R & R Family Holdings Pty Limited (ACN 143 168 245) v Bevillesta Pty Limited (ACN 008 428 162) (No. 2)
[2013] NSWADT 286
•11 December 2013
Administrative Decisions Tribunal
New South Wales
Medium Neutral Citation: R & R Family Holdings Pty Limited (ACN 143 168 245) v Bevillesta Pty Limited (ACN 008 428 162) (No. 2) [2013] NSWADT 286 Hearing dates: 3 and 4 July 2013 Decision date: 11 December 2013 Jurisdiction: Retail Leases Division Before: Deputy President D Patten
Non-judicial Member B Harrison - in advisory capacity
Non-judicial Member M Lonie - in advisory capacityDecision: In matter 125150:
1. Respondent Bevillesta Pty Limited to pay the Applicant $50,000 damages.
In matter 125181:
1. Respondent R & R Family Holdings Pty Ltd to pay the Applicant $298,042.
2. Respondent to pay interest in the sum of $7,462 to the Applicant.
In both matters:
1. R & R Family Holdings Pty Ltd to pay 50% of the costs of Bevillesta Pty Limited as agreed or assessed.
Catchwords: Damages - Alleged false and misleading pre-lease representations - Partly successful - Arrears of rent Legislation Cited: Administrative Decisions Tribunal Act 1997
Retail Leases Act 1994Cases Cited: Armstrong Jones Management Pty Ltd v Saies-Bond and Associates Pty Ltd [2007] NSWADTAP 47
Attorney General of NSW v World Best Holdings Ltd [2005] NSWCA 261Category: Principal judgment Parties: Matter No. 125150:
Matter No. 125181:
R & R Family Holdings Pty Limited (ACN 143 168 245) (Applicant)
Bevillesta Pty Limited (ACN 008 428 162) (Respondent)
Bevillesta Pty Limited (ACN 008 428 162) (Applicant)
R & R Family Holdings Pty Limited (ACN 143 168 245) (Respondent)Representation: Counsel
Mr T Marskell (for Bevillesta Pty Limited)
Mr R Minocha (Applicant in person - R & R Family Holdings Pty Limited)
Gilbert and Tobin (Respondent)
File Number(s): 125150 and 125181
reasons for decision
These two matters were heard together. The earlier (125150) was commenced on 15 October 2012 by an Application for Original Decision. An Amended Application was filed subsequently which annexed Points of Claim. These Points of Claim sought relief as follows:
1. An order declaring that the Lessee is entitled to rescind the Lease.
2. Compensation pursuant to section 10, alternatively section 62E, of the Act for damages suffered by the Lessee as a consequence of entering into the Lease, being such monies as this Tribunal has jurisdiction to award as would place the Lessee in the same position as if it had not entered into the Lease.
3. Pursuant to sections 72 and 72AA of the Act:
(a) an order that the Lessor pay $400,000 to the Lessee by way of damages, restitution, or refund;
(b) an order that any rental arrears purportedly owing to the Lessor are not due or owing by the Lessee to the Lessor.
(c) In the alternative to paragraphs 1 and 2:
(i) an order that the Lessor provide rain covers and wet weather access to the Premises;
(ii) an order declaring the Lessor is only entitled to $2,000 (inclusive of all other costs and GST) rent per week under the Lease;
(iii) an order declaring that the Lessor is not entitled to a security bond under the Lease; and
(iv) an order granting the Lessee relief against forfeiture.
4. Interest pursuant to section 72A of the Act.
5. Costs of the proceedings pursuant to section 77A of the Act.
The Points of Claim identified three bases for the relief claimed viz:
- Pre lease misrepresentations as to "tenancy mix"
- Pre lease representations as to rain cover and wet weather access
- Unconscionable conduct.
The second set of proceedings (125181) in which Bevillesta Pty Ltd (Receivers and Managers appointed) was Applicant, sought (apart from costs and interest) the single order that the Respondent to the proceedings pay $219,502.04 to the Applicant "in unpaid rent outgoings and promotional levies under a lease with the Applicant over the premises known as Shop GRD - R3005 in the shopping centre known as Top Ryde City".
