Khuu & Lee Pty Ltd v Corporation of the City of Adelaide
[2011] SASCFC 70
•29 July 2011
SUPREME COURT OF SOUTH AUSTRALIA
(Full Court: Civil)
KHUU & LEE PTY LTD v CORPORATION OF THE CITY OF ADELAIDE
[2011] SASCFC 70
Judgment of The Full Court
(The Honourable Justice Sulan, The Honourable Justice Vanstone and The Honourable Justice Peek)
29 July 2011
ADMINISTRATIVE LAW - JUDICIAL REVIEW - GROUNDS OF REVIEW - PROCEDURAL FAIRNESS - EXISTENCE OF OBLIGATION - GENERALLY
The appellant stallholder occupied three adjoining areas in Adelaide Central Market pursuant to a lease and two licences - the respondent statutory corporation determined not to renew one of the licences at the end of its term - appellant sought judicial review of decision not to renew licence - a single judge declined to make any such order - whether respondent was obliged to accord procedural fairness in determining not to renew a licence.
Held: appeal dismissed.
LANDLORD AND TENANT - RETAIL AND COMMERCIAL TENANCIES LEGISLATION - OBLIGATIONS, PROHIBITED TERMS AND PROTECTION FOR LESSEES - MINIMUM TERM OF LEASE AND RENEWAL OF TERM
Whether respondent obliged to accord appellant right of preference to re-let stall under s 20D of Retail and Commercial Leases Act (1995).
Held: appeal dismissed.
Local Government Act 1999 (SA) s 4(1), s 35, s 36, s 193, s 196, s 200, s 201, s 202; Retail and Commercial Leases Act 1995 (SA) s 20D, s 20F; Supreme Court Civil Rules 2006 s 199; Administrative Decisions (Judicial Review) Act 1977 s 3, referred to.
Kioa v West (1985) 159 CLR 550; General Newspapers Pty Ltd v Telstra Corporation (1993) 45 FCR 164; Griffith University v Tang (2005) 221 CLR 99; Australian Broadcasting Tribunal v Bond (1990) 170 CLR 321, applied.
R (Beer) v Hampshire Farmers' Markets Ltd [2004] 1 WLR 233; R v Panel on Take-overs and Mergers; Ex Parte Datafin plc [1987] QB 815; R (Agnello) v London Borough of Hounslow [2003] EWHC 3112, distinguished.
Plaintiff M61/2010E v The Commonwealth (2010) 272 ALR 14; Chase Oyster Bar v Hamo Industries [2010] NSWCA 190; Masu Financial Master Builders' Association of Victoria [1995] 2 VR 121; MBA Land Holdings Pty Ltd v Gungahlin Development Authority (2000) 206 FLR 120, considered.
WORDS AND PHRASES CONSIDERED/DEFINED
""administrative decisions" "public law function" "Datafin" "power to contract" "requires vacant possession of the premises for the lessor's own purposes""
KHUU & LEE PTY LTD v CORPORATION OF THE CITY OF ADELAIDE
[2011] SASCFC 70Full Court: Sulan, Vanstone and Peek JJ
SULAN J: I would dismiss the appeal. I agree with the reasons of Vanstone J.
VANSTONE J: The appellant is a stallholder in the Adelaide Central Market. Its stall comprises three adjoining areas, referred to as the “shop”, the “coolroom” and the “stand”. When the terms of the shop lease, and the coolroom and stand licences expired, the lessor/licensor, being the respondent Corporation, determined not to offer a renewal of the stand licence. Offers were made for the renewal of the shop lease and coolroom licence.
The appellant sought judicial review of the decision not to offer a new licence for the stand. The decision was that of the respondent’s City Services and Facilities Committee adopting the recommendation of its Central Market Committee. The appellant’s complaint was that in making its decision, the Corporation failed to comply with the rules of natural justice, in that it did not provide the appellant with opportunity to make submissions or provide evidence going to the decision. It sought an order in the nature of certiorari quashing the decision. In the alternative it sought relief under the Retail and Commercial Leases Act 1995 (Leases Act) arguing that the Corporation had not met obligations upon it under that Act.
