Sticky Fingers (Qld) Pty Ltd v Klooster

[2010] QCAT 611

CITATION: Sticky Fingers (QLD) Pty Ltd v Klooster [2010] QCAT 611

PARTIES:	Sticky Fingers (QLD) Pty Ltd
v
Mr Frank Klooster

APPLICATION NUMBER:   RSL009-10  

MATTER TYPE: Retail shop lease matters

HEARING DATE:     8 September 2010

HEARD AT:  BRISBANE

DECISION OF: Dr Peter McDermott RFD
Mr Greg Clarke
Mr Malcolm Macrae

DELIVERED ON: 24 November 2010

DELIVERED AT:      BRISBANE

ORDERS MADE:

Pursuant to section 83 of the Retail Shop Leases 1994, the Queensland Civil and Administrative Tribunal:-
(i) Frank Mark Klooster (the respondent) is        required to pay Sticky Fingers (Qld) Pty       Ltd (the applicant) the sum of $31,133.50       as compensation; and

(ii)  Sticky Fingers (Qld) Pty Ltd (the applicant) is       not liable to pay to Frank Mark Klooster (the       respondent) the sum of $7,370.00 for       payment for the “de-fit” to Troy Ware       Constructions as well as legal cost of $564       paid to Sykes Pearson Miller Lawyers for the       Notice to Remedy Breach of Lease.

CATCHWORDS :  Retail tenancy dispute – Retail Shop Leases Act 1994
Consent to assignment of lease unreasonably withheld- Property Law Act 1994, s 121
Notice to remedy breach of covenant-  Property Law Act 1994, s 124 – no evidence of an actual breach of covenant
Exclusion of jurisdiction of courts – matter brought before court after service of dispute notice- Retail Shop Leases Act 1994, s 94(1)
Order made for payment of compensation and declaratory order -- Retail Shop Leases Act 1994, s 94(1)

APPEARANCES and REPRESENTATION (if any):

Mr A Netherwood, Director of Applicant
Mr F Klooster. Respondent

REASONS FOR DECISION

INTRODUCTION

1. This is a retail tenancy dispute under the Retail Shop Leases Act 1994. The applicant and respondent are parties to a deed of variation of a lease of property dated 20 June 2007. The original lessee under the lease, which was executed on 14 April 1999, assigned all her rights under the lease to the applicant on 12 February 2004. On 18 February 2004 the term of the lease was renewed for a term of 3 years commencing on 14 April 2004. The applicant exercised an option of renewal to renew the lease for a term of three years commencing on 14 April 2007.

2. The property which is subject to the lease is a café at Montville known as Poppys, being Shop 15 at Montville Village Square situated on land described as Lot 15 on BUP104141, County of March, Parish of Maleny, Title Reference 50120057 (“the shop”).

3. On 2 December 2009 the applicant entered into a contract to assign the lease for the shop to Mr Ross Taylor for $32,500. Mr Taylor was to have paid cash for the business. The settlement date under the contract was 16 December 2009. On 15 December 2009 the respondent declined to consent to the assignment of the interest of the applicant in the lease to Mr Taylor.

4. The dispute between the parties essentially relates to a claim by the applicant for compensation for loss sustained by the applicant because the respondent unreasonably withheld consent to the assignment of the lease. The dispute also concerns the claimed costs of works on the shop (described as a “de-fit”) that have been expended by the respondent.

NOTICE OF DISPUTE

5. The dispute between the parties is set out in a Notice of Dispute dated 4 February 2010 and filed on 5 February 2010, the dispute relates to the failure of the respondent to consent to the assignment of the lease of the shop.

In that Notice of Dispute the applicant claimed the following remedies:-

1. Compensation -$27,350 ($32,500 lost sale less 25% of value of removed fixtures rrp$20,596).

2. Compensation- $7,365 ($6023 rent, $494 rates, $284 body corporate, $564 breach of lease) for costs since 16^th December 2009 that would not have been incurred had the sale been completed.

3. Compensation -$3180 (equivalent to 25% of rrp value of $12,735) for fixtures in the shop to which the applicant had no access and could not remove namely an exhaust fan and stainless steel canopy, a hot food display unit and a fridge and deli display.

6. Later, the applicant, by letter dated 25 February 2010, added to his dispute a claim that he had received from the respondent on 24 February 2010 for $7,370 “for the de-fit and making good of Lot 15”. The applicant essentially seeks relief against payment of that sum.

HISTORY OF THE MATTER

7. On 7 December 2009 the solicitors for the applicant requested the consent of the respondent to the assignment of the lease.

8. On 8 December 2009 the solicitors for the respondent wrote to the solicitors for the applicant and requested a number of documents so that their client could consider granting his consent to the assignment. The documents requested by the applicant included a statement of assets and liabilities of the assignee that was certified by a qualified accountant; the history of past business dealings of the assignee; details of borrowings necessary to complete the purchase and evidence of the provision of the purchase monies; two written trade references for the assignee and two written character references for the assignee.

