Civil and Administrative Tribunal New South Wales Medium Neutral Citation: George's Spice Pty Ltd v Southern Highland Rentals Pty Ltd [2016] NSWCATAP 220 Hearing dates: 15 April 2016 Date of orders: 04 October 2016 Decision date: 04 October 2016 Jurisdiction: Appeal Panel Before: L P Robberds QC, Senior Member J Harris SC, Senior Member Decision: Leave to amend the notice of appeal by adding ground 4A is refused. Leave to appeal on ground 5 is refused. The appeal is dismissed. Catchwords: Landlord and tenant of restaurant – landlord in breach of lease – breach rectified by landlord – tenant closes restaurant and stops paying rent – tenant not entitled to do so – tenant claims compensation for breaches. Legislation Cited: Civil and Administrative Tribunal Act 2013 Retail Leases Act 1994 Cases Cited: Giretti v Commissioner of Taxation (1996) 70 FCR 151 Murphy v Overton Investments Pty Ltd [2004] HCA 3 (2004) 216 CLR 388 Stead v State Government Insurance Commission [1986] HCA 54 (1986) 161 CLR 141 Walker Corporation Pty Ltd v Sydney Harbour Foreshore Authority [2009] NSWCA 178 Category: Principal judgment Parties: George's Spice Pty Ltd (Appellant) Southern Highland Rentals Pty Ltd (Respondent) Representation: Counsel: J P Knackstredt (Appellant) Solicitors: Mooney & Kennedy (Appellant) Mr Arvo Pikkat (Director) (Respondent) File Number(s): AP 16/05955 Decision under appeal Court or tribunal: Civil and Administrative Tribunal Jurisdiction: Consumer and Commercial Division Date of Decision: 06 January 2016 Before: K Rickards, General Member File Number(s): COM 15/51500; COM 15/51517 REASONS FOR DECISION 1. Southern Highland Rentals Pty Ltd (the Lessor) leased to George's Spice Pty Ltd (the Lessee) premises in Mittagong for a period of two years from 7 November 2013. As was known to the Lessor, the Lessee proposed to use the premises as a restaurant. The restaurant commenced trading on 13 December 2013. It ceased trading on 16 February 2014 and the Lessee closed the restaurant on 17 February 2014. 2. On 26 May 2014 the Lessee commenced proceedings in the Tribunal setting out the reasons for the application but without providing details of the orders sought, other than stating "Orders pursuant to section 71 and 71A of the Retail Leases Act 1994." 3. On 30 July 2014 the Lessor filed an application in the Tribunal stating that the Lessee had "breached their lease and has not paid rent". There was no express statement of exactly what orders were being sought although annexed to the application was a schedule of what was stated to be rent and interest payable by the Lessee under the terms of the lease until the end of its term. 4. The two applications were heard at the same time and on 27 March 2015 the Tribunal published its reasons for decision which were to the effect that the Lessee's application was dismissed and in the Lessor's application, the Lessee was ordered to pay the sum of $31,463.49 immediately. Order 2 dealt with a possible costs application and at the moment it is unnecessary to refer further to it. 5. The Lessee filed a notice of appeal which was heard by an appeal panel. On 9 September 2015 the appeal panel allowed the appeal and remitted the matter to the Tribunal as previously constituted to determine the following questions: 1. Did the Lessor breach the implied term that the premises would be fit for its permitted use as a restaurant from the commencement of the lease? 2. Did the Lessee suffer any loss by reason of any breach by the Lessor of the implied term and, if so, what was the quantum of that loss? 3. Is the Lessee entitled to succeed on its claim under s 34 of the Retail Leases Act? 4. What is the effect of any findings on questions (a) – (c) above on the Lessor's claim for rent and outgoings? 1. Paragraph 6 of the appeal panel's reasons was as follows: In the circumstances, for the reasons below, we would allow the appeal and remit the matter to the Tribunal for a re-hearing on limited questions including whether the implied term was breached, whether the bad odour caused the restaurant to fail, whether the appellant suffered loss by reason of the problems with the refrigeration equipment, whether the respondent was in breach of s 34 of the Act and what compensation, if any, the appellant is entitled to. It would also be necessary for the Tribunal to determine whether, in light of any findings it may make the respondent's claim for rent should be rejected or reduced. Facts not in dispute 1. The following facts were finally not in dispute on the hearing of the above appeal or alternatively were the subject of findings made by the appeal panel: 1. There was a term implied in the lease that the premises would be fit for the permitted use from the time of the commencement and for the duration of the lease (see par 30 Appeal Panel's reasons). 2. The implication of the term was supported by the representations made by Mr Pikkat (a director of the Lessor) to Mr Khan (a director of the Lessee) that the Lessor would ensure that the walk-in freezer, the cool room and the air conditioning were in working order prior to the commencement of the business and that steps would be taken to remove the smell emanating from the drainage (see par 35 of the Appeal Panel's reasons). 3. The fact that Mr Pikkat gave the undertakings he did supports an inference that he accepted the cool room and refrigeration equipment needed to be in working order and the smell needed to be eliminated before the restaurant opened. It must have been the case that Mr Pikkat accepted the smell was not conducive to the running of a restaurant, otherwise, why would he have undertaken to take the steps to eradicate it? The appeal panel inferred that the lease was based upon the assumption that the cool room and refrigeration equipment would be in working order and steps would be taken to eliminate the smell (see par 36 of the Appeal Panel's decision). 4. The restaurant opened for business on 13 December 2013. 5. There was a bad smell at the premises in early November 2013 which was not effectively removed by the Lessor until 15 January 2014. other evidence 1. Some of the other evidence placed before the Tribunal by the Lessee included a schedule which was said to show the daily takings for the restaurant from 13 December 2013 to 16 February 2014. Some of the entries in that document showed that on 7 January and 4 February 2014 the takings were nil; there were 13 days where the takings were less than $60; and the total received from 13 December 2013 to 16 February 2014 was $15,070.50. the tribunal's answers to the four questions referred to in par 5 above 1. The Tribunal answered question (a) in these terms: 16. Accordingly, because of the problems set out above in paragraph 14, the Lessor breached the implied term. 1. Paragraph 14 was in these terms: The evidence clearly establishes that, as at commencement of the lease, on 7 November 2013: ● There was an unpleasant odour within the premises; ● The cool room was not functioning; and ● Neither the freezer nor the air-conditioner were functioning properly. 1. The Tribunal answered question (b) in these terms: 20 The restaurant then opened on 13 December 2013. Any problems which occurred at this time of the restaurant opening and any losses subsequently sustained by the lessee were not caused by breach of the implied term, namely that the premises would be reasonably fit for use as a restaurant as at the commencement of the lease on 7 November 2013. 21 Neither party contemplated that operation of the lessee's restaurant business would coincide with the commencement of the lease, and this was reflected by the agreed rent-free period. No losses are demonstrated to have been suffered by the lessee because the premises were unable to be used as a restaurant as at the commencement of the lease. 22 Any losses claimed to have been sustained by the lessee can only be considered within the context of whether, after commencement of the lease, they were caused by the lessor's breach of its contractual responsibilities, either as expressed within the terms of the lease or as implied by the Retail Leases Act 1994. 1. The Tribunal answered question (c) in these terms: 37 Accordingly, the lessee is entitled to reasonable compensation for loss caused by reason of the lessor's delays in rectifying the defective freezer and the smell at the premises. 1. The Tribunal's answer to question (d) included the following: 38 The fourth and final remitted question is to determine the effect of the above findings upon the lessor's claim for rent and outgoings. The amount of reasonable compensation payable to the lessee by reason of the finding set out in the preceding paragraph must therefore first be determined. 39 … The lessee has provided evidence that it lost stock which had cost approximately $7,000 as a result of the failure of the freezer to operate properly. … . Accordingly, this amount should be ordered as payable by the lessor, or as a set off against any amount determined as payable by the lessee to the lessor. 47 The circumstances surrounding this matter did not justify the unilateral decision of the lessee to close the restaurant indefinitely as and from 17 February 2014. 48 The absence of a response by the lessor to the lessee's request for compensation and for suspension of rent did not justify the lessee treating its obligations under the lease as either being at an end or suspended until such time as it considered that its 'complaints and grievances' were satisfactorily addressed. 