HYDE PARK MANAGEMENT LIMITED and AMANDA BRYCE & GUSTY PHARMACY PTY LTD AS TRUSTEE FOR THE AMANDA BRYCE FAMILY TRUST
[2023] WASAT 24
•8 MARCH 2023
JURISDICTION : STATE ADMINISTRATIVE TRIBUNAL
ACT: COMMERCIAL TENANCY (RETAIL SHOPS) AGREEMENTS ACT 1985 (WA)
CITATION: HYDE PARK MANAGEMENT LIMITED and AMANDA BRYCE & GUSTY PHARMACY PTY LTD AS TRUSTEE FOR THE AMANDA BRYCE FAMILY TRUST [2023] WASAT 24
MEMBER: MR K BALES, SESSIONAL MEMBER
HEARD: DETERMINED ON THE DOCUMENTS
DELIVERED : 8 MARCH 2023
PUBLISHED : 29 MARCH 2023
FILE NO/S: CC 305 of 2023
BETWEEN: HYDE PARK MANAGEMENT LIMITED
Applicant
AND
AMANDA BRYCE & GUSTY PHARMACY PTY LTD AS TRUSTEE FOR THE AMANDA BRYCE FAMILY TRUST
Respondent
Catchwords:
Retail shop lease - Calculation of the period of years of occupation of premises for the purposes of s 13 and s 14A of the Commercial Tenancy (Retail Shops) Agreements Act 1985 (WA) - Test of continuous and seamless occupation to apply without regard to nature or number of grants of right of occupation - Termination and surrender of leases
Legislation:
Commercial Tenancy (Retail Shops) Agreements Act 1985 (WA), s 13, s 13(1), s 13(2A), s 13(2), s 13(2)(a), s 13(3a), s 13(3b), s 13(6), s 13(7), s 13(8), s 13(9), s 13B, s 13C, s 14A
Interpretation Act 1984 (WA), s 18
State Administrative Tribunal Act 2004 (WA), s 60(2), s 78
Result:
Reasons for decision provided pursuant to s 78 of the State Administrative Tribunal Act 2004 (WA)
Category: B
Representation:
Counsel:
| Applicant | : | N/A |
| Respondent | : | N/A |
Solicitors:
| Applicant | : | Squire Patton Boggs |
| Respondent | : | N/A |
Case(s) referred to in decision(s):
480 Hay Street Pty Ltd v Irwin St Lower Pty Ltd [2020] WASC 59
Dileum Pty Ltd v J K Corp Pty Ltd [1988] 1 WAR 244
REASONS FOR DECISION OF THE TRIBUNAL:
(The application was heard on the basis of the documents on 8 March 2023 pursuant to s 60(2) of the State Administrative Tribunal Act 2004 (WA) (SAT Act). The decision of the Tribunal was delivered to the parties by email on 8 March 2023. The following reasons comprise the reasons that were requested by the Applicant and provided pursuant to the provisions of s 78 of the SAT Act).
The application
On 7 March 2023, the Applicant lodged an application under s 13(7) of the Commercial Tenancy (Retail Shops) Agreements Act 1985 (WA) (Act) in respect of a Deed made on 2 March 2023 between the Applicant as landlord, Kaizen (Aust) Pty Ltd (Assignor) as assignor, and the Respondent as assignee, entitled 'Assignment, Extension and Variation of Lease' (Deed) relating to premises (Premises) known as Shop 7, Hawaiian's Melville Shopping Centre, Bicton, for approval of the following clause (Clause):
13.Damage or destruction to Centre or Premises
13.1Abatement of Base Rent and suspension of covenants to repair
(a)Except where clause 13.1(b) applies, if the Premises are destroyed or damaged so as to be wholly or partially unfit for occupation or use by the Tenant in the conduct of the Tenant's business then, from the date of destruction or damage until the Premises are restored and again put in a proper condition fit for use by the Tenant for the purpose of the Tenant's business, the Tenant shall not be required:
(i)to pay the Base Rent (other than a fair and reasonable proportion of it according to the nature and extent of the damage or destruction); or
(ii)to comply with its obligations to repair and maintain those parts of the Premises where the destruction or damage has occurred.
(b)The provisions of clause 13.1(a) shall not apply where:
(i)the Tenant has rendered the Landlord's relevant insurance policy void or the Landlord's insurance moneys irrecoverable in whole or part; or
(ii)the Tenant has caused the destruction or damage by its own negligent act or omission or default.