9. In response to that letter various documents were provided to the solicitors for the respondent. The documents included a letter from Ross Taylor outlining his experience, a resume of Ross Taylor, a resume of Evelyn Taylor who would be involved in the business but will not be a party to the lease, character references as well as certificates from Evelyn Taylor. The respondent did not make any enquiries of those who wrote the character references. As well as those documents, a statement of assets of Ross Taylor was provided but that statement was not verified by a qualified accountant as requested.

10. On 11 December 2009 the solicitors for the respondent wrote to the respondent to ascertain whether “you will accept the statement or insist on it being certified by an accountant”. The respondent did not instruct his solicitors to insist that the statement be verified by an accountant.

11. In that letter of 11 December 2009, the solicitors for the respondent also remarked that apart from vehicles and furniture the only real asset that was owned by the assignee was cash of $25,000. The solicitors advised the respondent in the following terms: “If you are prepared to consent to the assignment, you may wish to consider asking the assignee to pay a bond of say, 3 to 6 months rent so that you hold some security in the event the tenant defaults. We note that the current lease does not require a bond to be paid by the tenant”. This recommendation was not acted upon.

12. Also, in that letter of 11 December 2009 the solicitors for the respondent advised the respondent as follows: “the assignee does not propose to obtain financial advice or legal advice on the terms of the lease and therefore the [legal advice and financial advice] reports will not be provided”. The solicitors sought instructions from the respondent as follows: “Would you please advise whether you require these reports to be provided by the assignee or whether you will waive this requirement”. The respondent did not request Mr Taylor, the proposed assignee, to provide those reports.

13. On 15 December 2010 the solicitors for the respondent wrote to the solicitors for the applicant in the following terms:

“I refer to your request to assign the lease received on 7 December 2009.

My client has considered the information provided by the assignee.

My client has instructed that it is not satisfied with the information provided by the assignee and consent to the assignment of the lease is refused on the basis that clause 4.2 of the lease has not been satisfied.”

14. On 15 December 2009 the applicant sent an email to his solicitors after having discussions with the respondent. In that email the applicant remarked: “Frank has been asked to assign a lease to a guy with little to no experience, few assets and a distinct cash flow shortfall. I wouldn’t assign either”. In giving evidence before us the applicant remarked that he had written that email only after having had discussions with the respondent and without having seen what actual material had been provided to the respondent by Mr Taylor, the proposed assignee.

15. On 16 December 2009 (1:38pm) the applicant wrote an email to the respondent in which the respondent was advised that the applicant would not be exercising the option to renew the lease for a further term. In that email he also remarked:

“If it’s any reassurance then I will personally guarantee the rent for 6 months – you can have that drawn as an official lawyer document or accept my Gentlemen’s agreement – I will not default, but then nor do I suspect there will be a need to.

If a new buyer is not found then I shall have the hassle of having to remove all my fixtures & fittings, all my plant and equipment and trying to sell them separately.

In addition I would probably have to decorate before I hand over”.

16. The respondent replied to that email on 16 December 2009 (2:32 pm) in the following terms: “Though I sympathise with your concerns, my position remains unchanged”.

17. The applicant soon after replied on 16 December 2009 (3:15pm) in the following terms: “Even with a 6 months guarantee, that’s quite a reasonable guarantee what do you need from me to make this happen?”. The respondent did not response to that email.

18. On 4 January 2010 the solicitors for the respondent wrote to Mr and Mrs Netherwood, as directors of the applicant, claiming that it was then in breach of lease. Enclosed with that letter was a “Notice to Remedy Breach of Covenant” under section 124 of the Property Law Act 1974. That letter contained a demand for the payment of $563.96 for legal costs incurred by the respondent in providing the notice. The letter also advised the applicant that it had fourteen days in which to remedy the breach.

19. The “Notice to Remedy Breach of Covenant” referred to a “covenant by the lessee to keep the premises open for trade or business, and the breach by you of that covenant”. The notice also contained the statement: “I give you notice and require you to remedy that breach by opening the Premises for trade or business”. There is no evidence that the respondent had ever raised the issue of the alleged breach of covenant with Mr Netherwood prior to issuing the notice.

20. On 11 January 2010 the applicant wrote to the respondent in the following terms:

“I need to make arrangements to strip out the fixtures and fittings or of course you may wish to let the unit in a state of readiness for trade – as an ongoing concern – in which case you may be interested in purchasing the fixtures and fittings. To prepare the bare shell for trade would be a significant outlay for a new tenant, I conservatively estimate around $60,000 – the purchase and fitting of the exhaust fan and s/s canopy alone would be in excess of $7,000. Currently  there are a couple of interested parties in buying Poppy’s and that surely would be the best solution all round – a new tenant saves us both significant inconvenience. I do hope that we can come to some agreement over the matter. After 6 years we have had few disagreements so it is a shame it has to end so sourly”.

21. On 12 January 2010 the respondent wrote to the applicant in the following terms:

“I have no problems in you re-assigning the lease and I agree it to be your best solution. However, it is up to you to qualify the buyer as I will not let the lease to anyone who cannot show that you are capable of serving and supporting the terms of the lease”.

