Singh T/as Deevans Groceries and Indian Takeaway v NS Admin Pty Ltd

Judgment (9 paragraphs)

[1]

REASONS FOR DECISION

These proceedings were commenced on 3 January 2018.
The proceedings are brought pursuant to the Retail Leases Act 1994 (the 'Act'). There is no dispute that the applicants have a retail tenancy claim which arises out of a retail tenancy dispute under the Act and that the Tribunal has the jurisdiction under the Act to make orders of the type sought by the applicants.
The parties entered into a lease of retail and takeaway shop premises at 60 Saywell Road Macquarie Fields (the 'premises') by way of a formal lease document in or about November 2015. The term of the lease was 5 years commencing 26 August 2015 and terminating on 25 August 2020. Clause 1(c)(ii) gives the applicants a rent holiday of two months from the date of the execution of the lease. The lease provided that the applicants were required to use the premises as an 'Indian Supermarket/Take away restaurant'.
These proceedings were heard in the Tribunal on 13 June 2018. On 6 June the respondent applied for a vacation of the hearing date on the basis that: 1. Neither the respondent nor it's legal counsel was available to appear; 2. the respondent had not prepared, nor served points of defence to the applicant's case; and 3. the respondent had not prepared nor served any material in this matter.
On 3 April 2018 orders were made in the Tribunal requiring, among other things, the respondent to file and serve all documents upon which it relied, including points of defence by 17 April 2018. I find that the respondent failed to comply with this order, thus precipitating the application to vacate the hearing date.
On 8 June 2018 I rejected the application to vacate the hearing date. I made the following order: 'The request by the Respondent for an adjournment of the hearing listed at Room 15.4, Level 15, 66 Goulburn Street, Sydney NSW 2000 on Wednesday 13th June 2018 9:15 AM has been refused. Reasons: The respondent's request for a vacation of the hearing on 13 June 2018 is refused. The matter remains listed for hearing. The respondent must file in the Tribunal and give a copy to the applicant an affidavit sworn by an officer /director which addresses all actions taken by the respondent to comply with the Tribunal's orders including all steps to brief counsel prepare Points of Defence and its failure to serve its evidence in the proceedings. The matter remains listed on the above date and your attendance at the hearing is required.'

