Duncan's Catering Pty Limited v Bankstown City Council [2005] NSWADT 158

CITATION: Duncan's Catering Pty Limited v Bankstown City Council [2005] NSWADT 158 DIVISION: Retail Leases Division APPLICANT PARTIES: Duncan's Catering Pty Ltd RESPONDENT Bankstown City Council FILE NUMBER: 045109 HEARING DATES: 10/03/2005 SUBMISSIONS CLOSED: 03/24/2005 DATE OF DECISION: 07/12/2005

BEFORE: Montgomery S - Judicial Member APPLICATION: Claim for declaration of rights, obligations and liabilities under a lease MATTER FOR DECISION: Preliminary matter Administrative Decisions Tribunal Act 1997 LEGISLATION CITED : Local Government (Tendering) Regulation 1999 Local Government Act 1993 Retail Leases Act 1994 Manly Council v Malouf [2003] NSWADTAP 12 CASES CITED: Conoid Pty Ltd v International Theme Park Pty Ltd (1999) NSW SC 1138 Woolworths Ltd v Kelly (1991) 22 NSWLR 189 Seguin & Anor v Anglican Church Property Trust Diocese of Sydney (No 1) [2004] NSWADT 146 REPRESENTATION: S Reuben, barrister G Butterfield, solicitor ORDERS: 1. The Tribunal does not have jurisdiction to determine these proceedings and accordingly the application is dismissed; 2. The Council is to pay the Applicant's costs of two hours of time spent at the Tribunal by the solicitor for the Applicant.

REASONS FOR DECISION 1 In November 2001 the Bankstown City Council ("the Council") invited tenders for the supply of catering services for Bankstown Town Hall ("the Town Hall"). The Conditions of Tendering document issued by the Council states in Part A, under the heading 'Contract Description': "The Centre is seeking to establish a relationship with the Caterer and the Town Hall based on mutual benefit and a desire to see the business continue smoothly. Both the Centre management and the Caterer will be jointly responsible for ensuring that all aspects of the catering services exceed the Centres customers expectations and are delivered in the most effective and efficient manner. It is envisaged that only through such a partnership arrangement would the Centre fulfil its vision of becoming a venue that offers all the comforts and facilities which can be enjoyed at performance and function centres around the Sydney metropolitan area." 2 The Applicant submitted a tender in response to that invitation. Prior to the submission of its tender the Council showed the Applicant a kiosk ("the kiosk") that could be used for the sale of hot food, snacks, candy bars and similar products. 3 The Council accepted the Applicant's tender and gave notice to that effect by letter dated 12 December 2001. The Applicant acknowledged receipt of this notice and confirmed its acceptance of the Council's offer by letter dated 15 December 2001. The Council issued an Instrument of Agreement ("the Instrument") to the Applicant. The Applicant signed the Instrument on 15 February 2002 and returned it to the Council. On about 15 February 2002, the Applicant commenced supplying services under this agreement. 4 The Town Hall was a three level building containing a basement (with a large fully functional kitchen and store rooms), a first floor (containing two large function rooms, one auditorium, one theatre setting with a break out room, a finishing kitchen, two bar areas and the kiosk), and a second floor (with three smaller function rooms and another finishing kitchen). The Council used rooms within the Town Hall for its own functions, and in addition let the Town Hall rooms to third parties for third party functions. 5 Prior to February 2002, the Council's staff catered for some functions and procured catering services from third party caterers, including the Applicant. Prior to 15 February 2002, the Applicant catered for approximately 7 functions at the Town Hall, both for the Council and for third parties. The Council's staff operated the kiosk up until 15 February 2002. At that time, the Council supplied to the Applicant 2 sets of keys, one set being for the kiosk, and the other being for different function rooms, kitchens and the basement cool room. The Applicant purchased the existing stock located in the kiosk from the Council. 6 The keys were generally left in the supervisor's office at the Town Hall. Whenever the Applicant requested that the Council's supervisor provide the kiosk keys to the Applicant, they were handed over. On some occasions the Applicant did not return them to the supervisor immediately. On one such occasion the Applicant retained a set of keys for a continuous period of 2 months. 7 The Applicant contends that the agreement reached between the parties is a retail shop lease for the purpose of the Retail Leases Act 1994 ("the Act"). It argues that the kiosk was part of a built structure, namely the Town Hall and consequently, the kiosk constituted "premises" and was a retail shop for the purpose of the Act: Manly Council v Malouf [2003] NSWADTAP 12. 