| JURISDICTION : STATE ADMINISTRATIVE TRIBUNAL STREAM : COMMERCIAL & CIVIL ACT : COMMERCIAL TENANCY (RETAIL SHOPS) AGREEMENTS ACT 1985 (WA) CITATION : BEBA ENTERPRISES PTY LTD and ELLE PTY LTD [2013] WASAT 120 MEMBER : MR T CAREY (MEMBER) HEARD : DETERMINED ON THE DOCUMENTS DELIVERED : 5 AUGUST 2013 FILE NO/S : CC 1671 of 2012 BETWEEN : BEBA ENTERPRISES PTY LTD Applicant
AND
ELLE PTY LTD
Respondent
Catchwords: Landlord and tenant Retail shop Questions arising under lease Renewal of lease following noncompliant notice of exercise of option Landlord's sole election for market rent review Whether void and consequences of being void Severance of terms of lease Whether election exercised Disclosure statement Whether obligation to give disclosure statement arose Whether exception to obligation 'on the renewal of a retail shop lease under an option' applied
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Legislation: Commercial Tenancy (Retail Shops) Agreements Act 1985 (WA), s 3(4), s 4(4), s 4(4)(a), s 6, s 6(1), s 6(6), s 6(6)(a), s 11, s 13(1)
Interpretation Act 1984 (WA), s 19, s 19(1)(b), s 19(3) Result: Answers to referred questions provided
Matter listed for directions hearing to consider remaining referred questions
Summary of Tribunal's decision: The tenant of a retail shop lease referred 11 questions arising under the lease to the Tribunal for determination. The Tribunal determined a first tranche of seven of the referred questions. Those questions were concerned primarily with the ability of either party to call for a market rent review as at the first day of the term of a renewed lease. The parties had agreed upon the renewal despite the tenant failing to exercise an option to review in accordance with the requirements for doing so.
The tenant had argued that:
(a) upon the renewal of the lease, the term of the new lease that only the landlord could elect for a market review was void by reason of s 11(2)(c) of the Commercial Tenancy (Retail Shops) Agreements Act 1985 (WA);
(b) both parties had the right of election, by virtue of only that part of the impugned term giving the landlord such a right being void;
(c) in the alternative, and whether or not the whole term was void, remaining terms required a market rent review irrespective of an election;
(d) the landlord had, as a matter of fact and law, elected to review the rent to market; and
(e) the landlord was obliged by s 6 of the Commercial Tenancy (Retail Shops) Agreements Act 1985 (WA) to give the tenant a disclosure statement before entering the new lease, and its failure to do so gave rise to a right to claim compensation.
The Tribunal, in determining the first tranche of questions, concluded that:
(a) the lease term giving the landlord the sole right to elect a market review was not void by reason of the legislative provision upon which the tenant relied;
(b) in the event that the term was void, the result would have been that no market rent review would occur;
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(c) in the same event, it was not possible to sever only that term, leaving the other terms having the result for which the tenant contended;
(d) the landlord did not elect for a market rent review; and
(e) although the statutory exception to the requirement to give a disclosure statement did not apply on a literal interpretation, that would have led to an incongruous or absurd result. The Tribunal followed judicial authority in adopting an interpretation of the exception which avoided such a result and determined that the landlord was under no obligation to give a disclosure statement.
Category: B
Representation: Counsel:
Applicant : Mr A Throssell
Respondent : Mr M MacLennan
Solicitors:
Applicant : Hotchkin Hanly
Respondent : Lavan Legal
Case(s) referred to in decision(s):
Abjornson v Urban Newspapers Pty Ltd [1989] WAR 191
Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue [2009] HCA 41; (2009) 239 CLR 27
Bermingham v Corrective Services Commission of New South Wales (1988) 15 NSWLR 292
Caltex Oil (Australia) Pty Ltd v Best (1990) 97 ALR
Cooper Brookes (Wollongong) Pty Ltd v Federal Commissioner of Taxation (1981) 147 CLR; 35 ALR 151
Farleigh Investments Pty Ltd & Anor v Reefking Pty Ltd [2002] WASC 115
Head and Zimmermann Investments Pty Ltd [2009] WASAT 61
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REASONS FOR DECISION OF THE TRIBUNAL:
Overview 1 The applicant, Beba Enterprises Pty Ltd (Beba), has since 2007 operated a fashion retail business from premises in Bayview Terrace, Claremont owned by the respondent, Elle Pty Ltd (Elle), under successive leases between the parties. Each lease has been a 'retail shop lease' for the purposes of the Commercial Tenancy (Retail Shops) Agreements Act 1985 (WA) (CT(RS)A Act). 2 The initial lease (original lease) was for a term of four years commencing 17 October 2007, with options to renew for two additional four year terms. 3 Subsequent to the expiry of the four year term of the original lease, and despite it having failed to comply with the requirements for exercising the first option, Beba continued in occupation, with Elle's blessing, as if the option was validly exercised; that is, there is general acceptance that Beba currently holds a four year lease commencing 17 October 2011 on the same terms as the original lease, save for there being one remaining option for four years. 4 The original lease (by clause 3.2) provides for annual rent reviews over the entirety of the period comprising the original term and the two option periods. Six of the reviews are by application of a fixed percentage increase. The other two reviews (scheduled for 17 October 2011 and 17 October 2015) are by way of market review, subject to Elle's electing to review the rent at each market review date. 5 In this proceeding, Beba contends clause 3.2 of the original lease, which applies to the lease for the current term, is void to the extent that it gives Elle sole discretion to initiate a market review. This result is said to flow from a provision in the CT(RS)A Act. Beba claims that the clause has operation, but on the basis that either party has a right to initiate a review. 6 Alternatively, Beba argues that Elle, by its conduct, did elect to review the rent to market as at 17 October 2011. 7 Beba also contends, predicated upon the circumstance that its existing tenancy was created other than by way of renewal under the option to renew, that Elle was required to give it a disclosure statement in accordance with the relevant legislation, and that it failed to do so. (Page 5)
As any disclosure statement would necessarily have disclosed Elle's proposal for the rent payable at the commencement of the new lease, Beba may have been able to negotiate a figure lower than the rent for the last year of the original lease. If not, it would not have entered into the new lease. 8 The applicant has referred 11 questions arising under the lease to the Tribunal for determination. This decision is concerned with the first seven of those questions. Answers to the remaining questions were, by agreement with the parties, postponed by reason of the significance to them of the answers provided by this decision.