51 The statement made within my earlier decision that the existence of a bad smell was "fatal" to the lessee's business was used, perhaps inelegantly, to convey the observation that the ongoing existence of the bad smell was "fatal" to the ongoing successful conduct of the business; conversely, once the smell was removed, no inherent fatality remained. The presence of the smell at the premises was not a permanent situation and has not been adequately demonstrated on the evidence to have been permanently "fatal" to the conduct of the restaurant business at the premises, or to justify its sudden closure. 59 … The subject freezer and smell problems are not accepted as a cause of the above losses or expenses. 60 The evidence shows that the lessee unilaterally decided to close the restaurant and that it then later decided not to return, thereby leaving the subject items in situ; within the final letter from the lessee's solicitor to the lessor's agent, the stated reason for this decision to close was that the lessor had not responded promptly to the lessee's request for unspecified compensation for lost business income, abatement of ongoing rent and outgoings, and for a further rent free period. The lessee's decision to not return to re-open the business was the only cause of the loss of these items. Neither of the lessor's breaches of the lease in not repairing the freezer promptly or in not removing the smell before 15 January 2014, were a cause of the lessee's decision to not return to the premises. 62 The original position of the lessee was that it would close and then re- open on or about 4 April 2014. As previously stated, it is accepted that the smell at the premises which persisted until 15 January 2014 was the cause of the original decision of the lessee to close and then re-open. This decision was a reasonable and direct response to the loss of custom caused by the smell, such that it would allow resumption of the business as originally proposed with a new brand and within suitable premises. The subsequent separate decision to not return and re-open the restaurant was clearly expressed within the final letter from the lessee's solicitor to the agent to be due to a lack of response by the lessor to his letters and messages. 63 Given the above findings, it is now considered appropriate that the proper starting point for assessment of compensation to the lessor for loss of rent and outgoings is the lessee's proposed re-opening date of 4 April 2014. There should not be any subsequent notional rent free period applied after that date, because the establishment, repair and fitting work which had been required during the original rent-free period had already occurred. 64 The appropriate period for calculation of lost rent is therefore from 4 April 2014 until 27 October 2014 when the new tenant at the premises commenced payment of rent. This is a total of 207 days, for which the daily rental amount is $99.725917 was payable; this results in an amount of $20,643.26 for loss of rent to which should be added the amount of $611.27 for lost contribution to outgoings, and from which the amount of $7,000 for foodstuff lost by the lessee should then be deducted. The resulting amount is $14,254.53 to which interest should be applied at the rate of 10% per annum as specified within the lease agreement for the period from 27 October 2014 to 11 December 2015; the amount of interest payable is therefore calculated to be $1,597. This results in a total amount of $15,851.53 as being due and payable by the lessee to the lessor. correspondence 1. Mooney & Kennedy were the solicitors for the Lessee and on 7 November 2013 they forwarded to the Lessor's agent, Century 21 Carlton Real Estate, the executed lease. 2. On 13 November 2013 Alicia Devenny, an executive assistant employed by the agent, emailed Mr Kahn informing him that they had booked a cool room specialist to come out and fix the freezer on the following Friday and to do a service on the cool room to make sure it was all OK. 3. On 19 November 2013 Ms Devenny emailed Mr Kahn informing him that Arvo would be organising a cap for the drain behind the building. We take it that the reference to Arvo, was a reference to Mr Arvo Pikkat and that the reference to a cap for the drain behind the building, was a reference to a cover for the sewerage drain, which had no cover on it when Mr Kahn and Mr Pikkat inspected the premises on 7 October 2013 (see pars 11 and 14 of the affidavit of Mr Kahn dated 7 July 2014). 4. On Tuesday 10 December 2013 Ms Devenny emailed Mr Kahn informing him that she had a person coming out on the following Thursday to have a look at the freezer. 5. On 14 December 2013 Mr Kahn emailed Ms Devenny informing her that they were having a big problem to run the business – making reference to the fact that he had told her that the main problem was the refrigerator. He stated that most of his $7,000 odd dollars worth of food was gone into the bin. He said he had told her about the dishwashing in the bar with water leaking and they could not stand in the bar counter. The email also stated that the little refrigerator in the bar was not working. He asked could she please organise to fix the problems otherwise he would have to shut the business as it was impossible to operate the business with all of these problems. 6. Mr Kahn sent Ms Devenny another email on 14 December 2013 – this one at 9.43pm. He referred to his earlier email of that day and also said that there was a very bad smell from the drain hole. He referred to complaints by customers and "even they write in the paper about it." He asked her to try to fix the problem otherwise he could not run the business. He also stated "I'm losing opening customer". The reference to customers writing in the paper could be a reference to three customer review forms which are at page 47 of annexure AK1 referred to in par 73 of Mr Kahn's affidavit dated 7 July 2014. 7. On 17 December 2013 Mr Kahn emailed Ms Devenny informing her that her electrician had just come and collected the key and that Mr Kahn had shown him that the cool room main pipe was broken. The email stated that the electrician would fix this tomorrow but needed her request to do so. He also needed her request to fix the small refrigerator. The email requested Ms Devenny to call the electrician about these two matters. 8. On 18 December 2013 Mr Kahn emailed Ms Devenny and included in that email he asked who would be responsible for all of this damage. 9. On 14 January 2014 Ms Devenny emailed Mr Kahn stating that she had sat down with Arvo and discussed Mr Kahn's request for compensation for the lost goods due to the freezer issue. She stated: "We do not feel that we are liable to pay any compensation, especially as the freezer would have been up and running properly a lot sooner if your staff member had not turned the freezer on when they weren't supposed to, thus burning out the compressor which of course meant more parts had to be sourced which delayed the full repair of the freezer." The email also stated that the Lessee was responsible for the maintenance and running costs of the cool room, stoves, dishwasher and all permanent fixtures and fittings within the building. The email attached an invoice from the technician who repaired the freezer and the email requested that Mr Kahn pay $1,094 being the cost of the compressor. 10. On 17 January 2014 Mooney & Kennedy wrote to the Lessee setting out a number of complaints. The letter made reference to the fact that the Lessee's plan was to open the restaurant on Friday 13 December 2013 and that in preparation for the opening the Lessee purchased over $10,000 of stock and on 8 December placed it in the cool room. On 11 December the Lessee discovered that the refrigeration was defective such that all stock that had been placed therein was rendered unsaleable. The letter also stated that on 12 December 2013 the Lessee arrived at the premises and was informed by the chef that the electrician had left and that he had turned the cool room back on, thinking that it was repaired. It was said that the electrician did not leave a note to say that he was in the process of obtaining spare parts for the compressor and should not have left without giving the Lessee or its staff some notification that the cool room should not be turned on. The letter went on to say that despite repeated requests to Ms Devenny, the cool room was not repaired until 20 December 2013 and that Mr Kahn was unable to operate the business effectively during this period. The letter went on to say that in addition to that loss, the Lessee also sought compensation for the damage the business suffered due to the defective drainage system installed on the premises. It was said that this drainage system had caused unpleasant odours to be emitted throughout the restaurant which had subsequently damaged customer satisfaction. It was said that the restaurant had received numerous negative reviews which focussed entirely on this repugnant smell emanating from this drainage system. It was said that the Lessee brought this issue to the attention of Ms Devenny who, following an initial period of consultation with a repairman Mr Palmer, agreed to fix the defect on 9 November – but no repair person was sent to the property until Wednesday 15 January 2014. The letter went on to say that in those circumstances the Lessee required the Lessor to compensate it for the stock lost as a result of the defective equipment and also required to be compensated for business lost during the relevant periods. The letter concluded with a final paragraph stating that the Lessee wished to avoid any unpleasant confrontation but should this not be achieved, the Lessee "will have no alternative other than to make an application to the NSW Small Business Commissioner's Dispute Resolution Unit." 1. On 17 January 2014 Mooney & Kennedy emailed a copy of that letter to Ms Devenny and on 30 January 2014 Mr Kennedy again emailed Ms Devenny asking "could we please have a response to the attached letter." 