Administrative Decisions Tribunal New South Wales Medium Neutral Citation: Diagne v Payman [2011] NSWADT 206 Hearing dates: 13 April 2011, 15 June 2011 Decision date: 31 August 2011 Jurisdiction: Retail Leases Division Before: K Rickards, Judicial Member Decision: 1.The lessee Mohamed Diagne is to pay the lessor Farid Payman the sum of $20,403.09 in respect of arrears of rent and outgoings payable as at 15 June 2011, together with any further amount payable to the lessor as and from 15 June 2011 to the date of this decision in respect of rent or outgoings pursuant to the terms of the lease agreement between the parties. 2.The lessee Mohamed Diagne is to pay the lessor Farid Payman interest in the sum of $342.38, calculated at the prescribed rate of 8.75% per annum in respect of the specified amount set out in order 1 above for the period 15 June 2011 to the date of this decision. 3.The lessee's claims against the lessor for misleading and deceptive conduct are dismissed. 4.The lessee Mohamed Diagne is to provide a bank guarantee in favour of the lessor Farid Payman in the sum of $20,020.00 in accordance with the terms of the lease within 21 days. 5.In default of compliance with order 4 above, the lessor Farid Payman shall be entitled to immediate possession of the premises at 280 King Street Newtown. 6.The lessee's claims for orders for repair of the premises at 280 King Street Newtown are dismissed. 7.The lessor's claim for an order for immediate possession of the premises is dismissed. 8.The lessee Mohamed Diagne is to pay 50% of the costs of the lessor Farid Payman restricted to preparation for and attendance at the hearing of these proceedings, upon a party/party basis, as agreed or assessed. Catchwords: Settlement of dispute; misleading and deceptive conduct; claim for outgoings Legislation Cited: Retail Leases Act 1994; Administrative Decisions Tribunal Act 1997 Cases Cited: Davis v Sydney Harbour Foreshore Authority (No.2) [2009] NSWADT 28 Australian Broadcasting Commission v Australasian Performing Right Association Ltd [1973] 129 CLR 99; Kyluk v The Bike Mason Pty Ltd & anor. [2007] NSWADT 96 Category: Principal judgment Parties: Mohamed Diagne (Applicant in 105172, Respondent in 115029) Farid Payman (Respondent in 105172, Applicant in 115029) Representation: Counsel K Ginges (Diagne) A Di Francesco (Payman) Nicholas Angelos & Co (Payman) File Number(s): 105172, 115029 REasons for decision Background 1The retail shop premises which are the subject of these proceedings are located at 280 King Street Newtown ("the premises"). The owner of the premises is Mr Farid Payman ("the lessor"), who has leased the premises to Mr Mohamed Diagne ("the lessee") for a period of in excess of 20 years. Over the course of this period, Mr Diagne has operated a business at the premises known as the "Kilimanjaro African Restaurant". 2Despite the longevity of their association, the relationship between the parties has deteriorated over recent years, and has resulted in a number of applications coming before this Tribunal. 3Although reference was made within the lessee's submissions to a third set of proceedings bearing number 105163, those proceedings were commenced by the lessor for the appointment of an independent valuer to undertake a market rent review. The Tribunal duly appointed a valuer Robert Farrell from Cushman & Wakefield, his report dated 4 April 2011 ("the Cushman & Wakefield report") was subsequently provided to the parties, and was not the subject of any subsequent challenge. In general terms, the effect of the Cushman & Wakefield valuation report was to retrospectively reduce the rent payable in respect of the premises; the extent to which the retrospective period of rent reduction should apply in circumstances where the parties had previously entered into a settlement agreement which included the rent claimed as payable and outstanding in respect of the premises, is an issue in dispute between the parties which is dealt with later within this decision. 4During the course of the previous disputes between the parties concerning rent and outgoings, a settlement agreement was reached following mediation in August 2009. Similar issues were again then agitated between the parties and further proceedings were then commenced before this Tribunal, which were ultimately discontinued pursuant to the terms of a further settlement agreement achieved after mediation on 10 June 2010. Another issue in dispute in the present proceedings is the extent to which either or both of these agreements applied to any outstanding amounts for rent or outgoings due at the time that each agreement was made. 5The lessee's application in proceedings 105172 originally sought an order seeking payment of damages claimed to arise from misleading and deceptive conduct by the lessor. At the commencement of the hearing, counsel for the lessee advised that there would not be any claim for actual damages said to arise from any such conduct by or on behalf of the lessor. The lessee then gave evidence and was cross examined during the first day of the hearing. At the commencement of the second day of hearing, counsel for the lessee advised the Tribunal that the claim alleging misleading and deceptive conduct on the part of the lessor was not being pressed. 