Rose Holdings Pty Limited -v- Chusap [2002] NSWADT 153

CITATION: Rose Holdings Pty Limited -v- Chusap [2002] NSWADT 153 revised - 03/12/2002 DIVISION: Retail Leases Division 1. APPLICANT Rose Holdings Pty Limited 1. RESPONDENT Somdet Chusap 2. APPLICANT PARTIES: Somdet Chusap 2.RESPONDENT Rose Holdings Pty Limited

FILE NUMBER: 025012; 025023 HEARING DATES: 14/05/02, 12/06/02 SUBMISSIONS CLOSED: 06/12/2002 DATE OF DECISION: 08/28/2002

BEFORE: Fox R - Judicial Member APPLICATION: Claim for payment of money MATTER FOR DECISION: Principal matter LEGISLATION CITED : Administrative Decisions Tribunal Act 1997 Retail Leases Act 1994 CASES CITED: 1. APPLICANT B Miller, solicitor 2. APPLICANT REPRESENTATION: J Kosmin, solicitor 1. RESPONDENT J Kosmin, solicitor 2.. RESPONDENT B Miller, solicitor ORDERS: 025012; 1. Respondent to pay applicant $13,548.72 plus interest $790.66, making a total of $14,339.38. Note that Applicant has appropriated bond of $5,543.50 in part payment, leaving balance payable by Applicant to Respondent of $8,795.88; 2. No order for costs; 025023; 1. Application dismissed; 2. No order for costs

1 In these proceedings (025012) the Lessor Rose Holdings sued for the cost of the refurbishment (and rent lost during the period of refurbishment), of restaurant premises at 462 Oxford Street, Paddington after they were vacated by the Lessee at the end of an occupancy of some years. The Lessee, in matter number 025023 sought Orders relieving him from any liability. 2 The matter involved 2 days of hearing during which statements and oral evidence were given by the managing agent, Greg Cromie; the Lessee, Somdet Chusap; the Lessee's Wife Waewpradit Chusap; and the managing director of the Lessor company, Mr Rose. 3 To put the matter in context, it is clear that, because the original lease commenced in 1992, and the present Lease arises out of the exercise of an option contained in that lease, section 6(1) (d) applied, and the Retail Leases Act does not operate to imply terms and conditions of the letting in place of those contained in the lease document. Of course, the matter is before me as a Retail Tenancy Dispute pursuant to section 63 of the Act which gives me jurisdiction despite the operation of section 6. 4 It is fair to observe that the evidence before me, and argument, turned on two issues, one of which being the date of assignment and the state of the premises at that time, and the other being the obligations under the Lease and the state of repair of the premises at the time of surrender. The Lessee took an assignment some time in 1995, resulting in his being entitled to exercise an option in 1996 in turn resulting in the Lease in issue before me, commencing on 15 December 1996, and ending on the 14 December 2000. The actual date of assignment is only marginally relevant. 5 The affidavit of Mr Cromie and his oral evidence established that there was a meeting between he and the Lessee on 31 October 2000 in which the general state of cleanliness of the premises was discussed in the context of the issue of a new lease to cover occupancy after 14 December 2000. 6 There followed a letter of 2 November 2000 on the Ray White Double Bay letterhead, addressed to the Lessee, which stated as follows:- "………we require the following items to be attended to prior to entering into a new lease. 1. Repair broken window in upstairs area. 2. Repair leaking toilet. 3. Repair leaking tap in rear yard. 4. Remove all rubbish and unused items in the premises. 5. Replace broken tiles as necessary in sitting and kitchen area. 6. Repair hole in floor in kitchen. 7. Repaint premises throughout (GC and SR to discuss). 8. Re-configure the electrical wiring in the kitchen to ensure that extension leads are not run everywhere." 7 The Lessee responded by letter of 16 November 2000, which indicated that he would be vacating the premises on 14 December 2000. 8 There followed a letter of 22 November 2000 to the Lessee which contained the words "………please see as follows a list of all items which are to be completed prior to the premises being handed back on 14 December.…….." 9 There followed a 2 page list of many details including, in respect of the exterior of shop front, retail area of premises, room at rear of retail area, small room at rear, bathroom, upstairs front room and room in between front room and bathroom required either "paint throughout including the ceiling", or "repaint ceiling", or "patch walls as necessary where items are removed and repaint throughout inclusive of ceilings". 