Tong Joo Pty Ltd v Reilly

[2023] NSWCATCD 41

Civil and Administrative Tribunal

New South Wales

Medium Neutral Citation:

Tong Joo Pty Ltd v Reilly [2023] NSWCATCD 41

Hearing dates:

24 April 2023

Date of orders:

11 May 2023

Decision date:

11 May 2023

Jurisdiction:

Consumer and Commercial Division

Before:

D. Goldstein. Senior Member

Decision:

1. The application is dismissed.

2. In the event that a party wishes to bring a costs application, such application must be lodged in the Tribunal and served on/given to the costs respondent within 14 days of the date of the orders in these proceedings either attaching or referring to the documents relied upon in support of the application.

3. The costs respondent will have 14 days after the date it receives the application to lodge in the Tribunal and serve on/give to the costs applicant its submissions, if any, in response to the costs application, such submissions either attaching or referring to the documents relied upon.

4. The parties must state in their submissions whether or not they consent to the costs application being determined on the basis of the parties written submissions and attached documents, if any, without the need for a hearing.

5. Subject to the parties’ submissions, the Tribunal will determine any costs application made on the basis of the papers lodged in the Tribunal.

Catchwords:

RETAIL LEASE – GUARANTEE

Legislation Cited:

Retail Leases Act 1994

Cases Cited:

Realestate.com.au Pty Ltd v Hardingham RP Data Pty Limited v Hardingham [2022] HCA 39

Texts Cited:

O’Donovan & Phillips Modern Contract of Guarantee

Category:

Principal judgment

Parties:

Tong Joo Pty Ltd: Applicant
Susan Reilly: Respondent

Representation:

Mr S. Spring, solicitor (Respondent)

File Number(s):

COM 22/57075

Publication restriction:

NIL

REASONS FOR DECISION

1. In these proceedings the applicant who I will call the ‘lessor’ claims $103,980.38 from the respondent.

2. There is no dispute that the lessor’s claim is brought under the Retail Leases Act 1994 (the ‘Act’) and that the Tribunal has the jurisdiction to hear and determine the claim pursuant to the Act.

3. The proceedings were heard on 24 April 2023. At the hearing the lessor’s documents were accepted into evidence and marked exhibit A. The respondent’s documents were accepted into evidence and marked exhibit 1.

4. There is no dispute that the lessor entered into a lease of shop premises in Freshwater (the ‘premises’) with Suessox Pty Limited (‘Suessox’) commencing on 1 March 2013 and terminating on 29 February 2016. There is no dispute that Suessox did not exercise the option in that lease. There is no dispute that the respondent guaranteed Suessox’s obligations under the lessee. There is also no dispute that the respondent was a director of Suessox.

5. There is no dispute that Suessox continued in possession of the premises after the expiration of the lease. I find that Suessox continued in possession under clause 7.11 of the lease which provided that it occupied the premises on the basis of a periodic monthly tenancy.

6. There is also no dispute that in 2016 - 2017 the lessor and Suessox unsuccessfully attempted to negotiate a new lease of the premises.

7. Of relevance is the lessor’s assertion that a new lease of the premises with Suessox was entered into by way of email correspondence in January and February 2018. The respondent denies that such a new lease was entered into. The lessor also alleges that the respondent guaranteed the obligations of Suessox under the new lease. The respondent denies that she guaranteed the obligations of Suessox under new lease.

8. The documents that the lessor relies on are contained in a number of emails between the parties.

9. I find that on 20 January 2018 the lessor wrote to the respondent as an officer of Suessox stating that it had been on a monthly tenancy for nearly 2 years without a rent increase. Between 24 January and 19 February 2018 the parties corresponded concerning what an appropriate rent increase would be. On Friday 23 February 2018, the lessor wrote to the respondent as an officer of Suessox stating:

‘Hi Sue,

I would like to put forward a compromised proposal as follows:

1.   starting rent : $ 1100.00 plus GST per week

2.   Annual rent increase 5%

3.   3 year lease

PIs let me know.

Regards,

Shaun Lim’

10. On 27 February 2018 the respondent as an officer of Suessox replied stating:

‘Hi Shaun

Thankyou for your latest proposal

Please confirm my new monthly rent is $4,766.66 + GST

$5,243.33

commencing ^1St March 2018

regards

Sue’

11. On 28 February 2018, the lessor replied as follows:

‘Hi Sue,

I refer to your email below.

With the weekly rent that $1100.00 plus GST, this rent should be converted into 7 days in a week basis. Thus, (before GST), on an annual basis,

($ 1100.00 X 365) I 7days = $ 57 357.14.

I will round that to $ 57 350.00 plus GST for the first year rent.

Your new monthly rent from 1 March 2018 will be $ 5,257.00 incI GST.

Regards,

Shaun Lim’

12. I find that on 28 February 2018 the lessor sent the respondent the following documents:

1. the NSW Retail Tenant’s Guide;

2. The Lessor’s Disclosure Statement and the Lessee’s Disclosure Statement.

13. The Lessor’s Disclosure Statement was signed by the lessor. It referred to a 3 year term and stated that the lessee was to be Suessox Pty Ltd.

