O'Hehir and anor v Kennedy Plaza Pty Limited [2008] NSWADT 30 (16 January 2008)

Last Updated: 12 February 2008

NEW SOUTH WALES ADMINISTRATIVE DECISIONS TRIBUNAL

CITATION:
O'Hehir and anor v Kennedy Plaza Pty Limited [2008] NSWADT 30
This decision has been amended. Please see the end of the judgment for a list of the amendments.

DIVISION:
RETAIL LEASES DIVISION

PARTIES:
Applicants
John Gerard O'Hehir and Lynne Karen O'Hehir

Respondent
Kennedy Plaza Pty Limited



FILE NUMBERS:
065031

HEARING DATES:
14 May 2007, 15 May 2007, 16 May 2007, 15 August 2007, 16 August 2007

SUBMISSIONS CLOSED:
16 August 2007



DATE OF DECISION:
16 January 2008

BEFORE:
O'Connor K - DCJ (President)Fagg N - (Advisory) Non Judicial Member





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

CASES CITED:
Arndale (Kilkenny) Pty Ltd v Gaetjens & Anor (1970) 44 ALJR 434
Lamiri v Aidan Nominees Pty Ltd (1987) ANZ Conv R 567
Bischof & anor v Werncog Pty Ltd [2004] NSWADT 241
Kenny v Preen [1962] EWCA Civ 2; [1963] 1 QB 499
Wall’s Gifts and Tobacco Pty Ltd v Warringah Mall Pty Ltd [2003] NSWADT 161
Hawkesbury Nominees Pty Ltd v Battik Pty Ltd [2000] FCA 185
Byrnes v Jokona Pty Ltd [2002] FCA 41
Wilcox v Richardson [1997] NSWSC 281
Sunshine Retail Investments Pty Ltd v Wulff [1999] VSC 415
Penrith Whitewater Stadium Ltd & Anor v Lesvos Pty Ltd [2007] NSWCA 176
Radaich v Smith [1959] HCA 45; (1959) 101 CLR 209
Commonwealth v Amann Aviation Pty Ltd [1991] HCA 54; (1992) 174 CLR 64

TEXTS CITED:


APPLICATION:
Claim for payment of money

MATTER FOR DECISION:
Principal matter


REPRESENTATION:
J Meredith, barrister
D Quayle, barrister


ORDERS:
1. The respondent to pay the applicants $32,585.
2. Order to bear interest at the maximum rate permitted under s 72A.
3. As to costs, decision reserved subject to directions at para [196].
[On 7 February 2008, the Tribunal issued the following revised orders in this matter:
Orders made by decision delivered 16 January 2008 vacated, and following final orders made in substitution:
1. The respondent to pay the applicants the total amount of $41,030.20 comprising: (a) $32,585, as ordered in decision delivered 16 January 2008; and (b) interest on that amount at the rate of 11 per cent (calculated daily) as from 1 October 2005 to 7 February 2008 being $8,445.20.
2. By consent, no order as to costs.]


Reasons for Decision:

REASONS FOR DECISION

1 The applicants, John and Lynne O’Hehir, operate the Endless Summer Garden Centre at Kennedy Drive, Tweed Heads. The Garden Centre is one of a number of retail businesses in the Kennedy Plaza Shopping Centre, which was owned by the respondent, Kennedy Plaza Pty Ltd, from June 2002 to May 2006.

2 In February 2006 the applicants applied to the Tribunal for orders against the respondent under the Retail Leases Act 1994 (the Act). The dispute relates, principally, to the impact of the redevelopment works on the applicants’ business.

3 In their initial application the applicants claimed that the respondent engaged in conduct towards the applicants which was in breach of the terms of their lease or the conditions implied by the Act (a ‘retail tenancy claim’, see Act, s 71), and that the respondent also engaged in unconscionable conduct in breach of the Act (an ‘unconscionable conduct claim’, see s 71A).

4 The Tribunal sat at Murwillumbah on 14, 15 and 16 May 2007, and reconvened on 15 and 16 August 2007. At the opening of the resumed hearing on 15 August 2007, counsel for the applicants indicated that the applicants no longer pressed the unconscionable conduct claim. This decision was a welcome one, in the context of the proceedings, as it significantly confined the scope of the inquiry. (As the proceedings when they commenced included an unconscionable conduct claim, the Tribunal was constituted in the manner required for such a claim. This decision is the decision of the presiding member alone.)

5 As to the circumstances, the following witnesses were called for the applicants: Mrs O’Hehir; Mr O’Hehir; Mr Lewis Beckett, Centre lessee and operator of a bakery and pie shop; Ms Phyllis Stapleton, Centre lessee and operator of the Bay Boozatorium, a liquor store; and Dr Karen Coates, a garden centre customer. The following witnesses as to the circumstances were called for the respondent – Mr Alan Black, director, and Mr Mark St George, works supervisor.

6 As to the applicants’ estimates of their losses, the applicants relied on evidence given by Mr Ian Guy, garden industry financial analyst, and Mr Jonathan Burgess, accountant, Thiel Partners Audit; and the respondent relied on evidence given by Mr David Williams, accountant, FWB Partners.

7 Also filed were statements from various other persons who were not called, a large bundle of correspondence between the applicants and the respondent or its agents, together with other documents such as newspaper stories; plus a large bundle of colour photographs taken by the applicants before, during and after the redevelopment works.

The Claim

8 The applicants’ claim is found in the second further amended claim dated 10 August 2007 (Ex 13A), as further revised in the applicants’ final submissions handed up on 16 August 2007. The final claim was constructed as follows:

1. Lessor has breached the following sections of the Act: (a) section 34(1)(a), (b) (c) and (d); and (b) section 33.

2. Lessor has breached the following Lease Conditions: 2.14.1, 3.4, 4.1, 30.

3. Compensation in an amount not greater than $129,257.08 made up as follows:

(1) Loss of Profits: either $69,583 (Guy report), $67,810 (Burgess report at para 5.5.2) or Calculation of sales and gross profits (2005 and 2006 years) $65,051; and

(2) Associated Expenses $59,674.08, made up of :

(a) Additional advertising and leasing costs: $2,310.59

(b) Loss of front garden and product displays: $11,489.00

(c) Computer and printer: $2,470

(d) Stock loss: $26,529.14

(e) Stock decline and working capital costs: $2,000.00

(f) Burleigh Heads display garden: $14,875.35

Total: $124,725.08 (minimum) to $129,257.08 (maximum).

4. Interest on compensation awarded pursuant to s 72A of the Act.

5. Costs pursuant to s 77A of the Act and/or s 88 of the Administrative Decisions Tribunal Act 1997.

9 The applicants attribute a significant deterioration in the profitability of their business to the activities of the respondent. The sums claimed under item 3(1), above, relate to that alleged loss. The ‘associated expenses’ head of claim, item 3(2) refers to six additional alleged losses. These will be detailed later in these reasons.

Defence

10 The respondent denies that it committed any breaches of its obligations towards the applicants. If it did, it disputes the amount of damages sought by the applicants.

11 Mr Black says that the respondent did provide monetary compensation for disturbance to other centre tenants. He gave as an example the deal he made with Ms Stapleton – 2 months’ rent relief, and a further payment of $8,153, total value $16,000. His view is that the amounts claimed by the applicants by way of compensation are extreme. Ms Stapleton also obtained a long-term rent reduction of significance.

12 The respondent’s essential argument is that the downturn in profitability of the applicants’ business between 2002-2006 was attributable to wider economic and business conditions, most importantly competition from other garden centre businesses in the neighbourhood, and the impact on customer choices of more modern centres that had been built in the general neighbourhood of Tweed Heads/Coolangatta. There was also reference to the effects on gardening of water restrictions in the Tweed Heads/Coolangatta area.

The Lease

13 The applicants clearly had a lease that satisfies the requirements for a retail shop lease under the Act, and the Act applies. There is no dispute as to this matter.

14 The Lease in force at the times material to this case is Registered Lease 3760470R between Endless Summer Shopping Centre Pty Ltd A C N 001 372 149 (or its successors and assigns) and John Gerard O’Hehir and Lynne Karen O’Hehir, as joint tenants. It commenced 1 October 1997, for a term of 4 years, with an option to renew for 3 years as set out in cl 24. The demised premises are as specified in Part Folio Identifier 4/616206, and the more general description in the Lease is ‘Enclosed garden area and nursery containing an area of 700 square metres more or less at 97-99 Kennedy Drive, Tweed Heads’. The permitted use is ‘Retail garden centre and nursery’. The display garden is an area of about 30 square metres outside the boundary of the area demised by the Lease.

15 The original rent was $12,840 pa (i.e. $1,070 per month). A variation was registered on 8 May 2002 with the Lessor then being Dercam Pty Ltd A C N 068902152. The variation increased the rent to $1,376.23 per month ($16,514.76 pa) as and from 1 October 2001, subject to review. It increased the principal term by four years so as to expire on 30 September 2005. There was a further clause inserted, cl 32, to deal with GST. It provided that the rent had been calculated to include GST. After giving notice of an intention to exercise the option to renew early in 2005, the respondent informed the applicants that the rent would be doubled to $33,000 per annum plus GST and outgoings. The applicants activated the rent review mechanism (see s 32 of the Act), with the result that the independent assessor determined the rent at $21,000 plus GST and no outgoings. The option was exercised on 16 June 2005. Consequently the lease is now due to expire on 30 September 2008.

16 The terms of the lease put in issue by the claim are cl 2.14.1 (lessee’s covenant re signage), cl 3.4 (lessor’s covenant re peaceful enjoyment), cl 4.1 (lessor’s covenant re destruction of premises) and cl 30.1 (lessee’s obligation in respect of maintenance of display garden). They will be set out below.

17 The Act operates despite the provisions of a lease. A provision of a lease is void to the extent that it is inconsistent with a provision of the Act. See s 7. The claim puts in issue s 33 (notice of development works), and s 34 (compensation for disturbance).

