Egan v de Goede [2003] NSWADT 18 (29 January 2003)

Last Updated: 3 March 2003

NEW SOUTH WALES ADMINISTRATIVE DECISIONS TRIBUNAL RETAIL LEASES DIVISION

CITATION: Egan v de Goede [2003] NSWADT 18

PARTIES: APPLICANT

Timothy Egan

RESPONDENT

Gerhard (Peter) de Goede and Suzanne de Goede

FILE NUMBERS: 025065

HEARING DATES: 02/09/2002

SUBMISSIONS CLOSED: 02/09/2002

DECISION DATE: 29/01/2003

BEFORE: Montgomery S - Judicial Member

LEGISLATION CITED: Administrative Decisions Tribunal Act 1997

Retail Leases Act 1994

Legal Profession Act 1987

CASES CITED: Worsfold -v- de Goede [2002] NSWADT 273

Aspromonte Pty. Limited v Zagari (1999) NSWSC 831

Shevill v The Builders Licensing Board [1982] HCA 47; (1982) 149 CLR 620 at 626

Alessa Pty Limited -v- Total & Universal Pty Limited [2001] NSWADT 150

Townsend v SRA [1999] NSWADT 104

Citadin Pty Ltd v Eddie Azzi Australia Pty Ltd & anor (No 2)[2001] NSWADTAP31

Holpitt Pty Ltd v Varimu Pty Ltd [1991] FCA 269; (1991) 103 ALR 684

Hoblos v Marchese [1999] NSW ADT 127

Fonua v BHP Co. Ltd [1999] NSW ADT 59

Langley v UNSW (1984) EOC 92-018 at 75 468

Henry v Henry [1995] HCA 64; 135 ALR 564 at 576

Citadin Pty Ltd v. Eddie Azzi Australia Pty Ltd & Anor [2001] NSWADT 31

APPLICATION: Claim for payment of money

MATTER FOR DECISION: Principal

APPLICANT REPRESENTATIVE: APPLICANT

T Egan, in person

RESPONDENT REPRESENTATIVE: RESPONDENT

P de Goede, in person and agent

ORDERS: Mr Gerhard de Goede and Ms Suzanne de Goede are to pay to Mr Timothy Egan the amount of $10,878.98. This amount is to be paid within 21 days of these orders.

Reasons for Decision:

The Application

1 These proceedings relate the Cooks Gap General Store situated at Lot 90, Spring Creek Road, Cooks Gap 2850 ("the Premises"). The Premises are owned by Mr Peter de Goede and Ms Suzanne de Goede ("the Respondents"). Mr Timothy Egan leased the Premises and an associated residence from the Respondents. On 28 May 2002 Mr Egan lodged an application with the Tribunal in relation to a dispute between himself and the Respondents regarding the Premises. The application is brought under the Retail Leases Act 1994 ("the Act"). The matter came before the Tribunal on 6 June 2002 for an urgent application by Mr Egan to gain access to the premises.

2 That application was granted and the matter was referred for mediation. The parties attended mediation on 20 June 2002 but it failed to resolve the dispute. The matter subsequently returned to the Tribunal for hearing on 2 September 2002.

Details of the claim

3 Mr Egan sought an order that the Respondents pay him an amount $61,631 which he asserted were losses and cost incurred as a result of his lease agreement with the Respondents. He quantified the claim in the following terms:

Registration of business name $122.00

Public liability insurance (N. R. M. A.) $187.00

Reconnection of electricity $34.00

Accountancy fees $120.00

Legal fees $420.00

Application for an interim order $50.00

Travel expenses to Sydney Tribunal 6 June $105.00

Mediation fees at Maitland $448.00

Travel expenses to Maitland $80.00

Attendance at Tribunal 4 July $105.00

Loss of deposit on a cash register $75.00

Delivery of equipment to shop ex Sydney $150.00

Advertising $40.00

Tradespeople (electricians) $600.00

Loss of stock $7200.00

Losses on equipment $1895.00

Total $11,631.00

4 Mr Egan also sought an amount of $50,000 for lost income. This amount was based on the prices of similar businesses in the area. Two businesses for sale at Gulgong were priced at $45,000 and $65,000 respectively.

Background

5 It is not in dispute that in March 2002, Mr Egan and the Respondents held discussions in relation to the premises. At the time of those discussions the premises were leased to Ms Elise Worsfold. An outline of the background to that lease can be found in the recent decision of this Tribunal in Worsfold -v- de Goede [2002] NSWADT 273. It serves no purpose to repeat them here.

