Trust Company of Australia Ltd v Skiwing Pty Ltd
[2006] NSWCA 387
•21 December 2006
NEW SOUTH WALES COURT OF APPEAL
CITATION: TRUST COMPANY OF AUSTRALIA LTD v SKIWING PTY LTD [2006] NSWCA 387
FILE NUMBER(S):
41010/05
HEARING DATE(S): 14 November 2006
DECISION DATE: 21/12/2006
PARTIES:
Trust Company of Australia Ltd - Appellant
Skiwing Pty Ltd Trading as Cafe Tiffany's - Respondent
JUDGMENT OF: Handley JA Basten JA McDougall J
LOWER COURT JURISDICTION: Administrative Decisions Tribunal Appeal Panel
LOWER COURT FILE NUMBER(S): ADT 059063
LOWER COURT JUDICIAL OFFICER: M. Chesterman - ADCJ (Deputy President); G.B. Molloy - Judicial Member; B. Weule - Non-Judicial Member
COUNSEL:
R.J.H. Darke SC/M. Allars – Appellant
Self-Represented - Respondent
SOLICITORS:
RAJ Lawyers – Appellant
Self-Represented - Respondent
CATCHWORDS:
JURISDICTION – appeal from Appeal Panel of Administrative Decision Tribunal – whether decision was interlocutory – whether leave required – whether notice of appeal incompetentRETAIL LEASE – statutory interpretation – Retail Leases Act 1994 (NSW) ss 11 and 12 – whether the term “services” under s 12 included “outgoings”RETAIL LEASE – Retail Leases Act 1994 (NSW) s 30 – whether calculation of contribution to outgoings on proportionate basis should take into account vacancy ratesRETAIL LEASE – whether contractual obligation to pay contributions to outgoings included requirement that amount claimed be “reasonable” PROCEDURAL FAIRNESS – whether Administrative Decision Tribunal erred in relying on audited statement of outgoings and cross-examination of auditor without granting party access to further documentsCOSTS – whether Appeal Panel of the Administrative Decision Tribunal was a “court” for the purposes of the Suitors’ Fund Act 1951 (NSW)
LEGISLATION CITED:
Administrative Decisions Tribunal Act 1997 (NSW), ss 73, 119
Fair Trading Act 1987 (NSW), s 4
Interpretation Act 1987 (NSW), s 21
Retail Leases Act 1994 (NSW), ss 3, 7, 10, 11, 12, 21, 22, 27, 28, 29, 30, 70, 71, 72A, Schedule 2
Retail Leases Amendment Act 2005 (NSW), Schedule 1, cl 26
Suitors’ Fund Act 1951 (NSW), s 2
Supreme Court Rules 1970 (NSW), Part 51, r 4(1)
DECISION:
(1) Dispense with the filing of a summons for leave to appeal from the decision of the Appeal Panel of the Administrative Decisions Tribunal made on 7 December 2005
(2) Grant leave to appeal
(3) Direct that the Notice of Appeal filed on 30 December 2005 be treated as filed pursuant to leave
(4) Allow the appeal and set aside the order of the Appeal Panel
(5) In lieu thereof:
(i) allow the appeal to the Appeal Panel
(ii) set aside the order of the Administrative Decisions Tribunal made on 10 August 2005, and
(iii) remit the matter to the Tribunal for it to determine the applications under the Retail Leases Act according to law
(6) Order the Respondent to pay the Appellant’s costs of the appeal in this Court
(7) Grant the Respondent a certificate under the Suitors’ Fund Act 1951 (NSW) with respect to the costs of the appeal.
JUDGMENT:
IN THE SUPREME COURT
OF NEW SOUTH WALES
COURT OF APPEAL
CA 41010/05
ADT 059063HANDLEY JA
BASTEN JA
McDOUGALL J21 December 2006
TRUST COMPANY OF AUSTRALIA LTD v SKIWING PTY LTD
Skiwing Pty Ltd is the lessee of a shop in the Imperial Arcade, in Pitt Street, Sydney, of which the Appellant, Trust Company of Australia, is the lessor. Prior to the commencement of the lease in May 2000, there was no proper disclosure statement containing details of the relevant outgoings as required under s 11 of the Retail Leases Act 1994 (NSW). Contravention of s 11 only gave a right to terminate the lease in certain circumstances within a specified period. However under s 12 of the Retail Leases Act, there was no obligation to contribute to costs of “services” which were undisclosed.
The issues for the Court of Appeal were:
the proper construction of the term “services” under s 12 of the Retail Leases Act and whether “outgoings” and “services” were mutually exclusive concepts;
whether there had been a breach of s30 of the Retail Leases Act by calculating contribution to outgoings on a proportionate basis which included empty shops;
whether the contractual obligation to pay a contribution to outgoings was conditioned by a requirement that the amount claimed be “reasonable”;
whether the Tribunal acted unfairly to Skiwing in relying on an audited statement of the amount of total outgoings and the cross examination of the auditor, without granting Skiwing access to all documents in the lessor’s possession relating to outgoings payable with respect to the Imperial Arcade;
whether the notice of appeal from the Appeal Panel of the Administrative Decisions Tribunal was competent;
whether the respondent is entitled to a certificate under the Suitors’ Fund Act 1951 (NSW) with respect to the costs of the appeal.
Held by Basten JA (Handley JA & McDougall J agreeing):
In relation to (i)
The meaning of the term “services” must depend on its statutory context and its place in s 12: at [19].
Given the context of the term as used in s 12, it would be anomalous if the use of the word “services” picked up an obligation to contribute to services provided generally within a shopping centre, avoiding responsibility for payment of a contribution to such outgoings absent pre-lease disclosure, but made no such provision in relation to outgoings which were not the provision of services: at [23].
The structure of the Retail Leases Act supports the view that the term “services” in s 12 is to be understood in terms of fitout of the retail shop. The expenses included within the definitions of “outgoings” and treated as outgoings to be paid by the lessee, in Schedule 2 of the Retail Leases Act, have not merely the character of expenses relating to the building as a whole, rather than a particular retail shop in a building, but also the character of on-going expenses: at [24].
In relation to (ii)
If each tenant is required to pay that proportion of the outgoings which its floor space bears to the total floor space in the building (not just to the total occupied floor space in the building) then its payment will remain constant regardless of the level of vacancies, or the number of tenancies which are not paying a proportion to outgoings. The mere fact of a particular vacancy rate or that some tenants do not pay a contribution to outgoings, will not establish a breach of s 30 of the Retail Leases Act: at [38].
In relation to (iii)
Reading cl 1.16 of the lease as a whole, there is reference to reasonableness as a constraint on the recoverable costs of managing the centre and one would infer that that constraint applied to each aspect of the management fees: at [64].
Section 29(b) of the Retail Leases Act required that adjustment be made according to “the total amount actually expended…, but taking into account only expenditure properly and reasonably incurred”. It does not matter whether the lease is silent on this topic, or contains a contrary direction; the Retail Leases Act will, to the extent of the inconsistency, override the lease: s 7. Accordingly, Skiwing’s ultimate obligation with respect outgoings was to make contribution only in relation to those “properly and reasonably incurred”: at [65].
The factual finding by the Tribunal was consistent with a finding of reasonableness, even if it did not use that language. Skiwing did not demonstrate that application of the correct legal test would have been likely to lead to a different result: at [67]–[68].
In relation to (iv)
Section 28 of the Retail Leases Act demonstrates a statutory intention that a lessee must either be given an audited statement in relation to outgoings or must be provided with copies of relevant assessments, invoices and receipts. In particular cases, a level of further enquiry beyond that expressly provided for in the lease or by the Retail Leases Act, may be required: at [52].
Davies v Lyndhurst Developments Pty Ltd [2001] NSWADT 9, applied.