Background

18 The Shopping Centre is situated at 97-99 Kennedy Drive, Tweed Heads South. Kennedy Drive is a major road in the locality. The Shopping Centre’s original name was ‘Endless Summer’. The respondent changed the name to Kennedy Plaza as part of its redevelopment strategy. The Centre is a small one with a substantial frontage to Kennedy Drive within a residential area. It opened in the 1970s. It is set primarily on an east-west axis.

19 The applicants have carried on their business at this location since August 1994, initially as assignee of the existing lease. At that time they took over an existing lease. They received a new lease in 1997. They have exercised options to renew, and are presently in the final period of renewal, with the lease due to expire on 30 September 2008.

20 As at 2002 the Shopping Centre site had a long back lane which adjoined at about the mid-point a street at the back called Meridian Way. The main car entrance to the Shopping Centre faces Kennedy Drive, and is towards the western end near the garden centre.

21 The garden centre was in effect on an island separate from the general shopping area of the centre. It was located alongside the western boundary of the overall site and separated from the remainder of the site by the main car entrance. By agreement with the previous owner the applicants had been given use of a parcel of land outside the boundary of their centre and adjacent to the entrance driveway. With the previous owner’s permission they planted a display garden in that space. This is the display garden referred to in cl 30 of the Lease.

22 It is plain that the applicants were deeply offended by the way their display garden area was dealt with. It had been an established facet of their business for 10 years. It was fenced off without notice on 4 October 2004, and removed on 5 October 2004, so as to enable entrance widening works to proceed.

Overview of Evidence

23 Mrs O’Hehir gave the main evidence in support of the applicants’ claims. Mr O’Hehir’s evidence went to a narrower range of matters. Mrs O’Hehir appears to have been the manager of the business and responsible for the overall operation of the garden centre, with Mr O’Hehir being the expert in horticulture, and responsible for the landscape design and supplies side of the business. The evidence in reply is found in a statement filed 4 May 2007 by Mr Alan Black, adopted by him at hearing and his further oral evidence at hearing; and evidence from Mr Mark St George, the works supervisor.

24 The O’Hehirs’ first contact with Mr Black was in November 2000. He told them that he was interested in buying the Centre, and redeveloping it. They say he showed John O’Hehir a plan at that time which had a medical centre in the area occupied by their business. This evidence was not challenged. It would seem from that time onwards there was suspicion on the part of the applicants as to Mr Black’s intentions towards them.

25 The conditional purchase occurred, as previously noted, in June 2002. The respondent commenced informing the Centre’s tenants of its plans in August 2002. The changes proposed to the Shopping Centre were major.

26 The aim was to modernise the overall appearance, reconfigure the position of the shops, and bring the primary car parking area on to the front of the site rather than the rear where it had been. It is a concomitant of life as a tenant in a shopping centre that from time to time owners will be looking to refurbish and modernise the centre to keep it attractive to customers, and to make it a better selling proposition. This Centre was about 30 years old, the shops had a rather dated appearance and, overall, the Centre does not seem to have had satisfactory parking arrangements by today’s standards. So far as the Tribunal can discern from the evidence given by Mr Beckett and Ms Stapleton, there was general tenant support for an upgrading and redevelopment of some kind.

27 Mrs O’Hehir said that she was not opposed to an owner engaging in appropriate redevelopment. But she was opposed to aspects of this proposal. There were community objections. The process proved a difficult one for Mr Black. It took nearly two years to complete. There was an original Development Application (DA), an amended one, and a second DA before approval was obtained.

28 Mrs O’Hehir presented as a strong and resolute opponent of those with whom she disagreed; and not a person to be dealt with in the way Mr Black chose to deal with her. In closing submissions the respondent’s counsel attacked the credibility of Mrs O’Hehir. In my view she was a credible witness with a very specific recall of events.

29 Mr Black presented as a person who was prepared to be quite aggressive in his dealings with those standing in his way. He adopted a bullying and abusive tone in a number of his letters and oral statements. Typical of the language used by him was his constant demeaning reference to the display garden as a ‘rockery’. As Mr O’Hehir put it in his main statement, the display garden was not a rockery, it was a garden of mature plants and annuals. This point was amply demonstrated by the photographs placed in evidence. The bundle of documents includes numerous aggressive written statements by Mr Black, some made under his hand and others via solicitors’ letters.

30 As to the detail of Mr Black’s plan, the applicants had, I consider, an understandable anxiety about the possible impact of the redevelopment on their business. Under the existing arrangements they enjoyed benefits which were to be placed at risk. They saw their interests being sacrificed to the wider good as perceived by Mr Black.

31 Period prior to Redevelopment Works Commencing: Mr Black referred in his statement to obtaining advice around January 2003 as to his legal position in relation to the ‘rockery’. He said he was advised that at most the applicants occupied this space as a licensee, and the licence was terminable on one month’s notice. He says that he offered the applicants the possibility of extending the lease to cover the display area, but if the applicants had agreed to do so, he would require a demolition clause to be included in any such lease in case the respondent was required to deal with the area as part of the redevelopment. I accept the applicants’ evidence that he also raised the possibility of severing their area, and selling it to them.

32 It is not surprising that at an early point in the negotiations, Mr Black raised the possibility of severing the garden centre from the rest of the development, and selling it. The applicants’ business operated in a separate zone from the rest of the shops. It was set up in a good corner location. This is well-explained in Mr St George’s first statement at para [7].

33 In my view these communications by Mr Black suggest at least some consciousness on his part that he did not have any express rights under the existing Lease held by the applicants to engage in major alterations or refurbishments. He could solve that problem by severing their land (through sale) or getting a deal which involved a right to demolish.

34 The first DA had been lodged in November 2002, and ran into difficulties. In August 2003 the estate agents for the respondent sent a letter to tenants giving a brief outline of the proposed $1 million redevelopment. It advised that IGA Supermarket would be an anchor tenant, and that it had signed an ‘agreement to lease’. It said:

‘We will have to negotiate a new lease with tenants who already have leases. Those tenants who cannot come to terms with the landlord at the time of the new offering, will not be able to negotiate a new lease down the track. They will have to leave when their lease expires. This condition is non-negotiable.’

35 Mr Black was most concerned to improve the accessibility of the centre especially for the IGA Supermarket. As I perceive it, his view was that if the ‘look’ of the centre was improved as a convenient drop-in option for customers, all businesses would benefit through increased customer flow coupled with the attractiveness of a modern supermarket.

36 Mr Black submitted a revised DA in November 2003. He said that some modifications were required by Council in relation to traffic movement. He said that he was required by ‘traffic authorities’ to widen the ingress/egress at the western entrance. It was necessary for that purpose to dismantle ‘the rockery’. He saw it as necessary to change some of the car flows and parking lay out in the centre to make it work better as a whole.

37 At para 15 of his statement, he in effect acknowledges that his plan would impact on the way the applicants were receiving deliveries. He said that the applicants had ‘almost exclusive use’ of the parking area at their end of the Centre, and the ability to have ‘numerous large delivery trucks drop supplies to their nursery and ‘landscaping’ businesses directly at their nursery centre door, whilst also blocking one entry to the centre.’ He said: ‘I could see that if the centre was to expand, or the entrances to the Shopping Centre rearranged, this would impact on their ability to take deliveries as they currently did.’ He said that he provided for extra car spaces in the plan, and a dedicated loading zone.

38 In her evidence, Mrs O’Hehir was very critical of these changes. The car spaces were configured in a way that did not benefit her business, and the loading zone was placed in a position that served the needs of the supermarket and the other shops, but did not suit the needs of her business. According to Mr Black in his statement, only one loading zone for the whole centre was to be provided for in the future design, and ‘an additional loading [zone] outside the nursery was neither practical or safe for the new centre’ (para [24]). After the approval had been obtained, he advised the applicants that they would not be able to have delivery vehicles (which he said were often double semi-trailers) load or unload goods near their business, but they would have to use the loading bay provided.

39 The Redevelopment Works: The development consent was given on 16 June 2004 and redevelopment works commenced in September 2004. The consent authorised the following:

- A boundary adjustment

- Demolition of shops 1 and 2, at eastern end, to enable building of IGA Supermarket premises

- A total of five additional on-site car spaces (54 up from 49)

- Relocation of an existing bus bay at the eastern end to the western driveway end (near the garden centre)

- The provision of centralised loading bays that are capable of accommodating two large rigid vehicles or one semi trailer

- Provision for bicycle parking

- Site landscaping and pedestrian access through site

- Replacement of the existing public toilet and amenity facilities.

40 There is no significant dispute as to many of the assertions of fact made in this case. The works did occur for a period of, at least, 10 months. Shops that were let remained open for business (there were some vacancies). The leases remained on foot. Security fences were erected. There was a substantial presence of trade vehicles at various stages of the works. The garden centre was cut off to a significant extent during periods in May and June 2005. Two other shopkeepers, Mr Beckett and Ms Stapleton, referred to the difficulties customers had obtaining access to their shops and their premises at different stages.

41 Mr Black’s statement contains the following evidence as to the building works issues raised by the lessee and their impact on the lessee:

‘54 Redevelopment started in September 2004 and one of the first requirements (in accordance with building/safety codes) was to erect a security fence around the complex where renovation/reconstruction was to take place. I relied upon the expertise of our building contractors to ensure that safety and council requirements were strictly adhered to.

55 In submitting our final plans to council, we were required by council as part of our ingress and egress requirements not only for the developed premises, but also as part of our requirements during construction due to the trucks being used during the construction period to increase the size of the Western entrance. As such we were advised by our Architect that it was necessary to remove the rockery to satisfy these conditions. In early October 2004, I organised for the rockery to be removed. A cyclone security fence was put up around the rockery area and the area was cleared on or about 6th October. I had told the O’Hehirs on many occasions that it was on the landlords land and advised them that it would be removed. I had previously served them a Notice to Quit. While I considered the contents of the rockery to be owned by the Landlord, the O’Hehir’s [sic] were offered the opportunity to collect and [sic] plants or rocks from the contents of the dismantled Rockery. (LKO1 p 118).

