Oriental Carpet Department Store Pty Ltd v Supacenta Pty Ltd [2003] NSWSC 783 | Case summary

then the Lessor always has the right to re-enter and repossess the Premises despite anything in this Lease to the contrary. If the Lessor re-enters the Premises pursuant to this clause, it is freed from any action, suit, claim or demand by or obligation to the Lessee by virtue of the Lease. The Lessor's rights in this clause are without prejudice to any other remedy which the Lessor has or otherwise could have for arrears of rent, breach of covenant or for damage as a result of any such event". 5 Clause 14.2 deals with the service of notices or at least of any notice or other document required to be given or served under the lease and brings in certain parts of s 170 of the Conveyancing Act 1919. 6 Clause 15.2, with a sub-heading Acceptance of Rent, provides: "If the Lessor accepts any late payment of any money payable by the Lessee to the Lessor, the acceptance is not a waiver of the essentiality of the Lessee's obligation to pay the money on time or of the Lessee's continuing obligation to pay money on time to the Lessor under the Lease during the Term." 7 Clause 16 provides an option that if certain conditions have been fulfilled, including that the lessor has complied with the Terms and that the lease has not been determined so that there could be an option for a further five years, the lessee, has to give notice exercising the option within a certain window of opportunity. I do not at the moment think that it is necessary to do anything more than note the definition of Terms in clause 19.53, that is, "the terms, covenants or conditions in the Lease". 8 The lease was of premises which are subject to the Retail Leases Act 1994 and the provisions of that Act override the provisions of the lease so that the provision of the lease is void to the extent that the provision is inconsistent with a provision of the Act vide s 7. The Act requires in s 19 that a certain procedure be implemented with respect to rent reviews to current market rent. It makes provision, likewise, with respect to options in similar terms, and it contains provision 7A, prohibiting unconscionable conduct on behalf of a lessor or a lessee and allowing the tribunal created to deal with disputes under the Act to award up to $300,000 compensation for any such breach. 9 Section 68 of the Act provides that a retail tenancy dispute or other dispute or matter referred to in s 65(1)(a1): "may not be the subject of proceedings before any court unless and until the Registrar has certified in writing that mediation under this Part has failed to resolve the dispute or matter or the court is otherwise satisfied that mediation under this Part is unlikely to resolve the dispute or matter." 10 There has never been any certificate granted under s 68. The consequence is that under sub-section (3) of s 68, apart from an order in the nature of an injunction, this court must not proceed unless it is satisfied that mediation under the Part is unlikely to resolve the dispute or matter. 11 Up until yesterday it would seem that no-one on either side paid attention to whether the Retail Leases Act applied to the current lease. However, it is now common ground that the Act does apply. 12 A retail tenancy dispute is defined in s 63 of the Act as meaning any dispute concerning the liabilities or obligations of a party or former party to a retail shop lease or former lease. It would seem from Division 3 of Part 8 that a retail tenancy dispute could be a retail tenancy claim as defined in s 70 or an unconscionable conduct claim as defined in s 62B and s 70. 13 Under s 75 of the Act, if civil proceedings pending in a court involve a retail tenancy dispute, the court must, on the application of any party to the proceedings, transfer the proceedings to the Administrative Decisions Tribunal but only if the court is satisfied that the dispute is such as may effectively be dealt with as a claim under this Division and that it is appropriate that the dispute be dealt with by the Tribunal and that the interests of justice do not require that the matter be dealt with by the court. However, the section indicates that the court must take into account the general policy that retail tenancy disputes should be dealt with by the Tribunal rather than by the court. 14 It was said to me yesterday and this morning that because both parties were then of the view that the reference to mediation under the Retail Leases Act was unlikely to resolve the dispute or matter I should be satisfied of that matter and, accordingly, proceed. 15 In my view, it is not enough that the court be told that counsel for both parties are of that view. The court must satisfy itself that that view is correct. The statements made by counsel and solicitors will of course be an important matter when the court is considering whether it is satisfied and the court will be slow to ignore the considered statements. 16 However, the cases under s 110K of the Supreme Court Act 1970, such as Higgins v Higgins [2002] NSWSC 455 show that there are circumstances where mediation may be worthwhile despite the statement of the parties that mediation may be unlikely to resolve a dispute or matter. The position was made much easier for me because during the early afternoon the defendant came of the view that the matter could be dealt with by mediation under Part 5 of the Act and indeed I thought there was for a while general consensus that mediation either under Part 5 or elsewhere might be a useful exercise. 