10 There was a further inspection, and on 15 December 2000, a further letter was sent to the Lessee, which by inference indicated that some of the work had been done, but still asked for many other things to be attended to, and in particular again called for the painting of the underside of the exterior shop front awning, the ceilings of the retail area and room at retail area, repainting of the walls and ceilings of the hall stairway, the ceiling of the first floor small room at rear and bathroom and room in between bathroom and the repainting of the door and wall adjoining door of the upstairs front room. 11 At a further inspection of 21 December 2000 the Lessee formally surrendered the keys, although I am satisfied that Cromie had indicated to him that he was not satisfied with the work that had been done, and required further remedial work. At the Lessee's invitation a letter was forwarded to the Lessee's Solicitor on 21 December 2000, which was in somewhat short of form. It required attention to:- "downstairs, replace glass panel in window which had been boarded up, replace cracked light diffuser, replace light bulbs which are not working, paint underside of awnings, remove metal brackets which held the external ducted work in place. Upstairs, repaint wall in large front room which in currently painted in various shades of blue and white, repair the broken window in small room at rear of property". 12 I had before me a report of a builder by the name of Trembath, however he was not available to give evidence, and that certainly did not assist me in attempting to gain an indication of where the truth lay between the assertions of Mr Cromie on the one hand, and Mr Chusap on the other. 13 It was Mr Chusap's evidence that the premises were handed over in good and clean and fully repaired condition, he having himself effected much of the cleaning and painting. I was given a number of photographs of the inside of the premises as they presented on vacation, either late in December or early in January. There is no doubt in my mind that the Lessee had attempted to paint the inside of the premises, and it is just as clear that the work so done was not of a very high, or acceptable standard. 14 Immediately alongside the premises in question there was another restaurant, operated by Mr Faraone, the owner of that building. Mr Faraone ceased trading in December of 2000, and Mr Chusap in December 2000, moved into those next door premises, and commenced trading from there. The Lessee called Mr Faraone to give evidence, and I accept that he had some understanding of the condition and general state of repair of the premises in dispute. I accept him a witness of truth, and note that he was not prepared to say, on being shown the photographs of the state of painting of the inside of the premises, that they represented a proper or finished job. 15 The Lessee had an obligation, clearly spelt out in the Lease. Covenant 9.05 of the Lease reads as follows:- "Painting of interior, the Lessee shall at its own cost and expense paint the wall, ceilings and other parts of the interior of the premises which have at any time been previously painted with not less than two coats of first quality paint in a proper and workman like matter in the original colours thereof or in such other colours as may be approved of in writing by the Lessor when reasonably required by the Lessor and also, if required by the Lessor, during the last three months of the term or if the lease is being granted during the last three months of the subsequent term." 16 I am satisfied that, although he made attempts at painting, it could not be said that these comply with the requirement to "paint in a proper and workman like manner". I have no doubt that the Lessee genuinely believed that he had complied with the requirement of the lease in this regard, but I am also satisfied that he simply did not do so. 17 I should, of course, observe that the painting obligation only applies only to the interior of the premises, and consequently the Lessor's demand that the underside of the over-footpath awning be painted is misconceived. 18 The Lease further obliged the Lessee, even if such defect arose as a result of fair wear and tear, to at its own expense, and using tradesmen approved by the Lessor, repair "9.02.01 electrical fittings – promptly replace all faulty power point switches, light bulbs starters and tubes in the premises; 9.02.02 glass - promptly repair or replace all broken cracked or damaged glass in the premises or in any wall forming part of the premises; 9.02.03 doors locks and windows - keep and maintain and replace as necessary the doors, door fittings, locks, windows and window fittings of the premises in good and efficient working order and condition as at the date of commencement hereof." 19 Considering all of the evidence it seems to me to have been clear that the state of repair of the electrical fittings within the premises caused difficulty, right from the start of the occupancy. Both the Lessee and his wife in their statement and in their oral evidence seemed to consider that they should not have had to pay for some major electrical repairs in the power box at the commencement of the letting, and seemed to consider that all of these were matters for the Lessor. 