62 On or about July 2005 tradesmen removed the cyclone fencing that had been placed around the garden area. The fencing was necessary as we required the additional area for ingress and egress, however were not in a position to finalise the curb and guttering until completion of the car parking and driveway surfaces which did not take place until May/June 2005. This was done at this time so as to minimise damage to a new road surface during construction. As soon as road works were completed the fencing was removed.

63 I visited the sight [sic] on numerous occasions during the construction period, and was always very impressed with the way the construction team were working with the tenants to minimise any disruption to their business. As with any re-development of this nature, it was inevitable that some disruption would occur particularly when paving and driveway type work was being undertaken, which would require barricading while these areas hardened. I deny that the Garden Centre was blocked off to the public for eight days during June 2005. I am aware that while road resurfacing was taking place that a fly over was constructed to allow access to the public.

64 I am aware that this work was staggered to minimise such impact. From my observation and by design (due to their objection to the plans) the O’Hehirs business was the least impacted of all the current tenants as virtually no work was undertaken in and around the Garden Centre and I understand there was very little impact on any parking in their immediate vicinity.’

42 Mr St George said that works commenced on 15 September 2004 and were substantially completed by 30 May 2005. He said that he had been site foreman for several companies since 1999. He adopted practices that took account of building needs, health and safety and other regulatory requirements. He said that the entire site was surrounded by security fencing from 10 October 2004 to about 20 May 2005. He said there were separate walkways in and around the fencing to enable the public to access the shops.

43 The main security fence included within its perimeter the applicants’ leased shop area. As to the display garden area, that was fenced off separately around 5 October 2004 in preparation for its destruction. This occurred on 6 October 2004. This fencing, according to Mr St George, was pulled down around May 2005. He was unable to give any explanation as to why the works dependent on the display garden being removed did not proceed then for another 9 months (widening of entrance, new kerb and guttering).

44 As to the applicants’ assertion in their evidence that their business was totally cut off for periods of time in May and June 2005, Mr St George said ‘at one stage we had to build a flyover or walkover for the O’Hehirs as a result of concrete works that were done in front of the nursery’. He described these as resurfacing of the car park and driveway. He said that they put up additional signage to make it clear to customers that the garden centre was still open. He said they were blocked off for three of four days. His answers in cross examination were vague as to the nature and degree of permanence of the signage. He agreed in answer to questions from the Tribunal that he had no provision in his construction budget for directional signage and the like.

45 In cross examination, he described the flyover as a square piece of plywood, a metre wide by about 2.4m long. Further, he conceded that this facility mainly served the chemist nearby, and that it assisted the garden centre as it passed by a gate into the garden centre that was adjacent. He said this facility was in place for about two days.

46 He agreed that access was denied to the public for about three days in May as asserted by the applicants. He queried whether there was a similar eight day period in June 2005. He said that vehicular access was impossible for the period that the car park and entrance way resurfacing was taking place, but pedestrian access remained.

47 As to the back alley, he said that this was also only closed off for three or four days.

48 As to the works generally, he said that the garden centre was least affected as it was at the western end of the shopping complex, and most of the work took place at the eastern end. In his view, the impact on the garden centre was ‘minimal’ as compared to the rest of the centre.

49 As to impact on car parking during the works, he said that there was some presence of trade vehicles for tradesmen needing site access. But in his view there was ‘ample’ parking still available, especially as only five tenants were in occupation for the majority of the time (there were vacant shops). He said the garden centre was least affected as the work and the tradesmen were usually at the eastern end.

50 As to dust, he said that he tried to keep dust disturbance to a minimum. He claimed again that the garden centre would have been least affected because of its location.

51 As to signage, he said that he could not recall any ‘For Lease’ sign at the western end of the Shopping Centre.

52 The applicants’ case included numerous photographs taken at various stages of the works. When shown photographs that showed significant works, and little available car space, Mr St George’s replies were usually to the effect that the particular situations were ones of short duration.

53 Mr St George referred to his consultation practices. He said that tenants were provided with a scope of works document (hand delivered) and that ‘we worked with each of the tenants to ensure that any disruption was kept to a minimum’. He said that ‘all the works were done on a staggered basis to minimize disruption to all tenants’. He also said that he produced ‘high level project plans’. He was unable to produce either of these documents. He said they were with F W Curley Pty Ltd, the building contractor. He no longer worked for them.

54 He said the scope of works document had a ‘list of tasks’. He agreed in cross examination that he did not have any document that could be said to be a construction schedule, with dates and the like.

55 He said he would talk to the tenants on almost a daily basis on a range of issues and ‘felt that they were always informed as to major works being undertaken’. He said he tried to ‘juggle’ works to suit their requirements. He said, for example, that the resurfacing work was deferred from summer to winter near the garden centre so as to assist the applicants. He gave details in his second statement at para [7].

56 He acknowledged in cross examination that he did not have any discussions with the applicants before the display garden was removed. He agreed that any list he prepared, if it did make reference to removal of the display garden, had no proposed date on it. He said, in answer to questions from the Tribunal, that he had no group meetings with tenants.

57 On a number of these matters, Mr and Mrs O’Hehir’s evidence was far more detailed. As to some matters, Ms Stapleton gave far more detailed evidence, as did Mr Beckett. In several instances, Mrs O’Hehir was able to refer to notes or letters of protest from her or her solicitors. This evidence will be referred to more fully in dealing with the particulars of the claims.

58 I will deal with other aspects of the evidence in examining the liability issues.

59 In my view, the evidence established that the amenity of the applicants’ business was reduced, as compared to previously, in matters such as traffic flow, customer parking near the garden centre, and unloading by delivery vehicles. They also lost the substantial display garden. A new garden was planted in September 2005. Their concern is understandable that the loss of the display garden from October 2004 until, at least, September 2005, and the presence there instead of building rubble, security fencing and the like, diminished the profile of their business, and possibility its profitability.

Liability

(1) Notice Requirement

60 The applicants refer to the following obligation:

‘33 Lessee to be given notice of alterations and refurbishment

A retail shop lease is taken to provide that the lessor must not commence to carry out any alteration or refurbishment of the building or retail Shopping Centre of which the retail shop forms part which is likely to adversely affect the business of the lessee unless:

(a) the lessor has notified the lessee in writing of the proposed alteration or refurbishment at least 2 months before it is commenced, or

(b) the alteration or refurbishment is necessitated by an emergency and the lessor has given the lessee the maximum period of notice that is reasonably practicable in the circumstances.’

61 Section 33 is the first of a series of provisions in Part 4 which have the aim, as I see it, of providing a framework for orderly dealings between the lessor and lessees when a lessor decides to undertake activities which interfere with the lessor’s ability to carry on business.

62 The redevelopment was a major one, going well beyond mere alterations and refurbishments of a minor type. The redevelopment involved demolition of some existing shops, and substantial alteration of others. It involved major works to the tarmac of the Shopping Centre.

63 The applicants’ counsel made submissions as to the meaning to be given to the terms ‘alteration or refurbishment’. In my view there is no need to dwell on this point in this case. A major alteration or refurbishment was proposed. It was likely to take some time, and would adversely affect, to at least some degree, the business of all tenants including the applicants. Accordingly s 33 was engaged.

64 Mr Black said that once the purchase contract was signed in June 2002, he proceeded to hold a general meeting with centre tenants in August 2002. He says he showed them a sketch of ‘our vision for the premises’. It was an ‘artist’s impression’. He referred to difficulties that he encountered in dealing with the applicants. He said that he had meetings with the other tenants which were supportive of redevelopment, in contrast to the attitude adopted by the applicants. He said that the first DA was lodged on 4 October 2002. He referred in his statement to various meetings during the DA phase he had with Mrs O’Hehir where conflict and argument occurred.

65 While much of the evidence given by Mrs O’Hehir at the first three days of the hearing went to the unconscionable conduct claim and much of it is now not relevant to the final claim, it is clear that Mrs O’Hehir was active in leading opposition to Mr Black’s development in respect of several of its aspects. As I have already noted, Mr Black’s communications to Mrs O’Hehir during this period were often rude and intemperate. Mr Black said that he now regretted their contents, and that they were borne out of frustration.

66 The O’Hehirs gave evidence going to the process of consultation, as did two other tenants, Mr Beckett and Ms Stapleton. The evidence indicated that the respondent did not adopt a very formal approach to the undertaking of consultation, the holding of general or specific meetings or the giving of detailed information. The process was almost entirely undertaken by Mr Black with minimal involvement by the letting agents for the vacant shops.

67 The applicants said that there were only two written communications about the renovations: one, no shop would be affected in any way by the proposed renovations (letter dated 5 August 2003); and, that the DA had been approved (17 June 2004). There was no correspondence as to when the renovations would start, how long they would take or what would be involved.

68 The respondent claims that it gave adequate notice in writing. In closing submissions, seven letters or other documents – some from the respondent, some from agents – were referred to with the dates 28 August 2002, 4 September 2002, 4 September 2002, 5 September 2002 and 16 September 2002 and the two mentioned by the applicants – 5 August 2003 and 17 June 2004. It will be seen that all but the last two letters belong to the stage when the respondent was yet to complete the purchase (August-September 2002).

69 The respondent submits that s 33 does not oblige the lessor to identify the date of commencement, and only requires the lessor to notify the lessee in writing of the proposed alteration or refurbishment, and does not limit how early the notification may be.

70 In the case of major alterations or refurbishments, it is, of course, prudent practice to keep tenants informed at all stages of the process. If the project is such that it requires development consent then the notice contemplated by s 33 would be the one that issues after that point. It may be that it need not be a substantial or a detailed notice if relevant details have been given at earlier stages and those details are substantially unamended by the final consent.

71 What is required by this provision will vary according to the scale and nature of the proposed alteration or refurbishment. A one-off alteration of small scale, with a limited impact, may be able to be dealt with by a very simple notice.

72 In my view this was not a case of this kind. There is no evidence of any notice that advises with reasonable particularity the nature of the proposed alterations and refurbishments, as finally approved.

