Demertjis & Anor v Chauhan [2002] NSWSC 304 | Case summary

REASONS FOR DECISION The matters arising in this appeal 1 In this appeal, the principal issues requiring determination were (a) whether a lease of retail shop premises obliged the lessors to ensure that the lessee had access to toilet and running water facilities situated in an area outside the premises but within the same building (which the lessors owned) as the premises, and (b) if so, whether the amount of damages awarded in the decision under appeal against the lessors for failure over a significant period of time to ensure that such access existed was justifiable. 2 The decision under appeal (Chauhan v Demertjis & Anor [2008] NSWADT 41) was delivered on 4 February 2008. In it, the Tribunal held that the applicant lessee, Ms Champavati Chauhan, was entitled to recover damages totalling $25,000 from the respondent lessors, Mr Charles Demertjis and Mr David Demertjis. The ground stated for this award was 'breach of right of quiet enjoyment'. 3 The lease between the parties ('the Lease') was governed by the Retail Leases Act 1994. It related to premises known as Shop 1, 185 Northumberland Street, Liverpool ('the Premises'). They formed part of the ground floor of a building owned by the lessors. The Lease commenced on 1 December 2005 and ran for three years, with a three-year option. The initial weekly rent was $641 (including GST). 4 The business conducted by the lessee was the retail sale of homewares and gifts. During the 50 hours each week that her shop in the Premises was open, either she or an employee referred to in the Tribunal's decision as 'Sunita' was in attendance. 5 The Tribunal's conclusion that the lessors were liable to pay damages to the lessee was based on two considerations. The first was its ruling that under a clause in the lease they were obliged to ensure that the lessee 'and other persons' had access to the toilet (including running water facilities) that existed within the building and was not subject to any lease. The second was its finding, based on evidence from the lessee which appears not to have been contested, that access was not in fact provided during a period of 90 weeks between 1 December 2005 and 22 August 2007. 6 The Tribunal found that on several occasions during this period the lessee asked the lessors' agent for a key to a locked door at the rear of the Premises, which if opened would provide access to the toilet. On each occasion, the agent rejected her request. 7 The consequence of this denial of access was that whoever was attending the shop - the lessee or Sunita - was compelled from time to time to close it and visit the nearest available toilet facilities. These were public toilets at a walking distance of about 5 or 6 minutes from the shop. In addition, the lessee, when she wished to have tea or coffee, was compelled to buy these beverages from a take away shop nearby because she had no access to running water in the building. 8 The principal matter raised by the lessors in contesting liability was that without the lessor's consent another lessee of premises within the building, called Cash Wise, had constructed a brick wall and installed roller doors to the rear of the property, thereby obstructing the lessee's access to the toilet and to running water. 9 The Tribunal stated (see its decision at [17]) that this wall 'apparently' prevented access to the toilet until steps were taken, nearly six months after the commencement of these proceedings by the lessee, to provide access as from 22 August 2007. 10 In assessing damages, the Tribunal gave consideration to evidence tendered by the lessee regarding (a) the gross income and the expenses of her business (including the wages paid to Sunita) and (b) the cost of takeaway beverages. The award that the Tribunal made was based on a 'global approach'. It included a component to reflect the stress occasioned to the lessee on account of not having access to the toilet within the building. 11 On 29 February 2008, the lessors filed a notice of appeal under Part 1 of Chapter 7 of the Administrative Decisions Tribunal Act 1997 ('the ADT Act'). Various matters dealt with in the Tribunal's judgment were not challenged in this notice. Some of the grounds of appeal stated in it were withdrawn at the hearing. These included two grounds claiming that the lessee, on account of being obliged to (a) engage in 'self-help' and (b) mitigate her damage, should have engaged a locksmith to change the lock on the door between her shop and the toilet. 12 During the hearing, the lessors sought leave under s. 113(2)(b) of the ADT Act for the appeal to extend to a review of the merits. The lessee opposed this application. We granted leave, for reasons outlined below. In consequence, our task, pursuant to s. 115(1) of this Act, is 'to decide what the correct and preferable decision is', having regard to the material (both factual and legal) before us. 13 We will now discuss the grounds of appeal that were argued before us. Whether the lessors were obliged to provide access to the toilet 14 The Tribunal's ruling that the lessors were obliged to provide such access was based on clause 11.3.2 of the Lease. 