Sarker v World Best Holdings Ltd, World Best Holdings Ltd v Sarker (No.3) [2004] NSWADT 119 (25 June 2004)

Last Updated: 25 June 2004

NEW SOUTH WALES ADMINISTRATIVE DECISIONS TRIBUNAL RETAIL LEASES DIVISION

CITATION: Sarker v World Best Holdings Ltd, World Best Holdings Ltd v Sarker (No.3) [2004] NSWADT 119


PARTIES: FIRST APPLICANT, SECOND RESPONDENT
Abul Sarker
FIRST RESPONDENT, SECOND APPLICANT
World Best Holdings Ltd



FILE NUMBERS: 035087
035100

HEARING DATES: 05/04/2004-07/04/2004

SUBMISSIONS CLOSED: 29/04/2004



DECISION DATE: 25/06/2004

BEFORE: Donald BG - Judicial MemberFagg N - Non Judicial MemberGriffiths G - Non Judicial Member





LEGISLATION CITED: Administrative Decisions Tribunal Act 1997
Conveyancing Act 1919
Retail Leases Act 1994

CASES CITED: Sarker v World Best Holdings Ltd (No.2) [2004] NSW ADT 15.
Marshall v Council of the Shire of Snowy River (1994) Butterworths Property Reports 14,447
The Progressive Mailing House Pty Ltd v Tabali Pty Ltd [1985] HCA 14; (1985) 157 CLR 17,
Laurinda Pty. Limited v. Capalaba Park Shopping Centre Pty. Limited [1989] HCA 23; (1989) 166 CLR 623
Shevill v. Builders Licensing Board [1982] HCA 47; (1982) 149 CLR 620, at pp 625-626
Carswell v. Collard (1893) 20 R (HL) 47
Forslind v. Bechely-Crundall (1922) SC (HL) 173
Carr v. J.A. Berriman Pty. Ltd. [1953] HCA 31; (1953) 89 CLR 327

APPLICATION: Claim for payment of money
Claim for rectification of the lease
Unconscionability

MATTER FOR DECISION: Principal Matter


APPLICANT REPRESENTATIVE: FIRST APPLICANT, SECOND RESPONDENT
M. Ashhurst, barrister

RESPONDENT REPRESENTATIVE: FIRST RESPONDENT, SECOND APPLICANT
M. Ellicott, barrister

ORDERS: 1. Declare that Lease between World Best Holdings Ltd and Abul Sarker commencing 1 July 2003 has been duly terminated by the Lessee
2. World Best Holdings Ltd to pay Abul Sarker as compensation for unconscionable conduct and for repudiation of the Lease $80,630.77 within 30 days together with interest at 9% from 14 February 2004 until date of payment
3. World Best Holdings Ltd to pay Abul Sarker within 30 days two-thirds of his legal costs from 27 July 2003 to the date of this decision where rendered on the same basis as the costs set out in the Affidavit of Abul Sarker sworn 6 January 2004 filed herein


Reasons for Decision:

REASONS FOR DECISION

THE APPLICATIONS

1 This matter is an Application 035087 and a cross Application 035100 under the Retail Leases Act 1994 concerning Shop 48B Minto Mall Shopping Centre leased by the lessor World Best Holdings Limited (‘WBH’) to Mr Abul Sarker (‘Sarker’). The Application 035087 by Sarker was commenced in the Supreme Court on 31 July 2003, which on that day restored possession of the shop to Sarker after a lock out and ordered that the proceedings be transferred to this Tribunal under s.75 of the Retail Leases Act.

2 There have been three Applications for Urgent Interim Order in file No.035087 with an appeal to the Appeal Panel in the first of those.

3 The Application 035087 by Sarker, as finally amended on 29 March 2004 is for declarations that WBH wrongly terminated the Lease and has itself repudiated the Lease entitling termination by Sarker, together with declarations that WBH has engaged in unconscionable conduct under Part 7A of the Retail Leases Act. Sarker also claims compensation. As originally filed in the Supreme Court it did not include claims for unconscionable conduct.

4 The cross Application 035100 by WBH, as further amended just prior to the hearing, is for declarations that Sarker has repudiated the Lease entitling it to terminate the Lease, and for damages. It had originally also sought declarations that Sarker was acting unconscionably selling certain products and that the Lease be rectified in that regard. Those claims were removed in the last amendment of the cross Application on 22 March.

5 All claims are clearly within the jurisdiction of the ADT under the Retail Leases Act and the Tribunal was duly constituted for hearing unconscionability claims under Part 7A with a Judicial Member presiding and two Members expert in retail commercial business and dealings.

6 The hearing of oral evidence and initial submissions lasted three days. WBH filed extensive affidavits by its officers who had direct commercial responsibility for the Lease and its operation, containing many detailed allegations directly relevant to key facts in issue. However WBH ultimately chose not to call those witnesses or tender those affidavits, surprisingly given the intensity of the interlocutory conflict. It relied only on the agreed and admitted documents (see below), on the evidence of its lawyer, Mr Biber, of Mr Yee the lawyer who drew the Lease, and of an expert witness with knowledge of building matters, Mr Philpott. In those circumstances, the Tribunal was not assisted with WBH's version of much of what transpired and subject to ensuring we have been properly satisfied on the evidence, we have been guided by the documents and the Lessee Sarker's evidence as finalised during and after cross-examination.

7 In addition to the substantial documentation attached to Sarker's six affidavits admitted into evidence, Ex D, the Applicant also filed a very useful and substantial Chronological List of Annexures and Exhibits, Ex J with numbered documents (cited here as Ex J/1-109), which was accepted by WBH as evidence. The Tribunal also had reference to a large quantity of personal financial records of Sarker, in Exs I and N, and extensive records of the Shop 48B business, Ex D/6 January Affidavit principally on fit out expenses, Ex O on suppliers, and Ex P on fit out expenses.

8 The parties later filed written submissions.

FACTUAL FINDINGS

9 In about September 1997 WBH acquired Minto Mall Shopping Centre in a growing regional area south of Sydney, which has attracted a community of Bangladeshi Australians.

