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…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2022] SASC 133
Decision Date: 17 November 2022

CaseChat Overview and Summary

Forza and Autocash Pty Ltd were the parties involved in the dispute, which was heard by the Supreme Court of New South Wales. The disagreement centred around a lease agreement for a property, specifically concerning the validity of a rent review clause and the exercise of an option to renew the lease. The court had to decide whether the estoppel claim made by Autocash was valid, and if so, whether it could be used to grant any relief under section 68(2)(f) of the Retail and Commercial Leases Act 2003 (NSW). Furthermore, the court had to determine the validity of the rent review clause in the lease agreement and the exercise of the option to renew the lease.

The court examined the legal principles surrounding estoppel and the powers available under section 68(2)(f) of the Act. It found that Autocash's estoppel claim was not valid, as there was no evidence of conduct by Forza that would have contributed to or caused the assumption upon which the estoppel was based. Furthermore, the court held that section 68(2)(f) did not empower it to extend the lease beyond its expiry or to create a new lease or reinstate the option to renew as a standalone right. The court concluded that the estoppel claim could not be used to grant any relief, as it was not based on valid conduct by Forza. The court also found that the rent review clause was invalid, and the option to renew was not validly exercised.

The court dismissed the appeal against the Magistrate's declaration that the rent review clause was invalid and the consequential relief ordered. However, it allowed the appeal against the Magistrate's declaration that the option to renew was validly exercised. The court will hear the parties on the precise form of the orders and the question of costs. This decision highlights the importance of valid conduct in establishing an estoppel claim and the limited powers of the court under section 68(2)(f) of the Retail and Commercial Leases Act 2003 (NSW). It also emphasises the need for careful drafting of lease agreements to ensure the validity of rent review clauses and the exercise of renewal options.

Orders

Orders of the court

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Background

Background to the litigation

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Evidence

Evidence Before The Court

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Decision

Reasons for decision

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.

Ratio Decidendi

Legal Principle Established

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