Aspromonte Pty Ltd v Zagari

[1999] NSWSC 831

Reported Decision: [2000] 9 BPR 17,247
[1999] NSW ConvR 55-916

New South Wales

Supreme Court

CITATION:	Aspromonte Pty. Limited v. Zagari [1999] NSWSC 831
CURRENT JURISDICTION:	Equity Division
FILE NUMBER(S):	No.3390 of 1999
HEARING DATE(S):	9th and 10th August 1999
JUDGMENT DATE:	11 August 1999
PARTIES :	Aspromonte Pty. Limited - Ptff/XDef Francesco Zagari - Defendant/XCl
JUDGMENT OF:	Hodgson CJinEq at 1

COUNSEL :	Dr. C. Birch for plaintiff Mr. N. Kidd for defendant
SOLICITORS:	Agostino & Co., Fairfield for plaintiff Stewart Levitt & Co., Sydney for defendant
CATCHWORDS:	LANDLORD AND TENANT - RETAIL LEASES ACT. Prospective tenant spends $30,000 on preparation of shop, and then goes into possession and starts paying rent, in expectation of being granted a lease for not less than 6 months. Three months later, in June 1998, tenant and landlord execute a lease for 6 months with a 6 months option, commencing on 1st July, and solicitor gives a certificate under s.16 of the Retail Leases Act. Tenant claims benefit of 5 year lease. HELD that, prior to giving of the certificate, a lease had arisen to which the Retail Leases Act applied, so that its term was extended to 5 years; and that, while such a lease could be surrendered, the execution of the 6 month lease neither effected such a surrender nor displaced the pre-existing statute-extended lease.
ACTS CITED:	Retail Leases Act 1994 ss.6, 7, 8, 16.
DECISION:	See p.17 of judgment

- 17 -

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

CORAM: HODGSON, CJ in Eq.

Wednesday 11th August 1999

NO. 3390 OF 1999
ASPROMONTE PTY. LIMITED V. ZAGARI JUDGMENT
1   HIS HONOUR: The plaintiff is the owner of the property 244 Canley Vale Road, Canley Heights, which is also referred to in some of the evidence as 244a Canley Vale Road, Canley Heights. The defendant conducts a hairdressing business at that address.
2   By its summons filed on 27 July 1999, the plaintiff seeks a declaration that the property is not subject to any interest in favour of the defendant other than as a lessee from month to month, and that such leasehold interest will terminate on 27 August 1999; and an order that caveat number 5951516E lodged by the defendant against a title to that property be removed.
3 By his cross-claim filed on 9 August 1999, the defendant claims a declaration that he has the benefit of an agreement for lease of the property for a term of three years, plus an option for a further three years either from 16 March 1998 or 1 July 1999; or, alternatively, that he has the benefit of a lease for four and a half years commencing 16 March 1998, plus a six month option, pursuant to the provisions of the Retail Leases Act 1994.
4   In circumstances where the plaintiff claimed that a final decision in the matter was urgently required in connection with a liquor licensing application, I have dealt with this matter urgently on a final basis.

