City Convenience Leasing Pty Ltd v Boo

[2013] NSWADT 268

Administrative Decisions Tribunal

New South Wales

Medium Neutral Citation:

City Convenience Leasing Pty Ltd v Boo [2013] NSWADT 268

Hearing dates:

4 November 2013

Decision date:

26 November 2013

Jurisdiction:

Retail Leases Division

Before:

PR Callaghan SC, Deputy President

Decision:

The Application for Original Decision is dismissed.

The issue of costs is reserved.

Catchwords:

Retail lease - application for appointment of specialist retail valuer - agreement as to current market rent

Legislation Cited:

Retail Leases Act 1994

Cases Cited:

Australian Broadcasting Commission v XIVth Olympic Games Ltd (1988) 18 NSWLR 540
B.P. Refinery (Westernport) Pty Ltd v Hastings Shire Council (1977) 52 ALJR 20
Branir Pty Ltd v Owston Nominees (No.2) Pty Ltd (2001) 117 FCR 429
Codelfa Constructions Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337
Franklins Pty Ltd v Metcash Ltd (2009) 76 NSWLR 603
Masters v Cameron (1954) 91 CLR 353
Molotu Pty Ltd v Solar Power Pty Ltd (1989) 55 NSW ConvR 55-490
Moratic Pty Ltd v Gordon [2007] NSWSC 5
Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451
Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165
Waterman v Gerling Australia Insurance Company Ltd (2005) 65 NSWLR 300
Western Export Services Inc. v Jireh International Pty Ltd [2011] HCA 45

Texts Cited:

Carter on Contract
Carter, The Construction of Commercial Contracts

Category:

Interlocutory applications

Parties:

City Convenience Leasing Pty Ltd ACN 085 152 978 (Applicant)
Akau Boo, Vinh Quang Tran and Kim Chau Tran (Respondent)

File Number(s):

135104

reasons for decision

1.   Retail Leases Division. P.R. Callaghan S.C., Deputy President.

1. On 16 August 2013 by Application for Original Decision, City Convenience Leasing Pty Ltd ("the Applicant") sought from the Tribunal an order appointing a specialist retail valuer pursuant to s19 of the Retail Leases Act 1994 for the purposes of a lease from Akau Boo, Vinh Quang Tran and Kim Chau Tran ("the Respondents") to the Applicant dated 24 August 2006 in respect of convenience store premises on the ground floor, 19-21 Hunter Street, Sydney. The lease was for an original term of seven years which expired on 17 August 2013. It contained an option to renew for a further term of seven years and the Applicant exercised that option on 15 April 2013.

1. Section 19 of the Retail Leases Act relevantly provides:

"(1) A retail shop lease that provides for rent to be changed to current market rent is taken to include provision to the following effect:

...

(b) If the lessor and the lessee do not agree as to what the actual amount of that rent is to be, the amount of the rent is to be determined by valuation carried out by a specialist retail valuer appointed by agreement of the parties to the lease, or failing agreement, by the Tribunal.

...

(1A) A party to a lease may apply to the Tribunal for the appointment of a specialist retail valuer for the purposes of subsection (1)(b).

..."

1. In the normal course the Application would be dealt with in accordance with the Tribunal's Guideline dealing with the Appointment of Specialist Retail Valuers published on 26 November 2012. This guideline sets out the procedure for appointing specialist retail valuers. It enables the appointment to be made quickly, fairly, and without the parties incurring unnecessary expense in attending a hearing. The Respondents, however, have objected to the Application and to the implementation of that procedure and have moved the Tribunal for the rejection of the Application as a matter of law for four reasons ("the propounded reasons"), each put in the alternative and each said to be sufficient on its own to require such a rejection:

(a) Section 19 does not apply to the retrospective determination of rent that has been paid under the Lease, only to the prospective determination of rent yet to be paid;

(b)   In the alternative, the evidence confirms that there has been an agreement as to the actual amount of rent paid over the last year of the Lease as at $31,827.27 per month;

(c) In the third alternative, s19 does not apply at all given that the Lessee seeks to have the final year's rent determined prior to the execution of the option to renew in circumstances where the time periods for the determination of rent for a future option period set out in s32 of the Act have not been complied with;

(d)   In the fourth alternative, the Lessee is estopped from seeking the appointment of a specialist valuer having agreed as to the rent and actually paid rent at the agreed rate over the final year of the lease.

1. In accordance with directions from the Tribunal, the parties have put on written evidence and submissions in respect of the motion and the motion has now been the subject of a hearing.