22. Mr Alan Netherwood, a director of the applicant, gave evidence that on the evening of 27 January 2010 he had received a telephone call from the respondent in which the respondent advised that he had changed the locks at the shop. Mr Netherwood, in giving evidence, remarked that the respondent had declined to wait at the shop to enable him to remove equipment. The respondent in giving evidence remarked that it would not have been “safe” for him to remain at the shop as he had just changed the locks. We infer from those remarks that the respondent was concerned for his personal safety.

23. Mr Netherwood in his evidence remarked that when he arrived at the shop he noticed that some of the trading stock of the applicant had been deposited in the courtyard. He remarked that the respondent had taken frozen chickens from the shop and left them in the courtyard. Mr Netherwood said that his being locked out of the shop left him with no access to equipment, such as tables, chairs, an oven and a microwave, that he needed to use in his other nearby business, the Coffee Pot.

24. At this time when the respondent had purported to exercise the right of re-entry the applicant had not been in arrears of rent for the lease. In fact the applicant continued to pay rent and outgoings to the respondent until the end of the lease. Mr Netherwood had also not received any prior warning from the respondent that he would change the locks on the shop or remove trading stock from the premises. Mr Netherwood reiterated in his evidence that he needed access to the shop so that he could trade at the Coffee Pot.

25. On 28 January 2010 Mr Netherwood wrote a letter to his solicitor which detailed a conversation that he had with the respondent:

“Urgently need to speak to you early today.
At 8pm last night (Thursday) I received a phone call from Frank Klosster he has changed the locks in Poppy’s and taken possession.
He removed some (but not all) of my trading stock the majority of which belonged to the Coffee Pot and placed this in the courtyard for me – highly dodgy with frozen chicken etc defrosting everywhere.
He has removed 4 out of 6 tables and 9 out of 24 chairs that belonged to the Coffee Pot and placed these in the courtyard – I have no access to the other chairs and tables I need to open the Coffee Pot correctly.
There is also an oven, microwave and other Coffee Pot stuff stored in Poppy’s that I cannot access.
He refused me access to remove this, he has also refused me access to remove Poppy’s fixtures and fittings.
He would not wait for 15 minutes till Karen returned home, so I could not get down to see him at Poppy’s (small children at home).
He states that he will be reasonable and allow me to negotiate with a new tenant with regard to purchase of my fixtures and fittings.
He states that if a new tenant does not want them he will sell them at auction and I will get the proceeds.
Other than the letter of breach, which we have discussed I have had no intention that this was to happen – no notice served”. 

26. After receiving advice from the police, Mr Netherwood proceeded to remove some equipment from the shop. The fact that Mr Netherwood had acted on the advice of the police is evident from an email that was sent to him on 29 January 2010 by the respondent:

“Alan,
I received a phone call from the police this morning who felt it okay for you to re-enter the premises. He was wrong and was told this. On checking with my lawyers it had been verified that you were “Breaking and Entering”. This will not be tolerated, any further attempt to enter the premises for ANY reason will be swiftly dealt with. Meanwhile, formal complaints against the policeman’s comments are being made. I offered you the courtesy of possible negotiations with an incoming tenant, this has now been revoked and all fittings shall be removed from the premises and the building made good. Please advise in the next 24 hours as to which fittings you want on removal, failure to advise shall see them disposed of.
Please also note that 50% of the courtyard belongs with Poppy’s Lease and is not to be used for trade from your other shops.
Regards
Frank Klooster”

CONSIDERATION

27. The lease contains a covenant against assigning the lease without the consent of the Lessor (clause 4.2). By the operation of s 121(1) of the Property Law Act 1974, despite any express provision to the contrary, the lease of the shop is deemed to be subject "to a proviso that the ... consent is not to be unreasonably withheld but that this proviso does not preclude the right of the lessor to require payment of a reasonable sum in respect of any legal or other expenses incurred in connection with the ... consent".   This provision applies to all leases whether made before or after the commencement of the Property Law Act 1974 which is 1 December 1975 (s 1(2)-(3).

28. After the hearing we invited submissions by the parties as to the operation of s 121(1) of the Property Law Act 1974. We took this course of action because even though the complaint of the applicant relates to a notice seeking compensation from the respondent because his consent to the assignment of the lease was unreasonably withheld, the material before us did not contain any reference to s 121(1) of the Property Law Act 1974. Having regard to the operation of s 29 of the Queensland Civil and Administrative Tribunal Act 2009, we thought it appropriate that both parties fully appreciate “the nature of assertions” that we have to consider.

29. After the parties had filed their submissions in this Tribunal, we ensured that each party had a copy of the submissions made by the other party and also had an opportunity to make a final reply to each submission. We did this having regard to s 28 of the Queensland Civil and Administrative Tribunal Act 2009 which requires that QCAT must act fairly as well as observing the rules of natural justice.

30. It was on 15 December 2009 that the respondent indicated that he would not consent to the assignment of the lease, this is so even though prior to that date his solicitors had already provided the assignment documents for execution. We regard the provision of those assignment documents as being inconsistent conduct by the respondent who later decided to refuse consent.

