Supreme Court New South Wales Medium Neutral Citation: Jia v GJKR Pty Ltd [2017] NSWSC 629 Hearing dates: 12 May 2017 Date of orders: 12 May 2017 Decision date: 12 May 2017 Jurisdiction: Common Law Before: Beech-Jones J Decision: (1) The Amended Summons filed 2 March 2017 is dismissed. (2) The plaintiff is to pay the first and second defendant's costs of the proceedings. Catchwords: LOCAL COURT APPEAL – alleged agreement to vary rent payable under a lease – no written or oral judgment – magistrate did not decide issue because plaintiff conceded claim for rent untenable – no error of law in acting on concession – appeal dismissed Legislation Cited: Civil Procedure Act 2005 Conveyancing Act 1919 Local Court Act 2007 Retail Leases Act 1994 Uniform Civil Procedure Rules 2005 Cases Cited: Phillips v Ellinson Brothers Pty Limited (1941) 65 CLR 221 Category: Principal judgment Parties: Li Hong Jia (Plaintiff) GJKR Pty Ltd (First Defendant) Geoffrey Zhi-Xing Zhang (Second Defendant) Jessica Eun Nyeon Jin (Third Defendant) Representation: Counsel: CD Wood (Plaintiff) N Allan (First and Second Defendants) No Appearance (Third Defendant) Solicitors: Brighton Lawyers (Plaintiff) Ziman and Ziman (First and Second Defendants) No Appearance (Third Defendant) File Number(s): 2016/304785 Decision under appeal Court or tribunal: Local Court of New South Wales Date of Decision: 12 October 2016 Before: Magistrate Pierce File Number(s): 2014/35514 EX TEMPORE Judgment 1. HIS HONOUR: The plaintiff in these proceedings, Li Hong Jia, obtained a judgment in the Local Court on 14 September 2006 against three defendants in the sum of $14,017.50. The first of the three defendants, GJKR Pty Ltd ("GJKR") was the former tenant of retail premises owned by Ms Jia in Flinders Street, Surry Hills (the "premises"). The other two defendants, Geoffrey Zhi‑Xing Zhang and Jessica Eun Nyeon Jin, were guarantors of GJKR's obligations. In this Court, Ms Jin has not been served with any summons. She has not taken part in the appeal, even though she is named as a defendant. 2. Ms Jia now appeals against the Local Court judgment. She seeks an increase in the amount of the judgment to just over $51,000. 3. Appeals from the Local Court to this Court in civil proceedings are governed by ss 39 to 41 of the Local Court Act 2007 which relevantly provide: 39 Appeals as of right (1) A party to proceedings before the Court sitting in its General Division who is dissatisfied with a judgment or order of the Court may appeal to the Supreme Court, but only on a question of law. … 40 Appeals requiring leave (1) A party to proceedings before the Court sitting in its General Division who is dissatisfied with a judgment or order of the Court on a ground that involves a question of mixed law and fact may appeal to the Supreme Court but only by leave of the Supreme Court. … 41 Determination of appeals (1) The Supreme Court may determine an appeal made under section 39 (1) or 40: (a) by varying the terms of the judgment or order, or (b) by setting aside the judgment or order, or (c) by setting aside the judgment or order and remitting the matter to the Local Court for determination in accordance with the Supreme Court's directions, or (d) by dismissing the appeal. …" 1. It follows that Ms Jia has a right of appeal on a question of law (s 39(1)). However, no question of law per se was identified in her summons. Nevertheless, in the written and oral submissions put forward on her behalf, two questions of law were raised. The first is whether an alleged oral agreement to vary the rent payable under the lease or agreement for occupation of the premises was unenforceable by reason of either or both of s 23C and s 54A of the Conveyancing Act 1919. The second is whether the appropriate test for ascertaining the existence of such an agreement was applied by the learned Magistrate. An assertion in the initiating summons filed in this Court that the Magistrate did not provide adequate reasons was not pressed. Background 1. The following facts are either taken from the pleadings or were not in dispute. 2. Some time in December 2011, Ms Jia and GJKR signed an agreement to enable occupation of the premises for a period of three years for a monthly rental payment of $2,730 exclusive of GST. The document was in the form of a standard retail lease. In the Local Court there was a dispute between the parties about whether it could be characterised as a lease because of a contention that it did not provide exclusive possession of the premises to GJKR. That said, it appears to have been common ground that the agreement was regulated by the Retail Leases Act 1994 ("RLA"). 