Diakou Nominees Pty Ltd v Gouger Street Pty Ltd
[2017] SASC 72
•26 May 2017
SUPREME COURT OF SOUTH AUSTRALIA
(Civil)
DIAKOU NOMINEES PTY LTD (ACN 007 890 673) v GOUGER STREET PTY LTD (ACN 156 309 116) & ORS
[2017] SASC 72
Judgment of The Honourable Justice Stanley
26 May 2017
STATUTES - ACTS OF PARLIAMENT - INTERPRETATION - INTERPRETATION ACTS AND PROVISIONS - PRESERVATION OF RIGHTS, LIABILITIES AND LEGAL PROCEEDINGS ON AMENDMENT, REPEAL, LAPSING ETC OF ACT OR PROVISION
TAXES AND DUTIES - LAND TAX - WHO ARE LIABLE AND IN RESPECT OF WHAT LANDS - LESSEES - VALIDITY AND CONSTRUCTION OF AGREEMENTS AS TO PAYMENT OF TAX
STATUTES - ACTS OF PARLIAMENT - OPERATION AND EFFECT OF STATUTES - RETROSPECTIVE OPERATION - AS REGARDS VESTED RIGHTS, PAST TRANSACTIONS, NEW RIGHTS, NEW LIABILITIES
This matter concerns the proper construction of a lease between the plaintiff and the first defendant. The plaintiff is the lessor and the first defendant is the lessee following several assignments. The second defendant is the firm who drew up the lease. The issues raised concern the construction of the Retail and Commercial Leases Act 1995 as amended and its impact upon the proper construction of the lease between the plaintiff and the first defendant.
This Judgment determines a preliminary question, namely whether upon the proper construction of the lease, the Act and the Regulations, the Retail and Commercial Leases Act 1995 applies to the lease on and from 4 April 2011 or as renewed from 1 September 2011.
The Retail and Commercial Leases Act 1995 was amended by the Retail and Commercial Leases Variation Regulations 2010 commencing on 4 April 2011. Section 4 of the Act provides that where the annual rent under a retail shop lease exceeds the prescribed amount, the lease is not bound by the constraints of the Act. The regulations prescribed an amended amount of $400,000 for the purposes of section 4 of the Act. Prior to this amendment the prescribed amount was $250,000. The initial annual rent prescribed by the lease was $250,500. Pursuant to the then prescribed amount in section 4 the Act did not apply to the lease. At all times after 4 April 2011 the annual rent pursuant to the lease has been less than $400,000. Issues arise as to what affect section 4 of the Act has on the operation of the lease. Clause 4.10 of the lease governs the terms of review of annul rent. Clause 4.10 is in conflict with s 22 of the Act, should it operate on the lease insofar as it confers a right upon the lessor to be paid annual and five-yearly increases in rent with no ratchet down. Clause 2.2 provides for the recovery of outgoings, of which “land tax” is included by the definition of outgoings in Clause 1.1. Section 30 of the Act provides that the lessor shall not be able to require payment or reimbursement of land tax from the lessee.
Whether the Act applied to the lease once the annual rent payable fell below the threshold prescribed by s 4(2)(a).
The lease was first entered into on 1 September 2006 for a term of 5 years expiring on 31 August 2011. Under the lease the tenant has six rights of renewal each for a further 5 year term. The first right of renewal was exercised on 1 September 2011 for a further 5 year term. Whether exercising a right to renewal amounted to a new lease or the extension of a pre-existing lease.
Held, per Stanley J:
1. The Act has been amended by regulation 4 of the Retail and Commercial Leases Variation Regulations 2010 (SA) within the meaning of s 16 of the AIA (at [34]).
2. In amending s 4(2)(a) the Parliament manifested plainly a legislative intention for the Act to apply to retail shop leases from the time the annual rental payable pursuant to a lease no longer exceeded the prescribed amount (at [52]).
3. The exercise of an option to renew is considered by the common law to be the entry into a new lease and not the extension of a pre existing lease (at [63]).
4. The lease was subject to the operation of the Retail and Commercial Leases Act 1995 (SA) on and from 4 April 2011, and as renewed from 1 September 2011, with the consequence that:
a. Section 22 operates upon the September 2011 rent review, which is the subject of Clause 4.10(a) of the lease; and
b. Section 30 operates to preclude Diakou from recovering payment for or reimbursement for land tax levied on and from 4 April 2011 (at [67]).
Retail and Commercial Leases Variation Regulations 2010 (SA) (No 200 of 2010) reg 4; Retail and Commercial Leases Act 1995 (SA) s 3, s 4, s 5, s 6, s 12(1), s 20A, s 20B, s 20C, s 22, s 30, s 80, s 81; Acts Interpretation Act 1915 (SA) s 15; Landlord and Tenant Act 1935 (SA) Part 4, referred to.
WST Pty Ltd v GRE Pty Ltd & Anor (2012) 115 SASR 216; NZI Insurance Australia Ltd v Baryzcka (2003) 85 SASR 497; Goldedge Holdings Pty Ltd v Liquor and Gambling Commissioner & Anor (2014) 121 SASR 30; Mercantile Credits Limited v The Shell Company of Australia Ltd (1975-1976) 136 CLR 326, applied.
Ilic v City of Adelaide & Anor (2010) 107 SASR 139, not followed.