31. The letter of 15 December 2009 from the solicitors for the respondent contained the reason why the consent of the respondent was not granted to the assignment:

“My client has instructed that it is not satisfied with the information provided by the assignee and consent to the assignment of the lease is refused on the basis that clause 4.2 of the lease has not been satisfied.”

32. We have to consider whether the respondent had unreasonably withheld his consent to the assignment of the lease. We outline the matters we have considered in deciding this question.

33. At the outset we observe that this letter of 15 December 2009 does not specify what “information” the respondent was not satisfied with. We consider that if the respondent wanted more information about the financial standing of the assignee, it was open to him, as was suggested by his solicitors, to have the accounts of the assignee verified by an accountant. The respondent did not take this course of action. The respondent in an email to his solicitor on 14 December 2009 (3:52 pm) remarked:

“I am not sure if I am permitted to refuse an applicant. If not then I would agree with your advice and insist on a bond of 6 months and have his figures validated by an accountant. I am also concerned that he shall be under capitalised with his available cash after placing such a bond and paying his legals etc”.

34. However, the respondent simply declined consent instead of insisting on a bond of 6 months and having the accounts of Mr Taylor validated by an accountant. The respondent also did not seek further confirmation that Mr Taylor understood the lease documentation. We consider that the letter of the respondent to his solicitors reveals an appreciation that he did not have an unfettered right to decline consent to the assignment of the lease.

35. On the settlement date the applicant, in an email of 16 December 2009 (1:38 pm), made an offer to provide the respondent with a guarantee of 6 months rent. That offer of the applicant was soon after declined by the respondent: in an email of 16 December 2009 (2:32 pm) the respondent remarked: “Though I sympathise with your concerns, my position remains unchanged”. The applicant then sent an email, on 16 December 2009 (3:15pm), in the following terms: “Even with a 6 months guarantee, that’s quite a reasonable guarantee what do you need from me to make this happen?” The respondent did not respond and any chance of completing a sale to Mr Taylor was then lost. We comment that the applicant offered a guarantee of the rent beyond the existing term of the lease.

36. After reviewing the evidence before us we consider that on 15 December

2009 the respondent had unreasonably withheld his consent to the assignment of the lease to Mr Taylor. It has been remarked that, generally       speaking, a refusal to an assignment of a lease can only be reasonable if it is based upon "some quality or personality of the assignee": see Daventry       Holdings Pty Ltd v Bacalakis Hotels Pty Ltd [1986] 1 QdR 406 at 410 per Thomas J. The material that was provided to the respondent was evidence of the good character of Mr Taylor as well as his business experience. The respondent did not point to any creditable reason why it was reasonable to withhold his consent to the assignment of the lease to Mr Taylor. The respondent points to the fact that Mr Taylor disclosed that he had possession of some funds as well as assets and maintains that Mr Taylor was undercapitalised. However, the shop, which appears to be in the nature of a kiosk, would not appear to require any substantial expenditure of capital. The shop was to have been conducted by Mr Taylor and his wife and so there would not initially be any outlays for wages. The contract for the sale of the business provides that the business was being sold as a going concern. The evidence before us did not indicate that an assignee of the lease would need to fund any significant item of expenditure for the shop.

37. It is true that Mr Taylor did not provide all of the information that was         requested by the respondent. The Taylors in their previous business had         not employed an accountant and so were not able to comply with the   request of the respondent to have their accounts verified by an accountant.   The respondent did not insist upon this requirement. In this era when many            people in business use accounting software, it is certainly not unusual that           the accounts of the Taylors were not verified by an accountant. In any event    it is well settled that the applicant did not have to respond "to each and every detail or issue raised by the landlord": see Daventry Holdings Pty Ltd v Bacalakis Hotels Pty Ltd [1986] 1 QdR 406 at 412 per Thomas J.

38. In forming our opinion that the respondent had unreasonably withheld his consent to the assignment of the lease, we observe that the respondent did not verify the references that he been given by Mr Taylor. The respondent did not make enquiries of the five persons who provided character references in support of the Mr Taylor. In giving evidence he commented that those references were not on a letterhead: however, they were nevertheless references upon which enquires could be made. The applicant had certainly not made a request that Mr Taylor provide references on a letterhead.

39. The respondent indicated his concern that Mr Taylor may not have had adequate food industry experience. However, the assignee disclosure statement indicated that assistance would be provided by the spouse of the proposed assignee, who had experience in running a motel, including catering. There is no evidence that the respondent ever at any time made enquiries of Mr and Mrs Taylor as to their food industry experience.

40. Mr Taylor stated that he had previously owned a motel.

41. The respondent has pointed to what he regards as inconsistencies in the resume of Mr Taylor in not referring to his motel experience. The respondent in final submissions has remarked:

“Mr Taylor has stated he owned a motel business in New Zealand; he had no accountant and was unable to provide documentation to support this. His resume went back to 1991 and makes no mention of owning a motel. His resume also failed to show any food industry experience.”

However, the resume of Mr Taylor that was admitted in evidence before us, contains the following information about the motel experience of Mr Taylor:

“Hospitality Industry
1991- 2008 Links Motel
I worked alongside my wife with the day to day running of various motels

·Cash Handing

·Maintenance of Gardens, Spa and Swimming Pool

·Customer Service

·Administrative Duties

·Catering”.

