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[2014] NSWCATCD 2
NCAT Consumer and Commercial
2013-10-01
Gilbert J
Original judgment source is linked above.
reasons for decision 1There are two matters before the Tribunal 125137 in which Coslo Foods Corp Pty Ltd is Applicant (hereafter Coslo) and Ali Bardouh and Soumaya Bardouh (Bardouh) are Respondents, and 135021 in which Bardouh is Applicant and Coslo Respondent. 2The disputes concern what is indisputably a retail shop lease within the Retail Leases Act 1994 (the Act) of premises being two adjoining shops known as 243-245 Northumberland Street Liverpool (the premises). 3The relief sought by Coslo in its amended application for original decision was stated as follows: 1. A Declaration that as at 03.08.2012 Coslo Foods Pty Ltd ("Coslo) had a valid and enforceable Retail Shop Lease in respect of premises at 243-245 Northumberland St Liverpool NSW for the period 20/4/2012 to 19/4/2015. 2. A Declaration that Respondents/Lessor's lock out of Coslo from the said premises on 03.08.2012 was wrongful and in breach of Lessor's obligations pursuant to the said lease. 3. A Declaration that Lessor has unlawfully and in breach of the Lease interfered with Coslo's quiet enjoyment of possession of the premises. 4. A declaration that Lessor has in contravention of s62 D of the Retail Leases Act engaged in Misleading and Deceptive conduct in connection with the said lease. 5. A Declaration that the Lessor has in contravention of s62B(1) of the Retail Lease Act engaged in conduct that was in all the circumstances unconscionable in connection with the said lease. 6. Damages including punitive and exemplary damages in the sum of $350,000. 4The claim by Bardouh sought only: 1. An Order that the Respondent pay the Applicants the sum of $2,441.68 in unpaid rent. 2. An order that the Respondent pay the Applicants the sum of $6,543.00 in respect of make good works required to be carried out at the Premises following the termination of the Respondent's tenancy. 3. Interest. 4. Costs 5The principal witness for Coslo was Mr Arun Varma who swore three affidavits respectively 4 April 2013, 23 May 2013 and 28 May 2013. The affidavits uncontroversially reveal that Mr Varma's wife, Suraj Varma, at relevant times was the sole director of Coslo and that Coslo was the lessee of the premises under an unregistered lease which commenced 20 April 2009 and terminated 19 April 2012. There were three lessors Mr Varma himself and two members of his family Kamlesh Deo Varma and Aronesh Deo Varma. These lessors at the time owned the freehold. The lease contained an option for renewal for further term of three years from 20 April 2012 to 19 April 2015 and specified in effect that the option could only be exercised by notice served on the lessor not earlier than 19 October 2011 and not later than 19 January 2012. 6Relevant to the issues raised in this case include clause 5.1 in respect of the payment of rent etc and clauses 5.4, 5.5, 5.6, 5.7, 5.8, 5.9, 5.12, 5.13, 5.14, and 5.15 relating to rent reviews. Those clauses are as follows: What money must the lessee pay? 5.1 The lessee must pay to the lessor or as the lessor directs - 5.1.1 the rent stated in item 13 A in the schedule; 5.1.2 the share stated in item 14 A in the schedule of those outgoings stated in item 14B in the schedule; 5.1.3 the reasonable cost to the lessor of remedying a default by the lessee; 5.1.4 the reasonable cost to the lessor of dealing with any application by the lessee for the lessor's consent under this lease (whether or not it is given); 5.1.5 interest on these moneys at the rate stated in item 15 in the schedule when payment is more than 14 days overdue, calculated from the due date of the date of payment; 5.1.6 registration fee for registration of this lease at Land and Property Information NSW (payable on delivery to the lessor's solicitor of the executed lease); 5.1.7 stamp duty on this lease (payable on delivery to the lessor's solicitor of the executed lease) if not previously paid by the lessee to the Office of State Revenue; 5.1.8 if the lessee defaults, the lessors reasonable legal costs relating to the default; 5.1.9 the lessor's reasonable costs and expenses in connection with the preparation of this lease but only that part of those costs and expenses which are permitted to be recovered by a lessor under section 14 and section 45 of the Retail Leases Act, 1994; and 5.1.10 GST as provided for in clause 15. When and how is the rent to be reviewed? 5.4 The rent is to be reviewed on the rent review dates stated in item 16 in the schedule. If this lease is extended by legislation, the rent review dates include each anniversary of the latest rent review date stated in item 16 in the schedule (or if none is stated each anniversary of the commencement date) which falls during the extension. 5.5 The lessee must continue to pay rent at the old rate until the new rate is known. After that, the lessee is to pay the new rent from the next rent day. By that rent day the lessee is also to pay any shortfall between the old and new rate for the period since the rent review date. Alternatively, the lessor is to refund to the lessee any overpayment of rent. 5.6 There are three different methods described here for fixing the new rent on a rent review date. The method agreed by the lessor and the lessee is stated at item 16 in the schedule. The lessee is entitled to a reduction if the method produces a rent lower than the rent current just before the review date. Method 1. By a fixed amount or percentage. 5.7 In this case the rent beginning on each review date will be increased by the percentage or amount stated in item 16 in the schedule. Method 2. By reference to Consumer Price Index. 5.8 In this case - - take the yearly rent as of the last review date or if none, the rent at the commencement date ($X), - divide that rent by the Consumer Price Index Number for Sydney (All Groups) for the quarter ended just before that one (CPI 1), - multiple the result by the Consumer Price Index Number for Sydney (All Groups) for the quarter ended just before the review date (CPI 2). The product is the new rent for the year beginning on the review date ($Y), written as a formula - $X_ x CPI 2 = $Y CPI 1 5.9 The lessor must calculate the new rent after each review date and give the lessee written notice of the new rent. 5.10 If the Australian Bureau of Statistics makes a change in the reference base of the index and there is a published co-relation between the old and new base then the published co-relation is to be applied to convert the CPI 1 figure to the new reference base. If there is none then the lessor and the lessee agree to accept the calculations of the lessor's solicitor who must be retained to determine a fair co-relation between the old and the new series of numbers. 