Administrative Decisions Tribunal New South Wales Medium Neutral Citation: Nulla Nulla Holdings Pty Limited v 75 Cronulla Street Pty Ltd [2012] NSWADT 71 Hearing dates: 1 & 2 February 2012 Decision date: 26 April 2012 Jurisdiction: Retail Leases Division Before: K Rickards, Judicial Member Decision: 1. The claim by Nulla Nulla Holdings Pty Ltd for reimbursement of outgoings paid pursuant to its leases of the premises is dismissed. 2. The claim by Nulla Nulla Holdings Pty Ltd for abatement of rent in respect of the premises is dismissed. 3.Nulla Nulla Holdings Pty Ltd is declared liable to pay all past and future rent and outgoings as set out within the lease agreement between the parties commencing 1 September 2009, and including management fees. 4.The application by 75 Cronulla Street Pty Ltd for a declaration that Nulla Nulla Holdings Pty Ltd is in default of the lease agreement and is to rectify breaches of clauses 6.1, 6.9, 6.10 and 6.11 of the lease agreement is dismissed. 5. The Notice issued by 75 Cronulla Street Pty Ltd and dated 4 August 2011 is declared to be void and of no effect. 6.The application by 75 Cronulla Street Pty Ltd for a declaration that it has validly converted the lease into a periodic tenancy from month to month is dismissed. 7.Nulla Nulla Holdings Pty Ltd is declared to continue to have tenure of the premises as lessee pursuant to the terms of the lease agreement commencing 1 September 2009. 8.Unless either party files and serves written submissions in support of any application for costs within 14 days of this order, there will be no order as to costs. If written submissions are filed and served in accordance with this order, the other party may file and serve any submissions in reply within 28 days of this order, following which a determination as to costs will be made on the papers. Catchwords: Abatement of rent; outgoings; limitation; relief against forfeiture Legislation Cited: Retail Leases Act 1994 Cases Cited: Jones v Dunkel [1959] 101 CLR 298; Davies v Lyndhurst Developments Pty Ltd [2000] NSW ADT196; DB Rreef Funds Management Ltd & PT v Valentino Home Fashion Pty Ltd [2009] NSWADT 216; Trust Company of Australia Ltd v Skiwing Pty Ltd [2006] NSW CA; Tate v Unanderra Heights Pty Ltd [2005] NSWADT AP 5; Ragi Pty Ltd v Kiwi Munchies Pty Ltd [2007] NSWADT 108; Wanice Pty Ltd v Bocove Pty Ltd [2003] NSWADT AP24; Sabri v Selby [2004] NSWADT 252; Hace Corporation Pty Ltd v F Hannan Pty Ltd [1995] 7BPR 97544 Category: Principal judgment Parties: Nulla Nulla Holdings Pty Limited (Applicant/Cross Respondent) 75 Cronulla Street Pty Ltd (Respondent/Cross Applicant) Representation: Counsel D Barlin (Applicant/Cross-Respondent) P Lane (Respondent/Cross-Applicant) Robinson Legal (Applicant/Cross-Respondent) LaRosa Izzo & Co (Respondent/Cross-Applicant) File Number(s): 115083, 115134 REASONS FOR DECISION Background 1 The Applicant/Cross-Respondent ("Nulla Nulla") is the lessee of premises located at 75 Cronulla Street, Cronulla New South Wales ("the premises"). 2 The Respondent/Cross-Applicant ("Cronulla Street") is the lessor of the premises. 3 Nulla Nulla originally became assignee of the lease of the premises on or about 15 September 2004. 4 The parties then entered into a further lease agreement on 21 August 2007 which was expressed to commence on 1 March 2007 for a term of two and a half years expiring on 31 August 2009 and containing two further options to renew, each for a further period of five years ("the second lease"). 5 Nulla Nulla exercised its option under the second lease. Thereafter, negotiations took place about the new rental figure, followed by discussions about painting and repair work at the premises and reinstallation of skylights on the upper floor. Eventually, the parties entered into another lease agreement on or about 31 March 2011, which was expressed to have commenced on 1 September 2009 for a period of five years and with a further two options to renew, each for a further period of five years ("the third lease"). 6 A number of disputes subsequently arose between the parties. Nulla Nulla contended that it should not have historically been paying outgoings in relation to management fees, land tax, council rates, building insurance and water rates, due to non-compliance by Cronulla Street with the disclosure requirements set out within sections 11, 11A and 12 of the Retail Leases Act 1994 (the "RL Act"). Nulla Nulla then also claimed that it should receive an abatement of rent covering a period of some years, during which time the roof of the premises had often leaked and caused water to enter the upstairs flat, and rent abatement also for the period of time from when skylights were removed by Cronulla Street from the ceiling of the upstairs flat thereby removing natural light, until the skylights were subsequently reinstalled. 7 Another dispute arose between the parties concerning Nulla Nulla's obligations to clean the stairwell, the adjoining store room area, the upstairs carpet, and to rust treat and/or paint the upstairs balustrade on the exterior of the building. Cronulla Street issued a Notice of Termination based upon Nulla Nulla's failure to meet these alleged obligations. 