SUN v HATOUM

Judgment 1HIS HONOUR: Nature of proceedings The plaintiff by Amended Summons filed on 3 September 2010 appeals on a question of law from a decision of her Honour Acting Magistrate Tabbaa handed down on 28 June 2010. The proceedings before her Honour were heard on 7 September 2009, 15 March and 3 May 2010. The plaintiff in these proceeding Dr Sun was the defendant in the proceedings before her Honour and the defendant in these proceedings Dr Hatoum, was the plaintiff. 2The plaintiff seeks the following orders:

1. The decision of Acting Magistrate Tabbaa in matter 594 of 2008 in the Local Court at Bankstown be set aside.
2. The claim of the defendant be dismissed.
3. There be an award to the plaintiff in the sum of $7,152.68 plus interest plus costs.
4. In the alternative, that the proceedings be remitted to the Local Court differently constituted, to be heard and determined according to law.
5. The defendant pay the plaintiff's costs of this Summons and the costs of the proceedings in the Local Court. 3The appeal grounds were set out as follows: The learned Magistrate erred in law in: (i) Failing to provide any or adequate reasons. (ii) Failing to determine the scope of the contract of lease and whether it consisted of oral terms and conditions. (iii) Failing to give reasons or any adequate reasons for (apparently) rejecting the contention that the contract of lease consisted of written and oral terms and conditions. (iv) Failing to determine what representations were made by the defendant in relation to the use of room 4. (v) Failing to determine whether the plaintiff relied on the representations of the defendant in relation to the occupation of room 4 and failing to determine whether the plaintiff entered into the lease agreement in reliance on the said representations. (vi) Failing to determine whether the representations made by the defendant were misleading and deceptive pursuant to s42 of the Fair Trading Act 1987 (NSW). (vii) Failing to determine whether the plaintiff suffered damage as a consequence of the misleading and deceptive conduct of the defendant. (viii) Failing to determine whether the lease agreement was varied to allow the plaintiff to fit out and repair rooms 4 and 5 at the defendant's expense. (ix) Failing to determine whether subsequent statements by the defendant that the plaintiff would now have to share room 4 with other specialists constituted a repudiation of the lease agreement. (x) Failing to give any or any adequate reasons for failing to consider the evidence in relation to the said subsequent statements of the defendant in relation to the use of room 4. (xi) Finding that the plaintiff had any liability to the defendant for costs the defendant incurred in the Victorian equipment proceedings. Factual background 4For ease of reference, I will refer to the plaintiff as Dr Sun and to the defendant as Dr Hatoum. 5Dr Hatoum has practised as a general practitioner in New South Wales since 1993. In 1995 he and his wife opened a medical centre in Bankstown Square. In 1998 Dr Hatoum leased premises in Bankstown City Plaza and he and his wife operated a medical centre from those premises. The premises consisted of five rooms downstairs and two rooms upstairs. Dr Hatoum used one of the rooms and his wife a second room. The remaining rooms were subleased to other persons offering medical services. 6From about 1999 Dr Hatoum leased room 5 to a dentist, Dr Chong. Dr Chong continued to make use of that room until he died in December 2006. 7Although the lease with Dr Chong related to room 5, he was able to use room 4. There was no lease covering the use of room 4 but Dr Chong used it under licence with the permission of Dr Hatoum. There was a dispute between the parties as to the extent to which Dr Chong had used room 4. 8In the proceedings before her Honour there was evidence from Dr Hatoum and his receptionist Ms Bousamra that while Dr Chong was the main user of room 4, Dr Hatoum used part of room 4 for storage purposes and he and some of the medical centre staff used a sterilisation machine that was in that room. For a period of time there had apparently been two sterilisation machines in room 4, one belonging to Dr Hatoum and one belonging to Dr Chong. It was common ground, however, that during most of 2006 there was only one sterilisation machine in room 4 and it belonged to Dr Chong. 9Due to ill health, Dr Chong was not able to continue working until the date of his death. Some months before his death, his partner Ms Miao took over the lease of room 5 and used hire dentists to work from it. One of those dentists was Dr Sun. He commenced working from the medical centre in about May 2006. 10Dr Sun was born in China in 1973 and commenced working as a dentist in Australia in 2006. It was his evidence that while he was working at the medical centre, Dr Chong and through him Ms Miao, had exclusive use not only of room 5 pursuant to the lease, but also of room 4. In his affidavit (para 12) and in his oral evidence, he accepted that Dr Hatoum used part of room 4 for storage purposes and occasionally used the sterilisation machine but denied that members of staff shared the use of room 4 and in particular had access to the sterilisation machine. 