Civil and Administrative Tribunal New South Wales Medium Neutral Citation: Vuong v Savic [2015] NSWCATCD 96 Hearing dates: 4 August 2015 Decision date: 25 September 2015 Jurisdiction: Consumer and Commercial Division Before: D Bluth, Senior Member Decision: 1 The application is dismissed. 2 No order as to costs. Catchwords: Exercise of option to renew, unconscionable conduct s62B and claim pursuant to ss71-71A of the Retail Leases Act, 1994 Legislation Cited: Retail Leases Act, 1994 Trade Practices Act 1974 (Cth) Cases Cited: ACCC v Dukemaster Pty Ltd [2009] FCA 682 Attorney General (NSW) v World Best Holdings Ltd (2005) 63 NSWLR 557 Awad v Bucasia Pty Ltd [2003] NSWADT 247 Leads Plus Pty Ltd v Kowho Intercontinental Pty Ltd [2000] NSW SC459 Ramensky v Demagogue Pty Ltd (1992) BC9203501 (1992) (unreported) Sarker v World Best Holdings Ltd [2004] NSWADT 15 Yao & Anor v Cambooya Properties Pty Ltd [2004] NSW ADT 55 Category: Principal judgment Parties: Kien Thanh Vuong (applicant) Olga Savic as attorney for Elizabeth Savic (respondent) Representation: Self (applicant) Self (respondent) File Number(s): COM 15/40967 Publication restriction: Nil REASONS FOR DECISION 1. Kien Thanh Vuong (the Applicant) is the lessee under a lease for a term of two years expiring on 30 June 2014 (the Lease) from Elizabeth Savic (the Lessor) of a shop in a building at [***] Road, Canley Heights (the building). The Applicant operates a butcher shop (the shop). 2. The Lease is in the form of the Law Society Commercial Lease. Pursuant to the Lease, the Applicant had an option for a further two years (the Option). The Option is to be exercised by the lessee in writing between 1 January 2014 and 31 March 2014. 3. The Applicant did not exercise the Option in writing. Subsequently the Applicant was issued with a Notice to Quit requiring the Applicant to vacate the shop by 31 October 2014. 4. The lawyers for the Lessor then wrote to the Applicant on 16 December 2014 and advised the Applicant that the Lessor would allow the Applicant to hold over as a monthly tenant until 30 June 2015 when vacant possession was required. 5. On 30 June 2015, the Applicant lodged an application for an Original Decision naming Ms Olga Savic as the Respondent (Ms Olga Savic). The Application is a combined Retail Tenancy Claim and an Unconscionable Conduct Claim pursuant to ss 71 and 71A of the Retail Leases Act 1994 (RLA). 6. The matter was listed for directions hearing on 21 July 2015. The Applicant was not at that hearing because the Applicant misunderstood the notice from the Registry. The Applicant required the assistance of a translator who had been booked to attend the hearing and accordingly was present. The Applicant was contacted by telephone and participated in the directions hearing through the translator. 7. I determined upon enquiry of the parties that mediation under s68 of the RLA would be futile. I set the matter down for hearing at the next appropriate hearing date on 4 August 2015. Hearing 1. At the hearing both parties were in attendance and the Applicant had the assistance of a translator. Ms Olga Savic, the Respondent, indicated that she was acting as the attorney for her mother, the Lessor, and had conducted the leasing administration of the building on behalf of her mother since her father, the late Mr Savic, died in or about 2010. I was informed that Mrs Elizabeth Savic is aged 87. 2. Accordingly, I allowed the proceedings to continue as presently constituted but noting that in fact the named Respondent, Ms Olga Savic, was the attorney for the Lessor. Ms Olga Savic tendered photos taken some time ago showing clutter in the common area outside the shop, motors servicing the shop installed on the common areas and generally untidiness in and around the shop. 3. The Applicant gave evidence and took an affirmation. He extensively used the services of the translator, as his spoken English was very poor indeed. He produced photographs that he had taken a day before the hearing indicating that the shop was in a relatively ordered manner given the original complaints by Ms Olga Savic from her earlier photos. He was queried regarding the placement of certain motors and generators outside of the shop and he indicated that he had been allowed to do this by the late Mr Savic when he managed the building. 4. The Applicant's evidence was that he came into the shop in 1999 having taken over the shop from his own father, who had a lease with the late Mr Savic. He indicated that he paid the rent in cash to Mr Savic, who came to collect the rent regularly. He had continued on with this arrangement with Ms Olga Savic upon the death of her father. He was shown a lease entered into in 2012, which he indicated was the current Lease between the parties which contained the Option. 