Braze Flames Pty Ltd v Jerry Yuen Pty Ltd [2021] QCAT 101

QUEENSLAND CIVIL AND ADMINISTRATIVE TRIBUNAL CITATION: Braze Flames Pty Ltd v Jerry Yuen Pty Ltd [2021] QCAT 101 PARTIES: BRAZE FLAMES PTY LTD (applicant) v JERRY YUEN PTY LTD (respondent) APPLICATION NO/S: RSL035-19 MATTER TYPE: Retail shop lease matters DELIVERED ON: 15 March 2021 HEARING DATE: 1 February 2021 HEARD AT: Brisbane DECISION OF: Presiding Member Hughes Member Judge Member McBryde ORDERS: 1. Braze Flames Pty Ltd pay to Jerry Yuen Pty Ltd the sum of $760.44 plus GST. 2. Each party pays its own costs. CATCHWORDS: LANDLORD AND TENANT – RETAIL AND COMMERCIAL TENANCIES LEGISLATION – damages – where premises unfit for use – where insufficient supporting evidence to support claim – where tenant did not lawfully terminate lease – where surrender by operation of law – where tenant’s claim offset by landlord’s right to damages from unlawful termination PROCEDURE – CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS - COSTS – GENERAL MATTERS - where neither party entirely successful and inadequate material from both parties – where strong contra-indication against awarding costs Queensland Civil and Administrative Tribunal Act 2009 (Qld), s 100 Retail Shop Leases Act 1994 (Qld), s 43, s 83 Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175 Clarke v Cascade Pools (Qld) Pty Ltd [2010] QCAT 323 Creek v Raine & Horne Real Estate Mossman [2011] QCATA 226 Hadley v Baxendale (1854) 9 Ex. 341 -- 1 of 5 -- 2 Progressive Mailing House Pty Ltd v Tabali (1985) 157 CLR 17 Ralacom Pty Ltd v Body Corporate for Paradise Island Apartments (No. 2) [2010] QCAT 412 Wood Factory Pty Ltd v Kiritos Pty Ltd [1985] 2 NSWLR 105 APPEARANCES & REPRESENTATION: Applicant: M Reynolds of MGR Lawyers Pty Ltd Respondent: Self-represented by Jerry Yuen REASONS FOR DECISION What is this Application about? [1] Braze Flames Pty Ltd as tenant seeks to recover these amounts from its lessor Jerry Yuen Pty Ltd due to fire damage to its take-away business: Bond refund 21,162.00 Overpaid rent 1,204.00 Loss of goodwill 24,250.00 Loss of income 87,474.40 ($841.10 x 104 weeks - 23/01/18 to 22/01/20) Total $130,090.40 [2] Braze also claimed interest and costs. [3] Yuen did not file a response to the claim or a counter-claim. Background [4] The original lease was between Yuen and another tenant from 5 October 2014 to 4 October 2019, with two five-year options.1 On 14 November 2016, the lease was transferred to Braze. [5] On 23 January 2017, fire damaged the premises. [6] On 30 November 2017 and following numerous telephone calls and text messages, Braze asked Yuen for a refund of rent and an update on rectification.2 [7] On 17 March 2018, Braze notified Yuen that it was giving it “NOTICE to cancel this lease pursuant to clause 6.2 of the lease”, noting the delay in completing rectification.3 [8] On 22 March 2018, Yuen refunded Braze $3,902.00 for overpaid rent and informed Braze that it did not accept the termination and had replaced all necessary items and the premises were ready for internal renovation.4 1 Lease dated 19 November 2014. 2 Email Deen Lawyers to Joseph Ho Lawyers dated 30 November 2017. 3 Letter Deen Lawyers to Joseph Ho Lawyers dated 17 March 2018. 4 Letter Joseph Ho Lawyers to Deen Lawyers dated 22 March 2018. -- 2 of 5 -- 3 [9] On 26 March 2018, Braze purported to “reaffirm” its decision to terminate the lease, informing Yuen that it had overpaid rent of $5,361.00 (a further $1,459.30) and that rectification was still not complete.5 [10] On 29 March 2018, Yuen informed Braze on a “without prejudice” basis that it did not accept termination of the lease and did not dispute the overpaid rent but that it should exclude GST of $487.39, leaving a refund of $971.93.6 [11] An undated document entitled “Termination of the lease” claimed that Yuen used burnt and deformed materials as beams and supports, did not follow building codes in material selection and installation of ceilings and as a result the building was not safe for the public and relevantly stated: Because of the breach of the commercial lease by the landlord JERRY YUEN PTY LTD, the tenant, BRAZE FLAMES is entitled to terminate the contract. … Since, the building (sic) never been ready for public use and or for a business occupation and (sic) unacceptable delay in