10 In July 2002 WBH leased Shop 50A in Minto Mall to Dhaka Corporation Pty Ltd, commencing 1 August 2002 for five years with a three year option. (Dhaka is of course the capital of Bangladesh.) The permitted use in both the Disclosure Statement, 12 July 2002, Ex J/1 and in the Dhaka Lease, Ex J/2, was:-

The retail sale of Indian grocery and spices, Island, Fijian specialty foods and spices, Halal meat and poultry, Indian garments, Asian vegetables, pre-cooked Indian foods, phone cards and rental Indian videos (no other language, Indian only).

11 Special Condition 5 of the Disclosure Statement and Special Condition 4 of the Dhaka Lease gave Dhaka exclusivity for "Indian groceries and Halal meats..."

12 In April 2003, Mr Abul Sarker, himself a Bangladeshi Australian having worked in the telecommunication industry, as a restaurateur and as a taxi driver, but still of relatively limited means, applied to Minto Mallto lease Shop 48B for "Indian dresses, jewellery, cosmetics and some other? (word not clear) foods’ and ‘for displaying various Bangladeshi products" , Ex J/3. A few days later he told the WBH manager he now proposed a grocery store which would also sell the previously listed goods.

13 Representatives of WBH suggested that Sarker should consider taking a shop in another centre of theirs at Miller, a nearby suburb which he inspected on 17 May 2003 but he did not accept. On 28 May 2003 the management company for WBH sent a Lease Offer for Shop 48B in the Minto Mall, Ex J/4 specifying "Asian Grocery Shop" as the permitted use and with a special condition:-

The lessee will get the exclusive right for the Asian Grocery Shop in the Centre during the lease term and the option term.

14 A Disclosure Statement, Ex J/5, and Tenancy Fit out Guide for Minto Mall, Ex J/6 were then provided on 30 May. The Disclosure Statement repeated the exclusivity right from the lease offer, required a Bank Guarantee for $12,127.50 ‘prior to the Lease Commencement Date’, stated ‘The Lessee agrees that the fit out cost must be not less than $40,000’ and provided for a four-week fit out period from hand-over date. The Fit out Guide stated on p.4:-

On completion of your plans and receipt of Lessor's approval it may be necessary for you to submit it to Council for approval.

15 There was no other reference to Council application or approval.

[2003] FCAFC 210; 16 On 28 May 2003 Sarker paid $4,042.50 to WBH as ‘rent deposit’, Ex J/8. On 30 May 2003 Sarker signed and delivered the Disclosure Statement and on 3 June 2003 was given access to the premises for fit out, no lease as yet having been presented to him for execution.

17 The next day, 4 June 2003 Dhaka Corporation, trading four doors away, wrote to Ms James of WBH, Ex J/9:-

This has come to my knowledge that there will be another shop opening at my next door under the name ASIAN GROCERIES. Reference to the phone discussion between you and my brother - you have mentioned that they will be selling Chinese, Japanese, Korean groceries. If they stick to those product lines - I do not see any problem. But if the organizers are from my same country - I am very much concerned that once they start operating - they might start stocking Indian Groceries as well.

18 The letter referred to express terms of the Dhaka Lease including the exclusivity Special Condition 4 above.

19 The WBH manager replied on 6 June 2003 declining to intervene, drawing a distinction between ‘Asian Grocery’ and ‘Indian grocery’. She made an assertion which on the final evidence was quite unexplained, that the new shop as an ‘Asian Grocery Shop is allowed to sell Asian products which may include Chinese, Japanese, Korean...’ and did not conflict with "an Indian Grocery Retailer". She invited the two tenants to seek to "minimise conflicts".

20 We here note that despite much argument during interlocutory proceedings as to whether India is part of Asia, this was not an issue pressed at final hearing and for what it is worth, we are of the firm opinion that it simply cannot be contended that ‘Asian Grocery’ as a permitted use description does not include Indian food products. For WBH to have thought this was clearly a commercial error if it was the only basis on which it would persist in contending there was no direct conflict between the Leases.

21 On 16 June 2003, L W Williams & Associates, the lawyers for WBH on the Lease, submitted a detailed Lease to Sarker requiring the Lease to be executed and returned with various payments including the Bank Guarantee, Ex J/11. When the Lease was duly executed, the permitted use was hand amended to "Asian Supermarket" although s.33.5 of the Special Conditions on p.25 stated:-

Notwithstanding any other provisions to the contrary herein we will not permit any other tenant to operate an Asian Grocery Shop within the Centre without Your prior consent during your occupancy of the Premises.

22 In the correspondence much is made of the hand amendment from ‘Grocery Shop’ to ‘Supermarket’, including a suggestion that this hand amendment somehow had commercial and legal significance as part of the failure of the fit out to conform, Ex J/51 par3. We fail to see any significance in the amendment. If WBH was suggesting that use as an Asian Supermarket was contrary to the permitted use as an Asian Grocery Shop, such a suggestion is simply without merit.

23 On 25 June2003, the lawyers for Dhaka wrote to WBH (received 30 June 2003), Ex J/14 seeking an immediate agreement of inventory items that the new tenant would sell, failing which it would seek to have the dispute mediated "before the Retail Leases Tribunal (sic)".

24 Sarker made what he said was a business trip to Bangladesh to make contact with suppliers from about 9-17 June, Ex D/ 6 Jan Aff par 50. We note for later reference there was no evidence of any supplies to the shop direct from Bangladeshi suppliers.

25 Sarker executed the Lease on 27 June 2003, providing his lawyer with relevant cheques and certificates of currency of insurance. On that date he deposited $15,000 into the Commonwealth Bank and requested the Bank to issue a bank guarantee for the amount of $12,127.50 but was told there would be a delay in the issue of the guarantee. Ex D/31 July Affidavit, pars 11-12.

