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[2009] NSWSC 827
mixed. The respondents were ordered to pay $2,450 for loss of stock and garments, $8,417 by way of rent abatement, and 50% of the applicant's costs as agreed or assessed on a party/party basis. The written...
A tailor's shop was affected by a leaking roof, an unsightly damaged ceiling and construction activity in the arcade. The Tribunal found that the lessors breached lease promises about quiet enjoyment and roof maintenance, and failed to give the notice required for the construction works. It did not award section 34 compensation because the written request came after the works had ended. It awarded $2,450 for damaged garments and stock, rent abatement, and half of the applicant's costs. Several larger claims were rejected because they were not adequately proved. The reasons' rent figures add to $8,447, while the formal order states $8,417.
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The dispute arose from a three-year retail lease of shop 5, a tailor's premises in a six-shop arcade at Granville. The lease ran from 1 April 2009 to 31 March 2012, with monthly rent initially stated as $1,906.66 inclusive of GST and later increasing to $1,963.87 inclusive of GST ([3]-[4]). The parties were Abdul Razul Mohammady, the lessee, and Elizabeth and George Christofi, the lessors.
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The applicant said water entered the shop through the roof and ceiling, damaging garments and stock. He also complained that construction work in the arcade and a container placed outside shop 6 interfered with trade and made the arcade appear closed. He claimed $3,500 for stock, $5,000 for machinery and furniture, $20,000 for construction-related business interruption, and $10,000 for goodwill and future prospects ([5]-[6]).
The lessors said they had responded to complaints by arranging roof repairs, including installing new sheets over the roof in 2010 ([8], [33]). The evidence established water damage and an unsightly ceiling, but the timing and valuation of the damaged garments were not well documented. The Tribunal noted that photographs' dates were not established, that the person who took some photographs did not give evidence, and that there was no clear link between translated receipts and the particular damaged garments ([12]-[15], [62]-[65]).
The construction-related evidence was more concrete as to the physical circumstances. The lessors permitted work in shops 1 and 2 and in part of the arcade. The windows were covered, tiling was undertaken, and a large container outside shop 6 blocked the view of shop 5 from South Street. Mr Christofi accepted that the overall impression could be that the arcade was closed for renovation ([37]). Neither respondent had given the tenants written notice of the works under section 33 ([31], [39]).
The Tribunal ordered $2,450 for loss of stock and garments, rent abatement, and 50% of the applicant's costs ([Orders]). It rejected the claims for machinery, business interruption and goodwill because the applicant had not substantiated them ([86]). There is an arithmetic discrepancy in the rent component: paragraphs 83 and 84 calculate $5,412 plus $3,035, totalling $8,447, while the formal order states $8,417.
The Tribunal treated the lease's express terms as central. Clause 2 required the lessors to permit possession and use without interruption or disturbance, subject to the lease. Clause 10.1.2 required them to maintain the roof and external walls in good and serviceable condition ([32], [47]). The Tribunal reasoned that quiet enjoyment protects the lessee's uninterrupted enjoyment of the premises, and that necessary repairs may be relevant to avoiding a breach of that covenant ([46]).
The Tribunal found that the water leak damaged garments and that the ceiling remained stained and damaged. It also found that the area under the damaged ceiling could not be used satisfactorily or might present a risk if used ([63], 80, (f)). It considered that the lessors had continued to own and manage the arcade during the period when the damage remained, visited the premises, and had notice of the condition ([69]-[70]). On that basis, it found breaches of the express lease obligations and awarded compensation ([81]).
The construction works were assessed separately. The Tribunal found that the works and container interfered with the applicant's quiet enjoyment, and relied on the approach described in the cited authorities that substantial interference need not be direct and physical ([52]-[55], 80, (m)). It also found a breach of section 33 because the lessors did not give notice (80, [81]). The Tribunal noted that section 33 had no prescribed penalty for this breach, but considered the breach as part of the overall circumstances.
Section 34 did not provide a compensation route on the facts found. The Tribunal read that section as requiring a written request from the lessee and found that the applicant's January 2011 letter came after the construction works had ended. It therefore found that compensation under section 34 was unavailable ([71], [75], 80, [81]). The Tribunal nevertheless expressed concern that a lessee may not know of the works or the need to make a written request where the lessor has not provided section 33 notice ([74]-[76]). That concern did not change the result on the section 34 claim.
For rent abatement, the Tribunal used the 15% estimate of affected floor area and assessed the period during which the ceiling damage remained. It reasoned that, although the tenant did not occupy the ceiling itself, the damaged ceiling made the area beneath it generally unusable (80, [83]). It then added a further abatement for October and November 2010 because of the construction-related interference ([84]).
The Tribunal accepted that garments were damaged, but did not accept the applicant's entire claimed value. It started with $3,500 and deducted 30% for failure to mitigate, awarding $2,450 ([85]). It rejected the machinery, business-loss and goodwill claims because the evidence did not sufficiently establish either the losses or a method for calculating them ([77], [82], [86]).
The judgment does not set out a comprehensive account of the law before and after the decision. It describes the applicable principles and applies the provisions and authorities before it. Its account of quiet enjoyment is that the covenant protects the lessee's enjoyment of the premises for their usual purposes, and that substantial interference by a lessor's act or omission may breach it ([46], [49]-[51]). It also notes that interference need not always be direct and physical, referring to Spathis and Telstra as well as the Appeal Panel decision in Spuds Surf ([54]-[55]).
For repair obligations, the Tribunal said there is generally no implied warranty that commercial premises are physically suitable or in a reasonable state of repair at the beginning of a lease. It instead located the lessors' obligations in the express terms of this lease and the quiet-enjoyment covenant ([45]-[47], [70]-[81]). The result should therefore be read in the context of the particular lease wording and findings, rather than as a ruling that every landlord has a general obligation to repair every defect.
On section 34, the judgment treats a written request as a condition of compensation and relies on Duarte for that requirement ([57]-[59], [71]). On section 33, it confirms that the Tribunal regarded advance written notice as required for proposed works likely to affect the lessee's business, subject to the statutory exception reproduced in paragraph 40 ([40], [72]). The Tribunal's suggestion that a lessor's ability to rely on the written-request condition should depend on compliance with section 33 was expressed as a preferred approach, not as the rule applied to decide the applicant's section 34 claim ([76]).
The judgment also applies section 36 to reduced usability. It measured the rent reduction by the proportion of the premises it considered unusable and the time that condition continued (80, (l), [83]-[84]). The decision does not state that its 15% assessment is a fixed method for other cases. It is a factual assessment made on the evidence in this dispute.
At paragraph 46, the Tribunal says: “The covenant of quiet enjoyment is to secure of the lessee uninterrupted enjoyment of the leased premises.” In plain English, the covenant protects the tenant's ability to use and enjoy the leased space without substantial interference attributable to the landlord or someone claiming through the landlord. The Tribunal applied that idea to both the water-related condition and the nearby works ([70], 80-(g)).
At paragraph 71, it states: “If there is no written request from the lessee then the lessor under s34 is not liable to pay compensation.” In plain English, the Tribunal treated a written request as a required step for a section 34 claim. Because the relevant construction disruption had already ended by the time of the January 2011 letter, the Tribunal found the applicant could not obtain section 34 compensation for those completed works ([75], 80).
At paragraph 79, the Tribunal explained that it would determine compensation “based on the limited information provided”. This reflects the Tribunal's ability under section 73(2) of the Administrative Decisions Tribunal Act 1997 not to be bound by the rules of evidence, while remaining subject to natural justice ([78]-[79]). It did not mean every claimed amount was accepted. The Tribunal still rejected claims where the evidence did not establish the loss ([80], [86]).
