Administrative Decisions Tribunal New South Wales

• Medium Neutral Citation: Lu v Miao [2011] NSWADT 309
• Hearing dates: 14,15 July 2011, 2 August 2011,1 September 2011
• Decision date: 30 December 2011
• Jurisdiction: Retail Leases Division
• Before: Deputy President David Patten; M Lonie, Non judicial member; T Tyler, Non judicial member

Decision

1.I declare that on or about 15 June 2005 the Applicants entered the premises as occupiers under a retail shop lease.

2.I declare that the Respondent was guilty of unconscionable conduct when she locked the Applicants out of the premises on 15 February 2010.

3.I declare that no monies paid by the Applicants to the Respondent constituted key money within the Retail Leases Act.

4.I order that the Respondent pay to the Applicants the sum of $30,000 by way of damages for breach of contract and for unconscionable conduct.

5.Either party may make submissions as to costs within 21 days. The other party may reply within 21 days. Thereafter, the matter of costs will be decided on the papers.

6.In the event that no submissions are received in the Registry within 21 days pursuant to order 5 above, no order as to costs.

• Catchwords: Retail lease or Management Agreement - whether payments key money - unconscionable conduct
• Legislation Cited: Retail Leases Act 1994; Conveyancy Act 1919
• Cases Cited: Federal Commissioner of Taxation v Murry [1998] 193 CLR 605; Gordon v The Trustees of the Roman Catholic Church [2001] NSW ADT 230; Gillett & Anor v Burke & Anor [1997] 1VR 81; Attorney General v World Best Holdings [2005] NSWCA 261
• Category: Principal judgment
• Parties: Bo Lu (Applicant); Wei Fang Wang (Applicant); Lina Qun Miao (Respondent)
• Representation: Counsel; Mr McGrath for Applicants; Mr Bors for Respondent; McLaughlin & Riordan Solicitors (Applicants); Gary Cassim and Associates (Respondent)
• File Number(s): 105018

REasons for decision

1 The Applicants' Further Amended Application for an original decision in this matter claims damages for unconscionable conduct and seeks an order for the repayment, to the extent of the Tribunal's jurisdiction, of money allegedly paid to the Respondent as key money.

2 The basis for these claims is not coherently expressed in the Application and in order to understand it, it is necessary for me to say something about the facts as they emerged at the hearing.

3 Before coming to those facts, I record that in his opening of the case Mr McGrath, counsel for the Applicants, identified the issues as:

1.Whether S. 5(b) of the Retail Leases Act has any application to the case.

2.Whether key money was paid by the Applicants.

3.Whether there was unconscionable conduct by the Respondent.

4 Mr Bors, counsel for the Respondent, in his opening identified a further issue, namely:

1.Whether the arrangement between the parties was an informal sub-lease or a management agreement, as in the latter case, so he submitted, the Tribunal has no jurisdiction.

5 The first witness in the Applicants' case was the Applicant Bo Lu (known as Michael). I will hereafter refer to him as Mr Lu. His affidavits, respectively sworn 22 July 2010 and 30 June 2011 (the latter in reply to the affidavits in the Respondent's case), were read by Mr McGrath and Mr Lu was cross-examined.

6 He said that the Second Applicant, known as Cherry (Mrs Wang) is his "girl friend and business partner". He was born in Shanghai, China, on 20 October 1966 and completed a university degree in Civil Engineering before coming to Australia in 1990 where he obtained residency status in 1993.

7 After working for some years in a factory and as a taxi cab driver he and Ms Wang, who had no business experience, had their attention drawn to a newspaper advertisement published on 7 May 2005.

"Supermarket

For sale or lease.

One of the best on the Northern Beaches T/O) $20,000 per week.

Details ring 0416041 355"

8 In answer to the advertisement they arranged to meet the Respondent (Ms Miao) and her husband (Mr Chen) at the premises of the business advertised - 77 Addison Road, Manly (the premises).

9 They were given the opportunity to inspect the premises following which according to Mr Lu, Mr Chen said:

"The weekly turnover is $22,000.00. If you want to take over the shop you will have to pay me $1,970.00 per week on top of the rent you have to pay to the landlord which is about $4,500.00 per month. You will also have to buy the whole stock of the shop from me after we do a stock take. You'll need to pay us about $50,000.00 for the stock, we will work out the exact amount you have to pay us after we do the stock take.

At this stage I can promise that you guys can stay here for two years, no problem, but I'm not sure after that because the landlord wants to demolish the building."

10 Ms Wang told Mr Chen that they would think about the proposal. A few days later Ms Wang arranged another meeting attended by both Applicants with the Respondent and Mr Chen at the premises. Obviously some discussion preceded that part of the conversation recorded in paragraph 15 of Mr Lu's affidavit:

"Mr. Chen: We have now made a decision, we have chosen you out of the 60 couples we have interviewed to work in my shop.

My wife Una will teach Cherry how to order the milk, the confectionary, the cigarettes, the cakes and all of the stock for the shop. She will also teach her how to make the coffees.

Michael, I will take you to Campbell's Cash and Carry and I will show you how to order from the Coca Cola company and also the Schweppes company."

I will also show you how to buy the fruit and vegetables from Flemington market, you will have to get up early, we will need to meet you at Flemington markets at 4.00am in the morning."

Me: That's OK.

Cherry: Yes, Ok.

Me: Do we need to see a solicitor to make some public notary papers?

Mr. Chen: No, we won't need any legal papers.

All you need to do is to go to the Department of Fair Trading and get your own business name, you can't use my business name because you will need to pay your own income tax and GST.

Me: How does it work with the GST?

Mr. Chen: The fruit, the milk and vegetables you don't pay GST. The groceries, the drinks and cigarettes you have to pay GST. You will need to apply for an ABN number at the ATO. Don't worry I'll teach you everything and show you how to do the Tax and GST.

Me: OK then, you said we don't need any Solicitor or legal papers.

Mr. Chen: If you go to see a Solicitor you will need to pay stamp duty, a security bond and all of the legal costs. It will cost you more than $20,000.00, you are better off not spending that money, I'm helping you to save all that money.

Me: Its Ok, we don't mind spending money to see a Solicitor if it is necessary."

Mr. Chen: If you insist on going to a Solicitor, don't worry about it, we will just find someone else to run the shop instead of you, as I told you we have had 60 couples look at the shop. We will just get one of them in.

Me: Ok, if you don't think that it is necessary we won't worry about going to a Solicitor.

Mr. Chen: Don't tell the landlord that you found us in the Sydney Morning Herald, if she asks just tell her that you are our cousins., You just pay the electricity bill, the telephone bill and the insurance, just these three things only and you just look after the shop. As far as she is aware I am paying the shop rent.

We will do the stock take on 12 June and we will be ready for you to start in the shop on the Queen's birthday, 13 June."

Cherry: That's OK.

Mr. Chen: I need you to pay me a deposit now so we make sure you don't change your mind, otherwise we will lose money because we have already paid for our holiday to China for one month after you take over the shop.

Me: How much deposit do you want us to pay?

Mr. Chen: $20,000 and you can pay the rest when we have done the stock take. You will have to pay this money to us in cash. No bank cheque, no personal cheque, no credit card.

Me:I only have money available from my credit card, can I pay with that?

Mr. Chen: We won't accept your credit card, you will need to get a cash advance from your credit card.

Cherry: That's OK

Me: What else do you need us to pay

Mr. Chen:From the 12 th June you will have to pay the rent to the Landlord and the further payment of $1,970 each week in cash to me. You will also have to pay the electricity, the telephone bill, the Council inspection fee and the insurance for the shop.

Cherry: That's OK.

If anything in the shop breaks down or needs repairs I will pay you half of the cost of any repairs.

I am the first Chinese businessman in the Northern Beaches to sub lease my business to other persons, no one has thought to do that before. I am a very clever businessman.

If you work out here, after you have worked for me for a few years, I will think about selling the business to you for a good price."

Me: Thank you."

11 On the following Monday, Mr Lu and Ms Wang presented themselves at the premises and were given familiarisation assistance. They did this on several other occasions during the next two or three weeks. On 17 May 2005, Mr Lu drew $20,000 in cash from his credit card account and paid it to Mr Chen. Mr Lu and Ms Wang also attended the Flemington Markets with Mr Chen on four occasions. Once he accompanied Mr Chen to Campbell's Cash and Carry where Mr Chen introduced him, "This is Michael my cousin, he will be working in my shop from now on".

12 There was a stock-take at the premises on or about 12 June 2005 and the value of stock was agreed at $46,000. During the stock-take there was a conversation between Ms Wang and Mr Chen regarding payment of rent to the landlord and the further sum of $1,970 per week to Mr Chen. Mr Chen told Ms Wang that he would not give her a receipt for the payments to him but receipts for the rent would be sent to the premises. Ms Wang handed some cash to Mr Chen.

13 Mr Lu and Ms Wang commenced trading in the premises the following day. A day or so later Ms Miao suggested that the rent due to the landlord, Mrs Helen Humel, be paid direct into her account and provided account details. Thereafter, the Applicants paid into Mrs Humel's bank account the amount due for rent each month. Initially that rent was $4,574 per month but by April 2010 had increased to $5,403 per month.

14 A few days after they commenced to trade in the shop, Mr Lu handed the sum of $26,000 in cash to Mr Chen which, with the initial payment of $20,000, represented the $46,000 agreed value of the stock. In part, the money paid represented a loan to Mr Lu from his brother in China.

15 As I understand the evidence, the arrangement was that the weekly sum of $1,970 to be paid to the Respondent in cash would be taken to her at her business in Fairlight. When the Applicants sought to do this on 20 June 2005, Ms Miao grabbed the bundle of money Ms Wang was holding and quickly put it in her pocket. When Ms Wang suggested it be counted, Ms Miao said she would do this later and asked Ms Wang not to pay her money in future in front of customers or staff.

16 On or about 20June 2005, Mr Chen came to the premises and asked the Applicants to pay him $2,000 by way of reimbursement of the electricity supply bond. They complied with this request and subsequently received a receipt from Mr Chen for the payment.

17 According to the affidavit, from and after 13 June 2005, the Applicants operated the business in the premises and in the course of so doing paid for all electricity and telephone usage, the accounts having being transferred into their names. They also paid insurance premiums. According to Mr Lu, when he changed the electricity account he enquired about the bond and was told that there was no bond and none was required.

18 Mr Lu said that from 13 June 2005 to June 2007 they paid the Respondent $1,970 per week in cash by delivering the money to her shop at 148 Sydney Road, Fairlight. No receipts were given.

19 In September 2005, Mr Lu said he raised the subject of the electricity bond with Mr Chen:

"Me:Nick, I have rung Sydney Electricity to change the account into Cherry's name and they told me that it is not necessary to pay any bond when opening a new account.

"Why did you ask us for that money, the $2,000.00?"

Mr. Chen: That is the security deposit, it's just in case you stop paying the electricity bill and the telephone bill. If you don't pay the bill, because you run away or something they will charge us for the phone and electricity.