Ongoing failure to repair the roof, breach of quiet enjoyment

Clause 18 (l)l of the lease states: 'And the lessor doth hereby covenant with the lessees that they, paying the rent hereby reserved, and performing the covenants hereinbefore on their part contained, shall and may peaceably possess and enjoy the demised premises for the term hereby granted, without any interruption or disturbance from the lessor or any other person or persons lawfully claiming by, from, or under them.'
In their final submissions the applicants raise for the first time a claim for breach of s 34 of the Act. They claim the sum of $39,399.17 pursuant to that section of the Act.
In their Amended Points of Claim the applicants plead a claim for breach of quiet enjoyment as their third cause of action at paragraphs 18 - 21. They claim the sum of $39,399.17 as well as $12,000.00 said to be costs associated with taking a loan to pay part of the rental. They do not raise s34 of the Act.
Although the Tribunal does not require strict adherence to the rules of pleading, I find that it would breach the rules of procedural fairness if I were to consider the applicants' s34 claim when it was not brought to the respondent's attention in the Amended Points of Claim and when it is raised for the first time in closing written submissions in circumstances where the respondent has not had the opportunity of considering the claim or being heard in relation to it.
The applicants rely on their evidence of water leaking from the roof of the premises through the ceiling and into the premises. This evidence is not contradicted by the respondent. Mr Low's statement for the respondent confirms that the applicants complained to him or his colleagues regarding water penetration through the ceiling/roof of the premises. He states that on each occasion the complaints occurred after heavy rain.
Mr Low's evidence is also that on 20 December 2017 the roof of the premises was replaced.
In Martins Camera Corner Pty Ltd v Hotel Mayfair Ltd [1976] 2 NSWLR 15 Yeldham J said at page 23 E-F: 'I take the relevant law in relation to the covenant for quiet enjoyment to be correctly set out in Halsbury's Laws of England, 3rd ed., Vol 23, pp.605, 606, pars 1298, 1299 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 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 otherwise be affected...'
In Advance Fitness v Bondi Diggers [1999] NSWSC 264 Austin J stated at [111]: 'A breach of the covenant for quiet enjoyment occurs whenever the landlord causes substantial interference with the enjoyment of the demised premises through an act or omission that is either deliberate or negligent in the sense that its consequences were reasonably foreseeable: Martin's Camera Corner Pty Ltd v Hotel Mayfair Ltd [1976] 2 NSWLR 15; Kohua Pty Ltd v Tai Ping Trading Pty Ltd (1985) 3 BPR [97,240]; P Butt, Land Law (3rd ed 1996), p305-308.'
In Worrall v Commissioner for Housing of ACT [2002] FCAFC 127, the Full Court of the Federal Court of Australia considered a provision for quiet enjoyment under the Residential Tenancies Act, 1997 (ACT). Having referred to that provision and the landlord's obligation to repair arising from term 55 of the residential tenancy agreement, the Court dealt with a submission that a breach of the covenant for quiet enjoyment can only occur if a landlord acts unreasonably. The Court said at [73] and following: '73 To similar effect was the more recent decision of this Court in Hawkesbury Nominees Pty Ltd v Battik Pty Ltd [2000] FCA 185. It had, in that case, been contended that failure to repair or maintain the premises' exhaust system was, if anything, a breach of the covenant to repair, not of the covenant to give quiet enjoyment. Further, though not relevant for present purposes, it was contended that the relocation of the fan powering the system had taken place before the lessee became the tenant. The principle adopted, per Hill J at [37], was that: "... there will be a breach of the covenant for quiet enjoyment where the ordinary and lawful enjoyment of the demised premises is substantially interfered with by the acts of the lessor or those lawfully claiming under him, whether or not the title to the land or the possession of the land is otherwise affected. Whether what is complained of amounts to a substantial interference will be a question of fact. A breach may result either from acts of commission or omission by the landlord." 74 There are two conclusions which follow from the cases cited, not only by Hill J, but also by Higgins J at first instance in the Hawkesbury Nominees case. The first is that acts committed or authorised by or on behalf of the lessor may derogate from the grant even if the acts or omissions affect the quiet enjoyment of the premises only indirectly (see also Telex (Australia) Pty Ltd v Thomas Cook & Son (Australasia) Pty Ltd [1970] 2 NSWR 257; Haig v Chesney [1925] SASR 82; Aldin v Latimer Clarke, Muirhead & Co [1894] 2 Ch 437; Lend Lease Development Pty Ltd v Zemlicka (1985) 3 NSWLR 207; Aussie Traveller Pty Ltd v Marklea Pty Ltd [1998] 1 Qd R 1). 75 The second is that, whilst interference with the normal use of premises arising from failure to repair will breach the covenant of quiet enjoyment (see Martins Camera Corner Pty Ltd v Hotel Mayfair Ltd [1976] 2 NSWLR 15), it is no answer to a complaint of breach of the covenant that it was a result of work required by statutory or other lawful authority (see Reid House Pty Ltd v Beneke (1986) 5 ACLC 451). Nevertheless, to be a breach of the covenant there must be a substantial inference with the tenant's quiet enjoyment. That is no different, in substance, from the "significant" diminution referred to in s 71 of the Act. (emphasis added).
