Dimozantos and Anor Trading as D.C. & S.F. Dimozantos -v- Deutsche Property Funds Management Limited [2002] NSWADT 221

CITATION: Dimozantos and Anor Trading as D.C. & S.F. Dimozantos -v- Deutsche Property Funds Management Limited [2002] NSWADT 221 DIVISION: Retail Leases Division APPLICANT PARTIES: Demetrius Dimozantos and Sue Dimonzantos Trading as D.C. & S.F. Dimozantos RESPONDENT Deutsche Property Funds Management Limited FILE NUMBER: 025073 HEARING DATES: 09/09/2002, 01/10/2002 SUBMISSIONS CLOSED: 10/11/2002 DATE OF DECISION: 11/05/2002

BEFORE: Fox R - Judicial Member APPLICATION: Costs - Jurisdiction MATTER FOR DECISION: Principal matter LEGISLATION CITED : Administrative Decisions Tribunal Act 1997 Retail Leases Act 1994 CASES CITED: APPLICANT REPRESENTATION: M Lawson, barrister RESPONDENT N Kidd, barrister ORDERS: 1. Application dismissed; 2. Applicant to pay Respondent's costs (on a party party basis) incurred after 5 October 2002.

1 These proceedings commenced by Application dated 6 June 2002 and filed 19 June 2002 by the Respondent personally. The grounds of application were "Lessor is in breach of RTU Mediation Agreement and the Act in that they are allowing another tenant to trade outside their permitted use to the detriment of our business". The orders sought were "Lessor to be compelled to enforce usage clause of other tenant and pay compensation to us of $144,125.00 for past and continuing breaches". 2 An Amended Application was filed on 30 June 2002 by the Lease Police, stating that it was the support person for the applicant. The grounds of application were "Lessee has failed to police and enforce usage breaches which have impacted sales and profitability of business. Lessor has not performed obligations of specified leases and mediated agreement". The orders sought were "Order that the respondent pay $144,125.00 to the Applicant by way of damages and restitution under Section 72 of the Act. Order that the respondent has not acted in a best practice manner under the provisions of Section 78 of the Act". 3 The matter came before Mr Donald for directions of 1 August 2002. Mr Kondos, of the Lease Police, appeared for the Applicant by telephone, and Mr Nicols solicitor appeared in person for the Respondent. The note of the directions given on that day are; "Applicant to file and serve following documents by Friday 16 August, affidavit/statements, submissions, lease, disclosure statement. Respondent to file and serve (reply) by 30 August, Adjourned for 1 day hearing on 9 September". 4 The Applicant more or less complied with these directions by filing, on 20 August 2002, affidavits dated 12 August 2002 by Demetrius Dimozantos and Suzanne Dimozantos, there was also an affidavit by Peter Macaulay, seeking to establish "best practice". 5 On 28 August 2002 the Respondent wrote to the Registrar indicating, that it understood the directions to have meant that it was obliged to serve affidavits and submissions in response by 30 August, and noting other aspects which indicated that the Mediation Agreement and the Certificate of Failed Mediation issued by the Registrar of Retail Tenancy Disputes had been raised at the directions hearing. The letter went on the say that the Respondent was not ready to proceed to hearing, and wished to vary the pleading timetable because the Applicant's evidence had been served 3 days late, and because the Applicant had indicated that there was other evidence yet to be filed, and because, without leave or notice, a further amendment to the Application had been proposed. The Lease Police did not agree to the proposed adjournment, and so I then, "in chambers" directed: - "The matter raised by the respondent in the letter to Tribunal dated 28.08.02 may justify the Application to Vacate the 9 September hearing date, but I note that the applicant does not consent, and so I will have to hear evidence and rule on the Application on 9 September. I note that the applicant indicates that all the evidence he wishes to rely on was filed by 20 August. No matter what my ruling be on 9 September, certain obvious preliminary matters raised by the applicant's amended Application, and the applicant's evidence can be considered on 9 September. It is not beyond bounds of possibility that, on a full consideration of the Application and a preliminary view of the applicant's evidence, on 9 September, that it will become obvious that the matter cannot be disposed of in a single day's hearing, and in that event any possible prejudice suffered by the respondent may be redressed