Paragraph 83 explains the rent method: the Tribunal assessed 15% of the premises as affected and applied that proportion to the rent over the relevant period. Paragraph 84 adds a further amount for the two months of construction-related interference. The reasons calculate $5,412 and $3,035 respectively. Their sum does not match the $8,417 in the order, an inconsistency apparent on the face of the supplied judgment.
The reasoning is most directly relevant to a retail lease containing express promises comparable to clause 2 and clause 10.1.2 in this lease, where roof or structural defects interfere with use of part of the shop and remain unrectified. In this case, the Tribunal relied on the combination of the express terms, evidence of a leak and damaged ceiling, and reduced satisfactory use of the area beneath it ([32], [47], [63], [70], 80).
The section 36 analysis may be relevant where damage does not make the whole shop unusable but diminishes usability in a way that can be assessed proportionately. The Tribunal used a 15% assessment based on the affected area and duration, rather than treating the entire tenancy as unusable (80, [83]). The judgment does not establish that 15% is appropriate in other circumstances.
The section 33 analysis concerns proposed works likely to adversely affect a retail lessee's business, where the lessor fails to give the notice described in the section. Here, the works were in nearby shops and common areas, affected visibility and access, and included a container that blocked the view of shop 5 ([37]-[39], [72], 80, (m)).
For section 34, the case also illustrates the significance the Tribunal attached to a written request and its timing. The Tribunal found the applicant's request came after the construction activity ended and treated that as preventing compensation under the provision ([71], [75], 80). The Tribunal's concern about the relationship between sections 33 and 34 should be distinguished from its actual application of section 34 ([76]).
The supplied judgment contains no account of later courts' or tribunals' treatment of Mohammady v Christofi. It therefore does not establish whether later decisions followed, distinguished, doubted or otherwise considered this decision. Any assessment of later treatment would require sources beyond the judgment provided.
The authorities within the judgment are authorities the Tribunal itself cited or discussed, not later treatment of Mohammady. These include Martins Camera Corner, Spathis, Telstra, Duarte, Spuds Surf, Bonzali and Plant ([48]-[59], [93]-[96]). The Tribunal used Duarte in discussing the written-request requirement under section 34, and cited Plant in discussing the discretionary approach to costs. These citations explain the reasoning in this judgment but do not show how later courts treated it.
The judgment leaves several matters unresolved. First, it records a $30 difference between the calculation of rent abatement in paragraphs 83-84 and the amount ordered. The reasons calculate $5,412 plus $3,035, which is $8,447, while the order states $8,417. The supplied text does not explain the discrepancy.
Second, the Tribunal expressed a preferred relationship between sections 33 and 34, suggesting that a lessor's reliance on the lessee's failure to make a written request should be connected to the lessor's compliance with section 33 ([76]). But the Tribunal did not decide the section 34 claim on that basis. It found that the written request came too late, after the works were complete ([75], 80). The judgment does not resolve how that suggested approach would apply in a different case.
Third, the damages assessment for stock involved uncertainty about when photographs were taken, whether they depicted the garments damaged in the earlier leak, and how the receipts related to the items claimed ([62]-[65], [85]). The Tribunal made a practical assessment under section 73(2), but did not provide a general valuation method for similar claims.
Finally, the judgment does not explain how the extent of diminished usability should be measured in cases where damage is confined to part of a ceiling or where the tenant continues to trade. Its 15% assessment was tied to its findings about this shop and the evidence before it ([67], 80, [83]). The analysis should not be treated as a universal percentage or formula.
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Introduction 1This case concerns disputes that arose between the lessors and the lessee of retail shop premises as a result of water entering into the premises through the roof and the ceiling and damaging stock and trade of the lessee. The lessee also complains of construction work near the premises undertaken by the lessor or with the lessor's consent which affected his trade. 2The lessee is the Applicant Abdul Razul Mohammady and the lessors are the Respondents George and Elizabeth Christofi. 3The lease was for three years commencing on 1 April 2009 and terminating on 31 March 2012 and was not registered (the Lease). The monthly rent was $1,906.66 inclusive of GST for the first 12 months then increased from May 2010 to $1,963.87 per month inclusive of GST. The use of the premises is as a tailor. 4The premises is Shop 5, 47 49 South Street, Granville part of a shopping arcade comprising six shops. The shops in the arcade at the commencement of the lease when looking from South Street into the arcade noted from a sketch plan submitted with the Application are: shop 1was a butcher, shop 2 was a cosmetic shop and shop 3 was a sports goods shop. At the rear of the arcade directly opposite South Street is shop 4 a fruit market and then on the right is shop 5 a tailor, the subject of this dispute and finally there is shop 6 fronting South Street being a restaurant and takeaway shop. 5The Applicant sought in the Application for Original Decision compensation for the following amounts: (1) product and stock damages worth $3,500.00; (2) machineries and furniture damages worth $5,000.00; (3) business loss due to interruption by construction work with the concern of landlord $20,000.00; (4) goodwill and future prospect loss of $10,000.00 (as customersgot the impression that the business is closed. 6The Grounds for Application are as follows: (1) Due to the leakage of the roof the rain water damaged a lot of stock and machineries, even though we requested landlord several times in the past; (2) Due to the construction work by shop 1 for the last 4 5 months we lost most of our customers. The construction work gave an impression to the customer that our shop is closed. A lot of customers did not want to come to the shop because of the work. These were done with the concern of the landlord,who leased two other shops in the arcade to shop 1 which has been used as storage basis for the last 4 5 months so it reduced the traffic of the customer; Photos were supplied with the Application as follows: (1) Photo 1 shows the ceiling with a substantial part of the ceiling damaged by water stains and peeling paint. (2) Photo 2 shows the ceiling and the back wall where there is a rack with a cloth hanging and rolls of cotton underneath. (3) Photo 3 shows a stained ceiling and peeling paint as well as 4 rows of clothing hanging on hooks between the two columns against the rear wall. (4) Photo 4 is a closer version of photo 1 showing the water damage to the ceiling and the peeling paint. (5) Photo 5 shows the water damage close to the lights hanging from the ceiling. (6) Photo 6 is a longer shot of the ceiling showing the extent of the damage of water penetration and peeling paint. (7) Photo 7 is of the back wall with the clothes hanging to the left and some material and cushions to the right. (8) Photo 8 is of the arcade opposite the shop premises showing building work and rubble in the arcade outside shop no. 3. (9) Photo 9 appears to be taken from the back of the arcade in front of shop no. 4 showing a large container outside of shop no. 6. There is no indication when these photos were taken. 7Mr Dehsabzi, Solicitor, appeared for the Applicant. He submitted that the Respondents were negligent in the way the leaking roof was ineffectually repaired. The Respondents had an obligation to undertake proper repairs to the leaking roof, having received notice from the Applicant that there was leakage and from their own observations from attending the arcade and shops regularly. The Applicant suffered loss of stock and loss of business which Mr Dehsabzi submits is a quantifiable loss. Further, certain works in the arcade undertaken by another tenant, with the consent of the Respondents, resulted in the Applicant losing trade because shop 5 could not be viewed from the entrance to the arcade. The works undertaken in two of the shops and on the arcade suggested that the whole arcade was under construction and the shops were not open for trade. 8Mr Xylas, Solicitor, on behalf of the Respondents denied that the Respondents were negligent and breached a duty of care. Mr Xylas said that the Respondents always acted in a responsible and diligent manner in response to complaints regarding water leakage. There were three dates when notice was given regarding leakage of water through the ceiling and on each occasion repair work was carried out to try and stem the leakage: (i) the first notice was in June 2009 when the Respondents were overseas but they sent tradesmen to look at the problem and then on return inspected and noticed that waterproofing had been applied to the roof; (ii) on the second occasion in April 2010 the Applicant asserted that water came through the roof and the Respondents inspected but could see no evidence of any water penetration but nevertheless installed four new sheets over the roof; and (iii) on the third occasion in September 2010 again there was an assertion by the Applicant that more rain was coming into the premises but again there was no physical evidence. Nevertheless the Respondents attended to further repairing the roof.