Me: But, we have already changed it over to the new title.

Mr. Chen: I still want to keep this money as a security bond."

20 In May 2006, the Applicants became concerned that the business was not financially viable. They asked Mr Chen to come to the premises, which he did, and according to Mr Lu there was this conversation:

"Me:Nick we can't keep going, we don't want to work here anymore, we are not earning a reasonable income, Cherry is working long hours without getting a proper income and I am working for nothing, I'm just wasting my time. I would rather go back to driving taxis, I would make more money than we are making at the moment.

Mr. Chen: Ok then, if you want to go, you can go, but I'm not paying you for the stock that is here in the shop. If you are not happy you can just go."

21 Apparently nothing further was done to address the problem until April 2007 when there was a further conversation at the premises, as related by Mr Lu in his affidavit:

"Cherry:Nick, the economy situation is different now, at the beginning when we took over the shop you told us that the turnover was $22,000.00 per week and we can't make anywhere near that money, you have done nothing about the shop, you just are sitting there and collecting cash from us each week. We can't afford to keep paying that amount, will you reduce the amount we are paying to you?

Mr. Chen: Sorry, I can't reduce the money you are paying, otherwise I can't make money. If you don't want to keep paying I will just find another person to work here and you can go.

Cherry:Ok, that's fine, we can't afford to keep paying $1,970."

22 About two days later, however, Mr Chen told the Applicants that he would reduce their weekly payments to $1,700 but tempered this generosity by insisting that they pay an additional sum of $1,700 immediately so that payments would be in advance.

23 Thereafter, the Applicants delivered the sum of $1,700 cash per week to the Fairlight shop. No receipt was ever given except for the single payment in advance. The payments continued up to about the second week of February 2010.

24 In mid 2007 at Mr Chen's request they gave him a note in the Mandarin language:

"Cherry and Michael will stay working in the shop until the building is demolished."

25 In about May 2008 Mr Lu said he had a conversation with Mr Chen at the shop:

"Me: Nick, we really can't afford to keep paying the $1,700.00 a week to you. It is only a small shop, it is not a big business, if you take $1,700.00 away each week there is not enough income for us to survive. We pay the rent, the electricity, the phone bill and all of the business expenses and you pay nothing, not one cent. We are just wasting our time here working hard for nothing.

Mr. Chen: As I've told you before, I can't afford to drop the weekly payments, if I drop the payment I will not be making any money, you know if you don't like it you can just leave right now, I will keep this stock that you have here and get someone else to run the shop for me. I've already found someone to take over the shop and they have given me a $5,000.00 deposit."

26 Some time later, a "Chinese couple" came to the premises and asked questions about the business. Mr Lu referred them to Mr Chen.

27 The next day he went to the Respondent's shop at Fairlight and there was a conversation:

"Me: Nick, who were the people who came to the shop yesterday, why did they ask so many questions, it looks like you have told them they can take over the shop. If you want us to leave, that's fine but you will have to pay us for the stock.

Nick: I 'm not going to pay you any money for the stock, if you want to go that's your decision, but I'm not paying any money to you.

Me: Nick, it's not right, you just can't send people to the shop

without giving us any notice.

Nick: That's my business, I can send people there any time I want."

28 The business continued to trade unprofitably and for a time, from June 2008, Mr Lu worked in the shop on his own while Ms Wang sought outside employment but without success.

29 According to the affidavit in February 2009 the coffee machine broke down, costing $350 to fix, and the Applicants carried out other repairs totalling $300. Mr Lu had a conversation with Mr Chen.

"Me: Nick, we have spent $350 in repairing the coffee machine, we spent $100 on the steel plate for the floor and $200 on the new light fittings, can you pay us half of this, you remember when we first started here you told us that you would pay half the cost of any repairs.

Nick: I'm not going to pay for these.

Me: Nick, you are taking all this money off us every week and you are paying nothing in return. When we first started here, you promised that you would pay half of the cost of any repairs.

You should be honest with us, you should do what you agreed to do when we came in at the beginning. Why do we keep paying you all of this money when you keep breaking your promises every time?

Nick: The money you pay me, the $1,700.00 is my profit for my investment it is not to cover any repairs. You have been here for over three years now, you have to pay for your own repairs.

Me: If you had of told us that you wouldn't pay for half of the repairs, we would not have agreed to pay so much to you each week.

Nick: I will not pay for any repairs, if you want to stay, you can stay and keep paying me $1,700.00 per week and pay for your own repairs, or if you are not happy you can just go and I will get someone else in to run the shop."

30 Mr Lu's then relates his contact and conversation with Mrs Humel:

"On or about 3 February 2010, I delivered some groceries to the home of a customer I knew as Helen Humel, who I also knew was the landlady of the shop premises. Ms Humel is disabled and cannot walk without a walking frame and as a result I delivered groceries to her home as I also did with a number of other elderly customers of the shop. Whilst I was present at the landlady's home on this occasion delivering the groceries to her, we held a conversation in the English language using words to the following effect-

Ms Humel: Michael, I'm just wondering, if you could explain to me why does the lease for the shop show Una as the tenant, when you pay the monthly rent and she doesn't.

Me: They asked me to do it that way.

Ms Humel: That's not right, that's illegal, they should not sublease the premises to you without firstly obtaining my written permission. They told me that you are their cousins.

Me: We are not their cousins, we are not related to them at all.

Ms Humel: Well, how do you know them?

Me: They put an advertisement in the Sydney Morning Herald and we rang them.

Ms Humel: It's illegal, they have breached the lease, I need to speak to my Solicitors about it."

31 Thereafter, there were telephone conversations between Ms Wang and Mr Chen, which seem to have culminated in the events described by Mr Lu thus:

Shortly after 6.00pm on 8 February 2010 whilst I was present in the shop and I was standing at the counter area, I saw a person I recognised as Mr. Chen walk quickly into the shop. I then saw him go up to Cherry who was standing up in the mezzanine level and as he approached her he came up very close to her and pointed at her with his right index finger between her eyes and he then said:-

"Fucking bitch, what do you want?"

Cherry then said:

"Don't point at me in that way, you are a dishonest person, we can leave any time but you have to give us receipts for the whole period since we were first working in the shop."

I then saw Nick move his right arm in a closed fist and cause the fist to connect with the left side of Cherry's face. Cherry immediately covered her face with her left hand and fell down onto the ground where she was in a sitting position facing towards Mr. Chen. Mr. Chen then continued to swing both of his fists towards the top of Cherry's head. I then ran over to where they were standing and tried to get in between Cherry and Mr. Chen in order to stop him from hitting her. I then put my right arm out in front of where Mr. Chen was punching to try to block his punches. As I did this Mr. Chen was saying I'll kill you, I'll kill you." As he said these words I saw him continuing to throw punches with his right arm and kick his right leg towards Cherry although l did not see exactly where on her body these kicks and punches landed. I then saw Mr. Chen kick Cherry's left leg with his right foot. I then managed to stand in front of Mr. Chen and pushed him away using two open palms towards his shoulders. He then moved back and I kept pushing him towards the door of the shop. I then let him sit down in a chair outside the shop and I said to him in English words to the following effect:-

"You cannot punch a woman, you make a big mistake."

Mr. Chen then said words to the effect of:-

"I don't care, I regret I didn't punch her more heavily."

I then responded by saying words to the following effect to Mr. Chen:

"Maybe she will call the police and the police will be on their way. Now, you will be in trouble."

Mr. Chen then said words to the effect of:

"I don't care."

Nick then stood up and walked over to his car and got into it and drove away. I then went back into the shop and helped Cherry sit down in a chair and I then used some cold water to wash her face. She had a bit of blood on the left side of her face and she was crying and saying words to the effect of:-

"I want the police; I want to see the Doctor."

As Cherry said these words I saw her hair was loose all over her face and she was holding her left hand over her left eye and I could see a bruise on her left leg. Cherry then said words to the effect of:

"I feel a big headache, I want to go to hospital."

32 The assault was reported to the police at Redfern Police Station and photographs were taken of Ms Wang's injuries.

33 On 11 February thee was a further incident between the parties related by Mr Lu as follows:

"On Thursday 11 February 2010, Cherry and I opened the shop at 7.30am as usual and we continued to trade normally over the course of that day. At about 8.00pm after we had just closed the shop and Cherry and I were standing outside we saw three cars pull up. I then saw Ms. Miao get out of one of the cars and she then

came up to Cherry and I and said to us words to the following effect:

"Cherry, you will have to open the door and let us in, we have come to do a stock take."

I then telephoned a solicitor I knew who was a customer of ours who lived close by, Mr. Ian Byrne, and he then came to the shop straight away with his wife Pat.

Shortly after Mr. Ian Byrne and his wife arrived, I saw him making a telephone call on his mobile phone and he then turned to us and said words in the English language to the following effect:-

"I have just rung the police and asked them to come straight away."

The Solicitor, Ian Byrne then turned to Ms Miao and the other persons and said to them words to the following effect:

"You have no right to enter the shop as Cherry and Michael have lawful possession of the shop at the moment, if you enter the shop that will be a trespass and they will sue you for damages and you will also be required to pay the legal costs, it is best if it is sorted out through the Courts, I have just called the police and they are on their way."

Ms. Miao: I am allowed to go into the shop when I want; the lease is in my name. They are just here working for us

Ian Byrne: But they are here occupying the premises, they have been in occupation for four years, what do you mean, they are entitled to be here, you have subleased the premises to them.

Ms Miao: That's not true, there is no sublease they are just here working for us

Ian Byrne's wife, Pat, who was also present, then said to Ms. Miao and the other persons words to the following effect:-

"Alright, if you say they are working for you, have you paid their income tax and did you pay their superannuation? 9% per year? It's a Commonwealth offence if you haven't paid the tax and superannuation."

34 Soon after a police car arrived and 2 male police officers commenced inquiries. While they were speaking to Mr Byrne, Ms Miao and the people who accompanied her, including her daughter Lucy, entered the cars and drove away.

35 The Applicants traded normally in the premises on February 12 and 13 but when they went to open the shop on Sunday 14 February there was a security guard preventing access to the front door who told them that the lock had been changed during the previous night.

36 They contacted the police but were informed that it was a civil matter and that they should seek legal advice, which they did. They were concerned that the shop contained perishable items of food and that there would be damage to their goodwill.

