Exit Distraction Free Reading Mode
- Unreported Judgment
Gulp! Catering Solutions Pty Ltd t/as Grill'd Chermside v Scentre Management Limited QCAT 11
QUEENSLAND CIVIL AND ADMINISTRATIVE TRIBUNAL
Gulp! Catering Solutions Pty Ltd t/as Grill'd Chermside v Scentre Management Limited & Anor  QCAT 11
Gulp! CATERING SOLUTIONS Pty Ltd T/AS Grill'd CHERMSIDE
Scentre management limited & RE1 limited T/AS Scentre GROUP LEASING AND RETAIL solutions
Retail shop leases matter
14 January 2020
On the papers
LANDLORD AND TENANT – RETAIL AND COMMERCIAL TENANCIES LEGISLATION – OBLIGATIONS, PROHIBITED TERMS AND PROTECTION FOR LESSEES – INFORMATION REQUIREMENTS – where licensee seeks compensation from lessor – where licensee alleges false statements by lessor to lessee – whether licensee has right of action
ADMINISTRATIVE LAW – ADMINISTRATIVE TRIBUNALS – QUEENSLAND CIVIL AND ADMINISTRATIVE TRIBUNAL – where application by licensee to join lessee to proceeding – whether joinder appropriate
Queensland Civil and Administrative Tribunal Act 2009 (Qld), s 42(1)
Retail Shop Leases Act 1994 (Qld), s 43AA(a)
Body Corporate for Bay Villas on Stephenson v Stansure Strata Pty Ltd  QCATA 44
Coral Homes (Qld) Pty Ltd v Queensland Building Services Authority (No 2)  QCATA 242
Dixonbuild Pty Ltd trading as Dixon Homes v Queensland Building and Construction Commission and Anor  QCAT 377
Legal Services Commissioner v Leneham  QCAT 96
McNab Constructions Australia Pty Ltd v Queensland Building Services Authority  QCAT 681
Scott v James Dickson Constructions & Anor  QCATA 74
SB Partners Legal
Holding Redlich Lawyers
Grill'd Leasing Pty Ltd
Norton Rose Fulbright
This matter was heard and determined on the papers pursuant to section 32 of the Queensland Civil and Administrative Tribunal Act 2009 (Qld) (‘QCAT Act’)
REASONS FOR DECISION
- These reasons relate to two interlocutory applications: an application to join a party, and an application to strike out part of the claim.
- The substantive proceeding is one brought by Gulp! Catering Solutions Pty Ltd t/as Grill’d Chermside (‘Gulp’). As franchisee, it ran the Grill'd burger café at the Chermside Westfield shopping centre for several years.
- The respondent to the proceeding is the owner of the shopping centre: Scentre Management Limited and RE1 Limited t/as Scentre Group Leasing and Retail Solutions (‘Scentre’).
- The proceeding is under the Retail Shop Leases Act 1994 (Qld) (‘Retail Shop Leases Act’).
- Gulp did not have a lease with Scentre. Rather, there was a lease between Scentre (or its predecessor Westfield Management Limited) and Grill'd Leasing Pty Ltd (‘Grill'd Leasing’), which is a company associated with the franchisor Grill'd Franchising Pty Ltd. Gulp occupied the café premises as licensee of Grill'd Leasing.
- More specifically, there was a lease between Scentre and Grill'd Leasing for the term 1 December 2007 to 30 November 2014. There was then a later lease between those parties for the term 1 September 2015 to 31 August 2025. In the period between the two leases, it appears that the lease arrangements persisted by mutual agreement, under a holding over clause in the first lease.
- Meanwhile, an outlet licence deed between Gulp and Grill'd Leasing had been signed on 10 December 2007. Under that deed, Gulp was allowed to use the premises in return for a fee equivalent to the rent payable under the lease plus some other charges. It appears to be Gulp’s position that the 2007 deed remained in force as at 21 December 2018 when the franchise agreement was terminated by Grill'd Franchising Pty Ltd and Grill'd Leasing gave Gulp a ‘notice of termination of outlet licence’.
- In the notice of dispute filed in the Tribunal by Gulp on 10 December 2018, Gulp seeks compensation from Scentre. The claim for compensation relates to a claimed reduction in trade which Gulp says resulted from the impact of renovation work carried out by Scentre in the period January 2016 to June 2017, and from Scentre’s creation of a new dining precinct elsewhere in the shopping centre as part of those renovations. Gulp also contends that Scentre failed to give an adequate and timely pre-lease disclosure statement to Grill'd Leasing in 2015 about the nature of the intended renovations.
