| JURISDICTION : STATE ADMINISTRATIVE TRIBUNAL STREAM : COMMERCIAL & CIVIL ACT : COMMERCIAL TENANCY (RETAIL SHOPS) AGREEMENTS ACT 1985 (WA) CITATION : SAHANA INVESTMENTS PTY LTD and 59 ALBANY HIGHWAY JOINT VENTURE PTY LTD [2013] WASAT 6 MEMBER : DR B DE VILLIERS (MEMBER) HEARD : 19 AND 20 NOVEMBER AND 11 DECEMBER 2012 DELIVERED : 15 JANUARY 2013 FILE NO/S : CC 71 of 2012 BETWEEN : SAHANA INVESTMENTS PTY LTD Applicant
AND
59 ALBANY HIGHWAY JOINT VENTURE PTY LTD
Respondent
Catchwords: Commercial tenancies Duty to provide disclosure statement Should information about coffee service in office tenancy of building be disclosed to tenant in retail area of same building? Was landlord aware of coffee service within office tenancy? Is it relevant for purposes of complying with disclosure requirement that landlord was not aware of coffee service in office tenancy when lease with retail tenant was entered into? Obstruction by landlord of flow of business by allowing coffee service to operate Is landlord acting unconscionably by allowing coffee service to operate within office tenancy?
(Page 2)
Legislation: Commercial Tenancy (Retail Shops) Agreement Act 1985 (WA), s 3, s 6(1)(b), s 6(1)(c), s 14, s 15C s 15F
Food Act 2008 (WA)
Health Act 1911 (WA)
Planning and Development Act 2005 (WA), s 211(a) Result: Application dismissed
Summary of Tribunal's decision: The Respondent said that it had not been aware at the time the lease containing the disclosure statement was entered into, that the coffee service was in existence; even if the Respondent had been aware of the coffee service, it was under no obligation to disclose it to the Applicant since the coffee service falls outside the commercial retail tenancy area and is an ancillary use to the office area; the Respondent has not done anything to disrupt the flow of traffic to the Applicant since office workers were at liberty to utilise the services of the Caffissimo Cafe; and the decision of the Respondent not to take legal action against the tenant of the office part of the building under whose tenancy the coffee service operated, was not unconscionable.
The Tribunal found as follows:
(a) the tenancy of the Applicant formed part of a retail shopping centre;
(b) the Respondent had not been aware at the time the Caffissimo Cafe lease between the Applicant and the Respondent was entered into, of the existence of the coffee service;
(c) the disclosure statement that formed part of the Caffissimo Cafe lease did not contain false or misleading information;
(d) as a result of the finding in (b) and (c) above, there was no need for the Tribunal to consider the question of whether the Respondent had a duty, if it had known about the coffee service at the time the Caffissimo Cafe lease had been entered into, to enclose reference to the coffee service in the disclosure statement;
(e) the contention of the Applicant that the Respondent should be held liable for failing to disclose the existence of the coffee service to the Applicant, even though the Respondent only became aware of the operation of the coffee service after the Caffissimo Cafe lease had been entered into, was rejected;
(f) the Respondent did not obstruct the flow of business to the Applicant by allowing the coffee service to operate; and
(Page 3)
(g) the conduct of the Respondent after it became aware of the existence of the coffee service was not unconscionable.
The application was dismissed.
Category: B
Representation: Counsel:
Applicant : Mr P McQueen
Respondent : Mr M Hotchkin
Solicitors:
Applicant : Lavan Legal
Respondent : Hotchkin Hanly
Case(s) referred to in decision(s):
AB v State of Western Australia [2011] HCA 42
AG v NSW v World Best Holdings Pty Ltd [2005] NCWCA 261
Barbcraft Pty Ltd v Goebel Pty Ltd [2003] VCAT 1700
Fernandes and Lam (1999) ANZ ConvR 445
Lizzio v Ryde Municipal Council [1983] HCA 22
Murphy v Fremantle Markets Pty Ltd [2009] WASAT 84
S&A Gallo Pty Ltd v Hollowood Pty Ltd [2012] SASC 176
Strata Plan 70672 v Roman Catholic Church [2011] NSWSC 973
(Page 4)
REASONS FOR DECISION OF THE TRIBUNAL:
Introduction 1 Sahana Investments Pty Ltd (Applicant), as trustee for the Emerald City Trust, operates a Caffissimo Café (Caffissimo) in the commercial retail area (Retail Area) of a building complex (Building) owned by 59 Albany Highway Joint Venture Pty Ltd (Respondent). The address of the land upon which the Building is situated is No 59 Albany Highway, Victoria Park. The Building, known as Gateway Victoria Park, comprises a RetailArea, Office Area and Residential Area. The ground level of the Building is the Retail Area; the six levels above the Retail Area form the Office Area (two towers of four levels and six levels of offices); and the Residential Area is to the rear of the Building. The Respondent appointed Knight Frank Australia Pty Ltd (Knight Frank) as the managing and leasing agent for the Building. 2 The Applicant operates the Caffissimo from Unit G8 in the Retail Area. The permitted use of the Applicant's portion of the Retail Area is defined by the lease, which was entered into between the Applicant and the Respondent on 25 August 2010 (Caffissimo Lease), as a retail shop that includes a café lounge and takeaway facility. The Caffissimo commenced operations around 17 March 2011. The term of the Caffissimo Lease is seven years with an option to renew for a further five years. 3 The business model on which the Applicant based its calculation for the Caffissimo was to provide a café service predominantly to the office workers located in the Office Area. The rationale of the Applicant was that other potential competitors, except those within the Retail Area, are some walking distance away from the Building and that the Applicant would have what could be described as a captive market. The Retail Area is available for 11 retail outlets. 4 It is estimated that the Office Area can accommodate approximately 600 workers. The entire Office Area is tenanted by a single tenant, Monadelphous Engineering Associated Pty Ltd (Monadelphous). The permitted use of the Office Area is described by the lease between the Respondent and Monadelphous (Monadelphous Lease) as 'offices and ancillary purposes'. The Monadelphous Lease is dated 20 July 2010 and Monadelphous took occupancy of the Office Area around the same time as the date of the Monadelphous Lease. (Page 5)
5 The Caffissimo Lease contained a disclosure statement. The disclosure statement described the Office Area as '[e]stimated 9,800 [square metres] of office space over 6 levels above …'. 6 In around February/March 2011, soon after the Applicant commenced fitout of its tenancy, Ms Rashmi Nidagal of the Applicant became aware that a coffee service (Coffee Service) was operating from within the Office Area. In these proceedings, the Coffee Service has been described in various ways (for example, coffee cart; coffee café; coffee facility), but, in essence, the parties refer to the selling of coffee and other beverages on the third floor of the Office Area by an external operator called Venn Building (Venn). For purposes of convenience, the Tribunal will use the term 'Coffee Service'. The Coffee Service offers coffee and juices, as well as a small range of preprepared cakes, muffins and sandwiches. No food is prepared on site. The breakout area where the Coffee Service is located also contains selfhelp facilities where staff can make their own coffee and tea, and tables where staff can have their own lunch or utilise a vending machine (not operated as part of the Coffee Service). 7 The Applicant is of the view that the Coffee Service seriously undermines and restricts the realisation of its commercial model, since office workers in the Office Area can now utilise the Coffee Service rather than the services offered by the Applicant which operates from the Retail Area. The Applicant says that the Respondent should have informed it, by way of the disclosure statement, that the Coffee Service was operational in the Office Area, and the Respondent should take all measures available to it to close down the Coffee Service. The Applicant says that it is now suffering substantial losses as a result of the Respondent failing to disclose to it the presence of the Coffee Service, and it (the Applicant) should be compensated by the Respondent for the losses that the Applicant has suffered and will continue to suffer for as long as the Coffee Service operates. 8 The Respondent opposes the application. It says, in essence, that it was not aware at the time the Caffissimo Lease was entered into of the existence of the Coffee Service; that neither the Respondent nor Monadelphous are obstructing the flow of business to the Caffissimo; and that the Respondent is not acting unconscionably by not taking legal action against Monadelphous in terms of the Monadelphous Lease since the Coffee Service in its existing form is part of the ancillary use of the Office Area. (Page 6)
Issues 9 The issues for determination in this proceeding are as follows: 1) Whether the Retail Area of the Building is a 'retail shopping centre' for the purposes of the Commercial Tenancy (Retail Shops) Agreements Act 1985 (WA) (CT Act). 2) Whether the Respondent was aware of the existence of the Coffee Service at the time the Caffissimo Lease was entered into, and if so, whether the Respondent had a duty to disclose the existence of the Coffee Service to the Applicant. 3) Whether the disclosure statement provided to the Applicant contains false or misleading information. 4) Whether the Respondent has caused or failed to make reasonable efforts to prevent or remove a disruption to trading within the Retail Area, which disruption has caused a loss of profits to the Applicant. 5) Whether the Respondent is acting unconscionably by not taking the necessary steps to stop the Coffee Service from operating.
