Appeal Panel - Internal CITATION: Wallis Lake Fisherman's Co-operative Ltd v ACN 079 830 596 Pty Ltd (trading as Jolly Joe's Fish 'n'Chips) (RLD) [2008] NSWADTAP 34 APPELLANT Wallis Lake Fisherman's Co-operative Ltd PARTIES: RESPONDENT ACN 079 830 596 Pty Ltd (trading as Jolly Joe's Fish 'n' Chips) FILE NUMBER: 079070 HEARING DATES: 12 May 2008 SUBMISSIONS CLOSED: 12 May 2008 DATE OF DECISION: 5 June 2008 BEFORE: Callaghan P SC, Deputy President; Higgins S - Judicial Member; Griffiths G - Non Judicial Member CATCHWORDS: Question of law - leave to extend to the merits MATTER FOR DECISION: Principal matter DECISION UNDER APPEAL: ACN 079830 596 Pty Ltd (trading as Jolly Joe's Fish 'n' Chips) v Wallis Lake Fisherman's Co-operative Ltd [2007] NSWADT 297 FILE NUMBER UNDER APPEAL: 065122 DATE OF DECISION UNDER APPEAL: 12/14/2007 LEGISLATION CITED : Administrative Decisions Tribunal 1997 Retail Leases Act 1994 Morgan v 45 Flers Avenue Pty Ltd (1986) 10 ACLR 692 Placer (Granny Smith) Pty Ltd v Thiess Contractors Pty Ltd [2003] HCA 10, (2003) 77 ALJR 768 Collector of Customs v AGF-Gevaert (1996) 186 CLR 389 CASES CITED: Hinton v Commissioner for Fair Trading, Office of Fair Trading [2007] NSWADTAP 17 Building Professionals Board v Hans [2008] NSWADTAP 13 Cianfrano v Premier's Department of New South Wales [2008] NSWADTAP 21 Hewitt v Debus (2004) 59 NSWLR 617 Niemann v Electronic Industries [1978] VR 431 APPELLANT R J Colquhoun, barrister REPRESENTATION: RESPONDENT G Hoeben, barrister 1. We dismiss the appeal ORDERS: 2. We refuse to extend the appeal to a review of the merits of the Decision 3. Respondent (to appeal) to file and serve any submissions in relation to costs within 28 days. Appellant to file and serve any submissions in relation to costs within a further 28 days. Matter of costs to be determined on the papers unless either party applies for an oral hearing, in which case that application will be considered. Liberty to apply in relation to this direction on 2 days' notice. REASONS FOR DECISION Decision Appealed From 1 By Decision dated 14 December 2007 ("the Decision") this Tribunal (constituted by the President, who had sat with two advisory Non-Judicial Members) ordered (among other things) that the Appellant (as the Respondent below, referred to below also as "the Co-op" and referred to in this Decision as "the Appellant") pay to the Respondent (as the Applicant below and referred to in this Decision as "the Applicant") monetary compensation of $255,561.00 made up of $249,561.00 in respect of a retail tenancy claim, and $6,000.00 in respect of an unconscionable conduct claim; and that the monetary compensation should bear interest pursuant to section 72A from the date of the order at the rate equal to that payable from a judgment debt of the District Court. 2 The orders were made in proceedings which the President introduced in the Decision in the following terms (paragraphs 1 to 4): "From mid-April 2000 to 2 August 2006 Mr Kerry James ('Joe') Morris ran a fish and chips takeaway business, 'Jolly Joe's Takeaway', at the Wallis Lake Fisherman's Co-operative Ltd (the Co-op). He paid rent, and thought he had a lease under which he had secure tenure until 13 April 2009. The Co-op considered that Mr Morris occupied the area set aside for the takeaway business as a licensee, with no security of tenure, and his occupation could be terminated at will. The Co-op locked Mr Morris out on the morning of 2 August 2006 without alleging any kind of default. The result was that Mr Morris, then aged 66 years, lost his business … Mr Morris immediately took action in the Tribunal. The applicant for relief is Mr Morris's family company, ACN 079 830 596 Pty Ltd. It was the formal party to the agreement which is said to have given rise to a retail shop lease subject to the Retail Leases Act 1994 (RL Act or Act). The application was filed on 10 August 2006. As there had been no pre-filing attempt at mediation, the Tribunal referred the dispute to mediation by the Retail Tenancy Unit. Attempts at mediation were unsuccessful. The applicant did not press at that time an associated application for urgent interim relief by way of relief against forfeiture. The original application, and the amended application filed 2 April 2007, make the two types of claim permitted by the Act – a retail tenancy claim and an unconscionable conduct claim. The amended application alleges, in support of the retail tenancy claim, that the Co-op breached its obligations under the RL Act in numerous respects. In support of the unconscionable conduct claim, the applicant relies on the alleged breaches and several other actions, which, if not breaches, were unconscionable. The primary relief that is sought is damages for loss suffered as a result of alleged unlawful repudiation of the lease." 