Forza v Autocash Pty Ltd - [2022] SASC 133

Supreme Court of South Australia
(Magistrates Appeal)
FORZA & ORS v AUTOCASH PTY LTD
[2022] SASC 133
Judgment of the Honourable Chief Justice Kourakis
17 November 2022
LANDLORD AND TENANT - LEASES AND TENANCY AGREEMENTS
LANDLORD AND TENANT - RENT - PROVISIONS AS TO RENT IN AGREEMENT FOR LEASE OR LEASE - RENT REVIEW CLAUSES
LANDLORD AND TENANT - RENEWALS AND OPTIONS - EXERCISE OF OPTION - WHERE AMOUNT OF RENTAL OF RENEWED LEASE TO BE ASCERTAINED
LANDLORD AND TENANT - RETAIL AND COMMERCIAL TENANCIES LEGISLATION - OBLIGATIONS, PROHIBITED TERMS AND PROTECTION FOR LESSEES - MINIMUM TERM OF LEASE AND RENEWAL OF TERM
This is an appeal from the Magistrates Court against orders of the Magistrate declaring that clause 14 of the lease is void and that the respondent validly exercised its option to renew the lease. The appellants are the registered proprietors and lessors of commercial premises. The respondent is the lessee. The appellants and respondent entered into a lease with a term of five years with options to renew for two further five-year terms.
Clause 14 of the lease provided for annual rent reviews of the lease ‘by 5 per cent or the most recent CPI (Adelaide) whichever is greater’. Clause 14 also provided for a market rent review every 60 months. The respondent sought an early market review valuation of rent pursuant to s 36 of the Retail and Commercial Leases Act 1995 in order to inform its decision as to whether or not to exercise the renewal option. The valuation was not obtained until after the expiry of the initial term of the lease at which time the respondent purported to exercise its option to renew. The appellants refused to renew the lease on the basis that the purported exercise of the option after the expiry of the lease was ineffective.
The respondent brought an application in the Magistrates Court seeking orders that the lease be renewed and that the excessive rent paid during the initial term be returned to the respondent. The Magistrate upheld the respondent’s claims and held that the appellants were estopped from relying on the expiry of the lease because the parties acted on the common assumption that the time in which to exercise the renewal option would be extended until such time when a property valuation was obtained.
The appellants bring this appeal on twelve grounds, including, principally:
1.the Magistrate erred in finding that the parties adopted a convention to regulate their dealings in relation to the term of the lease and the exercise of the option of renewal;
2.the Magistrate erred in finding that the respondent should be granted relief under s 68(2) of the of the Retail and Commercial Leases Act; and
3.the Magistrate erred in finding that all annual rent reviews under clause 14 of the lease are void.

Held, per Kourakis CJ:
1.The Magistrate erroneously found that the appellants were precluded by convention estoppel from relying on the legal effect of the lease which rendered the exercise of the option after the expiry of the term invalid;
2.There was no conduct of the appellants which would provide the foundation for a favourable exercise of the power conferred by s 68(2)(f) of the Residential and Commercial Leases Act;
3.The appeal against the Magistrate’s declaration that the option to renew was validly exercised is allowed;
4.The appeal against the Magistrate’s declaration that the annual rent review provision in clause 14 is void pursuant to s 22(3)(c) of the Residential and Commercial Leases Act is dismissed.

Retail and Commercial Leases Act 1995 (SA) ss 36, 36(1), 22, 22(3)(c), 68(2), 68(2)(f), referred to.
National Westminster Finance NZ Ltd v National Bank of NZ Ltd [1996] 1 NZLR 548, applied.
Davis v CGU Insurance Ltd (2009) 104 SASR 422; Ewing International LP v Ausbulk Ltd (No 2) [2009] SASC 381; ACN 115 918 959 Pty Ltd v Hoeys Lawyers Pty Ltd [2021] VSC 79; Outback Energy Hunter Pty Ltd v New Standard Energy PEL 570 Pty Ltd [2018] SASC 8; C Convenience Stores Pty Ltd v Wayville Plaza Retirement Pty Ltd (2012) 114 SASR 299, discussed.
Republic of India v India Steamship Co Ltd (No 2) (The Indian Grace) [1998] AC 878; K Lokumal & Sons (London) Ltd v Lotte Shipping Co Pte Ltd (The August Leonhardt) [1985] 2 Llyods Rep 28 CA; Queensland Independent Wholesalers Ltd v Coutts Townsville Pty Ltd [1989] 2 Qd R 40, considered.

FORZA & ORS v AUTOCASH PTY LTD
[2022] SASC 133
Magistrates Appeal: Civil

KOURAKIS CJ: The appellants are siblings (the Forzas) and are the registered proprietors and lessors of premises on Holbrooks Road. The respondent, Autocash Pty Ltd (Autocash), is the lessee of the premises, and conducts on it the business of lending money on the security of motor vehicles which the owners leave with Autocash to hold and store on the premises. The Lease was for an initial term of five years with two options to renew it for further five year terms. Autocash and the Forzas entered into the written Lease on 4 November 2014, with a commencement date of 1 December 2014, but because the Forzas allowed Autocash a rent free period, it became common ground at trial that the first five year term commenced on 16 March 2015.
The base rent for the first year was $26,070 per annum payable in consecutive monthly payments of $2,172.50 plus outgoings. Clause 14 of the Lease provided for rent reviews on the annual anniversary of the commencement of the Lease ‘by 5 per cent or the most recent CPI (Adelaide) whichever is the greater’. Clause 14 also provided for a ‘Market Review’ every sixty (60) months.
The rent was in fact increased each year by 5 per cent.
During 2019 Ms Vidovic, Autocash’s managing director, and Mr Robert Forza (Robert), on behalf of the lessor, communicated about the market rent review which was due in March of the following year and the exercise of the option to renew the Lease at that time.
Those communications culminated in Autocash serving a notice on the Forzas pursuant to s 36 of the Retail and Commercial Leases Act 1995 (SA) (the RCL Act) seeking an early market review valuation in order to inform its decision on whether or not to exercise the renewal option. On 28 February 2020 Autocash filed an application in the Magistrates Court seeking orders that the Forzas sign a form nominating a valuer to perform and undertake the valuation. Exhibited to the application made by Autocash was an Australian Property Institute Limited (API) nomination form. On 13 March 2020 consent orders were made in those terms and Robert and Ms Vidovic signed the nomination form.
The API appointed McGees Property (McGees) to conduct the assessment. Robert and Ms Vidovic signed the written terms of engagement of McGees in mid‑April 2020. The terms of engagement provided by McGees included the following:
Your signature below signifies that the parties agree to vary the timelines contained in the lease, to those times provided above.
