Tribunal Orders Landlord to Pay Rent and Costs for Lease Breach

The Tribunal declared that the landlord breached the lease's exclusivity clause by permitting additional operators of the same type of food in the premises, ordering the tenant to pay outstanding rent and costs.

OUTCOME: Allowed

CITATION: [COMPANY_1] -v- [COMPANY_3] [2001] NSWADT 83 DIVISION: Retail Leases Division APPLICANT PARTIES: [COMPANY_1] RESPONDENT [COMPANY_2]: 005024 HEARING DATES: 19 - 23/03/01, 5 - 6/04/01 SUBMISSIONS CLOSED: 04/06/2001 DATE OF DECISION: 05/21/2001

BEFORE: [NAME_4] Member APPLICATION: Claim for declaration of rights, obligations and liabilities under a lease - Claim for payment of money - Claim for relief from payment of money MATTER FOR

DECISION: Principal matter LEGISLATION CITED : Retail Leases Act 1994 Taylor Farms v Kalcos (1999) BC 9900793 CASES CITED: Waltons Stores Ltd v. Maher (1988) 76 ALR 513 Prasad v Fairfield City Council (2001) NSWADT 28 APPLICANT REPRESENTATION: [NAME_6] barrister RESPONDENT [NAME_8] SC ORDERS:

1. Declare that from November/December 1999, [NAME_2] has not complied with its obligation under the lease to [NAME_1] of Shop 24LP [NAME_10] not to have more than one operator of Thai and Malaysian food in the [NAME_10].;

2. Declare that [NAME_1] is obliged under the lease to pay outstanding Rent, [ADDRESS] Costs and Marketing Fund Contributions (if any) and to continue paying those items.;

3. By consent declare that for so long as the current tax ruling remains applicable to the lease, the lessee is not obliged to pay GST in respect of the payments under the lease the subject of the ruling.; 4.Liberty to apply for further orders resulting from determinations in these reasons including orders as to damages and costs.;

5. Applications by each party otherwise dismissed.

1 [NAME_2] owns the building now known as [NAME_10] in the heart of the [ADDRESS] retail shopping area of the Sydney CBD. [ADDRESS] in the lower ground floor is probably one of the biggest and busiest in Sydney and NSW. [NAME_1] leases a take-away food shop in the [ADDRESS] of [NAME_10]. [NAME_2] and [NAME_1] are in an extensive and protracted dispute concerning the lease between them. 2 The dispute falls into three general areas:- (a) [NAME_1]'s claim that in breach of its rights, [NAME_2] has permitted more than one operator of Thai and Malaysian food in the [ADDRESS], (b) [NAME_2]'s claim for Turnover Rent and damages in relation to [NAME_1]'s failure to have kept proper records. (c) [NAME_1]'s claim for relief in relation to certain alleged financial obligations under the Lease. 3 Pursuant to my obligation under s.74 of the Act, I encouraged the parties during the hearing to use their best endeavours to settle the dispute having regard to my initial rulings and my observations during the hearing. Regrettably they were unable to reach agreement so it falls to the Tribunal to adjudicate the matter. Chronological findings of fact 4 In November 1996 [NAME_11], the principal of [NAME_1], approached [NAME_2] to begin negotiations for a tenancy in the proposed [ADDRESS] within the [NAME_10] then being redeveloped by [NAME_2] on its principal CBD site. [NAME_11] provided references and information establishing his credentials with his partner as a long-standing operator of Thai and Malaysian food services in Sydney including previously for many years in the Sydney CBD at the Queen Victoria Building. 5 These discussions resulted in a formal Letter of Offer of 2 December 1996 written by [NAME_13] as regional manager NSW, (copy to [NAME_14], group general manager). [NAME_13] then went on leave and the next meeting was between [NAME_11] and [NAME_14] on 11 December 1996 which resulted in a response written by [NAME_11] of 8 January 1997 proposing substantially different terms, in particular requiring a lower rental, rejecting Turnover Rent, requiring a rent-free fit out period and amending the [NAME_2] original permitted use of "retail sale of Thai take-away cuisine" to "exclusive rights for sale of Thai and Malaysian cuisine in [NAME_10] (covenant to be included in Lease)." 6 Further discussions then took place which included information being provided by [NAME_2] to [NAME_1] that the [ADDRESS] development would proceed in two with Stage 1 being specialist food outlets, cafes and restaurants with Stage 2 being the north-eastern sector leading to Mid-City Centre as a superior food hall and delicatessen as a competitor to the well-known [NAME_16] city food hall. The proposed food types and uses for Stage 1 were generally described to [NAME_11] in terms that no other food court operation was at that time designated for Thai/Malaysian food. 7 Originally the shop proposed for [NAME_1] in [NAME_2]'s letter of 2 December had been shop 23 LP on the plans but by the January negotiations it had been changed to 24 LP and the indications were for a Kebab shop on one side, a Chinese take-away on the other with a range of food types and usages proceeding around the Court, none of which were at that time designated as for Thai and/or Malaysian food. 8 The Floor Plan shown to [NAME_11] at that time included allocation of the whole of the Stage 2 to a tenant designated as [NAME_18], said to be a well-known and high-quality American delicatessen and food hall operator which would operate as a competitor with the well known [NAME_16] high quality Food Hall nearby. 9 At the meetings in January between [NAME_11] for [NAME_1] and [NAME_13] and [NAME_14] for [NAME_2], there was discussion of [NAME_11]'s requirement for exclusivity for Thai and Malaysian food in the [ADDRESS]. [NAME_13]'s evidence was that he expressly stated to [NAME_11] words to the effect that "exclusivity could not be offered" and in his evidence [NAME_11] agreed that at least [NAME_13] had stated that "[NAME_2] would not allow a covenant to be included in the Lease about exclusivity". 10 However I am satisfied on the evidence that in those discussions it was stated that [NAME_2], while not offering exclusivity as such, did not intend to have more than one Thai/Malaysian food operator in the [ADDRESS] and, when [NAME_13] sent the amended Offer of Lease to [NAME_11] on 30 January1997 it included the following segment: "SPECIAL CONDITIONS: Special Conditions 1. Subject to the development programme and the Owner's final approval rent is to be maintained at 15% of turnover until Stage 2 opens.