1. At the hearing, Counsel for the Respondents, while relying on all four of the propounded reasons, addressed in particular the second and fourth of those reasons. Central to the propounded reasons is an agreement ("the payment plan agreement") made between the parties in October 2012. The payment plan agreement was negotiated in discussions and emails between Mr Robert Condell of Tim Green Commercial, real estate agents, of Castlereagh Street, Sydney, the Respondents' managing agents ("TGC"), and Mr Mark Richerdson, the Business Development Manager for the Applicant. The propounded reasons include the assertion that the payment plan agreement included "agreement as to the actual amount of rent paid over the last year of lease as at $31,827.27 per month". On behalf of the Applicant, Mr Soltan does not dispute that an agreement was made as to the payment plan but contends that the agreement did not deal with market rent review.

1. The payment plan agreement was principally constituted by an email of 16 October 2012 from Mr Condell to Mr Richerdson:

"Further to our recent conversations and your email below, you have outlined your intention to initially pay $40,000 per month in addition to the MK Therapy payments and to increase this amount in the coming months in order to clear up the outstanding monies owed as per the attached current invoice.

I have discussed this proposal with the owners and they will only agree to this payment plan if it is strictly adhered to and that it is cleared up in the timeframe between now and February as per the attached draft payment plan (in addition to the amounts on the attached plan, interest will also be charged on the outstanding monies each month, however I cannot calculate this at present without knowing the payment dates).

The agreement would be that you pay the $40,000 for October this week and each subsequent monthly payment within the first 7 days of the month. Failure to make the payments would then result in repossession of the premises as per the original demand notice.

Can you please review the attached schedule of payments and advise your intentions. If we can reach an arrangement, I will draft a more formal agreement for you to agree to.

Please note I will also chase the owner for the signed DA to be returned asap."

The payment plan referred to in that email was as follows:

Payment Plan for

City Convenience at 19-21 Hunter Street, Sydney

Commencing 1st October 2012

Rental Amounts City Convenience	$31,827.27	$3,182.73	$35,010.00
MK Natural	$12,333.33	$1,233.33	$13,566.66
Monthly Contribution Alterations
OCT $40,000.00 NOV $40,000.00 DEC $55,000.00 JAN $60,000.00 FEB $63,200.45
Balance Due	Rental	GST	Amount	Total
Outstanding Amount 1/10/2012	$169,085.22	$16,908.53	$185,993.75	-$185,993.75
OCTOBER City Convenience Payment	$36,363.64	$3,636.36	$40,000.00	-$145,993.75
MK Natural Payment	$12,333.33	$1,233.33	$13,566.66	-$132,427.09
NOVEMBER City Convenience Charge	$31,827.27	$3,182.73	$35,010.00	-$167,437.09
City Convenience Payment	$36,363.64	$3,636.36	$40,000.00	-$127,437.09
MK Natural Payment	$12,333.33	$1,233.33	$13,566.66	-$113,870.43
DECEMBER City Convenience Charge	$31,827.27	$3,182.73	$35,010.00	$148,880.43
City Convenience Payment	$50,000.00	$5,000.00	$55,000.00	-$93,880.43
MK Natural Payment	$12,333.33	$1,233.33	$13,566.66	-$80,313.77
JANUARY City Convenience Charge	$31,827.27	$3,182.73	$35,010.00	$115,323.77
City Convenience Payment	$54,545.45	$5,454.55	$60,000.00	-$55,323.77
MK Natural Payment	$12,333.33	$1,233.33	$13,566.66	-$41,751.11
FEBRUARY City Convenience Charge	$31,827.27	$3,182.73	$35,010.00	-$76,767.11
City Convenience Payment	$57,454.95	$5,745.50	$63,200.45	-$13,566.66
MK Natural Payment	$12,333.33	$1,233.33	$13,566.66	$0.00

The references in the payment plan to MK Natural are to MK Natural Therapy Pty Ltd which took a sub-lease of 80 square metres within the subject premises, with the approval of the Respondents, in December 2011. In an email to Mr Condell on 24 October 2012 Mr Richerdson advised "We accept the payment proposal outlined in the attachments and email correspondence below."

1. The lease provides (item 16 and clause 5) for rent review to be by way of 5% per annum annual increase on "18/08/2007 and each anniversary of that date - other than 18/08/2012" and in respect of 18/08/2012 the method of rent review is expressed to be "current market rent".

1. There is an option contained in the lease (item 12, clause 4) which provides (item 13, clause 5) for the rent from the commencement of the further period to the first rent review date to be "the amount that the rent payable in the final year of the initial lease term plus 5% of that rent, and being exclusive of GST".

