Camseg Pty Ltd atf the Hair By Cam Discretionary Trust v Napoli

NCAT Consumer and Commercial|2022-03-24

Introduction

The applicant in these proceedings is the tenant under a lease of premises in Galston where it carries on the business of a hairdressing salon (the salon). The applicant purchased the business from the respondent in August 2015.
On 19 August 2015, the applicant and the respondent entered into an agreement (the Agreement) by which the respondent was granted the right to use, for the purpose of conducting her own hairdressing business and beauty therapy business, the spaces within the salon defined as the "Chair Space" and the "Beauty Therapy Space" and to use the access ways within the salon for access to and egress from the Chair Space and Beauty Therapy Space.
The "Chair Space" was defined as: "a space within the salon containing a hair dressing chair and it surrounds within the salon as the salon owner [the applicant] may from time to time in his absolute discretion designate to the independent contractor [the respondent]."
The "Beauty Therapy Space" was defined as: "a space (approximately ? m²) within the salon, containing a number of rooms set aside for beauty therapy treatment."
Clause 2 of the Agreement set out the rights conferred upon the respondent by the Agreement: "2. THE LICENCE 2.1 Subject to the terms of this Agreement the salon owner gives the independent contractor the right for the Licence Period and during the designated hours, in common with salon owner and all others authorised by the salon owner so far as is not inconsistent with the rights given: 2.1.1 to use the Chair Space and Beauty Therapy Space for the purpose of conducting her own Hairdressing Business and Beauty Therapy Business and; 2.1.2 to use the Access Ways for access to and egress from the Chair Space and Beauty Therapy Space. 2.2 The salon owner and the independent contractor agree and acknowledge that this agreement constitutes a licence and confers no tenancy whatsoever upon the independent contractor and that the independent contractor is not entitled to exclusive occupation of the Chair Space or Beauty Therapy Space. 2.3 At any time when the independent contractor is not using the Chair Space or Beauty Therapy Space, the salon owner may use the Chair Space or Beauty Therapy Space in connection with his business.

The application

On 20 December 2021, without legal assistance, the applicant commenced proceedings in the Tribunal.
In the application, the applicant sought orders as follows: 1. A preliminary hearing for NCAT to determine whether the Agreement is a Licence Agreement or Retail Lease Agreement. 2. The respective parties are not granted leave for legal representation until the preliminary hearing has concluded. 3. Should the Agreement be deemed a Licence Agreement, then NCAT issue a certificate deeming the Agreement to be a Licence Agreement and transfer the proceedings to the Local Court of NSW. 4. Should the Agreement be deemed a Retail Lease Agreement, then, an order per clause 72(1)(a) of the Retail Leases Act (NSW) 1994 (RLA') to claim damages for the sum of $29.913. 5. Each party is to bear their own costs in these proceedings.
In the application the applicant also explicitly stated that it was limiting its claim to below $30,000 "to keep the proceedings within a no costs jurisdiction".