2. It is our intention not to have more than one operator of Thai and Malaysian food.

3. Display of Thai artifacts to be in display cabinet.

4. Lessee to own 60% of fixtures and fittings." 11 [NAME_1] having by then been incorporated as a company, on 7 February 1997 a hand amended form of the [NAME_2] offer of 30 January was returned replacing the company name of the addressee and signed by [NAME_11] on behalf of the company but importantly in the Special Conditions section set our above, changing the turnover percentage in Special Condition 1 to 12% and adding the following Special Condition: "6. Rent free figure a period of six weeks." 12 Significantly this accepted Letter of Offer included among the costs payable by the Lessee "[ADDRESS] Costs: (if applicable) $300 per metre square per annum". 13 [NAME_2] then on 19 February 1997 sent a letter signed by its "Lease Administrator - Shopping Centres", [NAME_19], which included the following: I am in receipt of your signed Letter of Offer pertaining to the above tenancy and confirm that I will now arrange for preparation of the Lease documentation. I draw your attention to Special Condition 2 on the letter and confirm that while we have stated therein that it is not our intention to have more than one operator of Thai and Malaysian food, this does not confer exclusivity in relation to Thai and Malaysian food. 14 In early March 1997 the [NAME_21] had received a Draft Agreement to Lease with Lease annexed (which was not in evidence before me). In the form finally signed by the parties the Agreement to Lease appropriately dealt with the interim issue of the completion of the construction of the [ADDRESS], specifying in detail [NAME_22]'s Works and the Lessee's Works, annexing Part 3 of the extensive "fit-out manual" for [NAME_10] which specified [NAME_22] responsibilities both as to the person responsible for designing building, paying for, owning and maintaining the extensive list of fit-out items. 15 By letter of 27 March 1997 [NAME_11] submitted a substantial list of adjustments to the proposed lease documentation which was then discussed with [NAME_14], particular reference being made to the record keeping provision relevant to calculation and determination of Turnover Rent in s.21 of the Lease. [NAME_2]'s usual requirement was for a cash register and record system whereby receipts were recorded for each customer and each transaction. [NAME_1] said this was not possible for their business and proposed a system for tallying the cash recorded by the register every three or four hour period. That proposal was ultimately accepted for this particular Lease by [NAME_2] and resulted in clause 21.2 of the Lease discussed below. 16 The negotiations on the documentation continued until June. The Agreement for Lease with Lease annexed was finally negotiated and said in oral evidence to have been signed on 9 July 1997 although the signed copy in evidence as Exh. 1 is dated 23 September 1997. It implements the changes negotiated between the parties but significantly does not include in the Schedule to either the Agreement for Lease or the annexed form of Lease, all the Special Conditions set out in the Letter of Offer of 30 January as accepted in amended form by the [NAME_1] letter of 7 February. 17 Also significantly, while there is an inclusion in the reference table of the Lease to "[ADDRESS] Costs - $300 per square metre per annum", there was no operative provision within the Lease document establishing an express obligation to pay [ADDRESS] operating costs. 18 The Agreement for Lease implemented the agreed position from the amended Special Conditions as to the payment of rent during Stage 1 but did not include the six weeks rent-free period during fit-out contained in the Special Conditions with the acceptance of 7 February 1997. Nevertheless in evidence it was acknowledged that this six weeks rent-free period was subsequently implemented. 19 [NAME_1] commenced trading from the premises on 5 December 1997 and the Lease which commenced on 4 December 1997 was subsequently signed on 27 March 1998. Although subsequently stamped and registered, a counterpart was not provided to [NAME_1] for a number of months. 20 The executed Lease had a number of variations of detail from the Form of Lease annexed to the Agreement for Lease including the calculation of rent, the base gross sales figure (for calculation of Turnover Rent) and the termination date which was expressed to be 3 September 2009 although the term was "ten (10) years and nine (9) months". I note that [NAME_1] subsequently consented to a variation to the Lease to correct the obvious error of termination date to 3 September 2008. 21 The Lease effected the agreed changed record keeping provision in clause 21.2 and apart from the changes referred to, was in terms of the form annexed to the Agreement for Lease, including that it did not have an operative provision for the payment of [ADDRESS] Costs, Special Condition 2 or the six weeks rent free period (the latter period of course having concluded at the time the signed Lease commenced). 22 Clause 21 of the Lease provides:- 21.1 Provision of statistics For the purposes of determining the Turnover Rent and for a range of other statistical reasons which are relevant whether or not the Lessee is required to pay Turnover Rent under this Lease, the Lessee will (a) within 14 days after the last day of each month throughout the term give to [NAME_22] a statement itemised in reasonable detail and certified by the Lessee of the Lessee's Gross Sales (including if requested by [NAME_22] the number of transactions) during that month together with a cumulative total of Gross Sales for that part of the Turnover Rent Period then expired; and (b) within 42 days of the expiration of each Turnover Rent Period, and within fourteen (14) days after the date of any arrangement or transfer of this Lease by the Lessee, (time being of the essence) give to [NAME_22] a statement of the Lessee's Gross Sales during the expired Turnover Rent Period (itemised in reasonable detail) which is audited by an CPA Accountant." 21.2 Records For the purpose of determining the Turnover Rent: (a) the Lessee will: (i) during every 3 to 4 hour period ("the periods'), count and record on a cash register supplied by the Lessee and kept in the Premises, the total of all moneys received during the periods; (ii) record the total of all Gross Sales commencing from the first day of each Turnover Rent Period. (b) the Lessee must keep all cash register rolls or computer discs on which records or information are stored in accordance with sub-clause (a)(iii) for at least 3 years after the end of the Lease Year or Portion of a Lease Year to which they relate; (c) the records referred to in sub-clause (b) will be kept: (i) during the Term - at the Premises or any other place approved by [NAME_22] acting reasonably; and (ii) after the Expiration Date - at a place approved by [NAME_22] acting reasonably; (d) [NAME_22] will be entitled to inspect or cause an Accountant as auditor to inspect the records referred to in sub-clause (b): (i) at the place specified in sub-clause (c); (ii) during normal business hours; (e) When an inspection or audit is undertaken under sub-clause (d); (i) [NAME_22] and any auditor appointed by [NAME_22], will be entitled to enter into the place specified in sub-clause (c); and (ii) the Lessee will make available to [NAME_22] and to any auditor reasonably suitable facilities and equipment to enable [NAME_22] and any auditor to undertake an audit and inspection of the records referred to in sub-clause (b); (f) if [NAME_22] has an audit made of the Gross Sales shown by any statement given to [NAME_22] under clause 21.1 which determines the Gross Sales to have been understated the Lessee will pay to [NAME_22]: (i) any Turnover Rent which, arising from the audit, is shown not to have been paid; and (ii) if the audit finds the Gross Sales to have been understated by more than 5% of the cost of the audit. The decision of the auditor (in the absence of clear error) is binding on the parties. 21.3 Failure to comply If the Lessee does not comply with clause 21.1 or clause 21.2 [NAME_22] may, at [NAME_22]'s opinion and without prejudice to any other remedy or right, elect to have the Gross Sales for the Turnover Rent Period in which the non-compliance occurs to be taken to be: (a) an amount which represents the Gross Sales for the Turnover Rent Period on the basis that the Gross Sales for the that period are calculated as if they were throughout the Turnover Rent Period the highest monthly amount of Gross Sales specified in a statement under clause 21.1 or determined following an audit under clause 21.2(d); or (b) if no statement has been given by the Lessee the amount which [NAME_22] reasonably estimates to be the Gross Sales for the relevant Turnover Rent Period. If the provisions of this sub-clause apply, [NAME_22] will provide a statement of Gross Sales for the relevant Turnover Rent Period and Turnover Rent will be paid by the Lessee to [NAME_22] as if the statement of Gross Sales provided by [NAME_22] under this sub-clause was a statement provided by the Lessee under clause 21.1. [ADDRESS] then operated under the management of [NAME_2] with [NAME_13] as the responsible [NAME_2] officer. 24 There was no established management system for the monitoring of the cash record keeping regime for [NAME_1] or for any of the other tenants under their transaction receipts based regimes. [NAME_13] in his evidence confirmed that except for once reviewing turnover figures early on in the operation of the [ADDRESS], [NAME_2] did not during the first year of operation implement a system for regular review of the records the [ADDRESS] operators were obliged to keep. 25 [NAME_1] had installed a TEC MA 186 cash register which has the capacity to produce the three to four hour reports referred to in clause 21.2 (referred to in the evidence in this case as "X" reports) as well as daily tallies of total transactions (referred to as "Z") reports. However from the beginning [NAME_1] only retained the daily "Z" report slips based upon [NAME_11]'s understanding from his accountant that these would be sufficient for audit purposes under the Lease. 26 It was not established on the evidence that the accountant for [NAME_1] had specifically reviewed the terms of the Lease as to [NAME_1]'s accounting obligations but in July 1998 [NAME_1] submitted to its accountants "Z" reports for sales for December 1997 to June 1998 for the purpose of providing the annual statement under clause 21.1 of the Lease. 27 [NAME_1] had been complying with clause 21.1(a) in relation to monthly statements. [NAME_1] would provide gross sales within 14 days of the end of each calendar month. 28 Capital Costs Claim. In December 1997 immediately upon commencement of the Lease a dispute arose as to liability for certain works being modifications and alterations alleged to be payable by [NAME_1] in respect of its tenancy. Those items being: Modify ceiling Modify sprinklers Mechanical Services Kitchen exhausts Hydraulics Kitchen Exhausts Sprinklers On the face of it, these items were Lessee's work within Part 3 of Fit-out Manual (attached to the Agreement for Lease), and certainly the major ones such as hydraulics, kitchen exhausts, ceiling modification and additional design.

