Skiwing Pty Ltd trading as Cafe Tiffanys v Trust Company of Australia Limited

[2002] NSWADT 278

CITATION:	Skiwing Pty Ltd trading as Cafe Tiffanys v Trust Company of Australia Limited [2002] NSWADT 278
DIVISION:	Retail Leases Division
PARTIES:	APPLICANT Skiwing Pty Ltd trading as Cafe Tiffanys RESPONDENT Trust Company of Australia Limited (Stockland Property Management Ltd)
FILE NUMBER:	025117
HEARING DATES:	13/12/02
SUBMISSIONS CLOSED:	12/17/2002
DATE OF DECISION:	12/23/2002
BEFORE:	Donald BG - Judicial Member
APPLICATION:	Claim for declaration of rights, obligations and liabilities under a lease
MATTER FOR DECISION:	Principal matter
LEGISLATION CITED:	Conveyancing Act 1919 Interpretation Act 1987
CASES CITED:	Klianis v Chatham Pty Ltd (1994) Supreme Court of NSW (BC9403123 unreported) Norweigian American Cruises v Paul Mundy Ltd [1988] 2 Lloyds Law Reports 343 Xin v Zakos [2002] NSWADT 189
REPRESENTATION:	APPLICANT A I Tonking, barrister RESPONDENT N Sharp, barrister
ORDERS:	(a) the Lessee be entitled to display a sign advertising its business at the Pitt Street entrance to the Imperial Arcade between 12 p.m. and 2 p.m. and at the Pitt Street and Castlereagh Street entrances from 6 p.m. till the close of its business; (b) the specific locations are at or near those previously designated by the Lessor with the right of the Lessor to require relocation within the general entrance areas having regard to demonstrated public safety or pedestrian traffic requirements.; (c) the signs must accord with design and style standards appropriate for the Centre in which regard the style and design proposed by the Lessor to the Lessee in June/July 2002 by way of a replacement for the previous A frame signs would be appropriate at the cost of the Lessee unless otherwise agreed between the parties.

1 This Application was originally filed 2 October 2002 as a Retail Tenancy Claim concerning the right of the Lessee to place advertising signs for its business in the common areas of a shopping arcade owned and managed by the Lessor.

2 An Application for Urgent Interim Order also filed 2 October 2002 was heard and rejected by Judge O'Connor, President, on 4 October 2002, no reasons being published.

3 The Lessor's original affidavit was filed on 4 October 2002 and the Lessee's Points of Claim on 25 October 2002 and affidavits on 29 November 2002 together with the Lessee's Outline of Submissions. The Lessee’s Amended Points of Claim were filed on 10 December 2002. The Lessor's Submissions and further affidavit were filed on 11 December 2002.

4 At the start of the hearing on 13 December 2002 there was some uncertainty as to whether it was the hearing of the Primary Application or the Interim Application. The parties then agreed that the matter was ready to proceed for a full determination of the liability issue concerning the right of the Lessee to place the signs. However the Lessee's lawyer gave notice of an application to claim consequential damages in the event of a positive finding. It was agreed that this would be stood over pending a determination of liability with leave to both parties to file further appropriate material as necessary.

5 The Lessee's Amended Claim is that the Lessor is estopped by convention from denying the Lessee’s right to display signs in the common areas of the arcade of which the leased premises forms a part; alternatively an equitable estoppel, acquiescence or waiver apply to that effect or there is an implied term of the Lease to that effect. The Lessor denies any such entitlement on any of those bases.

6 The Tribunal during the hearing sought submissions on a further basis for such an entitlement namely that consent had been granted under the express terms of the Lease and continued to apply in some manner. Both parties were given leave to file further submissions on that basis of entitlement which they did on 17 December 2002.

Facts

7 A cafe under various names has been operating in shop C19 in the Imperial Arcade, Sydney, since 1965, originally as "Café Continental" and currently trading as “Café Tiffany's”.

8 The Lessee acquired the business and took an assignment of the then current lease in 1993, the now principal of the Lessee having worked in the business since 1985. That lease was due to expire on 30 April 2000 and in late 1999 the parties negotiated for a new Lease.

