Administrative Decisions Tribunal New South Wales Medium Neutral Citation: Blue Ink (Australia) Pty Ltd v Martyn [2011] NSWADT 247 Hearing dates: On the papers Decision date: 01 November 2011 Before: Deputy President David Patten Decision: 1.The Respondent to pay to the Applicants the sum of $15,119.36. 2.No order as to costs. Catchwords: Whether lease terminated by lessors breach - abatement of rent Legislation Cited: Administrative Decisions Tribunal Act Retail Leases Act Category: Principal judgment Parties: Blue Ink (Australia) Pty Ltd and Peter William Coulter and Maureen Therese O'Brien - applicants. Nichole Mary Martyn - respondent. Representation: Pickering Priestley (Applicant) Conroy Stewart Spagnolo (Respondent) File Number(s): 115062 REasons for decision (Deputy President David Patten) 1The Applicants in this matter, which was commenced on 11 May 2011, seek orders for the payment of rent, outgoings, and other monies said to be due under a lease of premises 7 Clyde Street Maclean (the premises). It was ordered that the matter be decided on the papers, such papers comprising the application for original decision; the affidavit of one of the Applicants Peter William Coulter, sworn 19 July 2011; the affidavit of the Respondent Nichole Mary Martyn, sworn 8 August 2011; the affidavit of Gloria Biddle sworn 8 August 2011; the affidavit of Marianne Potter sworn 9 August 2011 and the respective submissions of the parties. 2The power to determine proceedings by considering documents and other material lodged with the Tribunal without holding a hearing is contained in s76 of the Administrative Decisions Tribunal Act (ADTA). In this case, the Judicial Member who on 30 June ordered that the matter be decided on the papers, added the caveat that the member dealing with the matter could determine, in effect, that a hearing was necessary. I have found it appropriate to deal with the matter without such a hearing as there seems to be little dispute on the facts which, for the most part, are evidenced by documents, the authenticity of which is not disputed. 3By registered lease (the lease) AE 512 490W dated 1 December 2008 Blue Ink (Australia) Pty Ltd (Blue Ink) leased to the Respondent the premises for a term of 2 years, commencing 8 December 2008 and terminating on 7 December 2010. There was an option for renewal for a further term of 2 years. 4The lease described the premises by reference only to the Folio Identifier 8B/382383. Clause 6 contained these provisions in respect of the use of the premises: "Clause 6 Use How must the property be used? 6.1 The lessee must - 6.1.1 use the property for the purpose stated in item 17 in the schedule and not for any other purpose; 6.1.2 open for business at times usual for a business of the kind conducted by the lessee;" 5Item 17 in the schedule read "Permitted use: Hairdresser, Beauty Salon; Massages and Gift Shop". 6On the face of it, the lease constituted a retail shop lease within s3 of the Retail Leases Act (the Act) as hairdressers, beauty shops and gift shops are included in the Schedule 1 list of retail shop businesses. The parties seem to have accepted that this was so as they sought to overcome the impact of s16 of the Act by procuring a certificate by a solicitor pursuant to s 16 (3). Other relevant provision in the lease include: CLAUSE 5 MONEY What money must the lessee pay? 5.1 The lessee must pay to the lessor or as the lessor directs- 5.1.1 the rent stated in item 13A in the schedule; 5.1.2 the share stated in item 14A in the schedule of those outgoings stated in item 14B in the schedule; 5.1.3 the reasonable cost to the lessor of remedying a default by the lessee; ....................... 5.1.5 interest on these moneys at the rate stated in item 15 in the schedule .when payment is more than 14 days overdue, calculated from the due date to the date of payment; ................................ 5.1.7 stamp duty on this lease (payable on delivery to the lessor's solicitor of the executed lease) if not previously paid by the lessee to the Office of State Revenue; 5.1.8 if the lessee defaults, the lessor's reasonable legal costs relating to the default; ........................................ 5.1.lO GST as provided for in clause 15. CLAUSE 7 CONDITION AND REPAIRS Who is to repair the property? 7.1 The lessor must ~ 7.1.1 maintain in a state of good condition and serviceable repair the roof, the ceiling, the external walls and external doors and associated door jambs, and the floors of the property and must fix structural defects; 7.1.2 maintain the property in a structurally sound condition; and 7.1.3 maintain essential services. 