Referred questions for determination 9 The first tranche of seven questions referred to the Tribunal comprises: 1. Has the Respondent accepted the Applicant's offer to renew its lease by the Applicant's 'Notice of Exercise of Option' (Notice) dated 20 September 2011 as amended by its letter of offer of 28 November 2011 (Offer)? 2. If the answer to question 1 is yes, was it a term of the lease so formed (New Lease) that there would be a market rent review (and not that the Landlord is entitled to elect whether or not to review the rent to market) at the commencement of the new lease? 3. Is clause 3.2 of the Original Lease, incorporated in, or a term of the New Lease? If so, to the extent that clause 3.2 purports to allow the Respondent Landlord to elect not to review the rent to the market rent on a market review date (including the commencement date of the new lease) void by reason of section 11(2)(c) of the Commercial Tenancy (Retail Shops) Agreement[s] Act 1985 (the Act)? 4. If clause 3.2 of the Original Lease is incorporated in the New Lease, and the Respondent Landlord is entitled to elect to review or not review the rent to market as at the commencement date of the New Lease, has the Respondent Landlord so elected to review the rent? 5. Does clause 3.9 of the lease operate to require the rent under the lease, as at 17 October 2011 to be determined by reference to the market rent for the Premises? 6. Does the New Lease (formed upon acceptance of the Applicant's Notice and/or Offer) constitute a lease formed by the exercise of an (Page 6)
option under an existing lease, and fall within the exceptions contained in subsection 6(6) of the Act? 7. Was the Respondent, by reason of section 6 of the Act, required to provide the Applicant prior to the entry into of the New Lease with a disclosure statement setting out the proposed terms of the New Lease including the rent as at commencement?
Further relevant factual background 10 The parties prepared an agreed statement of relevant facts which, save for the omission of documentary references, is reproduced here as disclosing the facts pertinent to determining the referred questions: 1. The Applicant and the Respondent entered into a lease dated 14 November 2007 (Lease) of 7 Bayview Terrace, Claremont, Western Australia (Premises). 2. The Lease is a 'retail shop lease' as defined in the Commercial Tenancy (Retail Shops) Agreements Act 1985 (the Act). 3. The term of the Lease was 4 years commencing on 17 October 2007, with options to renew the Lease for two further terms each of four years. 4. It was an express term of the Lease at clause 2.3(a)(i) that: '(a) The Landlord grants to the Tenant the option or options to extend the Term for the further term or terms (if any) specified in the Reference Schedule upon the terms and conditions of this document (excepting any previously exercised option to extend). The Tenant may exercise and [sic] option to extend if and only if: (i) The Tenant, on each occasion, gives to the Landlord written notice of its exercise of the option not less than 3 months and not more than 6 months prior to the expiration of the then current term.' 5. Clause 3.2 of the Lease provided: The Landlord may elect to review the Base Rent at each Market Review Date. If the Landlord wishes to review the Base Rent on a Market Review Date then, subject to the Commercial Tenancy Act (if applicable to this document), the following clauses 3.3 to 3.9 (inclusive) shall apply on each occasion. (Page 7)
6. The Market Review Dates specified in item 9.1 of the reference schedule are 17 October 2011 and 17 October 2015. 7. The Lease provided that the Base Rent would be subject to a fixed increase of 5% on each of 17 October 2012, 2013, 2014, 2016, 2017 and 2018. 8. The Applicant's first option was exercisable between 16 April 2011 and 16 July 2011. 9. The Applicant did not exercise its option to renew the Lease at any time prior to 16 July 2011. 10. On or about 20 September 2011 the Applicant served on the Respondent a document titled 'Notice of Exercise of Option' (Notice) stating that the term of the lease was due to expire on 16 October 2011 and purporting to exercise an option to renew the lease under section 13(1) of the Act for a term commencing on 17 October 2011 to 16 October 2015. 11. The Applicant did not have a right to an option under section 13(1) of the Act, the Lease having provided for an initial term of 4 years, and two options to extend the Lease of 4 years each. 12. On 2 November 2011, Anna Hjelmstrom, on behalf of the Applicant emailed Lynne George, on behalf of the Respondent, asking for confirmation that the Notice had been received. 13. On 3 November 2011, Lynne George responded to Anna Hjelmstrom by sending an email confirming that the Notice had been received, and saying that the Respondent looked forward to a continued working relationship with the Applicant. 14. By letter dated 28 November 2011 (Rent Review Letter), the Applicant wrote to the Respondent stating: 'As you know, the Commercial Tenancies [sic] (Retail Shops Agreement[s]) Act ('Act') applies to the original lease and to the present renewal. Section 11(2)(b) of the Act provides that a party to a retail shop lease may, not more than three months before the date on which that review is to be carried out and not more than six months after that date, initiate a rent review by notice in writing served on the other party to the retail shop lease. By this notice, Beba now initiates the review of the rent which is to apply to the first year of the further term commencing 17 October 2011. (Page 8)
Beba proposes that the rent that shall apply from that date is $185,400 (exclusive of GST). Kindly advise as to whether the landlord agrees to that figure.' 15. By letter dated 9 December 2011, the Respondent's solicitors, Young & Connell Laywers [sic] (Young & Connell), wrote to the Applicant saying that the Respondent had sought its advice in respect of the Notice and the Rent Review Letter. 16. By letter dated 5 January 2012, Denis Marshall, on behalf of the respondent, wrote to Robert Cromb, on behalf of the applicant, stating as follows: 'Currently we are being advised by our valuer Mr David Liggins ... who is submitting an extensive report to us and this will [be] completed by 19 January, 2012 once he returned [sic] from his Christmas break. His preliminary advice is that we request of you to appoint a valuer to confirm a market rental for the premises supported by evidence of rental negotiated on comparable shops in Claremont which will be considered. We have over the years engaged Mr Liggins for an unbiased informed market opinion on many of our rental properties before making our companyies [sic] decision. It is the companyies [sic] view the rental offer is well below market rental and we await his views. Once the above information is made available to him we suggest your valuer and Mr Liggins meet to review their opinion with [a] view to minimising costs.' 17. On or about 12 January 2012 Anna Hjelmstrom wrote to D C Marshall confirming the receipt of the Respondent's letter of 5 January 2012 and stating that the Applicant was currently in the process of appointing its own valuer to conduct a valuation report on the property. Although the letter carried the date 12 January 2011, it was sent on 12 January 2012. 18. On or about 24 January 2012 the Applicant instructed Mr David Moore and Mr Dan Hill, certified practising valuers employed by Opteon (Western Australia) Pty Ltd, to provide a market rental valuation of the Premises. 19. On or about 15 February 2012, Mr Dan Hill assessed the 'current market rent' of the Premises as $193,000 per annum including outgoings and GST. (Page 9)