6 The parties do not agree with respect to several issues relating to the nature of the relationship between them and the basis upon which Mr Egan was in possession of the premises. A finding in relation to those issues is fundamental to the outcome of these proceedings.

7 I am satisfied that on or about 8 March 2002 the parties agreed that the Respondents would permit Mr Egan to enter into occupation of the premises when the Worsfold lease came to an end.

8 I am also satisfied that at that time, Mr Egan paid the Respondents an amount of $1000. This payment is recorded in a document signed by Mr de Goede. That documents recorded payment by Mr Egan of $1000 as "deposit shop, house in lieu of lease". The parties do not agree in regard to the purpose of this payment. Mr Egan asserts that it was payment of rent in advance and that no bond was required. In contrast, the Respondents assert that the payment represented a $1000 bond.

9 In my view, the payment of the $1,000 by Mr Egan was payment of rent in advance. The evidence presented by Mr Egan clearly shows that the Respondents had not required that any of the previous tenants paid a bond or security deposit in relation to the lease of the premises. I do not accept that the Respondents required that Mr Egan pay a bond in relation to the lease of the premises.

10 It is not in dispute that following that meeting between the parties it was agreed that Mr Egan would be permitted to occupy the premises but it was uncertain when he would be able to do so. It was also agreed that the Respondents would have their solicitor prepare a written lease. The rent was to be charged at $250 per week. At some time shortly thereafter Mr Egan indicated that he proposed to lease the premises in the name of a company called Enviro Farms Pty Limited; a company of which he was the sole director.

11 Mr Egan commenced trading from his private residence from about 1 April 2002. He entered into occupation of the premises on about 4 April 2002. From 4 April 2002 to 28 April 2002 Mr Egan and Ms Debbie Selman prepared the premises for trading and they commenced trading from the premises on 28 April 2002. Mr Egan asserts that it was a term of the agreement that he could occupy the premises rent free until he commenced trading. Mr Egan would clean the premises and make them in a usable state.

12 The Respondents asserted that rent was to be paid two weeks in advance, that the $1,000 paid on 8 March 2002 was a bond and therefore rent was payable from the time Mr Egan commenced trading.

13 The parties are in disagreement about whether a draft lease was ever prepared. It is common ground that no written lease was ever agreed between the parties. It is also common ground that no lease was prepared in the name of Enviro Farms Pty. Limited as the Respondents' solicitor had advised the Respondents that Enviro Farms Pty. Limited had been deregistered and that Mr Egan was not a Director of that company as he had indicated. The Respondents' solicitor had given this advice on or about 16 April 2002 and had advised the Respondents not to go ahead with the lease. Notwithstanding that advice, the Respondents decided to go ahead with the lease with Mr Egan trading under the registered business name of Cooks Gap Convenience Store.

14 On about 8 May 2002 the parties met to discuss a number of issues that had arisen between them. These included who was to be the lessee; whether Mr Egan could sub-let the rear of the premises; rent rebate for cleaning carried out by Mr Egan and Ms Selman; and the installation of a sink and heater. The parties disagree as to the outcome of this meeting.

15 Mr Egan asserts that, amongst other things, it was agreed that Ms Selman would be paid for cleaning work undertaken, an additional two weeks rent free period would be allowed in return for the work undertaken by Mr Egan and Ms Selman, and Ms de Goede would clean the residential premises on the weekend of 11-12 May 2002. The Respondents agree that a meeting was held on 8 May 2002 but deny that any of the issues were resolved. Notwithstanding that denial it is common ground that Ms de Goede went to the premises on 11 May 2002 and undertook some cleaning work there.

16 On 12 May 2002 Mr de Goede went to the premises and asked Mr Egan for rent. Mr Egan asserts that Mr de Goede told him that he was not prepared to give an additional two weeks rent free period and that in response he advised Mr de Goede that he was not prepared to stay in the premises if the Respondents were not prepared to abide by their agreement. He gave Mr de Goede notice that he would leave on 8 June 2002.

17 I accept Mr Egan's evidence in relation to this series of events. I accept Mr Egan's evidence that it was agreed between the parties that Mr Egan would lease the premises at $250 per week, inclusive of GST but subject to annual CPI increases. The Respondents did not require a bond. Mr Egan gave the Respondents $1000 representing four weeks rent with rental to commence from his first day of trading. In my view it is probably that an agreement was reached at the meeting between the parties on 8 May 2002 in the terms outlined by Mr Egan. I find as a fact that it was agreed between the parties that Mr Egan was allowed an additional two weeks rent free period in return for the work undertaken by Mr Egan and Ms Selman.