11Ms Miao gave evidence that initially Dr Chong had only used room 5 but that gradually he had increased his use of room 4 so that by 2006 he was using both room 5 and room 4 for his dental practice. She said that inside room 4 were a steriliser, a steel dental chair, a cabinet, a table and a chair. It was common ground that the cabinet, table and chair belonged to Dr Hatoum. Ms Miao denied that other members of staff used the steriliser, but did agree that other members of staff would give her items to be sterilised and that she would carry out that function by using the steriliser. She said that room 4 had a lock to which she had the only key. 12In about November/December 2006 Dr Hatoum was negotiating with Ms Miao and with Dr Sun about subleasing room 5 and to use a neutral term, the use of room 4. Neither Dr Hatoum nor Dr Sun wished Ms Miao to know about their direct negotiations. It seems that Dr Chong had built up considerable goodwill while practising from the medical centre and the use of room 5 would carry with it some of that goodwill. 13The negotiations with Ms Miao did not result in any agreement. The negotiations between Dr Hatoum and Dr Sun did result in an agreement. The issue before her Honour was the content of that agreement. 14It was Dr Hatoum's case before her Honour that he and Dr Sun had entered into a subletting agreement for room 5 in respect of which Dr Sun would pay a monthly rental of $2,500 inclusive of GST. It was common ground that such a sublease was entered into and was in writing. Dr Hatoum said that he had also agreed with Dr Sun that Dr Sun could have non-exclusive use of room 4 for which he would pay $110 per month. That agreement was oral. 15It was Dr Sun's case before her Honour that there was an agreement between Dr Hatoum and himself, which was partly in writing and partly oral. The part in writing was the sublease of room 5 and the oral part related to room 4. It was Dr Sun's contention that there was either a single agreement relating to both rooms 5 and 4, or if there were two agreements, they were interrelated so that fulfilment of one was conditional upon fulfilment of the other. 16Dr Sun said that Dr Hatoum had represented to him that he could have exclusive occupation of room 4 under licence on the same terms and conditions as Dr Chong for a monthly licence fee of $110 for the same term as the sublease of room 5. One of the difficulties confronting her Honour in this matter was the lack of precision in communications between Dr Hatoum and Dr Sun and Dr Hatoum and Ms Miao. For example, there were letters sent by Dr Hatoum to Dr Sun and Ms Miao which on occasions referred to the sublease as being in respect of room 5 only and in other correspondence suggested that the sublease included rooms 4 and 5. 17There was no issue that the parties had entered into a sublease in respect to room 5 only. That document was an exhibit. Dr Hatoum was the sublessor and Dr Sun was the sublessee. The term was 2 years 10 months and 27 days commencing 1 April 2007 and ending 27 February 2010. The agreed monthly rental was $2500 inclusive of GST and the premises were to be used as a dental surgery. Dr Sun was required to pay the reasonable costs associated with the preparation of the lease. Dr Sun was also obliged to indemnify Dr Hatoum for any loss and damages suffered by him arising from any accident or deliberate act in breach of the lease. 18Dr Sun took a copy of the sublease to his solicitors before signing it and obtained advice. As a result of that advice he asked for and received a two week rent-free period during which the fit out could take place. 19Dr Sun did not say anything to his solicitors about room 4. When cross-examined he said that he did not raise the matter with his solicitors because he trusted Dr Hatoum. 20It is common ground that Dr Sun occupied room 5 on 22 April 2007 and commenced fitting it out. On 24 April 2007 Dr Hatoum gave written authorisation to Dr Sun to carry out repairs, both to room 5 and room 4. Dr Sun then commenced practising as a dentist in his own right from the medical centre. 21According to Dr Hatoum, after a few weeks Dr Sun ceased attending the medical centre without explanation. According to Dr Sun, he was told on 3 May 2007 by Dr Hatoum that he would have to share room 4 with another doctor. Dr Sun said that he could not conduct his practice if he had to share room 4 and so he ceased working at the medical centre. Apart from returning the keys in early May, Dr Sun did not respond to letters or telephone calls made to him. 22The significance of Dr Sun not responding to letters and telephone calls was that a supplier of dental equipment had delivered equipment to the medical centre and was seeking to recover it. Dr Hatoum was not prepared to return the equipment without the consent of Dr Sun. This led to litigation between the supplier (a Victorian company) and Dr Hatoum and the incurring by Dr Hatoum of legal expenses until that issue was resolved. 23Dr Hatoum attempted to relet room 5 but was not able to do so until December 2007 when a new sublease was entered into with two dentists. That sublease was to commence on 25 February 2008. The rent payable by the new sub-tenants was comparable to that which would have been paid by Dr Sun. It was common ground that Dr Sun had not paid any rent or licence fee in respect of room 5 or room 4. Proceedings in the Local Court 24Dr Hatoum claimed the following amounts in his Statement of Claim: Unpaid rent $ 32,329.92 Loan for fit out $ 2,000.00 Legal fees for preparation of Sun lease and lease for new tenants $ 3,300.00 Re-advertising costs $ 300.00 Legal costs incurred in the Victorian proceedings $ 671.00 $ 39,600.92