IK Chemists Pty Ltd v CHOF4 Artarmon Pty Ltd

Factual background 8Whilst all the facts may not be agreed between the parties the salient facts are that the lease commenced on 17 April 2010 and the premises were being used for the carrying on of a pharmacy business in a retail shopping centre. It is actually a sublease but for the purposes of these Reasons I will treat it as a lease [the Lease]. 9On or about 30 November 2011 the applicant stopped trading from the premises and the respondent as landlord acted to secure the premises and erected a hoarding on or about 1 December 2011. 10On or about 6 December 2011 the respondent served a formal notice of breach of lease on the applicant requiring the applicant to open the premises for trade during the core trading hours of the shopping centre. 11The Applicant wrote on 6 December 2011 to the respondent alleging that the respondent had repudiated the lease by erecting the hoarding. The applicant purported to accept the repudiatory conduct of the respondent and regarded the Lease to be at an end. 12Following the directions of Senior Member Mullane, submissions were made by Mr B Le Plastrier on behalf of the respondent and by Mr S Goodman on behalf of the applicant. 13In the written submissions from the respondent the following issues of disputation between the parties were identified: (a)whether the applicant breached the terms of the lease prior to placement of the hoarding by the respondent; (b)whether the respondent's conduct in placing the hoarding amounted to repudiatory conduct; (c)whether the applicant's conduct in purporting to terminate the lease in reliance upon the placement of the hoarding by the respondent, in all the circumstances, amounted to repudiatory conduct by the applicant; (d)when did the lease actually come to an end and upon what basis; (e)to the extent to which the breaching party is liable to the innocent party for payment of rent and/or for damages for breach of the Lease. 14The first question for determination by the Tribunal is whether the Tribunal has jurisdiction to hear or to make any orders with respect to the dispute. As noted the respondent contends that the Tribunal has no jurisdiction and bases its claim to that effect upon the monetary limitation in s73 (1) of the RL Act. Section 73 of the RL Act states as follows: 'Section 73 - Monetary limit on Tribunal's jurisdiction (1) The Tribunal has no jurisdiction to make an order or orders in respect of a particular retail tenancy claim or an unconscionable conduct claim if the total of: (a) the amount or amounts (if any) of money to be paid, and, (b) the amount or amounts (if any) of money to be declared not to be due or owing; and (c) the value or values (if any) of the work to be done or the services to be performed (under or by virtue of the order or orders will exceed $400,000 or such other amount as may be prescribed by the regulations, whether on a balance of account or after set-off or otherwise).' 15There is no amount prescribed by the Regulations, so the monetary limit is still $400,000.00. 16Sections 75 (1) and (2) of the RL Act state: (1) If civil proceedings pending in a court involve a retail tenancy dispute, the court must on the application of any party to the proceedings transfer the proceedings (or so much of the proceedings as involve such a dispute) to the Tribunal to be dealt with as a claim under this Division, but only if the court is satisfied that: (a) the dispute is such as may effectively be dealt with as a claim under this Division and that it is appropriate that the dispute be dealt with by the Tribunal, and (b) the interests of justice do not require that the matter be dealt with by the court. (2) In determining whether or not it is appropriate that a matter be dealt with by the Tribunal, a court is to have regard to the general principle that retail tenancy disputes should be dealt with by the Tribunal rather than by a court.

