Civil and Administrative Tribunal New South Wales Medium Neutral Citation: Jude Trading Pty Ltd v Mosszan Pty Ltd; Mosszan Pty Ltd v Jude Trading Pty Ltd [2022] NSWCATCD 21 Hearing dates: 25 and 26 August, 29 October and 4 November 2021 Date of orders: 28 February 2022 Decision date: 28 February 2022 Jurisdiction: Consumer and Commercial Division Before: G Ulman Senior Member Decision: 1 In application COM 20/49850 (a) Pursuant to section 72(1)(f)(iii) of the Retail Leases Act 1994, a declaration that: (i) the respondents waived the applicant's late exercise of the option to renew the lease of the subject premises; (ii) the applicant validly exercised the option to renew the lease of the subject premises; (iii) the respondents repudiated the lease; and (iv) the applicant accepted the respondents' repudiation and validly terminated the lease. (b) Pursuant to section 72(1)(a) of the Retail Leases Act 1994, the respondents are to pay the applicant damages in the sum of $196,392.31 within 14 days. (c) Pursuant to section 72(1)(f)(iii) of the Retail Leases Act 1994, a declaration that the applicant is entitled to the return of the $41,375.10 bank guarantee held by the respondents as security for the applicant's obligations under the lease of the subject premises. (d) Pursuant to section 72(1)(g) of the Retail Leases Act 1994, the respondents forthwith deliver up to the applicant the $41,375.10 bank guarantee held by them as security for the applicant's obligations under the lease of the subject premises. (e) In the event a party wishes to make a costs application it must file and serve written submissions within 14 days, any party opposing the application is to file and serve its written submission within a further 14 days, and the Tribunal will make a decision on the papers as permitted by section 50(2) of the Civil and Administrative Tribunal Act 2013 unless persuaded that there should be oral submissions. (f) If after 14 days no written submissions are filed, then pursuant to Rule 38(2)(b) of the Civil and Administrative Tribunal Rules 2014,the respondents are to pay the applicant's costs of and incidental to these proceedings as agreed or assessed. 2 In application COM 20/32703 (a) Pursuant to Rule 38(2)(b) of the Civil and Administrative Tribunal Rules 2014, the applicants are ordered to pay the respondent's costs of and incidental to the proceedings as agreed or assessed. Catchwords: LEASES AND TENANCIES — Retail leases —Whether an option has been validly exercised —Whether there was an agreement for lease or statutory lease — Estoppel — Repudiation of lease — Damages for wasted expenditure — Adequacy of the evidence of loss — COVID-19 rent relief — Award of costs where proceedings discontinued without consent Legislation Cited: Retail Leases Act 1994 (NSW) Civil and Administrative Tribunal Act 2013 (NSW) Civil and Administrative Tribunal Rules 2014 (NSW) Retail and Other Commercial Leases (COVID-19) Regulation 2020 (NSW) Cases Cited: Ausko Cooperation Pty Ltd v Junapa Pty Ltd [2021] NSWSC 615 Arambewela v Castle Projects Pty Ltd [2018] NSWCATAP 14 Helou & ors v Bong Bong Pty Limited & anor trading as Regional Retail Properties [2006] NSWADT 128 Piazza Trevi v Cromwell BT Pty Ltd as custodian for the Cromwell Symantec House Trust [2017] NSWSC 794 Progressive Mailing House Pty Ltd v Tabali Pty Ltd (1985) 157 CLR 17 The Commonwealth of Australia v Amman Aviation Pty Ltd (1991) 174 CLR 64 Walton Stores (Interstate) Ltd v Maher 164 CLR 387 Texts Cited: Prof B Edgeworth, Butt's Land Law (7th ed) Category: Principal judgment Parties: In COM 20/49850: Jude Trading Pty Ltd (Applicant) Mosszan Pty Ltd (First Respondent) Montano Corp Pty Ltd (Second Respondent) Ronald Montano (Third Respondent) Fulvia Montano (Fourth Respondent) In COM 20/32703: Mosszan Pty Ltd (First Applicant) Montano Corp Pty Ltd (Second Applicant) Ronald Montano (Third Applicant) Fulvia Montano (Fourth Applicant) Jude Trading Pty Ltd (Respondent) Representation: Counsel: Mr J Doyle (Jude Trading Pty Ltd) Mr H El-Hage (Mosszan Pty Ltd, Montano Corp Pty Ltd & Ronald Montano and Fulvia Montano) Solicitors: Shad Partners (Mosszan Pty Ltd, Montano Corp Pty Ltd & Ronald Montano and Fulvia Montano) H Soltan (Jude Trading Pty Ltd) File Number(s): COM 20/49850 and COM 20/32703 Publication restriction: Nil REASONS FOR DECISION Introduction 1. There are two applications to be determined in these proceedings. They arise out of a dispute concerning a registered lease (the lease) of premises, a convenience store located in the Sydney CBD (the premises). 2. COM 20/49850 is an application by Jude Trading Pty Ltd. It is the former lessee of the premises and seeks damages from Mosszan Pty Ltd, Montano Corp Pty Ltd, Ronald Montano and Fulvia Montano, the owners of the premises, for their alleged repudiation and of the lease, and the return of a $41,375.10 bank guarantee (bank guarantee). Jude Trading Pty Ltd also claims an amount which is the difference between rent that remains owing under the lease adjusted or reduced for rent relief due to the financial impact to it of COVID-19 pandemic (the pandemic), and a rent credit to which it claims to be entitled as a result of the determination of the market rent by a specialist retail valuer. 3. Central to this dispute is whether the applicant validly exercised the option under the lease. 4. COM 20/32703 is an application by Mosszan Pty Ltd, Montano Corp Pty Ltd, Ronald Montano and Fulvia Montano against Jude Trading Pty Ltd. They were seeking certain declarations regarding the exercise of an option under the lease, an order for possession of the premises and for payment of outstanding rent. The application was discontinued, without consent, and the only remaining issue is whether a costs order should be made in favour of Jude Trading Pty Ltd. 5. For convenience, and unless the context otherwise requires, I will from now on refer to Jude Trading Pty Ltd as "the applicant" and Mosszan Pty Ltd, Montano Corp Pty Ltd, Ronald Montano and Fulvia Montano as "the respondents" in both proceedings. 6. The following persons have each had a part to play in the proceedings: 1. Mr Bassam Hallak, the sole director of the applicant (Mr Hallak); 2. Mr Peter Montano, a director of Montano Corp Pty Ltd (Mr Montano). Mr Montano is a real estate agent; 3. Mr Andrew Blenkinsopp, a Senior Commercial Portfolio Manager with MainStreet Real Estate, the respondents' agent (Mr Blenkinsopp); 4. Mr Jeng Juan Tan, a solicitor and former employee of Shad Partners, the respondents' solicitors (Mr Tan); 5. Mr Nabil Ajaje, the principal at ANB Lawyers, the applicant's former solicitors (Mr Ajaje); 6. David Shad, the Principal at Shad Partners, the respondents' solicitors (Mr Shad); 7. Mr James Whealing, independent valuer with Brady Whealing (Mr Whealing); 8. Mr Zoran Sarabaca from Xcllusive Business Sales Pty, the applicant's expert (Mr Sarabaca); and 9. Mr David White, from Bisval Pty Ltd, the respondents' expert (Mr White) Background 1. The lease of the premises commenced on 15 November 2015. G.C.S. Retail Corp Pty Ltd (GCS) was the lessee at that time. The lease was for a term of four years. The usage of the premises was described as "convenience store." The lease contained two options to renew, each for five years. If the lessee wished to exercise the option, Part IV of the lease required that it give the lessor not less than six months previous written notice during the last year of the term. 2. It is also relevant to note that the market rent review provisions of the lease provide that where there is a market rent review "the Rent from and including the relevant Review Date is to be the highest of the Rent payable during the year immediately preceding the Review Date or determined under this clause." This is commonly known as a "ratchet clause." The clause is prohibited by section 18(4) of the Retail Leases Act (the Act). 3. On 19 June 2018, the applicant entered into a contract for sale of business with GCS acquiring the business it conducted from the premises for $136,000. The was made up of $86,000 for goodwill, $25,000 for the equipment and $25,000 for trading stock. 4. A copy of the original disclosure statement (disclosure statement) that had been provided by the respondents to GCS was sent to the applicant on 2 July 2018. 5. Relevantly, page 3, item 6, of the disclosure statement describes the date for exercise of the option as "00/00/00 to 00/00/00". 6. The respondents consented to the assignment of the lease and the settlement of the sale of the business and assignment of the lease took place on 3 August 2018. The applicant then proceeded to undertake a fresh fit out of the premises at a cost, it says, of $88,470. In order to expand the services available in the premises, the applicant entered into a licence agreement with Western Union to operate a foreign currency exchange under a franchise agreement. For security purposes this required specific security fixtures and fittings to be installed by the applicant. 7. On 8 July 2019, Mr Ajaje, the applicant's then solicitor, wrote to Shad Partners, the respondents' solicitors, purporting to give written notice on behalf of the applicant of the exercise of its option to renew the lease for a further term of five years. Mr Ajaje also requested that the respondents' lawyers advise him of the proposed market rent in due course. 8. Mr Tan, at Shad Partners, replied by email to Mr Ajaje on 9 July 2019 informing him that he would seek instructions. The next day he informed Mr Ajaje, by email, that the last date for the applicant to exercise the option was 14 May 2019, and the respondent was considering the request to renew the lease. 9. On 25 September 2019, Mr Tan sent the following email to Mr Ajaje on 25 September 2019. It reads: Hi Nabil, I have just obtained instructions from the Lessor. The Lessor agrees to accept the Lessee's late notice to renew the lease, provided that the Lessee agrees to the followings: 1) The annual rent for the 1st anniversary of the option term (from 15 November 2019 to 14 November 2020) is $157,977.60 plus GST; and 2) All terms and conditions in the current Lease remain as are (except for the rent, number of option remaining, commencing, terminating date and clause 25). Let me know whether or not the Lessee agrees to the above so that l can prepare the lease documents. Thank you. 1. Clause 25 of the lease provided for the works to be undertaken by the respondents in 2015, when the lease commenced. 2. Mr Tan followed up with another email to Mr Ajaje on 8 October 2019. It reads: Hi Nabil, I refer to my email below. Kindly let me know whether or not your client agrees to the annual market rent of $157,977.60 plus GST (for the 1st anniversary of the option term, from 15 November 2019 to 14 November 2020). If I do not hear from you by 16 October 2019 (21 days from the date the Lessee is notified of the market rent), the Lessor will assume that the Lessee agrees to the market rent proposed by the Lessor. Thank you. 1. Mr Ajaje replied to Mr Tan on 16 October 2019. His email reads: Dear Colleagues We refer to your email below. We have difficulty understanding your comments as to the exercise of the option, in view of the executed Lessor disclosure statement (attached — see page 3, item 6). We note that the lessor has now accepted the exercise of the option. The lease calls for the rental to be the market rental. Our client does not consider the amount of $157,977.60 plus GST to be the annual market rental. We are instructed that our respective clients are engaging in direct discussions in relation to negotiating the annual market rental, and we await the outcome as to the same. Kind Regards 1. On 5 November 2019, Mr Tan sent Mr Ajaje an email informing him that the market rent in his 15 November 2019 email had been miscalculated. He said the revised market rent on 15 November 2019 should be $162,717.02 plus GST annually. He asked Mr Ajaje to confirm that the lessee agrees to the revised market rent so that he could issue the lease documentation. 2. Mr Ajaje replied by email the same day. Referring to Mr Tan's email he said this: The above email represents a proposed increase in rental. We are instructed to notify that our client does not consider the amount of $162,717.02 (plus GST) to represent market rental for the shop premises. Our client considers the market rental to be a lesser amount. We note that leasing agent has not been in contact with our client in relation to this matter. 1. On 7 November 2019, Mr Hallak and Mr Blenkinsopp had a conversation (7 November conversation), the details of which are in dispute. 2. This is Mr Blenkinsopp's version of the conversation: Hallak: My solicitor has told me to contact you as he thinks I might have more of a chance to resolve this dispute than through the lawyers." Blenkinsopp: You have lost the option because you did not exercise it on time. The landlord's Solicitors have sent correspondence outlining the position. Hallak: No, I don't agree. I have exercised the option. I want to negotiate the rent. Can we agree on frozen rent or a fixed amount? 1. Mr Hallak denies Mr Blenkinsopp's version of the conversation. He says the conversation was in the following terms: Hallak: Let us negotiate the market rent of the option and renew the lease. I likely (sic) to request an independent valuation to determine the market rent review if we do not agree on what the market rent is. Blenkinsopp: The independent valuation will not help you to drop the rent. We have a clause in the lease that says rent cannot be lower at market review. I can however work with the landlord and convince him that the market has dropped. 1. On 7 November 2019, the following email exchange took place between Mr Blenkinsopp and Mr Hallak: 1. Blenkinsopp to Hallak Hello Bassam, I hope you are well. Further to our conversation and prior correspondence we note that you have requested a change to the market review increase of 5%. In light of the increased costs for the property we have consulted the landlord party and we are willing to reduce our expectation to close the matter and finalise the new lease. We will agree to a market review of 4%. You have mentioned that you are likely to request an independent valuation to determine the market review. Can you please confirm whether you agree to the revised market review for rent to increase by 4% or whether you wish to proceed with a different course of action. Please advise. If you require more information please reply to this email or call me in the office on [number provided]. Regards 1. Hallak to Blenkinsopp Hi Andrew, Thanks for your email and follow up. As you are aware the market, in general, is down. That is why the interest rate is at its lowest level ever. Which is 0.75. And my shop and my business is no exception. Right now it is very tough for me with the current annual rent is $157K+GST. It will be much better if we request an independent valuer to set the right and actual rent for [the premises]. If the independent valuer confirms the current rent, or even add 6 percent increase, I will accept it. On the other hand, if he find out that the current rent is too high and should go down then a new lease should be issued to reflect the new rent. For peace in mind, and great business relations, I strongly prefer an independent valuer to decide the current market review of the lease. Best Regards. 1. Blenkinsopp to Hallak Thank you Bassam, I will liase (sic) with the landlord and look to get a suggested independent valuer. Once I have a person to nominate I will send you an email so you can see if you are happy to proceed with that valuer. If you require more information please reply to this email or call me in the office on [number provided]. Regards 1. Mr Blenkinsopp, the same day, that is 7 November 2019, sent this email to Mr Montano: Hi Peter, The lessee has requested an independent valuation to determine rent. Did you have anyone that you would like to suggest so we can look to get the matter completed as soon as possible. I have cced their response below. Please advise. 1. On 15 November 2019, Mr Blenkinsopp sent this email to Mr Hallak: Hello Bassam, Further to our correspondence please see attached. 1. Copy of Original Presidential Appointment Application Form from REINSW 2. Copy of scanned form signed by agent requiring your signature to complete, The form notes that the fee for the application will be $990. As per the act (sic) we agree to share costs equally. Once costs are required we will likely issue you an invoice against your ledger for your equal share. Can you please organise to read and sign page 5 of the application to complete the form so we can submit to commence the market review process? Should you have any questions feel free to call me. If you require more information please reply to this email or call me in the office on [number provided]. Regards 1. The application form attached to Mr Blenkinsopp's email was filled in and signed by Mr Montano. In the section "Type of Expert" a cross has been inserted adjacent to the word "Valuer". A few lines down in the same section are the printed words: "Other (please specify)". In the box adjacent to those words the following has been handwritten in uppercase: VALUER FOR RETAIL LEASE IN SYDNEY CBD The section below is headed "Purpose of the appointment". A cross has been inserted in the box adjacent to the words: "To determine current market rent for the property". A few lines down adjacent to the box "Other (please specify)" the following has been handwritten in uppercase: LEASE OPTION, REVIEW CURRENT MARKET RENT 1. It was Mr Montano's evidence that in early November 2019 he had a conversation with Mr Blenkinsopp who said to him: "The tenant wants a new lease. I've suggested we should get an independent valuation for the market value to facilitate the negotiations." 1. Following that conversation, Mr Montano said he thought the best course to take was to have the Real Estate Institute of New South Wales appoint an independent valuer and so he obtained the Presidential appointment form, inserted the relevant details and provided a copy to Mr Blenkinsopp. Mr Montana denies there was ever any discussion or agreement that the respondents will be bound by the valuation. He says the respondents always indicated both through their solicitor and agent that the option had not been exercised and the purpose of the valuation was to engage in further discussions and negotiations for a new lease. 