6The lessee changed legal representation and also represented himself during the period of time following on from when his application was filed. By the time that the hearing commenced, it was confirmed by counsel appearing upon his behalf that claims were also being made upon his behalf for orders in respect of excessive payment of outgoings, excessive payment of rent and rectification of disrepair at the premises. These changes to the lessee's application, although not previously specified within any formally amended application, were not objected to by the lessor. 7The above approach taken on behalf of the lessor, and also by the Tribunal in proceeding to a hearing of the lessee's changed application, accords with the intention of the legislature, as set out within the provisions of section 73(3) of the Administrative Decisions Tribunal Act 1997, that the Tribunal should "act with as little formality as the circumstances of the case permit and according to equity, good conscience and the substantial merits of the case without regard to technicalities or legal forms." 8Notwithstanding the advice given on behalf of the lessee on the second day of the hearing that the claim for misleading and deceptive conduct was not now being pressed, it should be noted that, having considered the lessee's concluded evidence, it is the Tribunal's view that this claim was not supported by the evidence. The right of any party to a retail shop lease to make such a claim is provided by sections 62D and 62E of the Retail Leases Act 1994 ("the Act"): "62D misleading or deceptive conduct in connection with retail leases A party to a retail shop lease must not, in connection with the lease, engage in conduct that is misleading or deceptive to another party to the lease or that is likely to mislead to deceive another party to the lease." "62E Right to compensation A party or former party to a retail shop lease who suffers loss or damage by reason of misleading or deceptive conduct of another party may recover the amount of the loss or damage by lodging a claim against the other party under section 71." 9The test as to whether conduct is misleading or deceptive, or is likely to mislead or deceive is an objective one; see Davis v Sydney Harbour Foreshore Authority (No 2) [2009] NSWADT 276 at paragraph 28. There is no evidence which satisfactorily establishes that the lessor did anything which could fairly and objectively be said to be misleading or deceptive in relation to rent or land tax payable and, although the insurance arrangement between the parties in respect of the property is somewhat unclear both in its coverage and effect, it cannot be objectively determined that the lessor has been deceptive or misleading toward the lessee in relation to the insurance, or that the lessee has been caused actual loss by reason of such conduct. 10The hearing of these proceedings took place on 13 April 2011 and 15 June 2011. Evidence was taken from the lessor, the lessee and from the lessor's agent Ms Athena Tsiolis, together with various annexed documents including the lease, invoices, correspondence between the parties and their solicitors, and the settlement agreements referred to above. It is not proposed to undertake a detailed review of all of this evidence but rather to refer to relevant aspects which have been emphasised by the parties and which are relied upon to support their respective positions concerning the issues raised. The Tribunal has also been assisted by two sets of submissions filed respectively on behalf of each of the parties. The Mediation Agreements 11When the form and content of the two settlement agreements reached between the parties in August 2009 and on 10 June 2010 are considered, it can be seen that the same broad issues in dispute were covered by each agreement and that the June 2010 agreement subsumes the earlier agreement. Despite this, the lessor contends that the earlier August 2009 agreement is still relevant to the present proceedings because, within that agreement, the lessee agreed to provide replacement security under the lease which has never in fact been provided, and also because this agreement dealt with previous rent and outgoings which had not been paid, which illustrates a "history of non compliance with the lease" and supports the application now being made by the lessor that the lessee should vacate the premises. It is also submitted that this failure to comply with previous agreements reflects poorly upon the lessee's credibility which is submitted to be "in issue in these proceedings" (see paragraphs 4.2 and 4.3 of the initial submissions filed on behalf of the lessor). 12Having considered all of the evidence, and given the findings within this decision in relation to the scope and effect of the June 2010 settlement agreement, although the Tribunal is not satisfied that the lessee was a particularly credible witness, especially relating to his evidence concerning communications with the lessor and the agent about outgoings and repairs, the extent of the lessee's credibility does not significantly impact upon determination of the relevant issues in dispute in these proceedings. Accordingly, consideration of the August 2009 agreement is of little real assistance. 