Honings Bakery Pty Ltd v Cerialis Pty Ltd

The Hearing 11Ms Claire Latham appeared for Honings and Mr David Murr SC appeared for Cerialis. Affidavits were filed by Mr Luke (Lucas) Honings and Ms Suzana Zuvela, the directors of Honings, Mr Arturo and Mrs Emilia Melograna, the directors of Cerialis and by the agent, Mr Ilan (Alan) Mr Weihart.

Chronology of facts and events 12Mr Honings, director of Honings, contacted a commercial leasing agent, Mr Weihart of Morgan Davis Property Consultants, on 28 March 2011 advising that he was looking to start up a speciality bakery outlet. Emails passed between them and on 31 May 2011, Mr Honings emailed Mr Weihart "I require 3 phase, with a minimum capacity of at least 200Kw for a wholesale speciality bakery". 13Honings inspected a number of properties introduced by Mr Weihart including Leighton Place Hornsby and the premises 144 George Street, Hornsby. Honings showed interest in the premises and emailed Mr Weihart on 1 February 2012 saying "they (the Council) saw no issue apart form [sic] submitting a DA with starting a bakery in that location". 14Mr Weihart sent an email to Mr Marcel Melograna, representing Cerialis and to its lawyer, Fox & Staniland stating "Honings Bakery wish to enter into a lease direct with Cerialis for one unit now, with the intent of taking both units within the next 14 months". A draft lease proposal was prepared by Mr Weihart noting the usage as "commercial bakery". 15The draft lease proposal was sent to Honings' lawyer, Mr Michael Grogan, and further draft lease proposals were submitted between 26 & 27 February 2012. The usage was listed as "commercial bakery". In fact there were seven (7) draft lease proposals prepared. On the third draft lease proposal a special condition was added as follows "This lease is subject to Council approval being obtained for the development application for the abovementioned usage". Honings paid a holding deposit of $3,66.67 was paid on 28th February 2012. Heads of Agreement were signed. Between 5th and 9th March 2012, Honings sent plans, drafting designs hydraulics layout, preliminary floor plan, site plans and elevations to Marcel Melograna of Cerialis. 16Mr Grogan on behalf of Honings, on 12 March 2012 emailed Fox & Staniland asking that in the reference schedule to the draft lease to "amend the use to Commercial Bakery and ancillary uses including retail sales". There does not appear to be a response to this request. 17Honings sought consent from the directors of Cerialis to a development application. The development application included the description of development as "change of use; fitout of commercial kitchen and shop front for bakery and use of existing signage pole; details of proposed development description of Building; fitout of commercial kitchens and shop front for baker". The signed development application was submitted to Hornsby Council by Mr Honings. 18On 16 March 2012, Mr Grogan wrote to Fox & Staniland to amend the use in the Lease to "Commercial Baker [sic] including retail sales". On 20 March 2012, Fox & Staniland responded "Agreed. However the landlords will not agree to a retail lease. In any case, it is the landlords understanding that the use will not be wholly or predominantly retail and therefore the lease is to be a commercial lease". 19On 28 March 2013, Honings signed the Lease and it was received by Fox & Staniland on the 29 March 2012. On 7 May 2012, Hornsby Council granted development consent to Application No 232/2012 for the "fitout and occupation of existing commercial premises to a wholesale bakery and café". 20On 25 May 2012, Mr Grogan wrote to Fox & Staniland stating "We note that bakeries and bread shops are listed in Schedule 1 of the Retail Leases Act as premises governed by the provisions of the "Retail Leases Act". We also note that Clause 17 of Schedule 3 of the Act provides that business specified in Schedule 1 are to be taken to be prescribed for the purposes of the definition of a retail shop as per (a) of the definition in Section 3 of the Act. Accordingly, it follows that the lease needs to be a retail lease". 21On 30 May 2012, Fox & Staniland submitted a draft lease, retail tenants guide and disclosure statement. On 5th June 2012, Mr Luke Honings telephoned Mr Arturo Melograna and advised that Honings had decided "not to sign the retail lease provided to us". Mr Grogan then emailed Fox & Staniland stating "my clients have decided not to proceed with the lease..". 22By letter dated 7 June 2012, Fox & Staniland asserted that the commercial lease is binding on Honings. On the 8 June 2012, Mr Grogan by letter to Fox & Staniland stated that no disclosure statement was supplied by Cerialis when the lease documentation was submitted and Honings "exercises its right pursuant to section 11(2) of the Retail Lease Act and terminates the Lease".

