Oh v Cafe Great Pty Ltd

NCAT Appeal Panel|2018-11-02|Before: Kirby P

Introduction

Kyung Sook Oh and Ju Sik Oh (the lessors) leased premises to Cafe Great Pty Limited (the lessee). The lessors have appealed from a decision of the Tribunal that they pay the lessee $14,963.96. The lessors admit that they owe the lessee $5,284.04 but dispute the balance.
The lessors have the right to appeal "on a question of law": Civil and Administrative Tribunal Act 2013 (NSW), (NCAT Act) s 80(2). The lessors did not ask for permission to appeal on any other ground.
The issues on appeal and our conclusions on those issues are summarised below: 1. Did the Tribunal make a legal mistake (an error of law) by giving inadequate reasons for the implied finding that the lease was terminated on 23 December and not 31 December 2014? Yes. 2. Did the Tribunal make a legal mistake (an error of law) by failing to give adequate reasons for a material finding of fact as to the amount of council rates owing by the lessor to the lessee? Yes. 3. Did the Tribunal make a legal mistake (an error of law) by construing the lease to mean that the lessee was not liable to pay the insurance for the building? No. 4. Having found two errors of law, how should the Appeal Panel deal with the appeal? By asking the Tribunal to reconsider the three issues set out at [21]. 5. Should the lessors pay the lessee's costs of the appeal? No.

Did the Tribunal err by failing to give adequate reasons for a material finding of fact as to the amount of council rates owing?

There was no dispute that the lessee was liable to pay the Council rates. We understand that the lessee paid the rates to the lessors, rather than directly to the Council. At [31], the Tribunal found that: Further, on the evidence before the Tribunal, in relation to the land tax I agree there has been an overpayment and should be refunded. Similarly with the overpayment of Council rates. Of course, offset against this should be the unpaid Council rates.
The Tribunal found at [9] that the lessee had overpaid Council rates in the sum of $2,300.41. The Tribunal went on to find at [9] that that amount should be refunded after being set off against the unpaid Council rates of $1,755.25. Although the Tribunal did not make the calculation in its reasons, the net payment is $545.16.
The lessors submit that the Tribunal failed to consider the evidence and calculations of Council rates owed by the lessee. That evidence includes the affidavit of Andrew Wong dated 21 November 2017. Attached to that affidavit is a schedule prepared by an officer of City of Ryde setting out the transactions for payment of rates from 1 July 2008 to 8 October 2017. That schedule does not identify who paid the various amounts but the Tribunal also had documents from the lessee evidencing payment of rates to the lessor. (See pp 31-53 of the lessee's bundle.) According to the lessors, despite submitting to the Tribunal that $841.77 was the amount owing, the Tribunal did not mention that amount in its reasons or say why it did not agree with the lessor that that was the correct amount.
On appeal, the lessors provided a Table which sets out the amounts they say were due and the amounts paid by the lessee for Council rates. The Table reflects the lessors' submission that the lessee owes them $841.77 in unpaid rates. That Table was not before the Tribunal but, according to the lessors, is based on the uncontested evidence. The amounts paid by the lessee between 22 May 2009 and 14 August 2009 were extracted from the handwritten notes on the Real Estate Green and Blue invoice dated 4 May 2009 in Annexure A of the affidavit of Jae Hun Park dated 21 December 2015. The amounts paid by the lessee between 28 August 2009 and 29 November 2010 are extracted from the bank statements of the lessee in Annexure A of the same affidavit. The amounts paid by the lessee between 25 May 2012 and 26 September 2014 are extracted from the BPay receipts of the lessee in the submissions of Joun Lawyers dated 14 March 2018 from pp 7-11.
Interest and other penalty charges were not included in the 'Amount Payable' column and only levies charged to the lessor during the term of the lease were included. If we understand the Tribunal's reasons and the lessors' submissions correctly, the Tribunal held that the lessee owes the lessors $545.16 in unpaid Council rates whereas the lessee contends that the outstanding figure is $841.77. During the Appeal Panel hearing Ms Kyoung, representing the lessee, appeared to concede that the lessee owed the lessor $841.77.
The amount of Council rates owing is a "material question of fact": NCAT Act, s 62(3). The Tribunal made a finding on that question but failed to refer to all the evidence or other material on which that finding was based and failed to give adequate reasons for its finding. Again, it can be implied from the Tribunal's reasons that the Member simply adopted the lessee's evidence that the amount owing was $841.77.

