World Best Holdings Limited v Sarker (RLD)
[2009] NSWADTAP 13
•13 March 2009
Appeal Panel - Internal
CITATION: World Best Holdings Limited v Sarker (RLD) [2009] NSWADTAP 13 PARTIES: APPELLANT:
RESPONDENT:
World Best Holdings Limited
Abdul SarkerFILE NUMBER: 089031 HEARING DATES: 15 and 16 September 2008 SUBMISSIONS CLOSED: 16 September 2008
DATE OF DECISION:
13 March 2009BEFORE: O'Connor K - DCJ (President); Perrignon R - Judicial Member; Weule B - Non-Judicial Member CATCHWORDS: Retail Leases – appeal by lessor - lessor’s termination notices – whether any breach of an essential term by lessee necessarily repudiates the lease – reliance on grounds not specified in notices – late payment of bank guarantee - estoppel - scope of permitted use – meaning of ‘Asian’ – whether includes ‘Indian’ – unconscionable conduct – open to be found - lessee traded for a limited period - measure of damages – costs - Appeal dismissed. DECISION UNDER APPEAL: Sarker and anor v World Best Holdings Limited and anor (No 4) [2008] NSWADT 75 & Sarker and anor v World Best Holdings Limited and anor (No 5) [2008] NSWADT 179 FILE NUMBER UNDER APPEAL: 045136 and 045137 DATE OF DECISION UNDER APPEAL: 03/12/2008 LEGISLATION CITED: Administrative Decisions Tribunal Act 1997
Retail Leases Act 1994
Conveyancing Act 1919CASES CITED: ACN 079 830 596 Pty Ltd (trading as Jolly Joe's Fish 'n' Chips) v Wallis Lake Fisherman's Co-operative Ltd [2007] NSWADT 297
Attorney General of New South Wales v World Best Holdings (2005) 63 NSWLR 557
Aspromonte Pty Ltd v Zagari [1999] NSWSC 831
Armstrong Jones Management Pty Ltd v Saies-Bond & Associates Pty Ltd (RLD) [2007] NSWADTAP 47
CAC Pty Ltd v Diamond Hill International Pty Ltd (1996) Butterworths Property Reports 14,754
Commonwealth v Amman Aviation Pty Ltd (1991) 174 CLR 64
Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd (1989) 166 CLR 623
Marshall v Council of the Shire of Snowy River (1994) Butterworths Property Reports 14,447
Peter Turnbull & Co Pty Ltd v Mundus Trading Co (Australasia) Pty Ltd (1954) 90 CLR 235
Progressive Mailing House Pty Ltd v Tabali Pty Ltd (1985) 157 CLR 17
Rawson v Hobbs (1961) 107 CLR 466
Sarker and anor v World Best Holdings Limited and anor (No 2) [2004] NSWADT 15
Sarker and anor v World Best Holdings Limited and anor (No 4) [2008] NSWADT 75
Sarker and anor v World Best Holdings Limited and anor (No 5) [2008] NSWADT 179
Schuler v Wickman Tools [1974] AC 235
Shepherd v Felt & Textiles of Australia Ltd (1931) 45 CLR 359
Shevill v Builders Licensing Board (1982) 149 CLR 620
Vale v Rosychamp [2008] NSWSC 1373
Wood Factory Pty Ltd v Kiritos Pty Ltd (1985) 2 NSWLR 105REPRESENTATION: APPELLANT:
RESPONDENT:
R Angyal SC / P Biber, lawyer
M Ashhurst SC / S Roppolo, solicitor, Kemp StrangORDERS: 1. Appeal dismissed.
2. As to costs, the parties are to make any submissions according to the following timetable. Respondent to file and serve submissions within 28 days. Appellant to file and serve submissions within a further 28 days. Determination to be made without hearing, as permitted by s 76 of the Administrative Decisions Tribunal Act 1997, unless one or both of the parties applies for a hearing, and the Appeal Panel so decides.
REASONS FOR DECISION
1 This appeal is brought under the Retail Leases Act 1994 (RL Act) by a retail shop lessor against orders made by the Retail Leases Division of the Tribunal. The Tribunal dismissed the lessor’s claim for relief, granted relief to the lessee and awarded costs against the lessor. There have been five decisions at first instance of which three are relevant to this appeal. They are the main decision, Sarker and anor v World Best Holdings Limited and anor (No 4) [2008] NSWADT 75 (12 March 2008), a decision on a preliminary point, Sarker and anor v World Best Holdings Limited and anor (No 2) [2004] NSWADT 15 (28 January 2004), and the costs decision, Sarker and anor v World Best Holdings Limited and anor (No 5) [2008] NSWADT 179 (20 June 2008).
2 The appellant is World Best Holdings Limited (WBH). At all material times it was the owner of the Minto Mall Shopping Centre situated at Minto near Campbelltown.
3 On 28 May 2003 the respondent (Mr Sarker) accepted WBH’s offer of a lease of a shop space. He was allowed into occupation on 3 June 2003 upon payment of a month’s rent in advance. A formal lease was prepared, with a commencement date of 1 July 2003 for a term of three years at an annual rent of $42,000 plus GST with an option to renew. There was a 50% rent reduction allowed for the first ten weeks of the lease period (cl 33.2). The lease stipulated that a bank guarantee for $12,127.50 (three months rent plus GST) was to be paid on or before the date of commencement (cll 13, 17). This was declared to be an essential term.
4 In the lessor’s unsigned typed original the permitted use is described as ‘Asian grocery store’. Those words are amended by hand to ‘Asian supermarket’ in the copy signed by Mr Sarker and returned by Mr Sarker’s solicitor. There is no counterpart signed by the lessor in evidence. The lease was not registered.
5 The lease included a special condition under which the lessee agreed ‘to fit out the premises in accordance with the Minto Mall tenancy Fit-out Guide and to use premium quality materials and qualified tradespersons to ensure that the design and appearance of the fit-out will be of the highest standard and a cost of not less than $40,000’ (cl 33.1).
6 The lease also included the usual term confining the use of the premises to the permitted use, and requiring the lessee to trade during core trading hours of the centre unless otherwise agreed (cl 18). This was declared to be an essential term (cl 24.1).
7 Mr Sarker commenced trading on 23 July 2003. On 24 July 2004 WBH instructed its solicitors to prepare a notice of termination under cl 24 of the lease (set out later in these reasons). It was served on Mr Sarker late on Friday 25 July 2003. Mr Sarker was given until 4.00 pm Sunday 27 July to vacate the premises. After the close of business on 27 July, WBH arranged for the locks to be changed. Over the following two days, the respondent took action to remove non-perishable stock and to seek to preserve perishable stock.
8 The notice particularised alleged breaches by Mr Sarker of the bank guarantee obligation and fit-out requirements. The notice amounted to a summary termination of the lease.
9 On Thursday 31 July the Supreme Court on application by Mr Sarker made interim orders requiring WBH to restore Mr Sarker to possession as from 9.00 pm that day. The Court transferred the proceedings to this Tribunal.
10 In the period between 31 July and 7 November Mr Sarker attended to requirements in relation to the fit-out and to the steps required for Council approval. On 5 September 2003 WBH had filed its own application to the Tribunal for relief. In the period 31 July to 7 November 2003, WBH maintained the position that it had lawfully repudiated the lease by its notice of 25 July, and treated Mr Sarker as merely being in occupation by virtue of the Supreme Court orders. His rent payments were described as occupation fees. Mr Sarker required development approval to trade in food products. WBH refused consent to his development application (12 August 2003) and impeded access by Mr Sarker’s plumber to do works required in that regard (23 and 30 September 2003), both matters resolved in favour of Mr Sarker after urgent order applications were made to the Tribunal (orders made 21 August 2003 and 24 October 2003, respectively).
11 On 7 November 2003 Mr Sarker recommenced trading. On 13 November 2003 WBH moved to evict Mr Sarker. On 14 November 2003 WBH issued a second termination notice, relying again on cl 24 of the lease. In addition to alleging breaches in respect of the bank guarantee obligation and the fit-out obligations, it also alleged breaches of the rental obligation and of the permitted use obligation.
12 The Tribunal refused WBH’s application for orders in support of the notices. Mr Sarker continued in occupation. While Mr Sarker had been late in paying rent, on 4 December 2003 he brought the rent up to date for the period expiring 1 January 2004. Around 28 or 29 January Mr Sarker ceased trading at the centre. Earlier in that month he had not had the shop open during core trading hours on number of occasions.
13 On 12 February 2004 WBH issued a third notice of termination which referred expressly to s 129 of the Conveyancing Act 1919. The notice relied only on alleged breaches of the core trading hours obligations.
14 On 24 February 2004 Mr Sarker’s solicitors gave notice of termination of the lease on the ground that by its conduct towards Mr Sarker since 25 July 2003 WBH had repudiated its obligations under the lease. Mr Sarker vacated the premises on 2 March 2004.
15 The Tribunal described the claims made by Mr Sarker and WBH at paras 145 and 146 of its reasons for decision. Mr Sarker sought:
(1) a declaration that World Best’s notices purporting to terminate the Lease were invalid; (2) a declaration that World Best had re-entered the Premises in breach of section 129 of the Conveyancing Act 1919; (3) a declaration that World Best had repudiated the Lease; (4) an award of damages for the losses suffered in consequence of the repudiation; (5) alternatively, relief from forfeiture; (6) further or in the alternative, ‘an order’ that World Best ‘engaged in unconscionable conduct’; (7) interest on damages; (8) costs; (9) interest on costs; (10) such further order or orders as the Tribunal should deem appropriate.
16 WBH sought:
(1) a declaration that Mr Sarker had repudiated the Lease and that World Best was entitled to accept his conduct as a repudiation and to terminate the Lease by its notice dated 25 July 2003; (2) a declaration that Mr Sarker had failed to act in good faith within the meaning of section 62B(4)(k) of the RL Act; (3) an award of damages to World Best, to be quantified at the hearing; (4) further or in the alternative, an award of damages pursuant to the usual undertaking as to damages given by Mr Sarker to the Supreme Court on 31 July 2003; (5) interest on damages; (6) costs; (7) interest on costs; (8) such further order or orders as the Tribunal should deem appropriate.
17 The Tribunal made the following orders:
‘1. The Tribunal declares as follows:(a) that the Respondent/Cross Applicant’s notices dated 25 July 2003 and 14 November 2003 respectively purporting to terminate the lease between the parties commencing on 1 July 2003 were invalid (b) that on 27 July 2003 Respondent/Cross Applicant re-entered the leased premises in breach of section 129 of the Conveyancing Act 1919 (c) that on 25 July 2003 and by its subsequent conduct the Respondent/Cross Applicant repudiated the lease
3. The application by the Respondent/Cross Applicant is dismissed.’2. The Respondent/Cross Applicant is to pay to the Applicant/Cross Respondent the sum of $72 223.79 as damages (exclusive of interest) for breach of the lease and for unconscionable conduct
18 In the preliminary decision, decision no 2, the Tribunal had rejected Mr Sarker’s submission that failure to comply with s 129 of the Conveyancing Act necessarily made the first and second termination notices unlawful.
