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  4. Crema Espresso Leasing Pty Ltd v Grocorp Developments Pty Ltd - [2023] QCAT 281

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Crema Espresso Leasing Pty Ltd v Grocorp Developments Pty Ltd[2023] QCAT 281

Crema Espresso Leasing Pty Ltd v Grocorp Developments Pty Ltd[2023] QCAT 281

QUEENSLAND CIVIL AND ADMINISTRATIVE TRIBUNAL

CITATION:

Crema Espresso Leasing Pty Ltd v Grocorp Developments Pty Ltd [2023] QCAT 281

PARTIES:

CREMA ESPRESSO LEASING PTY LTD ACN 165 916 334

(Applicant)

v

GROCORP DEVELOPMENTS PTY LTD ACN 151 679 364

(Respondent)

APPLICATION NO/S:

RSL133-19

MATTER TYPE:

Retail shop leases matter

DELIVERED ON:

10 July 2023

HEARING DATE:

15 March 2023

HEARD AT:

Brisbane

DECISION OF:

Member Katter, Member Judge, and Member McBryde

ORDER:

  1. The Applicant’s claims in the amended notice of dispute filed 11 January 2021 are dismissed.
  1. The Applicant is to pay the Respondent the sum of $166,655.57 plus interest at the rate of 12.85% per annum from 18 June 2019 until the date of payment.

CATCHWORDS:

LANDLORD AND TENANT – RETAIL AND COMMERCIAL TENANCIES LEGISLATION – where the dispute is a retail tenancy dispute – termination of lease agreement – whether false or misleading statement or misrepresentation – whether notice to remedy breach is required – whether lease agreement abandoned – whether accrued right to claim rent and outgoings arrears – whether contractual entitlement to claim interest on rent and outgoings arrears

CONTRACTS – REPUDIATION AND NON-PERFORMANCE – whether finding of repudiation is reliant upon finding of breach

Acts Interpretation Act 1954 (Qld) s 48A

Property Law Act 1994 (Qld) s 124

Queensland Civil and Administrative Tribunal Act 2009 (Qld) s 3

Retail Shop Leases Act 1994 (Qld) s 43AA, 46B, s 83(3)

Allphones Retail Pty Ltd v Hoy Mobile Pty Ltd [2009] FCAFC 85

Cedar Meats (Aust) Pty Ltd v Five Star Lamb Pty Ltd (2014) 45 VR 79; [2014] VSCA 32 

Commercial Bank of Australia Ltd v Amadio (1983) 15 CLR 447

Commercial Banking Co of Sydney Ltd v RH Brown & Co (1972) 126 CLR 337

DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423

Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd (2007) 233 CLR 115

Macquarie International Health Clinic Pty Ltd v Sydney Local Health District (2020) 103 NSWLR 443

QUYD Pty Ltd v Marvass Pty Ltd (2009) 1 Qd R 41

Ryder v Frohlich [2004] NSWCA 472

Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387

Wash Investments Pty Ltd & Ors v SCK Properties Pty Ltd & Ors [2016] QCA 258

Applicant:

B C O'Sullivan Counsel instructed by Twomey Dispute Lawyers

Respondent:

D V Ferraro Counsel instructed by MacGregor O'Reilly Nash

REASONS FOR DECISION

  1. [1]
    By amended notice of dispute filed 11 January 2021, the Applicant seeks compensation pursuant to section 43AA and 83(3) of the Retail Shop Leases Act 1994 (Qld) (“the RSL Act”). The Applicant also seeks a declaration pursuant to section 83(1) of the RSL Act that the Applicant was entitled to terminate the lease.
  2. [2]
    The Respondent filed an amended response and counter-claim dated 15 February 2021. The Respondent seeks an order that the Applicant pay to the Respondent amounts for rent arrears and outgoings and compensation for loss of rent.

Background

  1. [3]
    The Respondent owns a multi-tenanted site at 88 Bundall Road, Bundall, Queensland (“the Bundall property”).[1] 
  2. [4]
    On 15 December 2017, the Applicant entered into a 20-year lease agreement with the Respondent in relation to “Tenancy 2” being one of three tenancies at the Bundall property (“the Lease agreement”). The Applicant conducted a barista made coffee shop at the premises.[2]
  3. [5]
    On 15 December 2017 the Respondent also entered into a 15-year lease agreement with Freedom Fuels (“Freedom”) for a service station premises at the Bundall property.[3]
  4. [6]
    The dispute between the parties in these proceedings relates to the sale of barista made coffee by Freedom. 
  5. [7]
    The Applicant contends that the sale of barista made coffee by Freedom gives rise to a breach of the Lease agreement between the Applicant and the Respondent.
  6. [8]
    The Applicant further contends that the Respondent and its agents made false or misleading statements or misrepresentations that induced the Applicant to enter the lease or otherwise amounted to unconscionable conduct.
  7. [9]
    The Respondent issued a notice to remedy breach to the Applicant in relation to arrears of rent and outgoings on 18 June 2019.[4]
  8. [10]
    The Respondent re-entered the premises and took possession on 18 July 2019.[5]
  9. [11]
    The Applicant further contends that the purported termination of the Lease agreement by the Respondent was invalid.
  10. [12]
    The Respondent denies the allegations.