2. Mr Hallak and Mr Blenkinsopp had a conversion on 15 November 2019 (15 November conversation). What was said during this conversation is also in dispute. 3. Mr Hallak's version of the conversation is as follows: Hallak: Thank you for your email earlier today. So Peter [Montano] agreed to renew the lease for 5 years plus 5 years option with the initial rent to be determined by a valuer as per the lease?" Blenkinsopp: Yes. I emailed you the form for you to sign so that a valuer can be appointed. Hallak: But the valuation needs to be carried out by the Office of the Small Business Commissioner. This is a retail lease. Blenkinsopp: OK I understand Hallak: I will fill the Small Business Commissioner form then email it for you to sign. Blenkinsopp: That will be good. Please send me the form to sign. 1. Mr Blenkinsopp denies saying the respondent agreed to a five year lease with a five year option. The following is his version of the 15 November conversation: Hallak: I want the valuation to be undertaken by the small business commissioner as it's the correct way advised by them. Blenkinsopp: That's fine as long as it's for the purposes of bringing the retail valuation into the mix so that further discussions can take place to attempt to come to an agreement. 1. On 18 November 2019, Mr Hallak sent Mr Blenkinsopp, by email, a signed Office of Small Business Commissioner (OSBC) application form for the appointment of a specialist retail valuer for a current market rent review (OSBC form). Mr Blenkinsopp emailed the OSBC form, signed by Mr Montano, to Mr Hallak on 27 November 2019. In his covering email he provided the email address for the OSBC and a template email for Mr Hallak to use when lodging the form. 2. The OSBC form was lodged by Mr Hallak on 28 November 2019. The OSBC acknowledged receipt the next day. 3. It is to be noted that the OSBC form is a standard form used by the OSBC and contains information for the benefit of both retail landlords and tenants including the following: 1. On page 1: Under Section 31 of the Retail Leases Act 1994 (the Act) the OSBC can assist parties by appointing a specialist retail valuer (SRV). You can only have current market rent determined if your lease says your rent changes to current market rent or if there is an option that rent changes to current market rent. 1. On page 2: What if one party doesn't agree with the valuation? The Act allows parties to seek a review within 21 days of receiving the original valuation. 1. On page 5: Under the heading "Valuation" are three questions requiring a yes or no answer to be circled. The questions are: Are the parties unable to agree on the current market rent? Are the parties unable to agree on a SRV? Does your lease require a current market rent review or provide an option to renew or extend your lease at current market rent? Each question was answered "yes". 1. On page 6: The following question is asked: What is the date from which the reviewed rent should begin? The answer typed in is "15 November 2019". 1. Section 31(1) of the Act, referred to in the appointment form, prescribes the process for having the market rent of retail premises determined by an independent valuer if the parties to the lease are unable to agree the rent. In relevant part the section reads as follows: 1. A retail shop lease that provides for rent to be changed to current market rent or that provides an option to renew or extend the lease at current market rent is taken to include provision to the following effect: …. (b) if the lessor and the lessee do not agree as to what the actual amount of that rent is to be, the amount of the rent is to be determined by valuation carried out by a specialist retail valuer appointed by agreement of the parties to the lease, or failing agreement by the Registrar. 1. An OSBC officer sent an email to Mr Hallak and Mr Blenkinsopp on 2 December 2019. In relevant part it reads: I am writing to each of you to confirm our receipt of the attached joint application for the appointment of a Specialist Retail Valuer under section 31(1)(b) of the Retail Leases Act, 1994. The application nominates you as the appropriate contact for your party. 1. On 12 December 2019, Mr Montano gave written instructions to Mr Blenkinsopp to "Charge old rent until re-valuation. Fix figures on November and December statements. RENT: $12,914.05 G.S.T. $1,291.40". I take this to be Mr Montano's instructions for the rent from 15 November 2019, when the lease term ended, to continue to be charged at the same rate pending the outcome of the rent review. 2. The OSBC appointed Mr Whealing on 30 January 2020 to determine the market rent of the premises. On 12 February 2020, Mr Whealing invited the parties to provide their written submissions by 12 March 2020. 3. The applicant engaged Mr Fonteyn, a valuer with Leaseinfo Advisory to provide a market rental valuation submission to Mr Whealing. Mr Fonteyn's fee for this service was $2750. The applicant also engaged Mr Shoebridge to survey the gross lettable area of the premises. His fee was $990. The survey was included as part of Mr Fonteyn's submission. 4. In his valuation, Mr Fonteyn submitted that the market rent for the premises as at 15 November 2019 should be $96,000 excluding GST. 5. Mr Montano also provided a written submission to Mr Whealing. The one page document is undated but I understand it was sent to Mr Whealing on 11 March 2020. Mr Montano's submission relevantly said this: Lease commencement: 15/11/2015 TO 15/11/2019 Current rent: 15/10/2019 TO 15/11/2019 $12,914.05 PLUS G.S.T. Options: 2 option of five years Exercise of option. 15/11/2019 had expired when renewal notice was received …. In view of increase in outgoings and the prime location of the shop, the annual increase for the market review should be 10% and then 3% annually. I would like to confirm that the rent determination as at 15th November 2019. The start of the five year option. In my opinion the market review of option rent should be $14,205.45 per month plus G.S.T. 1. On 2 April 2020, Mr Whealing issued his rent determination (the rent determination). In summary, he said this: 1. his appointment was a result of the parties being unable to agree on the market rent as at the market review date of 15 November 2019; 2. the tenant was of the opinion that the market rent is $96,000 p.a. plus GST, while the lessor contended that it was $170,465 p.a. plus GST; 3. the passing rent payable immediately prior to the lease renewal date was $154,967 p.a. plus GST; 4. the lease has two option terms each of five years; 5. the ratchet clause in the lease contravened the Act; 6. he had regard to the provisions of the lease and Section 31 of the Retail Leases Act in arriving at the determination; 7. there were a number of leases (identified in the rent determination) that were considered in determining the rent; and 8. the effective market rent for the premises was $110,515.00. 1. The day after he received the rent determination, Mr Blenkinsopp informed Mr Montano by email that he would look at it and "implement the review accordingly". Mr Montano replied by email the same day instructing Mr Blenkinsopp not to do anything yet because he was "objecting to the conclusion of the valuer". Mr Blenkinsopp did as he was instructed but informed Mr Montano in a text message sent on 17 April 2020 that he suspected the applicant would not pay the rent Mr Montano was seeking "where according to the market review the balance of advance rent past 15/4/20 would be approx. $22,000 + GST." This was an approximation of the difference between the old rent being paid by the applicant since 15 November 2019 and the new, lower rent determined by Mr Whealing. 2. On 24 April 2020, Mr Tan sent an email to Me Ajaje. Mr Tan said he was instructed to inform the applicant it was late in exercising the option to renew the lease, the respondents offered to accept the applicant's late exercise of the option if the applicant agreed to an annual rent of $162,717.02 plus GST for the first anniversary of the option term. He went on to say that the applicant's late exercise of the option remained invalid, it was now a monthly tenant and the offer remained open for 14 days. 3. Mr Ajaje replied by email on 28 April 2020. He referred to what he described as discrepancies between the date for exercise of the option specified in the disclosure statement (a reference to the "00/00/00" option date) and what was contained in the lease. He maintained that the applicant had exercised the option and referred to the parties having made a joint application to the OSBC for a market rent determination which was determined by Mr Whealing to be $110,000 exclusive of GST. Mr Ajaje said the applicant was estopped from making the assertions in Mr Tan's 24 April 2020 email, requested an option lease be provided and threatened proceedings in the Tribunal if it was not received within 14 days. 4. On 28 April 2020, an application under section 32A of the Act for the review of the rent determination signed by Mr Montano and dated 17 April 2020 was lodged with the OSBC. Prior to lodging the application Mr Montano says he contacted the OSBC and had the following conversation with a phone operator: Montano: I have received the valuation prepared by Mr Whealing. There is no lease as the tenant did not exercise the option on time. I'm not happy with the figure. I know the review needs to be lodged within 21 days. Do I still need to lodge it if there is no lease?" Phone operator: You should still lodge the application to review to prevent time from running out and in the meantime obtain legal advice. I will put the application on hold once received to allow you to get that advice. 1. On 6 May 2020, Mr Ajaje wrote to the OSBC. In his letter he said that section 32A(2) of the Act required the review application to be made within 21 days after receipt of the determination. Having been filed on 28 April 2020, the review application was out of time. The OSBC responded on 1 June 2020. The officer dealing with the matter agreed that the review application was received outside of the 21 day period and accordingly closed the OSBC file. 2. Mr Shad applied to the OSBC on 6 May 2020, on behalf of the respondents, for the mediation of a dispute with the applicant in relation to the exercise of the option. There was no mention in the application of the rent determination or rent relief. The mediation took place on 10 June 2020. Mr Anthony Herro was the mediator. It was unsuccessful and a certificate under section 68 of the Act was issued by the Deputy Registrar on 20 July 2020. 3. On 29 June 2020, Mr Blenkinsopp delivered a notice of termination of the lease to the premises (first termination notice). It states that the respondent gives the applicant one month's notice to terminate the lease "in line with clause 4.2 of the lease…". Clause 4.2 was the holding over provision. Where the applicant remained in occupation of the lease at the expiration of the term, under that clause it does so as a monthly tenant and the lease could be terminated by either party on one month's written notice. 4. Mr Ajaje emailed a letter to Mr Shad on 13 July 2020 enclosing a copy of another application for mediation that had been filed with the OSBC. The application describes the dispute as being about the respondents' service of the termination notice contrary to the National Cabinet Mandatory Code of Conduct (the Code). In his letter, Mr Ajaje said that at the 10 June 2020 mediation, the parties agreed to refrain from any adverse action for a period of 21 days and the notice of termination had been received 19 days after that agreement had been reached. He also foreshadowed proceedings in the Tribunal, enclosed applications for both interim and final relief to be filed, and invited the respondents to withdraw the notice. 5. Later that day Mr Shad sent an email to Mr Ajaje. He said that it was his understanding that the moratorium was in relation to legal proceedings as distinct from a notice of termination but, to avoid unnecessary expense and to preserve the without prejudice nature of the mediation, the respondent withdrew the first termination notice. 6. Mr Ajaje replied to Mr Shad the same day. He maintained that the option to renew "was indeed properly exercised". He also flagged that the applicant was suffering loss of goodwill while the respondent was advertising the premises as "available" and "for lease", and the Retail and Other Commercial Leases (COVID-19) Regulation 2020 (the COVID Regulation) and the Code required the respondent to negotiate in good faith with the applicant. 7. On 14 July 2020, a number of emails passed between the parties solicitors and also an officer of the OSBC. In summary, the OSBC officer, noting that the parties had already participated in a mediation on 10 June 2020 with Mr Herro, asked Mr Ajaje and Mr Shad if they wished to have another mediation scheduled with Mr Herro or a section 68 certificate issued. Mr Shad requested a section 68 certificate. Mr Ajaje responded saying that the application sent to the OSBC was specifically in relation to COVID rental relief and not the subject matter of the earlier mediation. Mr Shad then asserted in an email to Mr Ajaje and the OSBC officer that the mediation in relation to rent relief was flawed because the Code did not prevent the respondents from terminating by reason of the lease coming to an end. Mr Ajaje responded with an email to the OSBC officer and Mr Shad taking issue with Mr Shad's contention. He stated that the Code required the respondents to act in good faith and asked that the mediation be scheduled with Mr Herro. 8. The final correspondence on 14 July 2020 was a letter Mr Shad emailed to Mr Ajaje. He said that on behalf of the respondent he was giving the applicant one month's notice in writing terminating the lease pursuant to clause 4.2, and the applicant was required to vacate the premises by 15 August 2020 (second termination notice). 9. On 20 July 2020, the Deputy Registrar issued another section 68 certificate. 10. The respondent commenced proceedings COM 20/32703 against the applicant on 3 August 2020. It sought: 1. A declaration that the applicant failed to exercise the option to renew by 14 May 2019; 2. A declaration that the applicant's purported exercise of option to renew on 8 July 2019 was not a valid exercise of the option; 3. A declaration that the applicant occupies the retail premises as a monthly tenant pursuant to clause 4.2 of the Lease; 4. An order that the applicant vacate the retail premises by 15 August 2020 or forthwith in the event the order is made after 15 August 2020; 5. An order that the applicant pay all outstanding rent until the date it vacates the retail premises, as sought in order 4, with rent calculated by reference to the rent payable immediately prior to the lease terminating date being $154,967 per annum plus GST; and 6. Costs 1. Mr Ajaje wrote to Mr Blenkinsopp on 11 August 2020. His letter enclosed the applicant's April to June Business Activity Statements for 2019 and 2020. Mr Ajaje said a comparison of the statements showed a turnover decline of 71.48% and under the Code the applicant was entitled to a rent reduction of 71.48%. He went on to say that the applicant was an impacted lessee in receipt of jobkeeper under the Coronavirus Economic Response Package (Payments and Benefits) Rules 2020 (Cth). Mr Ajaje then set out calculations for the rent relief the applicant claimed to be entitled. He said the rent relief was to be taken wholly in the form of rental waiver and not deferred, and calculated by reference to the rent determination of Mr Whealing. 2. Mr Ajaje, in a lengthy letter to Mr Shad dated 14 August 2020, referred to the two termination notices and the commencement of proceedings COM 20/32703. He said the two notices of termination constituted a repudiation of the lease, the applicant accepted the respondents' repudiation and terminated the lease. He also reserved the applicant's right to claim damages and to commence recovery proceedings. The keys to the premises, said Mr Ajaje, would be handed over to Mr Blenkinsopp on 16 August 2020. 3. The applicant vacated the premises on 16 August 2020 having made good the premises. 4. On 17 August 2020, Mr Shad wrote to the Tribunal seeking to withdraw their application COM 20/32703 because the respondent had vacated the premises. He asked that the proceedings be dismissed with no order as to costs. The Tribunal dismissed the application on 18 August 2020. 5. On 19 August 2020, Mr Ajaje informed the Tribunal that the applicant did not consent to the orders made on 18 August 2020 and it did not agree to "no order as to costs. 6. Principal Member Rosser, on 25 August 2020, dismissed the application in accordance with section 55(1)(a) of Civil and Administrative Tribunal Act 2013 (CAT Act) noting that the respondents had withdrawn their application. The Principle Member added these reasons: The [earlier] orders contain an error in that they were not made upon receipt of signed terms of agreement, but at the request of the Applicant only. The Applicant does not require the other party's consent to withdraw the proceedings, however either party is at liberty to apply for a costs order." 1. On 1 July 2021, the applicant applied to the Tribunal for a costs order in COM 20/32703. That application is considered later in these reasons. 2. In the meantime, on 17 August 2020 Mr Ajaje lodged a further mediation application with the OSBC. In his covering email he said the mediation was "solely in relation to the COVID-19 rental relief matter". Mr Blenkinsopp insisted that additional information be provided regarding the applicant's turnover loss before the respondents would agree to participate in a mediation. The mediation did not take place. 