Diakou Nominees Pty Ltd v Gouger Street Pty Ltd; Gouger Street Pty Ltd v Diakou Nominees Pty Ltd

[2023] SASC 66

SUPREME COURT OF SOUTH AUSTRALIA

(Civil)

DIAKOU NOMINEES PTY LTD v GOUGER STREET PTY LTD & ANOR; GOUGER STREET PTY LTD v DIAKOU NOMINEES PTY LTD

[2023] SASC 66

Judgment of the Honourable Justice Bleby  

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

STATUTES - ACTS OF PARLIAMENT - OPERATION AND EFFECT OF ACTS - RETROSPECTIVE OPERATION - AS REGARDS VESTED RIGHTS, PAST TRANSACTIONS OR NEW RIGHTS OR LIABILITIES

TAXES AND DUTIES - LAND TAX - LIABILITY FOR LAND TAX - LESSEES - VALIDITY AND CONSTRUCTION OF AGREEMENTS AS TO PAYMENT OF TAX

LANDLORD AND TENANT - TERMINATION OF THE TENANCY - FRUSTRATION: APPLICATION OF DOCTRINE TO LEASES

This is a preliminary trial of issues raised in the course of a long and complex dispute relating to the Lease of the Talbot Hotel in Gouger Street, Adelaide.

Diakou Nominees Pty Ltd (‘Diakou’) is the proprietor of the Talbot Hotel. On 1 September 2006, Diakou as Lessor and the Talbot Hotel Group Pty Ltd (‘Talbot Hotel Group’) as Lessee entered into a Lease of the Talbot Hotel. The Memorandum of Lease (‘the 2006 Lease’) provided 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 2006 Lease provided for a rent of $250,500 per annum. At that time, s 4(2)(a) of the Retail and Commercial Leases Act 1995 (SA) (‘RCLA’) provided that that Act did not apply to a retail shop lease if the rent payable under the lease exceeded $250,000 per annum. Consequently, the RCLA did not apply to the 2006 Lease on 1 September 2006.

On 8 July 2007, the Talbot Hotel Group assigned the Lease to Schillvest Pty Ltd (‘Schillvest’).

On 4 July 2011, the Retail and Commercial Leases Variation Regulations 2010 (SA) commenced operation. One effect of this was to prescribe the amount of $400,000 for the purposes of s 4(2)(a) of the RCLA, such that from that date, the RCLA did not apply to a retail shop lease if the rent payable under the lease exceeded $400,000 per annum. The rent payable under the Lease in the present matter has never exceeded $400,000.

On 1 September 2011, Schillvest exercised (or purported to exercise) the first right of renewal (‘the 2011 Lease’). Diakou and Schillvest at that stage had ‘agreed to disagree’ as to whether the RCLA applied to the 2011 Lease.

On 13 June 2012, receivers and managers were appointed to Schillvest. On 2 July 2013, the receivers and managers assigned the Lease to Gouger Street Pty Ltd (‘Gouger Street’). Gouger Street is the current tenant of the Talbot Hotel, having commenced occupation of the Talbot Hotel on 2 July 2013.

On 9 September 2014, the current market rent of the Talbot Hotel as of 1 September 2011, valued in accordance with clause 4.10(a) of the 2011 Lease, was $215,000 (excluding GST) per annum.

By a Deed of Assignment dated 18 December 2014, Schillvest (in Liq) assigned (or purported to assign) to Gouger Street Schillvest’s chose in action to claim from Diakou the amount of land tax and rent that Schillvest claimed to have overpaid from 4 April 2011 and 1 September 2011, respectively. Diakou was not a party to this Deed of Assignment.

By an Extension of Lease executed on behalf of Gouger Street and Diakou, the 2011 Lease was (purportedly) renewed for a further five-year term commencing on 1 September 2016 and expiring on 31 August 2021 (‘the 2016 Lease’).

On 20 April 2018, the current market rent as at 1 September 2016 was determined by an independent valuer to be $245,000 (excluding GST) per annum.

On 26 May 2017, Stanley J gave judgment on a preliminary issue, being whether the RCLA applied to the Lease. His Honour held that the Lease was subject to the operation of the RCLA on and from 4 April 2011, and as renewed from 1 September 2011. Stanley J concluded that s 22 of the RCLA operated on the September 2011 rent review, which is the subject of cl 4.10(a) of the 2006 Lease, and that s 30 operated to preclude Diakou from recovering payment for or reimbursement of land tax levied on and from 4 April 2011.

The issues identified for determination on the preliminary trial are as follows:

•Issue 1: Is the effect of the application of the RCLA to the 2006 Lease that cl 4.10 is wholly void and of no effect?

•Issue 2: If cl 4.10 became wholly void, was the effect that there was no grant of a further five-year lease on 1 September 2011 because there was no agreement between the Lessor and the Lessee as to a mechanism for fixing rent payable under the 2011 Lease?

•Issue 3: If cl 4.10 became void to a limited extent, was the effect that there was no grant of a further five-year lease on 1 September 2011 because there could be no grant of a further lease ‘on the same terms and conditions herein contained’?

•Issue 4: If cl 4.10 became void in whole or in part, was the effect that the 2006 Lease was frustrated and discharged with effect from 31 August 2011?

•Issue 8: Did Schillvest assign to Gouger Street its rights (if any) to recover overpayments of rent (if any) and land tax by the operation of the Deed of Assignment of Lease dated July 2013 between Schillvest, Gouger Street and Diakou?

•Issue 9: Did Schillvest assign to Gouger Street its rights (if any) to recover overpayments of rent (if any) and land tax by the operation of the Deed of Assignment dated 18 December 2014 between Schillvest and Gouger Street?

Held, per Bleby J:

1.Diakou is not prevented by issue estoppel from contending that the 2011 Lease was not validly entered into.

2.Issue 1: The effect of the application of the RCLA to the 2006 Lease is that cl 4.10 is wholly void and of no effect.

3.Issue 2: The effect of cl 4.10 being wholly void is that there was no agreement between the Lessor and Lessee as to a mechanism for fixing rent payable under the 2011 Lease. It would follow from this that there was no grant of a further five-year lease on 1 September 2011. However, that conclusion is subject, at least, to the determination of Issues 5 and 6.

4.      Issue 3: Issue 3 does not arise.

5.Issue 4: The effect of cl 4.10 being void did not have the effect that the 2006 Lease was frustrated and discharged. Neither did it have the effect that any contract to renew the 2006 Lease was frustrated.

6.Issue 8: Schillvest did not assign to Gouger Street its rights (if any) to recover overpayments of rent (if any) by the operation of the Deed of Assignment of Lease dated July 2013 between Schillvest, Gouger Street and Diakou.

7.Issue 9: Schillvest did assign to Gouger Street its rights (if any) to recover overpayments of rent (if any) and land tax by the operation of the Deed of Assignment dated 18 December 2014 between Schillvest and Gouger Street.

Retail and Commercial Leases Act 1995 (SA) ss 4(2)(a), 5, 20A, 22, 22(3)(c), 22(4), 30, 38(c); Retail and Commercial Leases Variation Regulations 2010 (SA); Commonwealth of Australia Constitution Act (Cth) s 109; Legislation Interpretation Act 2021 (SA) ss 16(2)(h), 17, 19, 20; Real Property Act 1883 (SA) ss 67, 68, 69, 115A, 153(2); Law of Property Act 1936 (SA) s 41; Frustrated Contracts Act 1988 (SA) s 6; Corporations Act 2001 (SA) ss 127, 198A, 477, 491(1), s 493, 506(1)(b); Landlord and Tenant (Covenants) Act 1995 (UK) s 25; Retail Leases Act 1994 (NSW) s 18(3)(c); Real Property Act 1900 (NSW); Land Transfer Act 1952 (NZ), referred to.
Ansett Transport Industries (Operations) Pty Ltd v Comptroller of Stamps (Vic) [1985] VR 70; Autocash Pty Ltd v Forza [2022] SAMC 24; Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue (Northern Territory) (2009) 239 CLR 27; Bahr v Nicolay (No. 2) (1988) 164 CLR 604; Blair v Curran (1939) 62 CLR 464; Booker Industries Pty Ltd v Wilson Parking (Qld) Pty Ltd (1982) 149 CLR 600; Brisbane City Council v Group Projects Pty Ltd (1979) 145 CLR 143; Butler v A-G (1961) 106 CLR 268; Carter v Egg Pulp Marketing Board (Vic) (1942) 66 CLR 557; City of Subiaco v Heytesbury Properties Pty Ltd (2001) 24 WAR 146; Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337; Connor Hunter (a Firm) v Keencrest Pty Ltd & Ors [2009] QCA 156; Commissioner for Railways (NSW) v Agalianos (1955) 92 CLR 390; Cooper Brookes (Wollongong) Pty Ltd v Federal Commissioner of Taxation (1981) 147 CLR 297; Corporate Affairs Commission (NSW) v Yuill (1991) 172 CLR 319; Cricklewood Property and Investment Trust Ltd v Leighton’s Investment Trust Ltd [1945] AC 221; Crown Melbourne Ltd v Cosmopolitan Hotel (Vic) Pty Ltd [2016] HCA 26; C Convenience Stores Pty Ltd v Wayville Plaza Retirement Pty Ltd (2012) 114 SASR 299; Davis Contractors v Fareham Urban District Council [1956] AC 696; Dean v Lloyd (1991) 3 WAR 235; Denny, Mott & Dickson Ltd v James B Fraser & Co Ltd [1944] AC 265; Diakou Nominees Pty Ltd v Gouger Street Pty Ltd & Ors [2017] SASC 72; Diakou Nominees Pty Ltd v Gouger Street Pty Ltd & Anor; Gouger Street Pty Ltd v Diakou Nominees Pty Ltd [2020] SASC 124; Ferngrove Pharmaceuticals Pty Ltd v Betterway Healthcare International Group Pty Ltd [2022] SASCA 31; Forza v Autocash Pty Ltd [2022] SASC 133; Frazer v Walker [1967] 1 AC 569; HL (Qld) Nominees Pty Ltd v Jobera Pty Ltd and Anor [2009] SASC 165; K & S Lake City Freighters Pty Ltd v Gordon & Gotch Ltd (1985) 157 CLR 309; MacDonald v Robins (1954) 90 CLR 515; Mercantile Credits Ltd v The Shell Company of Australia Ltd (1976) 136 CLR 326; Merrell Associates Ltd v HL (Qld) Nominees Pty Ltd (2010) 241 FLR 49; Metropolitan Water Board v Dick, Kerr and Co Ltd [1918] AC 119; Minister for Lands (NSW) v Jeremias (1917) 23 CLR 322; Mushroom Composters Pty Ltd v IS & DE Robertson Pty Ltd [2015] NSWCA 1; National Carriers Ltd v Panalpina (Northern) Ltd [1981] AC 675; oOH! Media Roadside Pty Ltd v Diamon Wheels Pty Ltd (2011) 32 VR 255; Palais Parking Station Pty Ltd v Shea (1980) 24 SASR 425; Placer Development Ltd v The Commonwealth (1969) 121 CLR 353; Pozetu Pty Ltd v Alexander James Pty Ltd [2016] NSWCA 208; Project Blue Sky Inc & Ors v Australian Broadcasting Authority (1998) 194 CLR 355; Pyramid Building Society v Howell & Bannister (1994) 14 ACSR; Rose v Commissioner of Stamps (SA) (1979) 22 SASR 84; Scanlan’s New Neon Ltd v Tooheys Ltd (1943) 67 CLR 169; Scholle Industries Pty Ltd v AEP Industries (NZ) Ltd (2007) 99 SASR 178; South West Water Authority v Rumble’s [1985] AC 609; Sperry Rand Australia Ltd v Arrandale Properties Pty Ltd [1979] VR 409; Story v Advance Bank Australia Ltd (1993) 31 NSWLR 722; Taylor v Public Service Board (NSW) (1976) 137 CLR 208; Tenstat Pty Ltd v Permanent Trustee Aust Ltd (1992) 28 NSWLR 625; Tindall Cobham 1 Limited & Ors v Adda Hotels & Ors [2014] EWCA Civ 1215; Toronto Suburban Railway Co v Toronto Corporation [1915] AC 590; The Progressive Mailing House Pty Ltd v Tabali Pty Ltd (1985) 157 CLR 17; Travinto Nominees v Vlattas (1973) 129 CLR 1; Wardley Australia Ltd v McPharlin (1984) 3 BPR 9500 (NSWSC); Wenn v Attorney-General for Victoria (1948) 77 CLR 84; Wilmott Growers Group Inc v Wilmott Forests Ltd (recs and mgrs. apptd) (in liq) (2013) 251 CLR 592; WST Pty Ltd v GRE Pty Ltd (2012) 115 SASR 216; Xenos v Wickham (1867) LR 2 HL 296; 400 George Street (Qld) Pty Limited v BG International Limited [2010] QSC 66, considered.