37 On 16 February the Applicants made an application to this Tribunal for urgent relief and on 18 February the Tribunal made orders by consent in these terms:

"By Consent and Without Admissions, the Tribunal Orders:-

1. Until further order LINA QUN MIAO by themselves, their servants and agents be restrained from:

a. any interference with the peaceable and quiet management and operation of the business carried on by BO LU and WEI FANG WANG at 75 to 77 Addison Road, Manly NSW

b any attempt :

1 to prevent BO LU and WEI FANG WANG from entering or re-entering,

2. to evict BO LU and WEI FANG WANG from,

c. to disturb the occupation by BO LU and WEI FANG WANG of premises known as 75 to 77 Addison Road, Manly NSW.

d. any attempt to interfere with the ability of servants or agents of BO LU and WEI FANG WANG to enter and remain upon the premises at 75 to 77 Addison Road, Manly NSW

2. The parties have Liberty to Apply to the Tribunal on three days notice.

3. The Application be adjourned for Directions on 8 April 2010"

38 The Tribunal also noted that the parties had reached agreement whereby Ms Miao would sell the goodwill fittings, fixtures etc. of the business to the Applicants for $65,000. The agreement was conditioned upon a number of matters included the obtaining of the landlord's consent to an assignment of the lease.

39 Paragraph 9 of the Consent Orders provided:

"These orders and the terms of the Agreement between the parties noted do not constitute settlement of disputes between the parties and the remedies the parties have do not merge."

40 Subsequently a formal agreement for the sale and purchase of the business was entered into and a fresh lease was negotiated with the landlord. The agreement was completed on 12 April 2010 and the Applicants continued to operate the business.

41 Mr Lu was cross-examined at some length by Mr Bors as to his employment prior to 2005; as to his finances; as to some apparently false information about his employment history contained in a letter from a mortgage broker to the Commonwealth Bank in 2007 (as to which I accept Mr Lu's denial of seeing the letter previously and of having any role in the false information contained in it); and as to the financial position of the business in the years between 2005 and 2010.

42 In re-examination Mr Lu told Mr McGrath that, in his belief, having paid $46,000 for stock; having paid what he regarded as a weekly sub-leasing fee to the Respondent and having paid for electricity and telephone charges, the business belonged to him and Ms Wang.

43 Ms Wang also gave evidence in the Applicants' case. In her affidavit sworn 16 February 2010, the contents of which were largely repeated in an affidavit of 23 July 2010, she gave evidence that she registered "Cherry's Grocery" as a Business Name with herself as proprietor on 1 June 2005. She corroborated Mr Lu's version of the conversations with Mr Chen in June 2005 and confirmed that her request for receipts for money paid to Mr Chen and Ms Miao was refused.

44 She testified as to telephone conversations with Mr Chen and Ms Miao in these terms:

"On or about 8 th February 2010 I telephoned Mr. Chen when we held a conversation using words to the following effect-

Me: Helen, the landlady, has asked Michael why we pay the rent into her account rather than you."

Mr. Chen: "I am on my way back to the shop, I'll ring you later."

Later that day I was present at the shop premises when I received a telephone call from Mr. Chen when we held a conversation using words to the following effect:-

Mr. Chen: I went to Helen Humel's house [the Lessor] last week and asked her if she could reduce the rent. That's good for you.

Me: Oh really.

Mr. Chen: Cherry, I have told Helen that we are cousins and I have just let you come and work in the shop to help us out. I told Helen that I don't get any money from you. I told her that you just pay for the electricity, the telephone bill and Helen's rent as well and that's it.

Me: Nick, I've already paid you $460,000.00 in cash since the beginning. If you told Helen that you got no money from us, what have we paid you this money for?

Mr. Chen then started yelling at me through the telephone and he then handed the telephone to Ms Miao and I then continued to hold a conversation with Ms Miao when we used words to the following effect-

Ms Miao: Nick went to Helen's house to talk to her about reducing the rent. It is not only better for you but it is better for both of us.

Me: Una, for two years we have paid you $1,970.00 per week in cash and then for a further two years, $1,700.00 per week in cash. We should not be arguing you should be thankful to us. We can't afford to continue to keep paying such a big amount. Michael and I each work 100 hours per week and we are not getting a reasonable income for this work. Seven days a week, thirteen hours a day, already its been four years and eight months, we have never stopped for one day.

Ms Miao: Well that's your business. Its up to you, if you want to stay, stay, but if you want to leave we can get someone else to take over the shop. We then ended our telephone conversation."

45 In relation to the occasion when the Applicants claim that Ms Wang was assaulted, her affidavit relates:

"At approximately 6.00pm on 8 February 2008 I was present at the shop when I saw Mr. Chen walk inside. He then approached me when we held a conversation during which we said to each other words to the following effect-

Mr. Chen: Fuck you and the shop

Me: Ok you are a wanker.

.

As we said these words we were standing face to face. At this time we were both in the mezzanine level of the shop and we continued with our verbal argument. Mr. Chen then pointed to close between my eyes with his right hand.

I then felt very scared of Mr. Chen's actions of pointing his hand at my face between my eyes and then in order to protect myself I moved my right arm in a swinging motion and the back of my right hand then connected with Mr. Chen's left shoulder. Mr. Chen then swung his right arm with a closed fist and hit me in the left eye. I then stumbled backwards, and I. could feel. pain in my left eye and surrounding area of my face. I then placed my hands above my head to protect myself and then saw Mr. Chen swing his arm and hit me in the chin and neck area. Mr. Chen then continued to punch and kick me repeatedly in various areas of my body including my arms, legs, shoulders and torso area. As he continued to hit and kick me, Mr. Chen said to me repeatedly in a loud voice:-

"I will kill you, I will kill you."

My boyfriend who was downstairs at the service counter of the shop at this time, then came running upstairs and wrapped his arms around Mr. Chen to stop him hitting me. As my boyfriend continued to hold Mr. Chen he said words to the following effect-

"Michael you go away, I killing her, I killing her."

My boyfriend then pushed Mr. Chen away towards the door of the shop and said to him words to the following effect-

"Get out of our shop"

I then saw Mr. Chen leave the shop. I then saw my boyfriend go outside and talk to Mr. Chen as I laid down as I was feeling very sore from the punches and kicks that I had received from Mr. Chen."

46 Ms Wang asserted that the injuries she suffered as photographed by the police included:

"bruising to my eye, bruising to my shoulders, bruising to my arms and legs, bruising to my torso area and general soreness.:

47 The affidavit of Ms Wang corroborated Mr Lu's evidence as to the events of 11 February 2010 and 14 February 2010.

48 In cross-examination Ms Wang told Mr Bors that she obtained the right to reside permanently in Australia in 2007 and that she was not given a receipt for the sum of $46,000 paid for stock in 2005.

49 Other affidavits read in the Applicants' case were those of Mr Lu and Ms Wang sworn in reply to the affidavits of Mr Chen and Ms Miao. I will refer to them in due course. Mr McGrath also read the affidavit of Mrs Helen Humel, the lessor of the premises, sworn 8 July 2011 and of her husband William Humel sworn the same date.

50 Mrs Humel denied that Ms Miao ever said to her in relation to the Applicants words to the effect, "This is Cherry. She and Michael will be managing our business here from 13 June. They will prepare your groceries order from then onwards."

51 She also denied that Ms Miao ever said to her words to the effect that "Cherry and/or Michael were managing the shop". Mr Humel was not cross-examined.

52 As to his involvement with the premises in May 2005, Mr Humel's affidavit states:

(a) I have reviewed my diary for the date 28 th May 2005 and surrounding dates and recall from my review of my diary that I was in Taree on 28 th May and in Forster on 29 th May 2005. I did not meet with Mr Chen on either of these dates.

(b) At some stage in about May 2005 Mr. Chen did inform me that he and his wife were purchasing a shop in Fairlight.

(c) However, at no stage did I ever hold any conversation with Mr. Chen in May 2005, or at any other time, when we said to each other words to the effect of-

Me: What is going to happen to this business?

Mr. Chen: I found a couple who is going to manage the business for us. We'll introduce you next time you come over to pick up your groceries.

I never held any such conversation with Mr. Chen.

(d) At no stage did Mr. Chen ever say anything to me about anyone "managing" the business.

(e) However, in about May or June 2005 I was present with Mr. Chen, when he said to me words to the following effect-

"Cherry is a relative of mine. Cherry and Michael will be working in the shop."

When Mr. Chen told me the above words I understood that Cherry was a relative of his and at no stage was I ever told that she was "managing" the shop."

53 Mr Humel said that after the Applicants commenced to operate the business, he saw Mr Chen in the shop on a couple of occasions in the first few months" and not afterwards. He did not see Ms Miao in the shop at all after June 2005.

54 Mr Humel deposed to a conversation he had with the Applicants in about late 2009 when Mr Lu said to him:

" We paid them $2,000 per week for 104 weeks and from June 2007 we paid to them $1,700 per week up until last week."

55 In the Respondent's case the principal witness was her husband Jian Ping Chen who swore an affidavit on 7 April 2011. He deposed to purchasing, with his wife in 1999, a supermarket trading at the premises for the sum of $168,000 which included goodwill and equipment. A lease of the premises was granted by Mrs Humel to his wife and the original lease was renewed in 2007 for 3 years with an option for a further 3 years. He worked in the business with his wife and by May 2005 had increased its weekly turnover from $10,500 per week to between $18,000 and $19,000.

56 In early 2005 they found another business at Fairlight which they wished to purchase and as a consequence decided to sell the subject business. For that purpose an advertisement was inserted in the Sydney Morning Herald and they held discussions with several interested parties including the Applicants. His first contact was with Ms Wang and he related a telephone conversation;

"CW I have seen the advertisement. Could you please explain to me more in detail about the business? How much do you want to sell it for?

JPC The turnover of the business is currently $18,000 - $19,000 per week and can reach up to $20,000 per week. It is one of the best mini-markets in the Northern Beaches. There is no direct competition. It is also located in a high density residential location. The net profit is around $3,500 per week. We are asking for $350,000.

CW You mentioned in the advertisement about leasing the business. Can you tell me more about this?

JPC My first preference is to sell the business. If I can't attract a good offer, then I will consider leasing the business. To lease the business, the applicant must have experience in running a small business. Do you have any experience in running a small business?

CW Yes, can I come to meet with you to discuss this further?"

57 About 3 days later he said that he met the Applicants at the premises and there was this conversation:

"JPC Are you interested in buying the business?

CW It is in a very good location but we don't have the sufficient funds in which to purchase the business. We may just have enough to buy your stock. However, we are interested in leasing your business.

JPC My first preference is to sell the business. If you want to lease the business, you must be experienced. You have to pay a bond as well as purchase the stock. You would also need to be financially stable and will need to provide proof of any real estate you own so that I can obtain the landlord's approval.

CW How much is the bond and the stock? How much is it to lease the business?"

JPC The stock is around $45,000, and there is a bond of $30,000 in order to protect my goodwill. The rent is about $2,000 per week plus GST plus 4% increase every year. To protect the goodwill of our business, if you run the business down such that the weekly turnover is less than what it is now, you will lose a percentage of your bond. If it is 10% less than what the turnover is now, you will forfeit $15,000 of you bond money. If the weekly turnover has reduced by more than 20% you will forfeit your entire bond money, a total of $30,000. This is because you would have damaged our business and I have already received an offer for $270,000 plus stock to purchase my business.