Breach of clause 25.1 of the Lease agreement

  1. [13]
    The Applicant submits that the sale of barista made coffee by Freedom gives rise to a breach of clause 25.1 of the Lease agreement. Clause 25.1 of the Lease agreement is as follows:
  1. 25.1
    Exclusivity
  1. (a)
    While the Tenant is a Crema Espresso Entity, the Landlord must not grant any lease, licence or other right of occupation in the Building or on the Land where the predominant purpose of the business is the sale of barista made coffee.
  1. (b)
    Nothing in this clause is intended to preclude the Landlord from granting to other tenants of the Complex uses which may involve the sale of coffee products as part of their business, including for example, a service station.
  1. [14]
    The Applicant submits that clause 25.1(b) should be interpreted as if it read “… the sale of coffee products other than barista made coffee…”. On the submission of the Applicant this would give effect to the purpose of clause 25.1.
  2. [15]
    There is no inconsistency between clause 25.1(a) and 25.1(b) as they appear in the Lease agreement. Prohibiting the grant of any lease, licence or other right of occupation where the predominant purpose is the sale of barista made coffee whilst still permitting the sale of coffee products are not inconsistent stipulations. Barista made coffee is, of course, a particular type of coffee product. Clause 25.1(a) prohibits the granting of a lease to a tenant that will be primarily selling barista made coffee. Clause 25.1(b) confirms that coffee products may still be sold. Read together the subclauses permit the sale of coffee products and prohibit the granting of a lease to a business that will predominantly sell barista made coffee. There is no inconsistency nor any ambiguity.
  3. [16]
    The sale of barista coffee by Freedom does not give rise to a breach of clause 25.1 of the Lease agreement. If selling barista coffee were the predominate purpose of Freedom’s business then there would be a breach by the Respondent. However, the plain reading of the clause does not prohibit the sale of barista made coffee so long as it is not the predominate purpose of the business.  There is no evidence before the Tribunal that would permit a finding that the predominant purpose of Freedom’s business is the sale of barista made coffee. Freedom is a service station. If, despite the name ‘Freedom Fuel’, the primary source of income for Freedom was derived from the sale of barista coffee, or if some other relevant metric (floor space, units of sale, etc) was identified to establish that the sale of barista made coffee was the predominate purpose of Freedom’s business, then there may have been a basis for finding breach. There was no such evidence before the Tribunal.
  4. [17]
    There is no identified breach of clause 25.1 of the Lease.

False or misleading statements or misrepresentation

  1. [18]
    The Applicant submits that the Applicant was induced to enter the Lease agreement by the Respondent’s false or misleading statements or misrepresentations.[6]
  2. [19]
    Section 43AA of the Retail Shop Leases Act (Qld) sets out:
  1. The lessor is liable to pay to the lessee reasonable compensation for loss or damage suffered by the lessee because-
  1. (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;
  1. [20]
    The Applicant submits that there are three relevant representations (“the representations”):
    1. (a)
      A direct competitor representation.
    2. (b)
      A press button coffee representation.
    3. (c)
      An exclusivity representation.

The direct competitor representation

  1. [21]
    It is not in dispute that in March 2017 Mr Romolo Bos, director of the Respondent, said to Mr Antony Forbutt, director of the Applicant, words to the effect of “there will be no direct competitors to Crema Espresso leasing the remaining sites on the premises due to the limited number of tenancies available”.[7]

The press button representation

  1. [22]
    There is some dispute as to what was said at a meeting between Mr Forbutt, Mr Bos and a leasing agent, Mr David Evans held in August 2017. Mr Forbutt recalls that Mr Bos said words to the effect “Freedom Fuels will be doing their $1 cheap coffees out of a press button machine in the corner of the store, similar to their other stores”.[8]
  2. [23]
    Mr Bos recalls that he said “Freedom fuels will be selling cheap convenience store coffee like at their other locations”.[9] Mr Bos conceded under cross-examination that he said words to the effect of “press button machine”.
  3. [24]
    Mr Evans recalls that words to the effect of “cheap coffees” were used by Mr Bos at the meeting.[10]

The Exclusivity Representation

  1. [25]
    There is dispute as to what was stated during a telephone conversation between Mr Forbutt and Mr Evans in or around October 2017. Mr Forbutt recalls that Mr Evans said:[11]
  1. “I cannot agree to an ‘exclusive coffee clause’ in the Lease as the Freedom               Fuels convenience store would be selling ‘convenience style’ coffee               products such as the press button coffee, pre-packaged instant coffee, pre-              packaged cold iced coffee drinks and any other products that contain coffee               flavouring that would be found in a normal convenience store.
  1. [26]
    Mr Forbutt recalls that Mr Evans also said “I am happy to include an exclusivity clause in there that protects against barista made coffee, it may be that a restaurant comes in and serves coffee after dinner but it would only be on a small scale”.[12] 
  2. [27]
    Mr Evans recalls that he said words to the effect of “My client cannot grant you a coffee exclusivity clause since Freedom Fuels is selling convenience store coffee and some of the other tenants might serve coffee as well”.[13]

