203 Castlereagh St Pty Ltd v Skybloo Holdings Pty Ltd

reasons for decision Introduction 1Before the Tribunal is an application for a stay of the orders for possession granted by the Tribunal in respect of Shop 120a, 'Sorrento - The Waterfront', Homebush Bay ('the premises') which were made on 22 July 2014. Facts 2By agreement for lease (undated) made between Payce Properties Pty Ltd (the landlord) as lessor ('the lessor'), and 203 Castlereagh St Pty Ltd ('the lessee') for the above shop ('the shop'), it was agreed that a lease would be granted to the lessee for a period of four years commencing on 18 July 2010 and terminating on 17 July 2014, at a rental of $53,100 per annum, plus GST ('the lease'). The covenants of the lease were guaranteed by Usama Maqableh ('the covenantor'). 3The Tribunal has been provided with documents which are undated and unsigned, but there is no dispute that the lease was entered into by the parties as provided in the agreement for lease, which was made in approximately May 2010, pending completion of the shop premises. It is also not in dispute that the lessee went into possession and occupied the premises pursuant to the terms of the lease, and established the business of a convenience store in the shop. Although it is unexplained, it is not disputed that the lessor is now Skybloo Holdings Pty Ltd. 4Clause 17 of the lease relevantly provided as follows: 17.1 Option of renewal (a) The lessee, from the expiry of the lease, is entitled to take a renewed lease of the premises for the further term of years, if any, set out in item 10 of the reference schedule on the conditions of this clause 17. (b) The lessor, if the lessee: (1) gives the lessor no more than 9 months and no less than 6 months written notice of the intention to renew; and (2) is not in default under the lessee's covenants, must grant to the lessee, at the lessee's own cost, a renewal of the lease for that further term of years unless clause 17.2 applies. 5The lessee was desirous of exercising the option. However, it is common ground that no letter or indication of exercise of the option was provided to the lessor no more than 9 months, and no less than 6 months, before the expiry of the lease; that is, no notification was given by the lessee of its intention to renew the lease between 18 October 2013 and 17 January 2014. 6Shortly after 17 January 2014, the lessor notified the lessee of its failure to exercise the option. The lessee took no action at that stage to seek the declaration or orders it now claims. 7On 8 May 2014, the lessor entered into an agreement for lease with a third party, namely, Waeil Rustom ('Rustom'). The agreement for lease provided for lease of the shop for a period of five years from 18 July 2014 until 17 July 2019. The Tribunal is informed that Rustom has, pursuant to the terms of his lease, taken possession of the shop.

Proceedings for NSW Civil and Administrative Tribunal 8By application filed on 7 July 2014 (Proceedings COM 14/34929), the lessee commenced proceedings seeking relief, namely: a declaration pursuant to s 72(1)(f)(iii) of the Retail Leases Act 1994 (NSW) ('the RL Act') that the lessor had engaged in conduct against the lessee which was unconscionable, contrary to s 62B of the RL Act, and a claim for damages. In particular, it was claimed that between 18 January 2014 and 1 July 2014, the lessor failed to enter negotiations with the lessee for a new lease, yet entered into a lease with Rustom, knowing that he was the prospective purchaser from the lessee of the business which had been established in the shop by the lessee. The lessee alleged that the lessor acted in bad faith contrary to s 62B(3)(k) of the RL Act in so doing 9This application was set down for first directions on 22 July 2014. 10Significantly, no relief was sought in those proceedings to restrain the lessor from entering into a new lease with Rustom. 11Despite this deficiency, the Tribunal made orders on 18 July 2014 having the effect of restraining the lessor from entering into a new lease with Rustom, and of preserving the status quo pending the hearing of the lessee's claims for relief. The orders were:

The Respondent is injuncted from evicting the Applicant.
The Applicant is to continue to pay rent while it occupies the premises.