26 On 1 July 2003 the lawyer for Sarker, Mr Ling, sent the executed Lease under cover of a letter explaining "The Bank Guarantee is being processed by the Bank and we will forward it to you as soon as it is received". This was received by the WBH lawyers on 4 July. Ling gave sworn evidence that he had previously phoned the WBH lawyer, Mr Yee on 1 July to say that "We are still waiting on the Bank Guarantee" to which Yee had replied "That will be fine". Yee also gave sworn evidence that he did not recall making that comment and that he did not think it likely he did. On balance we accept Ling’s evidence and conclude that the WBH lawyers on their behalf did not express any particular urgency about the guarantee while not in any way suggesting it was not required.

27 Sarker continued with the fit out which was not yet complete during early July and began acquiring stock for the shop including a range of spices and pickles relevant to Indian cuisine among foods associated with a range of other countries. Sarker says he showed invoices for these products to a representative of WBH who said "That's fine", that evidence not being contradicted. Ex D/26 Nov. Aff pars 7-10.

28 The fit out continued during early July and on Sarker's oral evidence it was of the same quality and style as that in the neighbouring Dhaka shop, including as to the construction and materials of floors, walls and ceiling. The photographic evidence showed a relatively basic shop with wall and central shelving and a sales area at the front, Ex I/Fit out tab. On about 19 July Ms James of the management company and WBH visited the shop and told Sarker "It looks very good, very bright". (Ex D Sarker 31 July Affidavit par 24). Sarker also gave oral evidence that representatives of WBH and the Centre management visited his shop during the fit out and made no negative comments about it. However there was no evidence of Sarker submitting any plans for approval by WBH or at that time determining the requirements for Council approval, if any, for his fit-out and use of the shop.

29 By 16 July the lawyers for Dhaka had received no response on the usage dispute and informed WBH of this, Ex J/22 whereupon on 18 July the management company replied, Ex J/24.

The new shop which is going to open soon is an "Asian Grocery" shop which trades in Asian products. It is common knowledge that the definition of an Indian Grocery Shop and an Asian Grocery Shop is different (emphasis added).

30 To this the lawyers responded with an express request for a precise inventory of products to be sold, 23 July 2003, Ex J/25.

31 Finally on 22 July 2003 Sarker commenced trading from the Shop under the name ‘Asian Supermarket’, not having received any advice from WBH as to the complaints from Dhaka concerning the usage dispute. Insofar as Sarker may have considered he had exclusivity as an "Asian Grocery Shop", it must have been apparent that any Indian stock lines or lines relevant to Indian food and cooking would at the very least be similar to some products for sale in the Dhaka Shop four doors down. However he made no comment about this to the Centre manager and it can be inferred he was prepared to accept the competition despite his exclusivity.

32 After Sarker had been trading for just 3 days, at 5 p.m. on Friday evening on 25 July 2003 an officer of the manager handed Sarker a lawyer's letter terminating his lease, Ex J/28. This letter was from Mr Phillip Biber (‘Biber’), a lawyer who had not acted on the Leases; it stated:

My client has a number of serious concerns, many of which have been previously expressed to you (emphasis added), regarding your tenancy which are also detailed below.

33 The letter then set out references to the Disclosure Statement and the Lease in particular relating to the fit-out requirements and the Bank Guarantee and then alleged four breaches of the Lease for failure to comply with the Fit out Guide (with particular emphasis on the use of vinyl flooring), failure to expend the $40,000 required and failure to provide a Bank Guarantee. On the basis of these alleged breaches the letter asserted:-

You have repudiated your obligations under the Lease, in particular in relation to compliance with the Tenancy Fit Out Guide, the quality of the fit out, the amount to be expended and provision of the Bank Guarantee.

34 The letter then purported to terminate the Lease and required removal of all stock by 4 p.m. on Sunday 27 July.

35 We note there was no evidence from WBH on the basis of which its lawyer could have asserted ‘many of which have been previously expressed to you’. We find no concerns had previously been expressed.

36 On the same day Biber wrote a letter to the lawyers for Dhaka responding to their correspondence concerning the usage dispute and advising them:-

I am instructed to advise that this particular matter is now a 'non issue' (emphasis added). I have been instructed today to serve a Notice of Termination of the Lease to Mr Sarker ... [who] has been requested to remove his stock no later than Sunday 27 July 2003....

37 On the following Sunday, WBH with the support of a security guard removed Sarker's stock and changed the locks.

38 At the same time, Sarker had secured a loan from Sydney Home Loans (Letter 25/07/2003, Ex J/30) which the evidence showed was to be used principally in relation to his house but also for the business.

39 On 29 July Ling, lawyer for Sarker, informed Biber of previous advice to the WBH lawyers concerning the guarantee and informed him that a bank cheque for the guarantee sum was available for immediate provision to the Lessor, Ex J/33. He also advised that prior to the termination notice there had been no negative comment on the fit out.

40 Also on that day, 29 July 2003, WBH generated a new Disclosure Statement for a new lease with Sarker for a term from 11/08.2003 to 10/08/2006, Ex J/37. That document was admitted into evidence by Deputy President Chesterman during interlocutory proceedings. It included Special Condition 4:-

Notwithstanding the ‘Permitted Use’ described on page 1 of this Disclosure Statement [which was ‘Asian Grocery Store’], the Lessee will agree with the Lessor that the Permitted Use will be described in the Lease in the following terms:

"Asian Grocery Shop, but expressly excluding the sale of Indian groceries and Halal Meats during the term of the lease and any renewal of it."

that is, a proposed exclusion of the permitted range of goods in the Dhaka Lease.

41 This document was not explained in the final evidence except that the original cross Application which would later be filed by WBH would seek rectification of the Sarker Lease to that effect. We refer also below to an interim application in relation to that.

42 Ling then referred Sarker to Kemp Strang Lawyers, to continue representing him in this matter and they repeated to Biber the claim of wrongful termination. Biber maintained the position for WBH that as the Lease had been repudiated by the Lessee, there was no obligation on the Lessor to give prior notice of termination, Ex J/39. This obliged Sarker to seek interim relief against being summarily dispossessed.

43 On 31 July Windeyer J in the Supreme Court, ordered that:-

1. The Defendant return to the Plaintiff the section of premises Shop 48B at Minto Shopping Centre at Minto at 9 p.m. on 31 July 2003.

