Fasako Pty Limited v TianyD Beauty & Hairdressing Australia Pty Limited and Yao Zhu

History of the problems with the pumps to the building and sprinklers in Shop 7

1. TianyD maintains that the pumps and sprinklers in the building were (and still are) incapable of providing the requisite flow rate service the fire sprinkler system in the premises whether it be configured as per an open plan or in accordance with TianyD's intended partition fit out. This forms the basis of the right for TianyD to terminate the Lease.
2. Mr Tom Skotadis and Mr Todd Jackson of CI Australia oversaw the approval of the fitout of TianyD on behalf of Fasako. Mr Charles Leung of ProjectAC was the design representative for TianyD and appeared to be coordinating the fitout on behalf of TianyD.
3. TianyD appointed Advance Building Approvals on 1 May 2017 to obtain a Complying Development Certificate for its fitout.
4. In or about May 2018 TianyD released media and advertising announcements as to its forthcoming commencement of business in Sydney at the premises from mid‑2017.
5. On 18 May 2018 Mr Gary Hajek of Austronics, who was the hydraulic consultant to Fasako emailed Mr Charles Leung of ProjectAC informing him of issues causing delay in the fitout: There is a bit of a hold up, due to fact with the amount of new sprinklers required to suit the basement area fitout. It appears that the pipework may not be big enough to supply the correct amount of water. We are currently speaking with a hydraulic consultant to work out what needs to happen…
6. Subsequently on 22 May 2018 Mr Hajek recommended a full investigation and hydraulic analysis of the building. Mr Hajek estimated a period of one week along with a further period of two to three weeks if there was no irregularity with the fire sprinkler system.
7. Mr Leung wrote to Mr Hajek a number of times in respect of obtaining an update on the situation. One such email was: I understand there was no definite fix(ed) plan on your works yet. But the purpose of this program is to draft out a timeline for all of us at this stage. What we need to do and what will happen … If any feedback from your consultants to keep us updated that would be great thanks.
8. Subsequently on 26 June 2017 Mr Hajek informed Mr Leung: There is a certain amount of supply pipework that requires upgrading to meet the requirements, but there is also a fire engineered solution that is required to make it all work as currently the existing sprinkler pump can't supply enough water, and this will be explained in the report. We also need to see if your existing PCI who was looking after the project can sign off on a fire engineered solution, if not we could assist with this, could you please ask the question of your PCI.
9. Then on 27 June 2017 Mr Hajek informed Mr Leung the following: From our initial hydraulic analysis, there is enough water in the existing fire sprinkler water tank, however, the existing pump cannot provide the required flow … There are two potential solutions … : 1. Upgrade the existing fire sprinkler diesel pump to allow the required new flow; or 2. (Preferred solution) engage a fire engineer to justify a reduction in the number of heads required to flow via a performance‑based fire engineering assessment. … Option 1 will come at great cost to the building owner. We are able to assist with Option 2, and the pumps will not require any further work. Option 2 is dependent on whether or not your PCA who has been engaged for Shop 7 for the CDC can sign off on performance solutions.
10. Mr Hajek on 28 June 2017 provided a further quote for the fire service works to TianyD. In it he stated the following: Despite the intention of the design team, our scope of work does not provide any guarantee that the proposed fire safety strategies would be accepted by the consent authority or the nominated PCA for peer review. As such the results of a fire engineering process will dictate which fire strategies will be adopted as part of the final engineering report. The proposed report will be prepared under the supposition that there are no other existing or proposed performance solutions applicable to the subject building.
11. TianyD's lawyers Avantro, wrote on 29 June 2017 to Fasako's lawyers Hunt & Hunt and said the following: Our client has been actively engaged in the design and fitout process for their business operating as a beauty salon. As you may be aware, our clients Project Architect and ProjectAC must appoint the building's base fire contractor for consultation and works related to the building's fire services. The vendors [sic] contractor, Austronics [sic], has identified issues with the water pressure for the fire sprinklers servicing the lower ground floor. This issue apparently affects all tenancies in the building especially if partitioning walls are erected. ProjectAC has consulted with Austronics and a few other fire engineering companies in an attempt to resolve this issue. We have now received advice from ProjectAC providing several solutions… Solution 1 would require upgrading the existing fire sprinkler pump, located on the common property which services the whole building. Solution 2 would be engaging in an alternate fire solution whereby two approaches are possible. ProjectAC believes the most cost effective and efficient method would be utilising Solution 1 - the Lessor upgrading the pump. The cost of such repairs and upgrades would form part of the building outgoings and payable by all tenants. Given our client entered into the lease in good faith, believing the usage of the premises for their intended business had no concerns, our client seeks that the rent free period be extended until the fire sprinkler issue can be concluded. In its current state, our client cannot fitout or use the premises (let alone obtain approval to commence works) for their intended purpose. We note our client is responsible under clause 7.8 for any costs and expenses involved with the adding and relocating fire sprinklers, but the Landlord has obligation to ensure the base building standard for the system is sufficient, supportive and able to sustaining (sic) use by each tenancy and any respective general renovations undertaken.
12. At around this time Mr Neville Hasham, strategic consultant to TianyD became involved. Mr Hasham had a conversation with Mr Zhou on or about 20 June 2017. Mr Zhou asked Mr Hasham to assist the process of the fitout of the premises.
13. Subsequently a meeting was held, chaired by Mr Tom Skotadis on 30 June 2017 including all the relevant consultants to try to resolve the issues of the fire sprinklers and pumps.
14. On 3 July 2017 Mr Chris Lou of CI Australia forwarded to Mr Hasham a copy of an Alternative Solution Report dated August 2010 via Defire which was a report in relation to the whole building with respect to fire and sprinkler issues. Mr Hasham reported this to Mr Zhou. Mr Zhou informed him that he had not heard of this report before.
15. The Defire Alternative Solution Report documented the findings of a fire safety engineering assessment undertaken to determine whether the proposed building complies with the relevant performance requirements of the Building Code of Australia (BCA). The report found that the design of the building includes areas which do not comply with the deemed-to-satisfy provisions of the BCA. Alternative solutions were then recommended to overcome these non-compliance issues.
16. The executive summary of the Defire Report stated: The fire safety engineering assessment undertaken found that the design of the building achieves compliance with the relevant performance requirements of the BCA, subject to the following recommendations. This report and the fire safety measures … must be identified on the fire safety schedule for the building. They must be maintained and certified in accordance with the EP&A Regulations 2000 and relevant Australian Standards. If there are building alterations or additions, a change in use or changes to the fire safety system in the future, a reassessment will be needed to verify consistency with the assessment contained in this report.
17. After the meeting on 30 June Mr Skotadis on 10 July 2017 emailed Mr Hasham and others and summarised the outcome of the meeting and stated: Any shortcomings relating to any base building services due to the specific tenant fitout requirements is not the responsibility of the owner to rectify. This is a tenant specific issue relating to their specific fitout requirements.
18. TianyD's lawyers Avantro challenged this statement by Mr Skotakis above in an email on 18 July 2017. The following assertion in that email was put: 'Was the (Defire report) disclosed to our client prior to entering the lease? We believe that if the lessor (or yourselves) was aware of the FES for the building, it should have been disclosed by way of submission of the original FES to our client. Clearly this would have been a determining factor as to whether our client would have entered the lease. Our client is not undertaking an unusual or excessive fitout for the retail space which is zoned classification of (A3.2-class 6) to acquire a Fire Engineered Solution for a standard fit out within this zone classification - this further validates the building fire safety issues were going to impact on any tenant trying to operate within this retail space. Clearly this was not disclosed.'
19. On 27 July 2017, Hunt and Hunt wrote to Avantro and stated: The issue that you have raised on behalf of your client has not been an issue with any other tenants in the building. At no time did your client indicate the intensity of partitioned rooms that it would require in the lower ground floor area. The permitted use as set out in the lease would not reasonably be considered to require 18 partitioned rooms in the lower ground floor area which is what we understand to be the fitout for which your client now seeks consent. Your client would have been aware of the fitout that it was likely to require and cannot expect the landlord to second guess the fitout requirements and more particularly cannot expect the landlord in any sense to have expected that there would be a requirement for such a multiple number of partitioned rooms on the lower ground floor area. The extent of partitioning required by your client in the lower ground floor area is not considered in any sense to be a standard business fitout for the permitted use as described in the lease or generally the shop premises. For a solution to be achieved for your client, there is a need for its appropriate consultants to meet with the managing agent for our client and the appropriate consultants of our client. The managing agent and the consultants are available on short notice for any such meeting. …
20. TianyD continued to maintain in its view that the Fire Engineer Solution was not an acceptable option available. On 17 August 2017 Mr Leung emailed Todd Jackson of CI Australia: I had discussions with Mr Zhou and others with the options we discussed. Below is the feedback: Current sprinkler layout (client accepted to consolidate a few rooms to reduce some sprinkler heads but not all as we discussed in the meeting)… The option to make a fire compartment between Levels G and LG (client not supporting this option as this would change their business operation) Provide a FES or performance engineered solution. I have since spoken to John at GNC, he has confirmed that the proposed performance solution for Shop 7 is acceptable by the PCA. The cost of the solution is approximately $10,000.00 (client NOT supporting this option because it is an additional cost for them to spend resolving building existing issues. They also doubted if an alternative fire solution can be found firstly, and secondly, even if a solution was found, there will be additional costs to them to make the solution comply (eg fire curtain, firewalls, smoke curtain etc)
21. By email dated 29 August 2017 Mr Skotadis informed Mr Leung: Following on from my previous email I advised that the Lessor in order to assist your client has engaged an independent consultant to review the proposed fitout plans and to cross reference against the current base building fire safety equipment specifications and limitations. The first draft is expected to be received by Monday 4 September. As a gesture of its good faith I am instructed by the Lessor that it will waive rent up to the date the report is received and any recommendations communicated to the Lessee. Please note that the Lessor whilst attempting to assist the Lessee in finding a solution to its fitout requirements does not waive any rights under the Lease which remains on foot and enforceable in its term. Any suggestion as conveyed by the solicitor for the Lessee that the Lessee could terminate the Lease is rejected by the Lessor.
22. On 28 August 2017 TianyD's lawyer Avantro informed Mr Skodatis: As our client does not wish for this matter to continue dragging on, we advise that a resolution to the issue should be made by Monday, 2 September 2017. The delay in this matter is causing detriment to our client in respect of its financial obligations, not only in terms of their business but to respective shareholders in the company. If this matter cannot be resolved (or plan accepted by our client) by date above we will issue notice of termination of lease.
23. On 12 September 2017 Avantro stated: Our client cannot wait any longer for this matter to be resolved. Despite assurances that a consultant report would be ready by Monday, 4 September 2017, it appears that a consultant has only now been engaged for further discussions. We are now instructed to formally prepare and serve notice of termination.
24. The meeting took place and there were discussions amongst the consultants.
25. Following on from these actions Mr Skotadis, engaged on behalf of Fasako hydraulic engineers Warren Smith & Partners who reported initially on 4 September with respect to a fire engineered solution. The summary of the outcomes are as follows: The fire services design in the tenancy is not feasible with AS2118.1-1999 The fire services design in the tenancy is feasible with AS2118.1-2006. Recommendations We recommend engaging a qualified fire engineer to provide a performance solution to use AS2118.1-2006 in lieu of AS2118.1-1999. The alternative solution will allow the tenancy to use existing town's main connection and the existing pump system along with the proposed design without further base building upgrades.
26. On 13 September 2017 Avantro on behalf of TianyD gave notice of termination (termination notice) and terminated the Lease. The termination notice stated as follows: Particulars of Breach Non‑disclosure of material facts relating to the existing base building fire services; representations by the age of the premise [sic] will be suitable for the Lessee's intended business; breaches under s62B and s62D of the Retail Leases Act and s18 of the Australian Consumer Law. TAKE NOTICE that the Lessee has relied on the representations of the agent that the premise can be renovated as per the Lessee's intended works conveyed to the agent prior to entering the lease for the premises. TAKE NOTICE that the Lessee is unable to proceed with renovation works due to the building's inadequate fire services to meet the Lessee's intended use of the premise [sic]. The agent and/or Landlord was or should be aware of the issues relating to the building's fire services which were not disclosed to the Lessee. TAKE NOTICE that the Landlord has refused to comply with the Lease in fulfilling its obligations in upgrading the building water pressure system so as to allow the Lessee to proceed with the renovation works. TAKE NOTICE that since the matter was raised to the Landlord, the Landlord has not provided a solution despite numerous requests by the Lessee that time was of the essence and a major concern for the Lessee, that there was substantial losses incurred by the Lessee for the delay. TAKE NOTICE that as you have failed to comply with the Lessee's request to rectify the base building fire service's issued, the Lessee hereby terminates the Lease pursuant to its terms, non-disclosure of facts, and provisions under the Retail Leases Act 1994 and Competition and Consumer Act 2010. ___________________________________________ Signed by: Avantro - Solicitor for the Lessee
27. On 15 September 2017 TianyD returned the keys to the premises.

