Kingsley's Chicken Pty Limited v Queensland Investment
[2006] ACTCA 9
•2 June 2006
HUMAN RIGHTS ACT
KINGSLEY’S CHICKEN PTY LIMITED v QUEENSLAND INVESTMENT
CORPORATION and CANBERRA CENTRE INVESTMENTS PTY LIMITED
[2006] ACTCA 9 (2 June 2006)
LANDLORD AND TENANT – retail and commercial leases – renewal of retail leases under the Leases (Commercial and Retail) Act 2001 (ACT) – negotiations between parties – whether the correspondence between the appellant tenant and respondent lessor constituted an offer to renew the existing lease.
STATUTORY INTERPRETATION – words having technical legal meaning – whether the Legislature intends words to have their technical legal meaning or an ordinary meaning – meaning that achieves the purposes of the Act.
Leases (Commercial and Retail) Act 2001, s 51, s 52, s 53, s 57, s 58, s 106, s 107
Legislation Act 2001, s 138, s 139, s 142
Human Rights Act 1998 (UK), s 3
Human Rights Act 2004, s 30
Masters v Cameron (1954) 91 CLR 353
Attorney-General for NSW v Brewery Employees Union of NSW (1908) 6 CLR 469
Webb vMcCracken (1906) 3 CLR 1018
Ghaidan v Godin-Mendoza (2004) 2 AC 557
ON APPEAL FROM A JUDGE OF THE SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
ON APPEAL BY STATED CASE BY ORDER OF CRISPIN J FROM THE DECISION OF A MAGISTRATE
No ACTCA 54-2005
No SCA 72 of 2005
No SCA 46 of 2005
Judges: Higgins CJ, Connolly and Spender JJ
Court of Appeal of the Australian Capital Territory
Date: 2 June 2006
IN THE SUPREME COURT OF THE ) No ACTCA 54-2005
) No SCA 72 of 2005
AUSTRALIAN CAPITAL TERRITORY ) No SCA 46 of 2005
ON APPEAL FROM A JUDGE OF THE SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
ON APPEAL BY STATED CASE BY ORDER OF CRISPIN J FROM THE DECISION OF A MAGISTRATE
BETWEEN:KINGSLEY’S CHICKEN PTY LIMITED ACN 008 597 877
Appellant
AND:QUEENSLAND INVESTMENT CORPORATION and CANBERRA CENTRE INVESTMENTS PTY LIMITED ACN 067 682 893
Respondents
ORDER
Judges: Higgins CJ, Connolly and Spender JJ
Date: 2 June 2006
Place: Canberra
THE COURT ORDERS THAT:
In the matter of the appeal from the decision of Gray J of 25 November 2005 (ACTCA 54 of 2005), the appeal be allowed and the matter be remitted to the Magistrate to hear and determine the application to disqualify the valuer.
In relation to the case stated, the questions (using the paragraphs in the stated case) be answered as follows –
[54]Q. Under subs 52(3)(a) of the Leases (Commercial and Retail) Act 2001 are the terms “offer “ and “accepts…subject to market rent” to be interpreted according to their meaning at contract law?
A. No.
[55]Q. If the answer to the question in par 54 is in the affirmative, does subs 52(3)(a) of the Leases (Commercial and Retail) Act 2001 require that there be binding agreement between the parties?
A.Unnecessary to answer.
[56]Q. If the answer to the question in par 54 is in the affirmative –
(a) Does the letter of 10 May 2004 from the respondent Queensland Investment Corporation amount to an offer in the contractual sense?
(b) If the answer to subpara (a) above is in the affirmative, given that by the appellant’s former solicitor’s letter of 10 June 2004 the respondents’ “offer” was accepted by the appellant subject to market rent, was this sufficient to cause the parties to fall within the scope of subs 52(3) such that the Magistrates Court had jurisdiction to determine market rent?
(c) If the answer to subpara (b) above is in the affirmative, did the Magistrates Court continue to have jurisdiction upon the appellant asserting that there was no binding agreement between the parties?
A.Unnecessary to answer.
The parties have leave to make application on the question of costs.
