Wirepa v Morris

Federal Court of Australia|2011-08-15

REasons for decision 1RETAIL LEASES DIVISION: S Higgins, Deputy President; N Lonie, Non-Judicial Member and T Tyler, Non-Judicial Member. The applicant, Silvani Wirepa (Ms Wirepa), commenced proceedings against the respondent, Jodie Morris (Ms Morris), in May 2010, in the Local Court at Newcastle. Ms Wirepa's claim arose from a lease of Shop 1 at 133 Beaumont Street, Hamilton in the State of New South Wales (the shop). 2Ms Wirepa's claim was for an amount of $8,762.25, which related to outstanding rent, damaged property, compensation for the cost of removal of property items, cleaning, cost of electricity and telephone services and the cost of filing her Statement of Claim. 3By consent the proceedings were transferred to the Tribunal and the matter first came before the Tribunal for directions at 28 August 2010. After Ms Wirepa's claim was transferred to the Tribunal, Ms Wirepa amended her claim by including a claim for loss of profits and 12.5 weeks of lost rent. In all, her claim is for the payment of $51,088.00. 4On 8 February 2011, Ms Morris, filed an application, as a counterclaim to that of Ms Wirepa. Ms Morris' claim is based on an alleged misrepresentation by Ms Wirepa that she was authorised, or had the authority to enter into the lease. Ms Morris, seeks a number of orders, including an order that Ms Wirepa pay her $35,989.00, which she asserts is the amount she paid to fit-out the shop. 5Initially, both matters were listed for hearing on 20 June 2011. However, as they were not ready for hearing, by consent, this date was vacated and a new hearing date of Monday, 15 August 2011 was set down. 6On Friday, 12 August 2011, Ms Wirepa wrote to the Tribunal requesting that the hearing date be vacated due to medication she was taking. Ms Morris objected to the hearing date being vacated. The Registry informed the parties that Ms Wirepa's application to vacate the hearing would be heard by the Tribunal on Monday, 15 August 2011. Ms Wirepa was also requested to provide the Tribunal with a medical certificate. 7On Monday, 15 August 2011, Ms Wirepa appeared before the Tribunal by telephone. Ms Morris appeared in person. Ms Wirepa pressed her application for adjournment of the hearing and in support of that application she provided a medical certificate from her medical practitioner. The certificate merely stated that Ms Wirepa was suffering from a migraine and would be unfit for duty until the following Monday. Ms Morris objected to any adjournment. 8I determined to refuse Ms Wirepa application for adjournment as her medical certificate failed to state that she was unable to appear before the Tribunal. I was also satisfied that both matters could proceed, with Ms Wirepa continuing to appear by telephone. Ms Morris did not object to this course and they both agreed that the matter should otherwise proceed on the papers, with Ms Wirepa and Ms Morris being given leave to file and serve further submissions if need be.

Issues 9There is no disagreement that on 18 January 2010, Ms Wirepa and Ms Morris executed a lease agreement on a pro-forma Real Estate Institute of New South Wales Commercial Lease form, in which Ms Wirepa agreed to lease the shop to Ms Morris for a period of 3 years, at a monthly rent of $2,816.66 (the written agreement). Ms Morris took possession of the shop, as agreed in the written agreement, on 17 March 2010. She vacated the shop one month later, on 18 April 2010. 10Ms Wirepa's claim is a 'retail tenancy claim' in respect of the written agreement she had entered into with Ms Morris: see sections 70 and 71 of the Retail Leases Act 1994 (the RL Act). 11Ms Morris's claim is a 'retail tenancy claim' and an 'unconscionable conduct claim': see sections 70, 71 and 71A of the RL Act. That claim as I have indicated arises from alleged misrepresentations by Ms Wirepa that she had authority to lease the shop, when she did not have that authority. The misrepresentations she asserts arise from the conduct of Ms Wirepa and the written agreement, prepared by Ms Wirepa, in which she is identified as the 'landlord' and Ms Morris is identified as the 'tenant'. Ms Morris asserts, when executing the written agreement, it was her belief that Ms Wirepa was authorised to enter the lease as the owner of the shop. However, at no time was Ms Wirepa the owner of the shop. She was the lessee of the shop and she asserts that Ms Morris was aware of this and that she had the authority to sublease. 12The powers of the Tribunal in regard to a retail leases claim is set out in section 72 of the RL Act. 13The powers of the Tribunal in regard to an unconscionable conduct claim are set out in section 72AA. 14Ms Wirepa and Ms Morris each bear the onus to establish their respective claims (including damages) on the balance of probabilities. 15In support of her claim, Ms Wirepa tendered into evidence a bundle of documents that were marked Exhibit W1. She also tendered into evidence an email she sent to Ms Morris on 1 April 2010 in regard to the bond (Exhibit W2) and a list of amounts allegedly owed to her by Ms Morris (Exhibit W3). Ms Wirepa did not provide a statement, but did provide some oral evidence during the hearing. 16In support of her claim, Ms Morris tendered into evidence a statement by her, dated 14 April 2011(Exhibit M1), a copy of page 47 of the Domain in the Newcastle Herald newspaper of 16 January 2010 (Exhibit M2) and an itemised list of costs incurred in setting up the shop. 17A summary of the evidence is set out below. 18While not raised as an issue by the parties, in my view, the first issue for determination is whether the agreement between Ms Wirepa and Ms Morris is a 'retail shop lease' as defined in the RL Act, as the Tribunal only has jurisdiction to hear and determine disputes arising out of such a lease.

