ITQ PTY LTD and HYDE PARK MANAGEMENT LTD
[2008] WASAT 66
•28 MARCH 2008
JURISDICTION : STATE ADMINISTRATIVE TRIBUNAL
STREAM: COMMERCIAL & CIVIL
ACT: COMMERCIAL TENANCY (RETAIL SHOPS) AGREEMENTS ACT 1985 (WA)
CITATION: ITQ PTY LTD and HYDE PARK MANAGEMENT LTD [2008] WASAT 66
MEMBER: JUDGE J CHANEY (DEPUTY PRESIDENT)
HEARD: 5 MARCH 2008
DELIVERED : 28 MARCH 2008
FILE NO/S: CC 1650 of 2007
BETWEEN: ITQ PTY LTD
Applicant
AND
HYDE PARK MANAGEMENT LTD
Respondent
Catchwords:
Commercial tenancy Claim for declarations concerning alleged unconscionable conduct Preliminary issue Whether effect of declarations would be to create a new lease Whether within jurisdiction
Legislation:
Commercial Tenancy (Retail Shops) Agreements Act 1985 (WA), s 3, s 15, s 16, s 26, Part IIA
State Administrative Tribunal Act 2004 (WA), s 16, s 91
Trade Practices Act 1974 (Cth), s 51AC
Result:
Proceedings found to be within jurisdiction
Category: B
Representation:
Counsel:
Applicant: Mr C Clifton
Respondent: Mr P Shanahan
Solicitors:
Applicant: Clifton Pham
Respondent: Clayton Utz
Case(s) referred to in decision(s):
DB Rreef Funds Management Ltd v Commissioner of Taxation [2005] FCA 509; (2005) 218 ALR 144
Gerraty v McGavin [1914] HCA 23; (1914) 18 CLR 152
Kiami Pty Ltd v Peat Resources of Australia Pty Ltd [1999] WASC 92
Mercantile Credits Ltd v Shell Co of Australia Ltd (1976) 9 ALR 39
Newcrest Mining (WA) Ltd v Commonwealth (No 2) (1993) 119 ALR 423
Pearce and Germain [2006] WASAT 305
Percival v Forster-Tuncurry and Districts Chamber of Commerce and Tourism Ltd [1997] NSWSC 383
REASONS FOR DECISION OF THE TRIBUNAL:
Summary of Tribunal's decision
ITQ Pty Ltd is the tenant of Shop 7, The Mezz, Mount Hawthorn. A dispute arose between ITQ and its landlord, Hyde Park Management Pty Ltd concerning an option to extend the lease after expiry of its initial term. The landlord contended that ITQ had failed to comply with the strict requirements governing the exercise of the option. The tenant contended that certain conduct on the part of the landlord was unconscionable and precluded Hyde Park from relying on the strict terms of the lease. It sought declarations to that effect from the Tribunal.
Hyde Park argued that the Tribunal had no jurisdiction to make the declarations sought, because the effect would be to create a new leasehold interest. That question was dealt with by the Tribunal as a preliminary issue.
The Tribunal examined the nature of matters that can be bought to it under the Commercial Tenancy (Retail Shops) Agreements Act 1985 (WA), and the remedies available in relation to those matters. It concluded that it could make declarations of the nature sought, and that any declarations would not "create" any new leasehold estate. It determined that the proceedings were within its jurisdiction.
Introduction
The applicant, ITQ Pty Ltd (ITQ) is a tenant of Shop 7, The Mezz, 148 Scarborough Beach Road, Mount Hawthorn. The Mezz is a retail shopping centre as defined by the Commercial Tenancy (Retail Shops) Agreements Act1985 (WA) (CTRSA Act) and thus leases of retail shops within the centre are governed by the provisions of that Act. The owner of The Mezz is Hyde Park Management Ltd.
