Lyons Road Pty Ltd v The Owners Strata Plan 38722 [2006] NSWSC 64 | Case summary

REASONS FOR DECISION Introduction 1 The applicant is the registered proprietor of Lots13 and 14 in Strata Plan 38722, being Shops 13 and 14 at 38-50 Lyons Road, Drummoyne ('the Premises'). The respondent is the owner of the common property of Strata Plan 38722. The dispute that has arisen between the applicant and respondent follows from a dispute the applicant has had with its tenant of the Premises, Ms Zouk. It is conceded that the dispute between the applicant and Ms Zouk comes within the terms of the Retail Leases Act 1994 ('the RL Act') in that it is a 'retail leases claim'. It is the applicant's contention that its dispute with the respondent is one that arises directly from its dispute with Ms Zouk and therefore also comes within the terms of the RL Act. On the other hand the respondent contends that while there may be an apparent factual relationship between the applicant's dispute with Ms Zouk and the applicant's dispute with the respondent, the latter dispute is not one over which the tribunal has jurisdiction. That is, the dispute the subject of this application is not a 'retail tenancy claim' as provided for in the RL Act. 2 In light of this the parties consented to the tribunal determining the issue of jurisdiction as a preliminary matter and these are the reasons for decision in respect to that issue. Background facts 3 The underlying facts in this matter are not contested. 4 On 20 August 2004, the applicant leased the Premises to Ms Zouk. That lease was for a period of 3 years with an option to renew for a further term of 3 years. Not long after the commencement of the lease a dispute arose between Ms Zouk and the applicant in regard to the condition of the Premises. That dispute related to the existence of asbestos in the roof and water penetration into the Premises. The asbestos and water penetration was such that it prevented Ms Zouk completing her fit out and use of the Premises. In light of these difficulties Ms Zouk withheld the payment of the rent and in early 2005, the applicant sought to terminate the lease. In response Ms Zouk filed an application in the tribunal seeking orders that included an order restraining the applicant from terminating the lease. 5 That claim was determined on 28 June 2005: see Zouk v Lyons Road Pty Ltd [2005] NSWADT 143. In that decision, Judicial Member Mr B. Donald determined that: (a) the applicant was not entitled to terminate the lease; (b) there was no continuing breach by the applicant of its obligations in respect of asbestos contamination or water penetration into the premises; and (c) as from the date of the decision, Ms Zouk's right and obligations under the lease continued. 6 The decision of Judicial Member Mr B. Donald however did not dispose of all the matters raised in Ms Zouk's application. It would appear that Ms Zouk finally completed the fit out of the premises in about August 2006 and she has traded from the premises since that date. In the meantime, Ms Zouk has amended her original application and is now seeking damages for loss of profits allegedly suffered in the period while she was unable to occupy the premises. 7 It is the applicant's contention that the defects complained of by Ms Zouk were defects relating to and arising from the common property of the building which is owned by the respondent. It is noted that the rectification work in respect to the asbestos and water penetration were undertaken by the respondent. In light of this the applicant lodged its application, by way of a cross claim, seeking indemnity from the respondent in respect to the amended claim of Ms Zouk. Relevant legislation ADT Act 8 The jurisdiction of the tribunal is set out in Part 3 of the Administrative Decisions Tribunal Act 1997 ('the ADT Act'). S.36 in that Part sets out the 'principle kinds of decision' that the tribunal has jurisdiction to make. These are: (a) original decisions, and (b) review reviewable decisions. 9 The term 'original decision' is defined in s.7 of the ADT Act to mean a decision of the tribunal made in relation to a matter over which it has jurisdiction under an enactment to act as the primary decision maker. The term "enactment" is defined in s.5 of the ADT Act to mean an Act other than the ADT Act: see s.5(b) of the ADT Act. 10 In this case the relevant Act is the RL Act. Retail Leases Act 1994 11 The powers of the Tribunal in respect to a claim relating to a retail shop lease are set out in Division 3 of Part 8 of the RL Act, in particular s.72 and 72AA. In this application, the relevant provision is s.72 which provides as follows: 72 Powers of Tribunal relating to retail tenancy claims (1) In proceedings for a retail tenancy claim lodged with the Tribunal under this Part, the Tribunal is empowered to make any one or more of the following orders that it considers appropriate: (a) an order that a party to the proceedings pay money to a person specified in the order, whether by way of debt, damages or restitution, or refund any money paid by a specified person, (b) an order that a specified amount of money is not due or owing by a party to the proceedings to a specified person, or that a party to the proceedings is not entitled to a refund of any money paid to another party to the proceedings, (c) an order that a party to the proceedings: (i) do any specified work or perform any specified service or any obligation arising under this Act or the terms of a lease, or (ii) surrender possession