Auntmore Twenty Three Pty Ltd v Waw Developments Pty Ltd [2008] RSLT 10

[2008] RSLT 10 THE RETAIL SHOP LEASES ACT In the matter of Dispute No 2008/0032 AUNTMORE TWENTY THREE PTY LTD - Claimant - and - WAW DEVELOPMENTS PTY LTD - Respondent Coram: A Forbes (CHAIR) S Kairl G Somerville Decision Given in Brisbane on Tuesday, 29 July 2008 -- 1 of 12 -- 2 1. The Claimant is the tenant of the Respondent’s shop 7 in the Carina North Shopping Centre, (“the Centre”). It conducts a take-away pizza business, known as Pizzaland Camp Hill (“Pizzaland”). 2. The Claimant seeks a declaration that it is not in breach of its lease by opening Pizzaland between 5 p.m. and 9 p.m. from Tuesday to Saturday and 5 p.m. to 8:30pm. on Sunday. In an amended notice of dispute it also seeks compensation for trading losses allegedly incurred by being obliged to trade at a loss, between noon and 3 p.m, for several months this year, in circumstances outlined below. 3. The Claimant also seeks a declaration about a levy recently imposed by the Respondent on tenants of the Centre. 4. The parties have agreed upon the terms of a consent order regarding a garbage service for Pizzaland. Background 5. The Centre is a small suburban operation comprising 10 retail shops. In 2003 the Claimant, by its director Mr Michael Allen, entered a lease with the then owners, Mr and Mrs Faranda (“the first lease”). In September 2007, on expiry of the first lease, the Claimant signed another lease, on the same terms, with the Farandas. The permitted use of the premises is as a “Take-way food shop.”1 Clause 49 of each lease provided (and provides): “[T]he lessee will keep the demised premises open for business during normal business hours." The Claimant is not required to pay any outgoings. There is no provision in the lease for a sinking fund, or for any “voluntary contribution”. 1 Clause 11, Item 3 Schedule -- 2 of 12 -- 3 6. In late 2007 the Farandas sold the centre to the Respondent, who thereupon became the Claimant's landlord on the existing terms and conditions. 7. In December 2007, the Respondent – apparently intending to expand the Centre - notified all the tenants that it required them pay a "voluntary contribution" in addition to their rent. 8. he Claimant paid the “voluntary contribution” for a couple of months, and then asked the Respondent to specify how the money would be spent. Thereafter, in the absence of a satisfactory answer, the Claimant paid only the rent stipulated in the lease. The Respondent continues to invoice the Claimant for the “voluntary contribution”. 9. On 6 February 2008 the Respondent advised the Claimant that in the Respondent’s view “normal business hours” meant 9 am to 5 pm, and that the Claimant was bound by its lease to trade throughout that period. 2 In the Claimant’s view, that demand was incompatible with the profitable operation of its type of business, and contrary to the interpretation of “normal business” hours that had always been observed by it and the previous landlord, the Farandas. 10. Soon afterwards, on 26 February 2008, the Respondent gave the Claimant a Notice of Breach pursuant to the Property Law Act 1974. The Respondent offered to let the Claimant open at 11 am, provided that it traded seven days each week. In response, under protest, to avoid possible forfeiture of its lease, the Claimant agreed to open from 12 – 3 pm each day from the second week in March, pending the resolution of this dispute, without prejudice to the present compensation claim. 2 Exhibit KA10, Statement of Michael Kerry Allen, 2 June 2008 -- 3 of 12 -- 4 The Claimant’s Case 11. Mr Allen, for the Claimant, states that he has operated independent take- away pizza businesses since 1973, and considers his business to have been a pioneer in that market on Brisbane’s south side. Pizzaland’s long-established trading pattern is to cater for the early evening dinner trade on Tuesdays to Saturdays from 5pm to 9 pm and on Sundays from 5 pm to 8.30 pm. 12. He further states that in February 2003, when Pizzaland's lease of other premises was about to expire, Mr Faranda invited the Claimant to move to the Centre. The Claimant accepted the invitation, signed the first lease and began business in shop 7. Faranda had supplied Pizzaland with fresh produce for years and was well aware of, and accepted Pizzaland’s normal trading hours, as set out above. 