Putri Kenanga Pty Ltd v Pham
[2009] NSWADT 301
•4 December 2009
CITATION: Putri Kenanga Pty Ltd v Pham [2009] NSWADT 301 DIVISION: Retail Leases Division PARTIES: FIRST APPLICANT
Putri Kenanga Pty LtdSECOND APPLICANT
Andre JapardiTHIRD APPLICANT
Herlina LieFIRST RESPONDENT
SECOND RESPONDENT
Binh Van Pham
Truan Trinh PhamFILE NUMBER: 085193 HEARING DATES: 13, 14 and 17 July 2009 SUBMISSIONS CLOSED: 9 September 2009
DATE OF DECISION:
4 December 2009BEFORE: Chesterman M - Deputy President; Griffiths G - Non-Judicial Member ; Harrison B - Non-Judicial Member CATCHWORDS: Retail lease – parties to lease – overpayment of bond – termination for non-payment of rent – unconscionable conduct – misleading or deceptive conduct LEGISLATION CITED: Administrative Decisions Tribunal Act 1997
Conveyancing Act 1919
Retail Leases Act 1994CASES CITED: Armstrong Jones Management Pty Ltd v Saies-Bond & Associates Pty Ltd (RLD) [2007] NSWADTAP 47
Attorney General of New South Wales v World Best Holdings Ltd (2005) 63 NSWLR 557
Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64
Gumland v Duffy [2006] NSWSC 10
Lyons Road Pty Ltd v The Owners Strata Plan 38722 (RLD) [2008] NSWADTAP 28
Owendale Pty Ltd v Anthony (1967) 117 CLR 539
Parris v Katsivardis [2002] NSWADT 150
Sarker v World Best Holdings Ltd (No 4) [2008] NSWADT 75
Spathis v Hanave Investment Co Pty Ltd [2002] NSWSC 304
Tennent & Ors v Moukhlina & Ors (RLD) [2008] NSWADTAP 83
Vale v Rosychamp [2008] NSWSC 1373
Wallis Lake Fishermen’s Co-operative Ltd v A.C.N. 079 830 596 Pty Ltd [2008] NSWSC 925REPRESENTATION: APPLICANT
RESPONDENT
G Wilkinson, barrister
L Katsinas, barristerORDERS: 1. The First and Third Applicants are not entitled to relief in these proceedings
2. The Respondents are liable to pay to the Second Applicant the sum of $2,916.00, comprising a principal sum of $2,534.00 and interest amounting to $382.00
3. Any application for costs in these proceedings must be filed and served, with supporting submissions, within 28 days of the date of this decision. The opposing party or parties must file and serve submissions in reply within a further 28 days. Unless reasons are advanced for a hearing to be conducted, the matter will be resolved ‘on the papers’, pursuant to section 76 of the Administrative Decisions Tribunal Act 1997.
REASONS FOR DECISION
Introduction
1 This case arose out of the termination of a retail shop lease (‘the Lease’) of premises at Epping (‘the Premises’) by the Respondent lessors, Binh Van Pham and Truan Trinh Pham, on the ground of non-payment of rent.
2 The lessee named in the Lease was the Second Applicant, Andre Japardi. The Third Applicant, Herlina Lie, is his wife. The First Applicant, Putri Kenanga Pty Ltd (‘Putri Kenanga’), is a company which Mr Japardi and Ms Lie incorporated in February 2005. At all material times, they have been its sole shareholders and directors. One of the questions raised at the hearing was whether Ms Lie and Putri Kenanga are proper parties to the proceedings.
3 The Applicants filed their Application to the Tribunal on 29 September 2008. They filed an Amended Application on 19 December 2008. In the Amended Application, they alleged that Mr and Mrs Pham had unlawfully terminated the Lease and had engaged in unconscionable conduct and misleading or deceptive conduct. They claimed relief against forfeiture of the Lease (while acknowledging that they could no longer obtain an order for possession), damages in the sum of $199,439.14, interest and costs.
4 Because the proceedings instituted by them include an unconscionable conduct claim, the Tribunal is constituted in accordance with Clauses 1 and 4 of Part 3B of Schedule 2 of the Administrative Decisions Tribunal Act 1997 (‘the ADT Act’). It is constituted by a Deputy President who is a member of the Retail Leases Division, assisted by two other appropriately qualified members acting in an advisory capacity only.
Outline of evidence
5 During March 2007, Mr Japardi and Ms Lie agreed in principle to take a lease of the Premises from Mr and Mrs Pham. On 15 March, Mr Japardi and Mr Pham signed a ‘Pre Lease Agreement’ on the letterhead of Tracy Yap Realty (‘Tracy Yap’), an estate agent then engaged by Mr and Mrs Pham. For present purposes, the significant terms of this agreement were as follows:-
-Lease term 3x3 years.
-Rental $4290 per month GST inclusive.
-Bond $8580 or bank guarantee.
-Tenant to pay one month rent in advance before keys are given.
-Tenant set up time one month free rent….
-Tenant to provide & maintain his own air conditioning unit. Upon vacating tenant must patch & repair any holes or damage left from removing the air conditioning.
-The landlord will put new tiles on the floor & place a new gyprock ceiling & install wiring for the ceiling lighting.
6 About this time, Mr Japardi gave Tracy Yap a cheque for $2,000 drawn on an account of Putri Kenanga, as a deposit on the Lease.
7 In June 2007, the local council approved a development application by Mr Japardi for the Premises to be used as an Indonesian cuisine restaurant.
8 On or about 28 June 2007, Mr Japardi, having engaged Ms Jenny McGillivray, of McGillivrays Solicitors, to act for him in relation to the Lease, signed a Lessee’s Disclosure Statement. At about this time, a Lessor’s Disclosure Statement was received by Ms McGillivray and placed on the file relating to the Lease.
9 When he was asked in cross-examination whether he had read the Lessor’s Disclosure Statement before signing it, Mr Japardi said that he had not read it. When asked when he read it for the first time, he said initially that he had never read it, but later that he had read it when preparing his affidavit for these proceedings. Ms Lie said in cross-examination that she had not read it.
10 The Lessor’s Disclosure Statement provided that the lessor would not carry out any work in relation to finishes, fixtures, fittings, equipment or services, but that the lessee would carry out such work ‘with the lessor’s consent’. Under a heading requiring details of ‘any other agreements between the lessor and lessee’, the following statement appeared:-
The lessor will pay the lessee $16,000.00 to carry out the work. Being: new tiles on the floor and place a new gyprock ceiling and install wiring for the ceiling lighting and the lessee is to paint all walls a suitable colour & to paint the ceiling white…
11 Mr Japardi testified that at some time before he executed the Lease, Mr Frank Aduca, an employee of Tracy Yap, told him that Mr Pham was prepared to pay no more than $16,000 for the tiling and the ceiling. In this conversation, no mention was made of the cost of the wiring.
12 Towards the end of July 2007, Mr and Mrs Pham executed the Lease, being named in it as the Lessors, and Mr Japardi executed it, being the only person named as the Lessee.
13 In his affidavit, Mr Japardi said that he did not know why the Lease designated him, rather than Putri Kenanga, as the Lessee. He added that at the time of execution of the Lease he did not understand that Putri Kenanga was an entity distinct from its shareholders. In cross-examination he admitted, however, than at the time when Putri Kenanga was incorporated his accountant explained to him some of the benefits of adopting a corporate structure when conducting a business. He also said that at the time he did not object to the Lease being in his name.
14 The Lease was for a term of three years commencing on 30 July 2007, with an option to renew for a further three years. It provided in the Reference Schedule for an initial annual rent of $46,800 plus GST. The monthly rent, exclusive of GST, was accordingly $3,900. With GST added, the amount became $4,290.
15 Clause 1 of the Lease contained covenants by the Lessee to pay rent and by the Lessor for quiet enjoyment. They incorporated relevant parts of Part 2 of Schedule 4 to the Conveyancing Act 1919.
16 Under clause 2(a), the ‘first such rent’ was ‘payable on the date stated in the Reference Schedule’ and thereafter the rent was payable ‘calendar monthly in advance’. It contained a covenant by the Lessee ‘to pay rent on the due date each month’. Under clause 2(b), the rent was subject to increases based on the CPI. The space in the Reference Schedule where the date of the first payment should have been entered was left blank.
17 This Schedule, coupled with clause 4, also required the lessee to pay 100% of the outgoings relating to water usage and discharge, sewerage, trade waste, sullage and a grease trap. The permitted use was stated to be ‘Indonesian Restaurant & Take Away’.
18 Under the heading ‘Security Deposit’, the Reference Schedule provided as follows: ‘One month’s rent of current period to be held by Retail Tenancy Unit.’ Clause 5(c) of the Lease stated: ‘The Lessee shall not apply the security deposit as part of the rent.’
19 Clause 6(c) stated:-
If the Lessor makes any Taxable Supply under this Lease, the Lessee shall pay on demand to the Lessor an amount equal to the GST which is so payable less the amount by which the Lessor is entitled to be indemnified in respect of that GST by an increased payment as hereinbefore in this clause mentioned.
20 Clause 7 was a common-form clause permitting assignment by the Lessee subject to conditions.
21 Under clause 9, the ‘essential terms ‘ of the Lease were defined to include the covenants to pay rent, outgoings and (if applicable) GST.
22 Clause 12 relevantly stated that the Lessee would be deemed to have committed a ‘default’ if the Lessee was ‘in arrears of payment of rent in excess of 7 days after the due date, whether a formal demand for payment has or has not been made’ or if the Lessee failed to comply with, or was in breach of, an ‘essential term’ of the Lease.
23 Clause 13 conferred on the Lessor a right to terminate the Lease in the event of a ‘default’ by the Lessee, by (a) ‘re-entering and taking possession of the demised premises, using reasonable force to secure possession’ and/or (b) serving written notice and/or (c) instituting proceedings for possession.
24 It was common ground that the Lease was governed by the Retail Leases Act 1994 (‘the RL Act’).
25 On 24 July 2007, Ms McGillivray sent to Mr James Soulos, the solicitor acting for Mr and Mrs Pham, three cheques that Mr Japardi had brought to the firm’s office. In a covering letter, she described these cheques, which were drawn on Putri Kenanga’s account, as follows: (a) a cheque to Tracy Yap for $8,580, ‘being bond’, (b) a second cheque to Tracy Yap for $2,290, for the balance of the first month’s rent (with GST included); and (c) a cheque to the Office of State Revenue for $673.75, being stamp duty.
26 Tracy Yap’s ledger relating to the Lease recorded the deposit of the first two of these cheques. In an Advice of Lodgment dated 20 August 2007, the Retail Tenancy Unit recorded the receipt of an amount of $8,580 as a bond relating to the Premises, with ‘A Japordi’ (sic) shown as the tenant.
