Protogeros -v- Fouzas [2004] NSWADT 62

CITATION: Protogeros -v- Fouzas [2004] NSWADT 62 DIVISION: Retail Leases Division APPLICANT John Protogeros PARTIES: RESPONDENTS Bill Fouzas Sylvia Fouzas FILE NUMBER: 035109 HEARING DATES: 01/03/2004 SUBMISSIONS CLOSED: 03/15/2004 DATE OF DECISION: 03/31/2004

BEFORE: Montgomery S - Judicial Member APPLICATION: Claim for payment of money MATTER FOR DECISION: Preliminary matter LEGISLATION CITED : Administrative Decisions Tribunal Act 1997 Retail Leases Act 1994 Aspromonte Pty. Limited v Zagari (1999) NSWSC 831 Randi Wixs Pty Limited -v- Pokana Pty Limited (No. 2) [2003] NSWADT 4 CASES CITED: Matheson v Matheson [1952] VLR 27 Watson v Watson [1968] 2 NSWR 647 Sarip Investment Pty Ltd v Uno Uno Pty Ltd [2004] NSWADT 27 APPLICANTS REPRESENTATION: J Trebeck, barrister RESPONDENT P James, solicitor ORDERS: 1. The Lessees' application for a stay of these proceedings is refused; 2. The Lessees are liable to pay the Lessor the full amount of the rent arrears. The parties are I invited to provide further material to clarify the amount of the rent arrears. This material is to be filed within 14 days of the date when this decision is published; 3. The Lessees are to pay the Lessor's costs in relation to the aborted hearing on 19 December 2003, and the directions hearing on 2 December 2003.

REASONS FOR DECISION 1 This is an application brought by Mr John Protogeros ("the Lessor") in relation to a retail shop lease ("the Lease") for premises located at 69 Kendall Street, Cowra ("the Premises"). Mr Protogeros is the registered proprietor of the Premises. Mr Bill Fouzas and Ms Sylvia Fouzas ("the Lessees") are the lessees of the Premises. At the Premises, the Lessees operated a shop known as the Golden Key Café ("the Café"). It is common ground that the Lease is governed by the Retail Leases Act 1994 ("the Act"). Background 2 Some time prior to August 1997 the Lessees entered into a partnership agreement with Zizis Papaioannou and Irene Papaioannou ("the Papaioannous") for the purpose of the operation of the Café. On 11 August 1997 the purchase of the Café business was settled. By letter dated 11 August 1997 the Lessees' solicitor, Mr Jim Kartsounis of Kartsounis & Co Solicitors, wrote to the Lessor's solicitors, Garden & Montgomerie Solicitors, and requested the inclusion of the Papaioannous as lessees. That consent was given by letter also dated 11 August 1997. On 13 August 1997 the Lessees and the Papaioannous took possession of the Premises and commenced renovations. 3 An undated document headed "Lease - Real Property Act 1900" in the standard Law Society "07L Lease" format ("the Lease document") was signed by each of the Lessees on 11 August 1997. The Papaioannous also signed the Lease document. Stamp duty was paid on the Lease document on 19 August 1997. The Lessor has not signed the copy of the Lease document before the Tribunal and there is doubt about whether he ever signed a copy of the Lease document. The Lease document has not been registered. 4 The Lease document expressed the arrangement to be for a term of 4 years from August 1997 to August 2001 with provision for options to renew. Rent was stated to be payable at the rate of $2600 per month with provision for annual adjustments. 5 The partnership agreement between the Lessees and the Papaioannous was subsequently terminated and the Papaioannous returned to Sydney on about 27 September 1997. It seems that the Lessees raised with the Lessor the possibility of removing the Papaioannous as parties to the Lease. The Lessor's solicitors wrote to the Lessee's solicitors and outlined their instructions as to the Lessor's views. On 29 October 1997 the Lessor's solicitors wrote: "We refer to your recent facsimile and have today received the following instructions from our client: 1. That an option to purchase is to be no longer included in the Lease. 2. That rental payments are to commence on the 1st February, 1998. 3. The annual rent is to increase by 6% a year commencing on the first anniversary of the Lease and to extend throughout the term of the Lease and the option periods. 4. Our client is happy to either amend the Lease or transfer the Lease to Mr & Mrs Fouzas." 6 It appears that the parties were never able to reach agreement with respect to the proposed amendments to the lease. The Lessor has asserted that the terms of the Lease had been varied and that rent was payable at the rate of $700 per week. On the Lessees' evidence, the Lessor has also asserted that the Lessees did not have a registered lease and that they could not exercise any option under the Lease. The Lessees maintained that they had signed the Lease document, that this document reflects the terms of the Lease and that they would not agree to any changes. 7 In approximately March 1999 the Lessees decided to list the Café for Sale at an asking price of $260,000 plus stock. In July 1999, they received an offer from Fanimra Pty Limited ("the purchaser") to purchase the business for the sum of $260,000 including stock. Garden & Montgomerie Solicitors were also solicitors for the purchaser. The Lessees assert that as a consequence of the dual role played by Garden & Montgomerie Solicitors, issues relating to the terms of the Lease affected negotiations in relation to the sale of the business. The purchaser withdrew from negotiations in September 1999 and the sale fell through. The business has not yet been sold however Mr James, on behalf of the Lessees, advised that a prospective purchaser has offered to buy the business at a price of $70,000. 