2. On 30 January 2014 Ms Devenny emailed Mr Kennedy stating that the "draft letter is currently with Arvo. We will get it to you within week.(sic)" 3. On 3 February 2014 Mr Kennedy emailed Ms Devenny asking for a reply to his letter of 17 January 2014. 4. On 3 February 2014 Ms Devenny replied to that email stating: "The draft letter is currently with Arvo, we'll have it to you by the end of the week. I understand that this situation is currently in the air but Alam is currently two months in arrears. Regardless of this side issue, he cannot hold off paying rent." 5. On 4 February 2014 Mr Kahn emailed Ms Devenny asking her to understand his position; making reference to customers walking away the first week; making reference to the fact that on some days they were totalling $34.50 and some days nothing in takings and every week he was spending $3,000 to $4,000 paying salaries. He stated that last week he re-advertised and had 14,000 new menus apparently for the Southern Highland newspaper. He stated that hopefully in another two weeks business would stand up. The email finished with "and fix the problem with my solicitor, …." 6. On 14 February 2014 Mooney & Kennedy wrote to Century 21 Carlton Real Estate. The letter referred to: (a) their letter of 17 January 2014; (b) various email exchanges; and (c) a large number of telephone calls to their office. The letter went on to say that those communications were attempts to resolve the multiple concerns with respect to the state of the building, the cooling system, and particularly the nasty smell coming from the drainage/sewerage system. "We are concerned on behalf of our client that there has been no response to the communications in (a) – (c) above, nor any meaningful attempts by the landlord to address the Lessee's ongoing concerns." 7. The letter concluded with the following paragraphs: However the problems, which are well documented, have given the restaurant a bad name in the area such that there are very few return customers. A large number of customers in the past have expressed the view that, whilst the food is good, the unpleasant smell which permeates throughout the entire restaurant is such that customers will not return. The point has been reached where our client has very few options other than to close the restaurant down for a period of approximately eight weeks. During that time the Lessee would endeavour to rebrand the restaurant and re-open it at about, Friday 4 April 2014. In this event, the Lessee seeks the co-operation of the Lessor, the suspension of accruing rent and outgoings, and a further rent free period after the restaurant re-opens. Our client reserves its rights to claim damages and compensation for loss of profits suffered as a result of the defects in the premises. We await your urgent response. 1. On 17 February 2014 Mooney & Kennedy wrote to Century 21 Carlton Real Estate referring to the fact there had been no response to their letter of 14 February. The letter concluded as follows: Having regard to all of the circumstances, which are well documented, our client has been left with no alternative other than to close the restaurant. The restaurant will remain closed until such time as the Lessor addresses our client's complaints and grievances. This would not have been necessary had the Lessor responded and addressed our client's concerns in a reasonable manner. the restaurant business on 14 – 16 february 2014 1. According to par 105 of the affidavit of Mr Kahn dated 7 July 2014, the restaurant was open for business on 14 February 2014. That happened to be a Friday and Valentine's Day. There were eight orders for dine in customers and eleven takeaway or delivery orders. Many of the customers said words to the effect that they were tourists and had not been to Mittagong before and had not heard of George's Spice. The takings were $1,197 for the night. 2. According to par 106 of that affidavit, on 15 February the restaurant had takings of $25 for the entire day. On 16 February the takings were $55. Mr Kahn stated that on 17 February "I closed the restaurant and did not intend to return until I received a satisfactory solution from Ms Devenny and Mr Pikkat. I intended for discussions and negotiations between myself and Mr Pikkat to occur to enable a resolution of the problems to ensure I could rebrand the restaurant and start afresh". The affidavit stated that to the best of Mr Kahn's knowledge, there had been no response to Mr Kennedy's letters from Ms Devenny or Mr Pikkat. 3. The affidavit concluded by stating that on 2 June 2014, after negotiations with Mr Pikkat's office and with their consent, Mr Kahn removed items of furniture, equipment and accessories from the restaurant. However there were items of furniture which were attached to walls and regarded as fixtures and he could not remove those items. grounds of appeal 1. On 5 February 2016 the Lessee filed a notice of appeal from the decision of the Tribunal made on 6 January 2016 when the Tribunal ordered that $15,851.53 be paid by the Lessee to the Lessor. 2. The notice of appeal contained the following five grounds of appeal: 1. The Member erred in law in finding that the appellant did not refer the matter to mediation or to another form of dispute resolution in the absence of a satisfactory response to its solicitors' letter dated 17 January 2014 (pars 42 and 49 of the decision of the Tribunal below) in circumstances where: 1. The Member failed to take account of a relevant consideration for which admissible evidence had been provided, or, in the alternative, 2. The Member made a finding for which there was no evidence, in that the evidence and other material before the Tribunal established the opposite of the finding, or, in the alternative, Particulars 1. Schedule of losses provided by the appellant, Exhibit "AK 3" (Affidavit of MD Nur-A-Alam Khan, Page 3, Item 24, 28/11/2014); 2. Written submissions made on behalf of the appellant following the original hearing dated (11 December 2014). Appellant's Evidence Folder, Tab 20, par 36. 1. Where fresh evidence, not adduced in the Tribunal below in consequence of a denial of procedural fairness (as articulated in ground 2 below), establishes the opposite of the finding. Particulars 1. Application for mediation dated 6 February 2014; 2. Certificate that mediation failed to resolve dated 19 May 2014. 1. The Member erred in law in denying the appellant procedural fairness by determining the issues before him on a question of causation involving findings which were not propounded by the respondent and not raised by the Tribunal below with the appellant during argument, being the findings referred to in ground 1 above. 2. The Member erred in law in finding that the bad smell was not "permanently fatal" to the operation of the restaurant (par 51 of the decision of the Tribunal below) in circumstances where: 1. That finding was inconsistent with its finding made following the original hearing (at par 44 of the original decision), and 2. No application to reopen had been made by the respondent, the issue had previously been fully ventilated and determined, and there was no prior notice that the original finding of 'fatality' might be reversed, contrary to the principles set forth Murphy v Overton Investments Pty Ltd in [2004] HCA 3 (2004) 216 CLR 388, at par 75. 1. The Member erred in law in making findings that were illogical or irrational in: 1. Finding that the bad smell was 'not permanently fatal' to the operation of the restaurant (par 51 of the decision of the Tribunal below), in circumstances where that finding: 1. Was inconsistent with its finding made following the original hearing (at par 44 of the original decision), and 2. Involves an unresolvable internal inconsistency; 1. Finding that the circumstances surrounding the matter did not justify the unilateral decision of the appellant to close the restaurant indefinitely as and from 17 February 2014 (pars 47 to 49 of the decision of the Tribunal below), in circumstances where that finding was inconsistent with: 1. The evidence of the respondent's main witness Mr Pikkat to the effect that he would not compensate the appellant for rebranding the restaurant, and Particulars Appellant's Evidence Folder, Tab 20 [22] (j) . The unchallenged evidence of the appellant that takings continued to decline after the bad smell was fixed on 15 January 2014. Particulars Appellant's schedule of takings, Affidavit of MD Nur-A-Alam Khan (28/11/2014, pars 32 and 33). 1. That the additional findings made by the Member were logically unavailable in light of the findings of the Appeal Panel in the previous appeal and the existing findings made by the Tribunal following the original hearing. 