The agreement 19Whether Ms Wirepa was authorised to lease the shop is not material in determining whether she made a promise to lease the shop to Ms Morris. This she did do and that promise is evidenced in the written agreement, prepared by her and signed by her and Ms Morris. While the form on which the written agreement is recorded, describes the agreement as a 'Commercial Lease' and not a lease falling within the terms of the RL Act, as I have indicated, this does not mean that the agreement falls outside the requirements of the RL Act. For the reasons set out below, I have found that the written agreement between Ms Wirepa and Ms Morris is a retail shop lease and subject to the provisions of the RL Act 20A 'retail shop' is defined in section 3 of the RL Act. It relevantly means: 'premises that are used, or proposed to be used, wholly or predominantly for the carrying on of one or more' of the prescribed businesses. The prescribed businesses for the purpose of the Act are listed in Schedule 1and includes 'beauticians' and 'clothing shops'. As the stated permitted use of the shop in the written agreement between Ms Wirepa and Ms Morris is one of the prescribed businesses in Schedule 1 of the RL Act, the shop is clearly a 'retail shop'. 21A 'retail shop lease' or 'lease' is also defined in section 3 of the RL Act to mean the following: '... any agreement under which a person grants or agrees to grant to another person for value a right of occupation of premises for the purpose of the use of the premises as a retail shop: (a) whether or not the right is a right of exclusive occupation, and (b) whether the agreement is express or implied, and (c) whether the agreement is oral or in writing, or partly oral and partly in writing.' 22Section 6 of the RL Act sets out those retail shop leases, which are not subject to the RL Act. That section is of no application to the agreement between Ms Wirepa and Ms Morris. 23Again, the written agreement between Ms Wirepa and Ms Morris satisfy the requirement of a 'retail shop lease' as defined in section 3 of the RL Act. As I have indicated, in the agreement, Ms Wirepa agreed to grant Ms Morris the right, for value (i.e. a monthly rent of $2,816.66), to occupy the shop, for use as a retail shop for a period of 3 years. I note the requirements of subsection 16(1) of the RL Act, which provides that the minimum term of a retail shop lease is 5 years, unless a certificate has been issued under subsection 16(3). While this is not an issue in these applications, I note subsection 6A(2) expressly provides that the Act applies to all retail shop leases that are for periods of one year and more. This I note is contrary to that stated in the heading of the pro-forma Real Estate Institute of New South Wales Commercial Lease form. 24As I have indicated, in making the promise to lease the shop, Ms Wirepa was acting as the lessee of the shop and not the owner of the shop. The evidence is that Ms Wirepa had been the lessee of the shop since 2006. In August 2009, she executed a new lease for a further 3 year period. That lease was also a 'retail shop lease' subject to the provisions of the RL Act. 25The question is whether a 'sublease' is also the subject of the provisions of the RL Act. In my view, a sublease is in effect a separate lease agreement. Accordingly, it will also fall within the provisions of the RL Act if it meets the description of the terms 'lease' and 'retail shop' as defined in that Act. My findings are that the written agreement between Ms Wirepa and Ms Morris do meet these descriptions. Hence I find that the written agreement between Ms Wirepa and Ms Morris, from which their respective claims arise, is a retail shop lease that is subject to the provisions of the RL Act. Consistent with my findings, I note the terms 'lessee' and 'lessor' are defined in section 3 of the RL Act to respectively include a 'sub-lessee' and a 'sub-lessor'. 26Finally, for the reasons set out below, the written agreement was terminated on 18 April 2010, when Ms Morris vacated the shop and Ms Wirepa re-took possession.

