Schnitzel World Pty Ltd v Yung Chon Pty Ltd
[2010] QCAT 474
•30 August 2010
CITATION: Schnitzel World Pty Ltd v Yung Chon Pty Ltd [2010] QCAT 474
PARTIES: Schnitzel World Pty Ltd v Yung Chon Pty Ltd
APPLICATION NUMBER: RET037-09
MATTER TYPE: Retail Shop Leases Matters
HEARING DATE: 3,4,5,6 August 2010
HEARD AT: Brisbane
DECISION OF: Ms Anne Forbes, Mr Michael Conrad & Ms Jody Gosling
DELIVERED ON: 30 August 2010
DELIVERED AT: Brisbane
ORDERS MADE:
1 The Application of the Applicant is dismissed.
2 The Respondent has liberty to file within 21 days of this order its written submissions setting out the basis of its claim for arrears of rent and outgoings to 15 April 2009 and its claim for costs.
3 The Applicant shall file its response within 42 days of this order.
4 The matter is adjourned to be dealt with on the papers.
CATCHWORDS : claim for compensation under Retail Shop Leases Act 1994 –sections 43(1), 43(2)(a), 46A – claim of false or misleading statements or representations and unconscionable conduct - expert witness challenged on expertise and independence – voir dire held – applicant not discharging onus of proof of loss or damage-application dismissed.
APPEARANCES and REPRESENTATION (if any)
Mr S Bullow – Counsel for the Applicant
Mr D O’Brien Counsel for the Respondent
REASONS FOR DECISION
This dispute was lodged in the former Retail Shop Leases Tribunal, and is now before this tribunal, according to the transitional provisions of Queensland Civil and Administrative Tribunal Act 2009 [“the QCAT Act”].
The Applicant Schnitzel World Pty Ltd (“Schnitzel”) was formerly the Respondent’s tenant in Shop 10 at Cannon Hill Shopping Centre. Ms Claudine Binet is the co-director of the Applicant company and its alter ego for the purposes of this claim.
Schnitzel claims compensation of $246,000 on three main bases:
(a) Section 43(2) of the Retail Shop Leases Act 1994 (“the Act”) for loss and damage allegedly suffered as a result of relying on false or misleading statements or misrepresentations by the Respondent’s agent, one Shae Dixon;
(b) Section 43(1) of the Act for further loss allegedly caused by the acts or omissions of the Respondent in managing the centre. In the third and last manifestation of its Notice of Dispute, the Applicant added several alternative claims relating to section 43(1); and
(c) Section 46A of the Act: (unconscionable dealing).
The Applicant also claims interest and costs and a declaration that the Respondent is not entitled to any amount under the lease or for the Applicant’s occupation of the premises.
The Respondent asks that the claim be dismissed and seeks costs as well as claiming arrears of rent and outgoings.
The Lease
The Applicant signed the lease on 17 January 2008. The term of 5 years began on 18 February 2008, at a base rent of $47,971.00 per annum and a 5% promotion levy. The permitted use of the premises was “specialty schnitzel takeaway and restaurant, including home delivery service.” The Applicant was required to provide a bank guarantee of $13,192.00, equivalent to three months’ gross rent.
Pursuant to Schedule 1 (Variation to Terms) the Applicant was granted a non-exclusive licence[1] to use, as a “seating area”, a space of 15m2 in a common area outside the shop. It is marked “A” on a plan attached to the lease. However, Clause 28(2)(b)(ii) forbade the Applicant to obstruct pedestrian access through the common area, and Clause 28(4) states: “The Lessor may relocate the Seating Area to a position in front of the Premises.”
[1] Schedule 1 to Lease: Variation to Terms, New Clause 28-Seating Licence.
On 29 February 2008 the parties signed a “Deed of Incentive”[2], supplementing the Offer to Lease and the lease itself. Relevant covenants include a three months’ waiver of the base rent (contingent on due performance of the lease), a contribution of $4000 toward the Applicant’s fit-out, and require the Respondent to “provide and install a drop down clear blind for the Seating Area.”
[2] Statement of Claudine Binet, 5.8.09: Attachment CB 4.
