CITATION: Megabelva Pty Ltd v Ascot Holdings Pty Ltd [2007] NSWADT 1 DIVISION: Retail Leases Division APPLICANT PARTIES: Megabelva Pty Ltd RESPONDENT Ascot Holdings Pty Ltd FILE NUMBER: 065049 HEARING DATES: On the papers SUBMISSIONS CLOSED: 17 July 2006 DATE OF DECISION: 9 January 2007 BEFORE: Higgins S - Judicial Member CATCHWORDS: Claim for payment of money MATTER FOR DECISION: Principal matter LEGISLATION CITED : Conveyancing Act 1919 Retail Leases Act 1994 APPLICANT G R Con Foo as Managing Agent on behalf of Applicant REPRESENTATION: RESPONDENT No appearance ORDERS: The applicant's application is dismissed REASONS FOR DECISION Introduction 1 The applicant lessor, Megabelva Pty Ltd, ('the applicant') through its managing agent, Mr Gavin R. Con Foo ('Mr Con Foo') of Sydney Prestige Properties filed an application in the Tribunal seeking orders against the respondent lessee, Ascot Holdings Pty Ltd ('the respondent'). The application relates to a dispute arising from the lease of premises located at 632 Darling Street, Rozelle in the State of New South Wales, owned by the applicant and leased by the respondent for use as a food and beverages shop. The applicant made the application after the Leichhardt Municipal Council ('the Council') had commenced proceedings against it for failing to carry out specified works and to submit specified information as per an Order 6 that had been served on it by the Council. The Order related to fire safety requirements of the premises which had not been met by the applicant. The Tribunal understands that these requirements included having certain electrical work done, which was to be certified by a qualified electrician. The Council commenced its proceedings against the applicant on 3 March 2006 and these appear to have been settled some time in late April or early May 2006, with the applicant paying the Council its costs of $1,700.00. The applicant now seeks to recover those costs from the respondent and it also seeks other orders. 2 At the request of the applicant, the Tribunal has determined the matter on the papers. As the history of the applicant's application shows, the respondent has not entered an appearance in this matter. However, from the material on the Tribunal's file I am satisfied that it has been served with the applicant's application, its amended application and the evidence on which the applicant relies. As set out below, I am also satisfied that the Tribunal has jurisdiction to hear and determine this matter notwithstanding the fact that the parties have not mediated the dispute as in my opinion this would not resolve the matter. 3 The Tribunal has now considered all the material that has been filed by the applicant and these are its reasons for decision in respect to the applicant's application. History of applicant's application 4 At the time of making its application, the applicant also made an application for an urgent interim order. In that order, the applicant sought orders that the respondent provide it with an electrical wiring certificate, a fire safety certificate, insurance certificates and to comply with the Council's requirement of development approval and building certificate and in the event of the applicant respondent failing to provide these, an order to 'allow the applicant access to the premises and payment of the landlord's electrician to certify that the wiring is up to Australian standard. If not, to rectify the wiring to Australian standard at the tenant's expense'. 5 The matter first came before the Tribunal, on 30 March 2006. On this occasion, Mr Con Foo appeared on behalf of the applicant but there was no appearance by the respondent. However, the Tribunal notes that the Tribunal's file contains a file note of a member of the Registry staff which states that on 29 March 2006, someone by the name of 'John' telephoned the Registry and said that he was calling on behalf of the respondent and that he would not be attending the Tribunal on the following day, that there would be no representative of the respondent attending that day, that orders could be made against him in his absence and he requested that an electrician provide a certificate. 6 Whether this particular file note was before the Tribunal Member on 30 March 2006 is unclear, but in any event the Tribunal made the following interim orders: 1. The Respondent to provide the Electrical Wiring Certificate and the Fire Safety Certificate to the Applicant and its agent no later than 4.00 pm on Friday, 3 April, 2006. 2. In default of compliance with Order 1, the Respondent forthwith thereafter and no later than 2.00 pm on 7 April 2006, permit the Applicant and/or its agent to enter upon the premises, 632 Darling Street, Rozelle, and remain thereon and re-enter as may be necessary for the purposes of the Applicant and/or its agent to examine the premises and all electrical wiring thereon and therein and as may be reasonably necessary to provide such certificates as may be necessary to comply with the requirement of the Leichhardt Council as identified in the proceedings now before the Balmain Local Court listed 29 March 2006 and adjourned for call over on 19 April 2006. 3. Liberty to apply. 4. Application adjourned for further directions/orders to 13 April 2006. 