42. This resume certainly discloses motel experience and catering. We are of the opinion that Mr Taylor had disclosed on the face of his resume sufficient experience which would have enabled him to run the shop which was in the nature of a kiosk. Mrs Taylor would also provide assistance in running the shop.

43. Prior to declining consent of the assignment of the lease, the respondent sought advice from his solicitors as to whether he would want the applicant to guarantee three years rent as a condition of his granting consent to the assignment. The respondent in his evidence had mentioned that he had considered imposing a requirement of having the applicant provide a guarantee of three years rent as a condition of granting consent to the assignment of the lease.

44. In the circumstances, having regard to the fact that the lease was to expire in April 2010, we consider that it would not have been be reasonable for the respondent to require that the applicant guarantee three years rent as a condition of his consent to the assignment. Such a condition would be contrary to the policy of section 50A of the Retail Shop Leases 1994 which provides for the release of the assignor from any liability under the lease if there is default by the assignor in a case where there are disclosing statements made by the assignor, assignee and lessor. The  respondent was at liberty to insist upon appropriate disclosing statements being tendered.

45. In any event, the respondent never actually informed the parties that he was prepared to consent to the assignment on the terms that the applicant provides a guarantee for three years rent. As we have mentioned earlier, the respondent declined to answer the email that was sent by the applicant on 16 December 2009 (3:15pm) who sought advice from the respondent as to “what do you need from me to make this happen?”.

46. There is some other evidence which in our view is evidence that the respondent unreasonably withheld consent to the assignment of the lease. The respondent in his email to his solicitor on 14 December 2009 (3:52 pm) remarked:

“The current tenant seems to be parting with his business at a bargain price, so I am sure that a more suitable tenant may be found, even at the risk of the current tenant not extending”.

47. The price in the contract of sale of the business is not really a matter that the respondent would have an interest in unless the respondent was himself hoping to sell the business. Hoping that a “more suitable tenant” would be found is not an appropriate decision to make when the respondent had not investigated the circumstances of Mr Taylor. 

48. We have given some consideration to the circumstances in which the respondent purported to exercise his rights of re-entry. The circumstances in which the respondent so acted appears calculated to prevent the applicant from exercising the right under the lease to remove the fixtures from the shop.

49. At one point in giving evidence the respondent made the observation that the applicant had left “abandoned” property at the shop. This remark was presumably made in the context of clause 8.5 of the lease which provides that should the lessee fail to remove its fixtures and fittings within seven days of the expiry of the lease or sooner determination, the fixtures and fittings of the applicant shall be deemed abandoned and shall become the property of the landlord.

50. The suggestion of abandonment is also reflected in the final submissions of the respondent who has submitted:

“Essentially, the Applicant and Guarantor under the Lease breached the Lease by abandoning the premises and by removing fixtures and fittings and I was put to cost and expense as a result of their actions”.

51. There could not, in our view, be any basis for a finding that the applicant had left “abandoned” property. The applicant had, in his email of 11 January 2010, given the respondent notice of intention of removing its fixtures and fittings. The applicant certainly could not retrieve the fixtures and fittings after the locks were changed at the shop.  There is no evidence that Mr or Mrs Netherwood, as directors of the applicant, had indicated they they abandoned possession of the shop upon which they ensured that rent was paid for the duration of the lease. There is also no evidence upon which we would be prepared to make an inference that the applicant abandoned possession of the shop. The fact that the applicant was proposing to assign the lease to Mr Taylor and was endeavouring to find another purchaser of the business is, in our view, inconsistent with the notion of abandonment: cf., Tehidy Minerals Ltd v Norman [1972] 2 QB 528 at 553; Grill v Hockey (1991) 5 BPR 11,421; Bookville Pty Ltd v O’Loghlen [1998] VSCA 27 at [14].

52. In our view the operation of clause 8.5 of the lease required that the lessee should have been given a proper opportunity of removing any fixtures and fittings. That the respondent wanted to prevent the applicant from exercising the right under the lease to remove the fixtures from the shop is apparent from the following written submissions of the respondent:

“Mr Netherwood was in breach of his lease, failed to remedy the breach and was subsequently locked out of the premises. He took it upon himself to break into the premises and removed 80% of the fixtures, an action totally uncalled for. He was advised prior to and after the break in that I had no interest in the fixtures and fittings and would work with him in finding a buyer for them.  He was later given all the remaining fittings that were of interest to him. No fittings remain in the shop or in my possession”. 

53. We appreciate that it was in the interests of the respondent for there to be fixtures in the shop, such a shop would be far easier for the respondent to let than a vacant shop. However, the applicant certainly had a right under the lease to take its fixtures and fittings, this right was conferred by clause 8.5 of the lease. Whilst the respondent regards this as “an action totally uncalled for”, the right to remove the fittings was a contractual right that could be exercised by the applicant under the lease.