The authorities cited make it clear that there will be a breach of the covenant of quiet enjoyment by an act or acts of omission, in this case the respondent's failure to carry out repairs to the roof of the leased premises.
I find that there is sufficient evidence adduced by the applicants in exhibits A and B to persuade me that the respondent breached the covenant for quiet enjoyment by reason of its failure to repair the roof of the premises in circumstances where the applicants were making continual complaints to the respondent's agent of water leaking through the roof and ceiling of the premises. I further find that on evidence adduced by the applicants in exhibits A and B that there was a substantial interference with their quiet enjoyment caused by the respondent's failure to repair the roof of the premises.
The applicants claim damages of $39,399.17 in relation to this breach.
They rely on the expert report of Mr Haddad of Latitude Accountants dated 24 January 2018 which is annexed to exhibit B as SLS 14. Mr Haddad's curriculum is attached to his report as annexure E. I accept Mr Haddad as a witness with the appropriate accountancy qualifications to enable him to give opinion evidence in these proceedings. In addition Mr Haddad states: 'I certify that I have read and agree to abide by the expert witness code of conduct pursuant to the Uniform Civil Procedure Rules (NSW) 2005 Schedule 7 throughout my report.'
Although Mr Haddad has not referred to the Tribunal's Expert Code of Conduct, I accept the above statement as being adequate and an indication that Mr Haddad is fully aware of his duties and responsibilities in giving expert evidence.
Mr Haddad describes the scope of his engagement and identifies the assumptions that he has accepted. Mr Haddad's report assesses the extent to which roof leaks in the premises caused a material loss of income to the business operated by the applicants from the premises. Four categories of loss were identified to Mr Haddad by the applicants. Mr Haddad then sought to quantify the losses identified by the applicants. His report is concerned with that. The four categories of loss referred to are: 1. damaged stock which was unsalvageable - category 1 loss; 2. lack of capability to operate the catering arm of the business - category 2 loss; 3. inability to sell hot food products to full capacity - category 3 loss; and 4. costs incurred in cleaning following flood damage to kitchen facilities event - category 4 loss.
Mr Haddad identified the assumptions regarding costs incurred that he had made based on information provided by the applicants.
Category 1 costs were assessed at $6,025.81 relying on invoices referred to and annexed to the report. Category 2 losses were calculated at $17,643.19 by a calculation of 'forfeited' sales identified in annexure B to the report. Category 3 losses were calculated at $2,430.17. Category 4 losses were calculated as $13,300.00 based timesheets and an average industry rate of $35.00 per hour.
The respondent did not engage an expert accountant to prepare a report commenting on Mr Haddad's report. However its closing submissions make a number of points in connection with the report and also in connection with this aspect of the applicant's claim.
The points made by the respondent are: 1. No causative link established between loss of sales and water ingress: 2. the use of the premises does not include a catering kitchen and as a result the applicants cannot claim for the category 2 loss; 3. evidence of loss of stock not supported by direct corroboration; 4. no evidence of actual financial outlay to substantiate the $13,300.00 cleaning cost asserted; 5. no basis for the $12,000.00 financing costs claimed in paragraph 21(f) of the amended points of claim.
In addition the respondent makes submissions to the effect that the expert report prepared by Mr Haddad should be given no weight.
I will deal with the issues raised by the respondent.
In Alexander and Others v Cambridge Credit Corporation Ltd (1987) 9 NSWLR 310, McHugh JA stated at page 358: "...to establish a causal connection between a breach of contract and the damage which the plaintiff has suffered, he needs only to show that the breach was a cause of the loss. This is to be decided by the application of commonsense principles. In general, the application of the "but for" test will be sufficient to prove the necessary causal connection. But that test is only a guide. The ultimate question is whether, as a matter of commonsense, the relevant act or omission was a cause."
In exhibit A at paragraph 22 Mrs Singh's evidence is that as a result of rain events in February 2017 causing water ingress into the premises she was unable to use the kitchen to cook takeaway foods and that sales were affected as she was unable to sell takeaway foods. In addition she states that she had to cancel pre booked catering services for customers and could not sell defrosted goods to customers. The evidence of Mrs Singh provides ample evidence of the effect of water ingress into the kitchen area of the premises in June 2016, January 2017, February 2017 and June 2017. She states that 'Our profit has been reduced and business affected and interrupted because of the rain.' I find that the evidence of Mrs Singh of rain leaking into the kitchen of the premises in instances that she refers to in exhibits A and B and the effects it has had establishes a causal link between water ingress and the loss claimed.
