Administrative Decisions Tribunal New South Wales Medium Neutral Citation: Moussa v Warren [2013] NSWADT 189 Hearing dates: 18 March 2013 Decision date: 22 August 2013 Jurisdiction: Retail Leases Division Before: S Higgins, Deputy President T Tyler, Non-Judicial Member M Foldi, NonJudicial Member Decision: The applicant's application is dismissed. Catchwords: Retail lease - Legislation Cited: Administrative Decisions Tribunal Act 1997 Retail Leases Act 1994 Cases Cited: 73 Union St Retail Pty Ltd v J & S Group Pty Ltd (RLD) [2013] NSWADTAP 32 Arjay Investments Pty Ltd v Morrison's Outdoor Catering Pty Ltd, Unreported, Supreme Court of NSW, 1 May 1995 Aspromonte Pty Ltd v Zagari [1999] NSWSC 831 Dellwest Pty Ltd v Cafabe Pty Ltd Unreported, Supreme Court of NSW, 26 November 1997 Hewett v Court (1983) 149 CLR 639 Long v Piper [2001] NSWCA 342 Perhauz & Anor v SAF Properties Pty Ltd & Ors [2007] NSWADT 122 Randi Wixs Pty Ltd v Pokana Pty Ltd (No 2) [2003] NSWADT 4 Category: Principal judgment Parties: Nehad Moussa (Applicant) John Warren (Respondent) Representation: N Moussa (Applicant in person) Cummins Hendricks Pty Ltd (Respondent) File Number(s): 125184 REASONS FOR DECISION Background 1On 24 December 2012, the applicant, Nehad Moussa, made an application for original decision, under s 37 of the Administrative Decisions Tribunal Act 1997 (ADT Act) and ss 71 and 62B of the Retail Leases Act 1994 (RL Act). The applicant also made an application for an interim order. The interim order application was heard on 28 December 2012. At the conclusion of the hearing of the interim order application, Judicial Member, Montgomery, gave an oral decision refusing the applicant's application. The Judicial Member also made orders for the filing and serving of evidence in regard to the applicant's substantive claim. 2The essence of the applicant's claim is that the respondent agreed to grant him a retail shop lease of the kitchen and restaurant at the Commercial Hotel Lockhart (the Hotel). The applicant also claimed that the respondent's conduct in failing to provide him with a written lease and his conduct in having him 'evicted' from the Hotel amounted to unconscionable conduct, contrary to s 62B of the RL Act. 3The respondent, Mr John Warren, together with his wife, Mrs Carol Warren, are the owners of the Hotel. They purchased the Hotel in late 2010. 4In October 2012, the respondent and his wife placed an advertisement in the Melbourne Age seeking a cook. They also advertised the Hotel for lease (i.e. long term) or sale. 5The applicant, who said he had worked in the restaurant industry for 25 years, responded to the respondent's advertisement. He initially contacted the respondent by telephone and subsequently travelled, from Melbourne to Lockhart, on 11 November 2012. On this day, he met with the respondent and his wife and following discussions with them he commenced preparing and cooking meals, in the kitchen of the Hotel, for the Hotel patrons. With the exception of the days when the applicant returned to Melbourne for two short trips, the applicant continued to prepare and cook meals in the kitchen of the Hotel, until 20 December 2012. During this time he also resided in the Hotel. On 20 December 2012, the respondent asked the applicant to leave. A dispute arose between the parties, a police officer attended late that evening and the applicant left the Hotel and has not returned. 6The remedies sought by the applicant are as follows: an order granting him possession of the kitchen and restaurant of the Hotel (i.e. 'my leased area (Restaurant)'); an order restraining the respondent from interfering with his business and re-entering the kitchen and restaurant of the Hotel; damages for loss suffered as a result of the respondent's conduct. 7The respondent contends that at no time had he reached an agreement to lease the kitchen and restaurant of the Hotel. Nor had he engaged in unconscionable conduct falling within s 62B of the RL Act. In the alternative, in the event the tribunal were to find that a lease had been entered into between the parties, the respondent contended that the applicant breached the lease and the lease was terminated in accordance with its terms. 8The applicant's application was heard, on 18 March 2013, at the Wagga Wagga Local Court. The applicant was unrepresented at the hearing. The respondent was assisted by Ms McFarlane, solicitor. 9At the conclusion of the hearing I reserved my decision. I have now considered all the material before the tribunal and find that the applicant has failed to establish his claim against the respondent. And these are my reasons for my findings. Issues 10At the hearing, the applicant did not press his unconscionable conduct claim. However, the conduct of the respondent remained a live issue. Accordingly, I have briefly dealt with his unconscionable conduct claim towards the end of these reasons for decision. 11The primary issue for determination in this application is whether, on the material before the tribunal: (a) the parties entered into a 'retail shop lease' as defined in s 3 of the RL Act, and (b) if they did enter into such a lease, what remedies are available to the applicant. 12In this application, the onus is on the respondent to establish his claim and remedies sought on the balance of probabilities. What is a retail shop lease? 13S 3 of the RL Act defines the term 'retail shop lease or lease' to mean: Retail shop lease or lease means any agreement under which a person grants or agrees to grant to another person for value a right of occupation of premises for the purpose of the use of the premises as a retail shop: (a) whether or not the right is a right of exclusive occupation, and (b) whether the agreement is express or implied, and (c) whether the agreement is oral or in writing or partly oral and partly in writing. 