Statutory framework 10 The application is brought pursuant to three different sections of the CT Act, namely: The relevant parts of the CT Act provide as follows: Retail Shopping Centre (Page 7)
Providing a Disclosure statement 6. Disclosure (1) Where a retail shop lease is entered into and the tenant has not, at least 7 days before the entering into of the lease, been given a disclosure statement in accordance with subsection (4) or the disclosure statement given contains false or misleading information, the tenant may, in addition to exercising any other right, do either or both of the following (a) within 60 days after the lease was entered into, give to the landlord written notice of termination of the lease; (Page 8)
(b) apply in writing to the Tribunal for an order that the landlord pay compensation to the tenant in respect of pecuniary loss suffered by the tenant as a result of the omission of the landlord to give a disclosure statement in accordance with subsection (4) or of the giving of false or misleading information by the landlord in the disclosure statement. …
Disruption 14. Compensation by landlord Where a retail shop lease provides for the occupation of a retail shop situated in a retail shopping centre, the lease shall be taken to provide that if the landlord (a) inhibits the access of the tenant to the retail shop in any substantial manner; (b) takes any action that would substantially alter or inhibit the flow of customers to the retail shop; (c) causes, or fails to make reasonable efforts to prevent or remove, any disruption to trading within the centre which disruption causes loss of profits to the tenant; (d) fails to have rectified as soon as practicable any breakdown of plant or equipment under his care and maintenance which breakdown causes loss of profits to the tenant; or (e) fails to adequately clean, maintain, or repaint the building or buildings of which the centre is comprised or any common area connected with the centre, and after being given by the tenant notice in writing requiring him to rectify the matter does not do so within such time as is reasonably practicable, then notwithstanding any provision contained in the lease, the landlord is liable to pay to the tenant such reasonable compensation in respect thereof as is thereafter agreed in writing between the parties or determined by the Tribunal.
Unconscionable conduct 15C. Unconscionable conduct of landlords (Page 9)
(Page 10)
(j) the extent to which the landlord was willing to negotiate the terms and conditions of any lease with the tenant; (k) the extent to which the landlord acted in good faith; (l) the extent to which the landlord was not reasonably willing to negotiate the rent under the lease; (m) the extent to which the landlord unreasonably used information about the turnover of the tenant's or a previous tenant's business to negotiate the rent; and (n) the extent to which the landlord required the tenant to incur unreasonable refurbishment or fit out costs. (3) In considering whether a landlord has contravened subsection (1), the Tribunal Case management 11 The application was lodged on 13 January 2012. The first directions hearing took place on 2 February 2012, at which the matter was adjourned for mediation. The mediation was not successful. 12 Following several directions hearings, as well as interlocutory proceedings, the matter was finally set down for a hearing. At the directions hearing that took place on 13 August 2012, the Tribunal ordered that the hearing would be conducted in two phases. The first phase would be to establish whether the Respondent was liable pursuant to the relevant parts of the CT Act, and if so, the second phase would determine the compensation payable to the Applicant by the Respondent. 13 The current proceeding only relates to the first phase. 14 The hearing took place over a period of three days. Several witnesses were called and extensive written and oral submissions were made. The Tribunal took into account all the information presented to it in the making of its determination. (Page 11)
Issues, submissions and consideration 15 The Tribunal will, for the sake of convenience, deal with each issue, fact, contention, submission and consideration separately under the relevant heading that relates to the specific issue.
1. Whether the Retail Area of the Building is a 'retail shopping centre' for the purposes of the CT Act? 16 The parties did not take serious issue with the question of whether the Caffissimo formed part of a retail shopping centre, but the question was raised as part of the proceeding. 17 A question that arises is, if all the available spaces within the Retail Area were not rented or occupied at the time when the Caffissimo Lease had been entered into, whether such vacancies affect the categorisation of the Retail Area as a 'retail shopping centre'. 18 At the time the Caffissimo Lease was entered into, there were two other retail shops in the Retail Area, namely, Big Chef Restaurant and Old Cathay Restaurant. By the time the Applicant commenced operations, a third retail shop, Pure Image, a hair salon, had also been established. 19 The Tribunal finds that the classification of the Retail Area does not depend on how many tenancies have been taken up, but rather, on the availability of areas for purposes of retail. The fact that all available tenancies are not taken up, or that some tenancies may have become vacant, does not detract from the area being a Retail Area for the purposes of the CT Act. 20 The Tribunal is satisfied that the Caffissimo does form part of a retail shopping centre as defined in s 3 of the CT Act. According to the disclosure statement that formed part of the Caffissimo Lease, the Retail Area comprises 11 retail outlets. The requirement that a retail shopping centre must comprise a cluster of five or more premises, which are used wholly or predominantly for the carrying on of a business involving the sale of goods by retail, does not require for all of the potential retail areas to be leased or occupied at the time a lease is entered into. 21 The correct classification of a 'cluster of premises' depends on the potential use of an area that is designed and available for the carrying on of a business of a retail shop. 'Retail shop' entails any premises situated in a retail shopping centre that are used wholly or predominantly for the carrying on of a business involving the sale of goods by retail. (Page 12)
22 The Caffissimo is situated in a retail shopping centre and it is a retail shop under the CT Act. 23 The Tribunal can therefore dispose of the first issue by confirming that the Retail Area of the Building is a 'retail shopping centre' pursuant to the CT Act, and that the Caffissimo is a 'retail shop'.
