Victorian Civil and Administrative Tribunal|2007-02-19

Jones & Anor v Mega Bargains Pty Ltd (Retail Tenancies) [2007] VCAT 344 (19 February 2007)

Retail Tenancies List; Alleged failure by lessor to comply with requirements as to particularisation of outgoings; Sections 46, 47, 48 and 49 Retail Leases Act 2003; Whether breaches of those sections entitle lessee to recover amounts paid for outgoings; No recovery where good consideration shown despite breach; No consideration to support over charging for electricity and the levying of management charge by lessor company itself other than in accordance with Section 49 of Retail Leases Act 2003; Claim to recover costs by individual litigant for his time and trouble in preparing and conducting the case not allowable under 2003; The amounts not in proper sense moreover no vexatious conduct of proceeding by lessor company

Jones & Anor v Mega Bargains Pty Ltd (Retail Tenancies) [2007] VCAT 344

The respondent lessor must comply with Sections 46, 47, 48 and 49 of the Retail Leases Act 2003 with respect to its lease of the premises known as Suites 7, 8 and 9, 3 Alexandra Street, Melton to the applicant.
The respondent must refund to the applicants the amounts of any outgoings paid by the applicants to the respondents representing 'management costs'.
The respondent must pay the applicant the sum of $1,355.72 representing an overpayment by the applicant to the respondent of electricity charges.
Proceeding otherwise dismissed.
Applicants' claim for costs dismissed.

Ms E. Ruddle of Counsel, instructed by Pearce Webster Dugdales

The Jones executed a lease commencing 15 December 2004 of premises being Suites 7, 8 and 9, 3 Alexandra Street, Melton, for a term expiring 15 December 2007. The lease granted them options to renew for two further three year periods requiring them to give written notice of exercise of the first option to the lessor, Mega Bargains Pty Ltd, no later than 15 December 2007. The lease permitted the Jones to use these premises as a 'dance school centre'. The lease required payment of rent of $22,855.20 per annum inclusive of Goods and Services Tax payable on the first day of each month.
Clause 4.1 required the tenants to pay their 'proportionate share' of the outgoings for the premises providing for Mega to give the Jones:

its written estimate of outgoings and the tenant's proportion:

(i) for the first lease year, before the commencing date; and

(ii) for each ensuing lease year, at least 30 days prior to the start of that lease year.

The clause provided for the tenant to carry a one-twelfth proportion of the landlord's estimate with each monthly instalment of rent.

The term 'outgoings' was defined in Clause 1.1 of the lease as follows:

'Outgoings' means all amounts reasonably paid by the Landlord in respect of the Building, including council and water rates and charges, insurance premiums, cost of repairs and maintenance (excluding structural repairs and capital costs), cost of providing and operating services (such as garbage removal, cleaning services, lighting, air conditioning, heating, parking and security), and management costs.

The Jones became dissatisfied with the manner in which outgoings were being charged to them under the lease. They were also dissatisfied with the condition of certain parts of the property common to the tenancy and others. The suites in question are located in a complex known as 'The Glass House Arcade'. This led to a mediation conducted under the auspices of the Small Business Commissioner. Following a mediation the parties signed terms of settlement dated 4 July 2006 and resolved their dispute.
On 28 August 2006 the Jones filed the present application in the Tribunal seeking relief against Mega Bargains Pty Ltd. Their application did not set out any particular relief and a document dated 6 February 2007 set out the orders which they sought as follows:
1. That a Management Facilities Company be appointed to henceforth manage the ongoing maintenance, cleaning, and related activities of the Glass House Arcade at 3 Alexandra Street Melton Vic 3337.
2. That Mega Bargains Pty Ltd to comply with the Retail Leases Act 2003 Sections 46, 47, 48 & 49, or return the sum of $16,830.81 (15th December 2004 to 1st February 2007 for our portion of the outgoing during that period and any other costs related to this matter under Section 92.2.b of the Retail Leases Act 2003) and my personal costs incurred to date $5052.00.
3. REFUND the amount of $1355.72 owed to BJ's Dance Center thru Mega Bargains Pty Ltd overcharging on electricity billing between 15th December 2004 and 8th November 2007. As stated in letter received by BJ's Dance Center 7th January 2007 from Mr Dominice Callea [of Pearce Webster Dugdales the solicitors for Mega].