27 At this time, neither the parties nor their solicitors or agents realised that the amount of the bond required by the Lease was only $3,900, representing one month’s rent.
28 At the time of the Pre Lease Agreement, the Premises, according to Mr Japardi, were ‘basically just a shell’. There was no ceiling, no gas connection, no connection to a grease trap located elsewhere in the building and no exhaust fan. There was only one power outlet and only one light, which was an emergency light. The surface of the floors was bare unlevelled concrete and the walls were of bare gyprock.
29 In August 2007, Mr Japardi took possession of the Premises. During the next few months, he arranged for extensive fit-out works to be completed. According to him, they included the following: installing the ceiling; tiling the floor; constructing a Hebel wall and a range hood in the kitchen; plumbing, including gas installation; installing lights, air conditioning, kitchen equipment, a cool room and a fire system; and waterproofing the kitchen floor and the walls.
30 The air conditioning system, the cool room and some items of furniture were obtained under lease from a company called LeaseChoice Pty Ltd. A number of items of kitchen equipment were leased from a firm called Silver Chef. In each of these leasing agreements, Putri Kenanga was the hirer and Mr Japardi and Ms Lie were guarantors.
31 The fit-out expenses for the Premises, along with other expenses incurred in conducting business in them (including the rent), were paid at different times out of accounts held in the individual names of Mr Japardi, Ms Lie and Putri Kenanga.
32 During August 2007, the ceiling was installed and the tiling carried out. Mr Pham made payments totalling $16,000 towards the cost of these operations. Mr Japardi paid for the tiles, which cost $2,535.40.
33 In September 2007, Mr Japardi arranged for an invoice for $2,125.20 from G & S Maroun Electrical Contractors (‘Maroun’), relating to the installation of wiring in the ceiling to be sent both to Putri Kenanga and to Mr and Mrs Pham. Putri Kenanga paid $800 to Maroun in relation to this invoice. In October 2007, Putri Kenanga paid in full an invoice for $2,750 from Mario Plumbing for installing a gas isolating valve.
34 Mr Japardi then sent copies of both invoices to Tracy Yap, requesting reimbursement from Mr and Mrs Pham. In a letter to Mr Japardi dated 18 October 2007, however, Tracy Yap stated that ‘regrettably the landlords declined the grant for compensation’, on the ground that they had given Mr Japardi $16,000 ‘to cover expenses for necessary jobs prior to business commencement as they agreed’ and that it was ‘unreasonable’ to expect that they should make any further payments.
35 When asked in cross-examination why he had requested Maroun to send the same invoice to Putri Kenanga and to Mr and Mrs Pham, Mr Japardi said that it was to assist Mr and Mrs Pham with their taxation obligations.
36 On or about 21 September 2007, the business of Putri Kenanga Restaurant commenced in the Premises. Mr Japardi was the ‘front of house person’, Ms Lie was the chef and one or two people worked as kitchen hands. Initially the business was open every day between 11 a.m. and 9 p.m.
37 As already mentioned, payment of the first month’s rent, including GST, was made by cheques for $2,000 (dated 15 March 2007) and $2,290 (dated 17 August 2007). On 9 October and 2 November 2007 respectively, two more payments of $4,290 on account of rent were made.
38 On four occasions between 23 September and 25 November 2007, fire alarms went off in the building in which the Premises are located. In the opinion of the NSW Fire Brigade, this was caused by cooking fumes in the Premises. Mr Japardi claimed that the central exhaust system was defective, whereas Mr and Mrs Pham treated him as responsible. They maintained that he should reimburse them for charges totalling $1,275 that they had paid to the building’s Body Corporate.
39 A letter dated 18 March 2008, written on Mr Japardi’s instructions by McGillivrays to Mr Soulos, contained an allegation that he had paid this amount to the Body Corporate, along with an amount of $120 for rubbish disposal fees, and that he was entitled to reimbursement from Mr and Mrs Pham. This last allegation was however withdrawn by Mr Japardi during his testimony at the hearing, though he maintained his denial of liability for the charges for false fire alarms. He suggested that Mc Gillivrays must have misunderstood his instructions.
40 On or about 30 November 2007, Tracy Yap was replaced by Bruce Lyons Real Estate (‘Bruce Lyons’) as Mr and Mrs Pham’s managing agents.
41 Early in December 2007, Ms Susan Cale, an employee of Bruce Lyons, advised Mr Japardi that Mr and Mrs Pham were not paying GST and that the monthly rent was therefore reduced to $3,900.
42 According to Mr Pham, he paid one instalment of GST, in the amount of $390.00, to the Australian Tax Office. He stated that in his opinion he and his wife were obliged to credit Mr Japardi with only one such overpayment.
43 The rent for December 2007 was paid as follows: $1,200 on 4 December and $2,700 on 18 December.
44 During this month, Ms Lie suffered a minor stroke, which she attributed to stress. She and Mr Japardi accordingly decided that henceforth their restaurant should be closed on Tuesdays and that on the other days of the week it should only be open between 11.30 a.m. and 2.30 p.m. and between 5.30 p.m. and 9.30 p.m.
45 Also during December 2007, Mr Japardi and Ms Lie ran into financial difficulties. He therefore asked Ms Cale in a telephone conversation whether he might be permitted to pay the rent by weekly instalments of about $1,000, in order to assist him with his cash flow. According to his evidence, she advised him later that she had referred this request to Mr and Mrs Pham and that they were prepared to grant it. The accuracy of this part of Mr Japardi’s evidence was not challenged in cross-examination.
46 In cross-examination, Mr Pham was asked whether he had received a request to accept rent on a weekly basis. He said that during December 2007 he had given permission for rent to be paid weekly for a period of two months only. The accuracy of this statement by him was not challenged.
47 On 18 December 2007, however, Mrs Pham sent an email message to Ms Cale asking her to explain to Mr Japardi that it was essential for him to pay his rent ‘at the end of each month as specified in Lease Contract’, that a reason for this was that Mr and Mrs Pham had to pay monthly instalments on a mortgage over the Premises and that if he was unable to afford the rent he should leave the Premises.
48 In this message, Mrs Pham also asked whether interest could be charged on rent that was paid after the due date. She stated that she had consulted Mr Soulos about the rent defaults, that Mr Japardi had ‘caused a lot of problem to us like he sent us a lot of invoices which he knows he has the liability to pay not us’ and that she and her husband had ‘assisted him $16,000 in building the restaurant and 1 month free of lease’.
49 On the same day, 18 December 2007, Ms Cale faxed a letter to Mr Soulos, to which a copy of Mrs Pham’s email message was attached. The letter included this statement: ‘I believe Mrs Pham would like you to [send] a warning letter to the tenant advising him of the consequences should he not pay the rent.’ Ms Cale said in the letter that when she recently explained to Mr Japardi that he must pay his monthly rent as it fell due, he made ‘all sorts of excuses’, including that he was ‘not making any money’ and that Mr and Mrs Pham owed him money for some items of fit-out. She said also that she would check soon whether a claim by Mr Japardi to have paid the December arrears recently by internet transfer was truthful. She added that Mrs Pham had expressed a willingness to release Mr Japardi from the Lease if he proved unable to pay the rent, but added the comment that this might be unwise because at this time of year it might be difficult to find a replacement tenant. The letter included with a request for advice as to what course of action should be pursued.
50 Attached to this letter in Mr Soulos’s file was a note, apparently written by Mr Soulos or by someone under his supervision. It set out in very brief form some of the matters contained in Ms Cale’s letter. It also included the following two lines:-
1. did Tenant Pay Bond 1 Mth
2. Landlord Can NOT charge interest on delai’d ( sic ) Rent
51 Mr Pham testified that his wife, rather than himself, was responsible for decisions taken on their behalf in relation to the Lease. She did not, however, give evidence in these proceedings. In addition, neither Ms Cale nor Mr Soulos was called as a witness.
52 The rent for January 2008 was paid as follows: $1,200 on 8 January, $700 on 15 January, $1,000 on 21 January and $1,000 on 29 January.
53 In a letter to Mr Japardi dated 30 January 2008, Mr Soulos stated: ‘I refer to my letter to you of 23rd February (sic) and am instructed to request that you pay the balance of rent for January, namely $1,000.00.’
54 According to records kept by Bruce Lyons, they tried unsuccessfully on a number of occasions between 31 December 2007 and 25 January 2008 to contact Mr Japardi by telephone (at his work, at his home or through his mobile), in order to point out that he was in arrears with the rent. They also sent an ‘arrears letter’ on seven occasions. They spoke to Mr Japardi twice during this period. The records show that during one of these conversations, on 3 January, he asked them to contact Mr and Mrs Pham in order to make arrangements for the rent to be paid by instalments on the ground that ‘things have been quiet’.
55 Because the remaining events in this outline of evidence occurred during 2008, all dates given are within that year, unless otherwise indicated.
56 On or about 25 January, Bruce Lyons was replaced by Ray White Epping (‘Ray White’) as Mr and Mrs Pham’s managing agents.
57 No rent was paid for February until 25 February. On that day, the full monthly rent of $3,900 was paid. According to Mr Japardi’s recollection, he paid it in cash, having borrowed some money from his mother.
58 Following a visit from Mr Igor Jugovic, an employee of Ray White, late in January, Mr Japardi wrote three letters dated 6 February to Ray White.
59 In the first two of these letters, Mr Japardi reiterated his claims that he should not be held responsible for the false fire alarms in the building and that, as stated in the Pre Lease Agreement, Mr and Mrs Pham should pay the cost of installing wiring for the ceiling lighting.
60 The third letter written by Mr Japardi to Ray White on 6 February was in the following terms:-
Due to the fact of the hardship on the business surrounding this area since November 2007, I am proposing to make arrangement for the rent payment to be paid weekly for few months. I am surely have genuine intention to pay the rent cost as first priority in the business and by working out based on ( sic ) current business potential. This is the only option that I can offer. Please consider as this is very helpful for our business survival.
61 On or about 6 February, Mr Japardi and Ms Lie received from Ray White a tax invoice stating that they owed a total of $6,036.89. This was made up of the following amounts: $3,900 as rent for February; $1,275 as ‘false fire alarm’ fees; and $861.89 as rubbish disposal fees together with interest on late payment.
62 On or about 11 February, Mr Jugovic and Mr Stone Xiao (who was employed by Ray White as a property manager) visited the Premises while (according to Mr Japardi) customers were present. They told Mr Japardi that he was in arrears with the rent and that he would be evicted if he did not pay it in full. According to Mr Japardi’s testimony, he told them that he had arranged with Bruce Lyons to pay the rent in weekly instalments and he referred to his letter of 6 February. In cross-examination, Mr Xiao said that his response was to the effect that he would have to check this matter and that any such arrangement would have to be in writing.