Evidence from the Applicant 9Mr Dehsabzi relied on two affidavits from the Applicant both dated 18 November 2011 which were admitted into evidence. Mr Mohammady gave evidence. He needed the aid of an interpreter. The interpreter was a registered interpreter Ms Kiannosh Pedram in the Persian and Dari language. Mr Dehsabzi asked Mr Mohammady whether he understood English. The Applicant said only 10 to 15% and that his level of education in Afghanistan was only up to the equivalent of Year 10. 10The Applicant's evidence was that he had occupied the shop from about 2005 when his wife was the lessee and then became the lessee in 2009. He says the first leakage of rain through the roof and coming into the shop was in January 2009. He told the real estate agent who had previously managed the property on behalf of the Respondents. The real estate agent according to Mr Mohammady advised him that the problem would be attended to but only from the outside of the premises in the roof. 11The next time rain came into the premises through the ceiling was during June 2009 and again Mr Mohammady told the real estate agent and he asserted that he told the Respondents as well (perhaps via the real estate agent). This time the rain was coming in through different spots in the ceiling close to the rear of the shop. Mr Mohammady said that there was continuous leaking through the roof when it was heavy rain but no leaking when there was only light rain. 12Mr Dehsabzi tendered photographs, numbered 1 to 31 of the damaged ceiling and of the premises and the damaged stock. These photos may have been taken by Mr Aliyah Aria, who provided a handwritten letter which was annexed to the first affidavit of the Applicant in which he says: "I...had seen water coming down from the top of the shop. We have taken some photos..." and this letter is dated 21 March 2011. The photos were admitted into evidence. Mr Mohammady pointed out that some photos showed that there had been a water leak through the ceiling, staining the ceiling and he then pointed out the water marks on the clothing in the photos and he said that this clothing was hanging under the ceiling when the water leaked through. The Tribunal notes that whilst the leak may or may not have been repaired externally, from the photographs tendered it is plainly obvious that the stains and peeling paint in the ceiling gave an unsightly appearance to the shop generally. 13Mr Mohammady explained some of the clothes which had water stains had been specifically made by him on order from clients requiring his tailoring skills to make these garments and consequently, having been water damaged, the clients would not buy these garments, viewing them as second hand or damaged. 14Mr Mohammady was then questioned about the amounts claimed for product and stock damage. Annexed to his first affidavit were receipts for payments of material from Afghanistan which were translated from the Persian/Dari language into English. The receipts were for fabrics and material imported from Afghanistan. It seemed the average cost of each role of material was between $100.00 to $150.00. At paragraph 5 of his first affidavit, Mr Mohammady listed in a Table 12 items being described as "perawan toumban (men)" or "darman suit (women)" . The prices next to 12 items totalled $5110.00. In his second affidavit he annexed translations of the receipts, for example, the translator has translated a receipt as follows: "Bridal dressing shop Forushgah-e Zeenat-e Aroos The supply of stunning bridal and engagement dressing. Address: Level 4, Maryam Shopping, Kabul Client Name: Rasool Mohammady Bill Number 701 Date: 1/2/1910 [sic]. Item Description of Purchase Quantity Unit Price Total
Evidence from the Respondents 26Mrs Elizabeth Christofi provided an affidavit dated 27 November 2011 which was admitted into evidence. Mrs Christofi then gave evidence. She corrected a minor matter in her affidavit (page 2, paragraph 17) "July" should read "June". Annexed to her affidavit was a schedule of rent payments and in paragraph 54 of her affidavit she stated that the Applicant had always been in arrears from the commencement of the Lease. The schedule showed that on 1 April 2009 the Applicant was three months in arrears which was not technically correct as the Applicant was a new tenant. It was pointed out that the Lease started on 1 April 2009 and that she had allocated unpaid rent from the previous tenant to the Applicant. Further, in paragraph 54 she said that the Applicant was consistently late. The schedule showed there were 36 payments of which the Applicant missed only three. Mrs Christofi was queried about her statement with respect to late payment and she conceded that the three late payments did not amount to a consistent default by the Applicant. 27At paragraph 13 of her affidavit Mrs Christofi said that she used to own a business selling children's wear which she operated from shop 5, the premises, now occupied by the Applicant. 28From her evidence it was clear that she and her husband decided to manage the arcade of shops themselves from around 2004 and no longer used a managing agent. She also said that she and her husband would immediately act upon complaints from tenants. In relation to the water leakage problem she believed that she and her husband had done what was necessary to stem the leakage. Mr Dehsabzi asked her to look at photograph numbers 27, 32 and 33 from the tendered photographs which showed significant damage and discolouration of part of the ceiling from water damage and that the damage and discolouration appears to have been there for many months. She agreed with this statement. 29Mrs Christofi was questioned about the fact that she and her husband visited the premises regularly, at least once or twice a month and why had she not mentioned anything about this discoloration and water damage to the ceiling in shop 5. She said that her husband had offered to paint the ceiling but had been rebuffed by the Applicant. Mr Dehsabzialso asked her whether she was prepared to spend money on the premises notwithstanding that the arcade had been sold on a long term settlement. Mrs Christofi responded yes, she would. 30Mrs Christofi was asked about construction work in the arcade. This was part of the Applicant's claim that he had suffered disturbance as a result of the construction work and two photos annexed to the Application showed work being done on the arcade. Mrs Christofi said that a tenant of the neighbouring premises had bought the businesses of the tenants of shops 1 and 2 in the arcade and wished to combine those shops with the neighbouring premises. The Christofis had allowed this to be undertaken by that tenant during their ownership pending completion of the sale of the arcade. She said she understood that the renovation work consisted of mainly internal work, although she noted from the photos that the windows facing South Street and the Arcade of shops 1 and 2 were covered up by paper to block out any viewing of the shops internally. Mrs Christofi said she understood that the work also involved new entrance doors and perhaps new shop fronts as well. She said she understood that part of the arcade, opposite the Applicant's premises shop 5, was retiled around the same time as the other works were being undertaken in shops 1 and 2. 3130. Mrs Christofi was asked whether notice regarding the works described in the preceding paragraph had been provided to the tenants in the arcade pursuant to section 33 of the Retail Leases Act 1994 (RLA). She said no notice had been provided to the tenants including the Applicant. 32The next witness was Mr George Christofi. Mr Christofi's affidavit also dated 27 November 2011 was admitted into evidence. Annexed to his affidavit is a copy of the Lease. Clause 10.1.1 and 10.1.2 are the covenants by the landlord regarding obligations on the landlord for maintenance of the structure being the physical shopping arcade including the roof over shop 5.The clauses are: 10. Maintenance and Repairs 10.1 The Lessor must: 10.1.1 make good any structural defects in the premises except where a defect is caused by the lessee or the way in which the Lessee uses the premises; and 10.1.2 if the premises are part (only of a building) maintain the roof and the external walls in a good and serviceable condition. 33Mr Christofi was asked by Mr Dehsabzi about the repairs to the roof over shop 5, on the basis that the Respondents had an obligation under Clause 10 of the Lease to effect those repairs. Mr Christofi responded by describing the various methods and attempts to stem the leakage that was undertaken, as set out in his affidavit, by installing new sheets of corrugated iron on the roof in May 2010 and again in September 2010. Mr Christofi was questioned about the repair work and in particular whether it was professionally done. He responded that he was not a professional roof repairer but a handy man and was entitled to attend to repairing the roof. 34Mr Dehsabzi asked Mr Christofi how often he visited the premises and he said at least once a month he would walk through and talk to the tenants. Mr Dehsabzi asked whether he had observed the condition of the ceiling in shop 5 and why he had not mentioned that the ceiling required attention. Mr Christofi responded that he thought it was the tenant's responsibility and if the tenant was comfortable with the ceiling as it was, then he wasn't going to interfere. 