The evidence 27In July 2006, Ms Wirepa purchased, from the then lessee, the business that was trading from the shop. This was a recycled clothing business and in purchasing the business the lease of the shop was assigned to Ms Wirepa. That lease expired in September 2009. As I have explained, in August 2009, Ms Wirepa executed a new lease agreement with the owner of the shop, Cugeta Pty Ltd. That agreement was also in writing on a pro-forma Commercial Lease agreement form. The term of the lease was 3 years, from 1 October 2009 to 30 September 2012. The permitted us of the shop was 'clothing shop and beautician' and the monthly rent was $1,751.57 per month. 28Under clause 31a of that agreement Ms Wirepa was only permitted to sub-let the shop with the written consent of the owners, Cugeta Pty Ltd. 29On Saturday, 16 January 2010, Ms Wirepa placed an advertisement in the Newcastle Herald. The advertisement was in the following terms: 'SHOP Front, long/short lease, Beaumont Street 100m2, prominent position, a/c alarm $650 p/w neg. [Telephone Number]' 30Ms Wirepa explained to the Tribunal at the hearing that she had been unable to manage the shop for some time due to other commitments. She said she had entered the new lease so that she could sell her business and recover her set-up costs. When she was unable to sell the business she decided to advertise for a new tenant. 31Ms Morris responded to the advertisement and contacted Ms Wirepa. In her statement, Ms Morris explained that she was looking for a shop from which she could launch her new maternity wear business. At the time she was operating a children's clothing business from a Mercedes van. Her plan was to sell that business and use the proceeds of the sale to start her new business. After having a look at where the shop was located she telephoned Ms Wirepa. Ms Morris said that after contacting Ms Wirepa they agreed that she would lease the shop for 3 years and the lease would commence on 17 March 2010. She said that at no time was there any discussion about her purchasing Ms Wirepa's business. In her statement, at paragraph 8, Ms Morris said: 'At no time did [Ms Wirepa] say to me that she was only leasing the Shop herself, or that she was not authorised or able to enter into the Commercial Lease. In speaking with her I believed that [Ms Wirepa] owned the Shop.' 32Ms Morris said Ms Wirepa undertook to prepare the lease documentation for her to sign. During the hearing, Ms Wirepa explained that she had contacted the Real Estate Institute to obtain the relevant form. They provided her with the pro-forma Commercial Lease agreement form. As I have indicated, on 18 January 2010, Ms Wirepa and Ms Morris executed the pro-forma commercial lease agreement, which identified Ms Wirepa as the landlord and Ms Morris as the tenant. 33It was the evidence of Ms Morris that on the same day she executed the written agreement, Ms Wirepa provided her with a document entitled 'disclosure statement'. The 'disclosure statement', also prepared by Ms Wirepa, contained the following introductory statement: 'This is an agreement between Silvani Wirepa known as the lessor and Jodie Morris trading as Mummalicious herein known as the lessee.' 34The 'disclosure statement' I note was not executed until 27 January 2010, some 9 days after the written agreement was executed. In the body of page 1 of this document the 'lessor' is identified as Ms Morris trading as Mummalicious and the 'lessee' is identified as Vera Palmer. At the hearing, Ms Morris explained that it had been agreed between herself and Ms Wirepa that Ms Palmer, who had occupied a small portion of the shop from which she operated her beautician business, would continue to occupy this space. 35On the second page of the document, the 'lessee' is identified as Ms Wirepa, the 'managing agent' is identified as Andrew Kerkhoff and the 'owner' is identified as Cutega Pty Limited. The document appears to have been signed by Ms Wirepa, Ms Morris and Ms Palmer. 36In late January and early February 2010, Ms Morris and Ms Wirepa 'got along well together' with Ms Wirepa providing Ms Morris with the names and contact details of some of her suppliers. In her statement, Ms Morris said that just prior to her taking possession of the shop her relationship with Ms Wirepa began to break down and as a result she spoke to a friend, who was a solicitor, to see if she could get out of the lease. The friend advised Ms Morris that it looked like Ms Wirepa 'is only leasing the Shop herself and she may not have the consent from the owner to sub lease the Shop.' and suggested Ms Morris ask for a copy of the owner's consent to sublease. 37Late in the evening (10.24pm) of 15 March 2010, Ms Wirepa sent, from her iphone, a lengthy email to Ms Morris about the handover of the shop the following Wednesday, 17 March 2010. In that email Ms Wirepa said that at handover Ms Morris needed to have with her 2 cheques, one for 'bond-4weeks (made out to the bond board)' and one for '4 weeks rent (to cover March and two weeks into April with the balance of 2 weeks rent to be cleared into the account by the 1 st of the month.' In regard to the time for the payment of rent, Ms Wirepa said the following: '... I have been requested by the managing agent to pay monthly in advance at the beginning of the month. If you would kindly agree to a definite date I will readjust the account so that the rent is paid directly into the owners account 2 days after. ... 38In her email, Ms Wirepa also said the fixtures and fittings in the shop needed to be returned at the end of the lease, in the condition they were given and that the items documented were not to be removed, sold or leased. In regard to the 'documented items', Ms Wirepa said Ms Morris was to indicate what she did and did not want of these items. Those she did not want were to be removed. Those items she did want could be purchased, at a price to be negotiated. However, what the 'document items' were is not contained in the document. Ms Wirepa ended the email by saying: 'If for whatever reason you choose to not continue with the lease of the premises, two more letters of request will be sent to you and proceedings will have to commence with the Tenancy Tribunal to seek compensation.' 