The Evidence 23Mr Weihart, real estate agent of Morgan Davis Property Consultants, specialising in leasing of commercial and industrial property, provided an affidavit dated 14 June 2013 on behalf of Cerialis and was cross examined. In his Affidavit, at paragraph 5, he says the following: "When I first met Honings he said to me words to the following effect: 'I am looking to set up a commercial wholesale bakery. I have a family recipe from Holland for a unique product. You cannot get this product in Australia. I have shops here who are interested in buying the product from me. I am looking for premises that will be suitable for this business. What is crucial is that this property has gas or three phase electricity'." 24Mr Weihart then sets out his dealings with Mr Honings in relation to showing him certain properties and, in particular, the subject premises in which Mr Honings showed considerable interest. Mr Weihart stated that the property at Leighton Place, Hornsby was not suitable retail space and in relation to the premises, Mr Weihart says at paragraph 13 of his affidavit: "This is also in my opinion not suitable for a retail coffee shop. It is a major thoroughfare and parking is not permitted on George Street. Very few people walk past that section of George Street. There are a number of different types of businesses there such as motorcycle retail, panel beaters, blind factory and an outlet, a brothel and a bowling alley. In order to attend any one of those premises, it is necessary to park on the property of the premises or around the back of premises, but it is difficult to find parking there. It is an area which is suitable destination business. What I mean by that is, people that are looking for a particular type of outlet specifically travel to this area". 25Mr Weihart in his affidavit and under cross examination maintained that Honings was looking to set up a commercial wholesale bakery. He confirmed that in all of the draft lease proposals, the usage listed was for a commercial bakery. At paragraph 40 of his affidavit he says: "At this time (2 March 2012 when he received the signed Heads of Agreement) Honings did not mention to me that he intended to use the premises or any premises that I had showed to him for the purposes of a café. I understood that he intended to conduct business as a commercial wholesale bakery". 26The two affidavits from the Directors of Cerialis, Arturo and Emilia Melograna, dated 13 June 2013 set out the dealings that they had with Honings but it is noteworthy that the initial dealings were conducted through their son, Marcel Melograna, who was not called by either party to provide evidence. Both the Melogranas acknowledged consenting to the Development Application lodged with Hornsby Council by Honings. Annexed to the affidavit of Emilia Melograna is a copy of the Council Officer's Assessment Report for Development Application 232/2012 from which the following is noted: (a)The application proposed a fitout and occupation of an existing commercial unit for the purpose of a wholesale bakery and café. (b)The proposed development involved internal fitout for the establishment of a wholesale bakery with the erection of partitioning, shelving, cool rooms, dry storage areas and commercial baking equipment. The application also included the fitout of a café that would be located at the front of the premises and would provide breads and pastries produced in the bakery as well as cold beverages, coffee and tea. (c)The reuse of the ground floor would entail floor area to be divided into 170sqm as a wholesale bakery (light industry), 17sqm for an office room and 30sqm as a café (service shop). 27Mr Arturo Melograna at paragraph 13 of his affidavit relates a conversation with Mr Lucas Honings on 4 June 2012 as follows: Honings: "We won't go ahead with the Lease unless you pay for the fire door" Me: "I will have to talk to my wife about that". At paragraph 14 he continues shortly after this Honings purports to terminate the Lease. 28As mentioned, the directors of Honings, Lucas Honings and Suzana Zuvela provided affidavits both dated 15 May 2013. The affidavit from Suzana Zuvela discusses the arrangement with coffee suppliers and also with the manner in which Honings subsequently conducted its business from new premises at Shop 514, 88-90 George Street, Hornsby. 29Mr Lucas Honings at paragraph 4 of his affidavit sets out his intentions when leasing the premises: "My intention was that Honings would operate a business which would involve both retail and wholesale sales of bakery products. I wanted to find premises to lease where a café could be operated by Honings and our baked goods could be sold to members of the public on a retail basis. I wanted to try and build the reputation of the business through retail sales so that it could also supply baked goods on a wholesale basis to other cafes and businesses. The retail sales through the shop were an important part of this plan, especially in my first few years, as I hoped retail customers would be impressed with our products and recommend the products to other businesses which could then purchase the products on a wholesale basis". 