Saville Hotel Group Pty Ltd v Michael John Parsons (Civil Disputes)
[2010] ACAT 35
•7 June 2010
ACT CIVIL & ADMINISTRATIVE TRIBUNAL
SAVILLE HOTEL GROUP PTY LTD V MICHAEL JOHN PARSONS (Civil Disputes) [2010] ACAT 35
AA 9 of 2009
Catchwords: Commercial lease in serviced apartment complex - option to review rent - valuation lower than initial offer - effect on subsequent options - comparison with other lessees - Trade Practices Act - whether compliance with terms of lease amounts to unconscionable conduct.
Legislation: ACT Civil and Administrative Tribunal Act 2008 (ACT)
ss 48(1), 48(2), 79 and 82(b)
Case law: Hurley v McDonald's Australia Ltd [1999] FCA 1728
Tribunal:Mr C G Chenoweth, Acting Presidential Member
Mr G Lunney SC, Member
Date of Orders: 7 June 2010
Date of Reasons for Decision: 7 June 2010
AUSTRALIAN CAPITAL TERRITORY )
CIVIL & ADMINISTRATIVE TRIBUNAL ) AA 9 of 2009
BETWEEN: SAVILLE HOTEL GROUP PTY LTD
Appellant
AND: MICHAEL JOHN PARSONS
Respondent
TRIBUNAL:Mr C G Chenoweth, Acting Presidential Member
Mr G Lunney SC, Member
DATE: 7 June 2010
ORDER
The Tribunal’s order of 7 May 2009 is set aside.
………………………………..
Mr C G Chenoweth
Acting Presidential Member
REASONS FOR DECISION
This is an appeal from a decision of the Tribunal given on 7 May 2009.
The proceedings from which the appeal came had been commenced in the Small Claims Court of the Australian Capital Territory on 12 December 2008. The Claim stated that the grounds of application were:
‘Rental for units in the Mantra on Northbourne complex, managed under lease by the Saville Hotel Group Pty Ltd, trading as Mantra on Northbourne, is not being paid on an equitable basis’.
‘My unit, Unit 66 which attracts 65 entitlement points, is receiving $975.00 per year less than units with identical entitlement points.’
‘This underpayment is on a continuing basis. This claim is for the period 19 October 2007 to 30 November 2008 inclusive.”
- While the claim by the respondent commenced in the Magistrates Court the matter was properly before the Tribunal for the reasons set out in the previous decision. An appeal therefore is available under section 79 of the ACT Civil and Administrative Tribunal Act 2008 ("ACAT Act").
- The appeal was dealt with under section 82 (b) of the ACAT Act as a review of that part of the decision that determined that the appellant had been guilty of unconscionable conduct in failing to pay to the respondent a greater amount by way of rent for the respondent's premises.
- The facts at the hearing were generally not in dispute.
- The respondent, (the applicant in the proceedings at first instance), had purchased a unit in a block of units on Northbourne Avenue, in Canberra. The unit, with other units, was managed by the appellant, and rented out on a short term basis to third parties. There was a lease agreement between the appellant and the respondent.
- The Lease was initially for 10 years expiring on 18 October 2008, with three further terms of 5 years each. The Lease provided for a rental to be paid in accordance with a Schedule to the Lease. The Schedule provided for regular reviews of the rental. These were to occur on the 3rd, 6th, and 9th anniversaries of the date of the commencement of the Lease on 18th October 2001, 2004, and 2007.
- Prior to 18 October 2004, the appellant wrote to the respondent regarding the review, proposing that the rent remain unchanged for the period commencing
19 October 2004 until the time of the next review.
- In response, the respondent wrote to the appellant objecting to fixing the rent on that basis and seeking a valuation pursuant to the Schedule. The Schedule provided that the rent for the unit calculated in accordance with the valuation would be the rent for the forthcoming rental period commencing on
19 October 2004.
- The valuation was carried out and resulted in a valuation of the annual rent for the respondent’s apartment which was $895.00 per annum less than the amount it would have been had he agreed to the proposal to keep the rental unchanged.
- Then in 2007, the appellant's General Manager wrote to all tenants advising of a further rent review. It was a standard letter, however, the figures varied from tenant to tenant.
- The letter which was written to the respondent was tendered in evidence and became exhibit “1”. The relevant part of it reads as follows:
“We have conducted a review of the current market conditions in Canberra relevant to the hotel and serviced apartment sector. As a result of our review and in accordance with Item 5(b) of the Schedule to the Lease, we propose that the Reviewed Rent to apply from 19th October 2007 increase to $14,406.00 per annum. This represents a significant increase of 18.5% over the current rent level.”
13.The letter was addressed to the respondent and was headed as follows:
RE: Lessee's Notice of Reviewed Rent
Apartment No. 513 being Unit No. 66 on Units Plan 1704 (“Apartment”) Located at 84 Northbourne Avenue, Braddon, ACT.
