Damm v Fentway Pty Ltd [2000] RSLT 5

1 [2000] RSLT 5 THE RETAIL SHOP LEASES ACT In the matter of Dispute 45/00 ROLF and KATHY DAMM - Claimants - and - FENTWAY PTY LIMITED - Respondent DECISION Given in Brisbane on 30 November, 2000. -- 1 of 6 -- Damm-v-Fentway 2 Decision Proceedings in this matter were commenced by the filing of a Notice of Dispute in the Registry on 19th July, 2000. At a directions hearing, it was contended by the respondent that the Tribunal had no jurisdiction to hear this matter, as there was no lease in existence as at the date of the filing of the Notice of Dispute or within the four months prior to that date. The resolution of this Dispute depends on whether the claimant tenants had exercised an option to renew a pre-existing lease in terms of the provisions of that lease or any variation. It was ordered that the question of jurisdiction be tried separately on very short notice, as its resolution might result in the proceedings being substantially curtailed. The lease was between Margaret Ann Barr as tenant and the respondent as landlord. It was signed on the sixteenth day of December, 1993, and the term of three years commenced on 14th November, 1993. The rights of Margaret Ann Barr were transferred to the claimant tenants by Deed of Assignment and Covenant dated 12 January, 1994. An Option to Renew the Lease was exercised by the claimants and a document headed, “Deed of Extension” dated 18 th August, 1997, was executed by the parties. The effect was to extend the period of the lease for three years from 14 th November, 1996. The right to renew the lease arises under clauses 6.01.01, 6.01.02 and 6.03 of the lease. A further Option to Renew is given under clauses 6.02.01, 6.02.02 and 6.02.03, which reads: 6.02.01 FURTHER OPTION TO RENEW – It is further agreed that upon the EXPIRATION OF THE NEW TERM CREATED BY THE EXERCISE OF THE OPTION CONTAINED IN CLAUSE 5.1 HEREOF AND IF THE Lessee shall duly and punctually pay the rent hereby reserved throughout the whole of the said term and shall strictly observe and perform all the covenants agreements and stipulations (including those of a negative character) on the part of the Lessee herein contained, the Lessee shall have the option of taking a further Lease of the demised premises for a period of 3 years PROVIDED THAT the Lessee gives written notice of exercise of such option to the lessor not more than six (6) months nor less than three (3) months prior to the date of the expiration of the term created by the exercise of the option pursuant to clause 5.1, upon the same terms and conditions as are herein contained save and except this clause and save and except that the rental shall be as follows: 6.02.02 The rental for the first period of twelve (12) months shall be as agreed upon between the parties or in default of -- 2 of 6 -- Damm-v-Fentway 3 Decision agreement being reached before the commencement of the said further period the rental shall be in respect of the first twelve (12) months thereof as is determined by a person being a member of the Australian Institute of Valuers (Queensland Division) appointed for that purpose by the President of the Queensland Law Society Incorporated at the instance of either party such rental shall however be not less than the rental payable in respect of the then last preceding year plus 5% and the cost of the reference and the determination shall be paid equally by the parties hereto and the Valuer shall be deemed to be acting as an expert and his decision shall be final. 6.02.03 The rental for the second and subsequent years of the further term shall be the rental pursuant to the immediately preceding sub-clause plus an adjustment based proportionately on the percentage increase in the Commonwealth Statistician’s Consumer Price Index as more particularly detailed in the Rental Schedule hereof and the rental shall be adjusted in each year according to the formula therein set out provided that in no case shall the rent payable in each year be less than the rent for the preceding year plus 5%. In order to comply with the provisions of 6.02.01, notice of exercise of such option to the lessor must be given not more than six months nor less than three months prior to the date of the expiration of the previously agreed lease. The last date on which such notice could be given under the lease was 13 August, 1999. Mr Damm has given evidence by way of an affidavit in which he states on 12 August 1999 he phoned Mr Karreman, the Controlling Director of the respondent landlord. He says that he asked Mr Karreman whether he had decided what he was going to about increasing the rent, to which Mr Karreman replied that he hadn’t made up his mind about the rent yet, but that he would consider the matter over the next few weeks and get back to the claimant, Mr Damm. The affidavit continues that Mr Damm stated that notice of exercise of the option had to be given by the following day and Mr Karreman stated, “I acknowledge that you have contacted me before the lease deadline clause has expired.” Thereafter there is some conversation alleged by Mr Damm and denied by Mr Karreman. We are not satisfied that Mr Karreman used the words attributed to him, but accept that Mr Damm sets out the gist of the conversations. On the same day, that is, 12 August 1999, in a letter Mr Damm states that he is writing to confirm the conversations of that morning in relation to the requirements for renewing the lease agreement. He continues: “We discussed the rent. You indicated that you wished to consider the matter over the next few weeks and you would contact me at a later date. Because of this -- 3 of 6 -- Damm-v-Fentway 4 Decision you felt it would not be necessary, at this point in time, for us to do anything further.” The Chairman has directed the Tribunal that although the renewal clause requires notice in writing by a specified date, these provisions can be altered by subsequent agreement between the parties. It was originally contended by the applicants’ representative that the conversation of 12 August 1999 and the