Ozkan v Ayab

ORDERS: 1. Declare that the lease between the parties is not a retail shop under the Retail Leases Act 1994; 2. Declare that the Tribunal does not have jurisdiction to determine the applicant's application; 3. Applicant's application is dismissed

REASONS FOR DECISION Introduction 1 This is an application by Saban Ozkan ('the applicant'), the former lessee of premises known as Lot 5, Wyee Road, Wyee in the State of New South Wales ('the premises'). In his application the applicant seeks relief by way of damages and other orders against Danielle Ayab, the owner/lessor of the premises ('the respondent'). The respondent has raised a preliminary issue as to the Tribunal's jurisdiction to hear and determine the applicant's application on the grounds that it was not a 'retail shop' as defined in s.3 and Schedule 1 of the Retail Leases Act 1994 ('the Act'). 2 With the consent of the parties a preliminary hearing was held for the purposes of determining this matter on 14 September 2006. During the course of the hearing, the parties were given liberty to make further submissions however, there is no record of any further submissions having been received. The Subject Lease 3 A copy of the lease was tendered into evidence by way of attachment to an affidavit of the applicant sworn on 29 August 2006. That lease identifies the applicant and another person by the name of Werner 'Ranftl' as being the lessees of the premises. The lease also, so far as is relevant, contains the following provisions: " USE the premises shall be used only as service station, convenience store, takeaway … TERM the term of the lease shall be 1 year only + 3 + 3 + 3 options commencing on 14.6.05 June 2005 and ending on the 13.6.06 June 2006." The Evidence 4 Prior to the hearing the respondent had filed and served an affidavit of Richard Merola, a qualified and registered business broker and real estate agent, who had visited the premises the previous weekend, 9 September 2006. Mr Merola also gave oral evidence at the hearing during which he presented the Tribunal with copies of photographs he had taken of the outside of the premises during his visit. 5 Attached to Mr Merola's affidavit was a report that he had prepared of his inspection. In that report he said that for the previous five years he had been in the business of classifying businesses for sale on a day-to-day basis for the purpose of facilitating the preparation of contracts for sale. He went on to state that, in his opinion, from his experience in dealing with the sale of service stations for most part of his professional career, the characteristics associated with such a business were as follows: "1. A minimum of one fuel bowser required. 2. Display of fuel price board. 3. Vehicle entry and exit access. 4. Weather canopy. 5. Internal fuel pay point and associated grocery lines." 6 In respect to what he saw during his inspection of the subject premises, Mr Merola said the following: "…[there] is 1 bowser with 2 hoses available and an additional 3 bowsers with 4 hoses available for fuel usage. Furthermore, 2 prominent fuel price boards situated at both end of the entrance and exit points of the business creating an eye-catching feature and exposing the business from a distance as a definite service station. In addition to my findings, although food is advertised and displayed as part of the business name, indeed this was not factual. Upon entrance of the business there was an expectation of food to be available, however after requesting for takeaway food this was declined due to no food available." 7 During cross-examination, Mr Merola said that when he attended the premises he did not identify himself as conducting an inspection. He went there and acted as if he was a normal purchaser and bought cigarettes and ice cream. He also explained that Wyee was a very small country town on the Central Coast north of Sydney. He also said the premises were on the main road to the town in which there was a general store and a nursery. He said that the premises were the only service station in the town. 8 In addition to the evidence of Mr Merola, the respondent relied on a plan that formed part of the record of the Land Titles Office in respect to the premises and a survey report of the premises. The plan was dated 17 May 1989 stated that the area of the land on which the premises were located was 1,100 square metres in size. The survey was dated 19 June 1987 and does not have any statement as to the total area of the premises. 9 The applicant had also filed and served his affidavit prior to the hearing. In that affidavit he explained that he was a cook by trade and he had joined his partner, Werner 'Renfaul', in taking over the premises as the premises were advertised as including a significant food sales opportunity. On this basis he and his partner decided that the applicant would look after the food side of the business and the partner would after the fuel side of the business. In support of this, he attached to his affidavit copies of the advertising of the premises which referred to the premises being for the purpose of 'fuel & food'. The advertising also contained a picture of the window of the premises which advertised a wide range of food for 'dine-in or takeaway'. In that advertising under the heading 'Overview' the following description of the premises was provided: "Freehold Service Station + 1 Bed Unit The property comprises a main road service station tenant vacated site but was rented at $8,500 with increase this year. The shop had eat-in area with hot foot cooked on site, ideal owner/occupier or lease-out, huge potential for site surrounding developments comprising residential users." 