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Fu Manchu Dining Pty Ltd v SP (Qld) Pty Ltd QCAT 394
QUEENSLAND CIVIL AND ADMINISTRATIVE TRIBUNAL
Fu Manchu Dining Pty Ltd v SP (Qld) Pty Ltd  QCAT 394
FU MANCHU DINING PTY LTD as trustee for the fu manchu chevron trust trading as fu manchu oriental kitchen
SP (Qld) Pty Ltd
Retail shop leases matter
23 July 2019
5 June 2019
ORDERS & DIRECTONS:
The Tribunal orders that:
The Tribunal directs that:
LANDLORD AND TENANT – RETAIL AND COMMERCIAL TENANCIES LEGISLATION – OTHER MATTERS – where tenant seeks compensation from landlord for costs incurred on account of landlord’s defaults – whether damage suffered – whether landlord liable
LANDLORD AND TENANT – RENT – BREACH OF COVENANT TO PAY – ACTIONS TO RECOVER RENT OR DAMAGES – ACTION TO RECOVER RENT – where landlord seeks order for payment of arrears of rent and outgoings – whether tribunal has jurisdiction
Retail Shop Leases Act 1994 (Qld), s 103
REASONS FOR DECISION
- The applicant (‘Fu Manchu’) operates a restaurant in a building at 44 Thomas Drive, Chevron Island owned by the respondent (‘SP (Qld)’).
- The building has had one or more other tenants from time to time. Behind the building is a gravel car park, which is on part of the land owned by SP (Qld). This is referred to as the common property car park in the written material before the Tribunal.
- Fu Manchu contends that there has been a lot of dust blowing into the restaurant from the car park. In this proceeding it seeks compensation for dust-related cleaning costs of around $43,000 as at late November 2018, plus a further unquantified amount for the period since. SP (Qld) denies liability.
- Fu Manchu also seeks reimbursement of some $7,000 it paid to build what has been called a stairwell landing (or podium): a timber platform at the rear of the building over which pedestrians can walk between a set of stairs and the car park. Fu Manchu says this landing was needed to mitigate a trip hazard. SP (Qld) denies liability, contending that the landing was built by Fu Manchu to house its gas bottles.
- SP (Qld) counter-claims for arrears of rent and outgoings in the order of $71,000.
- The Tribunal’s jurisdiction derives from the Retail Shop Leases Act 1994 (Qld) (‘Retail Shop Leases Act’).
- The matter was listed for a two-day hearing on 4 and 5 June 2019. However, on the first day, Fu Manchu sought a rescheduling of the hearing to a future date, on the basis that it had only recently become aware of additional material filed by SP (Qld) several months earlier. Mr Michael Yarwood, representing Fu Manchu, said that the email from SP (Qld)’s solicitor attempting to serve the material must have bounced because the size of the attachment was too large for the server used by Mr Yarwood. We declined to reschedule the hearing to a future date, but postponed the start of the hearing to the following morning to allow Fu Manchu more time to absorb the material. A further adjournment application was made at the start of the hearing on 5 June 2019, on the same basis, but we refused this for reasons given orally at the time. The matter then proceeded to hearing, with the parties then making their submissions in writing on 10 and 12 June 2019.
The lease and the commencement of trading
- The lease commenced on 1 November 2015. It is undisputed that Fu Manchu undertook extensive renovations and fitout before the restaurant commenced trading at the end of July 2016. In his opening statement, Mr Yarwood for Fu Manchu acknowledged that Fu Manchu had fallen behind in rent, at times, even during the renovation and fitout stage.
- The witnesses for Fu Manchu were Troy Hamilton and Mr Yarwood, and both were cross-examined. Mr Hamilton is a director of the company. He is also the restaurant manager. Mr Yarwood has at various times been a director and a secretary of Fu Manchu. Mr Yarwood says that he has at all times been a significant investor in the restaurant business.
