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Yojocatering Pty Ltd v Mozart Holdings Pty Ltd[2018] QCAT 402

Yojocatering Pty Ltd v Mozart Holdings Pty Ltd[2018] QCAT 402

QUEENSLAND CIVIL AND ADMINISTRATIVE TRIBUNAL

CITATION:

Yojocatering Pty Ltd v Mozart Holdings Pty Ltd [2018] QCAT 402

PARTIES:

YOJOCATERING PTY LTD

(applicant)

v

MOZART HOLDINGS PTY LTD

(respondent)

APPLICATION NO/S:

RSL059-16

MATTER TYPE:

Retail shop leases matter

DELIVERED ON:

26 November 2018

HEARING DATE:

24 November 2017

HEARD AT:

Brisbane

DECISION OF:

Member Holzberger, Presiding
Member Kairl
Member McBryde

ORDERS:

Mozart Holdings Pty Ltd must pay Yojocatering Pty Ltd the sum of $30,000.00, by: 4:00pm on 14 January 2019.

CATCHWORDS:

LANDLORD AND TENANT – RETAIL AND COMMERCIAL TENANCIES LEGISLATION – OTHER MATTERS – where licence and option agreements were incorporated in a retail shop lease – where the disclosure requirements of the Retail Shop Leases Act 1994 were not complied with – where the applicant purported to terminate the lease as a consequence – validity of termination – recovery of deposit

Retail Shop Leases Act 1994 (Qld), s 3, s 5A, s 22(1), s 22(3), s 83(1), s 83(2)(c), s 103, Schedule Dictionary

Real Management Solutions Pty Ltd v Brisbane City Council [2016] QCAT 370

APPEARANCES & REPRESENTATION:

 

Applicant:

Self-represented by J Y Kim and J Setiati

Respondent:

Self-represented by D Heimann and R Heimann

REASONS FOR DECISION

  1. [1]
    The dispute in this matter arises from a commercial arrangement between Yojocatering Pty Ltd (‘Yojo’) and Mozart Holdings Pty Ltd (‘Mozart’) in relation to a business at that time known as ‘Shlix’, conducted by Mozart at premises at 364 Brunswick Street, Fortitude Valley (‘the premises’).
  2. [2]
    The exact nature of the arrangement is somewhat difficult to define and each parties’ perception of its terms substantially differ from the perception of the other party.
  3. [3]
    It is quite apparent from witness statements filed on behalf of Yojo that English is a second language for its Directors and shareholders, Joung Young Kim and Johana Setiati. Daniel Heimann, a Director of Mozart, required the assistance of an interpreter at the hearing.
  4. [4]
    Notwithstanding the communication difficulties, negotiations for the arrangement were conducted by those three parties and Daniel Heimann’s wife Gina Heimann at a series of five meetings between June 2014 and January 2015.[1]
  5. [5]
    In the case of Mr Kim and Ms Setiati, it is clear that those negotiations proceeded without assistance from legal advisors or interpreters. By the fourth meeting, according to Daniel Heimann, held at the Treasury Casino on 2 December 2014 ‘we had reached an understanding on all the key terms’.[2]
  6. [6]
    Mr Kim and Ms Setiati transferred $30,000.00 (‘the deposit’) to Mozart by three transfers of $10,000.00 on each of 3, 4 and 5 December 2014. Daniel Heimann says he then instructed Mozart’s solicitors to prepare a draft letter regarding the terms of the agreement they had reached.[3] That letter was referred to throughout the proceedings as the ‘Nagel’ letter.
  7. [7]
    The Nagel letter provided as follows:

We place on record the arrangements to be entered into with relation to our company’s gelato shop at 364 Brunswick Street, Fortitude Valley as follows:

a. You are to form a company;

b. All arrangements will be guaranteed by Johana and Joung individually;

c. Your company will pay rental to us for the use of the goodwill and plant and equipment of the business at $1000 per week (a ceiling of $50,000 per year) plus GST with rent to be paid weekly in advance on Monday of each week.

d. The arrangement will continue for a period of 3 years from the takeover date to 2 February 2015.

e. You will pay an amount to us of $30,000 at this time (‘deposit’) for the purposes set out below.

f. The business will be conducted by you under the name Selato Bar (not Shlix the present business name).