20. On or about 28 March 2012 at approximately 3:00pm Mr Liggins, Mr Moore, and Mr Hill met at Epic Coffee in West Perth to discuss the market rental valuation of the Premises. 21. On or about 2 April 2012 Mr Hill sent to Mr Liggins an email attaching a schedule of rental evidence together with the assessed 'current market rental' for the Premises. 22. On or about 4 April 2012 Mr Liggins emailed to Mr Hill a copy of an evidence schedule, and stated that he would indicate his opinion of market rental which would be higher than the opinion reached by Mr Hill. 23. On or about 4 April 2012 Mr Hill made handwritten annotations on the evidence schedule which Mr Liggins had emailed to Mr Hill on that same date. 24. On or about 5 April 2012 Mr Hill emailed Mr Liggins stating that it appeared that they were not going to reach an agreement, and that he would recommend the Applicant to commence SAT proceedings. 25. On 26 April 2012, by email to the Applicant's valuer, Mr Liggins stated that he had been 'put on hold' by the Respondent while the Respondent and its lawyer considered the situation. 26. By letter dated 2 May 2012, Young & Connell wrote to the Applicant stating that: 27. By email dated 3 May 2012 Mr Hill provided to Mr Liggins a copy of his valuation for the Premises, and requested that Mr Liggins provide his valuation within 10 days. 28. By letter dated 10 May 2012, the Applicant's solicitors, Kliger Partners Lawyers (Kliger Partners), wrote to Young & Connell seeking amendments to the Deed and stating that reviewed rent should, if agreed between the valuers, be included in the Deed. 29. Kliger Partners also in their letter dated 10 May 2012 also stated as follows: '... the document you have sent through to record Kookai's exercise of its option is generally acceptable although we kindly request the following changes be made prior to execution.' (Page 10)
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Referred question 1: 'Has the Respondent accepted the Applicant's offer to renew its lease by the Applicant's 'Notice of Exercise of Option' (Notice) dated 20 September 2011 as amended by its letter of offer of 28 November 2011 (Offer)?' 11 The referred question, drafted by Beba or its legal representative, reflects Beba's analysis that the noncompliant notice to exercise the option constituted an offer to Elle to renew the lease. The significance of this will appear in the discussion concerning referred question 6. 12 The import of the question, particularly when considered together with referred questions 2 4, is better expressed by this question: by reason of the dealings between the parties, was Beba granted a new lease in substantially the same terms as the original lease, or alternatively, was an enforceable agreement for such a lease entered into? 13 Arising from the respective written submissions of the parties filed in relation to referred questions 1 7, the parties agree that one or other of the two just mentioned alternatives is the case. It does not appear to be necessary for me to determine which alternative applies, given that nothing relevant to any of the remaining referred questions turns on such a determination.
Referred question 2: 'If the answer to question 1 is yes, was it a term of the lease so formed (New Lease) that there would be a market rent review (and not that the Landlord is entitled to elect whether or not to review the rent to market) at the commencement of the new lease?'
Referred question 3: 'Is clause 3.2 of the Original Lease, incorporated in, or a term of the New Lease? If so, to the extent that clause 3.2 purports to allow the Respondent Landlord to elect not to review the rent to the market rent on a market review date (including the commencement date of the new lease) void by reason of section 11(2)(c) of the Commercial Tenancy (Retail Shops) Agreement[s] Act 1985 (the Act)?' 14 I have consolidated my consideration of these two questions because the answers for which Beba contends derive from the same body of reasoning. (Page 12)
15 Despite originally submitting that there was a term of the new lease, arising from the parties' dealings prior to the new lease being entered into, for a mutual right to elect a market review, Beba now concedes, subject to its arguments about the validity of the clause, that the new lease incorporates clause 3.2 of the original lease confining the election to Elle. The answers to the referred questions depend upon the determination of Beba's claim that clause 3.2, or part of it, is void by the operation of s 11(2)(c) of the CT(RS)A Act. 16 Section 11(2)(c) of the CT(RS)A Act provides: (2) If a retail shop lease provides for the review during the currency of the retail shop lease of the amount of rent payable under the retail shop lease having regard to the market rent of the retail shop concerned 17 Clause 3.2 of the lease, headed 'Market Rent Review', states: The Landlord may elect to review the Base Rent at each Market Review Date. If the Landlord wishes to review the Base Rent on a Market Review Date then, subject to the Commercial Tenancy Act (if applicable to this document), the following clauses 3.3 to 3.9 (inclusive) shall apply on each occasion. 18 The introductory words of s 11(2) of the CT(RS)A Act clearly apply to the terms of the lease in question. That being so, any provision in the lease corresponding with the description in s 11(2)(c) of the CT(RS)A Act will be void. 19 The language of clause 3.2 of the lease and it is the first sentence with which Beba is primarily concerned does not expressly refer to precluding or limiting increases or reductions of market rent. Its subject matter is the landlord's right of election to review the rent at market review dates. 20 Beba's written submissions (at paragraph 1.24) assert: By giving the respondent the sole right to elect a review of the amount of rent payable under the lease having regard to the market rent, clause 3.2 allows the respondent to preclude the increase or reduction of the market (Page 13)
rent by choosing not to elect a market rent review. By giving the landlord the sole discretion to elect a market review, clause 3.2 precludes the increase or reduction of the rent if the landlord does not elect to review the rent. A provision that precludes the increase or decrease in market rent, even if subject to a precondition, such as the landlord's election, still operates to preclude that increase ore decrease. 21 It is true that, by exercising its right to elect not to review the rent to market, a landlord is, in relation to that market review date, precluding both an increase and reduction in the rent. That preclusion arises from the agreed ability of the landlord not to proceed with a market rent, not, in my opinion, by reason of any 'provision in the retail shop lease purporting to preclude the increase or reduction of' the market rent. It must be borne in mind that nothing in s 11 of the CT(RS)A Act requires there be regular, or any, market rent reviews. 22 Beba's submission may have some traction if, for example, the clause stated that the review, once the landlord had elected one, would be effective to alter the base rent only where, as a result of the review, the rent was to increase. Where the election and its outcome are not so fettered, the mere provision of an election of the type under clause 3.2 of the lease cannot, in my view, be properly regarded as a provision of the type described by s 11(2)(c) of the CT(RS)A Act. 23 Beba's argument is developed further (written submissions paragraph 1.25) as follows: … clause 3.2 allows the respondent, prior to electing a market rent review, to unilaterally obtain a market rent valuation of the property and, if that market rent valuation indicates that a market rent review would reduce the rent payable by the applicant, preclude the reduction of the market rent by choosing not to elect to undertake a market rent review. 24 The mischief that, on Beba's case, s 11(2)(c) of the CT(RS)A Act is able to cure is the ability of a landlord to elect to review the rent to market only after obtaining a market rent valuation indicating that the market rent exceeded the current rent. Even if, contrary to my reading of it, s 11(2)(c) is available to invalidate a clause vesting sole discretion for a market review in a landlord, it can do so only if it is established that the election clause can have no result other than the increase for which Beba argues. Otherwise, it could not be said that the clause 'purports to preclude' any reduction of the rent. 25 Beba suggests that Elle, as landlord, would, before making its election, obtain a market rent valuation first, and elect for a market review (Page 14)