CW We don't have any money to pay for the bond and we don't have any real estate. We don't have any experience in running a small business. We don't know how much the business can make after all the costs. It's too risky for us.

BL No, we can't do this.

JPC Why did you tell me on the phone that you have experience in running a small business?

CW Because I really wanted this opportunity. I've just arrived back in Australia and it's been very hard to find a good job. Currently Michael is a taxi driver.

JPC Truthfully, I don't think you are suitable to lease the business. I am afraid to lease the business to you as I might lose my goodwill on it due to your lack of experience. Then the business would be worth less than it is now."

58 Although Mr Chen said that he thought his final remark would end the negotiations, Ms Wang telephoned him again about 3 days later:

"CW Nick, have you sold or leased your business yet?

JPC No but there are quite a few people interested. I have not made a decision yet."

CW Michael and I have a good idea that may suit all of us.

JPC What is it?

CW We can just manage your business. If you think we're not performing, you can dismiss us at any time. Also, if we're not happy we can leave at any time. We are both not bound by a lease. You can receive an amount from the takings of the business that you think is fair and the remainder we will receive, the balance as our management fee. If you receive a good offer for the business, you can still sell the business.

JPC That sounds interesting.

CW As an accountant, I know about this, I've just come from China and seen this; it's called a Business Management Agreement.

JPC Let me discuss with my wife."

59 After discussing the matter with his wife, he said that they both had a meeting with the Applicants and there was this discussion:

"JPC Cherry, I think your management deal is a good idea. You would be responsible for managing all day-to day aspect of the business. After all expenses, Lina and I would take an agreed amount each week. You keep the surplus as your management fee, whatever it is, even if it increases. You would be responsible for all of your own tax matters.

BL Nick, how much did you want to have out of the business?"

JPC We want to have $1,100 per week. The rest is yours as your management fee.

CW So how much does that mean we can get?

JPC You should get about $2,200 per week after all expenses and our income from the business. However, you will both have to work hard and be reliable. You will be working about 12 hours a day for 7 days a week. Are you sure you are prepared to do that? We will be checking.

CW Yes.

JPC You will have to open the shop everyday no later than 7.30am and close it at 8.30pm. You would be responsible for banking the takings.

You will need to record daily turnover figures. We will check these figures. From the takings you would pay all of the accounts for phones, electricity and insurances and the costs of maintaining the machinery. All of those accounts come to the shop address. We want them paid promptly and we will check them.

CW OK.

JPC You will have to order the stock, check it and pay for it out of the takings. It will be impossible for me to be at every delivery to check the quantities and use-by dates. It's also your duty to ensure the good presentation and cleanliness of the store. You will also have to maintain the grocery delivery service. I will train both of you as to how to do all of these things. I will continue to organise the discounts labels and sales items as this is an important part of the marketing for the customers.

CW Ok. We will go ahead.

JPC My wife and I can dismiss you at any time if we feel that you are not managing the business properly. You can leave at any time if the arrangement is not working out for you.

CW OK

JPC There is another important condition. We would like you to deposit with us an amount equal to the current value of the stock, as security. If and when you leave, we will do a stock take, and I will refund your security as to the value of the stock as it then is."

CW What if we don't make $2,200 a week?

JPC You can leave and we will refund your security. If business is bad, we will know and will consider reducing our income from the business. To be fair, if the cost of maintaining the machinery is more than $2,500 over a year, we will absorb the amount over $2,500 so as to protect your management fees.

BL That sounds fair.

JPC Down the track, if you want to buy the business, I will give you a good price.

CW - When would we start?

JPC - You can start work around the Queen's Birthday

The Applicants spoke with each other for a short while, then Cherry said words to the effect of:

CW We are happy to agree to your terms. Thank you for giving us this opportunity. We have been searching for a small business, but to make over $2000 per week, we have to invest around $180,000 plus stock. We cannot afford that. We are worried about signing a lease with no experience. Nick, are you 100% sure that you will refund the security deposit if we leave?

JPC Yes. We will give you back your money for the security deposit if you leave or we dismiss you. All the security does is protect me if you sell all the stock before you leave or take it away.

CW - Yes, I understand, Nick.

JPC If you want to proceed, we will need to tell all of the interested people that we are not selling or leasing the business any longer. Will you leave a deposit now to prove that you are serious.

BL - Now much deposit do you want?

JPC $2000.

Michael then reached into his bag and handed to me $2,000 in a bundle of notes. I wrote a receipt and gave it to Michael. After this, we had a further conversation to words of the following effect:

JPC We both need a solicitor so we can draft up a formal contract.

BL How much would that cost us to hire a solicitor?

JPC Probably a few thousand dollars. I don't know.

BL Nick, I have already given you $2,000. I will have to raise money for the security, which I'll probably draw from my credit card. We really can't spare the legal fees. Do we really need to pay solicitors? We are all from the same part of China, we trust you in this. Are you worried that you won't receive your income from the business? We have already agreed that you can dismiss us at any time.

JPC - Okay."

60 Mr Chen's affidavit continued:

(a) At no point of time during this conversation or any other subsequent conversation did I or my wife agree to lease our business to the applicants. Nor did we agree to sub-let the premises to the applicants. I know, from my initial conversation with Cherry Wang, that the applicants were not in a financial position to take up any lease or sublease.

(b) At no point of time did we ever agree to sell assign or lease any of our plant fittings fixtures or goodwill of the subject business to the applicants until the execution of the business contract in February 2010.

I was happy to proceed with the management agreement without it being formally drawn up by solicitors, as I could dismiss the applicants as managers at any time. As it happened, the applicants continued working under the management agreement for some five years.

At no time was any offer made to the applicants nor was there any agreement that they would be entitled to occupy the premises, or to prevent me from entering at any time. I always had and kept a key to the door.

On or around 28 May 2005 around 7pm, I had an appointment with Mr Humel, the lessor's husband, to discuss new lease arrangements. We had a discussion to the following effect:

JPC I'm going to buy another business in Fairlight. You probably won't see us as much as you did before when you've come over to pick up your groceries.

BH So what is going to happen to this business?

JPC I found a couple who is going to manage the business for us. We'll introduce you next time you come over to pick up your groceries."

61 According to Mr Chen, the agreement was that the Applicants would pay the rent direct to Mrs Humel and pay him in addition $1,100 per week not $1,970 as they asserted. Contrary to the version given by the Applicants. Mr Chen testified that he offered to provide receipts but Ms Wang said, "Don't worry about receipts. Michael has the first receipt. If we need receipts later on we will ask for them from you".

62 Mr Chen claimed that thereafter for the next 5 years he attended the shop at least once every week "to ensure that they were handling the business professionally and satisfactorily". According to Mr Chen, he developed a close relationship with the Applicants, as the following paragraphs of his affidavit reveal:

"During my weekly visits to the shop I would review the record kept by Cherry as to the daily takings of the store. She would record each day's taking on a page in an exercise book. From my review of the books, I had seen that the turnover was a little low in the beginning few months of their management, as expected, but that it had returned to the range of about $19,000 per week.

JPC I want to keep this as proof of what the turnover was when you started. It's my business, this is my information."

CW Of course, Nick, but I need the books to prepare my records. Can you come back later? I will give you a call when I have finished.

About one week later my wife and I went to the shop in Manly. Cherry handed me 2 exercise books, covering the takings for the period 13 June 2005 to April 2006. The books are exhibited hereto and marked "JPC2".

From the date they commenced their management of our business, we became very close friends with the applicants. We treated and helped them as if they were our younger siblings, especially Cherry. Whenever she encountered a problem, she always rang my wife for advice. When my wife's parents first came to Australia, Cherry and Michael took them sightseeing and out to dinner with my family.

Michael and Cherry would often tell us how well they were doing financially. On Christmas Day 2005, my family celebrate Christmas with Cherry and Michael. I recall that Cherry said words to the effect of:

"We have paid off half of the loan from Michael's brother, and have paid off the entire balance of Michael's credit card debt."

Around June 2007, Michael informed us that he had bought a two-bedroom unit in Waterloo. In about July of 2007, Cherry told us that she had bought an apartment in Shanghai with her brother.

Further, I distinctly remember on Christmas Day 2009, my daughter, wife and I celebrated Christmas with Cherry and Michael at Golden Centaury Seafood Restaurant at Haymarket. Cherry and Michael told us that they had a lot to celebrate that year. Cherry said words to the effect of:

"I have been receiving excellent rental income from the apartment that I bought two years ago in Shanghai. I have placed a deposit to buy a two bedroom flat in Waterloo, close to Michael's apartment. It will settle in September 2010."

Michael said:

"My unit in Waterloo has gone up significantly in value."

I was happy that Michael and Cherry were doing well.

In or about February 2006, I remember an occurrence where a good customer of the shop in Manly telephoned my shop in Fairlight and complained about Michael's poor performance in home deliveries. She said to me "Michael is always late in his deliveries and always gets the orders wrong. This is unacceptable!" I immediately went to the shop in Manly and Michael and I went to the customer's home where we apologised. Michael said to me "I will take more care in the customer's orders.

In about mid June 2007, during my inspection at the Manly shop, I had a conversation with Cherry to the following effect.

CW As you know from our daily records, you can see that business turnover is not as good as in the beginning of our management.

JPC It's okay, I am not too worried, it's only about $1000 different from what you started with."

CW But the rent has increased as well as the electricity. We're not making as much as we are used to."

JPC What do you want to do, Cherry?

CW We have been managers for two years. We have done a good job. Can you please reduce your income?

JPC Cherry, let me think about this and discuss with my wife.

I went back to my shop in Fairlight and had a discussion with my wife. We both liked Cherry and Michael and trusted them so we were prepared to reduce our income by $200 per week to $900 per week.

A few days later, Cherry rang me and we had the following conversation:

JPC Una and I will reduce our income to $900 per week, starting next financial year."

CW Thank you so much my older brother! We really appreciate this. Thank Lina for looking after me.

Thereafter, from 2 July 2007, my wife and I were paid $900 per week, and the balance after expenses remained the management fee of the applicants. I recall that on about 9 July 2007, Michael came into the Fairlight shop, and I gave him a receipt for that week's $900. Michael thanked me, took the receipt and left."

63 After referring to times, apparently in 2007 and 2008, when, according to Mr Chen's affidavit, there were tensions and difficulties in the personal relationship between the Applicants, he said that matters stabilised between them and there were no further incidents. He claimed that he continued to make regular inspections of the shop where he checked takings and stock levels.

64 In relation to the events of February 2010, Mr Chen's affidavit related:

"On or around 5 February 2010, I went to see the lessor's husband, to discuss the renewing of my lease which was to expire at the end of May. He said to me:

"It is no problem for me to give you another 3 by 3 lease, but this lease will still have a demolition clause. However, I can include in the lease that no demolition will occur within two years."

He then made a strange remark:

"If I renew your lease, would you sell the business to Cherry and Michael?

I replied:

"I am not sure if they would be interested."

