Pearson v Sakl World Pty Ltd

[2010] QCAT 58

CITATION: Pearson v Sakl World Pty Ltd [2010] QCAT 58

PARTIES:	Garry Michael PEARSON
v
Sakl World Pty Ltd

APPLICATION NUMBER:            RET012-09               

MATTER TYPE:

HEARING DATE:   26 February 2010

HEARD AT:   Brisbane

DECISION OF: C Endicott, senior member

DELIVERED ON:   26 February 2010

DELIVERED AT:   Brisbane

ORDERS MADE:  The respondent is ordered to pay $8,200 to the applicant for refund of rental bond together with interest of $496.73. 

CATCHWORDS :  Retail tenancy dispute – lease assigned - rental bond not refunded – claim for repairs

APPEARANCES and REPRESENTATION (if any):

The hearing took place on the papers and in the absence of the parties. 

REASONS FOR DECISION

1. Garry Pearson purchased a business known as “PJ’z Store” operating out of premises at 2 Goodman Close, Highland Park in November 2008 and he entered into a lease of the premises with the owner of the property, Sakl World Pty Ltd, dated 2 December 2008.
2. The premises consisted of a retail convenience store with a kitchen and cold room facilities and with a residential dwelling at the back of the premises.  The term of the lease commenced on 29 November 2008 for a period of one year with provision for the lessee to exercise options to extend the term of the lease.
3. Mr Pearson paid a rental bond of $8,200 in accordance with the terms of the lease.
4. For various personal reasons, Mr Pearson entered into a contract to sell the business in June 2009 and settlement of the sale took place on 22 July 2009.  Mr Pearson and Sakl World Pty Ltd, by its sole director Sergey Kouts, agreed to assign the lease to the purchasers of the business on 20 July 2009. 
5. The rental bond of $8,200 was not refunded to Mr Pearson and he filed an application on 4 August 2009 seeking orders against Sakl World Pty Ltd for the payment of the rental bond, costs and interest.  

THE LEGISLATION

6. From 1 December 2009 the Queensland Civil and Administrative Tribunal (the Tribunal) has replaced the Retail Shop Lease Tribunal on the commencement of the Queensland Civil and Administrative Tribunal Act 2009 (the Act).     
7. Section 133 of the Retail Shop Leases Act 1994 provides that from 1 December 2009 a retail tenancy dispute that had been referred to a former tribunal legal member and which had not been withdrawn, struck out or otherwise disposed of is taken to be an existing tribunal proceeding and the former tribunal legal member is taken to be a former tribunal. 
8. Section 245 of the Queensland Civil and Administrative Tribunal Act 2009 provides that an existing proceeding in a former tribunal is a pending proceeding if as at 1 December 2009 the former tribunal has not started to hear the matter or has not started to consider evidence for the purpose of making its final decision in the proceeding.   
9. Under section 256 of the Act, a pending proceeding is taken to be a proceeding before the Queensland Civil and Administrative Tribunal. In pending proceedings, the Tribunal only has the functions that the former tribunal had and can only make a decision that the former tribunal could have made in relation to the matter.  

