Kidd Nominees Pty Ltd v Ferrall Nominees Pty Ltd
[2003] WASC 73
KIDD NOMINEES PTY LTD -v- FERRALL NOMINEES PTY LTD & ANOR [2003] WASC 73
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2003] WASC 73 | |
| Case No: | CIV:2760/2002 | 3 APRIL 2003 | |
| Coram: | MASTER SANDERSON | 11/04/03 | |
| 9 | Judgment Part: | 1 of 1 | |
| Result: | Application granted Matter referred to Tribunal | ||
| B | |||
| PDF Version |
| Parties: | KIDD NOMINEES PTY LTD (ACN 008 809 069) FERRALL NOMINEES PTY LTD (ACN 008 924 338) BRIAN FERRALL TWADDLE |
Catchwords: | Practice and procedure Application to transfer application is made by originating summons to Commercial Tribunal Retail shop lease subject of dispute Turns on own facts |
Legislation: | Commercial Tenancy (Retail Shops) Agreements Act 1985 (WA), s 3(3)(c), s 11(3), s 11(5), s 16, s 27(1), s 27(2) Commercial Tribunal Act 1984 (WA) |
Case References: | Nil Exford Pines Pty Ltd v Vlado's Pty Ltd [1992] 2 VR 449 Mavromatidis v Dundon (1997) 18 WAR 298 O'Connor's Management Pty Ltd v Kao Holdings Pty Ltd (1998) 19 WAR 87 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
- Plaintiff
AND
FERRALL NOMINEES PTY LTD (ACN 008 924 338)
First Defendant
BRIAN FERRALL TWADDLE
Second Defendant
Catchwords:
Practice and procedure - Application to transfer application is made by originating summons to Commercial Tribunal - Retail shop lease subject of dispute - Turns on own facts
Legislation:
Commercial Tenancy (Retail Shops) Agreements Act 1985 (WA), s 3(3)(c), s 11(3), s 11(5), s 16, s 27(1), s 27(2)
Commercial Tribunal Act 1984 (WA)
(Page 2)
Result:
Application granted
Matter referred to Tribunal
Category: B
Representation:
Counsel:
Plaintiff : Mr R E Keen
First Defendant : Mr D F Beere
Second Defendant : Mr D F Beere
Solicitors:
Plaintiff : Michael J Hain
First Defendant : Beere May & Meyer
Second Defendant : Beere May & Meyer
Case(s) referred to in judgment(s):
Nil
Case(s) also cited:
Exford Pines Pty Ltd v Vlado's Pty Ltd [1992] 2 VR 449
Mavromatidis v Dundon (1997) 18 WAR 298
O'Connor's Management Pty Ltd v Kao Holdings Pty Ltd (1998) 19 WAR 87
(Page 3)
1 MASTER SANDERSON: By chamber summons dated 9 January 2003 the defendant sought an order that this action be referred to the Commercial Registrar under the Commercial Tribunal Act 1984, pursuant to s 27(2)(b) of the Commercial Tenancy (Retail Shops) Agreements Act 1985. There was no dispute between the parties as to the facts giving rise to this application and the position can be summarised in the following way.
2 The plaintiff filed an originating summons initiating these proceedings on 20 December 2002. The originating summons sought two declarations. First, that cl 3.6(c) of a lease over premises owned by the plaintiff and leased by the first defendant was in full force and effect and that on a rent review, the rent could never be less than the rent previously payable. Secondly, the plaintiff sought a declaration that the first defendant's notice to review the rental dated 29 November 2002 was of no force and effect. The basis for the second declaration was that the notice served by the defendant sought a reduction in the rent. If the Court found that cl 3.6(c) did apply and prevented the rent from being reduced, then the notice seeking such reduction would be of no force and effect.
3 (The parties agreed there was also an issue which would arise on the originating summons as to whether or not the defendants were liable to make payment of amounts charged to the plaintiff as goods and services tax (GST) pursuant to the provisions of the lease with respect to variable outgoings. This issue is not raised directly by the originating summons but, as I say, it was agreed between the parties that this was an issue between them.)
4 The lease itself is to be found as exhibit "ALK1" to the affidavit of Alison Louise Kidd, sworn 20 December 2002 and filed in support of the originating summons. Item 3 of the schedule to the lease provides for a lease term of 10 years. Item 6(a) of the schedule provides for fixed rental increases for the second to fourth years of the lease term and from the fifth year onwards, the rent to be reviewed in accordance with cl 3.6 of the lease. The first of these years commenced 10 August 2002. Item 6(b)(2) of the schedule provided that the review due on 10 August 2002 was a market review.