Adco Constructions Pty Ltd v Goudappel & Anor (2014) 254 CLR 1; Re F (1989) 51 SASR 141; Maxwell v Murphy (1957) 96 CLR 261; Chang and Another v Laidley Shire Council (2007) 234 CLR 1; Coleman v Shell Co of Australia (1943) 45 SR (NSW) 27; Kraljevich v Lake View & Star Limited (1945) 70 CLR 647; Australian Education Union v General Manager of Fair Work Australia and Others (2012) 246 CLR 117, discussed.
Attorney-General (Qld) v Australian Industrial Relations Commission & Ors (2002) 213 CLR 485; Debonair Nominees Pty Ltd v J & K Berry Nominees Pty Ltd (2000) 77 SASR 261; Australand Corporation (Qld) Pty Ltd v Johnson [2008] 1 Qd R 203, considered.
DIAKOU NOMINEES PTY LTD (ACN 007 890 673) v GOUGER STREET PTY LTD (ACN 156 309 116) & ORS
[2017] SASC 72Civil
STANLEY J:
Introduction
On 1 September 2006 the Talbot Hotel Group Pty Ltd as lessee and Diakou Nominees Pty Ltd (Diakou) as lessor entered into a lease of commercial premises in Gouger Street, Adelaide, known as the Talbot Hotel. The terms of the lease in the memorandum of lease provide for a term of five years commencing on 1 September 2006 and options for six rights of renewal each for a further five year term. The lease provided a rent of $250,500 per annum (exclusive of GST). The lease also provided that on each fifth anniversary of the commencement date the annual rent shall be the greater of current market rent as determined in accordance with clause 4.10(a)(i) by a valuer acting as an expert and the rent prior to the review date, increased by four per cent.
The lease was prepared by the lessor’s solicitors, Kelly & Co.
On 8 July 2007 the lease was assigned by the Talbot Hotel Group Pty Ltd to Schillvest Pty Ltd.
Section 4 of the Retail and Commercial Leases Act 1995 (SA) (the Act) provides for its application. Prior to 4 April 2011 s 4(2)(a) provided that the Act did not apply to a retail shop lease if the rent payable under the lease exceeded $250,000 per annum.
It is common ground between the parties that on 1 September 2006 when the lease commenced the Act did not apply to the lease because the annual rent payable at that time exceeded $250,000.
On 4 April 2011 the Retail and Commercial Leases Variation Regulations 2010 (SA) commenced, amending the Retail and Commercial Lease Regulations 2010 (SA) (the Regulations), with the effect that the amount of $400,000 was prescribed for the purposes of s 4(2)(a) of the Act.
As at 4 April 2011 and at all times thereafter, the rent payable under the lease has been an amount less than $400,000.
The first right of renewal was exercised and the lease was renewed for a five year term commencing on 1 September 2011.
On 13 June 2012 receivers and mangers were appointed to Schillvest Pty Ltd. On 2 July 2013 the lease was assigned by the receivers and managers of Schillvest Pty Ltd to Gouger Street Pty Ltd (Gouger Street) with the consent of Diakou. Gouger Street commenced occupation of the Talbot Hotel on 2 July 2013.
This matter comes before me for the determination of a preliminary question, namely, whether upon the proper construction of the lease, the Act and the Regulations, the Act applies to the lease on and from 4 April 2011 or as renewed from 1 September 2011.
The preliminary issues arises in the context of a dispute between the parties as to two questions. First, whether s 22 of the Act applies either on and from 4 April 2011 or 1 September 2011 to render unenforceable clause 4.10 of the lease insofar as it provides for a rent review as at 1 September 2011 to the higher of current market rent or a four per cent increase and insofar as it prevents a decrease in the rent. Second, whether s 30 of the Act applies either on and from 4 April 2011 or 1 September 2011 to prevent Diakou, as lessor, requiring Gouger Street to pay land tax or reimburse it for the payment of land tax.
The issue for determination is whether the Act applied to the lease once the annual rent payable fell within the threshold amount prescribed by s 4(2)(a).
Application of the Act
Section 4 of the Act provides for its application. It is in the following terms:
(1)This Act applies to a retail shop lease if the premises to which the lease applies consist of a retail shop or a retail shop together with an adjacent dwelling.
(2) However, this Act does not apply to a retail shop lease if—
(a) the rent payable under the lease exceeds $250 000 per annum or, if a greater amount is prescribed by regulation, that other amount; or
(ab) the lease is for a term of 1 month or less; or
(b) the right of occupation arises under—
(i) an agreement for the sale and purchase of premises; or
(ii) a mortgage; or
(iii)a scheme under which a group of adjacent premises is owned by a company and the premises comprising the group are let by the company to persons who jointly have a controlling interest in the company; or
(c) the lessee is—
(i) a public company or a subsidiary of a public company; or
(ii) an ADI; or
(iii)a body corporate authorised by law to carry on the business of insurance; or
(iv)the Crown or an agency or instrumentality of the Crown in right of the State, another State or Territory, or the Commonwealth; or
(v)a municipal or district council or other authority with powers and functions of local government.
(3)The regulations may exclude from the application of this Act (either conditionally or unconditionally) a specified class of retail shop leases.
As can be seen, s 4(1) provides that the Act applies to a retail shop lease if the premises to which the lease applies consist of a retail shop or a retail shop together with an adjacent dwelling. Section 3 defines “retail shop” by reference to retail activity being conducted at business premises, subject to exclusion by regulation, and “retail shop lease” is defined by reference to an agreement under which a person grants to another a right to occupy a “retail shop”. However, section 4(2)(a) provides that the Act does not apply to a retail shop lease if the rent payable under the lease exceeds $250,000 per annum or, if a greater amount is prescribed by regulation, that other amount. Section 4(2) provides other exclusionary conditions. For example, the Act does not apply if the lease is for a term of one month or less or the lessee is a public company, an insurance company, the Crown or one of its instrumentalities, or a local government body. The Regulations may exclude from the application of the Act a specified class of retail shop lease. In this case there is no dispute that the subject premises fall within the definition of a “retail shop” and the subject lease, both at its commencement and upon its renewal, falls within the definition of “retail shop lease”.