OUTLINE OF FACTS

5   I will commence by outlining the facts which seem to me to be clearly proved, noting at various points some areas of dispute between the parties.
6   In about December 1997, the defendant was working with his father, Dominico Zagari, as a hairdresser in a hairdressing business at Canley Vale. Pat Carbone, a director of the plaintiff, then spoke to the defendant about the possibility of the defendant renting the subject property. There are conflicts in the evidence in that, according to Mr Carbone, the defendant specifically requested that he have a short lease of the property, this being denied by the defendant. There is a further dispute as to the rent that was mentioned at this stage, Mr Carbone claiming it was $350 per week and the defendant claiming it was $300 per week.
7   In about January 1998, the defendant inspected the premises and decided to open a hairdressing shop there. According to Mr Carbone, and also according to a real estate agent Angelo Esposito, there was a meeting between those two persons and the defendant in about January 1998, when the defendant said that he needed time to fix the shop and that he would like to have a six month lease and a six month option. According to Mr Carbone, the defendant said that he wanted this lease to commence on 1 July 1998. The defendant denies these matters.
8   Commencing in about January 1998, the defendant had the shop prepared for his business. He submitted a development application and building application to Fairfield City Council, and obtained approvals. He purchased furniture, fixtures and fittings, and employed a tiler, plumber, painter and electrician to do work on the premises. Over $30,000 was spent on these matters. $16,000 of this was provided by his parents from money borrowed from Westpac on security of a mortgage entered into for that purpose over the parents' home. $4,500 was provided by the defendant's brother, and about $13,000 by his sister. Some of the expenditure was on items such as stock and movable furniture, which could be moved and used elsewhere, but at least $10,000 and probably more was spent on matters which could not be availed of elsewhere. It appears that Mr Carbone gave some physical assistance in the carrying out of this work.
9   According to the defendant, in early 1998 Mr Carbone said to him words to the effect: "You can stay as long as you like" and "I will give you a three year lease with a three year option". This is denied by Mr Carbone. The defendant says that but for statements such as these he would not have invested the money which he did on the shop.
10   The shop opened for business in about mid-March 1998, probably on 16 March 1998. The first rent was paid in early April 1998 by a cheque for $1,200. It is common ground that that cheque was in respect of four weeks rent.
11 On about 26 May 1998, Mr Esposito filled out a lessor's disclosure statement under the Retail Leases Act. This statement showed the lease period as being 1 June 1998 to 1 January 1999, and that there was an option, and the option period was shown as "1/1/99". The date on which the shop would be available was shown as 16 March 1998. The rent was noted as $1,516.66 monthly, and was shown as being based on $350 per week.
12   On or about 26 May, Mr Esposito took this document to the defendant and the defendant signed to the effect that he had received it. Mr Esposito's records show that the first payment of rent was received by him on behalf of the plaintiff on 9 June 1998, being $350 for the period 1 June to 8 June.
13   On about 16 June 1998, the defendant attended at the office of a solicitor, Maria Vukmirica, to sign a lease of the shop. That attendance was arranged by Mr Esposito, who owned the building in which Ms Vukmirica's office was located, and whose real estate agency was in the same building. Mr Esposito was present at this meeting.
14 The lease signed on that occasion provided for a term of six months commencing 1 July 1998 and terminating on 31 December 1998, with an option to renew for six months. The lease provided for a rent of $1,516.66 per month for the lease and also for the option period. Ms Vukmirica signed a certificate under s 16 of the Retail Leases Act in respect of that lease.
15   The defendant gave evidence to the effect that Mr Carbone was also present at that meeting. This was denied by Mr Carbone, Mr Esposito and Ms Vukmirica. The defendant also gave evidence to the effect that, when Ms Vukmirica pointed out the term of the lease, he said that he would later be getting a lease for three years plus a three year option, and that this assertion was assented to by both Mr Esposito and Mr Carbone. That evidence was denied by Mr Esposito and Ms Vukmirica. The defendant paid Ms Vukmirica $120 for her services in relation to the lease. It appears that he did not get any copy of the lease, at least until April 1999 or some time thereafter.
16   Subsequently to the defendant signing the lease, a further $2,700 was spent by the defendant and a beautician on merging the shop with part of a house on the same land, for use by the beautician in conjunction with the hairdressing business.
17   It is common ground that in 1998 there was a conversation between Mr Carbone and the defendant about a proposed development of the subject property as a tavern, but there is substantial dispute as to the timing and circumstances of that conversation. According to Mr Carbone, it occurred in July 1998 and it was initiated by him. According to the defendant, it occurred in about September 1998 and was the result of his seeing items in newspapers and raising the matter with Mr Carbone.
18   In about April 1999, the defendant's father was concerned that his lease in Canley Vale had run out, and he asked the defendant to show him the defendant's lease. The defendant did not have a copy of the lease, and the defendant's father then obtained documents relating to the lease from Mr Esposito and saw that the lease was for six months with a six month option. The defendant's father then went to see Mr Carbone and required the entry into a lease for three years plus a three year option.
19   It appears that the defendant consulted his present solicitors in about May 1999, and that a caveat claiming an entitlement to a three year lease and a three year option was lodged at the beginning of July 1999.
20   An application by the plaintiff, or associates of the plaintiff, for a liquor licence in relation to a proposed tavern development of the subject property has been listed for hearing commencing 12 August, that is, tomorrow. There is evidence that that application would be affected by the defendant's claim. It is in that circumstance that I have given the case an urgent final hearing.

