Civil and Administrative Tribunal New South Wales Medium Neutral Citation: Coslo Foods Pty Ltd v Bardouh [2014] NSWCATAP 97 Hearing dates: 13 October 2014 Decision date: 04 December 2014 Jurisdiction: Appeal Panel Before: Acting Judge K P O'Connor, AM, Deputy President K Rosser, Senior Member Decision: Appeal dismissed. Catchwords: RETAIL LEASES -valid exercise of option to renew by lessee - lock-out of lessee following notice to quit after expiry of original lease - held option had been renounced by lessee by conduct prior to lock-out - therefore notice to quit effective - Appeal - whether Tribunal erred in law -standard to be applied in relation to a finding of renunciation - Tribunal did not misapply standard to facts - communication on which the Tribunal primarily relied for its finding was considered in context - lock-out premature by one day - whether Tribunal failed properly to quantify appellant's loss of stock in its damages award against the respondent - no error - appeal dismissed. Legislation Cited: Retail Leases Act 1994 Civil and Administrative Tribunal Act 2013 Cases Cited: Abalos v Australian Postal Commission [1990] HCA 47; (1990) 171 CLR 167 Apriaden Pty Ltd v Seacrest Pty Ltd [2005] VSCA 139 Caldwell v Hill [2000] NSWCA 239 Collector of Customs v Pozzolanic [1993] FCA 456; (1993) 43 FCR 280 Craig v South Australia (1995) 184 CLR 163 Devries v Australian National Railways Commission [1993] HCA 78; (1993) 177 CLR 472 Fox v Percy [2003] HCA 22; (2003) 214 CLR 118 Golden Harvest (Australia) Pty Ltd v Paing Pty Ltd & Ors (RLD) [2002] NSWADTAP 40 Gumland v Duffy [2006] NSWSC 10 Hawkhouse Pty Ltd v La Cava Holdings Pty Ltd (FC(WA), 17 December 1991 Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd (2007) 233 CLR 115 Kirk v Industrial Relations Commission of NSW (2010) 239 CLR 531 Lotz v Coco Chocolates Pty Ltd [2013] NSWADTAP 43 Minister for Immigration & Ethnic Affairs v Wu Shan Liang [1996] HCA 6; (1996) 185 CLR 259 Minister for Immigration and Multicultural Affairs v Yusuf (2001) 206 CLR 323 Progressive Mailing House Pty Ltd v Tabali Pty Ltd [1985] HCA 14; (1985) 157 CLR 17 Shevill v Builders' Licensing Board [1982] HCA 47; (1982) 149 CLR 620 Soliman v Roads and Maritime Services (GD) [2012] NSWADTAP 11 State Railway Authority of New South Wales v Earthline Constructions Pty Ltd (In Liq) [1999] HCA 3; (1990) 160 ALR 588 Tyco v Optus Networks [2004] NSWCA 333 Texts Cited: - Category: Principal judgment Parties: Coslo Foods Corp Pty Ltd (Appellant) Ali Bardouh and Soumaya Bardouh (Respondents) Representation: M Mandoh (Appellant) M Southwick (Respondent) Surry Partners (Respondent) File Number(s): AP 14/46321 Decision under appeal Citation: [2014] NSWCATCD 2 Date of Decision: 2014-02-28 00:00:00 Before: D Patten (Principal Member) G Pinter (General Member, as adviser) P Drake (General Member, as adviser) File Number(s): 125137/135021 reasons for decision 1This is an appeal against a decision of the Consumer and Commercial Division of this Tribunal made under the Retail Leases Act 1994 (RLA): Coslo Foods Corp Pty Ltd v Ali Bardouh and Soumaya Bardouh [2014] NSWCATCD 2 (28 February 2014). 2The Tribunal below dealt with two applications for relief. In the first (no 125137) (a combined retail tenancy claim and unconscionable conduct claim) the former lessee of a retail shop (Coslo) sought substantial damages ($350,000) for wrongful termination of the lease by the assignees of the original lessor (the Bardouhs), and sought a number of other orders. In the second (no 135021) (a retail tenancy claim) the assignees (the Bardouhs) sought damages for rental arrears and for various make good items. 3The Bardouhs had on 28 March 2012 purchased at auction the freehold of land that contained the premises the subject of a lease to Coslo due to expire on 20 April 2012. The lease was renewable for a further term of three years. The Tribunal found that Coslo had effectively exercised that option on the first permitted date for that purpose, 19 October 2011. The sale was made subject to existing tenancies, and was completed on 14 June 2012. As at 14 June 2012, the new option lease had not been finalised. Coslo remained in occupation. The Bardouhs gave Coslo one month's notice to quit on 3 July 2014. The Bardouhs locked Coslo out overnight on 2/3 August 2014, one day short of the notice period. 4The critical issue in the case was whether Bardouhs' conduct was in breach of the lessee's rights as an option-holder who taken up the option for renewal. The Bardouhs submitted that Coslo had by its conduct renounced the option, and therefore was at the date of the notice to quit merely a tenant holding over under the expired lease on a month to month basis. Coslo submitted that it had not forgone the benefit of the option. It submitted that it was still engaged in negotiations with the Bardouhs when the lock-out occurred over the terms of the new lease that needed to be settled afresh, most importantly, the amount of rent for the new term. 5The Tribunal upheld the submission of the Bardouhs' and found that by its conduct Coslo had renounced the option. 