19 In the costs decision, the Tribunal made the following orders:
‘1. The Respondent/Cross Applicant is to pay to the Applicant/Cross Respondent interest on damages in the amount of $28,592.70.
2. Except for the costs of and incidental to the hearing conducted on 19 and 20 January 2004, the Respondent/Cross Applicant is to pay on a party/party basis the Applicant/Cross Respondent’s costs of and incidental to both the initial proceedings (files 035087 and 035100) and the remitted proceedings (files 045136 and 045137) in the Tribunal.
3. The amount of these costs, unless agreed by the parties, is to be assessed under the Legal Profession Act 2004.’
The Reasoning Process of the Tribunal
20 The Tribunal reached its decisions favourable to Mr Sarker by the following steps:
(i) The first and second termination notices were not in accordance with the requirements of s 129 of the Conveyancing Act.
(ii) Nonetheless a lessor may validly terminate a lease if the circumstances are such that the lessee’s conduct amounts to repudiation under general contractual principles. In that regard the Tribunal accepted that Mr Sarker was as at 23 July 2003 in breach of his obligations in respect of the fit-out, and that he had not complied with the term of the lease relating to the provision of the bank guarantee. As to the latter, WBH was estopped by its conduct from relying on that breach. The Tribunal rejected the submission that any breach of a term declared by the lease to be an essential term was sufficient to constitute repudiatory conduct.
(iii) The Tribunal accepted that it was permissible under the law for a party to rely on breaches of which the party was unaware at the time of giving notice or had failed to rely on at the time of giving notice to found a case of repudiatory conduct. This submission was particularly relevant to the permitted use issue. It had not been expressly relied upon in the first termination notice. It was asserted that Mr Sarker was at the time in breach of the permitted use, and this constituted repudiatory conduct. In relation to the first notice and, more importantly, the second termination notice, the Tribunal accepted that Mr Sarker had committed some of the breaches specified and that other breaches had occurred that were not specified. It was not satisfied that the breaches viewed as a whole amounted to repudiatory conduct in the circumstances. The Tribunal did not accept that he had been in breach of the permitted use.
(iv) The third termination notice was in accordance with s 129 of the Conveyancing Act. However the Tribunal was again not satisfied that the breaches relied upon were sufficient to justify termination.
(v) As to Mr Sarker’s notice, the Tribunal was satisfied that WBH by its conduct over the period of their relationship had acted in a way that entitled Mr Sarker to treat its conduct as repudiatory and terminate the contract.
(vi) WBH’s conduct was unconscionable. The Tribunal referred to various steps taken by WBH especially in the period 25 July to 14 November that had impeded Mr Sarker’s ability to conduct his business. It noted that during the entire period Mr Sarker had paid the rent due under the lease.
(vii) While Mr Sarker did not terminate the lease on the occasion of the initial repudiatory conduct by WBH, this did not mean necessarily that he had elected to affirm the contract. Nor did it mean that he had lost any right to rely on that conduct later as a basis for disaffirming the contract.
(vii) As to calculation of damages, the Tribunal accepted that the ordinary principle is that the innocent party is to be placed by the award of damages in the same situation as if the contact had been performed. However there had not been a sufficient uninterrupted period of trading to allow any realistic assessment to be made as to future profitability. Consequently the principle to be applied was that the innocent party should be permitted to recover such expenditure as is reasonably incurred in reliance on the defaulting party’s promise.
(viii) Based on that approach, therefore, Mr Sarker, was entitled to recover the items of expense listed in the schedule tendered to the Tribunal subject to certain reductions (as to fit-out expenses and costs of travel to India to source products). The Tribunal allowed the cost of trading stock losses occasioned by the long period in which he had not been able to use the premises between late July and early November.
The Appeal
21 The appellant’s appeal is made under s 77A of the RL Act, which in turn attracts the application of s 113 of the Administrative Decisions Tribunal Act 1997 (the ADT Act). The appeal is an error of law appeal only. The alleged errors of law are the subject of a notice of appeal with 13 grounds. At hearing ground 2(b) and ground (c) were not pressed. Leave was given to substitute a new ground 2(b). Leave was refused in relation to a new ground 2(c), essentially because of the prejudice to the respondent in having to meet a new ground at such a late stage of the proceedings.
22 The appeal puts in issue all steps in the reasoning process described above, as well as the orders as to damages and costs.
Background to the First Termination Notice
23 In the offer document given to Mr Sarker on 28 May 2003 and the lessor’s disclosure statement the permitted use was described as ‘Asian Groceries’. The centre leasing agent, Ms James had inserted this description after negotiations with Mr Sarker that had commenced early in April.
24 Mr Sarker, who is of Bangladeshi origin, had first expressed interest in taking up a shop in the centre to be run by his wife which dealt in goods described as ‘Indian outfit, jewellery and cosmetics’. His application indicated that he wished to trade in:
Imported Indian dresses, jewellery cosmetics and some other herber ( sic ) food, the store will also be use ( sic ) for displaying various Bangladeshi products for customers and relevant retailers like product promotion.
25 Later in the month he advised that he wished to open an Indian grocery store. According to Ms James, she advised him that there was a store already trading in Indian goods at the centre. She was referring to Dhaka Corporation Pty Ltd (Dhaka), trading under the name ‘Indian Imports’. Its lease was for an initial term of five years, and had commenced on 1 July 2002. Its permitted use was:
retail sale of Indian grocery and spices, Islander, Fijian specialty foods and spices, Halal meat and poultry, Indian Garments, Asia vegetables, pre-cooked Indian foods, phone cards and rental Indian videos (no other language, Indian only).
26 WBH had granted it an exclusive use, as follows: ‘no other Indian grocery and Halal Meat Shop will be allowed to operate in the shopping mall during this lease term’.
27 On 17 May, following a suggestion by Ms James, Mr Sarker and his wife inspected a possible alternative location, a shop at the nearby Miller Centre, also owned by WBH.
28 There was conflicting evidence as to precisely what was said by Ms James to Mr Sarker over the period April and May about the scope of the permitted use and the scope of the exclusive use given to Dhaka.
29 It is clear that ultimately Ms James agreed with Mr Sarker that he could conduct an ‘Asian grocery store’. On her evidence there was an oral agreement that he would only trade in Chinese, Japanese, Korean and other Asian groceries but not Indian groceries.
30 Mr Sarker was allowed into occupation on 3 June 2003. He was yet to tender the bank guarantee required under his lease. He commenced fit-out and purchasing stock for his business.
31 On 4 June 2003 Dhaka wrote to Ms James expressing concern over the scope of the permitted use granted to Mr Sarker and inquiring whether its exclusive use would be infringed. In reply by letter dated 6 June 2003, Ms James advised Dhaka that WBH regarded the ‘Asian’ grocery category as including such items as ‘Chinese’, ‘Japanese’ and ‘Korean’ food products, and, by implication, not Indian products. The letter also stated that ‘you and he should endeavour to minimise business conflicts’. The letter rejected any liability on the part of WBH for any business losses that Dhaka might incur.
32 The formal lease was sent to Mr Sarker for execution on 16 June. Dhaka protested again to WBH, this time by way of a solicitors’ letter dated 25 June and received 30 June. The Tribunal noted that there was nothing in her affidavit material to suggest that Ms James notified Mr Sarker of the objection from Dhaka.
33 On 16 July Dhaka’s solicitors wrote again to Ms James protesting that they had received no reply to their letter of 25 June and referring to unanswered phone calls. The letter stated that their client would seek to have the matter taken to mediation if WBH did not provide an inventory of the items that Mr Sarker proposed to sell.
34 Ms James replied by fax dated 18 July 2003 asserting that it is ‘common knowledge that the definition of an Indian Grocery Shop and an Asian Grocery Shop is different’. The letter stated that WBH could not compel the provision of an inventory of items if Mr Sarker did not infringe the permitted use. By fax sent 23 July Dhaka’s solicitors pressed their demand for an inventory and threatened legal proceedings if that did not occur within seven days.
35 On the same day Mr Sarker had opened for business. The assistant manager of the centre, Ms Timmins, visited Mr Sarker’s shop. She expressed concern that all the products and groceries being displayed appeared to be Indian. Mr Sarker rejected the suggestion that he was in breach of the lease in trading in Indian items, and asserted that Asian items could embrace Indian items. She advised Ms James of this exchange, and that she agreed with complaints from other tenants that Mr Sarker’s signage was poor. She also stated that she said she had asked Mr Sarker for a product list, but he declined to give her one.
36 On 24 July 2003 WBH instructed its solicitor to prepare a notice of termination. Late on Friday 25 July 2003 WBH delivered the notice to Mr Sarker.
37 The notice listed eight alleged breaches of the Lease by Mr Sarker. They included an allegation that he had failed to pay the bank guarantee by the due date, 1 July 2003, and that he had failed adequately to fit-out the premises. Notably, the notice did not include an allegation that he had breached the permitted use provision.
38 In contrast the second termination notice (14 November 2003) did include among the alleged breaches breach of the permitted use clause.
39 A central issue is whether either of these notices validly terminated the lease. There is no dispute that the first two termination notices did not comply with s 129 of the Conveyancing Act. In its decision no 2, the Tribunal rejected a preliminary submission by Mr Sarker that the failure of either of the notices to rely on s 129 of the Conveyancing Act 1919 was fatal to their validity. It ruled that it was open to a court or tribunal to give effect to a notice that failed to refer to s 129 of the Conveyancing Act if the circumstances were such that the lessee had by its conduct repudiated the lease under the general principles of contract law.
40 In the decision under appeal, the Tribunal rejected WBH’s further contention that the notices were effective under the general law because Mr Sarker had committed breaches which entitled the innocent party, WBH, to treat them as constituting repudiation of the contract.
Assessment of Witnesses and Factual Findings
41 It is desirable to set out in full the Tribunal’s appraisal of the evidence given by the principal witness for WBH, Ms James, and by Mr Sarker, and its key findings on factual issues.
‘ Assessment of the witnesses
147 As will have become apparent, the two key witnesses in this case were Mr Sarker and Ms James. Regrettably, neither of them was a satisfactory witness.
148 Mr Sarker’s replies to questions in cross-examination were characterised by frequent assertions that he could not remember what he was being asked to remember. On account of the lapse of time (more than four years) between most of the key events and the recent hearing, it is entirely probable that his recollection of some of these events had faded. But it was noteworthy that his claims of failure of memory were most commonly made in response to questions to which a truthful answer might have raised difficulties for his case. He prevaricated, for instance, when confronted with photographs showing that, in breach of the Fit-out Guide, some of the shelving that he had installed was fixed to a wall of the Premises. He also claimed not to remember important matters relating to the shortfall between the funds available to him during June and July 2003 and the amount needed to support the bank guarantee required under the Lease (see [68], [109] above).
