Savona v Chapple
[2010] NSWADT 195
•30 July 2010
CITATION: Savona v Chapple [2010] NSWADT 195 DIVISION: Retail Leases Division PARTIES: APPLICANTS
RESPONDENT
Paul Savona and Suzanna Gizella Savona
Colin George Chapple and Pauline ChappleFILE NUMBER: 095102 HEARING DATES: 29 March 2010 and 23 April 2010 SUBMISSIONS CLOSED: 14 May 2010
DATE OF DECISION:
30 July 2010BEFORE: Rickards K - Judicial Member CATCHWORDS: Compensation LEGISLATION CITED: Retail Leases Act 1994 CASES CITED: Laidlaw –v- Hiller Hewitt Elsley Pty Ltd [2009]NSWCA44; Empirnall Holdings Pty Ltd –v- Paull [1988]14 NSWLR 523 REPRESENTATION: APPLICANT
RESPONDENT
G Dilworth, barrister
In personORDERS: 1.The Respondents are to pay the sum of $46,696.36 to the Applicants
2.Unless within 14 days the Applicants file and serve submissions showing why costs should be awarded against the Respondents, there is to be no order as to costs
3.If submissions are filed pursuant to order 2, the Respondents are to file and serve any submissions in response within a further 14 days
4.The Tribunal will determine the matter of costs without a hearing, pursuant to section 76 of the Administrative Decisions Tribunal Act 1997.
REASONS FOR DECISION
BACKGROUND
1 The Applicants in these proceedings were the Lessors of retail premises located at and known as Unit 1, 50 Parraweena Road, Gwandalan, New South Wales (“the premises”) and the Respondents were the Lessees.
2 The Lessees conducted a hardware retail business at the premises. The Lessees had purchased this business in about August 1994, at which time the continuing lease of the premises was assigned to them.
3 The parties then entered into a new lease of the premises on 1 May 1996 which expired on 30 April 1999. A further lease of the premises was then entered into between the parties on 1 May 1999 and the term of that lease ended on 30 April 2002. This further lease agreement between the parties is referred to below within this decision as “the lease agreement”.
4 The Lessees did not wish to enter into any further lease agreement with the Lessors after April 2002, and instead remained in possession of the premises upon a monthly basis. The Lessees then continued conduct of the hardware business at the premises until late June 2008 when the premises were vacated.
5 The Lessors seek orders for payment by the Lessees of unpaid rent claimed to be due under the lease, interest in respect of the unpaid rent, the cost of painting the premises, the cost of removal of the Lessees’ fixtures and other items, and the cost of repairs required to be undertaken at the premises.
6 The Lessees concede that some of the rent due was not paid, but argue that any outstanding rent is not payable by them but is instead payable by a company which they incorporated on or about 1 July 2007, called Summerland Building Supplies Pty Ltd. The Lessees also contend that any obligations which may be found to exist in respect of the cost of cleaning, painting, or removal of fixtures and other items, rest only with Summerland Building Supplies Pty Ltd.
HEARING
7 The hearing of these proceedings took place on 29 March 2010 and 23 April 2010. The Lessors were represented by counsel and the Lessees were self represented by Mr Chapple.
8 The Applicant Mr Savona gave evidence and was cross examined. Affidavits of Mr Savona sworn 21 October 2009 and 1 March 2010 were admitted into evidence during the first day of hearing, together with an updated statement of account received from the contractors said to have been retained by the Lessors to clean, clear and paint the premises.
9 In the course of giving evidence on the first hearing day, Mr Savona produced and referred to a number of photographs of the premises which had been taken following the departure of the Lessees.