54. In assessing compensation we have to consider the issue of the “Notice to Remedy Breach of Covenant” to determine whether to make an adjustment for the respondent to be credited the sum of $563.95 for legal costs. We have already mentioned that the “Notice to Remedy Breach of Covenant” referred to a “covenant by the lessee to keep the premises open for trade or business, and the breach by you of that covenant”. However, the lease does not contain a covenant in those actual terms. Rather, the covenant in question, in clause 4.6 of the lease, is a “covenant by the lessee to keep the premises open for trade or business during ordinary business hours as is customary”.  We have taken the view that the “Notice to Remedy Breach of Covenant” did not fairly state the actual terms of the covenant in clause 4.6 of the lease. However, if the notice did fairly state the actual terms of the covenant, it still remained necessary to consider what were the customary hours of opening the shop.

55. The applicant gave evidence of the custom that related to the opening of the shop. The tenor of the evidence of the applicant was that he opened the shop during tourist demand, but that it would not be opened in quiet periods. Having regard to the fact that the shop is located in a location visited by tourists, it can be expected that there would be different fluctuations of tourist traffic at different times of the year. In submissions, the applicant remarked that the previous lessee would close the shop during February. The applicant submitted that the shop was closed most Februarys due to lack of trade. This is evidence of the fact that as a matter of custom the shop opened to meed the needs of tourist demand.  There is no evidence that the applicant had not opened the shop when there was tourist demand. Indeed, the tenor of the evidence of Mr Netherwood was that he would open both shops if there was sufficient demand.

56. In his final reply dated 28 October 2010, the respondent made the submission: “It is a fundamental term of the lease that the premises be open for trade at the times nominated in the Lease”. However, we do not accept that submission as the lease does not contain any specified times or hours of operation.

57. As we are not satisfied that the applicant was in breach of the lease as alleged in the “Notice of Remedy Breach of Covenant”, we have decided that we will not allow the respondent the claimed legal costs of $563.59.

58. Another matter that we regard as relevant to the “Notice to Remedy Breach of Covenant” is the fourteen day period that the applicant was given to remedy the alleged breach. The evidence of Mr Netherwood was that it would be difficult to obtain staff at that location. Even if there was a breach of lease, which we do not accept, the fourteen day period would not in our view be sufficient to enable the applicant to obtain staff to run the shop. We point out that Mr Netherwood had explained that the shop had been sanitised pending the assignment. As the respondent had tendered the assignment documents and thus indicating that he would consent to the assignment, the applicant would need some time to commence operations in the shop.

59. One matter that was raised by the applicant in his letter dated 25 February 2010 relates to the claim by the respondent for $7,370 for the “de-fit” and making good of the property.

60. We have already mentioned that under the terms of clause 8.5 of the lease the applicant as lessee had the right to remove all trade fixtures from the shop. Under that clause the tenant has to “immediately make good all damage done to the demised premises by reason of such removal”. Mr Netherwood in giving evidence stated that the applicant was not given the opportunity to make good any damage. This is understandable having regard to the circumstances whereby the respondent changed the locks to the shop.

61. Mr Netherwood in giving evidence remarked that the removal of the fixtures would require minor plaster work which he was able to do. He was not challenged in cross-examination on this aspect of his evidence.

62. The respondent by his email of 29 January 2010 advised the applicant that “any further attempt to enter the premises for ANY reason will be swiftly dealt with”. This in our view would not enable the applicant, in terms of clause 8.5, to “immediately make good all damage done to the demised premises by reason of such removal”. 

63. The quotation for work to the shop, which is in evidence before us, includes items which in our opinion would go well beyond any obligation of the tenant. There was no evidence which would justify that costs be charged to the applicant for the removal of the main door architrave. We are not satisfied that the applicant should be charged for the removal of the flue which was presumably in the shop before the shop was occupied by the tenant as well as roofing costs.  It is also not apparent why the lessee should be allowed the costs of replacing the wall tiles. We cite these as examples of why the claimed costs of the “de-fit” do not relate to the obligation of the tenant under clause 8.5 of the least to “make good” damage caused by the removal of fixtures.

64. Indeed, it is apparent that the applicant was, from the outset, conscious of the implications of clause 8.5. Annexed to the original dispute notice is a statement by Mr Netherwood that “I did not attempt to remove the large items that might have caused damage to the floor as I am not in a position to “make good” and have no desire to get more invoices from Frank, Indeed Frank is not even passing on the discount on the rates notices as I am only wishing to pay pro-rata till lease end”. In this context, we mention that the claimed costs of the “de-fit” include the removal of timber plinths and floor coverings as well as floor topping.

65. It is our opinion that this claim by the respondent of $7,370 for costs of the “de-fit” of the shop would be far in excess of the obligations of the applicant under clause 8.5 of the lease to “immediately make good all damage done to the demised premises by reason of such removal”. There is, we believe, some substance in the submission of the applicant that the “de-fit’ was a complete renovation.

66. We are also not satisfied that the costs that have been claimed by the respondent for the "de-fit" relate to damage done to the premises by the removal of fixtures by the applicant. The terms of clause 8.5 of the lease which requires the tenant to "immediately make good all damage" only relates to where fixtures have been removed by the tenant. We have earlier mentioned that Mr Netherwood was fully aware of the implications of this clause.

