Mohammed v Shorecolt Pty Ltd [2004] NSWADT 88

CITATION: Mohammed v Shorecolt Pty Ltd [2004] NSWADT 88 DIVISION: Retail Leases Division APPLICANT PARTIES: Ishmail Mohammed RESPONDENT Shorecolt Pty Ltd FILE NUMBER: 045012 HEARING DATES: 19/04/2004 SUBMISSIONS CLOSED: 04/19/2004 DATE OF DECISION: 05/07/2004

BEFORE: Rickards K - Judicial Member APPLICATION: Claim for payment of money MATTER FOR DECISION: Principal matter Administrative Decisions Tribunal Act 1997 LEGISLATION CITED : Conveyancing Act 1919 Retail Leases Act 1994 Gizah Pty Ltd v AXA Trustees Ltd (No. 2) [2001] NSWADT 164 CASES CITED: Irresistible Frocks Salon Pty Ltd v Sparbac Pty Ltd & Roche Group Pty Ltd [2003] NSWADT 241 Wood & Anor v Bergman (No. 2) [2003] NSWADT 175 APPLICANT REPRESENTATION: S Friend, solicitor RESPONDENT No appearance ORDERS: 1.The Respondent is to pay to the Applicant the sum of $23,020.00 by way of restitution and damages.; 2.The Applicant's application for costs against the Respondent is dismissed.

REASONS FOR DECISION APPLICATION 1 The claim in this matter is brought by the Applicant pursuant to s72(1)(a) of the Retail Leases Act 1994 seeking payment by the Respondent to the Applicant of damages and restitution said to arise from breaches by the Respondent of a lease agreement between the parties relating to shop premises located at 39A Elizabeth Bay Road, Elizabeth Bay, New South Wales. The Applicant states that he conducted a restaurant business known as "The African Drum" at these premises. 2 The Application was listed for hearing before me upon an exparte basis, as there had been no appearance previously entered or made on behalf of the Respondent. 3 At hearing on 19 April 2004, the Applicant appeared in person with his solicitor. There was no appearance by or on behalf of the Respondent. 4 At hearing, evidence was given both orally by the Applicant and by way of Affidavit sworn by him on 14 April 2004. The Applicant has some difficulties with the English language, but having heard and seen him and having questioned him concerning his evidence, I am satisfied that he was doing his best to be truthful and accurate before this Tribunal. 5 The lease agreement between the parties is alleged to be partly oral and partly in writing. The written part of the agreement is said by the Applicant to consist of a one page document which was handwritten by Mr John Jones, a director of the Respondent on or about 23 February 1999, and signed by the Applicant on that day. The exact contents of this document are unknown, as the Applicant says that it was among other documents and belongings which were on the premises when the Applicant was excluded from possession by the Respondent on or about 13 February 2001. The Applicant says that these documents and belongings have never been returned to him. This handwritten document was alleged by the Applicant to reflect the oral agreement reached between the Applicant and Mr John Jones on behalf of the Respondent that:- a) The Applicant would rent the premises from the Respondent for a period of 3 years from 23 February 1999 with an option to extend for a further 3 years. b) The rent payable was $1,000.00 per week. c) The Applicant was to pay a "bond" of $12,000.00 to the Respondent to secure the Applicant's obligations under the agreement. 6 The Applicant's evidence is that he paid the bond of $12,000.00 in cash to the Respondent on or about 23 February 1999 and then entered into possession of the premises. He says that he obtained this sum of cash from the Commonwealth Bank, Kings Cross branch where he held an account which contained, amongst some other savings, an amount of $30,000.00 which he had obtained by loan from his sister. He gave evidence that he was given a receipt for the bond payment by Mr Jones or by his brother on behalf of the Respondent, but that the receipt was also among the documents which were on the premises when he was excluded from possession. 7 The Applicant stated that after a period of 2 months of commencement of the agreement, he approached Mr John Jones and asked for a review of the rent, as he felt that the amount of $1,000.00 was too high. He says that after further discussion, it was agreed that the rent would be reduced to $500.00 per week. The Applicant says that he paid all rent due to the Respondent until 16 February 2001. He says that the rent was paid in cash to Mr John Jones or to his brother in an office upstairs from the subject restaurant premises. Annexed to the Applicant's Affidavit sworn 14 April 2004 is a receipt dated 9 February 2001 for the sum of $500.00, endorsed as being for "one weeks rent". There is a largely indecipherable signature at the foot of the receipt. 8 The Applicant gave evidence that by early February 2001 the ventilation fan in the premises was not working and that he requested that Mr Jones fix the problem. He alleges that Mr Jones told him that he would fix it when the rent was paid; notwithstanding the payment of rent by the Applicant on 9 February 2001, he says that he attended the premises on 13 February 2001 to find that the locks had been changed and that he was unable to enter the premises thereafter. There was no evidence given concerning any further attempts by the Applicant to re-enter the premises, or any other representations or discussions involving the Respondent. 