BCCM Group Pty Ltd v ASAP23 Pty Ltd - [2022] SASC 141

Supreme Court of South Australia
(Magistrates Appeal: Civil)
BCCM GROUP PTY LTD v ASAP23 PTY LTD
[2022] SASC 141
Judgment of the Honourable Chief Justice Kourakis
29 November 2022
LANDLORD AND TENANT - LEASES AND TENANCY AGREEMENTS
This is an appeal from the Magistrates Court against orders of the Magistrate requiring the appellant to yield up vacant possession of the leased premises. The respondent is the owner of Centro Hollywood Shopping Centre. The appellant leases from the respondent a portion of the premises from which it operates a car wash and dog wash.
The primary issue on appeal is whether the respondent validly terminated the lease pursuant to clause 25 of the Lease (as varied). That issue turns on the proper construction of clause 25 and in particular the meaning to be ascribed to the word ‘reconstruction’.
The appellant also appeals on the ground that the Magistrate erred in declining to exercise his discretion pursuant to s 68(2) of the Retail and Commercial Leases Act 1995 (SA) to grant the appellant dispensation or relief against forfeiture.
Held, per Kourakis CJ (dismissing the appeal):
1. Clause 25 of the Lease (as varied) was validly invoked to terminate the lease.
2.The definition of ‘reconstruction’ in clause 25 must be given its ordinary meaning both to advance commercial certainty and because its context does not provide any clear circumscription of its meaning.
3.The decision of the Magistrate that s 68(2) did not extend to granting relief against the operation of a provision of the Retail and Commercial Leases Act1995 itself cannot be upheld in circumstances where the lease was terminated pursuant to clause 25 of the Lease (as varied).
4.The Magistrate did not err in declining to exercise his discretion under s 68(2) to grant dispensation or relief against forfeiture.

Retail and Commercial Leases Act 1995 (SA) ss 3, 39, 68, referred to.

BCCM GROUP PTY LTD v ASAP23 PTY LTD
[2022] SASC 141
Magistrates Appeal: Civil

KOURAKIS CJ: ASAP23 Pty Ltd (ASAP23) is the owner of the Centro Hollywood Shopping Centre (the Shopping Centre) in Salisbury Downs which it purchased from CPT Custodian Pty Ltd (CPT).
The Shopping Centre stands on a triangular block of land, most of which was developed as retail shops. CPT granted a lease over an undeveloped portion of the Shopping Centre (the leased premises) to Waywood Pty Ltd (Waywood) for a period of 15 years from 1 December 2005 to 30 November 2020. The leased premises stands at the apex of the triangular block on the corner of Windzor Street and Martins Road. The written lease between CPT and Waywood (the original lease) contemplated that Waywood would construct a car wash on the leased premises which was then vacant. Clause 7 of the Special Covenants in the first schedule of the original lease provided that Waywood was to carry out that work and build the car wash at its own expense and reimburse CPT for any necessary works undertaken by it to facilitate the construction of the car wash. The car wash was built and operated by Waywood.
BCCM Group Pty Ltd (BCCM) purchased Waywood’s business on 7 March 2008. By a Deed of Assignment dated 28 March 2008, BCCM became the lessee of the leased premises under the original lease. BCCM entered into a Deed of Variation of the original lease on 12 November 2009 pursuant to which it was agreed that it would construct, at its expense, an additional car wash and a dog wash. On 27 November 2019 ASAP23 became the registered proprietor of the Shopping Centre and succeeded CPT as the lessor. I will refer to the resulting lease as the Lease (as varied). The car wash and dog wash were soon thereafter constructed. Clause 13 of the Deed of Variation also granted BCCM an option to renew the Lease (as varied) in the following terms:
13.OPTION TO RENEW
13.1If the Lessee:
(a)     wishes to have a renewed lease of the Premises for the Further Term or the first of the Further Terms (as the case may be); and
(b)     gives notice to that effect to the Lessor not less than nine (9) months before the expiry date; and
(c)     is not in Substantial Breach of the Lease at the time the notice referred to in Special Covenant 13.1(b) is given,
the Lessor must grant to the Lessee a renewed lease of the Premises for the Further Term or for the first of the Further Terms (as the case may be) on the same terms as contained in this Lease except that in this Special Covenant 13. The rent payable by the Lessee as at the commencement at the Further Term shall be determined in accordance with clause 8.15.
