Acecurbe Pty Ltd t/a Zorba's Carvery v Colonial Mutual Property Group Life Assurance Society Ltd [1994] RSLT 4

1 [1994] QRSLT 4 THE RETAIL SHOP LEASES ACT 1984 In the matter of Dispute No. 35/93 ACECURBE PTY LIMITED (T/A ZORBA'S CARVERY) - Tenant - and - COLONIAL MUTUAL (PROPERTY GROUP) LIFE ASSURANCE SOCIETY LIMITED - Landlord Coram: P Loewenthal J. - Chairman Mr T Davies - Member Ms L Peters - Member DECISION Delivered on 18 May, 1994, -- 1 of 6 -- 2 in Brisbane. In August, 1986, I K and J J Redpath were the owners of a building known as The Hub Apartments, Cavill Avenue, Surfers Paradise. That building included an arcade of shops known as The Hub Arcade. On 4 August, 1986, the Redpaths entered into a lease in respect of shops 14, 15 and 19 of The Hub Arcade, with certain named tenants. Subsequently, but prior to 1988, the Redpaths sold The Hub Apartments to the respondents, subject to the lease, and the respondent became the lessor of the three shops. In July, 1988, the tenants were carrying on a prepared food business known as "Zorbas Carvery" in the shops. They sold that business in July, 1988 to the claimant, who took an assignment of their lease. The term of the lease ends on 30 June, 1995. The claimants have brought proceedings for compensation against the respondent under the provisions of Section 15 of the Retail Shop Leases Act. The Retail Shop Leases Act was made law in 1984 and substantially amended 1989. Section 5(3)(A) makes it clear that amendments were not intended to be retrospective. The Chairman of the Tribunal has ruled that submissions to the contrary are directly in the face of the section referred to and are unarguable. This claim has to be decided in terms of the Act as it read in July, 1988. The relevant provisions of Section 15, as it then read, are - In every retail shop, lease or a retail shop (other than a periodic tenancy or tenancy at will) that forms part of a Retail Shopping Centre, the following provisions shall be implied:- (a) If the landlord or any person lawfully acting under his authority, whether he has the right to do so under the lease or not - (i)relocates the business of a tenant to alternative premises within the centre during the term or any renewal of the term of the lease of the tenant; (ii)inhibits the access of a tenant in the centre to his business in any substantial manner; (iii)takes any action other than action lawfully required by any statutory body or department or the Government that would substantially alter or inhibit the flow of customers to any retail shop or retail shops in the centre; (iv)causes or fails to make reasonable efforts to prevent or to remove any disruption to trading within the centre which disruption causes loss of profits to a tenant or tenants in the centre; (v)fails to have rectified as soon as practicable any -- 2 of 6 -- Acecurve-v-Colonial Mutual 3 Decision 3 breakdown of plant or equipment under his care and maintenance or any defect in the building or buildings that constitute the centre including common areas, which breakdown or defect causes loss of profits to a tenant or tenants in the centre; (vii) causes a tenant to vacate a retail shop prior to the expiration of the current term of the lease for the purposes of the extension, refurbishing or demolition of the whole or part of the centre. - then the landlord may be made liable to pay reasonable compensation to the tenant or tenants affected thereby. The following appears in the notice instituting the reference of dispute:- 6.Set out in reasonable detail and as simply as possible the main points of the dispute. 1.Losses caused to tenant by asbestos and failure by landlord to properly remove same and failure by landlord to adequately deal with problem. 2.Losses caused to tenant by landlord's failure to operate arcade as an arcade by landlord taking no steps to re-tenant shops and by failing to properly maintain same so as to be at all reasonably attractive to tenants (prospective) and customers (prospective) and to generate through traffic. 3.Losses caused to tenant by landlord's deliberate decision to effectively close arcade down. The claimant continued the business of restaurant and carvery in the premises. A plan of the arcade was attached to the lease and put before the Tribunal indicates that The Hub Arcade has ten shops on the eastern side and eight on the western side. It is not abundantly clear from the plan but an inspection by two members of the Tribunal shows that the claimant's shops are close to the entrance to the arcade with good sightline from Cavill Avenue, particularly to pedestrians proceeding in a direction from west to east. The Hub Arcade on the north leads directly into another shopping arcade known as The Dolphin Arcade. It is therefore open to traffic. The annual turnover for the claimant's business over the previous financial years has been as follows: 1989 $331,799 1990 $269,294 1991 $281,800 1992 $338,775 1993 $248,908 -- 3 of 6 -- Acecurve-v-Colonial Mutual 4 Decision 4 No explanation has been given for the variation in turnover. The Tribunal is asked to infer that variations were caused due to loss of trade for the reasons specifically dealt with in the notice instituting the Reference of Dispute and more fully dealt with hereunder. The accounts of the claimant indicated that it made a loss of $28,603 in 1989, a loss of $18,941 in 1990, a loss of $45,199 in 1991, a profit of $16,813 in 1992 and a loss of $46,260 in 1993. In each case the year indicated is the tax year. The Tribunal is concerned with the period ending on 26 October, 1993 when the respondent sold The Hub Apartments and ceased to be the landlord. It has been argued that there can be no compensation under Section 15 of the Act where a claimant is running a business at a loss or where a claimant has been trading illegally because it is in fact bankrupt. The Chairman rules that neither of these events could properly defeat a claim for compensation which is otherwise good in law. The claimant, at our request, prepared certain heads of submissions. We deal with the claim in terms of these heads, noting that we have already dealt with clause 1. (Clause 2 reads "Evidence of commercial strategy of CML resulting in arcade vacancies.") For commercial reasons, CML decided not to renew the leases of existing tenants as they