Barsoum v Glebe Administration Board [2002] NSWADT 19 (18 February 2002)

Last Updated: 16 May 2002

NEW SOUTH WALES ADMINISTRATIVE DECISIONS TRIBUNAL RETAIL LEASES DIVISION

CITATION: Barsoum -v- Glebe Administration Board [2002] NSWADT 19

PARTIES: APPLICANT

Samy Barsoum

RESPONDENT

Glebe Administration Board

FILE NUMBERS: 015041

HEARING DATES: 12/11/2001, 13/11/2001, 14/11/2001

SUBMISSIONS CLOSED: 14/11/2001

DECISION DATE: 18/02/2002

BEFORE: Molloy GB - Judicial Member

LEGISLATION CITED: Administrative Decisions Tribunal Act 1997

Retail Leases Act 1994

CASES CITED: Manton -v- Parabolic Pty Limited (1985) 2 NSWLR 361

J C Berndt Pty Limited -v- Walsh (1969) SASR 34

Aussie Traveller Pty Limited -v- Marklea Pty Limited (1998) 1 Qd.R 1

Spyer -v- Phillipson (1931) 2 Ch 183

North Shore Gas Company Ltd -v- Commissioner of Stamp Duties (NSW) (1940) 63CLR 52

Bain -v- Brand (1976) 1 App Cas 762

Melluish -v- B.M.I. No. 3 Limited (1996) 1 AC 454

Gizah Pty Limited -v- AXA Trustees Limited (No. 2) (2001) NSW ADT 164

APPLICATION: Claim for payment of money

MATTER FOR DECISION: Principal matter

APPLICANT REPRESENTATIVE: APPLICANT

J Gooley, barrister

RESPONDENT REPRESENTATIVE: RESPONDENT

D Flaherty, barrister

ORDERS: 1. Application dismissed

2. Leave granted to the Respondent to re-list this matter before me within fourteen (14) days of the date of this order to argue whether the Applicant should pay the costs of the Respondent of the whole matter, or any part of the matter. Should the Respondent re-list to argue this issue then such argument will be limited to that issue the subject of the re-listing. In the event that the Respondent does not re-list for argument then there will be no order as to costs.

Reasons for Decision:

BACKGROUND

1 By Agreement for Lease made 17 September 1999 the Respondent as Landlord agreed to Lease to the Applicant as Tenant part of the Town Hall Arcade in Sydney, being Shop 43B (the "Premises").

2 The Agreement for Lease provided relevantly:

a) The parties would enter into a Lease upon the agreed terms on the earlier of:

(i) the day which next following the last day of the defined Fitout Period; and

(ii) the date specified in the relevant Certificate as the date being the date the date of Practical Completion, the Fitout Period being the period of four (4) weeks commencing on the Date of Practical Completion of the Landlord's Works which were themselves defined as "all work to be undertaken by or behalf of the Landlord generally in accordance with the Landlord's Plans and Specifications.

3 "Practical Completion of the Landlord's Works" was defined as meaning "the date on which that part of the Landlord's Works which relate to the premises have been completed or, if the Landlord so elects, completed to the extent that the tenant may undertake the Fitout Works while the Landlord is completing the balance of the Landlord's Works".

The "Fitout Works" was defined as meaning "the works to fitout the premises to be undertaken by the tenant pursuant to this Agreement".

4 On or about 29 August 1999 the Applicant signed the Agreement for Lease. On or about 19 September 1999 he presented design plans for the premises at a meeting with management of the Arcade. On or about 14 September 1999 the Respondent advised the Applicant by letter "that the Date of Practical Completion of the Landlord's Works for the (premises) occurred on Tuesday 14 September 1999". This was so notwithstanding the fact that the Agreement for Lease was not dated until 17 September 1999. That means, as I understand the terms of the Agreement for Lease, that the Landlord's Works were in fact completed (in the view of the Respondent) to the extent that the Applicant may undertake his Fitout Works to the premises while the Respondent is completing the balance of the Landlord's works. It must follow therefore that, at least in the mind of the Respondent, that as at the date of the Agreement for Lease the Applicant was able to enter into the premises and commence his Fitout Works as he was entitled under the terms of the Agreement. And it also follows, although it is probably not relevant, that Clause 2.3(a) which provided that the Respondent must give to the Applicant fourteen (14) days notice of the anticipated of Date of Practical Completion of the Landlord's Works no longer applied.

5 Subsequently, the parties entered into a formal Lease. Although the Lease in evidence does not appear to be dated, neither does it have various portions complete, there was no dispute that the Lease was entered into on 16 December 1999 and the Applicant opened his shop at the premises on 20 December 1999.

6 As part of the Lease documentation there was a Disclosure Statement which relevantly contained the following provisions:

3. Town Hall Arcade is to be redeveloped. The number of retail shops in the Arcade may vary from the number disclosed in this Disclosure Statement (thereafter this paragraph dealt with estimates of outgoings).