6This ruling is the primary subject of the appeal. Background 7It is of assistance to provide an extended account of the background to this dispute. The narrative that follows is drawn from parts of the Tribunal's reasons and a review of the first instance file, and the material received into evidence as exhibits. The hearing took four days. (There is no transcript available.) 8The shop comprised two frontages, located at 243-245 Northumberland Street, Liverpool. As at 2012 it had been the site of a mixed business for 17 years, trading in Indian groceries, foods and spices, and Indian videos. The Varma family had conducted the business since about the year 2000 under the business name, 'Vinayak'. Since at least 2003, the owners of the freehold had been Mr A Varma and his two sons. Coslo had one shareholder and sole director, Mr Varma's wife, Mrs S Varma. The registered proprietors had mortgaged the freehold in 2003 to secure a loan. 9At para [8] of its reasons the Tribunal said, alluding to the family connection between the parties to the lease, 'it seems clear that the lessee, no doubt with the acquiescence of the lessor rarely if ever actually paid the precise amount of rent payable'. It also noted that the rent reviews did not occur, and having regard to the accounts placed in evidence 'it is possible on occasion rent was paid by a family member instead of Coslo'. 10By 2011 the registered proprietors were in financial difficulty. On 4 August 2011 The mortgagees took action against them, and obtained judgment for possession of the land. Coslo exercised its option to renew the lease, as noted earlier, on 19 October 2011. On 24 January 2012 the mortgagees obtained an order for possession of the land. On 19 February 2012 the mortgagees served a section 63 notice on the registered proprietors, giving rise to the sale by auction on 28 March 2012 to which we referred above. 11The mortgagees locked Coslo out on Thursday 5 April 2012 (just before the Easter weekend). Coslo applied to the Supreme Court for relief against forfeiture, resulting in interim orders (12 April 2012) allowing them to remain in occupation subject to payment of rent as due and other terms. Final orders to similar effect were made by consent on 6 June 2012. As noted above, the sale to the Bardouhs was completed on 14 June 2012. 12On 4 May 2012 the solicitors for the mortgagees had written to the solicitors for the Bardouhs stating that they had 'not at this stage prepared a lease for the option period given the default of Coslo under the terms of the unregistered lease.' The reference to default is to the alleged non-payments of rent that founded the lock out of Thursday 5 April. The Bardouhs began to negotiate with Coslo over the new lease from about 14 May 2012. First Instance Decision 13Coslo's case, in essence, was that it had been was an option-holder who had given proper notice of exercise of the option, and was entitled to call upon the new registered proprietors for a new lease at an agreed rental, or market rental determined in accordance with the lease or pursuant to s 31 of the RLA. Section 31 provides: 31 Reviews of current market rent (1) A retail shop lease that provides an option to renew or extend the lease at current market rent is taken to include provision to the following effect: (a) The current market rent is the rent that would reasonably be expected to be paid for the shop, as between a willing lessor and a willing lessee in an arm's length transaction (where the parties are each acting knowledgeably, prudently and without compulsion), determined on an effective rent basis, having regard to the following matters: (i) the provisions of the lease, (ii) the rent that would reasonably be expected to be paid for the shop if it were unoccupied and offered for renting for the same or a substantially similar use to which the shop may be put under the lease, (iii) the gross rent, less the lessor's outgoings payable by the lessee, (iv) rent concessions and other benefits that are frequently or generally offered to prospective lessees of unoccupied retail shops. The current market rent is not to take into account the value of goodwill created by the lessee's occupation or the value of the lessee's fixtures and fittings on the retail shop premises. (b) If the lessor and the lessee do not agree as to what the actual amount of that rent is to be, the amount of the rent is to be determined by valuation carried out by a specialist retail valuer appointed by agreement of the parties to the lease, or failing agreement, by the Tribunal. (c) The matters set out in paragraph (a) are to be taken into account by a specialist