Turan Hasan and Inver Kapuraya v Pirasta Pty Ltd

Evidence

1. The evidence in these proceedings consisted of a number of affidavits.
2. The lessees' evidence was contained in the affidavit of Mr Hasan dated 7 May 2014 which was exhibit A together with annexures.
3. The lessor's evidence was set out in the affidavits of Mr Humphries and Mr Kilroy which were exhibits 1, 2 and 3 together with the documentary exhibits to those affidavits.
4. Mr Hasan was cross examined on his affidavit. He declined the opportunity to ask either Mr Humphries or Mr Kilroy any questions about their evidence.

The issues

1. The lessees' case was set out in their application. However at the hearing they handed up a document entitled 'Submissions and summary for Turan Hasan'. The following issues can be extracted from that document. They are: 1. the lessees were not given the opportunity to renew the lease at a reduced rent; 2. the new lessee introduced by them was given an opportunity to have a new lease at a reduced rent with the result that the lessees lost $60,000.00; 3. the lessor reneged on an agreement with the lessees and demanded and received an additional sum of $11,000.00 which the lessees paid under duress; and 4. the lessees' claim for fees.
2. The lessor has a slightly different understanding of the lessees' claims. Its counsel handed up written submissions which addressed all claims which it sees as being made against it in these proceedings.
3. I will deal with the matters set out above first and then address the remaining claims as the lessor understands the lessees' case and the claims that it is exposed to.

The lessees were not given the opportunity to renew the lease at a reduced rent

1. The lessees' complaint was that they were entitled to renew the lease and to do so at a reduced rental. Mr Hasan on behalf of the lessees did not address this point in any detailed way, or explain the legal basis that would give rise to such an entitlement.
2. The lease does not give the lessees the right to renew the lease. It is clear that no options to renew were granted by the lessor.
3. The only other opportunity available to the lessees to renew the lease was as provided in section 44 of the Act which provides as follows: 44 Notice to lessee of lessor's intentions at end of lease (1) Not less than 6 months and not more than 12 months before the expiry of a lease, the lessor must by written notification to the lessee either: (a) offer the lessee a renewal or extension of the lease on terms specified in the notification (including terms as to rent), or (b) inform the lessee that the lessor does not propose to offer the lessee a renewal or extension of the lease. Note. A notice under paragraph (b) may include other information as to the lessor's intentions (for example, that the lessor intends to allow the lessee to remain in possession of the shop as a periodic tenant under any provisions of the lease as to holding over, or as a tenant at will). Because such a statement is only a statement of intention, a lessee should be aware that it may not of itself bind the lessor. (2) An offer made for the purposes of subsection (1) (a) is not capable of revocation for 1 month after it is made. Note. This allows the lessee 1 month to decide whether to accept the offer. The lessor may agree to hold the offer open for longer than 1 month. The parties may also negotiate a new lease. (3) If the lessor fails to give a notification to the lessee as required by this section, the term of the lease is extended until the end of 6 months after the lessor gives the notification required by this section, but only if the lessee requests that extension by notice in writing to the lessor given before the lease would otherwise have expired. (4) During any extension of the lease under subsection (3), the lessee may terminate the lease by giving not less than 1 month's notice of termination in writing to the lessor. (5) This section does not apply to a lease containing an option to renew or extend the lease or that is the subject of an agreement for the renewal or extension of the lease. (6) If a retail shop lease is for a term of 12 months or less, the periods of 12 months and 6 months in this section are shortened to 6 months and 3 months respectively.
4. The lessor has made detailed written submissions on this issue under the heading 'Notice Claim'.
5. The lessor submits that on 23 November 2013 it gave notice under section 44(1) of the Act that it did not propose to offer the lessee a renewal of the lease.
6. Section 44 (1) of the Act requires the notice to be given 'Not less than 6 months… before the expiry of the lease'. I find that the notice that the lessor relies upon was given less than 6 months before the expiry of the lease. The notice was given on 28 November 2013, approximately 3 months 7 days before the expiration of the lease. The notice relied upon does not comply with the Act in that regard. Secondly, the document relied upon was required by section 44 (1)(b) of the Act to 'inform the lessee that the lessor does not propose to offer the lessee a renewal or extension of the lease'.
7. The email relied upon by the lessor does not comply with section 44 (1)(b) of the Act. Of relevance it states that the lessor would not enter into lease negotiations until arrears are paid in full.
8. I reject the lessor's submissions on this issue. I find that the written notification was non-complaint with section 44(1)(b) of the Act because it was given too late and it did not in any event state what was required to be stated, namely the lessor did not propose to offer a renewal or extension of the lease.
9. The lessor also relies on section 44(3) of the Act. That sub-section is set out above. It provides: (3) If the lessor fails to give a notification to the lessee as required by this section, the term of the lease is extended until the end of 6 months after the lessor gives the notification required by this section, but only if the lessee requests that extension by notice in writing to the lessor given before the lease would otherwise have expired.
10. The lessor states that the lessees did not give the notice referred to. The lessees have not referred me to any document which would satisfy the requirements of section 44(3) of the Act. The affidavit of Mr Hasan dated 7 May 2014 does not annex a document that would satisfy section 44(3) of the Act.
11. By reason of the failure of the lessees to give the written notice required by section 44(3) of the Act, there was no extension of the term of the lease under section 44 of the Act.
12. For the reasons set out above, I find that the lessees have failed to make out a case that they were not given the opportunity to renew the lease at a reduced rent, or at all.