1. Mr Condell has not given evidence and the only material from him before the Tribunal is documentation to which he was a party. On behalf of the Applicant, a witness statement by Mr Richerdson was tendered. Mr Richerdson there confirms that on behalf of the Applicant he accepted the payment plan and his statement continues as follows:

"10. I also acknowledge and confirm that, at no stage was I of the understanding that I was involved in negotiations concerning a market rent review of the premises.

11. At all material times, I was solely focussed upon entering into of a Payment Plan concerning the accrued arrears of rental under the Lease.

12. At no time was I not involved in, nor did I partake in, any discussions, negotiations, meetings or any other type of communication, concerning the calculation of the market rent review, with Mr Condell, Mr Gebara, or any other personnel from TGC.

13. In undertaking the task of negotiating a Repayment Plan with Mr Condell, I solely had regard to the current understanding Tax Invoices issued by TGC, which were invoiced in accordance with the current (i.e. non market reviewed rental) monthly rental amount.

14. Accordingly, my acceptance of the Payment Plan was solely based upon the strictly outstanding Tax Invoices as no other figures or calculations were mentioned to me by Mr Condell or Mr Gebara, and further, no collateral information, calculations or documentation was referred to during the course of these negotiations.

15. I say that I accomplished my directed task of reaching a resolution of the rental arrears having strict regard to the Tax Invoices processed by TGC.

16. At no stage was I directed to consult external documentation or collateral agreements to complete my brief, nor did I view or peruse the Lease of the premise as it was not required of me in order to successfully negotiate the Payment Plan with TGC.

17. Therefore, given the discrete nature of my brief, and its single focus, I was not aware that the Lease of the Premises required a market rental review on the 18 August 2012 nor was this fact mentioned or communicated to me by Mr Condell or any other Staff from TGC."

1. On behalf of the Respondents, various tax invoices/statements raised by TGC have been tendered. A 3 page invoice dated 16 October 2012 shows, among other figures, debits for rent of $30,311.68 on 1 April 2012, 1 May 2012, 1 June 2012, 1 July 2012 and 1 August 2012, a debit for rent of $695.68 on 18 August 2012, and debits for rent of $31,827.27 on 1 September 2012 and 1 October 2012. $31,827.27 is shown in invoices thereafter as the monthly rent up to and including 1 September 2013. The TGC ledger card for the subject premises includes a debit for rent of $31,827.27 on 1 October 2013. The 16 October 2012 invoice also shows a balance due (inclusive of GST) of $185,993.75. $31,827.27 equates to $30,311.68 plus a 5% increase. Mr Soltan, on behalf of the Applicant, suggests that the debit item for rent of $695.68 on 18 August 2012 can be explained as follows:

Annual rent for the year ending 17 August 2012

($30,311.68 x 12)$363,740.16

Increase of annual rent at 5% (multiply by 5%)$18,187

Daily increase in annual rent (divide by 366 as

2012 is a leap year)$49.69

Number of days from 18 August 2012 to 31 August

2012 inclusive14

Increase in rent from 18 August 2012 to 31 August

2012 ($49.69 x 14)$695.68

1. Two witness statements by Mr Vinh Quang Tran, one of the Respondents, were tendered. The first attaches various documents including the emails, the payment plan, the invoices and the ledger card that I have referred to above. His evidence includes an explanation that the payment plan should have cleared the outstanding indebtedness of the Applicant to the Respondents in respect of the subject premises by the end of February 2013 and that there was then still a shortfall under the payment plan so the Respondents "then called up the bank guarantee supporting performance of the Lease to in part address that shortfall". Mr Tran makes reference to the payment plan agreement and to the extent that he purports to give evidence of the terms of that agreement, his evidence was objected to; as Mr Tran was not directly involved in any of the negotiations leading to the agreement, I do not attribute any weight to such assertions as he makes in that regard. In his second statement, which is one in reply, Mr Tran details dealings between the Respondents and Mr Mark Richerdson from 2010 including the sub-lease to MK Natural Therapy Pty Ltd in December 2011 and Mr Richerdson's signature on behalf of the Applicant of the Notice of Exercise of Option to Renew on 15 April 2013.

1. There have been tendered also on behalf of the Applicant witness statements by Mr Jamal Gebara and Mr Soltan. Mr Gebara in his statement, among other things:

a) Says that he was the founder and is the Chairman of the City Convenience Stores group ("CCS group"), one of the largest operators of convenience stores in Australia, and the main vehicle of which City Convenience Store Pty Ltd. The applicant company is an associated company and part of the CCS group.

b) Addresses Mr Richerdson's role thus:

"Mr Mark Richerdson was engaged by me to act on behalf of the CCS group including CCL in relation to negotiations with various suppliers and lessors. His duties include corresponding with potential lessors' agent on terms of proposed leases. He always informs me of all steps of negotiation. On occasions I instruct Mark Richerdson to resolve disputes with lessors, suppliers, employees and business partners.