The respondent points out that the shop lease permits the premises to be used an 'Indian Supermarket/Take away restaurant' both of which uses are referred to in schedule 1 to the Act. The respondent submits that the use of the premises does not include a catering kitchen and as a result the applicants cannot claim for the category 2 loss which relates to the catering arm of the business. I find that the term 'Take away restaurant' applies to a business of cooking food on the premises for sale either in the premises, on a take away basis, or by arrangement or order on the basis that it is taken away and not consumed on the premises. I can find no reason to restrict the meaning of the term 'Take away restaurant' to prevent the applicants from operating a catering style business where food is prepared on the premises, but collected by purchasers. For these reasons I reject the respondent's submission that the applicants are prevented from recovering the category 2 loss.
I also reject the respondent's submission that the category 1 loss should be refused because the applicants' evidence of loss of stock is not supported by direct corroboration. The applicants' expert has considered the category 1 loss claim and has referred to the invoices contained in annexure A of his report. In addition Mrs Singh has given evidence about loss of stock. I find that there is sufficient evidence of loss of stock for the claim to be considered by me.
I accept Mr Haddad's evidence regarding the Category 1, 2 and 3 losses. As a result I find in the applicants' favour in the sum of $26,099.17.
The respondent's submission regarding the category 4 loss is that there is no evidence of actual financial outlay to substantiate the $13,300.00 cleaning cost asserted. In my view if there has been excess work required to clean the premises because of the water ingress through the roof, the recoverable cost should be the actual cost incurred by the applicants in paying for the excess cleaning work. I can find little justification for the applicants' expert claiming an average industry rate of $35 per hour for this work. I have had regard to annexure SLS 18 to exhibit A which is the applicants' profit and loss for the October - December 2016 quarter. Cleaning is recorded as a cost of $590.00 which equates to $2,360.00 PA. While I appreciate that the applicants evidence indicates that rain events occurred in 2017 and 2018, the evidence that I have referred to indicates to me that the assessment of the category 4 loss is exaggerated, particularly when the actual costs incurred by the applicants have not been used. In addition I do not have a great deal of confidence in annexure C to Mr Haddad's report. It purports to attach timesheets but does not do so. Annexure C refers to rainfall dates stating the rainfall and then stating the amount of hours which are alleged to have been spent in cleaning as a result of the rainfall. Without the actual timesheets attached, or a clear statement from Mr Haddad that Annexure C had been prepared from actual timesheets, I give annexure C little weight.
As a result, I reject the category 4 loss assessment of $13,300.00. Nonetheless I accept the premise of the claim that additional cleaning costs were incurred which would have caused the applicants to incur additional costs. In circumstances where additional costs are accepted as having been incurred, I would allow the applicants a 50% increase on their 2016 cleaning costs, namely the sum of $1,180.00 for 1 5 years from 1 January 2017 - 30 June 2018 which is adequate in my view to compensate them for additional cleaning expenses. The total amount awarded is $1,770.00. While I appreciate that such an award may appear to be the result of guesswork, there is ample authority that in assessing damages I must do the best that I can in the circumstances and that in some circumstances guesswork will suffice. In Commonwealth v Amann Aviation Pty Ltd [1991] HCA 54, Mason CJ and Dawson J said at [31]: 'The settled rule, both here and in England, is that mere difficulty in estimating damages does not relieve a court from the responsibility of estimating them as best it can: Fink v. Fink [1946] HCA 54; (1946) 74 CLR 127, at p 143; McRae v. Commonwealth Disposals Commission [1951] HCA 79; (1951) 84 CLR 377, at pp 411-412:, Chaplin v. Hicks (1911) 2 KB 786, at p 792. Indeed, in Jones v. Schiffmann [1971] FICA 52; (1971) 124 CLR 303, Menzies J went so far as to say that the 'assessment of damages ... does sometimes, of necessity involve what is guess work rather than estimation': at p 308. Where precise evidence is not available the court must do the best it can: Biggin and Co. Ltd. v. Permanite Ltd. (1951) 1 KB 422, per Devlin J. at p 438. And uncertainty as to the profits to be derived from a business by reason of contingencies is not a reason for a court refusing to assess damages: see McGregor on Damages, 15th ed. (1988), pars 357-359.'
Next the respondent asserts that there is no basis for the $12,000.00 financing costs claimed in paragraph 21(f) of the amended points of claim. The applicants' submissions do not press that amount.
As regards the respondent's submissions regarding Mr Haddad's report, I have dealt with a number of issues above. One submission made by the respondent's counsel is that Mr Haddad's report of 24 January 2018 pre-dates his letter of instruction dated 15 February 2018. I do not consider that to be of any great significance in a situation where the applicants are litigants in person. Importantly at paragraph 22 of exhibit A which is dated 2 January 2018 Mrs Singh states that she has engaged an Accountant to prepare a report relating to loss incurred during the interruption of her business during rainy days. This establishes to my satisfaction that Mr Haddad was engaged most probably before 2 January 2018 to prepare the report now under consideration. I infer from this fact that the applicants' 15 February 2018 letter of instruction was produced at that time as a formality for the purposes of the report and in that way formalised previous instructions.
I find that despite the objections to Mr Haddad's report raised by the respondent that I will give it the weight that I consider appropriate which is indicated in my findings set out above.