3. Occupation of the premises under the agreement commenced from 1 December 2012. Monthly payments were made in February, March and April 2012 as per the agreement. However, GJKR fell into trading difficulties and the monthly payments ceased thereafter. 4. In June 2012, GJKR advised that it intended to vacate the premises. In July 2012, Ms Jia gave notice of her intention to terminate. On 29 August 2012, GJKR gave up possession and returned the keys to the premises. In August 2014, the premises were sold. In the meantime, from 19 September 2012 Mr Zhang, who was a director of GJKR, commenced making payments of $800 per month which continued until October 2014 and totalled $20,800. He also commenced paying $330 a quarter for the cost of advertising the premises. Pleadings 1. In light of the issues raised in the appeal, it is necessary to describe the pleadings in some detail. 2. In a further amended statement of claim Ms Jia pleaded the above facts. She sought recovery of an amount from all three defendants, representing the monthly rent of $2,730 plus GST from the time payments ceased until when the property was sold as well as various sundry items. 3. In their defence, the defendants pleaded five substantive defences. The first was that the agreement was not a valid lease but instead there was only created a tenancy at will which ceased on 29 August 2012. The second was that the commencement of the proceedings was contrary to s 68(1) of the RLA because mediation of the dispute had not yet taken place. The third contention was that the agreement was not a lease but instead a licence which was validly terminated on 29 August 2012. The fourth was a contention that some aspect of Ms Jia's conduct, or at least those who acted on her behalf, was misleading and deceptive contrary to s 18 of the Australian Consumer Law. 4. The fifth substantive defence was that: "On 9 August 2012 the parties reached an oral agreement that the rent or licence fee or occupational interest payable by the first defendant would be reduced to $800 per month which would be payable until the premises were relet." 1. The defendants also filed a cross-claim. It raised two matters. The first was to re‑plead the agreement of 9 August 2012 pleaded in the defence. It was pleaded that there had been a total failure of the consideration under that agreement. 2. The second matter pleaded in the cross-claim referred to the agreement to pay an amount for advertising to relet the premises. It was alleged that Ms Jia failed to place adequate or proper advertising to facilitate the reletting of the premises. 3. Ms Jia filed a defence to the cross-claim. In that defence she denied the agreement of 9 August 2012 had the effect contended. Instead she contended it was merely an "agreement" to pay an amount to offset the full amount of rent that was otherwise owing. She also pleaded that any such agreement was not supported by consideration, presumably on the basis that an agreement to pay a lesser sum is not enforceable. 4. Further, subparagraph 13(c) of the defence to the cross-claim pleaded: 13(c)(i) the Lease is a retail lease within the meaning [of] s 3 of the Retail Leases Act 1994 (NSW) ("the Act"); (ii) the alleged oral agreement is also a retail lease within the meaning of the Act; (iii) the alleged oral agreement contained in paragraphs 2 and 3 of the Statement of Cross Claim is in breach of s 18(2) of the Act. 1. Subsection 18(2) of the RLA precludes changes to the base-rent of a retail lease within 12 months of the lease being entered into. 2. The cross-defence did not make any reference to s 23C or s 54A of the Conveyancing Act. Rule 14.19 of the Uniform Civil Procedure Rules 2005 ("UCPR") states that a party may raise in a pleading any point of law. In the ordinary course a question of law, including one raised by the Statute of Frauds, is a matter that should be clearly pleaded (UCPR 14.14(1)). The Hearing 1. There was no opening of either parties' case before the presiding Magistrate. Instead, the parties proceeded to read affidavits and cross-examine witnesses. 