4. Town Hall Arcade includes the food court on the Sydney Square Level.

7 The tenancy details in the Disclosure Statement and details of outgoings and the Retail Shopping Centre Details were all extensively set out. I note that there were core trading hours, provision for a tenancy mix, a levy on tenants of $780.50 "towards the promotion of the reopening of the Arcade" and a promotion levy.

8 In addition, there was a document titled "Details as to Agreements or Representations". Relevantly paragraph No. 2 provided that the Respondent drew to the Applicant's attention "the likelihood of the following occurrences during the Lease ....

a) The Lessee's access to the shop and the flow of customers to the shop may be inhibited or altered while the Arcade or the Lessor's plant and fixtures are being maintained, repaired or repaired (sic) or repainted or there are alterations or additions being made to the Arcade;

d) Some plant and equipment in the Arcade which is under the Lessor's control may periodically break down and require repair, maintenance or replacement. This repair, maintenance or replacement may take some time, during which the Lessee may be inconvenienced and may suffer some loss in trading;

e) Refurbishment of the other tenancies which may create noise, dust and disruption to pedestrian flow."

As is usual the Disclosure Statement provided that the Applicant as Lessee acknowledge by signing it (which he did) that he received the Disclosure Statement prior to entry into the Lease, that the Respondent had made available to him a copy of the proposed retail shop Lease, and that the Applicant "believes that (he) will be able to fulfil the obligations contained in the Lease, including the payment of the proposed rent, outgoings and other amounts, based on (his) own business projections for the business", and that he had not relied on any statements or representations made by the Applicant as Lessor nor the Applicant's agents.

9 The Applicant opened the premises as a jewellery shop trading as "Cleopatra Jewellery" on 21 December 1999. He incurred fitout costs in excess of $72,145.00 (the quantum of which was not challenged). The Applicant was locked out of the premises on 10 May 2000 at which time he was in rent arrears under the terms of the Lease in the sum of $9,582.34.

Application To Tribunal

10 By Application filed 5 April 2001 the Applicant sought an rder that the Respondent pay damages to him "pursuant to the Retail Leases Act 1994", interest and costs.

11 The Applicant put his case in the following fashion: after the Applicant entered into occupation of the premises the Respondent carried out extensive renovation to the Arcade, especially in front of and nearby the premises and near the foot of the escalators leading up to the food court, such that people were put off going past the premises, such that the Respondent was unable to meet the pedestrian traffic flows that it held out were available in the Arcade, the result being that members of the public were unable or were put off from entering the premises which inevitably resulted in the Applicant being in receipt of less income than he anticipated such that he was unable to meet his rental obligations under the lease and which resulted in his eviction from the premises and being locked out.

12 It was submitted on behalf of the Applicant that he could call in aid the terms of Retail Leases Act Section 34, in particular sub-sections (1)(a),(b), (c) and perhaps (d).

13 In addition, the Applicant alleged that the Respondent had breached the terms of the lease by carrying out an eviction that was not warranted, the reasoning being that the tenancy could not be terminated until the tenant obtained the benefits of the lease contract. It was said that the Applicant did not get what he was entitled to get under the lease contract such that there was a derogation of the grant.

14 The Applicant abandoned his claim for any breach of the Trade Practices Act.

Evidence

15 The Applicant leased certain premises at Westfield, Burwood between 1996/1997 and 9 January 1999. Prior to 1996 he worked as an engineer, thereafter as a jeweller for six months employed at Rockdale in apparently the same type of business as he conducted in the Town Hall Arcade. He stated that he signed the Lease for the demised premises in August 1999, knowing that the Arcade was being renovated by the Respondent. The date of practical completion was 14 September 1999 and on 24 September 1999 the counterpart lease documents were "exchanged". The terms of the lease stated that the Applicant as Lessee must complete his fitout within one month from the date of practical completion. For various reasons he did not. Explanations were offered as to this failure, there was correspondence between the parties, there was an allegation of defective work by the Respondent which caused delay, but in my view none of that really matters because the Applicant opened for business on 20 December 1999.

16 The rent was $3,860.00 per month. The Applicant complained that the Respondent represented that all works to the Arcade would be completed by September/October 1999. The Applicant further complained that there was a representation by the Respondent that there would be 22,000 pedestrian movements per week day within the Arcade. But his prime complaint was that works continued in the Arcade from December 1999 through to May 2000. He alleged that the works were interfering with the operations of his shop business, that he complained all the way through from December through to May but admitted that he made no written complaints notwithstanding the fact that there is a clear statutory pre-requisite for a claim under Retail Leases Act Section 34 to come into operation, namely that before a Lessee is entitled to "reasonable compensation for any loss or damage" it must be shown "the Lessor does not rectify the matter as soon as reasonably practicable after being requested in writing by the Lessee to do so ...".

