Perrin v Hungay Pty Ltd [2005] NSWADT 257

CITATION: Perrin v Hungay Pty Ltd [2005] NSWADT 257 DIVISION: Retail Leases Division APPLICANT PARTIES: Bruce Perrin trading as Bondi Bed Shop RESPONDENT Hungay Pty Ltd FILE NUMBER: 055052 HEARING DATES: 31/10/2005 SUBMISSIONS CLOSED: 10/31/2005 DATE OF DECISION: 11/16/2005

BEFORE: Rickards K - Judicial Member APPLICATION: Claim for payment of money - Claim for relief from payment of money MATTER FOR DECISION: Principal matter LEGISLATION CITED : Retail Leases Act 1994 CASES CITED: APPLICANT REPRESENTATION: J Lloyd, Solicitor RESPONDENT A Benakis, Agent ORDERS: 1. The Respondent is not entitled to recover any amount of money from the Applicant as due or owing in respect of the lease of the premises; 2. If either party wishes to make any submission as to costs, such submissions must be in writing and filed within 14 days with the other party to file any written submissions in reply within 14 days thereafter; 3. In the absence of written submissions being filed in accordance with Order 2, there is no order as to costs

REASONS FOR DECISION 1 The Applicant was the lessee of premises known as Shop 3, 697 Anzac Parade, Maroubra ("the premises"), and the Respondent was the lessor. The premises were used for the purpose of selling beds and associated products, and it is common ground that the premises were a "retail shop" as defined in Section 3 of the Retail Leases Act 1994. 2 The lease commenced on 13 March 2003 and terminated on 12 March 2005. Ultimately, the Applicant held over in occupation as lessee until the end of June 2005 without exercising the available Option to Renew. 3 The Applicant was represented at the hearing by his solicitor Mr Lloyd, and the Respondent was represented by Mr Benakis who is a real estate agent employed with LJ Hooker Maroubra, who are the Respondent's managing agents. 4 The Applicant gave evidence during the hearing, and evidence was also given upon his behalf by his son. Statutory declarations which had previously been sworn by the Applicant and his son and filed in the proceedings were tendered and admitted into evidence. There were also a number of other documents tendered upon the Applicant's behalf some of which I shall refer to later. Documentary evidence was also tendered and admitted on behalf of the Respondent. There was no oral evidence given on behalf of the Respondent, but Mr Benakis made a number of submissions concerning the matter. 5 Having considered the evidence, it is apparent that there is very little factual dispute between the parties in relation to matters which are relevant to the determination of these proceedings. What is set out below by way of factual background are those matters which I accept as a correct version of events. Factual background 6 Within about 2 months of the Applicant going into possession of the premises, a problem became apparent whereby rain would leak through the roof and ceiling. 7 Initially, the rainwater mainly came in at the rear of the premises where a storeroom, showroom and kitchen area were located, but over time rainwater began to leak into the front of the premises where goods were out for general display to the public. When rainwater came in, beds and other goods would sometimes get wet and there was obvious water damage. Furthermore, water would leak onto the carpets which would then become mouldy and smelly. The leaking water also affected the wiring system at the premises rendering most, if not all, power points inoperable. 8 The effect of the above was that during and after periods of wet weather, the roof and ceilings would leak, not only damaging goods but also reducing the usable area of the premises and affecting customers entering the premises who would be walking on wet carpet and observing water damage to various goods for sale. 9 Unfortunately, apart from some photographs showing items which had sustained water damage, there is no specific evidence identifying the nature and extent of damage to any particular items. 10 During the first year of the lease the Applicant contacted the Respondent through the managing agent by telephone and by personal attendance on a number of occasions to advise that water was coming in and that the problem required urgent attention. On a number of occasions such approaches resulted in the attendance of a person or persons on behalf of the Respondent who would undertake repairs to the roof from time to time. These repairs did not succeed in preventing ongoing leaking of rainwater. 11 The Applicant's business was adversely affected by rain in July and December 2003 and in February 2004. The Applicant then wrote a letter to the Respondent on 13 May 2004 formally notifying the Respondent that rain had been entering the premises, that the power points throughout the showroom had never worked and that these problems had not been rectified and continued to affect his trading. 12 The Applicant's business was again adversely affected by rain in the months of August and September 2004 and January through to June 2005. 13 The premises were part of a larger building which also housed other separate lessees. A letter from Ways Youth Services dated 18 March 2005 confirms that written complaint concerning the multiple leaks in the roof had been made as early as 8 July 2003 by that lessee, followed by further complaints. 14 The Applicant's loss due to these water problems arose from a combination of overall decreased customer patronage, loss of value of stock which was damaged, and inability to make full use of the premises. 15 By early 2004, the Respondent was in receipt of information indicating that the roof needed to be replaced, and that this would also include removal and reinstallation of air-conditioning units on the rooftop as well as replacement of one air-conditioning unit. 16 A quotation was obtained by the Respondent for the air-conditioning work on 9 December 2004. After an earlier quotation, a business known as All Dry Roofing provided a second quotation for the roofing work on 24 February 2005. No works had been commenced by the time the Applicant vacated the premises in early July 2005. The works were subsequently commenced and were nearing completion as at date of hearing. 