Baxter & Fifties Food Pty Ltd atf The Ninja Bear Trust t/as Subway Wynnum Central v Subway Realty Pty Ltd & Anor [2015] QCAT 83

CITATION: Baxter & Fifties Food Pty Ltd atf The Ninja Bear Trust t/as Subway Wynnum Central v Subway Realty Pty Ltd & Anor [2015] QCAT 83 PARTIES: Ms Joanne Margaret Baxter and Fifties Food Pty Ltd atf The Ninja Bear Trust t/as Subway Wynnum Central (Applicants) v Subway Realty Pty Ltd (First Respondent) Kennion (Trustees) Pty Ltd (Second Respondent) APPLICATION NUMBER: RSL053-12 MATTER TYPE: Retail shop leases matters HEARING DATE: 2, 5 December 2013 and 8, 9, 10 October 2014 HEARD AT: Brisbane DECISION OF: Member White Member Kairl Member McBryde DELIVERED ON: 26 March 2015 DELIVERED AT: Brisbane ORDERS MADE: 1. The Application for a Declaration that the conduct of the First and Second Respondents was unconscionable under s 46A(2) of the RSL Act is dismissed. 2. The Application for Compensation and Declarations concerning the First Respondent having breached s 46(2) of the RSL Act is dismissed. 3. The Applicants are at liberty to arrange an alternative electricity provider and install a separate electricity meter on the demised premises situated at Shop 1, 95 Tingal Road, Wynnum within 30 days of the date of this Order, and the Second Respondent shall give the Applicants and/or their agent access to the shopping centre for this purpose. 4. The Second Respondent shall pay the -- 1 of 23 -- 2 Applicants $3,500.00 for compensation for foregone electricity savings, by 4:00 p.m. on 30 April 2015. 5. The Second Respondent shall pay the Applicants $1,765.41 for costs associated with the interruption to trade as a result of the flooding of the demised premises, by 4:00 p.m. on 30 April 2015. 6. The Second Respondent shall pay the Applicants $240.62 for costs associated with the turning off power to equipment, by 4:00 p.m. on 30 April 2015. 7. The Second Respondent’s Application for the First Respondent to pay the costs associated with the remedial work in installing an Overflow Relief Valve is dismissed. 8. All other Claims as between the parties are dismissed. 9. All Applications for Costs are dismissed. CATCHWORDS: RETAIL SHOP LEASE DISPUTE – Unconscionable conduct – Compensation – Notice to Exercise Option – Over Charging of Outgoings – Provision of Bank Guarantee – Bulk Electricity Charges – Repairs to Air- conditioner – Validity of Breach Notices – Failure to issue Disclosure Notices – Costs Queensland Civil and Administrative Tribunal Act 2009 (Qld) ss 3(b), 4(c), 100, 102 Retail Shop Leases Act 1994 (Qld) ss 7(3)(b), (4), 22, 29, 43(1)(a), (c), (d), 46(2), 46A, 46B, 83 Property Law Act 1974 (Qld) ss 124(2), (3) Australian Competition and Consumer Commission v 4WD Systems Pty Ltd [2003] FCA 850 Australian Competition and Consumer Commission v Simply No-Knead (Franchising) Pty Ltd (2000) 104 FCR 253 Australian Competition and Consumer Commission v Lux Distributors Pty Ltd [2013] FCAFC 90 Cameron v Qantas Airways Ltd [1994] 55 FCR 147 -179 Commercial Bank of Australia Ltd v Amadio [1983] 151 CLR 447 Hurley v McDonald’s Australia Ltd [2000] ATPR 41-741 -- 2 of 23 -- 3 Mudie v Gainriver [2002] 2002 QCA 546 Murrimbane v Campbell [2006 RSLT 013 QIC Logan Hyperdome Pty Ltd & Anor v Briridge Pty Ltd & Anor [2001] QSC 43 Sun Chi Tuan Pty Ltd v Helen Dimitrijevski & Anor [2008] RSLT 102 & 005 W Thomas & Co Pty Ltd v Federal Commissioner of Taxation [1965] 115 CLR 58 APPEARANCES: APPLICANT: Ms J Baxter RESPONDENT: Ms J K Chapple of Counsel instructed by Holding Redlich, Solicitors for the First Respondent Mr G Baker for the Second Respondent REASONS FOR DECISION Introduction [1] Kennion (Trustees) Pty Ltd is the lessor/owner of a shopping centre at 95 Tingal Road, Wynnum. Gregory Louis Baker is the director of Kennion. Subway Realty Pty Ltd is the lessee of Shop 1 in the shopping centre. Joanne Margaret Baxter as a franchisee of Subway. Ms Baxter operates the Subway franchise through her company, Fifties Food Pty Ltd as trustee for The Ninja Bear Trust. For the purpose of this decision, any reference to Ms Baxter, shall also refer to Fifties Food Pty Ltd atf The Ninja Bear Trust t/as Subway Wynnum Central. [2] Ms Baxter purchased the Subway franchise from Maria Taplin on 2 February 2011. Ms Baxter and Subway signed a Franchise Agreement and a sub-lease whereby Ms Baxter assumed responsibility/liability of the performance of Subway’s obligations under the head lease, including the payment of rent and outgoings. [3] Ms Baxter filed a Notice of Dispute on 24 April 2012. Ms Baxter also filed an Amended Amended Points of Claim (“AAPOC”). Subway and Kennion filed Responses. All parties filed extensive written statements and attached considerable exhibits in support of their respective cases. During the hearing five witnesses were made available for cross- examination. The final hearing commenced on 2 December 2013. On 5 December 2013, the hearing was adjourned part heard and recommenced on 8 October 2014, concluding on 10 October 2014. Actual time involved in conducting the hearing amounted to 4½ days. [4] During the hearing Ms Baxter sought to introduce further evidence to support the claims which had not been set out in her Notice of Dispute and the AAPOC. She also sought disclosure of more documents from Subway -- 3 of 23 -- 4 and Kennion. These applications were dismissed by the Tribunal on the basis that all parties had been earlier directed to file all witness statements prior to the hearing and that no further evidence would be able to be adduced at the hearing. Also, any application for further disclosure should have been made prior to the commencement of the hearing. [5] Although Ms Baxter’s applications were unsuccessful, Ms Baxter was afforded extra time to prepare her case when proceedings were adjourned on 3 and 4 December 2014. There was also a period of ten months between the adjourned hearing dates for her to prepare her case. This time was afforded to not only to Ms Baxter, but also Mr Baker. Both were not legally represented, to ensure that they addressed the relevant issues in dispute, noting our obligations under s 29 of the Queensland Civil and Administrative Tribunal Act 2009 (QCAT Act). [6] At the conclusion of the examination of witnesses, the parties were directed to file written submissions, which were all filed on 31 October 2014. The submissions were extensive and detailed and have been of great assistance in identifying the areas of contention between the parties. Claims [7] In summary, Ms Baxter seeks the following Declarations: 1. That Subway in not providing the Notice of the date of exercise of renewal between 21 April 2012 and 21 August 2012, Subway breached s 46(2) of the Retail Shop Leases Act 1994; 2. That Ms Baxter is not in breach of the sub-lease in any way; 3. That Fifty Foods is not in breach of the lease in any way; 4. That the breach notices issued by Kennion on 8 December 2011 and 27 July 2012 were invalid; 5. That Kennion had breached the lease and sub-lease in respect to (a) The failure to issue a Disclosure Notice; (b) Charging outgoings on the painting of the Demised Building; (c) Over charging Outgoings; (d) The circumstances