DIAKOU NOMINEES PTY LTD v GOUGER STREET PTY LTD & ANOR; GOUGER STREET PTY LTD v DIAKOU NOMINEES PTY LTD
[2023] SASC 66

Civil

1. BLEBY J:        This is a preliminary trial of certain issues raised in the course of a long and complex dispute relating to the Lease of the Talbot Hotel in Gouger Street, Adelaide.

   The lease of the Talbot Hotel, the parties and the issues

2. The matter commenced by way of two actions in 2015. Diakou Nominees Pty Ltd (‘Diakou’) is the applicant in Action 420 of 2015 and the respondent in Action 802 of 2015. It is the proprietor of the Talbot Hotel. On 1 September 2006, Diakou as Lessor and the Talbot Hotel Group Pty Ltd (‘Talbot Hotel Group’) as Lessee entered into a Lease of the Talbot Hotel. The Memorandum of Lease (‘the 2006 Lease’) provided 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 2006 Lease provided for a rent of $250,500 per annum. At that time, s 4(2)(a) of the Retail and Commercial Leases Act 1995 (SA) (‘RCLA’) provided that that Act did not apply to a retail shop lease if the rent payable under the lease exceeded $250,000 per annum. Consequently, the RCLA did not apply to the 2006 Lease on 1 September 2006.

3. Clause 4.10 of the Lease provided for annual rent reviews in the following terms:

   4.10   Review of Annual Rent

   Notwithstanding anything herein appearing to the contrary, or any agreement between the Lessor and Lessee otherwise, the annual rent hereby reserved shall be reviewed as at the date and in the years specified in Item 9 of the Schedule (each of such dates being called the “Review Date”) and shall be determined in accordance with the following provisions:

   (a)     On each fifth anniversary of the Commencement Date the annual rent shall be the “current market rent” for the Premises determined in accordance with the following paragraphs or shall be the rent prior to the review date increased by 4%, which ever is greater:

   …

   (b)     On 1 November 2006 and each anniversary of the Commencement Date (other than the review dates referred to in clause 4.10(a)) the annual rental shall be determined in accordance with the following paragraphs or shall be the rental payable during the year immediately preceding the review date increased by 3% per annum, which ever is greater:

   …

   (c)     Under no circumstances shall the rent payable following any rent review be less than the rent payable immediately prior to such rent review.

4. Sub-clause (a) included a lengthy definition of ‘current market rent’ and the process for its determination. Sub-clause (b) provided a formula for the determination of the annual rent as an alternative to the three per cent per annum increase, based on changes to the Consumer Price Index (CPI).

5. Clause 2.2 of the Lease provided that the Lessee would pay or reimburse to the Lessor all Outgoings levied, assessed or charged in respect of the Premises. The definition of ‘Outgoings’ in cl 1 included land tax.

6. On 8 July 2007, the Talbot Hotel Group assigned the Lease to Schillvest Pty Ltd (‘Schillvest’).

7. On 4 April 2011, the Retail and Commercial Leases Variation Regulations 2010 (SA) commenced operation. One effect of this was to prescribe the amount of $400,000 for the purposes of s 4(2)(a) of the RCLA, such that from that date, the RCLA did not apply to a retail shop lease if the rent payable under the lease exceeded $400,000 per annum. The rent payable under the Lease in issue in the present matter has never exceeded $400,000.

8. On 1 September 2011, Schillvest exercised (or purported to exercise) the first right of renewal. The Lease was thereby ostensibly renewed for a five-year term commencing 1 September 2011 (‘the 2011 Lease’). Diakou and Schillvest at that stage had ‘agreed to disagree’ as to whether the RCLA applied to the 2011 Lease.

9. On 13 June 2012, receivers and managers were appointed to Schillvest. On 2 July 2013, the receivers and managers assigned the Lease to Gouger Street Pty Ltd (‘Gouger Street’). This occurred by way of a Deed of Assignment of Lease between Schillvest, Diakou and Gouger Street. This Deed reserved the respective positions of Diakou and Gouger Street as to whether the RCLA applied to the 2011 Lease.

10. Gouger Street commenced occupation of the Talbot Hotel on 2 July 2013.

11. Gouger Street is the first respondent in Action 420 of 2015 and the applicant in Action 802 of 2015. It is the current tenant of the Talbot Hotel.

12. On 9 September 2014, acting at the request of Gouger Street and Diakou, Mr James Pledge of Knight Frank performed a market rent review of the Talbot Hotel. He determined that the current market rent as of 1 September 2011, valued in accordance with clause 4.10(a) of the 2011 Lease, was $215,000 (excluding GST) per annum. That was less than the rent being paid by Schillvest as of 31 August 2011 and, of course, less than the rent would be if it were increased by four per cent.

13. By a Deed of Assignment dated 18 December 2014, Schillvest (in Liq) assigned (or purported to assign) to Gouger Street Schillvest’s chose in action to claim from Diakou the amount of land tax and rent that Schillvest claimed to have overpaid from 4 April 2011 (in respect of the 2006 Lease following commencement of the RCLA) and 1 September 2011 (when the 2011 Lease was entered into), respectively. Diakou was not a party to this Deed of Assignment, and claims it is ineffective. Gouger Street, nonetheless, claims that the Deed of Assignment gives it a right to recover from Diakou monies allegedly overpaid by Schillvest.

14. By an Extension of Lease executed on behalf of Gouger Street and Diakou, the 2011 Lease was (purportedly) renewed for a further five-year term commencing on 1 September 2016 and expiring on 31 August 2021 (‘the 2016 Lease’). On its face, cl 4.10(a) applied to determine the rent review, as 1 September 2016 was the five-year anniversary of the commencement date for the 2011 Lease.

15. In late 2017, Diakou and Gouger Street agreed to engage someone to perform a market rent review for the period beginning 1 September 2016. On 20 April 2018, Mr Andrew Nobes of McGees Property determined the current market rent as at 1 September 2016 to be $245,000 (excluding GST) per annum.

16. The actions are being heard together, although they have not been combined formally. On 26 May 2017, Stanley J gave judgment on a preliminary issue, being whether the RCLA applied to the Lease.[1] His Honour held that the Lease was subject to the operation of the RCLA on and from 4 April 2011, and as renewed from 1 September 2011.

    [1]    Diakou Nominees Pty Ltd v Gouger Street Pty Ltd& Ors [2017] SASC 72.

17. The actions have made slow progress. On 30 May 2022, Gouger Street filed a document entitled Agreed List of Issues and Contentions (Revision 1). This document identifies 25 issues and the essential contentions of the parties in respect of each issue. On 23 June 2022, the Chief Justice ordered that the matter be listed for a preliminary trial, limited to issues 1, 2, 3, 4, 8 and 9 in the Agreed List of Issues and Contentions. The preliminary trial was conducted before me in November 2022. This is the determination of those issues. The remaining issues identified in the Agreed List are to be determined at a further trial, to be set down following this judgment.

18. As a result of finding that the RCLA applied to the Lease on and from 4 April 2011, and as renewed from 1 September 2011, Stanley J concluded that s 22 of the RCLA operated on the September 2011 rent review, which is the subject of cl 4.10(a) of the 2006 Lease, and that s 30 operated to preclude Diakou from recovering payment for or reimbursement of land tax levied on and from 4 April 2011.[2]

    [2]    Diakou Nominees Pty Ltd v Gouger Street Pty Ltd& Ors [2017] SASC 72 at [67].

19. The first tranche of issues identified for determination in this preliminary trial concerns the effect of the operation of s 22 of the RCLA on the rent review clause.

20. Section 22 provides:

    22—Restrictions on adjustment of base rent

    (1)     In this section—

    base rent means rent, or that component of rent, that comprises a specified amount (whether or not there is provision for the amount to change).

    Note—

    Turnover rent (rent determined by reference to the lessee’s turnover) is not base rent because turnover rent is not a specified amount of money (it varies according to the lessee’s turnover).

    (2)A retail shop lease must not provide for a change to base rent less than 12 months after the lease is entered into and must not provide for a change to that rent less than 12 months after any previous change to that rent, but this subsection does not apply to a change to base rent by a specified amount or specified percentage.

    For example, subsection (2) prevents a lease providing for an increase to current market rent more than once in 12 months. It does not prevent a lease providing for the rent to increase by $100 every six months. Nor does it prevent a lease providing for the rent to be increased to current market rent after 12 months and then to be increased by two per cent every six months after that.

    (3)     A provision of a retail shop lease is void to the extent that it—

    (a)     reserves or has the effect of reserving to one party a discretion to decide which of two or more methods of calculating a change to base rent is to apply on a particular occasion; or

    (b)     provides for a method of calculating a change to the base rent but reserves or has the effect of reserving to one party a discretion to decide whether or not the base rent is to be changed in accordance with that method on a particular occasion; or

    (c)     provides for base rent to change on a particular occasion in accordance with whichever of two or more methods of calculating the change would result in the higher or highest rent.

    (4)If a retail shop lease provides for a change to base rent in a way that may result in a decrease of rent1, a provision of the lease is void to the extent it prevents or enables the lessor or any other person to prevent the decrease.

    Example—

    1      A provision for the rent to change to current market rent.

1. The issues identified for determination on the preliminary trial are as follows.

   Issue 1:Is the effect of the application of the RCLA to the 2006 Lease that cl 4.10 is wholly void and of no effect?

   Issue 2:If cl 4.10 became wholly void, was the effect that there was no grant of a further five-year lease on 1 September 2011 because there was no agreement between the Lessor and the Lessee as to a mechanism for fixing rent payable under the 2011 Lease?

   Issue 3:If cl 4.10 became void to a limited extent, was the effect that there was no grant of a further five-year lease on 1 September 2011 because there could be no grant of a further lease ‘on the same terms and conditions herein contained’?

   Issue 4:If cl 4.10 became void in whole or in part, was the effect that the 2006 Lease was frustrated and discharged with effect from 31 August 2011?

   Issue 8:Did Schillvest assign to Gouger Street its rights (if any) to recover overpayments of rent (if any) and land tax by the operation of the Deed of Assignment of Lease dated July 2013 between Schillvest, Gouger Street and Diakou?

   Issue 9:Did Schillvest assign to Gouger Street its rights (if any) to recover overpayments of rent (if any) and land tax by the operation of the Deed of Assignment dated 18 December 2014 between Schillvest and Gouger Street?

   The Preliminary Issue

2. On the morning of the preliminary trial, senior counsel for Gouger Street announced the identification of a further issue that had the potential to render moot the first four issues. Gouger Street had only raised this issue with Diakou the previous day. I determined to hear argument on this preliminary issue as part of the preliminary trial, rather than hearing and determining it first. The parties provided extensive written submissions on this issue after the hearing.

3. The further issue concerns the character of a factual premise on which Stanley J proceeded to determine the whether the RCLA applied to the Lease. The issue before Stanley J was articulated in an Annexure to an order of Lovell J on 2 August 2016 in the following terms:

   Whether on the proper construction of the Lease, the Retail and Commercial Leases Act 1995 and the Retail and Commercial Leases Regulations 2010, the Retail and Commercial Leases Act 1995 applies to the Lease on and from 4 April 2011 or as renewed from 1 September 2011.

4. The order of Lovell J was that this issue was to be determined as a preliminary issue ‘upon the basis of the facts identified in Part B of the Annexure and the documents identified in Part C of the Annexure’. The ‘facts’ in Part B included the following:

   6.The first right of renewal was exercised and the Lease was renewed for a five year term commencing on 1 September 2011.

5. One of the documents identified in Part C was the Memorandum of Extension of Lease between Diakou and Schillvest dated 27 October 2011.

6. The focus of Issues 1 to 4 in the present preliminary trial, expressed summarily, is the contention of Diakou that from 4 April 2011, there was no valid lease capable of being renewed, such that no lease for a term commencing on 1 September 2011 came into existence. Gouger Street’s belated contention is that paragraph 6 of the ‘facts’ constituted an agreement, as a premise of the issue to be determined by Stanley J, that the parties had entered into the 1 September 2011 Lease. This operated, in Gouger Street’s submission, as an issue estoppel in the trial.

7. In this regard, Gouger Street pointed to Stanley J’s treatment of Gouger Street’s alternative argument, in the event that he was wrong about the application of the RCLA from 4 April 2011:[3]

   In any event, if I am wrong in this view I nonetheless consider that s 16(1) of the [Acts Interpretation Act 1915 (SA)] 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.