I instructed Mr Richerdson to correspond on behalf of CCL in relation to rental arrears due to the lessors of the (subject) premises ..."

c) Says that he was advised by CCS group's solicitors by email on 8 August 2013:

"In relation to the lease for 19-21 Hunter Street, the lease states that the rent should have increased by 5% every year, except in August 2012 when it should have been the 'current market rent'. For the option lease, the lease says that the rent is to be the rent payable for the seventh year plus 5%. Based on the amount the landlord is looking for now (and our own calculations), it appears that the rent has increased by 5% every year and no market rent review took place in 2012 ...

We understand from speaking to Peter Seeto that in August 2012, there was a dispute with the landlord over unpaid rent. It may be that during this time the whole issue of market rent was overlooked. Peter also mentioned that the rent paid by CCL in 2012 was close to the 'current market rent' even though it looks like CCL were not actually paying market rent that year ..."

d) Says that:

"If Mark Richerdson is to agree on market rent as at 18 August 2012 he will seek instructions first. I never discussed market rental review at 18 August 2012 with Mark Richerdson."

1. Mr Soltan's statement gives an account of the history of his involvement, commencing on 8 August 2013, with the subject lease and these proceedings. That account includes a discussion he had on 16 August 2013 with Coleman Greig, the Respondents' solicitors, wherein he sought to explain why the Applicant had not executed the option lease document which they had submitted to the Applicant's solicitors. The option lease document apparently provided for the monthly rent for the first lease year to be a figure calculated by increasing $31,827.27 by 5%.

1. None of the witnesses was cross-examined.

1. At the conclusion of my consideration of the material before me, I have come to be satisfied on the balance of probabilities that:

a) Commencing at least on 16 October 2012 and continuing beyond 18 August 2013 the Respondents have invoiced the Applicant and the Applicant has effectively paid, rent for the subject premises at the rate of $31,827.27 per month since 17 August 2012.

b) The terms of the payment plan agreement are predominantly presented by the email of 16 October 2012 from Mr Condell to Mr Richerdson and the payment plan itself which I have set out above.

c) There was an express (as a matter of proper construction), or an implied, term of the payment plan agreement that the parties agreed on rent of $31,827.27 per month as the rate of rent for the 2012-2013 lease year and as the relevant current market rent.

d) Additionally, it was a consequence of the payment plan agreement and its implementation, and the Respondents' invoicing, and the Applicant's payment, of rent at the rate of $31,827.27 per month for the 2012-2013 lease year, that the parties impliedly agreed on or confirmed rent at that rate for that year and as the relevant current market rent ("the supplementary agreement").

e) Inadvertence by the Applicant to any current market rent review until August 2013 does not detract from such a term in the payment plan agreement or from the supplementary agreement.

In light of the documentary evidence I have detailed above, I cannot see that there can be any controversy concerning the first of those findings. I will explain the balance of those findings particularly by discussing the Respondents' second and fourth propounded reasons.

1. The Respondents' second propounded reason asserts an agreement "as to the actual amount of rent paid over the last year of the lease as $31,827.27 per month" and the fourth propounded reason refers to such an agreement. Such a term is not explicit, at least in those actual words, in the principal documents constituting the payment plan agreement, being the email of 16 October 2012 from Mr Condell to Mr Richerdson and the payment plan itself. The actual words of that documentation do not detail monthly rent payments for the part of the 2012-2013 lease year beyond the time of the clearance of the debt the subject of the payment plan. Nor, it should be added, do those actual words refer to "current market rent" which is the concept referred to in s19 of the Retail Leases Act and in the subject lease in item 16 dealing with rent review at 18 August 2012. While there is evidence from Mr Richerdson to the effect that current market rent was not in his mind when he negotiated the payment plan agreement, the lease with its provisions concerning current market rent at 18 August 2012 was a significant part of the context or surrounding circumstances of that agreement. Also a significant part of that context was an obvious need then in the Applicant to achieve through the payment plan an agreement or an arrangement with the Respondents whereby the Applicant could avoid being dispossessed from the subject premises on account of substantial indebtedness to the Respondents under the lease . The opening section of the payment plan agreement in the heading refers to "Payment Plan ... commencing 1st October 2013" and under the sub-heading "Rental Amounts" refers, in relation to the Applicant, to $31,827.27. I have come to the view that particularly in respect of that part of the documentation, on a proper construction of the payment plan agreement, it should be read as referring to monthly rent of $31,827.27 as agreed to be paid for the entire 2012-2013 lease year and effectively as the agreed current market rent; in other words, such a term is part of the inferred intention in the agreement. Carter, The Construction of Commercial Contracts at [2-15], explains inferred intention thus:

"'Inferred intention', in relation to a contract, refers to the parties' intention in relation to matters on which they have expressed no intention. In relation to such matters, inferred intention is presumed to be the parties' actual intention"

1. In my opinion such a construction is called for by relevant law which might conveniently be presented by quoting, with references omitted, from the judgment of Allsop P in Franklins Pty Ltd v Metcash Ltd (2009) 76 NSWLR 603 at [19]:

"The essential character of the task of construction of commercial contracts can be seen in a number of authoritative decisions of the High Court, and of other courts authoritatively endorsed by the High Court. A commercial contract should be given a businesslike interpretation ... Thus, the nature and extent of the commercial aims and purposes of the agreement or parts thereof are part of the essential background circumstances: 'the genesis of the transaction, the background, the context, the market in which the parties are operating'... The need for a businesslike construction not only informs the nature and extent of the extrinsic material legitimately of assistance, but it also directs the approach to be taken to the ascription of meaning to the words used by the parties. The words should be given a construction so as 'to avoid ... [making] commercial nonsense or is shown to be commercially inconvenient'. This is not only a reflection of the place of the informing surrounding circumstances, it is also a requirement not to approach words in a business contact pedantically or in a manner prone to defeat the evident commercial purpose. They should be read 'fairly and broadly, without [the court] being too astute or subtle in finding defects'..."

Additionally, objective theory is to be applied in the determination of rights and liabilities in contract. As Gleeson CJ said in Australian Broadcasting Commission v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540 at 549: "...the general test of objectivity ... is of pervasive influence in the law of contract." In Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165 the High Court affirmed the principle of objectivity by which the rights and liabilities of the parties to a contract are determined:

"It is not the subjective beliefs or understandings of the parties about their rights and liabilities that govern their contractual relations. What matters is what each party by words and conduct would have led a reasonable person in the position of the other party to believe. References to the common intention of the parties to a contract are to be understood as referring to what a reasonable person would understand by the language in which the parties have expressed their agreement. The meaning of the terms of a contractual document is to be determined by what a reasonable person would have understood them to mean. That, normally, requires consideration not only of the text, but also of the surrounding circumstances known to the parties, and the purpose and object of the transaction."

I also add that in the payment plan, particularly in the opening section that I have referred to above, there is relevant ambiguity in the sense of language which is, in the context of rent beyond February 2013 or of current market rent, "ambiguous or susceptible of more than one meaning" as referred to by Mason J (as he then was) in Codelfa Constructions Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337 at 352 (cf Western Export Services Inc. v Jireh International Pty Ltd [2011] HCA 45).

1. If, contrary to my opinion, there were not such an express term, such a term would be appropriate to be implied in the payment plan agreement. I acknowledge that as Mason J said in Codelfa Constructions Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337 at 346 that "the Courts are slow to imply a term" but considering the summary of the grounds for the implication of a term in B.P. Refinery (Westernport) Pty Ltd v Hastings Shire Council (1977) 52 ALJR 20 at 26, cited by Mason J in Codelfa at 347, I am persuaded that such a term would be appropriate to be implied in the payment plan agreement. The grounds propounded in the B.P. Refinery case for the implication of a term are:

1) It must be reasonable and equitable;

2) It must be necessary to give business efficacy to the contract, so that no term will be implied if the contract is effective without it;

3) It must be so obvious that it goes without saying;

4) It must be capable of clear expression;

5) It must not contradict any express term of the contract.

On the basis of the material that I have discussed above I am satisfied that each of those grounds is satisfied.

1. In any event, given the events up to August 2013 that I have detailed above, I am of the opinion that there was a supplementary agreement as I have described it above, which would itself give rise to, or confirm, the existence of such a term in the contractual relationships between the parties. In my assessment, those events manifest a mutual intention in the Applicant and the Respondents to adopt a binding arrangement to the effect of such a term. Pertinent to this situation is what Allsop J (as he then was) said in Branir Pty Ltd v Owston Nominees (No.2) Pty Ltd (2001) 117 FCR 429 at [369]:

"...a number of authorities discuss the need not to constrict one's thinking in the formation of contract to mechanical notions of offer and acceptance. Contracts often, and perhaps generally do, arise in that way. They can also arise when business people speak and act and order their affairs in a way without necessarily stopping for the formalities of dotting i's and crossing t's or where they think they have done so. ... Sometimes this failure occurs because, having discussed the commercial essentials and having put in place necessary structural matters, the parties go about their commercial business on the clear basis of some manifested mutual assent, without ensuring the exhaustive completeness of documentation. In such circumstances, even in the absence of clear offer and acceptance, and even without being able (as one can here) to identify precisely when a contract arose, if it can be stated with confidence that by a certain point the parties mutually assented to a sufficiently clear regime which must, in the circumstances, have been intended to be binding, the court will recognise the existence of a contract. Sometimes this is said to be a process of inference or implication. For my part, I would see it as the inferring of a real intention expressed through, or to be found in, a body of conduct, including, sometimes, communications, even if it be the case that the parties did not consciously advert to, or discuss, some aspect of the relationship and say: 'and we hereby agree to be bound' in this or that respect. The essential question in such cases is whether the parties' conduct, including what was said and not said and including the evident commercial aims and expectations of the parties, reveals an understanding or agreement or, as sometimes expressed, a manifestation of mutual assent, which bespeaks an intention to be legally bound to the essential elements of a contract."

This sort of situation is discussed in Carter on Contract at [02-050], [02-060] and [02-070].

1. To the extent that the Applicant contends that Mr Richerdson had no authority on behalf of the Applicant to make any agreement concerning market rent, there seem to me to be two situations which require the rejection of such a contention. First, making any such agreement would have been within his general authority as referred to by Mr Gebara and as I have quoted above: "...to act on behalf of the CCS group including CCL in relation to negotiations with various suppliers and lessors." Secondly, his ostensible authority from the Applicant clearly enough extended to making such an agreement, consistently with the general principles particularly as referred to in Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451 especially at [36]; his job position and title and his involvements with the subject lease from 2010, particularly in relation to the sub-lease to MK Natural Therapy Pty Ltd in December 2011, the payment plan agreement itself and the exercise of the option in April 2013, point to his having been held out by the Applicant to have had authority to make on behalf of the Applicant an agreement with the Respondents concerning the actual amount of the rent in respect of the subject premises from 18 August 2012.

1. One of the submissions made by Mr Soltan on behalf of the Applicant is that any such agreement would be contrary to s7 of the Retail Leases Act which provides:

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

I see no such inconsistency. Here there was a provision in the lease "for rent to be changed to current market rent" (opening words of s19(1)) and the parties then made an agreement "as to what the actual amount of that rent is to be" (s19(1)(b)). What happened is thus expressly contemplated by s19. The agreement does not negate the Applicant's right to apply to the Tribunal for the appointment of a specialist retail valuer under s19(1A), rather the situation here is that s19(1)(b) applies to the agreement with the result that the occasion for such an appointment and for the Applicant to apply for that, does not arise.

1. With reference particularly to the words in the email from Mr Condell to Mr Richerdson of 16 October 2012 "If we can reach an arrangement, I will draft a more formal agreement for you to agree to", Mr Soltan submits that what was involved was a situation referred to in Masters v Cameron (1954) 91 CLR 353 at 360 as the third category, namely, "one in which the intention of the parties is not to make a concluded bargain at all, unless and until they execute a formal contract." That submission is contrary to Mr Soltan's position (and Mr Richerdson's) to the effect that while there is a dispute as to its extent, an agreement was made in respect of the payment plan. In any event, the agreement was, on my assessment, of the Masters v Cameron first category type being "one in which the parties have reached finality in arranging all the terms of their bargain and intend to be immediately bound to the performance of those terms, but at the same time propose to have the terms restated in a form which will be fuller or more precise but not different in effect." The parties carried the payment plan agreement into execution for the 2012-2013 lease year and it is not now to the point that a formal version of the agreement was not produced.

1. Mr Soltan also submits that:

"...clauses 5.13-5-15 stipulate the mode of reaching an agreement on the market rent at the review date of 18 August 2012. The Applicant and the Respondents must both sign a statement 30 days prior to the rent review date saying that they agreed on the market rent as provided in clause 5.14. There simply no such statement.

Clause 5.15 stipulates that if 'the rent is not agreed upon 30 days prior to the review date of 18 August 2012, then "the rent is to be' is to be determined by SRV appointed under clause 5.16 of the Lease. There was no agreement reached between the Applicant and the Respondents on the market rent 30 days before the rent review date on 18 August 2012."

Clauses 5.13 to 5.15 of the lease provide:

"5.13 The landlord of the tenant can inform the other in writing at least 60 days before the rent review date of the rent that the landlord or tenant thinks will be the current market rent at the review date.

5.14 If the landlord and the tenant agree on a new rent then that rent will be the new rent beginning on the rent review date and the landlord and the tenant must sign a statement saying so.

5.15 If the landlord and the tenant do not agree on the amount of the new rent 30 days before the rent review date, the current market rent will be decided by a valuer appointed under clause 5.16."