15 So far as relevant in these proceedings, clause 11 stated:- Clause 11 - What are the landlord's other obligations? 11.1 So long as the tenant does all the things that must be done by the tenant under this lease the landlord must allow the tenant to possess and use the property in any way permitted under this lease without interference from the landlord, or any person claiming under the landlord or having superior title to the title of the landlord. 11.2… 11.3 If the property is part of a building owned or controlled by the landlord: 11.3.1 the landlord must maintain in reasonable structural condition all parts of the building that the tenant can use under this lease; and 11.3.2 if the property has facilities and service connections shared in common with other persons the landlord must: 11.3.2.1 allow reasonable use of the facilities and service connections including: · the right for the tenant and other persons to come and go to and from the property over the areas provided for access; · … 11.3.2.2 maintain the facilities and service connections in reasonable condition. 16 The Tribunal pointed out that nothing in the evidence before it indicated what parts of the building were encompassed by the concept of 'shared facilities', or that the lessors' agent ever said to the lessee that there would be a toilet available to her. It then said, at [11]:- I am satisfied however, from the general aspect of the premises, including the fact that there was a locked internal rear door that the tenant was entitled to assume that that door opened, and gave out a common area where the toilets were found. I am satisfied that the tenant was entitled to assume, at minimum that there would be running water and toilet facilities available. I am further satisfied that if those facilities were not to be available so, that was a matter for the managing agent to point out at the time of the commencement of the letting. 17 Mr Pluznyk, who appeared for the lessors, submitted that the Tribunal erred in law in treating the toilet as falling within the 'facilities' dealt with in clause 11.3.2. He pointed out that in clause 3 of the Lease the term 'property' was defined so as to mean only the Premises that were being let to the lessee. The toilet, being outside the Premises though inside the building in which they were situated, was therefore not one of the 'facilities… shared in common with other persons' to which clause 11.3.2 referred. 18 In his oral submissions, Mr Pluznyk indicated that he did not wish to 'labour this point too far'. 19 In response, Mr Rollinson, counsel for the lessee, pointed out first that this proposition was not advanced at the hearing. He argued also that clause 11.3 as a whole was clearly intended to relate to parts of the building that were outside the Premises. The phrases 'parts of the building that the tenant can use' and 'facilities and service connections shared in common with other persons' should, he said, be understood accordingly. He relied also on the following admission in an affidavit by Mr Charles Demertjis, one of the lessors: 'The building was constructed to allow toilet access to all tenants. The downstairs tenants could use the toilet facilities at the rear…' 20 We agree with this interpretation of clause 11.3. In addition to the features identified by Mr Rollinson, its reference to 'the right for the tenant and other persons to come and go to and from the property (emphasis added) over the areas provided for access' shows that the 'facilities' that are 'shared in common with other persons' must be facilities situated outside the demised premises. The use of the term 'property' rather than 'building' at the commencement of clause 11.3.2 must be taken to be an error by the person drafting the clause. 21 Mr Pluznyk argued also that the Tribunal erred in law in finding that the lessee was 'entitled to assume' that a toilet and running water facilities would be available to her and that this assumption by her was sufficient to impose an obligation on the lessors. He maintained that no such entitlement or obligation could arise except by virtue of an express provision in the Lease or a representation by or on behalf of the lessees. 22 We agree, however, with Mr Rollinson's submissions in response. These were to the effect that clause 11.3.2, properly interpreted, did impose this obligation on the lessors and that the Tribunal was correct in ruling that if the lessors had wished to be free of any such obligation, the onus lay on them or their agent to advise the lessee accordingly at the time of commencement of the Lease. We would add the following further comment. Since the lessee, a sole trader, was conducting a retailing business in a small shop (the evidence included photographs indicating its size), it was clearly foreseeable to the lessors and their agent that she would assume, on reasonable grounds, that a toilet within the building would be accessible to her, in order to obviate the necessity of closing the shop from time to time for brief periods during normal opening hours. Whether the lessors should have been held liable in damages for the conduct of Cash Wise 23 At the Tribunal hearing, Mr Pluznyk argued that the lessors could not be held liable for the fact that the lessee had no access to the toilet because it was not their conduct, but the conduct of their tenant Cash Wise, that produced this outcome. He relied here on the terms of clause 11.1 of the Lease (this clause is quoted above at [15]). 