17 There was considerable debate, evidence to and fro, on whether all the work about which the Applicant complained had in fact been completed by the official opening of the Arcade on 2 February 2000. Oral, photographic and written evidence was tendered. The Applicant denied the work had been completed, the Respondent argued to the contrary.

18 It was the practice of the Respondent to require tenants to deliver to the Centre Management Office a Report showing gross sales for each individual month. The form of Report permitted a tenant to advise the Centre Manager of any problems under the heading "Notes". In the report for January 2000 this Applicant noted: "noise and construction dust affecting sales!". For February 2000 he referred to items having been stolen, for March 2000 there was no complaint and for April 2000 he complained about a rubbish bin, a sign board and observed that "more attention is necessary to attract traffic to the service area".

19 It is plain to me, and because this is so significant and both parties put considerable weight upon it, that whatever may have been the position relating to the Arcade renovations/repairs and refurbishment, to all intents and purposes as far as this Applicant was concerned the works being carried out by the Respondent were substantially completed by 2 February 2000, the date of the official opening of the Arcade.

20 I have carefully considered the photographic evidence that was put before me. I have carefully considered the evidence of the Applicant, his reports to the Centre Management and the material put before me by the Respondent.

21 It is important to understand that Retail Leases Act Section 34, although it writes into a retail shop lease certain statutory provisions, there are various restrictions on the operation of the Section. Firstly, as I have pointed out above, before a Lessee can seek "reasonable compensation" it must be shown that the Lessee gave notice in writing requesting the Lessor to rectify the alleged breaches of Section 34. It cannot be suggested that the Report of January 2000 constituted a Notice under Section 34 - plainly it did not.

22 More importantly sub-section (2) imports an obligation on this Tribunal to give "due consideration .... to whether the Lessor has acted in accordance with recognised shopping centre management practices" and further provides in sub-section (3) that "a retail shop lease may include a provision preventing or limiting a claim for compensation under the provisions implied by this section in respect of any particular occurrence if the likelihood of the occurrence was simply drawn to the attention of the Lessee in writing before the lease was entered into" and the section permits a disclosure statement as an appropriate method of notification. In this case the disclosure statement made it plain (clause 2) that the Lessee's access to the shop and the flow of customers to the shop may be inhibited or altered while the Arcade or the Lessor's plant and fixtures are being maintained, repaired or repainted or there are alterations or additions being made to the Arcade..." and it is also plain, and a circumstance which cannot be avoided (and to which I shall make reference later), that the Town Hall Arcade was at the time of the signing of the Agreement for Lease, at the time of the signing of the Lease and at the time of entry into occupation and opening of the demised premises, in a state of refurbishment and renovation. This was also made perfectly clear in the document styled "Details as to Agreements or Representations" to which I have referred in paragraph 8 above.

And that plain uncontested fact seems to me to not only fall within the terms of Section 34(2) but plainly within the terms Section 34(3). And in any event sub-section (4) makes it plain that the statutory provisions in Section 34 do not apply to any action taken by a Lessor in compliance with any duty imposed by or under an Act or resulting from a requirement imposed by a public or local authority acting under the authority of an Act. It cannot be suggested, and it was not suggested, that the works being carried out to the Arcade and about which the Applicant complained were not works that were required in order for the Applicant to comply with whatever were its requirements under the relevant approved Building Application. And there is no doubt that the works were required under Occupational Health and Safety Legislation, no doubt under Workers Compensation legislation, and so on.

23 A great deal of evidence was led on behalf of the Respondent with respect to difficulties in tiling the area situate near the demised premises and in the vicinity of the escalators to the food court. In my view the evidence seemed to show that although some tiles had not been completed outside the demised premises, the reason for this was simply that they could not be obtained. It seems that in the order of 20% of the tiling outside the demised premises had not been completed by 19 January 2000 but I am satisfied on the evidence that it had in fact been completed before 2 February 2000. I accept unreservedly the evidence of the Respondent's Project Manager for the Town Hall Arcade, Mr Chris Andrews, when he stated that there was very little that would demonstrate any affectation to the demised premises over and above that to any other shops within the Arcade. His view was, and I accept, that this is to be reasonably expected in a large refurbishment and is really not a cause for complaint and nothing had been put forward that would affect the financial viability of Shop 43B, the demised premises.

24 The Applicant relied upon a representation of pedestrian traffic movements within the Arcade. The Applicant alleged that the had several meetings with a Mr John Nuell, a representative of the Respondent, who represented to him that: "the Town Hall Arcade has an established traffic flow of 22,000 people per day and 6,000,000 exposures per year. The outlet we propose to lease to you is strategically placed to take advantage of increased traffic flows at all times of the day". In the Applicant's evidence it was not clear, and was not explored in the hearing, the actual location of the premises discussed in that conversation with Mr Neull. In the affidavit material (affidavit Applicant 10 July 2001 (Exhibit C)) this representation is referred to in paragraph 7. Paragraph 9 refers to an offer to lease shop K3, paragraph 13 refers to an offer to lease K5, paragraph 15 refers to an offer to lease shop 32 and it is not until paragraph 16 that the Applicant refers to the offer to lease shop 43B, the demised premises and the premises the subject of this hearing.