9 A lessor’s Disclosure Statement pursuant to s.11 of the Retail Leases Act was provided on 17th September 1999. This did not list any agreements or representations made by the lessor. A lessee’s Disclosure Statement pursuant to s.11A was executed by the Lessee on 24 September 1999 at the office of the Lessee's lawyer. A version of that Disclosure Statement is held on the files of the Lessor with the section relating to "representations relied upon" showing the "No" column ticked in respect of all categories of representations listed including the category “Any other representation upon which you are relying”. The version of the Lessee's Disclosure Statement produced by the Lessee and examined by the Tribunal contained no ticks in the "No" column. While there was a dispute as to which was the valid version, the Tribunal ruled that either way, the only possible conclusion on the facts was that no agreements or representations were asserted to be relied on by the Lessee other than in the Lease.

10 The Lease was executed by the Lessee and the Guarantors on or about 20 December 1999 and by the Lessor some time in March 2000 to commence 1 May 2000 for a term of 7 years. There was no express term of the Lease authorising the placement of any particular signs other but there are general provisions in clause

9.07:
LICENCES FOR USE OF COMMON AREAS- The Lessor reserves the right to grant to any person a licence to use any part of the common areas…either exclusively or in common with others for such purposes and for such periods as the lessor may think fit.

and in clause 10.13:

DISPLAYS OUTSIDE PREMISES — The Lessee shall not display goods, signs of any description or merchandise outside the demised premises without the consent of the Lessor.

11 Since 1965 up to the present dispute, the lessee at Shop C19 had placed an A frame ‘sandwich board’ sign at the Pitt Street entrance to the Imperial Arcade during lunchtime from 12 to 1 and at the Pitt and Castlereagh Street entrances in the evening from about 6 p.m. to close of business. At times over the period since 1965 the sign was also placed in the evening at the Castlereagh Street. entrance but over recent years and during the period of the current Lease and immediately prior thereto, the lunchtime sign has only been on the Pitt Street level. I find on the evidence that since 1993 when the Lessee acquired the business the lunch time sign was only put out at the Pitt Street level.

12 The Lease is a detailed Retail Shop Lease with a permissible use as a "coffee lounge" at an escalating annual rent payable in monthly instalments together with outgoings rent but with no percentage or turnover rent. The Lessee was required to carry on the business under the name "Tiffany" or "under such other name as is approved of in writing by the Lessor which approval shall not be unreasonably withheld".

13 Clause 10 of the Lease contains other detailed provisions concerning the common areas and car park in addition to those above which included:-

10.01.01
"The common areas shall at all times be subject to the control of the Lessor."
10.04
"The Lessee shall not obstruct … any part of the common areas and in particular … entrances, passageways …".
10.07
" The Lessor may permit any person … to display any merchandise … in any part … of the common areas … upon such terms and conditions as the Lessor may reasonably determine."
11.02
" CONDUCT OF CENTRE — The Lessor will conduct, manage and operate the Centre during the term."

14 The Lease contains a large number of provisions which prohibit the Lessee engaging in any conduct or action without the consent of the Lessor.

Category 1: Those where the Lessor's consent or licence power is absolute without provision as to whether or not the consent once given may be withdrawn. There are 11 of these of which some, including 9.06, 9.07 and 10.13, are not required to be in writing.

Category 2: One where consent in writing is required and which expressly provides that the consent so given can be withdrawn in certain stated circumstances.

Category 3: Those where consent may not be refused unreasonably (which will include a number where the provisions of the Conveyancing Act NSW 1919would imply reasonableness). There are 5 of these.

15 Following the commencement of the Lease on 1 May 2000 the Lessee continued to place its lunch time sign at the Pitt Street entrance and the evening signs in the Pitt Street and Castlereagh Street entrances. That state of affairs continued for many months. In December 2000 upon learning that the then Centre Manager was to leave the Centre, the Lessee asked for and obtained a letter in the following terms:

"Permission is given for you to place your luncheon board at the entrance of the Arcade in the Pitt Street section between 12 p.m. and 2 p.m. daily.

The board must be removed after 2 p.m. Failure to do will lose our permission."

16 The same placement of signs continued without comment from the Lessor until in late August 2001 a new Centre Manager, who had commenced duties in April 2001, had discussions with the Lessee, his file note of which records advice to the Lessee that it would no longer be permitted to place its lunch time sign at Pitt Street but that this would be permitted after 6 p.m.