63 Mr Jugovic was not called as a witness, although he remains in the employ of Ray White.
64 Mr Japardi alleged that during February he asked Macquarie Commercial and Business Property Ltd, estate agents, to provide a valuation of Putri Kenanga. He did this because of the financial problems that he was experiencing. He was told that the company was worth about $150,000, but did not receive a written valuation and did not know how this figure was calculated.
65 On 13 February, Mr Xiao visited the Premises again and gave Mr Japardi a document headed ‘Notice of Termination’ and addressed to Mr Japardi and Ms Lie. Referring to residential tenancy legislation and not, as would have been appropriate, to the RL Act, it alleged a breach of the Lease through rent being unpaid ‘for not less than 14 days prior to the notice being served’. The notice required vacant possession of the Premises on 28 February.
66 Mr Denis Nutt, who was the licensee of Ray White, testified that during February ‘several calls’ had been made to the Premises by Mr Jugovic or Mr Xaio, but the rent for the month remained unpaid. He claimed that Mr Japardi ‘was always making excuses or giving false promises to pay’ and ‘could not be reached on the telephone’. It was for these reasons, he said, that the notice of termination was prepared and served on Mr Japardi.
67 On or about 20 February, Mr Nutt visited the Premises. There was a conflict of testimony as to what then occurred.
68 According to Ms Lie’s evidence, Mr Nutt entered the kitchen and told her that they had to pay the rent straightaway or he would bring in the sheriff and close down their business. While saying these things in a loud and intimidating voice, he stood close to her and ‘pushed his folder’ into her body. She said that he should talk to Mr Japardi, who at this point came into the kitchen and (according to his evidence) saw his wife being treated in this way. Mr Nutt then repeated his threats to Mr Japardi. Soon afterwards, Ms Lie felt pains in her chest and realised that she could not move her left hand or leg very well. She consulted her general practitioner, Dr Lim, who did not discover any clinical cause for these symptoms.
69 In his affidavit, Mr Nutt denied having touched, pushed, prodded or menaced Ms Lie or anyone else. In his oral evidence, he said however that he had been ‘very firm’ with Mr Japardi, since in his opinion ‘landlords were entitled to their rent’. At one point in this evidence, he appeared to deny having spoken with Ms Lie at all, claiming that he would not have known who she was. Soon afterwards, however, he said that he did not remember whether he spoke with her. He agreed in cross-examination that it was ‘possible’ that he treated her as a tenant.
70 On 31 March, Mr Japardi paid $1,032 to Ray White on account of rent.
71 In a letter dated 10 April sent by fax to Ms McGillivray (who sent a copy of it to Mr Japardi), Mr Soulos claimed that the arrears of rent due under the Lease amounted to $6,768 and stated that if these were not paid in full by 15 April his clients would ‘proceed to termination of the lease’. He set out details of the arrears, ‘subject to any errors or omissions’, as follows:-
Rent due 29/2/08 to 29/3/08 $3,900.00
Less paid 31/3/08 $1.032.00
$2,868.00
Rent due 30/3/08 to 29/4/08 $3,900.00
Total arrears $6,768.00
72 In a reply faxed to Mr Soulos on 14 April (a copy of which was sent to Ray White by fax), Ms McGillivray wrote as follows:-
Accordingly my client is able to pay as follows -… in relation to your letter of 10 April, 2008 I wish to advise that my client is unable to pay the Total Arrears in full by the 15 April, 2008.
1. The sum of $1,500.00 immediately.
2. The balance of $5,268.00 to be paid by weekly payments of a minimum of $1,000.00 per week commencing Monday the 21 April, 2008. If my client is able to pay more he will do so but will pay a minimum of $1,000.00 per week.
As you would be aware my client pays any interest your client accrues due to his late payment.
Please give this matter your urgent attention and advise your clients’ instructions as a matter of urgency.
73 In cross-examination, Mr Japardi asserted that he instructed Ms McGillivray to propose an arrangement along these lines for the payment of current rent, not arrears, He said that he intended to discharge the arrears of rent from the profits of an agreement that he had made to supply a substantial quantity of food to an Indonesian Food Fair to be held at the University of New South Wales during May (‘the Food Fair’).
74 On 15 April, Mr Japardi paid $1,000 to Ray White on account of rent. On 22 April, he paid $400 and on 24 April he paid $100. He claimed in cross-examination that although these amounts were paid pursuant to the schedule in Ms McGillivray’s letter of 14 April, they were paid as current rent, not in discharge of the arrears.
75 In a letter faxed to Ms McGillivray on Thursday 24 April, Mr Soulos acknowledged receipt of her letter of 14 April and advised that his client would accept ‘payment of the arrears under the terms you have set out’. He added: ‘Interest for late payment is noted.’
76 Because the following day, Friday 25 April, was Anzac Day, the banks were closed.
77 On Saturday 26 April, Mr Jugovic and Mr Xiao came to the Premises. Once more, there was a conflict of testimony as to what then occurred.
78 According to Mr Japardi’s affidavit, these two gentlemen arrived around lunchtime, when customers were eating at four tables. They came up to him and immediately said ‘Where’s the $1,000 for rent?’ or words to that effect. He led them away from the customers, to a hallway near the kitchen. They repeated their demands in an abrupt and aggressive tone, standing close to him. He could see that Ms Lie, who was about seven weeks pregnant, was very upset, so he told them of her pregnancy, said that he would pay this amount on Monday (28 April) and asked them to leave. Mr Xiao then yelled: ‘I don’t care. If there’s no payment by Monday, then we’ll kick you out’ or words to that effect. Ms Lie then ‘lost control of herself’ and yelled to them that they should get out and that they would get their money. Mr Xiao repeated his threat of eviction. Mr Japardi said that he warned them about Ms Lie’s condition and that they should leave. They then left.
79 Soon afterwards, Ms Lie collapsed to the floor and started to bleed. Mr Japardi closed the restaurant and took her to see Dr Lim. After waiting for about two hours without being able to see Dr Lim, they went home. Two days later, on 28 April, the midwife attending to Ms Lie told her that she had had a miscarriage.
80 Ms Lie gave a similar account of these events. Ms Christine Kangestu, who was employed part time as a waitress, did likewise, in relation to what allegedly happened at the Premises.
81 In cross-examination, it was put to Ms Lie that she invented the story of having collapsed and suffered bleeding. She denied this. It was put to Mr Japardi, to Ms Lie and to Ms Kangestu that Ms Kangestu corroborated Mr Japardi’s and Ms Lie’s evidence because she was friendly with them. Each of them denied this, though they gave differing accounts of the extent of social contact that Ms Kangestu had with Mr Japardi and Ms Lie.
82 In his affidavit, Mr Xiao agreed that on 26 April he went to the Premises and warned Mr Japardi of the likelihood of eviction if the arrears were not paid, but denied saying ‘I don’t care’. In cross-examination, he denied asking for a payment of $1,000, adding that at the time he knew of Ms McGillivray’s proposal for payment of the arrears but did not know whether Mr and Mrs Pham had agreed to it. He said that instead he asked for payment of the full arrears of $5,300.00. He also disputed Mr Japardi’s assertion that customers were present and claimed that while he was ‘abrupt’ he was not aggressive. He acknowledged that it was ‘possible’ that Mr Japardi mentioned Ms Lie’s pregnancy.
83 As already mentioned, Mr Jugovic was not called as a witness.
84 On 28 April, Mr Japardi paid $1,000 to Ray White on account of rent.
85 On 29 April, pursuant to written instructions from Mr and Mrs Pham, Mr Soulos faxed a letter to Ms McGillivray stating that Mr Japardi ‘had not made payments as promised’ and that Mr and Mrs Pham required payment of the ‘total outstanding amount of $10,474.00’ within seven days, failing which they would terminate the Lease. Their letter of instructions to Mr Soulos, also dated 29 April, asked that Ms Soulos should sent a copy of the ‘demand notice’ to Ray White and set out ‘details of the outstanding amount’ as follows:-
Arrears outstanding: $5,300.00
Outstanding invoices: $1,275.00
May Lease: $3,900.00
Total Outstanding: $10,475.00
86 On 30 April, however, Mr Soulos faxed a letter to Ms McGillivray stating that there was an error in the amount claimed and that the correct amount was $9,475.00. It stipulated 6 May as the date by which payment was required. This was apparently prompted by a second letter of instructions, also dated 29 April, from Mr and Mrs Pham. This second letter was in the same terms as his predecessor, except for the correction in the amount due and for the substitution of the following ‘details’:-
March Arrear: $400.00
April Arrear: $3,900.00
May Lease: $3,900.00
Outstanding invoices: $1,275.00
Total Outstanding: $9,475.00
87 In a letter dated 30 April, Mr Japardi requested Ms McGillivray to ‘instruct’ Ray White to contact him by mail or fax regarding the rent, instead of calling at the Premises. He said that the visit by Ray White’s representatives on 26 April had caused customers to leave and had been upsetting to Ms Lie. There is no evidence as to whether Ms McGillivray ever acted on this request.
88 On 2 May, Mr Japardi paid $900 to Ray White on account of rent.
89 On Thursday 8 May, Mr and Mrs Pham wrote to Mr Soulos advising him as follows: (a) that ‘the tenant’ had only paid $900 instead of the required amount of $9,475.00; (b) that they ‘needed’ Mr Soulos to issue a letter to the tenant advising that the Lease was terminated ‘today’ and that Ray White would change the locks at the Premises at 9 a.m. on Monday 12 May; (c) that he should write to Ray White authorising them to lock the Premises and place advertisements for a new tenant; and (d) that since they ‘contributed $16,000.00 for the floor, ceiling and the lighting’, the tenant was ‘not allowed to remove these fittings from our shop’. They also requested advice from Mr Soulos as to how they could recover the outstanding debt of $8,575 from the tenant.
90 On Friday 9 May, Mr Soulos faxed to Ms McGillivray a letter stating that Mr and Mrs Pham would be ‘changing the locks of the shop premises on Monday’.
91 On the same day, Ms McGillivray faxed a reply to Mr Soulos in the following terms:-
I refer to the above matter and wish to advise I have now spoken to my client who informed me payment will be made today for total amount due.
I presume that locks will not be changed on Monday, please advice if this is not the case.
92 When asked in cross-examination whether he instructed Ms McGillivray to write this letter, Mr Japardi said that he did not recall having spoken to her on that day. He said that he would have been too busy, because he was preparing approximately 1,000 boxes of food for the forthcoming Food Fair.