Background
Ms Binet, and her business partner and co-director Ms Ward, planned to sell a cooked meat product under the brand “Schnitzel.” Towards the end of 2007 they inspected shop 15, with an area of 97m2, and access to an internal “food court” and a walkway adjacent to the car park. They were shown the premises by the Respondent’s leasing agent, Jeffrey Litte. Shop 15 had then been vacant for about 2 years.
Here it is desirable to describe the layout of the relevant part of the north side of the Centre. Shop 10 (excised from Shop 15) has Shop 14 on its western side, and Shop 7, occupied by an Indian Restaurant [“Banjara”] on its eastern side. A public walkway, about 2.5 metres wide, runs along the front of Shop 7 and expands (near the eastern side wall of Shop 10) to a width of about 8m under a skillion roof projecting into the car park and passing the main entrance to the Centre. The Banjara restaurant has an exclusive 25m2 outside seating area, square in shape, and situated under the north-eastern corner of the skillion roof, about 2.9m from the front of Schnitzel’s former shop.[3]
[3] Exhibit 3: enlarged plan tendered by the Respondent and Statement of Subidra Keeffe: Attachments SK3 and SK4.
Schnitzel’s former shop is 7.1m wide. Its outside seating area projects about 2.9 metres. The length of the seating area does not coincide with the width of the shop; it begins about half way (3.5m) from Shop 10’s eastern wall, and along the front of vacant Shop 14. There is an Emergency Services/Police parking bay immediately outside Banjara.
On 26 October 2007 the Respondent gave the Applicant an Offer to Lease Shop 15, but the Applicant decided that a fitout of that area would be too expensive. So it declined the offer and asked for a smaller shop. The Respondent then offered a part of shop 15 fronting the parking area, with an area of 62m2, and a non-exclusive licence of 15m2 as an outside seating area.
An exchange of emails followed. The Applicant required the seating area to be “enclosed with ... pull down blinds so we could use [it] in ALL weather conditions ...”.[4] On 4 December 2007 the Respondent offered to “install a pull down clear blind which will enable greater usage of the licensed area”.[5] The Applicant accepted that offer requesting that “the Landlord will be responsible for installing the enclosure of the licensed area at the same time as the shop fitout.”
[4] Statement of Claudine Binet, 5.8.09: Attachment CB3: Email Schnitzel World to Litte 30.11. 2007
[5] Statement of Shae Dixon: Attachment SD1, page 10.
On the following day, 5 December 2007, Ms Dixon, Ms Binet and Ms Ward met on site. Dixon (for the Respondent) told Binet and Ward that, as Banjara was “using” part of the common area outside Shop 10, she could not offer the Applicant a seating area aligned with the front of its shop, but only one as described above. Dixon said that the Respondent planned to refurbish the front of the centre, to fill in the Police parking bay, and to extend the covered walkway. Then, Dixon assured them, it would be possible to re-align the Applicant’s seating area with the front of its shop.
The Offer to Lease was amended to reflect these arrangements. In Clause 30 (Special Conditions), under the heading “Lessor’s Works”, these items were inserted:
· Pull down clear blind
· Work to fill in parking bay.[6]
[6] Statement of Claudine Binet, 5.9.09:Attachment CB1.
By 18 December 2007 the Applicant was provided with a survey plan of its shop and licensed seating area.
The Applicant began trading in early April 2008. Its manager Ms Binet, who lived in Stanthorpe - some 150 kms away - commuted weekly. Ms Ward, who resides in France, took no active part.
On 1 April Ms Dixon wrote to Banjara:
“As per earlier discussions we are in process of establishing an outdoor area in front of the external tenancies … Works … will commence shortly, with the plans being now finalised and will include incorporating an outdoor area directly in front of your tenancy”[7]
[7] Statement of Subidra Keeffe filed 1.6.10: Attachment SK5
On 18 April 2008 she wrote again to Banjara, referring to an “interim period whilst you are sharing the area with the adjoining tenancy ….”.[8]
[8] Ibid: Attachment SK6.
After some initial tension between the Applicant and Banjara, concerning the use of their respective seating areas, an accommodation was reached about June 2008. Ms Dixon (for the Respondent) assured Ms Binet and Banjara that the difficulty was merely a “short term arrangement.”[9]
[9] Email Shae Dixon 20 March 2008; statement of Claudine Binet, Attachment CB9
The Applicant’s business traded very poorly from the start, and by the end of May 2008 Ms Binet became increasingly worried. The rent free period was due to end in mid June 2008, and creditors were demanding payment. Apparently in an outburst of frustration she suggested that the installation of drop-down blinds be cancelled, only to recant soon afterwards. In fact two blinds were installed in July or August 2008. They extended across the front of the covered area, close to the edge of the roof-line, but did not enclose the Applicant’s seating area. Ms Dixon’s evidence was that it was impossible, for structural reasons, to install the blinds in any other position.
