Set aside by Appeal : Set aside by Appeal in part 6/10/2004 Sotiropoulos -v- Mattana Coiffure Pty Limited (No 2) (RLD) [2004] NSWADTAP 43 CITATION: Mattana Coiffure Pty Limited v Sotiropoulos (No2) [2004] NSWADT 80 DIVISION: Retail Leases Division APPLICANT PARTIES: Mattana Coiffure Pty Limited RESPONDENT Vlasios Vasilios SOTIROPOULOS FILE NUMBER: 035024 HEARING DATES: 6 April 2004 SUBMISSIONS CLOSED: 04/06/2004 DATE OF DECISION: 04/23/2004 BEFORE: Fox R - Judicial Member APPLICATION: Claim for payment of money - Claim for rectification of the lease - Costs MATTER FOR DECISION: Orders; costs LEGISLATION CITED : Retail Leases Act 1994 CASES CITED: APPLICANT REPRESENTATION: M Drake, barrister RESPONDENT G Burton, barrister ORDERS: Building works orders; 1.The Respondent use all reasonable endeavours to obtain approval for Development Application 8.2003.408.1, in its current form or as amended only so far as is necessary to satisfy the requirements of Mosman Council ("Development Application"), from Mosman Council at the earliest possible time.; 2.The Respondent, within 8 weeks of obtaining approval for the Development Application construct and rectify treatment room 2 (excluding joinery) in accordance with the plans and schedule of fittings provided by Michael Sandberg, SMS Architects and the four paint finishes specified in the applicant's schedule of finishes attached to these orders and marked "A" ("building works").; 3.The Respondent ensure that the premises are secure and locked and provided with adequate toilet facilities throughout the building works. ; 4.The Respondent, within nine weeks of obtaining approval for the Development Application provide the Applicant with certifications:; i) from a practising structural engineer with corporate membership of the Institute of Engineers Australia that the excavation works have either left the existing wall at the back of treatment room 2 in structurally sound condition, or that underpinning or similar works have been effected to render it structurally sound; and; ii) from an accredited certifier, qualified to make these assessments and accredited under section 109T of the Environmental Planning and Assessment Act 1979, that the building works have been completed in accordance with order 2 above, the Building Code of Australia and any development consents entitling those works to be carried out. ; Compensation orders; 5.The Respondent pay the Applicant $37,900 in compensation for the period from 5 September 2002 to 23 September 2003. ; 6.The Respondent pay the Applicant compensation in the sum of $1,803 a day for: ; i) three days lost trading on 24-26 September 2003 by closure of the salon during the installation of the temporary facilities, being $5409; and; ii) each additional day of trading lost from 6 April 2004 until the completion of the building works by closure of the salon, payable at the end of each week in which a day or more of trading is lost by cheque delivered to the leased premises during the trading hours of the applicant's business or as otherwise agreed between the parties.; 7.The Respondent pay the Applicant compensation in the sum of: $4,284 for the loss of the use of Treatment Room 2 from 24 September 2003 until 6 April 2004 calculated at the rate of $153 per week; and; i) $153 per week or part thereof for further loss of Treatment Room 2 from 6 April 2004 until the completion of the building works, payable at the end of each week by cheque delivered to the lease premises during trading hours of the applicant's business or as otherwise agreed between the parties.; 8.The Respondent pay the Applicant an agreed amount of $4,350 ($4,785 less GST) for the Applicant to replace the joinery (only) in Treatment Room 2.; 9.The Respondent pay the Applicant interest on the compensation payable under order 5 only at the rate of 6.57 per cent, being $2,292.; 10.The amounts referred to in orders 5-9 (excluding orders 6(b) and 7(b)) being the sum of $54,235, including interest, be paid within 28 days from the date of this order.; Costs order; 11.The Respondents pay one half of the Applicant's costs of preparation for trial up to the commencement of but not including the actual conduct of the hearing of 22 July and is to pay all of the Applicant's costs (including preparation) for the conduct of the matter on 23 and 24 July and all subsequent appearances in the matter including appearance of 6 April 2004, all on a party/party basis.; Liberty to apply; 12.Liberty to either party to apply on 7 days' notice.; Declaration; 13.The Lease granted by the Respondent to the Applicant comprised an exclusive right to occupy the ground floor built area as identified by the highlighter outlined area shown in the plan attached to this order, but noting that the plan does not accurately reflect the new laundry and new WC because that is still to be built. The lease further included a shared right to park a vehicle in Carney Lane and a shared right of access to the rear lane Council car park identified in the plan as existing garage as limited by clause 3.4 and 11.3.2 of the lease. REASONS FOR DECISION 1 In my 9 September 2003 reasons I made it clear that the Respondent should effect urgent remediation of the temporary facilities, and the Respondent did so by the end of that month. It transpired that there needed to be further Development Approval from the Mosman Council to allow the toilet and laundry facilities for the leased premises, as initially proposed, to be built. That approval, at the date hereof, is not yet to hand and the Works are still not completed. 2 I must say that many of the Orders which I make today were made as a result of negotiations between the parties, and I congratulate them on taking those steps, so bringing this difficult matter to some finality. 