10 These photographs of the premises, together with a number of invoices apparently issued by the Lessees after 1 July 2007 and the results of searches undertaken of the business name “Summerland Building Supplies” and the company “Summerland Building Supplies Pty Ltd”, were later annexed to a further affidavit sworn by Mr Savona on 19 April 2010, and which was admitted into evidence on the second day of the hearing. Mr Chapple advised the Tribunal that he had not, contrary to the Lessors’ contention, received this further affidavit. Following discussion, this further affidavit was admitted into evidence, because no new information was contained which would be unfair or cause real prejudice to the Lessees. The photographs had already been provided and had been the subject of cross-examination on the first hearing day, and Mr Chapple indicated that he was able to adequately explain why invoices had been issued after 1 July 2007 by the Lessees’ business rather by the company. Given the admission of this affidavit and its annexures, a further opportunity was given to Mr Chapple to consider this material and to again cross-examine Mr Savona about the photographs and documents, and it was also indicated that the Lessees would be able to respond to this material within their own subsequent evidence and submissions.
11 Mr Chapple gave evidence and was cross examined on the second day of the hearing, and affidavits sworn by him on 27 January 2010 and 15 March 2010 were admitted into evidence. Also admitted into evidence, despite objection taken by the Lessors as to form and content, were the annexures to Mr Chapple’s latter affidavit, which consisted of written statements and statutory declarations made by former employees David Bouten, Vivian Edmond and Mrs JA Handebo, and also by Robert Gear and Steven Griffiths, both of whom had assisted Mr Chapple to vacate the premises.
12 The statement of David Bouten asserted that he had been an employee of the previous operator of the hardware business for approximately 18 months until the Lessees purchased the business, that he was then employed by the Lessees for a further period of almost 3 years, and that during that period the interior of the shop had been painted, new fixtures and security gates installed and a tea room and toilet fitted. Mr Bouten also stated that he had visited the premises since the time that he left the Lessees’ employment and had always found the premises to be “neat, tidy and clean”.
13 The statutory declaration of Vivian Edmond stated that, over a period of nearly 6 years during which he was employed by the Lessees, the shop was always kept in “immaculate condition”, that he had heard from someone else that the damage to 2 panes of glass had been caused by the Lessor’s lawnmower, and that he had looked inside the front door of the premises approximately 2 weeks after the Lessees had moved out and had observed the premises to be “clean and tidy, no rubbish was evident although some fixtures were left behind”.
14 Mrs Handebo’s statement stated that she had regularly cleaned and mopped the shelves and hard surfaces of the premises during the period of her employment of some 5 to 6 years, and that the two windows on the top floor had been damaged by objects thrown from the Lessor’s lawnmower.
15 Robert Gear stated in his statutory declaration that he and Steven Griffiths had assisted the Lessee Mr Chapple to move certain items out of the premises on 23 June 2008. Mr Gear asserted that “the premises was (sic) left in good order, with no damage to the internal walls or floors. No painting was required on any of the internal walls or fixtures. The floor was required to be swept.”
16 The statutory declaration of Steven Griffiths confirmed that the date when the Lessees vacated the premises was 23 June 2008, and asserted that when the move was completed, the premises “were left in a non damaged state, only requiring a good sweeping of the floors … there was no damage to the internal or external walls or floors.”
17 The contents of the statements and statutory declarations are described above in order to illustrate the very general nature of the information contained within them, as well as the fact that the majority of such information consists of unqualified opinion which could not be tested under cross-examination. There is very little within this evidence which is probative or relevant to the real issues in dispute in these proceedings, and it should also here be noted that the photographs taken after vacation of the premises clearly contradict the general assertions made that the premises were clear of debris or were in a clean undamaged state. There is some evidence to suggest that the damage to the two upstairs windows was not the responsibility of the Lessees but had instead been caused by the person retained by the Lessors to mow the surrounding lawns, and the material from Robert Gear and Steven Griffiths suggests that the date when the premises were vacated was 28 June 2008. None of the other evidence provided within the statements and statutory declarations goes to the issue of whether or not the Lessees are liable for arrears of rent, for the cost of removal of fixtures or other items from the premises, or for the cost of re-painting the premises.
