Prsa & anor -v- Polymeris [2000] NSWADT 108

CITATION: Prsa & anor -v- Polymeris [2000] NSWADT 108 DIVISION: Retail Leases Division APPLICANTS/CROSS RESPONDENTS Stefan Prsa PARTIES: Kristina Prsa

RESPONDENT/CROSS CLAIMANT Harry Polymeris FILE NUMBER: 995014; 005013 HEARING DATES: 04/07/2000 SUBMISSIONS CLOSED: 07/04/2000 DATE OF DECISION: 08/11/2000

BEFORE: Donald B - Judicial Member APPLICATION: Claim for payment of money - Jurisdiction MATTER FOR DECISION: Principal matter LEGISLATION CITED : Retail Leases Act 1994 CASES CITED: APPLICANTS/CROSS RESPONDENTS REPRESENTATION: J Prowse, solicitor RESPONDENT/CROSS CLAIMANT Y Holt, barrister ORDERS: 1. Application dismissed; 2. Cross Claim dismissed; 3. Applicant to pay Respondent's costs of obtaining the affidavit by Edmunds of 2 June 2000.

REASONS FOR DECISION 1 This is a claim by the tenants for loss of the sale of their business as a result of the alleged failure of the lessor to consent to the assignment of the lease and for breach of the covenant of quiet enjoyment; the lessor cross-claims for the failure to make good by the tenant at the termination of the lease. 2 The tenants were assignees from Mr Tarleton, the previous lessee under a three-year lease which commenced on 20 October 1996. They acquired Mr Tarleton's business as a going concern together with the fixtures and fittings installed on the premises. The assignment became effective on or about 22 September 1997. 3 The tenants were not happy in the lease and also found the frequency of visits to the shop by the lessor, who lived at the rear of the premises, to be offensive and to interfere with their peace of mind concerning the occupation of the premises. In addition they were not satisfied with the commercial performance of the business and by 30 June 1998 had commenced advertising their business for sale. The disputes with the lessor included minor but irritating disputes concerning the maintenance of the border hedge along one side of the boundary of the premises. The first seriously interested purchaser, Mrs Poon, was, as conceded by the applicants at the hearing, only willing to buy the business if she secured a new lease rather than an assignment of the existing lease. 4 During the hearing of the matter I put to the lawyer for the applicants that, while the Retail Leases Act contained a regime obliging a lessor to consent to an assignment subject to certain procedures and conditions, there was no obligation on a lessor to agree to the termination of one lease and the grant of a new lease to the replacement tenant. This proposition was accepted on behalf of the tenants. 5 The lawyer for the applicants then submitted that the matter should proceed on the basis that the lessor's conduct demonstrated a course of dealing pursuant to which he would not have approved an assignment had it been sought. 6 I gave a ruling that there was no basis in law for that proposition and the lawyer for the applicant conceded that the claim by the applicants for the failure to approve fell away. Accordingly the claim for loss of the opportunity to sell the business also was conceded to be without proper basis in law. 7 The next claim by the applicants was for a breach of the covenant of quiet enjoyment on the basis of the rate of visitation by the lessor to the premises and the extent of his unwelcome comments to the lessees during those visits as to the manner of operation of their business. 8 The evidence was that the lessor came regularly to the shop from the beginning of the lease, bringing mail and delivering invoices. While this was initially friendly and not unwelcome, the lessees soon found it intrusive to the point of being distressing. Matters came to a head in August 1998 when there was heavy rain flooding into the premises which the applicants claimed also constituted a breach of quiet enjoyment as well as triggering a dramatic further deterioration in the personal relationship between the parties. 9 As a result, the applicant's lawyer wrote to the lessor requesting that he not make regular visits to the shop and from September 1998 to the end of October 1999 it was conceded that the lessor visited the premises only fortnightly to deliver mail. 10 There was a dispute also concerning the location of letterbox facilities. 11 In my opinion the evidence does not establish a breach of the covenant of quiet enjoyment. A lease is a property interest and entitles the tenant to enjoy the property to the exclusion of the lessor subject to the provisions of the lease for appropriate access. Accordingly a tenant can request a lessor not to visit the premises on a regular basis beyond what is necessary to exercise those lessor rights. Perhaps in this case the tenants should have so requested the lessor at an earlier time but as soon as the lessees formally requested the lessor to cease his regular visits, he did cease. 