14'Retail shop' is also defined in s 3 of the RL Act to mean as follows: retail shop means premises that: (a) are used, or proposed to be used, wholly or predominantly for the carrying on of one or more of the businesses prescribed for the purposes of this paragraph (whether or not in a retail shopping centre), or (b) are used, or proposed to be used, for the carrying on of any business (whether or not a business prescribed for the purposes of paragraph (a)) in a retail shopping centre. Note 1. Section 5 limits the retail shops to which this Act applies. Note 2. Clause 17 of Schedule 3 provides that the businesses specified in Schedule 1 are taken to be prescribed for the purposes of paragraph (a) of this definition until regulations prescribing businesses and repealing Schedule 1 are made 15As indicated in the note 2 above, the retail shop businesses falling within the terms of para (a) to the definition of retail shop lease, are those in Schedule 1 of the RL Act. Included in that Schedule are 'Restaurants, cafeterias, coffee lounges, food courts and other eating places'. 16S 8 of the RL Act sets out when a lease is entered into. It relevantly provides as follows: 8 When the lease is entered into (1) For the purposes of this Act, a retail shop lease is considered to have been entered into when a person enters into possession of the retail shop as lessee under the lease or begins to pay rent as lessee under the lease (whichever happens first). (2) However, if both parties execute the lease before the lessee enters into possession under the lease or begins to pay rent under the lease, the lease is considered to have been entered into as soon as both parties have executed the lease. Note. Therefore, if the lessee starts to pay rent as lessee or enters into possession as lessee, the lease is considered to have been entered into even if neither party has executed the lease at that time. Money paid in advance (purportedly as rent) as a deposit to secure premises for a proposed lease does not constitute rent paid as lessee under the lease. 17Section 7 of the RL Act provides that the Act operates despite the provision of a lease. That is, a provision of a lease is expressly stated to be void to the extent the provision in the lease is inconsistent with a provision of the RL Act. The Evidence 18At the hearing, the applicant relied on his affidavit, sworn on 27 December 2012, his further statement, filed on 6 March 2013 and his oral evidence, which largely reflected that contained in his affidavit and statement. 19The respondent relied on his affidavits sworn on 14 January 2013 and 13 March 2012. One of these affidavits was a response to the evidence filed by the applicant. The respondent also relied on the affidavit sworn by his wife, Carol Warren, sworn on 14 January 2013. The respondent and his wife also gave oral evidence and were cross-examined. 20In his affidavit and statement, the applicant described the sequence of events as follows: (a) on 11 November 2012, when he arrived in Lockhart, the respondents gave him a tour of the Hotel. He said that during their discussions, the respondent said that, the 'business' (i.e. Hotel business) was for sale for '$11,000 and 15 years lease and rent is $650 p/w plus outgoing. Or the sale of the freehold for $350,000.' He said the respondents informed him that their chef had left and they had been looking for another chef for some time 'so another option was to lease the restaurant'. He said the rent was to pay for the gas and part of the power, which was estimated to be $190. The outcome of their discussions 'was the idea of me [the applicant] leasing the restaurant as a start, and then looking into buying the whole business and make them an offer but not the freehold at the moment,' (b) on 12 November 2012, the applicant started to get the kitchen organised as it had been closed. He stayed for a couple of days and began to 'cook a few meals for customers while we negotiate a deal together.' He said the customers were very happy and paid the respondents for their meals, (c) on 15 November 2012, the applicant informed the respondents that he had to return to Melbourne to finalise some personal matters. He returned on 19 November 2012. The applicant said he and the respondent discussed 'the matter that night and decided to start taking responsibility of the Restaurant the day after which's 20th Nov. 2012 (I pay for my stock, wages etc and keep the profit) while we're getting the legal documents ready ...' In his further statement the applicant said: '..the agreement was that I would pay for stock & wages, I' would pay rent and power and of $190.00 per week. Mr Warren said he would organise the lease.' (d) the applicant said he started to get the kitchen more organised and began contacting suppliers and looking for staff to help him in the kitchen. The applicant said that the restaurant was attracting more customers, but the respondent continually avoided meeting with him to discuss the lease. The applicant said he 'got worried about the behaviour' of the respondent, especially 'knowing that they want to sell the business and I need legal document to have some security for my commitment.' In light of his concerns the applicant engaged a lawyer, Mr McLeod, (e) the applicant said, on 6 December 2012, he received a 'draft commercial lease' for the restaurant. A copy of the draft was attached to his statement. That draft was prepared using a pro-forma Commercial lease form. The term of the lease was stated to be 1 year, commencing on 26 November 2012. However, under the special conditions attached to the lease, the lease was subject to termination in the event the Hotel was sold prior to the expiration of the lease. The rent was stated to be $190.00 per week. The applicant said he did not agree with the terms of this lease, (f) on Friday, 7 December 2012, on