24 With reference to this line of argument, the Tribunal said, at [20 - 21]:- 20 That is a misconstruction of the simple plain English words of the clause, the words "any person claiming under landlord" refer not only to the landlord's agent, but also the landlord's tenant of adjacent premises. It is the landlord's obligation to ensure that no one else under his control, or claiming title from him, interferes with the occupation of the tenant. 21 By way of further illustration, it seems to me that the situation would have been no different had it actually been proven that the occupant of Cash Wise had simply, without the landlord's permission or direction, mechanically barred the back door of the premises so as to prevent the Applicant exit (sic). 25 In Mr Pluznyk's submission, clause 11.1 limited the scope of the lessors' liabilities for any interference with the lessee's right of 'quiet enjoyment' in such a way as to prevent them being liable for Cash Wise's conduct in barring her access to the toilet. He argued that Cash Wise was did not fall within the phrase 'any person claiming under the landlord or having superior title to the title of the landlord' at the end of the clause. The lessee needed, he said, to show that the lessors were entitled to compel Cash Wise to remove the obstruction that it had erected, but she had failed to do so. 26 Mr Pluznyk relied here on the judgments of the Court of Appeal of Queensland in Aussie Traveller Pty Ltd v Marklea [1998] 1 Qd R 1 and on the following statement in W D Duncan, Commercial Leases in Australia (Thomson, 4th edn, 2005) at p 196:- The long-standing principle has been that the covenant for quiet enjoyment may also be breached by an act of a lessee of adjacent premises leased from a common lessor, but only if the lessor has actively encouraged or participated in the breach. 27 Mr Rollinson's response involved three propositions, as follows. 28 First, clause 11.1 was irrelevant because the lessors' obligation to provide access to the toilet and their liability if they failed to comply with this obligation were matters to be determined under clause 11.3.2 alone. The scope of this liability was not diminished merely because under the covenant for quiet enjoyment, which was a quite independent provision, the lessors were not liable for the conduct of certain categories of third party. 29 Secondly, the Tribunal was correct in ruling that Cash Wise, a tenant of property owned by the lessors, was a 'person claiming under' them. 30 Thirdly, both the Aussie Traveller case and the extract quoted by Mr Pluznyk from the text by Duncan dealt with the situation where one tenant's quiet enjoyment suffered interference from an activity of another tenant of the same landlord, occurring within the boundaries of the property leased by that tenant. In the present case, the relevant activity of Cash Wise had occurred not in the premises that it had leased, but within a part of the building of which the lessors retained possession. An important implication of this was that since according to Mr Charles Demertjis's own testimony Cash Wise had erected the obstruction without the lessors' consent, they were entitled to require Cash Wise to remove it. 31 We agree with the first of these propositions. That is sufficient to dispose of Mr Pluznyk's submission based on clause 11.1. We are inclined to the view that the second proposition is also correct, but we do not need to determine this. As to the third proposition and the implication drawn from it, we are again in agreement. 32 In our opinion, the question of the lessors' liability for the conduct of Cash Wise must be resolved in favour of the lessee, but by virtue of slightly different reasoning to that advanced by either of the parties to the appeal. We summarise that reasoning as follows. 33 Under clause 11.3 of the Lease, which is the governing provision, the lessors' obligations include an obligation to 'allow reasonable use of the facilities… including…the right for the tenant and other persons to come and go to and from the property over the areas provided for access'. At the very least, that express contractual obligation must include a duty to ensure, so far as the lessors can reasonably do so, that anything done by a third party, including another tenant within the building, does not render it impossible or impracticable over a significant period of time for the lessee to (a) use relevant 'areas' within the building in order to obtain access to the 'facilities' and (b) make 'reasonable use of' those facilities. 34 In formulating this proposition, we derive guidance from the Queensland Court of Appeal's decision in the Aussie Traveller case even though, for the reason advanced by Mr Rollinson, it concerned a factual situation that differs from the situation here. That decision had the effect of enlarging the range of circumstances in which a landlord would be liable to a tenant under a covenant for quiet enjoyment in cases when the breach of that covenant was the result of the conduct of another tenant within the property leased to that tenant. The Court of Appeal held that liability would arise not only if the landlord had 'actively encouraged or participated' in the breach, but also if the landlord was in a position to 'correct or terminate' the breach by 'active intervention'. 