- The sole director of SP (Qld) was Mr Emmanuel Cassimatis until he died on 2 July 2017. The witnesses for the company were John Marendy, Michael Parisi and Marilyn Edwards. Mr Marendy is one of the executors of Mr Cassimatis’s estate, and he is now one of the directors of SP (Qld). Mr Parisi is a real estate agent who was the managing agent for the building. Ms Edwards is a solicitor with Kerr Lawyers. None of these witnesses was required for cross-examination.
The claims pressed by the parties
- Some aspects of Fu Manchu’s claims and SP (Qld)’s counter-application were ultimately abandoned at the hearing. These included, on Fu Manchu’s side, a claim for damages for unconscionable conduct, and on SP (Qld)’s side, a claim for possession of the premises and claims against the guarantors under the lease.
- The surviving claims are, on Fu Manchu’s side, for compensation for dust-related cleaning and reimbursement of the cost of constructing the stairwell landing, and on SP (Qld)’s side, arrears of rent and outgoings.
- Fu Manchu says in its submissions filed on 10 June 2019 that SP (Qld) ‘withdrew its amended counterclaim and advised it was not proceeding against the guarantors by way of counterclaim’. Only the second part of that statement is correct. There was no advice from SP (Qld), of which we are aware, that it was withdrawing its amended counterclaim except to the extent that it was no longer seeking possession of the premises or claiming against the guarantors. Similarly, the assertion by Fu Manchu in its submissions filed on 12 June 2019 that ‘… the respondent discontinued its claim for alleged arrears …’ is without any foundation known to us.
- It is desirable to mention the amounts sought from time to time by the parties, so that we can determine the extent of the claims we are dealing with.
- In relation to dust-related cleaning costs:
- (a)Fu Manchu attached to its notice of dispute (filed in May 2018) a Notice to Remedy Breach of Covenant dated 28 March 2018 asserting a failure by SP (Qld) to maintain the common property since 17 March 2016 such that ‘excessive dirt, debris and dust’ was blown into Fu Manchu’s premises causing additional expenses of $300 per week in additional cleaning costs for wages and materials, and requiring payment or a rebate of $31,800 (calculated at 106 weeks x $300 per week) to reimburse Fu Manchu for this expense;
- (b)there are a number of later notices to similar effect in the material, such as the one dated 29 November 2018 quantifying the additional costs at $420 per week and seeking a payment or a rebate of $43,402.47;
- (c)in its Amended Dispute Issues and Declarations Sought document filed on
7 December 2018, Fu Manchu sought damages of $43,402.47 for dust-related cleaning costs; and
- (d)in its submissions filed on 10 June 2019, Fu Manchu seeks, in addition to the figure of $43,402.47, further damages for the period 29 November 2018 to 10 June 2019 in a figure not yet quantified but to be calculated on the basis of 1.5 hours of additional cleaning per day.
- In relation to the cost of constructing the stairwell landing, Fu Manchu in its Amended Dispute Issues & Declarations Sought document filed on 7 December 2018 advised that is seeks damages of $7,012.50. In its submissions filed on 10 June 2019, Fu Manchu rounded the figure to $7,000.
- Fu Manchu contends that it should be compensated for its dust-related cleaning costs and the construction of the stairwell landing by way of an abatement of rent.
- In relation to the rent and outgoings arrears claimed by SP (Qld):
- (a)in the material there are numerous and quite frequent Notices to Remedy Breach of Covenant issued by SP (Qld) relating to arrears of rent and outgoings;
- (b)the most recent of these notices is dated 3 June 2019, and it asserts a claim to $71,289.05 within seven days;
- (c)the amount of rent and outgoings arrears sought by SP (Qld) in its counter-application filed in August 2018 was $51,084.41 as per its Notice to Remedy Breach of Covenant dated 20 August 2018;
- (d)by the time of SP (Qld)’s amended counter-application filed in January 2019, the figure had climbed to $64,600.05; and
- (e)by the time of SP (Qld)’s submissions filed on 10 June 2019, it had risen to $71,289.05.
