Administrative Decisions Tribunal New South Wales Medium Neutral Citation: North East Developments Pty Ltd v Business To All Australia Pty Ltd [2012] NSWADT 188 Hearing dates: 28 and 29 February, 12 and 13 July 2012 Decision date: 17 September 2012 Before: D Patten, Deputy President (M Lonie and B Harrison in advisory capacity) Decision: 1. Upon application 115098 I order the Respondent to pay to the Applicant $98,160. 2. Application 115175 is dismissed. 3. Subject to paragraph 68 - no order as to costs. 4. Each party liberty to apply within 21 days. Catchwords: Repudiation of lease - evidence insufficient to support claim for false or misleading representation - damages Legislation Cited: Administrative Decisions Tribunal Act 1997 Retail Leases Act 1994 Cases Cited: Amev - UDC Finance Ltd v Austin (1986) 162 CLR 170 Mirvac Funds Ltd v Frost [2010] NSWADT 41 O'Dea v Allstate Leasing Systems (WA) Pty Ltd [1982-1983] 152 CLR 359 Samaha v Corbett Court Pty Ltd [2006] NSWSC 1441 Watson v Foxman (1995) 49 NSWLR 315 Category: Principal judgment Parties: North East Developments Pty Ltd (Applicant) Business To All Australia Pty Ltd (Respondent) Representation: Mr R de Robillard (Applicant) Mr J Jobson (Respondent) Herbert Geer (Applicant) Andresakis & Associates (Respondent) File Number(s): 115098, 115175 Publication restriction: Nil REASONS FOR DECISION 1There are two applications before the Tribunal. The earlier, 115098, is an application by North East Developments Pty Ltd (in liquidation) (the Applicant) against Business to All Australia Pty Ltd (the Respondent). The latter application, 115175, is an application by the Respondent against the Applicant. 2In the earlier application, the orders sought were: (1) That the Respondent pay to the Applicant the sum of $35,901.55 by way of rent due and remaining unpaid; (2) that the Respondent pay to the Applicant the sum of $36,573.08 by way of loss and damages suffered while the subject premises remain vacant; (3) Interest pursuant to the provisions of s 72A of the Act; (4) Costs of these proceedings. 3The only order sought in the later application was "Damages plus business loss of $128,407". 4Some matters which provide the background to the dispute between the parties are not in issue. The Applicant owns the Portico Plaza Shopping Centre (the Centre) at 17-19 Aurelia Street, Toongabbie which was completed in or about 2006. Shop P34 (the premises) in the Centre was leased to the Respondent for a term of years pursuant to an agreement for lease dated 5 February 2007 for use as a newsagency. At that time the Respondent conducted a newsagency at 46 Aurelia Street, Toongabbie in a Strip Shopping Centre located about 100 metres from the Centre. It may be inferred that the Respondent intended to occupy the premises in conjunction with or as a sub-agency of its existing newsagency at 46 Aurelia Street. 5The Respondent took possession of the premises in or about February 2008 but vacated a few months later. Thereafter there was disputation between the parties about unpaid rent, and the contention of the Respondent that it had entered into the lease as a consequence of false representations made to it by the Applicant as to, in particular, the level of occupancy of the Centre. 6The dispute continued into 2009, until about May when negotiations commenced between the parties with a view to the Respondent being granted a fresh lease of the premises. There is a dispute as to whether Mr Craig Gallie, an employee of the Applicant, initiated these negotiations (as the Respondent contends) or as the Applicant contends, they were initiated by the Respondent. Nothing, I think turns on this. 7The negotiations eventually came to fruition and a lease of the premises was granted by the Applicant to the Respondent, such lease being for a term of 6 years commencing 1 February 2010 with an option to renew for a further 6 years. The lease provided for an initial rent-free period of 4 months. 8According to Mr Gallie's affidavit sworn 10 October 2011, on 18 May 2010 he wrote a letter to Mr Mark Yip, a director of the Respondent which included the following paragraphs: "Dear Mark, Rent As per Clause 35a of your lease agreement, I am writing to remind you that your rent-free period ends 31 May 2010. Your rent, as of 1st June 2010 will be $4,299.17 (plus GST), which is due and payable on the 1 June 2010 (and thereafter on the first day of each month). Please note, also due and payable each month is $214.96 (plus GST) for your marketing levy. Arrears I am also writing to you to advise you that you are in breach of Clause 35c as a result of unpaid marketing levies, which currently amount to $945.84 (includes GST). This amount is for 4 months of unpaid marketing levies, from February to May 2010. You now have 7 business days, from the date of this letter to correct this breach. If not, interest will be charged, as per Clause 10, calculated from when the amount became due for payment until it is paid. Sales figures We have contacted you several times, both in writing and verbally, requesting the submission of your sales figures. This correspondence is to notify you that you are in breach of your lease by failing to provide these figures. You now have 7 business days, from the date of this letter to correct this breach." 9The letter concluded with some comments of a general nature regarding the viability of the Centre: "Opening of Pharmacy Nutrition Warehouse Traffic to the Centre should increase as a result of the recent opening of Pharmacy Nutrition Warehouse. However, this increase will be minimal if the tenant owning the Pharmacy Nutrition Warehouse continues to trade from his original location across the road. Like your shop on Aurelia Street, the Pharmacy Nutrition Warehouse is extremely busy. If he does not bring his customers across to Portico Plaza, then you and other tenants suffer as does Portico Plaza as a whole. Keeping a competing business open across the road hinders the progress of Portico Plaza's leasing strategy, which in turn slows down the increase of shoppers to the Centre. This is because prospective tenants question why an existing tenant has a competing shop (i.e. competing with itself) across the road. This sends a negative and damaging message to prospective tenants that the future of Portico Plaza may be unstable as a current tenant appears to have a back up plan in case Portico Plaza fails. We have lost new leasing opportunities due to this perception, which is clearly inaccurate proven by our increased visitors to Portico Plaza. It is also damaging to shoppers who are confused as to why two shops exist and also plants insecurity into their mind about Portico Plaza's future. Our current customers are our best marketing advocates, and if they have a perception of uncertainty they are less likely to encourage others to shop at Portico Plaza. Equally as important is the fact that a quiet/empty shop is far less attractive, so by not having your customers frequent your shop at Portico Plaza, we believe this has slowed down the progress of attracting new business due to the "ghost town" emptiness of your shop. Australia Post has benefited from moving their location to inside Portico Plaza, especially from a security point of view as well as being part of a new and fresh environment and they have also avoided increased operating costs by not keeping a second outlet on the street. I trust the above traffic numbers and the increase in tenants has proved to you that Portico Plaza is turning around and attracting more and more customers and is a viable local neighbourhood shopping centre." 