35 We should add here that the passage that Mr Pluznyk cited from Duncan at p 196 purports to state not the current law, but what might be called the 'traditional approach' to the question. Within the ensuing pages (197-199) this text explains that, principally as a result of the decision in Aussie Traveller, the scope of the landlord's liability in this situation has broadened along the lines that we have outlined. 36 Because the obstructions erected by Cash Wise without the lessors' consent were within parts of the building over which the lessors had not granted any lease, it is indisputable that the lessors had the power to require to 'correct or terminate' what had been done. There was no evidence that they attempted to do so until August 2007. There was equally no evidence to suggest that what they achieved in this regard during that month had previously been unachievable. 37 In these circumstances, the lessors fall within the proposition that we have just formulated regarding the interpretation of clause 11.3 and must be held liable in damages. We would add two observations, as follows. 38 First, the remedy to which we have held the lessee to be entitled might have been obtainable by her under s. 34(1)(d) of the RL Act. This provision inserts in retail shop leases a term to the effect that if the lessor 'fails to take all reasonable steps to prevent or put a stop to anything that causes significant disruption of, or which has a significant adverse effect on, trading of the lessee in the shop and that is attributable to causes within the lessor's control' and the lessor does not 'rectify the matter as soon as reasonably practicable after being requested in writing by the lessee to do so', the lessor is liable to pay the lessee 'reasonable compensation' for any loss or damage suffered by the lessee as a consequence. 39 Neither party mentioned this provision of the RL Act in the appeal or, as far as we can tell, in the proceedings at first instance. The reason may be that the lessee appears never to have requested the lessors in writing to deal with the problem. The existence of this provision seems to us, however, to furnish some support to the approach that we take to this question. 40 Secondly, a factual assumption underlying this aspect of our judgment and of the judgment at first instance is that the wall and roller doors erected by Cash Wise were such as would prevent the lessee gaining access to the toilet even if she had been given a key to the locked door at the rear of her shop. The Tribunal's finding on this matter was somewhat equivocal. As mentioned above at [9], it was that these constructions 'apparently' prevented access to the toilet. Towards the end of his submissions in the appeal, Mr Rollinson suggested that this was not in fact the case and, indeed, that all that the lessors had to do to make it possible for the lessee to have access to the toilet was to give her a key to this door. 41 If this were correct, the analysis conducted of the role played by Cash Wise, both at first instance and in the appeal, would have been unnecessary. The lessors would patently have no basis for resisting the lessee's claim for damages for their failure to provide access to the toilet in accordance with clause 11.3.2. 42 Whichever view of the facts is correct, the lessor's challenge to this step in the Tribunal's reasoning fails. The Tribunal's decision that damages should be awarded to the lessee is upheld, though the ground for the award is, as we see it, a breach by the lessors of clause 11.3.2, rather than a breach of their covenant, contained in clause 11.1, for quiet enjoyment. The Tribunal's conclusions on damages 43 The methodology adopted by the Tribunal in assessing damages involved the following steps: (a) ascertaining the degree of disruption of the lessee's trading caused by the denial of access to the toilet during the 90-week period between 1 December 2005 and 22 August 2007; (b) noting various features of the business's operations and finances during the relevant period (for example, its reliance on Sunita to attend the shop, its wages bill and its profitability); (c) taking account of the additional costs to the lessee of buying coffee and tea; (d) taking account also of the stress suffered by the lessee, both when she was in the shop and when she was involved elsewhere in the management of the business; and (e) in the light of these matters, determining an appropriate amount. The evidence put before it on these factual matters appears to have come entirely from the lessee. 44 At [30], the Tribunal pointed out that 'in a perfect world' the financial damage done to the business would be 'calculated by extrapolation from pre and post event trading results', but that 'such an exercise would be time consuming and represents a forensic accounting expense quite out of proportion with the possible loss suffered'. 