g. You will accept sub-lease of the premises (the head lease to expire on 31 July 2017) and observe the terms and conditions of the head lease and pay the rental payable under the head lease to our company; if the rent is not paid to our company by the due date for payment of the head lease (the 28th of each month) the company will be at liberty to terminate the sub-lease and the rental arrangement with respect to the goodwill and plant and equipment.

h. You will pay for stock in trade at the time of takeover (estimated to be around $5000).

i. You will have an option to purchase the business at $130,000 (with the deposit of $30,000 to be applied to this purchase and credited to you) during the term of the sub-lease but you will be required to exercise any option by notice in writing to us by 15 January 2017 and to have at this time the approval of the landlord to the assignment of the head lease to you.

j. You will be required to provide immediately after preparation a copy of BAS statement for each quarter.

k. You will be expected to improve the turnover of the business but in the event that the turnover (calculated on a monthly basis) falls below $300,000 per annum (excluding GST) then our company is at liberty to bring the arrangements to an end and retain the deposit of $30,000.

l. You will apply and obtain all licences necessary for the conduct of the business.

m. You will accept the plant and equipment “as is where is” and fully maintain all plant and equipment and where necessary replace or repair with original parts.             

n. You must insure for public risk of no less than $20 million for any one event.

o. In the event you cease to operate the business at any time during the three year period all arrangements as set out in this letter are brought to an end as a consequence of your default and you will forfeit the deposit of $30,000.

On your confirmation of these arrangements we will have our solicitors (John Nagel & Co) draw the necessary documentation which will consist of a sub-lease and a leasing arrangement with respect to the goodwill and plant and equipment.