17 However, the defendant's now attitude means that I could not be satisfied that mediation under Part 5 is unlikely to resolve the dispute or matter and accordingly I will need to consider the question of the costs of the wasted two days or alternatively, I will need to do that because I have transferred the proceedings I will be functus and the proceedings will now pass out of my ken. 18 The court, however, has power to grant an interim injunction and the defendant agrees that that injunction should be made upon the usual undertaking as to damages and indeed it seems to me that the spirit, if not the letter of the Law Reform (Law and Equity) Act 1972 requires that that be done. In any event it would seem to me that it would be appropriate to grant such an injunction. 19 There is a very real issue between the parties as to the conversation that took place between Mr Jack of the defendant and Mr Faeghi of the plaintiff some time in the first part of July 2002. 20 Mr Ashhurst, who appears for the plaintiff, says that there are three versions of the conversation or its result, namely: (a) that the parties would vary the rent under the lease as and from 1 July 2002 to $33,155 per month and that there would be no obligation on the tenant to pay anything by way of increased rent before 1 July 2002; (b) that the rent would be adjusted as from 1 January 2002 to $33,155 per month; or (c) that the rent would be paid at the rate of $33,155 per month and the parties were left in dispute to be resolved by later negotiation as to the date from whence the variation would start. 21 Having heard the evidence, I have firm views on the matter but I do not think that it is appropriate to state them. If, however, the Tribunal considered under s 76A of the Act that this court, having heard all the evidence for two days, having seen the witnesses, having been assisted by experienced counsel and hearing addresses that it would be appropriate to re-transfer the matter to the court, especially in view of the fact that very complicated questions of equitable relief are also involved, a matter which I will pass to shortly, then I will of course give my reasons. At the moment it seems to me that it is appropriate because of s 68 that I do not do so. 22 However, whichever version of the conversation is taken there is a very strong probability that if there were some arrears of rent owing as at the date of the Jack/Faeghi agreement, then any right to re-enter under clause 13.1 of the lease had been waived by election. See Arnold v Mann (1957) 99 CLR 462 at 479. The right to sue for the amount of course would remain. 23 If that is not so, then one must consider whether the so-called arrears of rent were properly classed as moneys due under this lease. Mr Angyal, who appeared with Mr Sirtes for the defendant, says that the effect of the Jack/Faeghi agreement was that there was a variation of the lease so that if I find the conversation as Mr Jack originally put it in his affidavit, then the varied rent was money which was payable under the lease and so came within 13.1. 24 He also has at least two other variations on that. One, I must confess, I cannot really follow, that there was a lease containing the variation which somehow or other sprang into operation because the agreement itself was a retail shop lease under s 3 of the Retail Leases Act or that the document which is annexure B to Mr Jack's affidavit was a fresh demand because of the agreement and was not insisting on arrears of rent prior to the agreement. That last argument obviously has difficulties as a matter of fact because of the terms of schedule B, but again I will not delve into matters of fact. 25 What is due "under the lease" is often an awkward matter. Indeed, the word "under" causes confusion; see for instance R v Clyne; Ex parte Harrap [1941] VLR 200 and Arnold v Wood (1996) 135 FLR 343. Of course, if either the Tribunal or the court comes to the view that the re-entry was wrongful, then the lease is still in force and the action of the landlord was an actionable trespass and it is unnecessary to consider most of the other arguments that have been put before me. 26 I need to give some background to the other arguments. I do this so that the Tribunal can have a quick understanding of what the point is. The defendant had been claiming for some time prior to March 2003 that the plaintiff owed it over $50,000 for arrears of rent. Up until October 2002 a Mr Jack had been the man who was managing this account. He was replaced by a Mr Dowling, but it took Mr Dowling until February 2003 to become sufficiently on top of the job for him to start chasing the so-called arrears in earnest. He gave an ultimatum to the plaintiff in March that the arrears must be paid within a short period of time or he would re-enter, and he did so again in early April, threatening to re-enter in seven days, which would have been 9 April. 27 However, there was no re-entry on 9 April. The re-entry was a week later, on 16 April at 5.30 pm after the shops in the centre had closed. The plaintiff says that this was a most unconscionable thing. It says that the defendant must have known, because the advertisements were extensive, that it had spent a lot of money advertising special sales over the Easter period (April 16 is the Wednesday before the Easter break). Secondly, it must have known that the controlling director of the plaintiff was overseas in Turkey, but it deliberately chose just before the Easter break to re-enter because there would be less likelihood of there being any challenge in the court. Mr Dowling denied that this was what activated him but there was rather an absence of any alternative excuse. 28 There was then frantic debate between Mr Lakos, the plaintiff's solicitor, and the plaintiff's manager in Sydney, Mr Saffa, with Mr Dowling. They were able to make some contact with Mr Faeghi in Istanbul, and his general instructions were that everything possible that could be done be done in order to keep the shop open during the Easter break. What happened was that a letter was written by Mr Lakos, who worked all over the first three days of the Easter break, as did Mr Dowling, that he confirms that the plaintiff accepts the termination of its lease of the premises and will not make any claim for compensation or lease reinstatement related to the termination. 