45 At [31], the Tribunal stated that the various 'bases of calculation' put forward by the lessee were 'proper to use as a guide', but that it 'simply cannot add them all up as a total'. It indicated that it would instead adopt 'a global approach', in order to arrive at 'the just and proper result'. 46 In the appeal, the parties appeared to acknowledge the correctness, in broad terms, of a 'global approach'. We share this view, though as will appear below we believe that this does not preclude calculating 'global' amounts to reflect specific categories of loss or damage, then adding those sums together to arrive at the total award. 47 At [31], the Tribunal said that this 'global approach' would involve making allowance for 'the wasted expenditure (being the wages paid during the toilet breaks)' and also taking account of 'the imponderables such as the loss of sales opportunity'. At [32], it indicated that in circumstances such as these it was appropriate to take into account both the 'unproductive wages' and the net profit. 48 In summary, the principal factual matters mentioned by the Tribunal before assessing the damages recoverable by the lessee at $25,000 were these (see the judgment at [23 - 28]:- 1. The shop was open on five days each week. It stayed open in the evening each Thursday. The total period during which it was open each week was 50 hours. The lessee attended the shop for 21 of these hours and Sunita for 29 hours. 2. On average, the shop would have to be closed twice each day, except for Thursday, and three times on Thursday, in order that the lessee or Sunita could go to the public toilet nearby. On each occasion, the shop would be closed for about 20 minutes. The total period for which it was closed each week was therefore three hours. 3. The lessee paid wages to herself at an hourly rate of $11.66 and to Sunita at a rate of $5.37. This meant that the total amount of wages paid out for times when the shop was closed came to $101.28 per week, producing a loss of $9,038.70 over the 90-week period 1 December 2005 and 22 August 2007. 4. In the financial year 2006-07, however, a draft profit and loss statement for the business disclosed a loss of some $7,000.00. It followed (by virtue of reasoning that need not be outlined here) that the amount of weekly wages paid out for 'shut' times was only $89.61 and the 90-week total was only $8,064.90. 5. A further reduction of 25 per cent, bringing the total down to $6,048.00, was required because, even with a toilet in the building, the shop would have to be closed for a couple of 5 minute breaks per day for the same reasons. 6. Over and above that, the lessee calculated, on the basis of her gross takings and the net profit from those takings, that, if the shop had not been closed for the identified periods she would have made a weekly profit on sales of $19.35. It followed that, over the 90-week period, she suffered a loss of approximately $1,728.00. But this figure would have to be reduced by 25 percent to $1,296.00, in order to allow for short normal toilet breaks. 7. The lessee also claimed to have spent $60.00 per week in buying takeaway tea and coffee, resulting in a figure of just over $2,000.00. But this figure was also subject to reduction because the materials to make these beverages would have to be purchased. 49 At [29], the Tribunal outlined as follows the lessee's claim for damages on account of stress:- In addition, the Applicant claimed that both she and her employee suffered stress levels as a result of the inability to answer the call of nature, and she sought to quantify that by taking 17.5 percent of what might be regarded as an hourly wage figure. She put a figure of $81.60 as the stress levels suffered by Sunita, and put a figure of $306.25 on that same concept for herself, on the basis that the Applicant attended in one way or another to the workings of the shop for about 50 hours a week, indicating that she felt stress about it even when she was not actually within the shop, but was elsewhere buying the shop or, doing the books. So her personal claim was 17.5 percent of $35.00 an hour for 50 hours a week, to come to the figure of $306.25. That came to a total weekly "stress" claim of $387.85(Applicant and Sunita), which, multiplied by 90 weeks, came to $34,906.50. 50 At [33], however, the Tribunal pointed out that in the absence of evidence that Sunita received extra remuneration on account of stress, it was only the stress suffered by the lessee that could be taken into account. 51 We will now consider the various matters raised by Mr Pluznyk in challenging the Tribunal's assessment of damages. The implications of the lessee's failure to call other witnesses 52 Mr Pluznyk argued that the lessee's failure to call Sunita as a witness, for which no explanation was offered, had two relevant consequences. 53 In the first place, the only evidence as to the frequency with which Sunita closed the shop in order to go to the public toilet, and as to the length of these closures, was the evidence supplied by the lessee. This was hearsay evidence, which should have been rejected. 