Subsequent conduct of the parties after termination

1. Fasako proceeded to investigate the possibility of a fire engineer solution. This was conducted in conjunction with Advanced Building Approvals Pty Ltd the private certifying authority for the fitout for TianyD. An email was sent from Alan at Advanced Building Approvals Pty Ltd on 1 November 2017 which comments on the circulation space being non-compliant, the fire hydrant coverage and accessibility to the ambulant toilets.
2. In the subsequent follow up report of 3 November 2017 Warren Smith & Partners did a peer review of the consultant's fitout design and construction quality control of the fire services in the lower ground floor and ground floor. They reported that: The system was observed to be designed in accordance with AS2118.1-1999 Ordinary Hazard 3. The hydraulic calculations performed by the consultant showed a system demand of 40.33 l/s at 608.22 kpa flowing 37 heads with an area of 216 m2 located on the ground and lower ground floor levels of the shop. The technical details of the existing pumps including the flow test results and pump curve data were obtained from Innovative Fire who were the original base building contractors. The existing town's main connection and the pump system were found unsuitable to supply the required demand in the tenancy. We confirm that the system would comply if it can be certified in accordance with AS2118.1-2017. For ordinary hazard 3AS2118.1-1999 requires assistance to provide required design density of discharge over the most unfavourable array of 216 m2. In the current design, this 216 m2 houses 36 sprinklers. These 36 sprinklers will require a large amount of water supply to maintain the required design density of discharge thus making existing town's main supply and the pumps unsuitable. AS2118.1-2017 requires a system to provide required design density of discharge over the most unfavourable array of 18 sprinklers. This reduced the number of sprinklers by around 50% thus considerably reducing the required water supply. Hydraulic calculations using Hyena 6102 was required to confirm the flow and pressure from both scenarios. A study on the alternate solution report by Defire was conducted to get a broader understanding of the scenario and to understand the existing alternate solutions. The study confirmed that the existing report did not mention the use of AS2118.1-2017 in lieu of AS2118.1-1999 as a performance solution. A hydraulic calculation was then performed using Hyena 6102 in accordance with AS2118.1-2017. The obtained duty points were found to be below the pump curve and the existing pressure flow details from the town's main connection and the pump system was suitable for the new design. Recommendation We recommend engaging a qualified fire engineer to provide a performance solution to use AS2118.1-2017 in lieu of AS2118.1-1999. The alternative solution will allow the tenancy to use the existing town's main connection and the existing pump system along with the proposed design without further base building upgrades.
3. i-Fire Engineering prepared a report on behalf of CI Australia for Fasako on 26 October 2017. In the executive summary it stated that it had been engaged to provide a performance solution deemed to satisfy provision departure associated with the fire sprinkler system design as part of the fitout works for Shop 7. This performance solution demonstrates that the proposed building design will comply with the intention of BCA objectives at relevant fire safety performance for firemen.
4. At page 22 of the i-Fire report it stated: Based on the fire engineering analysis above, the proposed performance solution is considered to be acceptable and that fire spread is unlikely based on the proposed sprinkler design for Shop 7 (design based on 18 sprinklers operating simultaneously in lieu of a minimum area of operation of 216 m2 including the provision of additional fire safety features (such as fast response sprinkler heads throughout the shop and imperforate baffles around the internal tenancy stair void).
5. The i-Fire report was subsequently peer reviewed by Red Fire Engineering on 6 December 2017. In that report Red Fire stated that the review has been undertaken generally in accordance with the International Fire Engineering Guidelines. In its review Red Fire suggested the removal of the comparison between AS2118.1-1999 and AS2118.1-2006/2017 to avoid the need to carry out essential services maintenance of the system to the higher degree of two different standards.
6. Red Fire continued in its report: We agreed with the fire engineer that BCA assessment method…is appropriate and that the assessment could be absolute and comparative (both), qualitative and deterministic. The fire engineer proposed that Shop 7 will be limited to use as a hair salon/beauty therapy store. We accepted this condition provided the use of the shop was regularly inspected as an essential service. We are satisfied that the design will meet the relevant fire safety performance requirements of the BCA to the extent required by the EP&A Regulations.
7. Further on 6 December 2017 Alan at Advanced Building Approvals Pty Ltd sent an email stating as follows: Hi Todd, based on the provided below, we do not object to the FER below. If there are any other enquiries, feel free to give me a call.
8. Following the termination of the Lease, for a period of about three months (up until late January 2018) discussions took place between the parties in respect of the dispute concerning the fire services and continuance of the lease. Mr Andy Chan was engaged by Mr Pak Ka Chan to negotiate with Mr Zhu. Apparently there were at least three meetings to discuss the issues and whether or not TianyD would withdraw its notice of termination. Andy Chan initiated a number of Weechat discussions with Mr Zhu in respect of trying to find a commercial resolution to the dispute between the parties.
9. In the Weechat dialogue between Andy Chan and Mr Zhu the following transpired: 27.9.17 Chan … now can… you please pick the shop key back from the building manager and immediately asked (sic) your lawyer to liaise with our lawyer to retrieve the lease termination notice … Zhu: I have spoken to my lawyer. You keep the key. That is no use to me. 3.10.17 Chan … I have spoken to our lawyer today. I understand your lawyer has not retrieved the termination notice yet. 4.10.17 Chan … I have already spoken to the building manager today and acknowledge that you have no intention to retrieve the termination notice. Zhu … In regard to the termination notice it has no conflict to our negotiation. Chan … We have no choice but requested you to retrieve the previous issued determination notice. Then we can resolve issues. If you do not want to retrieve the termination notice, at least we wish you can give us the earliest date to carry out this design meeting.
10. Further negotiations took place between the parties and Avantro for TianyD advised Hunt & Hunt by email dated 22 December 2017: Our client seeks either: (1) the lease be mutually terminated with a new lease under the same terms be re‑signed between the parties …; or (2) a variation of lease is entered which would extend the lease term and rent‑free period.
11. On 5 January 2018 Hunt and Hunt wrote to Avantro in the following terms: 1. The landlord never had any issue with Sydney City Council as to any required water flow and pressures for the building including shop 7. 2. The development approval for the building provides for a mixed use which permits retail uses for the ground floor. That has never changed. 3. The building as constructed was compliant with AS1999 which was the applicable standard at that time. 4. On the basis of a usual substantial open plan retail operation, no changes would have been required in relation to fire sprinklers applicable to shop 7. 5. The issue as to fire sprinklers arose when your client first raised the issue with the landlord on 29 June 2017. 6. Our client was never made aware prior to the receipt of the proposed fitout that your client intended or required to subdivide the premises into a multiple number of consulting firms with floor to ceiling walls. 7. The disclosure statement under the Retail Leases Act was the opportunity for your client to assert any representations upon which it had relied. No representations were inserted by your client which is not surprising as on our instructions there were none given by the landlord. 8. After your client raised a fire sprinkler issue it is noted that there was a period thereafter of 5.5 months before a solution based on 2016 standards was developed which satisfied the requirements of the principal certifying authority appointed by the tenant. This solution does not require any additional expense to be incurred by the tenant in relation to the fire sprinkler requirements notwithstanding the intensive number of self contained consulting rooms required as part of the fitout. 9. The landlord cannot be responsible for the delays by the tenant in submitting its proposed fitout. Given that the lease started on 27 March, it was the choice of your client to delay until June before submitting a proposed fitout for approval. The submission of the required fitout was the first time that the landlord was made aware of the intensive internal fitout which it does not accept is a normal retail fitout or a fitout which necessarily flows from the approved use.
12. In the letter Hunt and Hunt offered on behalf of Fasako to extend the rent free period to 10 November 2017, representing in fact 7.5 months rather than the original three month's rent free period under the Lease, without accepting that Fasako had any legal requirement to grant the concession but was made in the spirit of goodwill to reflect the intended relations between the parties throughout the term of the Lease.
13. Again by letter to Hunt and Hunt dated 23 January 2018, Avantro stated: In order to move forward we advise our client is willing to enter into a new lease on similar terms with the three month rent‑free period … Our client is willing to sign the lease within three working days of receipt, as long as the terms have not been varied to a large extent.
14. By letter dated 25 January 2018 Hunt and Hunt for Fasako advised: It will not grant a new lease but is prepared to vary the terms of the existing lease.
15. By letter dated 14 February 2018 TianyD informed Fasako that it would withdraw the termination notice but subject to various commercial conditions being agreed between the parties. There was no response to this from Fasako.
16. On 27 February 2018 Fasako filed a notice to mediate a retail tenancy dispute and the parties on 3 April 2018 attended a mediation but were unable to reach a resolution of the dispute.
17. Fasako then made application for orders from the Tribunal for breach of lease and damages that TianyD pay the outstanding rent and that the Bank Guarantee held by Fasako can be applied against the rent outstanding. TianyD claimed that the Lease had been validly terminated by TianyD and consequently claimed damages from Fasako.
18. TianyD had entered into a retail lease for premises in Chatswood commencing on 1 November 2017 with a four month rent free period. That lease is dated 14 February 2018.