18 Consequently, because of the $1,000 paid by Mr Egan on 8 March 2002, the rent free period prior to the commencement of trading and the additional two weeks rent free period agreed on 8 May 2002, Mr Egan had paid rent to 8 June 2002.

19 On 22 May 2002 Mr Egan received from the Respondents a notice to vacate the premises. The notice required that Mr Egan give vacant possession of the premises by 26 May 2002. In response, Mr Egan contacted the Tribunal seeking advice and sought interim orders for access to the premises.

20 On 27 May 2002 the Respondents changed the locks preventing Mr Egan from gaining access to the premises. Later that day, Mr Egan and Ms Selman were permitted to gain access to remove some items from the premises. Mr Egan asserts that at this time he offered to pay Mr de Goede two weeks rent so he could retain possession of the premises but that Mr de Goede refused to accept the offer. Thereafter, Mr Egan accepted that the lease was at an end.

21 On 28 May 2002 Mr Egan lodged the application with the Tribunal and this was served on the Respondents on 1 June 2002.

Relevant legislation

22 Mr Egan has argued that the relationship between the parties is governed by the Act. Section 8 of the Act provides:

8 When the lease is entered into

(1) For the purposes of this Act, a retail shop lease is considered to have been entered into when a person enters into possession of the retail shop as lessee under the lease or begins to pay rent as lessee under the lease (whichever happens first).

(2) However, if both parties execute the lease before the lessee enters into possession under the lease or begins to pay rent under the lease, the lease is considered to have been entered into as soon as both parties have executed the lease.

Note. Therefore, if the lessee starts to pay rent as lessee or enters into possession as lessee, the lease is considered to have been entered into even if neither party has executed the lease at that time. Money paid in advance (purportedly as rent) as a deposit to secure premises for a proposed lease does not constitute rent paid as lessee under the lease."

23 Section 10 of the Act provides:

10 Right to compensation for pre-lease misrepresentations

(1) A party to a retail shop lease is liable to pay another party to the lease (the injured party) reasonable compensation for damage suffered by the injured party that is attributable to the injured party's entering into the lease as a result of a false or misleading statement or representation made by the party, or any person acting under the party's authority, with knowledge that it was false or misleading.

(2) The giving of a lessor's disclosure statement to a prospective lessee under a retail shop lease is considered to be the making of a representation by the lessor to the lessee as to the information in the disclosure statement.

(2A) The making of a representation by a prospective lessee in a lessee's disclosure statement given to a prospective lessor under a retail shop lease that the prospective lessee has sought independent advice, or as to statements or representations relied on by the prospective lessee in entering the lease, is considered to be the making of a representation by a lessee to the lessor.

(3) This section extends to apply to a statement or representation made before the commencement of this section.

24 Section 16 of the Act provides:

16 Minimum 5 year term

(1) The term for which a retail shop lease is entered into, together with any further term or terms provided for by any agreement or option for the acquisition by the lessee of a further term as an extension or renewal of the lease, must not be less than 5 years. An agreement or option is not taken into account if it was entered into or conferred after the lease was entered into.

(2) If a lease is entered into in contravention of this section, the validity of the lease is not thereby affected but the term of the lease is extended by such period as may be necessary to prevent the lease contravening this section.

Note. For example, if a lease is entered into for a term of 3 years, its term is extended by 2 years to 5 years. If a lease is entered into for a term of 2 years with an option for a further 1 year after that initial 2 years, the term of the lease is extended to 4 years (with the option for a further 1 year after that initial 4 years).

(3) This section does not apply to a lease if a lawyer, or a licensed conveyancer, not acting for the lessor certifies in writing that he or she has, at the request of the prospective lessee, explained the effect of subsections (1) and (2) to the prospective lessee and that the giving of the certificate will result in this section not applying to the lease.

(4) This section does not apply to a lease that results from the renewal of an earlier lease pursuant to an option conferred on the lessee, so long as there was no break in the entitlement of the lessee to possession of the retail shop and the option was granted by that earlier lease or by an agreement entered into before or at the same time as that earlier lease was entered into.

Note. Because of subsection (4), a lease will not be required to be for 5 years if it is a renewal of an earlier lease (because the minimum 5 year term requirement applied to the earlier lease and the availability of the renewal will have been taken into account in determining the term of that earlier lease).

