Alrioz Pty Limited -v- Allier Pty Limited and Ors [2002] NSWADT 276

CITATION: Alrioz Pty Limited -v- Allier Pty Limited and Ors [2002] NSWADT 276 DIVISION: Retail Leases Division APPLICANT Alrioz Pty Limited FIRST RESPONDENT PARTIES: Allier Pty Limited SECOND RESPONDENT Christine Rosekelly THIRD RESPONDENT Lyn Gan FILE NUMBER: 025110 HEARING DATES: 05/12/2002 SUBMISSIONS CLOSED: 12/05/2002 DATE OF DECISION: 12/23/2002

BEFORE: Donald BG - Judicial Member APPLICATION: Claim for payment of money MATTER FOR DECISION: Principal matter LEGISLATION CITED : Retail Leases Act 1994 Archbold v. Scully (1861)9 HL Cas 36 CASES CITED: Griffith v. Hodges (1824) 1CP 419 Relvok Properties v. Dixon (1972) 25 P&CR 1 APPLICANT REPRESENTATION: P Phan, solicitor RESPONDENTS No appearances ORDERS: 1. The Respondents are jointly and severally liable to pay the Applicant the sum of $27,610.76 plus interest on that sum from 20 April 2002 to the date of this decision at the current rate on a judgement debt of the District Court namely 9%.