13As outlined above, the settlement agreement made on 10 June 2010 was reached after mediation, and during a time when further proceedings had been commenced in this Tribunal. On behalf of the lessee, it was submitted that this June 2010 agreement is a contract like any other and that the usual rules of construction should apply to interpreting the document; in particular, it was also submitted that the terms of the concluded bargain are set out within the agreement, and that recourse should be had to extrinsic material only where there is ambiguity in the construction of the terms of the agreement or where it is evidence of the objective background. In support of this submission, a number of authorities were referred to which stemmed from the judgment of Gibbs J in Australian Broadcasting Commission v Australasian Performing Right Association Ltd [1973] 129 CLR 99 ("ABC") where, at paragraph 3 of the judgment, it is said: (3) "It is trite law that the primary duty of a court in construing a written contract is to endeavour to discover the intention of the parties from the words of the instrument in which the contract is embodied. Of course the whole of the instrument has to be considered, since the meaning of any one part of it may be revealed by other parts, and the words of every clause must if possible be construed so as to render them all harmonious one with another. If the words used are unambiguous the court must give effect to them, notwithstanding that the result was appear capricious or unreasonable, and notwithstanding that it may be guessed or suspected that the parties intended something different. The court has no power to remake or amend a contract for the purpose of avoiding a result which is considered to be inconvenient or unjust. On the other hand, if the language is open to two constructions, that will be preferred which will avoid consequence which appear to be capricious, unreasonable, inconvenient or unjust, even though the construction adopted is not the most obvious or the most dramatically accurate ..." 14Neither party raised the issue as to whether or not the agreement entered into on 10 June 2010 is inadmissible pursuant to section 69 of the RL Act which provides as follows: "Statements Made During Mediation Not Admissible Any statement or admission made in the course of the mediation of a retail tenancy dispute or other dispute or matter referred to in section 65(1)(a1) pursuant to arrangements made by the Registrar under this Part is not admissible at a hearing of a claim under Division 3 or in any other legal proceeding." 15The purpose of section 69 is to facilitate and encourage frank and open settlement discussions during the course of mediation without fear of any admission or concession being later used to disadvantage a party in the event that mediation is unsuccessful. This section confers statutory protection to the "without prejudice" discussions held during the course of mediation; however, as was held in Kyluk Pty Ltd v The Bike Mason Pty Ltd and Another [2007] NSWADT 96 a settlement agreement reached after mediation does not fall within the ambit of section 69 and accordingly is able to be considered in relation to an application for a costs order following hearing. Similarly, as is the case here, a settlement agreement entered into by the parties which records the terms agreed following a mediation process is able to be taken into account for the purpose of determining any relevant disputed issue in subsequent proceedings. 16Of particular relevance are the questions of: exactly what areas of dispute between the parties were captured by the agreement reached on 10 June 2010, and; what effect that agreement has upon rent payable by the lessee in the light of the subsequent market rent valuation contained within the Cushman & Wakefield report. 17Adopting the correct approach to consideration of the June 2010 settlement agreement, as set out by the High Court in ABC, the result is not exactly that which either party urges upon the Tribunal. 18The settlement agreement made on 10 June 2010 consists of two sections; the first section is entitled "Background" and has three paragraphs bearing the letters "A", "B" and "C", and the second section contains five consecutively numbered paragraphs. These five numbered "operative" sections must be considered within the context of paragraph C which reads: "The parties agreed to resolve all matters between them relating to rent and outgoings in respect of premises 280 King Street Newtown." 19The lessee contends that the recital within paragraph 1 of the agreement, that payment of a sum of $46,000 by the lessee would be "in full settlement and satisfaction of all claims made by Payman for rent and outgoings in respect of the leased premises up to the date of this agreement ..." , means that the agreement only covers all rent and outgoings that had actually been notified to the lessee as being claimed as at 10 June 2010. Conversely, the lessor claims that the meaning of the agreement is that the agreed payment would be in satisfaction of all rent and outgoings, whether claimed or not, but only up to the date of the deed being 10 June 2010. Neither of these submissions properly reflect the combined meaning of paragraph C and paragraph 1 of the document; it is clear that all matters relating to rent and outgoings between the parties as at the date of the deed, whether or not the subject of any formal claim, would be resolved and covered by the actions undertaken by the parties pursuant to the agreement. 20As a consequence, the Tribunal finds that the claims pursuant to the terms of the lease which had been made previously by the lessor, that rent be paid in advance up to 18 July 2010 and that land tax for the 2010 calendar year be paid, were covered by the terms of the June 2010 settlement agreement. 