Brisbane Paint Supply Pty Ltd v Ponticello Properties Pty Ltd [2002] RSLT 8

1 [2002] RSLT 8 THE RETAIL SHOP LEASES ACT In the matter of Dispute 21/2000 BRISBANE PAINT SUPPLY PTY LIMITED - Claimant and PONTICELLO PROPERTIES PTY LIMITED - Respondent DECISION Given in Brisbane on 18 July, 2002. -- 1 of 8 -- Brisbane Paint Supply-v-Ponticello Decision 2 In June 2000 the Claimant Tenant ["Brisbane Paint”] took an assignment of the balance of a three year lease which had a year to run and which expired on 14 June 2001. At the same time it took over the original lessee’s paint supply business, and commenced trading under a similar name. The shop measured about 6 metres by 10-12 metres and was situated in a small shopping strip on a main road. A few days after the above expiry date the Tenant left the premises in response to a notice to quit from the Respondent Landlord in the circumstances outlined below. The original lessee, Ms Ferlazzo paid a security bond of $5,200 to the Landlord at the commencement of her term, but no part of it has been refunded to her. The Tenant seeks orders that the Landlord refund these monies to Mrs Ferlazzo less a reasonable sum for reinstating the premises to their condition at the commencement of the original term, after due allowance for fair wear and tear. 1 At the hearing Mr Evans, managing director of the Tenant company, appeared for the Claimant; Mr Ponticello who occupies the corresponding position with the Landlord appeared for the Respondent. Mr Evans describes the arrangements between the Tenant and Ms Ferlazzo regarding the security bond as follows: “During the negotiations between myself and Mrs Ferlazzo, that was overlooked, so we agreed to allow Mrs Ferlazzo’s bond to stay in place until the first rest in the lease on 14 th July 2001, at which time if I renewed the lease, I would refund her the $5,260… If I didn’t renew the lease, then she’d get it back from Mr Ponticello.”2 Mr Ponticello agreed that the abovementioned bond was paid to him by the original tenant and that he has not refunded any part of it to Ms Ferlazzo. THE TENANT’S CASE It is common ground that, some three months before the expiry date, Mr Evans informed Mr Ponticello that the Tenant would not seek to renew the lease. Mr Evans wished to sell his business and during June 2001 he found a buyer, namely a Mr Cane of Betamaur Pty Ltd [“Betamaur”] who was prepared to negotiate with Mr Ponticello for a new lease. Mr Evans maintains that he kept Mr Ponticello fully informed of developments on a daily basis. He also says that Ponticello agreed verbally on no fewer than three occasions that the Tenant would remain in the premises on a monthly basis but otherwise on the same terms, until Betmaur secured a new lease. According to Mr Evans at least one such conversation took place on the subject premises, in the presence of Mr Evans’ daughter Alicia Gordon who managed 1 See clause 10.4 of the lease 2 Transcript page 12 -- 2 of 8 -- Brisbane Paint Supply-v-Ponticello Decision 3 the shop. Ms Gordon gave evidence to the same effect. By letter of 9 July 2001, Evans advised Ponticello that he [Evans] had sold the business to Betmaur, asked Ponticello to discuss a new lease with Mr Cane and to return the bond monies to Ms Ferlazzo. According to Evans he told Mr Ponticello that Betmaur would be moving into the premises on 1 July 2001, whereupon Ponticello raised no objection. Mr Cane began to conduct his business there and Brisbane Paint’s lease expired on July 14, 2001. That company’s rent was fully paid up to that date and Mr Evans and Mr Cane both say that the latter offered, in a fax message a few days’ later to Mr Ponticello to pay the first month’s rent. According to them Ponticello ignored that offer and responded with a written notice from his solicitors on the afternoon of July 19, giving Betmaur 48 hours to reinstate the premises and to quit. There were no further negotiations between Betmaur and Ponticello. The notice to quit was not produced to the Tribunal. Mr Ponticello states that it was directed to Betmaur. According to Cane it asserted that he was occupying the premises illegally, and that non-compliance with the notice would entitle the Landlord to confiscate the stock and fittings. Effectively, the notice was directed also to Brisbane Paint whose holding-over ended when Betamaur’s negotiations with the Landlord broke down On receipt of the notice of 19 July, Evans took legal advice and he and Cane hastily removed their stock and tidied the premises as best they could within 48 hours. We are bound to say that Evans was not well advised. In relation to monthly tenancies Clause 2.2 of the lease provides: “…each party may end the tenancy at any time by giving one month’s notice to the other.” Not surprisingly, Evans asserts that 48 hours was not a reasonable period of notice in the circumstances: “We barely got the stock out in time.” On July 22 Cane and Evans asked Ponticello’s solicitor for access to the premises to complete the cleanup and to make good. There was no response. According to Evans he also sent letters and faxes [to the same effect] direct to Ponticello but there was no response until August 20. Ponticello then sent Ms Ferlazzo’s solicitor a list of matters to be remedied and complained that he Evans had treated him ”disrespectful” [sic]. That letter was referred to Mr Evans who immediately undertook to carry out the work and proposed a date seven days’ later, namely August 28 for that purpose. On that day Evans arrived at the premises with appropriate materials and equipment. Ponticello did not keep the appointment, and Evans was unable to gain entry, but he cleaned the exterior of the premises as well as he could. Evans says that between 4 and 6 September