Jurisdiction

At the commencement of the hearing, which took place by telephone conference, Mr Sonmez, of counsel, who appeared for the applicant, expressly acknowledged that the Agreement between the applicant and the respondent was a "retail shop lease" within the meaning of the Retail Leases Act 1994 (NSW) (the Act).
The Tribunal will only have jurisdiction to resolve the dispute between the parties if the Agreement is a retail shop lease. Section 72 of the Act confers jurisdiction upon the Tribunal to resolve "retail tenancy claims". "Retail tenancy claims are relevantly defined by s 70 of the Act as claims in connection with a "retail tenancy dispute". Section 63 of the Act defines "retail tenancy dispute" as "a dispute concerning the liabilities or obligations … of a party or former party to a retail shop lease or former lease being liabilities or obligations which arose under the lease or former lease or which arose in connection with the use or occupation of the retail shop to which the lease or former lease relates."
The Tribunal is required to satisfy itself that it has jurisdiction to determine the dispute between the parties. That will only be the case if the relationship between the parties was a retail shop lease
Section 3 of the Act defines "premises", "retail shop" and "retail shop lease" as follows: "premises includes a defined area (for example, a stall in a market) in a building or other permanent structure." "retail shop means premises that - (a) are used, or proposed to be used, wholly or predominantly for the carrying on of one or more of the businesses prescribed for the purposes of this paragraph (whether or not in a retail shopping centre), or (b) are used, or proposed to be used, for the carrying on of any business (whether or not a business prescribed for the purposes of paragraph (a)) in a retail shopping centre." "retail shop lease or lease means any agreement under which a person grants to another person for value a right of occupation of premises for the purpose of the use of the premises as a retail shop - (a) whether or not the right is a right of exclusive occupation, and (b) whether the agreement is express or implied, and (c) whether the agreement is oral or in writing, or partly oral and partly in writing.
The businesses prescribed for the purposes of the definition of "retail shop" include those listed in Schedule 1 to the Act. The list in Schedule 1 includes both "hairdressers" and "beauty therapists".
I am satisfied that the arrangement between the parties met the definition of "retail shop lease", as the parties agree that the Agreement conferred upon the respondent a right of occupation of "premises" for the carrying on of hairdressing and beauty therapy businesses.
The Agreement provided that the applicant could, from time to time, designate the space which was to constitute the "Chair Space". That contemplated that the space to be used by the respondent for her hairdressing business might be changed from time to time. However, the Agreement required the applicant to designate "a space within the salon containing a hair dressing chair and its surrounds". Once designated, such space constituted the "premises" within the salon in respect of which the applicant granted the respondent a right of occupation for the purpose of use for her hairdressing business. I do not consider it inconsistent with the Agreement being a retail shop lease that the relevant premises might be changed from time to time. The parties did not lead evidence to suggest that the Chair Space designated by the applicant did change at any time. Nor was there any evidence to suggest that the Chair Space was not sufficiently defined.
Moreover, the Agreement granted the respondent the right to occupy the whole of the Beauty Therapy Space. The parties did not suggest that that space was not clearly identified.
In Sydney Markets Ltd v Wilson [2011] NSWCA 201, the Court of Appeal held that a stall within Paddy's Markets was a "retail shop" within the meaning of the Act. At the time that case was determined, there was no definition of "premises" in the Act. That definition was inserted by the Retail Leases Amendment (Review) Act 2017 (NSW) with effect from 1 July 2017, that is, after the parties entered into the Agreement. However, clause 38 of Schedule 3 to the Act provides that the amendment "extends to a lease entered into … before the commencement of the amendment".
At [41] - [42] Hodgson JA stated, referring to Manly Council v Malouf (2004) 61 NSWLR 394: 41 The case is clear authority for the proposition that "premises" does not mean vacant land; and that "premises" must be a building or part of a building or similar structure. It is less clear authority that "premises" must be a shop, in the ordinary meaning of that word; and indeed, in my opinion it is plain from par (b) of the definition of " retail shop " and some items in the list in Schedule 1 (for example, "engravers" and "nail bars") that premises need not necessarily be a shop in the sense of an enclosed structure. It is clear in my opinion that a counter in a shopping mall (that is, in a retail shopping centre) used for the business of an engraver or a nail bar would be a retail shop. 42 In my opinion, a finding that the area within Paddy's Market licensed to Mr Wilson constituted "premises" is not inconsistent with Malouf , in that it is an area within a building; and in the absence of evidence concerning the physical set-up of this area, I find I cannot be satisfied that this finding was an error of law.
At [61] Basten JA held: The use of the word "premises" in the Retail Leases Act should not be given a restrictive meaning, which would necessarily exclude areas within a building constructed for the purposes of retail selling. The fact that the floor space is within a building is, in this context, significant …
At [85] - [86] Tobias JA referred to his judgment in Manly Council v Malouf and the comment of Hodgson JA set out above that Malouf "is less clear authority that 'premises' must be a shop in the ordinary meaning of that word". His Honour stated: 85 … I intended by my use of that word [shop] where last referred to in [88] to refer to a "shop" as defined in ordinary parlance, namely, as referrable to the sale of goods within the whole or part of a building. As such, it refers to an area or space located generally within, or comprising the whole or part of, a building or similar structure used for the purposes of the retail sale of goods. 86 In other words, I intended the reference to "shop" to refer, as the Department submitted in the present case, to the nature of the use of the licensed space rather than to its physical characteristics, provided only that that space is located partly or wholly within a building or similar structure.
In my view, the judgments in Sydney Markets v Wilson are consistent with my conclusion that the Agreement between the applicant and the respondent was a retail shop lease.
Although the Agreement purported to state that it did not confer a tenancy upon the respondent, that could not prevent the Agreement constituting a retail shop lease if the terms of the Agreement otherwise satisfied the definitions in the Act. Section 7 of the Act provides that the Act "operates despite the provisions of a lease".
Nor did the fact that the respondent's right of occupation of the Chair Space and Beauty Therapy Space was not exclusive prevent the Agreement constituting a retail shop lease. The definition of "retail shop lease" explicitly provides that a right of occupation need not be exclusive.
I am satisfied that the Tribunal has jurisdiction to determine the application.