- The compensation is sought under Division 7 of Part 6 of the Retail Shop Leases Act: specifically under sections 43 and 43AA(a). Those sections make a lessor liable to pay a lessee compensation in particular circumstances. ‘Lessee’, for Division 7 of Part 6, is defined to include a franchisee entitled to occupy a shop ‘under the lease or with the lessor’s consent’.
- Section 43 creates liability in situations such as where action by a lessor substantially restricts the flow of potential customers past a shop. It is not disputed that Gulp is able to pursue a claim against Scentre under section 43.
- There is, however, controversy over whether Gulp can bring a claim against Scentre under section 43AA(a). That provision says:
The lessor is liable to pay to the lessee reasonable compensation for loss or damage suffered by the lessee because—
- (a)the lessee entered into the lease, including a renewal or assignment of the lease, on the basis of a false or misleading statement or misrepresentation made by the lessor or any person acting under the lessor’s authority;
- The reason for the controversy relates to the pre-lease disclosure requirements upon lessors under the Retail Shop Leases Act. These changed on 25 November 2016. Before then, a prospective lessor was required to give a disclosure statement only to a prospective lessee. This would include disclosure about intended renovations. However, the broadened definition of ‘lessee’ did not (and still does not) apply to the disclosure provisions. In other words, a franchisee in Gulp’s position is not a ‘lessee’ for the purposes of the disclosure provisions. Therefore, Scentre was required to give a disclosure statement to Grill'd Leasing but not to Gulp (or to Grill'd Leasing for Gulp’s information) in respect of the 2015 lease. What changed on 25 November 2016 was that the current section 21D was inserted. It provides for a ‘head lessor disclosure statement’ to be given for the benefit of a franchisee by a lessor in an arrangement, such as the one in the present case, where there is a lease by a shopping centre to a franchisor, together with a licence arrangement between franchisor and franchisee.
- It is common ground that section 21D does not apply in the present case, as it came into force after the current leasing/licensing arrangement began.
- Accordingly, as discussed in more detail later in these reasons, there is controversy over when section 43AA can be relied on by Gulp when there was no obligation on Scentre to give a pre-lease disclosure statement to (or for the information of) Gulp.
- Although the notice of dispute filed in the Tribunal by Gulp in December 2018 sought only compensation, submissions filed by Gulp on 15 May 2019 indicate that it also seeks an order that ‘the rent payable under the lease between [Scentre] and Grill'd Leasing Pty Ltd be amended …’ to reflect the alleged disruption of trade and the alleged false or misleading statements or misrepresentations. In the same submissions, Gulp quantifies the compensation sought at just over $300,000. This is for the period 1 September 2015 to 21 December 2018.
The interlocutory applications
- On 15 March 2019 Gulp applied for an order by the Tribunal joining Grill'd Leasing as an applicant to the proceeding.
- On 18 April 2019 Scentre applied for an order by the Tribunal striking out certain parts of Gulp’s notice of dispute: paragraphs 2.1.4, 4.1 to 4.3, and 9.4. These paragraphs relate to the claim made by Gulp under section 43AA(a) of the Retail Shop Leases Act.
- The parties, and Grill'd Leasing, have since filed submissions relating to one or both of the interlocutory applications:
- (a)Gulp on 12 April 2019, 31 May 2019 and 23 September 2019;
- (b)Scentre on 12 April 2019, 31 May 2019, and 27 September 2019; and
- (c)Grill'd Leasing on 12 September 2019.
Should Grill'd Leasing be joined as a party?
- Section 42(1) of the QCAT Act says:
42 Joining and removing parties
- (1)The tribunal may make an order joining a person as a party to a proceeding if the tribunal considers that—
- (a)the person should be bound by or have the benefit of a decision of the tribunal in the proceeding; or
- (b)the person’s interests may be affected by the proceeding; or
- (c)for another reason, it is desirable that the person be joined as a party to the proceeding.