17 In a letter of 14 September 2001 (which the Lessee denies receiving), in the context of declining to permit the Lessee to place some tables and chairs at the Pitt Street entrance in the evening, the Centre Manager said:

"I advise that I cannot allow the use of this area as proposed by you. I note that you continue to locate the A frame sign at the Pitt Street entrance and that the lighting and banners have not been removed from the windows of the premises.

Should you comply with our request, I may be in a position to review my decision".

Whether or not this was received, it is nevertheless relevant to the intentions of the Lessor as to then current consents.

18 Nothing further occurred until about 3 to 5 April 2002 when in meetings and correspondence the Centre Manager advised that the signs were not to be placed at either entrance and that any previous approval for them is "withdrawn as of the date of this letter and they are no longer permitted to be displayed in the common areas."

19 However no further action was taken and in June 2002 the Centre Manager discussed with the Lessee a style and art work for a more modern replacement sign which he told the Lessee the Lessor would be willing to fund. The Centre Manager says the Lessee did not reply to the offer. The Lessee says it did indicate a willingness to proceed with the new sign subject to wording but that the Centre Manager did not pursue the matter. In any event, the parties did not advance their discussions on this. At the hearing the Centre Manager stated that any offer in respect of such a replacement sign was now withdrawn.

20 On or about 1 October 2002 following further negotiations the Lessor wrote that the signs would be removed if placed by the Lessee and on 3 October the signs were removed. A sign of one other tenant was also removed on the same day.

21 On a view of the Arcade as requested by the Lessee, the Tribunal was able to observe on the Pitt Street and Castlereagh Street levels that many of the shops had the benefit of signs, display racks, shelves and extra seating within the common areas. In some cases the signs and structures are immediately adjacent to their tenancies; in some nearby by way of directional signage; in some as licensed seating in the centre of the common areas or by access corridors; in at least one case at the entrance of the Arcade, remote from the shop in question, in a location very close to the previous site of the Lessee's sign at the Pitt Street entrance.

22 The Centre Manager gave evidence of having formed an opinion that signs in common areas are a potential safety hazard and raise public liability issues. He placed before the Tribunal information concerning risk assessment obligations and advices from insurers concerning management of this risk. However he agreed that there had been no occasions of which he was aware when the Lessee's sign in particular and other signs and structures in the Centre had caused customers to fall or suffer any injury. Nor was he aware of any occasions when signs had been knocked over.

23 The Centre Manager gave evidence of two other tenants who had asked for the right to put signs at the Pitt Street entrance which had been denied. He also gave evidence of two tenants expressing concern at the signage; one that there were too many signs and the other specifically that the Lessee's sign was too large and blocked the entrance.

24 The Tribunal's observation however during the view was that the entrances were substantial and that none of the signage, in particular the more modern signs, could be said to constitute a blockage to the passage of even intensive pedestrian traffic into the Arcade.

25 What was seen by the Tribunal during the view was supported by photographic evidence tendered to the Tribunal showing clothing racks and signs throughout the Pitt Street and Castlereagh Street levels including racks for shops adjacent to escalators narrowing to a degree the access beside the escalator through to the remainder of the common areas.

26 The evidence demonstrated that, as is only to be expected in an important city shopping arcade, the common areas are managed to create an active and busy marketing ambience, utilising a wide range of signage display racks, shelves and extra seating; attracting customers by such an ambience is obviously important for the success of the business of the tenants and hence for the Arcade owner.

27 The issue for determination in this case is whether this Lessee is entitled to continue to place signs at the Pitt Street entrance at lunch time and at the Pitt and Castlereagh Street entrances in the evening and if so on what basis and terms.

Estoppel by convention

28 The first basis claimed by the Lessee entitling it to place the signs is that, by convention, the Lessor is estopped from denying such a right. The categories of estoppel are varied and arise both at common law and in equity and despite some endeavours and hopes that they may merge into a general proposition against un-conscientious conduct, the particular categories remain.

29 A commonly cited statement of the principle of estoppel by convention is by the High Court in Con-Stan Industries of Australia Pty Ltd v Norwich Winterthur Insurance (Australia) Ltd (1986) 160 CLR 266 at 244:

"Estoppel by convention is a form of estoppel founded not on a representation of fact made by a representor and acted on by a representee to his detriment, but on the conduct of relations between the parties on the basis of an agreed or assumed state of facts, which both will be estopped from denying."