73 The chain of letters to which the respondent refers in this case have nothing of that character. They are basic communications, no more. The final two letters are no better. The letter of 5 August 2003 (from Professionals, Haywood & Peterson, Real Estate) gives no details. The letter of 17 June 2004 (from Burgess Rawson, Property Consultants) simply advises grant of the DA and raises the issue of delivery of goods arrangements, and invites tenant submissions.

74 The position of the respondent at hearing, which went beyond the position put in the final submissions, appears to have been that the Shopping Centre tenants, including the applicants, were well aware of the proposed redevelopment because of the consultations Mr Black had conducted, the detail contained in the DAs, and the controversy which had surrounded them. In my view that is no answer to the obligation imposed by s 33.

75 Section 33 provides a procedure whereby lessees are to be given adequate detail as to all works to be undertaken, and the time lines. The period of not less than two months is intended to provide a window for negotiation for consideration of particular complaints or concerns over such matters as timing, impact on high season periods, necessity for particular works and adjustments which might achieve the intended purpose but minimise a particular adverse impact. The notice should cover the entirety of the works. A proper notice in this case would have included, for example, an indication as to when features in the common areas, such as the display garden, were likely to be affected, and how.

76 The failure of the respondent in this case to abide by s 33 of the Act exacerbated the tensions and problems that already existed, especially in its relationship with the applicants, and contributed to the tension and problems which followed.

77 The respondent breached s 33(a). In my view this was more than a mere procedural breach.

(2) Redevelopment Works

Provisions of the Act

78 Section 34, like s 33, belongs to Part 4 (‘Alterations and other interference with the shop’). The provisions of Part 4 seek to regulate lessor conduct that involves disturbance, relocation, demolition or damage to premises. In their final claim the applicants did not press under s 34 some of their original particulars of disturbance, as they accepted that no written notice was given. They continued to press them as breaches of the quiet enjoyment covenant of the Lease where the notice complication does not arise. They do not press a claim based on s 36, and it is not further considered.

79 Section 34 relevantly 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, ...

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 disturbance if a written statement specifically drawing the attention of the lessee to details of the anticipated disturbance was given to the lessee before the lease was entered into, and the statement included the following:

(a) a specific description of the nature of the disturbance,

(b) a statement assessing the likelihood of the disturbance occurring, including an indication of the basis on which the assessment was reached,

(c) a statement of the timing, duration and effect of the disturbance, so far as they can be predicted.

(3A) A general statement to the effect that disturbances may occur during the term of the lease without setting out the matters referred to in subsection (3) is not a statement to which that subsection applies.

(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.’

Provisions of the Lease

80 The applicants also rely on certain provisions in the Lease. The broadest obligation lying on a lessor is the covenant of ‘quiet enjoyment’, as it is commonly described. In this Lease it is called the covenant of ‘Peaceful Enjoyment’:

‘3.4 Peaceful Enjoyment. The Lessee paying the rent hereby reserved and observing and performing the several stipulations and covenants herein on his part contained or implied shall and may peaceably and quietly hold and enjoy the demised premises during the said term without any interruption by the Lessor or any person claiming lawfully through under or in trust for him.’

81 The covenant of quiet enjoyment is a fundamental protection for tenants. As Lang’s Commercial Leasing in Australia (Lang) notes at [30-610] the covenant is designed ‘to secure for the lessee uninterrupted enjoyment of the leased premises’. A tenant is entitled to recover damages from the landlord if the landlord physically interferes with the tenant’s enjoyment of the land: Harpum, Megarry and Wade, The Law of Real Property (6th ed. 2000), [14-196]. ‘The obligation which the lessor undertakes under the covenant is that the tenant will be free from disturbance by the exercise of adverse rights over the property or over neighbouring land occupied by the lessor ...’: ibid.

82 Lang notes further at [30-610] : ‘The lessor’s conduct may be authorised under the lease, hence the need for reservations in leases covering possible refurbishment, alterations and additions to the property and altering common areas ... . Conduct authorised in the lease, properly carried out by the lessor, will not constitute breach of the lessor’s obligations and is not remediable as breach of the covenant for quiet enjoyment.’

83 The Lease in this case did not contain any provisions entitling the lessor to undertake alterations, renovations and refurbishments going beyond necessary maintenance and repair. It follows that it did not have a procedure as to the way in which the lessor is to deal with the lessee in the event that alterations, renovations, refurbishments or major works are to be undertaken.

84 Lang gives a number of illustrations from the case-law of breaches of the covenant of quiet enjoyment by lessors, such as: interference with access to the leased premises, for example, by erected scaffolding in front of the leased premises; constructing a wall and attempting to restrict the width of a passageway through which the lessee had a right of access to the leased premises; overflow of water from parts of the building caused by blockage of drains for which the lessor was responsible to the leased premises; noise and vibration caused by the lessor which interfered with the lessee’s enjoyment of the leased premises.

85 Two of Lang’s illustrations involve shopping centres. One relates to the erection of shops in the common areas of the mall, without adequate entitlement under the lease, when lessees were entitled to the use and enjoyment of the entire pedestrian mall (Arndale (Kilkenny) Pty Ltd v Gaetjens and Anor (1970) 44 ALJR 434). The other relates to the rearrangement of stalls in an international food hall in a city building, which severely affected the profitability of one of the stall holder lessees (Lamiri v Aidan Nominees Pty Ltd (1987) ANZ Conv R 567).

86 The applicants also referred to another of the lessor’s covenants:

‘4.1 Destruction of Premises. If at any time during the continuance of this Lease the demised premises or any part thereof shall be destroyed or damaged or made inaccessible by any cause other than the wilful act or omission, default or neglect of the Lessee or any servant of the Lessee or any person who is in the demised premises with the permission of the Lessee whether expressed or implied so as to render the demised premises unfit for occupation or use for the purpose for which they shall for the time being be occupied or used or made inaccessible then the rent hereby reserved or a fair and reasonable proportion thereof (to be determined in case of dispute at the equal costs of the parties by the President for the time being of the Real Estate Institute of New South Wales or his nominee whose decision shall be final and binding upon both parties) according to the damage sustained shall be suspended and cease to be payable until the demised premises shall have been repaired, reinstated or made accessible.’

Assessment

87 In my view the provision at the heart of this case is the covenant of quiet enjoyment. Many of the matters raised in connection with the s 34 claim are equally relevant to the case founded on the covenant of quiet enjoyment.

The Section 34 Disturbance Claims

88 Because of the way the case was conducted I will start with the s 34 claim. As will be seen, many of the particular claims under this heading fail, or are weakened, by considerations to do with the requirement of written notice imposed on the lessee. The claims are also constrained by the level of disturbance that is required before a matter falls subject to the provision.

89 These complications do not affect the examination of the covenant of quiet enjoyment in the same way. The conduct of the respondent may be examined as a whole, without being broken up in to segments. The s 34 case was segmented, influenced partly by the notice requirement.

90 As will be seen, I am of the view that some of the alleged disturbances fall outside the sphere of s 34, some fail when viewed in isolation from each other on the issue of the degree of the disturbance, and in the instance of those of the requisite degree some fail, or are weakened because of the lateness of the written notice.

91 The applicants made seven assertions as to disturbances which they say are compensable within the meaning of s 34.

92 I will commence by dealing with the first of the four assertions which mainly concern customer flow and access, and are raised under either or both paragraphs of (a) (lessee access) and (b) (customer flow).

(i) That the respondent impeded the back entrance and lane way during the entire renovation period from September 2004 to September 2005, and for many months it was completely blocked off. Customers and delivery vehicles regularly used the lane way to gain access to the Shopping Centre because of the traffic conditions on Kennedy Drive. Closing the lane way also reduced the number of car parks near the garden centre by half, which was also shared by four other retailers.

93 This assertion has, as its background, the role that access via Meridian Way had in helping the Shopping Centre to function. The photographs indicate that Kennedy Drive is a major thoroughfare. I accept that customers would also seek to access the Centre by the Meridian Way entrance. Ms Stapleton gave evidence going to these matters, as well as Mrs O’Hehir. In particular I prefer Ms Stapleton’s evidence to that of Mr St George on the extent to which the lane way (or ‘back alley’) was interfered with. She said that the back alley was blocked off for approximately 3 months. She noted that this was needed as there were extensive plumbing and sewerage works. Details as to these matters, and their duration, were not supplied either by Mr Black or Mr St George. She said that she was forced to take deliveries (bulk liquor and the like) by the front of the shop.

94 As to the duration of the redevelopment works, the evidence is at variance. My conclusion is that the principal works had ended by July 2005, but there were some less significant continuing works occurring as late as September 2005 (installation of acoustic fence at rear).

95 I accept that the bulk of the work, as Mr St George said, took place at the eastern end of the centre, but I do not accept that the interferences to businesses at the western end including the applicants’ business were relatively minimal as a result. I accept that the western entry, i.e. the entry off Kennedy Drive, remained open at most times, but in my view, that does not diminish the force of the applicants’ criticisms of the impediments to access via Meridian Way or the congestion caused by trade vehicles.

(ii) That the respondent erected a security fence unnecessarily around the garden area in front of the applicants’ shop from 5 October 2004 to 1 July 2005. This inhibited access to the shop and portrayed the shop as being closed.

96 The evidence is consistent that the fence around the display garden site stayed in position for many months, the only difference is whether it was lifted in mid-April (Mr Black) or July (Mr St George). I prefer July in light of Mr St George’s evidence to that effect. It coincides with Mrs O’Hehir’s evidence. The respondent had practical reasons, it claimed, for keeping the barrier in place. This in my view does not diminish the force of the contention that it amounted, at the least, to a visual impediment that may have led potential customers to believe that the shop itself was closed. I doubt, however, whether it would have been significant as an access impediment in the sense of pedestrian access. A pedestrian would have had to skirt the display garden if he or she was coming from that direction.

(iii) That by Christmas 2004 the respondent had unnecessarily surrounded the whole Shopping Centre with security fencing which was not taken down until September 2005 after the renovations were complete.

