A business feud on the Gold Coast stemming from the sale of barista-made coffee by a service station has been settled with a tribunal order.
Queensland Civil and Administrative Tribunal (QCAT) was asked to decide a retail shop lease dispute between Crema Espresso Leasing Pty Ltd (Crema) and Grocorp Developments Pty Ltd (Grocorp) over a site in Bundall.
In December 2017, the developer had entered lease agreements with Crema for a drive-through coffee shop, and with Freedom Fuels for a service station, at its multi-tenanted site at 88 Bundall Road.
Crema objected to the sale of barista-made coffee by the neighbouring service station, claiming a breach of contract with Grocorp. It also contended Grocorp made false or misleading statements or misrepresentations that induced Crema to enter the lease or otherwise amounted to unconscionable conduct.
Grocorp had issued a remedy to breach to Crema in relation to arrears of rent and outgoings on 18 June 2019, before taking possession of the property a month later. It sought an order for payment of money owing and compensation for loss of rent, contending that the purported termination of the lease by Crema was invalid.
In the QCAT decision published last month, Crema was ordered to pay $166,655.57 plus interest at the rate of 12.85 per cent a year from 18 June 2019 to date of payment.
The dispute centred on Clause 25.1 of the lease agreement between the parties, which stated:
(a) While the Tenant is a Crema Espresso Entity, the Landlord must not grant any lease, licence or other right of occupation in the Building or on the Land where the predominant purpose of the business is the sale of barista-made coffee.
(b) Nothing in this clause is intended to preclude the Landlord from granting to other tenants of the Complex uses which may involve the sale of coffee products as part of their business, including for example, a service station.”
Crema argued 25.1(b) should be interpreted as if it read “…the sale of coffee products other than barista-made coffee”, to give effect to the purpose of the clause.
QCAT members Katter, Judge and McBryde did not agree.
“Read together, the subclauses permit the sale of coffee products and prohibit the granting of a lease to a business that will predominantly sell barista-made coffee. There is no inconsistency nor any ambiguity,” they stated.
“The sale of barista coffee by Freedom does not give rise to a breach of clause 25.1 of the lease agreement. If selling barista coffee were the predominate purpose of Freedom’s business then there would be a breach by the respondent. However, the plain reading of the clause does not prohibit the sale of barista-made coffee so long as it is not the predominate purpose of the business.”
In assessing Crema’s claim of false or misleading statements or misrepresentations, the members considered exchanges between the parties in lease negotiations which related to the exclusivity clause.
They pointed out Crema had requested the words “where the permitted use includes a substantially similar permitted use to that granted in the Lease” be replaced with “where the predominant purpose of the business is the sale of barista-made coffee”.
Therefore, they were not satisfied Crema entered the lease agreement “on the basis” of the initial representations.
“If the original exclusivity clause remained and was carried through into the lease agreement, it would be challenging to submit that Freedom’s sale of barista-made coffee was not a ‘substantially similar permitted use’ to that granted in the lease agreement. However, the respondent amended the proposed clause,” they stated.
The members found no evidence to support Crema’s claim of unconscionable conduct.
In relation to the termination of the lease agreement, they were satisfied Crema had repudiated the lease by the time Grocon took possession of the property, and found Crema owed more than $160,000 in outstanding rent and outgoings.
“A party unwilling or unable to be bound by contractual obligations to the extent of repudiation of contract is unable to terminate a contract in reliance on a breach of an essential term by an opposing party,” they stated.
“The purported termination of the lease agreement by the applicant was, therefore, ineffective. Without the right to terminate, any claim for damages … is not available to the applicant.”
No order was made regarding costs.