7.2 The lessee must otherwise maintain the property in its condition at the commencement date and promptly do repairs needed to keep it in that condition but the lessee does not have to - 7.2.1 alter or improve the property; or 7.2.2 fix structural defects; or 7.2.3 repair fair wear and tear. CLAUSE 12 FORFEITURE AND END OF LEASE 12.2 The lessor can enter and take possession of the property or demand possession of the property if- 12.2.1 the lessee has repudiated this lease; or 12.2.2 rent or any other money due under this lease is 14 days overdue for payment; 12.5 Essential terms of this lease include- 12.5.1 the obligation to pay rent not later than 14 days after the due date for payment of each periodic installment (and this Obligation stays essential even if the lessor, from time to time, accepted late payment); 12.5.2 the Obligations of the lessee in clause 5.1.2 (dealing with outgoings);" 7Schedule item 13A stipulated a rent of $18,720 a year, payable by monthly installments inclusive of GST of $1,716; annual variations were linked to the Consumer Price Index. 8Schedule item 14A stipulated at 100% the lessee's share of outgoings. 9Mr Coulter annexed to his affidavit a copy of the Disclosure Statement required by s11 of the Act and deposed that it was forwarded to the Respondent before the lease was entered into. That evidence was unchallenged by any evidence relied upon by the Respondent and, indeed, receipt of the Disclosure Statement was expressly acknowledged by letter dated 25 November 2008 of the Respondent's then solicitors Daniel Butt & Co. 10According to the affidavit, Blue Ink transferred its interest in the premises to Mr Coulter and Maureen Therese O'Brien as trustees for the Sands Unit Trust on 29 September 2009. At about that time he notified the Respondent of the transfer, delivered to her a deposit book for rent to be paid direct to Sands Unit Trust, and provided her with bank details by email. 11Mr Coulter annexed to his affidavit copies of emails passing between himself and the Respondent in the period between 8 February 2009 and 23 May 2010. It is unnecessary to refer to all those emails which concern defaults by the Respondent in paying rent punctually; the reasons given by her for such defaults; her complaints about a leaking roof; Mr Coulter's steps to remedy that complaint; and his attempts to assist her in formulating a program to bring the rent up to date. Some of them are set out below: "From: Nichole Martyn Sent Monday 8 February 2010 To: Peter Coulter Hi Peter Had assessor in to look at roof last week have had leaks again over the weekend. Rent will be to you by Friday 12 th and will be back on track by next month. Could you advise abut roof. Regards, Nichole .................................... From: Peter Coulter Sent Monday 8 February 2010 To: Nicole Martyn Hi Nichole As this thing is being drawn out by the insurance company I've asked the company that did the roof insulation to contact you about getting the leaks fixed as soon as possible. ............................................ From: Nichole Martyn Sent Monday 8 February 2010 To: Peter Coulter Thank you Peter, Nichole. ..................... From: Nichole Martyn Sent Friday 12 February 2010 To: Peter Coulter Hi Peter, I will not be able to deposit full amount today in rent I again apologize for the delay. Am hoping to have paid by Wed. I have not heard anything from roof guys. Regards Nichole. ......................................... From: Nichole Martyn Sent Monday 24 February 2010 To: Peter Coulter Hi Peter I am sorry the rent did not go in today as promised the truth is I can not see me getting the rent back to a month in advance in the near future I realize you have been very patient with this matter. The business is still growing I have had some personal circumstances that has made me have to restructure. I propose that I pay rent in full on the 8 th March $1,738.15 as well as rates due on 28 th Feb $454.00 If I could have one month to get back on my feet and in April start getting the rent back to in advance. Regards Nichole .................................... From: Peter Coulter Sent Monday 24 February 2010 To: Nichole Martyn Hi Nichole I can wear that as long as you're up front with me and you genuinely think you can be back to a month in advance by April. Also please remember Business Insurance second quarter invoice of $250 is due on 8 th March. I hope things improve but if any other unforeseen circumstances arise please let me know at once. .................................... From: Nichole Martyn Sent Monday 25 February 2010 To: Peter Coulter Thank you for your understanding I am aware of insurance Regards Nichole. .................................. From: Peter Coulter Sent Monday 17 March 2010 To: Nichole Martyn Hi Nichole Thinking about your situation. We probably should have a meeting next week to map out a schedule for you to get back on track. Is there a time next that would suit. ...................................... From: Nichole Martyn Sent Monday 8 February To: Peter Coulter Hi Peter, Monday morning at 8.30 would suit me and thank you for taking the time to work with me this week has been much better. Regards Nichole ...................................... From: Peter Coulter Sent Monday 18 March 2010 To: Nichole Martyn See you 8.30 Monday Clyde St. .................................. From: Nichole Martyn Sent Monday 23 March 2010 To: Peter Coulter "Hi Peter, As agreed Rent in full will be paid on the 8th April to then catch up on arrears I will deposit $144.84 each w eek commencing the 15th of April as well as insure that rent is paid on due date on the 8th of each month. The only thing that concerns me is the $500 due for insurance in June I will do my best to pay this on time. All is going well I will be back on track in Sept. Contact names and no are as follows for other therapists - Amanda Glen, counciller- 045801662 Suzanne Crae - Beautician changing no at moment will notify you of new no. Regards Nichole. PS - can you let me know what is going on with roof they are saying big rain next month." ............................................... From: Nichole Martyn Sent Monday 24 March 2010 To: Peter Coulter Hi Peter, I will commit to have the insurance paid. I have inquired about direct debit to your national account and as I bank with CBA there is a heavty fee for doing it that way I will make deposits to your account for the arrears weekly from the 15th April and would appreciate an answer on the roof situation as soon as possible as you have been very understanding with the rent arrears I have also been understanding with the fact you would like insurance to p ay for the new roof that the building needs before a situation arrises that could c ompromise both our insurance policies. Regards Nichole." 12On or about 27 May 2010, the Applicants received the letter of that date from Clarence Coast Law: "27 May 2010 The Manager Blue Ink (Australia) Pty Ltd CI- Mr and Mrs Coulter 3 Angourie Street Y AMBA NSW 2464 Dear Mr and Mrs Coulter Re: Lease of Premises - 7 Clyde Street, Maclean We advise that we have been consulted by Ms Nichole Martyn and she has instructed us that she hereby gives you notice of the termination of the Lease dated 1 December, 2008 as at 8 August, 2010. The grounds of this termination are as follows:- 1. The premises have been used partly as residential premises and accordingly the Retail Leases Act document which constitutes the Lease is inappropriate and of no effect. 2, There do not appear to have been any Disclosure Statements, as required by the Retail Leases Act, issued to our client and thus the Lease is void under the Act. 3. In November, 2009 there was severe leaking from the roof causing damage and inconvenience to our client and her business and despite frequent requests for repairs to be effected and assurances by you that such work will be done, the repairs of the roof have still not been carried out in contravention of Clause 8.2.4 of the Lease. 4, Furthermore you have failed to repair the cracked concrete at the entrance to the property and properly secure windows to the property. As stated notice is accordingly given of the termination of the lease as at 8 August, 2010. Our client will co-operate if given reasonable notice of inspections required by prospective future tenants. Yours faithfully Robert C. Thompson" 13Mr Coulter replied by email sent on 1 June 2010 at 1.08pm: "Afternoon Mr Thompson Re your letter dated 27lh May 2010 1. Nichole Martyn has a Commercial lease for 7 Clyde St. If she has been illegally using the property then she will have a question to answer from my solicitor. 2. A disclosure statement was posted to both Daniel Butt Solicitor and Ms Martyn on 21 Nov 200 8 3. In relation to roof repairs I have done everything i n my power to initially have the whole roof replaced and when that was becoming longwinded I tried to expediate an interim roof repair. 4. At Ms Martyn's request I replaced a concrete footpath, and that is the only piece of concrete I have been asked to attend to and she thanked me for my rapid response to her request. One of my responsibilities as a landlord is to maintain the security of the building. Even though the windows were adequately secure I still had additional locks installed at Ms Martyn's request. Additionally I had another security door fitted. Every request Ms Martyn has made has been attended to expediently. I do admit that this minor roof repair has taken longer than I had hoped but I have been trying my best to resolve the problem in the best interests of my tenant. Might I also add I've been leaving messages for Ms Martyn to phone me regarding the roof for over 2 weeks and she would not return my call. 5. Ms Martyn has been getting further and further behind with her rent. I have been incredibly lenient with her. I arranged a meeting with Ms Martyn on 22 nd March at 7 Clyde St to negotiate a schedule for her to catch up on outstanding rent and Insurance payments. Please note that her lease requires her to be responsible for the cost of insurance. When she couldn't afford to pay the due amount On 20th Nov 2009, I offered, and she agreed to pay me quarterly amounts of $ 250, due 8th /12/09 , which she paid on 21/12/09 , and due 8/3/10, 8/6110, and 8/9/10 all of which remain outstanding. 