  1. [8]
    Daniel Heimann says he met with Mr Kim and Ms Setiati on 11 January 2015 and ‘reviewed line by line the terms outlined in the Nagel letter’, and that they understood and agreed to those terms.[4]
  2. [9]
    It is uncontroversial that Mr Kim and Ms Setiati took over the business (or management of it, according to Daniel Heimann[5]) on 2 February 2015.
  3. [10]
    Mr Kim’s oral evidence is that on the evening of 2 February 2015, Daniel Heimann came to the premises with a sub-lease document which was executed by Daniel Heimann as Director of Mozart, for execution by them. He also gave them the address of a Justice of the Peace at Holland Park to witness their signatures. A witness was not required for Yojo’s execution of the lease, but it was required for the execution of the guarantee by Mr Kim and Ms Setiati at page 14 of the document.
  4. [11]
    Mr Kim and Ms Setiati attended on the Justice of the Peace the following day, but Yojo’s execution of the document is dated 2 February 2015 and the guarantee is undated. In any event, Mr Kim’s evidence is that no other document was provided to them at the time and they received no independent advice with regards to it.
  5. [12]
    By letter dated 12 February 2015, Mozart’s solicitors forwarded lease documents to Yojo for execution ‘after a period of at least seven (7) days has elapsed’.[6] The enclosures in that letter included the required retail shop lease disclosure statements.  Daniel Heimann’s evidence is that he was advised by his solicitor and that correspondence had been sent on 17 February 2015.
  6. [13]
    Mr Kim acknowledges receiving this correspondence and enclosures although he does not say when.
  7. [14]
    Also attached to the application is a copy of a letter from Mozart’s solicitors to Yojo dated 5 March 2015 which encloses ‘a signed copy of the sub-lease which incorporates the business licence and option for purchase’.[7] The document attached is the copy of the lease dated 2 February 2015 which was presented to Yojo on that date.
  8. [15]
    A meeting between Mr and Mrs Heimann and Mr Kim and Ms Setiati on 18 March 2015 convinced Mr Kim and Ms Setiati that they wanted no further dealings with Mozart and they sought legal advice. On 24 March 2015 Yojo’s solicitors, Corney & Lind, forwarded correspondence to Mozart’s solicitors pursuant to s 22(3) of the Retail Shop Leases Act 1994 (‘RSL Act’):
    1. (a)
      Purporting to terminate the sub-lease as a result of Mozart’s failure to provide a disclosure statement and draft lease at least seven days prior to execution of the sub-lease by Yojo; and
    2. (b)
      Demanding the return of the $30,000 paid by Yojo.[8]
  9. [16]
    Mozart instructed HWL Ebsworth Lawyers who responded to Corney & Lind on 30 April 2015 that:
    1. (a)
      They had ‘misunderstood the arrangements between our respective clients’;
    2. (b)
      The parties had entered into a management agreement and the $30,000 was paid under that agreement not ‘any’ sub-lease;
    3. (c)
      Yojo had repudiated the management agreement by abandoning the business and were also in breach including a failure to execute the sub-lease; and
    4. (d)
      Mozart accepted the repudiation and terminated the management agreement, forfeited the $30,000 deposit and reserved its rights.
  10. [17]
    Mozart’s response to Yojo’s application is simply that the $30,000 paid by Yojo to Mozart is ‘a security deposit in respect of the applicant’s management of the respondent’s business and upon the election by the applicant to acquire that business, as a deposit towards the acquisition price of the business’. It has, according to Mozart, no connection to the leasing of the premises and accordingly QCAT has no jurisdiction.[9]
  11. [18]
    The response relevantly provides:[10]
  1. (c)
    On 2 February 2015, being a date after the parties had entered into the management agreement, the parties signed a sub-lease. The sub-lease was never acted upon as binding between the parties (e.g. no tax invoices for rental were issued by the respondent to the applicant) and was subsumed by correspondence and enclosures issued to the applicant on 12 February 2015; and
  1. (d)
    On 12 February 2015 correspondence was forwarded by the solicitors for the respondent to the applicant enclosing an unsigned copy of the sub-lease and relevant disclosure statement, financial advise (sic) report and legal advice report and other documents consistent with entering into a subsequent sub-lease of the premises at some time in the future (e.g. upon exercising the right to acquire the business).
  1. [19]
    The response further stated:[11]
  1. As at the date that the applicant abandoned the business, the applicant had not exercised their option to acquire the business, and as such, any correspondence from Nagel & Co (solicitors for the respondent) to the applicant enclosing retail lease documentation can only be viewed as preparatory to the exercise of that option to acquire the business and obtain an assignment of the lease/sub-lease in the applicant’s own name.
  1. [20]
    In his witness statement, Daniel Heimann does not mention the execution of the sub-lease of 2 February 2015 or the events surrounding it.
  2. [21]
    The statement in the response that no tax invoices for rent were issued by Mozart is contradicted by Daniel Heimann’s evidence. Tax invoices exhibited to the statement show that rent was included, although it was charged monthly rather than weekly.[12]
  3. [22]
    The sub-lease was executed on 2 February 2015 at Daniel Heimann’s insistence. Yojo took possession of the premises and paid rental from that date. The sub-lease is the only signed document evidencing any agreement between the parties other than the Nagel letter.
  4. [23]
    To contend, as Mozart does, that the forwarding of the correspondence and enclosed sub-lease documents by John Nagel & Co on 12 February 2015 ‘subsumed’ the sub-lease dated 2 February 2015 and at the same time ‘can only be viewed as preparatory to the exercise of the option’ is nonsensical. Both the Nagel letter and the sublease clearly contemplate the sublease and licence commencing on 2 February 2015 regardless of whether the option is exercised or not at some future time.
  5. [24]
    The leases enclosed in the correspondence from John Nagel dated 12 February 2015 provide that the commencement date of the lease is 2 February 2015, and in the disclosure statements 3 February 2015. The sub-lease appears to us to be identical to the sub-lease executed by the parties on 2 February 2015.
  6. [25]
    We find that the sub-lease executed by the parties on 2 February 2015 was, at the time of its execution until Yojo terminated it, a binding sub-lease.
  7. [26]
    We find that the sub-lease is a retail shop lease.[13] The premises were used ‘wholly or predominantly for the carrying on of a retail business described in Schedule 1 of the Retail Shop Leases Regulation 2016’.
  8. [27]
    We find that Yojo validly terminated the sub-lease pursuant to s 22(3) of the RSL Act on 24 March 2015.
  9. [28]
    The RSL Act gives the Tribunal jurisdiction to hear ‘retail tenancy disputes’ subject to certain exceptions which do not apply here.[14]
  10. [29]
    Mozart says that the agreement to which the deposit of $30,000.00 applies is a separate agreement which pre-dates the sub-lease. It refers to that agreement throughout as the ‘management agreement’, the terms of which were summarised in the Nagel letter. Yojo’s claim for return of the $30,000.00 is not, Mozart says, a retail tenancy dispute and therefore QCAT has no jurisdiction to hear it.
  11. [30]
    A retail tenancy dispute is defined in the Schedule Dictionary to the RSL Act:

retail tenancy dispute means any dispute under or about a retail shop lease, or about the use or occupation of a leased shop under a retail shop lease, regardless of when the lease was entered into.