10So far as the evidence relates, no payment was made to the Applicant in response to Mr Gallie's letter or otherwise. Although there was at least one subsequent conversation between Mr Gallie and Mr Yip, and Mr Gallie sent reminder letters about allegedly outstanding amounts, the Respondent, on or about 7 September 2011, abandoned the premises without notice and, according to Mr Gallie, "stripped the shop of most of its fixtures and fittings without the consent of the Applicant." 11About 2 weeks later, the Applicant received a letter from the Respondent: "We wish to say that the behaviour of the lessor in this lease has been unfair. We were promised before we signed the new lease that a bank, possibly CBA would open up next to us and a chemist directly opposite us in by (sic) early 2010. We were also told that there were at least another seven types of business to open and this would turn around the number of customers for the centre and our business. The following were some of the business which were also to open: 1.Medical Centre open along side with chemist 2.Hairdressing business 3.Sanity Store 4.Poultry Meat/Seafood 5.Subway to be open in May 2010 6.Harris Farm Fresh Food Markets 7.Butcher is ready to be open from the day when we open. We advise that due to the vacancy and temporary shops of the shopping centre we were having problems to pay rent. Then without talking to us you notified the lottery office that you were going to lock us out. We have lost a lot of money in the business including, fixtures and fittings and we will obtain legal advise to see how to recover our losses against lessor. However, we ask that in the meantime you allow us access to the shop to remove our belongings. We await you urgent advise." 12On the facts I have so far recited there would seem to be a clear case of unlawful repudiation of the lease by the Respondent, acceptance of that repudiation by the Applicant and an entitlement of the Applicant to damages. However, before reaching conclusions on those matters, it is necessary for me to consider all the evidence in the case including the evidence relied upon in support of the Respondent's application. 13The hearing was conducted over 4 days in February and July this year. Mr R de Robillard appeared for the Applicant and Mr J Jobson for the Respondent. Although oral submissions were made by both counsel at the conclusion of the evidence, Mr Jobson, by leave, subsequently made written submissions on a question raised by me as to whether part of the Applicant's claim represented an unenforceable penalty and Mr de Robillard made written submissions in reply. 14Mr de Robillard read the affidavit of Mr Gallie to which I have already made reference and a further affidavit of Mr Gallie sworn 24 February 2012. In reply he read the affidavit of Andrew Buchanan sworn 13 March 2012 and a third affidavit of Mr Gallie sworn 13 July 2012. Apart from the testimony of Mr Gallie to which I have already referred, his evidence principally concerned the Respondent's claim, as did the testimony of Mr Buchanan. The Respondent's Application, which purported to be a combined Retail Tenancy claim and unconscionable conduct claim, as I have earlier indicated, sought the single order "Damages plus business loss of $128,407". Relevant paragraphs from the Application include: "5. The Applicant had entered into an earlier lease with the Respondent for the subject premises on 5 February 2007. A Deed of Variation was signed by the Respondent on 10 August 2007. 6. At the time of entry into the earlier lease, the Applicant incurred costs of $103,983.60 for fit-out of the premises; it installed an air-conditioner at the cost of $5,500.00 and paid a lotteries licence fee to NSW Lotteries of $22,000.00. 7.On or about 21 January 2009, the Applicant advised the Respondent that it would cease trading in the premises. 8.The earlier lease was terminated on entry into Registered Lease AFN15501N. 9.In or about May 2009 to August 2009, the Respondent Lessor through its employee, Craig Gallie, made representations to the Applicant for the purpose of inducing the Applicant to enter into a new lease with the Respondent, on which representations the applicant relied. Particulars of the representations are at paragraphs 36, 37, 38, 39, 49, 57 and 58 of the affidavit of Vicki Weng Yee Wong sworn 16 November 2011. 10.The representations made by the Respondent were untrue and misleading and deceptive and likely to mislead and deceive and in the circumstances amounted to unconscionable conduct and unfair tactics contrary to sections 62B and 62D of the Retail Leases Act 1994. 11.The Applicant relied upon the representations in relation to the tenancies of the shopping centre. The Applicants would not have recommenced trading and signed a new lease if they were informed of the true position of the tenancies in the centre." ... 15.The Respondent failed to provide a viable shopping centre in accordance with the representations made to the Applicant. The Respondent was in the position of knowing whether or not those representations were true at the time that they were made. 16.The representations made by the Respondent in relation to the tenancies of the shopping centre were misleading and deceptive or likely to mislead or deceive and the Applicant relied on those representations to its detriment. 17.The Respondent's conduct in seeking to recover unpaid rent and other amounts owing under the lease or arising from a breach by the Applicant is unconscionable in the circumstances. 15In support of his client's application, Mr Jobson read the affidavits of Mark Kui Wah Yip sworn 24 February 2012 and his wife, Vicki Weng Yee Wong, sworn 16 November 2011. Both were cross-examined by Mr de Robillard. 