Reliance

  1. [28]
    Section 43AA of the Act requires that the lessee enter the lease on “on the basis of” the false or misleading statement or misrepresentation. Like the common law action for misrepresentation, it is a requirement that the aggrieved party must have been induced to enter the contract by the representation. To be induced to contract by a representation there must be reliance, at least to some extent, on the impugned representation.  Whether the party has been induced in reliance on a representation is a question of fact.[14] The correspondence between the parties leading to the entry into the Lease agreement is informative in this regard.
  2. [29]
    The Lease agreement was executed on 17 December 2017. The earliest of the statements or representations was the ‘direct competitor’ representation in March 2017. The representation nearest in time to the point of entry into the Lease agreement was made in or about October 2017 being the ‘exclusivity representation’.
  3. [30]
    On 18 October 2017, subsequent to discussions between Mr Forbutt and Mr Evans,[15] the Respondent’s solicitors sent a draft lease containing an exclusivity clause as follows:[16]
  1. “Exclusivity
  1. (a)
    Whilst the Tenant is a Crema Espresso Entity, the Landlord must not grant                             any lease, licence or other right of occupation in the Building or on the                                           Land where the permitted use includes a substantially similar permitted use                             to that               granted in the Lease.
  1. (b)
    Nothing in this clause is intended to preclude the Landlord from granting to               other tenants of the Complex uses which may involve the sale of coffee               products as part of their business, including for example, a service station.”
  1. [31]
    On 26 October 2017, the Respondent solicitors sent an amended exclusivity clause removing the words “substantially similar permitted use”:[17]
  1. “Exclusivity
  1. (a)
    While the Tenant is a Crema Espresso Entity, the Landlord must not grant  any lease, licence or other right of occupation in the Building or on the               Land where the predominant purpose of the business is the sale of barista               made coffee.
  1. (b)
    Nothing in this clause is intended to preclude the Landlord from granting to  other tenants of the Complex uses which may involve the sale of coffee               products as part of their business, including for example, a service station.”
  1. [32]
    If the original exclusivity clause remained and was carried through into the Lease agreement, it would be challenging to submit that Freedom’s sale of barista made coffee was not a ‘substantially similar permitted use’ to that granted in the Lease agreement. However, the Respondent amended the proposed clause. The amendment was signposted and identified in correspondence between the solicitors.[18] It is not the case that there was a surreptitious amendment with the Applicant contracting ‘on the basis’ that the exclusivity clause would operate in accordance with the original version of the clause. To the contrary, a ‘Negotiation Table’ was exchanged between the parties that specifically identified the change to the exclusivity clause as follows:[19]

25.1 Exclusivity     

Amended so that the landlord must not grant any lease where the predominate purpose of the business is the sale of barista made coffee.

Agreed

  1. [33]
    The table with the ‘agreed’ notation was sent back to the solicitors for the Respondent on 8 November 2017.[20]
  2. [34]
    There is no evidence before the Tribunal of any objection or query from the Applicant in relation to the amended exclusivity clause. The amended clause was carried through and contained in the Lease agreement.
  3. [35]
    The three representations identified by the Applicant were each made prior to the correspondence between solicitors regarding the amended exclusivity clause. The amended exclusivity clause does not prohibit the granting of a lease to a tenant who will sell barista made coffee so long as it was not the predominate purpose of the business. If the Applicant was relying on the ‘direct competitor’ representation and proceeding on the basis that no other tenant would be permitted to sell barista made coffee, it would be reasonable to expect that the Applicant would seek to amend the wording of the amended clause to simply confirm that no other lease would be granted that permitted the sale of any barista made coffee. Further, if it were the case that the Applicant was relying on a representation that effectively confirmed that Freedom would only be selling ‘push button coffee’ and not barista coffee, it would be reasonable to expect that the Applicant would seek to amend the wording of the clause to simply confirm that no other lease would be granted that permitted the sale of any barista made coffee. No such further amendment was sought. Additionally, if the Applicant was relying on the representation that Freedom would only be selling “convenience style coffee products such as the press button coffee, pre-packaged instant coffee, pre-packaged cold iced coffee drinks and any other products that contain coffee flavouring that would be found in a normal convenience store” and not selling any barista made coffee whatsoever, then again it would be reasonable to expect that the Applicant would seek to amend the wording of the amended clause 25.1 to confirm that no other lease would be granted to a tenant that would be selling barista made coffee.  There was no further amendment of the clause. The amended clause was carried through and executed as part of the Lease agreement. The execution of the Lease agreement confirms that the clause was read, understood and agreed and it would be particularly challenging given the correspondence of 8 November 2017 and the agreement in the Negotiation Table to find that the Applicant was still relying on any of the prior representations.
  4. [36]
    Having regard to the intervening exchanges between the parties after the representations and prior to the entry into the Lease agreement, the Tribunal is not satisfied that the Applicant entered the Lease agreement ‘on the basis’ of the representations.
  5. [37]
    Clause 4.1(d) of the Lease agreement further refutes any potential reliance by the Applicant on the representations as the basis for the Applicant’s entry into the Lease agreement. Clause 4.1(d) was specifically referred to and agreed in the Negotiation Table exchanged between legal representatives on 8 November 2017. The wording in the Negotiation Table:
  1. “This clause had been amended to state that the tenant now acknowledges  that no promise, representation, warranty or undertaking has been given by               or on behalf of the landlord that the tenant has any exclusive right to carry               on the type of business permitted – ie no exclusivity is given in respect of               the premises”.
  1. [38]
    The clause was carried through at 4.1(d)(ii) of the Lease agreement as follows:
  1. “Except as set out above, no promise, representation, warranty or  undertaking has been given by or on behalf of the Landlord that the Tenant               has any exclusive right to carry on the type of business permitted under the               Lease or as to other businesses to be carried on in the Building…”
  1. [39]
    The Tribunal is not satisfied that the Applicant entered the Lease agreement ‘on the basis’ of the representations.