The nature of the tenancy under which ITQ currently occupies the premises is in dispute. As a consequence, ITQ commenced proceedings in the Tribunal in October 2007 seeking relief designed to resolve that dispute in its favour. At the initial directions hearings, Hyde Park asserted that the relief being sought by ITQ was not available within the Tribunal's jurisdiction. Upon that assertion being made, ITQ obtained the Tribunal's leave to lodge an amended application. The challenge to the Tribunal's jurisdiction was maintained, notwithstanding the amendment. At a directions hearing on 6 December 2007, Senior Member Raymond identified a preliminary issue for determination, and directed that the preliminary issue be determined before the matter otherwise proceeded. The preliminary issue was expressed to be:
"(i)Whether a declaration in the terms sought in par 1 of the orders sought would create a leasehold estate in Shop 7, The Mezz, 148 Scarborough Beach Road, Mount Hawthorn, which does not currently exist; and
(ii)If so, whether the Tribunal has jurisdiction to make such a declaration."
It is that issue to which these reasons are directed.
Factual background
The determination of the preliminary issue turns upon questions of law. There was, therefore, no evidence received on the hearing of the preliminary issue. Rather, the argument proceeded against a background of facts asserted in the applicant's Statement of Issues, Facts and Contentions filed with the Tribunal. For the purposes of consideration of the preliminary issue, I have proceeded on the assumption that the background facts, as set out in that document, are established. According to the Statement of Issues, Facts and Contentions, the background facts are as follows.
Prior to occupying Shop 7, ITQ was a tenant of Shop 5 at The Mezz. The Shop 5 tenancy arose under a lease which had a term of four years ending on 4 May 2007, with a three year option to renew. The Shop 5 lease did not have a clause allowing the respondent to terminate the lease for the purpose of redevelopment of the shopping centre.
In or around August 2005, Hyde Park requested ITQ to move its tenancy to a different location in The Mezz, so that Hyde Park could commence redevelopment.
ITQ agreed to move to Shop 7 at The Mezz, notwithstanding that it had no obligation to do so. It agreed to move on the basis that Hyde Park paid for its new fit‑out costs and relocation costs, and on condition that the new lease of Shop 7 was no more onerous than the lease on Shop 5.
Negotiations in respect of the lease of Shop 7 occupied seven or eight months during 2006, and on 30 November 2006, the applicant executed and returned to the respondent a lease of Shop 7, an agreement for lease, and a surrender of the lease of Shop 5. The new lease term commenced on 14 September 2006 and had an initial term of 10 months, expiring on 13 July 2007. Clause 2.3 of the lease is headed "Option to extend" and contained a grant by the landlord to the tenant of an option to extend the lease, initially for three years and two months, with a further option to extend for a further five years. The clause provided that the tenant may exercise the option to extend "if and only if" the tenant gave to the landlord written notice of its exercise of the option not less than three months and not more than six months prior to the expiration of the then current term.
Under the terms of the Shop 7 lease, the period for the exercise of the option to extend commenced on 13 January 2007 and expired on 13 April 2007.
Having sent the executed copy of the lease of Shop 7 and other documents to the landlord in November 2006, the applicant did not receive a copy of the lease executed by Hyde Park until, ultimately, 23 August 2007. On 10 April, 2007, Hyde Park informed ITQ's lawyers that Hyde Park was still waiting for ITQ to sign an application to the State Administrative Tribunal (SAT) for approval of certain terms to be included in the lease. Prior to that time, Hyde Park did not inform ITQ of the reason for the delay in returning the lease to the applicant. By 10 April 2007, there were only three days left within which to exercise the option to extend the term beyond 13 July 2007.
ITQ signed a SAT application and returned it to Hyde Park on 29 June 2007, and Hyde Park subsequently lodged the SAT application. Orders were made on that application on 11 July 2007. The letter communicating the decision was received by Hyde Park on 13 July 2007, the day that the initial term of the lease expired. It was over a month later, on 23 August 2007, that Hyde Park returned the executed lease to ITQ.
On 20 September 2007, ITQ's lawyers sent a notice of exercise of option to Hyde Park's agent. Apparently Mr Briers on behalf of Hyde Park had, some time earlier, suggested to Mr Percival on behalf of ITQ that ITQ "did not have a lease" because it had not exercised its option. On receipt of the purported exercise of the option, Hyde Park refused to extend the lease on the basis that the option had not been exercised within the time specified by the Shop 7 lease. Hyde Park offered to grant a new lease to ITQ but only on the basis of a very substantially increased amount for rent, outgoings and other expenses.