5. Annexed to the application were copies of correspondence that he had written to the solicitors for the Lessor/Respondent. The first letter is dated 27 October 2014 and no doubt was in response to the Notice to Quit requiring the Applicant to leave the shop by 31 October 2014. In that letter the Applicant says: I have been renting the premises at 240 Canley Vale Road, Canley Heights since 2002 and from 1999 to 2002 my father was renting. At each and every option calendar period in my Lease when Mr Savic and Olga Savic attended to pick [sic] the rent, I would say I would like to exercise the option in my Lease, Olga and her dad would say, don't worry about putting it in wrighting [sic] we will give you a new Lease when the Lease comes to an ends [sic], even though I understand that my option need [sic] to be exercised in wrighting [sic] 3 to 6 months prior to the expiration of the Lease. I have in the past and in particular been told by the Landlord not to worry as I will receive a new Lease to the premises, this has always been the case, however in this case I have been mislead [sic] and tricked and therefore I intend to pursue my Rights. 1. The letter continues as follows: About mid March this year Olga came into my Shop to collect the rent in the usual manner, she issued me with the usual receipt. I said Olga, my Lease ends in June this year and I would like to exercise the option for the further term. Olga said, don't worry about that at the end of the term, we will give you a new Lease just like my father and I have done in the past. I said how much will the rent be. Olga said I will increase the rent by 3%. Olga also said, don't worry you are entitle [sic] to your option at a minimum, but I will give you a new Lease. Based on her representations and on the past patters [sic] I respected and trust Olga and exepted [sic] the 3 percent increase with the new Lease. 1. It then transpired that Ms Olga Savic's lawyers sent a letter on 17 November 2014 to the Applicant stating as follows: I am instructed that the Landlord through her attorney, Olga Savic, denies all of the assertions and allegations contained in your letter. Specifically, Ms Savic denies informing you that you were not required to comply with the terms of the lease with respect of the exercise of the option. Under the circumstances the Landlord is prepared to allow you to continue to occupy the property as a monthly tenant in accordance with clause 12.4 of the lease until 28 February 2015. 1. The Applicant then wrote a further letter on 22 November 2014, no doubt with the assistance of the Applicant's friend, to the solicitors for Ms Olga Savic saying: I have obtained advice from a retail lease barrister. At the appropriate time he will then act for me if required, I simply would ask to be given the lease that I am entitled to and the lease that has been promised to me. Nothing changes the fact that I was told by Ms Olga Savic not to worry about exercising my option and that a new lease would be granted to me. Once again for the record this is a pattern that the landlord has supplied to me at all option periods in all of my previous leases. I request the following information to be provided: 1. A ledger report. 2. Copy of disclosure statement. 3. Confermation [sic] that I have never exercised my option period since 1999 in writing as it was done on a verbal contractual basis agreement under the instructions from the landlord on each and every occasion and which relates directly to me having been granted previous options and leases to my premises. 1. The Applicant's submission as expressed in the application for an Original Decision is that it would be unconscionable to allow the Lessor not to grant an extension of time to allow the Applicant to exercise the option. Evidence from the Respondent 1. Ms Olga Savic gave evidence and took the oath on the bible. She stated that she was the attorney for her mother and that her late father had owned the building up to 2011 when he died and ownership was transferred from his estate to the Lessor (Mrs Elizabeth Savic). 2. Ms Olga Savic stated that her late father had entered into a lease with the Applicant's father and then in 2002 without formal application, the Applicant had taken over the running of the butcher shop. This arrangement was accepted by her late father. 3. Ms Olga Savic stated that there were no formal leases with any of the tenants in the building and all parties were operating on monthly leases. In 2012 circumstances dictated that all the tenants be put on formal leases including the Applicant. Ms Olga Savic tendered a copy of the Lease and the Disclosure Statement and a letter from the lawyers then acting for Ms Olga Savic indicating that a Certificate under s16 of the RLA had been provided on behalf of the Applicant when the executed Lease had been returned although no copy of the actual certificate was tendered. 4. Ms Olga Savic also tendered a copy of a letter from the Applicant's then lawyers who had sent it by fax on 18 August 2014 to the lawyers for Ms Olga Savic stating as follows: We act for the Lessee and understand you act for the Lessor. We understand the current Lease has expired and our client did not exercise their option. Our clients would like to request for a new lease or exercise their option under the same terms and conditions of the currently expired Lease. 