Zeaiter Corporate Holdings Pty Ltd v Satchithanantham

[2008] NSWADT 165

CITATION:	Zeaiter Corporate Holdings Pty Ltd v Satchithanantham [2008] NSWADT 165
DIVISION:	Retail Leases Division
PARTIES:	APPLICANT/CROSS RESPONDENT Zeaiter Corporate Holdings Pty Ltd RESPONDENT/CROSS APPLICANT Hemalathasothy Ranjini Satchithanantham
FILE NUMBER:	055131
HEARING DATES:	5-6 September 2007, 10-11 October 2007
SUBMISSIONS CLOSED:	7 March 2008
DATE OF DECISION:	10 June 2008
BEFORE:	Chesterman M - ADCJ (Deputy President); Fagg N - (Advisory) Non Judicial Member ; Griffiths G - (Advisory) Non Judicial Member
CATCHWORDS:	Claim for compensation - misleading or deceptive conduct - - claim for declaration of rights, obligations and liabilities under a lease - claim for payment of money - claim for restoration of possession of premises - damages - unconscionability
MATTER FOR DECISION:	Principal matter
LEGISLATION CITED:	Administrative Decisions Tribunal Act 1997 Retail Leases Act 1994 Retail Leases Amendment Act 2005
CASES CITED:	Aspromonte Pty Ltd v Zagari [1999] NSWSC 831 Attorney General of New South Wales v World Best Holdings Ltd (2005) 63 NSWLR 557 Satchi & Satchi Australia Pty Ltd & Ors v Zeaiter Corporate Holdings Pty Ltd [2008] NSWSC 411 Satchithanantham v Zeaiter Corporate Holdings Pty Ltd (RLD) [2007] NSWADTAP 74
REPRESENTATION:	APPLICANT/CROSS RESPONDENT A R Vincent, barrister RESPONDENT/CROSS APPLICANT T Satchithanantham, agent
ORDERS:	1. The Respondent/Cross Applicant is to pay to the Applicant/Cross Respondent the sum of $70,187.78, comprising (a) a principal sum of $52,330.01 and (b) interest amounting to $17,857.77 2. The cross claim filed by the Respondent/Cross Applicant is dismissed 3. Any application for costs in these proceedings must be filed and served, with supporting submissions, within 28 days of the date of this decision. The opposing party must file and serve submissions in reply within a further 28 days. Unless reasons are advanced for a hearing to be conducted, the matter will be resolved ‘on the papers’, pursuant to section 76 of the Administrative Decisions Tribunal Act 1997.

REASONS FOR DECISION

Introduction

1 In this case, the principal issue requiring resolution was whether the rent due under a lease governed by the Retail Leases Act 1994 (hereafter ‘the RL Act’) was a figure initially quoted in a draft disclosure statement and a draft lease as the monthly rent, or the same figure specified in the executed and registered lease as the weekly rent.

2 On 8 February 2005, the Applicant/Cross Respondent, Zeaiter Corporate Holdings Pty Ltd (hereafter ‘Zeaiter’) commenced these proceedings in the Local Court at Bankstown. In June 2005, the Respondent/Cross Applicant, Mrs Hemalathasothy Ranjini Satchithanantham, filed grounds of defence and a notice of cross claim.

3 In this judgment, the Respondent/Cross Applicant will henceforth be referred to as ‘Mrs Satchi’. She and her husband, who appeared as her agent, agreed during the proceedings to this abbreviation of their surname.

4 The proceedings were transferred to the Local Court at Sydney during August 2005. On 15 September 2005, the Local Court ordered by consent that they be transferred to the Tribunal under section 75 of the RL Act. Although the normal practice of the Tribunal is to give separate file numbers to proceedings that comprise a claim and a cross claim, this was not done in the present case. The present proceedings have a single file number, 055131.

5 In separate Tribunal proceedings instituted on 24 February 2007 (file 075034), Mrs Satchi applied for an order that Zeaiter pay to her the damages sought in her cross claim, on the ground that it had filed a defence to the cross claim outside the time stipulated in directions. On 24 May 2007, in an ex tempore decision, the Tribunal ordered that this application be struck out, on the grounds that (a) Zeaiter’s lateness in filing its defence, for which it furnished an explanation, did not warrant the entry of summary judgment in Mrs Satchi’s favour and (b) the application merely duplicated proceedings – that is, the cross claim – that were already before the Tribunal by virtue of the Local Court’s order of 15 September 2005. This decision of the Tribunal was subsequently upheld by an Appeal Panel of the Tribunal (Satchithanantham v Zeaiter Corporate Holdings Pty Ltd (RLD) [2007] NSWADTAP 74) and by the Supreme Court (Satchi & Satchi Australia Pty Ltd & Ors v Zeaiter Corporate Holdings Pty Ltd [2008] NSWSC 411).

6 Because the cross claim by Mrs Satchi includes allegations of unconscionable conduct, the Tribunal is constituted in accordance with Clauses 1 and 4 of Part 3B of Schedule 2 of the Administrative Decisions Tribunal Act 1997 (‘the ADT Act’). It is constituted by a Deputy President who is a member of the Retail Leases Division, assisted by two other appropriately qualified members acting in an advisory capacity only.

7 Mr Satchi, who represented Mrs Satchi as her agent, has no formal legal training. He received some assistance from a solicitor, who during parts of the hearing was permitted by the Tribunal to sit beside him at the Bar table. The affidavits and written statements prepared by Mr Satchi, his cross-examination of opposing witnesses and his written submissions were, however, very lengthy and repetitive and dealt with a number of irrelevant matters. In reaching its conclusions, the Tribunal has endeavoured as far as possible to make allowances for his lack of legal training.

8 The disposal of these proceedings has been prolonged for other reasons as well. It proved necessary to call for written submissions because the four days of hearing were all required to complete the evidence. The time limits stipulated for written submissions were exceeded by both parties. Although the hearing concluded on 11 October 2007, the final submissions did not reach the Tribunal until 7 March 2008.