3 I will now deal with the aspects of my Orders which were not agreed, not necessarily in numerical order. 4 It seems to me that the claim for interest is appropriate in the amount calculated by Mr Darke. The amount in order 5 is entirely compensation for loss of income which, in the ordinary course, the Applicant would have been able to bank, and so put it to work either earning interest, or alternatively, in reduction of the Applicant's overdraft. 5 Both parties claimed orders for costs, seeking to find the requisite special circumstances in the settlement offers and counter offers brought into evidence in that regard. It is appropriate that I first make reference to the issue of annual rent increases envisaged by the Lease because the possible amount of those became a critical factor in the various offers and counter offers. 6 The matter of C.P.I. rent increases was first raised at the commencement of the hearing proper, and I then ruled that because it had not been pleaded, it was not appropriate that I allow it to be agitated. Today Mr Burton sought to again raise that matter, by way of set off. I acknowledge the logic of that approach, because it would be desirable that that issue, which still remains between the parties, be resolved. However, I cannot see how I can do that, having heard no evidence at all in relation to it. Mr Burton may well say, in effect:- "The lease speaks for itself, so rule on it" but that would deny Mr Darke the opportunity of raising proper evidentiary matter in response in denial. 7 It does however appear to me to be appropriate to observe that the evidence before me tended to establish that, on 16 June 2002, when the $200.00 per week rent reduction was agreed, the Applicant was actually paying an annual rental of $88,400.00, apparently with the Respondent's acquiescence, when strict compliance with the Lease would appear to have allowed C.P.I. increases dating from April 2001 and April 2002. These would have brought the annual rental, before the $200.00 per week reduction, to $94,724.00. I make no findings in that regard, nor do I make any order in relation thereto. 8 A series of letters between the parties making various offers of settlement were in evidence. The issues were complex, and consequently the offers were not of the simple lump sum variety. Instead, they attempted to establish a proper protocol to identify the nature of the building Works, and their method of execution and supervision as well as addressing monetary compensation. I find that the various differences between the offers in regard to the building Works aspects were not greatly in dispute by 14 February 2003. That is when the Respondent accepted relevant parts of the Applicant's offer of 7 February 2003. However the offer of 7 February 2003 included a claim for contribution to costs and a claim for compensation which the Respondent did not accept. At first glance the offer appeared to be slightly more favourable to the Respondent than the Orders made today, but it was rendered not comparable with the final result achieved by my Orders because it attempted to freeze the potential annual rent reviews. I am not able to say that it is clear that the offer was, in the end, more advantageous to the Respondent, and so the Respondent cannot be criticised for not accepting it. 9 Subsequent interchanges of correspondence did not achieve a situation where either party made an offer, acceptance of which would have placed the other party in a clearly better position than that which resulted from my findings. The "jockeying for position" involved in the correspondence commencing in October of 2002 and ending on 21 March 2003, did not involve any offer which was so advantageous that the failure to accept amounted to special circumstances. 10 However, the position was changed by a letter of 2 June 2003 from the Applicant to the Respondent in which there was yet another formula for the description and supervision of the Works still to be done, the provision of appropriate temporary facilities, the temporary closure of the Salon and compensation for that closure and finishing with the proposal:- "your client also agrees to our client seeking additional compensation (including by way of rent reductions and the recovery of legal costs, in the Tribunal)". It should be borne in mind that at this time, pleadings were in hand, and the matter had been set for trial. That offer was not accepted, but I am satisfied, if it had been, that the hearing would have been reduced to one day's duration and the preparation for it, on any view of the matter, would have been halved. In this regard I note that a substantial part of the hearing time was involved in establishing the condition of the premises, and the need for urgent remedial work to establish proper temporary facilities. This required, as well as much oral evidence, plans etc., two separate attendances for formal views of the premises, to establish the condition of the temporary facilities before and after the remediation. 