only if the valuation discloses an increase. As such, it relies on an assumption that Elle would follow the commercial imperative of getting its evidence first before making any election. It also assumes that when a landlord obtains a positive rent valuation, an increase in the rent will be the inevitable result of any market review. 26 It is not overly difficult to envisage circumstances where a landlord might elect a market review in the absence of a favourable (to him) market rent valuation, including, in the scenario of falling market rentals, where the landlord has a benevolent nature, or has reasons, perhaps separate from the landlordtenant relationship, to maintain a good relationship with the tenant. Further, the first assumption does not refer at all to the not uncommon case of a landlord electing for a market rent in the absence of any market rent valuation having been already obtained. 27 The second assumption is predicated upon market rental valuation bearing a degree of precision higher than it perhaps deserves, going by the competing rent valuations obtained by the parties to this matter. Of course, it is not necessarily the case that the landlord's valuation will carry the day, given that the tenant has a right to appoint its own valuer, and if the valuers are unable to agree, either party may refer the dispute to the Tribunal for determination under s 11(5) of the CT(RS)A Act. 28 This is not to say, however, that landlords in general, and Elle in particular, might not 'pick and choose' whether to elect a market review, depending upon the market conditions as are perceived by them, with or without expert guidance, at the time. Such a choice is made possible by an election of the type found in clause 3.2 of the lease. But, in my view, to say that the clause itself 'purports to preclude' any reduction is to elevate to fact the probabilities surrounding when the landlord may or may not exercise its election. 29 Beba points to extraneous Parliamentary materials, and in particular the second reading speech to the Bill which inserted s 11(2) into the CT(RS)A Act. In doing so, it calls in aid s 19 of the Interpretation Act 1984 (WA) (Interpretation Act). 30 Before reliance upon such extraneous material can occur, it is necessary to determine whether the meaning of the words used in the statutory provision in question, having regard to their context and the objects of the CT(RS)A Act, is tolerably clear. This principle has been repeatedly espoused by the High Court. For example, in Alcan (NT) (Page 15)
Alumina Pty Ltd v Commissioner of Territory Revenue[2009] HCA 41; (2009) 239 CLR 27 at [46] - [47], the court said: This Court has stated on many occasions that the task of statutory construction must begin with a consideration of the text itself. Historical considerations and extrinsic materials cannot be relied on to displace the clear meaning of the text. 31 The principle is reflected in s 19 of the Interpretation Act itself: see s 19(1)(b) and s 19(3). 32 In my view, the meaning of the words in s 11(2)(c) of the CT(RS)A Act, viewed in context of other provisions in the Act, and having regard to the objects of the Act (to which I will make brief reference shortly), is clear. It is the arguments of Beba which depend upon a meaning that the words used in the provision do not bear. 33 The objects of the CT(RS)A Act include 'to regulate commercial tenancy agreements relating to certain shops, to prohibit unconscionable conduct by landlords or tenants in relation to such agreements [and] to provide for the determination of questions arising under such agreements'. This much is to be gleaned from the Act's long title. 34 The provisions relating to rent reviews, as they stood at the times material to this proceeding, were (and still are) all found in one section, s 11 of the CT(RS)A Act. They include prohibition of provisions for multiple bases upon which a review could be made on a single occasion (s 11(1)); provisions applying to leases which provided for market reviews (s 11(2)); and a series of provisions to deal with the resolution of questions as to the rent payable arising from a rent review (s 11(3) to s 11(8)). 35 The various provisions are quite disparate, at least as between the three types to which I have referred. The same comment applies to the three parts of s 11(2) of the CT(RS)A Act. They deal, successively, with the meaning of market rent (s 11(2)(a)); the period in which a review may be initiated (the operation of the provision being expressly excluded where the lease makes 'specific provision' for that matter) (s 11(2)(b)); and the avoidance of provisions in a lease placing a fetter on the outcomes of a market review (s 11(2)(c)). 36 In light of the disparate nature of the provisions just summarised, it is difficult to discern any particular object of the CT(RS)A Act relating to an interpretation of the particular provision in question narrower than that of (Page 16)
regulation of commercial tenancy agreements. In those circumstances, speculation about more particular 'objects' tends to be a selfserving exercise, designed to ground an argument that a provision sought to be impugned offends such an 'object'. 37 The applicant's reliance upon s 11(2)(b) of the CT(RS)A Act is misconceived. As I have indicated, s 11(2)(b) applies where no specific provision is made for the time at which a review may be initiated. Where that is the case, the provision states that 'a party' may initiate the review within a certain period by notice. Although it is unnecessary for me to decide, it is highly questionable whether the provision operates as Beba suggests, by giving a right to initiate a review to either party, including a party who does not otherwise have that right. If correct, this would lead to the curious result in a case such as this that a tenant's ability to initiate a rent review would depend upon the entirely fortuitous circumstance that the lease made no specific provision as to the time at which a review may be initiated. 38 Again, the reference to the contents of a second reading speech applying to s 11(2)(b) of the CT(RS)A Act referred to by Beba is both inapplicable and unable to bestow a meaning contrary to the clear terms of what Parliament has provided. 39 The references in Beba's written submissions to commentary on a former Victorian provision in similar terms, and a general observation of the court in Caltex Oil (Australia) Pty Ltd v Best (1990) 97 ALR at 217 concerning inconsistency between a contract and statute, do not advance its argument. The conclusion (Beba's outline of submissions paragraph 1.38) that: [t]he purpose of section 11 is to ensure that where the parties have agreed that the rent is able to be set by reference to market rent, that it must be set to the true market rent (as defined by the Act) and the review is not to be constrained (Tribunal's emphasis) reads too much into the actual words of the statute. Properly construed, those words do invalidate any fetter placed upon the outcome of a market rent valuation once undertaken, but do not disturb the parties' agreement about the circumstances in which a market rental is to occur. 40 Finally, the conclusion used by Beba that the whole or part of clause 3.2 is void has forced it to contend for consequences of such invalidity which are unsupported by the legislation or the lease provisions. (Page 17)
41 First, despite the clear language of s 11(2)(c) of the CT(RS)A Act that a provision in a lease falling foul of the subsubsection is 'void', Beba submits, in effect, that clause 3.2 of the lease is to be rectified so as to allow both parties a right of election in accordance with the landlord's sole right as expressed by the clause. This, of course, is quite a different result from the clause being void, and must be rejected. The result would be that, in respect of the two dates stipulated as market review dates, no review was possible. 42 Second, in the event of a finding that clause 3.2 of the lease is void, Beba submits that the 'remaining' clauses, clauses 3.3 to 3.9, and clause 3.3(a) in particular, 'requires a rent review to be carried out on the Market Review Date, irrespective of any election by any party'. 43 Clause 3.3(a) of the lease states: The Landlord shall, not earlier than 6 months prior to, and not later than 6 months after, the relevant Market Review Date, give to the Tenant a notice in writing of the rate at which the Landlord proposes the Base Rent shall be payable from that market Review Date ('Proposed Rent'). 44 'Market Review Date' is one of three date descriptors referred to in the definition of 'Rent Review Date', which is otherwise defined as 'each of the dates specified in the Reference Schedule upon which the Base Rent will be reviewed or adjusted'. The Reference Schedule stipulates 17 October 2011 and 17 October 2015 as 'Market Review Dates'. 45 Beba's submission omits reference to the relationship borne by clause 3.2 of the lease to its succeeding clauses. Clause 3.2 vests the landlord with an election for a market review, and provides that, if the election is invoked, clauses 3.3 to 3.9 are to apply. 46 Were cl 3.2 of the lease to have been found void, Beba's second submission is capable of acceptance only if that clause could properly be severed, with the succeeding clauses 3.3 to 3.9 remaining intact. 47 I have derived benefit from the discussion about the relevant severance principles which appears in Farleigh Investments Pty Ltd & Anor v Reefking Pty Ltd[2002] WASC 115 at [70] [84]. In [75] and [76] of his reasons in that case, McKechnie J referred to the following passages from a Victorian Supreme Court decision Electric Acceptance Pty Ltd v Doug Thorley Caravans (Aust) Pty Ltd[1981] VR 799 (Electric Acceptance): (Page 18)