149 Notably on this last topic – the lack of sufficient funds to support the required guarantee – Mr Sarker’s affidavit evidence omitted important matters, with the consequence that a misleading impression was created. On this particular topic, this evidence implied that the reason why the Commonwealth Bank did not furnish the guarantee was that it was unduly slow in dealing with his application. It failed to mention that as from 17 July 2003 his account with the Bank did not have a sufficient credit balance and that he had not organised an overdraft facility.
150 The Tribunal is also not impressed with Mr Sarker’s attempt to substantiate his claim of having spent more than $32,000 on fit-out before 1 August 2003 by annexing copies of invoices. It is inclined to the view, expressed by Mr Philpott (who was not required for cross-examination) that some of these invoices did not relate to the task of fitting out the Premises. But an important point to be noted here is that Mr Sarker was not cross-examined in relation to these invoices.
151 In the Tribunal’s opinion, however, the testimony of Ms James was defective to an even greater degree than that of Mr Sarker. She too claimed that she could not remember important events due to the passing of several years. Like Mr Sarker, she could legitimately justify failures of recollection on this ground. But unlike Mr Sarker, she gave evidence on a number of crucial matters that suffered from two defects of cardinal importance.
152 In the first place, her evidence on these matters included assertions by her that were so manifestly improbable that the Tribunal is bound to disbelieve them. The two instances of prime importance are her assertions (see [31 – 36] above) that (a) she treated an alleged verbal promise by Mr Sarker at their meeting on 28 May to refrain from selling Indian groceries or Halal meats as sufficient to protect World Best’s interests, even though all other important aspects of the proposed lease between them were spelt out in the lease offer and the Disclosure Statement that she gave to him at that meeting, and (b) that she actually caused a term restraining him from selling these products to be deleted from a version of the lease offer that had been prepared before the meeting, on the alleged grounds that (i) its wording was unduly long and complex, (ii) Mr Sarker asked her to ‘trust him’ and (iii) she believed that ‘in Australia, sometimes a verbal agreement is acceptable’.
153 Secondly, Ms James’ answers to questions in cross-examination included allegations that formed no part of her affidavit evidence. Taking into account the fact that she swore no less than five affidavits, during the period between 11 November 2003 and 2 October 2007, the Tribunal is bound to conclude that, as Mr Ashhurst submitted, she sought in cross-examination to remedy deficiencies in World Best’s case by claiming to remember events that she had previously not mentioned. The Tribunal cannot attach any credibility to these claims.
154 One significant instance of this was an allegation made by her during cross-examination that has just been outlined. This was that she caused a term restraining Mr Sarker from selling Indian groceries or Halal meats to be deleted from an earlier version of the lease offer that had been prepared before the meeting on 28 May 2003. Another was her allegation during cross-examination that she believed (see [47]) that at some point after receiving Mr Khorshed Alam’s letter of 4 June she told him in a telephone conversation of Mr Sarker’s promise not to sell these products. A third instance was her alleged belief (see [63]) that she might have instructed Ms Timmins or Mr Liu to notify Mr Sarker of the concerns that Dhaka had expressed about the products that Mr Sarker proposed to sell and to require him to provide an inventory of these products. A fourth was her allegation (see [89]) that after Ms Timmins had told her on 23 July 2003 that Mr Sarker’s fit-out was unsatisfactory, she was told by Mr Liu (whom she had instructed to raise the matter with Mr Sarker) that Mr Sarker had refused to comply with the Fit-Out Guide.
155 After taking into account these and other features of the evidence given by Mr Sarker and Ms James, the Tribunal’s conclusion is that on the relatively few matters on which their evidence is in direct conflict, the evidence of Mr Sarker should be preferred.
156 The only other witness to be cross-examined was Ms Timmins [the assistant manager]. Her evidence appeared to be generally reliable, subject to the comment that in cross-examination she revealed certain matters that were not mentioned in her written evidence (see [85], [87] above).’
42 The Tribunal then set out its findings on key contested factual matters.
‘ The Tribunal’s findings on contested factual matters
157 Taking into account the foregoing observations on the quality of the testimony given in this case, the Tribunal makes the following findings on four significant factual matters that in varying degrees were the subject of dispute.
158 First and most importantly, it finds that Mr Sarker did not give any verbal promise to Ms James to refrain from selling Indian groceries or Halal meats when the two of them met on 28 May 2003. This finding follows in part from the Tribunal’s conclusion that on contested matters Mr Sarker’s evidence (despite its clear shortcomings) should be preferred to that of Ms James. But the Tribunal also considers it highly improbable (as already pointed out) that Ms James, who had in 2003 some 12 years’ prior experience in shopping centre management, would have taken the positive step of removing this important restriction on Mr Sarker’s activities from the first version of the lease offer, thereby permitting it to remain solely at the level of a verbal promise, when she was well aware (according to her own evidence) that Dhaka had an exclusive right to sell these products in the Mall.
159 The Tribunal notes in addition that Ms James, in her conversation with Mr Badrul Alam on 3 or 4 June 2003 and in her letters to Mr Khorshed Alam and to Campbelltown City Lawyers, did not ever claim that Mr Sarker had expressly agreed not to sell Indian groceries or Halal meats. Instead, she relied chiefly on the distinctly dubious proposition that the phrase ‘Asian groceries’, as commonly understood, did not include Indian groceries.
160 Furthermore, the Tribunal attaches significance to the fact that in her conversation with Mr Badrul Alam and in her letter dated 6 June 2003 to Mr Khorshed Alam, Ms James implicitly acknowledged that there was or might be a conflict between the agreement that she had concluded with Mr Sarker and the exclusive right that been granted to Dhaka. In the conversation, she said to Mr Badrul Alam that ‘you people can sort out this yourselves as he is from the same country as yourselves’. Her letter to Mr Khorshed Alam included the phrase ‘it is our hope that based in good faith you and he should endeavour to minimize business conflicts if any …’ If she had received an express undertaking from Mr Sarker not to sell Indian groceries or Halal meats, she would not, in the Tribunal’s opinion, have felt impelled to suggest that the two tenants might at some stage have to ‘sort the matter out’ between themselves.
161 Finally in this connection, even though Ms Timmins reported to Ms James on 23 July 2003 that Mr Sarker’s stock included Indian groceries, neither of them told him that this was in breach of an agreement that he had made and, moreover, the first termination notice, served two days later, did not mention any such agreement. This omission is significant because the notice listed several other alleged breaches of the Lease as grounds for the purported termination. If Ms James, who gave instructions for the writing of this letter, had believed at that time that a binding agreement to this effect had been concluded, the strong likelihood is that she would have instructed Mr Biber to include in the letter an allegation to this effect, together with an allegation that the agreement had been broken. Both these allegations were in fact made in the cross application filed by World Best in the Tribunal on 5 September 2003.
162 The second finding that the Tribunal makes is that, despite suggestions to the contrary by Ms James (see [63] above]), no-one on World Best’s behalf communicated to Mr Sarker during June or July 2003 the concerns that Dhaka had expressed about his intention to sell Indian groceries.
163 Thirdly, the Tribunal finds that at no stage before 25 July 2003 did Mr Sarker receive any indication from Ms James, Ms Timmins, Mr Liu or any other employee of World Best or KMPB that his fit-out did not comply with the requirements of the Lease and the Fit-Out Guide.
164 Fourth and finally, the Tribunal finds that, in the light of the observations contained in Mr Philpott’s reports, it is unlikely that Mr Sarker spent as much as he claimed (some $32,000) on fit-out before 1 August 2003, or that he spent a further $6,000-odd thereafter. But the Tribunal is also not inclined to accept the estimate by Mr Philpott that by 1 August the amount spent was likely to have been no more than $8,000, or that by the time of the second inspection this amount had increased to no more than $14,000. The Tribunal’s principal reason for leaving these matters somewhat at large is that neither the cross-examination of Mr Sarker at the recent hearing nor that of Mr Philpott at the earlier hearing addressed these issues to any significant extent.
165 The Tribunal does consider, however, that Mr Philpott’s criticisms of the quality of the workmanship displayed in the fit-out should be accepted. They were not contested in any expert evidence tendered on Mr Sarker’s behalf.’
Period to 14 November 2003
43 The grounds of appeal bearing on the first and second termination notices are:
1. The Tribunal erred in law:
(a) in failing to hold that proof that a lessee has breached an essential term of the lease entitles the lessor to terminate the lease for breach, without being required to comply with section 129(1) of the Conveyancing Act 1919 [cf paragraphs 187, 189, 192 and 195];
(b) in holding that, where a lessee has breached an essential term of the lease, the lessor cannot terminate the lease unless the lessee’s conduct in doing so constitutes proof that the lessee has repudiated the lease [cf paragraphs 189, 192 and 195]; and
(c) in consequently failing to find that the first termination notice was valid, on the basis that any or all or any combination of the eight breaches of essential terms of the lease found by the Tribunal to have been committed by the Respondent as at 25 July 2003 [paragraphs 199-202] entitled the Appellant to terminate the lease by issuing the first termination notice and re-entering the premises.
6. In the alternative to paragraph 1, the Tribunal erred in law in failing to find, on all the evidence including:
(a) the eight breaches of essential terms of the lease found by the Tribunal to have been committed by the Respondent as at 25 July 2003 [paragraphs 199 – 202];
(b) the breach of the essential term of the lease that the Respondent obtain a bank guarantee prior to the commencing date of the lease, which obligation had not been waived (see paragraph 2 above);
(c) the fact that the Respondent did not have the $40,000 necessary to complete the fit-out in accordance with clause 33.1 of the lease;
that the Respondent had repudiated the lease, which repudiation the Appellant was entitled to accept by issuing the first termination notice and re-entering the premises [paragraph 214].
2. The Tribunal erred in law in finding that the Appellant was estopped from relying on the Respondent’s breach of his obligation to obtain a bank guarantee prior to the commencing date of the lease, namely 1 July 2003, in circumstances where:
(a) the evidence disclosed that Mr Sarker had not applied for a bank guarantee, had misrepresented to his solicitor that he had applied for a bank guarantee for the purpose of obtaining an extension of time from the Appellant, and had made false statements to the effect that he had applied for a bank guarantee in several affidavits read to the Supreme Court and to the Tribunal in these proceedings [paragraphs 60, 109, 149, 158, 207, 207 [sic], 211 and 212];
(b) the Tribunal made no finding that the Respondent acted to his detriment in reliance on the representation of the solicitor for the Appellant that it did not insist on strict compliance with the requirement of the Lease that the Respondent furnish a bank guarantee by the commencing date.
3. The Tribunal erred in law in failing to find that the Appellant, by its first termination notice, was entitled to terminate the lease and did terminate the lease by reason of the Respondent’s breach of his obligation to obtain a bank guarantee prior to the commencing date of the lease, which was a breach of an essential term of the lease.