The matter is listed for directions on 22/7/14. 12On 18 July 2014 the Tribunal forwarded a notice to the lessee informing of the hearing on 22 July 2014. The notice is headed: 'Notice of Directions Hearing.' 13However, on 21 July 2014, namely on the eve of the return for directions of the lessee's application, the lessor filed an 'Application for an Original Decision' entitled 'Retail Leases Request for Interim Order' in the Consumer and Commercial Division of the Tribunal. These proceedings were COM 14/36787 and were listed for the following day, 22 July 2014. Such documents were emailed to the lessee at 4.45pm on 21 July 2014. The orders sought by the lessor are as follows: (1) The orders sought on an interim and final basis are:- (a) A DECLARATION that Lease AG316289 ('Lease') has expired. (b) A DECLARATION that the Respondent/Tenant has failed to exercise the option under the Lease. (c) The injunction granted on 18 July 2014 be dissolved and otherwise removed. (d) The Respondent/Tenant give immediate possession to the Applicant/Landlord. (e) Ancillary orders to give effect to the Respondent/Tenant vacating the premises. (f) Costs (g) Any other order the tribunal thinks fit. (2) Grounds for the application on an interim and final basis (a) The Respondent/Tenant failed to give any notice exercising the option pursuant to the Lease by the time required under the Lease. (b) In the alternative the Respondent/Tenant failed to give any notice exercising the option pursuant to the Lease at any time (or such purported notice was after the fact). (c) The Applicant/Landlord has entered into a lease with another party, which lease commenced on 18 July 2014. Hearing 14On 22 July, the application filed by the lessor came before the Tribunal as did the lessee's application. The lessee was legally represented on 22 July 2014, by Mr Nabil Ajale, as was the lessor. Mr Ajale applied for an adjournment on two bases: namely, firstly that he only had temporary carriage of the matter during the absence of the lessee's agent, Mr Soltan, who was overseas, and that he only received the lessor's application late on the previous day; and secondly, that the matter had only been listed for directions on that day and not for final hearing. 15The Tribunal refused the adjournment. Submissions were then heard over a period of more than three hours. At the conclusion of the hearing, the orders which had been made on 18 July 2014 in favour of the lessee preserving the status quo were set aside, and orders in the form sought by the lessor in its "request for interim order" were granted. The orders were as follows:
The lease between the parties in respect of premises Shop 120 Sorrento 19 Hill Road Homebush Road is declared ahve [sic] expired because the option to renew the lease agreement has not been exercised.
The lessee 203 Castlereagh Pty Ltd is to give immediate possession of the premises Shop 120a Sorrento 19 Hill Road, Homebush Bay NSW to the lessor Skybloo Holdings Pty Ltd.
The interim orders of the Tribunal made on 18 July 2014 are set aside. 16Reasons for the decision were provided. 17On 28 July 2014 the lessor locked out the lessee and took possession of the shop. 18On 31 July the lessee filed a Second Amended Application and Urgent Order Request (Proceedings COM 14/38681) which was listed on 5 August 2014. The lessee sought orders that it be immediately reinstated to the premises, and sought to rely upon three claims (the 'three claims' are set out in detail in paras [26]-[28]), to justify its claim for immediate relief. These claims were not raised at the directions hearing on 22 July 2014 by Mr Ajale. 19The lessor granted possession of the shop to Rustom on or about 4 August 2014, according to the lessee's submissions. 20On 5 August 2014, the Tribunal, aware that Rustom now had an interest, directed that he be served, and adjourned the proceedings to 12 August 2014. The orders made were:
By Determination of member, on 05 August 2014 the hearing was adjourned to a date to be fixed by the Registrar.
The Applicant is to serve a copy of the Second Amended Application upon the present occupant of the premises Mr Rustom by 5pm on 06-Aug-2014 together with written notice that he may appear before the Tribunal on the next occasion that these proceedings are listed.