in the interim before the second day's hearing, which is not likely to take place until middle October. On reflection, it seems to me that the directions hearing will take all day." 6 On 9 September 2002, I heard the submissions of the Respondent to the effect that the evidence already filed by the Applicant raised matters going back 5 or 6 years to which the Respondent could not adequately respond in the time available, and that the Applicant, after the initial filing of affidavits, having indicated that a report was to be filed by forensic accountant, and that only on 3 September, in a discussion with the registry, did the Applicant indicate that such evidence was not to be adduced. It was proper that the hearing date be vacated, and indeed, having considered all aspects, I was surprised that the Applicant had not consented, especially in view of the further document which it had filed on 20 August headed "Amended Application and Statement of Claim" stating the grounds of application to be 1. "(a) The Lessor and its agent breached clauses 1.1 in clause 9 of the Lease. 2. (b) The Lessor and its agent have breached clause 28.2 of the Lease. 3. (c) The Lessor and its agent have not acted in a best practise manner as prescribed in Section 78 of the Retail Leases Act New South Wales. 4. (d) The Lessor and its agents have misrepresented the applicant as outlined in Section 10(1)(2) of the Retail Leases Act New South Wales 1994. 7 The orders sought were; 1. "1. Compensation of Section 72 of the Retail Leases Act New South Wales for trading loses and loss of goodwill amounting to an amount greater than $300,000.00. 2. Declaration that the Lessors always in the position to act under the provisions of the lease and failed to do so at all relevant times resulting in this action. 3. Declaration of the Lessor derogated from grant. 4. Any such further order the Honourable Tribunal see fit to make. 5. Costs. 6. Interest". It is appropriate to indicate that the first order sought was obviously an error and omitted "not", in view of the jurisdictional limit imposed by Section 73. 8 The Respondent, on 9 September, raised the matter of the agreement reached at a mediation between the parties on 16 April 2002 and, in effect, pleaded it in bar. The Lease Police submitted that this was not now possible because Mr Donald, at the 1 August directions hearing had directed that evidence be filed, so that the substantial issues between the parties could be ventilated. I was satisfied that the first substantial issue between the parties was the question whether or not the Mediation Agreement in fact barred the proceedings. 9 The Respondent raised the fact that the Mediation Agreement had been signed by the Respondent Deutsche Property Funds Management Ltd, but that the "Lessee" was Perpetual Trustee Coy Ltd, as per a Custodian Agreement in effect between them. I directed "Applicant has leave to and is deemed to have joined Perpetual Trustee Coy Ltd as Defendant in place of Deutsche Property Fund etc, who are the responsible entity or managers for Perpetual". 10 Over the course of several hours protracted debate on this day the full scope of the dispute between the parties became clear to me, and I identified a number of preliminary issues which would have to be resolved to seek to render the dispute justiciable. 11 The first of these was the question of whether the Mediation Agreement could be pleaded in bar, the second was whether Section 71 limited the claim for compensation under Sections 10, (1) and (2) (the Lease having been entered into in 1995), the third issue related to the interaction of clause 9 in the Memorandum of Lease, clause 28 of the Lease special conditions, and Section 78 of the Act, the fourth point related to the fact that the "pre-lease" representation now sought to be ventilated could only have been made by or on behalf of Vynotos Pty Limited, the registered proprietor of the land in 1995, and whether those could be brought home to the Perpetual Trustee Company or the respondent Deutsche, it having acquired the property in the middle of the year 2001. 12 After making various other necessary directions I directed, "note if Applicant wishes discovery, that is to be done informally, by correspondence. Leave to both parties to apply on three days notice for telephone hearing". 13 The applicant then, on the one hand, made further written submissions seeking to establish that Mr Donald's direction to the effect that the substantial issues be heard, had robbed me of the power to consider the effect of the Mediation Agreement, and on the other hand, sought discovery of; 1. Centre management file on Four Season's Café. 2. Centre management file on Stockman's Café. 3. Leasing Strategy for Port Central 1998. 