7 When the matter came before the Tribunal on 13 April 2006, Mr Con Foo appeared on behalf of the applicant, but there was no appearance by the respondent. At this directions hearing, the applicant was ordered to file and serve all documents on which it relied by 19 April 2006 for the purpose of obtaining final urgent orders and the matter was adjourned for further directions to 20 April 2006. 8 When the matter came before the Tribunal on 20 April 2006, there was no appearance by either party. However, on 4 May 2006 when the matter was again listed for directions, Mr Con Foo appeared on behalf of the applicant, but there was no appearance on behalf of the respondent. Mr Con Foo advised the Tribunal that the prosecution by the Council had settled and the applicant now sought to recover from the respondent what it had paid to settle the matter. In light of this the Tribunal made orders that the applicant was to file and serve an amended claim and any additional evidence that it sought to rely on in support of that amended claim together and an order that the respondent file and serve evidence in reply. On 4 May 2006, the Registry wrote to Mr John Davies of the respondent advising him of the orders that had been made that day. 9 The matter next came before the Tribunal on 15 June 2006. Mr Con Foo appeared on behalf of the applicant, but again there was no appearance on behalf of the respondent. As the applicant had failed to file and serve its amended application and it wished to pursue that application the Tribunal ordered that the applicant to file and serve its amended claim by 22 June 2006 and adjourned the matter for further directions on 29 June 2006. 10 On 29 June 2006, Mr Con Foo informed the Tribunal that he had filed and served a copy of the applicant's amended application on the date ordered. As there was no appearance by the respondent and the applicant pressed its claim as set out in its amended claim the Tribunal made the following orders: 1. The applicant to file and serve an affidavit of service of its amended application on the respondent of its amended Application filed on 22 June 2006, by 3 July 2006. 2. The matter to be dealt with on the papers, subject to the respondent filing and serving submissions to the contrary on or before 17 July 2006. 3. Registry to write to the parties advising them of these orders. 11 The Tribunal notes that on 29 June 2006, a letter was written by the Registry to Mr Con Foo, in his capacity as agent for the applicant and Mr John Davies, as representative of the respondent, advising them of the orders that had been made. It is also noted that the Tribunal's file contains no record of any further correspondence from the respondent after this date. Amended Application 12 In its application as originally filed, the applicant sought similar orders to those contained in the urgent interim order application referred to in paragraph [4] above. In its amended application the applicant stated that it sought to 'amend orders for access to shop 632 Darling Street Rozelle to achieve a final certificate for Leichhardt Municipal Council fire certificate' to an order for 'payment of $1700 out of court settlement with LMC due to respondent not allowing access plus supplying a electrical certificate as per Lease clause 13 &14.' In its application as to the grounds for its application the applicant makes reference to the respondent refusing the applicant access to the premises, which resulted in delays in obtaining a 'final certificate' resulting in the Council commencing proceedings against it for failing to comply with a Fire Safety Order of the Council. In addition to this the applicant included the following grounds: 'The applicant has requested for a certificate of compliance in regards to insurance – purpose as per clause 9 of the Lease. A certificate or confirmation from LMC [the Council] that the shop at 632 Darling St is approved & permitted use as a food and beverages as per clause 5 of the Lease.' 13 Attached to the applicants application were the following documents: A letter from Mr Con Foo dated 25 May 2006, to the Administrative Decisions Tribunal. That letter sets out the requested amended orders sought by the applicant; A statutory declaration, dated 24 May 2005, of Mr Con Foo declaring that the following documents were sent by registered mail to the respondent at 8 Gordon Street, Rozelle, and also hand delivered to the respondent at the premises on 15 May 2006 at 5.32 pm. This declaration also declares that Mr Davies of the respondent had confirmed receipt of the attached documents at 4.33 pm on 22 May 2006: - Letter from Mr Con Foo, dated 15 May 2006, to Mr John Davies of the respondent advising him of the settlement of the prosecution. - Letter from Jonathon Wong of Accentro Legal, dated 21 March 2006, to John Davies of the respondent in respect to proceedings initiated by Leichhardt Municipal Council. That letter refers to repeated requests by the applicant for the certification of the electrical works that had been undertaken during the fit out and requesting a copy of same by 29 March 2006. The letter also advised that the respondent was in breach of the lease and that the applicant reserved its right to terminate the lease as a result