97 As to the general security fence surrounding the whole site, obviously that is necessary for various building and safety purposes. But that is beside the point. The applicants’ objection has to do with impediments to access, and clearly a fence would have had an effect in that regard. The photographs illustrate the way the security fence was arranged at various stages of the project.

98 I accept that the fence would have had an inhibiting effect on customer access. Mrs O’Hehir agreed with Mr St George that at no stage was the Shopping Centre entirely fenced off, and the main fence was moved about to some degree. Mr Beckett said that there was a 2 metre fence up for the whole time of the renovation, and that it basically covered the perimeter of the centre for the majority of the construction. On the other hand, Mr St George said that there was an entire fence surrounding the site from 10 October 2004 to 20 May 2005. My conclusion is that Mr St George did have some breaks in the fencing for specific access needs, but otherwise the fence was a substantial enclosure.

99 These restrictions covered the Christmas period, which I accept is a peak selling period for a business like a garden centre.

(iv) That the respondent totally blocked access to the applicants’ centre during the periods of 17-20 May 2005 and 6-14 June 2005 without any prior notice. During these two periods no customers could gain access to the centre or the car park.

100 Mrs O’Hehir’s evidence is that she was given no notice of the 17-20 May restriction. Mr St George acknowledged the occurrence of a 3-4 day blocking off of the garden centre. He tried to maintain access over the concrete works by means of the ‘fly-over’ previously described. I accept Mrs O’Hehir’s evidence, supported by diary notes, and correspondence, that there was a further blockage of eight days in June, and reject Mr St George’s assertion to the contrary.

101 Paragraphs (c) and (d) of s 34(1) deal with disruptions that affect trade. The next fresh assertion is placed under the heading of para (c). Assertion (iv) is also placed under (c).

(v) That the respondent erected a ‘For Lease’ sign in front of the lessees’ shop during the period from 16 September 2004 to in or about August 2005. During this time the applicants had no visible signage displaying details of their shop. This prevented customers from knowing that they were operational. When the sign was finally removed it still partially blocked the lessee’s sign.

102 I accept Mrs O’Hehir’s evidence that on 16 September 2004 with no warning a very large sign advertising and promoting a redesigned Shopping Centre was erected. I accept that it was done in such a way as to block off the usual sign that advertised the garden centre on the fence facing in the same direction, and advertising specials and the like. The evidence, especially the photographs, established this. The applicants complained. I accept Mrs O’Hehir’s evidence that the sign was not moved for nearly three months, and that it stayed in place in the new location until July 2005, and continued to impede the visibility of her signage. I reject Mr Black’s evidence that the signage was immediately moved upon request. His own solicitor’s letter of December 2004, responding to the complaint of inaction forwarded by the applicants’ solicitor, concedes that something needed to be done.

103 The next new assertion is placed under (d), while assertions (ii) and (v) are repeated.

(vi) That the respondent stated prior to the renovation that no shop would be affected in any way by the renovations (letter dated 5 August 2003). No other correspondence was received as to when the renovations would start, how long they would take or what would be involved.

104 The August 2003 letter, previously mentioned as to another point (the threat not to renew leases), included the statement: ‘Work will commence almost immediately after the DA is issued with minimum interruptions to the tenants business’. The Tribunal has accepted that a notice complying with s 33 was not given.

105 I do not think this is the kind of omission that para (d) has in contemplation when it speaks of ‘disruption’ to trade that is within the lessor’s control. In my view paras (a) to (d) of s 34(1) would, ordinarily, be concerned with physical interferences with the use of the premises by the lessee. The matters raised from (i) to (iv) are in that category. This understanding fits with the ordinary understanding of the covenant of quiet enjoyment. The terminology used in s 34 is drawn from the law on the covenant of quiet enjoyment.

106 I would not go so far as to rule out entirely non-physical interferences (cf Bischof & anor v Werncog Pty Ltd [2004] NSWADT 241 at [102]). It may be that a communication could be a source of disruption to trade, for example, some slanderous comment by the lessor in the media about the quality of the business or its long term future. Bullying conduct by a lessor, trying to drive out a lessee by persistent threats and violent behaviour, has been held to constitute a breach of the covenant of quiet enjoyment: Kenny v Preen [1962] EWCA Civ 2; [1963] 1 QB 499.

107 The next new assertion is as follows.

(vii) The respondent displayed an artist’s impression of what the renovations would look like when complete which did not include the lessees’ garden centre. This signage indicated that the garden centre would no longer be at the Shopping Centre. This sign was part of the ‘For Lease’ sign which blocked the lessees’ own sign.

108 Again, in my view this is not a trading disruption of the kind to which para (d) is directed. The applicants were offended by the way in which the respondent depicted the future centre. I do not see how a sketch illustration of a new development could have any significant effect on the trading environment, day to day, of an existing business at the site, even if that business is not shown in the sketch.

109 The Questions of Degree and Extent: In my view assertions (i) to (v) raise matters of a kind to which paras (a) to (d) are addressed. There are questions of degree still to be considered.

110 I am satisfied that the applicants’ access to the premises was affected in a ‘substantial manner’ by the general security fence and the constancy of works at the site over the period September 2004 to July 2005 (see para (a)). I am satisfied that, in combination, the display garden fence and the general security fence would have inhibited or altered to a ‘substantial extent’ the flow of customers to the shop. I do not think that the display garden fence, viewed in isolation, would have had that effect.

111 As is explained later in these reasons, the concept of ‘substantial interference’ and the term ‘disturbance’ is found in the law relating to the covenant of quiet enjoyment. I treat the word ‘substantial’ as seeking to convey an effect of an ‘ample or considerable’ amount (see Macquarie Dictionary definitions), going beyond, for example, a marginal or minor effect. The ‘substantial’ effect need not be long term. There could be a ‘substantial’ effect for a short time, and a less substantial effect for a longer period. In this case, there can be no doubting, I consider, that the applicants’ business suffered an extremely substantial adverse effect from the activities that occurred in the two periods identified in May and June. On the other hand, I do not think that for an effect to be substantial it must be an effect of that degree. This approach is, I consider, similar to that adopted in the modern law on quiet enjoyment, discussed below.

112 In my view, there was a substantial effect on access all the way through the redevelopment works. In that regard I place particular importance on the evidence in relation to the regular blocking of access via Meridian Way.

113 Paras (c) and (d) require it to be demonstrated that the activities in issue give rise to a ‘significant disruption of’ or ‘a significant adverse effect’ on trade. ‘Significant’ is an adjective of lower degree than ‘substantial’. It refers to something which is ‘important’ or ‘of consequence’ (Macquarie Dictionary). In my view item (v) (the sign blocking), would not have had a ‘significant’ effect on trade. I accept that it would have had some effect. I do see the action as relevant, however, to the claim based on the covenant of quiet enjoyment, and will return to it at that point.

114 In my view, therefore, only the matters the subject of assertions (i) to (v) reach the threshold of a disturbance of the kind to which s 34(1) refers.

115 Notice Requirement: The final requirement required for the compensation mechanism given by s 34(1) to apply is the notice in writing requirement. This requirement is mandatory: Wall’s Gifts and Tobacco Pty Ltd v Warringah Mall Pty Ltd [2003] NSWADT 161 at [26]. This requirement can have a substantially limiting effect on the practical utility of this provision as compared to simply relying on the covenant of quiet enjoyment, as this case illustrates.

116 In this case the applicants’ submission sets out in some detail the communications in writing that are relied upon as providing a notice.

117 As to (i) the letter relied upon is dated 27 May 2005. I accept that the letter adequately raises this issue, and required a response. In my view the date of the communication must limit the extent of the claim for compensation insofar as it relies on s 34(1)(a) to the period after that date. This would, therefore, mean that the compensable period is limited to the period between 27 May 2005 and the removal of the disturbance or, at the least, its reduction to a level that is not of a ‘substantial’ degree.

118 As to (ii) the notice the letter relied upon is dated 5 October 2004. I accept that the letter adequately raised this issue, and required a response. As previously stated, I do not think the security fence around the display garden, viewed in isolation, involved a ‘substantial’ impediment to customer access. As, at this time, no written notice had been raised combining the two concerns, it seems to me that this item fails under s 34(1)(b).

119 As to (iii), this matter again shows the required notice is the letter of 27 May 2005, which I accept raises this issue. This must limit the period that is relevant for compensation under this provision.

120 The result, thus far, is that I consider that assertion (i) is proven, a notice was given, but any compensation pursuant to s 34 would be confined to the period after 27 May 2005. The same applies in respect of assertion (iii).

121 As to (iv), the two blockage periods, the first was raised by the letter of 27 May 2005, and the second by the letter dated 14 June 2005. It is not clear that anything practicable could have been done, however, as the first blockage had passed when the 27 May letter issued, and the second blockage had ended when the 14 June letter issued. In my view these are not the sort of notices to which s 34(1) is directed. Section 34 has as its focus the making of adjustments while events are in progress.

The Quiet Enjoyment Claim

122 I have set out the quiet enjoyment covenant, cl 3.4. The applicants make the following assertions in support of breach of cl 3.4, and they should be read in conjunction with the fuller assertions that were made in connection with s 34:

(i) The renovations took one year to complete.

(ii) There was a denial of access to the lessees’ premises inhibiting customer access.

(iii) Dust from the construction entered the shop and destroyed products and the computer system which had to be replaced.

(iv) There was a security fence erected all around the premises.

(v) The garden which they maintained and constructed was destroyed, and it included a landscaped fountain and pond. They say that this was a signature piece that represented their business.

(vi) An advertising sign was blocked and or removed or interfered with.

123 Apart from the dust claim (item (iii) above), these matters have all been dealt with in the discussion of the s 34 claim. I accept that there would have been dust disturbance from the works – as described by the applicants, the other witnesses, Mr St George and as reflected in the photographs.

124 The applicants attributed the loss of plants and other products to the dust, and also the need to replace the computer system. There is no independent evidence supporting these claims. I am not satisfied that this link is made out. The dust disturbance remains relevant however to the quiet enjoyment claim.

