World Best Holdings Pty Limited -v- Awad [2001] NSWADT 140

CITATION: World Best Holdings Pty Limited -v- Awad [2001] NSWADT 140 DIVISION: Retail Leases Division APPLICANT World Best Holdings Pty Limited PARTIES: RESPONDENT Riad Awad FILE NUMBER: 005054 HEARING DATES: 23/05/2001 SUBMISSIONS CLOSED: 05/23/2001 DATE OF DECISION: 07/17/2001

BEFORE: Fox R - Judicial Member APPLICATION: Interim order MATTER FOR DECISION: Preliminary matter LEGISLATION CITED : Retail Leases Act 1994 Environmental Group -v- Croudace, Supreme Court of New South Wales, Equity Division (1468 of 98) CASES CITED: Majik Markets Pty Limited -v- S M Motor Repairs Pty Limited (unreported SC of NSW 13 October 1987) Star League -v- Dean Pay (SC of NSW 9 June 1995) APPLICANT REPRESENTATION: J Conomy, barrister RESPONDENT N Kidd, barrister ORDERS: Matter stayed until Industrial relations commision (New South wales) rules on respondent's section 106 application.

1 The Respondent tenant in these proceedings seeks an order staying the Applicant landlord's application for an order for the payment of substantial rent arrears. The premises in question are a shopping mall shop, operated by the Respondent as a green grocery, leased for five years (with a five year option) from 1 August 1998 to 30 July 2003 at an initial rental of $10,000.00 per month and then increased yearly by three per cent. The lease did not call for contributions to outgoings or promotions levies, but it did call for a rent "add-on" being five per cent of the gross sales. The Respondent tenant appears to have vacated the premises on 18 February of this year. 2 The Retail Tenancy dispute first raised its head in this jurisdiction early in the year 2000, and, in accordance with the usual procedure, was the subject of a mediation under the aegis of the Retail Tenancies Unit, and that resulted in an agreement dated 6 April 2000, which reduced the rent by 20 per cent, but retained the five per cent "add-on" and established arrears debt as at 28 February 2000 in the sum of $89,605.51, setting a regime for payment of these arrears along with the reduced rent. This detail is important in the sense that the parties had by their conduct, as early as January or February in the year 2000, acknowledged the fact that their issue fell within the ambit of the Retail Leases Act. One of the obvious functions of a mediation under Division 8 (apart from if successful in resolving the dispute), is to comply with the requirements of Section 68 which provides that: "a Retail Tenancy dispute or other dispute or matter… may not be the subject of proceedings before any Court unless and until the Registrar has certified in writing under this part has failed to resolve the dispute…" 3 The Retail Leases Division of this Tribunal became involved in the matter on 9 October 2000 when the Applicant landlord filed the current application. The amount in issue, by the time of this hearing, is in excess of $200,000.00, but, the premises now having been re-let, (albeit at a lower rental), the final amount claimed can be calculated, and is apparently within the $300,000.00 jurisdiction of this Division. 4 The Respondent tenant, in December 2000 filed its application in this Division ("the cross application") seeking orders terminating the lease (then) forthwith, refund of rent paid, including legal costs and disbursements incurred in connection with the lease, aggravated and exemplary damages in the sum of $400,000.00, and loss of opportunity damages in the sum of $75,000.00, interest, and costs. In view of the limits set by Section 73 this particular application must be read as claiming no more than $300,000.00 despite its rather grander purported ambit. 5 There was a directions hearing on 29 January of this year at which the Respondent tenant raised the proposal to file Summons in the Industrial Relations Commission and that appears actually to have been done on 9 March 2001. At the second directions hearing on 12 March 2001 in this Tribunal the matter was listed for hearing, as to the jurisdictional issue only on 23 May 2001. 6 I am now asked to rule whether the matter shall proceed in this Tribunal, which is a Court of Record, or in the Industrial Relations Commission, which in Court session is a Superior Court of record, but would appear, in relation to matters involving leases at least, not to have the same range of remedies available to it as does this Tribunal, although of course as I understand it, the Industrial Relations Commission is not hampered by the same kind of monetary limit as is imposed by Section 73. 