  1. [31]
    The object of the RSL Act is ‘to promote efficiency and equity in the conduct of certain retail businesses in Queensland’.[15]
  2. [32]
    The RSL Act sets out a broad range of orders that the Tribunal may make and requires that the Tribunal’s order must be ‘just to resolve a retail tenancy dispute’.[16]
  3. [33]
    In Real Management Solutions Pty Ltd v Brisbane City Council,[17] the Tribunal said:[18]

The definition of a retail tenancy dispute as meaning “any dispute under or about a retail shop lease dispute…” should be given its plain meaning according to the text, the context in which it is found and the object of the [RSL Act]. A retail tenancy dispute is not confined to a dispute under a lease. The dispute may be one “about” a lease. “About” given its ordinary definition means “on the subject of” or “concerning”, “with reference to” or “with regard to”.

  1. [34]
    The Tribunal went on to say that the connection between the dispute and the lease must ‘necessarily be a close one’.[19]
  2. [35]
    The sub-lease is the only document executed by the parties which purports to record the terms of their agreement or agreements and is consistent with the terms of the Nagel letter.
  3. [36]
    Clause 5 of the sub-lease provides ‘the additional clauses (if any) set out in the second appendix apply to this sub-lease’.
  4. [37]
    The second appendix to the sub-lease contains 13 clauses. Relevantly these provide:
    1. (a)
      Mozart grants Yojo a licence during the term of the sub-lease to use the goodwill, plant and equipment of the business for a licence fee of $1000 per week;[20]
    2. (b)
      The licence is for a period of 3 years commencing on 2 February 2015 or until termination or expiration of the head lease;[21]
    3. (c)
      Yojo is to pay a deposit of $30,000 to be applied to the purposes hereafter set out;[22]
    4. (d)
      Mozart grants Yojo an option to purchase the business for $130,000 on specified terms including that Yojo have ‘approval in writing of the landlord to the assignment of the head lease’ to Yojo;[23]
    5. (e)
      If the turnover of the business falls below $300,000 per annum (excluding GST) Mozart can terminate the licence and retain ‘as pre-estimated damages the deposit of $30,000’;[24]
    6. (f)
      If Yojo ceases to operate the business Mozart may terminate the licence and retain the deposit;[25] and
    7. (g)
      If the licence is terminated for any reason, the sub-lease terminates at the same time.[26]
  5. [38]
    In our view, there are a number of difficulties for Mozart denying that any of the clauses contained in the second appendix are not provisions arising under or about a retail shop lease, or about the use or occupation of a leased shop.
  6. [39]
    The second appendix is contained in a document titled ‘Lease/Sub-lease’ and its terms are expressed somewhat clumsily to ‘apply to the sub-lease’. If the provisions relating to the licence and option were intended to operate independently of the sub-lease it is a most unfortunate decision to incorporate them in the lease document rather than a separate one.
  7. [40]
    The licence and management provisions in the second appendix clearly relate to the occupation of a leased shop. The licence and the sub-lease are, at the very least, closely connected if not inextricably linked. The licenced is expressed to run ‘during the term of the sub-lease’.[27] Termination of the licence automatically terminates the sub-lease.
  8. [41]
    The deposit of $30,000.00 is not paid solely in relation to the option given in the second appendix. If the turnover falls below $300,000.00 Mozart is permitted to terminate the licence and it follows the sub-lease, and at least on according to the second appendix, retain the deposit as a pre-estimate of damage.
  9. [42]
    It seems contrary to the object of the RSL Act and the low cost resolution of tenancy disputes to say that a dispute relating to a provision contained in a retail shop lease may not be a retail tenancy dispute because it relates in whole or in part to a related transaction.
  10. [43]
    Leases routinely include provisions which could, and possibly should be, incorporated in separate agreements, for example options or rights of first refusal for the purchase of the premises by a tenant, licences to use other areas such storage rooms or car parks, fit out or other tenancy incentives. That does not mean that those provisions should be excised from the lease, or that a dispute relating to them is not a retail tenancy dispute. Those matters may well have been critical to the party’s decision to enter the lease in the first place.
  11. [44]
    Section 22(4) of the RSL Act permits the Tribunal to award reasonable compensation for the loss which flows from non-compliance with disclosure requirements. Section 83(2)(c) provides that the Tribunal may make orders requiring a party to a dispute to repay an amount to a specified person.
  12. [45]
    Having found that Yojo validly terminated the lease, it is difficult to see any justification for allowing Mozart to retain the deposit of $30,000.00. The second appendix specifies three circumstances which allow Mozart to do so. If Yojo exercises its option the deposit is applied to the purchase price. The deposit is pre-estimated damages if Mozart terminates the licence and consequently the sublease as a result of failure to achieve the specified turnover or if Yojo ceases to operate the business during the term of the licence. None of those has occurred.
  13. [46]
    It is not alleged that Yojo exercised the option.
  14. [47]
    It is not alleged by Mozart that during the period of occupation of the premises turnover fell below $300,000 per annum, or that Mozart purported to terminate the licence and sub-lease for that reason.
  15. [48]
    Yojo did not cease to operate the business during the term of the licence. It did so after termination of the sublease. The licence is expressed to operate during the term of the sub-lease.[28] Having found that Yojo’s termination of the sub-lease was valid, the licence and sub-lease is at an end and Mozart’s right to terminate it and retain the deposit is also at an end.
  16. [49]
    Mozart did not claim that its failure to comply with the disclosure requirements ought reasonably be excused pursuant to Section 22(5) of the RSL Act. It is our view that it could not. This was not a technical breach by Mozart. It acted with complete disregard to its obligations under the act, securing the execution of a complex commercial document without any opportunity to properly understand its contents and implications by two inexperienced people.
  17. [50]
    Yojo’s claim is not restricted to the deposit of $30,000.00. It also seeks to claim in respect of stock, ‘financial loss from operating a non-profitable business’, loss of opportunity, the cost of proceedings in QCAT and pain and suffering.[29] No evidence is called in support of those claims and we find that Yojo accordingly has failed to discharge its onus. Accordingly compensation is assessed at $30,000.
  18. [51]
    We order that Mozart pay to Yojo the sum of $30,000.00 by 14 January 2019.

