Duffy & Wolf v DS Pty Ltd [2002] RSLT 6

1 [2002] RSLT 6 THE RETAIL SHOP LEASES ACT In the matter of Dispute 16/02 JACK DUFFY AND UTE WOLF (T/A JUTA BALI) - Claimants - and - DS PTY LIMITED - Respondents DECISION Given in Brisbane on 20 June 2002 -- 1 of 7 -- Duffy & Wolf-v-DS P/L Decision 2 The issue is whether the Respondent landlord is liable to the Claimant tenants for breach of their lease with respect to quiet enjoyment. The Claimants say that another tenant is substantially disrupting their business by playing recorded music in the common area of the leased premises at a volume that is excessive in the circumstances. Relevant circumstances are noted below. They further say that the Respondent has the authority to prevent those disruptions but has failed to do so adequately despite repeated requests. They seek compensation by way of rent credits for a period since the formal lease commenced, to the date of hearing in the amount of $3,500.00 Directions Hearing on May 27 2002 At a directions hearing on 12 April 2002 the Respondent, appearing by its letting agent, Mr Cody, was ordered to file material in reply to the Claimants’ material by 10 May. The Respondent had not complied by May 23 and on that day, five working days before the date appointed for the hearing, it notified the Registry that it sought an adjournment on the basis that the Claimants had made a criminal complaint to the local police on matters relating to the dispute. 1 The Respondent also sought production of the Claimants’ trading records. The Claimants explained that they have not prepared full trading statements as the full financial year has not elapsed and they rely on a graph of gross turnover figures. At the further directions hearing on Monday 27 May the Respondent’s managing agent, Mr Cody, withdrew the adjournment application, stating that he had just been advised that no criminal charges would be laid against him. Mr Cody did not satisfy the Chairman that the Respondent had any justification for non-compliance with the orders for filing. Accordingly the Chairman limited the Respondent to providing the Tribunal with copies of the Claimants’ lease, the other tenants’ lease and a sound engineer’s report [referred to below] which had not been provided to the Claimants. At the hearing on 30 May Mr Cody had the opportunity to cross-examine the Claimants, to give brief oral evidence and to be cross-examined and make submissions. Claimants’ Evidence The Claimants lease a shop occupying 51 sq metres in a small arcade in a seaside town. There they deal in foreign artefacts – principally woodcarvings and pottery. They also operate a design service. Diagonally opposite their premises is a coffee shop leased by a Mr & Mrs Marcello Alesi. He is commonly referred to as Mr Marcello and he has the Respondent’s authority 1 The Chairman noted that even had criminal charges been laid, the substance of the complaint was not directly related to the dispute in this jurisdiction and would not ipso facto have satisfied her that an adjournment was warranted. -- 2 of 7 -- Duffy & Wolf-v-DS P/L Decision 3 to place tables, chairs, umbrellas and loudspeakers in the common area walkway outside his shop. Mr Marcello controls the loudspeakers from an amplifier inside his shop and plays recorded music. The walkway between Claimants’ shop and the coffee shop is about 4 metres wide. Two loudspeakers directly affected the Claimants when they filed their Notice of Dispute. One was directly outside their shop and the other is attached to a structural beam or bulkhead about 8 metres from their door. That speaker directs its sound toward the Claimants’ shop. The arcade and the Claimants’ shop are not air-conditioned and the shop has no direct access to the open air. Glass louvres run the length of the leased area above the display window and the 1.9 metre long sliding glass door. The door is heavy and stiff to move. Consequently the Claimants are unable to mitigate any nuisance by closing their entrance door. Moreover Mr Cody, the letting agent who appeared as agent for the Respondent conceded that it was his client’s preference that tenants kept their doors open to attract trade. The tenancy formally commenced on 1 February 2002 for a 12-month term at $715/month with options to renew. The Claimants were let in for a rent-free two-month period in December 2001 and trading commenced on 10 January. They became aware of noise from the loudspeakers at an unacceptable level at the outset and complained verbally to Mr Cody. He took no immediate action and the Claimants sent a series of letters to him between 18 December and mid April to which they received no written reply. At first they suggested that the speakers be removed and that one be relocated closer to the coffee shop’s outside area. They allege that the volume of noise cost them a substantial sale on 4 January. The speaker directly outside the shop was removed about 10 January and in February Mr Cody