RGM Hospitality Pty Ltd t/as Hop and Pickle v South Bank Corporation - [2024] QCAT 586

QUEENSLAND CIVIL AND
ADMINISTRATIVE TRIBUNAL

CITATION:

RGM Hospitality Pty Ltd t/as Hop and Pickle v South Bank Corporation [2024] QCAT 586

PARTIES:

RGM HOSPITALITY PTY LTD TRADING AS HOP AND PICKLE

(applicant)

v

SOUTH BANK CORPORATION

(respondent)

APPLICATION NO:

RSL029-23

MATTER TYPE:

Retail shop leases matter

DELIVERED ON:

12 December 2024

HEARING DATE:

28 November 2024

HEARD AT:

Brisbane

DECISION OF:

Ms Kate Chapple, Presiding Member
Mr Neil Judge, Member

Mr Don McBryde, Member

ORDERS:

Application dismissed.

CATCHWORDS:

LANDLORD AND TENANT – RETAIL SHOP LEASES ACT – where dispute between lessor and lessee including claim for compensation by lessee – where referral to Tribunal following mediation and failure to resolve dispute – whether evidence to support substance and quantum of compensation claim – whether unconscionable conduct by lessor

Retail Shop Leases Act 1994 (Qld), s 5A, s 61A, s 63(s), s 83(2)(b), s 83(3), s 103

ASIC v Kobelt [2019] HCA 18

Belmed Pty Ltd t/as Belmont Medical Centre v Nicols Construction Pty Ltd [2013] QCAT 158
Karate 4 Kids Pty Ltd t/as Karate 4 Kids v Orgwa Pty Ltd [2024] QCAT 191

Thorne v Kennedy [2017] HCA 49

APPEARANCES & REPRESENTATION:

Applicant:

Self-represented

Respondent:

Self-represented

REASONS FOR DECISION

BACKGROUND

The respondent lessor (‘SBC’) is the owner of multiple premises on Little Stanley and Grey Streets, South Bank in the State of Queensland used by tenants to carry on a variety of café, restaurant and bar businesses (‘the dining precinct’).
In February 2018, the applicant lessee (‘RGM’) took an assignment of a ten-year lease (‘the Lease’) commencing on 3 December 2014 and expiring on 2 December 2024 of premises known as Tenancy S06E situated within the dining precinct, from which RGM has since conducted its licensed restaurant business, the Hop and Pickle. In January 2020, at RGM’s request, SBC agreed by deed to grant RGM rent relief subject to conditions.
In May 2023, the parties participated in a mediation conference conducted by a mediator nominated by the Queensland Small Business Commissioner following the issue of a dispute notice given under s 61A of the Retail Shop Leases Act1994 (Qld) (‘RSL Act’). However an agreement could not be reached between the parties. The mediator referred the dispute to the Tribunal in accordance with s 63 of the RSL Act by filing a Referral by a mediator of a retail tenancy dispute in the Tribunal on 20 June 2023 (‘this application’).
By this application, RGM claims from SBC compensation in the amount of $750,000.00, being the monetary limit of the Tribunal’s jurisdiction under the RSL Act, for alleged loss or damage suffered by RGM as a consequence of SBC’s alleged conduct in the course of the Lease.
On 3 August 2023, SBC filed in the Tribunal a counter-application disputing RGM’s allegations and seeking an order that RGM comply with the Lease.
On 3 October 2023, SBC’s lawyers served on RGM a Notice to Remedy Breach of Covenant requiring the payment of arrears of rent and other moneys totalling $39,400.65 within 14 days.
On 9 November 2023, following an Application for interim order filed by RGM in the Tribunal on 3 October 2023, the Tribunal issued a decision restraining SBC from enforcing the Notice to Remedy Beach of Covenant until determination of this application or further order.
On 12 November 2024, SBC filed in the Tribunal an Application for interim order stating (inter alia) that: the Lease expires on 2 December 2024; SBC has given RGM a six-month notice to vacate, the vacation date being 2 January 2025; SBC has no intention of offering RGM an extension of the Lease; RGM has indicated an intention not to vacate; and RGM has not paid rent since October 2023 resulting in arrears of $178,491.39. However, the Application for interim order did not appear to seek any orders.
On 15 November 2024, the Tribunal refused SBC’s Application for interim order and directed that this application be listed for hearing on 28 November 2024. The hearing proceeded as listed before a three-member panel of the Tribunal.

Tribunal’s jurisdiction

The panel finds that the Lease is a “retail shop lease” as defined by s 5A of the RSL Act.
The panel finds that this application relates to a retail tenancy dispute such that the Tribunal’s jurisdiction is invoked pursuant to s 103 of the RSL Act.
The panel finds that the mediator referred the retail tenancy dispute to the Tribunal in accordance with the requirements of s 63(2) of the RSL Act, and thereby RGM is the applicant in this application.
Pursuant to s 83(2)(b) of the RSL Act, the Tribunal has the power (inter alia) to make an order requiring a party to the dispute to pay an amount (including an amount of compensation) to a specified person.
Pursuant to s 83(3) of the RSL Act, if the Tribunal finds that a party engaged in unconscionable conduct in connection with a retail shop lease, the Tribunal has the power to make an order requiring the party who engaged in the unconscionable conduct to pay an amount to a stated person.
Tribunal hearing - evidence
The panel notes that RGM’s written submissions filed more than a year prior to the hearing outline 13 matters as the basis of its compensation claim, and that SBC filed written submissions in response refuting RGM’s allegations and claims.
At hearing however, RGM advised the panel that its compensation claim specifically relates to loss or damage arising from the following matters alleged by RGM, which RGM broadly describes as unconscionable conduct by SBC rendering the Lease and leased premises not fit for purpose:
(a)SBC’s failure to address water inundation of the leased premises.
(b)Inequitable SBC consent/approval process – change in corporate control of RGM (clauses 9.2 and 12.14 of Lease document).
(c)Inequitable SBC consent/approval process – RGM’s proposed alterations or additions to the leased premises (clauses 5.2 and 12.14 of Lease document).
(d)Inequitable SBC expenditure of promotion and advertising amounts paid by RGM.
(e)SBC’s failure to address construction noise from neighbouring tenancies.
(f)SBC’s breach of confidentiality.
(g)Inadequate air conditioning to the leased premises.
(h)SBC’s favourable treatment of the Tippler’s Tap business to RGM’s detriment.
Prior to the hearing, RGM filed in the Tribunal a significant volume of material including photographs and videos of the leased premises capturing rain, construction noise from neighbouring tenancies and customer traffic/trade in and around the leased premises; the Hop and Pickle business activity statements, advertising and marketing expenditure statements, and rent ledgers; email correspondence relating to air conditioning issues; customer and local resident testimonials; and the Lease documents.
The panel invited RGM to explain each limb of its compensation claim, the quantum of the loss or damage claimed, and the evidence relied on to establish SBC’s liability and to substantiate RGM’s loss or damage. The panel then invited SBC to respond. The following is a summary of sworn oral evidence given by Mr Law of RGM and Ms Tomasi of SBC:
(a)SBC’s failure to address water inundation of the leased premises
RGM claims the leased premises are affected by water flowing from the outside common areas during rain, including light rain, and that 80% of the licensed area floods. RGM claims the leased premises are the only premises in the dining precinct affected in this way because they are positioned below the level of the street, allowing the inward flow of water. RGM acknowledges however that the construction of the leased premises is similar to that of the other premises in the dining precinct. RGM claims to have tried to have the matter addressed by SBC for seven years without success. RGM pointed the panel to a number of photographs and videos showing water present in the leased premises during or after rain. RGM claims that it lost business as a result of the water inundation and had additional costs in clean-up and repairing rotting timber. RGM has not quantified its claimed loss or damage or produced any evidence to substantiate loss or damage.
SBC claims that water ingress is common among the premises in the dining precinct that adjoin the outdoor common areas, there is no step down to the Hop and Pickle and no step up to the other premises, rather it is uniformly flat from the kerb. SBC argues that any issues relating to water ingress in the leased premises are the responsibility of RGM under the Lease.
(b)Inequitable SBC consent/approval process – change in corporate control of RGM (clauses 9.2 and 12.14 of Lease document)