30 Subsequent cases establish that it is not just an assumed state of facts which give rise to this form of estoppel, but also an assumed state of legal relations between parties; see cases cited in Meagher, Gummow and Lehane Equity: Doctrines and Remedies 4th Ed. at p.540

31 The Lessee's lawyer contends that in this case, notwithstanding that there were no express representations revealed in the Disclosure Statements and no express provisions in the Lease permitting these particular signs, it was a common assumption between the parties in entering into this Lease that the Lessee was permitted to place its signs at lunch time at Pitt Street and in the evenings at both entrances.

32 An example of the application of this doctrine was the decision of Young J in Klianis v Chatham Pty Ltd (1994) Supreme Court of NSW (BC9403123 unreported). This was a case where a video shop lessee displayed substantial signage and advertising material within its premises visible from outside contrary to a specific prohibition in the Lease against that conduct. Young J summed up the evidence covering various assignments and sub-leases:

"Accordingly, at the time when the latest head lease was granted and at the time when the sub-lease was granted, there is clear uncontradicted evidence that everybody acted on the basis that the signs which are common in video shops could be legitimately displayed and were not to be considered to be a breach of the Lease."

On that basis he concluded that convention or estoppel had been made out.

33 In this case the Lessee's lawyer contends that for 37 years everybody had proceeded in relation to this tenancy on the basis that these signs were permitted and that the new Lease was entered into on the basis of the common assumption that this state of affairs would also continue notwithstanding no express provision in the Lease and no representation or agreement to that effect acknowledged in the Disclosure Statements.

34 The Lessor’s lawyer contends that Young J's decision in Klianis would not apply because this is not a case of a breach of the Lease but a case where the question is whether the consent of the Lessor having been given, there being no breach of the Lease initially, that consent could be withdrawn. She also referred to the English Court of Appeal's exposition of conventional estoppel in Norweigian American Cruises v Paul Mundy Ltd [1988] 2 Lloyds Law Reports 343 and 352 where that Court said that the doctrine applies:

"…where (1) parties have established by their construction of their agreement or their apprehension of its legal effect a conventional basis, (2) on that basis they have regulated their subsequent dealings, to which I would add (3) it would be unjust or unconscionable if one of the parties resiled from that convention.”

35 Pointing to that third element of unconscienciousness or unconscionability, the Lessor says in the circumstances of this Lease the unconscionability element is certainly not made out even if the others are.

36 In my view while there is a basis for putting the case in terms of conventional estoppel, I am less comfortable in deciding on the basis of that legal theory in circumstances where a new lease has been negotiated with the processes of the disclosure of representations and matters relied upon. As I said in Xin v Zakos [2002] NSWADT 189, this structure within the Retail Leases Act of exposure of all matters relied on by the parties places a substantial burden in the path of a person seeking to rely on doctrines of estoppel. Hence I prefer to first analyse the application of the Lease according to its terms within the factual context established on the evidence before determining whether I need to decide if a conventional estoppel arises.

Consent

37 It is common ground that the Lessor consented to the placement of the signs at lunch time in the Pitt Street entrance and in the evenings at both entrances following the commencement of a new Lease on 1 May 2000. It is also not disputed that this consent could be within the terms of clauses 9.07 or 10.13 set out above; those clauses did not require consent to be in writing, unlike many other consent provisions in the Lease. As it was not a written consent, the question arises as to the nature and extent of this consent and how that is to be determined. On any view of it, this can only be determined by construing the Lease according to binding legal principle and by reference to evidence relevant to determining the intention of the parties in relation to the consent actually given pursuant to the Lease.

38 The first question is whether the consent is revocable at will as contended by the Lessor, or may be withdrawn on reasonable notice, as alternatively contended by the Lessor, or whether it continues for the duration of the Lease as contended by the Lessee.

39 The lawyers for the parties could not point to specific authority for the proposition that a consent given by a Lessor which consent was silent as to revocation and where the provision under which it was granted was silent as to revocation, could nevertheless be revoked at will or on reasonable notice. The Lessee's lawyer informed the Tribunal that "Somewhat surprisingly, a quite extensive search has not turned up any authority on this point." Accordingly I do consider I am bound by legal principle to apply this consent provision in a particular manner.