The issues and the parties' submissions

The parties were also in agreement that the Agreement between them had been terminated. The respondent asserted that the Agreement had been terminated by the notice from her solicitor sent in July 2021. The applicant asserted that the respondent's solicitors' letter constituted a repudiation of the Agreement and that the Agreement had been terminated by the applicant through the commencement of the application in the Tribunal, which the applicant asserted constituted acceptance by the applicant of the respondent's repudiation of the Agreement.
As clarified in the course of the hearing, the applicant's claim was for unpaid rent to the date of termination (less $880 which the applicant had received from an alternative tenant in December 2021), and for damages for breach of contract in respect of the period after December 2021. The applicant did not resile from its position that it sought only $29,913.
In defence of the applicant's claim the respondent relied upon: 1. The proposition that, in November 2020, the applicant had expressed the wish not to renew the Agreement in the course of the text exchanges between the respondent and Mr Cameron Segundo, and that accordingly the Agreement had not been renewed automatically for a further two years. Mr Pluznyk, of counsel, who appeared for the respondent, submitted that the term "wish", as used in clause 1.10 of the Agreement, was a term of very broad connotation and could be satisfied by an expression of ambition or desire; and 2. The proposition that the Agreement and/or the conduct of the applicant was unconscionable within the meaning of section 62B of the Act. In this regard the respondent submitted: 1. That the provision providing for automatic renewal of the Agreement for a further term was not necessary for the protection of the interests of the applicant; 2. That the failure of the applicant to warn the respondent of the imminence of the deadline for the giving of notice of intention not to renew was unconscionable. In this regard the respondent relied upon the decision of Moshinsky J in ACCC v JJ Richards & Sons Pty Ltd [2017] FCA 1224. 3. That the failure of the applicant to provide rent relief to the respondent was unconscionable. In this regard I note that the respondent did not suggest that there was any evidence before the Tribunal to suggest that the respondent was an "impacted tenant" within the meaning of the relevant regulations so as to be entitled to the benefit of deferrals and waivers of rent under the applicable regulations, but nevertheless submitted that Principle 3 of the Code of Conduct (ie the National Cabinet Mandatory Code of Conduct - SME Commercial Leasing Principles During COVID-19) specified that "landlords must offer tenants proportionate reductions in rent payable in the form of waivers and deferrals of up to 100% of the amount ordinarily payable, on a case-by-case basis, based on the reduction in the tenants' trade during the COVID-19 pandemic and a subsequent reasonable recovery period". As I understand the respondent's submission it is that it was unconscionable of the applicant not to grant relief in accordance with Principle 3 of the Code regardless that the regulations enacted to give effect to the Code limited the application of that principle to "impacted tenants". I note that there was no evidence before the tribunal of the respondent's reduction in trade during the pandemic, and that the respondent did receive some rent relief from the applicant in any event. 1. The proposition that the applicant had not established its right to bring the application because the applicant purportedly filed the application in its capacity as trustee and had not produced the entirety of the trust deed and because the lease of the salon to the applicant did not identify that the applicant held the lease as trustee. This submission is in my view clearly misguided. The Tribunal is not concerned whether the applicant holds the benefit of its claim against the respondent as trustee. There is no obligation upon the applicant to establish the terms of any trust and, regardless whether the lease of the salon to the applicant was held for its own benefit or for the benefit of a trust, there is no suggestion that the applicant was unable to provide to the respondent the benefit of the Agreement. I do not consider that this submission warrants further consideration.