1. The Member also made two errors of fact or of mixed fact and law, for which leave to appeal is sought. These errors were: 1. The finding that the circumstances surrounding the matter did not justify the unilateral decision of the appellant to close the restaurant indefinitely as and from 17 February 2014 (pars 47 to 49 of the decision of the Tribunal below). The Appeal Panel ought to grant leave for this ground of fact or mixed fact and law to be brought on the basis that: 1. the decision of the Tribunal under appeal was not fair and equitable, and, in the alternative, 2. the decision of the Tribunal under appeal was against the weight of evidence, in that it was inconsistent with the evidence of the respondent's main witness Mr Pikkat to the effect that he would not compensate the appellant for rebranding the restaurant, and the unchallenged evidence of the appellant that takings continued to decline after the bad smell was fixed on 15 January 2014; 1. The finding that the bad smell was not 'permanently fatal' to the operation of the restaurant (par 51 of the decision of the Tribunal below). The Appeal Panel ought to grant leave for this ground of fact or mixed fact and law brought on the basis that: 1. the decision of the Tribunal under appeal was not fair and equitable, and, in the alternative, 2. the decision of the Tribunal under appeal was against the weight of evidence, 3. in that the finding was inconsistent with its finding made following the original hearing (at par 44 of the original decision) and involves an unresolvable internal inconsistency. orders sought by the lessee 1. The Lessee sought judgment in its favour in the proceedings which it had commenced; it sought an order that the proceedings commenced by the Lessor be dismissed; and it sought an order that the Lessor pay to the Lessee the sum of $50,188.92. The amounts making up that figure are itemised in what is described as a schedule of capital expenditures exhibited to the affidavit by Mr Kahn dated 28 November 2014. Also exhibited to that affidavit is a bundle of documents which the affidavit stated evidenced the expenditures referred to in the affidavit. The affidavit stated that the schedule showed the expenses incurred in the set-up, fit-out and operation of the restaurant, as well as the costs incurred in closing the restaurant and engaging in mediation and NCAT litigation with the Lessor. $7,000 of that amount relates to the lost perishable stock resulting from refrigeration problems. In its reasons given on 6 January 2016, the Tribunal made a finding to the effect that this $7,000 was to be deducted from the amount otherwise payable by the Lessee to the Lessor. representation of the parties 1. The appeal was listed in a call over on 23 February 2016. An order was made that the appeal be listed for hearing on 15 April 2016. It was noted that the Lessor did not wish to participate in the appeal. The Lessor attended at the call over by telephone and confirmed its non-participation in the appeal. There were no written submissions filed by the Lessor. 2. On the hearing of the appeal the Lessee was represented by solicitor and counsel. Notwithstanding what was said at the call over, Mr Arvo Pikkat, a director of the Lessor, appeared and was granted leave to represent the Lessor. Mr Pikkat did not orally attempt to answer the detailed submissions of the Lessee. submissions of the lessee Ground 1 1. In written submissions dated 14 April 2016 it was submitted on behalf of the Lessee: 1. That in its decision dated 6 January 2016, the Tribunal found that the Lessee had not referred the matter to mediation or to another form of dispute resolution prior to closing the restaurant and 2. That finding was erroneous. 1. To support the first of those findings, the Lessee relied upon what was stated in pars 42, 47 and 49 of the Tribunal's reasons for decision. 2. Paragraphs 41 – 49 were in these terms: 41 Following removal of the smell on 15 January 2014, the lessee's solicitor wrote to the lessor on 17 January 2014, claiming compensation for loss of business and stock alleged to have been caused by the delays and inefficiencies of the lessor in repairing the defective refrigerator and freezer and in remedying the offensive smell. This letter invited a financial proposal from the lessor, failing which the lessee would "have no alternative than to make an application to the NSW Small Business Commissioner's Dispute Resolution Unit." 42 Despite the stated intention of the lessee to refer this matter to mediation or perhaps to an another form of dispute resolution in the absence of a satisfactory response to the solicitors' letter dated 17 January 2014, the lessee did not in fact take any such action before subsequently deciding to close the restaurant and to cease paying rent and outgoings. 43 Following on from the 17 January 2014 letter, the lessee's solicitor sent two further email messages on 30 January and 3 February 2014 to the lessor's agent seeking a response, and apparently also telephoned the agent on more than one occasion after 17 January 2014. The solicitor then sent a further letter to the lessor's agent on Friday 14 February 2014 advising that: "…our client has very few options other than to close the restaurant down for a period of approximately eight weeks. During that time the lessee will endeavor (sic) to rebrand the restaurant and re-open at, or about, Friday 4 April 2014. In this event, the lessee seeks the co-operation of the Lessor, the suspension of accruing rent and outgoings, and a further rent free period after the restaurant re-opens. …….. We await your urgent response." 44 The above letter was then immediately followed by another letter sent by the lessee's solicitor to the agent on the next business day which was Monday 17 February 2014, advising the restaurant was now closed. This letter stated that there had been "no response to our letter of the 14 February 2014" as justification for the immediate closure of the restaurant. 45 This 17 February 2014 letter went on to state as follows: "Having regard to all of the circumstances, which are well documented, our client has been left with no alternative other than to close the restaurant. The restaurant will remain closed until such time as the Lessor addresses our client's complaints and grievances …" 46 The fact that there had not been a response to the 14 February letter did not justify immediate closure of the restaurant. Only an extremely short period of time (one business day at most) had elapsed since the previous letter had been sent by the solicitor. Further to this, the previous letter sent on 14 February 2014 had not imposed any deadline upon the lessor for action, nor had it warned of indefinite closure. This earlier letter had also advised that the restaurant was closed with a view to re-opening in approximately seven weeks' time after a "re-brand", and it sought suspension of rent and outgoings for that period together with the granting of a further rent-free period after the restaurant had re-opened. 47 The circumstances surrounding this matter did not justify the unilateral decision of the lessee to close the restaurant indefinitely as and from 17 February. 48 The absence of a response by the lessor to the lessee's request for compensation and suspension of rent did not justify the lessee treating its obligations under the lease as either being at an end or suspended until such time as it considered that its "complaints and grievances" were satisfactorily addressed. 49 In the letter from its solicitor dated 17 January 2014, the lessee had initially warned that it proposed to refer its claim for compensation to mediation unless an acceptable proposal was received from the lessor, but it subsequently chose to abandon this proper and available course. 1. The Lessee submitted that the evidence establishing that the matter had been referred to mediation was at item 24 of exhibit AK 3 and in par 36 of the Lessee's final submissions dated 11 December 2014. Item 24 of exhibit AK 3 was an entry dated 15 April 2014. It showed the "vendor" as the Small Business Commissioner NSW and that for mediation the amount paid was $760. In our view that was evidence from which it could be concluded that the Lessee had referred the dispute to mediation by 15 April 2014. Paragraph 36 of the Lessee's final submissions dated 11 December 2014 was a submission that a number of the items referred to in the schedule set out in exhibit AK 3 were available during mediation. It does not state when the dispute was referred to mediation. 2. We understand that the Lessor did not challenge that exhibit AK 3 recorded payments made by the Lessee in connection with the restaurant and in those circumstances, we are of the view that it could be concluded from item 24 in that exhibit that the Lessee had referred the dispute to mediation by 15 April 2014. 3. However the above evidence and that conclusion does not prove that the Tribunal's finding in its decision dated 6 January 2016 that the Lessee had not referred the matter to mediation prior to closing the restaurant, was erroneous. The restaurant was closed on 17 February 2014. The Lessee has not referred us to any evidence that it had referred the dispute to mediation prior to 17 February 2014. The evidence relied upon by the Lessee says nothing about whether the Lessee referred the matter to another form of dispute resolution. 4. The Lessee also submitted that there was fresh evidence before the Appeal Panel and we were referred to documents at Tabs 23 – 25 of the Lessee's evidence folder. The document at Tab 23 is a copy of an unsigned and undated application for mediation addressed to the NSW Government Small Business Commissioner which shows the Lessee as the applicant. The document at Tab 24 is a copy of a letter from the Small Business Commissioner NSW dated 17 April 2014 to the Lessee which records receipt from the Lessee of its application for mediation. The documents at Tab 25 are a copy of a letter from the Small Business Commissioner NSW dated 19 May 2014 to the Lessee enclosing a certificate dated 19 May 2014 certifying that mediation had failed to resolve the dispute. 