30Mr Honings having been introduced to the premises by the agent Mr Weihart and preferring them over Leighton Place, where he was close to signing a lease proposal, then visited those premises on 1 February 2012 in the presence of Marcel Melograna. At this meeting, he says he brought a draft drawing of how he planned the bakery and café business to be set up which he showed to Marcel Melograna and Mr Weihart. The draft drawing of 31 January 2012 is annexed to his affidavit. The Tribunal notes that the drawing does not indicate café but does show the word "shop" at the front of the building. Mr Honings also states in his affidavit that he had a conversation with Mr Marcel Melograna about coffee machines and about the glass shop front with words to the effect: "I will investigate with the Council whether a change of use is permitted for the premises to allow us to operate a bakery and café. I really like the glass shop front. It will be good for our café area". 31Mr Honings states that he emailed Mr Weihart and his solicitor Mr Grogan regarding the proposed Lease and that on 16 February 2012 he collected the keys to the premises from Mr Marcel Melograna and met with, Ms Vivian Botros from Viva, his designer, who took measurements of the premises and they "discussed the layout of the commercial kitchen of the café we intended to install at the premises". 32Mr Honings says that he met with Marcel Melograna at the premises and was provided with a lease proposal prepared by Mr Weihart and on 2 March 2012 he signed the Lease proposal (the seventh?), (this may be different to the Heads of Agreement signed on the 28 February 2012). A copy of that lease proposal is annexed to his affidavit and the use of the premises is stated as a commercial bakery. 33Mr Honings then says that he met Marcel Melograna on or about 8 March 2012 at the premises to go through the proposed fitout and to seek the consent of Cerialis for this fitout and that on 9 March 2012 he sent an email to Marcel Melograna attaching a full set of drawings for the proposed fitout for his review and requesting that he provide a letter of the owner's consent. A copy of this email is attached to his affidavit and it says: "Early this evening I received the latest set of drawings for 144 George Street. The final set will be finished by Monday morning for Council's submission Monday afternoon. The details in the attached file should provide sufficient information to prepare a letter of consent for the submission of a DA to Council. I will drop in on Monday afternoon to provide an overview of all the documents before these get submitted at Hornsby Council. I can than [sic] also pick up the letter of consent if you want". 34Mr Honings says that on 12 March 2012 he met with Marcel Melograna at the premises and gave him the form of consent to the development application for signature on behalf of Cerialis. He also says on 12 March 2012 he sent an email to his solicitor, Mr Grogan setting out proposed amendments to the draft Lease. One of these was that he wanted to extend the permitted use "to be used for retail sales". He said in his oral evidence on cross examination that he had received advice from a former retail executive at Westfield that he should request a widening of the use under the Lease to grant the Lessee more flexibility. This according to Mr Honings apparently made good commercial sense. 35On 13 March 2012 he again met with Marcel Melograna at the premises and was provided with the signed and stamped consent from Cerialis forming part of the development application. A copy of that development application is annexed to his affidavit and it is noted that the details of proposed development is described as "fitout of commercial kitchen and shop front for bakery".

Approach to determining jurisdiction of the Tribunal 36Both Counsel submitted to the Tribunal that the approach to be taken by the Tribunal in determining whether there is a "retail tenancy dispute" over which it has jurisdiction is well established and is set out in Wood & Wilson v Bergman [2003] NSWADT 82 and Moweno Pty Limited v Stratis Promotions Pty Limited (2002) NSWSC 1151 approved by the Court of Appeal in (2003) NSWCA 376. 37In summary it is as follows: (a)firstly, one looks at the lease to see what is the permitted or agreed use of the premises; (b)if the agreement clearly defines what the use of the premises is to be, then the question as to whether or not the premises are a "retail shop" under s 3 of the Act will be determined by whether or not that use appears within Schedule 1; (c)if the permitted or agreed use is not clear or is uncertain, or the use covers a number of different types of businesses some of which are, or may be, within Schedule 1 described businesses, then an analysis is required of the actual use(s) of the premises to determine whether the predominant use(s) fall within one or more of the businesses prescribed in Schedule 1.

