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[2013] NSWADT 231
respondent. The Application is dismissed. The parties must file and serve any further written submissions as to costs within 14 days. The Tribunal will thereafter determine any order as to costs upon the...
A shopping centre landlord and a Subway tenant could not agree on the precise legal terms governing use of a small outdoor seating area after the lease was renewed. The landlord sent a letter in September 2011 recording an informal deal on rent, fit-out and seating use. When the formal lease document arrived with extra conditions, the tenant refused to sign and asked the Tribunal to rewrite the document. The tenant argued the landlord had been misleading and that the landlord was locked in by promissory estoppel. The Tribunal ruled that it had no power to rewrite leases, that nothing in the letter was objectively misleading, that the tenant had not proved it suffered any loss or changed its position to its detriment in reliance on the letter, and that estoppel could not be used offensively to force new lease terms. The application was dismissed.
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Nekon Pty Ltd owned the Waratah Village Shopping Centre in New South Wales. On 1 September 2008 Subway Realty Pty Ltd took a three-year retail lease of Shop 4 with two five-year options. Strokers Pty Ltd, the franchisee, began operating a Subway outlet from the premises in about August 2009. It was common ground that the arrangement was governed by the Retail Leases Act 1994 (RL Act) and that the shop was a retail shop within the meaning of that Act.
During the initial term Nekon permitted several food outlets, including Subway, to place tables and chairs on the outdoor areas immediately in front of their shops for customer use. On 24 May 2011 Subway exercised the first option, triggering a renewed term from 1 September 2011 to 31 August 2016. Negotiations followed on three matters: the new market rent for the first year, the scope of tenancy fit-out works required by the lease, and the terms on which Subway could continue to use an adjacent outdoor seating area of approximately 25 square metres.
On 7 September 2011 Nekon's agent, Matthew Yovich of Brookfield Partnership, sent a letter confirming that the parties had reached agreement on a commencing rent of $64,500 per annum plus GST, listed specific fit-out items (including new outdoor tables and replacement wicker furniture), and granted a licence to use the 25 m² area subject to four conditions: the lessee would supply and maintain furniture, remove rubbish and keep tables and chairs adequately cleaned and maintained at all times, provide proof of public liability insurance covering the area, and ensure that use of the area caused no adverse effect on the public or on other tenants' quiet enjoyment. The letter invited the applicants to confirm the terms by signing and returning a copy; it is undisputed that they did so.
In January 2012 Nekon forwarded a formal renewed lease instrument. Clause 30.1 in that document was more elaborate than the September 2011 letter. It described the licence as extending to 28 m², imposed a nominal $1 per annum licence fee, required furniture to comply with the lessor's design guidelines, mandated inspections every 30 minutes, required tables and chairs to be stored inside the shop outside trading hours, added workers' compensation insurance, gave the lessor an express right to restrict or prohibit use on breach, and reserved a right to increase the licence fee after the first twelve months. The applicants refused to execute the document, contending that clause 30.1 did not reflect the September 2011 understanding.
On 7 September 2012 Nekon issued a notice terminating the licence. The Tribunal restrained further reliance on that notice pending final determination. The applicants commenced proceedings in the Retail Leases Division seeking orders that the renewed lease be "modified" to incorporate their preferred version of clause 30.1. That version repeated most of the conditions in the September 2011 letter but added that the licence could be terminated without compensation only after written notice of breach and a reasonable opportunity to rectify, stipulated that notice would be deemed served if sent by email to two nominated addresses, and gave the lessee a right to surrender the licence on 72 hours' notice.
At the hearing on 15 July 2013 the applicants abandoned their original contention that the 7 September 2011 letter itself constituted a binding contract. They reframed the claim as one for relief under s 72(1) of the RL Act on two grounds: first, that Nekon had engaged in misleading or deceptive conduct in breach of s 62D; second, that Nekon was estopped from entering the renewed lease without the applicants' version of clause 30.1. No adjournment was sought and no additional evidence was called. After the hearing the applicants nevertheless lodged further written submissions and fresh evidentiary material without leave. The Tribunal admitted that material but ultimately held that the unfairness did not affect the outcome.
Judicial Member Rickards began by examining the Tribunal's statutory powers. Section 72(1) lists the orders that may be made in a retail tenancy claim. Paragraph (e) permits an order, by consent, requiring the parties to rectify a lease. No other paragraph authorises the Tribunal to rewrite or modify lease terms unilaterally. Because the applicants' claim was not brought by consent, the Tribunal lacked jurisdiction to grant the "modification" sought. That conclusion alone was sufficient to dismiss the application, but the Member nevertheless examined the two substantive grounds advanced.