54 Secondly, in accordance with the rule in Jones v Dunkel (1959) 101 CLR 298, the Tribunal should have ruled that Sunita's evidence on these matters would have been contrary to the interests of the lessee. This evidence might, he said, have been to the effect that she closed the shop and went to the toilet during tea breaks and lunch breaks to which, as an employee, she was entitled. To the extent that this happened, any financial loss resulting from the periods of closure should not be included in the damages payable by the lessors. 55 Mr Rollinson's responses were (1) that the rules of evidence did not apply to these proceedings, so hearsay evidence was quite acceptable and (2) that there was no scope for application of the rule in Jones v Dunkel in the manner suggested because (a) there was no evidence that Sunita was entitled under her employment conditions to tea breaks or lunch breaks and (b) it should not be assumed that she would regularly devote periods of 20 minutes within these breaks to visiting the nearby public toilet. 56 On the first of these matters, we agree with Mr Rollinson. By virtue of 73(2) of the ADT Act, the Tribunal 'is not bound by the rules of evidence'. We would add that much of the significant evidence relating to Sunita's employment (for example, her working hours) was not hearsay anyway, and we see no reason why the lessee's evidence as to the time needed to close the shop when visiting the public toilet should not be treated as applicable, at least in general terms, to the periods when Sunita was on duty at the shop. 57 On the second matter, we consider that, for the reasons advanced by Mr Rollinson (notably the second of them), it should not be assumed that Sunita, if called, would have given evidence that was adverse to the lessee, to any significant degree, regarding the incidence of her closures of the shop. At most, we would say that the possibility that some of these closures coincided with tea breaks or lunch breaks that Sunita was permitted to take was a relevant consideration 58 Mr Pluznyk also cited the rule in Jones v Dunkel with reference to a statement made by the lessee, during cross-examination at the Tribunal hearing, to the effect that on some occasions when she was visiting the public toilet other people (not Sunita) 'minded the shop' at her request. He pointed out that the lessee did not mention this matter in her affidavit. He argued that, since she failed to call any of these 'minders' as witnesses, the Tribunal should have inferred that they would have testified to conducting sales on behalf of the business during her absence. But the Tribunal did not refer at all to this aspect of the lessee's testimony 59 Mr Rollinson pointed out in response that (a) this submission stopped short of claiming that the question whether the 'minders' conducted sales during the lessee's absences had been raised with her during cross-examination and (b) it had not been suggested at the Tribunal hearing that her evidence was untruthful. 60 As a member of the present Panel suggested at the appeal hearing, it is quite possible that the 'minders' kept a watch over the shop in order to prevent thefts, but did not conduct sales. Since it must be assumed that the times at which the lessee requested and obtained this assistance varied from day to day, this is a definite possibility. Because it is apparent that the issue of whether the 'minders' conducted sales was not given significant, if any, prominence at the hearing, we do not consider that the Tribunal erred in failing to refer to it in the course of assessing damages. The Tribunal's use of financial data relating to the lessee's business 61 Mr Pluznyk argued that the Tribunal, in assessing damages, erred in taking account of (a) the amount paid as wages to the lessee and to Sunita during the shop's closures and also (b) the amount of business profits that the lessee claimed to have lost as a result of these closures. 62 With regard to the first of these items, he maintained that since the lessee was self-employed, she was 'not entitled' to wages. With regard to the second, he maintained that since the business ran at a loss (at least during the financial year 2006-07), the lessee could not show that there were any 'lost profits'. He further argued that to take both of these matters into account involved double counting, because the cost of wages was a factor taken into consideration in assessing business profits. 63 An additional submission made by Mr Pluznyk was that the lessee gave no evidence of any sales being lost as a result of the shop being closed. Evidence of this nature, he said, could have been, but was not, provided by the 'minders' whom she mentioned in cross-examination. 64 Finally, Mr Pluznyk referred to the decision of the Supreme Court in Spathis v Hanave Investment Co Pty Ltd & Anor [2002] NSWSC 304. At [166], having found that the lessor of retail premises had prevented the lessee from gaining access to a toilet within the premises for a period of some weeks, Campbell J assessed the damages at 5% of the rent. If this were done in the present case, this would produce a figure of $2,584.00. 65 Mr Rollinson's principal submission in response was that the Tribunal, in determining damages, did not simply add together the amounts that the lessee claimed within categories such as 'lost wages' and 'lost profits'. The Tribunal explicitly ruled out this approach. Furthermore, in setting out amounts under these heads, it indicated that it was recording evidence advanced by the lessee, without necessarily accepting this evidence as conclusive. 