   (Footnote omitted)

   [3]    Diakou Nominees Pty Ltd v Gouger Street Pty Ltd& Ors [2017] SASC 72 at [63].

8. This paragraph, in Gouger Street’s submission, adopted the ‘fact’, agreed by reason of its inclusion in the Annexure to the order, that a new lease came into existence on 1 September 2011.

9. At one level, the question reduces to the proper characterisation of the ‘fact’. In response, senior counsel for Diakou pointed first to Diakou’s application to amend its pleadings in 2020. Nicholson J heard that application.[4] Diakou applied to amend its pleading to plead that because an essential term (the rent) was not agreed to by Diakou and Schillvest, as a result of the retrospective application of the RCLA they could not have agreed and did not agree to the purported extension of the Lease. The pleaded consequence was that on and from 1 September 2011, Schillvest remained in occupation and paid rent under a tenancy at will from month to month, terminable on one month’s notice.[5]

   [4]    Diakou Nominees Pty Ltd v Gouger Street Pty Ltd & Anor; Gouger Street Pty Ltd v Diakou Nominees Pty Ltd [2020] SASC 124.

   [5]    SCCIV-15-420 Statement of Claim: Third Revision, [30A]-[30D], [31A].

10. Gouger Street had opposed the application to amend in these terms, but not on the basis that Diakou was prevented from doing so by an issue estoppel. Nicholson J allowed the amendment, holding that the proposed pleadings were reasonably arguable.

11. Diakou then pointed to observations made by Stanley J in the judgment on the preliminary issue. The first of these was the comment:[6]

    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.

    [6]    Diakou Nominees Pty Ltd v Gouger Street Pty Ltd& Ors [2017] SASC 72 at [26].

12. The second was Stanley J’s ultimate conclusion that:[7]

    (a)Section 22 operate upon the September 2011 rent review, which is the subject of Clause 4.10(a) of the lease…

    [7]    Diakou Nominees Pty Ltd v Gouger Street Pty Ltd& Ors [2017] SASC 72 at [67].

13. It is that conclusion from which the first four issues on this preliminary trial are launched. Diakou’s essential contention in response to the preliminary issue as raised was that the only question before Stanley J was whether or not the RCLA applied to the 2006 Lease from 4 April 2011. The parties had not committed themselves to any agreement as to the status of the 2011 Lease prior to the determination of that question.

14. It is a common difficulty with statements of agreed facts that the parties do not give sufficient attention to whether what they are agreeing are simply facts, or whether they extend to conclusions about the operation of law. Paragraph 6 of the ‘facts’ in the Annexure is an example of this. As a purely factual proposition, it may be taken to represent an agreement that the parties did the things necessary to effect entry into the 2011 Lease, including execution and registration. If that is what was agreed, the use of passive language and the incorporation of legal conclusions were unfortunate.

15. As senior counsel for Gouger Street submitted, notwithstanding the use of the term ‘facts’, it is for the parties to decide what is in issue and what is not. In senior counsel’s submission, the material before Stanley J demonstrated that whether described as facts or otherwise, the parties were not in dispute that the 2006 Lease was renewed in the form of the 2011 Lease. To this end, Gouger Street described the proceedings before Nicholson J as ‘only in relation to amending pleadings’.

16. That much is true. However, in such a drawn-out matter, where issues are hived off for determination in order to find some way through a complex morass of issues, the pleadings are critical to articulation of those issues.

17. In Blair v Curran, Dixon J said:[8]

    A judicial determination directly involving an issue of fact or of law disposes once for all of the issue, so that it cannot afterwards be raised between the same parties or their privies. The estoppel covers only those matters which the prior judgment, decree or order necessarily established as the legal foundation or justification of its conclusion…

    Nothing but what is legally indispensable to the conclusion is thus finally closed or precluded. In matters of fact the issue-estoppel is confined to those ultimate facts which form the ingredients in the cause of action…

    [8] (1939) 62 CLR 464 at 531-532.

18. It was not necessary for Stanley J to determine whether the 2011 Lease was validly entered into, neither was it necessary that it be agreed in order for his Honour to determine the preliminary issue. Notwithstanding the unfortunate wording of paragraph 6 of the ‘facts’ identified in the Annexure, that paragraph is capable of being understood as referring to the fact that the 2011 Memorandum of Extension of Lease was executed and lodged for registration.

19. Stanley J expressed the issue before him (and this was the only issue) to be whether the RCLA applied to the 2006 Lease once the annual rent payable fell within the threshold amount prescribed by s 4(2)(a) of the Regulations (that is, prior to any putative renewal, in April 2011). In those circumstances, I am not persuaded that Diakou committed itself to a position, in a way that was capable of giving rise to an issue estoppel, that the 2011 Lease was validly entered into.

20. The phrasing of paragraph 6 of Part B of the Annexure, in apparently incorporating a proposition of law, was not necessary for the exercise of Stanley J’s jurisdiction. Gouger Street was not under any apprehension to that effect for the following five and a half years. Before Gouger Street raised the point before me, no party had taken any step premised on the basis that Diakou had bound itself to the validity of the 2011 Lease.

21. I find that Diakou is not prevented from contending that the 2011 Lease was not validly entered into.

    Issue 1: Is the effect of the application of the RCLA to the 2006 Lease that cl 4.10 is wholly void and of no effect?

22. Section 5 of the RCLA provides:

    (1)This Act operates despite the provisions of a lease.

    (2)A provision of a lease or a collateral agreement is void to the extent that the provision is inconsistent with this Act.

23. Section 22 of the RCLA contains several prohibitions. Relevantly, s 22(3)(c) stipulates that a provision of a retail shop lease is void to the extent that it provides for base rent to change on a particular occasion in accordance with whichever of two or more methods of calculating the change would result in the higher or highest rent. Each of cll 4.10(a) and 4.10(b) of the 2006 Lease has this prohibited effect: cl 4.10(a) on each fifth anniversary of the Commencement Date and cl 4.10(b) on each anniversary of the Commencement Date other than those anniversaries the subject of cl 4.10(a).

24. Then, where a lease provides for a change to base rent in a way that may result in a decrease in rent, s 22(4) renders void a provision of the lease to the extent that it prevents or enables the lessor or any other person to prevent the decrease. It is a ratchet clause, with a potential effect on the 2006 Lease in the following way.

25. Clause 4.10(a) includes a provision for the rent to change to the ‘current market rent’. A rent review on the basis of ‘current market rent’ could, on a given occasion, result in a decrease. That is what occurred when Mr Pledge reviewed the current market rent as of 1 September 2011. In that circumstance, cl 4.10(a) would, on its terms, require the four per cent increase alternative, that being the higher resultant rent. However, as identified above, that device is prohibited by s 22(3)(c).

26. If s 22(3)(c) operates to render void only that part of cl 4.10(a) that applies the (higher) four per cent increase, and does not invalidate the whole clause, then the (lower) ‘current market rent’ part of the provision would apply. If that would result in a decrease, as it did for the September 2011 current market rent review, cl 4.10(c) would purport to prevent its application. However, s 22(4) would apply to render cl 4.10(c) void. The ‘current market rent’ decrease in rent would then apply.

27. This gives rise to complex questions of construction of ss 22(3)(c) and 22(4), and of the interaction of those sections with cl 4.10. The position of Diakou, in essence, is that s 22(3)(c) rendered cl 4.10(a) void in its entirety on 4 April 2011, when the RCLA commenced to apply to the 2006 Lease. The effect of this was that there was no agreement on the rent payable, with any purported exercise of the right of renewal under cl 4.9 not resulting in an enforceable agreement. Gouger Street, by contrast, submitted that cl 4.10(a) is to be read down, such that the offending part of the clause is to be treated as severed for as long as the RCLA applies to the lease. Similarly, it submitted that cl 4.10(c) is to be read down for as long as the RCLA applies.

28. The starting point is the text of the subsections. Gouger Street emphasised that each subsection provides that a provision is void to the extent that it would operate in the identified prohibited way. It drew a comparison with the operation and effect of s 109 of the Commonwealth Constitution, which provides:

    When a law of a State is inconsistent with a law of the Commonwealth, the latter shall prevail, and the former shall, to the extent of the inconsistency, be invalid.

29. Gouger Street pointed to the jurisprudence establishing that ‘invalid’ in this context did not mean ultra vires the power of the State, but rather inoperative, such that if the inconsistent Commonwealth law were to be repealed, the State law would resume operation.[9] By dint of analogous reasoning, it submitted, the use of the words ‘void to the extent of…’ in s 22 should be read as meaning ‘inoperative’ to the extent described, but no further.

    [9]    Butler v A-G (1961) 106 CLR 268 at 274 (Fullagar J); 278 (Kitto J); 283 (Taylor J) and 286 (Windeyer J); Carter v Egg Pulp Marketing Board (Vic) (1942) 66 CLR 557 at 573 (Latham CJ).

30. Accepting, for the moment, the force of this analogy by reason of the common words ‘to the extent of’, this could only be one step in the analysis. To extend the analogy, inconsistency within the meaning of s 109 also raises a question whether the inconsistent State provision can be severed. If not, the whole Act will be held to be invalid ab initio, or the date the inconsistency arose. That will depend on interpreting the State legislation and whether it is intended nonetheless to operate in its severed state.[10] Here, as I will come to, Diakou contends that invalidation of the ratchet aspect of the rent review clauses has the consequence that there cannot be said to have been agreement on rent, an essential term, at the time of the September 2011 rent review.

    [10] See, e.g., Wenn v Attorney-General for Victoria (1948) 77 CLR 84.

31. This preliminary observation illustrates that the question of construction extends to examining what the parties can be taken to have agreed in light of the later imposition of the RCLA provisions. That still first requires understanding the legislative position, as the initial framework of analysis must be the statute.

32. Gouger Street identified different modes of operation of each of ss 22(3) and 22(4). On s 22(3), the first textual aspect it identified was that each subparagraph directs attention to whether a rent review clause operates in the described fashion ‘on a particular occasion’. It submitted that the manner in which s 22(3) operates on a given clause cannot be separated from the particular occasion of the rent review in question. If, on a given occasion, the clause would operate in a prohibited way, then on that occasion, s 22(3) operates to nullify its operation.

33. Thus, in approaching the application of s 22(3)(c) on the occasion of the September 2011 rent review, the first question is whether cl 4.10(a) provides for a change in base rent on the particular occasion of 1 September 2011, by two methods of calculation? The answer to that is yes. The next question is whether one method results in a higher rent on this particular occasion? The answer is yes, the four percent increase method does. The third question is whether the operation of cl 4.10(a) would result in a change to rent determined by the method which calculated the higher rental? Again, the answer is yes.

34. The result in that case, on Gouger Street’s submission, is that on the particular occasion of the rent review on 1 September 2011, s 22(3)(c) would render inoperative that part of cl 4.10(a) that provides for the four percent increase method.

35. Expressed in this way, at this stage of the analysis, this submission asserts the result of a constructional choice which the text alone does not necessarily require. The alternative way of reading the phrase in s 22(3)(c), ‘provides for base rent to change on a particular occasion’ is that a provision of a lease is void to the extent that it identifies the proscribed methodology and contemplates the occasions on which that methodology is to be engaged. That is to say, the statute voids from the outset a provision of a lease that contains this methodology and identifies the occasions when the methodology is to be deployed.

36. Gouger Street identified contextual and purposive indicators in support of its proposition that the former approach represents the correct constructional choice. At the outset, it identified that the mischief to which s 22(3)(c) was addressed was that of always requiring the higher of two possible methodologies of rent calculation to be adopted. That is a mischief against which the legislature has sought to protect the interests of lessees. As Stanley J observed in the determination of the earlier preliminary issue, the purpose of the legislation is the protection of the lessees of retail shop leases.[11]

    [11] Diakou Nominees Pty Ltd v Gouger Street Pty Ltd& Ors [2017] SASC 72 at [47].

37. Gouger Street also relied on s 20A of the RCLA. That section appears at the commencement of Part 4A, the subject of which is ‘term of lease and renewal’. It provides:

    20A – Objects

    (1)     The Parliament recognises that conflicts sometimes arise between a lessor’s expectation to be able to deal with leased premises subject only to the terms of the lease and a lessee’s expectation of a reasonable security of tenure.

    (2)     The objects of this Part are to achieve an appropriate balance between reasonable but conflicting explanations and to ensure as far as practicable fair dealing between lessor and lessee in relation to the renewal or extension of a retail shop lease.