At Ms Binet’s request, Ms Dixon and Mr Juchi Chen, the Respondent’s general manager, met her early in June 2008 to discuss her problems. He says, and she does not deny, that she was upset and tearful. Mr Chen says that he advised her, inter alia, to remain open during core trading hours. Later, he tried to assist her by extending the rent free period, and by halving the rent. Ms Dixon suggested that Ms Binet could place her tables and chairs outside her licensed area, away from her front window, in a position depicted in Exhibit 4, but Ms Binet did not do so.
From September 2008 to February 2009 neither the Applicant nor Banjara used the seating areas because, so they say, the Respondent did not clean or maintain them properly, and occasionally the roof leaked.
Shortly before Easter 2009 the Applicant did not renew its equipment leasing contract, and the equipment was repossessed.
The Applicant never paid the full amount of rent for Shop 10, even at the reduced rate. On 31 March 2009 it received a Notice to Remedy Breach of Covenant, claiming $20,037.03 for rent and outgoings. On 15 April 2009 the Respondent re-entered the premises and the Applicant departed.
The Applicant’s Case
The Applicant says that during negotiations for the lease, Ms Dixon made representations to Ms Binet which induced it to enter the lease to its detriment. The Applicant contends that those representations were false, misleading or unconscionable. The Applicant’s complaints are particularised as follows:
(i) The Respondent represented that it would install at its expense, pull down clear blinds to protect and enclose the Applicant’s seating area, and failed to do so;
(ii) The Respondent promised to create a new outside seating area for Shop 7 by removing a police parking bay, and relocate the Applicant’s seating area directly outside Shop 10, and failed to do so;
(iii) The Respondent’s agent (Dixon) failed to inform the Applicant of the nature and extent of a licence held by the tenant of the adjoining restaurant (Shop 7) to use part of the common area immediately outside Shop 10 as its seating area;
(iv) Unconscionable conduct, in that Respondent did not act in good faith during the negotiations and in failing to fulfil the promises described in (i) and (ii) above;
(v) Failure by the Respondent to maintain the cleanliness of the outside seating area when it was required by the lease agreement to do so; and
(vi) By the defaults described in (i) to (v), the Respondent restricted the Applicant’s trading, and thus caused the losses alleged.
Ms Binet says that the Applicant’s decision to lease an area of only 62m2, which allowed only limited inside seating, meant that the Applicant relied heavily on the outdoor seating area. She says this is why she stipulated that the blinds enclose it and provide some protection. She says that she made this requirement clear by describing an L-shape with her hands in discussions with Ms Dixon on 5 December 2007, and that the latter said that her requirements would be met. The Applicant claims that Ms Dixon’s letter of 1 April 2008 to Banjara[10] supports the claim that that representation was made.
[10] See footnote 3
Ms Binet says that Ms Dixon showed her plans for the refurbishment of the outside of the Centre, but did not indicate at any time that the installation of blinds, or the readjustment of the outside seating area would be delayed.
The Applicant did not adduce any statement in writing, or other evidence from Ms Ward, although according to Ms Binet, Ward was present when the lease was under negotiation.
The Respondent’s Case
Ms Dixon, who is responsible for the day to day management of the Centre, was adamant that she had made no representation, oral or in writing, that the Respondent would provide the Applicant with a fully enclosed outside seating area. Further, she denied that such an arrangement was ever discussed. Ms Dixon says that Ms Binet and Ms Ward told her that they had ample experience in running cafes, that they made careful notes of the shop and its surrounds, and took measurements before the lease was signed. They gave Dixon the distinct impression that Schnitzel was to be primarily a takeaway and home delivery business, with just a small eating or waiting area.
Ms Dixon agrees that she told Ms Binet and Ms Ward during negotiations at the end of 2007 that she could not offer them an outside seating area exactly aligned with the front of Shop 10. She agrees that she told them that it would be possible to realign the Applicant’s seating area if the plan to remove the Police parking bay came to pass. She denies that she showed them any plans or drawings of any refurbishment prior to execution of the lease, and asserts that she neither promised nor discussed any time frame for carrying out that plan.