arranged a meeting of all tenants. The removal of the first speaker reduced the noise to some degree. However, according to the Claimants, popular Italian ballads are played up to seven times each day and the sound is loud enough to penetrate their shop. Mr Duffy says that in February Mr Marcello turned up the volume of the speakers to an uncomfortable level for up to 30 minutes at a time over a period of three weeks. The inference is open that this was a retaliatory act. The Claimants say that the music is intrusive to the extent that they are unable at times to converse with customers at a normal level. They say that customers, especially those who are seeking Ms Wolf’s advice on matters of design and colour or considering the purchase of artworks costing up to $600, attend the shop for consultations of up to an hour and a half. Ms Wolf asserts that they need silence in the shop. The Claimants acknowledge that the particular problem would probably cease if the remaining speaker on the western side of the bulkhead were removed. Both Claimants complain that they have experienced antagonism from other tenants since they first complained to the Respondent. -- 3 of 7 -- Duffy & Wolf-v-DS P/L Decision 4 The Claimants’ graph of turnover in the shop from early January to the date of hearing shows a marked upward ‘spike’ late in February then a sharp drop in early March from $850 to around $400 per week, and little improvement to the date of hearing. The Claimants were cross-examined by Mr Cody. When Ms Wolf was asked to speculate on the sharp downturn in trade in March she attributed it to the attitude shown them by other tenants, rather than the offending music, saying:- “ I put it down to Marcello screaming and doing his nana, and I put it down to the woman coming into the shop, and I put it down to orchestrated – there are seven shops in that arcade who are bad- mouthing us, who are saying, `Don’t go in there and buy anything…I am saying that’s part of it2 Ms Wolf is the partner more involved in design consultation with clients: Mr Duffy is present in the shop for only 10-15% of the opening hours. We note that the sharp downturn in trade occurred during a period when Ms Wolf was overseas from 21 February to 11 March. Respondent Landlord’s Evidence Mr Cody conceded that, as the Respondent’s agent, he had the authority to control Mr Marcello’s use and positioning of the loudspeakers in the common area of the arcade. He explained that he had been trying to keep a ‘low key’ response to the many letters from the Claimants. He said that he tried to alleviate the problem by having the closest speaker removed in January. He obtained a report from a Mr Wright, a sound engineer, but did not disclose the contents to the Claimants. He stated that no other tenants complained of the music, and that the Claimants’ insistence on compensation from the first day of the lease hindered his attempts at rectification and that each successive letter from them made a different claim. He stated that he had failed to find any proof of disruption to the Claimants’ level of trade. In response, the Claimants’ say that they do not base their claim on reduced trade. Mr Cody fairly accepted the possibility that the nature of the Claimants’ business requires a softer ambience. He told the Tribunal that he gave instructions to Mr Marcello to remove speaker No. 4 the day before the hearing. When asked why he had not done so before, he said that as he had done what he could to alleviate the problem and the Claimants still seemed bent on claiming compensation, his client preferred that the Tribunal “sort the matter out”. He is prepared to give Mr Marcello a direction to maintain the volume of the remaining speakers at an acceptable level. 2 . Transcript p 27 -- 4 of 7 -- Duffy & Wolf-v-DS P/L Decision 5 The report of the sound engineer, Mr Wright, was frankly focussed on selling the Respondent a new background music system, but he did comment on the inadequacy of the current system and its slightly “tinny” sound. THE LAW A common law covenant of quiet enjoyment and a covenant not to derogate from the grant are implied as of course in all leases. Moreover there is an express term in the Claimants’ standard REIQ lease requiring them not to create any nuisance affecting other tenants or customers and obliging them to abate any such nuisance promptly: clause 11.1.5. That term is reflected in the Marcello lease: clause 7.04: “The Lessee shall not …do …anything which may grow to be an injury or annoyance to the Lessor or adjoining or neighbouring tenants or occupiers…” We find that the Claimants have suffered annoyance from Mr Marcello’s sound system, which at times has interfered with their dealings with customers, even though not reflected at the till. The question is whether the landlord can be held liable for acts of the other tenant In Aussi Traveller Pty Ltd v Marklea Pty Ltd (1997) Q Conv R 54 – 485 a tenant was awarded damages by