the instructions of the applicant, the applicant's solicitor prepared a document the applicant described as a 'heads of agreement'. A copy of that document was attached to the applicant's statement. It is headed 'CONDITIONS TO BE INCORPORATED INTO LEASE.' The conditions set out in this document included: (a) four, one year options to renew the lease,(b) an option (i.e. first option) of 'purchasing the full Hotel lease' and (c) in the event the applicant did not exercise his option to purchase the 'Hotel business' and the business was sold to another person or company, the respondent would pay the applicant 50% of that portion of the sale price, which exceeded the amount of the applicant's option to purchase; (g) the applicant said that he worked on the Saturday and Sunday and asked the respondent to discuss the lease with him. He said the respondents said they were too busy to discuss it, (f) on Monday 10 December 2012, the applicant travelled to Melbourne. Later that day he faxed a copy of the 'CONDITIONS TO BE INCORPORATED INTO LEASE', prepared by his lawyer, to the respondent. The applicant said that at 8:30 that evening, the respondent rang him and said 'he'd agree and asked me to go back', (g) the applicant said that he returned to Lockhart on 12 December 2012. He said the respondent 'continued to prevaricate on the lease'. He said a function had been planned for Friday, 14 December 2012. The applicant said that he informed the respondent and his wife that if there was no lease he would return to Melbourne. He said the respondent asked him to stay and that they would have a meeting on the Monday 17 December 2012, (h) the applicant said he stayed for the weekend and ran the kitchen. He said he had employed waiters and kitchen hands, (i) the applicant said, on Monday, 17 December 2012, there as an exchange of letters between his solicitor and the respondent's solicitor. He said there was an 'agreed letter' from the respondent's solicitor, but the respondent would not sign it. A copy of the letters were attached to the applicant's statement, (j) the applicant said, on Tuesday, 18 December 2012, his solicitor received a letter from the respondent's solicitor setting out 'the agreed terms'. The applicant said he signed the letter as did the respondent. A copy of the letter was also attached to the applicant's statement and its contents are discussed in more detail below, (k) the applicant said, on Wednesday, 19 December 2012, he catered for a function at the Hotel. He said he believed his solicitor received 'a draft lease' from the respondent's solicitor. He said he did not see that 'draft lease', (l) the applicant said, on Thursday, 20 December 2012, at about 10 am the respondent's wife told him that she and her husband were 'not going to continue with the arrangement'. He said he argued with the respondent's wife and she agreed to have a meeting with the applicant and her husband during the afternoon. He said, at about 4 pm the respondent's wife told him that they would meet after the bar was closed. The applicant said he called his solicitor, who wrote a letter to the respondent's solicitor. Again a copy of that letter was attached to the applicant's statement and its content is discussed below, and (m) the applicant said he cooked dinner that evening and when he had finished he met with the respondent at the bar of the Hotel. The applicant said the respondent was drunk. He said the respondent said to him 'we are not going on with it' and asked the applicant to leave. When the applicant refused to leave, the respondent called the police. The applicant asserted that the police officer who came was a friend of the respondent and that he was evicted. 21In his oral evidence, the applicant said he had been caught out previously when he was told he did not have a lease and for this reason he was 'pushing for a lease document'. During his oral evidence, the applicant also acknowledged that he had not taken any steps to formally establish a retail business. That is, he had not obtained an ABN number, registered a business name, made inquires about obtaining a bank eftpos machine, or opened an account with suppliers. He said he had not made these arrangements because he was not prepared to do so until he had a formal lease. 22In support of his claim for loss and damage, the applicant tendered into evidence a document that listed the amount of total daily cash takings during the 5 weeks he was 'operating the restaurant' in the Hotel. The applicant also tendered into evidence the till rolls for these days. It was the applicant's contention that in addition to the cash amounts, there were credit card payments for meals he had prepared. These were processed through the till at the bar of the Hotel. He asserted that these credit card payments amounted to about 30% more in the weekly cash takings. 23In his statement, dated 14 January 2013, the respondent said that after the applicant returned from Melbourne in November 2012, the applicant 'commenced running the Restaurant in his own right' and they had several discussions about what sort of a lease he could have. Following those discussions the respondent approached his solicitor to draft a lease agreement. The respondent did not dispute the sequence of events as explained by the applicant. However, the respondent contended that during the course of their negotiations for a lease, he and his wife were becoming concerned about the state of cleanliness of the kitchen, the applicant's lack of relevant food handling certificates and the manner in which he treated staff. 