29 Protracted negotiations proceeded with [NAME_1]'s architectural and building advisers referring to major problems during the fit-out as part of the basis for contesting this capital works claim by [NAME_2]. By 4 August 1998 [NAME_2] had accepted a [NAME_1] offer to pay $5,000 in full settlement of the $29,846 claim, payable by $1,000 monthly instalments. These payments have been made. 30 Trading appears to have continued in the ordinary course during 1998 with little "cross-over" of food types between the operators; that is, from [NAME_1]'s perspective no other operators were in fact selling items of Thai and Malaysian food or if any such items were sold they were obviously minor and not such as to give rise to any dispute between the parties. 31 In August 1998 [NAME_2] "out-sourced" its Centre Management function to [COMPANY_24] ("[NAME_24]") although [NAME_13] continued in his function under [NAME_24] and it appears [NAME_14] also continued in his role. 32 At that time Stage 2 was being developed but as negotiations had broken down for it to be operated as a food hall and delicatessen as originally proposed, it too became an extension of the [ADDRESS] with convenience food operators. It opened in November 1998 including, it appears, North Indian Flavour, an operator of Indian food. 33 At the end of 1998 [NAME_13] resigned his employment with [NAME_24] and was replaced in January by [NAME_25]. 34 In April 1999 [NAME_10] retained the services of [NAME_27] trading as [NAME_29] whose functions included carrying out housekeeping and menu reviews and her review of April 13, 1999 stated that by selling "roti", [NAME_1] was selling an "item not within permitted use". This resulted in a formal notice from [NAME_10] to [NAME_1] stating:- "As a result of this survey we are advised that your store is not trading within its permitted usage. As this constitutes a breach of the Lease we respectfully request your co-operation through the immediate removal of all non-permitted items from your menu." The report had also listed bottled and canned beverages and iced tea as non-permitted uses. This would be subsequently varied by agreement between the parties at the same time that the variation for the Lease termination date referred to above was being effected.

35 [NAME_11] for [NAME_1] then went to great lengths to produce documentary evidence that "roti" was legitimately included within Thai and Malaysian food including a letter from the Malaysian High Commission. The point was ultimately accepted by [NAME_25] in a letter of 4 November 1999 attaching the proposed Variation of Lease of document. 36 In October 1999 the food operator "[NAME_30]" next to [NAME_1] began selling a substantial number of laksa dishes which [NAME_1] claimed to number up to 13 and which at least included eight such dishes based on a photograph of their menu board. I am satisfied that laksa is now widely known in Australia as a specialty Malaysian food, being a noodle dish using coconut milk and chilli spiced soup with particular ingredients providing a distinctive flavour. 37 Understanding that [NAME_29] continued to be retained as consultants for reporting on non-permitted food uses, [NAME_1] by letter of 22 November 1999 wrote to [NAME_27] referring to an alleged 13 laksas on the [NAME_30] menu and asking her to forward the letter to [NAME_25] together with her comments in this regard. As noted above, prior complaints as to non-permitted usage by [NAME_25] were based on a report first had from [NAME_29]. 38 Then on 27 October 1999 the shop branded "[NAME_31]" beside [NAME_30], and therefore very near [NAME_1], changed hands under a new lease which defined its permitted use as "Asian Seafood Cuisine" including three items, Seafood Laksa, Chi Chi and Thai Prawn Salad (which [NAME_1] would serve as Thai dishes). An undated photo of the [NAME_31] menu board shows that this operator then offered six laksa dishes and two other dishes identified as Thai dishes. [NAME_11] asserts, but [NAME_25] denies, that he complained in December 1999 to [NAME_25] concerning the sale of Thai food through [NAME_31]. 39 In December 1999 [NAME_25] received the monthly turnover figures for the various food store and other store operators within [NAME_10] and in association with the Centre accountant, [NAME_32], caused a letter to be written to a number of tenants including [NAME_1] stating: "We are concerned that your reported sales may not accurately reflect the true position of the store's performance. Your store's turnover does not appear to be consistent with the general performance of the Centre in any of the categories We respectfully request that you conduct a thorough audit of your sales advise us of the outcome of your investigations. In the event that despite your audit, the December turnover remains unacceptably low, [NAME_22] reserves its rights under the terms of the Lease to appoint an independent auditor who will appraise your business performance. We await your urgent response." This letter was dated 12 January 2000 but [NAME_25] went on holidays during January and did not hold any discussion with [NAME_1] either before sending it or at any later time. 40 [NAME_1] did not respond directly to the letter of 12 January despite the fact that it says it considered that its downturn in trading had explanations including the expansion of Thai/Malaysian food offerings principally in [NAME_30]. Unfortunately the extent of the documented concern about those competing operators expressed by [NAME_1] directly to [NAME_2] or [NAME_24] was not great, the principal concern having been the letter to [NAME_29]; on the uncontroverted evidence of [NAME_11], [NAME_27] informed him that she had been asked by [NAME_25] consequent upon that letter of 22 November, to come to Sydney and do a report. 41 There was also a formal letter of 21 February 2000 from [NAME_1] to [NAME_33], the General Manager of [COMPANY_2], copy to [NAME_24], complaining of competing Thai/Malaysian food sales but this did not specifically seek to tie that complaint into a basis for response to the letter of 12 January. 42 By February/March 2000 there was clearly a breakdown in the working relationship between [NAME_11] and [NAME_25] on a number of issues, including some going back to the fit-out period, those relating to competing food use, return of documentation as well as the need for an explanation on the level of sales. Then in March, [NAME_10] specified the trading hours to apply during Easter; [NAME_1], being concerned as to the state of repair of its floor, being a matter it acknowledges was within its repair obligations, elected to close its operations on 21/22 April 2000 to permit completion of the work in one job using a particular form of sealant for which such a period of time was necessary. 43 Also in April 2000 the differences came to a head over [NAME_1]'s reduction of amounts from rent payments for the [ADDRESS] Costs for which there was no operative provision in the Lease and which, on legal advice, [NAME_1] contended it was not obliged to pay despite having paid them from the beginning. 44 Also during April 2000 [NAME_1] sought to mediate its differences with [NAME_2] before the Retail Tenancy Unit without success. 45 On 5 May 2000 [NAME_10] debited [NAME_1]'s account with $1,900 being the payment calculated under the formula in the lease for failure to operate during the Centre's Easter trading hours; this debit was then disputed by [NAME_1] for the reason it considered the floor repairs to have been essential. 46 [NAME_25] continued to consider the monthly sales reports from [NAME_1] through the end of March to be unsatisfactory and by late April/early May had engaged [NAME_36], a business operating as forensic accountants, and during the week 6-13 May, employees of [NAME_36] began covertly to observe the operation of [NAME_1] without notice to the Lessee. They were observed however and by the end of the week [NAME_11] asked who they were and discovered, in the presence of the Centre Security Services that they were retained by [NAME_36]. The matter was then raised by [NAME_1]'s solicitors with [NAME_10]. 47 On 17 May, [NAME_1] made its first application to this Tribunal related only to the alleged breach of its rights in relation to food types being sold within the [ADDRESS]. From then on it must be said that a full-scale war broke out between the parties which in the nature of any major dispute, expanded to become the major and expensive matter that now falls to the Tribunal to resolve. 48 On 5 June two staff members of [NAME_36] appeared at the [NAME_1] premises bearing an unsigned letter on [COMPANY_2] letterhead advising [NAME_1] that [NAME_36] was conducting an audit pursuant to clause 21.2 of the Lease. They returned next day asking to be provided with the "Z" reports by [NAME_1] but not the "X" reports which as noted previously had not in fact been kept by the Lessee. 49 From 11 June 2000 onwards, [NAME_1] began to generate and keep the X reports as required by clause 21.2, this always having been within the capacity of its cash register system. 50 [NAME_36] then set up a programme for surveillance of the premises and its transactions to begin on 8 July and operate for 10 days during July on Tuesdays, Thursdays and Saturdays. 51 The surveillance aroused serious tension between the parties, not unexpectedly, and [NAME_1] referred the matter to this Tribunal. Interim orders were made concerning the surveillance and the conduct [NAME_36] was to observe. 52 As a result of its surveillance [NAME_36], under the management of a partner [NAME_37], produced a report of 16 August 2000, expressed to be an audit under clause 21.2 of the Lease. The report calculated the gross sales of [NAME_1] for the 1990-2000 year at a level substantially in excess of the sales reported by [NAME_1] and sufficient, in [NAME_2]'s initial contention, to entitle it both to determine Turnover Rent on the basis of the highest monthly amount of gross sales for the year calculated by [NAME_36] and also to recover the cost of the audit.