12 Further, for the period up to September 1998 it is not established by the applicant that even if the lessor's unwelcome visits had caused them distress, which they obviously did, this caused them loss or damage in the sense of an inability to optimise their business or attract an assignee who would hopefully acquire their business. 13 Accordingly in my view the claim for breach of the covenant of quiet enjoyment also fails. I note in passing that although it was not framed as a claim under the implied conditions in s.34, the evidence would not constitute conduct which is compensatory thereunder. 14 The respondents' cross-claim was pressed only in relation to failure to leave the premises in good condition, fair wear and tear excepted. 15 During the course of evidence it became clear that the lessor had not invested in the maintenance or refurbishment of the interior of the premise for over fifteen years. He claimed that the tenants were responsible to replace entire sections of sheeting on the roof surrounding a flue when the evidence established that the installation of the exhaust system that had caused adjustment to the roof had long preceded the tenants' occupation and had been consented to by the lessor. It was clear on the evidence that the tenants had made every effort to clean the premises in the condition in which they had originally been leased. 16 Accordingly the lessor through his lawyer rightly conceded that there was no basis for any claim in respect to the wall tiles, the floor plinth or the roof metal sheeting and that his claim remained only for re-painting and degreasing the walls beyond the cleaning undertaken. 17 In my opinion having heard the evidence of Mr and Mrs. Prsa and Mr Polymeris, as well as having viewed the photographic evidence, these items constitute fair wear and tear and are not payable by the tenant. 18 I do not consider that the claim in respect of trimming the hedge at the boundary of the property has any merit. It can only be regretted that such a minor matter can be raised to the level of a legal dispute between parties. 19 Accordingly in my opinion the remaining aspects of the cross-claim that were not conceded also fail. Costs 20 The lessor sought costs as the entire claim failed; his the lawyer asserted that a proper reading of the Act would have made it clear from the outset that there was no basis for mounting the claim for failure to consent to an assignment in circumstances where no assignment was proposed. 21 The lessor further submitted that their evidence by way of affidavit as to business loss only became necessary because of the affidavit by the applicants of expert evidence as to loss of business value. 22 Section 88 of the Administrative Decisions Tribunal Act 1997 only permits the Tribunal to award costs where there are special circumstances "warranting an award of costs". 23 While the applicants claim was clearly flawed in law as to the failure to approve the new tenant, it was not so clearly flawed in relation to the claim for breach of the covenant of quiet enjoyment. Accordingly in my view there are no special circumstances concerning the entire case warranting an order for costs. However I do accept the submission by the lawyer for the lessor that the cost of obtaining the expert business evidence in reply was only necessary because the consent to assignment claim was pressed. Accordingly in my view the applicant should pay the respondents costs of retaining Mr Edmunds to prepare the report annexed to his affidavit of 2 June 2000. Thrown away costs 24 As a result of an oversight by myself, the hearing of this matter did not proceed on its first listed day of 8 June 2000 causing both parties to incur some level of cost for the period which their legal advisers were delayed from proceeding to other business. 25 Both parties made an application under the Suitors Fund Act, s.7, for compensation for the costs of 8 June. 26 In my opinion the Suitors Fund Act does not apply in a situation such as this. However having consulted with the Registrar of the Tribunal, I propose that the Registrar make an application to the Attorney General's Department for an ex-gratia payment of the sum of $750 to each party by way of costs, being my assessment of the likely reasonable costs for the lost time. 27 By way of limited amelioration of this delay, I note that for at least one of the parties, they had not completed their written submissions by 8 June and in fact only lodged them on the day of the actual hearing. 28 To fund the proposed ex gratia payment, I have advised the Registrar that I will not be seeking my own fees as a part-time member for hearing and preparing reasons in this matter and one other matter. This should fund the ex-gratia payment proposed.