Ferguson & Anor t/as Marika Asian Groceries v Cherish Enterprises Pty Ltd [2013] QCAT 412

CITATION: Ferguson & Anor t/as Marika Asian Groceries v Cherish Enterprises Pty Ltd [2013] QCAT 412 PARTIES: Jocelyn Ferguson and Terry Ferguson t/as Marika Asian Groceries (Applicant) v Cherish Enterprises Pty Ltd (Respondent) APPLICATION NUMBER: RSL073-12 MATTER TYPE: Retail shop leases matters HEARING DATE: 30 May 2013 HEARD AT: Brisbane DECISION OF: Sandra G Deane, Presiding Member Don McBryde, Member Neil Judge, Member DELIVERED ON: 5 August 2013 DELIVERED AT: Brisbane ORDERS MADE: 1. Jocelyn Ferguson and Terry Ferguson t/as Marika Asian Groceries is to pay Cherish Enterprises Pty Ltd $9,382.20 by 4pm on 16 August 2013 CATCHWORDS: RETAIL SHOP LEASE DISPUTE – claim for compensation by former tenant – failure to clean and maintain the centre and ensure that the lessor met health and safety and fire regulations - claim for arrears of rent and outgoings by lessor Retail Shop Leases Act 1994 ss 28, 43, 83, 103 APPEARANCES and REPRESENTATION (if any): APPLICANT: Jocelyn Ferguson and Terry Ferguson t/as Marika Asian Groceries, in person RESPONDENT: Cherish Enterprises Pty Ltd represented by Mr C Toogood of T Lawyers -- 1 of 9 -- 2 REASONS FOR DECISION [1] Mr and Mrs Ferguson were tenants in a shopping centre at Beenleigh owned by Cherish Enterprises. Mr and Mrs Ferguson claim compensation in the sum of $90,000 for loss of potential income. They contend that the lessor’s failure to clean and maintain the centre and ensure that it met health and safety and fire regulations has caused this loss. Cherish Enterprises counterclaims for outstanding rent and outgoings. Such a counterclaim may be entertained as the dispute is also about the payment of compensation by the lessor to the lessee.1 [2] The lease term commenced on 1 September 2008 and expired on 31 August 2011. Mr and Mrs Ferguson gave evidence that they vacated the premises in or about late July 2011. Mr Johnson Lin’s evidence suggests they may have stayed until the expiration of the lease. We prefer the evidence of Mr and Mrs Ferguson as their evidence was more definitive. [3] Mr and Mrs Ferguson moved out of the premises and commenced to trade at alternative premises. They admit that they owe an amount for rent and outgoings but contend it ought to be set off against the amount of compensation payable to them. The admission as to the amount owing was not precise. In that context it is incumbent upon Cherish Enterprises to prove, to the Tribunal’s satisfaction, the amount owing. [4] Mr and Mrs Ferguson contend that the amount of rent claimed should be discounted by 30%, being the discount Cherish Enterprises offered in view of the then state of the centre, including that there was no anchor tenant to assist to attract customers to the centre and the businesses being carried on at the centre. [5] Mr Lin gave evidence that at the time the 30% discount was offered to Mr and Mrs Ferguson the terms and conditions of that discount were not reduced to writing and he could not recall if any conditions were orally advised to Mr and Mrs Ferguson. Mr Lin in his written statement did not give evidence that the discount was conditional2. Cherish Enterprises purported to revoke the offered discount on the basis that amounts were not paid by the due date. [6] The evidence filed by both parties in support of their claims was not extensive. Cherish Enterprises did not provide a copy of the rent ledger in respect of this lease. Nor did it provide the Disclosure Statement, nor correspondence relating to the rent offer on the lease, nor annual budget estimates for outgoings nor annual outgoings audited statements. [7] The evidence about amounts invoiced, paid and outstanding is limited and does not provide much assistance to the Tribunal to form a view as the amount outstanding. 1 RSL Act s 103(2)(d). 