6. I am astounded and extremely disappointed that after having been so lenient with Ms Martyn she is attempting to muddy my name in an attempt to squirm out of a legally binding Lease. She knows I 'm approachable, all she had to do was phone me to discuss her predicament and the problem could have been easily solved. Now I find myself in a situation of having to defend my integrity which I intend to do rigorously. 7.1 have included email communication between myself and Ms Martyn in support of all previous points. 8. Ms Martyn as of 8th June has debt of $ 5095. 41 which is legally due and payable on that date. Please see attached spreadsheet. 9. My agent will be requiring access to the property. Regards Ps If Ms Martyn would like to negotiate an early completion of her lease please suggest she might like to contact me otherwise the lease stands and I will be pursuing the debt. Peter Coulter." 14According to Mr Coulter's affidavit, the Respondent vacated the premises in or about August 2010 having paid no rent since about February. He said that despite "reasonable steps" to re-lease the premises he was unable to do so before the lease expired. 15The affidavit of the Respondent asserts that in about May 2009, there was a water leak "in the front bedroom of the premises" which she reported to Mr Coulter who "had it repaired". Nonetheless, she claimed that a water stain on the ceiling continued to enlarge and that in November 2009 following a storm, "there was a severe leak in the main part of the salon where I operated my hairdressing business". She said that although she complained about this to Mr Coulter and a tradesman inspected the premises, nothing further occurred. She collected rain water which penetrated the roof in a bucket. She said that the water penetration problem continue intermittently until she vacated the premises in August 2010. According to her affidavit she complained to Mr Coulter by telephone on at least 10 occasions in the first 6 months of 2010. 16Annexed to the Respondent's affidavit was a document from Excell Roofing Pty Ltd dated 25 May 2010, in these terms: " Job Address - 7 Clyde St Maclean Report - the metal roof at above address is not in sound water proof condition. The roof has a large amount of storm damage including large dents and scratches, numerous sections of the roof sheets and ridge capping have become loose and lifting allowing the roof to leak. There is also a lot of rust patches and rust holes. The entire roof needs to be removed and replaced with new roof sheeting and flashings. 17She claimed in the affidavit that leaking of water into the premises often caused her to stop work and on occasions to close her salon. She said that her ability to operate and develop her business was severely restricted and that it was this that caused her to terminate the lease. 18Ms Biddle, who apparently worked for the Respondent, deposed to an occasion in November 2009 when a power failure occurred "caused by a gross water leak in the roof of the premises". At the time she said that a client was undergoing treatment. She also said that the roof leaked, "basically every time we had had heavy rain". 19Ms Potter, apparently a client of the Respondent, said that once during an appointment in November 2009 there was a storm and heavy rain. She observed water coming out of an overhead light. She directed this to the Respondent's attention and saw her place a bucket to catch the dripping water. 20On behalf of the Applicant it was submitted that the evidence did not establish more than a minor leak, which would only have had a minor effect on the business. It was pointed out that the Respondent was constantly in default with the payment of rent and it was contended that she was using the water leak as an excuse for avoiding her obligations when her real intention was to move her business to another town. According to the Applicant's submission I should find that steps were taken to locate the source of the leak and repair it as soon as the leak was reported, and that it was repaired to the Respondent's satisfaction in June 2009. It was not until February 2010 that a further complaint was made, which led to inspection by Excell Roofing and a recommendation that the entire roof be replaced. 21In my opinion, the evidence does not establish the entitlement of the respondent to terminate the lease as claimed in the letter of her solicitors dated 27 May 2010. As to the first alleged ground of termination, there is slight evidence of some residential use in the affidavit of Ms Biddle but such evidence does not prevent the lease being a retail shop lease within s3 of the Act. The only use or purpose permitted by the lease was a "listed business" and the evidence suggests that if not wholly, at least predominately, that was the purpose to which the premises were put. 22As to the allegation that no Disclosure Statement was given, the unchallenged evidence of Mr Coulter is to the contrary. As is his evidence in relation to the allegation that the lessor failed to repair cracked concrete. 