93 Mr Japardi testified however that on Friday 9 May he wished to pay $1,000 on account of rent. At about 4.40 p.m. he rang Mr Xiao, who agreed to his request to make this payment by internet transfer, since he could not get to the bank before it closed. A payment of $1,000 was made by internet transfer to Ray White around midnight on 10 May. An ANZ internet banking printout annexed to Mr Japardi’s affidavit confirmed this.
94 In cross-examination, Mr Xiao denied that Mr Japardi made any contact with him at all on 9 May. He said also that he was the only person at Ray White who could have authorised a payment such as Mr Japardi wished to make.
95 Mr Japardi testified that on Monday 12 May the Premises were not open for business as he and Ms Lie were preparing the required boxes of food for the Food Fair.
96 At about 8 or 9 a.m. on Tuesday 13 May, Mr Nutt, Mr Stone and Mr Jugovic came to the Premises, where Mr Japardi, Ms Lie and Ms Kangestu were continuing to prepare the food boxes. Mr Nutt told them that he and his colleagues were taking possession of the Premises and that they would have to leave soon. Ms Kangestu said that he spoke in a loud voice and was ‘ordering people about’. They left the Premises, taking various goods, once the locks had been changed. This took somewhere between one and two hours.
97 Mr Japardi alleged as follows, with corroboration from Ms Lie: (a) that Mr Nutt told them that they must leave within five minutes; (b) that he told Mr Nutt about the payment of $1,000 on 10 May; and (c) that Mr Nutt rejected his request for permission to finish preparing the boxes for the Food Fair. Mr Nutt and Mr Xiao denied these allegations, though Mr Nutt did say that he told Mr Japardi and Ms Lie that they must vacate the Premises as soon as possible.
98 Mr Nutt claimed, with corroboration from Mr Xiao, to have handed a notice of termination to Mr Japardi. Mr Xiao said that he told Mr Japardi not to take away any items that belonged to Mr and Mrs Pham.
99 In a letter faxed to Ms McGillivray on 16 May, Mr Soulos stated, after referring to a telephone conversation on the previous day, that (a) Mr Japardi’s payment of $1,000 had been received by Ray White on 14 May, but after the time when the locks were changed at the Premises and (b) that Mr Japardi must remove his ‘leased equipment, furniture and decorations’ within seven days, but not the ‘flooring, ceiling or lighting’ because Mr and Mrs Pham had paid $16,000 towards these and had not charged one month’s rent.
100 On 24 May, Mr Japardi and Ms Lie were given access to the Premises to remove further items. Mr Japardi alleged that the electric supply to the cool room, where there was a substantial quantity of perishable food worth $2,354.00 (according to his estimation), had been turned off, with the result that the food was no longer saleable. Mr Nutt said in cross-examination that no member of his staff had turned off the electricity.
101 Pursuant to a lease commencing on 15 June 2008, the Premises were relet by Mr and Mrs Pham to a company called Experience Italy Pty Ltd. The permitted use was stated to be ‘restaurant’ and the monthly rent was $4,000.
Assessment of the witnesses
102 The Tribunal agrees with a submission by Mr Katsinas that on occasions Mr Japardi gave answers in cross-examination that were ‘evasive and designed to suit the facts and circumstances of his case’. It would add that a number of the relevant answers were quite implausible.
103 Among the instances that the Tribunal would identify are the following:-
1. Mr Japardi gave different and contradictory answers when questioned in cross-examination as to when he first read the Lessor’s Disclosure Statement. This document included the clause limiting to $16,000 the contribution by Mr and Mrs Pham to the installation of the tiling, ceiling and wiring. He appeared to be trying to support his claim that they promised to pay more than this amount by alleging that at all material times he had been unaware of the existence of this clause.
2. At the time of executing the Lease, he claimed not to have understood the differences between individual and corporate ownership of a business even though (a) he admitted that his accountant explained some of these differences when he and Ms Lie incorporated Putri Kenanga and (b) he did not object to being the sole signatory on the Lease.
3. His alleged reason for asking Maroun to prepare duplicate invoices for its wiring services – to assist Mr and Mrs Pham with their tax obligations – was unconvincing.
4. He made unconvincing claims that his solicitor, Ms McGillivray, who was not called as a witness, acted contrary to his instructions on three separate occasions. They all involved letters written by her to Mr Soulos. The letters were (a) her letter of 18 March 2008 requesting reimbursement by Mr and Mrs Pham for amounts, which Mr Japardi had not in fact paid, for rubbish disposal and false fire alarm fees; (b) her fax of 14 April 2008 proposing a schedule for the repayment of arrears of rent (his claim in cross-examination was that it was supposed to be a schedule for the payment of current rent); and (c) her fax of 9 May 2008 promising that he would pay all arrears of rent on that day.
5. Mr Japardi’s assertion that the last of these three letters was written without his instructions was accompanied by a claim that according to his recollection he did not even speak to her on the day (9 May 2008) when it was sent. Yet her letter, which was written in response to a fax sent earlier the same day by Mr Soulos, contained the statement ‘I have now spoken to my client’. If his version of these events were correct, it would have to be concluded that this statement by Ms McGillivray was a deliberate untruth. The Tribunal sees no grounds for reaching such a conclusion.
6. Mr Japardi’s evidence regarding the alleged valuation of Putri Kenanga was also unconvincing. Given that on his own account he was keen to sell the business at the Premises because of difficulties in keeping it afloat, it is hard to believe that he obtained a valuation but did not ask for any written report stating the estimated value and the basis on which it was calculated.
104 The Tribunal also agrees with a submission by Ms Wilkinson that ‘limited weight’ should be given to Mr Pham’s evidence. But the distinctly different reason for this assessment is, as Ms Wilkinson observed, that he had little involvement with the Lease. He left it to be handled by Mrs Pham, Mr Soulos and the relevant employees of the three managing agents. On a few matters – for example, the reasons why the managing agents were changed during the term of the Lease and his understanding of the position regarding GST – his answers were unconvincing.
105 Because neither Mrs Pham nor Mr Soulos gave evidence despite being available to do so, it is open to the Tribunal to infer that their evidence would not have assisted the case being advanced by Mr and Mrs Pham.
106 The Tribunal is bound to record its impression that, although Mr Nutt and Mr Xiao claimed in cross-examination not to have been ‘aggressive’, but merely ‘firm’ and ‘abrupt’, when visiting the Premises on the occasions outlined above, their demeanour when testifying (notably that of Mr Nutt) gave credibility to the assertions by Mr Japardi, Ms Lie and Ms Kangestu that their manner was in fact aggressive and intimidating.
107 The Tribunal had no opportunity to determine whether any such assessment might also be made of Mr Jugovic, since Mr and Mrs Pham did not call him as a witness. Since he could have been called, the Tribunal may properly assume that any evidence given by him would not have assisted their case.
Who should be the parties to these proceedings?
108 Both in the Application initially filed in the Tribunal (on 29 September 2008) and in the Amended Application (filed on19 December 2008), the persons named as Applicants were Mr Japardi, Ms Lie and Putri Kenanga.
109 In his opening address at the hearing, Mr Katsinas, counsel for Mr and Mrs Pham, maintained that Ms Lie and Putri Kenanga were not proper parties to these proceedings because the only person named as Lessee in the Lease was Mr Japardi. He did not develop this contention further in his written submissions filed after the hearing.
110 In her submissions on behalf of the three Applicants, Ms Wilkinson argued that Ms Lie should remain on the record as a party because she had been ‘treated as a de-facto lessee or party to the lease’ by Mr and Mrs Pham and their agents and was a person ‘affected by’ the Lease.
111 Ms Wilkinson made the same claim with regard to Putri Kenanga, characterising it also as a person ‘affected by’ the Lease. She pointed out (a) that it was the corporate vehicle that had been incorporated for the purposes of Mr Japardi’s and Ms Lie’s restaurant operations; (b) that they were its sole shareholders and directors; (c) that any damage suffered by it was therefore suffered by Mr Japardi and Ms Lie; (d) that to the knowledge of Mr and Mrs Pham it had provided cheques for the deposit, bond, rent and stamp duty relating to the Lease; and (e) that at the time of signing the Lease Mr Japardi did not appreciate the distinction between signing in his own name and signing on behalf of Putri Kenanga.
112 In the Tribunal’s opinion, these arguments fail to take proper account of the provisions of the RL Act that specify who may apply to the Tribunal for relief under the Act. As already stated, the Applicants in these proceedings lodged both retail tenancy claims and unconscionable conduct claims.
113 Section 71(1) states that ‘a party or former party to a retail shop lease or former retail shop lease may lodge a retail tenancy claim in respect of the lease with the Tribunal for determination of the claim’. Section 63(1) defines ‘party or former party to a retail shop lease or former retail shop lease’ as including ‘a guarantor or covenantor under a lease or former lease’.
114 Section 71A(1) states that ‘a lessor, or former lessor, under a retail shop lease or former retail shop lease may lodge an unconscionable conduct claim with the Tribunal for determination of the claim’. Section 71A(3) states that ‘a lessor or lessee under a retail shop lease or former retail shop lease’ includes ‘a guarantor or covenantor under a lease or former lease’.
115 In Parris v Katsivardis [2002] NSWADT 150, the applicant was an ‘informal sublessee’ of part of premises owned by his father. The respondent was a tenant of the premises under a retail shop lease. The Tribunal held that it had no jurisdiction to determine the applicant’s claim for damages against the respondent based on an allegation that the respondent had unlawfully denied him access to goods within the premises. After quoting the terms of section 71(1), the Tribunal said at [17]:-
On the evidence before me I am not satisfied that the dispute between the parties is a retail tenancy claim in respect of which the Tribunal has jurisdiction. The Applicant is neither a party nor former party to a retail shop lease or former retail shop lease with the Respondent. He therefore has no standing to bring a retail tenancy claim against the Respondent for determination by the Tribunal. In my view the Tribunal has no jurisdiction to determine this matter. It follows that the application must be dismissed for want of jurisdiction.
116 In Lyons Road Pty Ltd v The Owners Strata Plan 38722 (RLD) [2008] NSWADTAP 28, in the course of an extended discussion of the scope of the phrase ‘retail tenancy dispute’ as defined in section 63 of the RL Act, the Appeal Panel said at [80] that subject to a limited exception, involving specialist retail valuers, section 71(1) ‘empowers only parties and former parties to a lease or former lease to lodge a retail tenancy claim with the Tribunal’. It described this consideration as a ‘particularly telling feature of the Act’s provisions regarding the Tribunal’s jurisdiction. At [78], it had drawn attention to the fact that section 63(1) extended the definition of ‘party or former party’.
117 Accordingly, it is not open to Ms Wilkinson to contend that Ms Lie or Putri Kenanga must continue to be treated as co-applicants, along with Mr Japardi, in these proceedings solely because that they are persons ‘affected by’ the Lease or are ‘de-facto’ lessees.
