Endeavour Foundation v Cela Pty Ltd [2002] RSLT 29

1 [2002] RSLT 29 THE RETAIL SHOP LEASES ACT In the matter of Dispute 126/2001 ENDEAVOUR FOUNDATION -Claimant and CELA PTY LIMITED - Respondent DECISION Given in Brisbane on 26 July, 2002. -- 1 of 7 -- Endeavour-v-Cela 2 Decision This Dispute was commenced by a Notice of Dispute dated 19 th November, 2001, and filed in the Registry on 20th November, 2001. That Notice included Hayview Pty Ltd (T/A WAWConsultancy) as a respondent, but at a Directions Hearing held on 6th February, 2002, the Chairman, comprising the Tribunal, ordered that that company be dismissed from the proceedings and called for submissions as to the jurisdiction of a Retail Shop Lease Tribunal to hear the dispute, having regard to the fact that circumstances had changed after the filing of the Notice. As set out in the Notice, the main points in dispute were: - "1. Failure by lessor to bring the cooling system up to a working order as agreed at the time of entering into the lease. 2. Lessor is making no effort to rectify the plant and equipment, despite being given notice on numerous occasions." The dispute was referred to mediation, as required by the Retail Shop Leases Act 1994 ("the Act") but the mediation was not attended by the respondent. The mediator referred the dispute to the Chief Executive Officer, who appointed a Tribunal to deal with it. The dispute then came before a three- Member Tribunal on Monday 27 th May, 2002. The Tribunal approved Mr D E Gilbert as agent for the claimant and Ms Wright as agent for the respondent. Before the formal hearing commenced, Mr Gilbert as agent for the claimant stated that the amount of the claim was $12,843.00. Ms Wright filed signed copies of the respondent's statement (previous unsigned copies on file) and submitted that the claim for loss of profit should be struck out because there was no profit and loss statement or other verification of the figures claimed by the claimant. That submission did not extend to the claim for reimbursement of the cost of putting the evaporative air-conditioning into proper working order, but that claim was disputed. The Tribunal refused the application to strike out the claim for loss of profit, but proceeded on the basis that the issue of liability be tried, and if the Tribunal found the respondent to be liable to the claimant, then it would hear further evidence and submissions as to the amount of compensation. The hearing then proceeded on the basis that the claimant had incurred expense and had lost profit because the respondent had not performed an obligation undertaken by it to "fully refurbish" the pre-existing evaporative air- conditioning system. The respondent has maintained its submission that the agreement to refurbish merged in the agreement for lease, which made no reference to refurbishment, and did not bind the respondent after the lease had been executed, and went on to say that there was no retail tenancy dispute as defined in the Act, and the Tribunal had no jurisdiction. On this point, the Chairman held, as a matter of law, that the claimant was entitled to rely upon the disclosure statement submitted by the respondent -- 2 of 7 -- Endeavour-v-Cela 3 Decision contemporaneously with a draft lease, in which statement the respondent as lessor acknowledged an obligation to provide evaporative air-conditioning. There was no evidence of any waiver by the claimant. The obligation (subject to proper definition) remained in force. The respondent went on to submit that the "operation of the agreement to refurbish is not clear, because it can be used to encompass both to re- condition and to re-invigorate in the sense of making look new." That submission goes on: - "(The) claimant alleges that in this case it meant the former, whereas the respondent alleges that it meant the latter. The agreement does not indicate which of these two factual situations were (sic) referred to by the agreement to refurbish." The respondent submitted that the question to ask in deciding whether a contractual term is so uncertain as to be unenforceable or create no binding contract is whether the term is "so obscure and so incapable of any definite or precise meaning that the Court is unable to attribute to the parties any particular intention." The respondent cited authority to support that proposition. While the proposition of law as put forward by the respondent may well be correct, the Tribunal takes the view that the disclosure statement referred to above, in setting out the lessor's undertaking to provide evaporative air- conditioning, is sufficiently clear to give a real meaning to the term "fully refurbished". The undertaking to supply evaporative air-conditioning could never have meant that the respondent lessor obliged itself to hand over inoperative machinery; but, rather, it clearly meant that the premises would be supplied by the respondent lessor to the claimant lessee with evaporative air- conditioning effected by machinery in working order. Thus, the dispute resolved itself into a question of whether the air-conditioning equipment was in working order when the premises were made available to the claimant lessee. While the evidence supports the respondent's submission that it did cause work to be carried out to improve the appearance of the air-conditioning outlets, that evidence does not cover the point of whether the machinery was in working order at the date of the respondent making the premises available to the claimant. The claimant alleges that the air-conditioning equipment had not been "fully refurbished" at the date of