3 Other background facts to the proceedings, as set out in the Decision included: (a) The Co-op was formed in 1947 and has continuously operated at 1 Wharf Street, Tuncurry. It handles fresh fish and seafood and supplies it to retailers (paragraph 11). (b) At all relevant times the Co-op has also had two food sales outlets on the wharf: a fresh fish and seafood outlet and a takeaway outlet (paragraph 12). (c) In 1999 the Co-op decided to outsource the takeaway outlet. Following negotiations with Mr Morris, including a written invitation for expressions of interest, discussions between Mr Morris and Co-op officers, and an Agreement to Lease document (a copy of which Mr Morris signed) Mr Morris moved into possession of the takeaway outlet and commenced operating it about 12 April 2000, shortly before the Easter period (paragraphs 14 and 15). (d) Pending the granting of a new Crown Lease to the Co-op and the preparation of a new Foreshore Management Plan by the local Council, execution of a formal Lease of the takeaway outlet was deferred and never occurred (paragraph 27). (e) "Mr Morris occupied the takeaway outlet for the next five years, paid rent and traded (trading hours seven days a week 10 am to 9 pm) without any significant incident until the appointment of a new General Manager, Mr David Bell, in November 2005" (paragraph 30). (f) "The lease into which the applicant company entered, via Mr Morris, was a one by three by five years lease" (paragraph 38). Appeal 4 In respect of the retail tenancy claim the Appellant appeals from the Decision on questions of law and seeks leave to extend the appeal to a review of the merits (section 113(2) Administrative Decisions Tribunal Act 1997 – "the Act"). There is no explicit challenge in respect of the unconscionable conduct claim. 5 As to the merits aspect of the appeal, Ms G Hoeben, Counsel for the Respondent, submits that no application for leave was made within the 28 day period specified in section 113(3) of the Act and that no further time ought be allowed for such an application to be made. A Notice of Appeal had been filed on 21 December 2007, seven days after the Decision. In section 7 of the Notice of Appeal the Question "Are you appealing on a question of law or seeking leave to extend the appeal to the merits or both?" is responded to by completion of a box signifying an affirmative answer to the "… or both" part of the question. Section 7 of the Notice of Appeal goes on to specify: " Appeal on a question of law What is the question of law arising from the Tribunal's decision? Please attach a SEPARATE SHEET to answer this question. Leave to extend Appeal to the merits What are your reasons for asking the Tribunal to extend the appeal to the merits? Please attach a SEPARATE SHEET to answer this question." There are attached to the Notice of Appeal two pages headed "What are the questions of law in the Tribunal's Decision?" and containing four numbered paragraphs. That is the only attachment and there is no attachment stating any reasons for asking for an extension of the appeal to the merits. 6 At the hearing of the Appeal, Mr R.J. Colquhoun, Counsel for the Appellant, indicated that the matters set out in the attachment to the Notice of Appeal as the suggested questions of law were also relied on as the reasons for asking for an extension of the appeal to the merits. There was, we think, a deficiency of sorts in the Notice of Appeal in that there was not a separate specification of the reasons for asking for an extension of the appeal to the merits. Nevertheless, particularly given the present confinement of those reasons to what was already stated in the Notice of Appeal, there can be no real prejudice to the Applicant. The constraints on the Tribunal under section 73 including that to act "… without regard to technicalities or legal forms" are relevant, as is also section 81 dealing with irregularities. We see it appropriate to deal with the situation as not restricting the Notice of Appeal as contended for by the Applicant and also not one warranting any amendment to the Notice of Appeal. In these circumstances, we treat the Notice of Appeal as also seeking leave to appeal on the merits. We are satisfied that the matter has been sufficiently argued before us on such a basis. 