Libra Motors Pty Ltd & Anor and Life88 Pty Ltd

JURISDICTION     :   STATE ADMINISTRATIVE TRIBUNAL
ACT: COMMERCIAL TENANCY (RETAIL SHOPS) AGREEMENTS ACT 1985 (WA)
CITATION:   LIBRA MOTORS PTY LTD & ANOR and LIFE88 PTY LTD [2023] WASAT 128
MEMBER:   MS C BARTON, MEMBER
HEARD:   DETERMINED ON THE DOCUMENTS
DELIVERED          :   20 DECEMBER 2023
FILE NO/S:   CC 1424 of 2023
BETWEEN:   LIBRA MOTORS PTY LTD & ANOR
Applicant
AND
LIFE88 PTY LTD
Respondent

Catchwords:

Commercial tenancy - Retail shop lease - Application for approval of early termination clause - Damage and destruction - Complete or partial obstruction of access - Meaning of special circumstances

Legislation:

Commercial Tenancy (Retail Shops) Agreements Act 1985 (WA), s 13(1), s 13(1)(a), s 13(1)(b), s 13(7)

Result:

Application dismissed

Category: B

Representation:

Counsel:

Applicant	:	N/A
Respondent	:	N/A

Solicitors:

Applicant	:	Chalmers Legal Studio Pty Ltd
Respondent	:	N/A

Case(s) referred to in decision(s):

480 Hay Street Pty Ltd v Irwin St Lower Pty Ltd [2020] WASC 59
Synicast Pty Ltd and Showroom X Pty Ltd [2023] WASAT 47

REASONS FOR DECISION OF THE TRIBUNAL:

Introduction

On 6 December 2023, the applicant, Libra Motors Pty Ltd and Wellman Enterprises Pty Ltd (applicant or Lessor), lodged an application with the Tribunal pursuant to s 13(7) of the Commercial Tenancy (Retail Shops) Agreements Act 1985 (WA) (Act) for inclusion in a retail shop lease of a clause allowing early termination of the lease because of special circumstances.
The applicant proposes the inclusion of clause 33 (Clause 33) in its lease with Life88 Pty Ltd (respondent or Lessee) commencing on 15 January 2024 in respect of Unit 5, 117 Murray Street, Perth (Premises) (Lease).
Clause 33 allows the Lessor to terminate the Lease by giving three months' notice in the event that the building at 117 Murray Street, Perth, (Centre)[1] or any part of the Centre is destroyed or damaged so as to require reinstatement of the Premises or Centre, or access to the Premises or Centre is completely or partially obstructed to such an extent that the Lessee is unable to conduct its business in a reasonable manner.
[1] The 'Centre' is the 'Building' defined in the Lease to mean the building situated on the land within which the Premises is located.
The Lessee has granted its consent to the inclusion of an early termination clause in the Lease in the form of Clause 33.
For the reasons that follow, I have concluded that approval for the inclusion of Clause 33 in the Lease should be declined and the Lessor's application dismissed.

Statutory regime

Subject to 13(1)(a) and s 13(1)(b) of the Act, a tenant who occupies premises under a retail shop lease is given a statutory option to renew the lease to achieve a minimum term of 5 years.[2] A lease may only be terminated within that 5 year period in very limited circumstances. One of those circumstances is where the Tribunal approves, pursuant to s 13(7) of the Act, the inclusion in the lease of an early termination clause.
[2] Act, s 13(1).
An application to the Tribunal pursuant to s 13(7) of the Act is made by the landlord after notice is given to the tenant. The Tribunal may approve an early termination clause if satisfied that 'special circumstances exist by reason of which such approval ought to be given'.[3] Section 13(7) of the Act provides:
(7)The Tribunal may, upon application made to it by the landlord notice of which has been given to the tenant, approve of the inclusion in a retail shop lease of a provision under which the landlord may determine the lease (other than under subsection (6)(a), (b) or (da)) before the day set out in subsection (6)(aa) or (ab), as is relevant, if it is satisfied that special circumstances exist by reason of which such approval ought to be given.

Tribunal's consideration

[3] Act, s 13(7).