8 After Nulla Nulla concluded that it had been paying outgoings for a prolonged period of time when it was not obliged to do so, it partially withheld payment of rent; this led to Cronulla Street issuing a Notice of Conversion which purported to convert the term to a monthly tenancy only. Accordingly, a further issue to be determined in these proceedings is whether Nulla Nulla should be granted relief against forfeiture of its tenancy under the third lease agreement. The Hearing 9 Hearing of these proceedings took place at Sydney on 1 and 2 February 2012. On behalf of Cronulla Street, evidence was given by the managing agent Spyros Abelas, by Peter Khoury (who is the son of the director of Cronulla Street, Norm Khoury), and by the roof plumber Deeb Jaa Ja. A brief medical report was admitted into evidence which stated that Norm Khoury was physically unable to attend to give evidence at the hearing. No affidavit or other evidence was sought to be adduced from Norm Khoury, despite his significant involvement in ownership and management of the subject building and lease, and his involvement in discussions and decisions which were relevant to the disputes to be determined in these proceedings. In these circumstances, it can be assumed that his evidence would not have assisted Cronulla Street in these proceedings (see Jones v Dunkel [1959] 101 CLR 298). 10 On behalf of Nulla Nulla, evidence was given by its director Steven Hackett, his wife Francine Hackett, its café manager Josh Beh, and the building expert Mark Irvine. 11 The statements as to relevant facts which are set out below within this decision reflect either factual matters not in dispute, or acceptance of facts which are considered to be more probably true than not after due consideration of the evidence given by the respective witnesses. It is here noted that all witnesses appeared to be doing their best to be truthful and to give as accurate an account of relevant events as possible. 12 During the course of the hearing, Nulla Nulla abandoned its claim for repayment of past outgoings paid, and relief from future liability, for land tax, council rates, building insurance and water rates, but maintained its claim in respect of management fees. Abatement of Rent 13 Nulla Nulla makes a claim for partial abatement of rent covering the period September 2004 to March 2011 because of its alleged inability to use a portion of the upstairs section of the premises, which can generally be described as a residential flat; this loss of use is said to have been caused by the roof leaking on various rainy occasions between September 2004 and sometime in 2008. 14 Nulla Nulla also claims a partial abatement of rent because of what it claims to have been a lack of lighting in part of the upstairs flat, which arose following replacement of the roof in 2008 when the skylights were removed, and which continued until skylights were reinstated in March 2011. 15 The provisions of section 36 of the RL Act override any contractual or common law rights or obligations which might otherwise exist between parties to a lease:- "Damaged premises (1) A retail shop lease is taken to provide for the following if the shop or the building of which the shop forms part is damaged: (a) The lessee is not liable to pay rent, or any amount payable to the lessor in respect of outgoings or other charges, that is attributable to any period during which the shop cannot be used under the lease or is inaccessible due to that damage. (b) If the shop is still useable under the lease but its useability is diminished due to the damage, the lessee's liability for rent and any amount in respect of outgoings attributable to any period during which useability is diminished is reduced in proportion to the reduction in useability caused by the damage. (c) If the lessor notifies the lessee in writing that the lessor considers that the damage is such as to make its repair impracticable or undesirable, the lessor or the lessee may terminate the lease by giving not less than 7 days notice in writing to the other and no compensation is payable in respect of that termination. (d) If the lessor fails to repair the damage within a reasonable time after the lessee requests the lessor in writing to do so, the lessee may terminate the lease by giving not less than 7 days notice in writing of termination to the lessor. (e) Paragraphs (a)-(d) do not affect any right of the lessor to recover damages from the lessee in respect of any damage or destruction to which those paragraphs apply." 16 It is important to note that section 36 draws a clear distinction between a "shop" and the "building" within which such "shop" may be located. This distinction is important in the context of the present proceedings because abatement of rent is only available if the usability of the "shop" is affected, rather than the usability of the building. 17 In this case, the premises are expressed within the lease agreement to be "downstairs and upstairs, 75 Cronulla Street, Cronulla". 