Which party bears the onus to satisfy the Tribunal that it has jurisdiction? 38A number of cases on determining what is a retail lease under the Act were referred to by both Counsel. Before consideration is given to these cases and submissions by Counsel, a preliminary question arises, namely which party Honings or Cerialis bore the onus of determining that these proceedings were within the jurisdiction of the Tribunal. Both parties relied on the decision of Judicial Member Molloy in Akora (Bondi Junction) Pty Ltd v Buttrose [2008] NSWADT275 to arrive at diametrically opposed views regarding which party bore the onus. 39Ms Latham on behalf of Honings submitted that in Akora the Tribunal determined that the onus was on the respondent in that case, the landlord, Mr Buttrose, to satisfy the Tribunal that the business being carried out at the premises was not a business defined or encompassed by Schedule 1 of the Act. The onus is, according to Ms Latham, on Cerialis to establish that this Tribunal does not have jurisdiction to hear this matter. 40Mr Murr SC on behalf of Cerialis submitted that the onus of showing that the claim is within the jurisdiction of the Tribunal lies on Honings as the applicant in the proceedings. He referred to High Court authority in Owners of Ship Shin Kobe Maru v Empire Shipping Co Inc (1994) 181 CLR 404, Mason CJ, Brennan J, Deane J, Dawson J, Toohey J, Gaudron J, McHugh J, at [426] held "where jurisdiction depends on particular facts or a particular state of affairs, a challenge to jurisdiction can only be resisted by establishing the facts on which it depends. And, of course, they must be established on the balance of probabilities in the light of all the evidence advanced in the proceedings held to determine whether there is jurisdiction." 41Mr Murr SC then submitted that the obiter dicta in Akora at [50] to the effect that the onus is on the respondent landlord to satisfy the Tribunal that the business being carried on is not a Schedule 1 business, is inconsistent with this High Court authority, and cannot be correct. The principle that the Tribunal referred to in Akora [50] "he who asserts must prove" is correctly stated, but the party that "asserts" is the applicant, Honings who in effect asserts the existent of facts bringing the dispute within jurisdiction. In Akora, it was Akora the tenant not Buttrose, the landlord, who had brought the proceedings before the Tribunal. 42Akora is an unsatisfactory decision for a number of reasons. In this Tribunal's reading of the decision, Judicial Member Molloy was endeavouring to accommodate the decision of the Appeal Panel in Sassin v McGlinn & anor t/as Westland Produce (RLD) [2008] NSW ADTAP54 where the Appeal Panel expressed concern regarding the approach taken by Judicial Member Molloy in the decision under appeal. The Appeal Panel examined the manner in which evidence was presented to the Tribunal regarding jurisdiction and was critical that it was decided on a provisional basis akin to an interlocutory application without testing the evidence. The Appeal Panel held [62] "the Tribunal's decision should resolve finally as between the parties such issues of fact and law as are required to establish that the Tribunal either possesses, or does not possess, jurisdiction to hear and determine the application to which it relates".. 43Unfortunately for Judicial Member Molloy, the next matter he heard on jurisdiction was in fact the dispute between Mr Richard Buttrose, as landlord and Ms Simmone Logue who was conducting a business of a caterer as Akora (Bondi Junction) Pty Limited as lessee. The difficulties faced by Judicial Member Molloy in the conduct of that case can be seen from his deliberations part way through his Reasons [14]: "It is important for me to observe that I recommended to the Respondent [Buttrose], on more than one occasion, that he seek and obtain legal advice and representation in these proceedings and, in addition, at the hearing he was warned by me that the tender of the documents of the opposing party was generally not recommended simply because such evidence was often a two-edged sword. The Respondent insisted upon representing himself and he insisted upon relying upon the sworn evidence led on behalf of the Applicant". 44As noted by Mr Murr SC, Judicial Member Molloy believed that Mr Buttrose was asserting lack of jurisdiction and thus bore the onus, which Judicial Member Molloy decided he had not discharged. However, while Mr Buttrose was challenging the jurisdiction of the Tribunal in asserting that the matter was not a retail dispute, it was Akora that had bought the proceedings and therefore was in fact the asserting party and should have borne the onus. As explained, I consider the decision in Akora as unsatisfactory. I agree with the submission by Mr Murr SC that the onus is on the applicant Honings to satisfy the Tribunal that it has jurisdiction to entertain the application. 45There is one further matter which the Tribunal believes is important to note prior to its consideration of submissions from Counsel. That is, that the Tribunal will take no notice of what transpired after the Lease was entered into, that is the Tribunal will ignore the subsequent draft lease submitted on 30 May 2012 by Fox & Staniland for Cerialis in response to the request from Mr Grogan to issue a "retail lease" and the surrounding correspondence . The Tribunal notes that the submissions from Counsel also ignore this subsequent draft Lease and treat the Lease executed by Honings as the Lease under consideration.