39At 2.35pm on the following day, 16 March 2010, Ms Morris sent an email to Ms Wirepa in response to her email of the previous day. In her response she said: '... I'm not interested in purchasing any shop fittings at a later date as they form part of the lease as set out in the Disclosure Statement. I will need you to provide me with a copy of the head lease prior to me taking occupation of the premises, so that I can verify that you are the tenant of the premises, for the term of your lease and to confirm that you have consent to sublet the premises to me from the shop owner for that period. If you ate (sic) concerned about the disclosing your rental amount, please feel free to delete that from the lease.' 40In her statement, Ms Morris said that during a conversation with Ms Wirepa on this day she had informed her of the following: 'I don't need to get approval from the owner to sublet you the shop. I have sublet in this building in the past to other people and have never had any problems. Don't worry about it.' 41Ms Wipera sent a further email to Ms Morris at 8.32pm that evening, 16 March. Again it is a lengthy email. At the end of the email Ms Wipera said: '... Your concerns about whether the rent will be paid to the owner is unfounded based on a lack of trust. I have been in this shop for nearly 4 years. I have also sublet in the same building with consent from the managing agent for 12 months. I have tenants who have been with me for more than 3 years. Your fears are not justified. ...' 42It is not all together clear from the emails attached to Ms Morris' statement as to the sequence of emails that followed this email. From the content of the emails it would appear that at 9.19pm that day, Ms Wirepa sent Ms Morris an email stating that she would provide her with a copy of her lease and that she would allow her a few days in lieu of rent so that she could remove some of the items Ms Morris did not wish to keep. Ms Morris responded at 9.25pm stating that she would take her up on the few days in lieu of rent and she requested that the exterior sign to the shop be removed by the Sunday lunch time so that she could replace it with her sign. It would appear that some time prior to sending this email Ms Morris had sent an email in reply to the lengthy email Ms Wipera had sent at 8.32pm. In this response, Ms Morris said she needed to discuss with Ms Wipera the amount she was required to pay on handover. She said that she was well aware of having to pay the bond but not aware that she was required to pay almost 6 weeks rent. She said she had expected to pay 2 weeks rent in advance as this is what she usually paid. Otherwise she addressed each of the issues raised by Ms Wirepa in her email. 43At 11.00pm, Ms Wirepa sent a short email to Ms Morris stating that the cheque situation should be delayed until the Friday and that she would read Ms Morris' comments the following day. 44As I have indicated, Ms Morris took possession of the shop on Wednesday 17 March. As agreed, on 22 March 2010, Ms Morris paid Ms Wirepa, rent for the period 22 to 31 March 2010. 45However, the relationship between Ms Morris and Ms Wirepa continued to deteriorate during the time Ms Morris was fitting out the shop. There were issues in regard to Ms Wipera gaining access to the shop to collect items that belonged to her and Ms Morris painting the cabinets in the shop and the shop window frames without Ms Wipera's consent. 46In her statement Ms Morris said that on 30 March, shortly after Ms Wirepa had sent her an email complaining about her having painted the shop window frames, Ms Wirepa came to the shop and said: 'Why have you painted the window frames? I am going to get into a lot of trouble off the owners because you have painted the window frames without permission.' 47It was as a result of this conversation that Ms Morris came to realise that the owners of the shop may have no knowledge of her being in possession of the shop, despite Ms Wirepa's ongoing representation to the contrary. 48It is the evidence of Ms Morris that after speaking with some of the other tenants in the building she contacted the managing agent of the building, Mr Andrew Kerkoff. Ms Morris said Mr Kerkhoff, had no knowledge of her, or that Ms Wirepa had subleased the shop. He asked whether she had purchased Ms Wirepa's business to which she responded 'no'. He also informed her that Ms Wirepa was not authorised by the owners to sublet the shop as she did not have the owner's consent to do so. He said to leave it with him and he would sort it out. It is the evidence of Ms Morris that Mr Kerkhoff contacted her the following day, 1 April 2010, and informed her that the owners had retrospectively granted permission for her to sublease the sop from Ms Wirepa and they had done so 'primarily to protect [her] goods while [they] get it sorted out.' 49There were a number of email exchanges between Ms Morris and Ms Wirepa on this day. Ms Wirepa sent an email early in the morning in regard to the transfer of the telephone account for the shop. This was followed by an email in regard to items Ms Wirepa had come to collect from the shop the previous day. In that email, Ms Wirepa demanded that Ms Morris pay the bond and the outstanding rent. Ms Morris replied to both emails. At 4.14pm, Ms Wirepa sent an email to say that she had just spoken to the managing agent and that he and the owners were 'distinctly upset' with what she had done to the windows of the shop. She said they had discussed the option of Ms Morris signing a lease agreement with them and then a separate business agreement between her and Ms Morris for the difference between the actual rent amount for the shop and that agreed to between her and Ms Morris. It is the evidence of Ms Wirepa that, at the request of Mr Kerkhoff on 1 April 2010, she provided a copy of the written agreement to him. This was the first time he had seen the agreement. 