The powers of the Tribunal, conferred by s 73 of the Administrative Decisions Tribunal Act 1997 (NSW) (“ADT Act”), are broad and discretionary. They impose few express constraints, although it should be inferred that the Tribunal must act in a procedurally fair way, as between the parties. The judicial member did not err in exercising his discretion in the present case. The factual findings made by the Tribunal were open to it, on the material before it. A complaint that they were the “against the evidence” is not made out, but even if it were does not demonstrate an error of law: at [54]–[55].
Italiano v Carbone & Ors [2005] NSWCA 177, applied.
In relation to (v)
The Administrative Decision Tribunal’s decision was an interlocutory judgment as the order sought to delegate to Stockland the power to calculate the amount owing and was not a judgment for a money amount: at [16].
The decision of the Appeal Panel dismissing an internal appeal from those orders must also be interlocutory. Thus the notice of appeal was invalid as leave to appeal is required for an appeal from an interlocutory decision under s 119(1A) of the ADT: at [18]
In relation to (vi)
The Appeal Panel had the relevant characteristics to be a “court” for the purposes of the Suitors’ Fund Act, though no tribunal has been prescribed for the purposes of “court” in s 2(1). Accordingly, the respondent to the appeal, Skiwing, is entitled to a certificate under the Suitors Fund Act with respect to the costs of the appeal: at [74].
Australian Postal Commission v Dao (No. 2) (1986) 6 NSWLR 497, applied.
IN THE SUPREME COURT
OF NEW SOUTH WALES
COURT OF APPEAL
CA 41010/05
ADT 059063HANDLEY JA
BASTEN JA
McDOUGALL J21 December 2006
TRUST COMPANY OF AUSTRALIA LTD v SKIWING PTY LTD
Judgment
HANDLEY JA: I agree with Basten JA.
BASTEN JA: Skiwing Pty Ltd, trading as Café Tiffany’s, (“Skiwing”) is the lessee of a shop in the Imperial Arcade in Pitt Street, Sydney. The Appellant, Trust Company of Australia Ltd trading as Stockland Property Management (“Stockland”), is the lessor. Skiwing has made a number of claims which have been considered by the Retail Leases Division of the Administrative Decisions Tribunal, the history of which is partly recounted in an earlier matter between the same parties in this Court: see Skiwing Pty Ltd v Trust Company of Australia [2006] NSWCA 276; see also Trust Company of Australia Ltd v Skiwing Pty Ltd [2006] NSWCA 185. The present proceedings involve two applications made by Skiwing on 15 March and 30 June 2004 and an application by Stockland made on 3 June 2004.
The primary question on this appeal concerns the meaning of the word “services” in s 12 of the Retail Leases Act 1994 (NSW). The section provides:
12 Lessee not required to pay undisclosed contributions
A provision of a retail shop lease that requires the lessee to pay or contribute towards the cost of any finishes, fixtures, fittings, equipment or services is void unless the liability to make the payment or contribution was disclosed in a disclosure statement given to the lessee in accordance with this Part.
The Retail Leases Act also makes provision for the disclosure statement, to be given prior to the execution of the lease, to contain details of “outgoings” of the lessor to which the lessee was required to contribute: s 11. That provision was not complied with, but the sanction for contravention was held not to be avoidance of the obligation to contribute, but the right to terminate the lease, in certain circumstances and within a specified time period: s 11(2) and (3). Accordingly there were questions raised as to whether the concepts of “outgoings” and payments for “services” were mutually exclusive and the extent to which one might affect the definition of the other.
Some of the provisions of the Retail Leases Act considered below were amended by the Retail Leases Amendment Act 2005 (NSW) (“the 2005 Amendment Act”). The 2005 Amendment Act did not commence until 1 January 2006 and hence could not affect the nature or extent of the pre-lease disclosure obligations relevant to Skiwing’s lease. Some amendments do apply to retail shop leases entered into before their commencement, but will not be relevant for present purposes, because they do not affect things done prior to the commencement date: see 2005 Amendment Act, Schedule 1, cl 26.
Various issues were sought to be raised by Skiwing by way of cross-appeal, which are best understood once the procedural history of the matter is explained.
Procedural history
The steps by which the matter came before this Court are complex and will be referred to below to the extent necessary to identify the issues raised. It should be noted, however, that there were four substantive decisions in the Tribunal, which are of relevance. First, on 17 August 2004, Judicial Member Donald handed down a decision (“the first ADT decision”): Skiwing Pty Ltd v Trust Company of Australia Ltd [2004] NSWADT 169. Mr Donald considered numerous bases upon which Skiwing argued that it was not required under the lease to make any contributions to outgoings and that it was entitled to recover those payments which had been made. Mr Donald found that there had been no proper disclosure statement containing details of the relevant outgoings and that, accordingly, s 11 had been contravened. However, he also held that the sole remedy for a contravention of s 11 was the qualified right to terminate the lease within six months of entering into it. That remedy had not been engaged. Secondly, he concluded that s 12 was not engaged, stating at [72]:
“In my opinion s.12 does not deal with ‘outgoings’ which are dealt with in numerous other sections of the Act. On ordinary principles of statutory interpretation, the list of cost items referred to in s.12 uses specific language and does not include a reference to ‘outgoings’. Given that ‘outgoings’ are expressly defined in s.3 and dealt with elsewhere, ss. 22, 27-30, it is in my opinion not possible to contend that ‘services’ in s.12 includes the various activities that relate to the operation of the Centre the cost of which is covered by the lessor's outgoings.”
The application by Skiwing was dismissed by the Tribunal.
That decision was taken by Skiwing on appeal to the Appeal Panel of the Administrative Decisions Tribunal. On 11 March 2005 the Appeal Panel handed down its decision on the first appeal: Skiwing Pty Ltd v Trust Company of Australia Ltd [2005] NSWADTAP 10. In that decision, the Appeal Panel rejected all of the grounds of appeal raised by Skiwing in relation to the first ADT decision, except that which related to the operation of s 12. In particular, it rejected a challenge to the conclusion that s 11(2) provided the only remedy if a lessor had failed to comply with s 11(1) and that Skiwing could not exercise any right under s 11(2) to terminate the lease: at [51].
The critical part of the Panel’s reasoning in relation to s 12 appeared at [59]-[65] and commenced by reference to the definition of “outgoings” in s 3 of the Act. As at 1 May 2000, that section provided:
outgoings means a lessor’s outgoings on account of any of the following:
(a)the expenses directly attributable to the operation, maintenance or repair of the building in which the retail shop is located or (in the case of a retail shop in a retail shopping centre) of any building in the retail shopping centre or any areas used in association with any such building,
(b)rates, taxes, levies, premiums or charges payable by the lessor because the lessor is the owner or occupier of any such building or the land on which it is erected.
The Panel set out that definition, including an amendment to par (b) relating to a taxable supply under the GST legislation, which did not take effect until 27 June 2000, and continued:
“[60]This definition embraces payments of ‘expenses’ or of ‘rates, taxes, levies, premiums or charges’ that are made by a lessor and are for that reason ‘a lessor’s outgoings’. The term ‘outgoings’ does not merely include such payments. They constitute what the term ‘means’.
[61]What the Tribunal describes as ‘the scheme of the Act with regard to outgoings’ can therefore only apply to ‘outgoings’ in this sense of payments that the lessor has made. It cannot apply to charges that the lessor levies upon a lessee for services that the lessor itself provides.”
In other words, the distinction sought to be drawn by the Appeal Panel on the first appeal, was between amounts paid by the lessor to third parties and services provided by the lessor itself. The Appeal Panel set aside the first ADT decision and remitted the matter to the judicial member to determine the extent of any liability of Skiwing to contribute to outgoings under the lease and the amount of any payment to be made by either party to the other: at [75].