20 It appears that they took much the same view in relation to the plumbing. 21 The Lessee's evidence did not satisfy me that the electrical repair set forth in the quotation of Mr Trembath in the sum of $533.00, were not necessary, or did not arise as a result of a failure by the Lessee to comply with his obligation to repair and keep safe during the term of the lease. 22 A claim was made for glass repairs in the sum of $268.00 in relation to the kitchen window, and I am satisfied that arose as a result of the Lessee's removal of an exhaust fan of some sort, and that, obviously, falls to the Lessee's account. 23 Not so clear, perhaps, was the claim for $170.00 "to repair window in rear bedroom – secure top sash to prevent it from falling out, repair as necessary sashes and sash springs". 24 Despite the terms of the lease, it seems to me that these are matters more of a structural nature, and the Lessee could be excused for considering that this was a matter for the Lessor to resolve. In this regard it also seems to me to be appropriate to indicate that as I understood Mr Rose's evidence, had this requirement been drawn to his attention during the occupancy, it would have been repaired without claim on the Lessee. 25 Another of the more agitated areas of claim was for plumbing repairs to "fix leaking flush pipe of upstairs cistern, remove modified storm water grate from bathroom floor and install brass floor grate," and further "ceramic tiling supply and lay new tile about bathroom floor". 26 I have to say that, from the photographic evidence, it was clear that the tiling in and around the toilet which was situated in the upstairs bathroom was far from "Vogue" standard. However nothing in the evidence persuaded me that, although it may not have been highly attractive, it was not of an appropriate standard considering the age and general state of repair of the building. The claim for the re-tiling cost must fail. 27 The claim for plumbing repairs, in so far as it related to the flush pipe of the upstairs cistern, was properly founded, because I am satisfied that it falls within the Lessee's general maintenance requirements. I cannot understand why this apparently relatively simple plumbing repair was not effected to cure the leakage which took place from the bathroom above into the washing up area in the kitchen below. However the Plaintiff's claim in this regard fails because it is not proven; the quotation did not distinguish between the flush pipe repairs (which were proper), and the removal of the modified storm water grate which was not properly brought home to the Lessee. 28 The claim for the removal of various hooks, dynabolts, screws, mirror tiles etc, is ill founded, I accept the Lessee's evidence to the effect that whatever plugs, screws and dynabolts they installed they removed and properly patched. 29 To summarise I am satisfied that it was proper for the Lessor to claim against the Lessee the following amounts:- 1. Electrical repairs etc, $553.00 2. Glass repairs $268.00 3. Painting $4,400.00." 30 However the matter does not end there. The evidence of Mr Ross was that upon receiving the total claim from the builder for the work to the premises, in the sum of $8,141.10 including GST, he simply said that, "that's too much, it will have to be reduced". Apparently some negotiations followed, and in the end the amount paid to the builder was $6,668.53 including GST. That amounted to a reduction of 18%, and, obviously, that should apply pro-rata to the matters which I have allowed. 31 There is one further point. The painting quotation makes no distinction between the making good sealing, etc, of the inside of the premises and painting them, and the removal of flaking paint from awning and repainting. I was given no evidence of cost break up in this regard, but in the interest of finality, propose to make an ad hoc assessment. Allowing for the fact that the work would have to be done in a busy pedestrian thoroughfare, a figure of $300.00 seems appropriate. The calculation is as follows: Total amount allowed $5,201.00 Reduced by 18% $4,264.80 Less allowance for awning painting $300.00 AMOUNT ACTUALLY ALLOWED $3,964.82 32 It was clear from the evidence that the premises were vacant for many months, and were eventually substantially internally rebuilt when they were let as a shoe shop. The Plaintiff's claim was for rent for make good period 15 December 2000 to 31 January 2001 - $15,912.32. 