13.2Landlord may reinstate
(a)In the case of the destruction of or structural damage to:
(i)the Premises; or
(ii)a substantial part of the Centre,
the Landlord shall, within 90 days after such destruction or damage, by written notice to the Tenant, elect either:
(iii)to terminate this lease; or
(iv)to rebuild and restore the Premises or the Centre (as the case may be).
(b)If the Landlord elects to restore or rebuild, it may restore or rebuild the Centre and the Premises in a different form so long as the lettable area of the new premises does not vary by more than 5% from the Floor Area of the Premises immediately prior to such damage or destruction and the materials used are not of inferior quality or appearance to the materials previously used.
(c)For the purposes of this clause, the expression a substantial part of the Centre means:
(i)one half or more of the Gross Lettable Area in the Centre as determined by the Landlord; or
(ii)a significant part of the Centre as, in the reasonable opinion of the Landlord, renders the restoration of the Centre uneconomic or undesirable or the continued occupation of the Centre impractical.
(d)If the provisions of subsection 13(1) of the Act apply to this lease then, unless the State Administrative Tribunal has approved the inclusion of clauses 13.2(a) and 13.2(b) pursuant to subsection 13(7) of the Act, the Landlord is entitled to terminate this lease pursuant to this clause only at a time after the expiry of the minimum term that may be obtained by the Tenant under subsection 13(1) of the Act.
13.3Continuation of business
The Tenant shall use its best endeavours to continue operating the Tenant's Business in the Premises if it is practicable to do so during any period of restoration or rebuilding of the Premises or the Centre (as the case may be).
13.4Tenant may determine if no re-instatement
If the Premises shall be destroyed or damaged so as to be wholly unfit for occupation or use by the Tenant and the Landlord has not restored the same within 90 days after the event causing the destruction or damage, the Tenant may, at any time within a further 30 days thereafter, terminate this Lease by giving the Landlord notice in writing.
13.5Pre-termination rights
Any termination of this Lease pursuant to any of the clauses in this clause 13 will not prejudice or affect any right or claim which any party may have against any other party in respect of any breach of this lease occurring prior to the date of termination.
The Applicant provided a copy of a lease dated 9 January 2014 between the Applicant as landlord and the Assignor as tenant which granted a lease of the Premises for a term of 10 years from 1 April 2014 to 31 March 2024 (Lease). The Clause was one of the provisions in the Lease.
The Deed contains the following independent operative clauses:
2.1Assignment
(a)From and including the Assignment Date the Assignor assigns and transfers the Assignor's Leasehold Interest to the Assignee free from any encumbrance for the Balance of the Term (including the right to exercise any option to renew on the terms and conditions of the lease) but subject to the terms of this document.
2.2Extension for the First Further Term
(a)From and including the Assignment Date, the Landlord leases the Premises to the Assignee for the First Further Term on the terms and conditions of this document.
(b)From the Commencing Date of the First Further Term the Landlord and the Assignee mutually covenant and agree that:
(i)the Landlord will observe and perform the Landlord's Covenants; and
(ii)the Assignee will observe and perform the Tenant's Covenants,
as fully as if the Original Lease (as assigned) had been repeated in full in this document (except for any option of renewal) with such modifications only as are contained in this document or as are necessary to make the provisions of the Original Lease sensibly apply to this document.
The Deed contains the following relevant effective definitions:
Assignment Date means 1 April 2023;
Assignor's Leasehold Interest means the whole of the Assignor's estate, right and interest in the Lease and the Premises;
Balance of the Term means the residue of the Term which is unexpired at the Assignment Date and where the context permits includes the First Further Term;
Commencing Date of the First Further term means 1 April 2024;
First Further Term means a term of 9 years from 1 April 2024 to 31 March 2033;
Landlord's Covenants means the terms, covenants and conditions contained in or implied by the Lease and on the part of the Landlord to be observed and performed;
Original Lease means the Lease;
Tenant's Covenants means the terms, covenants and conditions contained in or implied by the Lease and on the part of the tenant to be observed and performed; and
Term means a term of ten years from 1 April 2014 to 31 March 2024.
In support of the application, the applicant stated:
5.Special circumstances by reason of which provision should be approved for inclusion In Lease
5.1Damage or destruction of Centre or Premises (clause 13)
We ask the State Administrative Tribunal to approve the inclusion of clause 13 on the grounds that, in the event of a total or substantial destruction of the Premises or the Centre, both the Landlord and the Tenant are entitled to terminate the lease under this clause. This provides the Tenant with a resolution where one would not necessarily be available to the Tenant at general law in the absence of the clause.