of specified premises to another person, or (iii) assign his or her or its rights under a lease to a specified person, or (iv) do or perform, or refrain from doing or performing, any specified act, matter or thing, d) an order granting a party to the proceedings relief against forfeiture, e) an order, by consent of the parties, requiring the parties to the proceedings to rectify a lease, f) an order: (i) declaring any provision made by a lease to be void for being inconsistent with this Act or the regulations, or (ii) declaring that a lessor is not entitled to withhold consent to an assignment of the rights of a lessee, or (iii) declaring the rights and liabilities of the parties under law, whether any consequential relief is or could be claimed or not, or (iv) declaring that a party is or is not entitled to receive payment of the whole or a part of a security bond, d) such other order, in the nature of an interlocutory order of a kind referred to in paragraphs (a)-(f), as the Tribunal considers proper to be made in order to resolve or assist resolution of the dispute between the parties . 2) The Tribunal may make such ancillary orders as it considers necessary for the purpose of enabling an order under this section to have full effect. 3) The Tribunal may impose such conditions as it considers appropriate when making an order under this section. 4) The Tribunal may make an interim order under this section pending final determination of a claim, if it appears to the Tribunal desirable to do so.' (italics added) 12 A 'retail tenancy claim' is defined in s.70 of the RL Act as follows: ' retail tenancy claim means any of the following: (a) a claim in connection with a liability or obligation with which a retail tenancy dispute is concerned, being (i) a claim for payment of money (whether or not stated to be by way of debt, damages, restitution or refund), (ii) a claim for relief from payment of a specified sum of money, (iii) a claim for the doing of specified work or the provision of specified services, (iv) a claim for the surrender of possession of specified premises, (v) a claim for assignment of rights under a lease or for a declaration that a lessor is not entitled to withhold consent to an assignment of the rights of a lessee, (vi) a claim for relief against forfeiture, (vii) a claim regarding the rectification of the lease, (viii) a claim regarding the invalidity of a lease for inconsistency with this Act or the regulations, (ix) a claim for declaration of the rights, obligations and liabilities of the parties under a lease, (x) without limiting the generality of subparagraph (i), a claim for compensation under section 10, 34, 35 or 62E, (xi) without limiting the generality of any other subparagraph, a claim with respect to the entitlement of a party or former party under a lease to receive payment of the whole or a part of a security bond, …' (italics added) 13 A 'retail tenancy dispute' is defined in s.63(1) of the RL Act to mean: 'any dispute concerning the liabilities or obligations (including an obligation to pay money) of a party or a former party to a retail shop lease or former lease, being liabilities or obligations which arose under the lease or former lease or which arose in connection with the use or occupation of the retail shop to which the lease or former lease relates, and without limiting the generality of the foregoing) includes a dispute about a security bond, but does not include a dispute of the kind referred to in section 19(1)(b) or 31(1)(b) as to the rent payable under a retail shop lease (where the rent is to be current market rent for the shop).' 14 S.71(1) of the RL Act sets out those persons who can lodge a 'retail tenancy claim' with the tribunal. That subsection provides as follows: 'A party or former party to a retail shop lease or former retail shop lease may lodge a retail tenancy claim in respect of the lease with the Tribunal for determination of the claim.' 15 The term 'a party' or 'former party' to a retail shop lease is defined in s.63 of the RL Act to include a person who is a guarantor or covenantor under the lease or former lease. The applicant's claim against the respondent 16 In its application lodged with the tribunal, the applicant asserts that the respondent is liable to: '(a) indemnify the [applicant] with respect to the entirety of the claim by Zouk, including the costs of these proceedings; and (b) pay damages to the [applicant] for all additional costs and expenses incurred by the [applicant] and rent not paid by … Zouk.' Consideration 17 Both parties submitted written submissions. The respondent submitted submissions first, to which the applicant replied. The respondent then submitted further comprehensive submissions in reply. I have considered these and the material contained in the applicant's application. 