The Applicant is to file and serve any further amended Application joining the present occupant Mr Rustom upon all parties on or before 11-Aug-2014, together with notice of any further allocated hearing date. 21The lessee did not seek an order that Mr Rustom be joined. 22On 12 August 2014 the Tribunal declined to make any orders at that time in view of the fact that the orders made on 22 July 2014 could have rendered that decision-maker functus officio, and that the arguments sought to be raised could not now be raised in those proceedings. The Tribunal adjourned those proceedings and they remain adjourned, with the decision being reserved. 23On 19 August 2014, the lessee commenced further proceedings (COM 14/42164) under s 53(4) of the Civil and Administrative Tribunal Act 2013 (NSW), seeking orders that the orders made on 22 July 2014 be set aside, and seeking immediate possession of the premises. Such proceedings were referred to Tribunal Member Paull on 26 August 2014. The Member dismissed the application, finding that there was no irregularity in the way in which the orders were made. Appeal 24By Notice of Appeal dated 19 August 2014, the lessee appeals the orders made on 22 July 2014 as set out in para [15] above. A stay is also sought, and this is now the subject of the present hearing before the Tribunal. Submissions of the lessee: Denial of procedural fairness 25The lessee submits that it was denied natural justice for the following reasons: (1)it was refused an adjournment in circumstances where the proceedings had been listed on 22 July 2014 only for directions; (2)the application by the landlord was filed only the day before the directions hearing, and the legal representative for the lessee had no chance to obtain instructions; and (3)in any event, the legal representative for the lessee was not prepared for argument on the complex issues sought to be raised. 26The landlord responds that, despite the above, the critical facts were simple, namely: (a) that there was no exercise of the option contained in Cl 17 of the lease; and (b) that the application which it filed was simply the mirror reverse of the orders which would flow if the claim for relief by the lessee was rejected. New argument 27The three claims now sought to be relied upon by the lessee are set out hereunder. 28The first submission is to the effect that the period in which the lessee was required to give notice of the exercise of the option was extended by 6 weeks. The lessee claims that such extension must follow by virtue of the fact that, following commencement of the lease on 18 July 2010, it was granted a 6 week rent-free fit-out period. In fact, the lessee says that it gave written notice of its intention to exercise the option within the period of 6 weeks following 17 January 2014. 29Secondly, the lessee argues that clause 17.1 of the lease provides that 'if' notice were given, it does not provide 'only if'; the lessee seeks to raise an argument that there is a clear distinction. 30Third, it is submitted that the declaration and orders made on 22 July 2014 are only interim orders, since the lessor's application only sought such orders. 31The lessee also maintains that the lessor engaged in unconscionable conduct. It is claimed that the lessor, in effect, bypassed the tenant, knowing that Rustom was prepared to occupy the shop, and that therefore the lessee was deprived of a sale price of the business to Mr Rustom of approximately $300,000 plus stock valued at $70,000. Accordingly, damages are claimed by the lessee from the lessor arising out of the unconscionable conduct claimed. 32The lessor responds asserting that the issues which were before the Tribunal were straightforward. That is, the only issue before the Tribunal on 22 July 2014 was whether notice had been given to exercise the option as required by clause 17.1 of the lease. A document was tendered before the Tribunal in which the lessee acknowledged that notice of exercise of the option had not been provided. Consideration 33The lessee's three claims were not argued on 22 July 2014. However, they raise matters which might have been put forward had such claims been fully prepared. 34No doubt the Tribunal Member considered that, with the concession being made by the lessee's representative that the required notice had not been given, interim relief should be refused because the lessee had no reasonably arguable case, and the inconvenience to the lessor outweighed any vague claim of the lessee. However, this conclusion entirely overlooks the possibility that the lessee could have had submissions to make upon the meaning and interpretation of Cl 17.1 of the lease. 35There is no question that the lessee's proceedings were listed on 22 July 2014 for directions only, and that the application by the lessor was made only on the preceding evening. Mr Ajale could not have anticipated that he would be required to provide argument on the day in support of his client's case, nor indeed be ready to defend his client's tenancy, and to deal with the orders sought by the lessor. He could not obtain instructions, and was not prepared for a final hearing. 