Lynch & anor -v- Perpetual Trustees Australia Limited [2000] NSWADT 78

CITATION: Lynch & anor -v- Perpetual Trustees Australia Limited [2000] NSWADT 78 DIVISION: Retail Leases Division APPLICANTS Brian Lynch and Jillian Turnbull PARTIES: RESPONDENT Perpetual Trustees Australia Limited as Trustee for Macquarie Country Wide Management Limited

FILE NUMBER: 005019 HEARING DATES: 28/04/2000 SUBMISSIONS CLOSED: 04/28/2000 DATE OF DECISION: 04/28/2000

BEFORE: Davidson R - Judicial Member APPLICATION: Claim for declaration of rights, obligations and liabilities under a lease MATTER FOR DECISION: Principal matter LEGISLATION CITED : Retail Leases Act 1994 CASES CITED: Jones -v- Dunkel (1959) 101 CLR 298 APPLICANT REPRESENTATION: T Lynch, barrister RESPONDENT S White, barrister ORDERS: 1. Restraining order against Respondent made.; 2. Each party to pay their own costs.; 3. Liberty to apply on 24 hours notice in relation to any application by either party arising from the stay granted by the Tribunal on 28 April 2000.; 4. Stay for 28 days on Undertakings by the Respondent through its counsel.

EX TEMPORE REASONS FOR DECISION 1 This is an application under the Retail Leases Act 1994. The applicants are Brian John Lynch and Jillian Margaret Turnbull. They are the lessees of the Cowra Hot Bake at 59 Kendall Street, Cowra, which is shop 5 in the Cowra Shopping Plaza. The respondents are The Perpetual Trustees of Australia Limited as Trustees for Macquarie Countrywide Management Ltd. 2 The applicants are the successors, so far as the second applicant is concerned in any event, of people who have carried on the Cowra Hot Bake since about 1988. The Cowra Shopping Plaza has changed hands at various times. It was originally owned by a company known as Tryoval Pty Limited, who sold the premises to the Cowra Shire Council, who later sold the premises to The Perpetual Trustees Australia Limited as Trustees for Macquarie Countrywide Management Ltd. 3 It suffices to state that the applicants have at all times since 1988 and including portion of 1988, had a lease of the premises and indeed they were granted options to renew that lease at various times. The leases of the premises of the applicants, or rather the successors so far as the second applicant is concerned, at all times contained a covenant in the following words: "The lessor shall not lease any other part of the centre or permit the use of any other part thereof for the purpose of a hot bread bakery or cake shop." 4 The application under the above Act seeks a declaration from the Tribunal that the respondent is not entitled to grant a lease to Coles Supermarkets Australia Pty Ltd or Bi-Lo Pty Ltd in contravention of the above provision of the lease of the applicants. In addition to that the applicants seek an order that the respondent be restrained from granting any such lease. The respondent entered into a lease with - or rather an agreement for a lease with Coles Supermarkets Australia Pty Ltd and Bi-Lo Pty Ltd dated 26 November 1999. That agreement contained a provision in item 8 of schedule A in respect of the use of the premises and it read as follows: "Supermarket including all ancillary retail or service offerings developed by the lessee as adjuncts to the traditional concept of a supermarket with optional 24 hour trading." 5 However, prior to that, the company Bi-Lo Pty Ltd had for many years (and indeed since 1988 from a date earlier than the applicants, or rather the applicants before their successors), operated premises in the Plaza and indeed had renewed those leases under options to renew. The company Bi-Lo Pty Ltd had validly renewed an option to be granted a further lease and that lease was to be a lease on the granting of it, there having at this stage been no lease entered into, which contained (as did the prior leases before the exercise of the option) the following provisions: "3. All incoming goods, wares and merchandise shall be delivered to the lessee through the inwards goods doors designed by the lessor." and "Use of the premises. Food bar and/or variety store and for the sale (by wholesale and/or retail) hire or provision of any merchandise or services and for ancillary service including offices, amenities, storage space and car parking, provided no part of the premises shall be specifically designated as a delicatessen." 6 The respondent has opposed the orders sought, principally upon the basis that the above provisions of the leases to Bi-Lo Pty Ltd do not embrace a hot bread bakery and on the basis that there is insufficient evidence establishing any intended contravention of the above provisions of the lease to the applicants. 