ISSUES

21 The issues that need to be determined by me are, firstly, certain issues of fact between the parties; secondly, the legal position of the parties apart from the effect of the Retail Leases Act; and, thirdly, the effect, if any, of the Retail Leases Act on that position. This third issue requires some consideration of s 3 of the Act and, in particular, the definition of "retail shop lease or lease" in that section, and ss.6, 7, 8, 9, 11 and 16 of the Act. Those provisions are in the following terms:

6(1) This Act does not apply to any of the following leases of retail shops:

(a) leases for a term of less than 6 months without any right for the lessee to extend the lease (whether by means of an option to extend or renew the lease or otherwise), and for this purpose a provision for holding over by the lessee at the end of the term of the lease is not considered to confer a right on the lessee to extend the lease if it operates effectively at the discretion of the lessor,
(b) leases for a term of 25 years or more (with the term of a lease taken to include any term for which the lease may be extended or renewed at the option of the lessee),
(c) leases entered into before the commencement of this section,
(d) leases entered into under an option granted or agreement made before the commencement of this section,
(e) any other lease of a class or description prescribed by the regulations as exempt from this Act.

(2) This Act does not apply to any lease referred to in this section that is assigned to another person after the commencement of this section.

7. This Act operates despite the provisions of a lease. A provision of a lease is void to the extent that the provision is inconsistent with a provision of this Act. A provision of any agreement or arrangement between the parties to a lease is void to the extent that the provision would be void if it were in the lease.

8(1) For the purposes of this Act, a retail shop lease is considered to have been entered into when a person enters into possession of the retail shop as lessee under the lease or begins to pay rent as lessee under the lease (whichever happens first).

(2) However, if both parties execute the lease before the lessee enters into possession under the lease or begins to pay rent under the lease, the lease is considered to have been entered into as soon as both parties have executed the lease.

9. A person must not, as lessor or on behalf of the lessor, offer to enter into a retail shop lease, invite an offer to enter into a retail shop lease or indicate by written or broadcast advertisement that a retail shop is for lease, unless:

(a) the person has in his or her possession a copy of the proposed retail shop lease (in written form, but not necessarily including particulars of the lessee, the rent or the term of the lease) for the purpose of making the lease available for inspection by a prospective lessee, and
(b) the person makes a copy of the proposed lease available to any prospective lessee as soon as the person enters into negotiations with the prospective lessee concerning the lease.
Maximum penalty: 50 penalty units.

...

11(1) At least 7 days before a retail shop lease is entered into, the lessee must be given a disclosure statement for the lease. A disclosure statement is a statement in writing that contains the information, and is accompanied by the material, that is contained in or required to complete or accompany the form of disclosure statement set out in Part 1 of the form contained in Schedule 2 (but only to the extent that is relevant to the lease concerned). The layout of the disclosure statement need not comply with that of the form set out in Part 1 of the form contained in Schedule 2. However, a lessor's disclosure statement is complete for the purposes of this section only if it has attached to it a form to be completed by the lessee as set out in Part 2 of the form contained in Schedule 2.

Note: Because the disclosure statement need only include information relevant to the lease, if the retail shop is not in a retail shopping centre the disclosure statement need not include information that is relevant only to shops in retail shopping centres.

(2) If a lessee was not given a disclosure statement as required by subsection (1) or if the disclosure statement that was given to the lessee was incomplete or contained information that at the time it was given was materially false or misleading, the lessee may terminate the lease by notice in writing to the lessor at any time within 6 months after the lease was entered into, unless subsection (3) prevents termination.

(3) The lessee cannot terminate the lease under this section on the ground that the disclosure statement is incomplete or contains information that is materially false or misleading if:

(a) the lessor has acted honestly and reasonably and ought reasonably to be excused for the failure concerned, and
(b) the lessee is in substantially as good a position as the lessee would have been if the failure had not occurred.

(4) If a lease is entered into by way of the renewal of a lease, a written statement (a "lessor's disclosure update") that updates the provisions of an earlier disclosure statement given to the lessee is, in conjunction with that earlier disclosure statement, considered to be a disclosure statement given for the purposes of this section at the time the lessor's disclosure update is given.

(5) The termination of a lease under this section does not affect any right, privilege, obligation or liability acquired, accrued or incurred under the lease in respect of any period before its termination.

(6) A lessor under a retail shop lease is guilty of an offence if subsection (1) is not complied with in relation to the lease.
Maximum penalty: 50 penalty units.

...