Unconscionable conduct

Section 62B of the Act states so far as is relevant to these proceedings: '(1) A lessor must not, in connection with a retail shop lease, engage in conduct that is, in all the circumstances, unconscionable. (2) (3) Without in any way limiting the matters to which the Tribunal may have regard for the purpose of determining whether a lessor has contravened subsection (1) in connection with a retail shop lease, the Tribunal may have regard to: (a) the relative strengths of the bargaining positions of the lessor and the lessee, and (b) whether, as a result of conduct engaged in by the lessor, the lessee was required to comply with conditions that were not reasonably necessary for the protection of the legitimate interests of the lessor, and (c) whether the lessee was able to understand any documents relating to the lease, and (d) whether any undue influence or pressure was exerted on, or any unfair tactics were used against, the lessee or a person acting on behalf of the lessee by the lessor or a person acting on behalf of the lessor in relation to the lease, and (e) the amount for which, and the circumstances under which, the lessee could have acquired an identical or equivalent lease from a person other than the lessor, and (f) the extent to which the lessor's conduct towards the lessee was consistent with the lessor's conduct in similar transactions between the lessor and other like lessees, and (g) the requirements of any applicable industry code, and (h) the requirements of any other industry code, if the lessee acted on the reasonable belief that the lessor would comply with that code, and (i) the extent to which the lessor unreasonably failed to disclose to the lessee: (i) any intended conduct of the lessor that might affect the interests of the lessee, and (ii) any risks to the lessee arising from the lessor's intended conduct (being risks that the lessor should have foreseen would not be apparent to the lessee), and (j) the extent to which the lessor was willing to negotiate the terms and conditions of any lease with the lessee, and (k) the extent to which the lessor and the lessee acted in good faith.'
The facts relied upon by the applicants are that as the respondent's agent conceded in cross examination, the respondent owns 4 shops in a row in the complex in which the premises are situate, including shop premises adjacent to the premises the subject of these proceedings. The applicants assert and it is not denied that the respondent leased those shop premises to a third party allowing the lessee to use the premises for the same purpose as the applicant's premises.
As stated at the commencement of these Reasons, the lease required the applicants to use the premises as an 'Indian Supermarket/Take away restaurant'.
The applicants Amended Points of Claim raise a breach of the terms of the disclosure statement. In the alternative the applicants state that the 'conduct of the Respondent in unreasonably failing to disclose its intention to allow an existing shop right next to the Applicant Indian Takeaway and Groceries shop to operate as a Groceries had affected the Applicant's business operation and is therefore unconscionable.' The applicants claim the sum of $75,078.53 in connection with this aspect of their claim.
The applicants' evidence in support of this claim is not lengthy. At paragraph 57 of exhibit A Mrs Singh states; 'The respondent had authorised the Meena Bazaarto open right next door selling same items and groceries as mine. This Shop has opened on or about July 2017 till now and this has also impacted business sales. Again we were not notified, and the owner does not consider the rights of the tenant and does not follow the contract. He just does what suits him.'
The applicants rely on the disclosure statement they assert was provided to them and in particular item 2 which states that the permitted use of the premises was 'Retail store or as otherwise agreed to' which was stated to be exclusive to them.
The Act provides remedies to a lessee if a disclosure statement was incomplete or contained information that at the time it was given was materially false or misleading. In those circumstances a lessee may terminate the lease by notice in writing to the lessor at any time within 6 months after the lease was entered into. The applicants do not apply for any of the remedies provided by the Act in connection with disclosure statements.
As stated the Tribunal does not require adherence to the strict rules of pleading. As a result I will treat the applicant's claim arising out of paragraphs 22 - 24 of the Amended Points of Claim as being for unconscionable conduct, limited to the conduct raised in the evidence, namely the content of the disclosure statement and the respondent's conduct in leasing adjacent premises to a third party and allowing that third party to use the premises for predominantly the same purpose as the use allowed to the applicants, namely an Indian Supermarket.
The parties' submissions do not address the relevant authorities which deal with the meaning of unconscionable conduct. The applicants' submissions are brief. The respondent's submissions state that the applicants were not granted exclusivity. The report relied upon by the applicants is criticized