38. Section 22 appears in Part 5; this expression of objects is not directly applicable. Nonetheless, I accept that the RCLA is remedial, consumer protection legislation, designed to protect the interests of lessees where the annual rent falls below the threshold.[12] The constructional choice is to be approached having regard to that purpose.

    [12] Diakou Nominees Pty Ltd v Gouger Street Pty Ltd& Ors [2017] SASC 72 at [49]; WST Pty Ltd v GRE Pty Ltd (2012) 115 SASR 216 at [10].

39. In Gouger Street’s submission, the approach of occasional or operative invalidation for which it contended would protect the lessee as a consumer as and when the occasion requires. On this approach, on 1 September 2011, cl 4.10(a) operated only insofar as it provided for a rent review to current market value. If, on some future occasion, current market value represented an increase higher than the four per cent method, cl 4.10(a) would be inoperative insofar as it permitted the current market value method.

40. Gouger Street contrasted this contended operation of cl 22(3)(c) with that of s 22(4). Section 22(4) does not contain reference to a ‘particular occasion’ of carrying out a rent review. It simply renders void a provision of a lease to the extent that it prevents or enables the lessor or any other person to prevent a decrease that may result from the operation of a rent review provision.

1. Gouger Street submitted that s 22(4) applied in the present case as follows. First, cl 4.10(a) attracted its operation as it provides for a change to base rent in a way which may result in a decrease in rent, that is, the method of assessing current market value. Next, cl 4.10(a) also contains a provision that prevents such a decrease from resulting, namely, that part of the clause which provides for a four per cent increase. It follows, in Gouger Street’s submission, that that part of the clause providing for the four per cent increase is rendered inoperative.

2. A similar analysis can be applied to cl 4.10(b). That clause provides for an alternative to a three per cent increase that is based on changes in CPI. As CPI may reduce, to apply that alternative may result in a decrease in rent.

3. It also follows on this analysis that cl 4.10(c) is inoperative while the RCLA applies to the Lease.

4. The consequence of the combined operation of ss 22(3)(c) and 22(4) on cl 4.10(a), on Gouger Street’s analysis, would be as follows. Section 22(4) renders cl 4.10(a) void to the extent that the clause prevents a decrease. The phrase in cl 4.10(a), ‘or shall be the rent prior to the review date increased by 4%, whichever is the greater’ prevents the possible decrease enabled by the current market rent review method. It is therefore void.

5. Section 22(3)(c) then renders cl 4.10(a) void ‘to the extent’ that it allows for the higher of two methods of changing base rent. However the four per cent method having been voided by cl 22(4) for all purposes, there is nothing for it to act upon.

6. In support of this approach, Gouger Street relied on the approach taken in Tindall Cobham 1 Limited & Ors v Adda Hotels & Ors.[13] This case concerned the construction of covenants against assignment in certain hotel leases, and the interaction of those covenants with the Landlord and Tenant (Covenants) Act 1995 (UK). Section 25 of that Act provided, in part:

   [13] [2014] EWCA Civ 1215.

   25.— Agreement void if it restricts operation of the Act.

   (1)Any agreement relating to a tenancy, is void to the extent that—

   (a)     it would apart from this section have effect to exclude, modify or otherwise frustrate the operation of any provision of this Act, or

7. With respect to form of this language, Patten LJ said:[14]

   Although the words “void to the extent that” indicate that Parliament did not intend to invalidate more of the relevant agreement than was necessary to safeguard the objectives of the Act in the context of the particular assignment under consideration, those words do not in my view preclude the Court from taking a balanced approach to invalidation which, whilst neutralising the offending parts of the contract, does not leave it emasculated and unworkable. … It seems to be generally accepted that the Court will not sever the terms of a contract for this purpose unless the unenforceable provision is capable of being removed without the necessity of adding to or modifying the wording that remains; the remaining terms are supported by adequate consideration; and the removal of the unenforceable provisions does not alter the character of the contract: see Sadler v Imperial Life Assurance Co of Canada [1988] IRLR 388 at p. 393.

   [14] Tindall Cobham 1 Limited & Ors v Adda Hotels & Ors [2014] EWCA Civ 1215 at [46].

8. The interaction of ss 22(3)(c) and 22(4) as described above achieved, in Gouger Street’s submission, the object of not invalidating more of the Lease than was necessary to safeguard the consumer protection objective of s 22. In this regard, Gouger Street also pointed to obiter remarks by the Queensland Court of Appeal in Connor Hunter (a Firm) v Keencrest Pty Ltd & Ors.[15] The Court upheld the validity of impugned rent review provisions in that case. Chesterman JA went on to observe:[16]

   [15] [2009] QCA 156.

   [16] Connor Hunter (a Firm) v Keencrest Pty Ltd & Ors [2009] QCA 156 at [73]-[74].

   Although it is unnecessary to do so because of the conclusion I have just expressed, it may be said that the first respondent’s basis for contending that the rent review clauses are invalid would not yield the result for which it would hope. The basis is
   s 20 of the Act which provides that:

   
   

   “If a provision of this Act is inconsistent with a provision of a retail shop lease, the provision of this Act prevails, and the provision of the lease is void to the extent of the inconsistency.”

   The inconsistency identified by the first respondent is that the provisos to clause 2.3(a) and (d), and clause 16.2, are a separate basis for reviewing the rent so that the clauses offend s 27(4) or s 36(e). The inconsistency can be removed, in accordance with s 20, if the provisos are avoided. That is the extent necessary to remove the inconsistency. The clauses would be left with one basis only for adjusting rent and would not offend the Act. The rent reviews that have occurred would be unaffected.

9. Ultimately, the question here is one of construction of s 22, in context, in its application to cl 4.10. Gouger Street, understandably, contends for an approach consistent with that taken in or supported by the above passages, on the basis that to do so is consistent with the objects of the Act in protecting the interests of lessees, without leaving the interests of Gouger Street emasculated in demanding invalidity of cl 4.10 in its entirety.

10. Diakou, by contrast, commenced its analysis with the effect of s 22(3)(c) on s 4.10(a). The effect (and purpose) of each sub-paragraph of s 22 was, in its submission, to prohibit ratchet clauses. It pointed to statements in the Second Reading Speech debate in Parliament to the effect that the Bill by which the amendments were introduced was intended to prohibit ratchet clauses.[17] On the basis that regard may be had to these passages pursuant to s 16(2)(h) of the Legislation Interpretation Act 2021 (SA), these passages are not helpful. The mere remarking by members of Parliament during the debate that the clause will ‘prohibit’ ratchet clauses says nothing about how that prohibition will be given effect.

    [17] House of Assembly, Tuesday 7 February 1995, p 1096; Wednesday, 8 March 1995, p 1857; Wednesday 15 March 1995, p 1943.

11. As with Gouger Street’s argument, Diakou’s argument proceeded in stages. First, cl 4.10(a) answered the description of the prohibited element in s22(3)(c), in that it provided for a change in base rent, in accordance with whichever of two methods of calculating the change would result in the higher rent. It was that contingent method of rental review that was the subject of agreement. In Diakou’s submission, the prohibition and consequent voidness could only attach to that contingent method.

12. Diakou submitted that Stanley J demonstrated that he held this opinion in his determination of the previous preliminary issue, when he said:[18]

    If the Act applies to the lease, s 22(3) renders void clause 4.10 of the lease…

    [18] Diakou Nominees Pty Ltd v Gouger Street Pty Ltd& Ors [2017] SASC 72 at [26].

13. With respect to his Honour, the character of the voidness attaching to cl 4.10 was not argued at that preliminary trial. I read this passage, which preceded even his Honour’s recounting of the parties’ submissions, as simply explaining the general relevance of the dispute before him over whether the RCLA applied at all.

14. Diakou also relied, heavily, on the decision of the New South Wales Court of Appeal in Pozetu Pty Ltd v Alexander James Pty Ltd.[19] This was an application for leave to appeal against a decision of an Appeal Panel of the New South Wales Civil and Administrative Tribunal (‘NCAT’). It concerned a provision (the ‘Option Rental Provision’) of a retail shop lease, which conferred on the lessee an option to renew the lease for a period of five years from 1 September 2008. The rent payable from the commencement date of the new lease until the first review date was to be the greater of current market rent and 105 per cent of the rent in the last year of the previous term.

    [19] [2016] NSWCA 208.

15. Section 18(3)(c) of the Retail Leases Act 1994 (NSW) was in the same terms as s 22(3)(c). In an action claiming damages by reason of the lessee’s alleged repudiation of the lease, the lessor, Pozetu, contended that the Option Rental Provision contravened s 18(3)(c) and was void. NCAT accepted that submission.[20]

    [20] Pozetu Pty Ltd v Alexander James Pty Ltd [2016] NSWCA 208 at [16].

16. In the present case, Diakou submitted that the New South Wales Court of Appeal ‘seemingly approved’ that conclusion. However, on the appeal, Pozetu changed its position and sought to argue that s18(3)(c) did not invalidate the Option Rental Provision. The Court of Appeal did not permit Pozetu to change its position in this manner.[21] It explained its reasons for this refusal, concluding:[22]

    For these reasons, the Court declined to permit Pozetu to rely on the grounds in its draft Notice of Appeal contending that the Appeal Panel erred in law in holding that the Option Rental Provision was void by reason of s 18(3)(c) of the RL Act. The Court also declined to permit Pozetu to rely on these grounds in support of its application for judicial review of the Appeal Panel’s decision. Of course, in so doing the Court should not be taken as expressing a view as to the merits of the argument Pozetu wished to advance.

    (Emphasis added)

    [21] Pozetu Pty Ltd v Alexander James Pty Ltd [2016] NSWCA 208 at [33].

    [22] Pozetu Pty Ltd v Alexander James Pty Ltd [2016] NSWCA 208 at [40].

17. The judgment of the Court of Appeal proceeded on the basis that all parties to the Tribunal proceedings had accepted that the Option Rental Provision was to be regarded as void by reason of s 18(3)(c).[23] The consequence of that accepted position was that on the purported exercise of the option to renew the lease, the parties had failed to reach a concluded agreement on all essential terms of the new lease. As the Court of Appeal observed:[24]

    If the parties never reached agreement as to a fundamental term of the renewed lease, they could not have concluded a final and binding agreement to enter into a new lease for a term of five years. As three members of the High Court recently observed:[25]

    “On basic principles, there can be no enforceable agreement to renew a lease, breach of which sounds in damages, unless at least the essential terms of such a lease have been agreed upon.”

    It is an essential term of a lease that the parties have agreed on the rental payable by the lessee or on a mechanism for determining the rental payable by the lessor.[26]

    (Footnotes in original)

    [23] Pozetu Pty Ltd v Alexander James Pty Ltd [2016] NSWCA 208 at [60].

    [24] Pozetu Pty Ltd v Alexander James Pty Ltd [2016] NSWCA 208 at [45].

    [25] Crown Melbourne Ltd v Cosmopolitan Hotel (Vic) Pty Ltd [[2016] HCA 26 at [31] (French CJ, Kiefel and Bell JJ).

    [26] Placer Development Ltd v The Commonwealth [1969] HCA 29; 121 CLR 353 at 360-361 (Taylor and Owen JJ); Booker Industries Pty Ltd v Wilson Parking (Qld)Pty Ltd [1982] HCA 53; 149 CLR 600 at 604 (Gibbs CJ, Murphy and Wilson JJ); Crown Melbourne Ltd v Cosmopolitan Hotel (Vic) Pty Ltd [[2016] HCA 26] at [199] (Nettle J) and authorities cited there.

18. Thus, the Court of Appeal did not endorse the tribunal’s conclusion that s 18(3)(c) necessarily invalidated the whole of the Option Rental Provision. However, it recognised, consistently with the observations of the High Court in Crown Melbourne Ltd v Cosmopolitan Hotel(Vic) Pty Ltd,[27] that if this was the effect of the section on the Option Rental Provision, the parties could never have formed an agreement to enter into the new lease, the rental payable being an essential term.

    [27] [2016] HCA 26.

19. These observations do point up one further matter, however. The comments by the New South Wales Court of Appeal, quoted above, identify that a mechanism for determining the rental payable is as much of an essential term of the lease as the rent itself. When considering what it is that s 22(3)(c) renders void, it should be remembered that cl 4.10(a) not only identifies two different methods for calculating the rent, but also the mechanism for choosing between them, that is, whichever is higher. Diakou’s core thesis that the whole of cl 4.10(a) is invalid draws force from the observation that the mechanism for choosing one of two methods is itself prohibited by the section. Absent that mechanism, Diakou’s contention is that the parties did not reach agreement over which method was to be used.

