These proceedings concern a property at 84 - 90 Atchison Street, Crows Nest. The dispute centres upon part of the building known as shops 1, 2 and 4, which are used for retail purposes. Some of that area has been used as a fruit shop, and some of it has been used as a delicatessen and associated cafe. In practical terms, access to the delicatessen and cafe is achieved by going through the fruit shop.
The plaintiff, Centocinquanta Pty Limited, conducted a delicatessen and cafe business in the delicatessen and cafe area from about 26 July 2015 until 9 November 2016. On 10 November 2016, possession of shops 1, 2 and 4 was taken by the third defendant, NFG Crows Nest Pty Limited ("NFG Crows Nest"), pursuant to a lease granted to it by the registered proprietor of the property, the second defendant, 86 Dunning Avenue Pty Limited ("86 Dunning Avenue"). The lease is for a two year term with an option for a further two years. NFG Crows Nest has licensed part of the area, essentially the area used as a fruit shop, to the fourth defendant, JYJ Meats and Foods Limited. The fourth defendant has commenced operation of a fruit shop from its licensed area. NFG Crows Nest wishes to use the remaining area to conduct its own delicatessen business.
Upon taking possession, NFG Crows Nest arranged for a wooden wall or partition to be erected around the delicatessen and cafe area. This was done with the knowledge of 86 Dunning Avenue which itself made arrangements for security guards to attend the site so as to prevent the plaintiff from gaining access to the property. The plaintiff has been effectively excluded from the property, although arrangements have since been made for the plaintiff to remove its perishable stock.
By its Further Amended Notice of Motion filed on 18 November 2016 the plaintiff seeks injunctive relief against the second, third and fourth defendants, requiring removal of the wall or partition and restraining any interference with the operation of its business in the delicatessen and cafe area.
Centocinquanta Pty Limited v Demasi - [2016] NSWSC 1689 - NSWSC 2016 case summary — Zoe
The plaintiff claims there is a serious question to be tried or a prima facie case that a retail lease exists between it and 86 Dunning Avenue. The plaintiff also claims, in the alternative, that there is a serious question to be tried or a prima facie case that a retail lease exists between it and NFG Crows Nest. Before turning to consider those claims, something needs to be said about the recent history of ownership and use of the 84 - 90 Atchison Street property.
86 Dunning Avenue completed its purchase of the property in April 2015. The purchase was subject to two existing leases. These were: (1) a lease of shops 1, 2 and 4 to Freshguys Pty Limited ("Freshguys") for a term ending on 31 August 2015, but containing an option to renew; and (2) a lease of shop 3, a liquor store, to Kallin Pty Limited.
86 Dunning Avenue, which evidently acquired the property with a view to redeveloping it, became involved in negotiations for the surrender of the two leases. Agreements were reached whereby 86 Dunning Avenue paid at least $120,000 to Kallin Pty Limited and $650,000 to Freshguys to effect surrenders of the leases. Under the terms of its surrender, Freshguys was required to vacate shops 1, 2 and 4 by 31 August 2015, or such other date as was agreed between it and 86 Dunning Avenue.
In June 2015 86 Dunning Avenue commenced issuing invoices to Crows Nest Superfresh for rent. That was the business name used by Freshguys for the fruit shop business it conducted at the premises. The rent under the lease was about $31,500 plus GST at that time.
Freshguys had sub-leased the delicatessen area to Delitalia Gourmet Foods Proprietary Limited. That company operated the delicatessen under the name Delitalia. Freshguys paid $250,000 to Delitalia Gourmet Foods Pty Limited to effect the surrender of the sub-lease. Although the evidence is not clear, it seems there is some connection between Delitalia Gourmet Foods Pty Limited and the plaintiff. The plaintiff, which was incorporated on 26 July 2015, henceforth conducted a delicatessen business from the premises using the name Delitalia.
A manager employed by the plaintiff, Mr Tony Macri, deposed in his first affidavit that the fruit shop business conducted by Freshguys was sold to the first defendant, Natalina Demasi, and her husband Carmelo De Velli, in July 2015. Mr Macri deposed that he had a conversation with Mr De Velli on 30 July 2015 to the following effect:
Mr Macri: "Carmelo, I understand that you have taken over the shop from Superfresh."
