Ponticello Properties Pty Ltd v Nguyen
[2024] QCAT 375
•7 August 2024
QUEENSLAND CIVIL AND
ADMINISTRATIVE TRIBUNAL
CITATION:
Ponticello Properties Pty Ltd v Nguyen [2024] QCAT 375
PARTIES:
PONTICELLO PROPERTIES PTY LTD ATF THE PONTICELLO FAMILY TRUST (applicant)
v
LAP VAN NGUYEN (respondent)
APPLICATION NO/S:
RSL050-23
MATTER TYPE:
Retail shop leases matter
DELIVERED ON:
7 August 2024
HEARING DATE:
On the papers
HEARD AT:
Brisbane
DECISION OF:
A/Member D Brown – Presiding
Member JudgeMember McBryde
ORDERS:
Lap Van Nguyen is to pay Ponticello Properties Pty Ltd ATF The Ponticello Family Trust, $11,335.67 within 30 days, being:
(a) Rent owed in the amount of $ $11,804.27.
(b) Legal costs in the amount of $2,501.40.
(c) Less the security bond forfeited and retained by Ponticello Properties in the amount of $2,970.00
CATCHWORDS:
LANDLORD AND TENANT – RETAIL AND COMMERCIAL TENANCIES LEGISLATION – BREACH – REPUDIATION AND NON-PERFORMANCE – retail shop lease dispute – nonpayment of rent – repudiation of lease – whether damages claimed are payable.
Queensland Civil and Administrative Tribunal Act 2009 (Qld), s 9
Retail Shop Leases Act 1994 (Qld), s 5A, s 5B, s 5C, s 17, s 24, s 48
BMG SP Pty Ltd v YFG Strathton Pty Ltd [2023] QSC 52
Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd (2007) 233 CLR 115Shevill v Builders Licensing Board (1982) 149 CLR 620
APPEARANCES & REPRESENTATION:
This matter was heard and determined on the papers pursuant to s 32 of the Queensland Civil and Administrative Tribunal Act2009 (Qld)
REASONS FOR DECISION
By referral by a mediator of a retail tenancy dispute on 15 September 2023 this dispute was referred to the Tribunal. The applicant, Ponticello Properties Pty Ltd as the trustee for The Ponticello Family Trust (‘Ponticello Properties’), seeks from the respondent, Lap Van Nguyen (‘Mr Nguyen’), the amount of $38,381.78 for unpaid rent and other outgoings.
A mediation was scheduled for 29 June 2023. However, the respondent Mr Nguyen indicated he was not willing to participate in mediation and subsequently did not attend.
Background
Mr Nguyen entered into a 7-year lease (as the tenant/lessee) with the applicant Ponticello Properties (as the landlord/lessor) for shop 7, 1150 Beaudesert Road, Acacia Ridge, Qld, being a shop in the Acacia Marketplace Shopping Centre. The lease commenced on 10 January 2022 and was due to expire on 9 January 2029.
The lease confirmed the use of the premise was for the retail sale of cooked seafood, country fried chicken, takeaway, bubble tea and the operation of a carvery.
The lease provides for the annual rent to be paid in advance by instalments on the first day of each month.[1] There was also a provision for a reduced rent period for the first 8 months of the lease whereby the tenant need only pay half of the monthly instalments.[2] The annual rent increased every year with the cost in the first year of the lease being $45,000 per annum.[3]
[1]Clause 3.1 of the lease agreement.
[2]Ibid, clause 3.2.
[3]Ibid, clause 1 item 5.
Mr Nguyen paid no rent under the lease and spent significant time in Vietnam during the period of the lease.
There was ongoing communication between Ponticello Properties and Mr Nguyen between 7 March 2022 and 26 June 2022 as to payment of the rent and the bank guarantee which was due to be provided by 20 March 2022. On 6 April 2022 Mr Nguyen replied advising he was in Vietnam and could not transfer the money from there but would pay everything he owed when he returned to Australia on 21 April 2022. There was also a request from the Mr Nguyen’s solicitors to amend the date the bank guarantee was due from 20 March to 29 April 2022, which was agreed to by the Applicant.