5. The Appeal Panel has found another piece of evidence which is relevant to when the Lessee sought mediation. It is at page 30 of exhibit AK3. It is a tax invoice from the Small Business Commissioner NSW to the Lessee dated 8 April 2014 for $760, payment for which was due on 15 April 2014. It would therefore appear that it is not possible to conclude from the evidence that the referral to mediation (or an application for mediation) was made prior to 8 April 2014. 6. It was also submitted on behalf of the Lessee: The erroneous finding about the failure to refer the matter to mediation was critical to the outcome of the Second Tribunal Decision, as it was a component of the ultimate finding that the closure of the restaurant was unwarranted and therefore not caused by the original complaint, namely, the bad smell (which was found in the First Tribunal Decision to be "fatal" to the operation of a restaurant: paragraphs 47 and 60 of the Second Tribunal Decision). 1. In our view that submission should be rejected for two reasons. First, the Tribunal's reasons for decision do not state expressly or impliedly that the finding in par 49 of its reasons, that the Lessee chose to abandon its proposal to refer its claim for compensation to mediation, was a factor which the Tribunal took into account in deciding: 1. Whether the closure of the restaurant was unwarranted; or 2. That neither of the Lessor's breaches of the lease in not repairing the freezer promptly or in not removing the smell before 15 January 2014 was a cause of the Lessee's decision not to return to the premises (see par 60 of the Tribunal's reasons); 3. The fact that there had not been a response to the 14 February letter did not justify immediate closure of the restaurant (par 46 of those reasons); and 4. To make the findings set out in pars 47 or 48 of the reasons. The conclusion to be drawn from the evidence and the Tribunal's reasons is that the finding in par 49 played no part in the Tribunal's deciding those four matters. Secondly, what the Appeal Panel has to decide is whether, even if the Tribunal Member was wrong in finding that the Lessee did not refer the matter to mediation or to another form of dispute resolution, or was wrong in finding that the Lessee chose to abandon its proposal to refer its claim for compensation to mediation, the orders made by the Tribunal are correct. For the reasons set out below, the Appeal Panel is of the view that the orders made by the Tribunal are correct and that the appeal should be dismissed. 1. If the appeal were allowed and the matter referred back to the Tribunal and the Tribunal made a finding that the Lessee did not choose to abandon its proposal to refer its claim for compensation to mediation, would that bring about findings in favour of the Lessee on the questions whether: 1. The Lessee was entitled to close the restaurant; 2. The Lessee was entitled to compensation for direct expenditures incurred by it in relation to the restaurant, which were allegedly lost as a result of the failure of the business, which it is alleged was caused by the bad smell and 3. The loss suffered by the Lessee includes any liability it has to pay rent and outgoings to the Lessor pursuant to the Lease which liability can be offset against any claim made by the Lessor for payment of such rent and outgoings. 1. In our view the answers to those questions are in the negative. 2. The Lessee bases its claims in respect of these matters on the bad smell which it claims was the reason why the business declined and ultimately closed (see par 27 of the Lessee's submissions dated 14 April 2016). 3. The Appeal Panel does not agree with these claims. 4. The Lessor breached the lease in not repairing the freezer promptly and not removing the smell prior to the commencement of the lease and allowing it to remain at the premises until 15 January 2014. For those breaches the Lessee was entitled to compensation for the losses it suffered. The rebranding of the restaurant would have given the Lessee the opportunity to in effect start up its business again. But the breaches by the Lessor did not give the Lessee the right to close the restaurant and not pay any further rent and outgoings. 5. We are therefore of the view that to remit the proceedings to the Tribunal again to deal with the alleged abandonment referred to in par 49 will not bring about a more favourable result in favour of the Lessee. In those circumstances, even if the Tribunal Member fell into error in his findings concerning mediation, this could not result in any different orders being made. In our view a properly conducted retrial could not possibly produce a different and more favourable result for the Lessee (Stead v State Government Insurance Commission [1986] HCA 54 (1986) 161 CLR 141 at 147 and Giretti v Commissioner of Taxation (1996) 70 FCR 151 at 164B - 165F). 6. It therefore follows that ground 1 in the notice of appeal does not entitle the Lessee to any of the orders sought and that this ground of appeal should be dismissed. Ground 2 1. In support of this ground it was submitted that further and in the alternative to ground 1, the findings about the failure to refer the matter to mediation were not the subject of any debate between the parties at the hearing before the Tribunal on 25 November 2015, and that there was no prior notice given by the Tribunal that such a finding would be made. It was submitted that the finding was of an essential nature to the disposition of the matter by the Tribunal. It was submitted that this amounted to a failure on the part of the Tribunal to provide the Lessee with a proper opportunity to be heard which was a denial of procedural fairness. 2. In our view, for reasons similar to those in pars 49 – 55 above, a properly conducted re-trial to deal with the alleged failure to refer the matter to mediation and to deal with the alleged abandonment of the mediation, could not possibly produce a different and more favourable result for the Lessee. We are therefore of the view that this ground of appeal should be dismissed. Grounds 3 and 4 1. Grounds 3 and 4 were dealt with together in the Lessee's submissions. The topics were summarised as being inconsistent findings between the first Tribunal decision and the second Tribunal decision and illogicalilty. 2. It was submitted that in par 51 of the Tribunal decision dated 6 January 2016 the Tribunal found the bad smell was not "permanently fatal" to the operation of the restaurant. This was said to be an oxymoronic finding which was inconsistent with the Tribunal's original finding of fatality in par 44 of the Tribunal's first decision. 3. It was submitted that an order for remitter is not an order for retrial (Murphy v Overton Investments Pty Ltd [2004] HCA 3, (2004) 216 CLR 388 at [75]) and that on a remitter the undisturbed findings stand (Walker Corporation Pty Ltd v Sydney Harbour Foreshore Authority [2009] NSWCA 178 at [86]). It was submitted that the Tribunal departed from these principles and that there was no basis for the existing undisturbed findings to be altered unilaterally and without prior notice or warning by the Tribunal. In effect it was submitted that there had been a fundamental departure from the original undisturbed findings. 4. It was also submitted that the finding that the bad smell was not "permanently fatal" was also internally inconsistent as it involved an oxymoron. It was submitted that fatality is necessarily a permanent state and that in those circumstances this "new finding" was also irrational or illogical. It was finally submitted that these alleged altered findings were critical to the outcome of the second Tribunal decision as they formed a key component of the ultimate conclusion that the loss that had been suffered by the Lessee (particularly, the loss incurred in fitting out the premises which was wasted as a result of the closure of the restaurant) was not caused by the bad smell. 5. Paragraph 51 of the Tribunal's second decision dated 6 January 2016 is relevant to grounds 3 and 4 and it is set out at par 13 above. 6. Paragraph 44 of the Tribunal's first decision was as follows: I hold some real concern as to the extent to which I can rely upon the "customer compliant" (sic) documents supplied by the lessee as a reliable record of customer reactions to any smell which existed at meal times. The origin of these documents and the manner in which they were brought into existence is open to question. On the other hand, it was frankly and understandably conceded by all relevant witnesses who gave evidence that the existence of a bad odour would be fatal to the successful operation of the lessee's restaurant business. 1. The critical question on these grounds of appeal 3 and 4 is what does the last sentence of par 44 mean. Does it mean that the bad odour, (which existed until 15 January 2014) would prevent the restaurant ever being successfully operated during the balance of the two year period of the lease. Or does it mean that the bad odour would prevent the restaurant being successfully operated during that period of time when the bad odour caused potential customers not to attend at the restaurant. 2. We are of the view that par 44 cannot be read in isolation from the remainder of the first reasons for decision. In particular par 44 must be read with pars 41 and 45. 3. Paragraph 41 was as follows: The quantum of the lessee's claim, as disclosed by the tendered evidence, is as follows: ● Compensation for lost stock in the amount of $7,000. ● Losses and expenses in relation to fees and equipment as outlined in the affidavit of Mr Khan dated 28 November 2014, in a total sum of $50,188.92. ● Compensation for loss of customer goodwill, assessed by the accountant Mr Hussein to be in the sum of $150,000.00. 