The matter was then the subject of further consideration by Judicial Member Donald who handed down a second decision on 10 August 2005: Skiwing Pty Ltd v Trust Company of Australia Ltd [2005] NSWADT 188 (“the second ADT decision”). In reconsidering the matter, Mr Donald noted at [6]:
“For the Lease in question, the Disclosure Statement specifically stated ‘Facilities and services provided by the Lessor – Nil’ and quite clearly did not contain any reference to a list of outgoings. Accordingly on the Appeal Panel's view of the way the Act works, under this Lease any services provided by the Lessor within the meaning of that word in s.12, are barred; and the matters listed as outgoings in the Lease, even though they may not fall within the definition of outgoings in the Act, in so far as they are ‘services’ provided by the Lessor, are barred from recovery unless listed in the Disclosure Statement.”
Applying the Appeal Panel’s approach, the Tribunal concluded that the lessee’s contribution to outgoings was restricted to the following items, namely municipal rates, water rates, land tax, insurances, toilet requisites and waste removal.
Stockland appealed from the second ADT decision on the basis that other outgoings did not constitute “services” and were therefore recoverable. Skiwing also appealed, though its appeal was limited to the failure of the Tribunal to deal with its claim under s 72A of the Retail Leases Act for interest on the amount of the refund to be paid by Stockland. As the order of the Tribunal had merely required Stockland to recalculate the contributions payable and had not involved a money judgment, no question of interest yet arose. The Appeal Panel, in its second appeal decision “deferred” consideration of the Skiwing appeal: at [52].
On 7 December 2005, the second Appeal Panel dismissed Stockland’s appeal, but in doing so adopted a construction of s 12 which was at variance with its earlier reasoning: see Trust Company of Australia Ltd v Skiwing Pty Ltd (No. 2) (RLD) [2005] NSWADTAP 71.
The primary submission made on behalf of Stockland on the second appeal was identified by the Appeal Panel at [68] in the following terms:
“Mr Biscoe submitted that, by virtue of these aspects of the legislation, the term ‘services’ in s 12 should be interpreted eiusdem generis with (that is, in the same general category as) the preceding terms ‘finishes, fixtures, fittings [or] equipment’ and as referring, like these terms in their context, to individual shops rather than to buildings or land. By virtue of this reasoning, he submitted, we should treat ‘services’ as a concept wholly distinct from ‘outgoings’. He acknowledged, however, that we had held otherwise in the first appeal.”
On the second appeal, the Appeal Panel accepted that the distinction it had sought to draw on the first appeal, between services provided by the lessor through its own employees and services provided through a third party, even a wholly owned subsidiary, would give rise to artificial distinctions which were not appropriate and accordingly that approach should not be followed: [81]-[86]. Rather, the Appeal Panel decided to treat “services” and “outgoings” as overlapping categories and held that the term “services” should be given its natural meaning: at [87]. Thus, the Appeal Panel considered that whilst the cost of child-minding facilities, cleaning, management costs, pest control and security might all constitute outgoings, they would also constitute “services” according to the natural meaning of the term: at [88]. Because the Appeal Panel considered that the second ADT decision came to the same result as it would had the Tribunal applied the new approach , the appeal was dismissed.
Stockland’s appeal
Stockland seeks to appeal to this Court pursuant to s 119 of the Administrative Decisions Tribunal Act 1997 (NSW) (“the ADT Act”). An appeal may only be brought “on a question of law” against “any decision of the Appeal Panel in those proceedings”: s 119(1). Where the decision of the Appeal Panel is an “interlocutory decision” an appeal lies only by way of leave: s 119(1A).
The parties to the present proceedings appear to have treated Mr Donald’s second decision as being otherwise than interlocutory. Thus, an appeal was lodged as of right and no point was taken that leave was required. The orders made by the judicial member required Stockland to prepare a schedule of contributions to outgoings for each of the financial years affected by the decision, to calculate the appropriate share of the lessee and:
“3.either reimburse the Lessee with any difference between the total amount already paid for those years 2000 to 2005 and the proper claimable amount or alternatively if there is a continued shortfall, issue a notice to the Lessee for the shortfall which the Lessee is by virtue of this judgment obliged to pay.”
It was perhaps the form of the order which induced Skiwing to appeal to the Appeal Panel on the basis that no allowance had been made for interest. However, this decision was not a judgment for a money amount, as had been sought by Skiwing in its amended points of claim dated 23 April 2004, but was more in the nature of an answer to a separate question concerning liability. To the extent that the order sought to delegate to Stockland the power to calculate the amount owing, that was not a proper exercise of the Tribunal’s powers. Otherwise, there was nothing in these orders which prevented Skiwing from challenging any further calculation undertaken by Stockland.
If the orders made by the judicial member of the Tribunal were interlocutory, the decision of the Appeal Panel dismissing an internal appeal from those orders must also be interlocutory, as it left on foot the orders as made by Mr Donald.
It would appear to follow that, despite an absence of objection taken in this Court, that the notice of appeal was invalid. That issue can be addressed further after considering the substantive issues relied upon by the parties, although it will have consequences also in relation to a separate cross-appeal brought by Skiwing.
Challenge to decision of Appeal Panel
The question of law sought to be raised in the appeal concerns the proper construction of the term “services” contained in s 12 of the Retail Leases Act. That term is not defined in the Retail Leases Act, or in the Interpretation Act 1987 (NSW), s 21. However, depending on the statutory context, it is undoubtedly capable of bearing a wide meaning: see, eg, Fair Trading Act 1987 (NSW), s 4(1), services. In some cases, the statutory context may permit the term to be given the full scope of its potential meaning. In other contexts, it may need to be read down, so as to give it a more limited meaning. As noted in relation to the argument before the Tribunal, Stockland contended that it should be read eiusdem generis, in its context in s 12.
It is correct to say that it should be read in context and, initially, that context is its place in s 12. Section 12 deals with the circumstances in which a lessee is obliged to pay or contribute towards the cost of “any finishes, fixtures, fittings, equipment or services”. These words, Stockland contended, should be understood as all directed to the fitout of the specific shop the subject of the retail shop lease. None of the words should be understood as referring to the shopping centre at large, or any other part of a building in which the retail shop is located.
Viewed in the abstract, each element of this construction would appear to be preferable to its alternative. In other words, the words should all have a common point of reference and the point of reference should be the retail shop itself. This approach obtains support from two other provisions of the Act. First, s 21 provides for the payment of a “special rent” to cover the cost of fitout:
“21 Special rent—cost of fitout
Nothing in this Act prevents a retail shop lease from providing for the payment of a special rent (in addition to any other rent) to cover the cost of fitout, fixtures, fittings and equipment installed or provided by the lessor at the lessor’s expense.”
The language of s 21 is similar to that of s 12, although it is not identical. Thus, there is no reference in s 21 to “finishes” although there is reference to “fitout”. Further, there is no reference in s 21 to “services”, but on one view the cost of fitout would include not merely the cost of the materials and equipment installed or provided, but the cost of installation or provision, that being a service provided in relation to the fitout. Accordingly, the differences in language are not significant.
Secondly, it is permissible to take into account the terms of Schedule 2 of the Act, as it then stood, which makes provision for the content of the lessor’s disclosure statement. Schedule 2 is important, not because of its form, but because it identifies the content required of a disclosure statement given pursuant to s 11. Nevertheless, the form is deliberately structured so as to ensure that different categories of information are disclosed in an orderly manner. Thus, the first table of details required to be disclosed is headed “Tenancy details”; the second “Outgoings to be paid by the lessee” and the third “Retail shopping centre details”. (There are other headings which need not be noted for present purposes; further, the form has been amended, though not significantly for present purposes, since 1 May 2000 when the lease in question commenced.) One set of details was identified as follows:
“Finishes, fixtures, fittings, equipment and services to be provided by the lessor.