118 Other judgments relating to retail shop leases – see for example Tennent & Ors v Moukhlina & Ors [2008] NSWADT 26 at [81 – 100] (decision reversed on other grounds in Tennent & Ors v Moukhlina & Ors (RLD) [2008] NSWADTAP 83); Vale v Rosychamp [2008] NSWSC 1373 at [54 – 61] – contain discussions of the possibility that the person or group of persons who must be regarded as the lessee differs from the person or persons so designated in the lease document. But it is not sufficient that a person not named in the document merely pays the rent or other expenses associated with the lease or is regularly seen by the lessor or its agents to be an active participant in the business carried on at the premises. Generally speaking, there must be evidence of assent by the lessor to such a person acquiring the status of lessee through a process such as assignment, novation or (as mentioned in Vale v Rosychamp) the grant of a ‘concurrent lease’. No such evidence was advanced in this case. Indeed, the correspondence emanating from Mr and Mrs Pham or their solicitor Mr Soulos consistently treated Mr Japardi, expressly or by implication, as the sole lessee.
119 Under subsections (1)(c) and (4) of section 67 of the ADT Act, the Tribunal may order that a person who is not a party to proceedings should be joined as a party. The Tribunal must consider that ‘the person ought to have been joined as a party or is a person whose joinder is necessary to the determination of all matters in dispute in the proceedings’. But in these proceedings no application for joinder was made. This is presumably because from the outset the record has depicted Ms Lie and Putri Kenanga as co-applicants with Mr Japardi.
120 Furthermore, the Tribunal is not persuaded that it should make an order under section 67(4) of its own motion. With reference particularly to the claim by Putri Kenanga to be regarded as a party, it pays particular heed to warnings sounded by the Supreme Court in Wallis Lake Fishermen’s Co-operative Ltd v A.C.N. 079 830 596 Pty Ltd [2008] NSWSC 925 (a case arising under the RL Act) against equating any loss sustained by a ‘corporate vehicle’ (such as Putri Kenanga) with the loss thereby sustained by its shareholder/directors. At [23 – 24], Harrison As J made the following observations, which are in direct opposition to a proposition advanced by Ms Wilkinson:-
23 The Tribunal was required to assess losses suffered by the defendant caused by the plaintiff’s breach of contract. The defendant was a company. The task confronting it was not one of assessing whatever loss may have been suffered by Mr and Mrs Morris (whether it be as shareholders or in some other capacity).
24 Mr and Mrs Morris chose to conduct a business through a corporate vehicle. In the circumstances, it was the loss suffered by the defendant by reason of the breach of contract that was recoverable. It was erroneous to proceed to assess damages on the basis that the existence of the corporate vehicle could be disregarded. The incongruity of the result reached… may be illustrated by the observation that what was being allowed as company loss of profits included that which could be expected to be claimed as business deductions.
121 For these reasons, the Tribunal accedes to the argument made by Mr Katsinas that Ms Lie and Putri Kenanga should not be treated as Applicants in these proceedings. Any substantive relief granted in these proceedings must be to Mr Japardi, the remaining Applicant.
Were there lawful grounds for terminating the Lease?
122 The ground on which Mr and Mrs Pham, through their agents, claimed to be entitled to terminate the Lease was the failure of Mr Japardi, the lessee, to pay moneys due to them under the Lease. In deciding whether this claim is supported by the evidence, a number of specific assertions made by the parties must be investigated.
123 The ‘false fire alarm’ fees. In the letters sent by Mr Soulos to Ms McGillivray in the period immediately before the termination, the amounts demanded from Mr Japardi chiefly comprised arrears of rent. They also included, however, an amount of $1,275.00 that Mr and Mrs Pham claimed as reimbursement for their payment of ‘false fire alarm’ fees.
124 In the Tribunal’s opinion, it was not open to Mr and Mrs Pham to rely on this claim in support of their contention that they were entitled to terminate the Lease. This is for the following reasons: (a) since very little evidence was adduced as to why these fees were incurred, the Tribunal is not persuaded that Mr Japardi was in fact liable to make reimbursement for them; (b) although section 129 of the Conveyancing Act 1919 was applicable because any such liability was not a liability to pay rent, the demands for their reimbursement that were sent to Mr Japardi did not satisfy the requirements laid down for notices under this section; and (c) because any failure to make such reimbursement would be neither a breach of the covenant to pay rent nor a breach of any other ‘essential term’, it would not be a ‘default’ under clause 12 providing grounds for termination under clause 13.
125 In calculating what amount, if any, was due to be paid by Mr Japardi at the time of termination, this claim for $1,275.00 for ‘false fire alarm’ fees must accordingly be disregarded.
126 The overpayment of security deposit. It will be recalled that before the Lease was executed Mr Japardi paid $8,580 to Tracy Yap as security deposit. He did so because (a) the Pre Lease agreement provided that the deposit should comprise two months’ rent and (b) at that stage both parties assumed that GST was payable on the rent. It was common ground at the hearing that the amount required by the Lease was in fact only $3,900.
127 Ms Wilkinson argued that the excess amount ($4,680) paid by Mr Japardi should be treated as a payment of rent. She submitted that clause 5(c) of the Lease, by stating that the Lessee ‘shall not apply the security deposit as part of the rent’, implicitly supported this proposition. She also drew attention to the handwritten note, attached to Ms Cale’s letter of 18 December 2007 to Mr Soulos, which suggested that Mr Soulos realised that an overpayment had been made (see [50] above).
128 Mr Katsinas argued that since ‘both parties remained oblivious to the overpayment until the commencement of the proceedings’ it could not be treated, at the time of the termination, as constituting a payment of rent. Mr Japardi had done nothing, he said, to indicate that this was the basis on which it had been paid to Tracy Yap. At that time, the total amount paid by way of security deposit was required to be held by the Retail Tenancy Unit until, pursuant to statutory procedures, it was disbursed to the party or parties entitled to it.
129 The Tribunal’s ruling on this question is that, when assessing whether, at the time of termination of the Lease, the rent was in arrears, Mr and Mrs Pham, or their agents, should have taken the overpayment into account. The records accessible to them, if duly consulted, would have revealed that it was indeed an overpayment. Furthermore, the evidence showed that during December 2007 Mr Soulos did advert to the question whether an appropriate amount had been paid by way of security deposit. If Mr and Mrs Pham wished to rely on default in the payment of rent as a ground for terminating the Lease, the onus lay on them to ensure that any unallocated payment made by Mr Japardi was credited to him as a payment of rent.
130 The amounts paid as GST. On similar reasoning, the Tribunal concludes that the three payments of $390 made by Mr Japardi on the assumption that he was bound by the Lease to pay GST on the rent should have been treated as payments of rent. Nothing in clause 12(c), or in any other provision of the Lease, entitled Mr and Mrs Pham to retain these payments once it was established that they were not liable for GST. Mr Pham’s claim that Mr Japardi should have applied to the Australian Tax Office for a refund of any amount paid as GST is not accepted.
131 Mr Pham’s agreement to accept weekly instalments of rent. In outline, the evidence on this issue was as follows. During December 2007 Mr Pham granted a request by Mr Japardi to pay rent on a weekly basis, but limited this arrangement to two months. On 6 February 2008, Mr Japardi made a written request for permission to pay rent in weekly instalments. This coincided with a demand made to him by Ray White for the full amount of rent due for that month. When Mr Xiao and Mr Jugovic visited the Premises on 11 February 2008, Mr Japardi said that he had been given permission to pay the rent in weekly instalments. Mr Xiao replied that he would check this and that any such permission would have to be in writing. In subsequent letters of demand from Mr Soulos to Ms McGillivray (for example, on 10 April 2008), the figures quoted for rent due and unpaid referred invariably to the monthly amount of $3,900. There was no suggestion that the prior arrangement for payment in weekly instalments was still operative.
132 Ms Wilkinson pointed out that the only evidence suggesting that the arrangement for weekly instalments was limited in point of time was that of Mr Pham. She submitted that the reason why he and Mrs Pham engaged Ray White in place of Bruce Lyons to collect the rent was that Ray White paid over the rent as it was collected instead of on a monthly basis. This change of agents was consistent, she maintained, with a longer-term arrangement to receive weekly instalments from Mr Japardi.
133 In the Tribunal’s opinion, the effect of the letters of demand sent by Mr Soulos was indubitably to bring to an end – if it had not already ended – any period during which Mr Pham had agreed to accept weekly instead of monthly instalments of rent. Since there was no apparent consideration for his prior consent to this arrangement, it was open to him and Mrs Pham at any time to indicate to Mr Japardi that henceforth rent would have to be paid in monthly instalments as required by the Lease. The Tribunal also endorses the observation in Mr Katsinas’ submissions that no inference relating to this matter can be drawn from the substitution of Ray White for Bruce Lyons as managing agents for the Lease.
134 The notice of termination dated 13 February 2008. The Tribunal agrees with a submission by Ms Wilkinson that at the date of this notice the rent was not due and unpaid for a period of ‘not less than 14 days’, as alleged in it. On the other hand, because it was then due and unpaid for seven days, there was a ‘default’ by the Lessee within the meaning of clause 12 of the Lease. But these matters are not significant, because the ground of termination on which Mr and Mrs Pham rely is that on the date on which Mr Japardi was evicted, three months later, there was a ‘default’ as defined in this clause.
135 The exchange of letters relating to payment of the arrears. As indicated above at [72 – 75], the parties’ solicitors exchanged letters in April 2008 relating to a proposal by Ms McGillivray for payment by Mr Japardi of arrears alleged to amount to $6,768.00.
136 Ms Wilkinson submitted that the schedule of payments agreed upon - $1,500 to be paid immediately, with the balance to be paid by weekly instalments of $1,000 commencing on 21 April – related both to the arrears and to future instalments of rent. She did not advert to Mr Japardi’s claim in cross-examination that he asked Ms McGillivray to propose this schedule for the payment of current rent, not arrears.
137 The terms used in Ms McGillivray’s letter and Mr Soulos’s reply are, however, quite clear. What was proposed and agreed to was a schedule for the payment of the arrears which, as at 14 April 2008, amounted to $6,768. Mr Japardi’s obligation to pay rent as required by the Lease was not affected. As Mr Katsinas pointed out, the rate of payment set out in this schedule – that is, an immediate payment of $1,500 and weekly instalments of $1,000 thereafter – was barely sufficient to cover current rent. If the interpretation advocated by Ms McGillivray were correct, the rate of repayment of the arrears would have been very slow.