Zeaiter’s claim

9 The claim brought by Zeaiter, as finally formulated in written submissions by its counsel, Mr Vincent, was as follows.

10 Zeaiter, a property development company, was the owner of a property at 53 Station Street, Wentworthville. These proceedings concerned a retail shop lease of premises on the first floor (‘the Premises’). A formal lease of the Premises, executed by both parties and subsequently registered, identified Zeaiter as the lessor and Mrs Satchi as the lessee. The date of execution was stated to be 3 March 2004. This lease (hereafter ‘the Registered Lease’) was expressed to run from 15 January 2004 to 14 January 2007, with an option to renew for a further three years. The permitted use was defined as ‘retail clothing shop and purposes reasonably ancillary thereto’.

11 In the Registered Lease, the initial rent was stated as ‘$57,200.00 a year by monthly instalments of $4,766.67’. The lessee was also required to pay GST on the rent, making the total monthly figure $5,243.33. There was a provision for annual increase by reference to the CPI. The rent was payable monthly in advance as from the commencement date, 15 January 2004, but no payment would be required until 15 February 2004.

12 In addition, the lessee was liable during the first year to pay the sum of $5,092.00 for outgoings within four specified categories, her ‘share’ being ‘100% plus 3% or CPI annually (whichever greater)’. Outgoings were to be paid on the next rent day following a request from the lessor, so long as the lessor had paid the relevant outgoing or had received an assessment or account for payment of it.

13 The lessee was also required to pay a security deposit of $10,486.67 or provide a bank guarantee to this amount. This was pursuant to a clause (Part 19 of Annexure A), which concluded by stating that this amount was to be altered in line with the rent in order that it should be ‘the equivalent of two calendar months’ rent plus G.S.T. (if applicable)’.

14 Under clause 5.1.8 of Annexure B to the Registered Lease, the lessee was obliged to pay the lessor’s ‘reasonable legal costs’ relating to any ‘default’ by the lessee.

15 Under clauses 12.1 and 12.2 of Annexure B, the lessor was entitled to terminate it and repossess the Premises if rent or any other money payable by the lessee under the Lease was due and unpaid for 14 days. Under clause 12.7, these rights could be exercised without prejudice to any right of the lessor to recover damages.

16 In circumstances outlined below, the Registered Lease was terminated by repossession of the Premises on 12 July 2004.

17 By a lease commencing 1 December 2004, Zeaiter relet the Premises to new tenants, at the same rent as had been stipulated in the Registered Lease. Under this lease (‘the new lease’), the obligation to pay rent did not commence until 15 February 2005.

18 Zeaiter’s claim in these proceedings was for unpaid rent and outgoings up to the date of termination of the Registered Lease, damages for lost rent and for outgoings following termination, expenses incurred in reletting the Premises, and interest.

19 Mr Mark Zeaiter, the manager of Zeaiter, stated in an affidavit that, according to its records, the total amount of a number of payments made by Mrs Satchi on account of rent and outgoings was $17, 529.99. These payments were of varying amounts and were made between 27 January and 16 June 2004. In addition, she paid the amount of the security deposit ($10,486.67) by two instalments: $2,420.00 on 11 February 2004 and $8,066.67 on 17 February 2004. The aggregate of these two amounts ($17,529.99 and $10,486.67) is $28,016.66.

20 Mr Zeaiter claimed that the total amount due for rent and outgoings, or for damages in lieu, between 15 January 2004 and 15 February 2005 (the date on which rent became payable under the new lease) was $74,054.67, comprising $34,082.37 for unpaid rent and outgoings up to the date of termination and $39,972.30 for damages relating to the period thereafter. This total amount of $74,054.67 was made up of 13 instalments of the monthly rent of $5,243.33 (including GST) and four instalments of $1,311.19, together with a further amount of $646.61, on account of outgoings. He stated also that Zeaiter paid $6,292.00 as commission to an estate agent in finding new tenants for the Premises. The aggregate of these two amounts ($74,054.67 and $6,292.00) is $80, 346.67.

21 The total amount claimed by Zeaiter was accordingly $52,330.01 (the difference between $80,346.67 and $28,016.66) plus interest.

22 Mr Vincent also indicated in his submissions that Zeaiter wished to claim costs, but suggested that a decision on this matter might require a separate hearing.

Mrs Satchi’s claim

23 The principal ground on which Mrs Satchi opposed Zeaiter’s claim was a contention that, by virtue of events preceding the execution of the Registered Lease, the parties had already entered into a lease, binding upon both of them, under which the monthly rent was not $4,766.67 plus GST, but only $1,100 plus GST. In virtually all other respects, according to her, the terms of the lease between her and Zeaiter were those contained in the Registered Lease.

24 For these reasons, Mr Satchi argued, in his submissions on behalf of Mrs Satchi, that Zeaiter’s repossession of the Premises on 12 July 2004 was unlawful and that the Tribunal should make a declaration to this effect and should order that Zeaiter restore possession of the Premises to Mrs Satchi.

25 In addition, Mrs Satchi maintained by way of cross claim that Zeaiter, through its director Mr Zeaiter and an estate agent (Mr Tony Khoury) whom it had employed to find a tenant for the Premises, had engaged in conduct that was misleading or deceptive, within the meaning of sections 62C – 62E of the RLA, and in conduct that was unconscionable, within the meaning of section 62B(3).

26 In his submissions, Mr Satchi argued that by virtue of this conduct Zeaiter was liable to pay damages totalling $400,000.00 (which constitutes the upper limit of the Tribunal’s jurisdiction under the RL Act), together with interest and costs.

27 The factual matters on which these contentions were based will now be outlined.

Outline of evidence

28 In late 2003, Mr Tony Khoury, who was an employee of Ray White Real Estate Wentworthville (‘Ray White’), was endeavouring, on Zeaiter’s instructions, to find tenants for the Premises at 53 Station Street, Wentworthville, and also for separate premises on the ground floor of the same building (‘the ground floor premises’). There was no written agency agreement between Zeaiter and Ray White.

29 Mr Zeaiter told Mr Khoury that Zeaiter wanted to charge rent of about $57,000 plus GST for the Premises, together with outgoings estimated at about $1,273, including GST, per quarter. Mr Khoury displayed in the front window of Ray White’s office a ‘For Lease’ sign advertising the Premises. He said in cross-examination that this sign would have been destroyed three or four years ago and that no copy of it was available.