The Tribunal raised with the parties the question whether s 11 of the Act was relevant. That section relevantly provides: 11 Lessor's disclosure statement (1) At least 7 days before a retail shop lease is entered into, the lessor must give the lessee a disclosure statement for the lease (the lessor's disclosure statement) that complies with the following requirements - (a) the lessor's disclosure statement is to be in writing and is to be in or to the effect of Parts A and B of the form in Schedule 2 (the prescribed form), (b) the lessor's disclosure statement is to include Part B of the prescribed form for the purposes of Part B being completed by the lessee and provided to the lessor as the lessee's disclosure statement (under section 11A), (c) the lessor's disclosure statement must contain the information and be accompanied by the material that is required to complete or accompany Part A of the prescribed form (but only to the extent that is relevant to the lease concerned), (d) the form of the lessor's disclosure statement is not required to comply strictly with the prescribed form (including its layout) so long as it is substantially to the same effect as the prescribed form. Maximum penalty - 50 penalty units. … (2) If a lessee was not given a disclosure statement as required by subsection (1) or if the disclosure statement that was given to the lessee was incomplete or contained information that at the time it was given was materially false or misleading, the lessee may terminate the lease by notice in writing to the lessor at any time within 6 months after the lease was entered into, unless subsection (3) prevents termination. … (3) The lessee cannot terminate the lease under this section on the ground that the disclosure statement is incomplete or contains information that is materially false or misleading if - (a) the lessor has acted honestly and reasonably and ought reasonably to be excused for the failure concerned, and (b) the lessee is in substantially as good a position as the lessee would have been if the failure had not occurred. (4) If a lease is entered into by way of the renewal of a lease, a written statement (a lessor's disclosure update) that updates the provisions of an earlier disclosure statement given to the lessee is, in conjunction with that earlier disclosure statement, considered to be a disclosure statement given for the purposes of this section at the time the lessor's disclosure update is given.
It is clear that the no disclosure statement was provided to the respondent by the applicant prior to the renewal of the lease or at any time.
The respondent submitted that s 11 was applicable and permitted the respondent to terminate the Agreement in July 2021, as she had done.
The applicant submitted that the new lease had been entered into on 1 December 2020, at which time parties had become committed to the renewal which was to take effect on 1 March 2021, and that, therefore, the time within which the respondent was entitled to terminate the renewed lease had expired on 1 June 2021 so that the respondent's purported termination in July 2021 was ineffective.
I note that s 8 of the Act provides: 8 When the lease is entered into (1) For the purposes of this Act, a retail shop lease is considered to have been entered into when a person enters into possession of the retail shop as lessee under the lease or begins to pay rent as lessee under the lease (whichever happens first). (2) However, if both parties execute the lease before the lessee enters into possession under the lease or begins to pay rent under the lease, the lease is considered to have been entered into as soon as both parties have executed the lease.
Mr Sonmez also submitted that the respondent's solicitors' letter of 22 July 2021 was not effective for the purposes of sub-section 11(2) because it did not purport to terminate the Agreement by reference to s 11 of the Act or the applicant's failure to provide a disclosure statement.
In response to the respondent's claims of unconscionable conduct, Mr Sonmez submitted that the respondent was not a vulnerable person but rather was a sophisticated participant in a commercial transaction and had in fact sold the business to the applicant.
Mr Sonmez further noted that the respondent's own affidavit included the statement that "as the five year term was coming to an end I decided that I no longer wanted to take up the extra term to stay at the salon for a further two years", which suggests that the respondent was in fact aware of the approaching deadline in November 2020.
Mr Sonmez also pointed out that the Agreement was based upon an agreement which the respondent, while previously the owner of the business, had entered into as landlord with another tenant.

