Susanna and John Pty Ltd v Trident Ashgrove JV Pty Ltd as Trustee and Tribune Properties Pty Ltd
[2011] QCAT 101
•16 March 2011
| CITATION: | Susanna and John Pty Ltd v Trident Ashgrove JV Pty Ltd as Trustee and Tribune Properties Pty Ltd [2011] QCAT 101 |
| PARTIES: | Susanna and John Pty Ltd |
| v | |
| Trident Ashgrove JV Pty Ltd as Trustee and Tribune Properties Pty Ltd |
| APPLICATION NUMBER: | RET021-09 |
| MATTER TYPE: | Retail shop leases matters |
| HEARING DATE: | 8 March 2011 |
| HEARD AT: | Brisbane |
| DECISION OF: | Ms Anne Forbes, Presiding Member Ms Jody Gosling, Member Mr Don McBryde, Member |
| DELIVERED ON: | 16 March 2011 |
| DELIVERED AT: | Brisbane |
ORDERS MADE: | The claim for compensation is without substance and is dismissed. |
| CATCHWORDS: | Claim for compensation – Tenant’s allegation that lessor’s redevelopment of the shopping centre substantially restricts, or alters access by customers to the leased shop, or the flow of customers past the shop – claim of unconscionable conduct by lessor Retail Shop Leases Act 1994, ss 43(1), 46A(1) |
APPEARANCES and REPRESENTATION (if any):
| APPLICANT : | Susanna and John Pty Ltd represented by Mr Liu |
| RESPONDENT: | Trident Ashgrove JV Pty Ltd as Trustee and Tribune Properties Pty Ltd represented by Mr McKeering |
REASONS FOR DECISION
The Applicant is the tenant of Shops 29 and 30 (“the premises”) owned by the Respondent Lessor (“Trident”) at the Highpoint Plaza Centre (“the Centre”), Ashgrove. There the Applicant conducts the “Highpoint Seafood and Café”.
In a Notice of Dispute lodged on 11 November 2009 and amended on 15 March 2010 the Tenant seeks compensation under the Retail Shop Leases Act 1994 [“the RSL Act”]. Mr Huang, a director of and spokesman for the Tenant claims that:
(a) Trident constructed a coffee shop in a kiosk in the vicinity of Shops 29/30 which has compromised their visibility and substantially restricted access by customers, or altered the flow of potential customers past the shop;
(b) The Respondent’s action in issuing what Mr Huang claims is a surrender notice for the lease, constitutes unconscionable conduct within the meaning of section 46A of the Act.
The Applicant also seeks:
(a) Compensation for loss of turnover and for future loss;
(b) An order that the Respondent reduce its rent by 30%; and
(c) An order that the said kiosk be closed.
The parties were not legally represented at the hearing. Mr Liu, a friend of Mr and Mrs Huang, appeared for the Applicant. The Respondent landlord was represented by its director and manager, Mr McKeering. An interpreter assisted Mrs Huang whose first language is Cantonese.
The Applicant had lodged two earlier Notices of Dispute, the later one being concluded by consent orders on 22 September 2009, which were expressed to be “in full and final settlement” of all matters in dispute between the parties up to and including that date.[1] The matters in dispute concerned the ambit of the permitted use of the premises under the lease as well as allegations of unconscionable conduct. Accordingly we have no jurisdiction over, and do not propose to deal with, issues predating those orders.
[1] The current Notice of Dispute was lodged less than 2 months after the consent orders.
BACKGROUND
The Applicant leased the premises from Trident’s predecessor in title for two years from 1 July 2006. In December 2007 the Applicant exercised an option for a new term of four years from 1 July 2008, with two further options to renew.
The permitted use of the premises is as a “seafood shop – dine in and take away and snack bar.” There is no exclusive use; on the contrary, Clause 4 of the lease provides: “The Landlord may … grant any lease, licence … to any person for any use … notwithstanding that any such use may be the same as or similar to the Permitted Use.” Clause 21 stipulates that the Respondent may choose to redevelop the Centre at any time.