18 The permitted use of the premises, as expressed within the lease agreement, is as a café. In fact, only the downstairs section of the premises has been used as a café by Nulla Nulla. Part of the upstairs section has been used for storage of stock and equipment, the manager Josh Beh resided upstairs for a short period of time, and there is evidence to indicate that there have been other persons occasionally staying in the upstairs flat. 19 In order to base an entitlement to rent abatement pursuant to section 36, there must be demonstrated a period of time when the café could not wholly or partially be used because of either the leaking roof or a lack of lighting upstairs caused by removal of skylights. 20 The evidence of the building expert Mr Irvine establishes that the carpet in part of the upstairs portion of the premises was water stained due to water ingress, that this probably occurred between 2004 and 2008, and that the cause of water ingress was the leaking roof; his report and evidence also establish that part of the ceiling was water damaged from the same cause. The director of Nulla Nulla Steven Hackett, his wife Francene Hackett and the employed manager Josh Beh all gave evidence as to how part of the upstairs flat had become a lot darker following removal of the skylights, and how part of the flat had become unusable and unpleasant during and after rainy periods. However, no satisfactory evidence was advanced to establish that all or any part of the café conducted could not be used at any time because of either the leaking roof or any loss of natural light in the upstairs section of the premises. Accordingly, Nulla Nulla's claim for abatement of rent must fail. Limitation Period 21 The claim made by Nulla Nulla seeks reimbursement of what are claimed to be improperly charged management fees during the term of the second lease from 1 March 2007 to 31 August 2009 in the amount of $87,073.19, and during the term of the third lease from 1 September 2009 to 31 March 2011 in the amount of $73,951.14; additionally, it seeks a declaration that it is not liable to pay management fees as and from 1 April 2011 to date and continuing for the duration of the term of the present third lease. 22 Section 71(2) of the RL Act states that a retail tenancy claim: "may not be lodged more than 3 years after the liability or obligation that is the subject of the claim arose". 23 The provisions of this section were applied by the Tribunal in Davies v Lyndhurst Developments Pty Ltd [2000] NSW ADT196 where, at paragraphs 19 to 24, it determined that it did not have jurisdiction in respect of claimed outgoings which were referable to a time more than 3 years before lodgement of the claim. 24 The RL Act was amended in 2005, and part of such amendment included a new section 71B as follows: "71B Lodging of claims after 3 years (1) A retail tenancy claim may be lodged more than 3 years but no later than 6 years after the liability or obligation that is the subject of the claim arose, if the Tribunal orders that the claim may be lodged with the Tribunal. (2) An unconscionable conduct claim may be lodged more than 3 years but no later than 6 years after the alleged unconscionable conduct occurred, if the Tribunal orders that the claim may be lodged with the Tribunal. (3) The Tribunal may make an order under this section: (a) on application by the party or former party concerned, and (b) after hearing such of the persons likely to be affected by the application as it sees fit, and (c) if the applicant satisfies the Tribunal that it is just and reasonable to make the order." 25 The subject application was lodged by Nulla Nulla with the Tribunal on 23 June 2011. At that time, there had been no previous order made by the Tribunal allowing lodgement of such part of the claim as related to any liability or obligation claimed to have arisen more than 3 years before the date of lodgement, namely before 23 June 2008. 26 It is clear that section 71B(3) requires an application to be made to the Tribunal for permission to lodge any claim which relates to claimed obligations or liabilities which are more than 3 years old, and that the Tribunal must hear from such persons who may be affected by the application, following which the Tribunal has power at its discretion to make an order allowing such a late claim if it satisfied that it is "just and reasonable" to do so. 27 The question as to whether proceedings commenced without leave are null and void, or whether the failure to obtain leave prior to commencement of proceedings is merely an irregularity, was considered by the Tribunal in DB Rreef Funds Management Ltd & PT v Valentino Home Fashion Pty Ltd [2009] NSWADT 216 where, after considering a number of relevant superior court decisions, Deputy President Callaghan came to the following conclusion: "(18) As to that submission, I can see no reason why, as a matter of law, any leave granted under 271B would not relate back to at least, the date of the Second Notice of Motion, 7 April 2009. Indeed, in general, in relation to amendments and to extensions of limitation periods, the rights and liabilities of the parties should be determined as at the date of the commencement of the proceedings. See, for example, [s64.40] and [s65.25] of Ritchie's Uniform Civil Procedure NSW. I refer to in particular in Ingot v Macquarie [No.3] [2005] NSWSC 255 where McDougall J allowed certain amendments to the initiating process, dealing with the then provisions of the Supreme Court Rules relating to amendments, including amendments relating to statute-barred claims; he said at [31] and [32] (report references have been added to the case references): 31 It follows, in my judgment, that even if the amendments sought cannot be supported under Pt 20 r 4, they may be supported under Pt 20 r 1. 