13.2In this Special Covenant 13:
“Further Term” means one (1) right of renewal for a further term of ten (10) commencing on 1 December 2020 and expiring on 30 November 2030.
“Substantial Breach” means a breach by the Lessee of any covenant in this Lease:
(a) in respect of which notice has been given by the Lessor to the Lessee pursuant to section 10 of the Landlord and Tenant Act 1936 (SA); and
(b)     which the Lessee has failed to rectify within a reasonable time (as specified in the notice, or if not specified a period of twenty-eight (28) days) after receipt of the notice.
The Magistrate found that BCCM did not exercise the option in accordance with clause 13 of the Lease (as varied) but found that ASAP23 was estopped from denying that it had been renewed. Accordingly, the Magistrate found that a purported notice of termination given by ASAP23, which was premised on a monthly tenancy arising on a holding over, was ineffective.
After BCCM commenced proceedings in respect of the first notice ASAP23 served a second notice purporting to give six months’ notice of the termination of the Lease (as varied) in accordance with clause 25 on the ground that ASAP23 proposed to reconstruct the car washes and the dog wash. It was common ground that ASAP23 did not propose to reconstruct the car washes and dog wash because they were in need of repair or renovation. ASAP23 had entered into contractual arrangements to grant a new lease over the leased premises to a third party who proposed to construct a petrol station on the site.
The Magistrate found that the second notice of termination was valid in that it was authorised by, and legally effective in accordance with, clause 25 of the Lease (as varied).
The Magistrate also found that the terms of s 68 of the Retail and Commercial Leases Act 1995 (SA) (the Act) did not apply to allow BCCM any dispensation or relief against forfeiture.
I would dismiss the appeal. On a proper construction of clause 25, the word ‘reconstruction’ must be given its ordinary, wide, meaning both to advance commercial certainty and because its context does not provide any clear circumscription of its meaning. It includes therefore the demolition of an existing structure and the construction of a different building altogether.
The terms
The Lease (as varied) describes the land over which it is granted as the portion of the land in Certificate of Title Volume 5922 Folio 984 which is marked in red on the plan attached to the Lease. The leased premises is defined in the ‘Reference Schedule’ of the original lease as ‘Shop GL1 Centro Hollywood Bulky Goods being the place marked in red on the plan attached to this lease’. The Reference Schedule defines ‘the Land’ as all that land situated at the corner of Windzor Street and Burton Road, Salisbury Downs and known as ‘Centro Hollywood Bulky Goods Centre’.
Clause 12 of the Lease (as varied) provides for an abatement of rent proportionate to any diminution of the usability of the premises caused by damage other than that damage caused by the Lessee. Clause 12.4 confers a power on the Lessor to terminate the lease if repair is impractical or undesirable so that the Lessor is not bound to continue to accept a reduced rental for the remainder of the term:
12.4If the Lessor notifies the Lessee in writing that the Lessor considers that the damage to the Premises is such as to make its repair impractical or undesirable, the Lessor or the Lessee may terminate this Lease by giving not less than seven (7) days’ notice in writing to the other and no compensation is payable in respect of that termination;
By clause 12.5, the Lessee too is released from its obligations for the duration of the term, if the useability of the premises is not restored:
12.5If the Lessor fails to repair the damage within a reasonable time after the Lessee requests the Lessor in writing to do so, the Lessee may terminate this Lease by giving not less than seven (7) days’ notice in writing of termination to the Lessor without right or claim for damage by reason of the termination of this Lease;
I observe here that clauses 12.4 and 12.5 apply only in those cases in which the repair of damage to the leased premises is necessary to restore its functionality.
Clauses 13.1 and 13.2 reserve to the Lessor the power to make rules regulating the use of common areas and to make structural changes to them. Clause 13.4 confers a power on the Lessor to change the size of and to alter or reconstruct the Shopping Centre:
13.4The Lessor may increase or decrease the size of, alter or reconstruct the Centre or any part of it - other than the Premises.