Prescribed threshold
The lease commenced to operate on 1 September 2006. The rent prescribed by the lease was $250,500 per annum and accordingly the lease was excluded from the operation of the Act at that time.[1] With effect from 4 April 2011 the Regulations made pursuant to the Act were amended by the Retail and Commercial Leases Variation Regulations 2010 (SA) (Variation Regulations) to provide, inter alia, that “[f]or the purposes of s 4(2)(a) of the Act, the amount of $400,000 per annum is prescribed (and, consequently, the Act does not apply to a retail shop lease if the rent payable under the lease exceeds $400,000 per annum)”. This was the first time the threshold amount prescribed in s 4(2)(a) of the Act was increased by regulation. Neither the Regulations nor the Variation Regulations contain any transitional provisions.
[1] As at 1 September 2006 s 4(2)(a) relevantly provided that the Act did not apply to a retail shop lease if the rent payable under the lease exceeded $250,000 per annum.
As at 4 April 2011, the rent was less than $400,000 per annum. When the lease was renewed on 1 September 2011 the rent remained less than $400,000 per annum.
Other relevant provisions of the Act
Pursuant to s 5 of the Act it operates despite the provisions of a lease. A provision in a lease is void to the extent it is inconsistent with the Act.
Section 6 prescribes when the lease is entered into.
Section 12(1) provides that a lessee is to be given a disclosure statement for a lease before it is entered into or renewed.
Section 20B provides for a minimum term of five years for a lease.
Section 22 provides various restrictions on the adjustment of base rent of a retail shop lease.
Section 30 prohibits a provision in a retail shop lease requiring a lessee to pay land tax or reimburse the lessor for the payment of land tax, however, the lessor’s liability for land tax may be taken into account in the assessment of rent.
Section 80 provides that the Governor may make regulations for the purposes of the Act.
Section 81 provides:
(1) Part 4 of the Landlord and Tenant Act 1936 (the former legislation) is repealed.
(2) However—
(a) the former legislation continues to apply, subject to modifications prescribed by regulation, to retail shop leases entered into before the commencement of this Act (including such a lease that is renewed after the commencement of this Act under a right or option of renewal conferred before the commencement of this Act); but
(b) if the retail shop lease creates a periodic tenancy, this Act applies to the lease as from the beginning of the first period after the first anniversary of the commencement of this Act as if there were a novation of the lease on that date.
(3) The regulations made for the purposes of subsection (2)(a) may provide that specified provisions of this Act apply to a retail shop lease entered into before the commencement of this Act.
…
The relevant terms of the lease
The Memorandum of Lease contains, inter alia, the following terms:
(1)By clause 4.9, conferring a right or option on the lessee, (and the assignee of the lessee on the terms of the lease) to a succession of six further terms of five years;
(2)By clause 4.9, imposing an obligation upon the lessor to grant such further terms in the event of the exercise of the option;
(3)By clause 4.10, conferring a right upon the lessor to be paid annual and five-yearly increases in rent (with no ratchet down);
(4)By clause 4.10, imposing an obligation upon the lessee to pay such increased annual rent; and
(5)By clause 2.2, conferring a right on the lessor to receive payments from the lessee on account of land tax and an obligation on the lessee to pay land tax.
If the Act applies to the lease, s 22(3) renders void clause 4.10 of the lease and s 30 of the Act prohibits clause 2.2 of the lease at least to the extent it provides for the recovery of the amount of land tax paid by the lessor. This has significant commercial consequences for the parties to the lease.
Submissions of the parties
Gouger Street submits that the Act applies to all post-1995 retail shop leases except whenever the annual rent payable from time to time under such a lease exceeds the threshold as prescribed from time to time. Once the prescribed amount for the purpose of s 4(2)(a) of the Act increased to $400,000 per annum the Act applied to the lease.
In the alternative, Gouger Street submits that the exercise of the option to renew the lease brought a new lease into being on 1 September 2011 and the Act applied to that new lease which came into existence after the increase in the threshold for the purpose of s 4(2)(a) commenced on 4 April 2011.
Diakou and Kelly & Co submit that the Parliament did not intend the Act subsequently to apply to the lease in circumstances where the Act did not apply to the lease at its commencement and the parties to the lease had acquired existing rights and obligations under the lease which were not to be interfered with by a subsequent amendment to the Act increasing the prescribed sum for the purpose of s 4(2)(a). They submit that the parties to the lease entered into a commercial arrangement whereby rights and obligations in relation to payment of rent from time to time and other obligations such as land tax were created which were potentially binding for a period of 35 years. Both the common law and s 16 of the Acts Interpretation Act 1915 (SA) (AIA) prevent the amendment effected by the Variation Regulations from retrospectively altering the existing rights and obligations of the parties created by the lease.
They submit that there is no basis to conclude that the Act should apply to any renewal or extension of the lease after 4 April 2011 on the basis that this is a new lease. They submit that the relevant issue is not whether a new term or even a new lease has come into being after 4 April 2011 but whether the parties had vested rights and obligations, whether absolute or contingent, in existence prior to 4 April 2011 and whether the Act evinces an intention to interfere with such rights and obligations.