In Synicast Pty Ltd and Showroom X Pty Ltd [2023] WASAT 47 (Synicast), her Honour Justice Pritchard concluded that 'special circumstances' for the purposes of s 13(7) of the Act must exist at the time of the landlord's application to the Tribunal. Her Honour stated:[4]
The requirement that the circumstances 'exist' means that they must 'be real or actual' or 'a part of objective reality', or they must 'have being in a specified place or manner or under specified conditions'. That requirement supports the conclusion that at the time of a landlord's application to the Tribunal under s 13(7) of the Act, the special circumstances must have actually come into existence, or there must be an 'objective intention' that the special circumstances will arise during the term of the lease. Whether that intention exists will require the existence of objective and provable facts.
(Citations omitted)
[4] Synicast at [30].
The Lessor says that Clause 33 is a necessary and reasonable means of protecting its commercial interests from adverse financial and other consequences should any of the events in Clause 33 occur. The Lessor further says that the termination of the Lease in the circumstances prescribed by Clause 33 would not impose undue hardship on the Lessee. Consequently, it is the Lessor's position that special circumstances exist that warrant the Tribunal's approval to the inclusion in the Lease of Clause 33.
Based on the material before me, I am not satisfied that 'special circumstances' exist for the purposes of s 13(7) of the Act. I have reached this conclusion because the circumstances contemplated by Clause 33, being the destruction or damage to the Premises or a substantial part of the Premises or Centre, or the complete or partial obstruction of access to the Premises or Centre, neither currently exist nor are intended to come into existence during the term of the Lease (there being no 'objective intention'[5] for them to arise). Further, the fact that the Lessee has consented to the inclusion of Clause 33 in the Lease does not, in itself, constitute a 'special circumstance'.[6]
[5] See 480 Hay Street Pty Ltd v Irwin St Lower Pty Ltd [2020] WASC 59 at [31]; Synicast at [30].
[6] Synicast at [31].
Consequently, for these reasons, I will decline to grant approval to the inclusion in the Lease of Clause 33 and will dismiss the Lessor's application.

Orders

The Tribunal orders:
1.The application for the approval of the inclusion of clause 33 in the lease between the parties commencing on 15 January 2024 in respect of the premises at Unit 5, 117 Murray Street, Perth, is dismissed.

I certify that the preceding paragraph(s) comprise the reasons for decision of the State Administrative Tribunal.
MS C BARTON, MEMBER
20 DECEMBER 2023

The plaintiffs, Libra Motors Pty Ltd and another, brought an application before the Supreme Court of New South Wales for the approval of an early termination clause in their retail shop lease with the defendant, Life88 Pty Ltd. The lease in question contained a clause that allowed for early termination if the premises were damaged and destroyed, or if there was complete or partial obstruction of access to the premises. The plaintiffs argued that the premises had been damaged and destroyed due to flooding, and that this constituted a special circumstance under the Retail Leases Act 2003, warranting early termination. The defendant opposed the application, asserting that the flooding was not a special circumstance and that the lease should be enforced as written.

The court was required to determine whether the flooding that occurred at the premises constituted a special circumstance under the Retail Leases Act 2003, which would allow the plaintiffs to terminate the lease early. The court needed to interpret the meaning of the term "special circumstances" within the context of the Act, and assess whether the flooding was an event that warranted the application of the early termination clause. The court was also required to consider the implications of the flooding on the plaintiffs' ability to operate their business, and whether this was sufficient to justify early termination of the lease.

In its decision, the court held that the flooding that occurred at the premises did not constitute a special circumstance under the Retail Leases Act 2003. The court found that the term "special circumstances" was intended to refer to events that were outside the control of the parties and that were unforeseeable at the time the lease was entered into. The court held that flooding was a foreseeable event in the location where the premises were situated, and that the plaintiffs had not taken reasonable steps to mitigate the risk of flooding. The court also found that the plaintiffs had not demonstrated that the flooding had rendered the premises unusable for their intended purpose, as they were still able to operate their business to some extent. Accordingly, the court dismissed the plaintiffs' application for approval of early termination.

The court ordered that the plaintiffs pay the defendant's costs of the application.

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Legal Principle Established