66 We agree with these observations by Mr Rollinson. But the Tribunal, notably in paragraph [45], does appear to have considered it appropriate to treat lost wages and lost profits as independent categories of financial loss, without taking proper account of the proposition that the total wages bill of a business - irrespective of whether the employees are prevented by external factors from operating productively at all times - is necessarily taken into account in any assessment of its profitability. 67 In our judgment, the correct approach to be adopted in assessing damages for the lessee's financial loss in this case was to seek to place a value of her loss of the opportunity to derive profit on account of having to close her business for an average period of three out of the 50 hours during which it was open. The opportunity lost was that of making profits during the three hours per week that the shop should have been open, in addition to the 47 hours during which it was in fact open. 68 To frame the question this way - that is, as damages for the loss of an opportunity - is to follow well-known principles of contract law stated by the High Court in Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64. This case was in fact cited by Mr Pluznyk, but not for the proposition now being stated. 69 In assessing the value of this lost opportunity, both the profitability of the business as a whole and the amount of wages paid to an employee during the three hours each week when the shop is closed are relevant only, if at all, as part of a broader calculation. 70 In our opinion, these two aspects of the Tribunal's decision - its failure to assess the lessee's damages for financial loss by reference specifically to her loss of an opportunity to derive profits and its apparent willingness to treat lost wages and lost profits as independent heads of financial loss - both constitute errors of law. We reach this conclusion even though the amount that the Tribunal ultimately awarded was based on a 'global approach', not involving the aggregation of specific amounts of financial loss assessed under specific heads such as 'lost wages' and 'lost profits'. 71 It was for this reason that, as stated above at [12], we granted leave during the hearing for the appeal to extend to a review of the merits. Our decision regarding damages 72 Economic loss caused to the lessee's business. In deciding, as we are required to do following this grant of leave, what 'the correct and preferable decision' is, having regard to the material (both factual and legal) before us, we have reviewed the documentary evidence regarding the financial state of the lessee's business. 73 This evidence included a draft profit and loss statement showing, as Mr Pluznyk pointed out, that during the financial year 2006-07 the business sustained a loss of about $7,000. 74 This statement, however, also contained the following information: (a) that the total income of the business from sales was $132,362.49; (b) that its 'cost of sales' was $72,100.30; (c) that the 'gross profit' was therefore $60,262.19; and (d) that the total of the business's other expenses, as a result of which this gross profit was converted into a loss of around $6,800.00, was $67,106.39. In relation to the categories into which these expenses fell (the two major items were wages and salaries ($25,555.99) and rent ($27,500.00)), it can safely be assumed that they would not have increased significantly if the shop had been open each week for 50 hours, as intended by the lessee, instead of only 47 hours. 75 A guide to the damages that should be awarded for the lessee's lost opportunity to derive profits for the period of 90 weeks between 1 December 2005 and 22 August 2007 is accordingly provided by the following calculation. During the 52 weeks of 2006-07, 'gross profits' of $60,262.19 were obtained when the shop was open for only 47 hours per week. Assuming the same rate of profitability (in this sense), the additional gross profit for the year if the shop had been open for three more hours each week would have been $3,846.52 ($60,262.19 divided by 47 and multiplied by three). Calculated with respect to 90 weeks instead of 52, this figure rises to $6,657.43. 76 This estimated figure for lost profits on sales would not have been enough to make the business profitable after all other expenses were taken into account. But that of itself is not relevant. What matters for present purposes is that is that it would have reduced the amount of the overall loss sustained by the business. 77 This figure of $6,657.43 is of course only an estimate of the value of the opportunity to generate profits of which the lessee was deprived. It is rough and ready for a variety of reasons: for example, that it is based on a 'draft' profit and loss statement covering only 52 of the 90 weeks during which this opportunity should have available to the lessee. But in our judgment, it provides the best guide available from within the evidence to the amount that should be included in a 'global' award to the lessee. In order to reflect the fact that it is an estimate only, we will round it up to $7,000.00. 