20. This thesis has received support since the hearing of this preliminary trial. On 17 November 2022, the Chief Justice delivered judgment in Forza v Autocash Pty Ltd.[28] This was a single judge appeal from a decision of a magistrate.[29] One issue arising was the effect of s 22(3)(c) on cl 14 of a lease of commercial premises. Clause 14 read:

    [28] [2022] SASC 133.

    [29] Autocash Pty Ltd v Forza [2022] SAMC 24.

    14.     Rent Review

    At the annual anniversary of the Lease Commencement Date (refer clause 6) by 5% or the most recent CPI (Adelaide) whichever is the greater

    Market review every 60 (sixty) months.

21. The parties in Forza accepted that cl 14 was inconsistent with s 22(3)(c). The lessor submitted that the words, ‘or the most recent CPI (Adelaide) whichever is the greater’ could be severed. That submission mirrors Gouger Street’s submission with respect to cl 4.10(a) in the present case.

22. The magistrate did not accept that this portion of the clause could be severed. She observed that the lessor did not contend that one of the two methods of calculation was invalid. Rather, she characterised the lessor’s submission as ‘effectively asking the Court to choose one method over the other to eliminate the inconsistency with s 22(3)(c)’.[30] She rejected that approach, characterising it as rewriting the contract so as to achieve severability.

    [30] Autocash Pty Ltd v Forza [2022] SAMC 24 at [10].

23. The Chief Justice endorsed the magistrate’s approach in this regard. His Honour drew from an observation of White J in C Convenience Stores Pty Ltd v Wayville Plaza Retirement Pty Ltd, on the topic of the severability of void restrictive covenants, that:[31]

    Ultimately, the question of whether offending provisions should be severed is to be determined by reference to the intention of the parties as disclosed by the contract itself.

    [31] (2012) 114 SASR 299 at [170].

24. The Chief Justice concluded in Forza:[32]

    The critical question is the intention of the parties at the time of the contract. There are no contextual circumstances, either leading up to or after the execution of the contract, which provide any foundation for ascertaining the objective intentions of the parties as to which of the two limbs of the rent review clause should be severed in the event of invalidity. In particular, the selection of one of those ends, the flat five per cent increase, in the periods after the Lease was entered into, shows no more than that that was the most favourable option and was selected by the Forzas as such. It does not disclose anything about the Forzas’ subjective intention in the event of invalidity and discloses even less as to the objective intention of Autocash.

    [32] Forza v Autocash Pty Ltd [2022] SASC 133 at [82].

25. Diakou relied on Forza as establishing that in the present case, s 22(3)(c) renders cl 4.10(a) wholly void, as it did cl 14 in that case, unless the parties had agreed that one or other of the limbs would be severed. There is no material difference between cl 14 in Forza and cl 4.10(a) in the present case.

26. Gouger Street submitted that it was apparent that both the magistrate and the Chief Justice in Forza applied common law contractual principles of severance in circumstances where the application of s 22(4) was not in issue. That is, by contending for the retention of the five per cent method, the lessor was contending for the result prohibited by s 22(4) (as the alternative CPI method ‘may’ result in a decrease in rent).

27. More specifically, Gouger Street submitted that no submission appeared to have been made, and no consideration given to, the operation of s 22(4) on cl 14 so as to give a statutory direction as to severance of the part that prevents a possible decrease, that is, the words ‘5% or’ and ‘whichever is the greater’. Further, it submitted that no consideration was given to the ‘wait and see’ construction, which I understood to be the consequence of the words in s 22(3)(c) ‘on a particular occasion’, such that the section requires the lower of the two rents to be adopted once the outcome of the rent review was known. The mischief addressed by s 22(3)(c) is the requirement to adopt the higher of the two methods provided, whereas the mischief addressed by s 22(4) is the ratchet effect.

28. These matters not being addressed in Forza, Gouger Street submitted that Forza was not authority for the proposition relied on by Diakou. In response, Diakou contended that s 22(3)(c) had to operate according to its terms. Moreover, it submitted that in Forza, s 22(4) had no work to do. The only change that could occur under cl 14 was five per cent or CPI, whichever was the greater. That provision could not, in Diakou’s submission, allow the rent to decrease, even if CPI operated negatively.

29. There are several operative elements to the competing contentions. In order to understand how s 22 operates on cl 4.10, it is first necessary to determine which parts of s 22 are capable of operating on the clause. Whether s 22(4) is capable of operating on clause 4.10(a) and (b) is an elemental part of the contest. If it does, then it is necessary to progress to the question of how it interacts with s 22(3)(c). If it does not, the question is simplified to the manner of application of s 22(3)(c) only.

30. As a matter of bare textual reading, cl 4.10(a) includes a method that ‘may result in a decrease of rent’. Indeed, the example given in s 22(4), which is part of the Act,[33] is of the first method provided by cl 4.10(a), being a provision for the rent to change to current market rent. Similarly, the method provided for in cl 4.10(b) which is dependent on changes to CPI, may result in a decrease in rent.

    [33] Legislation Interpretation Act 2021 (SA), ss 19, 20.

31. Next, and again as a matter of pure text, as Gouger Street submitted, the words in cl 4.10(a), ‘or shall be the rent prior to the review date increased by 4%, whichever is the greater’, prevents any possible decrease by application of the current market rent method. Again, cl 4.10(b) operates in a similar fashion.

32. However, at the same time as agreeing these clauses, the parties also agreed cl 4.10(c), which provides:

    (c)Under no circumstances shall the rent payable following any rent review be less than the rent payable immediately prior to such rent review.

33. This is a qualification to both cll 4.10(a) and 4.10(b), in that it provides, in effect, that the ‘non-percentage’ change method in each case is not to apply should it result in a decrease in rent.

34. Obviously enough, s 22(4) operates to render void cl 4.10(c). It might be thought, then that this observation is of no consequence. However, in my view, it is of consequence to Gouger Street’s argument. Identifying that consequence requires some steps.

35. Gouger Street submitted, and indeed it was an essential part of its argument, that s 22(4) necessarily operated first on cll 4.10(a) and (b), that is, prior to cl 22(3)(c). Section 22(3)(c) then operated only on so much of the clauses as survived the operation of s 22(4). This was, in Gouger Street’s submission, a consequence of s 22(3)(c) operating only on the particular occasion of a rent review, whereas s 22(4) did not direct attention to the particular occasion of a rent review being carried out. Rather, the effect of s 22(4) on a provision of a lease was to be determined by reference to whether a provision of a lease might result in a decrease in rent.

36. The next step, then, is to consider the effect of the words ‘on a particular occasion’. Gouger Street’s contention that this only has the effect of suspending the method of calculating rent on the occasion of the rent review that results in the higher rent has two parts. One is the use of the words ‘on a particular occasion’. However, as explained above, that can be read in another way as well. That is simply that a provision of a lease that makes provision for rent to change in accordance with the higher of two methods, and identifies the occasion when that is to occur, it is void, to that extent, at all times.

1. Accepting that ‘void’ means inoperative for as long as the RCLA applies is one thing. It is a different proposition to say that the voidness only visits on the occasion of the rent review.

2. The starting point is the rule that an Act is considered to be speaking at all times:[34]

   An Act or a legislative instrument will be considered as speaking at all times, and every provision of an Act or a legislative instrument, whether expressed in the present or the future tense, will be applied to the circumstances as they arise, so that effect may be given to each provision according to its spirit, true intent and meaning.

   [34] Legislation Interpretation Act 2021 (SA), s 17.

3. I did not understand Gouger Street’s contention to deny the application of this rule. Rather, on its submission, the wording of s 22(3)(c) meant that in its continuous operation, it only had work to do on the occasion (in this case) a rent review.

4. On the basis, however, that s 22(3)(c) is considered to be speaking at all times, the first observation is that it does not stipulate the occasion of its own operation. It simply provides that a provision that provides as proscribed, ‘is void’ to the extent that it does so. That is to say, its commencing operative language is one of unqualified voiding.

5. Next, the words ‘to the extent that’ are certainly directed to confining that which is void within the lease. However, they remain words of descriptive limitation: that part of the lease that ‘provides for base rent to change on a particular occasion [such as a rent review date]’ in the prohibited manner, is void. There is nothing about the words ‘to the extent that’ that supports s 22(3)(c) only having a visiting effect on the occasion of the rent review. In my view, these words simply ensure that no more of the lease is void than that which has the proscribed effect, for as long as the RCLA applies. As I will come to, the consequences of that confined and potentially temporary voidness are another matter.

6. Third, the contention by Gouger Street that the words ‘on a particular occasion’ in s 22(3)(c) mean that the section only results in voidness on the occasion of (in this case) the rent review requires, in my view, a highly strained reading of the text. Section 22(3)(c) says that a provision of a retail shop lease is void to the extent that it provides for base rent to change on a particular occasion in the proscribed manner. On its face, those words are nothing more than a description of the content of that which is rendered void. That is, if a provision provides for base rent to change on a particular occasion (such as on an anniversary of a commencement date), in the proscribed manner, that provision is void to that extent.

7. In my view, the words of s 22(3)(c) do not purport to operate only on the particular occasion. They operate to render a provision meeting the description in the sub-section void at all times.

8. This reading of s 22(3)(c) does not underestimate the importance of the approach described in Connor Hunter (a Firm) v Keencrest Pty Ltd & Ors[35] and Tindall Cobham 1 Limited & Ors v Adda Hotels & Ors,[36] above, and the undesirability of a consequence that would emasculate the contract. However, the question of statutory interpretation must come first. How that might then affect the lease, and whether severance in accordance with the terms of the legislation can be achieved without adding to or modifying the wording that remains is a subsequent question. For example, a lease might contain a further provision addressing the event of application of the RCLA. If it does not, the possibility that the RCLA may at some stage cease to apply will not prevent a conclusion, if it is warranted, that there has been no agreement on an essential term.

   [35] [2009] QCA 156.

   [36] [2014] EWCA Civ 1215.

9. Once it is accepted that both ss 22(3)(c) and 22(4) operate at all times on the provisions of the lease to which they are relevant and not, in the case of s 22(3)(c), just on the occasion of (in this case) a rent review, the next step in the interpretive process can be taken. Sections 22(3)(c) and 22(4) are expressed to regulate different things. When they are applied to the 2006 Lease, s 22(3)(c) has an obvious application to cll 4.10(a) and (b), as qualified by cl 4.10(c). Section 22(4) has an obvious application to cl 4.10(c) itself, to the extent that cl 4.10(c) ‘prevents or enables [Diakou] to prevent [a] decrease’.

10. Taking cl 4.10(a) as an example, this clause does two things. First, on its terms, it provides a mechanism that transgresses s 22(3)(c). Secondly, in its effect, it prevents the ‘current market rent’ method from applying where that would happen to result in a decrease, because a four per cent increase would always be greater. That effect would seem to attract the operation of s 22(4).

11. Once Gouger Street’s contention as to the effect of the words ‘on a particular occasion’ is rejected, there is no basis for saying that cl 22(4) applies first to neutralise cl 4.10(c) and then that part of cll 4.10(a) or 4.10(b) that would consequently, in effect, purport to prohibit a decrease, with s 22(3)(c) to then operate on what, if anything, is left. Rather, in applying at all times, both ss 22(3)(c) and 22(4) operate on the sub-clauses of cl 4.10, at the same time and at all times, to the extent that these sub-clauses make the proscribed provisions. Both ss 22(3)(c) and 22(4) operate, at all times, to render void provisions of the lease to the extent to which those provisions provide for the proscribed methods. Thus:

    ·to the extent that cl 4.10(a), on its terms, prevents a decrease under the current market rent review method, it is void (s 22(4));

    ·similarly, to the extent that cl 4.10(b), on its terms, prevents a decrease under the CPI-linked method, it is void (s 22(4));

    ·to the extent that each of cll 4.10(a) and 4.10(b) provides for base rent to change on a particular occasion in accordance with whichever of two or more methods of calculating the change would result in the higher rent, it is void (s 22(3)(c)); and

    ·given that each of cll 4.10(a) and 4.10(b) provides for a change to rent that may result in a decrease in rent, being the current market rent method or CPI‑linked method, to the extent that cl 4.10(c) prevents that decrease, cl 4.10(c) is void (s 22(4)).

12. It is sufficient for present purposes to determine how, on its terms, s 22(3)(c) applies to cll 4.10(a) and (b). That section renders void a provision of a lease to the extent that it provides for base rent to change on a particular occasion in accordance with the identified mechanism. That is, it renders void not just the method that results in the higher rent, but the provision for the rent to change in accordance with the proscribed mechanism.

