Gani v Maiolo [2011] NSWADT 219 (14 September 2011)

Last Updated: 15 September 2011

Administrative Decisions Tribunal New South Wales

Case Title:	Gani v Maiolo
Medium Neutral Citation:	[2011] NSWADT 219
Hearing Date(s):	10/03/2011 and 18/04/2011
Decision Date:	14 September 2011
Jurisdiction:	Retail Leases Division
Before:	D Bluth, Judicial member
Decision:	1. The Applicant was in breach of the Lease on 3 August 2010. 2.The bond money is not to be returned to the Applicant but forfeited by the Respondent. 3.The parties are to pay their own costs of the proceedings.
Catchwords:	Promissory Estoppel
Legislation Cited:	Retail Leases Act, 1994
Cases Cited:
Texts Cited:	Meagher Gummow & Lehane, Equity Doctrines and Remedies, 2nd Ed Snell's Principles of Equity, 28th Ed
Category:	Principal judgment
Parties:	Mohammad Murul Gani (Applicant) Maria Maiolo and Raffaele Maiolo (Respondents)
Representation
- Counsel:
- Solicitors:	Mooney & Kennedy (Applicant) GP Legal (Respondent)
File number(s):	105144
Publication Restriction:

REASONS FOR DECISION

1. This is a dispute between Mohammad Murul Gani as the lessee (Applicant) and Maria Maiolo and Raffaele Maiolo the lessors (Respondent) in connection with a lease at 155 Pittwater Road, Manly (Premises) being Registered Lease No AF4713685 (Lease) entered into on or about 13 April 2010.

2. The Applicant operated an Indian Restaurant briefly at the premises.

3. At the premises a restaurant had always been conducted and the last restaurant was called Terracotta which according to the lessor (and this was not challenged in the evidence) had a four and a half stars rating.

4. Terracotta gave notice to the Respondent that it was vacating the premises and the Respondent advertised in the Sydney Morning Herald for a new tenant under the heading "Restaurant Opportunity".

5. The Applicant answered the advertisement and met the Respondent on the premises, and after inspection agreed to lease the premises on the terms then being offered by the Respondent.

6. Consequently a lease was entered into between the Applicant and the Respondent for five years plus two days and the Applicant entered into possession after a rent free period and paid rent for two months.

7. The Respondent alleged that the Applicant was in arrears of rent and through the Respondent's lawyer gave notice to the Applicant regarding those arrears. Subsequently the Respondent on 3 August 2010 locked the Applicant out of the premises.

8. The Applicant approached this Tribunal for Original Decision in respect of the following orders:

1. Relief from forfeiture of the Lease; and

2. The Bond money of $25,000.00 retained by the Respondent be returned to the Rental Bond Unit.

Subsequently the Tribunal was advised that order number 1 (the relief against forfeiture) was not being pursued and thus the issue before this Tribunal was in respect of Order number 2 only.

Hearing

9. The matter came before the Tribunal for hearing on 10 March 2011. Mr Peter Kennedy represented the Applicant and Mr Bruno Gelonesi represented the Respondent. Unfortunately the Respondent Mr Raffaele Maiolo who had conducted all the negotiations with the Applicant was not present in the Tribunal on that day and on the application of the Applicant the hearing was adjourned until 18 April 2011 to allow the Respondent to attend the Tribunal and be cross-examined.

10. At the hearing on 18 April 2011 the parties were represented by the lawyers as mentioned previously and Mr Raffaele Maiolo was present in the Tribunal. Both the Applicant and Respondent, Mr Raffaele Maiolo were cross-examined. Mrs Maria Maiolo provided an Affidavit in support of the Affidavit of her husband. The issues were vigorously dealt with by the legal representatives of the two proponents/litigants, however, as a result of the large variance in recollections and evidence from the parties this Tribunal had some difficulty in reaching a decision.

The issues

11. The Applicant says in summary the following:

(a) He agreed to take a lease for five years (and two days) with a one month rent free period commencing on 13 April 2010.