2. That the Defendant be restrained from interfering with the Plaintiff's possession of the said premises.

44 He transferred the proceedings to the ADT and reserved costs. There is no record of his reasons.

45 The next day the new lawyers for Sarker, Kemp Strang sent the bank cheque for the guarantee amount to Biber, at the same time complaining of non-compliance with Order 1 since Sarker’s stock had not been returned. Biber surprisingly replied:-

I would also take issue with your interpretation of "returning possession". This merely means returning possession of the shop premises to your client and there is no relationship to your client's stock and other movables. If your client had required an order along these lines in the Court, he should have sought one.

46 When giving evidence Biber agreed that he had made no review of the law in making that assertion. We think the assertion is plainly wrong in the context of the Court’s order in proceedings to restore a right to trade in a shop which must include restoring stock removed in the dispossession.

47 The bank cheque for the bank guarantee amount was accepted only on a without prejudice basis and remains held on that basis by WBH. It appears that the stock was returned on 4 August 2003 although some may have been damaged or perished.

48 Sarker then consulted the local Council as to its requirements for the fit out and occupation of the shop, obtaining the relevant Application Form which, together with the floor plan, it submitted to the Centre Management for approval, Ex J/45. The plan included a tiled floor. WBH through its lawyer, Biber, refused to consent to the Application because of inconsistencies alleged in the evidence before the Supreme Court and the then prevailing situation, including its own expert’s report that "a maximum of $4,000 has been spent on floor and walls plus the shelving".

49 This required Sarker to apply again for judicial intervention, this time to this Tribunal for an urgent application that the Lessor consent to the application for the DA. This was granted on 21 August 2003 on the grounds that this would simply preserve the status quo while the full dispute between the parties was properly determined. WBH was ordered to sign the consent to the Council application. It thereupon appealed that ruling to an Appeal Panel of the Tribunal which on 25 August 2003 confirmed the order and refused any stay.

50 The parties commenced mediation but in the midst of this WBH filed its cross Application on 5 September 2003 for declarations that the Lease had been validly terminated by the First Termination Notice as s.129 of the Conveyancing Act 1919 did not apply. Alternatively WBH sought orders to rectify the Lease as noted above to exclude the Dhaka food range and for a declaration of unconscionable conduct by Sarker ‘by not acting in good faith in selling Indian groceries from the premises’, on the grounds in filed affidavits that there was an agreement by Sarker that the permitted use should read ‘Asian Grocery Store permitting the sale of Chinese, Japanese, Korean and Malaysian products but not Indian groceries’. An agreement not to sell Halal meat was also part of the factual basis alleged as underlying the claims.

51 On 19 September 2003 the Council approved the Development Application subject to some conditions, Ex J/60. On the same day Sarker paid a second rental payment, Ex J/61.

52 On 23 September 2003 WBH's Manager denied access to Sarker's plumber beyond the area of the Shop for the purpose of completing the installation of a hand-basin as required by the Development Approval, also asserting that WBH had not consented to the fit out plan, Ex J/66. Through its solicitor WBH continued to refuse to consent to any such fit out plans. Ex J/63 the latest version of which were provided to WBH on about 24th September, Ex J/69.

53 By early October the parties were bogged down in voluminous legal correspondence involving all aspects of the various cases and their timetables as well as the status of the request for consent to the fit out and the access by the plumbers, together with the complexity of summonses for documents. In this context WBH persisted to refuse access to a plumber so on 15 October Sarker filed yet a further application to this Tribunal for an Urgent Interim Order for access to the common property of Minto Mall for the plumber to complete the installation of the basin. The Tribunal made an order for the plumber's access on 24 October 2003 and this was duly done.

54 However WBH immediately responded on 28 October through Biber advising it would now seek an urgent interim order to restrain the sale of Indian groceries and Halal meats, Ex J/81.

55 On 30 October Mr Sarker made the third rental payment, Ex J/82A, on 7 November 2003 the Council confirmed that trading from the premises in Asian groceries was approved except for fresh foods or produce, Ex J/83A, which resulted in a WBH application for Urgent Interim Order on 13 November 2003 to restrain this conduct.

56 Even before that application could be determined, let alone heard, the very next day Biber served directly on Sarker a second termination notice asserting failure to pay rent on the due date, failure to comply with the specific obligations in respect to fit-out including to have spent $40,000, Ex J/85. Significantly this notice added a ground of breach being "You are trading in Indian Groceries, contrary to the permitted use". Again this notice of termination was based on an alleged repudiation of essential obligations under the Lease.

57 Biber for WBH then on 15 November wrote to the Council seeking to persuade it that Sarker had not met Council's conditions of Development Approval citing some 12 grounds. The Council, having inspected the shop on 5 November and noting that no fresh food or produce were to be sold, dismissed the WBH request on 26 November 2003. Ex J/87.

58 The urgent application by WBH to restrain Sarker dealing in Indian goods, lodged within file 035087 which did not at that time include an unconscionable conduct claim, was heard by a Tribunal constituted by three members on 28 November 2003; nor was that urgent claim expressed in terms of unconscionable conduct but breach of contract. (WBH’s earlier related cross Application 035100 did include an unconscionable conduct claim which is no doubt why a three member Tribunal was convened.) Nevertheless, it was rejected by the Tribunal who considered untested affidavit material suggesting there was an agreement by Sarker not to sell such goods. The file recording of the ex tempore reasons of Deputy President Chesterman in rejecting the application, indicates that having regard to the Lease and the Disclosure Statement, WBH:-

has not sufficiently shown a significant likelihood that the version that it puts forward based on affidavit evidence of a conversation by its manager would be accepted in the forthcoming trial of the matter...

59 The Tribunal considered that it would be inappropriate to subject Sarker’s ‘embryonic business’ to further hardship on top of the already ‘significant hardship’ to which he had been subject during the previous progress of the dispute as it might even cause the business to fail.