Plainly enough, the extent to which the Lessor may make changes to, including the reconstruction of, other leased premises within the Shopping Centre, pursuant to clause 13.4 of the Lease (as varied) will be determined by the terms of any leases which it has granted over those other premises. The purpose and legal effect of clause 13.4 of the Lease (as varied), and in such counterparts as it may have in the leases of other premises in the Shopping Centre, is to provide, probably out of an abundance of caution, that the lessees of premises in the Shopping Centre, do not have the benefit of any promise or warranty that the remainder of the Shopping Centre will not be altered during the terms of those leases. It is for those reasons that clause 13.4 of the Lease (as varied) excludes the leased premises.
I reject the appellant’s submission that the clause necessarily excludes the application of clause 25 to the leased premises. In the ordinary course, the clauses of any instrument, including a lease, which the parties have executed with the intention of creating legal relations, must be construed so as to give effect to each clause and give the terms of the instrument as a whole a coherent operation. That is achieved in this case by giving clause 13.4 the meaning I would ascribe to it and allowing clause 25 the operation I describe below.
Clauses 13.5 and 13.6 of the Lease (as varied) reserve to the Lessor closely circumscribed rights of access to the leased premises:
13.5Viewing and Signs
The Lessor may:
(a)     at all reasonable times enter the Premises and view its state of repair and may serve on the Lessee a notice in writing of any defect requiring it within a reasonable time to repair that defect in accordance with any term of this Lease; and
(b)     exhibit the Premises to prospective lessees and put on the Premises a “To Let” sign or notice during the three (3) months prior to the expiration of the term and the Lessee will not remove or obscure any such sign or notice.
13.6Lessor May Repair
This Lessor may at all reasonable times and after reasonable notice (except in the case of an emergency) enter the Premises for any one or more of the following purposes:
(a)     complying with the terms of any law affecting the Premises and any notices served on the Lessor or Lessee by any statutory, licensing, municipal or other competent authority;
(b)     carrying out any repairs, alterations or works of a structural nature;
(c)     installing any services such as air-conditioning apparatus, automatic fire sprinklers, gas pipes, water pipes, drainage pipes, cables or electrical wiring;
(d)     making any repairs which the Lessor may think necessary to the Premises;
(e)     making any Improvements or alterations to the adjoining premises or to the Centre which the Lessor may consider necessary;
(f)     taking inventories of fixtures; and
(g)     exercising the powers and authorities of the Lessor under this Lease.
In carrying out any works referred to in this clause the Lessor will not cause unnecessary interference with the use of the Premises by the Lessee.
The powers granted by clauses 13.5 and 13.6 detract from the grant of exclusive possession conferred by the Lease (as varied) but do not authorise an interference with the enjoyment of the leased premises which would deny the grant itself.
Clause 24 provides:
24. RELOCATION
If at any time during the term the Lessor provides the Lessee with details of a proposed refurbishment, redevelopment or extension (“Development Works”) sufficient to indicate a genuine proposal to carry out the Development Works within a reasonably practicable time after the Lessee is required to relocate in accordance with this clause 24 and the Development Works cannot practicably be carried out without vacant possession of the Premises then:
24.1 the Lessor may give the Lessee not less than 3 months’ notice in writing (“the Lessor’s Notice”):
(a)advising the Lessee that the Lessor requires the Lessee to vacate the Premises by not later than the expiry date of the Lessor’s Notice;
(b)proposing that the Lessee relocate to alternate premises within Centre identified by plans and specifications provided to the Lessee with the Lessor’s Notice (“the Alternate Premises”); and
(c)specifying the minimum rent payable for the Alternate Premises.
24.2 If a Lessor’s Notice is given:
(a)the Lessee may terminate this Lease within one (1) month after the Lessor’s Notice is given by giving written notice of termination to the Lessor, in which case this Lease is terminated three (3) months after the Lessor’s Notice was given unless the parties agree that it is to terminate at some other time; and
(b)the Lessee will not be entitled to recover any monies from the Lessor by way of compensation or otherwise on termination of this Lease but without prejudice to the rights of either party in respect of any antecedent breach matter or thing;
Clause 24 and clause 25, which I set out below, are twin provisions which together cover the circumstances in which the Lessor may terminate the grant of exclusive possession to the Lessee before the expiry of the term other than for breach. For now, I simply observe as to clause 24 that it empowers the Lessor to terminate the lease over the leased premises on three months’ notice only if it is able to offer alternative premises to the Lessee. The Lessee may accept the offer of alternative premises, in which case the lease continues but over the alternative premises, or reject it, in which case the lease is terminated.