18 At the end of hearing on 23 April 2010, orders were made that the Applicants were to file and serve submissions within 7 days and that the Respondent was to file and serve written submissions within 21 days. The Applicants provided submissions, but the Respondents did not. Instead, the Mr Chapple swore a further affidavit on 17 May 2010, which included and attached new material and information, and sought to have this material and information included as evidence in the proceedings. This application to introduce fresh evidence after completion of the hearing was opposed, and was refused.
FINDINGS
Personal Liability of the Lessees; Terms Relating to Possession of the Premises
19 The Lessees personally entered into various obligations pursuant to the terms of the lease agreement made on 1 May 1999.
20 Clause 13.2 of the lease provided that, in the event of the Lessees holding over after the expiration of the term of the lease, the Lessees would become a monthly tenant upon the same terms and conditions as contained within the lease and would pay a monthly rental equivalent to a monthly proportion of the total yearly rent payable during the final year of the term of the lease.
21 On 1 July 2007, the Lessees incorporated the company Summerland Building Supplies Pty Ltd. The Lessees say that on that same day a letter was sent by Mr Chapple to Mr Savona in the following terms:
“Dear Paul,
This letter is to advise you that as of today 1st July 2007 we are now trading as a PROPRIETARY LIMITED COMPANY and no longer as a partnership.
As from today all future accounting and expenditure will be carried out by the company, and not be the previous partnership.
Yours faithfully,Should you have any queries or problems with this matter please drop into the shop so that we may discuss any issue you may have.
Colin Chapple”
22 The Lessors deny receiving the above letter.
23 The Lessees contend that from 30 April 2002, when the term of the subject lease expired, until 30 June 2007, they occupied the premises as tenants pursuant to a verbal agreement made between them and Mr Savona. The Lessees say that the agreement made was that, in consideration of them paying rent and remaining in possession of the premises, they would be free of any of the terms of the previous lease agreement. This contention emerges from the questions put by Mr Chapple to Mr Savona in the course of cross examination, and was confirmed by Mr Chapple during the course of the hearing. The Lessors deny that any such agreement was made.
24 Although no written submissions were ultimately filed by the Lessees, it is also clear, based upon the contents of the affidavits filed by the Lessees, the cross-examination of Mr Savona conducted by Mr Chapple, and Mr Chapple’s own evidence, that the Lessees contend that they are not personally liable for any obligations which may be found to exist either under the terms of the 1999 lease agreement or under the terms of the verbal agreement which they claim was made at the end of the term of the lease in April 2002, because of the Lessees’ letter sent to the Lessors on 1 July 2007 and the conduct of the Lessors after that date.
25 The 1999 lease agreement expressly dealt with the situation which would apply in the event of the Lessees holding over in possession of the premises after expiration of the term:
- “13.2 HOLDING OVER:- In the event of the Lessee holding over after the expiration or sooner determination of the term hereby granted with the consent of the Lessor, the Lessee shall become a monthly tenant only of the Lessor, such tenancy to be terminable by no less than one month’s notice at a monthly rental equivalent to a monthly proportion of the total yearly rent and Outgoings payable by the Lessee hereunder at the expiration or sooner determination of such term and otherwise on the said terms and conditions, mutatis mutandis, as those herein contained, so far as applicable.”
26 Although Mr Chapple did suggest, in the course of his questioning of Mr Savona, that there had been an verbal agreement made in late April or early May 2002 that the Lessees could remain in possession of the premises unconstrained by the terms and conditions of the prior lease agreement, no assertion of any such conversation was provided by Mr Chapple in his first affidavit sworn 27 January 2010. Instead, the only conversation said within the affidavit to have occurred at about this time is set out as follows:
- “[29] In or about 30 April 2002, the lease expired with the applicants. My wife and I decided not to enter into a new lease with the applicants. We remained at the premises as a monthly tenant. My wife and I went to see the applicant in unit 5 and verbally informed him of this decision.”
