Howell and Kakulas and Christodulou - [2012] WASAT 9

JURISDICTION : STATE ADMINISTRATIVE TRIBUNAL

STREAM: COMMERCIAL & CIVIL

ACT: COMMERCIAL TENANCY (RETAIL SHOPS) AGREEMENTS ACT 1985 (WA)

CITATION: HOWELL and KAKULAS & CHRISTODULOU [2012] WASAT 9

MEMBER: MS NATASHA OWEN-CONWAY (MEMBER)

HEARD: DETERMINED ON THE DOCUMENTS

DELIVERED : 13 JANUARY 2012

FILE NO/S: CC 1792 of 2011

BETWEEN: BRIAN LESLIE HOWELL
LISA ANNE HOWELL
Applicants
AND
LOULA KAKULAS
PELAGIA CHRISTODULOU
Respondents

Catchwords:

Substantial landscape work Whether expenditure is an operating expense Whether nature and extent of landscape work was for the operation, maintenance or repair of retail shopping centre common area or an improvement Whether expenditure for an improvement to common area of a retail shopping centre is an operating expense for the purpose of s 12(3) of the Commercial Tenancy (Retail Shops) Agreements Act 1985 (WA)

Legislation:

Commercial Tenancy (Retail Shops) Agreements Act 1985 (WA), s 3, s 12, s 16
Income Tax Assessment Act 1936 (Cth), s 53

Result:

A landlord's expenditure to remodel and renovate the gardens of a retail shopping centre, situated on the common area of the retail shopping centre is not an 'operating expense' within the meaning of that phrase as defined by s 12(3) of the Commercial Tenancy (Retail Shops) Agreements Act 1985 (WA) and the terms of the lease in question

Category: B

Representation:

Counsel:

Applicants: Self-represented
Respondents : Mr L Barker

Solicitors:

Applicants: N/A
Respondents : GV Lawyers

Case(s) referred to in decision(s):

Federal Commissioner of Taxation v Western Suburbs Cinemas Ltd (1952) 86 CLR 102
McLaughlin v Dungowan Manly Pty Ltd [2007] NSWSC 197

REASONS FOR DECISION OF THE TRIBUNAL:

Summary of Tribunal's decision

The applicants, the tenants of Unit 3 Mindarie Central Shopping Centre, disputed the claim made by the respondents for a contribution of $883.65 towards the variable outgoings alleged to have been incurred by the former landlord of the Mindarie Central Shopping Centre in the financial year ending 30 June 2011. The respondents claim that there is a shortfall in the budgeted variable outgoings for the Mindarie Central Shopping Centre, in respect of which shortfall they are entitled to seek a contribution from the tenants, including the applicants.
It was common cause that the budgeted variable outgoings for the Mindarie Central Shopping Centre was exceeded in the financial year ending 30 June 2011 as a result of the prior landlord's expenditure on landscaping and gardening works.
The Tribunal has concluded that the expenditure incurred by the former landlord of the Mindarie Central Shopping Centre, and in respect of which the respondents now seek a contribution from the applicants, was not incurred for the operation, maintenance and repair of the Mindarie Central Shopping Centre and the common area thereof, and is not an operating expense of the respondents.

Background

The applicants are the trustees of the Howell Family Trust. On 20 May 2010 the applicants, as trustees, executed a deed of assignment of lease in respect of the property identified in the assigned lease and referred to as Unit 3, Mindarie Central. By…

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: [2012] WASAT 9
Decision Date: 13 JANUARY 2012

CaseChat Overview and Summary

In the case of Howell and Kakulas and Christodulou, the dispute centred around whether certain landscaping expenses incurred by the landlords of a retail shopping centre were classified as operating expenses. The matter was brought before the Supreme Court of Western Australia. The landlords, Howell and Kakulas, sought to recover the expenses from the tenants, including Christodulou, under section 12(3) of the Commercial Tenancy (Retail Shops) Agreements Act 1985 (WA). The primary legal issue was whether the significant landscaping work performed constituted an operating expense or if it represented an improvement to the common areas of the shopping centre.

The court examined the nature and extent of the landscaping work to determine whether it fell under the category of operation, maintenance, or repair, or if it constituted an improvement. The court had to decide if the substantial landscaping work, which included the replacement of turf and the installation of new landscaping beds, was an operating expense as defined by the Act. The court further considered whether such expenditure for improvements to the common areas of a retail shopping centre qualified as an operating expense under the legislation.

In its judgment, the court held that the substantial landscape work undertaken did not qualify as an operating expense. The court found that the nature and extent of the landscaping work constituted an improvement to the common area rather than a maintenance or repair activity. Consequently, the court ruled that the expenditure for this improvement did not fall within the definition of an operating expense as provided by section 12(3) of the Act. The court's decision hinged on the distinction between regular maintenance and significant improvements, determining that the latter did not meet the criteria for being an operating expense. As a result, the landlords were not entitled to recover the landscaping costs from the tenants under the statutory provision in question.

Orders