renovation, BRAZE FLAMES decided to terminate the contract in this regard.7 [12] On 1 June 2018, Yuen informed Braze that the premises had been ready for business since 22 April 2018 and sent rent invoices for May and June 2018.8 [13] On 10 June 2018, Braze confirmed that it was not continuing the business due to the delay in rectification.9 [14] On 13 June 2018, Yuen served Braze a Notice to Remedy for non-payment of rent.10 [15] On 7 January 2020, Yuen cancelled the lease.11 [16] On 6 March 2020, Yuen sold the land.12 What order is just to resolve the dispute?13 [17] As applicant, Braze must prove its claim beyond this date on the balance of probabilities. Yuen admitted that the premises were not ready for business until 22 April 2018. However, Braze did not adduce sufficient evidence to support its claim that the premises were unfit for use after 22 April 2018. [18] Braze attached 11 black and white photographs to support its claim that Yuen did not engage a registered builder, used burnt and deformed materials and did not comply with building codes. The photographs have little, if any, evidential weight. The photographs appear to show some scattered debris in an unidentified location. Eight are undated. Three have a handwritten notation “28 March 2018” at the top. The photographs do not prove the materials that Yuen used were non-compliant, or even that the depicted materials were the materials Yuen used. 5 Letter Deen Lawyers to Joseph Ho Lawyers dated 26 March 2018. 6 Letter Joseph Ho Lawyers to Deen Lawyers dated 29 March 2018. 7 Notice of dispute, attachment 12 undated. 8 Letter Joseph Ho Lawyers to Deen Lawyers dated 1 June 2018. 9 Letter Braze Flames Pty Ltd to Joseph Ho Lawyers dated 10 June 2018. 10 Letter Joseph Ho Lawyers to Braze Flames Pty Ltd dated 13 June 2018. 11 Historical Title Search dated 18 August 2020. 12 Historical Title Search dated 18 August 2020. 13 Retail Shop Leases Act 1994 (Qld), s 83(1). -- 3 of 5 -- 4 [19] Braze did not adduce any building codes or supporting evidence – expert or otherwise – of the condition of the premises after 22 April 2018, when Yuen claimed the premises were fit for use. The Tribunal cannot award amounts without substantiation: … the tribunal cannot make assumptions or guess at facts and events or the meaning or importance of material. The tribunal cannot make findings of facts where there is no evidence. It cannot award damages if there is no material that points to the quantum of the damage suffered. Parties must take responsibility for the preparation of their own case.14 [20] Moreover, Braze did not lawfully terminate the lease. Braze had a right to terminate if the premises were not fit for use within three months of the fire damage on 23 January 2017.15 However, Braze was only entitled to terminate upon executing a surrender in registrable form on its copy of the lease and delivering it to Yuen at the expiration of one month after notifying Yuen of its intention to terminate the lease.16 [21] There is no evidence of Braze having done this. Even if the Tribunal accepts the letters of 17 March 2018 or 26 March 2018 as notice of intention to terminate, the (apparent) later undated notice does not comply with clause 6.2, nor is there any other evidence of Braze complying with clause 6.2 by executing and delivering a valid Deed of Surrender. [22] Instead, Braze unilaterally gave up possession. Braze cannot terminate the lease by simply giving up possession, without the agreement of Yuen. Yuen’s correspondence indicates that it did not agree to termination. By Braze giving up possession in breach of clause 6.2 and without Yuen’s agreement, when Yuen resumed possession the lease was surrendered by operation of law,17 entitling Yuen to damages for breach of condition.18 [23] This means that Yuen is entitled to damages for loss of rent for the balance of the term, subject to its duty to mitigate the loss by, for example, re-letting the premises. Although Yuen did not file a counter-claim, the Tribunal is required to make the orders it considers to be just to resolve the dispute.19 It would not be just to make an order calculating Braze’s loss without considering any amount owing by Braze to Yuen. Braze is therefore only entitled to compensation for disruption to its trading caused by Yuen’s failure to take reasonable