OUTGOINGS UNDER THE RETAIL LEASES ACT 2003

Section 39 of the Retail Leases Act provides that a tenant pay the landlord amounts in respect of outgoings except in accordance with specific provisions in the lease. Sub-section (2) states that regulations:

May prescribe the manner in which the amount of outgoings may be determined and apportioned to a tenant.

Section 41 of the Act provides that a provision in a lease is void which requires the tenant 'to pay an amount in respect of the capital cost of the building in which the premises are located' or 'any building in a retail shopping centre in which the retail premises are located'. Section 46 requires a lessor to provide a written estimate of the outgoings for which the tenant is liable to contribute, itemising the outgoings. It requires the estimate be given before the lease is entered into and one month before each accounting period. Unless the estimate is given, the tenant is not liable to contribute 'until the tenant is given that estimate'. Section 47 states that a retail premises lease is taken to provide that the landlord is under certain specific obligations with regard to the provision of outgoings' statements. The section requires that a statement be prepared detailing all expenditure by the landlord in each accounting period on account of outgoings to which the tenant is liable to contribute. The statement must be given to the tenant within three months after the end of the relevant account period. Sub-section (5) of the section is of central significance in the present proceeding and so I will set it out in full:

(a) prepared in accordance with relevant principles and disclosure requirements of applicable accounting standards (in force from time to time) made by the Australian Accounting Standards Board; and

(b) in the case of a statement given under sub-section (3)(b), accompanied by a report prepared by a registered company auditor (within the meaning of the Corporations Act) that states whether -

(i) the statement correctly states the landlord's expenditure during the accounting period in respect of the total amount of outgoings, and each individual outgoing that comprises more than the prescribed percentage of the total amount of outgoings, to which the tenant is liable to contribute; and

(ii) the total amount of estimated outgoings for that period (as shown in the estimate of outgoings given to the tenant) exceeded the total actual expenditure by the landlord in respect of those outgoings during that period.

Sub-section (6) provides that the auditor's statement is not required if the outgoings are confined to certain limited items and the statement is accompanied by copies of assessments, invoices etc. Sub-section (7) provides that the auditor preparing the report:

Must ensure that the tenant is given a reasonable opportunity to make a written submission to the auditor on the accuracy of the outgoings statement.

Section 48 provides for an adjustment of the outgoings account between landlord and tenant within a month after the outgoings statement is provided and in any event no later than four months after the end of the relevant accounting period.
Section 49 of the Act makes specific provision for management fees. Sub-section (1) is as follows:

(1) A provision of a retail premises lease is void to the extent that it makes the tenant liable to pay an amount for management fees unless -

(a) the management fees relate to the management of the building in which the retail premises are located or, if the retail premises are located in a retail shopping centre, that centre; and

(b) the lease, or a disclosure statement given to the tenant in accordance with Part 4, specifies -

(i) the amount of the management fees for any accounting period of the landlord during the term of the lease; and

(ii) a rate, or a method for calculating a rate, for working out the amount for which the tenant is liable for that period.

Sub-section (2) deals with the 'indexation' of management fees in subsequent years of a lease and is irrelevant to the present proceeding.
Regulation 10 of the Retail Leases Regulations 2003 provides that for the purposes of Section 39(2) of the Act:

The amount of an outgoing may be determined and apportioned to a tenant by multiplying the total amount of the outgoing by the relevant fraction.