14. The lessor also stated that the lease document was being prepared. There is also no dispute that a no formal lease was entered into to document the asserted new lease. There is also no dispute that there is no written and signed guarantee of the new lease.

15. I find that Suessox did not sign and return to the lessor a Lessee’s Disclosure Statement.

16. The lessor also refers to the facts, which I find that it has established, that from 28 February 2018 to 2 December 2019 Suessox paid monthly rent, such rent being in the sum of $5,257.00 as from 28 February 2018 and increasing to $5,519.85 as from 2 April 2019.

17. The lessor submits that on 3 scenario’s, what it describes as a statutory lease came into existence. In all 3 scenarios the lessor relies on ss3 and 8(1) of the Act. Section 3 is the definitions section of the Act. The lessor relies on the following definition:

‘retail shop lease or lease means any agreement under which a person grants to another person for value a right of occupation of premises for the purpose of the use of the premises as a retail shop—

(a)  whether or not the right is a right of exclusive occupation, and

(b)  whether the agreement is express or implied, and

(c)  whether the agreement is oral or in writing, or partly oral and partly in writing.’

18. Section 8(1) of the Act states:

‘(1)  For the purposes of this Act, a retail shop lease is considered to have been entered into when a person enters into possession of the retail shop as lessee under the lease or begins to pay rent as lessee under the lease (whichever happens first).’

19. In the first scenario the lessor asserts that by the terms of the 2013 Lease, the emails dated 23, 27 and 28 Feb 2018 as referred to above and the payment of rent on 28 Feb 2018 in the amount of $5,257.00 by Suessox, as well as possession of the premises by Suessox on 1 March 2018, there was created a statutory lease (between the lessor, Suessox as the Lessee and the respondent as the Guarantor as defined in clause 9.3 of the 2013 Lease) within the terms of "retail shop lease" or "lease" as defined in s3 and s8(1) of Act and the terms of the statutory lease thereby created are all the terms of the 2013 Lease subject to the provisions contained in the three said emails.

20. In the second scenario, the lessor submits that by the terms of the 2016 Proposed Lease, the emails dated 23, 27 and 28 Feb 2018 as referred to above, the payment of rent on 28 Feb 2018 in the amount of $5,257.00 by Suessox, as well as possession of the premises by Suessox on 1 March 2018, there was created a statutory lease (between the lessor, Suessox as the lessee and the respondent as the Guarantor as defined in clause 9.3 of the 2016 Proposed Lease) within the terms of 'retail shop lease" or "lease" as defined in s3 and s8(1) of the Act, and the terms of the statutory lease thereby created are all the terms of the 2016 Proposed Lease subject to the provisions contained in the three said emails.

21. In the third scenario, the lessor submits that by the terms of the 2016 Proposed Lease, the emails dated 23, 27 and 28 Feb 2018 as referred to above, payment of rent on 28 Feb 2018 in the amount of $5,257.00 by Suessox, as well as possession of the premises by Suessox on 1 March 2018, there was created a statutory lease (between the lessor and the respondent as the lessee) within the terms of "retail shop lease" or "lease" as defined in ss3 and s8(1) of the Act and the terms of the statutory lease thereby created are all the terms of the 2016 Proposed Lease subject to the provisions contained in the three emails.

22. I do not accept any of the three scenarios referred to be the lessor. In my view they are all self-serving both as to the terms of the lease and the fact that the respondent had agreed to be a guarantor, or that the respondent had under the third scenario agreed to be the lessee.

23. I find that by:

1. the exchange of the three emails referred to at [9] – [11],

2. the fact that the lessor sent a Lessor’s Disclosure Statement to the respondent in her role as a director of Suessox which referred to a lease for three years and that the lessee was to be Suessox Pty Ltd;

3. payment of rent in the amount of $5,257.00 as from 28 February 2018 by Suessox which was in the same amount referred to by the lessor in its 28 February 2018email; and

4. the fact that Suessox continued in occupation of the premises, that a lease was created by reason of s8(1) of the Act. As stated, section 8 provides:

‘For the purposes of this Act, a retail shop lease is considered to have been entered into when a person enters into possession of the retail shop as lessee under the lease or begins to pay rent as lessee under the lease (whichever happens first).’

24. In addition, I find that by an objective view of the three emails to which I have referred, the lessor stated to Suessox that a new 3 year lease was being proposed. The Lessor’s Disclosure Statement made that plain and also that Suessox Pty Ltd was to be the lessee. I find that Suessox accepted the proposal by the terms of the respondent’s 27 February 2018 email and its payment of the rent in the exact amount that the lessor had asked for. I further find that the terms of the 2013 Lease and the 2016 proposed lease were not referred to in the parties’ email correspondence and that there is no basis for finding that those terms were to be incorporated into the 2018 lease, when that was never suggested to Suessox. The lessor stated on 28 February 2018 that that the lease document was being prepared. That did not occur. The terms of the lease would have been apparent if it was prepared. I further find that s8 of the Act does not require terms and conditions of a lease as a pre-requisite to a shop lease being entered into.

