Beba Enterprises Pty Ltd v Elle Pty Ltd
[2014] WASC 141
•17 APRIL 2014
BEBA ENTERPRISES PTY LTD -v- ELLE PTY LTD [2014] WASC 141
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2014] WASC 141 | |
| Case No: | GDA:14/2013 | 12 & 13 FEBRUARY 2014 | |
| Coram: | ALLANSON J | 17/04/14 | |
| 13 | Judgment Part: | 1 of 1 | |
| Result: | Appellant granted leave to appeal Appeal allowed Respondent granted leave to cross-appeal Cross-appeal and notice of contention dismissed | ||
| B | |||
| PDF Version |
| Parties: | BEBA ENTERPRISES PTY LTD ELLE PTY LTD |
Catchwords: | Appeal Commercial Tenancy (Retail Shops) Agreements Act 1985 (WA) Whether the State Administrative Tribunal erred in holding that s 6(6)(a) applied upon a landlord's acceptance of an offer constituted by a tenant's ineffectual exercise of an option Statutory construction Cross-appeal Leave to appeal where claim further proceedings would be futile |
Legislation: | Commercial Tenancy (Retail Shops) Agreements Act 1985 (WA), s 6 State Administrative Tribunal Act 2004 (WA), s 105 |
Case References: | Beba Enterprises Pty Ltd v Elle Pty Ltd [2013] WASAT 120 City of Swan v LWP Property Group Pty Ltd [2013] WASCA 90 Hughes v St Barbara Ltd [2011] WASCA 234 Paridis v Settlement Agents Supervisory Board [2007] WASCA 97; (2007) 33 WAR 361 Secretary to the Department of Premier and Cabinet v Hulls [1999] VSCA 117; [1999] 3 VR 331 Settlement Agents Supervisory Board v L J Hooker Settlements Pty Ltd [2009] WASCA 89 Taylor v The Owners - Strata Plan No 11564 [2014] HCA 9 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CIVIL
Case Number CC 1671 of 2012 in the State Administrative Tribunal at Perth
- Appellant
AND
ELLE PTY LTD
Respondent
ON APPEAL FROM:
Jurisdiction : STATE ADMINISTRATIVE TRIBUNAL OF WESTERN AUSTRALIA
Coram : MR T CAREY (MEMBER)
Citation : BEBA ENTERPRISES PTY LTD AND ELLE PTY LTD [2013] WASAT 120
File No : CC 1671 of 2012
Catchwords:
Appeal - Commercial Tenancy (Retail Shops) Agreements Act 1985 (WA) - Whether the State Administrative Tribunal erred in holding that s 6(6)(a) applied upon a landlord's acceptance of an offer constituted by a tenant's ineffectual exercise of an option - Statutory construction
Cross-appeal - Leave to appeal where claim further proceedings would be futile
Legislation:
Commercial Tenancy (Retail Shops) Agreements Act 1985 (WA), s 6
State Administrative Tribunal Act 2004 (WA), s 105
Result:
Appellant granted leave to appeal
Appeal allowed
Respondent granted leave to cross-appeal
Cross-appeal and notice of contention dismissed
Category: B
Representation:
Counsel:
Appellant : Mr J C Vaughan SC
Respondent : Mr M D Howard SC
Solicitors:
Appellant : Hotchkin Hanly
Respondent : Lavan Legal
Case(s) referred to in judgment(s):
Beba Enterprises Pty Ltd v Elle Pty Ltd [2013] WASAT 120
City of Swan v LWP Property Group Pty Ltd [2013] WASCA 90
Hughes v St Barbara Ltd [2011] WASCA 234
Paridis v Settlement Agents Supervisory Board [2007] WASCA 97; (2007) 33 WAR 361
Secretary to the Department of Premier and Cabinet v Hulls [1999] VSCA 117; [1999] 3 VR 331
Settlement Agents Supervisory Board v L J Hooker Settlements Pty Ltd [2009] WASCA 89
Taylor v The Owners - Strata Plan No 11564 [2014] HCA 9
1 ALLANSON J: Beba Enterprises Pty Ltd and Elle Pty Ltd are, respectively, the tenant and landlord under a retail shop lease. The lease is regulated by the Commercial Tenancy (Retail Shops) Agreements Act 1985 (WA) (the Act).