retail valuer appointed under paragraph (b) in determining the amount of the rent. (d) The lessor must, not later than 14 days after being requested to do so by a specialist retail valuer appointed under paragraph (b), supply the valuer with information (where reasonably available to the lessor) requested in a list provided by the valuer to assist the valuer to determine the current market value, including the following information about leases for comparable retail shops in the same building or retail shopping centre: (i) current rental for each lease, (ii) rent free periods or any other form of incentive, (iii) recent or proposed variations of any lease, (iv) outgoings for each lease, and including any other information prescribed by the regulations. (e) A valuation for the purposes of paragraph (b) is to be in writing and to contain detailed reasons for the specialist retail valuer's determination and to specify the matters to which the valuer had regard for the purposes of making his or her determination. (f) The parties to the lease are to pay the costs of a valuation by a specialist retail valuer appointed under paragraph (b) in equal shares. Note. The procedure provided by this section can be avoided if the parties can come to an agreement as to what the rent is to be. (1A) A party to a lease may apply to the Tribunal for the appointment of a specialist retail valuer for the purposes of subsection (1) (b). (1B) A party to a lease may make written submissions to a specialist retail valuer to assist in the valuer's consideration of the valuation, and the valuer must consider any such written submissions. (2) A specialist retail valuer must make a valuation of a current market rent for the purposes referred to in this section not later than 1 month after receiving the information referred to in subsection (1) (d). (3) A specialist retail valuer may apply to the Tribunal under Part 8 for an order that a lessor comply with a request referred to in subsection (1) (d) to supply relevant information about leases for retail shops situated in the same building or retail shopping centre to assist the valuer to determine the rent. (4) The reasons and matters included in a valuation as referred to in subsection (1) (e) must not be set out in a way that discloses information identifying other leases or parties to other leases or relating to the business of parties to other leases. This subsection does not apply to leases between the parties to the lease for which the valuation is made or to leases whose parties consent to the disclosure of the information. 14Coslo referred in its submissions at first instance (written submissions, 23 August 2013) to the speed with which the Bardouhs had installed a new tenant after the lockout (lockout 2/3 August, new tenant 13 August). It pressed the case that the Bardouhs had a tenant in the wings ready to take over, and were not serious about any negotiations to renew the lease. 15The Tribunal held that the notice purporting to exercise the option on which Coslo relied was an effective one and would, ordinarily, have entitled them to a renewal on the basis set out in the lease. However, it referred to the subsequent negotiations between the parties, and concluded that, by its conduct, Coslo had renounced the option. It held at [45] that 'communications emanating from Coslo especially the email of 16 June [2012] evince an intention to be no longer bound by any obligations arising from the exercise of the option and communications from Bardouh indicate an acceptance of that repudiation'. 16Coslo did not seek to return to the premises after the lock out. The Tribunal found that the Varmas relocated the business to an address about 200m away, 25-27 Scott Street, Liverpool: see further [52] ff. 17The Tribunal dismissed Coslo's primary claim, but did make an order against the Bardouhs to pay Coslo $10,000 in damages in respect of tenants' fixtures retained by the Bardouhs: see [59]. It noted in that regard that Coslo had been deprived of the opportunity to remove its property during 3 August 2012, as the Bardouhs effected entry into the premises, and thereby committed an unlawful trespass, by securing the property overnight on 2/3 August which was earlier than the time specified by the notice of 3 July 2012. In response to other claims by Coslo, the Tribunal found no evidence of unconscionable conduct or of deceptive and misleading conduct by the Bardouhs. In relation to the Bardouhs' application the Tribunal rejected the element of the claim relating to arrears of rent, and granted its make good claim in two aspects, awarding it the cost of removing rubbish from the premises ($4313), and the cost of replacing a tile ($100), total $4413. There was no order for costs. The Appeal 18Coslo now appeals. The appeal is governed by the provisions of the Civil and Administrative Tribunal Act 2013, primarily s 80(2). 