A single judge of this Court heard evidence called by both parties. Giving comprehensive reasons he declined to make any order for judicial review and found for the Corporation on the Leases Act claim: Khuu & Lee Pty Ltd v Corporation of the City of Adelaide (2010) 108 SASR 277.
The judge found that under r 199 of the Supreme Court Civil Rules 2006 the order more suited to the claim was mandamus, that is, “an order to compel the performance of a duty of a public nature that cannot be enforced by some other adequately legal remedy”: r 199(2)(c).
On the question of jurisdiction to entertain judicial review the judge considered whether the decision involved a “duty of a public nature” under a statutory power, namely s 202 of the Local Government Act 1999 (LGA). He found that the Corporation’s acts amounted to private commercial dealings, rather than any exercise of public power: [54]. He considered and distinguished a line of English cases which the appellant cited in support of its argument that there was an exercise of public power. He observed that in refusing to grant a new licence, the Corporation was not purporting to apply any particular policy and the refusal to grant a licence did not, plainly, offend any management plan. The judge noted that, relevant to r 199(2)(c), the plaintiff potentially had available to it a remedy under the Leases Act.
In relation to the Leases Act claim the judge found that Division 3 of Part 4A of that Act applied. However, he found that preference did not have to be given to the appellant as existing lessee (which includes licensee) because the Corporation did not plan to re-let the area occupied by the stand within six months (or at all): s 20D(3)(d). The judge went on to find that the Corporation brought itself within a second exception to the requirement to give preference under s 20D(3)(b), it having proved that the appellant had been guilty of both substantial breaches and persistent breaches of the lease and licenses, and specifically of persistent breaches of the stand licence: [84], [91]. Further, he found that in a combination of three letters written to the appellant, the Corporation had complied with its duty under s 20F to give notice that it was not required to give preference to the licence holder and to explain why it was not so required.
In respect of an argument that the Corporation had failed to conduct negotiations in good faith as required by s 20E of the Leases Act, the judge found that there were no negotiations with respect to the stand and, in any event, there was nothing to show a lack of good faith in relation to the shop lease and cool room licence negotiations: [94] and [98].
The arguments on appeal
The arguments on appeal were similar to those before the single judge.
It was said that the judge should have found that the decision not to renew the stand licence was amenable to judicial review. Despite the fact that r 199(2)(b) provided that certiorari was available only in respect of decisions of an inferior court or tribunal, the decision was liable to be quashed by such a writ.
It was put that given that the Central Market was a retail shopping centre within the meaning of the Leases Act, and that, as the respondent was a statutory body, the licence under question was not to be governed solely by the law of contract, or property rights, but was also governed by two statutory regimes. The first of those was said to be the Local Government Act 1999 (SA) (the LGA). Counsel for the appellant, Mr Ower, pointed to s 35 of the LGA which incorporates councils constituted under the Act (including the Adelaide City Council which means the Corporation of the City of Adelaide: s 4(1) LGA) and s 36 grants it legal capacity. Section 193 of the LGA classifies the land on which the Central Market operates as community land. Such land is subject to a number of restrictions including, by s 196, Management plans, s 200, Use of community land for business purposes and s 202 which is headed “Alienation of community land by lease or licence”.
Mr Ower submitted that the Corporation’s decision to adopt the Central Market Committee’s recommendation not to renew the appellant’s licence was an exercise of power under s 202 of the LGA, and therefore was an administrative decision, or decision made in the exercise of a statutory power, and thus amenable to judicial review for want of procedural fairness. He referred to the well known statement of Mason J in Kioa v West (1985) 159 CLR 550 at 584:
The law has now developed to a point where it may be accepted that there is a common law duty to act fairly, in the sense of according procedural fairness, in the making of administrative decisions which affect rights, interests and legitimate expectations, subject only to the clear manifestation of a contrary statutory intention.
Mr Ower also referred to s 20 of the Leases Act which requires, prima facie, that preference be given to an existing tenant where the lessor proposes to re-let the premises. He put that, on the basis of provisions of the Act, the appellant had an interest in the renewal of the licence and a legitimate expectation that it would be granted. This was the second statutory regime to which counsel pointed. In the absence of plain words excluding them, the principles of procedural fairness regulated the exercise of the power under s 202(1): Kioa and Plaintiff M61/2010E v The Commonwealth (2010) 85 ALJR 133 at 147-148.