2 Paragraph 5 statement dated 9 May 2013. -- 2 of 9 -- 3 [8] Section 83 of the Retail Shop Lease Act 1994 (RSL Act) vests power in the Tribunal to make orders the Tribunal considers just to resolve retail tenancy disputes. [9] Cherish Enterprises claims for arrears of rent, outgoings, other amounts owing under the lease and interest on such amounts. The only statement of evidence relied upon by Cherish Enterprises is the statement of Johnson Lin dated 9 May 2013. It does not set out the amount said to be owed. During the hearing Mr Lin gave evidence that the amount claimed was $38,127.10 as at 31 May, 2013 as set out in a schedule which sets out a claim for interest. [10] The schedule shows that $11,489.96 is claimed for interest. Under the terms of the lease interest is payable on money unpaid from the due date until the money is paid3 at the greater of the Default Rate4 and the Bank Rate5 plus 10% per annum. [11] Cherish Enterprises has not provided any evidence of: a) the method of calculation of the amount claimed, including the interest rate used; b) the Westpac Banking Corporation’s Indicator Lending Rate quoted from time to time by way of certificate signed by an officer of the relevant bank as contemplated by the lease or at all. [12] There is insufficient evidence for us to be satisfied on the balance of probabilities that Cherish Enterprises is entitled to the amount claimed for interest. We therefore find that Cherish Enterprises has not proven its claim for interest. [13] The balance of the amount claimed is $26,637.14 relating to the period November 2010 to August 2011. Of that amount $3,949.30 is in respect of outgoings. The documents filed show that the amount charged for outgoings did not change during the term of the lease. In our experience that seems unlikely. There is no evidence of the adjustment required to be performed under clause 4.3 of the lease. [14] There is insufficient evidence for us to be satisfied on the balance of probabilities that Cherish Enterprises is entitled to the amount claimed for outgoings. We therefore find that Cherish has not proven its claim for outgoings. [15] The invoices before the Tribunal variously include and do not include the 30% discount. Some have a notation that the discount will be waived if not paid by a stated date or that the invoice will be void if the full amount is not paid by a stated date. A summary of the amounts claimed and 3 Clause 16.6. 4 Schedule 1 Lease Details – 20% per annum. 5 Defined in clause 1.1 of the Schedule. -- 3 of 9 -- 4 additional information in relation to the discount if consistently applied are set out below: Date Total Rent 30% discount Outgoings August 2011 $2,618.31 $2,223.38 $667.01 $394.93 July 20116 $2,618.31 $2,223.38 $667.01 $394.93 June 20117 $2,618.31 $2,223.38 $667.01 $394.93 May 20118 $2,716.479 $2,223.38 $667.01 $394.93 April 201110 $2,618.31 $2,223.38 $667.01 $394.93 Mar 201111 $2,700.5912 $2,223.38 $667.01 $394.93 Feb 201113 $2,841.2714 $2,223.38 $667.01 $394.93 Jan 201115 $2,618.31 $2,223.38 $667.01 $394.93 Dec 201016 $2,618.31 $2,223.38 $667.01 $394.93 Nov 201017 $2,668.9518 $2,223.38 $667.01 $394.93 Totals $26,637.14 $22,233.80 $6,670.10 $3,949.30 [16] Having reviewed the documents filed it appears that Cherish Enterprises applied the 30% discount to payments made to October 2010 despite their late payment. We are not satisfied that Cherish Enterprises have on the balance of probabilities demonstrated it is entitled to withdraw the discount unilaterally. We therefore find that the amount of rent owing is $15,563.70.19 6 Tax invoice 2 July 2011. 7 Tax invoice 2 June 2011. 8 Tax invoice 2 May 2011. 9 Includes $80.16 electricity; $18 ambulance levy. 10 Tax invoice 2 April 2011. 11 Tax invoice 2 February 2011(page 8 of 33 – Statement of J&T Ferguson 5 December 2012). 12 Includes $73.28 – electricity; $9 – ambulance levy. 13 Tax invoice 2 February 2011. 14 Includes $195.96 – electricity; $27 – ambulance levy. 15 Tax invoice 2 January 2011. 16 Tax invoice 2 December 2010. 17 Tax invoice 2 November 2010. 18 Includes $32.64 – electricity; $18 – ambulance levy. 19 $22,233.80 less $6670.10. -- 4 of 9 -- 5 [17] The lease provided for a security deposit in the sum of $2,117.50. There is evidence before the Tribunal that this amount was invoiced on 1 December 2008.20 Cherish Enterprises has not given evidence that the security deposit was not paid. We therefore find that it is more likely than not that the security deposit was paid and therefore the amount payable by Mr and Mrs Ferguson to Cherish Enterprises should be reduced by the amount of the security deposit. The amount which, on the balance of probabilities, is owing by Mr and Mrs Ferguson to Cherish Enterprises is $13,446.20. [18] The Tribunal may order a lessor to pay a lessee reasonable compensation for loss or damage suffered by the lessee in defined circumstances.21 These include where the lessor neglects to clean or maintain the centre.22 [19] The Tribunal is not bound by the