Relevant provisions of the CTRSA Act
Section 16 of the CTRSA Act enables a party to a retail shop lease to refer to the Tribunal any question between the parties which "he believes to be a question arising under the lease". The Tribunal is then required to determine whether or not the question referred to it is a question arising under the lease, and to hear the question.
Part IIA of the CTRSA Act deals with unconscionable conduct. That part of the Act was introduced with effect from 11 May 2007, and applies only to conduct that occurred after date. Section 15C specifies that a landlord under a retail shop lease shall not, in connection with the lease, engage in conduct that is, in all the circumstances, unconscionable. Section 15D proscribes conduct of that nature by a tenant.
Section 15F enables a landlord or tenant who suffers loss or damage because of unconscionable conduct to recover that loss or damage by applying to the Tribunal. Sections 15F(3) to (6) provide:
"(3)Without limiting section 26, in proceedings in relation to an unconscionable conduct application, the Tribunal may make any one or more of the following orders that it considers appropriate -
(a)an order that a party to the proceedings pay money to a specified person, whether by way of debt, damages or restitution, or refund any money paid by a specified person;
(b)an order that a specified amount of money is not due or owing by a party to the proceedings to a specified person, or that a party to the proceedings is not entitled to a refund of any money paid to another party to the proceedings.
(4)The Tribunal may make any ancillary orders that it considers necessary for the purpose of enabling an order under this section to have full effect.
(5)The Tribunal may impose any conditions that it considers appropriate when making an order under this section.
(6)The Tribunal may make an interim order under this section pending final determination of an unconscionable conduct application, if the Tribunal considers it appropriate to do so."
Section 26 specifies powers exercisable by the Tribunal in relation to applications bought under the Act. As is evident from the introductory words of s 15F(3), the orders which can be made under s 26 apply to unconscionable conduct as well as to any other proceedings concerning questions arising under a lease referred to the Tribunal under s 16. Section 26 provides:
"Orders of Tribunal
(1)Without limiting any power to make an order that is conferred by the State Administrative Tribunal Act 2004 but subject to this Act the Tribunal may make -
(a)an order that requires a party to proceedings before it to pay money to a person specified in the order;
(b)an order for a party to proceedings before it to do, or refrain from doing, anything specified in the order; or
(c) an order dismissing proceedings before it.
(1a)The power in subsection (1)(b) includes power for the Tribunal to order the parties to enter into an agreement varying a retail shop lease as specified in the order where the Tribunal has found that the tenant under the lease was before entering into the lease misled by the landlord as to the meaning or effect of a term or condition of the lease.
(1aa)The Tribunal may, where it considers it appropriate to do so, make an order terminating a retail shop lease under section 6A.
[(2)repealed]
(3)An order of the Tribunal requiring anything to be done or discontinued may fix the time within which that thing is to be done or discontinued, as the case may be."
From the introductory words of s 26, it can be seen that the remedies available under that section are in addition to remedies which are under the State Administrative Tribunal Act 2004 (WA) (SAT Act). That is consistent with s 16(1) of the SAT Act which stipulates that in exercising its original jurisdiction the Tribunal is to deal with a matter in accordance with both the SAT Act and the enabling Act, in this case the CTRSA Act.
Section 91 of the SAT Act provides:
"Declaration
(1)The Tribunal may make a declaration concerning any matter in a proceeding instead of any orders it could make, or in addition to any orders it makes, in the proceeding.
(2)The Tribunal's power to make a declaration under subsection (1) is exercisable only by a judicial member.
(3)The Tribunal's power under this section is in addition to, and does not limit, any power of the Tribunal under the enabling Act to make a declaration.
(4)The Tribunal may at any time make any order necessary or desirable to give effect to a declaration made under subsection (1).
(5)A declaration made under subsection (1) is binding, according to its terms, on -
(a) the parties to the proceeding; or
(b)such of them as are specified in the declaration,
and not otherwise."
The application before the Tribunal
The form of the application lodged by ITQ is an application under s 16(1) of the CTRSA Act. It identifies amongst the "questions arising under a retail shop lease" an issue as to whether or not Hyde Park's conduct was unconscionable. The applicant might well have used the form of application under s 15F(1) of the CTRSA Act rather than s 16(1). In substance, the application is brought under either or both of s 15F(1) and s 16. Nothing turns on that matter of form since the ultimate nature of the remedy claimed, being a declaration pursuant to s 91 of the SAT Act, is potentially available in either case.
