Banks-Gorton v Vaggelas [1993] RSLT 2

[1993] QRSLT 2 THE RETAIL SHOP LEASES ACT 1984 RETAIL SHOP LEASE TRIBUNAL -- D E C I S I O N -- Dispute No. 13/93 LEE BANKS-GORTON - TENANT - and - BETTY MATINA VAGGELAS - LANDLORD 17 June 1993 Coram: P V Loewenthal (Chairman) Mr M Macrae (Member) Ms S Kairl (Member) -- 1 of 3 -- BANKS-GORTON -V- VAGGELAS 13/93 2 THE CHAIRMAN: Yes, this is a claim by Mr Lee Edward Banks-Gorton, formerly the lessee of premises in Palm Beach, Mrs Vaggelas being the lessor. The claim that now comes before us is for $2500, and the allegation is that the sum of $2500 was paid by Mr Banks-Gordon to Mrs Vaggelas or at her direction, and falls within the definition of key money within the Retail Shop Leases Act. Key money is defined to mean: Any money that is to be paid to or at the direction of a landlord or landlord's agent by way of a premium non-repayable bond or otherwise, or any benefit that is to be conferred on or to or at the direction of a landlord or a landlord's agent in connection with the granting, renewal or assignment of a lease. Under Section 8 of the Act: The landlord under a retail shop lease or any person acting under the landlord's authority shall not be entitled to any key money in connection with the granting, renewal, extension or assignment of the lease. The material before us indicates that there was a previous lease of the premises between Mrs Vaggelas and Mr Gorton. Mr Gorton had, with the consent of the landlord, assigned the lease and the subtenant had fallen into arrears in the payment of rental. That lease was subsequently surrendered and there were negotiations for a fresh lease. While the subtenant was in possession, he had fallen into arrears and generally been a source of concern to Mrs Vaggelas and her husband and their company acting as his agents. His actions had undoubtedly caused concern and distress. When at a particular stage matters had so progressed that Mr Banks-Gorton entered into possession of the premises and cleaned them out and commenced a negotiation with Mr Vaggelas for a fresh lease, a request was made for $10,000. In subsequent negotiations, this was reduced to $2,500. Mr Vaggelas contends that the money requested was as compensation for time taken by himself and staff, and mental stress. Mr Banks-Gorton contends that the payment fell within the definition of key money. There is material before us to support both points of view, and there is little doubt that Mr Vaggelas was put under mental stress, and that time and expense were taken up in dealing with the subtenant. However, there was no legal claim by Mr or Mrs Vaggelas against Mr Banks-Gorton. Any claim which they had would have been against the subtenant, who it appears is a bankrupt. What is clear and particularly appears from the transcript of a conversation which took place between Mr Vaggelas and Mr Banks-Gorton, is that it was made abundantly clear -- 2 of 3 -- BANKS-GORTON -V- VAGGELAS 13/93 3 that unless a sum of money was paid, there would be no fresh lease. The transcript in portion reads this way. There was a request for and discussion of the money to be paid, $10,000 being requested, and then Mr Gorton said: I haven't got $3000 to pay up front. Never mind, you know, what is it for? What is $10,000 for? Really, I have paid the back rent from that other guy's. That has cost me $2500, which you told me I had to pay before you would give me a lease, and now----- Mr Vaggelas replied: This is not rent. This is so that you can get the lease. I don't care what you call it. Call it what you like. In the meantime, carry on without the lease and I'll see what I can do. This is a clearly implied threat that, if the money was not paid, there would be no lease, and if there was no lease, Mr Vaggelas would have the right to take action. This is made further clearer in further parts of the conversation. At one stage, Mr Vaggelas said: I'm not changing the rent, but if you want me to look at the rent review, you start fooling around with solicitors and that, and we will look at the rent, and the rent might go up as well. There were further negotiations, and a compromise figure of $2500 was agreed upon and paid. By statutory declaration, of which we have been given a photostat copy, and signature to which is admitted, Mr Banks-Gorton said: No consideration by way of fine, premium or otherwise has been paid to the lessor or any other person or party for the granting of the said lease... Mr Banks-Gorton admits that his signature appears on this document, and a letter from Mrs Vaggelas' solicitors makes clear that the document was prepared for stamp duty purposes. Mr Banks-Gorton says that he has no memory of signing this document. Be that as it may, we have come to the conclusion that there was no legal obligation on Mr Banks-Gorton to pay the $2500. He paid it entirely in order to be given a lease. It falls squarely within the definition of key money, as provided for in the Act, and that under the provisions of Section 8, the landlord is entitled to recovery. We have come to this conclusion unanimously, and we consequently order Mrs Vaggelas to pay to Mr Banks-Gorton the sum of $2500. Payment shall be made within seven days. -- 3 of 3 --