McGees provided its valuation on or about 1 June 2020. McGees determined the market rental value of the premises to be an annual rent of $29,000 per annum. The Forzas disputed the valuation. On the other hand, Autocash, by letter dated 11 June 2020 sought to exercise its option for a further five year term at that base rent for the first year. Autocash stated that the purpose of the letter ‘is to confirm, in accordance with section 36(1) of the Act that Autocash Pty Ltd exercises the option under the lease of [the premises] for a further term’. Section 36 of the RCL Act provides a mechanism for the determination of the market rent in advance of the renewal of a lease but does not extend the period in which an option to renew may be exercised. No reference was made in Autocash’s letter to an understanding or assumption that the option could be exercised after the expiry of the initial term of the Lease.
The Forzas refused to renew the Lease on the grounds that the purported exercise of the option by Autocash after the expiry of the initial term was ineffective. Autocash brought an application in the Magistrates Court seeking an order that the Lease be renewed for a further five year term and an order for the return of excessive rent paid in the course of the initial term on the ground that clause 14 was invalid in that it conferred an option on the Forzas to select the formula for the annual rent review which was most favourable to them.
The Magistrate upheld both of Autocash’s claims. The Magistrate held that the Forzas were estopped from relying on the expiry of the initial term of the Lease because both Autocash and the Forzas acted on the common assumption that the time in which to exercise the option would be extended until a property valuation was obtained.
I would allow the appeal against the Magistrate’s decision that the Forzas were estopped from denying that Autocash’s option to renew the Lease had expired. The communications between Robert and Ms Vidovic on the determination of a market rental were not premised on an express statement, a clear implication or an acceptance that the option to renew the Lease remained open after its expiry if a market valuation had not been obtained before that date.
I would dismiss the appeal against the Magistrate’s order for the repayment of the rent increases. Clause 14 was invalid by reason of its inconsistency with s 22(3)(c) of the RCL Act. It is not possible to sever either limb of clause 14 because there is no express or implied mutual contractual intention that one or other of the limbs should govern the annual rent increases in the event of invalidity.
The Lease Agreement
The Lease Agreement was executed on 4 November 2014. The lessors were Paula Lucille Forza, Vincenzo Mario Forza, Roberto Rocco Forza and Luciano Anthony Forza as trustees for their respective family trusts. Clause 5 reads:
Initial lease term: 5 years
Options: 5 + 5 years
No further provision is made as to how the options may be exercised.
Clause 6 provides:
Lease commencement date: 1 December 2014.
Notwithstanding the 1 December commencement date, the parties agreed that Autocash should have a rent-free period during which time Autocash make improvements to the premises. The parties subsequently agreed on a variation of the Lease commencement date. A copy of the Lease with the date 16 March 2015, inserted in lieu of the 1 December 2014 date, was sent to Ms Vidovic by Robert on 16 February 2015.
Clause 10 is headed Lease Period and reads:
Refer clause 6, the initial period is 60 months with the option to extend twice an additional 60 (sixty) months each option.
Clause 10 appears to simply repeat clause 5. The reference in clause 10 to clause 6 should be construed as a reference to the commencement date of the period specified in clause 10.
Clause 14 is headed Rent Review and provides:
At the annual anniversary of the Lease Commencement date (refer clause 6), by 5% or the most recent CPI (Adelaide) whichever is the greater [sic].
Market review every 60 (sixty) months.
The timing of the market review at the expiry of each five year period ties it to the exercise of the option to renew.
The option for a further 5 year period conferred by Clause 5, can have no contractual force after the expiry of the initial term. However, there is no procedure for the timely determination of the annual rent in accordance with clause 14 ahead of the exercise of the option. It follows that if the option were exercised before the expiry of the initial term, without a determination of the market rent, both the Forzas and Autocash would be bound by the independent market rent review if they had not reached prior agreement. As we shall see s 36 of the RCL provides a statutory process to obtain a timely valuation which either fills the void, or supplants alternative contractual processes, in retail leases.
Clause 23 is headed Fit-Out and provides:
Property is taken as is.
Any improvements require [sic] are at the cost of the Lessee.
Lessee is to retain ownership of the Fit-Out.
Fit-Out as Lessee’s Cost.
Rent Review notices were sent in January or February of each successive year of the initial term giving notice of a 5 per cent increase in the rent.
Negotiations of the market review for 2020
The email accompanying the notice sent by Robert on 19 February 2019 adverted to the requirement for a market review in the following year in the following terms:
Please be advised that next year we have a market review as per rental agreement. As I stated to you when you signed the rental agreement, you can select a licensed real estate person to conduct the review or if not, we can. I just wanted to give you plenty of time as I would anticipate we would need the review to be completed by end of January 2020.
The reference to a ‘licensed real estate person’ suggests an informal approach to settling on a market review valuation. It must be remembered that the Lease did not prescribe any particular process for the market review if the Forzas and Autocash did not reach agreement. Robert’s reference to the need for the review to be completed by the end of January 2020 was of course a sensible suggestion if the market rent were to be applied, as the Lease provided, for the first year of the second five year term commencing on 17 March.[1] However the Lease itself did not stipulate a timetable or prescribe the steps for obtaining an independent valuation which fell within the meaning of the words ‘Market Review’.
[1] On a commencement date of 16 March 2015, the first five year term expired on 15 March 2020. An extra day appears to have been mistakenly allowed.
Importantly, the perceived need to complete the review by the end of January 2020 could only be based on an assumption that the option had to be exercised before 16 March 2020 and that Autocash would want to know the annual rent beforehand so that it could make an informed choice as to whether or not to renew the term. If there were no intention to renew the Lease, there would be no need for the rent review to be completed by a particular time or at all. Furthermore, the Forzas had no contractual part to play in Autocash’s decision on whether or not to exercise that option.
On 18 July 2019 a commercial real estate agent, Mr Luis Schipani sent an email to Robert informing him that he had been contacted by Ms Vidovic who was concerned about the market review. He referred to Autocash having had a ‘negative experience’ in respect of another property that it had previously leased. He informed Robert that he advised Ms Vidovic that Autocash should not need to engage an agent because the Forzas were fair and reasonable. Mr Schipani noted the Forzas’ concern to achieve a fair market rate and secure a lease extension ahead of a bank meeting in September. He set out two options by which agreement on a market review might be reached. The first was to obtain reports from him, including a market review report with a rental recommendation and a lease review report. After providing those reports, he would arrange meetings to reach agreement and would give final instructions to a legal practitioner to prepare the Lease. He quoted in the order of $1,000 plus GST for his services. The second option was for Mr Schipani to engage a valuer who was likely to charge approximately $2,500 plus GST.
Robert forwarded that letter to Ms Vidovic on 19 July 2019. He informed Ms Vidovic that he was happy to proceed in the way Mr Schipani suggested and asked if she too agreed.
Ms Vidovic replied saying that she was confident that they would come to an agreed rental amount with Mr Schipani’s help. She then asked for Robert’s assistance as to the date by which she would ‘need to let you know about my option to renew’.
On 20 July 2019 Robert replied:
Enclosed is the copy of the lease Agreement.
It states you have two options to renew every 60 months.
It also states we are to have rent market review every 60 months.
There is no specified date to advise me when to renew.