(5) This section does not apply to a lease to the extent that its application would be inconsistent with the terms of any head lease under which the lessor holds the retail shop.

25 Section 34 of the Act provides:

34 Lessee to be compensated for disturbance

(1) A retail shop lease is taken to provide that if the lessor:

(a) inhibits access of the lessee to the shop in any substantial manner, or

(b) takes any action that would inhibit or alter, to a substantial extent, the flow of customers to the shop, or

(c) unreasonably takes any action that causes significant disruption of, or has a significant adverse effect on, trading of the lessee in the shop, or

(d) fails to take all reasonable steps to prevent or put a stop to anything that causes significant disruption of, or which has a significant adverse effect on, trading of the lessee in the shop and that is attributable to causes within the lessor's control, or

(e) fails to rectify any breakdown of plant or equipment under the lessor's care or maintenance, or

(f) in the case of a shop within a retail shopping centre, fails to adequately clean, maintain or repair the retail shopping centre (including common areas),

and the lessor does not rectify the matter as soon as reasonably practicable after being requested in writing by the lessee to do so, the lessor is liable to pay the lessee reasonable compensation for any loss or damage (other than nominal damage) suffered by the lessee as a consequence.

(2) In determining whether a lessor has acted unreasonably for the purposes of subsection (1) (c), due consideration is to be given to whether the lessor has acted in accordance with recognised shopping centre management practices.

(3) 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 specifically drawn to the attention of the lessee in writing before the lease was entered into.

Note. A disclosure statement is an appropriate means of specifically drawing the attention of the lessee to the likelihood of an occurrence.

(4) The provisions implied by this section do not apply to any action taken by the lessor:

(a) as a reasonable response to an emergency situation, or

(b) 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."

26 Pursuant to Part 3 of the Act, the Tribunal has powers to make orders in relation to a retail tenancy claim. The Tribunal's order making powers are set out in section 72 of the Act. The provisions relevant to these proceedings are:

72 Powers of Tribunal relating to retail tenancy claims

(1) In proceedings for a retail tenancy claim lodged with the Tribunal under this Part, the Tribunal is empowered to make any one or more of the following orders that it considers appropriate:

(a) an order that a party to the proceedings pay money to a person specified in the order, whether by way of debt, damages or restitution, or refund any money paid by a specified person,

(b) an order that a specified amount of money is not due or owing by a party to the proceedings to a specified person, or that a party to the proceedings is not entitled to a refund of any money paid to another party to the proceedings,

(c) an order that a party to the proceedings:

(i) do any specified work or perform any specified service or any obligation arising under this Act or the terms of a lease, or

(ii) surrender possession of specified premises to another person, or

(iii) assign his or her or its rights under a lease to a specified person, or

(iv) do or perform, or refrain from doing or performing, any specified act, matter or thing,

(d) an order granting a party to the proceedings relief against forfeiture,

(e) an order, by consent of the parties, requiring the parties to the proceedings to rectify a lease,

(f) an order:

(i) declaring any provision made by a lease to be void for being inconsistent with this Act or the regulations, or

(ii) declaring that a lessor is not entitled to withhold consent to an assignment of the rights of a lessee, or

(iii) declaring the rights and liabilities of the parties under law, whether any consequential relief is or could be claimed or not,

(g) such other order, in the nature of an interlocutory order of a kind referred to in paragraphs (a)-(f), as the Tribunal considers proper to be made in order to resolve or assist resolution of the dispute between the parties.

(2) The Tribunal may make such ancillary orders as it considers necessary for the purpose of enabling an order under this section to have full effect.

(3) The Tribunal may impose such conditions as it considers appropriate when making an order under this section."

27 Section 88 of the Administrative Decisions Tribunal Act 1997 ("the ADT Act") provides:

88 Costs

(1) Subject to the rules of the Tribunal and any other Act or law, the Tribunal may award costs in relation to proceedings before it, but only if it is satisfied that there are special circumstances warranting an award of costs.

(2) The Tribunal may:

(a) determine by whom and to what extent costs are to be paid, and

(b) order costs to be assessed on the basis set out in Division 6 of Part 11 of the Legal Profession Act 1987 or on any other basis.

(3) However, the Tribunal may not award costs in relation to proceedings for an original decision unless the enactment under which the Tribunal has jurisdiction to make the decision provides for the awarding of costs.

(4) In this section, costs includes:

(a) costs of or incidental to proceedings in the Tribunal, and

(b) the costs of or incidental to the proceedings giving rise to the application, as well as the costs of or incidental to the application."