Accordingly, the next day [NAME_2] cross-claimed in these proceedings for declarations and orders relating to failure to comply with clauses 21.1 and 21.2 of the Lease together with orders to recover the costs of the audit. 53 [NAME_1] had on 6 and 7 July amended its application to expand its claims and further amendments, although ultimately very confusing and hard to follow, would again expand the claims to cover a wide range of issues in dispute between the parties. 54 At the same time in June 2000 [NAME_2] granted to the proprietors of [NAME_30] an additional lease of a shop in the Stage 2 area of the [ADDRESS] about 30-40 meters from [NAME_1] to operate under the business name "[NAME_39]". The Lease permitted the unlimited sale of "all types of dim sims, Asian food … Asian noodles….". [NAME_39] commenced trading shortly thereafter and by the time of the hearing, was trading in a menu that included a significant number of items identified as Thai and Malaysian food including at least ten laksas. 55 The matter came on for hearing commencing 19 March 2001 following extensive interlocutory proceedings for the production of documents. The hearing proceeded from 19-23 March and was concluded on 5-6 April. Initial rulings 56 I made initial rulings concerning the matter which limited the evidence and affected the nature of the claims. 57 Mental Stress. [NAME_1] had added claims for compensation for the mental stress caused to its principal, [NAME_11], as a result of the surveillance by [NAME_40]. It also claimed for medical costs. A substantial amount of evidence was filed relating to those claims. During interlocutory proceedings I considered that claim and the evidence and decided that such claims were not a relevant head of claim by a corporate Lessee claiming a breach of either the covenant of quiet enjoyment or breach of the rights against disturbance pursuant to s.34 of the Act. They are claims personal to the individual; the Lessee may only sustain claims for losses incurred by itself. Accordingly I ruled that this dimension of the case and the related evidence should not be proceeded with. To the extent that it remains necessary, given that the applicant persisted with the claims in all subsequent amendments to its application including in paragraph 10(iv) of the Sixth Further Amended Application, I dismiss that claim. 58 Rights to Turnover Rent. [NAME_2]'s cross-claim in respect of Turnover Rent and the costs of the audit by [NAME_36] was based on clause 21.2(b) of the Lease (see above). At the commencement of the hearing, having carefully considered the construction of the whole of clause 21 and having reviewed the material filed, I stated my view that I considered clause 21 of the Lease had a particular application when properly construed. I indicated that, since it is at least arguable that clause 21.3 has a penalty operation, by potentially imposing the highest month's gross sales to apply throughout an entire year for purposes of calculating Turnover Rent upon failure of the Lessee to have complied in certain respects, the clause needs to be very strictly construed. 59 Clause 21.1 requires the filing of monthly and annual certified gross sales (the annual return to be audited by an accountant). Clause 21.2 obliges the Lessee to keep particular records which are to be available for the purpose of verifying the sales returns under s.21.1. In this Lease the nature of those records was carefully negotiated and included the 3 to 4 hourly records (the so-called "X" records) together with records of all gross sales for the day. Cash register rolls or discs are to be kept on which that information is stored and to be kept at a nominated place. Clause 21.2(d) entitles [NAME_22] to cause an audit to inspect the records held under clause 21.2(b) and the Lessee must facilitate that in the stated manner. Then by clause 21.2(f) if an audit made of gross sales shown by any statement given to [NAME_22] under clause 21.1 determines the gross sales to have been understated, then the Lessee must pay the Turnover Rent which is shown not to have been paid and if the gross sales have been understated by more than 5% the Lessee must pay the costs of the audit. 60 As a matter of clear construction the only audit to which clause 21.2 applies is an audit of the particular records to be kept under that clause for the purpose of verification of the statements filed under that clause. Clause 21.2 does not prescribe an audit at large for which the Lessee is potentially liable to pay in the stated circumstances. The audit contemplated is a confined and limited audit to compare existing records with filed statements. It should be apparent to any person involved in commercial leasing that such an audit would be within a specific and narrow compass and would not be a major or expensive exercise. 61 Accordingly I ruled that in the circumstances where the Lessee had admittedly failed to keep the particular records which it had expressly negotiated for, namely the 3 to 4 hour "X" reports, there was nothing on which the audit provisions of clause 21.2 could operate. Accordingly the only basis for [NAME_2]'s claim was under clause 21.3 for the failure of the Lessee to have complied with clause 21.2 in relation to the 3 to 4 hour reports. In this case there was no allegation of failure to file the statements under clause 21.1, only to have failed to have kept the records under 21.2 in which case the rights for that failure are set out in clause 21.3(a) namely that the gross sales for calculating Turnover Rent for the annual period will be "calculated as if they were throughout the Turnover Rent period the highest monthly amount of gross sales specified in the statement under clause 21.1 or determined following an audit under clause 21.2(d). I have ruled that there was no audit under clause 21.2(d) so therefore [NAME_22]'s rights on the proper construction of clause 21.3 are to apply to the Lessee's own filed statements for the highest month across the entire period. 62 The clause does not provide that in the absence of the specific audit provided for in clause 21.2, [NAME_22] can conduct an audit at large to calculate an independently determined highest month gross sales for the purposes of clause 21.3. At best, a [NAME_23] could claim that under the general law to determine a further general right to damages, beyond clause 21.3, for breach of the Lessee's obligation under the Lease to keep the appropriate records, it can conduct an audit at large and recover the cost of that from the Lessee. 63 As a result of my ruling, [NAME_2] amended its application to claim the costs of the audit and the claimed Turnover Rent by way of general damages for breach of clause 21.2. In the circumstances I allowed the amendment. 64 As a consequence of my observation as to the arguably penal nature of the remedies under clause 21, [NAME_1] amended it's application seeking a declaration to the effect that they operate as a penalty . It was foreshadowed that as a result of this expansion of the case, there may be third party applications by industry groups to participate in the matter. 65 Following the bulk of the evidence but prior to conclusion of their respective cases, [NAME_2] informed the Tribunal that it was withdrawing its claim for Turnover Rent. [NAME_1] sought to press its claim for a declaration that clause 21 of the Lease operated in a penal manner. However I made a ruling that this issue of penalty fell away with the withdrawal of the Turnover Rent claim as there was no continuing dispute between the parties justifying the Tribunal continuing to consider the matter. 