19The right to appeal is confined to 'any question of law'. The Appeal Panel has a discretion to permit the appeal to extend to 'any other ground' (in effect, questions of fact, and perhaps mixed questions of fact and law). That discretion is the subject of further direction in the case of appeals from the CCD, as here: see sched 4, cl 12. The Appeal Panel must be satisfied that the appellant may have suffered a 'substantial miscarriage of justice' on one or more of the bases set out in that provision. 20The notice of appeal was lodged on 31 March 2014. It was prepared by Mr A Varma, on behalf of Coslo. It sought to have the Tribunal's decision set aside as it affected Coslo, and orders substituted in terms of those sought in the original proceedings by Coslo. The grounds set out in the notice of appeal were wide-ranging, and did not identify with any clarity specific questions of law. The notice attached numerous documents, seen as refuting the Tribunal's key findings of fact, especially in relation to the question of the continued operation of the option. 21The notice included an application for an extension of appeal to 'other grounds' and set out matters seen as relevant to the criteria found in the special provision affecting CCD appeals. The respondents, the Bardouhs, filed their notice in reply on 17 April 2014. Coslo filed on 11 August 2014 a revised bundle of documents (page nos 1-71). 22At the commencement of the hearing there was an application from Mr Southwick for the Bardouhs to have the proceedings struck out for non-compliance with directions, supported by submissions filed 10 October 2014. Mr Southwick's application referred to the delays caused by Mr Varma in complying with the directions timetable, and the lack of clarity of the notice of appeal, and its oppressiveness. In reply Coslo said that it had sought and been granted extensions to the timetable, while it waited for an application to the Tribunal for the transcript of the four-day hearing to be provided (not granted), and sought legal aid for legal representation. 23By the day of the hearing, Coslo did have the services of a legal representative, Mr M Mandoh, barrister. (Coslo had been represented at first instance by Mr S Reuben, barrister. The Bardouhs' representative, Mr Southwick, had appeared for them below.) 24In declining to grant the respondents' application, the Appeal Panel noted that Coslo was now legally represented, and noted that written submissions handed up at the hearing prepared by Mr Mandoh, in effect confined the scope of the appeal to two questions, cast as questions of law: (a) whether in finding that the option had been renounced the Tribunal erred in law; and (b) whether the Tribunal erred in law in its approach to the quantification of the loss suffered by Coslo as a result of the premature lock-out. 25While Mr Southwick had had no opportunity to prepare any written submissions directly replying to Mr Mandoh's submissions, he agreed to proceed to have the appeal heard without an adjournment for that purpose. Internal Inconsistency 26We will deal first with the second of the two points made in the submissions in relation to Tribunal's reasoning in support of its finding that the option was renounced. 27Coslo submitted that there is an apparent inconsistency in the findings of the Tribunal that itself points to an error of law. The whole of para [45] is expressed as follows: 45. This letter [of 28 June 2012] was followed within a few days by the notice dated 3 July to vacate the premises on 3 August. That notice seemed to proceed on the assumption stated in the letter of 28 June that Coslo was then a monthly tenant holding over under the expired lease. In my opinion that was a correct assumption. As it seems to me the communications emanating from Coslo especially the email of 16 June evince an intention to be no longer bound by any obligations arising from the exercise of the option and communications from Bardouh indicate an acceptance of that repudiation. 28The submission is that it is logically inconsistent and erroneous for the Tribunal to have found that the holding over provisions of the lease were applicable, while at the same time finding that the option lease had validly arisen in the interim. 