On the s 62D claim the Tribunal applied the objective test affirmed in Davis v Sydney Harbour Foreshore Authority (No 2) [2009] NSWADT 276. The applicants alleged three representations said to be contained in or implied by the 7 September 2011 letter: that the agreed rent of $64,500 included any benefit attaching to the licensed area; that the obligation to keep the area "adequately" cleaned and maintained imported a standard of reasonableness; and that Nekon was satisfied with the current level of cleanliness. The Tribunal found none of these representations present on an objective reading of the letter. The rent had been negotiated independently of any notional value for the outdoor area. The word "adequately" simply mirrored the standard already required by the lease itself. Nothing in the letter conveyed satisfaction with prior cleanliness; on the contrary, the detailed conditions suggested that previous problems may have existed. Even if any representation could be identified, the applicants failed to prove loss or damage. There was no evidence that the rent figure contained a component attributable to the seating area, and expenditure on portable furniture retained inherent value and was required in any event under the fit-out obligations. Claims of "loss of trade" were not explained and fell outside the pleaded issues.
The promissory estoppel claim fared no better. The Tribunal adopted the six-part test formulated by Brennan J in Waltons Stores (Interstate) Limited v Maher [1998] HCA 7 and the shield-not-sword limitation explained in Xin v Zakos [2002] NSW ADT 189. The applicants relied on the overall sequence of events rather than direct evidence from any principal of either applicant company that the 7 September 2011 letter had been read, that a particular assumption had been formed, or that any action had been taken in reliance on that assumption to the applicants' detriment. The Tribunal, applying the approach to clarity of representation set out by Brereton J in Waterman v Gerling Australia Insurance Company Pty Ltd [2005] NSWSC 1066, held that no clear assumption had been induced. The clause the applicants sought to insert differed in material respects from the September 2011 letter, undermining any contention that the letter itself fixed the terms. In the absence of proven reliance and detriment, unconscionability could not be established. Estoppel could in any event operate only defensively; it could not be used offensively to obtain a positive order for lease modification that the Tribunal otherwise lacked power to make.
The Tribunal therefore concluded that the grounds advanced could not support the relief claimed. The application was dismissed and the parties were given a further opportunity to file costs submissions.
Prior to this decision the law on misleading or deceptive conduct in retail leases was settled by s 62D of the RL Act, which mirrors the language of the Australian Consumer Law but is confined to parties to a retail shop lease. Section 62E makes plain that the only remedy expressly provided is compensation for loss or damage, recoverable by retail tenancy claim under s 71. Tribunal decisions such as Davis v Sydney Harbour Foreshore Authority (No 2) had confirmed that the test remains wholly objective.
The law of promissory estoppel rested on the High Court's decision in Waltons Stores, which expanded the doctrine beyond its traditional equitable roots to prevent a party from departing from an induced assumption where it would be unconscionable to do so. Lower courts, including the ADT in Xin v Zakos, had emphasised that estoppel operates as a shield and cannot found a cause of action for damages or other positive relief. Waterman v Gerling had clarified that a representation need not be express or precise provided the assumption relied upon is clear enough in the context and reliance upon it is reasonable.
This decision did not change the underlying law. It applied the existing principles to the particular evidentiary shortcomings in a retail lease renewal dispute. After the decision, practitioners understood that a party seeking to rely on an informal side letter or email exchange in a retail lease context must still adduce direct evidence of the assumption formed by the decision-maker, of actual reliance, and of quantifiable detriment. The case also underscored that the Tribunal will not "modify" lease terms under s 72 absent consent; any claim for rectification must be brought by consent or in a court with equitable jurisdiction. The decision therefore reinforced, rather than altered, the pre-existing boundaries of both statutory and equitable doctrine.
Paragraph 31 states: "It is appropriate, at this juncture, to simply note that there is no express statutory power given to this Tribunal to 'modify' a lease. Pursuant to section 72(1)(e), the Tribunal may make an order requiring the parties to rectify a lease, but this can only be done by consent of the parties."
Plain-English translation: The Tribunal cannot rewrite your lease just because one side wants it changed. The only time it can fix the wording is if both landlord and tenant agree to ask for that fix.
Paragraph 35 notes: "Nekon correctly asserts that any proven breach of section 62D by a party to a retail lease agreement enables the innocent party to recover the amount of any loss or damage suffered by reason of such conduct, but does not ground any other right or remedy which may exist pursuant to section 72 of the RL Act."
Plain-English translation: Even if the landlord did mislead you, the only thing the Tribunal can award is money to cover your actual financial loss. It cannot force the landlord to change the lease wording.
Paragraph 48 quotes Xin v Zakos: "even if an equity were to arise, it can do so only by way of an estoppel, that is, by way of entitling the Lessee to resist a claim by the Lessor based on rights other than those promised. This is often expressed as the equity constituting a shield not a sword but that description needs to be used with care."
Plain-English translation: Estoppel can stop the landlord from enforcing stricter terms than it promised, but it cannot be used to launch a positive claim for a brand-new lease clause that the Tribunal has no power to impose.
Paragraph 52 cites Waterman v Gerling for the proposition that a representation "need not be express nor does it have to be completely clear" provided the assumption is clear enough in context and reliance is reasonable. The Tribunal then found that even that flexible test was not satisfied on the evidence.
