Lampropoulos & Anor and Bana & Ors
[2006] WASAT 80
•29 MARCH 2006
JURISDICTION : STATE ADMINISTRATIVE TRIBUNAL
STREAM: COMMERCIAL & CIVIL
ACT: COMMERCIAL TENANCY (RETAIL SHOPS) AGREEMENTS ACT 1985 (WA)
CITATION: LAMPROPOULOS & ANOR and BANA & ORS [2006] WASAT 80
MEMBER: MR M SPILLANE (MEMBER)
HEARD: ON THE PAPERS
DELIVERED : 29 MARCH 2006
FILE NO/S: CC 3145 of 2005
BETWEEN: DENISE LAMPROPOULOS
KATHERINE KIKIROS
ApplicantsAND
JOHN BANA
LORRAINE KERSHAW
JULIE WATSON
Respondents
Catchwords:
Underground power levy - Rates and taxes
Legislation:
Commercial Tenancy (Retail Shops) Agreements Act 1985 (WA)
Local Government Act 1995 (WA), s 6.38
Result:
Question answered in the affirmative
Category: B
Representation:
Counsel:
Applicants: Self-represented
Respondents : Self-represented
Solicitors:
Applicants: Self-represented
Respondents : Self-represented
Case(s) referred to in decision(s):
Davison v Bathurst City Council [1966] 1 NSWR 61
Sunskill Investments Pty Ltd v Townsville Office Services Pty Ltd [1991] 2 Qd R 210
Case(s) also cited:
Nil
REASONS FOR DECISION OF THE TRIBUNAL:
Summary of Tribunal's decision
The applicants sought confirmation that the underground power levy charged by the City of Nedlands in respect of premises situated at 71 Princess Road/122 Dalkeith Road, Nedlands are "rates and taxes" as defined under the terms of the lease document pertaining to the premises and, as such, are recoverable property expenses payable by the tenants.
Having examined the terms of the lease, the Tribunal determined that such a levy comes within "rates and taxes" as defined in the lease and as such was recoverable by the landlord from the tenants.
Facts
In its rate notice to the applicants, issued 26 August 2005 in respect of the property at 71 Princess Road, Nedlands, the City of Nedlands outlined the following amounts to be due and owing:
General Rates GRV $122 720 at 0.060900 cents $7473.65
240L Refuse collection service $1289.40
Subsequent 240L Refuse Collection $1074.50
Emergency Services Levy GRV at 0.0142 cents
(max $175) $1742.62
UPL Stage 2 $3439.25.
The total of all of these amounts was $15 019.42.
By letter dated 6 October 2004, Mr Geoff Loneragan, of Acton Central who manages the property on behalf of the applicants, wrote to the tenants and under the heading "Underground Power Levies" described the underground power levies as recoverable property expenses and outlined the reasons why he believed the underground power levies were recoverable from the tenants.
It is clear from correspondence furnished to the Tribunal that the tenants do not agree with this contention and see the underground power levies as a capital expense rather than an operating expense.
The matter is therefore brought to the Tribunal for determination as to whether the underground power levies are rates and taxes, as defined under the terms of the lease and are recoverable from the tenants or whether they are a capital expense and not recoverable.
Applicants' submissions
By letter of 12 October 2005, Mr Geoff Loneragan of Acton Central, the landlord's agent, filed submissions. Those submissions also referred to a letter of 6 October 2004 to the tenants, which included correspondence from Jackson McDonald Lawyers dated 29 September 2004.
Suffice to say that the principal arguments relied on by the applicants are:
1)The imposition of the underground power charges by the City of Nedlands and collected via a levy are related to a State Government initiative in conjunction with Western Power which is known as the State Underground Power Program.
2)The levy is a State charge calculated on the basis of the land owned by the owner and is therefore covered by the lease definition of rates and taxes.
3)The payment of the levy and installation of underground power is a requirement of a statutory authority, and property owners do not have a choice as to whether or not they wish to participate in the program.
4)The installation of underground power cannot be deemed to be capital expenditure undertaken by the lessor, as the work is not undertaken by an individual owner to an individual property. The ownership and maintenance of the underground power system, is with Western Power.
5)The imposition of charges to landowners by the City of Nedlands to meet the costs associated with compliance with the State Government initiative which jointly funds the installation of underground power to multiple properties cannot be deemed a capital expenditure.