relating to the provision of a bank guarantee; (e) Issuing Breach Notices; (f) The circumstances relating to the Plumbing, Sewerage and/or Drainage Issues; (g) The charges relating to the bulk electricity charges; and (h) Charging for the repair of the air conditioning unit. 6. That as a result of the above breaches, Subway and Kennion have acted unconscionably or have breached the laws of trespass. -- 4 of 23 -- 5 [8] Ms Baxter seeks the following orders: (a) That Kennion refund to Subway all monies paid in respect to the costs of issuing the Breach Notices of 8 December 2011 and 27 July 2012 and Subway pay such monies to Ms Baxter; (b) That alternatively Kennion pay Ms Baxter the above monies directly; (c) That Kennion and Subway pay Ms Baxter compensation as assessed by the Tribunal; (d) That Kennion and/or Subway pay Ms Baxter the following: (i) $18,519.89 for outgoings associated with fire protection, bulk waste bin, painting and caretaking for the year 2011 – 2015; (ii) $726.97 for replacement of Bank Guarantee; (iii) $2,437.70 for legal fees associated with the Breach Notices; (iv) $1,765.41 for compensation associated with flooding; (v) $240.62 for compensation for turning off power to equipment; (vi) $12,716.75 for compensation for forgone electricity savings; (vii) $7,954.00 for air-conditioning repairs. (viii) Interest on the above amounts. (e) That Clause 8.10 of the lease be struck out. (f) That Ms Baxter and Fifties Food be permitted to access to change the electricity meter. (g) That Subway pay their own legal costs including all legal costs accumulated on the “Combo Report” for Subway store number 29505. (h) That Subway and/or Kennion pay Ms Baxter and Fifties Foods costs on an indemnity basis. [9] The Tribunal has extracted the above summary of Ms Baxter’s claim from Ms Baxter’s AAPOC and her submission filed on 31 October 2014. Ms Baxter has included in her submissions additional declarations and remedies which were not identified in her AAPOC. As Subway and Kennion were not been afforded an opportunity to respond to these fresh claims, declarations and remedies, we dismiss these additional claims. We will make reference to these claims during the course of our decision. It is in the interest of all the parties that there should be a determination of all matters in dispute and to fulfil objects and functions of the Tribunal set out in ss 3 and 4 of the QCAT Act1. In particular, to have the Tribunal deal with matters in a way that is accessible, fair, just, economical, informal and quick and to ensure proceedings are conducted in an informal way that minimizes costs to parties, and is as quick as is consistent with achieving justice. 1 QCAT Act ss 3(b), 4(c). -- 5 of 23 -- 6 [10] The orders sought by Ms Baxter are resisted by Kennion on the following grounds: (a) The Tribunal does not have jurisdiction, as the lease of 20 May 2003 between Kennion and Subway is subject to the earlier provisions of the Retail Shop Leases Act 1994, which were amended in 2006; (b) There is no privity of contract, that is, no contractual relationships between Ms Baxter or Fifties Foods and Kennion, that is, as between the sub-lessees and Lessors; and (c) It did not consent to the granting of the sublease. [11] Kennion also seeks an order for costs. [12] Subway resists the orders sought against Kennion on the grounds that it has no obligation to pay Ms Baxter or Fifties Food because under the Franchise Agreement and the sub-lease between Subway and Ms Baxter, she has obligation to pay outgoings to Kennion. [13] Subway also submits that any order that may be direct to it, would in any case be payable by Ms Baxter pursuant to the sub-lease and Franchise Agreement. [14] Subway submits that Ms Baxter’s claim is untenable and is not supported on the evidence. Subway is silent in respect to the question of costs. Retail Shop Leases Act 1994 [15] Once jurisdiction is established the Tribunal can determine disputes and make orders pursuant to ss 83 and 103 of the Act. An order can require a party to do something or not to do anything and can include the payment of compensation. [16] The primary dispute relates to claims under the sub-lease between Subway and Ms Baxter and Fifties Food. The sub-lease was entered into on 2 February 2011, well after the 2006 amendments which expanded the definition of “lessee” to include a sub-lessee or franchisee entitled to occupy the shop under the lease, or with the lessor’s consent. This amendment removed the problem of lack of privity of contract between a head lessor and a sub-lessee/franchisee. [17] As this is an issue raised by Kennion from the outset, we find that this is a dispute which we can be determine and we reject Kennion’s submission that the Tribunal doesn’t have jurisdiction. The lease and sub-lease [18] In regard to Kennion’s assertion that it did not give consent for the sub- lease, we refer to Clause 23.3 of the Head lease: The lessee may sublet the whole of the premises to any bona-fide Subway licensee/franchisee of Subway Systems Australia Pty Ltd without the prior -- 6 of 23 -- 7 consent of the lessor provided that the first person to whom the lessee sublets executes the guarantee annexed to this lease. The lessee may subsequently sublet the whole of the premises to any bona-fide Subway licensee/franchisee of Subway Systems Australia Pty Ltd without the prior consent of or written notice to the lessor, however the lessee must provide written notice to the lessor as to the name and address of the licensee/franchisee concurrently with the execution of such sublease of the premises. [19] It was never contested that Kennion was not notified of Ms Baxter’s occupation of the premises and entering into a sub-lease. Kennion, was well aware of Ms Baxter’s occupation of the premises. Also, the evidence establishes that there was significant communication between the parties throughout the relevant times the subject of this dispute. It is difficult to accept that Kennion acted throughout on the basis that it was not aware of the sub-lease. Kennion took no action to challenge the sub-lease arrangement and Ms Baxter’s occupation of the demised premises. [20] It follows that we reject Kennion’s submission that consent was required and it did not give consent in respect to the sub-lease. The Head lease clearly made provision for a sub-lease being granted without the consent of the Lessor. [21] The relevant parts of the sub-lease are: (a) The Sub-Lessee agrees to perform and observe all of the obligations of Sub-Lessor as tenant under the Head lease .....2; (b) The Sub-lessor is conveying to the Sub-Lessee, subject to the terms and conditions of this sub-lease only the rights to the Premises what were acquired under the Head lease .........3; [22] The sub-lease not only set out the rights and obligations between Ms Baxter and Subway, but also it materially affected the rights and obligations of Kennion. Although there is no direct contractual relationship with Ms Baxter or Fifties Food and Kennion, when both the Head lease and the sub-lease are read together, contractual obligations were implied. This becomes very relevant to the way Kennion and Baxter approached the matters in dispute. [23] Much turns on all of the parties’ obligations under the Head lease and sub- lease. The Head lease and sub-lease must be read together to make sense of their obligations. Kennion cannot simply rely on its non-consent to the sub-lease to submit that there is no privity of contract between it and Baxter/Fifties Food. The Head lease provides for and foreshadows a future sub-lease, given the nature of Subway’s business. The sub-lease does affect Kennion rights and obligations as between Kennion and Subway. Clause 7 of the sub-lease conveys Subway’s rights to Baxter. Therefore, Kennion was put on notice when the sub-lease was set up that 2 Clause 4 of the sub-lease. 