I left shortly afterwards. When I left, I felt apprehensive why he had expressed an interest in a possible sale by us to the applicants of the business. Lina had to exercise her option to renew by the end of May 2010 in her current lease.

On 8 February 2010 I was at Dee Why in a fruit shop to pick up my fruit. Cherry rang me and we had a conversation to the following effect:

CW: Nick, I have received a call from the landlord. He asked for Michael and me to go to his house this Wednesday so he can talk to us. Do you know why?

JPC: Cherry, I'm at the fruit market. I'll call you back.

I called Cherry back at 1:55pm. We had a conversation to words of the following effect:

JPC: Cherry, what has happened?

CW: The landlord wants to talk to us on Wednesday at his home. Do you know anything about that?

JPC: Well, last week I went to Bill's place to discuss the renewing of the lease and the future of the building and the business. But I don't know why he wants to talk to you.

CW: Are you sure that you don't know?

JPC: Sorry, Cherry, I have no idea.

CW: Nick, if your lease gets renewed, what are you going to do?

JPC: I will probably want to sell it.

CW: Well, we are interested in buying the business, how much do you want for it?

JPC: Around $200,000. What do you think?

CW: We have already managed the business for over four and a half years. You told us in the beginning that if we were interested in buying your business later on, that you would give us a good discount. $200,000 is too expensive!

JPC: Cherry, you have already made at least $500,000 from our business in the last four and half years. Why do you think that $200,000 too expensive?

CW: We have both been working so hard. Michael and I have both been working 13 hour days for 7 days a week. You aren't giving us a good discount to buy the business.

JPC: Cherry, you know how much the business can make. If it's on the market now, it can fetch around $300,000. You know that. If we sell the business to you at $200,000 it is a big discount.

CW: No! You are a liar, you are cheating us.

JPC: Don't be angry, no one is forcing you to buy the business.

CW: You are a cheater and a big liar.

At 5:50pm that day, I received a call from Cherry again and had a conversation to the following effect-

CW: Nick, you are a bastard! We don't want to work anymore. We want to leave!

JPC: Cherry, listen, we never asked you to manage the business. You asked us to give you and Michael the opportunity.

She hung up straight after that.

I was concerned that Cherry and Michael would simply lock the store. I rang Cherry five minutes later and had the following conversation to the effect of:

JPC: Cherry, tell me when you want to leave.

CW: You're a bastard, we can leave anytime we want to. You told us this at the beginning.

JPC: You can leave, but you have to tell me when you are going to leave. I can organise someone to replace you.

CW: You're bastard! Come to the shop and I'll tell you to your face.

At around 6:05pm that evening, I went to the shop in Manly and walked past Michael who was standing behind the counter at the cash register. Cherry was upstairs in the kitchen standing behind the chair. Her back was to the gas stoves. We had a conversation to the following effect:

JPC: Now can you tell me when you want to leave.

CW: You're a liar and you cheated us. We can leave at anytime.

Cherry became very enraged and slapped me on the left cheek of my face. A scuffle occurred as I defended myself. I was subsequently charged by Manly Police for assault, and an interim AVO was made against me. Ultimately, on 28 February 2011, Manly Local Court dismissed the charge against me in relation to this incident and refused to make a final AVO, after a full contested hearing at which Cherry and Michael gave evidence.

On 8 th February 2010 I rang the lessor's husband at 6:48pm. I had a conversation with him to the following effect: PC Bill, Cherry and Michael want to leave. Lina and I will be back running the store."

BH Nick, you have been sub-leasing these premises all these years. I'm cancelling your lease.

JPC What are you talking about Bill? You've known that Cherry and Michael were managing my business for the last five years!

Mr Humel then hung up the phone without replying."

65 What followed seems to be largely common ground. Mr Chen organised for a stocktaking to occur on 11 February without consulting with the Applicants and subsequently locked them out of the premises. This conduct was met by the Applicants seeking urgent interim relief in the Tribunal which, in turn, led to the agreement whereby they purchased the business.

66 Replying to the affidavits of the Applicants, Mr Chen denied the substance of most of the conversations relied upon by the Applicants.

67 Mr Chen was cross-examined at some length by Mr McGrath. He was at pains to emphasise, whether responsive to the question or not, that the Applicants were managing the business and were not entitled to occupation of the premises on any other basis. For example this exchange at T6:

"Q. Do you think you had the right to put them out on less than a days notice?

A. WITNESS: I think so.

Q. If you had that right then should we take it that the weekly fee they paid did not entitle them to occupation of the supermarket at all?

A. WITNESS: They're not entitled occupying the supermarket because my business, I'm going every week inspecting, I care of my business, they just manage my business.

.......................................

Q. Are you telling the Tribunal the cash they paid you or your wife every week wasn't an occupation fee?

A. WITNESS: No, it's our income from our business.

Q. You'd agree of course that the payments to you weren't rent in advance?

A. WITNESS: They never, never get the income from business in advance, we're always one week late.

Q. But you're saying it wasn't rent at all, is that right?

A. WITNESS: Never been treated as a rent.

Q. You agree that the payments made weren't money they would ever get back?

A. WITNESS: Why should. I get my income from my business.

Q. We should take it you agree that Michael and Cherry were never going to get the money they paid you or your wife back, that's correct, isn't it?

A. WITNESS: Michael and Cherry never pay me. We get our money from our business.

Q. Yes but Mr Chen, could you answer the question. You were never going to pay Michael and Cherry back that money, were you?

A. WITNESS: No. I first clear, I never get any money from Cherry and Michael.

...............................................

Q. Mr Chen, do I understand correctly that you say that your wife and you 45 were allowed to put Michael and Cherry out of the store at any time with no notice, is that correct?

A. INTERPRETER: Yes, that's correct, it's part of this agreement.

Q. Would you agree that the payments they made to you each week were something - were payments for which they received no real rights?

A. INTERPRETER: It's none of their money. The money they gave to me was income from my business, they were only managing the business.

Q. Mr Chen, do you understand I am not asking about whether the income was income from your business?

A. INTERPRETER: So what do you mean by that?

Q. I am asking you whether Michael and Cherry received any rights in return for the payments they made to your wife and yourself?

A. INTERPRETER: For the right to manage my business.

Q. But that was a right that you're telling us that you could end at any time with no notice, is that correct?

A. INTERPRETER: Yes, I've already mentioned to you it was part of the agreement when - Cherry agreed to at the very beginning."

68 It emerged during cross-examination that Mr Chen did not disclose, until he filed amended tax returns in 2010, any of the weekly monies received from the Applicants. When he did make disclosure it was on the basis that his wife and himself each received $500 per week.

69 In relation to the manner in which Mr Chen treated the business for taxation purposes, there was this exchange with Mr McGrath:

"Q. Coming back to your tax returns, you've never disclosed the gross receipts of the business in your tax returns, have you?

A. INTERPRETER: Yes, I did.

Q. The gross receipts, not just the payment, the weekly payment made?

A. WITNESS: No.

Q. Is that because you weren't in fact running the business at all?

A. INTERPRETER: It was run by me, I did my weekly inspection and give them advice on how to run the business.

Q. I am suggesting that if you had been running your own business through a management agreement with Michael and Cherry you would have disclosed in your tax returns the gross receipts of that business, do you agree?

A. INTERPRETER: I only told my accountant the income, I don't know how she did with them."

70 Mr Tyler asked some questions along the same lines:

"Q. I will pickup on that theme as well, for you or your accountant to prepare the business activity statement you'd need details of all of your sales and your purchases. You've admitted to us that the lease was between yourself and Mr Hummel or Mrs Hummel, you're saying it's your business, as I suggest that it is your duty to prepare the BAS statement or have it prepared on your behalf, what information did you give to whoever prepared your BAS statement to enable to do, to prepare this statement or was no BAS statement prepared?

A. INTERPRETER: Yes, I have told them the turnover of the Manly business bit I did not get the full information on the purchase, that information, or on the tax component of it because Cherry had throw away a lot of tax invoices on the business.

Q. I would suggest then that that would be a disadvantage to you if a BAS statement was prepared if you're able to prepare your sales but are unable to declare the purchases then the amount that you would have to pay to the tax office would be far greater than the law requires, if that BAS statement is prepared correctly?

A. INTERPRETER: That's correct.

Q. A BAS statement is normally signed by the person who is responsible, you signed the BAS statement?

A. WITNESS: Honestly I did not sign."

71 Mr McGrath later pursued that matter of BAS statements with Mr Chen:

"Q. I am showing you a document, Mr Chen, can you identify what it is?

A. INTERPRETER: It's a BAS statement.

Q. Mr Chen, do you see the ABN number on the BAS statement?

A. WITNESS: Yes.

Q. Are you able to inform the Tribunal whether that is the ABN for the business you and your wife ran or not?

A. INTERPRETER: No it's not.

Q. Are you able to recognise it as the ABN for Cherry's Grocery is the business run by Cherry and Michael?

A. INTERPRETER: Yes, there were writings on it.

Q. Might I see that again, thank you. Can you recognise the signature on the second page as being that of Cherry?

A. INTERPRETER: Yes.

Q. Have you seen that document or the original thereof before?

A. WITNESS: (not transcribable)."

72 The second witness in the Respondent's case was the Respondent herself, Lina Quin Miao. She confirmed in global terms in her affidavit sworn 7 April 2011 her husband's versions of the conversations he had with the Applicants.

73 She corroborated her husband's evidence that the weekly sum paid by the Applicants was at first $1,100 per week and later reduced to $900 per week. She said that the money was either personally brought to their Fairlight business by one of the Applicants or "when Nick received the sum when he carried out inspections on the business in Manly".

74 She claimed that Ms Wang telephone her "almost on a daily basis requesting advice and instructions as to the performance of her duties in Addison Road, which I gave her."

75 Ms Miao recounted the events of February 2010 as follows:

"Matters thereafter proceeded satisfactorily until 8 February 2010 when Nick Chen was involved in an incident in the shop after which he was charged with assault also an AVO was taken out against him by Cherry that evening.

On 8th February2010 Cherry rang me several times and she sounded very anxious. She kept on asking for Nick and wanting t get in touch with Nick. Later on, I informed my husband that Cherry seemed very eager to talk to him and he called her back. He was talking to Cherry for about 30min and then he handed the phone over to me. Cherry and I then had a conversation to the words of the following effect-

QM Cherry, calm down.

Cherry:- Lina, Nick wants $200 000 for the shop. You husband is too greedy. We have already worked for you for four and half years. You told us when we started to work for you that would give us a good discount. Do you think $200 000 is a good discount? That's bullshit!

QM Cherry, calm down. You've already made about half a million from our business. Nobody's forcing you to buy our business, only if you want to buy it.

Cherry You are just like your husband. You're a liar and a cheat. I always called you my older sister and I thought you would look after me.

QM: "I think $200,000 is already a good discount. You can't buy a business with the current profit for $200,000."

Cherry: You and your husband are both stingy and mean."