8 On 12 March 2003 the Lessor filed a Statement of Liquidated Claim in the District Court of New South Wales at Orange, claiming an amount of $72,600 from the Lessees as unpaid rent. The Lessor also sought interest on the unpaid rent at the rates prescribed by the District Court Act plus costs. The Lessor obtained a default judgement on the Claim, however, on a Motion by the Lessees heard on 5 August 2003 the default judgement was set aside and the matter was transferred to this Tribunal. 9 The Lessees' filed a defence to the Lessor's Statement of Liquidated Claim in which they relied on the Lease document as providing for the terms of the Lease. They say that under the Lease document rent was $600 per week and the commencement date for payment of rent was 22 February 1998. The Lessees asserted that they were induced to make an agreement to pay rent in the amount of $700 per week by duress and for undue influence on the part of the Lessor. In the Defence the Lessees stated: "From about late September 1997, the plaintiff personally and through his legal representatives asserted to the defendants that: a) The defendants did not have a lease; b) The plaintiff would not sign and register the lease unless the defendants complied with the plaintiff's demands; c) The defendants' interest in the premises would not be recognised unless the defendants' complied with the plaintiff's demands; d) The plaintiff would not give the defendants any security for the lease, in relation to the defendants' sale of the business unless the defendants' complied with the plaintiff's demands; and e) Unless the defendants complied with the plaintiff's demands (inter alia) to increase the rent by $100.00 per week the plaintiff could and may summarily evict the defendants from the premises. In response to the above representations and threats the defendants paid rent in the sum of $700.00 per week when the lease provided for rent in the sum of $600.00 per week." 10 After its transfer from the District Court, the matter came before this Tribunal's Deputy President Acting Judge Chesterman for a Directions Hearing on Thursday 16 October 2003 at which time the Deputy President set a timetable for the filing of documents and listed the matter for a further Directions Hearing on 20 January 2004. 11 By letter dated 21 November 2003, the Lessor's solicitors advised the Tribunal that they had received no documents from the Lessees and requested that the matter be restored to the list. The matter was listed for Directions on 2 December 2003. At that time the Deputy President set a new timetable for the filing of documents and listed the matter for Hearing on 19 December 2004. 12 The Lessees failed to comply with the Deputy President's timetable and by fax from their solicitors dated 17 December 2003 to the Tribunal they advised that they wished to withdraw the proceedings. This is an unusual approach given that the Lessor commenced the proceedings. The Lessor was not advised and did not consent to the vacation of the hearing. 13 In late January 2004 the Lessees commenced fresh District Court proceedings alleging the loss of the opportunity to sell their business. On 29 January 2004, the Tribunal matter was mentioned before Judicial Member Fox. A new timetable was set and the matter was set down for hearing on 1 March 2004 for hearing on the following: (i) Whether there should be a stay of proceedings; (ii) Whether there should be an interim order for costs; (iii) Whether there should be an order for the payment of money in favour of the Lessor in the event that the stay is refused. 14 On 16 February 2004 the Lessees filed an application for an urgent interim order seeking a stay on the hearing of the Lessor's application for rent. The reasons provided for seeking the order were: "Sydney District Court proceedings 290 of 2004 make claim under the Section 42 of the Fair Trading Act (NSW) arising out of the same facts and circumstances giving rise to damages in excess of any rent outstanding." 15 Mr James stated that as the District Court proceedings arise from the same facts, the Tribunal proceedings should be stayed until those proceedings are finalised. The Lessor opposes the stay and seeks orders for unpaid rent and costs thrown away because the Hearing did not proceed on 19 December 2003 and the costs incurred in attending a directions hearing that would not have been required had the Lessees complied with the Directions made by the Deputy President. 16 The application for a stay of proceedings was heard on 1 March 2004. The Lessees' case 17 The Lessees seek a stay of these proceedings until the District Court proceedings are finalised. The basis for the application is that the matters arise out of the same facts and circumstances giving rise to damages in excess of any rent outstanding. Essentially the argument is that the District Court claim is for a greater amount than the amount sought by the Lessor. 18 The Lessees have been unable to quantify their claim in the District Court but Mr. James asserts that the current sale price of the business is approximately $70,000 and given that the purchaser had previously offered an amount of $260,000 it can be assumed that the Lessees would be asserting a loss of some $190,000. 