2. Whether the Respondent was aware of the existence of the Coffee Service at the time the Caffissimo Lease was entered into, and if so, whether the Respondent had a duty to disclose the Coffee Service to the Applicant 24 The answer to this issue will be analysed in two parts. The first part is whether the Respondent was aware of the Coffee Service at the time the Caffissimo Lease was entered into. The second part is whether the Respondent failed to discharge its statutory duty in regard to the information it provided in the disclosure statement.
2.1 Was the Respondent aware of the Coffee Service? 25 The parties take divergent positions in regard to the question of whether the Respondent was aware, at the time the Caffissimo Lease was entered into, of the existence of the Coffee Service. The Applicant says that the Respondent was aware, or should have been aware, of the Coffee Service. The Respondent says that it was not aware of the existence of the Coffee Service and could not have been aware since occupation of the Office Area had been taken by Monadelphous. The Respondent says it only became aware of the Coffee Service sometime after the Caffissimo Lease had been entered into. 26 The Tribunal finds that neither the Respondent nor its agent, Knight Frank, had been aware of the Coffee Service at the time the Caffissimo Lease was entered into. 27 The reason for this finding is supported by a proper analysis of the evidence before the Tribunal.
28 Mr Shaun Alexander Tubic is the manager of the Applicant and he was involved at all stages of negotiations for the Caffissimo Lease. Mr Tubic explains why the location of the Retail Area within the Building was so attractive to the Applicant. Mr Tubic says he expected a steady flow of office workers from the Office Area to the Caffissimo; the primary source of market was expected to be the staff of the Office Area; (Page 13)
and there was no other café trading in the immediate vicinity when the Caffissimo Lease was entered into. Mr Tubic says that over the course of the negotiations leading to the Caffissimo Lease, he was of the belief that the Caffissimo would not encounter direct competition from any other tenants in the Building, and that the café facilities offered by Caffissimo were unique to the Building. Mr Tubic says that no mention was made in the negotiations leading to the Caffissimo Lease, nor was there any mention in the disclosure statement forming part of the Caffissimo Lease, of the Coffee Service. In fact, Mr Tubic says he was given a verbal assurance by a representative of Knight Frank that the Applicant would enjoy exclusive trading rights in the Retail Area. Mr Tubic says he and his wife, Ms Nidagal, only became aware of the presence of the Coffee Service after the Caffissimo Lease had been entered into. Mr Tubic says he immediately raised concerns with Knight Frank, since the presence of the Coffee Service had a direct impact on the commercial viability of the Caffissimo. Mr Tubic says he was given the assurance by the representatives of Knight Frank that the Coffee Service was only temporary; the Coffee Service was aimed at the workers of Monadelphous; and that the Coffee Service would close down as soon as the Caffissimo became operational. Mr Tubic says the Coffee Service continues to operate and has a severe impact on the operations of the Caffissimo. Mr Tubic says it is his belief that the Respondent, either itself or through Knight Frank, had been aware, or should have been aware, prior to entering into the Caffissimo Lease, of the Coffee Service. Mr Tubic says that correspondence between the Respondent and Monadelphous indicates that the Respondent, or its agent, Knight Frank, had knowledge of the presence of the Coffee Service prior to the Caffissimo Lease being signed. 29 Ms Rashmi Nidagal is the wife of Mr Tubic. Ms Nidagal submitted a witness statement in which she supported the contents of the statement tendered by Mr Tubic. Ms Nidagal did not give oral evidence. 30 Mr Scott William Cameron is the General Manager (Project Coordination) of Finbar Group Limited (Finbar). The Respondent is a subsidiary of Finbar. Mr Cameron says that Finbar's Managing Director, Mr Darren Pateman, was responsible for negotiations of the Caffissimo Lease on behalf of the Respondent. Mr Pateman dealt with the Applicant via Mr Mark Gutteridge of Knight Frank. Mr Cameron says that he (Mr Cameron) was aware of the negotiations leading to the Caffissimo Lease and the contents of the negotiations since most of the emails between the negotiators were copied to him. Mr Cameron says he had no knowledge of the Coffee Service at the time the Caffissimo Lease was (Page 14)
entered into. Mr Cameron refers to the approved plan for Level 3 of the Office Area where the Coffee Service is located and says there is no mention on the approved plan for the Coffee Service. Mr Cameron says he only became aware of the Coffee Service in around January 2011, after the Caffissimo Lease had been executed. Mr Cameron says that he was told by Mr Ryan Abbott of Knight Frank about the presence of the Coffee Service. Mr Cameron says he was told by Mr Abbott that he (Mr Abbott) had been informed by Mr John Collings of Monadelphous that the Coffee Service was of a temporary nature and would discontinue when similar services within the Retail Area and in the vicinity of the Building became available. Mr Cameron says that Monadelphous had not sought, nor was it given, approval by the Respondent for the Coffee Service to operate. Mr Cameron says he has now formed the view that the Coffee Service is a 'minor operation'; that it is 'incidental' to Monadelphous' commercial and office use of the Office Area; and that the presence of the Coffee Service could go unnoticed, even to a person who visits Level 3, due to the 'relative insignificance' of the Coffee Service (paragraph 7, Witness Statement Exhibit J). 31 Mr Ryan Abbott, Director of Asset Management Services at Knight Frank, says that the Monadelphous Lease provides for a tea preparation/lunch breakout area, but not for a Coffee Service as currently operates on Level 3 of the Office Area. Neither Knight Frank nor the Respondent has received an application from Monadelphous for the Coffee Service to operate, nor was approval given for the Coffee Service to operate. Mr Abbott says that Level 3 of the Office Area, from where the Coffee Service operates, had not been accessible to the Respondent, Knight Frank or members of the public since Monadelphous had taken possession in July 2010. Knight Frank only accesses the Office Area for purposes of maintenance or annual inspections. He says he personally only became aware of the Coffee Service around January/February 2011, after the Caffissimo Lease had been entered into. He says he immediately spoke to Mr Collings of Monadelphous and Mr Collings replied that the Coffee Service was of a temporary nature and would operate only until the Applicant commenced the Caffissimo. 32 Mr Mark Guttridge is the Associate Director of the Retail Services (Investment Property Management) division of Knight Frank. His division is involved in the leasing of properties for clients of Knight Frank. Mr Guttridge says that he dealt with Mr Robbie Doyle, who, at the time the negotiations for the Caffissimo Lease were taking place, was an independent business broker. Mr Doyle was making enquiries about the opportunity to establish a Caffissimo in the (Page 15)