Lessee has to pay for the finishes, fixtures, fittings, equipment and services to be provided by the Lessor: yes/no.
If yes, to what extent:
Finishes, fixtures, fittings, equipment and services to be provided by the lessee.”
In the Tribunal, one contention had been that the Retail Leases Act gave effect to a structure pursuant to which outgoings and services were independent and mutually exclusive concepts. From that it was sought to argue that the term “services” in s 12 should be given a sufficiently broad construction so that, when taken together with the outgoings dealt with in s 11, the two terms ensured that all aspects of the payments due from the lessee to the lessor would be properly covered by the provisions which regulated the requirements of pre-contract disclosure and those regulating liability for such payments. In its second decision, the Appeal Panel abandoned that approach. It was correct to do so, and not merely because there is no reason to treat ‘outgoings’ merely as disbursements, as opposed to wages paid by the lessor to its own employees, but also because it is impossible to avoid the conclusion that many of the outgoings referred to in Schedule 2 involve the provision of services. Mutual exclusivity would have curious results. Air conditioning, ventilation, security, child-minding, repairs and maintenance, gardening and cleaning are all items in respect of which disclosure is required under the heading “Outgoings” and all of which involve the provision of services. However, that conclusion does not assist the Respondent lessee. Given the context of the term as used in s 12, it would be anomalous if the use of the word “services” picked up an obligation to contribute to services provided generally within a shopping centre, avoiding responsibility for payment of a contribution to such outgoings, for the whole period of a retail shop lease, absent pre-lease disclosure, but made no such provision in relation to outgoings which were not the provision of services.
Properly understood, the structure of the Retail Leases Act, with respect to pre-contract disclosure, supports the view that the term “services” in s 12 is to be understood in terms of fitout of the retail shop. The expenses included within the definition of “outgoings” and treated as outgoings to be paid by the lessee, in Schedule 2, have not merely the character of expenses relating to the building as a whole, rather than a particular retail shop in a building, but also the character of on-going expenses. Although a retail shop lease may relate to the whole of a building, thus making the first point of distinction of limited weight, there is a more emphatic distinction between on-going expenses which will be incurred from time to time and those, like finishes, fixtures, fittings and equipment, which are likely to be provided at or about the time of commencement of the lease and thereafter, by way of replacement for material supplied at fitout, only as occasion requires.
It may be true that none of these considerations, taken alone, would be conclusive. However, taken as a whole they are persuasive in favour of the construction of s 12 initially preferred on a reading of the section taken in isolation, namely that the term “services” is restricted to the provision of finishes, fixtures, fittings and equipment for use within the retail shop and such as are likely to be provided at the commencement of the lease, if they have not already been installed or provided. It follows that, as was held in the first ADT decision, and subject to the separate arguments raised by Skiwing, Stockland is entitled to recover by way of contribution to outgoings, an amount on account of all the outgoings specified in cl 1.16 of the lease, liability for payment of which is provided in cl 3.04.
It follows that, in respect of the “appeal” by Stockland, if competent, and subject to questions raised on the “cross-appeal”, the following orders would be appropriate:
(1)Appeal allowed and decision and orders made by the Appeal Panel on 7 December 2005 set aside.
(2) In lieu thereof, make the following orders:
(a)orders made by the Tribunal on 10 August 2005 be set aside;
(b)reinstate the orders made by the Tribunal on 17 August 2004.
(3)Order the Respondent to pay the Appellant’s costs of appeal in this Court.
(4)Grant the Respondent a certificate under the Suitor’s Fund Act 1951 (NSW).
Cross-appeal by Skiwing
By its cross-appeal, Skiwing sought to challenge all four decisions noted above. However, it challenged only one aspect of the orders made by the Appeal Panel on 7 December 2005, namely that which concerned payment of interest, a matter which remained to be dealt with by the judicial member and was not addressed by the Appeal Panel. To the extent that Skiwing sought to appeal against the decision on the second appeal, and disregarding questions of competency, its appeal should be dismissed.
In reverse chronological order, the second decision against which Skiwing purported to appeal was the second ADT decision, made on 10 August 2005. Two matters were sought to be raised in relation to that decision. The first, being the question of interest, has already been noted, as a matter which does not yet arise. However, it follows from the conclusion reached above in relation to the Stockland appeal that, unless Skiwing is successful on some other basis, it is unlikely that any question of payment from Stockland to it will eventuate. The question of interest will therefore be moot.
The second aspect of the second ADT decision which is sought to be challenged is the holding that Skiwing remained liable to pay outgoings on account of rates, taxes, insurance, toilet requisites and waste removal. Again, so far as that challenge depends on the terms of s 12, and disregarding questions of competency, it must fail, those outgoings not falling within the language of s 12, as determined above, being the only provision which would render void the contractual liability.
Again in reverse chronological order, the third decision from which Skiwing purported to appeal was the first decision of the Appeal Panel, handed down on 11 March 2005. This aspect of the cross-appeal faces three difficulties. First, that decision of the Appeal Panel was undoubtedly interlocutory, involving the remittal of the matter to the judicial member. Thus, a summons seeking leave would be required to appeal against that decision. Secondly, pursuant to s 119(3) of the ADT Act, an appeal must be made within the period allowed by the Supreme Court Act 1970 (NSW) or within such further time as this Court may allow. Pursuant to the Supreme Court Rules, an application for leave to appeal should have been made within 28 days of the decision below: Part 51, r 4(1). The cross-appeal, however, was not lodged until 10 February 2006. Accordingly, Skiwing would need an order from this Court extending the time within which to seek leave to appeal. Thirdly, even if these procedural steps were taken, Skiwing would need to obtain leave to bring the appeal.
If there were merely a question of time and the procedural steps necessary to seek leave, I would permit Skiwing to make the relevant applications for three reasons. The first is that Stockland also needs leave to take the relevant procedural steps. Secondly, there has as yet been no final determination of the proceedings before the Tribunal and it is at least arguable that Skiwing would be entitled to challenge any of the interlocutory decisions once a final determination was made. Thus the issues sought to be agitated were those upon which Judicial Member Donald ruled against Skiwing in his first decision, other than the matter on which Skiwing succeeded on the first appeal to the Appeal Panel. Each of those matters was raised before the first Appeal Panel and ruled upon by the Appeal Panel, albeit adversely to Skiwing. Accordingly, although Skiwing ultimately seeks to challenge in the present proceedings, a fourth decision, namely the first ADT decision, that step is unnecessary as it would be entitled, in a timely fashion, to challenge the first decision of the Appeal Panel.
However, before addressing the procedural issues, it is convenient to consider the substantive issues which Skiwing seeks to raise, other than matters of statutory construction determined under Stockland’s appeal.
Substantive issues on cross-appeal
(a) Finding of no reliance on representation; breach of s 30As appears from the first ADT decision, Mr Stojanoski, on behalf of Skiwing, claimed that he had had a conversation with the centre manager in which he had sought an assurance that everyone in the building was paying a contribution to outgoings. The reply he claimed to receive was to the effect:
“Yes, it is based on your 154 sqm divided with the whole building.”
The judicial member found either that no such representation was made, or that it was not relied upon by Mr Stojanoski: see [2004] NSWADT 169 at [12]-[13]. On any view, that was a finding of fact (or possibly two findings of fact). The Appeal Panel, in its first decision, treated them as findings of fact and declined to intervene: see [2005] NSWADTAP 10 at [19].
Although the comment has no relevance to the present ground of appeal, it may be noted that a claim of misrepresentation, made with knowledge that it was false or misleading, can give rise to a liability to pay reasonable compensation, pursuant to s 10(1) of the Retail Leases Act. In its second decision, the Appeal Panel referred to s 10, apparently by way of background, and stated at [18]:
“But the amount of compensation recoverable by a lessee under this section is likely to be limited, or indeed non-existent, unless it can be shown that if the true position had been disclosed by the lessor, the lessee would not have entered into the lease.”