IN THE SUPREME COURT OF THE ) No ACTCA 54-2005
) No SCA 72 of 2005
AUSTRALIAN CAPITAL TERRITORY ) No SCA 46 of 2005
ON APPEAL FROM A JUDGE OF THE SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
ON APPEAL BY STATED CASE BY ORDER OF CRISPIN J FROM THE DECISION OF A MAGISTRATE
BETWEEN:KINGSLEY’S CHICKEN PTY LIMITED ACN 008 597 877
Appellant
AND:QUEENSLAND INVESTMENT CORPORATION and CANBERRA CENTRE INVESTMENTS PTY LIMITED ACN 067 682 893
Respondents
Judges: Higgins CJ, Connolly and Spender JJ
Date: 2 June 2006
Place: Canberra
REASONS FOR JUDGMENT
THE COURT:
This matter comes before the Court of Appeal by way of a stated case on appeal from a decision of a single judge of this Court. Both matters involve the application of the Leases (Commercial and Retail) Act 2001 (the Leases Act) to a commercial lease over premises used as a food outlet in a major Canberra shopping centre. The real question for determination in this Court, both by way of resolving the questions in the stated case and the appeal, involves the interpretation of those provisions of the Leases Act that operate to modify what would be the ordinary common law rights of a landlord and tenant in respect of commercial premises.
The appeal and stated case essentially fall to be determined on the question of the proper interpretation to be placed on certain terms used in the Leases Act. Essentially, the question is whether the terms “offer” and “accepts” should be taken to have a technical legal meaning derived from contract law or whether a broader meaning should be given to these terms consistent with what is said to be the legislative intent.
The appellant has been a tenant of the respondents since October 1992 when it first occupied premises in the food court of the Canberra Centre, a major retail facility in the heart of Canberra. On 13 October 1998 a new lease was entered into by the parties, which by its terms was to expire on 12 October 2003.
The Legislative Assembly enacted the Leases Act in 2001, which by its terms seeks to regulate commercial and retail leases. Among its provisions is a regime whereby a tenant can, during the latter stages of a lease, seek an indication from a landlord as to whether the lease will be renewed, and the regime provides that, should the lease be renewed, the rental may not exceed market rent and there are specific provisions to resolve disputes within the Magistrates Court as to whether the proposed rent complies with this requirement.
These latter provisions become operative when a lessor makes an “offer” to the tenant to renew the lease and the tenant “accepts” that offer, subject to the determination of market rent. In the proceedings below both the learned Magistrate and the learned Judge have taken the use of the term “offer” in the operative provision of the Leases Act to have the ordinary common law meaning of a contractual offer as laid down by the High Court in Masters v Cameron (1954) 91 CLR 353 at 360. Both the learned Magistrate and the learned Judge took the view that, as the correspondence between the lessee and lessor concerning a renewal of the lease was, in the lessor’s case, always marked as “subject to lessor approval”, there had never been an “offer” to renew the lease, and accordingly the dispute resolution provisions of the Leases Act did not have effect. The principal issue in this appeal and stated case is whether the term “offer” in the Leases Act should be given its conventional common law contractual meaning or whether it should be given a broader meaning to encompass commercial negotiations leading towards a possible renewal of a commercial lease.
The renewal provisions
These are found in Division 12.2 of the Leases Act. Section 106 provides -
Objects of div 12.2
(1)The Legislative Assembly recognises that conflicts sometimes happen between a lessor’s expectation that the lessor will be able to deal with the leased premises subject only to the terms of the lease and a tenant’s expectations of reasonable security of tenure.
(2)The objects of this division are to achieve an appropriate balance between reasonable but conflicting expectations and to ensure fair dealing, as far as practicable, between lessor and tenant in relation to the renewal or extension of premises.
The mechanism whereby a tenant can require the lessor to indicate whether the lease will be renewed is contained in s 107. By s 162 this is expressly applied to a lease entered into before the commencement of the Leases Act, which is the case in respect of this lease. Section 107 relevantly provides:
Lessor’s intentions about renewal
(1)This section applies to all leases.
(2)The tenant may, in writing, ask the lessor to tell the tenant whether the lessor intends to renew the lease if -
(a)for a lease for longer than 1 year - the lease is due to end in not less than 6 months and not longer than 1 year; or
(b)in any other case - the lease is due to end in not less than 3 months and not longer than 6 months.
(3)If the lessor receives a request under subsection (2) on a day (the request day), the lessor must tell the tenant, in writing within 1 month after the request day, either that -
(a)the lessor proposes to renew the lease; or
(b)the lessor does not propose to renew the lease.
...
The renewal negotiations
It is common ground that on 9 December 2002, which is within the period prescribed in s 107(2)(a), the appellant caused a facsimile to be sent to the respondents’ retail manager asking whether the lease would be renewed. It is also common ground that on 20 December 2002, which is within the period prescribed in s 107(3), the retail manager of the Canberra Centre (the retail manager) replied by letter stating -
I refer to your facsimile message of 9/12/02 regarding the above tenancy and confirm that it is the Lessor’s intention to offer a new lease to Kingsley’s Chicken Pty Ltd over the premises CL15B on expiry of the lease on 12/10/03.