- Overall, it can be seen that Fu Manchu has pressed to have the Tribunal treat and resolve the dust-related cleaning costs dispute as a rolling one, taking into account developments up to the time of hearing. The same approach has been taken by SP (Qld) in relation to arrears of rent and outgoings. We see no reason to depart from the approach of treating and resolving those aspects of the dispute in this manner.
Dust-related cleaning costs
- Fu Manchu says the dust problem became apparent only after it started trading: before then it was not evident because Fu Manchu was carrying out its own renovation and fit out, and these hid the problem.
- Mr Yarwood, in an email to lawyers for SP (Qld) dated 28 December 2017, said that the state of the common property was necessitating up to an extra five hours of cleaning per day for Fu Manchu’s kitchen staff.
- Mr Yarwood has prepared a spreadsheet setting out figures for staff costs attributed to the additional cleaning. The spreadsheet shows figures from 14 September 2016 to 28 November 2018, totalling $43,402.47. The additional hours vary at times, but are mostly 1.5 hours per trading day. The spreadsheet shows the additional hours being performed by various staff members identified by their first name. No additional costs are shown for the period 16 April 2018 to 31 May 2018. Fu Manchu says that this was because there was a period when the influx of dust temporarily stopped as the result of SP (Qld) having a sealing product, Flexi-C-Ment gravel lock, applied to the car park.
- In cross-examination, Mr Yarwood said that the reprieve lasted until November 2018, but he later revised this evidence when it was pointed out to him that the spreadsheet shows resumed additional cleaning costs from June 2018.
- The evidence of both Mr Yarwood and Mr Hamilton is that there was a significant dust problem. It is undisputed that Mr Yarwood pleaded guilty in 2011 to fraud and uttering. He was imprisoned and later struck off the roll of solicitors for this conduct. This history of dishonesty is something we take into account in assessing the credibility of his evidence. However, Mr Hamilton also says there was a dust problem, and there is no suggestion that he has a history of dishonesty.
- Nonetheless, it is relevant to take into account that both witnesses have a financial interest in their account of the dust problem being accepted.
- It does seem a surprising proposition that a gravel car park could generate such a dust problem. Mr Parisi said in his affidavit that prior occupants of the building, who ran businesses including a bakery and a chicken outlet, had never complained of dust. We have no reason to doubt this evidence, and we accept it. We consider this evidence to be of some significance, though it is not determinative: there is always the possibility that the surface degraded substantially over time.
- Fu Manchu submits that the sealing of the car park by SP (Qld) with Flexi-C-Ment in 2018 was an admission of a dust problem. SP (Qld) says that the sealing was done to address potholes caused by heavy rain.
- Mr Faulkner for SP (Qld) draws our attention to a letter dated 8 February 2017 sent by Mr Yarwood to solicitors for SP (Qld). The letter is four pages in length. It appears to have been triggered by the solicitors having sent copies of notices relating to rent arrears. Mr Yarwood began the letter by saying that ‘… we … wish to clearly enunciate certain frustrations, which have in turn impacted on the viability of the operation …’. The letter went on to discuss various matters such as a delay in SP (Qld) granting approval for extended trading hours, and an objection by SP (Qld) to Fu Manchu supplying food to a nearby café. Under the heading ‘Rear Carpark’, Mr Yarwood devoted two paragraphs to the issue of another tenant storing derelict, unregistered cars in the carpark. There was no mention of a dust problem. This was at a time when, according to Mr Yarwood’s spreadsheet, the dust problem had been creating hundreds of dollars per week in additional cleaning costs for a long time.
- Fu Manchu’s material contains a file copy of a letter from Mr Yarwood on behalf of Fu Manchu to Mr Cassimatis dated 29 May 2017. The letter is a page and a half in length. Mr Yarwood started by saying that Fu Manchu had remedied the rent arrears in full. He went on to mention that Fu Manchu hoped in coming weeks to commence work on garden beds using railway sleepers. (It is apparent from other material that the proposed garden beds would have been in the rear car park). Mr Yarwood also talked about a Council decision to approve extended trading hours, and briefly discussed Fu Manchu’s marketing plans. Mr Yarwood went on to propose that the addition of a rear dining deck would be a valuable addition to the restaurant enterprise. He suggested that discussions take place on a shared funding arrangement so that the proposed deck could be ready by springtime.