5.11 If the index used to calculate the new rent is discontinued the lessor may substitute another index that, as nearly as practicable, serves the same purpose and, if there is no such index, then the rent will be fixed by Method 3. Method 3. By reference to current market rent. 5.12 In this case the rent is to be the current market rent. This can be higher or lower than the rent payable at the rent review date and is the rent that would reasonably be expected to be paid for the property, determined on an effective rent basis, having regard to the following matters - 5.12.1 the provisions of this lease; 5.12.2 the rent that would reasonably be expected to be paid for the property if it were unoccupied and offered for renting for the same or a substantially similar use to which the property may be put under this lease; 5.12.3 the gross rent, less the lessor's outgoings payable by the lessee; 5.12.4 where the property is a retail shop, rent concessions and other benefits that are frequently or generally offered to prospective lessees of unoccupied retail shops; and 5.12.5 the value of goodwill created by the lessee's occupation and the value of lessee's fixtures and fittings are to be ignored. 5.13 The lessor or the lessee can inform the other in writing at least 60 days before the rent review date of the rent that the lessor or lessee thinks will be the current market rent at the review date. 5.14 If the lessor and the lessee agree on a new rent then that rent will be the new rent beginning on the rent review date and the lessor and the lessee must sign a statement saying so. 5.15 If the lessor and the lessee do not agree on the amount of the new rent 30 days before the rent review date, the current market rent will be decided by a valuer appointed under clause 5.16. 7In item 13 of the schedule of items the commencing rent was stated to be $50,000 per annum. Item 16 specified the method of rent review on each rent review date viz 20 April 2010 method 2, 20 April 2011 method 2, 20 April 2012 method 3, 20 April 2013 method 2 and 20 April 2014 method 2. 8The evidence is conflicting as to the amount of rent actually paid under the lease whilst the Messrs Varma owned the freehold but it seems clear that the lessee, no doubt with the acquiescence of the lessor rarely if ever actually paid the precise amount of rent payable. Nor does it appear that any attempt was ever made to implement the rent reviews provided for by Clause 5.4. In light of the evidence of Mr Varma and the state of Coslo's accounts in evidence, it is possible that on occasion rent was paid by a family member instead of Coslo. 9During the term of the lease and indeed during the term of a previous lease of shop 243 only from the same lessors Coslo traded from the premises as a supermarket and grocer specialising in spices and Indian foods employing the Business Name Vinayak. 10According to Mr Varma's affidavits Coslo gave notice of exercise of the option on 19 October 2011 in this form: NOTICE OF EXERCISE OF OPTION TO: KAMLESH DEO VARMA, ARONESH DEO VARMA AND ARUN DEO VARM FROM: COSLO FOODS CORP PTY LTD RE: COSLO FOODS CORP PTY LTD LEASE FROM KAMLESH DEO VARMA, ARONESH DEO VARMA AND ARUN DEO VARM PPTY: 243-245 NORTHUNBERLAND STREET, LIVERPOOL TAKE NOTICE that Coslo Foods Corp Pty Ltd hereby exercises the option contained in Lease for property at 245 Northumberland Street, Liverpool the term of three (3) years from 20th April, 2012 to the 19th April, 2015. DATED: 19/10/2011 THE COMMON SEAL of COSLO FOODS CORP PTY LTD ABN 16 114 626 550 was affixed in the presence of : (signature) (signature) _______________ ___________________ Secretary Director _____________________ ____________________ Print Secretary Full Name Print Director Full Name 11Notwithstanding the exercise or purported exercise of the option no fresh lease was entered into. However at some point prior to January 2012 the lessors had mortgaged the freehold to Perpetual Trustee Company Ltd and Challenger Managed Investments Ltd and they following default under the mortgage took possession of the freehold in January 2012. As mortgagees in possession they sold the freehold to Bardouh under a contract dated 28 March 2012. They also alleged non-payment of rent by Coslo and purported to enter into possession of the premises for non-payment of rent on 5 April 2012. Coslo thereupon sought relief against forfeiture in the Supreme Court. 12On 12 April 2012 Gzell J made Interim Orders allowing Coslo back into the premises and ultimately on 16 June final orders were made in the proceedings by consent: By consent, the Court orders: 1. The Plaintiff be relieved against forfeiture of its right of occupation of the premises known as 243-245 Northumberland Street, Liverpool in the State of New South Wales, being the premises the subject of the plaintiff's claim in these proceedings and being part of the property contained in Folio Identifier 4/610927, being the forfeiture effected by the Defendants entry and taking of possession on or about 5 April 2012. 2. Otherwise, the Summons be dismissed. 3. The Plaintiff pay the First and Second Defendant's costs of the proceedings, as agreed or assessed on a solicitor/client basis, with such payment to occur either within 14 days of agreement as to quantum of such costs or, in the event of the need for assessment, within 14 days of the issue of a Certificate of Determination in respect of those costs. 4. The Defendants are released from the undertaking previously given to the Court and/or to the Plaintiff to the effect that the Defendants would give advance notice to the Plaintiff of any proposed settlement of the sale of the property the subject of these proceedings. Further, the Court notes: 5. The Defendant's consent to these orders is given without any admission as to the legality or reasonableness of the entry and taking of possession, which took place on or about 5 April 2012. 