he and his daughter made more -- 3 of 8 -- Brisbane Paint Supply-v-Ponticello Decision 4 than 40 calls to Ponticello’s mobile phone number or by land line to his office in efforts to arrange access to the premises. On every such occasion Ponticello either hung up at once on the caller or switched off the phone. Evans has lodged a log of those attempts to contact Ponticello. On September 5 Ms Ferlazzo’s solicitors referred to Evans another letter from Ponticello to her. It set a deadline of 48 hours for Brisbane Paint to make arrangements with Ponticello to carry out certain work, but by the time Evans received that letter the deadline had passed. Evans made several more abortive attempts to contact Ponticello in person or through his solicitor but the latter stated that they were no longer acting for him. There the matter stands. It is Evans’ belief that Ponticello’s evasiveness is connected with his retention of the security bond. Evans claims that he suffered a considerable loss in the sale of the business and that he had every incentive to assist Betmaur to negotiate a new lease. Evans states that he has direct knowledge of the state of the premises at the commencement of Ms Ferlazzo’s term as he helped her to move in. He says:- • The vinyl flooring was in places badly discoloured. The floor was uneven and there were longitudinal and lateral splits in the vinyl. It had worn out near the front door and had been patched with a square of newer material held in place with gaffer tape; • The poly-plastic hand basin was old and discoloured and there were stress cracks in the bowl; • Signage from a past tenant was clearly visible thorough what appeared to him to be a single coat of plastic paint. Ms Ferlazzo agrees with these observations about the state of the premises at the commencement of her tenancy. She also says that several of the fluorescent lights were out of order and that she had to pay for certain electrical repairs. Now as to the state of the premises when Evans vacated them, he says that there were splashes of paint that could have been easily removed with solvent ns that he could have made all proper repairs for little more than $900.00. The necessary work, in his view, comprised the following:- • Removing wooden battens from the walls, filling plug holes, patching the adjacent paintwork and fully re-painting the interior walls to the standard apparent at the commencement of the lease; • Repainting stairs and window-sills; • Cleaning paint stains from handrail and basin; and • Removing rubbish. -- 4 of 8 -- Brisbane Paint Supply-v-Ponticello Decision 5 Mr Cane denies that any rubbish was left outside the premises. He estimates that approximately one-half to 1 cubic metre of rubbish [chiefly cartons] was left in the shop and that if access had been reasonably allowed, it could have been moved in one trip to the dump with a car trailer. He added that a licensed electrician friend removed an illuminated sign outside the shop and made the junction box safe. LANDLORD’S CASE Mr Ponticello accepts Mr Evans’ estimate of the size of the leased premises. He admits that Mr Evans told him in May and June 2001 that Evans had a potential purchaser for the business and [in due course] that he had sold it. He admits that his solicitors gave Betmaur notice to quit within 48 hours on 18 July 2001. But Ponticello denies that he received an offer from Cane to pay a month’s rent after the lease expired. He also denied that he authorised Betmaur to occupy the premises on a month-to-month arrangement while they negotiated a new lease. However, in the following passages of the transcript Mr Ponticello did eventually concede, albeit grudgingly, that he agreed that the Tenant [Evans’ company] could hold over on these terms: MS GORDON:…Bill [Evans] said, “Well, look, we don’t know yet, but when the lease expires, can we go month by month until we find somebody who will go under a three year lease agreement or something like that with you?” And you had agreed. MR PONTICELLO: I never agreed to anything.3 And then to the Chairman: MR PONTICELLO: I’ve got no problem with that, as long as the rent is paid and everything is right. THE CHAIRMAN: You had no problems with them holding over? MR PONTICELLO: No, no problems as long as the rent was paid. If they want to sell the business, they can go on the same lease as prior.4 In reference to the “same lease [terms] as prior”, Mr Cane’s unchallenged evidence is that Ponticello “would not accept anything less than a five-year lease at a significantly increased rental”. Mr Ponticello admits that he received two letters from the Tenant [Evans’ company] in August 2001. They letters are included in the Tenant’s material. They contain an offer to ‘make good’ and nominate August 28 as a suitable 3 Transcript p20 4 Transcript p21 -- 5 of 8 -- Brisbane Paint Supply-v-Ponticello Decision 6 date to perform the work. . Ponticello has not explained why he failed to reply to this letter but he claims that he attended the premises on the nominated date when Evans failed to appear. Nor has Ponticello explained why it was so difficult for Evans to contact him at about that time other than suggesting that his mobile phone was stolen. The log kept by Evans show that several of the calls in question made contact with Ponticello’s instrument but were quickly terminated after Evans had identified himself. He offers no reason for failing to respond to messages sent to him on his ordinary telephone. Mr Ponticello claims that he paid for complete cleaning and repainting of the premises and for an electrician to replace some fluorescent lights and attend to power points and to do some unspecified work on a junction box. Some rubbish was also removed and the hand-basin was replaced. A new tenant named McNamara paid for new floor covering. Mr Ponticello produced an invoice from Aussie Excavators for removal of rubbish from the premises including the old vinyl flooring. 