Robert’s reply is plainly intended to be no more than a recitation of the provisions of the Lease. So much is clear from the first sentence which advises that the Lease is enclosed and from the structure of the next two sentences which commence ‘It states’ and ‘It also states’. The third sentence which commences ‘There is no specified date’ is clearly therefore a reference to the absence of a date for exercise of the option in the Lease. It cannot reasonably be read as a statement by Robert assuring Ms Vidovic that Autocash could exercise the option at any time. Indeed, the converse is true. The implication from the email as a whole is that Autocash could advise the Forzas of its intention to renew at any time before the expiry of the first 60 month term.
Nonetheless, Ms Vidovic gave evidence that she understood Robert was expressing his view as to what was to occur and that he was not referring to the terms of the Lease. She believed that Robert was saying that he did not need Autocash to notify him of the intention to renew the Lease within a particular timeframe.
The Magistrate accepted Ms Vidovic’s evidence.[2] It is difficult to reconcile the acceptance of Ms Vidovic’s evidence with the plain words of the letter. It is as difficult to understand how Ms Vidovic might have thought that the Forzas would, acting commercially, be happy to have an extended period of uncertainty about whether or not Autocash would exercise the option and at what annual rent after the expiry of the initial term. If it were necessary, I would set aside that finding because it is glaringly improbable having regard to the plain words of Robert’s response and the commercial improbability of the Forzas adopting that position.
[2] Paragraph [34] of the judgment.
However, it is not necessary to do so. Ms Vidovic’s subjective belief as to that communication and what was meant is simply irrelevant. On an objective view of the communication, it is not an unequivocal communication of the Forzas view that the option could be exercised at any time, including after the termination of the Lease. Nor is it an unequivocal acquiescence in a view that Autocash held. It could not be such a communication both because that is not what the email says and because, at that early stage, Ms Vidovic herself had not formed a view that the option could be exercised after determination of the Lease. It is because Ms Vidovic did not have an understanding of any applicable timeframe that she asked Robert for his view on that question.
On 22 July 2019 Ms Vidovic sent an email to Robert asking him ‘what date you see my lease to be expiring on’. He replied ‘as I understand, it is the 16^thMarch 2020’. That was mistaken. The last day of the five year term was 15 March 2020.
On 22 July 2019 Robert sent an email to Ms Vidovic setting out what he and his siblings believed was ‘a fair and balanced review of our current situation’. On 26 July 2019 Robert sent Ms Vidovic another informal proposal about the market rent. Ms Vidovic replied that she could not respond to the proposal until late August.
In September 2019 Ms Vidovic obtained a market appraisal from Commercial SA, a commercial leasing agent, and sent it to Robert. By email dated 23 September 2019 Robert informed Ms Vidovic that after a family discussion, the Forza’s had come to the view that the appraisal given by Commercial SA ‘lacked substance and validity’. He explained the calculations and research which led the Forzas’ to reject the Commercial SA appraisal. His email concluded:
We have decided to make one last offer of $800 per week with no increases for five years and we take no responsibility of your outgoings payments. Any outgoings outstanding will need to be cleared for this offer to be accepted. This will then equate to $41600 per annum + outgoings.
If this offer is not satisfactory, then we may need to get a proper valuer market appraisal done.

It is not clear what significance Robert attached to a ‘proper valuer market appraisal’. He did not have any understanding of s 36 of the RCL Act at that stage. It is most probably therefore a reference to Mr Schipani’s alternative proposal that they engage a licensed valuer.
In October 2019 Robert asked Ms Vidovic for the name of the person she might nominate to perform the market review so that he could check his qualifications. That email confirms that Robert had in mind a licensed valuer. Moreover in prompting Ms Vidovic to suggest a valuer, Robert was acting consistently with the position expressed in his email of 19 February 2019 that ‘we would need the review to be completed by end January 2020’. Ms Vidovic replied saying that setting the market rent was not as simple as getting a valuation but she did not give the name of any valuer she had in mind.
On 8 November 2019 Robert again asked Ms Vidovic about who she would nominate for the market review and observed that the process seemed ‘to be taking an extraordinary long time’. On 25 November 2019 Ms Vidovic made an offer as to the new base rent for a renewal period if the option were exercised. Robert rejected that offer on 10 December 2019. Robert suggested that they obtain a market appraisal in the new year ‘and go from there’.
The email exchanges in October 2019 and November 2019 paint a curious picture in which Robert appears more anxious to obtain a timely independent market review than Ms Vidovic.
Not until 7 January 2020 did Ms Vidovic appear to appreciate the need for urgency. On that date she served on Robert a notice purporting to be given under s 36 of the RCL Act (the Notice). It provided:
In accordance with s 36 of the Act, Autocash Pty Ltd as lessee under the Lease, requests a determination of the current market rent of the Lease.
On a copy of the Notice kept by Ms Vidovic she has recorded ‘hand delivered to Robert Forza, 7/1/20 (Robert’s son). We have 21 days after valuation to exercise our option’. At trial it became apparent that Ms Vidovic had obtained legal advice before she served the Notice. Ms Vidovic testified that she had received legal advice that she would have 21 days after receipt of the valuation to exercise the option.
Two things of substantial importance should immediately be noted. First, the sole source of the error, on Ms Vidovic’s own case, was poor legal advice. There was no statement or conduct by the Forzas which contributed to the mistaken view of the law which she recorded on the notice. Secondly, Ms Vidovic had not communicated anything to the Forzas suggesting that she held that belief; the notice was a private note made only on her copy of the Notice.
On 14 January 2020 Ms Vidovic sent a quote for a valuation which had been sent to a solicitor from whom, presumably, Ms Vidovic had obtained the advice.
Robert replied that after receiving the notice of 7 January 2020, that he had contacted API and that he had received ‘a referral/quote’ from them. Attached to Robert’s email was a quote from Herron Todd White Property Valuers. The attached quote included an email to Robert from Herron Todd White which thanked him for his enquiry and opportunity to be of service. It is not apparent on the face of the email whether Herron Todd White was in any way formally nominated by API or whether Robert had contacted Herron Todd White himself after he had been given their contact details. However, in his evidence Robert explained that he telephoned the API contact centre and asked for a valuer to be recommended. The contact centre operator quickly read out a half dozen names. Robert requested the contact details for the first mentioned valuer which was Herron Todd White.
On 28 January 2020 Robert sent an email to Ms Vidovic. It read relevantly:
Thank you once again for making me aware of the Retail and Commercial Leases Act 1995 which I believe is the vehicle we both should use to resolve this.
We truly believe our premises is worth more than $1000 per week which is why our final offer is $850 per week with no other changes to the lease except the following:-
·Your outgoings need to be paid in full or a finance charge monthly will need to be implemented.
·Knowing you will not agree and I am into going back and forth, I think it best we follow the Retail and Commercial Leases Act 1995 for a completely independent valuation of what the true market rate is and go from there.
I have sent you a quote for the review, please advise to go ahead as we have very little time left.