subsequent letter amounted to an exercise of the renewal of the lease. This contention cannot be upheld in the light of Mr Damm’s statement that he still wanted to be in a position of bargaining from strength in regard to the question of a rent increase before committing himself to a lease renewal. The further contention is that the conversation as confirmed by the subsequent letter amounted to a waiver of the requirement that the renewal notice be in writing and be received before 13 th August, 1999. We accept this contention, particularly in view of a letter written on the letterhead of the respondent and signed. We set out this letter in full, as follows: “13 October, 1999. R & K Damm Happy Snapper Shop 2 17 Zeigenfusz Road THORNLANDS QLD 4163. Dear Sir/Madam, RE: RENT REVIEW – CRYSTAL WATERS SHOPPING CENTRE As you are probably aware your lease is due to expire on 14 November, 1999. After a review of your current rental situation we have determined your rent shall be increased by 5%, effective 14 November, 1999. We fell an increase of 5% is necessary as the rental for your tenancy has remained static during the past number of years. Therefore if you are in agreement with the proposed increase your rental will be increased to: - $1688.20 per month. If you are not in agreement with the proposed increase please keep in mind the “Make Good” provision of your current lease. If you wish to enter into a new lease with us please contact our office -- 4 of 6 -- Damm-v-Fentway 5 Decision no later than the 22 October, 1999 so that we can arrange new lease documents to be drawn up. Yours faithfully (SGD) R Porter Financial Controller.” It has been contended that this is a new and independent offer by the respondent to enter into a new lease and the words “new lease” in the final paragraph have been relied upon to support this view. We are aware that in law a lease entered into as the result of the tenant exercising an option is a new lease, but we are equally aware that in common parlance such a lease is referred to on occasions as an extension or renewal, and on other occasions as a new lease. The use by the respondent’s solicitors in previous deeds of the words “deed of extension” are not strictly correct. Mr Damm has said that in reply to this letter he telephoned the Fentway office and spoke to Mr Porter and then stated that he had previously spoken to Mr Karreman and stated that he wanted to exercise the option to further extend the lease. Mr Karreman gave evidence that he did not know of this conversation and denied it had occurred. We accept that he is a truthful witness but Mr Porter, who was not called, may not have reported to him. On the probabilities, we accept that there probably was a conversation between Mr Damm and Mr Porter because in the months following the respondent sent out monthly statements in which the amount of the previous rental plus 5% was claimed. These amounts were paid. Further, in March 2000 a draft lease for a period of three years was received by the claimants from the lessor’s solicitors. Although the draft lease was in the form of a new lease, not much weight can be put on this as the draft lease contained material which was inconsistent with a new lease to the claimants over the premises originally leased by them. The floor space area as set out in this new document was approximately 30% greater than that occupied by the claimants. The usage was defined as a liquor store, whereas the claimants carried on a fish and chip business. There were other discrepancies. The most reasonable explanation is that what occurred was something which has occurred in other proceedings before this Tribunal, that is, that the typist who prepared the draft was using the wrong lease as a precedent. We take the view that the sending of a draft lease (whether it contained errors or not) is more consistent with a verbal agreement for renewal of the lease than otherwise. The Chairman has directed that a verbal agreement for lease for the term of three years where there has been part performance and occupation is legally binding. -- 5 of 6 -- Damm-v-Fentway 6 Decision By letter dated June 28, 2000, the respondent’s solicitors gave the claimants a Notice of Quit the premises by 13 th August, 2000. The claimants vacated the premises before the final date in terms of this notice. It is contended by the respondent that the claimants accepted that they had no lease and therefore vacated the premises. The claimants’ contention is that they quit the premises in order to avoid possible liability for substantial legal costs, which might result in the loss of their house. We accept that this is an explanation. The respondent has contended that the claimants vacated the premises because the business they conducted in them was non-viable. From the material put before us, this contention might well be true. However, it may have been that the claimants seized the opportunity to vacate the premises by accepting the Notice to Quit as a repudiation by the respondent and, as such, a release for them from their liabilities. We take this as a matter to be considered when and if the claim comes before a Tribunal to consider liability and quantum. At the moment we are only concerned with jurisdiction. As indicated above, we have come to the conclusion that there was a valid lease at the stage when the Notice of Dispute was filed in the Registry, and that the Tribunal has jurisdiction in this claim. The matter should normally come before a Chairman on a further directions hearing. However, the Chairman has decided to short-circuit this and has made an order in terms of the usual form of order on directions in terms of the attached order. He directs that this order shall stand unless within ten days of it being posted by the Registrar to the solicitors for each of the parties, a request to the contrary is received by the Registrar in writing or by telephone. If the times suggested are unacceptable, the parties are asked to submit other times, which will be considered by the Chairman. P V Loewenthal, Chairman. -- 6 of 6 --