10 Also attached to the applicant's affidavit was a copy of a flyer that he had prepared and distributed. That flyer identified the type of food which was available from the premises to eat in or for home delivery. In addition to this, in his affidavit the applicant set out the variety of products that were sold from the store at the premises and he provided a description of the type of customers that came to the premises. The applicant went on to state that with respect to overall profits of the business that those of the convenience store and the food business far outweighed that from the sale of fuel. He said that the fuel side of the business averaged about $100.00 per day where the takeaway made about $340.00 profit per day and the grocery lines about $305.92 per day. During his oral evidence the applicant tendered into evidence schedules to support the figures that he had provided in his affidavit. He explained that these schedules had been prepared by his business partner, who had ceased working in the business in late December 2005 because the business had not been sufficiently profitable to pay both their wages. However his business partner came in once a fortnight to help with the book work. 11 The applicant had also attached to his affidavit a drawing of the layout of the convenience store at the premises. In his oral evidence he also explained that he had vacated the premises in April 2006 and that when left he took numerous items, which he and his partner had placed there. This included a griller, a four burner oven, two kebab machines, a large cool bay-marie, a chicken rotisserie, a convection oven and five tables. He also explained that there was another service station about 30 seconds away from the premises which sold prepared food such as meat pies and coffee. 12 In his oral evidence the applicant acknowledged that the petrol sales represented the most significant gross income of the business. He also explained that the only petrol that was sold from the premises was unleaded petrol and disel. While there were bowsers for super grade petrol these had not been in operation while he and his partner were in occupation. Relevant Legislation 13 S.72 of the RL Act gives the Tribunal jurisdiction to hear and determine "retail tenancy claims". A "retail tenancy claim" is defined in s.70 of the RL Act to include a claim in connection with a "retail tenancy dispute": see s.70(a). The term "retail tenancy dispute" is defined in s.63 of the RL Act to mean a dispute concerning the liabilities and obligations of a party or former party to a "retail shop lease or former lease". The term "retail shop lease" is defined in s.3 of the RL Act. That definition, as it applied on 1 February 2004, was in the following terms: "Retail Shop" means premises that: (a) are used wholly or predominantly for the carrying on of one or more of the businesses specified in Schedule 1 (whether or not in a retail shopping centre); or (b) (are used for the carrying on of any business (whether or not a business specified in Schedule 1) in a retail shopping centre. 14 Schedule 1 lists numerous retail shop businesses, including business such as 'convenience food shops', 'fast food shops', 'general stores', 'takeaway food shops'. 15 Schedule 1 of the Act was amended by the Retail Leases (Amendment) Act 2005 effective from 1 January 2006. These amendments however, do not have any impact on these proceedings. 16 S.5 of the Retail Leases Act specifies that certain retail shops are excluded from the operation of the Act. The relevant provision for the purposes of this application is that contained in s.5(a) which provides that the Act does not apply to 'shops that have a lettable area of 1,000 square metres or more.' Submissions 17 The respondent submitted that the material before the Tribunal demonstrated that the premises were used wholly or predominantly for the carrying on of a service station, which was not a business coming within the terms of Schedule 1 of the Act. The respondent also made reference to correspondence of the applicant in which he allegedly referred to the premises being a 'service station'. In any event, the applicant submits that the lettable area of the premises exceeded 1,000 square metres which made it form under the Act by reason of s.5(a) of the Act. 18 The applicant, on the other hand, contended that the lease provided for three uses, two of which came within the description of a business listed in Schedule 1. Accordingly, the Tribunal was required to determine what the predominant use was and if this was one or more of the business that came within the Schedule it was a "retail shop'. The predominant use the applicant contended should be determined on the basis of that use which generated the largest profit income. In this regard the evidence was that the convenience store and takeaway food and café/cafeteria generated the largest profit income. Consideration 19 While the Tribunal found Mr Merola to be a truthful and forthright witness, his evidence is of limited assistance for the purposes of determining this application. He was not involved in the negotiations for the lease of the premises and he had no knowledge of the use of the premises prior to his visit of 9 September 2006. Indeed on the basis of the evidence of the applicant, whom the Tribunal also found to be a truthful witness, the manner in which the premises were used at the time of Mr Merola's visit appears to have differed from the manner it was used by the applicant and his partner. 20 If it is accepted that the total area of the leased premises exceeds 1,000 square metres, this will be sufficient to dispose of this application as the premises come within the terms of s.5(a) of the Act and it is therefore not a retail shop for the purposes of s.3. 