Mr Chen, the Respondent’s general manager, says that his letting agent informed him at the end of 2007 that the Applicant was a potential tenant with a new concept in home delivered and takeaway foods. He says that he had plans drawn up in March 2008 for refurbishment of the external seating area. But on making inquiries at government agencies he found that the work needed town planning approval, that it would unduly interfere with existing services, and would involve significant expense. As the relevant tenants were not paying rent regularly, he abandoned the plan.
Mr Chen says that he never discussed an all weather enclosed seating area with the Applicant, or represented that he would provide one. The area concerned is a walkway, though not formally designated as such, and the Applicant’s lease prohibited obstruction of pedestrian traffic.
Both Mr Chen and Ms Dixon firmly rejected the suggestion that the maintenance and cleanliness of the Centre were wanting. They say that the anchor tenant, Woolworths, is quite demanding in that regard, and that the Respondent pays a cleaning company about $171,000 per annum for its services. The cleaners attend on a daily basis, and Ms Dixon states that she makes random checks of their work.
The Experts
On the issue of loss and damage the Applicant relied on three reports by Mr Donald Evan Gilbert, while the Respondent tendered a report by Ms Lisa Bundesen, a chartered accountant Counsel for the Respondent, Mr O’Brien, challenged Mr Gilbert’s evidence at the threshold, on two grounds: (1) That the witness did not have appropriate expertise or experience to qualify him as an expert in this case; and (2) That he lacked proper independence.
In a forum bound by the rules of evidence, objection (1) would raise an issue of admissibility,[11] while objection (2), if sustained, would be a matter of weight,[12] provided that any particular relationship is disclosed.[13]
[11] Clark v Ryan (1960) 103 CLR 486; Makita (Australia) Pty Ltd v Sprowles (2001) 52 NSWLR 705.
[12] Australian Securities and Investments Commission v Rich (2005) 190 FLR 242.
[13] Fortson Pty Ltd v Commonwealth Bank of Australia (2008) 100 SASR 162.
Objection (1)
Mr Gilbert is the principal of the business “Queensland Lease Consultants”. His letterhead proclaims that it offers services in rent reviews and determinations, business analyses, lease negotiation, tenancy disputes and compensation matters. A curriculum vitae attached to his reports shows that he obtained degrees in commerce and economics from a South African University in the 1970s, is qualified as a land valuer and as a specialist retail valuer for the purposes of disputed rent determinations under the Act. However, he acknowledges that he does not practise as an accountant, and that he is neither a chartered accountant or a certified public accountant, although he claimed in cross examination that he ”can interpret profit and loss statements better than most accountants”. He further claimed, in relation to assessment of loss and damages in cases of this kind: “I’m an expert in these areas. Many of these claims are settled on the basis of one report [by me].” And indeed, Mr Gilbert’s fees show that he values his expertise highly.[14].
We seriously doubt whether doubt whether Mr Gilbert, for the purposes of this case, would meet the requirements of Clark v Ryan (above), and other authorities in that line. However, as this tribunal is not strictly bound by the rules of evidence, we prefer to treat the evidence elicited on the voir dire as material relevant to weight, rather than admissibility.
Objection (2)
As noted above, this is, at best, a question of weight. Mr O’Brien tendered printed copies of the web site of a business known as Australian Asset and Property Consultants [AAAPC] in which Mr Gilbert is described as a member.[15] AAAPC holds itself out as a provider of services in dispute resolution and litigation. The same website lists Mr Gilbert as one of its expert witnesses and Mr Bullow as a “specialist”. (As the record will show, Mr Bullow acted as Counsel for the Applicant in this case.) Photographs of Messrs
Gilbert and Bullow adorn the AAAPC website.
[15] Exhibit 6.
Mr O’Brien also tendered an extract from the Business Names Register of Queensland; it records that persons and entities carrying on business in AAAPC include Mr Gilbert and a company named Jubull Pty Ltd.[16] Yet another exhibit shows that one of the two directors of Jubull Pty Ltd is Mr Bullow.[17] However, Mr Gilbert emphasised that there is no business arrangement between himself and the Applicant’s counsel and described AAAPC as “simply a group for marketing.”
