Skiwing Pty Ltd v Trust Company of Australia Ltd
[2005] NSWADT 188
•10/08/2005
CITATION: Skiwing Pty Ltd v Trust Company of Australia Ltd [2005] NSWADT 188 DIVISION: Retail Leases Division PARTIES: APPLICANT
Skiwing Pty Ltd
RESPONDENT
Trust Company of Australia LimitedFILE NUMBER: 045078, 055048 & 055049 HEARING DATES: On the papers SUBMISSIONS CLOSED: 08/07/2005 DATE OF DECISION:
10/08/2005BEFORE: Donald BG - Judicial Member APPLICATION: Claim for declaration of rights, obligations and liabilities under a lease MATTER FOR DECISION: Principal matter LEGISLATION CITED: Retail Leases Act 1994 CASES CITED: Skiwing Pty Ltd v Trust Company of Australia Limited [2004] NSWADT 169
Skiwing Pty Ltd v Trust Company of Australia Ltd [2005] NSW ADTAP 10REPRESENTATION: APPLICANT
Z Stojanoski, agent
RESPONDENT
M Allars, barristerORDERS: Order that the Lessor: 1. Prepare a Schedule of Lessee’s Contribution to Outgoings for each of the financial years ending 2000 to 2005 limited to the following items: municipal rates, water rates, land tax, insurances, toilet requisites, waste removal; excluding other items. 2. Calculate the appropriate share of the Lessee applying the provisions of the Lease in respect of the lettable retail area of the Centre. 3. Either reimburse the Lessee with any difference between the total amount already paid for those years 2000 to 2005 and the proper claimable amount or alternatively if there is a continued shortfall, issue a notice to the Lessee for the shortfall which the Lessee is by virtue of this judgment obliged to pay. 4. Issue future notices of the Lessee’s share of contributions to outgoings on that basis. Declare that the Lessee is obliged under the Lease to pay the contribution to the promotional fund pursuant to cl 17.14 and Item 14 of the Lease.
REASONS FOR DECISION
1 This decision relates to three matters all concerning the obligation of the Lessee to contribute to certain outgoings and costs under the Lease between the parties which commenced on 1 May 2000.
2 Two matters, 055048,055049 are remitted to me from the Appeal Panel in its decision Skiwing Pty Ltd v Trust Company of Australia Ltd [2005] NSW ADTAP 10. The Panel disagreed with my decision Skiwing Pty Ltd v Trust Company of Australia Limited [2004] NSWADT 169 relating to those matters then numbered 045027,045068. The third matter 045078 was stood over pending the appeal as it involves the same issues.
3 The Appeal Panel overturned my decision in one important aspect and determined that s.12 of the Retail Leases Act 1994, which absolutely bars recovery of certain costs unless disclosed in the Lessor’s Disclosure Statement, can also include under the category of ‘services’ items falling within the outgoings of a lessor as defined in the lease in relation to premises. I had concluded it cannot have that effect and that the general provision for failure to disclose outgoings in s.11 applies, namely the right to terminate the lease rather than outright avoidance of the contribution.
4 The instruction by the Appeal Panel, remitting the matter to the Tribunal, as to my task is not clear in paragraphs 62-66 of their decision dealing with the way the Retail Leases Act 1994 governs "outgoings" on the one hand and "cost of … services" on the other, as well as the inter-relationship of s. 3 (definition of outgoings), s.22 (recovery of outgoings), s.11 and Schedule 2 (disclosure statement and outgoings) and s.12 (undisclosed lessee's contributions).
5 I read the Appeal Panel to be saying that a cost item can only be an "outgoing" as defined in the Act, (rather than the lease), if it is one of the "payments that the lessor has made. It cannot apply to charges that the lessor levies upon a lessee for services that the lessor itself provides." (par 61.) The Panel added:-
6 For the Lease in question, the Disclosure Statement specifically stated "Facilities and services provided by the Lessor - Nil" and quite clearly did not contain any reference to a list of outgoings. Accordingly on the Appeal Panel's view of the way the Act works, under this Lease any services provided by the Lessor within the meaning of that word in s.12, are barred; and the matters listed as outgoings in the Lease, even though they may not fall within the definition of outgoings in the Act, in so far as they are ‘services’ provided by the Lessor, are barred from recovery unless listed in the Disclosure Statement.
62… anything in the nature of a 'service' that the Lessor itself provides pursuant to the Lease cannot fall within the [outgoings] …regime. But it may well be a "service within s.12, in which event this section prohibits the charging of any contribution to the Lessee unless the liability to make this contribution has been disclosed in the Disclosure Statement.
63. It also follows that an item included in a definition of "outgoings" in a lease will not be an "outgoing" under the Act if it is in the nature of a service the lessor itself provides. Furthermore, it may well be a "service" within the meaning of s.12.
7 The Appeal Panel specifically rejected my own view that the way the Act works is that matters which constitute outgoings as defined in s.3, including matters relating to a lessor managing the operation, maintenance and repair of a building, are not, as a matter of both proper statutory construction and legislative policy, included within ‘services’ within s.12.
8 Accordingly, my task is to examine the outgoings here claimed by the Lessor and determine which of them also constitute ‘services’ provided by the Lessor, applying the Panel’s reasoning, so as to be barred under s.12 for failure of the Lessor to have declared them in the Disclosure Statement either as outgoings or as services.
9 The Appeal Panel in particular noted that all expenses within item 1.16.07 of the Lease would be debarred by s.12 for failure to be declared in the Disclosure Statement. That item is:-
10 The Appeal Panel also said that items debarred by s.12 "…would appear also to be the case with item 1.16.15" which reads:
The cost of operating and supplying all services from time to time provided by the Lessor for the tenants, occupiers and invitees of the Centre including but without limiting the generality of the foregoing the cost of providing or subsidising any child minding centre and the cost of policing and regulating traffic in the carpark.