60 The WBH statement of account to Sarker as at 11 December 2004 records him as fully paid up, Ex J/91.

61 On 24 December the lawyers for Sarker prepared an amended application adding a claim for unconscionable conduct which does not appear to have then been filed but which they assert was provided to the lawyer for WBH; see Kemp Strang letter to ADT 29 March 2004 and annexures.

62 All matters had been set down for hearing on 19 January 2004 but on that date because of delays over the holiday period in relation to aspects of the evidence, the Tribunal reluctantly agreed to yet a further adjournment, hearing on that date only argument on the issue of the status of termination notices. On 28 January 2004 the Tribunal ruled that the notices, being based on a repudiation of contract under the general law were not necessarily invalid therefore under s.129 of the Conveyancing Act, Sarker v World Best Holdings Ltd (No.2) [2004] NSW ADT 15, see below. The hearing was stood over to 5 April.

63 On 22 January 2004 Sarker traded for the last time at the premises and on 12 February 2004 WBH gave a notice under s.129 of the Conveyancing Act requiring remedy of the failure to comply with core trading hours in the Lease, Ex J/99. The intense conflict over discovery continued unabated, eg Ex J/103 and finally Kemp Strang on behalf of Sarker responded on 24 February 2004 asserting that the conduct of WBH itself constituted the repudiation of the Lease which Sarker elected to accept, notifying the termination of the Lease, Ex J/104.

64 Sarker finally departed Minto Mall on 1 March 2004. His evidence to the Tribunal may be summarised that he and his family had been completely financially and emotionally worn down by the dispute with WBH and were unable to continue attempting to trade.

65 On 22 March WBH dropped its rectification and unconscionable conduct claims, removing the whole issue of whether there had been an oral agreement by Sarker that he would not sell the Dhaka range of goods, the subject of the Tribunal’s decision in one of the urgent applications.

66 Kemp Strang on 29 March 2004 filed its amended application adding an unconscionable conduct claim, which was only finally particularised on 5 April, the date of the hearing.

67 No evidence at all was led by WBH at the hearing of any oral agreement by Mr Sarker to a limitation on his scope of trading. As noted above, although affidavits sworn by Ms James and Ms Timmins of WBH, both being managers with direct knowledge of the events, were filed, neither was called as a witness. Accordingly that issue is decided in favour of the Lessee. It should be noted as astonishing, given the intensity with which those issues were fought in the interlocutory stages that they would be abandoned at the final hearing with the witnesses whose affidavits had been filed and served not even being called.

MAJOR CONCLUSIONS FROM FACTUAL FINDINGS

68 In ordinary commercial terms and based on our respective experience of commercial dealings we summarise what has happened in the following way. We are satisfied on all the evidence that:

(a) Sarker in relevantly tight financial circumstances decided to take on a new business operation which he would operate as a family business serving his ethnic community. He negotiated a lease from WBH to run an Asian Grocery Shop, with exclusive rights in that category.

(b) WBH did not scrutinise Sarker's financial circumstances in any great detail and allowed Sarker into possession under an offer of lease giving him exclusive rights to run an Asian Grocery Shop without, for unexplained reasons, checking its position vis-à-vis other tenants' Leases.

(c) What happened at Minto Mall was, to use the colloquial expression we used at the hearing, a "stuff-up" over the permitted use provisions and exclusivity rights of two shops in the Mall.

(d) We do not think it can seriously be contended that India is not part of Asia and that Indian goods do not fall within the generic description of Asian Groceries Shop as permitted trading items. Accordingly we consider it was commercially astonishing for WBH to have tried to fix the problem by sticking with that proposition.

(e) Sadly, instead of accepting that a simple error had been made which required a commercial negotiation for its resolution, WBH chose an unsupportable commercial and legal distinction and then sought to rely on whatever legal argument was available to it in order to bring an end to one of the Leases, solving the problem by removing one of the traders.

(f) While Sarker did not comply with the Tenancy Fit out Guide during the fit out period, there was no management of this process at all by WBH during the rent-free fit out period and no warnings given to Sarker that he had failed to seek approval for his plans and tradespeople.

(g) There was no suggestion prior to the First Termination Notice which came out of the blue after Sarker had been trading for just 3 days, that Sarker's fit out activity had anything other than the acceptance of WBH and the Centre Management. Both parties approached the process in a very informal manner.

(h) It can be inferred that Sarker was happy to do this to save money in the early stages of establishing a new business when he had very limited financial resources and major commitments to his house and new business. He may have been happy to take a risk that nothing would flow from not pursuing formal Council approval processes when the Fit out Guide did not insist on it and the centre managers seemed happy for him to start trading with no check.

(i) At the same time, strictly speaking, the provision of the Lease governing fitout did not specifically insist that the requirements of the Guide had to be complied with before the end of the fit out period. Accordingly the subsequent compliance with Council requirements may strictly have been adequate in terms of the lease provisions.

(j) Sarker probably took advantage of the lax administration of the fit out process to contain his costs such that the objectively assessed value of the works, at least as at the date of the purported termination, may not have been $40,000. Nevertheless, the behaviour of WBH does not exonerate Sarker from his responsibility to obtain written approval for his fit out and to use qualified tradespeople to carry out the works. Sarker probably also made no attempt to determine whether he needed to apply to Council, because no one from WBH indicated this was essential and the Lease did not make it so.

(k) In relation to the bank guarantee WBH through its solicitors did not insist on the bank guarantee being in place, let alone a lease, before allowing him into possession (with everything that flowed from that in terms of the commencement of the Lease under the Retail Leases Act).

(l) Immediately the guarantee became an issue, Sarker stood willing to provide cleared funds to cover the security and those funds were in fact paid, albeit held, on a without prejudice basis by WBH.

(m) When the error as to use was pressed by the other tenant who also had exclusive rights in relation to Indian foods, WBH decided, presumably on legal advice, to solve the problem by peremptorily terminating Sarker's lease. This was done without any warning on the ground that his failure properly to comply with the fit out terms and his failure to provide the Bank Guarantee, were expressly essential terms under the Lease justifying repudiation with no notice or warning.