30 In or about November 2003, Mr Satchi contacted Mr Khoury and expressed interest in obtaining a lease of the Premises and possibly, at a later stage, the ground floor premises. It would appear that Mr Satchi intended to use the ground floor premises for trading and the Premises upstairs for storage.

31 It is useful to record here that although the lease eventually granted was to Mrs Satchi, she made it clear in her oral evidence that she took no active part in the transactions with which this case is concerned. She said that she signed all the documents that Mr Satchi asked her to sign and she did not play any role in the business conducted at the Premises.

32 According to Mr Khoury, he and Mr Satchi reached an agreement for a three- year lease of the Premises to Mrs Satchi, under which the rent, outgoings and security deposit payable were to be as ultimately set out in the Registered Lease. In particular, the annual rent was to be $57,200 plus GST, payable in advance by monthly instalments. It is significant that an annual rent of $57,200 is equivalent in amount to a weekly rent of $1,100.

33 According to Mr Khoury, they also agreed that Mrs Satchi would install a staircase linking the Premises with the ground floor premises and would remove it at the conclusion of the lease. They agreed further that the commencement date should be 15 January 2004, there should be a rent-free period of one month between 15 December 2003 and the commencement date, and no rent at all would be payable until 15 February 2004.

34 According to Mr Satchi, the agreement reached was in these terms, except (crucially) that (a) the rent was to be a monthly rent of $1,100 plus GST, (b) the security deposit, taking the form of a bank guarantee, should be the equivalent of two months’ rent and (c) the lessee should be two companies intended to be incorporated and to be owned by Mrs Satchi and her son. They were to be called Brightstar Properties Holdings Pty Ltd and Satchi & Satchi Australia Pty Ltd.

35 Mr Khoury then issued, on the letterhead of Ray White, a one-page document purporting to record in summary form the terms of this agreement (hereafter ‘the Agreement’).

36 The Agreement was ambiguous in its description both of the premises to be leased and (crucially) of the amounts agreed upon for rent and security deposit. It identified the premises as ’53 Station St Wentworthville’ without specifying which floor of this building was to be let. On the matters of rent and security deposit, it stated as follows:

Rental: $1,100 + GST

Rental Free: One month

Security: 2 Months (Bank Guarantee)

Rent Payment: Monthly pay in advance.

37 The Agreement identified as the lessee ‘Brightstar Properties & Holdings Australia’ and ‘Satchi & Satchi Australia’. It specified 15 December 2003 as the commencement date. It briefly recorded in uncontroversial terms the permitted use, the term, the option term, the formula for increasing the rent (‘CPI’) and the obligation of the lessee to pay the costs of insurance, ‘legal cost’ and the amounts for outgoings later set out in the Registered Lease. It was addressed to Mr Satchi, whose fax number appears on it.

38 In the documentary evidence, there are two versions of the Agreement. In substance, they do not differ from each other. One of them has the heading ‘LETTER OF INTREST’ (sic) and is dated 28 December 2003, though fax machine notations at the top show that it was faxed on 28 November 2003. The other version is dated 1 December 2003 and does not have this heading.

39 On 28 November 2003, Mr Khoury faxed the former version of the Agreement to Mr Satchi. On 1 December 2003 he sent a copy of the Agreement (apparently the latter version) to Mr Tim Olliffe, of Olliffe & Co, solicitors, who acted for Zeaiter on this lease and on a number of other property transactions at that time. He also sent it to Ms Christine Karthikeyan, of Karthikeyan Solicitors, who acted for Mr and Mrs Satchi.

40 Mr Satchi alleged that on 28 November 2003, following these negotiations with Mr Khoury, he paid a deposit of $500 to Ray White. According to Ray White’s records, however, a cheque for this sum was not received until 27 January 2004. This cheque was not met, but a second payment of $500 was made the following day.

41 Mr Khoury alleged that, pursuant to instructions from Mr Zeaiter, he gave the keys to the Premises to Mr or Mrs Satchi on or about 15 December 2003. Mr Satchi testified however that as at 29 December 2003 a ‘previous tenant’ of the Premises was still in occupation. He said also that between 4 December 2003 and 5 January 2004 he was overseas. Either earlier or during this time out of Australia, he arranged for two containers of clothing goods to be sent to the Premises from Singapore, for the purposes of the business to be conducted there and in the ground floor premises.

42 On 15 December 2003 Mr Khoury faxed a letter to Olliffe & Co confirming that the lessee of ‘53 Station Street Wentworthville’ was to be Mrs Satchi. It is not clear what prompted the sending of this letter at this time.

43 Also on 15 December 2003, Olliffe & Co sent to Karthikeyan Solicitors a disclosure statement and an unexecuted memorandum of lease (‘the Draft Lease’) relating to the Premises, together with a memorandum of their costs and disbursements. These were stated to be $1,319.70, including an amount of $218.05 for stamp duty.

44 The covering letter contained the following passage:

As the Disclosure Statement is submitted herewith the Lease will not be entered into until the expiration of seven days of receipt by you of the documents. Unless we hear to the contrary you shall be deemed to have received the documents on 17th December 2003.

Insofar as it needs to be said, no agreement shall exist until a formal Lease is signed by all parties and the relevant costs and disbursements paid.

45 Relevantly, both the disclosure statement and the Draft Lease specified the rent as $13,200.00 per annum ($1,100.00 per month) plus GST, payable by monthly instalments in advance. The disclosure statement identified the gross annual rent as $14,520.00 and the gross monthly rent as $1,210.00. The Draft Lease provided for a security deposit or bank guarantee in the amount of $2,420.00, representing two months’ rent plus GST.

46 In both of these documents, Mrs Satchi was named as the lessee and the commencement date was stated to be 15 December 2003. The disclosure statement indicated that there was to be a rent-free period of one month, with payment of rent to commence on 15th January 2004. The Draft Lease stated that ‘payment of rental shall not commence until 15th January 2004’.

47 Mr Olliffe, who gave evidence in these proceedings, said that he had given to Ms Aileen Bailey, a clerk employed by Olliffe & Co, the copy of the Agreement that he had received from Mr Khoury and had instructed her to prepare the Draft Lease. He did not review the Draft Lease before it was sent out. The file maintained on this matter by Olliffe & Co contained a copy of a lease between other parties, with handwritten amendments changing its text to that of the Draft Lease. Mr Olliffe testified that the handwriting was not his own and that he believed that it may have been Ms Bailey’s handwriting.