Having regard to s62B as referred to above I find that the matters referred to in sub-sections (a) - (h) are not present on the facts or matters that I have referred to in [66]. As regards s65(i)(i) that is a matter which I may have regard to since I am able to infer that the respondent did not disclose to the applicants that it intended to lease the adjacent premises to a third party and allow the that third party to use the premises as Indian Supermarket. However I do not regard that failure to be particularly significant since the respondent's failure occurred on Mrs Singh's evidence in July 2017, some years after the commencement of the lease. At that point the only action the applicants could take to protect their interests was to bring these proceedings, which they did.
In NRM Corporation Pty Ltd v Australian Competition and Consumer Commission [2016] FCAFC 98 the Full Federal Court stated at [163] - [164] after a detailed consideration of unconscionable conduct with reference to numerous authorities: 'Unconscionable conduct is that which is "clearly unfair or unreasonable, or serious misconduct": Australian Competition and Consumer Commission v Coles Supermarkets Australia Pty Ltd [2014] FCA 1405 at [36] per Gordon J. In (inter alia) imposing penalties, her Honour found that Coles had engaged in unconscionable conduct and had misused its market power. Its conduct, it was said, was "not done in good conscience". There must be disregard of certain norms or standards which "must be more than those that happen to be personal to the court or tribunal charged with the responsibility of deciding whether conduct is unconscionable": Director of Consumer Affairs (Vic) v Scully [2013] VSCA 292 at [56], (2013) 303 ALR at 186 per Santamaria JA (Neave and Osborn JJA agreeing). But it remains undesirable to attempt any comprehensive definition of that which is "unconscionable": Tonto Home Loans Australia Pty Ltd v Tavares [2011] NSWCA 389. Allsop P (as his Honour then was) there concluded: [291] ... It is neither possible nor desirable to provide a comprehensive definition. The range of conduct is wide and can include bullying and thuggish behaviour, undue pressure and unfair tactics, taking advantage of vulnerability or lack of understanding, trickery or misleading conduct. A finding requires an examination of all the circumstances. See also: PT Ltd v Spuds Surf Chatswood Pty Ltd [2013] NSWCA 446 at [106] per Sackville AJA, (McColl and Leeming JJA agreeing).'
PT Ltd v Spuds Surf Chatswood Pty Ltd [2013] NSWCA 446 was a decision which dealt with the Act. At [93] - [106] Sackville AJA provides a comprehensive discussion and examination of the authorities which deal with unconscionable conduct. At [106] Sackville AJA stated: 'The difficulty of imposing a definitive constraint on the meaning of "unconscionability" is illustrated by other comments made by Allsop P in Tonto v Tavares, at [291]: 'Aspects of the content of the word "unconscionable" include the following: the conduct must demonstrate a high level of moral obloquy on the part of the person said to have acted unconscionably: Attorney-General (NSW) v World Best Holdings Ltd, at [121]; the conduct must be irreconcilable with what is right or reasonable: Australian Securities and Investments Commission v National Exchange Pty Ltd, at [30]; Australian Competition and Consumer Commission v Samton Holdings Pty Ltd (2002) 117 FCR 301; [2002] FCA 62, at [44]; Qantas Airways Ltd v Cameron at 262; factors similar to those that are relevant to the [Contracts Review Act 1980] are relevant: Spina v Permanent Custodians Ltd, at [124]; the concept of unconscionable in this context is wider than the general law and the provisions are intended to build on and not be constrained by cases at general law and equity: National Exchange at [30]; the statutory provisions focus on the conduct of the person said to have acted unconscionably: National Exchange at [44]. It is neither possible nor desirable to provide a comprehensive definition. The range of conduct is wide and can include bullying and thuggish behaviour, undue pressure and unfair tactics, taking advantage of vulnerability or lack of understanding, trickery or misleading conduct. A finding requires an examination of all the circumstances. (Emphasis added.)' (citations omitted)
As regards 'moral obloquy' Sackville AJA discussed this term at [101] -[105]. At [105] His Honour stated: 'Perhaps for these reasons, in Tonto Home Loans Australia Pty Ltd v Tavares [2011] NSWCA 389; 15 BPR 29,699, Allsop P (with whom Bathurst CJ and Campbell JA agreed) suggested (at [293]) that Spigelman CJ in A-G v World Best Holdings may have stated a "too stringent" test, although Allsop P left the issue open. His Honour said that: What is required is some degree of moral tainting in the transaction of a kind that permits the opprobrium of unconscionability to characterise the conduct of the party.'
In considering the respondent's conduct in these proceedings I will adopt the approach stated by Allsop P as quoted above as regards the 'moral' element of unconscionability.