3 Clause 7 of the sub-lease. -- 7 of 23 -- 8 its rights would be materially affected as against Subway. Kennion was therefore able to seek remedies directly against Baxter. [24] We also take the view that Kennion, knowing that Ms Baxter was the Sub- Lessee, should have sent Breach Notices to both Subway and Baxter4. Although this would have been a duplication, given the nature of the relationship between all parties, these are important documents which should been brought to the notice of the defaulting party. It is also the most obvious way that all parties would be kept informed for significant breaches, notwithstanding the enormous amount of emails and correspondence that were being exchanged between the parties. [25] Although Subway, as the “middleman” had a duty to pass on information to its sub-lessee and also to receive information and notices on behalf of the sub-lessee, Ms Baxter, we find that it not fatal that Kennion may not have sent information, documents and notices to Baxter. Having heard all of the evidence, we find that in respect to the complaints made by Baxter, particularly concerning the service of notices, Baxter became aware of them and had knowledge of the potential breaches which had occurred or were occurring at the relevant times. [26] The evidence also establishes that it had come to Kennion’s knowledge that a sub-lease had been granted and Ms Baxter took over all of Subway’s obligations under the Head lease. Despite the granting of the sub-lease, Subway still had obligations to Kennion under the Head lease. Kennion had no direct obligation to Ms Baxter, notwithstanding that there is very clear evidence of significant communication between Ms Baxter and Mr Baker for Kennion during the relevant time periods. Kennion’s rights against Subway were also preserved. [27] We also note that the sub-lessee, Ms Baxter irrevocably appointed Subway to be her attorney to secure the performance of her obligations under the lease5. There were default provisions in the sub-lease should Ms Baxter default in her obligations6. Subway could terminate the sub- lease for such breaches. We therefore find that Subway had an obligation to take whatever steps were necessary to ensure Ms Baxter complied with not only her obligations under the sub-lease but also the Head lease. This includes the passing on of information, letters, emails and notices. [28] Under the sub-lease, Subway had the same rights as Kennion had under the Head lease, as they applied to seeking remedies for default. [29] Although there was no direct contractual relationship between Kennion and Ms Baxter or Fifties Food, this doesn’t bar Ms Baxter from bringing her Application against Kennion. The contractual obligations between the parties merged, and the Head lease and the sub-lease should be read 4 Clause 23.13 of the Head lease. 5 Clause 17 & 19 of the sub-lease. 6 Clause 5 of the sub-lease. -- 8 of 23 -- 9 together, whereby Subway and Ms Baxter obligations co-exist as against Kennion and vice versa. [30] What this means is that had Ms Baxter’s brought an action against Subway, Subway could have joined Kennion. Had Kennion brought an action against Subway, Subway could have joined Ms Baxter. The end result is what has emerged in these proceedings. [31] For the reasons set out above, we find that these proceedings relate to the relationship of landlord and tenant/s and as such we intend to address the issues in dispute as between Kennion and Baxter, through their respective contractual relationship with Subway. The only matter which directly involve Subway are those which relate to the allegations of unconscionable conduct. Unconscionable Conduct [32] Sections 46A and 46B of the Retail Shop Leases Act 1994 (RSL Act) sets out the provisions applicable to unconscionable conduct. The Act provides for a wide range of conduct which would constitute acting unconscionably. [33] A review of the case authorities point to assessing the following: (a) Is the conduct an overwhelming case of unreasonable, unfair, bullying and thuggish behaviour7; (b) Is it serious misconduct or something clearly unfair or unreasonable and showing no regard for conscience, or irreconcilable with what is right or reasonable8; (c) It is necessary to do more than merely show that the behaviour is misleading or deceptive9; (d) Is the conduct unacceptable and some moral fault or responsibility is involved10; (e) Is it a deliberate or reckless act11; (f) Does a party have some special disability/disadvantage12; (g) Is it an unconscionable use of a superior position or bargaining power to the detriment of a party13; (h) Is it taking advantage of an innocent party14; 7 Australian Competition and Consumer Commission v 4WD Systems Pty Ltd [2003] FCA 850 at 183 – 185; Australian Competition and Consumer Commission v Simply No-Knead (Franchising) Pty Ltd (2000) 104 FCR 253. 8 Cameron v Qantas Airways Ltd [1994] 55 FCR 147-179. 9 Hurley v McDonald’s Australia Ltd [2000] ATPR 41-741 at 22. 10 Ibid. 11 Ibid. 12 Commercial Bank of Australia Ltd v Amadio [1983] 151 CLR 447. 13 Ibid. 14 Ibid. -- 9 of 23 -- 10 (i) Is the conduct against a normative standard of conscience, permeated with accepted and acceptable community values in context of accepted and acceptable community values; consumer dealings, requiring honest and fair conduct, free of deception; and notions of justice and fairness as well as vulnerability, advantage and honesty15; (j) The overall conduct of the parties; power imbalance; intimidation; unfairness; and a party in a weaker position16; [34] Ms Baxter relies upon the following conduct to support her claim that Subway acted unconscionably17. (a) Ms Vale, who is employed by Subway as a lease Administrator failed to forward to Ms Baxter a Notice to Remedy Breach; (b) Subway not taking action to require Kennion to replace an air conditioning Unit; (c) Subway not taking action to require Kennion to remedy the drainage and sewerage issues; and (d) Subway not taking action to require Kennion to redress and remedy the overcharging of irrecoverable outlays. [35] In respect to (a) above, Ms Vale said she received a Notice to Remedy Breach on 19 October 2011 and she had no record of sending it on to Ms Baxter. We find that this was not deliberate or intentional. Ms Vale did not attempt to hide her conduct and she impressed as a truthful witness. [36] Having heard the evidence on this point, we find that Ms Vale’s conduct falls well short of unconscionable conduct. It was