Carmelo: "Yes, Natalie and me have taken over the fruit shop business. The Bova boys have told me about the arrangements with you guys and they have given me a copy of the sub-lease, I will leave it all the same just like in the sub-lease and each week we will pay you for the deli sales and you pay us rent."
Mr Macri: "Okay, I confirm that the rent is $4,400 per month and that all sales go through your POS system and that you will pay to us weekly the sales from the deli, just like the Bova boys did in the past. I will let the boss know."
Carmelo: "Yes, no problem from me, but if you could please pay the rent to the Bova boys for a while, as I owe them for the stock of $50,000.00."
Mr Macri: "No problem, I will arrange for the rent to be paid to Bova as directed and when you would like us to pay the rent to you, if you could start invoicing us."
The reference to "the Bova boys" is to the owners of Freshguys.
In a subsequent affidavit, Mr Macri deposed that the conversation in fact took place in about late September 2015. There is evidence that the first defendant commenced invoicing the plaintiff for monthly rent of $4,400 from October 2015.
It appears that the transfer of the Superfresh business did not take place until about late August or early September 2015. Before that time, there had been discussions between Mr Joe Bova of Freshguys and Mr Oliver Li of 86 Dunning Avenue concerning the possibility of Freshguys staying on for a while after 31 August 2015. Mr Li indicated that 86 Dunning Avenue would be looking to start work on the property in January 2016. A rent of $12,000 plus GST per month was agreed upon. On 31 August 2015, 86 Dunning Avenue sent an invoice to Crows Nest Superfresh in that amount for rent for September.
However, at about that time, Mr Bova told Mr Li that Mr De Velli would be taking over the running of the business. He provided Mr De Velli's details to Mr Li, and Mr Li arranged for 86 Dunning Avenue to reissue the invoice for the September rent to Crows Nest Fruit. Mr Li deposed that he understood that Crows Nest Fruit was replacing Freshguys as the tenant and had immediately commenced conducting the business previously conducted by Freshguys. 86 Dunning Avenue continued to invoice Crows Nest Fruit for rent each month.
From about October 2015, discussions took place between Mr Li and Mr De Velli about the possibility of a new short term lease. A draft lease and associated documents relating to the Retail Leases Act 1994 (NSW) were submitted by 86 Dunning Avenue. Curiously, at least for a time, the plaintiff's present solicitor, Mr Laface, apparently acted for the first defendant, trading as Crows Nest Fruit, on this transaction.
In any event, the first defendant ultimately entered into a lease of shops 1, 2 and 4 from 86 Dunning Avenue for the period 1 January 2016 to 31 May 2016. The rent remained at $12,000 plus GST per month.
At the conclusion of that term, the first defendant held over as a monthly tenant, the tenancy being terminable by either party giving at least 30 days' notice. The rent appears to have increased to $18,200 plus GST in July 2016. The first defendant gave a 30 day notice of termination on 5 October 2016. It appears that the first defendant had vacated the leased area by 9 November 2016.
In February 2016, disputes emerged between the plaintiff and the first defendant. These proceedings were commenced against the first defendant on 1 March 2016. On 4 March 2016, I granted an interlocutory injunction to restrain the first defendant from interfering with the operation of the plaintiff's business.
The dispute persisted and seems to have been intense. Allegations have been made by the first defendant that the majority shareholder in the plaintiff, Mr John Hopoate, engaged in intimidation and indeed assaulted a member of the Demasi family at the premises in May 2016. There is evidence that Mr Hopoate was charged with common assault in relation to that incident. He pleaded guilty to the charge and has been convicted. There is also evidence that the police also took action to obtain an apprehended violence order against Mr Hopoate to forbid him from going near the premises. I was informed that the apprehended violence order remains in force.
In about August 2016, the first defendant decided she would move on from the premises. 86 Dunning Avenue was informed of that intention. 86 Dunning Avenue then commenced negotiations with a Mr Danny Wang for entry into a lease of shops 1, 2 and 4. Ultimately, those negotiations resulted in the lease being granted to NFG Crows Nest. That company, which was incorporated on 24 October 2016, is associated with Mr Wang, who became its sole director.