138 The rent payment of $1,000 made on 10 May 2008. There was a conflict of testimony on the question whether Mr Japardi told Mr Xiao on 9 May 2008 that he proposed to make this payment. It is not necessary, however, to determine the truth of this matter. Because there is written evidence that the payment was made by internet transfer on 10 May, the Tribunal is not persuaded, despite a claim to the contrary by Mr Soulos in his letter of 16 May to Ms McGillivray, that Ray White had not received this amount by the time of the lockout. Mr Japardi testified, without contradiction, that when Mr Nutt and Mr Xiao arrived at the Premises on 13 May he advised Mr Nutt about the payment. Mr Nutt appears to have made no attempt to ascertain whether it had arrived in Ray White’s bank account. For the purpose of ascertaining whether rent was in arrears at the date of termination of the Lease, this payment must be taken into account in Mr Japardi’s favour.
139 The question whether rent was due and unpaid for more than seven days after the relevant ‘due date’. As already indicated, clause 12 of the Lease provided that the Lessee would be deemed to have committed a ‘default’, entitling the Lessor to terminate the Lease under clause 13, if the Lessee was ‘in arrears of payment of rent in excess of 7 days after the due date, whether a formal demand for payment has or has not been made’.
140 For reasons given earlier in this section of its judgment, the Tribunal considers that in deciding whether there was, at the date of termination, a ‘default’ by Mr Japardi as so defined, the amount by which the security deposit was overpaid ($4,680) and the three amounts paid on account of GST (totalling $1,170) should be treated as payments of rent. On the other hand, the prior agreement by Mr Pham to accept weekly instalments of rent was no longer operative.
141 A useful table (‘Table A’) in Ms Wilkinson’s submissions, incorporating these rulings in Mr Japardi’s favour, displays the amounts of ‘total rent due’ and ‘total rent paid’ on relevant dates within the period from 15 March 2007 (when Mr Japardi paid a deposit of $2,000 to Tracy Yap) to 10 May 2008 (the date of the internet transfer of $1,000). It assumes that although the Lease did not expressly state the day of each month on which monthly instalments of rent were payable, this should be taken to be the last day. Since the commencement day for the Lease was the 30th, not the 31st, of July, it is more accurate to treat the 30th as the relevant day. But little depends on this.
142 The evidence tendered by Mr and Mrs Pham included some other tables of a similar nature. But the Tribunal accepts Table A as providing the best outline of this aspect of the case.
143 According to Table A, the rent was not in arrears during February 2008 or virtually all of March 2008, even though the parties, being unaware that the security deposit had been overpaid, believed that it was in arrears. But Mr Japardi made no payment between 29 February and 30 March towards the monthly instalment of $3,900 that became payable on 29 February. Consequently, he fell into arrears, to the extent of $1,950, when a further instalment of $3,900 became payable on 30 March. This was the situation even after the adjustments in his favour for overpaid security and GST payments are taken into account. Although he made payments totalling $5,432 between 31 March and 10 May, these were insufficient to bring him into positive territory at any time, given that a further instalment of $3,900 became payable on 30 April.
144 Table A shows that on 30 April 2008 his total rent obligations since the conclusion of the rent-free period on 30 August 2007 came to $35,100 (representing nine monthly instalments of $3,900). The total amount that he had then paid, incorporating the overpayments of security deposit and GST, was $32,782, leaving a shortfall of $2,318. He reduced the gap to $1,418 with his payment of $900 on 2 May and reduced it to only $418 with his payment of $1,000 on 10 May. At this point, the total amount that he had paid was $34,682.
145 Subject to a submission by Ms Wilkinson, which will now be discussed, the conclusion follows that for a period of exceeding seven days following 30 April 2008, being the date when an instalment of $3,900 fell due, Mr Japardi was ‘in arrears of payment of rent’ within the meaning of clause 12 of the Lease.
146 Ms Wilkinson’s submission was as follows. The total amount of rent paid by Mr Japardi ($34,682) was sufficient to meet a monthly rent obligation of $3,900 for 8.893 months. If the final payment of $1,000 was left out of account, his payments were sufficient to cover the rent for 8.636 months. But at the date of termination he had only been subject to this obligation for 8.419 months (i.e., from 30 August 2007, when the rent-free period came to an end, until 13 May 2008). Clause 12(a) of the Lease provided that ‘default’ occurred when the Lessee was ‘in arrears in payment of rent’, not ‘in arrears of payment of rent in advance’. ‘Payment in advance’, she argued, ‘is the mechanism by which rent is paid pursuant to clause 2 of the lease, but the default provision does not capture this mechanism.’ In consequence, there was in fact no ‘default’ by Mr Japardi.
147 Ms Wilkinson did not cite any authority in support of this line of reasoning. In the Tribunal’s opinion, it is at odds with the express terms of clauses 2 and 12 of the Lease. Clause 2 stated that the rent was ‘payable monthly in advance’ and included a covenant by the Lessee to ‘pay rent on the due date each month’. Clause 12 stated that a ‘default’ by the Lessee occurred if the Lessee was ‘in arrears of rent in excess of 7 days after the due date’. The ‘due date’ in each clause is clearly intended to be the same date within each month of the currency of the Lease: i.e., the date on which a monthly instalment of rent, referable to the ensuing month, became due and payable. Ms Wilkinson’s contentions would treat them as different dates.
148 Under clause 12, a ‘default’ will arise irrespective of whether a ‘formal demand for payment’ had been made. In fact, Mr Soulos’s letter of 30 April to Ms McGillivray constituted a ‘formal demand’, although for reasons already given it substantially overstated the amount due from Mr Japardi.
149 For the foregoing reasons, Mr Japardi’s claim that he was not in ‘default’ under clause 12 of the Lease must be rejected.
150 Neither the Lease nor the applicable law required prior notice of termination of the Lease. But on 9 May 2008, notice was in fact given in a fax from Mr Soulos to Ms McGillivray. Her reply, faxed to him on the same day, indicated that this notice had been received and indeed communicated to Mr Japardi.
151 A further argument made by Ms Wilkinson was that when Mr Xiao agreed on 9 May 2008 to Mr Japardi’s proposal to make a payment of $1,000 towards the arrears of rent, he waived on Mr and Mrs Pham’s behalf any right of termination that they then possessed. She relied for this proposition on the judgment of Macready AsJ in Gumland v Duffy [2006] NSWSC 10 at [102]. In that paragraph, his Honour quoted the following passage from the judgment of Campbell J in Spathis v Hanave Investment Co Pty Ltd [2002] NSWSC 304 at [118]:-
It is well enough established that, if a landlord is entitled to terminate a Lease for breach of covenant, and he or she knows of that breach but subsequently accepts rent, that is a waiver of the landlord’s rights to terminate the Lease on the basis of that breach. The principles are succinctly summarised by Windeyer J in Owendale Pty Ltd v Anthony (1967) 117 CLR 539, at 556.
A waiver in this sense is more properly understood as an election. The essence of the doctrine, in cases between landlord and tenant, is that where a Lease contains a provision for forfeiture and a right of re-entry upon breach of a covenant by the lessee, then, upon a breach occurring, the lessor can either take advantage of his right of forfeiture and re-entry or waive this and treat the Lease as still subsisting. If, with knowledge of a breach, giving him a right of re-entry, he does an act inconsistent with his avoiding the Lease, he is deemed to have elected not to avoid it. Anything which a landlord does or says which is an unequivocal recognition of the continued existence of the Lease when he is aware of facts which would have given him a right of re-entry will amount to a waiver of that right. One act which, by the common law, is always regarded as unequivocal, and therefore necessarily a waiver of a right of re-entry on account of a breach of covenant by the lessee, is the lessor’s acceptance, with knowledge of the fact of the breach, of rent accrued due after the breach. Apart from any special term in the Lease… or any statutory modification of the common law, acceptance of rent due in respect of a current period is an obvious recognition of a tenancy then subsisting….
152 Macready AsJ then said at [103] that ‘a question arises as to whether the rent which was received accrued due after the event giving rise to the forfeiture’.
153 At [104], he commenced to answer this question:-
Gumland [the lessor] submitted that under clause 3.2 of the lease rent was due by monthly instalments in advance on the 30th day of each month and the right of forfeiture arose if the rent was not paid within 7 days of that day (see also clause 12.1). That is, the right of forfeiture arose 7 days after the date on which the rent was due. Accordingly, the rent for July 2003 (or more accurately, the month commencing 30 June 2003) was payable on 30 June 2003 and a right of forfeiture arose if that rent was not paid by 7 July 2003. Gumland’s notice of termination was served on 1 August 2003. Applying the principle set out above, acceptance of rent during the period 7 July 2003 to 1 August 2003 could only amount to a waiver of the right of forfeiture if the rent accepted accrued due after 7 July 2003. It is not a waiver of a right of forfeiture to accept rent that fell due prior to the right of forfeiture arising.
154 In the Tribunal’s judgment, the last two sentences of this passage establish that this claim of waiver by accepting rent cannot be sustained. If Mr Xaio did indeed accept rent on Mr and Mrs Pham’s behalf on 9 May 2008, it was ‘rent that fell due prior to the right of forfeiture arising’. The instalment of rent that had been unpaid for more than seven days and had therefore entitled Mr and Mrs Pham to terminate the Lease was the instalment due on 30 April 2008. Any acceptance of rent paid in partial discharge of that obligation would not constitute a waiver of the right of termination.
155 The Tribunal accordingly concludes that the termination of the Lease on 13 May 2008 was in accordance with the agreement embodied in the Lease.
Disturbance of the business carried on at the Premises
156 Section 34(1) of the RL Act relevantly provides:-
Lessee to be compensated for disturbance
(1) A retail shop lease is taken to provide that if the lessor:…
(b) takes any action that would inhibit or alter, to a substantial extent, the flow of customers to the shop, or
and the lessor does not rectify the matter as soon as reasonably practicable after being requested in writing by the lessee to do so, the lessor is liable to pay the lessee reasonable compensation for any loss or damage (other than nominal damage) suffered by the lessee as a consequence.(c) unreasonably takes any action that causes significant disruption of, or has a significant adverse effect on, trading of the lessee in the shop, or…
157 Ms Wilkinson submitted that the visits of employees of Ray White to the Premises on 11, 13 and 20 February and 26 April 2008, while customers were present, resulted in disruption of the business carried on there. During these visits they made repeated demands in loud voices for rent to be paid. In behaving in this way, they contravened the above provisions of the RL Act and also the Lessor’s covenant for quiet enjoyment contained in clause 1 of the Lease.