The Evidence

28 Mr Egan appeared and gave evidence on his own behalf. Ms Selman and Ms Elise Worsfold also gave oral evidence and were subject to cross-examination. Mr Egan also provided a written chronology of events; statutory declarations from Mr Scott Worsfold, Ms Rachael Lee Szymkarczuk, Ms Elise Worsfold, Ms Tania O'Donahue, and Ms Jodie Henderson; a document signed by Jodie Henderson in relation to her earnings from her operation of a business in the premises; budget estimates for the workings of the business and opinion from Simon Bennet of Bennett Lawrence Pty Ltd Chartered Accountants in relation to those estimates.

29 Mr de Goede appeared and gave evidence on behalf of the Respondents. Mr de Goede's affidavit was also put in evidence as were Statutory Declarations from Ms Susanne Barrett (de Goede), Ms Nicole Griffiths, Mr Peter Fairy, Ms Joan Fairy; Statements from Ms Lynette Fisher and Ms Margaret Goggin and a personal reference from J.P. Thompson. Also put in evidence were an advertisement headed "Cooks Gap Home Grocery Service" the Respondents' chronology of events; a receipt for payment of $1,000 from Mr Egan dated 8 March 2002 and photographs of the premises.

Mr Egan's Case

30 Mr Egan's case is essentially that he entered into an agreement with the Respondents to lease the premises. Pursuant to section 8 the Act a lease existed despite the fact that there was no written document signed by the parties. Pursuant to section 16 the Act that lease was for a period of not less than 5 years. In support of this submission, Mr Egan referred to the decision of Hodgson CJinEq in the matter of Aspromonte Pty. Limited v Zagari (1999) NSWSC 831.

31 Justice Hodgson states at paragraphs 48-52 of the decision:

"In my opinion the entry into possession of the shop on the payment of rent, meant that there was some kind of lease in existence ... This in my opinion, would be so at general law, and it would be confirmed by S.8 of the Act. ... I remain of the view that s.8(1) discloses an intention that there can be entry into a retail shop as lessee and payment of rent as lessee under a lease, where these events occur at a time when there is consensus as to the terms of such a lease, but not yet any written lease entered into."

32 Mr Egan referred to the definition of a retail shop in the Act and in particular to the enterprises deemed by schedule 1 of the Act to be retail shop businesses. Schedule 1 provides for convenience food shop; fast food shops; general stores; mixed business shops; restaurants, cafeterias, coffee lounges and other eating places; and takeaway food shops. Mr Egan submitted that there can be no doubt that his business falls into the category of a retail shop business. Consequently, he submitted, the lease is subject to the Act.

33 Mr Egan asserts that in breach of the lease, the Respondents locked him out of the premises, with a pad locked chain across the entrance to the grounds. He argued that he is entitled to compensation for this action by the Respondents.

34 Mr Egan also asserts that pursuant to section 10 of the Act he is entitled to compensation for pre-lease misrepresentations by Mr de Goede that he had no objections to Mr Egan sub-letting part of the premise. Mr Egan's evidence is that the potential to sub-let the premises was critical in his decision to lease the premises. It would not have been viable for him to have leased the premises unless he could sub-let part of them. Mr de Goede subsequently denied ever having given consent to the sub - letting of the premises, and refused to allow Mr Egan to rent the premises to either of two prospective tenants.

35 In support of this claim, Mr Egan referred to Statutory Declarations from Mr Scott Worsfold and Ms Rachel Lee Szymkarczuk, each of whom indicated that they were present when Mr de Goede consented to Mr Egan sub-letting part of the premises.

36 Ms Tanya O'Donoghue provided a Statutory Declaration stating that she and her partner Mr Vince Jones were prepared to Sub-let the premises at a weekly rental of $150.00.

37 Mr Egan further argued that he entered a lease agreement with the Respondents believing that the premises were approved for the service of takeaway food. The Respondents were aware that Mr Egan intended to continue the business as a takeaway food business. At the time of the agreement, the Respondents had full knowledge that the premises did not have approval from Council to operate as a take-away food outlet yet they failed to divulge that knowledge to Mr Egan. Mr Egan asserted that if at any time during the course of his negotiations with the Respondents he had known that he would not be able to operate a take-away business at the premises, he would never have entered into a lease agreement with the Respondents.

38 Mr Egan argued that the Respondents induced him to enter into a lease agreement by false or misleading statements or representations. He is therefore entitled to compensation for damages, under Section 10 of the Act.