(b) On inspection of the premises on the first day he advised the Respondent that certain matters (including the grease trap) were unsatisfactory and the Respondent agreed to attend to these matters.

(c) The Applicant did not accept the keys from the Respondent and in fact physically returned the keys to the Respondent.

(d) The awning to the premises indicated a Greek restaurant and the Applicant said this needed to be replaced and the Respondent agreed as to the replacement and also to the fact that the Respondent would be responsible for the replacement.

(e) When the awning was delivered and installed the Applicant paid in cash $2,300.00 to the awning installer saying that the Respondent had asked him to pay the money in cash because the Respondent was short of money and the Applicant treated this as a loan.

(f) Because the work being done by the Respondent in and about the Premises was not completed until 6 May the Applicant says that he and the Respondent agreed that the rent free period would start on 7 May and end on 7 June when the first rent would be paid.

(g) The Applicant says at the time of the eviction the Applicant was up to date in accordance with based on the agreement regarding the rent free period.

(h) The Applicant's then Solicitor Karam C Ramrakha wrote to the

Respondent's Solicitor alleging the first monthly payment of rent

was due on 7 June 2010 and that the Applicant was thus not in

default.

12. When the Respondent locked the Applicant out of the premises on 3 August 2010 it was the Respondent who was in breach of the Lease and such breach caused the Applicant substantial loss and damages.

13. The Respondent says in summary:

(a) Yes the parties entered into a lease commencing on 13 April 2010 with a rent free period/start up period of one month and in rent commencing on 13 May 2010.

(b) Yes the Applicant did mention that certain items need rectification and the Respondent agreed to attend to these items.

(c) The Respondent did not accept the keys from the Applicant and the keys were always with the Applicant.

(d) The grease trap did not require a complete overhaul which is a substantial building and plumbing job but rather only what was changed was the filter.

(e) There was no change to the Lease as alleged and the works undertaken were minor which would not have prevented the Applicant to fitting out the premises and starting up.

(f) Rent was due on 13 May 2010 in accordance with the terms of the Lease which was not altered and consequently the Applicant was in arrears during the period of occupation.

(g) The Respondent caused his solicitor to write to the Applicant on at least two occasions to advise the Applicant that he was in arrears and that rent had to be brought up to date.

(h) While the Respondent agreed with the Applicant that the awning could be changed it was at the cost and responsibility of the Applicant. The Respondent denies saying that he was short of money and required a loan.

As a result of the Applicant being in arrears and after due warning the Respondent exercised lock out.

(j) The bond money of $25,000.00 is accounted for in lost rent and damages caused by the Applicant's default and clean up of the premises after the Applicant had been locked out.

Written Submissions

14. At the end of the hearing I asked the Applicant and the Respondent to make written submissions. Only the Applicant has chosen to make such submissions which were helpful in setting out the issues.

"Contentious issues

15. The first critical issue for determination in these proceedings is the "commencement date" of Registered Lease AF4713685. The evidence relied upon respectively by the lessee and the lessor is polarised. The lessee contends that the commencement date was 7 May 2010. The lessors contend that the commencement date was 13 April 2010. If the Tribunal accepts the lessee's contention, then accordingly:

(a) Rent was up to date;

(b) There was no default; and

(c) The lock out on 3 August 2010 was invalid and unlawful

In this event the lessee asserts that he is entitled to compensation, pursuant to s72 Retail Leases Act 1994 (NSI/10..

16. The second critical issue for determination in these proceedings is who is liable for the awning replacement. The lessors contend that Mr Gani is responsible, whilst the lessee contends that as a landlord fixture the lessors' are responsible, and as such he is entitled for repayment of monies that are loaned to replace the awning.

The lessors' documentary evidence

17. Mr Kennedy in his submissions then looked at the Lessors' documentary evidence which comprise two documents, the Lessors' Disclosure Statement and the Lease.