29 Following that, a very strange document called Casual Licensing Agreement was entered into between an entity known as the Retail SupaCenta Pty Limited, which maybe is related to the defendant but there is no direct evidence of it (no-one complied with s 153 of the Corporations Act 2001 to identify its ACN) and a company called Peter Faeghi Group Pty Limited, which seems to be another company in the same group as the plaintiff, for there to be a licence for one month from 19 April to 18 May 2003. Later, at the request of Mr Faeghi, this was extended. 30 The defendant says that the letter of Mr Lakos and the licensing agreement either worked as a surrender of the lease if it still existed or, alternatively, meant that the plaintiff was forever barred from seeking relief against forfeiture because it had given consideration and given the plaintiff the benefit of being able to use the premises. 31 The plaintiff, on the other hand, says that this conduct was unconscionable both under the general law and under the Retail Leases Act and that if a landlord delays until just before a public holiday break and it knows the controller of the tenant is overseas and negotiates out a deal in a situation where it knows there is stock in the shop which has to be sold, it is putting the plaintiff in such a position that it has no choice but to agree to any terms at all, no matter how Draconian. It says that, under such circumstances, the common law even would give relief under the action of money had and received and equity would give relief by way of relief against forfeiture and, if necessary, the Tribunal could give relief under section 62B of the Retail Leases Act. 32 The defendant did not contest the position that one cannot contract out of one's equitable rights but rather said that the agreement of 18 April was a release of those equitable rights. This was an argument that was only made shortly before the end of the argument. It appears to have a number of problems about it but it is not one that I have yet resolved. I mention these matters because the dispute as to whether relief against forfeiture can be given in the light of the agreement of 18 April is an extremely difficult question of equity law, which will require my staff and myself to do considerable research in addition to the assistance that has already been given to me by counsel, and the Tribunal may well take the view that it is preferable to refer the matter back to this court rather than deal with it itself. That, however, is a matter for the Tribunal. 33 So far as the claim for money had and received is concerned, I would note that Mr Ashhurst relied on what the High Court said in Mason v State of New South Wales (1959) 102 CLR 108 and that it seemed to me that the court or tribunal that ultimately decides the matter would also have to consider very seriously Lord v Proctor [1923] VLR 524 at 532. 34 There is also a claim that the 18 April agreement was either void or alternatively should be set aside because of what is now known as economic duress. This again is a rather complex area of the law and has been considered both in the Court of Appeal in Crescendo Management Pty Ltd v Westpac Banking Corp (1988) 19 NSWLR 40 and by the House of Lords on many occasions. I will just give the leading case Pao On v Lau Yiu Long [1980] AC 614. See also Cockerill v Westpac Banking Corp (1996) 142 ALR 227, 277 and Young on Consent (Law Book Company, Sydney, 1986) pp 69 and following. 35 Again it seems to me that the question of economic duress is a retail tenancy dispute which needs to go to the Tribunal. 36 Accordingly, I extend the order that was originally made by Campbell J on 18 June 2003 until further order. 37 I note that the undertaking as to damages continues. 38 I order that the defendant pay the costs of the suit to date and I transfer the whole of the proceedings to the Administrative Decisions Tribunal. 39 The reason why I ordered the costs to be paid by the defendant is that in Mr Angyal's submissions the point of jurisdiction was first raised after all the evidence was in, either just before or just after lunch on the second day of the hearing. Had those submissions been made at the very beginning of the hearing then we would not have wasted a day and a half. I appreciate that no one directed their mind to this particular point but that really is not anyone's fault except the parties. 40 Secondly, at the end of the submissions I suggested that it was proper for this dispute to be mediated. I suggested that the way forward would be for me merely to reserve my decision and to refer the matter to a mediator; if the mediation solved the dispute, well and good. If it did not, I could then reach the view that mediation under the Act would be unlikely to resolve the dispute and I could then decide it without further waste of costs. 41 I left the bench for a few minutes while counsel got instructions. Mr Ashhurst informed me that his client was amenable to that. Mr Angyal informed me that he insisted on mediation under the Act. At that stage I had no option but to decide what I had to decide because my view was that s 65 compelled me and s 75 required me to stop hearing the matter and transfer it. Accordingly the waste of the costs shall be visited on the defendant. 42 If it should happen that the matter comes back to this court, then it may be that some adjustment can be made in the future, though I rather doubt it, but I wait to hear argument on that if and when the point should arise. The costs, of course, should only be the costs to date, just in case the matter does come back to this court. 43 The exhibits should be transferred to the Tribunal.

Oriental Carpet Department Store Pty Ltd v Supacenta Pty Ltd

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Cases Cited (7)

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