7 Any consideration of the issue raised by the Respondent must start with Section 76 of the Retail Leases Act, entitled "jurisdictional overlap". It is appropriate to repeat Section 76 (1) in full: "If a Retail Tenancy claim has been lodged with the Tribunal under this Part and at the time it was lodged no issue arising under the claim was the subject of a dispute in civil proceedings pending before a Court, a Court has no jurisdiction to hear or determine such an issue in civil proceedings, unless:- (a) The claim lodged with the Tribunal, or the part of that claim to which the issue relates, is withdrawn or dismissed for want of jurisdiction, or; (b) a Court of record has, on a judicial review, quashed or declared invalid an order, determination or ruling of the Tribunal made in respect of the claim on the ground that the Tribunal had no jurisdiction to hear and determine the issue. 8 "Court" is defined in Section 63 as: "A Court, Tribunal or other body or person authorised by law, or by consent of the agreement of the parties, to decide or resolve any issue that is in dispute between the parties and includes an arbitrator". 9 It follows that Section 71(1) admits of the following statement "The Industrial Relations Commission 'has no jurisdiction to hear or determine' the Retail Tenancy claim which was lodged with the Tribunal". 10 The prohibition appears to be absolute and that would appear to be a complete answer to the Respondent's application. 11 In argument before me much was made of the fact that the Industrial Relations Commission is able to declare the lease void, and at first blush it appeared to be suggested that this Tribunal did not have that same power. That seemed an odd proposition to be made on behalf of a Respondent who had made an application for orders terminating the lease, and for a refund of all monies paid under it, two orders which, jointly, amount to a full voiding of the lease. 12 The Respondent's argument was that this Tribunal has no power to avoid a lease because it is unfair, harsh or unconscionable, that being the power given by the legislature to the Industrial Relations Commission under Section 106 of its Act, and that proposition needs more detailed consideration. 13 It was conceded that this Tribunal presently has no jurisdiction to make orders relating to contracts on the basis that they are unfair, harsh and unconscionable. If it did, then there is now no reason why I could not fashion orders pursuant to Section 72 having the effect of avoiding the lease, if that were the appropriate course to take. 14 In any event, the legislature has given very clear guidance on what is to be done in circumstances of jurisdictional overlap in the clear words of Section 78, which applies in circumstances where the mechanisms of the Retail Leases Act are the first port of call of one of the parties. 15 Further guidance is given by Section 79, which applies in circumstances where a party has selected another Court in which to commence its proceedings, and of course that provides that either party (i.e the Applicant in that jurisdiction, or alternatively, the Defendant) can then elect to have the matter transferred to this Tribunal. In this context reference is often made to the Minister's second reading speech. The Minister clearly stated his view that the Courts were to be an alternative to the Tribunal, but that appears to have been said in a context where the Minister was first contemplating alternative dispute resolution proceedings to the exclusion of Court jurisdiction, but was persuaded to change his view, and the end result was Section 79 which creates a regime where, having started elsewhere, either party has the right to demand a transfer to the Tribunal, which must be granted, but only if the Court is satisfied that: "(a) The dispute is such as may be effectively dealt with as a claim under this division and that it is appropriate that the dispute be dealt with by the Tribunal, and; (b) Interest of justice do not require that the matter be dealt with by the Court". 16 Sub-Section 2 then gives guidance: "in determining whether or not it is appropriate that a matter be dealt with by the Tribunal, a Court is to have regard to the general principle that Retail Tenancy disputes should be dealt with by the Tribunal rather than by a Court". 17 Clear that the legislature regards the Tribunal as the prime arbiter in matters involving Retail Tenancy disputes and yet another indicator against granting the Respondent's application for a stay. 18 Yet another consideration is the fact that, on any view of the matter, the lease now in issue is one which can only be described as a very standard kind of shopping centre lease. Its provisions, although detailed, appear not to be in any way unusual or particularly stringent when compared with those kind of leases for other retail shopping malls or centres. It is the very kind of Lease which is one of the prime targets of the Retail Leases Act. 19 I note that matters come to this Tribunal in two ways, either by an Applicant selecting the Tribunal, or alternatively, by either party, having commenced litigation elsewhere, electing to be within the Tribunal. I note that the legislation establishes no mechanism for leaving the Tribunal, and that seems to me to be the end of the matter as far as the Respondent is concerned, but for one obvious exception:- If a party were to establish that the relief it seeks is greater in aggregate money terms than the present $300,000.00 limit, this Tribunal would have no alternative but to terminate the proceeding before it. 20 Viewed from what might be described as the point of procedural fairness, it seems to me to be quite unfair to the Applicant to now stay proceedings almost a year and a half after they were first brought within the legislation, and, of any view of the matter, more than a month after the Respondent fully conceded the jurisdiction of this Tribunal by making an application in it in response to the Applicant's application. 