Has the Act been amended when a regulation prescribes a greater amount than $250,000 in s 4(2)(a)?
Diakou and Kelly & Co submit that the Act was amended by regulation 4 of the Retail and Commercial Leases Variation Regulations 2010 (SA) increasing the prescribed sum pursuant to s 4(2)(a) to $400,000. They submit s 16 of the AIA applies to that the amendment. As a result the amendment to s 4(2)(a) increasing the prescribed sum does not affect the right and interest created and exercisable under the lease prior to the amendment of s 4(2)(a). Accordingly, they submit the Act cannot apply to the lease subsequent to the amendment increasing the prescribed sum to $400,000.
Gouger Street submits that s 16 of the AIA has no application in this case as its operation is conditioned upon the repeal or amendment or expiry of an Act. In this case there is no question of repeal or expiry. It submits that the Act has not been amended. It submits that the making of the regulation to increase the prescribed amount to $400,000 per annum is not an amendment of the Act for the purpose of s 16 of the AIA. It submits that the prescribed sum in s 4(2)(a) is merely a factum or integer of the application of the Act. The making of a regulation pursuant to s 4(2)(a) prescribing a greater amount than $250,000 is indistinguishable from a provision which fixed the prescribed amount at a specified amount as increased annually by the consumer price index.
I do not accept Gouger Street’s submission.
Section 4(2)(a) is an example of a Henry VIII clause. A Henry VIII clause is a clause in an Act of Parliament which enables the Act to be amended by subordinate or delegated legislation. The name of the clause is derived from that monarch’s extensive use of such provisions during his reign.[2] Bennion notes that delegated power is often given to amend monetary limits in Acts of the UK Parliament.[3] This is an example of its use in legislation enacted by the Parliament of South Australia. The legal force of the prescription resides in the Act.[4] An amendment made by the use of such a power as is conferred by s 4(2)(a) is as effective as if made directly by an amendment to the Act itself. In Ilic v The City of Adelaide and Anor[5] the Court considered that regulation of a similar kind to that which operates pursuant to s 4(2)(a) has an administrative character. In my view, the regulation involves the delegation of legislative power so as to amend the Act. In these circumstances I consider the Act has been amended by regulation 4 of the Retail and Commercial Leases Variation Regulations 2010 (SA) within the meaning of s 16 of the AIA.
[2] Delegated Legislation in Australia, 3rd ed. Pearce and Argument [1.8] and [1.20]. See also Ilic v City of Adelaide and Anor [2010] SASC 139 at [76]; (2010) 107 SASR 139 at 161.
[3] Bennion, Statutory Interpretation, 4th ed, p 200.
[4] Ilic v City of Adelaide and Anor [2010] SASC 139 at [78]; (2010) 107 SASR 139 at 162.
[5] [2010] SASC 139 at [78]; (2010) 107 SASR 139 at 162.
Retrospectivity
There is a canon of construction or presumption that legislation does not intend to alter or affect, retrospectively, existing rights and obligations of persons subject to that legislation. In Maxwell v Murphy,[6] Dixon CJ said:
[6] (1957) 96 CLR 261 at 267.
The general rule of the common law is that a statute changing the law ought not, unless the intention appears with reasonable certainty, to be understood as applying to the facts or events that have already occurred in such a way as to confer or impose or otherwise affect rights or liabilities which the law had defined by reference to the past events.
That principle is enshrined in s 16(1) of the AIA[7] which relevantly provides:
Where an Act is repealed or amended ... then, unless the contrary intention appears, the repeal, amendment ... does not –
(a)revive anything not in force or existing at the time the repeal, amendment ... takes effect; or
(b)affect the operation of the repealed, amended ... Act or enactment, or alter the effect of the doing, suffering or omission of anything, prior to the repeal, amendment ...; or
(c)affect any right, interest, title, power or privilege created, acquired, accrued, established or excisable ... prior to the repeal, amendment ...; or
(d)affect any duty, obligation, liability ... imposed, created or incurred, ... prior to the repeal, amendment ...;[8]
[7] Adco Constructions Pty Ltd v Goudappel & Anor [2014] HCA 18 at [27]; (2014) 254 CLR 1 at 15; see also Re F (1989) 51 SASR 141 per King CJ at 143.
[8] Adco Constructions v Goudappel & Anor [2014] HCA 18 at [27]; (2014) 254 CLR 1 at 15.
As was said in Chang and Anor v Laidley Shire Council,[9] “retrospectivity” is a word that is not always used with a constant meaning. Accordingly, it is important to identify the statutory provisions which are said to be given “retrospective” effect and to identify precisely the respect or respects in which they are being given that effect. The presumption that a statute does not, absent clear intention, operate retrospectively is understood to mean that it will not provide that at some date prior to its enactment the law should be taken to have been that which it was not. As Fullagar J said in Maxwell v Murphy:[10]
I think that the word “retrospective” has acquired an extended meaning in this connexion. It is not synonymous with “ex post facto”, but is used to describe the operation of any statute which affects the legal character, or the legal consequences, of events which happened before it became law.
[9] [2007] HCA 37 at [111]-[113]; (2007) 234 CLR 1 at 32-33.
[10] (1957) 96 CLR 261 at 285.
Interference with existing rights does not make a statute retrospective. Many if not most statutes affect existing rights.
In Coleman v Shell Co of Australia,[11] Jordan CJ said:
[An Act] is not retrospective because it interferes with existing rights. Most Acts do. There is no presumption that interference with existing rights is not intended; but there is a presumption that an Act speaks only as to the future ...
