Submissions on behalf of Cerialis
47Mr Murr SC made the following submissions on behalf of Cerialis:
(a)Whether the premises were a retail shop ie., whether it was proposed that they would be used wholly or predominantly for carrying on a retail business - is determined as at the time that the lease was entered into, 30 April 2012. The permitted use in the lease is "commercial bakery including retail sales" the words in italics were added in handwriting, obviously at a later stage in the preparation of the lease.
(b)Nevertheless, Honings contends that because the word "bakery" is used in the Lease and because one of the items in Schedule 1 of the Act is "Bakeries or bread shops", the parties intended that the premises be used to carry on one of the prescribed businesses. But the purpose of the Act, as well as the association of the word "bakeries" with "bread shop", makes it clear that the Schedule refers to retail bakeries "a baker's shop", rather than a "building or room to bake in; bakehouse". It plainly does not refer to commercial bakeries producing for wholesale distribution.
(c)Honings supports its contention by reference to the decision in Akora (Bondi Junction ) Pty Limited v Buttrose [2008] NSWADT 275. In that case, the issue was whether premises were used as a retail bakery (with some external or wholesale distribution), or as a wholesale bakery (with some retail sales). Goods baked on the premises were made for sale through a retail shop-front, with a breakfast, lunch and dinner menu, as well as for takeaways sales. But the tenant conducted a number of other shops, and had sought to rationalise production by doing all the baking in one location. So goods baked on the premises were also sold through the other shops, and as well as that, some were sold wholesale (although the evidence did not disclose what volume or proportion).
Despite the additional baking taking place for other premises/shops, the Tribunal found "overwhelmingly on the evidence" that the premises in question were in fact being used as a (retail) bakery and/or a takeaway food shop.
(d)The issue in Akora is similar to the issue in the present case, but it does not require the Tribunal in the present case to reach the same conclusion. Indeed, the decision makes clear that whether a particular business falls within one of the Schedule 1 categories is a question of fact, the answer to which depends upon evaluation of the particular way that the business is conducted or proposed to be conducted. This is a matter to be decided on the basis of the evidence in the particular case.
(e)The primary evidence is the Lease itself, and the terms used in it. They combine a non-retail use "commercial baker" with a non-specific retail use - "retail sales". It is clear from the evidence from Mr Honings that the use intended to be covered by "retail sales" was the conduct of a café. The conduct of a café is a prescribed business ("Restaurants, cafeterias, coffee lounges, food courts and other eating places)". The provision does not require that the respective uses be carried out in any particular proportion, although the order of the words and the fact that "retail sales" was a later addition suggest that the parties intended that the predominant use be as a commercial bakery.
(f)Honings never went into possession, so the actual conduct of the business is not available as evidence of what the parties intended. So their intention must be gathered from their words and conduct at the time the lease was entered into. As always, contemporaneous documents provide the most reliable evidence, rather than affidavits or oral evidence made long after the event, when the parties are in dispute.
(g)At that time, the intention of Cerialis was that the premises would be used predominantly for carrying on the business of a commercial (ie. non-retail) bakery. The evidence in support of this includes:
(1)Until 16 March 2012, all written communication with Mr Weihart and between solicitors regarding Mr Honings' intended business referred to a bakery, a commercial bakery, or, in one case, a wholesale specialty bakery. There is not a single reference to use as a café, and no reference to retail sales from the premises.
(2)When Cerialis arranged for a formal lease proposal to be prepared and submitted to the intended lessee, the usage or permitted use was "Commercial bakery", again with no reference to café or retail sales. The document went through seven versions before it was executed. Mr Honings requested amendments, some of which were made. He did not request any change to the permitted use. The document was signed and a holding deposit was paid simultaneously with "commercial bakery" as the permitted use.
(3)On 16 March 2012, Mr Honings' solicitor requested the lessor's solicitor to amend the permitted use in the (draft) lease to "Commercial baker[y] including retail sales". The words "including retail sales" were then handwritten in the draft lease and suggest that retail sales were to be a use subordinate to the primary use of the premises as a commercial bakery.
(4)The directors of Cerialis understood the words this way. The letter from Fox & Staniland of 20 March 2012 shows this stating that the landlord will not agree to a retail lease, and in any case, "it is the landlords' understanding that the use will not be wholly or predominantly retail...".
(5)Nothing happened after that letter was sent and before the Lease was executed to alter that understanding. It was not until almost two months later on 25 May 2012 that Mr Honings' solicitor wrote saying (for a self-evidently incorrect reason) that the lease need to be a retail lease.
(h)Honings points to various documents as evidence that Cerialis or Mr Weihart knew that the premises were to be used as a café. These include two different sets of plans, as well as the development application, which Mr and Mrs Melograna signed as directors. But none of these documents clearly indicated a proposed use of the premises as a café, and certainly did not convey that that would be the predominant use. The plans were emailed to Marcel Melograna on 9 March 2012 and did not make reference to a café. So far as floor areas is concerned, they convey the impression that the bakery, including the loading dock, is far and away the most important part of the proposed business. Mr Honings acknowledged in his oral evidence that Mr and Mrs Melograna may not have had the whole of the development application at the time they executed the owner's consent.
(i)At the time that the Lease was entered into, Honings notwithstanding its contentions in these proceedings now, must also have intended that the premises would be used predominantly for carrying on the business of a commercial bakery. The evidence in support of this includes:
(i)From the very outset, Mr Honings said that he was looking for premises for a "wholesale specialty bakery".
(ii)Contrary to the evidence of Mr Honings' intention that he had in mind a use as a café, it is not to be believed that if the use as a café played any significant part in his intentions let alone being the predominant intended use it never appeared in any written communication.
(iii)None of the premises that Mr Honings inspected and considered including the subject premises were suitable for conducting a business that was predominantly a café. They were in areas made up of what Weihart refers to as "destination businesses" ie. places sought out by people wanting a particular service and visited only to obtain that service rather than general shopping areas, with a high volume of passing trade. The subject premises fronted a major traffic thoroughfare, with no street parking and, as the photographs show, limited off-street parking. The premises at Leighton Place were particularly unsuitable. Yet at the time he started negotiating for the present premises, Mr Honings said that he was "a few weeks away" from signing a lease there.
(iv)The development application that Mr Honings lodged sought fitout of the commercial kitchen and shopfront "for bakery". It did not refer to a café.
(v)Development consent was given in different terms to the original application from fitout and occupation of existing commercial premises to a wholesale bakery and café. It can reasonably be inferred that the Council would not have changed the wording on its own initiative, and that it did so on the application of somebody it regarded (rightly or wrongly) as authorised to make the application. But, however it came about:
(i)The use of the premises was restricted to "wholesale bakery" and
(ii)Mr Honings never disputed or complained about it being restricted in that way, and never sought to have the use amended.
(6)When Mr Honings instructed Mr Grogan to seek an amendment of the permitted use in the proposed lease, he requested addition of the words, "and ancillary uses including retail sales". "Ancillary" means "accessory, auxiliary" (Macquarie Dictionary), or "subservient, subordinate" (Concise Oxford Dictionary). It does not mean predominant. Even accepting that the wording was suggested by a friend of Mr Honings who was a leasing expert employed by Westfield, and that Mr Honings did not know what "ancillary" meant, there is no reason to believe that the friend misunderstood or misrepresented Mr Honings' intentions as to use of the premises. It is more likely that a Westfield leasing expert would have been very alert to the need to express the permitted use accurately and comprehensively.