Did the Tribunal err in construing the lease to mean that the lessee was not liable to pay the insurance for the building?

Item 14B of the lease states that building insurance is one of the outgoings for which the lessee is liable. However, the lease also provides at Cl 5.1.2, that "the lessee must pay to the lessor or as the lessor directs: the share stated in item 14A in the schedule of those outgoings stated in14B in the Schedule". (Emphasis added.) The share of outgoings in item 14A is expressed as "Lessee to pay all Council, Water, Trade Waste charges and 50% of Land Tax". Significantly there is no mention of building insurance in item 14A. Item 14B defines Outgoings as "(a) local council rates and charges; (b) water sewerage drainage and trade waste charges; (c) land tax; and (d) insurance for the land or the building of which the property is part, fairly apportioned to the period of this lease".
The Tribunal set out Clause 5.1.2 of the lease and item 14. The Tribunal reasoned that item 14 was ambiguous and that Item 14B was the "print form of the lease without alteration or amendment". We understand the Tribunal to mean that item 14B is a standard clause as created by the Law Society of New South Wales and that item 14A, which is a specific direction, overrides Item 14B. At [29] and [30], The Tribunal concluded that: In my opinion, the payment of outgoings between the parties is governed solely by item 14A is a specific direction which overrides item 14B. This view is supported by an examination of the Lessors Disclosure Statement where under Item 16 outgoings, council rates, land tax and water and sewerage and waste disposal all have estimates ascribed but for insurance it is left totally blank. Total outgoings for year 1 is nominated at $4800. Accordingly, I determine that the applicant as lessee, is not required to pay insurance premiums as item 14 A only calls for all council, water trade waste charges and 50% of land tax consistent with the Lessors Disclosure Statement.
The lessor maintains that the Tribunal misconstrued the lease and that item 14B clearly states that one of the outgoings for which the lessee is liable is building insurance. In support of that submission the lessor submitted on appeal that the lessee had paid for the building insurance from 16 September 2008 to 2 March 2010. The lessee said that she had no record of ever having paid for building insurance. We have not taken into account the evidence from either party about payment of the building insurance because we do not know if that evidence was before the Tribunal.
The meaning of a contract, such as a lease, is a question of law. In our view, the Tribunal construed the lease correctly and gave adequate reasons for its conclusion. The only obligation that the lease imposes on the lessor is the obligation in cl 5.2.1 to pay the share stated in item 14A of those outgoings stated in item 14B. Item 14A obliges the lessee to pay all council, Water Trade Waste charges and 50% of land tax. As there is no reference in item 14A to any share of the building insurance, the Tribunal was correct to conclude that the lessee was not liable to pay for that insurance.

Having found two errors of law, how should the Appeal Panel deal with the appeal?

The powers of the Appeal Panel include to set aside the decision under appeal and substitute a new decision, to deal with the appeal by way of a new hearing or for the whole or any part of the case to be reconsidered by the Tribunal: NCAT Act, s 80(3); s 81(1) and (2).
The parties did not provide the Appeal Panel with all the evidence before the Tribunal, so we are not in a position to deal with the appeal by way of a new hearing. In our view, it is appropriate to ask the Tribunal to reconsider three issues: 1. whether the lease was terminated on 24 December 2014 or 31 December 2014 and, if it was terminated on 31 December 2014, the amount of unpaid rent owing to the lessor; 2. the amount of council rates, if any, that the lessee owes the lessor; and 3. the total amount owed by the lessor to the lessee.
Alternatively, the parties may be able to agree on the amount outstanding and provide the Tribunal with consent orders.

Should the lessors pay the lessee's costs on appeal?

The lessor applied for her costs of appeal. While Ms Kyoung represented herself at the Appeal Panel hearing, she had paid a lawyer to prepare a Reply to the Appeal and written submissions. Because the claim in this case is less than $30,000, the rule is that each party pays their own costs unless there are special circumstances warranting an award of costs: NCAT Act, s 60; Civil and Administrative Tribunal Rules 2014 (NSW), r 38. Ms Kyoung submitted that it was inconvenient and expensive to respond to the appeal. Those considerations do not amount to special circumstances warranting an award of costs.

Orders 1. The appeal is upheld in part. 2. The decision of the Tribunal made on 27 July 2018 is set aside. 3. The Tribunal is to reconsider the issues set out at paragraph [21] of these reasons. Note: Depending on the parties' submissions, the Tribunal may determine those issues 'on the papers' or by having a hearing with or without further evidence.

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: 30 November 2018

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