39 Mr Egan argued that the Respondents' conduct as lessor was consistent with Mr de Goede's conduct in similar transactions between himself as lessor and other like lessees. Mr Egan submitted that the Respondents had no intention of providing him with a written lease and had no intention of allowing him to sub-let part of the premises. They allowed him to lease the premises as a take-away outlet, in the full knowledge that there was no Council Approval for that purpose. He argued that each of these three factors adversely affected his interests as lessee, and placed him at a great financial risk. Mr Egan asked that the Tribunal have regard to this behavior.

40 With respect to the quantum of damages, I have outlined above the details of the individuals amount that Mr Egan has claimed. The most significant item is a claim for $50,000 for loss of income.

41 Mr Egan stated that in 1997 he had a knee reconstruction which kept him out of work for 12 months and he has been unable to gain employment since. At 54 years of age his chances of securing any form of employment are very slim. Self-employment is his only realistic hope of financial independence. He saw this business as his last real chance of obtaining employment.

42 Mr Egan's father provided him with all the money to establish the business at the premises. He lost all that money in the venture.

43 Mr Egan stated that since the mediation he has approached all the major lending institutions in an effort to borrow $10,000 to buy enough stock to get started again. All refused his applications. Letters from the ANZ and Commonwealth banks were put in evidence in support of this assertion. Mr Egan stated that he has been in receipt of Centrelink payments since May 2002.

44 Mr Egan provided projected figures for the business for four years. These figures show an average net income per week of $511.75. he said that both the previous tenants received a net income of more than $600 per week. A statement by Ms Jodie Henderson supports this assertion. Mr Egan assessed his losses over the next four years at $133,051.

45 Mr Egan stated that two businesses of a similar nature to his business have been available for sale at Gulgong, the town closest to Cooks Gap. These were priced at $45,000 and $65,000 respectively. He is seeking to recover sufficient damages to enable him to re-establish himself in a business similar to the one he was operating at Cooks Gap. Based on the prices of similar businesses he is seeking fifty thousand dollars in compensation from the Respondents plus a further $11,631.00 to cover losses sustained to date plus any additional costs he may incur as a result of this action.

The Respondents' Case

46 Mr de Goede presented the case on behalf of the Respondents. Most dealings in relation to the lease had been between Mr de Goede and Mr Egan. He therefore had personal knowledge of most of the incidents referred to by Mr Egan. He denied many of Mr Egan's assertions.

47 Mr de Goede's evidence is that he had always intended providing Mr Egan with a written lease. Mr Egan had advised that the entity which would be entering the lease was Enviro Farms Pty. Limited however that company had been de-registered. Mr de Goede stated that at all times the Respondents had indicated that they would be prepared to give Mr Egan a lease. He said he had repeated this offer at mediation but Mr Egan had failed to accept it.

48 Mr de Goede stated that he had grave doubts that Mr Egan ever intended conducting a business as he never arranged for the telephone to be transferred nor had he obtained bank finance.

49 Mr de Goede stated that that the reason the Respondents allowed Mr Egan into possession of the premises was that we were tricked into believing he was a director of Enviro Farms Pty. Limited to which the Respondents were going to provide a lease. He argued that this misrepresentation by Mr Egan has caused the Respondents significant loss of rent as they would otherwise have been able to let the premises to genuine tenants.

50 The Respondents dispute that they had ever agreed to the subletting of the premises. In support of that assertion Mr de Goede referred to a document which was said to be instructions given to the Respondents' solicitors on 16 April 2002. This document makes no reference to subletting. He also stated that when Mr Whitehall, a Health and Building Inspector at Mudgee Shire Council, attended the premises on 5 April 2002, there was no discussion at all with him in relation to subletting.

51 Mr de Goede stated that the issue of subletting was first raised on 8 May 2002. He submitted that by that time Mr Egan had become aware that he did not have the capacity to pay the full rent.

52 Mr de Goede further stated that the Respondents had always leased the premises as a General Store. He said that the Respondents do not believe there is any barrier to selling take-away food from the store. Mr Egan's initial stated purpose in wanting to rent the premises was to run a restaurant and it was to this end that the Respondents arranged for Mr Whitehall to attend the premises.

53 Mr de Goede submitted that Mr Egan has not taken steps to mitigate any losses he may have sustained and he is deliberately trying to exaggerate any claim he may have had. Mr Peter Fairy and Ms Joan Fairy undertook a stock-take of the goods that remained in the premises on 2 June 2002. Their evidence contradicts Mr Egan's valuation of the stock. Their assessment of the stock value is $2,235.98. This is to be contrasted with Mr Egan's valuation of the stock at $7,200.