27 This aspect of the Lessee’s evidence was also referred in the second affidavit of Mr Chapple sworn 15 March 2010 as follows:
- “[7/2]I would like to reiterate that everything in my affidavit dated 27 January 2010 sections 20/29 are still valid but I wish to clarify paragraph 29. When our lease expired in or about 2002 my wife and I went to see Mr Savona in unit 5, at Savona Industrial Village, Gwandalan. We advised him that as the rent is becoming too excessive and we would not be entering into a new lease. This was agreeable to both parties and confirming that the old lease was terminated at that time, we therefore agreed to continue occupancy on a month by month basis.”
28 Pursuant to section 8 of the Retail Leases Act 1994, a retail lease is considered to have been entered into when a person enters into possession of the retail shop as lessee under the lease or begins to pay rent under the lease. A lease does not necessarily have to be in writing and the existence of a lease and its particular terms can be inferred from the conduct of the parties.
29 Other than the assertions made by Mr Chapple during cross-examination of Mr Savona, as well as in his own evidence, that the Lessors verbally agreed in April 2002 to allow the Lessees to stay on at the premises upon a monthly basis without being bound by any of the terms of the previous lease, there is no evidence pointing to any such agreement by the Lessors.
30 There is also no evidence of any behaviour of the Lessors unambiguously referable to the existence of this new agreement as alleged by the Lessees; this requirement of unambiguous behaviour accords with the principles and authorities outlined by the Court of Appeal in Laidlaw –v- Hillier Hewitt Elsley Pty Ltd [2009] NSWCA 44, and which are particularly summarised within the judgment of His Honour MacFarlan AJ at paragraphs 5 and following. There is also no reason, either suggested by the Lessees or apparent from the evidence in this matter, as to why the Lessors would have expected any benefit from entering into such an agreement instead of permitting the Lessees to hold over under the terms of the previous lease. For these reasons, I am satisfied that the terms of the 1999 lease continued to apply at all relevant times after 30 April 2002.
31 In relation to the argument that Summerland Building Supplies Pty Ltd assumed all responsibilities as lessee of the premises because of the letter sent by the Lessees on 1 July 2007, this letter, even if received by the Lessors, did nothing more in its terms than advise the Lessors that “all future accounting and expenditure will be carried out by the company”. There was no request by the Lessees for the Lessors to now accept Summerland Building Supplies Pty Ltd as the lessee of the premises or for the Lessees to be released from their responsibilities pursuant to the terms of the lease. The fact that there may have been subsequent invoices issued by Summerland Building Supplies Pty Ltd to the Lessors as customers, or that cheques may have been issued by the company to the Lessors, does not establish that the Lessors had expressly or impliedly agreed to replace Mr and Mrs Chapple as Lessees of the premises. The Lessors were not privy to the financial structure utilised by the Lessees to conduct their business, and neither the acceptance of any cheques for rent which may have been drawn upon an account operated by the company, nor the receipt of trading accounts issued by the company for products, constitute unambiguous conduct solely referable to the existence of a new lease agreement between the Lessors and Summerland Building Supplies Pty Ltd.. It is very questionable whether any such proposition was contained within the letter dated 1 July 2007 but, even if this was the case, the correct approach to be applied is to determine whether the subsequent conduct of the Lessors after 1 July 2007 points to no other conclusion than that the Lessors had agreed that the Lessees could assign to the company the right to occupy the premises as well as the Lessees’ obligations to the Lessors pursuant to the lease agreement. This was the approach adopted by the Court of Appeal in Laidlaw (supra) and in its earlier decision in Empirnall Holdings Pty Ltd –v- Machon Paull [1988] 14 NSWLR 523.
32 There is no evidence of any conduct by the Lessors unequivocally pointing to the existence of an agreement to have Summerland Building Supplies Pty Ltd assume the rights and responsibilities as lessee of the premises. Accordingly, the Lessees are personally responsible for obligations pursuant to the terms of the 1999 lease agreement, including any unpaid rent or payment due in respect of other obligations pursuant to the lease.