trial judge for nuisance caused by dust and noise created by another tenant. The Court of Appeal observed that penetration of sound into leased premises was a physical interference with enjoyment of premises, and: “…In the circumstances prevailing here the defendant was rightly held liable for the sawdust & noise nuisance created by [the tenant] which, although not shown to have been authorised or encouraged by the defendant, was capable of being corrected or terminated by active intervention on his part”[ at 59,852] By enforcing clause 7.04 of Mr Marcello’s lease, the Respondent can control Marcello’s use and placement of loudspeakers. He acknowledged as much in his evidence. Indeed he has already procured the removal of one speaker. Not every annoying act of a neighbouring tenant will attract legal relief: the annoyance must be substantial. In Aussi Traders the noise of the neighbour’s machinery made ordinary speech inaudible and adversely affected sales. Here, in view of the small size of the shop, the lack of air conditioning, the narrowness of the arcade, the location and closeness of the speaker, and the capacity of the other tenant to turn the volume up at whim, we hold that the annoyance to the Claimants in the conduct of their business was, at times, substantial. We accept that customers contemplating an expensive purchase are likely to spend longer in the Claimants’ shop than customers of some of the other businesses in the arcade, and need quiet to come to a decision. -- 5 of 7 -- Duffy & Wolf-v-DS P/L Decision 6 However, while we accept that the type of business conducted by the Claimants needs subdued sound, their expectations are not entirely realistic. Ms Wolf did not want any music produced by Marcello’s speakers to be audible within the leased area, but the Respondent simply cannot be expected to provide complete silence. A level of sound normal for background ambient music in a shopping centre must be tolerated. We do not accept the Claimants’ contention that the Respondent failed to respond to their many complaints. He had one speaker removed, called a tenants’ meeting and engaged an expert. It is regrettable that the Claimants chose to use extravagant language in their dealings with Mr Cody: at the directions hearing Ms Wolf claimed they had been treated with “absolute contempt” and at the hearing she referred to Mr Cody in most uncomplimentary terms. The speaker described on the plan as No. 4 should be removed and another installed at the Respondent’s expense [should Mr Marcello require it] on the other side of the roof-beam or bulkhead in question. Mr Cody has now directed that the remaining offending speaker be removed. It is unfortunate that such an offer was not made earlier. Compensation We are not satisfied that any specific downturn in the Claimants’ business can be related to the offending music. One speaker was removed at the end of the rent-free period after which substantial sales were made. The wide fluctuations in noise only occurred over some 2-3 weeks, some of which time overlapped a period when Ms Wolf was overseas and when Mr Duffy replaced her in the shop. Mrs Wolf conceded that the drop in trade in early March might be traced to the attitude of the other tenants [as it seemed to her]. We do not accept that the Respondent bears any liability for a “soured relationship” within the arcade; in any case such matters are beyond the Tribunal’s jurisdiction. The Claimants have not satisfied the Tribunal that there is any basis for compensation under the Act and accordingly we dismiss that part of the application. The orders we make are as follows:- 1. That the Respondent through its agent cause speaker No. 4 to be removed from its present position on the bulkhead in the Walk Arcade, Redcliffe, at its own expense, and replace it with a speaker of adequate quality in the position described in Option 1 of the report of Mr Darren Wright of AEI Music (dated 20th March, 2002). 2. That the Respondent through its agent L J Hooker direct Mr and Mrs Marcello Alesi, the tenants of Shop 8 in the Walk Arcade, to continuously -- 6 of 7 -- Duffy & Wolf-v-DS P/L Decision 7 control the volume of the entire sound system at a level normal for background music in a retail shopping centre. 3. That the Respondent through its agent monitor the volume and quality of the sound system in accordance with Order 2 hereof and direct the tenants of Shop 8 (where necessary) to comply with Order 2 hereof. 4. In the event that the Respondent replaces the sound system with one similar to Option 2 or 3 in Mr Wright's report, the respondent shall control the volume of sound at a level no greater than that stipulated in Order 2. 5. The Claimants' claim for compensation by way of credit to future rental instalments is dismissed. 6. The parties have liberty to apply to the Tribunal relating to compliance with these Orders upon 2 business days' notice to the other party. A Forbes, Chairman. -- 7 of 7 --