Subway Realty Pty Ltd v Nekon Pty Ltd [2013] NSWADT 231

Administrative Decisions Tribunal New South Wales Medium Neutral Citation: Subway Realty Pty Ltd v Nekon Pty Ltd [2013] NSWADT 231 Hearing dates: 15 July 2013 Decision date: 17 October 2013 Jurisdiction: Retail Leases Division Before: K Rickards, Judicial Member Decision: 1. The Application is dismissed. 2. The parties must file and serve any further written submissions as to costs within 14 days. The Tribunal will thereafter determine any order as to costs upon the basis of filed papers in accordance with section 73 of the Administrative Decisions Tribunal Act 1997. Catchwords: Misleading and deceptive behaviour; Estoppel Legislation Cited: Retail Leases Act 1994 Cases Cited: Davis v Sydney Harbour Foreshore Authority (No 2) [2009] NSWADT 276; Xin v Zakos [2002] NSW ADT 189 Waltons Stores (Interstate) Limited v Maher [1998] HCA 7 Waterman v Gerling Australia Insurance Company Pty Ltd [2005] NSWSC 1066 Category: Principal judgment Parties: Subway Realty Pty Ltd (Applicant) Strokers Pty Ltd (Applicant) Nekon Pty Ltd (Respondent) Representation: Counsel M Klooster (Applicants) D Pritchard SC (Respondent) Cordato Partners (Applicants) Uther Webster & Evans (Respondent) File Number(s): 125144

REASONS FOR DECISION 1The Respondent ("Nekon") is the owner of the Waratah Village Shopping Centre at Waratah, New South Wales. This centre comprises a number of individual shops, some with adjoining outdoor areas. 2On 1 September 2008 the First Applicant ("Subway") entered into a lease agreement in respect of Shop 4 at the shopping centre ("the premises") for a period of 3 years with two 5 year options ("the Lease"). 3The Second Applicant ("Strokers") is a franchisee which has operated a "Subway" takeaway food outlet from the premises since about August 2009. 4It is common ground that the Lease is a retail lease agreement for the purposes of the Retail Leases Act 1994 (the "RL Act") and that the premises comprise a retail shop for the purposes of the RL Act. 5The dispute which is the subject of these proceedings concerns an outdoor area immediately adjacent to the premises which has been used by Subway patrons for the consumption of Subway takeaway food. 6During the initial term of the Lease, Nekon allowed a number of operators of food outlets operating in the vicinity of the premises, and including the Subway business conducted at the premises, to place tables and chairs in the areas immediately outside their respective shops for use by customers. 7By notice given on 24 May 2011, Subway exercised its option to renew the Lease for the period 1 September 2011 to 31 August 2016 (the "New Lease"). 8After the option to renew was exercised, there was discussion between the parties about formalising the arrangement for use by the Applicants of the seating area immediately outside the premises. 9Renewal of the Lease also required setting of a new market rent for the premises for the first year. After a period of negotiation between the parties extending over a number of months, agreement was reached that the new amount of rent payable for the first year of the renewed term would be $64,500 per annum plus GST. At the same time, tentative agreement was also reached between the parties concerning the nature and extent of tenancy fit out works required under the terms of the Lease, and it was also agreed that Subway would be permitted to use the area of approximately 25 square metres immediately outside the premises for outdoor seating subject to certain conditions. 10The Respondent's agent Matthew Yovich sent a letter or communication to the First Applicant on 7 September 2011 which reflected what Nekon understood to be the precise items of agreement and sought confirmation from the First Applicant. Its terms were as follows: "WARATAH VILLAGE Re: Lessee confirmation of Market rent review and proposed works Tenancy: SHOP 4 - SUBWAY Attention: Glenn Robertson Date: 7 September 2011 Dear Glenn Further to our recent discussions and the signed correspondence date 16 August 2011, we confirm the following Market rent review $64,500 per annum + GST agreed Tenancy fitout works The following works to be undertaken by the franchisee prior to 16th October 2011. Above shopfront signage to be cleaned and internally illuminated and re-positioned post installation in accordance with the fitout guide. New signage at the front of the awning in accordance with the fitout guide including power supply from the tenancy. Purchase of new outdoor tables in accordance with the Lessor's specifications Replacement of any outdoor seating more than 12 months old, with new wicker furniture in accordance with the Lessor's specifications Alterations to exposed electrical cables and power point adjacent to the shopfront to ensure these are concealed Note: Graphic treatment to shopfront no longer required Licensed Seating Area Lessee to be granted use of an approx. 25m2 outdoor seating area as per attached outdoor seating plan (final configuration to be finalised) conditional upon the following; Lessee responsible for provision and maintenance of furniture and upgrade as may reasonably be required; and Lessee responsible for removal of rubbish, cleaning and maintaining of tables. Chairs and tables must be adequately cleaned and maintained at all times; and The Lessee providing proof that the Lessee's public liability insurance policy covers the licensed seating area; and Provided there is no adverse effect or interference to the use of the shopping centre by the public or quiet enjoyment of shop premises leased to other tenants. Please confirm the above by signing and returning a copy of this correspondence. Don't hesitate to contact me should you have any queries. Regards Brookfield Partnership Matthew Yovich On behalf of Nekon Pty Ltd cc: Robert Rockefeller" 11The above document provided for execution and return by the Applicants; there is no dispute that this was done. 12As outlined above, the dispute which is the subject of these proceedings relates to the nature and extent of any subsisting rights of the Applicants relating to use of this outdoor seating area adjacent to the premises. 