Regulation 3 defines the 'relevant fraction' to be:

"relevant fraction" means the fraction calculated using this formula -

"A" is the lettable area of the retail premises; and

"B" is the total of lettable areas of all the retail premises which receives the benefit of the outgoing

Whilst the proceeding was pending in the Tribunal, the Jones had been withholding the outgoings' instalments sought by Mega. At one stage on 20 December 2006 Mrs Ivanov on behalf of Mega threatened to cut off power and later threatened to change the locks on the building. Mr Jones sought an urgent hearing in the Tribunal to obtain injunctive relief. Subsequent discussions with Mega's solicitor, Mr Callea however led to the threats being withdrawn.
According to Mega it forwarded two auditors' statements relative to outgoings for the premises for the years ending 30 June 2005 and 30 June 2006 together with a draftsman's plan completed in December 2006 of the tenancies at the Glass House Arcade. According to Mr Jones that material reached him on 8 January 2007. The auditors' report was on the letterhead of McLennan Partners Pty Ltd, Certified Practising Accountants and was headed 'Independent audit report to the members of Mega Bargains Pty Ltd'. Under the heading 'Scope' this report stated, inter alia:

The Company [that is Mega] is responsible for the information contained. We have conducted an independent audit of these accounts in order to express an opinion on them to the members of the Company and relevant Authority [sic].

The report noted that it related only to the statement of outgoings and did not extend to the company's statutory account. McLennan Partners disclaimed any reliance on the report:

... prepared as a special purpose report to which it relates to any person other than the members of the Company and relevant Authority, or for any purpose other than that for which it was prepared.

Our audit has been conducted in accordance with Australian Auditing Standards to provide reasonable assurance as to whether the statement of outgoings of Mega Bargains Pty Ltd are free of material misstatement. Our procedures included examination, on a test basis, of evidence supporting the amount and other disclosures in the statement of outgoings. These procedures have been undertaken to form an opinion as to whether, in all material respects, the statement of outgoings are presented fairly.

In our opinion the statement of outgoings fairly represent a statement of the transactions in relation to the commercial properties owned by Mega Bargains Pty Ltd and located at 3 Alexandra Street Melton Victoria in accordance with applicable Accounting Standards, other mandatory professional reporting requirements and the Association Incorporation Act (Vic).

The audit opinion with respect to outgoings for the year ending 30 June 2006 was to similar effect. Also included in the package was a document styled 'Proposed budgets 2007'. There was no audit opinion expressed with regard to this document.
In each case the allocation of outgoings was based upon a total lettable area of all premises at the Glass House Arcade at 916.5 sq m. This figure included some 178.4 sq m unoccupied and designated as 'vacant premises'. The Jones' tenancy at Suites 7, 8 and 9 was assessed as having an area of 237.9 sq m. The total outgoings apportioned were for the year ending 30 June 2005, $55,708.75 of which some $14,460.57 was allocated to the Jones' tenancy. The total apportioned for the year ending 30 June 2006 was $51,428.82 with $13,349.61 allocated to the Jones' tenancy.
Previously on 22 September 2006, apparently in purported compliance with the terms of the mediated agreement reached under the auspices of the Small Business Commissioner and the requirements of the Retail Leases Act Mr Frank Duc Huynh, accountant, forwarded a letter 'To whom it may concern' a copy of which was provided to the Jones, headed 'Auditing expenses for property No. 3 Alexander Street Melton Vic 3337 Mega Bargains Pty Ltd Financial year ended 30 June 2005 and 2006'. The covering letter stated:

Please find enclosed excel spreadsheets which I have listed all expenses and date of payments. These expenses have been checked based on tax invoices given by clients. All expenses were paid by cheque, credit cards, Bpay, direct debit etc. shown on the statements. And for those expenses were paid by cash only, the only evidence I have were tax invoices which were supplied by clients.

Mr Huynh is not a registered auditor. Mr Jones complained that in those circumstances material furnished by him was not in compliance with Section 47 of the Retail Leases Act. The Huynh material was in one sense more expansive than the material provided by McLennans. McLennans totalled outgoings under a series of standard headings. The Huynh material however, listed each individual expenditure sought to be apportioned to the tenants separately. For the year ending 30 June 2005 the Huynh spreadsheet totalled $54,899.56 by way of outgoings. For the previous financial year it showed outgoings of $50,184.03. Mr Jones pressed for an audit report as required by the section. On 29 November 2006 Mr Ian Macpherson of McLennan Partners Pty Ltd wrote to Mr Callea of Pearce Webster Dugdales (Mega's solicitors) explaining what had been done to that date. He noted that they received original documents on 20 September 2006. According to Mrs Ivanov these documents had been forwarded directly by Mr Huynh to McLennans. The letter continued:

An initial assessment indicated there were omissions in the data and no basis to conduct the audit. We also needed to draft a statement of outgoings which was outside our original brief.