The evidence

The applicant relied upon affidavits affirmed by Cameron Joel Seguna on 9 February, 14 March and 21 March 2022, and the documents annexed to those affidavits, and affidavits affirmed by Raymond Joseph Seguna on 15 March and 21 March 2022, together with the documents annexed to those affidavits. The applicant also relied upon a 22 page bundle of documents filed by the applicant on 28 January 2022.
The respondent relied upon an affidavit affirmed on 16 March 2022 and the attachment to that affidavit and also upon a two-page letter dated 23 March 2022 which provided details of the rent reductions which the respondent claimed she should have received pursuant to the Code of Conduct.
All of that material was admitted subject to relevance. Neither party required the witnesses for the other side to give oral evidence or be cross-examined. Both parties were content to rely on the written evidence and agreed that it would not be suggested that any evidence should not be accepted because it had not been put to a witness who had given contrary evidence.
In any event, as I understand the way that Mr Pluznyk put the respondent's case, the respondent did not maintain that she had, prior to 1 December 2020, given notice in writing of her wish not to renew the Agreement, and did not maintain that she had sent the text messages in November referred to in her affidavit, which she was unable to produce. In those circumstances there was no factual contest of substance between the parties.

Consideration

In my view section 11 is applicable to the renewal of the Agreement.
Section 80 of the Act provides: A reference in this Act to the renewal of a retail shop lease (the current lease) is a reference to the lessor and the lessee under the current lease entering into a new retail shop lease for the retail shop to which the current lease relates (whether or not on the same terms as the current lease).
Clearly, the fresh agreement that arose by virtue of the operation of clause 1.10 of the Agreement was a renewal of the retail shop lease constituted by the Agreement.
It is clear from sub-section 11(4) of the Act that s 11 requires a disclosure statement to be given before a renewal of a retail shop lease is "entered into". As s 8 provides, a lease is entered into when the lessee goes into possession "as lessee under the lease" or begins to pay rent "as lessee under the lease". In my view, it is clear that the respondent did not go into possession under the renewed lease or pay rent under the renewed lease until the commencement of the renewed lease on 1 March 2021. As no renewed lease was executed, sub-s 8(2) was not applicable.
As no disclosure statement was provided by the applicant to the respondent before the renewed lease was entered into, the respondent was entitled to terminate the renewed lease by notice in writing to the applicant at any time within six months after 1 March 2021.
In my view it is not necessary that a notice in writing terminating a lease pursuant to s 11(2) refer to s 11 or to the lessor's failure to provide a disclosure statement before the entry into the lease.
The respondent's solicitors' letter of 22 July 2021 clearly gave notice of termination of the Agreement then persisting between the applicant and the respondent.
In my view it does not negate the notice that it was expressed to be given by reason of the Agreement being null and void.
Accordingly, I find that the respondent validly terminated the Agreement between the parties on 22 July 2022 in accordance with the provisions of s 11(2) of the Act. It follows that the respondent has no liability to the applicant for any rent accruing after that date and that the applicant has no claim against the respondent for damages for breach of the Agreement.
The application should be dismissed.
Against the possibility that I am wrong in finding that the respondent validly terminated the Agreement, I turn to consider the matters raised by the respondent in defence of the claim.
Were it necessary to decide, I would find that notice of non-renewal was not given by either party. I accept that, upon any reasonable or commercial interpretation of the Agreement, the statement by the applicant in November 2020 that it was prepared to offer a month to month arrangement provided the head lessor was prepared to offer a the applicant a month-to-month tenancy could not have constituted notice by the applicant that it wished not to renew the Agreement. A retail shop lease, just as much as any commercial agreement, must be construed so as to make commercial sense. A construction of the Agreement, by which the written expression by either party of an ambition or desire or preference that the tenancy not be renewed would have the binding effect that the lease would not be automatically renewed, would not be a commercially sensible construction. Still less so a construction by which a conditional or contingent expression of such an ambition, desire or preference would have that effect.
I would accept that, if the respondent was not entitled to terminate the Agreement pursuant to s 11 in July 2021, the respondent repudiated the Agreement by her solicitor's letter of 22 July 2021.
I would not accept the respondent's submissions regarding alleged unconscionable conduct by the applicant.