No money was paid by Mr Nguyen in April 2022 and on 3 May 2022 he advised he was not able to get back to Australia due to testing positive for Covid-19 prior to departure and having to quarantine for 14 days. On 6 May 2022 Ponticello Properties asked Mr Nguyen when he would be returning to Australia and if he still wanted to proceed with the lease. On the same day Mr Nguyen replied “Yes my flight 18 of May” and provided a copy of his itinerary.
On 23 May 2022, when Ponticello Properties followed up with Mr Nguyen due to no rent having been paid, the bank guarantee being outstanding, and registration fees and survey plan fees being overdue, Mr Nguyen replied asking if he could reduce the bank guarantee to the equivalent of 4 months’ rent. When advised the options were to have the bank guarantee remain at 5 months’ rent or add back into the lease a lease guarantor and pay the legal costs of any change, Mr Nguyen advised “It takes 5 days for bank may have it on Friday.”
On 25 May 2022 Ponticello Properties asked Mr Nguyen to advise when payment of rent, registration fees and the survey plan fee will be paid as they were all overdue. On the same day Mr Nguyen replied, “I will pay together when I get the bank guarantee.”
No payment was made in May. Ponticello Properties followed up with Mr Nguyen as to the outstanding amounts due on 30 May and 2 June 2022 and included Mr Nguyen’s solicitors in the email on 2 June 2022. On 2 June Mr Nguyen’s solicitors replied advising they had not been able to contact Mr Nguyen and advising Ponticello Properties that they may wish to contact Mr Nguyen directly.
Ponticello Properties further followed up with Mr Nguyen and his solicitors on 10 June and 22 June 2022. On 26 June 2022 at 9:56pm an email was received from Mr Nguyen which stated:
“I m sorry I can not start the shop because I had lost all my money I’m in Viet Nam now to chasing get my money back I will send the keys back for Robert, you can rent to some one else I’m very sorry above this happened”
On 27 June 2022 the solicitors for Ponticello Properties wrote to the respondent’s solicitors to advise that they considered the email to be an indication Mr Nguyen was repudiating the lease, and unless the bank guarantee, outstanding rent and registration fees, and legal costs of $330 were paid within 7 days, Ponticello Properties would be regarded as having accepted Mr Nguyen’s repudiation and would terminate the lease.
On 6 July 2022 Ponticello Properties’ solicitors emailed Mr Nguyen’s solicitors to advise that as more than 7 days had passed with no payment made Ponticello Properties had accepted Mr Nguyen’s repudiation and would take steps to change the locks and re-let the premises. On 8 July 2022 Mr Nguyen’s solicitors responded to advise that they had been unable to contact Mr Nguyen in relation to the previous correspondence and as a result do not have instructions to act for Mr Nguyen.
On 1 September 2022 Ponticello Properties re-let the premises.
Ponticello Properties seeks an order for $38,381.78 in damages/costs from Mr Nguyen consisting of:
(a)Outstanding rent arrears[4] $18,777.22
(b)Real Estate Agent fees $ 9,450.00
(c)Legal fees $ 6,287.60
(d)Administration fees $ 5,000.00
(e)Survey Plan fees $ 1,155.00
(f)Accountant fees $ 682.00
(g)Less the security bond -$ 2,970.00
[4]Calculated from the period of 10 January 2022 to 31 August 2022.
What is the Tribunal’s jurisdiction?
The Tribunal has jurisdiction to determine matters it is empowered to deal with under the Queensland Civil and Administrative Tribunal Act 2009 (Qld) (‘QCAT Act’) or an enabling Act.[5] The enabling Act here is the Retail Shop Leases Act 1994 (Qld) (‘RSLA’). Under the RSLA, the Tribunal has jurisdiction to hear ‘retail tenancy disputes’.[6]
[5]QCAT Act, s 9(1).
[6]RSLA, s 103(1).
The phrase ‘retail tenancy dispute’ is defined in the RSLA to mean
any dispute under or about a retail shop lease, or about the use or occupation of a leased shop under a retail shop lease, regardless of when the lease was entered into.