16(1) The term for which a retail shop lease is entered into, together with any further term or terms provided for by any agreement or option for the acquisition by the lessee of a further term as an extension or renewal of the lease, must not be less than 5 years. An agreement or option is not taken into account if it was entered into or conferred after the lease was entered into.

(2) If a lease is entered into in contravention of this section, the validity of the lease is not thereby affected but the term of the lease is extended by such period as may be necessary to prevent the lease contravening this section.

Note. For example, if a lease is entered into for a term of 3 years, its term is extended by 2 years to 5 years. If a lease is entered into for a term of 2 years with an option for a further 1 year after that initial 2 years, the term of the lease is extended to 4 years (with the option for a further 1 year after that initial 4 years).

(3) This section does not apply to a lease if a lawyer, or a licensed conveyancer, not acting for the lessor certifies in writing that he or she has, at the request of the prospective lessee, explained the effect of subsections (1) and (2) to the prospective lessee and that the giving of the certificate will result in this section not applying to the lease.

(4) This section does not apply to a lease that results from the renewal of an earlier lease pursuant to an option conferred on the lessee, so long as there was no break in the entitlement of the lessee to possession of the retail shop and the option was granted by that earlier lease or by an agreement entered into before or at the same time as that earlier lease was entered into.

Note.
Because of subsection (4), a lease will not be required to be for 5 years if it is a renewal of an earlier lease (because the minimum 5 year term requirement applied to the earlier lease and the availability of the renewal will have been taken into account in determining the term of that earlier lease).

(5) This section does not apply to a lease to the extent that its application would be inconsistent with the terms of any head lease under which the lessor holds the retail shop.

