Eastfire Pty Ltd v Imbecote Pty Ltd [2002] RSLT 18

1 [2002] RSLT 18 THE RETAIL SHOP LEASES ACT In the matter of Dispute 83/2001 EASTFIRE PTY LIMITED - Claimant and IMBECOTE PTY LIMITED - Respondent DECISION Given in Brisbane on 16 December 2002. -- 1 of 6 -- Eastfire-v-Imbecote 2 Decision This Dispute was commenced by a Notice of Dispute dated 27th July, 2001, and filed on 6th August, 2001. In that Notice, the claimant/tenant, Eastfire Pty Limited, sought an order that "rental be reduced to a market rent that takes account of the current state of the shopping centre." The dispute was referred to mediation in accordance with s.56 of the Retail Shop Leases Act 1994 ("the Act"), the mediation to be held on Thursday 13th September, 2001. The respondent, Imbercote Pty Limited, did not attend the mediation. By notice dated 14th September, 2001, the mediator referred the dispute to the Registrar pursuant to s.63 of the Act. The Tribunal referred the dispute to a Tribunal Legal Member, who advised that the order sought was beyond the jurisdiction of a Retail Shop Lease Tribunal as defined in the Act, but that an amended notice might be filed. The claimant filed an amended Notice of Dispute dated 11th October, 2001, in which the tenant sought "an order for reasonable compensation pursuant to s.43(2)(a) of the Retail Shop Leases Act 1994." Interlocutory steps were taken pursuant to orders made on directions hearings, and the dispute was set down for hearing before a full Tribunal on Wednesday and Thursday, 19th and 20th June, 2002. With a letter dated 14th January 2002, and received by the Registry by facsimile transmission on that date, the claimant's solicitors particularised a total claim of $743,980,00, but limited the claim to $250,000 to fall within the jurisdiction of a Retail Shop Lease Tribunal. The particulars involved a sum of $629,258.00 for loss of profit, not actual trading losses. At the invitation of the Tribunal, and with the consent of the respondent's agent, the claimant by its approved agent Mr G W Diehm of Counsel, submitted to the Tribunal and to the respondent a re- formulated claim particularising an amount of $389,160.06, abandoning the excess over $250,000. That claim, on which the hearing proceeded, comprised: Trading loss nett of amortised lease costs for year ended 20th June 2001 (used as a benchmark for calculation) - $67,264.23. The figure of $67,264.23 is used as the basis for the following calculations. Loss from September 2000 to date of hearing - 1.75 years at $67,264.23 = $117,712.40. Anticipated loss from 19th June, 2002, to 14th October, 2004 (date of expiry of lease term) - $2.33 years at $67,264.23 = $156,725.66. Cost of fitout $114,722.00. Total: $389,160.06. Claimant does not seek amount in excess of jurisdictional limit - $250,000.00. -- 2 of 6 -- Eastfire-v-Imbecote 3 Decision Section 43(2)(a) of the (Retail Shop Leases) Act 1994, pursuant to which the claimant seeks compensation in its amended Notice of Dispute, reads as follows: - "2. The lessor is liable to pay to the lessee reasonable compensation for loss or damage suffered by the lessee because - (a) The lessee entered into the lease, or a renewal of it, on the basis of a false or misleading statement or misrepresentation made by the lessor or by any person acting under the lessor's authority;" (Emphasis added.) The Tribunal has considered the question of liability. In its amended Notice of Dispute, the claimant set out what it refers to as promises by the respondent lessor, and which the Tribunal treats as representations, including: - 1. A multi-million dollar Coles refit; 2. A double-storey Carpark; 3. A general upgrade of the Centre, including such things as signage and landscaping; 4. That the shopping centre would be managed by Richard Ellis Retail Services; and 5. That all efforts would be made to improve the appearance, functionality, tenant mix and operation of the complex. The evidence before the Tribunal included a document headed, "Offer to Lease Maryborough Plaza, Maryborough" submitted to the claimant lessee by Richard Ellis Retail Services in early May 1998, as shown in the evidence of A J Matt for the claimant in paragraph 12 of his statement. That document included a preamble, the relevant part of which read as follows: - "The premises is part of the proposed refurbishment to the existing Centre. The proposed refurbishment will comprise Coles Supermarket, Food for Less and Fosseys, as the anchor tenants, and a number of specialities. Works are scheduled to commence in August 1998, and subject to the usual exigencies pertaining to construction. The projected completion date for the refurbishment to the Centre is 3 December, 1998, for a realignment of the Mall, internal and external refurbishment, improvements to carparking and new specialty shops." In response to a question by the Chairman, the witness A J Matt stated about that paragraph:- "I guess that sums it up, yes. I couldn't put at that particular time of lst May, when I think that letter was written, I wouldn't have been aware of -- 3 of 6 -- Eastfire-v-Imbecote 4 Decision the amount, but that became clear as time went on." Essentially, the witness, Andrew John Matt, a director of the claimant Eastfire Pty Limited, confirmed that the paragraph from the Offer to Lease set out above summarised the representations made by the Managing Agent on behalf of the respondent lessor. The witness then referred to articles which appeared in a local newspaper published in Maryborough concerning statements made by the manager of Richard Ellis Retail Services, Ray Caurana, at a meeting to announce the launch of "the new look shopping centre" on the day before. The date of the publication of the newspaper containing the article is shown by the evidence to have been 12th June, 1998, one day after the claimant signed the Offer to Lease on 11th June, 1998. Thus, the claimant cannot rely upon the newspaper article as a