- It is noteworthy that there was no mention of a dust problem, despite the discussion of a proposed dining deck facing the car park.
- Mr Faulkner submits that the first mention of a dust problem in the documents is in a letter dated 16 September 2017 from Mr Yarwood to Raine and Horne, which is Mr Parisi’s firm. The letter was on MY Management letterhead. In the letter, Mr Yarwood described that firm as consultant manager to the Fu Manchu restaurant business, and he described himself as having a keen commercial interest as a shareholder and funder.
- The letter noted the death of Mr Cassimatis and went on to discuss two main issues. One related to movement in a wall. The other related to dust from the car park:
… the dust issue from the rear carpark. The carpark is in a poor state, and frequently generated dust is trespassing into the kitchen area creating a health nuisance and jeopardizing operations. It was generally raised between Mr. Hamilton and Mr. [Cassimatis] in the weeks before his sudden death. It will be necessary for us to take immediate remediating works … [and] we seek from you permission to carry out these necessary and critical works, and deduct same from rental owing … Certainly this was an ongoing discussion with Mr. Cassimatis …
- The permission sought was not granted.
- In cross-examination, Mr Yarwood indicated that he too, and not just Mr Hamilton, had discussed the dust issue with Mr Cassimatis.
- It is suggested by SP (Qld), in effect, that the letter of 16 September 2017 represented the start of an attempt by Fu Manchu to take advantage of the death of Mr Cassimatis by inventing a problem, said to have been discussed with Mr Cassimatis, which could yield an offset to Fu Manchu’s rent obligations.
- Anticipating such a submission, Mr Yarwood in his opening statement at the hearing said that Fu Manchu was not in arrears of rent at the time of Mr Cassimatis’s death. Mr Faulkner challenges that assertion, pointing to a balance owing of $19,910 shown on the Rental Statement produced by SP (Qld) as at 2 July 2017. Sums exceeding $10,500 were paid by Fu Manchu in mid-July 2017, but as at 16 September 2017 the balance owing shown in the Rental Statement was $28,487.
- Further, we note that the idea of deducting expenditure relating to the alleged dust problem from Fu Manchu’s rent liability was expressly canvassed in the letter.
- Mr Faulkner submits that we should take into account that Fu Manchu has not provided any photographs illustrating the alleged dust problem, despite Mr Yarwood’s assertion at the hearing that the green and black surfaces in the restaurant ‘don’t hide’ the dust. Nor has Fu Manchu provided evidence from any of the staff said to have been engaged in the additional cleaning. We agree that the lack of evidence of a somewhat more independent character than the evidence of Mr Yarwood and Mr Hamilton is indeed noteworthy.
- Considering the evidence as a whole, we do not regard the sealing with Flexi-C-Ment by SP (Qld) in April 2018 as an admission of a dust problem. The explanation given by SP (Qld) is credible, and we accept it.
- We consider it possible that from time to time some dust drifted in from the car park. However, in light of the matters we have outlined above, we regard the notion of a serious dust problem as alleged by Fu Manchu, generating substantial additional cleaning costs, to be highly improbable. We do not accept the evidence of Mr Yarwood and Mr Hamilton about the dust issue. If there was a problem on the scale alleged, it is highly likely that it would have been raised in the earlier correspondence, and that it would have been adequately evidenced in this proceeding. We accept SP (Qld)’s submission that the alleged dust problem was a contrivance thought up by Fu Manchu in an effort to reduce its rent liability.
- In these circumstances we do not consider it fruitful to embark upon a discussion of the various things which Mr Yarwood and Mr Hamilton say that Mr Cassimatis said about the car park and the alleged dust problem. Suffice it to say that there is no corroboration for this evidence. The evidence, coming entirely from Fu Manchu’s witnesses, does not further bolster Fu Manchu’s case.