22 Sections 16 to 19 are in Pt.2 of the Act which is entitled "Before the Lease is Entered Into".

SUBMISSIONS

23 Mr Kidd, for the defendant, submitted in relation to the Retail Leases Act that there was no dispute that the subject property was a retail shop within the meaning of the Act. He submitted that the effect of s 8 of the Act was that a lease was entered into in about March 1998. He pointed out that accordingly there had been breaches of ss.9 and 11 of the Act, although he made no submission that any consequences relating to this dispute flowed from those breaches.
24 He submitted that s.16(3) of the Act was not effectual to protect the plaintiff from the consequence of s.16(1) of the Act, namely, that the plaintiff had the benefit of a five year lease commencing in March 1998. He submitted that this was so for two reasons.
25 The first reason was that this certificate was given after the lease had been entered into, whereas it could be effectual only if given before the lease was entered into. The scheme of the Act was to ensure that before any lease within the Act is entered into, various things happen by way of disclosure and information to the lessee, including advice concerning the effect of the Act; and that the idea was that the lessee should not become in any way bound or committed to a lease until these things had happened. This was confirmed by the title of Pt.2 of the Act, and also by the words "prospective lessee" in s.16(3).
26 The second reason Mr Kidd advanced for the proposition that the certificate was not effectual to protect the plaintiff was that it was not given by a lawyer "not acting for the lessor" within s.16(3). Mr Kidd pointed out that in this case the solicitor had acted previously for the lessor; was a tenant of the lessor's agent and thus beholden to that agent and not truly independent; had given the advice and certificate in the presence of the lessor's agent and perhaps the lessor's principal; had done so at a meeting arranged by the lessor's agent; handed the bill for the meeting to the lessor's agent; had voluntarily made an affidavit in these proceedings at the request of the lessor without any communication to the defendant or his legal representatives as to whether privilege was waived; and gave the signed lease to the lessor's agent, making no arrangements for a copy to go to the lessee.
27   Mr Kidd further submitted that, even if this certificate was somehow effective to prevent the written lease expanding into a five year lease, it was not effective to bring about the end of a pre-existing lease extended by force of the statute to five years. Mr Kidd submitted that such a pre-existing lease could only be ended by an express surrender, not by being displaced simply through the legal operation of the subsequent written lease.
28 Turning to the question of the position apart from the Retail Leases Act, Mr Kidd submitted that the defendant's expenditure on the property was incompatible with there being an agreement that the defendant should only have a six month lease and six month option. He submitted that I should accept the evidence of the defendant that he was expressly promised a three year lease and a three year option in early 1998, and also subsequently prior to the execution of the written lease. I should also accept the father's evidence that an assurance was given by Mr Carbone that the defendant could stay in the shop as long as he liked.
29   Mr Kidd submitted that such an agreement could be enforced notwithstanding the absence of writing because the expenses on the shop would amount to part performance, and on that matter I was referred to the case of Watson v Delaney (1991) NSW ConvR 55-572. He also submitted that by its definition of "retail shop lease" in s.3 and by the terms of s.8(1), the Retail Leases Act displaced the requirements of provisions such as s.54A of the Conveyancing Act for writing; and he referred me to a decision of El Chiekh v Gratsis, unreported, Hamilton J., 4 July 1997, in support of that submission.
30 Dr Birch, for the plaintiff, submitted that s.8(1) of the Retail Leases Act only applies where the entry into possession or payment of rent is under "the lease". When there is an agreement that the lease commence on a future date, then that provision does not apply. In this case he submitted, on the evidence of Mr Carbone, there was an agreement in about January or February 1998 that the lease not commence until 1 July. In any event, Dr Birch submitted the Act would not apply to any lease in this case other than the written lease signed in June 1998, because apart from that lease there was no lease for a term of six months or more, so that the application of the Act was excluded by the terms of s.6(1)(a).
31 In relation to the written lease, the Act would have application, but the solicitor's certificate was effectual to prevent that lease being expanded into a five year lease. It was given before the commencement of that lease on 1 July, and was given to a prospective lessee of that lease commencing 1 July. Even if that submission were not accepted, Dr Birch submitted that a s.16(3) certificate is effectual even if given after a lease has been entered into, or has commenced. He contrasted other provisions of Pt.2, such as s.11(1), which expressly provided that certain things should happen before a lease is entered into.
32 Dr Birch also submitted that Ms Vukmirica in this case was plainly not acting for the lessor. The fact that she had on one previous occasion acted for the lessor, and the involvement of the lessor's agent in the meeting, was not enough to displace the situation, that plainly she regarded herself as acting for the lessee in advising the lessee on the lease and, in particular, on the effect of s.16 of the Act.
33   In relation to the volunteering of the affidavit to the lessor, Dr Birch submitted that this was not a situation giving rise to legal professional privilege, because the presence of the lessor's agent, expressly consented to by the lessee, indicated that it was not an occasion of confidential communications. In any event, both parties in their evidence in this case had put in issue what was said at this meeting, the defendant relying on some of the conversations to support his claim of an express agreement for the grant of a three year lease and three year option. In those circumstances any legal professional privilege, if it might otherwise exist, was plainly waived. Dr Birch also submitted that the solicitor owed some duty to the plaintiff in relation to the giving of such a certificate.
34 Turning to the position apart from the effect of the Retail Leases Act, Dr Birch submitted that it was not shown that more than around $10,000 irrecoverable expenditure had been incurred. This was not a large sum, in circumstances where the defendant was given at least twelve months, and where there was no suggestion in the evidence that the defendant was to be required to leave immediately on the expiration of that twelve months. The evidence was to the effect that, but for the problems arising from the defendant's claim and the lodging of the caveat, the defendant would probably have been permitted to stay well beyond the twelve months. In circumstances where the defendant was not committing himself to any long period but was hopeful of having, in fact, a substantial period if the success of his venture justified it, he might reasonably have judged his commercial interest to be such as to undertake that relatively small expenditure.
35   Dr Birch submitted that I should prefer the evidence of Ms Vukmirica to that of the defendant in relation to what was said at that meeting. He submitted that an explanation proffered by the defendant for the circumstances of that meeting, namely, a suggestion that otherwise he would be incurring legal fees of around $5,000, was wholly implausible. He submitted that, having regard to the father's evidence and particularly the oral evidence, the likelihood is that the suggestion of a three year lease and three year option originated from the father in about April 1999.