3. The applicant commenced the present proceedings on 27 November 2020. By its points of claim subsequently filed, the applicant sought the following relief: 1. A declaration under s72(1)(f)(iii) of the Act that the respondents are estopped from denying that the applicant has validly exercised its option to renew the lease for a further five years commencing from 15 November 2019 with the Market Rent payable as rent and other terms substantially the same as that of the lease. 2. Further or in an alternative, a declaration under s.72(1)(f)(iii) of the Act that an agreement for lease within the meaning of the Act was concluded between the applicant and the respondents as to the subject premises. 3. Further or in an alternative, a declaration under s.72(1)(f)(iii) of the Act that a lease within the meaning of the Act was entered into under its section 8 between the applicant as lessee and the respondents as lessor. 4. A declaration under s72(1)(f)(iii) of the Act that the respondents repudiated the lease and/or the agreement of lease referred to in 1-3 above with the applicant. 5. An order under s72(1)(a) of the Act that the respondents are to pay the applicant damages for its losses. 6. An order under s16BA of the Act that the respondents are to return the bank guarantee held under the lease to the applicant even if the Tribunal finds the applicant is not entitled to relief set out above. 7. An order under section 60 of the Civil and Administrative Tribunal Act 2013 (CAT Act) that the respondents pay the applicant's costs of and incidental to these proceedings. 1. It is also relevant in the context of this dispute to note that through to late November 2020 the parties had continued to conduct negotiations over the rent relief the applicant was seeking as a consequence of the pandemic. 2. In addition, during the months of May and June 2020, Mr Hallak was engaged in negotiations for the sale to a Mr Bader of part of the applicant's business conducted from the premises. According to Mr Hallak's evidence, Mr Bader was prepared to acquire 75% of the business and take control of the applicant for $195,000. However, on 13 July 2020, Mr Bader's solicitor informed Mr Hallak that his client was only prepared to pay $138,750 for the business. According to Mr Hallak, Mr Bader informed him that the respondents were advertising the premises for lease and wanted $170,000 and that he could go to the respondents' and lease the premises directly from them without having to pay anything to the applicant. The sale to Mr Bader did not proceed. Points of claim and points of defence 1. By its points of claim, the applicant relevantly asserted that: 1. it exercised the option in accordance with the terms of the lease; 2. the lodging of the jointly executed application for the appointment of a specialist retail valuer with the OSBC on 27 November 2019, the parties recorded their binding agreement to proceed with a valuation and the respondents accepted the applicant's offer for a market review of the rent; 3. the respondents were therefore obliged to renew the lease for a further period of 5 years from 15 November 2019 at a rent to be determined by the specialist retail valuer; 4. the applicant became entitled to a new 5 year lease of the premises with the rent payable for the first year being the market rent as determined by the specialist retail valuer and subject to other amendments in accordance with the terms of the lease; 5. alternatively the applicant notionally entered into possession of the premises as lessee under a consensus or an agreement for lease within the meaning of the Act; 6. the parties acted on the common assumption that they had agreed to renew the Lease for a five year period and that the market rent for the first year of that renewed lease would be the Market Rent as determined by the specialist retail valuer. 7. the respondents are estopped by their words and actions from denying that common assumption, the exercise of the option, and the agreement to renew; 8. each of the respondents' termination notices and the commencement of proceedings COM 20/32703 constituted a repudiation of the lease by the respondents; 9. the applicant accepted the respondents' repudiation of the lease; and 10. the respondents twice declined to participate in a mediation for the purposes of agreeing COVID 19 rent relief and the applicant is entitled to rent relief pursuant to the COVID Regulation and the Code. 1. By their points of defence the respondents: 1. deny that the applicant validly exercised the option on 8 July 2019; 2. deny that they made an offer for a market review of the rent or that either party intended to be bound by any market determination; 3. while admitting that they signed an application to dispute the market rent pursuant to section 32A of the Act, say that the applications under sections 31 and 32A were to facilitate the parties negotiations in good faith as to the market rent and that neither agreed to be bound by the determination; 4. deny that the parties acted on the common assumption that they had agreed to renew the lease for a five year period and that the market rent for the first year of that renewed lease would be the market rent determined by Mr Whealing; 5. deny that the applicant entered into possession of the premises as lessee under a consensus or an agreement for lease within the meaning of the Act; 6. deny that the respondents are estopped from refusing to renew the lease with effect from 15 November 2019; 7. deny that the first termination notice, the second termination notice or the commencement of proceedings COM 20/32703 constituted the respondents' repudiation of the lease; 8. say that having given the respondents possession of the premises on or about 16 August 2020, the applicant capitulated in proceedings COM 20/32703, there was no hearing on the merits in those proceedings and the applicant would not be entitled to any costs; 9. by not defending proceedings COM 20/32703, the applicant is estopped from asserting that the option had been validly exercised and from claiming damages; 10. deny that in breach of the Code, the respondents failed to negotiate in good faith with the applicant and failed to provide it with rent relief; and 11. admit they have not returned the bank guarantee to the applicant Amounts claimed by the applicant 1. The applicant claims wasted expenditure and stock loss totalling $267,301. This amount consists of the following: 1. Wasted expenditure Purchase of goodwill: $86,000 Purchase of equipment: $25,000 Business improvement expenditure: $88,470 James Whealing's determination fee:$3,575 Simon Fotayn's submission fee: $2,750 David Shoebridge's surveying fee: $990 De-fit costs: $15,516.60 Disposed trading stock: $10,000 TOTAL: $232,301.60 1. Stock said to be worth $35,000 that was transferred to the applicant's other business but could not be liquidated. 1. In the alternative it claims the amount Mr Sarabaca values the business. It was Mr Sarabaca's opinion that based upon direct market data, the value of the business as at November 2019 would be $168,500 plus stock at valuation and $123,000 plus stock at valuation when the business closed in August 2020. Mr Sarabaca attributed the decline in value over that period to the decline in sales. 2. The applicant also claims 1. A rent credit of $22,000 plus GST which is an adjustment required by the lease as a consequence of having continued to pay rent at the old and higher rate while the determination was being conducted; and 2. the return of the bank guarantee. 1. The applicant accepts that it owes rent for the period 15 April to 15 August 2020 but there is a dispute as to what that rent should be after taking into account the application of rent relief under the COVID Regulation and the rent credit. Jurisdiction 1. Subject to one particular aspect of this matter, it is not in dispute that the Tribunal has jurisdiction under the Act to make the declarations and orders sought by the applicant in its application and determine the cost issue in the respondents' application, COM 20/32703. 2. One jurisdictional issue which has been raised by the respondents and that is in relation to the rent relief claimed by the applicant. They contend that COVID-19 rent relief negotiations need to take place before the Tribunal can exercise any powers under the Act and those negotiations have not yet taken place. I will deal with this issue later in these reasons. Hearing and evidence 1. At the hearing, Mr Doyle of counsel appeared for the applicant and Mr El-Hage of counsel appeared for the respondents. 2. The applicant's evidence consists of three affidavits sworn by Mr Hallak and an expert report by Mr Sarabaca. The respondents' evidence consists of an affidavit sworn by each of Mr Montano, Mr Blenkinsopp and Mr Tan, and an expert report by Mr White. Mr Sarabaca also provided a response to Mr White's report and both experts, at my request, provided a joint statement. The parties' witnesses were cross-examined. 3. Both counsel made oral submissions at the hearing. Written submissions have been provided by Mr Doyle. The respondents' written submissions are signed by Mr Shad. Issues 1. In my opinion, these are the are the issues to be determined by the Tribunal in these proceedings: 1. Did the applicant, by its solicitor's letter dated 8 July 2019, exercise the option to renew the lease? 2. If the answer to the preceding question is "no", did the respondents waive the late exercise of the option and the parties treat it as having been validly exercised? 3. Alternatively to issue (2), did the parties enter into a new lease on the same terms of the lease renewed under the option clause with the rent determined in accordance with section 31 of the Act? 4. Are the respondents estopped from denying that the applicant validly exercised the option to renew the lease or that the parties entered into an agreement for lease as provided for by the option? 5. Are the parties deemed to have entered into a statutory lease on or after 15 November 2019 by operation of section 8 of the Act. 6. Did the respondents repudiate the lease entitling the applicant to accept the repudiation and terminate the lease? 7. Is the applicant entitled to damages, and if so, what is the quantification of those damages? 8. What, if any, rent adjustments need to be made having regard to the rent determination, and the COVID Regulation? 9. Is the applicant entitled to the return of the bank guarantee? 10. Is the applicant entitled to a costs order in COM 20/32703? Applicant's Submissions 1. The following is a summary of the submissions made on behalf of the applicant: 1. The Tribunal does not have to decide whether the applicant validly exercised the option by Mr Ajaje's 8 July 2019 letter. This is because the parties' subsequently, by their words and conduct, agreed to either treat the option as having been exercised, that is, they agreed to waive the late exercise of the option or, alternatively, they agreed to enter into a new lease on the same terms as the lease renewed under the option clause with the rent determined by the process prescribed in section 31 of the Act. 2. The words and conduct consisted of the following:: 1. Mr Hallak's version of the 7 November 2019 conversation with Mr Blenkinsopp; 2. Mr Hallak's 7 November 2019 email to Mr Blenkinsopp; 3. Mr Hallak's version of the 15 November 2019 conversation with Mr Blenkinsopp; 4. the REINSW form for the presidential appointment of a valuer, and the OSBC form for the appointment of specialist retail valuer under section 31 of the Act; 5. Mr Montano's 11 March 2020 submission to Mr Whealing; 6. Mr Blenkinsop's email of 3 April 2020 to Mr Montano, 7. Mr Blenkinsopp's text message to Mr Montano of 17 April 2021; and 8. Mr Montano lodging an application for the review of Mr Whealing's determination under section 32A of the Act. 1. Mr Hallak's evidence of the conversations fits neatly with the facts as they emerged from the correspondence. 2. There was agreement on all necessary terms because the parties agreed to a renewal of the lease with reference to the exercise of the option under the expired lease with the commencing rent to be determined by a specialist retail valuer, and the terms otherwise in accordance with the expired lease. The deal was determined entirely by the option clause in the lease and included all of the relevant terms. 3. If it is found that the respondents did not waive the late exercise of the option, nevertheless there was an agreement for lease, all of the terms of the lease having been agreed. 4. Alternatively, there was a retail shop lease as defined by the Act, which only requires an agreement to grant a right of occupation and does not require agreement on all of the essential terms. By the applicant's continued occupation of the premises and payment of rent after the parties had committed to the agreement to lease, they are deemed to have entered into a statutory lease on or after 15 November 2019 by operation of section 8 of the Act 5. The respondents are estopped from denying that the applicant exercised the option for a renewed lease or the grant of a new lease as provided for by the option, with the rent to be determined by the independent valuer appointed by the OSBC. This is because their agent, Mr Blenkinsopp, repeatedly encouraged the applicant to assume that the process of an independent valuation would be binding and determinative of a new rental to apply under a renewed lease. The applicant relied on that encouragement and committed to pay rent under the new lease even if the section 31 determination resulted in an increased rent as sought by the respondents. The applicant also continued to occupy the premises after the lease expired and paid rent on time, it participated in the review process incurring costs, it did not seek alternative premises in late 2019 and did not pursue negotiations of over the rent at the time the review process was initiated. It was also unconscionable for the respondents to allow and encourage the applicant to persist in its assumptions. 6. As a consequence of having served the two termination notices and commenced proceedings COM 20/32703, the respondents represented that the lease was at an end. These acts represented a clear repudiation of the lease. The applicant was entitled to accept the respondents' repudiation, terminate the lease and sue for damages. 7. The applicant's damages claim is advanced on two bases; wasted expenditure incurred by the applicant or, in the alternative, the value Mr Sarabaca attributes to the applicant's business. 8. Mr Sarabaca's valuations are only relied upon as a fallback, the applicant's primary contention being that it is entitled to recover wasted expenditure. 9. The applicant's wasted expenditure is the best and appropriate method for quantifying its damages. This is because: 1. the applicant traded for approximately two years which included at least six months of reduced trading during the pandemic; 2. the applicant may have chosen to continue trading for the entire duration of the lease, which had two options each of five years, and not sell its business; 3. as acknowledged by Mr Sarabaca, the applicant's financials were basic and did not contain enough detail in order to make appropriate adjustments and determine actual earnings; 4. there is evidence of the applicant having negotiated a partial sale of its business to Mr Bader during the pandemic which valued it at $260,000, an amount similar to the wasted expenditure; and 5. Mr Sarabaca's valuation assumes the applicant will sell its trading stock at a fair market value but the evidence is that $10,000 worth of stock was disposed of due to spoilage and short shelf life, and a further $35,000 worth of stock was yet to be liquidated. 1. The Tribunal should disregard the evidence of Mr White who valued the applicant's business at $21,000 The "Net Asset Backing Method" he used did not take into account the goodwill the applicant paid when purchasing the business and business improvement expenditures incurred after purchasing the business. The evidence of Mr Sarabaca, a business broker and licence business valuer, should be preferred over Mr White's evidence, a chartered accountant with no particular qualifications as to the valuation of small businesses. Mr Sarabaca had access to a database of reported business managed by the Australian Institute of Business Brokers which Mr White did not. 2. The applicant continued to pay rent at the previous rate while Mr Whealing was conducting the market rent review. As a consequence of the rental determination, the applicant is entitled to a rent credit of $22,000 plus GST, calculated from 15 November 2019. 3. The COVID Regulation requires that part of the rent payable by the applicant for the period 15 April 2020 until the lease was terminated on 15 August 2020, is to be adjusted because of the impact of the pandemic on the applicant. 4. The lease having been terminated, the respondents are not entitled to any of the deferred rent. 5. The respondents are required by section 16BA of the Act to return the bank guarantee to the applicant. Respondents' submissions 1. There are three specific submissions made on behalf of the respondent that I should address at the outset. 2. In his initial written submissions Mr Shad contended, at some length, that the applicant's claim was an abuse of process and Anshun estoppel operated to prevent the applicant pursuing its claim. The basis for these contentions was that the exercise of the option and possession of the premises were issues in the applicant's proceedings, they arose from the same substratum of facts that lead to the respondents' earlier proceedings and could have been brought in those proceedings if the applicant had not capitulated and given possession of the premises without contesting the declarations and orders sought by the respondents. 3. These contentions were not repeated in later submissions. Mr Doyle submitted that they were without merit. I agree. Leaving aside the question whether the respondents repudiated the lease, the respondents unilaterally discontinued the proceedings 14 days after they were commenced. The applicant had no opportunity to pursue any cross claim in relation to the exercise of the option even if it wanted to. In those circumstances, there was no Anshun estoppel and no abuse of process by the applicant seeking a declaration regarding the exercise of the option. 