16Mr Yip dealt with the substance of the Respondent's application very shortly in his affidavit: "I say that on or about April 2009 I had a meeting with Mr Craig Gallie who I understood was the Centre Manager. I was asked by Mr Gallie as follows "what happened with your lease and what are you planning to do." I recall saying to Mr Gallie words to the effect "Mr Symond had promised us that the (sic) would be 65% occupancy Portico Plaza by the time we open but up to that date we closed and only 4 shops opened and our business were suffering and we could not sustain to pay for the wages and stock and we would be unable to reopen." I said to Mr Gallie "there were only 3 other shops opened at that time and I have already indicated the difficulties to the property manager of Capital Finance, Mr Bob Lemon and I have explained to him the situation. In one meeting on or about May/June 2009 Mr Gallie indicated to my wife and I as follows, "I have already have had a few potential newsagent tenants making enquiries to open up a newsagency but I would like to offer you to re-open the newsagency because you have already had a lease with North East Development and the newsagency could reopened (sic) at any time. Mr Gallie also said "We have to organise a new lease with you." On or about 7 September 2010 I received a call from the Lotto Area Manager, Mr Russell Osburg saying words to the effect "NSW Lottery Office received a call from Portico Plaza Centre Manager that the lessor will be locking us out of the centre this afternoon due to a rent issue". Mr Osburg said "we do not want to get involved but we have to pick up the lottery machine in the late afternoon or early tomorrow morning because it is NSW Lottery's property". I say that on or about 10 September 2010 we were informed by Mr Osburg that "I tried to pick up the lottery machine but the premises is closed and can you tell me where I can get the keys". I replied to him "You would have to contact the Centre Manager". I also say that on a number of meetings I had with Mr Gallie that in most of those meetings my wife, Mrs Yip was present at these meetings." 17He told Mr de Robillard in cross-examination that he still owns the 46 Aurelia Street Newsagency. 18Ms Vicki Wong was somewhat more expansive in her affidavit sworn 16 November 2011 upon the subject of discussions with representatives of the Applicant. As the Respondent's application stands or falls upon the representations made, I will quote the relevant paragraphs from the affidavit: "27. On or about April 2009 the Director of the Respondent Company, Mark Yip, was approached by Mr Craig Gallie the new Centre Manager for Portico Plaza. A meeting was arranged to see him. 28. On or about May 2009 Mr Gallie asked 'what happened with your lease, your newsagency has closed down". 29. I said "Mr Symond had promised us that there would be at least 60 to 65% occupancy of the plaza when we opened but there was only our shop and 3 others at the time". 30. I said to Mr Gallie "I have already spoken to Mr Bob Lemon the Property Manager of Capital Finance I have explained to him the situation ". 31. On or about May/June 2009 Mr Craig Gallie organised a number of other meetings with both myself and the other director. 32. In one meeting Mr Gallie indicated as follows: "I have already have had (sic) a few potential newsagency tenants making enquiries to open a newsagency but I would like you to offer you (sic) to open a newsagency but I would like to offer you the opportunity to re-open because you already have a lease with North East Developments Pty Ltd and the newsagency could be re-opened at any time". 33. He also said, "however if you are wishing to re-open we will have to enter into a new lease with you". 34 At one of these meetings Mr Gallie said to us "I am a very experienced Centre Manager and I have been in this field for over 10 years and have managed the Centre size as Westfields (sic)". 35. He also said, "I own a real estate agency and have a lot of business connections from previous projects and businesses so I will have no problem to lease all the shops out in Portico Plaza". 36. In one meeting he said "I am very confident that Portico Plaza will not stay vacant for very long as I already have a list of people ready to sign up". 37. Mr Gallie told us the following: "The butcher will re-open the butcher shop and a bakery will open in a space between Woolworths and the butcher and also Harris Farm fresh fruit market and CBA possible will open next door to us and a Best and Less kind of department store is looking to open". 38. Mr Gallie also said "a chemist and a medical centre will open up along each other, Sanity store will open as well as a hair dressing business. A noodle bar and Subway has already had a shop fit out and will open up in the food court very soon, and a tobacconist will open next to you soon". 39. Mr Gallie also said "so with all these businesses going in the centre it will be more than 65% occupancy level as promised to you and I am confident that rest of the space will fill up very quickly". 40. I said to Mr Gallie that Mr Symond had said similar things to us before but nothing happened. 41. Mr Gallie replied "Mr Symond had no experience in Centre Management and leasing, however, I am a professional in this field with many years of experience in centre management and leasing". 42. In or about late June 2009 Mr Gallie commenced negotiations for a new lease and terms with us. 43. On or about July 2009 I said words to Mr Gallie as follows: "Can you discharge us from the lease first and then we can negotiate a new lease". 44. Mr Gallie said "wait until you sign the new lease first". 45. I said "we are still receiving outstanding rent invoices since 2008". Mr Gallie replied "the rent money from this old lease will be waived once you sign the new lease". 46. On or august (sic) Mr Gallie recommended to us to join a buyer group called "Nextra". 47. We both, my husband and I were initially hesitant to have the respondent join the Nextra group because there was a substantial initial ongoing members fees with a 5 year contract involved. 48. Mr Gallie however, insisted that it would be beneficial to join them as they were specialist in lease negotiations and had great power to help product purchase and merchandise by the Respondent of the newsagency which was to re-open in the Centre. 49. On or about August 2009 we were told by Mr Gallie "a few new tenants have signed being a chemist, Australia Post, Florist, butcher and Indian Grocery and there are also some potential tenants such as CBA Bank, Electrical White goods, Liquor Store, Hair dresser and Green Grocer which I believe will be Harris Farm. 50. On or about October 2009 we corresponded with NSW Lottery as per Mr Gallie's advise (sic). 51. On or about mid October 2009 in a meeting with Mr Gallie he said "I am not supposed to tell you this but please keep this confidential a very large department store Dimmey's has signed to take the lease and has taken all the space upstairs level above your shop starting from next to Woolworths extending all the way to the food court". 52. Mr Gallie than took both, my husband and I over to Portico Plaza and showed us the exact location of where Dimmey's were going to be located. 