steps to rectify20 up to 22 April 2018, offset by any amount owing to Yuen for Braze’s repudiation of the lease. [24] The rent was $33,750 per year plus GST increasing at four percent per year. The lease was to expire on 4 October 2019, meaning Yuen would have received rent of $59,710.47 from 22 April 2018 had Braze not repudiated. Without evidence of market demand for the premises and given the shopping centre was in the outer suburbs, the Tribunal will apportion half of the balance of the term to allow a period of nine months as a reasonable period for Yuen to have found another tenant to mitigate its loss. The Tribunal therefore assesses Yuen’s loss of rent arising from Braze’s repudiation at $29,855.24. 14 Clarke v Cascade Pools (Qld) Pty Ltd [2010] QCAT 323, [3]. 15 Lease dated 19 November 2014, clause 6.2. 16 Lease dated 19 November 2014, clause 6.2. 17 Wood Factory Pty Ltd v Kiritos Pty Ltd [1985] 2 NSWLR 105. 18 Progressive Mailing House Pty Ltd v Tabali (1985) 157 CLR 17. 19 Retail Shop Leases Act 1994 (Qld), s 83(1). 20 Retail Shop Leases Act 1994 (Qld), s 43. -- 4 of 5 -- 5 [25] The Tribunal accepts Braze’s claim for overpaid rent of $1,204.00 being the difference between the rent of $5,106 it paid to Yuen for the first six weeks while the premises were unfit and the refund of $3,902. [26] Braze’s claim for loss of goodwill and loss of income are consequential damages. Consequential damages are not recoverable if too remote.21 Moreover, they must be substantiated. [27] The Tribunal is not satisfied to award loss of goodwill for the purchase of the business or loss of income from 22 April 2018 in circumstances where the evidence is that premises were fit for use as at 22 April 2018 and Braze did not lawfully terminate the lease. Braze did not adduce evidence of causation for any loss of goodwill. Braze had an obligation to act in its own best interests, including providing all evidence to support its case: The statutory regime under which QCAT operates places obligations upon parties themselves to take care in their dealings with Tribunal matters, and to act in their own best interests. QCAT’s resources for the resolution of disputes are in high demand and serve, as the High Court has recently observed in relation to court resources, ‘…the public as a whole, not merely the parties to the proceedings’. Finality in litigation is highly desirable, because any further action beyond the hearing can be costly and unnecessarily burdensome on the parties.22 [28] The Tribunal is satisfied to award Braze loss of income from the start of the period claimed on 23 January 2018 to when the premises were fit for use on 22 April 2018, being $841.10 per week23 for eight weeks, equating to $6,728.80. [29] The Tribunal does not propose to award interest to Braze in circumstances where it would be offset by interest payable by Braze. [30] This means that Braze is entitled to a total of $7,932.80 offset by rent owing to Yuen of $29,855.24, resulting in a net amount owing to Yuen of $21,922.44 plus GST. [31] Yuen claimed to have refunded the bond of $21,162.00 to Braze. However, it did not file any proof of payment or any other evidence. Without supporting evidence, the Tribunal is not satisfied that Yuen refunded to bond to Braze. [32] The bond held by Yuen is $21,162.00. Deducting this from the net outstanding amount owing to Yuen of $21,922.44 equates to $760.44. The appropriate order that is just to resolve the dispute is that Braze pay to Yuen the sum of $760.44 plus GST. [33] Given that neither party has been entirely successful and the inadequate material from both parties, the Tribunal does not propose to depart from the strong contra-indication against awarding costs.24 [34] The appropriate orders are: 1. Braze Flames Pty Ltd pay to Jerry Yuen Pty Ltd the sum of $760.44; and 2. Each party pays its own costs. 21 Hadley v Baxendale (1854) 9 Ex. 341. 22 Creek v Raine & Horne Real Estate Mossman [2011] QCATA 226, [13], citing with approval Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175, 217. 23 Financial Statements for Saleem Family Trust from 1 October 2016 to 31 December 2016. 24 Queensland Civil and Administrative Tribunal Act 2009 (Qld), s 100; Ralacom Pty Ltd v Body Corporate for Paradise Island Apartments (No. 2) [2010] QCAT 412, [29] (Wilson J). -- 5 of 5 --