Eviction by Notice
44 Section 129 of the Conveyancing Act protects a tenant against instant eviction for non-rental breaches of a lease. The key protection is that the tenant must be given a ‘reasonable time’ to remedy the specified breaches giving rise to the notice. It provides relevantly:
‘ 129 Restrictions on and relief against forfeiture of lease
(1) A right of re-entry or forfeiture under any proviso or stipulation in a lease, for a breach of any covenant, condition, or agreement (express or implied) in the lease, shall not be enforceable by action or otherwise unless and until the lessor serves on the lessee a notice:
(a) specifying the particular breach complained of, and
(b) if the breach is capable of remedy, requiring the lessee to remedy the breach, and
(c) in case the lessor claims compensation in money for the breach, requiring the lessee to pay the same,
and the lessee fails within a reasonable time thereafter to remedy the breach, if it is capable of remedy, and where compensation in money is required to pay reasonable compensation to the satisfaction of the lessor for the breach.
(2) Where a lessor is proceeding by action or otherwise to enforce such a right of re-entry or forfeiture, or has re-entered without action the lessee may personally bring a suit and apply to the Court for relief; and the Court, having regard to the proceedings and conduct of the parties under the foregoing provisions of this section, and to all the other circumstances, may grant or refuse relief, as it thinks fit; and in case of relief may grant the same on such terms (if any) as to costs, expenses, damages, compensation, penalty or otherwise, including the granting of an injunction to restrain any like breach in the future, as the Court in the circumstances of each case thinks fit.
(8) This section shall not affect the law relating to re-entry or forfeiture or relief in case of non-payment of rent.
(9) The notice mentioned in this section shall be in the form set out in the Sixth Schedule or to a similar effect.
(10) This section applies to leases made either before or after the commencement of this Act, and shall have effect notwithstanding any stipulation to the contrary.’
45 As noted earlier, WBH did not base its notice on s 129. Instead it relied on cl 24.1 and 24.2 of the Lease which provided:
‘ Default
Essential terms
24.1 Each of Your obligations to pay money under and Your obligations under clauses 13, 14, 16, 18, 20 (except under clauses 20.3 and 20.5) and 21 are essential terms of this lease. Other obligations under this lease may also be essential terms.
Our right to end this lease
24.2 We may end this lease by giving you notice or by re-entry if you:
(a) repudiate your obligations under this lease;
(b) do not comply with an essential term of this lease; or
(c) do not comply with an obligation under this lease (which is not an essential term and in Our reasonable opinion:
(i) the non-compliance can be remedied, but You do not remedy it within a reasonable time after We give You notice to remedy it;
(ii) the non-compliance cannot by [sic] remedied or compensated for; or
(iii) the non-compliance cannot be remedied but We can be compensated and You do not pay Us compensation for the breach within a reasonable time after We give You notice to pay it.’
46 The first termination notice had the following key paragraphs:
‘NEGOTIATIONS & DISCLOSURE STATEMENT
2. In relation to fitout:1. At the time of providing you with the lessor’s disclosure statement, you were also provided with Minto Mall’s Tenancy Fitout [sic] Guide.
(a) at the foot of page 1 of the disclosure statement under the heading “ Lessor’s Requirements as to Quality and Standards of Fittings in Shop ”, it is stated “ As set out in the Tenancy Fitout Guide (if any) and in any event to be of a premium quality ”;
(b) special condition 2 on page 2 of the disclosure statement states “ The Lessor agrees that the Lessee enjoys four (4) weeks fit out period from the hand over date ”;
(c) special condition 4 in the disclosure statement provides:
“ In compliance with the Minto Mall Tenancy fitout Guide, the lessee agrees to design and fitout the tenancy (shop signage and shop interiors) to a high quality, which should be outstanding both in visual appearance and as the show place of the Lessee’s merchandise .”
(d) special condition 5 of the disclosure statement provides:
“ The Lessee agrees that the fitout must not be less than $40,000.00 ”.
3. The 15 page Tenancy Fitout Guide is clear in its terms and you have failed to obtain WBH’s approval, both prior to and subsequent to the fitout which I am instructed has now been completed.
4. The Tenancy Fitout Guide on page 8 provides that “ Vinyl tiles or sheet vinyl flooring will not be allowed without written permission of the tenant co-ordinator ”. No such permission was sought nor obtained in writing or otherwise.
5. You failed to provide WBH or its authorised agent (KMPB Group Pty Limited) or the Centre Manager with any preliminary design requirements which commence on page 10 of the Tenancy Fitout Guide.
6. On page 2 of the disclosure statement, you were obliged to provide WBH with a bank guarantee (or a cash bond) “ prior to the lease commencement date, in accordance with clause 13 of the lease in an amount of $12,127.50 ”.
THE LEASE
7. Special condition 33.1 on page 24 of the lease provides:
“ You agree to fit out the premises in accordance with the Minto Mall tenancy Fitout Guide and that You will use premium quality materials and qualified tradespersons to ensure that the design and appearance of the fitout will be of the highest standard and at a cost of not less than $40,000.00 .”
8. Pursuant to clause 13 of the lease and item 17 of the reference schedule to the lease, you were obliged to provide a bank guarantee in the sum of $12,127.50 “ on or before the Commencing Date, namely 1 July 2003 ” (clause 13.2 of the lease).
I am instructed by my client that you have breached a number of terms and conditions of the lease as follows:
A. You have failed to comply with the terms of the Tenancy Fitout Guide as required under the terms of the disclosure statement and, more particularly, clause 20.2(b), (c) and (e) of the lease.
B. You have failed to undertake a fitout of a high standard and premium quality expending a sum of not less than $40,000, again as required under the disclosure statement and special condition 33.1 of the lease. I am instructed that the cost of fitout expended by you in painting the walls and laying vinyl flooring would not even be one tenth of that amount required.
C. You have laid vinyl flooring in the shop premises contrary to the express provisions of the Tenancy Fitout Guide referred to above.
D. You have failed to comply with an essential term of the lease, namely provision of the bank guarantee and, therefore, you are in default under the lease (clauses 13 and 24.1 of the lease).
E. You have repudiated your obligations under the lease, in particular in relation to compliance with the Tenancy Fitout Guide, the quality of the fitout, the amount to be expended and provision of the bank guarantee.
My client reserves all its rights with respect to recovery of damages by virtue of the several breaches of the lease and your wrongful repudiation of the lease.’As a consequence of the foregoing and pursuant to clause 24.2 of the lease, I give you notice on behalf of WBH that your lease of the shop premises dated 27 June 2003 is hereby terminated. Kindly ensure that you remove all of your stock no later than 4.00 pm, Sunday, 27 July 2003, as my client intends to re-take possession of the shop premises immediately thereafter.
47 It will be seen that there were two principal concerns: adequacy of fit-out; and non-payment of bank guarantee. No reasonable period of time was given to remedy these alleged breaches.
48 At one time the law was that only a notice of termination that complied with s 129 of the Conveyancing Act could effect termination of a commercial lease such as the present. The Tribunal concluded at paras [43] to [49] of its preliminary decision, decision no 2, that the following five propositions now represent the law:
‘(1) It is quite possible for a notice by a contracting party terminating the contract on account of one or more breaches by the other party to do so both under an express term providing for termination and on the ground that the other party’s conduct amounted to repudiation. There is no rule that the party serving such a notice must elect between these two modes of termination.
(2) Any ground of termination that was valid at the time of the notice of termination can be relied upon as justification by the terminating party, even if this party did not refer to it in the notice (but referred instead to some other ground) or indeed was not aware of it at the time of giving the notice: see Shepherd v Felt & Textiles of Australia Ltd (1931) 45 CLR 359 at 377-378 and Carter, J W, Breach of Contract, 2nd edn, 1991 (hereafter ‘Carter’), [1006].
(3) The presence of a contractual right to terminate is not generally treated by the courts as excluding a common law right, such as the right to terminate on the ground of conduct amounting to repudiation (Carter, [1014]).
(4) Where a contractual right to terminate does not exclude common law rights and the party purporting to terminate has sought inappropriately to rely on the contractual right, it may still be open to this party to claim that, providing the relevant grounds at common law exist, the notice that he or she has given is effective at common law.
(5) There are no particular formalities associated with termination pursuant to a common law right, such as on the ground of conduct by the other party amounting to repudiation. It is sufficient, as Carter states at [1015], that there be ‘unequivocal words or conduct evincing an election to terminate the performance of the contract’. There is no need, according to Carter at [1016], to ‘state the basis for the election’. The party terminating ‘may say’, for instance, that the contract is ‘off’ or ‘at an end’ or that the other party’s breach ‘has been “accepted” as a repudiation of the contract’ (Carter at [1016]).’
49 Applying these propositions, the Tribunal went on to rule in its main decision:
‘55 First, in the absence of a contrary indication either in clause 24.2 or elsewhere in the Lease, we should apply the normal presumption … that the existence of an express contractual right to terminate a contract does not exclude common law rights of termination, such as termination on the ground of conduct amounting to repudiation.
56 It may well be, as argued by Mr Ellicott (see [50] above), that the wording of subparagraph (a) of clause 24.2 was in fact sufficient to indicate that termination on this common law ground, as well as on a contractual ground, was available to the Respondent in appropriate circumstances and could be effected in the manner set out in the clause. But we do not need to rule on this specific question.
57 Secondly, each of the two Notices of Termination could therefore, as a matter of law, effect termination on the ground of conduct of the Applicant amounting to repudiation, even though (a) according to their natural meaning they communicated an intention of terminating pursuant to the contractual right and (b) termination according to this mode was not open to the Respondent on account of non-compliance with s 129(1) of the Conveyancing Act. In this connection, we have found Rawson v Hobbs (1961) 107 CLR 466 (outlined above at [48]) to be a particularly helpful authority.
58 Thirdly, each of the Notices contained ‘unequivocal words… evincing an election to terminate the performance of the contract’ (see Carter at [1015] and [49] above). For that reason, each Notice was adequate to effect termination on the ground of conduct by the Applicant amounting to repudiation.
59 We note in passing that, if we had reached the contrary conclusion (i.e., that the Notices were not adequate in this regard), it would still have been open to the Respondent at the adjourned hearing to allege and prove conduct on its part which, taken in conjunction with either or both of the Notices, sufficiently conveyed its intention to terminate the lease on this ground. This follows from the statement in Carter, at [1015], that this intention may be evinced by conduct (whether or not accompanied by words). In the ‘Bases of Argument’ for this separate hearing (see [17] above), the Respondent’s right to make such an assertion at the adjourned hearing is expressly preserved.
60 Fourth and finally, the Notices, in so far as they purported to effect termination on this ground of repudiatory conduct, cannot be held invalid on account of the Respondent’s failure to comply with s 129(1) of the Conveyancing Act. This follows from the concluding words of Meagher JA’s statement of principle, quoted above at [30], in Marshall v Council of the Shire of Snowy River (1994) Butterworths Property Reports 14,447 at 14,457, although in some earlier authorities, the opposing view is to be found (see eg Wood Factory Pty Ltd v Kiritos Pty Ltd (1985) 2 NSWLR 105 at 132, 144; Butt, P, ‘The contractualisation of leases: a further step?’ (1996) 70 ALJ 97 at 100).