6. The Defendants have given to the Plaintiff an undertaking (as part of the agreement reflected in the Court's orders) in the following terms: "The Defendants undertake, so long as both of the conditions set out in paragraphs (a) and (b) below continue to be true, that they will not take any steps to enter into physical possession of the property known as 243-245 Northumberland Street, Liverpool NSW and occupied by the Plaintiff ("the Property") nor will they give or purport to give notice to the Plaintiff for the purpose of determining the Plaintiff's occupation of the Property, provided that: (a) the contract for sale of land (dated 28 March 2012) relating to the Property and between the Defendants and Ali and Soumaya Bardouh remains on foot and enforceable by the Defendants; and (b) the Plaintiff complies strictly with its obligations under the terms of its occupation of the Property, including specifically in relation to, but not limited to, its obligations to pay rent." 13The contract for sale of the freehold was expressed to be "subject to existing tenancies" and had annexed to it a copy of the lease registered AD354766J from Kamlesh D Varma, Aronesh D Varma and Arun D Varma to Coslo dated 31 July 2007 of part of the land in Folio Identifier 4/610927 namely 243 Northumberland Street, Liverpool. This lease was for a term which commenced on 20 April 2006 and expired on 19 April 2009. 14Clause 50 of the Contract for sale dealt with existing tenancies in these terms: (1)... (2)Tenant means a person who has the right to possession, occupation or use of the whole or any specified part of the property under the Tenancies. (3)Tenancies means the tenancy or tenancies disclosed in the Tenancy Documents. (4)Tenancy Documents means the lease, licence or other documents setting out or relating to the terms of any Tenancies, copies of which are attached to this contract. (5)... 15From about May 2012, Mr Bardouh and Mr Varma were in conversation about the lease. According to his affidavit of 4 April 2013: In or about June 2012 prior to the completion date Ali Bardouh (AB) came to the premises and had a conversation with me in which words to the following effect were said:AB: Is Coslo prepared to have the lease rental under the lease reviewed to market.I said: Coslo has another 3 years to go on the lease because of the exercise of the Option but we still do not have a registered documented lease pursuant to the Option.AB: My wife and I as purchasers of the building want the lease to Coslo to continue as I want a tenant in the premises on settlement. So if you are prepared to agree to review the rent to market and release Coslo's caveat on the property for settlement, I will ensure that your Option of renewal lease will be documented.I said: Coslo agrees to that. I have already spoken to my wife about reviewing the rent to market and she has agreed and provided the lease is also registered.AB: I will get my Real Estate agent to deal with you. 16Mr Varma deposed to the fact that he then obtained from two real estate agents appraisals of the rent of shops 243 and 245 Northumberland Street in the range of $40,000 to $55,000 per annum and sent those appraisals to Bardouhs' Solicitor. Evidence that the premises were subsequently relet by Bardouh for $75,000 per annum suggests that these assessments were extremely conservative. 17In June 2012 Coslo was notified that Dunn and Horne Commercial had been appointed as the Agents of Bardouh and a few days later it received a letter from Horne Commercial dated 3 July 2012 Mr. Arun VermaCoslo Foods Corp Pty Ltd243-245 Northumberland StreetLiverpool NSW 2170Dear Arun (Sam),Re: Notice to VacatePpty: 243-245 Northumberland Street, Liverpool NSW 2170We refer to your occupancy of the above mentioned premises and advise that you are required to vacate the premises on 3 August 2012.A final inspection will be carried out and it is expected that the premises will be left in a clean and tidy condition and the required works noted in our letter dated 28 June 2012 be completed. We have attached a copy of our previous letter for your reference.Please do not hesitate in contacting the writer should you wish to discuss any aspect of the above in further detail.We thank you for your co-operation.Yours faithfully,DUNN & HORNE COMMERCIAL 18Mr Varma asserted that notwithstanding the notice, he continued to pay rent until 3 August upon which date Coslo was locked out of the premises. He claims that this termination of the lease by Bardouh was unlawful and caused it to suffer loss and damage including the loss of perishable stock. 19I will return to the evidence given by Mr Varma as to the loss the applicant allegedly sustained. 20Mr Varma was cross examined at some length by Mr Mark Southwick, counsel for Bardouh. The cross examination was directed inter alia to the quality of the air conditioning in the premises, to the condition of the tenants fixtures when the lease was terminated and as to the quantum of rent actually paid under the lease. Mr Varma's explanation regarding an item of $81,665.21, shown as paid for rent in the applicants accounts, was as I understand it that everything in excess of $50,000 constituted a contribution towards mortgage payments due on the property. 21Mr Southwick suggested that the shop was not trading as at 3 August 2012, a proposition which Mr Varma denied. He also denied that only rubbish of no value was left in the premises and denied that in truth, he had moved the applicants business to his brother's similar business nearby. He maintained that stock on hand at any time had a value of about $350000. 22It emerged during the cross examination that somewhat curiously in June 2012 an application was made to ASIC for deregistration of Coslo. This application was based on a statement that Coslo was not carrying on business, had assets worth less than $1000 and had no outstanding liabilities. It seems that this application was subsequently stayed at the request of Bardouh. Mr Varma somewhat unconvincingly explained the deregistration application as arising from an intention to reorganise the Company. 23I formed an unfavourable opinion of Mr Varma as a reliable witness. He was vague in his responses to questions and often purported to have no recollection of matters which I would have expected him to recall. His evidence in my view was seriously undermined by the application to deregister Coslo. 24The only witness in the Respondents' case was Mr Ali Bardouh who swore affidavits respectively dated 11 April 2013 and 26 July 2013. 25Mr Bardouh said that he and his wife purchased the property of which the premises form part at auction on 28 March 2012. He testified as to conversations with Mr Varma both before and after completion of the purchase regarding Coslo's tenancy and identified a number of emails and letters which passed between the parties in the period July to August 2012. His position was that he wished to ensure that what he regarded as a market rent was paid by the applicant and that any rent arrears were paid. He identified invoices for expenses which he claimed were "incurred" so as to bring the premises up to a condition in which they could be relet. 