40 The next question therefore is the nature of the consent granted on the proper construction of the Lease with reference to its terms and other relevant evidence.

41 The Lessor's argument was based primarily on the construction of the Lease as a whole by reference to a range of provisions giving the Lessor control over the common areas including in relation to granting licences on such terms as it may think fit for structures and activities together with extensive provisions placing control of the common areas within the power of the Lessor within the overall power to regulate the conduct of the Centre, summarised above. The Lessor contends that that bundle of provisions in the Lease makes it quite clear that any consent once given can be revoked by a Lessor because otherwise it would not be in a position to exercise its rights in respect of the common areas.

42 In my assessment this is not the correct construction to be given to that bundle of lease provisions. The grant of any right, for whatever term, long or short, prevents the Lessor acting contrary to that grant in its management of the common areas while the consent runs. Of course the management of a major arcade is complex involving the simultaneous application of a range of rules and consents. That does not mean the Lessor cannot be fixed with the obligation to maintain a right granted while otherwise properly managing the centre in exercise of its other rights.

43 The Lessor also contended that s. 23D(1) of the Conveyancing Act NSW 1919 supports the principle that any right constituted by this consent is "a mere interest at will ". However in my view that section relates to "interests in land created by parol"; even within the extended definition of “land” in s.7 of the Conveyancing Act, this contractual licence pursuant to the Lease is not, nor is it contended by the Lessee to be, an interest in land at law or in equity.

44 The Lessor also contends there is an analogy with the conferral of power to make a statutory rule which by s.43(1) of the Interpretation Act 1987 (NSW) includes the power to repeal that rule. I do not think the analogy with the power attaching to a statutory rule is relevant to the position of a contractual consent under a lease.

45 In my view the best evidence of the intention of the parties as to the duration of this consent lies in their conduct both from the commencement of this Lease and during the preceding Lease under which the same consent was operative. Of course the Lessee point to a 37 year history of the continuation of this or similar consent and while that is obviously informative, it is the more contemporaneous conduct which I think should be examined to determine the current intention.

46 To begin, I think the evidence is quite contrary to the basic proposition of the Lessor that this consent is revocable at will. Further, when reviewed in full, I think it establishes that the intention was that when this consent was continued from the commencement of the Lease it was intended to continue during the Lease, subject to ordinary commercial and practical constraints.

47 Firstly, regard can be had to the extensive practice throughout the Arcade of granting consents to many tenants for placement of signs, racks, shelving, seating etc in common areas either adjacent to their shops, in nearby common areas or in some cases remotely. It is apparent from this evidence that consents to do these things are commercially valuable incidents of the leases, intended by the parties to enhance the operation of the respective tenants and of the Arcade as a whole. I do not think any of the tenants or the Lessor would contend that the Lessor could at will remove all such rights except where there was an express licence setting out a term.

48 Secondly, the Lessor for the first sixteen months of the current lease, continued the longstanding consent that had applied since 1993 when this Lessee became the proprietor of the Café Tiffany’s business.

49 Thirdly, even after the new Centre Manager reviewed the various rights of this Lessee in respect of signage, window advertising and seating in August-September 2001, he did not conduct himself as if the Lessor could peremptorily revoke this consent. While some communications purported to revoke the consent for the lunchtime sign, others established a negotiation context.

50 Fourthly in June 2002 when seeking to resolve the matter, the Centre Manager proposed a replacement design for signs to be provided at the Lessor’s expense and presented alternative artwork. That is quite inconsistent with a suggestion that the Lessor had the right to revoke the consent at will, or even at all.

51 The Lessor’s lawyer responds by pointing to evidence from the occupier of this cafe from 1965 to 1981 who agreed that the consent for the signs could have been withdrawn. However in my view that evidence relates to a time period far less relevant than recent years and since the start of the new Lease. She also points to the express letter of consent of 29 December 2000 from the retiring Centre Manager, (par 16 above), which referred only to the consent for the lunchtime sign; the inference is drawn that there was no continuing consent for the evening signs or at least not one which could not be revoked. Suffice to say that this letter obviously does not relate to the continuing position for the evening signs which continued to be consented to and accordingly I do not accept this letter establishes one way or the other the nature of the overall consent for the signs.