61 It follows from this line of reasoning that there is no basis on which either of the two Notices of Termination, as a matter of law, can be held invalid.’
50 The principal submission of WBH before the Tribunal, reiterated in the appeal grounds, was that Mr Sarker had at the time of each of the first two notices issued under cl 24 breached essential terms of the lease; and breach of an essential term constituted repudiation. The Tribunal said:
‘187 The Tribunal has considered a number of other authorities that bear indirectly on the principal issue on which these competing submissions focused: namely, whether any breach by a lessee of a term identified in a lease as an ‘essential term’ inevitably constitutes ‘repudiation’, in the sense used by Meagher JA in Marshall v Council of the Shire of Snowy River , with the consequence that if the lessor accepts the repudiation and terminates the lease accordingly, ‘section 129 becomes an irrelevance’. The additional authorities that the Tribunal has consulted include Progressive Mailing House Pty Ltd v Tabali Pty Ltd (1985) 157 CLR 17, Wood Factory Pty Ltd v Kiritos Pty Ltd (1985) 2 NSWLR 105 and Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd (1989) 166 CLR 623.
188 The Tribunal’s conclusions on these matters (which it has not found to be straightforward) may be stated in four propositions.
189 The first is that proof that a lessee has breached a term identified in the relevant lease as an ‘essential term’ does not necessarily constitute proof that the lessee has repudiated the lease, in the sense necessary to entitle the lessor to accept the repudiation, terminate the lease and re-enter the premises without being required to comply with section 129(1) of the Conveyancing Act 1919.
190 In so ruling, the Tribunal relies principally on Young J’s judgment in CAC Pty Ltd v Diamond Hill International Pty Ltd (1996) Butterworths Property Reports 14,754. This is the only case cited to it in which this specific issue had to be resolved. The covenant breached by the lessee – to pay the lease preparation costs – was expressly stated to be an ‘essential term’. But Young J held that this was not enough to render section 129(1) inapplicable. He considered that conduct amounting to repudiation according to common law principles had to be shown. He envisaged that conduct – as did Gibbs CJ in Shevill v Builders Licensing Board – as conduct evincing ‘an intention no longer to be bound by the contract’ or ‘to fulfil the contract only in a manner substantially inconsistent with’ the obligations set out in it. As the facts before Young J amply demonstrated, not every breach of a term of a lease that is identified as an ‘essential term’ satisfies this description.
191 With reference to the passage in Gibbs CJ’s judgment in Shevill v Builders Licensing Board on which Mr Angyal relied, the Tribunal attaches significance to the fact that the Chief Justice was explicitly dealing with the circumstances in which a breach of covenant by a lessee might give rise to a forfeiture of the lease. He was not discussing the issue arising in this case, which is whether a right to terminate a lease on account of one or more breaches of covenant by a lessee should be exercisable without observance of the statutory requirement of notice imposed by section 129(1). This observation regarding the topic being addressed by Gibbs CJ receives some support from his brief reference to section 129 in the passage relied on by Mr Ashhurst, though the precise import of that reference is not easy to determine.
192 The second proposition that the Tribunal puts forward here is that the wording of the Lease in the present case was such that breaches of the terms that it designated as ‘essential’ should not be held automatically to amount to repudiatory conduct. There are, in the Tribunal’s opinion, two compelling reasons for this conclusion. The first is that, as in CAC Pty Ltd v Diamond Hill International Pty Ltd , the Lease in clause 24.2(b) expressly stated that the consequence of a breach of an essential term by the lessee was to confer on the lessor a right of termination by notice or re-entry. It did not purport to characterise such breaches as fundamental breaches or breaches of fundamental terms, let alone as repudiatory conduct. Indeed, in clause 24.2(a), the Lease stated that repudiation of the lessee’s obligations under the lease constituted a separate and independent ground of termination. The second reason is that any breach of a number of entirely trivial obligations – for example, one of the numerous detailed requirements of the Fit-Out Guide – was characterised under clause 24.1 of the Lease as a breach of an ‘essential term’. To hold that such a breach should automatically constitute ‘repudiation’, entitling the lessor to exercise its right of termination without giving notice under section 129(1), would manifestly deprive the lessee of this important statutory protection in a wide range of circumstances, identifiable only by conducting a close reading of both the Lease and the detailed Fit-Out Guide.
193 Thirdly, any matter that might assist a party terminating a lease to justify the termination on the ground of repudiation by the other party can be relied upon by the terminating party to justify the termination, even if this party did not refer to it in the notice or indeed was not aware of it at the time of giving the notice. This proposition was put to the Tribunal at the hearing in January 2004 (see Sarker v World Best Holdings Ltd (No 2) [2004] NSW ADT 15 at [45]), but its correctness was not specifically determined. In the opinion of the present Tribunal, the principal authority then relied on ( Shepherd v Felt & Textiles of Australia Ltd (1931) 45 CLR 359 at 377-378) clearly shows it to be correct.
194 Fourthly, the Tribunal is not inclined to accept Mr Ashhurst’s submission that because World Best did not execute the Lease, none of the covenants contained in it was binding on Mr Sarker. Although Young J’s observations in CAC Pty Ltd v Diamond Hill International Pty Ltd would seem to support this proposition, it is, in the Tribunal’s respectful opinion, at odds with the terms of sub-sections 3 and 8 of the RL Act and with subsequent Supreme Court authority – for example, Aspromonte Pty Ltd v Zagari [1999] NSWSC 831 – interpreting these provisions. By virtue of the Tribunal’s ultimate conclusions regarding the termination notices, this specific question does not need to be determined in the present judgment.
195 The outcome of these conclusions reached by the Tribunal is that the question whether the termination notices were valid despite World Best’s failure to comply with section 129(1) depends on whether such breaches of the Lease as Mr Sarker committed were of such a nature as to constitute repudiation in the common law sense – i.e. without reference to the Lease’s characterisation of any terms breached as ‘essential terms’. It must be asked whether his conduct evinced an intention ‘no longer to be bound by the contract’, but instead ‘to fulfil the contract only in a manner substantially inconsistent with his obligations’. This question may conveniently be discussed with reference to each of the two termination notices in turn.’
51 The Tribunal proceeded to apply this analysis to the circumstances. It had regard to several additional unspecified breaches. It accepted that the bank guarantee had not been furnished by the due date, but concluded that an estoppel arose. WBH had allowed extra time on 1 July 2003 for the furnishing of the guarantee. It had not raised any further objection while Mr Sarker proceeded with his fit-out. As to the other eight alleged breaches (including four previously unspecified ones) it considered that they were all fit-out related, and that they were Mr Sarker’s non-compliance with the required standard as at the date of opening the shop did not constitute repudiatory conduct on his part.
52 The Tribunal concluded as to these two topics:
‘212 The Tribunal accordingly does not accept Mr Angyal’s submission that Mr Sarker’s explanation for the failure to provide a guarantee on 1 July, given by him on that day to Mr Ling and relayed soon after to Mr Yee, was deliberately false. Mr Sarker may be open to criticism for having delayed too long in applying for a guarantee (he did not do so until 27 June), for failing to keep a sufficient sum in the account after 16 July and for not notifying Mr Ling of the state of the account after that date. But it is not correct to say, as Mr Angyal maintained, that Mr Yee’s granting of permission for Mr Sarker to provide the guarantee later than the Lease stipulated was induced by a deliberately false representation on Mr Sarker’s part.
213 It follows from this reasoning that World Best was not entitled to rely on Mr Sarker’s failure to provide a guarantee before 1 July 2003 when claiming in the first termination notice that it was entitled to terminate the Lease.
214 In the light of this review of the extent to which Mr Sarker breached the nine obligations on which Mr Angyal relied, the Tribunal considers that his conduct did not, according to the tests for common law repudiation outlined above, amount to repudiation of the Lease. The breaches that he committed all stemmed from his failure to fit out the Premises in a timely manner and in accordance with the requirements spelt out in the Lease and the Fit-Out Guide. Those breaches were of varying severity. Clearly, he failed to take his obligations in this connection seriously enough. But despite the opening words of the termination notice, they were not breaches of which World Best had previously complained. It cannot be said that in committing them he evinced ‘an intention no longer to be bound by the contract’, or that he intended ‘to fulfil the contract only in a manner substantially inconsistent with his obligations’.
215 For these reasons, the Tribunal concludes that the first termination notice was invalid by virtue of World Best’s failure to comply with section 129(1) of the Conveyancing Act 1919.’
Assessment
53 We have reviewed the various authorities relied upon by the appellant. In our view, the Tribunal has accurately stated the law as it presently stands.
54 In this case, we do not see any basis for the submission that the notice was a dual notice: i.e. a notice under the lease; and a notice invoking general law rights given to all contracting parties to terminate for breach of a condition (or essential term, or fundamental term). The notice squarely invoked the rights that cl 24 of the Lease purported to give. The notice in Marshall on the other hand was one that clearly sought to rely on the common law right to repudiate for breach of a condition.
55 We accept that where a lessor asserts a right of re-entry for breach of a non-rental obligation the law has moved from requiring absolute compliance with s 129 to a position where a fundamental breach of a non-rental obligation may also be treated as repudiation.
56 It would, in our view, be a radical step - one which would largely subvert the protective function performed by s 129 and the various provisions of the RL Act itself which seek to preserve the lease relationship - for the courts to allow a wronged party to terminate a lease on the basis of a breach of a term merely because it has been described as an essential term. This would be an especially strange result in circumstances where it was a breach capable of being remedied if reasonable time was given, or if the breach was of minor degree. In our view, for the reasons given by the Tribunal, the law has not gone that far. Such an extreme approach would produce, to adopt words of Lord Kilbrandon in Schuler v Wickman Tools [1974] AC 235 at 272, ‘grotesque consequences’ for the operation of retail leases.
57 There is nothing in our view unusual about a lessor giving a lessee an extension of time for payment in relation to the bank guarantee or security deposit obligations. The Tribunal received evidence from Mr Sarker as to what steps he had taken to have the guarantee in place by 1 July 2003, and what action he took ultimately to ensure that this requirement was met. His explanation was accepted by the Tribunal, in particular that his solicitor had obtained an assurance from the lessor’s solicitor that it could take more time to put the guarantee in place.
58 Nor, in our view, is it unusual for there to be issues around the quality of fit-out. The Tribunal found in this case that Mr Sarker had not expended anything like the amount specified by the lease at the time he opened for business. It accepted substantially Mr Philpott’s evidence, for WBH, that the quality of the fit-out was poor. It also accepted that Mr Sarker had failed to obtain a development approval for sale of food products, especially perishable items. In our view, it was open to the Tribunal to find that these failures did not amount to repudiatory conduct on the part of Mr Sarker.
