Grand Development Pty Ltd v Simdex Surry Hills Pty Ltd [2009] NSWADT 26 (6 February 2009)

NEW SOUTH WALES ADMINISTRATIVE DECISIONS TRIBUNAL

CITATION:
Grand Development Pty Ltd v Simdex Surry Hills Pty Ltd [2009] NSWADT 26

DIVISION:
GENERAL DIVISION

PARTIES:
APPLICANT
Grand Development Pty Limited

RESPONDENT
Simdex Surry Hills Pty Limited

FILE NUMBERS:
085142

HEARING DATES:
1 December 2008

SUBMISSIONS CLOSED:
1 December 2008

DATE OF DECISION:
6 February 2009

BEFORE:
Fox R - Judicial Member

LEGISLATION CITED:
Retail Leases Act 1994

CASES CITED:
Nichols Global Enterprises Pty Limited v Biviano & Anor [2003] NSWADT 134

TEXTS CITED:

APPLICATION:
Jurisdiction, lettable area

MATTER FOR DECISION:

REPRESENTATION:
APPLICANT
D Hall, solicitor

RESPONDENT
S Farkas, agent

ORDERS:
1. The Tribunal has jurisdiction because the lettable area of the premises is less than 1,000 sqm, and the business conducted on the premises is that of "furniture shop"
2. Costs reserved
3. Listed for directions 19 February 2009 at 10:30am.

Reasons for Decision:

1 The Applicant is the Lessor of premises in Flinders Street, Darlinghurst which the Lessor’s surveyor Theo Mossel described as "two storey single tenanted free standing brick warehouse/showrooms". The Respondent (which traded as "Design Warehouse") is the former tenant of the premises. It is common ground that the business conducted from the premises was that of a furniture showroom.

2 A dispute about outstanding rent in the sum of approximately $38,500.00 arose when Design Warehouse quit the premises in March 2008, and the Lessor took action in the Local Court to recover that amount. It appears that Design Warehouse raised the question of transfer to this Tribunal, pursuant to section 75 and to resolve that the lessor then made the present application seeking a declaration that that Tribunal had no jurisdiction because the premises contained a lettable area of more than 1,000 square metres.

4 The evidence for the Applicant was by way of Affidavits from Norman Blundell, real estate agent and letting agent for the premises and from Theo Mossel, surveyor. For the Respondent there were Affidavits by Simon Farkas, director of Design Warehouse and Graham Wilson, surveyor. There was nothing relevantly controversial in the Affidavit of Mr Blundell and he was not cross examined, but the three other witnesses were.

5 Mr Mossel’s evidence was that he had surveyed the premises in June of 2005 and, using one of formulae promoted by the Property Council of Australia (PCA) in its publication "Method of measurement for lettable area", found that the two floors comprised 1,141.1 square metres. The formula used was gross lettable area (GLA). He further deposed that he (in July 2008) measured the property using a different formula promoted by the Property Council in the same publication, being the gross lettable are retail (GLAR). Using that method the area comes to 980.3 square metres.

6 Obviously if, properly considered, the lettable area of the premises is less than 1,000 square metres, then Design Warehouse has the right, under section 75 of the Act, to have the matter adjudicated by the Tribunal, instead of leaving it to the Local Court.

8 It gives, by description and by diagram, indications of various measuring techniques aimed, amongst other things, at smoothing out the measurement of internal engaged structural columns, free standing internal columns, protruding service conduits and, service cupboards etc. The formulae were formerly described as the "BOMA" method of measurement.

10 On cross examination Mr Mossel indicated that he felt his first measurement (GLA) to be the correct application of the formula because the publication shows it to be appropriate for "warehouses and showrooms", whereas the GLAR is appropriate for "freestanding shops". I have already given Mr Mossel’s description of the premises in the first sentence of these reasons.

11 When asked "what makes it a showroom?" he said that it was a place which displayed large and heavy items which people could not simply buy and take with them. He went on to refer to the fact that the premises had previously been used as a car showroom. He admitted that he had asked no one in the building for a description of what was sold, and further he did not know that items were sold (to put it in my words) on a cash and carry basis.