not deliberate or reckless; overwhelmingly unfair; misleading or deceptive. There was no moral fault. We do not accept that any party was in a position of superiority. We do not accept that a party was taking advantage of an innocent party. It was an oversight which was readily admitted. Such conduct doesn’t fall within any of the criteria of case authorities. [37] In respect to (b), (c) and (d) above, under the sub-lease, Subway had an obligation to notify Kennion if Ms Baxter notified Subway when Kennion failed to perform its duties under the Head lease18. Baxter went to great lengths to set out her dissatisfaction in the way in which Subway failed to take sufficient action to notify or persuade Kennion to fix the air- conditioner, drainage and sewerage issues and overcharging issues. The evidence was that Subway did not ignore these complaints. Again, there was significant communications between parties about the complaints. Kennion did not accept Ms Baxter’s complaints. Because a lessor or and Sub-lessor disagrees with a lessee, this doesn’t constitutes 15 Australian Competition and Consumer Commission v Lux Distributors Pty Ltd [2013] FCAFC 90. 16 Australian Competition and Consumer Commission v Simply No-Knead (Franchising) Pty Ltd (2000) 104 FCR 253. 17 AAPOC paragraphs 2(e), 2(l), 99(c). 18 Clause 7 & 8 of the sub-lease. -- 10 of 23 -- 11 unconscionable conduct. Those issues are now the subject to this dispute and are matters of law, fact and the interpretation of the lease. [38] We accept the submission of Subway on this point. That is, Ms Baxter assumed that Kennion was not legally entitled to behave in the manner alleged. Subway cannot be said to have acted unconscionably by failing to force Kennion to do something which it (Kennion) asserted it was legally entitled to do under the lease. [39] We accept that Ms Vale, made sufficient attempts to appease Ms Baxter’s complaints by liaising with Mr Baker for Kennion. There is nothing in the evidence which would constitute unconscionable conduct within the criteria of the case authorities referred to in this decision. [40] Ms Baxter also submits that Mr Baker for Kennion acted unconscionably. She asserts that Mr Baker’s withdrawal from direct contact with her, was the conscientious use of his superior position to put her at a special disadvantage. She submits that it became a pattern of behaviour which deprived her of information and the ability to communicate directly with Mr Baker. She submits that Mr Baker sent her fairly harshly worded emails which made her feel intimidated. She submits that as a result of the above, there was a power imbalance whereby Mr Baker was in a superior position and she felt she was treated unfairly. [41] Overall, Ms Baxter’s evidence and her submissions, are that she believed she was in a position of special disadvantage and she felt she was the innocent party. She primarily directs her submission towards Mr Baker’s conduct, but she also took the view that his actions and conduct were supported by Subway. [42] Having heard her evidence and read her submissions on this point, we find Ms Baxter did not impress as a completely truthful witness. She was hesitant and consistently failed to answer questions and appeared to construct her answers to enhance her case. She answered in a way to avoid too much scrutiny of her conduct and state of mind. Her behaviour before the Tribunal, in not answering specific questions put to her, when she was cross examined affects her credibility. She refused to accept uncontested facts. She came across as a strong woman who would not be easily intimidated. She put her case in a forthright manner. [43] We have read the correspondence and email exchanges between Mr Baker and Ms Baxter and we do not find that his conduct was in any way intimidating. The exchanges were within the acceptable standards of commercial dealings. His conduct and that of Subway were within the norms and standards of society in terms of honesty and fairness. We take into account that there were disagreements between Mr Baker and Ms Baxter, this doesn’t mean by putting your position in a direct and robust way, that this constitutes intimidation. [44] Ms Baxter is an experienced business woman, having owned and operated two other Subway businesses. She has also prepared her own -- 11 of 23 -- 12 case in these proceedings and has made lengthy submissions, which have involved some complex areas of law and detailed analysis of the facts. She impresses as a savvy business woman who doesn’t back away from a fight. She could not be said to be in a position of special disadvantage or a victim. She matched Subway and Mr Baker in the way she responded to correspondence and emails during the course of the disputation between the parties, leading up to these proceedings. [45] Accordingly, it follows that we find that Mr Baker for Kennion and Subway did not act unconscionably. Specific Claims [46] We will now deal with each specific claim. Subway not providing the Notice of the date of exercise of renewal of the lease [47] Ms Baxter has not made any submissions on this issue. During the course of the hearing, it became evident that Ms Baxter had exercised the option and she was in occupation of the demised premises. We do not intend to make any finding on this issue. No compensation would flow if the option has already been exercised. There has been no loss or damage suffered. Breach Notices [48] There are three Breach Notices in question. They being issued on 14 October 2011, 8 December 2011 and 27 July 2012. [49] The first Breach Notice issued on 14 October 2011, relates to the payment of contested outstanding outgoings. We have already found that Kennion had an obligation to serve Breach Notices not only on Subway but also Ms Baxter19, or at the very least bring the issue of the Breach Notice to the attention of Ms Baxter. We also take the view that Subway could have served their own Breach Notices on Ms Baxter. Although Kennion did not serve Ms Baxter, the breach concerning the non-payment of outgoings was a live issue between the parties and Ms Baxter was well aware of the alleged breaches and had knowledge of the background to them. There was considerable communication between the parties concerning these outgoings. [50] Ms Baxter was in breach at the time the Breach Notice was issued and we therefore find that the Breach Notice was validly issued. [51] The second Breach Notice issued on 8 December 2011, relates to Ms Baxter’s non-compliance with the provision of the correct Certificate of Insurance and her failure to provide a replacement bank guarantee. There was an exchange and escalation of correspondence and emails between the parties concerning these issues, leading up to the issue of the Breach Notice. 