2 Under s 6 of the Act, where a retail shop lease is entered into and a tenant has not, at least seven days before entering into of the lease, been given a disclosure statement in accordance with s (4), the tenant may, in addition to exercising any other right:
(a) within 6 months after the lease was entered into give to the landlord written notice of termination of the lease, unless subsection (3) prevents termination;
(b) apply in writing to the [State Administrative] Tribunal for an order that the landlord pay compensation to the tenant in respect of pecuniary loss suffered by the tenant as a result of –
(i) the omission of the landlord to give a disclosure statement …
(a) on the renewal of a retail shop lease under an option (including the option arising by reason of s 13(1)); or
(b) on the assignment of a retail shop lease.
4 The State Administrative Tribunal has jurisdiction under s 16 of the Act:
(1) Subject to section 11(5), a party to a retail shop lease may refer to the Tribunal any question between the parties which he believes to be a question arising under the lease and the Tribunal shall -
(a) determine whether or not the question referred to the Tribunal is a question arising under the lease; and
(b) if it is such a question, hear and determine it.
6 The original lease was for a term of four years commencing 17 October 2007, with options to renew for two additional four year terms. By cl 2.3 of the lease the landlord granted to the tenant the option or options 'to extend the Term for the further term or terms'. Clause 2.3(a) provided the tenant may exercise an option to extend 'if and only if' the tenant gives to the landlord written notice of its exercise of the option not less than three months and not more than six months prior to the expiration of the then current term. By cl 2.3(b) if the tenant validly exercised an option to extend then 'prior to the expiration of the then current Term, the Landlord, the Tenant and the Guarantor (if any) must execute a deed recording the extension'.
7 In the proceedings in the Tribunal, the parties agreed a statement of relevant facts, which gives the background to the dispute before the Tribunal. Among the matters agreed were:
1. Beba's first option was exercisable between 16 April 2011 and 16 July 2011 (agreed fact 8).
2. Beba did not exercise its option to renew the lease at any time prior to 16 July 2011 (agreed fact 9).
3. On or about 20 September 2011 Beba served on Elle a notice titled 'Notice of Exercise of Option' 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 s 13 of the Act (agreed fact 10).
4. Beba did not have a right to an option under s 13 (agreed fact 11).
5. On 2 November 2011, Beba emailed Elle, asking for confirmation that the notice extending the option had been received (agreed fact 12).
6. On 3 November 2011, Elle responded confirming that the notice had been received and saying that Elle looked forward to a continued working relationship with Beba (agreed fact 13).
7. By letter dated 28 November, Beba wrote to Elle giving notice that it was initiating a rent review of the rent to apply 'for the first year of the further term commencing 17 October 2011', and proposing the rent to apply (agreed fact 14).
8 Further letters passed between the parties, and in March 2012, they met to discuss the market rental valuation of the premises. No agreement was reached.
9 In May 2012, the solicitors for Elle wrote to Beba stating that:
(a) it was confirmed that Beba had exercised its option to extend the term of the lease; and
(b) enclosing a copy of a deed of extension for execution.
10 Further negotiation continued, with Beba proposing an amendment to the deed, which Elle did not accept.
11 In its application to the Tribunal, Beba referred 11 questions arising under the lease for determination, although only the first seven were determined. In its reasons, the Tribunal said that the balance was, by agreement, postponed 'by reason of the significance to them of the answers provided by this decision': Beba Enterprises Pty Ltd v Elle Pty Ltd [2013] WASAT 120 [8].
12 The first question asked the Tribunal to determine whether Elle had accepted Beba's offer to renew its lease by Beba's 'Notice of Exercise of Option' dated 20 September 2011 as amended by its letter of offer of 28 November 2011. Questions 2 to 5 were about review of rent, if the new lease had been so formed. Questions 6 and 7 were in these terms:
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?
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?
13 If the Tribunal determined that Elle was required to provide a disclosure statement, questions 8 and 9 were about determination of any loss suffered by Beba, and the amount of compensation payable.
14 Beba sought orders regarding the rent payable under the new lease and annual reviews of that rent, and an order that Elle pay to Beba compensation pursuant to s 6(1)(b) of the Act.
15 The grounds of Beba's application in the Tribunal, in effect a pleading of material facts, allege:
(1) Had Elle served a disclosure statement prior to the formation of the new lease and disclosed that the rent under the new lease for the first year was $350,000 plus GST, and not the market rent at 1 October 2011, then Beba would have withdrawn its notice and offer before they were accepted.