As the applicant submitted, the respondent was not inexperienced in commercial transactions and had previously conducted the business which she had sold to the applicant. There was no inequality in bargaining power between the parties. Moreover, the respondent had, as lessor, entered into an agreement in similar terms with another party during the time that she had operated the business from the salon. There is no foundation for the submission that the automatic renewal term in clause 1.10 was not reasonably necessary for the protection of the interests of the applicant. The term operated equally for the benefit of both parties.
I would also reject the respondent's submission that it was unconscionable for the applicant not to warn the respondent that the automatic renewal was imminent.
The decision in ACCC v JJ Richards & Sons Pty Ltd, upon which the respondent relied, is clearly distinguishable. The respondent in that case had entered into numerous agreements (approximately 26,000) for the provision of waste management services. At least some of those contracts were "small business contracts" within the meaning of clause 23(4) of the Australian Consumer Law (ACL) and certain terms were alleged to be "unfair" within the meaning of clause 24 of the ACL. The decision addressed only the question whether the impugned terms, where they were contained in contracts that were small business contracts, were unfair within the meaning of clause 24 of the ACL. For that reason alone the decision cannot be directly applicable to the question whether conduct is unconscionable within the meaning of s 62B of the Act.
The relevant renewal clause which was found to be unfair provided that a waste management contract with the respondent would be automatically renewed for an equivalent term to the original term, unless the other party cancelled the contract within 30 days of the end of the term.
The matter came before Moshinsky J for the making of orders including injunctions and declarations, to which the respondent consented. The terms of the ACL required the Court to be satisfied that the orders were appropriate. In relation to the renewal clause his Honour stated, at [56(a)]: The automatic renewal clause binds customers of JJ Richards (JJR Customers) to subsequent contracts, unless the JJR Customer cancels the contract within 30 days before the end of the initial or any subsequent contract term. In the majority of cases the subsequent contracts, which customers are automatically bound by, are of equal duration to the initial contract's duration. The clause and, in particular, the limited period of time within which a JJR Customer can terminate the contract and the lack of any requirement in the contract for JJ Richards to provide notice to a customer that the contract is about to expire and that the automatic renewal will otherwise occur, may result in JJR Customers inadvertently missing the opportunity to terminate the contract and therefore remaining contracted to JJ Richards for extensive periods with no opportunity to change to an alternative supplier during the term of the renewed contract. In the context of the whole contract, the automatic renewal clause creates a significant imbalance in the respective rights and obligations of the parties as JJ Richards is more likely to be aware of when customers' contracts are coming up for renewal than small business customers, who as small businesses have limited resources and competing demands that mean they may not have effective systems in place to identify the termination period for their waste management contract. The significant imbalance arising from the operation of this clause is exacerbated by the operation of certain of the other Impugned Terms, such as the price variation, exclusivity and termination clauses. For example, while JJ Richards has an incentive to contract with, and remain contracted with, as many customers as possible, as the contract requires the customer to use JJ Richards exclusively, the JJR Customer relies on its ability to periodically choose whether to renew or change its supplier of waste management services. [Emphasis added].
The renewal clause in the present case does not impose a limited time within which notice of non-renewal may be given, it may be given at any time more than three months prior to the expiry of the term. Moreover, there is no obvious imbalance between the relative capacities of the parties to identify the approach of the deadline for notice of non-renewal. The argument of the respondent in this case relies upon an assumption that the applicant was aware of the deadline and the respondent was not. In fact the evidence of the respondent itself suggests that she was well aware of the approaching deadline and there is no suggestion in the evidence that any misrepresentation on the part of the applicant swayed the respondent not to give notice prior to the deadline
In the absence of evidence that the respondent was an "impacted tenant" and entitled to claim the benefit of the various regulations enacted under the Act to provide relief to tenants during the COVID-19 pandemic, there was in my view nothing unconscionable about the applicant failing to provide rent relief during the pandemic.