17 Rent initially payable by the Applicant pursuant to the Lease was in the sum of $4,300.00 monthly rising to $4,515.00 in the second year. 18 The Applicant's son compiled a comparative schedule showing reduced business turnover for the months which were affected by rain. In addition, Business Activity Statements submitted by the Applicant to the Australian Taxation Office relating to those months were admitted into evidence. Submissions 19 In his Application, the Applicant seeks payment of compensation for loss of business in the sum of $66,000.00, and additionally seeks an order that "the amount of $27,000.00 not be paid by Bondi Bed Shop because of shops unusability (sic)". 20 Mr Lloyd for the Applicant confirmed that the application was being made pursuant to Section 34(1)(d) of the Retail Leases Act 1994 in that the Respondent had failed to take all reasonable steps to prevent or put a stop to the leaking of rainwater into the premises which had caused significant disruption of, or which had had a significant adverse affect upon, the trading of the Applicant in the shop and that was attributable to causes which were within the Respondent's control. 21 It was conceded by the Applicant that any entitlement to compensation based upon Section 34 could only arise within a reasonable period after the date of the first letter sent by the Applicant complaining of the problems. Any compensable loss could only therefore arise after May 2004. 22 Mr Lloyd for the Applicant suggested that the proper approach is to assess compensation by adding the loss of turnover for the eight rain affected months which occurred after May 2004, and to then deduct from that sum, the agreed amount of unpaid rental which is $31,338.50. 23 On behalf of the Respondent, Mr Benakis conceded that the Applicant is entitled to some form of compensation, but submitted that such compensation should be fair, and take into account that rain did not consistently fall through the affected months but rather on some days and not on others. It was not suggested on behalf of the Respondent what that "fair" figure should be. The Respondent also submitted that the decreased turnover could be due to a number of factors other than water leakage. 24 The Respondent also submitted that in calculating what is fair compensation, I should not take account of any claimed losses during the three month period when the applicant held over on a monthly basis after the termination date of the lease. 25 The Respondent also pointed out that it was not seeking interest upon arrears of rental and that this should be taken into account in determining the matter. Findings 26 As indicated above, the Respondent concedes that compensation is payable but denies that it should be liable for the amount of compensation as claimed by the Applicant. 27 I am satisfied that the Respondent was well aware by May 2004 that the roof of the premises had been leaking significantly for some time and affecting the businesses which were operating under that roof, including the business of the Applicant. I am also satisfied that by May 2004 the Respondent knew, or reasonably should have known, because of the failure of repairs to stop water leakage and information given to the Respondent, that the only reasonable solution was replacement of the roof. Given such knowledge, and the fact that the subject works have later been undertaken and are nearing completion within a period of approximately 12 weeks, I find that it would have been reasonably practicable to have the roof replaced at least prior to September 2004 when the Applicant again suffered disruption to his business by reason of rainwater leaking through the roof. 28 It is incumbent upon the Applicant to prove his actual loss caused by the Respondent's failures. There have been no accounts provided to this Tribunal, nor any expert report as to loss, and I am asked to assess the Applicant's loss based upon the diminished turnover figures. While I accept that the turnover figures as disclosed in the Business Activity Statements provided to the Australian Taxation Office are correct, and that they support the Applicant's contention that he suffered a downturn in business by reason of the Respondent's failures to properly deal with the leaking roof, such figures do not assist in any real way in determining what loss the Applicant has actually suffered. For example, there is no evidence as to what other fixed or variable overheads applied during the period in question, and I am also mindful of the submission made on behalf of the Respondent to the effect that even during months affected by rain there are other events and variables which may have affected the turnover figure, such as availability and supply of stock and general economic conditions. 29 I am not satisfied that the Applicant has sustained loss in the amount claimed. However, it is reasonable to expect that the Applicant would have been generally able to meet his basic rental commitments had his business not encountered the problems caused by leaking rainwater. As I have indicated previously, I am of the opinion that it would have been reasonably practicable for the Respondent to have had such problems resolved by September 2004. Accordingly, the Applicant is entitled to compensation for significant interruption to his business generally during seven rain affected months until he vacated the premises. In my view, it is fair and reasonable that the Applicant should be relieved from payment of rental for those months but I am not satisfied that any other loss has been proved. The monthly rental for those seven months was $4515, making a total of $31,605. 30 Given that the Respondent has not charged interest upon arrears of rental, and that the amount otherwise payable by the Applicant for rent due without addition of interest is $31,338.50, I do not consider it appropriate that the Respondent should be ordered to pay the small difference of $266.50 in the circumstances. Orders 31 I accordingly order that the Respondent is not entitled to recover any amount of money from the Applicant as due or owing pursuant to the lease of the premises. 32 I also order that if either party wishes to make any submissions as to costs, it should file its written submissions within 14 days with a further period of 14 days then allowed for the other party to respond by way of filed written submissions. 33. I further order that unless there are written submissions filed as to costs, there will be no order as to costs.