18. The Lessor's Disclosure Statement is revealing in its brevity. As Mr Kennedy has noted it is a document that seems to have been prepared before the events that have transpired between the Applicant and the Respondent in that it notes the Lease commences on 19 March 2010. I suspect it was prepared in anticipation of finding a tenant. As noted by Mr Kennedy there is no reference to any rent free period. The Disclosure Statement says very little else.

19. The Lease is a more expansive document, but as Mr Kennedy notes there is no evidence as to when the Lease was prepared, it does not appear to be dated, does not appear to have been issued with a Disclosure Statement and clause 1(c) of Annexure A to the Lease is amended by the Respondent by hand but such amendment does not appear to have been initialled by the Applicant..

20. As noted by Mr Kennedy in his submissions, clause 1(c) of Annexure A to the Lease is on first reading uncertain and ambiguous. Clause 1(c) states as follows:

"The first monthly payment is due on 13 May 2010. If this is not the commencement date it is because a set up period or rent free period from the commencement day to that day has been allowed by the lessor"

21. Further the original typed clause had 1 May, but this has been ruled out and the term 13 May has been written and initialled by the Respondent but not initialled by the Applicant.

22. I agree that the clause on first reading is a little difficult. The more usual clause granting a rent free period is:

"The lessee is entitled to one month rent free".

23. However, notwithstanding the initial difficulty comprehending the clause, I find that clause 1(c) is quite explicit as to how it operates. It states when the first monthly payment is due and then gives an explanation if that date is different to the commencing or commencement date in the Lease. The rent free or set up period is an allowance by the lessor. It is a concession by the lessor not an express agreement or covenant between the parties. The clause expresses it as the Vendor allowing a grace period. There may be a collateral agreement and no doubt there often is regarding the rent free but the way the clause is drafted, in my view, is that it is not an express grant but a concession by the lessor.

24. Further the alteration to the date in clause 1 (c) initialled by the Respondent but not by the Applicant is not, in my view, determinative of anything, other than the fact that such date was not initialled by the Applicant.

Applicant's Position

25. As noted by Mr Kennedy, for the Applicant to succeed the Applicant has to establish that it was not in arrears of rent at the time of the lock out by the Respondent. To determine this it is relevant for the Applicant to move the first monthly payment date for rent from 13 May to 7 June to make the rent payments up to date at the time of the lockout on 3 August 2010.

26. In summary the Applicant's submissions with respect to the change of rent payment date in clause 1(c) are as follows:

(a) The Applicant did not have exclusive possession of the premises from the commencement date as the lessor was doing repairs and held the key.

(b) There was a representation by the Respondent to the Applicant that:

"The premises has a fully equipped commercial kitchen but not a Tandoori oven, and also has grease traps, air conditioning and ventilation and that these were completely operation".

This representation is taken from the Affidavit of the Applicant affirmed on 18 November 2010. Such representation induced the Applicant into the Lease and consequently when the Applicant indicated there were defects to the premises which would prevent him from operating a restaurant on the premises, the Respondent agreed to rectify those defects.

(c) Irrespective of what the Lease said about the commencement date and first monthly payment, the Lease was varied orally between the parties so that the commencement date of the Lease was to be 7 May not 13 April (with a rent free start up period until 7 June) and the Applicant relies on the doctrine of promissory estoppel. Accordingly the first part of a clause 1 (c) of Annexure A to the Lease should read "The first monthly payment is due on 7 June 2010."

Respondent's Position

27. Mr R Maiolo provided an Affidavit dated 18 January 2011 and also was cross-examined in relation to that Affidavit and other matters.

28. In relation to the work on the Premises that he agreed to do, Mr Maiolo in clause 16 of his Affidavit states:

"The lease allowed for one month rent free and during that time I attended to any matter that was raised by the Applicant. These included:

(a) checking the ventilation system (annexed to the Affidavit is a certifying report);

(b) checking the air conditioning system (annexed to the Affidavit is a certifying report);

(c) checking the gas appliances (annexed to the Affidavit is a certifying report);

(d) checking the coffee machine and grinder (annexed to the Affidavit is a certifying report)."