Respondents' submissions
By letters dated 10 October 2005 and 17 October 2005, Dr J Bana, Director of Travelworld and the first respondent in this matter, made the following submissions:
1)The payment for the installation of underground power should be the responsibility of the owner and not the lessee as it is a service charge to the owner for work done by the City as per the Local Government Act 1995 (WA) (LG Act) s 6.38 and not a Local Government rate per se;
2)The lease agreement made no mention of this charge and the tenants were not made aware before signing the lease that such a charge would be made and the Nedlands City Council had publicised the intention of an underground power project as early as 2001.
3)Such work increases the capital value of a property but contributes little, if anything, to the business of the lessee.
4)An example was also given of a lessee in a different property in Claremont who was not required to meet the cost of the underground power levy.
Consideration
A copy of the executed and stamped lease for the premises in question, with the applicants as lessor and the first, second and third respondents as lessees, was provided to the Tribunal and it is the terms of that lease that are critical to the resolution of this matter and not what might have been done in other premises with different leases.
The relevant definition, for the purposes of this case, is found at cl 1 of the Definitions and Interpretations clause of the lease under the heading "Rates and Taxes", and states:
"'Rates and Taxes' means the aggregate in each Lease Year of all:
(a)council rates and charges payable to the local authority including charges for rubbish removal;
(b)water drainage and sewerage rates payable to the Appropriate Authority for the supply of water including meter fees and charges for the disposal of storm water and sewerage and charges for water consumption where not separately metered and paid for by any other tenant of the Building;
(c)land tax and charges (State and Commonwealth) and Metropolitan Region Improvement Tax calculated on the basis of the Land being the only property owned by the Lessor in the State; and
(d)any other rate tax or imposition
levied charged assessed or imposed in respect of the Leased Premises, Building or the Land, or the ownership or occupation of them during a Lease Year."
Standard books of precedents published in Australia contain numerous examples of covenants imposing an obligation or liability to pay both rates and taxes, and the words themselves have been considered by the courts on many occasions.
In the present case, the relevant words that must be examined in the definition of rates and taxes are found at par (a) and par (d) together with the final sentence of the definition.
In Sunskill Investments Pty Ltd v Townsville Office Services Pty Ltd [1991] 2 Qd R 210 , the Full Court tackled the difficult issue of the proper construction of the words "charge", "rate" and "tax" in a lease.
In his judgment, McPherson J referred to the decision of Davison v Bathurst City Council [1966] 1 NSWR 61 and stated:
"While the word 'charge' means 'liability to pay', and is frequently used in the Local Government Act in the sense of a liability to pay money laid on real property, there was a cognate but distinct meaning of the word in the sense of the cost or price demanded for services or goods whether or not they are desired by the recipient."
In respect of the word "rate" McPherson J stated:
"Textbooks and judgments are notably reticent about defining the term 'rate'; but the underlying conception is of a levy to defray the expenses of local government imposed on all owners or occupiers of property in a particular area. Its essence is that it is calculated according to values of land or buildings in the locality rather than the cost of supplying the service to particular premises, so that each owner[s] or occupier[s] bears his rateable share of those expenses. Hence the word 'rate'."
As outlined earlier, in the present case subparagraph (a) under the definition "Rates and Taxes" includes "council rates and charges payable to the local authority" and subparagraph (d) has a wide ambit in that it states:
"any other rate tax or imposition levied, charged, assessed or imposed in respect of the Leased Premises, Building or the Land or the ownership or occupation of them during a Lease Year."
Conclusion
Applying the principles in the cases outlined above, the Tribunal has no difficulty in determining that even if the underground power levy imposed by the rate notice, was not caught by subparagraph (a) of the definition of Rates and Taxes in the lease, it would certainly be caught by subparagraph (d).
The result therefore is that the liability arising under the rate notice from the City of Nedlands does constitute "rates and taxes" as defined in cl 1.1 of the Lease and is therefore recoverable as property expenses by the landlord with each lessee being liable for a proportionate amount of such charges.
Orders
1.The underground power levy charged by the City of Nedlands constitutes "rates and taxes" as defined in cl 1.1 of the lease between the parties and as such is recoverable by the landlord from the tenants.
I certify that this and the preceding [19] paragraphs comprise the reasons for decision of the State Administrative Tribunal.
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MR M SPILLANE, MEMBER
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