29In our view, this is a misreading of the Tribunal's reasoning. The Tribunal is saying that as at 28 June 2012 the legal position in its view was that the option had been renounced (or repudiated) by conduct, with the result that the tenant was in occupation of the premises on a month to month basis. If the Tribunal's original premise is correct (option renounced), then this is clearly the case. There had been none of the additional steps taken to finalise a new option lease by the date from which the new term would have commenced, 20 April 2012, so matters remained in flux pending that step. The Tribunal's analysis is no more than the orthodox one, if its original premise is correct. We now turn to the attack on the original premise. Whether Option Renounced 30Clearly it is unusual and serious for a tribunal to hold that a validly-given notice of an option has been renounced by the giver of the notice by reason of subsequent conduct. The following observations of Macready AssJ in Gumland v Duffy [2006] NSWSC 10 are, we consider, apposite: [R]epudiation is a serious matter not lightly to be found or inferred: Shevill v Builders' Licensing Board [1982] HCA 47; (1982) 149 CLR 620 per Wilson J at 633; Apriaden Pty Ltd v Seacrest Pty Ltd [2005] VSCA 139. This is particularly so in the case of a lease: Progressive Mailing House Pty Ltd v Tabali Pty Ltd [1985] HCA 14; (1985) 157 CLR 17 at 32-33. There must be an actual renunciation of the party's liabilities, conduct by which it makes further performance impossible or a declaration that it will only carry out its obligations if it feels like it: Shevill at 625-6, 633. Whether the conduct in question amounts to repudiation involves a close consideration of all the surrounding circumstances: Hawkhouse Pty Ltd v La Cava Holdings Pty Ltd (FC(WA), 17 December 1991, BC9100857. 31In a leading case on repudiation in the Australian contract law, Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd (2007) 233 CLR 115 at [44] Gleeson CJ, Gummow, Heydon and Crennan JJ said (footnotes omitted, emphasis added): The term repudiation is used in different senses. First, it may refer to conduct which evinces an unwillingness or an inability to render substantial performance of the contract. This is sometimes described as conduct of a party which evinces an intention no longer to be bound by the contract or to fulfil it only in a manner substantially inconsistent with the party's obligations. It may be termed renunciation. The test is whether the conduct of one party is such as to convey to a reasonable person, in the situation of the other party, renunciation either of the contract as a whole or of a fundamental obligation under it. ... Secondly, it may refer to any breach of contract which justifies termination by the other party. ... There may be cases where a failure to perform, even if not a breach of an essential term (as to which more will be said), manifests unwillingness or inability to perform in such circumstances that the other party is entitled to conclude that the contract will not be performed substantially according to its requirements. This overlapping between renunciation and failure of performance may appear conceptually untidy, but unwillingness or inability to perform a contract often is manifested most clearly by the conduct of a party when the time for performance arrives. In contractual renunciation, actions may speak louder than words. 32Therefore, if renunciation is asserted, the Tribunal must undertake an objective appraisal of the conduct of the party said to have renounced by reference to the likely judgment of a reasonable person in the situation of the other party. To similar effect, Lotz v Coco Chocolates Pty Ltd [2013] NSWADTAP 43 at [67] (Chesterman DP presiding), a case arising the Tribunal's retail leases jurisdiction, referring in turn to Shevill at 625-6 per Gibbs CJ. For an example of the application of the test to a lease dispute, there a case where the lessor was found to have engaged in conduct that amounted to renunciation of its obligations under the lease, see Caldwell v Hill [2000] NSWCA 239 esp per Mason P at [34] ff. 33Coslo's submission is that the Tribunal arrived at an erroneous finding that was fundamental to its ultimate ruling in the case; and contended that the mistake was such that it constituted an error of law going to jurisdiction of the kind to which cases such as Craig v South Australia (1995) 184 CLR 163 at 179; Minister for Immigration and Multicultural Affairs v Yusuf (2001) 206 CLR 323 at [82]; and Kirk v Industrial Relations Commission of NSW (2010) 239 CLR 531 at [60]-[70]. 34The Appeal Panel is exercising its statutory jurisdiction to hear an appeal on a question of law. It is not called on to address the question of the limits on the judicial review function of superior courts to which the case-law on jurisdictional error primarily speaks. 