9 In the Application, the Applicant seeks the following:- a) Repayment of the sum of $12,000.00 in respect of the security deposit or bond paid. b) Payment of the sum of $13,220.00 representing loss of goods and equipment. c) Payment of the sum of $200,000.00 representing loss of benefit of the use of the lease for a period of 4 years. 10 In the course of the hearing, the Applicant's solicitor also submitted that I should award interest pursuant to the provisions of s72A of the Retail Leases Act 1994 and that I should make an order for costs in favour of the Applicant against the Respondent pursuant to s88 of the Administrative Decisions Tribunal Act 1997 . LIABILITY 11 Having considered the evidence given on behalf of the Applicant, I am satisfied that the premises comprised a restaurant and were therefore a "retail shop" as defined by s3 of the Retail Leases Act 1994. 12 I find that on or about 23 February 1999 an agreement to lease the premises was entered into between the Applicant and the Respondent upon the terms as alleged by the Applicant. I accept that the Applicant executed a document which had been prepared by the Respondent and which contained the essential items of the agreement reached between the Applicant and the Respondent, and that the Applicant thereafter paid the bond or security deposit of $12,000.00 to the Respondent and entered into possession of the premises. Accordingly, in my view, s54A of the Conveyancing Act 1999 does not prevent the Application being brought. Further, s3 of the Retail Leases Act 1994 defines a "retail shop lease" as:- "any agreement under which a person grants or agrees to grant to another person for value a right of occupation of premises for the purpose of the use of the premises as a retail shop:- (a) whether or not the right is a right of exclusive occupation, and (b) whether the agreement is express or implied, and (c) whether the agreement is oral or in writing, or partly oral and partly in writing". 13 For the reasons set out above, I find that the agreement between the Applicant and the Respondent entered into on or about 23 February 1999 constitutes a retail shop lease as defined under the foregoing section, and that accordingly the provisions of the Retail Leases Act 1994 apply. 14 Pursuant to the provisions of s7 of the Retail Leases Act 1994, the Act overrides any inconsistent provision of a lease. 15 Section 34(1) of the Retail Leases Act 1994 renders a lessor liable to pay reasonable compensation for any loss or damage suffered by the lessee arising from circumstances, inter alia, where the lessor:- (a) inhibits access of the lessee to the shop in any substantial manner, or (b)takes any action that would inhibit or alter, to a substantial extent the flow of customers to the shop, or (c) unreasonably takes any action that causes significant disruption of, or has a significant adverse effect on, trading of the lessee in the shop, or (d) fails to take all reasonable steps to prevent or put a stop to anything that causes significant disruption of, or which has a significant adverse effect on, trading of the lessee in the shop and that is attributable to causes within the lessor's control, or (e) fails to rectify any breakdown of plant or equipment under the lessor's care or maintenance. 16 According to the evidence of the Applicant, the breakdown of the ventilation fan was the precursor to the Applicant being excluded from the premises. There is no evidence before me to indicate whether it was the responsibility of the Applicant or of the Respondent to maintain or repair this ventilation fan. Having considered the evidence, I am however satisfied that:- a) As at 13 February 2001, by virtue of the retail shop lease agreement entered into between the parties, the Applicant was entitled to access to, and possession of the premises. b) The Respondent excluded the Applicant from access to and possession of the premises on or about that same date. c) The action of the Respondent as above was in breach of the terms of the retail shop lease agreement between the Applicant and the Respondent, and specifically the provisions of s34(1)(a), (b) and (c) of the Retail Leases Act 1994 which are imported into that agreement. d) The Respondent did not rectify these breaches following written request made by the Applicant through his solicitors in letter dated 21 February 2001. e) Accordingly, the Respondent is liable to pay reasonable compensation for loss or damage thereby suffered by the Applicant. DAMAGES 17 The Applicant claims the sum of $12,000.00 in repayment of the security deposit or bond paid by him to the Respondent on or about 23 February 1999. I accept that such payment was made, and given the absence of any evidence before me to indicate any claim or entitlement of the Respondent to part or all of that sum, I admit such claim. 