The plaintiff's claim that a retail lease exists between it and 86 Dunning Avenue is set forth in paragraphs 13 to 20 of its Points of Claim filed 18 November 2016. Those paragraphs suggest that the claim is based upon the plaintiff being in possession of the delicatessen area from about 26 July 2015, 86 Dunning Avenue permitting and continuing to permit such possession, and 86 Dunning Avenue accepting a payment of rent of $4,400 from the plaintiff on 9 September 2016.
It may be accepted that 86 Dunning Avenue was aware that the delicatessen area was occupied by an entity different from its tenant. Mr Li deposed that he understood that the business conducted in the delicatessen was that of a sub-tenant. However, there is no evidence that the plaintiff made any payment of rent to 86 Dunning Avenue on 9 September 2016 as alleged. The plaintiff attempted to make such a payment on 9 November 2016 (after the first defendant's lease had been terminated) but the payment was not accepted by 86 Dunning Avenue.
In any case, as the matter was argued, it became apparent that the plaintiff's claim primarily rests upon a conversation which Mr Macri alleges he had with Mr Li in August of 2015. Mr Macri deposes to a conversation to the following effect:
Mr Macri: "Hey, guys, you have come here a few times, what are your names."
Mr Li: "My name is Oliver and this is Vince the designer, I am the new owner of the property."
Mr Macri: "Nice to meet you."
Mr Li: "We have decided to leave you in the shop until we are ready to knock down the building and build units here."
Mr Macri: "Oh, I was unaware that the building was being knocked down."
Mr Li: "We are happy to just get the rent for now and worry about it later."
Mr Macri: "So do we continue to pay the rent to Bova?"
Mr Li: "Yes, pay it to him and he will forward it to us, but if there is any problems, let me know and I will give you our account details."
The conversation is denied by Mr Li. It is not for the Court on this application to make a determination as to whether Mr Macri or Mr Li is correct. I will proceed on the basis that it is possible that, at a final hearing, Mr Macri's account will be accepted.
Under the Retail Leases Act, a retail shop lease is defined to mean any agreement under which a person grants or agrees to grant to another person for value a right of occupation of premises for the purpose of the use of the premises as a retail shop. The right of occupation need not be a right of exclusive occupation. The agreement may be express or implied, and may be oral or in writing, or partly oral and in writing. It is not suggested that the agreement in this case is in writing or partly in writing; it is wholly oral.
Mr Macri places the conversation as having occurred in August 2015. That is at the time when the Freshguys lease was still in place, although it was coming to an end. Mr Li and Mr Bova had negotiated a new reduced rent that would be payable if Freshguys stayed on for a while. Mr Macri further places the conversation as having occurred before he had his conversation with Mr De Velli referred to earlier.
The conversation with Mr Li, as deposed to by Mr Macri, seems to be in the nature of a casual exchange on the occasion that Mr Li and Mr Macri first spoke to each other.
It is necessary to consider whether the conversation, assuming it to be ultimately accepted by the Court as having occurred, might support a conclusion that a retail shop lease was entered into between 86 Dunning Avenue and the plaintiff. I put to one side the question whether Mr Macri, who is not a director of the plaintiff, possessed authority to enter into leases for the plaintiff.
A number of statements are attributed to Mr Li. The statement attributed to him about deciding to leave the plaintiff in the shop is not suggestive of any grant of a right of occupation. It rather suggests the assertion of a right to remove the plaintiff at any time the new owner wished to do so.
The statement attributed to him about being happy just to get the rent for now and worry about it later, is clearly a reference to the rent 86 Dunning Avenue was currently receiving from Freshguys. It indicates that 86 Dunning Avenue was content to leave matters as they were.
The statement attributed to him about the plaintiff continuing to pay rent to Mr Bova is similarly indicative of 86 Dunning Avenue being content for matters to be left as they were. Viewed in that context, the suggestion that the plaintiff's rent would then be forwarded by Mr Bova ought to be seen as a recognition that, in practical terms, the rent paid by the plaintiff would be available to fund Mr Bova's payments to 86 Dunning Avenue. I do not see the statement as indicative of the making of any agreement between 86 Dunning Avenue and the plaintiff for the occupation of any space, or an agreement involving the payment of rent by the plaintiff to 86 Dunning Avenue via Mr Bova as an agent.