48 On 29 December 2003, Karthikeyan Solicitors faxed a letter, marked ‘urgent’, to Olliffe & Co, acknowledging receipt of the letter of 15 December 2003 with enclosures. They stated that Mr Satchi was overseas, that he would return at the end of the month, that their client intended to enter into the lease ‘from January 2004’ and that as soon as they had further instructions they would forward the executed lease and ‘other related documents’.

49 On 6 January 2004, Mrs Satchi executed the Draft Lease at the office of Karthikeyan Solicitors. As well as signing this document, she initialled some amendments to the spelling of her name. Ms Karthikeyan had explained its terms to her and to Mr Satchi and also signed a certificate under section 16 of the RL Act forming part of the Draft Lease.

50 On 7 January 2004, Karthikeyan Solicitors sent to Olliffe & Co the Draft Lease together with cheques drawn on a joint account of Mr and Mrs Satchi for the security deposit ($2,420.00) and Olliffe & Co’s costs and disbursements ($1,319.70). In a covering letter, they requested that in the Draft Lease the commencement and termination dates be amended to 15 January 2004 and 14 January 2007 respectively and that the date on which rental payments were to commence be amended to 15 February 2004. They requested also that upon completion, Olliffe & Co should forward to them a copy of the registered lease for their records.

51 In a reply dated 13 January 2004, Olliffe & Co stated that ‘the writer’ (Mr Olliffe) had returned from holidays on the previous day and that Zeaiter was prepared to accept the requested amendments provided that Mrs Satchi accepted responsibility for maintaining and servicing the air conditioning equipment (fair wear and tear excepted).

52 In a reply dated 14 January 2004, Karthikeyan Solicitors stated that Mrs Satchi was prepared to accept this responsibility.

53 According to Mr Satchi, occupation of the Premises pursuant to the Draft Lease commenced on 15 January 2004. Annexed to an affidavit of Mr Satchi was an invoice dated 16 January 2004 from locksmiths, bearing a signature which Mr Satchi identified as his. It recorded a fee for re-keying locks at 53 Station Street, Wentworthville.

54 At some time between 13 and 22 January 2004, Mr Olliffe became aware that the rent and the amount of the security deposit were misstated in the disclosure statement and the Draft Lease. In his oral evidence, he said that he could not remember how he came to realise this, but that it may have been in the course of a telephone conversation with Mr Zeaiter. He said that during this period he was acting for Zeaiter in a large number of property transactions and that Mr Zeaiter probably pointed out this error to him during a conversation in which they were reviewing these transactions. Neither Mr Zeaiter nor Mr Khoury could furnish any evidence indicating or suggesting how or when this error was noticed and drawn to Mr Olliffe’s attention.

55 In a letter to Karthikeyan Solicitors dated 22 January 2004, Olliffe & Co wrote:

We refer to the above matter and enclose the amended document.

The rental, we are informed, is $1,100.00 per week, plus G.S.T. Suitable apologies for the error.

We will resolve the stamp duty and fees later.

56 It would appear – though the evidence is not entirely clear on this point – that ‘the amended document’ contained in this letter was a copy of the Draft Lease (bearing Mrs Satchi’s signatures and initials), to which Mr Olliffe had made some handwritten amendments and notations. These were as follows: altering the dates of commencement, termination, and first rent payment in accordance with the earlier request by Karthikeyan Solicitors; altering the dates of any renewal of the lease; and increasing the amounts for rent and for the security deposit so as to correspond with what subsequently appeared in the Registered Lease. At the bottom of one page, Mr Olliffe had also written ‘fix bond’ and fix commencement date’.

57 Ms Karthikeyan, who was called as a witness by Mrs Satchi, testified that she notified both Mrs Satchi and Mr Satchi about this letter from Olliffe & Co indicating that the rent was to be substantially greater than was shown in the Draft Lease.

58 According to Mr Satchi, Ms Karthikeyan notified him on 23 January 2004 of the contents of this letter and told him that he should ‘sort out with the agent’ the matter of the increase in rent.

59 Mr Satchi alleged further that on 24 January 2004, during a conversation with Mr Khoury at the Premises, he claimed that this increase in the rent must be a mistake and that he could not pay it because he had spent a great deal of money on renovating the Premises and on arranging for the delivery of stock from Singapore.

60 According to Mr Satchi, Mr Khoury’s response was to say that, in order to comply with ‘instructions from the landlord’, he had to pay the extra amounts of rent and security deposit, and that if he did not do so within two days Mr Khoury would lock him out of the Premises.

61 In consequence, Mr Satchi claimed, he raised no further objection, either directly or through Karthikeyan Solicitors, to the increase in the rent and he did not mention to Ms Karthikeyan the pressure allegedly put upon him by Mr Khoury.

62 During examination in chief and cross-examination, Mr Khoury said that he did not recall any such conversation with Mr Satchi.

63 During cross-examination, Mr Satchi was asked how much he had spent on renovating the Premises between the end of December 2003 (being the time when, according to him, he first had access to them) and 24 January 2004. He gave various amounts, ranging between $35,000 and $50,000, before finally settling on the lower of these figures. He was asked whether he had any invoices or other documents that might substantiate this alleged expenditure. He said that he did not, because these documents were in the Premises when the lockout occurred in July 2004 and he did not have time to retrieve them.

64 Mr Ian Grey, whose role in this case is outlined below, testified that on visiting the Premises on a date in February 2004 he observed that there was ‘a lot of renovation’ going on, including painting the roof, laying carpet and repairing the air conditioning. He said that he did not know, however, what renovation work, if any, took place during January 2004.

65 During this period, negotiations were also proceeding for a lease of the ground floor premises from Zeaiter to Satchi & Satchi Pty Ltd. This lease, which was for three years commencing on 1 March 2004, stipulated an annual rent of $41,600, payable monthly in advance. It was otherwise in substantially the same terms as the Registered Lease. It was executed on or about 4 April 2004. Some of the correspondence concerning the lease of the Premises – notably a letter from Olliffe & Co to Ray White dated 25 February 2004 – related to this transaction as well.

