Jurisdiction of Tribunalagreement to occupy premises"public road"
Judgment (4 paragraphs)
[1]
Reasons for decision
The applicant occupies a building and a surrounding area which is located at Memorial Square in the Hurstville city centre (this combination of the building and its surrounding area is referred to within this decision as "the premises").
The applicant operates a business at the premises called "Moochi Natural Frozen Yoghurt", pursuant to a franchise agreement which the applicant entered into on 31 January 2013 with the franchisor Moochi Franchising Pty Ltd (referred to below within this decision as "Moochi").
Memorial Square is a public area which is adjacent to Forest Road and is under the control and management of the respondent.
On 26 September 2014, the respondent issued a written notice to Moochi purporting to terminate the agreement under which the premises were occupied. This notice also required the building and other improvements to be removed, and the site to be remediated.
The threshold issue to be determined within this decision is whether or not a retail lease agreement as defined by the Retail Leases Act 1994 exists between the applicant and the respondent in respect of the premises. If no such retail lease agreement exists, the Tribunal lacks jurisdiction to determine the subject dispute.
Hearing of this matter took place in Sydney over the course of the afternoon of 31 March 2015, and my decision was then reserved. All of the evidence and submissions provided by the parties have now been considered, but will not necessarily be specifically referred to below.
During 2012, the respondent received an expression of interest from Moochi for operation of a kiosk/cafe and outdoor eating area within the southern corner of Memorial Square.
The respondent had apparently received and then evaluated a number of relevant expressions of interest, following which it granted consent in principle to Moochi to erect and operate a kiosk or cafe and outdoor eating area at the premises.
The above consent appears to have been published on 17 October 2012 and was stated to have been given by the respondent in its capacity as a "roads authority" under the Roads Act 1993. The consent is set out at the head of a document which then contains the terms of an agreement between the respondent and Moochi concerning the premises (referred to below as "the October 2012 agreement").
Within the October 2012 agreement, Moochi agreed to lodge a development application by 15 November 2012 seeking development and building approval from the respondent for the kiosk/cafe and other improvements to be erected and for its food retail business to then operate at the premises; Moochi also agreed that it would pay rent to the respondent at an initial rate of $42,000 per annum plus GST as and from the "commencement date" of the agreement (which was 7 days after granting of Development Consent by the respondent), but this requirement was subject to clause 4.2 which provided that no rent was payable for the first month of the term of the agreement.
Moochi proceeded to apply for and then obtain the required Development Consent from the respondent.
Clause 9.1(b) of the October 2012 agreement regulated the hours during which the subject business could be operated at the premises; clause 9.2(a) also provided that Moochi's business would not be conducted prior to 12 noon on each Anzac Day during the term of the agreement.
Clause 9.2 (k) prevented Moochi from assigning or encumbering its interest under the agreement.
Clause 14.1 provided that the respondent could revoke the agreement by written notice to Moochi in the event that Moochi was wound up, ceased or threatened to cease conduct of the business, or entered voluntary administration or a scheme of arrangement.
Moochi did come to be placed under external administration on 10 September 2014. The respondent then issued a document entitled "Notice of Revocation of Consent" addressed to Moochi on 25 September 2014, which required the premises to be vacated, Moochi's property to be removed, and the premises to be repaired and generally remediated within the ensuing 7 days.
Pursuant to the terms of its agreement with Moochi, the applicant had commenced trading at the premises during September 2013. Pursuant to that agreement, the applicant had also been responsible for the cost of installation and erection of the takeaway food kiosk at the premises, together with all associated works and installations.
All rent invoices for the premises issued by the respondent's agent were addressed to Moochi; there appears to be no issue that these invoices were in turn paid by the applicant.
There was no express provision for payment of rent by the applicant to the respondent, nor were the premises specifically identified, within the Franchise Agreement between Moochi and the applicant dated 31 January 2013. Although section 13 of the generic Disclosure Document which was issued by Moochi to accompany the Franchise Agreement did provide an estimated range of rent ,promotional fees and outgoings which would be payable by the applicant to an unnamed lessor of "between $5,000 and $7,000" in respect of the unspecified premises, it can be seen that section 18.1(a) of the same document also provided that the applicant as franchisee:
"...is responsible for entering into any lease or other agreement required by its landlord. The franchisee must ensure that the lease includes an option for the lease to be assigned to the Franchisor in the event of termination of the Franchise Agreement."
Of course, no such "lease or other agreement" was ever negotiated or expressly entered into by the applicant with the respondent.
The initial payments of rent by the applicant following on from its occupation of the premises appear to have commenced in response to a request from Moochi which is set out within an email to the applicant's accountant Mr Fred Sari on 30 September 2013:
"Could you please make a payment for the September rent invoice as well?
We will credit you 1.5 weeks of rent to your Moochi Operations inventory costs. It is better that you make a payment, rather that (sic) us.
Thanks"
There is no written agreement between the parties which expressly provides for occupation of the premises by the applicant.