29. Under cross-examination Mr Maiolo confirmed these works as the only works undertaken.

30. Mr Maiolo denied that he retained the key thus denying the Applicant exclusive possession. Mr Maiolo says that the Applicant insisted that he hold a key and he went to the Premises on a number of occasions at the request of the Applicant to take some deliveries.

31. Mr Maiolo denies having any conversation with the Applicant in agreeing to amend the Lease to change the commencing date of the lease and changing the rent-free period to end on 7 June 2010.

Discussion of the opposing positions

32. The Applicant's response to points raised by Mr Maiolo is set out in his Affidavit of the 14 February 2011. The Applicant says as follows:

(a) "I was very much concerned about the existing condition of the grease trap as it was leaking dirty oil and very unhygienic. I also cannot operate the restaurant without a proper grease trap due to the occupational health and safety regulation. Raffaele proposed me to keep all the used and dirty oil in one bucket and he will take it away. He tried to comfort me by saying words to me to the following effect:

Raffaele: Don't worry. I have been doing this for a long time.

I strongly opposed to his suggestion as per the above reasons. Finally Raffaele accepted and I returned the key. So that Raffaele can get on with the work.

Raffaele then replaced the new grease trap, new fly screen and also repaired the very outdated air conditioner, ventilation and performed other minor repairs. On 6 May 2010 he completed his repairs and returned the keys to me."

(b) Annexure "G" in Raffaele's Affidavit is not a checking report, but merely a cleaning report.

(c) Raffaele promised to have the work carried out so that I could open the restaurant on Wednesday, 20 April 2010. In anticipation of that I placed an order with Faraj Halal Meat for the delivery of a quantity of meat, ....

(d) When I arrived at the restaurant to take delivery of the meat, it was obvious there had been a delay of having the rectification work completed. The meat was placed in a freezer and was accessed when I was given back the keys on 6 May 2010."

33. In the written submissions of Mr Kennedy on behalf of the Applicant he calls into question the credibility of Mr Maiolo and makes reference to inconsistencies in Mr Maiolo's oral evidence whilst under cross examination.

34. I do not accept that there were inconsistencies in the evidence of Mr Maiolo and if I am wrong and there were, they do not in my opinion reflect unfavourably on the credibility of Mr Maiolo. On the other hand, there were significant inconsistencies in the evidence of the Applicant in particular in the Applicant's response to the statement by Mr Maiolo about the works being done on the premises. For example Annexure "G" to the Affidavit of Mr Maiolo (paragraph 26) is a letter from Commercial Combined Catering relating to the San Remo coffee machine. It states that the coffee machine was inspected on 15 May 2010 at 11:00 am and the words are "Checked: Steam pressure, water pressure, coffee extraction and hot water temperature. Coffee machine is in perfect working order". It is signed by a technician. It is not merely a cleaning report as alleged by the Applicant, it is as stated by Mr Maiolo to be a certifying report.
35. Further, Mr Maiolo is semi-retired and of an age greater than 65. Mr Maiolo vehemently denied that he volunteered to put the dirty oil in a bucket and take it away. Given the denial in the witness box and his general demeanour such a proposition put forward by the Applicant regarding the removal of the dirty oil in a bucket by Mr Maiolo is in my view highly improbable. I do not accept that Mr Maiolo made such a statement regarding the oil and consequently the non-working of the grease trap, as opposed to saying that it requires simply cleaning and replacing the filter.

36. Further as evident from the statements annexed to the Affidavit of Mr Maiolo (paragraph 26) the works undertaken were not substantial, they were checking that various appliances and the air conditioning was in working order. These works appear to be far less intrusive on any lessee seeking to start up a business in the Premises, as opposed to the general nature of the works alleged by the Applicant which he says prevented him from exclusive possession of the Premises.