25 In my view it is therefore difficult to conclude that one should adopt unreservedly the representation allegedly made by Mr Nuell in relation to these discrete premises. However, the issue is academic because I have absolutely no difficulty in accepting the evidence of Mr Thomas Brown in his affidavit 12 September 2001 (Exhibit 3) which plainly showed that at least in April 2000 the average day showed traffic movements of 35,070. In his second affidavit 15 October 2001 (Exhibit 4), which annexed a series of daily traffic reports commencing 3 April 2000 it is plain that the pedestrian traffic movement per day exceed the amount represented by Mr Nuell. No traffic counts were available prior to April 2000 but in order to maintain a claim for a misrepresentation under this head the onus is on the Applicant and clearly it was not discharged.

26 It was also alleged that Mr Hammond in or around 25 August 1999, represented to the Applicant that "the Food Court will also open at the same time as you which means that you are going to get a lot of traffic. This will be great for your business". The Applicant alleged that the food court did not open until mid-January 2000. Quite frankly, I do not think much hangs upon that simply because the Applicant himself did not open his shop until 20 December 1999 so, even on the Applicant's case there would have been less than one month between the date of opening the shop and the date of opening the food court. And this, coupled with the general refurbishment of the Arcade, is not a matter in my opinion about which the Applicant can mount a serious complaint, having regard to the terms of the disclosure statement, the document styled "Details as to Agreements or Representations" and the plain fact of the matter that at all times the Applicant was aware that he was moving into an Arcade that was in the process of refurbishment, repair and renovation.

Summary of Evidence

27 It seems to me plain, and I find accordingly:

a) That at the time the Applicant moved into the demised premises and opened his shop the Arcade was in the process of renovation, repair and refurbishment.

b) The Applicant knew at the time he signed the Agreement for Lease, the Disclosure Statement and the Lease that the Arcade was in such a state and that the immediate environs of the demised premises were the subject of renovation activity.

c) The renovation activity was not such as in all the circumstances falls within the statutory impositions in Section 34 because:

i) no notification in writing was given by the Applicant as Lessee requiring the Respondent as Lessor to rectify any particular matter;

ii) in all the circumstances the Respondent as Lessor had acted in accordance with recognised shopping centre management practices;

iii) the documentation signed by the Applicant and the Respondent made specific reference to the likelihood of the particular occurrences about which the Applicant has complained;

iv) and in any event the Respondent was under a statutory duty to complete the requirements complained about by the Applicant.

28 I am not satisfied that the works about which the Applicant has complained, but subject to one primary submission with which I shall deal below, were such as to constitute a breach either of the lease or of Section 34 such that would entitle this Applicant to relief in this Tribunal.

Evidence of Loss

29 The Applicant sought to bolster his case by stating that the Respondent's works to the Arcade so affected his income from his business that he was unable to meet the rent. The Applicant's affidavit (paragraph 52) and his own oral evidence makes it plain that by 23 February 2000 he was completely up to date with the rent. He conceded that the rent for March was due 1 March 2000 in the sum of $3,860.78. He paid of that sum $2,000.00 on 28 March and made a further payment of $1,861.00 on 1 May. It is plain however that he had not made any payment for the rent due 1 April nor 1 May. His evidence was that his gross income had increased but not to a sufficient level to pay the rent. He said that no money was available.

30 However, the evidence also showed that he had purchased a house on 31 January 2000 for a purchase price of $310,000.00, had contributed about $60,000.00 from his own funds and borrowed about 80%. His argument seemed to be that the Arcade business did not generate enough money to pay the rent and that the rent must be paid from the business. This was an argument that, quite frankly, I am unable to understand. Rent is payable pursuant to contract. The contract requires the rent to be payable whatever the economic state is of the business from time to time. It is a matter of economic judgment for a tenant entering into a lease to determine the economic viability of the business that he/she proposes to conduct from the premises the subject of the lease. If the economic viability is such that from the proceeds of the business rent payments cannot be made then it is the contractual obligation of the tenant to find the rent from whatever other resources are available to the tenant, in discharge of the tenant's contractual obligations. I reject the proposition apparently serious advanced by this Applicant that rent must be paid from the business. I also reject the proposition (if relevant) that there was no money available because plainly there was money available to meet the Applicant's rental obligations. And in any event, in setting up a new shop (as in this case) a tenant must factor into his calculations the cost of fitout, the cost of stock and so on such that all of these financial considerations become part of the tenant's financial appreciation of whether or not he/she is going to enter into the lease contract.