[16] Exhibit 7.
[17] Exhibit 8.
The Evidence of Mr Gilbert (for the Applicant)
His first report is a slender document of some 10 pages, apart from his CV, appended photographs and copies of certain business documents of Schnitzel. His second report is a lengthy traverse of Ms Lisa Bundesen’s comments on his first report. Mr Gilbert acknowledged that he had not read the documents filed in this dispute, or the terms of the lease. He relied on accounting exercises conducted by a qualified accountant who was not called to give evidence.
In essence, Mr Gilbert’s opinion is that the Appellant’s business failed because it lacked ”a demarked [sic] area to set out tables and chairs to trade from and generate sales, protected against the weather”. In those circumstances, he concludes that “business failure was a certainty.” In his evidence in chief he was not prepared to consider any other likely causes of the Appellant’s misfortune, although in cross examination he did concede that the Applicant’s lack of capital may be relevant.
The Evidence of Ms Bundesen (for the Respondent)
Ms Lisa Bundesen, a chartered accountant, conducted a comprehensive examination of the trading history of the Applicant and the documents in this dispute for the purposes of a forensic accounting report. In her opinion several factors made Schnitzel’s failure inevitable, including:
inadequate assessment of risks of the industry;
inadequate assessment of the risks of the reduced shop size;
Inadequate working capital and cash flow forecasting;
lack of due diligence in assessing risks associated with the introduction of a new product; and
failure to open in core hours.
In our view this case calls for an expert in forensic accounting rather than the expertise professed by Mr Gilbert. For that reason, and in the circumstances outlined above, we prefer the opinion of Ms Bundesen to that of Mr Gilbert.
In the light of our findings on liability we do not need to discuss the respective assessments of quantum.
The Law
Section 43(1) of the Act materially provides that compensation is payable for loss or damage suffered by the lessee where the lessor –
(c)…takes action that substantially restricts or alters… (i) ... access by customers to the leased shop: or… (ii) the flow of customers past the shop; or…
(d)causes significant disruption to the lessee’s trading … or does not take all reasonable steps to prevent … significant disruption … or
(e) does not have rectified as soon as practicable-(i) … or (ii) any defect …”
(Emphases added)
The Act requires a Claimant relying on section 43(2) to prove that a representation was made; that it was in the circumstances misleading; that it was a material fact in the decision to enter the lease - in other words, that the Claimant relied upon it - and that loss resulted from that reliance. The representation need not be the only inducement, provided that it is one reason for undertaking the lease.[18] It is not necessary that the misrepresentation be fraudulent. The fact of a "false or misleading statement" suffices.
“A positive unqualified prediction ... may be misleading conduct in trade or commerce, if relevant circumstances show the need for some qualification to be attached to that statement, or the possibility of its non-fulfilment to be disclosed as the requirement of fair trading ... [T]he misleading or deceptive conduct may be found in the failure to qualify the statement or disclose the risk of non-fulfilment."[19]
[18] Dawsons Ltd v Bonnin [1922] 2 AC 413 at 432; Yuting Liu & Anor v Village Centre Dispute 2007/0121, 12 March 2009.
[19] Wheeler Grace & Pierucci Pty Ltd v Wright [1989] ATPR 40-490 at 50-025
The Applicant who relies on section 43(2)(a) - a statutory remedy in remedial legislation - is not required to show that the representor had no reasonable grounds for making the representation[20], and “there is no basis for holding that [the section] is limited in its application to statements as to past or present facts”.[21]
[20] Cf Trade Practices Act 1974 (Cth) s 51A.
[21] GO & MJT Nominees Pty Ltd v Hollywells Homewares Pty Ltd [2010] QSC 169 per Alan Wilson J.
Findings
Section 43(2) and enclosure of the seating area
Ms Binet did not clearly particularise the allegations of false or misleading statements or misrepresentations by Ms Dixon or anyone else on the Respondent’s behalf. It is surprising that the Respondent did not seek further and better particulars at an early stage, but we appreciate that counsel may not have been involved until late in the piece. Be that as it may, the tribunal is left to wonder whether the Applicant asks us to construe a representation from the words of the amended Offer to Lease, the words of the lease itself, or an oral statement by an agent of the Respondent. On the latter point, Ms Binet referred vaguely to a meeting with Ms Dixon on 5 December 2007, when she says they discussed the enclosure, but she failed to specify what relevant statement, if any, the latter then made.