66 [NAME_2] nevertheless pressed its claim to recover the costs of the audit by way of general damages for breach of the record keeping provisions. CLAIMS FOR FULL DETERMINATION Claim for breach of food type condition 67 [NAME_1] initially based its claim for relief for permitting other sales of Thai and Malaysian food solely upon s.34 of the Act. Indeed it had taken that approach from its very first letter to [NAME_33] of 21 February 2000 and maintained that position well into the hearing of the matter. [NAME_2] accordingly developed this case as a response to that claim. Section 34 provides:- 34 Lessee to be compensated for disturbance (1) A retail shop lease is taken to provide that if [NAME_22]: (a) inhibits access of the lessee to the shop in any substantial manner, or (b) takes any action that would inhibit or alter, to a substantial extent, the flow of customers to the shop, or (c) unreasonably takes any action that causes significant disruption of, or has a significant adverse effect on, trading of the lessee in the shop, or (d) fails to take all reasonable steps to prevent or put a stop to anything that causes significant disruption of, or which has a significant adverse effect on, trading of the lessee in the shop and that is attributable to causes within [NAME_22]'s control, or (e) fails to rectify any breakdown of plant or equipment under [NAME_22]'s care or maintenance, or (f) in the case of a shop within a retail shopping centre, fails to adequately clean, maintain or repair the retail shopping centre (including common areas), and [NAME_22] does not rectify the matter as soon as reasonably practicable after being requested in writing by the lessee to do so, [NAME_22] is liable to pay the lessee reasonable compensation for any loss or damage (other than nominal damage) suffered by the lessee as a consequence. (2) In determining whether a [NAME_23] has acted unreasonably for the purposes of subsection (1) (c), due consideration is to be given to whether [NAME_22] has acted in accordance with recognised shopping centre management practices. (3) A retail shop lease may include a provision preventing or limiting a claim for compensation under the provisions implied by this section in respect of any particular occurrence if the likelihood of the occurrence was specifically drawn to the attention of the lessee in writing before the lease was entered into. Note . A disclosure statement is an appropriate means of specifically drawing the attention of the lessee to the likelihood of an occurrence. (4) The provisions implied by this section do not apply to any action taken by [NAME_22]: (a) as a reasonable response to an emergency situation, or (b) in compliance with any duty imposed by or under an Act or resulting from a requirement imposed by a public or local authority acting under the authority of an Act. 68 [NAME_1] relies on paragraphs (b), (c) and (d). 69 In the course of the hearing I expressed my doubts as to whether the proper interpretation of s.34, in the context in which it appears in the Act, supported [NAME_1]'s case. I suggested it may be confined it to disturbances of a physical or management nature that impact upon a particular shop and does not extend to the conduct of a [NAME_23] relating to rights granted to other premises which, from a commercial point of view, have a trading impact upon a shop. 70 As a result of those doubts, [NAME_1] amended its application to add breach of contract and estoppel claims in relation to the food use issue. [NAME_2] expressed its concern at such amendments but I offered it the opportunity to lead further evidence or take time to respond and sensibly in my view, counsel for [NAME_2] accepted that the amendments could be managed without inappropriate prejudice to his client. Accordingly all those issues were addressed in the submissions in the matter. Therefore the food usage issue is the subject of the claims in paragraphs (xii), (xviiA-D),(xviiiA,B), (xixA,B) of the Sixth Further Amended Application. 71 In summary those claims are that permitting other Thai/Malaysian food sales in the [ADDRESS] is:- (a) a breach of s.34; (b) a breach of a term of the lease or other collateral contract; (c) conduct from which [NAME_2] is estopped; (d) a derogation from the grant of the lease to [NAME_1]. 72 As to s.34, I am of the view that it does not provide a basis for claim by a lessee asserting that the grant of trading rights to, or the failure to enforce trading restrictions upon, other shops in a shopping Centre, have damaged its business. As noted during the hearing, I consider the section applies to disturbances of a physical or management nature that are related to a particular shop and does not extend to the conduct of [NAME_22] in this case relating to rights granted to other premises which, from a commercial point of view, have a trading impact upon a shop. 73 Therefore I reject the claims under s.34. 74 Turning to the claim based in contract, my first task is to determine the status of the negotiations and correspondence leading up to the Agreement for Lease concerning food types in the [NAME_1] operation and in the [ADDRESS]. As set out above, this was clearly a central issue in the negotiations between the parties and was addressed on a number of occasions over nearly three months leading up to the acceptance by [NAME_1] of the offer. [NAME_1] sought exclusivity for the two food types. [NAME_2] consistently declined to agree to exclusivity for the food types. The negotiation was resolved by the inclusion as a special condition in the agreed letter of offer that: "2. It is our intention not to have more than one operator of Thai and Malaysian food." 75 [NAME_1]'s signed acceptance, [NAME_2] further confirmed the offer terms in the letter from [NAME_19] of 19 February stating: "I draw your attention to special condition 2 on the letter and confirm that while we have stated therein that it is not our intention that more than one operator of Thai and Malaysian food, this does not confer exclusivity in relation to Thai and Malaysian food." 76 [NAME_2] contends that this special condition is merely a statement of the intention that existed at the date on which the statement was made and that the proper construction of that condition as a matter of the consensus between the parties is that [NAME_2] was free at any time following that date to change its intention and permit another Thai/Malaysian food operator. 77 Secondly, it points to the fact that this special condition did not find its way into either the Agreement for Lease or the Lease as finally signed. 78 Thirdly it draws the Tribunal's attention to the following express provisions in the Lease: 14.1 The Lessee warrants to [NAME_22] prior to executing the Lease the Lessee disclosed by notice to [NAME_22] all information, and every representation, warranty, promise or undertaking (other than as may be expressly contained in the Lease) that the Lessee has relied on in entering into the Lease or which has in any material way induced the Lessee to enter into the Lease. 14.4 [NAME_22] may lease premises in the Centre to persons who may use their Premises for a similar or the same kind of Permitted Use and the same type of business as the Lessee's Business. 24.4 The Lease comprises the whole of the agreement between the parties in respect of its subject matter. 79 What was the contractual status of the Special Condition? I cannot accept that these parties intended that statement, expressed to be a Special Condition, would be interpreted simply on the basis that it was only [NAME_2]'s intention for that moment and that [NAME_2] could renege on the statement of intention the day after it had been stated. A distinction was clearly drawn in the negotiations between exclusivity of the entire food type and the grant of rights for another "Thai/Malaysian food operator". That distinction having clearly been drawn it is a matter for interpretation what "operator" means, but it would fly in the face of ordinary use of language between ordinary commercial parties that they were entering into a relationship where such a statement of their intention for the lease stated as a Special Condition could be abandoned by one the very day after it had been agreed. 80 In my opinion this condition was intended to have contractual effect between these parties and formed part of the Lease between them. 81 The fact that it was not expressly included in the Lease document as finally signed is not a barrier to this. A number of matters agreed between the parties and forming part of their commercial agreement and relationship were not properly reflected in the Lease document. The incorrect termination date and the right to sell beverages were both subsequently amended by way of a formal variation of the Lease. The insertion of an operative provision for the [ADDRESS] Costs was agreed by way of rectification of the Lease as having always been part of their agreed lease terms. The rent-free period during fit-out was implemented as set out in the accepted letter of offer even though it was not included in the Agreement for Lease document. 82 Clause 14.1 above is in my view not a barrier to giving contractual effect to Special Condition 2 as the condition is clearly set out in a communication between the parties as contemplated by that clause. 83 The general provision in clause 14.4 as to similar businesses is readily able to be read, as a matter of interpretation, subject to the express terms of this condition and has areas of operation beyond the precise terms of the special condition, for example, to permit other food type operators. Clause 14.4 does not permit the "same Permitted Use", only "the same kind of use as the Permitted Use". It can also be meaningfully interpreted and applied consistent with the right of [NAME_1] to be the only "operator". 