21Paragraph 5 of the June 2010 settlement agreement contained an acknowledgement by the lessor that the lessee had properly exercised his option to renew the lease. This renewal of the lease subsequently led to a further dispute between the parties as to what the applicable market rent figure should be for the new term. As a result, the lessor filed an application with the Tribunal for the appointment of a valuer, which then resulted in the Cushman & Wakefield report. This report did not, upon the evidence before the Tribunal, follow on from any unreasonable delay or other unreasonable conduct on the part of the lessor. The new term of the lease had commenced in November 2009, and the Cushman & Wakefield report had the effect of determining that the rent payable by the lessee for the period from November 2009 was lower than the amount which the lessee had actually been paying during the period before the settlement agreement was made on 10 June 2010. 22Of course, it would have been open to the parties to agree upon the amount of rent payable for the new term of the lease within the terms of the settlement agreement, but this was not done. Accordingly, it was clearly within the knowledge and apprehension of the parties that the issue of exactly what this figure would be, was still very much unresolved and that it might eventually need to be determined by an independent valuer in the event of disagreement. The settlement agreement was entered into upon this basis. The lessee cannot later come back, in such circumstances, to seek to revise the concluded terms of the settlement agreement made on 10 June 2010. 23It follows that the Cushman & Wakefield rent valuation figure can only be applied to rent payable after 18 July 2010. Notwithstanding the submission of the lessee that a somewhat higher credit figure in favour of the lessee is applicable against the amount of rent arrears still presently payable, paragraph 35.2 within the lessor's initial submissions sets out the correct calculation which results in a credit amount of $6,466.50 to be applied in favour of the lessee. In addition, in accordance with the lessee's submissions, given the stated terms of the 2010 settlement agreement, a credit should also be given to the lessee for the sum of $3,007.50 for the double-counting of 6 months' land tax which occurred by reason of the subsequent imposition of half of the land tax due for 2010 within the charges raised in the following financial year. The Bank Guarantee 24The terms of both of the settlement agreements between the parties, as well as the terms of the original lease agreement between the parties, provided for the provision of a bank guarantee by the lessee. There has been no satisfactory explanation given by the lessee as to why this has not occurred, notwithstanding the terms of these various documents. Given the uncertainty surrounding the amounts payable for rent, land tax and insurance which arose between the parties, the lessee's failure to pay the guarantee can perhaps be understood to a limited degree, but this failure cannot be justified, nor should it be permitted to continue. In the circumstances, an opportunity will be given to the lessee to remedy this failure promptly, failing which serious consequences should ensue. Insurance 25The state of evidence concerning the amount of insurance payable by the lessee as and from 10 June 2010 is entirely unclear. There is, quite simply, no reliable evidence provided by either party to set out exactly what should have been payable and what should continue to be payable. What can be said, based upon scrutiny of policy documents which show the type and extent of insurance coverage obtained by the lessor, is that he has treated the entire premium as being payable by the lessee when in fact the premium covers risks which are not those of the lessee and for which the lessee should not pay; specifically, there is insurance for the building itself, as well as what is commonly described as "landlord's insurance" against the risk of non payment of rent and against other risks associated with a commercial tenant. The lessor has not satisfactorily explained the inconsistencies and ambiguities within the material presented. On the other hand, the lessee has obtained quotations from an insurance company and from a broker which are widely divergent and which are based upon demonstrably incorrect criteria. Notwithstanding these vagaries, it is the Tribunal's assessment that, given the period of time which has transpired since the premium has been charged to the lessee, he should receive a credit for the lesser claimed sum of $1,057.47, which is derived from the not entirely comparable GIO policy quotation obtained by him. Recoverability of Outgoings 26A considerable part of the submissions made on behalf of the parties was directed toward the obligations which a lessor has pursuant to sections 27 to 29 of the Act. Contrary to the lessee's contentions, where a lessee has not been given an outgoings estimate or statement, that lessee is not relieved from liability to pay outgoings; see the comments of the Appeal Panel in Wanice Pty Ltd v Bocove Pty Limited [2003] NSWADTAP24 at paragraph 32: "(32) The Panel considers that neither in s22, nor in section 27 or section 28, can language be found requiring that the obligations imposed on a lessor by the latter two sections must be treated as obligations arising under section 22, so as to produce the result that non compliance precludes recovery of the outgoings stipulated in the lease. Similarly, for the reasons advanced by the Appellant and, indeed, put forward in Cronulla Newsagency Pty Ltd v Pizzata and Others [2002] NSWADT 121, section 27 and section 28 should not be interpreted as impliedly establishing conditions precedent to the recovery of outgoings. In this connection, the contrast between these two sections and other sections of the Act (including section 22) in which the consequences of non compliance are clearly spelt out is, in the panel's opinion, of compelling importance." 