26In his later affidavit, Mr Bardouh said that on 3 August 2012, he was present at the premises when a Mr Ripepi took a number of photographs which are in evidence. He also testified as to a meeting at the premises at about 5pm on 9 August: Representatives of Coslo attended the premises on 9 August 2012 to remove their property. I was present at 5pm together with Joseph Ripepi. Mr Ripepi spoke to Arun Varma at about 5pmRipepi: "Have you finished?"Varma: "Yes"On about 10 August 2012, one of Mr Varma's sons, whose name I cannot recall, attended the Premises. While on the Premises, Mr Varma's son said:"My father has sent me around to collect the sign board."I understood the reference to "the sign board" to be a reference to the "Vinayak" sign board that was hanging off the awning at the front of the Premises. I recall that I had an electrician at the Premises at the time who was securing the live wires that had been left exposed by Coslo. I said:"OK, I will have the electrician take it down for you. Tell your father to come and take away anything else that he wants." 27Mr Bardouh said that subsequently no request was made by Coslo to remove any goods or other items from the premises. According to Mr Bardouh, there was no further claim by the applicant until an email dated 6 September 2012. From: Arun Varma [mailto:]Sent: Thursday, 6 September 2012 11:32 AMTo: Ashley SmithSubject: Coslov vs Bardouh Lease Dispute REF; AS;BT;206050Dear Ashley,We refer to your letter dated 3rd September 2012 between your client Bardouh and Coslo Foods Corp PTY Ltd. Please find below our response to the points highlighted in your letter:1. The cheque provided to Dunn & Horne for your client in the amount of $2,243.68 cheque dated 02-08-12 was made under strict protest. To date, we dispute that there was no outstanding lease payments that were due by Coslo under the terms & conditions of the lease. In fact, there was an overpayment of lease payments made by Coslo.The cheque was made in good faith and in strict protest but was stopped by Coslo as a result of the early lockup of the premises.2. With reference to rubbish removal, Coslo made Logistic arrangements to have ALL rubbish and items removed from the premises by cob 3rd August 2012 as per the notice to vacate was 3rd of August 2012 (per eviction notice). Coslo hired removalists, trucks, storage facilities and contractors to assist in removal which was already underway that week. However, the property was locked out by your client/Dunn & Horne on the 2nd August 2012 as a result of which Coslo was unable to complete the removal.Please note our eviction date was 3rd August 2012 however the shop was locked on the 2nd August 2012 which caused Coslo to sustain further financial losses including the payment of wages, truck hire, storage bins & skip bins etc. which was organised for the 3rd August 2012.3. The 'further period of time' you are referring to in your letter, that was provided to Coslo came a WEEK after the lockdown and Coslo was made aware of this so called extension near around 3pm through an email sent by Dunn & Horne. This gave COSLO no time to arrange for Logistics, however COSLO made every effort to remove as much as possible within the 8 hours time within which there was constant physical interruptions made by the Agent and the Owner.In addition, we note that there were still fixtures and fittings which we weren't able to remove due to the timing restriction. These include:a) Air Conditioning unit with accessoriesb) Office fixtures and fittings including a filing cabinetc) 2 x sweet display countersd) 3 x approx. 12mx1m high steel display shelvese) 2 x approx.. 5m long serving countersf) bulk spices display units (square made from slate timber 1.5 x 1.5 x 2)g) 2m wide x 1.5m vegetable display unit4. Refer to point #3 & #4.The lessee denies any liability as it was carrying out its lease obligations as per the lease terms and conditions and was carrying out its duties to have the shop in order by the eviction date of 3rd August however, was unable to do so as a direct result of the early lock out by the landlord.Based on the above, the lessee will now seek compensation against the lessor.Sincerely,A Varmaon behalf ofThe Director Coslo Food Pty Ltd 28The evidence to which I have referred raises a number of issues. The first concerns the status of the applicants tenancy as at 20 April 2012. On the face of it, the option for renewal was duly exercised within the specified period and therefore as at 20 April 2012, the applicant was entitled to call upon the registered proprietors for a renewed lease at market rental determined in accordance with the lease or pursuant to s 31 of the Act. In my opinion no significance should be attributed to the omission of a reference to 243 Northumberland Street in the operative part of the notice exercising the option and Mr Southwick did not submit otherwise. 29Mr Southwick did however submit that the option was not validly exercised as at the time rent was outstanding. He referred to Gilbert J McCaul (Aust) Pty Ltd v Pitt Club Ltd (1959) 59SR122. 30Pitt Club Ltd is authority for the proposition that option clauses in a lease where the option requires that there has been due and punctual payment of the rent amount to a conditional offer which may only be accepted if the condition has been fulfilled. In a case where there had been frequent defaults this was not the situation which obtained. The principle is applicable to this case. However the condition is much less onerous being no more than "no rent or outgoing is overdue for payment" a condition which has regard only to the state of affairs as at the date of exercise. In this case there is no reliable evidence as to the position of rent and outgoings as at 19 October 2011 and nothing to contradict Mr Varma's testimony that the rent payable under the lease was always paid punctually. 31Moreover there is in evidence a document annexed to the affidavit of Suruj Varma sworn 23 May 2013 in the following terms: RETAIL LEASE AGREEMENTBETWEENThe LESSOR (KAMLESH D VARMA, ARONESH D VARMA ANDARUN D VARMA)&The LESSEE (COSLO FOODS CORP PTY LTD)RECITAL1. The Lessee seeks an extension of Lease reference AD354766J dated 31/07/07 that has a lease expiry date of 04/04/122. The Lessor agrees to grant the extension of the term of the LeaseIt is hereby agreed that:1. The Lessor and the Lessee agree to extend the Lease for a period of three years from 20/04/12 until 19/04/15 with an option to renew for a further three years thereafter, in accordance with the existing Lease terms and conditions.(signature) (signature) Signed by LESSOR Signed by LESSEEDate: 11/10/2011 Date: 11/10/2011 32Although the document precedes the period during which the option could be exercised and is somewhat carelessly drafted its operative terms are tolerably clear as are the intentions of the parties and I see no reason why it should not be given effect thereby rendering the subsequent exercise of the option superfluous. 