Solace Surf Pty Ltd v Dargins Pty Ltd
[2011] QCAT 586
•18 November 2011
| CITATION: | Solace Surf Pty Ltd and Ors v Dargins Pty Ltd & Ors [2011] QCAT 586 |
| PARTIES: | Solace Surf Pty Ltd t/as Solace Surf Tony Hanrahan David Gunthorpe |
| v | |
| Dargins Pty Ltd & Ors |
| APPLICATION NUMBER: | RSL054-11 |
| MATTER TYPE: | Retail shop leases matters |
| HEARING DATE: | 1 November 2011 |
| HEARD: | On the papers |
| DECISION OF: | Ms Anne Forbes, Member |
| DELIVERED ON: | 18 November 2011 |
ORDERS MADE: | 1 That part only of the Notice of Dispute be struck out, namely the claim for a declaration that in failing to carry out a Rent Review Noosa is in breach of the lease. 2 That costs of this application be costs in the cause. |
| CATCHWORDS: | Application to strike out proceeding – proceeding under Retail Shop Leases Act 1994 for declarations – one head of claim struck out as misconceived – rest of claim to proceed Queensland Civil and Administrative Tribunal Act 2009, s 47 |
APPEARANCES and REPRESENTATION (if any):
This proceeding was heard on the papers in the absence of the parties pursuant to section 32(2) of the Queensland Civil and Administrative Tribunal Act 2009.
REASONS FOR DECISION
On or about 1 July 2007 the first Applicant, Solace Surf Pty Ltd (“Solace”) leased from the Respondent (“Noosa”) premises at 229-231 Gympie Terrace, Noosaville, for the purposes of a surf clothing shop. The lease was due to expire on 30 June 2012.
By mid-2010 the business was languishing. A market rent review was due on 1 July 2010. Solace proposed a rent reduction, but Noosa did not agree. Soon afterwards Solace vacated the premises. In those circumstances the following provision of the lease came into play:
“9.4(5) If the tenant vacates the premises, whether with or without the landlord’s consent, the landlord will be obliged to take steps to mitigate its damages and to endeavour to lease the premises at a reasonable rent and on reasonable terms. The landlord’s entitlement to damages shall be assessed on the basis that the landlord should have observed the obligation to mitigate damages contained in this paragraph. The landlord’s conduct taken in pursuance of the duty to mitigate damages will not by itself constitute acceptance of the tenant’s breach or repudiation or a surrender by operation of law.”
According to Solace the only attempt by Noosa to find a new tenant was a small notice affixed to the shopfront. Solace also says that it introduced “possible” tenants, but they required a lower rent than Solace had been paying, and Noosa would not accept them unless Solace reimbursed Noosa for an estimated rent deficiency of $16,500.
Substantive relief sought
On 9 June 2011 Solace and its guarantors (the second and third Applicants) commenced these proceedings under the Retail Shop Leases Act 1994 (“the RSLA”) seeking relief (as amended[1]) that may be summarised as follows:
[1] Response to application for Miscellaneous Matters 14 October 2011.
i. A declaration that in failing to carry out a Rent Review Noosa is in breach of the lease.
ii. A declaration that Noosa is in breach of the Lease by failing to advise Solace of the outgoings one month before the end of each financial year, and by failing to provide Solace with an audited statement of expenditure for outgoings.
iii. A declaration that Noosa, in not responding reasonably to Solace’s efforts to find another tenant for 12 months and unreasonably refusing to accept a prospective tenant breached its obligation to mitigate its loss as required by clause 9.4(5) of the Lease.
iv. A declaration that Noosa engaged in unconscionable conduct in relation to the retail shop lease.
v. An order that Noosa pay an amount to Solace for the said unconscionable conduct.
On 20 September 2011 Noosa sought an order striking out the substantive application, wholly or in part (“the interlocutory application”). Such an order may be made if the Tribunal, or a legally qualified member or adjudicator, considers a proceeding, or part of same, to be frivolous, vexatious or misconceived, or lacking in substance, or otherwise an abuse of process.[2]
[2] Queensland Civil and Administrative Tribunal Act 2009 (“QCAT Act”), s 47.
Taking the grounds of the substantive application seriatim, I shall deal with the merits of the interlocutory application, as I see them, in the light of submissions upon that application.