50Early in the morning of 1 April 2010, Ms Wirepa sent an email to Mr Kerkhoff in regard to the shop. In that email she said that she had just taken a position with a construction company so that she could have a separate income to the shop in order to settle the arrears. She went on to say: '... Jodie Morris has taken over management of the shop with the use of my shop fittings with the intention of selling clothes to larger and pregnant women. ...' 51In that email she went on to explain the arrangement she had made with Ms Morris. Later that day she sent another email to Mr Kerkhoff in which she said: 'Just to clarify, the agreement I had with Jodie Morris was to include the extra for all the shopfittings (sic), furniture, coathangers (sic), wall fittings, glass cabinets, air conditioning, security systems, cash register etcetra (sic). The extra over is to cover the difference of items to the value of $12,87.00 and for the subsequent purchase of the business (goodwill). Originally, negotiations were to include my stock within the shop. She changed her mind at the last minute. Not being familiar with the process, I made out a sub-lease with Ms Morris because she wanted sole jurisdiction over property. Last year I had made request to you asking for a sub-lease arrangement with the shop. Without reading the contract meticulously I assumed it was included. I did not think there would be a problem after subleasing to tenant in studio office upstairs. So I apologise for the confusion. In regards to the front window (paint) I have sent letter of request to Ms Morris to remove it ASAP before Tuesday. ... I am quite prepared to resume responsibility of the store and assist Jodie Morris to find an alternate shop.'' 52That evening, Ms Morris responded, by email, to Ms Wirepa's email of that afternoon. In that email Ms Morris accused Ms Wirepa of being a liar and dishonesty and said the following: '... I had a surprise late afternoon/evening visit from the Managing Agent - Andrew Kerkhof today, (lovely guy) and we had a great meeting, and his version of your claims below, are completely different - as they would be - because your (sic) a liar! I have been speaking with him on the phone for a few days now, so his visit was a welcome relief. ... These are the facts and lies that you have told:- 1.You DID NOT have consent from the owner to sub-let the shop to me, (as you claimed). That consent was only granted to me today, and primarily to protect me - not you. 2.The window situation had been sorted out with Andrew and the owners and there IS NO issue with the fact they have been painted. In fact I was congratulated on how good it looks. I raised your email below with Andrew, and he said there was no issue - so your (sic) trying to stir up trouble where there is none. Surprise Surprise ... 3.Andrew advised you that you had done the wrong thing as far as the business was concerned and you should have sold your business to me as an ongoing interest - not sub-let the shop illegally, but your lie to try and cover this, was that I didn't want to buy your business? AT NO TIME was your business ever offered to me for sale - and I would NEVER have purchased it anyway, I answered an add (sic) in the Newcastle Herald to "lease" a shop - not purchase a business (I still have the add(sic)). 4.... 5.... 6.You only renewed your lease for the business 6 mths ago, and then promptly started advertising it for rent (knowing you did NOT have consent from the owner) and advertised it for way more a week that your lease states, in the hope that someone naive like me would come along ... 7... 8... You are the MOST dishonest, trouble-making despicable person I have ever had the displeasure of meeting. I will be dealing with the Property management ONLY - not you. Andrew will be in touch with you for further details about the shop lease etc... 53On 2 April, Ms Wirepa sent, by her iphone, an email to Ms Morris in which she said 'I strongly urge you to look for alternate tenancy, and if necessary I will assist you to move out' and she demanded that she remove the paintwork from the window frames. Ms Morris responded by stating that nothing needed to be done to the windows as Mr Kerkoff had spoken to the owners and they were fine with what had been done. 54On 3 April 2010, Mr Kerkhoff sent an email to Ms Wirepa to inform her that the owners had agreed to her subletting the shop to Ms Morris. In that email he said: '... Understanding you have taken another job elsewhere and you no longer have any fixtures, stock etc to run the business it may be prudent to continue the sublet you have already arranged with Jodie but on the same terms you are paying. ... Consider just having a separate sale agreement for the extra amount you have agreed on already and then the outcome is the same for you. ...' 55On 12 April 2010, Ms Wirepa served Ms Morris with a Notice of Breach of Agreement, allegedly pursuant to section 62 of the Retail and Commercial Leases Act 1995. There is no such Act in NSW. Nevertheless, the alleged breaches were stated to be Ms Morris' failure to pay the bond, two weeks rent and damage to the shop front. The notice required Ms Morris to remedy the breaches within fourteen days of the notice. On the same day, Ms Wirepa also issued a notice of intended inspection and a notice to vacate the premises. The notice of intended inspection stated that on 18 April, at 5.00 pm, Ms Wirepa would enter the shop to reclaim possession, to change the locks and to put any items belonging to Ms Morris into storage at her cost. The notice to vacate required Ms Morris to vacate the shop on 19 April 2010. 56In response to the notice, Ms Morris vacated the premises on 18 April 2010. Ms Wirepa took possession of the premises. In June 2010 she sold her business and the owner of the shop agreed to MS Wirepa surrendering her lease and that a new lease would be entered with the purchasers of the business. In purchasing the business, the purchasers paid Ms Wirepa $9,000 plus GST for the fittings and fixtures.