Upon a consideration of the authorities, I think that, as regard any matter or transaction, if events have occurred prior to the passing of the Act which have brought into existence particular rights or liabilities in respect of that matter or transaction, it would be giving a retrospective operation to the Act to treat it as intended to alter those rights or liabilities, but it would not be giving it a retrospective operation to treat it as governing the future operation of the matter or transaction as regards the creation of further particular rights or liabilities.
[11] (1943) 45 SR (NSW) 27 at 30-31.
In Kraljevich v Lake View & Star Limited,[12] Dixon J (as he then was) said:[13]
The presumptive rule of construction is against reading a statute in such a way as to change accrued rights the title to which consists in transactions passed and closed or in facts or events that have already occurred. In other words, liabilities that are fixed, or rights that have been obtained, by the operation of the law upon facts or events for, or perhaps it should be said against, which the existing law provided are not to be disturbed by a general law governing future rights and liabilities unless the law so intends, appears with reasonable certainty.
[12] (1945) 70 CLR 647.
[13] (1945) 70 CLR 647 at 652.
In AEU v Fair Work Australia,[14] French CJ, Crennan and Kiefel JJ said that it is to be assumed that in enacting a statute which falsifies retrospectively existing legal rules upon which people have ordered their affairs, exercised their rights and incurred liabilities and obligations, the Parliament will use clear language to effect that result. They said:[15]
[14] Australian Education Union v General Manager of Fair Work Australia and Ors [2012] HCA 19 at [30]; (2012) 246 CLR 117 at 134-135.
[15] Australian Education Union v General Manager of Fair Work Australia and Ors [2012] HCA 19 at [31]-[32]; (2012) 246 CLR 117 at 135-136.
Consistently with its underlying rationale, the resistance of the common law to construing statutes as taking effect before the dates of their enactment is graduated according to the extent of their propounded effects. In RS Howard & Sons Ltd v Brunton, Griffith CJ said:
"it is a settled rule of construction of Statutes that a law is not to be construed as retrospective in its operation unless the Legislature has clearly expressed that intention, and a further rule that it is not to be construed as retrospective to any greater extent than the clearly expressed intention of the Legislature indicates."
That graduated response was also reflected in the quotation by Lord Mustill in L'Office Cherifien from the judgment of Staughton LJ in Secretary of State for Social Security v Tunnicliffe:
"It is not simply a question of classifying an enactment as retrospective or not retrospective. Rather it may well be a matter of degree – the greater the unfairness, the more it is to be expected that Parliament will make it clear if that is intended."
In Attorney-General (NSW) v World Best Holdings Ltd Spigelman CJ referred to the judgments of Staughton LJ and Lord Mustill and said:
"This approach requires the court to determine the scope and degree of the unfairness or injustice that is applicable in the particular case. The greater the unfairness or injustice, the less likely it is that Parliament intended the Act to apply. Where Parliament has used general words the courts will apply the well established technique of reading them down."
While "fairness" and "justice" denote values underlying the relevant common law principles, it is neither necessary nor desirable, as a general rule, that the task of construction be mediated by broad evaluative judgments invoking that terminology. They carry the risk that the courts may then exceed their proper constitutional function. It is sufficient to focus upon the constructional choices which are open on the statute according to established rules of interpretation and to identify those which will mitigate or minimise the effects of the statute, from a date prior to its enactment, upon pre-existing rights and obligations.
[Footnotes omitted.]
When an Act is amended, the effect of the amendment upon existing rights and liabilities is determined by the meaning of the statute. The common law developed rules or canons of statutory construction as an aid to discovering that meaning. Those rules or canons are enshrined in the AIA. Those rules or canons are subject to any contrary intention evinced with sufficient clarity in the statute. While those rules distinguish between retrospective and prospective operation of the statute, that distinction is not always clear-cut. The terms “retrospective” and “prospective” may often be a convenient shorthand but, in a given case, it may be necessary to identify more precisely the particular application of the amendment to the statute in question.[16]
[16] Attorney-General (Qld) v Australian Industrial Relations Commission & Ors [2002] HCA 42 at [6]; (2002) 213 CLR 485 at 492.
Consideration
The preliminary question to be decided gives rise to a constructional choice in the interpretation of s 4(2)(a). The construction of s 4(2)(a) is to be decided by reference to the text, context and purpose of the provision.[17]
[17] Australian Educatino Union v General Manager of Fair Work Australia and Ors [2012] HCA 19 at [27]; (2012) 246 CLR 117 at 134.
The constructional choice is whether or not in enacting s 4(2)(a) the legislature intended that where the Act did not apply initially to a lease because the annual rental exceeded the prescribed threshold, it would subsequently apply to the lease if the annual rental did not exceed the threshold. This could occur where the threshold was increased by regulation to an amount greater than the annual rental payable under the lease or the annual rent decreased.
The Act operates prospectively.[18] Section 81 is a transitional provision which provides that Part 4 of the Landlord and Tenant Act 1936 (SA) continues to apply to retail shop leases entered into before the commencement of the Act including a lease that is renewed after the commencement of the Act under a right or option of renewal conferred before the commencement of the Act.
[18] Debonair Nominees Pty Ltd v J & K Berry Nominees Pty Ltd [2000] SASC 244 at [32]; (2000) 77 SASR 261 at 269.