The Respondent purchased the Centre in September 2007. In May 2008 it notified its tenants that it intended to redevelop the Centre, although plans were yet to be completed. Work commenced in mid-2008. In February 2009 the Respondent, at its expense, provided the Applicant with a new shopfront and slightly increased the floor area of the premises. In the process the Respondent’s shop was closed for a fortnight, and the Applicant was given a 50% remission of its rent. About the same time the Respondent invited the Applicant to refurbish its premises in keeping with the renovated Centre. Arguably that request fell within the Applicant’s duty to maintain and repair, but the Respondent did not pursue that question.
Prior to the redevelopment, cars could drive in from the street and park at street level. The open area in front of the Centre was excavated, so that vehicles now sit at a slightly lower level than before, to improve the view of the Applicant’s and other premises from the street. Three alternative entrances are now offered:
· A main entrance a few steps below the Waterworks Road footpath provides a clearly defined way through the abovementioned coffee kiosk to shops, including the Applicant’s premises;
· An entrance from the front customer car park leads up two short flights of steps (“the orange stairs”) to the eastern side of the kiosk, about 3 metres from the Applicant’s premises;
· People who park in the basement may enter by the orange stairs or by a lift.
So much is evident from a series of clear photographs and plans submitted by each party, the accuracy of which is not in dispute.
The Applicant’s premises, and several others, face Waterworks Road. There is an Australia Post shop (shortly to be vacated) on one side of the premises and a travel agency on the other. Adjacent to the travel agency is a dress shop formerly occupied by a business known as Monique’s cake shop.[2] Monique’s had a licence to place tables and chairs and to serve its customers outside its premises. The relevant seating area was partly enclosed on three sides by ornamental fig trees in planter boxes. Monique’s surrendered its tenancy during the redevelopment, and the Respondent then erected the coffee kiosk in the area formerly licensed to Monique’s. The kiosk opened for business on 19 November 2009. It comprises a service counter, with tables and chairs beneath umbrellas.
[2]The extent of the Applicant’s permitted use when Monique’s threatened to sue the Respondent, was a term of the settlement concluded on 22 September 2009.
Apart from the kiosk, the Respondent installed several new tenants, including a doctor’s surgery, a branch of a well known pathology practice, a gymnasium and a Defence Housing organisation. In or about November 2009, at its own expense, the Respondent erected new signage in front of the Centre, and installed illuminated signs outside each tenancy, including the subject premises.
On 20 November 2009 the Respondent invited the Applicant to surrender its lease in exchange for another on similar terms, reflecting changes to the Centre. The Applicant declined that offer.
LEGISLATION
In every retail shop lease (other than a periodic tenancy or a tenancy at will) the Act implies a right to compensation.[3] A landlord must pay reasonable compensation to a tenant for loss or damage suffered by the latter if the lessor:
[3] Retail Shop Leases Act 1994, section 42.
“ (b) takes action … that substantially restricts, or alters –
(i) access by customers to the leased shop; or
(ii) the flow of potential customers past the shop…..”[4]
[4] Retail Shop Leases Act 1994, section 43(1).
Section 46A(1) of the Act provides: “A lessor must not, in connection with a retail shop lease, engage in conduct that is, in all the circumstances, unconscionable.”
THE APPLICANT’S CASE
Flow of potential Customers:
The Applicant, at the hearing, submitted that section 43(1)(b)(ii), above, is the focus of the dispute. The Applicant alleges that when potential customers approach its shop by the nearest entrance, namely the orange stairs, their initial attention is inevitably directed to the kiosk, and thus away from its shop. According to the Applicant it then requires an effort of will by a person mounting the stairs to notice other tenancies on that level.
The Applicant also complains that the umbrellas and tables pertaining to the kiosk, and new plants in boxes, reduce the visibility of its premises from the street. Mr Huang considers that the Respondent is “favouring“ the kiosk owner because (so he says) one David Field, a former business partner of another tenant, Glenn Gardener, had a financial interest in the kiosk. However, Gardener gave unchallenged evidence that, while Field did have a brief interest in the kiosk, he sold it three months after the kiosk opened.
Unconscionable conduct:
When the Applicant received a notice from the Respondent’s solicitor in November 2009, inviting the Applicant to surrender its lease for a new one, Mr Huang sensed trouble ahead. He claims that it arrived at about the time that the coffee kiosk opened. The Applicant had lodged its latest Notice of Dispute just one week earlier, and Huang says that he feared that under a new lease, the Applicant would be unable to challenge the presence of the kiosk, or would be taken to have accepted it.