of the continuing breach. - Letter from A.J.J. Thompson of Ritchie & Castellan, solicitors, dated 4 May 2006, to Mr Con Foo concerning the settlement of the proceedings initiated by Leichhardt Municipal Council. That letter states that the Council attended Balmain Court on 30 March, 19 April and 3 May 2006. From the invoice attached to this letter it would appear that the matter was first in Court on 21 March 2006. - Two statements from Adam Szostak of Adcom Electric regarding electrical installations at the premises. It is noted that one statement is dated 17 April 2006. It is unclear on whose instructions these statements were made. However, I have assumed that the certificates satisfied those matters which were outstanding form the Order of Council. - Copies of pages 18, 19, 28, 29, 34, 36 and 37 of a Lease. Jurisdiction 14 S.71 of the Retail Leases Act 1994 ("the Act") "provides that a party or former party to a retail shop lease or former retail shop lease may lodge a retail tenancy claim in respect of the lease with the Tribunal for determination of the claim". The term "retail tenancy claim" is defined in s.70 of the Act and includes: '(a) a claim in connection with a liability or obligation with which a retail tenancy dispute is concerned, being: (i) a claim for payment of money (whether or not stated to be by way of debt, damages, restitution or refund); (ii) … (ix) a claim for a declaration of rights, obligations and liabilities of the parties under the Lease; ….' 15 S.72 of the Act sets out the powers of the Tribunal in relation to a retail tenancy claim, however s.74(1) of the Act provides that the Tribunal must not make an order in respect of a retail tenancy claim unless it has brought or used its best endeavours to bring, the parties to the claim to a settlement acceptable to all of them. Sub-section (2) of that section provides that the Tribunal may adjourn the hearing of a claim to enable the dispute or matter concerned to be referred to the Registrar of the Retail Tenancy Unit for mediation of the dispute or the matter. 16 S.68 of the Act provides that a retail tenancy dispute may not be the subject of proceedings before the Tribunal unless and until the Registrar has certified in writing that mediation under Part 8 of the Act has failed to resolve the dispute or the matter or the Court is otherwise satisfied that mediation under this Part is unlikely to resolve the dispute or the matter. 17 In this application, there has been no mediation and therefore no certificate that mediation has failed has been issued by the Registrar of the Retail Tenancy Unit. However, having regard to the history of this matter and the nature of the dispute, the Tribunal noted on 4 May 2006 that it was satisfied that mediation was unlikely to resolve the dispute. The Lease 18 In addition to the material referred to above, the applicant filed and served a copy of the lease that is the subject of this application. The lease is stated to have commenced on 6 September 2004 and end on 5 September 2009. It also contains options to renew for a further two 5 year periods. As mentioned above, the stated use of the premises is that of 'food and beverages'. It is noted that Mr John Davis is a guarantor under the lease. The lease contains terms that are consistent with what generally appears in a retail lease, but for the purposes of this application the relevant provisions are those relating to the use of the premises, insurance and indemnity. a) Use of premises 19 Clause 5 of the lease relates to the use of the premises and the provisions relevant to this application are as follows: Permitted Use 5.1 The Lessee shall not without the prior consent of the Lessor use the Premises otherwise than for the purpose set out in Item 9 of the Reference Schedule. Approvals for Use 5.2 The Lessee shall at its own costs make all such applications, take all such steps and do all such acts, matters and things as are or may be necessary to enable the Premises to be used for the purpose for which they are permitted to be used pursuant to the provisions of this Lease and the Lessee acknowledges that it accepts this Lease with full knowledge of and subject to any prohibitions or restrictions on the use to which the Premises may be put under any Laws or Requirements. Compliance with the Laws 5.6 The Lessee shall at all times comply with and observe at its own costs or expenses all Laws and Requirements in relation to or affecting the Premises (and the Lessee's fixtures and fittings) and the use or occupation of the Premises PROVIDED THAT: 5.6.1 The Lessee shall obtain the prior consent of the Lessor (such consent not to be unreasonably withheld) and otherwise observe the provisions of this Lease before complying and observing any such Laws or Requirements: 5.6.2 The Lessor may (without being under any obligation to do so) elect, comply with and observe any such Laws or Requirements (or any part thereof, in which case the balance shall be complied with and observed with by the Lessee) and all costs and expenses of whatsoever nature incurred by the Lessor thereby shall be paid by the Lessee to the Lessor, 5.6.3 The Lessee shall not be liable for any structural alteration, or additions unless they are imposed or directed by