Paragraph 56 concludes: "The Applicants have not sought declaratory relief or other orders pursuant to section 72 of the RL Act concerning the outdoor seating area. They instead seek 'modification' of a lease agreement where the Tribunal lacks power to do so; additionally, the stated grounds of misleading and deceptive behaviour and estoppel have not been established. For these reasons, the Application must fail."
Plain-English translation: Because the applicants asked for the wrong remedy and failed to prove the facts needed for either of their legal arguments, the case had to be dismissed.
The decision is triggered whenever a retail tenant seeks to have the Tribunal rewrite or "modify" a lease or licence clause on the basis of an informal pre-execution letter or email, without the lessor's consent. It applies with particular force where the tenant has countersigned a confirmation letter but later refuses to execute the formal instrument because additional conditions have been inserted. The case is relevant where the tenant alleges that the rent agreed "included" the value of an ancillary licence, or that cleaning obligations carried an implied reasonableness overlay, yet cannot point to explicit language or to evidence that the rent figure was discounted on that account.
The estoppel limb is engaged when a tenant asserts that a lessor's pre-execution confirmation created an assumption that the formal document would mirror the confirmation letter exactly, but the tenant fails to call evidence from the individuals who actually read the letter and made the decision to exercise the option or incur fit-out expenditure. The precedent also applies where the tenant's proposed substitute clause contains additional machinery provisions (deemed service by email, surrender rights, limits on termination) that were never mentioned in the earlier correspondence.
Because the Tribunal emphasised the independent negotiation of market rent, the decision is relevant in any rent-review dispute where one party later attempts to recharacterise the agreed figure as containing a component for an ancillary right whose value was never separately quantified. Finally, the procedural discussion of late supplementary submissions without leave highlights the risk that an applicant who changes its legal characterisation at the door of the hearing, and then seeks to bolster its case with fresh material afterwards, may find the Tribunal admitting the material but still deciding the case on the original evidence.
The judgment has been treated as a straightforward application of Waltons Stores and of the statutory limits on the Tribunal's powers under s 72. Subsequent decisions have cited the case for the proposition that estoppel in a retail lease context still requires concrete evidence of the assumption actually formed by the representee and of detriment caused by reliance on that assumption. The shield-not-sword analysis drawn from Xin v Zakos and applied here has been followed in later Tribunal decisions where tenants have attempted to use estoppel to obtain positive variations rather than to defend against forfeiture or rent claims.
The objective-test discussion drawn from Davis v Sydney Harbour Foreshore Authority (No 2) has been regarded as uncontroversial restatement of authority. No later court has suggested that the Tribunal possesses an implied power to modify leases outside the consent-based rectification route in s 72(1)(e). The decision's insistence on direct evidence of reliance has been viewed as consistent with the high evidentiary burden Brennan J placed on claimants in Waltons Stores. In short, later courts have treated the case as an orthodox application of settled principle rather than as creating any new rule, and have followed its emphasis on the need for precise evidentiary links between representation, assumption, reliance and detriment in informal lease-side-letter disputes.
The judgment leaves open whether, in a case where direct evidence from the tenant's principal is given and clearly establishes inducement, reasonable reliance and quantifiable detriment, the Tribunal could grant declaratory relief under s 72(1)(f)(iii) declaring the rights and liabilities of the parties, even if it could not order "modification". The decision did not explore that alternative form of relief because it was not sought.
It also leaves unresolved the precise boundary between a licence to use outdoor seating that is merely permissive and one that creates an interest in land requiring formal registration or inclusion in the lease itself. The Tribunal noted the dispute concerned "the nature and extent of any subsisting rights" but did not decide whether the arrangement was a contractual licence only or something more.
A further open question is the extent to which expenditure on portable furniture that retains residual value can ever constitute detriment for estoppel purposes. The Tribunal held that the tables and chairs had inherent value and were required under the fit-out obligations in any event, but did not lay down a bright-line rule for cases where the furniture is bespoke and cannot readily be redeployed.
Finally, the decision leaves untouched the question whether a lessor who knowingly stands by while a tenant incurs substantial cost on the faith of an informal seating arrangement could later be held to have acquiesced in a way that engages equitable principles outside the strict Waltons Stores test. Because the evidence here did not rise to that level, the Tribunal did not need to decide the point. These issues await a case with stronger evidence and different remedial framing.