Retail Area of the Building. Mr Guttridge was directly involved as the sole person in the negotiations with the Applicant on behalf of Knight Frank and the Respondent. Mr Guttridge says that after extensive negotiations with the Applicant, he emailed the final version of the Caffissimo Lease and disclosure statement to the Applicant on 20 August 2010. After some delays and exchange of communications, the Caffissimo Lease was executed on 15 October 2010. Mr Guttridge says that at the time the Caffissimo Lease was entered into, neither he, nor the Respondent, nor Knight Frank were aware of the presence of the Coffee Service. Mr Guttridge says that at no stage prior to the entering of the Caffissimo Lease, nor since the entering into of the Caffissimo Lease, has the Respondent or Knight Frank been requested for approval, nor has the Respondent granted approval, for the Coffee Service to operate. Mr Guttridge says that although the approved fitout plan for the Office Area shows a tea preparation/breakout area, this is the standard term for a 'lunch room', and is not indicative of a facility such as the Coffee Service being allowed to operate. He further explained that the area where the Coffee Service is located is not visible from outside the Building and that the area from where the Coffee Service operates cannot be accessed without the approval of Monadelphous. He says he only became aware of the existence of the Coffee Service in around March 2011, after the Caffissimo Lease had been entered into. Mr Guttridge explained that the reason the Respondent did not offer the Applicant exclusive rights to operate its business service was not because he was aware of the Coffee Service, but because he had been aware at the time of the negotiations that a book café had expressed an interest to take up a tenancy, and the other tenancies in the Retail Area were also selling some products for example, coffee that overlapped with the products of the Caffissimo. 33 Mr Robbie Doyle is a business broker within the sales division of Knight Frank. Although Mr Doyle is currently employed by Knight Frank, at the time the Caffissimo Lease was entered into, he worked as an independent business broker and represented the Caffissimo franchise on a 'success only' basis. Part of his scope of works included finding suitable franchisees and locations for new Caffissimo outlets. Mr Doyle said he liaised with Mr Guttridge about the availability of retail space in the Building. Although Mr Doyle had intimate knowledge of the negotiations leading to the Caffissimo Lease, and particularly the desire of the Applicant to secure exclusive trading rights, he had no knowledge of the existence of the Coffee Service prior to the Caffissimo Lease being executed. (Page 16)
34 Mr John Collings is the Facilities Manager of Monadelphous. Mr Collings says that Monadelphous started relocating staff to the Office Area around July 2010. It was at this time, around mid July 2010, that Monadelphous arranged for Venn to set up the Coffee Service so as to cater for the needs of the Monadelphous staff. Mr Collings says Monadelphous did not seek, nor did it receive, approval from the Respondent to establish the Coffee Service. The Coffee Service is very basic and no planning approval was required or sought. Mr Collings says Monadelphous has legal advice to the effect that the Coffee Service falls within the terms of the Monadelphous Lease. Mr Collings says that there were no plans, documentation or contract which outlined the fitout or the conditions of operation of the Coffee Service. Mr Collings says Monadelphous submitted a registration of the Coffee Service with the Town of Victoria Park on 10 October 2011 after an inspector from the Town had visited and inspected the Coffee Service. Mr Collings says that the Respondent had been aware of the Coffee Service prior to 19 July 2011, but he does not know when the Respondent first became aware of the Coffee Service. 35 Mr Ian Smith was the Facilities Manager of the Respondent at the time the Coffee Service commenced operations and when the Caffissimo Lease was entered into. He says he had no knowledge of the Coffee Service at the time the Caffissimo Lease had been entered into, and only visited Level 3 of the Office Area when he was accompanied by a representative of Monadelphous for purposes of maintenance of the airconditioner and to inspect problems with the windows. Mr Smith says that although he had seen people having coffee in the breakout area on Level 3, he did not notice the Coffee Service. Mr Smith says that no one from the Respondent, Knight Frank or Monadelphous discussed the Coffee Service with him prior to the date the Caffissimo Lease was entered into, and he did not undertake any works or maintenance in regard to the facilities or equipment of the Coffee Service. Mr Smith says the existence of the Coffee Service was not in the line of his duties; the existence of the Coffee Service at the time of the parties entering into the Caffissimo Lease had not been mentioned to him; and the existence of the Coffee Service 'wasn't even on my radar'. 36 Ms Jade Rubino, a director of Venn, is responsible for the operation of the Coffee Service. Ms Rubino says that she commenced the operation of the Coffee Service at the request of Monadelphous. Her father is the Managing Director of Monadelphous. Ms Rubino says that at the time she commenced the operations, there were no other coffee facilities in close proximity to the Building and she offered the service to staff of (Page 17)
Monadelphous at the request of Monadelphous. Ms Rubino says the Coffee Service commenced operation in mid July 2010. She says there were no plans or sketches of the Coffee Service and no approval was sought by Venn from Knight Frank or the Respondent for the Coffee Service to operate. Ms Rubino says she would continue to operate the Coffee Service for as long as Monadelphous requested it. Ms Rubino says there is no sublease between Monadelphous and Venn in regard to the Coffee Service and the registration form submitted to the Town of Victoria Park was submitted by Monadelphous.
Consideration 37 The evidence before the Tribunal is overwhelming against the belief held by the Applicant that the Respondent or Knight Frank bore any knowledge of the existence of the Coffee Service at the time the Caffissimo Lease was entered into. 38 The Tribunal accepts that Mr Tubic is sincere in his belief that the Respondent or Knight Frank had been aware of the Coffee Service, or should have been aware of the Coffee Service, prior to the Caffissimo Lease being entered into. The Tribunal does not, however, find that the evidence before it supports the belief held by Mr Tubic or Ms Nidagal. 39 Ms Rubino's evidence does not assist to determine when the Respondent became aware of the existence of the Coffee Service, but it is clear, however, that Ms Rubino had no direct dealings about the establishment of the Coffee Service with the Respondent or Knight Frank prior to the Caffissimo Lease being entered into. In fact, it appears that, up to the hearing, there had been no direct communication between the Respondent and Ms Rubino about the existence or the continued presence of the Coffee Service, and Ms Rubino never sought approval from the Respondent or from the Town of Victoria Park for the Coffee Service to be established. 40 The Tribunal does not accept the contention by the Applicant that, since Mr Rene Bak, Building Manager, allegedly utilised the Coffee Service sometime in September 2011 so as to establish what range of products were on offer at that stage, such a visit by Mr Bak is evidence that the Respondent had been aware of the Coffee Service prior to the Caffissimo Lease being entered into more than 12 months prior, or that it was easy to access Level 3. The Tribunal also notes that Mr Bak was not called to give evidence to explain the circumstances of his visit and the way in which he obtained access to Level 3. (Page 18)