The Brashes Case 17A major hurdle to be overcome by the respondent in relation to its application that the Tribunal lacks jurisdiction is the decision by Deputy President Chesterman in Brashes Convenience Store Pty Ltd v Pitt & Castlereagh Pty Ltd [213] NSW ADT 118. 18In that decision the tenant Brashes Convenience Store filed an Application for Original Decision against the defendant landlord seeking damages greater than $400,000.00. The respondent landlord then made an application which came before Deputy President Chesterman that the Tribunal lacked jurisdiction pursuant to section 73(1) of the RL Act. After reviewing a number of Tribunal decisions and Supreme Court decisions in relation to the Consumer Claims Act 1998 where the jurisdiction is limited to $25,000.00 the Tribunal followed the decision in Prestige Residential Marketing Pty Ltd v A&M Short Investments Pty Ltd & Anor [2005] NSW SC485 where Master Malpass said at [13-15]: '13. In a general sense, it may be said that there were two broad areas of dispute between the parties. The first consideration was whether the monetary jurisdictional limit of the tribunal was determined by the amount claimed or the amount of the order that could be made.... 14 Save for the claims that are excluded thereby, regulation 6 prescribes a jurisdictional limitation in the sum of $25,000. The sum of $25,000 is prescribed therein for the purposes of s14 of the Act. What S14 does is to impose a limitation on the making of orders. This appears unambiguously from both the heading and the content of the section. 15 In my view, the imposition of such a jurisdictional limitation does not take away jurisdiction altogether in respect of a claim made in a sum in excess of the amount of $25,000. The tribunal has jurisdiction to make an order so long as the quantum of the order does not exceed the prescribed amount of $25,000. A party that brings a proceeding in the Tribunal which is subject to such a jurisdictional limitation can only obtain an order in respect of the sum that does not exceed an amount of $25,000.' 19Consequently, Deputy President Chesterman held in Brashes at [39]: 'Section 73 does not purport to limit, either expressly or by implication, the amount of monetary relief that an applicant can claim in Tribunal proceedings under the Act. Instead, it imposes an upper limit on the amount that, under the order or orders made by the Tribunal with respect to a particular retail tenancy claim or unconscionable claim, may be required to be paid, declared not to be due or owing, or involved as the value of work done or services performed. It says nothing, in its express terms, as to the amount that an applicant may claim.' 20Both parties in their submissions agreed that if an applicant commenced proceedings in the Tribunal it was submitting to the jurisdictional limit of $400,000 notwithstanding that its claim may be in excess of that amount. That is termed "abandoning the excess" which was found by the Tribunal in Andjoy Pty Ltd v Shand [2015] NSW ADT 192 and Kindful (Australia) Pty Ltd v Country Villa Holdings Pty Ltd [2006] NSW ADT 224 confirmed in Brashes at [p48] to be valid conduct by a party 21Deputy President Chesterman, was satisfied that pursuant to s73(1) and the case law did not lack the Tribunal jurisdiction to hear the Brashes retail dispute not withstanding that the claim was for excess of $400,000.00. He then raised a major policy consideration regarding the issue of whether a claim in excess of $400,000.00 meant that the disputation between the parties could be outside the jurisdiction of the Tribunal. 22It is this policy issue that now focuses the attention of the Tribunal on the question of the jurisdictional limit in s73 in this case. Deputy President Chesterman said in Brashes [at 49-53]: 49. The major policy considerations that, to my mind, militate strongly against acceptance of Mr Cornish's arguments may be briefly summarised as follows. Those arguments would leave it open for applicants under the RL Act who wished their matter to be heard in the District Court or the Supreme Court, instead of the Tribunal, to assert that the amount owed to them by the respondent exceeded $400,000. At this point, the Tribunal would be faced with a most undesirable set of alternatives. It would either have to accept the applicant's assertion as to the scale of the claim at face value, irrespective of whether the factual material and expert opinion adduced in support of if had any credibility, or be compelled, at a very early stage of the proceedings, to investigate the truth and significance of this evidence. This investigation would have limited utility if and when the matter went to trial, because it would be conducted before any opposing evidence had been filed. 50. Similarly, Mr Cornish's arguments would enable respondents to scrutinise the applications made against them, along with any evidence that the applicant has filed - as indeed the Respondent has done in this case - and to object to the Tribunal's jurisdiction if the total amount claimed was or appeared to be in excess of $400,000. The same undesirable alternatives would confront the Tribunal. 51. In either of these situations, the Tribunal would on occasions be bound to decline jurisdiction or to make an order for transfer to the Supreme Court under section 76A (so long as the proceedings included an unconscionable conduct claim). The proceedings would then be heard in the District Court or the Supreme Court. It might then emerge that the claim had been inflated well beyond its true scale in the application and the accompanying evidence, and that it was entirely inappropriate to be brought in either of these Courts. 52. As Mr Soltan emphasised in his submissions, these consequences are entirely contrary to the policy underlying section 75(2) of the RL Act. This provision states that when a court in which proceedings under the Act have been brought is determining an application under section 75(1) for transfer of the proceedings to the Tribunal, the court must "have regard to the general principle that retail tenancy disputes should be dealt with by the Tribunal rather than by a court". 53. On account of the conclusion that I have reached, I do not need to review the competing arguments on the question of whether or not the Application and the evidence that the applicant disclose a claim for monetary relief exceeding $400,000. 23Mr Goodman in his submissions derives significant support from these paragraphs for the proposition that notwithstanding the purported claim by the respondent for $641,173.56 the Tribunal has jurisdiction to determine the retail lease dispute between the parties following these policy considerations set out by Deputy President Chesterman 24Mr Goodman also referred to the decision of the Court of Appeal in PT Ltd v Spuds Surf Chatswood Pty Ltd [2013] NSWCA 446 as supporting his submission. Mr Goodman points out that the Court of Appeal considered the interaction between the lessor's entitlement to an amount in the order of $420,000.00, the remitted question of the calculation of damages due to the lessee (which could possibly be less than $20,000.00 leaving the lessor entitled to a net amount in excess of $400,000.00), and the jurisdictional limit of $400,000.00. Sackville AJA stated at [190]. "It is premature to reduce the amount awarded to PT to $400,000 because the final orders made by the Appeal Panel may require payment to PT of an amount less than $400,000 in a manner that does not involve the Appeal Panel's jurisdictional limit being exceeded. The Appeal Panel should address any jurisdictional issues that arise on the remitter".

