MCK.B Enterprises Pty Limited v Wearncog Pty Limited [2004] NSWADT 6

CITATION: MCK.B Enterprises Pty Limited v Wearncog Pty Limited [2004] NSWADT 6 DIVISION: Retail Leases Division APPLICANT PARTIES: MCK.B Enterprises Pty Limited RESPONDENT Wearncog Pty Limited FILE NUMBER: 035093 HEARING DATES: 3/11/2003 SUBMISSIONS CLOSED: 11/03/2003 DATE OF DECISION: 01/14/2004

BEFORE: Fox R - Judicial Member APPLICATION: Costs MATTER FOR DECISION: Costs LEGISLATION CITED : Administrative Decisions Tribunal Act 1997 Retail Leases Act 1994 CASES CITED: Randi Wiks v Pokana 2003 NSWADTAP 27 APPLICANT REPRESENTATION: V Dominello, solicitor RESPONDENT M Pavey, solicitor ORDERS: Respondent to pay 80% of Applicant's costs of preparing for and appearing at directions hearing of 11 September 2003.

1 This matter first came before me on 28 August 2003 on the Applicant Lessee's Application to prohibit the Respondent Lessor from allowing the construction of a kiosk outside the shop which was adjacent to the Applicant's shop. The Respondent Lessor operates part of the Harbour Side Shopping Centre in the Darling Harbour complex, the Applicant has a lingerie shop, and the shop next door is a newsagency. The Respondent and the newsagency had agreed on the construction of the kiosk. The Applicant relied on the rights implied into the Retail Shop Leases by Section 33 and 34 of the Retail Leases Act 1994. 33 Lessee to be given notice of alterations and refurbishment A retail shop lease is taken to provide that the lessor must not commence to carry out any alteration or refurbishment of the building or retail shopping centre of which the retail shop forms part which is likely to adversely affect the business of the lessee unless: (a) the lessor has notified the lessee in writing of the proposed alteration or refurbishment at least 2 months before it is commenced, or (b) the alteration or refurbishment is necessitated by an emergency and the lessor has given the lessee the maximum period of notice that is reasonably practicable in the circumstances. 34 Lessee to be compensated for disturbance (1) A retail shop lease is taken to provide that if the lessor: (a) inhibits access of the lessee to the shop in any substantial manner, or (b) takes any action that would inhibit or alter, to a substantial extent, the flow of customers to the shop, or (c) unreasonably takes any action that causes significant disruption of, or has a significant adverse effect on, trading of the lessee in the shop, or (d) fails to take all reasonable steps to prevent or put a stop to anything that causes significant disruption of, or which has a significant adverse effect on, trading of the lessee in the shop and that is attributable to causes within the lessor's control, or (e) fails to rectify any breakdown of plant or equipment under the lessor's care or maintenance, or (f) in the case of a shop within a retail shopping centre, fails to adequately clean, maintain or repair the retail shopping centre (including common areas), and the lessor does not rectify the matter as soon as reasonably practicable after being requested in writing by the lessee to do so, the lessor is liable to pay the lessee reasonable compensation for any loss or damage (other than nominal damage) suffered by the lessee as a consequence. (2) In determining whether a lessor has acted unreasonably for the purposes of subsection (1) (c), due consideration is to be given to whether the lessor has acted in accordance with recognised shopping centre management practices. (3) A retail shop lease may include a provision preventing or limiting a claim for compensation under the provisions implied by this section in respect of any particular occurrence if the likelihood of the occurrence was specifically drawn to the attention of the lessee in writing before the lease was entered into. Note. A disclosure statement is an appropriate means of specifically drawing the attention of the lessee to the likelihood of an occurrence. (4) The provisions implied by this section do not apply to any action taken by the lessor: (a) as a reasonable response to an emergency situation, or (b) in compliance with any duty imposed by or under an Act or resulting from a requirement imposed by a public or local authority acting under the authority of an Act. 2 It was the Applicant's position, right from the start, that it needed details of the proposed kiosk, because it feared that the construction would adversely affect its trading position. 3 It transpired at the first Directions hearing that the Lessor had been in dispute with the newsagent for some time, and the resolution of that dispute, in a mediation, under the aegis of the Retail Tenancy Unit, had resulted in an agreement to allow an 8sq m point of sale kiosk to be built in the area immediately outside the newsagency. 4 It was always quite clear that the kiosk would be somewhere near to the entrance of the Applicant's shop, and, I did, at the first hearing, and do now accept that the Applicant has a genuine and well based concern about the nature and location of the kiosk, and its effect on trade. 5 The Respondent's case, right from the start, was, that it was bound by the agreement with the newsagent, but that the newsagent had not made any plans available, and consequently it was unable to propose any plans to the Applicant. 6 In order that these aspects might be clarified, and on the general understanding that no adverse steps would be taken in the interim, I adjourned the matter to 11 September. 7 On 11 September, the situation was a little clearer, and it appears that there were plans in the offing. In an attempt at preserving the status quo, and at the same time, seeking to apply the spirit of mediation which is to prevail in this Division, I made the following orders:- 1. The Respondent is prohibited from finally approving plans for kiosk submitted to it by World News unless such plans are also approved by the Applicant. 2. If plans submitted are approved as between the Respondent and World News, they are to be served upon the Applicant within 3 working days of such approval and the Applicant is to indicate within a further 3 working days whether it approves. 3. If such plans are not so approved by the Applicant there is to be a mediation at RTU within a further 5 working days to seek to find amendment to the plans which are acceptable to the Applicants – the Respondent is to invite World News to such mediation. 4. Both parties have liberty to apply for further directions by way of telephone hearing on two working days notice. 5. Further directions on 25 September 2003. 8 On 25 September the Applicant withdrew, but sought an order for costs. 9 I directed that written submissions be made, and the matter be subject to further oral submissions on 3 November 2003. 