32 There is, I think, another basis upon which this conclusion can be supported. Glass JA in McGee ([1977] NSWLR 170) and Priestley JA in Proctor ((1984) NSWLR 166) made it plain that the rule in Weldon v Neal ((1887) 19 QBD 394) was a rule of practice. It followed, as Priestley JA emphasised in Proctor at 183, that the Court had always had, and retained, power to permit an amendment to introduce a statute-barred cause of action. The rule in Weldon v Heal suggested that, ordinarily, and in the absence of 'peculiar circumstances' the power should be exercised against the applicant; and the rules, in the words of Priestley JA 'brought about a change of practice' in the exercise of a power the courts had always had'. It would be quite extraordinary if that change of practice were limited to the precise situations described in sub r (3)-(5) of Pt 20 r 4: particularly where, as Glass JA accepted in McGee at 280 was the case, those sub rules 'did not exhaust the categories of amendments which might be made after the expiry of periods of limitation'. I do not think that it can be said, in the face of Priestley JA's analysis in Proctor, that the Court has no power apart from Pt 20 r 4 to permit an amendment to an originating process to introduce a statute-barred cause of action, even if the consequence of permitting that amendment is, absent some order to the contrary, that it relates back to the date of filing of the originating process. The analysis of Priestley JA in Proctor was explicitly confirmed by Mason P in Air Link [2003] NSWCA 251; (2003) 58 NSWLR 388) at 403 [63] - [64]. (19) Those views, which, in my opinion, I should follow, indicate that there is a general procedural discretion to permit, even in the context of claims for the potential limitation problems, amendments permitting their introduction and relation back to the filing of the originating process. The RL Act and the Administrative Decisions Tribunal Act 1997 (and the Administrative Decisions Tribunal (General) Regulations 2004) do not have detailed provisions of the sort constituted by Part 20 of the Supreme Court Rules which McDougall J had under consideration (now ss64 and 65 of the Civil Procedure Act 2005). Nevertheless, s81(1) of the Administrative Decisions Tribunal Act 1997 provides: 81 Amendments and irregularities (1) The Tribunal may, in any proceedings before it, make any amendments to the proceedings that the Tribunal considers to be necessary in the interests of justice." It seems to me that either within the generality of that provision, or otherwise, a general procedural discretion as referred to by McDougall J is available to this Tribunal. (20) In the result, there is, in my opinion, no statutory embargo on an extension of time order being granted in respect of the Orders sought by the Lessee nunc pro tunc, and as at, or subsequent to the time of filing of the First Application. Whether there be an appropriate case established for any such extension has to be considered." 28 As opposed to the situation in DB Rreef, in the present proceedings there has been no actual application for leave made at any time by Nulla Nulla, as required by the provisions of s71B, in respect of that part of its claim seeking reimbursement of management fees paid more than 3 years before the date of commencement of these proceedings. 29. Apart from the difficulty described in the foregoing paragraph, there is also no evidence, despite assertions from Mr Hackett that he had had no previous similar experience in retail leasing as at 2004 and that he did not thereafter wish to "rock the boat", to satisfactorily establish that it would be just and reasonable for the Tribunal to now permit such a claim to be made. 30 Accordingly, the Tribunal has no jurisdiction to determine any claim in these proceedings for reimbursement of management fees paid, or indeed for any other liability, arising prior to 23 June 2008. Nulla Nulla's Claim for Reimbursement of Management Fees 31 Nulla Nulla submits that management fees were charged by Cronulla Street upon the "pretext" that they were outgoings. 32 Various letters provided by the agent Mr Abelas establish that at all relevant times during the course of the various leases, he notified Nulla Nulla as to the amount of management fees which would be charged as an outgoing. 