We will write to you in the new financial year with details of proposed commercial terms. Should you wish to discuss this matter, please do not hesitate to call me.
The purpose of s 107, it seems to us, is to provide a mechanism whereby a tenant may establish, well within the period of the lease, whether the lessor proposes to renew the lease and to allow the tenant time within which to make commercial arrangements accordingly, either with a view to proceeding into negotiations for a renewed lease or to find alternative premises from which to conduct its business.
It is common ground that the retail manager wrote to the appellant’s agent on 7 April 2003 in the following terms:
RE: CANBERRA CENTRE - SHOP CL15B PROPOSED LEASE
Enclosed is a letter of offer containing the terms and conditions of a lease dated 7 April 2003, a Disclosure Statement and the Owner’s general form of lease which we are advised is consistent with the Leases (Commercial and Retail) Lease Act 2001. The Owner reserves the right to amend or replace the form of lease.
The letter then sets out various disclaimers, advises that the appellant obtain independent legal advice, and concludes -
You are requested to acknowledge receipt of the above by signing the enclosed copy of this letter together with the executed letter of offer and Disclosure Statement.
The letter has printed on its face the words “Subject to Lessor Approval”.
The accompanying letter, also stated to be “Subject to Lessor Approval”, sets out the terms of the proposed lease with a base rental of $108,000 per annum.
It is also common ground that the appellant’s agent replied to the retail manager in April confirming that a lease proposal had been provided. On 25 September 2003 the appellant’s agent wrote to the retail manager for the respondents in the following terms -
In response to a request from Kingsley’s Chicken Pty Ltd as required by the tenancy legislation, the owner has made Kingsley’s Chicken Pty Ltd an offer to renew the current lease. This offer to renew the lease has been accepted.
The owner proposed a new base rent of $108,000 pa plus GST from the renewed date. This rental proposal has not been accepted as reflective of fair market rent in accordance with the tenancy legislation.
The letter goes on to set out some arguments in support of this contention and notes that the lessor had indicated a preparedness to consider reducing the original rent. The letter concludes -
Under the circumstances, Kingsley’s Chicken Pty Ltd believes that it is within its rights to proceed to the formal valuation process but in view of the long relationship would prefer to reach agreement rather than going to such lengths.
Would you please re-consider the rent proposal and contact us as soon as it is convenient.
It seems to us that this correspondence reflects an ordinary commercial negotiation where both parties are assuming that there has been an offer to renew the lease pursuant to the Leases Act, the issue for negotiation being the appropriate rental, which by the operation of s 51 of the Leases Act, may not exceed market rent.
Section 51 provides -
Rent on renewal
(1)This section applies if -
(a)either -
(i) the lessor proposes to renew the lease and makes an offer to the tenant to renew the lease in response to a request under section 107 (Lessors intentions about renewal); or
(ii) the lessor gives the tenant preference under section 108 (Rules of conduct at end of lease term for shopping centre leases) by making an offer to the tenant to renew the lease; or
(b)the lessor otherwise makes a renewal offer to the tenant within 12 months after the end of the existing lease.
(2)The lessor must not propose that the rent to be charged initially under the renewed lease exceed the market rent for the premises (other than under an option to renew contained in the lease).
(3)In this section, a proposal or offer to renew the lease does not include an option to renew contained in the lease.
On 2 October 2003 the retail manager wrote to the appellant’s agent purporting to withdraw the original offer and to propose a new lease. It is apparent that there had been negotiations about the size of the leased premises and the new lease, which was included with the letter, provided for an additional 12 square metres of area (from 76.8 sq m to 88.8 sq m) with a base rental proposed at $108,000 per annum. This proposed lease again was headed “Subject to Lessor Approval”.
It is common ground that, on 13 October 2003, the original lease came to an end, and the appellant continued to occupy the premises and to pay the rent pursuant to the terms of that lease. It seems that commercial negotiations continued, and on 24 February 2004, the retail manager wrote to the appellant’s agent, again with the “Subject to Lessor Approval” disclaimer, proposing a further lease. This lease reverted to the original lease area of 76.8 sq m, but proposed a lower base rental for year one of $96,000, with stepped increases to $116,689 in year five. Further negotiations followed and, on 10 May 2004, the retail manager wrote again to the appellant’s agent with the usual disclaimer, proposing a lease in substantially similar terms.