23The allegation of a leaking roof is of more significance. On the face of it the leaking roof evidenced a breach by the Applicants of their obligation under the lease to maintain the roof "in a state of good condition and serviceable repair". Moreover, the evidence of the Respondent coupled with the evidence of Ms Biddle and Ms Potter and the evidence that the roof required replacement suggests to me that it was not a minor matter but rather a significant defect which did impact upon the Respondent's business. However, breach of the Applicants' obligation, while it may sound in damages, would not give the Respondent the right to terminate the lease unless she could also show that the Applicants regarded themselves as no longer bound by it or, in other words, by their conduct had repudiated the lease. The evidence falls far short of this, as it appears that the Applicants took action to repair or replace the roof within a reasonable time. For the same reason the Respondent was not entitled to exercise the statutory right of termination given by s36(1)(d) of the Act. 24Accordingly, the solicitors' letter of 27 May 2010 constituted an unlawful repudiation of the lease by the Respondent. As it seems, the Applicants chose not to accept the repudiation but instead treated the lease as still on foot until it expired on 7 December 2010. In the meantime, they sought to minimize their loss by seeking, without success, to find a new lessee. They also replaced the leaking roof. 25The evidence does, however, I think, establish an entitlement of the Respondent to an abatement of rent in accordance with s36(1)(b) of the Act and that abatement would extend to outgoings. In my view, within that provision the premises were damaged and usability was diminished. Accordingly, there should be an abatement up to the time the Respondent vacated the premises on 8 August 2010. It is impossible to calculate this with any precision but doing the best I can I think an abatement of 15% would be appropriate. 26I think that the abatement should apply for a period of 8 months, that is from the water damage in November 2009 to date of vacation. 27The amount claimed should also, I think, be reduced in respect of the period while the roof was replaced which would have rendered the premises unusable. This occurred, according to the Respondent's affidavit, in September or October 2010. Although there was no evidence on the subject, I think it reasonable to reduce the Applicants' claim by $1,000 on this account. The work was substantial, involving removal of existing roof, ridges and flashings and replacement with new roofing ridges and flashings. The quoted cost was nearly $14,000. 28The Applicants claim as follows: 1.Shortfall of rent paid for month of February 2010 $ 869.11 2.Unpaid rent for the months of May to November 2010 inclusive totalling $12,167.05 3.Installments of rates payable June, August and December 2010 - $ 1,352.37 4. Insurance premium $ 750.00 5. Interest to 31 October 2011 at 10% per annum in accordance with item 15 and clause 5.15 of lease $ 2,078.00 6. Legal costs arising from Respondent's breach of lease. $ 1,659.35 TOTAL......... $18,875.88 29Against the above claimed amounts there should be an abatement of 15% applied to the rent of $1716 per month for a period of 8 months and the outgoings, $1,352.37. Such abatement totals $2,262.05, which sum should be increased by $1,000 to $3,262.05 in accordance with paragraph 27 of these reasons. 30As to costs, the Applicants' claim $1659.35 pursuant to the lease as arising out of the Respondent's default. The amount claimed includes most of the costs of these proceedings. I think I should allow the sum claimed, which is the subject of a detailed bill of costs, but make no other order in respect of costs. 31The Applicants are entitled to interest on rent and the outgoings as abated and the insurance premium. As the sum fell due in the period from 1 February 2010 to end of November 2010, I will allow interest upon the abated amount of $11,876.48 at 5% per annum for 10 months. Such interest totals $494.85. For the period 1 December 2010 to 31 October 2011, a period of 11 months, I will allow interest upon the sum of $11,876.48 at 10% per annum, which I calculate at $1,088.68. In all interest is thus $1,583.53. 32In the result, I hold the Applicants entitled to an order for the payment of $15,119.36, being the amount of their claim including allowed interest $18,381.41 less a deduction of $3,262.05. 33I make these orders: 3.I order the Respondent to pay to the Applicants the sum of $15,119.36. 4.No order as to costs. 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: 01 November 2011