19 Decision paragraph [24]. -- 12 of 23 -- 13 [52] Ms Baxter says that she was not aware of the correspondence and emails between Subway and Kennion leading up to the issue of the Breach Notice. She says that she was not aware of defect in the Certificate of Insurance which she had already supplied to Kennion through Subway. Notwithstanding her lack of knowledge concerning the inadequacy of the Certificate of Insurance, she was well aware of the issues surrounding the replacement bank guarantee. She remedied the breaches on 12 December 2011 (Certificate of Insurance) and 22 December 2011 (Bank Guarantee) [53] She was in breach at the time of the issue of the Breach Notice and we therefore find the Breach Notice was validly issued. [54] The third Breach Notice issued on 27 July 2012 relates to Ms Baxter’s non-payment of air-conditioning repair costs. Although she was aware that these costs were outstanding, she did not pay them as she was attempting to negotiate a resolution of the air-conditioning issue with Kennion. The air-conditioning issue is also the subject of these proceedings and will be discussed later. We find that the Breach Notice was validly issued and Ms Baxter. [55] Ms Baxter seeks the refund of the legal fees she paid to Kennion for the issue of the Breach Notices. She relies upon ss 124(2) and (3) of the Property Law Act 1974 where a Court has a discretion to grant relief having regard to the conduct of the parties, even if a Breach Notice was validly issued. She submits that had she received the Breach Notice which was served on Subway on 14 October 2011, she would have taken steps to remedy the alleged breach. She submits she did not receive crucial and time sensitive information. We accept that Ms Baxter did lose the opportunity to respond and it would have been prudent for Kennion to have taken steps to serve her with the Breach Notice. Subway could have also informed her or passed on the Breach Notice. [56] However, we find that Ms Baxter was aware of the alleged breaches prior to the issue of the Breach Notices. We have found that they were validly issued. [57] There are no similar provisions under the RSL Act as those referred to in the Property Law Act 1974. In any case, we do not find any circumstances which would warrant the granting of relief as to the legal costs expended by Kennion’s in this matter. [58] Taking those matters into account, we consider that Ms Baxter was liable to pay Kennion’s legal costs associated with the issue of the Breach Notices. Disclosure Notice [59] It is common ground that Subway did not provide a Lease Disclosure Statement under Part 5 of the RSL Act. -- 13 of 23 -- 14 [60] Ms Baxter sought to introduce this cause of action into her case at the beginning of the hearing. As she had never previously raised this point in her claim, and the other parties would have been disadvantaged, the Tribunal refused her application to amend her Claim. The parties had had ample time to prepare their respective cases and it had also been directed that no further evidence was to be able to be filed at the hearing. Irrespective, of this ruling, we consider it appropriate to make some observations on this point, as our later findings turn on Ms Baxter’s knowledge and understanding of the terms of the Head lease and sub- lease. [61] Ms Baxter has attempted to introduce this claim into her final submissions. We do not intend to allow this, for the same reasons as previously enunciated during the course of the hearing. However we make the following observations. [62] Notwithstanding the obligation of a Lessor to provide a Lease Disclosure Statement, under the RSL Act20, the provision of Disclosure Statements is to inform the prospective Lessee of critical information about the lease. Section 22 of the RSL Act provides for compensation to be paid to the Lessee if there is non-compliance or the Disclosure Statement is defective. Subsection (5) provides the Lessee cannot terminate the lease for non-compliance if the Lessor acted honestly and reasonably and the Lessee is in substantially as good a position as the Lessee would have been if the disclosure statement were not defective. [63] The evidence adduced was that prior to acquiring the franchise, Ms Baxter had owned and operated two other Subway business and knew it was Subway’s practice when entering into a head lease it would sublet those premises to the franchisee. In documentation provided to Ms Baxter, Subway recommended that she obtain a “notarised estoppel” signed by the landlord and the outgoing franchisee (Mrs Taplin) at settlement. As well, she was advised to hold sufficient money in an escrow account to cover any “rent and related charges” which were outstanding from the vendor to the landlord under the lease before settlement proceeded. [64] It was also recommended by Subway that Ms Baxter conduct her own due diligence to ascertain the amount of outgoings and rent payable under the lease, prepare a business plan, and consult with her accountant, lawyer and financial advisers before proceeding with the purchase. Ms Baxter signed a receipt confirming that she had received the package of information sent by Subway. [65] Ms Baxter obtained accountancy advice and was represented during the transaction by her lawyer. Ms Baxter carefully read the lease and took steps to ascertain the monthly fees for rent and outgoings and other expenses together with review Ms Taplin’s profit and loss statements. She also obtained the audited outgoings report for the 2010 financial year. Ms Baxter also read the sub-lease. 20 RSL Act s 22. -- 14 of 23 -- 15 [66] As previously indicated the purpose of Part 5 of the RSL Act is to ensure that a lessee is informed of critical information concerning a lease or sub- lease. Given Ms Baxter had demonstrated experience in conducting a Subway franchise and having been represented by a lawyer supported by her accountant during a due diligence period, it is difficult to accept that she was prejudiced by any non-compliance by Subway or Kennion. She had an opportunity to seek all the information which would have ordinarily been inserted in a Disclosure Statement. There is no evidence to indicate that any such information was excluded from Ms Baxter’s due diligence inquiries. [67] Also, taking into account QIC Logan Hyperdome Pty Ltd & Anor v Briridge Pty Ltd & Anor21, Ms Baxter doesn’t have an arguable claim to support an amendment to her claim to include this additional claim. We do not consider that her claim was not fundamentally flawed; lacked particularity; had no arguable claim or shortcomings. She had every opportunity to have included this additional claim prior to the hearing. Painting [68] There are two issues here. Firstly, was the repainting of the complex a capital cost or maintenance expense and secondly, if a maintenance expense, were the repainting maintenance correctly calculated taking into account the gross floor area. If a capital cost, then the RSL Act doesn’t permit these costs being passed on to lessees.22 [69] The definition of “outgoings” under the lease include repair, painting, cleaning and graffiti removal.23 [70] Section 7(1)(a) of the RSL Act provides that a lessors outgoings for a retail shopping centre or leased building are the lessor’s reasonable expenses directly attributable to the operation, maintenance or repair of the centre or building of building. [71] We have been referred to W Thomas & Co Pty Ltd v Federal Commissioner of Taxation24 where it was noted: The words “repair” and “improvement” may for some purposes connote contrasting concepts; but obviously repairing a thing improves the condition it was in immediately before repair. It may sometimes be convenient for some purposes to contract a “repair” with a “replacement” or a “renewal”. But repairs to a whole are often made by the replace of worn-out parts by new parts. Repair involves a restoration of a thing to a condition it formerly had without changing its character......... Whether or not work done upon a thing is aptly described as a repair of that thing is thus a question of fact and degree. 