66 This lease of the ground floor premises is mentioned here because during cross-examination Mr Satchi referred to it while seeking to explain why he did not object to the increase in the rent for the Premises. He alleged, though he had not done so in his written evidence, that he understood Mr Khoury to have indicated on Zeaiter’s behalf that the increased rent of $1,100 per week (plus GST) would relate to both the Premises and the ground floor premises. Mr Khoury denied having said this and Mr Zeaiter denied having ever instructed Mr Khoury to indicate that Zeaiter would agree to this arrangement.

67 On or about 27 January 2004, Mr Satchi paid to Ray White the sum of $4,743.33. Together with the payment of $500 referred to at [40] above, this was sufficient to cover the monthly rent stipulated in the Draft Lease as amended by Mr Olliffe – that is, $5,243.33.

68 Ms Karthikeyan testified that between 22 January and 2 February 2004 she obtained further instructions regarding the lease from Mr and Mrs Satchi, but these did not include an instruction to query the increase in the rent. They asked her instead to request Olliffe & Co for deferral once more of the commencement date and the date of first payment of rent and for ‘both proprietors’ (meaning apparently two business names that had recently been registered by them) to be added as lessees. Karthikeyan Solicitors put these requests to Olliffe & Co in a letter dated 2 February 2004.

69 In a reply dated 4 February 2004, Olliffe & Co rejected these requests except the request to add ‘an extra proprietor’. They also enclosed a further clause relating to the air conditioning.

70 In a letter dated 9 February 2004 to Olliffe & Co, Karthikeyan Solicitors indicated that their client now wished to have the lease granted to a company, which was then being incorporated. They also claimed that the amount due for the security deposit should be $9,533.33, on the ground that since GST was claimable every three months it ‘should not be added on to the Bond’.

71 In their reply dated 12 February 2004, Olliffe & Co enclosed an amended page of the lease, showing the names of guarantors, and asked Karthikeyan Solicitors to make other amendments so as to substitute the proposed company for Mrs Satchi as the lessee.

72 On 13 February 2004, Satchi & Satchi Australia Pty Ltd was incorporated.

73 In a letter to Olliffe & Co bearing this date, Karthikeyan Solicitors advised that Mrs Satchi was the sole director and shareholder of this company and that accordingly the identity of the guarantor would have to be changed. The letter added that if necessary they would arrange for a fresh set of documents to be collected from Olliffe & Co for execution by their client. Later the same day, Karthikeyan Solicitors faxed a copy of the certificate of incorporation to Olliffe & Co.

74 On 14 February 2004, according to the document itself, Mrs Satchi signed the lessee’s disclosure statement which ultimately accompanied the Registered Lease.

75 On or about 14 February 2004, Mr Satchi gave to Ray White a cheque for $8,066.67 towards the security deposit. Together with the $2,420.00 already paid (see [50] above), this constituted a payment of the security deposit stipulated in the Draft Lease as amended by Mr Olliffe – that is, $10,486.67.

76 Ms Karthikeyan testified that on 17 February 2004, during a conversation in which she asked Mr Satchi about the fresh set of documents that would have to be collected, he told her that he and his wife no longer required her services in this matter.

77 On 18 February 2004, Olliffe & Co sent to the Respondent, c/- Karthikeyan Solicitors, a second memorandum of costs and disbursements. It recorded the receipt of the earlier payment of $1,319.70 and called for payment of an extra amount of $919.60, reflecting the fact (as Mr Olliffe explained) that extra stamp duty was chargeable and a larger amount for professional costs was appropriate on account of the increased rent due under the lease.

78 On 25 February 2004, having discovered that Karthikeyan Solicitors were no longer acting for Mrs Satchi, Olliffe and Co sent to Ray White a copy of the lease including new clauses relating to the proposed staircase and to the air conditioning. It would appear that a copy of the second memorandum of costs and disbursements was also enclosed. A covering letter included the following statement: ‘Insofar as it needs to be said, no agreement shall exist until formal lease documents are signed by all parties and the relevant costs and disbursements paid.’

79 The lease document sent with this letter was the document that ultimately became the Registered Lease. It specified the increased amounts for rent and security deposit and identified Mrs Satchi as the lessee. Mr Olliffe could not recall the precise circumstances in which he became aware that, despite recent indications from Karthikeyan Solicitors that the intended lessee was to be Satchi & Satchi Australia Pty Ltd, Mr and Mrs Satchi finally decided that it should be Mrs Satchi.

80 On or about 3 March 2004, Mrs Satchi executed the lease in this form. Mr Satchi witnessed her signature. In an affidavit, Mrs Satchi alleged that he forced her to sign and that she believed this to be because he was under pressure from Zeaiter to accept the increased rent. In cross-examination, she said however that she signed all documents of relevance to these proceedings, including her affidavit, because her husband required her to do so.

81 On 3 March 2004, having received the lease bearing Mrs Satchi’s signature, Olliffe & Co wrote to Zeaiter requesting that a representative call at their office to approve and execute it. On or about this date, Mr Tony Zeaiter, a director of Zeaiter, complied with this request.

82 Olliffe & Co then arranged for stamping of the lease, obtained the consent of Westpac Bank (as mortgagee) to its being granted and procured registration. This took place on 14 May 2004. The form of consent by Westpac required a further signature by Mrs Satchi, which was obtained at Mr Olliffe’s request by Mr Khoury during late April or early May 2004.

83 On 24 May 2004, Mr Olliffe sent a copy of the Registered Lease by post to Mr Satchi.

84 Although, as mentioned earlier, Mr Satchi had imported a quantity of clothing from Singapore for the retail business contemplated under the two leases at 53 Station Street, Wentworthville, this business did not commence trading until late May 2004. By this time, Mr Satchi had reached an arrangement with a gentleman named Ian Grey, with whom he had conducted business dealings for some months, to take over the business. A contract of sale of the business from Mrs Satchi to a company owned by Mr Grey was signed on 3 June 2004.

85 This contract contained a clause by which Mrs Satchi agreed to grant a sublease of the Premises to this company, ‘in accordance with the current lease, which the vendor currently holds over the premises’. It also provided for Mrs Satchi to pay the rent on the Premises up to 31 May 2004, following which Mr Grey’s company would ‘pay the rent in advance of $5,243.33 per month effective from 1st June 2004 until remaining period of the lease’.