54 Mr de Goede argued that it was the Respondents, not Mr Egan, who were induced to enter into a lease agreement as a consequence of false or misleading statements or representations. Mr Egan represented that the lessee would be Enviro Farm Pty. Limited. This representation led the Respondents to allow him into occupation. Mr Egan has subsequently failed to provide details as to who the lessee would be. There is no explanation provided as to why Mr Egan could not enter into a lease and operate the premises as a restaurant or takeaway store as he had initially proposed to do.

Findings

55 I note generally that where there is a conflict between Mr Egan's recollection of events and those of Mr de Goede, I prefer Mr Egan's evidence.

56 I have indicated above that it is my view that a valid lease existed between Mr Egan and the Respondents as a consequence of an agreement reached on or about 8 March 2002. I do not consider that the issues raised with respect to Enviro Farms Pty. Limited alter this situation. Mr Egan was a party to the lease as an individual, not as a director of Enviro Farms Pty. Limited. In any event, the Respondents were aware that Enviro Farms Pty. Limited had been deregistered by at least 16 April 2002. They took no action to determine the lease at that stage but rather chose to proceed with the lease with Mr Egan.

57 The premises, though of a mixed character, fall within the meaning of a retail shop for the purposes of the Act, as they were used predominantly for carrying on a business listed in the Schedule to the Act. Accordingly the Respondents were obliged to deal with prospective lessees in accordance with the requirements of the Act. On the evidence before me, they did not do so. They did not furnish a lease or facilitate an assignment of lease and they did not provide Mr Egan with a disclosure statement. I am satisfied that pursuant to the Act the lease is for a period of at least five years.

58 I am also satisfied that Mr Egan paid an amount of $1,000 on 8 March 2002 and that this amount was rent paid in advance. The Respondents neither sought nor received a bond in relation to the lease.

59 I am satisfied that it was a term of the lease that rent was payable at $250 per week from 28 April 2002. The rent in advance was therefore sufficient to cover the period to 26 May 2002. I am satisfied that on 8 May 2002 the parties entered a further agreement which resulted in a further two weeks rent free period. Consequently, the combination of the rent in advance and the further rent free periods extended the period for which rent had been paid to 8 June 2002.

60 I am satisfied that in breach of the lease, the Respondents gave Mr Egan a notice to vacate the premises and locked him out of the premises on 27 May 2002. In doing so they made it clear that they no longer intended to be bound by the agreement and repudiated the lease. Mr Egan was entitled to accept the repudiation and has done so. He is also entitled to recover damages as a consequence of the Respondents' repudiation: Shevill v The Builders Licensing Board [1982] HCA 47; (1982) 149 CLR 620 at 626, per Gibbs CJ.

61 The Respondents' failures in respect of non-provision of the lease and non-provision of a disclosure statement do not appear to have caused Mr Egan any financial harm.

62 Given my findings in relation to the repudiation of the lease by the Respondents it is not necessary for me to determine the issues relating to the alleged misrepresentations. Nevertheless, I am satisfied that Mr Egan was induced to enter the lease by misrepresentations made by the Respondents and that he would be entitled to compensation as a result. In my view the compensation to which he would be entitled is the same as his entitlement to damages for the wrongful repudiation.

63 It is apparent from the details provided with respect to Mr Egan's claim that he seeks to recover costs that he has incurred in prosecuting this case. Costs of or incidental to the proceedings giving rise to the application and costs of or incidental to the application are within the meaning of costs for the purposes of section 88 of the ADT Act. The Tribunal's power to award those costs is governed by that section.

64 Under section 88 of the ADT Act, the Tribunal may award costs only "if it is satisfied that there are special circumstances warranting an award of costs". I must therefore consider whether I am satisfied that there are such special circumstances.