158 The Tribunal considers however that while this aspect of the employees’ behaviour might be relevant in assessing whether their conduct was ‘unconscionable’ within the meaning of the Act (a question shortly to be discussed), it could not of itself give grounds for an award of compensation under section 34 or of damages for breach of the covenant for quiet enjoyment. The principal reason is that no evidence was tendered to show the scale of any business losses sustained. In addition, no written request as is required by the concluding words of section 34(1) was given by Mr Japardi to Mr and Mrs Pham.
Unconscionable conduct
159 ‘Unconscionable conduct’ under the RL Act. Mr Japardi claimed that the behaviour of the relevant employees of Ray White (Mr Nutt, Mr Xiao and Mr Jugovic) and, to a lesser extent, of Mr Soulos amounted to unconscionable conduct under the RL Act for which Mr and Mrs Pham, by whom they were engaged to act in relation to the Lease, should be held liable.
160 Remedies against a party for unconscionable conduct, taking the form of an order for the payment of money or an order that a specified amount of money is not owing, are provided for in section 72AA of the RL Act.
161 Section 62B is concerned with the definition of unconscionable conduct. It relevantly provides:-
Unconscionable conduct in retail shop lease transactions
(1) A lessor must not, in connection with a retail shop lease, engage in conduct that is, in all the circumstances, unconscionable. …
(3) Without in any way limiting the matters to which the Tribunal may have regard for the purpose of determining whether a lessor has contravened subsection (1) in connection with a retail shop lease, the Tribunal may have regard to:
(a) the relative strengths of the bargaining positions of the lessor and the lessee, and
(b) whether, as a result of conduct engaged in by the lessor, the lessee was required to comply with conditions that were not reasonably necessary for the protection of the legitimate interests of the lessor, and…
(d) whether any undue influence or pressure was exerted on, or any unfair tactics were used against, the lessee or a person acting on behalf of the lessee by the lessor or a person acting on behalf of the lessor in relation to the lease, and…
(i) the extent to which the lessor unreasonably failed to disclose to the lessee:(g) the requirements of any applicable industry code, and…
- (i) any intended conduct of the lessor that might affect the interests of the lessee, and
- (ii) any risks to the lessee arising from the lessor’s intended conduct (being risks that the lessor should have foreseen would not be apparent to the lessee), and…
(k) the extent to which the lessor and the lessee acted in good faith. …
162 In Attorney General of New South Wales v World Best Holdings Ltd (2005) 63 NSWLR 557 at 583 [120–121] Spigelman CJ, with whom Tobias JA agreed, made the following observations about this statutory version of unconscionable conduct:-
121 The Ministerial Second Reading Speech, quoted (at 581 [112]) above, indicates a similar concern to distinguish what is unconscionable from what is merely unfair or unjust. Even if the concept of unconscionability in s 62B of the Retail Leases Act is not confined by equitable doctrine, as the decisions under s 51AC of the Trade Practices Act suggest, restraint in decision-making remains appropriate. Unconscionability is a concept which requires a high degree of moral obloquy. If it were to be applied as if it were equivalent to what as “fair” or “just”, it could transform commercial relationships in a manner which the Minister stated was not the intention of the legislation. The principle of “unconscionability” would not be a doctrine of occasional application, when the circumstances are highly unethical, it would be transformed into the first and easiest port of call when any dispute about a retail lease arises.120 Unconscionability is a well-established but narrow principle in equitable doctrine. It has been applied over the centuries with considerable restraint and in a manner which is consistent with the maintenance of the basic principles of freedom of contract. It is not a principle of what “fairness” or “justice” or “good conscience” require in the particular circumstances of the case…
163 The question whether lessors could be liable for unconscionable conduct committed by their agents was addressed in Armstrong Jones Management Pty Ltd v Saies-Bond & Associates Pty Ltd (RLD) [2007] NSWADTAP 47. The Appeal Panel said at [147]:-
As to another matter canvassed by the Tribunal, we doubt that s 62B(3) should be approached on the basis that the types of conduct to which it refers as possibly founding a conclusion that ‘unconscionable conduct’ has occurred is to be confined to conduct actually done by the lessor. We do not see the specific reference to conduct by an agent in para (d) as carrying with it the suggestion that, therefore, agent conduct of other kinds is excluded from the view of the provision. Sometimes lessors are hands-on managers of shopping centre, and carry on that activity through directors and employees. At other times lessors are not hands-on managers and hand over that responsibility to specialist firms in the field. Such lessors may be more in the nature of passive investors… In our view, subject to usual limitations of agency law, the agent’s conduct can, and should, be attributed to the lessor.
164 The parties’ submissions. The principal factual matters on which Ms Wilkinson relied in endeavouring to make good this claim of unconscionable conduct were as follows:-
1. Both Mr Soulos and Mr Xiao (in his role as one of Ray White’s property managers) failed to check carefully whether Mr Japardi was in fact in arrears of rent during the period from February to May 2008 and, if so, to what extent. They should have investigated the important questions of whether the correct amount of security deposit had been paid and whether Mr Japardi was liable for GST, but they did not do so. Mr Soulos, in particular, should have realised that the security deposit had been overpaid because during December 2007 he or someone under his supervision had referred to this question in the handwritten note attached to Ms Cale’s letter of 18 December 2007. In addition, Mr Soulos and Mr Xiao failed, before proceeding to evict Mr Japardi, to discharge their professional obligation to present to him a detailed document (such as ‘Table A’) setting out the financial situation with regard to the Lease. In consequence of these failures, Mr Soulos (in letters to Ms McGillivray) and Messrs Xiao, Nutt and Jugovic (during their visits to the Premises) regularly misrepresented the situation with regard to rent payments as considerably worse than it actually was. Until 30 March 2008, they alleged that Mr Japardi was in arrears when this was not the case. Between 30 March and 13 May 2008, they significantly overstated the amount of the arrears.
2. In pressing for rent to be paid, Mr Xiao and Mr Soulos made other statements that lacked any proper basis. In the notice of termination dated 13 February 2008 Mr Xiao asserted incorrectly that there had been a default in rent payments over a period of 14 days. In his letter of 29 April 2008 to Ms McGillivray, Mr Soulos maintained that the rent for May 2008 was payable when this was not the case.
3. In each of the visits made to the Premises by employees of Ray White, they acted in an unacceptably aggressive and intimidating manner. They put Ms Lie, in particular, under severe stress, jeopardising her health (which they knew or should have known to have been poor in recent months) and, very probably, bringing about the termination of her pregnancy (of which, Mr Xiao admitted, he was ‘possibly’ aware).
5. Although Mr Xiao agreed on 9 May 2008 that Mr Japardi could pay $1,000 towards the arrears of rent by internet transfer, Ray White proceeded to evict him four days later, without taking this payment into account.4. As already mentioned, they made repeated demands for rent in loud voices in the presence of customers of the restaurant, thereby disrupting the business being carried on at the Premises and causing financial loss to Mr Japardi.
6. Since the Premises were relet very soon after the termination of the Lease, it should be inferred that Mr and Mrs Pham deliberately employed strategies, put into effect by their agents, to encourage Mr Japardi to abandon the Premises.
165 Ms Wilkinson argued that different elements of this conduct by Mr Soulos and by the employees of Ray White fell within subparagraphs (d), (g), (i) and (k) of section 62B(3) of the RL Act.
166 With reference to subparagraph (g), which states that in determining whether unconscionable conduct has occurred the Tribunal may have regard to ‘the requirements of any applicable industry code’, she drew attention to Rules 3 and 4 of the NSW Real Estate Agents’ Rules of Conduct promulgated by the Department of Fair Trading (hereafter ‘the Code of Conduct’). Rule 3 states that an estate agent must act honestly, fairly and professionally with all parties in a transaction, and must not mislead or deceive any parties in a negotiation or a transaction. Rule 4 requires agents to exercise reasonable skill, care and diligence.
167 It is convenient here to refer also to Rule 5. It states: ‘An agent must not engage in high pressure tactics, harassment or harsh or unconscionable conduct.’
168 The chief argument made by Mr Katsinas in response was that because Ray White’s employees found it very difficult to make contact with Mr Japardi by telephone, they had no choice but to visit the Premises when they needed to ask him to pay the rent that was due.
169 Mr Katsinas also submitted that the claims by Mr Japardi, Ms Lie and Ms Kangestu that Ray White’s employees were aggressive and intimidating in their dealings with him and Ms Lie should not be believed. He contended that in view of the differing accounts given by Mr Japardi, Ms Lie and Ms Kangestu as to the nature of their relationship, the Tribunal should find that Ms Kangestu was a relative or close friend and should attach little weight to her evidence. He also contended that in view of Ms Lie’s behaviour immediately after the visit by Mr Xiao and Mr Jugovic to the Premises on 26 April 2008 the Tribunal should not regard their behaviour as playing any role in her miscarriage.
170 The Tribunal’s conclusions on liability. The Tribunal has given careful consideration to this claim of unconscionable conduct. It attaches particular importance to two facets of Ms Wilkinson’s argument.
171 With regard to her submission that Mr Xiao and Mr Soulos failed in their duty to furnish Mr Japardi with an accurate account of the position with regard to rent, the Tribunal makes the following observations. If a lessor or lessor’s agent, knowing that a lessee owed little or no rent, deliberately misrepresented the situation by claiming that there were substantial arrears, this could well amount to unconscionable conduct. This conclusion would be all the more likely if the lessee had no access to professional assistance and was not capable of conducting his or her own investigation of the state of affairs, and/or if the clear motive of the lessor or agent in making this representation was to induce the lessee to form the opinion that paying off the arrears would be impossible and for that reason to abandon the premises. It would not be difficult to rule in those circumstances that the behaviour of the lessor or lessor’s agent was ‘highly unethical’ and involved a ‘high degree of moral obloquy’.
172 The situation in these proceedings is however materially different, for two reasons in particular. First, the most significant factor inducing Mr Soulos and Mr Xiao first to claim incorrectly that rent was in arrears, then to overstate the amount of arrears that had accrued, was an error that neither the parties nor their agents perceived until after the lease had been terminated. This was the error relating to the amount of the security deposit. The Tribunal cannot infer from the note mentioning ‘Bond 1 Mth’, attached to the letter dated 18 December from Ms Cale to Mr Soulos, that Mr Soulos then realised that an overpayment had occurred. Secondly, Mr Japardi had a solicitor, Ms McGillivray, acting for him both at the time of execution of the Lease and when demands to pay arrears of rent were being communicated to him. In theory at least, he was as well placed as Mr and Mrs Pham to obtain expert advice on the question of how much rent he owed at any given time. His position in this regard was not materially weaker than theirs (cf subparagraph (a) of section 62B(3), which refers to the ‘the relative strengths of the bargaining positions of the lessor and the lessee’).