125 Two recent Federal Court cases are among the cases that have looked at what is required for a breach of the covenant of quiet enjoyment: Hawkesbury Nominees Pty Ltd v Battik Pty Ltd [2000] FCA 185 (Full Court) and Byrnes v Jokona Pty Ltd [2002] FCA 41 (Allsop J). Relevant principles, mainly drawn from Allsop J’s judgment at [58] to [65] for the present discussion are:

- In a commercial lease setting, it is the business for which the lease has been granted which forms the framework of analysis as to whether there has been interference with the possession of the tenant.

- It is the ordinary and lawful enjoyment of the premises for the known or permitted purpose which is to be protected from an interference which is substantial.

- Whether what is complained of amounts to a substantial interference will be a question of fact. A breach may result either from acts of commission or omission by the lessor.

- A material reduction in the full enjoyment of the premises may amount to substantial interference.

- The lessee takes the property not only in the physical condition in which he, she or it finds it, but also subject to the uses which the parties must have contemplated would be made of the parts retained by the lessor.

- One should be careful about making a finding of breach of the covenant where the matters complained of worsen the position only a little from the state of affairs at the date of the grant.

126 There was discussion in the proceedings of the question of whether the display garden might, as a result of the more flexible definition of lease found in the Act as compared to the common law, be the subject of a lease governed by the Act (the ‘statutory lease’ as it is called in some of the cases). This was seen as bearing on the question of whether the actions taken by the respondent in relation to the display garden fell within the scope of the proceedings. The respondent had taken the view that the display garden was at most the subject of the grant of a licence; and therefore the respondent was free to do as it liked with the space. From the outset Mr Black acted on this basis; and justified his peremptory demolition of the display garden on that basis.

127 In my view the covenant of quiet enjoyment protects not only a lessee’s enjoyment of the demised premises, but also those aspects of the common areas in a shopping centre that bear on the lessee’s enjoyment of the demised premises. As the case illustrations given earlier from Lang show, an interference with occupation can involve interferences of a physical kind which impair the lessee’s immediate enjoyment of the premises themselves (for example, the erection of scaffolding outside a shop). In the context of a shopping centre, the interference may be less immediate, in that it impairs the lessee in relation to matters which involve the use and enjoyment of the common area incidental to the Lease. This is well illustrated by the High Court decision in Arndale (Kilkenny) Pty Ltd v Gaetjens and Anor (1970) 44 ALJR 434. In that case tenants in a shopping centre sued over the owner’s decision to allow stall-holders to operate in the undercover mall area of the centre. The common form lease identified the demised premises and then gave the tenants the right to use and enjoy the common areas during trading hours. Barwick CJ and Menzies J, in their joint judgment, noted at 435: ‘It is obvious that the use and enjoyment of the mall is part of the attraction of becoming a tenant of a shop in the shopping centre.’

128 The owner in Arndale had submitted that the lessor had a right to appropriate the mall area provided it did not involve a substantial interference with the use and enjoyment of the mall for the purposes for which it was designed. It will be seen that this argument does not go as far as the position taken by Mr Black in this case, where he claimed a right to do as he liked with the display garden whether or not there was a substantial interference.

129 Nonetheless their Honours rejected the more qualified position taken before them. They said:

‘This argument we reject. It is clear, we think, that the right of each lessee is to use and enjoy, in common with other tenants and with the owner, the whole of the defined common areas and, unless there is in the lease a positive authorisation for the owner to take away part of a common area and to occupy it to the exclusion of the tenants, the appellant cannot do what it proposes.’

130 Windeyer J accepted at 436 that minor infringements on the open area of the mall would be permissible where they were reasonably necessary for safety reasons or by way of improving the amenity (fire extinguishers, small plant displays were mentioned). Windeyer J said:

‘Here the question is whether the lessor can appropriate to itself, and for its own purposes not the common good, a part of the common area and exclude those to whom it had granted a common right to have the use and enjoyment of the whole area from enjoying this right. In my opinion it cannot lawfully do so.’

See further Wilcox v Richardson [1997] NSWSC 281 (CA); and Sunshine Retail Investments Pty Ltd v Wulff [1999] VSC 415 (Hedigan J).

131 In this instance, the applicants had been accorded rights in respect of the common area that extended to the enjoyment of the display garden and reasonable signage display. They were enjoyed in connection with the Lease, in the same way as the tenants as a whole in the Arndale case enjoyed the benefit of the shopping centre mall, albeit in a situation where the Lease itself had a general term covering the enjoyment of common areas.

132 The applicants had an obligation under the Lease to maintain this area, described there as the ‘lawn and garden areas’.

‘30.0 GARDEN MAINTENANCE

30.1 IT is an essential term of this Lease that the Lessee is to maintain the lawn and garden areas adjacent to the demised premises extending from the driveway entrance adjacent to the green grocery to the western boundary of the property of which the demised premises forms part.’

133 To strengthen its claim in this regard, the applicants in their closing submissions argued that the display garden area had been the subject of a grant of exclusive use and occupation, giving rise in law to a lease. They referred to cases such as Penrith Whitewater Stadium Ltd & Anor v Lesvos Pty Ltd [2007] NSWCA 176 (19 July 2007) and Radaich v Smith [1959] HCA 45; (1959) 101 CLR 209 where the relationship in respect of the affected land had been cast by the grantor as a licence but the Court found that in law a lease had been granted. I do not need to deal with that submission.

134 In my view the law today recognises that in shopping centres the rights of the lessee under the lease relationship do not end at the boundary of the demised premises. The lessee may take action against interferences with rights enjoyed in connection with the lease that relate to the use of the common area. Sometimes those rights will have been spelt out expressly in the lease, sometimes they will be implied. I am satisfied that in this case, at the least, that the applicants had an implied right to the use and enjoyment of the display garden, and to the reasonable placement of its ‘specials’ signs.

135 The respondent’s submission is that any interferences such as penetration of dust and the blockages for concreting and road works in May and June 2005 were temporary. The display garden event is put to one side on the basis of the licence argument, which I have rejected. The fence around the Shopping Centre is said not to have affected the applicants in any material way. I disagree. I do not agree that the works were of minor and limited effect. In any event all of these submissions are complicated by the fact that none of the activities were authorised by the Lease.

136 In my view when the circumstances as a whole are considered there was substantial interference with the applicants’ right of quiet enjoyment. The compartmentalisation of the various events, as was required of the applicants, partly because of the notice requirement, in presenting their s 34 case is not required on this occasion. The breach arose from the scale and duration of the redevelopment works, the activities that form a usual part of redevelopment works (the erection of fences, penetration of dust and the like), and the breach extended to the interferences with facilities located in the common areas enjoyed by the applicants in connection with their Lease, such as the display garden and signage.

137 In light of this conclusion, I do not think it necessary to consider in any detail the claim based on Covenant 4.1 or the claim based on Covenant 2.14.1 (Signage). As to Covenant 4.1, the issue in this case is inaccessibility. The premises were, in my view, rendered inaccessible in the way explained in the discussion of the s 34 claims. There was a breach of this provision. The respondent failed to take steps to have the rent reviewed and possibly suspended or reduced.

138 I am satisfied that the respondent breached the covenant of quiet enjoyment, and the applicants are entitled to an award of damages. I am satisfied that the respondent breached the obligation imposed by s 33. I am also satisfied that there were breaches of s 34(1), to the extent and subject to the qualifications previously set out.

139 As to whether there is to be a general award of damages for breach of the covenant of quiet enjoyment, it is not necessary to examine separately the question of what compensation might be appropriate in connection with the breaches of s 34(1).

Relief

140 To reiterate, the relief sought is:

Compensation made up as follows:

(1) Loss of Profits: either $69,583 (Guy report), $67,810 (Burgess report, see para 5.5.2) or Calculation of sales and gross profits (2005 and 2006 years) $65,051; and

(2) Associated Expenses $59,674.08, made up of :

(a) Additional advertising and leasing costs: $2,310.59

(b) Loss of front garden and product displays: $11,489.00

(c) Computer and printer: $2,470

(d) Stock loss: $26,529.14

(e) Stock decline and working capital costs: $2,000.00

(f) Burleigh Heads display garden: $14,875.35

Total: $124,725.08 (minimum) to $129,257.08 (maximum).

Principle

141 Deane J stated in Commonwealth v Amann Aviation Pty Ltd [1991] HCA 54; (1992) 174 CLR 64 (12 December 1991) at 116:

‘The general principle governing the assessment of compensatory damages in both contract and tort is that the plaintiff should receive the monetary sum which, so far as money can, represents fair and adequate compensation for the loss or injury sustained by reason of the defendant’s wrongful conduct. The application of that general principle ordinarily involves a comparison, sometimes implicit, between a hypothetical and an actual state of affairs: what relevantly represents the position in which the plaintiff would have been if the wrongful act (i.e. the repudiation or breach of contract or the tort) had not occurred and what relevantly represents the position in which the plaintiff is or will be after the occurrence of the wrongful act.’

142 The applicants seek damages for the disturbance to their business caused by the redevelopment works. They say that there are two components: the loss of customers while the works were proceeding, and the continuation of that fall-off for the next 12 months, while they tried to rebuild the customer base.

143 As to this matter, the principal evidence is in Mrs O’Hehir’s main statement at paras [136] and following. She referred to the general impact of the works on the amenity of their centre. She referred to the difficulty that customers who had parked at the eastern end of the Shopping Centre – the main site of works – had in getting from that area to the garden centre, because of fencing and other works blockages. She referred to the reduced amount of free car space at the western end near the garden centre because of the presence of trade vehicles and the like. Also in evidence, via the accountants’ reports, are the trading figures, including the number of customers and the division of receipts as between the garden centre and the landscaping side. The landscaping side of the business was actively developed from 2002 onwards. This is explained more fully in Mr O’Hehir’s main statement.

144 Mr O’Hehir’s statement refers to the special place of the display garden in the business’s operation. He described it as ‘our shop front, designed to attract customers into our Garden Centre and its loss had an immediate effect on our business.’