7 The four paragraphs in the attachment to the Notice of Appeal read as follows: "1. The Tribunal erred in its determination as contained in paragraph 127 of its determination that the applicant company, ACN 079 830 596 Pty Ltd (trading as Jolly Joe's Fish 'n' Chips), was in reality the alter ego of Mr and Mrs Morris (who were not parties to the application before it and that the economic loss in a family business setting of this kind should be assess by reference to the loss suffered by the owners of the company rather than that suffered by the company alone which was after all the applicant in this matter. There was no rational basis on which an order for damages could be made to compensate persons who are not parties to the proceedings especially where they have no put any material before the Tribunal as to their actual financial circumstances and where they were not a party to the terms of the lease that the Tribunal determined to exist. 2. The Tribunal erred in the manner in which it dealt with the accounting evidence, at which had been the subject of substantial challenge during the hearing before it, and the application of the evidence by the experts having regard to the judgment of the Court of Appeal in Makita (Australia) Pty Ltd v Sprowle (2000) 52 NSWLR 502. 3. The respondent has in the judgment been given the benefit of a lease but has not been required to pay the goodwill that was an essential term of the lease. The Tribunal erred in making a finding that a lease existed in the terms originally negotiated but that the payment of goodwill, in the amount of $10,000.00, which was an essential term of that lease and which the respondent had deferred the requirement for the applicant to pay until such time as a formal lease was entered, was not payable. 4. The lease, which the Tribunal found, existed and which was negotiated between the applicant and respondent in 2000 contained options for renewal of the lease of 1 + 3 + 5 years. These options were negotiated to be exercised in writing but no such option was exercised in writing. The Tribunal erred in finding that a lease for a period of 9 years was in effect given the options of said lease were never exercised in the manner agreed to between the parties. In the absence of evidence of the exercise of the options the Tribunal should have found the existence of a lease for a maximum of 5 years from the date of occupation of the leased premises as provided for under the Retail Leases Act and that subsequent to the expiry of that 5 year lease that applicant's occupation was on a holding over basis." Questions of Law 8 Mr Colquhoun's submissions for the Appellant centre on paragraph 1 in the attachment to the Notice of Appeal. He makes particular reference to paragraph 127 of the Decision: "In my view neither of these approaches should be adopted. The applicant company is, in reality, the alter ego of Mr and Mrs Morris. Economic loss claims in a family business setting of this kind should be assessed by reference to the loss suffered by the owners of the company that is Mr and Mrs Morris." His essential contention is to the effect that the Applicant is a separate legal person to its owners, that it may have losses but that those losses are different to any losses of the owners. He emphasises the separate legal personality of the company particularly with reference to what Young J. (as he then was) said in Morgan v 45 Flers Avenue Pty Ltd (1986) 10 ACLR 692 at 694-5: "Unfortunately, it very often happens in cases in this Court that a person has arranged his affairs for commercial or fiscal reasons employing a particular structure, which with respect to creditors and the government he expects to be recognised as no sham, but when it comes to a dispute with his former wife or former business associates it is not in his interest to maintain the structure and he pleads before this Court that one must not look at the structure at all but rather at the "realistic" or "practical" effect of what has happened. I do not find this sort of submission attractive. So long as the law permits people to erect structures which have meaningful legal consequences then if a person elects to erect such a structure he must take the consequences of such erection for better, for worse, for richer or poorer, in commercial sickness of commercial health." There can be of course no gainsaying the separate legal personality of the company. Nevertheless, the Decision requires closer scrutiny to assess what his Honour was doing by way of assessment of the damages aspect of the retail tenancy claim. 