fell due, but only to allow them to remain on under short term tenancy agreements. If shops in The Hub Arcade became vacant, only monthly or short term tenancies were offered to potential tenants. This Tribunal has frequently held that a landlord is not responsible for loss suffered by a tenant due to other vacancies in the same centre, where such vacancies are not due to any action by the landlord. On the other hand, where a landlord deliberately keeps other shops in the centre vacant in spite of tenants being available, then it may well be that the landlord falls within the provisions of Section 15(a)(iii) of the Act. In the matter before us, it has been argued that a decision taken for good commercial purposes cannot bring into effect the provisions of the subsection just quoted. The Chairman has rejected this argument as examination of subsection (i) of the same section makes a landlord liable for compensation where he relocates the business of a tenant, even though he does so for good commercial reasons. The Chairman has ruled that a deliberate policy of refusing long term tenancies may fall into the category of an action that would substantially alter or inhibit the flow of customers to any shop. As such it may give rise to a claim for compensation. A bar chart indicating the occupancy of all shops in the arcade from the commencement of the 1988 financial year until the end of 1993 gives a clear and easily visible indication of the -- 4 of 6 -- Acecurve-v-Colonial Mutual 5 Decision 5 tenancies of the various shops in the arcade. This indicates that although vacancies did occur in the arcade, except for shops furtherest from Cavill Avenue, most of the shops were occupied for most of the time until mid-1993. Against this there is evidence from specific customers of the claimant that they were deterred from patronising the claimant's business due to the existence of vacancies. Further, an automatic pedestrian counter installed at the entrance to The Dolphin Arcade from The Hub Arcade indicates a small decline of pedestrian traffic over the years. This decline is slightly more than for other entrances to The Dolphin Arcade. As far as we can make out, there is no correlation between the decline in pedestrian traffic as so indicated, shop vacancies in the arcade and the claimant's turnover. In particular, in 1992, the claimant had the biggest turnover of the years under consideration. We feel that the shop vacancies may have had some minor effect on the claimant's trading. However, the effect was minimal and is impossible, in our opinion, to quantify. We have therefore come to the conclusion that the claimant has not established the basis of its claim under this heading. The next claim is number 3 in the heads of submissions and reads "Evidence of Cleanliness and Maintenance of Arcade". The evidence in this regard is that in the early stages the contract cleaner was not efficient. However, the contract cleaning was taken over by a Mr Hemsley and was thereafter of a high standard. The complaint is that cleaning only took place in the early morning before business opened and that there had been a continuous buildup of dirt and rubbish during the day, requiring subsequent cleaning. We take the view that in a small shopping arcade a daily cleaning in the early morning is all that can be expected. There might well be some minor buildup of dirt and rubbish during the day, but the experience of the members of this Tribunal is that such buildup would occur mainly in the late evening and be removed by the early cleaning. Minor complaints have been made with regard to the type of floor covering, which was vinyl and easily marked by cigarette butts and the cover over the grease trap. These are very minor and do not, in our opinion, merit any compensation. Clause 4 of the heads of submission reads "Evidence of Disruption to Trading and Inhibiting the Flow of Customers by Hot Dog Stand and Time Share Operators". Clause 16 of the lease between the parties reads: The Lessees are aware that the lessors have granted licences for the use of portion of the common arcade area for a kiosk, entertainment machines, scales, art union ticket seller, time share seller and an itinerant artist and not withstanding the provisions of clauses 2, 3 and 11 hereof, the lessors may grant licences or concessions in respect -- 5 of 6 -- Acecurve-v-Colonial Mutual 6 Decision 6 of the common area, provided that any such licence or concession shall not obscure any window of the demised premises fronting on the arcade area nor unduly interfere with the common use of such arcade area. The evidence is that touts for the time share business approached and made a nuisance of themselves to persons using the arcade. This is unfortunate, but in our opinion is covered by the clause just quoted. A hot dog vendor was allowed to operate at the entrance to the arcade. Over a period of time, the hot dog vendor's space increased. The evidence is that, as a general rule, with one possible exception, the hot dog vendor only traded after the normal trading hours of the claimant. We have come to the conclusion that the claimant has not made out a case in this regard. Clause 5 of the heads of submissions reads "Evidence of Asbestos, Landlord's Action with respect to the Asbestos, and Disruption to Trade caused by the Asbestos Issue". In the course of alterations, it was revealed that asbestos had been used in the construction of the arcade. The arcade was built approximately 35 years ago and asbestos was commonly used at that stage. The evidence indicates that the respondents took immediate steps to have the effect of the asbestos investigated and remedies suggested. It was certainly not generally known to the ordinary public that asbestos had been found in premises on The Hub Arcade, although a newsletter circulated among tenants of The Dolphin Arcade indicated that this was the case. We are unable to state or to find that the presence of such asbestos in any way affected trade or entitles the claimants to compensation. Clauses 6, 7 and 8 of the Heads of Submissions are repeats or resumes of what has gone before. We have concluded that the claimant has not made out its case and is not entitled to compensation. Dated at BRISBANE this SIXTH day of JUNE, 1994. Chairman Retail Shop Lease Tribunal -- 6 of 6 --