18 As pointed out by the respondent there are essentially two matters for determination. These are: (a) identifying the nature of the claim, or cause of action, by the applicant against the respondent; and (b) the proper construction of the term 'retail tenancy claim' in s.70 of the RL Act and whether this includes the abovementioned claim of the applicant against the respondent. Nature of applicant's claim against the respondent 19 The respondent contended that the nature of the applicant's claim the subject of this application was a claim arising from the respondent's common law duties and statutory obligations under the Strata Schemes Management Act 1996 to maintain and repair the common property of the building. That is, it was purely a tortious action over which the tribunal has no general jurisdiction. The respondent went on to state that even though its alleged acts or omissions may have given rise to the dispute between the applicant and Ms Zouk, this did not transform the nature of the applicant's claim against the respondent from being a claim in tort. 20 The applicant does not appear to dispute these contentions of the respondent, which in my opinion, on the material before the tribunal is correct. The applicant however contends that the principles set out by Scrutton LJ in Barclays Bank v Tom [1923] 1KB 221 should be applied in that the tribunal should be reluctant to hold it has no jurisdiction to hear its claim as 'a very substantial stratum of facts and issues' in this claim and that contained in the claim by Ms Zouk are the same. In Barclays Bank v Tom, the issue before the court was whether a third party procedure (i.e. a claim by a defendant against a third party if held liable for the claim of the plaintiff) should be dealt with at the same time as the substantive claim. 21 While the principles set out by Scrutton LJ are uncontroversial, I agree with the submissions of the respondent that these principles do not go so far as to state that a statutory body such as the tribunal is thereby vested with jurisdiction over matters which it would not otherwise have: see A Calkos Pty Limited v Taylor Farms (Australia) Pty Limited & Ors (Commercial Tribunal of NSW, GMM Hoeben, Deputy Chairman, 9 April 1998). Construction of term 'retail tenancy claim' 22 As set out above, by reason of s.37 of the ADT Act, the jurisdiction of the tribunal in respect to retail shop leases is that set out in Division 3 of Part 8 of the RL Act, in particular s.72. That section sets out the powers of the tribunal in respect to a 'retail tenancy claim'. As mentioned above that term is defined in s.70 to mean a 'claim in connection with a liability or obligation with which a retail tenancy dispute is concerned'. It is the words 'in connection with' which are relied on by the applicant as founding the tribunal's jurisdiction to hear and determine its claim. That is, the applicant contends that these words are sufficiently wide to include third party claims which arise primarily from the same facts that have given rise to the dispute between a landlord and a tenant to a retail shop lease. 23 The respondent concedes that the provisions of the RL act should be given a broad construction but goes on the submit that the words 'in connection with' in s.70 should not be considered in isolation but should be considered in the context of the section as a whole and the other provisions of the RL Act. In this regard the respondent relied on the decision of Kirby J in Taylor Farms (Aust.) Pty Limited v A Calkos Pty Limited & Ors [1999] NSWSC 186. That decision concerned the jurisdiction of the former Commercial Tribunal to hear and determine a cross claim by a tenant against the landlord for misleading and deceptive conduct under ss.42 and 68 of the Fair Trading Act 1987. This decision predated the coming into force of Division 2 of Part 7 of the RL Act which inserted provisions in respect to misleading or deceptive conduct by a party or former party to a retail shop lease (see s.62D of the RL Act). 24 At the time Taylor Farms (Aust.) (supra) was decided the list of prescribed claims in s.70 was not as comprehensive as it is today, however the introductory words were the same. Similarly, for the purpose of this application, the definition of 'retail tenancy dispute' in s.63 of the RL Act was in effect the same as it is today. In holding that the then Commercial Tribunal had no jurisdiction to hear and determine the tenant's cross claim Kirby J said the following in [30] to [39]: '30 The tenant, Taylor Farms, contends that a "retail tenancy claim" has been deliberately framed in broad terms. Relevantly, it is a claim for payment of a specified sum of money, or a claim for relief from payment. The issue is whether a claim under s 68 for a breach of s 42 of the Fair Trading Act 1987 is a "retail tenancy claim". 31 The Cross Claim of Taylor Farms seeks to establish liability on the part of the landlord under the Fair Trading Act, which might then be set off against any liability for unpaid rent. The contention is, therefore, that the Commercial Tribunal has jurisdiction to determine whatever issues may separate retail landlord and tenant. 32 Counsel for the landlord, Calkos, resisted such a construction upon a number of bases. … 33 … 34 … 35 [The] jurisdiction in the Commercial Tribunal is founded upon there being "a retail tenancy claim". A retail tenancy claim, in turn, is dependent upon their being "a retail tenancy dispute". The "retail tenancy dispute" has, as its touchstone, a liability or obligation which arises in one or other of two ways, namely: either under the lease, or in connection with the use of the retail shop to which the lease relates. 