1. Paragraph 45 was as follows: The above conclusion, however, does not mean that the lessee should not remain bound under the terms of the lease agreement to pay rent at least as and from 15 January 2014, nor does it justify the lessee closing its restaurant business, or its claim for loss of profits and compensation for losses said to arise from the claimed breach by the lessor. 1. In our view pars 41 and 45 of the Tribunal's first decision make it clear that what par 44 means is that the witnesses conceded that the existence of a bad odour would prevent the restaurant being successfully operated during that period when the bad odour caused potential customers not to attend at the restaurant. 2. In our view what is stated in par 51 of the Tribunal's second decision is not inconsistent with what is stated in par 44 of the Tribunal's first decision. 3. In our view, if the Lessee's submission is correct, the following would be the consequences which would flow from pars 44 and 45: 1. The restaurant could never be successfully operated because of the existence of the bad odour which only remained until 15 January 2014; 2. Notwithstanding that fact, the Lessee would not be justified in closing the restaurant i.e. it would have to continue to operate the business at a loss; 3. The Lessee would not be entitled to recover from the Lessor its loss of profits; and 4. The Lessee would remain bound to pay rent. 1. In our view this analysis confirms our views stated in pars 66 and 69 above. 2. We are therefore of the view that the Lessee's submissions concerning grounds 3 and 4 should not be accepted. Ground 5 1. The first written submission made in support of ground 5 was as follows: 24. For the same reasons as those set forth in respect of Grounds 1 to 4 above, the Appeal Panel ought to: a. set aside the findings that the circumstances surrounding the matter did not justify the decision of the Tenant to close the restaurant, and that the bad smell was not "permanently fatal"; b. reinstate the original finding that the bad smell was "fatal"; and, accordingly, c. conclude (in accordance with that reinstated finding and the Tenant's uncontested evidence, referred to below) that the bad smell was the cause of the failure of the restaurant and, therefore, the cause of the Tenant's loss. 1. That submission is rejected for the reasons set out above concerning grounds 1 – 4. 2. The Lessee also submitted that there was no contest in the evidence as to the material facts and that the reinstatement of the original finding that the bad smell was "fatal" leads inexorably to that conclusion. It was submitted that the Tribunal below held that the Lessee's decision not to reopen the restaurant was the only cause of the Lessee's loss but what was not properly determined in the light of the errors discussed in the Appellant's written submissions dated 14 April 2016, was why the decision was made to close the restaurant. The Lessee submitted that the uncontested evidence of its witnesses was that the bad smell was the reason why the business declined and ultimately was closed. It was submitted that this was reflected in the Tribunal's original finding of fatality and was supported by its receiving customer complaints about the smell on and after the restaurant's opening night; the restaurant's takings declining significantly from the opening night until some days in February 2014, the restaurant made no money at all. It was submitted that the original finding of fatality by the Tribunal at first instance was unsurprising in light of the location of the restaurant in a small regional centre and the likely impact upon the restaurant's business of word of mouth. It was submitted that given the Tribunal's erroneous findings, these matters were simply not considered. It was submitted that if the erroneous findings had not been made, these matters would have been considered and, the Tribunal would inevitably have found that the loss suffered by the Lessee, including in relation to the fitout costs, was caused by the bad smell, because it caused the business to decline and fail and therefore led to the restaurant closure. 3. The Appeal Panel does not accept any of these submissions for the following reasons: 1. For the reasons set out above concerning grounds of appeal 3 and 4, there is no basis for a "reinstatement of the original finding that the smell was 'fatal'". 2. The reason why the Lessee made the decision to close the restaurant is not determinative of the question whether the Lessee had a right to terminate the lease or close the restaurant; 3. Evidence of any decline in the business to 17 February 2014 is not evidence of facts which gave to the Lessee a right to close the business or terminate the lease; 4. Apart from the failure of the Tribunal to refer to the implied term in par 22 of its second decision, the Appeal Panel does not accept that the Tribunal made any relevant erroneous finding. The evidence was such that the Tribunal was entitled to make the finding that it had not been adequately demonstrated on the evidence that the smell was fatal to the conduct of the restaurant business in the future and to make a finding that it had not been adequately demonstrated that the smell justified the closure; 5. For the reasons given concerning grounds of appeal 3 and 4, there was no original finding of fatality as propounded by the Lessee; 6. The Tribunal was entitled to, and should have, which it did, come to the view on the evidence, that it was not satisfied that the claimed losses of the Lessee were caused by the bad smell. 1. Paragraph 51 of the Tribunal's reasons is a correct finding of fact that the Lessee had not demonstrated that as a result of the bad smell it was not possible for the Lessee to successfully conduct a restaurant business at the premises at any time during the remaining period of the lease. Thus the re-branding of the restaurant was proposed by the Lessee as a means of starting up again a restaurant business at the premises. 2. To obtain an order that the Lessor pay the Lessee a sum of money for breach of the implied term, it was necessary for the Lessee to convince the Tribunal that because of the bad smell the Lessee suffered a loss. Having regard to the case propounded by the Lessee, this meant that the Lessee had to prove that as a result of the bad smell, it was not possible for the Lessee to conduct its restaurant business successfully at the premises. 3. The Lessee did not claim loss of profits but did claim compensation for direct expenditures incurred in relation to the restaurant, which were lost as a result of the failure of the business (it being alleged that this was caused by the bad smell) and for its liability for rent and outgoings. Thus in order for the Lessee to obtain an order in its favour it had to prove that the bad smell prevented the Lessee conducting a successful restaurant on the premises. 4. As we understand it, the Lessee relies upon the following to prove that the bad smell resulted in its being impossible for the Lessee to conduct a successful restaurant business at the premises: 1. The original finding that the bad smell was fatal, should be reinstated; 2. The Lessee receiving customer complaints about the smell on and after the restaurant's opening night; 3. The restaurant's takings declining significantly from the opening night until some days in February 2014 the restaurant made no money at all; 4. The original finding of fatality by the Tribunal , as a matter of common sense, was unsurprising in light of the location of the restaurant in a small regional centre and the likely impact upon the restaurant's business of (as could be inferred occurred in this case, adverse) word-of-mouth; and 5. Given the Tribunal's erroneous findings, these matters were simply not considered. If the erroneous findings had not been made, these matters would have been considered and, in the light of the absence of any evidence to the contrary, the Tribunal would inevitably have found that the loss suffered by the Lessee (including in relation to the fit-out costs) was caused by the bad smell, because it caused the business to decline and fail and therefore led to the restaurant's closure. 1. The Appeal Panel does not accept those submissions for the reasons set out in pars 77, 78, 116 and 117. some evidence called by the lessee 1. Part of the evidence relied upon by the Lessee before the Tribunal, was an affidavit sworn 7 July 2014 by Mr Kahn, the sole director of the Lessee. In that affidavit Mr Kahn stated that his doctor had suggested that he pursue a less physically demanding occupation. Given his experience in operating a restaurant in the past, Mr Kahn came to the decision to open an Asian and Indian restaurant. In October 2013, Mr Kahn's home was in Sydney and he started looking on the internet for premises to operate a restaurant. He found that restaurant premises in Mittagong were available for lease and on 7 October he drove to Mittagong and inspected the restaurant with Mr Pikkat. The premises were apparently not being used as there was no power and Mr Pikkat used a torch to show Mr and Mrs Kahn around. The bad smell was present at that time. Mr Kahn proposed to have a grand opening of the restaurant on 6 December but that was later changed to 13 December 2013. He advertised the grand opening in the Southern Highlands newspaper and started delivering 10,000 menus throughout the area. On the opening night the restaurant had approximately 40 customers and almost all of them complained about the bad smell. Two customers walked out of the restaurant half way through their meal and did not pay the bill. By 8pm all of the customers had left the restaurant, despite it being open until 10pm. The takings were $1,400 that night. 