67. Having regard to the email of the respondent that was sent on 29 January 2010, we can infer that certain fixtures were removed by the respondent and not the applicant. In fact the statement of claim that was filed by the respondent in the Magistrates Court on 4 June 2010 confirms that fixtures which were not removed by the applicant were removed by the respondent (para 12).

68. In these circumstances it would not be just in our view to require the applicant to pay such costs of the "de-fit". If the applicant had removed any fixtures prior to then, it would not be liable under clause 8.5 for any costs as it was denied the opportunity to "immediately" make good any damage by being told not to again enter the premises. On 29 January 2010 the respondent had effectively told Mr Netherwood that he would be reported to the police for breaking and entering should he again enter the premises. We later in these reasons express the view that the applicant is not liable for the cost of making good caused by the removal of fixtures that were removed by the respondent.

MAGISTRATES COURT

69. Mr Netherwood in giving evidence before us remarked that he had been sued by the respondent in the Magistrates Court for some $10,000.00. The respondent had informed us that would obtain judgement as the applicant had not filed a defence in the time allowed. We were not informed at the original hearing when the proceedings before the court commenced or whether the court was informed of the existence of the dispute notice.  

70. We are, of course, aware that s 94(1) of the Retail Shop Leases 1994 provides that on or after the lodgement of a dispute notice for a retail tenancy dispute, the dispute must not be referred to arbitration or heard by any court. There is an exception in s 94(2)(b) which provides that s 94(1) does not apply if a proceeding about the issue in dispute was started in a court before the dispute notice was lodged and the proceeding has not been removed, or transferred, to QCAT.

71. After the hearing we made a direction for the parties to lodge any documents in their possession that relates to the proceedings in the Magistrates Court. A copy of the statement of claim of the respondent has been filed in the Registry of this Tribunal. The statement of claim was filed in the Noosa Registry of the Magistrates Court on 4 June 2010. This date is well after the lodgement of the dispute notice and so the claim in the Magistrates Court is not preserved under s 94 of the Retail Shop Leases Act 1994.

72. The statement of claim is a claim by the respondent against the applicant and Mr and Mrs Netherwood as guarantors for the sum of $10,008.64, and is a claim for breach of lease and for breach of the guarantee.

73. The claim for a breach of the lease is based upon the following allegation: "Continuously from and on or before November 2008 and through to 4 January 2010 the First Defendant did not keep the café/takeaway shop open for trade or business during ordinary working hours as it was required to do by clause 4.3 of the lease" (para 5). This allegation does not refer to clause 4.6 of the lease which we have earlier referred to which requires the Lessee to keep the shop open "during ordinary business hours as is customary".  Clause 4.3 of the lease does not contain a clause that relates to the hours of opening of the shop.

74. The substantial part of the claim relates to the "de-fit" of the shop. The statement of claim contains the following allegation: "By clause 8.5 of the lease and if at the expiration of the lease, the First Defendant failed to remove all trade fixtures the Plaintiff would be entitled to remove all trade fixtures and to recover from the First Defendant its costs incurred of doing so" (para 3, particular (i)(F)". We consider that this allegation does not fairly reflect the terms of clause           8.5 which only enables "the Lessor to make goods (sic) all such damage" and to recover the cost of the damage from the Lessee where that damage was caused by the removal of fixtures by the Lessee. The clause provides          for "abandoned" fixtures to become the property of the Lessor, but does not entitle the Lessor to recover the cost of removal of abandoned fixtures.

75. The particulars of the Magistrates Court claim lists a number of items of expenditure that are alleged to be caused by the breach of lease by the applicant. These are $220 for payment to North Coast Locks; $357 for payment to APN Newspapers; $99 for payment to O'Dea Signs and $1962.14 for legal fees payable to Sykes Pearson Miller Lawyers. We note that $705.85 which is claimed for the Notice to Remedy Breach of Covenant is greater than the sum of $564 that was previously claimed by the respondent for this item of expenditure. We particularly note that the claim of legal fees does not include any costs in relation to the assignment to the Taylors. The respondent did not before this Tribunal claim those particular expenses from the applicant.

76. We have thought it appropriate make a declaratory order to refer to those items of expenditure which are before this Tribunal for consideration.  We have elsewhere in these reasons expressed our conclusion that the respondent has any basis for the claim against the applicant of $7,370 for payment to Troy Ware Constructions. We consider that the declaratory order should refer to those expenses as well as the claimed legal costs of $564 paid to Sykes Pearson Miller Lawyers for the Notice to Remedy Breach of Lease.

77. We also mention that the solicitors for the applicant had on 4 August 2010 wrote to the solicitors for the respondent for the respondent to seek the agreement of the applicant for a stay of proceedings pending the proposed amalgamation of this matter with the existing QCAT matter between the parties. This was also not disclosed in the affidavit of the solicitor.

COMPENSATION

78. Under s 83(1) of the Retail Shop Leases 1994, this Tribunal may make orders which this Tribunal considers to be just to resolve a tenancy dispute. This jurisdiction also, by virtue of s 83(2)(b) of that Act, includes an order requiring a party to the dispute to pay an amount (including an amount of compensation) to a specified party (a payment order).