10 It should be noted that no evidence was filed by either party, the entire matter was by way of the submissions of Mr Dominello on behalf of the Applicant and Mr Suchard and/or Ms Pavey on behalf of the Respondent. 11 The lawyers were fully and actively instructed, and I am prepared to deal with the matter on the basis that the matters put to me at the substantive directions hearing on 11 September exactly reflected the evidence of the relevant parties, and would have been sworn in evidence had the matter proceeded. This is why I indicated that the commencement of these reasons that I accept that the Applicant had a genuinely held belief about the effect of the kiosk. 12 The Applicant's submissions in relation to the matter of costs fall within a small ambit:- "the Applicant submits that had the Respondents complied with its statutory obligation and provided written notice of the alteration then the Applicant would have had an opportunity to consider the proposed alteration and reflect on its rights concerning same". 13 This was expanded by way of oral submissions to refer to a letter of 12 August in which, writing direct to the Respondent, the Applicant sought information in relation to the building proposed: "urgently provide us with details concerning any proposed development concerning the subject passageway and in particular any approvals that you have provided to the newsagent concerning development onto the common areas as discussed in this letter". 14 An onsite meeting followed on 18 August, but by 22 August the Applicant had heard nothing further and again asked for the plans, indicating that if no information was received by the end of the day, an Application would be made. Nothing was heard and the Application was made. 15 The Respondent's response has simply been to indicate that the Applicant has given no evidence to establish that there would be an adverse effect on trade, and in any event, it did not have any plans at the relevant time. I must say that that response appears to me to be somewhat disingenuous, I can see no reason why the Respondent could not give an undertaking that it would take no further steps without notifying the Applicant so that the Applicant would have proper opportunity to test its statutory rights. 16 The issue involved the prospect of substantial building activities, over a relatively short time, which, once started, are difficult to stop. There is always the likelihood of, once the work had been started, the Respondent arguing that no matter what the rights or wrongs of the case were, the Applicant had not taken it's action sufficiently early or quickly. It is for this reason that, in my view this Tribunal in such circumstances should be very reluctant to place fetters on any early approach. 17 One of the reasons for Section 88 of the Administrative Decisions Tribunal Act 1997 is to ensure that risk of an adverse costs order does not dissuade Applicants from making a proper Application. The innovation to find simple and expensive remedies to retail Lease disputes does not stop at the (almost) mandatory mediation imposed by Section 63. In circumstances such as these that same philosophy dictates a positive emphasis on encouraging parties to establish a status quo early in the piece without resort to technicality. It follows that a failure to give a proper undertaking to take no adverse steps until there has been a proper exploration of the dispute at mediation, can amount to special circumstances for the purposes of Section 88. 18 However, I am also satisfied that that, if special circumstances are brought about by a failure to respond to a proper request for an undertaking or disclosure, then that request must be clear and unequivocal, and the more so if the request is made by a lawyer to a lay person. In this regard I am not satisfied that Mr Dominello's letter of 22 August 2003 to the Retail Manager of the Respondent clearly enough demanded an opportunity to see plans or an undertaking not to commence work until the plans were seen. It seems to me that the demand, as made, was properly open to the layman's response, "well I can't give you the plans yet because I have not been given them by the party who is preparing them". 19 It cannot be said that Mr Dominello's application to the Tribunal was inappropriately early, but in order to show that there were special circumstances for the September 11 Application, the letter of 22 August should have unequivocally demanded, if plans were not yet available to the Respondent, an undertaking not to commence work etc. This is especially so in view of the fact that the Respondent had cooperated with the Applicant in having an onsite meeting, at which the general outline and concept of the proposal was discussed; it cannot be said that the Respondent left the Applicant completely in the dark in this regard. I am unable to find that the situation on 22 August was such that the Respondent should bear the Applicant's costs, but it might well have been so had the Respondent adopted a complete "stonewall" approach. 20 However, the situation had changed quite markedly by the hearing on 11 September. The Respondent had instructed its Solicitors, and although the Applicant still does not appear to have unequivocally sought an undertaking for the works not to be commenced until there had been an opportunity to consider the plans, the Respondent's lawyers should have offered the relevant undertakings. Had that been done, the hearing of 11 September would have been a short simple affair, requiring little more than the handing up of agreed orders. 21 The fact that an appropriate undertaking was not given in circumstances which plainly called for such an undertaking to be given, amounts to special circumstances, and renders the Respondent liable in costs for that day. It is appropriate to refer to the decision of this Tribunal in Randi Wiks v Pokana 2003 NSWADTAP 27 at paragraph 13. The commercial nature of matters in this Division raises different considerations for special circumstances/costs than those which apply in other Divisions. 22 I recognise that an appearance of some sort was necessary on 11 September in any event, and so the Applicant is not entitled to all of its costs on that day. Rather than call for more evidence in this regard, in the interest of finality, my order is that the Respondent pay 80% of the Applicant's costs of preparing for and appearing at the hearing of 11 September. 23 I note with some concern that on the hearing of this Cost Application the Respondent raised the fact that the agreed kiosk was, as far as the Applicant was concerned, a substantial area reduction of a previously disclosed (much larger) kiosk proposal. This would appear to have been an issue of some relevance, but I have no note of that aspect being raised either on 28 August or 11 September.