The rent dispute
On 10 June 2004 the appellant’s then solicitors wrote to the respondents’ solicitors stating that –
We are instructed to advise you that our client accepts this offer of a new lease, subject to the rent being at market rent. Our client remains of the view that the rental does not represent market rent for the premises.
On 23 June 2004 the respondents’ solicitors wrote to the appellant’s then solicitors which, while disagreeing as to whether or not certain provisions of the Leases Act applied, stated -
In any event we note your client’s acceptance of the lessor’s proposal of 10 May 2004, subject to resolution as to whether or not the initial rent under the lease is market rent.
The lessor’s proposal of 10 May 2004 was expressed to be subject to lessor approval. We are instructed that the lessor has approved the proposal, and have been instructed to prepare a lease on the terms of that proposal.
Given the disagreement as to whether or not the rent for year one of the lease constitutes the market rent for the premises we are instructed that the lessor will refer the dispute to the Magistrates Court in accordance with section 52(3) of the Act.
On 6 July 2004 the respondents lodged an application in the Magistrates Court seeking a determination of market rent.
Section 52 of the Leases Act provides as follows -
52 Market rent - rent reviews, options and renewals
(1)Subsection (2) applies in relation to a lease if-
(a)the lease states that market rent is to be charged for premises; or
(b)market rent is to be charged for the premises because of section 49 (Rent setting or review if lease method void).
(2)The lessor or tenant may ask the Magistrates Court to refer a dispute about market rent for the lease for mediation if the lessor and tenant cannot agree on the market rent for the premises within 14 days after either tells the other that it disputes the proposed rent.
(3)The lessor or tenant may also ask the Magistrates Court to refer a dispute about the rent to be paid under a renewal to mediation if -
(a)the lessor-
(i)proposes to renew the lease and makes an offer to renew the lease in response to a request under section 107 (Lessor’s intentions about renewal); or
(ii)gives the tenant preference under section 108 (Rules of conduct at end of lease term for shopping centre leases) by making an offer to the tenant to renew the lease; or
(iii)otherwise makes a renewal offer to the tenant before the end of 12 months after the end of the existing lease; and
(b)the tenant accepts the lessor’s offer to renew the lease subject to the rent for the lease being market rent.
(4)On request under subsection (2) or (3), the Magistrates Court must -
(a)if the court considers that mediation would not be productive or if the parties agree - after consultation with the parties, appoint a valuer to work out the market rent; or
(b)refer the dispute to a mediator for mediation.
(5)If the Magistrates Court refers a dispute for mediation, the mediator must report the result of the mediation to the court not later than 28 days after the dispute was referred.
(6)If the mediator reports to the Magistrates Court that the parties to the lease cannot agree on the market rent, the court must, after consultation with the parties, appoint a valuer to work out the market rent.
(7)In this section, a proposal or offer to renew the lease does not include an option to renew contained in the lease.
It is apparent that the parties at this time were all of the view that the provisions of s 52(3)(a)(iii) and s 52(3)(b) applied at this point, in that the lessor had made a renewal offer within 12 months of the expiry of the lease (being the letter of 10 May 2004 with the proposed lease subject to the lessor’s approval, and the letter of 23 June 2004 indicating that the lessor had approved the proposed lease), and the tenant had accepted the offer subject to market rent (being the letter of 10 June 2004).
It was common ground that the parties took part in mediation before a Registrar of the Magistrates Court on 5 August 2004 which was unsuccessful and, following this, a valuer was instructed by the Magistrates Court to begin a market rental valuation. The valuer, Mr SJ Flannery of the firm of McCann Property & Planning, reported to the parties in December 2004 that the market rent for the subject premises as at 13 October 2003 was $96,000 pa (excluding GST).
The Leases Act provides in s 53(3), that –
The market rent worked out by the valuer is the rent under the lease if the parties fail to agree on a different rent to be charged within 14 days after being given a copy of the valuer’s report.
There is, however, provision for challenges to be made to the valuer’s report and for a new valuer to be appointed in limited circumstances. Section 57 provides for such a challenge if it is alleged that the valuer had a conflict of interest (which is not asserted in this case) or if the valuer has not properly conducted the valuation. Section 58 provides as follows:
Appointment of new valuer in other cases
(1)A party to a lease may apply to the Magistrates Court for the appointment of a new valuer if the party has reasonable grounds for believing that -
(a)the valuer appointed to work out the market rent for the lease has failed to comply with section 57; or
(b)the valuer has failed to conduct a valuation in accordance with this Act.
(2)On application under subsection (1), the Magistrates Court may disqualify the valuer and appoint a new valuer.
...