Brooking J continued at 819: "The tests of severability are the same whether the provision is on the one hand illegal or void on the ground of conflict with public policy or on the other hand void for uncertainty: Brew v Whitlock (No 2), [1967] VR 803, at pp 806, 812-3; cf. Beneficial Finance Corporation Ltd v Conway (No 2), [1971] VR 594, at p 605. The High Court in the Fazal Deen Case approved the test laid down in McFarlane v Daniell (1938), 38 SR (NSW) 337: 'If the elimination of the invalid promises changes the extent only but not the kind of the contract the valid promises are severable: Putsman v Taylor, [1927] 1 KB 637, at pp 640, 641'. The sentence cited by the High Court appears in the following context in ((1938) 38 SR (NSW) 337 at p 345): 'When valid promises supported by legal consideration are associated with, but separate in form from, invalid promises, the test of whether they are severable is whether they are in substance so connected with the others as to form an indivisible whole which cannot be taken to pieces without altering its nature: Horwood v Millar's Timber & Trading Co Ltd [1917] 1 KB 305, at 315. If the elimination of the invalid promises changes the extent only but not the kind of the contract, the valid promises are severable: Putsman v Taylor, [1927] 1 KB 637, at pp 640-1. If the substantial promises were all illegal or void, merely ancillary promises would be inseverable.'" Brooking J then stated the test as follows: "The Full Court in Brew v Whitlock (No 2), [1967] VR 803, at pp 811-3, after referring to McFarland v Daniell (1938), 38 SR (NSW) 337 and the Fazal Deen Case (1962), 108 CLR 391, laid down as a test of severability, as regards both uncertain provisions and provisions illegal or void by reason of public policy, whether the invalid promise is so material and important a promise in the whole bargain that there should be inferred an intention not to make a contract which would operate without it, but to make a contract which is conditional upon the operation of that promise. The Court was of [the] opinion that the other test (whether the invalid promise must be treated as forming with the valid promises an indivisible whole which cannot be taken to pieces without altering its nature, and whether the elimination of the invalid promise would alter the kind of the contract) came to the same thing." 48 The first difficulty with Beba's argument that the succeeding clauses, and particularly clause 3.3(a) of the lease, remain in full force and effect where clause 3.2 is found to be void is that the succeeding clauses are not 'separate in form from' it. Clause 3.2 provides expressly for a precondition for the application of the succeeding clauses that Elle exercises it right of review. (Page 19)
49 The second, more significant, problem is that the independent operation of the succeeding clauses for which Beba argues - that Elle is required, within a certain period, to initiate a market rent review - is entirely inconsistent with clause 3.2 of the lease, entitling Elle to elect such a review. To adopt the words from the second of the quoted passages from Electric Acceptance above, the condition appearing in clause 3.2 is so material and important in the whole bargain that there should be inferred an intention not to make a lease which would operate without it.
Referred question 4: 'If clause 3.2 of the Original Lease is incorporated in the New Lease, and the Respondent Landlord is entitled to elect to review or not review the rent to market as at the commencement date of the New Lease, has the Respondent Landlord so elected to review the rent?' 50 Beba submits that Elle did elect to review the rent to market, and relies upon the chain of events recorded by the agreed statement of relevant facts in paragraphs 14, 15, 16, 18, 20 and 22 reproduced above. It particularly relies upon the contents of the letter dated 5 January 2012 from Mr Marshall of Elle to Mr Cromb of Beba reproduced at paragraph 16 (Marshall letter), which, it asserts, 'are directly consistent with, and can only be attributed to, an election by the respondent to review the rent to market value, and represented to the applicant that the respondent was reviewing the rent to market value' (Beba's written submissions paragraph 2.7). The latter aspect of this assertion is also relied upon as foundation for an estoppel argument, in the alternative to the claim of an election having been made by Elle. 51 Contrary to Beba's submission (written submissions paragraph 2.3) that the lease does not prescribe the method by which the landlord is to elect a market review, or communicate that election, in my view, clause 3.3 of the lease does prescribe those very things. If a notice meeting the description in clause 3.3(a) were to be given to the tenant, the tenant would thereby have notice of the landlord's election, and would be required to give its reply in accordance with clause 3.4. 52 If the landlord elects a review, it must comply with clause 3.3(a) of the lease, by reason of the concluding words of clause 3.2. In order to comply, the notice must be 'of the rate at which the Landlord proposes the Base Rent shall be payable from the Market Review Date'. (Page 20)
53 The agreed facts disclose that no complying notice was ever given by Elle. The Marshall letter was sent within the period for the giving of a clause 3.3(a) notice, but it does not refer to any proposed rate resulting from the market review. 54 Even accepting, for the sake of the argument, Beba's premise that a notice is an effective notice provided that it is 'directly consistent with, and can only be attributed to, an election by the respondent to review the rent to market value', the Marshall letter is not such a notice. It was written in response to the applicant's 28 November 2011 letter, asserting Beba's right to initiate a rent review and purporting to exercise such a right. I accept the respondent's characterisation (Elle's written submission paragraph 62) that, at best, the Marshall letter reflects tacit acceptance of the incorrect proposition that Beba was legally entitled to initiate a review and indicating a willingness to comply. 55 Similarly, the indication in the Marshall letter of discussions with Elle's valuer indicative of the valuer's appointment, and the suggestion (as a matter of the valuer's 'preliminary advice') that Beba appoint its own valuer to 'confirm a market rental … which will be considered', are clearly responses to Beba's purported initiation of a rent review, not any election by Elle. The subsequent discussions between valuers flowed from the same circumstances and misapprehension of the true legal position. 56 The answer to the referred question must therefore be in the negative. 57 Beba's claim of an estoppel arising from Elle's conduct is raised for the first time in its written submissions. An estoppel claim, even if made out, would not affect the determination of referred question 4 as it is expressed, making it appropriate that the answer be provided notwithstanding any estoppel claim. Should such a claim be pressed, it will be necessary for the application to be amended appropriately.