79. We have made a payment order which requires that the respondent should pay the applicant the sum of $31,133.50 as compensation for loss sustained by the applicant because the respondent unreasonably withheld consent to the assignment of the lease.  This is a unanimous decision of this Tribunal.

80. We assess the various items of compensation as follows:

(a)  The applicant claimed compensation of $27,350 for the lost sale. This sum has been calculated as being $32,500 for the lost sale less 25% of the value of removed fixtures ($rrp $20,956.00). The respondent, who has claimed that the applicant has overvalued the fixtures, will not be prejudiced by what he considers to be an overvaluation of the fixtures for otherwise this component of the claim would exceed $27,350.

From this amount of compensation of $27,350 we consider it would be appropriate and fair to made an allowance for a number of items which were not raised by the respondent but which we consider should be allowed to the respondent in our calculation of compensation. First, we consider that it would be fair to deduct the costs of commission for the sale. We consider that it would not be fair to the respondent for there to be an allowance for the commission that would have been payable had the respondent given consent to the assignment of the lease. Based on the standard REIQ rate of 5% for the first $18,000 and 2.5% for the remainder, we regard the sum of $1292.50 as being a fair amount to deduct as commission. Secondly, we deduct the legal expenses that the respondent would have been entitled to for giving consent to the assignment. We have already mentioned that the proviso to s 121(1) of the Property Law Act 1974 "does not preclude the right of the lessor to require payment of a reasonable sum in respect of any legal or other expenses incurred in connection with the licence or consent".  Under clause 4.2 of the lease any assignment of the lease is "at the cost of the Lessee". We therefore propose to allow as legal expenses the sum of $1,375 which is the estimated legal expenses of the respondent as stated in the letter of the solicitors of the respondent dated 8 December 2009. We consider that $1,375.00 is a fair estimate of the legal costs to consent to an assignment.

We therefore assess $24,332.50 as being one component of the compensation that is referred to in our payment order.

(b) The applicant claimed compensation- $7,365 ($6023 rent, $494 rates,
$284 body corporate, $564 breach of lease) for costs. The sum of $563.95 was demanded from the respondent in the letter dated 4 January 2010. However, as this sum has not been paid it cannot be allowed to the applicant. The remainder of this component of the claim are the expenses that the applicant has paid after the proposed date of settlement of 16th December 2009. We consider that those expenses have been incurred by the respondent because of the fact that the respondent has unreasonably withheld his consent to the assignment of the lease. The respondent has objected to this aspect of the claim as he submits that the applicant would have to incur these expenses in any event. However, if there had been consent to the assignment of the lease these expenses would have been paid by Mr Taylor as assignee of the lease. Also, if the applicant would have insisted on appropriate disclosing statements having been made then s 50A of the Retail Shop Leases Act 1994 would have operated to release of the assignor from any liability under the lease to which the assignor would otherwise be subject to if there was default by the assignee.

We assess $6,801 as being the other component of the compensation that is in our payment order.  

(c)  The applicant claimed compensation of $3180 (equivalent to 25% of rrp value of $12,735) for fixtures that were still in the shop at the date of the notice being an exhaust fan and stainless steel canopy, a hot food display unit and a fridge and deli display. The respondent objected to the inclusion of these fixtures in the claim as they had been since removed. We accept the submission of the respondent that there should be no allowance to the applicant for fixtures and fittings.

DECLARATORY ORDER

81. Under s 83(1) of the Retail Shop Leases 1994, this Tribunal may make orders, including a declaratory order, which we consider just to resolve a retail tenancy dispute.

82. In determining this application we consider that it is just to make a declaratory order that            

Sticky Fingers (Qld) Pty Ltd (the applicant) is not liable to pay to Frank Mark Klooster (the respondent) the sum of $7,370.00 for payment for the “de-fit” to Troy Ware Constructions as well as cost of $564 paid to Sykes Pearson Miller Lawyers for the Notice to Remedy Breach of Lease.

We also express our opinion that s94(1) of the Retail Shop Leases 1994 operated to exclude the jurisdiction of the Magistrates Court in respect of the claim of $7,370.00 for payment for the “de-fit” to Troy Ware Constructions as well as costs of $564 paid to Sykes Pearson Miller Lawyers for the Notice to Remedy Breach of Lease. This is because those claims were already the subject of a Notice of Dispute under the Retail Shop Lease Act 1994.

ORDERS

Pursuant to section 83 of the Retail Shop Leases 1994, the Queensland Civil and Administrative Tribunal:-

1. makes the following payment order:

   Frank Mark Klooster (the respondent) pay Sticky Fingers (Qld) Pty Ltd (the applicant) the sum of $31,133.50 as compensation; and

2. makes the following declaratory order :

   Sticky Fingers (Qld) Pty Ltd (the applicant) is not liable to pay to Frank Mark Klooster (the respondent) the sum of $7,370.00 for payment for the “de-fit” to Troy Ware Constructions as well as cost of $564 paid to Sykes Pearson Miller Lawyers for the Notice to Remedy Breach of Lease.