Unconscionable Conduct

  1. [40]
    The Tribunal may order payment of money if it finds that a party to the dispute engaged in unconscionable conduct in connection with the retail shop lease.[21] In deciding whether a party to a retail tenancy dispute has engaged in unconscionable conduct in connection with the retail shop lease, the Act sets out the following matters that the Tribunal may have regard to:[22]

(a) the relative strengths of the bargaining positions of each of the parties

There was nothing before the Tribunal to permit a finding that one party was in a stronger bargaining position vis-à-vis the other party to the Lease agreement. Each party had engaged legal representatives to act on their behalf during negotiations. The potential that a lessor at a multi-tenanted site may permit a competitor of a lessee does not indicate that a disparity exists between the relative strength of the bargaining positions of the parties. To the contrary, the extent of exclusivity or non-competition within the Bundall property was an issue that the parties were specifically negotiating prior to entry into the Lease agreement. Whether or not there is a misrepresentation is a question distinct from whether there is disparity between the relative strengths of bargaining positions.

(b) whether, as a result of conduct engaged in by the party, the other party was required to comply with conditions that were not reasonably necessary for the protection of the other party’s legitimate interests;

There was no evidence before the Tribunal to permit a finding that either party required the other party to comply with conditions that were not reasonably necessary to protect legitimate interests.

(c) whether the other party was able to understand any documents relating to the lease;

The parties were assisted by legal representatives and no finding could reasonably be made in this regard.

(d) whether any undue influence or pressure was exerted on, or any unfair tactics were used against, the other party or a person acting for the other party by the party or a person acting for the party in relation to the lease;

There is no evidence of undue influence or pressure being applied by either party.

(e) the amount for which, and the circumstances under which, the other party could have acquired an identical or equivalent lease from a person other than the party;

There is no evidence regarding identical or equivalent leases.

(f) the extent to which the party’s conduct towards the other party was consistent with the party’s conduct in similar transactions between the party and parties like the other party;

There is no evidence of conduct towards other parties in similar transactions.

(g) the requirements of any applicable industry code;

The Tribunal has not been presented with any applicable industry code relevant to the issues in dispute.

(h) the requirements of any other industry code, if the other party acted on the reasonable belief that the party would comply with the code;

There is no relevant evidence in this regard.

(i) the extent to which the party unreasonably failed to disclose to the other party:

(i) any intended conduct of the party that might affect the other party’s interests; and

If the Tribunal were to accept that the Respondent had knowledge at or prior to entry into the Lease agreement, that Freedom would be selling barista made coffee, then it would be necessary to consider whether a failure to specifically disclose this knowledge was unreasonable.

Did the Applicant have knowledge that Freedom would be selling barista made coffee? There is no direct evidence before the Tribunal that would permit a finding that prior to entry into the Lease agreement the Respondent knew with certainty that Freedom would be selling barista made coffee. However, the amended clause contained in the Negotiation Table that was exchanged in email correspondence between the legal representatives of the parties on 26 October 2017 did specifically make reference to barista made coffee. An inference could be drawn from the inclusion of the amended clause that the Respondent wanted to at least leave open the potential for Freedom, or another tenant, to sell barista coffee so long as it was not going to be the predominant purpose of the business of any such tenant. Whilst there is no specific evidence of a communication that ‘Freedom will be selling some barista made coffee’, the amended clause 25.1 specifically refers to barista made coffee and draws attention to the potential sale of barista made coffee. As noted above clause 25.1 is not unclear nor ambiguous. Therefore, the amended clause communicated the potential for sale of barista made coffee so long as it was not the predominate purpose of the business and there was no failure to disclose, unreasonable or otherwise.

(ii) any risks to the other party arising from the party’s intended conduct (being risks that the party should have foreseen would not be apparent to               the other party);

Again, the amended clause communicated the potential sale of barista made coffee by another tenant so long as it was not the predominate purpose of the other tenant’s business. There was no failure to disclose.

(j) the extent to which the party was willing to negotiate the terms and conditions of any lease with the other party;

As noted above, there was negotiation between legal representatives prior to entry into the Lease agreement. There is no evidence of unwillingness to negotiate.

(k) the extent to which the party and the other party acted in good faith.

Had the amended clause 25.1 not been exchanged between the legal representatives and then included in the Lease agreement and had it been established that the Respondent was aware prior to entry into the Lease agreement that Freedom would be selling barista made coffee, there would have been grounds to find that the Respondent had not acted in good faith. These findings have not been made (for the reasons explained above) and there is no ground to find that the Respondent has not acted in good faith.