Submission on behalf of Honings 46Ms Latham made the following submissions: (a)The permitted or agreed use of the premises was "commercial bakery including retail sales". (b)Cerialis' case appears to be that Honings intended to conduct wholesale sales from the premises and that this use would somehow exclude the premises from the definition of "retail shop" provided for in the Act. In so doing, Cerialis appears to focus on the use of the words "commercial bakery" in the description of the use of the premises in the Lease. (c)However, in listing "bakeries or bread shops" in Schedule 1, the Act does not make any reference to the need for a bakery to operate as a retail shop in order to be a specified business for the purposes of the Act. (d)The fact that the premises were to be used as a bakery is sufficient. There is no requirement in the Act that the bakery operate exclusively or predominantly for the sale of goods on a retail basis. (e)In interpreting statutory terms, the intention of the legislature is to be given effect. Courts seek to ascertain the intention of the legislature through the object or purpose underlying the legislation and to ascertain the meaning of words in light of that object or purpose. Here there is no statement of object or purpose in the Act itself. An overview of the Act, however, provides guidance as to its object or purpose. (f)At s 5 of the Act, certain retail shops are specifically excluded from the Act. This list of exclusions identifies those shops that the legislature did not intend to be covered by the protections set out in the Act. If the intention of the legislature was to exclude any businesses that included wholesale sales, one would expect such an exclusion to be specified at s 5. (g)The meaning of words is to be determined according to their ordinary usage, unless Parliament expresses a clear intention that a different meaning is to apply. In this case, the Act does not provide a specific definition of the word "bakeries" as it appears in Schedule 1. In those circumstances, the word is to be given its ordinary and natural meaning. (h)In determining the ordinary and natural meaning of a word, the Courts rely on a range of dictionaries. Both the Macquarie Dictionary and the Oxford English Dictionary have been accepted as appropriate sources by the Courts. (i)The Macquarie Dictionary defines "bakery" as: (i)A building or room to bake in. (ii)A baker's shop." The Oxford English Dictionary defines "bakery" as "a place where bread and cakes are made or sold" (emphasis added). (j)Accordingly, it is clear that the ordinary and natural usage of the word "bakery" includes premises where products are made and need not include premises where products are sold, ie. the word "bakery" may simply refer to the area in which baking takes place. In those circumstances, the word "bakeries" as appearing in Schedule 1 should not be construed narrowly as only referring to premises which are used as a shop. The word also includes premises used to bake goods for sale or distribution on a wholesale basis. Indeed, such an interpretation has previously been given to the word "bakeries" as it appears in Schedule 1 in Akora (Bondi Junction ) Pty Limited v Buttrose [2008] NSWADT 275. (k)Even if, contrary to the above analysis, the definition of "retail shop lease" requires that retail sales be predominantly carried out, the agreed use of the premises as specified in the Lease is consistent with such a usage. The Reference Schedule of the Lease states the proposed use of the premises is "commercial bakery including retail sales". The word "wholesale" is not used. (l)The adjective "commercial" is relevantly defined by the Macquarie Dictionary as: "1.Of, or of the nature of, commerce. 2. Engaged in commerce. 3. Capable of returning a profit, a commercial project. 4. Capable of being sold in great numbers: is the invention commercial? 5. Setting possible commercial return above artistic considerations. 6. Preoccupied with profits or immediate gain". (m)The word "commercial" is relevantly defined by the Oxford Dictionary as: " 1.Concerned with or engaged in commerce a commercial agreement 2. Making or intended to make a profit commercial products ●having profit rather than artistic or other value as a primary aim: their work is too commercial. " (n)Accordingly it appears that the key element of the word "commercial" is the purpose of engaging in commerce with the intention of making a profit. The operation of a retail bakery fits this definition. As such, the use of the word "commercial" cannot be equated with the word "wholesale". In the circumstances, even if the Act requires a bakery to conduct a predominantly retail business, the agreed use specified in the lease is consistent with such a business. (o)As the Lease clearly specified the agreed or permitted use of the premises, one need not (and should not) look at any material beyond the Lease itself to determine the actual proposed use of the premises by Honings.