21 QIC Logan Hyperdome Pty Ltd & Anor v Briridge Pty Ltd & Anor [2011] QSC 43. 22 RSL Act s 7(3)(b). 23 Dictionary Appendix to the lease. 24 W Thomas & Co Pty Ltd v Federal Commissioner of Taxation [1965] 115 CLR 58, 72. -- 15 of 23 -- 16 [72] In this case, there was evidence that the building needed painting as a result of graffiti, fading and weathering. Mr Baker believed that it was impracticable to continue to paint over the graffiti. The building had experienced significant wear and tear. The repaint did not improve the functionality of the building and did not change its character. [73] Accordingly, we find that the repainting expenses were proper outgoings charged by Kennion. [74] It was uncontested that the audited and actual costs of repainting Building No 2 during the financial years 2010/2011 and 2011/2012 were $16,720.00. Ms Baxter conceded in evidence that this was different to the estimated costs of $18,308.40. She accepted that should there be a shortfall between the actual and estimated costs, she would be liable for such shortfall. Mr Baker gave evidence that $13,376 related to the financial year 2010/2011 and the balance was for the financial year 2011/2012. [75] Mr Baker also submitted that should the Tribunal find that the apportionment of painting costs include the Commonwealth Bank Building, then Kennion would need to recalculate the apportionment of the painting costs. We find that the painting costs should only be apportioned as “building outgoings” and not as Mr Baker termed it “complex outgoings”. The lease is clear on this point. The demised premises only relate to the building and not the other buildings in the complex25. [76] We have attempted to follow Ms Baxter’s submission wherein she attempts to calculate the difference in her calculations and Kennion’s calculations. We see a flaw in her calculations. Her conclusions are based on a percentage of the Gross Floor Area as it relates to the Complex and not the building the subject to the demised premises. She also bases her calculations on a painting outgoing of $8,166.99 for the financial year 2010/2011 where in fact the outgoing charge was $13,376.00. [77] As a result we do not intend to find in favour of Ms Baxter on this point. We find that the painting outgoings were correctly calculated and apportioned by Kennion. [78] We also note, based on the evidence that the amount of $5,573.72 which is sought by Ms Baxter by way of compensation is a misconstrued calculation as this is amount doesn’t relate to the repainting issue. This is the difference between the entire annual estimate and the actual incurred outgoings, which Ms Baxter agreed would be payable if there was a shortfall in the actual outgoings. Outgoings Generally [79] Ms Baxter contends that Kennion has not calculated outgoings in accordance with the lease noting that there two types of outgoings. 25 Item 5 of the lease dated 20 May 2003. -- 16 of 23 -- 17 One being for the complex and the other for the building in which the demised premises are located. Kennion acknowledges that it did miscalculate various outgoings and admit to a clerical error. Kennion now uses footnotes on annual estimates which identifies the two types of outgoings. Ms Baxter submits that this doesn’t comply with s 37 of the RSL Act. Ms Baxter doesn’t give any reasons for asserting non- compliance with s 37 of the RSL Act. [80] The error has been acknowledged and Kennion has now taken steps to remedy the error. We do not intend to make any finding in respect to this issue as it serves no utility in the overall dispute between the parties. Bulk Waste Bin [81] The lease provides for charging for bulk waste bin collection and has been included in the Annual Estimate of Outgoings. There are charges for two clearances of bulk waste bins. The first bin is apportioned at a rate of 9.76% of total cost of that collection and the other bin is charged at rate of 100% of total costs as this bin is specifically used by Ms Baxter because of the large amount of waste produced by the business. [82] It is not contested that the second bin collection has been in place since July 2005 and had been arranged by a previous sub-lessee/franchisee. [83] Ms Baxter submits that she was not aware of the second bin charge. Subway submit and we find that Ms Baxter was informed of the additional bulk waste bin charges prior to entering into the sub-lease and she had the opportunity to make her own inquiries during her due diligence period. We accept this submission. [84] We therefore reject Ms Baxter’s claim in respect to the additional charges. Fire Protection Services [85] The lease provides for this type of charge as an outgoing. Ms Baxter concedes in her submission that she readily accepted the charge once it was identified. There is no evidence to support her contention that the Chubb plans were defective. Again, Ms Baxter had every opportunity prior to entering into the sub-lease to question these charges. [86] We therefore reject Ms Baxter’s claim. Caretaking [87] Ms Baxter contends that Mr Baker was an employee of Kennion and therefore under the lease26, caretaking charges are restricted to 5% of outgoings from time to time. She also listed in her statement and submission a litany of complaints about Mr Baker’s caretaking duties including: misleading the valuer who determined the market rent 26 Paragraph (e) of Definition of Outgoings in Dictionary Appendix of lease. -- 17 of 23 -- 18 assessment; the number hours Mr Baker worked; cleaning of graffiti; cleaning the sewerage inspection chamber; cleaning the toilets and common areas; gardening; the use of outside contractors; the frequency of unlocking the waste bins; fixing leaking roof; and removing of mould contamination. [88] We accept Mr Baker’s evidence that he was not employed by Kennion. Accordingly, the 5% restriction doesn’t apply. We also accept his evidence that he carries out his duties in an appropriate manner. [89] We reject Ms Baxter’s evidence on her observations of Mr Baker’s duties. We have also made earlier comments about Ms Baxter’s evidence in these proceedings, and we find that she was unconvincing in her assertions in this issue. [90] It follows that we do not accept her claim in the refund of caretaking fees. Bank Guarantee [91] Ms Baxter contends that she was informed by Ms Vale that she didn’t have to pay the outgoings set out in Invoice No 551 for $5,067.02. She says that Ms Vale said: ‘I would not be paying this bill until all investigations have been completed’. As a result Kennion having not received payment, took recovery action which ultimately meant that the bank guarantee supplied by Ms Baxter was