84 This does not mean my ruling is that any other sale by a [ADDRESS] operator of a Thai or Malaysian item in its menu, if permitted by [NAME_2], would be a breach of the condition. In my view [NAME_2] has agreed here that in the [ADDRESS] tenant mix, it would not authorise or permit another [ADDRESS] business to be styled as a Thai/Malaysian food "operator" or to include within its business an area of activity which constitute it a Thai/Malaysian food "operator". It is a matter for judgment at what point the inclusion of a number of Thai or Malaysian items means a business has become such an "operator". 85 In the course of the hearing much evidence was addressed to this point. [NAME_1] conceded ultimately that despite its initial claims to the contrary, the sale by a pie shop of a "Thai pie" as a single item would not constitute that person as a Thai/Malaysian food operator nor would the sale by a crepe food operator of a single crepe dish named as a Thai crepe. Similarly, [NAME_1] did not complain during 1998 when other outlets sold individual items such as satays or curries. 86 It was acknowledged within the original operation of the [NAME_10] that there would be a degree of overlap of food types and issues of non-confirming sale of food with the result that [NAME_2] originally used on a regular basis [NAME_29] to provide reports as referred to above. That was a sensible approach to resolving such disputes but it always rested with the [ADDRESS] to give effect to [NAME_2]'s legal authority under the leases to restrain non-permitted uses. 87 [NAME_1]'s serious concerns began in September/October 1999 when [NAME_30] began selling a substantial range of [NAME_1] considered that [NAME_31] under its new management had such a range of food that constituted it a Thai/Malaysian operator. The other real basis of complaint is the significant range of items offered since June/July 2000 by [NAME_39] after these proceedings had been commenced. 88 In my opinion, a food shop can properly be characterised as a Thai/Malaysian food operator if it displays for sale and sells such a range of food within those distinctive categories that ordinary members of the public would regard it as a general outlet for such food, even if it was also an outlet for other food types as well. [NAME_25], as a [NAME_2] witness, acknowledged that a food outlet could be classed as an operator of more than one cuisine. Nor would simply removing the description 'laksa' from a menu board, as has happened for [NAME_30], change the relevance of an unchanged range of laksa spicy coconut based soups in establishing an outlet as such an operator. 89 I am satisfied that [NAME_2] is in breach of the special condition by continuing to permit [NAME_30] to trade in a substantial range of laksas which are undoubtedly Malaysian food and leasing the [NAME_39] premises on an unlimited basis in circumstances where it in fact expressly promotes on its menu board at least ten laksas. 90 The evidence before me on the range of Thai/Malaysian items offered by Fish- Delish was less conclusive; however the evidence that it had offered six Laksa dishes and two other dishes identified as Thai dishes would be sufficient in my opinion under the above test to have constituted it an operator of Thai/Malaysian food for so long as that state of affairs continued. This was no longer the case during our view of this shop. 91 Accordingly I am satisfied that from about November/December 1999, [NAME_2] did not comply with its obligation under the lease to [NAME_1] in terms of Special Condition 2. 92 Before turning to the appropriate remedy, I should comment on the other legal claims concerning the food use issue. 93 If contrary to my opinion, Special Condition 2 is not of contractual effect then [NAME_1] claims that [NAME_2] should be estopped from acting contrary to it and that a declaration and positive orders for damages should be made. That claim is put on the basis of the promissory estoppel category of equitable relief for unconscientousness or unconscionability. However the terms of the declaration sought and the claim for damages seek to use that doctrine in a positive manner as a sword rather then to stop [NAME_2] relying on the condition. They go beyond the usual scope of the doctrine of promissory estoppel; see Waltons Stores Ltd v. Maher (1988) 76 ALR 513. Accordingly I reject this claim. 94 I also note that there is some question as to whether this Tribunal has the power to entertain defences based upon the equitable doctrine of promissory estoppel (see Taylor Farms v Kalcos (1999) BC 9900793.) In my view a proper reading of the Retail Leases Act conferring on this Tribunal the wide ranging jurisdiction in ss 71,72, and in circumstances where other Courts must transfer proceedings in retail lease matters to this Tribunal on the application of any party, the clear intention of the legislature is to fully equip this Tribunal with authority to determine all matters as pleaded before it in a retail lease dispute, including to determine whether any of the various equitable doctrines apply. For that reason I have made a ruling on this claim. 95 I note further that if Special Condition 2 be considered no more than a representation inducing the contract and not part of the contractual terms, it could have no result in this case as the usual remedy for this is rescission the time for which has well passed. Nor is there an application here for an order declaring that [NAME_1] is entitled to rescind the Lease. 96 Next [NAME_1] seeks a declaration that in failing to keep other tenants within permitted uses and in granting other leases, e.g. the [NAME_39] lease on terms of unlimited food usage, [NAME_2] has derogated from its grant relying on the decision of [NAME_42] in this Tribunal in Prasad v Fairfield City Council (2001) NSWADT 28. I would have some difficulty seeing that on the facts of this case, the business of [NAME_1] had been so severely affected as to constitute a derogation. In Prasad, [NAME_42] determined that the tenant's business in question had been rendered unviable by the actions of [NAME_22]. Accordingly I am inclined not sustain this element of the [NAME_1] case. Remedy in relation to food use issue. 97 There will be a declaration in relation to this issue. [NAME_1]'s claim was mounted during the hearing for damages to be calculated on the basis of the change in value of the lease assessed by reference to the valuation of the rent. It led evidence that the current rental assessed by an expert valuer is $2200 per sq. m. p.a. whereas its rent under the lease is $3244 per sq.m. 98 I have a real difficulty with that basis of claim because the evidence establishes that the range of rents negotiated at various times for the various shops in the [ADDRESS] varies very markedly, the very lowest on the evidence being nearly a quarter of the rent negotiated by [NAME_1] with others closer to its rent being both above and below. 99 Also the valuation relied on by [NAME_1] did not have particular regard to food usage, but carefully compared a number of leases by reference to floor space. Therefore even though it appears that the other leases did not have a condition equivalent to Special Condition 2, and that it may be open to infer that the difference with an average of other rents was due to the absence of the condition, I find it hard to conclude that an award of damages so calculated would be seen as properly compensating the loss flowing from the breach. 100 In my view the best measure of damages for breach of a condition of this nature is the measurable loss of profit based on the reduced revenue likely to have flowed from the breaches for the period during which they continue. 101 [NAME_1] in its final amended application and submissions included a general claim for a reasonable sum, para (xviiiB), and asserted I could determine damages at large having regard to the information before me. 102 One aspect of this is determining the period for which the breaches continued and are likely to continue. [NAME_2] has rights under its lease with [NAME_30] to enforce the permitted use to require it to cease the offending range of items. As to [NAME_31], the range of items during the view by the Tribunal during the hearing were noted as not including a sufficient range as to constitute a continuing breach; [NAME_2] has a degree of legal constraint for this lessee. Where a general lease was granted to [NAME_39] there may no immediate avenue for [NAME_2] to take legal action but this is not to say that commercial persuasion or other action may not be available to remove the situation that constituted [NAME_2] in breach of special condition relating to [NAME_1]. 103 [NAME_1] led some evidence from a shopping centre management specialist that included some comparative sales figures through July 2000 suggesting an average 18% or so reduction in [NAME_1] sales over the same period in the previous 12 months. However those figures do not show the position during the [NAME_39] lease, nor do they give me a basis for inferring profit levels. 