53. Mr Gallie said while we were at the Plaza "Dimmey's is very big in Melbourne and their product range covers your every day household need and high in brands at very attractive pricing and this is going to be the first to open in Sydney and will attract a lot of people into Toongabbie". He also said "I want to assure you those shops are coming in, you can go to the website and have a look at it there will be another one of our anchor stores aside from Woolworths and we expect them to be opening up before Christmas to take advantage of the seasonal sale". 54. On or about 29 October 2009 we joined the Nextra Group and paid $1,094.50 being the joining fees and became liable for $220 monthly fees and we paid a further $2,500 to Nextra to negotiate the new lease with Mr Gallie." 19Thereafter, according to Ms Wong, negotiations for a lease to the Respondent were conducted by Nextra, leading to an agreement in December 2009. No one from Nextra gave evidence about those negotiations although Ms Wong annexed to her affidavit a document which appears to indicate a conditional offer by the Applicant "half base rent until 13 shops on plaza level are open and trading". I interpose that the subject lease dated 10 March 2010 expressed to commence on 1 February 2010 contained no such provision but it did by clause 2.4 and clause 35 provide for a rent-free period: "2.4 Rent-free Period (a)In this clause: (i)Rent-free period means the period in Item 1A commencing on and including the Commencement Date; and (ii)Complies means complies prior to and during the Rent-free period with all payment obligations under the Agreement for Lease and all essential terms of this Lease (excluding Rent payment but including the obligation to open and trade from the premises on and continuously after the Commencement Date). (b)If and only if the Tenant complies, no Rent is payable in respect of the Rent-free period. (c)Subclause (b) does not apply to any amounts payable by the Tenant under this Lease other than Rent. (d)Item 1A and this clause 2.4 will be omitted from any renewal or extension of this lease." ... 35.Rent-free Period (a)Notwithstanding any other provision of this lease, if this lease commences on or before 1 February 2010 as determined by the Landlord in accordance with clause 34 above, the Tenant will not be required to pay Rent for the period from and including the Commencement Date and expiring on the day that is four (4) months after the commencement Date (Rent-free period). (b)For the avoidance of doubt, if this Lease does not commence on or before 1 February 2010 the Tenant must pay Rent from the Commencement Date in accordance with clause 2 of this lease and the Tenant will not have the benefit of the Rent-free period. (c)For the avoidance of doubt, the Tenant acknowledges and agrees that is will be required to pay the Marketing levy during the Rent-free period. (d)This clause 34 (sic) will be omitted from any renewal or extension of this lease." 20Item 1A in the Reference Schedule simply provides "refer to clause 34" (sic clause 35). 21Clause 25.6 contains a warranty by the Respondent that it relied only on its own enquiries: "25.6Warranties and undertakings. The Tenant warrants that it: (a)has relied only on its own enquiries in connection with this lease and not on any statement, promise, representation, warranty or undertaking by the Landlord or any person acting or seeming to act on the Landlord's behalf except as set out in this Lease, the landlord's Disclosure Statement or the Tenant's disclosure Statement; and (b) has notice of the Rules which are current when it signs this Lease." 22Ms Wong's affidavit in paragraph 57 deposed: "57. On the understanding that those new tenancies were assured to open up in the Centre and that Mr Gallie would ensure full occupancy of the Centre and continue with proper trading, we agreed as directors on behalf of the Respondent for the Respondent to enter into a new lease with the Applicant." 23I am unclear as to what was meant by the expression "those new tenancies" and the rest of the paragraph is too vague and imprecise in my view to give rise to enforceable rights. 24Equally imprecise were the terms of paragraph 58: "58. Also at the time of signing the lease we did again raised (sic) our concerns with Mr Gallie and he said words to us to this effect "there is nothing to worry about because already there are better terms in the current lease than your first lease and you can't afford also for everyone else to open and if you don't act quickly I will get another tenant for the newsagency". 25The paragraph appears to be directed to the terms of the lease itself rather than to any alleged representations by the Applicant. 26Ms Wong was extensively cross-examined by Mr de Robillard. She agreed that during the negotiations for the new lease she knew that she was still being held liable under the earlier lease and she was trying to resolve that liability. She denied that when the Respondent entered into the new lease the shopping mall was 60% leased. 27She agreed that if a new lease was not signed the benefit of special cabling installed as required by NSW Lotteries would be lost. She agreed that she had not made a record of any conversation with Mr Gallie and she agreed that by February 2010 several tenants had or were about to move into the Centre and that there was a side agreement that any liability the Respondent had under the earlier lease would terminate and it would retain the benefit of the bond provided under that lease. 28Ms Wong maintained her denial that she and her husband approached Mr Gallie in April 2009 regarding a new lease and her claim that it was he who approached them in June or July. She said it was about August that Mr Gallie suggested they join Nextra but that they delayed doing so for a time and it was coincidental that they joined just before the lottery licence was to be cancelled. She agreed that on 7 September 2010, the day the Applicant took possession of the premises, the lottery office collected its machine. 29There was evidence about the value to a newsagency of a lottery agency. Exhibit M constituted a letter dated 9 January 2007 from NSW Lotteries to Mr and Ms Yip advising, "approval has been granted to offer you appointment as a NSW Lotteries Online Agency at Shop P34 Portico Plaza". The appointment was subject to a number of conditions. 30It appears that in January 2009, the Respondent was granted a temporary suspension of the agency "pending your decision about the future of your business". By letter of 17 August, NSW Lotteries required a commitment to "re-open Portico Plaza Newsagency before 30 October or your agency agreement will be terminated". 