Mr Ower also relied on these provisions of the LGA as evidence that there was a “public element” in the respondent’s exercise of power to alienate land under s 202, so as to attract a common law right of review.
Mr Ower mounted an alternative argument based on the Leases Act. He argued that the judge was wrong in refusing to grant declarations to the effect that in its dealings with the appellant the respondent had failed to comply with the Act.
Analysis – Judicial Review
It is convenient to deal first with the argument based on exercise of statutory power. Section 202 LGA is found in Chapter 11, Part 1 of the LGA which is entitled “Local government land”. Division 3, Community land, deals with the classification of local government land owned by a council as community land. Division 6, Disposal and alienation of local government land, contains only s 201 – which places restrictions on the sale or other disposal of local government land – and s 202, which deals with leases and licences over community land. Its terms are as follows:
202—Alienation of community land by lease or licence
(1) A council may grant a lease or licence over community land (including community land that is, or forms part of, a park or reserve).
(2) Before the council grants a lease or licence relating to community land, it must follow the relevant steps set out in its public consultation policy.
(3) However, a council need not comply with the requirements of subsection (2) if—
(a)the grant of the lease or licence is authorised in an approved management plan for the land and the term of the proposed lease or licence is five years or less; or
(b)the regulations provide, in the circumstances of the case, for an exemption from compliance with a public consultation policy.
(4) A lease or licence is to be granted for a term not exceeding 21 years and the term of the lease or licence may be extended but not so that the term extends beyond a total of 21 years.
(4a) Subsection (4) does not prevent a new lease or licence being granted at the expiration of 21 years (subject to the other requirements of this Act or any other law).
(5) A lease or licence may provide for—
(a)the erection or removal of buildings and other structures for the purpose of activities conducted under the lease or licence;
(b)the exclusion, removal or regulation of persons, vehicles or animals from or on the land, and the imposition of admission or other charges;
(c)any other matter relevant to the use or maintenance of the land.
(6) A lease or licence must be consistent with any relevant management plan.
(7) This section operates subject to the provisions of the Adelaide Park Lands Act 2005 in respect of the Adelaide Park Lands under that Act.
It may be seen that the section places restrictions upon the power to grant leases or licences over community land. However, a council derives its power to grant leases and licences, not from this section, but from its status as a body corporate (established in s 35) and the conferral of powers upon it in s 36, including the power to enter into contracts of any kind: s 36(1)(a)(i). Section 202 contains restrictions on powers otherwise held, including requirements that a council comply with its own public consultation policy. Reading the whole of the section in its context (and with the relevant regulations) makes clear that the section is concerned, as its title suggests, with regulating the way in which community land is to be alienated. It is not concerned with a decision of a council not to re-let community land. Therefore s 202 can have no application to a refusal to grant a licence and the public element which might have been provided by s 202(2) cannot be relied upon.
The respondent’s power to contract is given by s 36 of the LGA. The mere fact that the power to contract is found in the LGA does not mean that any decision taken relevant to a contract is amenable to judicial review. Not every decision taken by a statutory corporation pursuant to a general power to contract is liable to judicial review; only administrative decisions affecting rights, interests and legitimate expectations: General Newspapers Pty Ltd v Telstra Corporation (1993) 45 FCR 164 at 171-173. General Newspapers was a case decided in the context of the Administrative Decisions (Judicial Review) Act 1977 (ADJR Act) which applies to “decisions of an administrative character made … or required to be made … under an enactment”: s 3 ADJR Act. However, the judgment of Davies and Einfeld JJ makes clear that at common law the obligation to afford procedural fairness is likewise confined to administrative decisions. Their Honours referred to the quotation from the judgment of Mason J in Kioa earlier set out and observed at 171:
The reference to ‘administrative decisions which affect rights, interests and legitimate expectations’ reflects the concept which his Honour developed in more detail in Australian Broadcasting Tribunal v Bond. In Bond, Mason CJ did not imply that there was a duty to comply with the rules of natural justice in respect of every act or thing done by a body incorporated or otherwise formed under a federal enactment or in circumstances governed entirely by the ordinary laws of the land such as the law of contract. His Honour was speaking of decisions which had force and effect because they were authorised or required by an enactment. See also Annetts v McCann (1990) 170 CLR 596 at 598.