4. Mr Shad's initial written submissions also went to some length in contending why the applicant's solicitor's 8 July 2019 letter was not a valid exercise of the option. While the applicant continued to maintain for some time that the option had been validly exercised by that letter, it was a contention that was not pursued at the hearing or advanced in Mr Doyle's written submissions. That is understandable considering that the basis for it was that the disclosure notice specified that the date for exercise of the option was "00/00/00". I am not sure how it could have been seriously suggested that what was an obvious error justified the contention that the option had been validly exercised when the lease made abundantly clear when it was required to be exercised. 5. In case it might later be relevant, I find that the mistake in the disclosure statement did not affect the provisions of the lease and, specifically, when it was that the applicant was required to exercise the option. The option exercise date in the disclosure statement was an obvious mistake and meaningless. No cogent reasons were advanced as to how it could be said that the option was validly exercised on 8 July 2019 when the disclosure statement specified "00/00/00" as the option exercise date. Furthermore, and as submitted by Mr Shad, the decision of Sackar J in Piazza Trevi v Cromwell BT Pty Ltd as custodian for the Cromwell Symantec House Trust [2017] NSWSC 794 at [340]-[351],makes plain that the disclosure statement does not have contractual force. If the applicant wished to exercise the option for a further five year term, under Part IV of the lease it was required to give to the respondents during the last year of this lease not less than six months written notice prior to the expiration of the lease term, The lease term ended on 14 November 2019 which meant the applicant was required to give that notice by no later than 14 May 2019. It did not do so which meant that the applicant's purported exercise of the option was out of time when the 8 July 2019 notice was given by its solicitor. 6. Mr Shad also submits that the applicant did not plead in its points of claim the 15 November conversation that took place between Mr Hallak and Mr Blenkinsopp, and there should be an inference drawn that the conversation did not occur because it would have been pleaded if it had occurred. 7. I reject the submission. There is no doubt the conversation occurred. This is because in their respective affidavits, Mr Hallak and Mr Blenkinsopp each set out their recollection of the conversation. In addition, the absence of any mention of the conversation in the points of claim is not fatal. Strict pleadings are not a feature of proceedings in the Tribunal. In any event, there is no suggestion that the respondents have not been taken by surprise or prejudiced in any way. 8. The other submissions made by Mr El-Hage and Mr Shad are summarised as follows: 1. There was never a meeting of the minds to give rise to any agreement for lease, there being no agreement as to start date, term, rent, use or any other essential terms. 2. There are fundamental difficulties with the contention that Mr Hallak's 7 November 2019 email was an offer accepted by the lodging of the application for the appointment of a specialist retail valuer. This is because the email is silent as to the essential terms of the lease and whether the applicant would be bound if the valuation resulted in a rental increase of more than 6%. 3. On the evidence a finding cannot be made that there was an intention on the part of the parties to make a concluded bargain as the parties never agreed to be bound by the rental figure produced by Mr Whealing, neither party signed up to the proposition that they would be bound by the outcome of the valuation and there is nothing in the evidence that would allow for the finding that the respondents would be bound by the outcome. There is also no evidence from which it can be said that there was even an implied inference that the respondents agreed to be bound by the outcome. 4. In regard to the estoppel claim: 1. the respondents have impermissibly sought to use estoppel as a sword rather than as a shield. 2. no assumption could reasonably be made by the applicant having regard to the correspondence between the parties; 3. the purpose of the valuation was to assist the parties with negotiations of a possible new lease, as asserted by Mr Montano and Mr Blenkinsopp; 4. there was no clear and unequivocal representation giving rise to the assumption that the lease will come into existence. Instead, and at best, the only assumption that could be made is that the parties would obtain an independent valuation and engage in further good faith negotiations over the rent; 5. the respondents never agreed nor did they conduct themselves in a manner which indicated that they would be bound by the valuation, and they did not agree to be bound by it; and 6. even if the assumption is established, the applicant has not suffered significant detriment if there was a departure from the assumption nor would it be unconscientious that the promise not to be kept. 1. The Tribunal should reject the contention the 14 July 2020 notice was a repudiation of any asserted new lease or agreement to lease. This is because the notice was given pursuant to the lease and not a new lease or agreement to lease. 2. The commencement of proceedings by the respondent was not repudiatory conduct. The manner in which relief was claimed by the respondents in COM 20/32703 was consistent with the lease continuing until the dispute was resolved. 3. By vacating the premises and not participating in the proceedings commenced by the respondents, the applicant did not mitigate any loss suffered and, moreover, its conduct contributed to and caused any loss suffered. 4. The applicant should not be able to recoup its expenditure on establishing the business because those costs were incurred before the relevant lease renewal agreement came into existence and the amounts expended by the applicant were incurred in 2018 in reliance on the lease and not on the asserted new lease or agreement for lease. 5. In relation to expenditure incurred by the applicant after it entered into the lease, there is no reliable evidence of items installed and even if there was such evidence, the items were not installed in contemplation of a long-term lease, that is, with an option. 6. Even if the Tribunal is satisfied about some of the items installed and the amounts expended, there is no causal connection between any breach and loss suffered, the applicant's evidence of expenditure is unreliable, the defit cost would have been incurred in any event and the applicant retained the equipment and improvements. 7. Mr Sarabuca's evidence should not be accepted because it was unreliable and unhelpful. His evidence of comparable sales was taken from sales in Western Australia and Queensland that occurred in 2012 and 2015. In order to compare a convenience store in Perth with one in Sydney it is necessary to look at the factors that were relevant to the store. These include its location; is it in a shopping centre, how long it has been there, the number of employees and any regulatory factors specific to Perth that might affect the valuation of convenience stores? Another factor is whether there is any special treatment for payroll tax. The absence of this information adds to the unreliability of the comparisons used by Mr Sarabaca. Consideration 1. I now turn to consider the issues raised in this dispute. Did the applicant by its solicitors letter dated 8 July 2019 exercise the option to renew the lease? 1. The first issue is whether the applicant by its solicitor's letter of 8 July 2019 validly exercise the option to renew under the lease. I have already addressed this issue earlier in these reasons and need not repeat what I said other than to say that the answer to the question is "no". If the answer to the preceding question is no, did the respondents waive the late exercise of the option and the parties treat it as having been validly exercised? 1. The next issue to be determined is whether the parties nevertheless treat the option as duly exercised. 2. It is the applicant's contention that the contemporaneous documentary evidence supports the finding the respondents waived the late exercise of the option, the parties did treat it as having been exercised and they agreed that the market rent for the first year of the option lease was to be determined in accordance with the process prescribed by section 31 of the Act. In addition to the documents, it says Mr Hallak's version of the conversations that took place with Mr Blenkinsopp on 7 and 15 November 2019 support the contention. 3. In short, the respondents say that the documents relied upon by the applicant do not support the applicant's contention, there being no agreement on the essential terms of the lease including a fundamental dispute regarding the amount of the rent. Rather than making a binding determination as to what that rent should be, Mr Whealing's appointment and the rental valuation he produced was, according to the respondents, for the purpose of enabling the parties to negotiate the rent. This latter assertion is made by Mr Blenkinsopp in both his affidavit and oral evidence. 4. The conclusion I have come, based on an objective assessment of the evidence, is that the respondents did waive the late exercise of the option, and the parties treated it as having been validly exercised. These are my reasons. 5. The first of Mr Blenkinsopp's two emails sent to Mr Hallak on 7 November 2019 email asked Mr Hallak to confirm whether he agreed to a rent increase of 4% or if he wished "to proceed with a different course of action". Mr Hallak's immediate email response to that was to say that it would be much better for "an independent valuer to set the right and actual rent" and that it was his preference for "an independent valuer to decide the current market review of the lease". In my view, in choosing those words, Mr Hallak was expressing a clear preference that someone independent of the parties determine the current market rent. His statement that "If the independent valuer confirms the current rent, or even add 6 percent increase, I will accept it" was, also in my view, a clear and unequivocal declaration by Mr Hallak that he was committed to the process and the outcome, even if it resulted in a substantial rent increase. I am unable to read into his email anything that would suggest that Mr Hallak was contemplating that the door to further negotiations over the rent remained open once the independent valuer had made a decision. Rather he was committing to abide by the valuer's decision, whatever it might be. 6. The second email Mr Blenkinsopp sent to Mr Hallak on 7 November 2019 did not take issue with Mr Hallak's proposal to appoint an independent valuer to decide the current market rent. On the contrary, he embraced the proposal informing Mr Hallak that he would liaise "with the landlord and look to get a suggested independent valuer" and send him an email once he has a person to nominate so Mr Hallak "can see if (he is) happy to proceed with that valuer". That email is, in my view, consistent with acceptance of what Mr Hallak had proposed, that is, for an independent valuer to decide the current market review of the lease. There is nothing said in that email to suggest that any further rent negotiations were to take place once the valuation had been received. 7. In so far as the conversation on 7 November 2019 between Mr Blenkinsopp and Mr Hallak is concerned, I accept Mr Hallak's version of that conversation as it is consistent with the subsequent contemporaneous email correspondence that passed between him and Mr Blenkinsopp later that day. Mr Hallak's version of the conversation is also confirmed by the email Mr Blenkinsopp sent to Mr Montana on 7 November 2019 where he informed Mr Montano that Mr Hallak had "requested an independent valuation to determine the rent" and asked if he (Mr Montano) could suggest anyone "to get the matter completed as soon as possible"(emphasis added). This evidence does not suggest in the slightest that the valuation was for the purposes of further discussion and negotiation. The words "to determine the rent" in Mr Blenkinsopp's email, in my view, clearly indicate a binding process for an independent valuer to decide what the rent should be. 8. I also accept Mr Hallak's version of his conversation with Mr Blenkinsopp on 15 November 2019 for three reasons. 9. Firstly, it was consistent with the subsequent contemporaneous email correspondence. As Mr Doyle submitted, it fits neatly with the subsequent facts. 10. Secondly, Mr Blenkinsopp asserts that in response to Mr Hallak saying that he wanted the valuation undertaken by the OSBC, he said: "That's fine as long as it's for the purposes of bringing the retail valuation into the mix so that further discussions can take place to attempt to come to an agreement". This is a critical statement so far as the respondents' defence is concerned. Despite that, and notwithstanding Mr Blenkinsopp being a qualified and experienced real estate agent of some years, nowhere in any of the contemporaneous correspondence is it repeated or confirmed. I would expect for the valuation to have been used for the purpose contended by Mr Blenkinsopp, the prudent thing to have done would have been to confirm it in email correspondence with Mr Hallak, or even Mr Montano, or record it in a file note. There is no evidence of that having happened. The absence of any mention by Mr Blenkinsopp in any contemporaneous email or file note that the valuation was for the purpose of further discussion in an attempt to come to an agreement on the rent leads me to conclude that it was never said. 11. Thirdly, in assessing the evidence of Mr Hallak and Mr Blenkinsopp while each was being cross examined, where there was a conflict I have preferred the evidence of Mr Hallak over the evidence of Mr Blenkinsopp. Although at times under cross-examination he lapsed into being an advocate for the applicant's case, I nevertheless consider Mr Hallak to be a truthful witness, his evidence being consistent with the contemporaneous documents. On the other hand, Mr Blenkinsopp was a poor witness who repeatedly failed to directly answer questions put to him, was argumentative and at pains to craft the narrative that the rental determination was only for the purposes of negotiating the rent of a new lease. His evidence was not consistent with the contemporaneous documents. 12. Turning then to the REINSW and OSBC forms, it is relevant to note the following: 1. Both the REINSW form and also the OSBC form subsequently used to appoint Mr Whealing specifically state that the appointment is for the purposes of determining the current market rent when the parties are unable to agree the rent, as was the case here. 2. The REINSW form has been signed by Mr Blenkinsopp but was filled in by Mr Montano. In doing so Mr Montano selected the box (by placing an "x" next to it) which described the purpose of the appointment as "(to) determine current market rent for a property". He also added, by hand, the words "lease option, review current market rent". Mr Montano. in cross examination. said that there was insufficient space on the form for him to add that the valuation was only for a new lease and negotiating the new rent. His explanation is an afterthought and I do not accept it. There was no reason why Mr Montano could not have added to the form, by hand, any additional information he thought might have been relevant, including, as he repeatedly said while giving evidence, that the market review was for the purpose of negotiating a new lease and to try to reach an agreement on a new rent. 3. The OSBC form has been signed by Mr Montano and read by Mr Blenkinsopp. The printed section of the form explicitly refers to section 31 of the Act and the assistance the OSBC can give the parties by appointing a specialist retail valuer. Relevantly, the form also states the following: You can only have current market rent determined if your lease says your rent changes to current market rent or if there is an option that rent changes to current market rent. ….. What will the SRV do? The SRV will conduct a valuation to determine the current market rent. 1. The OSBC form also contains this question: "Does your lease require a current market rent review or provide an option to renew or extend your lease at current market rent? That question has been answered "yes" 2. Neither the REINSW form nor the OSBC form as completed and signed by the parties representatives mentions anything about the valuer's appointment being for the purpose of further negotiation over the rent. 1. Once Mr Whealing was appointed, both parties took up his invitation to make submissions. Neither the applicant's submission nor the submission provided by Mr Montano on behalf of the respondents makes any mention of the valuation being for the purposes of engaging in further discussions and negotiations for a new lease or rent. 2. In cross examination, Mr Montano said he spoke to Mr Whealing after he was appointed to let him know that the option was invalid and that he could do a market review and that would help us negotiate a new lease. I do not accept that this conversation ever took place. It was not mentioned in Mr Montano's affidavit. There is no mention anywhere in the rent determination issued on to April 2020 of the conversation. Further, Mr Whealing did not give to corroborate what Mr Montano claims to have occurred. 