- Gulp’s reasons for seeking joinder of Grill'd Leasing may be summarised as follows:
- (a)the lease at the heart of the dispute is a common transaction involving Grill'd Leasing, as well as Gulp and Scentre;
- (b)there is an intertwining of interest between Gulp and Grill'd Leasing in the matter;
- (c)the joinder of Grill'd Leasing as a party would enable the Tribunal to have evidence and submissions from a critically-involved player;
- (d)any later instigation by Grill'd Leasing of litigation against Scentre would lead to duplication, potentially a shift in the evidence and issues, and the risk of inconsistent findings;
- (e)any changes made by the Tribunal to the lease will affect the interests of Grill'd Leasing, as its lease runs until 2025; and
- (f)any findings against Scentre that relate to ongoing conduct will affect Grill'd Leasing’s interests as the ongoing lessee.
- Scentre and Grill'd Leasing both oppose the joinder application. Essentially, their joint position is that joinder is unnecessary and undesirable: evidence from Grill'd Leasing can, if it is needed, be obtained without Grill'd Leasing being made a party, and joinder would tend to protract the proceeding. Grill'd Leasing does not wish to be put to the expense of being involved in a proceeding, and it does not want to be exposed to the risk of having a costs order made against it as a party.
- In respect of Gulp’s argument that the Tribunal should amend the amount of rent payable under the lease between Grill'd Leasing and Scentre – which would presumably have a flow-on benefit to Gulp because of how the outlet licence fee was calculated – Scentre and Grill'd Leasing point to section 103 of the Retail Shop Leases Act which limits the Tribunal’s jurisdiction. In particular, it precludes jurisdiction in relation to the amount of rent payable under a retail shop lease.
- The parties and Grill'd Leasing have drawn attention to a number of cases on joinder which explain that a balancing exercise is involved. On the one hand there are considerations of efficiency: reducing the risk of multiple proceedings on the same issues, avoiding the risk of inconsistent findings in different proceedings, and so on. The statutory objectives of speed and economy are relevant, so, on the other hand, it must be borne in mind that adding a party may add to the duration and complexity of a case. Further, it has been observed that ‘to include parties in contentious litigation without their consent is a serious matter and will not be done lightly’.
- I consider that there would be some advantages in joining Grill'd Leasing. Grill'd Leasing was intimately involved in the lease arrangement and would be able to make helpful submissions. Further, while Grill'd Leasing has not indicated any intention to bring proceedings against Scentre, that might change if there were adverse findings against Scentre in the current substantive proceeding. There would then be the risk of a further proceeding covering much of the same territory, and the risk of inconsistent findings. On the other hand, Grill'd Leasing does not regard joinder as desirable from its point of view. Joinder is not necessary for the purpose of eliciting relevant evidence: such information can be obtained from Grill'd Leasing as a witness. It is also not apparent how joinder would practically help Gulp (apart from sharing the burden of the advocacy role, if Grill'd Leasing took a position aligned with Gulp’s), given that the Tribunal lacks jurisdiction to amend the amount of rent. It is not obvious that the Tribunal would be inclined to order any other change to the lease (assuming it has power to do so). Any order compensating Grill'd Leasing would not benefit Gulp. Any entitlement of Gulp to compensation from Scentre depends on Gulp’s direct rights against Scentre. Finally, Gulp does not seek any remedy against Grill'd Leasing.
- In these circumstances, the conscription of Grill'd Leasing into the role of a party to the proceeding, along with the inevitable consequence of cost to Grill'd Leasing and the risk (even if small) of a costs order, would be a very grave step in return for little benefit. On balance, I do not consider that joining Grill'd Leasing would be warranted. The joinder application is therefore refused.
Should the section 43AA part of Gulp’s case be struck out?
- The Tribunal can strike out a part of a proceeding that is misconceived or lacking in substance.
- The strike-out power should be used cautiously: an ‘applicant should not be denied access to a hearing unless the lack of a cause of action is clearly demonstrated’. On the other hand, where such a lack is shown, use of the strike-out power is just as it saves the other party the expense and inconvenience of having to gather evidence and prepare arguments on the matter.
- As discussed earlier in these reasons, there was no disclosure obligation under the Retail Shop Leases Act upon a lessor in respect of a franchisee-licensee as at 2015. It is not suggested that there was a disclosure obligation under any other Act or pursuant to any non-statutory legal principle. Scentre submits that, therefore, Gulp cannot have any entitlement to compensation against it under section 43AA(a) of the Retail Shop Leases Act.