In evidence is a registered lease AG519511D from Bevillesta Pty Limited (hereafter for convenience the Respondent) to R & R Family Holdings Pty Limited (the Applicant) of premises described as "Folio Identifier 1/1152688 Part being Shop GRD-R3005 in the Centre known as Top Ryde City, Cnr Blaxland Road and Devlin Street, Ryde" (hereafter the subject premises). Although the Applicant submitted to the contrary, I regard the terms of the lease as registered as binding upon the parties.
The lease was for a term of ten years commencing 4 August 2010 and terminating 3 August 2020. It reserved a base rent of $175,000 pa subject to annual reviews. There were also provisions for payment of a Turnover Rent and a Promotion Levy. The permitted use was described as "Modern Australian menu including Pizza, Pastas, Risotto limited to five (5) dishes". Against a box in reference Schedule Item 17 headed "Food and Beverage items for sale (clause 11.1)" appeared the words "See menu in Schedule 2 Menu based on above usage".
In Part A of the lease is a clause:
"Exclusivity
The Tenant acknowledges and agrees that no exclusivity as to the Permitted Use will be given to the Tenant at any time during the Term."
Other provisions of the lease relevant to this case include:
Part B
"3.1 Despite any other provision in this lease, while R & R Family Holdings Pty Ltd ACN 143 168 245 is the Tenant and is in actual occupation of the Premises, the Landlord agrees that the Base Rent as stated (and increased) in accordance with this lease, will be reduced by 30%, for the period beginning on the Commencement Date until the date the cinema within the Centre opens for trading."
General Clauses
"11.1 Using the Premises
(a) The Tenant may only use the Premises for the Permitted Use and any storage reasonably associated with that use. If the Permitted Use of the Premises includes the sale of food and beverages the Tenant may only sell the items specified in Item 17.
(b) The Landlord may allow other tenants in the Centre to carry on a use the same as or similar to the Permitted Use or to sell similar items."
"23.1 Disclosure statement acknowledgment
The Tenant acknowledges and warrants that it has received from the Landlord in accordance with the Act:
(a) at the commencement of negotiations:
(i) a copy of the proposed lease; and
(ii) a copy of the NSW Retail Tenancy Guide published by the Retail Tenancy Unit; and
(b) at least seven days before this lease was entered into within the meaning of the Act:
(i) a copy of the proposed lease; and
(ii) a disclosure statement."
Schedule 2 to the lease contained a copy menu which included numerous items of food and beverage. The menu included five items under the heading "Lunch Size Pasta" and four items under the heading "Risottos".
When the case was called on for hearing, Mr R Minocha, a Director of the Applicant announced his appearance for it. Mr T Marskell of counsel appeared for the Respondent. Mr Marskell's instructing solicitors had conveniently collected into three folders the current pleadings, the Applicant's evidence and the Respondent's evidence.
The folder comprising the Applicant's evidence was admitted into evidence as Ex A. It contains a number of unsworn and unsigned statements apparently made by Mr Minocha, a large number of emails passing between Mr Minocha and representatives of the Respondent and copies of various documents.
Mr Marskell agreed subject to a number of deletions to allow the statements into evidence as part of Ex A. In respect of some matters I gave Mr Minocha leave to adduce oral evidence.
Mr Minocha is an experienced businessman and for the past seven years has operated an Italian/Grill restaurant in Westfield's complex at Parramatta. He said that he was attracted to the subject premises in November 2009 in response to an advertisement inviting expressions of interest in Top Ryde City. He spoke to Mr Steve Ellis, the Respondent's Leasing Executive and with Mr Tim Andrews, General Manager Leasing. From then until about June 2010, he had a number of discussions with Mr Ellis and with Mr Andrews about taking a lease of the subject premises. These included negotiations as to the Respondent's contribution to the fit out of the premises and the menu of food he would be permitted to sell. On at least one occasion during the lengthy negotiations Mr Minocha indicated that he did not wish to proceed but changed his mind when the Respondent increased its offer of contribution to his fit out. Following one of his withdrawals from the negotiations the Respondent, through Mr Ellis, threatened to seek damages.
According to Mr Minocha the Applicant executed the lease on 12 May 2010 but it was not executed by the Respondent until the end of June. The lease itself bears no date.