7 Turning firstly to that matter, the evidence in this particular case is sparse. On the 14 April 2000 it was stated by counsel on behalf of the respondent: "Now, my instructions are that the bakery is presently being built. Bi-Lo Pty Ltd is spending money putting in plant and equipment, and I also understand that employees are being approached or taken from the applicant. Now, that is a different forum. That is a different argument. That is not a retail tenancy claim and that is where I go to my jurisdictional point and this is where the evidence needs to be fleshed out. But if I read that correctly, the new lease comes into being on 1 May, Bi-Lo Pty Ltd in our submission is entitled to bake bread and that is all that it is doing. It presently can bake bread. It can bake bread under the old lease in 15 per cent of the premises. It can decide not to surrender the lease and if it decides not to surrender the lease it can then continue or start baking bread in that part of the shop and that is the fundamental flaw I think in an interim injunction, because what my friend is asking the Tribunal to do, is to require us to breach our contract and also put us in a position where we may have to enforce that undertaking or that injunction on a third party, Bi-Lo Pty Ltd in the circumstances, we just cannot do that. We may be in contempt of the Tribunal if Bi-Lo Pty Ltd continues to do it. There is nothing commercially or legally that we can do to stop Bi-Lo Pty Ltd doing what it is doing and that brings me on to a more fundamental point. There should be someone from Bi-Lo Pty Ltd making submissions because it is its income that is being affected." 8 That was regarded, so far as what was said in respect of the activities of Bi-Lo Pty Ltd, as common ground between the parties. The evidence does establish that wiring for an oven was put into the premises of Bi-Lo Pty Ltd by Bi-Lo Pty Ltd. It also establishes that employees of the applicants were to work with Bi-Lo Pty Ltd as bakers. The evidence also establishes that signs have been put upon the premises which do show that a brighter, fresher building and discount store was being erected by Bi-Lo Pty Ltd part of which is described as a bakery. Not only that, it establishes that a sign was put up above the doors of the area to be occupied by Bi-Lo Pty Ltd, which contained in three separate places the words: "Fresh from the bakery." 9 The respondent has submitted that all that the evidence establishes is that the premises were to be used by Bi-Lo Pty Ltd as a bakery, not as a hot bread bakery. However, in my view that submission cannot be sustained. It is quite clear that if bread is fresh from the bakery, then it must be hot bread. That is explained as follows. The bread is fresh from the bakery; it is accordingly the bakery that produces the fresh bread and the bread must be hot if it comes fresh from the bakery. It is quite clear that hot bread is contemplated as being sold, otherwise the words, "fresh from the bakery" are nonsensical. It is clearly without any doubt that hot bread is going to be sold, or anticipated to be sold by Bi-Lo Pty Ltd. It is also quite clear from the three signs above its premises, that the inference must be drawn that that sale of hot bread is a significant element of its business. 10 That being so, it is the same element that is comprised within the provision in the lease of the applicants set out above. The first matter, however, despite that evidentiary hurdle at the beginning which I have resolved in the applicants' favour is whether or not the company Bi Lo Pty Ltd is permitted to carry on the business of a hot bread bakery under its permitted use in the lease which it has and which it had prior to the grant of the lease to the applicants. 11 The applicants' lease contains the wording as referred to above, "a hot bread bakery". The first question which may appropriately be determined is what those words mean; the lease provisions, in each instance, have to be construed. If one turns to the dictionary meanings of bakery, one sees that bakery is connected up with a building or room to bake in or a bakehouse. It is also connected up with the words referred to in the dictionaries as a person baking bread or one who makes and sells bread. See the Macquarie Dictionary, second edition (1995) reprint at 128, the Australian Concise Oxford Dictionary (1997) at 71. 12 The use of the premises as a hot bread bakery in addition to that have the connotation of performing an act. That act, of course, must be the act of making the bread and, indeed, then selling it hot. It is the type of act which is referred to in the affidavit of Brian John Lynch sworn on 13 April 2000 wherein he describes the process as that of "mixing the dough, proofing the mixture, baking the bread" and then, of course, selling it. Thus, it is clear in my view that the applicants have a provision in their lease which contemplates the production or process of production or the making of the particular food. 13 The question arises whether the provision in the lease to Bi-Lo Pty Ltd contemplates the same thing. The wording of that provision is cast in quite wide terms. It does refer firstly to a food barn. A barn, according to the dictionary meanings, does ordinarily contemplate a building for storing particular things and a large shop or supermarket which keeps prices down by providing minimum service to the customers. One has, for instance, the storing of hay and grain in a barn and often stabling livestock in a barn according to the dictionaries. One also covers in the dictionaries so far as a barn is concerned, a large store, shop or supermarket as referred to. See the Macquarie Dictionary Supra, at 139; the Australian Concise Oxford Dictionary Supra, at 77. Nevertheless, one has to be extremely careful. All provisions are to be read as a whole. In addition to that the word "barn" is not a word which should be dealt with in any precise or dictionary sense in my view without reservations. Indeed, it may be merely a catch word to invite customers. The clause itself, however, does contain after the word "barn" the words "and/or". 