145 According to Ms Stapleton, the proprietor of the liquor store at the eastern end of the site, although the O’Hehirs’ business was away from the major area of construction (the eastern end), they appeared to be impacted more severely than her in respect of: access, use of the car park facilities, fencing off, the removal of the display garden and the blockage of signage.

146 Mr Beckett, of the bakery and pie shop, referred to the car parking situation at times being ‘horrendous’, and being ‘bad’ most of the time. He was also of the view that customer numbers had been adversely affected by the reconstruction and that they were only slowly recovering. He was very critical of the lack of organisation and planning, as he saw it, of the works.

Loss of Profits Claim

147 The principal claim is for losses connected with the redevelopment works. The losses are claimed in respect of the 2004-2005 and 2005-2006 financial years, in particular the principal period of works. The works started in September 2004. They ended in either July 2005 or September 2005 depending on which account is accepted. On either version the works were over for most of the financial year ending 30 June 2006. The applicants’ claim treats this as a recovery period, and claim relief in respect of the continuing effect on their trade of the rebuilding works.

148 The applicants relied on reports from Mr Guy and Mr Burgess. The respondent relied on a report from Mr Williams. There was an attack on Mr Guy’s qualifications. His firm specialises in tracking the performance of the garden nursery industry. It undertakes confidential research in to the operation and profitability of the industry. It develops bench marks, and gives advice to businesses in the industry. I accept that Mr Guy has specialised knowledge of this industry.

149 However, I found his approach to the estimate of possible losses suffered by the applicants’ business unconvincing. He hypothesised from base-lines of performance belonging to their best years (around 1999 and 2000), without giving any close attention to the fact that the subsequent years’ figures showed a trend line of decline in customer numbers and sales from the centre, and in contrast with an upward trend line for the landscaping side of the business. I did not find his extrapolations helpful.

150 I found the reports of Mr Burgess and Mr Williams more concrete in their attention to the particulars of the applicants’ business. There was an attack on the neutrality of Mr Williams’ report. It is plain that some of Mr Williams’ statements and some of his general assumptions were founded on an uncritical acceptance of Mr Black’s version of the respondent’s conduct, and Mr Black’s self-serving minimisation of the impacts of that conduct on the applicants. This is a problem which constantly bedevils expert reports prepared, as they usually are, in advance of the final findings of the court or tribunal. I have taken these difficulties into account in considering Mr Williams’ analysis.

151 There was an attack on Mr Burgess’s report in accepting some of the points made in Mr Guy’s report. Similarly, I have taken them into account in considering Mr Burgess’s analysis. As I have tended to accept the applicants’ account of the gravity of the respondent’s conduct, the Burgess assumptions in these matters are closer to the final outcome than Mr Williams’s.

152 Both reports use 2003-2004 as the ‘base line’ year for comparison with the performance of the business in years 2004-2005 and 2005-2006. I see this as appropriate.

153 In the course of reviewing Mr Guy’s report, Mr Williams stated that ‘a more appropriate methodology ... in assessing lost profits is to apply an appropriate gross profit percentage to the estimate of lost sales and then add additional cost and or deduct any costs savings that are directly attributable to event which has caused the loss to be suffered’ (para 5.19). Mr Williams reviewed the applicants’ financial information, including tax returns. He noted the flat pattern in overall sales, and declining net profit except in the year 2004-2005. His conclusion was that ‘while sales, gross margin and net profit did experience a brief improvement during the year of construction it could be argued that the financial results could have been marginally better during this period had it not been for the minor disruption to its trade caused by the construction work’ (para 6.11). He found the evidence of loss of profits inconclusive.

154 As an alternative measure of compensation, he referred to the pay-outs made by the respondent to two of the tenants. He gave his understanding of those pay-outs and concluded that it would be appropriate to pay the applicants $15,000. Mr Burgess disputed any adoption of this alternative method. If it were to be considered, he disputed Mr Williams’ evaluation of the pay-out to Ms Stapleton. Mr Burgess contended that the immediate compensation paid to Ms Stapleton (the lump-sum payment plus the short term rent reduction) did not represent the totality of the benefit to Ms Stapleton, as Mr Williams had assumed. He contended that the long-term rent reduction given to Ms Stapleton in connection with her next lease was the most important benefit she achieved (down from $400 per sq m to $292 per sq m), and if that was taken into account, a figure more in the order of $119,000 was the proper measure.

155 In my view the original approach proposed by Mr Williams is the appropriate one. This approach is also seen by Mr Burgess as appropriate. There is, I think, sufficient financial information in evidence, to enable a loss of profits estimate to be made. The appendices to the Williams’ report and the Burgess’ report each contain very detailed financial information derived from the business records of the applicants’ business and the tax returns prepared by their accountants. I also prefer that approach to a slight variation, put forward in closing submissions by counsel for the applicants (based simply on sales and gross profits).

156 The applicants’ submissions emphasised the desirability of separating for the purpose of estimating loss of profits the nursery side of the business from the landscaping side of the business. This point was made in response to Mr Williams’ approach of assessing the financial position of the applicants’ business by reference to total turnover. The total turnover figures do not show a very marked decline in turnover across the business, whereas the nursery side, viewed in isolation, does.

157 Normally, it would be appropriate to look at the business as a whole. However, I accept in this case that the business had two profit centres, and the impact of the redevelopment works largely affected the nursery side of the business. Mr Burgess separated the two sides, so I am more inclined to use his figures.

158 The statistics kept by the applicants of the number of customers relate almost entirely to walk-in customers. The data for the months of April to September 2003 (broadly speaking, the winter months) and for the same months for 2004 show 3,146 customers as compared to 2,474 customers. So there was a decline of 21.3%. This decline forms part of a long-term trend. In the year 2000-2001 the customer numbers were 9,156; 01-02, 6,983; 02-03, 5,884; 03-04, 5,632; 04-05, 4,339; and 05-06, 3,265. Data for the first four months of 06-07 were reported, 1,317 customers, which if projected produce an annualised figure of 3,951, perhaps suggesting that the downward trend has been arrested, and an uptrend was beginning to occur.

159 The key period of works was late September 04 to July 05. There were 1,316 customers in July to August, and 3,023 in the period September to June, as compared to 1,782 and 3,850 in the equivalent blocks of the previous year. So it is arguable that around 800 customers were lost during the redevelopment period, assuming that otherwise the figures for the two years had been equal, itself a risky assumption given the trend-line of previous years. The applicants then contend that there was a knock-on effect, as customers once put off from going to the centre, might not return, and this affected the next year’s figures.

160 The further complication in the case is that the distribution of effort in the business, as noted above, has shifted over the years. I have mentioned Mr O’Hehir’s evidence that a deliberate decision was taken in 2002 to build up the landscaping side of the business, for which he is largely responsible.

161 In 00-01 the ‘garden centre’ side of the business (i.e. sales at the shop) constituted 67% of turnover compared to 33% on the ‘landscaping’ side. The landscaping materials would, usually, then be supplied from the business. A broadly-similar business ratio continued to apply in the years 01-02, 02-03 and 03-04.

162 In the main year under notice, 04-05, there was a significant shift with the landscaping side predominating 47%-53%, and a broadly similar ratio was repeated in 05-06. (For the first four months of 06-07 the ratio was even more marked towards the landscaping side, but this may be explained by seasonal factors.) Mr Guy’s report is useful in relation to this trend. He explains that this kind of redistribution of effort is increasingly common in family gardening businesses of the present kind. As I understood him, the landscaping side has better margins, and it allows for a personalised service to be given away from the price competition that major chains can bring to bear on ordinary garden products.

163 Using the statutory accounts data (Williams Report, App. 1), the difference in trading turnover between 03-04 and 04-05 on the ‘garden centre’ side is from $222,000 (rounded) to $189,000 (rounded). There is a further decline to $150,000 (rounded) in 05-06. If the two years prior to 04-05 are grossed and compared with the two years 04-05 and 05-06, the comparison is $425,000 versus $339,000. At most it would seem that the applicants could claim that the effect of the redevelopment works and their aftermath in diminishing sales led to a loss of gross turnover in the vicinity of $86,000.

164 The landscaping business comparison for the same two year periods is $226,000 versus $391,000. It is hard to conclude that the landscaping side of the business suffered any serious impact from the redevelopment works, though Mr and Mrs O’Hehir considered that there was some cross-impact.

165 I do not agree with Mr Burgess’s suggestion that one might have expected to see the walk-in side of the business improve along with the landscaping business. This suggestion ignores, I feel, the underlying trend.

166 The next issue that is the subject of some uncertainty is the appropriate profit margin to apply to the turnover. Both Mr Williams and Mr Burgess applied a figure around 48-52%. Mr Burgess stated in his report (para 5.1.3.6) that this was the best that could be done, as there was no more precise information available dividing the two sides of the business. These figures are in accord with the returns prepared for the business by its accountant.

167 One of the matters to which I turn later is stock losses. I agree, broadly, with the point made by Mr Williams that there is a substantial ‘lost’ stock element in a calculation as to lost turnover. To put forward the lost stock component as an additional claim beyond the compensation recovered in the loss of profits calculation would, ordinarily, involve double-counting.

168 There is a level of speculation in calculations of this kind. In my view, the turnover loss over the two year period 04-06 is affected by a general trend of a declining number of customers. The figures suggest that the applicants reacted to this trend by moving their business more towards the landscaping side, which had higher profitability than garden centre sales.

169 I consider that there were factors that may have played some role in contributing to the decline. Mrs O’Hehir did not agree that the Boyd’s Bay Nursery (as at 2007, a 20,000 square metre site, with 33 staff), located about a kilometre away from her business, was a significant threat to the garden centre. She said that Boyd’s was more of a bulk supplier like Bunnings. She said her centre was a boutique nursery that sold one off creations with a focus on unique garden art, garden sculptures, unusual pots and premium plants. It seems to me that businesses like Boyd’s Bay and Bunnings would have had some cross-effect on her business.

170 There was a dispute in the case as to the significance or otherwise of water restrictions, leading to affidavits from the solicitors on either side. I am satisfied from that material, and the references to the matter in the evidence of the O’Hehirs, that water restrictions have been common on one or other side of the border, and sometimes both sides, over the years since 2000, that they have continued on the Coolangatta side, and were reduced on the Tweed side around 2003.