65 The provisions of section 88 of the ADT Act have been considered in a number of decisions of this Tribunal. A useful analysis of the case law was undertaken by Judicial Member Donald in Alessa Pty Limited -v- Total & Universal Pty Limited [2001] NSWADT 150. The Judicial Member stated at paragraphs 4 to 8 of his decision:

4 This Tribunal has rejected the general proposition that because of the commercial character of retail lease relationships, costs should follow the event. Townsend v SRA [1999] NSWADT 104. It has done so notwithstanding the tendency to a contrary view in Victoria in retail lease cases. See the review of the Victorian position by the Appeal Panel of this Tribunal in Citadin Pty Ltd v Eddie Azzi Australia Pty Ltd & anor (No 2)[2001] NSWADTAP31

5 The meaning of "special circumstances" has been considered in cases in a number of decisions of this Tribunal. Descriptions of such circumstances range from "circumstances which take the matter out of the ordinary course (see Holpitt Pty Ltd v Varimu Pty Ltd [1991] FCA 269; (1991) 103 ALR 684 referred to by this Tribunal in Hoblos v Marchese [1999] NSW ADT 127), to circumstances where the claims "lacked any conceivable merit in fact or law", the purpose of a costs order in those circumstances being described as a measure to prevent "the gross abuse of the legislation by frivolous and vexatious and misconceived proceedings". Fonua v BHP Co. Ltd [1999] NSW ADT 59 quoting Hutley JA in Langley v UNSW (1984) EOC 92-018 at 75 468.

6 These analyses of the test to be applied make it clear that the circumstances must be seriously beyond the usual or ordinary pursuit of a claim so that it would be seriously unfair to a party to proceedings before the Tribunal not to be awarded some or all of its costs where it has been successful.

7 Clearly vexatious proceedings in the sense confirmed by the High Court in Henry v Henry [1995] HCA 64; 135 ALR 564 at 576 namely "productive of serious and unjustified trouble and harassment" would be special circumstances but that ought not be seen as an absolute statement of the test. It would in my view place the bar unnecessarily high for the Tribunal in exercising its discretion in the circumstances of each case. According my formulation of serious unfairness is in my opinion the most useful approach to take.

8 The Appeal Panel of this Tribunal has ruled that, in an appeal context, the fact that no sufficiently arguable questions of law were disclosed constituted special circumstances entitling an award of costs. Citadin Pty Ltd v. Eddie Azzi Australia Pty Ltd & Anor [2001] NSWADT 31."

66 Taking into account all the matters raised in Mr Egan's submissions, and despite considerable sympathy for his case, I am not satisfied that there are special circumstances warranting an award of costs against the Respondents. I therefore refuse Mr Egan's application for payment of those aspects of his claim which relate to the prosecution of this application. The items which I consider as falling into this category are:

Application for an interim order $50.00

Travel expenses to Sydney Tribunal 6th June $105.00

Mediation fees at Maitland $448.00

Travel expenses to Maitland $80.00

Attendance at Tribunal 4 July $105.00

67 These items total $788. I consider that Mr Egan is entitled to recover the losses he incurred as a result of the termination of the lease by the Respondents, with the exception of those items. I accept the valuation of stock that remained in the premises on 2 June 2002 presented by Mr Peter Fairy and Ms Joan Fairy. I accept that the stock was valued at $2,235.98 and not $7,200.

68 Mr Egan is therefore entitled to recover an amount of $11,631 less $788, and less $4,964.02 (being the difference between Mr Egan's valuation and Mr and Ms Fairy's valuation). That is, he is entitled to recover $5,878.98.

69 The issue of Mr Egan's loss of income is more difficult. The actual loss that he can claim to have suffered is difficult to estimate, and is probably low. This is because he did not purchase a business as a going concern but rather entered the empty premises and had to establish the business from scratch. On his own evidence he has been unemployed since 1997. There is no evidence to suggest that he has experience in an undertaking such as this or indeed in any business venture. Small businesses are notoriously vulnerable. Many fail within a short space of time.

70 It may well be that Mr Egan's business would have succeeded and that at some point in the future it would have been well established and a saleable item. It is also possible that the business would have failed. It is impossible to know which of those possibilities is more likely.

71 I do not accept that the businesses for sale in Gulgong to which Mr Egan referred are a reasonable basis to estimate the value of his loss. The price which any business can attract is related to its history, its potential and the goodwill it has generated. Mr Egan's business has neither a history nor goodwill and its potential is uncertain. Even if the estimates that Mr Egan provided are accurate, they make no provision for the threats and obstacles that all business face.

72 Nevertheless, I am satisfied that Mr Egan is entitled to some compensation for his loss of business. In the circumstances, it is my view that an award of $5,000 is appropriate.

73 It follows that the Respondents are liable to pay Mr Egan a total of $10,878.98. This amount is to be paid within 21 days.

Orders

Mr Gerhard de Goede and Ms Suzanne de Goede are to pay to Mr Timothy Egan the amount of $10,878.98. This amount is to be paid within 21 days of these orders.