The application identifies nine "questions between the parties arising under" the Shop 7 lease. They are as follows:
"1.Whether the lease falls within the ambit of the Commercial Tenancies [sic] (Retail Shops) Agreement[s] Act 1985 [(WA)]?
2.Whether any breaches of the lease occurred by one or both of the parties?
3.Whether the Respondent's conduct was as such as to put the Applicant to believe that the 3 months notice regarding the exercise of option to review would not be insisted upon?
4.Whether the Respondent's reliance on the Applicant's failure to give notice under the lease unconscionable within the meaning of section 15C of the Commercial Tenancy (Retail Shops) Agreements Act1985 (WA) and section 51AC of the Trade Practices Act 1974 [(Cth)]?
5.Whether the Applicant has been misled by the Respondent into the belief that the Respondent's strict legal rights were abandoned or suspended for the time?
6.Whether it would be unconscionable for the Respondent to be permitted to deny that the Respondent has allowed or encouraged the Applicant to assume to the Applicant's detriment that the Respondent waived the strict compliance with the requirements of clause 3.2 of the Lease.
7.Whether the Applicant was induced not to give notice of exercise of the option under the Lease on time as a result of the Respondent's conduct.
8.Whether the Respondent should be estopped from relying on the failure of the tenant to give due notice of exercise of the option provided for by the clause 2.3 of the Lease.
9.Whether the Applicant is entitled to be treated as if it had properly exercised its option to renew?"
Nothing in the materials before the Tribunal on the preliminary issue indicates any allegations of breaches of the lease by either party, and accordingly the question numbered 2 above does not appear to arise. Counsel for ITQ indicated at the hearing that it abandoned any reliance on s 51AC of the Trade Practices Act 1974 (Cth) in these proceedings.
The relief claimed by the applicant is in the following terms:
"1.Declaration pursuant to s 91 of the State Administrative Tribunal Act [WA] that:
(a)the Respondent's reliance on the Applicant's failure to exercise its option strictly in accordance with clause 3.2 of the Lease was unconscionable;
(b)the Respondent is estopped from relying on the failure of the Applicant to give notice of the option strictly in accordance with clause 2.3 of the Lease as a ground for denying that the Applicant has exercised its option to review the Lease;
(c)the Respondent by conduct waived strict compliance with the requirements of clause 3.2 of the Lease; and
(d)the Applicant is entitled to be treated as if the Applicant had properly exercised its option to renew its Lease of Shop 7, The Mezz, 148 Scarborough Beach Road, Mt Hawthorn.
2.Any other orders that the SAT may make with a view to achieving a solution acceptable to the parties of the Lease."
As counsel for the respondent pointed out, the use of the conjunctive "and" between subparagraphs (c) and (d) leads to some confusion as to the relationship between the subparagraphs of the application for relief. The construction suggested by the applicant, and upon which argument proceeded, was that the final subparagraph (d) should be treated as a declaration as to the conclusion which follows if the Tribunal were to make a declaration in terms of any one or more of subparagraphs (a), (b) or (c).
Hyde Park's contentions
The ultimate contention by the respondent is that the application is fatally flawed because the Tribunal does not have the jurisdiction to make the declarations sought. In summary, it is said that the Tribunal lacks the jurisdiction because the effect which would flow from the making of any of the declarations would be to create a leasehold interest where none presently exists. It is asserted that the making of declarations having that effect is the preserve of courts exercising equitable jurisdiction, and that the Tribunal has no general inherent equitable jurisdiction.
It is said that a new tenancy would be created by the making of declarations, because "in the absence of the orders sought … (ITQ) is 'holding over' at the premises on the terms of the expired lease pursuant to a monthly tenancy at will". The respondent argues that the orders sought endeavour to place the applicant in the same position as if it had properly exercised the option.