35At paragraph 49 of his affidavit, Mr Christofi estimated the area of the ceiling that was damaged by the water leak as being two square metres, in a total of sixty square metres of area. On viewing the tendered photographs he was now inclined to think that the area may be greater than 4 m² especially when the repair work to be done would be beyond the actual damage to the ceiling. 36Mr Christofi was asked why the Respondents had taken over the management of the arcade themselves. He answered that it came down to the fact that they wished to collect the rent themselves to ensure that the rent was received and also they did not want to pay commission on the collection of rent. 37Mr Christofi was then queried by Mr Dehsabzi about the decision to sell the arcade. His evidence was that during April 2010 the Respondents exchanged contracts for the sale of the arcade to the owner of the property next door. One of the tenants of the property next door purchased the business of shops 1 and 2 in the arcade and became tenants of the Respondent. These tenants wished to make alterations to the shops 1 and 2. A Development Application was lodged the local Council seeking consent. In August 2010 that tenant commenced work on shops 1 and 2 in accordance with that DA. The windows were covered over as most of the work was done inside. There was a complaint from the tenant of shop 4 about the work and Council came out and put a stop work order because of a deficiency in the DA (probably due to lack of actual development consent). Further in October/November the construction works included tiling on that side of the arcade and during that period a large container was sited outside shop 6. Mr Christofi conceded that the container would have blocked the view of shop 5 from South Street and that the overall impression would be that the arcade was closed for renovations the work being done on the shops hoarded up and tiling on that half of the arcade as well. There was a large container blocking one part of the arcade, the other part of the arcade which was visible was under renovation. These works continued between October and November 2010. 38Like Mrs Christofi, Mr Christofi was questioned as to whether he was prepared to spend money on the arcade and he said that he did spend money. He was questioned whether he differentiated between spending money on a property that he was going to own for a long time and on a property that was sold pending a long term settlement. He could see the subtle difference between the two situations and acknowledged that he was less likely to spend money on a property that he had sold. He confirmed that exchange of contracts took place during April 2010 and settlement occurred some time around March April 2011. Therefore, it was 12 months that the Respondents owned the arcade of six shops including the premises while it was the subject of a sale. 39Mr Christofi was then asked whether he gave notice under section 33 of the RLA regarding the construction works. He said no notice was given to the tenants including the Applicant.
The Retail Leases Act, 1994 40The relevant sections under the RLA for consideration are as follows: Section 33 - Lessee to be given notice of alterations and refurbishment. A retail shop lease is taken to provide that the lessor must not commence to carry out any alteration or refurbishment of the building or retail shopping centre of which the retail shop forms part which is likely to adversely affect the business of the lessee unless: (a) the lessor has notified the lessee in writing of the proposed alteration or refurbishment at lease 2 months before it is commenced, or (b) the alteration or refurbishment is necessitated by an emergency and the lessor has given the lessee the maximum period of notice that is reasonably practicable in the circumstances. Section 34 - Lessee to be compensated for disturbance in: (1) A retail shop lease is taken to provide that if the lessor: (a) inhibits access of the lessee to the shop in any substantial manner, or (b) takes any action would inhibit or alter, to a substantial extent, the flow of customers to the shop, or (c) and unreasonably takes any action that causes significant disruption of, or a significant adverse effect on, trading of the lessee in the shop, or (d) fails to take all reasonable steps to prevent or put a stop to anything that causes significant disruption of, or which has a significant adverse effect on, trading of the lessee in the shop and that is attributable to causes within the lessor's control, or (e) fails to rectify any breakdown of plant or equipment under the lessor's care or maintenance, or (f) in the case of a shop within a retail shopping centre, fails to adequately clean, maintain or repair the retail shopping centre (including common areas), and the lessor does not rectify the matter as soon as reasonably practicable after being requested in writing by the lessee to do so, the lessor is liable to pay the lessee reasonable compensation for any loss or damage (other than nominal damage) suffered by the lessee as a consequence. Section 36 - Damaged Premises (1) A retail shop lease is taken to provide for the following if the shop or the building of which the shop forms part is damaged: (a) The lessee is not liable to pay rent, or any amount payable to the lessor in respect of outgoings or other charges, that is attributable to any period during which the shop cannot be used under the lease or is inaccessible due to that damage. (b) If the shop is still useable under the lease but its useability is diminished due to the damage, the lessee's liability for rent and any amount in respect of outgoings attributable to any period during which useability is diminished is reduced in proportion to the reduction in useability caused by the damage. 41Mr Xylas, on behalf of the Respondents, submitted that in the Application for the Original Decision and from the evidence during the hearing the Applicant has made a monetary claim for the following items: (a) damages to products and stock damage; (b) damages to machinery and furniture; (c) business losses due to interruption by construction work; and (d) losses for "goodwill and future prospect". 42The Tribunal will proceed on this basis: 43Mr Dehsabzi on behalf of the Applicant made the following submissions: (a) that the Respondents' duty as landlord to repair the premises was owed by reason of the Residential Leases Act 2010 and the cases that he produced to support his submission were in the Consumer Trader Tenancy Tribunal which related to residential tenancy disputes; (b) other cases referred to such as Summer v Salford Corp [1943] AC 283 and O'Brian v Robinson [1973] AC 912 were based on the UK Housing Act and he asserted that these cases also supported the Applicant's position regarding the responsibility of the Respondents to repair the premises nevertheless pursuant to the lease terms the Respondents were responsible; (c) that the Respondents' regularly visited the arcade and in particular the premises to collect rent and were able to observe the current state of the ceiling and the unsatisfactory nature of the premises and yet did nothing to remedy the situation; (d) the Applicant had notified the Respondents' agent of the water leakage and also in relation to the works being undertaken by another tenant in the arcade that such works interfered with the Applicant's ability to trade from the premises; (e) the breach of the obligations of the Respondents entitled the Applicant to a rent reduction because of the loss of use of part of the premises; (f) the amounts on the receipts of the materials damaged as a result of the water leakage have been converted into Australian dollars and this represents part of the damages claimed; and (g) that the trading figures for the Applicant shows the business suffered a loss during the period of water damage through the ceiling and during the period of the construction works. 