This statement tends to recast the language of s 10 in a way which could lead a Tribunal to ask a wrong question. Under s 10, the party to whom a false or misleading statement or representation is made must establish that it has entered into the lease “as a result of” that statement or representation. It must further establish that it has suffered damage “attributable to” entering into the lease. There is a risk of error in running these two questions together. There may also be a question as to what is meant by “the lease” in such circumstances. However it does not appear that anything turned on this statement by the Tribunal in relation to s 10, either in relation to its conclusion in the second appeal, or in relation to the question of misrepresentation relied upon by Skiwing in the course of the first appeal.
The second question which arises in this context is the significance of the representation from the perspective of Skiwing. On one view, Skiwing’s concern may simply have been one of equity between tenants in the sense that it did not wish to enter into a lease which was less favourable to it than the leases being offered to other tenants. However, there may be a connection between the terms of the particular representation and the separate complaint by Skiwing of a breach of s 30(1) of the Retail Leases Act. That provision states:
“30Non-specific outgoings contribution limited by ratio of lettable area
(1)A lessee under a retail shop lease in a retail shopping centre is not liable to contribute towards a non-specific outgoing of the lessor (that is, an outgoing not specifically referable to any particular shop in the retail shopping centre) unless the shop is one of the shops to which the outgoing is referable, and is not liable to contribute an amount in excess of an amount calculated by multiplying the total amount of that outgoing by the ratio of the lettable area of the shop to the total of the lettable areas of all the retail shops to which the outgoing is referable.”
Even on his own evidence, Mr Stojanoski received an assurance that Skiwing would be required to contribute only on the proportionate basis required by s 30. Whether he thought that if not all tenancies were in fact required to contribute that the total outgoings would be divided only amongst those tenancies which did contribute is not entirely clear. However, that was the complaint made separately by reference to a complaint of breaches of s 30, based upon the existence of empty shops. This is certainly the context in which Skiwing is said to have become aware of the alleged misrepresentation: see [2004] NSWADT 169 at [31]-[32]. Further, Stockland admitted that it had entered into leases which “do not contain any independent obligation by those tenants to contribute to outgoings”: at [34].
During the course of the appeal, Mr Stojanoski, on behalf of Skiwing, was invited to file a further written submission explaining why he thought that the existence of such tenancies, or indeed of vacant premises within the building, led to the conclusion that there had been a breach of s 30. His submission asserted that if total outgoings remained constant, but only 40 out of 50 premises within the building contributed, the cost per contributor would be 25% higher than if all contributed. That is, fixed outgoings would be divided between a smaller number of tenants. As a fact that is undoubtedly true, if that is the way the outgoings are divided. However, if each tenant is required to pay that proportion of the outgoings which its floor space bears to the total floor space in the building (not just to the total occupied floor space in the building) then its payment will remain constant regardless of the level of vacancies, or the number of tenancies which are not paying a proportion of outgoings. In effect, the lessor must itself bear such expenses as it is unable or unwilling to pass on to its tenants. The fact that some premises are vacant or that some tenants do not make a contribution to outgoings, will not establish a breach of s 30.
In the Tribunal’s first decision, the judicial member held at [66]:
“I am well satisfied on all of the evidence that, whether or not the very substantial contribution to outgoings of this tenant amounted to over one-fifth of its total payments under the lease, those outgoings were first properly attributed only to the total outgoings of this particular retail Arcade and secondly that the contribution was calculated only by reference to the proportion of the lettable area of the premises to the total retail area of the Imperial Arcade shopping centre.”
As the Appeal Panel noted on the first appeal, at [71] Skiwing went no further than to dispute the Tribunal’s factual findings. That being so, there was no error of law on the part of the Appeal Panel or (if it were relevant) on the part of the judicial member. Accordingly, the complaints of misrepresentation and breach of s 30 of the Retail Leases Act, are not competent on an appeal limited to a question of law.
(b) Termination under s 11
The next matter complained of by Skiwing on its “cross-appeal” is the finding that it did not exercise its right to terminate the lease under s 11 of the Retail Leases Act. Section 11(1) requires that a lessee be given a disclosure statement at least 7 days before a retail shop lease is entered into with a lessor. The judicial member found that Skiwing had not been given a disclosure statement in accordance with this provision. Sub-sections 11(2) and (3) provide:
“(2)If a lessee was not given a disclosure statement as required by subsection (1) or if the disclosure statement that was given to the lessee was incomplete or contained information that at the time it was given was materially false or misleading, the lessee may terminate the lease by notice in writing to the lessor at any time within 6 months after the lease was entered into, unless subsection (3) prevents termination.
(3)The lessee cannot terminate the lease under this section on the ground that the disclosure statement is incomplete or contains information that is materially false or misleading if:
(a)the lessor has acted honestly and reasonably and ought reasonably to be excused for the failure concerned, and
(b)the lessee is in substantially as good a position as the lessee would have been if the failure had not occurred.”
In Skiwing’s amended points of claim dated 23 April 2004, the allegation of a breach of s 11(1) was relied upon as a basis for asserting that the obligation to contribute to the outgoings was void. That argument was rejected by the judicial member and by the Appeal Panel. In the course of argument, Mr Stojanoski suggested that a failure to comply with s 11 would render the lease void because it would be ‘inconsistent’ with the Act: see s 7. However, the nature of the inconsistency was not explained: Tcpt (CA) 14 November 2006, pp 29-30; c.f. the argument discussed at [71] below. The argument finds no support in the statutory scheme and must be rejected.
Although Skiwing sought to avoid the operation of the six month limitation period in a number of ways, these need not be addressed because there is simply no basis for thinking that Skiwing has terminated the lease. Thus s 11(2) was not engaged.
(c) Evidence concerning calculation of outgoings
The remaining issues sought to be raised by Skiwing all relate to the calculation of the outgoings for the purpose of determining Skiwing’s contribution.
These grounds involved a number of issues which may be identified as follows:
(i)Skiwing was entitled to challenge the amounts included in the outgoings in order to establish whether they were properly referable to the lessor’s outgoings, for the purposes of cl 3.04 of the lease;
(ii)for that purpose, Skiwing was entitled to issue summonses requiring the production of documents relied upon by Stockland to calculate its outgoings;
(iii)relevant material not having been produced, Skiwing was entitled to re-open its case to allow for reliance upon the material when produced;
(iv)the Tribunal made findings as to the outgoings which were against the evidence.
(i), (ii) and (iv) access to and assessment of information
The challenge raised by Skiwing to the amount of the total outgoings was summarised by the Appeal Panel in its first decision in the following terms:
“[29]Before and during the proceedings at first instance, Skiwing maintained that it should be granted access to all the documents in Stockland’s possession relating to the outgoings payable with respect to the Imperial Arcade. Skiwing asserted that the total amount of outgoings put forward by Stockland included outgoings on the commercial space, as well as the retail space, in the Arcade, and also on other buildings owned by Stockland in the Central Business District of Sydney.
[30]The Tribunal’s response to this claim was to request, in the face of opposition from Stockland, that Mr Marshall, one of the KPMG partners responsible for auditing the recoverable outgoings in relation to the Imperial Arcade’s retail centre, should prepare an affidavit and make himself available for cross-examination. Mr Marshall complied with this request, and answered questions put both by Mr Stojanoski and by the Tribunal.”
The Appeal Panel then noted that the Tribunal had made findings of fact regarding the figures for the outgoings as follows:
“[17]The evidence from Stockland’s current Centre Manager, Mr Doherty and Mr Marshall one of the KPMG partners responsible for auditing the recoverable outgoings in relation to Stockland Imperial Arcade retail Centre, was that both estimated and actual outgoings related specifically to the retail space and did not include charges relating to the commercial space. Any outgoing of a general nature for the building was apportioned between the commercial and retail areas on the basis of lettable area.