REASONS FOR DECISION 1The Respondent ("Nekon") is the owner of the Waratah Village Shopping Centre at Waratah, New South Wales. This centre comprises a number of individual shops, some with adjoining outdoor areas. 2On 1 September 2008 the First Applicant ("Subway") entered into a lease agreement in respect of Shop 4 at the shopping centre ("the premises") for a period of 3 years with two 5 year options ("the Lease"). 3The Second Applicant ("Strokers") is a franchisee which has operated a "Subway" takeaway food outlet from the premises since about August 2009. 4It is common ground that the Lease is a retail lease agreement for the purposes of the Retail Leases Act 1994 (the "RL Act") and that the premises comprise a retail shop for the purposes of the RL Act. 5The dispute which is the subject of these proceedings concerns an outdoor area immediately adjacent to the premises which has been used by Subway patrons for the consumption of Subway takeaway food. 6During the initial term of the Lease, Nekon allowed a number of operators of food outlets operating in the vicinity of the premises, and including the Subway business conducted at the premises, to place tables and chairs in the areas immediately outside their respective shops for use by customers. 7By notice given on 24 May 2011, Subway exercised its option to renew the Lease for the period 1 September 2011 to 31 August 2016 (the "New Lease"). 8After the option to renew was exercised, there was discussion between the parties about formalising the arrangement for use by the Applicants of the seating area immediately outside the premises. 9Renewal of the Lease also required setting of a new market rent for the premises for the first year. After a period of negotiation between the parties extending over a number of months, agreement was reached that the new amount of rent payable for the first year of the renewed term would be $64,500 per annum plus GST. At the same time, tentative agreement was also reached between the parties concerning the nature and extent of tenancy fit out works required under the terms of the Lease, and it was also agreed that Subway would be permitted to use the area of approximately 25 square metres immediately outside the premises for outdoor seating subject to certain conditions. 10The Respondent's agent Matthew Yovich sent a letter or communication to the First Applicant on 7 September 2011 which reflected what Nekon understood to be the precise items of agreement and sought confirmation from the First Applicant. Its terms were as follows: "WARATAH VILLAGE Re: Lessee confirmation of Market rent review and proposed works Tenancy: SHOP 4 - SUBWAY Attention: Glenn Robertson Date: 7 September 2011 Dear Glenn Further to our recent discussions and the signed correspondence date 16 August 2011, we confirm the following Market rent review $64,500 per annum + GST agreed Tenancy fitout works The following works to be undertaken by the franchisee prior to 16th October 2011. Above shopfront signage to be cleaned and internally illuminated and re-positioned post installation in accordance with the fitout guide. New signage at the front of the awning in accordance with the fitout guide including power supply from the tenancy. Purchase of new outdoor tables in accordance with the Lessor's specifications Replacement of any outdoor seating more than 12 months old, with new wicker furniture in accordance with the Lessor's specifications Alterations to exposed electrical cables and power point adjacent to the shopfront to ensure these are concealed Note: Graphic treatment to shopfront no longer required Licensed Seating Area Lessee to be granted use of an approx. 25m2 outdoor seating area as per attached outdoor seating plan (final configuration to be finalised) conditional upon the following; Lessee responsible for provision and maintenance of furniture and upgrade as may reasonably be required; and Lessee responsible for removal of rubbish, cleaning and maintaining of tables. Chairs and tables must be adequately cleaned and maintained at all times; and The Lessee providing proof that the Lessee's public liability insurance policy covers the licensed seating area; and Provided there is no adverse effect or interference to the use of the shopping centre by the public or quiet enjoyment of shop premises leased to other tenants. Please confirm the above by signing and returning a copy of this correspondence. Don't hesitate to contact me should you have any queries. Regards Brookfield Partnership Matthew Yovich On behalf of Nekon Pty Ltd cc: Robert Rockefeller" 11The above document provided for execution and return by the Applicants; there is no dispute that this was done. 12As outlined above, the dispute which is the subject of these proceedings relates to the nature and extent of any subsisting rights of the Applicants relating to use of this outdoor seating area adjacent to the premises. 13On or about 5 January 2012, Nekon submitted a new lease agreement to the First Applicant which contained clause 30.1 in the following terms: 30.1 The Lessor as Licensor agrees to grant the Lessee as Licensee a licence to use a area of approximately 28m2 for outdoor seating ('the licensed area'), upon payment of a licence fee of $1.00 per annum, subject to the following conditions:- (a) The Licensee, at the Licensee's expense, will be required to provide furniture in accordance with the licensor's furniture design guidelines and ensure that the furniture is adequately maintained and/or replaced where reasonably required; (b) The Licensee will be required to ensure that the licensed area and tables and chairs are serviced, cleared and cleaned at all times during the Licensee's trading hours with inspections of the licensed area and tables and chairs to be undertaken every 30 minutes at a minimum; (c) The Licensee will be required to ensure that the tables and chairs are correctly positioned within the licensed area during trading hours and stored in the lessee's Premises outside of normal trading hours; (d) The Licence will be required to provide evidence that the Lessee's public liability insurance policy, and worker's compensation insurance policy, covers the licensed area; (e) The Licensee's use of the licensed area shall not cause any adverse effect or interference to the use of the Shopping Centre by the public, or to the quiet enjoyment of shop premises leased to other tenants; (f) The Licensor reserves the right to restrict the use of the licensed area and the number of tables and chairs placed in the licensed area at any time in the event that the Licensee is in breach of any of the conditions referred to herein; and (g) The Licensor reserves the right to increase the licence fee at the end of the initial twelve (12) month period. 