The hearing

1. The matter came on for hearing before me on 3 and 4 December 2018. Ms A Avery-Williams appeared as counsel for Fasako and Ms T Fishburn appeared as counsel for TianyD.
2. The witnesses were Mr Pak Ka Chan the COO of Fasako, Mr Gary Hajek of Austratronics, hydraulic consultants to Fasako, on behalf of Fasako, Mr Neville Hasham a consultant to TianyD, Mr Tom Skotadis of CI Australia on behalf of Fasako, Mr Y Zhu the owner and founder of TianyD, Mr Andy Chan the nephew of Mr Pak Ka Chan and Mr Tai‑Guen (Steven Moon) a director of GN Consulting Pty Ltd, fire safety engineers.
3. Certain participants in the history of this matter were not called particularly, Mr Edward Boyce of Hunt & Hunt who is a director of Fasako and the lawyer acting for Fasako and Ms Amy Qui Zhang, real estate agent who was instrumental in introducing the parties.

Evidence of Mr Steven Moon

1. Mr Moon was engaged by TianyD's lawyers to prepare a report on the sprinkler system in the premises.
2. Significantly, Mr Moon is a director of GN Consulting Pty Ltd that specialises in the safety, engineering and design of fire systems and was involved in an aspect of fire sprinkler system design at the building in about July 2016 which noted in 2016 the inadequacy in respect of the existing fire sprinkler pumps as follows: 'Hydraulic calculations show that the existing diesel pump serving the shop seven sprinkler system is not capable of providing the required flow rate as such, the diesel pump will need to be upgraded to satisfy the system demand. Alternatively seek the services of a fire engineer to justify the shortfall as part of a performance solution referred to in FS04.'
3. Mr Moon served his report on 5 October 2018. Mr Moon's report focuses on the minimum requirements of the relevant standard at the time of the building's construction as well as in March 2017 when the lease was entered into. Mr Moon was asked in his report to assume that all ancillary areas within the premises were to be considered minor and not constituting a high hazard classification. Mr Moon also considered various design schemes to determine the system demand on the assumption that the premises were an open plan layout which was a liberal approach in all the circumstances.
4. Mr Moon stated in his report the following: 1.2 The focus of my opinion is whether or not the original design of the existing fire sprinkler system satisfies the minimum requirements of Australian Standard AS2118.1‑1999 (Automatic Fire Sprinkler Systems - Part 1; General Requirements) (the standard). This is the reference standard within the Building Code of Australia being the Standard applied at the time of construction of the building and continued to operate as at March 2017 (I am instructed that a lease of Shop 7 was entered into in March 2017 by my instructors' client). 1.4 I conclude that the existing water supply infrastructure of the fire sprinkler system in the building is inadequate for Shop 7. The fire sprinkler system is therefore non‑compliant with the Standard. 5.12 In response to question five, What is the Effect, if any, of full height partitioning of an area, on a fire sprinkler system? How, if at all, does this differ from an 'open plan' layout? (a) Internal full‑height partitioning of a fire sprinkler protected space a result in requiring additional five sprinklers (and associated pipework) to be installed depending on the location of the internal full‑height partition/walls. Typically, it is likely that full‑height partitioning will result in the need for additional fire sprinklers (and associated pipework). (b) An 'open plan' layout would typically minimise a number of fire sprinklers (and associated pipework) required because there would be less obstructions to consider for fire sprinkler spacing. .… An open plan configuration is typically the least demanding configuration for a fire sprinkler system including the flow rate requirements of pumps. 5.17 Shop 7 is not capable of being serviced by the pumps. The flow rate of the pumps is not adequate. Neither of the pumps is able to provide the required flow rate of 36.7L/S (required for an open plan layout of Shop 7). 5.21 If Shop 7 was to be partitioned, it is highly likely that it would require additional fire sprinklers to be installed due to the limitations in terms of the fire sprinkler spacing. 5.29 With consideration of the proposed fit out of Shop 7 as a 'beauty and hair salon' with full height walls and partitions, the number of fire sprinklers and the most hydraulically unfavourable area of operation increases to 37 fire sprinkler heads, resulting in a total flow rate requirement of 40.3L/S. 5.34 The fire safety Standard that applied to this building in March 2017 was AS2118.1999 - automatic fire sprinkler system. This was the Standard that was 'referenced' by the Building Code of Australia at the time of construction of the building and it remains a current reference standard as of the date of this report. 5.38 (a) A 'Performance Solution Report' is a fire engineering assessment of a fire safety measure (for example, a construction element, egress requirement or building fire safety system). It is designed to satisfy the 'performance requirements' of the Building Code of Australia (not its 'deemed to satisfy' requirements). (b) If a 'Performance Solution Report' is commissioned, it is typically at the time of project completion or soon after occupation of a building (for example, following identification of defective and/or non‑compliant issues by a third party that was not part of the design and construction team). A Performance Solution Report occurs at approximately 5% of workflow cases. 6.2 Based on the results of the hydraulic models in the flow rate test, I conclude that there is a flow rate shortfall of 4.62L/S in the pumps. Given that the pumps cannot provide the required system demand of the as‑installed fire sprinkler system in Shop 7, it is my opinion that the existing system as‑installed is not compliant, nor will any future alterations to increase the number of fire sprinklers within Shop 7 be compliant. This assumes that the hazard category of a fire sprinkler system is retained as a minimum Ordinary hazard three classification (which includes a beauty/hairdressing salon). 6.3 The as‑installed fire sprinkler system for Shop 7 does not comply with the Standard for an ordinary hazard three classification.
5. Mr Moon's report included results of a flow rate test. The testing was performed applying standard industry-accepted methodology for carrying out flow test - utilising calibrated Ambit flow instruments. Mr Moon also relied on hydraulic modelling of the existing and proposed fire sprinkler design installation scenarios.
6. I note that annexed to the Affidavit of Mr Pak Ka Chan were the Fire Safety Statements for the building from 2010 through to 2017. Each of the statements has a certification that each essential fire safety measure specified in the statement has been assessed by a properly qualified person and was found, when it was assessed, to be capable of performing: 1. in the case of an essential fire safety virtue of a Fire safety Schedule, to a standard no less than that specified in the schedule, or 2. in the case of an essential fire safety measure applicable otherwise than by virtue of a fire safety schedule, to a standard no less than that to which the measure was originally designed and implemented. Significantly 'it is noted in the schedule to each of the Fire Safety Statements reference to the alternate solutions (active) fromthe fire engineered solution report by Defire of 2010 and also to the alternate solutions (passive) listing all those measures referred to in the Defire report. Each of the annual Fire Safety Statements are signed off and sent to the Fire Commissioner of New South Wales and a copy of the statement must be prominently displayed in the building.
7. Mr Moon was cross-examined by Ms Avery-Williams whether the ambit of his report was properly focused on the premises rather than the whole building. Mr Moon clarified that if one aspect of the building is defective from a fire safety perspective, it renders the entire building itself defective. The following cross examination then took place. Avery-Williams: In relation to question 12 of your report - here at paragraphs 5.35 and 5.36 you are asked whether or not the building complies but you made it clear that you were only looking at Shop 7 so you didn't conduct any calculations of the whole of the building, did you now? Moon: No, I didn't. Avery-Williams: So when you said the building does not conform with the standard you base that solely on the fact that on your present calculation Shop 7 doesn't comply with the standard? Moon: Well because the sprinkler pumps serve the entire building, if the sprinkler pumps are unable to provide sufficient flow rate or pressures for any part of the building then the building doesn't comply. Avery-Williams: Right, so again that compliance might be achieved via the implementation of a fire engineering solution. Moon: Correct Avery-Williams: And your calculations about compliance might also be affected if you consider for example the whole number of the sprinklers on the ground floor and lower ground floor? Moon: Again, we are talking about the most remote areas of operation. So, the way that it's calculated is based on either the boundary of the tenancy or the boundary of what's known as a 'fire compartment'. So, for instance, if it was a car park you'd go to the most demanding portion of the car park and calculate the group of sprinklers there depending on the hazard. Avery-Williams: Yes? Moon: So, it has to be done in segmented ways and that's how the design is done. Moon: What we requested Mr Jennings to do is to see the full capacity of the pump. Because the pump duties that were on the plaque it was just one point based on a pressure and flow. But the pump itself can actually be run to flow more water if you actually run the pump in that extent. And because its' never been done as part of the annual fire safety statement or annual test we need to know what the full capacity of the pump was. Avery-Williams: Yes and that's why the full capacity of the pump exceeds the amount recorded on the pump block? Moon: Yes and which was again erroneous anyway. At that point in time we weren't even looking at the system demands on the block plan. We were only considering what we calculated for the existing base built as well as the proposed plan which both exceeded the existing block plan system demand.
8. Mr Moon was asked whether he could (hypothetically) have reached a different result if his scope of report was the entire building, rather than the premises. To this hypothetical he agreed. Mr Moon then provided the following direct answer in respect of a challenge to his assumption. Avery-Williams: And any of those changes in assumption may result in the fact that this is in fact compliant, that's right isn't it? Moon: No, I don't think so.
9. Mr Moon was asked if he had previous experience (if any) with any beauty salons. Mr Moon responded that he had previous experience designing class 5 (retail) buildings and tenancy spaces and, in any event his opinion was to consider the premises from an open plan perspective.
10. Flowrate is a measure of the volume of water over a period of time. Mr Moon performed two assessments. The first assessment was to determine the actual system demand (rather than simply assuming the veracity of the underlying recorded design as noted on the block plan/plaque. Second a maximum flow rate test. Mr Moon undertook hydraulic modelling to determine the system demand of the existing fire sprinkler system. He did so via the PIPES program. He prepared four separate hydraulic models (for the lower ground and ground floors for both the proposed and existing fire sprinkler system design. The hydraulic model results from the existing sprinkler system (unmodified) indicating the system demand (required flow rate and pressure) of 36.7 L/S & A 579.7 9 kPa. This is significant as it shows a different system demand (significantly higher) from the assumed system demand, that is the amount shown on the block plan and the pump plaque. They recorded the system demand flow rate at 21.8 5L/S (or 1311 L/Min (this figure represents the original system demand flow rate for the building's sprinkler system.
11. Mr Moon concluded that this flow rate representing the fire sprinkler system demand as noted on the block plan and pump plaque is erroneous and insufficient. This information is recorded in the graphs and models prepared by Mr Moon and annexed to his report. It is based on the numerical results of the flow rate test with the system demand plotted for reference to the results from the Flow Rate Test. These graphs and models show the discharge pressure and flow of the pumps which is inclusive of the towns mains water support, and its capacity (or in Mr Moon's opinion the lack of ability) to accommodate for the hydraulically calculated fire sprinkler system demand of the existing fire sprinkler system for the premises.
12. Mr Moon's report shows that this system demand is erroneous. He was cross-examined about this and he confirmed that he had performed an audit of the system demand which demonstrated that the information recorded on the block plan was erroneous.
13. Secondly, Mr Moon's report documented the maximum flow rate capacity of the pump. The results show that the maximum rate achievable for each of the pumps was 32.08 L/S (1,925 L/MIN). This was assessed by the Flow Rate Test which was to run as much water through the pumps to test their capacity. This test was not to plot the system demand points. Rather, it was to look at the flow rate capacity of the pumps. Accordingly Mr Moon concluded that there was a system shortfall when assessing the maximum flow rate capability of the pumps when compared against a hydraulically calculated fire sprinkler system demand.