In such circumstances, and even if part of the Premises remained undamaged, the viability of the Tenant's business could be reduced since the operating success of the Tenant's business depends to a large extent on the operating success of the shopping centre as a whole.
Damage to part of the Premises could also involve damage to a substantial part of the shopping centre, including the common areas, which could lead to many problems, including:
(a)the cost of rebuilding or reconstructing the shopping centre may not be a viable proposition;
(b)the rebuilding or reconstruction of the shopping centre could interfere with the functioning of the remainder of the centre and prevent proper access to the premises;
(c)the advertising of the shopping centre as a whole may not be feasible;
(d)the airconditioning and heating of the shopping centre could be disturbed; or
(e)damage to portions of the common area in the shopping centre may prevent or seriously hamper access by customers to the premises.
In such circumstances, it may be of benefit not only to the Landlord but also to the Tenant to terminate the lease.
The Landlord's right to terminate the lease pursuant to the proposed destruction clause is discretionary and would not be exercised in every case.
Accordingly, the Landlord submits that the above would constitute a special circumstance by reason of which the damage or destruction clause should be approved by the State Administrative Tribunal for inclusion in the lease.
The Legislation
Section 13(7) of the Act provides:
The Tribunal may, upon application made to it by the landlord notice of which has been given to the tenant, approve of the inclusion in a retail shop lease of a provision under which the landlord may determine the lease (other than under subsection (6)(a), (b) or (da)) before the day set out in subsection(6)(aa) or (ab), as is relevant, if it is satisfied that special circumstances exist by reason of which such approval ought to be given.
Section 18 of the Interpretation Act 1984 (WA) (Interpretation Act) provides:
In the interpretation of a provision of a written law, a construction that would promote the purpose or object underlying the written law (whether that purpose or object is expressly stated in the written law or not) shall be preferred to a construction that would not promote that object or purpose.
Section 13(6) of the Act provides:
The landlord under a retail shop lease is not entitled to determine the lease —
(aa)if the lease is a lease referred to in subsection (1), before the day on which the term that may be obtained by the tenant under that subsection expires; or
(ab)if the lease is a lease the current term of which, or the current term plus the option term, is 5 years or longer, before the day that is 5 years after the day on which the earlier term commenced,
except –
(a)by reason of default by the tenant or failure of the tenant to remedy any such default in accordance with the lease; or
(b)by reason that —
(i)it would be inconsistent with a head lease under which the premises are held by the landlord for the retail shop lease to continue; and
(ii)that inconsistency is not, by reason of section 13A(1), removed;
or
(c)under and in accordance with a provision that is included in the lease with the approval in writing of the Tribunal given under subsection (7) or (7A); or
(da)under and in accordance with a provision of the lease that is the same, or substantially the same, as a provision prescribed for the purpose of this section; or
(d)where the Tribunal has granted an application by the tenant under subsection (7b), in relation to a lease referred to in paragraph (aa).
Section 13(1) of the Act provides:
Subject to this section, where under a retail shop lease —
(a)the term of the lease (in this section called the current term) is more than 6 months but less than 5 years; and
(b)the current term plus any term (in this section call the option term) that may be obtained by the tenant by way of an option to renew the lease totals more than 6 months but less than 5 years,
the lease shall be taken to give the tenant the option to renew the lease for a term commencing immediately after the expiry of the current term and the option term, if any, and ending on a day specified by the tenant that is not later than 5 years after the day of commencement of the current term.
Section 13(2A) of the Act provides:
For the purposes of subsection (1), a lease for a term of more than 6 months includes a tenancy where the tenant has been continuously in possession of the retail shop for more than 6 months as a result of either or both of the following —
(a)the lease being renewed (one or more times);
(b)the lease being continued.
Section 13(2) of the Act provides:
Subsection (1) does not apply to a retail shop lease in respect of premises —
(a)if the tenant occupied the premises as a retail shop for a period, including any time prior to the commencement of this Act, ending immediately before the commencement of the current term and that period plus the current term and the option term, if any, totals 5 years or longer; or[.]
Section 13(8) of the Act provides:
Where the tenant under a retail shop lease assigns the lease, the term to which the assignee becomes entitled is the balance of the term of the assigning tenant, determined as provided by the lease including, where applicable, the option arising under subsection (1), as at the date of the assignment.