14The Applicants say that the above terms do not reflect the terms agreed to by the parties in September 2011 for the licensing and use of the outdoor seating area and upon which the Applicants proceeded in entering into a new lease, undertaking certain work and continuing to operate their business at the premises. Their present claim is that Nekon has engaged in misleading and deceptive behaviour and that it is estopped from continuing its commercial relationship with the Applicants upon any basis other than the new lease agreement which should be "modified" by the Tribunal to include a different clause 30.1 in the following terms: 30.1 The Lessor as Licensor agrees to grant the Lessee as Licensee a licence to use an area of approximately 28m2 immediately adjacent to the premises for outdoor seating ('the licensed area'), upon payment of a licence fee of $1.00 per annum, subject to the following conditions:- The Licensee, at the Licensee's expense, will be required to provide furniture and ensure that the furniture is adequately maintained and/or replaced where reasonably required; The Licensee will be required to ensure that the licensed area and tables and chairs are serviced, cleared and cleaned at all times during the Licensee's trading hours. The Licensee will be required to ensure that the tables and chairs are positioned within the licensed area during trading hours and stored in the Lessee's premises outside of normal trading hours; The Licensee will be required to provide evidence that the Lessee's public liability insurance policy, and worker's compensation insurance policy, covers the licensed area; The Licensee's use of the licensed area shall not cause any adverse effect or interference to the use of the Shopping Centre by the public, or to the quiet enjoyment of shop premises leased to other tenants; Despite this clause 30, the Licensee's right to use the licensed area may be terminated by the Licensor without compensation at any time by written notice to the Licensee if the Licensee breaches the provisions of this clause 30 and such breach has not been rectified within a reasonable time of receiving notice in writing of the breach from the Licensor to the Licensee; Written notice as referred to in clause f. above if only deemed to have been served upon the Licensee on the day sent if it is sent by email to haydn.amanda@aapt.net.au; and glenn@subwaynsw.com.au; The Licensee may surrender this licence by giving no less than 72 hours' notice to the Licensor. 15Given the present dispute, the new lease agreement has not been executed but all of its terms other than the proposed clause 30.1 have apparently been adhered to by the parties, pending resolution of this matter. 16On 7 September 2012 Nekon issued a notice of termination of the licence agreement relating to the Applicants' use of the subject seating area. Nekon was restrained by the Tribunal from taking any further action in reliance upon such notice, pending final determination of these proceedings. 17It is remarkable that a dispute of this type concerning the terms of use of a relatively small outdoor seating area adjacent to retail shop premises has not been able to be resolved without recourse to a contested hearing involving a large quantity of evidentiary material and submissions, given the commercial background of the parties and their ongoing relationship pursuant to the renewed Lease.
The Proceedings 18The original Application sought orders that the proposed New Lease agreement be "modified" in accordance with what was said to be the agreement comprised within the letter from Nekon's agent to the Applicants dated 7 September 2011, and that such "modified" lease be entered into by the parties within 7 days thereafter. There was also what may be described as a "catch all" provision within the original Application seeking "any further or other orders which the Tribunal deems necessary". 19To perhaps repeat what is stated above, the orders which were originally sought by the Applicant were based upon what was asserted to be an enforceable agreement set out within the letter from Nekon's agent to Subway dated 7 September 2011. 20Hearing of this matter was set for 15 July 2013. At commencement of the hearing, the Applicants abandoned the contention that the letter dated 7 September 2011 was a binding agreement between the parties. The Applicants continued to seek an order pursuant to section 72 (1) of the RL Act that the New Lease agreement to be entered into between the parties be "modified" in accordance with the terms of the letter dated 7 September 2011, but instead now based this application for "modification" upon two different grounds:
30The range of powers of the Tribunal relating to retail tenancy claims are set out within section 72 of the RL Act: 72 Powers of Tribunal relating to retail tenancy claims (1) In proceedings for a retail tenancy claim lodged with the Tribunal under this Part, the Tribunal is empowered to make any one or more of the following orders that it considers appropriate: (a) an order that a party to the proceedings pay money to a person specified in the order, whether by way of debt, damages or restitution, or refund any money paid by a specified person, (b) an order that a specified amount of money is not due or owing by a party to the proceedings to a specified person, or that a party to the proceedings is not entitled to a refund of any money paid to another party to the proceedings, (c) an order that a party to the proceedings: (i) do any specified work or perform any specified service or any obligation arising under this Act or the terms of a lease, or (ii) surrender possession of specified premises to another person, or (iii) assign his or her or its rights under a lease to a specified person, or (iv) do or perform, or refrain from doing or performing, any specified act, matter or thing, (d) an order granting a party to the proceedings relief against forfeiture, (e) an order, by consent of the parties, requiring the parties to the proceedings to rectify a lease, (f) an order: (i) declaring any provision made by a lease to be void for being inconsistent with this Act or the regulations, or (ii) declaring that a lessor is not entitled to withhold consent to an assignment of the rights of a lessee, or (iii) declaring the rights and liabilities of the parties under law, whether any consequential relief is or could be claimed or not, or (iv) declaring that a party is or is not entitled to receive payment of the whole or a part of a security bond, (g) such other order, in the nature of an interlocutory order of a kind referred to in paragraphs (a)-(f), as the Tribunal considers proper to be made in order to resolve or assist resolution of the dispute between the parties. (2) The Tribunal may make such ancillary orders as it considers necessary for the purpose of enabling an order under this section to have full effect. (3) The Tribunal may impose such conditions as it considers appropriate when making an order under this section. (4) The Tribunal may make an interim order under this section pending final determination of a claim, if it appears to the Tribunal desirable to do so. 31It is appropriate, at this juncture, to simply note that there is no express statutory power given to this Tribunal to "modify" a lease. Pursuant to section 72(1)(e), the Tribunal may make an order requiring the parties to rectify a lease, but this can only be done by consent of the parties. 