Performance solutions

1. Mr Moon stated in his report at paragraph 5.3.18 that conducting a performance solution is a somewhat atypical occurrence. It occurs in approximately 5% of work locators for a base building (post-construction scenario).
2. Mr Moon reviewed the performance solution which is alleged to have been achieved via the i‑Fire report and verified/certified by Red Fire Engineers Pty Ltd. Mr Moon was given a copy of these reports in his letter of instructions. The sources of information which were considered in the i-Fire report include the information on the fire sprinkler block plan which (following from Mr Moon's report) may record an erroneous system demand.
3. The Tribunal notes that Red Fire Engineers Pty Ltd and i-Fire were engaged by Fasako to prepare the reports on a performance solution. Ms Fishburn makes the point that having regard to Fasako's reliance on those reports there is a total absence of evidence from the authors of those reports or any expert evidence for the performance solutions contended for by Fasako. There is no evidence before the Tribunal as to whether the content of those reports are feasible solutions in light of the expert evidence given by Mr Moon, especially his evidence regarding the erroneous system demand information upon which, presumably, all fire system work in the building had been based. Consequently, Ms Fishburn, requested that the Tribunal draw a reasonable inference that any evidence such experts may have given would not have been favourable to Fasako's case in accordance with the principles set out in Jones v Dunkel (1959) 101CLR 29.
4. Mr Moon was then asked a series of questions based on a performance solution. There was contention between counsel whether Mr Moon was answering to hypothetical situations rather than the actual fire engineered solution of 20 November 2017. Counsel for TianyD has directed the Tribunal to the following excerpt from the transcript to demonstrate the entirely hypothetical basis of the propositions put to Mr Moon as to the nature of Mr Moon's answers.. Avery-Williams: It is completely possible to not comply with the standard but to have an engineered solution ? Moon: Yes Avery-Williams: And it may also be affected by a fire engineered solution …? Moon: Yes … Avery Williams … a fire engineered solution could make shop 7 comply? Moon: Yes, correct. Avery Williams … if a certifying authority accepted a fire engineered solution, then you would agree that it would be a compliant shop? Moon: If you can justify it, yes. … Avery Williams: So, for example, if D-Fire … reviewed the i-Fire report and was satisfied with it, then you would agree with me that would be a complying solution? Moon: Yeah, Yeah. … Avery-Williams: After yes, subsequently, and so if there is a fire engineered solution that has been accepted by PCA, you would agree with me that despite the conclusion in your report, shop 7 can still comply? Moon: Yeah, with the performance requirements of the PCA, yeah.
5. Ms Fishburn asked the Tribunal based on the above cross examination to consider that the evidence from Mr Moon related to his considering a hypothetical solution put to him which was subsequent to his report in October 2018 not in relation to the specific fire engineered solution obtained by iFire Engineering / Red Fire in November 2017.

Annual Fire Safety Statements

1. Mr Moon was asked a series of questions about the Annual Fire Safety Statements for the building: Fishburn: Mr Moon, are you aware of the plaque details which are recorded on two of the pumps in the building? Moon: The pumps as in the block plan? Fishburn: Yes. Moon: Yes, I am. Fishburn: And in your opinion, is information inscribed within that block plan erroneous? Moon: Yes, it's wrong. Fishburn: And is it wrong insofar as the flow rate? Moon: The flow rate, based on the performance of the pumps, its undersized for the duty points which was mentioned previously that's noted on the block plan and this is what the annual fire safety statements would be based on or the annual fire safety fire flow test. So in that respect they would have been testing the system on incorrect data. Fishburn: So the certificates they are the ones which I've referred you to, you're saying that they are referring to incorrect data? Moon: Correct
2. Mr Moon was further cross-examined by Ms Avery-Williams. Avery-Williams: But the flow rate test that was conducted in September of 2018 didn't consider the system demand points did it? Moon: No, we specifically didn't give that information to the contractors. Avery-Williams: It was only a maximum flow rate test? Moon: Yes Avery-Williams: And that is recorded at 5.9 as being 32.0 litres per second? Moon: Correct, yes. Avery-Williams: And that exceeds the 21.85 litres per second recorded by you at paragraph 5.8? Moon: Yes, the 21.85 litres per second indicating the system demand what it was originally designed to. Avery-Williams: Yes and the maximum flow rate of 32.08 exceeds that doesn't it? It's more. Moon: Yes it does. It exceeds what is basically an error. The system demand being 21.85 is inadequate. Avery-Williams: It's inadequate for what? Moon: For the proposed tenancy for Shop 7. Avery-Williams: Well but that's based on the system demand for the whole building isn't it? Moon: Yes the system demand of the whole building is supposed to be based on the worst-case scenario. So, when you're actually sizing a pump you'll do it based on the worst-case scenario of any part of the building. So that's the original designer's scope of worst and that's what they've signed their design certificate on. We've basically come in and audited only Shop 7 and realised that the system demand fitted in the block plan is insufficient.

The case for each party

1. TianyD's case is based on termination of the Lease. In her opening address Ms Fishburn put the case as follows: 'Our particular case, in its various causes of action that have been put, is simply that the termination by TianyD was an effective one. What we are seeking is a declaration or a validation as to the validity of our particular termination and we're also seeking costs, compensation, damages however it may be determined under the various causes of action. By way of summary of how our claim is structured we seek out two remedies ie. that the termination be valid as well as attended costs via the Retail Leases Act. Various legislative provisions I intend to rely on depending on how the evidence falls out, refer to section 10 (1), 11 (2), 11 (2A), section 12 and section 62E of the Retail Leases Act. That's effectively in the area of non-disclosure and then in terms of the other causes of action we have contractual breach causes of action under the lease, in particular clause 9.1 which is the covenant as to quiet enjoyment. Also clause 9.2A which is breached, to maintain the building. Clause 9.3 which is a covenant to keep the building in sound structural condition. We also impute an implied business term under the criteria required for that and the implied business term is to the effect that the business of TianyD would be able to use the premises to conduct business. That's set out in the action claim for relief. We also rely upon two common law claims, one is common law mistake as well as frustration. That's all I intended to say by way of opening, Member.'
2. Fasako's case as encapsulated by Ms Avery-Williams, in essence is that TianyD had no cause of action to terminate the Lease. Fasako seeks specific performance of the Lease. As put by Ms Avery-Williams in her cross respondent submissions on the cross claim, (77) and (79): TianyD points to a failure to disclose that the pumps were 'inadequate' for the building and for the premises, irrespective of fit-out. This was not a matter upon which Fasako was aware at any time prior to receipt of Mr Moon's report in these proceedings. Rather, Fasako had received each year the annual safety compliance certificate. In the circumstances, Fasako could not have made such disclosure. Again, this alone is not a matter which has caused TianyD to suffer loss: given it could be rectified by an FES which was obtained at Fasako's cost. It was TianyD's failure to seek such a performance solution that has caused loss and damage in this case. The report by Defire in 2010 does not deal in any way with the pumps, sprinkler head numbers or sprinkler configuration in the premises, the subject of the Lease.
3. Further, Ms Avery‑Williams asserts that Fasako relies on the terms of the Lease in particularly clauses 7.2, 7.3 and 7.8 that TianyD had no right to terminate the Lease.

Terms of the Lease

1. The following clauses are relevant: 7.2 Lessee to obtain consents The lessee must: (a) obtain development consent from Sydney City Council for its use of the premises and obtain and comply with all legal requirements in the fit out, partitioning, standard of finish and use of the premises; (b) obtain the written consent of the lessor to the design, fit out and standard of finish and presentation of the premises; (c) obtain the prior written consent of the lessor to any change to the design, fit out, standard of finish and presentation of the premises; and (d) comply at its own cost with the Building Code of Australia in its fit out, use and occupation of the premises. 7.3 Lessees' work (a) If at any time after the commencement of the term the lessor gives consent to the lessee for any building and fit out work at the premises, the lessee must comply with the conditions that the lessor imposes: (subclauses (1)-(7) include various requirements with respect to the fit out). (b) In doing any building and fit out work of the lessee, the lessee must: (1) comply with all laws and the requirements of authorities. 7.8 Not to interfere with services (a) The lessee must not interfere with or overload any of the services that pass through, under or over the premises and must pay the cost of rectifying any damage which it causes to those services; (b) If, as a result of the installation of the lessee's partitioning or fit out, any change is required to the: (1) sprinkler system; (2) air-conditioning ducting; or (3) any other building services; the lessee must pay the costs of those changes. 7.16 The Lessor gives no warranty as to the use to which the premises may be put. The Lessee has entered into this Lease with fully knowledge of, and subject to, any restriction on the use of the premises. 9.1 If the lessee pays the rent and performs the conditions of the lease, then subject to any right of the lessor, the lessee may peacefully and quietly enjoy the premises without any interruption from the lessor.
2. Fasako through Hunt and Hunt and its consultants throughout discussions with TianyD both in meetings and in letters and in particular prior to the termination of the Lease by TianyD continued to assert that any problem with the sprinkler system was as a result of TianyD's fit out requirements and consequently pursuant to clause 7.8(b) TianyD was responsible to rectify and pay for any upgrade or requirements with respect to the pumps and the sprinkler system.
3. This in turn led TianyD to look to various breaches by Fasako under the Retail Leases Act 1994 (RLA) in particular the requirement of disclosure, as set out in ss 11 and 12 of the RLA. Those sections state as follows: 11 (2) If a lessee was not given a disclosure statement as required by subsection (1) or if the disclosure statement was given to the lessee was incomplete or contained information that at the time it was given was materially false or misleading, the lessee may terminate the lease by notice in writing to the lessor at any time within six months after the lease was entered into, unless subsection (3) prevents termination … 11 (3) The lessee cannot terminate the lease under this section on the ground that the disclosure statement is incomplete or contains information that is materially false or misleading if: (a) the lessor has acted honestly and reasonably and ought reasonably to be excused for the failure concerned, and (b) the lessee is in substantially as a good a position as the lessee would have been if the failure had not occurred. 12 A provision of a retail shop lease that requires the lessee to pay or contribute towards the cost of any finishes, fixtures, fittings, equipment or services is void unless the liability to make the payment or contribution was disclosed in a disclosure statement given to the lessee in accordance with this part.