86 Mr Grey, who was called as a witness by Mrs Satchi, said that he never saw a copy of the Registered Lease. He made the observation that the amount of rent payable under it was ‘outrageously high’, although it could be termed a ‘commercial rent’. He said that because of the circumstances of his dealings with Mr Satchi he had no choice but to agree to buy the business (which he expected to be profitable) and to take responsibility for the obligations under the Lease. He said also that no formal sublease was ever entered into and that apart from one cheque for $4,000, given to Ray White at about the time when Zeaiter retook possession of the Premises, he made no payment on account of rent due on the Premises.

87 Mr Khoury testified that between an unspecified time in early 2004 and mid-June 2004 he frequently advised Mr Satchi by telephone that the rent was in arrears under the Registered Lease and also the lease of the ground floor premises. Mr Satchi indicated on each occasion that the arrears would soon be paid.

88 On or about 16 June 2004, Mr Khoury told Mr Zeaiter that according to his calculations the shortfall in rent and outgoings under the Registered Lease was about $10,000 and that the rent for he ground floor premises was also in arrears. Mr Zeaiter agreed with Mr Khoury’s suggestion that he should threaten eviction under both leases unless the arrears were paid. Mr Khoury then conveyed this threat to Mr Satchi (with Mr Grey being present). Mr Satchi said that when the sale of two specified properties was completed at the end of June funds would be available to pay the arrears. When Mr Khoury relayed this information to Mr Zeaiter, he was instructed to allow the tenants until the end of June to pay the arrears.

89 It appears from the ledger maintained by Ray White that on or about 16 June 2004 a rent payment of $1,800.00 was made. Despite further communications (according to Mr Khoury) between him and Mr Satchi, no more payments of rent were made until after the lockout.

90 This account by Mr Khoury of conversations between him and Mr Satchi was not disputed by Mr Satchi.

91 On 5 July 2004, on Mr Zeaiter’s instructions, Mr Khoury gave to Mr Satchi two notices threatening repossession of the Premises and the ground floor premises respectively unless the arrears of rent were paid by 5 pm on 12 July 2004. The notice relating to the Premises was incorrect in being addressed to ‘Satchi & Satchi Australia’ and in referring to eviction procedures against ‘your company’. Both notices were incorrectly dated 7 September 2004.

92 At some time after 5 pm on 12 July 2004, acting on instructions from Mr Zeaiter, Mr Khoury accepted from Mr Satchi a cheque for $4,000 for rent on the ground floor premises, but changed the locks on the Premises upstairs.

93 In a letter to Ray White dated 16 July 2004, Mr Satchi said that as a result of the lockout the business conducted on the ground floor was in difficulties. He promised to pay the arrears due on the Premises, but although the rent for the ground floor premises was kept up to date, no further payments were made in respect of the Registered Lease.

94 By a letter dated 10 August 2004, Olliffe & Co advised Mrs Satchi that as at 3 August she was in arrears of rent under the Registered Lease in the sum of $13,929.00 and advised that if this sum was not paid within 14 days, legal proceedings would be commenced without further notice. This letter prompted a response dated 23 August 2004 from Mrs Satchi, denying liability. On 3 September 2004, Olliffe & Co replied, repeating the demand for arrears of rent.

95 During September 2004, Mr Khoury, pursuant to instructions from Mr Zeaiter, allowed Mr Satchi to have access to the Premises, whereupon Mr Satchi removed a quantity of goods that had been there since the lockout on 12 July.

96 As mentioned above, Zeaiter granted a lease of the Premises, commencing on 1 December 2004, to new tenants, at the same rent as had been stipulated in the Registered Lease. Under this lease (‘the new lease’), the obligation to pay rent did not commence until 15 February 2005.

97 Extracts from a ledger maintained by Ray White provided support for Zeaiter’s claim (see [19 – 20] above) that up to the date of the lockout Mrs Satchi was required to pay a total of $34,082.36 for rent and outgoings under the Registered Lease, but had paid only $28,016.66. The last payment to be made before the lockout was a payment of $1,800 on 16 June 2004.

98 The evidence tendered by Mrs Satchi included allegations that she had made payments not recorded on the ledger relating to the Registered Lease. But it was apparent from examining a copy of the ledger maintained by Ray White for the lease of the ground floor premises that some at least of these additional payments related to this lease, not to the Registered Lease. In other parts of this evidence, there were allegations by Mr Satchi that the total rent that had been paid for the Premises at the time of the lockout was as alleged by Mr Zeaiter, but that this was more than sufficient because rent was only payable at the rate of $1,100 per month plus GST, as initially stated in the Draft Lease.

Assessment of the evidence

99 The evidence relating to many of the factual matters of relevance in this case was in documentary form. The documents contain ambiguous phrases and apparent errors (notably the document that has been labelled ‘the Agreement’). Those tendered on behalf of Mrs Satchi were presented to the Tribunal in a disorderly fashion. But this documentary evidence must provide the basis for many of the findings that the Tribunal must make.

100 On three matters of major importance, the Tribunal’s findings require a choice between conflicting accounts given by two key witnesses, Mr Khoury and Mr Satchi. These are as follows: (a) what rent for the Premises was agreed upon between Mr Khoury and Mr Satchi in their negotiations during November 2003; (b) whether Mr Khoury, at his meeting with Mr Satchi on or about 23 January 2004, conveyed a threat of eviction if Mr Satchi did not signify agreement to a weekly rent of $1,100 plus GST (hereafter ‘the increased rent’) and pay more or less immediately the increased amount required for the security deposit; and (c) whether at or soon after this meeting Mr Khoury indicated to Mr Satchi that Zeaiter treated, or was prepared to treat, the increased rent as covering the ground floor premises as well as the Premises upstairs.

101 The Tribunal must accordingly assess the credibility of each of these witnesses.

102 Mr Khoury’s recollection of the relevant conversations with Mr Satchi was incomplete (as he freely admitted) and not particularly reliable. If he had maintained a diary or some other written note of the contents of these conversations, he might well have been able to assist the Tribunal further. The Tribunal has no reason to believe, however, that he did not try to be truthful in testifying.