13. The Claimant entered into the current lease on the understanding that it would continue to trade on Tuesdays to Saturdays from 5 pm to 9 pm and on Sundays from 5 pm to 8.30 pm. According to Allen, the Claimant would not otherwise have signed the current lease if it had been required to observe different hours, as now demanded by the Respondent. He had tried opening on Mondays several years ago, and in his first weeks at the Centre he tried lunchtime trading. Both experiments were commercial failures, and he soon returned to the above arrangements, which, so he says, were “normal business hours” for his business, and accepted as such by the grantor of the current lease. Allen’s evidence is that the Claimant observed those hours in the Centre for over four years without “complaints, problems, pressures or adverse comments from clients, the lessor or other tenants.”3 3 Statement of Michael Kerry Allen, 2 June 2008, paragraph 9. -- 4 of 12 -- 5 14. Accordingly the Claimant contends that the Respondent's interpretation of the phrase “normal business hours” in its lease is untenable, both because of his arrangements with the Farandas, and in view of the fact, as asserted by it, that several other retailers in the Centre do not adhere to a 9 am to 5 pm regime. For example, the hairdresser closes on Sundays, and the coffee shop closes at 2 pm on weekdays, and at 1 o'clock on weekends. 15. The Claimant disputes the Respondent’s hearsay evidence that other tenants have complained about its premises being closed during the day. 16. Attilio Faranda, the Claimant’s former landlord, explained his arrangements with his former tenant: “… [We] simply meant to ensure that reasonable hours were kept in line with what the take-away pizza market expected. There was no intention to force, or even to suggest a seven day trading regime and lunch time trading was entirely a matter for the lessee. “4 17. Another witness who provided a detailed statement for the Claimant was Robert Rosso. Mr Rosso’s firm, Lida Trading Company Pty Ltd, has supplied the take-away pizza industry with containers for more than 30 years and now supplies 80% of the Queensland market. In his experience the retail pizza industry falls into three distinct categories: (1) small take-away outlets with no dining-in facilities, which rely heavily on local support, as the product is not suitable for carrying long distances; (2) restaurants; and (3) “multi-nationals” offering home deliveries to a mass market. 18. The Claimant, according to Mr Rosso, is in the first of these categories, and the natural requirements and constraints of such a business are as follows: 4 Statement of Attilio Faranda 25 March 2008, Exhibit KA19; Statement of Kerry Allen dated 2 June 2008 -- 5 of 12 -- 6 “Although they pay rent … for 24 hours a day, 7 days a week, they operate productively for only 2-3 hours each day….Their market is overwhelmingly an evening meal trade, with their most productive hours between 6 pm and around 8 - 8.30 pm. ..Pizza is a ”night time” food and does not sell during the day. So lunch trading is not pursued by the take away pizza industry. “ … There are a number of reasons why pizzas aren’t associated with a lunch trade; pizzas are generally shared – hamburgers, sandwiches and pies are a one person meal… [Besides]…people aren’t prepared to wait for a pizza to be made and cooked at lunchtime. “… Seven day trading is also rare in the takeaway category … experience has shown Monday trading to be largely unprofitable and [it is]… not pursued to any extent.” The Compensation claim 19. Nevertheless, for the reasons set out above, the Claimant reluctantly opened for lunchtime trading since 10 March 2008. Mr Allen tendered handwritten records of sales from that date to May 2008, a selection of cash register print-outs, and a spreadsheet showing the costs of opening at lunchtime. Those records indicate that lunchtime sales rarely exceeded $40 per day, and on many days there were no sales at all. The Claimant seeks compensation for enforced losses of $4,123 to 24 May 2008, increasing by an average of $61.55 per day thereafter. -- 6 of 12 -- 7 The “Voluntary Contribution” 20. The Respondent continues to invoice the Claimant for the “voluntary contribution” at the rate of $254.17 per month 5 and alleges that $1,136.14 is owing on that account since February 2008. The Respondent’s Case 21. Mr James Wright, solicitor, is a director of the Respondent company and represented it at the hearing. 