8 The Applicant further contends that it had been given a right to occupy the kiosk. It says it was required by its agreement with the Council to sell 'fast food' and the Council represented to it that it could do so. The Applicant says that the only practical way in which it could do so was from the kiosk. This required the Applicant to occupy the kiosk. The Applicant also says that the right to occupy the kiosk was a right granted for value: Conoid Pty Ltd v International Theme Park Pty Ltd (1999) NSW SC 1138. The Applicant was required to pay the Council a commission based on the value of the services in respect of each aspect of the contract supplied by the Applicant. The amount of the commission payable was 12% when the Applicant's total turnover from the function was greater than $1,200.00 excluding GST, and 15% when the total turnover was greater than $5,000.00 excluding GST. Consideration must be sufficient, though it need not be adequate: Woolworths Ltd v Kelly (1991) 22 NSWLR 189 per Kirby P at 193 to 194. The Applicant says that this was sufficient consideration. 9 The Applicant says that the fact that some of the terms of the Agreement were implied and/or oral does not preclude the Agreement from being an enforceable agreement to lease. Therefore the Agreement comprised a 'retail shop lease' as defined in section 3 of the Act. In this regard it contends that (a) the parties entered into an agreement; (b) the right to occupy the kiosk was granted under that agreement; (c) the right of occupation was granted for value; and (d) the right of occupation was granted for the purpose of the kiosk being used as a retail shop. 10 The Applicant also contends that the application of the Act to the kiosk is not excluded by section 5 of the Act because the area of the kiosk is less than 1000 square metres and the kiosk was not used by the Applicant to conduct a business on behalf of the Council. The Applicant relies on views expressed by Simos J in Conoid Pty Ltd v International Theme Park Pty Ltd in support of this contention. The Applicant also says that the application of the Act to the Agreement is not excluded by Section 6 of the Act because the term of the Agreement was greater than 6 months. Accordingly, it is argued, there was an agreement for lease and the minimum term of 5 years provided for by section 16 of the Act applies. 11 The Council raises several arguments against the Applicant's contentions and submits that the Tribunal has no jurisdiction to determine these proceedings. The Council's principal arguments are that: there is no agreement, as the Council never signed the Instrument; if there was an agreement for longer than 6 months with a right to renew, there was no value given; and if there is a Retail Lease for the purposes of the definition in the Act, it falls within the exemption as the business carried on fell into the exception in section 5(b) of the Act; and if an agreement is proven, it was only an agreement for occupancy on an "each occasion" basis and falls within the exception in section 6 of the Act. 12 I agree with the Applicant that there is no merit in the first three of these arguments. With respect to the failure by the Council to sign the Instrument, the Council says that clause 5 of the Local Government (Tendering) Regulation 1999 ("the Regulation") provides that a contract to which the Regulation applies must be in writing and must be executed by or on behalf of the Council. In my view, the Council's argument is misconceived. The failure to reduce an agreement to writing does not preclude the existence of a 'retail lease' for the purposes of the definition in the Act. The existence or otherwise of a retail lease will be determined by the parties' intentions. 13 Section 55 of the Local Government Act 1993 requires that a council must invite tenders before entering into various categories of contracts. The conduct of the tender process is governed by the Regulation. Nevertheless, in my view it does not follow that the failure of the Council to sign an Instrument would invalidate an agreement that had been entered between the Council and a successful tenderer if the objective appearance of the parties' intention was that an agreement would come into existence. The clear intention of section 55 of the Local Government Act and clause 5 of the Regulation is to ensure an accountable tender process, not to invalidate an agreement reached through that process if the requirements of clause 5 of the Regulation are not satisfied. 