36 Taylor Farms do not suggest that the obligation upon Calkos arose under the lease. Do such obligations arise "in connection with the use or occupation of the retail shop to which the lease relates"? The words "in connection with" are of wide import. ( Burswood Management Limited & Ors v Attorney General (Cth) & Anor (1990) 23 FCR 144) Barwick CJ, in Brown & Ors v Rezitis & Ors ((1970-71) 127 CLR 157), a case concerned with s 88F of the Industrial Arbitration Act 1940, said this: (at 165) "Whilst it can be said that the expression 'in connection with' is of wide import, it does emphasise the need for a close connection between the order made and the contract or arrangement varied or avoided..." However, I do not believe that the words in the definition are so broad as to encompass any liability, whatever its source. The retail landlord and tenant come into contact by reason of that relationship. That contact may give rise to liability in a variety of ways. The tenant may assert, for instance, that he or she has been defamed by remarks made by the landlord. However, in a claim for rent by the landlord, the Commercial Tribunal, in my view, would not be vested with jurisdiction to determine (without a jury) whether rent should be offset by an award of damages for defamation. It was suggested, by counsel for Calkos, that the causal connection required to satisfy the requirements of a "retail tenancy dispute" can only be met if the obligations arise either under the lease, or by virtue of the Retail Leases Act 1994. The definition, for instance, is apt to pick up obligations upon the landlord arising under s 34, in respect of which the retail landlord may be obliged to pay compensation, were he in breach. 37 Such a construction may be too narrow. Negligence by the landlord impacting upon the tenant, where damage was foreseeable, may be enough (cf Brian Oxley and Frances Peroni v Imperial Charter Pty Limited (Commercial Tribunal, 26.8.96, Deputy Chairman R B Davidson). 38 Whatever the limits, I believe that determining a claim for damages under the Fair Trading Act 1987 (ss 42 and 68) is beyond that limit. I believe, with respect, Deputy Chairman Hoeben expressed the point well when she said this: "Statutory substantive jurisdiction cannot be found by mixing and matching any number of pieces of legislation, whether they give limited jurisdiction to the Tribunal (as it does by s 78 of the FTA) with another jurisdiction conferred by legislation, the latter forming the basis of the claim. If the Tribunal was to have jurisdiction under ss 42 (and therefore 68) Parliament would either have enacted the relevant amendment under either the Tribunal Act or the FTA, as it did with the District Court in 1992 with the introduction of s 135. Parliament has made no such amendment." 39 I believe, therefore, that the Tribunal was correct to strike out paragraph 2.' 25 The respondent also referred to the decision of Rein AJ in Pascoe v Holyoake [2006] NSWSC 64 in which the applicant, the administrator of the estate of the landlord of a retail shop lease, sought to have transferred to the Supreme Court a claim that the tenant to the lease had lodged in the tribunal so that the administrator could bring a cross claim against the managing agent of the premises the subject of the lease. In that case it was conceded that the tribunal had no jurisdiction to hear and determine an application by the administrator of the landlord against the managing agent and reliance was placed on s.23 of the Supreme Court Act 1970 as the basis for transfer. However, Rein AJ determined the issue on the proper construction of s.76 of the RL Act, which he held at [20] that the combined effect of ss.75 and 76 of the RL Act was that they together 'evince an intention that the Tribunal is a specialist forum in which retail tenancy disputes should be heard, unless both parties to the dispute are content to have their dispute heard in another forum, or proceedings have first been commenced in a court and the interests of justice or other matters make it inappropriate for the Tribunal to hear the dispute.' 26 In my opinion, this decision is of little assistance in the proper construction of s.72 of the RL Act and the meaning of a 'retail tenancy claim' in s.70 of that Act. However, it does support a construction of the tribunal's powers under the RL Act as being a specialist tribunal for hearing and determining retail tenancy claims. 27 I agree with the respondent's submissions that notwithstanding the amendments to ss.70 and 63 of the RL Act the construction of a 'retail tenancy claim' under s.72 of the RL Act as applied by Kirby J in Taylor Farms (Aust.)(supra) continues to be applicable. That is, the words 'in connection with' in s.70(a) when read together with the remaining words in the introductory part of that paragraph, in particular the words 'retail tenancy dispute' which in turn is defined in s.63 to mean a dispute 'concerning the liabilities or obligations of a party or former party to a retail shop lease' does not encompass a general tortuous claim of the kind that is the subject of this application. 28 I also agree with the respondent's submissions that support for such this construction of a 'retail tenancy claim' can be found in the parliamentary debate and second reading speech for the Retail Leases Bill 1994 (No 2): see NSW Legislative Council Hansard, 13 May 1994 at article 32 and 48. 29 Accordingly, for the reasons set out above, the tribunal has no jurisdiction to hear and determine this application. But as pointed out by Rein AJ in Pascoe v Holyoake, this does not mean that the applicant is prevented from brining its claim against the respondent in another jurisdiction. 30 In light of these findings it is appropriate to order that the applicant's application be dismissed and that orders be made enabling the parties to make a cost application in the event they choose to do so.

Lyons Road Pty Ltd v The Owners Strata Plan 38722

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