103 The Tribunal has distinctly stronger grounds for doubting both Mr Satchi’s veracity and his capacity to remember accurately the relevant conversations. This is chiefly for a combination of three reasons, namely, that his account of key events was highly implausible, that there were significant inconsistencies between different parts of his testimony and that in cross-examination he appeared more than once to want to avoid answering questions that sought to expose these inconsistencies.

104 His explanation for not questioning, either directly or through Karthikeyan Solicitors, the statement in Olliffe & Co’s letter of 22 January 2004 that the quoted rent was a weekly rent, not a monthly rent, was that he was fearful that Mr Khoury might put into effect an alleged threat of eviction. But his attempt to substantiate his vulnerability to this alleged threat by claiming to have spent substantial sums on renovation led him into (a) asserting at different times that widely differing amounts (ranging from $35,000 to $50,000) had been spent on renovation within a period of only three weeks (spanning the New Year holiday) since the day when (on his account) the previous tenant vacated the Premises and (b) providing, under pressure, an entirely unsatisfactory explanation for his failure to produce any invoices or other documents evidencing this expenditure. This claim was improbable for the further reason that $35,000 was an inordinate amount to spend on renovating premises that, on his own account, were intended for storage only.

105 The Tribunal also finds it hard to believe that if this threat had been made Mr Satchi, who throughout this litigation has endeavoured vigorously to enforce what he believes to be his entitlements and those of his wife, would have failed to mention it to Ms Karthikeyan. In fact, despite his persistent assertion that in November 2003 he and Mr Khoury had agreed that the rent should be $110 per month plus GST, he did not even suggest to her that Zeaiter might be bound to accept this rent, on the ground that it had been stipulated in a Draft Lease which Zeaiter’s solicitors had prepared and Mrs Satchi had signed. In the period between Ms Kathikeyan’s receipt of the letter of 22 January 2004 from Olliffe & Co and her reply dated 2 February 2004, Mr Satchi gave her instructions on a number of matters relating to the lease. But he did not even mention to her either (a) the alleged threat by Mr Khoury or (b) any belief on his part that the rent initially agreed upon between him and Mr Khoury was $110 per month plus GST.

106 The following aspects of his subsequent conduct suggest strongly that this initially agreed rent was in fact $110 per week (plus GST): (a) his making payments, on 27 January and 14 February 2004 respectively, that would bring the amounts already paid for rent and security deposit up to the level required under the Registered Lease; and (b) his indication to Mr Grey, as recorded in the agreement dated 3 June 2004 for the sale of the business conducted in the Premises, that the rent due was as stated in the Registered Lease.

107 Finally, it is noteworthy that his allegation, during cross-examination, that he understood Mr Khoury to have indicated on Zeaiter’s behalf that the increased rent would be sufficient for both the Premises and the ground floor premises was (a) inconsistent with his allegation of a threat of eviction, (b) also not mentioned by him to Ms Karthikeyan and (c) absent from his written evidence filed before the hearing.

108 For these reasons, the Tribunal does not accept parts of Mr Satchi’s evidence and prefers the evidence of Mr Khoury to that of Mr Satchi in those circumstances where a conflict between them exists.

109 The Tribunal accordingly finds as follows: (a) the rent for the Premises agreed upon between Mr Satchi and Mr Khoury in their negotiations during November 2003 was $110 per week plus GST; (b) it is not established that any significant amount was spent by Mr or Mrs Satchi on renovating the Premises before Mr Satchi was told, on 23 or 24 January 2004, of the increased rent; (c) Mr Khoury did not, on or about 24 January 2004, convey to Mr Satchi a threat of eviction if the extra amounts due for rent and security deposit were not paid within a short period of time; and (d) Mr Khoury did not ever indicate to Mr Satchi that a increased rent of $1,100 per week (plus GST) would be accepted by Zeaiter as sufficient for both the Premises and the ground floor premises.

110 The Tribunal further finds that Mr Khoury, in negotiating a rent of $110 per week (plus GST) during November 2003, was acting in accordance with instructions from Zeaiter.

The Tribunal’s conclusions

111 The Tribunal has given consideration to two lines of argument which, if sustained, would provide support for contentions advanced by Mrs Satchi in her defence and her cross claim. Neither of them was mentioned in the written submissions filed by her.

112 First, the Tribunal has considered whether she might be able to claim that on or before 15 January 2004 Zeaiter became legally bound by the terms of the Draft Lease, including the rent stated in it, by virtue of the following facts: (a) that on 15 December 2003, Olliffe & Co sent it on Zeaiter’s behalf to Mrs Satchi’s solicitors, with a request that she execute it; (b) that she executed it on 6 January 2004 and her solicitors returned it to Olliffe & Co the next day; and (c) that she entered into possession of the Premises on or before 15 January 2004.

113 Section 8(1) of the RL Act is relevant here. It states: ‘a retail shop lease is considered to have been entered into when a person enters into possession of the retail shop as lessee under the lease or begins to pay rent as lessee under the lease (whichever happens first).’ In decisions interpreting this provision (see, for example, Aspromonte Pty Ltd v Zagari [1999] NSWSC 831 at [52]) it has been held that a pre-requisite of its operation is that there must be ‘consensus’ as to the terms of the lease.

114 In the present case, however, there was no ‘consensus’ that the rent should be as stated in the Draft Lease. As just indicated, the Tribunal has found that both parties to the prospective lease had agreed upon the larger rent ultimately stated in the Registered Lease. Even if, contrary to this finding, Mrs Satchi believed that the intended rent was as stated in the Draft Lease, this was not Zeaiter’s intention. A further reason why no such consensus should be found to have existed is that Olliffe & Co stipulated, in their letter of 15 December 2003 forwarding the Draft Lease to Karthikeyan Solicitors, that ‘no agreement shall exist until a formal Lease is signed by all parties …’

115 Secondly, the Tribunal has given consideration to whether an estoppel might be held to have arisen, precluding Zeaiter from denying that on or about 7 January 2004 an agreement to lease was created, embodying the terms of the Draft Lease. The grounds for such a claim would be that Mrs Satchi, reasonably relying on the representations set out in the Draft Lease, suffered significant detriment through spending a substantial sum of money on renovating the Premises for the purposes of a lease which she believed at the time to be affordable by her.