24In her statement, the respondent's wife, Mrs Warren, also gave evidence about the state of the kitchen. Mrs Warren said that it became very obvious to her that the applicant was not going to be able to run the business. She was especially concerned that the Health Inspector would close them down and in support of her assertion she attached a number of photographs, she had taken of the kitchen, on 22 December 2012, two days after the applicant had left the Hotel. I note, these are taken shortly after the applicant had left the Hotel and that the applicant disputes the assertions made by Mrs Warren. 25On the basis of my findings below, it is unnecessary for me to deal with this issue concerning the state of the kitchen other than to note that the applicant disputed some of the assertions made by Mrs Warren. 26In his affidavit of 13 March 2013, the respondent said: (a) he and his wife ran the Hotel as a partnership. He said he is also a full time employee of REX Airlines. He said that his and his family's primary residence is in Wagga Wagga and as a result he and his wife share the operation of the Hotel, which often means that he or his wife are at the Hotel alone, (b) he said that throughout the applicant's occupation at the Hotel, he did attempt, in good faith, to negotiate a lease and arrange for the preparation of same through his solicitor. The respondent referred to the various communications between himself and the applicant and their respective solicitors. Copies of the relevant documents were also attached, (c) in regard to his contact with the applicant while he was in Melbourne on 10 December 2012, the respondent said he did not ask the applicant to return. He said he contacted the applicant to see if he was returning as the Hotel had a booking for 14-16 people the following Tuesday night. He said he cancelled the booking when the applicant indicated he would not be returning to Lockhart by that time, (d) he said: '.. on many occasions I felt threatened and overpowered by [the applicant] in negotiations regarding the Lease. [The applicant] was experienced regarding leases and demanding particular Lease terms', (e) he said the annual Hotel Christmas function had been planned for the weekend of 15 December and 60 people were expected to attend. He said the applicant 'continued to advise he was leaving after this function unless a Lease was signed.' He said he had only just received the letter, dated 13 December 2012, from his solicitor containing advice on the terms the applicant had requested being included in the lease, and (f) he said it was his understanding that the 18 December 2012 letter, signed by his solicitor was a: ' final negotiation regarding the Lease term which were to be included in a subsequent Lease document for signing.' He said he instructed his solicitor to prepare a draft lease incorporating the agreed matters. That draft, he said, was to be sent to the applicant: 'for viewing, completion of the inventory and final approval.' He said his solicitor prepared a draft and posted it to the applicant's solicitor. He said the applicant's solicitor received the draft lease the following morning, (g) he said, on the same morning, he and his wife decided to withdraw the offer to lease because of concerns about the cleanliness of the kitchen and complaints from staff. He said 'as the kitchen and dinning area is contained within the commercial Hotel premises, the manner in which the kitchen is operated reflects upon the operation of our Hotel business', (h) he said he was not aware of the applicant having purchased any equipment for the kitchen. He explained that the applicant had been given a float of $300 to begin operating the kitchen. He also said that the applicant used their supplier accounts to purchase food for use in the kitchen, the majority of which they have paid. 27In their oral evidence the respondent and his wife re-iterated what was contained in their affidavits. The respondent also said that at no time did the applicant make any contribution in the form of rent or the cost of gas and electricity. The gas used at the Hotel was exclusively used in the kitchen. Did the parties enter into an agreement to lease? 28Although the applicant has not brought his claim against the applicant's wife, Mrs Warren, the co-owner of the Hotel, I have assumed he intended to do so. I have also assumed that, at all times, the respondent in his dealings with the applicant was doing so on his behalf and also on behalf of his wife. 29At no time did the applicant contend that his claim arose from a statutory lease arising under subs 8(1) of the RL Act: see Aspromonte Pty Ltd v Zagari [1999] NSWSC 831 at [51], Randi Wixs Pty Ltd v Pokana Pty Ltd (No 2) [2003] NSWADT 4 at [24] to [38] and 73 Union St Retail Pty Ltd v J & S Group Pty Ltd (RLD) [2013] NSWADTAP 32 at [134]. That is, the applicant did not argue that, on 2 November 2012, or any day thereafter: (a) he was in possession of the restaurant as a lessee under a lease, or (b) he paid rent, or (c) he and the respondent executed a lease. 30Nor, in my opinion, on the evidence before the tribunal, was an argument of this nature available. 31The essence of the applicant's argument is that, on 18 December 2012, when he and the respondent agreed to the matters set out in the letter of the respondent's solicitor there was a concluded 'agreement' between himself and the respondent to lease the restaurant. 32As I have explained, the respondent's argument is that no agreement was reached and the agreement of the matters set out in the letter of 18 December 2012 was part of the ongoing negotiations between himself and the applicant in regard to a lease. He went on to argue that the draft lease, prepared by his solicitor and forwarded to the applicant's solicitor, on 19 December 2013, was no more than an offer to lease, which he subsequently withdrew before the offer was accepted. 33The letter of 18 December 2012 was in the following terms: Dear Sirs Re: Warren lease to Moussa Restaurant - Commercial Hotel Lockhart Your re: Ian McLeod I refer to most recent correspondence. The matter has been further discussed with the owner who is prepared to proceed with the matter on the following basis:- 1) The lease to be for a period of 1 year (whether the freehold of the hotel is sold or not). 