QM: Are you saying that you want the business for free?

Cherry: Not free, but not at your price.

QM: You know Cherry; I don't have to sell the business to you at all. I can sell it on the market to anyone for a lot more than $200 000.

Cherry became very angry and started to scream.

Cherry: You and your husband are big liars and cheaters! You're a mean bitch! Be careful, you big bitch!

Cherry hung up immediately after that.

Due to the difficulties in further management of the shop by reason of the AVO and the unpleasant state of affairs existing between us we decided to terminate the management and obtain legal advice. As a result, a notice of terminations was prepared by our solicitors. A friend, Peter Wilson, delivered this notice between 4-5pm 11 th February 2010.

Nick could not attend by reason of AVO, we went to the shop at Addison Rd, in company of my daughter Lucy, Peter and stocktaker.

At about 8pm on Thursday 11 th February, myself, Peter Wilson, a family friend, a stocktaker and my daughter Lucy arrived at the shop at Manly to perform stocktaking in order to refund their stock deposit.

The shop was locked up and Cherry and Michael were standing outside the store.

My daughter, Peter and myself walked towards Cherry and Michael and faced them. I could see that the shop was locked with new locks. I heard my daughter say to Cherry:

"Please open the locks on the store and leave. We need to do the stocktaking."

I, Lucy and Peter Wilson were standing in a group. Suddenly Cherry became outraged and said very loudly to us:

"This is bullshit; we've been managing this shop for almost 5 years. You can't dismiss us like this with a stupid letter."

I said to her in Chinese:

"Your Management Contract has been terminated; you have also assaulted my husband. Please leave."

Cherry was very enraged and yelled to me in Chinese:

"How dare you try to dismiss me! I've been managing here for almost 5 years already. Your lease will be cancelled."

76 Following further conversation, Ms Miao and her party left but as the affidavit relates:

"My husband arranged for a locksmith to be present at 77 Addison Rd, Manly on Saturday 13th February in order to enter for the stocktake. At approximately 12am on Saturday 13 th February 2010, Peter Wilson, a security guard, a locksmith and myself we arrived at the shop at 77 Addison Rd, Manly. We then changed the locks. We then stationed the security guard in front of the store. Peter Wilson, myself and the locksmith then left the premises.

On the morning of 14 th February 2010, being a Sunday, the security guard called Nick and informed him that people were attempting to access the shop. My daughter, Peter and myself went to the shop shortly after the call.

When we arrived, I saw that Cherry, Michael and Ian Byrne standing in front of the shop. Shortly after, two police arrived and Ian Byrne went to them and immediately started to speak with the officers.

The police then spoke to my daughter. I could not understand completely but I heard them talk about the Court Order that was supposed to have been delivered to us a Court Order by 12 th February.

I had a copy from my lease from Mrs Humel which I gave to Lucy. I saw my daughter show the police a copy of the lease in my name of the premises at Manly. I saw that the police then spoke with my daughter and then to Cherry and Michael saying "This is a civil matter, there's nothing we can do about this, please move on." The applicants then left.

By 15 February 2010 we still have not received of any notices from the respondents. My husband organised for stocktaking to be held at 6:00am on February 15 2010, being a Monday. He also arranged for two security guards to be at the premises; one stationed outside the shop to keep the peace, and one with us inside so as to supervise the stocktaking.

On the morning of 15 th February, around 6am, two stocktakers, my daughter and myself arrived at the shop in Manly to perform stocktaking. At approximately 7.30am, I heard people speaking loudly outside and I recognised them to be Cherry and Michael. I could see that Michael appeared very angry and tried to force his way into the store. Our security guard stopped his attempt."

77 There was further conversation but ultimately the matter was resolved as mentioned earlier by proceedings in this Tribunal and the ultimate sale of the business to the Applicants.

78 During the cross-examination of Ms Miao, it transpired that she, like her husband, had amended tax returns in 2010 to disclose as income the payments which she said were received from the Applicants. Cross-examined about the payments made, there was this exchange:

"Q . What do you say the money Michael - sorry, the money you received each week was for?

A. INTERPRETER: Those money were withdrawals from my business. I don't know what you mean by what's the money for.

Q. So they were simply withdrawals from your business, you say?

A. INTERPRETER: Yes, from our many business and out of the agreement between us.

Q. Then are you telling the Tribunal that because the monies received were simply withdrawals made by you from your business, then Michael and Cherry received no rights at all in respect of the payment of those monies?

A. INTERPRETER: No, they still have a right. If they exceed the agreed amount, then get 22 hundred a week.

Q. And was that the only right they received in relation to those payments?

A. INTERPRETER: They were just managers. Just a relationship like between an employer and the work employee."

79 Ms Miao was cross-examined about her right to terminate the relationship without notice:

"Q. Are you telling the Tribunal you had a right to terminate instantly at any time?

A. INTERPRETER: Because back in June 2005, Nick and myself between - between Nick and myself and Cherry and Michael, we had an agreement that we can terminate each other at any time and to us, this is a pretty new arrangement. However, Michael had done it twice like this before.

Q. He'd done this and terminated two people in the Manly shop before or in other shops?

A. INTERPRETER: When I say twice, I mean there were two occasions after a fight between Michael and Cherry and Michael rang me to say "No, I'm-" - Michael rang Nick, I correct myself. Michael rang Nick so "I'm stopping doing this now". Tomorrow. "I'm stop doing this tomorrow". After they fighting, he was stopped straight away and stopped coming again.

Q. Why did you terminate the arrangement?

A. INTERPRETER: Because Cherry had a fight with Nick and there was AVO in place and due to that AVO, Nick couldn't go there any longer. She manage to involve in the management of the shop and our lease was only last - our lease lasted only for three months, was only for three months. And if the lease expire in three months time, we couldn't - and we will lose everything in our business."

80 Some support was lent to the Respondent's case by witnesses Mr Ling Xia Jiang, Mr Peter Wilson and the Respondent's daughter, Ms Lucy Chen.

81 Mr Jiang testified that he negotiated with Mr Chen during March 2008:

"I telephoned Mr Chen and made an appointment to see him. Ming Cai and I met Mr Chen one or two days later being a Saturday at his shop in Fairlight and explained my presence. He said words to the following effect to me in front of Ming Cai:

"I want someone to manage my mini-mart in Manly. My current managers want to leave so I need to replace them. They were a couple and the man doesn't want to work with his ex-girlfriend anymore. "

I asked Mr Chen:

"What do you mean by managing your business and how much can I pay per week?"

He said words to the following effect in which he outlined roughly the proposition he wished to put to us:

"You will just help me run the business under a management contract. I know the takings because I have checked their turnover books. The turnover is about $18,000 - $19,000 per week. After paying all expenses and what I want out of the business, you would get over $2200 per week as your management fee. My income from the profits would be $900.00 per week. If you don't make what I told you, you can leave anytime.

I will come down to help you and train you."

I asked

"Do you have any records which you can sure us of the turnover figures?"

Mr Chen then showed us two books with turnover records for the business at Manly from the current managers. I saw dates from 2005 to early 2006. We were satisfied that Mr Chen's statement about the turnover figures were accurate.

He also said:

"You will only have to pay a stock deposit which the current managers are holding for us, which I think is about $40,000 - $50,000. Do you have that much?"

I spoke to Ming Cai and replied "Yes".

I asked

"What will happen if we don't make $2200 per week after all expenses and your share?"

Mr Chen replied:

"If you make less than $2200 I will cut my profit to make up the difference so you will still receive $2200 for your trouble. You will have to keep good figures of the turnovers for me to look at."

I asked

"When can we leave? What if we have personal reasons to leave such as sickness? Can we leave at anytime?"

Mr Chen replied:

"Of course, you can go at anytime and get your stock deposit money back, but, if I am not happy, I can dismiss you at anytime. If this happens l will guarantee to give you your money back. I had a discussion with Ming Cai. We agreed and received the address of the shop at 77 Addison Road Manly."

82 Mr Wilson, a friend of the Respondent said that on 11 February 2010 at approximately 4pm, he delivered to the Applicants at the premises, a letter from the Respondent's solicitors, Gary Cassim and Associates, in the following terms (omitting formal parts):

"We act for Lina Miao who instructs us that she has terminated your contract of management. We hereby confirm the notice of termination of your contract to manage the business at the above address effective immediately.

Our client requires you to leave the premises at or by 8.00pm on Thursday 11 th February 2010 taking with you all of your possessions including all cigarettes unless such can proven by documentation to show they were purchased legally.

We advise that our client will be attending to take possession of the premises and all of the fittings fixtures which should be in working condition and stock at 8pm on Thursday 11 th inst and will close the shop for trading at that time.

Our client will be in company with:-

A stocktaker who shall take stock of all stock in the shop immediately

A Police Officer who has been provided by the Police Department to keep the peace during your departure,

Such witnesses as our client deems necessary to witness the proceedings.

Under your agreement stock was paid for by you on your assumption of the management to enable the parties to balance accounts on termination of your contract and therefore ready willing and able to pay you immediately the figure arrived at by the stocktaker less any amount for stock not paid for and in respect of which money is due.

Please have all accounts for payments available for perusal this evening which should include the last bill for electricity, milk, bread and the newsagents.

Any adjustments for any monies due to you will be adjusted with the stock figure.

Please note our client intends to change all locks and deny you further entry into the premises and require you to leave peacefully and without any further altercation

Our client will also require all monies for takings unbanked to be handed to her."

83 At approximately 8pm, Mr Wilson attended the premises with Ms Miao, Ms Lucy Chen and a stocktaker. His version of following events was:

"The shop was locked but Cherry and Bo Lu were standing outside. We approached them and I heard Lucy say to Cherry "Did your receive the notice of termination".

Cherry replied "yes".

Lucy said words to the effect

"Please unlock the shop so as the stocktaker can perform the stocktake."

Cherry became very angry and replied aggressively words to the effect "we're not going anywhere (Cherry was pointing to Bo lu) we have been here as managers for 5 years managing the shop we have spoken to the landlord he said we could stay. We won't leave."

Lucy made a reply the effect of which was "you have been dismissed, you assaulted my father. We are able to terminate your management at any time. Please unlock the doors.

Cherry's voice became louder and she started shouting words to the effect "I am not going to. We have been managing the shop for over 5 years". She also started yelling abuse and calling Lucy names.

Cherry, after several requests from Lucy to open the shop refused and became increasingly aggressive but repeated the above statements on a few occasions.

I heard Cherry use the word "managers" on several occasions.

During all of this exchange Bo Lu did not speak.

At approximately 8.10pm a police officer arrived.

Lucy then spoke to the police officer and I heard her say words to the effect "we have terminated the management contract for the shop and we are here to gain access to the shop for a stocktake."

Cherry injected herself into the conversation yelling and said words to the "they can't do this we have been working here for 4 & half years we manage this shop".