12 Mr Farkas’ evidence on the other hand, was to the effect that the showroom had many ancillary furniture items, such as lamps, vases and statues, stools and bedside tables and that these were bought and carried out every day. He referred to the fact that the letting had always been thought to be within the Retail Leases Act, and that the authorised use, pursuant to the Lease, was:- "retail showroom and associated offices". In his view the business was a furniture shop, not just a showroom. He agreed that a facility for showing dresses on a wholesale basis, so that buyers from department stores might consider to buy in volume, but where none were sold direct to the public, would be a showroom as opposed to a shop.

13 Mr Wilson, surveyor, gave evidence to state that he had been told to measure the GLAR, and that he computed it to be 943 square metres. The difference between his conclusion of GLAR and that of Mr Mossel arose from a different interpretation of the exclusions directed by the PCA formula.

Nichols Global Enterprises Pty Limited v Biviano & Ano [2003] NSWADT 134 and "lettable area"

14 I considered a similar dispute (and the GLAR formula) in the matter of Nichols Global Enterprises Pty Limited v Biviano & Anor [2003] NSWADT 134. In that decision I questioned the relevance of the GLAR formula to a single occupied free standing building and in fact did not completely apply it. In that matter I was not asked to compare the two formulae, I only had GLAR measurements before me. I remarked that the formula was useful in explaining the surveyor’s calculation but was "of little assistance to me in putting some meaning to the concept of "lettable area" as that term was used in section 5 of the Retail Leases Act as it then applied. "Lettable area" now appears in section 3 as well, as a result of the 2005 amendments, but that definition, only excludes car parking spaces and separate storerooms, and (regrettably) does nothing further to indicate what is included in "lettable area".

16 The uncontradicated evidence before me is that the business did not just show furniture for order, it actually sold things to the public to be then and there taken away. That being the case, I am satisfied that the business conducted was a furniture shop. These remarks are not intended to indicate that a business which only shows furniture in order to receive orders for manufacture and later delivery, on a retail basis, and does no takeaway trade, is not a furniture shop. That is an issue for another day. That said, on the basis of the PCA publication, the correct formula to apply is GLAR, because that is said to refer to shops instead of showrooms.

17 In my view, Mr Mossel, in deciding which formula was appropriate, should have had regard to schedule 1 of the Retail Leases Act, and perhaps should have made enquiries to establish the actual use of the premises before electing a formula.

18 Although the parties agreed that my indicating which of the 2 formulae was appropriate would resolve the issue, because both surveyors agreed that the GLAR measurement lead to a lettable area of less than 1,000 square metres, I am not satisfied that it does end the matter. Jurisdiction is not a matter of agreement, it is a matter of law. The point at issue is:- what is the "lettable area" of the premises as used in the Act; that may not be the same as the GLAR. The statute refers to "lettable area". It is trite law that I have to look to the plain ordinary meaning of those words before I apply section 78 to gain some guidance. As I observed in Biviano, the GLAR formula may be appropriate and properly applied for measuring the occupancies in buildings which have communal facilities, but it seems to me to be a different matter when applying the formula to retail tenancies which are occupied by one tenant.

19 The PCA publication in its’ instructions for the application of the GLAR formula gives the exclusions and comments:-

	"GLA June 2005	GLAR July 2008
Ground Floor	571.6 square metres	486.5 square metres
First Floor	569.5 square metres	493.8 square metres
TOTAL	1141.1 square metres	980.3 square metres

EXCLUDED	External walls	92.8 square metres
FROM THE	Toilets and stair	56.0 square metres
GLAR:	kitchen	12.0 square metres
		160.8 square metres

INCLUDED IN	Loading dock	18 square metres
THE GLAR:	Area under open stair less
	than 1.5 metres in height	9 square metres
	Void over open stair	13 square metres"

"GLAR (Ground Floor)	459 square metres
GLAR (First Floor)	484 square metres
GLAR (Total)	943 square metres

Areas excluded by the GLAR-
Toilets (ground)	16 square metres
Fire stairs (ground)	12 square metres
Kitchen (ground)	12 square metres
Area under open stairs less than 1.5m in height	7 square metres
Void over open stairs	13 square metres
Toilets (first floor)	16 square metres
Fire stairs (first floor)	12 square metres
Parking space	18 square metres"

22 I am unable to agree with Mr Mossel’s calculation, because he seems to include the area under the open stair and the void over stair, both of which are specific exclusions from the GLAR. Mr Wilson appears to have more closely complied with the formula, and so I prefer his conclusion.