EVIDENCE

10. Mr Pearson gave evidence by way of a statutory declaration dated 4 November 2009.  He declared that he purchased a business operating out of premises at 2 Goodman Close, Highland Park in November 2008, that the business premises are owned by Sakl World Pty Ltd and that Sergey Kouts is the sole director of that company.
11. He gave evidence that he met Mr Kouts at the premises on or about 6 November 2008, that he walked through the premises with Mr Kouts and that he raised with Mr Kouts the condition of the premises.  Mr Pearson gave evidence that Mr Kouts said that he would attend to the repair of the premises.  
12. A lease over the premises was signed on 25 November 2008 and commenced 29 November 2008.  Mr Pearson paid a rental bond of $8,200. 
13. Mr Pearson gave evidence that at the time of his taking possession, the premises were in a poor state of repair which he particularised as:
• Broken glass in the east facing sliding door in the dining room;
• Ripped and torn fly screen in the east facing sliding door in the dining room;
• Broken floor tile in kitchen floor;
• Torn fly screen to laundry door;
• Vertical drapes were missing drape elements in the east and west facing windows on the living room;
• Interior doors were in generally poor condition including delaminating in some places, holes and grubby paint work;
• Ensuite door completely missing;
• Paint flaking from ceiling in various places;
• Sliding doors throughout house not sliding properly.
14. Mr Pearson provided photographs which he asserts were taken on 6 December 2008 at the premises and which he asserts reveal the poor condition of the premises which had been sustained over a long period of neglect and lack of proper maintenance and could not have resulted from a very short period of neglect or a single occurrence.
15. Mr Pearson sold the business, the purchasers were approved as tenants by the lessor of the premises and the lease was assigned to the purchasers.  Mr Pearson gave evidence that the lessor did not raise any issues about damage to the premises and the disclosure statement signed by the lessor did not raise any damage issues. 
16. Mr Pearson asserted that the lessor had attended at the premises many times during his tenancy and was aware of the existence of the damage at the time the lessor gave the disclosure statement. 
17. Mr Pearson asserts that he made numerous verbal and written requests for the refund of the rental bond but the lessor had failed to do so.
18. Mr Pearson has provided evidence contained in statutory declarations from Brendon Patrick McMahon, Janice Hampton, David Webley, Shane Hurly, and Yuphin Pearson which confirm the evidence given by Mr Pearson that there was damage to the premises consistent with the photographs provided to the Tribunal at or near to the commencement of Mr Pearson’s lease of the premises.
19. Mr Kouts, the sole director of Sakl World Pty Ltd, did not provide evidence through a statutory declaration but provided a short statement to which he attached a range of documents.  He stated that the previous tenants to Mr Pearson had executed a surrender of lease in which they confirmed that the premises had been left in good condition.  Mr Kouts stated that Mr Pearson had given him no notice of any problems with the condition of the premises. 
20. The documents attached to his statement included a letter dated 2 November 2009 with the greeting “Hi Garry” but not bearing any address of the intended recipient of the letter, a commentary by Mr Kouts on the claims made by Mr Pearson, a single page headed “special conditions”, correspondence from Laurence Wilson & Associates, solicitors for the lessor, a quotation for repairs for $6,457.50 by Mr Organiser given to a Todd Read dated 3 August 2009 and a tax invoice for professional services from Laurence Wilson & Associates dated 19 August 2009, deed of covenant dated 20 July 2009, lease dated 2 December 2008 and surrender of lease dated 21 November 2008. 
21. In his statutory declaration Mr Pearson referred to the quotation by Mr Organiser and denied that the works included on the quotation were his responsibility.  He asserted that the works were capital in nature, not repairs brought about by damage caused by him or were improvements to the premises that the new tenants had elected to carry out.     

SUBMISSIONS

22. The Tribunal received written submissions from Mr Pearson via his lawyers.  It was submitted that Mr Pearson had produced photographs of the damage at the premises in existence at the commencement of the lease and the photographic evidence was confirmed by the evidence in the statutory declarations from Mr McMahon, Ms Hampton, Mr Webley and Mrs Pearson.  It was submitted that Mr Kouts had not produced any evidence contradicting the evidence of Mr Pearson about the existence of damage at the premises at the commencement of the lease. 
23. It was further submitted that Mr Kouts had not raised any issue about the condition of the premises at the time the lease was assigned to the purchasers of Mr Pearson’s business or during the term of his lease of the premises.  It was submitted that the disclosure statement provided by the lessor in July 2009 stated that there were no unresolved retail tenancy disputes at that time.  It was submitted that if Mr Kouts had been genuinely concerned about the condition of the premises or the actions of Mr Pearson then such concerns ought to have been included in the disclosure statement.
24. It was submitted that the lessor had signed a Deed of Covenant on Assignment of Lease in which the lessor agreed to consent to the assignment on the terms contained in the Deed.  One such term provided that the assignee assume from the date of assignment all the liabilities and responsibilities of the assignor under the lease.  
25. The submissions referred to clause 2 of the Deed which states that nothing in the document shall be construed as a release to the assignor from its liability under the lease. The submissions however refer to section 50A(2) of the Retail Shop Leases Act 1994 which releases an assignor from liability under a lease in certain specified circumstances.   It was submitted that once the assignment of the lease was completed any rights that the lessor had against Mr Pearson were lost.
26. It was submitted that the assignees of the lease had paid a rental bond by way of a bank guarantee as permitted by the lease.
27. Mr Pearson denied in his submissions that any issue had been taken by Mr Kouts to his premature entry into possession of the premises either at the time the lease was signed or at the time it was assigned.  The lessor had not disclosed any such breach in the disclosure statement. 
28. Mr Pearson submitted that the statement in the surrender document by the previous tenants that the premises had been left in good condition was a standard clause found in such documents.  It was submitted that as Mr Kouts had not produced evidence from the previous tenants about the condition of the premises in November 2008 that an inference could be drawn that their evidence would be adverse to the case advanced by Mr Kouts on the Jones v Dunkle principle. 
29. It was submitted that Mr Pearson is not liable to repair damage to the premises as he has been released from liability by section 50A(2) of the Retail Shop Leases Act 1994. It was submitted that the quotation for works provided to the Tribunal by Mr Kouts covered some substantial capital improvements to the premises and not repairs for minor damage.  It was submitted that the Retail Shop Leases Act 1994 prohibited a lessor from recovering amounts for capital works from a tenant. 
30. It was submitted that other specified parts of the works included in the quotation could not possibly relate to damage during the brief period of occupation by Mr Pearson.  These items of repair indicated an extended period of neglect by the lessor of the premises.  It was submitted that the lessor was seeking to pass on to Mr Pearson the liability of the lessor to maintain the property in good condition and repairing fair wear and tear items. 
31. Mr Kouts did not lodge any submissions apart from sending to the Tribunal an email on 22 February 2010 attaching an earlier email in which he asserted that all his actions are based on the lease terms and conditions for which both parties have responsibility. 