FACTUAL DISPUTES

36   I will first consider the factual disputes in the matter. In relation to those disputes I am not satisfied that I can rely on the detail or even the substance of the evidence of any of Mr Carbone, Mr Esposito or the defendant.
37   As regards Mr Carbone, his evidence was that the agreement right from the start provided for $350 per week rent. This evidence did not sit well with the evidence that the first payment of rent for a period of four weeks was in the sum of $1,200, and I was unconvinced by Mr Carbone's attempted explanation of this in the witness box, that the defendant at the time of payment requested that the lessor "look after me this month" and that he acceded then to that request.
38   Further, Mr Carbone's evidence that, in about January 1998, the defendant explicitly asked for a six month lease and six month option, commencing 1 July 1998, appears to me to be wholly implausible and unlikely. It also conflicts with the disclosure statement drawn up in May 1998, showing the commencement of the lease as being 1 June 1998.
39   As regards Mr Esposito, he also gave evidence that a sum of $350 per week was agreed at least by February 1998, and I do not accept that evidence for the same reason as I have given. He also gave evidence to the effect that a six month lease plus six month option was expressly agreed in February 1998, and yet advances no satisfactory explanation as to why no disclosure statement was prepared until 26 May and no lease is entered into until about the middle of June.
40   As regards the defendant, he steadfastly maintained that Mr Carbone was at the meeting with the solicitor, and that he expressly referred to his entitlement to a three year lease plus three year option at that meeting. I accept the solicitor's denial of these matters.
41   Having regard to my views of those witnesses, I am not satisfied that there was any express mention of a three year lease plus a three year option at any time prior to April 1999. However, I think it probable that something was said by Mr Carbone in the early stages to the effect that the defendant could stay as long as he liked, and that a statement along those lines played a part in inducing the defendant to undertake the expenditure which he undertook. However, I also accept that at this time the defendant was indicating that he did not want to commit himself to any long term arrangement at that stage.

LEGAL POSITION APART FROM RETAIL LEASES ACT

42 I will next consider the legal position of the parties, apart from the effect of the Retail Leases Act. It follows from my factual finding that there is no agreement between the parties for a three year lease plus a three year option. There may be a question as to whether the defendant might be entitled to sum equitable relief for the expenditure incurred in reliance on what must have been fairly vague assurances by Mr Carbone that he could stay as long as he wished.
43   In circumstances where the defendant was not committing himself to any long-term arrangement, it seems to me that the only equitable relief which would be contemplated would be some kind of compensation. However, I have no evidence of the proportionality of what was spent to the expected proceeds of the business over twelve months, or any other period which might be relevant to consider, and the evidence does not justify a finding of any loss of anything more than $10,000. In those circumstances I do not think a case is made out for equitable relief on the basis of expenditure.

EFFECT OF RETAIL LEASES ACT

44 Finally, I consider the effect of the Retail Leases Act.
45 In my opinion, if one confines attention to the written lease for the term of 1 July 1998 to 30 December 1998, plus a six month option, then s.16 would not have the effect of extending the term of that lease to five years, or four and a half years plus a six month option. In my opinion, confining one's attention to that lease alone, the certificate given by Ms Vukmirica was valid. In relation to that written lease, the defendant could properly be described as "a prospective lessee".
46   In my opinion, the matters referred to by Mr Kidd are not enough to preclude the finding, which I make, that Ms Vukmirica was a lawyer not acting for the lessor. It may have been preferable for her to have some expressed authorisation from the defendant before making the affidavit which she made, but ultimately no objection was taken to the affidavit on the basis of legal professional privilege; and I think there is much force in Dr Birch's submission that, having regard to the presence of the lessor's agent, this was not a situation of confidence which would give rise to legal professional privilege. I accept Ms Vukmirica's evidence to the effect that she enquired from the defendant whether he wished Mr Esposito to stay, and that the defendant indicated at least his concurrence to that situation.
47   In my opinion, the difficult question is whether there was some lease relating to a period prior to 1 July 1998 which was extended by the statute to be a lease for five years; and if there was, was this lease displaced by the written lease or in some other way precluded from being a lease for five years as a result of the solicitor's certificate.
48 In my opinion the entry into possession of the shop on the payment of rent meant that there was some kind of lease in existence from about the middle of March. This, in my opinion, would be so at general law, and it would be confirmed by s.8 of the Act. The first difficult question is whether any such lease as that would be excluded from the operation of the Act by s.6(1)(a).
49 It appears that the intention of s.6(1)(a) is to exclude from the operation of the Act leases which are of such a short duration that it is not appropriate to impose the provisions of the Act in relation to those leases. On the facts as I have found them, at the time of entry into possession and commencement of payment of rent, no agreement or consensus was established as to any particular term. The expenditure of the $30,000 perhaps suggests an expectation held by both parties that the occupation would be for, at least, six months. The disclosure statement of 26 May suggests a consensus at that stage that the lease should be for a period from 1 June 1998 to 1 January 1999. Both sides in different ways also state in evidence that there was a consensus that there should be a six month lease and six month option arrived at some time before the actual signing of the lease, and I am satisfied that there was, in fact, such a consensus.
50 It seems to me that there is a question whether, for a lease to be excluded by the force of s.6(1)(a), there has to be an agreement between the lessor and lessee for a term shorter than six months; or whether it is sufficient that there be a mere lack of legally enforceable agreement for a term equal to or greater than six months. However, whichever approach one takes on that question, it seems to me that, if there is entry into possession of a shop and payment of rent during negotiations for a lease of at least six months, and such a lease is subsequently entered into, the effect of s.8 is that the Act requires that the lease which is ultimately entered into be considered as having been entered into at the earlier time; and it seems to me further that that lease is not excluded from the operation of the Act by s.6(1)(a).
51   In an earlier decision of mine in Whiteway House No.199 Pty Ltd v Abracoona Pty Ltd, 29 May 1998, unreported, I said this in relation to the construction of s.8(i):