[18]In order to be quite satisfied on the accounting procedures followed by Stockland and its auditors and also to be satisfied that the contribution figures were correctly calculated, the Tribunal expressly requested Mr Marshall to attend and give oral evidence answering questions from both … the Tribunal and the Applicant Skiwing. This request reflected the assertion by Skiwing of its belief that the outgoing items had related to the total building and not only to the retail space and also to its belief that costs attributable to Stockland's other buildings in the CBD, for example the Piccadilly Arcade, were being included in the costs recovered as outgoings of the Imperial Arcade.
[19]Having questioned Mr Marshall, I am satisfied that the figures for outgoings presented by Stockland on an annual basis are properly verified by its auditors and that they relate only to the Imperial Arcade retail Centre.”.
The Tribunal made other findings in relation to the management fees, and the amounts for insurance and wages. The Tribunal concluded at [26]:
“To agree with the requests of Skiwing to go behind that process and scrutinise in detail all the expenses, review all the insurance policies and other material would in my opinion be out of all proportion given that the Skiwing share is 2.3% such that even a 10% error in the total outgoings, which is not at all likely, would result in only a small increase to Skiwing.”
Having noted this conclusion, the Appeal Panel continued at [34], setting out Skiwing’s assertion of “an entitlement to check all the figures underlying Stockland’s calculation of outgoings”. It noted the comment of the Tribunal in Davies v Lyndhurst Developments Pty Ltd [2001] NSWADT 9:
“[31]… If an Applicant does not accept the figures proposed by the lessor, even if they be audited, an Applicant must (by implication if nothing else) have the right to explore that issue. That, in turn, raises the (disturbing) prospect of a full testing of each and every docket or claimed expenditure, in an ‘open court’ adversarial hearing with all its attendant detail. (In effect, this is what the Applicant asks me to order.)
[32]In keeping with the spirit of the Act, to seek to resolve as many issues as possible by alternative dispute resolution means, and in an attempt, generally, at limiting the hearing to matters genuinely in issue, I direct the Respondent to make all dockets and records available to the Applicant … . This process, on the one hand, will have more clearly defined the issues between the Parties, and, on the other hand, may well drive them both to the conclusion that the amount in issue is so small as not to justify the full expense and risk of a full hearing on this point.”
The Appeal Panel also noted that cl 3.04.03 of the lease provided:
“The Lessor shall as soon as practicable after the last day of each lease year furnish to the Lessee an audited statement giving reasonable details of the outgoings and indicating the Lessee’s outgoings rent for that lease year. Except in the case of manifest error notified by either party to the other within fourteen (14) days of the service of such statement on the Lessee, such statement shall be prima facie evidence as to the matters stated therein.”
The issue before the Appeal Panel was whether the judicial member had demonstrated an error of law in his approach to the procedural question. It concluded that there was no error of principle established in the approach adopted by the judicial member, applying the test set out in House v The King (1936) 55 CLR 499 at 505. The Appeal Panel concluded at [39]-[41]:
“We recognise that a lessee who considers that the amount charged for contributions is excessive may well wish to scrutinise all the documentary material on which the calculation of this amount is allegedly based. As Davies v Lyndhurst Developments illustrates, it is open to the Tribunal to order that access to this material be granted. But it does not follow that access must be granted in every case.
It is noteworthy that in Davies, there was evidence suggesting that the auditors certificate had not been given in wholly satisfactory circumstances. …
A further factor distinguishing Davies from the present case is that in Davies there was no finding by the Tribunal that an error in the calculation of outgoings was likely to make little difference to the applicant. Unlike Skiwing here, she was the only lessee required to pay the lessor’s outgoings.”
The statutory power of Skiwing to challenge the claim for ‘outgoings rent’ must derive from s 22 of the Retail Leases Act, which relevantly provides:
“22 Recovery of outgoings from lessee
(1)The lessee under a retail shop lease is not liable to pay any amount to the lessor in respect of any outgoings except in accordance with provisions of the lease that specify:
(a)the outgoings that are to be regarded as recoverable, and
(b)how the amount of those outgoings will be determined and how they will be apportioned to the lessee, and
(c)how those outgoings or any part of them may be recovered by the lessor from the lessee.
(2)In this Part, the expression outgoings to which the lessee contributes refers to any outgoings in respect of which the lessee is liable under the lease to make any payment to the lessor.”
Section 27 of the Retail Leases Act was amended by the Retail Leases Amendment Act 2004 (NSW), the particular amendment commencing on 1 January 2005, and a new provision was substituted by the 2005 Amendment Act. Because the applications before the Tribunal, the subject of the present proceedings, were made in March and June 2004, the relevant form of s 27 is that in force prior to the amendments in 2005, and read as follows:
“27 Estimates and expenditure statement of outgoings to be provided by lessor
A retail shop lease is taken to include provision to the following effect:
(a)The lessor must give the lessee a written estimate of the outgoings to which the lessee contributes under the lease, itemising those outgoings under the item descriptions used in the list of outgoings in the form of lessor’s disclosure statement set out in Part 1 of the form contained in Schedule 2.
(b)The estimate of outgoings must be given to the lessee in respect of each accounting period of the lessor during the term of the lease and must be given before the lease is entered into and thereafter during the term of the lease at least 1 month before the commencement of the accounting period concerned.
(c)The lessor must make a written expenditure statement available for examination by the lessee detailing all expenditure by the lessor on account of outgoings under the item descriptions used in the list of outgoings in the form of lessor’s disclosure statement set out in Part 1 of the form contained in Schedule 2.
(d)The expenditure statement must be made available at least twice in each of the lessor’s accounting periods during the term of the lease (once in relation to expenditure during the first 6 months of each such accounting period and once in relation to expenditure during the second 6 months of each such accounting period), and in each case must be made available within 1 month after the end of the 6 month period to which it relates.”
Pursuant to s 28, as at 1 May 2000, the lease is also taken to include a provision entitling the lessee to an “outgoings statement” that “details all expenditure by the lessor in each accounting period of the lessor during the term of the lease on account of outgoings to which the lessee is required to contribute”: s 28(a). The outgoings statement is required to be prepared in accordance with “relevant principles and disclosure requirements of applicable accounting standards … as in force from time to time”: s 28(c). It is also required to be accompanied by an auditor’s report: par (e). That report is to include a statement by the auditor as to whether or not “the outgoings statement correctly states the expenditure by the lessor during the accounting period concerned in respect of outgoings to which the lessee is required to contribute …”: par (f). Further, s 28 provides:
“(h)The outgoings statement need not be accompanied by an auditor’s report if the statement does not relate to any outgoings other than land tax, water, sewerage and drainage rates and charges, local council rates and charges, insurance, and it is accompanied by copies of assessments, invoices, receipts or other proof of payment in respect of all expenditure by the lessor as referred to in paragraph (a).”