In oral evidence, Mr Minocha dealt with conversations he had with Mr Ellis regarding the "tenancy mix". In answer to a question from me, Mr Minocha said:
"A. Okay. I said to Mr Ellis that I would like to know what the tenancy mix is of the other restaurants because they're going to be seven or eight restaurants and he responded and said Hurricane's was going to be one of them, there's going to be sushi, there was Thai, there was a Stefano restaurant and two cafes which would be selling sandwiches and coffees, one was coffee, muffins and sandwich, the other one was focaccia, Turkish and -"
Mr Minocha gave evidence of another conversation with Mr Ellis at the "end of June" regarding the tenancy mix. He purported to confirm this aspect of the conversation in an email sent the next day to Mr Ellis:
"On another note, I wish to reconfirm our discussion yesterday with regards to other tenancies. The following are the other café/restaurants for the precinct:
Hurricanes, us, Chinese, two cafes, (one selling pastas besides other items, second selling pizza, besides other nick nacks), Moroccan/African cuisine, Sushi and Thai."
Mr Ellis replied on the same day:
"I confirm that is the mix now ... we have agreed terms with Kazbah since our meeting - they do North African-Middle Eastern dishes ..."
I asked Mr Minocha whether he regarded as false the statements in Mr Ellis' email of 1 July. He replied:
"A. Sir, once the representation that is one café selling pastas and few other items is a full fledged Italian restaurant. The other case which was pizza and knick-knack is a full grill restaurant and does similar menu to what I do, it's not just knick-knacks. And so does the one selling pasta does the similar menu--
Q. Just take this slowly, Mr Minocha, because this seems to be important.
A. Yes, sir.
Q. This is the representation you rely on, is it?
A. Yes, I do.
Q. How do you say it's false? It was Hurricane's--
A. That's correct. Then Chinese is correct.
Q. Chinese, yes?
A. Now the one of the cafes which Mr Ellis represented--
Q. It's the next representation you say it's false, is it?
A. Yes.
Q. Two cafes, ones selling pastas beside other items--
A. Second selling pizzas and knick-knacks. Mr Ellis at that stage knew that the one doing pizzas and knick-knacks the knick-knacks are knick-knacks, they're snacks, but they do steaks, they do seafood, they do grill, they do gourmet salads, they do everything that I'm doing. So that is why - and Mr Ellis knew at that stage and that's when I cross-examine him it'll come out with the evidence."
As I understand Mr Minocha's evidence, he regarded as false or misleading the reference to "nick nacks" when the restaurant was operating so he believed as a "full grill restaurant".
Referring to his email of 1 July 2010, Mr Ellis in his statement made 15 May 2013 said:
"I never confirm to any tenant that a particular tenancy may not change. When I am requested to provide information regarding a particular tenancy mix, the information I provide is always based on the information I have at the time. That is why I used the word "now" in this email and accords with my usual practice."
It seems clear that throughout the negotiations Mr Minocha expressed interest in the mix of businesses with whom he would be in competition. However the lease is not only silent as to the existence of any promise to Mr Minocha as to the tenancy mix but expressly gives the lessor the right to allow other tenants to carry on the same or a similar use to the lessee.
I turn to the claim that the Respondent promised the Applicant covered access to the subject premises and failed to honour that promise. To understand the significance of it, it is necessary to state that the subject premises are at the end of an open piazza onto which a number of cafés and restaurants open. Outside each café and restaurant is an area for open air eating furnished with tables and chairs.
As I understand it, the nub of the complaint is that the Respondent allowed its lessees to block what could otherwise have been a covered walkway along the front of the cafés providing access to those cafés including the Applicant's café at the end.
Plans and photographs forming part of Ex A seem to establish that there was to be a covered, albeit narrow, walkway between the cafés as leased and the seating areas outside them. Evidence establishes that by various means free passage along that walkway was prevented or restricted.
An email sent by Mr Martin Dall'Asta, a designer retained by the Respondent, to Mr Minocha on 27 May 2010 seems to confirm this position with the statement:
"Restaurant access area: it is required to provide an open access area of minimum 750 mm width. Also allow an area for menu display".
In cross examination Mr Minocha agreed with Mr Marskell that throughout the lease negotiations he was represented by a solicitor. He also conceded to Mr Marskell that the disclosure statement completed by him contained no reference to any representation upon which he relied.