44Mr Xylas made the following submissions: (a) there was no evidence adduced by the Applicant to support his claims for losses due to construction works. The Applicant did not provide any evidence that trading from the shop was affected by any construction works or that his business suffered any substantial and continuous disruption on account of any construction works; (b) the Applicant did not provide any evidence that trading from the shop was affected by any water leaking in the shop or that his business suffered any substantial and continuous disruption on account of any water leaking in the shop; (c) the Applicant produced no evidence to support the income figures he quotes and that any claim for business losses or for any loss to "goodwill and future prospect" should fail as there is simply no evidence to support the claims; (d) there is no evidence that the Applicant had to close the shop at any time during the term of the lease or that the Applicant had reduced the hours of trade from the shop at any time.The Applicant has done nothing more that make bare assertions as to his losses; (e) there is no evidence that may have provided some methodology for calculating potentially lost sales. There is no comparative data demonstrating sales during periods where there was no interruption by rain, as compared to days where the shop may have been affected by the rain leaking in the shop; (f) there are photographs of the items of clothing which show that they have some wet mark or stain on them.However, there is no evidence corroborating the Applicant's evidence, that these items of clothing were damaged on 1 June 2009 as a result of water leakage and is no evidence when the photographs were taken; (g) these photographs have never been produced to the Respondents before the first affidavit was served on the Respondents. Prior to commencing these proceedings the Applicant never mentioned to the Respondents that he had items of clothing that were damaged from water dripping from the ceiling in the shop and the Applicant has never produced to the Respondents any damaged items of clothing despite having many opportunities to do so; (h) there are six (6) invoices (in a foreign language) attached to the Applicant's first affidavit. The Applicant's second affidavit contains translations for the foreign invoices.There is no evidence to show how these receipts are related to the items of damaged clothing; (i) in the Applicant's second affidavit, the Applicant asserts that two sewing machines have been affected as a result of water leakage and he further asserts that the purchase price of two (presumably he is referring to the two sewing machines) is $1,640.00.The Applicant has failed to provide any evidence to support a claim in relation to the sewing machines, not provided any receipt or tax invoice and no evidence of how the sewing machines have been affected as a result of water leakage; (j) the Applicant does not provide any evidence to support his assertions that the Respondents have acted in breach of a duty of care or that they have been negligent.Notwithstanding that the Applicant has not based his claims on any specific provisions of the Retail Leases Act 1994 or the Lease, (i) Clause 15 of the Lease (Abatement of Rent and Restoration in the Event of Damage) is couched in similar terms to section 36 of the RLA, (ii) Under section 34, the Respondents' obligations only arise when written notice is given to the lessor by the lessee, see the Tribunal's decision of Duarte & Ors v Mitchell & Ors [2007] NSW ADT 276 at paragraph [93], and (iii) The evidence shows that the onlywritten notice given to the Respondents by the Applicant was in January 2011. (k) In the alternative, if the Tribunal was of the view that the Respondents did not rectify the ceiling as soon as reasonably practicable after the letter was issued by the Applicant in January 2011, there is no evidence that the Applicant suffered any loss or damage as a consequence of this or alternatively, if there was any loss or damage suffered by the Applicant such loss or damage was only nominal and the Applicant is not entitled to any relief under this provision.
Lessor's obligation to repair 45The first problem for the Applicant is that the premises are commercial and not residential therefore the Residential Tenancies Act 2010 and the cases in the CTTT submitted on behalf of the Applicant are irrelevant. As a general rule there is no implied warranty by a lessor that the premises are legally or physically suitable for a lessee or that they are or should be in a reasonable state of repair at the commencement of the lease. 46The obligation of the lessor to undertake repairs ironically arises pursuant to the obligation by the lessor to provide to the lessee quiet enjoyment. That is to say it is not a positive obligation but rather in some respects a negative obligation in that the repairs become necessary to be undertaken by the lessor so that the lessor does not breach the implied covenant of quiet enjoyment or the express covenant in the lease if it is so found. The covenant of quiet enjoyment is to secure of the lessee uninterrupted enjoyment of the leased premises. 47Clause 2 of the Lease states as follows: The Lessee's right to possession If the Lessee does everything which the Lessee is required to do under the Lease the Lessor must permit the Lessee to have possession of the premises and to use them for the purpose and in a manner allowed under the Lease without interruption or disturbance by the Lessor or by another person lawfully claiming under the Lessor. The Lessee's right to be free of interruption or disturbance is however subject to the rights of the Lessor under the Lease. 48In Martins Camera Corner Pty Ltd v Hotel Mayfair Ltd (1976) 2 NSW LR p15 a blocked drain on the roof resulted after very heavy rain for water to enter into the leased premises being a camera store and substantially damaging the stock of the Lessee. Yeldham J found that the lessor had failed to ensure that the drains and downpipes from the roof were kept free from rubbish and debris which congregated and thus caused the water to flow. 49Yeldham J at p23 held "I take the relevant law in relation to the covenant for quiet enjoyment to be correctly set out at Halsbury's Laws of England, 3rd Ed, Vol.23, pp 605, 606 in these terms: The covenant for quiet enjoyment operates according to its terms to secure the tenant, not merely in the possession, but in the enjoyment of the premises for all usual purposes; and where the ordinary and lawful enjoyment of the demised premises is substantially interfered with by the acts or omissions of the landlord or those lawfully claiming under him, the covenant is broken, although neither the title to, nor the possession of the land may be otherwise affected... 50If the act causes physical interference of the demised premises, there is a breach of covenant, notwithstanding that the act itself is done off the premises... 51In the circumstances of that case Yeldham J held that the lessor was in breach of the duty of care not maintaining the roof clear of debris and that such breach was the cause of the lessee's loss.
Claim for breach of the covenant for quiet enjoyment 52In Spathis v Hanave Investment Co Pty Ltd & Anor (2002) NSW SC 304 Campbell J held at p153: In my view, the construction of the hoarding outside the shop, and its retention, amounted to a breach of the covenant of quiet enjoyment. The lack of visibility of the shop to passers by, the dim light inside the shop, and the view from the shop consisting of hoarding together with timber and concrete supports, made it unfit from a reasonable point of view for using as a cake and sandwich shop. This is confirmed by the lack of custom in the shop, and the fact that the shop traded at a loss. 53Campbell J came to this view after extensively examining the cases on the law of breach of covenant of quiet enjoyment commencing with Browne v Fowler (1911) 1 Ch 219 through to Southwark London Borough Council v Tanner (1999) 3 WLR 939. 54In Spuds Surf Chatswood Pty Ltd v PT Ltd (RLD) [2012] NSW ADTAP 2, the Appeal Panel held in relation to a claim of breach of the covenant for quiet enjoyment the following: "227. Interference with the quiet enjoyment of leased premises, to amount to a breach of a covenant for quiet enjoyment, has to be substantial but it does not have to be direct and physical (Spathis v Hanave Investment Co Pty Ltd [2002] NSWSC 304 at [125] [152] and Telstra Corporation Ltd v Sicard [2009] NSWSC 827 at [20] and [21]). 55This conclusion receives support from the following passage (at paragraph [21]) in the second of the two decisions to which the Tribunal referred, namely, Telstra Corporation Ltd v Sicard [2009] NSWSC 827: It is now established that there can be a breach of the covenant for quiet enjoyment without a direct and physical interference with the tenant's use and enjoyment of land. As Lord Millett explained in Southwark London Borough Council v Tanner (1999) 3 WLR 939, (at 957), the mistaken belief that there had to have been a direct and physical interference with the tenant's use and enjoyment of the land, before the covenant for quiet enjoyment was breached, had on occasions led courts to incorrectly dismiss "complaints of the making of noise or the emanation of fumes, of interference with privacy or amenity, and other complaints of a kind commonly forming the subject matter of actions for nuisance". The covenant will be breached if the premises are rendered unfit from a reasonable point of view for the purpose for which they are granted [Gordon v Lidcombe Development Pty Ltd [1966] 2 NSWR 9; Aussie Traveller Pty Ltd v Marklea Pty Ltd [1998] 1 Qd R 1; Spathis v Hanave Investment Co Pty Ltd [2002] NSWSC 304, [124] [125], (where Campbell J, as his Honour then was, reviews many of the authorities)]. 