41 The Tribunal accepts the evidence of Messrs Cameron, Guttridge, Abbott, Doyle and Smith that none of them were aware of the existence of the Coffee Service prior to the Caffissimo Lease being entered into. The Tribunal rejects the interpretation given by Mr McQueen to the evidence of Mr Smith when Mr McQueen says that 'at least in my interpretation of the transcript is that he [Mr Smith] was aware of it [Coffee Service] in July [2010]'. There is nothing in the evidence of Mr Smith to support a conclusion that Mr Smith was aware of the Coffee Service prior to the parties entering into the Caffissimo Lease. Mr McQueen, in his questioning of Mr Smith, suggests that Mr Smith 'walked past the café every two or three weeks', but those are not the words of Mr Smith. Those are the words of Mr McQueen. In fact, Mr Tubic, in his evidence, says that the references Mr Smith allegedly made to him about having a coffee at Level 3 were made after the Caffissimo commenced operations. There is no evidence by Mr Tubic that Mr Smith had told him that he (Mr Smith) had been aware of the Coffee Service prior to the Caffissimo Lease being entered into. Mr Smith was very firm and credible, regardless of very intense examination by Mr McQueen, that he (Mr Smith) had not been aware of the Coffee Service prior to the Caffissimo Lease being entered into. A proper reading of Mr Smith's evidence shows that he recalls visiting the Level 3 area, but that his visit was for certain maintenance work that had nothing to do with the Coffee Service. Mr Smith says, and the Tribunal accepts his evidence, that although he recalls seeing people drink coffee in the breakout area on Level 3, at no stage did he witness or take note of the Coffee Service. 42 Each of the witnesses (Messrs Cameron, Guttridge, Abbott, Doyle and Smith) only became aware sometime after the Caffissimo Lease had been entered into of the existence of the Coffee Service. These witnesses were extensively crossexamined by Mr McQueen and the Tribunal. Their evidence about their knowledge or lack of knowledge of the Coffee Service was credible, convincing and consistent with all the other evidence before the Tribunal. 43 The Tribunal also does not accept that the letter from Mr Collings to Mr Abbott, dated 19 July 2011, is supportive of the contention that Mr Abbott had been aware of the existence of the Coffee Service prior to the parties entering into the Caffissimo Lease. Mr Collings says in the letter 'as you are aware, this facility has been established for a year now …'. This does not suggest, nor did Mr Collins say in oral evidence, that the Respondent or Knight Frank actually knew about the Coffee Service at the time the Caffissimo Lease was entered into. (Page 19)
44 In light of all evidence before the Tribunal, the Tribunal finds that neither Knight Frank nor the Respondent knew at the time the Caffissimo Lease was entered into of the existence of the Coffee Service. This finding is supported by the following: 1) The floor plan for Level 3 where the Coffee Service is located bears no reference to the Coffee Service. The floor plan only refers to a 'breakout' area which is consistent with lunch areas associated with offices. 2) Neither Monadelphous nor Venn had either requested or received approval from the Respondent or Knight Frank to establish or operate the Coffee Service prior to the Caffissimo Lease being entered into. 3) There is no evidence of any approval or permission sought prior to the Caffissimo Lease being entered into by the Respondent, Monadelphous, Venn or Knight Frank from the Town of Victoria Park or from any other relevant authority for the Coffee Service to operate. 4) The Monadelphous Lease does not contain any reference to the establishment of the Coffee Service. It is not disputed, with the benefit of hindsight, that the Coffee Service had been in operation prior to the parties entering into the Caffissimo Lease, but neither the Respondent nor Knight Frank had been aware of the Coffee Service at the time the Caffissimo Lease had been entered into. 5) The Tribunal accepts the evidence that after Monadelphous had taken possession of the Office Area, access to the Office Area in general, and Level 3 in particular, was strictly controlled, and neither the Respondent nor Knight Frank could access the Office Area without the approval of, and in the company of, a staff member of Monadelphous. This enhances the credibility of evidence that neither the Respondent nor Knight Frank had been aware of the Coffee Service at the time the Caffissimo Lease was entered into. 6) The Coffee Service is not visible from outside the Office Area and the service it offers is only available to office workers in the Office Area. There is no evidence (Page 20)
of the Respondent, any representative of the Respondent or Knight Frank becoming aware, prior to the parties entering into the Caffissimo Lease, of the existence of the Coffee Service by viewing it from the outside of the Building. 7) There is no documentary evidence before the Tribunal of communication between the Respondent and Monadelphous to support the contention that the Respondent or Knight Frank had knowledge of the existence of the Coffee Service prior to the Caffissimo Lease being entered into. 45 The Tribunal therefore finds that neither the Respondent nor its agent, Knight Frank, had been aware of the Coffee Service at the time the Caffissimo Lease was entered into.
2.2 Did the Respondent fail to discharge its statutory duty? 46 Now that the Tribunal has found that neither the Respondent nor Knight Frank had been aware of the existence of the Coffee Service at the time the Caffissimo Lease was entered into, the question that remains is whether the Respondent failed to discharge its duties pursuant to s 6(1)(b) of the CT Act. 47 The answer to this question rests on two contentions from the Applicant. Firstly, the Applicant says that it had been guaranteed exclusive rights to operate a café in the Building, and secondly, the Applicant says that s 6(1)(b) of the CT Act applies to the Caffissimo Lease even if the Respondent only became aware of the Coffee Service after the Caffissimo Lease had been entered into. 48 The Tribunal rejects both of these contentions. 49 The Tribunal will deal with each of the contentions separately. 50 The evidence before the Tribunal is overwhelming against the contention of Mr Tubic that exclusive rights were given or promised by the Respondent or Knight Frank to Mr Tubic. The suggestion by Mr Tubic that he was informally assured of the Caffissimo having exclusive rights, or that the Caffissimo would not face competition from within the Retail Area, is not supported by the evidence before the Tribunal. 51 The reasons for this finding are as follows: (Page 21)
1) The Caffissimo Lease does not contain any reference to exclusive rights of the Caffissimo. 2) The repeated requests by Mr Tubic prior to the Caffissimo Lease being entered into to be granted exclusive rights were expressly and emphatically rejected by the Respondent and Knight Frank. All the documentary evidence before the Tribunal supports this conclusion. 3) The evidence by Mr Tubic that he was given an informal assurance by someone in Knight Frank (Mr Tubic does not identify in his statement who the person is who purportedly gave him the assurance, but it could only have been Mr Guttridge since he did the negotiation on behalf of the Respondent) that the Caffissomo would be granted exclusive rights, or that no competing uses would be allowed in the Retail Area, is not supported by any documentation or any evidence other than that of Mr Tubic. In fact, the file note dated 20 August 2010 produced to the Tribunal by Mr Guttridge supports Mr Guttridge's evidence; namely, that he left Mr Tubic and Ms Nidagal in no uncertainty that exclusive rights would not be granted or guaranteed. The Tribunal also finds it incredulous that if such an informal assurance of exclusivity had been given, Mr Tubic would not inform his lawyer immediately of it. The Tribunal rejects the suggestion of Mr McQueen that the file note may not have been made at the time or shortly after the conversation between Mr Guttridge and Mr Tubic. In contrast to the evidence of Mr Guttridge, Mr Tubic did not confirm by way of writing or file note, or in any other way the 'assurance' of exclusivity purportedly given to him by Mr Guttridge or any other representative of the Respondent. In light of the conflicting evidence of Mr Tubic and Mr Guttridge, the Tribunal prefers the evidence of Mr Guttridge. 4) The Tribunal does not accept the evidence of Mr Tubic that he asked Mr Guttridge what tea and coffee facilities were in the Office Area, and that the reply of Mr Guttridge was that only the 'usual' facilities existed. Mr Tubic made no mention of this conservation in his (Page 22)