reason of the nature of the Lessee's business or the Lessee's use or occupation of the Premises and the Lessee's Law. b) Insurance 20 Clause 9 of the lease makes provision for insurance. Clause 9.2 of the lease sets out what insurance cover the lessee is obliged to keep in force in regard to the premises during the term of the lease. These are property insurance, public risk insurance, plate glass insurance, and "other insurance which in the reasonable opinion of the lessor, a prudent lessee would take out." 21 Clause 9.3 of the lease provides that the lessee is required to take out insurance with an insurance office or company approved by the lessor, that the insurance policies that are taken out are to name the lessor as the owner of the property and that the insurance policy is to contain a clause providing that the insurer would not cancel, suspend or otherwise prejudice the insurance cover without giving the lessor at least 10 days written notice. 22 Clause 9.4 of the lease makes the following provision in respect of evidence of insurance: 9.4 The Lessee will in respect of any policy of insurance if required to be effected by the Lessee pursuant to this Clause 9 as and when required by the Lessor produce to the Lessor the policy of insurance (or a certified copy) and a certificate of currency. d) Indemnity 23 Clause 10 of the lease makes provision for indemnity and so far as is relevant to this application the relevant provisions are as follows: Indemnity 10.1 The Lessee shall indemnify and keep indemnified the Lessor from and against all claims and demands made against or suffered or incurred by the Lessor arising directly or indirectly out of: 10.1.1Any breach, non-observance or non-performance by the Lessee of any of the covenants, conditions or other terms of this Lease, 10.1.2Any act, neglect or default of the Lessee or the Lessee's employees, servants, officers and agents,… 24 In its application the applicant refers to clauses 13 and 14 of the lease, but it has not identified which particular part of these clauses relate to its application. In my opinion, clause 13 which relates to Common Areas is of no relevance to this application. 25 Clause 14 relates to reservations and the only relevant part of this clause is clause 14.4 which sets out certain circumstances in which the lessor has a right to enter the premises. These include entry to effect alterations, to conduct inspections, maintaining and repairing the 'Services' in the premises. 'Services' are defined in clause 2.1.23 to include electrical and fire prevention. However, under clause 14.4, the right of entry is subject to the lessor giving reasonable notice of proposed entry unless the lessor considers it to be an emergency. Consideration 26 I have examined all the material that has been filed by the applicant in this application, including a copy of the Council's brief in regard to the prosecution of the applicant, which gave rise to this application. 27 As I have mentioned, the application that is for determination is the amended application of the applicant, in particular an order that the respondent pay the applicant a sum of $1,700.00 being the amount that it paid to the Council to settle the prosecution proceedings. It is the applicant's contention that these were only commenced because the respondent delayed granting the applicant access to the premises or alternatively failed to provide the requisite certificates. 28 While the amended application does not expressly seek any other orders, it would appear from the terms of the abovementioned grounds together with the terms of the original application that the applicant continues to seek orders in respect to evidence of insurance and a copy of a certificate of compliance from the Council in respect to the use of the premises. I will deal with each of these separately. a) Payment of $1,700.00 29 Council's brief in regard to the prosecution of the applicant shows that the prosecution of the applicant arose from an inspection by the Council's inspectors of the premises on 9 December 2004. The applicant was advised of the outcome of that inspection and subsequently, on 6 January 2005, the Council issued an Order requiring the applicant to 'engage the services of an Accredited Certifier, Building Grade 1 or 2 (NSW) to carry out Building Code of Australia audit of the building in terms of the deemed-to-satisfy fire safety provisions. …' In that Order, the applicant was also given 28 days to comply with that requirement. It would appear that the applicant finally submitted the requisite report to Council on 23 March 2005. This report outlined numerous fire safety deficiencies in the premises and these were made the subject of a further Order, dated 3 May 2005. The Council then conducted several inspections of the premises and after each inspection the Order was amended deleting those items that had been attended to. The correspondence in the Council's brief is addressed only to the applicant and there is no mention of the respondent. Accordingly, without evidence to the contrary, it would appear that it was the applicant and not the respondent who had assumed responsibility of what was required to be done and not the respondent. By July 2005, there were two matters outstanding. These were an inspection report/certificate from an electrical contractor and the submission of a fully completed Fire Safety Certificate. A Fire Safety Certificate had been issued but it was not adequate. 