The new lessee introduced by them was given an opportunity to have a new lease at a reduced rent with the result that the lessees lost $60,000.00

1. The second ground of complaint by the lessees is dependent upon them establishing that the new lessee was granted a lease at a reduced rent.
2. Mr Humphries the retail Asset Manager for the lessor gave evidence on behalf of the lessor. In his affidavit which is exhibit 2 at paragraphs 52 - 54, Mr Humphries deals with the new lease. Exhibit DH-01 to his statement contains a copy of the lease granted to the new lessee and a table which compares the rental payable by the lessees and the new lessee. The new lessee's annual rent obligation is $3,541.00 less than that paid by the lessees. In cross examination Mr Hasan agreed with the table referred to, assuming of course that it accurately represented the position.
3. I find that the rent paid by the lessees and the new lessee was approximately the same. As a result the lessees have not made out the basis for this head of claim, which I reject.

The lessor reneged on an agreement with the lessees and demanded and received an additional sum of $11,000.00 which the lessees paid under duress

1. This claim relates to the arrangements made by the parties when the lessees sold their business to an incoming lessee, with the co-operation of the lessor.
2. The lessees having no option for renewal, having failed to secure the lessor's agreement to the grant of a new lease, in truth had nothing to sell except their fixtures and fittings. However, the lessees and the lessor did co-operate with each other so that the lessees were able to sell the business carried out on the demised premises and the purchaser of that business was granted a new lease. I find that the motivation for that co-operation was so that the lessor would be paid rent arrears and so that the lessees would reduce their indebtedness to the lessor and receive a payment from the sale of their business.
3. Mr Hasan deals with this subject briefly at paragraphs 12 - 17 of his affidavit. At paragraph 13 of his affidavit Mr Hasan states that he entered into a contract of sale with a purchaser that was subject to him introducing the proposed purchaser to the lessor and negotiating a lease between the new purchaser and the lessor. The contract of sale is not in evidence.
4. The fact is that the lessor accepted the purchaser and entered into a lease with the two individuals who purchased the lessee's business. As stated above, the new lease is in evidence.
5. At the same time as arrangements were being made for the execution of the new lease and for the new lessee to take possession of the premises, arrangements were being made between the lessor and the lessees regarding the transaction and the money to be paid by the lessees to the lessor in reduction of the rental arrears of $74,708.06 which amount has been agreed by Mr Hasan in his evidence.
6. There are a number of emails and items of correspondence which evidence what occurred between the lessor and the lessees as regards the proceeds of the sale of the business received by the lessees and how the proceeds would be applied to the reduction of the rental arrears. The matter may be summarised by stating that an agreement was made which the lessor resiled from. A new agreement was proposed by the lessor, which resulted in the lessees receiving less money than the original agreement. The lessees state that they agreed to the new agreement and receiving a lesser amount by reason of duress.
7. The first agreement as referred to by Mr Hasan in his evidence is evidenced by an email attached to his affidavit from the lessor's solicitor to his representative dated 5 March 2014. That email states that the content of the lessees' representative email also dated 5 March 2014 sent at 1.48pm was agreed. The agreement was that the sum of $28,275.06 would be paid by the purchaser to the lessor out of money otherwise payable to the lessee. In addition the lessor would retain a rental bond of $16,433.00.
8. There are some elements of this agreement that require consideration. On 5 March 2014 at 12.52 pm the lessor's solicitor wrote to the lessees' representative. They stated that the lessor would require $44,708.06 to settle the rent arrears. They also stated at point 7, that that the sale of business contract between the lessees and the purchasers would need to include a condition that that part of the sale proceeds would be paid to the lessor and that a bank cheque in the sum of $28,275.06 would be required in that regard. All of this was described as the lessor's 'offer'.
9. The lessees' representative agreed to or accepted this 'offer' at 1.48 pm on 5 March 2014. The lessor's solicitor confirmed the agreement at 3.08 pm and asked for the purchaser's solicitor to draw a solicitor's trust account cheque in the sum of $28,275.06 payable to Pirasta Pty Ltd.
10. The lessor did not proceed with that agreement.
11. On 6 March 2014 the lessor's solicitor wrote to the lessees' representative stating that the lessor had reached the agreement referred to above on the basis that it had allegedly been told by the lessees that the business had been sold for $60,000.00. The letter stated that the agreement had been voided by the fact that the lessor had learned that the lessees were receiving $89,000.00 or more from the sale of the business.
12. A settlement offer was contained in separate 'without prejudice correspondence'. The lessor's solicitor went on to state that if the offer was not accepted by 5.00pm the following day, the lessor would institute proceedings for outstanding rent, interest and costs and would if necessary institute bankruptcy proceedings.
13. The without prejudice offer, which was in the exhibit to Mr Humphries affidavit, stated that the lessor would settle for $55,443.00 made up of the rental bond of $16,433.00 and a cash payment of $39,010.00 which was $10,734.94 more than what was required in the first agreement.
14. At paragraph 16 of his affidavit, Mr Hasan refers to the events and correspondence of 6 March 2014 to the effect that the sum of $11,000.00 was allegedly 'extorted' from him.
15. At paragraph 17 of his affidavit, Mr Hasan stated that he agreed to pay this money under duress, 'knowing that I would lose the ability to secure any money for my fixtures and fittings without the transaction I had provided for the Lessor.'