14 The Council's argument that there was no value given must also fail. In my view, the amount of the commission payable was sufficient value: Conoid Pty Ltd v International Theme Park Pty Ltd. 15 I also agree with the Applicant that there is no merit to the Council's assertion that the relationship between the Applicant and the Council was one of agent and principal and/or akin to principal and agent. Clause 20 of the conditions of contract which form part of the Instrument negates any agency. More importantly, when viewed objectively it cannot be said that the parties' intention was that the arrangement was to be one of principal and agent. Accordingly, in my view, if there were a retail lease for the purposes of the Act it would not be caught by the exception in section 5(b) of the Act. 16 However, I agree with the Council's argument that the agreement between the parties falls within the exception in section 6 of the Act. Insofar as is relevant, section 6 of the Act states: "6 Leases to which Act does not apply (1) This Act does not apply to any of the following leases of retail shops: (a) leases for a term of less than 6 months without any right for the lessee to extend the lease (whether by means of an option to extend or renew the lease or otherwise), and for this purpose a provision for holding over by the lessee at the end of the term of the lease is not considered to confer a right on the lessee to extend the lease if it operates effectively at the discretion of the lessor". 17 The Applicant says that the agreement was for a term of one year and that the circumstances of the grant of rights of occupation of the kiosk are similar to the circumstances in the matter of Conoid in which Simos J found that a retail lease existed. In this matter the Applicant was provided with a separate set of keys for the kiosk. There was no interference from the Council in the conduct of the kiosk. There was no interference in how the Applicant paid its staff, or in how the Applicant directed its staff, or in what products the Applicant purchased to sell at the kiosk. 18 The Applicant concedes that it relied on the Council to procure patrons but says that its reliance upon the Council was less direct and/or significant than was the case in Conoid. The Council did not book the kiosk. Rather, the Council referred whoever had booked the adjacent auditorium to the Applicant in relation to the opening of the kiosk. On occasions, if the booking party did not pay a bond, the Applicant did not open the kiosk. Whether the Applicant made a profit or loss in how it operated the kiosk when it was open was not something over which the Council had control. 19 In contrast, the Council submits that any agreement to grant occupancy was on an "ad hoc" or "from time to time" basis. This is submitted on the basis that the Applicant's use of the Town Hall on each occasion that the Council required the catering services of the Applicant constituted an occupancy of limited duration, in most instances less than a day. The Applicant was granted the occupancy on each of those distinct occasions. Therefore, each instance of occupancy can only be for less than six months and without any right to extend the lease. It would follow, the Council submits, that the Tribunal does not have jurisdiction to hear the present proceedings. 20 I agree with the Council's argument. I do not agree that the agreement prevented interference from the Council in the conduct of the kiosk. The Applicant and the Council were jointly responsible for the catering services. The Council operated the premises; it had control over the access to the kiosk, in particular, the keys. The keys were generally left in the supervisor's office at the Town Hall. In fact, the Council dictated when the Applicant could operate the kiosk as it had control over the entire Town Hall. The kiosk only opened when the Council conducted its business. The Council had input into the services being provided by the Applicant. 21 The definition of 'retail shop lease or lease' in section 3 of the Act includes a right of occupation of premises whether or not the right is a right of exclusive occupation. This provision was considered in: Seguin & Anor v Anglican Church Property Trust Diocese of Sydney (No 1) [2004] NSWADT 146. In that matter the Tribunal was asked to determine the status of a right of interrupted occupation conferred on the applicants by a licence agreement. The applicants were permitted to enter and use premises over a period of two years for a permitted use described as 'sale of antiques'. However, the times within which they could enter and use the premises were restricted to 'any hour Monday to Saturday inclusive but not outside the hours of 12 noon to 6.00 p.m. on any Sunday'. The Tribunal found that the arrangement was a form of non-exclusive occupation and stated at paragraph 56: "the policy of the RL Act could, we think, be averted too easily by commercial landlords if, solely through the device of reserving a right periodically