Referred question 5: 'Does clause 3.9 of the lease operate to require the rent under the lease, as at 17 October 2011 to be determined by reference to the market rent for the Premises?' 58 Clause 3.9 of the lease states: (Page 21)
59 Beba points to one or more clauses of the lease dealing with the review of base rent within the suite of the clauses which are expressed by clause 3.2 to apply if the landlord elects a market review which are inconsistent with the requirements of the CT(RS)A Act. It argues that this gives rise to the requirement that 'the Base Rent shall be reviewed on each Market Review Date' in accordance with clause 3.9 of the lease. 60 I have already referred to the fact that clause 3.2 of the lease provides that, if the landlord invokes the election, clauses 3.3 to 3.9 are to apply. I have also determined that, when one reads all the clauses together, it is clear that clauses 3.3 to 3.9 are triggered if, and only if, the election is made. Clause 3.9 itself provides ample demonstration of such interdependence of these clauses. 61 The starting point is clause 3.2 of the lease. By this clause, the parties agreed that the landlord has an election. If the landlord does not elect a market review in respect of one of the market review dates, there will be none. That is the effect of the parties' agreement. 62 If the landlord does elect a market review, clause 3.2 of the lease dictates that 'then, subject to the Commercial Tenancy Act … the following clauses 3.3 to 3.9 (inclusive) shall apply on each occasion'. 63 For similar reasons to those relied upon in rejecting the suggestion that if clause 3.2 of the lease were found void, it could be severed without disturbing clauses 3.3 to 3.9, it is not open on a reasonable construction of these clauses to give clause 3.9 an operation independent of the preceding clauses, including clause 3.2. The effect, for which Beba contends, would be to require a market review on each market review date, contrary to clause 3.2. 64 On the correct construction of these provisions, clause 3.9 of the lease can only apply to a market review initiated by the landlord. Where, as I have found, the landlord did not elect a market review, the clause has no operation. (Page 22)
Referred question 6: 'Does the New Lease (formed upon acceptance of the Applicant's Notice and/or Offer) constitute a lease formed by the exercise of an option under an existing lease, and fall within the exceptions contained in subsection 6(6) of the Act?'
Referred question 7: 'Was the Respondent, by reason of section 6 of the Act, required to provide the Applicant prior to the entry into of the New Lease with a disclosure statement setting out the proposed terms of the New Lease including the rent as at commencement?' 65 The parties rely upon divergent submissions as to the legal basis of the new lease which, on both parties' cases, was entered into by 3 November 2011 at the latest. 66 In summary, Beba submits that the proper legal analysis requires a conclusion that the new lease was not entered into or formed as a result of the exercise of the option under the original lease, but rather upon Elle's acceptance of Beba's offer to enter a lease in essentially the same terms as the original lease. The offer was constituted by Beba's non-compliant notice to exercise the option. Case authorities, both of the Supreme Court and this Tribunal, are cited in support. 67 Elle, on the other hand, contends that a view that the new lease arose by renewal of the original lease under an option is to be preferred, despite the notice of renewal not complying with the requirements for such notices under the lease. Two alternative legal foundations are advanced: 68 Elle relies upon decisions of the Supreme Courts of Queensland and South Australia in support of its alternative formulations, while recognising that Beba's favoured approach has also received judicial backing. (Page 23)
69 It is necessary to provide an answer to referred question 6 on the basis of proper legal analysis, and not the consequences of one outcome as opposed to another. 70 In Head and Zimmermann Investments Pty Ltd[2009] WASAT 61, I preferred the view that a purported exercise of an option to renew which is not compliant with the conditions for such exercise amounts to a counteroffer by the lessee of the irrevocable offer (being the option to renew), which may or may not then be accepted by the landlord. I did so in light of what is described by the learned authors of Commercial Tenancy Law in Australia, Bradbrook and Croft, Butterworths (2nd ed, 1997) at 260 - 261 as the 'predominant view' in Australia that an option to renew is an irrevocable offer. Although there appears to have been some retreat from this in the latest edition of the same text (Commercial Tenancy Law, Bradbrook Croft Hay (3rd ed, 2009)) (Bradbrook Croft Hay) at 399 401), the authors maintain that, on the correct characterisation of dealings akin to those between the parties in the present matter, a fresh agreement for a new term has been made after the time limited for exercise of the option: Bradbrook Croft Hay at 434. 71 The following passage from the judgment of the Full Court of Western Australia in Abjornson v Urban Newspapers Pty Ltd[1989] WAR 191 at [204], part of which is reproduced in the passage in Bradbrook Croft Hay to which I have just referred, is particularly apposite to the present case: In my opinion the learned judge on appeal correctly held that there was no exercise of option by the appellant by her letter of 29 March as accepted by the respondent on 2 April. Clause 13(f) of the lease required the option to be exercised by way of a request made within a certain time. Acceptance by the lessor was not necessary to such exercise. There was no obligation on the appellant as lessee to exercise the same and failure to do so within the time prescribed could not constitute a breach by her of any obligation under the contract. She did not exercise the option within the time prescribed and thus she had not accepted the irrevocable offer of the lessor contained in cl 13(f) to grant her the further term upon her acceptance of that offer in the manner provided for. Her purported acceptance out of time was in fact a counter offer specifying all the necessary terms by reference to the terms of the lease, which counter offer was accepted by the respondent on 2 April. … 72 I therefore find, as a matter of legal analysis, that Beba's non-compliant notice of exercise of the option dated 20 September 2011 constituted a counteroffer by Beba to be bound by essentially the same (Page 24)
terms as the original lease which was to expire on 16 October 2011, and that Elle accepted that counteroffer on 3 November 2011. 73 The remaining questions concern the operation of s 6 of the CT(RS)A Act. 74 Section 6, as it stood in late 2011, read as follows: Disclosure (1) Where a retail shop lease is entered into and the tenant has not, at least 7 days before the entering into of the lease, been given a disclosure statement in accordance with subsection (4) or the disclosure statement given contains false or misleading information, the tenant may, in addition to exercising any other right, do either or both of the following (2) Where the tenant under a retail shop lease gives to the landlord a notice of termination under subsection (1) the lease terminates upon the expiry of a period of 14 days after the notice was given. [(3) deleted] (4) A disclosure statement given for the purposes of this section shall be in the prescribed form duly completed and signed by or on behalf of the landlord and the tenant and shall contain a statement notifying the tenant that he should seek independent legal advice. (5) Where the tenant under a retail shop lease (in this subsection referred to as the outgoing tenant) assigns the lease to another person (in this subsection referred to as the incoming tenant), nothing in this section gives to the incoming tenant a right to terminate the lease that the outgoing tenant would not have had if he had continued as the tenant under the lease. (6) A disclosure statement is not required to be given (Page 25)