2. An affidavit of Mr Zhang was read which included reference to the events of 9 August 2012. He stated that during a meeting held at Ms Jia's agent's office, that is the office of Mr Ozerski, which was attended by Ms Jia's husband, Mr Lin, Mr Zhang and Ms Jin, Mr Zhang said: "I know we are in arrears of rent. I am willing to pay $800 a month to pay off the arrears until you find another tenant." Mr Zhang also said: "If you get a tenant for less than what you were paying I will pay the difference and in addition I will pay $330 per month towards advertising costs until you find a tenant." Mr Zhang's affidavit recorded that, "All parties agreed to that". 1. On behalf of Ms Jia, an affidavit was read from her husband who, it appears, acted as her representative throughout all the relevant dealings with Mr Ozerski and GJKR. In paragraph 13 of that affidavit he stated: "On or about 9 August 2012, I had various telephone and face to face conversations with Mr Ozerski in words to the effect of: Mr Ozerski: 'Geoffrey and Jessica cannot run the coffee shop business, but they understand that they have to pay rent for the remaining term of the Lease or until you find a new tenant.' Me: 'What are they going to do?' Mr Ozerski: 'They will pay $800.00 per month to reduce the rent owing for the balance of the Lease term or until you found a new tenant. They will also pay $330.00 per month for advertising fees in re-letting the Shop.' Me: 'Ok, I guess there is no choice but to do that.'" 1. An affidavit of Mr Ozerski was read which also addressed the events of 9 August 2012. Like Mr Lin, he recounted being contacted by Ms Jin by telephone who offered to pay $800 rent per month and $330 per month for advertising until the shop was rented to another tenant. Mr Ozerski recalled then contacting Mr Lin and stating that: "Jerry and Jessica are quitting the coffee shop but they understand they are obliged to pay rent for the rest of the lease. They offered to pay $800 per month to reduce the rent owing until you find a new tenant. They will also pay $330 a month for the advertising." Mr Ozerski recorded Mr Lin saying, "Okay. We just have to do that". 1. There was cross-examination of the various witnesses on these issues. In light of what transpired during the submissions, it is not necessary to refer to that evidence. 2. After the evidence in the hearing was complete the parties' counsel made submissions. Counsel for GJKR, Mr Zhang and Ms Jin, addressed first. He submitted that Ms Jia had failed to mitigate her loss and had otherwise breached the agreement about advertising as pleaded in the cross-claim. Counsel then addressed so much of the defence as relied on s 68(1) of the RLA. 3. Counsel for Ms Jin then addressed. At the outset of his submissions the presiding Magistrate noted that many matters had been pleaded but the submissions had not addressed them. Counsel for Ms Jia then addressed on the issue of the advertising of the premises and the form of rental offer that was made by potential replacement tenants, and the reasonableness of the conduct of his client in rejecting them. 4. Counsel for Ms Jia then moved to what he described as "the $800 arrangement". His Honour enquired as to how the amounts of $800 that were paid were taken into account in the calculations of the amount sought by Ms Jia. It was clarified that the amount sought by Ms Jia had been reduced by the total of those payments. Counsel for Ms Jia submitted that she was entitled to payments of an amount representing the full monthly rental payment less the $800 payments. 5. The following exchange then occurred: "HIS HONOUR: Yes, it does but I don't want to have to get out a calculator. That 81 odd thousand is presumably at 3,000 a month. TAM: Yes, that's correct. HIS HONOUR: Well, you can't have that, can you, in light of what Mr Lin says in para 13. TAM: Yes, I understand. HIS HONOUR: And what you can have from 29 August 2012 is $800 per month. And if the 20,800 that was actually paid does turn out to be that amount, 800 a month for whatever is the relevant period, then you're basically not entitled to anything apart from the arrears before 29 August 12. Agreed? TAM: I'll just get some instructions. Look, your Honour, the only submission I can make is what I submitted earlier, which is the $800 is not any type of reduced rent after the premises was handed back to the plaintiff. HIS HONOUR: You say that but what I'm asking you to do is not just to tell me that you make that submission but why you make it in the teeth of para 13 of Mr Lin's affidavit. TAM: 13 of Mr Lin's affidavit. Just give me a second, your Honour. HIS HONOUR: And I do need that help with the arithmetic. I don't know whether the 20,000 odd comes to the 800 a month from 29 August. I hope I don't have to drag out a calculator and work it out. TAM: Just give me a second, your Honour. Yes, your Honour, I understand what you're saying and I consider the point and I would agree with your Honour in regards to the $800." (emphasis added) 1. The reference to "13 of Mr Lin's affidavit" in this exchange is to the paragraph set out above (at [21]). 