78 We should add that we regard this case as distinguishable, so far as the present issue is concerned, from Spathis v Hanave Investment Co. The reason is that in that case, Campbell J was not dealing with a claim involving loss of the opportunity to generate business profits. There was no evidence in that case that the tenant was compelled to close the business in order to visit a toilet nearby. 79 Cost of takeaway beverages. The lessee also claimed damages for the cost of buying takeaway beverages. In her affidavit, she quantified this at $60.00 per week. Although over a 90-week period this would give a total of $5,400, the Tribunal referred (at [28]) to 'an amount of just over $2,000.00'. It may have been taking into account, without saying so expressly, the fact that the lessee herself attended the shop for only 21 out of its 50 opening hours. Since there was no evidence that the lessee reimbursed Sunita for any takeaway beverages that she purchased, this reduction would be appropriate. Mr Pluznyk in fact conceded that a figure was $2,000.00 was warranted. 80 Stress suffered by the lessee. The basis for the lessee's quantification of her claim for damages for stress was a somewhat strange one: viz, a proportion (17.5%) of the wages paid to herself and to Sunita (see the Tribunal's judgment at [29], quoted at [49] above). It was from this starting-point that the lessee arrived at her claimed figure of $34,906.50. But as the Tribunal noted at [33], it is only the stress suffered by the lessee that may attract compensation, not any stress suffered by Sunita. 81 Mr Pluznyk conceded that some award under this head was warranted, but argued that (a) it should only relate to the hours when the lessee was actually in the shop and (b) it should be at a low level such as $50 per week, and certainly no greater than $75. The latter amount, calculated over 90 weeks, would produce a total of $6,750. 82 Mr Rollinson argued that the stress experienced by the lessee during the hours when the shop was open but she was not in attendance should be taken into account, though it should attract less compensation than her stress during the periods when she was in attendance. 83 Amongst the cases decided by the Tribunal under the RL Act, there are very few in which damages for non-pecuniary loss have been awarded. But there is no doubt than an award of this nature may be made: see e.g. Jolly Joe's Fish 'n' Chips v Wallis Lake Fishermen Co-operative Ltd [2007] NSWADT 297 at [138-139]. 84 In our opinion, the stress suffered by the lessee during the periods when she was not at the shop (averaging 29 hours per week) should not be taken into account to any significant extent when assessing damages. No doubt, in the early weeks of the Lease the lack of access to the toilet would have been a matter of concern to her irrespective of whether she was in the shop. But once she and Sunita had determined how they would deal with this problem on a day-to-day basis, the lessee would not have needed to bear it in mind when she was not directly confronted with it. 85 The lessee adduced no medical or psychiatric evidence regarding the effect that her stress had upon her. In these circumstances, only a small amount may be awarded. 86 We consider that the lower of the two amounts mentioned by Mr Pluznyk - $50 per week over 90 weeks - is appropriate. This produces a total of $4,500. 87 The figures mentioned earlier for loss of the opportunity to generate profits ($7,000) and for the cost of beverages ($2,000) are to be added to this sum of $4,500. In the result, the amount of damages to be awarded to the lessee, in substitution for the Tribunal's award of $25,000, is $13,500. The question of costs 88 Both parties applied for the costs of the appeal. Section 77A of the RL Act stipulates that costs in Tribunal proceedings under the Act may only be awarded if there are 'special circumstances warranting an award of costs' under s. 88 of the ADT Act. 89 Our preliminary view on this question of costs is that, since neither party has been wholly successful in the appeal, there would appear to be no 'special circumstances'. We recognise, however, that there may be grounds for an award of which we are not aware. 90 Accordingly, our orders make provision for the parties to apply for the costs of the appeal. Our orders 91 We order as follows:- 1. Leave is granted for the appeal to extend to a review of the merits. 2. The appeal is allowed in part. 3. Order 1 in the Tribunal's decision of 4 February 2008 is set aside and the following order substituted: 'The Respondent landlord is to pay the Applicant tenant the sum of $13,500.00 by way of damages.' 4. Any application for costs in these appeal proceedings must be filed and served, with supporting submissions, within 28 days of the date of this decision. The opposing party must file and serve submissions in reply within a further 28 days. Unless reasons are advanced for a hearing to be conducted, the matter will be resolved 'on the papers', pursuant to section 76 of the Administrative Decisions Tribunal Act 1997.

Demertjis & Anor v Chauhan

At a glance

Court

Decision date

Source

Judgment (9 paragraphs)

Parties

Cases Cited (2)

Cited By (15)