The terms of s 4 are instructive. Section 4(1) relevantly provides that the Act applies to a retail shop lease if the premises to which the lease applies consist of a retail shop. Section 4(2) excludes from the application of the Act identified categories of leases that would otherwise fall within the operation of s 4(1). In enacting s 4(2)(a) the Parliament intended that the Act would not apply to certain retail shop leases. Specifically the Act would not apply if the rent “payable” under the lease exceeded $250,000 per annum or, if a greater amount is prescribed by a regulation, that other amount. Apart from leases excluded because the annual rental payable exceeds the prescribed sum, by s 4(2)(c) Parliament has excluded certain leases on the basis of the status of the lessee. However, during the term of the lease the status of a lessee may alter so that the lessee may become or cease to be within the prescribed exclusions. It can be seen that in enacting s 4(2), the Parliament intended that the Act might apply or not apply to a particular lease pro tempore. The subject matter of the Act is the rights and liabilities of the parties to a retail shop lease. The Act seeks to regulate the commencement, the performance and the renewal of such leases. It is to be expected that the relationship of parties to a lease will change over time. In these circumstances, the Parliament intended that the Act would continue to speak to the particular factual matrix in existence over the life of the lease. This supports a construction that would not exclude the application of the Act for all time to a lease on the basis that s 4(2)(a) operated at the time the lease was entered into to exclude its application. Conversely, it supports a construction that the Act would not apply where during the life of the lease the annual rental came to exceed the prescribed amount.
There are other features of the text and context of the statutory scheme which support this construction. The text of s 4(2)(a) addresses the “rent payable under the lease”. That is to be understood as a reference to the rent that becomes due and payable in accordance with the terms of any retail shop lease. The expression “payable” refers to the amount to be paid from time to time during the term of the lease, which amount may, and in the usual commercial experience of retail shop leases, does change over time. The use of the expression “payable” is not to be confined to a reference to the rent fixed at the commencement of the lease. The reference is to rent calculated annually. The expression “payable” is ambulatory. It is referable to the rent payable from time to time during the term of the lease. If the Parliament had intended to confine the test for the application of the Act referable solely to the rent payable at the commencement of the lease, it could have said so expressly. The failure to do so can be contrasted with the provisions of s 81(2). Further, the terms of s 4(2)(a) evince an intention on the part of the legislature that the prescribed threshold for the application of the Act by reference to annual rental might increase from time to time. The application of the Act which can override the provisions of a retail shop lease is subject to the will of the executive which can increase the threshold amount from time to time. There is a statutory intimation that the application of the Act will be subject to variation from time to time in accordance with any regulation made with respect to s 4(2)(a). The possibility of the threshold amount increasing at any time means the Act might not apply to a lease at its commencement if the annual rental exceeded the prescribed threshold but come to apply to a lease if over the term of the lease the threshold increased to an amount exceeding the annual rental payable under the lease. Alternatively, the Act could apply to a lease initially because the annual rental payable does not exceed the prescribed amount but over time the Act will cease to apply if the annual rental increases to a sum in excess of the prescribed amount. In the further alternative, the Act could again apply to the lease if the prescribed amount is increased to an amount which exceeds the amount payable under the lease.
A consideration of the purpose of the Act also supports this construction. The purpose of the legislation is the protection of the lessees of retail shop leases. The provisions of the Act operate to render void provisions of leases that are contrary to provisions of the Act. Examples are s 22(3) which renders void clause 4.10 of the lease and s 30 which precludes a provision such as clause 2.2 of the lease insofar as it applies to land tax. Section 20A identifies one of the objects of the Act is to ensure as far as practicable fair dealing between lessor and lessee in relation to the renewal or extension of a lease. But those protections are conferred only on certain lessees. The Parliament has excluded from the protection accorded by the Act lessees who pay an annual rental above the prescribed amount. Presumably the Parliament decided to limit the protection accorded by the Act to lessees who do not enjoy a certain equality of bargaining power with lessors. The identification of those lessees depends upon the discrimen of the annual rental payable.
Presumably the Parliament considered that a lessee who was seeking to lease shop premises of such a size or location that it commanded a rent in excess of the prescribed threshold was sufficiently large to be able to protect its own commercial interests. The annual rental being the discrimen, the legislature identified the need for a mechanism to increase that threshold from time to time to ensure the protection afforded lessees who lack the requisite equality of bargaining power continued. In my view it follows that the legislature intended that the application of the Act would be subject to variation from time to time at the will of the executive. The executive could by regulation increase the threshold so that it would apply to existing leases to which it had not previously applied where the rent payable no longer exceeded the prescribed amount.
It is clear the Act permits lessors and lessees to contract out of its application. They can do so by agreeing an annual rental that exceeds the prescribed sum in s 4(2)(a). In my view, however, the concomitant of that proposition is that once the rental payable pursuant to a lease does not exceed the prescribed sum, the Act applies to that lease. I do not consider that Parliament intended that in circumstances where the Act did not apply to a lease at the time it was entered into, because the annual rental exceeded the prescribed sum, the Act should never apply to the lease thereafter, notwithstanding that an amendment increasing the prescribed threshold resulted in the annual rental not exceeding that threshold. The Act’s purpose is remedial. It is intended to protect lessees and to fix clearly the rights and obligations of each party to a retail lease. The Parliament carved out an exception to the application of the Act on the basis discussed above. The discrimen chosen by Parliament for carving out that exception to the application in the Act being the amount of annual rental payable, I consider Parliament intended that, once the annual rental did not exceed the prescribed sum, the Act should apply.