Clause 25 is the critical clause in issue on the appeal. It provides:
25. REDEVELOPMENT
25.1 If the Lessor proposes to substantially repair, renovate or reconstruct the building in which the Premises are located and the Lessor decides that the work cannot be carried out practicably without vacant possession of the Premises, the Lessor may give the Lessee at least six months’ written notice terminating this lease (“Termination Notice”).
25.2 The Termination Notice must: –
(a)detail the plans for the building works; and
(b)state the date of termination.
25.3 After receiving the Termination Notice the Lessee may terminate this Lease on giving 7 days written notice. The Lessee must execute and deliver to the Lessor with such notice those documents listed in clause 25.4(a) and 25.4(b).
25.4 If the Lessee has not exercised its right to terminate the Lease within one month of the termination date then the Lessee must execute and deliver to the Lessor prior to the termination date:
(a)a surrender of this Lease in registrable form by mutual consent and the no monetary consideration; and
(b)the original “Lessee’s copy” of this Lease.
25.5 All costs except the Lessee’s legal costs of surrendering this Lease are to be paid by the Lessor.
25.6 All documents are to be prepared by the Lessor’s solicitor.
It will be noted that in contrast to the more limited reservations in clauses 13.5 and 13.6, clauses 24 and 25 grant the Lessor a power to take vacant possession of the leased premises when the proposed works cannot be carried out practicably without doing so.
I observe too that whilst the proposed works in clause 24 ‘refurbishment, redevelopment, or extension’ are not limited to the leased premises, and may include work on other parts of the Shopping Centre, clause 25 operates only if the works ‘substantial repair, renovation, or reconstruction’ are to be carried out on the building in which the Premises are located.
There is much overlap between the nouns of clause 24: ‘refurbishment’, ‘redevelopment’ or ‘extension’, and the verbs of clause 25: ‘repair’, ‘renovate’ or ‘reconstruct’. Redevelopment perhaps has the widest meaning and repair the narrowest. Refurbishment and renovate carry much the same meaning.
Unless the context requires the word ‘reconstruction’ to be read down its ordinary meaning is capable of including the construction of a building which is different to what it replaces. Indeed, it may bear a meaning as wide as redevelopment. Its connotation extends to the putting together or creation of something better than that which is replaced.
In Fraser v L O’Malley & Son Pty Ltd, Wootten J explained:[1]
…I have not found the provision easy to construe because the word “reconstruction” is capable of very varying meanings according to the context in which it is used. In some contexts it may import an obligation to adhere as faithfully as possible to the past state of affairs… On the other hand, it may import a desire to get away from the past situation to a considerable degree… the cases pointed up the fact that the meaning of the word will depend to a considerable extent on the context in which it is used, including both the purposes of the provision in which the words appear and the words with which it is associated. The most relevant consideration in deciding the width of meaning to be accorded the word seems to me to be the purpose of the clause as derived from what it says as a whole against the context of the surrounding circumstances.
[1] (1975) 2 BPR 9133 at 9137-9138.
The Magistrate’s reasons
Even though the Magistrate did not explicitly do so, I accept that his Honour construed clause 25 by reference to both the definition of ‘demolition’ in the Act and s 39 of the Act. Indeed, counsel for BCCM contended on appeal that his Honour was correct to do so.
Section 3(1) of the Act defines ‘demolition’ to mean:
demolition of a building of which a retail shop forms part includes a substantial repair, renovation or reconstruction of the building that cannot be carried out practicably without vacant possession of the shop;
Section 39 of the Act provides:
39–Demolition
(1)If a retail shop lease provides for termination of the lease on the grounds of proposed demolition of the building of which the retail shop forms part, the lease is taken to include provision to the following effect:
(a)     the lease cannot be terminated on that ground unless and until the lessor has provided the lessee with details of the proposed demolition sufficient to indicate a genuine proposal to demolish that building within a reasonably practicable time after the lease is to be terminated;
(b)     the lease cannot be terminated by the lessor on that ground without at least six months written notice of termination;
(c)     if notice of termination on that ground is given to the lessee, the lessee may terminate the lease by giving the lessor not less than seven days written notice of termination at any time within six months before the termination date notified by the lessor.