31 It is also significant to note that the Applicant did not apply for relief against forfeiture. As a general rule in this Tribunal I think it is fair to say that stay applications are generally only granted if an Applicant can satisfy the Tribunal that rent will be paid in accordance with the lease contract. It may be that stay applications are often granted upon terms as to payment and are brought back before the Tribunal or otherwise the subject of a self-executing Order. It is difficult for an Applicant/Lessee to avoid his/her contractual obligation to pay rent.

Derogation of Grant

32 The Applicant's strongest submissions was that the Applicant as tenant did not get for what he contracted. It was submitted that the lease in clause 12.1 which contained the usual covenant for quiet enjoyment, was a positive covenant and that once the lease was granted all other documentation including the agreement for lease and the disclosure statement became absolutely irrelevant. Clause 12.1 is in the following terms:

"If the tenant pays the Rent and other money payable under this Lease and observes and performs when required its obligation under this Lease the Tenant may occupy and enjoy the premises throughout the Term without any interruption by the Landlord or by any person rightfully claiming through, under or in trust for the Landlord".

Reliance was placed upon a number of cases. Firstly, the Applicant relied on Manton -v- Parabolic Pty Limited (1985) 2 NSWLR 361. At the outset I drew to the attention of the parties the fact that in this case I had acted for the Second Defendants and Cross Claimants who were successful in those proceedings. The Applicant submitted that the lease between it and the Respondent became a Deed upon registration pursuant to Real Property Act Section 36. Therefore it was said that the covenant for quiet enjoyment became a landlord's covenant in a Deed. It was submitted that Manton -v- Parabolic was authority for the following proposition:

A Deed is a document whereby a person does the most solemn act possible with respect to its subject matter provided the document complies with the statutory requirements for formal validity. In this case the entry into the lease was the most solemn act possible with respect to the occupation of the demised premises.

33 Nextly, reference was made to J C Berndt Pty Limited -v- Walsh (1969) SASR 34. In this case a landlord carried out extensive reconstruction of a building which necessitated the erection of a hoarding in front of the demised shop premises and the use of a hoist and chute to facilitate the removal of materials. The hoarding remained in front of the demised premises for a period of about four months. The tenant alleged that the hoarding obscured the shop windows and interfered with the access of customers to the shop, that there had been a consequent fall-off of business and he sued for damages for breach of the covenant for quiet enjoyment in his lease. At page 37 Walters J said:

"Interruption contemplated by a covenant for quiet enjoyment need not be an actual interference with the possession or occupancy of the premises demised, but embraces every interruption of a beneficial enjoyment of the thing demised, whether accidental or wrongful, or in whatever way the interruption may be caused ... and thus it seems to me that a disruption of the access to, or of the view of, windows of a retail shop is sufficient to constitute interference with the enjoyment of the premises themselves. In the instant case a free and unrestricted passageway for members of the public along the eastern footpath of Gawler Place and an unobstructed view of the shop frontage were an implied accommodation of the demised premises, and any interference with that apparent accommodation was an interference with the ordinary use and enjoyment of the premises themselves".

34 It seems to me, however, that really what His Honour was saying was that it is a question of fact to be determined on the material before the Court or Tribunal. And, of course, it also depends upon the contractual terms as agreed between the landlord and tenant.

35 Reliance was also placed upon Aussie Traveller Pty Limited -v- Marklea Pty Limited (1998) 1 Qd.R 1. Here the Queensland Court of Appeal held that the question of whether a disturbance or interference with a tenant's occupation of leased premises amounted to a breach of the Landlord's implied obligation not to derogate from its grant was one of fact. Where there was substantial interference with a tenant's occupation of leased premises due to the conduct of another of the landlord's tenants and the landlord through lease provisions was capable of correcting or terminating that conduct but failed so to do, the landlord was in breach of its implied obligation to the first mentioned tenant not to derogate from its grant. Aussie Traveller is a classic case showing analysis by the Court of the factual circumstances that would result in a derogation. The factual circumstances, partly set out above, are expanded upon by MacPherson JA at page 7 when His Honour said:

"The sawdust made working conditions difficult. It collected on the floor, on the machinery, and on raw or finished products, where it tended to soil or stain the Plaintiff's canvass products, with the consequence that, in selling its goods, the Plaintiff found it necessary to discount its normal retail prices. In addition, the noise of the spindle planer was so loud as to make ordinary speech inaudible in the Plaintiff's premises. The planer was operated, at a minimum, every second day, often from early morning until lunch time. It was impossible to conduct telephone conversations or speak to customers except in the office or outside the premises. To shut out the sound, employees wore earmuffs, and some customers who could not stand the noise left the premises without making purchases. The sawdust and the noise resulted in a high turnover in the workforce employed by the Plaintiff, as well as increased absences from work through headaches and respiratory illnesses".

The legal principle is not an issue, rather the facts that go to support its application in this particular case. For the reasons I have set out above in my view the actions of the Respondent in all the circumstances of this case were not such as to amount to a substantial interference with the Applicant's occupation of the demised premises.