The police officer replied with words to the effect "we are here to keep the peace Mr Cassim contacted our Duty Sergeant and advised him what was taking place"

About this time a man arrived who introduced himself as Ian Byrne a solicitor acting for Cherry & Bo Lu. He said words to the effect "Cherry & Bo Lu have been in the shop for 5 years. This notice of termination was only served at 4pm today I will be applying to the supreme court first thing in the morning for orders to overturn this notice. Lina Qun Maio will be notified by 5pm Friday 12 th February."

The police then said words to the effect to Lucy and me "if these people are going to the courts tomorrow to seek orders 1 day will not make a difference"

I was standing near Ian Byrne and the Police Officer and I heard the Police Officer say words to the effect "this is only a Civil matter but if you say that you can get orders by 5.00pm tomorrow (12 th February) we will leave the matter until then".

84 Ms Lucy Chen, in relation to the events at which she was present on 11 February, deposed to the following facts:

"2. At about 8pm on Thursday 11 th February, my mother, Peter Wilson, a family friend, a stocktaker and I arrived at the shop at Manly at approximately 8pm to enter the shop and take stock.

3. I could see Cherry and Michael were standing outside the shop and that the shop has been

locked up.

4. Peter and my mother walked to toward them. We were facing Cherry and Michael, outside the doors of the shop. Peter Wilson was standing behind me. The stocktaker was standing away from us, near the benches. I could see that the locks have been changed from those previously on the doors.

I said to Cherry:

"Please leave the premises and remove the locks on the shop. You have already received a letter from our solicitors informing you of the termination of your management contract. We are here to do the stocktaking."

Cherry became outraged and said very loudly:

"This is bullshit; we've been managing this shop for almost 5 years. You can't dismiss us like this with a stupid letter. We've been managers here for so long! We won't leave."

I said to her:

"Of course we can dismiss you. Not only are you a liar and cheater, but you assaulted my father. You remember the terms of the management contract that you agreed to when you first began, that we can terminate your management at any time. Please unlock the doors. This was all explained to you in the letter that our solicitor wrote."

85 Both Mr Lu and Ms Wang swore affidavits in reply to the affidavits read in the respondents case. Mr Lu denied that he ever discussed with Mr Chen an arrangement whereby he and/or Ms Wang would manage the business for Ms Miao. He also denied that he ever said that the Respondents had the right to dismiss the Applicants at any time.

86 Mr Lu's affidavit referred to a conversation with Mr Chen regarding the "merchant machine" located in the premises:

"Prior to Cherry and I taking over the lease of the shop, on or about 8 June 2005 I was present at the shop with Cherry, Mr. Chen and Ms. Miao when I held a conversation with Mr. Chen when we used words to the following effect:-

Mr. Chen: "We had better write a letter to St. George requesting them to transfer the merchant machine from our title to your new title so you can receive the EFTPOS money into your account when you take over the shop."

Me: "OK".

After we held the above conversation Mr. Chen dictated the words to me and I wrote out the words in a letter to St. George Bank. After I finished writing out the words Mr. Chen dictated to me I showed the letter to Mr. Chen and he read it in front of me and said to me words to the following effect:-

"That will do."

He then called out to Ms. Miao who was present elsewhere in the shop words to the following effect;-

"Lina, come over and sign this letter."

I then saw Ms. Miao come over to Mr. Chen and sign the letter at the bottom of the page. We then faxed the letter to St. George Bank. A copy of this letter which I have obtained from St. George Bank is annexed hereto and marked "A"."

87 The letter to St George Bank referred to was in the following terms:

"Mr Cardine

St George Bank

Fax [phone]

Dear Sir/Madam,

I, Qun Miao (the merchant ID is 057998205 1739 Terminal ID is: 09011959, inform you that I will hand my business located at 77 Addison Rd., Manly NSW to Ms Wei Fang Wang (which registered business name as "Cherry's Grocery") in the morning of 13/6/05 afterwards. I would like to request you too approve transfer the merchant machine to the new business name.

Thank you very much for your kind!

Sincerely yours,

Qun Miao

8/6/05"

88 In relation to the assertion, denied by Mr Chen, that the business was conducted under the name "Cherry's Grocery", the affidavit stated:

"Also in the period leading up to us taking over the lease of the shop, Mr. Chen me to Campbell's Cash and Carry Brookvale and at that time he helped me open a new account at Campbell's Cash and Carry in the name "Cherry's Grocery". A copy of a statement we received from Campbell's Cash and Carry shortly after we took over the shop is annexed hereto and marked "B"."

89 Mr Lu denied Mr Chen's testimony that he came to the business once a week, in effect to oversee its management. He said that Mr Chen came about once a month to buy cigarettes, which were sold to him at wholesale price. He denied that Mr Chen, to his knowledge ever came to the shop and carried out "handyman" repairs. He said that the certificate of registration of the business name "Cherry's Grocery" obtained in 2005 was displayed on the wall in the upstairs area of the shop where Mr Chen used to sit when smoking a cigarette and drinking coffee.

90 Ms Wang, in her affidavit in reply, denied ever hearing the words "Business Management Agreement" or seeing those words written before February 2010. She said it was always her intention to lease the premises and business.

91 Ms Wang denied that Mr Chen came to the shop once a week and also denied, in effect, that on any occasion he involved himself or expressed other than casual interest in the business. According to Ms Wang, Mr Chen occasionally came to the shop to buy cigarettes and smoked them there because "my wife won't let me smoke in the shop, that's why I come here to shop". Ms Wang said that he would smoke a cigarette in the upstairs section and she would bring him a cup of coffee.

92 As to the registration of the name "Cherry's Grocery", Ms Wang said:

"It is incorrect that Mr. Chen had never heard of the name "Cherry's

Grocery" prior to 2006 as stated by him at this paragraph of his Affidavit.

b) Prior to Michael and I taking over the business we had attended at the Office of Fair Trading at Hurstville and registered the business name "Cherry's Groceries." This was during the time when Michael and I were doing our training at the shop. After we registered the business name Michael and I went to the shop and I showed the "Business Name Certificate" for the name "Cherry's Grocery" to Mr Chen at that time and Michael and Mr. Chen then held a conversation when they used words to the following effect-

Michael: "Cherry and I have gone and registered a business name".

Mr. Chen: "Really, what is the business name?"

Me: "It's called Cherry's Grocery."

Mr. Chen: "Oh, that's good."

c) Shortly after Michael and I took over the business we displayed the Certificate of Business Name in the upstairs area above the desk next to the calendar. I saw Mr. Chen looking at the Certificate of Business Name in this area on occasions when he would sit upstairs at the desk smoking his cigarettes and drinking coffee. We now display the Business Name Certificate behind the counter area at the shop."

93 As to the personal relationship, stated by the Respondent, to have become very close, Ms Wang said:

"Whilst Michael and I were on friendly terms with Mr. Chen and Ms. Miao, after we took over the business in June 2005 we did not see them very often and only usually either saw Mr. Chen when he came to the shop to purchase discount cigarettes or saw Mr. Chen and Ms. Miao when Michael and I went to their shop at Fairlight to provide them with the weekly payments. I never considered Mr. Chen and Ms. Miao to be close friends because I had not known them very long although we did have a good working relationship.

At no stage did I consider that Mr. Chen and Ms. Miao treated me as if I was their younger sibling as suggested by Mr. Chen at paragraph 42 of his Affidavit. At no stage did I ever telephone Ms. Miao and ask her for advice. I did not consider her to be close enough to me to discuss personal matters with her.

When Ms. Miao's parents came to Australia, Mr. Chen, Ms. Miao and the parents and Michael and I all went out to dinner at the Sydney Fish Markets. I did not go to any other places with Ms. Miao's parents and only met them on the one occasion."

94 In reply to the Respondent's evidence that Ms Wang told them she had bought real estate in Shanghai and Australia, Ms Wang denied both the alleged statements and the underlying facts. She said that she does not own property in Shanghai or anywhere else. On the issue of whether the Applicants were conducting their own business or managing the Respondent's business, Ms Wang said that before taking occupation of the business in June 2005, she applied for and was allotted ABN - No. 56318 703233.

95 Ms Wang denied making the remarks attributed to her by Ms Lucy Chen during the incident on 11 February 2010.

96 I formed a very unfavourable impression of the evidence of the Respondent and Mr Chen notwithstanding making allowance for language difficulties. They both gave evidence through a Mandarin interpreter but even so there were problems. Both witnesses insisted on making frequent unresponsive self-serving comments and were quite incapable of giving frank answers, which might possibly be perceived as contrary to their interests.

97 On the other hand, I regard both Applicants as honest and truthful witnesses who did their best to assist the Tribunal. Although English was not their first language they gave evidence without an interpreter and were frank and responsive.

98 Moreover, there are pieces of incontrovertible evidence, in my view which lend support to the Applicants' version of events. Perhaps most significant is the manner in which the arrangement between the parties actually worked out, including the registration of the business name "Cherry's Grocery"; the acquisition of an ABN number; and the transfer of the Campbell's Cash and Carry Account and the electricity and telephone accounts into the name of Cherry's Grocery or of Ms Wang. There are also the conflicts between the unchallenged evidence of Mr and Mrs Humel and the evidence of Mr Chen and the Respondent and the letter to St George Bank quoted earlier.

99 In the result, I prefer the evidence of the Applicants to that of the Respondent and her witnesses wherever they are in conflict. In particular, I reject the evidence of the Respondent as to the establishment of the contractual arrangement except to the extent it accords with the evidence of the Applicants. I am satisfied, on the probabilities, that the Applicants initially paid $1,970 per week in cash to the Respondent and from about April 2007, $1,700 per week. In my opinion independent support for this conclusion is derived from the fact that when the Respondent and Mr Chen belatedly disclosed the receipts for income tax purposes they only disclosed $1,000 per week which did not even represent their own evidence as to the amount paid. I accept the evidence of the Applicants that it was Mr Chen who refused to provide them with a receipt for the monies paid and it was he who persuaded them not to seek legal advice. It is certainly very regrettable that when entering into a somewhat complicated and open-ended relationship neither of the parties evidenced the arrangement with even a single written word.

100 The Tribunal's jurisdiction in this matter depends upon there being a "retail shop lease or lease" within s.3 of the Act. It is also necessary to consider the provision of s.5. Relevant provision of s.3 and s.5 are as follows:

3 In this Act

"listed business" means a business prescribed for the purposes of paragraph (a) of the definition of "retail shop" (including a business for the time being specified in Schedule 1).

.......................................

"retail shop" means premises that:

(a) are used, or proposed to be used, wholly or predominantly for the carrying on of one or more of the businesses prescribed for the purposes of this paragraph (whether or not in a retail shopping centre), or

(b) are used, or proposed to be used, for the carrying on of any business (whether or not a business prescribed for the purposes of paragraph (a)) in a retail shopping centre.

Note: Section 5 limits the retail shops to which this Act applies.

.....................................................