25. There is no dispute that Suessox gave back possession of the premises to the lessor at the end of December 2019, which the lessor states was in breach of the new lease entitling it to damages. There is also no dispute that Suessox was de-registered on 26 February 2021, with the consequence, on the lessor’s case, that the respondent as guarantor is liable for the damages arising out of Suessox’s breach of the lease. If there is a dispute about the date that Suessox was de-registered, I find that it was de-registered on 26 February 2021.

Was a guarantee given by the respondent?

26. I find that in New South Wales, there is no requirement for a guarantee to be in writing.

27. At 2.20 of the text Modern Contract of Guarantee the learned authors state (footnotes excluded):

‘The courts undertake a two-stage inquiry: first they examine whether the parties in fact intended to be bound at a point in time; and if they did, the second inquiry is whether their agreement at that time is complete and certain enough to constitute an enforceable contract. An earlier oral consensus is usually discharged by a subsequent written agreement between the parties.’

28. I find that there is no evidence that the lessor made it known that a personal guarantee from the respondent was required. That information could have been conveyed in its emails to Suessox as referred to above. Equally there is no evidence that the respondent indicated that she agreed or intended to be bound to the lessor as a guarantor in the 2018 lease negotiations.

29. The lessor’s submission is that the ‘course of dealing’ between the parties is the basis of the respondent being bound as a guarantor. The lessor cited the High Court decision in Realestate.com.au Pty Ltd v Hardingham RP Data Pty Limited v Hardingham [2022] HCA 39 at [124] and [126] in support of its submission. That case was not a lease case concerning a guarantor’s liability. The case concerned a claim relating to the infringement of the copyright in a large number of real estate photographs and floor plans, the property of the plaintiff.

30. Paragraphs 124 – 126 of the decision cited by and relied upon by the lessor are as follows, (footnotes excluded):

‘As this Court said in Con-Stan Industries of Australia Pty Ltd v Norwich Winterthur Insurance (Australia) Ltd129, "[t]he circumstances in which trade custom or usage may form the basis for the implication of terms ... have been considered in many cases". In addition to implied terms that arise from a trade or industry custom, there are also many cases in which it has been recognised that an implied term might be based upon a "past course of dealing between the parties"

Where an industry custom is not expressed in words between the parties, the custom can form the basis of an implied term of the contract between the parties. In such circumstances, the effect of the BP Refinery criteria, particularly reasonableness and obviousness, is that before an implied term based on custom is recognised, there "must be evidence that the custom relied on is so well known and acquiesced in that everyone making a contract in that situation can reasonably be presumed to have imported that term into the contract". This case does not concern any alleged industry custom.

As to an implied term arising from a course of dealing, the dealing does not need to reflect an industry practice but must reflect a clear and obvious practice between the parties. Many instances of a course of dealing involve a practice that has been expressed in words on previous occasions as an express term, although not on the relevant occasion. Sometimes those words expressed as part of the course of dealing are treated as the basis of an implied term on the relevant occasion. In many cases, however, it might be better regarded as an express term if the inference is that, on the relevant occasion, the parties incorporated, by their conduct, the previously expressed term.’

31. The above extracts appeared in the joint judgement of Edelman and Steward JJ under the heading ‘The second task: identifying implied terms’. As is clear on a reading of the above paragraphs, the discussion of ‘course of dealing’ was in context of the implication of terms, not in relation to an agreement to be a guarantor being found on the basis of a course of dealing between parties. I find that there is nothing in the paragraphs cited that support the lessor’s submission that a finding should be made that the respondent guaranteed Suessox’s obligations under the 2018 lease because of a course of dealing.

32. I find that the lessor’s claim against the respondent alleging that she is liable as a guarantor must fail because there was no request by the lessor that she guarantee Suessox’s obligations under the February 2018 lease and no agreement or intention by her that she would guarantee those obligations.

33. I will make an order that the lessor’s case is dismissed.

Costs

34. In the event that a party wishes to bring a costs application, such application must be lodged in the Tribunal and served on/given to the costs respondent within 14 days of the date of the orders in these proceedings either attaching or referring to the documents relied upon in support of the application.

35. The costs respondent will have 14 days after the date it or she receives the application to lodge in the Tribunal and serve on/give to the costs applicant its or her submissions, if any, in response to the costs application, such submissions either attaching or referring to the documents relied upon.

36. The parties must state in their submissions whether or not they consent to the costs application being determined on the basis of the parties written submissions and attached documents, if any, without the need for a hearing.

37. Subject to the parties’ submissions, the Tribunal will determine any costs application made on the basis of the papers lodged in the Tribunal.

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I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales.

Registrar

Decision last updated: 17 July 2023