Financial evidence:
The Applicant has not traded on Saturdays since the beginning of 2009. It has never traded on Sundays. Mr Tey, a chartered accountant, prepared the Applicant’s financial statements and BAS statements for the years ending June 30, 2008, 2009 and 2010. His evidence is that after the redevelopment the Applicant’s turnover declined by 4.79% in 2008-2009, and by 15.45% in 2009-2010. He could not say whether a decline continued after 30 June 2010. His report says nothing about the reduction in the Applicant’s trading hours (by closing on Saturdays as well as Sundays), but he felt bound to concede that longer trading hours would probably result in higher turnovers. He added that, since the global financial crisis of 2009, restaurateurs among his clients have experienced declining incomes.
Other witnesses for the Applicant, Barry Lock and Brendan Howes, expressed complete satisfaction with the Applicant’s products. Mr Lock says that he has no difficulty in locating the Applicant’s shop, despite the fact that the kiosk is first seen from the orange stairs. However, in his opinion, if one didn’t know the Applicant’s shop was there, one would not go looking for it. Mr Howes considers the new entrance an improvement, and says that he has no difficulty in walking through the kiosk area, by way of a short cut to the Applicant’s premises. He commended the new illuminated signs.
The Tenant’s submissions may be summarised as follows. Accessibility is not the problem. What really matters is that the Applicant’s shop has lost visibility to the public. The kiosk is in a better position to attract customers, and has diminished the Applicant’s trade. All three entrances favour the kiosk, because its position at the head of the stairs attracts people’s attention, and substantially reduces the likelihood of their seeing the Applicant’s shop. Moreover, the kiosk’s offerings include seafood.
THE RESPONDENT’S CASE
Mr Kim Vojacek is the architect who designed the redevelopment. He found that the old street entrance was ill defined with a surface too rough and steep for prams and the elderly. Exposure to Waterworks Road was poor; parked cars limited the Centre’s visibility, signage was confusing and a dense hedge of ornamental fig trees obscured several shop fronts. His brief was to maximise exposure of all tenancies. The redevelopment opened sightlines from the road and removed visual clutter. The car park was made compliant with Council requirements. The kiosk’s umbrellas obscure much less than the former fig trees, as they are set well above eye level. The new vegetation is low-level or consists of plants with slender stems. The retaining wall behind the street-side car park does not obscure shops at the front of the Centre.
Mr Glenn Gardener, a supplier of serviced offices, has been a tenant of the Centre for seven years. He used to patronise the Applicant’s shop twice a week. He says that his office has a clear view to that shop, that the new entrances present no appreciable obstacle to pedestrian traffic and that the orange stairs do not favour any one tenant over another.
Mr Bede King, the Respondent’s solicitor, explained why the Respondent asked its tenants to accept new leases. The redevelopment rendered some leases, including the Applicant’s, inconsistent with the Centre’s “master sketch”. That sketch was filed in the relevant Government department to save tenants the expense of individual plans. It was the Department that required new leases, which were issued over several months so as to minimise interruptions to business. There was no deliberate or sinister connection between the opening of the kiosk and the request for surrender of the Applicant’s lease.
Michael Bahr has been responsible for opening and closing the Centre for the last six years. He says that while the previous owner of what is now the Applicant’s fish shop was busy on weekends, he had never seen the Applicant open on a Saturday. A man known as Johnny, who used to own Monique’s cake shop, and who now works in the kiosk, makes sure that a clear path for pedestrians is preserved. Mr Bahr stated, with some emphasis, that the Applicant’s shop was cleaner when its former owner was in charge.
Mr McKeering, director and manager of the Centre, states that he is at the Centre on most business days. Pedestrian access was greatly improved by the redevelopment. He negotiated the licence for the kiosk to use part of the common area. That agreement requires the kiosk to keep a clear passage way between the tables, physically defined by a concrete seam line. Mr McKeering produced plans of the kiosk’s area[5] showing the permitted location of tables and umbrellas during business hours, and the required passage for pedestrians. He does his best to monitor compliance, and has not received any complaint from the Applicant about access through the kiosk area.