2) No fixed rent is to be paid. 3) The tenant is to pay 100% of gas consumed on the whole hotel premises and 30% of the electricity consumed on these premises. 4) The tenant will be given quiet enjoyment of the premises pursuant to clause 5 of the lease. 5) The tenant will not be given an option to buy any lease but will be given the first right of refusal should the owner enter into other negotiations relative to both the leasing and selling of the premises. We trust that the tenant has effected public liability insurance relative to his current occupancy. Could you please provide appropriate evidence. (italics added) 34At the bottom right hand side of the letter, the applicant wrote, in handwriting, 'I agree with the above conditions of lease.' 35At the bottom left hand side the respondent's solicitor wrote, in handwriting, 'John Warren agrees to the above conditions.' 36On this day, the applicant's solicitor wrote, to the respondent's solicitor, in the following terms: '... Our client agrees to the lease terms and conditions and has signed a copy of your letter to this effect. So as the matter can be put to rest pending the issue of the lease would you ask your client to also sign a copy of the letter and forward a copy to us by fax as soon as possible. Our client is following up on the public liability insurance and we have requested he let us have this as soon as possible.' 37The respondent's solicitor forwarded a copy of the countersigned letter under the cover of a further letter. In that cover letter the respondent's solicitor said: 'Thank you for your letter of today. We let you have letter signed by the writer on behalf of Mr Warren. This is at the request of Mr Warren. We shall let you have amended Lease for signing as soon as possible. We await receipt of evidence of public liability insurance cover. 38The letter of 18 December does not contain any express words to the effect that by countersigning the letter the parties (i.e. the applicant and the respondent) intended this to form a concluded and binding lease agreement, or agreement to lease. However, as explained above, the meaning of 'retail shop lease and lease', in s 3 of the RL Act, a concluded and binding lease agreement or an agreement to lease need not be express. It can also be implied or inferred from the surrounding circumstances. Accordingly, in my view, the question is what was the intention of the parties when they countersigned the 18 December letter? 39As pointed out by the Tribunal in Perhauz & Anor v SAF Properties Pty Ltd & Ors [2007] NSWADT 122, at [65], in the absence of any of the three 'events' to which s 8 refers (i.e. possession, payment of rent or execution of a lease), an agreement for the lease of a retail shop is nevertheless binding where there is an 'agreement under which a person grants or agrees to grant ... a right of occupation' (emphasis added). The example, given by the Tribunal in Perhauz, of such circumstances was as follows: 67 ... [Nevertheless], the law recognises (see e.g. Progressive Mailing House Pty Ltd v Tabali Pty Ltd (1985) 157 CLR 17 at 25-27) that if two parties on 1 January make a contractually valid agreement, which they both intend to be binding, to the effect that on 1 July one of them will become the lessee of premises owned by the other for a specified period and at a specified rent, that agreement may be enforced by appropriate contractual remedies, such as an award of damages to be paid by the party in breach. 40At [72], in Perhauz, the Tribunal went on to say that even where a consensus is reached between the parties this did not mean that this 'is enforceable as an agreement for a future lease where the words that have been used, considered in the light of surrounding circumstances, state or imply that the parties are not legally bound unless and until a formal lease has been executed.' That is, even where consensus/agreement is reached as to the terms of a lease, in the absence of express words or terms, there remains a question as to whether the parties in reaching a consensus had the intention to conclude a binding agreement. 41In Perhauz, at [82], the Tribunal followed the long established test in determining, in the absence of express words, the intention of the parties at the time a consensus on the terms of a lease are reached. The test is whether a reasonable person would interpret the words used on both sides, taking due account of the context in which they occurred, as expressing a joint intention to conclude a binding lease or agreement to lease. That is, it is an objective test. Ultimately, however, the intention of the parties is a question of fact having regard to all the relevant circumstances. 42At [87], in Perhauz the Tribunal referred to the presumption, or 'expectation' as to when a commercial lease is concluded. The Tribunal went on to discuss some of the relevant authorities, which have dealt with this issue. Although these authorities referred to by the Tribunal concern commercial lease agreements, they are equally applicable to retail shop lease agreements under s 3 of the RL Act. 43The first decision is that of Young J in Arjay Investments Pty Ltd v Morrison's Outdoor Catering Pty Ltd, Unreported, Supreme Court of NSW, 1 May 1995. In that decision, His Honour said: The question as to whether there has been a binding contract in this sort of situation is one which is often difficult to resolve because one has to look at the intention of the parties where the understanding they may have reached is contained in what might be called commercial correspondence often imprecisely formulated. The courts have worked out various guidelines to assist