Temple v Penney (No 2)[2023] QCAT 182

QUEENSLAND CIVIL AND ADMINISTRATIVE TRIBUNAL

REASONS FOR DECISION

Background

1. [1]
   Keiran Temple, as tenant, leased from Heather Penney, as landlord, premises described as Shop 7, 46 Esplanade, Paradise Point for a term of 1 year with 2 options of 1 year each. Base rent was $66,000.00 p.a.
2. [2]
   The term of the lease was from 27 January 2020 to 26 January 2021. There was a rent free period from 27 January 2020 to 26 February 2020 but the liability to pay outgoings remained.
3. [3]
   Prior tenants had operated a restaurant café from the premises and the landlord alleges the premises were handed over with an operational kitchen and restaurant.  The tenant alleges that a new fit out of the premises was necessary because of the state the premises had been left in. The tenant commenced the fit out on 28 January and completed it by 26 March 2020.  He alleges he expended funds on redecoration and fit out of $34,993.24. Of that sum he claims $23,000 being the cost of his own labour.
4. [4]
   During the period between 28 January 2020 and 26 March 2020 the tenant made the following payments:

27 Feb 2020 $1,400.00

5 Mar 2020 $1,370.00

14 March 2020 $1,370.00^[1]

5. [5]
   As a result of the COVID-19 pandemic, the Queensland Government, on 23 March 2020, directed all restaurants to close until further notice. 
6. [6]
   On 24 March 2020 the tenant emailed the landlord with a request to have his rent payments changed from weekly to monthly effective immediately and a request to reduce his rent to reflect the inevitable trade loss he was going to experience.
7. [7]
   The email was acknowledged by the agent who advised it would be referred to the landlord’s daughter Sarah Filippini.
8. [8]
   On 30 March 2020, Ms Filippini emailed the tenant and asked when the next payment would be due. She advised that the landlord had received only 2 payments of rent and $2,000 of the $5,000 bond. It seems that the payment of rent on 27 February 2020 of $1,370.00^[2] was overlooked.
9. [9]
   In a text message exchange with the landlord on 16 April 2020 the tenant  complained, inter alia, that he had received no response to his reported current financial situation and that the landlord has made no effort to work out a solution between them.^[3]
10. [10]
    On 17 April 2020 the landlord purported to serve a Notice to remedy breach of covenant (the Notice) and then changed the locks. On 24 April 2020 the landlord terminated the lease. The tenant says that the termination was invalid and claims he now claims damages and compensation and return of his belongings, pursuant to sections 43 and/or unconscionable conduct under section 46A of the Retail Shop Leases Act 1994 (Qld)(‘RSL Act’) and sought return of his belongings left in the premises.
11. [11]
    On the day the Notice was allegedly served, Ms Filippini emailed the tenant with a list of demands including a demand for rent for the period 27 February 2020 to 26 March 2020 as well as rent for the period from 27 March 2020 to 26 April 2020 of $5,500.00. The list also included a claim for return of items allegedly removed by the tenant.
12. [12]
    The tenant by email dated 22 April 2020 advised that because of the Covid 19 pandemic and other matters he was struggling financially and unable to continue to operate his business. He advised he was prepared to forfeit the complete fit out less the coffee equipment (which he did not own) to satisfy the debt. However, this was after the purported service of the Notice and before its expiration.
13. [13]
    Negotiations, under the threat of the Notice, like the Sword of Damocles, continued until the landlord took possession of the premises and changed the locks. At that time, the tenant was still prepared to negotiate but under the threat of the Notice. He alleged in the email that he had been bullied by the landlord and not shown any empathy and understanding for his position due to the Covid pandemic .
14. [14]
    In her counter-application the landlord claims arrears of rent as well as loss of rent up to when the premises were relet. She also claimed the fit out and contents removed by the tenant as well as compensation for damage done to the property. The difference in rent between the lease and rent being paid by the replacement tenant was also claimed as well as other costs incurred in reletting the premises.

Jurisdiction

15. [15]
    A jurisdictional issue has already been determined in this matter by Member Dean in the matter of Temple v Penney.^[4] The learned Member found that under the COVID-19 Emergency Response Act 2020 (Qld) (the ‘COVID Act’) and the Retail Shop Lease and Other Commercial Leases (COVID-19 Emergency Response) Regulation 2020 (Qld) (‘the Regulations’) that the tenant’s claim was arguably an eligible lease dispute within the Tribunal’s jurisdiction under section 42 of the Regulations. Indeed, it was established that it was an affected lease dispute.^[5]
16. [16]
    An affected lease dispute means any dispute concerning the liabilities or obligations of the parties to an affected lease arising during the response period and includes a dispute about negotiating or a failure to negotiate rent under part 2, division 3.^[6]
17. [17]
    The tenant contends that his business was affected by the pandemic restrictions on restaurants opening and contends that the landlord failed to negotiate the rent payable.
18. [18]
    The learned member found that the tenant was entitled to file this Review  Application and that the Tribunal has jurisdiction to hear and determine his claimed eligible lease dispute even though a mediation has not been conducted.