RGM claims that when Mr Law acquired control of RGM, the SBC consent/approval process was unfair and delayed by consent/approval issues relating to proposed changes to the fit out of the leased premises. RGM claims that because the matter was never finalised, RGM was unable to sell the business. RGM has not quantified its claimed loss or damage or produced any evidence to substantiate loss or damage.
SBC agrees the matter was never finalised and the process was complicated by issues relating to the fit out of the leased premises.
(c)Inequitable SBC consent/approval process – RGM’s proposed alterations or additions to the leased premises (clauses 5.2 and 12.14 of Lease document)
RGM claims that no proposed changes to the fit out of the leased premises were ever approved by SBC in the course of the Lease, but a Mr O’Donnell of SBC gave the impression that approval had been given. RGM has not quantified its claimed loss or damage or produced any evidence to substantiate loss or damage.
SBC argues that RGM must comply with the relevant provisions of the Lease.
(d)Inequitable SBC expenditure of promotion and advertising amounts paid by RGM
RGM claims the Hop and Pickle is seldom mentioned in SBC’s promotional emails for the dining precinct, other businesses are given prominence on the SBC website ahead of the Hop and Pickle, and events organised by SBC either attract customers to venues more than 500 metres away from the Hop and Pickle or are events offering free food or alcohol, which means that visitors are not motivated to spend money at the Hop and Pickle. RGM has not quantified its claimed loss or damage or produced any evidence to substantiate loss or damage.
SBC argues the promotion and advertising budget is not designed to serve a particular tenant or tenants, much like marketing budgets for shopping centres, and is separate from SBC’s funding of major events.
(e)SBC’s failure to address construction noise from neighbouring tenancies
RGM claims that for the period late 2022 to October 2024, there were only four months when there was no construction noise from neighbouring tenancies such as the Tippler’s Tap, Baba Ganoush, Smokehouse, Bourbon Street, resulting in significant disruption to the Hop and Pickle business. RGM has not quantified its claimed loss or damage or produced any evidence to substantiate loss or damage.
SBC acknowledges there have been significant upgrades to premises in the dining precinct as a result of new tenancies, there is a process provided for in the Lease for notification of works which SBC has complied with, and the upgrades have resulted in an increase in overall trade in the dining precinct.
(f)SBC’s breach of confidentiality
RGM claims SBC sent an email to all of the dining precinct tenants, which enclosed (among rent notices relating to other tenancies) the rent notice relating to the Hop and Pickle showing rent arrears of around $178,000. As a result, RGM claims the Hop and Pickle has suffered reputational damage and a significant drop-off in trade because people believe the business is going to close down. RGM has not quantified its claimed loss or damage or produced any evidence to substantiate loss or damage. RGM acknowledges the Lease expiry date is 2 December 2024 and that RGM and SBC have agreed on 2 January 2025 as the vacation date.
SBC did not comment.
(g)Inadequate air conditioning to the leased premises
RGM claims the air conditioning has never been fit for purpose as it is inadequate to cool the kitchen area, and SBC never allowed a contractor to inspect the air conditioning. RGM claims the problem has continued for seven years resulting in an uncomfortable work environment at the Hop and Pickle. RGM has not quantified its claimed loss or damage or produced any evidence to substantiate loss or damage.
SBC argues the Lease deals with the parties’ obligations in relation to air conditioning. SBC claims that since 2022 RGM requested not to be included in the air conditioning contractor maintenance schedule offered to tenants in the dining precinct; SBC suggested to RGM that it would cost $500 to $1,000 to rectify the issue, and RGM argued that it was an SBC cost. RGM agrees it asked to be removed from the maintenance schedule, because the air conditioning was not cooling, but it refutes SBC’s other claims.
(h)SBC’s favourable treatment of Tippler’s Tap business to RGM’s detriment
RGM claims SBC has behaved unconscionably in its favourable treatment of the Tippler’s Tap business by allowing relocation and providing subsidies, and RGM has been forced to compete with a state-sponsored business resulting in losses in the Hop and Pickle business. RGM has not quantified its claimed loss or damage or produced any evidence to substantiate loss or damage.
SBC acknowledges the Tippler’s Tap requested relocation to different premises in the dining precinct as it planned to expand its business, and SBC offered a rent-free period, which was standard practice. SBC rejects RGM’s claims that the Tippler’s Tap is state sponsored.
