QCAT update: Retail shop lease dispute

In the recent decision of Daggar & Anor v Lawrence & Ors [2019] QCAT 314, the Queensland Civil and Administrative Tribunal (Tribunal) dismissed a claim by the tenants of a retail shop for loss and damage as a result of alleged misrepresentations by the Lessors and agent.

Background

Ms Daggar and Ms Mackenzie (the applicants) operated a shop in Clontarf between 1 March 2015 and 31 March 2019. The premises was owned by Mr and Mrs Lawrence (the Lessors) until 2017, with Wave Realty Pty Ltd (Wave) acting as agent for the Lessors.

The applicants allege that they entered into the lease due to misrepresentations made by the Lessors and Wave, and filed a notice of dispute under the Retail Shop Leases Act 1994 (Qld) (the Act).

At the time of the hearing, the application to be determined by the Tribunal was a claim under s 43AA of the Act for false or misleading statement or misrepresentation, with the applicants seeking a refund of all lease payments made to the Lessors during the operation of the shop.

The alleged misrepresentations

The applicants' claim was for loss and damage sustained as a result of a number of misrepresentations made by or on behalf of the Lessors, including (among other allegations):

1. That the premises was capable of obtaining a food business licence from the Council;

2. That there was a high level of foot traffic past the premises;

3. That the applicants did not need to listen to the Council in relation to the requirement for a food business licence and/or a development approval to operate the business; and

4. That no disclosure statement was given to the applicants, nor were they given the opportunity to obtain legal and/or financial advice prior to entering into the leases.[1]

The applicants also maintained that the Lessors and Wave (the respondents) failed to disclose the costs associated with installing a commercial kitchen to satisfy Council's requirements to obtain a food business license.

Decision

The Tribunal ultimately preferred the evidence of the respondents for a number of reasons as outlined below.

Inconsistency of evidence

The Tribunal noted that the applicants' evidence revealed a number of inconsistencies. For example, the applicants initially argued that the respondents made misrepresentations as to the lawful use of the premises, but later noted it was the respondents' failure to advise them of the costs involved in obtaining the necessary approvals, which caused their loss.

The Tribunal similarly found that the respondents had not misrepresented the foot traffic of the area to the applicants. The Tribunal noted, however, that the applicants' residential proximity to the premises[2] meant that even if the respondents had made the representation, it would not have been relied upon by the applicants. As a result, the Tribunal found the applicants to be unreliable witnesses.

On the other hand, the Lessors' evidence was consistent across their oral and written evidence, and was supported by evidence given by an employee of Wave. The Tribunal considered that the Lessors presented as reliable witnesses. The Tribunal also accepted the evidence presented by the owner/principal of Wave, stating that she presented as an honest witness.

Disclosure statements

The applicants alleged that had the respondents required them to provide a disclosure statement, financial advice report or a legal advice report, as required under the Act, the applicants' lack of business acumen and financial backing would have been revealed and they would have been prevented from entering into the lease.

It was conceded at the hearing that the respondents did not provide the applicants with a disclosure statement or satisfy the requirements of s 21B of the Act. The applicants also failed to provide the respondents with a disclosure statement under s22A of the Act or a financial advice report or legal advice report under s 22D of the Act. The owner/principal of Wave acknowledged that it was her first commercial lease and she was not aware of the requirement for disclosure statements, a financial advice report or legal advice report in accordance with the Act.

The Tribunal held that each party to the lease failed to satisfy obligations under the Act, but that the rights that flowed from this failure were not exercised by the parties. Further, the Tribunal held that the respondents' failure to provide the disclosure statement, or obtain one from the applicants, did not constitute a representation as the information contained in statements would not have addressed any of the alleged misrepresentations and, as a result, the applicants would not have been dissuaded from entering into the lease.

Misrepresentations

The Tribunal held that:

"In the course of the evidence it became apparent that many of allegations related not to representations made by the respondents but to alleged failures by the respondents to advise the lessees [the applicants] of certain facts of which the lessees say the respondents should have been aware. Further, the applicants said that because they were naive, the respondents were 'morally' obliged to tell them these facts."[3]

The applicants conceded that they were inexperienced in commercial business and did not read the lease before signing. The applicants similarly noted they had made their own enquiries about the Council's requirements prior to entering the lease. As such the applicants' allegation that the respondents failed to inform them of the requirement to obtain Council approvals (including the time and costs involved with compliance) did not constitute a representation that was relied upon. The fact that the applicants had continued to operate their business without Council approvals supported this.

The Tribunal ultimately dismissed the application.

Conclusion

Whilst the respondents were ultimately successful, this case serves as a timely reminder for agents to err on the side of caution and seek appropriate advice, including legal advice where necessary, when acting outside their area of expertise.

Agents should also ensure that during the course of every transaction, they keep appropriate records such as files notes of meetings and telephone conversations, and copies of emails and letters, and make sure that those materials are readily available, if later required, to evidence the agent's role in the transaction. A thorough paper trail evidencing the agent's involvement in a transaction will greatly assist in the defence of any such claims.

[1] [2019] QCAT 314 at [11]

[2] The applicants resided in the neighbouring property since September 2013.

[3] Ibid [92]

For more updates like this, visit our news here.