…
(3)If a retail shop lease is terminated on such a ground and demolition of the building is not carried out within a reasonably practicable time after the termination date notified by the lessor, the lessor is liable to pay the lessee reasonable compensation for damage suffered by the lessee as a consequence of the early termination of the lease, unless the lessor establishes that at the time notice of termination was given by the lessor there was a genuine proposal to demolish the premises within that time.

I observe first that clause 25 mirrors s 39 save that it does not expressly replicate s 39(3) of the Act. However, there is no reason to doubt that it is implicit in clause 25 that the proposal must be genuine and that BCCM would have an action for damages if it were not. Nothing turns on the reversal of the persuasive onus in that subsection.
More importantly, the inclusive definition of ‘demolition’ in s 3(1) of the Act is no more than a convenient shorthand used to identify clauses of a kind which would attract the statutorily implied terms found in s 39 of the Act. There is no such convenient shorthand definition in the Lease (as varied). Nor is there any orthodox basis for construing private agreements such as the Lease (as varied) by reference to statutory definitions in legislation dealing with the same or similar subject matters unless the parties expressly or by necessary implication include those definitions. Finally, even though the inclusive definition of ‘demolition’ in the Act extends to reconstruction, the statutory definition does not assist in giving any particular meaning to the term ‘reconstruction’.
The Magistrate’s essential and brief reasons for finding that reconstruction was not limited to the erection of a similar building were:[2]
[170]I do not accept the Applicant’s submission that there is any ambiguity in respect of clause 25.1 of the Original Lease and therefore the contra proferentem rule has no application in this matter.
[171]I consider that a reasonable businessperson would understand that the plain and ordinary meaning of clause 25.1 of the Original Lease provides that if the lessor decides to redevelop the Premises, the lessor can give six months’ notice to the lessee to vacate the premises.
(Footnotes omitted)
[2] [2021] SAMC 140.
Consideration
The appellant makes the threshold contention that clause 25 of the Lease (as varied) has no application to the leased premises because the entirety of those premises are not within a building.
I reject that submission for three reasons. First, CPT and Waywood by execution of the original lease, and BCCM and ASAP23 by taking their respective assignments, subscribed to documents which included clause 25 as a term of the lease. There can be no conclusion other than that they intended it to apply as a term of the lease over the leased premises. The circumstance that the terms of the original lease might be sourced in a template designed for leased premises accommodated entirely within a shopping centre does not result in the deletion of those clauses which may be thought to be more apt to premises of that kind. On the contrary the execution of the original lease and the Lease (as varied) means that work must be found for clause 25. Quite apart from that imperative, it is appropriate to construe clause 25 to read ‘in which the premises, or any part of the premises are located’ as a matter of commercial efficacy.
Leased premises may be accommodated in two separate buildings or may include appurtenances such as paved areas, car parks or other open structures. It would be a surprising result if clause 25 was thereby rendered inutile.
BCCM also contends that because the plant and equipment of the car and dog washes, including their structural elements, were its property, clause 25 of the Lease (as varied) did not apply to it. That contention too fails to give clause 25 any operation even though it remains a term of the Lease (as varied). The Magistrate found that the structural elements of the car wash were the property of BCCM. That conclusion may be doubted but it is not challenged by way of alternative contention. In any event there is no basis on which clause 25 can be read down to exclude from its operation structures which are the property of BCCM.
The principal matter of context which tells against giving ‘reconstruction’ its ordinary meaning is the tension between the grant of exclusive possession for a period of initially 15 years under the original lease, and an option for a further period of 10 years under the Lease (as varied) on the one hand, and the conferral of a unilateral power on the Lessor to terminate the lease on no more than six months’ notice.
On the other hand, the term on its face appears to so empower the Lessor. Waywood entered into the original lease subject to clause 25 and then BCCM too entered into the Lease (as varied) subject to that clause.
Looking more broadly at the commercial context, I observe that a premises in a shopping centre, generally speaking, has a commercially advantageous location, for which a higher rent is commonly extracted. However, in order to maintain that advantage, it is notorious that from time to time shopping centres must be refurbished and redeveloped, and particular shops repaired, renovated, and reconstructed in order to continue to attract higher levels of custom. That marketing imperative, and the inclusion of clauses like clause 25 in shopping centre leases, is the mischief addressed by s 39 of the Act. CPT, ASAP23, Waywood, and BCCM must be taken to have been aware of that commercial reality when entering into the original lease and the Lease (as varied) and to have understood that clauses 24 and 25 were intended to give CPT, and then ASAP23, powers to undertake such redevelopments.