1. Ms Olga Savic had earlier tendered photos of the shop indicating some problems associated with the occupation of the shop namely the clutter in the common area of boxes preventing egress and access to the rear of the shop and boxes in front of the shop from the neighbouring tenant. Ms Olga Savic indicated that the reason that they did not want the Applicant to continue occupancy was that they wished to renovate the shop. 2. Ms Olga Savic vehemently denied making the representations alleged by the Applicant. She denied agreeing to a renewal of the Lease. She confirmed that she told the Applicant that any option must be formally exercised. She was very assured of this fact. I did note that Ms Olga Savic spoke with a soft voice and I had trouble hearing her. I had to often ask her to repeat herself and I observed that she had the tendency to speak through the side of her mouth which in my view made her diction less than clear. Tribunal's assessment of the evidence 1. I queried the Applicant as to how he could write these letters read by me in paragraphs 12, 13 and 15 given the poor level of his English and he indicated that they were written with the assistance of a friend. The Applicant was questioned by me as to the veracity of these conversations with Ms Olga Savic referred to in the letters and he stated categorically that they were true. 2. I take the view on presentation of both the Applicant and Ms Olga Savic in the witness box that both were telling the truth. This is hard to reconcile. I have no doubt that Ms Olga Savic when asked by the Applicant about the option did not indicate that she would allow an oral exercise of the option. It is more likely that, in a soft voice not clearly spoken, she deflected any discussion of the option to avoid giving any acceptance of an oral exercise. 3. It is clear, also, in my view, in assessing the Applicant in the witness box that without the benefit of a translator he would have little comprehension as to what was being conversed in English other than the odd words of lease, shop, rent and option. In my assessment, anything more complicated would be lost on him. At no stage did the Applicant indicate there were any witnesses to the conversations with Ms Olga Savic. 4. Accordingly I have formed the view that Ms Olga Savic did not say she would allow the Applicant to exercise the option orally and thereby grant a new lease. I also believe that the Applicant did not understand this but may have thought the exact opposite. Unconscionable conduct 1. Section 62B of the RLA states: S62B Unconscionable conduct in retail shop lease transaction (1) A lessor must not, in connection with a retail shop lease, engage in conduct that is, in all the circumstances, unconscionable. 1. Then s 62B(3) lists a non-exclusive set of varying circumstances which the Tribunal may have regard to in assessing whether the lessor engaged in unconscionable conduct. However, these are listed without in any way limiting the matters to which the Tribunal in fact could consider. Option to renew cases where unconscionable conduct was alleged 1. In the case of Yao & Anor v Cambooya Properties Pty Ltd [2004] NSW ADT 55, the tenant claimed that ISPT Pty Ltd, the Landlord's predecessor in title to the leased premises, refused to grant a new lease to them even though they had sufficiently indicated to ISPT's agent, Mr Michael Ryan, that they wished to exercise a valid option of renewal. 2. Under the lease, if the tenants were to exercise their option to renew, they were obliged to give written notice to ISPT by 3 June 2002, this being 90 days before the expiry of the lease on 31 August 2002. They tendered no evidence about compliance and therefore implicitly acknowledged that they failed to comply with this clause. 3. The tenants and the managing agent, Mr Ryan, gave different accounts of the conversations held between them during December 2001 to early June 2002. The tenant stated that he told Mr Ryan several times that the tenant wanted to renew the lease and Mr Ryan's reply was "I know, I know, I will fix it" or words to this effect. According to Mr Ryan, he said that the conversation was that the tenant said that the lease was about to end and asked when he could sign a new lease. In reply, Mr Ryan said that he should speak to his solicitor about this matter and denied that he indicated he would arrange for an exercise of option on the tenant's behalf or that he would fix it or that the option could be exercised orally or that the tenant had in fact exercised it. 4. The Tribunal in Yao & Anor accepted that Mr Ryan was instructed by the owner of the property to market the complex for sale preferably with only monthly tenancies and for that reason not to encourage the exercise of options or renewal of leases by any tenants. Although Mr Ryan realised that the tenant was not going to go about renewing the lease in the right way, he refrained from advising the tenant to give notice in writing due to his duty to the landlord. The Tribunal held that Mr Ryan's accounts of the facts were to be accepted over the tenant. 