The decision in Griffith University v Tang (2005) 221 CLR 99 illustrates the same distinction. There, in the context of the appellant having been excluded from a University post graduate degree program, the plurality, comprising Gummow, Callinan and Heydon JJ, observed at 129:
… a statutory grant of a bare capacity to contract does not suffice to endow subsequent contracts with the character of having been made under that enactment. A legislative grant of capacity to contract to a statutory body will not, without more, be sufficient to empower that body unilaterally to affect the rights or liabilities of any other party. The power to affect the other party's rights and obligations will be derived not from the enactment but from such agreement as has been made between the parties. A decision to enter into a contract would have no legal effect without the consent of the other party; the agreement between the parties is the origin of the rights and liabilities as between the parties
In my view the respondent’s decision not to renew the appellant’s licence was not an administrative decision, but rather an ordinary decision made in the course of a conventional commercial relationship: Australian Broadcasting Tribunal v Bond (1990) 170 CLR 321 at 336 per Mason CJ. That is because s 36 grants a general plenary power to contract. Therefore, the decision to adopt the Committee’s recommendation was not given force and effect because it was required or authorised by either s 36 or s 202 LGA. Once that characterisation is accepted then any relevant interest in, or expectation of, a renewal held by the appellant is not to the point. Indeed the applicability of the Leases Act to the relationship and the remedies found therein only serves to underline the inherently commercial nature of the decision, and incidentally, as a reminder that the appellant might have recourse to remedies under that Act.
Mr Ower next submitted that, even if the source of the council’s power was not s 202 LGA, the nature of the power exercised, being a “public law power”, meant that it was amenable to review. In support of this submission he relied on two English decisions.
In R (Beer) v Hampshire Farmers’ Markets Ltd [2004] 1 WLR 233, the Court of Appeal considered whether a decision by a private company that operated farmers’ markets was susceptible to judicial review. The local council had assisted in establishing a private company (the defendant) in order that it take over the operation of a farmers’ market. The defendant was responsible for granting licences to producers who wished to participate in that market. Having invited applications from prospective participants, the defendant rejected the appellant, Beer’s, application. At first instance it was held that, in determining Beer’s application, the defendant had deprived him of natural justice.
On appeal the only issue was whether the defendant’s decision was reviewable. It was common ground that, had the decision been made by the council itself, it would have had a sufficient “public element or flavour” to make it reviewable: at 247. Dyson LJ, with whom Longmore LJ and Sir Martin Nourse agreed, held that the decision was reviewable. It possessed a “sufficient public law element” because the markets were “held on publicly owned land to which the public had a right of access”: at 248. Also, the close relationship between the council and the defendant company, and particularly the fact that the company was incorporated by the council to carry out functions previously performed by the council, rendered the company’s decisions reviewable: at 248-249.
It is relevant to note two background considerations. First, the right of public access was part of a much broader common law right residing in the public, to go to market to buy and sell, subject only to the statutory regulation of that right by the local authority. Such a common law right could only be taken away for just cause and then only in accordance with the principles of natural justice. Mr Ower did not submit that any such right obtains in relation to the Central Market land, or indeed, anywhere in Australia.
Then, in looking to a “public law element” or “flavour” his Lordship was applying an approach that, while accepted in England, has yet to gain acceptance in Australia. In Beer, while noting the concession (said to be correctly made) that if the decision had been taken directly by the council it would have been reviewable, his Lordship observed that not all decisions by local authorities were amenable to judicial review or involved the exercise of public functions. He concluded that the particular decision would have been reviewable if made by the council because it had a “public element or flavour” to it: at 247. His Lordship outlined the relevant test as follows at 240:
[16]It seems to me that the law has now been developed to the point where, unless the source of power clearly provides the answer, the question whether the decision of a body is amenable to judicial review requires a careful consideration of the nature of the power and function that has been exercised to see whether the decision has a sufficient public element, flavour or character to bring it within the purview of public law. It may be said with some justification that this criterion for amenability is very broad, not to say question-begging. But it provides the framework for the investigation that has to be conducted. There is a growing body of case law in which the question of amenability to judicial review has been considered. From these cases it is possible to identify a number of features which point towards the presence or absence of the requisite public law element.