If the option had been exercised in accordance with the terms of the lease then, the respondent contends, the effect of the exercise of the option would be to constitute a new leasehold estate and a new lease for a further term – see Gerraty v McGavin [1914] HCA 23; (1914) 18 CLR 152 at 163 which has been applied in Kiami Pty Ltd v Peat Resources of Australia Pty Ltd [1999] WASC 92 at [9]; Mercantile Credits Ltd v Shell Co of Australia Ltd (1976) 9 ALR 39 per Gibbs J at 50; Newcrest Mining (WA) Ltd v Commonwealth (No 2) (1993) 119 ALR 423 at 500; and DB Rreef Funds Management Ltd v Commissioner of Taxation [2005] FCA 509; (2005) 218 ALR 144 at [12]. The proposition is put that, strict compliance with the notice requirements of the option to extend not having been met, no new leasehold interest was created at the expiry of the initial term for the Shop 7 lease, and the Tribunal now has no power to create a new leasehold interest.
On that basis, it is argued that the Tribunal lacks any jurisdiction to entertain the application as presently presented and that the application should thus be dismissed.
Matters referred to the Tribunal
I have set out above what the applicant identifies as the questions arising under the lease which it refers to the Tribunal. What constitutes "a question arising under a retail shop lease" is dealt with in s 3(3) of the CTRSA Act. That subsection provides:
"Terms used in this Act
…
(3)A reference in this Act to a question arising under a retail shop lease includes a reference to -
(a)a question whether or not a lease exists or has existed;
(b)a question whether or not a lease is or was a retail shop lease;
(c) a question arising -
(i)in relation to any communication, including a disclosure statement under section 6, between the parties to the retail shop lease, prior to their entry into the retail shop lease, which communication was material to the terms and conditions of the retail shop lease; or
(ii)in relation to the retail shop lease under a provision of this Act;
(d)a matter that is in dispute between the landlord and the tenant under section 12 in relation to -
(i)operating expenses of the landlord under the retail shop lease generally;
(ii)an allocation made under section 12(1)(b) of the proportion of those operating expenses; or
(iii)a determination of the relevant proportion for the purposes of section 12;
or
(e)any other matter that is in dispute between the landlord and the tenant in connection with the retail shop lease, whether or not that matter is dealt with by the provisions of the retail shop lease."
Section 3(3)(a) invites reference to the Tribunal of questions as to whether or not a lease exists. Section 3(3)(e) invites reference to a broad range of matters in dispute between the landlord and tenant, provided the dispute is "in connection with the retail shop lease". A dispute between a landlord and tenant as to whether or not the landlord has acted unconscionably in relation to the lease would appear squarely to fall within the category of matters that might be referred to the Tribunal under s 16. Even if such disputes are not said to be a question arising under the lease for the purpose of s 16, there is a separate entitlement to bring those matters to the Tribunal pursuant to s 15F(1).
The matters referred to in the paragraphs numbered 3, 5, 6 and 7 of the list of questions identified in ITQ's application can all be said to be aspects of Hyde Park's conduct which might provide a basis for a conclusion that its conduct was unconscionable.
It seems to me unarguable that those are matters which are properly within the range of matters that can be referred to the Tribunal for determination. The question is whether the remedy sought by the applicant is beyond the Tribunal's jurisdiction, and if so, whether the proceedings should be dismissed on that basis.
Is the remedy beyond the Tribunal's jurisdiction?
Once it is open to the Tribunal to consider the matters referred to it, either pursuant to its jurisdiction arising under s 16 or its jurisdiction arising under s 15F, it follows that the Tribunal has jurisdiction to grant any of the remedies specified in s 26 or s 15F(3) of the CTRSA Act, or under the SAT Act, including s 91.
It is correct, as the respondent submits, that s 91 is a statutory power which can only be exercised by the Tribunal "instead of any orders it could make, or in addition to any orders it makes" in the proceeding. The Tribunal must, therefore, have jurisdiction to deal with the matter, and make orders in relation to it, before it can utilise the power of s 91 to make a declaration. In other words, it is not open to a party to come to the Tribunal seeking a declaration under s 91 in respect of a matter which is not otherwise susceptible to the Tribunal's jurisdiction.
It does not, however, follow that the power to grant a declaration is not available where the effect of the declaration might be the same as the effect of the grant of some remedy available in a court exercising equitable jurisdiction.