21 Although the documents are less complex, the situation in these proceedings is not so different to that which faced W Santo J in the Environmental Group -v- Croudace, Supreme Court of New South Wales, Equity Division (1468 of 98) in which his Honour held that because there were matters which could only be disposed of in the Industrial Relations Commission, it was appropriate that the Commission make its decision first, because it might well affect the remaining issues which would then have to be decided by the Supreme Court. In much the same way, in these proceedings it would appear to be proper, if this Tribunal has no jurisdiction to rule on the "harsh and unconscionable" aspects of the lease, it might well be appropriate that I stay these proceedings to await the decision of the Industrial Relations Commission. However to do so would be to fly in the face of the very clear words of Section 76 because the fact remains that this Tribunal was seised of jurisdiction, in respect of the Retail Tenancy Claim both by the concession of the parties in joining in the mediation facilities provided pursuant to the Legislation, and by the subsequent pleading in the litigation. 22 The most telling argument for the Respondent is the fact that if Section 76 has the effect of a complete prohibition, then the Respondent would be absolutely denied the opportunity of exercising his right which would flow from his establishing that the Lease is a contract which is technically "unfair". 23 In point are the comments of Young J in Majik Markets Pty Limited -v- S M Motor Repairs Pty Limited (unreported SC of NSW 13 October 1987) and those of Santo J in Star League -v- Dean Pay (SC of NSW 9 June 1995), quoted in Croudace, on which his Honour concluded "the mere fact that proceedings have been commenced in another particular Court will not alone justify the granting of a Stay" and that comment weighs strong for the continuance of the matter in this Tribunal. But to do that would deny the Respondent such rights as may flow from the "unfair contract" provisions of the Industrial Relations Act. 24 The gateway for resolving this aspect is found in the Respondent's argument to say that the alleged unfairness of the contract is an issue which could not be a raised pursuant to the Retail Tenancy claim and so falls outside Section 76 and I think that analysis, because it does avoid the denial to the Respondent, must be correct. That, of its own, is an indicator to the Respondent's entitlement to stay of proceedings but, of course, that does not avoid the clear prohibition set forth in Section 76. Once the Industrial Relations Commission has ruled on the unfairness of the Lease, if that ruling does not totally avoid the lease, then it would appear to be the case that the other issues which were first pleaded between the parties in this Tribunal, by the operation of Section 76, can only be resolved in this Tribunal. 25 I think there must be a Stay until such time as the Industrial Relations Commission has ruled on the matters which are not denied it by Section 76, and if after such ruling a there is still any part of the lease liability to be considered, that must be resolved in this Tribunal. 26 I have earlier adverted to the a unfair effect of the fact that the Respondent did not, immediately after the commencement of these proceedings, raise the IRC issue, but of course it does seem to me that Section 88 of the Act allows that to be addressed, and I indicate now that I am satisfied that the Respondent's actions in this regard may well amount to special circumstances, and that the Applicant is entitled of costs on a full indemnity basis up to and including the present hearing, and including the costs of the mediation and the mediator's fee. I make no order at this time but, I indicate that, subject always to such further matters as the parties may wish to then raise when these proceedings are resolved either by further hearing on the facts in this Tribunal, or alternatively, there being nothing factual left to decide pursuant to the Orders of the IRC, when this matter is then formally dismissed, I would propose to make such a costs order, when this matter is then formally dismissed.