11 I have in my findings of fact I made comment on the unfortunate state of the initial temporary facilities, and I am satisfied that the Respondent should have taken urgent remedial steps once the condition of the premises was raised by the Applicant. I am also, in view of the apparent quality of the work which the builder had done, satisfied that the Applicant was justified in seeking some clear indication of the quality of the further remedial work before actually allowing the builder back into the premises. It is appropriate to observe in this regard that the initial rebuilding agreement reached between the Applicant and the Respondent (see paragraphs 18 and 19 of my 9 September 2003 reasons) was a variation within the broad of parameters of the Lease, and only varied the Applicant's right of quiet enjoyment, it did not abrogate it. The Respondent's tardiness in taking steps to remedy the facilities is a separate basis for finding special circumstances, and is a separate trigger for the costs order which I propose to make. I think I have already made it clear that in my view the Respondent's subsequent failure accept the offer of 30 May 2003 also and separately amounts to special circumstances. 12 I note that Mr Darke very properly indicated that he limited the claim to party/party costs. 13 The Lease granted by the Respondent to the Applicant comprised an exclusive right to occupy the ground floor built area as identified by the highlighter outlined area shown in the plan attached to this order, but noting that the plan does not accurately reflect the new laundry and new WC because that is still to be built. The lease further included a shared right to park a vehicle in the area identified in the plan as "existing garage", as limited by clause 3.4 and 11.3.2 of the Lease, and a shared right of access through that "existing garage" area to Carney Lane. ORDERS Building works orders 1.The Respondent use all reasonable endeavours to obtain approval for Development Application 8.2003.408.1, in its current form or as amended only so far as is necessary to satisfy the requirements of Mosman Council ("Development Application"), from Mosman Council at the earliest possible time. 2.The Respondent, within 8 weeks of obtaining approval for the Development Application construct and rectify treatment room 2 (excluding joinery) in accordance with the plans and schedule of fittings provided by Michael Sandberg, SMS Architects and the four paint finishes specified in the applicant's schedule of finishes attached to these orders and marked "A" ("building works"). 3.The Respondent ensure that the premises are secure and locked and provided with adequate toilet facilities throughout the building works. 4.The Respondent, within nine weeks of obtaining approval for the Development Application provide the Applicant with certifications: i) from a practising structural engineer with corporate membership of the Institute of Engineers Australia that the excavation works have either left the existing wall at the back of treatment room 2 in structurally sound condition, or that underpinning or similar works have been effected to render it structurally sound; and ii) from an accredited certifier, qualified to make these assessments and accredited under section 109T of the Environmental Planning and Assessment Act 1979, that the building works have been completed in accordance with order 2 above, the Building Code of Australia and any development consents entitling those works to be carried out. Compensation orders 5.The Respondent pay the Applicant $37,900 in compensation for the period from 5 September 2002 to 23 September 2003. 6.The Respondent pay the Applicant compensation in the sum of $1,803 a day for: i) three days lost trading on 24-26 September 2003 by closure of the salon during the installation of the temporary facilities, being $5409; and ii) each additional day of trading lost from 6 April 2004 until the completion of the building works by closure of the salon, payable at the end of each week in which a day or more of trading is lost by cheque delivered to the leased premises during the trading hours of the applicant's business or as otherwise agreed between the parties. 7.The Respondent pay the Applicant compensation in the sum of: $4,284 for the loss of the use of Treatment Room 2 from 24 September 2003 until 6 April 2004 calculated at the rate of $153 per week; and i) $153 per week or part thereof for further loss of Treatment Room 2 from 6 April 2004 until the completion of the building works, payable at the end of each week by cheque delivered to the lease premises during trading hours of the applicant's business or as otherwise agreed between the parties. 8.The Respondent pay the Applicant an agreed amount of $4,350 ($4,785 less GST) for the Applicant to replace the joinery (only) in Treatment Room 2. 9.The Respondent pay the Applicant interest on the compensation payable under order 5 only at the rate of 6.57 per cent, being $2,292. 10.The amounts referred to in orders 5-9 (excluding orders 6(b) and 7(b)) being the sum of $54,235, including interest, be paid within 28 days from the date of this order. Costs order 11.The Respondents pay one half of the Applicant's costs of preparation for trial up to the commencement of but not including the actual conduct of the hearing of 22 July and is to pay all of the Applicant's costs (including preparation) for the conduct of the matter on 23 and 24 July and all subsequent appearances in the matter including appearance of 6 April 2004, all on a party/party basis. Liberty to apply 12.Liberty to either party to apply on 7 days' notice. Declaration 13.The Lease granted by the Respondent to the Applicant comprised an exclusive right to occupy the ground floor built area as identified by the highlighter outlined area shown in the plan attached to this order, but noting that the plan does not accurately reflect the new laundry and new WC because that is still to be built. The lease further included a shared right to park a vehicle in Carney Lane and a shared right of access to the rear lane Council car park identified in the plan as existing garage as limited by clause 3.4 and 11.3.2 of the lease. 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.