in coming to a conclusion as to whether there is a binding agreement. These are only guidelines and the actual evidence in a case, or the actual intention of the parties, will, of course, mean that one may have to put some of the guidelines to one side, but nonetheless they are helpful. One of these guidelines is that where one has a lease of commercial premises one normally expects that the lease will only come into existence after there has been an exchange of formal documents; Blackburn Developments No 19 Pty Ltd v Downs Surgical (Australia) Pty Ltd (1974) 2 BPR 9141, which applies the Eccles v Bryant [1948] Ch 93 rule for leases. See also Summit Properties Pty Ltd v Comserv (No 784) Pty Ltd (1981) 2 BPR 9173. A second guideline is that if one can see in the negotiations that the parties have in mind the preparation of a more formal document by a solicitor, one tends to think that they did not intend to be bound until the formal document was produced and exchanged. Thirdly, the mere fact that parties have hit upon a price or have worked out the basic conditions of their agreement does not necessarily indicate that they have actually reached agreement; Clifton v Palumbo [1944] 2 All ER 497. Indeed, it is not at all uncommon in a sale of land transaction for estate agents to prepare a document similar to the heads of agreement document in the present case for the purpose of being submitted to the solicitors for both sides so that they have some details from which they can draw a formal document. The mere agreement on the basics does not mean that there is an operative agreement. 44In Dellwest Pty Ltd v Cafabe Pty Ltd Unreported, Supreme Court of NSW, 26 November 1997, Bryson J noted the guidelines referred to by Young J, in Arjay and went on to say: Judges of the Equity Division have, I think it is right to say, approached allegations that there has been an agreement to grant a commercial lease with the knowledge that commercial practice is that a binding relationship is made at the point of execution and delivery of the lease. However that is no more than an approach, as it is quite open to persons in negotiation. Judges of the Equity Division have, I think it is right to say, approached allegations that there has been an agreement to grant a commercial lease with the knowledge that commercial practice is that a binding relationship is made at the point of execution and delivery of the lease. However that is no more than an approach, as it is quite open to persons in negotiation. 45In Long v Piper [2001] NSWCA 342, at [42], Priestley JA said: [48] The issue is whether there was a concluded agreement for lease in that the appellants were legally bound to grant and the respondents were legally bound to take a lease of the hotel on the terms of the draft lease. The fact that there was agreement on the terms in the draft lease does not mean that there was a concluded agreement for lease. As was said by Gleeson CJ in Australian Broadcasting Corp v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540 at 548 - "It is to be noted that the question in a case such as the present is to be expressed in terms of the intention of the parties to make a concluded bargain: see, eg, Masters v Cameron [(1954) 91 CLR 353] (at 360). That is not the same as, although in a given case it may be closely related to, the question whether the parties had reached agreement upon such terms as are, in the circumstances, legally necessary to constitute a contract." 46In my opinion, when objectively assessed, the terms of the communications between the applicant and the respondent and their solicitors and the circumstances in which they were made, the respondent, nor the applicant, intended their consensus on the matters in the letter of 18 December, to conclude a binding lease agreement, or a binding agreement to lease the restaurant of the Hotel. 47It is difficult to infer such an intention from the terms of the 18 December letter, which states no more than the owner being 'prepared to proceed' with the 'matter' on the basis of the matters set out in that letter. The letter also requested evidence of public liability insurance relative to the applicant's 'current occupancy'. At that time, the applicant's occupancy was not as a lessee and the issue of public liability insurance was clearly a matter on which the respondent sought proof before a lease was concluded. 48It is also difficult to infer such an intention from the conduct of the parties prior to this date. On the contrary, the inference arising from the conduct of the applicant and the respondent is that a concluded and binding lease agreement, or agreement to lease would not arise until a written lease was executed by both parties. 49On the evidence before the tribunal, from the time he arrived in Lockhart, the applicant insisted that he needed a 'legal document to have some security' for his commitment. He said he was not prepared to make a commitment to operate a retail business until such time he had that 'legal document'. On the basis of his evidence of previous experience, he clearly meant a written lease that was signed by himself and the respondent. That this was his intention is also consistent with his ongoing threat to leave the Hotel if he did not receive this document. 50Consistent with this intention is the lack of any evidence of the applicant taking any steps to commence operating his own business from the Hotel. While I accept the evidence that he was responsible for running the kitchen after he returned from Melbourne in November 2012, I find that he was doing so as part of the Hotel business generally and not on his own account. 51My finding is also consistent with the letter of the applicant's solicitor of 18 December. In that letter, as I have noted, the solicitor spoke of the 'matter' being put to rest 'pending the issue of the lease.' 