36 Reference was also made to Peter Butt's book "Land Law", 4th edition. There it is stated (paragraph 1545) that there are two key relevant covenants, one for quiet enjoyment and one not to derogate from the grant of the lease. At paragraph 1546 it is stated that the covenant for quiet enjoyment "is a covenant that neither the landlord nor those claiming through the landlord will substantially interfere with the tenant's peaceful enjoyment of the premises. By letting the premises, the landlord gives the tenant the right to possession during the term and impliedly promises not to substantially interfere with the tenant's exercise of that grant". The learned author refers to numerous cases and at paragraph 1548 observes: "Breach of the covenant is said to require substantial interference with the enjoyment of the premises, although in more recent time the stringency of this requirement seems to have been relaxed. Nevertheless, it is clear that trivial interference is not actionable".

37 On the question of non-derogation from grant at paragraph 1551 the learned author states:

"Having given something with one hand a grantor is not with the other to take away the means of enjoying it. In the present context the landlord must not do or allow either the leased premises or on other land under the landlord's control, anything that is inconsistent with the purposes for which the premises are leased, unless the parties have expressly or impliedly agreed otherwise .... the purpose for which the premises are leased defines the scope of the landlord's covenant not to derogate. The covenant is breached where the lease is made for a particular purpose, and the landlord's activity or non-activity renders the leased premises "unfit or materially less fit" for that particular purpose. There need not be complete frustration of the intended purpose; the test is whether the premises "for practical purposes" are to be "fairly regarded" as having been rendered unfit. There is no breach where the premises remain "reasonably fit for practical purposes" for their intended use, even though less fit than before. The question is: are the premises "unfit from a reasonable point of view for the purposes for which (they were) granted."

38 The Applicant's submission is effectively twofold: firstly it is said that because of the positive covenant for quiet enjoyment in clause 12.1 of the lease, because the lease is a deed all other documentation including the disclosure statement became irrelevant.

39 Secondly, it is submitted that there is a derogation from the grant of the lease because the Respondent/Lessee has taken away from the Applicant/Lessor the means of enjoying the lease.

40 It seems to me that there are two major difficulties that confront the Applicant. Although it is true, and I accept for the purposes of argument that the lease is a deed, I do not understand retail lease law as excluding from the circumstances surrounding a Lessee's occupation other relevant documents. In particular, I reject the proposition that one should exclude the terms of any disclosure statement. Such a statement is required to be provided by a landlord offering a retail lease and to suggest that somehow or other in reliance upon Manton -v- Parabolic and the general principles pertaining to deeds that one should ignore the terms of a disclosure statement, flies in the face of the legislation and in the face of reality. In this case the disclosure statement made it plain that the Arcade was in the process of renovation and refurbishment and in my view I can take that into account together with the unchallenged evidence, admitted evidence, that at the time the Applicant moved into the demised premises the Arcade was still in the process of renovation and refurbishment. There is no doubt that continued up to and indeed past the date of the official opening but I am not satisfied on the evidence that there was anything other then extremely minor works carried out near the demised premises after that date.

41 With regard to the principle of non-derogation it seems to me, and with great respect, that it is a principle that does not apply in these circumstances. It cannot be reasonably suggested that the demised premises were materially less fit for the particular purpose or were "unit from a reasonable point of view for the purposes for which they were granted". Indeed, the premises were in fact occupied. The Applicant traded as a jeweller. He earned income. He declared that income in his monthly reports to Centre Management. Furthermore, it is significant that Mr Butt observes that the principle applies where a landlord does something or allows something to be done "that is inconsistent with the purposes for which the premises are leased" but this is subject to this observation: "unless the parties have expressly or impliedly agreed otherwise". It seems to me absolutely plain from the terms of the disclosure statement and the conduct of the parties, in particular the failure of the Applicant to complain after January 2000, that the parties in fact agreed by their conduct that the Respondent could continue to carry out the works that were necessary in order to complete the refurbishment and renovation of the Arcade.

42 In my opinion the evidence falls far short from establishing any breach of the lease let alone a breach sufficient to constitute derogation from the grant or a breach of the covenant for quiet enjoyment.

