Cadonia Pty Limited v Gourmet Fast and Fresh (Sydney) Pty Limited [2008] NSWADT 44

CITATION: Cadonia Pty Limited v Gourmet Fast and Fresh (Sydney) Pty Limited [2008] NSWADT 44

DIVISION: Retail Leases Division

APPLICANT Cadonia Pty Limited PARTIES: RESPONDENT Gourmet Fast and Fresh (Sydney) Pty Limited

FILE NUMBER: 065152, 075013

HEARING DATES: 10 December 2007

SUBMISSIONS CLOSED: 10 December 2007

DATE OF DECISION: 6 February 2008

BEFORE: Fox R - Judicial Member

CATCHWORDS: Claim for payment of money - Costs - Damages

MATTER FOR DECISION: Principal matter

LEGISLATION CITED : Retail Leases Act 1994

CASES CITED: Advanced Underpining v Voulelatos & Anor [2001] NSWADT 100

APPLICANT M Zwar, solicitor REPRESENTATION: RESPONDENT No appearance

ORDERS: 1. The Respondent, pursuant to section 72(1)(a) of the Retail Leases Act 1994 is to pay the Applicant by way of debt and damages the sum of $145,669.45. 2. The Respondent is to pay the Applicant's costs on a party/party basis for attendance at all directions and interlocutory proceedings, and on a full indemnity basis for preparation for and attending at the hearing including witness expenses for Mr Condell, Mr Spiegel and Mr Houseman.