- Gulp has not very precisely explained the mechanism under which it says liability could arise under section 43AA(a) in its favour. It contends that it was entitled to occupy the premises under the lease because of the circumstances of the leasing arrangement (as distinct from any express term in the lease). In my view, it appears arguable that liability under section 43AA(a) could arise if Gulp is successful in establishing that Scentre made a false or misleading statement or misrepresentation to Grill'd Leasing, for example in its September 2015 disclosure statement to Grill'd Leasing. I do not express any concluded view on this, because I have not had the benefit of submissions directly on the points I will now discuss.
- Section 43AA(a) has been set out earlier in these reasons. In its potential application to this case, as approached by the parties, Gulp is the ‘lessee’, Scentre is the ‘lessor’, and the ‘lease’ is the lease between Grill'd Leasing and Scentre that commenced on 1 September 2015. (In view of the definition of ‘lease’ in the Schedule to the Retail Shop Leases Act, however, it may be arguable that the relevant ‘lease’ is the licence agreement and, perhaps, that the relevant ‘lessor’ is Grill'd Leasing, but I will put that possibility aside as no party has advanced it).
- Given that Parliament has extended the definition of ‘lessee’ to include a franchisee (who is not a party to the lease) for Division 7 of Part 6, which includes section 43AA, it might be assumed as a starting point that Parliament intended such a franchisee (such as Gulp) to be able to claim against a lessor (such as Scentre) even though typically in such an arrangement the franchisee will never have ‘entered into’ the lease in the usual sense of having signed it. This assumption is perhaps reinforced by the fact that the content of section 43AA(a) – albeit differently numbered as section 43(2)(a) – appeared in the Retail Shop Leases Act even before section 21D (the disclosure provision to benefit a franchisee who is not party to the lease) was inserted, and the wider definition of ‘lessee’ for the purposes of Division 7 of Part 6, to include franchisees, was also present. Section 43AA(a) does not explicitly say that the false or misleading statement or misrepresentation had to be made to the ‘lessee’ who is claiming the compensation. So it may be arguable that a franchisee-licensee who ‘entered into’ the lease, in the sense of agreeing to be part of the occupancy arrangements enabled by the lease, including acceptance of the amount to be paid for occupancy, on the basis of a false or misleading statement or misrepresentation made by the lessor to the franchisor-lessee, can make a claim under section 43AA(a).
- On that basis, Gulp would have an arguable claim against Scentre under section 43AA(a).
- Even so, the claim might be defeated if it turns out that the 2007 outlet licence deed between Gulp and Grill'd Leasing remained in force and obliged Gulp to continue occupancy regardless of the terms of the second lease. In that scenario, it might be that Gulp’s ‘entry into’ the lease occurred regardless of any false or misleading statement or misrepresentation in 2015. Again, however, I express no concluded view because I have not had the benefit of submissions on these issues.
- One approach would be to invite further submissions before deciding the strike-out application. However, the better approach is to refuse the application and allow the matter to be argued in more detail at the hearing of the substantive proceeding. In taking this view, I note that Scentre has already filed statements addressing the disclosure statement it gave to Grill'd Leasing in September 2015 and the steps it took to inform shopkeepers about the renovations.
- Accordingly, the appropriate result is to refuse both the joinder application and the strike-out application.
 Retail Shop Leases Act, Schedule (definition of ‘lessee’).
 Ibid, s 22(1).
 Ibid, s 103(1)(b)(i).
 These include Body Corporate for Bay Villas on Stephenson v Stansure Strata Pty Ltd  QCATA 44; Coral Homes (Qld) Pty Ltd v Queensland Building Services Authority (No 2)  QCATA 242, Dixonbuild Pty Ltd trading as Dixon Homes v Queensland Building and Construction Commission and Anor  QCAT 377, McNab Constructions Australia Pty Ltd v Queensland Building Services Authority  QCAT 681, and Scott v James Dickson Constructions & Anor  QCATA 74.
 QCAT Act, s 3.
 Coral Homes (Qld) Pty Ltd v Queensland Building Services Authority (No 2)  QCATA 242, .
 QCAT Act, s 47.
 Legal Services Commissioner v Leneham  QCAT 96, .
- Published Case Name:
Gulp! Catering Solutions Pty Ltd t/as Grill'd Chermside v Scentre Management Limited & Anor
- Shortened Case Name:
Gulp! Catering Solutions Pty Ltd t/as Grill'd Chermside v Scentre Management Limited
 QCAT 11
14 Jan 2020