(Emphasis added)
It is clear from the judgment that Dyson LJ was applying the principles outlined in the seminal English decision R v Panel on Take-overs and Mergers, Ex parte Datafin plc [1987] QB 815. Specific reference was made to the following statement by Lloyd LJ in that case, at 847:
If the body in question is exercising public law functions, or if the exercise of its functions have public law consequences, then that may, as Mr Lever submitted, be sufficient to bring the body within the reach of judicial review. It may be said that to refer to ‘public law’ in this context is to beg the question. But I do not think it does. The essential distinction, which runs through all the cases to which we referred, is between a domestic or private tribunal on the one hand and a body of persons who are under some public duty on the other.
As I shall outline below, while this approach is now accepted in England, it has not yet been adopted in Australia.
Mr Ower also relied on the decision of Silber J in the High Court of England and Wales in R (Agnello) v London Borough of Hounslow [2003] EWHC 3112 (Admin). There, the local council chose to shift the market it operated to a smaller location permitting fewer participants. To determine which members would be offered a tenancy in the new market the council established a “relocation committee”. Existing tenants were told that their eligibility for tenancy in the new market would be determined by reference to identified factors relating to their commercial viability. They were asked to provide financial information relating to their operations, but were not invited to make submissions on their viability.
A number of unsuccessful tenants sought judicial review of the decision. Against them it was argued that the decision was commercial in nature and so was not amenable to judicial review. Applying Beer, Silber J took the view that the decision should be subject to judicial review.
In Datafin the English Court of Appeal held that the Panel on Take‑overs, a non-statutory body which exercised power without any “visible” statutory source, was amenable to judicial review. Although neither the panel itself nor the power it exercised had a statutory source, the panel’s decisions had significant commercial force as they were influential in the decision-making of a number of commercial organisations, including the London Stock Exchange. Lloyd LJ observed that a body might be subject to judicial review if it were exercising “public law functions” or “functions with public law consequences”: at 847.
In this Court, Mr Ower’s submissions relying on Beer and Agnello necessarily proceeded on the footing that the “public law functions” test was an accepted, or at least, appropriate approach to determining whether the council’s powers were amenable to judicial review. However, within intermediate appellate courts there are, at best, conflicting views as to whether this test represents the common law of Australia. (See Chase Oyster Bar v Hamo Industries [2010] NSWCA 190, [76] [81] Basten JA; c/f Masu Financial Management Pty Ltd v FICS (No 2) [2004] NSWSC 829; State of Victoria v The Master Builders’ Association of Victoria [1995] 2 VR 121; MBA Land Holdings Pty Ltd v Gungahlin Development Authority (2000) 206 FLR 120, [207ff]). The acceptance of Datafin in Australia has not been expressly considered by the High Court. Aronson asserts that the High Court has “studiously avoided” the line of cases: Aronson M, Dyer B and Groves M, Judicial Review of Administrative Action (4th ed, Lawbook Co, 2009) p 146 at 3.290.
As I have observed, the facts of Beer, and indeed Agnello, are far from the present situation. The critical feature in both was the historical common law right of public access to the land which gave decisions relevant to the market a sufficient “public element, flavour or character”. That imposed additional obligations on the councils in their dealings with licence holders. In contrast, members of the public have no established right to set up a stall in the Central Market and the public has no particular interest in the negotiations between the Corporation and potential stall holders. The position with respect to the Central Market is that the contractual relations between the Corporation and licence holders are essentially private. It is comparable to a private shopping centre.
Analysis – Leases Act
Mr Ower also argued that the respondent failed to comply with the Leases Act. Most of the complaints related to the operation of s 20D of that Act. That section provides that in certain circumstances an existing lessee is entitled to preference upon a re-letting. The terms of the section are as follows:
20D—Preference to be accorded to existing lessee
(1) If a lessor of premises in a retail shopping centre proposes to re-let the premises, and an existing lessee wants a renewal or extension of the term, the lessor must give preference to the existing lessee over other possible lessees of the premises.