56The factual situation in this case is similar to the factual situation in Duarte and Ors v Mitchell and Ors [2007] NSW ADT 276 referred to by Mr Xylas. There, the dispute was between the lessor and the lessee regarding damage to the premises by rain during the early months of 2007. The damage was so serious that the local authority ordered the lessees to cease using the premises until specified repairs had been carried out. The premises were subsequently repaired but there was an argument regarding arrears of rent and damages suffered by the tenant to its trade. 57The Tribunal noted at [79] and following: "79. A lessor's obligations under section 34(1)(d) is, however, expressed in terms of failing to take "all reasonable steps" to "prevent or put a stop to" disruption of the lessee's trading. It is not an absolute obligation. Furthermore, compensation may only be claimed if the lessor fails to "rectify the matter as soon as reasonably practicable after being requested in writing by the lessee to do so". The Tribunal is of the opinion that where subparagraph (d) of subsection (1) is the provision specifically relied on, this requirement of "rectifying the matter" does not enlarge the lessor's obligation beyond that of "taking all reasonable steps". In this situation, the concluding words of the subsection make it clear that what are found to constitute "all reasonable steps" must be taken "as soon as reasonably practical" after written notice has been received. 58In the present case, the lessors were not given any written notice of the relevant disruption of trading. 59It should be pointed out also that no evidence, expert or non expert, was tendered suggesting that the repairers engaged by (the lessor) were patently not qualified or that the tasks that they were instructed to carry out were patently inadequate to render the premises fit for the lessee's to resume trading. Similarly, there was no evidence as to when, in the particular circumstances of the case, that steps taken by the lessors to have the repairs carried out should be taken to have infringed the time limit imposed in section 34(1), namely, "as soon as reasonably practical"." 60An interesting aspect of Duarte is that the abatement provisions of the lease were invoked so that whilst the lessee was unable to trade the lessee was entitled to an abatement of rent. 61The relevant clause in the Lease regarding abatement of rent is clause 15 which states as follows: "15. ABATEMENT OF RENT AND RESTORATION IN THE EVENT OF DAMAGE 15.1 If the premises or the building of which they are part is destroyed or damaged (other than by any neglect or default by the Lessee or any employee or contractor of the Lessee) so that the use of the premises or access of the premises is prevented or reduced, then the Lessee's obligation to pay rent or other monies will cease or be reduced in proportion to the denial of the use or access in respect of the period during which use or access is affected. 15.2 If the Lessee's use or access to the premises is only reduced, then the extent to which the Lessee's obligations to pay rent or other monies is to be reduced must be agreed upon by the Lessor and Lessee failing agreement within one (1) month after the damage to the extent must be referred to arbitration in accordance with the law with regard to arbitration."
Discussion of the Evidence 62The Respondents evidence is that in June 2009 their former agent received notice of the water leakage in the shop and they became aware of the Applicant's complaint of water dripping when they were visiting the shopping arcade and they met up with the Applicant during April 2010 and September 2010. The evidence that after June 2009 the Applicant notified the Respondents of any water leaking into the shop apart from these two occasions in April 2010 and September 2010 is questionable. There is no evidence from the Applicant that he requested the Respondents to repair the ceiling in the shop before the Applicant sent to the Respondents the letter of January 2011. 63The Applicant provided photos of the damage to the ceiling and to his stock and clothing and also written letters in support of the fact that the ceiling was leaking and caused the damage. The time that these photos were taken has not been established by the Applicant. The photographer who took these photos gave no evidence. The letters annexed to the Applicant's first affidavit refer to the fact that the writers could observe water leaking from the ceiling. Those letters are dated around 21 or 22 March 2011. All of this is a little unsatisfactory. No new leaks are claimed by the Applicant to have occurred in March 2011. The Tribunal is of the view that the photos were probably taken around March 2011, at the time that the letters were also written. However, what this evidence does show and demonstrably so, is the fact that there was previously a water leak or leakage and that externally the leak had been stemmed, presumably by the work of Mr Christofi in installing the sheeting, as described by Mr Christofi but, in fact, nothing was done to the interior of the premises by way of patching the ceiling and painting over the ceiling to make the ceiling presentable. Further, in the letter by the Applicant to the Respondents which the Respondents acknowledge receipt on 27 January 2011 (paragraph 39 of the Affidavit of George Christofi) it is evident that, as stated by the Applicant in that letter, the premises are "an eyesore with stained ceilings and paper hanging down...most customers who come to the shop are expressing their bad feelings about the shop. They don't feel good to come back again". 64It is the evidence of the Respondents that before the Respondents received the January 2011 letter from the Applicant they offered to repair the ceiling in October 2010 and the Applicant's wife advised the Respondents that was not necessary as the Applicant wanted to paint the shop. The Applicant's wife was not called to give evidence. The Applicant was equivocal about this offer to paint and it was not made clear whether he was present or not at that time of this offer by the Respondents. However, it is the Applicant who is the lessee and the offer by the Respondents to paint should have been asked of him. 65It is not clear from the evidence when the photos of the damaged clothing was taken. If the photos of the ceiling were taken by Mr Aria around March 2011 then the photos of the damaged clothing may also have been taken at that time, some 21 months after the clothing was allegedly damaged in the first leak in June 2009. 66Under section 36 of the RLA (or clause 15 of the Lease), relief from the obligation to pay the rent is only available during the period where the usability of the shop is prevented or diminished. However, the question put by Mr Xylas on behalf of the Respondents is whether the Applicant continued to use that part of the premises so damaged? The Respondent's position appears to be that the Applicant continued to use the whole of Shop 5 and no part abatement should be applicable. 67Mr Xylas submitted that the Applicant did not provide any evidence and it is not part of the Applicant's case that the shop has been damaged and that there is any specific period during the term of the lease when the Applicant could not conduct his business or that the shop could not be used or that the shop was inaccessible due to any damage or that the Applicant's use of the shop has been diminished or reduced due to the damage. Notwithstanding these points, the Tribunal is of the view that the photos speak for the situation, that the ceiling of the shop was particularly damaged and the area underneath the ceiling may not have been useable and the container outside shop 6 certainly impeded viewing and possible access to shop 5. 68Mrs Elizabeth Christofi said that she operated a business selling children's wear from shop 5. While she was not questioned on this point it seems to the Tribunal that it is most likely given the damage to the ceiling that if she were the tenant in Shop 5 and the ceiling was so damaged as in this case for the continuous period and remained unrepaired, that she as tenant would have expected and required the landlord to rectify and repair the damage and compensate for any loss suffered as a result of the water leakage. The Tribunal makes the assessment from observing Mrs Christofi in giving evidence noting that she gave the impression of being an astute businesswoman. 69The Respondents in their evidence confirmed that they were reluctant to spend money on the arcade and in particular to rectify any damage to the premises as the arcade had been sold by them, although settlement was delayed for 12 months and they continued to own the arcade during that time and collect rent and attend upon the arcade and in particular the premises and would have noticed the peeling, damp ceiling. 70The Respondents had by express covenant in the Lease, clause 2, agreed to provide the Applicant with quiet enjoyment. The express covenant together with the express covenant, in clause 10.1.2 to maintain the roof, obliged the Respondents to ensure that the roof did not leak to cause loss or damage to the Applicant.