52I draw no adverse inferences from the applicant's conduct and I accept that he was only acting to protect his own interests in that he was not going to be committed to a lease until he had it in writing and signed by the respondent. On countersigning the letter of 18 December 2012, the applicant undoubtedly had every expectation that this would occur. That expectation, as events unfolded in the following days, was not realised. 53In my opinion, nor can it be inferred that the respondent intended his agreement to the matters contained in the letter of 18 December 2012 to be a concluded and binding agreement to lease or agreement to lease. A draft lease was forwarded, on the following day, by the respondent's solicitor, to the applicant's solicitor. In the cover letter, the respondent's solicitor said it had been 'prepared for your consideration' and it was noted that an inventory was yet to come. The draft lease was incomplete and contained special conditions, which, in part, did not entirely reflect the matters agreed upon the previous day. 54In my opinion, the conduct of the parties immediately on the day the applicant was informed that the respondent was not going to proceed with the lease is also consistent with my findings. 55On 20 December 2012, the respondent's solicitor wrote to the applicant's solicitor notifying that the applicant was to vacate the premises forthwith. That letter was sent at 11.02 am and was in the following terms: 'We have today received instructions from our client advising that they are not proceeding with the above lease. Would you please notify your client and indicate that he is to forthwith vacate the premises.' 56The applicant, as I have explained, was also residing at the Hotel during the negotiations for a lease. 57The applicant's solicitor replied to this letter, that day, at 4:40pm, in the following terms: 'We refer to your letter of today and confirm the contents thereof have been directed to our client. We are instructed to advise our client will not vacate forthwith as he relies upon the lease confirmation arrangements detailed in your letter of 18 December 2012 and signed by our client and by Mr Goldsmith on instructions from your client. Our client has food orders being delivered to enable him to operate the business. Today we received the lease for our client's approval and signature so our client believed your clients' commitment to the lease was genuine. Your clients are obliged to let the lease stand and to do otherwise is definitely unconscionable conduct on their part. Our client has requested a reason be given for the sudden change of instructions to you about the lease. We have been requested that your clients reconsider their position and revert to the agreed lease terms.' 58I note the applicant's solicitor did not say that a concluded binding lease or agreement to lease had been entered on 18 December. Instead he spoke about 'the lease confirmation arrangements' and having received the lease that day 'for approval' by the applicant. Nor did the applicant's solicitor assert that the respondents' conduct was a breach of a concluded binding agreement between the parties. Instead he seemed to acknowledge the respondents were still able to change their minds as requested they reconsider their position. 59Accordingly, I find that on 18 December 2012, the applicant and respondent did not intend their agreement to the matters identified in the latter dated that day to be a concluded binding lease agreement or agreement to lease. Damages, specific performance 60On the basis of my findings it is unnecessary for me to deal with the remedies sought by the applicant, or the claim, in the alternative, by the respondent that the applicant had breached the lease. 61For completeness, on the information before the tribunal, I would make the following remarks in regard to the remedies sought by the applicant. 62As a general rule, an order for specific performance of a personal obligation under a contract will only be made where damages would be an inadequate remedy: Hewett v Court (1983) 149 CLR 639 at 665. In this application, had the applicant succeeded in his claim on liability, damages would, in my opinion, be an adequate remedy. 63In this application, had the applicant succeeded in his claim, the main component of his damages claim would be the net amount of estimated losses of being deprived of running a business from the Hotel. In this regard the applicant failed to provide sufficient evidence on which such losses could be estimated. This is largely due to the short period in which he operated the kitchen and the fact that he did not run it as his own business. As he did not run the business he was not able to identify what his ongoing costs would be. I also note that the period during which he did operate the kitchen he catered for functions, organised by the respondents, during that Christmas festive period. I also note the respondent's contention that the estimates provided by the applicant far exceeded what the Hotel business had earned prior to this from the restaurant. Unconscionable conduct 64S 62 B of the RL Act prohibits a lessor and a lessee from engaging in conduct, in connection with a retail shop lease, that in all the circumstances is unconscionable. In so far as that section relates to a lessor, it provides as follows: 62B Unconscionable conduct in retail shop lease transactions (1) A lessor must not, in connection with a retail shop lease, engage in conduct that is, in all the circumstances, unconscionable. (2) ... (3) Without in any way limiting the matters to which the Tribunal may have regard for the purpose of determining whether a lessor has contravened subsection (1) in connection with a retail shop lease, the Tribunal may have regard to: (a) the relative strengths of the bargaining positions of the