(2) The lessor is to presume that the existing lessee wants a renewal or extension of the term unless the lessee has notified the lessor in writing within 12 months before the end of the term that the lessee does not want a renewal or extension.
(3) However, the lessor is not obliged to prefer an existing lessee if—
(a)the lessor reasonably wants to change the tenancy mix in the retail shopping centre; or
(b)the existing lessee has been guilty of a substantial breach or persistent breaches of the lease; or
(c)the lessor requires vacant possession of the premises for the purposes of demolition or substantial repairs or renovation; or
(d)the lessor—
(i)does not propose to re-let the premises within a period (the relevant period) of at least 6 months from the end of the term; and
(ii)requires vacant possession of the premises for the lessor's own purposes during the relevant period (but not for the purpose of carrying on a business of the same kind as the business carried on by the lessee); or
(e)the renewal or extension of the lease would substantially disadvantage the lessor; or
(f)the lessee's right of preference is, in the circumstances of the case, excluded by regulation.
If the licensor does not propose to re-let or does not propose to re-let within the relevant period, then s 20F requires notice to be given. I set out its terms:
20F—Notice of absence of right of preference
(1) If a lessee of a retail shop in a retail shopping centre does not have a right of preference, the lessor must, at least 6 months (but not more than 12 months) before the end of the term of a lease, by written notice—
(a)notify the lessee of that fact; and
(b)state why there is in the circumstances of the case no right of preference.
(2) If the term of the lease is for 12 months or less, the periods referred to in subsection (1) are to be reduced by one-half.
It was argued that the judge erred in finding that the obligation to give preference did not apply because of the exception created by s 20D(3)(d). It was said that subsection (3)(d) requires a positive finding that the lessor “requires vacant possession of the premises for [its] own purposes during the relevant period”. The judge accepted evidence that established the Corporation’s consistent position that it required the licensed area for the purpose of returning it to roadway. Mr Ower argued that despite that claim, the evidence overwhelmingly demonstrated that the Corporation was in fact reclaiming the land to “rein in” the appellant.
If the Corporation did not propose to re-let the premises, then because of the opening clause of s 20D(1), the obligation to give preference to the appellant never arose. The respondent’s reasons for deciding not to re-let would be irrelevant. Any obligation on the respondent to establish that it required the land for its own purposes would only be relevant where it sought to bring itself within the exception under s 20D(3)(d). In my view, the judge was entitled on the evidence to accept the genuineness of the Corporation’s position. Further, I agree with the respondent’s alternative submission, that the application of s 20D(3)(d)(ii) does not necessitate an investigation into a lessor’s reasons for requiring vacant possession for its own purposes. Mr Ower submitted that failure of the respondent to undertake any study or investigation into suggested congestion at the area covered by the licence indicated that the respondent did not in fact require vacant possession for its own purposes. However, that submission effectively imports into s 20D(3)(d) a requirement that the purpose for which a lessor requires vacant possession be a reasonable one. In my view it is sufficient that the judge accepted the respondent made a bona fide determination that it required vacant possession of the land for roadway. The council was not obligated to justify its decision.
Therefore, either because of the terms of s 20D(1), or because the respondent brought itself within the exception in s 20D(3)(d), the appellant had no right of preference.
As I understand the appellant’s submissions, if it is accepted that the Corporation’s genuine position was that it planned to return the stand area to roadway, then no complaint is made about the way in which notice was given under s 20F. It also becomes unnecessary to consider whether the respondent could have brought itself within the terms of s 20D(3)(b) on account of breaches of the licence.
I consider that the complaints directed to the judge’s decision in respect of the Leases Act are not sustained.
Conclusion
For the reasons given I have concluded that the judge correctly found that the respondent’s decision not to renew the licence was not susceptible to judicial review. Although the Leases Act applied to the tenancy, the judge was correct in finding that relief under that Act was not available.
I would dismiss the appeal.
PEEK J: I agree with the orders proposed by Vanstone J and with her reasons.
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