The case of Spuds Surf Chatswood Pty Ltd v PT Ltd (No 4)  NSWCATAP 11 is the last of several proceedings between the parties. Those proceedings provide a useful consideration of the damages payable to a tenant in the event that a landlord is found to have interfered with the tenant’s trade from its premises.
Such claims are usually made by tenants on the basis that the landlord has acted unconscionably and/or in a manner that enlivens the implied compensation provisions under applicable retail lease legislation. Some examples of where these claims arise include impact from redevelopment works or changes to common areas that interfere with customer traffic passing, or sightlines to, affected premises.
The key points from the various Spuds proceedings in relation to the assessment of damages are that:
- a tenant claiming damages in the way of reduced turnover and profits for improper conduct by the landlord must meet the following requirements (impact requirements):
- the tenant must show that the conduct had an ‘immediate and continuing impact’ on turnover; and
- the tenant must be able to properly quantify the losses arising from that impact;
- if a tenant can meet the impact requirements:
- it is sufficient to show that the conduct is “a” cause of the loss, not “the” cause; and
- if the landlord wishes to argue that other matters (for example, poor economic conditions, increased competition etc.) have caused or contributed to the tenant’s claimed losses, then the onus shifts to the landlord to prove that to be the case, that is, it is not up to the tenant to exclude those other causes; and
- if a tenant cannot meet the impact requirements, but is still able to show that the landlord has acted improperly, an equitable remedy such as a rent abatement may still be awarded.
From January 1999, Spuds was the tenant of shops 415 and 416 at Westfield Chatswood pursuant to a lease from PT. From July 2001 to December 2001, negotiations took place between Spuds and PT to expand Spuds’ business into shop 417 of the Centre. Spuds took possession of shop 417 in July 2002.
Subsequently, Spuds alleged that PT breached its own guidelines (set out in a “redbook” that PT was at that time issuing to all prospective tenants) by permitting the construction of kiosks in the vicinity of Shops 415-417, portions of which obstructed sightlines to the premises.
After negotiations between the parties to resolve Spuds’ complaint failed, Spuds commenced proceedings claiming relief against PT on a variety of grounds, including for unconscionable conduct. Spuds alleged that PT's conduct caused it to sustain losses in the form of reduced turnover and profits and sought an award of damages.
Considerations by the Tribunal and the Courts
It was eventually decided that PT had acted unconscionably by permitting the erection of the kiosks. Significant time was then spent considering the financial reports provided by Spuds in support of its claim.
The financial reports did not demonstrate that the construction of the kiosks had an immediate and continuing impact on Spuds’ trade, and the Tribunal and Courts therefore would not award Spuds’ damages for reduced turnover and profits.
However, it was decided that Spuds was entitled to a reduction of the rent due to PT’s unconscionable conduct, and an award was made accordingly.