We sought instructions from Mega Bargains which were clarified on 19/10/2006.

We then attempted to prepare the statement of outgoings but again needed more information from Mega Bargains and clarification on a number of expenses and invoices as to their correct treatment. We also did not have any floor plan or basis to allocate the tenants' share of outgoings. This information was requested on 10/11/2006.

A response was received on 23/11/2006 by Mega Bargains and included floor areas and we are now in a position to complete the work by 8/12/2006 for both years 2004/5 and 2005/6 including a forecast for the 2006/7 year. There are some qualifications which will be referred to in the auditors' report as some of the data is little less than perfect.

The matter was before me for directions on 1 December 2006. When I fixed it for final hearing on 12 February 2007 I directed that the Jones file and serve ' a statement of the relief which they seek'. That statement ordered to be provided by 8 December 2006 was not filed and served until 9 February, that is, the Friday before the Monday hearing. It was only brought to my attention about 15 minutes prior to the commencement of the hearing. In addition, Mr Jones filed an affidavit by himself, setting out a narrative of events from his standpoint including a number of annexures including reports and excel spreadsheets referred to above together with an affidavit from Mr Peter Waterson of Global Building Management and an affidavit from Mr David Taylor. The burden of these affidavits was that the standard of maintenance for the Glass House Arcade was substandard particularly having regard to the outgoings levied on the tenants.
At the hearing Mrs Ivanov gave evidence on behalf of Mega. She was cross-examined at some length by Mr Jones. Some of the lines of cross-examination seemed to be aimed at supporting the view that maintenance levels were inadequate and unsatisfactory. He also sought to cross-examine as to the detail of the statements provided by Huynh and McLennans. These lines of cross-examination were largely unsuccessful because Mrs Ivanov had omitted to bring with her any of the source documents.
Mr Jones both in his affidavit and in his oral presentation complained about inadequate maintenance to the roof of his tenancy. Mrs Ivanov conceded that there were continuing problems with the roof. She said that a roofing contractor who had been engaged late last year had carried out work on the roof of a different tenancy where she had been of the understanding that he would amongst other things, attend to the problems with the roof of the Jones' tenancy. Mr Jones said that some work had been carried out but that it was inadequate. The parties were agreed that further work needed to be carried out, in particular the provision of flashings around a penetrating air-conditioning unit on the roof.
Mrs Ivanov generally defended the quality of the management which her company Mega provided. She said she was not a director of the company but undertook these tasks with the authority of her husband who was a director. She resides in Queensland hence there is no resident management but various contractors are engaged to provide cleaning, gardening services, sanitary services and the like.
Mr Jones complained about an expenditure apportioned amongst the tenants in the sum of $4,500 relative to security cameras. Mrs Ivanov said that this represented the cost of installation of the cameras not the cost of their supply.
I told Mr Jones that in the belief that this proceeding would turn upon what statements had or had not been provided by the lessor company and their adequacy ex facie I had not directed that there be discovery or production of documents. I told him that if the case were to change its character into a detailed reconciliation of expenses or an enquiry as to the existence or appropriateness of particular services it would be necessary to adjourn the hearing so that documents could be produced and further enquiries might be undertaken. Ms Ruddle, Counsel for Mega, said that in light of the very late service of Mr Jones' affidavit material, she was in no position on behalf of Mega to respond to the criticisms in the affidavit. Mr Jones elected to continue, implicitly as I understood it, accepting that these more detailed issues will not be dealt with in the present proceeding.