37. The concession by a lessor for a start-up period or rent free is really a period of grace to allow a lessee to fit out the premises before commencing to trade. The works undertaken, or described by Mr Maiolo should not have interfered with the Applicant and the Applicant did not provide any evidence as to how and why these minor works interfered with his possession of the Premises.

38. From the Affidavit of Mr Maiolo dated 18 January 2011 and observing his demeanour in the witness box it was clear to me that he was a very cautious man and did nothing in relation to these Premises without consulting his lawyer. For example:

(a) At paragraph 15 Mr Maiolo says:

"I consulted with my solicitor, who directed me to give all copies of the keys to Mr Gani."

(b) Then a few lines below:

"I then called my solicitor, who called Mr Gani's solicitor."

This paragraph related to the dispute about who had the keys.

(c) Also, at paragraph 13:

"I retained the services of Mr Bruno Genolesi from Genolesi Parasyn Pty Limited for all of my legal advice and at no time have I ever agreed to make any changes to the lease agreement without first seeking legal advice."

39. In light of the evidence and cross-examination of both parties this Tribunal finds that the parties did not orally agree to change the commencing date, nor the date for first payment of rent in clause 1 (c) of Annexure A to the Lease. The Lease was not amended.

Promissory Estoppel

40. In Snell's Principles of Equity (28th Ed Sweet & Maxwell 1982, the elements necessary for promissory estoppel are described as follows (at P556)":

"Whereby his words or conduct one party to a transaction freely makes to the other an ambiguous promise or assurance which is intended to affect the legal relations between them (whether contractual or otherwise), and the other party acts upon it, altering his position to his detriment, the party making the promise or assurance will not be committed to act inconsistently with it."

41. Also from Meagher Gummow and Lehane Equity Doctrines and Remedies (2nd Ed Butterworths 1984) at p39 a more expansive description is as follows:

(a) Presently subsisting legal relations between the parties, which usually are in contract but may arise from statute or a fiduciary obligation ... so that if binding obligations did not exist at the time of assurances relied on, there can be no estoppel effective when the obligations did arise ...

(b) Words or conduct of one party unequivocally assuring the other party (despite the absence of fresh consideration) that he will not enforce his rights or will suspend them ...

(c) Action upon such assurance by the other party ... all of which lead to

(e) That party's disability being either permanent or curable by him only

upon sufficient prior notice of intention so to do or other conduct

making the intention plain". (2010 CCH Australia Limited NSW

Conveyancing Law and Practice para 24-440)

42. In the alternative, whilst no promissory estoppel may exist there could have been a collateral agreement between the parties to amend the commencement date and first rent payment date (paragraph 21).

Summary regarding amendment to the Lease

43. For the Applicant's contention that the Applicant was up to date and not in default of rent, then the date in clause 1(c) of Annexure A to the Lease would have to be altered from 13 May to 7 June 2010 as being the first date for payment of rent (extending of the rent free/start up period.) There is no documentary evidence to this effect, there is no evidence of an express agreement between the parties to this effect and there is no evidence of an implied agreement either.

44. The Applicant appears to have unilaterally decided that this is what clause 1(c) will read and consequently operated on that basis, but there is no evidence that this was ever agreed to by the Respondent and in fact the evidence is totally to the contrary.

45. As there was no promise express, implied or by conduct by the Respondent to varying or altering the rent free/start up period, there can be no promissory estoppel because there was no such promise. There was no such unambiguous conduct as required by Snell, nor words or conduct as required by Meagher, Gummow and Lehane.

46. The Respondent's solicitors clearly demanded rent in accordance with the terms of the Lease and wrote to the Applicant on at least two occasions asserting that the Applicant owed rent, consistent with the conduct of the Respondent. If the Applicant had believed that there was in effect such an agreement with the Respondent about the alteration to the Lease and consequently a later payment date for rent then the Applicant would have communicated his belief to the Respondent well prior to the letter from the Applicant's then solicitor, Karam C Ramrakha who wrote after the lock out raising this issue only after the Respondent had exercised its right to terminate the Lease.