5 Clause 3.6(b) sets out how the market review is to be conducted. The first step required the landlord on or before the market review date to notify the tenant in writing of the amount which the landlord considered to be the reviewed rent. This was never done. Rather, the landlord took advice from a valuer who indicated that the reviewed rent would not be
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- more than the rental then payable: see annexure "MJH5" to the affidavit of Michael John Hain, sworn 20 December 2002 and filed in support of the originating summons. As a consequence, the plaintiff did not implement the review process set out in cl 3.6(b). In response, the first defendant served on the plaintiff a notice setting out what the first defendant says was a reasonable rent. The notice also stated that the lease was a retail shop lease and therefore s 11(5) of the Commercial Tenancy (Retail Shops) Agreements Act 1985 ("the Act") applied. In taking this step the lessee effectively relied on s 11(5)(b) of the Act on the premise that the provisions of s 11(3)(a) or (b) had not been implemented. It is common ground between the parties that the lease is a retail shop lease within the meaning of the Act. The lessee's business is that of a retail pharmacy which comes within the definition of a retail shop in s 3(1) of the Act. As such, the lease meets the definition of a retail shop lease contained in that section.
6 Clause 3.6 of the lease has the subheading "Review of Rent". Clause 3.6(a) and (b) deal with the way in which rental is to be calculated. For present purposes it is cl 3.6(c) and (d) which are relevant. They are in the following terms:
"(c) Despite anything in sub-clauses (a) and (b), the Rent payable after a Review Date is not to be less than the Rent payable (or which but for rent reduced or rent free periods would be payable) immediately prior to that Review Date.
(d) If the Retail Shops Act applies to this lease and if on a proper construction of the Retail Shops Act the formula and procedure for reviewing the Rent to market set out in s 11(2) of the Retail Shops Act must be applied instead of the provisions of sub-clause (b) then despite any agreement of the parties to the contrary the formula and procedure set out in section 11(2) of the Retail Shops Act is to be applied to the review of Rent on the relevant Market Review Date in lieu of the procedure referred to in sub-clause (b)."
- (Under cl 1.1 the phrase "Retail Shops Act" is defined to mean the Commercial Tenancy (Retail Shops) Agreements Act 1985).
7 Section 11 of the Act deals with rent review. The section is in the following terms:
(Page 5)
- "11. Rent review
(1) A provision in a retail shop lease for review of the amount of rent payable under the lease during the currency of the lease is void unless the lease specifies, in respect of each occasion on which the review is to be made, a single basis on which the review is to be made.
(2) If a retail shop lease provides for the review during the currency of the retail shop lease of the amount of rent payable under the retail shop lease having regard to the market rent of the retail shop concerned ¾
- (a) that market rent shall, for that purpose, be taken to be the rent obtainable at the time of that review in a free and open market as if, all the relevant factors, matters or variables used in proper land valuation practice having been taken into account, that retail shop were vacant and to let on similar terms as are contained in the current retail shop lease;
(b) unless specific provision is made in the retail shop lease for the time at which a review may be initiated, a party to the retail shop lease may not more than 3 months before the date on which that review is to be carried out and not more than 6 months after that date, initiate the review by notice in writing served on the other party to the retail shop lease; and
(c) a provision in the retail shop lease purporting to preclude the increase or reduction of that market rent or to limit the extent to which that market rent may be increased or reduced is void.
(2a) A provision in a retail shop lease purporting to preclude the tenant from voluntarily disclosing the rent under the lease is void.
(3) A retail shop lease that provides for review of the amount of rent payable during the currency of the lease shall be taken to provide that where the parties do not agree on the rent payable as a result of the review, the
(Page 6)
- question shall be resolved, subject to subsection (5), by either ¾
- (a) a person licensed under the Land Valuers Licensing Act 1978 agreed to by each of the parties; or
(b) 2 persons licensed under that Act, one of whom is appointed by the landlord and one of whom is appointed by the tenant.
- (3a) If the parties to a retail shop lease referred to in subsection (3) do not agree on the rent payable as a result of the review concerned, the rent payable immediately before that review shall not be increased or reduced before the question is resolved or determined under this section, but nothing in this subsection prevents any increase or reduction in rent which takes place after that resolution or determination from being due and payable with effect from the date of that review.
(4) A person who acts under subsection (3)(a) or (b) shall, at the request of and on payment of the required fee by a party to the lease, provide reasons for his decision in writing to that party.
(5) Notwithstanding subsection (3), a party to a retail shop lease may refer to the Registrar for determination a question as to the rent payable as a result of the review by the parties where ¾
(a) the persons acting under subsection (3)(b) fail to reach an agreement on the rent to be paid; or
(b) a person has not acted under subsection (3)(a) or (b) and the leave of the Registrar has been obtained,
but otherwise such a question shall not be referred to the Registrar.
(6) In determining a question under subsection (5), the Registrar shall act according to equity, good conscience and the substantial merits of the case without regard to
(Page 7)
- technicalities or legal forms, and shall not be bound by the rules of evidence, but may inform himself or herself on any matter in such manner as the Registrar thinks fit.