171 In my view the entire loss of turnover over the two years 04-06 can not be attributed to the redevelopment works. I would allow 70% in the year of the works, and 50% in the next year (05-06) giving rise to an average of 60% of $86,000, i.e. $51,600. The gross profit margin across the business was of the order of 50%. I am dubious as to whether it would have been 50% on the garden centre side viewed separately. The respondent refers in its submissions to Mr Guy’s suggestion that there is an industry average around 30%. I will allow 40%. Accordingly the amount I would allow under this heading is $20,640.

172 There was no claim for a substantial rent reduction. The claim for rent relief for 11.5 days in May and June is adequately addressed by the loss of profits award. I will not take this matter any further, though, in my view, rent reduction is one of the primary ways in which a responsible centre manager should deal with compensating tenants who are in occupation during major works.

The Associated Expenses Items

173 The contention is that these are exceptional costs that were only incurred because of the breaches committed by the respondent. They are costs, it is said, that would not have been incurred had the applicants been left to run their business without the respondent’s interferences.

174 I will begin by explaining briefly the nature of the claims.

(i)(a) Additional advertising; and (b) leasing costs: $2,310.59. Item (i)(a) refers to two advertisements placed in the Tweed Sun on 1 and 8 November 2004. The applicants say that these advertisements were placed in an attempt to deal with a drop off in trade after the redevelopment works started. Item (i)(b) is a claim for release from rent for the periods when the business was blocked off in May and June 2005, estimated at 11.5 days, giving rise to $577.59. I have already addressed this item.

(ii) Loss of front garden and product displays: $11,489. This claim has two components: the cost of replacement display garden in 2006 including labour and materials, $4,348 (and an estimate of the value in plants lost by reason of its destruction); and $7,100 (the value of the garden that was destroyed).

(iii) Computer and printer: $2,470. This matter is referred to at para [133] of Mrs O’Hehir’s main statement. This is a loss said to have been caused by dust disturbance. I am not satisfied, as previously noted, that a causal link was established, and this is disallowed.

(iv) Stock loss: $26,529.14. This matter is referred to at para [134] of Mrs O’Hehir’s main statement. She says that a normal stock loss after the spring/summer period is about 3 per cent. In March/April 2005 they had to dump 40%. She attributes this to the impact of the redevelopment works. She calculated the loss of stock by taking the recorded inventory value minus the stocktake which gave the total amount dumped. The applicants’ argument is that they stocked up on the basis of usual selling conditions, and instead found itself saddled with an oversupply of stock when the selling conditions deteriorated due to the redevelopment works.

(v) Stock decline and working capital costs: $2,000. It is said in support of this item that as a result of falling turnover (attributed to the respondent’s conduct) losses were suffered attributable to declining economies of scale, such as transport costs.

(vi) Burleigh Heads display garden: $14,875.35. This refers to a display garden erected by the applicants in a home improvements display centre at Burleigh Heads. The applicants said that they took the decision to erect this display as a result of the significant decline in the garden centre’s custom and the unsightly nature of the site where the former display garden had stood. The construction itself occurred in July 2005. The sum claimed is the cost of construction plus an amount for personal and staff time attending on the construction.

175 The garden centre display garden claim (item (ii) above) stands apart. The respondent was not, in my view, entitled to interfere in any way with the display garden. Accordingly there should be an award. I will deal with the amount later.

176 Two of the claims, items (i)(a) and (vi), are in the nature of claims for promotional costs seen as necessitated by the damage done to the garden centre’s accessibility and image by the redevelopment works.

177 In principle I accept that an innocent party might be put to the effort of engaging in additional promotion, beyond that which they might otherwise have engaged in, by unlawful conduct on the part of the other party. The difficulty that this case poses is unscrambling what promotional activity might have occurred anyway from that which may be said to be attributable to the unlawful conduct.

178 In a more normal shopping centre environment, I think a responsible centre manager would have seen it as desirable to make allowances for increased promotional activity to off-set reductions in customer amenity caused by building works. A responsible owner would have increased the centre’s promotional activity, and, possibly, also have provided support to individual traders.

179 The stock decline and working capital costs claim, item (v), is a small one, and, I think, speculative. In my view, this item is met adequately within the framework of the general damages award.

180 Finally there is the stock loss item, item (v). This has similar problems to the promotional costs claim. I accept that a lessee may stock up on a certain set of assumptions, and find them displaced by unlawful conduct of the lessor. In principle, losses of this kind should be recoverable. The difficulty here is that stock losses may derive from a range of factors – such as misjudgements by the trader of market preferences, seasonal conditions, the wider economy, and events outside the control of either the lessee or the lessor. In this case the situation is further complicated by the fact that the applicants knew, certainly by June 2004, that a redevelopment was to proceed.

181 Therefore, I exclude from further consideration under this side of the damages claim the following amounts: the rent claim, $577.59, the computer and printer claim, $2,470; the stock decline and working capital costs claim, $2,000. I will reorganise the balance of the claims into the ‘Display Garden Claim’, the ‘Promotional Claims’ and the ‘Stock Loss Claim’.

The Display Garden Claim

182 Had the display garden not been interfered with, the applicants would have gone on tending and cultivating it at no cost to the lessor. They obtained, I consider, a good deal of personal satisfaction from having a display garden of quality, they were pleased with the awards and commendations it had received, and it was an asset in obtaining publicity for their business and in the visual presentation of their business to customers.

183 There is a debate in the financial reports and in the submissions over whether there is double counting involved in compensating for the loss of the garden and for its reinstatement (in a lesser form, at least as to area occupied).

184 Mr Burgess stated that the mature plants and annuals had commercial value, and compensation should be given for their loss, independent of any further costs incurred in building the new garden a year later. Mr O’Hehir said that he sometimes uplifted plants from the display garden and sold them. In this regard, the applicants claim $7,100.

185 I am not satisfied that in the ordinary course many or any of these plants would have been sold. The garden, I accept, formed part of the overall presentation of the centre. Its removal impacted on profits, and the compensation should be found in that context.

186 On the other hand, I accept that the applicants were put to unnecessary expense in having to reinstate the garden. They have claimed $4,348. The way that amount is estimated, and the relevant documentation, is set out in Mr O’Hehir’s evidence. I accept the amount claimed as reasonable.

‘Promotional Claims’

187 As previously noted, I consider additional promotional costs to be a compensable item in a case of this kind. As I have explained, there was a pattern of decline in customer numbers over some time prior to the redevelopment works commencing. The advertisements were, in my view, partly a response to that phenomenon. I would be inclined to allow half the claim in respect of the two advertisements, i.e. $870.

188 The building of the display garden at Burleigh Heads was the major promotional initiative taken by the applicants, it is said, in consequence of the redevelopment works. I accept their evidence that this was a motivation. I do not think it was the sole or main motivation. It had the potential benefit of giving the applicants’ business a stronger profile in a more central part of the Gold Coast market. They took the decision while the Shopping Centre was substantially affected by the redevelopment works. By the time the Burleigh Heads display garden was constructed, a degree of normality had returned to the conduct of their business. I would make a small allowance of 20% of the construction costs in respect of this aspect of the claim ($13,587.05 exclusive of GST), i.e. $2,717 (rounded off).

‘Stock Loss Claim’

189 The applicants were aware by June 2004 that there was to be a major redevelopment. They did not receive notice of the kind contemplated by s 33. They knew by 17 June 2004 that the development consent had been given.

190 Given the vigour with which the matter had been pursued, it was reasonably predictable that works would commence soon thereafter, as they did (in late September). I accept that they could not be certain of that, and therefore had, to some extent, to make stocking decisions that provided for the possibility that works might not commence in the immediate future.

191 Had the respondent given a notice of the sort s 33 envisages, then it may have been that they could have made more informed decisions. I accept, therefore, that some of the stock losses can be attributed to over-purchasing at a time when it was not clear how soon the works would commence. On the other hand, as explained in dealing with the loss of profits claim, there was an overall pattern of deteriorating trading conditions on the nursery side. This state existed, independently of the redevelopment works. The redevelopment works contributed to a, difficult to measure, exacerbation of the situation.

192 Therefore I would be inclined to allow a proportion of the stock losses that were incurred in April/May 2005, but not allow any discount for the second set of losses. It seems to me that they are adequately catered for within the lost profits calculations. I can see no link between those losses and purchases of stock made at the point when the redevelopment schedule was unknown.

193 Again the calculation is somewhat speculative, but I would allow $4,000 in this respect.

Summary

194 Accordingly I would allow the following amounts:

Loss of profits, $20,640.

Reinstatement of display garden, $4,348.

Additional promotional expenses, $3,597.

Stock Loss, $4,000.

Total: $32,585.

Interest

195 The award should be subject to interest at the maximum rate allowed by the Act.

Costs

196 There are foreshadowed applications on both sides. The following directions are given, which allow for the time of year. Applicants to file and serve submissions by 15 February 2008. Respondent to file and serve its submissions and any submissions in reply to the Applicants’ submissions by 7 March 2008. Applicants to file any submissions in reply to any application made by the Respondent by 14 March 2008. Matter to be determined on the papers, subject to grant of any application to the contrary.

Order

1. The respondent to pay the applicants $32,585.

2. Order to bear interest at the maximum rate permitted under s 72A.

3. As to costs, decision reserved subject to directions at para [196].
[On 7 February 2008, the Tribunal issued the following revised orders in this matter:

Orders made by decision delivered 16 January 2008 vacated, and following final orders made in substitution:

1. The respondent to pay the applicants the total amount of $41,030.20 comprising: (a) $32,585, as ordered in decision delivered 16 January 2008; and (b) interest on that amount at the rate of 11 per cent (calculated daily) as from 1 October 2005 to 7 February 2008 being $8,445.20.

2. By consent, no order as to costs.]

AMENDMENTS:


11/02/2008 - Revised orders added - Paragraph(s) Orders