Submissions on behalf of TianyD

1. Ms Fishburn submits that TianyD relies on ss11(2) and 12 of the RLA in that it was entitled to terminate the lease based on the non-disclosure of financial impediments.
2. The argument as put by Ms Fishburn that as Fasako relies on clause 7.8(b) of the Lease to pass on any costs relating to the upgrade of the sprinkler system, as a result of TianyD's partitioning or fitout, then TianyD argues that this should have been specifically disclosed in the Disclosure Statement and a failure to do so renders the clause in the Lease void pursuant to s12 of the RLA.
3. The effect of s11(2) of the RLA is that if there was something 'incomplete' or 'materially false and misleading' in a Disclosure Statement, a lessee can terminate within six months of entry into the retail lease provided the factors in s11(3) are not engaged.
4. The submission continues that clause 7.8(b) of the Lease imposes upon TianyD a financial obligation to pay the costs of any changes to the sprinkler system, air-conditioning, ducting or any other building services as a consequence of the installation of the lessees' partitioning or fitout.
5. As clause 7.8(b) of the Lease amounts to a clause that will require TianyD to 'pay or contribute towards the cost of… equipment or services' as it requested the lessee to pay these changes required then that obligation to contribute to the cost was not disclosed in the disclosure statement.
6. Ms Fishburn says that an obvious area in which it ought to have been disclosed in the Disclosure Statement is at point 16 under the heading 'Other Monetary Obligations and Charges' which states 'outline any costs arising under the lease including up-front costs or other costs not part of the outgoings and not referred to elsewhere in this Disclosure Statement'.
7. Pursuant to s12 of the RLA then according to Ms Fishburn, clause 7.8(b) is void and its omission in the Disclosure Statement renders the Disclosure Statement 'incomplete' for the purposes of s11(2). As the Disclosure Statement was incomplete TianyD then was entitled to terminate the Lease pursuant to s11(2) of the RLA. The termination notice was conveyed on 13 September 2017 within six months of the lease commencement.
8. Ms Fishburn further submits that the exemptions referred to in sub section 11(3) do not apply to exempt Fasako from its obligations to make disclosures. Ms Fishburn submits that it cannot be said that TianyD is in 'substantially as good a position as the lessee would have been if the failure had not occurred' as by entering into the Lease as TianyD found itself leasing premises it could not use at all. Further, if the failure had not occurred TianyD would not have entered into such a lease, that is to say if TianyD had been told up front that any changes to the air conditioning, or to the sprinklers including the upgrade of the pump in the building was to be at the expense of TianyD.
9. Secondly it cannot be said that Fasako had acted both 'honestly and reasonably and ought to be reasonably excused for the failure concerned bearing in mind that the legal adviser Mr Boyce was both a director of Fasako (it's only Australia director) a signatory to the Disclosure Statement and Lease and the author of correspondence enclosing these documents and pointing to the provisions of clause 7.8(b) of the Lease to impose the obligation on TianyD for the upgrade of the pumps or to pay for a fire engineer's solution.
10. Ms Fishburn points to the second reading speech introducing amendments to the RLA in 2016 where it was stated in Parliament: 'The government is committed to ensuring parliament's original intent for upfront disclosure of the financial cost of the lease should be mandated as a foundation of the Act'.

Other causation - breach of implied term in the Lease

1. Ms Fishburn argued that not only was TianyD entitled to terminate the Lease pursuant to its rights under s11(2) in the RLA but also it could terminate the Lease pursuant to a breach of an implied term. TianyD submits that there was an implied term in the Lease to the effect that TianyD would be able to use the premises to conduct retail business and this was an essential term of the Lease, which was breached entitling TianyD to terminate.
2. Ms Fishburn submitted that TianyD satisfies the conditions necessary for the implication of such term following the test set out in BP Refinery Westernport Pty Ltd v Shire of Hastings (1977) (180 CLR 266 and 282‑283, approved by the High Court in Codelfa Constructions Pty Ltd v State Rail Authority of NSW (1982) HCA 24 and 347.
3. In summary the test requires that the implied term is: 1. reasonable and equitable; 2. necessary to give business efficacy into the contract, so that no term will be implied if the contract is effective without it; 3. so obvious it goes without saying; 4. capable of clear expression; and 5. not contradict any express term of the contract.
4. Ms Fishburn submits that all the elements of the test are found in these facts in that the implied term was both reasonable and equitable to expect to conduct a business from the premises, it gives business efficacy to the terms of the Lease in that this is a commercial transaction where TianyD wishes to trade from the premises and Fasako is to collect rent, so it is obvious that it goes without saying that the premises were to be fit for the purposes of retail. Further, it is within the terms of the bargain struck between the parties and accordingly implied in the Lease and it is capable of clear expression plainly that a business can be conducted from the premises.

Quiet enjoyment, doctrine of frustration and other causes

1. Ms Fishburn also points to clause 9.1 of the Lease regarding quiet enjoyment. Ms Fishburn states that there was a breach of. This is a breach of quiet enjoyment rendering TianyD able to terminate the Lease on notice.
2. Ms Fishburn also points to clause 9.2(a) of the lease which provides that the lessor must maintain and keep the building in good order and condition. Ms Fishburn says that the pumps were inadequate and as a consequence it failed to maintain the building and there was a serious breach of its obligations under clause 9.2(o) (as noted in clause 9.2(c) if there is a breach the lessee is not entitled to terminate the lease but Ms Fishburn says that if there is a breach of the covenant then TianyD is entitled to compensation.
3. A further argument put forward by Ms Fishburn entitling TianyD to terminate the Lease is pursuant to the doctrine of frustration in that the parties were frustrated to conduct the business of renting the premises, of conducting a retail business and for Fasako to obtain rent. The substance and condition of the Lease was that it was to provide retail premises for a commercial entity from which to conduct retail business, such premises to be of an adequate condition to facilitate the retail business operation. This was prevented as a result of the inadequacy of the pumps supplying the sprinklers.
4. Ms Fishburn says the longevity of the frustrating event was not short lived and it was not temporary or intermittent. Rather it was for the entire duration of the Lease until termination. Mr Moon's evidence (which Ms Fishburn says was unchallenged) is that the Fire Safety Certificates are void being based on data in the assumed 'system demand' which is erroneous. Accordingly occupation of the premises, even now, is without legal basis. The doctrine of frustration can operate in respect to leases, include a retail lease having regard to the proposition that leases are 'ordinary contracts' (see Progressive Mailing House Pty Ltd v Dabali (1985) 157 (1985) 157CLR 17).
5. Ms Fishburn submits that TianyD accepts that the doctrine of frustration, as applicable to leases, applies in only very limited cases. However, the facts of TianyD's predicament, namely the total inability to conduct business from the premises, coupled with Mr Moon's evidence that the Fire Safety Certificates are void, are of such an exceptional nature and warrant application of the doctrine of frustration. TianyD seeks a declaration of the Lease was validly terminated as a result of it being discharged due to being frustrated.
6. TianyD also makes a claim for compensation pursuant to s34 RLA. Section 34 provides if the lessor: 1. inhibits access to the lessee to the shop in any substantial manner; or 2. … 3. unreasonably takes any action that causes significant disruption of, or has a significant adverse effect on, trading of the lessee in the shop, or 4. 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, or 5. fails to rectify any breakdown of plant or equipment under the lessor's care or management… 6. … 7. and the lessor does not rectify the manner as soon as reasonably practicable after being requested in writing by the lessee to do so, the lessor is liable to pay the lessee the reasonable compensation from any loss or damage suffered as a consequence.
7. Ms Fishburn submits that the factual circumstances surrounding the inadequacies of the pumps satisfies all the subsections in s34 entitling compensation to TianyD. The inadequacy of the pumps amounted to Fasako's inhibiting TianyD's access to the premises in a substantial manner because TianyD was prevented from operating at the premises at all and in any capacity.
8. In relation to subsection 34(c) Ms Fishburn submits that Fasako's conduct in respect of the pumps was unreasonable. First the premises were let in circumstances where the pumps were (and still are) inadequate and the Fire Safety Statements are void. Second, in circumstances where Fasako refused to replace the pumps, including in circumstances of TianyD offering to share the cost of the replacement pumps amongst all the tenants in the building this was unreasonable. Further, Fasako continued to rely upon clause 7.8(b) of the Lease to the effect that it was TianyD's total responsibility to rectify inadequacies of the pumps.Ms Fishburn submits that TianyD suffered 'significant disruption' and/or 'adverse effect' as it was plainly unable to operate the business from the premises despite significant financial investment in the fitout, equipment and stock and the opportunity cost amounting to $184,988.05 as well as the loss of time over six months and business reputation being amongst other things the advertisement for a new shop to commence at the premises which never materialised.
9. TianyD relies on sections 62E and 66D of the RLA with respect to claims for compensation arising from misleading and deceptive conduct by Fasako. The misleading conduct as alleged is that Fasako advertised the premises as having multiple potential uses, the omission to disclose the 2010 Defire report, failure to disclose that the premises were not able to be used due to the problems with the sprinklers and the pumps other than as open plan fitout and ultimately failure to disclose the inadequacies of the pumps in the building.
10. TianyD submits that Fasako breached the covenant of quiet enjoyment contained in clause 9.1 of the Lease by not fixing the sprinkler/pump problems in the building and consequently not allowing TianyD to undertake its fitout.