14 The words following that relate in my view to ordinary merchandise or services of a nature which do not relate to food except the word delicatessen. I will come back to the meaning of "merchandise" but there is that one item which does relate to food; the limiting item "provided no part of the premises shall be specifically designated as a delicatessen". That immediately raises the question of whether the wording of the provision after the words "food barn" relate to merchandise in a wider sense than simply storing goods. However, "delicatessen" is a storing of goods, and as referred to, if one looks at the other words after the words "food barn and/or", even though they do not relate to, in my view, food, they do relate to a retail outlet or a wholesale outlet of goods rather than to the production or making process of particular goods. A delicatessen does not make the goods ; a process such as the slicing of ham in a delicatessen is not the production or the making of ham. 15 If one looks at the dictionary definition of "merchandise", one simply has the link-up with merchandise and trading, and the link-up with merchandise to merchants. One, for instance, has enterprises such as merchant banks, merchant ships and types of traders in goods. One sees that generally merchandise refers to goods, commodities and the stock of a store to trade in. Although it is quite clear from the dictionaries that manufactured goods can come in to that, it nevertheless is a matter which must be determined in the light of the whole clause, and the clause in my view does have a flavour of the sale of goods stocked by a particular person. (See again the Macquarie Dictionary supra at 1113; the Australian Concise Oxford Dictionary supra at 677). 16 The traditional concept of "supermarket" without adjuncts is also relevant, and that ordinarily refers to a large self-service store selling goods and some household goods and garden supplies rather than to the process of production or making goods. (See the Macquarie Dictionary supra at 1754, where the word "supermarket" is defined as "a large, usually self-service retail store or market selling food and other domestic goods". See also the Australian Concise Oxford Dictionary supra at 1138 where "supermarket" is defined in the way referred to above as "a large self-service store selling foods and some household goods and garden supplies".) It is a large retail outlet for a wide range of goods; a feature is the payment for goods, collected by customers from sections or departments in the store, at rows of exit checkout turnstiles. In that context ancillary services may be found. But the thrust of item 8 of Schedule A of the agreement for lease dated 26 November 1999 is that of a retail business not a manufacturing business. The clause deals with a retail outlet; it embraces service retail offerings. The descriptive phrase is "ancillary retail or service offerings" not "ancillary retail and service offerings". 17 Thus, although the word "supermarket" is referred to in the agreement for lease dated 26 November 1999, that reference to "supermarket" in the circumstances cannot assist. Also as stated, the clause that is referred to in The Lease To Bi-Lo Pty Ltd in my view clearly does not embrace the concept of the production or making process in respect of a hot bread bakery. It follows from that, that unless the respondent is successful in respect of a number of other submissions of a discretionary nature, then the orders sought by the applicant ought to be made. 18 The respondent relied upon the aspects that the orders are not of utility, that the applicant had been guilty of laches, that there was a third party involved, namely Bi-Lo Pty Ltd and Coles Supermarkets Australia Pty Limited, and that the area of the premises in the agreement for lease dated 26 November 1999 exceeded 1000 metres. 19 In addition to that, primarily, however, the respondent relied upon the aspect that damages were an adequate remedy. 20 The Tribunal, firstly, before turning to the discretionary matters, turns to the aspect of damages. The provision referred to above in the lease to the applicants was, on any view, inserted to protect them from competition. 21 The amount of rent which was inserted in that lease was fixed upon that basis. That is quite clear and undisputed. The applicants have conducted their business upon the basis of the provision for many, many years. They have renewed their lease in reliance on that provision. They have built up a good business, and it is quite clear that if they are not protected by having the above provision in the lease cut away from under them, they will suffer damages. 22 Once that emerges, in my view, they ought not to be put in the position of having a portion of their livelihood taken away from them for a number of years. On any view their renewal, or option to renew the lease, is for a period of time covering two or three years. That means that during a long period of time they will receive less money, in my view, than they would have received before. Indeed, as stated, the outline referred to above clearly establishes that. 23 It follows that in view of the length of time, their reduction of income and the wait which they would have to endure before suing for damages, that they are entitled to the restraining order, and that damages are quite inadequate. That appears as stated from the simple outline referred to above. It demonstrates that an injustice would occur by a long wait time with a loss of moneys to live upon. That being so, that defence is rejected. 