3. I would also add this about the oral evidence given by Mr Montano. He was a poor witness. He was argumentative, repeatedly failed to directly answer questions that were put to him and gave evidence which I consider to be inconsistent with the contemporaneous documents. Like Mr Blenkinsopp, throughout his cross-examination Mr Montano attempted to craft the narrative that the option had not been exercised, there was therefore no lease, and the only purpose for the appointment of Mr Whealing was, to help negotiate a new rent. 4. Having received the rent determination, Mr Blenkinsopp, on 3 April 2020 informed Mr Montano by email that he would look at it and "implement the review accordingly". There is no suggestion in this communication from Mr Blenkinsopp to Mr Montano that he (Mr Blenkinsopp) was contemplating the recommencement of negotiations over the rent. On the contrary, that communication, in my view, can only be interpreted as Mr Blenkinsopp accepting that the new rent for the option lease had been determined and, as a consequence of that, he was going to update the rent records for the lease. 5. When Mr Tan sent an email to Mr Ajaje on 24 April 2020, it was not for the purpose of commencing negotiations over the rent. Rather, it was quite the opposite and in the nature of an undisguised threat. It made no reference to the rent determination, instead informing the applicant's solicitor that his client had not exercised the option in time, it was a monthly tenant, and the respondents would only accept the late exercise of the option if the applicant agreed to an annual rent of $162,717.02 plus GST for the first year of the option term. The letter sits in stark contrast to what Mr Blenkinsopp and Mr Montano would have the Tribunal believe was the purpose of the rent determination. 6. Mr Montano attempted to appeal the rental determination by lodging a review application pursuant to section 32A of the Act. The section permits a party to a lease to apply to the Registrar for the appointment of two specialist valuers to conduct a review of the determination made by a specialist valuer under section 31. The application must, however, be made within 21 days after the party first received a copy of the determination. There is no dispute that the review application lodged by Mr Montano on behalf the applicant was out of time 7. In cross examination, Mr Montano gave evidence that he was told by someone at the OSBC just to lodge the section 32A application and the OSBC will hold it. He also said his solicitor had informed him that there was no necessity to pursue the review application as the lease was null and void. Mr Montano's evidence is uncorroborated. In any event, I do not accept that the application was lodged simply for it to sit with the OSBC. I am comfortably satisfied that the reason Mr Montano sought a review of the rent determination was because he was unhappy with the outcome, and he knew it was a binding determination that could only be set aside or changed by a review under section 32A of the Act. Furthermore, if his solicitor did give advice that there was no necessity to lodge the review application, that was most likely because the application was out of time rather than anything to do with an opinion on the status of the lease or the option. 8. In my view, the decision to lodge the review application is consistent with the belief that the rent determination by Mr Whealing was binding on the parties unless it could be the subject of a review permitted under section 32A of the Act. 9. If the reason behind seeking a rent determination truly was, as the respondents contend, to assist in the lease negotiation process, that process ought to have commenced immediately upon the rent determination being issued. That never happened. Furthermore, what can, in my view, be reasonably inferred from the evidence is that both Mr Montano and Mr Blenkinsopp, despite being experienced real estate agents, believed that the ratchet clause would be the respondents' insurance in a rent review. It was only when they realised the clause was invalid, once the rent determination was made, that they came up with the story or narrative that the determination was only for the purposes of further negotiations. 10. Based on an objective assessment of the evidence to which I have referred, I am comfortably satisfied, and accordingly find that: 1. on 7 November 2019, following the exchange of emails between Mr Hallak and Mr Blenkinsopp and their conversation that day, and by their conduct and Mr Montano's continuing conduct in acquiescing in the rent review process culminating in Mr Montano filing an application for the review of Mr Whealing's rent determination, the respondents waived any objection to the late exercise of the option and the parties treated the option under the lease as validly exercised; 2. the parties agreed that the rent for the first year of the option lease would be decided by a rent determination conducted pursuant to section 31 of the Act and not ; and 3. the rent was duly determined by Mr Whealing's rent determination. Did the parties enter into a new lease on the same terms of the lease renewed under the option clause with the rent determined in accordance with section 31 of the Act? 1. The next issue for determination is whether the parties entered into a new lease on the same terms of the lease renewed under the option clause leaving the rent to be determined in accordance with section 31 of the Act. 2. While it is not necessary for me to determine this issue having found that the option was exercised, I will briefly say something about this issue. 3. On the basis of the evidence considered in relation to whether the option was exercised, and for the reasons given in relation to that question, I would be comfortably satisfied that the parties did enter into an agreement for lease on the same terms as the lease renewed under the option clause. At no time during period 7 November 2019 through to Mr Tan's 24 April 2020 is there any suggestion in any of the email correspondence or in conversations to which reference has been made, that any other terms of the lease remained to be negotiated or agreed. All of the essential terms of the lease were agreed including how the rent would be determined. The rent was determined. There was nothing left to be agreed. 4. Mr El-Hage referred to the decision of Darke J in Ausko Cooperation Pty Ltd v Junapa Pty Ltd [2021] NSWSC 615 (Ausko). He submitted that in that case the minds of the parties were more closely aligned than in the present case yet his Honour found that the parties in Ausko did not enter into a binding agreement for lease. However, the case is distinguishable from the present proceedings. This is because, unlike here, the tenant in Ausko decided not to exercise the option but instead attempted to negotiate a new lease. The distinguishing feature was of some importance as observed by his Honour in the following passage: [60] …..Further, this is not a case where the parties were explicitly speaking of a renewal of an existing lease. The plaintiff decided not to exercise its option to renew the lease and instead sought to negotiate what Ms Kwon described as "a new term" or "a new lease". [61] That is perhaps not a major difference in itself, but taken with the matters already referred to, and in circumstances where the parties must be taken to have contemplated that a formal lease document would be prepared and executed yet made no express reference to the existing lease playing any role in that regard, I do not think it is implicit that the parties contemplated that the formal document would take the form of the existing lease save for changes to accommodate the matters agreed upon in the correspondence. Had that been intended it would have been very simple to make a statement to that effect. 1. There was only one issue in the present matter in respect of which the parties had been unable to agree and that was the rent. They agreed on how that should be determined. There was nothing left to agree. The parties conduct at all relevant times was consistent with the rent being determined in the context of the late exercise of the option having been waived and with the existing lease provisions determining the terms of the new option lease. 2. Had I not decided that the respondents waived the late exercise of the option and the parties agree to treat the option under the lease as exercised, I would have found that the parties entered into a new lease on the same terms of the lease renewed under the option clause, the first year's rent being the rent determined by Mr Whealing's rent determination. Are the respondents estopped from denying that the applicant validly exercised the option to renew the lease or that the parties entered into an agreement for lease? 1. Again, while not necessary for me to determine this issue, I will for completeness briefly address whether respondents are estopped from denying that the applicant validly exercised the option to renew the lease or that the parties entered into an agreement for lease. 2. Mr Doyle has submitted that the respondents are estopped by their actions and representations from denying either the applicant's exercise of option, or that the respondents agreed to enter into a new lease on the terms stipulated by the option with commencement rent to be determined by Mr Whealing. 3. The respondents deny that they are estopped, as asserted. 4. It was submitted by Mr Shad that estoppel may only be used as a shield and not a sword. I reject the submission. As pointed out by Mr Doyle, the High Court in Walton Stores (Interstate) Ltd v Maher 164 CLR 387 (Mason CJ and Wilson J, Brennan J and Deane J ) did make it clear that estoppel can be used as a sword to create positive rights and as a basis for a damages claim. Deane J in particular at pages 444 to 445 said this: It has often been said that estoppel can be used only as a shield and not as a sword. In so far as estoppel by conduct is concerned, that statement is generally true only in the very limited sense that such an estoppel operates negatively to preclude the denial of, or a departure from, the assumed or promised state of affairs and does not of itself constitute an independent cause of action….. There is no basis in principle for such a constriction of the doctrine. In so far as decisions or statements in judgments in cases in other courts would support a contrary view, they should not be accepted in this country. 1. In his submissions, Mr Doyle referred to the decision of Darke J in Kyrollos 4M Pty Ltd v Bassal [2018] NSWSC 833 (Kyrollos). The case concerned a dispute over whether an option for a new lease had been validly exercised and whether the current market rent as at the commencement date of a new lease had been determined as required by the lease. If the parties could not agree the rent, the lease required a valuer to be nominated by the President of The Law Society of New South Wales to determine the rent. A valuer was nominated by the Society's President. The valuer then sent the parties' representatives a letter setting out his terms and conditions for conducting the valuation. The parties accepted the terms and conditions with both signing and returning a letter of acceptance to the valuer. A current market rent determination was provided by the valuer. The defendant subsequently contended that the determination was not binding as it was not undertaken in accordance with the terms of the lease. His Honour did find that the procedure for determining the rent proposed by the valuer was not in accordance with the specific terms of the lease but said this: [29] However, the proposed procedure was clearly described in detail in Mr Kempthorne's letter of 5 February 2016, and both parties expressly agreed, in writing, to the proposed procedure, by signing and returning the letter of acceptance to Mr Kempthorne. Both parties thereby agreed that the rent review would be conducted in that manner, and further that they would each be bound by Mr Kempthorne's determination. The parties thereafter participated in the procedure (including by making submissions, meeting Mr Kempthorne, and providing further information to him) without demur. The conduct of the parties manifested their mutual assent to the procedure (see Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153; [2001] NSWCA 61 at [71]-[82]). [30] In these circumstances, the parties should be taken to have effected a variation of the lease insofar as the rent review is concerned. Alternatively, the parties could be regarded as having become bound by an estoppel by convention. Both parties apparently adopted an assumption that the rent review would be conducted in accordance with the proposed procedure and that the resulting determination would be binding upon them. Thereafter both parties participated in the procedure, apparently upon the basis of that assumption. Further, viewing the conduct of the parties objectively, each party may be taken to have intended the other to act on that basis. Finally, departure from the assumption by one party would occasion at least some detriment to the other in the form of wasted time and effort in participating in the agreed procedure (see Moratic Pty Ltd v Gordon (2007) 13 BPR 24,713; [2007] NSWSC 5 at [32]; Miller Heiman Pty Ltd v Sales Principles Pty Ltd (2017) 94 NSWLR 500; [2017] NSWCA 106 at [42]-[44]). 1. It is evident from the facts in the present proceedings that I have described in the context of whether the option was exercised, that even though the applicant did not exercise the option within the time prescribed by the lease, the applicant and the respondents nevertheless agreed to a rent review process being conducted in accordance with the procedure prescribed by section 31 of the Act, and that the outcome of that process would be binding on them. The parties then actively participated, without demur or reservation in that process, both making submissions to Mr Whealing in a manner that could only be said to be consistent with the mutual assumption that not only would it be binding but the new rent would apply to a new option lease. 2. Consistent with the approach of Darke J in Kyrollos, I am comfortably satisfied that the parties were bound by an estoppel by convention. I find that the applicant did rely upon the assumption that was created by the respondents' conduct and acted to its detriment, at the very least by continuing in occupation and trading from the premises and paying rent, by participating in the rent review process and by incurring costs in making submissions to Mr Whealing. In those circumstances, the respondents are estopped from denying that the applicant validly exercised the option to renew the lease and from denying that they agreed with the applicant to a new lease on the terms stipulated by the option with commencement rent to be determined by the independent valuer appointed by OSBC. Are the parties deemed to have entered into a statutory lease on or after 15 November 2019 by operation of section 8 of the Act. 1. It is contended on behalf of the applicant that should it be found that the respondents did not waive the late exercise of the option under the lease, nevertheless, by operation of section 8 of the Act, there is a statutory lease. This is not an issue that I need to decide given the findings so far but I will again, for completeness, briefly say something about this issue. 2. Section 8 prescribes when a lease is entered into under the Act. Under that sub section (1), a retail shop 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 is first. Under subsection (2), if both parties execute the lease before the lessee enters into possession or begins to pay rent, the lease is considered to have been entered into as soon as both parties have executed the lease. 3. Mr Doyle referred the Tribunal to the decisions in Helou & ors v Bong Bong Pty Limited & anor trading as Regional Retail Properties [2006] NSWADT 128 (Helou) endorsed by the Appeal Panel in Nguyen v Perpetual Trustee Company Ltd; Perpetual Trustee Company Ltd v Nguyen [2015] NSWCATAP 264 in support of the contention that the parties are deemed to have entered into a statutory lease by operation of section 8 of the Act on or after 15 November 2019. 4. In Helou, the Tribunal at [82] said this: [82] In the Tribunal's opinion, the foregoing cases establish the following propositions regarding s 8(1). First, a person who is already in possession of retail shop premises pursuant to a pre-existing tenancy not covered by the Act may be said notionally to 'enter into possession… as lessee under the lease' without vacating and re-entering the premises, once an agreement for a new lease falling within the Act is concluded. Secondly, the commencement of a lease by virtue of entry into possession or payment of rent by the lessee may occur under s 8(1) even though no formal deed or agreement of lease is ever executed, so long as the parties have reached 'consensus' as to the terms of the lease. Thirdly, in order to reach this 'consensus' so as to give rise to the requisite 'lease relationship', it is not necessary that the parties reach agreement on all the terms of the right of occupation. This is an implicit consequence of the broad definition of 'lease' in s 3, embracing 'any agreement', express or implied, and whether oral, in writing, or partly oral or partly in writing, 'under which a person grants or agrees to grant to another person for value a right of occupation of premises for the purposes of the use of the premises as a retail shop'. 1. If I had been required to decide this issue, I would have concluded that the applicant did in fact enter into what is referred to as a statutory lease under the Act from 15 November 2019, consistent with what was said in Helou. The applicant was already in possession of the premises under a pre-existing lease, it had not vacated and re-entered the premises, and it continued to pay rent. While for the purposes of a statutory lease under the Act reaching agreement on all essential or critical terms is not required, as I have found, the parties agreed on the terms of the lease except for rent but agreed on the method for calculating that rent. Further, the definition of "retail shop lease" found in section 3 of the Act – which is "any agreement under which a person grants to another person for value a right of occupation of the premises for the purpose of the use of the premises is a retail shop…" is sufficiently broad as to include an agreement that is partly oral and partly in writing, as is the case here. Did the respondents repudiate the lease entitling the applicant to accept the repudiation and terminate the lease? 