Submissions of behalf of Fasako by Ms Avery-Williams

1. Ms Avery-Williams submits that firstly there were mischaracterisations and misstatements of fact on behalf of TianyD. This relates to the brochures and information imparted by TianyD through its agent Ms Zhang to the directors of Fasako in particular Mr Chan. What Ms Avery-Williams submits is that after the provision of the brochure by Ms Zhang, the scope of TianyD's services to be provided from the premises broadened to include a number of services that would not require full height partitions including hairdressing (wash, cut, blow, and oil treatment), make up services and nail care services. All of the pre-lease correspondence was silent on the fact that full height partitions were required, that private treatment rooms were required. Consequently the submission is that the fit out requirements of TianyD necessitated the expenditure of money in relation to the pumps.
2. The next submission by Ms Avery-Williams in relation to TianyD's case was that at no stage did TianyD seek a performance solution in respect of the fitout of the premises. Further references made to Mr Moon's opinion that the fitout was not unusual. Mr Moon gave no such opinion according to Ms Avery-Williams. Any view expressed as to an 'unusual' fitout for a beauty salon would be beyond his expertise as a fire engineer. His opinion was clarified in cross-examination as follows: Avery-Williams: Now in your report at paragraph 5.31 at question 10 you are asked whether the proposed floor plan for the use, that is TianyD's proposal, is an irregular or unusual proposal. You don't have any experience in designing beauty salons to say whether or not that's an irregular or unusual proposal do you? Mr Moon: The irregular or unusual being considered with respect to trying to find out what the system demand for that area is, so regardless of what the use might be, the method of determining the system demand remains the same. So that's why it's unregular or unusual. Avery Williams: So you say it's not irregular or unusual to investigate the demand for fire sprinklers? Mr Moon: It's not. Avery-Williams: And that's what you mean? You don't mean the actual fitout itself is unusual? Mr Moon: No, no, no. Avery-Williams: Right, thank you.
3. Further, Ms Avery-Williams challenges any Jones v Dunkel inference to be taken against the fact that Mr Boyce did not give evidence. Mr Boyce is a lawyer and while he is a director of Fasako alone that is not sufficient. There is no evidence that Mr Boyce had any dealings prior to entering into the lease with the agent, Ms Zhang, nor did he receive at any time the promotional brochure, nor was he involved in any role with TianyD in respect of their proposed fitout and it could not be said he was aware at some time earlier with any issue in respect of the ability of the fire system to service shop 7, either as proposed to be fitted out by TianyD or at all. The mere fact that Mr Boyce authored solicitor's correspondence in relation to the lease can be neither a reason to call him to give evidence, nor a reason to draw any inference in respect of a failure to do so.
4. Ms Avery-Williams makes the point that a new matter is now relied on that was not necessarily set out in the actual cross-claim from TianyD, giving rise to purported right to terminate the Lease under s11(2) of the RLA in that the Disclosure Statement was incomplete 'or materially false and misleading' because it did not identify the matters set out in clause 7.8(b) of the Lease, namely that if as a result of the lessee's partitioning or fitout any change was required to the fire sprinkler system, the lessee must pay the cost of those charges.
5. Ms Avery-Williams says that firstly this was not pleaded in the statement of cross-claim nor identified in Ms Fishburn's opening remarks and not run during the hearing. Secondly it cannot be maintained as a proposition of law, or of fact. In this regard the content of the lessor's Disclosure Statement is identified in schedule 2 to the RLA. It can only be said to be incomplete, or materially false or misleading if some deficiencies identified having regard to those contents. No such deficiency has been identified. Indeed, in response to question 9.2 'Is the lessor providing any contribution towards the costs of the lessee's fit-out' the answer was no. The effect of the submissions made on behalf of TianyD is that in every lease entered into, the lessor would be required to guess at every possible fitout cost that might arise in an as yet unknown fit out to be designed by the lessee.
6. Further Ms Avery-Williams submits that if there had been any relevant nondisclosure for the purposes of s11(2), then Fasako was entitled to rely on the exceptions set out in s11.3(a) and (b).
7. Ms Avery-Williams draws on the evidence from Mr Zhu that he was aware, even before entry into the Lease, that the costs of renovations including changes to the fire sprinkler system were required to be borne by TianyD. So much was made plain in the offer conveyed by Ms Zhang to Mr Pak Ka Chang on 24 February 2017 by special condition 6 of the letter of offer of lease and further set out in the fitout guide provided by Mr Arthur Chen on 8 March 2017 which relevantly provided: 'sprinkler alterations are to be carried out by the base building contract at the tenant's cost'. Consequently as Mr Zhu and TianyD was at all times represented by a lawyer and advised by the same lawyer on the terms of the lease (including clause 7.8) the lessee's disclosure statement signed by Mr Zhu identifies, in answer to question 5, that TianyD had relied on information in the Lease, which information of course included clause 7.8 of the Lease, the Lessee's Disclosure Statement.
8. In the written submissions Ms Avery-Williams says as follows: It cannot seriously be suggested that TianyD was unaware of its requirement to bear the cost of any change to the sprinkler system arising as a result of its partitioning or fit out, with the result that they are now in anything other than 'as good a position' as if the alleged failure had not occurred. It was, as a matter of fact, aware of the requirements. There is no evidence from TianyD that it would not have entered into the lease if it had been told in the disclosure statement that it was responsible for the cost of any changes to the sprinkler system as a result of its fit out as identified in clause 7.8. Finally clause 7.8 is not a clause which attracts the operation of s12 of the RLA. It is not a clause that 'requires' the lessee to pay or contribute towards the cost of any services. Rather, it provides a contingent liability which only arises if the lessee's fitout or partitioning so demands.
9. In relation to the submission by Ms Fishburn of an implied term in the Lease, such term being words 'to the effect that TianyD would be able to use the premises from which to conduct retail business … in other words that the premises were able to be used for a retail purpose', such implied term was not breached, if it was in fact so implied. Ms Avery‑Williams says in her submissions: 'Assuming, for present purposes, such a term was implied into the lease, it has not been breached. The premises can be used to conduct business, and to conduct a retail business. This is an example of the cross applicants failing to deal with the accepted FES. It is sufficient to note here that for the reasons set out above, namely the existence of an accepted and unchallenged performance solution, the premises were able to, and are able to, be used for the conduct of a retail business, including a retail business with a fit out and partitioning to the extent desired by TianyD.
10. With respect to the claim for breach of the covenant of quiet enjoyment Ms Avery-Williams points out that the opening words of clause 9.1 of the Lease state 'if the lessee pays the rent'. The fact of the matter is that TianyD has paid no rent. Further the concept of 'interference' is a reduction in the lessee's entitlements beyond the scope of the condition in which he or she has taken the premises. Here, there has been no reduction in those entitlements. As a matter of fact, there had been no change at all in the premises or TianyD's use or enjoyment of them since March 2017.
11. In relation to the doctrine of frustration there is a requirement for a supervening event to frustrate the parties' endeavour. In this case there is no such supervening event, even on the arguments of TianyD, if the pumps were already ineffective from the beginning of the Lease then the doctrine of frustration does not apply.

Waiver of the termination or affirmation of the Lease

1. Ms Avery-Williams submits that if the Tribunal finds contrary to her submissions that the termination was effective, then Fasako argues that the Lease was subsequently affirmed or the termination was waived, by the inconsistent conduct of TianyD.
2. Waiver has been defined as 'an intentional act done with knowledge whereby a person abandons their right by acting in a manner inconsistent with that right' (see, Commonwealth v Verwayen (1990) 28 CLR 394 at 487 per Mason CJ). Accordingly the conduct on which Fasako relies to make the argument of waiver is as follows: 1. TianyD through Mr Zhu by attending a meeting on 18 October 2017 and agreeing in the formation of an action plan pursuant to which Fasako would commission a FES at its own cost, such report to be peer reviewed by D-Fire; 2. By Mr Zhu continuing to correspond with Andy Chan and indicating to him that TianyD was willing to continue with the lease and that TianyD would bring a design team from China to Sydney; 3. TianyD's consultant Mr Hasham continued to engage with Todd Jackson from CI Australia (the building managers) as to the design and fit out of the premises; 4. the 'without prejudice' correspondence dated 22 December 2017 sent by the lawyers for TianyD proposed either that the lease be mutually terminated or a variation of lease be entered into.
3. Ms Avery-Williams further says that the above indicates that by TianyD's action, TianyD was proceeding on the basis that the lease remained on foot and had not been effectively terminated. In the solicitor's correspondence on behalf of TianyD there was no assertion that the lease had been effectively terminated in September 2017.

Claims for compensation

1. Fasako disputes the claims for compensation made out by TianyD under ss34, 62D and 66E of the RLA.
2. In relation to the claims under section s34 of the RLA, Ms Avery-Williams submits that no liability to pay TianyD reasonable compensation for loss or damage suffered arises pursuant to subsections 34(a), (c), (d) and (e).
3. In relation to s34(a) Ms Avery-Williams submits that Fasako has not inhibited access to the shop at any substantial manner, it has not inhibited access as TianyD has had possession of the shop pursuant to the lease.
4. Ms Avery-Williams submitted that it ought not to be forgotten that the base building fire systems existed at the time the Lease was entered into (albeit the limitations were unknown). Annual Fire Safety Certificates had been issued to Fasako. Moreover, it was always available to TianyD to take action including the commissioning of a performance solution (as ultimately occurred at the cost of Fasako).
5. Similarly it cannot be said that Fasako has taken any action, unreasonably, that caused significant disruption of, or had a significant adverse effect on, trading of the lessee. The argument put by TianyD regarding Fasako's failure to operate the building pumps is based on the very question that the Tribunal is to consider. Fasako's position is that it had no obligation to upgrade the building pumps, particularly as there was an alternate solution available (being the preparation of a FES).
6. The same position applies in relation to s34(d) where TianyD has argued that Fasako has breached that subsection by failing 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 acceptable causes within the lessor's control. Fasako's answer to this is that the refusal to update the building pumps was not in the circumstances unreasonable where an accepted performance solution was able to be prepared. The situation may be different if no FES could be obtained. However according to Ms Avery-Williams that is not the circumstances in this case.
7. In relation to subsection 34(e) there was no breakdown of plant or equipment under the lessor's care and therefore no claim can arise.
8. The claims under sections 62D and 62E are defended by Fasako on the basis that there was no misleading conduct by Fasako. The premises are zoned Class 6 which allows for multiple potential users, the report from Defire would be of no particular assistance to TiarnyD as it did not deal with the pumps in the building nor the sprinklers in the premises but only in relation to recommendations to make the building BCA compliant in other areas and in any event Fasako relies on the Annual Fire Safety Certificates that the building was compliant and such Certificate was available for inspection of the building.
9. Further, there was no breach by Fasako of the covenant of quiet enjoyment pursuant to clause 9.1 of the Lease. TianyD was able to conduct its business from the premises once it completed its fitout which was in its hands, not Fasako's. There was the ability, as later demonstrated to undertake a fitout with a performance solution.

Defence by TianyD

1. In relation to the assertion by Fasako that TianyD through its conduct post the termination of the lease waived the termination, Ms Fishburn submits that this is not the case. Ms Fishburn says it is not the case in that if one looks at the decision in Commonwealth v Verwayen (1990) 20 CLR, the principal regarding waiver is relevant to exercising the right to terminate not necessarily the conduct post the termination. TianyD elected to terminate and issue the termination notice, abandoning the right to affirm the lease. Thereafter it did not retract its election to terminate.
2. On the facts the post termination contact and negotiations between the parties or their representatives was of a limited nature according to Ms Fishburn. The contact was wholly initiated at the behest of Fasako and its consultants including the nephew of Mr Pak Ka Chan. Consistent with its unequivocal conduct at the time of its election to terminate and thereafter, TianyD returned the keys forthwith and never again had possession of the premises and did not ever have the keys returned to them.
3. The intervention of Mr Chan on behalf of Fasako was at Fasako's instigation and consistently Fasako sought to have TianyD withdraw the termination notice. Fasako points to the meeting on 18 October 2017 where Fasako agreed to commission a FES at its own cost.
4. Ms Fishburn says this conduct is inconsequential because firstly it was instigated by Fasako itself and secondly it took place over a month after the date of the unequivocal election to terminate the lease, and thirdly it related to a process (the obtaining of a FES) which in itself gave no certainty as to the question of whether the premises would be rendered suitable. It was merely an exploratory attempt the cost of which was wholly to be paid for by Fasako.
5. In relation to the participation of Mr Zhu, the allegation is that he was 'willing to continue with the lease'. Such proposition arises out of the conversations with Mr Chan. There can be nothing in the fact that a design team from China was coming to Sydney especially in the circumstances where Mr Zhu indicated that he was looking at alternate premises to open the first shop namely in Chatswood.
6. As noted in the evidence some steps were taken by Fasako after the termination of the Lease (although the sufficiency of the steps are questionable having regard to the evidence of Mr Moon). This is irrelevant given termination had already been effected and any discussion between the parties after this time was only at its highest, in fact commercial negotiations. Mr Zhu's evidence was consistent that he had not withdrawn the termination notice and that the period that followed the termination was only what he considered to be commercial negotiations. Avery Williams: And Mr Zhu in September 2017 you instructed your lawyer to send notice of termination for this lease? Zhu: Yes Avery Williams: But after that date you continued to engage with the landlord to find a solution for your fitout. Zhu: No, I didn't approach the landlord actively, it is the landlord who called me… Avery Williams: Right and you would agree with me that there was an action plan developed to engage a fire engineer? Zhu: No, it is the landlord that said they were willing to solve this problem arising and then I agreed to the meeting and at the end it is not resolved as you can see and I think they are setting a trap for me. Avery Williams: But you agreed that the landlord should engage a fire engineer? Zhu: If the landlord is willing to solve the problem for us I said yes, that we can have a talk. If they can do something substantial real help for us then that's okay. But during this process the landlord was just trying to have our lawyer to retract or withdraw our termination notice and trying to give the keys back to us and we refused those requirements and Tom from management said that. Avery Williams: I object, this is not a response to the question. Mr Zhu, do you agree or disagree that after September of 2017 you continued to take steps to proceed with the lease of this shop? Zhu: Please refer to page 954, I said that what we have discussed is verbal, it doesn't mean the content of the agreement. I have made it very clear that this is just some verbal discussion, if we want to put it into formal we have to put it into the legal binding agreement.