representation which induced the claimant lessee to execute the "Offer to Lease". Instead, on that issue the claimant must rely upon what its representative Andrew John Matt was told by Keith John Paton, the sole director of the company Imbercote Pty Limited, and upon what was said at the meeting which Mr Matt attended (his statement, paragraph 17) on 11th June, 1998. The evidence given by Keith John Paton on behalf of the respondent is that the newspaper articles were an acceptably accurate statement of what occurred at the meeting. The witness A J Matt refers to the meeting in paragraphs 18 and 19 of his statement (as well as in his oral evidence). In paragraph 19 he says that: "On that same night, following the formal part of the announcement, I met with Richard Ellis and Bob Paton and they told me how successful the Maryborough Plaza would be under this new professional management and with the promised improvements being made. It was following this meeting with the landlord and his advisers that we were galvanised into action and decided to sign a new lease." The witness makes a specific statement regarding signing the Offer to Lease. The Offer to Lease document does not state specifically that the offer is revocable by the intending lessee at any time before the formal lease is executed; but it does contain a statement that, "No binding agreement exists between the parties, pending execution of a lease." Under the circumstances, the claimant was not bound to accept a lease of the new premises until the formal lease was executed by the lessee on 22nd October, 1998, having been sealed by the respondent lessor on 20th August, 1998. It follows that the claimant Eastfire Pty Limited, in sealing the lease, relied upon the representations made in June 1998 as modified by circumstances and events occurring between the publication of the newspaper articles and the date of signing of the lease. It had been stated at the meeting, so the evidence shows, that the proposed works would be completed by Christmas 1998. It must have been clear by 22nd October 1998 that no work had been started on the premises occupied by Coles or on the carparking building. Given the extent of the refurbishment represented to the value of $5m, it ought to have been clear, and the Tribunal is of the opinion that it was clear, to the directors of the claimant -- 4 of 6 -- Eastfire-v-Imbecote 5 Decision that the work would not be completed by Christmas 1998. Indeed, it might have been inferred from that fact that the proposal would not go ahead. Except to the extent of refurbishment excluding the work forecast to be done by Coles and the building of the additional carpark, the claimant did not adduce evidence of any inquiry made of the respondent or its agents concerning the respondent's intentions in October 1998. There is no evidence of the claimant having made any inquiry of Coles either directly or through the respondent's agent or through any organisation such as the RAQ. Although the witness A J Matt insisted under cross-examination that he hoped that the represented improvements would be carried out to Maryborough Plaza, it is significant that in reply to a question from his Counsel, he stated that the claimant, had it not signed the lease, would have remained in occupation as a tenant on a month-to-month basis for about four months after the new centre, "Station Square," opened. That is, the witness based the claimant's attitude not on failure to carry out certain works, but on the opening of "Station Square." Of course, A J Matt denied this when pressed in cross- examination, but his answer to his own Counsel remains significant. The evidence makes it clear that at all times the claimant through its directors thought it desirable to remain in Maryborough Plaza. Correspondence passing between the parties before June 1998 shows that interest. There is no evidence before the Tribunal to show that the claimant could have remained in occupation as a monthly tenant, and the witness for the respondent stated that the respondent would not have allowed that situation to continue. The witness A J Matt stated that the claimant wanted to "keep its options open" and did not want to commit itself to a new lease before the meeting held on 11th June, 1998. Nevertheless, there were discussions between Matt and Paton about a new lease at about that time. The Chairman put it to the witness A J Matt that on the claimant's figures, the claimant would be better off just walking out and paying or continuing to pay the rent. Mr Matt gave an answer in two parts, the first being more or less a sentimental attachment to the business for the reasons he stated, and the second being that he was trying to get value for his fixtures and fittings, although in his opinion the business would only get worse. The onus of establishing reliance on the respondent's representations, made by it or its agent, lies on the claimant. Having regard to all the evidence, and the impressions made on the Tribunal by the witnesses, the Tribunal is not satisfied that the claimant has discharged that onus. In reaching that conclusion, the Tribunal formed the opinion that the witness A J Matt was an honest witness, but materially influenced by the perhaps unfortunate consequences of his decision to take a new lease at Maryborough Plaza. The Tribunal infers that A J Matt, as a Director of Eastfire Pty Ltd, formed the opinion, before the events, that to enter into a new lease at Maryborough Plaza and to take a lease of a newsagency shop at Station Square Shopping Centre, if the latter centre opened, would be more advantageous or at least less disadvantageous than to leave a vacancy for some other newsagency to open in -- 5 of 6 -- Eastfire-v-Imbecote 6 Decision Maryborough Plaza to compete with a newsagency opened by Eastfire Pty Ltd at Station Square Shopping Centre. The Tribunal orders that the claim be dismissed. AW Couper Chairman -- 6 of 6 --