- We do not accept as reliable the hours, dollar amounts or other particulars shown in the spreadsheet put forward by Mr Yarwood. We find that the additional cleaning costs, if there were any, have been grossly exaggerated.
- In light of this finding, it is not necessary for us to discuss the submissions made by the parties about whether SP (Qld) would be liable for additional cleaning costs by virtue of any terms of the lease or provisions of the Retail Shop Leases Act, or about whether any liability could be offset against Fu Manchu’s rent liability. Even if we reached conclusions on these legal issues, we would not be in a position to award damages or quantify any offset in the absence of reliable evidence of the true amount of the additional costs.
- Accordingly, we award no damages and order no offset or abatement in relation to dust-related cleaning costs.
The cost of the stairwell landing
- Mr Yarwood says that in April 2017 Fu Manchu had the landing constructed at the cost of $7,012.50 because of a tripping hazard at that location particularly in rainy conditions. He said he had told Mr Cassimatis about this hazard in preceding months but no action was taken by SP (Qld). Mr Yarwood says that because of the public health and safety risk, Fu Manchu arranged for the construction of the landing.
- Mr Hamilton also says that he had raised the matter with Mr Parisi. In cross-examination, he said that Mr Cassimatis had agreed to the construction taking place.
- There is no documentary evidence of SP (Qld) agreeing to the construction or accepting responsibility to meet the cost. It will be apparent from the discussion above that we do not regard Fu Manchu’s witnesses as reliable.
- We are not satisfied that there was a genuine safety problem that required the construction of the landing, or that there was any undertaking by SP (Qld) to meet the cost of construction.
- We might add that, even if it were accepted that there was a safety issue, that it was raised with Mr Cassimatis and Mr Parisi, that no action was taken by SP (Qld), and that Mr Cassimatis gave approval for the construction, Fu Manchu has not articulated any legal basis upon which it would be entitled to recover the cost of construction from SP (Qld).
- Accordingly, we do not award damages, or allow a set off or abatement, in respect of the cost of constructing the stairwell landing.
Rent and outgoings arrears
- The lease requires Fu Manchu to pay rent and outgoings monthly.
- Fu Manchu, in its Amended Dispute Issues & Declarations Sought document filed on 7 December 2018, said it ‘disputes the quantum of rental arrears claimed …’. However, it has not explained why, or put forward evidence to show that it has paid the rent and outgoings which SP (Qld) says have not been paid.
- We have no reason to doubt Mr Parisi’s evidence or the accuracy of the Rental Statements that he has provided. We find that as at 3 June 2019 Fu Manchu owed $71,289.05 in overdue rent and outgoings under the lease.
- In closing submissions, Mr Faulkner addressed the issue of whether the Tribunal has jurisdiction to make an order for the payment of arrears of rent and outgoings. He submitted that the Tribunal does have jurisdiction. Mr Yarwood has not responded to these arguments.
- We note that section 103(1) of the Retail Shop Leases Act gives the Tribunal jurisdiction to hear retail tenancy disputes. The matter before the Tribunal is such a dispute because it is a dispute under a retail shop lease as defined. However, section 103 of the Retail Shop Leases Act also excludes certain types of disputes from the Tribunal’s jurisdiction. Relevantly:
103 QCAT’s jurisdiction
-  QCAT has jurisdiction to hear retail tenancy disputes, other than a retail tenancy dispute—
- [b] about—
- [i] the amount of rent payable under a retail shop lease; or
- [ii] the amount of a lessor’s outgoings under a retail shop lease; or
-  However, QCAT has jurisdiction to hear a retail tenancy dispute about—
- [a] the procedure for the determination of rent payable under a retail shop lease, but not the actual amount of the rent; or
- [b] the basis on which the lessor’s outgoings are payable by, and the procedure for charging the lessor’s outgoings to, a lessee under a retail shop lease, but not the actual amount of the outgoings; …
- At first glance, the exclusions could be read as removing jurisdiction in this case, on the basis that there is a dispute about the amount of rent and outgoings payable under the lease which is not merely about the procedure for determining those amounts.