4. Current Leasing Strategy and policy. 5. Security incident log 1998 - present. 6. Memos to tenants indicating Management/Ownership of the Centre 1998 - present. 14 The Respondent refused, and the Applicant sought an urgent further directions hearing, which was listed for 1 October. I noted that the hearing of 11 October was for identified legal issues only, and that the only aspect which might have been appropriate to discover in that regard would have been the matter indirectly raised in part of the 6th item, and so I directed "This was an application for "discovery" - rejected, Respondent to, within 3 days, file affidavit setting forth the ownership and management structure of the Centre to the point of establishing the authority of Respondent to enter into the Mediation Agreement". 15 When the hearing commenced on 11 October 2002, it was noted that the Applicant had made the further amendments to the Application to bring it within the $300,000.00 limit and there were further affidavits of Mr Dimozantos dated 27 August and filed 6 September, and dated 7 October and filed 10 October. 16 There was, of course, also the Certificate of Failed Mediation issued by the Registrar of Retail Tenancy Disputes on 13 June 2002. 17 In its written submission of 19 September the Lease Police again raised the comment made by Mr Donald on the first directions hearing, "......the Tribunal would not adjudicate on any agreement reached at mediation as it could only be enforced by "specific performance" Proceedings at the Supreme Court of New South Wales". That is not an unexpected observation in relation to an Application which at the time either stated its grounds:- "Lessor being in breach of RTU Mediation Agreement" or "Lessor has not performed obligations of specific leases and mediated agreement". It was not, nor could it be an indication that the effect of the Mediation Agreement could not be an issue at the hearing. 18 Of course, the first issue to be resolved before me was the question whether this Tribunal has power to hear a matter at all if there is in evidence before it an agreement which on its face operates as a release, pleaded in bar to an action between the Lessor and Lessee signatories thereto. 19 The parties, at the 11 October hearing, acknowledged that the background to the Mediation Agreement was that the Lessee was more than $40,000.00 in arrears of rent and that the Lessor had failed to prevent a competing café business (Four Seasons Café) to adhere to its list of authorised sales, and had allowed it to encroach on the list of authorised sales of the Dimozantos. The Agreement, in full, read as follows:- This Agreement reached 16 April 2002 Between Jim and Sue Dimozantos ("Lessee") AND Deutsche Property Funds Management Ltd (ABN 47 006 036 442) ("Lessor") as a result of mediation in relation to Shop F1 Port Central Shopping Centre, Horton Street, Port Macquarie ("the shop") and lease registered dealing number 2534838 ("the lease"). 1. The Lessee will seek to sell the shop business as soon as possible but in any case by 30 September 2002 and the Lessor will facilitate this sale by agreeing to enter into a new 5 year lease at a rent on terms no less favourable than current lease with a qualifying tenant. The Lessor will refer all enquiries concerning the shop to the Lessee and only deal with a potential purchaser introduced by Lessee. 2. The Lessee will accept $10,000.00 in full settlement of all arrears payable in respect of the shop up to 30 April 2002, payable on surrender of the lease of the shop or sale of the business whichever first occurs. 3. From 1 May 2002 until the sale of the business or 30 September, the Lessor will accept payment of 50% of the rent and outgoings. This clause will cease to apply if Lessor ensures that shop F12/F13 (Four Seasons) does not sell items contrary to their permitted use under Annexure "B" to their lease, including fried eggs, bacon, cakes, iced chocolate, toasted sandwiches, fruit juices, streak burgers, roast rolls and biscuits. 4. The Parties agree to keep this agreement strictly confidential except as required by law or to obtain professional advice or involving a related corporation. 5. Each party releases the other from all actions, suits, claims or like, arising out of the lease prior to today. 