In considering whether the Tribunal addressed the procedural question in an appropriate manner, it is necessary to consider the nature of the jurisdiction conferred on the Tribunal. Thus, pursuant to s 71 of the Retail Leases Act, a procedure is available for a party to a retail shop lease to lodge a “retail tenancy claim” in respect of the lease with the Tribunal for determination. The term “retail tenancy claim” is defined in s 70 of the Retail Leases Act as including “a claim for payment of money (whether or not stated to be by way of debt, damages, restitution or refund)”: s 70(a)(i). It may also include a claim for relief from payment of a specified sum of money: sub-par (a)(ii). The powers of the Tribunal must be exercised by reference to such a claim and must, to the extent that they impose obligations on one of the parties, have regard to the specific provisions of the Retail Leases Act regulating a retail shop lease. Under s 22, there is a prohibition on recovery of outgoings otherwise than in accordance with the terms of the lease, which must comply with that section and with the requirements with respect to apportionment in s 30. Further, ss 27 and 28 provide a level of disclosure with respect to outgoings, both anticipated and actual. Section 28 demonstrates a statutory intention that a lessee must either be given an audited statement in relation to outgoings or must be provided with copies of relevant assessments, invoices and receipts where the outgoings are effectively restricted to charges and fees payable to other bodies. Further, in a particular case, as the Appeal Panel noted, a level of disclosure beyond that expressly provided for in the lease or by the Retail Leases Act, may be required depending upon the circumstances of the particular case. Thus, as in Davies v Lyndhurst Developments, there may be evidence suggesting that an auditor’s report was flawed.
In the present case, an auditor’s report was provided and a partner of the firm responsible was required to give evidence. The additional material sought to be relied upon appears to have been the view put forward on behalf of Skiwing that the management fees were manifestly excessive on their face. With respect to that matter, the judicial member noted:
[20]A very substantial item in the list is a management fee ranging between $197,000 and $235,000. The evidence established that that fee is calculated by Stockland as 3% of the turnover of the rental retail space in the shopping centre … . The auditors consider that this is a commercially usual figure.
[21]Skiwing asserts it is excessive. The only relevant evidence on that was an extract table provided by Skiwing from a source it described as ‘Rawlinson’s 2002 cost estimates for developments, p.782’, which tabulates operating costs of buildings of various types listing management fees as between 7% and 13% of total outgoings. The estimated and actual management fees charged in relation to the Imperial Arcade constitute about 14% on average of the total outgoings and so while at the high end of that range are not significantly beyond it.”
The Tribunal also concluded that there was no basis to question the credibility of the centre manager or the auditor: at [23].
The powers of the Tribunal, conferred by s 73 of the ADT Act, are broad and discretionary. They impose few express constraints, although it should be inferred that the Tribunal must act in a procedurally fair way, as between the parties. The scope for review of the exercise of powers pursuant to such a provision was considered by this Court in Italiano v Carbone & Ors [2005] NSWCA 177 at [70], [76] and [160]-[162]. There is no reason to suppose that the judicial member erred in exercising his discretion in the present case in the manner set out above. No error has been demonstrated on a question of law in that regard.
The factual findings made by the Tribunal were open to it, on the material before it. A complaint that they were “against the evidence” is not made out, but even if it were does not demonstrate an error of law: see further at [68] below.
(iii) Refusal to re-open hearing
The application to re-open the hearing to admit further evidence arose in the context of, but separately from, Skiwing’s attempt to obtain documents by summons. The evidence given by the centre manager led to the production of three ‘offer packages’ made to other tenants: [2004] NSWADT 169 at [43]. The Tribunal sought submissions from Skiwing based upon the evidence taken up to that point (at [44]) and the Tribunal noted that in correspondence to the Registry, Skiwing sought “yet further documents in relation to the offer packages, in particular the originals of the file of documents said to relate to the Skiwing lease itself”: at [45]. However, the Tribunal declined to ‘re-open the evidence’ pending receipt of the submissions: at [46].
The Appeal Panel dealt with this challenge briefly, noting and accepting Skiwing’s assertion that the Tribunal was bound to observe procedural fairness and that it had power to allow a party to re-open its case. The basis for re-opening was said to be “discrepancies with the documents in Mr Doherty’s affidavit”: [2005] NSWADTAP 10 at [44]. (Mr Doherty was Stockland’s centre manager.)
In its written submissions in this Court, Skiwing emphasised, correctly, the need for the Tribunal to act in a procedurally fair manner. However, that did not impose on the Tribunal an obligation to put another party to the expense of obtaining evidence to support an applicant’s case, if not persuaded that there was a substantial basis for so doing. As the Tribunal recognised, there is a need to measure cost against likely benefit, in order to ensure that investigative powers are not used oppressively.
In relation to the “offer packages” and the file concerning Skiwing’s lease, it would appear that the relevance of the materials sought was directed to the misrepresentation claim, which, it has been held, was largely misconceived. Whether that is so or not, Skiwing has failed to demonstrate an error in relation to a question of law on the part of the Appeal Panel in rejecting the challenge to Mr Donald’s procedural ruling.
(d) Reasonableness of outgoings
Apart from complaints in relation to the disclosure statement, the substantive case run by Skiwing had two major limbs. The first, as discussed above, was that the claim for contribution in relation to outgoings was based on a total amount for outgoings which was improperly inflated by reference to impermissible expenses. The second limb, which is sought to be identified under the present heading, is the assertion that the quantum of the claim was “unreasonable”.
This challenge by Skiwing raises a question of law, namely whether the contractual obligation to pay a contribution for outgoings was conditioned by a requirement that the amount claimed be “reasonable”. The judicial member dealt with this question in two passages in the first ADT decision which read as follows:
“[15]The provisions of the lease ultimately signed by the parties and dated 28 March 2000, to commence on 1 May 2000, define ‘OUTGOINGS’ in clause 1.16 in familiar terms covering a very wide range of expenses relating to the management and maintenance of the Centre. It is notable that the definition of outgoings in the lease is not qualified by any notion of reasonableness and simply includes all expenses actually incurred by the Lessor in the listed of categories.”
Having considered the basis of the calculation upon which the “outgoings rent” was calculated, the basis for calculating the management fee (being the most substantial relevant item in the list) and the portion which the management fee bore to the total outgoings, the Tribunal concluded at [24]:
“As noted, there is no qualification in the lease that outgoings must be reasonable.”
Before the Appeal Panel, Skiwing apparently argued that a lessor under a retail shop lease is bound by an implied obligation to restrict the amount charged to a “reasonable amount”, relying on Finchbourne Ltd v Rodrigues [1976] 3 All ER 581 at 587 (Eng CA): [2005] NSWADTAP 10 at [23]. The Appeal Panel accepted that submission with respect to outgoings “over which the lessor does have some control – for example those concerned with maintenance and repair”: at [25]. The Panel continued at [26]:
“[26]If therefore the Tribunal’s statement at [24] that ‘there is no qualification in the lease that outgoings must be reasonable’ was intended to imply that Stockland was under no obligation whatsoever to restrict the amount of outgoings that it charged to its tenants, we disagree with it.
[27]We do not think, however, that the Tribunal intended to say this. The statement appears in a passage ([20]-[24]) which dealt with a claim by Skiwing that the amounts included in the total outgoings for management fees were excessive. Having considered the evidence on this issue, the Tribunal in fact concluded that the management fees, ‘even if high, are within the usual charges to be expected for a retail shopping centre of this nature’. Implicitly, it implied a standard of reasonableness.”
Two points may be made in this respect. First, the judicial member, in the passages set out above, clearly stated that the lease was not subject to a requirement that outgoings must be reasonable. It is not appropriate to dismiss these statements on the basis that the Tribunal “did not mean to say this”: it said it in unequivocal terms and repeated the statement. While it was appropriate to ask what test the judicial member in fact applied, there may have been a difference between the test implicit in the statement that the management fee was not “excessive” and the test of reasonableness of such a fee.
Secondly, so far as the lease is concerned, the statement was wrong. The term “outgoings” were defined in cl 1.16 of the lease and, in relation to the management fee, included at 1.16.15 the following (emphasis added):
“The cost of managing, controlling and administering the Centre and the collection of rents and other moneys including but without limiting the generality of the foregoing the reasonable wages and other emoluments paid to any Centre manager and other clerical staff employed by the Lessor for such purposes together with all statutory overheads related to such wages and fees and charges paid to any managing agent … .”