2. On 14 December many customers complained that the smell was very bad. The takings for that day were $1,198.50. The takings for 15 December 2013 were $613.20. On 18 December there were very few customers who came to the restaurant. The few that did come, took their food away and said the smell was too bad to sit in the restaurant and eat. The takings that day were $457. 3. On 17 January 2014 Mr Kahn ordered another 12,400 menus, placed an advertisement in the Southern Highland newspaper and made arrangements for entertainment to be provided at the restaurant. 4. On 25 January the takings were $903.50 and in his affidavit of 7 July 2014, Mr Kahn stated that this corresponded with the recent advertising he had undertaken and the delivery of menus throughout the area. 5. Each day Mr Kahn continued to drive from Sydney to the restaurant however on some days he did not have a single customer. 6. Between 1 and 13 February 2014, the restaurant had takings of $1,165.60, an average of $105.90 per day. 7. On 14 February Mr Kahn opened the restaurant for business. It was a Friday night and Valentine's Day. He had a number of telephone bookings for a table. During the evening he was told by the customers that they were tourists and had not been to Mittagong before. He took $1,197 that night. He took 19 orders from customers, 11 of which were takeaway or delivery orders and 8 were for dine-in customers. 8. On 15 February the takings were $25 for the entire day. On 16 February the takings were $55 for the entire day. On 17 February Mr Kahn closed the restaurant and did not intend to return until he received a satisfactory solution from Ms Devenny and Mr Pikkat. He intended to have discussions and negotiations between himself and Mr Pikkat to occur to enable a resolution of the problems to ensure he could rebrand the restaurant and start afresh. 9. In his affidavit Mr Kahn referred to the letter written by Mr Kennedy on 17 February 2014 notifying Ms Devenny and Mr Pikkat that he was closing the restaurant and that it would remain closed until the Lessor addressed his complaints and grievances. To the best of his knowledge, there was no response to Mr Kennedy's letters from Ms Devenny or Mr Pikkat. 10. On 2 June 2014, after negotiations with Mr Pikkat's office and with their consent, Mr Kahn removed items of furniture, equipment and accessories from the restaurant. However there were items of furniture which were attached to walls and regarded as fixtures and he could not remove those items. 11. The Lessee relied upon an affidavit of Ekutun Nahar sworn 7 July 2014. Ms Nahar is the wife of Mr Kahn. She stated that on 13 December 2013 they opened the restaurant and she stood at the front door to hold it open for customers. She stated that when the customers entered the restaurant they said words to the effect that the restaurant was very nice but there was a very bad smell. 12. During the middle of eating their food, two customers started to walk out the door without paying. Ms Nahar had a conversation with them and asked what was wrong. They said the smell was too bad and they could not stay and eat. They did not finish their meal nor pay for it. By 8pm all customers had left the restaurant. 13. Ms Nahar said that each day she stood out the front of the restaurant and handed out menus to people who walked past. Many of the people she tried to hand a menu to said words to the effect: "Your restaurant smells too bad to eat in." 14. Ms Nahar gave evidence that she continued to stand out the front of the restaurant handing out menus to people in the street. She said that many people had conversations with her, the substance of which was: "Your restaurant smells" and Ms Nahar's response was: "There is no more smell. It is good now." 15. Ms Nahar said that there were never many customers and on some days they took only one order. 16. The Lessee relied upon an affidavit of Mostafa Mollah dated 7 July 2014. He was hired by Mr Kahn as a curry chef in the middle of November 2013 for the restaurant at Mittagong. A few days later he drove to Mittagong to look at the restaurant and when he walked into it he noticed a very bad smell. 17. He referred to two people leaving the restaurant without paying on the opening night. He stated that during that night a customer came to the kitchen door and had a conversation with him. The customer stated that the food was very nice but the restaurant smells very bad. He stated that once the tradesperson worked on the drains cleaning them and removing material from them the bad smell had gone. 18. Mr Mollah stated that from mid January 2014, although the bad smell had gone, the restaurant had very few customers. The few orders that they did have, were takeaway orders. 19. Mr Mollah stated that in early February he had a conversation with Mr Kahn who told him that they were going to close the restaurant for two months and see if they could reopen under a different name and have more customers. 20. The Lessee prepared a takings schedule for the restaurant for the period from 13 December 2013 – 15 February 2014. The total for the period was $15,070.50. There were only 5 days when the takings exceeded $800.00. On the other days, the takings were low, on some days extremely low and on 7 January 2014 there were no takings. Attached to these reasons for decision is a copy of the takings schedule. 21. It was submitted that the Appeal Panel ought to find that the breach of the implied term caused the loss suffered. It was noted that the Lessee's claim for loss of profit had been abandoned and what remained of the Lessee's claim was: 1. Its claim for compensation for direct expenditures incurred by it in relation to the restaurant, which were lost as a result of the failure of the business – which was caused by the bad smell and by the failure by the Lessor to fix the refrigeration (in respect of the lost stock component), and 2. Its liability for rent and outgoings. 1. As to the Lessee's claim (a), it was submitted that the evidence of loss was $50,188.92, $7,000 of which related to the lost perishable stock resulting from refrigeration problems, which was allowed by the Tribunal below. It was submitted that the evidence of the fit-out and other set-up costs was never challenged by the Lessor and it should be accepted. 2. As to claim (b), it was submitted that the existence of the bad smell was fatal to the Lessee's business and was thus the direct cause of the Lessee's decision to close the restaurant permanently and its inability to pay rent pursuant to the lease. 3. It was submitted that in those circumstances, the loss suffered by the Lessee includes any liability that it has to pay rent and outgoings to the Lessor pursuant to the lease. It was submitted that the claim for that loss therefore offset any claim made by the Lessor for payment of rent and outgoings. It was submitted that in those circumstances there should be no order that the Lessee pay any sum to the Lessor on account of rent and outgoings and the Lessor's application in that regard should be dismissed. letter 17 august 2016 1. By letter dated 17 August 2016 to the Tribunal, the solicitors for the Lessee corrected some errors in the Lessee's written submissions dated 14 April 2016 and expanded upon the submissions which had already been made on behalf of the Lessee. The Appeal Panel has taken all of those matters into account in the preparation of these reasons for decision. The solicitors for the Lessee provided to the Tribunal a copy of their letter dated 17 August 2016 which they forwarded to the Lessor enclosing a copy of their letter to the Tribunal dated 17 August 2016. ground 4A 1. In its written submissions the Lessee sought leave to amend its grounds of appeal by adding the following ground 4A: The Member erred in law in failing to apply the correct test by determining the question of breach otherwise than by reference to the term as to fitness for purpose found to be implied in the lease by the previous Appeal Panel. Particulars Tribunal decision, paragraphs 20 – 22. Appeal Panel decision, paragraphs 14, 30 and 34 – 38. 1. Paragraphs 17, 20 – 22 of the Tribunal's second decision were as follows: 17 The second question remitted for determination is: did the lessee suffer any loss by reason of any breach by the lessor of the implied term and, if so, what was the quantum of the loss? 20 The restaurant then opened on 13 December 2013. Any problems which occurred at this time of the restaurant opening and any losses subsequently sustained by the lessee were not caused by breach of the implied term, namely that the premises would be reasonably fit for use as a restaurant as at commencement of the lease on 7 November 2013. 21 Neither party contemplated that operation of the lessee's restaurant business would coincide with the commencement of the lease, and this was reflected by the agreed rent-free period. No losses are demonstrated to have been suffered by the lessee because the premises were unable to be used as a restaurant at the commencement of the lease. 22 Any losses claimed to have been sustained by the lessee can only be considered within the context of whether, after commencement of the lease, they were caused by the lessor's breach of its contractual responsibilities, either as expressed within the terms of the lease or as implied by the Retail Leases Act 1994. 