35The Appeal Panel accepts, as did its predecessor, that a finding of fact on a critical matter may miscarry to such a degree that an error of law arises: see, generally in the retail leases context, Golden Harvest (Australia) Pty Ltd v Paing Pty Ltd & Ors (RLD) [2002] NSWADTAP 40. As noted more recently in Soliman v Roads and Maritime Services (GD) [2012] NSWADTAP 11 at [20]: It is unusual for an appeal body to upset a finding of fact made by a trial body. Appeal courts have used a variety of terms to explain the point at which they will intervene and hold that the trial body so misunderstood the material before it as to commit an error of law. The point of intervention has been described, for example, as being 'no evidence' for a finding, where it is 'glaringly improbable', or where 'critical evidence' to the contrary of the finding has not been taken into account. The point of intervention is similarly tightly drawn in relation to assessments of the credibility of a witness. See generally, Abalos v Australian Postal Commission [1990] HCA 47; (1990) 171 CLR 167, Devries v Australian National Railways Commission [1993] HCA 78; (1993) 177 CLR 472, State Railway Authority of New South Wales v Earthline Constructions Pty Ltd (In Liq) [1999] HCA 3; (1990) 160 ALR 588 and Fox v Percy [2003] HCA 22; (2003) 214 CLR 118. 36The debate therefore is always whether there has been a miscarriage of such a degree that the ordinary protection of findings of fact from appeal on the ground of question of law is lost. 37Coslo's submissions focus on the communication to which weight is given by the Tribunal - the email of 16 June 2012. Coslo submits that a careful examination of the text of the communication and its context reveals that it did not have the significance attached to it by the Tribunal, and that Tribunal misconstrued the communication. 38The Bardouhs' reply is that the finding was an available finding of fact having regard to the evidence as a whole, and no error of law arises. Relevant to this submission is the well known statement that '[t]he reasons for the decision under review are not to be construed minutely and finely with an eye keenly attuned to the perception of error': Collector of Customs v Pozzolanic [1993] FCA 456; (1993) 43 FCR 280 at 287, cited with approval by Brennan CJ, Toohey, McHugh and Gummow JJ in Minister for Immigration & Ethnic Affairs v Wu Shan Liang [1996] HCA 6; (1996) 185 CLR 259 at [30]. Consideration 39The 2009 lease provided that any new lease between the parties resulting from exercise of the option was to have a 'new rent' (cl 4.6.1), and stated: If the new rent is to be current market rent it will be decided in the same way that current market rent is to be decided under Method 3 stated in clause 5 assuming that this lease and the new lease were one continuous lease and the commencement date of the new lease was a rent review date. 40In its reasons the Tribunal set out the material elements of cl 5 (see para [6]). It will be seen that Method 3 specifies that the rent is to be 'current market rent', and sets out a number of criteria, and provides at cl 5.15 for a decision to be made by a valuer appointed under cl 5.16 if the parties do not agree on the amount of the new rent 30 days before the rent review date. This clause covers much of the ground of s 31 of the RLA. In any event s 31 applies to the extent that any gaps exist in the lease provision. 41In a stable lease relationship, the question of the rent for the next term and whether the issue needed to be referred for independent valuation would, very likely, have been resolved in the period prior to commencement date of the new lease (here, 20 April 2012). But during that period the mortgagees in possession were moving to sell the freehold, were in dispute with Coslo over unpaid rent, had effected a lock-out soon after the sale, and Supreme Court proceedings for relief against forfeiture had ensued. Clearly by the time of completion of the sale (14 June 2012), the Bardouhs as the new owners would have been keen to finalise the lease for the next term, and in that regard have settled the amount of the rent. 42Having found at [34] that 'as at April 2012, Coslo had a legally enforceable right to a three year lease of the premises in accordance with the terms of the lease which expired on 19 April 2012 at a market rent determined in accordance with that lease or in accordance with s 31 of the Retail Leases Act' the Tribunal stated at [35]: 'The question which then arises is whether Coslo's position changed between 20 April 2012 and 3 August 2012'. 43The Tribunal referred from [36]-[40] to the following communications: solicitors for the mortgagee in possession to Coslo, 30 March 2012; further letter from the solicitors, 20 April 2012; reply from Coslo's solicitor, 27 April 2012; and solicitors' further letter, 2 May 2012. These communications were all concerned with the question of shortfalls in payment of rent, and bringing rent up to date. There is no express reference in this group of communications to the exercise of the option to renew, let alone the giving of any active consideration to the terms that needed to be settled afresh in the option lease. 44As noted at [7] of our reasons, above, the mortgagees' solicitors did write on 4 May 2012 to the solicitors for the Bardouhs stating that they had 'not at this stage prepared a lease for the option period given the default of Coslo under the terms of the unregistered lease.' The Bardouhs were on notice at least by this point that the option to renew had been exercised. 