59 Accordingly, we agree with the Tribunal that the first termination notice was invalid. The consequence is that Mr Sarker was entitled to be restored to possession, and he was entitled to relief for losses incurred by being prevented from continuing to trade in the short term. In that regard, we accept that he did not hold development approval to trade in food products, in particular perishable food products.
60 He did not reopen until 7 November 2003 after obtaining development approval, restocking and undertaking improvements to the fit-out.
Ground 4
61 Ground of appeal 4 goes to the question of the permitted use. It is as follows:
4. The Tribunal erred in law:
(a) in failing to determine whether, on the proper construction of the lease from the Appellant to the Respondent, the permitted use of the premises as an “ Asian grocery store ” under clause 18.1 did not permit the Respondent to sell Indian groceries and Halal meats [cf paragraphs 216, 219 and 257];
(b) in failing to find, that, on the proper construction of clause 18.1 of the lease, the Respondent was not entitled to sell Indian groceries and Halal meats;
(c) in failing to find that, by selling Indian groceries and Halal meats, the Respondent traded outside the use permitted by clause 18.1 the [sic] lease and thereby breached an essential term of the lease; and
(d) in failing to find that the Appellant was entitled to, and did, terminate the lease by its first termination notice for breach by the Respondent of clause 18.1 of the lease;
(e) in failing to find that the second termination notice was valid to the extent that it relied on breach by the Respondent of clause 18.1 of the lease; and
(f) in failing to find that, if the Appellant did not terminate the lease by its first termination notice, it terminated the lease by its second termination notice.
Assessment
62 WBH’s counsel took the Appeal Panel to the material before the Tribunal that might support the contention that the parties had a mutual understanding that ‘Asian’ did not include ‘Indian’. In our view, the Tribunal properly evaluated the evidence on this point and the factual finding it made was open to it on the evidence. The Tribunal was critical of the evidence of both Mr Sarker and Ms James, but was more critical of Ms James’ and pointed to crucial omissions in her evidence, and, what it saw as replies under cross-examination designed to bolster WBH’s case.
63 It is clear from the factual narrative (aspects of which we have set out earlier in these reasons) that WBH (via Ms James) was well aware from the outset of its dealings with Mr Sarker that he was interested in trading in Indian-type products. With a business already trading at the Minto Mall in Indian products, i.e. Dhaka, there was an obvious possibility of overlapping use, dispute and conflict. Within a few days of negotiations commencing, Mr Sarker expressed a wish to trade in Indian grocery items. The evidence of Mr Sarker and Ms James was in conflict as to what transpired between them around this matter. Ultimately the parties settled in their written instrument on ‘Asian Grocery Shop’ as the permitted use. This occurred in circumstances where on Ms James’ own evidence Mr Sarker had requested the right to trade in Indian food products.
64 In our view, a prudent agent would in this situation have gone to great care to specify the meaning of Asian Grocery and dealt in writing with the possibility that the term ‘Asian’ might be interpreted to include ‘Indian’ products. In the Dhaka lease there was a high level of precision both as to the permitted use and the component of that use which was exclusive. This degree of attention was notably absent from the Sarker lease.
65 The Tribunal did not deal in its reasons with the question of whether the term ‘Asian Grocery’, properly construed, extended to Indian food products. The appellants submits that this omission involved an error of law, and that, on ordinary principles, the meaning of ‘Asian Grocery’ does not include sale by retail of Indian food products. The submission basically is that Asian food in its ordinary understanding is food belonging to the main region of Asia, not the subcontinent of India. It is a cultural expression as distinct from a geographic expression. So, for example, in day to day social experience ‘Asian’ food, and ‘Indian’ food are spoken of as separate categories, and this is reflected in restaurant descriptions.
66 The Tribunal’s reasons are detailed and closely reasoned. It would be surprising, to say the least, that the Tribunal would have failed to identify as a major plank of the appellant’s case that the question of the proper textual construction of the ‘permitted use’ clause was seriously in issue.
67 The appellant’s case at hearing was that the ‘permitted use’ clause was to be read down by reference to the oral communications between the parties. This case failed on the evidence. The Tribunal was not, in our opinion, called on to address the further issue of whether absent the oral variation the words in the lease had the limited meaning now suggested.
68 We note, as did the Tribunal, that the first termination notice made no reference to breach of the permitted use clause. Yet this was the issue at the forefront of the protests that WBH had received from Dhaka in the run-up to Mr Sarker opening his shop. This points, in our view, to an understanding by WBH that it had given Mr Sarker a licence to trade in groceries that were distinctive to the Asian geographical region. The continent of Asia is large. Often it is described by reference to its sub-regions, one of which is ‘South Asia’ which embraces India and nearby countries or by the expression ‘the Indian sub-continent [of the continent of Asia]’. See further, Merriam-Webster’s Geographical Dictionary (3rd ed. 1997), pp 80-81, and its description of the political divisions of Asia; similarly, Oxford Concise Dictionary of World Place-Names (2005). See also Longman’s Dictionary of Geography (1966), which defines Asia as including ‘(5) ancient plateau blocks of Arabia, peninsular India and Indo-China ...’.
69 In our view, in the negotiations that led to the description of the permitted use, Mr Sarker succeeded in his objective of obtaining a description that allowed him to trade in any groceries distinctive to the Asian region, and that therefore included South Asian groceries, in particular Indian groceries. We agree with the Tribunal that Ms James’ advice to Dhaka that it sort out with Mr Sarker the problem of their overlapping uses points to an understanding on her part that ‘Asian’ subsumed ‘Indian’.
70 In making these observations, we acknowledge that many Australians may tend to see ‘Asian’ when used in connection with groceries or restaurant cuisine as referring to items with a Chinese, Japanese, Vietnamese or Thai provenance, as distinct from, say, items with an Indian or, for example, Persian provenance.
71 Nonetheless the word ‘Asia’ in its ordinary meaning encompasses all of the countries or regions mentioned (as well as many others). A prudent lessor would, we believe, have been extremely careful to delimit the meaning of Asian to exclude Indian in circumstances where an exclusive use had been given to an incumbent lessee in a nearby shop to trade in Indian food items.
72 Moreover, in the circumstances of this case, it stretches credulity that a tenant of Bangladeshi origin, and one who had indicated from the outset an interest in trading in goods of interest to Indian and Bangladeshi customers who lived in the suburbs near the centre, would have accepted a limitation that excluded him from trading in Indian goods and instead trading in goods from countries such as China and Korea.
Ground 5
73 Ground of appeal 5 deals with the linkage between the Tribunal’s findings in relation to the first termination notice and the question of the validity of the second termination notice.
5. The Tribunal erred in law:
(a) in finding that the second termination notice served by the Appellant was invalid because the consequence of the Appellant having repudiated the lease by serving an invalid first termination notice was that the Respondent, despite having affirmed the lease, was freed from his obligations under the lease [paragraphs 216 – 223];
(b) in failing to find that the Appellant, by its second termination notice, terminated the lease.
74 This ground refers to the following passage in the Tribunal’s reasons.
‘216 The second termination notice. As summarised above at [130], the grounds of termination stated in the second notice, which was served on 14 November 2003, were Mr Sarker’s breaches of the following obligations: (1) failure to pay three monthly instalments of rent on the due dates, as required by clause 6.1; (2) failure to obtain World Best’s approval to the fit-out; (3) failure to comply with the specific obligations regarding the quality of the fit-out contained in clauses 20.2 and 33.1; and (4) ‘trading in Indian Groceries, contrary to the permitted use’.
217 Mr Angyal did not, in his submissions, claim that any other breach by Mr Sarker could be relied on by World Best in maintaining that Mr Sarker’s conduct amounted to repudiation of the Lease.
218 As to the first alleged breach, it may be noted that, since it related to the lessee’s obligation to pay rent, section 129(1) of the Conveyancing Act 1919 did not apply to it (see section 129(8)). But the allegation in the second termination notice that Mr Sarker was in arrears of rent was disputed at the time by his solicitor and was not the subject of any supporting evidence at the hearing. It must therefore be left out of account.
219 The Tribunal does not accept Mr Angyal’s submission as to the fourth alleged breach. Its reason is that it has rejected the claim by World Best that Mr Sarker orally agreed not to sell Indian groceries.
220 With regard to Mr Sarker’s breaches of the second and third obligations, the Tribunal considers that the case for characterising them as constitut[ing] repudiatory conduct is stronger than under the first termination notice. The reason is that they involved failure by him to comply with his fit-out obligations, despite the clear indications in the first notice that World Best treated compliance as important, over an additional period of nearly five months.
221 In dealing with this issue, Mr Ashhurst advanced the following argument. First, because the first termination notice was invalid in point of law, the serving of it constituted a repudiation of the Lease. This was a proposition that Mr Angyal did not contest. Secondly, although Mr Sarker did not at this stage accept the repudiation and terminate the lease, the repudiation, coupled with World Best’s continued insistence that the Lease was at an end, freed him from his obligations under the Lease, such as the obligation to incur further expenditure in fitting out the Premises.
222 Mr Ashhurst formulated this proposition as follows in his written outline of submissions: ‘[World Best] can hardly claim that Mr Sarker was demonstrating a consistent refusal to comply with the fit-out guide whilst it was at the same time stating (through its lawyers) that there was no point because the lease was already terminated.’ In support of this reasoning, Mr Ashhurst cited the judgment of Dixon J in Peter Turnbull & Co Pty Ltd v Mundus Trading Co (Australasia) Pty Ltd (1954) 90 CLR 235 at 246.
223 The Tribunal agrees with this submission, which Mr Angyal did not expressly oppose.
224 For these reasons, the Tribunal concludes that the second termination notice was invalid.’
Assessment
75 For similar reasons to those given in connection with the grounds addressing the first termination notice (Grounds 1, 6, 2 and 3) Ground 5 is rejected. We have reviewed the authorities. In our view, the Tribunal gave cogent reasons for not treating the second termination notice as effective. WBH had impeded Mr Sarker’s ability to progress the fit-out by refusing to give approval to the development application, and by impeding plumber access. It had not accepted that Mr Sarker was lawfully in occupation as a tenant. To adapt the language of Dixon J in Peter Turnbull, especially at 246-248, WBH had persistently maintained that Mr Sarker had no lawful right to remain in occupation as a tenant and it had not co-operated at crucial points in enabling him to proceed with the fit-out. In these circumstances WBH could not treat Mr Sarker’s failure to complete the fit-out satisfactorily as a breach entitling it to terminate the contract. Mr Sarker was entitled to be excused from ‘literal compliance’ with the terms of the lease.