2. Counsel for Ms Jia then addressed on the issue raised by s 68(1) of the RLA. His Honour intervened and stated that he did not think "that section is an obstacle" to Ms Jia's claim. Counsel for Ms Jia then ceased his submissions. 3. His Honour noted that there were a number of matters raised by the pleadings that neither counsel had addressed. His Honour stated that: "I take it because they are not addressed that really no issue is taken in relation to them but I just want to be safe in that respect." 1. His Honour then referred to a number of pleaded issues that related to the events that occurred after 29 August 2012. His Honour added: "But I don't need to come to that because we have got the $800 agreed to, post 29 August. Are you with me?" Counsel for Ms Jia, and Counsel for GJKR and the other defendants, responded "Yes". 1. His Honour then referred to paragraph 7 of GJKR's cross-claim which pleaded that there was a total failure of consideration (see [13]). His Honour sought and obtained confirmation that it was not being pursued. His Honour then returned to the question of advertising which was not only a matter that related to mitigation but to the agreement pleaded in the cross-claim. In relation to that, his Honour stated (CB 81:20): "But there doesn't seem to have been any evidence really that would get high enough to show that responses to advertising were not dealt with in a timely and proper manner. [Mr Ozerski], … and Ms Haigh may not have been the most active agents in the eastern suburbs but they were doing a bit of work." 1. There was a further exchange on this topic and eventually his Honour stated that: "…I don't really think it is fair to say that there's any evidence sufficient to … show a breach of an implied term … So for that reason, if I can put that on one side." 1. His Honour then came to the issue raised by paragraph 13 of the defence to the cross-claim that I have set out above. In relation to that, his Honour said: "So I take it nobody raises that as a live issue?" The response from counsel for Ms Jia was: "No, your Honour." 2. His Honour then enquired of counsel: "What else?". His Honour further enquired as to how the claim for damages by Ms Jia would now be resolved in light of the determination of the issues as they had fallen out. Eventually, his Honour gave the parties a short adjournment to determine the amount, but before doing so his Honour stated: "Look, I will just again get you to do a little bit of arithmetic and I will go off the Bench. But I would propose to give judgment for the plaintiff on the claim for a relatively small amount, arithmetically worked out and the cross-defendant on the cross-claim, which is the plaintiff for the reasons we have been discussing." 1. After the short adjournment the parties provided figures. His Honour enquired as to whether there were any separate issues affecting the guarantors and was advised there were not. His Honour then dealt with the issues of costs. 2. As I will explain, in light of the issues raised on the appeal, it was necessary to set out the course of the hearing in some detail. There was ultimately no oral judgment much less any written judgment given by his Honour. I mean no criticism in that regard. To the contrary, the above reveals that his Honour conducted the hearing bearing in mind the overriding obligation in s 56(1) of the Civil Procedure Act 2005 to "facilitate the just, quick and cheap resolution of the real issues in the proceedings". In particular, his Honour commenced the submissions by having regard to the pleadings as the means of defining the real issues in the proceedings. His Honour proceeded through the course of the submissions to determine what, in light of some preliminary assessments, was truly being pressed by counsel for the parties. 