Ms Wirepa's claim 57As I understand her claim, Ms Wirepa seeks payment of 12.5 weeks of lost rent at $1,751.00 per month, 35 months of lost profit at $2816 - $1751 per month, compensation for alleged damage caused by Ms Morris to her fittings and fixtures, compensation for costs that Ms Morris should have incurred as the lessee and compensation for the costs incurred in returning the premises to the state they were in at the time the lease agreement was entered into. 58There is no dispute that Ms Morris breached the written agreement in that she failed to pay the bond and the rent when it was due and payable. The written agreement provided that Ms Morris was to pay rent, in advance, on the 1 st day of every month. Pursuant to clause 9 of the written agreement, Ms Morris agreed to pay the rent promptly and in the manner directed by Ms Wirepa. This she clearly failed to do as of 1 April 2010. 59Clause 30b (i) of the written agreement provided that Ms Wirepa had the right to re-enter the shop where Ms Morris had failed to pay rent for a period in excess of 14 days, whether formally demanded or not. That is, regardless of the validity of the notices, Ms Wirepa had a right to re-enter possession 14 days after rent was due and payable and no rent was paid. On the evidence, Ms Wirepa's intended to re-enter the shop on 19 April 2010, which was clearly more than the required 14 days. Subject to any right Ms Morris might have had to seek relief against forfeiture, Ms Wirepa's re-entry had the effect of terminating the agreement on that day. Leaving aside the claim of Ms Morris, her breach of the agreement and the subsequent termination of the agreement by Ms Wirepa, gave Ms Wirepa a right to seek payment of the rent outstanding as at the date of termination and damages for the loss of benefit she would have gained if the written agreement had not been terminated: see Progressive Mailing House Pty Ltd v Tabali Pty Ltd (1985) 157 CLR 17. 60Ms Wirepa calculated the rent that was outstanding as at 18 April 2010 to be $1,666.85. Ms Morris does not dispute this calculation. 61In regard to damages for loss of benefit, Ms Wirepa has calculated this to be made up of 2 amounts. The first amount was the rent (i.e. $1751.00 per month) that she alleged she was required to pay, under her lease, from 18 April 2010 to 30 June 2010, when her lease was surrendered. The second amount was the difference between the amount Ms Morris had agreed to pay (i.e. $2816.00 per month) and the rent Ms Wirepa was required to pay under her lease for the 35 months that remained of the term of the written agreement had it not been terminated. On Ms Wirepa described this as being her 'loss of profit' and calculated it to be $1,065.00 per month for 35 months. 62In my view Ms Wirepa has failed to establish these particular claims. In regard to the first amount, there is no evidence to support her contention that she was in fact required to pay and did pay rent under her lease for this period. The inference arising from the content of the June 2010 letter, from Mr Kerkhoff to Ms Wirepa, suggests no rent due and payable Ms Wirepa at that time and Ms Wirepa has not otherwise put on any evidence that establishes that she did in fact pay rent to the owners up until 30 June 2010. 63In regard to the second amount, Ms Wirepa's claim can only extend to the period of her lease (i.e. to 30 June 2010 when her lease was surrendered). As I have indicted, on her own evidence, Ms Wirepa has described this amount as her 'loss of profit' (i.e. the difference between the rent she was required to pay under her lease and the written agreement rent amount). As I have explained, Ms Wirepa had calculated this amount to be what was needed to recoup, over the term of the written agreement with Ms Morris, what she had paid for and had valued her business was worth. However, the value of her business, at 30 June 2010, was $9,000. This is the amount the purchasers of the business paid and what she accepted as payment. In the absence of any independent evidence as to the value of her business some 21/2 months earlier, I can only assume it had not changed substantially, if at all. Accordingly, I am not satisfied that Ms Wirepa has established her 'loss of profit' claim. 64This leaves Ms Wirepa's claim for damages for breaches of the terms of the written agreement. These breaches appear to relate to damage caused by Ms Morris in breach of clause 12 of the lease (i.e. making alterations to and decorating the shop without the permission of Ms Wirepa). 65The main area of dispute is Ms Morris having painted the windows and cabinets and also having disposed of some of the display boxes belonging to Ms Wirepa that she had left in the shop. 66Again, Ms Wirepa has failed to persuade me that she has in fact suffered loss and damage as asserted. Ms Morris acknowledged that she had not sought the permission of Ms Wirepa to paint the windows or cabinets. I note Ms Wirepa's objection to the painting of the windows was based on the owners having objected. However, there is no evidence of the owners having objected. Mr Kerkhoff's email of 3 April makes no mention of this. Nor is there any evidence that the windows were in fact repainted prior to the surrender of Ms Wirepa's lease. In support of her claim Ms Wirepa provided a quote for the removal of the black spray paint from the windows, but there is no evidence that the work was done and Ms Wirepa paid for it. Accordingly, she has failed to establish this aspect of her claim for loss and damage. I make the same finding in regard to Ms Wirepa's claim for the damaged glass shelving, the replacement shelving, the shop front display cabinets, the removal of the unfinished wallpaper and the removal of the signage panel. Again, other than mere assertion, Ms Wirepa has not established that Ms Morris caused the alleged damage or that she has in fact suffered loss. It would appear from the evidence that the buyers of her business and the new lessees of the shop took the shop and fittings and fixtures in the state they were in. 67In regard to the cabinets, it is the contention of Ms Wirepa that their value was diminished by $250.00 when Ms Morris painted them black. While this might be the view of Ms Wirepa, she has failed to put on any evidence of an independent nature, which supports her view. 68In regard to her claim for the cost of contract cleaners, it would appear from the evidence of Ms Wirepa that she personally cleaned the premises. That is she did not use the cleaners from whom she obtained a quote. Accordingly, this claim has not been established. 69Ms Wirepa's claim in regard to the keys and alarm sensor, the light bulbs, electricity and the telephone is also not supported by any actual tax invoices. Estimates have been provided in regard to the electricity and the telephone. These estimates are based on actual costs incurred by Ms Wirepa for these services prior to Ms Morris taking possession of the premises. How Ms Morris can be liable for these costs is not altogether clear. The written agreement made no provision for Ms Morris to pay for outgoings and the document entitled 'disclosure statement has the letter 'N/A' inserted in the 'electricity' and 'telephones (public)' outgoings details on page 2. 70From the email exchanges between Ms Wirepa and Ms Morris, it would appear that an arrangement had been made that Ms Morris would arrange for the telephone and the electricity services to be transferred into her name. However, this arrangement was not part of their written agreement (i.e. their retail shop lease). Accordingly, even if it were established that Ms Morris breached this arrangement, any loss suffered by Ms Wirepa is not a loss arising from a retail lease claim. Even if I am wrong, Ms Wirepa has failed to persuade me that she has incurred the loss claimed. 71In summary, I find that Ms Wirepa has established her claim in one respect, namely a breach of the lease in that Ms Morris failed to pay the rent that was outstanding as at 18 April 2010, when the lease was terminated. That amount has been calculated by Ms Wirepa as being an amount of $1,666.85.