Mr Pluznyk submitted that the Code of Conduct was an industry code within the meaning of that term in paragraphs (g) and (h) of sub-section 62B(3) which permit the Tribunal, for the purpose of determining whether a lessor has engaged in unconscionable conduct in connection with a retail shop lease, to have regard to: (g) the requirements of any applicable industry code, and (h) the requirements of any other industry code, if the lessee acted on the reasonable belief that the lessor would comply with that code.
The term "industry code" is not defined in the Act but in my view the Code of Conduct does not meet that description.
It follows that, if I had not accepted that the respondent validly terminated the Agreement in July 2021 I would have found the respondent bound by the Agreement and liable to pay rent pursuant to the Agreement until December 2021, when the applicant accepted her repudiation and terminated the Agreement, and liable to the applicant for damages for breach of contract in respect of the balance of the term after December 2021.
I accept the applicant's evidence that the monthly rent payable from August to December 2021 was $2,715.51. Accordingly the amount which I would have found payable for rent up to December 2021 is $13,577.55, from which would need to be deducted the sum of $880 which the applicant received from the replacement tenant in December 2021, leaving $12,697.55.
I also would have awarded compensation for breach of contract up to March 2022 calculated as 3 months rent less $880 per month. The evidence disclosed that the applicant had only been able to mitigate its loss to that extent up to March 2022. Clause 1.9 of the Agreement provided that the rent payable under the Agreement should increase on each anniversary of the commencement date in proportion to the CPI for Sydney. The applicant provided evidence (extracts from the Australian Bureau of Statistics website) to establish that the rent would have increased on 1 March 2021 to $2,798.36. Accordingly the amount I would have awarded as damages for breach of contract up to the date of the hearing is $5,589.38
The evidence before the Tribunal is not sufficient to enable any reliable assessment of the applicant's loss after March 2022. I accept that the applicant had not found a full replacement for the respondent by March 2022 and that the onus of establishing a failure to mitigate would fall upon the respondent, however there was no evidence of the prospects which the applicant might have in future of arranging an alternative means of utilisation of the premises or obtaining a replacement tenant to take over the respondent's position. At the least, such evidence would have included details of the extent to which the other chairs and beauty treatment facilities in the premises were utilised, both during the period that the respondent operated at the premises and subsequently.
The applicable principles were summarised by the Appeal Panel in Bavin v Parklea Operations Pty Ltd [2019] NSWCATAP 120: 96 There is well established authority that a court and a tribunal, must do the best it can to assess damages: see Commonwealth v Amann Aviation Pty Ltd [1991] HCA 54 at [31]; Baak v Concrete Services Group Pty Ltd [2016] NSWCATAP 42, at [17] and Tuck v White [2016] NSWCATAP 132, at [44]. … 98 In Commonwealth v Amann Aviation Pty Ltd [1991] HCA 54 at [31], Mason CJ and Dawson J noted the following: 31 The settled rule, both here and in England, is that mere difficulty in estimating damages does not relieve a court from the responsibility of estimating them as best it can. Indeed, in Jones v Schiffmann Menzies J. went so far as to say that the 'assessment of damages … does sometimes, of necessity involve what is guess work rather than estimation." Where precise evidence is not available the court must do the best it can. And uncertainty as to profits to be derived from a business by reason of contingencies is not a reason for a court refusing to assess damages. 99 The Appeal Panel has accepted that this 'settled rule' equally applied to the Tribunal in that it was obliged to assess the loss or damage arising by reason of a breach of contract: see Baak v Concrete Services Group Pty Ltd [2016] NSWCATAP 42, at [17] and Tuck v White [2016] NSWCATAP 132, at [44]. 100 In Baak, at [46], the Appeal Panel also referred to the High Court decision in Fink v Fink [1946] HCA 54; (1946) 74 CLR 127, at page 143 where their Honours, Dixon and McTiernan JJ (with whom Latham CJ and Williams J agreed) said: Where there has been an actual loss of some sort, the Common Law does not permit difficulties of estimating the loss in money to defeat the only remedy it provided for breach of contract, an award of damages.' 