1. The next issue is whether the respondents repudiated the lease entitling the applicant to accept the repudiation and terminate the lease. 2. The respondents refused to enter into a new option lease with the applicant, issued two notices of termination and commenced proceedings for possession. The applicant says that in doing so the respondents repudiated the lease, the applicant accepted that repudiation and terminated the lease on 15 August 2020. 3. In Progressive Mailing House Pty Ltd v Tabali Pty Ltd (1985) 157 CLR 17 at 33 Mason J (as his Honour then was) said this as to what constitutes repudiatory conduct: What needs to be established in order to constitute a repudiation is that the party evinces an intention no longer to be bound by the contract or that he intends to fulfil the contract only in a manner substantially inconsistent with his obligations and not in any other way… 1. Citing World Best Holdings Ltd v Sarker [ 2010] NSWCA 24 and Enviro Remote Sensing Australia Pty Ltd v Bankstown airport Ltd (2008) 14 BPR 26,191, Prof Brendan Edgeworth in the of Butt's Land Law (7th Ed) said this: [7.1610] Where a landlord purports to terminate the lease for the tenant's repudiation, but the tenant's conduct is not in fact repudiatory, the landlord may well be found to have repudiated, entitling the tenant to terminate the lease and sue for damages. 1. A landlord commencing proceedings for possession will have similar consequences. Referring to a number of cases including Joint Coal Board v Noone Pty Ltd (1984) 3 BPR 9440 (Joint Coal Board), a case cited by Mr Doyle, Prof Edgeworth, said this: [7.1860] Where the landlord chooses to recover possession by taking court proceedings, summons claiming possession in an unequivocal fashion and served on the tenant operates as a re-entry and brings about a forfeiture from the date of service. 1. In Joint Coal Board, Yeldham J at 9454 said this: In my opinion the service of the summons in the present proceedings, which claims possession of the premises described in the head lease and an order that the plaintiff he at liberty to issue a writ for possession forthwith, was such an unequivocal act indicating the lessor's intention to treat the lease as being at an end as to constitute a re-entry pursuant to s 85(1)(d) of the Conveyancing Act 1919 and cl 2(b) of the lease. 1. The first termination notice served by Mr Blenkinsop on 29 June 2019 was an unequivocal statement that the respondents no longer intended to be bound by the lease. It was, however, withdrawn shortly after being served and not accepted by the applicant. 2. The second termination notice, Mr Shad's letter to Mr Ajaje 14 July 2019, was also, in my view, an unequivocal statement that the respondent no longer intended to be bound by the lease. It was not withdrawn by the respondents. 3. When the respondents commenced proceedings in the Tribunal on 3 August 2020 seeking, inter alia, an order that the applicant vacate the retail premises by 15 August 2020, they committed, in my view, what Yeldham J described as "an unequivocal act indicating (their) intention to treat the lease as being at an end". It was an unequivocal act by the respondents' indicating that they intended to treat the lease as being at an end. It was a repudiation of the lease. 4. On 14 August 2020, Mr Ajaje wrote a lengthy letter to Mr Shad. Referring to the two notices and the commencement of proceedings for possession, he informed Mr Shad that the applicant accepted the respondents' repudiation of lease and terminated the lease. The applicant vacated the premises on 16 August 2020. 5. Having found that the parties treated the option in the lease was validly exercised, I find that by service of the second termination notice and commencement of proceedings for possession of the premises, the respondents did repudiate the lease. The applicant was entitled to accept that repudiation and terminate the lease, which it did on 15 August 2020. Is the applicant entitled to damages, and if so, what is the quantification of those damages? 1. The next issue is whether the applicant is entitled to damages and if so, what is the amount of those damages. 2. The respondents having repudiated the lease and the applicant having accepted the repudiation and terminated the lease, it is entitled to recover the damages suffered as a consequence of the respondents' breach. 3. The applicant claims damages for wasted expenditure and stock loss totalling $267,301. In the alternative, it claims damages based on Mr Sarabaca's valuations of the applicant's business. 4. Mr Sarabaca, in his report, valued the business as at November 2019, at the end of the first four year term of the lease, and in August 2020. This was his conclusion: …. based upon the direct market data collected, the value of the business as at November 2019 would be between $132,000 and $205,000 plus Stock at Valuation. The value of the business at closure as at August 2020 would be between $96,000 and $150,000 plus Stock at Valuation. 1. If the applicant is entitled to damages, the respondents say that the appropriate amount is $21,000 excluding realisation costs and tax as at November 2019 and $19,500 again excluding realisation costs and tax as at August 2020. These are the values Mr White attributed to the applicant's business based on the value of the assets purchased by the applicant in 2018 from GCS, the former tenant of the premises. 2. I directed that both experts meet and produce a joint report in an attempt to narrow down the issues in dispute between them. That report was duly produced. In short, while there was agreement on some matters, including that the financial information provided by the applicant showed inconsistencies and lacked details, they were nevertheless unable to reach a joint agreement on the value of the business. 3. In his report Mr Sarabaca identified three approaches in valuing the applicant's business as at August 2020; the capitalisation of earnings method, the asset based method and the direct market data. He was of the opinion that direct market data was the best indicator of the market value of the business. The data he used was from Bizstats, a database of business sales Mr Sarabaca helped set up and which is managed by the Australian Institute of Business Brokers. Members of the Institute contribute actual sales data. The sources he relied on were three sales of convenience stores located in Western Australia and Queensland. One sale was in 2012 and two in 2015. He said there were no more recent comparable sales and no comparable sales in Sydney. He also said that despite the sales taking place some years ago, he did not think the market for convenience stores had changed at all. Mr Sarabaca said that he called brokers in Western Australia and Queensland to confirm that the sales were of businesses that were comparable to the applicant's business, 4. Mr El-Hage was critical of Mr Sarabaca's report being based on sales that took place many years ago and in other States. Mr Doyle was also not an enthusiastic supporter of the report. He said that I should prefer the wasted expenditure method for quantifying the applicant's damages and not Mr Sarabaca' market valuation of the business. This was because the applicant only traded for two years which included at least six months of trading affected by the pandemic and the financial information provided by the applicant contained insufficient detail to appropriately value the business. Mr Doyle also contended that and Mr Sarabaca's valuation assumes the applicant will sell its trading stock at fair market value but he said there was evidence that $10,000 of the stock was disposed of due to short shelf life and a further $35,000 worth of stock was yet to be liquidated. 5. The wasted expenditure claim by the applicant is not without its difficulties as pointed out out in submissions on behalf of the respondents. In particular, a significant number of the amounts claimed by the applicant that make up what is described as "business improvement expenditure" which total $88,470, are unsupported by any documentary evidence. Moreover, the documentary evidence has been provided cannot be readily cross referenced to or matched against any of the items that make up that claim. What is also unsupported by any documentary evidence is the applicant's claim for trading stock that the applicant claims to have disposed of or that could not be liquidated. It was Mr Hallak's evidence that when the lease came to an end he held stock on the premises for which he paid $35,000 for general stock and $110,000 for cigarettes and tobacco. He says that at the time the business closed, approximately $10,000 of stock was disposed of due to spoilage and short shelf life. The $110,000 in cigarettes and tobacco was transferred to his other business but resulted in overstocking and some of the cigarettes were disposed of due to the expiry dates. As at May 2021 he still held approximately $70,000 of this stock. Mr Doyle says the applicant accepts that 50% of the stock will ultimately be liquidated leaving a balance claimed of $35,000. 6. In The Commonwealth of Australia v Amman Aviation Pty Ltd (1991) 174 CLR 64 (Amann Aviation), which Mr Doyle relies as the basis for pressing the applicant's claim for wasted expenditure, Mason CJ and Dawson J, relevantly said this in relation to such claims: Page 81 If the performance of a contract would have resulted in a plaintiff, while not making a profit, nevertheless recovering costs incurred in the course of performing contractual obligations, then that plaintiff is entitled to recover damages in an amount equal to those costs in accordance with Robinson v Harman, as those costs would have been recovered had the contract been fully performed. Similarly, where it is not possible for a plaintiff to demonstrate whether or to what extent the performance of a contract would have resulted in a profit for the plaintiff, it will be open to a plaintiff to seek to recoup expenses incurred, damages in such a case being described as reliance damages or damages for wasted expenditure. 1. The fact that there is difficulty in calculating damages is not an excuse for a court, or tribunal, doing the best it can with the evidence at hand. As Mason CJ and Dawson J said Page 83 The settled rule, both here and in England, is that mere difficulty in estimating damages does not relieve a court from the responsibility of estimating them as best it can. Indeed, in Jones v. Schiffmann Menzies J. went so far as to say that the "assessment of damages ... does sometimes, of necessity involve what is guess work rather than estimation". Where precise evidence is not available the court must do the best it can. And uncertainty as to the profits to be derived from a business by reason of contingencies is not a reason for a court refusing to assess damages. 1. In my opinion the applicant is entitled to damages for wasted expenditure rather on the basis of either value attributed to the business by Mr Sarabaca and Mr White. These are my reasons for rejecting the valuations: 1. Both experts and also Mr Hallak conceded that the applicant's financial information used as the basis of Mr Sarabaca's valuation was generally unsatisfactory. 2. The applicant had only been trading for approximately two years. Further, although the business remained open during the pandemic, for at least six months its trading was significantly affected according to Mr Hallak's unchallenged evidence. 3. The age of the comparable sales relied upon by Mr Sarabaca make it inherently problematic for sales that took place that many years ago in other States to be reliable comparisons notwithstanding Mr Sarabaca's evidence to the contrary. 4. The value Mr Sarabaca attributed to the business as at August 2020 is less than the wasted expenditure claimed by the applicant. 5. While Mr White adopted a different approach in valuing the applicant's business, his valuation of $21,000 is difficult to reconcile with the applicant acquiring the business in August 2018 from GCS for $111,000 (of which goodwill was $86,000 and assets $25,000) and reporting a turnover of $733,066 as at November 2019 and $535,933 as at August 2020. Added to that is Mr Hallak's evidence, which I accept, that after applicant acquired the business from GCS, the shop was refurbished and fitted out by the applicant prior to commencing to trade from the premises. 1. The applicant acquired the business from GCS and was assigned the lease in August 2018. At the time there were 14 months left to run on the lease. It is implausible, in my view, that the applicant would go to the expense of acquiring the business and incurring other costs in fitting out the premises if it was not expecting to remain in occupation of the premises beyond the expiration of the first term of the lease. I am comfortably satisfied that the applicant expected to recover the expenditure it incurred in acquiring, setting up and operating the business over the term of the lease and for at least a further 5 years under the first option granted under the lease. 2. Mr Shad submitted that the applicant did not mitigate any loss suffered and its conduct contributed to or caused the loss suffered. No evidence was adduced on behalf of the respondents as to the conduct that was said to contribute to the loss or how the applicant ought to have mitigated its losses. If complaint was directed to the stock losses claimed by the applicant, the evidence discloses that the applicant continued to trade up until its contractor started to remove the fit out from the premises on 11 August 2020. It then attempted to resell the stock in its other business. I am not persuaded that the applicant failed to mitigate any loss that it suffered but it is, of course, another matter whether the applicant can prove the loss. 3. The applicant's claim for wasted expenditure includes the cost of acquiring the business from the previous tenant of the premises. 4. Mr Shad submitted that the applicant should not be able to recoup those expenses incurred in establishing a business because they are incurred before the renewal of lease agreement came into existence. I reject the submission. The applicant is entitled to recover preliminary expenses (See: Amann Aviation per Gaudron J at page 154). 5. I also reject Mr Shad's submission that there is no causal connection between any breach and any loss suffered. It was the direct consequence of the respondents' breach that the expenditure incurred by the applicant in acquiring the business from the previous tenant and fitting out the premises was lost, it being unable to recoup that expense by continuing to trade when the respondents repudiated the lease. 6. In assessing the applicant's damages for wasted expenditure, I find that the evidence establishes that the applicant did pay $111,000 to purchase the business, the amount consisting of goodwill ($86,000) and equipment ($25,000). It is reasonable to expect that the applicant would have recovered those costs had it continued to conduct its business from the premises for the first five year option period had the lease not been repudiated by the respondents. According to the contract for sale, the business was sold as a going concern. It is assumed, therefore, that the sale was GST-free. The applicant is therefore entitled to be compensated for the cost of acquiring the business in the amount of $111,000. 7. I also find that the applicant did incur expense in the course of the rent review determination conducted by Mr Whealing those expenses being Mr Whealing's fee ($3,575), Mr Fotayn's submission fee ($2,750) and Mr Shoebridge's survey fee ($990). Those expenses, which in total amount to $7,315, are reasonably foreseeable. The applicant is entitled to be compensated for those costs in the amount of $6,650 which excludes the GST component. GST is not recoverable in a damages claim. 8. The applicant has claimed $15,516.60, inclusive of GST, being the costs incurred with Aminedevelopments to remove the fit out from the premises between 11 and 15 August 2020. Mr Shad submits that these costs would have been incurred in any event. I reject that submission. Whether those were likely to be incurred at the end of the lease is, in my view, irrelevant. They were incurred as a direct consequence of the respondents' breach and the applicant is therefore entitled to be compensated for those costs in the amount of $14,106, being the amount claimed excluding GST. 9. The applicant's wasted expenditure claim includes claims for business improvement expenditure of $88,470, $10,000 for trading stock said to have been disposed of and $35,000 in unliquidated stock. These claims are more problematic due to the paucity of evidence to support them. 10. It was Mr Hallak's evidence that business improvement expenditure of $88,470 was made up of the following amounts: Coffee machine $8,800 Installation of coffee machine $300 Coffee machine stand $1,500 Point of Sale System: 3 Computers & Scanners $4,800 Second Hand Open Display Fridge $9,800 Signage $10,000 LED strip lighting over shelving and showcases $3,000 Fitout: Large showcase - 6x8 metres $12,000 Fitout: Counter showcase $3,800 3 X CCTV Surveillance systems $12,900 Split system air-conditioner $3,100 Electrician to cabling of all wires neatly $1,500 Door Shutters (electric - custom made steel) $3,500 Free stand $1,200 Lighting (inside and outside) and general electrical work $6,900 Store room shelves and work $1,100 Safes $1,040 Electrical security customer door with installation $1,200 1 X large TV monitor (currency exchange- customers) $780 1 X small TV monitor (currency exchange - staff) $250 Total $88,470 1. The following are the only documents in evidence to support the applicant's business improvement expenditure claim: 1. 12 Month Purchase Plan Agreement with Lavazza Office Coffee $8,999 plus GST; 2. Global Displays receipt to supply and install floor to ceiling display units with glass sliding doors for $12,500 plus GST; 3. Shop for Shops the tax invoice to supply two counter showcases with LED lighting and lockable doors, plus freight $3,150 including GST; 4. what appears to be an electronic funds transfer printout showing a transfer of $1,000 to a business by the name of "Signwave" on 19 December 2018; and 5. what also appears to be an electronic funds transfer printout showing a transfer of $816.302 to a business by the name of "Kangaroo signs" on 26 February 2020. 