45During May and the early part of June, it would seem from the reasons and the evidence on file that Mr Varma (for Coslo) and Mr Bardouh dealt directly with each other. The Tribunal refers, for example, without criticism, at [15] of its reasons to a conversation between Mr Varma and Mr Bardouh as recorded in Mr Varma's affidavit, in which both refer to the option to renew. Mr Bardouh is quoted as being prepared to keep Coslo as the tenant subject to 'rent to market'. Mr Bardouh said he would get his real estate agent to deal with him. 46The Tribunal refers at [40] to the mortgagees' solicitors' letter of 2 May 2012 (see above, [44]), and then continues at [41]: Following this, several emails passed between the parties regarding the assessment of market rent. The tone of them changed with Mr Varma's email to Mr Bardouh of June 16 and Mr Bardouh's reply of the same date. 47It does not spell out the content of these emails. These are: (1) email dated 12 June to Mr Varna from Mr Bardouh indicating that he will come tomorrow to discuss the new lease and 'progress the market review'; (2) an email dated 14 June to Mr Varma from Mr Bardouh stating that Mr Bardouh had come to see him yesterday about the new lease and market review but he was not in, and would now come by today at 3pm to discuss; (3) a reply from Mr Varma asking can we meet tomorrow, 15th; and then (4) a further email after that meeting from Mr Bardouh - 'As discussed in our meeting this afternoon and on previous occasions in the last week, I am awaiting for your email. Please send before 5pm today as we need this new lease reflecting market rate finalized by Monday 18/6/12. Please include examples of rental properties.' (See Ex 3 before the Tribunal, being in turn Ex AB-1 to the affidavit of Mr Bardouh sworn 11 April 2013 at 10-12.) 48The Tribunal then sets out the full text of the exchange of emails of 16 June 2012. They begin with the reply email sought by Mr Bardouh in communication (4) referred to above. Mr Varma starts with the assertion that the 'current market rental has declined'. Next he states: 'We propose that the Lease be reinstated as per the old Lease on Auction sale contract or alternatively, new lease with following is proposed.' Read in context the reference to the old lease could reasonably be construed as a reference to its rental amount and its other features. The 'new lease' proposed as an alternative contained a lower rent ($45,000 'GST and outgoings inclusive') a total considerably lower than the previous lease's original rent amount ($50,000 exclusive of GST and outgoings, which had not been adjusted during the life of the lease. 49The Tribunal then sets out Mr Bardouh's reply, sent 3 hours' later on 16 June 2012. It commences as follows: 'I will employ real estate agents and solicitors to handle this starting early next week. Coslo Pty Limited is on a monthly lease for now, I withdraw my offer to negotiate a new lease with you and or your company. Please note that from the outset I have suggested to employ an independent valuation expert to determine the market value and that you have refused this offer.' 50Despite the above reply we note that Mr Bardouh did as late as 28 June 2012 through his agent advise Coslo by letter that he was prepared to offer a new lease. That letter asserted that Coslo was a tenant holding over on a month to month basis, an assertion accepted as accurate by the Tribunal given the events of 16 June 2012. The letter advised that the rent was to be substantially increased (to $78,000 pa). The Tribunal noted elsewhere in its reasons that the amount it obtained from the new tenant that replaced Coslo was just below that figure, indicating in its mind that it was a realistic figure. 51The letter of 28 June 2012 was followed on 3 July 2012 by a formal notice from the agent requiring Coslo to vacate the premises a month later on 3 August 2012, and requiring them to make good the premises in ways outlined in the letter of 28 June 2012. 52In support of its submission that the Tribunal misconstrued Mr Varma's email of 16 June 2012 to such an extent that it erred in law, Coslo drew attention to its heading, 'without prejudice'. It was contended that this was strong evidence for the view that the email was no more than part of a usual negotiating exercise over the rent to be set under the option lease. In our view, the heading 'without prejudice' is merely an ingredient to be considered in forming a judgment as to the nature of the relationship between the parties. (Privilege in the technical sense was formally waived: reasons, [35].) 