Period After 14 November 2003
76 The notice of appeal asserts that:
(a) in failing to find that the Respondent’s conduct after 14 November 2003 including:7. The Tribunal erred in law:
(i) failing to obtain a discharge of the Supreme Court order made on 31 July 2003 which restrained the Appellant from interfering with the Respondent’s possession of the premises;
(ii) claiming in these proceedings relief against forfeiture;
(iv) paying the rent due under the lease,(iii) continuing to occupy and trade from the premises; and
constituted an election to affirm the lease which disentitled the Respondent from treating the Appellant as having repudiated the lease by its prior conduct [cf paragraphs 232 – 235];(c) in failing to find that the Respondent’s purported termination of the lease by:(b) in failing to find that as at 24 February 2004 the Respondent was not entitled to terminate the lease on the basis of prior repudiatory conduct of the Appellant [cf paragraph 235];
(ii) its handing over of the keys on 1 or 2 March 2004,(i) its solicitor’s letter dated 24 February 2004; and
was invalid and constituted a repudiation of the lease by the Respondent which the Appellant was entitled to accept by re-entering the premises [cf paragraph 271];
(d) in failing to determine the Appellant’s damage by reason of its termination of the lease [cf paragraph 271].
77 This ground of appeal revisits the factual findings of the Tribunal. The Tribunal was satisfied that there had been instances of breach by Mr Sarker, most notably in connection with the fit-out obligations. But it was of the view that they could be dealt with in the usual way, by the giving of relevant notices and by way of claims for monetary compensation.
78 We are satisfied that the Tribunal properly considered and appraised the evidence. We set out at the beginning of these reasons the Tribunal’s overall appraisal of the key witnesses. It expressed dissatisfaction with aspects of the evidence of Mr Sarker, but expressed greater concern over the evidence of WBH’s principal witness, Ms James. It accepted substantially the evidence as to fit-out of WBH’s consultant, Mr Philpott.
79 Grounds (b), (c) and (d) must fail as ground (a) has been rejected.
Assessment of Damages
80 The notice of appeal asserts:
8. The Tribunal erred in law in applying the rule that a plaintiff is entitled to recover reliance damages rather than expectation damages if it is not possible to predict what position a plaintiff would have been in had the contract been fully performed (paragraphs 242-247) in circumstances where the Respondent’s evidence was that his business would have been profitable [paragraph 99].Contractual damages
81 In our view, the Tribunal properly applied the leading authorities, in particular the dicta in Commonwealth v Amman Aviation Pty Ltd (1991) 174 CLR 64 at 85-86 per Mason CJ and Dawson J. There was only the barest information as to the possible profitability of Mr Sarker’s business. He had trading figures from his three days of operation in July 2003. He lost stock as a result of the closure, and had to restock. In our view, it would be commercially impossible to come up with any reliable indication of the long-term level of profitability (or otherwise) of the business on the basis of his trading experience over the two months – mid-November to mid-January.
The Unconscionable Conduct Finding
82 The notice of appeal asserts:
Unconscionable conduct
9. The Tribunal erred in law in finding that the matters contained in the amended particulars filed by the Respondent on 3 October 2007:
(a) amount to unconscionable conduct under section 62B(1) of the Retail Leases Act ;
(b) are the types of conduct to which sub-paragraphs (i) and (k) of section 62B(1) of the Retail Leases Act require the Tribunal to have regard [paragraph 259].
11. The Tribunal erred in law in failing to find that the matters contained in the amended particulars filed by the Respondent on 3 October 2007 did not involve such moral obloquy as to amount to unconscionable conduct under section 62B(1) of the Retail Leases Act .10. Because the Respondent was prohibited by clause 18.1 of the lease from selling Indian groceries and Halal meats, the Tribunal erred in law in finding that the Appellant engaged in unconscionable conduct by entering into the lease with full knowledge that the exclusive use granted to the Respondent was in conflict with the exclusive use already granted by the Appellant to Dhaka Corporation Pty Ltd for shop 50A [paragraphs 249 and 257].
83 The Tribunal found that Mr Sarker was entitled to repudiate the lease by dint of the history of conduct of WBH towards him. In addition, it made a finding that the conduct was unconscionable. Its award of damages could be founded on either basis. In our view, the reasoning of the Tribunal in relation to the principal claim, the retail tenancy claim, was sound. Therefore, it was not essential to its conclusions to make a finding on the unconscionable conduct claim.
84 Section 62B provides:
‘ 62B Unconscionable conduct in retail shop lease transactions
(1) A lessor must not, in connection with a retail shop lease, engage in conduct that is, in all the circumstances, unconscionable.
(2) A lessee must not, in connection with a retail shop lease, engage in conduct that is, in all the circumstances, unconscionable.
(3) Without in any way limiting the matters to which the Tribunal may have regard for the purpose of determining whether a lessor has contravened subsection (1) in connection with a retail shop lease, the Tribunal may have regard to:
(a) the relative strengths of the bargaining positions of the lessor and the lessee, and
(b) whether, as a result of conduct engaged in by the lessor, the lessee was required to comply with conditions that were not reasonably necessary for the protection of the legitimate interests of the lessor, and
(c) whether the lessee was able to understand any documents relating to the lease, and
(d) whether any undue influence or pressure was exerted on, or any unfair tactics were used against, the lessee or a person acting on behalf of the lessee by the lessor or a person acting on behalf of the lessor in relation to the lease, and
(e) the amount for which, and the circumstances under which, the lessee could have acquired an identical or equivalent lease from a person other than the lessor, and
(f) the extent to which the lessor’s conduct towards the lessee was consistent with the lessor’s conduct in similar transactions between the lessor and other like lessees, and
(g) the requirements of any applicable industry code, and
(h) the requirements of any other industry code, if the lessee acted on the reasonable belief that the lessor would comply with that code, and
(i) the extent to which the lessor unreasonably failed to disclose to the lessee:
(ii) any risks to the lessee arising from the lessor’s intended conduct (being risks that the lessor should have foreseen would not be apparent to the lessee), and(i) any intended conduct of the lessor that might affect the interests of the lessee, and
(j) the extent to which the lessor was willing to negotiate the terms and conditions of any lease with the lessee, and
(k) the extent to which the lessor and the lessee acted in good faith.
(4) Without in any way limiting the matters to which the Tribunal may have regard for the purpose of determining whether a lessee has contravened subsection (2) in connection with a retail shop lease, the Tribunal may have regard to:
(a) the relative strengths of the bargaining positions of the lessee and the lessor, and
(b) whether, as a result of conduct engaged in by the lessee, the lessor was required to comply with conditions that were not reasonably necessary for the protection of the legitimate interests of the lessee, and
(c) whether the lessor was able to understand any documents relating to the lease, and
(d) whether any undue influence or pressure was exerted on, or any unfair tactics were used against, the lessor or a person acting on behalf of the lessor by the lessee or a person acting on behalf of the lessee in relation to the lease, and
(e) the amount for which, and the circumstances under which, the lessor could have granted an identical or equivalent lease to a person other than the lessee, and
(f) the extent to which the lessee’s conduct towards the lessor was consistent with the lessee’s conduct in similar transactions between the lessee and other like lessors, and
(g) the requirements of any applicable industry code, and
(h) the requirements of any other industry code, if the lessor acted on the reasonable belief that the lessee would comply with that code, and
(i) the extent to which the lessee unreasonably failed to disclose to the lessor:
(ii) any risks to the lessor arising from the lessee’s intended conduct (being risks that the lessee should have foreseen would not be apparent to the lessor), and(i) any intended conduct of the lessee that might affect the interests of the lessor, and
(j) the extent to which the lessee was willing to negotiate the terms and conditions of any lease with the lessor, and
(k) the extent to which the lessee and the lessor acted in good faith.
(5) A person is not to be taken for the purposes of this section to engage in unconscionable conduct in connection with a retail shop lease by reason only that the first-mentioned person institutes legal proceedings in relation to that lease or refers to arbitration a dispute or claim in relation to that lease.
(6) A person is not to be taken for the purposes of this section to engage in unconscionable conduct in connection with a retail shop lease by reason only that the first-mentioned person fails to renew the lease or issue a new lease.
(7) For the purpose of determining whether a lessor has contravened subsection (1) or whether a lessee has contravened subsection (2):
(a) the Tribunal must not have regard to any circumstances that were not reasonably foreseeable at the time of the alleged contravention, and
(8) A lessor or lessee, or former lessor or lessee, who suffers loss or damage by reason of unconscionable conduct of another person that is in contravention of this section may recover the amount of the loss or damage by lodging a claim against the other person under section 71A.(b) the Tribunal may have regard to circumstances existing before the commencement of this section but not to conduct engaged in before that commencement.
(9) If the matter of such loss or damage arises in connection with a matter the subject of proceedings in the Tribunal, the Tribunal may proceed to decide it, and in so doing may award such sum as it thinks fit.
(10) In this section:
lessee or former lessee includes a person who is a guarantor or covenantor under a lease or former lease.’
85 While the Tribunal did not link the particulars of WBH’s conduct that it saw as unacceptable and in total unconscionable to specific sub-paragraphs of s 62B, the following links could, we think, properly be made. First, there was a substantial difference in the relative strengths of the bargaining positions of the parties. WBH was an experienced shopping centre operator with an experienced management team. Mr Sarker was new to retailing (cf. sub-paragraph (a)). Mr Sarker was required to comply with conditions that were not reasonably necessary for the protection of WBH’s interests (the critical example being the attempt to obtain an order in the November proceedings that would have restricted the permitted use ( cf. sub-paragraph (b)). WBH engaged in tactics that might be regarded as unfair (notably, withholding consent to the development approval in August 2003 and impeding access by the plumber to the premises) (cf. sub-paragraph (d)). WBH was not open with Mr Sarker as to the terms of the permitted and exclusive use granted to Dhaka, and did not inform Mr Sarker of the protest correspondence from WBH in the June/July period ((i)). WBH’s response to Dhaka that it was for the two lessees to sort out between themselves the difficulty that had emerged over the permitted uses was unreasonable. The Tribunal referred, in addition, to several other matters: see [254] read in conjunction with [249].
86 In our view, it was reasonably open on the evidence for the Tribunal to reach the conclusions it did on these matters.
87 The conduct of WBH towards Mr Sarker went beyond a level of robustness that might be expected in commercial dealings. It well knew when Mr Sarker opened for business on 23 July that there was a live issue as to the products in which he proposed to trade. There is no evidence that it did anything between 4 June when Dhaka first complained and 23 July to address the problem. On 16 June it furnished Mr Sarker with the formal lease in which the permitted use remained as ‘Asian grocery shop’ knowing that Dhaka believed the use granted to WBH might have allowed Mr Sarker to trade in the Indian products for which it held an exclusive use. It did not insist on strict compliance with the bank guarantee obligation as at 1 July, with the result that Mr Sarker continued to proceed with the fit-out, and incur costs. The evidence is that WBH via Ms Timmins first raised concerns with Mr Sarker over the quality of the fit-out, the products in which he was trading and his signage the day he opened. WBH had been warned weeks before, by the Dhaka correspondence, over the products question. It appears not to have taken any active interest in the quality of the fit-out or signage until the matter was pressed by other tenants.