9 That damages claim was, his Honour pointed out (in paragraph 106 of the Decision), put by the Applicant with reference to the return to Mr and Mrs Morris: "The economic loss claim in this case is put in relatively simple terms. The claim is for, principally, the return to Mr and Mrs Morris from the business after meeting all outgoings (rent, staff wages and related costs, product costs) in the last year multiplied by the period left on the lease. As previously noted, the applicant is a two dollar company, which has one director, Mr Morris and two shareholders, Mr and Mrs Morris. The return to Mr and Mrs Morris comprises: drawings in the nature of remuneration; lease payments in respect of the motor vehicle owned by the applicant and funded out of the takings of the business; and amounts applied in connection with their home office. The claim also includes certain future business deductions brought forward (see below)." 10 Each of the Applicant and Appellant led evidence below from Accountants. Primary financial records from the business had been lost, (paragraphs 117-119). Significant attack was made by Counsel then appearing for the Appellant on Mr Morris' record keeping practices. His Honour assessed (paragraphs 121-123) the resulting situation presented at the hearing: "In the Tribunal's opinion, it will often be the case that businesses of the kind under notice in this case will not readily withstand the "blowtorch" of scrutiny across the range of legal obligations that bear on the employment of staff, maintenance of records, and taxation requirements. The business was a small one, it relied on seasonal trade, it dealt overwhelmingly in cash, customer purchases would have been, overwhelmingly, in small amounts of cash, and it employed staff as needed with the exception of one or two regulars. The Tribunal is not in the best position in an inquiry of this kind to reach final conclusions of the degree of specificity urged by counsel for the Co-op in relation to particular issues of legal compliance. The obligations to which attention was drawn are sometimes complex, and the ultimate determination of compliance lies with other regulatory bodies and processes. The Tribunal must, in the end, make the best assessment of all the evidence before it: Fink v Fink (1946) 74 CLR 127 at 143; Biggin & Co v Permanite Ltd [1951] 1 KB 422; and recently, Uszok v Henley Properties (NSW) Pty Ltd [2007] NSWCA 31 per Beazley JA at [135]-[137]. The evidence in this case, in my opinion, is adequate to that task. I do not regard this as a case where the applicant has failed to adduce evidence that might have assisted the Tribunal in its task; see further, Placer (Granny Smith) Pty Ltd v Thiess Contractors Pty Ltd (2003) [2003] HCA 10, (2003) 77 ALJR 768 at [38] per Hayne J." 11 During the hearing his Honour directed the Accountants to confer and "to produce a joint report for the purpose of arriving at a fair value of losses incurred by the Applicant as a result of the cessation of the lease" (paragraph 107). A joint report as such was not produced but the Applicant's Accountant advised in writing of figures that had been agreed between him and the Appellant's Accountant, which he explained in the following terms: "This report provides an estimation of the immediate revenue loss that Mr Morris has incurred … This report does not attempt a full valuation of the business, Jolly Joes Fish and Chips prior to the cessation of business. The report uses the widely accepted technique of determining the before tax net profit of the business and expanding the profit over the remaining term of the lease. The ongoing costs of the business that remain with Mr Morris after cessation of the business are also added to the net profit. Non-cash deductions such as depreciation are added back to the profit and loss. Extraordinary items with no future impact on the cash flow or net profit have also been removed. Any adjustments are listed at Appendix 1. All calculations and assumptions are based on un-audited figures supplied by the owner and agreed between Mr Mark Edmunds FCPA and Mr Douglas Atkinson CPA." From those figures, his Honour deduced the figure of $249,561, which he awarded as damages in respect of the retail tenancy claim. There is no issue as to the mathematical aspects of the calculation of that figure. 12 His Honour explained (paragraph 115) what the Accountants had done, thus: "In my view, the information that the experts used is clearly exposed. The assumptions that they used in respect of that information are apparent. They reached a conclusion as to the level of practical profitability of the business, that is the amount that reached the shareholders' Mr and Mrs Morris by way of personal benefit after meeting all outgoings, and multiplied that by the time left on the lease." 