22. As there has not been a lessees’ resolution under section 52 of the Retail Shop Leases Act 1994, he contends that “normal business hours” in the subject lease means 9 – 5 pm, seven days a week. According to Mr Wright’s letter to the Claimant of 6 February 2008, 6 and his written submissions, these hours are essential to the viability of this small Centre. But in his oral submissions he asserted that the Respondent requires the Claimant to open only five days per week, Monday to Friday, from 9 am to 5 pm. 23. Mr Wright concedes that the Respondent does allow some variations from “desired” trading hours, according to the nature of tenants’ businesses. The lease of the coffee shop, for example, refers to the “usual business hours of the centre” – a phrase (we observe) that is hardly more precise, on its face, than “normal business hours”. While the Respondent’s disclosure statement to the lessee of the coffee shop identifies “core trading hours” as 9 am – 8 pm on Thursdays and 9 am – 6 pm on the other days of the week, Wright admits that the coffee shop closes at 2 pm on weekdays (as Mr Allen alleges) and before 5 pm on Saturdays and Sundays. 5 Tax invoice 00000179 for August 2008, Exhibit KA28 to 2 nd Further Statement Michael Kerry Allen, 29 July 2008 6 Exhibit KA10 to Statement of Michael Kerry Allen -- 7 of 12 -- 8 24. The hairdresser’s lease is in the same terms as the Claimant’s, so far as trading hours are concerned. However, Wright admits that the hairdresser closes at 3.30 pm on Saturdays and does not open on Sundays. 25. The Respondent has provided no justification or explanation for the “voluntary contribution” of which the Claimant complains. Submissions 26. The Claimant’s counsel, Mr May, submits that the meaning of “normal business hours “ in Clause 49 is not clear. It is apt to refer to: • the ‘normal business hours” of the type of business conducted by the Claimant; or • the normal hours of some other kind of business; or • the normal business hours of the Centre in general. He submits that the first interpretation should be applied. 27. He referred the Tribunal to a recent re-statement by the High Court of the rules of construction of a contract, applying the principle of objectivity rather than the subjective beliefs and understandings of the parties: “The meaning of the terms of a contractual document is to be determined by what a reasonable person would have understood them to mean. That, normally, requires consideration not only of the text, but also of the -- 8 of 12 -- 9 surrounding circumstances known to the parties, and the purpose and object of the transaction.”7 28. Mr May submits that his construction should be preferred because: • The parties to the original lease knew that the “take away food shop“ that the Claimant would operate was an independent take-away pizza shop; • The hours of such a business are a matter of notoriety; • The Farandas were familiar with the Claimant’s business practice long before the first lease was executed; • To construe “normal business hours” as meaning “normal” for any type of take-away food business would give no certainty to the contract, in view of the widely varying practices of such businesses; • To construe the term to mean “normal business hours of the Centre” would likewise produce no certainty, in view of Mr Wright’s admission that he permits variations of the 9 - 5 pattern, depending on the nature of the a particular tenant’s business. 29. It may also be pertinent, we suggest, that the parol evidence rule does not exclude evidence that the parties used their written words in a special sense. 8 The parties were invited to address us on any question of estoppel, but did not do so. 30. In reply, Mr Wright argued that the Claimant provided no evidence of the normal business hours of take-away food shops in general. He submitted that “normal business hours“ cannot be read down to the normal hours of a take- away pizza business, considering that the Claimant might assign its lease to a different kind of takeaway business, less dependent on evening trade. 7 Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd & Ors, 219 CLR 165 at [40]; see also Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451. Prenn v Simmonds [1971] 1 WLR 1381; Re Michael; Ex parte Epic Energy (WA) Pty Ltd (2002) 25 WAR 511. -- 9 of 12 -- 10 31. Mr Wright made no submissions about the disputed “voluntary contribution.” 