1. Mr Hallak's evidence is that a number of the contractors did not provide receipts for equipment and fit out payments while some were paid for equipment and fit out in cash and did not provide receipts. Mr Hallak's evidence did include photographs of the premises taken both prior to and after the applicant purchased the business from the previous tenants. The post purchase photographs showed the premises stripped out, being fitted out and in its completed state, including a photograph of a Lavazza coffee machine. There is also a photograph of a large external sign being fitted high up on the side wall of the premises by workmen using a mobile extension platform. Based on this evidence, which was not challenged by the respondents, I am comfortably satisfied that the applicant did undertake work in fitting out the premises. 2. The applicant produced only a handful of documents to corroborate its business improvement expenditure claim but none of the documents are readily identifiable with the amounts specifically claimed by the applicant. I am therefore unable to be satisfied to the requisite standard that all of the applicant's claimed business improvement expenditure of $88,470 was incurred. However, I am mindful of what the High Court said in Amann and, as I said, I am comfortably satisfied that the applicant did undertake fit out work in the premises and incurred expenses as a consequence. The applicant is entitled to be compensated for business establishment expenditure for which it has produced documents to substantiate the expenses incurred. In addition, there will be an amount of $15,000 awarded to cover fit out expenses. Although no business records, other than those I have referred to, were in evidence, I am comfortably satisfied on the basis of the applicant's photographic evidence that the applicant did undertake a fit out of the premises and some compensation for the cost of doing so is justified. Accordingly, I find that the applicant is entitled to be compensated in the amount of $50,078.94 which is made up as follows: 1. Lavazza Purchase Plan Agreement $8,999 2. Global Displays $12,900 3. Shop for Shops (excluding GST) $11,363.64 4. Signwave $1,000 5. Kangaroo signs $816.30 6. For other fit out items $15,000 Total $50,078.94 1. Mr Hallak's evidence was that when the business closed, the applicant had 35,000 in general stock and 110,000 worth of cigarettes. He said that approximately $10,000 of stock was disposed of due to spoilage or otherwise short shelf life. He also said the applicant held approximately $110,000 in cigarettes and tobacco stock which was transferred to Mr Hallak's other business but resulted in overstocking and some of the cigarettes were disposed of due to their expiry date. Approximately $70,000 of this stock was still held in May 2021. 2. Mr Doyle says the applicant is also entitled to trading stock it has been unable to liquidate. He says that of the $70,000 worth of trading stock that could not be liquidated the applicant accepts that 50% of that stock will ultimately be liquidated leaving a balance claimed $35,000. 3. The applicant has not adduced any documentary evidence showing any stock purchases let alone purchases of $70,000, no documentary evidence to support that claim that stock valued at $35,000 that could not be liquidated and no documentary evidence to support the claim for $10,000 in lost trading stock. What that stock was and how such neatly rounded off amounts were calculated was not explained was not explained by Mr Hallak. 4. In my view, in claims for stock loss such as this, it was incumbent upon the applicant in seeking compensation to adduce evidence upon which there could be some reasonable and justifiable basis for finding that the applicant did in fact suffer the losses as claimed. For example that could include purchase orders, invoices and photographs. In the complete absence of any evidence of that nature, I am unable to be satisfied to the requisite standard to be able to make a finding that the applicant has suffered the claimed stock loss. This part of the applicant's claim is therefore refused. What, if any, rent adjustments need to be made having regard to the rent determination, the COVID Regulation and the bank guarantee? 1. The next question for determination raises a number of issues. They are: 1. What rent adjustments should be made as a consequence of Mr Whealing's rent determination? 2. It being accepted that the applicant owes the respondent rent for the 15 April to 14 August 2020, how much is owed after allowing for rent relief having regard to the Code and COVID Regulation? 3. Is the applicant entitled to the return of bank guarantee that was provided by the applicant as security for its obligations under the lease. 1. I will deal with each of these issues in turn. What rent adjustments should be made as a consequence of Mr Whealing's rent determination? 1. Mr Whealing found that the rent for the first year of the option lease was $110,000 plus GST. The option lease was to have commenced on 15 November 2019. The annual rent up until 14 November 2019 was $154,969 plus GST. Pending the rent determination, the applicant continued to pay rent at the higher rate, as required by the lease from 15 November 2019 to 31 March 2020. 2. Part IV of the lease prescribes the process by which the lease option is to be exercised. Clause d of Part IV sets out what adjustments are to be made once the rent has been determined for the renewed term of the lease. It reads as follows: If the rent for the renewed term is not ascertained before its commencement, the Lessee shall pending ascertainment thereof pay the rent at the rate payable immediately before the expiration of the term of this present Lease and upon the rent for the renewed term being ascertained any necessary adjustment of rent calculated from the commencement of the renewed term shall forthwith be made between the Lessee and the Lessor. 1. While I do not understand this to be in dispute, the applicant, by reason of clause d, is clearly entitled to a rent credit being the difference between the higher rent paid from 15 November 2019 to 31 March 2020 and the lower market rent determined by Mr Whealing. The applicant's points of claim states that as at 4 June 2020, the carryover rental credit was $20,610.58 inclusive of GST. According to an email sent by Mr Hallak to Mr Blenkinsopp on 4 June 2020, the adjustment of the rent as a consequence of the rent determination is that the applicant is owed $20,610.58. Mr Ajaje, in a letter sent to Mr Blenkinsopp on 11 August 2020 also said the rental credit was $20,610.58 Nothing has been raised by the respondents to suggest that this calculation is incorrect or that the applicant is not entitled to be repaid or have the benefit of the adjusted amount. Indeed, the email Mr Blenkinsopp sent to Mr Montano on 17 April 2020 in effect acknowledged that the adjusted rent was approximately $22,000 plus GST. 2. Having found that the parties did treat the option under the lease as validly exercised and Mr Whealing having determined that the rent for the first year of the option lease was lower than the rent the applicant continued to pay after 15 November 2019, Part IV, clause d required an adjustment to be made in the applicant's favour. On the basis of the evidence to which I have just referred, I am comfortably satisfied that the rent credit to which the applicant is entitled is $20,610.58. How much rent is owing by the applicant after allowing for rent relief having regard to the Code and COVID Regulation? 1. The next issue concerns how much rent is payable by the applicant for the period 15 April to 14 August 2020 after allowing for rent relief as a consequence of the pandemic. Before I deal with that issue, I need to address the jurisdiction issue raised by Mr El-Hage, 2. As I understand it, Mr El-Hage submits that until the parties have attempted to resolve their differences over rent relief, in other words exhausted the negotiation process set out in the Code and in the COVID Regulation, the Tribunal does not have jurisdiction to determine the matter. I am unable to accept that submission. These are my reasons. 3. The Code sets out leasing principles by which parties to a commercial lease are expected to negotiate and agree appropriate temporary rent relief arrangements during the pandemic. In addition to the principles, the Code says that where landlords and tenants cannot reach agreement on leasing arrangements as a direct result of the pandemic, the matter should be referred by either party and subjected to applicable State or Territory retail/commercial leasing dispute resolution processes. 4. Despite the fact that it's title includes the word "mandatory," the Code does not of itself have legislative force in this State. It is, however, recognised in the COVID Regulation which prescribes a process that obliges the parties to a commercial lease to negotiate in good faith the rent payable having regard to the impact of the pandemic and the principles set out in the Code (see: clause 7). If the parties to a lease are unable to reach agreement on those matters, then the Tribunal has the power to make orders under Part 8 (Dispute resolution) of the Act in relation to an impacted commercial lease dispute which includes any obligation to pay money (see: clause 8 of the COVID Regulation). 5. Clause 9 of the COVID Regulation, relevantly, requires the Tribunal to have regard to the Code when making a decision or order relating to the recovery of possession of premises, the termination of a commercial lease, or the exercise or enforcement of any other right of a lessor of premises. However, neither the Code nor the COVID Regulation require negotiations over rent relief to be exhausted before the Tribunal can exercise any of the powers under Part 8 of the Act. In other words, there is no jurisdictional impediment to the Tribunal making an order under Part 8 in relation to the appropriate amount of rent relief even if there is some possibility of further negotiations resolving the dispute. 6. The Tribunal, in my view, also has a broad discretion in dealing with matters such as this. Each matter must of course be decided on a case by case basis. The fact the parties here have been endeavouring to resolve the rent relief issue for some time by direct negotiation, and the respondent on two occasions has refused to participate in a mediation of the rent relief dispute, justifies the Tribunal exercising its discretion and determining the rent relief issue now. 7. Turning then to the issue at hand, there is no dispute that the applicant owes rent to the respondents for the period 15 April to 14 August 2020 and the rent owing is to be adjusted for rent relief as a consequence of the pandemic. The applicant was in receipt of jobkeeper, the lease was an impacted lease and the applicant an impacted lessee under the COVID Regulation. The Code therefore applies. 8. The total rent payable for the period 15 April to 14 August 2020 was $40,133.32 or $10,033.33 per month, inclusive of GST, as per the rent determination. In November 2020, Mr Blenkinsopp sent the applicant an invoice for $23,754.45 which he says is the rent payable for this period. It is not clear from the evidence how this figure is calculated and whether it was based on the old rent or the rent determination. If it is the latter, that represents a rent discount or waiver of 42%. 9. The applicant says that it had a decline in turnover of 71.48% for the period 15 April to 14 July 2020, and 55.9% from 15 July to 14 August 2020. It claimed a rental waiver commensurate with the percentage decline in turnover for each of those periods. Based on a monthly rent of $10,033.33, it says the total rent waiver for the period should be $27,228.20 leaving rent owing of $13,105.12. 10. Under leasing principle 3 in the Code, landlords must offer tenants a proportionate reduction in rent payable in the form of waivers and deferrals up to 100% of the amount ordinarily payable on a case by case basis. Leasing principle 4 says that rent waivers must constitute no less than 50% of the total rent payable under principle 3. 11. Both Mr Sarabaca and Mr White were of the opinion that the applicant's financial information was unsatisfactory. Mr Sarabaca described the financials that were provided as " basic and did not contain enough detail in order to make the appropriate adjustments and determine actual owners earnings." Even Mr Hallak conceded that the applicant's financial information was incomplete. I am therefore unable to accept that the accuracy of the applicant's percentage decline in turnover figures for the purposes of calculating rent relief. 12. Doing the best I can with the information provided, I am of the view that a rent waiver of 50%, the minimum waiver stated in the Code, is appropriate. The lease having come to an end it is not appropriate, in my view, for there to be any rent deferral. 13. The total amount of rent outstanding is $40,133.32. A 50% waiver reduces the outstanding rent to $20,066.66. Offset against this amount is the $20,610.58 rent credit to which the applicant is entitled leaving a balance of $543.92 owing by the respondents to the applicant. The bank guarantee 1. That then leaves the issue of the bank guarantee. 2. Section 16BA of the Act requires a lessor who receives a bank guarantee for a lease to return the bank guarantee to the lessee within 2 months after the lessee completes performance of the obligations under the lease for which the guarantee has been provided as security. 3. The respondents still hold the $41,375.10 bank guarantee. Since no cross-claim has been brought by the respondents and it has been found that they have repudiated the lease and the lease validly terminated by the applicant, there is no basis for the respondents continuing to hold the bank guarantee. An order will therefore be made for the bank guarantee to be returned to the applicant. Interest 1. The applicant claims interest. Under section 72A of the Act the Tribunal has the power in relation to a retail tenancy claim to order that the amount ordered to be paid include interest at a specified rate on the whole or any part of the amount and 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 the rate which is payable on a judgement debt of the District Court of New South Wales. 2. The award of interest is discretionary and intended to compensate a party for being kept out of its money. In the exercise of my discretion, the applicant is entitled to interest on the following amounts from 27 November 2020, the date it commenced proceedings in the Tribunal, at the rate payable on a judgement debt of the District Court of New South Wales: 1. The amount paid to acquire the goodwill and assets in August 2018 of the business that had been conducted from the premises $111,000 2. Expenses incurred in the rent review by Mr Whealing $6,650 3. Business establishment expenses $50,078.94 4. Removal of fit out costs $14,106 5. The rent credit after adjustment for rent owing and rent relief $543.92 Total $182,378.86 1. The amount of interest to be awarded on $182,378.86 is $14013.45, calculated as follows: Start Date End Date Days Rate Amount Per Day Total 27/Nov/2020 31/Dec/2020 35 6.25% $31.1439 $1090.04 01/Jan/2021 30/Jun/2021 181 6.1% $30.4798 $5516.84 01/Jul/2021 31/Dec/2021 184 6.1% $30.4798 $5608.27 01/Jan/2022 28/Feb/2022 59 6.1% $30.4798 $1798.31 Total 459 $14,013.45 1. The amount payable by the respondents to the applicant, inclusive of interest, is $196,392.31. Costs 1. Both the applicant and the respondent seek costs. For their benefit in deciding whether they wish to make a costs submission, I will indicate now, and subject to anything they wish to say, it is my provisional view only that because the amount claimed by the applicant is more than $30,000, Rule 38(2)(b) of the Civil and Administrative Tribunal Rules (the Rules) applies and, having regard to the outcome of the applicant's claim, the respondents should pay the applicant's costs of and incidental to the proceedings, as agreed or assessed. In other words, costs should follow the event. 2. To give the parties time to consider their respective positions, the final orders will provide for the filing of file written submissions on the question of costs if they wish to do so. If no written submissions are filed, then an order for costs will be made in favour of the applicant, as I have indicated. Is the applicant entitled to a costs order in COM 20/32703? 1. The final issue to be decided is the costs dispute in COM 20/32703 (the proceedings), the proceedings commenced by the respondents (Mosszan et al). They were discontinued without the applicant's (Jude's) consent and, therefore, it now seeks an order for costs. 2. Section 60(1) of the CAT Act provides that each party to proceedings in the Tribunal is to pay the party's own costs. Section 60(2) does permit the Tribunal to award costs in relation to proceedings before it if there are special circumstances warranting the making of the order. However, where there are proceedings in the Consumer and Commercial Division of the Tribunal, then despite section 60, the Tribunal may, by Rule 38(2)(b) of the Rules, award costs in the absence of special circumstances provided the amount claimed or in dispute in the proceedings is more than $30,000. 3. The applicant has filed two affidavits; one by each of Mr Hallak and Mr Soltan. In addition, there are three separate sets of written submissions by Mr Doyle. For the applicant, there is an affidavit by Mr Shad. He has also filed written submissions. 