rules of evidence23 but is required to satisfy itself that on the balance of probabilities that one or more of the defined circumstances occurred and that the lessee suffered loss or damage as a result. [20] The Centre Manager gave evidence that about a year or so after the former anchor tenant, IGA, vacated the centre the cleaning contractor’s hours were reduced as there was less foot traffic and a new anchor tenant had not at that time been secured to increase foot traffic. The Centre Manager did not accept that this lead to a decrease in the cleanliness of the centre. It is not disputed that IGA vacated the centre in late September 2007. [21] Mr and Mrs Ferguson gave evidence that the level of cleanliness declined after the cleaner’s hours were reduced and provided photographs taken of the centre in about December 2008 which supported this. We find that taking photographs of the centre at this time is consistent with a concern that the cleanliness of the centre was deteriorating. [22] The Tribunal finds that it is more likely than not that the cleanliness of the centre declined after the lessor reduced the cleaning contractor’s hours in the latter part of 2008. [23] Mr and Mrs Ferguson provided little evidence to demonstrate their loss and how this was caused by Cherish Enterprises’ failure to clean and maintain the centre. They provided brief statements by a small number of customers stating that the state of the centre caused them to either spend less time at Mr and Mrs Ferguson’s shop or to stop shopping at their shop altogether. They did not provide profit and loss statements, records of takings, records of foot traffic, records demonstrating profit margins or a statement by their accountant. 20 Attached to Notice of Dispute filed 5 June 2012. 21 RSL Act s 43(1). 22 Ibid s 43(1)(e). 23 Ibid s 28(3)(b). -- 5 of 9 -- 6 [24] During the course of the hearing Mr and Mrs Ferguson requested their accountants to email to the Tribunal registry certain tax records. Cherish Enterprises objected to the Tribunal allowing these documents into evidence at such a late stage. Mr and Mrs Ferguson had ample opportunity to file documents of this nature prior to the day of the hearing. The Tribunal refused to allow these documents into evidence in view of the directions made: a) on 22 August 2012 to file all material upon which they intend to rely including witness statements by 10 October 2012; b) on 5 November 2012 to extend the time to file all material upon which they intend to rely including witness statements to 22 November 2012; c) on 27 November 2012 to again extend the time to file all material upon which they intend to rely including witness statements to 6 December 2012; d) on 5 March 2013 to file any further statements of evidence (including any expert statements) to be relied upon by 19 March 2013. [25] Having regard to the photographs, the customer witness statements and Mr and Mrs Ferguson’s evidence the Tribunal finds that there were a number of cleaning and maintenance issues which arose after September 2008 which would deter customers and potential customers from attending the centre and Mr and Mrs Ferguson’s business. [26] We find that a right to compensation arose. It is therefore necessary to determine whether Mr and Mrs Ferguson have established the amount of compensation they are entitled to on the balance of probabilities. They assured the Tribunal that they had lost more than $90,000. Such assurances on their own are insufficient to establish their entitlement to an amount of compensation. [27] After vacating the premises the subject of the dispute Mr and Mrs Ferguson opened a shop at alternative premises to continue with their business. Mr and Mrs Ferguson rely upon statements by a small number of customers and former customers. These statements give some limited evidence of loss of sales. If compensation is payable it would be calculated as the loss of profit on the loss of sales. Mr and Mrs Ferguson gave evidence that their profit margin on sales was approximately 16%. There was no contrary evidence on this matter. In those circumstances we accept that the profit margin was 16%. [28] Cherish Enterprises contend that there is no credible evidence of loss and that the loss could be attributable to reasons other than the state of the centre. [29] Mr Parsons gave evidence that: -- 6 of 9 -- 7 a) he spends approximately $10 per week more at Mr and Mrs Ferguson’s shop