The proceedings below
On 24 December 2004 the then solicitors for the appellant wrote to the solicitors for the respondent indicating that they would make an application pursuant to s 58, based on the argument that the valuer had not given sufficient reasons for calculating the rent, and had not adequately dealt with the appellant’s submissions. A formal notice of motion was filed with the Magistrates Court on 24 January 2005 seeking such an order.
This application came before Magistrate Burns on 24 March 2004 when his Honour raised the question of his jurisdiction to entertain it. On 14 April 2005 the respondents’ solicitors served a notice to quit upon the appellant, and on 22 April 2005 the appellant’s solicitors sought orders in the Magistrates Court contesting the notice to quit.
On 27 May 2005 Magistrate Burns ruled that the Magistrates Court had no jurisdiction to deal with the Notice of Motion to appoint a new valuer pursuant to s 58 of the Leases Act. His Honour so held on the basis that the requirements of s 52 necessary to attract the original jurisdiction of the Magistrates Court to appoint a valuer to work out market rent had never been satisfied because there had never been an “offer” by the lessor to renew the lease and the tenant had never accepted such an “offer”. In his reasons of 27 May 2006, his Honour held, at [22], that –
the words “offer” and “acceptance” are to be accorded their usual, well understood meanings in contract law.
It seems to us that this was the crucial point in both his Honour’s reasoning and in the reasoning of Justice Gray on appeal. Once it is accepted that the words “offer” and “accepts” as they appear in s 52 of the Leases Act have their ordinary contractual meaning, it must follow that unless there is a formal offer and acceptance in conventional contractual terms, the relevant provisions of the Act are not enlivened.
In support of his conclusion his Honour referred to the well-known passage in Masters v Cameron where Dixon CJ, McTiernan and Kitto JJ said (at 360) -
Where parties who have been in negotiation reach agreement upon terms of a contractual nature and also agree that the matter of their negotiation shall be dealt with by a formal contract, the case may belong to any of three classes. It may be one in which the parties have reached finality in arranging all the terms of their bargain and intend to be immediately bound to the performance of those terms, but at the same time propose to have the terms restated in a form which will be fuller or more precise but not different in effect. Or, secondly, it may be a case in which the parties have completely agreed upon all the terms of their bargain and intend no departure from or addition to that which their agreed terms express or imply, but nevertheless have made performance of one or more of the terms conditional upon the execution of a formal document. Or, thirdly, the case may be one in which the intention of the parties is not to make a concluded bargain at all, unless and until they execute a formal contract.”
His Honour went on, with what seems to us to be entirely conventional and appropriate common law reasoning, to state that [38] -
In each of the two former cases the parties are immediately bound. In the third case they are not bound until they execute a formal, written contract. In Masters v Cameron the Court referred to the decision in Rossiter v Miller (1878) 3 App Cas 1124, where Lord Blackburn said:
Parties often do enter into a negotiation meaning that, when they have (or think they have) come to one mind, the result shall be put into formal shape, and then (if on seeing the result in that shape they find they are agreed) signed and made binding; but that each party is to reserve to himself the right to retire from the contract, if, on looking at the formal contract, he finds that though it may represent what he said, it does not represent what he meant to say. Whenever, on the true construction of the evidence, this appears to be the intention, I think that the parties ought not to be held bound till they have executed the formal agreement.
The question of which category a particular case falls into is to be determined upon the intention disclosed by the language employed by the parties. The terms of the language employed in the letter of 10 May 2004, to the effect that each party acknowledged that neither was bound and no contract created until the “lease documentation” was executed by both parties is so clear that it leaves no room for argument. I am satisfied that the case is one that falls into the third category referred to by the Court in Masters v Cameron, and no binding agreement was intended by the parties until they executed a contract in writing. It must follow that no process of offer and acceptance has occurred so as to enliven the Court’s power under section 52 to appoint a valuer, or to entertain an application under section 58.
The appellant brought an appeal to the Supreme Court against his Honour’s decision, which was heard by Gray J, and dismissed, on 25 November 2005. His Honour also held that the statutory use of the terms “offer” and “acceptance” were to be accorded their conventional common law meaning, and it inevitably followed from this that his Honour endorsed the reasoning of Magistrate Burns, based as it was on clear High Court authority, so as to form the view that the correspondence between the appellant tenant and the respondent lessor did not amount to an “offer” and “acceptance”, and that the case fell into the third category of case identified in Masters v Cameron.