lessor and the lessee, and (b) whether, as a result of conduct engaged in by the lessor, the lessee was required to comply with conditions that were not reasonably necessary for the protection of the legitimate interests of the lessor, and (c) whether the lessee was able to understand any documents relating to the lease, and (d) whether any undue influence or pressure was exerted on, or any unfair tactics were used against, the lessee or a person acting on behalf of the lessee by the lessor or a person acting on behalf of the lessor in relation to the lease, and (e) the amount for which, and the circumstances under which, the lessee could have acquired an identical or equivalent lease from a person other than the lessor, and (f) the extent to which the lessor's conduct towards the lessee was consistent with the lessor's conduct in similar transactions between the lessor and other like lessees, and (g) the requirements of any applicable industry code, and (h) the requirements of any other industry code, if the lessee acted on the reasonable belief that the lessor would comply with that code, and (i) the extent to which the lessor unreasonably failed to disclose to the lessee: (i) any intended conduct of the lessor that might affect the interests of the lessee, and (ii) any risks to the lessee arising from the lessor's intended conduct (being risks that the lessor should have foreseen would not be apparent to the lessee), and (j) the extent to which the lessor was willing to negotiate the terms and conditions of any lease with the lessee, and (k) the extent to which the lessor and the lessee acted in good faith. (4) ... (5) A person is not to be taken for the purposes of this section to engage in unconscionable conduct in connection with a retail shop lease by reason only that the first-mentioned person institutes legal proceedings in relation to that lease or refers to arbitration a dispute or claim in relation to that lease. (6) A person is not to be taken for the purposes of this section to engage in unconscionable conduct in connection with a retail shop lease by reason only that the first-mentioned person fails to renew the lease or issue a new lease. (7) For the purpose of determining whether a lessor has contravened subsection (1) or whether a lessee has contravened subsection (2): (a) the Tribunal must not have regard to any circumstances that were not reasonably foreseeable at the time of the alleged contravention, and (b) the Tribunal may have regard to circumstances existing before the commencement of this section but not to conduct engaged in before that commencement. (8) A lessor or lessee, or former lessor or lessee, who suffers loss or damage by reason of unconscionable conduct of another person that is in contravention of this section may recover the amount of the loss or damage by lodging a claim against the other person under section 71A. (9) If the matter of such loss or damage arises in connection with a matter the subject of proceedings in the Tribunal, the Tribunal may proceed to decide it, and in so doing may award such sum as it thinks fit. (10) In this section: lessee or former lessee includes a person who is a guarantor or covenantor under a lease or former lease. 65In Attorney-General of New South Wales v World Best Holding Ltd (2005) 63 NSWLR 557; (2005) 223 ALR 346 and [2005] 261, at [121], Spigelman CJ made the following remarks about the concept of 'unconscionability' as it appears in the RL Act and referred to in the Minister's Second Reading Speech: 121 ... [Unconscionability] is a concept which requires a high level of moral obloquy. If it were to be applied as if it were equivalent to what was "fair" or "just", it could transform commercial relationships in a manner which the Minister expressly stated was not the intention of the legislation. The principle of "unconscionability" would not be a doctrine of occasional application, when the circumstances are highly unethical, it would be transformed into the first and easiest port of call when any dispute about a retail lease arises. 66In my opinion, on the material before the tribunal, the applicant and the respondent were in equal bargaining positions. Furthermore, both had legal representation. There is no evidence of the applicant having to comply or being requested to comply with conditions that were not reasonably necessary to protect the applicant's legitimate interests. On the contrary, the evidence is that both parties sought to protect their respective interests and no unreasonable conditions were sought or imposed by or on either party. While the applicant pressed, as a matter of urgency, for a written lease and the respondent did not respond as quickly as the applicant hoped, in my opinion, it cannot be said that the respondent was not willing to negotiate. 67Both acted in good faith and there is no evidence of undue influence or pressure being exerted on the applicant. Nor, in my opinion does the conduct of the respondent asking the applicant to leave the Hotel amount to unfair tactics in the relevant sense. I can understand that being told that the respondent did not wish to proceed with the lease and then being asked to leave the Hotel caused the applicant considerable distress. However, I am not persuaded that the circumstances in which this occurred was unfair let alone unconscionable in the relevant sense. Conclusion and Orders 68In summary, for the reasons set out above, I find that the applicant failed to establish that he and the respondent had entered a concluded and binding lease, or agreement to lease the restaurant of the Hotel. Accordingly, there is no breach of agreement giving rise to a claim for damages. 69On the basis of my findings, the appropriate order is to dismiss the applicant's application. 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: 22 August 2013