The rationale for such a construction is starkly highlighted by the submission of Diakou and Kelly & Co that the original parties to the lease in this case contracted out of the application of the Act for up to 35 years. The consequence of this submission is that irrespective of whether the annual rental payable pursuant to the lease does not exceed the prescribed sum for most of that period, the application of the Act is excluded by the parties agreeing at the commencement of that period a rental in excess of the prescribed amount. That is a startling proposition given that the annual rental commonly will be fixed by reference to market factors.
Speaking generally, the agreement of parties to a lease that the Act should not apply to the lease is ineffective, except to the extent that they can exclude the application of the Act by agreeing an annual rental in excess of the prescribed sum. It is not open to the parties to a lease to agree that the Act should not apply to a lease where the annual rental does not exceed the prescribed amount. On the other hand, it is open to the parties, when renewing a lease to agree an annual rental in excess of the amended prescribed amount if they wanted the Act not to apply to the lease. But that is not what occurred in this case.
Diakou submits that, by reason of the parties to the lease agreeing an annual rental in excess of the prescribed amount, the lease embodies “foundational and constating rights” which were rights created, accrued or acquired prior to the amendment to s 4(2)(a). It submits that, pursuant to s 16(1) of the AIA, in the absence of a contrary intention, the amendment did not affect those “rights”. Those rights are said to flow from the provisions of the lease. Diakou submits they include: a right to have the lessee reimburse land tax; a right that on review the rent is to increase to current market rent or a 4 per cent increase, whichever is greater; a right to a ratchet clause; and rights to renew the lease for terms of five years up to 35 years. It was a matter of dispute whether the Act as amended interfered with those “rights”. Diakou submits that the amendment to s 4(2)(a) cannot interfere with those rights absent the appearance of a contrary legislative intention to do so. It submits that no such intention appears. I do not accept this submission. The Act is drafted and is intended to be read and understood in the light of the AIA. The Act and the AIA work together. The meaning of the Act is to be understood in the light of the AIA. The scheme of the AIA is to state general principles that apply unless a contrary intention is manifested in the Act.[19] In my view, there is. For the reasons outlined above, in amending s 4(2)(a) the Parliament manifested plainly a legislative intention to affect those pre-existing “rights” as from the time the annual rental payable pursuant to the lease no longer exceeded the prescribed amount.
[19] Attorney-General (Qld) v Australian Industrial Relations Commission & Ors [2002] HCA 42 at [8]; (2002) 213 CLR 485 at 492-493.
Whatever “rights” existed pursuant to the lease before 4 April 2011, when s 4(2)(a) was amended, the Act evinced an intention that the lease was to be regulated by its provisions for so long as the annual rental payable did not exceed the prescribed amount. The Act would operate prospectively in the sense that the Act would interfere with those “rights” created by the lease from the date of the amendment and not before.
This construction is consistent with the purpose of the Act. It operates to protect lessees from the superior bargaining power of lessors and regulates their relationship. It does so only from the time the Act applies to the lease in accordance with the terms of s 4(2)(a).
This construction is also supported by the authority of earlier decisions of this Court which considered the construction of the Act.
In WST Pty Ltd v GRE Pty Ltd & Anor[20]the parties had entered into a retail shop lease in 2006 at a rent of $210,000 per year with a term providing for reviews of rent. The lease was for a 10-year term with a right of renewal. The lease contained a term under which the lessee, GRE, agreed to pay land tax, however, the lease contained a proviso that the lessee was not liable to pay land tax if the lease was a retail shop lease to which the Act applied. On 21 May 2011 the annual rent payable pursuant to the lease exceeded $250,000. By this time the prescribed threshold in s 4(2)(a) had increased to $400,000. The lessor, WST, contended that the parties agreed that GRE would be liable to pay land tax when the lease exceeded $250,000 and this should be characterised as an accrued and vested right.
[20] [2012] SASCFC 146, (2012) 115 SASR 216.
Gray J, with whom Anderson and Peek JJ agreed, held that GRE was not liable to pay land tax under the lease as it was a retail shop lease to which the Act applied. GRE would only be liable to pay land tax from 22 May 2011 and for the remainder of the 10-year term if the rent exceeded the limit then prescribed the application of the Act.
Gray J rejected the contention of the lessor that the relevant threshold at the date of renewal was that fixed at the commencement of the lease. He did not accept that if the rent was above $250,000 at the time of the renewal, land tax would be payable by the lessee.
Gray J said:[21]
At the time that the parties entered into the lease, they entered into a retail shop lease within the meaning of the Retail and Commercial Leases Act and a lease to which the Act applied as the rent was less than $250,000.00. The parties to the lease should be taken to have contemplated that the threshold of $250,000.00 may change and that the lease was entered into on that basis.
…
The second question concerns the liability of the lessee, GRE, to pay to the lessor, WST, land tax from time to time from 22 May 2011 and for the remainder of the 10 year term of the lease and any renewal. The answer to this question necessarily depends on the amount of rent payable during any particular period and the relevant threshold at that time. By the relevant threshold, I refer to the threshold as fixed by section 4(2)(a) of the Act and any regulations thereunder. If, at any time, the annual rent payable exceeds the then applicable threshold, the lessee will be liable to pay land tax as assessed on the land.
[21] [2012] SASCFC 146 at [19], [25], (2012) 115 SASR 216 at 220, 221.
Gray J rejected a submission by the lessor that the legislative scheme should not be construed to in any way erode or take away an accrued or vested right that the lessee was liable to pay land tax when the annual rent payable exceeded $250,000. The lessor contended that to adopt any other construction would give the Act a retrospective operation. It said such a construction should not be adopted without clear statutory language to that effect. Gray J rejected this submission. He considered that the characterisation of the lessor having accrued or vested rights under the lease was simplistic. He said that the lease by its terms, recognised the provisions of the Act and in particular recognised the paramountcy of the Act and that any provision of the lease which directly or indirectly defeated, evaded or prevented the operation of the Act other than to the extent permitted by the Act, was of no effect.