On 16 June 2014, the respondent's agent sent an email message to Mr Sari entitled "Re: Any Update"; this title, when read in conjunction with the content of the email message, suggests that the message was sent in response to an earlier message or messages from Mr Sari seeking advice as to the possibility of the applicant acquiring Moochi's interest in the premises. No such prior communications have been placed into evidence. The message states:
"Please be advised that Council has resolved to assign the licence to MH Investments Pty Limited...(indecipherable)...Moochi provide a bank guarantee to cover 12 months rental in the event of default of the...(indecipherable)...addition to the standard 3 month rental bond required to be paid in advance by the assignee..
If you could let me know if you would like to proceed with this we can advise the solicitor for the Lessee. Should you have any questions in relation to this please feel free to contact me."
There is no evidence provided on behalf of the applicant as to any steps taken by it toward any such assignment; rather, it submits that it "has not rejected this proposal and is ready willing and able to meet the conditions imposed by the respondent"; this submission is difficult to understand within the context of the applicant's contention that a retail lease agreement exists between the parties, because it does not address the provisions for assignment set out within sections 39 or 41 of the Retail Leases Act 1994 . Further, this submission fails to address the apparent impossibility of provision by Moochi of a bank guarantee.
The applicant seeks, amongst other orders, an order for relief against forfeiture and a declaration that it is the "equitable lessee" under a retail lease agreement existing between the parties pursuant to the provisions of the Retail Leases Act 1994.
In summary, the respondent contends that there cannot be any retail lease agreement as asserted by the applicant because:
the agreement concerns a public road expressly entered into pursuant to the provisions of the Roads Act 1993; and
the applicant is not in any event a party to any agreement with the respondent.
It is conceded by the respondent that it agreed with Moochi, and then later gave development consent to Moochi, for the erection and subsequent operation of a retail takeaway food outlet and eating area at the premises, such that in other circumstances the premises would clearly fall within the definition of a "retail shop" as set out within section 3 the Retail Leases Act 1994.
In my view, the somewhat hybrid October 2012 agreement which initially set out the consent of council, and then set out the terms under which Moochi's retail activities would be undertaken, does fall within the definition of a retail lease agreement as set out within section 3 of the Retail Leases Act 1994, despite its recitation that it was made or entered into under the Roads Act 1993. Relevantly, the respondent relies upon the provisions of section 139 and 139A of the Roads Act 1993. While these sections certainly permit the respondent to grant consent to erection of a structure, and to impose conditions as to its use, in or upon a public road, the applicability of the Retail Leases Act 1994 to the October 2012 agreement is not thereby excluded, and it has not been established on the balance of probabilities that the subject area covered by the premises is a "public road" under the Act.
The above provisions of the Roads Act 1993 relate to consents and approval for conduct of activities and for certain types of development in public road areas. These provisions do not govern, nor do they relate to, the specific terms of a commercial lease agreement concerning a specific developed area such as are contained within the subject executed October 2012 agreement.
The existence of a retail shop lease agreement would operate in favour of an operator such as the applicant, such as to secure and protect its rights as a lessee under the Retail Leases Act 1994. However, the evidence referred to above in this decision demonstrates that there is no such agreement between the applicant and the respondent for the following reasons:
there was no express agreement concerning the premises other than the October 2012 agreement, to which the applicant was not a party;
the October 2012 agreement expressly prohibited assignment of Moochi's rights under the agreement, although section 39 of the Retail Leases Act 1994 does operate to override such prohibition;
there has been no conduct on the part of the respondent to indicate any agreement with, or acceptance of, the applicant as lessee or licensee of the premises, such as to create an implied retail shop lease agreement. Mere acceptance of payment of rent and other outgoings directly from the applicant does not of itself constitute any such agreement or acceptance;
notwithstanding the provisions of the October 2012 agreement prohibiting assignment by Moochi, the respondent did resolve in June 2014 to permit such assignment to the applicant upon certain terms, but these terms were not met;
Moochi subsequently entered into external administration, with the effect that the respondent thereafter validly terminated the October 2012 agreement by written notice given on 25 September 2014; and
there has been no assignment of rights by Moochi to the applicant.
Accordingly, the unfortunate conclusion is that the applicant is not a lessee of the premises pursuant to a retail shop lease agreement with the respondent. This finding means that the Tribunal does not have jurisdiction to determine the subject dispute between the parties.
The presumption created by section 60 of the Civil and Administrative Tribunal Act 2013 is that the parties are to bear their own costs of these proceedings. This presumption can only be displaced if the Tribunal is satisfied that "special circumstances" exist, and is also then satisfied that such circumstances "warrant" an award of costs. Accordingly, the parties will bear their own costs of the proceedings unless a written application is made and accompanied by submissions, in which case an opportunity should be given to the other party to respond and a decision as to costs made on the papers.
[2]
ORDERS
The application is dismissed.
In accordance with the provisions of section 60 of the Civil and Administrative Tribunal Act 2013, each party is to pay its own costs of the proceedings unless the respondent provides written submissions limited to 500 words in length to the Registry and to the applicant within 7 days of the date of these orders as to why any other order should be made in respect of costs.
In the event that submissions as to costs are provided by the respondent to the Registry and to the applicant in accordance with order 2, the applicant is to provide any written submissions limited to 500 words in length to the Registry and to the respondent within 14 days of the date of these orders, and a decision in relation to costs will then be made upon the papers.
[3]
Civil and Administrative Tribunal of New South Wales
[4]
5 May 2015
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: 09 July 2015