Was there a negotiation of rent?

19. [19]
    Section 11 of the Regulations provides that:

The lessor and lessee under an affected lease must cooperate and act reasonably and in good faith in all discussions and actions associated with—

1. (a)
   mitigating the effect of the COVID-19 emergency on the parties to the lease; and

2. (b)
   other matters to which this part applies.

20. [20]
    Section 12 provides that:

3. (1)
   A lessor under an affected lease must not, during or after the response period or extension period, take a prescribed action on any of the following grounds—

1. (a)
   a failure to pay rent for a period occurring wholly or partly during the response period or extension period;

2. (b)
   a failure to pay outgoings for a period occurring wholly or partly during the response period or extension period;

3. (c)
   the business carried on at the leased premises not being open for business during the hours required under the lease during the response period or extension period.

3. (2)
   However, subsection (1) does not prevent the lessor taking a prescribed action—

3. (a)
   in accordance with—

3. (i)
   a variation of the lease made under division 3; or

3. (ii)
   a settlement agreement or other agreement between the lessor and lessee entered into about a matter mentioned in subsection (1)(a), (b) or (c); or

3. (iii)
   an order of a court or tribunal; or

2. (b)
   if, despite a genuine attempt by the lessor to negotiate rent payable and other conditions of the lease under division 3, the lessee has substantially failed to comply with the lessee’s obligations under that division in relation to the negotiations; or

3. (c)
   on a ground that is not related to the effects of the COVID-19 emergency.

3. (3)
   The lessee under the affected lease may apply to QCAT or a court with jurisdiction to hear the matter for an order requiring the lessor to comply with subsection (1).

3. (4)
   …

3. (5)
   In the proceeding, QCAT or a court may—

2. (a)
   make any order it considers appropriate; and

2. (b)
   award costs against the lessor or the lessee in the proceeding.

21. [21]
    The response period is defined as starting on 29 March 2020 and ending on 30  September 2020.^[7]
22. [22]
    The emails above do not evidence any attempt by the landlord to negotiate the rent payable or any other conditions prior to service of the Notices to remedy breach of covenant (the Notice). The landlord does not depose in the affidavit material of any attempts to meet the requirements of the Covid legislative changes. We note that the lease provided that the tenant pay the rent monthly not weekly and it was not necessary for the tenant to seek such a reduction.
23. [23]
    The landlord’s response was to serve the Notice. It was served by email at 5:20 pm on 17 April 2020. It is suggested in the email that it was also served by hand. There is no evidence that it was served by hand. The lease does not provide for service by email.
24. [24]
    The Notice contained an error in that it misdescribed the premises. A second Notice was prepared correcting the error. However, the notices relied upon s. 124 of the Property Law Act 1974 which did not apply to a lease for a term of 1 year or less. Consequently, we find the Notice to be invalid.
25. [25]
    The landlord entered the premises at a time before the period allowed under the purported Notice elapsed. The locks were changed. We find that the landlord’s entry and change of locks was unlawful.
26. [26]
    Termination of the lease without justification amounts to repudiation which entitles the other party to elect to accept the termination and sue for damage. The breach of the lease relied upon by the landlord based on the invalid Notice amounts to such a repudiation. The landlord is not in a position to remedy the breach having taken possession of the premises. The tenant is entitled to damages. 

What relief is available to the tenant and what can the Tribunal order?

27. [27]
    Section 44 of the Regulations which replicates section 83 of the QCAT Act (save for some minor changes to recognise an “eligible lease dispute”) defines the orders that the Tribunal can make. Section 44 provides:

3. (1)
   Subject to subsection (3), QCAT may make the orders, including declaratory orders, QCAT considers to be just to resolve an eligible lease dispute.

3. (2)
   In making an order for an eligible lease dispute, QCAT must have regard to the extent to which each party has complied with part 2.