13 There was a factual issue as to the claimed figure of $600 per week for cash drawings taken by Mr and Mrs Morris. His Honour accepted, on the evidence, that claimed figure (paragraphs 124-125). 14 On this issue the Appellant's Accountant, following the Accountants' conference, maintained contentions that Mr Morris' drawings should be either totally excluded or reduced by reference to the annual wage of a full time shop assistant under a State industrial award (paragraph 109). His Honour repeated those contentions in paragraph 126 and the two "approaches" he referred to in the first sentence of paragraph 127 are those contentions. His Honour rejected both of them, in effect explaining in paragraph 127 that the actual losses in this regard of Mr and Mrs Morris were what should be taken into account. 15 The above scrutiny satisfies us that his Honour was considering, as he indicated in paragraph 107 "… losses incurred by the Applicant …" and in paragraph 115 "… the level of practical profitability of the business …", and that he was not ignoring the separate legal personality, and losses of, the company in arriving at his assessment of the damages for the retail tenancy claim. He explained in paragraph 123 of the Decision, which we have set out above, that "the Tribunal must, in the end, make the best assessment of all the evidence before it". As Hayne J put it in Placer (Granny Smith) Pty Ltd v Thiess Contractors Pty Ltd [2003] HCA 10, (2003) 77 ALJR 768, cited by his Honour in paragraph 123, at [37] and [38], a claimant such as the Applicant has to prove not only that it suffered damage as a result of the breach of contract but also the amount of the loss it sustained; it has to do so on the balance of probabilities and with as much precision as the subject matter reasonably permits; nevertheless, if the claimant has adduced such evidence as it is able to, it may be that estimation, if not guesswork, will be necessary in assessing the damages to be allowed. 16 The method of assessing the Applicant's damages on the retail tenancy claim was consistent with the way in which the Applicant propounded its claim and also with that assessed by the Accountants on both sides in conference between them during the hearing. 17 There was, in our opinion, no error of law in respect of the first paragraph in the attachment to the Notice of Appeal as submitted by the Applicant. 18 We do not detect the second paragraph of the attachment to be pressed as involving a separate question of law. Further, his Honour's treatment of this contention is, with respect, eminently acceptable: "At hearing Mr Johnson, counsel for the Co-op, sought to put in issue any reliance on Mr Atkinson's report and any reliance on the joint estimate, even though his client's accountant (Mr Edmunds) had endorsed it. He argued that Mr Atkinson's evidence and, at the least, Mr Edmunds' endorsement of the calculation referred to, should be rejected, on the basis that they had not exposed their assumptions (referring in this regard to Makita (Australia) Pty Ltd v Sprowles (2000) 52 NSWLR 705 per Heydon JA at 711 and ff) and they had not been able to examine the source records. I deal with the source records point later in these reasons. As to the former point, this is not a case akin to Makita v Sprowles. There an expert gave an opinion as to a matter of fact (slipperiness of stairs) relying on hypotheses and simulated experiments. The expert's opinion in Makita was, on its face, far-fetched, as in many years of regular use of the stair-case both before or after the accident there had been no similar slip incident. The assessment in this case is not far-fetched in that way. Moreover, in this case the accountants did provide the Tribunal with criteria enabling evaluation of the validity of their opinion, and had before them factual material of sufficient reliability to give an opinion." 