. That letter does however set out what I regard as useful parameters. To some extent the misrepresentation infected the rent being paid as at December 2009 and hence the rent payable since. However the respondents have been in occupation for a further 4½ years without their rent being reviewed. If they had exercised the option for renewal there would have been an adjustment of the rent "to market" and annual CPI reviews thereafter. Doing the best I can I think justice would be served if I ordered that the total rent and interest found to be due by the respondents in accordance with the above expressed conclusions be abated by $7,500.00.
I propose to order the parties to file with the Registrar minutes of order reflecting the declaration which I propose to make. I would hope that consequential orders can be made in Chambers without the need for a further hearing but in case that is not so I will give liberty to apply.
As to costs my preliminary view is that as each party has had a measure of success there should be no order. But I give each party liberty to make submissions as to costs within 21 days the other party to reply within 14 days. Thereafter the matter of costs will be decided on the papers. In the event that neither party makes a submission as to costs there will be no order.
Declarations and Orders
Declare that the respondents since 8 December 2009 have been liable to pay to the applicant rent at the rate of $2,833.53 inclusive of GST per calendar month.
Declare that the respondents are liable to pay to the applicant interest on overdue rent in accordance with cl 5.1.5 of the lease at the rate of 15% p.a.
Order that the total of the sums payable by the respondents to the applicant in accordance with 1 and 2 be abated by $7,500.00.
Order that the parties file with the Registrar within 21 days minutes of order reflecting declarations and order 1, 2 and 3.
Liberty to each party to apply for re-list on 7 days' notice to the Registrar and to the other party.
Subject to para 54 above no order as to costs.
D Patten
Principal Member
Civil and Administrative Tribunal of New South Wales
7 August 2014
I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales.
Registrar
Decision last updated: 17 October 2014
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