  1. [41]
    In relation to unconscionable conduct, the Tribunal is not limited to considering the matters set out in section 46B(1) of the Act.[23] In addition to the section 46B(1) considerations, the Applicant submits that the representations (“direct competitor’, “press button” and ‘exclusivity’) induced the Applicant to enter the Lease agreement and then the Respondent permitted Freedom to sell barista made coffee contrary to the representations thus undermining the commercial purpose of the Lease agreement. What is described is an action in misrepresentation. As noted earlier, there was no reasonable reliance on the representations. The representations could not be described as inducing the agreement. Even if the elements of an action for misrepresentation could also establish an action for unconscionable conduct, the element of inducement has not been found.
  2. [42]
    In Commercial Bank of Australia Ltd v Amadio,[24] Justice Deane set out the requirements for unconscionable conduct. A party to a transaction must be under a special disability in dealing with the other party. That disability must be sufficiently evident to the stronger party. It must also be unfair for the stronger party to procure the weaker party's assent to the impugned transaction in the circumstances.
  3. [43]
    The categories of ‘special disability’ are open and it is not possible to completely catalogue the categories of special disability.[25]
  4. [44]
    The Applicant has argued that the potential false or misleading statements, or misrepresentations gave rise to unconscionable conduct. There has been no identification and no evidence that would permit a finding that the Applicant was under a special disability vis-à-vis the Respondent having regard to relative bargaining positions. The parties were negotiating about exclusivity. The negotiations involved legal representatives. The truth or otherwise of representations is something separate from whether one party is under a special disability in relation to the other party. The asserted knowledge of the Respondent and unawareness of the Applicant that Freedom would be selling barista made coffee contrary to representations does not establish that one party is at a special disability in dealing with the other. Instead, if such a representation was relied upon and if it was false or misleading or otherwise a misrepresentation, then the action would be under section 43AA of the Act. An action under section 43AA of the Act does not translate across to an action for unconscionable conduct in the absence of a special disability or at least some identifiable disparity in the relative bargaining strengths of the parties.
  5. [45]
    The evidence does not support a finding that there has been unconscionable conduct.

Termination of the Lease

Effectiveness of the notice to remedy breach

  1. [46]
    On 18 June 2019 the Respondent served a notice to remedy breach on the Applicant. The Applicant contends that the notice is defective because the heading purports that the notice is also a notice of forfeiture and because a reasonable time was not provided for the Applicant to remedy the breach.
  2. [47]
    Section 124(8) of the Act states that the notice “shall be in approved form”. The approved gazetted Form 7 under the Property Law Act 1994 (Qld) (“the PLA”) does not contain ‘forfeiture’ in the heading. The use of the word “forfeiture’ in the heading of the form served does create some ambiguity as to the nature and intent of the notice. It may not be fatal to the validity of the notice in that there is substantial compliance[26] with the form requirements and despite the obfuscation caused by the heading, the remainder of the notice makes it reasonably clear that the Applicant is to remedy the breach by paying outstanding rent and outgoings.
  3. [48]
    However, there has not been sufficient time allowed to remedy the breach. Section 124 of the PLA provides that the lessee is to remedy the breach within a reasonable time after service of the notice to remedy. The notice to remedy that was served on 18 June 2019 stipulated a remedy date of 25 June 2019. The Respondent re-entered and took possession of the premises on 18 July 2019.
  4. [49]
    What is a reasonable time is dependent upon the circumstances of the lease and the nature of the breach. The Respondent submits that a reasonable time was provided because effectively the Applicant had until 18 July 2019, one month, to remedy the breach. The Respondent submits that the date of termination or forfeiture of lease and not the remedy date should be the relevant date for assessing whether a reasonable time has been provided.[27] Further the Respondent submits that there had already been a lengthy period in which the Applicant had been in arrears - 8 months at the time of issuing the notice. In addition, the Applicant was actively seeking to assign the lease.[28]
  5. [50]
    The following factors weigh against the finding that the time allowed was reasonable time. In the context of a twenty-year lease, a one-week remedy period (thereafter permitting termination if the breach is not remedied) is, by contrast, a very short remedy period. The amount of arrears is significant and the reasonableness of being able to make the payment within the stipulated time is a relevant consideration. The Respondent had known about the arrears for eight months and had not issued any prior notices to remedy breach (albeit in circumstances where there is evidence of negotiation between the parties during that time in an attempt to resolve the arrears).  The Applicant asserts that the fit-out cost at the premises was close to half a million dollars. The consequence of termination would, on the case of the Applicant, render that fit-out nugatory or at most the fit-out would be of nominal value. The gravitas of these factors weighs towards permitting a lengthier period to remedy than was provided.
  6. [51]
    In Macquarie International Health Clinic Pty v Sydney Local Health District[29] Bell J stated, “If the tenant is sufficiently informed that he or she has a reasonable time to remedy the default, the time said to be reasonable in the notice will be treated as surplusage and can be disregarded if in fact it is not a reasonable time”. Relying upon the reasoning of Bell J, the Respondent submits that the Applicant was given from 20 June 2019 to 18 July 2019 to remedy the breach. [30] However, the action of a lessor re-entering is something separate from informing a tenant that they have reasonable time to remedy a breach despite a timeframe contained in the notice. There is no evidence to support a finding that the tenant was sufficiently informed that they had reasonable time despite the seven-day stipulation in the notice.
  7. [52]
    Therefore, the requirements of section 124 have not been met and the purported termination of the Lease agreement pursuant to the PLA is ineffective.