possession, but clearly, the point at issue clearly was whether the machinery was working at that date and would continue with normal use and service to operate as evaporative air-conditioning might be expected to do. Since the claimant's case is based on failure to "fully refurbish" in the sense mentioned above, the onus of proof that the air- conditioning machinery had not been "fully refurbished" lies on the claimant. The evidence showed that, although formally the lease commenced in May -- 3 of 7 -- Endeavour-v-Cela 4 Decision 2001, the claimant lessee took occupation and the store opened on about 8 th or 9th June, 2001. It was not until October 2001 that the claimant's representative in the store switched on the air-conditioning machinery and found that it was "not working." That is, a time of slightly over four months elapsed between the date upon which the claimant took possession of the premises and the date upon which the air-conditioning system was first switched on. But the witness Peter Leslie Merilaid, the Manager of the claimant's store in Toowoomba the subject of this dispute, said that when the claimant first took over the store the previous witness Michael Lorberg took him, Merilaid, over to the switches and turned them on, and Merilaid and Lorberg felt air coming out of them. But Merilaid also said that he did not think that the air coming out of the conditioners was cool. The witness went on to state that when he turned the air-conditioning on in September/October, his recollection was that, "I think after a week one of the units out the back - we have three units; two that service the front of the store, and one that services the back of the store - my recollection is that it probably was a week or so and the back unit didn't work at all, and then probably two or three days later we had an electrical burning smell coming through the units, so we turned them both off." Then, under further cross-examination, the witness answered in the affirmative the question: "So whether they were pushing out cold air or not, aside from that, they were working, a week later one stops, a few days later you notice a burning smell, so you decide as the Store Manager to turn those remaining two off?" The witness C J Ryan stated in evidence that he inspected the air- conditioning units in "about November 2001". At about that time, one unit (out of three) had a seized fan motor, while one other unit he did not "class as working because it had a burning smell, and there was no way you could use it", while the third unit was not working. The witness Johannes Hans Werder, called on behalf of the respondent, gave evidence that, having inspected the machinery in October 2001, he gave a quotation dated 24 th October 2001 for the work and material involved in putting the system back into working order. According to the quotation, three units were not working, all motors were seized, and three pumps would have to be replaced. Thus, Mr Werder's evidence as to the condition of the system in October differs from the condition described by the evidence of Mr Ryan as a result of his inspection in November 2001. Much evidence was devoted to the question of whether water was connected to the units, but in the end the Tribunal was left with the proposition that there was no consistent direct evidence, and that the witnesses had all made certain assumptions. The relevance of this point appeared to be that, if water was not in fact connected to the units, then they had not been "fully refurbished" in the sense mentioned above. Unfortunately, the evidence did not clarify this position. Although Mr Werder's evidence is somewhat weakened by his admission in response to a question from the Chairman that his statement that the equipment was working in May 2001 was merely an -- 4 of 7 -- Endeavour-v-Cela 5 Decision assumption, in general he was an informative witness. Overall, he satisfied the Tribunal that the inspections made in October and November 2001 did not, under all the prevailing circumstances, enable him, or any other expert witness, to state what was the condition of the machinery in May 2001 at the time of the handover to the claimant. Essentially, all three pieces of machinery may or may not have been working in proper working order as the date of the handover. On the other hand, the evidence given on behalf of the respondent by the witness Peter Thomas McPhee and the evidence given by the witness Michael Leslie Lorberg satisfy the Tribunal that no instructions were given by the claimant to any contractor with regard to the working condition of the air- conditioning units themselves. That evidence shows that instructions were given with regard to the ducting and with regard to the appearance of the premises, but nothing was done to ensure that the evaporative air- conditioning equipment was in working order. On the balance of probabilities, the Tribunal holds that the evaporative air- conditioning units were not "fully refurbished" in the meaning of that term given above, there having been no attempt made by or on behalf of the respondent to ensure that the machinery was operating as three effective evaporative air-conditioning units. In short, the Tribunal is satisfied on the evidence that none of the expert witnesses could have made a positive statement, based on an inspection in October or November 2001, that any attention had been given to the air-conditioning units in relation to their working as such in May or June 2001. That being so, the evidence to the effect that the estimator called in to refit the premises was not instructed to do