[5] Exhibit 2 and BGM 30 and 31 to affidavit of Bernard McKeering.
McKeering disputes Huang’s claim that all traffic is directed to the main entrance adjacent to the kiosk. He described a clear pathway to the Australia Post shop (next door to the subject premises) and an alternative entrance at the other end of the Centre. He says that there is a clear line of sight from the main entrance to the Applicant’s shop and rejects Huang’s claim that the redevelopment has left the Applicant in a “backwater”.
Presentation in retail trade is vital, according to McKeering. The Applicant’s presentation is poor, and is exacerbated by dim lighting and “home-made” menus attached to the window. Other tenants have complained about it. Presentation has not improved since Huang augmented his window display with copies of correspondence between the parties, including “without prejudice” communications. While all other tenants refurbished their premises after the redevelopment, the Applicant has failed to so, although the Respondent provided new signage and even offered to pay for the Applicant’s renovations.
Andrew Brown, the Respondent’s development manager, testifies that since the redevelopment was completed he visits the Centre twice each week. He confirms McKeering’s criticisms of the Applicant’s presentation. He states that on a few occasions when he saw the kiosk’s furniture slightly encroaching upon the passage way, he reminded “Johnny” of the terms of the licence and the matter was immediately remedied.
The Respondent’s submissions may be summarised as follows. During the past three years, dealing with the Applicant’s three Notices of Dispute and other complaints has cost the Respondent considerable loss of time. Mr Huang’s apparent belief that the Respondent wishes to terminate his lease is quite misconceived; on the contrary, the Respondent has made every effort to assist the Applicant and to accommodate its demands. The Respondent aims to create the best possible environment for its tenants and to that end, has spent a lot of money on the Centre. There is no basis for the allegation that any act or omission of the Respondent has damaged the Applicant’s business. Signage, parking and access have been greatly improved. When the Respondent acquired the Centre there was a 50% vacancy rate; now several new tenants have arrived and 150 people work there. The application should be dismissed, and the Applicant ordered to sign a new lease, compliant with the redevelopment.
CONSIDERATION
Several matters may be summarily concluded: the application for orders that the Respondent reduce the Applicant’s rent and close the kiosk are, if not fanciful, manifestly beyond jurisdiction. Absent consent, the Tribunal has no power to vary a lease, let alone rescind the lease or licence of another tenant, particularly one who is not a party to the proceedings. These two claims are dismissed.
On the other hand the Tribunal has no jurisdiction to order a party to execute a lease, as sought by the Respondent. We have seen a draft of the proposed new lease and can see nothing in it that should alarm the Applicant. It is fanciful for Mr Huang to see it as some underhand or sinister attempt to prejudice the Applicant’s claims. He has not sought legal advice about that apprehension, and we strongly recommend that he do so.
Unconscionable Conduct:
Section 51AC of the Trade Practices Act 1974 (Cth) is analogous to section 46A of the RSL Act. The meaning of the word “unconscionable” as used in section 51AC has been considered in a number of authorities.
In Hurley v McDonald’s Australia Ltd [1999] FCA 1728 the Full Court of the Federal Court said:
“For conduct to be regarded as unconscionable, serious misconduct or something clearly unfair or unreasonable, must be demonstrated … the term carries the meaning given by the Shorter Oxford English Dictionary, namely, actions showing no regard for conscience, or that are irreconcilable with what is right or reasonable … The various synonyms used in relation to the term ‘unconscionable’ import a pejorative moral judgment …”
More recently, in Attorney General (NSW) v World Best Holdings Ltd (2005) 63 NSWLR 557 Spiegelman CJ remarked:
“Unconscionability is a concept which requires a high level of moral obloquy. If it were to be applied as if it were equivalent to what is “fair or “just” it could transform commercial; relationships…”.[6]
[6]These remarks were cited with approval by Campbell JA in Canon Australia Pty Ltd v Patton [2007] NSWCA 246 and in M & H Noble v Paulmarg Pty Ltd [2009] QSC 265 per Martin J.
Section 46A of the RSL Act lists a number of matters to which the Tribunal may have regard when considering whether or not there has been a contravention of the Act by unconscionable conduct. We find no evidence of oppressive or deceptive conduct on the Respondent’s part, let alone misconduct of such gravity to warrant a finding of unconscionability. The allegation of unconscionable conduct is dismissed.