11 On the remit, I was charged with scrutinizing all items in 1.16 having regard to those and other comments to identify those items which may not be included in the claimable outgoings because they are services provided by the Lessor which by virtue of s.12 must be specified in the Disclosure Statement before they can be recovered at all.
The cost of managing, controlling and administering the Centre and the collection of rents and other monies including but without limiting the generality of the foregoing the reasonable wages and other emoluments paid to any Centre manager and other clerical staff employed by the Lessor for such purposes together with all statutory overheads related to such wages and fees and charges paid to any managing agent but not including leasing commissions and fees and salaries, wages, travelling and accommodation expenses incurred by the directors or administrative officers of the Lessor not directly engaged in the management and operation of the Centre.
12 It might be contended that the Appeal Panel was drawing a distinction between, on the one hand the Lessor itself by its own staff and using its own assets providing a service in relation to the building and of benefit to each shop premises and, on the other hand outsourcing that work to other people by way of contract. The Panel did not specifically deal with that distinction but reading their decision, it would be in my view an inappropriate one because the key issue they appear to address, particularly in singling out items 1.16.07 and 1.16.15 is the nature of the service and whether that service is one for which the Lessor accepts responsibility.
13 Therefore I am proceeding on the basis that debarred items are those constituting services whether provided by the Lessor itself using its own staff and assets or outsourced to contractors whether as to personnel or equipment.
14 For each of the years in question, from financial 2000 through to financial 2005, the Lessor in its letter of 4 May 2005 lists the following items as relevant outgoings:
15 In its submissions the Lessor contends that every one of those items ‘…is consistent with the Appeal Panel's holding that a matter specified in a lease as an outgoing must not be a charge for a service that the lessor itself provides’.
municipal rates
water rates
land tax
wages
insurances
repairs and maintenance
cleaning
energy and communications
toilet requisites
waste removal
gardens and grounds
security
management expenses
air conditioning - common area
other (2001, 2004 only).
16 For example the Lessor submits that, ‘The repair and maintenance of the common areas of the Centre is part of the cost of operation of the building rather than a service provided by the lessor.’ So, too, for the cleaning of common areas, the cost of maintaining gardens and landscaped areas, the cost of providing security and also management expenses. The Lessor specifically asserts that "Wages of staff of the Centre employed in relation to its operation are part of the cost of operation of the building rather than a service provided by the lessor."
17 I find it impossible to draw those distinctions for those items all of which seem to me quite clearly to fall within the Panel’s description of services.
18 Of the listed items, I think it is quite clear that rates, tax, insurances, toilet requisites, waste removal are not services provided by the Lessor. However, on the face of it all the others are as they are all services that partly pertain to each retail shop lease in the Shopping Centre and they are provided by the Lessor whether directly through its own staff or through contractors.
19 Accordingly I propose to direct the Lessor to:-
20 On my reading of it, Application 045078 raises the same issues as here determined and these orders should effectively determine that matter. Accordingly I make those orders in that matter as well.
1. prepare a Schedule of outgoings for each of the six financial years limited to the following items:
excluding other items,
municipal rates
water rates
land tax
insurances
toilet requisites
waste removal,
2. calculate the appropriate share of the Lessee applying the provisions of the Lease in respect of the lettable retail area of the Centre which the Appeal Panel agreed I had found were correctly applied.
3. either reimburse the Lessee with any difference between the total amount already paid for those years 2000 to 2005 and the proper claimable amount or alternatively if there is a continued shortfall, issue a notice to the Lessee which the Lessee is by virtue of this judgment obliged to pay.
4. issue future notices of the Lessee’s share of contributions to outgoings on that basis.
21 As to the claim for contribution to promotional expenses which I had upheld at first instance, that is also set aside by the Appeal Panel in par 74. However under par 75 of their decision, I am to reconsider whether applying their reasoning, this contribution is payable.
22 In my original decision, cited by the Panel, I had said of this item:-
23 On any view of the Appeal Panel’s decision, this item was set out in the Disclosure Statement, and so should be recoverable whether as a service, an outgoing or an item separately described and detailed. Accordingly I propose to order that the Lessee is obliged to make this payment.
27 Clause 9 of the letter of offer provided that a charge of 5% base rental will be levied under the proposed lease on offer. The Disclosure Statement states that ‘The Lessee is to contribute to the retail shopping centre promotional fund as specified in the lessor’s letter of offer." The lease repeats the 5% figure in Item 14 ‘Maximum contribution to Promotional Fund’ in the reference schedule to the lease with the operative provision obliging the tenant to pay being clause 17.14.
24 I make the following orders:-
Order that the Lessor:-
1. prepare a Schedule of Lessee’s Contribution to Outgoings for each of the financial years ending 2000 to 2005 limited to the following items:
excluding other items.
municipal rates
water rates
land tax
insurances
toilet requisites
waste removal,
2. calculate the appropriate share of the Lessee applying the provisions of the Lease in respect of the lettable retail area of the Centre.
3. either reimburse the Lessee with any difference between the total amount already paid for those years 2000 to 2005 and the proper claimable amount or alternatively if there is a continued shortfall, issue a notice to the Lessee for the shortfall which the Lessee is by virtue of this judgment obliged to pay.
4. issue future notices of the Lessee’s share of contributions to outgoings on that basis.
Declare that the Lessee is obliged under the Lease to pay the contribution to the promotional fund pursuant to cl 17.14 and Item 14 of the Lease.
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