13. It may be broadly accepted, as Gouger Street submitted, that the mischief being addressed is the existence of methods of calculating rent, one of which results in a higher rent than the other with the higher rent being adopted. However, Parliament has chosen to address that mischief by invalidating not just the higher resulting rent, but the provision for base rent to change in accordance with the mechanism of stipulating two or more methods.

14. Once that provision is identified as void, there is nothing in the Lease that provides for one or other of the methods to apply in any event. To conclude that the parties intended that one or other method would apply in any event would require reading in words that have not been the subject of any agreement. The present situation is relevantly indistinguishable from that considered by the Chief Justice in Forza v Autocash Pty Ltd.[37] Gouger Street has not identified any basis other than the terms of the Lease for identifying the objective intentions of the parties. Clauses 4.10(a) and 4.10(b) are, together with cl 4.10(c), void in their entirety.

    [37] [2022] SASC 133.

15. Subject to addressing the further issues raised on the preliminary trial, this conclusion has the potential to emasculate the Lease. Bearing in mind the observations of Patten LJ in Tindall Cobham 1 Limited & Ors v Adda Hotels & Ors,[38] above, it can be accepted that Parliament did not intend to invalidate more than that which gave effect to the identified mischief. However, it would be a mistake, in my view, to conclude that for this reason, Parliament only intended to sever the method with the higher resulting rent.

    [38] [2014] EWCA Civ 1215.

16. Parliament cannot be taken to have had a particular form of lease in mind. Other leases may contain further alternative methods of rent review, expressed to apply in the event of invalidity of a clause exhibiting the mischief contemplated by s 22(3)(c). Put another way, an imputed general intention of Parliament not to emasculate leases beyond that which is rendered void by the terms of the section will not save a particular lease from being emasculated if, on its terms, that which is rendered void by the words of the section leaves an irrecoverable gap. Whether that has occurred in this case is, in the first instance, the subject of Issue 2.

    Issue 2:     If cl 4.10 became wholly void, was the effect that there was no grant of a further five-year lease on 1 September 2011 because there was no agreement between the Lessor and the Lessee as to a mechanism for fixing rent payable under the 2011 Lease?

17. Diakou submitted that as cl 4.10 was rendered void, there was no agreement on the rent, on a mechanism for determining the starting rent or on the rent for years two to five of the 2011 Lease, if the Lessee had purported to renew the Lease under cl 4.9. This submission relied, in the first instance, on the premise that while a right of renewal is an incident of a lease, its exercise results in the grant of a new lease.[39]

    [39] Mercantile Credits Ltd v The Shell Company of Australia Ltd (1976) 136 CLR 326 at 344-345 (Gibbs J).

18. The next step, in Diakou’s submission, was that cl 4.9(a) of the 2006 Lease constituted an offer, in terms, to the Lessee to grant a new lease at the expiration of the first term. Clause 4.9(a) provided, in part:

    (a)      First Right of Renewal

    On the written request of the Lessee made not less than six nor more than nine months before the expiration of the Term set out on page 1 of this Lease and PROVIDED THAT there shall not at the time of such request be any existing breach or non-observance of any of the covenants and conditions herein contained and on the Lessee’s part to be observed and performed the Lessor will at the expense of the Lessee grant to the Lessee an extension of the Lease for the further term set out in Item 7 to the Schedule (if any) subject to and upon the same terms and conditions as are herein contained save for the exclusion of this clause 4.9(a)…

19. Until Schillvest exercised the option, that is, accepted the irrevocable offer contained in cl 4.9(a), there was no contract for a further term.[40] Once Schillvest did exercise the option, there arose a contract requiring Diakou to grant the 2011 Lease on the same terms and conditions as the 2006 Lease.[41]

    [40] Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue (Northern Territory) (2009) 239 CLR 27 at [8] (French CJ).

    [41] Booker Industries Pty Ltd v Wilson Parking (Qld) Pty Ltd (1982) 149 CLR 600 at 606.

20. Those terms and conditions included cl 4.10. Diakou submitted that this exigency resulted in there being no agreement on a fundamental term of the 2011 Lease, that is, the rent or a mechanism for fixing the rent payable. To this end, it relied on the following passages in Pozetu Pty Ltd v Alexander James Pty Ltd:[42]

    If the parties never reached agreement as to a fundamental term of the renewed lease, they could not have concluded a final and binding agreement to enter into a new lease for a term of five years. As three members of the High Court recently observed:[43]

    “On basic principles, there can be no enforceable agreement to renew a lease, breach of which sounds in damages, unless at least the essential terms of such a lease have been agreed upon.”

    It is an essential term of a lease that the parties have agreed on the rental payable by the lessee or on a mechanism for determining the rental payable by the lessor.[44]

    If the parties to a purported renewal of a lease have not agreed on the rental payable under the lease or on a mechanism for ascertaining the rental, no new lease comes into existence either at law or in equity. It necessarily follows that if a lessee purports to exercise an option to renew a lease but there is no agreement between the lessor and lessee as to the rental payable under the renewed lease, no new lease comes into existence, either in law or in equity. If the lessee remains in possession and pays rent a tenancy at will determinable on one month’s notice comes into force pursuant to s 127(1) of the Conveyancing Act, but that occurs independently of the purported exercise of the option to renew.

    As Mr Lynch accepted in argument, if there is no agreement between the parties as to the rental payable under the renewed lease, the exercise of the option to renew cannot result in an agreement for a lease enforceable as a contract. The reason is that an agreement does not result in a binding contract unless the parties have agreed on all terms essential as a matter of law to the creation of the contract sought to be enforced.[45]

    (Footnotes in original)

    [42] [2016] NSWCA 208 at [45]-[47] (Sackville AJA, McColl and Ward JJA agreeing).

    [43] Crown Melbourne Ltd v Cosmopolitan Hotel (Vic) Pty Ltd [[2016] HCA 26] at [31] (French CJ, Kiefel and Bell JJ).

    [44] Placer Development Ltd v The Commonwealth [1969] HCA 29; 121 CLR 353 at 360-361 (Taylor and Owen JJ); Booker Industries Pty Ltd v Wilson Parking (Qld) Pty Ltd [1982] HCA 53; 149 CLR 600 at 604 (Gibbs CJ, Murphy and Wilson JJ); Crown Melbourne Ltd v Cosmopolitan Hotel (Vic) Pty Ltd [[2016] HCA 26] at [199] (Nettle J) and authorities cited there.

    [45] Mushroom Composters Pty Ltd v IS & DE Robertson Pty Ltd [2015] NSWCA 1 at [61]-[63] (Sackville AJA, Macfarlan and Gleeson JJA agreeing).

21. The consequence of cl 4.10 being void, Diakou submitted, was that any exercise of the right of renewal under cl 4.9(a) could not result in an enforceable agreement as there was no agreement on the rent payable. As an alternative, Diakou cast the consequence as the agreement being void for uncertainty. It further submitted that in circumstances where there could be no grant of a further lease on the same terms and conditions as the 2006 Lease, with both cll 4.10 and 2.2 being void, the lease could not be in the ‘same form’. It followed that the obligation to grant a lease in the same form was impossible to perform. On any view, it submitted, no new lease came into existence at law or in equity on 1 September 2011.

22. Gouger Street submitted that Pozetu should be distinguished. It submitted, based on the description in the judgment, that the ‘option provision’ in the lease in that case itself specified the (void) mechanism for determination of rent for the renewed term. In circumstances where the provision fixing rent was conceded to be void, the exercise of the option was found not to give rise to an agreement, as there was no agreement as to rent. Gouger Street sought to distinguish this from the present case, in that cl 4.9 of the 2006 Lease does not refer to rent, and only provided that the renewed term would be ‘upon the same terms and conditions as are herein contained’.

23. The consequence, in Gouger Street’s submission, was that even if cl 4.10 was wholly void, the provision in cl 4.9(a) for renewal on the ‘same terms and conditions as are herein contained’ meant that the existing rent would continue into the renewed term, but with no review of the rent.

24. In the first instance, I do not think Gouger Street’s characterisation of the description of the lease from the judgment in Pozetu is accurate. Gouger Street relied, in this regard, on paragraph [12] of the judgment of Sackville JA, which reads as follows:[46]

    Clause 4.2 of the 2003 Lease conferred on James as lessee an option to renew the lease for a period of five years from 1 September 2008.[47] The 2003 Lease stated that the rent payable from the commencement date of the new lease until the first review date was to be the:

    “Greater of:

    (a)     Current Market Rent; and

    (b)     105% of the rent in the last year of the previous term.”[48]

    I refer to this provision in the 2003 Lease as the Option Rental Provision.

    (Footnotes in original; emphasis in original)

    [46] Pozetu Pty Ltd v Alexander James Pty Ltd [2016] NSWCA 208 at [12].

    [47] Clause 4.2; Schedule, Item 12A.

    [48] Clause 5.11; Schedule, Item 13A.

25. It is apparent from the footnotes to this passage that the option to renew the lease was contained in cl 4.2 and Item 12A of the Schedule. The ‘Option Rental Provision’ was contained in cl 5.11 and Item 13A of the Schedule. Contrary to Gouger Street’s submission, the provision containing the option to renew does not appear to have contained the mechanism for determination of rent for the renewed term.

26. I therefore do not accept Gouger Street’s submission seeking to distinguish Pozetu. Neither would I depart from the reasoning in that case. Gouger Street’s submission depends on the proposition that in the event of cl 4.10 being void, the existing rent in the 2006 Lease at the time of renewal constitutes one of ‘the same terms and conditions’ on which the lease is to be renewed. The relevant words in cl 4.9(a) are, ‘subject to and upon the same terms and conditions as are herein contained save for the exclusion of this clause 4.9(a) …’. This phrase, in its terms, incorporates all clauses of the 2006 Lease, except for cl 4.9(a), as on renewal that clause becomes redundant. It extends to an agreement that cl 4.10 will be incorporated into the new lease.

27. Gouger Street’s argument relies, with respect, on an unduly semantic reading of cl 4.9(a). In the event of cl 4.10 being void, to conclude that the existing rent under the 2006 Lease remains as an existing term and condition fails to give effect to the agreement the subject of cl 4.9(a). Clause 4.9(a) does not incorporate an agreement that the old rent will continue to apply if cl 4.10 happens to be void. It expresses an agreement by the parties to incorporate all terms and conditions contained in the lease. The subsequent voidness of cl 4.10 means that one of the terms agreed to be included in the new lease is void.

28. This conclusion is assisted by, although not dependent upon, the express exclusion of the renewal of cl 4.9(a) itself. On renewal, cl 4.9(a) obviously enough becomes redundant. Yet the parties saw fit it exclude it expressly. They did not address the possibility of non-application of any other clause. The only available conclusion, in my view, is that the agreement contained in clause 4.9(a) included an agreement to incorporate cl 4.10. On cl 4.10 being void, there was no agreement as to the rent or the mechanism for determining rent on the renewed lease.

29. Gouger Street further submitted that as s 22 only supervened for as long as the RCLA applied to the Lease, it followed that it was ‘contemplated’ (necessarily, by Parliament) that the suspended clauses would cease to be suspended and resume operation if, at some time in the future, the RCLA ceased to apply. The suspended clauses thereby remained a term of the Lease, but their operation was subject to the RCLA for as long as it applied.

30. In my view, this submission fails as a matter of logic. It may be accepted that Parliament intended the RCLA to apply to those leases with below-threshold rents only for as long as the rent remained below the threshold. It follows that the RCLA might cease to apply to some leases in the future. However, that does not address the effect of the RCLA on the present lease at the time that it does apply. In some cases, as observed above, for the RCLA to commence to apply to a lease may not have the effect of the parties having failed to agree on an essential term of renewal. For example, the parties may have included an alternative provision, to apply in the event of application of the RCLA. In the present case, the RCLA applies to the Lease on its terms. Clause 4.10 was void at the time of renewal.

1. Clause 2 of the Deed of Assignment then provides:

   Subject to this deed:

   (a)the Assignor as beneficial owner assigns to the Assignee absolutely the Assignor’s right title and interest in the Lease (including the benefit of all options to renew the Lease included therein) for the extended and unexpired Term in accordance with this deed commencing on the Assignment Date;

2. The Deed then repeats the terms of Recitals F to I as cll 6(c) to (f).

3. Gouger Street submitted that at the date of assignment, Schillvest’s right to recover overpayments of rent had not yet accrued. The basis for this was that from 1 September 2011, Schillvest had paid rent on the basis of an amount agreed, on an interim basis, to be the rent payable pending the undertaking of a rent valuation. The rent determination had not taken place as at the Assignment Date. It was eventually undertaken on 9 September 2014, by Mr Pledge. As discussed at an early point in these reasons, Mr Pledge determined that the current market rent as of 1 September 2011, valued in accordance with clause 4.10(a) of the 2011 Lease, was $215,000 (excluding GST) per annum.