5. In considering whether the actions of Mr Ryan were unconscionable pursuant to s62B of the RLA, the Tribunal referred to dicta of Young J in Leads Plus Pty Ltd v Kowho Intercontinental Pty Ltd [2000] NSW SC459 and stated: [71] ...This is not a case where, to quote Young J [at 24], the Lessor 'deliberately avoids the proper attempts of the Lessee to exercise the option' or other 'exceptional circumstances' of a similar nature are apparent. Also, no fault can be attributed to the landlord (though, as Young J indicated, a landlord's conduct in this context can be held unconscionable even when no fault is present). At its highest, the present case might fall within his Honour's dictum at [24] that 'there will be some cases where it will be unconscionable for the landlord to take advantage of a small mistake on the part of a tenant to obtain a windfall'. [72] In determining this, the presence of some of the factors listed in s 62(B)(3) is of course significant…they were clearly in a weaker bargaining position than the Respondent…not fully able to understand the documents relating to the lease… [73] We do not consider, however that the conduct of Mr Ryan, as we have determined it, constituted unfair tactics…He did not mislead Mr Yao [tenant] or give him unsound advice… [74] We agree instead…that the primary reason for the Applicant's failure to exercise the option falls within the following dictum of Young J in Leads Plus at [23] 'These are matters involving failure to act with reasonable diligence or prudence rather than pure accident or surprise'. 1. The leading decision on unconscionable conduct is from Spigelman CJ in Attorney General (NSW) v World Best Holdings Ltd (2005) 63 NSWLR 557 who said at [120-121]: 120 …Unconscionability is a well-established but narrow principle in equitable doctrine. It has been applied over the centuries with considerable restraint and in a manner which is consistent with the maintenance of the basic principles of freedom of contract. It is not a principle of what "fairness" or "justice" or "good conscience" requires in the particular circumstances of the case … 121…Even if the concept of unconscionability in s 62B of the Retail Leases Act is not confined by equitable doctrine, as the decisions under s 51AC of the Trade Practices Act suggest, restraint in decision making remains appropriate. 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. 1. The Tribunal held in Sarker v World Best Holdings Ltd [2004] NSWADT 15 that the landlord had engaged in unconscionable conduct. Problems arose when the landlord granted another lease to Mr Sarker with the exclusive right to operate an Asian grocery in the centre. There were requirements relating to fitout and bank guarantee that Mr Sarker had not strictly complied with. A few days after Mr Sarker commenced trading the landlord sought to terminate the lease on the basis that Mr Sarker had repudiated the lease by failing to comply with the fit out requirements and pay the bank guarantee on or before the commencement date. 2. The Tribunal found that the landlord had engaged in unconscionable conduct in breach of s 62B(1) of the RLA. It was held that the landlord had employed a wide variety of tactics (including refusing to give the tenant consent to apply for DA for the fitout, refusing access to the tenant's plumber to perform works required and refusing to return the tenant's stock) to wear down the tenant and push the tenant to leave the premises. The Court of Appeal unanimously affirmed the decisions of the Tribunal and dismissed the landlord's appeal [Attorney General (NSW) v World Best Holdings Ltd (2005) 63 NSWLR 557]. Conversing with a tenant who speaks little or no English 1. In ACCC v Dukemaster Pty Ltd [2009] FCA 682, the Federal Court of Australia found that the landlord under a retail lease was found to have engaged in conduct that was unconscionable in contravention of s51AC of the Trade Practices Act 1974 relating to unconscionable conduct in business transactions. One aspect of the conduct found to be misleading or deceptive was the landlord corresponding with certain tenants in English when the landlord knew that these tenants possessed little or no ability to speak or read English. The landlord was imposing strict deadlines which gave the tenants very little time to respond and therefore limiting their ability to obtain independent advice. This was viewed as unconscionable conduct. Is silence unconscionable conduct? 1. In Ramensky v Demagogue Pty Ltd BC9203501 (1992) (unreported), it was held that whether silence constitutes conduct which is misleading or deceptive depends on the circumstances. In that case, a vendor and purchaser entered into a contract for sale. The purchaser alleged that the vendor engaged in misleading or deceptive conduct by abstaining from revealing to the purchaser that the driveway to the south east portion of the development was not part of the common property and was to be the subject of a road licence. The purchasers sought to rescind the contract on that ground. 2. The court held in Ramensky that: whether silence constitutes conduct which is misleading or deceptive…depends upon the circumstance. Here the circumstances were special and out of the ordinary. Moreover the express representations by Demagoguge [the vendor] were such as to indicate that there was nothing unusual at all about this aspect of the development. In this case, there was both a positive misrepresentation and a misrepresentation conveyed by a failure to say anything about a road licence. In the opinion I hold of the circumstances, Demagogue through Mr Miller [agent] and the draft contract created a clear but erroneous impression that there was nothing unusual concerning the access to this site and in particular there was no suggestion that a road licence from the Lands Administration Commission was necessary to provide such access… 1. I query whether in this case, there was a positive misrepresentation. If the version of the facts by Ms Olga Savic is to be believed, then there was no express misrepresentation as she did seek to explain to the Applicant the need to renew the option. The facts in this case are unlike the situation in Ramensky where the circumstances were completely out of the ordinary for off the plan sales and there was an obligation on the vendor to reveal the fact about the road licence. However in this case, it was stated by Ms Olga Savic that she did advise the tenant that the tenant had to exercise the option to renew. 