14.On the face of it this letter is an offer to the respondent to increase the rent, which was accepted by the respondent. In making the offer, the appellant was complying with Clause 5.4(b) of the Schedule to the Lease. Clause 5.4(c) provided that if the respondent did not reject the proposed rent, then that proposed rent would become the rent from the relevant review date.
15.A valuer would be appointed under the Schedule to the Lease in circumstances in which the parties were effectively in dispute about the amount of the rent for the forthcoming period. In the absence of such a dispute, Clause 5.4 cast no obligation on the respondent to appoint a valuer in order to propose a rent to be offered in accordance with Clause 5.4(b).
16.The following are to be noted about the letter sent by the appellant of 2 July 2007.
Firstly it was a letter addressed to the respondent, and its subject was the respondent's single unit in the complex. It makes no mention of review of other leases in the complex.
Secondly, it was a proposal for an increase to a stated rental. It pointed out that this amount was a particular percentage of the current level of rent. It did not refer to the calculation of the increase in rent as having been based on, or calculated by reference to a percentage of the then current rent.
17.The offer made was quite clear, and was made within the four corners of the provisions of Clause 5.4. That clause provided a mechanism which the respondent had previously referred to in order to dispute the previous proposal put forward by the appellant. However, that was not done on this occasion.
18.In the initial proceedings, the Tribunal held that there had been a breach of the Trade Practices Act 1974 on the basis that the appellant had acted unconscionably. There is an equivalent provision in the Territory Fair Trading Act.
19.What was to be regarded as unconscionable conduct was considered in Hurley v McDonald's Australia Ltd [1999] FCA 1728 in the Full Court of the Federal Court. At [22], the Court said:
“For conduct to be regarded as unconscionable, serious misconduct or something clearly unfair or unreasonable, must be demonstrated – Cameron v Qantas Airways Ltd (1994) 55 FCR 147 at 179. Whatever unconscionable means in S51AB and S51AC, the term carries the meaning given by the Shorter Oxford English Dictionary, namely, actions showing no regard for conscience, or that are irreconcilable with what is right or reasonable – Qantas Airways Ltd v Cameron (1966)66 FCR 246 at 262. The various synonyms used in relation to the “unconscionable” import a pejorative moral judgment -Qantas Airways Ltd v Cameron (1966) 66 FCR 246 at 283-284 and 298.”
20.The Tribunal is of the view that the actions of the appellant were not clearly unfair or unreasonable, or for that matter were unfair or unreasonable at all. The letter of offer was in plain terms and was clearly provided for in the Lease between the parties. The decision that the respondent had to make upon receiving it was whether the proposed dollar sum of rent proposed was a market rent. If he did not consider it so, then the steps that were open to him were clearly set out in the Lease. Presumably he could also have opened negotiations with the appellant.
21.In taking the steps that it did, the appellant was observing the terms of the Lease. Nothing was unfair or unreasonable in what it did or the way in which it did it.
22.The Tribunal considered the argument in the earlier decision that because the property was valued as a whole, and the rent resulting from the valuation had been allocated between units on the basis of unit entitlements, that required each of the unit owners to be offered the same rent.
23.There is nothing in the Lease document to support such an interpretation. To use the valuation method as a basis for allocating rentals as between separate unit owners would over-ride the terms of the Leases themselves, and pay no regard to the steps that differing unit owners may have taken to act under their leases to advance their best interests.
24.The order of 7 May 2009 is set aside.
25.Section 48 (1) of the ACAT Act provides that the parties to an application must bear their own costs unless the ACAT Act otherwise provides, or the Tribunal otherwise orders.
26.Having regard to all the circumstances of the case, the Tribunal makes no order as to costs under section 48 (2) of the ACAT Act.
.............................................
Mr C G Chenoweth
Acting Presidential Member
PUBLICATION DETAILS
TO BE PUBLISHED
To be completed by Tribunal Staff
PART A FILE NO: AA 09/9
APPELLANT: SAVILLE HOTEL GROUP PTY LTD
RESPONDENT: MICHAEL JOHN PARSONS
SOLICITORS: APPLICANT: Howes Kaye Halpin,
Solicitors
RESPONDENT: Self
OTHER: APPLICANT:
RESPONDENT:
TRIBUNAL MEMBER/S: Mr C G Chenoweth, Acting Presidential Member, and Mr G Lunney SC, Member
DATE/S OF HEARING: 20 October 2009 PLACE: CANBERRA
DATE/S OF DECISION: 7 June 2010 PLACE: CANBERRA
PART B
RECOMMENDATION:
FULL REPORT ( ) CASE NOTE ( ) UNREPORTED DECISION ( )
COMMENTS:
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