Ms Morris' claim 72Ms Morris asserts that her claim is a complete answer to Ms Wirepa's claim and is also a claim for damages. For the reasons set out below, I have not found that Ms Morris' claim to be a complete answer to the claim of Ms Wirepa. 73Ms Morris has based her claim on an alleged breach of section 10 (pre-lease misrepresentation), section 62B (unconscionable conduct in a retail lease shop transaction) and 62D (misleading and deceptive conduct in connection with a retail lease) of the RL Act. The alleged unconscionable conduct and the alleged misleading and deceptive conduct are based on the alleged pre and post written agreement representation and conduct by Ms Wirepa that she was authorised, or had the authority to lease the shop. 74The remedy for a breach of section 10, section 62B, or section 62D is the same, namely compensation for the loss and damage suffered as a result of the relevant breach (see sections 10, 62B(8) and (9), and 62E of the RL Act). 75On the material before the Tribunal I am not persuaded that Ms Morris has established a breach of section 10 or section 62B of the RL Act. Section 10 of the RL Act requires proof that Ms Wirepa when making the alleged false or misleading representation did so knowing that it was false or misleading. In my view the evidence does not support such a finding. 76Section 62B of the RL Act requires proof of unconscionability by a party to a retail lease. As explained by Spigelman CJ in Attorney-General of New South Wales v World Best Holdings Ltd (2005) 63 NSWLR 557; (2005) 223 ALR 346 'unconscionability is a concept which requires a high level of moral obloquy.' In my view, while Ms Wirepa's conduct might be questioned in many respects, it is not of a nature described by the Chief Justice. 77However, I am satisfied that Ms Morris has established, to the requisite standard, that Ms Wirepa engaged in conduct (i.e. made a representation) in breach of section 62D of the RL Act, which is in the following terms: 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. 78In a recent decision, Fagerlund and Atkinson v PPS Nominees Pty Ltd [2011] NSWADT 24 at [70] to [78], the Tribunal set out the legal principles relevant to a breach under this section. At [70], the Tribunal pointed out that the party to a lease who claims that another party to that lease breached section 62D bears the onus to prove that the other party engaged in conduct (e.g. made a representation) that was (a) misleading or deceptive towards the claiming party, or (b) likely to mislead or deceive the claiming party. 79At [72], the Tribunal pointed out that section 62D is in similar terms to section 52 of the repealed Trade Practices Act 1974 (Cth) (now clause 18 of Schedule 2 of the Competition and Consumer Act 2010 (Cth), which applies, in NSW, as NSW law: see section 28 of the Fair Trading Act 1987). 80The Tribunal went on to say that the test as to whether conduct is misleading or deceptive or likely to mislead or deceive is an objective one, having regard to the circumstances of each case: Cantarella Bros v Valcorp Fine Foods Pty Ltd [2002] FCA 8 and Hornsby Building Information Centre Pty Limited v Sydney Building Information Centre (1978) 140 CLR 216. Unlike the breach in section 10 of the RL Act, the i ntent of the person engaged in the conduct alleged to be misleading or deceptive or likely to mislead or deceive is of no relevance, for the purpose of establishing the breach. 81Ultimately, it is a question of fact, to be determined by reference to all of the circumstances (including (but not exhaustively) the terms of any agreement and disclosure statements), as to whether an alleged representation is misleading or deceptive or likely to mislead or deceive : Campbell v Backoffice Investments Pty Ltd (2009) 83 ALJR 903. 82Silence can also amount to conduct that is misleading or deceptive or likely to mislead or deceive: see Demagogue Pty Ltd v Ramensky [1992] FCA 557; (1992) 39 FCR 31 at 42 83On the basis of the evidence it is not all together clear whether, at the time Ms Morris contacted Ms Wirepa, Ms Wirepa was in fact still operating her business from the shop. My impression from the evidence is that she may have been operating her business at that time as the shop was still equipped with fittings and fixtures that Ms Wirepa had used for her business. 84I accept the evidence of Ms Morris that at the time she executed the written agreement, she believed that Ms Wirepa was the owner of the shop. She is relatively young and had little, if any, experience in business let alone leasing a retail shop. Ms Wirepa, on the other hand, had more experience, but seemed to have little knowledge about her rights and obligations under a retail shop lease, let alone the lease she had signed with the owners of the shop. This is evidence by the documents she prepared for Ms Morris to sign. The pro-forma lease agreement form was clearly incorrect, and the document entitled 'disclosure statement' did not comply with the requirements of the RL Act. 85Nevertheless, as I have said Ms Morris' belief does not establish that the conduct of Ms Wirepa was misleading or deceptive or likely to mislead and deceive her. 86In my view there is insufficient evidence, objectively assessed, to support a finding that Ms Wirepa represented (including by silence) that she was the owner of the shop. However, I am satisfied that on the evidence, assessed objectively, that Ms Wirepa did represent to Ms Morris that she was authorised to enter into the lease for the shop and that the representation, when made, was false. The representation is evidenced in the written agreement, the document entitled 'disclosure statement', Ms Wirepa's conduct generally and in subsequent conversations and communications with Ms Morris around 16 March 2010, just prior to Ms Morris taking possession of the shop. Ms Wirepa's evidence is also that she believed she had this authority, when she did not. As I have explained, Ms Wirepa's knowledge is not relevant for the purpose of a section 62D breach. Authority to sublease was given around 3 April 2010, after Ms Morris had contacted Mr Kerkhoff. 