33 This aspect cause me much concern, because it seemed to me that the Lessee should not have to bear the cost of delays resulting from the difficulty of having tradesmen do work over the Christmas break. On the other hand, the Lessee full well knew that his Lease was ending on15 December, and must, as a matter of law, be taken to have accepted the risks following from the fact that he did not on surrender leave the premises in the condition required by the Lease. 34 The evidence establishes that the actual surrender of the keys did not occur until 21 December 2000 and that would have been the first opportunity, had the work been done properly, that the premises could have been shown, in reasonable condition, to prospective incoming Lessees. Had that same surrender, in the same unsatisfactory condition, occurred on 15 December, the Lessee may well have been able to argue that it was possible to have tradesmen quote and commence repairs before the Christmas break. As the Lessee delayed that until 21 December, I think the Lessee must be found to have accepted the inherent risk of being unable to find tradesmen over the Christmas break, and consequently must bear the rent lost until the first working day of the new year which was Tuesday 2 January 2001. 35 Although I was given no evidence of the time it took to complete the works, it seems to me that the repairs and painting which I have allowed would have prevented inspection no more than a week, and consequently I am satisfied that the Lessee's liability for rent ceased on 9 January 2001, a total of 25 days. 36 I note that the rental paid for the premises was $110,000.00 per annum "gross" which on my calculations means $301.37 per day. 37 I note that the claim includes GST on top of the rental claimed, but it seems inappropriate for me to include that because I am not satisfied that such rental payments, pursuant to existing leases, were liable to GST. 38 It follows that the rental payable in respect of the 25 day period is $7,534.25. 39 It was conceded between the parties that outgoings were payable in the sum of $2,049.72. The end result is: Cost of repairs allowed $3,964.82 Rent claim allowed $7,534.25 Outgoings agreed $2,049.72 TOTAL AMOUNT ALLOWED $13,548.79 40 It is acknowledged that there was a bond held in the sum of $5,543.50 and when this amount is taken into account, the actual amount now payable by the Lessee to the Lessor is $8,005.29. 41 The Lessor conceded that there were no special circumstances to entitle it to an order for costs, and the Lessee, in its cross action, certainly was not so entitled. 42 However Mr Miller for the Lessor did argue that he was entitled to claim costs in the sum $6,624.20 pursuant to clause 8.05.8 of the Lease:- "In case of default by the Lessee and observing or performing any covenants in this lease contained or implied or legal and other cost charges and expenses for which the Lessor shall become liable or which the Lessor shall suffer or incur in consequence of or in connection with such default". 43 This aspect of the claim falls squarely within the definition of Retail Tenancy Dispute found in section 63(1) and whatever may be the case in respect of leases coming into effect after the commencement of the legislation, in this Lease, which is within one of the exceptions to the Act, the "contract liability" claim would appear to be quite arguable. Be that as it may, section 77A gives me a discretion:- "the Tribunal may award costs under section 88 of the Administrative Decisions Tribunal Act …….." and section 88 of the Administrative Decisions Tribunal Act again underscores that in subsection 1 "……… the Tribunal may award costs in relation to proceedings before it, but only if it is satisfied that there are special circumstances warranting an award of costs." 44 Whilst a strict interpretation of the provisions of the Lease, may entitle the claim for costs, the end result would be so Gilbertian that I exercise my discretion against it. 45 The Lessor claimed interest pursuant to Section 72A, and in view of all of the circumstances that does appear to me to be a proper claim. I think the proper rate is 7%, because it seems to me to be the appropriate commercial rate, calculated from one month after the date of formal demand, being 10 February 2001, and consequently interest at the rate of 7% is payable from 10 March 2001. I make that (7 August) 515 days, and I calculate the interest to be $790.66. ORDERS 025012 1 Re spondent to pay applicant $13,548.72 plus interest $790.66, making a total of $14,339.38. Note that Applicant has appropriated bond of $5,543.50 in part payment, leaving balance payable by Applicant to Respondent of $8,795.88. 2 No order for costs 025023 1 Application dismissed 2 No order for costs. Decision revised on 3 December 2002 Order 1 in 025012 revised by adding the words "Note that Applicant has appropriated bond of $5,543.50 in part pyament, leaving balance payable by Applicant to Respondent of $8,795.88."