CONCLUSION

32. It is not in dispute that Mr Pearson and Sakl World Pty Ltd entered into a retail shop lease on 2 December 2008 and that Mr Pearson paid a rental bond of $8,200 in accordance with the terms of the lease.  It is not in dispute that the lease was assigned with the lessor’s consent on 20 July 2009 and the rental bond has not been refunded to Mr Pearson.  Mr Kouts has not challenged the claim made by Mr Pearson that the assignees have paid a separate rental bond by way of bank guarantee. 
33. The lease between Mr Pearson and the lessor contained the following clause: The Lessee agrees to pay to the Lessor an amount equivalent to two month’s rental by way of bank guarantee as and by way of security bond which shall be paid prior to the Lessee taking possession of the demised premises.  The bond will be utilised in the event of default under this Lease but otherwise will be refunded to the Lessee upon the expiration of the Lease”.
34. According to the lease, Mr Pearson is entitled to a refund of the rental bond on the expiration of the lease.  In view of the assignment of the lease to the purchasers of his business on 20 July 2009 and the provision of a separate rental bond by the assignees of the lease, it has been contended that Mr Pearson was entitled to the refund of the rental bond not on the actual expiry date of the lease but from the day when his ongoing liability for the payment of rent under the lease ceased i.e. 20 July 2009. 
35. Mr Kouts does not appear to dispute the contention that the rental bond was refundable from 20 July 2009 but he does dispute that the full amount of the rental bond should be refunded to Mr Pearson.   Mr Kouts contends that Mr Pearson is in beach of the lessee’s obligations under the lease to maintain the premises in good condition and he contends that Mr Pearson is responsible for the cost of carrying out repairs contained in the quotation by Mr Organiser.  Mr Pearson denies any such breach of his obligations under the lease.
36.  Mr Kouts did not provide any evidence to substantiate his claim that Mr Pearson did not maintain the premises in good condition.  On the other hand Mr Pearson provided evidence by way of photographs of damage existing in the premises as of 6 December 2008, less than a week after the commencement of the lease.  In addition evidence was given by five witnesses confirming the claim by Mr Pearson that the premises were not in good repair at the time of the commencement of the lease.       
37. The Tribunal accepts the evidence adduced by Mr Pearson.  The Tribunal finds that the premises were not in good condition at the time of the commencement of the lease.  The Tribunal is not satisfied that any of the repair work described in the quotation by Mr Organiser was occasioned by the actions of Mr Pearson.  There is no basis for the claim by Mr Kouts that Mr Pearson had failed to maintain the premises in good condition in breach of the terms of the lease.
38. In view of these findings, the Tribunal is satisfied that Mr Pearson is entitled to a refund in full of the rental bond of $8,200.  The Tribunal accepts the submissions that the entitlement to the refund arose from the date of the assignment of the lease as at that date, by virtue of the terms of the Deed of Covenant, the lease effectively came to an end as far as Mr Pearson was concerned.  As there has been no breach of the lease by Mr Pearson, the Tribunal does not need to address the other submissions referred to in paragraphs 25 and 29 of these reasons.  
39. Mr Pearson has sought interest on the amount of the rental bond unpaid since 20 July 2009. The Tribunal is satisfied that interest on the debt should be awarded at the rate of 10% being the interest rate payable on debts recovered through the court system.  The Tribunal calculates that interest of $496.73 is payable to the date of this decision. 
40. Mr Pearson also seeks recovery of legal costs quantified at $3,191.65. Mr Pearson was self represented in this proceeding as neither this Tribunal nor the former Tribunal had granted leave to Mr Pearson to be legally represented. The Tribunal is not satisfied that it is in the interests of justice to make an order facilitating the recovery of legal costs by Mr Pearson in circumstances where leave had not been granted for him to be legally represented in the proceeding. Both Mr Pearson and the respondent must bear their own costs of the proceeding in accordance with section 100 of the Queensland Civil and Administrative Tribunal Act 2009.