Before the Supreme Court appeal had been dealt with and, acting on the basis that the learned Magistrate had held that the jurisdiction conferred on the Magistrates Court by the Leases Act had not been enlivened, the lessor’s notice to quit fell for determination by Magistrate Burns, and his Honour inevitably, it seems to us given his earlier determination, held that the lessor was entitled to possession of the premises. An appeal was lodged in the Supreme Court against this decision. This appeal came before Crispin J on 1 February 2006 and his Honour, noting that the decision of Gray J was on appeal to this Court, directed that that matter be joined with and heard together with that appeal. As a consequence of this order, a stated case was prepared for this Court.
The questions for this Court
The first question in the stated case is, it seems to us, determinative of this appeal. It is –
[54]Under subsection 52(3)(a) of the Leases (Commercial and Retail) Act 2001 are the terms “offer” and “accepts … subject to the rent for the lease being market rent” to be interpreted according to their meaning at contract law?
There is a well accepted convention that when the legislature uses a technical legal term in legislation, the courts will ordinarily give to that term its usual legal meaning. This was clearly the approach adopted by the learned Magistrate. He cited the well-known passage from O’Connor J in Attorney-General for NSW v Brewery Employees Union of NSW (1908) 6 CLR 469 where, in considering the meaning of the statutory term “trade marks”, his Honour said (at 531) –
The rule of interpretation to be applied in such a case is well known. Where words have been used which have acquired a legal meaning it will be taken, prima facie, that the legislature has intended to use them within that meaning unless a contrary intention clearly appears from the context.
However, this maxim must also be read with O’Connor J’s earlier remarks in Webb vMcCracken (1906) 3 CLR 1018 at 1027 where it is stated that –
... the Court will not treat a group of words as having a technical legal meaning merely because they would convey to a lawyer the same meaning as a known technical legal phrase.”
The words “offer” and “accepts” clearly can have a broader meaning than the legal terms- what advertisers please to call an “offer” may to a lawyer be at most an invitation to treat. The first definition of offer in the Australian Concise Oxford Dictionary (3rd ed) is “to present for acceptance or refusal or consideration” and the second “express readiness or show intention” fall well short of the contractual meaning from Masters vCameron.
An argument was advanced in this appeal that does not seem to have been drawn to the attention of either the learned Magistrate or the learned Judge on the primary appeal. That is that whatever the common law of statutory interpretation, the ACT Legislative Assembly has made clear in the Legislation Act 2001 (the Legislation Act) that legislative intention must be given a primary role in working out the meaning of an Act. Section 139 of the Legislation Act provides -
139 Interpretation best achieving Acts purpose
(1)In working out the meaning of an Act, the interpretation that would best achieve the purpose of the Act is to be preferred to any other interpretation.
(2)This section applies whether or not the Act’s purpose is expressly stated in the Act.
Section 138 of the Legislation Act provides -
138Meaning of working out meaning of an Act
In this part:
working out the meaning of an Act means -
(a)resolving an ambiguous or obscure provision of the Act; or
(b)confirming or displacing the apparent meaning of the Act; or
(c)finding the meaning of the Act when its apparent meaning leads to a result that is manifestly absurd or is unreasonable; or
(d)finding the meaning of the Act in any other case.
It seems to us that the purpose of the Leases Act is to regulate and modify the common law of landlord and tenant in relation to retail and commercial leases, and that the modifications enacted by the Legislature extend from the negotiation phase of the relations between lessor and lessee through to the form of the final executed lease. It follows that, if the terms “offer” and “accepts” are to be read in the formal contractual sense of the words - as opposed to the ordinary English language usage set out above - the Leases Act will have limited application until such time as the negotiations between lessor and lessee have crystallized to a firm understanding of the kind described in Masters v Cameron.
This view of the purpose of the Leases Act can be found by reference to the terms of the Act, and to legislative history of the Act, which by virtue of s 142 of the Legislation Act may include parliamentary debates and any explanatory materials.
Section 53 of the Leases Act creates the concept of an “interim agreement”. Section 53 relevantly provides -
(4) If the parties to a lease enter into an interim agreement about renewing or extending the lease -
(a)the lessor cannot withdraw the offer to renew or extend; and
(b)the tenant cannot withdraw the acceptance of the offer.
(5) However, subsection (4) does not apply if the parties agree, after the interim agreement is entered into, that the offer or acceptance may be withdrawn.
This provision, it seems to us, would be entirely meaningless and otiose if “offer” and “acceptance” were given their formal contractual meaning.