Footnotes

[1]Affidavit of Daniel Heimann filed 11 April 2017, para [6] Ex D.

[2]Ibid, para [10].

[3]Ibid, para [14]–[15].

[4]Affidavit of Daniel Heimann filed 11 April 2017, para [11].

[5]Ibid para [22].

[6]Letter John Nagel & Co to Yojocatering Pty Ltd dated 12 February 2015 – Annexure C to the application.

[7]Application Annexure C.

[8]Affidavit of Daniel Heimann filed 11 April 2017, Exhibit ‘I’.

[9]Response filed 11 July 2016, Annexure A – para [1].

[10]Ibid Annexure A – para [11].

[11]Ibid para [13].

[12]Affidavit of Daniel Heimann filed 11 April 2017, Exhibit ‘H’.

[13]Retail Shop Leases Act 1994 (Qld) (RSL Act), s 5A.

[14]RSL Act, s 103.

[15]RSL Act, s 3.

[16]RSL Act, s 83(1).

[17][2016] QCAT 370.

[18]Ibid para [39].

[19]Real Management Solutions Pty Ltd v Brisbane City Council [2016] QCAT 370, para [39].

[20]Sub-lease, Second Appendix, Clause 2.

[21]Ibid Clause 3.

[22]Ibid Clause 4.

[23]Ibid Clause 7.

[24]Ibid Clause 19.

[25]Ibid Clause 10.

[26]Ibid Clause 11.

[27]Sub-lease, Second Appendix, Clause 2.

[28]Ibid.

[29]Statement of Joung Young Kim filed 27 January 2017, paras [4] and [6].

Close

Editorial Notes

  • Published Case Name:

    Yojocatering Pty Ltd v Mozart Holdings Pty Ltd

  • Shortened Case Name:

    Yojocatering Pty Ltd v Mozart Holdings Pty Ltd

  • MNC:

    [2018] QCAT 402

  • Court:

    QCAT

  • Judge(s):

    Member Holzberger, Member Kairl, Member McBryde

  • Date:

    26 Nov 2018

Appeal Status

Please note, appeal data is presently unavailable for this judgment. This judgment may have been the subject of an appeal.

Cases Cited

Case NameFull CitationFrequency
Real Management Solutions Pty. Ltd. v Brisbane City Council [2016] QCAT 370
4 citations
Jump To
Cite 1 - [2016] QCAT 370
Cite 2 - [2016] QCAT 370
Cite 3 - [2016] QCAT 370
Cite 4 - [2016] QCAT 370

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