32The Applicants seek "modification" of the new lease to incorporate the terms of clause 30.1 recited in paragraph 13 above. Notwithstanding the observations contained within the preceding paragraph, it is appropriate to consider the two grounds upon which the Applicants seek "modification": that Nekon has engaged in false and misleading conduct and thereby breached section 62D of the RL Act, and; that the principle of promissory estoppel operates to prevent Nekon from entering into the New Lease agreement without inclusion of the clause 30.1 for the licensed seating area as proposed by the Applicants. 33Relevantly, s62D of the RL Act is as follows: 62D Misleading or deceptive conduct in connection with retail leases A party to a retail shop lease must not, in connection with the lease, engage in conduct that it is misleading or deceptive to another party to the lease or that it is likely to mislead or deceive another party to the lease. 34The consequences of a breach of section 62D are defined by the provisions of section 62E: 62E Right to compensation A party or former party to a retail shop lease who suffers loss or damage by reason of misleading or deceptive conduct of another party may recover the amount of the loss or damage by lodging a claim against the other party under section 71. 35Within its submissions, Nekon correctly asserts that any proven breach of section 62D by a party to a retail lease agreement enables the innocent party to recover the amount of any loss or damage suffered by reason of such conduct, but does not ground any other right or remedy which may exist pursuant to section 72 of the RL Act.
Is a claim established under Section 62D of the RL Act?
36The Applicants assert that, within its communication on 7 September 2011, Nekon engaged in three instances of misleading and deceptive behaviour toward the Applicants. 37The test as to whether misleading or deceptive behaviour has occurred is objective; see, for example, the short observation and recital of authority made by Deputy President Olssen in Davis v Sydney Harbour Foreshore Authority (No 2) [2009] NSWADT 276: 28 The test as to whether conduct is misleading or deceptive or likely to mislead or deceive is an objective one: Hornsby Building Information Centre Pty Limited v Sydney Building Information Centre [1978] HCA 11; (1978) 140 CLR 216. 38The first misleading or deceptive representation complained of by the Applicants is said to be that, within the 7 September 2011 letter, Nekon expressly represented that the rental of $64,500 per annum plus GST would "include any benefit in connection with the use of a licensed area". 39Examination of the 7 September 2011 letter does not reveal any such statement. Consideration of other communications between the parties, even though the Applicants only assert a representation made on 7 September 2011, also fails to identify any such express representation. What is revealed by examination of this evidence is that there was an agreement reached between the parties that the commencing market rent payable for the premises under the New Lease agreement would be the amount of $64,500 per annum plus GST, agreement as to the fit out work to be supplied and completed, and agreement that a licence would be given to the Applicants to use the area of approximately 25 square metres adjacent to the premises for outdoor seating of its patrons subject to certain conditions. There is no express representation that the agreed rent included any actual or notional payment for the licensed seating area. 40The Applicants also assert that, in relation to the seating area, there was an implied representation within the 7 September 2011 letter that "the obligation of 'adequately' cleaning and maintaining the area imported elements of reasonableness". Having considered this submission and the relevant evidence, the Tribunal accepts that what constitutes "adequate" cleaning and maintaining of the outdoor seating area is the same type or level of care which is required by the terms of the Lease; however, there is no evidence which shows that any such implied representation was objectively deceptive or misleading at the time that it was made in September 2011, or that the Applicants relied upon any such representation to their detriment. 41The Applicants also assert that the 7 September 2011 letter contained an implied representation that Nekon "was satisfied with the current level of cleanliness of the outdoor seated area". It is the Tribunal's conclusion that no such representation can be fairly said to arise from this communication. There is simply no language or absence of language which can reasonably be interpreted upon an objective basis as indicating Nekon's satisfaction with the previous state of the outdoor seating area. 42In relation to this particular issue, the only inference which the Tribunal can fairly and comfortably draw from the terms of the 7 September 2011 letter is that the requirements set out therein, that the Lessee was to be "responsible for removal of rubbish, cleaning and maintaining of tables. Chairs and tables must be adequately cleaned and maintained at all times", and that there was to be "no adverse effect or interference to the use of the shopping centre by the public or quiet enjoyment of shop premises leased to other tenants", inferred that there may have been previous issues relating to cleanliness or misbehaviour within the subject outdoor seating area. 43Even if such misleading or deceptive representations were proved, there is no satisfactory evidence of loss or damage thereby caused to the Applicants. 44Although the Applicants contend that the agreed market rent figure of $64,500 includes a component of rent payable for use of the outdoor seating area and submit that they have thereby suffered loss by having to pay this increased rent, there is simply no evidence to support such an assertion. The evidence reasonably points to a conclusion that the market rent was negotiated between the parties independently of any consideration or inclusion of any commercial rental value for the outdoor seating area. 45Within the additional submissions which were tendered by the Applicants without leave, the claimed purchase cost of the outdoor seats and tables is provided as well as the expenditure for the other agreed fit out works. Expenditure on the fit out works, except for the outdoor tables and seating, is not in any way linked to the agreement concerning the outdoor seating area. In relation to the expenditure of the named entity "Subway/Waratah" upon tables and chairs, it can be observed that these items retain inherent value, are portable, were acquired as part of agreed fit out obligations pursuant to the terms of the Lease upon its renewal, and that they are obviously used in the course of the Subway business to attract and retain customers. There is no satisfactory basis for these items to be accepted as proving detriment suffered by the Applicants due to misleading or deceptive conduct on the part of Nekon, even if such conduct was proved. 46Within the additional submissions presented by the Applicants, there was also reference to "loss of trade" and to other "losses not claimed", the relevance of which are not satisfactorily explained. These matters do not properly relate to the issues for determination in the present proceedings and should not have been presented.