now than he used to at the previous shop; b) the old centre was not inviting and there were cleaning and lack of maintenance issues. [30] Mr and Mrs Ferguson gave evidence that: a) because of the state of the centre Mr Parsons limited his time at their shop; b) he now spends more time at their new shop and therefore spends more money; c) Mr Parsons continued to shop with them over the period September 2008 to July 2011. [31] Mr and Mrs Ferguson contend this establishes a loss of sales of $10 per week for 35 months. [32] Mr Parsons did not expressly give evidence that the state of the premises caused him to spend less money at Mr and Mrs Ferguson’s old shop. [33] We are not satisfied, on the balance of probabilities, that the difference in sales is attributable to the state of the centre. [34] Ms Smith gave evidence that: a) she spent approximately $500 per week at Mr and Mrs Ferguson’s shop while she traded at the centre; b) the centre was not inviting and there were cleaning and lack of maintenance issues. [35] Mr and Mrs Ferguson gave evidence that because of the state of the centre Ms Smith left the centre in January 2011 and stopped spending money at their shop. They contend this establishes a loss of sales of $500 per week for 6 months. [36] We are satisfied, on the balance of probabilities, that Mr and Mrs Ferguson have suffered loss of sales due to the state of the centre and loss of profit in respect of such sales in the sum of $2,080.24 [37] Ms Galey gave evidence that: a) she spent approximately $100 per week at Mr and Mrs Ferguson’s shop; b) she stopped going to their shop because of the hazards at the centre created by cleaning and lack of maintenance issues; 24 $500 per week x 26 weeks (approx) x 16%. -- 7 of 9 -- 8 c) she recommenced trading with Mr and Mrs Ferguson’s business at their new premises. [38] Mr and Mrs Ferguson gave evidence that Ms Galey stopped shopping with them in early December 2008. They contend this establishes a loss of sales of $100 per week for approximately 31 months. [39] We are satisfied, on the balance of probabilities, that Mr and Mrs Ferguson have suffered loss of sales due to the state of the centre and loss of profit in respect of such sales in the sum of $1,984.25 [40] Ms Java gave evidence that: a) she spent approximately $45 per week at Mr and Mrs Ferguson’s shop; b) she spent less after using the female toilets at the centre because of cleanliness issues; c) she now spends $50 to $75 per week at their new shop. [41] Mr and Mrs Ferguson gave evidence that they believed Ms Java stopped shopping with them about September 2008. They contend this establishes a loss of sales of approximately $40 per week for 35 months. [42] We are not satisfied on the balance of probabilities that Mr and Mrs Ferguson have established such a loss. Ms Java’s evidence is more consistent with a reduction in purchases rather than a complete cessation. There is no evidence about the amount of the reduction. We are not satisfied that on the balance of probabilities the difference in sales between the amount purchased at the old shop and the new shop is attributable to the state of the centre. [43] Ms Simic gave evidence that: a) she spends approximately $60 - $80 a week on asian groceries; b) she has been a regular customer but she chose not to shop with Mr and Mrs Ferguson due to the state of the centre. [44] Mr and Mrs Ferguson contend this establishes a loss of sales of approximately $70 per week for 35 months. We are not satisfied on the balance of probabilities that Mr and Mrs Ferguson have established such a loss. There is no evidence before the Tribunal as to the amount Ms Simic spent with Mr and Mrs Ferguson’s business while at the centre or evidence as to when she ceased shopping at their business. Ms Simic’s evidence is that she bought $60 - $80 per week in March 2013 and is otherwise silent. 25 $100 per week x 124 weeks (approx) x 16%. -- 8 of 9 -- 9 Summary [45] We find that Mr and Mrs Ferguson have established an entitlement to compensation in the amount of $4,064. It is likely that Mr and Mrs Ferguson’s loss was greater than this. Unfortunately the evidence to support additional losses has not been placed before the Tribunal. [46] The amount for compensation should be set off against the amount owing to Cherish Enterprises in the amount of $13,446.20 so that Mr and Mrs Ferguson are to pay Cherish Enterprises an amount of $9,382.20. -- 9 of 9 --