witness statement; no reference is made in the Applicant's statement of issues, facts and contentions about the discussion; and Mr Tubic admits that he did not mention the discussion to his lawyers or anyone else until the question was put to him during crossexamination. The Tribunal accepts that with the benefit of hindsight such a question should have been put to the Respondent, but the Tribunal finds that it was not put. 5) The existence of other tenancies in the Retail Area that may sell products that overlap with those of Caffissimo were disclosed to and accepted by Mr Tubic on behalf of the Applicant. The contention by Mr McQueen that the principal reason the Applicant signed the Caffissimo Lease was because an informal assurance of exclusivity had been given is simply not supported by the evidence before the Tribunal. 52 The Tribunal therefore rejects the contention of the Applicant that some form of informal assurance of exclusive rights had been promised to it by the Respondent or Knight Frank. 53 Mr McQueen further contends that the CT Act imposes a form of strict liability onto the Respondent, according to which the Respondent could be held liable for a breach of s 6(1)(b) of the CT Act, even if neither the Respondent nor Knight Frank had been aware, at the time the Caffissimo Lease had been entered into, of a particular fact or information that otherwise would have had to be disclosed to the Applicant. 54 The Tribunal does not accept this reasoning by Mr McQueen. 55 The reasons for not accepting Mr McQueen's contentions are as follows: 1) There is no suggestion in the wording of s 6(1)(b) of the CT Act to support an interpretation that a regime of strict liability is applicable so as to hold the Respondent liable for failing to disclose information that the Respondent was not aware of at the time the Caffissimo Lease had been entered into. The Tribunal does not accept Mr McQueen's contention in his closing submissions that 'the fact that it [Coffee Service] wasn't disclosed because there was no knowledge of it, it said in my submission, is irrelevant …'. The knowledge of the Respondent and its (Page 23)
agent, Knight Frank, at the time when the Caffissimo Lease was entered into is indeed relevant, since the Respondent could not be expected to disclose information to the Applicant which it (the Respondent) did not possess or was not aware of. 2) The certainty and transparency that are sought to be achieved by s 6(1)(b) of the CT Act, namely, where all known and relevant information is disclosed to a prospective tenant, would be undermined if the Respondent could be held liable for the failure to disclose something to the Applicant that neither the Respondent nor its agent, Knight Frank was aware of at the time the Caffissimo Lease was entered into. There is no evidence before the Tribunal to suggest that the Respondent closed its eyes on purpose for what was going on in the breakout area on Level 3, or that it provided to the Applicant false or misleading information. 3) There is no suggestion in the second reading debates that gave rise to the CT Act to support a contention that Parliament intended for s 6(1)(b) of the CT Act to be interpreted in a manner suggested by Mr McQueen. Ms Henderson, the Minster for Consumer Protection, introduced the second reading of the Commercial Tenancy (Retail Shops) Agreements Amendment Bill by saying: The cornerstones of this legislation are the provisions which facilitate the exchange of information. This is particularly so for information from landlord to tenant during the initial stages of lease negotiations. (Hansard page 2582, 21 September 1989) In supporting the bill, Mr Catania said as follows about the requirements to provide a disclosure statement to tenants: These amendments provide for the disclosure statements, which landlords are required to make, to be full and accurate so [a] tenant, when negotiating leases, can be fully informed of their requirements. (Hansard page 3279, 4 July 1990) (Page 24)
These references clearly support the interpretation preferred by the Tribunal, namely, that relevant information that was known to the Respondent at the time the Caffissimo Lease was entered intoshould have been declared in the disclosure statement. 4) The Tribunal was not referred to any authorities where Mr McQueen's proposed interpretation of s 6(1)(b) of the CT Act had been adopted by any court or tribunal. The Tribunal accepts the general categorisation of the CT Act, and the provision of a disclosure statement in particular, as of a 'beneficial' nature (AB v State of Western Australia [2011] HCA 42) so as to offer protection to tenants. Such a general beneficial purpose of the CT Act does not, however, support the specific conclusion the Applicant attempts to make. Regardless of the beneficial nature of the CT Act, the Tribunal must interpret the provisions of the CT Act on the basis of acceptable statutory principles, and the clear wording of s 6(1)(b) of the CT Act does not support the interpretation proposed by Mr McQueen. 5) The Tribunal accepts that s 6(1)(b) of the CT Act places a statutory obligation on a landlord not to provide false or misleading information to a prospective tenant, but s 6(1)(b) of the CT Act does not refer to information that is withheld from a landlord, or information that only becomes available to the landlord after a lease had been entered into, or information that forms part of the ancillary use of another tenancy. 6) The Respondent in this proceeding cannot be held liable for omitting to give to the Applicant information about the Coffee Service that was not known to the Respondent at the time the Caffissimo Lease was entered into. 56 In conclusion, the Respondent cannot be regarded as having provided false or misleading information if, at the time the Caffissimo Lease was entered into, it was not aware of the existence of a particular fact, or information about the Coffee Service was not at its disposal. 57 The Tribunal's finding in regard to issue 2 is therefore that: (Page 25)
a) neither the Respondent nor Knight Frank were aware of the existence of the Coffee Service at the time the Caffissimo Lease was entered into; b) the Respondent is not liable for a breach of s 6(1)(b) of the CT Act for the reason that it only became aware of the existence of the Coffee Service after the Caffissimo Lease had been entered into; and c) neither the Caffissimo Lease nor any representation made by the Respondent or Knight Frank to the Applicant or to Mr Tubic gave or promised the Applicant any exclusive trading rights. 58 The issue of which much was made in written and oral submissions, namely, if the existence of the Coffee Service had been known to the Respondent at the time the Caffissimo Lease was entered into, whether the Respondent was obligated, pursuant to s 6(1)(b) of the CT Act, to disclose to the Applicant additional information than that the Office Area was for 'office and ancillary purposes', is, in light of the above findings, moot and not for this Tribunal to determine.
3. Whether the disclosure statement provided to the Applicant contained false or misleading information 59 In light of the assessment of evidence above under issue 2, the Tribunal finds that the disclosure statement that formed part of the Caffissimo Lease did not contain any false or misleading information. The reasons for this finding are: a) The Tribunal does not accept the evidence of Mr Tubic that the Respondent or Knight Frank made a promise or gave an undertaking or assurance that the Applicant would enjoy exclusive rights. b) The information contained in the Caffissimo Lease and the disclosure statement was an accurate reflection of the knowledge held by the Respondent and Knight Frank at the time the Caffissimo Lease had been entered into. c) Neither the Respondent nor Knight Frank had been aware at the time the Caffissimo Lease was entered into of the existence of the Coffee Service. (Page 26)
d) The fact that the existence of the Coffee Service became known to the Respondent and to Knight Frank after the Caffissimo Lease had been entered into does not constitute a breach of the obligations of the Respondent pursuant to s 6(1)(b) of the CT Act.