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.

The Tribunal's view 48In Moweno Pty Limited v Stratis Promotions Pty Limited (2002) NSWSC 1152 Barrett J [25] defined the circumstances in which evidence of actual use of the relevant premises would be useful "only if the written agreement of the parties was uncertain or there was some suggestion that the true terms of their bargain were to be gathered from their conduct, as distinct from the written word". 49Barrett J also cited [20] a passage from the joint judgment of Dixon, Williams, Webb, Fullagar and Kitto JJ in Thompson v Easterbrook (1951) 83 CLR 467 at [481], in dealing with the situation where the purpose for which a lease is granted is not apparent from the terms of the lease. Their Honours cited the following dictum of Lord Watson in the English case of Westropp v Elligott (1884) 9 App Cas 815 at [831]: "Where the particular purpose for which the holding is to be used is not defined by contract, the legislature must have intended that the purpose should be ascertained by reference to the use or uses which the contracting parties must as intelligent and reasonable men be held to have had in their contemplation when they entered the lease." 50The submission by Ms Latham on behalf of Honings, simply put is, that the Reference Schedule in the Lease showed the use as "commercial bakery including retail sales", "bakery" is a business listed in Schedule 1 under "bakeries and bread shops". Bakery is defined in the Oxford Dictionary and Macquarie Dictionary as a place where baking takes place, not necessarily any sales. 51Ms Latham then seeks to give the word "commercial" meaning because the word cannot be ignored, as it is specifically stated in the Reference Schedule. After examining various definitions Ms Latham submits that the word "commercial" implies "engaging in commerce with the intention of making a profit". She definitely eschews any suggestion that it is an antonym for "wholesale", notwithstanding the use of the word "wholesale" by Mr Honings when describing his proposed business. 52In responding, Mr Murr SC also undertakes some dictionary contortions. However, it is clear to the Tribunal that in fact following the third limb of the procedure from Wood & Wilson following Barrett J in Moweno that the permitted or agreed use in the Lease stated as "commercial bakery including retail sales" "covers a number of different types of businesses some of which are or may be, within Schedule 1" of the Act. According to the procedure an analysis is required of the actual use of the premises to determine the predominant use to see if that use falls within one of the businesses prescribed in Schedule 1. However, the problem is that Honings never took possession and never operated its business from the premises. This makes the facts in this case significantly different to the other decisions on jurisdiction and use which were canvassed by the parties. 53Ms Latham draws comfort from the Tribunal's decision in Akora (Bondi Junction) Pty Limited v Buttrose [2008] NSWADT 275, that a "catering business" does not exclude a bakery and thus the use by Honings fell within Schedule 1 without further enquiry being necessary. In the Tribunal's view the decision in Akora is distinguishable for a number of reasons. Firstly the use was for "any lawful retail purpose" and in the context of an application to the Tribunal for relief under the Act automatically required an enquiry as to the actual use, because as is the case, not all retail uses fall within Schedule 1. Secondly the Lessee had been conducting its business from the premises for a number of years, so an examination of the use could be undertaken, and further the premises were actually in a retail precinct described as "shop 1 and Level 1" Judicial Member Molloy [53, 54 and 56] found: "53 It is plain to me, overwhelmingly on the evidence, that whether or not the Applicant operated a catering business, the fact is that the premises in question were being used as a bakery and as a takeaway shop. The use of the administrative office upstairs was certainly minor. 54 I clearly conclude that the evidence demonstrates that Ms Logue had a catering business but that it was not conducted from the premises. 56 I am content to find that the premises were used for the carrying out of a bakery and/or a takeaway food shop. There is nothing in the Act that prohibits a bakery business operating from a retail shop, and which is not in breach of sections to sell its product to other shop or clients." 