Other sections of the Act including s 13(3a), s 13(3b), s 13(9) s 13B, s 13C, and s 14A, the texts of which need not be set out in these reasons, embrace the concept of continuous occupation of premises by the tenant whether or not by way of consecutive grants, and whether or not by the original tenant.
Findings
The Tribunal makes the following findings:
(a)The Premises, being situated within a shopping centre, fall within the definition of a retail shop for the purposes of the Act.
(b)In applying the provisions of s 18 of the Interpretation Act, for the purposes of the statutory scheme under s 13 and s 14A of the Act in general, and the calculation of the period of years provided for in s 13(1) of the Act in particular, the test of a continuous and seamless period of occupation should be applied without reference to the number or character of the grants of rights of occupation during the relevant period.
(c)The term of a lease may only be terminated by expiry, by notice given by one party to the other, by re-entry by the landlord in accordance with the terms of the lease, or by written or implied surrender by the tenant resulting in the merger of the leasehold estate into the superior estate held by the landlord.
(d)The Lease created a leasehold estate with a term of 10 years from 1 April 2014 to 31 March 2024.
(e)Clause 2.1 of the Deed was effective to transfer the Balance of the Term to the Respondent without surrender or modification of any kind, resulting in the Respondent being the holder of a continuous and seamless right of occupation of the Premises with effect from 1 April 2023 until the expiry of the Term on 31 March 2024.
(f)By reason of the provisions of s 13(2)(a) and s 13(8) of the Act, the provisions of s 13(1) of the Act do not apply to the leasehold estate created by the Lease, nor to the leasehold estate granted subsequently to the assignment of the Balance of the Term for the First Further Term, as the tenant had already enjoyed occupation of the Premises for a period in excess of 5 years under the Lease prior to the immediate and seamless assignment of the Balance of the Term.
Supplementary findings
The Tribunal notes that subsequently to the completed assignment of the Balance of the Term, and without involvement by the Assignor in any capacity, the Respondent as tenant entered into the new commercial arrangements with the Applicant evidenced in clause 2.2 of the Deed, including the grant to the Respondent of a leasehold estate for the First Further Term of nine years commencing on 1 April 2024 and expiring on 31 March 2033, together with the grant of an option to renew the term of the lease for a term of five years commencing on 1 April 2033 and expiring on 31 March 2038.
A tenet of Equity regards that which evidence shows ought to have been done as having been done.
As the term of the leasehold estate for the First Further Term does not commence until the expiry of the Term of the Lease as assigned, there is no reason for, nor evidence to support, an implied surrender of the Term at law either by the Assignor or by the Respondent at any time.
The Tribunal has had the benefit of the judgments of JJ Brindle and Kennedy in the case of Dileum Pty Ltd v J K Corp Pty Ltd [1988] 1 WAR 244, which support, and are consistent with, the test of a continuous and seamless period of occupation of premises for the purposes of s 13(1) of the Act.
In the case of 480 Hay Street Pty Ltd v Irwin St Lower Pty Ltd [2020] WASC 59 at [42] Curthoys J stated (obiter) in relation to the interpretation of s 13(7) of the Act:
In the context of costs, the term 'special circumstances' has been held to mean 'circumstances that are out of the ordinary, but without having to be extraordinary or exceptional'. I have concluded that that is an appropriate manner in which to interpret that term in the Act.
The Tribunal finds that it is not necessary to decide whether or not this application for approval of the Clause satisfies the test approved by Curthoys J for the identification of special circumstances.
The Tribunal finds that it is not necessary to decide whether or not the definitions of the terms 'Landlord's Covenants' and 'Tenant's Covenants' in clause 2.2(b) of the Deed are sufficient to apply the provisions of the Clause to the leasehold estate created by the provisions of clause 2.2(a).
Order
On 8 March 2023 the Tribunal ordered:
1.The Tribunal finds that by reason of the provisions of s 13(8) of the Act, the Respondent has acquired the balance of the term of ten years from 1 April 2014 without the benefit of an option arising under the provisions of s 13(1) of the Act.
2.For the reason stated in paragraph 1, the Tribunal has no jurisdiction to consider the application under s 13(7) of the Act, and the application is therefore dismissed.
I certify that the preceding paragraph(s) comprise the reasons for decision of the State Administrative Tribunal.
MR K Bales, SESSIONAL MEMBER
29 MARCH 2023
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