173 This is not to say that Ray White’s employees, who maintained the rent ledger, should be excused for their failure to check whether the alleged arrears had been properly calculated before they took the drastic step of evicting Mr Japardi. They had a professional duty, which they did not discharge, to take account of every payment that Mr Japardi had made. The Tribunal is only saying here that this specific aspect of their conduct, considered in isolation, was not unconscionable within the meaning of section 62B.
174 The second facet of Ms Wilkinson’s argument requiring particular attention is her contention that the relevant employees of Ray White, when demanding the payment of rent during their visits to the Premises, acted in an unacceptably aggressive and intimidating manner, putting Ms Lie, in particular, under severe stress. As indicated above, the Tribunal, taking account of the demeanour of Mr Nutt and Mr Xiao during their cross-examination, accepts the claims by Mr Japardi, Ms Lie and Ms Kangestu that their manner during these visits was indeed aggressive and intimidating. The Tribunal attaches weight also to Mr Nutt’s statement during cross-examination that during his visit on 20 April 2008 he was ‘very firm’ with Mr Japardi, since in his opinion ‘landlords were entitled to their rent’.
175 In addition, the Tribunal accepts evidence from Mr Nutt and Mr Xiao, and from records kept by the agents previously employed (Bruce Lyons), that it was difficult to make contact with Mr Japardi in order to make it clear to him that he must address the matter of the arrears quickly. It recognises that Mr Japardi had become a ‘problem tenant’ so far as Ray White’s employees were concerned.
176 The manner, however, in which Mr Nutt and Mr Xiao conveyed demands for the payment of arrears of rent during the period leading up to the termination of the Lease placed Mr Japardi and Ms Lie under unwarrantable emotional pressure in circumstances where Mr Nutt and Mr Xiao knew or should have realised that Ms Lie was particularly susceptible to such pressure. Their conduct, in the Tribunal’s opinion, amounted to ‘high pressure tactics’ and ‘harassment’ such as Rule 5 of the Code of Conduct proscribes. Furthermore, when evicting Mr Japardi on 13 May 2008, they again adopted ‘high pressure tactics’. They insisted, without any apparent justification, that he, together with Ms Lie and Ms Kangestu, should vacate the Premises within a very short period of time (between one or two hours, as matters transpired), determined by reference to the period needed to change the locks. None of this behaviour complied with the requirement to act ‘fairly and professionally’ with regard to the Lessee as well as the Lessor under the Lease. Mr Nutt and Mr Xiao accordingly failed to fulfil their obligations under Rules 3 and 5 of the Rules of Conduct.
177 The Tribunal views this course of conduct by these two employees of Ray White as ‘unconscionable’ within the meaning of section 62B of the RL Act. In so concluding, it takes particular account of the factors set out in subparagraphs (a), (b), (d), and (g) of subsection (3) of this section (these are set out at [161] above).
178 The Tribunal further determines that Mr and Mrs Pham should be held liable for this unconscionable conduct engaged in by their agents. The evidence given by Mr Pham, in particular, showed that Mr Nutt and Mr Xiao, in their capacity as employees of Ray White, were given broad authority to demand the payment of arrears of rent and conduct the eviction in such manner as they thought fit.
179 Damages. The question then arising is whether, and if so to what extent, this conduct by Mr Nutt and Mr Xiao inflicted damage on Mr Japardi, providing the basis for an order for the payment of money under section 72AA.
180 After careful consideration, the Tribunal has concluded that save in one respect no damage suffered by Mr Japardi on account of the termination of the Lease is attributable to the conduct of Mr Nutt and Mr Xiao that it has characterised as unconscionable. Its reasons for so holding are as follows.
181 During the period when this conduct occurred, Mr and Mrs Pham were entitled, or at least believed that they were entitled, to claim arrears of rent from Mr Japardi. If demands for payment of these arrears had been communicated in an appropriate manner – that is, without aggression and intimidating behaviour – nothing in the evidence suggests that the ultimate result would have been any different. The aggressive and intimidating conduct by Mr Nutt and Mr Xiao was not the reason why Mr Japardi fell into arrears on 30 March 2008 (as indicated in ‘Table A’) and remained so for some six weeks, giving grounds for lawful termination of the Lease.
182 One item of damage sustained by Mr Japardi is, however, attributable to this conduct. This is the cost of perishable food, estimated by him to be $2,534.00, that was rendered unsaleable because the supply of electricity to the cool room in the Premises was turned off between the time when he vacated the Premises and the time, eleven days later, when he returned to retrieve some of his possessions. While Mr Japardi was cross-examined regarding his estimate of the cost of this food, it was not put to him that no such loss occurred. The Tribunal accepts his claim that someone employed by Ray White must have turned off the electricity because there is no reason why he, or Ms Lie or Ms Kangestu for that matter, would have done this. It notes also that neither Mr Nutt nor Mr Xiao denied that this occurred. The only evidence that they furnished on the matter was a claim by Mr Nutt, which the Tribunal does not accept, that the electricity could not have been turned off by any member of his staff.
183 In the Tribunal’s opinion, Mr Nutt (who was, it should be recalled, the licensee of Ray White) should have either allowed Mr Japardi to remove the perishable food from the cool room on the day of eviction or ensured that the cooling system remained in operation until the food had been removed. It views his failure to do either of these things as a further example of the ‘high pressure tactics’ that he and Mr Xiao employed. These aspects of his behaviour fall within the scope of the conduct by him that the Tribunal has characterised as unconscionable.
184 It follows that Mr Japardi is entitled to an award of damages amounting to $2,534.00 with respect to his unconscionable conduct claim.
185 In his Application to the Tribunal, Mr Japardi claimed interest on any damages awarded. The Tribunal is authorised by section 72A of the RL Act to award interest at a rate not exceeding the rate prescribed for interest on a judgment debt of the District Court. During the period since mid-May 2008, when this loss was sustained, that rate has been 10% per annum until 5 March 2009 and 9% thereafter. The Tribunal assesses the interest to be awarded at $382.00.
186 The amount to be awarded to Mr Japardi with respect to his unconscionable conduct claim is accordingly $2,916.00.
Misleading or deceptive conduct
187 Section 62D of the RL Act states that a party to a retail shop lease must not, in connection with the lease, engage in conduct that is misleading or deceptive to, or is likely to mislead or deceive, another party to the lease. Section 62E provides a remedy in damages for a breach of section 62D.
188 Ms Wilkinson submitted that Mr and Mrs Pham, or their agents, contravened section 62D, giving rise to remedies under section 62E, by the following conduct: (a) representing that GST was payable under the Lease; (b) accepting on 24 April 2008 Mr Japardi’s proposal of 14 April 2008 to pay arrears of rent by instalments without allowing him a reasonable amount of time to comply with ‘the agreed variation’; and (c) permitting Mr Japardi to make a payment by internet transfer on 9 May 2008, but then terminating the Lease four days later without ascertaining whether the payment had been made.
189 The Tribunal does not accept any of these contentions. Its reasons with regard to each of them are these: (a) the representation regarding GST did not cause any loss, because even if GST is not included in the chargeable rent Mr Japardi, for reasons already stated, was in arrears at the date of termination; (b) the default by Mr Japardi on which the termination was based arose from his failure to pay the rent due on 30 April 2008, not from any alleged failure to comply with the agreement regarding arrears; and (c) for reasons set earlier in the context of Ms Wilkinson’s arguments regarding waiver (see [151 – 155] above), a lessor, after a right to terminate on grounds of failure to pay rent has arisen, may properly accept rent that fell due before the right to terminate arose without losing this right.
190 For these reasons, Mr Japardi’s case, in so far as it is based on the RL Act’s provisions regarding misleading or deceptive conduct, must fail.
Concluding observations
191 Annexed to Mr Japardi’s affidavit was a significant quantity of documentation showing amounts expended by him, or by Putri Kenanga, on fit-out works conducted in the Premises. This documentation also showed that he and Ms Lie signed guarantees of liabilities undertaken by Putri Kenanga in hiring equipment for the Premises.
192 Ms Wilkinson submitted that all the expenses and liabilities outlined in this documentation should be included in the damages that she claimed to be recoverable from Mr and Mrs Pham on account of the termination of the Lease. She based this contention on a principle that was stated by the High Court in Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64 (see in particular the judgment of Mason CJ and Dawson J at 86) and discussed and applied by this Tribunal when awarding damages to the lessee under a retail shop lease (see Sarker v World Best Holdings Ltd (No 4) [2008] NSWADT 75 at [236 – 248]). This principle is to the effect that where a breach of a contract by one of the parties causes it to be terminated before it can be ascertained whether the contract would have been profitable for the other party, that party is entitled, generally speaking, to recover from the party in breach the expenses that he or she incurred in connection with the contract.
193 The correctness of this contention by Ms Wilkinson need not be determined here because the Tribunal has held that Mr Japardi’s claim to recover compensation for the financial loss caused by the termination of the Lease must be rejected. But there are two reasons why, if the occasion had arisen, the Tribunal would have been inclined to doubt its correctness.
194 The first and most important is that, in contrast to Sarker, this is not a case where at the time of termination of the relevant lease it could not be ascertained whether the lessee’s business was a profitable one. In Sarker, the lessee’s business only operated for four days before the termination. In the present case, Mr Japardi’s business was in operation for nearly eight months. Moreover, it was not successful enough to enable him to maintain regular rent payments. He himself admitted that it was in difficulties during a period of five months preceding the termination of the Lease.
195 Secondly, the expenses incurred by Putri Kenanga could not simply be treated as losses suffered by Mr Japardi when assessing any damages recoverable for him. The passage quoted above (at [120]) from Wallis Lake Fishermen’s Co-operative Ltd v A.C.N. 079 830 596 Pty Ltd [2008] NSWSC 925 makes this clear.
196 What these observations indicate is that even if Mr Japardi had succeeded in his primary claim in this case – i.e., that the termination of the Lease was unlawful – it would by no means have followed that he would have recovered the total amount, or even a substantial proportion, of the damages that he claimed.
197 The submissions of both parties included claims for costs. Two factors of relevance to this question are (a) that each party has been successful to a certain degree and (b) that determination of the outcome has been difficult, as the length of this judgment demonstrates.
198 In this situation, the provisional view of the Tribunal is that, pursuant to section 88(1) of the ADT Act (which is applicable by virtue of section 77A of the RL Act), no order for costs should be made. But there may be grounds, of which the Tribunal is unaware, for a decision under section 88(1A) that it would be ‘fair’ to make such an order.
199 With this in mind, the Tribunal directs as follows. Any application for costs in these proceedings must be filed and served, with supporting submissions, within 28 days of the date of this decision. The opposing party or parties must file and serve submissions in reply within a further 28 days. Unless reasons are advanced for a hearing to be conducted, the matter will be resolved ‘on the papers’, pursuant to section 76 of the ADT Act.
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