(2) Beba would have either made a fresh offer on the basis that the rent was market rent, or would have sought and obtained a replacement tenancy.
(3) If the rent under the new lease is not the market rent, Beba has suffered loss and damage, being any amount of rent payable under the new lease that is more than market rent, alternatively losses arising from operating from a new tenancy.
16 In its further amended response, filed 19 February 2013, Elle asserted that the notice of exercise of the option was ineffective, and the lease lapsed on 16 October 2011; there was then a holding over as a monthly tenant until 3 November 2011; Beba and Elle were, from 3 November, parties to a new lease 'as if the option under the old lease had been validly exercised'. Alternatively, Elle responded that the parties by their conduct had waived the right to assert the notice of 20 September 2011 was defective, and there was a valid renewal of the lease.
17 The Tribunal proceeded on the basis that the option was properly characterised an irrevocable offer by the landlord. Beba's non-compliant notice of exercise of the option was a counteroffer by Beba to be bound by essentially the same terms as the original lease: Beba Enterprises Pty Ltd v Elle Pty Ltd [72]. The Tribunal, accordingly, found that the new lease was constituted by the acceptance by Elle of that counteroffer when it responded on 3 November 2011. The Tribunal answered question 1 in this way:
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'.
18 The Tribunal answered question 6 by holding that the new lease did not constitute a lease formed by the exercise of an option, but that the new lease did fall within the exceptions contained in s 6(6). Question 7 was answered 'No' - that is, Elle was not required to provide a disclosure statement.
19 Beba applies to this court for leave to appeal under s 105(1) of the State Administrative Tribunal Act 2004 (WA), on the following ground:
As to its answers to referred questions 6 & 7, having correctly held that the new lease did not constitute a lease formed by the exercise of an option, the Tribunal erred in law:
a. in holding that, on its proper construction, s 6(6)(a) of the Commercial Tenancy (Retail Shops) Agreements Act 1985 (WA) (Act) applied upon a landlord's acceptance of an offer constituted by the tenant's ineffectual exercise of an option resulting in renewal without interruption, or alternatively, on any case of a renewal of lease other than on the valid exercise of an option; and
b. consequently, in holding that the new lease fell within the exception contained in s 6(6)(a) of the Act and the respondent was not required to provide the appellant with a disclosure statement as to the new lease in accordance with s 6(1) of the Act.
20 It was not in contention that the single ground of appeal was an appeal on a question of law.
The reasons of the Tribunal
21 The Tribunal arrived at its answer to question 6 by construing s 6(6) of the Act as disclosing a legislative intention that required the Tribunal to 'read in' words which were not in the text, to the effect that s 6(6) was to be construed in this way: a disclosure statement is not required to be given on the renewal of a retail shop lease under an option (including the option arising by reason of s 13(1) or upon the landlord's acceptance of an offer constituted by the tenant's ineffectual exercise of an option resulting in renewal without interruption.
22 The Tribunal considered at some length the authorities on the conditions that must be met for words to be read into an act. It is unnecessary for me to deal with them at any length. Counsel for the respondent did not seek to support the Tribunal's reasoning on this point. That concession was properly made.
23 There still appears to be some controversy about the nature of an option, and whether the grant of an option may give rise to either a conditional contract or an irrevocable offer: see Hughes v St Barbara Ltd [2011] WASCA 234 [81] - [84]. While the form of the contract may, in a particular case, decide the question, here the answer must be more general. Section 6(6) may apply whether a particular option is characterised as a conditional contract or as an irrevocable offer, and expressly applies where the option arises under s 13 of the Act. Regardless of how the option is characterised, it is an essential feature in each case that the renewal of the lease is effected by the act of the tenant. Upon the tenant exercising the option there is nothing more to be done by the landlord that might affect whether or not a lease, or an enforceable agreement to lease, is made. The extension of s 6(6)(a) to a lease formed by the landlord's acceptance of an offer, even where that offer is constituted by an ineffective exercise of an option, goes far beyond what has been enacted.
24 Since the hearing of this appeal, the High Court has again considered when a court may be justified in reading a statutory provision as if it contained additional words: see Taylor v The Owners - Strata Plan No 11564 [2014] HCA 9. While two members of the court dissented in the result, there was no difference on the principle that the fundamental task of the court is and remains the construction of the words the legislature has enacted: see French CJ, Crennan and Bell JJ [39], Gageler and Keane JJ [65].