Mr Simon Low is the managing agent of the premises. He provided a statement on behalf of the respondent which in exhibit 1. At paragraph 17 he stated: 'The Tenants' Premises sits adjacent to other retail and/or commercial shops on Saywell Road, Macquarie Fields. There are at least twenty other retail shops and/or commercial shops on this strip. No exclusivity with respect of permitted use could be given to any tenant in this strip.'
Mr Low's evidence in cross examination leads me to doubt this evidence. While paragraph 17 may be true in the most general sense, I find that Mr Low did not reveal the true state of affairs. In cross examination Mr Low admitted that the respondent owns 4 shops in a row. Mr Low also stated in cross examination that 'someone' told the applicants of the fact that Meena Bazaar was leased and that Meena Bazaar opened in approximately November or December 2017. Mr Low stated that before Meena Bazaar opened, the premises were used as a coffee shop.
There is a conflict of evidence between Mrs Singh and Mr Low about whether the applicants were told that the respondent would allow Meena Bazaarto sell the same items as those sold by the applicants. I prefer Mrs Singh's evidence because she was frank in the way she gave her evidence and did the best she could to answer all questions put to her. As I have found Mr Low's statement painted a different picture compared to the evidence he gave when being cross examined. In addition Mr Low's evidence that 'someone' told the applicants about Meena Bazaar does not inspire a great deal of confidence that the applicants were so informed. For these reasons I prefer Mrs Singh's evidence.
On the evidence that is before me I find that: 1. Meena Bazaar is situate next door to the applicants' premises; 2. The respondent owns the applicants leased premises and Meena Bazar; 3. The applicants premises and Meena Bazaar are part of a 4 shop bloc owned by the respondents; 4. The premises in which Meena Bazaar is situate were previously a coffee shop; 5. Meena Bazaar opened in July 2017; 6. Meena Bazaar sells the same items and groceries as sold by the applicants; and 7. The respondent did not disclose to the applicants that it was allowing the premises next door to the applicants to sell the same items and groceries as sold by the applicants.
The applicants have referred to the disclosure statement as part of their unconscionability claim. I am unable to find that the content of the disclosure statement issued on behalf of the respondent adds to or enhances their unconscionability claim. At item 8 as a 'Key Disclosure Item' it is stated that the lease does not provide the lessee with exclusivity in relation to the permitted use of the premises. In Part 1 of the document at item 2, the permitted use of the premises are described. It is stated that the permitted use is exclusive to the lessee. I find that on a careful reading of the disclosure statement the applicants could not have formed the view that it was unequivocally clear that they had an exclusive right to use the premises as a Retail store, so far as the respondent was concerned. However the position was unclear because of the contradiction contained in disclosure statement which was prepared by the respondent or its agent, which suggested exclusive use.
The next issue that I must determine is whether the respondent engaged in unconscionable conduct by reason of the material findings of fact that I have made in [76]. Having regard to these findings of fact, I make a further finding that the respondent as owner of 4 shops in a row was able to give exclusivity of use to any of the lessee's within its 4 shop bloc, so far as the 4 shop bloc was concerned. I further find that the applicants case is quite clearly that the respondent failed to give them exclusive use, within the 4 shop bloc, so far as it was within its power to do so.
In my view the respondents conduct in leasing the shop premises next door to the applicants and allowing those premises to be used for selling the same items and groceries as the applicants, was unconscionable. Alternatively, since the evidence is not particularly clear, if the respondent allowed the lessee of the shop premises next door to the applicants to change the use of the premises from a coffee shop to a use where items and groceries the same as those in the applicants premises could be sold, I find such conduct to be unconscionable.
The reasons for making the findings of unconscionable conduct are that I find that the respondent must have known that the impact of its conduct would adversely impact the applicants' business as run from the premises and its earnings derived from that business. I find that such conduct fits many of the descriptions of unconscionable conduct referred to in the authorities referred to above. The respondents conduct was in my view clearly 'unfair and unreasonable'. I also find that the respondent's conduct was 'irreconcilable with what was right or reasonable' insofar as the respondent must have known that its conduct was highly likely to have had an adverse financial impact on the applicants. It is this conduct which would constitute the 'moral tainting' referred to by Allsop in Tonto Home Loans Australia Pty Ltd v Tavares.