5 He also produced several receipts for what he says was other remedial work. The Tribunal was left to infer that those invoices were rendered on or soon after the respective dates on which the work was carried out. However, these documents have certain deficiencies that Mr Ponticello did not satisfactorily explain. For example: • Phillip Rizzo’s invoice dated 21 October 2001 for $4,373.60 states that he removed timber battens, patched the plaster and, inter alia painted the premises internally. Rizzo’s claim for materials is not itemised and there is no indication of the time taken to do the work. • Michael Day’s invoice of 19 September 2001for $954.00 asserts that he did general-purpose repair work including internal painting. According to Ponticello, Day was paid at a rate of $10/hour as an assistant to Rizzo. However, Day’s invoice pre-dates Rizzo’s by more than a month. The Tribunal finds it difficult to accept that Day painted the walls some four weeks before Rizzo removed battens from those walls. There can be no suggestion that these alleged outlays include new floor covering, as Mr Ponticello himself asserts that they were paid for by McNamara. It seems to us that Ponticello’s attitude to this dispute is encapsulated in this portion of his evidence: “ …I feel like, you know, that I’ve been basically used, due to the fact that…I have the situation where Mrs Ferlazzo has sold the business to Mr Evans ...and then subsequently when the business was sold I didn’t pressurise to get the security deposit back at the minute, and he has put pressure on me to refund the money. . I am going according to the lease, and that is what we are doing.” 6 5 Transcript p59 6 Transcript p15 -- 6 of 8 -- Brisbane Paint Supply-v-Ponticello Decision 7 TRIBUNAL’S FINDINGS Mr Evans submits that there are three ultimate issues in this dispute. The Tribunal would add a fourth: 1. On July 18 2001 was there a valid lease between his company and the Landlord? 2. Was the Landlord’s notice to quit a given in accordance with the lease? 3. Was his company, as the Tenant, given a fair and reasonable opportunity to rectify and make good the premises allowing for fair wear and tear? 4. Were the costs of rectification allegedly incurred by the Landlord actually incurred, and if they were, are they fair and reasonable? Inevitably there are questions of credit which the Tribunal must resolve. Mr Evans and Ms Gordon impressed as honest and generally reliable witnesses. Where the evidence of Mr Ponticello is in conflict with theirs the Tribunal is not disposed to act on Mr Ponticello’s version. We take this view after all due allowance for his partial deafness and lack of familiarity with legal procedure. Some of his evidence was incomprehensible. Other parts of it were unresponsive, self-contradictory, or at odds with his written material. FINDINGS issue 1: We find that the Landlord and Tenant agreed to an extension of the lease on the same conditions except as to the term, on a month-to–month basis, while the Landlord and Betmaur conducted negotiations. Issue 2: According to Clause 2.2 of the lease to Evans’ company, any subsequent monthly tenancy was determinable on one month’s notice by either party. Mr Evans was given 48 hours’ notice. That notice was manifestly inadequate and inconsistent with Clause 2.2. Issue 3: Mr Ponticello insisted that the remedial work after Evans’ company departed was a “long [and expensive] job”. Mr Evans was ready and willing to do that [or to have it done], and we hold that, if he had been given a proper opportunity to do it, there would have been no need for Mr Ponticello to incur all or any of the expenses which he claims to have incurred. Issue 4: In this respect the Tribunal has the benefit of the professional experience of the two members who respectively represent tenants and landlords. • The Tribunal rejects the Landlord’s claim for new floor covering. We find that the vinyl floor covering was by no means new at the commencement of Mrs Ferlazzo’s tenancy; and that in any event, new -- 7 of 8 -- Brisbane Paint Supply-v-Ponticello Decision 8 floor covering was paid for by Mr McNamara. • We allow the cost of a new hand-basin to relace the one that was installed by Mr Krause before Ms Ferlazzo’s occupation of the premises; • Complete repainting of the premises, was not warranted at the outgoing tenant’s expense. The latter’s duty was simply to ‘make good’. Besides, it appears that the previous paint job was not of high quality. We are prepared to allow the reasonable cost of removal of the battens from the walls and of removing the signs thereof; • We allow part only of the electrician’s charges as we hold that Mr Cane had paid part thereof, and that the lighting was less than adequate when Ms Ferlazzo commenced her term; • We are prepared to allow part of the claim for rubbish removal. In the judgement of the Tribunal a fair and reasonable amount to restore the premises to the condition they were in when the lease in question commenced [fair wear and tear excepted] is no greater than $1,800.00. IT IS ORDERED THAT: Within 14 days of this order Ponticello Properties Pty Ltd refund to Ms Rita Ferlazzo the sum of three thousand four hundred dollars [$3,400.00] being so much of a security bond paid by her to the Landlord as exceeds a reasonable sum which in the judgement of this Tribunal is proper to restore the subject premises to the condition that they were in at the commencement of her lease from the Landlord, fair wear and tear excepted. A F Forbes Chairman -- 8 of 8 --