Failure to carry out market rent review
This topic is treated in clause 3.2 of the lease, subject to sections 20[3] and 28[4] of the RSLA. Accepting, for present purposes, Solace’s claim that it sought a review, and Noosa refused, Solace’s remedy lay in section 28(2) of the RSLA, entitling it to ask the chief executive to nominate a specialist retail valuer to make the required determination.[5] Clause 3.2(3) of the lease, as well as the RSLA, clearly contemplates that the tenant may initiate this process. There is no suggestion that Solace did so, and in my view its inactivity cannot now be presented as a cause of action. Therefore I consider that the present head of claim is misconceived, and should be struck out.
[3] Act prevails over inconsistent leases.
[4] Rent review on basis of current market rent.
[5] As in Kumari v Gao [2008] QRSLT 19.
Failure to advise outgoings and to provide audited statement
This claim is based on sub-clauses 2.2(c) and 2.2(d) of the lease. On present materials, it is by no means clear, even if this allegation is made out, that Solace suffered any consequent loss or damage. However, that deficiency may be curable by amendment, and I do not consider that this claim, as it stands, should be stigmatised as frivolous, misconceived etc. I decline to strike it out.
Alleged failure to mitigate
This claim depends on clause 9.4(5) of the lease, quoted above. The question whether the instrument’s reference to damages should more appropriately be a reference to debt need not be pursued here. In its Response to the Notice of Dispute, Noosa submits that clause 9.4(5) only comes into play where the lessor terminates the lease. But the terms of the clause do not support that interpretation. Further, in its submissions in support of the interlocutory application, Noosa contends that the present claim amounts to one for determination of rent payable, which the Tribunal has no jurisdiction to make. I reject that submission. In essence, Solace is complaining that, if Noosa had duly complied with the subject clause (which allegedly it did not) Solace’s liability to Noosa, if any, would be eliminated or reduced. If that is not a dispute about the procedure for determining rent payable[6], it is a retail tenancy dispute, namely a dispute under or about a retail shop lease, which is clearly a matter for this Tribunal.[7]
[6] RSLA, s 103(2)(a).
[7] RSLA, s 103(1), Schedule Dictionary, “retail tenancy dispute”.
The success or failure of this claim will depend, of course, on the evidence presented at the trial, on the mitigation issue. I do not consider that s 47 of the QCAT Act is applicable to this claim. I decline to strike it out.
Unconscionable conduct
Section 46A was added to the RSLA in the year 2000. Since then, the elusive concept of unconscionable conduct has often been invoked as a residuary or makeweight complaint in applications containing more specific allegations.[8] So far it has not been a fruitful vine.[9] Nevertheless, it is a recognised cause of action in the RSLA, and having raised it, Solace is clearly entitled to have its allegation tried on its merits. Of course I am not concerned with those merits here, and I express no opinion on them. The evidence is yet to be completed and assessed.
[8]“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”: Schnitzel World Pty Ltd v Yung Chon Pty Ltd [2010] QCAT 474 at [68].
[9]A section 46A claim succeeded in Gilmour v Hing, Chun, Leung and Ng [2004] QRSLT 28; similar claims failed in Schnitzel World Pty Ltd v Yung Chon Pty Ltd [2010] QCAT 474; Potiris v Palmtree Pty Ltd [2004] QRSLT 9; Susanna and John Pty Ltd v Trident Ashgrove JV Pty Ltd as Trustee and Tribune Properties Pty Ltd [2011] QCAT 101 (appeal dismissed); Fumi Sushi Pty Ltd v Perpetual Nominees Ltd (No 2) [2006] QRSLT 25; Queensland Developments Pty Ltd v Simnat Pty Ltd [2002] QRSLT 4; Opal Paradise Pty Ltd v Abelian Pty Ltd and Pier Properties Pty Ltd (No 2) [2005] QRSLT 10; N & C Pty Ltd v Hillhouse [2008] QRSLT 17; Lau v WAK Gladstone Pty Ltd [2004] QRSLT 26; Pacific Lifestyle Financial Services Pty Ltd v El Safty Enterprises Pty Ltd [2007] QRSLT 6; Opal Paradise Pty Ltd v Abelian Pty Ltd and Pier Properties Pty Ltd (No 3) [2005] QRSLT 17.
I do not consider that s 47 of the QCAT Act is applicable to this claim. I decline to strike it out.
Costs
Costs may be awarded under s 47(2)(c). I shall order that any costs of this largely unsuccessful application be costs in the cause.
ORDERS
That part only of the Notice of Dispute be struck out, namely the claim for a declaration that in failing to carry out a Rent Review Noosa is in breach of the lease.
That costs of this application be costs in the cause.
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