HYDE PARK MANAGEMENT LIMITED and TERESINA ANN PEARSON
[2023] WASAT 12
•3 MARCH 2023
JURISDICTION : STATE ADMINISTRATIVE TRIBUNAL
ACT: COMMERCIAL TENANCY (RETAIL SHOPS) AGREEMENTS ACT 1985 (WA)
CITATION: HYDE PARK MANAGEMENT LIMITED and TERESINA ANN PEARSON [2023] WASAT 12
MEMBER: MR K BALES, SESSIONAL MEMBER
HEARD: DETERMINED ON THE DOCUMENTS
DELIVERED : 4 JANUARY 2023
PUBLISHED : 3 MARCH 2023
FILE NO/S: CC 1874 of 2022
BETWEEN: HYDE PARK MANAGEMENT LIMITED
Applicant
AND
TERESINA ANN PEARSON
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
Legislation:
Commercial Tenancy (Retail Shops) Agreements Act 1985 (WA), s 13, s 13(1), s13(2A), s 13(2), s 13(2)(a), s 13(3a), s 13(3b), s 13(6), s13(7), s 13(8), s 13(9), s13B, 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 4 January 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 4 January 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 22 December 2022, Hyde Park Management Limited ACN 008 698 708 (applicant) lodged an application under s 13(7) of the Commercial Tenancy (Retail Shops) Agreements Act 1985 (WA) (Act) in respect of a retail shop lease between the parties entitled 'Extension and Variation of Lease' relating to premises (Premises) known as Shop 9, Hawaiian's Melville Shopping Centre, Bicton, (New Lease) 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
(f)Except where clause 1.1(g) 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.
(g)The provisions of clause 1.1(f) 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
(h)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).
(i)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.
(j)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.
(k)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 1.1(h) and 1.1(i) 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 the New Lease which granted a lease of the Premises for a term of 3 years from 29 November 2022 to 28 November 2025. The grant by the New Lease was expressed to be an extension of a lease of the Premises between the parties which had granted a lease for a term of 5 years from 29 November 2017 to 28 November 2022 (in the New Lease and in these reasons defined as Original Lease). The Clause was one of the provisions in the Original Lease.
The New Lease contained the following clause:
4PROVISIONS OF THE LEASE TO APPLY
(a)From the Commencing Date of the Further Term the Landlord and the Tenant mutually covenant and agree that:
(i)the Landlord will observe and perform the Landlord's Covenants; and
(ii)the Tenant will observe and perform the Tenant's Covenants,
as fully as if the Lease had been repeated in full in this deed (except for any option of renewal) with such modifications only as are contained in this deed or as are necessary to make the provisions of the Lease sensibly apply to this deed.
The New Lease contained the following relevant effective definitions:
Commencing Date means 29 November 2022;
Further Term means a term of 3 years from 29 November 2022 to 28 November 2025;
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;
Lease means the Original Lease; and
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.
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 Original Lease created a leasehold estate with a term of 5 years from 29 November 2017 to 28 November 2022.
(d)The New Lease created a new leasehold estate with a term of 3 years from 29 November 2022 to 28 November 2025 resulting in a continuous and seamless period of occupation of the Premises from 29 November 2017 to 28 November 2025.
(e)By reason of the provisions of s 13(2)(a) of the Act, the provisions of s 13(1) of the Act do not apply to the leasehold estate created by the New Lease, as the tenant had already enjoyed occupation of the Premises for a period of 5 years under the Original Lease prior to the immediate and seamless commencement of the term of the New Lease.
Supplementary findings
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 4 of the New Lease are sufficient to apply the provisions of the Clause to the leasehold estate created by the New Lease.
Order
On 4 January 2023 the Tribunal ordered:
1.The Tribunal has no power under s 13(7) of the Act to consider Clause 13, due to the provisions of s 13(2)(a) of the Act.
I certify that the preceding paragraph(s) comprise the reasons for decision of the State Administrative Tribunal.
MR K Bales, SESSIONAL MEMBER
3 MARCH 2023
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