88 In a recent decision, White J of the Supreme Court rejected an unconscionable conduct claim made under the RL Act by a lessee against a lessor: see Vale v Rosychamp [2008] NSWSC 1373 (19 December 2008). The lessee claimed that the lessor had acted unconscionably in the way that it had dealt with the lessee over the lessee’s attempts to sell his business and obtain the grant by the lessor of a lease to an interested buyer. The lessor had refused to negotiate the lease with the interested buyer. The lessee alleged that the lessor wanted the building vacant to maximise the sale price of the site which was on the market. The lessor had concerns over the viability of the new tenant, and over potential disputes especially in the context of a proposed redevelopment of the site. Critical to the court’s approach was the fact that the incoming tenant was seeking a fresh lease as distinct from a mere assignment of the existing licence. Accordingly the requirements under the RL Act, s 39 relating to the giving of consent to assignments were not applicable.
89 The Court found that the lessor had done no more in its dealing with the incumbent lessee’s attempts to sell the business and put in place a new lessee than look to its own legitimate commercial interests and how they might be affected by acceding to the requests of the incumbent lessee.
90 In introducing its consideration of the lessee’s claim the Court referred to the statements of the Chief Justice in Attorney General of New South Wales v World Best Holdings [2005] NSWCA 261; (2005) 63 NSWLR 557 at [119]-[121] from which the reference to ‘moral obloquy’ in the grounds of appeal is drawn. See also Armstrong Jones Management Pty Ltd v Saies-Bond & Associates Pty Ltd (RLD) [2007] NSWADTAP 47 at [141]; and ACN 079 830 596 Pty Ltd (trading as Jolly Joe's Fish 'n' Chips) v Wallis Lake Fisherman's Co-operative Ltd [2007] NSWADT 297 at [49].
91 Spigelman CJ said:
121 … Even if the concept of unconscionability in s 62B of the Retail Leases Act is not confined by equitable doctrine, as the decisions under s 51AC of the Trade Practices Act suggest, restrain in decision-making remains appropriate. Unconscionability is a concept which requires a high level of moral obloquy. If it were to be applied as it were equivalent to what is ‘fair’ or ‘just’, it could transform commercial relationships … .’‘120 Unconscionability is a well-established but narrow principle in equitable doctrine. It has been applied over the centuries with considerable restraint and in a manner which is consistent with the maintenance of the basic principles of freedom of contract. It is not a principle of what ‘fairness’ or ‘justice’ or ‘good conscience’ requires in the particular circumstances of the case. …
92 In this case WBH engaged in conduct, especially from 25 July onwards, that could only be justified if it was successful in demonstrating that it had acted lawfully in moving to terminate the lease on 25 July. It based many of its actions in the period 31 July to 7 November on the proposition that it had a tenant who was wrongly in occupation. It was not successful in establishing that the circumstances as at 25 July were such that Mr Sarker had by his conduct repudiated the lease. Its similar submissions going to the period after 25 July said to found the later notices of 14 November and 12 February were also rejected. If Mr Sarker was, as the Tribunal found, a tenant lawfully in occupation at each of these points, many of WBH’s dealings with him were hostile and impeded his ability to operate his business. This case involves numerous items of negative conduct on the part of WBH that go well beyond looking to its legitimate self-interest. Ground 9 is rejected.
93 Ground 10 reagitates the permitted use question. For the reasons given, our view is that the Tribunal was correct in its conclusion that the specification ‘Asian grocery store’ did not preclude trade in Indian groceries and Halal meats.
94 As to ground 11, the Tribunal accepted that Mr Sarker had engaged in conduct that constituted breach of the lease, most importantly in relation to the quality of the fit-out works. However, it was not satisfied that the conduct was so egregious as to amount to grounds for repudiation in the circumstances. Given that conclusion, it would be odd to find that that conduct along with the other failures of performance (for example delayed payment of rent) reached a plane of ‘moral obloquy’ sufficient to warrant an unconscionable conduct finding.
Appeal against the Costs Order
95 In retail leases proceedings parties ordinarily bear their own costs. At the time of these proceedings, the applicable legislation (RL Act, s 77B read in conjunction with s 88 of the ADT Act, as it then stood) allowed the Tribunal to make an award of costs ‘but only if it is satisfied that there are special circumstances warranting an award of costs’.
96 The notice of appeal asserts:
‘ Costs
12. The Tribunal erred in law in finding that there were “ special circumstances warranting an award of costs ” within the meaning of section 88(1) of the Administrative Decisions Tribunal Act 1997 to the Respondent for the following reasons:
12.1 The Tribunal did not determine whether, on the proper construction of the lease from the Appellant to the Respondent, the permitted use of the premises as an “ Asian grocery store ” under clause 18.1 required the Respondent not to sell Indian groceries and Halal meats [see Ground of Appeal 4(a) and paragraph 110]. Not having determined this matter:
12.1.1 It was not open to the Tribunal to find that the Appellant’s real motive in evicting the Respondent was to put pressure on him to accept a lease in which he would be prohibited from selling Indian groceries [paragraph 101].
12.1.2 It was not open to the Tribunal to find that the Appellant had not acted in good faith in putting pressure on the Respondent to abandon the premises or to accept a restriction on his activities [paragraphs 71, 72, 101 and 102].
12.1.3 It was not open to the Tribunal to find that the Appellant, in filing and defending interlocutory applications before the Tribunal, had an “ ulterior and collateral purpose ” of stopping the Respondent from selling Indian groceries, “ this being a restraint on the scope of his trading that [the Appellant] could not otherwise impose ” [paragraphs 77, 96, 105-107 and 114(c)].
12.1.4 It was not open to the Tribunal to find that the Appellant filed and defended interlocutory applications in circumstances where the stance that it adopted was unmeritorious [paragraph 114(d)].
12.1.5 It was not open to the Tribunal to find that the Appellant had acted at different times and in different ways so as to prolong unreasonably the time taken to complete the proceedings [paragraph 114(b)].
12.2 The findings in sub-paragraphs 12.1.1 to 12.1.5 not being open to the Tribunal, it was not open to the Tribunal to find that there were special circumstances warranting an award of costs to the Respondent.
13. In finding that it would be “ seriously unfair ” not to award costs to the Respondent [paragraph 113], the Tribunal erred in law in failing to take into account any of the following improper conduct by the Respondent in the course of the proceedings:
13.1 Attempting to mislead the Tribunal by his affidavit evidence as to non-provision of a bank guarantee, in circumstances where timely provision of a bank guarantee was an essential term of the lease [principal judgment, paragraph 148].
13.2 Prevaricating in his oral evidence to the Tribunal [principal judgment, paragraph 147].
13.3 Falsely claiming fit out expenses, in circumstances where (i) provision by the Respondent of a fit out that satisfied the requirements of the lease and the Fit-Out Guide was an essential term of the lease; and (ii) where the Respondent claimed as damages his expenditure on fit out [principal judgment, paragraphs 150 and 266].
13.4 Failing to have vacated interlocutory orders of the Supreme Court of New South Wales made on 31 August 2003 that required the Appellant to give the Respondent possession of the premises, in circumstances where the Respondent had vacated the premises in March 2004 and did not claim an order for possession [principal judgment, paragraph 226].
13.5 Resisting discharge of the orders of the Supreme Court of New South Wales, in circumstances where the Respondent had vacated the premises in March 2004 and did not claim an order for possession [principal judgment, paragraph 226].
13.6 Maintaining a frivolous and vexatious claim for relief against forfeiture, in circumstances where the Respondent had vacated the premises in March 2004 and did not claim an order for possession [Second Further Amended Summons, paragraph 6; principal judgment, paragraph 226].
13.7 Making a groundless application for interest on costs [paragraph 17; Second Further Amended Summons, paragraph 10].
13.8 Refusing to provide particulars of unconscionable conduct, and then failing to provide complete particulars until the second day of the hearing [principal judgment, paragraph 249].
13.9 Refusing to provide particulars of repudiatory conduct, and then failing to provide complete particulars until the second day of the hearing.
13.11 Making a groundless claim for $69,000 for loss of profits that would have been earned after termination, which he abandoned on the third day of the hearing on the basis that the lease had been terminated before it could be ascertained whether the Respondent’s business would have been profitable [Applicant’s Summary of Damages, as amended on 4 October 2007; principal judgment, paragraph 242].13.10 Failing to comply with the Tribunal’s directions for the provision of evidence, which caused the vacation of the final hearing set down for 19 and 20 January 2004 and the consequent expenses of an interlocutory hearing on those days, where the Respondent was unsuccessful [paragraph 117].
97 It will be seen that a discretionary judgment is called for by s 88.
98 The first of the alleged errors itemised under Ground 12 revisits the permitted use issue. As we have explained, we consider that the Tribunal was satisfied that the words ‘Asian grocery store’ had a broad connotation that embraced Indian groceries and Halal meats. The sub-grounds which follow are dependent on the first alleged error.
99 In our view, it was open to the Tribunal to infer from the evidence that WBH’s conduct in the period 23 July to 31 July was connected to the protests and threats of legal action it had received from the neighbouring tenant, Dhaka. This is the basis, as we see it, for the conclusions expressed by the Tribunal as to the reason for WBH wishing to restrict Mr Sarker’s trade, the references to an ulterior or collateral purpose and its concerns as to its further conduct of proceedings against Mr Sarker.
100 As to Mr Sarker’s conduct in respect of the bank guarantee, the Tribunal dealt with this issue in its principal decision in a manner which we consider discloses no error of law. The Tribunal recognised that Mr Sarker’s evidence was of poor quality at a number of points. It noted the movements in his bank account such that at certain points he did not have funds sufficient to meet the guarantee, and the statements he made in the housing loan application that ultimately procured the funds. It was well aware that Mr Sarker’s evidence had many unsatisfactory aspects.
101 As to the fit-out issues, the Tribunal was critical of Mr Sarker on this point. It accepted that his original fit-out was inadequate and non-compliant, and that his assertions as to his level of expenditure were overstated and that the amount he spent on the fit-out fell well below the amount required under the lease. Nonetheless, we do not consider that he was disentitled from claiming expenses (to the extent they were incurred) in connection with fit-out as part of the measure of damages.
102 We do not regard the conduct of Mr Sarker in relation to the events later in 2004 in the Supreme Court, long after he vacated, as relevant to the issue of costs of the proceedings in this Tribunal.
103 We have noted the appellant’s references to particular items of alleged misconduct on the part of Mr Sarker in the way he conducted his case in the Tribunal (at paras 13.5 and following). The Tribunal, in this instance having decided that there were special circumstances sufficient to justify a global costs award in favour of the successful party did not proceed to sub-divide or discount the order, or make a partial order in favour of WBH, as it is now suggested should have occurred. We see nothing unusual or inappropriate in an outcome of that kind. The Tribunal acted within the wide bounds that surround the costs discretion.
Order
1. Appeal dismissed.
2. As to costs, the parties are to make any submissions according to the following timetable. Respondent to file and serve submissions within 28 days. Appellant to file and serve submissions within a further 28 days. Determination to be made without hearing, as permitted by s 76 of the Administrative Decisions Tribunal Act 1997, unless one or both of the parties applies for a hearing, and the Appeal Panel so decides.
3
19
3