The respondent's contention is that, if the declarations sought (or any of them) are granted, then the Tribunal will, in effect, be granting an equitable remedy. It is not entirely clear to me what equitable remedy is being referred to. The respondent, in its submissions, makes reference to the conclusion of the Tribunal, constituted by the Hon R Viol, supplementary Deputy President in Pearce and Germain [2006] WASAT 305 at [46] to [75] where the Tribunal reached the conclusion that it has no inherent equitable jurisdiction, and no power to grant relief against forfeiture in proceedings bought under the CTRSA Act. As I understand the respondent's contention, it is that the grant of the declarations sought in this case would be tantamount to a grant of relief against forfeiture.
The applicant did not contend that the Tribunal has jurisdiction in equity, and did not suggest that the decision in Pearce and Germain [2006] WASAT 305 is wrong. With respect, I consider that the decision is plainly correct. But I do not accept that the declarations sought amount, in substance and effect, to a grant of relief against forfeiture or any other equitable remedy. So long as the Tribunal has jurisdiction to make orders of some kind under the enabling legislation, the Tribunal (constituted by a judicial member) has jurisdiction to make a declaration "concerning any matter in a proceeding". That must include a declaration as to the relevant rights or obligations of the parties. The consequences which flow from the making of a declaration as to rights are not the touchstone of the jurisdiction to make the declaration.
The preliminary issue
The first aspect of the question identified as a preliminary issue was as to whether a declaration in the terms sought would create a leasehold estate which does not currently exist. In my view, the making of a declaration by the Tribunal would not "create a leasehold interest". The option to extend the lease is created by the Shop 7 lease. Whether the extended term contemplated by that lease is to be taken to have been granted may (if the applicant's case is made out) be a consequence of the parties' conduct in relation to the lease. That consequence flows from the conduct, not the Tribunal's declaration. A declaration simply records the Tribunal's finding in relation to the conduct and its consequences.
During the hearing I raised a question as to whether the authorities referred to above at [29] concerning the effect of the exercise of an option to renew a lease were applicable to the exercise of an option to extend the term of a lease. The Shop 7 lease is drawn in terms of extension rather than renewal. A distinction between the two appears to have been drawn by Santow J in Percival v Forster-Tuncurry and Districts Chamber of Commerce and Tourism Ltd [1997] NSWSC 383. In view of my conclusion that a declaration does not create rights and obligations, it is not necessary to consider further the question raised during argument.
I might add that the argument which has been ventilated on the hearing of the preliminary issue would, at least with the benefit of hindsight in the light of my conclusions, have been better dealt with at the hearing of the substantive matter. That is because it seems to me that the answer to the preliminary issue did not necessarily finally resolve the proceedings even if decided in favour of the respondent. That is because the application for relief was not confined to the declarations sought. The applicant also sought "other orders that the SAT may make with a view to achieving a solution acceptable to the parties of the lease". In the context of an allegation of unconscionable conduct, it is open to the Tribunal to make orders for payment of money or an order that a specified amount of money is not due. Orders analogous to an injunction can be granted under s 26 of the CTRSA Act. If unconscionable conduct on the part of the landlord were made out, it may well be possible to fashion compensatory orders with a view to putting the tenant in a position it would have been but for the unconscionable conduct. All of that may be possible, even if declarations were not made in the terms sought. Furthermore, the precise terms of any declaration that might be made may turn on the evidence adduced at, and findings made after, the hearing of the matter. The Tribunal's jurisdiction arises by virtue of the allegation of unconscionable conduct. It would be open to the Tribunal, if that allegation is made out, to grant a range of remedies which may not precisely match the remedies sought in the application.
Whether or not the applicant's case has any merit, and whether or not any of the conduct of the respondent can be categorised as unconscionable, are matters which are not before me for determination at this point in time. Given the range of outcomes which are properly open in the proceedings, it would have been preferable for the whole matter to have been dealt with at one hearing, rather than fragmenting it by the hearing of a separate preliminary issue.
Conclusion
For the reasons set out above, I am of the view that the Tribunal has jurisdiction to entertain the application and the matter should now be programmed for further hearing.
Order
The proceedings are adjourned to a further directions hearing at 10.00 am on 4 April 2008.
I certify that this and the preceding [45] paragraphs comprise the reasons for decision of the State Administrative Tribunal.
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JUDGE J CHANEY, DEPUTY PRESIDENT
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