There was no reason for 86 Dunning Avenue to make such an agreement. It had its arrangements with its tenant concerning all of shops 1, 2 and 4. There was no discussion about any amount of rent, and there is no evidence that 86 Dunning Avenue was even aware of the amount that the plaintiff was paying.
Something more can perhaps be made of the statement attributed to Mr Li that, if there were any problems, Mr Macri should let him know, and he would supply his own account details. Such a statement arguably suggests a preparedness to enter into an agreement with the plaintiff in the future, but it does not seem to me to amount to either a grant of a right of occupation or an agreement to grant a right of occupation for value.
It is, of course, necessary to consider the conversation as a whole and in the context in which it is said to have occurred. In my opinion, the conversation so viewed does not support a conclusion that 86 Dunning Avenue granted the plaintiff a right of occupation of any part of shops 1, 2 and 4, or agreed to grant the plaintiff any such right, whether expressly or impliedly.
The tenor of the conversation, which as I have said was a casual exchange, was not the creation of new rights, but rather an acceptance that the present arrangements would, at least for the time being, continue.
The position is not advanced by the evidence given by Mr Macri of a conversation he had with Mr Bova in September 2015 in which Mr Bova said that the landlord only wanted their rent and were "not too fussed who is operating the premises". That is consistent with the position being that 86 Dunning Avenue only had its arrangements with its tenant, and was unconcerned with whatever arrangements the tenant had with its sub-tenants or licensees.
I do not accept the plaintiff's submission that the conversations show that 86 Dunning Avenue expressly approved or permitted the plaintiff's continuing occupation and requested that rent be paid to them via Mr Bova. In my view, whilst Mr Li indicated that the new owner was content to allow the plaintiff to continue its existing occupation for the time being, no agreement was made whereby rights of occupation were conferred upon the plaintiff for value.
It is relevant to note that the existence of such an agreement is not supported by any documentary evidence, and it gains no support from the subsequent conduct of the parties. 86 Dunning Avenue appears to have conducted itself throughout on the basis that it had a tenant for the whole of shops 1, 2 and 4, being Freshguys initially, later the first defendant, and now NFG Crows Nest. It acted consistently with Mr Li's professed understanding that the delicatessen business was conducted by a sub-tenant. It is noteworthy also that, in its dealings with those tenants, 86 Dunning Avenue acted with some formality and with an evident appreciation of the Retail Leases Act.
The plaintiff, on the other hand, made no claim that it had a lease with 86 Dunning Avenue until recent times, after it became clear that the first defendant was likely to vacate the premises. Mr Macri made no mention of his conversation with Mr Li in his first affidavit, even though that affidavit contained an extensive description of the plaintiff's "lease arrangements". No assertion of a lease with 86 Dunning Avenue was made by the plaintiff's solicitor in correspondence with the first defendant's solicitor in July and August 2016. It is noteworthy that the plaintiff's solicitor sent a letter to the first defendant's solicitor on 16 August 2016 which referred to "the lease agreement reached by our clients" under which the rent was $4,400.
Further, the first defendant's solicitor wrote a letter to the plaintiff's solicitor on 18 August 2016, in which reference was made to an agreement reached in September 2015 to sub-let the delicatessen area to the plaintiff on a monthly basis. This was not contradicted by the letter sent by the plaintiff's solicitor in reply on 31 August 2016. Of course, had the plaintiff and 86 Dunning Avenue entered into a lease in August 2015, it would make no sense for the plaintiff and the first defendant to enter into a sub-lease in September 2015.
I note further that in a letter sent on 15 July 2016 the plaintiff's solicitor referred to 86 Dunning Avenue as the "head lessor". Also, no assertion of a lease with 86 Dunning Avenue was made by the plaintiff's solicitor in a letter to 86 Dunning Avenue itself on 15 July 2016. The letter referred to 86 Dunning Avenue as the registered owner. The letter further referred to the plaintiff paying rent to the first defendant. There is no mention of the payment of rent to 86 Dunning Avenue.
This evidence strongly reinforces the conclusion that the plaintiff was only ever a sub-tenant of the delicatessen area.