Interaction of Sections 33 and 34 of the RLA 71Section 34 is a very important section to protect the rights of lessees. However, compensation payable to a lessee under s34(1) is predicated upon the lessor failing to rectify the damage caused to a shop "as reasonably practicable after being requested in writing by the lessee to do so". If there is no written request from the lessee then the lessor under s34 is not liable to pay compensation. This was demonstrated in the Tribunal's decision of Duarte and Ors v Mitchell. 72Pursuant to section 33 a lessee is to be given notice by the lessor of a proposal, alterations and refurbishment which may affect the lessee's trading. Under that section the lessor must give notice of intention to commence work on the building or retail shopping centre which is likely to impact on the trading of the lessee. 73The lessee once having received notice under s33 would be most watchful of the works being undertaken and if access to the lessee's shop is inhibited (s34(1)(b)), or if the lessee's trade is disrupted (s34(1)(c)), or the lessor fails to take steps to prevent a disruption to trade which is in the lessor's control (s34(1)(d)) then the lessee is able having been previously alerted by written notice to give written notice to the lessor asking the lessor to act accordingly and failure to act by the lessor will render the lessor liable to the lessee for damages. 74However, if no written notice is given to the lessee pursuant to section 33 and the lessee is really unaware of what is happening, notwithstanding that works are generally being undertaken in or near the premises, then the lessee not knowing necessarily of the lessee's rights would be unaware of the requirement to provide to the lessor written notice requesting the lessor to so act whilst the disruption is ongoing. Some lessees may only observe well after works have been undertaken, that the trade in their shop has suffered. In these circumstances the lessee by giving late notice may have passed the time for the lessor to act to prevent the activity impeding on the lessee's access to the shop or disruption to trade and consequently compensation may not be payable under s34. This is the point made by Mr Xylas on behalf of the Respondents that by the time the notice is given, the damage has been done and the Lessor cannot do anything. 75In this matter Mr Mohammady falls into that category having received no notice from the Respondents about the work being commenced or the siting of the large container outside shop 6 blocking the view of shop 5, Mr Mohammady demonstrated his complete unworldliness in relation to understanding his rights under the RLA and it is only at some later stage well after the events that he writes a letter in January 2011 to the lessor by which time all the damage had been done. 76It is the Tribunal's view that it would be preferable under section 34(1) if the lessor could only rely upon the requirement of the lessee to provide written notice provided that the lessor in the relevant circumstances complies with section 33. Thus it would be preferable if the lessor seeking to avail itself, in respect of a claim for compensation from a Lessee under subparagraphs (b), (c) and (d) of s34(1) to resist such a claim on the basis that no written request had been made by the lessee, that such requirement for written request by the lessee would be predicated upon the receipt by the lessee of notice under section 33 from the Lessor. In other words why should the Lessee be obliged to give notice when the Lessor has not complied with s33?.
Section 73 of the Administrative Decisions Tribunal Act (ADT Act) 77In these proceedings the evidence of damage to stock, loss of earnings due to interruption by construction work and loss of goodwill and future prospects was not properly quantified by the Applicant in accordance with the rules of evidence. There was no proper accounting, no methodology to calculate loss, no connection between the receipts produced and the damaged clothing as pointed out by Mr Xylas on behalf of the Respondents in his submission. 78Section 73 of the ADT Act directs a Tribunal in relation to the procedure of the Tribunal generally. Subsection 73(2) states as follows: "A Tribunal is not bound by the rules of evidence and may enquire into and inform itself in any matter in such manner as it thinks fit, subject to the rules of natural justice". 79In accordance with s73(2) of the ADT Act, the Tribunal does not have to follow the rules of evidence and given the circumstances in this case, notwithstanding the unsatisfactory nature of the evidence, the Tribunal considers that clothing was damaged and that the clothing has a value, and that the Applicant's trade was actually diminished by the leaking ceiling and the appearance of the shop and by the construction work on the arcade and by the presence of the container. The Tribunal proposes determine the amount of compensation based on the limited information provided to this Tribunal during the hearing.
Findings by the Tribunal 80(a) There was water leaking through the roof in June 2009 which was repaired on behalf of the Respondents. (b) There may have been water leaking through the roof in April 2010 and September 2010 and further repairs were effected by the Respondents. (c) Notwithstanding that the Respondents repaired or attempted to repair the leaking roof, the Tribunal is satisfied that material and clothes (stock) were damaged in June 2009. The photos show this although the Tribunal is cognisant of the lack of proof that the photos are those of the damaged articles in June 2009. (d) The quantifiable loss has not been substantiated by the Applicant to the satisfaction of the Tribunal. (e) The Applicant has been unable to demonstrate that machinery was damaged by the water leakage. (f) The water leakage caused damage to the ceiling which was unsightly from June 2009 to the end of the lease in that that part of the ceiling and the floor area under the ceiling could not be used satisfactorily or alternatively posed a risk to the Applicant if it were so used [eg. placing or storing of storing articles]. Pursuant to clause 2 of the Lease incorporating the covenant for quiet enjoyment the Applicant was entitled to enjoy the full benefit of the premises. (g) Works undertaken in the arcade and in shops in the arcade around the premises which were sanctioned by the Respondents interfered with the quiet enjoyment by the Applicant of the premises entitling the Applicant to recompense in accordance with the principals as set down by the Appeal Panel in Spud's Surf. (h) The Applicant has failed to substantiate any loss of trade as a result of the breach of the covenant for quiet enjoyment. (i) The area of the damaged ceiling and the floor under the ceiling was unable to be quantified by measurement by the Applicant but the Respondents agreed it was up to 15% of the ceiling area [ie. 15% of the area of shop 5.] (j) The Applicant cannot obtain relief under section 34 of the RLA as no notice in writing was provided to the RespondentsJanuary 2011 when the works had been completed. (k) The Respondents breached section 33 of the RLA by not providing notice to the Applicant. (l) The Applicant's use of the premises and access to the premises has been reduced by action or inaction of the Respondents in remedying the roof and not painting the ceiling and clause 15.2 of the lease is relevant for consideration with respect to abatement of rent. (m) Included within the express covenant of quiet enjoyment is the understanding that the Applicant was to enjoy the benefit of the premises and the Respondents by allowing building work to be effected to the arcade around and opposite shop 5, breached section 33 of RLA by not providing the appropriate notice and delivering to the Applicant the benefit of quiet enjoyment of the premises during the two months of construction. (n) In all the circumstances the Applicant appears not to have been able to benefit from using 15% of the area of the premises from June 2009 to when the ceiling was repaired and painted by the Respondent in April 2011. (o) Notwithstanding the failure of the Applicant to substantiate the actual damage to material and clothes based on the photographs presented to the Tribunal and the limited evidence being the receipts annexed to the affidavits of the Applicant and the explanation of the Applicant regarding the additional work that he had undertaken in respect of certain garments which was, as a tailor, his living and consequently his expected profit, the Tribunal is satisfied that $3,500.00 is a reasonable amount for compensation subject to the question of the Applicant's failure to mitigate against any loss.