Rent Due for December 2006
33 The Lessees submitted that, due to illness of Mr Chapple in the period immediately prior to December 2006 which necessitated hospitalisation and absence from the premises for a period of time, they had asked that payment of half of the rent due for December 2006, namely the sum of $2,700, be waived, and that the Lessors agreed to this request . The Lessors contended that they only agreed that payment of this sum could be deferred until Mr Chapple had recovered from his illness.
34 Despite the Lessees remaining in possession of the premises until the end of June 2008, there is no evidence of any demand being made by the Lessors for payment of the subject sum of $2,700, prior to the time that these proceedings were commenced. Further, this claim was not pressed within the submissions filed for the Lessors. For these reasons, it is determined that the sum of $2,700, being rent payable for half of the month of December 2006, is not payable by the Lessees.
Rent Due and Payable by the Lessees
35 There is no dispute that payments of rent were not made for the month of April, May, June and July 2008. During the course of the hearing, the Lessee Mr Chapple contended that payment for March 2008 had been made in May 2008. This was the first time that such contention had been made. No such assertion was made within either of the affidavits sworn by Mr Chapple, nor is there any extrinsic evidence suggesting that this payment was made. I am accordingly satisfied that rent for the month of March 2008 is due and payable by the Lessees.
36 The premises were vacated by the Lessees at the end of June 2008 without prior notice. Pursuant to the terms of the lease, payment of one month’s rent was due to be made by the Lessees in lieu of notice. The Lessees are therefore liable for payment of rent for the months of March, April, May and June when they were in possession of the premises and also for the month of July when prior notice had not been given. This is a total of 5 months at a monthly rental of $5,400 which comes to a total amount payable of $27,000.
Interest
37 Clause 1.11 of the lease defines the appropriate rate of interest for unpaid rent to be 2% in excess of the prevailing standard overdraft rate of interest charged from time to time by the Westpac Bank. I accept as accurate the schedule supplied by the Lessors setting out calculation of the interest due and payable on the unpaid rental sum of $27,000 for the period 1 March 2008 to 31 March 2010 in the sum of $5,745.41, to which I add interest at the rate of 10.96% per annum for the period of 122 days from 1 April 2010 to 1 August 2010 in the sum of $1,050.95. This results in a total sum of $6,796.36 payable as interest.
Painting Work
38 There is dispute between the parties as to whether or not the Lessees are liable for the cost of the painting of the premises. The Lessors rely upon clause 9.3.1 of the lease in support of their argument that the Lessees are obliged to have repainted the premises, failing which they must reimburse the Lessors for the reasonable cost of such work being undertaken.
39 The Lessors claim the sum of $14,800 for the cost of painting, being the amount quoted by the painter Danny Strong in his quotation dated 30 November 2008. This quotation includes all labour and material for interior painting of the unit including all structural beams, cross members, uprights, flooring upstairs, paving downstairs, the offices and amenities, the stairway and hand railing and the under ceiling at the front entry to the premises.
40 Clause 9.3.1 of the lease reads as follows:
- “[9.3.1] PAINTING AND PAPERING:- At all times during the currency of the term hereby demised to keep the subject premises properly painted or papered and to a high standard of repair and shall paint all entry doors, the office walls and ceiling every two (2) years from the commencement of the lease.”
41 It is clear from the above term that there was no specific requirement for the Lessees to paint any particular part of the premises, or to do so at any particular time, other than a requirement to “paint all entry doors, the office walls and ceiling every two (2) years from the commencement of the lease”. Other than this specific requirement, there was an obligation upon the Lessees to “keep the subject premises properly painted…” This requirement is vague and, in the absence of evidence establishing that the premises were not “properly painted” is incapable of justifying the order which the Lessors seek. Apart from the lack of clarity as to exactly what the term “properly painted” means, and although Mr Savona gave evidence of a certain amount of disrepair and debris at the premises which was also corroborated by the photographs admitted into evidence, there is no evidence that the premises were in general not “properly painted” as at the date when the Lessees vacated the premises, other than the photographs showing damage to some gyprock panels in the premises which would obviously require painting following repair and also showing the stairs leading up to the second level of the premises which exhibit obvious signs of wear and tear.