33It is also the case that so far as the evidence relates no notice was given by the lessors in accordance with s 133E of the Conveyancing Act 1919. 34In my view as at 20 April 2012, Coslo had a legally enforceable right to a three year lease of the premises in accordance with the terms of the lease which expired on 19 April 2012 at a market rent determined in accordance with that lease or in accordance with s 31 of the Retail Leases Act. 35The question which then arises is whether Coslo's position changed between 20 April 2012 and 3 August 2012. This involves consideration of communications passing between the parties in that period. Many of those communications were privileged but any such privilege was formally waived. In considering the question I have assumed that Bardouh upon completion of the purchase were bound by any existing rights of Coslo but I accept that this may not have been the position necessarily. 36On 30 March 2012, the Solicitors for the mortgagee in possession, Norton Rose, wrote to Coslo: Dear SirPerpetual Trustee Company Limited and Challenger Managed Investments Limited v Arun Deo Varma, Kamlesh Deo Varma and Aronesh VarmaSecurity property: 243-245 Northumberland Street, Liverpool NSW 2170As you are aware, we act for Perpetual Trustee Company Limited (Perpetual) and Challenger Managed Investments Limited (Challenger).We refer to our letter to you dated 15 February 2012 enclosing Notice by Mortgage to Tenant under section 63 of the Real Property Act 1900 (Notice).As you are aware, the Notice requires Coslo Foods Corp Pty Ltd (Coslo) to pay monthly rent instalments in the amount of $4,166.67 under the lease between Arun Deo Varma, Kamlesh Deo Varma and Aronesh Varma and Coslo dated 24 November 2009 (Lease) directly to our client.We are instructed Coslo is in default under the Lease in that it has failed to pay rental payments by the due date.You are required to pay the outstanding rent of $4,166.67 to our client immediately.Our client reserves all rights under the Lease.Yours faithfully 37It is to be observed that the amount claimed in the letter represented the rent initially payable under the lease $50,000 pa by monthly instalments of $4,166.67. 38A further letter was sent by Norton Rose to Coslo on 20 April 2012: We refer to your email sent on 20 April 2012.In accordance with the Orders of the Supreme Court of NSW made on 12 April 2012, Coslo Foods Corp Pty (Coslo) is required to pay the following amounts by 20 April 2012: Rent (due 20 March 2012) calculated on pro-rata basisGST $ 3,091.40$ 309.14 Rent (due on 20 April 2012)GST $ 4,166.67$ 416.66 Legal costs $10,000.00 Agent costs $ 858.10 TOTAL AMOUNT $18,841.97
We confirm that on 19 April 2012, Norton Rose Australia received a bank cheque in the sum of $5,000.00. This cheque is presently clearing in our trust account. Please ensure that any rental payments are made in accordance with the section 63 Notice previously served on your client. Specifically, cheques should be made payable to Perpetual Trustee Company Limited. Your client asserts that the Unregistered Lease provides your client with an entitlement to occupy the Premises. Although our client makes no admission in respect of the validity of the Unregistered Lease, item 16 (Annexure A) of the Unregistered Lease provides for a review of the rental payments on 20 April 2010 and 20 April 2011 using Method 2 Consumer Price Index. Upon notification of the increased amounts, your client is required to clear any shortfall it has not paid in respect of the Unregistered Lease as a consequence of rental increases. In this regard we refer your client to Clause 5.5 of the Unregistered Lease. Our client has instructed us to notify your client of the following calculations of the rent in accordance with Clause 5.8 of the Unregistered Lease as follows: Rent Review Date New Rent Rate Shortfall 20 April 2010 $50,000 x 170.5 = $51,479.50 $1,479.50 165.6 $ 147.95 GST 20 April 2011 $51,479.50 x 175.9 = $53,109.94 $3,109.94 170.5 $ 310.99 GST TOTAL SHORTFALL $5,048.38
In addition to other amounts due, our client requires your client to pay the shortfall amount of $5,048.38 on the next rent due date (ie 20 May 2012). Following your client's re-entry into occupation of the Premises, we have received no formal response to our letter dated 29 March 2012 in relation to our client's proposal for the review of the rent for the premises to make it consistent with market rental. At this stage, your client has failed to remedy the defaults that led to our client terminating the lease and re-entering the premises. Our client proposes to rely on the failure of your client to respond to the review of rent (and the unfair low level of rent that has been paid in the past) as matters that should be taken into account as part of discretionary considerations to refuse relief against forfeiture. In any event, there is no continuing lease and our client does not propose to continue the rent review process at this stage. Our client reserves all rights, including the right to have a market rent review of the rent payable under the lease if it is reinstated. Our client requires your client to pay increased rent in the sum of $4,868.41 (incl. GST) on the 20th of each month whilst they remain in occupation of the Premises. Our client requires this amount, together with the shortfall amount of $5,048.38, to be paid on 20 May 2012. 39It will be observed that the letter seeks to impose upon Coslo the hitherto unenforced rent reviews provided by the lease to occur on 20 April 2010 and 20 April 2011. Whether the mortgagee was entitled to do this so long after the relevant date and in such an informal and unparticularised manner may be a matter for debate but in any event, Coslo seems to have accepted an obligation to pay increased rent prospectively in the letter written by its Solicitor, Vaikom Rajeev of 27 April 2012: We refer to your letter dated 20 April 2012 and advise as follows: 1. Our client paid the sum of $9166.67 on 20 April 2012 notwithstanding the fact that he was required to pay only $7,983.87 towards balance of rent for the premises as on that date. Our client has paid an excess of $1,182.80 and we expect that the surplus will be deducted from the next rental payment. 