18 I accept the evidence from the Applicant that by reason of his exclusion by the Respondent from the premises, he lost possession of various personal and other items. Amongst those items, the Applicant claims damages in the sum of $21,600.00 for loss of African Art wall hangings. In paragraph 10 of his Affidavit sworn on 14 April 2004, the Applicant refers to owning various items which were in the premises at the time that he was locked out, including the subject wall hangings. In further support of this aspect of his claim, the Applicant provided as annexure "D" to his Affidavit an unsigned list of works with the name of "Artist Ghasan Said" and an address appearing at the head of the list. The Applicant in his Affidavit says that this list was prepared by this artist, Mr Said. The list has a value adjacent to each item, apparently assessed by the artist himself. There is no independent or expert valuation of this material. The total of the values assessed by the artist comes to only $10,800.00. In the Application, the Applicant claims a total sum of $13,220.00 in respect of the loss of all goods and equipment on the premises at the time of the lockout, of which the African Art wall hangings form only part. In giving evidence, the Applicant frankly conceded that he did not actually own the hangings, but that they were owned by the artist Mr Said. The Applicant said that he would be responsible to pay an unspecified sum of money to that artist if and when an item was sold. The Applicant's solicitor has urged upon me that I should allow this part of the claim because the Applicant was a bailee of the goods. I do not accept such submission as it is unsupported by any evidence. In addition to the unsatisfactory evidence concerning the value of the hangings, I am also not persuaded that the Applicant had the requisite title or interest in the wall hangings to entitle him to any compensation for their loss. 19 I accept that the Applicant owned the following items which he lost when excluded from possession of the premises, and I also accept the values claimed as set out hereunder:- 3 Mini Hi-Fi players @ $457.00 each $1,371.00 2 sofa seats @ $250.00 each $500.00 New Television @ $499.00 $499.00 60 rolls of wallpaper @ total cost of $600.00 $600.00 2 microwaves @ cost of $250.00 each $500.00 Fan @ $20.00 $20.00 Kitchen utensils and cutlery @ $700.00 $700.00 Personal clothing and jackets @ $600.00 $600.00 20 chairs and 2 tables $200.00 ------------ Total $4,990.00 20 In the Application, there is also a claim of $200,000.00 for "loss of benefit of the lease" representing 4 years @ $50,000.00 per annum. 21 Section 16 of the Retail Leases Act 1994 imports a minimum 5 year term into any retail shop lease, which would have therefore entitled the Applicant to enjoy use of the premises until 23 February 2004, a period of approximately 3 years beyond the date that he was excluded from possession. This of course is less than the 4 years claimed by the Applicant. 22 The Applicant in the course of giving evidence conceded that he had not made a profit from the restaurant business prior to being locked out. He said that he was of the opinion that the restaurant business had improved since November 2001 when he became involved full-time in its operation, following the loss of his full-time job at the Sebel Townhouse. The Applicant said that the restaurant had recently received increased publicity in a local newspaper and was becoming more popular especially with people from "Fox Studios". In his Affidavit, the Applicant stated that the restaurant was "becoming profitable" at the time that he was excluded from possession. The Applicant's further evidence was that the restaurant business had its own bank account and that tax returns had been prepared. No bank records or accounting records were placed in evidence before me. 23 It is clear that the business had not yielded a profit to the Applicant prior to his exclusion from the premises. I am not satisfied that the Applicant possesses the appropriate qualifications to give opinion evidence concerning anticipated future profit from the restaurant business. In the circumstances, I am not satisfied on the balance of probabilities that the Applicant has lost any business profit arising from the Respondent's breach of the subject agreement. 24 Section 72A of the Retail Leases Act 1994 provides that this Tribunal may order interest on the whole or part of any amount ordered to be paid for the whole or any part of the period between when the cause of action arose and when the order takes effect. The rate of interest is not to exceed the applicable interest rate payable on a judgment debt of the District Court. 25 Section 47(1) of the Retail Leases Act 1994 relevantly states:- "A retail shop lease is taken to include provisions of the following effect: (a) money paid by the lessee to the lessor as security for the performance of the lessee's obligations under the lease must be held by the lessor on behalf of the lessee in an account bearing interest. (b) the lessor must account to the lessee for interest earned on such a deposit but the lessor is entitled to retain any such interest and deal with it as money paid by the lessee to the lessor to form part of the security deposit concerned." 26 Whilst s47(2) of the Retail Leases Act 1994 permits a lessor to appropriate security monies in accordance with any lawful entitlement to do so, there is no evidence before me suggestive of any such entitlement on the part of the Respondent. 