Mr Jones said that there had still been no compliance with Section 47 of the Retail Leases Act. He said that the so called auditors' reports did not use the hallowed phrase that the relevant apportionment statement gave a 'true and fair view'. He called into question the independence of McLennan Partners saying it was not proven that they had been independently engaged, nor he said, was it proven that they had undertaken their enquiry in accordance with appropriate accounting standards.
He said the statements should be doubted insofar as the auditor's letter to Mega's solicitors on 29 November foreshadowed certain qualifications expressed on the basis of data which was 'less than perfect'. No qualifications to this effect appeared in the relevant reports.
He denied liability for the sum of $7,800 shown as 'management fees'. There was no management company engaged.
He referred to Section 307C of the Corporations Act of the Commonwealth which states, inter alia:

(a) An audit of the financial report for a financial year; or

(b) An audit or review of the financial report for a half year;

the individual auditor must give the directors of the company, registered scheme or disclosing entity:

(i) no contraventions of the auditor independence requirements of this Act in relation to the audit or review;

(ii) no contravention of any applicable code of professional conduct in relation to the audit or review.

Mr Jones noted that no such declaration had been provided here. According to Mr Jones the roof of his tenancy was part of the common property and should be repaired as such. He was critical of some of the work that had been done already which entailed he said, the disconnection of at least one existing downpipe.
Mr Jones said that in light of an admission made by Mr Callea the solicitor for Mega it was admitted that he and Mrs Jones had been overcharged for electricity. He calculated the overcharge at $1355.72 and claimed a refund of this amount.

Ms Ruddle of Counsel who appeared for the respondent said that the provision of the auditor's reports entailed compliance by Mega with its obligations under Section 47 of the Retail Leases Act albeit late. She said there was no basis for impugning the independence of the auditor or speculating as to the matters raised by Mr Jones. Insofar as Mr Jones had asked no less than 14 questions, there was, she said, no obligation on the part of the lessor to provide answers to them. No adjustments had been carried out pursuant to Section 48 because of the lateness of the auditor's reports and the failure of the tenant's outgoings instalments for the second half of the year. She said there were no issues under Section 49 of the Act relative to the management fees. She said they were authorised by the terms of the lease and the detailed provisions of Section 49(2) dealing with indexation of management fees had no application where the fees remained steady as they did in this case. As to the first year of the lease, there had been compliance with the requirement to provide an estimate of outgoings pursuant to Section 46 of the Act insofar as the disclosure statement had set out the relevant outgoings, now however there were final audited statements for both years.

Mr Jones' general attack on the quality and 'value for money' of the management provided at the Glass House Arcade was aimed at supporting his contention that a management company should be appointed to assume those roles.
As explained above the proceeding did not enable me to hear the necessary full range of evidence to draw conclusions as to the adequacy of their management and services available in the arcade. The thought however that the absence of any resident management might be unsatisfactory certainly has a measure of plausibility.
Assuming without deciding that the present regime is unsatisfactory I invited Mr Jones to inform me where I might derive the power to make the order appointing a management company which he sought. He was unable to identify any power for me. Whilst both the Retail Leases Act 2003 and the Fair Trading Act 1999 which would give the Tribunal jurisdiction over the present dispute contain general empowerments to the Tribunal to make orders aimed at resolving disputes in addition to specific traditional powers, I am unpersuaded that those statements of generality would authorise the Tribunal to make the order which Mr Jones seeks.
So far as I am aware a power such as this to appoint a corporation to manage somebody else's business is not one which would be exercised by any superior court in Australia. Certainly courts do exercise powers to appoint persons to manage enterprises in a variety of circumstances, the most obvious example being the power to appoint a receiver and manager of the property of a corporation. The power of the Supreme Court to appoint a receiver is statutory. It is to be found in Section 37 of the Supreme Court Act 1986. There are also additional powers to appoint receivers and like persons in the Corporations legislation. Nevertheless, as the decision of the Full Court of the Supreme Court demonstrates, the power to appoint a receiver is circumscribed to particular circumstances and cannot be made simply because in a particular instance it seems convenient to do so. National Australia Bank Limited v Bond Brewing Holdings Limited [1991] VicRp 31; [1991] 1 VR 386. I am not persuaded that a Court would have jurisdiction to make the appointment sought by Mr Jones. A fortiori such an appointment cannot be made by this Tribunal. The application for appointment of a management company is refused.
The next question is whether in the circumstances Mega has complied with its obligations under Section 47 of the Retail Leases Act, albeit late in the provision of the auditor's report. In my view Mr Jones' submissions insofar as they seek to incorporate by reference obligations under the Corporations Act applying to auditors are misconceived. Section 47(5)(b) of the Retail Leases Act refers to the Corporations Act only for the purpose of incorporating the registration system for auditors under that legislation. It does not in my view, otherwise, either directly or indirectly, impose the obligations laid down by the Corporations Act upon audits or the provision of the auditor's reports under Section 47. Even if that were not the case, the reference to Section 307C of the Corporations Act would be misconceived. The declaration which that section requires from an individual auditor relates only to a corporation's 'financial report'. This expression is defined in Section 9 of the Corporations Act to mean:

An annual financial report or a half-year financial report prepared under Chapter 2M.

These are statutory accounts in the form of balance sheets and profit and loss accounts not the specialised report called for in the Retail Leases Act.

Whilst there is no document produced that proved affirmatively that Mr McLennan was a registered auditor within the meaning of the Corporations Act, nevertheless, there was nothing produced which would suggest otherwise. In my view, the general presumption of regularity renders it proper for me to presume that Mr McLennan is what he purports to be, namely, a registered auditor, in the absence of evidence to the contrary.
Whilst the hallowed phrase 'true and fair view' is not to be found in the McLennan reports the audit opinion does state that they 'fairly represent a statement of the transaction in relation to the commercial properties ...' which is in my view adequate for the purpose. Neither side produced material setting out audit standards as stipulated by the Australian Accounting Standards Board as referred to in Section 47. Again, however, the processes described in the audit report as to how it was compiled seem to be in accordance with general audit principles as I understand them and again in the absence of anything to the contrary I believe I should accept these reports as being what they purport to be, namely proper audit reports. The fact that these reports are produced on the basis of material produced by Mega is not in itself an objection to the adequacy of the report. Every audit by its very nature proceeds on the basis of material initially generated by some person other than the auditor by way of the source materials. Putting the matter 180o the other way, Mr Jones submitted that it was an objection to the adequacy of this material, that the apportionment itself was generated by the auditor. What I have said already indicates that there was an initial apportionment created by Mr Huynh which was the subject of revision by the auditor. There was no reason to think that there was anything inappropriate in that course and there is nothing in Section 47 which would render it other than proper.
It is clear that the exempting provisions of Sub-section (6) of Section 47 do not apply because outgoings other than those referred to in the section are claims against the tenant and the assessments, invoices and so forth are not provided. These reports by McLennan in so far as the audit opinion goes do not appear to track the requirements laid down in Section 47(5)(b)(i) and (ii) of the Retail Leases Act set out in full above. I accept that compliance with requirements such as this must be judged as matters of substance and not mere form. If alternative language is used which in substance conveys the same meaning as the words in the statute, it would be no objection to the adequacy of the reports that the very words used in the statute have not been employed in the reports. Nevertheless, the clearest means of compliance is by directly tracking the statutory words. In substance however, I do not believe that the audit opinion which is quoted above goes the distance of asserting that the relevant statement 'correctly states the landlord's expenditure during the accounting period ...'. To say that it 'fairly represents' the transactions is in my view somewhat less than the statute requires. Moreover, there is no comparison as required by sub-paragraph (ii) with the estimate of outgoings.
It follows that I cannot accept Ms Ruddle's submission that Section 47 has now been complied with.
Nor with respect to the obligation to provide an estimate of outgoings under Section 46 of the statute can I regard that obligation as having been complied with. It will be recalled that McLennan Partners provided an estimate for the year ending 30 June 2007. No one has made any criticism of this document, hence I regard Section 46 as complied with, albeit late for the present accounting period, viz. the financial year 2006/7.