Moreover, unlike the contract in Fraser v L O’Malley & Sons Pty Ltd[3] there is no context which allows one reading down of clause 25 over another. For example, it may be read down to mean only a reconstruction required to repair a defect or damage in the premises and not a demolition and rebuilding undertaken in order to achieve a more contemporary or useable shop of the same kind. However, given that the consequences to the Lessee is nonetheless the loss of the promised term, there would be little reason to limit clause 25 in that way.
[3] (1975) 2 BPR 9133.
Alternatively, as BCCM contends in this case, it may include a demolition and complete rebuilding but only of similar premises. On that construction, difficult questions would arise about the degree of similarity. In this case, the answer might easily be given that a petrol station is not a car and dog wash. In other cases, it might be difficult to say whether the premises are similar or dissimilar. Again, there is neither text nor context which supports that reading down. Moreover, once again, on that construction the Lease (as varied) would still be terminated, and the further term of 10 years lost, if ASAP23 proposed to construct an improved car wash. The only protection given by the construction urged by BCCM is that resumption for the purposes of reconstruction will perhaps be less frequent if ASAP23 can only exercise the power to build something similar. However, that construction limits, without any textual or contextual basis, ASAP23’s ability to improve the structures and operation of the Shopping Centre.
The appellant contends that it is an error to give the word ‘reconstruct’ in clause 25 of the Lease (as varied) a meaning as extensive as redevelopment when construction of that kind is addressed by clause 24. However, as I have observed clause 24 confers a power which is available only if the Lessor can offer alternative premises. Perhaps more importantly the word ‘redevelopment’ better fits a clause which deals with a proposal to undertake works which may extend beyond the building in which the leased premises are located. Moreover, the appellant’s construction would effectively negate a redevelopment of the Shopping Centre as a whole. It could only be undertaken as leased premises became vacant allowing those premises, or the premises of a lessee who accepted the vacant premises as alternative accommodation, to be reconstructed in a way which redeveloped, over time, the Shopping Centre.
I acknowledge that it is an error to proceed from the preconception that the clauses must be construed to facilitate any redevelopment which the Lessor in its discretion sees fit to adopt. I do not reason in that way. The point I seek to make is that there is no contextual reason to substantially constrain the ordinary meaning of the words of clauses 24 and 25 such that they have an impractical, if not incoherent, operation.
On balance, the plain words of the provision, the requirements of commercial certainty in the entry of leases and the difficulty in identifying an obvious or uncontentious reading down, leads to the conclusion that the provision must be given its plain meaning.
I dismiss the appeal on this ground.
Relief under s 68
BCCM put an alternative contention before the Magistrate that should the termination notice be legally valid and effective under the Lease (as varied), nonetheless the Magistrate should exercise a discretion pursuant to s 68(2) to relieve it from the effect of the second termination notice. It relied on subparagraphs (e), (f), and (j) of s 68(2) of the Act.
Section 68 of the Act provides:
68—Jurisdiction of the Magistrates Court
(1)An application for an order under this section may be commenced by application to the Magistrates Court by a party (or former party) to a retail shop lease or a collateral agreement.
(2)The Magistrates Court may on application under this section, by order—
(a)     restrain an action in breach of this Act, a retail shop lease or a collateral agreement; or
(b)     require a person to comply with an obligation under this Act, a retail shop lease or a collateral agreement; or
(c)     order a person to make a payment (including a payment of compensation) that is payable under this Act, a retail shop lease or a collateral agreement; or
(d)     order the payment of compensation for loss or damage resulting from a breach of this Act, a retail shop lease or a collateral agreement; or
(e)     relieve a party to a retail shop lease or a collateral agreement from the obligation to comply with a provision of the lease or agreement; or
(f)     reinstate rights under a retail shop lease that have been forfeited or have otherwise terminated; or
(g)     require the payment of rent under a retail shop lease into the Magistrates Court until the lease has been performed or an application for compensation has been determined; or
(h)     require that rent paid into the Magistrates Court be paid out and applied as directed by the Magistrates Court; or
(i)    require a tenant to surrender possession of premises to the lessor; or
(j)    do anything else necessary or desirable to resolve a dispute between the parties to the retail shop lease.