Termination by the Lessor at common law

  1. [53]
    The parties both submit that it is possible to terminate a lease at common law without issuing a notice to remedy breach based upon a lessee’s repudiation of a lease.[31] Reference is made to the decision of the Queensland Court of Appeal in Wash Investments Pty Ltd & Ors v SCK Properties Pty Ltd & Ors [2016] QCA 258. Paragraph 24 of the decision sets out that “…s 124(1) is engaged only where a right of re‑entry or forfeiture is to be exercised on the basis of a breach. It is not engaged where a lessor seeks to re‑enter or forfeit the lease, not for the lessee’s breach, but upon another ground.” Reference is made to “renunciation” being a form of repudiation that provided a ground distinct from breach of contract as a basis for terminating that was not reliant upon section 124 of the PLA:[32]
  1. “… the present case is an example of that described in that passage in Koompahtoo Council, in that the tenant’s failure to perform had manifested an unwillingness or inability to perform. It was not a repudiation in the sense of a breach of contract which justified termination under the general law of contract. Rather, it was repudiation in the nature of a renunciation. That was a ground for termination which was distinct from that conferred by the lease itself, whereby cl 17.2, it had been agreed that the landlord could re‑enter and take possession and terminate the lease if the tenant was in default. It follows that the landlord’s rights of re‑entry and forfeiture, according to the findings of the trial judge, were not of a kind which engaged s 124(1).”
  1. [54]
    The decision in Koompahtoo did not go so far as to state that renunciation is something distinct from breach of contract. A manifestation of unwillingness or inability to substantially perform may occur before performance is due. Such a breach is called an “anticipatory breach”.[33] In Koompahtoo the Court stated that the same unwillingness or inability “… may be termed renunciation”.[34] A renunciation is an express statement of unwillingness or inability to substantially perform which is merely one form of anticipatory breach. If the anticipatory breach or renunciation is so fundamental as to indicate an unwillingness or inability to substantially perform the contract (or an essential term of the contract being a ‘condition’) then the anticipatory breach or ‘renunciation’ is said to be repudiation of the contract. Repudiation arises when there is a breach (either anticipatory or actual) that manifests an unwillingness or inability to perform. To breach in such a way is to repudiate and vice versa. The concepts are inseparable.
  2. [55]
    There is some relevant commentary in Cheshire and Fifoot[35] regarding whether an anticipatory breach (or a ‘renunciation’) is actually a breach:
  1. “The position is sometimes taken that an ‘anticipatory breach” is really not a breach at all unless it can be and is ‘accepted’ as a repudiation, and the contract is terminated on that ground; on that basis damages cannot be claimed for an anticipatory breach if the contract is not terminated. That view is illogical and unnecessarily restrictive, and is not uniformly accepted.”
  1. [56]
    The issuance of a notice to remedy for a breach that has not yet occurred (an anticipatory breach) would be nonsensical and it follows that the notice requirements in section 124 of the PLA apply for actual breaches and not for anticipatory breaches. The failure of the Applicant to pay rent in the present matter is indeed an actual breach of contract. That failure to pay rent is not an anticipatory breach (or a renunciation). In that the failure to pay rent is an actual breach of an essential term, it is not permissible for the Lessor to avoid the requirements of section 124 of the PLA. If it were possible to simply rely on common law breach of a condition of a contract and proceed to terminate without reference to the PLA, then the provisions of the PLA relating to notice requirements would be rendered optional and avoidable. Section 124 is not optional if the ground for terminating is actual breach. Therefore, the Respondent has taken possession of the premises without validly terminating the contract.

Termination by the Applicant in response to re-entry

  1. [57]
    By letter dated 23 July 2019, the Solicitor the Applicant purported to terminate the lease in response to the re-entry by the Respondent stating “… our client accepts your client’s repudiation of the Lease and … our client terminates the Lease”.[36] However, at the time of the Respondent’s re-entry, the Applicant owed in excess of $160,000.00 in outstanding rent and outgoings (there is dispute regarding a rent reduction addressed below). Payment of rent is an essential obligation of any lease agreement. Section 12.1 of the Lease agreement sets out that it is a default event if, fourteen days after it has become due, rent remains unpaid. Therefore, the Tribunal is satisfied that by the time of re-entry the Applicant had, effectively, repudiated the Lease agreement. The Respondent did not effectively terminate the agreement in accordance with the requirements of the PLA but the failure to validly terminate does not disturb the circumstance that the Applicant was in breach to such an extent that the Applicant’s failure to pay rent evinced an unwillingness or an inability to be bound by the contractual obligations of the Lease agreement. A party unwilling or unable to be bound by contractual obligations to the extent of repudiation of contract is unable to terminate a contract in reliance on a breach of an essential term by an opposing party.[37] The purported termination of the Lease agreement by the Applicant was, therefore, ineffective. Without the right to terminate, any claim for damages, such as the claim in relation to the fit-out of the premises is not available to the Applicant.
  2. [58]
    The question might be asked regarding the status of the Lease agreement in circumstances where the purported terminations by both parties were ineffective. After the purported terminations, both parties treated the Lease agreement as at an end. There were no steps taken by either party to attempt to continue with the Lease agreement. If the parties treat their contract as having ended, then the contract is to be regarded as discharged. Parties will often regard their contract as having ended if both parties assert that the other has repudiated. When there is a period of inactivity or a clear intention not to continue with the contract, the contract is regard as abandoned.[38]