21 The premises as described on the lease are 'Lot 5, Wyee Road, Wyee' and there does not appear to be any dispute as to the correctness of the survey report attached to the submissions of the respondent. However, that survey report does not contain any statement as to the total area of the building or the land on which the building has been erected. The only document which contains any reference to the area is that which is on a plan of the boundaries of land which is similar in shape to that contained in the survey. However, the circumstances in which the plan came into existence is unknown. Therefore, in my opinion the figures stated on the plan cannot be taken as a representation of the actual size of the premises. In any event, even if the figure is correct, for the reasons set out below, in my opinion the premises, notwithstanding its size, is not a retail shop. 22 In this application, the uses of the premises, which the applicant and Ms Ayab had in contemplation when they entered the lease was that of a service station, convenience store and takeaway. From the advertising it also appears to have a residential component to it. Whether the parties had in contemplation a predominant use out of these stated uses is not clear. In any event, there is no evidence of such pre-contractual discussions between the parties. Accordingly, in accordance with the statement of principle of Barrett J. in Moweno v Stratis (supra) as cited above, the Tribunal must determine what the predominant use was and if that use is a use that accords with one of the businesses in Schedule 1 it will be a retail shop and if it does not then it fails to satisfy this requirement giving the Tribunal no jurisdiction to hear and determine the matter. 23 In the decision of Wood & Wilson v Bergman (supra) the parties relied on numerous factors to support their respective contention of predominant use of the premises: see para [71] to [76]. The factors relied on by the lessee were the respective floor area, the number of stock lines, the time devoted by the lessee and their staff, the number of items sold and contributions to overall profits for each use. When these factors were taken into account, the lessee argued that the predominant use of the premises was for the selling of food, drink and groceries. The lessor on the other hand argued that the relevant factors were the outward appearances of the premises and the use that contributed most to gross takings. In that application, as in this application, the use that contributed most to the gross takings was the selling of petrol, which the lessor, as does the respondent in this application, contended established that the selling of petrol was the predominant use of the premises. 24 In Wood & Wilson v Bergman (supra) Deputy President Chesterman found that the various factors relied on by the parties had been made out. However, he went on to say the following at [78] to [80]: "78. At the end of the day, however, it is not relevant, in my view to consider whether this characterisation of the Lessees' enterprise is correct. The Act does not expressly exclude service or petrol stations from the definition of "retail shop". It has nothing at all to say about service or petrol stations as such. So far as the Act is concerned, premises that are used predominantly for the businesses of selling of groceries and/or automotive parts are "retail shops" within s.3, irrespective of whether the fact that petrol is sold there also warrants calling the premises a "service station" or a "petrol station". 79. The above discussion at [16], [17] of the meanings of "predominant" and "predominate" indicates that they draw on concepts such as "stronger", "leading", "main", "conspicuous" and "more effective". Apply these to the evidence of actual use, I find it impossible to say that the use of the premises for the Schedule 1 businesses was "predominant" as compared with the use for the petrol/selling business. 80. The former use may have involved the expenditure of more time by the Lessees and their staff, the engagement of a larger proportion of the area leased and, by a small margin, the generation of a larger sum by way of profit. According to those measures, it was the "leading" or "main" use. But the latter use was the more conspicuous one and, in terms of gross takings was the "leading" or "more effective" use." 25 In this application the only distinguishing feature contended for by the applicant was the gross takings of the various aspects of the business. In my opinion, this is not sufficient when regard is had to the other evidence. In this regard I find that on the basis of the appearance of the premises they show a predominant use as a service station which happens to include the sale of food. I also note that the use of the premises as a service station is the first use mentioned on the lease and the advertising also used the word 'fuel' before it mentioned 'food'. The evidence also indicates that it was the applicant and not the respondent who decided to develop the food part of the permitted use. It was he who brought in equipment for this purpose and he who removed it after he left. There is no evidence that this was done in accordance with an agreed intention of all the parties that the predominant use of the premises was to be a convenience store or take away food. And finally, consistent with the appearance of the premises it was the sale of fuel which generated the most in gross sales from the business. 26 Taking all these factors into account I find that the premises the subject of the lease of this application was not used wholly or predominantly for the carrying on of one or more of the businesses specified in Schedule 1 of the Act. Accordingly, the Tribunal has no jurisdiction to hear and determine the applicants' application. 27 For the reasons set out above, the Tribunal makes the following orders: 1. Declare that the lease between the parties is not a retail shop under the Retail Leases Act 1994 . 2. Declare that the Tribunal does not have jurisdiction to determine the applicant's application. 3. Applicant's application is dismissed.

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