25 The majority said, at [38]:
The question whether the court is justified in reading a statutory provision as if it contained additional words or omitted words involves a judgment of matters of degree. That judgment is readily answered in favour of addition or omission in the case of simple, grammatical, drafting errors which if uncorrected would defeat the object of the provision. It is answered against a construction that fills 'gaps disclosed in legislation' or makes an insertion which is 'too big, or too much at variance with the language in fact used by the legislature'.
26 The dissenting judges, Gageler and Keane JJ, said at [65]:
The constructional task remains throughout to expound the meaning of the statutory text, not to divine unexpressed legislative intention or to remedy perceived legislative inattention. Construction is not speculation, and it is not repair.
27 The extent to which the Tribunal would have altered the Act is too great and too much at variance with the language in fact used by the legislature to permit that construction to stand. It is not a construction of the text, but the formulation of a new category of exception from the requirement to provide a disclosure statement. The essential feature of renewal by the exercise of an option is absent.
28 Beba has established that the Tribunal erred in law, as alleged, and the ground of appeal has been made out. That is not, however, the end of the consideration required. The respondent cross appealed, and sought to make out a notice of contention. The respondent also argued that, notwithstanding the error, leave should be refused as the application before the Tribunal is otherwise doomed to fail.
Leave to Appeal - Applicable principles
29 The approach to the question whether or not leave should be granted under s 105 of the State Administrative Tribunal Act has been considered in a series of decisions in the Court of Appeal, beginning with Paridis v Settlement Agents Supervisory Board [2007] WASCA 97; (2007) 33 WAR 361 [16] - [18]. In short, leave should be granted if, in all the circumstances, a grant of leave is in the interests of justice. Leave may be refused where, even if the appellant might establish the errors which it asserts, the decision of the court would have had no impact upon the rights and obligations of the parties, and there was no prospect that allowing the error to go uncorrected would impose substantial injustice: City of Swan v LWP Property Group Pty Ltd [2013] WASCA 90 [24]; Settlement Agents Supervisory Board v L J Hooker Settlements Pty Ltd [2009] WASCA 89 [30]; Secretary to the Department of Premier and Cabinet v Hulls [1999] VSCA 117; [1999] 3 VR 331 [16].
30 Elle submitted that, notwithstanding the error in construction by the Tribunal, no substantial injustice would result if the court refused leave. The answers given to questions 6 and 7 shut out any further consideration by the Tribunal of whether Beba suffered loss as a result of Elle's failure to comply with s 6(1) of the Act. Elle submits, however, that on the witness statements and documents now before the Tribunal, Beba would be unable to establish that it has suffered loss for which it could recover compensation, and suffers no injustice from being denied the chance to advance that claim.
31 Elle submits that Beba gave notice of its intention to exercise the option, and made an enforceable agreement to enter a new lease because of its mistaken belief that it was entitled to initiate a market rent review. The witness statements already filed in the proceedings in the Tribunal disclose that the officers and employees of Beba who made the decision to give notice of exercise of the option did so under a mistaken belief about the operation of the rent review clause in the original lease. A disclosure statement would have revealed the annual rent at the commencement of the tenancy and the frequency of reviews. Beba's error was not about either of those matters, and would not have been corrected by disclosure of the matters required by the prescribed form.
32 Counsel for Beba put forward two reasons why the court should not accept that argument.
33 First, counsel for Beba isolated the question where the error of law had been demonstrated. It is a quite separate question from whether Beba will ultimately succeed in its claim for compensation. On that question of law, there can be no argument that Beba has reasonable prospects of success.
34 To follow that reasoning, however, would be to accept that there is a substantial injustice in wrongly determining a question of construction, when that error may not bear on the practical relief Beba seeks in the Tribunal. If Beba was entitled to a disclosure statement, but could have suffered no compensable loss as a result of Elle's failure to provide one, it would be a sterile exercise to return the matter to the Tribunal to determine whether Beba suffered loss and the amount of compensation.