Retention of Tenant's Fitout

43 It was uncontested that the Applicant failed to pay rent such that by 10 May 2000 he was substantially in arrears and on that date the respondent terminated the lease and seized possession of the demised premises. It was also not in dispute that the Respondent had a right under the terms of the lease to terminate it on 10 May 2000 for non-payment of rent. The submission on behalf of the Applicant that somehow the termination was "unfair" has no basis. Unfairness of termination is not an issue for this Tribunal. If, contrary to my conclusions above, whatever may have been the position in December 1999 or January 2000, the evidence showed plainly that the Applicant got what he bargained for by February 2000. The Applicant's case seems to be that because he had paid out something in the order of $10,648.49 rent plus $72,145.00 in fitout costs and various other expenses eg promotional levy $780.50, airconditioning and sprinklers $6,528.00, lease registration and legal costs $1,400.00, together with expenses relating to a guarantee, and because he only occupied the premises from 21 December 1999 up to 10 May 2000, then somehow or other it was "unfair" that the money that he spent on fitout ought not to be returned to him. There is no doubt that the lease should have commenced, with the payment of rent, on 15 October 1999 but because of various difficulties the parties seemed to have agreed that the lease would not in fact commence as to the payment of rent until 21 December 1999. In my view nothing hangs upon that at all. The plain fact is that the Applicant did not pay the rent, for whatever reason. He seems to think that rent should only be paid from the proceeds of the business, a submission which in my view is at variance with the law; and on the facts as I have found them there was nothing "unfair" (if that is a proposition of law) in the actions of the respondent.

44 The lease required the tenant to remove within seven days of the date of termination all of his fittings. Clause 13.3(a) permits the Respondent to enter into and take possession of the demised premises and eject the Applicant therefrom in the case of, relevantly, where the rent or any part of it is in arrears and unpaid for 14 days after it is due (whether demanded or not), such obligation to pay rent being an essential term (clause 13.2) such that re-entry and taking possession under clause 13.3 brings the lease to an end. In these circumstances the Applicant is required to remove from the demised premises his tenant's fixtures within 7 days from 10 May 2000.

45 Clause 14.3 provides that if he does not so remove then the Respondent/landlord can remove and store them at the risk and cost of the tenant, or the property in the tenant's fittings vests in the Respondent/landlord who may deal with them as it thinks fit without being liable in any way to the Applicant. Indeed, clause 14.4 provides that the Applicant indemnifies the Respondent in respect of the removal and storage of the Applicant's fittings.

46 It is significant to note that the Respondent wrote to the Applicant on 1 May 2000 noting that he was in arrears, giving the Applicant seven days to pay the arrears and warning him of Clause 13.3 of the lease "which enables us to re-enter into and take possession of the premises". The Respondent wrote yet again to the Applicant on 9 May, which letter referred to a meeting between the Applicant and the Respondent on 8 May (about which there was no evidence before me) and noting that the Respondent would prefer to enter into occupation of the premises with the co-operation of the Applicant, noting that the Applicant has "refused to co-operate" and the Respondent proposed to change the locks. By letter 11 May the Applicant was advised in writing by the Respondent that possession had been taken on 10 May, the locks changed, the "lease is now at an end" and inviting the Applicant to remove his "fixtures, fittings and stock from the premises and to make telephone arrangements with the Centre Manager for that purpose.

47 Thereafter there was further correspondence. On 18 May the Respondent wrote observing that the Applicant had not contacted it to remove the fixtures and fittings and therefore it had "no alternative then to arrange for these fixtures and fittings to be removed and stored ... at your cost". By letter 25 May 2000 the solicitors for the Respondent wrote requesting for the Respondent "immediate access to his stock which is currently held by you" ... and seeking confirmation of "a time and a place where our client will be able to collect his stock including the safe which was removed from the premises".

48 By letter 26 May 2000 the solicitors for the Respondent denied any wrongful termination, noted that all the Applicant's stock, fixtures and fittings had been removed from Shop 43B and stored (in accordance with the Respondent's letter 18 May 2000) and that the safe remained on site, but also in storage. It was stated that if the Applicant paid to the Respondent $800.00 for the removal and storage fees then the Respondent could "collect his stock, fixtures and fittings". By letter 29 May the Respondent's solicitors advised that the costs incurred by the Respondent "in respect of the removal of (the) goods and storage of those goods" was in fact $800.00 and by letter 31 May that $800.00 was in fact delivered to the Respondent's solicitors. No admissions were made by the Respondent.

49 By letter 9 June 2000 the Applicant's solicitors asserted on his behalf that the following items were missing:

a) all shop fittings;

b) alarm system;

c) security system;

d) camera monitoring system;

e) glass shop front and glass door;

f) signage;

g) light fittings;

h) timber flooring.

A demand was made for the immediate return of those items and it was also alleged that "a large amount of ... stock (was) missing".

50 The evidence seems to show that on or about 2 June the Applicant attended at Shop 43F (not the demised premises) and removed various items of goods. On 5 June further arrangements were made for the Applicant to attend to remove goods from his safe and the safe itself. It appears clear and uncontested that items (b) -(h) inclusive above remained intact within the demised premises Shop 43B and, indeed, remain there now.