87I am also satisfied that Ms Morris was mislead by these representations of Ms Wirepa and that she relied on them. I find this to be particularly so prior to and at the time Ms Morris took possession of the shop. 88As I have indicated, pursuant to section 62E of the RL Act, where Ms Morris is able to establish that she has suffered loss and damage as a result of the misleading representation she is entitled to recover that loss or damage. It is the contention of Ms Morris that the loss and damage she suffered as a result of Ms Wirepa's misleading and deceptive representation is her total cost of setting up her business. 89In support of her claim, Ms Morris tendered into evidence a schedule of those costs, which included the costs she incurred in purchasing fittings and stock, the rent she paid (i.e. $972.00) and the total income she earned during the period the shop did trade (i.e. $3,685.65). Ms Morris' claim was also supported by a number of tax invoices. 90During the hearing, Ms Morris explained that there were a number of fittings that she has continued to use personally. She also explained that when she left the shop she continued to sell her stock on the internet. She identified the stock she had been able to sell in its entirety and also that which had been sold in part. As I understood from her evidence, the stock that had been sold was sold for a profit. In summary, the stock Ms Morris was unable to sell and the price paid for that stock was identified by her as follows:

Luchious $602.60 (50% sold) $ 301.30
HK Shoes 240.00
Sascco $977.19 (50% sold) $ 488.60
Shoes on Line $1,862.94
Ripe $15,594.46 (50% sold) $7,797.23
TOTAL $10,690.07 91Tax invoices to support the purchase of this stock were attached to Ms Morris' statement. In my view in making her estimate, Ms Morris may have given an estimate that might have been more favourable towards her claim. In making this remark I am not inferring that Ms Morris sought to mislead the Tribunal. My impression of her was to the contrary, but as she was unable to be exact, in my view it is appropriate to adjust the value down. Accordingly I adjust the total amount of unsold stock to $8,000.00. 92Of the remaining items, Ms Morris only provided invoices for some of the costs she incurred in setting up the shop. These were receipts from Bunnings Hardware, the cost of placing an ad in the Newcastle Leader Newspaper and invoices for the hire of a truck and car from Thrifty and Newcastle Bus and Truck Hire. The Bunnings Hardware invoices (2) total $325.60. I note the invoices are dated 38 and 29 March 2010, which is consistent with the date on which she commenced trading. The invoice from Thrifty is in my view not claimable as it relates to the hire of a vehicle in May 2009, which pre-dates the written agreement. However, the invoice from Newcastle Car & Truck Rental is dated 15 April 2010 and this amount in my view is claimable. That amount is $109.00. 93For the reasons I have already stated, in the absence of any invoice or receipt evidencing the costs claimed, I must also find that Ms Morris has failed to establish these particular losses. 94In regard to the rent paid by Ms Morris, in my view this is not an amount she can recover as she did in fact benefit from being given possession of the shop. As she has identified, she traded from the shop for 6 days and received a total income of $3,685.65. This amount cannot be claimed as a loss of earnings (profits). Nor is there any other evidence to support a loss of profit claim. 95Accordingly, in summary I find that Ms Morris's loss as a result of the misrepresentation of Ms Wirepa is $7,434.60. 96The question is whether she should also be excused from paying the outstanding rent in regard to Ms Wirepa's claim. In my view, there is no basis to excuse Ms Morris from paying the outstanding rent, which she agreed to pay when she executed the written agreement. As I have indicated, Ms Morris did occupy the shop and traded from it for 6 days during which she earned an income.

Orders 97For the reasons set out above, my findings are: (a) the written agreement (i.e. the retail shop lease the subject of these applications) was terminated on 18 April 2010; (b) by reason of the surrender of Ms Wirepa's lease on 30 June 2010, Ms Wirepa's claim for damages could not extend beyond that date; (c) Ms Morris is liable to pay Ms Wirepa outstanding rent in the amount of $1,666.85; and (d) Ms Wirepa is liable to pay Ms Morris damages for misleading representations in breach of section 62D in the amount of $7,434.60. 98In making a final order it is appropriate to set-off the amounts that I have found to be payable by the parties and a single order is made that Ms Wirepa pay Ms Morris an amount of $5,767.75.

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: 27 January 2012

Trade Practices Act 1974(Cth)

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