Section 43(1)(b) RSL Act:
We turn now to the allegation that the Respondent has substantially restricted or altered access by customers to the Applicant’s shop, or substantially altered or restricted the flow of potential customers past its shop. We have been greatly assisted in understanding the layout of the Centre by the photographs and architects’ plans tendered by the parties.
It is undisputed that the former undefined street and basement entrances to the Centre have been replaced by no fewer than two defined entrances, as well as a lift. A potential customer entering by way of the orange stairs would find himself in close proximity to the Applicant’s shop: we accept Mr Vojacek’s estimate that the top step is approximately 3 metres from the shop. We accept that from the top of the stairs the kiosk is the first business seen, but it is reasonable to expect that a potential customer will look elsewhere, and in so doing, have a clear view of the Applicant’s shop. We are satisfied that the Respondent has taken, and is continuing to take all reasonable steps to ensure a clear passage for potential customers of the Applicant through the kiosk area, by enforcing the relevant term of the kiosk’s licence (whether or not it is a requirement of the planning authority). We are unpersuaded that any act or omission of the Respondent has placed the Applicant in a “backwater”. Monique’s cake shop was as proximate to the Applicant’s premises as the kiosk is today. With respect to the Applicant’s complaint that the kiosk sells some goods similar to the Applicant’s, it need only be pointed out that the Applicant’s lease expressly disavows any “exclusive use”.
The presence of the adverbs “substantially” and “significantly” in sub-sections 43(1)(a)-(c) of the Act must not be overlooked or diminished. The evident intention of the legislature is to preclude claims for compensation based on trivial, insubstantial or fanciful grievances on the part of tenants disappointed by the profits, or lacks of profits of their enterprises. The Applicant has signally failed to persuade us that the Respondent has done or omitted anything that could properly be seen as a substantial or significant interference with its trade, or prospects of trade.
While the onus of proof is upon the Applicant, and it is not the Tribunal’s task to assign a definite cause, it may be significant that, according to the Applicant’s witness Tey, vendors of prepared meals, in particular, have suffered from the recent “economic crisis”. There is also the fact that the Applicant is closed every weekend. According to Mr Tey the Applicant’s turnover fell 15% after its decision not to open on Saturdays, reducing its trading hours by approximately the same proportion. Further, we accept the Respondent’s evidence that the Applicant’s presentation leaves something to be desired. It is axiomatic that attractive presentation is vital in the retail trade, especially in difficult economic times. The Applicant may care to consider whether its resistance to upgrading its premises is a recalcitrant and self-defeating stance.
The claim for compensation is without substance and is dismissed.
THE CLAIM FOR COSTS
The Respondent, Trident, seeks an order for costs. Regrettably the Applicant did not seek professional assistance to prepare its case. If it had done so, the Tribunal and the Respondent would have been spared the task of dealing with extravagant propositions and prolix, sometimes trivial complaints such as these:
· The illuminated sign outside the shop (supplied by the Respondent) had the word “Café” in smaller type than the other words;
· The picture of a lighthouse on the sign suggested a fresh fish shop rather than a fish and chip outlet and café;
· The Respondent used its superior power against the Tenant;
· The Respondent exhibits “passive abusive behaviour”;
· Mr McKeering should be “removed and dismissed from the proceeding” and penalised.
The material filed in this dispute fills two formidable arch files. One set of documents from the Applicant comprises some 200 pages of correspondence between the parties since 2007. In fact, it evidences consistent attempts by the Respondent to placate and assist the Applicant.
The Respondent did not incur professional costs for its representation at the hearing, although it may have done so at an earlier stage. Costs are not awarded to parties representing themselves, or represented by a non-lawyer. If the Respondent wishes to press its claim for costs, it should particularise and quantify them before proceeding further, bearing in mind the special onus that rests on parties seeking costs in this Tribunal: see Queensland Civil and Administrative Tribunal Act 2009 ss 100 and 102.
We reserve the question of costs and will hear the parties on that issue, upon the Respondent giving the Applicant and the Registrar seven (7) clear days’ written notice of intention to apply.
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