In relation to all limbs of RGM’s compensation claim, RGM argues it is very difficult to quantify the loss or damage they have suffered; as a small business, they do not have the resources to engage experts to provide assessments of liability and quantum; and it is sufficiently evident from the business activity statements that over time in the course of the Lease the Hop and Pickle lost business as a result of SBC’s conduct, including unconscionable conduct. RGM claims all money paid to SBC since it took over the Hop and Pickle lease in February 2018 ($812,987.60) which is comprised principally of rent ($614,049.52). However, it seeks the maximum compensation amount of $750,000 that may be awarded by the Tribunal.
Consideration of evidence
SBC and Hopngroup Pty Ltd entered into the Lease dated 28 November 2014 subject to the conditions and covenants contained in the schedule attached.
The parties signed a Deed (Lessor’s Consent to Assignment of Lease) dated 26 February 2018 giving effect to the assignment of the Lease from Hopngroup Pty Ltd to RGM with the consent of SBC. Clause 2.4(a)(2) of the Assignment Deed provides that RGM assumes and must perform all the covenants of the assignor under the Lease as if RGM had originally been named in the Lease as the tenant. Pursuant to clause 3.17 of the Deed, RGM acknowledges that the disclosure, reporting and other applicable requirements of the RSL Act have been complied with.
RGM and SBC signed a Confidentiality Deed on 7 January 2020 and 23 January 2020 respectively by which the rent otherwise payable by RGM under the Lease was reduced to specified sums for specified periods, with related amendments to the method of calculation of the promotion levy and the turnover rent percentage. Clause 2.2 of the Confidentiality Deed provides (inter alia) that the rent reduction does not affect any other rights of SBC under the Lease and is conditional on RGM performing its obligations under the Lease. Pursuant to clause 2.3 of the Confidentiality Deed, RGM acknowledges (inter alia) that the rent reduction is reasonable and final compensation and releases SBC from any claims against SBC and any claim for compensation under the RSL Act.
The panel considers there is no evidence before the Tribunal to suggest that RGM was not aware of, did not consent to, or is not bound by the terms of the Assignment Deed and the Confidentiality Deed.
The Tribunal has consistently based any compensation orders on a standard of proof requiring that there must be sufficient evidence to support a claim for loss and that bare allegations without supporting evidence are not sufficient.[1]
[1]Belmed Pty Ltd t/as Belmont Medical Centre v Nicols Construction Pty Ltd [2013] QCAT 158; Karate 4 Kids Pty Ltd t/as Karate 4 Kids v Orgwa Pty Ltd [2024] QCAT 191.
The panel has considered RGM’s compensation claim on the basis that it sits outside a claim anticipated to be excluded by clause 2.3 of the Confidentiality Deed.
The panel considers each limb of RGM’s compensation claim, as set out in paragraph [16] of these reasons, to be no more than bare allegations made without credible supporting evidence to establish the substance or quantum of the claim or the basis on which SBC is liable to meet the claim.
The panel notes that RGM concedes it is not able to quantify each limb of its compensation claim.
The panel considers that RGM’s ambit claim at the maximum of the Tribunal’s monetary limit of $750,000, which RGM states mostly represents a refund of the rent paid by RGM under the Lease, in the absence of any credible evidence correlating the sum of $750,000 with loss or damage actually suffered by RGM, raises serious questions about RGM’s motivation in pursuing this action against SBC.
The panel considers RGM’s bare allegations of unconscionable conduct against SBC raise particularly serious questions. Section 46A of the RSL Act prohibits unconscionable conduct on the part of a lessor and a lessee but does not define it. The High Court has observed that a finding of unconscionable conduct requires the unconscientious taking advantage of a special disadvantage, which has been variously described as requiring victimisation, unconscientious conduct, or exploitation.[2]
[2]Thorne v Kennedy [2017] HCA 49, cited in ASIC v Kobelt [2019] HCA 18.
The panel considers there is no credible evidence before the Tribunal that SBC’s conduct towards RGM in the course of the Lease bears any resemblance to unconscionable conduct.
The panel finds that RGM fails in its compensation claim against SBC and the appropriate order is that RGM’s application is dismissed.