Three representations of fact are made in that email. First, that Robert had reached the view, which is not surprising given the length of time over which the parties had failed to reach agreement, that there was no further point in exchanges on what the market rent should be. Secondly, that Robert appreciated, again correctly, that the only way to resolve the impasse was to obtain an independent valuation. Thirdly, Robert again expressed the position which he had taken consistently over the preceding 12 months that the valuation had to be obtained quickly because ‘we have very little time left’. That last sentence in the email of 28 January was not repeated or mentioned in the Magistrate’s reasons.
The third statement is important. It shows that, consistently with the view Robert had expressed from early in 2019, he saw the need to obtain the valuation before the expiry of the first five year term. Again, it must be observed that the Forzas did not control whether or not there would be an extension of the Lease. That was a matter within the power of Autocash alone. Robert’s communication shows that he believed that Autocash was required to exercise that option before the expiry of the Lease and he appreciated that it would want to know what the market rent was before it made that decision. The third statement is inconsistent with the premise on which Ms Vidovic claimed to be proceeding that the Forzas would accept an exercise of the option after the expiry of the Lease. Of course, Robert’s subjective understanding of the law is irrelevant. An objective reading of his communication does not suggest at all that the Forzas were working on the assumption, or engaging in the negotiations over the exercise of the option on the basis, that the option might be exercised after the initial term of the Lease had expired. It is certainly not an unequivocal indication that that was so. On the contrary, objectively viewed, it expects that the option will be exercised before the initial term of the Lease expires.
For the same reason, the communication cannot be seen as an acquiescence in a view which Autocash held, because no such view had, at that stage, been communicated by Autocash to Robert.
On 28 January 2020 Ms Vidovic replied informing Robert that her partner’s mother had passed away. She then stated:
Robert as far as the rent review I would like to have worked this out between us. If you think we can resolve it between us please give me a call tomorrow.
That response is puzzling. Ms Vidovic again appears reluctant to proceed expeditiously to an independent valuation even after serving the Notice three weeks earlier.
Robert on the other hand continued to prompt Ms Vidovic to embark on that course. He sent another email to Ms Vidovic on 4 February 2020. He again enclosed the Herron Todd White quote. He also attached a rent renewal notice which proposed a rent of $3,683.33 per month for the year commencing on 17 March 2020, for Ms Vidovic’s perusal and acceptance. That offer is consistent with the offer made in his email of 28 January 2020. The notice of rent increase had no legal effect under the Lease other than as an offer to enter into the second five year term at that base rent.
Ms Vidovic did not respond to Robert for about a month until she served on him the application pursuant to s 36 of the RCL Act. Indeed, Robert’s evidence was that he received the notice about one and a half hours before the return hearing date of 13 March 2020. Nonetheless he attended the hearing and, as I earlier observed, consented to the orders that the parties requested the API to appoint a valuer. Ms Vidovic’s evidence as to why she did not respond to Robert’s email of 4 February 2020 earlier is difficult to follow. It is sufficient to simply note that objectively viewed the explanation is not a reasonable one. Be that as it may, consent orders for an independent valuation by McGees were made on 13 March.
I mention here for completeness that it was not contended on appeal or at trial that the letter of instructions to McGees constituted a mutually agreed contractual variation of the Lease. That position appears to be well-founded. The term is plainly a proforma one which may be important in respect of leases which stipulate a timeframe for obtaining a valuation. In its proper context in a trilateral engagement, it makes it clear that McGees was not bound to deliver its valuation within any timeframe stipulated in the Lease. Autocash relied on the terms of the engagement to give the communications preceding the expiry of the Lease a colour favourable to their estoppel case. However, for the reasons given, the effect of the communications is intractably adverse to that case.
On 1 June 2020 McGees provided its valuation which assessed an annual market rent of $29,000. On 11 June 2020 Autocash purported to exercise its option.
On 30 July 2020 Robert wrote to Ms Vidovic asserting that Autocash had not effectively exercised the option because the Lease had expired. Robert asserted in the letter that the Lease had expired on 1 December 2019 despite the written alteration to the commencement date which he had personally made and sent to Ms Vidovic. In his evidence Robert explained that he had reverted to the 1 December commencement date because that was the date selected by the McGees valuation as the relevant date for the renewal. He also testified that the ‘opinions’ he cited in the letter as to the invalidity of the exercise of the option were those of his siblings who had met to discuss the matter. The debate about those matters at trial and on appeal are but a zephyr in a thimble. First, whether the commencement date was 1 December 2019 or 16 March 2020, the Lease had expired well before the exercise of the option and was therefore ineffective at law. Secondly, to raise an estoppel against the Forzas’ insistence on their contractual right Autocash must establish that both the Forzas and Autocash had made an assumption that the option could be exercised after the expiry and that each of them knew, from the communications and/or conduct of the other, that the other was acting on that assumption.
The Legislation
Section 22 of the RCL Act 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.
Section 36 of the RCL Act provides:
36—Opportunity for lessee to have current market rent determined early
(1)A retail shop lease that provides an option to renew or extend the lease at current market rent is taken to include provision to the following effect:
(a)     the lessee is entitled to request a determination of the current market rent within the period that begins six months before and ends two months before the last day on which the option may be exercised under the lease, but may not make such a request if the lessor and the lessee have already agreed as to what the actual amount of that rent is to be;
(b)     the lessee makes a request by giving notice in writing of the request to the lessor;
(c)     if the lessee makes a request, the amount of the current market rent is to be determined (as at the time of the request) in accordance with the provisions of section 35, and the period within which the lessee must exercise the option is varied so that the last day on which the option may be exercised is 21 days after the determination of rent is made and notified to the lessee in writing or the last day of the term of the lease, whichever is the earlier;
(d)     the parties agree that the amount of rent determined under paragraph (c) is the current market rent for the purposes of the exercise of the option (even though it may be a determination of the current market rent as at some earlier time);
(e)     the parties to the lease are to pay the costs of the determination of current market rent in equal shares unless the lessee decides not to exercise the option to renew the lease in which case the lessee is liable to reimburse the lessor for the lessor's share of the costs (ie the lessee must bear the costs in their entirety).
(2)If the term of the lease is 12 months or less, the periods of six months and two months in this section are shortened to three months and 30 days respectively.
It is to be noted that s 36 does not grant any power to renew a lease outside of the time provided by the lease.
Section 68(2) of the RCL Act provides:
(2)The Magistrates Court may on application under this section, by order—
(a)     restrain an action in breach of this Act, a retail shop lease or a collateral agreement; or
(b)     require a person to comply with an obligation under this Act, a retail shop lease or a collateral agreement; or
(c)     order a person to make a payment (including a payment of compensation) that is payable under this Act, a retail shop lease or a collateral agreement; or
(d)     order the payment of compensation for loss or damage resulting from a breach of this Act, a retail shop lease or a collateral agreement; or
(e)     relieve a party to a retail shop lease or a collateral agreement from the obligation to comply with a provision of the lease or agreement; or
(f)     reinstate rights under a retail shop lease that have been forfeited or have otherwise terminated; or
(g)     require the payment of rent under a retail shop lease into the Magistrates Court until the lease has been performed or an application for compensation has been determined; or
(h)     require that rent paid into the Magistrates Court be paid out and applied as directed by the Magistrates Court; or
(i)    require a tenant to surrender possession of premises to the lessor; or
(j)    do anything else necessary or desirable to resolve a dispute between the parties to the retail shop lease.