4. Gouger Street submitted that the right to recover overpayments of rent was an incident of the exercise of the right under the Lease to review the rent. It could only arise once the rent review had taken place, and therefore did only arise once Mr Pledge had determined the current market rent, on 9 September 2014. In those circumstances, the words ‘the Assignor’s right title and interest in the Lease’ in cl 2 of the Deed of Assignment should be construed as being broad enough to include the right to recover overpayments of rent that were made from 1 September 2011. Gouger Street, as Assignee, was exercising the right of the Lessor to require the rent to be reviewed as at 1 September 2011. The overpayment from that date (on Gouger Street’s case) was only exposed and only crystallised on that rent review. The phrase ‘right title and interest in the Lease’ was required to be construed according to its terms and application in the circumstances.

5. Diakou submitted that any right that Schillvest may have had to recover an asserted overpayment was not a right ‘in the Lease’. Rather, it was a common law right of restitution. ‘The Lease’, by contrast, was the instrument and Schedule and Annexures thereto, and the phrase ‘right title and interest in the Lease’ only referred to the rights in rem conferred by the Lease and capable of assignment. Any right of restitution of overpayments that occurred prior to assignment were rights in personam of Schillvest, arising under the general law, not the Lease.

6. In this regard, Diakou pointed to cl 4.10(e) of the Lease:

   (e)If the new rent from a Review Date shall not be determined until after that Review Date, the Lessee shall continue to pay the annual rent payable by the Lessee immediately prior to the Review Date until the new rent has been determined. Upon determination of the new rent, the Lessee shall forthwith pay to the Lessor any adjustment necessary in respect of any underpayment of the annual rent.

7. This is, of course, part of cl 4.10 which I have found to be invalid. In any event, it points up that under the rent review scheme rendered void by the RCLA, it was only contemplated that the rent would rise on a review. On that understanding, the Lease made provision for adjustment of any subsequently determined underpayment.

8. The parties did not make any commensurate provision in the event of overpayment pending the rent review, for the obvious reason that such an event was, by the terms of cl 4.10, expressly not in contemplation. Having said that, it is not clear to me whether the phrase ‘right title and interest in the Lease’ in cl 2 of the Deed of Assignment would be construed to cause any outstanding obligation of Schillvest under cl 4.10(e) to be assigned to Gouger Street, should such have existed.

9. This observation illustrates that the question is one of construction only. The parties were unable to assist with any authority that could assist directly. The assignment of the cause of action for which Gouger Street contends, if it has occurred, would likely be permitted on the basis that the putatively assigned cause of action was ancillary to the transfer of an interest in property.[101] Diakou did not suggest otherwise. That observation serves only to focus that the question of construction is whether the words in cl 2 served to assign the putative cause of action for overpayment as ancillary to the property transfer effected by the Deed of Assignment.

   [101] Scholle Industries Pty Ltd v AEP Industries (NZ) Ltd (2007) 99 SASR 178 at [16] (White J).

10. There is no clear answer. To the extent that the words in cl 2 might be said to be ambiguous, the parties did not identify any surrounding circumstances to assist in the interpretation of the phrase.[102] I accept there is some force in Gouger Street’s contention. However, there are three matters that may be said to provide some contextual weight in favour of a conclusion that the words in cl 2 do not include that putative cause of action.

    [102] Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337 at 352 (Mason J).

11. First, as Diakou submitted, the existence of cl 4.10(e) provides a contextual indicator that any cause of action of the Lessor in respect of overpayment, following a rent review, was not a right ‘in the Lease’. The parties simply did not objectively contemplate the existence of such a right.

12. Secondly, Schillvest expressly maintained by Recital H and cl 6(e) that it, as Assignor, was entitled to invoke a market rent review as at 30 September 2011 as contemplated by cl 4.10 of the 2006 Lease. This is not a strong indicator, as only Gouger Street as Assignee then expressly ‘reserve[d] all rights in this regard’. Any entitlement to a market rent review was clearly a right in the Lease capable of being assigned. The point is that Schillvest expressed an interest in that entitlement in the Deed of Assignment.

13. Thirdly, and again while hardly conclusive, the words of Recital C tend to suggest that the operative words in cl 2 do not extend as far as Gouger Street submits. Recital C, which I set out again below, contains words additional to those in cl 2, which I have underlined:

    C.Subject to the consent of the Lessor, the Assignor has agreed to assign to the Assignee all the right title and interest of the Assignor in the Lease for the extended and unexpired Term and the benefit of all rights and privileges contained in the Lease as from the Assignment Date.

14. Clause 2 contains words similar to ‘as from the Assignment Date’, namely, ‘commencing on the Assignment Date’.

15. Gouger Street’s argument incorporates the proposition that once a cause of action to recover overpayments is crystallised following review, that is a ‘right’, the benefit of which crystallises after the Assignment Date. However, the phrasing in Recital C might be said to offer a contextual indicator that Gouger Street is not intended to receive the benefit of any right to recover overpayments made by Schillvest before the Assignment Date.

16. If the second and third indicators I have identified above have any force as contextual considerations, that force is not great. The first indicator has some force, but it is not conclusive by itself. There remains little by way of context in the Deed of Assignment that provides any assistance. Ultimately, on a plain reading of cl 2, assisted by the first contextual indicator identified above, I do not think that a right of recovery in restitution on account of overpayments made prior to the Deed of Assignment amounts to a ‘right title or interest in the Lease’ that was assigned. While there is no obvious answer, I accept Diakou’s contention that it is a cause of action in restitution that was not assigned.

17. On Issue 8, I therefore conclude that Schillvest did not assign to Gouger Street its rights (if any) to recover overpayments of rent (if any) by the operation of the Deed of Assignment of Lease dated July 2013 between Schillvest, Gouger Street and Diakou.

    Issue 9:     Did Schillvest assign to Gouger Street its rights (if any) to recover overpayments of rent (if any) and land tax by the operation of the Deed of Assignment dated 18 December 2014 between Schillvest and Gouger Street?

18. On 18 December 2014, the Liquidators of Schillvest and the Directors of Gouger Street signed a document entitled ‘Deed of Confirmation and Assignment’. Clause 1 of this Document (following the Recitals) provided:

    1.     Confirmation of common intention

    Schillvest and GSPL confirm that their common understanding at the time that the Deed of Assignment of Lease was entered into was that GSPL would by reason of the assignment be entitled to claim to recover from Diakou:

    (a)     Payments made by Schillvest on account of rent from 1 September 2011 in excess of the amount lawfully payable upon a proper application of terms of the lease.

    (b)     Payments made by Schillvest on account of land tax not lawfully payable under the lease.

19. By this document, the parties confirmed that their common understanding was contrary to the position as I have found it to be with respect to overpayments of rent, and contrary to the position that Gouger Street has conceded is the case with respect to the payments of land tax. Clause 2 is the operative part of the document:

    2.     Assignment

    Insofar as Schillvest retains any rights, whether by way of rights arising under the lease or otherwise, whether at common law, in equity or under statute, to recover by action against Diakou:

    (a)     payments made by Schillvest on account of rent from 1 September 2011 in excess of the amount lawfully payable upon a proper application of terms of the lease; and/or

    (b)     payments made by Schillvest on account of land tax not lawfully payable under the lease;

    Schillvest assigns to GSPL absolutely all such rights of action.

20. The document is expressed to be a deed. It is purported to be executed by Schillvest Pty Ltd (In Liquidation) in accordance with s 127(1) of the Corporations Act 2001 (Cth) and by Gouger Street in the same manner. The execution clause does not exhibit the common seal of either company.

21. Diakou submitted that this document is not a deed of Schillvest. It submitted that the Liquidators had no power to execute the document in accordance with s 127(1) of the Corporations Act, as liquidators are not directors. It submitted that when a company is in liquidation, for a deed to be validly executed it must be executed by other means. Those other means were necessarily in accordance with s 41(1)(b) of the Law of Property Act 1936 (SA), which provides that a body corporate executes a deed by affixation of the common seal of the body corporate in accordance with the rules governing the use of the common seal.

22. Section 127(1) of the Corporations Act provides:

    127  Execution of documents (including deeds) by the company itself

    Executing a document without a common seal

    (1)A company may execute a document without using a common seal if the document is signed by:

    (a)     2 directors of the company; or

    (b)     a director and a company secretary of the company; or

    (c)     for a proprietary company that has a sole director—that director, if:

    (i)    the director is also the sole company secretary; or

    (ii)     the company does not have a company secretary.

23. Section 127(2) addresses the execution of a document by affixing a common seal. Section 127(3) provides:

    (3)A company may execute a document as a deed if the document is expressed to be executed as a deed and is executed in accordance with subsection (1) or (2).

24. Section 127 is facilitative.[103] It provides a further method for the execution of company documents to those that may otherwise be provided for in the company’s constitution or, for that matter, under the Law of Property Act.

    [103] Ferngrove Pharmaceuticals Pty Ltd v Betterway Healthcare International Group Pty Ltd [2022] SASCA 31 at [40].

25. Section 127(1) makes no provision for execution of a document by liquidators. This is the subject of s 477(2), which provides, in part:

    (2)     Subject to this section, a liquidator of a company may:

    …

    (d)     do all acts and execute in the name and on behalf of the company all deeds, receipts and other documents and for that purpose use when necessary a seal of the company; and

26. Diakou acknowledged the existence of s 477. The effect of its argument, however, was that this changed nothing. Section 127 simply confers a power on the directors. Section 477(2) does not place the liquidator in the shoes of the directors; rather, it confers powers which must necessarily be exercised according to law. Section 127 not being available, as it is concerned with directors’ powers, it is necessary for a liquidator to execute any deed in accordance with s 41(1)(b) of the Law of Property Act.

27. Diakou did not identify any authority in support of this construction. Indeed, neither party was able to identify any direct authority on the question.

28. Gouger Street submitted that it would be absurd if the power in s 127 were not available to liquidators on a liquidation, requiring liquidators to conform with s 41(1)(b). In this regard, they relied on the following statement by Beach J in Pyramid Building Society v Howell & Bannister:[104]

    It follows from those sections that the liquidator of Pyramid has the power to execute on behalf of Pyramid all documents. The execution of documents is a function ordinarily performed by officers of a company pursuant to powers conferred on them by the company. In the present case the power to sign or execute the certificates in question was conferred upon the directors of Pyramid, its commercial lending manager and its loans administration manager. But on the appointment of Mr Hodgson as liquidator of Pyramid, those officers ceased to have those powers. In my opinion that power was transferred to the liquidator and through the liquidator to Mr Edge, so that when Mr Edge signed the certificates he was exercising the functions or powers ordinarily conferred upon the directors of pyramid, its commercial lending manager or its loans administration manager. If that was not the situation it would mean that if the power to sign documents had been specifically conferred upon a named officer of the company, or a category of officers of a company, that power could never be exercised by a liquidator. In my opinion that would be an absurdity.

    [104] (1994) 14 ACSR 633 at 636.

29. Diakou submitted that this reasoning was inapposite in the present case, as Beach J was there considering the signing of certificates, not the execution of a deed.

30. Schillvest was in voluntary liquidation; the powers under s 477(2) were extended to the liquidators by operation of s 506(1)(b). Sub-section 477(2)(d) is one grant of power to a liquidator among an extensive list of powers in s 477. The powers in s 477 are not unbounded; for example, s 477(2A) circumscribes a liquidator’s ability to compromise debts to the company. However, the general purpose and effect of s 477 is to give to liquidators the broad run of general powers that are otherwise conferred on directors. Thus, s 477(1)(a) provides:

    (1)     Subject to this section, a liquidator of a company may:

    (a)     carry on the business of the company so far as is, in the opinion of the liquidator, required for the beneficial disposal or winding up of that business; …

31. This subsection has no direct application to the present controversy, but it is a contextual indicator of the broadly facilitative purpose of the section. Further, s 477(1)(a) performs a substitute function, in the case of liquidation, for that of s 198A. Sub-section 198A(1) provides that the business of a company is to be managed by or under the direction of the directors. Sub‑section 198A(2) empowers the directors to exercise all the powers of the company except any powers that the Act or the company’s constitution requires the company to exercise in general meeting.