1. Paragraphs 14, 30 and 34 - 38 of the first Appeal Panel's reasons were as follows: 14 As we have observed, the respondent does not now challenge the implication of a term that the premises would be fit for the permitted use from the time of commencement and for the duration of the lease. The respondent does not accept, however, that the implied term was breached or, if it was, the appellant suffered the loss is alleges. 30 The respondent now accepts that implied into the lease was a term that the premises would be fit for the permitted use from the commencement of the lease and for its duration. That concession is enough to dispose of this ground. That is because the respondent accepts that in the particular factual circumstances, the lease contract contains that term. 34 Had the concession not been made by the respondent in this matter and it was necessary for us to decide the issue, we would have held that in these particular factual circumstances, the term was implied. We are of the opinion that, having regard to the matters below, it is so obvious and goes without saying that implied into this lease was a term that the premises would be fit for its permitted use as a restaurant from the commencement of the lease. Such a term in this case gives business efficacy to the lease: Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337 at 346-347. 35 The implication of the term is supported by the representations made by Mr Pikkat to Mr Khan that the respondent would ensure that the walk-in freezer, the cool room and the air conditioning were in working order prior to the commencement of the business and that steps would be taken to remove the smell emanating from the drainage. 36 The fact that Mr Pikkat gave the undertakings he did support an inference that he accepted the cool room and refrigeration equipment needed to be in working order and the smell needed to be eliminated before the restaurant opened. Although the undertaking with respect to taking steps to eliminate the smell was not expressed in terms that those steps would be taken before the restaurant opened, we infer that it must have been the case that those steps would be undertaken before the restaurant opened. It must have been the case that Mr Pikkat accepted the smell was not conducive to the running of a restaurant; otherwise, why would he have undertaken the steps to eradicate it? We infer that the lease was based upon the assumption that the cool room and refrigeration equipment would be in working order and steps would be taken to eliminate the smell. If that assumption is so, then the express terms referred to do not cover the state of the refrigeration equipment and drainage at the time of entry into the lease such as to prohibit the implication of the term. 37 We do not think that the express terms of the lease referred to by the Tribunal at [28] of the reasons is inconsistent with the implied term such that the term cannot be implied. Those express terms deal with maintenance and servicing of, inter alia, the cool room and drainage as being the lessee's responsibility after the lease is entered into. However, they do not prevent the implication of a term that the premises, including the cool room and drainage, would be in working order such that the premises was fit for the purpose of the lease from its commencement: namely running a restaurant. We note that Clause 6 of the lease and item 17 of the schedule provide that the permitted use of the premises was a restaurant. No other use was permitted. As such, the implied term is not inconsistent with the express provisions of the lease. There is nothing in the content of the implied term which would engage the operation of s7 of the Act. 38 The Tribunal erred in its conclusions on the implied term. Ground 2 is upheld. 1. It is difficult to understand what the Tribunal Member meant by pars 20 – 22. He was aware that the Appeal Panel had held that there was an implied term that the premises would be fit for the permitted use, although he expressed the implied term in the abbreviated form used by the Appeal Panel in par 34 and not in the full form used by the Appeal Panel in pars 14 and 30. 2. He was also aware that the implied term mentioned by the Appeal Panel was a term implied in addition to any terms which might be implied by operation of the provision of the Retail Leases Act 1994 (see par 13 of the Tribunal's reasons dated 6 January 2016). 3. Notwithstanding this knowledge, the Tribunal Member went on to state what is in par 22 of the Tribunal's reasons. That paragraph does not include any reference to the implied term spoken of by the first Appeal Panel. As a result what is stated in par 22 is incorrect. It therefore follows that the Tribunal did not consider whether any losses alleged to have been suffered by the Lessee, were caused by a breach of that implied term. 4. The Tribunal determined the Lessee's claim for loss of the food under s 34 (1) (e) of the Retail Leases Act 1994 and concluded that the loss suffered by the Lessee was $7,000. 5. However the other claims made by the Lessee were not considered in relation to the implied term and in this respect the Tribunal Member erred. 6. Notwithstanding that fact, the Lessee could only recover compensation for breach of the implied term if it could prove that the bad smell caused the Lessee to suffer loss. The evidence did not enable such a finding to be made and the Tribunal correctly found against the Lessee on this point. Thus the Tribunal Member made the following correct relevant findings: 1. The circumstances surrounding the matter (which included the bad smell) did not justify the unilateral decision of the Lessee to close the restaurant indefinitely as and from 17 February 2014 – see par 47; 2. Once the smell was removed, no inherent fatality remained. The presence of the smell was not a permanent situation and had not been adequately demonstrated on the evidence to have not been permanently "fatal" to the conduct of the restaurant business, nor to justify its sudden closure – see par 51; 3. The smell problems were not accepted as a cause of the claimed losses and expenses – see par 59; 4. The Lessee's decision to not return to re-open the business was the only cause of the loss of the items claimed by the Lessee. The breach in not removing the smell before 15 January 2014, was not a cause of the Lessee's decision to not return to the premises – see par 60; 5. The decision not to return and re-open the restaurant was clearly expressed within the final letter from the Lessee's solicitor to the agent to be due to a lack of response by the Lessor to his letters and messages – see par 62; and 6. None of the evidence referred to in pars 83 to 102 above affects the findings made by the Tribunal which are set out in this paragraph. 1. It must also be borne in mind that: 1. There was no evidence as to the prospects of the restaurant, without the smell problem, being a financial success; 2. The Tribunal was entitled to conclude that the re-branding proposal, which was proposed by the Lessee, was a reasonable one, such that it would allow resumption of the business as originally proposed with a new brand and within suitable premises (see par 62 of the Tribunal's reasons) ; and 3. The Lessee was not making any claim for loss of profits. 1. Section 53 (1) of the Civil and Administrative Tribunal Act 2013 states: (1) The Tribunal, may in any proceedings, make any amendments to any document (for example, an application or appeal) filed in connection with the proceedings that the Tribunal considers to be necessary in the interests of justice. 1. Having regard to what we have stated in pars 116 – 117 above, we do not consider it to be necessary in the interests of justice to grant leave to amend the notice of appeal. The granting of such leave would be futile as the Lessee would have to fail on that ground. We therefore refuse leave to amend the notice of appeal to add the proposed ground 4A. ground 5 1. The Lessee requires leave to appeal on ground 5 as it is not a ground on a question of law. The application before the Tribunal was in the Consumer and Commercial Division which means that clause 12 of schedule 4 of the Civil and Administrative Tribunal Act 2013 is applicable. 2. We have fully dealt with the matters relied upon by the Lessee to support this proposed ground 5. For the reasons set out above concerning the proposed ground 5, the Appeal Panel does not agree with the submissions made by the Lessee in support of leave being granted. There is also the added requirement for the Lessee that it has to satisfy the requirements of clause 12 of schedule 4. 3. In our view the analysis which we have made of the evidence and the submissions shows that the decision was fair and equitable and that the decision of the Tribunal under the appeal was not against the weight of evidence. 4. We are therefore not satisfied that the Lessee may have suffered a substantial miscarriage of justice because: 1. The decision of the Tribunal was not fair and equitable or 2. The decision of the Tribunal under appeal was against the weight of evidence, or significant new evidence has arisen. The alleged new evidence does not appear to be new nor, in our view is it significant having regard to the evidence which was before the Tribunal concerning mediation. 1. We therefore refuse leave to appeal on ground 5. orders 1. The Appeal Panel makes the following orders: 1. Leave to amend the notice of appeal by adding ground 4A is refused. 2. Leave to appeal on ground 5 is refused. 3. The appeal is dismissed. Takings Schedule (605 KB, pdf) 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: 29 May 2018