(n) Over the next six months WBH prosecuted its legal arguments intensively, virtually refusing to negotiate or concede any point, appealing two interlocutory decisions and maintaining until just prior to the hearting the existence of a collateral agreement for a limited use of Sarker's premises which would have solved the problem.

(o) Ultimately WBH declined to lead any evidence at the hearing of the collateral agreement and withdrew its claim in that regard, providing no witnesses as to its conduct prior to the purported termination of the Lease and only offering evidence of its lawyer and building assessor.

69 Accordingly, as commercial people, we consider the conduct of WBH to be quite unacceptable in the ordinary management of a retail shopping centre having regard to usual industry standards and practices. The question is whether under the law governing the rights and obligations between these two parties, WBH was entitled to pursue the course it did.

The legal issues simply put

70 In this case the parties invoke legal doctrines that inevitably overlap. Each claims the other by its conduct repudiated the lease. Sarker also argues that the conduct of WBH was unconscionable conduct. WBH also says it has served a valid termination notice under s. 129 of the Conveyancing Act. Each claims rights to orders and compensation for these defaults.

Repudiation

71 Usually termination of a Lease is pursuant to the express terms of that lease permitting termination for breach. However, any such termination for breach of express or implied terms of a lease must comply with s 129(1) of the Conveyancing Act under which courts and this Tribunal can grant relief to a lessee:-

(1) A right of re-entry or forfeiture under any proviso or stipulation in a lease, for a breach of any covenant, condition, or agreement (express or implied) in the lease, shall not be enforceable by action or otherwise unless and until the lessor serves on the lessee a notice:

(a) specifying the particular breach complained of, and

(b) if the breach is capable of remedy, requiring the lessee to remedy the breach, and

(c) in case the lessor claims compensation in money for the breach, requiring the lessee to pay the same,

and the lessee fails within a reasonable time thereafter to remedy the breach, if it is capable of remedy, and where compensation in money is required to pay reasonable compensation to the satisfaction of the lessor for the breach.

(2) Where a lessor is proceeding by action or otherwise to enforce such a right of re-entry or forfeiture, or has re-entered without action the lessee may personally bring a suit and apply to the Court for relief; and the Court, having regard to the proceedings and conduct of the parties under the foregoing provisions of this section, and to all the other circumstances, may grant or refuse relief, as it thinks fit; and in case of relief may grant the same on such terms (if any) as to costs, expenses, damages, compensation, penalty or otherwise, including the granting of an injunction to restrain any like breach in the future, as the Court in the circumstances of each case thinks fit.

72 WBH did not go down that path and concedes that the first and second termination notices did not comply with s.129 but says the Lessee is consequently not entitled to any protection under s.129.

73 Although it may seem odd to some, the law recognises a separate right to terminate a lease without a tenant being entitled to the protection of s.129. That is where the conduct of the lessee amounts to what is called a ‘repudiation’. The Tribunal has ruled in interlocutory proceedings in this matter that this alternative method is part of the law. Sarker v World Best Holdings Ltd (No.2) [2004] NSW ADT 15. The law is as stated by Meagher JA (with whom Kirby P and Powell JA agreed) in Marshall v Council of the Shire of Snowy River (1994) Butterworths Property Reports 14,447 at 14,457

An examination of the decision of the High Court of Australia in The Progressive Mailing House Pty Ltd v Tabali Pty Ltd [1985] HCA 14; (1985) 157 CLR 17, particularly per Deane J at 55, demonstrates that, a lease being a contract, when one party to it repudiates it or commits a fundamental breach or a breach of one of its essential terms, the other party may "accept" the repudiation or breach and terminate the lease. In such a case, ... the innocent party, will have two rights: first, a contractual right to terminate the lease by re-entry for breach of covenant ..., and secondly on the application of ordinary principles of contract law to terminate for breach. If he relies on the former right, he must comply with s 129 of the Conveyancing Act before re-entering; if, as here, he relies on the latter right, s 129 becomes an irrelevance.

74 The Tribunal endorsed that principle for this case and ruled that these notices can be construed as alleging such a ‘repudiation’.

75 However, once the lease terms as such are no longer the basis of the termination notice, the question then is, what conduct of a lessee is so serious and fundamental as to entitle repudiation? It obviously must be of a quite different character than mere failure to comply with lease terms, as s.129 tells us the procedure for that. It must be sufficiently serious that no chance to remedy the failure need be given. The fact that ‘essential’ terms are involved will not of itself be sufficient; all the circumstances must be reviewed.

76 The cases confirm just that proposition. In Laurinda Pty. Limited v. Capalaba Park Shopping Centre Pty. Limited [1989] HCA 23; (1989) 166 CLR 623, the High Court judges said:-

(Brennan J. 643.)

Delay will amount to repudiation if the defaulting party "evinces an intention no longer to be bound by the contract ... or shows that he intends to fulfil the contract only in a manner substantially inconsistent with his obligations and not in any other way": Shevill v. Builders Licensing Board [1982] HCA 47; (1982) 149 CLR 620, at pp 625-626; Progressive Mailing House Pty.Ltd. v. Tabali Pty.Ltd [1985] HCA 14; (1985) 157 CLR 17, at pp 33, 40. If the inference to be drawn from the circumstances is that the defaulting party intends to perform an essential promise after some minor delay, repudiation cannot be inferred; but if the inference is that the defaulting party intends so to delay performance that the promisee will be substantially deprived of the benefit of the promise, repudiation can be inferred. The inference is not lightly drawn: Progressive Mailing House Pty.Ltd. v. Tabali Pty.Ltd, at p 32.

(Deane and Dawson JJ., 658-9).

The question is what effect the lessor's conduct "would be reasonably calculated to have upon a reasonable person" (per Lord Herschell L.C., Carswell v. Collard (1893) 20 R (HL) 47, at p 48; Forslind v. Bechely-Crundall (1922) SC (HL) 173, at p 190). It suffices that, viewed objectively, the conduct of the relevant party has been such as to convey to a reasonable person, in the situation of the other party, repudiation or disavowal either of the contract as a whole or of a fundamental obligation under it. ...[The] continued refusal properly to address the lessee's legitimate requirements and complaints was, to adapt words used by Fullagar J. in Carr v. J.A. Berriman Pty. Ltd. [1953] HCA 31; (1953) 89 CLR 327, at p 351, such that a reasonable man could hardly draw any other inference than that the lessor was not prepared to take its primary obligation under the contract seriously.