anything about the air-conditioning units themselves, and he did not engage a refrigeration mechanic, satisfies the Tribunal that the respondent was in breach of its obligation, whereby the claimant suffered compensable loss and damage. The amount of such loss and damage will have to be determined in further proceedings, the date for which will be fixed at a directions hearing to be called by the Registrar. This decision goes against the respondent. Under the circumstances, the Chairman considers it desirable to deal, in some detail, with the respondent's written submissions. Using the same numbering as the respondent's agents did in those submissions, the following comments are made: - Nos. 1 to 5 (inclusive): No comments necessary. Nos. 6 to 9 (inclusive): These matters are dealt with in the body of the Tribunal's decision. The question of the meaning of "refurbish" is dealt with in the body of the decision. The decision shows that the Tribunal holds the respondent liable to compensate the claimant because the claimant suffered losses as a result of the respondent's failure. 11 to 15 (inclusive): These points are covered in the body of the decision. -- 5 of 7 -- Endeavour-v-Cela 6 Decision 16: The authority cited is not strictly in point. A Court will not find a covenant void for uncertainty if against the factual matrix in which it was made the covenant can be given an ascertained meaning. Courts are reluctant to write off agreements as being void for uncertainty. 17: The authority cited is not applicable to the facts in this dispute. As appears from the body of the decision, the Tribunal holds that the relevant fact is that the claimant would be given possession of the premises with evaporative air-conditioning in working order. This fact is confirmed by the respondent lessor's disclosure statement. 18: The various dictionary meanings have to be looked at and applied against the actual circumstances. In this dispute it would be stretching the language too far to hold what was meant by "refurbish" was to make the ducting of the air-conditioning look new. 19: The evidence overall satisfied the Tribunal that the claimant expected to receive and the respondent had agreed to give possession of the premises as a shop having evaporative air-conditioning, not that the premises would contain old and virtually useless machinery. 20: This issue is covered above. 12 to 23 (inclusive): The point regarding merger was dealt with at the Directions Hearing held on 4 th March, 2002. To repeat, the Chairman held, as a matter of law, that the agreement to "refurbish" was not separate and apart from the lease agreement. No question of a merger of two executory agreement arises. 24 to 26 (inclusive): The Chairman holds, as a matter of law, that the covenant comprised in clause 15.10 of the lease relates to what is to happen after occupation is given to the claimant tenant, at which time the air- conditioning should have been in working order in accordance with the obligations undertaken by the respondent lessor. Thus, the clause has no adverse effect so far as the claimant is concerned. 27-30 (inclusive): Manifestly the claimant's claim was not based on s.43(2)(a) of the Act. 31 to 36 (inclusive): The question of the meaning of the term "refurbish" is dealt with in the body of the decision. 37 to 41 (inclusive): The Tribunal does not accept the argument that the respondent's obligation was restricted to making the shop look nice, without regard to the effectiveness of the air-conditioning. The fact that blowers were connected to provide re-cycled air is not sufficient. The evidence overall is such as to show that nothing was done to ensure that the evaporative air- conditioning was operating as it ought to have done. 42 to 60 (inclusive): The Tribunal has given consideration to the question of servicing at three monthly intervals and has come to the conclusion that the -- 6 of 7 -- Endeavour-v-Cela 7 Decision point is not relevant because on the evidence, as stated above, the evaporative air-conditioning had not been "refurbished" in the sense explained above by the respondent at about the time of delivery of possession to the claimant. 61 to 88 (inclusive): The points made in these submissions will receive attention in connection with the determination of the amount of compensation. 92 to 96 (inclusive): The points made in these submissions have been noted. The Tribunal has not taken into account the fact that the respondent did not attend the mediation hearing, because it's submission that it could not be made obligatory on the respondent to attend is correct. As for the other points mentioned in paragraph 93, they have not influenced the Tribunal. 97: This point has been dealt with throughout the body of the decision and has been referred to in this addendum. 98: The evidence did not satisfy the Tribunal that the claimants had any duty to service the air-conditioning equipment before switching it on. The Tribunal holds that the simple fact is that the respondent had not "refurbished" as it was obliged to do. 99: This point will be dealt with in connection with the determination of the amount of compensation. In summary, the Tribunal holds that the respondent is liable to compensate the claimant in respect of loss and damage suffered by the claimant as a result of the respondent's failure to perform its obligation to "refurbish" in the sense set out above the evaporative air-conditioning units. The nature and extent of the loss will be considered by the Tribunal in the hearing to establish the amount of compensation. A W Couper, Chairman. -- 7 of 7 --