The applicants requested Mr Haddad of Latitude Accountants to prepare a report on the financial consequences of the respondent granting a lease to a direct competitor of the applicants, Meena Bazaar who it is stated sells 60 key products sold by the applicants from the premises.
Mr Haddad's curriculum is attached to his report as annexure E. I accept Mr Haddad as a witness with the appropriate accountancy qualifications to enable him to give opinion evidence in these proceedings. In addition Mr Haddad states: 'I certify that I have read and agree to abide by the expert witness code of conduct pursuant to the Uniform Civil Procedure Rules (NSW) 2005 Schedule 7 throughout my report.'
Although Mr Haddad has not referred to the Tribunal's Expert Code of Conduct, I accept the above statement as being adequate and an indication that Mr Haddad is fully aware of his duties and responsibilities in giving expert evidence.
Mr Haddad describes the scope of his engagement and identifies the assumptions that he has accepted.
The applicants advised Mr Haddad that by reason of the respondent's conduct they were of the view that they had sustained 2 categories of loss: 1. Loss of revenue; and 2. Loss to good will.
Mr Haddad calculates the category 1 loss as $56,760.79 and the category 2 loss as $18,317.74. Together these amounts make up the $75,078.53 claimed by the applicants.
The respondent's submissions make a number of criticisms of Mr Haddad's report. They are: 1. Mr Haddad has accepted key assumptions provided by the applicants without verifying the relevant data; 2. Internal inconsistencies between [26] and [28] of the report; 3. It fails to assess a loss of profit as opposed to a loss of revenue; and 4. Assessments of future loss are inappropriate given that the applicants are seeking an order for the termination of the lease.
A significant criticism of the Haddad report is that the author uncritically accepts a number of matters as instructed by the applicants. For their part, the applicants do not make good any of the factual matters which are the subject of their instructions and information provided to Mr Haddad, as referred to in paragraphs 13, 14, 20, and 21 of the report. Reliance on an opinion based on factual assumptions that are not established by evidence is problematic since the opinion has the potential to mislead, or to be unreliable.
I am not bound by the rules of evidence and have accepted into evidence Mr Haddad's report on the financial loss caused by the respondent's conduct in allowing the Meena Bazaar premises to be used for a purpose which allowed the lessee to sell similar grocery items as sold by the applicants. The issue is how much weight should I give to the report. The respondent submits that I should give little or no weight to it.
I circumstances where the Haddad report is the only report that I have regarding the applicant's financial loss arising out of the Meena Bazaar issue I have come to the conclusion that I should give it weight despite the fact that it relies on a number of unproved assumptions. I accept that because the assumptions that I have referred to have not been made good in evidence, or investigated by Mr Haddad there exists the possibility that Mr Haddad's final figures may be erroneous. I will therefore apply a discount of 15% to Mr Haddad's estimates of loss that I accept.
As cited above, in Commonwealth v Amann Aviation Pty Ltd Mason CJ and Dawson J said at [31]: 'The settled rule, both here and in England, is that mere difficulty in estimating damages does not relieve a court from the responsibility of estimating them as best it can: Fink v. Fink [1946] HCA 54; (1946) 74 CLR 127, at p 143; McRae v. Commonwealth Disposals Commission [1951] HCA 79; (1951) 84 CLR 377, at pp 411-412:, Chaplin v. Hicks (1911) 2 KB 786, at p 792. Indeed, in Jones v. Schiffmann [1971] FICA 52; (1971) 124 CLR 303, Menzies J went so far as to say that the 'assessment of damages ... does sometimes, of necessity involve what is guess work rather than estimation': at p 308. Where precise evidence is not available the court must do the best it can: Biggin and Co. Ltd. v. Permanite Ltd. (1951) 1 KB 422, per Devlin J. at p 438. And uncertainty as to the profits to be derived from a business by reason of contingencies is not a reason for a court refusing to assess damages: see McGregor on Damages, 15th ed. (1988), pars 357-359.'
Based on Mr Haddad's report I accept the net loss for the period July - December to be $10,543.65 and the net loss for the period January - June 2018 to be $7,380.81, a total of $17,924.81.
Since the parties are agreed that the lease is to come to an end in August 2018, I find that there is no need to assess losses which may occur after June 2018, or the category 2 loss as referred to by Mr Haddad.
The amount found in favour of the applicants arising from the respondent's breach of s62B of the Act is ($17,924.81 - 15%) = $15,236.09.
For the reasons provided above I make a monetary order for $62,040.26 in favour of the applicants for the following items; 1. Resealable rear door, Abatement of rent - $10,725.00; 2. Leaking roof, Abatement of rent - $8,800.00; 3. Leaking roof, breach of quiet enjoyment $27,869.17; and 4. Unconscionable conduct, $15,236.09.

At a glance

Court

Decision date

Source

Judgment (9 paragraphs)

Parties

Cases Cited (18)