3. In respect of the so-called agreement to vary the rent to pay $800 the exchanges revealed that his Honour commenced by querying how Ms Jia could deny that variation in light of Ms Lin's affidavit. In circumstances where it appears that Counsel for Ms Jia had the opportunity to take instructions and to consider the matter ("Just give me a second your Honour"), his Honour received a concession that that claim was not maintainable by Ms Jia and would not be pressed. 4. Any remaining doubt about that is resolved by the fact that the issue was twice returned to in the subsequent exchanges (see [31] and [34]). Those passages confirm that his Honour received confirmation from Counsel for Ms Jia that the issue did not have to be addressed. If, by the end of submissions, there was truly a matter that still needed to be determined, then it would be expected that Counsel would have brought that to his Honour's attention and requested reasons. Neither Counsel sought to do so. 5. A review of the transcript of the hearing as a whole reveals that the only matter that was ultimately required to be decided by his Honour was GJKR's complaints about the quality of the advertising and the level of activity of Ms Jia's agents in seeking to relet the premises. His Honour determined that complaint adversely to GJKR in the passage set out above (at [32] to [33]). The Appeal 1. I have identified the two questions of law that are sought to be raised on behalf of Ms Jia on the appeal earlier in these reasons. The principal point sought to be raised is a contention that an agreement to vary the rent payable in the form that it is asserted was found by his Honour was incorrect in law because "It is clear that a contract required to be in writing by the statutes of frauds cannot be varied orally" (Phillips v Ellinson Brothers Pty Limited [1941] HCA 35; 65 CLR 221 at 243). In this case it is said that the agreement being varied, namely a lease, had to be in writing. Detailed submissions were made in support of and against this argument by both Counsel. 2. The alternative point was that, to the extent his Honour analysed the evidence concerning what occurred on 9 August 2012, his Honour's conclusion that that amounted to an agreement to relieve GJKR of its obligations to pay beyond $800 per month was erroneous. In particular, it was submitted that, even if one proceeded solely by reference to Mr Lin's evidence, the only relevant discussion concerned an agreement to "reduce the rent owing for the balance of the lease term", which is not capable of amounting to an agreement for a variation of the amount payable going forward. Again detailed submissions were put by counsel for both parties on that issue. 3. Nevertheless, in light of what I have earlier concluded, these points do not arise. On this appeal it was accepted by Counsel for Ms Jia that, if in fact the proper conclusion to draw from what occurred before his Honour was that Ms Jia, conceded this aspect of GJKR's defence, then no question of law arose of the kind now identified. In this case, there was a concession which was in effect an abandonment of a particular claim. It is not an error of law for a Magistrate to act upon a concession of counsel. It was only his Honour's duty to decide the real issues in dispute between the parties. By the end of submissions the matter now sought to be raised on appeal was not one of them. 4. It follows that the appeal must be dismissed. 5. I also note that a notice of contention was raised by GJKR and Mr Zhang which concerned the issue as to whether or not Ms Jia had mitigated her loss in respect of amounts owing for rent in the period after 29 August 2012. This was properly framed as a notice of contention because it only arises in the event that some entitlement of Ms Jia to receive an amount in excess of the $800 payments referable to that period is established. 6. I address the role of notices of contention in respect of appeals confined to questions of law in Ken Wolf Real Estate Pty Ltd v O'Halloran [2012] NSWSC 993 at [53]. It suffices to state that, if a notice of contention seeks to raise matters of fact that were undetermined by the Presiding Magistrate, then this Court cannot rectify that by making findings of fact in its own right. Instead, it would be necessary to remit the matter back to the Local Court for further determination. However, it is not necessary to consider this further. 7. Accordingly, the Court orders that: (1) The amended summons filed 2 March 2017 be dismissed. (2) The plaintiff to pay the first and second defendant's costs of the proceedings. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 22 May 2017