31Relevant, in my view, to this case is the letter dated 1 October 2009 by Mr Yip and Ms Wong to Lotteries NSW in that it indicates their state of mind at a time before the subject lease was signed. Omitting formal parts the letter read: "We are writing in response to your letter. We would like to express our concerns of NSW Lottery office's intended decision to terminate our NSW Lotto license at Portico Plaza Agency No. 3554 - Portico Plaza Newsagency. As per our phone conversation, you may be aware we have our agency temporary closed due to unseen circumstances of the centre management which we have no control of. Portico Plaza Centre is currently under receivership as the centre developer went into bankruptcy. At the moment the company Capital financial has been secure 100% control of the centre (intended 35-45 shop space) and the development of 130's plus apartments above the centre. Our initial decision of opening another agency in Toongabbie across the road from our existing agency was based on the potential growth of the centre and it's development of the apartments, but most importantly it was the NSW Lottery decision to grant a new lottery license within the new centre. At the time, we were promised by the developer (Mr Simon Symond - Brother of Aussie Home Loan John Symond) when we first open our agency in the centre it will have Woolworth's and between 35-45 retailers specialty stores with 60% of them will be open. At this stage there is still only 15% retailer stores opened. This does not bring enough traffic for our business to survive. And with this condition the new centre management has understanding of the difficulties of our situation and has allowed us to temporary close until more shops are open. As we still have five years lease with the centre plus we already spend $25,000 for the new NSW Lottery Licence and the shop fit for the lottery counter with provision of two terminal spaces and all the other shop fitting cost at total cost of over $150,000. As you know our Core business is depending on NSW Lottery Products if you terminate our NSW Lottery Licence it like murdering my family, without NSW Lottery Products, our shop cannot trade. We will lose all the money we've invested plus ongoing lease cost need to repay. At this moment, the New Centre Management is working on new strategies to attract more tenants into the centre. They have indicated to us at this stage they have signed five new tenants and looking at open before Christmas or early next year, plus five other potential tenants in negotiation (i.e. Signed Tenants are Chemist, Australian Post, Florist, Butcher and Indian Grocery. The potential tenants are CBA Bank, electrical White Good, Liquor Store, Hairdresser, and Green Grocery). We hope to reopen along with the other five new stores. Therefore, we are asking for your support and to give us more time for this special circumstance. As we still believe in the future of this centre once the centre is in full occupies and develop of the above apartments in progress. We and NSW Lottery will both benefit from this investment." 32I turn to the evidence relied upon in the Applicant's case by way of reply to the Respondents' affirmative case. 33Mr Gallie's affidavit of 10 October 2011 contained these 2 paragraphs: "The Respondent was never told certain businesses were going to open from a particular date. Any conversation would have been in the context of the type of tenancies sought for the Centre. At no time were any of these representations made, as signed leases were not in hand. There was very little interest in the Butcher space. Mark Yip on behalf of the Respondent had enquired about the Butchery and had said word to the following effect: "It would be good to get a butcher back in the Centre". I would have agreed, as a Butcher would certainly be an attractive type of shop, which would add value to the Centre. At no time did I say that a Butcher shop was ready to open from the day the newsagent is open. At no time did I say that a Bank would open up next to the Newsagent. ... We have been actively advertising the Centre as a whole, in a bid to attract tenants for the Centre, including Shop P34, the subject of these proceedings. Once we have an interested tenant, we then direct them to shop premises that may suit their intended business. We have been advertising via our main sources, such as through our website; online advertising through 'Real Commercial' at www.realcommercial.com.au; in the Centre through posters and in the local press including Fairfax and Cumberland press. All local paper advertising has been half page in size and placed in the more expensive early general news (EGN) section. We presently have a serious prospective tenant for shop P34 and we are hopeful they will be in the shop by Christmas, with a 6 month rent-free period." 34The final affidavit of Mr Gallie, that sworn 13 July 2012, has annexed to it a table which indicates that the number of people visiting the Centre as detected by sensors was steadily rising in the period from January 2009, when the monthly figure was 125,920, to January 2010 when the monthly figure was 165,830. 35Another table annexed to the affidavit showed that as at May 2010 a lease to Woolworths Ltd of 2580 square metres was in place under a lease which expired on 11 December 2027; there was a lease to Dimmey's of 977.50 square metres under a lease which expired 11 November 2012; that there were another 11 leases current for fixed terms and that 5 other shops were let on a casual basis. 36A bundle of documents, Exhibit 7, purport to constitute notes and reports regarding the Applicant's attempts to lease premises in the Centre during the latter half of 2009. The records seem to indicate that as at 9 September negotiations were current with Kaiser Craft - Scrap Book Supplies in relation to Shop G1-2; with Aquarium/Pet Supply Shop G17-18; with Australia Post, Shoes - Payless Shop P20; with Bhart Bhuson Indian Grocery Shops P22, A, B and C; with Lester Sawyer - Butcher Shop , P23; with Baker/Café Shop P24/25; with Wendy's and Donut King, Shop P29; with Harrisons Pharmacy Shops P30-32; with Tobacconist Shop P35; with several potential lessees Shop P36; with Greg Bridges Shop P 37; with Lily Law shop P39; with Michael Zouka shop P40; with Dimmey's shops M42-43; with Charles David Shop M45; with Angkur shop M46 and with Sushi Gon Train Shop M49. 37At that time, according to the report, Shops P19, P20, P21, P26 (2580 square metres leased to Woolworths), P30-32 were actually subject to a lease in place and some of the other negotiations appeared to be in an advanced state. 38Finally in reviewing the evidence, I refer to the affidavit of Mr Andrew Buchanan who was not required for cross-examination and is the solicitor for the Applicant. His then firm Dibbs Barker wrote to Andresakis & Associates, the solicitors for the Respondent, on 22 October 2009 sending the Lessor Disclosure Statement and lease for execution. 39Under the heading "Details as to the Agreements or Representations" relevantly there appeared on the Lessor Disclosure Statement: "The Lessor draws the Lessee's attention to the possibility of the following occurrences during the term of the lease and any extension of the term, and that such occurrences may cause the Lessee to be inconvenienced, and/or access by the Lessee and the flow of customers to the premises to be altered or inhibited, and/or the Lessee to suffer some loss in trading: (a)premises in the Centre may be vacant for some period or periods in the future and there may be delay in letting or reletting them; (b)the leases of some existing lessees (including major lessees) may expire during the term of the lease, and there is no assurance that any such lease will be renewed; (c)the Lessor may in its absolute discretion change the tenancy mix from that shown on the tenancy plan attached to this Disclosure Statement; (d)some premises in the Centre may now or later be leased for a use which may adversely affect the trading of the Lessee in the premises." 