Estoppel by convention
In National Westminster Finance NZ Ltd v National Bank of NZ Ltd[3] the New Zealand Court of Appeal (Casey Hardie Boys and Tipping JJ) summarised the elements of estoppel by convention as follows:
The authorities show that for an estoppel by convention to arise the following points must be established by the party claiming the benefit of the estoppel (the proponent):
(1)The parties have proceeded on the basis of an underlying assumption of fact, law, or both, of sufficient certainty to be enforceable (the assumption).
(2)Each party has, to the knowledge of the other, expressly or by implication accepted the assumption as being true for the purposes of the transaction.
(3)Such acceptance was intended to affect their legal relations in the sense that it was intended to govern the legal position between them.
(4)The proponent was entitled to act and has, as the other party knew or intended, acted in reliance upon the assumption being regarded as true and binding.
(5)The proponent would suffer detriment if the other party were allowed to resile or depart from the assumption.
(6)In all the circumstances it would be unconscionable to allow the other party to resile or depart from the assumption.
[3] [1996] 1 NZLR 548 at 550.
Applying the second and fourth elements to the circumstances of this case, Autocash was required to prove that it knew that the Forzas had accepted an assumption made by it, that it was entitled to exercise the option after the expiry of the initial term and that in deferring the exercise of the option until after that expiry Autocash had acted as the Forzas intended it to act. If those elements were proved the remaining elements would necessarily also be established.
In Davis v CGU Insurance Ltd[4] Vanstone J, with whom Doyle CJ and Layton J agreed, identified as a further issue:
[31]… whether the mutuality underpinning the conventional assumption demands a meeting of the minds, as opposed to, merely, conduct which would suggest to a reasonable observer that the parties had proceeded on such an assumption.
[4] (2009) 104 SASR 422 at [30]-[34].
Vanstone J identified that the latter alternative only was required by reference to the following authorities:
[32]In Republic of India v India Steamship Co Ltd (No 2) (The Indian Grace) [1998] AC 878 at 913 Lord Steyn stated the relevant principle in the following terms:
It is settled that an estoppel by convention may arise where parties to a transaction act on an assumed state of facts or law, the assumption being either shared by them both or made by one and acquiesced in by the other. The effect of an estoppel by convention is to preclude a party from denying the assumed fact or law if it would be unjust to allow him to go back on the assumption … It is not enough that each of the two parties acts on an assumption not communicated to the other. But it was rightly accepted by counsel for both parties that a concluded agreement is not a requirement for an estoppel by convention.
[33]It seems clear that what is required is “some mutually manifest conduct by the parties which is based on a common but mistaken assumption”: The August Leonhardt [1985] 2 Lloyds Rep 28 CA, 34-35. That this type of estoppel is said to have had its origins in estoppel by deed, leading to a recognition that the recitals in informal documents could be binding as estoppels (Handley at 8-002) indicates that an agreement or preparedness to proceed on the assumed basis must be demonstrated. The statement of principle by the New Zealand Court of Appeal in National Westminster Finance NZ Ltd v National Bank of NZ Ltd [1996] 1 NZLR 548 at 550, formulated after a survey of the leading English and Australian authorities, makes this clear. …
[34]In Queensland Independent Wholesalers Ltd v Coutts Townsville Pty Ltd [1989] 2 Qd R 40 at 46, McPherson J, speaking for the Full Court, required “demonstrable acceptance” of the assumption. He said:
The word “conventional” in this context carries connotations of agreement, not necessarily express but to be inferred, or at least a demonstrable acceptance of a particular state of things, as the foundation for the dealings of the parties.

In Ewing International LP v Ausbulk Ltd (No 2)[5] Layton J identified the same necessary factual foundation for an estoppel by convention:
[238]The ‘underlying assumption’ that provides the foundation for such an estoppel must be manifest and demonstrable, in that there must be clear conduct of the parties evidencing the assumption. In K Lokumal & Sons (London) Ltd v Lotte Shipping Co Pte Ltd, Kerr LJ said (at 34‑5):
All estoppels must involve some statement or conduct by the party alleged to be estopped on which the alleged representee was entitled to rely and did rely. In this sense all estoppels may be regarded as requiring some manifest representation which crosses the line between representor and representee, either by statement or conduct...in cases of so-called estoppels by convention, there must be some mutually manifest conduct by the parties which is based on a common but mistaken assumption.
[5] [2009] SASC 381 at [238]-[240] (citations omitted).
In ACN 115 918 959 Pty Ltd v Hoeys Lawyers Pty Ltd[6] (Hoeys Lawyers) Blue AJ (sitting as a Judge of the Supreme Court of Victoria) referred to the passage in National Westminster Finance NZ Ltd v National Bank of NZ Ltd produced in [61] above and then continued:
[914]There must be ‘some mutually manifest conduct by the parties which is based on a common but mistaken assumption’.[7] There must be demonstrated ‘an agreement or preparedness to proceed on the assumed basis’.[8]
…
[916]The question whether the elements are satisfied is partly objective and partly subjective. Thus ‘acts done privately by one party without coming to the knowledge of the other can scarcely be capable of affecting their mutual relations or of raising assumptions capable of forming a conventional or accepted basis governing their relations’. The parties need not believe that the assumption is true: it is sufficient that they act on the basis that it is true and they may even know that it is not actually true.
[917]The first three elements are complementary. The first element relates to the conduct of the parties rather than their state of mind and the test is therefore objective. The second element relates to both the state of mind of the parties and to their communications and/or conduct and the test is a combination of objective and subjective. Objectively, the parties’ conduct and communications must manifest an acceptance of the assumption as true for the purposes of the transaction and intention that the acceptance govern the legal position between them. Subjectively, the proponent must accept the assumption as true for the purposes of the transaction and intend that the acceptance govern the legal position between them and believe that the opponent is also doing so. If the opponent causes the proponent to believe that the opponent is accepting the assumption as true for the purposes of the transaction and intends that the acceptance govern the legal position between them, but privately does not so accept or intend, that would not prevent establishment of the estoppel if the other elements are established. As observed above, it does not matter if the proponent does not believe that the assumption is factually true, provided that the proponent believes that the parties are acting on the basis that it is true for the purposes of their transaction.
[918]The test for the fourth element is a combination of objective and subjective. Objectively, the proponent must be entitled to act in reliance on the assumption being regarded as true and binding. Objectively and subjectively, the proponent must act in reliance on the assumption being regarded as true and binding. The opponent must either know or intend that the proponent act in reliance upon the assumption being regarded as true and binding, or cause the proponent to believe that the opponent so knows or intends.
[919]The fifth element is objective and the sixth element is evaluative.
[6] [2021] VSC 79 at [913] (footnotes omitted).