Significant facts to my mind are that the procedure there provided for is one for implementation prior to the rent review date, that in this case the rent review date was 18 August 2012 and that procedure was not implemented at any stage. I do not see that the non-implementation of that procedure in any way impinges on the payment plan agreement or the supplementary agreement.

1. The findings that I have made above concerning the payment plan agreement and the supplementary agreement are such that in my opinion the issue of estoppel would not arise. Nevertheless, out of caution, I will deal with that issue also. My conclusion is that if my findings concerning the payment plan agreement and the supplementary agreement be wrong, the Respondents' claims based on estoppel would succeed, not to the extent asserted in the fourth propounded reason, that the Applicant is estopped from seeking the appointment of a specialist retail valuer, but to the extent that the Applicant is estopped from disputing that there was an agreement of $31,827.27 per month as the rate of rent for the 2012-2013 lease year and as the relevant current market rent. I will explain, in comparatively short form, my reasons for this view.

1. It is contended on behalf of the Applicant that the claimed estoppel would be against the exercise of a statutory right and impermissible. For the reasons that I have given above for not accepting the contention that any agreement such as the payment plan agreement or the supplementary agreement would be contrary to s7 of the Retail Leases Act, I am of the opinion that the estoppel, as I have explained its extent, is not against the exercise of a statutory right. To repeat, I have found that in a situation where there was a provision in the lease "for rent to be changed to current market rent" as referred to in the opening words of s19(1), the parties made an agreement "as to what the actual amount of the rent is to be" as referred to in s19(1)(b). Thus, there is no negation sought of the Applicant's rights under the section, rather the situation here is that s19(1)(b) applies to the agreement with the result that the occasion for the appointment of a specialist retail valuer and for the Applicant to make an application under s19(1A), does not arise. I add that the Applicant relies in particular on Molotu Pty Ltd v Solar Power Pty Ltd (1989) 55 NSW ConvR 55-490 as authority that estoppel cannot stand in the face of a statutory right such as that afforded to the Applicant under s19. That case dealt with the Conveyancing (Vendor Disclosure and Warranty) Regulation 1986 which implied various warranties by a vendor in a contract for sale of real estate; it gave a purchaser a right of rescission if there were, among other things, insufficient disclosure of the local government planning situation of the property; while the Court acknowledged the principle that there can be no estoppel in the face of a statute, it held that there could be a waiver of such a right of rescission and that such a waiver did not conflict with that principle; similarly, in my opinion, the making of an agreement as to the actual amount of the rent in the present case, or an estoppel in respect of such an agreement, could not, as I have sought to explain, conflict with that principle; both situations relate to the manner of exercise of statutory rights, not to the negation of those rights.

1. The Respondents rely both on conventional estoppel and promissory estoppel. The elements in those estoppels were, I think, conveniently and sufficiently summarised by Brereton J in Moratic Pty Ltd v Gordon [2007] NSWSC 5 by reference to his earlier decision in Waterman v Gerling Australia Insurance Company Pty Ltd (2005) 65 NSWLR 300:

"...In equitable promissory estoppel, it is necessary for a plaintiff to establish (1) that it has adopted an assumption as to the terms of a legal relationship with the defendant; (2) that the defendant has induced or acquiesced in the plaintiff's adoption of that assumption; (3) that the plaintiff has acted in reliance on its assumption; (4) that the defendant knew or intended that the plaintiff so act; and (5) that it will occasion detriment to the plaintiff if the assumption is not fulfilled. ... In common law conventional estoppel, it is necessary for a plaintiff to establish (1) that it has adopted an assumption as to the terms of its legal relationship with the defendant; (2) that the defendant has adopted the same assumption; (3) that both parties have conducted their relationship on the basis of that mutual assumption; (4) that each party knew or intended that the other act on that basis; and (5) that departure from the assumption will occasion detriment to the plaintiff ..."

1. On the basis of the matters I have written about above, I am satisfied on the probabilities that:

(1)   Both parties adopted an assumption as a term of their legal relationship to the effect that the monthly rate of rent would be $31,827.27 for the 2012-2013 lease year and the relevant current market rent.

(2)   The Applicant induced or acquiesced in the Respondents' adoption of that assumption as an aspect of the Applicant's endeavours to cope with its indebtedness to the Respondents in respect of the subject lease.

(3)   The parties conducted their relationships on the basis of that mutual assumption and the Applicant knew or intended that the Respondents were so acting.

(4)   Departure from that assumption would occasion detriment to the Respondents, namely, liability to a belated valuation of the current market rent at 18 August 2012, to the possible refund of rent paid for the 2012-2013 lease year and to being subjected to an option lease possibly at a lower rental.