6. If the shop business is sold and a new lease is entered into under clause 1 Lessor, or if the shop business is not sold by 30 September 2002, the lease will be terminated without penalty, subject to the payment of the $10,000.00 in clause 2 hereof and any monies owing under the lease between 1 May and 30 September 2002. 7. The Lessor may elect not to require the Lessor to make good the shop. 20 Mr Lawson, on behalf of the Lessee submitted that:- 1. To allow the agreement to be pleaded in bar is to in effect specifically perform it, and the Tribunal has no power to do so. 2. The Lessor of the premises (Perpetual Trustee Company Limited) was not the signatory to the Mediation Agreement. 3. The release clause (clause 5) only operated to 16 April 2002, and did not operate in relation to any failure by the Lessor, after that date, to enforce the authorised use and so such post 16 April breaches would still be able to be ventilated in these proceedings. 21 It seems to me that one of the central planks of the Act, in seeking to regulate the relationship between landlord and tenant, and perhaps addressing the perceived power imbalance between Lessor and Lessee, is found in Part 8 Division 2, and specifically Section 68(1 and 2) which mandates mediation. 68 Disputes and other matters must be submitted to mediation before proceedings can be taken (1) A retail tenancy dispute or other dispute or matter referred to in section 65 (1) (a1) may not be the subject of proceedings before any court unless and until the Registrar has certified in writing that mediation under this Part has failed to resolve the dispute or matter or the court is otherwise satisfied that mediation under this Part is unlikely to resolve the dispute or matter. (2) The Registrar must certify that mediation under this Part has failed to resolve a retail tenancy dispute or other dispute or matter referred to in section 65 (1) (a1) if the Registrar is satisfied that any one or more of the parties to the dispute or matter has refused to take part in or has withdrawn from mediation of the dispute or matter. 22 I note in passing, considering the scheme of the legislation, there might be an expectation (as the Applicant seemed at first to have) that the relevant specialist Retail Lease Tribunal might have power to enforce agreements reached at such mediations. Had that been intended, the definition of "Retail Tenancy Dispute" would have been wider than that found in Section 63(1) Division 1 Preliminary 63 Interpretation (1) In this Part: court means a court, tribunal or other body or person authorised by law, or by consent or agreement of parties, to decide or resolve any issue that is in dispute between parties, and includes an arbitrator. party or former party to a retail shop lease or former retail shop lease includes a person who is a guarantor or covenantor under a lease or former lease. retail tenancy dispute means any dispute concerning the liabilities or obligations (including any obligation to pay money) of a party or former party to a retail shop lease or former lease, being liabilities or obligations which arose under the lease or former lease or which arose in connection with the use or occupation of the retail shop to which the lease or former lease relates. Tribunal means the Administrative Decisions Tribunal of New South Wales established by the Administrative Decisions Tribunal Act 1997 . 23 This definition seems to limit 'retail tenancy dispute' to matters which arise directly out of the lease, rather than matters which arise indirectly via a mediation agreement. This aspect of the matter was not fully argued, and I was referred to no decided authorities. 24 It may well be the case that if the Lessor and Lessee enter into a written release, then the pleading in bar of such a contract in subsequent litigation may be to enforce one of the terms of it, but it seems to me that I am bound by the plain and clear terms of an agreement reached between the parties. To do otherwise would be to descend to the realms of comic opera; upon my proposing to proceed with the hearing despite the claimed words of the Agreement, because I did not have the power to enforce it, the Respondent would need to (I suppose) seek an immediate adjournment, which I would have to grant on his undertaking to immediately make urgent Application in the Supreme Court for an interim injunction to prevent me proceeding. 25 The evidence before me was that, although the payment of $10,000.00 referred to in Clause 2 had not been made, the reduced rent referred to in Clause 3 had been so invoiced, and had been paid by the Applicant. This amounted to part performance, and I am satisfied that the Agreement has come into effect. 