40Messers Andresakis and Associates replied to the letter of 22 October by letter of 18 November seeking some amendments to the lease. A lease incorporating agreed amendments was sent to Andresakis and Associates on 8 December and a lease executed by the Respondent was received into Mr Buchanan's office on 11 December. 41On 29 January 2010 Mr Buchanan's firm sent an email to Andresakis and Associates: "Hi Angelo, We do not appear to have received your client's duly signed Disclosure Statement. Could you please arrange for this to be returned to me as a matter of urgency. Kind regards" 42According to Mr Buchanan the signed Lessees Disclosure Statement was never received. This evidence was unchallenged by the Respondent. 43Sections 10, 11 and 11A of the Retail Leases Act 1994 (the Act) concern the obligations to give Disclosure Statements and the consequences of failure to do so: "10 Right to compensation for pre-lease misrepresentations (1) A party to a retail shop lease is liable to pay another party to the lease ("the injured party") reasonable compensation for damage suffered by the injured party that is attributable to the injured party's entering into the lease as a result of a false or misleading statement or representation made by the party, or any person acting under the party's authority, with knowledge that it was false or misleading. (2) The giving of a lessor's disclosure statement to a prospective lessee under a retail shop lease is considered to be the making of a representation by the lessor to the lessee as to the information in the disclosure statement. (2A) The making of a representation by a prospective lessee in a lessee's disclosure statement given to a prospective lessor under a retail shop lease that the prospective lessee has sought independent advice, or as to statements or representations relied on by the prospective lessee in entering the lease, is considered to be the making of a representation by a lessee to the lessor. (3) This section extends to apply to a statement or representation made before the commencement of this section. 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. Because the disclosure statement need only include information relevant to the lease, if the retail shop is not in a retail shopping centre the disclosure statement need not include information that is relevant only to shops in retail shopping centres. (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. (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. (4) If a lease is entered into by way of the renewal of a lease, a written statement (a "lessor's disclosure update") that updates the provisions of an earlier disclosure statement given to the lessee is, in conjunction with that earlier disclosure statement, considered to be a disclosure statement given for the purposes of this section at the time the lessor's disclosure update is given. (5) The termination of a lease under this section does not affect any right, privilege, obligation or liability acquired, accrued or incurred under the lease in respect of any period before its termination. (6) A lessor under a retail shop lease is guilty of an offence if subsection (1) is not complied with in relation to the lease. Maximum penalty: 50 penalty units. Clause 20 of Schedule 3 provides that the forms set out in Schedule 2 are taken to be prescribed for the purposes of sections 11 and 11A until regulations prescribing the forms and repealing Schedule 2 are made. 11A Lessee's disclosure statement (1) Not later than 7 days after receiving a lessor's disclosure statement, or within such further period as may be agreed with the prospective lessor, the lessor must be given a lessee's disclosure statement. A lessee's disclosure statement is a statement in writing that contains the information that is contained in or required to complete the form of lessee's disclosure statement set out in the prescribed form (but only to the extent that it is relevant to the lease concerned). The layout of the lessee's disclosure statement need not comply with that of the prescribed form. (2) If a lease is entered into by way of the renewal of a lease, a written statement (a "lessee's disclosure update") that updates the provisions of an earlier lessee's disclosure statement given to the lessor is, in conjunction with that earlier lessee's disclosure statement, considered to be the lessee's disclosure statement given for the purposes of this section at the time the lessee's disclosure update is given. (3) A lessee under a retail shop lease is guilty of an offence if subsection (1) is not complied with in relation to the lease. Maximum penalty: 50 penalty units. (4) The regulations may prescribe additional matters to be included in the form of lessee's disclosure statement for the purposes of this section. Clause 20 of Schedule 3 provides that the form set out in Part 2 of Schedule 2 is taken to be prescribed for the purposes of section 11A until regulations prescribing the form and repealing Schedule 2 are made." 44The Applicant submits that the Respondent is estopped by its conduct in not completing the Lessees Disclosure Statement from relying on any representation in that paragraph 5 of the prescribed form provides: "In entering into the retail shop lease the lessee has relied on the following statements or representations made by the lessor or the lessor's agents. Note: Matters such as agreements or representations relating to exclusivity or limitations on competing users sales or customer traffic should be detailed." 45Palmer J dealt with a somewhat analogous set of facts in Samaha v Corbett Court Pty Ltd [2006] NSWSC 1441 (22 December 2006). There the Lessee left blank the space provided in paragraph 5 yet subsequently sought to rely on representations alleged to have been previously made by the lessor. Palmer J dealt with the estoppel issue in paragraphs 69 to 71 of his judgment: "69. There is no dispute that Mr Corbett received the Lessee's Disclosure Statement prior to his execution of the lease. There was no challenge to his evidence that he relied on it in entering into the lease: T 218-T 219.11. That evidence is inherently probable: if the Lessee's Disclosure Statement had asserted reliance by Mr and Mrs Samaha on a representation that the centre would be fully let on opening and would contain a specified tenancy mix, a loud warning of risk of litigation would have sounded for Mr Corbett. 