The law was correctly stated by Lord Shaw in the following extract from his judgment in Forslind (at pp 191-192) which is directly in point to the circumstances of the present case:

"If, in short, A, a party to a contract, acts in such a fashion of ignoring or not complying with his obligations under it, B, the other party, is entitled to say: 'My rights under this contract are being completely ignored and my interests may suffer by non-performance by A of his obligations, and that to such a fundamental and essential extent that I declare he is treating me as if no contract existed which bound him.' ... In business over and over again it occurs - as, in my opinion, it occurred in the present case - that procrastination is so persistently practised as to make a most serious inroad into the rights of the other party to a contract. There must be a stage when the person suffering from that is entitled to say: 'This must be brought to an end. My efforts have been unavailing, and I declare that you have broken your contract relations with me.'"

Lord Shaw went on to point out (at p 192) that "the question whether the stage has been reached when procrastination or non-performance" constitutes repudiation is essentially one of fact. That question will, as has been said, only be properly answered in the affirmative when procrastination or non-performance has marked the stage of conveying to a reasonable person, in the situation of the other party, repudiation or disavowal either of the contract as a whole or of a fundamental obligation under it.

77 The factual inquiry we therefore must make should have regard to the whole situation, not merely whether certain terms may have been declared ‘essential’ terms entitling termination.

Conclusion on Repudiation

78 We are firmly of the view that no reasonable lessor in these circumstances could have regarded Sarker’s conduct at the time of either the first or second notice as a complete disavowal of the lease or his obligations under it. At all times he provided security of exactly the same value and liquidity as a bank guarantee. He approached the fit out in the same manner as it appeared to apply to others in the Centre and prior to the first notice he had reasonable grounds for believing the lessor was happy with his work. When the fit out and the lack of Council approval were contested he immediately set about attempting to remedy those failings, only to have the lessor persistently block those endeavours. While there will inevitably be a dispute about the valuation of his fit out, see below, and while we have observed he bears some responsibility for the consequences of these breaches, this is not such as to suggest he has simply disregarded his obligations and decided to have no regard to the existence of the contract.

79 Therefore we do not accept WBH’s contention that Sarker has repudiated his lease such that it can terminate that lease. Furthermore, we think it is equally clear on the evidence that WBH used the repudiation contention as a convenient legal tool to solve the problem created by its own error. It sought to render the problem a ‘non-issue’. That is a very relevant circumstance in assessing whether it was the lessee Sarker who had persistently disregarded his obligations.

80 On the other hand, we do think WBH has repudiated the lease by its relentless campaign beginning with a surprise lock out and proceeding over six months of the most intensive legal war. It took quite unsustainable legal points such as that an order to restore possession did not include the obligation to return the stock. It refused a bona fide request to sign the Council application and then refused simple access for a plumber, both actions requiring recourse to this Tribunal for judicial orders. It appealed the first of those interim orders causing further delay and expense. After the Council had approved the development application, WBH even mounted an attack on that approval. WBH asserted a basis for action which it never exposed to proof, namely that Sarker had agreed to a limited use excluding Indian groceries. It did everything it could to strike down the lease, going far beyond appropriate enforcement of its rights as a lessor.

81 Therefore we consider Sarker was entitled to terminate the lease.

Termination by WBH on Notice

82 WBH asserts that its third notice of termination served in compliance with s.129 was nevertheless valid and that it should be entitled to terminate after allowing time for compliance under s.129. This was based on the failure to maintain trading hours under the Lease during late January and February after Sarker had given up.

83 Suffice to say, whether or not this conduct constituted a breach, under the discretion of judicial tribunals to grant relief against forfeiture pursuant to sub section (2), the factors we have recited as justifying Sarker’s termination, also entitle him to relief against forfeiture pursuant to the third notice. The fact that Sarker’s lawyer only served its notice of acceptance of the repudiation and terminated the lease after a period when Sarker had not been trading from the premises does not, in all the circumstances invalidate its notice or disentitle relief against forfeiture.

Unconscionable Conduct.

84 We also consider that WBH has engaged in unconscionable conduct in terms of Part 7A of the Retail leases Act. The parts of s.62 which we think apply are:-

62B Unconscionable conduct in retail shop lease transactions

(1) A lessor must not, in connection with a retail shop lease, engage in conduct that is, in all the circumstances, unconscionable. ...

(3) Without in any way limiting the matters to which the Tribunal may have regard for the purpose of determining whether a lessor has contravened subsection (1) in connection with a retail shop lease, the Tribunal may have regard to:

(a) the relative strengths of the bargaining positions of the lessor and the lessee, and

(b) whether, as a result of conduct engaged in by the lessor, the lessee was required to comply with conditions that were not reasonably necessary for the protection of the legitimate interests of the lessor, and ...

(d) whether any undue influence or pressure was exerted on, or any unfair tactics were used against, the lessee or a person acting on behalf of the lessee by the lessor or a person acting on behalf of the lessor in relation to the lease, and ...

(f) the extent to which the lessor’s conduct towards the lessee was consistent with the lessor’s conduct in similar transactions between the lessor and other like lessees, and ...

(i) the extent to which the lessor unreasonably failed to disclose to the lessee:

(i) any intended conduct of the lessor that might affect the interests of the lessee, and

(ii) any risks to the lessee arising from the lessor’s intended conduct (being risks that the lessor should have foreseen would not be apparent to the lessee), and ...

(k) the extent to which the lessor and the lessee acted in good faith.