19 Paragraph 3 of the attachment is not pressed by the Appellant, at least as involving a question of law. In any event, there was evidence (paragraphs 29 and 76) particularly in the form of a letter dated 11 May 2001 from the Appellant's then General Manager that the $10,000 was payable only in circumstances ("when a full lease is provided") which never came about (paragraph 76): "Regarding the goodwill amount of $10,000 we have agreed that this will be paid when a full lease is provided. You will receive a months notice of this being due." 20 Paragraph 4 of the attachment was pressed to an extent. It may be that some question of law is involved at least as far as there has to be a construction arrived at of the, albeit informal, retail lease (Collector of Customs v AGF-Gevaert Ltd (1996) 186 CLR 389 at 394-398). Nevertheless, his Honour's finding that the agreement was for "a one by three by five years lease" is not in issue and absent any formal lease or any evidence as to option exercise requirements, it is difficult to see (and it is not explained by the Appellant) "that the options of the said lease were never exercised in the manner agreed between the parties." That the Applicant achieved by agreement with the Appellant in the circumstances which eventuated an entitlement to a nine years term, appears to us to be a correct conclusion. 21 Thus, on questions of law, the appeal must be dismissed. Merits 22 Appeal Panels in this Tribunal regularly deal with applications for leave to extend appeals to reviews of the merits of the decisions under appeal. From time to time, Appeal Panels have discussed in some detail principles or practices relevant to the exercise of the discretion involved, including references to various analogous Court situations; for example, Hinton v Commissioner for Fair Trading, Office of Fair Trading [2007] NSWADTAP 17 at [85] and [86]; Building Professionals Board v Hans [2008] NSWADTAP 13 at [28] to [38], and Cianfrano v Premier's Department of New South Wales [2008] NSWADTAP 21 at [5]–[7]. Submissions in this Appeal included references to various other authorities, for example by Mr Colquhoun to Hewitt v Debus (2004) 59 NSWLR 617 and by Ms Hoeben to Niemann v Electronic Industries [1978] VR 431. We have considered, but do not see that it is necessary to canvass, all the guidance to be gleaned from those and other decisions but we do note in particular guidance in Hinton at [85] and [86]. "While the Appeal Panel's discretion to grant leave is not qualified by the ADT Act (see, for example, Sunol v Collier [2006] NSWADPAP 51 at [29], it should be exercised with caution and in the interests of justice. It is not enough that the appellant disagrees with the decision. The Appeal Panel is not designed to be a second trial level of the Tribunal. As McHugh J said in CDJ v VAJ (1998) 197 CLR 172 at [111] the power to permit an appeal on a question of fact is 'not intended to have the practical effect of obliterating the distinction between original and appellate jurisdiction'. Appeal Panels must recognise the importance of not interfering with soundly-made decisions. An appellant should normally, we think, demonstrate on persuasive grounds that a substantial injustice would result if the decision was allowed to stand. We have rejected the appellants' arguments on points of law. So an application for extension which gives emphasis to errors on points of law is not open." 23 We understand the Appellant's concern on the merits aspect of the Appeal, as with the questions of law aspect, to emphasise paragraph 1 in the attachment to Notice of Appeal. We have discussed above in Questions of Law section of this Decision what is raised by, and by submissions concerning, the material not only in the first paragraph of the attachment to the Notice of Appeal but in the other three paragraphs as well. Rehearing of the merits of the retail tenancy claim is in our opinion not warranted by anything that has been put before us. Not only did his Honour's decision, in our opinion, not involve any error concerning a question of law, it seems to us (as we have discussed above in relation to all the material in the attachment to the Notice of Appeal), that there is nothing on the face of the Decision or in the submissions which have been made to us, that indicates that any other relevant error, or any injustice, occurred. Factual matters were obviously extensively agitated in the hearing at first instance and appear to have been thoroughly covered in the Decision. In these circumstances no case exists for the exercise by us in favour of the Appellant of the discretion to extend the appeal to a review of the merits of the retail tenancy claim. Orders 1. We dismiss the appeal 2. We refuse leave to extend the appeal to a review of the merits of the Decision 3. Respondent (to appeal) to file and serve any submissions in relation to costs within 28 days. Appellant to file and serve any submissions in relation to costs within a further 28 days. Matter of costs to be determined on the papers unless either party applies for an oral hearing, in which case that application will be considered. Liberty to apply in relation to this direction on 2 days' notice. 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.