Accrued rights

  1. [59]
    Abandonment does not affect accrued rights or entitlements.[39] A right accrued to the Applicant prior to the re-entry was the right to be paid rent and outgoings up to that point. The arrears schedule set out in the notice to remedy breach lists a total amount of $166,655.57 arrears for rent and outgoings. There was, however, a dispute regarding whether there had been an agreed rent reduction. The amount of arrears in the notice did not account for the rent reduction.
  2. [60]
    The Applicant asserted that Mr Forbutt and Mr Bos agreed in or around December 2018 to a reduced monthly rent amount of $10,000.00.[40] Mr Bos accepted that there was an agreement to reduce rent to $10,000.00 per month.[41] However, there was dispute regrading whether or not the Applicant had agreed to repay the reduction amounts after the Applicant returned to profitable trading. Mr Forbutt denied that there was any agreement to repay. Mr Bos asserted there was an agreement to repay. For reasons set out below it is not necessary to make any finding regarding whether or not the reduced amount was to be repaid.
  3. [61]
    An agreement to simply accept less rent than is due under the Lease agreement is not an agreement that is supported by consideration. There is no benefit to the Respondent and no detriment to the Applicant meaning there is no consideration and that such agreement is, therefore, not enforceable as a contract.
  4. [62]
    The promise to accept less rent (irrespective of whether the reduced amount is repayable) would however become enforceable if all the elements of estoppel are present. For estoppel to be found, there must be a promise, the promisee must act in reliance on the promise to their detriment and then the promise is not fulfilled in circumstances where it is unfair or unjust to break that promise.[42] The Applicant stated during the hearing that the Applicant did make some payments of $10,000.00. However, there is no documentary evidence to indicate the payment of any amounts of $10,000.00. In Young v Queensland Trustees Ltd (1956) 99 CLR 560 the High Court held that the burden of proving payment or satisfaction of debt rests with the party that alleges satisfaction. If there was a dispute as to the amount of arrears, it would be reasonable to assume that any documentation relevant to payments made would be before the Tribunal. There was no such evidence. The Tribunal cannot make a finding that monthly payments of $10,000.00 were made. Therefore, there is insufficient evidence to find that the Applicant has acted (made payment) in reliance on the promise of reduced rent. Nor is there any evidence of detriment to the Applicant from any action in reliance on the promise. Estoppel cannot be relied upon to enforce the promise of reduced rent.
  5. [63]
    The Respondent has the right to be paid the arrears as set out in the notice. However, in that the Tribunal has found that the notice to remedy was not in accordance with statutory requirements, the legal costs associated with the notice will not be awarded. In relation to interest on the arrears, the right to payment of the arrears was an accrued right under the contract. Likewise, any claim for interest would require reference to the contractual right for interest set out in the Lease agreement. The Lease agreement sets out at clause 12.5 that interest on arrears is to be paid at “the stipulated rate”. The stipulated rate is defined in clause 1 of the Lease agreement as “a percentage interest rate per annum equal to the prime lending rate charged by the Landlord’s bank plus (5) per-cent”. The Respondent submits that the stipulated rate is 12.85%.[43] To strictly apply the stipulated rate, interest should be applied individually to each overdue invoice in relation to rent and outgoings from the point at which each invoiced amount became overdue. There is a paucity of evidence before the Tribunal in this regard. The Tribunal has not been furnished with sufficient evidence to permit such calculations. Rather, the Tribunal will proceed in a way that is economical, informal and quick[44] and will calculate interest on the total amount of arrears from the date of the notice to remedy to the date the payment is made. 

Costs

  1. [64]
    Both parties seek costs. Neither party has achieved the order they sought. The Applicant’s amended claim will be dismissed. The Respondent’s counterclaim met with some success but only to the extent of the arrears amount of $166,655.57 plus interest. The Respondent had requested the Tribunal to order payment to the monetary limit of the jurisdiction being $750,000.00 in relation to claims that  exceeded $2,880,000.00. There is nothing before the Tribunal to support a finding that it is in the interests of justice to depart from the default position that each party bear their own costs in proceedings before the Tribunal.
  2. [65]
    Accordingly, the Applicant’s claim is dismissed. The Applicant is ordered to pay to the Respondent the arrears amount plus interest. No order will be made regarding costs.

Footnotes

[1] Affidavit of Romolo Bos, 4 June 2021 at paragraph 3.

[2] Ibid at paragraph 7.

[3] Lease Freedom, Amended Notice of Dispute, Annexure, Hearing Book page 88.

[4] Affidavit of Antony Forbutt, 10 May 2021 at paragraph 70.

[5] Ibid at paragraph 77.

[6] Applicant’s written submissions, 29 March 2023 at paragraph 66.

[7] Affidavit of Antony Forbutt, 10 May 2021 at paragraph 22(a); Affidavit of Romolo Bos, 4 June 2021 at paragraph 49(a).

[8] Affidavit of Antony Forbutt, 10 May 2021 at paragraph 25.

[9] Affidavit of Romolo Bos, 4 June 2021 at paragraph 50.

[10] Affidavit of David Evans, 3 June 2021 at paragraph 37.

[11] Affidavit of Antony Forbutt, 10 May 2021 at paragraph 29.

[12] Ibid at paragraph 30.

[13] Affidavit of David Evans, 3 June 2021 at paragraph 23.

[14] Commercial Banking Co of Sydney Ltd v RH Brown & Co (1972) 126 CLR 337 at 350.

[15] Affidavit of Evans at paragraph 25.

[16] Notice of Dispute, Annexure A at paragraph 11.

[17] Ibid at paragraph 12.

[18] Affidavit of Romolo Bos, 4 June 2021, Exhibit RB03.

[19] Ibid.

[20] Ibid.

[21] Retail Shop Leases Act 1994 (Qld) section 83(3).

[22] Ibid at section 46B.

[23] Ibid at section 46B(3).