85 We are satisfied that the conduct of WBH falls clearly within this prohibition.

86 In our assessment, WBH was exploiting its own loose management of both the fit out system and the security by way of bank guarantee. Seeking to terminate the lease without warning on those grounds was not reasonably necessary for legitimate protection of its interests in terms of (b). A liquid amount equal to the security under a bank guarantee was immediately provided. It had raised no issue as to the standard of the fit out or Council compliance. Sarker responded on both fronts immediately. WBH used unfair tactics against Sarker by not giving any notice at all of its concerns as to breaches of the Lease in terms of (d). WBH unreasonably failed to disclose to the lessee its intended conduct in terms of (i). WBH acted in bad faith by seeking to exploit the provisions under the Lease to solve its own commercial error in terms of (k).

87 In our opinion this entitles Sarker to recover compensation under s.72AA of the Retail Leases Act and also to an ancillary order that he is entitled to terminate the Lease. That section provides:-

(1) In proceedings for an unconscionable conduct 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.

(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.

DAMAGES

88 Extensive evidence was filed to establish damage and Sarker was cross-examined at some length on aspects of that. The cross-examination produced acknowledgments from Sarker that certain items were not properly claimable under various headings.

89 Importantly there is no claim for loss of goodwill so there is no need to make an assessment of whether Sarker’s business would have been likely to succeed in normal trading circumstances. His lack of working capital had given us concern in that regard but we do not need to determine this issue.

90 The damages claims are as follows:

Rent

91 Sarker claims five monthly instalments of rent on the basis that he did not have the benefit of trading during that period because of the conduct of WBH. The Lease provided for one month rent-free but that was the month of June when he had access to the premises. As we consider the first month's delay in commencing trading during July was because of Sarker's own delay in completing the fit out, with a subsequent delay of virtually a month while the Council approvals and additional fit outs were completed, again because of Sarker’s non-compliance, we consider that as between the parties the proper award of rent would be for three such rent payments i.e. $12,127.50.

Security Deposit

92 We agree that the security deposit should be refunded to Sarker in the same amount, $12,127.50.

Stock

93 The amount claimed of $43,995.15 was challenged by WBH as not supported by evidence. The only evidence is in Ex D, 6 January Aff, Ex AS 2, which lists $16,659.94 as ‘Stock loss/missing due to lock out’ and Ex O which appends invoices for new stock in November/December 2003 which Sarker claims amount to $15,000 but which on being totalled by the Tribunal were approx $13500. As Sarker was trading during that period, it is likely much of that stock was sold. Accordingly we would not be satisfied that more than $20,000 should be allowed for lost or damaged stock during the July-January period. We allow $20 000.

Fit out

94 The principal list of fit out costs is in Ex AS1 to Sarker’s 6 January affidavit part of Ex D. Following cross-examination Sarker amended that list as Ex P, reducing the fit out claim to $32,650.32 having regard to the retained value of certain items and whether certain other items should not be pressed. Mr Philpott, the business valuer for WBH challenged that value; he valued the fit out following compliance with Council requirements at $13,915.56. Even though this is a basic shop, we think that the cost of shelving and the final tiled floor together with the wider range of expenditures on Sarker’s list which are generally within the requirements of a fit out, entitle him to the adjusted figure now claimed, $32,650.32.

Insurance

95 We accept WBH's submission that Sarker actually traded at least during the period 6 November to 21 January, a total of 21/2 months with two of the months generally attributable to his own delay and the Council application. Accordingly we think the insurance claim should be reduced by one-third. We allow $1006.94

Business trip

96 There is no evidence from Mr Sarker as to why this was necessary for him to establish sources of supply or that he actually used any such sources when trading. We do not allow this claim.

Business name and Development Application

97 We allow $362.

Phone and fuel

98 Sarker has reduced this following scrutiny of the claimed items, Ex P. We accept a claim for $2,356.51.

Takings

99 While Sarker concedes, and WBH contends, there can be a deduction from its loss for takings, we would regard net takings after cost of goods sold for the 60 plus trading days between November and January when the shop did trade as not deductible in favour of WBH. That net amount is the return to labour and capital on the business for the brief trading period and should remain to Sarker’s account.

Total

100 In summary we assess the total loss at $80,630.77.

Costs

101 The recovery of costs before the Tribunal requires "special circumstances", s.88(1) Administrative Decisions Tribunal Act 1997.

The test has been variously stated including that the circumstances must be seriously beyond the usual 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 had been successful. Alessa Pty Limited -v- Total & Universal Pty Limited [2001] NSWADT 150.

102 In our opinion that principle applies in this case. WBH:-

(a) pursued a claim for reasons we have found not to be in good faith,

(b) forced Sarker to a number of interlocutory matters which ought in reasonable conduct not to have been pursued,

(c) appealed a matter where there is no real chance of success,

(d) sought to maintain an argument that India was not part of Asia which we simply find unsustainable and which should never have been raised,

(e) mounted a case on the basis that there was a separate oral agreement by Sarker not to stock certain classes of Indian goods, a claim which was ultimately dropped just prior to hearing without offering any evidence from witnesses who would know of the commercial dealings between the parties.

103 In all of those circumstances we think it would be seriously unfair for costs not to be awarded to Sarker.

104 We cannot finally assess those costs as we have no evidence of costs beyond the 6 January Affidavit of Sarker, Ex D. The costs there set out of $62,211 (including counsel’s fees) up to the expected hearing in January appear to be within expected limits for the extensive legal process up to that date. On a party/party basis we would allow costs at 2/3rds of the costs actually incurred by Sarker where billed on the same basis as those referred to in Ex D.

Orders:

1. Declare that Lease between World Best Holdings Ltd and Abul Sarker commencing 1 July 2003 has been duly terminated by the Lessee.

2. World Best Holdings Ltd to pay Abul Sarker as compensation for unconscionable conduct and for repudiation of the Lease $80 630.77 within 30 days together with interest at 9% from 14 February 2004 until date of payment.

3. World Best Holdings Ltd to pay Abul Sarker within 30 days two-thirds of his legal costs from 27 July 2003 to the date of this decision where rendered on the same basis and rates as the costs referred to in the Affidavit of Abul Sarker sworn 6 January 2004 filed herein.