Implied Terms of the Lease

1. Ms Avery-Williams submits that there was in the Lease an implied 'duty to cooperate'. This is expanded in that there is implied into every contract a duty of 'cooperation' which imposes on both parties an obligation to do all things that are necessary to enable the other to have the benefit of the contract (see Cheshire & Fifoot Law of Contract (10th ed) Seddon, Bigwood, Ellinghaus) at 10.4.1 and the authorities there cited. That duty requires performance to act necessary to preserve only the benefit of the contract, the scope of which is defined by what has been promised under the contract. Ms Avery-Williams puts forward the fact that the implied duty to cooperate placed on TianyD clear obligations under clauses 7.2, 7.3 and 7.8 of the Lease to comply with the Building Code of Australia, to pay the cost of renovation and fitout, and, if any change was required to the sprinkler system by reason of its partitioning or fitout, to pay the costs of those changes, including the cost of obtaining a fire engineered solution.
2. Ms Fishburn states that in turn Fasako was in breach of this implied duty to cooperate by denying TianyD the benefit of the Lease. Not only did TianyD not have the 'full realisation of the bargain' it had zero realisation. Consequently TianyD suffered as a result of Fasako's failure to cooperate.

Pumps in the building and sprinklers in the premises

1. The Tribunal in reviewing the totality of the evidence notes in particular the report and evidence of Mr Steven Moon. His position is that the pumps in the building are defective and that the Annual Fire Safety Statements are incorrect based on the collection of wrong data relating to the flow system. His conclusion at 1.4 of his report is that the fire sprinkler system in the premises is non-compliant with the Standard.
2. Mr Moon was strenuously examined in relation to his findings. That is why I have gone to some length to reproduce his evidence. He was adamant about the inability of the pumps to service the premises and in his view the building was suspect from a fire safety point of view. His view on this issue follows his earlier involvement with the building in 2016 where he had already come to the view that the pumps were inadequate prior to his engagement to do a report in October 2018.
3. The non-satisfaction by the building of certain BCA requirements relating to fire safety as of 2010 was not something new. This was in fact contained in the Defire report in 2010 and the recommendations both active and passive were repeated in every Annual Fire Safety Statement. However it is noteworthy that in the Defire report there was no mention of the inadequacy of the pumps and the sprinklers.
4. Mr Moon, under cross-examination from Ms Avery-Williams, accepted that a fire performance engineered solution could be a satisfactory result for the occupation of the premises by TianyD. The Tribunal finds that Mr Moon accepted that a performance engineered solution either arranged by Fasako's consultants Warren Smith & Partners or any hypothetical performance solution could be a satisfactory solution. However Ms Fishburn says that such a solution could not be relied upon and was suspect. However, the solution provided by Fasako or any hypothetical solution were not tested in evidence as according to Ms Fishburn such solutions are not relevant because they came after the purported termination of the Lease..
5. The Tribunal has been asked by TianyD to take adverse inferences pursuant to Jones v Dunkel that a number of witnesses for Fasako were not called such as Mr Boyce and that their evidence would not assist Fasako. The Tribunal agrees with the submission from Ms Avery‑Williams that Mr Boyce would not have assisted the Tribunal with any further evidence other than his written letters which were in evidence in any event and consequently no adverse inference will be drawn. Further, it is also unlikely that the agent Ms Zhang could provide any relevant information to the Tribunal.
6. It is open to the Tribunal to also take a Jones v Dunkel inference that no experts were called by TianyD to challenge the fire engineer performance solution obtained by Fasako through Warren Smith & Partners. It is open to the Tribunal to accept that solution as being an appropriate alternative solution to handling the fire sprinklers for the fitout of TianyD in the premises. Further, while TianyD continually asserted that the pumps in the building were inadequate and did not comply with BCA requirements TianyD produced no evidence from any Council or fire authority to support the assertions.
7. The Tribunal is not convinced that the two propositions are mutually exclusive. That is, the pumps for the building were inadequate (and the Tribunal only has Mr Moon's evidence on that issue) the premises could be fitted out by TianyD in accordance with their fit out requirements, in particular relating to the number of sprinklers and the full length partitioning. Throughout the relationship with Fasako and during these proceedings proceedings TianyD maintained that the two propositions are mutually exclusive. It is put by TianyD that assuming the pumps to the building supply water to the sprinklers in the premises are inadequate then TianyD could not undertake its fitout.
8. There was in fact a performance engineered solution resolved by Fasako's consultants. As mentioned in paragraph 43 of these Reasons the recommendation from Warren Smith & Partners was that a qualified fire engineer be engaged to provide a performance solution to use AS21185.1-2017 standard. The alternative solution will allow the tenancy to use the existing town's main connection and the existing pump system along with the proposed design without further base building upgrade. That performance engineered solution was qualified as satisfactory by Advanced Building Approvals, the engaged consultants by TianyD for PCA and peer reviewed by Red Fire.
9. The Tribunal notes that Mr Moon's report and his evidence was predicated on his assumption, as stated in paragraph 5.34 of his report (as set out in paragraph 66 of these Reasons) that the fire safety standard that applied to the building was AS2118‑199 at the time of completion of the building and continued to apply at the time that the Lease was entered into between the parties. However, Fasako's consultants Warren Smith & Partners took a different view that the relevant Standard to be used for the premises was to be compliant with AS21185.12017. This was accepted by peer review by Red Fire and acknowledged by Advance Building Approvals, the certifier for TianyD in conjunction with the suggested performance engineered solution.
10. TianyD focused on the question whether the building pumps were adequate or not. The Tribunal believes that the real issue is whether in the normal course of events TianyD could conduct its fitout. On the evidence the Tribunal finds that notwithstanding the report from Mr Moon, that TianyD in the normal course of events would have been able to undertake its particular fitout by use of a fire engineered solution.

Termination of the Lease

1. This brings the Tribunal to consider the critical issues, as asserted by Ms Avery-Williams, that for TianyD to be successful, it must have a right to terminate the Lease. Termination of the Lease is a very significant event and not to be undertaken without justification as a wrongful termination would be seen as repudiatory conduct by TianyD.
2. Ms Fishburn says that TianyD had such a right under s11(2) of the RLA because of nondisclosure in the Lessor's Disclosure Statement. While Ms Avery-Williams takes issue with this claim by TianyD as not being earlier pleaded, the Tribunal is prepared to consider the issues raised. There were in fact, in my view two nondisclosure issues. The first is nondisclosure of clause 7.8(b) of the Lease, that is the clause under which Fasako maintained that it is not responsible for any costs of the fit out. The Tribunal notes that a draft lease was in fact submitted to TianyD as part of the Disclosure Statement, and no doubt in that Lease was clause 7.8 as set out. The second alleged nondisclosure was the Defire report of 2010. On close examination of that report, I find there is no mention of any alleged failure of the pumps or sprinklers, particularly in relation to Shop 7. The report, as I have dealt with earlier, focuses on particular non-compliant issues in the building relating to fire safety and provided recommendations for the building owner to follow, to ensure that the building was compliant with BCA requirements. These recommendations are repeated in every Annual Fire Safety Statement being both active and passive recommendations. The Fire Statement is to be prominently displayed every year on the building.
3. The Tribunal finds that there was no failure by Fasako to disclose or not disclose anything in the Disclosure Statement under s11(2) of the RLA. Consequently TianyD had no right pursuant to s11(2) of the RLA to terminate the Lease. Further, and incidentally, there was no disclosure on behalf of TianyD of any representations such as those that were imputed to Fasako by way of knowledge of TianyD's requirements for fit out, upon which TianyD alleges it relied on in the lessee's Disclosure Statement. The Statement is silent.
4. Further, TianyD alleges that pursuant to s12 of the RLA, clause 7.8(b) of the Lease is void because it is contrary of s11 as it was not disclosed in the Disclosure Statement to be an expense by the TianyD. In my view such a clause as clause 7.8 is generally found in most if not all leases both retail and commercial. It is not an unusual clause, and not unusual in the costs of alterations to the building as a result of a lessee's fit out is usually passed on to the lessee. Most lessees accept this. In fact Mr Zhu, in his cross examination was quite comfortable with the fact that yes, TianyD would pay for the costs of its fit out and any costs caused to the building as a result of that fit out.
5. Further, consequent upon Warren Smith & Associates and Red Fire on behalf of Fasako determining a fire engineered solution that could be used by TianyD to accommodate its fit out and not cause any alterations to the building (thereby possibly invoking clause 7.8(b) of the Lease) the alleged nondisclosure (which is rejected) of clause 7.8 is irrelevant as there were no costs to be incurred.
6. This brings the Tribunal to the issue raised that Fasako somehow already knew or ought to have known or should have been alert to the fact that TianyD had a particular fit out consequent upon Mr Chan being so informed by a number of photos and brochure in relation to premises of TianyD in China. I reject such proposition. In my view a lessor would not be cognisant of any requirement of a fit out by a lessee nor would a lessor take any particular interest in a fit out of the lessee, unless there was a particular requirement under the Lease or in the commercial negotiations for the lessor to be so responsible. I note that in fact Fasako was making no contribution to the fit out by TianyD. Therefore there was no obligation on Fasako in any way to make any disclosure in this regard.