16. The first question that I will deal with is whether the lessor was entitled to resile from the first offer. The lessor has dealt with it in its submissions. It states that there was no consideration to support the agreement, since the lessor was accepting a lesser sum in substitution for a larger debt. The rule in Pinnels' Case (1602) 5 Co Rep 117a, was relied upon.
17. Pinnel's Case dealt with a slightly different situation in holding that the payment of a lesser sum does not discharge the total debt. There is no claim for the larger amount of rental arrears in this case.
18. I find that there was valuable consideration to support the agreement whereby the lessees were to pay a lesser amount to discharge the rent arrears.
19. The valuable consideration to which I have referred was the agreement of the lessees to the lessor's requirement that the documentation between the lessees and the purchaser was to include a condition that that part of the sale proceeds would be paid direct to the lessor and that a bank cheque in the sum of $28,275.06 would be required in that regard. The fact that the lessor's solicitor later relaxed the requirement of a bank cheque to a solicitor's trust account cheque is in my view of no consequence. The obvious benefit to the lessor of having a the third party purchaser pay the amount of $28,275.06 direct to it without the involvement of the lessees was adequate consideration to make the agreement binding.
20. There remains a further issue in connection with the first agreement. The lessor states that the lessees told their representative Mr Humphries that they were receiving $60,000.00 from the sale of his business and that it relied upon that statement and acted on it, for example as referred to at item 1 of their solicitor's email of 5 March 2014.
21. Mr Humphries statement which is exhibit 3 deals with this issue. Mr Humphries frankly states that he cannot recall the conversation with Mr Hasan about this. He does however refer to emails in which he reports on the conversations to the effect that the lessees were receiving $65,000.00.
22. Mr Hasan was cross examined about this conversation as well as about other matters. I was impressed by Mr Hasan's evidence. I found him to be frank and ready to agree to a number of matters adverse to his position which were put to him by Mr Cornish.
23. In connection with this subject, Mr Hasan's evidence was that he told Mr Humphries that he was in debt for over $65,000.00 and that after the sale of the business he would clear that debt. Mr Hasan was adamant that he did not tell Mr Humphries how much he was receiving for the sale of his business. Mr Hasan freely admitted that he read the lessor's solicitor's email dated 5 March 2014 as sent at 12.52 pm but that he viewed the transaction as a private matter in which he was not obliged to correct any mistaken assumption by the lessor.
24. I accept Mr Hasan's evidence that he did not tell Mr Humphries how much money he was receiving from the sale of the business. I also accept that Mr Hasan did tell Mr Humphries that he was in debt to at least $65,000.00 and that he would clear that debt on the sale. I prefer this evidence to Mr Humphries emails to Mr Kilroy in which he states that Mr Hasan claimed that he was selling the fit out for $65,000.00.
25. I have come to the conclusion that there was an agreement for valuable consideration between the parties which takes this case out of the rule established in Pinnels' Case, namely that the payment of a lesser amount will not discharge the larger amount. However, as I have stated the lessor does not seek the payment of the larger amount in this case. Rather, the lessees say that they were forced to pay an additional $10,734.94 due to duress.
26. The lessor also submitted that the first agreement was 'accord executory' or non-binding on the lessor until the performance of what had been promised. The lessor submits that it was free to revoke the promise before performance. In other words the lessor states that it was entitled to revoke the first agreement at any time before the payment of the agreed sum, namely the amount of $28,275.06.
27. The lessor relies on a statement by Goff LJ in Daulia Ltd v Four Milbank Nominees Ltd & Anor [1978] 1 Ch 231 as referred to by Bergin CJ in Eq in Phillip Segal & Anor v Max Christopher Donnellly & Ors [2012] NSWSC 833.
28. The court in Daulia Ltd v Four Milbank Nominees Ltd & Anor referred to what it described as a unilateral contract in the following terms: 'The concept of unilateral or "if contract" is somewhat anomalous, because it is clear that, at all events until the offeree starts to perform the condition, there is no contract at all, but merely an offer which the offeror is free to revoke.'
29. If the first agreement was a unilateral contract the lessor's submission would be correct that it was free to revoke the offer before performance. The basis upon which the lessor states that the first agreement is a unilateral contract was not stated in the lessor's written submissions. If the first agreement was a bi-lateral contract, the authorities cited by the lessor's solicitor would not apply and in particular the submission that the lessor was free to revoke the offer before performance by the lessees.
30. I have considered the lessor's solicitor's email of 5 March 2014, sent at 12.52pm as referred to above. In my view and I find that offer created a unilateral contract not a bi-lateral contract for the reason that the offer did not require the performance of obligations by the lessor. The only party required to perform were the lessees.
31. It follows from my reasons above that I find that the lessor was entitled to revoke the first agreement as it was an agreement that was, accord executory.
32. I also find that the lessees agreed to pay the additional amount of $10,734.94 pursuant to what was a new offer by the lessor, that it was entitled to make in place of the first offer. The lessees had the choice as to whether they accepted it or not. I understand that the realities that confronted the lessees meant that they had no other option that to accept it, if they were to conclude the sale of the business to the purchaser. However, having regard to my findings about the lessor's right to revoke the first offer as it was accord executory, I find that the payment of $10,734.94 by the lessees was not made under duress.