2. You have attempted to increase the rent in accordance with the Lease in the sum of $4,868.41 including GST. Although we do not agree with your calculation or method in increasing the rent, we will make monthly repayments in this amounts ($4,868.41 including GST) on the 20th of each month under protest and without any admission as to your client's entitlement to the increased rent. 3. We note the orders of Gzell J where the amount of rent payable is to be fixed at $50,000 per annum as per the lease and that amount is not to be increased until the finalisation of these proceedings. For one reason or the other, unbeknown to my client, that is not reflected in the written Orders of the Court. We are seeking instructions as to whether Gzell J should be approached personally to deal with this blatant disregard of your client of the agreement in Court by Mr. Gasic of your firm on 12 April 2012 to not to increase the rent payable as it stands in the amount of $50,000.00 until final resolution of the matter. 4. In relation to your claim for the "shortfall" amount calculated from 20 April 2010, we do not accept any such claim. Your client was not the Proprietor or the Lessor of the premises at the time and therefore cannot be entitled to the amount claimed. On what basis does your client claim any "shortfall" when it was neither the Lessor nor the Registered proprietor during the claimed periods since April 2010. In any event, we do not concede that there was a shortfall. Your's Faithfully VAIKOM RAJEEVSolicitor 40Norton Rose replied on 2 May 2012: We refer to your letter dated 27 April 2012.We respond using the same paragraph numbering as follows: 1. Our client accepts that your client has paid the following amounts: (1) $5,000 payable to Perpetual Trustee Ltd by way of Bank Cheque hand delivered in Court on 19 April 2012; (2) $10,858.10 payable to Norton Rose Australia by way of Bank Cheque and delivered on 20 April 2012; and (3) $4,166.67 payable to Perpetual Trustee Ltd by way of Bank Cheque and delivered on 20 April 2012 Total $20,024.77. Of this amount, our client will apply $10,858.10 in reduction of its costs. The balance of $9,166.67 will be applied as follows: (1) $3,400.54 in reduction of the rent due on 20 March 2012; (2) $4,583.34 in reduction of the rent due on 20 April 2012; and (3) $1,182.80 in reduction of the amount due in respect of the rental increase under the Unregistered Lease. 2. Our client acknowledges your client's acceptance to make monthly rental payment of $4,868.41 (including GST). We note the next rent due date is 20 May 2012. Please ensure the rental payment is made payable to Perpetual Trustee Company Limited. However, your client has asserted that the method upon which the rental increase has been calculated is incorrect. Please provide us with details of the basis upon which your client asserts the increase has been incorrectly calculated. 3. We refer to the hearing on 12 April 2012 and the orders made by the Court on that occasion. There was no order made in regards to fixing the rent payable at $50,000.00 per annum under the Unregistered Lease. Your client's recollection of the orders is incorrect and inconsistent with the orders made by the Court. Indeed, order 1.(e) confirms that your client is to maintain rental payments in accordance with the Unregistered Lease. The Unregistered Lease provides for the rental increase. If you contend that the Court made orders otherwise than as reflected in the orders entered and sealed by the Court, please provide us with a copy of the transcript of the hearing. 4. We refer again to item 16 (Annexure A) and Clauses 5.5 and 5.8 of the Unregistered Lease. Clause 5.5 requires your client to pay any shortfall it has not paid in respect of the Unregistered Lease as a consequence of rental increases upon notice of the new rental rate. That notice was provided in our letter dated 30 April 2012. Your client is required to pay the balance of the shortfall amount of $5,048.38 by 20 May 2012 in addition to its obligation to pay rent in the sum of $4,868.40 including GST on that date. On 16 April 2012, our client served your client with a Notice to Produce. Your client has not provided any documentation in answer to the Notice to Produce. Our client requires your client to comply with the Notice to Produce on or before 3 May 2012. We note that your client has not filed an application to proceed by way of pleadings as permitted by the timetable entered in the Proceedings on 20 April 2012. We assume that your client has abandoned its contention that pleadings are desirable. Our client will object to any later application to proceed by pleadings unless there is good reason why the timetable ordered by the Court should be extended. As your client does not wish to proceed by way of pleadings, there is little advantage in a directions hearing tomorrow. In the circumstances, we propose that the parties approach the registry for orders adjourning the directions hearing until a date after we have seen your client's evidence in chief due tomorrow. Assuming that evidence will be served tomorrow, we propose that the Proceedings be relisted on Monday, 7 May 2012 morning instead. Please let us know as a matter of urgency your clients instructions in relation to this proposal. 41Following this, several emails passed between the parties regarding the assessment of a market rent. The tone of them changed with Mr Varma's email to Mr Bardouh of June 16 and Mr Bardouh's reply of the same date: From: samdev verma [mailto: herbalprosam@gmail.com]Sent: Saturday, June 16, 2012 2:52 PMTo: alibardouh@hotmail.comCC: Vaikom Sundar RajeevSubject: Ref: Coslo LeaseWithout Prejudice.Dear Ali,Further to our meetings, please note that the current market rental has declined as per the Real Estates information that we have received.However,We propose the Lease be reinstated as per the old Lease on Auction sale contract or alternatively, new lease with following is proposed:1. Lease Term: From 20th July 2012 to 19th July 20152. Option to Renew for further 3 years from 2015 to 20183. Option to Sublease4. Rent increase by CPI per yr from July 20155. Rent Review: July 20156. Method of rent review: Market rental or CPI whichever is lessor7. Rent: $45,000.00 per year (GST and outgoings inclusive)8. Option to purchasePlease advise your opinion and confirm.Kind Regards,Sam (arun varma) From: Ali Bardouh alibardouh@hotmail.com Sent: Saturday, June 16, 2012 5:53PM To: 'samdev verma' Subject: RE: Coslo Lease Hi Sam, I will employ real estate agents and solictors to handle this starting early next week. Coslo Pty Limited is on a monthly lease for now, I withdraw my offer to negotiate a new lease with you and or your company. Please note that from the outset I have suggested to employ an independent valuation expert to determine the market value and that you have refused this offer. Furthermore, I suspect the person you have introduced yesterday into the meeting as your business colleague