The legislative history of the Leases Act is somewhat complex, in that the parliamentary debates occurred in the context of both a Government Bill and a Private Members Bill both seeking to address statutory modification of the common law of landlord and tenant in the context of commercial and retail leases. However, it seems to us that the entire debate was conducted on the basis that s 52 was intended to be operative during negotiations occurring prior to the conclusion of a formal contract. During the detail stage debate to s 52 of the Leases Act, Mr Stanhope MLA, the present Chief Minister, successfully moved two amendments to s 52. These were supported by Mr Stefaniak MLA, the then Attorney-General. Section 52(3) is the operative provision which allows the lessor or the tenant to refer a dispute about the rent to be payable to the Magistrates Court, and is the provision that has been held below to be operative only when a Masters v Cameron level of agreement has been reached. Mr Stanhope first moved to extend from three months to 12 months the provision of s 52(3)(a)(iii) which provides that the Magistrates Court may deal with a dispute if the lessor “otherwise makes a renewal offer to the tenant before the end of 12 months after the end of the existing lease”. Mr Stanhope said (Hansard, 6 March 2001 at 618) –
The design in this amendment is to extend from three months to 12 months the period in relation to which a negotiation may open or commence between a landlord and a tenant. The intention is to facilitate the opening of negotiations at a much earlier stage, in the hope that matters will be settled between the landlord and the tenant in a timely fashion. It also allows the tenant more scope and more time to apply at an earlier stage for whatever orders they may wish of the Magistrates Court in respect of things that they may be unhappy with.
Mr Stefaniak accepted this amendment (at 619).
It is clear from these remarks that the Legislative Assembly intended that the term “offer” to be understood in the context of an opening of negotiations. There is an express reference to this process allowing for any matters in dispute to be referred to the Magistrates Court.
A further amendment was moved and accepted inserting what is now s 52(3)(b) “the tenant accepts the lessor’s offer to renew the lease subject to the rent for the lease being market rent”. In moving the amendment, Mr Stanhope said (Hansard 6 March 2001 at 619) –
What this amendment does is clarify the tenant’s right to accept an offer to renew but it reserves to the tenant the right to argue about the level of rent. Once again, it is a provision that enhances the position of the tenant in terms of the tenant’s negotiation position vis a vis rent
It seems to us that to confine the terms “offer” and “accepts” to their technical contractual meaning would substantially subvert the legislative intent in enacting s 52 of the Leases Act, as it would confine the jurisdiction of the Magistrates Court to disputes in situations where the negotiations between the parties had reached the stage of a formal legal agreement as understood in Masters v Cameron. How could there be such an agreement if the level of rent was not agreed?
It should be noted that the Legislation Act does not merely provide that the court may have regard to legislative history in construing an Act. Rather, s 139 is a positive requirement that -
(1)In working out the meaning of an Act, the interpretation that would best achieve the purpose of the Act is to be preferred to any other interpretation.
This provision, it seems to us, is in similar form to the interpretive provision in the Human Rights Act 1998 (UK) referred to by the House of Lords in Ghaidan v Godin-Mendoza (2004) 2 AC 557. Section 3(1) of that Act provides that –
(1)So far as it is possible to do so, primary legislation and subordinate legislation must be read and given effect in a way which is compatible with the Convention rights.”
An equivalent provision is to be found in s 30(1) of the Human Rights Act 2004, which provides that –
(1)In working out the meaning of a Territory law, an interpretation that is consistent with human rights is as far as possible to be preferred.
The legislative direction to “prefer” an interpretation that is consistent with a policy objective was given effect to in Ghadidan v Godin-Mendoza. Lord Nicholls of Birkenhead said (at 571) –
the interpretive obligation decreed by section 3 is of an unusual and far reaching character. Section 3 may require a court to depart from the unambiguous meaning the legislation would otherwise bear. In the ordinary course the interpretation of legislation involves seeking the intention reasonably to be attributed to Parliament in using the language in question.
We are far from satisfied that, in their ordinary usage, the terms “offer” and “accepts” as used in the Leases Act necessarily imply the technical contractual meaning of the terms. Even if it were to be accepted that, of the two possible interpretations, the technical legal approach would be favoured, the effect of s 139 of the Legislation Act, in our view, requires this Court to prefer an interpretation that best achieves the purpose of the legislation. It seems clear to us that this would favour the view that the terms in question are to be given their ordinary meaning rather than restricted to their technical contractual meaning. It follows that the learned Magistrate, and the learned primary appeal Judge, were in error in holding that the jurisdiction of the Magistrates Court was not enlivened because the parties had not yet reached a firm contractual agreement.
Counsel were of one mind that, should this be our view, the preferable order would be to remit the matter to the Magistrates Court to exercise the function conferred on that Court pursuant to s 58 of the Leases Act, as there was not sufficient evidence before us to enable us to determine this question. When the matter came before the Magistrates Court, the appellant and the respondents both submitted that the Court did have jurisdiction, and the argument was, in effect, as to whether sufficient grounds for disqualification of the valuer were capable of being made out. This may become relevant to the question of costs.