Additional heads of claim

1. The lessor has identified other heads of claim that it states arise out of the application. Those heads of claim are: 1. The abatement Agreement Claim; 2. New Lease Entitlement Claim; and 3. Vacancy Claim.
2. As I have stated, the lessees do not press these claims and have made no submissions based on them.
3. I accept the lessor's submissions regarding the claims referred to in the preceding paragraph. To the extent that the lessees assert that these claims entitle them to the relief claimed, I dismiss those claims.
4. During the course of the hearing I stated primarily for the benefit of Mr Hasan that my jurisdiction in these proceedings arises primarily from the Act and in addition I was bound to give effect to the terms of the lease between the parties. Mr Hasan stated many times that in his view he was entitled to better treatment and consideration from the lessor. Be that as it may, I have no jurisdiction to impose my own notions of fair dealings on the parties and to make orders based on what I believe is just in the circumstances.
5. For the reasons set out above, the lessees' application is dismissed.

COSTS

1. Either party is at liberty to make a costs application in these proceedings.
2. Any costs application pursuant to section 60 of the Civil and Administrative Tribunal Act 2013 or rule 38 of the Civil and Administrative Tribunal Rules 2014 must be lodged in the Tribunal and served on the costs respondent within 21 days of the date of this order either attaching or referring to the documents relied upon in support of the application.
3. The costs respondent will have 21 days after the date of receipt of the costs application referred to above, to lodge in the Tribunal and serve on the costs applicant the submissions, if any, in response to the costs application, such submissions either attaching or referring to the documents relied upon.
4. The cost applicant will have 14 days after the date of receipt of the cost respondent's submissions to lodge in the Tribunal and serve on the costs respondent the submissions, if any, in reply, such submissions either attaching or referring to the documents relied upon.
5. The Tribunal will determine any costs application on the basis of the papers lodged in the Tribunal D Goldstein Senior Member Civil and Administrative Tribunal of New South Wales 14 October 2014 I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales. Registrar

Amendments 02 February 2015 - number reused 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: 02 February 2015