Ms Ruddle submitted that the disclosure statement provided with the lease constituted compliance with Section 46 for the purposes of the year ending 30 June 2005. The relevant section of the disclosure statement is headed 'Outgoings estimate of 2004/2005' and states with respect to BJ's Dance Center (the Jones) their annual share is $768.55 per month. According to Mr Jones' statement from the bar table, and this stood uncontradicted, the amount actually charged for the first financial year of the tenancy, that is the year ending 30 June 2005, was a higher monthly impost. The document in the disclosure statement does not purport to be an estimate for the year ending 30 June 2005 and was not the basis for the charging of outgoings instalments for that year. In my view therefore, Section 46 has not been complied with for that year. Nor has it been complied with for the year ending 30 June 2006. There is no particular form of document required. On the face of it one might have thought that the material prepared by the auditors for the year ending 30 June 2006 purportedly under Section 47 could also operate in satisfaction of the obligation under Section 46. Tempting as this view is, ultimately I cannot accept it. The provisions of Section 45(5)(b) require the auditor to make a comparison between the actual outgoings and the estimate. The section clearly contemplates that they are two separate documents and therefore the one document cannot serve both purposes as an estimate under Section 46 and as a report of actual expenditure under Section 47.
Next, I turn to the question whether the 'management costs' in the sum of $7,150 allocated to the Jones' tenancy in the sum of $1,855.96 in the 2005 year and in the sum of $7,800 allocated to the Jones in the sum of $2,024.68 is properly chargeable.
First, the audited figures demonstrate that the contention made by Ms Ruddle that these amounts remained steady and were not increased and hence, are not affected by Section 49(2) of the Retail Leases Act cannot be accepted.
There is however a more fundamental question as to whether those amounts are payable at all. It will be recalled that management fees are not dealt with in the lease at all except as an item in the definition of outgoings. Section 49(1) of the Act quoted above requires that the amount of the management fees and a rate or method of calculating a rate for working out those amounts must be specified. The section allows this specification to be either in the lease or in the disclosure statement. The disclosure statement sets out an amount of $7,800 for management costs. It is presumably the existence of that figure which led Ms Ruddle to make the submission about the non-application of Sub-section (2). The audited figures however, show that a lesser sum seems to have been charged in the year ending 30 June 2005 I need not stay to consider whether the fact that the larger amount, namely $7,800 is shown in the disclosure statement enables acceptance of Ms Ruddle's submission because neither the lease nor the disclosure statement sets out 'a rate, or a method for calculating a rate, for working out the amount for which the tenant is liable for that period' with respect to management fees. The two sub-paragraphs of Section 49(1)(b) are joined by the conjunctive 'and'. That means that disclosure must be made not merely of the amount but also of the rate or method. In the absence of such rate or method the management costs or fees were not properly chargeable.
Finally, I accept the contention put by Mr Jones that he and his wife should receive a refund of $1,355.72. Mr Jones said that the solicitor for Mega had admitted that there had been over-charging of electricity. Such an admission in general terms was renewed by Ms Ruddle in the course of the hearing. I invited Ms Ruddle to put any alternative submission she might make as to how that over-charging should be rectified or to advance any critique of Mr Jones' calculations which were set out in an annexure to his affidavit. My invitation was made in the morning and renewed during final addresses in the afternoon. No alternative proposal, interpretation or critique was advanced, hence I propose adopting the figure of $1,352.72.
No specific order seems to be sought with respect to the repair of the roof. The argument before me was conducted on the basis that the roof formed part of the common property. The photographs which Mega produced however, show that the Jones' tenancy is freestanding. There is no subdivision of the arcade site, the whole of the premises and all of the tenancies being upon a single title. In those circumstances, since the demised premises, so far as the Jones are concerned, are constituted by the relevant 'suites', it is highly arguable that the roof of their tenancy is part of the demised premises. If that is true, then the lessor's only statutory obligation to repair derives from Section 52 of the Retail Leases Act. In its original incarnation that section required a lessor to keep the premises, their fixtures and fittings in good repair. In 2005 however the section was retrospectively amended so as to oblige the lessor only to maintain the premises 'in a condition consistent with the condition of the premises when the retail lease was entered into -'. As I understood Mr Jones' case, the roof problems have been present from the start of his tenancy. If the question of the roof depended on Section 52, the lessor would not be obliged to repair so far as I can see. At any rate, since no specific order is sought and the lessor proposes to carry out repairs, I need say no more on the subject.