Further, cl 1.16.17 refers to “audit costs properly and reasonably incurred in the conduct of the Centre”. It is true that, in other places there is no express reference to reasonableness: for example, cl 1.16.04, merely provides, in terms which demonstrate substantial overlap with cl 1.16.15:
“Wages and payroll taxes payable in respect of employees of the Lessor employed solely for the purpose of operating, cleaning, maintaining, promoting and/or administering the Centre.”
Reading cl 1.16 as a whole, there is undoubtedly reference to reasonableness as a constraint on the recoverable costs of managing the centre and one would infer that that constraint applied to each aspect of the management fees.
Secondly, and more importantly, the Retail Leases Act makes extensive provision with respect to the obligation of a lessor to provide a written estimate of outgoings to which the lessee contributes under the lease, together with a written statement of actual expenditure: see ss 27 and 28 referred to above at [50]-[51]. The Act further requires that an adjustment is to be made between the lessor and the lessee in respect of under-payment or over-payment in respect of outgoings. Section 29(b) provides in terms that the lease “is taken to include” certain provisions, including a requirement that the adjustment be made according to “the total amount actually expended …, but taking into account only expenditure properly and reasonably incurred by the lessor” (emphasis added). It does not matter whether the lease is silent on this topic, or contains a contrary direction; the Retail Leases Act will, to the extent of inconsistency, override the lease: s 7. Accordingly Skiwing was correct to say that its ultimate obligation with respect to outgoings was to make contribution only in relation to those “properly and reasonably incurred”.
It follows that the test applied by the judicial member was legally in error. It follows, that to the extent that the Appeal Panel failed to recognise the error, it also erred. In determining whether the error was material, it is necessary to take into account the Tribunal’s finding with respect to the fees in fact charged.
As noted above at [53], the judicial member appeared to set for himself the question whether the fees were “excessive”. However, that language appears to have been taken from Skiwing’s submissions – the matter is not raised in the amended points of claim. The findings in fact made by the judicial member have been referred to at [45] and [53] above. In their terms, they are consistent with a finding of reasonableness, even if they do not use that language.
Skiwing seeks to challenge the factual findings on their merits. Thus, in written submissions, it was variously asserted that: (i) vacancies apparently meant that the management expense cannot have been based on 3% of turnover; (ii) Mr Doherty gave inconsistent explanations in relation to the increase of wages over a period; (iii) one explanation was an increase in staff, “when the staff was the same”; (iv) loss of rent insurance was not an expense directly attributable to the operations of the centre and (v) the cost per square metre, as demonstrated in the evidence, was several times higher than it should reasonably have been. However, all these matters are challenges to factual findings made by the judicial member. If the facts actually found are consistent with the conclusion that the outgoings were properly and reasonably incurred, the error will not be material. Skiwing has not demonstrated that application of the correct legal test would have been likely to lead to a different result.
Had a different view been taken of the facts, I would have been minded to grant leave to Skiwing to file an application for leave to appeal out of time, even though the period of the delay from the date of the first decision of the Appeal Panel is some 18 months to the date of the hearing before this Court. The reason for taking that approach would be that, according to the first decision of the Appeal Panel, it must have been likely that the Tribunal would find in favour of Skiwing on the basis that it was not liable for a major part of the outgoings rent claimed by Stockland. The same conclusion may have followed, in practical terms, from the second decision of the Appeal Panel. It was only when that decision was challenged in this Court that Skiwing saw the need to reagitate its challenge to the reasonableness of the outgoings rent, on which it had been unsuccessful before the first Appeal Panel. (See further at [31] above.)
Conclusions
For reasons noted above, the appeal as filed by Stockland was incompetent. However, the issue raised by it, without objection from Skiwing, addressed a question of law, with respect to which it demonstrated error on the part of the Appeal Panel. I would dispense with the requirement that a summons for leave to appeal be filed, leave to appeal and treat the incompetent notice of appeal as being filed pursuant to leave and competent. The appeal should be allowed and the decision of the Appeal Panel set aside.
If the appeal to the Appeal Panel is allowed, the orders made by the judicial member, following the first decision of the Appeal Panel, should also be set aside. Stockland did not appeal from the first decision of the Appeal Panel, and the latter’s order setting aside the orders made by the first ADT decision stands. The matter should be remitted to the Tribunal for further consideration according to the legal principles set out above.
The notice of cross-appeal filed by Skiwing is also incompetent and should be dismissed. Skiwing has established that there was legal error, not accepted by the Appeal Panel, in the first ADT decision in holding that the outgoings did not need to be “properly and reasonably incurred”, despite s 29(b) of the Retail Leases Act. However, not being persuaded that the error was material, given the findings of fact made by the judicial member, I would not extend the time for Skiwing to apply for leave to appeal. Nevertheless, because the matter will need to go back to a judicial member for determination according to law, it may be open to the Tribunal to allow further consideration of this aspect of Skiwing’s complaint, if it thought that course appropriate in accordance with its powers under s 73 (and Part 2 generally) of the ADT Act. This course would be open, not the least because the orders made pursuant to the first ADT decision were set aside on the first appeal to the extent necessary to allow the Tribunal to reconsider what were permissible outgoings, for which contribution was payable to Stockland.
There remains the question of costs of this appeal. As noted above, Stockland having been successful in challenging the order of the Appeal Panel, although by an inappropriate procedure, should have its costs of the hearing before this Court.
Although this Court has held that the Tribunal is not a court capable of exercising the judicial power of the Commonwealth, for the purposes of the Trade Practices Act 1976 (Cth), the Appeal Panel had the relevant characteristics to be a “court” for the purposes of the Suitors’ Fund Act 1951 (NSW): though no tribunal has been prescribed for the purposes of the definition of “court” in s 2(1), see Australian Postal Commission v Dao (No. 2) (1986) 6 NSWLR 497 at 513 (Kirby P, Samuels JA agreeing) and 515-516 (McHugh JA). Accordingly, the respondent to the appeal, Skiwing, is entitled to a certificate under the Suitors’ Fund Act with respect to the costs of the appeal.
With respect to the cross-appeal, matters relating to the construction of the Retail Lease Act were substantially covered by questions raised on the appeal by Stockland. So far as the additional challenges to the first decision of the judicial member and the first Appeal Panel decision are concerned, Stockland’s submissions were largely directed to the complaint that Skiwing had not appealed from the first decision of the Appeal Panel. For reasons noted above, I would not have treated that fact as conclusive of the challenges raised by Skiwing, to the extent that they had legal merit. In relation to the question of reasonableness of the outgoings, Skiwing established that there had been an error on a question of law. Although it should not be granted leave to appeal in relation to that matter, the outcome of Stockland’s appeal may allow it to ensure that its arguments are properly considered and determined by the Tribunal when the matter is remitted to it. In the circumstances, I would make no order as to the costs of the cross-appeal.
I would propose the following orders:
(1)Dispense with the filing of a summons for leave to appeal from the decision of the Appeal Panel of the Administrative Decisions Tribunal made on 7 December 2005.
(2)Grant leave to appeal.
(3)Direct that the Notice of Appeal filed on 30 December 2005 be treated as filed pursuant to leave.
(4) Allow the appeal and set aside the order of the Appeal Panel.
(5) In lieu thereof:
(i) allow the appeal to the Appeal Panel;
(ii)set aside the order of the Administrative Decisions Tribunal made on 10 August 2005, and
(iii)remit the matter to the Tribunal for it to determine the applications under the Retail Leases Act according to law.
(6)Order the Respondent to pay the Appellant’s costs of the appeal in this Court.
(7)Grant the Respondent a certificate under the Suitors’ Fund Act 1951 (NSW) with respect to the costs of the appeal.
(8) Dismiss the cross-appeal, with no order as to costs.
McDOUGALL J: I agree with Basten JA.
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LAST UPDATED: 21/12/2006
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