33 Section 12 of the RL Act provides as follows: "12 Lessee not required to pay undisclosed contributions A provision of a retail shop lease that requires the lessee to pay or contribute towards the cost of any finishes, fixtures, fittings, equipment or services is void unless the liability to make the payment or contribution was disclosed in a disclosure statement given to the lessee in accordance with this Part." 34 Management fees were not disclosed as an "outgoing" within the initial two lease agreements between the parties but were disclosed as being an outgoing which was fully payable by Nulla Nulla within the terms of the third lease. 35 The mere fact that the management fees are described as an "outgoing" does not of itself mean that the provisions of section 12 cannot apply; however, consideration of the proper construction of the term "services" contained within section 12 was undertaken within the unanimous judgment of the Court of Appeal in Trust Company of Australia Ltd v Skiwing Pty Ltd [2006] NSW CA: "24 Properly understood, the structure of the Retail Leases Act, with respect to pre-contract disclosure, supports the view that the term "services" in s 12 is to be understood in terms of fitout of the retail shop. The expenses included within the definition of "outgoings" and treated as outgoings to be paid by the lessee, in Schedule 2, have not merely the character of expenses relating to the building as a whole, rather than a particular retail shop in a building, but also the character of on-going expenses. Although a retail shop lease may relate to the whole of a building, thus making the first point of distinction of limited weight, there is a more emphatic distinction between on-going expenses which will be incurred from time to time and those, like finishes, fixtures, fittings and equipment, which are likely to be provided at or about the time of commencement of the lease and thereafter, by way of replacement for material supplied at fitout, only as occasion requires. 25 It may be true that none of these considerations, taken alone, would be conclusive. However, taken as a whole they are persuasive in favour of the construction of s 12 initially preferred on a reading of the section taken in isolation, namely that the term "services" is restricted to the provision of finishes, fixtures, fittings and equipment for use within the retail shop and such as are likely to be provided at the commencement of the lease, if they have not already been installed or provided. It follows that, as was held in the first ADT decision, and subject to the separate arguments raised by Skiwing, Stockland is entitled to recover by way of contribution to outgoings, an amount on account of all the outgoings specified in cl 1.16 of the lease, liability for payment of which is provided in cl 3.04." 36 Management fees are therefore not a "service" covered by the provisions of section 12. Consideration of the management fees commences with the provisions of section 11 of the RL Act. If neither of the disclosure statements which accompanied the second lease and the third lease properly disclosed the payable management fees, then Cronulla Street has breached the requirements of section 11(1): "11 Lessor's disclosure statement (1) At least 7 days before a retail shop lease is entered into, the lessee must be given a disclosure statement for the lease. A disclosure statement is a statement in writing that contains the information, and is accompanied by the material, that is contained in or required to complete or accompany the form of disclosure statement set out in the prescribed form (but only to the extent that is relevant to the lease concerned). The layout of the disclosure statement need not comply with that of the prescribed form. However, a lessor's disclosure statement is complete for the purposes of this section only if it has attached to it a form to be completed by the lessee in the form prescribed for the purposes of section 11A." 37 The consequences of such breach are set by section 11(2): "(2) If a lessee was not given a disclosure statement as required by subsection (1) or if the disclosure statement that was given to the lessee was incomplete or contained information that at the time it was given was materially false or misleading, the lessee may terminate the lease by notice in writing to the lessor at any time within 6 months after the lease was entered into, unless subsection (3) prevents termination" 38 Section 11(3) is as follows: "(3) The lessee cannot terminate the lease under this section on the ground that the disclosure statement is incomplete or contains information that is materially false or misleading if: (a) the lessor has acted honestly and reasonably and ought reasonably to be excused for the failure concerned, and (b) the lessee is in substantially as good a position as the lessee would have been if the failure had not occurred." 