51 The difficulty that I have in dealing with this aspect of the matter is that the lease obligates the Respondent to attend at the premises and remove his stock, fittings and so on within seven days of the date of termination and in fact the Respondent did not so do. It is not an argument (it seems to me) for an Applicant to say: "I know I did not attend in accordance with the lease but I did later on under arrangements that I made with the landlord and therefore I am entitled to restitution damages". It seems to me that either the terms of the lease apply or they do not. In my view, but subject to any statutory obligations, terms of retail leases apply as terms of a contract. The real question is: what is the consequence if in fact a tenant does not collect his goods and fittings? There is no doubt that the fittings as specified above remain in the premises, now let to another tenant. The Applicant seeks a right to reclaim those items calculated by way of damages.

52 In determining whether an item is a tenant's fixture and therefore removable, one has to ask two questions: firstly, has the item become a fixture? and if the answer is "yes" then the item has become part of the realty; if the answer is "no" then the item remains the tenant's personal property; secondly, if the answer to the first question is "yes" then one needs to ask a supplementary question: "Is the fixture for trade, domestic or ornamental purposes"? and if the answer is "yes" the tenant can remove the fixture as a tenant fixture but if the answer is "no" the tenant cannot remove it.

53 My attention was directed to Spyer -v- Phillipson (1931) 2 Ch 183 where the Court there held that valuable oak and pine panelling, ornamental chimney pieces and period fire places installed by a tenant, with no more or less degree of annexation than was usual for items of that kind, were removable, because they were attached for their better enjoyment by the tenant rather than for the permanent improvement of the landlord's property. However, in North Shore Gas Company Ltd -v- Commissioner of Stamp Duties (NSW) (1940) 63CLR 52 at 69 Dixon J expressed the "better opinion is that the item forms part of the realty unless and until the tenant exercises the right to remove it". In Bain -v- Brand (1976) 1 App Cas 762 Lord Cairns at 770 said, in rebutting an argument that fixtures installed by a tenant for trade purposes remain the tenant property rather than became part of the realty, that such fixtures "became part of the inheritance", the tenant had a right to remove them but on failure to exercise that right they continue to be part of the inheritance.

My attention was also directed to Melluish -v- B.M.I. No. 3 Limited (1996) 1 AC 454. It is plain from this case (which dealt primarily with revenue issues) that relevantly the "intention of the parties as to ownership of the chattels fixed to the land is only material so far as intention can be presumed from the degree and object of the annexation. ... the terms of any (contractual) agreement (between the landlord and the tenant) will regulate the contractual rights to sever the chattel from the land as between the parties to that contract and, where an equitable right is conferred by the contract, as between certain third parties. But such agreement cannot prevent the chattel, once fixed, becoming in law part of the land and as such owned by the owner of the land so long as it remains fixed".

54 It seems to me the difficulty that confronts the Applicant is that on any view he simply failed, for whatever reason, to comply with clause 14.1(b), ie within seven days of the date of termination remove from the demised premises the tenant's fittings. Indeed, the evidence shows that not only did he fail to comply but that in effect he did not make any complaint about the fittings until 9 June 2000. Consequently, as a matter of contract (clause 14.3(b) property in the tenant's fixtures vests in the Respondent. And it is plain that the premises have been re-let and the fixtures remain in the premises and are being used.

In any event, there was precious little, if at all, any evidence that would demonstrate the degree of annexation of each and every item, or indeed of any item, about which complaint was made. It may be that one might have been able to mount an argument relating to the degree of annexation of light fittings, perhaps signage but in my experience it is usual to leave in situ an alarm and security system, a camera monitoring system, glass shop front and glass door and timber flooring.

55 It was submitted that I had certain powers under Retail Leases Act Section 72 to award damages in a case like this. However, I am of the opinion that the claim by the Applicant for reimbursement of the cost of his fit-out has simply no basis in law and is unsustainable.

Loss of Income

56 The Applicant also sought damages by way of loss of income, basing his submission on the alleged breach or breaches of contract by the Respondent depriving him of his income such that he was entitled to claim a loss calculated on average weekly earnings. I have found that there have been no breaches as alleged by the Respondent but in any event in deference to this argument I am unable to see how an Applicant conducting a business could sustain an argument based on average weekly earnings as the basis of loss. It seems to me, but absent any further argument, that any loss sustained by an Applicant in the circumstances as alleged by this Applicant would depend for calculation/assessment on the reasonable profits that one would have expected from a business of this type in this location and having regard to all the relevant surrounding circumstances.

Conclusions

57 In my opinion the application fails in all respects. I dismiss the Application.

58 I make the following additional Order:

Leave granted to the Respondent to re-list this matter before me within fourteen (14) days of the date of this order to argue whether the Applicant should pay the costs of the Respondent of the whole matter, or any part of the matter. Should the Respondent re-list to argue this issue then such argument will be limited to that issue the subject of the re-listing. In the event that the Respondent does not re-list for argument then there will be no order for costs.

In this regard I would respectfully draw the attention of both parties to Administrative Decisions Tribunal Act 1997, Section 88 and my decision in Gizah Pty Limited -v- AXA Trustees Limited (No. 2) (2001) NSW ADT 164.