27 I accordingly allow interest at the relevant statutory rate in respect of the security deposit repayable by the Respondent to the Applicant from the date that such security deposit was paid on 23/2/99 to date, as follows:- 23/02/99 to 28/02/00 @ 9.5% $1,155.62 01/03/00 to 31/08/00 @ 10% $600.00 01/09/00 to 31/08/01 @ 11% $1,320.00 01/09/01 to 28/02/02 @ 10% $600.00 01/03/02 to 05/05/04 @ 9% $2,355.29 ------------ Total $6,030.00 28 Whereas I accept that the Applicant was denied possession of the various personal items which I have allowed at the values as asserted by him, he is not, in my view, entitled to interest in relation to that part of his claim, taking into account the likely further depreciation of value of the items concerned. COSTS 29 Costs in proceedings in this Tribunal are regulated by s88 of the Administrative Tribunal Act 1997. Subsection (1) provides that:- "Subject to the rules of the Tribunal and any other Act or law, the Tribunal may award costs in relation to proceedings before it, but only if it is satisfied that there are special circumstances warranting an award of costs." 30 Section 77A of the Retail Leases Act 1994 permits the Tribunal to award costs in respect of any application made under that Act. 31 Mr Friend, on behalf of the Applicant, has argued that the Respondent should be ordered to pay the Applicant's costs of this Application and that the special circumstances justifying such an order are that:- a) The Respondent did not appear in these proceedings. b) The Respondent has shown a "disregard for the whole claim". c) The Respondent did not attend mediation or attempt to mediate. d) The Respondent has shown a "contumelious disregard for the Applicant's rights". 32 I am not satisfied that the evidence establishes the final ground asserted above. 33 In considering whether special circumstances exist sufficiently to enable an order for costs, I have regard to the decision of the Appeal Panel in Irresistible Frocks Salon Pty Ltd v Sparbac Pty Ltd & Roche Group Pty Ltd (No. 2) [2004] NSWADT 72. In that decision the Tribunal referred to the definition of "special circumstances" set out by it in Gizah Pty Ltd v AXA Trustees Ltd (No. 2) [2001] NSWADT 164 as "circumstances that are out of the ordinary, but without having to be extraordinary or exceptional". 34 The Tribunal in Irresistible Frocks Salon Pty Ltd v Sparbac Pty Ltd & Roche Group Pty Ltd (No. 2) [2004] NSWADT 72 also cited with approval its previous recognition in Wood & Anor v Bergman (No. 2) [2003] NSWADT 175 that:- "The Retail Leases Division is unique within the Tribunal, in that it alone deals with commercial disputes between parties who are engaged in trade and commerce for reward. In Gizah , at [22] and [33-34], the significance of this for costs orders was explained as follows. Whereas in the context of appeals from administrative decisions the requirement of 'special circumstances' might be interpreted so as not to discourage proceedings by a private individual on account of the risk of an adverse costs order, no such consideration should apply in the context of retail lease disputes. The 'commerciality' of the Retail Leases Division calls for an interpretation quite different from that which might be adopted in any other Division of the Tribunal". 35 The judgment in Irresistible further emphasises, however, [9] the principle flowing from Wood and earlier cited decisions of the Tribunal, that the mere fact that the Retail Leases Division deals with relationships of a commercial character does not imply that costs within this Division should simply follow the event. 36 The Applicant's argument that I should order costs because of special circumstances that the Respondent has not attended mediation or appeared in response to the claim should, in my view, fail. This Tribunal in Irresistible had these things to say concerning a party which had failed to appear in the proceedings: " [44] Irresistible sought a costs order against Sparbac . It claimed that Sparbac's failure to appear was cogent evidence of its having no arguable defence to Irresistible's claim. But we do not think that this necessarily follows. There are a number of other reasons why a respondent to proceedings who has been served with initiating process may not file an appearance. Furthermore, it cannot be said that the phenomenon of a party failing to appear is so 'out of the ordinary' that it might constitute 'special circumstances'…. [45] Yet another consideration of significance is that, if we were to accept Irresistible's argument, we would be conveying the message that any party that chose not to appear in Tribunal proceedings within this Division, and thereby suffered a default judgment to be entered against it, would in the ordinary course be liable to pay the costs of the applicant. In a jurisdiction in which the prima facie presumption is that costs orders should not be made, it would be unfortunate if respondents who were otherwise inclined not to appear were induced to file an appearance and offer some sort of defence to the claim solely to avoid a costs order". 37 I do not find that the matters relied upon by the Applicant constitute "special circumstances", and therefore dismiss the Applicant's application for a costs order against the Respondent. ORDERS 1.The Respondent is to pay to the Applicant the sum of $23,020.00 by way of restitution and damages. 2.The Applicant's application for costs against the Respondent is dismissed.