cashed. [92] We do not accept Ms Baxter’s evidence on what she recalls Ms Vale advising. Ms Vale disputes this conversation. We accept Ms Vale’s evidence on this point. [93] Invoice No 551 related to the earlier discussion in this decision, that is, the shortfall between the estimated annual outgoings and the actual outgoings. The payment of these outgoings had been a continuing issue between the parties. We consider that it would have been reasonable for Ms Baxter to have been aware that as a result of the non-payment of outgoings, Kennion’s would call in the bank guarantee and/or issue a Breach Notice. [94] Although the evidence on this point was quite convoluted, as a result of the considerable amount of emails, correspondence and communications between the parties, we are left with the overall impression that Ms Baxter would have been aware of the possibility of the bank guarantee being called in. [95] We find that Kennion exercised its rights under the lease and validly called in the bank guarantee. Bulk Electricity [96] Ms Baxter asserts that she requested Kennion to agree to change the electricity supplier in order to reduce her electricity charges which form part of her outgoings charged by Kennion. This would necessarily involve -- 18 of 23 -- 19 installing a new electricity meter. She sought this change from Kennion, via representations to Subway soon after taking occupation of the demised premises in 2011. Kennion responded, giving its consent on condition that Subway provide the following indemnity: We require written confirmation that any works we ultimately agree to will be carried out at no expenses to us and on the basis that your tenant will indemnify and hold harmless this company and its agents, invitees, employees and tenants from and against any and all demands, liabilities, losses, claims, damages, costs and other expenses (including legal fees) arising directly or indirectly out of or involving such works by your tenant and its contractors, agents, etc27. [97] Subway would not provide the indemnity. No reason was given for refusing to provide the indemnity, other than, they didn’t give such indemnities. [98] The parties make contentious submissions as to whether by seeking the indemnity, this constituted Kennion refusing Ms Baxter’s request. However, it was uncontested that Kennion did impose a condition that an indemnity had to be provided. Kennion later sought, by way of an alternative, the payment of monies into trust until the installation of the electricity meter was completed without incident28. This is extraordinary, given Kennion already held a Bank Guarantee as security, in the sum of $15,000.00. [99] We find that it was unnecessary for Kennion to seek the indemnity or seek the payment of monies into trust. Its rights to seek recovery of any loss and damage as a result of the installation of the new electricity meter, were already preserved under the terms of the lease. The lease didn’t provide for the provision of the indemnity sought by Kennion. [100] Notwithstanding the above, we do not consider that Kennion’s conduct was unconscionable. Kennion sought the indemnity on the basis that it wanted to ensure there would be no future argument between the parties concerning this matter. However, we find that it was unnecessary as Kennion had no right or entitlement to impose such a condition. [101] We also take the view that during the course of reasonable commercial conduct, it is not unusual for such indemnities to be sought and given. We are not surprised by the conduct of the parties in respect to this issue, given the deterioration of their relationships and the escalation of a whole range of disputes arising between them. Any of the parties could have easily compromised their rigid positions and the new electricity meter could have been installed without too much fuss. The parties’ rights and obligations as noted earlier were preserved under the terms of the lease. [102] Ms Baxter submits that Kennion was in breach of the lease for imposing the condition to provide the indemnity29. Ms Baxter seeks Kennion to pay 27 Kennion email to Subway dated 29 August 2011. 28 Meeting of 3 July 2012. 29 AAPOC paragraph 2(d). -- 19 of 23 -- 20 compensation as a result of the loss she suffered because Kennion substantially restricted her access to her lease shop. She relies upon s 43(1)(a) of the RSL Act. She submits that the electrical meter serves the premises exclusively and therefore falls under the definition of “lease shop”, which includes “items of plant external to the premises but serving them exclusively”. We agree. We find that Kennion breached its obligations to allow a new electricity meter to be installed in the demised premises. [103] Ms Baxter seeks compensation of $12,716.75 based on the calculations of Jobson Energy, representing her potential financial loss of cheaper electricity supply for the period August 2011 to the date of hearing. This is an ongoing loss. [104] The difficulty which emerges is quantifying Ms Baxter’s financial loss. Ms Baxter was in a position to mitigate her losses at a much earlier time. This would have significantly reduced the amount she now seeks. The only evidence submitted on quantum was that put by Ms Baxter. Her evidence was the Jobson Energy calculations which she exhibited to her statement. [105] Jobson Energy did not provide a statement to the Tribunal nor was a representative of Jobson Energy called to give evidence. Kennion and Subway were not given the opportunity to cross-examine Jobson Energy on their calculations. These calculations submitted by Ms Baxter are hearsay. [106] Ms Baxter was cross-examined on the circumstances of Kennion’s refusal and request for the indemnity, albeit fleetingly. She was not cross- examined about the Jobson Energy calculations. [107] We do not place much weight on these calculations and find that they are speculative. [108] However, we do find that it is more likely than not that Ms Baxter lost the opportunity to negotiate the lowering of the electricity charges through another electricity supplier. We accept her proposition and on the balance of probabilities, she would have been able to secure cheaper electricity. This must be balanced against her not taking action to mitigate her potential financial loss by not providing the indemnity sought by Kennion. [109] Taking the above matters into account, we make a general award of compensation to Ms Baxter in the sum of $3,500.00. Air-Conditioning [110] Ms Baxter’s claim in respect to the air-conditioning relates to whether Kennion are under an obligation to replace the air-conditioning unit within the demises premises or to continue to incur expenses in repairs. -- 20 of 23 -- 21 [111] The air-conditioner is 18 years old and Mr Baker is of the view that it can last forever as long as it is maintained and repaired when necessary. He says that it doesn’t need replacement. [112] Ms Baxter also raises again whether the work carried out on an old air- conditioning unit is a capital expenditure or a maintenance costs, thereby invoking s 7(3)(b) of the RSL Act. Kennion relies on Clause 8.10 of the lease to assert that maintenance costs apply. [113] Subway