‘Retail shop lease’ is defined in the RSLA at section 5A to mean “a lease of a retail shop”. A number of exceptions as to what constitutes a ‘retail shop lease’ are contained in subsections 5A(2) and (3). However none of these apply in this matter.
‘Retail shop’ is defined in the RSLA at section 5B which provides:
Retail shop means premises that are —
(a) situated in a retail shopping centre; or
(b) used wholly or predominantly for the carrying on of a retail business.
‘Retail business’ is defined in the RSLA at section 5C of the RSLA to mean “a business prescribed by regulation as a retail business”. The regulation referred to in section 5C is the Retail Shop Leases Regulation 2016 (Qld) (‘the Regulation’).
In this matter, it is clear on the evidence that this is a retail shop lease as the lease was within a retail shopping centre being Acacia Marketplace Shopping Centre and was leased to be used for the retail sale of cooked seafood, country fried chicken, takeaway and bubble tea and the operation of a carvery, which would fall within the definition of ‘takeaway food’ under the Regulation.
Repudiation
It is possible to terminate a lease at common law without issuing a notice to remedy breach based upon a lessee’s repudiation of a lease. Under general contractual principles, an innocent party may terminate a contract where there has been repudiation by the other party.
A party repudiates a contract if, by its conduct, it demonstrates an unwillingness or inability to render substantial performance of the contract.[7] Such a conclusion follows where the conduct of a party demonstrates an intention to no longer be bound by the contract or shows that he or she intends to fulfil the contract only in a manner substantially inconsistent with his or her obligations and not in any other way.[8]
[7]BMG SP Pty Ltd v YFG Strathton Pty Ltd [2023] QSC 52, [133]; Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd (2007) 233 CLR 115.
[8] BMG SP Pty Ltd v YFG Strathton Pty Ltd [2023] QSC 52 [134]; Shevill v Builders Licensing Board (1982) 149 CLR 620.
Whether a party has repudiated the contract is a question of fact, to be determined on an objective basis. The subjective intentions, beliefs or wishes of a party are irrelevant. The test is whether the conduct of one party is such as to convey to a reasonable person, in the situation of the other party, renunciation of either the contract as a whole or a fundamental obligation under it.[9]
[9] BMG SP Pty Ltd v YFG Strathton Pty Ltd [2023] QSC 52 [135], Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd (2007) 233 CLR 115.
Material filed and Procedural Issues
The only material before the Tribunal in addition to the initial referral is material provided by Ponticello Properties. As Mr Nguyen has filed no response and has not participated in the proceedings, the Tribunal has considered s 92 of the QCAT Act.
There is an affidavit of service provided by Ponticello Properties confirming they served Mr Nguyen on 27 November 2023 by posting to Mr Nguyen’s address for notices as per the lease document.
The Tribunal has sent all notices of hearing and directions to Mr Nguyen by email to both of the two email addresses provided in the initial referral by the mediator, one of which is the email address from which Mr Nguyen was communicating with Ponticello Properties whilst in Vietnam.
Accordingly the Tribunal is satisfied that Ponticello Properties has given Mr Nguyen a copy of the application and Mr Nguyen is aware of the proceedings and has been given notice of the hearing as required by section 92 of the QCAT Act and the Tribunal is able to deal with the matter in the absence of Mr Nguyen.[10]
[10]QCAT Act, s 93.
Findings
Based on the evidence provided by Ponticello Properties under the hand of Francesca Rizzo and Josephine Rizzo the Tribunal makes the following findings of facts:
(a)In December 2021, Ponticello Properties and Mr Nguyen entered a retail tenancy agreement (‘the lease’) in respect of the premises. The lease was a retail shop lease as defined under the RSLA.
(b)The lease was for a period of 7 years, due to commence on 10 January 2022, and had an annual rent for the first year of $45,000 per annum. The rent was to be paid in equal monthly instalments, in advance on the first day of the month. However, for the first 8 months Mr Nguyen had a reduced rent period and only had to pay half of the monthly instalment.