to re-enter the premises for a short period of time, they could claim that a lease or licence granted by them did not fall within the Act." 22 The arrangement in this matter is quite different to that in Seguin. In these circumstances it is my view that the arrangement between the parties is as the Council contends. The Applicant was granted occupancy on each of the distinct occasions upon which it operated the kiosk. The longest period in which it retained a set of keys to the kiosk was two months. All other occasions were for lesser periods and the Town Hall supervisor generally retained control over them. The arrangement between the parties falls within the exception in section 6 of the Act. It follows, in my view, that the Tribunal does not have jurisdiction to determine these proceedings and accordingly the application must be dismissed. Costs 23 Each of the parties has sought an order for costs. The Tribunal's power to award costs is governed by section 88 of the Administrative Decisions Tribunal Act 1997 ("the ADT Act"). Section 88 provides that 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. 24 The Applicant submitted that it is entitled to costs for the morning of 10 March 2005. The Applicant asserted that the time for hearing of this matter could have been reduced if the Respondent had concluded its case in an orderly fashion in the time allocated. During the morning of 10 March 2005 the Council persisted in its application for transfer and foreshadowing an intended application under section 76A of the Act. The Applicant contends that the Council wasted the whole of the day until shortly after 2.30 pm when it withdrew its application for transfer and withdrew any foreshadowed application to file an unconscionable conduct claim. The Council finished its oral argument at approximately 3.30pm. This left very little time for the Applicant to present its oral submissions. Further submissions have been required and response has had to be made where the matter had to be revisited by counsel. Valuable time was wasted which has led to additional costs on the part of the Applicant. 25 The bringing of that application was wholly within the power and control of the Council. The Applicant further asserted that the Council brought about the situation entirely of its own making and that such conduct on the part of the Council could constitute special circumstances to attract the exercise of discretion under section 88 of the ADT Act to justify an award of costs. 26 The Council submits that there are no "special circumstances" that warrant the awarding of costs in favour of the Applicant. It says that the matter was listed for a day and concluded within that day. In this sense, there is nothing out of the ordinary relating to the time it took to finalise on that day. It ended within the estimate given by both parties. The Council says that there are no costs unreasonably incurred by the Applicant in respect of Counsel as the liability it has is unaffected by the fact that the matter occupied the entire day. 27 The Council submits that should the Tribunal determine that the Applicant is entitled to costs for the morning of the hearing on 10 March 2005 the extent of the costs of the morning of the hearing should be for the time spent at the Tribunal by the solicitor for the applicant between 11:00 am and 12:45pm. Of this time, the Council submits that the parties addressed the Tribunal on the facts of the matter for approximately 30 minutes. This was a necessary step and it did not add to the length of the Tribunal hearing in any special or unreasonable way. Therefore, the time left over is 1 hour and 15 minutes. If the Tribunal finds that there are special circumstances that warrant an award of costs, then the Council submits that those costs should be limited to 1 hour and 15 minutes of time spent at the Tribunal by the solicitor for the Applicant. 28 I agree that the manner in which the Council dealt with its application for transfer of the proceedings amounts to special circumstances to attract the exercise of discretion under section 88 of the ADT Act to justify an award of costs. I agree with the Council's submission that those costs should be limited however it is my view that the time thrown away was two hours and not 1 hour and 15 minutes as the Council contends. I accept the Council's submission as to the cost of Counsel's time. In my view an appropriate order is that the Council pay for two hours of time spent at the Tribunal by the solicitor for the Applicant on 10 March 2005. Orders 1. The Tribunal does not have jurisdiction to determine these proceedings and accordingly the application is dismissed. 2. The Council is to pay the Applicant's costs of two hours of time spent at the Tribunal by the solicitor for the Applicant.