104 In my view the Tribunal at this stage is not adequately equipped to make a fair determination of the proper award of damages. While one approach could be to find that the Applicant, [NAME_1], has simply not made out its claim, I do not think that is the fair result in the circumstances. Instead I consider that this matter should be stood over for [NAME_1] to substantiate its claim having regard to the rulings made in this decision and for [NAME_2] to establish the extent to which it is likely to be able to remedy or reduce the extent of the offending operations. 105 It will also give the parties an opportunity to resolve the matter by negotiation which is clearly by far the better course, although my suggestions in that regard during the matter have yielded no success. (It may be that the rulings on other outstanding matters between the parties can facilitate a negotiation on this particular item.) Claim for Audit Costs 106 I turn now to the claim by [NAME_2] to recover the cost of the [NAME_36] audit notwithstanding that it was expressed to be a report under clause 21.2. 107 My initial ruling above was that [NAME_2] has no right to claim the cost of the audit as an audit under 21.1(d) as it was not such an audit. 108 Secondly there is no right under 21.3 for [NAME_22] itself to determine the amount which it "reasonably estimates to be the Gross Sales", and therefore to commission and audit, in circumstances where the Lessee has in fact filed the monthly and annual statements; in this case s.21.3(b), claimed by [NAME_2] to be a basis for the audit, does not apply. 109 Even if by way of general damages for determining the consequences for a [NAME_23] of failure by a Lessee to keep the right records under clause 21.2, some form of audit or examination of the figures is the appropriate course of action, I am satisfied that the surveillance and financial report implemented and produced in this case go well beyond the extent of the financial analysis contemplated by the Lease. 110 As noted, [NAME_2] had no management procedure for managing contracts to ensure compliance with record keeping provisions. In this case it made no inquiry for the first 2½ years of the Lease to determine whether the "X" reports were being kept. [NAME_13] and [NAME_25] confirm that neither [NAME_2] nor [NAME_24] as its managers had a procedure for monitoring the operation of cash registers. [NAME_25] as the manager nor [NAME_36] when retained as auditors gave any thought to other available sources of information for the purpose of even an initial examination of [NAME_25]'s concerns as to the possible under-reporting by [NAME_1]. 111 It was acknowledged by the witnesses for [NAME_2] that had they thought of it, there is a readily available supply of information from the other operations in the [ADDRESS] from their transaction based record requirements (the type of recording originally proposed for [NAME_1]). A number of other operators were comparable in accounting terms to the nature of the business at [NAME_1] and their records would have quickly enabled the compilation of comparative data on both the daily numbers of transactions for comparison with the [NAME_1] "Z" reports and the average spend per customer from comparable businesses. 112 Armed with that straightforward information, if that indeed revealed either a statistically significant variation in the [NAME_1] numbers of transactions from its "Z" reports or the average spend calculable from those "Z" reports, there would have been a basis in substance for indicating to [NAME_1] that there was a problem with their returns. 113 This being a commercial dispute and not a criminal matter, the appropriate course in my view would then have been to set this out for [NAME_1] in either correspondence or at a meeting and indicate that [NAME_2] required explanation for the differences and possibly a level of observation of the operation of the cash registers and the transactions to determine whether there was an accounting basis for a belief that [NAME_1] had not been correctly reporting its sales. 114 [NAME_24] as manager for [NAME_2] however chose not to take any of these steps and from then through the hearing adopted the position that it was dealing with a situation tantamount to fraud. A firm of forensic accountants, [NAME_36], was engaged. [NAME_36] acknowledged in evidence that the people involved in providing the advice in this instance had no prior experience in surveillance and no particular experience in relation to the operation of cash registers. For them this was their first such surveillance and while they applied what they considered to be other professional care in structuring and carrying out the surveillance, they acknowledged that a far better surveillance would have involved the location of observers with direct sight of cash registers. It was also acknowledged that had agreement been able to be reached on such a structure, it would be physically possible to locate observers in such positions. 115 The resulting surveillance involved the recording of numbers of customers and the observing of the nature of their purchases for the purpose of estimating both the total number of transactions and an average spend per customer. In addition there were occasional observations of questionable entries to the cash register, but only very few. 116 [NAME_2] witnesses agreed that, were it able to be arranged, some form of video surveillance directed to the cash register in lieu of stationing people with direct sight, would also have provided an option for more precise information gathering. 117 In the result, the determination of the average spend per customer included inferences derived from averaging the prices from the menu and price list and observing the items purchased. 118 Furthermore the conclusions in the report of [NAME_36] to determine its estimate of the highest monthly sales during the relevant 12 month accounting period were based on its estimates of total through pedestrian traffic in the entire [ADDRESS], drawing such information from the beam counters at a number of locations throughout the [ADDRESS]. 119 A difficulty with this data is that the [ADDRESS] is not only a shopping location, it is also a pedestrian thoroughfare from the CBD, and the [ADDRESS] in particular, through the underground walkways and shopping areas linking to Town Hall Railway Station through the QVB. As a result [NAME_36] acknowledged that they did not know what the correlation was between the foot traffic data derived for the entire Centre and those who purchased at [NAME_1]. [NAME_36] confirmed that I should have concern about concluding that there was a correlation between the two sets of data. 120 In addition to these concerns the expert retained by [NAME_1], [COMPANY_44], chartered accountants, engaged in litigation support and economic loss assessment, provided an alternative analysis of the documented data (not based upon its own surveillance) to question first the average spend per customer conclusions of the [NAME_36] report and second the conclusions as to the sales for the turnover period. In the circumstances I do not considered it necessary, nor do I determine which expert's report is more accurate; I only conclude that the issues raised by Furzer Crestani, and their critique of the [NAME_36] report from which [NAME_45] of Furzer Crestani did not resile after cross examination, are a further basis for declining to uphold a claim that the cost of the [NAME_36] report is appropriately charged to the Lessee by way of general damages for breach of its record keeping obligations. 121 It appears that in this case the management of the [NAME_10] from the outset formed a view that there was a serious case of misreporting such that covert surveillance needed to be implemented as the first step without any discussion with the Lessee. This was obviously aided by the fact that [NAME_1] simply declined to respond to the letter of 12 January. On the other hand by 5 May, when the first surveillance was begun, there had been no further communication from [NAME_24] or [NAME_2] following up on the matter. The parties were regrettably in dispute on a number of issues and this no doubt contributed to the mutual decision neither to respond on the part of [NAME_1] nor to expressly raise the matter on the part of [NAME_24] for [NAME_2]. 122 Regrettably in my opinion, these attitudes caused the matter to spin out of control resulting in a very expensive exercise causing real distress to the principals and staff of [NAME_1] and serious concern to [NAME_2] which continues through these proceedings. The expense of the surveillance ($65,000) was out of all proportion to any possible level of Turnover Rent for the year in question ($18,000 even on the [NAME_2] assessment), not to mention the cost of these proceedings. 