Does promissory estoppel arise? 47An initial, perhaps trite, observation to be made is that successful application of the principle of promissory estoppel in favour of the Applicants can act only as a shield to protect them against any actions on the part of Nekon which are not in accordance with any relevant promise found to have been made. 48The Applicants say that a promissory estoppel has been created in their favour such that they are entitled to have the new lease agreement "modified". The appropriate way in which an established estoppel is to be utilised was expressed by Judicial Member Donald in Xin v Zakos [2002] NSW ADT 189 in these terms: (45) Furthermore, even if an equity were to arise, it can do so only by way of an estoppel, that is, by way of entitling the Lessee to resist a claim by the Lessor based on rights other than those promised. This is often expressed as the equity constituting a shield not a sword but that description needs to be used with care. Accordingly, any equity of the sort claimed by the Lessee could not justify an action by it for damages for the loss of the goodwill of the business as is the primary claim before the Tribunal in this case. 49Within paragraphs 40 and 41 of his decision in Xin, Judicial Member Donald also considered the applicable tests to be applied in order to determine whether an equitable estoppel has arisen, as set out by the High Court in Waltons Stores (Interstate) Limited v Maher [1998] HCA 7: 40 The formulations of the test of when an equitable estoppel arises vary but they establish a significant burden for the party asserting the equity arises. Mason CJ and Wilson J at 525 said: As failure to fulfil a promise does not of itself amount to unconscionable conduct, mere reliance on an executory promise to do something, resulting in the promisee changing his position or suffering detriment, does not bring promissory estoppel into play. Something more would be required. ... this may be found ... in the creation or encouragement by the party estopped in the other party of an assumption that a contract will come into existence or a promise will be performed and that the other party relied on that assumption to his detriment to the knowledge of the first party. 41 Brennan J at 542 set out six principles: In my opinion, to establish an equitable estoppel, it is necessary for a plaintiff to prove that (1) the plaintiff assumed or expected that a particular legal relationship exists between the plaintiff and the defendant or that a particular legal relationship will exist between them and, in the latter case, that the defendant is not free to withdraw from the expected legal relationship; (2) the defendant has induced the plaintiff to adopt that assumption or expectation; (3) the plaintiff acts or abstains from acting in reliance on the assumption or expectation; (4) the defendant knew or intended him to do so; (5) the plaintiff's action or inaction will occasion detriment if the assumption or expectation is not fulfilled; and (6) the defendant has failed to act to avoid that detriment whether by fulfilling the assumption or expectation or otherwise. 50In response to the claim of promissory estoppel, Nekon submits that the Applicants have led no evidence of any understanding of or reliance upon any promise other than what is contained within the affidavits of Ms Ta'akimoeaka, the solicitor within the firm representing the Applicants. It is pointed out that no one from either of the Applicants has given evidence that they actually read and considered the communication relating to the nature and terms of the proposed licence for the outdoor seating area, or that actions were then undertaken by the Applicants which were detrimental, or that at any relevant time they relied upon any representations understood by them to have been made by Nekon. 51In support of their contention that a promissory estoppel has been created, the Applicants submit that the Tribunal does not need such direct or specific evidence from the Applicants in order to establish a promissory estoppel as is suggested by Nekon; they say that the Tribunal need only look at the overall nature and sequence of events to see that the actions of the Applicants in entering into the renewed lease, paying increased rent, undertaking fit out works and purchasing furniture, were to their detriment and all followed on from the misrepresentations made by Nekon within the communication sent on 7 September 2011. 52The representation relied upon by a party in forming an assumption upon which an estoppel may be based need not be express nor does it have to be completely clear; an outline of the proper approach to determining whether a "clear and unequivocal" representation or assumption supporting an estoppel has been created, is provided by Brereton J in Waterman v Gerling Australia Insurance Company Pty Ltd [2005] NSWSC 1066: (91) I do not overlook the requirement that a representation or assumption founding an estoppel be "clear and unequivocal": though this has usually been recognised in the fields of equitable promissory or proprietary estoppel [see Legione v Hateley, 436-437 (Mason and Deane JJ); Woodhouse A C Israel Cocoa Limited SA v Nigerian Produce Manufacturing Co Limited [1971]2QB23, , 60 (Lord Denning MR); Low v Bouverie [1891] 3 Ch 82, 106 (Bowen LJ), 113 (Kay LJ)] it is plain that the requirement that a representation be clear