[7] Davis v CGU Insurance Ltd [2009] SASC 220 at [33] per Vanstone J (with whom Doyle CJ and Layton J agreed) citing The August Leonhardt [1985] 2 Lloyds Rep 28 at 34-35 per Kerr LJ (delivering judgment of the Court of Appeal on behalf of Oliver, Kerr and Lloyd LJJ).
[8] Davis v CGU Insurance Ltd [2009] SASC 220 at [33] per Vanstone J (with whom Doyle CJ and Layton J agreed).
In Outback Energy Hunter Pty Ltd v New Standard Energy PEL 570 Pty Ltd[9] Blue J identified the following as the elements of estoppel by convention:
[9] [2018] SASC 8 at [269].
[269]The elements of estoppel by convention are:
1.    The parties proceed on the basis of an assumption of fact and/or law capable of forming the foundation of the remaining elements.[10]
2.    Each party, from the perspective of the other, accepts the assumption as true for the purpose of the transaction in question.[11]
3.    Such acceptance is intended to govern the legal position between the parties.[12]
4.    The proponent takes or omits to take action and is entitled to so act in reliance upon the assumption.[13]
5.    The other party knows that the proponent is so acting.[14]
6.    The proponent would suffer detriment if the other party were permitted to depart from the assumption.[15]
7.    It would be unconscionable for the other party to depart from the assumption.[16]
[10] National Westminster Finance NZ Ltd v National Bank of NZ Ltd [1996] 1 NZLR 548 at 550 per Casey, Hardie Boys and Tipping JJ element (1) as adopted and approved in AlphaWealth Financial Services Pty Ltd v Frankland River Olive Co Ltd [2008] WASCA 119, (2008) 66 ACSR 594 at [164] per Buss JA (with whom Steytler P agreed) (see also at [27] per Pullin JA) and Davis v CGU Insurance Ltd [2009] SASC 220, (2009) 104 SASR 422 at [33] per Vanstone J (with whom Doyle CJ and Layton J agreed). It appears that an assumption as to the law must relate to private legal rights: AlphaWealth Financial Services Pty Ltd v Frankland River Olive Co Ltd (2008) 66 ACSR 594 at [164] per Buss JA (with whom Steytler P agreed) but no issue of public legal rights arises in the present case.
[11] National Westminster Finance NZ Ltd v National Bank of NZ Ltd [1996] 1 NZLR 548 at 550 per Casey, Hardie Boys and Tipping JJ element (2) as adopted and approved in AlphaWealth Financial Services Pty Ltd v Frankland River Olive Co Ltd (2008) 66 ACSR 594 at [164] per Buss JA (with whom Steytler P agreed) and Davis v CGU Insurance Ltd (2009) 104 SASR 422 at [33] per Vanstone J (with whom Doyle CJ and Layton J agreed). Element (2) is framed in these cases as being “to the knowledge of” the other rather than “from the perspective of” the other but framing the element in terms of perspective better accommodates the case where the other party does not actually make the assumption.
[12] National Westminster Finance NZ Ltd v National Bank of NZ Ltd [1996] 1 NZLR 548 at 550 per Casey, Hardie Boys and Tipping JJ element (3) as adopted and approved in AlphaWealth Financial Services Pty Ltd v Frankland River Olive Co Ltd (2008) 66 ACSR 594 at [164] per Buss JA (with whom Steytler P agreed) and Davis v CGU Insurance Ltd (2009) 104 SASR 422 at [33] per Vanstone J (with whom Doyle CJ and Layton J agreed).
[13] National Westminster Finance NZ Ltd v National Bank of NZ Ltd [1996] 1 NZLR 548 at 550 per Casey, Hardie Boys and Tipping JJ element (4) (part) as adopted and approved in AlphaWealth Financial Services Pty Ltd v Frankland River Olive Co Ltd (2008) 66 ACSR 594 at [164] per Buss JA (with whom Steytler P agreed) and Davis v CGU Insurance Ltd (2009) 104 SASR 422 at [33] per Vanstone J (with whom Doyle CJ and Layton J agreed).
[14] National Westminster Finance NZ Ltd v National Bank of NZ Ltd [1996] 1 NZLR 548 at 550 per Casey, Hardie Boys and Tipping JJ element (4) (part) as adopted and approved in AlphaWealth Financial Services Pty Ltd v Frankland River Olive Co Ltd (2008) 66 ACSR 594 at [164] per Buss JA (with whom Steytler P agreed) and Davis v CGU Insurance Ltd (2009) 104 SASR 422 at [33] per Vanstone J (with whom Doyle CJ and Layton J agreed).
[15] National Westminster Finance NZ Ltd v National Bank of NZ Ltd [1996] 1 NZLR 548 at 550 per Casey, Hardie Boys and Tipping JJ element (5) as adopted and approved in AlphaWealth Financial Services Pty Ltd v Frankland River Olive Co Ltd (2008) 66 ACSR 594 at [164] per Buss JA (with whom Steytler P agreed) and Davis v CGU Insurance Ltd (2009) 104 SASR 422 at [33] per Vanstone J (with whom Doyle CJ and Layton J agreed).
[16] National Westminster Finance NZ Ltd v National Bank of NZ Ltd [1996] 1 NZLR 548 at 550 per Casey, Hardie Boys and Tipping JJ element (6) as adopted and approved in AlphaWealth Financial Services Pty Ltd v Frankland River Olive Co Ltd (2008) 66 ACSR 594 at [164] per Buss JA (with whom Steytler P agreed) and Davis v CGU Insurance Ltd (2009) 104 SASR 422 at [33] per Vanstone J (with whom Doyle CJ and Layton J agreed).
It is, with respect, important to understand why Blue J reframed the second point by using the words ‘from the perspective’ instead of to the knowledge of’. His Honour’s explanation is found in footnote 11. With some trepidation, I respectfully attempt some elaboration. It is not uncommon for a party or parties to enter into a transaction accepting as conventional matters of fact and/or law which they know to be wrong. The term ‘knowledge’ implies that each party believes the assumption to be true and/or correct and that the other party knows that that is what the other believes. The phrase ‘from the perspective of the other’ makes it clear that to establish an estoppel by convention the second element is established if it appeared to each of the parties that the other accepted the assumption to be true, even if, in his or her own mind, the other party knew it to be false. Blue J continued:
[270]The first three elements are capable of being satisfied in two different sets of circumstances:
(a) the parties make a mutual assumption: ie each party makes the assumption and knows that the other party is making the same assumption and both parties intend it to govern their legal relations;
(b) the proponent alone makes the assumption and believes that the other party is making the same assumption and intends it to govern the legal position between the parties when the other party does not actually make the assumption but knows that the proponent is making it in that belief with that intention and plays a causative role in relation thereto (usually by positive conduct but in exceptional circumstances by acquiescence therein).[17]
[271]The parties do not necessarily need to believe in the truth of the relevant assumption provided that they proceed on the basis as if it were true and the other elements enumerating above are satisfied.[18]
[17] See Republic of India v India Steamship Co Ltd (No 2) (the Indian Grace)[1998] AC 878 at 913 per Lord Steyn cited with approval in Davis v CGU Insurance Ltd (2009) 104 SASR 422 at [32] per Vanstone J (with whom Doyle CJ and Layton J agreed).