54However, the clear evidence here is that Honings was proposing to operate a bakery as a commercial venture being the predominant use and that any retail sales via a café was ancillary. The Tribunal agrees with the submissions made by Mr Murr SC set out in paragraph 47 of these reasons that all the evidence points this way. Any proposed retail use is secondary. Further, the Tribunal notes from the Hornsby Council Officer's Assessment Report of the Development Application referred to in paragraph 26 of these Reasons that the total area of the premises was 217 sqm and the café was to occupy only 30 sqm which comes to 7.2% of the area. Even if the actual areas are larger than noted in the application, the café on any calculation is certainly not a predominant use but only an ancillary or auxiliary use of the premises. 55The definition of the word "commercial" submitted by Ms Latham that it is for profit and thus fits into a retail description is rejected by the Tribunal. While it is agreed that the word "commercial" is not another word for "wholesale" it is clear that in the Real Estate Industry property sectors are divided into residential, retail, commercial and industrial. So while "commercial" may not be an antonym for "retail" it is certainly not a synonym. It is clearly a separate property sector to retail and generally connotes a non-retail aspect. Commercial properties can combine office and retail areas but as separate terms they indicate clearly separate aspects of the real estate industry and are so treated. . 56This supports the submissions by Mr Murr SC that the actual intention of the parties is paramount to the question. The Tribunal deduces that the intention of both of the parties for the use of the premises was for a non-retail use as a bakery with ancillary retail use as a café, even though it is doubtful the Lessor, Cerialis was fully cognisant of the actual ancillary retail use anticipated. The evidence by Ms Suzana Zuvela of the use of the current premises as predominantly retail is not relevant. The predominant use of the premises was for a commercial bakery not a retail use. Honings having the onus to satisfy the Tribunal that this is a retail tenancy dispute and that the Tribunal has jurisdiction has not, in the Tribunal's view discharged that onus. 57The Tribunal noted that Mr Marcel Melograna was not called. Ms Latham sought a Jones v Dunkel inference to be drawn by the Tribunal. However in light of the evidence provided from the other parties, the Tribunal believes that any evidence that Mr Marcel Melograna might have given as to be of such a critical or of a substantive nature that an inference should be drawn as to his non-attendance. Even if Mr Marcel Melogranna was aware of the proposed café as such, that was not the predominant use.

Alternate way of looking at the issue 58The issues confronting the Tribunal in this matter are not dissimilar to the issues raised in a decision of the Appeal Panel in Car City Minchinbury Pty Limited v Lifestyle Vehicles Pty Limited [2008] NSWADT AP76. 59In the decision under appeal (Lifestyle Vehicles Pty Limited v Car City Minchinbury Pty Limited [2008] NSW ADT 195) the tenant applied to the Tribunal for declaratory and substantive relief under the Act, and the landlord disputed the jurisdiction on the grounds that the lease did not grant a right of occupation of premises for the purposes of their use for the carrying on of any of the types of business listed in Schedule 1 of the Act and therefore fell outside the definition of "retail shop" lease in Section 3. 60The use in the lease was stated as "second-hand goods shop". In the appeal proceedings the only question to be determined was whether the phrase "second-hand goods shop" which is one of the phrases appearing under the heading "retail shop business" in Schedule 1 of the Act included businesses in which second-hand cars were sold. Interestingly, at the time the lease was entered into the landlord had provided lease documents in conformity with the Act and was "plainly" of the view that the Act applied, although as both the Tribunal and the Appeal Panel noted at [13] "this opinion was, of course, not determinative of the matter". 61The Tribunal's determination as summarised by the Appeal Panel [16-23] was that as the Act was "beneficial legislation" as per Tobias J in Manly Council v Malouf (2004) NSWCA299 at 405, and that the phrase "second-hand goods shop" was not so ambiguous, but that any ambiguity should be resolved in favour of giving the possibility of a remedy before the Tribunal and adopting the interpretation of the phrase from other legislation [for example the Fair Trading Act 1997 and the Sale of Goods Act 1923] the phrase second-hand goods includes vehicles. Consequently, the lease was a retail lease and relief under the Act was available. 