39 In order to decide whether or not Nulla Nulla is entitled to reimbursement of payments made toward management fees, it is unnecessary to make a finding as to whether the two tests set out within section 11(3) are satisfied; as was emphasised by the Appeal Panel in Tate v Unanderra Heights Pty Ltd [2005] NSWADT AP 5 at paragraphs 37 and 38, the sole consequence of a breach of section 11 by a landlord is that a tenant has a right of termination of the lease but which is only exercisable within 6months after the lease was entered into. Pursuant to section 11, Nulla Nulla's only remedy was termination of the respective leases, but the time for exercising that remedy is long past. 40 The above approach to application of section 11 was also adopted by President O'Connor in Ragi Pty Ltd v Kiwi Munchies Pty Ltd [2007] NSWADT 108: "33 It will be seen that non-compliance with s 11 gives the lessee a right of termination, exerciseable within 6 months after the lease was entered into. KM did not exercise this right, consequently that right has been lost. Section 11 has continuing relevance to these proceedings to the extent that the conduct might support an unconscionable conduct claim." 41 An additional contention made by Nulla Nulla is that it is not liable to pay the management fees because of breach by Cronulla Street in not properly specifying how these fees were to be determined, as is required by section 22 of the RL Act: "22 Recovery of outgoings from lessee (1) The lessee under a retail shop lease is not liable to pay any amount to the lessor in respect of any outgoings except in accordance with provisions of the lease that specify: (a) the outgoings that are to be regarded as recoverable, and (b) how the amount of those outgoings will be determined and how they will be apportioned to the lessee, and (c) how those outgoings or any part of them may be recovered by the lessor from the lessee. (2) In this Part, the expression "outgoings to which the lessee contributes" refers to any outgoings in respect of which the lessee is liable under the lease to make any payment to the lessor. (3) Costs associated with the advertising or promotion of a retail shop or retail shopping centre, or of any business carried on there, are not outgoings for the purposes of this section." 42 Both the decision of the Tribunal in Ragi (supra), and the Appeal Panel decision in Wanice Pty Ltd v Bocove Pty Ltd [2003] NSWADT AP24, establish that the obligations imposed upon a lessor by sections 27 and 28 to give estimates of outgoings and to then provide outgoing statements do not produce the result that non compliance precludes the recovery of the outgoings stipulated in the lease. 43 In Ragi, the Tribunal ruled that the lessor had not complied with section 22 because the relevant clause of the lease did not properly specify recoverable outgoings and because the parties had agreed to a payment system whereby the amount estimated for outgoings was fixed rather than being determined at the end of each relevant accounting period. Notwithstanding this finding, the Tribunal held that the lessor should still be reimbursed in respect of unpaid outgoings upon the basis that it was entitled to fair compensation for the use and occupation of the premises by the lessee. After reviewing a number of superior court authorities, the conclusion reached by the Tribunal was as follows: "145 In my view, the parties to the lease were both commercially experienced. They bargained in a usual way. For the reasons given, I am satisfied that there is no adequate proof of any misrepresentation by the agent in the course of those dealings going to the treatment of other tenants in respect of outgoings. Nor, for the reasons given, do I find any substantive breaches by Ragi of its obligations in such matters as the making of repairs and the like. 146 The present circumstances do not present, I accept, as radical a situation as that dealt with in the Victorian line of authority, where the non-compliant landlord faced loss of the entire rent. In my view, Ragi is entitled to fair compensation for the use and occupation of the premises by KM. KM received good consideration under the contract, void as it is so far as the outgoings covenant is concerned by reason of s.22. 147 As to what is 'fair and reasonable' compensation, I am content, as the Victorian Court was in Ovidio, to be guided by the price agreed between the parties for occupation of the premises. I do not think it should, in effect, be reduced by depriving Ragi of the outgoings component." 44 Applying the rationale in Ragi to the present case, Nulla Nulla has reached an agreement with Cronulla Street as to the price to be paid for occupation of the premises which includes payment of management fees, and there is no reason why this should not be treated as fair and reasonable compensation to Cronulla Street for such occupation. 45 The claims made by Nulla Nulla that it be reimbursed for past payment of management fees and that it be relieved from payment of ongoing management fees are therefore dismissed. Nulla Nulla's Obligation to Repair; the Notice Issued by Cronulla Street on 4 August 2011 46 Cronulla Street contends that the tenant has failed to maintain the premises as specified by clauses 6.1, 6.9, 6.10 and 6.11 of the lease agreement. 47 There is no general obligation of the lessee to maintain the premises other than as set out within the terms of the lease. 