was in fact your solicitor. Your attempt to use office space rental value as comparison during one of the meetings also did not work for you. These are some of the reasons why I have withdrawn my offer of a new lease with you or your company. In the meantime please remove all structures you have built illegally into the car park namely the large shed and the builders metal fence and concrete blocks and all rubbish with 7 days leaving the car park clean and tidy. The condition of the car park will hinder our attempts to lease the vacant shop. Further instruction will come later from either my agent or solicitor. My managing agents and or solicitor will be in touch with you next week. 42Mr Varma sent an email on 20 June: From: samdev karma Sent: Wednesday, 20 June 2012 1:07pm To: v563184@bigpond.net.au Cc: Vaikom Sundar Rajeev Subject: Ref: Lease 243-245 Northumberland st, Liverpool.nsw Your Ref: GWKA/RS Dear Sir, Further to you letter dated 15 june, which was received by Coslo Foods Pty Ltd on the 19th. Reference is made on the above Lease Please Kindly Confirm the Lease Amount Payable by the 20th. Our records shows that the Lease is paid to 20th July as one months advanced monthly payment. The Current Lease amount payable as per old lease is $4,548.00 per month. Our account is Overpaid with total of $1235.00 as at 20th july 2012. The current payable is $3313.00 less the above overpaid amount. Please confirm that the above coincides your Record. Awaiting for your Reply by Today Close of Business. Please c/c All Correspondence to my above email and to my solicitors email. vaikomlaw@gmail.com 43This met with a reply from Vincent Love & Co acting for Bardouh on 22 June: On settlement of this matter rent was adjusted as $4,868.41 per calendar month paid to 20 June 2012. Your clients, rental is $4,868.41 in advance payable by 20 July 2012 and is currently not yet paid to our clients' account as follows: Bank National Australia Bank Account Name Ali & Soumaya Bardouh BSB 082 124 A/c No 13-685-6836 Any overpayment to the previous owner is your clients responsibility to raise with the previous owner. We dispute that the current rent is $4,548.00 as set out in your letter but rather that the current monthly rental is $4,868.41 as advised by Norton Rose to also include readjustment for CPI increases in accordance with the Lease. 44The next communication seems to have been the letter from Dunn & Horne Commercial to Coslo of 28 June: Re: New Lease Ppty: 243-245 Northumberland Street, Liverpool NSW 2170 We write in relation to your lease at the abovementioned premises and advise that you currently occupy the premises on a monthly holdover. Having reviewed the current market we propose the following terms: Commencement Date: 20 July 2012 Term: Three (3) years Option: Three (3) years Permitted Use: Grocery store/Supermarket Rent: $76,800 pa (G) + GST Rent Review: 5% annually and Market at option Additionally we have been advised by the Lessor to that you are to arrange the following works: 1. Empty out the items which belong to you in the brick storage area behind the vacant shop; 2. Remove storage shed behind the leased premises; 3. Remove fence at the rear of the premises; 4. Remove concrete blocks and other debris in the parking area. We appreciate your immediate assistance in resolving the above items, should you fail to carry out these items within the next fourteen (14) days we will arrange directly and recover the costs. Should you wish to discuss in further details please do not hesitate in contacting the writer directly. 45This letter was followed within a few days by the notice dated 3 July to vacate the premises on 3 August. That notice seemed to proceed on the assumption stated in the letter of 28 June that Coslo was then a monthly tenant holding over under the expired lease. In my opinion that was a correct assumption. As it seems to me the communications emanating from Coslo especially the email of 16 June evince an intention to be no longer bound by any obligations arising from the exercise of the option and communications from Bardouh indicate an acceptance of that repudiation. 46Having said that it is unnecessary to consider Mr Southwick's submission that the application to deregister Coslo of itself amounted to a repudiation of any contractual rights which then existed. On any basis however it was I think powerful evidence that Coslo, a company making significant losses, had no real desire to continue in business on the site. This view is reinforced by the sign directing business elsewhere to which I will hereafter refer and to the evidence which I accept given by Mr Bardouh in his affidavit sworn 26 July 2013 that on 9 June 2012 at the premises Mr Varma said to him "We are not sure that we are going to continue trading here. We are looking at another premises in Scott Street". 47In my opinion the lessor was entitled to require Coslo to vacate the premises on one month's notice and the notice to that effect was valid. However I am not satisfied that it can it be concluded on the evidence that Coslo was in default with the payment of rent as at 3 August 2012. There is too much confusion on the subject to make a positive finding one way or the other particularly as the sum claimed to be overdue is quite small. But in any event Bardouh took possession of the premises before the notice expired in that Coslo was deprived of the opportunity to remove its property during the course of August 3 2012. See McDonald Multiple Pty Ltd v Presto Smallgoods (NSW) Pty Ltd [1978] 1 NSWLR 337. Bardouh should be held liable for any loss proved as a result of what was an unlawful trespass. 48Evidence as to loss is rather scanty. In Mr Varma's earliest affidavit of 4 April 2013 there are references to loss in paras 5 and 19: 5. Coslo was trading as a supermarket and grocer from the premises and has traded from those premises until lock out by the landlord for over 17 years. It specialised in the sale of spices and foods that were perishable like Indian foods, delicacies and sweets. The business enterprise of Coslo was the sole source of income to my wife and me. 19. I suffered financial loss as I lost trading stock including perishable goods, sweets and Indian cuisine foods. I lost my reputation, business brand name as Coslo was trading and in the market for the last 17 years. I suffered potential trading loss for another 3 years after Coslo had exercised the Option to year 2015. 