submits that this issue was never part of Ms Baxter’s claim and therefore should not be entertained by the Tribunal. [114] There are claims and counter-claims concerning this issue. Kennion pursuant to the lease passes on repair and maintenance costs to Ms Baxter. Ms Baxter says it is becoming uneconomical to repair and that it should be replaced as a capital item. [115] We take the view that the lease makes provision for repair and until the air-conditioning unit cannot be repaired then Ms Baxter has an obligation to continue to repair. Accordingly we reject Ms Baxter’s claim in respect to the air-conditioning unit. Plumbing, Sewerage and Drainage Issues [116] Ms Baxter’s submits that she was not afforded quiet enjoyment of the premises. Ms Baxter relies upon ss 43(1)(c) & (d) of the RSL Act. She says that she suffered loss as a result of a defect contained in the demised premises and such defect caused significant disruption to her trading. She further says Kennion did not take all reasonable steps to prevent or stop significant disruption within Kennion’s control. [117] Ms Baxter says she suffered loss as result of a plumber attending her store without notice and flooded the store on 20 September 2011. She seeks $449.13 for loss of trade. The plumber used a high pressure water hose to clear the blockage and that this caused sewerage to back up and flood the premises. [118] Ms Baxter’s other loss was for damages resulting from the premises being flooded with sewerage and effluent in January 2012 following a high rainfall event. [119] All parties accept that the flooding was caused by the installation of the Overflow Relief Gully in the demised premises by Kennion, in the incorrect location. Repairs were arranged by Kennion within two months after it received advice from the Brisbane City Council as to how to remedy the problem. Kennion inserted a reflux valve. [120] Kennion seeks Subway to pay for installing the Overflow Relief Gully in the sum of $5,780.00, on the basis that Subway refitted the premises in 2003 and lowered the lowest point of the drain entry below the Over Relief Valve, by adding a floor drain. -- 21 of 23 -- 22 [121] We accept Subway’s submission based on the evidence. That is, Kennion should have realized that the open floor wastes which were necessarily installed as part of the Subway tenancy, would allow sewerage to enter into the tenancy. Also, Kennion can’t stand silently without giving its approval to the planned fitout. This resulted in a major defect to the demised premises which also caused significant disruption to Ms Baxter’s business operation. [122] We therefore accept Ms Baxter’s claim for compensation in the sum of $449.13. We reject Kennion’s claim for Subway to pay installation costs. [123] As far as Kennion’s submission that the plumber was an independent contractor, therefore should be liable for such damage. We find that Kennion engaged the plumber to carry out the remedial work. The plumber was Kennion’s agent. Kennion may wish to take this up directly with the plumber. Certainly, there was no contractual relationship between Ms Baxter and the plumber. Electricity Shut Down [124] This claim also falls within Ms Baxter’s quiet and enjoyment claim. [125] Ms Baxter says that Kennion’s plumber attended the demised premises without notice and turned the power off to the walk-in fridge, freezer, hot and cold baine and individual air conditioning unit to undertake maintenance works on the roof of the building. She suffered loss of $240.62 as a result of not being able to restart the air conditioning for three hours during lunch time trading hours on a hot day. [126] Kennion do not deny the events, nor were these events challenged in the robust way other claims were during the course of the hearing. [127] We accept Ms Baxter’s evidence that she suffered loss as a result of a significant disruption to her business. We therefore accept the amount of compensation sought. [128] Both claims for compensation due to interruption to trade are modest and do not warrant close scrutiny by the Tribunal. We find that the quantum of the claims are fair and reasonable under the circumstances presented to us. Other Claims [129] In paragraphs 7 to 13 of this decision, we set out the parties’ claims and the relief each party sought. We have determined the substantive claims. In respect to the other claims, we make the following determinations: (a) We do not intend to make any general ruling whether a particular party has or has not breached the lease. This is unnecessary given there has been a determination of the substantive claims and it serves no good purpose to make a general ruling on this issue; -- 22 of 23 -- 23 (b) There is no evidence in support of, nor are we persuaded that there has been any trespass by any party. We dismiss this claim; and (c) We do not intend to make any ruling on whether Clause 8.10 of the lease should be struck out. Matters relevant to this clause have been addressed elsewhere in this decision. Costs [130] Both Ms Baxter and Kennion seek orders for costs. Subway’s Response and Submissions were silent in respect to the question of costs. [131] Other than as provided under the QCAT Act, each party to a proceeding must bear the party’s own costs for the proceedings. The Tribunal may make an order requiring a party to a proceeding to pay all or part of the costs of another party to the proceeding if the Tribunal considers the interest of justice require it to make the order.30 [132] Section 102 of the QCAT Act provides that the Tribunal may have regard to a party in a proceeding acted in a way that unnecessarily disadvantages the other party to the proceeding; the relative strengths of the claims made by each of the parties; the financial circumstances of the parties; and anything else the Tribunal considers relevant. [133] Under the QCAT Act, costs do not follow the event. There has to be good reason for such an award, such as in cases where there have been offers to settle or where the proceedings were frivolous or vexatious.31 [134] We do not consider that these proceedings were frivolous or vexatious. These proceedings raised important issues between the parties. Both Ms Baxter and Kennion have only been partly successful. Although Subway has been successful, it was caught up in these proceedings as a result of its contractual arrangements with both Ms Baxter and Kennion. It played an integral part in the communications between Ms Baxter and Kennion. Ms Baxter did not begin these proceedings with some mischievous motive. Although Ms Baxter misconceived her Claim against Subway, she did have genuine concerns about the way Subway and Kennion had responded to her complaints. [135] Having regard to the overall history of the proceedings and the overall circumstances to which we have referred, on balance, we are not satisfied that the interests of justice require that any costs order be made. We dismiss the applications for costs. 30 QCAT Act ss 100, 102. 31 Sun Chi Tuan Pty Ltd v Helen Dimitrijevski & Anor [2008] RSLT 102 & 005. Murrimbane v Campbell [2006] RSLT 013 where Mudie v Gainriver [2002] 2002 QCA 546 was followed. -- 23 of 23 --