48 Cronulla Street claims that there was a condition precedent to the granting of the third lease that the tenant would paint the upstairs interior of the premises, paint the hallway, paint the stairwell in the staircase between the upper and lower floors of the premises, paint the exterior of the premises including the balustrades, eaves and fascias and clean the carpet in the upper floor of the premises. 49 These obligations which are claimed to be a condition precedent go beyond those which are set out within clauses 6.1, 6.9, 6.10 or 6.11 of the lease, are not recited within any appendix to the third lease, and were not referred to by the solicitors for Cronulla Street at the time that the third lease agreement was concluded. The evidence does not establish that these requirements formed part of the lease agreement. Additionally, the evidence does not establish that there has been a failure on the part of Nulla Nulla to keep the premises tidy or in reasonable repair, or to paint the premises in accordance with the express provisions of the lease. There is no obligation on the part of Nulla Nulla to now proceed to undertake any works additional to those which are specified within the terms of the lease agreement. 50 The submissions made on behalf of Cronulla Street appear to link the conversion notice which was issued on 29 November 2011 to the alleged failures to maintain as set out above, but this conversion notice is actually based upon an alleged failure to pay rent. 51 The relevant notice given by Cronulla Street to Nulla Nulla in relation to the alleged failures to undertake repairs, painting and cleaning was the notice issued on 4 August 2011. The contention made on behalf of Cronulla Street that the Tribunal has no power or jurisdiction to make any order in respect of this particular notice because it has not yet been acted upon by Cronulla Street is incorrect; pursuant to section 72 of the RL Act, the Tribunal is given a wide discretion to make such orders as it considers appropriate to resolve disputes: 72 Powers of Tribunal relating to retail tenancy claims (1) In proceedings for a retail tenancy claim lodged with the Tribunal under this Part, the Tribunal is empowered to make any one or more of the following orders that it considers appropriate: (a) an order that a party to the proceedings pay money to a person specified in the order, whether by way of debt, damages or restitution, or refund any money paid by a specified person, (b) an order that a specified amount of money is not due or owing by a party to the proceedings to a specified person, or that a party to the proceedings is not entitled to a refund of any money paid to another party to the proceedings, (c) an order that a party to the proceedings: (i) do any specified work or perform any specified service or any obligation arising under this Act or the terms of a lease, or (ii) surrender possession of specified premises to another person, or (iii) assign his or her or its rights under a lease to a specified person, or (iv) do or perform, or refrain from doing or performing, any specified act, matter or thing, (d) an order granting a party to the proceedings relief against forfeiture, (e) an order, by consent of the parties, requiring the parties to the proceedings to rectify a lease, (f) an order: (i) declaring any provision made by a lease to be void for being inconsistent with this Act or the regulations, or (ii) declaring that a lessor is not entitled to withhold consent to an assignment of the rights of a lessee, or (iii) declaring the rights and liabilities of the parties under law, whether any consequential relief is or could be claimed or not, or (iv) declaring that a party is or is not entitled to receive payment of the whole or a part of a security bond, (g) such other order, in the nature of an interlocutory order of a kind referred to in paragraphs (a)-(f), as the Tribunal considers proper to be made in order to resolve or assist resolution of the dispute between the parties. (2) The Tribunal may make such ancillary orders as it considers necessary for the purpose of enabling an order under this section to have full effect. (3) The Tribunal may impose such conditions as it considers appropriate when making an order under this section. (4) The Tribunal may make an interim order under this section pending final determination of a claim, if it appears to the Tribunal desirable to do so. 52 There is no satisfactory evidence establishing that as at 4 August 2011 Nulla Nulla was in breach of any term of the lease agreement requiring painting, cleaning or repair of the premises and accordingly that notice is declared to be void and of no effect. The Notice of Conversion dated 29 November 2011 53 This particular notice was issued by Cronulla Street upon the grounds that Nulla Nulla had only partially paid monthly instalments of rent which were due and payable on or about 8 July 2011 and 8 September 2011 and that the rent had therefore been in arrears for more than 7 days. 54 Factually, the above assertions would appear to be correct. 