36Any party is entitled to have an opportunity to be heard; that is, to have a hearing where the Tribunal is provided with the benefit of considered arguments by each of the parties. The opportunity to provide a party with a hearing must be a genuine opportunity. In Minister for Immigration and Multicultural Affairs v Bhardwaj (2002) 209 CLR 597, Gaudron and Gummow JJ said at [40]: Procedural fairness, which is one aspect of the rules of natural justice, requires that a person who may be affected by a decision be informed of the case against him or her and that he or she be given an opportunity to answer it. The opportunity to answer must be a reasonable opportunity. 37In Kioa v West (1985) 159 CLR 550, Mason J said at 584: It is a fundamental rule of the common law doctrine of natural justice expressed in traditional terms that, generally speaking, when an order is to be made which will deprive a person of some right or interest or the legitimate expectation of a benefit, he is entitled to know the case sought to be made against him and to be given an opportunity of replying to it. See also SZTOV v Minister for Immigration and Boarder Protection [2014] FCA 942 at [14]. 38Despite the lessor's submissions, the fact remains that there may have been issues to be relied upon by the lessee that were not apparent on the simple pleadings. Those matters could have entitled the lessee to some relief. However, the lessee was not given the opportunity of ventilating these matters since the lessee's application was listed for directions only. 39As the Tribunal is not now dealing with the merits of the appeal, I make the above observations only because these issues were raised by the lessee's agent during the course of submissions. It would be inappropriate for the Tribunal to make further comment at this stage on this question, as this must abide the hearing of the appeal. 40As has been noted above, Rustom has not been joined as a party to the lessee's proceedings. At present, he is in possession of the premises. The effect of the stay sought by the lessee would be to determine Rustom's right to possession of the premises and re-instate the lessee in possession. 41In the absence of Rustom being joined to the proceedings, the Tribunal cannot grant a stay, but the lessee's appeal will remain. If successful, this claim could only be for damages and not for possession. Rustom has already taken possession of the premises under a new lease, and unless or until his lease is set aside, he has a legal right to remain in possession. A stay of orders as sought by the lessee could not now be granted because of the intervention of Rustom's rights. 42The lessee submits that a claim for damages is an inadequate remedy, and that an order that the lessee be permitted to re-enter is the only appropriate relief: see Lineablu Pty Ltd v St George Sailing Club Ltd [2004] NSWSC 1199. Whether or not that is so, does not justify the Tribunal making an order effectively nullifying Rustom's rights when he is not a party. And, the lessee would have to establish or show a legal right to possession of the shop to the exclusion of Rustom. 43If, upon legal advice, the lessee moves to join in Rustom, and to seek orders that his lease be set aside on some equitable basis, it is not impossible that a claim for possession could be upheld. The lessee might attempt to do so by establishing firstly his right to exercise the option and that it was in fact exercised, and second, that a conspiracy existed between the lessor and Rustom to cause harm to the lessee. Summary 44The lessee's application for a stay and reinstatement of the lessee in the shop is refused, because:- (1)Any order could not be enforced in view of the current tenancy; (2)It would be necessary to join in Rustom in these proceedings if possession of the shop is sought by the lessee; (3)The lessee, to be successful, might need to establish: (i)that the option was validly exercised; and (ii)that the lessor and Rustom engaged in a conspiracy to injure the lessee; before any reinstatement order could be considered. (4)If, on appeal, the lessee can establish a valid exercise of the option, its remedy may be for possession. However, no reinstatement orders can be considered without Rustom being made a party to the proceedings. 45To give a further opportunity to the lessee to join Rustom, the Tribunal will extend the time for a further 4 weeks. If not availed of, the lessee's claim can only proceed as a claim for damages, subject to success on its appeal. Orders 46Accordingly the Tribunal orders that: (1) The application for a stay be dismissed; (2) The time be extended to 10 October 2014 to join Rustom if the lessee wishes to do so; (3) The matter be placed in the first available callover after 10 October 2014 for the determination of the appeal; (4) The hearing of the appeal be expedited. I hereby certify that this is a true and accurate record of the reasons for decision of the New South Wales Civil and Administrative Tribunal. Principal Registrar

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