(c)The lease also required Mr Nguyen to pay a security amount, by way of bank guarantee of $26,097.20, registration fees in respect of registering the lease and all surveyor or architect’s fees. The lease also required Mr Nguyen to pay the costs of any monies Ponticello Properties as the landlord expended as a consequence of any default by Mr Nguyen.
(d)On or around 29 July 2021 Mr Nguyen paid a $4,125 deposit into the real estate agent’s account (‘real estate deposit’). These funds were used to pay the rent payments due in January and February 2022 and partial payment in March, meaning the first rent payment sought from Mr Nguyen was on 1 March for $1,491.77.
(e)On 7 January 2022 there was a request from Mr Nguyen to change the commencement date of the lease to 20 March 2022 due to the fact he was required to travel to Vietnam to sell assets for the bank guarantee. Ponticello Properties refused to change the commencement date but agreed to extend the time for the bank guarantee upon the signing of an updated deed and Mr Nguyen providing a cash deposit of $4,125 on an interim basis.
(f)On or around 13 January 2022 the $4,125 cash security deposit (‘security deposit’) was paid by Mr Nguyen into Ponticello Properties’ solicitors’ trust account.
(g)Mr Nguyen paid no rent during the period of his lease and failed to provide a bank guarantee in breach of his obligations under the lease. Survey fees sought from Mr Nguyen in the amount of $1,155 were not paid by Mr Nguyen. On or around 10 June 2022 Ponticello Properties’ solicitors paid the survey fee of $1,155 from Mr Nguyen’s security deposit leaving $2,970 remining in the trust account.
(h)Mr Nguyen sought to repudiate the contract on 26 June 2022 by email when he confirmed he could not start the shop as he had lost all his money and would return the keys, and advised Ponticello Properties they could rent the premises to someone else.
(i)On 27 June 2022 Ponticello Properties’ solicitors advised Mr Nguyen’s solicitors by email that unless Mr Nguyen provided receipt of the bank guarantee and the outstanding rent, registration fee and legal fees, Ponticello Properties was to be regarded as having accepted Mr Nguyen’s repudiation and was to terminate the lease.
(j)No payments were made by Mr Nguyen and on 6 July 2022 Ponticello Properties’ solicitors advised Mr Nguyen’s solicitors by email that as more than 7 days had passed and no payment had been made, Ponticello Properties accepted Mr Nguyen’s repudiation and would take steps to change the locks and re-let the premise. The security deposit was also forfeited and paid to Ponticello Properties.
(k)The premise was re-leased as from 1 September 2022.
Damages
As detailed in paragraph 16, Ponticello Properties seek $38,381.78 in damages for losses as a result of Mr Nguyen’s default of the lease obligations and then repudiation of the lease. Given the finding that Mr Nguyen is in default for failing to pay rent and has repudiated the contract, the Tribunal will consider each of these claims in turn.
Rent Arrears
As a result of Mr Nguyen’s failure to pay rent in breach of the contact and subsequent repudiation of the contract, Ponticello Properties are entitled to rent due and unpaid, up until the premise was re-let, being 1 September 2022. There are however some issues with Ponticello Properties’ calculation of the total rent on their costings document.
Ponticello Properties assert the total rent owed to them is $18,777.22. This figure is not accepted by the Tribunal.
As noted in the statement of Francesca Rizzo and Josephine Rizzo and evident in the email correspondence provided between the parties in March 2022, Mr Nguyen was not required to pay any rent until 1 March 2022 given the real estate deposit was used to cover the first two months’ rent and partial payment in March.
Therefore Ponticello Properties are not entitled to seek to claim for rent in January and February as they have sought to do on the costing provided to the Tribunal, as they have already been paid for these months from the real estate deposit. Ponticello Properties is also only entitled to claim $1,491.77 for the month of March, which was what was sought from Mr Nguyen, due to $570.73 from the real estate deposit being used towards the March rent.
Ponticello Properties have also sought to claim twice for the month of August on their costing which they are not entitled to do, both at the half rent rate of $2,062.50 and full rent from 11 August to 31 August at $2,847.95. Noting Mr Nguyen was entitled to 8 months of half rent[11] and the total period up until 31 August is 7 months and 21 days it is unclear upon what basis Ponticello Properties are seeking to claim full rent.