62The Appeal Panel [29] summarised the issues raised on appeal: (a)whether Schedule 1 of the Act was to be interpreted as inclusive in respect of the types of retail activities covered by the Act or exhaustive of the type of business covered by the Act. (b)Instead of construing "second hand goods shops" as a composite expression for which a meaning existed in common parlance, the Tribunal construed each of its terms separately, then treated a combination of those meanings as the meaning of the phrase as a whole; and (c)It failed to have regard to the history of related legislative provisions, including provisions within Schedule 1 itself. 63In respect of the first issue regarding inclusiveness of the type of business covered by the Act, the Appeal Panel [36] noted that the Long Title of the Act is "An Act to make provision with respect to the leasing of certain retail shops and the rights and obligations of Lessors and Lessees of those shops, and for other purposes. The Appeal Panel held that "the plain words of the Schedule, read in conjunction with section 3, indicate that leases of "certain retail shops" (to quote from the long title) are covered by the Act, but other retail leases are not covered - (we) reject any prior assumption of "inclusiveness" in ascertaining the range of retail eases covered by the [Act]". 64In relation to the interpretation of "second hand goods shop" the relevant passage of the decision of the Appeal Panel that is helpful to considerations in this matter is found [52]. "Furthermore the list of "retail shop businesses" in Schedule 1 includes several phrases for which the only meaningful interpretation is one that reflects their usage, as composite expressions, in everyday speech. Three examples, already mentioned in these reasons at [9], are the phrases "convenience food shops", "general stores" and "mixed business hops". Their inclusion suggests an intention on the part of the legislature that, as the Tribunal said in Tringas v Quach [2007] NSW ADT 24, one's attention should focus, when interpreting a phrase in the Schedule, on "what the ordinary person would reasonably think may well be included in a shop from which [the relevant] described business is being carried out". One of the major issues ventilated by the lessee in Minchinbury was that the Act was "beneficial legislation" and in accordance with the Tribunal's decision under appeal should "not be construed narrowly" relying on the decisions of Malouf v Manly Council, both in the Supreme Court and the Court of Appeal. However, as the Appeal Panel held [72-74] "72. In more general terms, we incline to the opinion, as we indicated to counsel during the hearing, that the intent of the Act is to alter pre-existing common law and statutory principles relating to retail leases in ways that will benefit both lessors and lessees. The benefits that it confers include the availability of a tribunal to resolve retail tenancy disputes. To treat the protection of retail tenants as the only beneficial purpose underlying the Act is to take an unduly narrow view of what it seeks to achieve. 74. We must observe the principle that, as Tobias JA said in Manly Council v Malouf at 410 [74], 'beneficial legislation....should not be construed narrowly'. But this does not mean that other principles of statutory construction must be put to one side when they would or might produce a different outcome." 65The Appeal Panel overturned the decision of the Tribunal and held that the phrase "second-hand good shops" in Schedule 1 does not include second hand car sales businesses such as carried out by Lifestyles Vehicles at the premises and consequently the Tribunal lacked jurisdiction. 66Accordingly it does not necessarily follow that if the use under the lease is listed in Schedule 1 "Retail shop businesses" that it automatically means that the Tribunal has jurisdiction. As with "second-hand good shops" "Bakeries" is listed. So is "Patisserie". However, following the decision of the Appeal Panel in Minchinbury "Bakeries" and for that matter "Patisserie" are not necessarily retail uses. 67The Tribunal makes two declarations. The first is that the lease between the parties is not a retail shop lease within the meaning of the Retail Leases Act 1994 (NSW). The second is that the Tribunal therefore does not have jurisdiction to determine the Application for Original Decision. D Bluth Senior Member Civil and Administrative Tribunal of New South Wales 26 March 2014 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: 21 August 2014