- (7) For the purpose of determining a question under subsection (5) the Registrar may require the parties to furnish to the Registrar such valuations, documents or other information as the Registrar thinks fit and the parties shall comply with any such requirement.
(8) In determining a question under subsection (5) the Registrar, after considering all the circumstances of the case, may determine that any increase or reduction in rent payable as a result of the determination of the Registrar under that subsection is payable over such period as the Registrar thinks fit."
8 For the purposes of this application it is subs (3) and (5) which are relevant. As is clear from the history of the dispute which I have set out above, the provisions of subs (3) have not been activated. The parties have not agreed on a valuer, nor have they appointed two valuers under subs (3)(b). That means that it is open to either party to refer the matter to the Registrar under subs (5)(b). Before that can be done, leave of the Registrar must be obtained. This is a point taken up by counsel for the plaintiff in his submissions and I will return to it later in these reasons.
9 The defendant's application is brought under the provisions of s 27 of the Act. For present purposes, s 27(1) and (2) are relevant. They are in the following terms:
"27.Other jurisdictions
(1) Where this Act provides for the reference of a question to the Registrar and the question is one that a court also has jurisdiction to determine, proceedings may be instituted to determine the question either ¾
- (a) before the court; or
(b) by way of a reference to the Registrar,
but not both.
(2) Where proceedings are instituted in, or are before, a court for the determination of a question that, but for
(Page 8)
- subsection (1), could be referred to the Registrar the question shall ¾
- (a) if all parties to the proceedings so agree; or
(b) if the court of its own motion or on the application of a party so directs,
be transferred to the Registrar and shall be disposed of as if the question had been referred to the Registrar under this Act."
10 The defendants' submissions in support of their application were succinct and can be summarised in this way. To finally dispose of matters in dispute between the plaintiff and the defendants, three matters must be determined. First, is cl 3.6(c) of the lease of any force and effect? (Throughout the hearing both counsel referred to this clause as the "ratchet clause", a term I will adopt). Second, does the requirement in the lease that the defendant pay all variable outgoings, include payment of GST? Thirdly, if the ratchet clause is of no force and effect, and the rent is to be varied down, what should be the amount of the rent? The defendants accept that questions 1 and 2 can properly be dealt with by this Court. However, they say that question 3 is a matter within the province of the Registrar. That being the case, they say it would be best to have one hearing so that all matters can be determined. Otherwise it will be necessary, if the defendants' argument is accepted, to resolve the first two questions in this Court and then go to the Commercial Tribunal. Furthermore, it was submitted s 27 of the Act clearly anticipates the Court taking this utilitarian approach, and referral to the Registrar is the most practical course.
11 The plaintiff resists the application on a number of different grounds. First, it is said that there has been no compliance with the provisions of s 11(3) of the Act and therefore there can be no reference to the Registrar under s 11(5). However, this is a situation where "a person has not acted under subsection (3)(a) or (b)". It is simply the case that no valuer or valuers have been appointed. In my view there is no ouster of the jurisdiction of the Registrar based on a failure to comply with s 11(3). It is further said that reference cannot be made to the Registrar because leave of the Registrar has not been obtained. No doubt, in the ordinary course where it has not been possible to set a rent pursuant to s 11(3), leave of the Registrar is required. But such leave is required only in relation to a rental determination. The present originating summons does
(Page 9)
- not deal with that question. It relates only to the proper interpretation of the ratchet clause and the liability to pay GST. Accordingly the provisions of s 11(5) are no impediment to the making of the order sought by the defendants.
12 It was further submitted that what was involved in the plaintiff's application was a question of the proper construction of the lease. It was said that such a question of construction did not arise "under the lease". It was submitted that it was not therefore a matter within the jurisdiction of the Registrar under s 16 of the Act. That submission ignores the provisions of s 3(3)(c) of the Act which is in the following terms:
"(3) A reference in this Act to a question arising under a retail shop lease includes a reference to -
…
(c) a question arising -
(i) …
(ii) in relation to the retail shop lease under a provision of this Act."
14 Finally, it was said that the questions of construction raised by the originating summons are complex and for that very reason, ought to be considered by the Court. With respect, it seems to me that the issues raised on this application are relatively straightforward. There is no reason to suggest that the Registrar, intimately familiar with dealing with commercial lease disputes, would not be in a position to resolve the issues raised by this originating summons. To the contrary, this is a perfect instance where the summary disposal of the matters at issue by the Registrar is much to be preferred to the full-blown process of the Court associated with determination of an originating summons.
15 In my view the proper course is to make orders in terms of the chamber summons. However, I will give the parties the opportunity to make submissions as to the precise form of orders and as to costs.
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