23 I have difficulty in accepting that the legislature meant that the outer walls of the structure were to be part of the lettable area, it seems to me that the more appropriate test is to find the actual internal floor space, and that is what the GLAR is (in part) all about. That same rationale, it seems to me, justifies the exclusion of the stair void and the area below stairs which is height restricted. The under stair area is obvious, it simply is not accessible. The upper floor void is a little more difficult to conceptualise but, clearly enough, on the upper floor, the void cannot be described as retail space, and I accept that the industry practice in this regard as reflected by the GLAR formula is appropriate.

There was, in the "Biviano" premises, no void above the stairway because it lead to a mezzanine floor. The under-height area under the stairway had been excluded. I included the toilets because those premises were a licensed restaurant and had to have toilets as a condition of its’ licence.

25 Mr Farkis’ evidence was that the toilets in the building were for the use of staff only, and not available to the public. He argued that this differentiated from Biviano and rendered the exclusion proper. I am not satisfied that this is correct. The toilets (in this single occupied building) were used by members of staff (and perhaps the occasional client) and were so used as a close adjunct to the retail purpose. The comfort of staff is as much a part of the business undertaking as the actual display of goods for retail sale.

27 I accept the exclusion of the fire stair, in the particular circumstances of this matter because the fire regulations prevent the placement of any objects of any kind in it. There can be no retail related activity in such a fire isolated space.

28 The result illustrates the difficulties inherent in setting parameters by absolute measurements, because there must always be an instance where something falls just one side, or just the other side of a border line or threshold. That appears to be the case here. When I take Mr Wilson’s conclusion of 943 square metres and add the areas of ground floor toilet 16 square metres, the kitchen 12 square metres and the first floor toilet 16 square meters, I come to a total of 987 square metres.

29 Mr Mossel’s measurements are little hard to apply because he does not distinguish between the toilets and stairs (by which I assumed him to mean the fire stair). He gives a total of 56 square metres for these and that tallies with Mr Wilson’s measurements of those individual areas (16 + 12 + 12 + 16 = 56). It follows that Mr Mossel agreed that the fire stairs occupied 24 square metres.

30 As I indicated above, I have further difficulty with Mr Mossel’s calculation because the applicable part of the GLAR formula specifically excludes areas where there is less than 1.5 metre height clearance above floor level, (see diagram on page 22 of the publication). Similarly, the void over the open stairs is specifically indicated on that page 22 to be not included in the lettable area.

31 If I take Mr Mossel’s figure of 980.3 square metres GLAR and correct it by deducting the 9 square metres under height under stair area and the stair void of 13 square metres, and then add the kitchen area of 12 square metres I conclude 970.3 square metres (980.3 –9 – 13 + 12 = 970.3).

32 I should point that Mr Mossel included the open stairway because it may not have been part of the original architectural design. Whilst I admit the relevance of that consideration because the PCA guide indicates that such a "non original" feature should not be excluded from the GLAR, it is clear from Mr Farkis’ evidence that the stairway was there when the occupancy commenced. For Mr Farkis’ purposes, it was part of the architectural design of the structure, and consequently he is entitled to have this area excluded.

33 Finally I observe that both totals exclude the loading dock/parking area of 19 square metres. I am satisfied from Mr Farkis’ evidence that the area in question was used for parking. The exclusion is correct, not by any application of the PCA formula, but because as at 1 January 2006, that area is statutorily excluded. This point concerned me because, based on Mr Williams’ calculations, which I accept as correct, the inclusion of the 19 square metre carpark would exceed 1,000 square metres. It follows that, on Mr Williams’ calculations, the premises were outside the jurisdiction when the Lease was signed in 2003, but came within it when the 2005 amending Act came into operation. Whether the legislature intended to so "shift" certain occupancies is not a point which arose in argument. The amending Act gives clear guidance in sections 84B, 84C and schedule 3 about the application of other amendments to existing Leases, but makes no reference to section 3. I can only conclude that the legislature intended to apply the exclusion from 1 January 2006.

34 My formal declaration is that this Tribunal has jurisdiction to hear the matter because the premises were used as a retail shop, the lettable area of which is no more than 987 square metres and so the section 5 exclusion has no application.

Administrative Decisions Tribunal of New South Wales

Grand Development Pty Ltd v Simdex Surry Hills Pty Ltd [2009] NSWADT 26 (6 February 2009)