Once the Magistrates Court had ordered that it had no jurisdiction to determine the issues between the parties, contrary to the submissions of both parties, the conduct of the respondents in seeking to order the appellant to quit the premises is entirely understandable, and again this may be relevant to the eventual order as to costs.
The stated case sought a range of answers to questions that would arise depending on the answer to the primary question as to whether or not the jurisdiction of the Magistrates Court was enlivened to appoint a valuer to determine market rent and to entertain an application pursuant to s 58 to appoint a new valuer. It seems to us that there is a danger in proceeding beyond this primary question in these proceedings. Until the application is dealt with according to law, it is a somewhat hypothetical set of questions and gives rise to the long recognised danger of appellate courts proffering what are in effect advisory opinions. It seems to us that the proper course is not to answer the stated case questions beyond the point that is necessary to determine the appeal, and to remit the matter to the Magistrates Court for further determinaton. Should the application be successful, a new valuer will be appointed, and a new market rent set. This must, it seems to us, be a determination of market rent at the date of the conclusion of the former lease. Should the application be unsuccessful, then the extant determination of the valuer will have effect. As it is common ground between the parties that there is no “interim agreement” here, the parties will be free to decide whether or not to enter into a new five year lease from 13 October 2003.
It is appropriate to observe that s 55 of the Leases Act clearly provides that once the market rent is “worked out” then that is the rent to apply from the date of the end of the former lease. This is clearly a sensible provision, as otherwise a tenant could, by long process of appeal and negotiation, effectively freeze a rental that had long been overtaken by events. Section 55 provides -
55 Rent pending valuation- rent reviews and options to extend
If the rent for premises is not worked out under section 52 (Market rent ‑ rent reviews, options and renewals) or 53 (Valuation to work out market rent) before the extension of the lease is to commence or a rent review is due (the relevant date) -
(a)the rent continues at the rate charged immediately before the relevant date until the rent has been worked out; and
(b)once the rent has been worked out and set, the party who owes the other party the difference between the rent paid and the rent that should have been paid must pay the difference to the party owed within 30 days after the rent is set.
It follows that, once the rent is “set” (which will occur either when the application to appoint a new valuer pursuant to s 58 is dismissed, or when, should a new valuer be appointed, that valuer determines the market rent) it may be necessary, should that rent exceed the rate of rent in place at 13 October 2003, for the appellant to make an adjustment in favour of the respondents to reflect the fact that they have continued in occupation since that date at the old rent.
The Orders
The orders of the Court are, therefore, that in the matter of the appeal from the decision of Gray J of 25 November 2005 (ACTCA 54 of 2005), the appeal should be allowed and the matter should be remitted to the Magistrate to hear and determine the application to disqualify the valuer.
In relation to the case stated, the questions (using the paragraphs in the stated case) should be answered as follows -
[54]Q. Under subs 52(3)(a) of the Leases (Commercial and Retail) Act 2001 are the terms “offer “ and “accepts…subject to market rent” to be interpreted according to their meaning at contract law?
A.No.
[55]Q. If the answer to the question in par 54 is in the affirmative, does subs 52(3)(a) of the Leases (Commercial and Retail) Act 2001 require that there be binding agreement between the parties?
A.Unnecessary to answer.
[56]Q. If the answer to the question in par 54 is in the affirmative –
(a) Does the letter of 10 May 2004 from the respondent Queensland Investment Corporation amount to an offer in the contractual sense?
(b) If the answer to subpara (a) above is in the affirmative, given that by the appellant’s former solicitor’s letter of 10 June 2004 the respondents’ “offer” was accepted by the appellant subject to market rent, was this sufficient to cause the parties to fall within the scope of subs 52(3) such that the Magistrates Court had jurisdiction to determine market rent?
(c) If the answer to subpara (b) above is in the affirmative, did the Magistrates Court continue to have jurisdiction upon the appellant asserting that there was no binding agreement between the parties?
A.Unnecessary to answer.
The parties have leave to make application on the question of costs.
I certify that the preceding sixty-one (61) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Court.
Associate:
Date: 2 June 2006
Counsel for the appellant: Mr C Erskine
Solicitor for the appellant: Meyer Vandenberg
Counsel for the respondents: Mr FJ Purnell SC
Solicitor for the defendant: Mallesons Stephen Jaques
Date of hearing: 1 May 2006
Date of judgment: 2 June 2006
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