[24] [1983] HCA 14 at paragraphs 11 to 13; (1983) 15 CLR 447.

[25] Ibid.

[26] See Acts Interpretation Act Qld section 48A; QUYD Pty Ltd v Marvass Pty Ltd (2009) 1 Qd R 41.

[27] See Macquarie International Health Clinic Pty Ltd v Sydney Local Health District (2020) 103 NSWLR 443 at 326 – 340.

[28] See Respondent written submissions, 29 March 2023 at paragraph 109.

[29] 103 NSWLR 443 at 326(c).

[30] Respondent written submissions, 29 March 2023 paragraph 108.

[31] Applicant written submissions, 29 March 2023, paragraph 62; Respondent written submissions, 29 March 2023, paragraph 110.

[32] Wash Investments Pty Ltd & Ors v SCK Properties Pty Ltd & Ors [2016] QCA 258 at paragraph 25.

[33] Cheshire and fifoot, Law of Contrat, February 2023 at 9.2.

[34] Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd (2007) 233 CLR 115, 135; [2007] HCA 61 at paragraph 44.

[35] Cheshire & Fifoot, Law of Contract, February 2023 at 9.2.

[36] Affidavit of Forbutt Exhibit AF-12.

[37] Allphones Retail Pty Ltd v Hoy Mobile Pty Ltd [2009] FCAFC 85.

[38] See Ryder v Frohlich [2004] NSWCA 472. DTR Nominees Pty Ltd v Mona Homes Pty Ltd,
(1978) 138 CLR 423

[39] Cedar Meats (Aust) Pty Ltd v Five Star Lamb Pty Ltd (2014) 45 VR 79 [2014] VSCA 32 at [19]

[40] Affidavit of Forbutt at paragraph 65.

[41] Affidavit of bos at paragraph 59.

[42] Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387

[43] Respondent’s written submissions, 29 March 2023 at paragraph 115(c).

[44] Queensland Civil and Administrative Tribunal Act 2009 (Qld), section 3.

Close

Editorial Notes

  • Published Case Name:

    Crema Espresso Leasing Pty Ltd v Grocorp Developments Pty Ltd

  • Shortened Case Name:

    Crema Espresso Leasing Pty Ltd v Grocorp Developments Pty Ltd

  • MNC:

    [2023] QCAT 281

  • Court:

    QCAT

  • Judge(s):

    Member Katter, Member McBryde

  • Date:

    10 Jul 2023

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
Allphones Retail Pty Ltd v Hoy Mobile Pty Ltd [2009] FCAFC 85
2 citations
Jump To
Cite 1 - [2009] FCAFC 85
Cite 2 - [2009] FCAFC 85
Cedar Meats (Aust) Pty Ltd v Five Star Lamb Pty Ltd [2014] VSCA 32
2 citations
Jump To
Cite 1 - [2014] VSCA 32
Cite 2 - [2014] VSCA 32
Cedar Meats (Aust) Pty Ltd v Five Star Lamb Pty Ltd (2014) 45 VR 79
2 citations
Jump To
Cite 1 - (2014) 45 VR 79
Cite 2 - (2014) 45 VR 79
Commercial Bank of Australia Ltd v Amadio (1983) 15 CLR 447
2 citations
Jump To
Cite 1 - (1983) 15 CLR 447
Cite 2 - (1983) 15 CLR 447
Commercial Bank of Australia Ltd. v Amadio [1983] HCA 14
1 citation
Jump To
Cite 1 - [1983] HCA 14
Commercial Banking Company of Sydney v R H Brown & Co (1972) 126 CLR 337
2 citations
Jump To
Cite 1 - (1972) 126 CLR 337
Cite 2 - (1972) 126 CLR 337
DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 C.L.R 423
2 citations
Jump To
Cite 1 - (1978) 138 C.L.R 423
Cite 2 - (1978) 138 C.L.R 423
Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd (2007) 233 CLR 115
2 citations
Jump To
Cite 1 - (2007) 233 CLR 115
Cite 2 - (2007) 233 CLR 115
Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd [2007] HCA 61
1 citation
Jump To
Cite 1 - [2007] HCA 61
Macquarie International Health Clinic Pty Ltd v Sydney Local Health District (2020) 103 NSWLR 443
2 citations
Jump To
Cite 1 - (2020) 103 NSWLR 443
Cite 2 - (2020) 103 NSWLR 443
QUYD Pty Ltd v Marvass Pty Ltd[2009] 1 Qd R 41; [2008] QCA 257
2 citations
Jump To
Cite 1 - [2009] 1 Qd R 41
Cite 2 - [2009] 1 Qd R 41
Ryder v Frohlich (2004) NSWCA 472
2 citations
Jump To
Cite 1 - (2004) NSWCA 472
Cite 2 - (2004) NSWCA 472
Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387
2 citations
Jump To
Cite 1 - (1988) 164 CLR 387
Cite 2 - (1988) 164 CLR 387
Wash Investments Pty Ltd v SCK Properties Pty Ltd [2016] QCA 258
3 citations
Jump To
Cite 1 - [2016] QCA 258
Cite 2 - [2016] QCA 258
Cite 3 - [2016] QCA 258
Young v Queensland Trustees Limited (1956) 99 CLR 560
1 citation
Jump To
Cite 1 - (1956) 99 CLR 560

Cases Citing

No judgments on Queensland Judgments cite this judgment.

1

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