70. The Lessee's Disclosure Statement, signed by Mr and Mrs Samaha and sent to Corbett Court after they had received the advice of their solicitor, was a clear and unequivocal representation to Corbett Court that there were no representations by it upon which Mr and Mrs Samaha were relying in entering into the lease. Corbett Court relied upon that representation in entering into the lease and thereby changed its position irrevocably. 71. Mr and Mrs Samaha are therefore estopped from departing from the representation in their Lessee's Disclosure Statement." 46However, there is no evidence in this case that the Applicant relied on the absence of a signed Lessee's Disclosure Statement as constituting a representation by the Respondent that it did not rely on any representation made to it when it executed the lease. Indeed, in my view, it would be far-fetched to conclude that it did. 47There was, in my opinion, no estoppel. However, the earlier remarks of Palmer J are very much in point: "59. The Lessee's Disclosure Statement expressly and clearly called upon Mr and Mrs Samaha to state what representations made by Corbett Court, if any, they were relying upon in entering into the lease. The fact that, after having received legal advice, they did not specify any such representations must raise an evidentiary presumption that there were no relevant representations made or that, if any representations were made, Mr and Mrs Samaha did not place any reliance upon them." 48In a case where a party alleges reliance on oral representations, which are denied, plainly the tribunal of fact needs to determine precisely what words were spoken in the relevant context. In this connection the observations of McLelland CJ in Eq in Watson v Foxman (1995) 49 NSWLR 315 at 318 are particularly apt: "Where in civil proceedings, a party alleges that the conduct of another was misleading or deceptive, or likely to mislead or deceive (which I will compendiously describe as "misleading") within the meaning of s 52 of the Trades Practices Act 1974 (Cth) (or s 42 of the Fair Trading Act), it is ordinarily necessary for that party to prove to the reasonable satisfaction of the court: (1) what the alleged conduct was; and (2) circumstances which rendered the conduct misleading. Where the conduct is the speaking of words in the course of a conversation, it is necessary that the words spoken be proved with a degree of precision sufficient to enable the court to be reasonably satisfied that they were in fact misleading in the proved circumstances. In many cases (but not all) the question whether spoken words were misleading may depend upon what, if examined at the time, may have been seen to be relatively subtle nuances flowing from the use of one word phrase or grammatical construction rather than another, or the presence or absence of some qualifying word or phrase, or condition. Furthermore, human memory of what was said in a conversation is fallible for a variety of reasons, and ordinarily the degree of fallibility increases with the passage of time, particularly where disputes or litigation intervene, and the processes of memory are overlaid, often subconsciously, by perceptions or self-interest as well as conscious consideration of what should have been said or could have been said. All too often what is actually remembered is little more than an impression from which plausible details are then, again often subconsciously, constructed. All this is a matter of ordinary human experience. Each element of the cause of action must be proved to the reasonable satisfaction of the court, which means that the court "must feel an actual persuasion of its occurrence or existence". Such satisfaction is 'not ... attained or established independently of the nature and consequence of the fact or facts to be proved' including the 'seriousness of an allegation made, the inherent unlikelihood of an occurrence of a given description, or the gravity of the consequences flowing from a particular finding': Helton v Allen (1040) 63 CLR 691 at 712. Considerations of the above kinds can pose serious difficulties of proof for a party relying upon spoken words as the foundation of a causes of action .. in the absence of some reliable contemporaneous record or other satisfactory corroboration." 49As it was in Foxman, so it is in this case. There is no written document and no contemporaneous record of the conversations relied upon by the Respondent. Moreover, although he may have wanted to paint a rosy picture, it seems to me inherently unlikely that Mr Gallie would make false representations in light of the negotiations with numerous lessees or potential lessees which were actually taking place, as evidenced by Exhibit 7. 50In this case the allegation of the Respondent is that the Applicant breached sections 10 and 62B of the Act. Section 62B deals with unconscionable conduct. In my opinion, in the circumstances of this case and having regard to the provisions of s 62B(3) only a false or misleading statement proved against the Applicant could found a finding of unconscionable conduct. No other basis has been suggested. 51In its application, the Respondent seemingly relies on the alleged representation that the Applicant would provide "a viable shopping centre" and other representations said to be false or misleading in relation to the occupiers or potential occupiers of the Centre. 52In his affidavit of 24 February 2012, Mr Yip deposes to no statement or representation which, in my opinion, could arguably be categorised as false or misleading. Ms Wong is more specific and the relevant paragraphs of her affidavit are reproduced above. From those paragraphs, I believe that only paragraphs 36, 37, 38, 39, 49 and 51 contain representations that are capable of being relevant. 53I am satisfied that Ms Wong was an honest witness seeking to assist the Tribunal. But even taking her evidence at its face value, I fail to be satisfied that the representations or statements she relies on were either false or misleading. On incontrovertible evidence as I have indicated, negotiations with numerous potential lessees were occurring during the second half of 2009 and some were in an advanced state. Mr Gallie's expressions of confidence may have been optimistic but, in my view, they could not be categorised as false or misleading in the absence of evidence that he did not hold or had no reasonable basis for holding an optimistic view. On the contrary, in my opinion, the evidence establishes that by December 2009, there were grounds for Mr Gallie to have an optimistic outlook about the future of the Centre. 