55 Pursuant to the provisions of section 72(1)(d) of the RL Act, the Tribunal has discretionary power to make an order granting relief against forfeiture, having regard to each particular set of circumstances and is "similar to (the power) exercised by courts in equity"; see Sabri v Selby [2004] NSWADT 252, at paragraph 51. In Sabri, Member Higgins (as she then was) referred to the decision of McLelland CJ in Hace Corporation Pty Ltd v F Hannan Pty Ltd [1995] 7 BPR 97544 as containing the appropriate approach to deciding whether to grant relief against forfeiture: (14,329)The general principals (sic)on which an application for relief against forfeiture is dealt with may be briefly stated as follows. The court treats a power to forfeit a lease for non-payment of rent as a security for the rent and, generally speaking, on payment of any outstanding rent the court will grant relief against any such forfeiture on such conditions as it may consider appropriate in the particular circumstances, which will usually involve payment of the lessor's costs and expenses. Although relief against forfeiture for non-payment of rent should not be relieved against, where all arrears of rent have been paid and where no interests of third parties have intervened, is a very heavy burden and normally involves demonstrating that by reason of the conduct of the lessee or for some other reason, the grant of relief against the forfeiture would be inequitable (see generally Pioneer Quarries (Sydney) Pty Ltd v Permanent Trustee Co of NSW Ltd (1970) 2 BPR 9562, Steiper v Deviot Pty Ltd (1977) 2 BPR 9602, Tutita Pty Ltd v Ryleaco Pty Ltd (1989) 4 BPR 9635, Hayes v Gunbola Pty Ltd (1986) 4 BPR 9247 and Cicinave v Jasco Pty Ltd (1989) 5 BPR 11,139). 57 The retention of part of the rent which was due and payable by Nulla Nulla was based upon its perception that there had been breaches by Cronulla Street of its obligations under the RL Act to properly disclose various outgoings payable under the lease agreements which had existed between the parties. Breaches had in fact occurred, and the reaction of Nulla Nulla was in direct response to them. The relevant retained sums were paid into a trust account with the express advice that they would be paid upon determination of the issues in dispute. It is expected that any money remaining in trust will be disbursed in a manner consistent with the decision in these proceedings. 58 Cronulla Street bears the onus of demonstrating that, by reason of Nulla Nulla's conduct or by reason of any other relevant circumstances, a grant of relief by the Tribunal to Nulla Nulla against forfeiture of the lease would be inequitable. 59 The evidence establishes that Nulla Nulla has successfully traded at the premises for a prolonged period. There is no evidence pointing toward insolvency or an unwillingness on the part of Nulla Nulla to meet its proper obligations as lessee of the premises. The decision by Nulla Nulla to withhold rent payments has now been determined after a lengthy hearing to be without legal foundation, but this decision did follow a pattern of conduct by Cronulla Street which was not transparent in relation to expressing its requirements regarding the new lease and the premises, and in disclosing future management fees payable. There is insufficient evidence to satisfy the Tribunal that there would be any inequity in granting Nulla Nulla relief against forfeiture of its rights as lessee pursuant to the third lease. 60 For the above reasons, the Notice of Conversion dated 29 November 2011 issued by Cronulla Street to Nulla Nulla is set aside, and Nulla Nulla is declared to continue to have tenure of the premises as lessee pursuant to the terms of the third lease. ORDERS (1)The claim by Nulla Nulla Holdings Pty Ltd for reimbursement of outgoings paid pursuant to its leases of the premises is dismissed. (2)The claim by Nulla Nulla Holdings Pty Ltd for abatement of rent in respect of the premises is dismissed. (3)Nulla Nulla Holdings Pty Ltd is declared liable to pay all past and future rent and outgoings as set out within the lease agreement between the parties commencing 1 September 2009, and including management fees. (4)The application by 75 Cronulla Street Pty Ltd for a declaration that Nulla Nulla Holdings Pty Ltd is in default of the lease agreement and is to rectify breaches of clauses 6.1, 6.9, 6.10 and 6.11 of the lease agreement is dismissed. (5)The Notice issued by 75 Cronulla Street Pty Ltd and dated 4 August 2011 is declared to be void and of no effect. (6)The application by 75 Cronulla Street Pty Ltd for a declaration that it has validly converted the lease into a periodic tenancy from month to month is dismissed. (7)Nulla Nulla Holdings Pty Ltd is declared to continue to have tenure of the premises as lessee pursuant to the terms of the lease agreement commencing 1 September 2009. (8)Unless either party files and serves written submissions in support of any application for costs within 14 days of this order, there will be no order as to costs. If written submissions are filed and served in accordance with this order, the other party may file and serve any submissions in reply within 28 days of this order, following which a determination as to costs will be made on the papers. ********** 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: 26 April 2012