The Respondent called two witnesses in its case in addition to Mr Ellis, namely Mr Peter Reece and Mr Paul Savelberg.
According to Mr Ellis, negotiations commenced with Mr Minocha towards the end of October 2009 and continued until the lease was executed about June 2010. During this period Mr Ellis was also negotiating with other prospective tenants. Some of his negotiations with Mr Minocha concerned the tenancy mix at the Top Ryde complex but others concerned such aspects as restaurant design and seating plan. On more than one occasion he said that Mr Minocha withdrew from the negotiations.
As to the tenancy mix, Mr Ellis deposed that when asked about the tenancy mix he was always careful to base his answer on the information he had at the time, being aware that the situation was subject to change. He denied ever telling Mr Minocha that a particular mix was the "final" mix.
Mr Minocha cross examined Mr Ellis at some length without in my view undermining his evidence. However it is significant that Mr Ellis answered the question "So is that correct that we were supposed to have wet weather access at the design stage as you say?" with "Yes it would appear so".
Mr Reece, Centre Manager of Top Ryde City since 5 September 2011 testified as to the amount claimed by the Respondent against the Applicant. Although Mr Reece was also cross examined by Mr Minocha there was no challenge to the accuracy of his evidence as to the amounts payable by the Applicant to the Respondent under the lease.
Mr Savelberg is the Retail Manager at the Top Ryde complex and has held that position since March 2010. His affidavit did not address the matters which ultimately became at issue in these proceedings and Mr Minocha did not wish to cross examine him.
After conclusion of oral evidence on the second day of the hearing the parties were given leave to make written submissions.
In its submissions which occupied some 49 pages, the Respondent correctly identified the Applicant's case as based on three propositions:
(1) That the tenancy mix was misrepresented by the Respondent before the lease was executed and the Applicant relied on such misrepresentation to its detriment.
(2) That the Respondent misrepresented the position about covered access to the subject premises and again such misrepresentation was relied upon by the Applicant to its disadvantage.
(3) That in the period between 5 May 2010 and 17 May 2010 the Respondent engaged in unconscionable conduct within s 62B of the Retail Leases Act 1994.
Mr Minocha also made lengthy written submissions. It should be noted that he suffered disadvantage as a lay person in presenting a rather complicated case in which he was the Applicant's sole witness. Many of his submissions were not based on evidence before the Tribunal or were otherwise irrelevant. Nothing in the submissions in my opinion pointed to evidence supporting a conclusion that the Respondent represented that there would be a particular tenancy mix of cafés and restaurants at the centre let alone that the Applicant relied on them.
There are I think in any event unsurmountable difficulties in Mr Minocha's contention that legal consequences flow from Mr Ellis' email of 1 July 2010. The expression "nick nacks" does not appear in Mr Ellis' emails but reflects what Mr Minocha says Mr Ellis said to him the previous day. Although use of the phrase was not denied by Mr Ellis in ordinary speech it does not seem to bear much relationship to a restaurant business. More significantly however by 1 July 2010 the Applicant had executed the lease and therefore could not have relied on any subsequent statement even if false.
In my opinion it was not established that the Applicant relied on any representation made by the Respondent regarding the tenancy mix when entering into the lease let alone that any representation was false. In my view the evidence establishes no more than that from time to time the Respondent fairly and honestly told the Applicant the current position in relation to other potential lessees. This part of the Applicant's claim fails.
In relation to the failure of the Respondent to provide covered access to the Applicant's café, Mr Marskell submitted that the Applicant had simply failed to prove its case and pointed to the absence of any reference to the walkway in the Disclosure Statement or the lease.
Mr Marskell referred to the decision of an Appeal Panel of this Tribunal: Armstrong Jones Management Pty Ltd v Saies-Bond and Associates Pty Ltd [2007] NSWADTAP 47 and particularly to the observations in paras 118 and 119:
118 We do not share the Tribunal's view (one supported by Mr Gray for S-B in his submissions) that the lessee's disclosure statement obligations can be read down so as to exclude from the exchange process a representation as to a major anchor tenant. The lessor's disclosure statement obligations are wide ranging, and cover, as we see it, many matters to do with the overall operation of the shopping centre. The many warnings to which we have referred, found both in Part 1 and in the body of Part 2 (as set out above), are all designed, we think, to implant firmly in the minds of the parties the importance of transparency as to all matters of material significance to each party. In this regard, we agree with the approach adopted by Palmer J in Samaha.