24 The aspect of the utility of the order is resolved in favour of the applicants. The order, simply because of the matters outlined by me above, must, of necessity, have utility. It simply is an order which gives effect to rights and obligations of the parties, which the above Act is designed to protect, and avoids injustice to them. That demonstrates that it has an appropriate utility. 25 So far as laches is concerned, that also must be rejected because the applicants did not become aware of the position until just before they made their application to the Administrative Decisions Tribunal, which application is dated 12 April 2000 and, upon becoming aware of the position, a letter was immediately written by the solicitors for the applicants to the respondent. The letter was written to the solicitors for the respondent on 28 March 2000. 26 That letter sought that a lease be not granted to Bi-Lo Pty Ltd in contravention of the applicants' entitlements under their lease and requested advice as to that within 48 hours. No satisfactory advice was ever received that such a lease would not be granted. Indeed, the solicitors for the respondent rejected any notion that the applicants were entitled to relief in respect of anything being done by their clients. 27 Accordingly, the question of laches is one to be resolved in favour of the applicants. Acquiescence and delay are linked concepts; laches, acquiescence and delay are grounds to oppose a restraining order. Certainly as demonstrated the applicants did not acquiesce and did not delay. 28 However, the question of the aspect of the non-joinder of the third parties is a more difficult question and has much more substance. The Tribunal must consider that aspect of the third parties not being before the Tribunal and have regard to it and, indeed, must give it substantial weight. The Tribunal is also entitled to consider the whole of the circumstances in respect of that non-joinder. 29 The Retail Leases Act 1994, provides for relief as between lessors and lessees. The Tribunal is unable to make an order which is binding upon the third party, Coles Supermarkets Australia Pty Limited, or Bi-Lo Pty. Ltd. The respondent itself may take proceedings alleging a retail lease as between - or a matter in connection with a retail lease, rather, coming within the Act - as between itself and Coles Supermarkets Australia Pty Limited and Bi-Lo Pty. Ltd by way of cross-claim and declaratory orders. 30 However, even if the applicants and the respondents did not take that step then, of course, a party might be interested and be joined under sections 67 and 68 of the Administrative Decisions Tribunal Act, 1997. At the outset of the proceedings, the Tribunal raised with each of the parties the question of the joinder of the third parties. The Tribunal did express the view that the third parties, in its opinion, ought to be joined. However, each of the parties declined to take steps in that regard, and the respondent stated that it intended, however, to rely upon the non-joinder as a reason for the non-granting of an injunction. 31 The position of the respondents was preserved. However, to take that view appears, quite clearly, to be a tactical view rather than something which is done to resolve the merits. It paves a way for a submission to be made when there was an opportunity of doing something else. However, the respondent may have relied upon the applicant to take the appropriate steps, and that detracts from any such attitude. 32 The applicant, however, did write to the Manager Bi-Lo Pty Ltd on 28 March 2000, and did state, in that letter: "Re: Lynch and Turnbull Lease from Perpetual Trustees Australia Limited Premises-Shop 5, Cowra Shopping Plaza, 59 Kendal Street, Cowra. We act for Mr Brian Lynch and Mrs Jillian Turnbull, who operate the Cowra Hot Bake from shop 5, Cowra Shopping Plaza. Our clients have instructed us they have recently received advice that Bi-Lo Pty Ltd intends to install and operate a bakery and hot bread shop within part of the premises of the Cowra Shopping Plaza in the near future. Our clients have instructed us to give you formal notice of the provision made in the lease they have executed with Perpetual Trustees Australia Limited, which reads as follows: 'The lessor shall not lease any other part of the centre or permit the use of any other part thereof for the purpose of a hot bread bakery or cake shop'. Our clients have instructed us to advise you that they intend to rely upon the above clause and should you enter into a lease or any arrangement to use part of the premises within the Cowra Shopping Plaza as a hot bread bakery or cake shop they intend to institute legal proceedings against you for injunctive relief and payment of damages without further notice to you." 33 That letter brought forward a letter to the solicitors for the applicants dated 31 March 2000 from the Legal Services Property section of Coles Myer Limited which read as follows: " Re: Lynch and Turnbull Lease from Perpetual Trustees Australia Limited I am in receipt of your letter dated 28 March 2000 addressed to Bi Lo Pty Ltd. Bi Lo Pty Ltd is not a arty to the above mentioned lease between your client and Perpetual Trustees Australia Limited and as such is not bound by any provision contained in that lease. It is inappropriate for formal notice to be served on Bi Lo Pty Ltd and nonsensical that your clients intend to institute legal proceedings against Bi Lo Pty Ltd. We suggest that your client address its concerns to the lessor." 