47. There was no evidence of any collateral agreement by the parties to alter the rent free/start up period.

The Awning

48. Again from the submissions of Mr Kennedy on behalf of the Applicant:

"8. The evidence relied upon respectively by the lessee and the lessors as to the awning is likewise polarised. The lessee contends that:

(a) the existing awning was unsatisfactory;

(b) it was a pre-condition to him entering in a lease of the premises and the awning be replaced at the lessors' cost;

(c) he had no contact with the supplier of the awning;

(d) he advanced the lessors $4,500.00 towards the awning as the lessee was short of money (I believe it should read "the lessor was short of money";

(e) the lessors paid in full $7,300.00 cash on 27 April 2010;

(f) the supplier issued a tax invoice and receipt addressed to Mr R Maiolo.

49. The lessors contend that:

(a) the lessee ordered the awning and is responsible for paying for it; and

(b) the lessee was always short of money and that he wrote a cheque for $2,300.00 to the awning supplier.

50. The awning is clearly a landlord's fixture in the absence of clear evidence to the contrary (and) is the lessors' responsibility. The lessors have not evidenced any demand for repayment of the $2,300.00 which was allegedly loaned to the lessee. No claim is made for this amount in the accounting statement dated 18 April 2011. There is no evidence as to when the awning was ordered or when the application to Manly Council for consent was made."

51. The Lessors' Disclosure Statement states the following:

"The lessee has to pay for the finishes, fixtures, fittings, equipment and services to be provided by the lessor: yes.

If yes, to what extent: 100%."

52. Clause 7(a) of the lease states the following:

"The lessee shall keep the interior of the demised premises and all fixtures and fittings therein in a state of good repair having regard to the condition of the commencement of the lease fair, wear and tear and damage caused by fire, flood, storm, tempest excepted ..."

53. Whilst the awning is a fixture clause 7(a) of the Lease does not pass responsibility of the awning onto the Applicant as lessee, as the clause specifically refers to only the interior of the premises. In fact on reading of
54. the lease there is no mention of the exterior of the premises being the responsibility particularly of the lessee.

55. However, this dispute is not about the responsibility for a fixture attaching to the premises or what in fact certain clauses of the Lease mean with respect to replacing the awning. This dispute is about a purported loan of money by the Applicant to the Respondent . There may be a jurisdictional point (which was not raised in the hearing) as to whether such a dispute is a Retail Lease Dispute under Section 70 of the Retail Leases Act. I suspect not. However, in any event this Tribunal is not persuaded by the evidence from the Applicant both in Affidavit and in cross examination that the scenario he paints actually happened. This Tribunal finds that there was no loan made by the Applicant to the Respondent.

Summary of Findings

56. The terms of the Lease were unaltered. The Applicant was in breach of the Lease on 3 August 2010 for non-payment of rent. The Lease was validly terminated by the Respondent. The Respondent has accounted for the Bond money in lost rent and restoration of the premises. The Bond money is not to be returned to the Applicant but forfeited to the Respondent. There was no loan regarding payment for the awning.

Costs

57. Under Section 77A of the Retail Leases Act, 1994 the Tribunal may award costs in respect of proceedings in accordance with Section 88 of The Administrative Decisions Tribunal Act, 1997. Section 88 states that the parties must bear their own costs unless the Tribunal is satisfied that it is fair" to make an award of costs".

58. Having reviewed all the material and the matter as a whole, I do not propose to make any Order for payment of costs by any party and Order that the parties each bear their own costs.

Orders

1. The Applicant was in breach of the Lease on 3 August 2010.

2. The bond money is not to be returned to the Applicant but forfeited by the Respondent.

3. The parties are to pay their own costs of the proceedings.



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