75 The section imposes a requirement on landlords to provide prospective tenants with a disclosure statement at least seven days before entering into a lease. 76 The form of the disclosure statement to be given is prescribed. One of the details to be provided in the statement is the rent payable at the commencement of the lease. 77 The requirement for a disclosure statement is expressly excluded in the circumstances referred to in s 6(6) of the CT(RS)A Act. 78 The referred questions call for answers regarding the operation of s 6 of the CT(RS)A Act in light of the circumstances of this case, and in particular in light of the legal basis of the new lease as I have found it to be. Further, the answer to referred question 7 will be determined by the answer to the second part of referred question 6, given that, unless the new lease falls within one of the s 6(6) exceptions, Elle must necessarily have been under the obligation to furnish a disclosure statement. 79 Going on the language of s 6(6)(a) of the CT(RS)A Act, the new lease does not qualify for exemption. The new lease came about by reason of Elle's acceptance of Beba's offer to lease constituted by the noncompliant notice of exercise of the option. However, this is not the end of the matter. 80 The manifest intention of Parliament in enacting s 6 of the CT(RS)A Act was to impose upon a landlord, prior to entering into an enforceable retail shop lease, an obligation to provide the prospective tenant, by way of a document in standard form, with the critical terms and other important information in respect of a lease into which it is about to enter. The time stipulation the disclosure statement is required to be given at least seven days before entering in the lease will allow the prospective tenant to not proceed with the lease, or to attempt to renegotiate its terms. Failure to give the statement may render the landlord open to the serious consequences of termination of the lease or a compensation claim subsequent to entering into any lease. 81 Parliament expressly excluded the disclosure statement obligation in the case of renewal under an option, the obvious rationale for the (Page 26)
exclusion being that in such a case, the tenant is to be taken as being already apprised of the matters to be included in a disclosure statement. 82 The application of the literal meaning of s 6(6)(a) of the CT(RS)A Act to the facts of the present case would lead to the incongruous, if not absurd, result that the landlord was required to give a disclosure statement where, had the same tenant exercised its option to renew in the correct manner, it would not have been burdened with that obligation. In my view, it is impossible to believe that Parliament would have intended that the same exclusion would not apply upon a renewal of a lease, effective immediately upon the expiry of the term of the original lease, arising from the acceptance of an offer constituted by a noncompliant notice to exercise an option. 83 The conclusion just stated is further underlined by the fact that, upon an agreement for a new lease, the tenant's failure to comply with the legal requirements to exercise its option can be seen as making compliance by the landlord with any requirement to give a disclosure statement at least seven days before entering into the lease extremely difficult, if not impossible. 84 Section 3(4) of the CT(RS)A Act deems a lease to be entered into when 85 In the factual circumstances of this case, it is likely (the agreed statement of relevant facts did not address the issue) that the new lease was entered into on 17 October 2011, because this was the first day of the new lease for which rent was paid, probably as part of the final rental payment made under the original lease. In the event that the first rent payment for the new lease was made later, the first alternative under s 4(4)(a) above (the date of the tenant entering into possession) would, on a literal construction, result in a 2007 date as being the date of entry into the (new) lease, which would itself appear an absurd result. A construction more attuned to common sense might result in the first day of the term of the new lease (17 October 2012) being the date once more. (Page 27)
86 Assuming 17 October 2011 as the date of entry into the (new) lease, the effect of Beba giving its noncompliant notice on 20 September 2011 was to require a decision by Elle about whether or not to accept Beba's offer for a new lease commencing immediately upon the expiry of the original lease. On the facts of this case, on 3 November 2011, when Elle accepted Beba's offer, the lease had already been 'entered into' for the purposes of the CT(RS)A Act one way or another, and, therefore, Elle could not comply with any obligation it had under s 6(1) of the CT(RS)A Act. At the time, Elle had not instructed its solicitors, and was responding to Beba's assertedright to renew the lease by reference to s 13(1) of the CT(RS)A Act (statement of agreed facts paragraph 10), a claim later abandoned. Beba would have been required to possess the wisdom of Solomon (or to have recall to good legal advice as the dealings between the parties progressed) in order to register the requirement upon a literal interpretation of s 6 of the CT(RS)A Act for the giving of a disclosure statement before accepting Beba's offer. 87 What then is permissible in terms of the Tribunal's ability to construe the statutory words so as to enlarge the scope of the exclusion to include the scenario presented by this case? 88 The ability to construe a statutory provision so as to imply, or 'read in' words in a statute which are not in the text, has been the subject of much controversy. A useful commentary of the controversy appears in Statutory Interpretation in Australia (DC Pearce & RS Geddes, 6th Edition, 2006) (Pearce and Geddes) at [2.28] [2.33]. As that commentary discloses, such an ability was accepted, with certain limitations, by the High Court in Cooper Brookes (Wollongong) Pty Ltd v Federal Commissioner of Taxation (1981) 147 CLR 297; 35 ALR 151 (Cooper Brookes), which authority has been frequently followed (see Pearce and Geddes at [2.34]). 89 In Cooper Brookes, Mason and Wilson JJ observed (at 320 321; 169 170): The fundamental object of statutory construction in every case is to ascertain the legislative intention by reference to the language of the instrument viewed as a whole. But in performing that task the courts look to the operation of the statute according to its terms and to legitimate aids to construction. The rules [of construction], as DC Pearce says in his Statutory Interpretation, p 14, are no more than rules of common sense, designed to achieve this object. They are not rules of law. If the judge applies the literal rule it is because it gives emphasis to the factor which in the (Page 28)