54However, in any event, the Respondent's claim fails because, in my opinion, it failed to prove reliance on the alleged false and misleading statements and representations. It had previously carried on business in the premises; it carried on a similar business 100 metres away; it failed to complete the Lessee's Disclosure Statement by including reference to statements or representations relied on; it failed to mention such representations until a statutory notice was served in respect of unpaid rent and the letter of 1 October 2009 to Lotteries NSW which complained of a misrepresentation by Mr Symond in respect of the earlier lease seems to me to be inconsistent with a claim that the Respondent entered into the second lease as a consequence of representations and statements made to it. There seems to be another reason altogether, namely, its desire to preserve its investment in the premises and the benefit of the lottery licence. Moreover, the final negotiations for the lease were conducted by Nextra on the Respondent's behalf. As I have already stated no one from Nextra entered the witness box and I infer that the evidence of any negotiator or negotiators would not have assisted the Respondent's case. 55The claim by the Respondent on its application should be dismissed. As a consequence, it is unnecessary to quantify the Respondent's claim for damages. 56I return to the issue of damages claimed by the Applicant under a number of heads. It was common ground that no rent was paid by the Respondent under the lease which was expressed to commence on 1 February 2010 and expire on 31 January 2016. However, as indicated earlier clause 35 provided for a rent-free period of 4 months. 57In accordance with clause 2.4(a)(ii) and (b) the Applicant asserts that the Respondents by virtue of breaches of the lease became disentitled to the benefit of the rent-free period. During the submissions of counsel I raised the question whether the operation of clause 2.4 according to its terms might constitute an unenforceable penalty as, on its face, any breach during the relevant period, no matter how insignificant, would result in forfeiture of the whole of the benefit of the rent-free period. I gave counsel leave to make written submissions on the subject and both did so. Mr Jobson submitted that clause 2.4 did involve a penalty referring to O'Dea v Allstate Leasing System (WA) Pty Ltd (1982-1983) 152 CLR 359 and Amev - UDC Finance Ltd v Austin (1986) 162 CLR 170. In my view, the clause in its terms does operate as a penalty. To forfeit the lessee's entitlement to a 4 months rent-free period for any breach during that period of an essential term of the lease, no matter how small, does not, in my opinion, represent a genuine attempt by the lessee to pre-estimate its loss. I note that the only breach which could be relied upon is failure to pay marketing levies, an obligation which constitutes an essential term by virtue of clause 22.1. Interest would constitute adequate compensation for that breach. 58Accordingly, in assessing the amount of unpaid rent due when the lease was repudiated, the Respondent, in my opinion, is entitled to the benefit of the rent-free period. It follows that its liability was to pay rent from the period from 1 June 2010 to 7 September 2010, a sum which I calculate as $15,290 inclusive of GST. 59A fresh lease of the premises was granted by the Applicant to KA Callum and P Crossie to operate from 1 November 2011 (although the lease in evidence, Exhibit C, states a commencement date of 25 December) for a term of 6 years but at a lesser rent. There was no evidence, in my opinion, to justify a finding that the Applicant did not take reasonable steps to minimise its loss, although Mr Jobson did submit that there was and referred to Mirvac Funds Ltd v Frost (No 2) [2010] NSWADT 41. However, the onus to prove failure to mitigate lies on the Respondent and is not an easy onus to satisfy given that it was the party in default. Moreover, it was the Respondent's own case that premises within the Centre were difficult to lease. Indeed, the lease to Ms Callum and Mr Crossie was for the purposes of a café, not a newsagency. There was, in my opinion, no obligation upon the Applicant to do other than continue to seek prospective lessees for all unoccupied shops in the Centre without necessarily focussing particular attention on Shop P34. I do not understand Deputy President Higgins as having said anything to the contrary in Frost. 60On the basis claimed by the Applicant, it seems reasonable to allow as damages an amount equivalent to rent which would have been paid to 31 October 2011 viz $8,355 inclusive of GST and thereafter the difference between the sum the Respondent was liable to pay to the Applicant under the lease and the sum payable by Ms Callum and Mr Crossie under the new lease for the period up to 31 January 2016. This sum, including allowances for rent increases, was calculated by the Applicant at $42,509. That sum, in my opinion, should be allowed, resulting in an award of damages for lost rent of $50,864. 61The Applicant is also entitled to recover Marketing Levies and Management and Administration Charges in accordance with the lease as claimed up to 7 September 2010. These total $2,136. 62The Applicant is also entitled to be compensated for the 3 month rent-free period granted to Ms Callum and Mr Crossie not encompassed within the calculation of $42,509 set forth above. This amounts to $14,187 inclusive of GST. It is also entitled to letting fees in respect of the new lease $11,616 and legal costs associated with the new lease of $4,192. 63Against the total of its proved loss, the Applicant is obliged to give credit to the Respondent for the bond which it cashed for $15,125. 64There remains the matter of interest. The Applicant has supplied detailed and complicated calculations justifying its claim for interest up to 12 July 2012 of $17,316.23. The calculation is based on sums which I have not fully allowed. I think justice would be served if I allowed $15,000 for interest up to date. 65Although I constituted the Tribunal in the matter, I was assisted by Mr M Lonie and Mr B Harrison in accordance with Schedule 2 Part 3B, Division 4 of the Administrative Decisions Tribunal Act 1997. I gratefully acknowledge their advice. 66In summary therefore I would award: Arrears of rent to 7 September 2010 $15,290 Damages for lost rent inclusive of allowance for rent-free period under new lease$65,051 Marketing levies to 7 September 2010$ 2,136 Letting fees - new lease$11,616 Legal costs - new lease$ 4,192 Interest $15,000 TOTAL:$113,285 67That total is to be reduced by the proceeds of the Bond to $98,160. 68In relation to costs I give each party leave to make a written submission lodged with the Registry within 21 days, the other party to reply within 14 days. Thereafter the matter to be decided on the papers. 69Finally, in case there has been an arithmetical error in the calculations made above, each party has liberty to apply within 21 days. Orders: 1.Upon application 115098 I order the Respondent to pay to the Applicant $98,160. 2.Application 115175 is dismissed. 3.Subject to paragraph 68 above - no order as to costs. 4.Each party liberty to apply within 21 days. 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: 17 September 2012