4. The parties have agreed that this cost application is to be determined on the papers. Accordingly, an order will be made under section 50(2) of the CAT Act. 5. The events giving rise to this cost application are not in dispute. In summary: 1. the respondents issued the second termination notice on 14 July 2020 giving one month's notice of the termination of the lease and requiring the applicant to vacate the premises by 15 August 2020; 2. the applicant commenced the proceedings on 3 August 2020. It claimed, inter alia, an order that the applicant vacate the premises by 15 August 2020 and a further order that it pay all outstanding rent until the date of vacate the premises; 3. on 1 July 2020, the respondents' agent sent an invoice to the applicant for rent in the amount of $56,821.80. A further invoice was sent to the applicant on 7 August 2020 in the amount of $71,027.25 which included the previously invoiced amount of $56,821.80; 4. on 4 August 2020 the Tribunal sent the parties a notice of directions hearing to be held on 21 September 2020; The notice contained directions for the purpose of the parties preparing for the directions hearing; 5. on 14 August 2020, Mr Ajaje sent a lengthy letter to Mr Shad setting out the reasons why the applicant contended that the respondent had repudiated the lease, accepting the repudiation and terminating the lease; 6. Mr Shad sent an email to the Tribunal on 17 August 2020. Mr Ajaje was copied in on the email. The email reads: We refer to the above matter and advise that we act for the applicant. (Jude Trading Pty Ltd) has now vacated the premises and (Mosszan et al) now seeks to withdraw the application. We kindly request the Tribunal make the following orders: The application is dismissed in accordance with section 55 (1) (a) of the Civil and Administrative Tribunal act 2013 as (Mosszan et al) has withdrawn the application. No order as to costs Thank you in advance. 1. The order dismissing the proceedings was made by the Tribunal on 18 August 2020. 2. Mr Ajaje sent an email to the Tribunal on 19 August 2020. He copied Mr Shad into that email. In relevant part the email reads: We refer to the below matter. The orders referred to "by consent". For abundance of caution, our client did not consent to the below matters. Kindly amend the orders to delete "by consent" and to refer to the request is that of (Mosszan et al). Our client does not agree to the order of "no order as to costs". 1. Another order dismissing the proceedings was made on 25 August 2020 by the Tribunal. The Principal Member's reasons state that "either party is at liberty to apply for a costs order." 1. In his affidavit, Mr Hallak says that following the directions made by the Tribunal on 4 August 2020, the applicant instructed ANB Lawyers (Mr Ajaje's firm) to respond to the application and comply with the directions. He also says that ANB lawyers instructed Mr Andrew Fernon of counsel and the applicant incurred significant legal costs to both in order to respond to the application. He does not say what those costs were. 2. Mr Soltan says in his affidavit that he was first instructed in the middle of April 2021 to prepare evidence for the applicant's damages claim in COM 20/49850. Sometime around 6 June 2021, he received the respondents' rental invoices of 1 July and 7 August 2020. He then advised the applicant that it was in a position to make a costs application under Rule 38 of the rules. Mr Soltan says he received instructions on 17 June 2021 to make the costs application. 3. The thrust of Mr Shad's affidavit evidence is that rather than defend the proceedings brought by the respondents, as was the applicant's right, by handing over possession of the premises on 16 August 2020 it simply capitulated and agreed to grant possession to the respondents. As a consequence, it was his evidence that the applicant having, in his words, "capitulated and vacated voluntarily, it was unnecessary (and plainly futile) …. to pursue the relief" sought in paragraphs (i) to (iv) of the application. It is to be noted that those particular paragraphs concern the exercise of the option and recovery of possession of the premises. Mr Shad omits to mention that his clients also sought an order that the respondent pay all outstanding rent to the date it vacated the premises, the rent to be calculated on the basis of the rent being $154,967 per annum. 4. The application for costs is made by the applicant under Rule 38(2)(b) of the Rules on the basis that the amount claimed by the respondents in their application exceeded $30,000. It is, however, submitted by Mr Doyle that under general civil proceedings cost principles, a claimant who withdraws a claim is ordinarily liable for the costs thrown away by the defendant in responding to the claim and, in any event, the premature instigation of the proceedings and then their withdrawal without any intervening circumstance amount to special circumstances warranting a costs order under section 60(2) and 60(3) of the CAT Act. 5. Mr Shad articulates the respondents' opposition to the costs application on a number of bases. In summary they are: 1. by reason of section 60(1) of the CAT Act, the parties are to pay their own costs; 2. assuming the $30,000 threshold is established and Rule 38 applies, and even though in the absence of special circumstances the Tribunal may award costs, it should not do so because: 1. the cross application should have been made promptly and diligently after the dismissal order was made on 25 August 2020; 2. a delay of 10 months to make the application after liberty to apply was granted was tardy and not reasonably explained; 3. minimal cost are likely to have been incurred by the applicant where the proceedings were commenced and withdrawn within a period of 20 days after the premises were vacated; 4. the applicant having capitulated by granting possession of the premises to the respondents indicates that the cost application is not fairly arguable; 5. the application commenced proceedings was not filed prematurely and the respondents were entitled to bring the option dispute before the Tribunal to provide certainty and finality to the parties; 6. there was no hearing on the merits; 7. there should be an exercise of discretion in favour of the respondents because they obtained substantively what was being sought from the applicant who capitulated. 8. even though there is no time stipulation in the CAT Act and Rules for the making of a costs application, the Tribunal should still have regard to the objects of the CAT Act set out in section 3, and in particular: 1. to enable the Tribunal to resolve the real issues in proceedings justly, quickly, cheaply and with as little formality as possible; 2. to ensure that the decisions of the Tribunal are timely, fair, consistent and of a high quality: and 3. to promote public confidence in tribunal decision-making; and 1. the Tribunal must give effect to the guiding principle found in section 36. 1. If the respondents successfully oppose the costs application, cost should follow the event and this is particularly so where the costs incurred in the costs application will be much greater than any reasonable costs that could have been incurred by the applicant during the period when the proceedings were commenced and then withdrawn. 1. The first issue to be determined in the context of this costs application is whether the applicable cost provision is that which is found under section 60 or Rule 38. 2. The respondents application commencing the proceedings sought an order that the applicant pay all outstanding rent but the actual amount claimed was not quantified. The absence of a specific amount claimed does not preclude the Tribunal from making an order under Rule 38. If the order sought does involve an implied claim that the applicant pay more than $30,000, Rule 38(2)(b) will be enlivened (see: Allen v TriCare (Hastings) Ltd [2017] NSWCATAP 25 at 43). There is, however, evidence that on two occasions, one just before and one shortly after the proceedings were commenced, of the respondents' agent issuing invoices to the applicant for outstanding rent exceeding $30,000. 3. It is to be noted that the respondents do not take issue with applicant's contention that the proceedings involved a claim for an amount in excess of $30,000. 4. I am comfortably satisfied on the basis of the two invoices issued by the respondents agent, that it can be implied that the respondents' claim for outstanding rent was for more than $30,000. Rule 38(2)(b))therefore applies in the determination of this costs application. 5. In Arambewela v Castle Projects Pty Ltd [2018] NSWCATAP 14 (Arambewela), the Appeal Panel, consisting of a Principal Member sitting alone, considered a costs application by a party against whom an appeal had been withdrawn. The applicable cost provision was Rule 38(2) of the Rules. Relevantly the Principal Member said this: [18] Neither the NCAT Act, nor the NCAT Rules made under that Act, contains a specific provision dealing with costs when the applicant/appellant elects to discontinue proceedings. The relevant provision is simply that the Tribunal may award costs even in the absence of special circumstances: r 38(2) of the NCAT Rules. The principles guiding the exercise of the discretion to award costs are well-established. The purpose of making a costs order is to provide compensation to the party in whose favour the order is made for the expense the party has been put to in prosecuting or defending legal proceedings. In general terms, this means that the successful party is entitled to an order for costs in its favour: Latoudis v Casey [1990] 170 CLR 534, [1990] HCA 59; Oshlak v Richmond River Council [1998] 193 CLR 72; [1998] HCA 11. While there is a general discretion for costs there is no absolute rule that, absent disentitling conduct, a successful party is to be compensated by the unsuccessful party, and nor is there any rule that a successful party might not be ordered to bear the costs of an unsuccessful party: Thomson v Chapman [2016] NSWCATAP 6 at [71]. The proper exercise of the discretion requires the Tribunal to do justice between the parties and to exercise the discretion having regard to relevant considerations and in a manner which is not arbitrary or capricious: Oshlak v Richmond River Council at [22]. [19] Where an application or appeal is discontinued there is of course no "successful party". Nonetheless, I accept that in the ordinary course, absent some compelling reason, the discontinuing party should pay the costs of the discontinued proceedings. [20] Where the initiating application has been determined, the discretion to depart from the "usual rule" will generally only be exercised where there has been some disentitling conduct on the part of the successful party: Oshlak v Richmond River Council at [40], [69]. The decision-maker is not confined to considering the party's conduct in the actual litigation itself, but can take into consideration matters which led up to and were the occasion of litigation: Furber v Stacey & Anor [2005] NSWCA 242 at [24]. In my view, these principles should be applied in the exercise of the discretion to award costs where the proceedings have been discontinued. 1. In the present costs application, having discontinued the proceedings without consent, the respondents should pay the applicant's costs unless there has been some disentitling conduct by the applicant. This is in accordance with the approach of the Principal Member in Arambewela. 2. Has there been any disentitling conduct on the part of the applicant? The respondents give a number of reasons why the Tribunal should not make a cost order but only two of those reasons, in my view, could be said to arguably constitute disentitling conduct on the part of the applicant. The first is the delay in bringing the application. The second is what has been described as the applicant's capitulation. In my view neither amounts to disentitling conduct on the part of the applicant. These are my reasons: 1. True it is that there has been a long delay on the part of the applicant in seeking costs. Some explanation for the delay has been provided by Mr Soltan in his affidavit although it is somewhat superficial. It appears that a few months after becoming involved in the matter in April 2021, Mr Soltan came across the rental invoices issued in July and August 2020 by the respondents' agent. It was then that he advised the applicant that it was in a position to make a costs application under Rule 38(2). There is no evidence explaining why no costs application was made between 25 August 2020 and when Mr Soltan was instructed in April 2021, or why it then took a further five months for the application to be made. 2. On the other hand, there is nothing in the CAT Act or Rules which prescribes a time limit within which costs applications may be brought. The respondents have also not pointed to any prejudice suffered by them such that they are unable to effectively oppose the costs application. Indeed, their legal representatives have been able to mount a very robust defence to the application that does not suggest any prejudice caused by the delay. 3. It is, in my view, wrong to view the applicant as having capitulated in the face of the proceedings by surrendering possession of the premises on 16 August 2020. As my findings in COM 20/49850 show, the commencement of proceedings by the respondents was repudiatory conduct on their part entitling the applicant to accept the repudiation, terminate the lease and vacate the premises. It was not an act of capitulation. In any event the respondents' claim for rent was very much alive and there is no suggestion of any capitulation by the applicant in respect of that claim.. 4. While mindful of the guiding principle found in section 36 of the CAT Act, and the obligation it imposes upon parties and their legal representatives, I do not consider those provisions to operate so as to preclude a party from seeking a costs order where the right to do so has been expressly reserved by the Tribunal and without limit as to time. 1. The following factors are, in my view, also relevant here in the context of the exercise of the Tribunal's discretion to award costs to the applicant: 1. The second termination notice was served by the respondents' solicitors on the applicant's solicitors on 14 July 2020 giving one month's notice of termination of the lease and informing the applicant to vacate the premises by 15 August 2020. The application to commence the proceedings was filed with the Tribunal on 3 August 2020. In other words, it was filed before the time specified in the notice for the applicant to vacate the premises. The application was clearly premature. 2. It cannot be said that by the applicant vacating the premises, the respondents obtain substantially what they had sought. There still remained a substantive rent claim which the respondents abandoned in withdrawing the proceedings. 3. There is no suggestion from the evidence that Mr Shad contacted Mr Ajaje prior to his email of 17 August 2020 to the Tribunal either seeking his consent to the proposed orders or his consent to communicating with the Tribunal about the matter. That would have been the appropriate thing to do rather than making a unilateral application for orders which on any view were relevant to the applicant. 1. Having regard to the matters to which I have referred, the applicant is entitled to an order for costs of and incidental to the proceedings. 2. I will add this in case it might be of relevance in the event the applicant's costs have to be assessed. There is no evidence of what costs were actually incurred by the applicant between the time it was served with the respondents' application commencing proceedings and when they were dismissed. Based on the number of submissions filed and the length of the submissions, and the number of affidavits that have been filed, it seems likely that more costs were spent arguing the costs application than were incurred prior to the dismissal of the proceedings. It would be quite inappropriate if that were the case particularly given the guiding principle found in 36 of the CAT Act. Whether all of those costs were reasonably incurred will no doubt be a matter for a costs assessor if the parties are unable to reach agreement on the quantification of the costs. Orders 1. These are the orders of the Tribunal: 1. In application COM 20/49850 1. Pursuant to section 72(1)(f)(iii) of the Retail Leases Act 1994, a declaration that: 1. the respondents waived the applicant's late exercise of the option to renew the lease of the subject premises; 2. the applicant validly exercised the option to renew the lease of the subject premises; 3. the respondents repudiated the lease; and 4. the applicant accepted the respondents' repudiation and validly terminated the lease. 1. Pursuant to section 72(1)(a) of the Retail Leases Act 1994, the respondents are to pay the applicant damages in the sum of $196,392.31 within 14 days. 2. Pursuant to section 72(1)(f)(iii) of the Retail Leases Act 1994 , a declaration that the applicant is entitled to the return of the $41,375.10 bank guarantee held by the respondents as security for the applicant's obligations under the lease of the subject premises 3. Pursuant to section 72(1)(g) of the Retail Leases Act 1994, the respondents forthwith deliver up to the applicant the $41,375.10 bank guarantee held by them as security for the applicant's obligations under the lease of the subject premises. 4. In the event a party wishes to make a costs application it must file and serve written submissions within 14 days, any party opposing the application is to file and serve its written submission within a further 14 days, and the Tribunal will make a decision on the papers as permitted by section 50(2) of the Civil and Administrative Tribunal Act 2013 unless persuaded that there should be oral submissions. 5. If after 14 days no written submissions are filed, then pursuant to Rule 38(2)(b) of the Civil and Administrative Tribunal Rules 2014, the respondents are to pay the applicant's costs of and incidental to these proceedings as agreed or assessed. 1. In application COM 20/32703 1. Pursuant to Rule 38(2)(b) of the Civil and Administrative Tribunal Rules 2014, the applicants are ordered to pay the respondent's costs of and incidental to the proceedings as agreed or assessed. ********** I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales. Registrar DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 21 March 2022