4. Whether the Respondent has caused or failed to make reasonable efforts to prevent or remove a disruption to trading within the Retail Area, which disruption has caused a loss of profits to the Applicant 60 The Applicant contends that the Respondent is acting in breach of s 14, and particularly s 14(b) and s 14(c), of the CT Act by allowing the Coffee Service to continue its operations, and thereby the Respondent causes or allows a disruption which, in turn, causes a loss of profit to the Applicant. The Applicant says that the failure by the Respondent to terminate the Coffee Service, or substantially alter or inhibit the flow of customers to the Caffissimo, causes a disruption within the Retail Area that, in turn, causes a loss of profits to the Applicant. 61 The contentions of the Applicant are rejected. 62 The reasons for the finding are as follows: 1) The parties referred to various judgments in which courts made decisions about competition between tenancies or other uses of a tenancy within a retail context. None of the decisions, however, deal with a situation as that presented in this proceeding. In the matter of Fernandes and Lam(1999) ANZ ConvR 445, the court dealt with the question of whether the competing use of a tenancy within the same centre fell within the scope of the particular lease, but in that matter, the dispute was not between a use of an office area in a way that might impact on a tenancy in the retail area. The question in this proceeding does not relate to what can be generally described as 'competition' between two retail tenancies within the same retail shopping centre. This proceeding concerns an activity outside of the Retail Area that may impact on a shop situated within the Retail Area. In this proceeding before the Tribunal, there has been no determination that the Coffee Service is not ancillary to the Office Area, and this Tribunal is not called upon to make such a determination. (Page 27)
There are contentions before the Tribunal that the Coffee Service is in breach of the Monadelphous Lease, but no such finding has been made by a competent authority, and the Respondent's position is that the Coffee Service is lawful. The S&A Gallo Pty Ltd v Hollowood Pty Ltd[2012] SASC 176 decision is also not of direct relevance to this proceeding since it concerned a dispute in regard to conduct within the same retail centre. Although the Applicant relies on Lizzio v Ryde Municipal Council [1983] HCA 22 to conclude that the Coffee Service is not incidental use of the Office Area, there has been no finding of a court or tribunal to support the contention of the Applicant, and this proceeding is not required to make a determination in regard to the lawfulness of the Coffee Service under the Monadelphous Lease. This proceeding does not involve the Monadelphous Lease; Monadelphous is not a party to the proceeding; and the Respondent is of the view that the Coffee Service, in its current form, is not in breach of the Monadelphous Lease. 2) Section 14 of the CT Act does not operate in regard to a factual matrix as those before the Tribunal in this proceeding, where staff of the Office Area utilise the Coffee Service in the breakout area on Level 3 of the Office Area. The existence of the Coffee Service has not been found by any court or tribunal to be unlawful; it has not been found that the Coffee Service is in breach of any town planning scheme or health regulation; the Coffee Service is located outside the Retail Area within the Office Area; and the Respondent is not taking any action or failing to take action in a manner that meets the requirements of s 14(b) or s 14(c) of the CT Act. The Applicant rests its contentions on the assumption that the Coffee Service is unpermitted, a breach of the Monadelphous Lease, and/or a breach of town planning approvals or of health regulations. None of those contentions has been determined by a court or tribunal or are justified in light of the facts before the Tribunal. The Tribunal is not satisfied that the Respondent has taken any steps, or failed to take any steps, in regard to the Coffee Service that brings the Respondent's actions within the ambit intended by s 14 of the CT Act. (Page 28)
The Tribunal deals below with the question of whether the Respondent is acting unconscionably by allowing the Coffee Service to operate. 3) The Respondent has not taken any action, nor did the Respondent fail to take any action, that would 'substantially alter or inhibit the flow of customers to the retail shop'. The Tribunal accepts that some of the staff of Monadelphous who utilise the services of the Coffee Service may, in the absence of the Coffee Service, visit the Caffissimo. In a similar vein, staff may choose to make their own coffee or utilise the vending machine in the breakout area on Level 3 of the Office Area. That is a matter of choice of each individual and does not, by itself, constitute an action on the part of the Respondent to 'substantially alter or inhibit the flow of customers' to the Caffissimo. 4) The evidence before the Tribunal is that the Coffee Service is situated on Level 3 of the Office Area. There is no restriction on staff who work in the Office Area to exit the Office Area so as to visit the Caffissimo. To some staff it may be more convenient to stop at Level 3 to make their own coffee, eat a sandwich or to utilise the services of the Coffee Service, but there is no evidence before the Tribunal to support the contention that the Respondent is taking any action or allowing any activity to disrupt or to diminish the flow of potential customers to the Caffissimo in a manner foreshadowed by s 14 of the CT Act. 5) The Respondent had not taken any action to prevent staff members of Monadelphous visiting the Caffissimo; there is no evidence to suggest that Monadelphous had taken action to prevent the staff from utilising the Caffissimo; the Coffee Service is not available to members of the public; and members of the public are not prevented in any way to visit the Caffissimo. 6) None of the actions, or failure to act, by the Respondent in regard to the Coffee Service fall within the ambit of s 14(b) or s 14(c) of the CT Act, according to which the Respondent has taken action that substantially alters or (Page 29)
inhibits the flow of customers to the Caffissimo or causes or fails to make reasonable efforts to prevent or remove any disruption to trading 'within the centre'.
5. Whether the Respondent has acted unconscionably by not taking steps to stop the Coffee Service from operating 63 The Applicant contends that the conduct of the Respondent, by allowing the Coffee Service to continue its operations, is unconscionable. The Applicant says that the Respondent should take the necessary legal action, including termination of the Monadelphous Lease if necessary, to prevent Monadelphous from allowing the Office Area to be used for a purpose that is not 'ancillary' to office use and which use competes directly with the Caffissimo. 64 The Tribunal does not accept the contention that the conduct of the Respondent in regard to Monadelphous or the Coffee Service is unconscionable. 65 The reasons for this finding are: 1) In the events leading to the parties entering into the Caffissimo Lease, none of the conduct of the Respondent fit the indicia of unconscionable conduct as per s 15C of the CT Act. The negotiations were at arms length. Each party had the opportunity to make proposals so as to maximise the benefits it wished to secure under the Caffissimo Lease. The Applicant had assistance from legal representatives. The Applicant was successful in negotiating various amendments to the draft lease. The Applicant's directors, Mr Tubic and Ms Nidagal, are both financially qualified and employed in financial positions (refer to the email of 20 August 2010 in which Ms Nidagal set out their financial credentials to Mr Guttridge). The Applicant had the assistance of the Master Franchisors of Caffissimo, Mr and Mrs Barr: refer to the assessment done in the decision of Strata Plan 70672 v Roman Catholic Church[2011] NSWSC 973 of the indicia of unconscionable conduct. None of the conditions in s 14C(a) s 14C(n) of the CT Act were applicable to the events leading up to the parties entering into the Caffissimo Lease. (Page 30)