32. In Project Blue Sky Inc & Ors v Australian Broadcasting Authority, the plurality said that the primary object of statutory construction:[105]

    … is to construe the relevant provision so that it is consistent with the language and purpose of all the provisions of the statute.[106] The meaning of the provision must be determined “by reference to the language of the instrument viewed as a whole”.[107] In Commissioner for Railways (NSW) v Agalianos,[108] Dixon CJ pointed out that “the context, the general purpose and policy of a provision and its consistency and fairness are surer guides to its meaning than the logic with which it is constructed”. Thus, the process of construction must always begin by examining the context of the provision that is being construed.[109]

    (Footnotes in original)

    [105] (1998) 194 CLR 355 at [69] (McHugh, Gummow, Kirby and Hayne JJ).

    [106] See Taylor v Public Service Board (NSW) (1976) 137 CLR 208 at 213, per Barwick CJ.

    [107] Cooper Brookes (Wollongong) Pty Ltd v Federal Commissioner of Taxation (1981) 147 CLR 297 at 320, per Mason and Wilson JJ. See also South West Water Authority v Rumble’s [1985] AC 609 at 617, per Lord Scarman, “in the context of the legislation read as a whole.”

    [108] (1955) 92 CLR 390 at 397.

    [109] Toronto Suburban Railway Co v Toronto Corporation [1915] AC 590 at 597; Minister for Lands (NSW) v Jeremias (1917) 23 CLR 322 at 332; K & S Lake City Freighters Pty Ltd v Gordon & Gotch Ltd (1985) 157 CLR 309 at 312, per Gibbs CJ; at 315; per Mason J; at 321, per Deanne J.

33. The Court is required to give the words used the meaning that the legislature is taken to have intended them to have.[110] Ordinarily, that meaning will correspond with the grammatical meaning of the section, although the context, consequences of any particular construction and the purpose of the statute may sometimes require a non-literal interpretation to be adopted.[111] The other aspect of this is that absent an examination of context and purpose, a literal interpretation may be impossible, or meaningless.

    [110] Corporate Affairs Commission (NSW) v Yuill (1991) 172 CLR 319 at 321 (Brennan J).

    [111] Project Blue Sky Inc & Ors v Australian Broadcasting Authority (1998) 194 CLR 355 at [78] (McHugh, Gummow, Kirby and Hayne JJ).

34. Absent s 127, the directors would, in exercising the power to execute deeds as an incident of s 198A, be required to comply with s 41 of the Law of Property Act. However, the Corporations Act has made other provision in that regard. As the Court of Appeal observed in Ferngrove Pharmaceuticals Pty Ltd v Betterway Healthcare International Group Pty Ltd:[112]

    The purpose of s 127(3) is to allow companies to execute a deed without fixing a company seal, which the company may not have, to the instrument.

    [112] [2022] SASCA 31 at [57] (Kourakis CJ, Doyle and Bleby JJA agreeing).

35. The force of Diakou’s submission lies in the text of s 477(2)(d), which does not expressly incorporate the methodology permitted of directors in s 127. Further, s 477(2)(d) contemplates the use of the company seal ‘when necessary’.

36. Having said that, bearing in mind the manifest purpose of s 127(3), s 477 is clearly intended to empower liquidators to carry on the business of a company in the manner contemplated by the Corporations Act. The prospect of the power to execute a deed being denied to a liquidator where, for example, the company does not have a company seal, appears absurd. Neither is there any purposive reason to deny that facility.

37. I read the power in s 477(2)(d), and specifically the word, ‘execute’ as necessarily impliedly incorporating the methodology provided for by s 127. That is, the section impliedly confers on liquidators a power to execute deeds in the manner contemplated by s 127, with the liquidator(s) signing in place of the director(s). I adopt a purposive construction that I consider to be necessary to avoid absurdity and on the additional basis that this construction otherwise furthers the object of s 477. The force of Diakou’s submission to the contrary lies in a literal reading of the sections. However, in my view, this is a case where the context, the consequences of a literal construction and the purpose of statutory regime conferring powers on liquidators require a non-literal interpretation to be adopted.

1. If I am wrong in this conclusion, it would be necessary for the liquidators to have complied with s 41(1) of the Law of Property Act and execute the deed by affixing the common seal of Schillvest, assuming it existed. The liquidators did not do so. In that case, s 41(4) provides:

   (4)Notwithstanding the defective execution of a deed by or on behalf of a party to the deed, the execution will be taken to be valid if it appears from evidence external to the deed that the party intended to be bound by it.

2. Gouger Street relied, in the alternative to its submissions on the application of s 127, on a number of matters to support a submission that s 41(4) was satisfied. Most of these matters were, however, exigencies of the deed itself and not evidence ‘external to the deed’. That said, any evidence ‘external to the deed’ need not be direct evidence of the intention of the party. It may be that the conclusion of an intention to be bound can be drawn from circumstantial evidence that tends to confirm the intention otherwise expressed in the deed. In Ferngrove Pharmaceuticals, the Court of Appeal said:[113]

   Section 41(4) largely reflects the modern common law. At common law extrinsic evidence is admissible to determine the parties’ intention when executing an instrument said to be a deed.[114]  The parties’ subjective intention is relevant and the Court is not restricted to deducing the intention solely from the instrument itself.[115]  The self-description as a deed on the one hand, or as a mere agreement on the other, is relevant but not decisive.  When the terms ‘agreement’ and ‘deed’ are used indiscriminately and interchangeably the Court must construe the instrument to determine whether it was intended to take effect as a deed or not.[116]

   Section 41(4) of the LPA is important in this case. The document entitled ‘Deed’ in this case can be said to suffer from defective execution in that Ferngrove did not affix a seal in accordance with s 41(1)(b). Nonetheless it can properly be inferred that Ferngrove intended to be bound by the Deed because it is signed by its sole director and shareholder. There is no evidence that Ferngrove had a corporate seal, or that, if it did, its failure to fix it to the document resulted from a desire not to be bound. Moreover, the fact that Ferngrove reviewed the clauses of the ‘deed’ and requested that Betterway amend some of its terms manifests an understanding that it would be bound by the terms of the ‘deed’ on execution. The sending of the document by express, tracked post, and Ferngrove’s request that a facsimile of the executed document be returned to it, also shows that Ferngrove understood, and intended, that it would be bound by the deed on execution. The importance of the ‘deed’ as a prerequisite to establishing what was expected to be a mutually beneficial trading commercial opportunity under the Supply Agreement also confirms as much.

   (Footnotes in original)

   [113] [2022] SASCA 31 at [59]­–[60] (Kourakis CJ, Doyle and Bleby JJA agreeing).

   [114] Xenos v Wickham (1867) LR 2 HL 296 at 312; Wardley Australia Ltd v McPharlin (1984) 3 BPR 9500 (NSWSC); Ansett Transport Industries (Operations) Pty Ltd v Comptroller of Stamps (Vic) [1985] VR 70; Dean v Lloyd (1991) 3 WAR 235 at 252.

   [115] Westlaw AU, The Laws of Australia (online at 14 April 2022) 28. Real Property ‘28.2 Old System Title’ [28.2.480]; Rose v Commissioner of Stamps (SA) (1979) 22 SASR 84 at 87-88, cf Nicholas Seddon, Seddon on Deeds (Federation Press, 2015) [2.5].

   [116] 400 George Street (Qld) Pty Limited v BG International Limited [2010] QSC 66.

3. Here, the deed was signed by the Liquidators. The signatures are not evidence ‘external to the deed’. However, it is not contested that the Liquidators whose signatures appear on the deed were appointed as Liquidators of Schillvest. That fact is in evidence by the Historical Company Extract for Schillvest which was tendered at the hearing.

4. The fact of the Liquidators’ appointment indicates that the company had, by special resolution, resolved that it be wound up.[117] Moreover, Schillvest was, from that date, required to cease carrying on its business except so far as, in the opinion of the Liquidators, was required for the beneficial disposal or winding up of that business.[118] That is to say, the Liquidators had statutory obligations limiting their functions to the disposition of the business of the company with a view to winding up. The fact that they were appointed is evidence that Schillvest intended to be bound by a document signed by them.

   [117] Corporations Act 2001 (Cth), s 491(1).

   [118] Corporations Act 2001 (Cth), s 493.

5. This may not be sufficient evidence to draw the required inference on its own. However, Gouger Street also pointed to evidence that, prior to execution of the document, the Liquidators had received a letter from the solicitors for the Receivers dated 8 December 2014, confirming that the Receivers released any security they had over any causes of action to recover overpayments or rent and land tax, so that Gouger Street could pursue a claim to recover those overpayments. That letter is not evidence of Schillvest’s intention. However, it is evidence that the Deed was signed by the Liquidators in circumstances where a barrier to the Liquidators being able to do so had been removed.

6. The Liquidators also received a letter dated 12 December 2014 from the solicitors for Gouger Street, enclosing a copy of the draft deed and requesting its execution. The letter contained the following:

   3.Our client is desirous to ensure that its entitlement to bring proceedings against the lessor to recover overpayments by Schillvest is beyond doubt.

   4.We are writing to request on behalf of our client that you, in your capacity as the liquidator of Schillvest, enter into a deed with our client confirming, so far as you are able, that Schillvest retains no rights to bring the proceedings and so far as may otherwise be necessary, assigns absolutely to our client Schillvest’s “chose in action” (or right to claim) the amount of land tax and rent overpaid by Schillvest to the lessor.

7. Again, this letter is not itself evidence of Schillvest’s intention to be bound, as it is not Schillvest’s letter. However, the deed was signed on 18 December 2014. This was six days after this letter and 10 days after the Liquidators had received the letter from the Receivers. These communications preceded, in short order, the Liquidators signing the document. That evidence allows an inference that the Liquidators, acting on behalf of the company, were acceding to Gouger Street’s request to cause Schillvest to execute the deed, having cleared the potential obstacle of the permission of the Receivers. That, in turn, permits an inference that they intended the company to be bound by the deed.

8. In my view, the evidence is sufficient, if only just, to permit the inference that Schillvest intended to be bound by the deed. I find, pursuant to s 41(4) of the Law of Property Act, that the execution, to the extent that it is defective, is taken to be valid in any event.

9. As a further alternative, Gouger Street submitted that the deed, if not valid as a deed, nonetheless had effect as a simple contract, in that in consideration for the assignment, Gouger Street undertook by cl 4(a):

   … to indemnify and keep indemnified on a full indemnity basis Schillvest from and against any liability for costs which may be incurred by Schillvest to Diakou arising out of proceedings brought by GSPL against Diakou.

10. Diakou complained that this document is not pleaded to be effective as a simple agreement. That appears to be correct. Diakou also contended that there was no evidence of consideration on the face of the document. It did not refer to cl 4(a).

11. This argument only received short attention from both parties. In the event, I have found that the deed was validly executed. It is further the case, however, that Gouger Street has not pleaded the existence of a simple agreement and has confined itself on the pleadings to the existence of a deed.[119] In those circumstances, I am not satisfied that the question of whether there was a simple agreement is properly before me. For that reason, I decline to make any finding as to whether there was, in any event, a simple agreement in force in the terms of the deed.

    [119] SCCIV-15-802, Statement of Claim Third Revision at [13].

12. I conclude that Schillvest did assign to Gouger Street its rights (if any) to recover overpayments of rent (if any) and land tax by the operation of the Deed of Assignment dated 18 December 2014 between Schillvest and Gouger Street.

    Conclusion

13. On the issues as raised on the preliminary trial, I conclude as follows.

14. On the preliminary issue, I find that Diakou is not prevented by issue estoppel from contending that the 2011 Lease was not validly entered into.

    Issue 1:The effect of the application of the RCLA to the 2006 Lease is that cl 4.10 is wholly void and of no effect.

    Issue 2:The effect of cl 4.10 being wholly void is that there was no agreement between the Lessor and Lessee as to a mechanism for fixing rent payable under the 2011 Lease. It would follow from this that there was no grant of a further five-year lease on 1 September 2011. However, that conclusion is subject, at least, to the determination of Issues 5 and 6.

    Issue 3:     Issue 3 does not arise.

    Issue 4:The effect of cl 4.10 being void did not have the effect that the 2006 Lease was frustrated and discharged. Neither did it have the effect that any contract to renew the 2006 Lease was frustrated.

    Issue 8:Schillvest did not assign to Gouger Street its rights (if any) to recover overpayments of rent (if any) by the operation of the Deed of Assignment of Lease dated July 2013 between Schillvest, Gouger Street and Diakou.

    Issue 9:Schillvest did assign to Gouger Street its rights (if any) to recover overpayments of rent (if any) and land tax by the operation of the Deed of Assignment dated 18 December 2014 between Schillvest and Gouger Street.

15. I will hear the parties as to the orders to be made in consequence of these conclusions.