particular case he thinks is decisive. When he considers that the statute admits of no reasonable alternative construction it is because (a) the language is intractable or (b) although the language is not intractable, the operation of the statute, read literally, is not such as to indicate that it could not have been intended by the Legislature. On the other hand, when the judge labels the operation of the statute as 'absurd', 'extraordinary', 'capricious', 'irrational' or 'obscure' he assigns a ground for concluding that the Legislature could not have intended such an operation and that an alternative interpretation must be preferred. But the propriety of departing from the literal interpretation is not confined to situations described by these labels. It extends to any situation in which for good reason the operation of the statute on a literal reading does not conform to the legislative intent as ascertained from the provisions of the statute, including the policy which may be discerned from those provisions. 90 In Bermingham v Corrective Services Commission of New South Wales (1988) 15 NSWLR 292, McHugh JA, as he then was (later of the High Court), said (at 302): [I]t is not only when Parliament has used words inadvertently that a court is entitled to give legislation a strained construction. To give effect to the purpose of the legislation, a court may read words into a legislative provision if by inadvertence Parliament has failed to deal with an eventuality required to be dealt with if the purpose of the Act is to be achieved. 91 As for the conditions which needed to be satisfied in order for the 'reading in' of missing words in a statute to occur, his Honour said (at 302): First, the court must know the mischief with which the Act was dealing. Secondly, the court must be satisfied that by inadvertence Parliament has overlooked an eventuality which must be dealt with if the purpose of the Act is to be achieved. Thirdly, the court must be able to state with certainty what words Parliament would have used to overcome the omission if its attention had been drawn to the defect. 92 The three preconditions have been applied by McHugh J in the High Court and in various other Australian jurisdictions (see Pearce and Geddes at [2.39]). I consider it appropriate that I do so to the circumstances of the present case in order to decide the question of whether the literal, or some other, construction of the exempting provision, s 6(6)(a) of the CT(RS)A Act, is to be adopted for the purposes of this matter. (Page 29)
93 I have already dealt in substance with the first two preconditions. For reasons already expressed, bearing in mind the purpose of s 6 of the CT(RS)A Act, by confining the exclusion under s 6(6)(a) to renewals of a lease 'under an option', the Parliament has, in my view, inadvertently overlooked a case such as the present where the lease was renewed by the acceptance of an offer constituted by a noncompliant exercise of an option to renew. 94 Turning to the third precondition, and focussing on the consequences which I have found to be incongruous and absurd were the literal operation of the statute to be adopted, Parliament may have inserted the following words appearing immediately after the brackets and their contents in s 6(6)(a) of the CT(RS)A Act: … or upon the landlord's acceptance of an offer constituted by the tenant's ineffectual exercise of an option resulting in renewal without interruption … 95 My use of 'may' in the previous paragraph is merely to indicate that Parliament might also, having had the omission drawn to its attention, have taken the opportunity to include any case of a renewal of lease other than on the valid exercise of an option. It is not intended to convey uncertainty as to Parliament's presumed rectification of the current hiatus in the statute. 96 I appreciate that Beba claims that any disclosure statement given by Elle which was referable to the formation of the new lease would have disclosed that the rent was unchanged from the final year of the original lease, providing Beba with an opportunity to either negotiate a lower lease or not proceed with the new lease. Although such a consequence would have been to Beba's advantage, it is at odds with the policy underlining the legislative provisions for a disclosure statement. It appears that Beba's decision to proceed with a new lease was based upon its incorrect view about its ability to initiate a market review. That is a matter of its making. Moreover, such a motivation would have applied regardless of whether or not Beba validly exercised its option. The enlarged construction of the s 6(6)(a) exception which I have adopted cannot, in my view, be impugned on the basis of any alleged unfairness towards the tenant in this case. 97 For the above reasons, the new lease does fall within the exceptions contained in s 6(6) of the CT(RS)A Act, and particularly s 6(6)(a) as I have construed that subsection. That being the case, Elle was not required (Page 30)
to provide Beba with a disclosure statement prior to entering into the new lease.
Order 98 The Tribunal shall issue an order in the following terms: 1. The Tribunal makes the following determinations in relation to questions 1 7 referred to it: Question 1: Has the Respondent accepted the Applicant's offer to renew its lease by the Applicant's 'Notice of Exercise of Option' (Notice) dated 20 September 2011 as amended by its letter of offer of 28 November 2011 (Offer)? Answer: The answer to the preferred question: 'By reason of the dealings between the parties, was Beba granted a new lease in substantially the same terms as the original lease, or alternatively, was an enforceable agreement for such a lease entered into?' is 'Yes'. Question 2: If the answer to question 1 is yes, was it a term of the lease so formed (New Lease) that there would be a market rent review (and not that the Landlord is entitled to elect whether or not to review the rent to market) at the commencement of the new lease? Answer: No. Question 3: Is clause 3.2 of the Original Lease, incorporated in, or a term of the New Lease? If so, to the extent that clause 3.2 purports to allow the Respondent Landlord to elect not to review the rent to the market rent on a market review date (including the commencement date of the new lease) void by reason of section 11(2)(c) of the Commercial Tenancy (Retail Shops) Agreement[s] Act 1985 (the Act)? Answer: Yes, clause 3.2 of the original lease is a term of the new lease. No, clause 3.2 is not void. (Page 31)
Question 4: If clause 3.2 of the Original Lease is incorporated in the New Lease, and the Respondent Landlord is entitled to elect to review or not review the rent to market as at the commencement date of the New Lease, has the Respondent Landlord so elected to review the rent? Answer: No. Question 5: Does clause 3.9 of the lease operate to require the rent under the lease, as at 17 October 2011 to be determined by reference to the market rent for the Premises? Answer: No. Question 6: Does the New Lease (formed upon acceptance of the Applicant's Notice and/or Offer) constitute a lease formed by the exercise of an option under an existing lease, and fall within the exceptions contained in subsection 6(6) of the Act? Answer: No, the new lease does not constitute a lease formed by the exercise of an option. Yes, the new lease does fall within the exceptions contained in s 6(6) of the Commercial Tenancy (Retail Shops) Agreements Act 1985 (WA). Question 7: Was the Respondent, by reason of section 6 of the Act, required to provide the Applicant prior to the entry into of the New Lease with a disclosure statement setting out the proposed terms of the New Lease including the rent as at commencement? Answer: No. 2. The proceeding is listed for a directions hearing at 10.15 am on 13 August 2013 in order to consider the remaining questions referred to the Tribunal. (Page 32)
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