[11]Clause 3.1A of the Lease.
Accordingly the Tribunal finds that Ponticello Properties are entitled to $11,804.27 in unpaid rent, being $1,491.77 for the month of March 2022 and $2,062.50 for each of the 5 months from April to August 2022. The Tribunal accordingly orders Mr Nguyen is to pay damages in the amount of $11,804.27 for rent arrears to Ponticello Properties.
Real Estate Fee
Ponticello Properties are seeking $9,450 for real estate costs. The invoice provided is dated 16 December 2021 and provides no details other than that it is a commission due for the lease of 7/150 Beaudesert Road, Acacia Ridge.
Clause 141(b)(iii)(E) of the lease under s 14.1(a), in relation to default by the tenant, states the landlord may recover from the tenant real estate commission charges and fees. This clause, however, needs to be read in conjunction with s 24 of the RSLA which states the lease must not contain a provision requiring the lessee to make any payment other than as set out in section 24. Section 17 of the RSLA states that if a provision of the Act is inconsistent with a provision of the lease, the provision of the Act prevails and the provision of the lease is void to the extent of the inconsistency.
Section 24 of the RSLA does not provide that a lessee can be asked to pay real estate fees. There is a provision in s 4(1)(b)(ii) that a lessor can ask the lessee to pay damages for breach of a term of the lease. However, this does not assist in this case. The real estate costs were incurred prior to the lease starting. Accordingly at that time there was no breach of the lease and therefore these costs cannot be said to be damages for breach of the lease.
Section 48 of the RSLA also states that a lessee under a retail shop lease is not liable to pay any amount for the lessor’s legal or other expenses in relation to preparing, renewing or extending the lease. As these real estate fees were in association with the preparation stage of the lease, an order for compensation for the real estate fees may offend against this provision.
While there may have been an entitlement to any real estate costs for re-letting the premise after Mr Nguyen’s repudiation of the contact, as Ponticello Properties have provided no evidence of any real estate fees associated with the re-letting of the premises, the Tribunal cannot make a determination on any such costs.
For the above reasons Ponticello Properties is not entitled to damages from Mr Nguyen for the real estate commission fees occurring in December 2021 before the start date of the contract and the request for $9,450 in damages is refused.
Legal Fees
Ponticello Properties seek $6,287.60 in damages for legal costs. In support of these damages four itemised invoices are provided from their solicitors.
Section 48 of the RSLA states a lessee under a retails shop lease is not liable to pay any amount for the lessor’s legal or other expenses in relation to the preparing, renewing or extending the lease; obtaining the consent of the mortgagee of the lessor; or the lessor’s compliance with the RSLA.
Section 24 of the RSLA, which restricts the items for which a lessee can be liable for payment, allows the lessor to require the lessee to pay only legal costs incurred in responding to a request by the lessee for a variation of the lease, or the lessor’s consent to the lessee entering into a sublease or licence with another person, or as damages for breach of a term of the lease.
The lease has corresponding obligations at clause 11.2(e) and (f) for the tenant to pay all costs incidental to the grant or refusal of any consent or authority of the landlord which may be requested by the tenant under the terms of the lease and all monies the landlord may expended in consequence of any default by the tenant in the performance of the lease. There is also the provision for the tenant to pay costs associated with notices under the Property Law Act. However, that does not apply in these circumstances.
The first invoice from Ponticello Properties’ solicitors in the amount of $3,284.60 is dated 20 December 2021 and relates to work in relation to preparing the lease. Accordingly this is not payable by the respondent Mr Nguyen pursuant to s 48(1) of the RSLA and as such Ponticello Properties are not entitled to damages for any amount of this invoice.
The second invoice is in the amount of $1,139.60 and dated 22 March 2022. The first five entries relate to work associated with Mr Nguyen’s request to defer the commencement date and the drafting of the deed poll for the extension to the date the bank guarantee was required. Accordingly these are recoverable from Mr Nguyen, as they are costs incurred in responding to a request from him to vary the terms of the lease. The last three entries for checking and conferring on the lease documents and seeking mortgagee’s consent are not recoverable as they are prohibited by s 48(1). Accordingly Ponticello Properties are entitled to damages only for the first five entries on the invoice in the amount of $754 plus GST, being a total of $829.40.