32. Mr May’s alternative argument is that Clause 49 is void, because of the combined effect of Part 7 of the Retail Shop Leases Act (Retail Shop Lease Trading Hours) and section 31B of the Trading (Allowable Hours) Act 1990. However, in view of our findings we need not consider this argument. Findings 33. The Respondent did not tender evidence contrary to that of Messrs Faranda and Rosso, and neither witness was cross-examined. We accept Rosso’s evidence that the type of business operated by the Claimant primarily services the evening meal trade and that normal business hours for such a business are those stated by the Claimant. 34. We accept the uncontradicted evidence of Mr Allen that the Claimant was invited to the Centre by Mr Faranda, and also the evidence of Allen and Faranda that the latter was well aware of, and accepted the normal trading hours of the Claimant when the first, and the current lease were signed. 35. In our view Clauses 11 and 49 of the subject should be read together. It is not commercially realistic to read either clause in isolation from the other or from circumstances of the Claimant’s business that were well known to the original parties to the lease when it was entered into. 36. We accept uncontradicted evidence that the Claimant traded at the Centre under the first, and the current lease, for over four years without any objection by the Farandas. In our view, this is a significant indication of the true intent of landlord and tenant, embodied in Clause 49. -- 10 of 12 -- 11 37. We find, therefore, that the expression “normal business hours” in Clause 49 of the subject lease, on the evidence, was intended to mean, and does mean the normal business hours of the Claimant as observed by it before and after the execution of the first lease, namely 5 pm to 9 pm from Tuesday to Saturday, and 5 pm to 8.30 pm on Sunday. Compensation 38. We accept that the Claimant traded at a loss in the lunch hour for a period prior to this hearing, under protest, reasonably believing that it was necessary to do so in order to avoid an action for breach of its lease, and possible forfeiture. We accept the evidence of Mr Allen that operating costs in the disputed period were $18.37 per hour, but incomplete records make precise quantification impossible. We have decided, therefore, to discount the losses alleged. We find that the Respondent is liable to compensate the Claimant in the amount of $1,736.00 for losses incurred by trading between 12 noon and 3 pm. The Voluntary Contribution 39. The subject lease does not impose any liability to pay outgoings. The Respondent does not claim that the “contribution” has any basis in law. Section 24 prohibits provisions in a lease requiring a lessee to make payments other than the categories in subsection (1). The Act is silent on the matter of collateral agreements outside the lease terms, but there is no evidence that any such agreement was made. We shall make the declaration sought. -- 11 of 12 -- 12 Declarations 1. It is declared that the Claimant is not in breach of Clause 49 of the lease by opening the subject premises from 5.00 pm to 9.00 pm between Tuesday and Saturday, and 5.00 pm and 8.30 pm on Sunday of every week. 2. It is further declared that the Claimant is not liable to pay to the Respondent any amount by way of a “voluntary contribution” now or in future. Orders It is ordered that: 1. The Respondent shall pay to the Claimant within 28 days of this order, the sum of $1,736.00 for losses incurred by trading between 12 noon and 3.00 pm prior to the hearing. It is ordered by consent that: 2. The Respondent will forthwith provide the Claimant with access to a shared garbage receptacle at the Centre. 3. The Claimant will pay the Respondent for its share of the total cost of the garbage receptacle in accordance with the proportion that the area of the Claimant’s premises bears to the total area of all premises in the centre using the said receptacle. 4. The Respondent will invoice the Claimant for its share of the cost of the receptacle and at the same time give the Claimant a copy of the relevant account rendered to the Respondent by the supplier of the receptacle. Anne Forbes Chairman -- 12 of 12 --