Compensation payable to the Applicant 81Having determined that the Respondents owed to the Applicant a duty not to breach clause 2 of the Lease regarding the Applicant's quiet enjoyment of the premises and clause 10 of the Lease regarding the duty of the lessor to make good any structural defects and to maintain the roof and the external walls in a good and serviceable condition, the Applicant is entitled to compensation for the Respondent's breaches of these two clauses of the Lease. The Applicant is not entitled to compensation under section 34 of the RLA. The Respondents breached section 33 of the RLA when they failed to provide notice to the Applicant regarding the building works be undertaken in the arcade. There is no prescribed penalty with respect to that breach, however the breach of section 33 adds to the general tone of the Respondents' attitude to performance under the Lease and under the RLA. 82As identified by Mr Xylas on behalf of the Respondents the Applicant has failed to properly quantify and prove its loss. All the assertions of loss of product and stock damages at $3,500.00, machinery and furniture worth $5,000.00, business loss to interruption $20,000.00 and goodwill and future prospect loss of $10,000.00 is unsatisfactory. The amount claimed in the schedule in the Affidavit for stock was $5,110.00. Nevertheless, the Tribunal is faced with the problem of having to determine what in all the circumstances is an appropriate amount of compensation for the breach of Lease. 83The Tribunal starts with the proposition that 15% of the ceiling was damaged and not repaired from June 2009 through to the end of April 2011. Rent is generally determined on a square metre basis in that the tenant occupies so many square metres and rent is calculated accordingly. Whilst a tenant does not occupy the ceiling, nevertheless that part of the ceiling damaged, in the Tribunal's view made the area under the ceiling generally unusable. Therefore, the Tribunal is of the view that an appropriate amount of compensation would be an abatement of rent under s36 of the RLA of 15% for the period from June 2009 through to mid-April 2011. Rent on an exclusive GST basis between June 2009 and 1 May 2010 is $1,733.33 per month of which 15% is $260.00 per month. For 10 months the amount is $2,600.00. Rent from 1 May 2010 through to mid April 2011 on a GST exclusive basis is $1,785.34 per month, and 15% is $267.80 per month. For ten and a half months the amountis$2,812.00. Total rent abatement is $5,412.00. 84In relation to the works being carried out on the Arcade disturbing the quiet enjoyment of the Applicant for the months of October and November 2010 the Tribunal believes that the full amount of rent for those two months should be abated (now 85% having taken into account the 15% abatement above). Again rent on a GST exclusive basis per month is $1,785.34 and for two months rounded out to $3,570.00, less 15% is $3,035.00. 85A more problematic calculation is how much compensation should be paid for the product and stock damage estimated at $3,500.00. There is no correlation between the invoices, the photos and the actual damaged garments and stock. In fact, another figure is $5,110.00. Nevertheless, garments appear to have been damaged and the Tribunal accepts this. There was no questioning of the Applicant by the Respondents as to what mitigation the Applicant undertook with respect to what he says now was second hand clothing and could not be sold for the retail value. However, the Applicant is obliged, in the Tribunal's view, to undertake some mitigation of damage and try to sell the clothing at a reduced price. The Tribunal could only make a guess as to what the net value, after an attempt to mitigation could be. As a starting point the Tribunal accepts the sum of $3,500.00 and in the circumstances the Tribunal allows the Respondent's 30% deduction for failure of the Applicant to mitigate. Therefore the Applicant is entitled to $2,450.00 for the product and stock damages as compensation. 86The Applicant failed to prove damage to the sewing machines and furniture, the Applicant failed to prove the business loss due to interruption by construction work claim of $20,000.00 and the Applicant failed to prove the loss of goodwill and future prospects of $10,000.00. These claims are rejected.
Costs 87The Respondents made a submission regarding costs. The Respondent's submission is that under section 88 of the Administrative Decisions Tribunal Act 1997, the Tribunal is empowered to award costs but only if it is satisfied that it is fair to do so having regard to the relative strengths of the claims made by each of the parties. 88Section 88 of the Administrative Decisions Tribunal Act 1997 says: "88. Costs (1) Each party to proceedings before the Tribunal is to bear the party's own costs in the proceedings, except as provided by this section. 1(A) Subject to the Rules of Tribunal and any other Act or law, the Tribunal may award costs in relation to proceedings before it, but only if it is satisfied that it is fair to do so having regard to the following: (c) the relative strengths of the claims made by each of the parties, including whether a party has made a claim that has no tenable basis in fact or law, (d) the nature and complexity of the proceedings, (e) any other matter that the Tribunal considers relevant." 89The submission from Mr Xylas on behalf of the Respondents in anticipating that the Respondents would not pay any damages to the Applicant was that the Applicant had sought damages against his client without success largely due to the fact that the Applicant had failed to provide sufficient evidence to support the assertions made and particularly in relation to the quantum of damage claimed. The Applicant also had claimed damages to the sewing machines and had provided no evidence to support such claims. 90Whilst the Tribunal notes the inadequacy of the Applicant's quantification and proof of the loss incurred, nevertheless as the Respondents have breached their obligations under the Lease it is the Tribunal's view that the Applicant is entitled to compensation. 91A further submission from Mr Xylas was that the Applicant failed to provide the Respondents with any opportunity to resolve the claim for damages without resorting to legal proceedings by failing to notify the Respondents that he suffered any damages or losses and by failing to provide any evidence of such damages or losses before the proceedings were commenced. 92In response to this particular submission, the Tribunal notes that there have been a number of appearances before the Tribunal and at any one of these attendances, the parties could have discussed the claim and sought to resolve the matter. Further, it is a requirement before a matter is set down for hearing that the parties are referred to the Retail Tenancy Unit for mediation. Such a mediation was undertaken which failed. The Tribunal has no knowledge of what occurred in the mediation and only has the certificate under s68 of the RLA stating that mediation took place unsuccessfully, however mediation was another opportunity to try to resolve the issues between the parties. 93In Bonzali v Ersoy (No.2) [2010] NSW ADT 132 Judicial Member Rickards dealt with a cost application and at paras 3-5 said as follows: 3. The awarding of costs by the Tribunal is permitted by S88 of the Administrative Decisions Tribunal Act 1987 ("ADT Act") , but only if the Tribunal is satisfied that it is fair to do so. Otherwise, the usual principle is that each party is to bear its own costs. 4. There is a non-exhaustive list of factors set out within s88 of the ADT Act which the Tribunal may take into account in determining whether it is fair to make a cost order in favour of a party. 5. Notwithstanding the list of factors which can be considered in considering this issue, the observation made by the Appeal Panel in Plant v Meriton Properties Pty Ltd (No.2) [2010] NSW ADT AP20 needs to be borne in mind: "[9] care needs to shown in not allowing the 'fairness' exception to become a vehicle introducing into the Tribunal the usual court practice of making orders for costs that follow the event". 94Judicial Member Rickard then explored the history of the litigation between the parties in Bonzali v Ersoy the case referred to above finding that the Applicant in that case had made an untenable claim for compensation which "clearly falls within the circumstances outlined in S88(1A)(c) of the ADT Act and therefore attract consideration as to whether it is fair to award costs in favour of the Respondents". 95Judicial Member Rickard concluded at para 12 the following: "Given that one component of the Applicant's claim was clearly untenable and that the other major component, although unsuccessful, was not unreasonably commenced or maintained, I am satisfied that it is fair that the Applicant should pay a sum equivalent to 50% of the Respondents' costs, as are agreed between the parties or assessed, upon a party/party basis." 96In this case the Tribunal takes into account following the Appeal Panel's decision in Plant v Meriton Properties Pty Limited whilst the Applicant was ultimately successful in receiving some compensation, albeit not in line with the ambit claim originally made in the Application, costs should not necessarily follow the event. However, in all of the circumstances of this case where the premises were damaged and the Applicant was unable to use part of those premises, and the damage to the ceiling was so unsightly as to be plainly obvious to the Respondents and to customers of the Applicant as to the inadequacy of any repairs done to the ceiling itself, and clothing was damaged, and the ability of the Applicant to trade was impeded particularly during the two months when works were being done on the arcade and the container was outside shop 6 and no notice under S33 of the RLA was provided, the Respondents knowing of these matters for some time, having visited the premises monthly should have sought to ameliorate the damage and compensate the Applicant, and consequently failure to do so, they should now pay, in the Tribunal's view, half of the costs of the Applicant.
Orders
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: 22 June 2012
Mohammady
Christofi
The respondents were ordered to pay $2,450 for loss of stock and garments, $8,417 by way of rent abatement, and 50% of the applicant's costs as agreed or assessed on a party/party basis. The written reasons calculate the two rent-abatement components as $5,412 and $3,035, which total $8,447, not the $8,417 stated in the orders. The supplied judgment text therefore contains an apparent $30 discrepancy between the calculation and the order.