13On or about 5 January 2012, Nekon submitted a new lease agreement to the First Applicant which contained clause 30.1 in the following terms: 30.1 The Lessor as Licensor agrees to grant the Lessee as Licensee a licence to use a area of approximately 28m2 for outdoor seating ('the licensed area'), upon payment of a licence fee of $1.00 per annum, subject to the following conditions:- (a) The Licensee, at the Licensee's expense, will be required to provide furniture in accordance with the licensor's furniture design guidelines and ensure that the furniture is adequately maintained and/or replaced where reasonably required; (b) The Licensee will be required to ensure that the licensed area and tables and chairs are serviced, cleared and cleaned at all times during the Licensee's trading hours with inspections of the licensed area and tables and chairs to be undertaken every 30 minutes at a minimum; (c) The Licensee will be required to ensure that the tables and chairs are correctly positioned within the licensed area during trading hours and stored in the lessee's Premises outside of normal trading hours; (d) The Licence will be required to provide evidence that the Lessee's public liability insurance policy, and worker's compensation insurance policy, covers the licensed area; (e) The Licensee's use of the licensed area shall not cause any adverse effect or interference to the use of the Shopping Centre by the public, or to the quiet enjoyment of shop premises leased to other tenants; (f) The Licensor reserves the right to restrict the use of the licensed area and the number of tables and chairs placed in the licensed area at any time in the event that the Licensee is in breach of any of the conditions referred to herein; and (g) The Licensor reserves the right to increase the licence fee at the end of the initial twelve (12) month period. 14The Applicants say that the above terms do not reflect the terms agreed to by the parties in September 2011 for the licensing and use of the outdoor seating area and upon which the Applicants proceeded in entering into a new lease, undertaking certain work and continuing to operate their business at the premises. Their present claim is that Nekon has engaged in misleading and deceptive behaviour and that it is estopped from continuing its commercial relationship with the Applicants upon any basis other than the new lease agreement which should be "modified" by the Tribunal to include a different clause 30.1 in the following terms: 30.1 The Lessor as Licensor agrees to grant the Lessee as Licensee a licence to use an area of approximately 28m2 immediately adjacent to the premises for outdoor seating ('the licensed area'), upon payment of a licence fee of $1.00 per annum, subject to the following conditions:- The Licensee, at the Licensee's expense, will be required to provide furniture and ensure that the furniture is adequately maintained and/or replaced where reasonably required; The Licensee will be required to ensure that the licensed area and tables and chairs are serviced, cleared and cleaned at all times during the Licensee's trading hours. The Licensee will be required to ensure that the tables and chairs are positioned within the licensed area during trading hours and stored in the Lessee's premises outside of normal trading hours; The Licensee will be required to provide evidence that the Lessee's public liability insurance policy, and worker's compensation insurance policy, covers the licensed area; The Licensee's use of the licensed area shall not cause any adverse effect or interference to the use of the Shopping Centre by the public, or to the quiet enjoyment of shop premises leased to other tenants; Despite this clause 30, the Licensee's right to use the licensed area may be terminated by the Licensor without compensation at any time by written notice to the Licensee if the Licensee breaches the provisions of this clause 30 and such breach has not been rectified within a reasonable time of receiving notice in writing of the breach from the Licensor to the Licensee; Written notice as referred to in clause f. above if only deemed to have been served upon the Licensee on the day sent if it is sent by email to haydn.amanda@aapt.net.au; and glenn@subwaynsw.com.au; The Licensee may surrender this licence by giving no less than 72 hours' notice to the Licensor. 15Given the present dispute, the new lease agreement has not been executed but all of its terms other than the proposed clause 30.1 have apparently been adhered to by the parties, pending resolution of this matter. 16On 7 September 2012 Nekon issued a notice of termination of the licence agreement relating to the Applicants' use of the subject seating area. Nekon was restrained by the Tribunal from taking any further action in reliance upon such notice, pending final determination of these proceedings. 17It is remarkable that a dispute of this type concerning the terms of use of a relatively small outdoor seating area adjacent to retail shop premises has not been able to be resolved without recourse to a contested hearing involving a large quantity of evidentiary material and submissions, given the commercial background of the parties and their ongoing relationship pursuant to the renewed Lease.