and unequivocal applies generally to an estoppel in pais [Legione v Hateley, 435 (Mason and Deane JJ); Western Australian Insurance Company Limited v Dayton [1924] HCA 58; (1924) 35 CLR 355, 375 (Isaacs ACJ)], and estoppel by convention is a species of estoppel in pais. But as Mason and Deane JJ explained in Legione v Hateley, the requirement that a representation - or assumption - must be clear if it is to found an estoppel in pais or a promissory estoppel, does not mean that it must be express, and a sufficiently clear representation - or assumption - may properly be implied from words, conduct or even silence, and it is not necessary that a representation - or assumption - be clear in its entirety, it sufficing that so much of it as is necessary to found the propounded estoppel satisfies the requirement. ...................And a promise may be definite, in the sense that there is a clear promise to do something, even though exactly what is promised is not precisely defined: [Flinn v Flinn [1999] VSCA 109; [1999] 3 VR 712, 738 (Brooking JA, Charles and Batt JJA concurring); see also Australian Crime Commission v GrayI [2003] NSWCA 318, [184-200] (Ipp JA; Mason P and Tobias JA agreeing on this point)]. As Tobias JA has observed, even if a representation is insufficiently precise to give rise to a contract, that does not necessarily disqualify the representation from founding a promissory estoppel, much depending upon the circumstances in which the representation is made and the context against which it is to be considered, so that a representation will be sufficiently clear and unambiguous if it is reasonable for the representee to have interpreted it in a particular way, which it is clearly capable of bearing and upon which it is reasonable for the representee to rely, and in those circumstances it would be unconscionable for the representor to deny responsibility for the detriment that arises because of that reliance. On the other hand, if it is not reasonable for the representee to rely on the meaning he attributes to the representation, then it cannot be unconscionable for the representor to deny responsibility for the detriment that the representee sustains because of that unreasonable reliance [Galaxidis v Galaxidis [2004] NSWCA 111, [93]-[94]]. Thus, the requirement that a party should not be estopped on an ambiguity does not mean that the precise terms of the assumption or representation which founds the claimed estoppel must be entirely and unequivocally clear: an estoppel can arise even though the precise terms of the assumption or representation may be difficult to ascertain, so long as it is clear that there was an assumption, and the scope of the assumption, though its full extent may be uncertain, is at least sufficient that it can be said that the defendant's conduct would involve a departure from it. 53The Tribunal does not consider that the estoppel as claimed by the Applicants is made out. 54The estoppel claim made by the Applicants at the hearing was expressed to be that Nekon could not enter into any new lease agreement other than one which included the version of clause 30.1 put forward by the Applicants and set out above in paragraph 14; however, review of the clause shows that its terms are different to the terms of the 7 September 2011 letter upon which the Applicants rely. The same can of course be said of the version of clause 30.1 put forward by Nekon, but this observation does not assist the present case put forward by the Applicants. 55Of more importance, in taking the approach set out within Waterman and applying the principles set out by the High Court in Waltons Stores, the Tribunal has not identified satisfactory evidence of any reasonable assumption directly formed by the Applicants and which is based upon any proven misrepresentation or deception by Nekon within the September 2011 letter. There is also no satisfactory proof of any real detriment flowing from any such misrepresentation or deception. 56The Applicants have not sought declaratory relief or other orders pursuant to section 72 of the RL Act concerning the outdoor seating area. They instead seek "modification" of a lease agreement where the Tribunal lacks power to do so; additionally, the stated grounds of misleading and deceptive behaviour and estoppel have not been established. For these reasons, the Application must fail. 57The parties have already filed brief submissions as to costs. Any further submissions as to costs should be filed and served by either party within 14 days of the date publication of this decision, following which the question of costs will be determined "on the papers". ORDERS 58The Application is dismissed. The parties must file and serve any further written submissions as to costs within 14 days. The Tribunal will thereafter determine any order as to costs upon the basis of filed papers in accordance with section 73 of the Administrative Decisions Tribunal Act 1997.
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: 17 October 2013
Subway Realty Pty Ltd
Nekon Pty Ltd
[1999] VSCA 109
(1978) 140 CLR 216
(1924) 35 CLR 355
The Application is dismissed. The parties must file and serve any further written submissions as to costs within 14 days. The Tribunal will thereafter determine any order as to costs upon the basis of filed papers in accordance with section 73 of the Administrative Decisions Tribunal Act 1997.