119 In our view, lessees should see the disclosure statement regime as providing the place in which to record all material representations that induced them to enter the contract.
In my view however there is a distinction to be made between a representation which relates directly to the premises leased and a representation which does not. Here the alleged representation under consideration is in the latter class in that it concerns not the subject premises themselves but the area under the control of the Respondent outside them. Moreover the breach was not that the walkway was not physically available but that the Respondent permitted its lessees to prevent the free passage of pedestrians though it. In my view the Respondent was bound by a collateral contractual obligation to ensure that the covered passageway shown on plans remained available to customers of the Applicant and that its failure to do so constituted a breach of that obligation.
The breach however in my view was of a relatively minor nature sounding in damages and not such as to entitle the Applicant to terminate the lease.
There was no evidence as to the impact of the lack of a walkway upon the Applicant's business. Presumably the impact would be restricted to periods of heavy rain when I imagine custom to the restaurant would be reduced in any event. In the absence of evidence as to the Applicant's loss, in assessing damages I must do the best I can on the evidence. Given that the lease is for a 10 year term, I assess damages at $50,000.
The other items of the Applicant's claim rest on a finding that the Respondent has been guilty of unconscionable conduct within s 62B of the Act. The matters relied upon by the Applicant seem to be:
- The alleged misrepresentations referred to above
- The alleged threat by the Respondent to the Applicant of legal proceedings following the Applicant's withdrawal from negotiations
- Failure of the lessor to manage and operate the Top Ryde City shopping centre in a professional and competent way
- The fact that the Respondent allegedly offered rent abatements to lessees other than the Applicant
- The fact that the Applicant was required to provide a bank guarantee when other lessees were not
- The failure of the Respondent to grant a fresh lease to the Applicant on more favourable terms after the Applicant at the Respondent's request signed a letter dated 16 June 2011.
None of these matters was supported by credible evidence but in any event none in my opinion amounted to the "moral obloquy" referred to by Spigelman CJ in Attorney General of NSW v World Best Holdings Ltd [2005] NSWCA 261. The claim of damages for unconscionable conduct fails. However the Respondent did have a contractual obligation to manage the Centre in a professional and competent manner (cl 12.1(a) of the Lease). Although Mr Minocha had his own ideas as to how this obligation should be fulfilled; he called no expert evidence on the subject. On the other hand, there was evidence from the Respondent as to marketing and promotional activities carried out. In the absence of evidence I am unable to conclude that a breach of cl 12.1(a) of the lease was established.
There remains the Respondent's claim for unpaid rent etc. As at 18 December 2012 when the Respondent's Application was filed the total claim was $219,502. The Applicant did not challenge the basis of calculation and the amount outstanding as at the conclusion of the hearing was $298,042. To this as submitted by the Respondent should be added interest pursuant to s 72A of the Retail Leases Act. I will allow interest at 6% per annum on the difference between $298,042 and $50,000 viz $248,042.00 for the period from 1 June 2013 until 30 November 2013. I calculate such interest at $7,462.
In the circumstances as this was substantially a commercial dispute between two businessmen I think it fair under s 88 of the Administrative Decisions Tribunal Act 1997 that there be some order in respect of costs. The Applicant was partially successful in its claim but the Respondent has been successful in obtaining a much larger award. This must be weighed against the fact that most of the hearing was occupied with issues in the Applicant's case upon which it was partly successful.
I propose to order that the Applicant pay one half of the Respondent's costs.
In hearing this matter I was assisted by Mr B Harrison and Mr M Lonie in an advisory capacity. I gratefully acknowledge the benefit of their knowledge and experience.
Orders
In matter 125150:
1. Respondent Bevillesta Pty Limited to pay the Applicant $50,000 damages.
In matter 125181:
1. Respondent R & R Family Holdings Pty Ltd to pay the Applicant $298,042.
2. Respondent to pay interest in the sum of $7,462 to the Applicant.
In both matters:
1. R & R Family Holdings Pty Ltd to pay 50% of the costs of Bevillesta Pty Limited as agreed or assessed.
Decision last updated: 12 December 2013
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