[18] See Grundt v Great Boulder Proprietary Goldmines Ltd (1937) 59 CLR 641 at 676 per Dixon J; Santos Limited v Delhi Petroleum Pty Ltd [2002] SASC 272 at [459] per Lander J and [718] per Besanko J.
The purpose of [270] is not to alter the requirement noted by Blue AJ in [914] and [916] of Hoeys Lawyers, that each party manifestly conduct itself in a way which is perceived by the other as an acceptance of the assumption. The point of [270] is to emphasise that an estoppel does not only arise when both parties do in fact make the assumption perceived by the other set out in subparagraph (a) of [270]. An estoppel by convention also arises when the proponent of the estoppel is the only party who has made the assumption and mistakenly believes the other party (the opponent) has made the assumption when the opponent knows of the proponents mistake and plays a causative role in it.
Magistrate’s reasons
The Magistrate dealt with the validity of clause 14 of the Lease as follows:
[7] Early in each year from 2017 to 2020 Mr Forza sent Ms Vidovic a Notice of Rent Increase with effect from 17 March of that year. The Notices increased the rent by 5% each year and Autocash paid the rent as notified, up until March 2020. Mr Forza gave evidence that he did not ever check the CPI before issuing a notice of a rent increase. He just applied a 5% increase on the previous year’s annual rental. Ms Vidovic said that she had never disputed the annual 5% increase in rent until this proceeding because she was unaware that clause 14 was “not allowed”.
[8]Section 22 of the RCLA prohibits ‘ratchet’ rent clauses, whereby the rent can rise but not fall. The section relevantly provides:
22(3) A provision of a retail shop lease is void to the extent that it –
…
(c) Provides for base rent to change on a particular occasion in accordance with whichever if two or more methods of calculating the change would result in the higher or highest rent.
The Magistrate correctly identified that the validity of clause 14 depended on the severability of one or other of the alternative rent review mechanisms.
[9] It is agreed that the Annual Review provision of clause 14 is inconsistent with s 22(3)(c) of the RCLA because it does just that. The issue for determination is whether the Annual Review provision is void, as submitted by Autocash, or whether it should be read down to permit either an annual increase in rental by 5% or by the CPI, as contended for by the Forzas. The Forzas submit that the removal of one of the methods of increasing the rent would prevent the clause from contravening the RCLA and is the limited extent to which the clause ought to be declared void.
The Magistrate then distinguished the authorities on which the Forzas relied and rejected their contention that post-contractual conduct allowed the clause to be rewritten:
[10] The authorities cited by the Forzas support the general proposition that the Court may excise a portion of the Annual Review provision so that the remainder does not contravene s 22(3)(c). However, in those cases the offending wording that the courts considered could be severed or deleted comprised a proviso, and a reference to a party to whom a right had been invalidly reserved. That is not the case here. The Forzas do not assert that one of the two methods of calculating an increase in rent is invalid. Instead, they are effectively asking the Court to choose one method over the other to eliminate the inconsistency with s 22(3)(c). The Forzas have not identified any authority to provide any guiding principle in this regard.
[11]It is well-established that the courts will not rewrite a contract for the parties to achieve severability. I do not accept the Forzas’ contention that it is relevant to note the parties’ post-contractual conduct to assist with reading down the Annual Review provision as it is it is inadmissible for this purpose and contrary to the principle of objectivity in determining a parties’ rights under a contract. I find that the Annual Review provision is not severable and is therefore void by operation of s 22(3)(c) of the RCLA.
The Magistrate also rejected the Forzas’ reliance on the powers conferred by s 68 of the RCL Act:
[12]In the further alternative, the Forzas contend that if the Court determines that the Annual Review Provision is void, the Court may reinstate either an annual rent increase of either 5% or the CPI. The Forzas assert that the Court’s power to do so arises under s 68(2)(f) of the RCLA, which permits the Court to reinstate rights under a lease which have been forfeited or terminated, and under s 68(2)(j) which permits the Court to “do anything else necessary or desirable to resolve a dispute between the parties to the retail shop lease.” The Forzas say that in the circumstances, this is necessary and desirable to avoid prejudice to the Forzas.
[13]This submission overlooks that pursuant to s 68(1) of the RCLA a party is required to make an application to the Court to enliven its discretion to make orders under s 68(2). Neither of the Forzas’ defence or cross-claim contains an application for such a remedy, because until the trial, the Forzas denied that clause 14 was void. It follows that the Court’s jurisdiction under s 68(2) is not technically enlivened in this instance.
…
The Magistrate set out the salient passages of several authorities including Outback Energy Hunter Pty Ltd v New Standard Energy PEL 570 Pty Ltd[19] before continuing:
[62]In my view, it can be objectively inferred from the parties’ correspondence and conduct that there was a mutual assumption that they had adopted a convention to regulate their dealings in relation to the term of the lease and Autocash’s exercise of the Option. The convention was that the timelines contained in the lease had been varied in order for the lease and the ability to exercise the Option to continue until the Market Review was completed, and that Autocash would have a reasonable period of time following this within which to decide to exercise the Option.
[63]This inference is available from the following findings which I consider to be established on the balance of probabilities. In July 2019, Mr Forza conveyed to Ms Vidovic, orally and by forwarding Mr Schipani’s email, that the Forzas sought the renewal of the lease by Autocash. Autocash conveyed a similar intention by Ms Vidovic’s enquiry about the date by which Autocash was required to exercise the Option. Mr Forza’s reply was oblique, particularly in circumstances where the lease did not provide for this. The parties then engaged in negotiations to endeavour to agree upon a market rent supported by an agreed valuation.
[64]Mr Forza’s email of 10 December 2019 marked a turning point where the parties’ focus became directed towards an independent valuation of the market rent. It is implicit from this email and the parties’ conduct that this process would not commence until sometime in January 2020. Autocash’s s 36 notice formalised the start of this process. When Autocash perceived that the parties could not agree upon an independent valuer and appropriate instructions for the valuation, it commenced this action by FDN 1, around a fortnight before the lease was due to expire. It is inconceivable that Autocash would have embarked on this legal process without having protected its position by having exercised the Option if it did not consider that the parties had adopted the convention.
[19] [2018] SASC 8 at [269]-[271] (citations omitted).
With respect, the finding in [63] that the parties were seeking to renew the Lease does not entail any conclusion about the time within which the option to do so was to be exercised. The findings in [64] fail to refer to Robert’s emails pressing for agreement on a market rent or its independent valuation throughout 2019 and the unexplained procrastination by Autocash. In that context the late service of the s 36 notice is better explained by a sudden realisation on Autocash’s part that the time was running out and by the erroneous legal advice it had received, to which the Magistrate does not refer. The Magistrate continued:
[65]Notwithstanding that Mr Forza had referred to “time constraints” in his offer of 4 February 2020, the Forzas did not take issue with Autocash’s application only a few weeks later and did not raise any need for lease extension documents to be executed. The parties executed the API nomination form only three days before the lease expired without any mention of a need for formality in the lease documentation.