42 There is no apparent dispute that the Lessees did not paint entry doors, office walls or office ceilings every 2 years from the commencement of the lease. However, it is incumbent upon the Lessors to demonstrate that this breach of the Lessees’ obligations has caused actual loss to the Lessors, and to also demonstrate the extent of such loss. Even if the Lessors were to show that the Lessees’ breach of clause 9.3.1 had caused loss and expense to the Lessors in creating a need for the entry doors, office walls and ceilings to now be painted in addition to the gyprock panels and stairs referred to in the preceding paragraph, no assistance in determining the extent of such loss or expense can be gained from the quotation provided by Danny Strong because it simply sets out a composite figure of $14,800 as being the cost of repainting of what appears to be the entirety of the premises. I accordingly disallow the claim in respect of painting of the premises.
Removal of Fixtures and Repairs
43 Clause 10.4 of the lease imposed upon the Lessees an obligation to remove all fixtures and fittings at the time of vacating the premises failing which the Lessors were entitled to remove and dispose of the fixtures and reinstate the premises with the Lessees being liable for the cost of same.
44 I have considered the evidence of Mr Savona as to state of the premises, the partial concessions made by Mr Chapple as to the items left at the premises, and the photographs taken of the premises, and I am satisfied that a significant amount of fixtures, fittings and general debris were left at the premises by the Lessees. The Lessees have argued that some of this property is not theirs but instead belongs to the original business owner, and that some of the remaining fixtures and fittings are of real value to the Lessors, but such arguments do not displace the clear obligation imposed upon the Lessees pursuant to clauses 9.2 and 10.4 of the lease to keep the premises in good repair, and to remove all rubbish and fixtures.
45 During the course of the hearing, it emerged that there was disagreement between Mr Chapple and Mr Savona as to who was responsible, or who should have made a claim upon respective insurers, for the damage to the glass panels at the premises, regardless of how such damage had been caused. It was contended by the Lessees that this damage had been caused by stones thrown by the Lessor’s lawnmower. The Lessor was not in a position to specifically deny this, but stated that he was unaware of any such damage being cause by the mower’s operation. Having considered the entirety of the evidence, I am not satisfied that damage to these glass panels has been caused by any fault on the part of the Lessees, and I accordingly disallow the amount of $1,100 claimed for the cost of repair of this damage.
46 In support of the claim for the cost of repairs and removal of fixtures and other items, the Lessors rely upon the quotation given by Al and Phil Handymen dated 22 November 2009, which is in a total sum of $14,000. Although the Lessees have argued that this amount is excessive, there has been no direct evidence provided to support this contention. After deduction of the amount of $1,100 claimed for the damaged glass panels, I am satisfied that the sum of $12,900 is properly due and payable by the Lessees to compensate the Lessors for the reasonable cost of repairs and removal of fixtures and other items from the premises.
47 In summary, the amounts found to be due and payable by the Lessees are as follows:
- Rent $27,000.00
Interest $6,796.36
Repairs and removal of fixtures $12,900.00
TOTAL $46,696.36
1.The Respondents are to pay the sum of $46,696.36 to the Applicants.
2.Unless within 21 days the Applicants file and serve submissions showing why costs should be awarded against the Respondents, there is to be no order as to costs.
4.The Tribunal will determine the matter of costs without a hearing, pursuant to section 76 of the Administrative Decisions Tribunal Act 1997 .3.If submissions are filed pursuant to order 2, the Respondents are to file and serve any submissions in response within a further 21 days.
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