3. (3)
   Without limiting subsection (1), QCAT may make any 1 or more of the following orders—

2. (a)
   an order for a party to the dispute to do, or not to do, a stated thing;

2. (b)
   an order requiring a party to the dispute to pay an amount, including an amount of compensation, to a stated person;

3. (c)
   an order about the amount of rent payable for the response period or extension period or how rent is to be worked out, including, for example, by reference to the turnover of the lessee’s business;

4. (d)
   an order that a party to the dispute is not required to pay an amount to a stated person;

5. (e)
   …

3. (4)
   If QCAT finds a party to an affected lease dispute has contravened section 11 or a party to an eligible lease dispute has engaged in unconscionable conduct in relation to an affected lease or small business lease, QCAT may make only 1 of the following orders based on the contravention or unconscionable conduct—

1. (a)
   an order requiring the party who contravened the section or engaged in the unconscionable conduct to pay an amount to a stated person;

2. (b)
   an order that the party who contravened the section or engaged in the unconscionable conduct is not required to pay any amount to any person.

The hearing

28. [28]
    This matter was heard on the papers. The tenant has continually failed to comply with the directions of the Tribunal and no excuse has been provided. We have been obliged to consider the matter on the basis of admissions by the parties as contained in the Response and Counter-application and the tenant’s Reply as well as the landlord’s witness statements.
29. [29]
    The landlord has brought an Application for Miscellaneous Matters seeking to strike out the tenant’s claim for not complying with the Tribunal’s directions. We consider that to be an inappropriate response. Although, the tenant has not provided any statements of evidence he is still entitled to have the matter determined on the material filed.
30. [30]
    We find that the landlord contravened section 11 by not attempting to negotiate any reduction in rent. However, in view of the failure of the tenant to file any statements of evidence we are not prepared to order the landlord to pay any sum to the tenant.

Schedule of claims

31. [31]
    Directions were made on 30 March 2023 for the parties to provide a schedule of claims. The landlord has provided such a schedule.
32. [32]
    In considering the landlord’s claim, we take account of the fact that she is in breach of the lease and is unable to reinstate the premises.
33. [33]
    The landlord makes the following claims:

    1. (a)
       Rent arrears up to and including 24 April 2020 of $6,603.84. We disallow the claim as, contrary to section11, the landlord made no attempt to negotiate a reduction in rent prior to serving of the notice.
    2. (b)
       Loss of rent until the premises were relet of $11,000.00. Disallowed for the same reason.
    3. (c)
       Fit out and contents removed $40,000.00. We disallow this sum or any sum. There is no reliable evidence of the value of any items removed and the value of same. There have been expressions of value ranging from $30,000.00 to $100,000.00 by a number of witnesses with no expertise to provide such valuations.
    4. (d)
       Boxed shelving valued at $16,000.00. Again, there is no expert evidence of value. We disallow the sum.
    5. (e)
       ASAP Glass repair $630. There was damage caused by the tenant. It was repaired and the receipt was in evidence.^[8] We allow this claim.
    6. (f)
       Reduced future rent of $7,875.01. This represents the reduction in rent between what the premises are now being let for and what was being paid for by thetenant. We do not allow the claim.
    7. (g)
       Cost to secure the premises $201.41. No particulars provided. Disallowed.
    8. (h)
       Replacement keys $440.00. No particulars provided. Disallowed.
    9. (i)
       Rectification costs of $40,532.00 for plumbing, electrical, painting ss benches, dishwasher and waste removal. The landlord relies upon the email of a Mr Dance dated 4 May 2022. The email outlines the work required by the new tenant to upgrade the premises to their requirements. For example, the connection of a 3-phase electrical connection to meet the requirements of their new ovens. This is not evidence of the value of any damage done to the premises by the tenant. We disallow the whole of the claim.
    10. (j)
        Costs of storing the tenant’s items $120.00. No particulars provided. Disallowed.
    11. (k)
        Agent’s fees to relet the shop. $6,820.00. No particulars provided. Disallowed.
    12. (l)
        Legal fees $6,794.21. Fees for advising on the substantial issues are not allowed on the basis that the landlord has been substantially unsuccessful in her counter-application.  The fees in relation to the jurisdictional issue are disallowed on the basis that the landlord was unsuccessful. Disallowed.
34. [34]
    In conclusion, although we have found in favour of the tenant we do not award any damages, compensation or costs as the tenant has failed to comply with directions made by the Tribunal. We dismiss the tenant’s Notice of Dispute.
35. [35]
    We allow the landlord’s claim only to the extent of damage done to the premises by the tenant of $630.00. We, otherwise, dismiss the remainder of the cross-application.
36. [36]
    We make no order as to costs.