101 In JLW (Vic) Pty Ltd v Tsiloglou and Others [1994] VicRp 16; [1994] 1 VR 237, at 241, Brooking J said (omitting citations): A plaintiff cannot recover substantial as opposed to nominal damages unless he proves both the fact and the amount of damage: …. If he proves the fact of the loss but does not call the necessary evidence as to its amount he cannot be awarded substantial damages …: he must put the tribunal in the position of being able to quantify in money the damage he has suffered: … So juries in personal injuries cases are often directed that the plaintiff must prove to their satisfaction what he has suffered and will suffer and what is fair and reasonable compensation in respect of that. It is often said that the amount of the damage must be proved with certainty, but this only means as much "certainty" as is reasonable in the circumstances: …. Where precise evidence is obtainable, the court naturally expects to have it; where it is not, the court must do the best it can. (italics added) 102 In Gallagher v Masters Installation Pty Ltd [2017] NSWCATAP 117, at [51], the Appeal Panel stated: 51 The settled rule is subject to the proviso that the difficulty must not arise from the fact that the plaintiff has produced no evidence of loss or damage, or because the court has rejected the evidence which was put forward on loss caused by the breach. In either case the plaintiff will be restricted to a nominal sum (Carter on Contract [41-180]). The settled rule only applies where the facts and circumstances which the court is considering make it difficult for the court to estimate the damages suffered by a particular litigant. It does not apply where the party who has the onus of proof does not call evidence which is readily available to be placed before the Court, but the party does not do so (see Gerrard v Slamar [2004] WASCA 253 at [32] and [33]). In that case Heenan J with whom Steytler and Le Miere JJ agreed said at [33] - "To my mind, this is not a case where evidence attempting to quantify the loss from the vehicle being unavailable for that three month period was impossible to obtain nor inherently uncertain or incapable of reasonably precise calculation … ." At [34] his Honour continued: "In those circumstances I consider that this is a case where the respondent has failed to establish damages and that the court cannot estimate or guess in an endeavour to make good that omission".
See also Bell Solar Pty Limited t/as Sunboost v Anderson [2021] NSWCATAP 278 at [59] - [63].
Consistently with those principles, it would be appropriate to make an assessment of the loss sustained by the applicant during the eleven months from 1 April 2022 to 28 February 2023, doing the best I can on the limited information available.
Eleven months rent at the full rate applicable under the Agreement would be $30,781.96. That figure must be discounted both by reason of the fact that the payments are being accelerated and by reference to the possibility that the applicant might find an alternative tenant. The alternative tenant which the applicant has located for the Beauty Therapy Space, or some of it, has entered only into a 12 month arrangement, however, it is reasonable to assume that a similar arrangement would be reached for the balance of the term. That would suggest a deduction of $9,680 in respect of the Beauty Therapy Space alone. It is also appropriate to apply a discount to take account of the possibility that the applicant might itself be able to make greater use of the salon and increase the revenue from its own business in the absence of the respondent.
Because the applicant has provided so little information to guide the assessment, I consider that the discount for the contingencies outlined in the previous paragraph should be substantial.
Doing the best I can I would assess the present value of the loss which the applicant would sustain over the 11 months to February 2023 at $10,000.
The sum of the three figures which I have calculated is $28,286.93. Accordingly, if I had not determined that the respondent validly terminated the Agreement in July 2021, I would have ordered the respondent to pay the applicant the sum of $28,286.93, which is less than the amount to which the applicant explicitly limited its claim.
However, as I have determined that the respondent did validly terminate the Agreement in July 2021, the application will be dismissed.

Costs

Despite the avowed intention of the applicant to avoid exposure to an order for costs by limiting its claim to a sum below $30,000, both parties indicated at the hearing that, if successful, they would seek an order for costs.
Because the amount in dispute in the proceedings did not exceed $30,000, s 60 of the Civil and Administrative Tribunal Act 2013 (NSW) is applicable and special circumstances are necessary before I can make an order for costs.
I will make directions permitting the respondent to file submissions seeking an order for costs and the applicant to file submissions in response.
My orders are: 1. Application dismissed. 2. The respondent may file and serve written submissions within 14 days of the date of this decision seeking an order in relation to the costs of the proceedings. 3. If the respondent files submissions in accordance with order (2), the applicant may file submissions in response within a further 14 days. 4. Any submissions filed in accordance with orders (2) and (3) must address the question whether the question of costs may be determined on the papers and without a hearing pursuant to s 50(2) of the Civil and Administrative Tribunal Act 2013 (NSW). 5. If no submissions are filed in accordance with order (2), there will be no order as to the costs of the application.

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 July 2022

Retail Leases Amendment (Review) Act 2017(NSW)

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Judgment (8 paragraphs)

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Legislation Cited (3)

Cases Cited (12)