19 The Lessees admit rent arrears however there is dispute as to the amount of those arrears. The dispute arises because of an assertion by the Lessor that rent was payable at the rate of $700 per week whereas the Lessees argue that rent was payable at the rate of $600 per week. The Lessor's case 20 The Lessor accepts that the Tribunal proceedings and the District Court proceedings arise from the same facts in that they are both concerned with the Lessees' occupation of the Premises however he argues that the proceedings are otherwise unrelated. The District Court proceedings are not related to the option or the other amendments that were sought by the Lessor except to the extent that the claim that the Lessees lost the opportunity to sell their business because of the Lessor's conduct. With respect to that claim, the Lessor asserts that the purchaser withdrew from the negotiations for reasons unrelated to the Lessor's conduct. 21 The Lessor relies on an affidavit of his solicitor, Geoffrey John Casey, sworn on 26 February 2004. In his affidavit Mr Casey recounts a telephone conversation he had with from Emmanuel Delavaris, Director of the purchaser, in which Mr Delavaris referred to other factors that influenced his decision to withdraw from the negotiations. These factors included "a development close to the Golden Key in Kendal Street involved with the refurbishment of Bi-Lo", that he learned "that McDonalds were coming to Cowra" and that he had trouble getting accommodation in Cowra. 22 Mr Trebeck argued that the issues relating to the lost sale of the business are therefore unrelated to the rent arrears and therefore the stay of these proceedings is not justified. 23 Mr Trebeck said that the Lessor seeks an order for rent arrears based on the Lessees' admission that rent was payable at the rate of $600.00 per week. Mr Trebeck referred to the Defence that the Lessees filed in the District Court. Paragraph 7 of that Defence states: "The defendants say the rent to be paid pursuant to the lease or the agreement for lease was $600.00 per week." 24 The Lessor also seeks an order for costs thrown away because the Hearing did not proceed on 19 December 2003 and the costs incurred in attending an additional directions hearing required because of the Lessees' failure to comply with the Directions made by the Deputy President. 25 Mr Trebeck stated that he had appeared in the District Court proceedings and had argued against the transfer of the proceedings to the Tribunal because of the lack of jurisdiction to deal with matters under the Fair Trading Act. He said that he would have expected the matters now before the District Court to be raised as a cross-claim in the District Court or raised as a defence to the Tribunal proceedings. Notwithstanding Mr Trebeck's argument regarding the limited jurisdiction in the Tribunal, the Lessees' solicitors had persisted in the application for transfer of proceedings. However, after the transfer of proceedings to the Tribunal, the Lessees' solicitor also formed the view that Mr Trebeck had originally proffered. Consequently, the Lessees advised the Tribunal that they wished to withdraw the application and the Hearing did not proceed on 19 December 2003. Mr James conceded that the transfer of proceedings was the result of an error by the Lessees' solicitors. Mr Trebeck argued that the Lessor now finds himself stranded in the Tribunal without a cross-claim to meet and unable to have the matter returned to the District Court. The Lessor has incurred additional costs as a consequence of that error and therefore should be able to recover those costs. Submissions 26 At the hearing on 1 March 2004 it was agreed that I should make a decision based on the material available at that time and any written submissions. Mr Trebeck provided written submissions at the hearing. Mr James was invited to make written submissions in reply and a timetable was set for the filing of those submissions and any additional submissions that Mr Trebeck wished to provide. Mr James did not provide any submissions in reply in response to that invitation. Mr Trebeck made the following submissions "1. This matter has been listed for hearing in relation to the following issues: a. Whether there should be a stay of these proceedings pending resolution of the lessee' claim in District Court proceedings 290 of 1994. b. In the event the application for a stay in refused, whether there should be a money judgment for the lessor. c. Whether there should be an interim order for costs. Application for stay 2. There is no articulation of the basis of the application for the stay, other than the references referred to in the next paragraph, or any identification of the principles which are invoked by the lessee. 3. The facts said to give rise to the basis of the application for a stay are to be found in: a. Mrs Fouzas' affidavit sworn 13 February 2004, par 31; and b. Mr James' affidavit sworn 12 February 2004, pars 17 - 18. c. Application filed 16 February 2004 (item 4: "arising out of the same facts and circumstances giving rise to damages in excess of any rent outstanding"). 4. It seems that the application is founded on the proposition that the lessees have a cross-claim against the lessor, said to be greater than the lessor's claim for rent, and nothing more. There are two answers to this: a. There is no power contained in Part 8 Division 3 of the Retail Leases Act to adjourn the lessor's application pending the resolution of other proceedings in another Court, or to enter judgment but stay the judgment. There is a power to adjourn proceedings in the ADT Act (s 73(5)(f)), but it is submitted that this power should not be exercised when what is really sought is a restraint upon the lessor's right to have his case heard for an indefinite period. b. Alternatively, if there is a power, the power should not be exercised as a matter of discretion, for the following reasons: