Victorian Civil and Administrative Tribunal|2015-07-08

the Applicant (Charcoal Chicken) had not yet cleared the debris from the roof or fixed the faulty work around the canopies.

I comment that I do not attach much weight to this statement as Mr Stamatakos in the same sentence also said that Charcoal Chicken had not:

Mr Naso confirmed that he had fixed the faulty work in April 2012, and the Mr Merlo confirmed this.
However, Mr Mavroidis also deposed that when he went back to the Premises in April 2013 at the request of Unique Homes, he went up on the roof and saw rubbish there. He took photos. These were tendered as Exhibits R9(a)-(d) by the respondent. They clearly show plumber's rubbish on the roof.

Did the responsibility to clean the rubbish left on the roof by Charcoal Chicken pass to another party after the event of February 2012?

Charcoal Chicken contends (at paragraph 26 of its submission) that:

Mr Houdalakis gave evidence that the Body Corporate were responsible for the state of the roof. Accordingly once it had been apprised of the debris on the roof, it was under an obligation to keep the roof clean. It is not sufficient to say that the tenant was under an obligation to clean the roof. Its obligation was to clean the roof then bill the offending party.

On one view this argument misses the point, which is that after Charcoal Chicken became aware of the blockage and of the defective workmanship on the roof, it became obligated to fix both problems. Importantly, it accepted the responsibility to get the roof plumbing fixed by Nastar plumbing. The roof could have been cleaned at that time.
However, I think there is some force in the Charcoal Chicken's argument that the owner's corporation was responsible for the roof. Mr Houdalakis of the owner's corporation manager says in his statement at paragraph 14 (TB 9.4) that on 16 May 2012 he received an invoice from Unique Homes dated 2 March 2012 which, after reporting on its investigation of leaks, recommended that:

The rubbish on top of Shop 10 be removed so as it does not block up sums(sic)/drainpipes.

The roof is common property. I consider that as the owner's corporation was aware of the rubbish on the roof and knew it ought to be cleared, it had a responsibility to either engage a contractor to get the rubbish removed or, if it considered the tenant to be responsible, to ensure that the tenant undertook the work. It would appear that the owner's corporation adopted neither course.
Certainly Mr Katranis gave evidence that he thought the 'OC' had attended to removing the rubbish, from which it may be inferred that Charcoal Chicken thought the owner's corporation was attending to this.
In the circumstances, I consider that Charcoal Chicken has discharged the burden on it as tenant to establish that it did not cause the relevant damage.
I accordingly find that clause 3 of the lease, alternatively s 57 of the Act, is enlivened with respect to the second event
The issue then arising is: having regard to the nature and extent of the damage to the Premises and the resultant interference with their use by Charcoal Chicken, for what period is the tenant's obligation to pay rent and outgoings to be suspended?

For what period is Charcoal Chicken entitled to abatement?

It is necessary to examine the evidence about the impact of the second event.
Mr Katranis, in his evidence on the second day of the hearing, said that the flooding on the second occasion was not as bad as on the first occasion. In particular, water did not come in over the canopies, but came down the back wall. This was '90%' of the water penetration.
Mr Katranis gave detailed evidence about the event in May 2013 at paragraphs 13-16 inclusive of his affidavit sworn 5 December 2013 (TB 2.3):

13 Again, in mid-May 2013 the premises were flooded for a second time. This caused significant damage to all the equipment and given the fact that the premises were flooded, it was necessary to turn off the electricity at the premises for safety reasons. This meant that the coolroom, fridges and freezers were not operational and that all the food that was stored in the premises had to be thrown out and destroyed. This was done in conjunction with two officers from the Moreland City Council being Officers Carney and Males.

14 I was present on 16 May 2013 when the officers from the Moreland City Counsel attended the premises following the flooding. They advised me that the food was now potentially hazardous and that it now must be destroyed. I agreed to this course of action and all the food stored at the premises at that time was destroyed. Now produced and shown to me and marked with the letters 'AK3' are notices of seizure and detention of that food.

15 Further, the premises were held to be unfit for occupation and it was noted that the premises were not permitted to reopen for trade until the Council's environmental health officer had inspected the premises and deemed it compliant with the Food Act 1984 and the Food Standards Code. The Council closed the premises. Now produced and shown to me and marked with the letters 'AK4' is a true copy of such assessment dated 16 May 2015.

16 As a result, the equipment again was repaired and/or replaced and the premises cleaned. It took a considerable period of time to clean the equipment and the premises. Integrated Consulted Services were to certify compliance with the Food Act and the Food Standards Code.

In asserting that there was water penetration of the shop on 16 May 2013 Mr Katranis is in direct conflict with Mr Stamatakos who, in his statement at paragraph 25 (TB8.5), says:

I attended Shop 10 and observed no water damage from the alleged severe thunderstorm that day. When I asked Mr Katranis to show me where the water damage had occurred, Mr Katranis pointed to the north facing wall being the wall away from the major pieces of equipment including the fryer, the bain marie, the grill, the charcoal rotisseri (sic) and refrigerators. I could not find any sign of water ingress or flood on the wall or anywhere in Shop 10.

Faced with this head-on conflict of evidence, there is a real question as to whether the Premises suffered any damage at all.
Certainly, Mr Merlo, who was called on behalf of Mr Stamatakos, was of the view that the fit out of the shop made the Premises essentially resistant to water damage. In particular, at page 8 of his report (TB7.9) under the heading Hardy Finishes In Shop Prevent Any Substantial Damage he said:

In the event that the leaking roof issue was widespread as alleged by the tenant (certainly not agreed to by the Writer), it should be noted that the finishes within the shop are essential (sic) resistant to any water damage. The floor of the shop is tiled, the visual food display has a stainless steel top and bench, the large stainless steel canopies protect anything beneath them from any spillage, the drinks refrigerated cabinets should be resistant to spillage, the large cool room is roofed and therefore potentially unaffected by water. Consequently, any claim for significant damage to equipment and fittings would be untenable.

Mr Merlo considered that a shutdown of one day would be justified in respect of the second event.
Mr Katranis did not concede this, but he did concede that had it not been for the dispute which Charcoal Chicken had had with its insurer in respect of the claim made after the second event, the business could have been restarted within six weeks, as distinct from 5 and a half months.
No justification for this estimate of six weeks was given. In particular, no detailed evidence was given of the extent of damage which was said to have been caused to Charcoal Chicken's equipment. No independent technical report was submitted by Charcoal Chicken. The evidence of Mr Katranis, such as it was, was that the insurer would not replace again the equipment which it had already replaced in 2012.
Attached to an email from the loss assessors, Crawford & Company, dated 30 July 2013 copied to Charcoal Chicken's lawyer (TB16.1), is a report from Quantum Restorations on the electrical items and machinery located at the Premises. On the basis of the report the loss assessor said that only one item - a sandwich press - was found to be 'not economical to repair'. The email went on:

'All other items either have no damage, or can be restored to their pore-loss (sic) condition'.

There is external evidence supporting Mr Katranis' claim that because of the flood the power had to be turned off, and that this led to Moreland City Council seizing food stored at the Premises. The evidence comes firstly in the form of an AFSA (Australian Food Safety Assessment) dated 17 May 2013 (TB 2.40) which noted that two officers attended the Premises after flooding from the roof. The document went on to record that electricity had been turned off and the coolroom, refrigerators and freezers were not operational. Potentially hazardous food had been destroyed. The Premises were declared 'closed' and were 'not permitted to open for trade until Councils Environmental Health Officer has inspected the premises and deemed them compliant with the Food Act 1984 and the food Standards Code'. The AFSA notice is consistent with a 7-page Notice of Seizure and Detention in respect of foodstuffs issued by Moreland City Council on 16 May 2013 (TB 2.23-2.9) and a 9-page Notice of Seizure and Detention issued by the council on the following day (TB 2.30-2.38).
The fact that Charcoal Chicken led no evidence regarding damage to the Premises after the second event is almost fatal to its claim under s 57 of the Act and clause 3 of the Lease. The abatement arises under clause 3 of the Lease on damage or destruction to the Premises occurring which renders them unfit for use and occupation by the tenant or under s 57 of the Act when they cannot be used or are rendered inaccessible. It would appear that neither damage to stock nor to machinery will trigger abatement. It is the use of the premises which must be interfered with. See Hirlmont Pty Ltd v Dybka [1998] QCA 305; (1998) Q ConvR 54-517, noted in Australian Tenancy Practice and Precedents, Lexis Nexis Looseleaf Service at [25 33].
Charcoal Chicken does not articulate the argument fully but it is clear that it is contending that by reason of the cutting off of power and damage to equipment the Premises were unfit for use as a take away food store. Also, Charcoal Chicken can be taken to be saying that for the period Moreland City Council maintained that the Premises were 'closed' they were also 'inaccessible' for the purposes of s 57(a) of the Act.
Mr Katranis in his affidavit of 5 December 2013 exhibited a report from Integrated Consulting Solutions dated 10 October 2013 (TB 2.45) which listed a number of items in the Premises requiring attention which had been identified by the insurer. A review of this report makes it clear that these issues relate to hygiene and cleanliness, rather than the reconnection of power.
No evidence was been put before the Tribunal as to the period that the power was kept off as a result of damage, real or potential, to the electrical system in the Premises. This is a critical matter, because once the power was restored, there should have been no reason for access to the Premises to be denied merely by reason of lack of refrigeration or of power for cooking and lighting. In other words, there should have been no reason why the Premises remained unfit for use as a take away food store or remained 'inaccessible' because of a closure notice from the Council.
In the absence of direct evidence as to when the power was restored, it is not possible to fix an exact date when the Premises became fit again for use as a take away food store. There is also no evidence as to when the Council lifted its closure order. It is likely, in the normal course of things, that power could have been restored within days.
In absence of direct evidence as to when the Premises became fit for use again and 'accessible' I adopt as the relevant period of abatement six weeks, as this is the time that Mr Katranis said the Premises would have been closed but for Charcoal Chicken's dispute with its insurer after the second event.
I find and declare that Charcoal Chicken is entitled to suspension of the obligation to pay rent and any outgoings payable under the Lease for six weeks from 16 May 2013.

Charcoal Chicken & Souvlaki Xpress Pty Ltd v Stamatakos (Building and Property) [2015] VCAT 1017 (8 July 2015)

Charcoal Chicken & Souvlaki Xpress Pty Ltd v Stamatakos

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Charcoal Chicken & Souvlaki Xpress Pty Ltd v Stamatakos (Building and Property) [2015] VCAT 1017 (8 July 2015)