53It is plain that at this point the parties were a long way apart in relation to a the new rent. Equally, it is plain from the reply email from Mr Bardouh that he wished to end the relationship. Mr Bardouh stated that he was not prepared to accept the Varma proposal, and he asks them to leave the premises and refers to other matters of concern to him (make good, removal of debris and the like). Importantly, Mr Bardouh referred to Mr Varma's failure to agree to engage an independent valuer to address the issue. 54The final conclusion of the Tribunal ('the communications emanating from Coslo especially the email of 16 June evince an intention to be no longer bound by any obligations arising from the exercise of the option and communications from Bardouh indicate an acceptance of that repudiation') must be seen in the wider context of the case, as revealed by other parts of the reasons and by reference to the material that was placed before the Tribunal. 55It is clear that the Varma family was in financial difficulty by mid-2011 in keeping up the mortgage payments. The Tribunal expressed understandable doubt as to whether an arms-length relationship had existed as between Coslo (sole director, Mrs Varma) and the registered proprietors, her husband and their two sons, as to timely payment of rent. Plainly an arms-length purchaser (as the Bardouhs were) from a mortgagee in possession was likely to insist on orthodox payment practices. Coslo faced the likelihood that, if it was to continue in business at these premises, they would be faced with a demand for rent under any renewed lease at the market rate, as occurred. 56Moreover, there had been an application to ASIC for deregistration of Coslo on 18 June 2012, later withdrawn. The Tribunal spoke at [46] of this conduct providing 'powerful evidence that Coslo, a company making significant losses, had no real desire to continue in business on the site.' It saw this view as reinforced by the notice and then the sign it erected directing business elsewhere (4 August, and later in August, respectively): see reasons, [46], [53]-[55]. In our view, all of these matters were part of the commercial context against which the Tribunal made its assessment. 57The Tribunal expressed itself in a curt way. But it is clear, we consider, that it had reached the view that Mr Varma could not seen to be dealing genuinely with the new lessor, especially in relation to the need to resolve quickly the key issue of rent, and in his failure to accede promptly to the request for an independent valuer. By this conduct, an objective observer could reasonably conclude that he had renounced the option. 58In our view the Tribunal could not be said to have so misconstrued the email exchange of 16 June 2012, or the surrounding circumstances, to give rise to an error of law, either in the sense of misapplying the standard laid down in Koomphatoo to the facts, or by failing to adhere to the general standards to which we have referred earlier in these reasons in relation to the adequacy of reasons for critical findings of fact. Quantification of Damages 59Coslo's submission is that the Tribunal erred in failing to make any award for its loss of stock. The difficulty with this submission is that the Tribunal made a factual finding at [58] that there was no stock left at the premises as at 3 August 2012, accepting the evidence on this point given by Mr Bardouh. We note that while Coslo had been locked out a day too soon, it did have the period that commenced with the notice of quit to take action in relation to its stock. 60Coslo submitted that because of the Bardouhs' misconduct in locking it out prematurely, the Tribunal should have drawn an inference against the Bardouhs and favourable to Coslo in respect of the state of the premises and the continued presence of stock, said to be 'approximately 10 tonnes, and valued at approximately $200,000.' 61We do not see the dicta of Handley JA in Tyco v Optus Networks [2004] NSWCA 333 at [96] as affecting our conclusion. His Honour is making no more than a usual observation about the drawing of inferences against a party whose actions have made an accurate determination problematic. The Bardouhs' actions resulted in one day being cut from the usual notice period (and we accept that there was a further grace period allowed under the lease for removal of equipment, and an offer of a convenient day was made in that regard by the Bardouhs' solicitor). The Bardouhs' conduct did not render the determination problematic in any significant way. 62It is apparent from reading the reasons as a whole that the Tribunal formed a poor impression of Mr Varma as a witness, and found more credible Mr Bardouh's evidence on disputed points. 63No question of law arises. Order Appeal dismissed. I hereby certify that this is a true and accurate record of the reasons for decision of the New South Wales Civil and Administrative Tribunal. Registrar I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales. Registrar 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: 04 December 2014