"retail shop lease" or "lease" means any agreement under which a person grants or agrees to grant to another person for value a right of occupation of premises for the purpose of the use of the premises as a retail shop:

(a) whether or not the right is a right of exclusive occupation, and

(b) whether the agreement is express or implied, and

(c) whether the agreement is oral or in writing, or partly oral and partly in writing.

Note: Sections 6, 6A and 84B limit the retail shop leases to which this Act applies.

..........................................

s.5 Certain retail shops excluded from the operation of this Act

This Act does not apply to any of the following retail shops:

................................

(b) shops that are used wholly or predominantly for the carrying on of a business by the lessee on behalf of the lessor."

101 "Grocery shops" are listed in Schedule 1 to the Act and thus the only jurisdictional issue which this case raises is whether the arrangement between the parties falls within s.5(b).

102 As it seem to me to the contest is between whether (as the Applicants asset) there was a lease and sublease of the business and the premises granted by the Respondent to the Applicants, or whether (as the Respondent asserts) the Applicants merely contracted to manage the business on the Respondent's behalf. In arguing the latter case, Mr Bors referred to an absence of any direct reference in the initial conversations on the Applicants' case to a sublease; to the absence of any obligation to reinstate the premises; and to the fact that initially services were not transferred into the names of the Applicants.

103 In support of his contention that the Applicants were managing the business, Mr Bors pointed to the Respondent agreeing to a reduction in the weekly sum payable when there was a downturn in the business, to the dealings between the parties in relation to stock and to the training given by Mr Chen and Ms Miao.

104 As it seems to me most of these points are in truth equivocal. In my view the actuality of what occurred points strongly to an agreement whereby the Respondent subleased the premises to the applicants and leased to them the plant fittings, fixtures and goodwill of the business. In particular I refer to the evidence that from the very beginning the business name, Cherry's Groceries was registered; that the Applicants acquired an ABN number and were responsible for BAS statements; that services were transferred to them; that the Respondent and her husband did not bring the business to account in any way; and only belatedly returned as income part of the sums they received from the Applicants; and that neither the Respondent nor Mr Chen, on the evidence I accept, took virtually any interest in the state of the business. This, in my opinion, was not the case of someone carrying on the business on behalf of someone else. Rather, in truth, the Applicants were carrying on the business for themselves, albeit under an arrangement which, in no way satisfactorily protected their interests.

105 However, under the relationship which I have found to exist, the Respondent was entitled to be paid a consideration based upon the rent which she was obliged to pay to Mrs Humel, and the capital value of the plant, fixtures, fittings and goodwill of her business. Plainly, they were assets which had a value to the Respondent and were capable of being sold or leased independently of the premises. See for instance the discussion as to the nature and meaning of goodwill in the judgment of Gaudron, McHugh, Gummow and Hayne JJ in Federal Commissioner of Taxation v Murry [1998] 193 CLR 605.

106 Mr McGrath submitted, as I understand it, that all payments made by the Applicants to the Respondent (as opposed to the head rent which they paid to Mrs Humel) should be categorised as "key money" and therefore recoverable in accordance with s.14 of the Act which provides:

14 Key-money and lease preparation expenses prohibited

(1) A person must not, as lessor or on behalf of the lessor, seek or accept the payment of key-money or lease preparation expenses in connection with the granting of a retail shop lease and any provision of a retail shop lease is void to the extent that it requires or has the effect of requiring the payment of key-money or lease preparation expenses in connection with the granting of the lease.

(2) If a person contravenes this section:

(a) the person is guilty of an offence and liable to a penalty not exceeding 100 penalty units, and

(b) (whether or not the person is convicted of an offence under paragraph (a)) the lessee is entitled to recover from the lessor as a debt any payment made or the value of any benefit conferred by the lessee and accepted by or on behalf of the lessor in contravention of this section.

(3) This section does not prevent a lessor:

(b) from receiving payment of rent in advance, or

(c) from securing performance of the lessee's obligations under the lease by requiring the provision of a security bond or other bond or a guarantee from the lessee or any other person (such as a requirement that the directors of a company that is the lessee guarantee performance of the company's obligations under the lease), or

(d) from seeking and accepting payment for goodwill of a business from a purchaser of the business, but only to the extent that the goodwill is attributable to the conduct of the business by the lessor, or

(e) from seeking and accepting payment for plant, equipment, fixtures or fittings that are sold by the lessor to the lessee in connection with the granting of the lease, or

(f) from seeking and accepting payment for the grant of a franchise in connection with the granting of the lease.

(4) This section does not prevent a person, as lessor or on behalf of the lessor, from requiring payment by a prospective lessee or the lessee of a reasonable sum in respect of lease preparation expenses incurred in connection with making an amendment to a proposed lease that was requested by or on behalf of the prospective lessee or the lessee, other than:

(a) an amendment to insert or vary the particulars of the lessee, the rent or the term, or

(b) an amendment to remedy a failure by or on behalf of the lessor to include or omit a term of the proposed lease that was, at the time of the failure to include or omit, agreed between the lessor and the proposed lessee or lessee to be included in or omitted from the proposed lease, or

(c) an amendment requested before the lessor is given a lessee's disclosure statement under section 11A.

(5) If a prospective lessee or the lessee is liable to pay a reasonable sum referred to in subsection (4), the lessor must provide the prospective lessee or lessee with a copy of any account presented to the lessor in respect of those expenses. The prospective lessee or lessee is not required to make any such payment until the lessor has complied with this requirement.

107 "Key money" is defined in s.3 to mean:

"any money paid to or at the direction of a lessor or lessor's agent, by way of a premium, non-repayable bond or otherwise, or any benefit that is conferred on or at the direction of a lessor or lessor's agent, in connection with the granting, renewal, extension or assignment of a lease (and a reference in this Act to the payment of key-money includes a reference to the conferral of any such benefit)."

108 As to whether what was paid constituted key money , Mr McGrath referred me to the decision of Judicial Member Bluth in Gordon v The Trustees of the Roman Catholic church [2001] NSW ADT 230. and to the cases referred to therein, which included the decision of the Court of Appeal of Victoria in Gillett & Anor v Burke & Anor [1997] 1VR 81 (Tadgell, Ormiston and Smith JJ).

109 The facts in Gordon were far removed from the present case but in Gillett, Smith J made reference to the principles involved in these paragraphs:

"In the present case, the learned trial judge's analysis of the concept of "premium" was carried out in the context of his conclusion that term A provided a consideration be paid for the granting of or agreeing to grant a lease His Honour took the view that any consideration over and above the payment of rent should be regarded as a premium in the ordi nary meaning of that term The task that was presented to him was to define the term "premium" and the phrase "something of a like nature" and apply those definitions to the facts before him.

Bearing in mind the purposes of the legislation and the definition of "key-money" I find the analysis of Rowland J per suasive The Act is attempting to protect small tenants with little bargaining power The definition of "key-money" ex tends beyond "premiums" as such to "something of a like nature" and thus its meaning was intended to be different from the traditional meaning of a payment for the grant of the lease or assignment of a lease The problem is to identify the sense in which the word "premium" is used in its statutory context and to identify the criteria intended by the legis-lature to be used in identifying "something of a like nature" Some indication of the purpose of the legislation is to be found in the parliamentary debates From this material, it is reasonable to conclude that an objective was to prevent landlords using their bargaining strength to demand a payment in addition to market rental That objective appears most clearly.

Rowland J's approach requires a demonstration of a detriment to the tenant or proposed tenant and

(a) the payment of something over and above the true or lawful rental,

(b) or the payment of something for which there is no real consideration, or

(c) a consideration that is so out of proportion to the benefit that it cannot be a true consideration.

This approach requires the substance of the transaction to be considered and this may require an extensive, but manageable, investigation "

110 Although Mr McGrath submitted that the payments in this case fell into all three of the categories referred to in the above quotation, I find myself unable to agree. It is true that the payments made were above the lawful rent, in the sense that they exceeded the rent payable under the lease from Mrs Humel. However, in my opinion, there was a real consideration, namely the lease of the plant fixtures, fittings and goodwill of the Respondent's business. It may be that the additional consideration paid was out of proportion to the benefit received, but there is no evidence by valuation or otherwise which in my opinion would justify me in reaching that conclusion.

111 Moreover looking at the substance of the transaction the sums paid in excess of the rent due to Mrs Humel were very unlike what in ordinary parlance would be categorised as akin to a premium or non-refundable bond. No finite sum was payable and the Applicants were entitled to terminate the agreement at any time.

112 Accordingly, I find that what was paid to the respondent did not constitute key money and reject the claim.

113 In my view, the agreement between the parties, having no fixed term, was either terminable upon reasonable notice in accordance with the general law or as a tenancy at will under s.127 of the Conveyancy Act. In the latter case, reasonable notice required one month's written notice of determination.

114 The act of the Respondent in locking the Applicants out of the premises on 14 February 2010 plainly did not constitute reasonable notice of determination either at common Law or unders.127 of the Conveyancing Act. The act constituted a breach by the Respondent of the agreement with the Applicants. The Applicants are entitled to damages for any loss suffered whilst they were out of possession.

115 The question remains whether the locking out was unconscionable within s. 62 B(1) of the Act. Although I am not limited to a consideration of the matters listed in s.62 B(3), I am of the opinion that the conduct of the Respondent amounted to undue influence or pressure and unfair tactics within subclause (d). In my view, the conduct constituted the high standard of moral obloquy referred to by Spigelman CJ in Attorney General v World Best Holdings [2005] NSWCA 261 at paragraph 124. The Respondent, in my opinion, was acting illegally, grossly unreasonably and without good faith when she locked the Applicants out of the premises. She was not simply enforcing her rights under the agreement.

116 As to damages, there was some evidence as to the financial loss suffered by the Applicants in the days they were excluded from the premises. Having found unconscionable conduct, I am also entitled to order damages under s.72 AA of the Act which in this case includes compensation for the indignity and humiliation suffered by the Applicants. Doing the best I can on the evidence, I think an award of $30,000 would meet the circumstances of the case.

117 Although I alone constituted the Tribunal in this case, I was assisted by Mr M. Lonie and Mr T. Tyler whose wise advice I gratefully acknowledge.

118 I make these orders:

1.I declare that on or about 15 June 2005 the Applicants entered the premises as occupiers under a retail shop lease.

2.I declare that that Respondent was guilty of unconscionable conduct when she locked the Applicants out of the premises on 14 February 2010.

3.I declare that no monies paid by the Applicants to the Respondent constituted key money within the Retail leases Act.

4.I order that the Respondent pay to the Applicants the sum of $30,000 by way of damages for breach of contract and for unconscionable conduct.

5.Either party may make submissions as to costs within 21 days. The other party may reply within 21 days. Thereafter, the matter of costs will be decided on the papers.

6.In the event that no submissions are received in the Registry within 21 days pursuant to order 5 above, no order as to costs.

I hereby certify that this is a true and accurate record of the reasons for decision of the Administrative Decisions Tribunal.

Registrar

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Decision last updated: 30 December 2011