There was no reason for Robert not to consent to the order to which Autocash was plainly entitled under the statute when he had been served with the application only hours earlier. Whether or not a valuation would be obtained before the time in which the option had to be exercised expired was only a matter of concern for Autocash because the Forzas had no powers to block Autocash’s exercise of the option. Autocash was at liberty to exercise the option in the days which remained and before it had received the valuation and if it did so an independent valuation would be necessary to resolve the impasse on the market value of the lease. However, Autocash chose not to do so. Again, the strongest inference available is that it failed to do so relying on the erroneous legal advice which it had received and which Ms Vidovic had noted on her copy of the s 36 Notice. The Magistrate continued:
[66]The parties continued to conduct themselves on this basis after the expiry date of the lease. There was no mention of Autocash’s omission to exercise the Option when the parties executed the McGees Terms, or instructed Mr Nobes, or while they awaited his determination. I consider this conduct can only be consistent with the Forzas having shared the same assumption as Autocash. This is reinforced by Mr Forza’s offer to “renew” the lease on 13 June 2020, which indicates that the Forzas considered Autocash’s option to do so continued. It is not until Mr Forza’s email of 30 July 2019 that the first mention is made of the lease having expired. Mr Forza does not assert in that email that this was a long held view but rather it had been more recently formed, following the family reaching a belated consensus about this.
[67]I accept Ms Vidovic’s evidence that she held the assumption from 7 January 2020 that Autocash had 21 days from receipt of the Nobes determination to exercise the Option. It is consistent with her handwritten note on the s 36 Notice. Contrary to the Forzas’ submission, the source of Ms Vidovic’s assumption is irrelevant to an estoppel by convention. I find that the first three elements of Blue J’s formulation of estoppel by convention are established on the balance of probabilities.
[68]I accept Ms Vidovic’s evidence that Autocash was willing to exercise the Option and the only reason it refrained from doing so was in reliance on the assumption that the convention governed the parties’ legal relations. I consider it is apparent from the Forzas’ conduct that they knew that Autocash was so acting.

Conduct after the expiry of the term cannot found the estoppel. Nor is the conduct relied on capable of colouring the conduct manifested by the parties before the expiry of the term. Whether or not it supports the inferences drawn by the Magistrate about the subjective beliefs of the parties is debatable but is in any event irrelevant.
In the alternative, the Magistrate held that she would have exercised the power conferred by s 68(2)(e) to order relief which would effect a renewal of the Lease.
[78]Section 68(2) RCLA vests a broad jurisdiction in this Court in respect of retail and commercial leases. Relief under s 68(2) is discretionary but the discretion must be exercised judicially, that is fairly and doing justice between the parties in all the circumstances bearing in mind the purpose for which the discretion exists. It requires an examination of the circumstances and the conduct of the parties and a determination as to where the justice of the case lies.
[79]I take into account the Forzas’ submission that the Court can be guided by common law principles in relation to relief against forfeiture. For the reasons I have already expressed with respect to the issue of estoppel by convention, I consider this as a case where the Forzas by their conduct and their silence have contributed to Autocash’s failure to act as strictly required under the lease with respect to the exercise of the Option. While Autocash acknowledges breaches of the lease with respect to a failure to pay outgoings, account should also be taken of Autocash’s overpayment of rent following my findings as to the validity of the Annual Review provision. Balancing these considerations with all the circumstances I have set out with respect to the issue of estoppel by convention, I find that it would be appropriate and in the overall interests of justice to exercise the discretion under s 68(2) to grant the relief sought by Autocash.
[80]I do not consider granting such relief would be contrary to s 36 of the RCLA as submitted by the Forzas. As I have already noted, s 36 implies a provision into the lease to provide a mechanism for a lessee to request and obtain a current market rent determination before exercising an option to renew a lease within a prescribed time period. Section 68(2)(e) empowers the Court to relieve a party from an obligation to comply with a provision of a lease. There is no carve out of the operation of s 68(2)(e) with respect to the provision implied by s 36.
Discussion
I deal first with the validity of clause 14.
The Forzas contend that clause 14 should be read down so that rent is reviewed by 5 per cent per annum. Clause 14 would therefore be amended as follows:
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.
The issue of severability was helpfully considered in White J in C Convenience Stores Pty Ltd v Wayville Plaza Retirement Pty Ltd.[20] In that case, White J found that clauses of a contract were void as restrictive covenants. In considering the severability issue, White J held that ‘[u]ltimately, 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’.[21] White J applied the principles of contractual construction to derive the objective intention of the parties.[22]
[20] (2012) 114 SASR 299.
[21] At [170].
[22] Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337.
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 percent 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.
I would, therefore, affirm the Magistrate’s conclusion as to the invalidity of clause 14.
I would, however, allow the appeal on the ground that the Magistrate erroneously found that the Forzas were precluded by conventional estoppel from relying on the legal effect of the Lease which rendered the exercise of the option after the expiry of the initial term invalid.
In order to establish the second and fourth limbs of conventional estoppel, the proponent must prove conduct on the part of each party which would be perceived by the other as the adoption of the convention for which the proponent contends.
For the reasons given in paragraphs [23] to [54] above, the communications by Robert provide no foundation for any such perception. On the contrary, his communications are consistent with the position that the option to renew the lease lapsed on the expiry of the first term and that if Autocash desired an independent valuation before exercising the option, it had to be obtained before the expiry of the term. Moreover, the evidence clearly established that the causes of the assumption made by Autocash were first the erroneous legal advice it had obtained and, secondly, if Ms Vidovic’s testimony was correctly accepted, her idiosyncratic subjective understanding of the communications.
On the failure of Autocash’s estoppel case, Autocash could not rely on the exercise of any power conferred by s 68(2)(f) for two reasons. First, the only foundation for the favourable exercise of that power identified by Autocash, and acted on by the Magistrate, was conduct by the Forzas which was said to have contributed to, or caused the adoption of the assumption, which founded the estoppel case. For the reasons I have given, there was no such conduct. In any event, there was no forfeiture. The Lease had expired without Autocash exercising the option. I am not persuaded that s 68(2)(f) of the RCL Act empowers the Court to order to extend the Lease beyond its expiry, or to order that the parties be bound by a new lease, or to reinstate the power to exercise the option as a standalone right which was not anchored to a lease. The first two options create new rights under a different, court ordered lease; they do not reinstate rights under the forfeited lease or the lease on which the otherwise terminated rights were founded. The third alternative order is, even more obviously, not anchored in any lease.
Conclusion
I dismiss the appeal against the Magistrate’s declaration that clause 14 is invalid and the consequential relief ordered. I allow the appeal against the Magistrate’s declaration that the option to renew was validly exercised. I will hear the parties on the precise form of the orders and on the question of costs.