It would be possible to give a construction to s.8(1) to the effect that there cannot be entry into possession as lessee under a lease, or payment of rent as lessee under a lease, unless the lease is already in existence in the full sense of the word; that is, unless there had already been a formally executed lease or at least a concluded agreement. However, in my opinion that construction of s.8(1) should be rejected, particularly having regard to the terms of s.8(2). Section 8(2) deals with a situation where both parties execute the lease before the lessee enters into possession under the lease, or begins to pay rent under the lease. Those words, in my opinion, clearly contemplate the possibility that the lease may not be executed by both parties until after the lessee has entered into possession under the lease, or has begun to pay rent under the lease. That means in my opinion that the words "under the lease" in both subsections should not be given a narrow and restricted construction, but rather should be considered to be satisfied where thee is entry into possession or payment of rent pursuant to a consensus as to terms which is subsequently given effect to by an executed lease. That is a situation which happens very commonly, and in my opinion that is the situation which the section is intended to deal with.

52 I remain of the view that s. 8(1) discloses an intention that there can be entry into a retail shop as lessee and payment of rent as lessee under a lease, where these events occur at a time when there is consensus as to the terms of such a lease but not yet any written lease entered into.
53 In my opinion the effect of these views in this case is that under s.8(1) there must be considered to have been a lease effected by the Act commencing in about mid-March 1998. That lease would then be extended to a period of five years with four and a half years plus a six month option, unless that is excluded by the effect of s.16(3).
54   In my opinion a lease extended in that way by force of the statute could be surrendered by agreement between lessor and lessee. It seems to me that the question in this case is whether it can be superseded or displaced by a written lease commencing at a different date and with a term of six months plus a six month option.
55 Having regard to the terms particularly of s.7 of the Act, I am of the view that the entry into such a written lease would not, by force of that entry alone, displace a lease extended by statute in the way I have described. In my opinion such a situation is not the same as a surrender by the lessee of a lease extended by the terms of the statute.
56   One further reason why, in my opinion, the lease commencing on 16 March, and extended to a period of five years by the statute, would not be affected by the certificate that was given in this case, is that in relation to that lease the defendant was not a prospective lessee within s.15(3); and I think that that approach is supported by the heading of Pt.2 of the Act which, in my opinion, confirms the legislative intention that the matters dealt with in Pt.2 take place before a lease is entered into. In my opinion it is consistent with the whole scheme of the Act that the lessee be given adequate information about what the lessee is to be involved in before the lessee becomes involved in a lease to which the Act applies.
57   For those reasons, in my opinion, the defendant does have the benefit of the Act, subject to one matter. I am not sure if there is anywhere in the evidence an indication of acceptance and commitment by the defendant to a lease for a period of four and a half years. If the defendant is to claim the benefit of such a lease, it seems to me that there must be an agreement or commitment by the defendant to be bound by those terms for his part, so that he would not be able to walk away if he decides it is not in his interest to continue with such a lease. At present my view is that such an agreement can be indicated at this stage, but I would be prepared to hear further submissions on that.
58   In relation to the terms of the lease, it seems to me that the terms of the written document, insofar as they are not inconsistent with the lease to which I have referred, would apply.

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I certify this and the preceding 16
pages to be a true copy of the reasons
for judgment of Justice D.H. Hodgson

Date 17th August 1999
Associate

Last Modified: 08/18/1999