WST v GRE is the converse of this case. In WST when the lease was entered into the annual rental was below the prescribed threshold in s 4(2)(a) but over time increases in rent saw the annual rental exceed $250,000 but by the time this occurred the prescribed threshold had increased to $400,000. The Full Court rejected the submission that the increased threshold applied only to leases that had been entered into after the making of the regulation increasing the threshold. The decision is contrary to the proposition that the increase in the prescribed threshold applies only to leases that are entered into after the increase in the threshold to $400,000 took effect. The clear implication in the Court’s reasons is that the Act will apply to a lease once the annual rent payable under the lease does not exceed the prescribed threshold.
This analysis is also supported by the reasons of the Full Court in NZI Insurance Australia Ltd v Baryzcka.[22]Debelle J, with whom Duggan and Williams JJ agreed, rejected a submission that the 1997 amendments to the Act which introduced, inter alia, s 20B into the Act, did not apply to a retail shop lease that had been entered into before the amendments took effect. He rejected the submission on a number of grounds. First, because the 1997 Act applied to existing leases. The amending Act contained no transitional provisions. He contrasted s 20B with s 20C. Section 20C applies only to leases entered into after commencement of Division 3 of the Act. Section 20C is found in Division 3. Section 20B has no such limitation. It is found in Division 2. Debelle J considered that Parliament intended s 20B should operate immediately and to the extent necessary on leases in force when the Act came into operation. He said that when read together, it was apparent that ss 20A and 20B intend that reasonable security of tenure should be immediately available. If s 20B did not immediately affect existing leases, there would be a hiatus until those leases expired. In effect, Debelle J held that upon its enactment s 20B took effect immediately and applied to all leases which were then operative.
[22] [2003] SASC 190, (2003) 85 SASR 497.
Gouger Street’s alternative contention
In any event, if I am wrong in this view I nonetheless consider that s 16(1) of the AIA does not operate so as to leave unaffected rights created by the lease once a new lease came into existence upon the exercise by Gouger Street of its option to renew on 1 September 2011. The exercise of an option to renew is considered by the common law to be the entry into a new lease and not the extension of a pre‑existing lease.[23]
[23] Goldedge Holdings Pty Ltd v Liquor and Gambling Commissioner & Anor [2014] SASC 147 at [45]; (2014) 121 SASR 30 at 38.
In Mercantile Credits Limited v The Shell Company of Australia Ltd,[24] Gibbs J (as he then was) said that it is clear that when a right of renewal in a lease is exercised a new lease comes into being.[25] As a retail shop lease is defined in s 3(1) of the Act as an agreement under which a person grants or agrees to grant to another a right to occupy a retail shop, the exercise of the option to renew the lease constituted an agreement within the definition of a “retail shop lease”. The rights claimed by Diakou flowing from the renewal of the lease in September 2011 had not accrued or been created before the amendment of s 4(2)(a). The rights claimed by Diakou flowing from the entry into the original lease in 2006 were rights limited by the five-year term of that lease. Accordingly, the Act applied to that new lease, brought into existence on 1 September 2011, because at that time the annual rental payable in accordance with the lease was less than the prescribed amount in s 4(2)(a), which by that date had been amended to the greater sum of $400,000.
[24] (1975-1976) 136 CLR 326.
[25] (1975-1976) 136 CLR 326 at 344-345.
The original lease provided an irrevocable offer from Diakou as the lessor to enter into a further agreement for an additional five years, which offer was only capable of acceptance by the lessee in the future if certain conditions were satisfied. There was no right in Diakou created, acquired or accrued in respect of any period beyond the term of the original lease until the option was validly exercised or the offer of a further term came to be validly accepted. Neither of those events was certain or inevitable. Those claimed rights were not enforceable beyond the term of the original lease absent the exercise of the option to renew.[26] It is to be remembered that terms like “right” and “interest” in the context of s 16(1) of the AIA are to be understood by reference to the statute that has been amended. They are terms that are not used solely in any technical sense derived exclusively from property law or analytical jurisprudence.[27] The rights claimed by Diakou could not persist for 35 years absent the continuing renewal of the lease. While the option conferred on the lessee remained unexercised, Diakou had no right which could be enforced by an order of a court so as to change any of the rights and duties which then constituted the relationship between the parties to the lease.[28]
[26] Australand Corporation (Qld) Pty Ltd v Johnson [2008] 1 Qd R 203 at [130].
[27] Chang and Anor v Laidley Shire Council [2007] HCA 37 at [117]; (2007) 234 CLR 1 at 34.
[28] Australand Corporation (Qld) Pty Ltd v Johnson [2008] 1 Qd R 203 at [130].
Accordingly, even if I am wrong in my primary conclusion, I am of the view that the Act applied to the lease from 1 September 2011.
Conclusion
In the circumstances, I would answer the preliminary question as follows:
The lease was subject to the operation of the Retail and Commercial Leases Act 1995 (SA) on and from 4 April 2011, and as renewed from 1 September 2011, with the consequence that:
(a)Section 22 operates upon the September 2011 rent review, which is the subject of Clause 4.10(a) of the lease; and
(b)Section 30 operates to preclude Diakou from recovering payment for or reimbursement for land tax levied on and from 4 April 2011.
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