REASONS FOR DECISION 1 These proceedings have been on foot since 15 September 2006 and amount to a quite simple claim for recovery of rental lost upon the tenant vacating the premises pursuant to notice to quit upon the rental having fallen grossly into arrear, costs of reinstatement of premises, and damages by way of recovery of the difference between the original rent and that obtained from the next tenant. The Applicant was represented by Mr Zwar, whilst the Respondent appeared by way of Ms Salama, an authorised representative of the company who, in effect, appeared as a matter of courtesy only. Ms Salama's written authority made it clear that the Respondent conceded liability for the claim, but pressed a "defence" which reflected the proposition made in the cross claim. That was a claim for unspecified compensation for structural repairs to the premises, and pleading poor trading conditions, (in effect) a claim for relief from payment of all rent from the day when the premises were vacated. 2 The premises are situated at the corner of Pitt and King Street, Sydney, right in the heart of the city shopping precinct, and at the time in question, commanded a rental of approximately $400,000.00 per annum. The premises are of 3 stories, with frontal tower, heritage listed and built in the 1880s. The occupancy comprised of part of the street frontage, and the whole of the first and second floors of the building. The authorised use was for the sale of prepared sandwiches and similar ready for consumption take away food from the ground floor, preparation on the first floor, and cooking on the second floor, both of these latter being limited to whatever was approved by the Council. The evidence before me established that, when trading conditions became difficult, and the Respondent fell into arrears of rent, the Respondent sought permission to carry out alterations to the first floor to render it suitable for the preparation and sale of beverages, which could be consumed on the premises along with the food purchased downstairs. The second floor was converted to offices. 3 I am satisfied from the evidence that Sunil Oranha, the Director of the Respondent company, had been associated with other companies, which had traded from the site since the mid 1990s, in similar food retailing activities. 4 It is clear from the Tribunal file and the evidence before me that the Respondent intended to mount a full defence of the claim, although it is not at all clear to me whether that amounted simply to putting the Applicant to proof, or whether it was proposed to seriously raise poor trading conditions as a defence. Be that as it may, it was somewhat surprising to find that, on the day of the hearing, there was no evidence presented other than the letter of authority which, as I have indicated earlier, virtually concedes the claim. 5 I should point out that, in the filed material, the Respondent did raise an assertion that, before vacating the premises, he introduced a Mr Verma who proposed to run a "City Convenience Stores" franchise from the site. However I am satisfied from the evidence that Mr Verma did not ever follow it up. 6 Turning to the evidence, I had the Affidavit of a Director of the Applicant Cadonia, Joseph Issac Spiegel, the Lease, and Affidavit of Leslie Houseman, solicitor for the Applicant, and two Affidavits of Danny Condell a Director of "Tim Green Commercial" an agency which was at all relevant times the managing agent of the premises. 7 Mr Spiegel, Mr Houseman and Mr Condell were available in Court for cross-examination. 8 I accept the evidence of Mr Houseman to the effect that he was not ever able to contact Mr Verma. 9 I also accept the evidence of Mr Spiegel establishing the rental arrears. 10 I further note that Mr Spiegel's Affidavit brought into evidence a 7 page letter dated 19 August 2005, signed by Sunil Orasna and John Atkinson, both Directors of the Respondent asking that, in lieu of the rental of $33,330.00 per month they be allowed to pay rental of $25,000.00 per month and indicating that such a concession would not forego any balance of rent unpaid, offering, in consideration of that concession, to fully cooperate in the marketing of the premises to another tenant and finishing with these words: "We acknowledge that we have no claims against you and no basis for any claims or disputes against you or with you. We appreciate that you have been a good landlord and that to date you have been very lenient with us in respect of the regular and consistent late payment of rent by us and the complete non-payment by us of the special rent." 11 In view of all of that I must say that I found it difficult to understand how the Respondent proposed to defend the claim, or for that matter prosecute the cross claim (matter no. 075013). 12 I should point out that the reference to special rent was to an obligation created by the Lease, for the payment of over a period of months, of arrears of rent arising out of the immediately preceding tenancy. 13 The Applicant vacated the premises on 30 November 2005, and it appears that the reinstatement of the premises was completed within the next month, the work being done by RNB Taylor Pty Limited, who claimed a payment of $9,490.91 together with GST making a total of $10,440.00. The premises were re-let to Wittners, a retailer of shoes, who commenced occupation early in January of 2006, paying a monthly rental of $29,715.50, representing a monthly difference of $3,617.83 before taking GST into account. There was an initial rent free period, and rental properly commenced on 14 May 2006, but the loss did not continue for very long because the Applicant had negotiated the sale of the premises, that was settled on 28 July 2006, so limiting the claim for damages for loss of rent once the new tenant had taken occupation, to $10,269.97. 14 There was the usual claim for replacement of locks and onsite security etc., and that came to $614.00, and I am satisfied that that is also a proper claim. 15 The Applicant also claimed a leasing fee, which was $40,000.00 plus GST. 16 I was concerned about the claim for reinstatement, and at the leasing fee, and took the opportunity of hearing oral evidence from Mr Condell. That satisfied me that the claim for reinstatement amounted to nothing more than the amount paid for the removal and disposal of the partitions and floor coverings installed by the Applicant, and that that all took place after the Applicant had been given access to the premises to remove fridges, counters and the rest of the Applicant's "movables". 17 Mr Condell also satisfied me that the leasing fee was substantially less than the industry standard. He said that, for the 6 year Lease, it would be 13.5 percent of the average annual rent, and that for this particular Lease that would have amounted to a figure of just under $52,000.00. 18 In this regard I note that, even if it were proposed that the only letting fee appropriate would be for a lease of approximately 4 years (being the balance of the term of the Lease in question), then the letting fee claimed would have been 12 percent of the average annual rent, and that, too, would have been almost $5,000.00 in excess of the letting fee claimed. 19 The Applicant waived any legal fees payable in accordance with Clause 17.7 of the Lease, being legal costs of all steps taken to remedy the Respondent's breach of the Lease. 20 The Applicant also (generously in my view) waived any claim for interest on the outstanding rental arrears and damages. 21 The claim, as proven before me, is as follows: a) Arrears of rent to 1 December 2005 - $74,516.10 b) Damages, being rental lost from 2 December 2005 to 13 May 2006 (vacancy period and rent free period) - $204,126.86. c) Damages (difference between Respondent's rent and new tenant's rent) from 14 May 2006 to 14 July 2006 - $10,269.97. d) Special rent – not paid - $21,702.52. e) Make good - $10,440.00. f) Locksmith etc. (repossession) - $614.00. g) Letting fee including GST - $44,000.00. h) Total: $365,669.45 i) Less rental bond forfeited - $220,000.00. j) Balance: $145,669.45 22 The Respondent, pursuant to section 72(1)(a) of the Retail Leases Act 1994 is to pay the Applicant by way of debt and damages the sum of $145,669.45. 23 Turning the matter of costs, I must say that I can see no reason why the Respondent should not also pay costs. I have made my thoughts clear in this regard in Advanced Underpinning Pty Limited v Voukelatos & Anor [2001] NSWADT 100. If a Respondent or Applicant uses the procedures of the Tribunal in what turns out to be an obvious and ill advised attempt to simply delaying the matter, and puts an Applicant to the expense preparing for and fully proving the matter, then they must be prepared to pay the price. I cannot think of a clearer instance of special circumstances, and clearly so indicated in the Tribunal's Practice Note 12 relating to the manner of conducting the hearing. The Respondent is to pay the Applicant's costs on a party/party basis for attendance at all directions and interlocutory proceedings, and on a full indemnity basis for preparation for and attending at the hearing including witness expenses for Mr Condell, Mr Spiegel and Mr Houseman. 24 The cross claim (matter 075013) is dismissed, no order for costs.