35 The second reason, however, is more practical and in my opinion should be accepted. Beba's case is not doomed as a matter of law. The court should not make a finding that Beba's case has no reasonable prospect of succeeding on the facts when the witnesses have not been heard, and the court cannot know what other evidence might be provided between now and a hearing. In my opinion, I should not find that Beba has suffered no injustice from the demonstrated error, and refuse leave, unless satisfied that its case has no reasonable prospects of success. I am not prepared to speculate about what further evidence might be adduced, and how the Tribunal might assess it.
36 Accordingly I would grant leave.
The cross-appeal and notice of contention
37 Elle sought leave to cross-appeal and gave a notice of contention. The issue raised in each was essentially the same: should the Tribunal have found that the new lease was the renewal of a lease under an option, for the purposes of the Act, and fell within the exception in s 6(6)(a).
38 The qualification 'for the purposes of the Act' was, on my understanding of the argument, a significant part of the argument put forward on behalf of Elle. Counsel submitted that, as a matter of construction of s 6, this was a renewal under an option. He identified the problem in the Tribunal's reasoning was that it started with a common law idea of what happens if there has been a non-compliant exercise of an option, and 'dropped' it into the legislation, rather than starting with the legislation. Counsel submitted that on the agreed facts, the question for the Tribunal was whether those facts come within the proper construction of the composite phrase in s 6(6)(a), 'the renewal of a retail shop lease under an option'. Whether facts found fall within a statutory provision properly construed is generally a question of law.
39 I am unable to accept the argument put forward on behalf of Elle for these reasons. Section 6(1) is concerned with where a retail shop lease is entered into. Lease is defined in s 3 to mean 'any lease, licence, or agreement, whether in writing or not, that provides for the occupation of premises situated within the State whether for a term or by way of a periodic tenancy or a tenancy at will …'
40 By s 6(1) a disclosure statement is required where a retail shop lease is entered into, and must be given at least seven days before the entering into of the lease. By s 3(4):
For the purposes of this Act a retail shop lease is entered into when -
(a) under the retail shop lease, the tenant enters into possession of, or commences to pay rent in respect of, the premises the subject thereof; or
(b) where the retail shop lease is in writing, all of the parties thereto have signed the retail shop lease,
whichever first occurs.
41 This may create a difficulty in applying s 6(1) when a lease expires, the tenant remains in possession and continues to pay rent on a holding over, and the parties then agree that the lease is to be renewed and to operate from an earlier date. Despite that difficulty, reading s 6 as a whole, the renewal of a retail shop lease is treated under the Act as entering into a lease. Otherwise, there would be no purpose in s 6(6)(a) providing an exception to the requirement to give a disclosure statement 'on the renewal of a retail shop lease under an option'.
42 The other circumstance where a disclosure statement is not required is on the assignment of a retail shop lease: s 6(6)(b). In my opinion, it is pointless to look for something common in the two exceptions, and each operates on its own terms.
43 Despite the argument put forward by counsel by Elle, it is necessary, in my opinion, to read s 6(6)(a) in the context of the general law regarding options. Where a lease is renewed on the same terms, the tenant will know the terms and probably will have continuity of possession. A disclosure statement may have little or no utility. Section 6(6)(a) does not, however, apply to all renewals, or even to renewal on the same terms, but only to renewal under an option. An option may, according to the particular circumstances, be properly characterised as an irrevocable offer on the part of the grantee, a conditional contract between the grantee and grantor of the option, or, in the case of the option under s 13 of the Act, a statutory entitlement to renew. The common feature of each of them is that an enforceable agreement to lease for the further term is brought into effect by the act of the tenant. The landlord has no discretion to do anything that affects the exercise of the tenant's right to renew. It is that feature which distinguishes renewal under the option from other cases of renewal, even where possession is continuous and the terms of the lease are unchanged. Section 6(6)(a) is, in my opinion, confined to those circumstances where the renewal is at the discretion of the tenant.
44 In the present matter, on Beba giving Elle 'notice' of exercise of the option, Elle was entitled to refuse to renew. If Elle was to accept the notice, as an offer to renew the lease, it was required to give the prescribed disclosure. The consequence of Elle's failure to give the prescribed disclosure is for the Tribunal to determine.
45 I would grant leave to cross-appeal but dismiss the appeal, and dismiss the notice of contention.
Conclusion
46 The orders will be that the appellant have leave to appeal and the appeal is allowed. The respondent is granted leave to cross-appeal but the cross-appeal and the notice of contention are dismissed.
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