2. Did Ms Olga Savic have a positive obligation to ensure that the Applicant understood what she was saying because of the communication gap between the landlord and the tenant? It is unlikely that such an obligation exists as it would put such an onerous obligation on lessors in general. In Dukemaster the conduct of the landlord was more overt resulting in a breach of the Trade Practices Act 1974. 3. In the case of Awad v Bucasia Pty Ltd [2003] NSWADT 247, the lessee sought an order that the lessor grant to him a lease of three years on the grounds that he had validly exercised an option of renewal which expired on 30 June 2003. The tenant alleged both a retail tenancy claim under s71 and unconscionable conduct claim under s71A of the RLA. 4. The Tribunal ruled on the facts given by the lessor as more likely and found that the lessee had not exercised the option to renew in accordance with the lease. In terms of the lessee's claim on unconscionability, the Tribunal reviewed the statutory 'definition' of unconscionable conduct by a lessor in s62B(3) (it is actually a list of relevant factors for consideration by the Tribunal, rather than a definition) and stated as follows: [73]…nothing contained in it is reflected to any significant degree in relevant conduct of the Lessor. We do not think, for instance,, that the relevant strengths of the bargaining positions of the parties…played a role in this case, or that there was undue influence or pressure or unfair tactics by the Lessor…or that the Lessor's failure to disclose to the Lessee (if it did so fail) that it would not accept a late notice of exercise of the option was 'unreasonable'… 1. The Tribunal noted that in Leads Plus Pty Ltd, Young J was not prepared to treat as "unconscionable" in the broader sense of the term, established by general equitable principles, the conduct of a lessor who refused to accept a notice of exercise of an option to renew a lease in circumstances broadly similar to those in Awad. The Tribunal took the underlying principle in that decision to be that it is not "unconscionable" for a lessor to insist on strict and timely compliance with a provision in the lease setting out the requirements for the exercise of an option to renew. Conclusion 1. The review of the cases suggests that the bar for the Courts and Tribunals to find unconscionable conduct on the part of a landlord is high. Save for the most exceptional circumstances or deliberate act to bully/mislead/deceive the tenant or silence on the part of the landlords, the Court has not found unconscionable conduct. In the words of Spigelman CJ in Worlds Best Holdings there has to be a high level of "moral obloquy". That is not to say that fault has to be attributed to the landlord for there to be unconscionable conduct. As Young J indicated in Leads Plus Pty Ltd, a landlord's conduct can be held unconscionable even when no fault is present. There will be cases where it will be unconscionable for the landlord to take advantage of a small mistake on the part of a tenant to obtain a windfall. 2. However, in this matter before the Tribunal, accepting that Ms Olga Savic did not agree to an oral exercise of the option, and that at best the Applicant was mistaken because of language or hearing difficulties, it does not appear to me that Ms Olga Savic has used the mistake on the part of the Applicant to obtain any windfall. The failure of the Applicant to exercise the option leading to the Lease being terminated and a refusal by Ms Olga Savic on behalf of the Lessor to renew the Lease is not unconscionable conduct within the meaning under the RLA despite any miscommunication and misunderstanding that may have occurred between the parties. 3. In fact, the Applicant did see a lawyer who wrote on 18 August 2014 to Ms Olga Savic's lawyer noting that the Applicant had not exercised the option to renew and seeking an indulgence from the lessor to extend the exercise date. The indulgence was not given. There was no suggestion in that letter that in fact an oral exercise of option had been accepted. Further, in the letters sent by the Applicant to the lawyers for Ms Olga Savic and repeated by me in paragraphs 12, 13 and 15 of these Reasons, the Applicant refers to a course of conduct between the parties indicating that the lessor, be it Mr Savic or Ms Olga Savic, were relaxed about any formality regarding the exercise of an option in a lease. However, the evidence is that the Applicant only ever had one lease for two years with an option for two years. Consequently, what is said in the letter must not be correct. Orders 1. The application is dismissed. 2. No order as to costs. D Bluth Senior Member Civil and Administrative Tribunal of New South Wales 25 September 2015 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: 01 October 2015