We have already noted that no evidence was offered by Ms Ward.
Ms Binet made it clear in her email of 30 November 2007 to Mr Litte that one reason for the Applicant’s rejection of the original offer to lease 62m2 was the lack of an enclosed seating area. She then received the offer of something less than an enclosure, namely a “pull down clear blind to enable greater use of the area”. In response she, and Ms Ward (for the Applicant) accepted an Offer to Lease amended by insertion of the words “Pull down clear blind.”
A claim of an actionable representation based on an oral statement must be proved “with a degree of precision sufficient to enable the court to be reasonably satisfied that they were in fact misleading in the proved circumstances.”[22]We observed Ms Binet closely during her cross examination and, making due allowance for the stress of the proceedings and her financial worries, she presented as intense, excitable and emotional, with a tendency to be less than responsive in her answers to Counsel’s questions. Ms Dixon, on the other hand, impressed us as calm and professional in manner and, allowing for the passage of time, had a reasonably accurate recall of relevant events. Where the evidence of Ms Dixon differs from that of Ms Binet, we prefer the evidence of the former witness, and reject that of the latter (except on the barely disputed issue of the Police parking bay).
[22] Watson v Foxman (1995) 49 NSWLR 315per McClelland CJ in Eq.
Accordingly we are not satisfied that the Respondent, by its agent, represented that it would enclose the outside seating area. It is noteworthy that the licence of the Applicant’s seating area was non-exclusive, whereas Banjara’s was exclusive. Enclosure of the Applicant’s area would have been quite inconsistent with the Applicant’s contractual duty not to obstruct passing pedestrians.
Section 43(2) and re-alignment of the Applicant’s seating area
Counsel for the Applicant submitted that his client’s case extended to a misrepresentation by the Respondent that the outside seating area was something other than appears in Plan “A” attached to the lease. However, as this entirely new claim was not even faintly dealt with in Counsel’s final submissions we do not propose to entertain it.
The Applicant was aware by 5 Dec 2007 that Banjara had a licence which permitted it to place its furniture in front of part of Shop 10.[23] Further, the Applicant’s solicitor wrote to the Respondent’s solicitors on 11 January 2008 to confirm the statement in the Lessor Disclosure Statement that the Respondent did not intend to embark in any refurbishment or redevelopment of the Centre.[24]
[23] Email Ms Binet to Applicant’s solicitor 5 December 2007:CB 5
[24] Statement of Shae Dixon 1: Attachment page 42.
Nevertheless, we consider that the proposal to fill in the Police car park and redevelop the north side of the Centre was not, as Mr Chen says, “only discussed broadly” but was further advanced as early as December 2007. Although architect’s plans were not produced until March 2008 it seems probable that in a discussion with Binet and Ward in December 2007 Ms Dixon drew a sketch to illustrate the reference, in the Offer to Lease, to “work to fill in parking bay”. Dixon’s letters of 1 and 18 April 2008 to Banjara support the Applicant on this point.
In the circumstances outlined above we find that Ms Dixon represented to the Applicant, during negotiations for the lease, that the Applicant’s outside seating area would be re-aligned with Shop 10, and that the Applicant reasonably relied on that representation when it signed the lease.
It was not until the second day of the hearing that Mr Chen, at the request of the presiding member, produced enlarged plans showing the precise positions of Schnitzel’s and Banjara’s seating areas.[25] It appears that Ms Dixon believed, and represented to the Applicant, that Banjara’s area extended partly across and right up to Schnitzel’s shopfront, but the plan shows that Banjara’s area began some 2.5 m away from Schnitzel’s shop. But little turns on this mutual misapprehension.
[25] Exhibits 3 and 5.
The Applicant was bound to satisfy us that some or all of the alleged loss and damage resulted from a failure by the Respondent to effect the re-alignment, and it has failed to satisfy us in that regard. Such a trivial matter as a minor encroachment by a neighbouring tenant’s furniture can hardly explain the utter failure of the Applicant’s venture, or the loss and damage alleged. According to Ms Dixon Banjara’s furniture was occasionally placed outside Shop 10, but not markedly outside Banjara’s licensed area.