27The effect of section 28A of the RL Act is that a lessee is entitled to withhold payment of outgoings if a written estimate required under section 27, or an outgoings statement as required under section 28, have not been provided within 10 working days following written request; however, the withheld contributions or payments must then be made within 28 days after the date that such estimate or statement has been provided, and the lessor cannot recover interest or late payment charges. Repairs 28Having reviewed the evidence, the Tribunal considers that the lessee has, very much at the "heel of the hunt", sought to utilise selected comments made within the Cushman & Wakefield report concerning the condition of the premises in support of orders that the lessor now effect repairs to the premises. 29In April 2010, the lessee entered into renewal of the lease agreement as and from November 2009 without addressing any of the repair issues which have now been raised during the course of these proceedings and which quite clearly would have been in existence at that time. The lessee then made no written request for repair or rectification of damage during the subsequent period up to the present time, apart from what may be drawn from the contents of his filed affidavit material. 30The contentions made by the lessee as to repair also overlook the requirements of the lease that the lessee shall be responsible for plumbing repairs and for maintenance and decoration of the shop front. 31There is also no evidence which satisfactorily establishes that the lessor has failed, in accordance with his obligations under clause 7.1 of the lease, to maintain the roof, ceiling, external walls and doors, and the floors of the property, in a good condition and serviceable repair, or to maintain the property in a structurally sound condition and to maintain essential services. 32In the circumstances, the lessee's application for orders to repair the premises is dismissed. Costs 33Both parties have made submissions as to the costs orders which should be made. 34Section 88 of the Administrative Decisions Tribunal Act 1997 provides that parties to proceedings before the Tribunal are to bear their own costs unless the Tribunal is satisfied, having regard to a number of specified factors, that it is fair to award costs against one or more of the parties. Although section 88 (1)(e) permits the Tribunal a wide discretion to take into account any matter which it considers relevant in determining whether it is fair to make a costs order, a number of specific factors are also set out within the section which are required to be taken into account by the Tribunal. 35There are various unsatisfactory aspects of the lessee's conduct in relation to the present dispute which include his failure to arrange a bank guarantee or payment of a security deposit and the making a claim for misleading and deceptive conduct which clearly lacked merit. In addition, the Tribunal is satisfied that the lessee failed, without adequate explanation, to fully comply with the interim orders made by the Tribunal on 18 April 2011 or with the terms of the April 2010 settlement agreement. On the other hand, some components of the lessor's claim have not succeeded, and at least some of the dispute which has led to these proceedings originates from unclear and non-compliant procedures relating to outgoings due under the lease and an unjustified amount claimed against the lessee for insurance. On balance, the above features of the lessee's conduct of the proceedings render it fair that he bear a proportion of the lessor's costs, but not the entirety of those costs. It is considered fair in the circumstances that the lessee pay 50% of the lessor's costs restricted to preparation for and attendance at the hearing, as agreed or assessed, upon a party/party basis. ORDERS 1.The lessee Mohamed Diagne is to pay the lessor Farid Payman the sum of $20,403.09 in respect of arrears of rent and outgoings payable as at 15 June 2011, together with any further amount payable to the lessor as and from 15 June 2011 to the date of this decision in respect of rent or outgoings pursuant to the terms of the lease agreement between the parties. 2.The lessee Mohamed Diagne is to pay the lessor Farid Payman interest in the sum of $342.38, calculated at the prescribed rate of 8.75% per annum in respect of the specified amount set out in order 1 above for the period 15 June 2011 to the date of this decision. 3.The lessee's claims against the lessor for misleading and deceptive conduct are dismissed. 4.The lessee Mohamed Diagne is to provide a bank guarantee in favour of the lessor Farid Payman in the sum of $20,020.00 in accordance with the terms of the lease within 21 days. 5.In default of compliance with order 4 above, the lessor Farid Payman shall be entitled to immediate possession of the premises at 280 King Street Newtown. 6.The lessee's claims for orders for repair of the premises at 280 King Street Newtown are dismissed. 7.The lessor's claim for an order for immediate possession of the premises is dismissed. 8.The lessee Mohamed Diagne is to pay 50% of the costs of the lessor Farid Payman restricted to preparation for and attendance at the hearing of these proceedings, upon a party/party basis, as agreed or assessed. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 31 August 2011