The third invoice is in the amount of $1,148.40 dated 18 May 2022. Ponticello Properties are not entitled to claim the cost of the first entry on this invoice for the solicitors to peruse mortgagee’s consent, as this is prohibited under s 48(1)(b) of the RSLA. The remaining costs, however, are all associated with Mr Nguyen’s breach of the contract due to failure to pay rent and the cost of the survey plan and accordingly are recoverable as damages from Mr Nguyen pursuant to s 24(1)(b)(ii) and clause 11.2(f) and 14.1(B)(iii) and (D) of the lease agreement. As such Ponticello Properties are entitled to recover only $870 + GST from this invoice being a total of $957.00.
The fourth invoice is in the amount of $715 and dated 15 July 2022. This invoice is entirely in relation to Mr Nguyen’s breach of the contract by failure to pay rent and responding to Mr Nguyen’s repudiation. Accordingly Ponticello Properties are entitled to damages in amount of $715.00 for these legal costs.
In total, as noted above, Ponticello Properties are entitled to recover $2,501.40 in legal costs expended due to the request by Mr Nguyen to vary terms of the lease and due to Mr Nguyen’s breach/default under the lease due to failure to pay rent and his subsequent repudiation of the lease, pursuant to clauses 11.2(e) and (f) and c14.1(b)(iii)(D) of the lease. The Tribunal accordingly orders Mr Nguyen is to pay damages in the amount of $2,501.40 for legal costs to Ponticello Properties.
Administration Fees
Ponticello Properties has sought damages of $5,000 for administration which is purported to be 2.5 weeks wages and a director’s fee for one week. The only document to support this claim is a document providing the gross yearly salary, PAYG tax, super and total salary of Francesca Rizzo.
The material provided by Ponticello Properties is insufficient to evidence what work the sought administration fees are for, and how they relate to Mr Nguyen and why they are damages which should be paid by Mr Nguyen for breach of the contract.
There is also no provision in the lease or the RSLA which requires Mr Nguyen as the lessee/tenant to have to pay the wages of Ponticello Properties as the lessor/landlord or to pay a director’s fee.
Accordingly the request for damages of $5,000 is refused.
Survey Plan Fees
Ponticello Properties have sought damages in the amount of $1,155 for the cost of survey plan fees.
In order to seek damages, Ponticello Properties need to demonstrate a loss which needs to be compensated. There is however no such loss for the survey fees.
Ponticello Properties paid the $1,155 costs for the survey fees not with their own money but with a portion of the security deposit provided by Mr Nguyen. Therefore there is no loss to Ponticello Properties, and they are not entitled to any damages for the survey fees.
Accountant Fees
Ponticello Properties seek damages of $682.00 for accounting fees. In support of this claim they have provided an invoice dated 12 October 2021 for professional services rendered for the month of September 2021, said to be for professional processing and administration services rendered in association to lessee Lap Van Nguyen.
Like the request for real estate fees, this relates to costs incurred before the lease was signed or the contract commenced and which are effectively expenses relating to preparing the lease, which Mr Nguyen cannot be liable for pursuant to s 48 of the RSLA.
In addition there is no provision in the lease which allows for the payment of accounting fees and no provision in s 24 which would allow these costs to be paid by the lessee.
Accordingly the request for damages of $682 is refused.
Orders
As Ponticello Properties has retained $2,970 remaining in the security deposit paid by Mr Nguyen in January 2022, this needs to be offset against any damages owed to them.
Accordingly, the Tribunal orders that:
Lap Van Nguyen is to pay Ponticello Properties Pty Ltd ATF The Ponticello Family Trust, $11,335.67 within 30 days, being:
(a)Rent owed in the amount of $11,804.27.
(b)Legal costs in the amount of $2,501.40.
(c)Less the security bond forfeited and retained by Ponticello Properties in the amount of $2,970.00.
0
4
2