Ms Binet admitted that she never placed her tables and chairs in the part of the Applicant’s seating area adjacent to shop 14. In one of her statements she explained that she wanted her customers to identify with Schnitzel. When asked in cross-examination why she had not used the seating area at all from September 2008 until the Applicant departed in April 2009 she replied, somewhat inconsequentially: “I decided to protect my prototype ... I was ashamed ... [there was] dog poo [there]”
It is almost inevitable that a common area, in part of a shopping centre open to the public at all hours, will occasionally be littered by a passing animal or drunken lout. But we accept the Respondent’s evidence of the efficiency – and expense - of its cleaning arrangements, and bear in mind the mutual responsibility of tenants to keep clean their own outside areas. In our view it was unreasonable for the Applicant to refrain from using its seating if, as it contends, using it was essential to viability of its business.
Our findings upon the third version of the Notice of Dispute, drawn by the Applicant’s counsel and produced shortly before the hearing may be summarised as follows:
1 Alleged misrepresentation by silence: The Applicant claims that it would not have entered the lease with the seating area located as depicted on Plan A if the Respondent had revealed that it could offer seating properly aligned with Shop 10.
Finding: The Applicant has adduced no acceptable evidence that the Respondent could have made such an offer, or that the Respondent’s silence on in that regard matter caused any loss or damage to the Applicant.
Unconscionable conduct: An alleged failure by the Respondent to act in good faith towards the Applicant.
Finding: The Applicant raised three alternative claims under this heading, each of them more confused than its predecessor. There is no evidence of bad faith on the part of the Respondent or any of its agents. On the contrary, the Respondent allowed the applicant to trade for one year, effectively without paying any rent or outgoings and forbore to issue a Notice of Breach until the Applicant had indicated that it was abandoning its efforts to trade. If such conduct were to be regarded as unconscionable, the lot of landlords confronted by unsuccessful traders would be perilous indeed. Furthermore, the Respondent increased the period of rent remission and halved the rent in an effort to assist the Applicant. But when Schnitzel closed its doors it had paid the Respondent little more than $9,000. The allegations of unconscionable conduct are rejected.
Claims under s 43(1) for disruption of trade by restriction of customer access:
Finding: The potent and operative adjective in section 43(1) is “substantial”. There is no evidence of any such interference. Accordingly these allegations are dismissed.
4. Derogation from grant:
Finding: This claim was abandoned, and advisedly so.
Conclusion
It is not our task to decide which of several factors might have been causes of the demise of the Applicant’s business venture. Our task is simply to deal with the Applicant’s allegations on their legal merits, and to decide whether any act or omission by the Respondent entitles the Applicant to compensation under the Act. For the reasons we have given, we find no substance in any of the Applicant’s claims.
However, we consider it just to declare that the Respondent terminated the lease on 15 April 2009, as the Respondent has expressed no interest in pursuing arrears of rent beyond that date.
We feel bound to add that this litigation has cost the parties dearly – particularly the shareholders of the Applicant, who lost considerable sums before litigation began.
And two issues remain to be decided, namely the Applicant’s liability for arrears of rent and outgoings, and the costs of these proceedings.
This matter originated the former Retail Shop Leases Tribunal 12 months ago, before the present tribunal was constituted. Each tribunal was created to dispense speedy and affordable justice. Neither ideal has been achieved on this occasion. The case has been unduly complicated, not to say confused, by multiple amendments made to the Notice of Dispute and the addition of claims without substance. Swingeing claims of claims of unconscionable conduct should not be made unless compelling evidence exists. In too many cases s 46A of the Retail Shop Leases Act has been used as a mantra, makeweight or catch-all clause. A section 46A claim is a grave allegation, not one to be used for such purposes.
DECLARATION:
It is declared that the lease between the Applicant as lessee and the Respondent as lessor terminated on 15 April 2009.
ORDERS:
The Application of the Applicant is dismissed.
The Respondent has liberty to file within 21 days of this order its written submissions setting out the basis of its claim for arrears of rent and outgoings to 15 April 2009 and its claim for costs.
The Applicant shall file its response within 42 days of this order.
The matter is adjourned to be dealt with on the papers.
$5897.83; Inv 867 dated 1.8.09 $3984.75; Inv 882 dated 23.10.09 $3483.33; Inv 886 dated 16.12.09 $7035.75; Inv 888 dated 11.1.10 $5371.67.
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