1 This application was filed 17 September 2002 by the Lessor applicant and served on the Lessee company and Ms Rosekelly and Ms Gan as guarantors. It was listed for directions before the Tribunal on 17 October 2002 at which time there was no appearance for any of the respondents. The lawyer for the Lessor advised the Tribunal that Ms Gan was unable to come to Sydney. 2 Directions were made for the Lessor to file and serve its affidavit evidence by 18 November 2002 with the respondents to file and serve affidavits in reply by 4 December 2002. The Tribunal adjourned the matter for further directions on 5 December 2002 noting that if there was no appearance by the respondents the matter should be listed for hearing ex parte. 3 The Tribunal directed the Registry to notify the respondents of the directions and to inform them of the availability of phone facilities for further appearance. Specific instructions were given as to the current address for Ms Gan. This was done including the respondents being advised of the 5th December directions date "...and if no appearance for hearing". 4 The Lessor filed and served its affidavit and the Lease pursuant to the directions and on 22 November 2002 Ms Rosekelly provided a document headed Letter of Defence/Statement of Evidence addressed to the Registrar of the Tribunal. 5 At the further directions hearing on 5 December there was no appearance for any of the respondents and the Lessor applied for the matter to be determined ex parte. The respondent Ms Rosekelly's letter had not been served on the Lessor whose lawyer was given access to it. 6 The Tribunal decided to proceed and determine the matter ex parte being satisfied that the respondents were fully aware that if they did not appear then the matter would proceed for hearing. 7 The claim is for failure to pay rent under registered lease 7256067J commencing 1 August 2000 in respect of retail premises at 18 Blue Gum Rd., Jesmond, NSW for use as a "café and sports clothing shop". Rental of $3,432 per month was payable with a CPI increase of 3.5% as from 1 August 2001. By clause 20 of the Lease a 3½ month rent free period applied followed by a 10 month rent reduction referable to flooring costs. 8 The evidence for the Lessor was by way of affidavit by Mr V T S Lim, a director of the Lessor, which annexed correspondence to the Lessee in respect of the rent payment record. This revealed that the Lessee fell into arrears at the very first payment due 20 November 2000 but paid on 20 December 2000. Only eight further payments were made over the next 12 months, the last payment on 20 December 2001. 9 Mr Lim stated that regular demands were made for rent from 20 August 2001 but no formal written demand was made until 18 March 2002 followed by a further demand a month later and re-possession of premises on 30 May 2002. Rent is only claimed up to 20 May 2002, some 10 days prior to re-possession of the premises. 10 The guarantors were called on by letters of demand on 4 July 2002. 11 The guarantee in s.14 of the Lease is in broad form and renders the guarantors liable notwithstanding "the granting of time or other indulgence or concessions to the Lessee etc" with provisions that it was a continuing guarantee notwithstanding re-entry to the premises. 12 The Lessor therefore relied on the managing agents statement of account of rent unpaid up to the date of re-possession together with the provisions of the guarantee in its claim on the Lessee and the guarantors for unpaid rent less the deduction of the rental bond, a sum of $27,610.76. It also claims interest. 13 The only evidence in reply was the unsworn letter from Ms Rosekelly. This letter did not dispute the validity of the Lease or the application of the guarantee. It advised that she had resigned as a director of the Lessee company on 23 August 2001 a year after the lease had commenced, citing failure of the business and an unworkable relationship with her business partners. Her letter set out her personal hardship as a sole parent. The letter did not dispute the amount of unpaid rent. However she did query the continuation of the Lease for nearly a further year from the time when the business encountered its serious difficulties. 14 There being no default judgment process in matters before this Tribunal, this query requires the Tribunal, proceeding ex parte, to consider whether the Lease and the guarantees should be enforced according to their terms or whether there is any legal basis, in light of the time taken ultimately to demand payment of rent and then to terminate the Lease and seek a new tenant for the premises, to reduce any claim by the Lessor. I am obliged to ensure that I am adequately informed on this question, consistent with the rules of natural justice. 15 The matter having been raised with him, the lawyer for the Lessor submitted that the record revealed that a rent payment had been received late in December of 2001 and that the Tribunal should infer that it was commercially reasonable for the Lessor and its agents to leave an opportunity for the Lessee to "trade out" for a further three months before formal letters of demand. He relied solely on the proposition that given the holiday period and a rent payment as late as 20 December 2001, it was reasonable to have taken no steps to terminate the lease and mitigate the loss by 30 May 2002. 16 The issue is whether leases being contracts as well as property interests are subject to any principle under general law obliging a party to take appropriate steps to mitigate its loss such that the delays noted constitute a failure to mitigate entitling the respondents to some adjustment of claim. 17 Long standing authority suggests there is no such principle and that a lessor can sue for rent even after years of delay, subject only to the Limitation Act, however expensive that may be for a tenant. "...a landlord who has failed to collect the rent for say, thirty years, is still entitled to sue for the current rent and any unmpaid rent which became due within six years of the action; Archbold v. Scully (1861)9 HL Cas 36", in Hill and Redman's Law of landlord and Tenant 15th Ed Dobry & Barnes 1970 Butterworths London pp 355-6. "...if the tenant have abandoned the possession...,the lighting of fires in the rooms...will not deprive him of his right to rent. Griffith v. Hodges (1824) 1CP 419; see also Relvok Properties v. Dixon (1972) 25 P&CR 1(entry by landlord merely to secure premises).", in Woodfall Landlord and Tenant 28th Ed., Wellings 1978 Sweet and Maxwell London p.310. 18 While this may appear to expose a tenant and a guarantor, in this case such exposure can be removed under standard provisions in the lease and under the Retail Lease Act requiring the lessor to agree to an assignment of the lease or sub-lease to a financial assignee/sub-lessee. Hence a tenant with a failing business can take steps to mitigate its own loss by finding the best available assignee/sub-lessee and limiting its exposure. 19 Here the guarantor's letter complains that her business partner would not agree to discontinue the business. I accept the submission of the Lessor's lawyer that this is a matter between those parties and not something for which the Lessor should ordinarily be responsible. 20 For these reasons I conclude that the Lessor is entitled to enforce the Lease and the guarantee provisions according to their terms and to recover the sum of $27,610.76. 21 The next issue is interest which the applicant claims by reference to s.39A of the Local Courts (Civil Claims) Act 1970. However the Tribunal's discretionary authority to award interest is s.72A of the Retail Leases Act 1994 which by s.72A(3) is not to exceed the rate of interest on a judgment debt of the District Court. As interest is generally claimable on unpaid amounts I will exercise my discretion and make that order. 22 Accordingly I order that: The Respondents are jointly and severally liable to pay the Applicant the sum of $27,610.76 plus interest on that sum from 20 April 2002 to the date of this decision at the current rate on a judgment debt of the District Court namely 9%.