116 If the Tribunal thought Mr Satchi’s evidence on these matters to be credible, it might be inclined to accept this line of reasoning and conclude that an estoppel arose (though it would have to consider the significance of the evidence that on a number of matters not involving the rent to be paid the parties did not reach final agreement until Mrs Satchi executed the Registered Lease on 3 March 2004). But in its opinion, any reliance on the representation as to rent contained in the Draft Lease could not be held to have been reasonable on account of its finding that a distinctly higher rent was agreed upon in the negotiations during November 2003. Furthermore, the Tribunal has found that there was no credible evidence of substantial amounts being spent on renovation of the Premises during the relevant period.

117 The Tribunal cannot discern, in the lengthy, repetitive and often obscure submissions filed on Mrs Satchi’s behalf, any other line of argument that might provide grounds for concluding that the rent lawfully due under her lease of the Premises was as stated in the Draft Lease, not the Registered Lease.

118 Equally, the Tribunal cannot discern any grounds for ruling that the conduct of Zeaiter or of any of its agents was ‘unconscionable’ within the meaning of section 62B of the RL Act. It will be apparent from the foregoing account of events that the documentation prepared by Mr Khoury was most unsatisfactory, particularly on account of his crucial failure to indicate in the Agreement that the stated rent was a weekly, not a monthly, rent. It may be argued that since the Agreement was ambiguous as to the agreed rent, Olliffe & Co should have clarified this question before sending the Draft Lease to Karthikeyan Solicitors. But it is doubtful whether the actions of these agents may be attributed to Zeaiter for the purposes of determining whether Zeaiter’s conduct was ‘unconscionable’. More importantly, even if such attribution could be made, nothing done by Mr Khoury or by Olliffe & Co remotely qualifies as unconscionable conduct. None of their actions could by any stretch of the imagination be described as involving ‘a high degree of moral obloquy’ or as ‘highly unethical’ (see Attorney General of New South Wales v World Best Holdings Ltd (2005) 63 NSWLR 557 at 583).

119 The same applies to the conduct of Zeaiter itself, which for present purposes may be equated with the conduct of Mr Zeaiter. The evidence establishes that in or before November 2003 he instructed Mr Khoury to lease the Premises for a weekly rent of $110 plus GST. He left the later handling of the transaction to Mr Khoury and to Olliffe & Co. His only relevant intervention was to point out to Mr Olliffe on or soon before 22 January 2004 that this was in fact the required rent.

120 As to Mrs Satchi’s reliance, in her cross claim, on the ‘misleading or deceptive conduct’ provisions (sections 62C – 62E) of the RL Act, it is sufficient to point out that, as argued by Mr Vincent in his submissions, these provisions are not applicable to conduct occurring before 1 January 2006, the date of commencement of the Retail Leases Amendment Act 2005. This is made clear in clause 33 of Schedule 3 of the RL Act.

121 The Tribunal accepts Zeaiter’s evidence showing that at the date of the lockout, 12 July 2004, the total amount that had become payable for rent and outgoings under the Registered Lease was $34,082.37, but that the payments actually made (including those for the security deposit) amounted only to $28,016.66. Since the last payment made was a payment of $1,800 on or about 16 June 2004, it is apparent that the condition stated for termination of the lease under clauses 12.1 and 12.2 of Annexure B (arrears over a period of not less than 14 days) had been satisfied. Although the notices of intended eviction served by Mr Khoury were defective in more than one respect (see [91] above), their meaning was clear enough.

122 The Tribunal accordingly holds that Zeaiter’s repossession of the Premises on 12 July 2004 was valid according to the terms of the Registered Lease.

123 The Tribunal also accepts the evidence showing that Zeaiter did not receive rent under the new lease until 15 February 2005. There being no ground put forward for holding that it failed after the lockout to take reasonable steps to find a new tenant, it is entitled, as claimed in reliance on clause 12.7 of Annexure B, to damages totalling $39,972.30 for lost rent and outgoings between 12 July 2004 and 15 February 2005.

124 Finally, the Tribunal accepts Zeaiter’s claim, pursuant to clause 5.1.8 of Annexure B to the Registered Lease, for the amount of commission ($6,292.00) paid to its estate agent for reletting the Premises.

125 The total of these three amounts owed to Zeaiter ($34,082.37, $39,972.30 and $6,292.00) is $80,346.67. The payments made by or on behalf of Mrs Satchi came to $28,016.66.

126 The Tribunal accordingly upholds Zeaiter’s claim for the amount of the shortfall, that is, $52,330.01.

127 Zeaiter also sought an order that interest be paid on any sum awarded to it. The RL Act provides in section 72A(1) that the Tribunal, when making an order for the payment of money in a retail tenancy claim, may also order that interest be paid ‘for the whole or any part of the period between when the cause of action arose and when the order takes effect’. The rate of interest must not exceed that payable on a judgment debt of the District Court. In recent years, this rate has not exceeded 9% per annum. This is the rate that the Tribunal regards as appropriate to the present proceedings.

128 Mrs Satchi’s obligation to pay the principal sum found to be owing ($52,330.01) accrued over the period of twelve months between 15 February 2004 (the date when rent became payable under the Registered Lease) and 15 February 2005 (the date when rent became payable under the new lease). To take account of this factor, the rate of interest that the Tribunal adopts for this period is 4.5%. The amount of interest payable is $2,354.85.

129 Between 15 February 2005 and the date of this decision (a period of 3 years and 3.5 months), the appropriate rate per annum is 9%. The amount of interest payable is $15,502.92.

130 The total amount of interest payable to date is therefore $17,857.77.

131 The application for costs made by Mr Vincent on Zeaiter’s behalf will be dealt with separately, as indicated in the Tribunal’s orders.

Orders

The Tribunal orders as follows:

1. The Respondent/Cross Applicant is to pay to the Applicant/Cross Respondent the sum of $70,187.78, comprising (a) a principal sum of $52,330.01 and (b) interest amounting to $17,857.77.

2. The cross claim filed by the Respondent/Cross Applicant is dismissed

3. Any application for costs in these proceedings must be filed and served, with supporting submissions, within 28 days of the date of this decision. The opposing party must file and serve submissions in reply within a further 28 days. Unless reasons are advanced for a hearing to be conducted, the matter will be resolved ‘on the papers’, pursuant to section 76 of the Administrative Decisions Tribunal Act 1997.