2) The Tribunal accepts that s 15C of the CT Act does not constitute a closed list of indicia of unconscionable conduct. Unconscionable conduct is found in the facts of a particular dispute and cannot be defined with absolute certainty. It has been said that unconscionable conduct is recognised when it presents itself (Barbcraft Pty Ltd v Goebel Pty Ltd [2003] VCAT 1700), but caution has to be demonstrated so as to not classify any disagreement between landlord and tenant as a form of unconscionable conduct on the part of the landlord. For unconscionable conduct to be found, there must be a high standard of moral obloquy; otherwise it could, figuratively speaking, become an open door for litigation outside the terms of the lease: refer, for example, to AG v NSW v World Best Holdings Pty Ltd [2005] NCWCA 261 and Murphy v Fremantle Markets Pty Ltd[2009] WASAT 84. The Tribunal must therefore consider the entirety of the conduct of the Respondent to determine whether the Respondent's conduct falls within the scope of unconscionable conduct. While the Tribunal may sympathise with the position in which the Applicant finds itself, there is insufficient evidence before the Tribunal to support a finding of unconscionable conduct on the part of the Respondent in regard to the ongoing presence of the Coffee Service. The Respondent, through Knight Frank, had made several attempts to close down the Coffee Service, but the Respondent has now concluded that the Coffee Service in its current form is consistent with the 'ancillary use' of the Office Area. In short, the Respondent made reasonable attempts to have the Coffee Service closed down, but for now it seems the Respondent has made a decision not to commence legal action in light of legal advice it received and in consideration of the commercial relationship between the Respondent and Monadelphous. These actions or decisions of the Respondent do not support a finding of unconscionable conduct. 3) None of the contentions by the Applicant namely, that the Coffee Service constitutes a breach of the Monadelphous Lease; a breach of the town planning approval for the Building since the Coffee Service is not (Page 31)
'ancillary' to the office use; and/or a breach of the Food Act 2008 (WA) has been tested or determined by any court or tribunal. Although s 15C and s 15F of the CT Act can be described as 'beneficial provisions', it does not mean that the facts in these proceedings fall within the ambit of what can be regarded as unconscionable conduct. The core of the Applicant's contentions is based on the assumption that the Coffee Service is not an ancillary use to the Office Area. Mr Tubic says that, in his view, the Coffee Service required 'development approval'. Mr Tubic does not, however, offer any evidence to substantiate this claim. Mr Cameron and Mr Collings are, on the other hand, of the view that the Coffee Service is entirely lawful and consistent with the Monadelphous Lease. Mr Cameron's evidence is supported by the contentions of Mr Hotchkin. The Tribunal is, however, not called upon to make a final determination of the question about the lawfulness of the Coffee Service since that is a matter that may be, ultimately, for the Respondent and Monadelphous or other regulating authorities to determine. The Tribunal notes, however, that the Town of Victoria Park has inspected the Coffee Service; notification of the Coffee Service has been given to the Town of Victoria Park; no complaint has been lodged in regard to the Coffee Service pursuant to s 211(a) of the Planning and Development Act 2005 (WA); and no action has been taken against the Respondent or Monadelphous pursuant to the Health Act 1911 (WA). The contention of the Applicant that the Coffee Service is unlawful is therefore nothing but an assumption. 4) The Tribunal does not accept the contention of the Applicant that the Respondent has been turning a blind eye to the Coffee Service or has not been active to enforce the terms of the Monadelphous Lease. The overwhelming evidence before the Tribunal is that representatives of Knight Frank took immediate steps when they became aware of the Coffee Service. The evidence is that representatives from Knight Frank discussed the Coffee Service with Mr Collings. Although Mr Collings says that he did not give any assurance to (Page 32)
Knight Frank's Mr Abbott that the Coffee Service would terminate, the Tribunal accepts the evidence of Mr Abbott that he was told the Coffee Service would close down as soon as the Caffissimo became operational. Mr Abbott's evidence is supported by the email and other exchanges between Knight Frank and the Applicants, as well as between Knight Frank and Monadelphous. Mr Abbott explained in great detail the assurances that were given to him by Mr Collings while, in contrast, Mr Collings appeared evasive and less than forthcoming when he was crossexamined. The Respondent did not leave the matter there. When it appeared that the Coffee Service was not closing down, a breach of lease notice was sent to Monadelphous. Note, for example, the email from Mr Cameron to Mr Abbott dated 7 July 2011, and the subsequent breach of lease letter dated 8 July 2011 from Mr Abbott to Mr Collings. Mr Collings replied on 19 July 2011, saying that the Respondent did not agree that Monadelphous was in breach of the Monadelphous Lease and that the Coffee Service was permissible as an ancillary use of the Office Area. When it appeared that Monadelphous was not heeding the breach of lease notice, Knight Frank handed the dispute to the Respondent for its representatives to personally pursue the matter with Monadelphous. The Respondent's Mr Cameron wrote to Monadelphous on 12 September 2011, saying that the Coffee Service was in breach of the Monadelphous Lease since it constitutes a 'separate business' within the Office Area. No further action was taken by the Respondent pursuant to the letter of 12 September 2011. The decision of the Respondent not to take further legal action cannot be categorised as being 'unconscionable'. The Respondent has had legal advice to the effect that the Coffee Service does not necessarily breach the Monadelphous Lease; the Respondent has decided that it is not in its commercial interests to engage in litigation against Monadelphous; and the Town of Victoria Park has not taken any steps to close the Coffee Service down. These are all valid legal and commercial considerations and cannot be classified as 'unconscionable conduct'. The Tribunal accepts that an (Page 33)
argument can be made that a landlord which refuses to intervene in an unlawful activity by a tenant that directly impacts on another tenant may be held to act unconscionably, but that does not apply in this case. 5) The conduct of the Applicant in the negotiations giving rise to the Caffissimo Lease should also be considered, particularly, whether the Applicant's business model and due diligence in regard to the feasibility of establishing the Caffissimo in the Building were adequate. The Applicant had the benefit of legal advice throughout the negotiations, as well as support from the Master Franchisors of Caffissimo. The Applicant's business model was based on the assumption that the Caffissimo's main clientele would originate from the Office Area, and the Applicant assumed there would only be limited staff amenity facilities in the Office Area. In short, the Applicant knew that the success of the Caffissimo depended on the assumption that the staff from the Office Area would not have any other option but to utilise the Caffissimo services. Nonetheless, the Applicant did not specifically find out what type of facilities would be available in the breakout area/s of the Office Area. The Applicant did not seek to inspect the breakout area/s. The Applicant did not seek any written assurance from the Respondent as to what was allowed or not allowed in the breakout area/s as 'ancillary use', and the Applicant did not enclose in the Caffissimo Lease any protection against an eventuality such as the Coffee Service being established in the Office Area. The evidence before the Tribunal is that modern offices often provide quite extensive tea and meal facilities and services to their staff. Given the corporate knowledge of Mr Tubic and MsNidagal, and in particular the Master Franchisors, the Applicant may have taken steps to better protect and secure its position.
Conclusion 66 In conclusion, the Tribunal finds as follows: a) the tenancy of the Applicant forms part of a retail shopping centre; (Page 34)
b) the Respondent had not been aware at the time the Caffissimo Lease between the Applicant and Respondent was entered into of the existence of the Coffee Service; c) the disclosure statement that formed part of the Caffissimo Lease did not contain false or misleading information; d) as a result of the finding in b) and c) above, there is no need for the Tribunal to consider the question of whether the Respondent had a duty, if it had known about the Coffee Service at the time the Caffissimo Lease had been entered into, to enclose reference to the Coffee Service in the disclosure statement; e) the contention of the Applicant that the Respondent should be held liable for failing to disclose the existence of the Coffee Service to the Applicant, even though the Respondent only became aware of the operation of the Coffee Service after the Caffissimo Lease had been entered into, is rejected; f) the Respondent does not obstruct the flow of business to the Applicant by allowing the Coffee Service to operate; and g) the conduct of the Respondent after it became aware of the existence of the Coffee Service is not unconscionable. The application must therefore be dismissed. Orders (Page 35)
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