30 When, in early December 2005, the applicant had continually failed to rectify these two outstanding issues despite Council's requests, the Council commenced prosecution action against the applicant. From the material provided it would appear that the Court Attendance Note was filed some time in late February or early March and as mentioned above, it was first mentioned on 22 March 2006. Yet the only evidence of a request by the applicant for an electrical certificate is the letter to Mr Davis of the respondent dated 21 March 2006. 31 As mentioned above, clause 5.6 of the lease places an obligation on the respondent to comply with all Laws and Requirements in relation to the premises. This would in the ordinary course of events include compliance with Orders of the Council in regards to the premises and a failure to do so would be a breach of the lease by the respondent and for which the applicant would be entitled to be indemnified if it incurred any loss in regard to that breach: see para [23] above. I have assumed that the applicant contends that its payment of $1,700.00 is such a loss and therefore one for which the respondent is liable. 32 However, on the material before the Tribunal it is not possible to find that this loss was attributable to the conduct of the respondent. As I have mentioned, the material indicates that the applicant had assumed responsibility for compliance with the Order. Furthermore, it was not until the day before the matter first came before the Court that a written demand was made on the respondent for an electrical certificate. In my opinion, without some further evidence that supports the applicant's claim that the respondent was responsible for obtaining the certificate the letter of 21 March to the respondent is inconclusive and it is not possible to find that the respondent was responsible as claimed by the applicant. 33 This leaves the question of whether the respondent refused the applicant access to the premises in breach of clause 14.4 of the lease. If it did then this would also constitute a breach of the lease and for which the applicant is entitled to be indemnified if it suffered a loss as a result of that breach. 34 As mentioned above, the right of entry under clause 14.4 is subject to the requirement of notice, unless the lessor considered entry to be a matter of urgency. In this application the applicant has failed to provide any evidence of notice or urgency. Indeed the material contained in the Council's brief would suggest that the applicant had ample opportunity to issue a notice and failure to comply with that notice would give rise to certain remedies being available to the applicant, including an entitlement to be indemnified for any loss suffered as a result of that failure. There is no evidence of the applicant notifying the respondent of its intention to enter the premises for the purpose of complying with Council's Order. The only notice is the letter of 21 March 2006. That letter however, does not seek entry to the premises. Accordingly, the applicant has failed to establish any breach by the respondent in this regard. b) Evidence of insurance 35 As mentioned in para [22] above, clause 9.4, places an obligation on the respondent to provide the applicant with evidence of the insurance it has undertaken to secure in accordance with its obligations under clause 9.2. A failure to provide such evidence is a breach and is a basis on which the applicant can terminate the lease: see clause 15.1 and 15.2.1 of the lease. However, a pre-requisite to such a termination is the issue of a notice under s.129 of the Conveyancing Act 1919. In this application the applicant does not seek declarations as to its right to terminate, however, neither has it provided any evidence to support its bland assertion that the respondent has failed to provide this evidence. Accordingly, it has failed to establish this particular breach. c) Certificate of compliance from Council 36 As mentioned above in para [20] pursuant to clause 5.2 of the lease the respondent is obliged to make all applications and take all necessary steps to ensure that the use of the premises are approved by the relevant authority. This would include Council approval if the existing or proposed use had not previously been approved. A failure to do this would be a breach and the remedies available to the applicant are the same as I have already mentioned. 37 Again the applicant has failed to provide any evidence other than the bland assertion that it had not been provided with a certificate of compliance by the respondent. The facts underlining this assertion and the above assertions are completely unknown to the Tribunal. It cannot therefore make any findings or orders as sought by the applicant. Conclusions and Orders 38 For the reasons set out above, the applicant has failed satisfy the Tribunal of the matters asserted in its application and on this basis the Tribunal orders that the applicant's application be dismissed. 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.