In summary, the conversations relied upon by the plaintiff do not, in my opinion, support a conclusion that a retail shop lease was entered into between 86 Dunning Avenue and the plaintiff. Moreover, the existence of such a lease is not supported by any documentary evidence or the subsequent conduct of the parties.
I appreciate that an agreement giving rise to a retail shop lease may be oral and it may be implied. Nevertheless, for the above reasons, I do not think that the plaintiff has established that there is a serious question to be tried or a prima facie case (in the sense described in Australian Broadcasting Corporation v O'Neill (2006) 227 CLR 57; [2006] HCA 46 at [65]) that a retail lease exists between it and 86 Dunning Avenue.
I have come to the same conclusion concerning the plaintiff's alternative contention that a lease exists between it and NFG Crows Nest.
The plaintiff alleges in its Points of Claim that in about August 2016 an agreement for a sub-lease of the delicatessen area was entered into between NFG Crows Nest and the plaintiff at a rental of $4,400 per month. The conversations relied upon by the plaintiff in this regard are alleged to have occurred in August 2016 between Mr Macri and Mr Wang. I again leave aside the question whether Mr Macri possessed authority to bind the plaintiff to a lease.
It is claimed that Mr Wang made statements to the effect that he would be happy for the plaintiff to remain in the shop. These conversations are said to have occurred at a time when Mr Wang was negotiating with 86 Dunning Avenue for a lease of shops 1, 2 and 4. NFG Crows Nest was not in existence at that time.
In any event, it is my view that, at their highest, the statements attributed to Mr Wang amount to representations concerning Mr Wang's intentions concerning the premises in the event a lease was obtained. Those statements, and the conversations generally, do not go as far as to amount to a grant of a right of occupation or an agreement to grant a right of occupation for value. There was no discussion about the term of any tenancy. The only mention of rent was Mr Macri describing the current position that rent of $4,400 was paid by the plaintiff to the first defendant.
I do not accept the plaintiff's submission that the evidence supports the existence of an agreement to grant a sub-lease. Neither do I accept that the statements attributed to Mr Wang amount to a promise to grant a sub-lease such as might give rise to an estoppel.
Again, I do not think that the plaintiff has established that there is a serious question to be tried, or a prima facie case, that a lease or an agreement for lease exists between it and NFG Crows Nest.
Accordingly, both in relation to 86 Dunning Avenue and NFG Crows Nest, the plaintiff has failed to show a sufficient likelihood of success to justify in the circumstances the preservation the status quo (or, more accurately, the restoration of the status quo ante) pending the final hearing.
In those circumstances, it is not necessary to go on to consider the competing arguments on other issues, including as to whether the balance of convenience favours the granting of the interlocutory injunctive relief sought by the plaintiff.
I should note that the plaintiff supported the grant of relief on the ground that litigants ought to be discouraged from resorting to self-help remedies such as occurred in this case by the erection of the wooden wall or partition and the exclusion of the plaintiff from the premises. It was pointed out that, when that conduct occurred, directions had been made for the service of evidence and the matter had been referred to Court-annexed mediation to occur by 16 December 2016. However, the plaintiff was aware that the first defendant was bringing her lease to an end, and there were no orders in place restraining 86 Dunning Avenue in any respect. NFG Crows Nest had not yet been joined as a party to the proceedings. There was no impediment upon 86 Dunning Avenue proceeding to grant a lease to NFG Crows Nest.
Further, the complaint of self-help rings somewhat hollow in circumstances where, in May 2016, the majority shareholder in the plaintiff (which had the benefit of an interlocutory injunction against the first defendant) went to the premises and assaulted a member of the first defendant's family. Had it been necessary to deal with the balance of convenience, or discretionary matters, that conduct would have needed to be carefully weighed, notwithstanding the apprehended violence order currently in place designed to prevent its recurrence. This is because the practical effect of granting relief would be to require the businesses of the plaintiff and the fourth defendant to operate side by side. Access to the delicatessen and cafe area is, as I have mentioned, achieved by going through the fruit shop itself.
The adequacy of the undertaking as to damages proffered by the plaintiff would also have required close consideration.
For the above reasons, the plaintiff's Further Amended Notice of Motion filed on 18 November 2016 will be dismissed with costs.
[2]
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: 30 November 2016