Implied terms in retail leases

1. The Appeal Panel in News v Cotes & Laptev [2019] NSWCATAP 110 held at 76-78: 76 However, it appears clear from the high authority discussed and followed by a unanimous NSW Court of Appeal in Alcatel Australia P/L v Scarcella (1998) 44 NSW LR 349 (CA) at 363-370, that the term is one implied by law. It is often known as the rule in Mackay v Dick (1881) 6 App Cas 251 at 263 and is regarded as a duty imposed by law on the contracting parties to cooperate on undertaking what is necessary to achieve the object of the contract - what is sometimes called loyalty to the promise or loyalty to the bargain. 77 This is a long-standing, entrenched and distinct duty in a term implied by law, in contrast to the more contentious implications of terms of good faith and fair dealing. It is a concomitant of the term implied by law to exercise a contractual power in good faith and for proper purposes (and, more controversially, reasonably) that are discussed at the same passages from Alcatel. 78 The primary member with respect therefore spoke too broadly when he said at [50] 'There is no law requiring parties to be cooperative' if he was intending to exclude such an implied term.
2. I shall refer to this implied term as loyalty to the promise or loyalty to the bargain.
3. The Appeal Panel in Georges Spice Pty Ltd v Southern Highlands Rental Pty Ltd [2015] NSWCATAP 191 at [31] held: The Appeal Panel stresses, however, that whether such a term would be implied into a retail lease (or any lease at all) will depend on the factual circumstances of each case. The authorities indicate that courts are hesitant to imply terms into leases. Ordinarily, there is no implied covenant that leased premises will be fit for any particular use, even if the lease contemplates use of the demised premises for a particular purpose: Advanced Fitness Cooperation Pty Ltd v Bondi Diggers Memorial Sporting Club Ltd (1999) NSWSC 264 at [93].
4. And at [34] the Appeal Panel held: We are of the opinion that, having regard to the matters below, it is so obvious it goes without saying that implied into this lease was a term that the premises would be fit for its permitted use as a restaurant from the commencement of the lease. Such a term in this case gives business efficacy to the lease: Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337 at 346-347.
5. I shall refer to this second implied term as that the premises were fit for the purpose of operating a retail shop from the commencement of the lease term.
6. Again the Appeal Panel found an implied term in a retail lease in Pampering Patisseries Pty Ltd v Fanos [2018] NSWCATAP 94 at [86]. However, in our view, there would be implied into the lease a term that the lessor's works be carried out within a reasonable time but not later than the end of the rent-free period. This is because it is clear from the surrounding circumstances that the negotiations concerning the rent-free period extended the time so as to ensure all fit out works could be completed before rent was payable. Such a term is necessary to give business efficacy to the lease is capable of clear expression and is not inconsistent with any terms of the lease: see BP Refinery (Westernport) Pty Ltd v Hastings Shire Council [1997] 180 CLR 266.
7. The first and second implied terms are relevant to the Lease the subject of this dispute. The implied term of loyalty to the promise or to the bargain is found in all leases (Mackay v Dick). In News v Cotes the implied term meant that the parties, particularly the lessor was to cooperate with the lessee, Ms News to enable her to do her fitout of the proposed restaurant in an efficient manner without hindrance. Ms News argued that the delays in approval, the required use of the lessor's tradespeople (who perhaps were unlicensed and inefficient) and overall the unresponsive attitude to the entreaties from Ms News for various requests for assistance, caused in her mind the loss that she suffered and was a breach of lease. The case put by Ms News was that the lessors breached the implied term and denied to her to gain the bargain of promise of premises from which to run her new restaurant. However, on the evidence as found by the primary member, the lessors did what they had to do, no more or no less. In fact the problem for Ms News was more the fact that the bargain struck was inadequate in terms of the time to obtain the necessary approvals to conduct the fitout in the three months rent free period allowed. It was not necessarily the fact that the lessors were not uncooperative.
8. Now turning to the conduct of Fasako and TianyD pursuant to the implied term of loyalty to the promise or bargain in this Lease, the same argument as put by Ms News was made on behalf of TianyD, that Fasako failed to allow to TianyD the bargain of the Lease. TianyD took over three months to grapple with the fire sprinkler issues for its fitout.
9. On 27 July 2017 Hunt & Hunt wrote to Avantro and pointed out that the responsibility for the Fitout lay with TianyD and offered for the consultants of TianyD to meet with the Lessor's consultants to look at a fire engineered solution. On 17 August 2017 Mr Leung informed CI Australia that "John at GNC confirmed that the proposed performance solution is acceptable by the PCA" but that Mr Zhu rejected that solution because of the costs approximated at $10,000.00 (paragraph34 of these Reasons). GNC may be the same firm of consultants that employs Mr Moon.-
10. Mr Skotadis of CI Australia on 29 August 2017 offered to TianyD while advising on the progress on the report from its fire engineer consultants that Fasako as a gesture of good faith would waive the rent up to the date of the report when received.
11. Fasako offered to consider a fire engineer solution and ultimately Fasako took responsibility for achieving a fire engineered solution to the problem of the pumps and the sprinklers in order for TianyD to obtain approval from the PCA for its fitout and occupation. This is quite in line with the expectations of parties to comply with such an implied term for the parties to keep loyalty to the promise or the bargain.
12. By the letter dated 5 January 2018 from Hunt & Hunt to Avantro, Mr Boyce sets out very clearly the building complied with Council, the fit out responsibilities lay with TianyD, that probably the proposed fit out with floor to ceiling partitions required significant consideration of fire safety issues and sprinklers, which was not raised by TianyD until well outside the three month rent free period for fit out, that the Disclosure Statement was not completed by TianyD to assert any representations of Fasako upon which TianyD relied and that in the end Fasako had found a solution to the fire sprinklers for the fit out which did not require any additional expense to TianyD. In keeping with the original bargain (consistent with an implied term of loyalty to the bargain) Fasako then offered the performance solution to the sprinklers, at no substantial cost to TianyD and certainly no imposed costs under clause 7.8(b) of the Lease and offered to increase the rent free period substantially to accommodate TianyD's delays.
13. I agree with submissions from Ms Avery‑Williams that the responsibility to undertake the fit out of the premises lay with TianyD pursuant to clause 7 of the Lease. Whatever problems were thought to be in relation to the pumps in the building, nevertheless there was available as demonstrated by the consultants to Fasako a fire engineered solution to the fit out which TianyD chose not to pursue. Similar to the position taken by Ms News, TianyD continued to blame Fasako for the delay in TianyD undertaking its fitout due to the inadequacy of the pumps. However, the Tribunal finds that Fasako did endeavour to facilitiate the Fitout by TianyD through the offers made by Hunt & Hunt and Mr Skotadis. Consequently the Tribunal finds that it was TianyD rather than Fasako that breached the implied term to deny Fasako the bargain or benefit of a five year lease to a tenant of the premises.
14. In relation to the second implied term, that the premises are fit to be used as a retail shop the first question should be as to whether such a term would be implied in the Lease. The general view is that there is a reluctance to apply such a term in lease documents as the lease document itself sets out the relationship between the parties. In fact there was a specific clause 7.16 in the Lease dealing with the use of the property which put the responsibility to TianyD to accept the use at the risk of TianyD. Consequently, in accordance with the decision in Georges' Spice I see no reason firstly to imply such a term as there was a specific term in the Lease and secondly even if the term was implied it was not breached by Fasako.
15. In relation to the claims by TianyD for the right to terminate the Lease pursuant to s34 of the RLA, firstly I agree with the submissions of Ms Avery-Williams that a breach of s34 does not entitle a lessee to terminate the Lease but only resonates in damages. Secondly I agree with the submissions as to the reasons why there was no breach of s34 by Fasako in any event. Similarly I do not find that the Lease was frustrated in any way. The doctrine of frustration relies on an intervening event after the parties had made their bargain and consequently the bargain can no longer be kept. Firstly there was no frustrating event and secondly even if it is alleged that the inadequacies of the parts were such an event according to the report from Mr Moon the inadequacy of the pats was always present.
16. Again the relation to the alleged breach of quiet enjoyment TianyD always had occupation of the premises pursuant to the Lease, there was no breach by Fasako of this covenant as it was incumbent upon TianyD to undertake its fit out. While there may have been unhelpful statements made by consultants to Fasako such as Mr Skotadis that if the pumps are inadequate then that might be the responsibility of TianyD. Nevertheless Mr Skotadis was mistaken and it was up to TianyD's consultants to find a proper solution to the problem of the fit out as the responsibility for the fit out lay with TianyD and on further investigation it would have been able to obtain a fire engineered solution. I was incumbent upon TianyD to find such a solution.
17. In relation to the claim made by Fasako that the conduct of TianyD after the purported termination of the Lease constituted waver, according to the evidence Mr Zhu he was always of the view that TianyD had validly terminated the Lease and consequently there was in my view no waiver of the termination notice by TianyD notwithstanding that they were continuing to engage albeit, may appear somewhat reluctantly in commercial negotiations in trying to better their position viz a viz the terms of the original deal. Therefore if I am incorrect in that TianyD had validly terminated the Lease then such termination stands and TianyD is entitled to damages. Whilst the damages are set out in the affidavit of Mr Zhu, if there are claims made for the cost of stock not used the Tribunal would reduce such claim by half as the Tribunal is of the view that such stock could easily have been utilised in the Chatswood shop.
18. However as I have found notwithstanding any alleged inadequacy of the pumps a performance solution was available to TianyD, it was incumbent upon TianyD in accordance with the terms of the Lease that it would undertake its fit out and it failed to do so. It had no right to terminate the Lease pursuant to the Notice of Termination. The Lease remained on foot as a result of the invalid termination. On the evidence before me Fasako continued to maintain that the Lease was on foot and did not accept the repudiatory conduct of TianyD.
19. Further, as the Lease was on foot and the Tribunal has found that there is an implied term that the parties do all that is necessary to maintain the benefit of the bargain or promise, TianyD breached that implied term by not pursuing a fire performance engineered solution that was available. TtianyD in not accepting the open offer made by Fasako through its lawyers, Hunt & Hunt on 5 January 2018 to adopt the performance engineered solution to the fit out and take up the offer of the additional months of rent free breached the implied term denying Fasako the bargain of the Lease. Fasako is entitled to damages for breach of the Lease. As these damages are not fully quantified and there may be issues of mitigation, Fasako and/or TianyD can approach the Tribunal to either have the question of the quantum of damages dealt with by way of submissions without a hearing under s50(2) of the Civil & Adminstrative Tribunal Act 2013 (NSW) or by way of a further hearing.
20. Further, Fasako in the usual manner is entitled to its costs of these proceedings to be paid by TianyD.

Directions for Cost

1. Fasako is to provide to the Tribunal and TianyD either in person or by post, submissions and documents in relation to the application for costs within 42 days of publication of this judgment.
2. TianyD is to provide to the Tribunal and Fasako, either in person or by post, submissions and documents in relation to costs 28 days after receipt of the submissions from the respondent.
3. The Tribunal intends to hear the costs application on the papers and dispense with a hearing under s50(2) of the Civil and Administrative Tribunal Act, 2013 (NSW) and the matter is to be heard on the papers. If either party seeks to be heard in person, they should advise the Registry prior to 14 days after publication of this judgment setting out their reasons why and the Registry will advise of the outcome in due course.

Orders

1. The Tribunal finds that the Notice of Termination dated 13 September 2017 was ineffective to terminate the Lease between the parties.
2. The Tribunal finds that there is implied into the Lease that each party will maintain loyalty to the promise and that TianyD breached the implied term.
3. TianyD and Mr Yao Zhu are to pay to Fasako all rent and outgoings pursuant to the Lease and damages.
4. Fasako can apply the bond held in reduction of any amounts owing pursuant to order number 3.

I hereby certify that this is a true and accurate record of the reasons for decision of the New South Wales Civil and Administrative Tribunal. Registrar 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: 15 June 2021