A decision of the Administrative Decisions Tribunal of NSW (Tribunal) recently confirmed the position under the Retail Leases Act 1994 (NSW) (Act) that a statement or representation that is ultimately misleading does not necessarily provide an actionable right.
The facts of the case may be briefly summarised as follows:
- The lessee lodged an application against the lessor for conduct that the lessee alleged was unconscionable pursuant to the Act.
- During the course of the fitout of premises a dispute arose in relation to the lessor’s alleged failure to provide a mechanical exhaust system for the shop.
- The claim of the lessee was based on alleged pre-lease misrepresentations contrary to Section 10 of the Act and misleading representations contrary to Section 62D of the Act.
Pursuant to Section 10 of the Act, a party to a retail shop lease is liable to pay another party to the lease, reasonable compensation for damage suffered by the injured party entering into a lease as a result of a false or misleading statement or representation made by the other party acting under the parties authority with knowledge that it was false or misleading.
Section 62D of the Act provides that a party to a retail shop lease must not in connection with the lease be engaged in conduct that is misleading or deceptive to another party to the lease or that is likely to mislead or deceive another party to the lease.
The representation which the lessee alleged to be false or misleading was a statement contained in the lessor’s tenancy fitout manual which noted that the lessor had provided the mechanical system for the exhaust system to food tenancies.
Relevantly, the fitout manual had been prepared prior to the subdivision of premises which resulted in creation of new premises which were the subject of the lease to the tenant. The tenant was originally offered a lease of the un-subdivided premises.
The Tribunal found that the lessor had, through the tenancy fitout manual, represented that it would provide exhaust ducts to all food tenancies and this was ultimately misleading or false. However, to succeed under Section 10 the lessee also had to prove its claim that at the time the lessor made the statement or representation it had no reasonable basis to make it and that the lessee relied on the statement or representation when entering into the agreement to lease. The lessee did not prove its case in this regard.
The same principles apply in relation to the claim under Section 62D. The lessee would be required to prove on the balance of probabilities that when the lessor made its representation to the lessee, the lessor did not have a reasonable basis for belief that the food tenancy in which the lessee was interested would be provided with exhaust ducting. The Tribunal found that there was insufficient evidence that proved that at the time the representation was made the lessor had no reasonable basis to represent that the tenancy in which the lessee was interested would be provided with exhaust ducting.
Importantly, the Tribunal noted that if the lessee had relied on the representation in entering in to the Lease it would have been expected that the lessee would have raised its concerns after it had been provided with the lessor’s offer of lease, disclosure statement and agreement to lease none of which committed the lessor to carry out the exhaust ducting work. The representation in the tenancy fitout manual was not sufficient in the circumstances.
Two points in particular to note from this decision of the Tribunal from a practical perspective are:
- Lessors’ should ensure consistency in works descriptions in all relevant documentation for example the offer to lease, disclosure statement and agreement for lease; and
- The lessor contended in its arguments that the statement in the tenancy fitout manual was not in fact a representation when read in light of introductory words in the manual stating that the document was a guide only and to be read in conjunction with the agreement to lease and lease and that in the event of any inconsistency the provisions of the lease shall apply. The disclaimer also went on to note that delivery of the tenancy fitout manual does not give any contractual rights nor is it to be regarded as a warranty or representation in any way. The Tribunal did not accept this argument noting that the manual was prepared in accordance with a statutory duty provided in Section 13A of the Act which provides that a tenant is not required to carry out any fitout that is of a kind not referred to in the tenancy fitout guide.
Accordingly, take care with fitout guides as a lessor to ensure they are accurate as disclaimers will not necessarily protect you.