What then is the appropriate disposition of this matter? I have already explained why I must dismiss the application for the first head of relief sought by Mr Jones.
As to the second head of relief, I believe it is appropriate that I order the respondent to comply with Sections 46 to 49 of the Retail Leases Act 2003. I do not however accept the suggested corollary of that, namely that some $16,830.81 should be refunded by Mega to the Jones. This amount as I understand it, represents the entire amount paid by the Jones for outgoings from 15 December 2004 to 1 February 2007. Mr Jones did not articulate the ground upon which he suggested these sums might be recovered. He might for instance have been contending that he paid these amounts under the mistaken belief that he was under a legal obligation to do so. Now however he realised that there was no such legal obligation and the amounts should be recoverable as moneys paid under mistake. Whilst Mr Jones made individual criticisms of particular services, he did not contend for instance, that no services had been provided clearly with respect to all matters other than the overcharged electricity and the management fees actual outlays were undertaken. Ms Ivanov's evidence was that all services were adequately provided and in the circumstances of the hearing it could not be effectively challenged. The Court of Appeal in Ovidio Carrideo Nominees Pty Ltd v The Dog Depot Pty Ltd [2006] VSCA 6; (2006) V Conv R 54-713 held that authorities established that good consideration was a defence to a claim for the repayment of moneys paid under a mistake. The claim to recover the entire amount of outgoings paid must therefore fail.
Based on the admissions made there would appear to be no consideration which would provide a defence to the claim for the recovery of the overpaid electricity charges. With respect to the management fees there appears to be no established restitutionary right of recovery of amounts payable to a landlord for managing the landlord's business of letting commercial premises. As I understood Ms Ivanov's evidence, these management fees were payable to the lessor company itself, presumably for the trouble which she took on its behalf. The only basis upon which these amounts could be claimed is by express covenant in the lease. The lease includes a covenant for the payment of these amounts in the relatively roundabout way of including them within the definition of outgoings. Section 49(1) of the Retail Leases Act however avoids the covenant to the extent that it authorises the recovery of the management fees in the present circumstances. There is no defence to a claim for their recovery.
I reject the claim made by Mr Jones for costs. Section 92 of the Retail Leases Act limits the costs which can be awarded as between party and party to circumstances where a party sought to be made liable for costs to the other party has refused or withdrawn from alternative dispute resolution procedures (not the situation here where a Small Business Commissioner mediation was held and completed or where the party vexatiously conducts the proceeding in a manner disadvantaging the other party). Mr Jones contended that Mega has delayed this proceeding at every turn. There were two directions hearings and a final hearing. In contrast to many of the matters in this List, the commencement and disposition of this proceeding has been quite speedy. Many of the matters relied upon by Mr Jones pertained to the mediation conducted under the auspices of the Small Business Commissioner rather than to what happened in the Tribunal. In my view there is no basis for contending that Mega has conducted this proceeding in a vexatious manner. The claim for costs must therefore fail.
In any event the amounts claimed may not be properly characterised as 'costs' at all. In Cachia v Hanes [1994] HCA 14; (1994) 179 CLR 403 the High Court held that a concept of costs where used in the New South Wales Supreme Court Act extended to moneys outlaid for professional legal services and did not include compensation for time spent by a litigant who was not a lawyer in preparing and conducting his case. The 'costs' sought here seem to be of that latter excluded category.

Jones & Anor v Mega Bargains Pty Ltd

At a glance

Court

Decision date

Source

Judgment (62 paragraphs)

Jones & Anor v Mega Bargains Pty Ltd (Retail Tenancies) [2007] VCAT 344 (19 February 2007)

Parties

Cases Cited (1)