52 Accordingly in my opinion the proper construction of the legal relationship between these parties under the Lease in terms of the duration of the consent at the time when it was continued at the commencement of the Lease was that, subject to compliance with other aspects of the consent governing its operation, the duration was for the term of the Lease.

53 The conduct of the parties also makes it clear that the consent is subject to practical constraints.

54 As to location, the sign must not be placed in a manner which causes a risk to public safety or unduly inhibits access to or within the Arcade. The evidence was quite clear in this regard that the particular location in question over the years has never had either of these impacts and while they are quite properly matters for regular risk assessment by a Centre Manager in the context of its insurance, there was no evidence that the insurers of this Centre had raised the issue of any particular signs, shelves or other seating within this Centre as the basis for requiring additional risk cover. This is not to say that the parties would not be taken to have intended that particular location may need adjustment within the general entrance spaces from time to time having regard to actual traffic movements and other bona fide proposals for the common areas. I think that was part of the way this consent must have been intended to operate.

55 Similarly, I conclude that the intention of the parties in relation to the consent would include the need for any sign to accord with the style and design for the Centre as a whole and for signs and structures within the common areas; as those changed, it would be necessary for the signage to change. In fact, in this case the Lessor had proposed, at its expense, a more modern metal frame sign on a base rather than the A frame signs and the parties had discussed in detail art work for such a sign. In the circumstances those discussions did not come to fruition but in my opinion, they indicate an intention of the parties that those are relevant factors in the operation of the consent to the signage. Accordingly, in my view, the nature of this consent includes that the signs comply with appropriate design and style requirements of the Centre Manager having regard to the general operation of the signage and structures and the style of the Arcade as a whole. In this regard I note that the Centre Manager had been prepared to agree to a form of sign shown in photographic evidence rather than the more out of date A frame which had applied for many years; in my opinion the terms of consent would include the obligation of the Lessee to comply with that requirement at its own cost or as may be agreed between them.

56 Deciding the matter on this basis, it is not necessary to form a final opinion on the claim based on conventional estoppel.

Implied term

57 I do not think it is necessary to determine whether there was an implied term under the Lease permitting the placement of the sign. In my view the express provisions of the Lease interpreted in their application according to the available evidence provide the more appropriate and proper basis for the Tribunal to determine that the commercial relationship between these parties regulated the granting and operation of the consent to the signs.

Equitable estoppel, waiver and acquiescence

58 The Lessee put its case alternatively on the basis of principles of equitable estoppel, waiver and acquiescence. In my view as noted, the more sensible legal theory upon which to assess the relations between the parties is to proceed from the terms of the Lease and apply them with reference to the evidence as to the intention of the parties. Accordingly, I do not think it is necessary to examine in detail these principles except briefly.

59 In relation to equitable estoppel, the fact that the Disclosure Statements and the Lease referred to no representations concerning the signage at the commencement of the new Lease, creates the same concern as I had as to concluding a mutual assumption as to the state of the consent to signage within the doctrine of conventional estoppel.

60 Nor do I think that the facts in this case are apposite to a conclusion of waiver of rights or acquiescence in a breach; rather this was a positive consent to conduct as a valuable commercial incident of the Lease within its terms.

Conclusion

61 Accordingly I shall order that:-

(a) the Lessee be entitled to display a sign advertising its business at the Pitt Street entrance to the Imperial Arcade between 12 p.m. and 2 p.m. and at the Pitt Street and Castlereagh Street entrances from 6 p.m. till the close of its business

(b) the specific locations are at or near those previously designated by the Lessor with the right of the Lessor to require relocation within the general entrance areas having regard to demonstrated public safety or pedestrian traffic requirements.

(c) the signs must accord with design and style standards appropriate for the Centre in which regard the style and design proposed by the Lessor to the Lessee in June/July 2002 by way of a replacement for the previous A frame signs would be appropriate at the cost of the Lessee unless otherwise agreed between the parties.

62 The matter is adjourned pending the decision of the Lessee whether to amend its Application to seek compensation for the removal of the signs since October 2002 with the right of the Lessor to respond thereto. Upon such amendment, the matter will be listed for directions.