The Magistrate held that s 68(2) did not extend to giving relief against s 39 of the Act itself. However, the notice of termination was issued pursuant to clause 25 of the Lease (as varied) and not the Act. Section 39 of the Act imposes conditions on the exercise of powers granted to a lessor to terminate a lease for the purposes of the extended statutory definition of ‘demolition’. However, the Lease (as varied) expressly required notice of the kind stipulated by s 39 of the Act. It was the termination effected by that clause which was in question. That conclusion of the Magistrate cannot be upheld.
However, in addition, the Magistrate indicated that he would have exercised his discretion under s 68 of the Act adversely to BCCM. The Magistrate accepted that he may have regard to general equitable principles governing relief against forfeiture in respect of leases. Equitable relief is granted against forfeiture to avoid injustice by relieving against unconscionable or unconscientious conduct. Relief of that kind might be granted pursuant to s 68(2)(f) noting that it extends to any termination. The Magistrate rightly held that the use of s 68(2)(j) was a matter of last resort. I would add that, generally it will do no more than support orders ancillary to such relief as might be granted under the preceding subparagraphs. Indeed, were it a standalone omnibus provision, there would be little need for the preceding subparagraphs. Section 68(2)(e) of the Act is not applicable in that BCCM do not seek relief from an obligation to comply with a provision of the Lease.
The Magistrate noted BCCM’s difficulty in relocating the premises and the net present value of the anticipated profit of approximately $2.5 million for the balance of the Lease (as varied). On the Magistrate’s finding, BCCM will of course also lose a substantial part of the value of its property in the structure and plant and equipment of the car washes and dog wash. Nonetheless the Magistrate declined to exercise the discretion for the following reasons:[4]
[53]Whilst the Applicant had raised concerns about the Respondent’s conduct in this matter, I accept the Respondent’s submission that there was no obligation upon it to provide any notice to the Applicant about the redevelopment other than to comply with clause 25 of the Original Lease and s.39 of the Act. As such, I do not make any adverse findings as to the Respondent’s conduct with regard to the Second Termination Notice.
[54]I accept the Applicant submissions that there are a number of factors in favouring relief to the Applicant. These factors include but are not limited to: the potential financial detriment; loss of goodwill including potential customers; the significant term to run on the Original Lease; and the fact the Applicant wished to renew the Original Lease.
[55]As against these factors; those leaning against a favourable exercise of the discretion to grant relief, include but are not limited to: the fact that the Respondent is entitled to rely on s.25 of the Original Lease; that it has complied with its requirements under the s.39 of the Act; and that it has its own commercial interests, namely, it has entered into an agreement with a third party.
[56]The decision whether to grant relief is a finely balanced one.
[57]The Applicant was aware that at any time there was the risk that clause 25 of the Original Lease may be relied upon by the Respondent. Both parties are likely to suffer financial detriment.
[58]Weighing the relevant considerations referred to above, I consider on balance that I would have, in any event, not exercised my discretion in favour of the Applicant under s.68(2) of the Act.
[4] [2022] SAMC 17.
I would affirm the Magistrate’s decision on this ground.
The power conferred by subparagraph (f) is discretionary. It requires a judicial determination of what is fair and just, albeit informed by the equitable principles against forfeiture.
Once it is accepted that the power to terminate the Lease (as varied) granted by clause 25, on an objective construction, applies even when the Lessor intends to reconstruct the building in which the leased premises are located in a way which substantially differs from the existing building, it is difficult to identify why the exercise of that power by ASAP23 is unfair in the circumstances of this case. True it is that BCCM will lose the value and benefit of a substantial investment, but that is precisely what clause 25 contemplates and protects, albeit in a limited way, by requiring six months’ notice. Moreover, damages are recoverable if the reconstruction proposed is not genuine. This is not a case in which, for example, ASAP23 encouraged BCCM’s expenditure knowing that it was likely to exercise the power conferred by clause 25 soon thereafter or reckless as to that circumstance. Nor is it a case where ASAP23 has made that decision shortly after the expenditure, and before BCCM could recoup any benefit in reckless disregard of the hardship thereby caused.
I would not interfere with the Magistrate’s discretion. I dismiss the appeal on this ground.
Conclusion
The appeal is dismissed.
I will hear the parties as to costs and ancillary orders.