49The affidavit sworn 23 May 2013 contained this paragraph: 15. Coslo sustained losses for overhead steel shelves, counter, security cameras and goods were all left valued at over $200,000. I attach photos of the shop, goods, quote for air conditioning unit and a photo of the current shop that uses Coslo's goodwill built over 17 years - Annexure "M". The documents on their own annexed as Annexure M are quite unhelpful as apart from the photographs they consist of a quotation "to do complete air conditioning for two shops" dated 3 January 2012 and a quotation dated 9 august 2012 for supplying and fitting various shop fixtures. 50Mr Varma's affidavit sworn 28 May 2013 explained the documents which constituted Annexure M in his previous affidavit: 2. I refer to Annexure M of my Affidavit sworn/affirmed on 23/5/2013 and say that: i) The air conditioning unit was a tenants fixture. It was installed in 2010 by the same installer Mohammed Rauf of Electrical, Refrigeration, Air Conditioning, Installation Repairs and Maintenance. I recall the air conditioning unit and system at cost was approximately $20,000 but it was less than 8 horse power. ii) In January 2012 I wanted to upgrade the existing air conditioning units with 2 x 8 horse power units, the same installer attended the shop and provided me with quotation for $23,350 plus GST. Coslo did not proceed with it. iii) On 9/8/2012 after lock out I obtained a pricing from Raet Singh who is a professional carpenter/builder of what it would cost to supply and fit items that were in the shop. The items of shelving and product display counter, he quoted on of $24,000 was the estimate of the items which were left in Coslo's shop after the lockout. This accords with my view of what the items would cost to replace. I recall he did the fitting and installation of the counter and the shelves about 15 years ago and he knew the layouts of our shop. 51Also unhelpful were the unsigned letter and draft accounts annexed to Mr Varma's affidavit of 4 April 2013. The letter dated 29 April 2012 quite falsely stated "This Company is currently paying $81500 rent and part of the mortgage for the financial year ending 30 June 2011". 52In his affidavit sworn 26 July 2013 Mr Bardouh responds to the claims of loss made by Mr Varma in his affidavit of 28 May 2013. Mr Bardouh asserts and there is no evidence to the contrary that Coslo made no claim for property left on the premises until he received an email from Coslo on 6 September 2012. That email which is in evidence refers to a number of tenants fixtures which Coslo claims it was not able to remove "due to the timing restriction" namely an air conditioning unit, office fixtures including a filing cabinet, counters and display shelves and display units. There was no claim made for loss of stock. 53As mentioned above on or about 10 August Mr Bardouh permitted a son of Mr Varma to remove from the premises a sign "Vinayak" hanging on an awning at the front of the premises. On 4 August 2012 according to Mr Bardouh he took a photograph of the front window of the premises which included the notice: "Dear Valued Customers Please note that Vinayak has moved from these premises. Please contact us on info@vinayak.com.au. We apologise for any inconvenience." 54Later in August 2012 Mr Bardouh said that he took another photograph of the front window of the premises which included a sign: "Vinayak Moving Sale We are relocating to 25 Scott Street Liverpool" 55Underneath the above sign was a street map showing the location of the premises and the Scott Street address, a short distance away. That distance according to Mr Bardouh was about 200m. 56Annexed to Mr Bardouh's affidavit of 26 July 2013 is an ASIC Current Business Name Extract which indicates that the Business Vinayak Spices trading at 25-27 Scott Street, Liverpool was registered on 28 March 2013. The proprietor is shown as Sachin Verma and the address for service of documents is 28 Elouera Crescent, Moorebank, the address given by Mr Varma in his various affidavits. 57It seems to me apparent on the balance of probabilities that in effect Coslo transferred the business hitherto carried on in the premises to the Scott Street address 200m away, the transferee being a related party. In that circumstance and because Coslo in any event was no more than a monthly tenant there could be no claim for loss of goodwill. In any event there was no attempt to quantify such loss. 58As to stock, I accept Mr Bardouh's evidence that there was none left on the premises as at 3 August 2012. 59Coslo is entitled to compensation for tenants fixtures, the value of which it lost upon the assumption that it could have removed them if given the opportunity during 3 August 2012. There is however no evidence as to the value of those fixtures which include the air conditioning unit nor any evidence as to whether it would have been financially viable to remove them from the premises. Doing the best I can I assess the value of the tenants fixtures at $10000 and I propose to make an order in Coslo's favour for that sum. 60As to the other relief sought by Coslo there is no utility in making formal declarations as sought even though I have found that Bardouh's entry into possession constituted a trespass. In my view no misleading or deceptive conduct by Bardouh was proved and there was no evidence of unconscionable conduct. 61In relation to the claim by Bardouh I am not satisfied that it was proved that any rent was outstanding as at 3 August 2012 and the claim for arrears of rent is dismissed. It is I think just as likely that rent had been overpaid. 62As to other claims made by Bardouh: (1) There is no evidence that the claim relating to repair and servicing of air conditioning units relates to any default of the lessee and a similar position relates to the claim for repairs to electrical cabling and lighting. (2) Bardouh is entitled to the cost of removing rubbish and I alIow the sum claimed of $4313. I also allow the cost of replacing a tile viz $100. 63This is a case in my view where there should be no order as to costs. Both parties have had a measure of success but both were at fault in my view in the way they behaved towards each other in the first half of 2012. Given some measure of goodwill on both sides the dispute should have been capable of resolution without lengthy and expensive litigation. 64Finally I record that in this matter I was assisted by Mr G Pinter and Ms P Drake as advisers. I gratefully acknowledge the benefit of their knowledge and experience.
Orders I make these orders: In matter 125137: 1. That the respondents Ali Bardouh and Soumaya Bardouh pay Coslo Pty Ltd the sum of $10000. 2. No order as to costs. In matter 135021: 1. Coslo Pty Ltd to pay to Ali Bardouh and Soumaya Bardouh the sum of $4413. 2. No order as to costs. 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: 28 February 2014
Coslo Foods Corp Pty Ltd
Ali Bardouh and Soumaya Bardouh