- However, an examination of the legislative history suggests otherwise. Prior to amendments made by the Retail Shop Leases Amendment Act 2016 (Qld), section 103(1) included an exclusion for ‘arrears of rent under a retail shop lease’. That exclusion was modified in section 103(2) by a provision that gave jurisdiction for a dispute about ‘arrears of rent payable under a retail shop lease if the dispute is also about the payment of compensation by the lessor to the lessee under the lease’.
- The fact that in the previous version of the Act ‘arrears of rent’ was distinguished from the concept of ‘the amount of rent payable’ indicates that Parliament in the latter term was referring to a concept other than arrears. Perhaps, for example, ‘the amount of rent payable’ would refer to the amount of the monthly rental liability.
- The 2016 amending Act removed the exclusion relating to arrears of rent in section 103(1) and the associated modification of that exclusion in section 103(2). Parliament must therefore have intended the Tribunal to have jurisdiction in relation to arrears of rent disputes. In light of the legislative history, we interpret ‘the amount of rent payable’ in the current section 103(1)(b)(i) as not referring to arrears. We adopt the same approach in relation to ‘the amount of a lessor’s outgoings’ in the current section 103(1)(b)(ii). Accordingly, we consider that the Tribunal has jurisdiction in relation to the question of rent arrears and outgoings arrears.
- As a small portion of the arrears in question in this case may predate the amendments discussed above, which took effect on 25 November 2016, we consider that the current law nonetheless applies.
- Accordingly, we will order that Fu Manchu pay the arrears of rent and outgoings to SP (Qld). As the funds are overdue, and Fu Manchu has been well aware of its obligations, we will allow only seven days for payment.
- Subject to some exceptions, each party in a Tribunal proceeding must bear its own costs.
- Fu Manchu submits that there should be no order for costs, on the basis that costs are not ordinarily awarded in Tribunal proceedings.
- SP (Qld) indicates in its closing submissions that it wishes to be heard on the issue of costs. We take that to mean that Mr Faulkner contends that he cannot make proper submissions on costs until the outcome of the dispute is known.
- In cases where a party intends to seek costs, it is appropriate to allow parties the opportunity to know the Tribunal’s findings, orders and reasons before expecting them to make detailed submissions on costs. Accordingly, given that it appears that SP (Qld) may wish to pursue an application for costs, we will allow time for the filing of submissions before we make a decision about costs.
- Fu Manchu has not established its claims against SP (Qld), and so we will dismiss those claims.
- We will order that Fu Manchu pay the arrears of rent and outgoings, as at 3 June 2019, to SP (Qld) within seven days. We will also make directions about any costs application.
 At .
 At .
 Attached to the submissions filed by SP (Qld) on 10 June 2019.
 Lease clauses 3.05 and 6.14.
 See definition of ‘retail tenancy dispute’ in the Schedule to the Retail Shop Leases Act; the definition of ‘retail shop lease’ in s 5A of the Retail Shop Leases Act; the definition of ‘retail shop’ in s 5B of the Retail Shop Leases Act; the definition of ‘retail business’ in s 5C of the Retail Shop Leases Act; and the list of retail businesses, which includes ‘restaurant’, in Schedule 1 to the Retail Shop Leases Regulation 2016 (Qld).
 Retail Shop Leases Act (prior to the amendments which took effect on 25 November 2016), s 103(1)(b)(i).
 Ibid, s 103(2)(d).
 See, for example, Li Ali Pty Ltd v The Pine Kitchen Pty Ltd  QCAT 401, -, where the amendments were treated as procedural rather than substantive.
 Queensland Civil and Administrative Tribunal Act 2009 (Qld), s 100.
- Published Case Name:
Fu Manchu Dining Pty Ltd v SP (Qld) Pty Ltd
- Shortened Case Name:
Fu Manchu Dining Pty Ltd v SP (Qld) Pty Ltd
 QCAT 394
Member Kanowski, Member Judge, Member McBryde
23 Jul 2019