26 The plain words of the document, on the one hand identified a full formula for the resolution of the dispute between the parties up to its date and then to 30 September, and on the other hand, satisfied me that the document was intended to be a full and final settlement and that Clause 5 did intend to operate fully to prevent any litigation. 27 It follows that Mr Lawson's third proposition must also fail. 28 It seemed to me that perhaps the most potentially viable point raised was the fact that the Lessor of the premises was not the same party as signatory to the Mediation Agreement. Technically speaking, I suppose, Deutsche Property Management Pty Limited, not being the registered proprietor of the land is not the "Lessor" as defined in Section 3 of the Act, but in this regard it is interesting to note that the definition of Retail Tenancy Dispute in section 63 refers to "a party of or former party" a concept which may be wider than the definition of "Lessor". 29 The Respondent placed the 2001 contract for the purchase of the shopping centre in evidence before me, and it showed the purchaser to be "Deutsche Property Funds Management Limited or its nominee, the Perpetual Trustee Company Limited". It is trite that the New South Wales Real Property Act does not allow trusts to be noted on the register, and consequently only the Perpetual Trustee Company appears as the registered proprietor. I am satisfied that it is clear that the Perpetual Trustee Company has no beneficial interest in the property, holds as trustee, and that the beneficial owner is Deutsche Property Funds Management Ltd. It would be surprising indeed if a release given by the beneficiary of the trust did not bind the trustee of the same trust. 30 I hold that the agreement entered into on 16 April 2002 between the Applicant and Deutsche Property Funds Management Ltd is a full answer to the action now proposed to be taken by the Applicant, and the Application is dismissed. 31 The next question to be resolved was the question of costs, the Respondent having claimed special circumstances. 32 This aspect of the matter was not rendered any the simpler by the fact that there was a Certificate that Mediation had Failed. This was placed in evidence before me with correspondence from and to the Registrar of Retail Tenancy Disputes which satisfied me that the Applicant had contacted the Retail Tenancy Unit and had indicated that the Agreement had failed. It appears that this is not an unusual event, and in such circumstances it is the usual practice of the Registrar to contact the other party, and if that other party also agrees that the Mediation Agreement has failed, then a Certificate is issued. That was not the case in these present circumstances, there was apparently an administrative oversight, and the Respondent was never approached - the Registrar simply issued the certificate, on the Applicant's request but it was clearly issued in error. 33 In order to fully explore this aspect, I directed that Mr Dimozantos give evidence to establish the state of his mind when he telephoned the Registrar. 34 I am satisfied from the evidence that Mr Dimozantos genuinely (although mistakenly) believed that the Mediation Agreement did not relieve the Lessor of the obligation to police the authorised uses, and so he did not act deceitfully when he contacted the Unit and indicated that the Mediation Agreement had failed. It follows that there are no special circumstances to justify an order for costs against the unsuccessful Applicant up until and including the hearing of 9 September 2002. 35 However, on any view of the matter, after 9 September 2002, the issue of the Mediation Agreement having been clearly raised, I am satisfied that the further pursuit of the matter was almost foolhardy and certainly was so after the filing of the affidavits of Mr Keen (which annexed the RTU letter acknowledging that the Registrar's Certificate had been issued in error) on 25 September 2002 and Mr Holmes (disclosing the Sale Contract and subsequent title details) on 4 October 2002. 36 I find that there are special circumstances in relation to any costs incurred by the Respondent after the service on the Applicant of the affidavit of Patrick Josse Hamilton Holmes dated 3 October and filed 4 October, and I order the Applicant to pay the Respondent's costs (on a party party basis) incurred after the date of service of that affidavit.