In those circumstances, I am satisfied that an estoppel to the extent that I have indicated would have arisen.

1. For completion, I will deal also with the first and third of the Respondents' propounded reasons, again in comparatively short form.

1. The first propounded reason is that "Section 19 does not apply to the retrospective determination of rent that has been paid under the lease, only to the prospective determination of rent yet to be paid." In support of that, it is submitted on behalf of the Respondents that:

"There is no power conferred by s19(1) allowing the Tribunal to appoint a specialist retail valuer to retrospectively re-determine the rental that should have been paid for the period of the Lease that has already past and pursuant to which, or during which rent at a particular amount has already been paid. The Lessee's present application does not seek the appointment of a specialist retail valuer to determine what the rent 'is to be' but rather seeks a determination as to what it says the rent should have been for the last year of the Lease from 18 August 2012 to 18 August 2013, already past."

On behalf of the Applicant it is contended that there was no agreement as to the current market rent and in particular that, first, there was no agreement concluded by offer and acceptance and secondly, the invoicing of the monthly rent during the 2012-2013 lease year at the rate of $31,827.27 was merely "automatically generated by the (Applicant's) computer system." As I have sought to explain above in relation to my findings concerning the payment plan agreement and the supplementary agreement, I am of the view that an agreement between the parties as to the current market rent was achieved. The monthly rent was not only invoiced by the Respondents at $31,827.27, it was effectively paid by the Applicant at that figure. It is pointed out on behalf of the Applicant that s19(1A) which provides for this type of application includes no specification of a time with which the application may be brought. In my opinion an application might be made for the appointment of a specialist retail valuer even after the current market rent review date if there were then an extant dispute as to the current market rent on and from the current market rent review date. By reason of the matters that I have referred to above in relation to the payment plan agreement and the supplementary agreement, I am of the view that there was no such extant dispute here and that the occasion for the Applicant's application did not arise or had passed.

1. The third of the propounded reasons is that s19 does not apply at all given that the Lessee seeks to have the final year's rent determined prior to the execution of the option to renew in circumstances where the time periods for the determination of rent for future option periods set out in s32 of the Act have not been complied with. Section 32 relates to an option to renew or extend a lease at current market rent and includes in such a lease a provision to the effect including:

"(a) the lessee is entitled to request a determination of the current market rent at any time within the period that begins 6 months before and ends 3 months before the last day on which the option may be exercised under the lease, but may not make such a request if the lessor and the lessee have already agreed as to what the actual amount of the rent is to be."

It is submitted in particular on behalf of the Respondents:

"To allow the Lessee to utilise s19 to retrospectively re-determine the rent owing for the last year of the Lease which would then determine the amount of rent payable for the first year of the option (that amount plus 5% in Item 13 of the Lease), would cut across s32(1)(a), by in effect allowing this Lessee to have the current market rent applicable to the option period determined by an application made several months after the last date for the exercise of the option."

I am not able to accept this submission for the reason that, as is submitted on behalf of the Applicant, the option in the subject lease does not fall within the terms of s32. As I have noted above "current market rent" is nominated in item 16 of the subject lease as the method of rent review at 18/08/2012 and (item 13) for the rent from the commencement of the further (option) period, that is 18/08/2013, to the first rent review date to be "the amount of the rent payable in the final year of the initial lease term plus 5% of that rent, and being exclusive of GST." Thus, there is not, as required by s32, "a retail shop lease which provides an option to renew or extend the lease at current market rent".

1. I add that I was referred by the parties, particularly the Applicant, to a number of other cases, text references and other documents. I have considered all that material but do not see that of it any affects these reasons to an extent that it needs to be specifically mentioned.

1. In the result I find that the first, second, and fourth of the Respondents' propounded reasons, but not the third, have been established. In these circumstances, the motion brought by the Respondents is upheld and the Application for Original Decision is dismissed.

1. In their respective written submissions each of the Applicant and the Respondents referred to the issue of costs but the hearing was limited to two hours and there was no opportunity for that issue to be addressed then. The parties should now be given the opportunity to deal with the issue whether the Applicant should be ordered to pay the Respondents' costs of the proceedings and I will direct a regime giving an opportunity for that issue to be addressed by further written submissions and then to be decided by the Tribunal on the papers.

1. The Tribunal ORDERS that:

1) The Application for Original Decision is dismissed.

2) The issue of costs is reserved.

The Tribunal DIRECTS that:

3) Any further submissions by the Respondents as to costs are to be filed and served within 14 days of the publication of this decision and any submissions in response by the Applicant are to be filed and served within 14 days thereafter.

4) The issue of costs will then be dealt with by the Tribunal on the papers.

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Decision last updated: 26 November 2013