34 Thus Bi-Lo Pty Ltd was recalcitrant. The respondent adduced no evidence from Bi-Lo Pty Ltd in respect of the present application and indeed, substantially relied upon endeavouring to defeat the applicants' application by way of legal arguments and matters which it could obtain by way of defence from areas in the evidence of the applicants. It adduced no comprehensive evidence at all in respect of just what had taken place. That had to be eked out and was able to be eked out but in a form which fell far short of what should be before the Tribunal. 35 However, the respondent was more in contact with Bi-Lo Pty Ltd, than the applicants. Indeed, the applicants and Bi-Lo Pty Ltd were at arm's length and the adduction of evidence from the applicants from Bi-Lo Pty Ltd and their co-operation with Bi-Lo Pty Ltd was something which one would not normally expect. However, one would expect it from the respondent. Despite that, the evidence was not adduced and inferences may be more comfortably drawn in accordance with Jones v Dunkel (1959) 101 CLR 298, from the non-adduction of that evidence from Bi-Lo Pty Ltd. 36 I have indicated my firm views as to the legal position in interpretation of the leases. Despite the aspect that one would not normally make a restraining order in a matter unless third parties had been given the opportunity to be heard before the Tribunal, in this particular case I am of the view this is insufficient to defeat the claims made by the applicants. 37 The other matter which the applicants contest is that because the plan, which is attached to the agreement for lease between Coles Supermarkets Australia Pty Limited and the respondent, refers to an area of 1,594 square metres then the claim is outside the Retail Leases Act 1994. The matter arises because section 5 of the Retail Leases Act 1994 provides that the Act does not apply to shops that have a lettable area of 1000 square metres or more. The lease which the applicants have is a lease for an area of 77 square metres. 38 The applicants seek relief in respect of a provision contained in their lease. That squarely brings the matter within the Retail Leases Act 1994. It follows from that that the Tribunal is clearly granted power to make an order which resolves a dispute in connection with that particular lease. That appears quite clearly from section 63 of the Retail Leases Act 1994 which defines a retail tenancy dispute in wide terms. It directs, firstly, attention to the lease itself and then directs attention to liabilities or obligations arising under that lease or former lease or liabilities or obligations which arose in connection with the use or occupation of the retail shop to which the lease or former lease relates. The word "arose" is wide, the words "in connection with" are still wider than that. 39 The matter accordingly, on any view, must fall within the jurisdiction of the Tribunal and that submission, in respect of the area, is likewise rejected. It follows, for those reasons, that the relief sought by the applicants must be granted. I accordingly make the following orders and declarations: (1) That Perpetual Trustees of Australia Limited as trustees for Macquarie Country Wide Management Ltd be declared not to be entitled to grant a lease to Coles Supermarkets Australia Pty Limited and Bi-Lo Pty Limited authorising Coles Supermarkets Australia Pty Limited and Bi-Lo Pty Ltd to use premises in the Cowra Shopping Plaza at 59 Kendall Street, Cowra, for the purpose of a hot bread bakery or to permit Coles Supermarkets Australia Pty Limited and Bi-Lo Pty Ltd to use premises thereat for the purpose of a hot bread bakery. (2) That Perpetual Trustees Australia Limited as trustees for Macquarie Country Wide Management Ltd refrain from granting a lease to Coles Supermarkets Australia Pty Ltd and Bi-Lo Pty Ltd for the purpose of same using premises in the said Plaza or permitting the use of premises in the said Plaza which is contrary to the said use, namely, the use of a hot bread bakery. 40 The applicants in the present matter seek an order for costs against the respondent. Costs, of course, may only be awarded in the Administrative Decisions Tribunal in special circumstances. There is a provision in the Retail Leases Act 1994 providing for the award of costs in accordance with the Administrative Decisions Act 1997. However, that simply casts one back to the provisions of the latter Act which provide for the award of costs only in special circumstances. 41 In this particular matter the applicants, in effect, rely upon the non-co-operation of the respondent, the respondent not having responded to letters in a positive way and not having given them the appropriate undertaking. However, the matter was fully argued before the Tribunal and in my view the respondent produced arguments which it was entitled to adduce and to have the Tribunal determine the matter. In my view that means that the matter came properly, before the Tribunal despite what the applicants may say as to the attitude of the respondents. 42 In addition in my view, the matter falls within the aspect of litigation before the courts which is of a nature which the courts decide every day. That being so, I see nothing special about the particular type of litigation itself. 43 I, accordingly, make an order that each of the parties pay their and its own costs of the application before the Tribunal.