123 In the result, I am fully satisfied that the claim by [NAME_2] for damages for the cost of the [NAME_36] surveillance and report as a proper consequence of the breach by [NAME_1] of the record keeping provisions cannot be sustained and should be dismissed. 124 I also consider that a further basis for rejecting the claim is that, having withdrawn its Turnover Rent claim before the end of the proceedings, [NAME_2] cannot sustain, even under a head of general damages, a claim for the costs of the process to produce the report constituting the basis for that claim. It may well be that this is the more appropriate basis upon which to dismiss the claim but in view of the extent of material put before me as to the gathering and evaluation of information required as a result of failure to keep the records, I have also set out all my reasons for rejecting the claim. [ADDRESS] Costs Claim 125 In para (xiii) [NAME_1] seeks an order under s.72 that it is not obliged to pay [ADDRESS] Costs notwithstanding their inclusion in each of the Lease Schedule, the agreed Letter of Offer and the agreed rectification of the Lease inserting an operative provision obliging the payment of these costs. I do not think that claim can be sustained. 126 The grounds for this claim and my decision on them are as follows: (a) There was no disclosure of the [ADDRESS] Costs in the disclosure statement. The signed letter of offer was an attachment to the Disclosure Statement sent by [NAME_2] in its letter of 7 March 1997 to [NAME_1]. This expressly lists [ADDRESS] Costs at $300 per square metre per annum. In my opinion this is sufficient disclosure. (b) These are outgoings of [NAME_22] to which [NAME_1] is contributing and no relevant information as specified in s.27(a), (c) of the Act have been provided; they are also claims for outgings where s.29(b) and s.30 of the Act have not been complied with. I accept [NAME_2]'s submission that these sections apply to out-goings strictly so called. These are not out-goings of [NAME_2] but contributions to its own costs for operating the [ADDRESS]. [ADDRESS] Costs are charged as a fixed lump sum and it is not referable to any of the outgoings. The purpose of ss. 27 - 30 is to permit proper evaluation of variations in out-goings where the lessee contributes a proportion of a variable figure for out-goings. Here there is no variation in the lessee's obligation which needs to be verified. The same reason applies for rejecting arguments under s.29(b) and s.30 of the Act. (c) The costs are not properly chargeable because [NAME_2] has failed adequately to clean the common areas. There is simply insufficient evidence upon which this claim can be based. 127 Accordingly I reject [NAME_1]'s claims that it is not obliged to pay the [ADDRESS] Costs specified in the Lease as rectified. Fit-Out Costs 128 [NAME_1] seeks an order that the $5,000 paid by way of settlement of the dispute over the claim for modifications and alterations. In my view, not only does it appear that the bulk of those payments were expressly within the Lessee's responsibility in the fit-out schedule to the Agreement for the Lease, the parties have resolved this dispute by agreeing to the amount presumably having regard to a range of difficulties that had taken place during the fit-out and which justified the reduction of the claim. I am not satisfied that the matter ought to be re-opened by the Tribunal. Floor Tiles Payment 129 [NAME_1] claims a right to re-payment of the penalty paid under protest under cl.4.4 of the Lease for having closed its shop during the specified Easter trading period for 2000. 130 In my opinion the evidence clearly established that it was [NAME_1]'s decision to use a particular method for remedying a floor tile problem which it acknowledged was within its repair obligations. There was nothing in the evidence or the submissions to establish that the $100 per hour liquidated damages amount in item 16 of the schedule of the Lease was a penalty rather than a genuine pre-estimate of damage. In those circumstances I am not satisfied that there is a real basis for this claim. Nor do I think s.36 applies as contended by [NAME_1] because this is damage to a tenant's fixture for which the tenant is liable. Rear Passageway Repair Claim 131 In Para (vi) [NAME_1] maintains a claim for an order for repair of the rear passage serving the shop. The Centre Manager has acknowledged that this is a building defect by letter of 2 May 2000. I do not propose to make an order at this stage but simply to request [NAME_2] to ensure that this small matter is dealt with; it should not have been necessary for either party to have contested such a small matter before this Tribunal. Marketing Fund reporting claim 132 Para(x) claims an order that [NAME_2] has not complied with its reporting obligations in respect of Annual Marketing Expenses. I am not satisfied that this claim is made out. Some information has been provided by [NAME_2] to [NAME_1]. Clause 15(xii) of the Lease requires written notice of an alleged breach before liability arises, which [NAME_2] says has not been given. The commencements of the proceedings and inclusion of this claim in broader proceedings is not such a notice. [NAME_2] also says no damage is alleged. 133 I do not think this is a claim of serious dimension and it should never have been left for the Tribunal. The same information is available to [NAME_1] as is available to all other [ADDRESS] operators. I simply recommend to [NAME_2] that it ensures that full information continues to be provided in this regard. GST Claim 134 Again this is an unnecessarily pressed claim and has been consented to as the lessee has a tax ruling and [NAME_2] agrees to have regard to that. [NAME_2] 135 Generally speaking I consider the right course in this matter now is for [NAME_2] to reconsider the extent to which it seeks continuing orders in terms of its Application in light of my determination. I accordingly grant liberty to apply to it to seek further orders. 136 It is clear from my reasons that I have determined that [NAME_1] had failed to keep proper records as required by clause 21.2 but that it has since 11 June 2000 remedied that. I do not believe there is any need for orders at this time as to past, present or future record keeping. 137 I have rejected the present claim for damages for the previous failure. [NAME_2], having gathered the available information to which I refer and having assessed the X reports now being generated by [NAME_1], having discussed the matter with [NAME_1], including discussing the impact of what I have determined to be other Thai/Malaysian operators, may then consider it has established a proper basis for belief of under-reporting for the current or any previous accounting period. In that circumstance, in the absence of reaching agreement as to a method of scrutinising the [NAME_1] record keeping process, there may be a basis for seeking orders in that regard. However it is premature at this stage to make orders in that regard. To that extent the current application by [NAME_2] for surveillance orders is dismissed. 138 I will declare that the lessee is obliged to pay and continue paying outstanding Rent, [ADDRESS] Costs and Marketing Fund Contributions. 139 I will make no order as sought conditionally permitting re-entry and termination of the lease as, provided Rent, [ADDRESS] Costs and Marketing Fund Contributions and other moneys lawfully payable by the lessee under the Lease are paid, there would be no basis for such orders. Costs 140 Costs are only warranted in proceedings before this Tribunal under s.88 of the ADT Act in special circumstances. 141 I am provisionally of the opinion that because the surveillance course chosen on behalf of [NAME_2] was beyond an appropriate response to the perceived under-reporting by [NAME_1], given any possible level of recoverable Turnover Rent and the now the acknowledged alternative courses of action and sources of information open to it, that [NAME_1] should be entitled in these proceedings to recover from [NAME_2] the costs it has incurred in retaining consultants to evaluate and counter that report, namely the costs of retaining [NAME_45] of [COMPANY_44]. 142 I also am provisionally of the view that [NAME_1] is entitled to costs for the Interim Orders of the Tribunal relating to the surveillance. 143 Another factor concerning both these elements of costs is the withdrawal by [NAME_2] of the claim for Turnover Rent the subject of the surveillance and audit. 144 However, there has not been a proper opportunity for argument by the parties concerning costs in terms of the applicable law under s.88 of the ADT Act so I will make no order at present and grant liberty to the parties to make application in respect of costs.

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