Problematical Policy Considerations 25In Kindful the Tribunal awarded damages to the lessor of $400,000.00 rather than the amount claimed and admitted of $449,343.29 referring to the monetary limit in s73(1) and consequently limiting the order to that amount. The Court of Appeal in PT v Spuds appears to be anticipating what might occur after the eventual calculation of damages owing to the applicant and appears to be saying that once the amount is determined and it is in excess of $400,000.00 then the award is reduced to that monetary limit in accordance with the jurisdiction. 26Such an outcome is exactly what the respondent is seeking to avoid. Mr Le Plastrier in his submissions finds error in the Brashes decision [at paragraph 66-68 of his submissions]: 66. First, the Deputy President's concern that applicants may inflate the amount sought in the application once it is on foot in order to leave the Tribunal overlooks practical reality. If an applicant has realised that its applications seeks more than $400,000, the applicant would simply discontinue proceedings in the Tribunal. No explanation is given by the Deputy President for why an applicant would apply to the Tribunal to have the matter transferred to the court when an applicant could simply issue a notice of discontinuance in the Tribunal and start again in court. 67. Secondly, even if such applications were being made to the Tribunal, it is neither a difficult nor a foreign task for the Tribunal to make a preliminary assessment of the value of a claim. The Tribunal is required to assess whether a plea of unconscionability is made out sufficiently the purposes of a section 76A application. It is plainly more difficult for the Tribunal to determine whether one party has acted unconscionably than it is for the Tribunal to undertake the purely arithmetic assessment required by section 73 to determine whether the claim exceeds $400,000. The Tribunal has a well-established body of jurisprudence dealing with the test for section 76A. It is difficult to see why the Tribunal would have a problem determining whether a claim prima facie exceeds $400,000 when the Tribunal has faced no difficulty determining whether a party has a cause in unconscionable conduct. 68. Thirdly, on the construction accepted in Brashes the consequences for a party to a claim in which its opponent sought over $400,000 and was subsequently shown to have inflated that figure after the matter was removed to a court are far less severe than for a party such as Charter Hall which will be deprived of the ability to recover an additional $241,173.56 that it is owed by IK Chemists. If Charter Hall must continue in the Tribunal, and the Tribunal finds that $641,173.56 is due to Charter Hall, then notwithstanding that finding, and ironically because of that finding, Charter Hall cannot recover the $241,173.56 in excess of the $400,000 no to which it is entitled in a Court because of estoppel.

Way Forward 27Brashes is an interesting case. The respondent in Brashes, as the respondent here, sought to have the Tribunal not hear the retail claim because of the jurisdictional monetary limit on the basis that the retail lease claim may be in excess of $400,000.00. In the Tribunal's opinion the distinguishing point in this case to Brashes is that it was the applicant in Brashes who potentially had the claim in excess of $400,000.00. The respondent did not have a claim potentially larger than $400,000.00, yet the respondent was seeking to invoke the jurisdictional point to oust the retail lease claim from the Tribunal. However, in this retail dispute before the Tribunal, it is the respondent, not the applicant, who asserts a claim greater than the monetary limit. 28In Brashes it could be easily said that the applicant submitted to the jurisdiction and abandoned the excess by commencing in the Tribunal. But why should the respondent Charterhall, here abandon the excess and submit to the limited jurisdiction? If Brashes ultimately had decided that it wished to recover its full claim, it could have withdrawn and commenced in the District or the Supreme Court. 29The concern of Deputy President Chesterman regarding a party inflating its claim so as to be outside the jurisdiction of the Tribunal, can in the opinion of this Tribunal be adequately covered by the procedure under the Civil Procedure Act 2005 the Uniform Civil Procedure Rules and under ss75(1) and (2) of the RL Act to transfer the proceedings to the Tribunal. 30In this matter I note that the respondents' Statement of Claim in the Supreme Court is accompanied by an affidavit verifying that the allegations of fact in the Statement of Claim are true in accordance with the Uniform Civil Procedure Rules. This should satisfy the concern expressed by Deputy President Chesterman regarding any enquiry to be undertaken by into the quantum of the retail dispute between the parties. 31The Tribunal agrees with the submissions by Mr Le Plastrier that the retail dispute between the parties taking into account the amount claimed in the Statement of Claim filed in the Supreme Court is in excess of $400,000.00. Accordingly the respondent should not have to unwillingly submit to the jurisdiction of this Tribunal. There is no point in the Tribunal hearing the retail dispute only to be then be limited, if the respondent is successful to monetary orders up to $400,000.00. Unlike the situation in Kindful, it is the respondent who will be prejudiced. 32The Tribunal is satisfied that the retail dispute between the parties is in excess of the jurisdictional limit under s73(1) of the RL Act and makes the following orders: (1)The Tribunal does not have jurisdiction to hear the retail dispute between the parties; (2)While costs were not discussed unless the respondent specifically believes that it should apply for costs, within 14 days of this order, there is no order for costs. (3)If the respondent does so apply then the issue of costs should be dealt with on the papers with submissions from the parties within 21 days of the respondent's application. D Bluth Senior Member Civil and Administrative Tribunal of New South Wales 16 September 2014 Amended 2 October 2014

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: 14 October 2014