METROPOLITAN REDEVELOPMENT AUTHORITY and EDMUND RICE EDUCATION AUSTRALIA COLLEGES LTD TRADING AS CHRISTIAN BROTHERS TRINITY COLLEGE WA
[2024] WASAT 73
•24 JULY 2024
JURISDICTION : STATE ADMINISTRATIVE TRIBUNAL
ACT: COMMERCIAL TENANCY (RETAIL SHOPS) AGREEMENTS ACT 1985 (WA)
CITATION: METROPOLITAN REDEVELOPMENT AUTHORITY and EDMUND RICE EDUCATION AUSTRALIA COLLEGES LTD TRADING AS CHRISTIAN BROTHERS TRINITY COLLEGE WA [2024] WASAT 73
MEMBER: MS R PETRUCCI, MEMBER
HEARD: DETERMINED ON THE DOCUMENTS
DELIVERED : 24 JULY 2024
FILE NO/S: CC 441 of 2024
BETWEEN: METROPOLITAN REDEVELOPMENT AUTHORITY
Applicant
AND
EDMUND RICE EDUCATION AUSTRALIA COLLEGES LTD TRADING AS CHRISTIAN BROTHERS TRINITY COLLEGE WA
Respondent
Catchwords:
Commercial Tenancy (Retail Shops) Agreements Act 1985 (WA) - Commercial tenancy - Retail shop lease - Application by landlord for approval of a proposed special condition permitting early termination of lease for significant development of the land which is semi-developed - Whether 'special circumstances' warrant granting the application
Legislation:
Commercial Tenancy (Retail Shops) Agreements Act 1985 (WA), s 13(1), s 13(6), s 13(6)(a), s 13(6)(aa), s 13(6)(ab), s 13(6)(b), s 13(6)(c), s 13(6)(da), s 13(7)
State Administrative Tribunal Act 2004 (WA), s 60(2)
Result:
Early termination clause approved
Category: B
Representation:
Counsel:
| Applicant | : | N/A |
| Respondent | : | N/A |
Solicitors:
| Applicant | : | Allion Partners 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
Parties may enter into a lease on such terms as they agree, subject to any statutory restrictions.
The application before the Tribunal concerns whether 'special circumstances' exist to warrant the approval under s 13(7) of the Commercial Tenancy (Retail Shops) Agreements Act 1985 (WA) (CTRSA Act) for a proposed special condition for the early termination of a lease.
In accordance with s 60(2) of the State Administrative Tribunal Act 2004 (WA), the application has been determined on the materials before the Tribunal (set out below at [15]).
What follows are my reasons giving approval for the proposed special condition.
Background
The applicant, Metropolitan Redevelopment Authority trading as DevelopmentWA (MRA or Landlord), is the registered proprietor of Lot 502 on Deposited Plan 73841 being the whole of the land comprised in Certificate of Title 2870 Folio 685 (premises).
The premises are in a semi-developed state with development currently paused due to market conditions and construction cost increases. It is proposed that the premises will be the subject of significant development by the State of Western Australia in conjunction with the City of Perth.
The respondent is Edmund Rice Education Australia Colleges Ltd trading as Christian Brothers Trinity College WA (Trinity College).
Trinity College operates an independent day school for boys located on the Swan River foreshore in East Perth, adjacent to the premises.
Access Licence
Pursuant to a document dated 8 December 2022 and titled 'Access Licence', MRA, as licensor, granted to Trinity College, as licensee, a non-exclusive licence for Trinity College to enter and use the former sales office located on the premises for the 'storage of school uniforms and other property' (Access Licence) while Trinity College undertakes renovations of its school grounds, including the construction of a new uniform shop.
The term of the Licence is set out in the Schedule to the Access Licence as follows:
4TERM OF LICENCE
A term commencing on and from the date of the execution of this deed by MRA and expiring on the earlier of:
(a)the date of termination of this Licence under clause 11; and
(b)the date of commencement of a lease entered into by MRA in favour of the licensee
(c)the date being one month after MRA or the Licensee gives written notice to the other that this Licence shall terminate provided that such notice may not be given earlier than three months from the date of execution of this deed by MRA
Clause 11 of the Licence provides that if the licensee is in breach of any of the licensee's covenants (as defined in clause 1 of the Licence) after notice has been given to the licensee, the licensor may terminate the Licence.
MRA, as licensor, is proposing to terminate the Licence and enter into a lease with Trinity College (Lease) whereby the premises are leased for a term of five years for the 'sale of school uniforms' (permitted use). Included in the Lease are various special conditions. These are set out in the Schedule to the Lease. Relevant to the proceeding is special condition 11.4 which is set out in full below at [20].
MRA's application and the basis for it
On 8 July 2024, MRA commenced these proceedings in the Tribunal under s 13(7) of the CTRSA Act.
As explained above, MRA proposes to terminate the Access Licence and enter into the Lease with Trinity College which includes special condition 11.4 allowing for the early termination of the Lease.
MRA's application is supported by:
(a)the Access Licence between MRA and Trinity College;
(b)the draft Lease between MRA and Trinity College;
(c)a letter dated 6 June 2024 from Mr M Panegyres, Partner, Allion Partners acting for MRA; and
(d)attached to the letter of 6 June 2024, a signed acknowledgement dated 8 July 2024 by Ms S Finn, Chief Financial Officer and Mr C Woolley, Chief Executive Officer for Trinity College whereby they state they approve the inclusion of special condition 11.4 in the draft Lease.
MRA seeks the approval of the Tribunal for the inclusion in the Lease of special condition 11.4 in the Schedule to the Lease which is titled 'Termination to develop Premises or Land' (special condition 11.4).
Special condition 11.4 falls within special condition 11 of the Lease which it titled 'Special Conditions'. The effect of proposed special condition 11.4, as explained by MRA is that it may terminate the Lease for development of the premises prior to the expiry of the five-year term, provided that six months' notice is given to Trinity College.
The 'Land' that is the subject of special condition 11.4 is defined in the Schedule to the Lease as the premises (see above at [5]).
The Lease is for a term of five years from the date of execution of the Lease and, if applicable includes any extension to that period.
Special condition 11.4 provides:
11.4Termination to develop Premises or Land
(a)Terms used in this Special Condition
In this Special Condition 11.4, terms defined in this Special Condition only apply in respect of this Special Condition 11.4 and, unless the contrary intention appears:
Development means the construction of buildings, facilities and infrastructure on the Land and includes the sale of the Land, in whole or in part, for such purposes; and
Termination Date, in relation to the termination of this Lease under this Special Condition 11.4, means the date set out in a termination notice for the Lease referred to in Special Condition 11.4(d)(iii)(B).
(b)Application
This Special Condition 11.4 applies if DevelopmentWA wishes to undertake a Development of the whole or any part of the Premises or the Land before 5 years of the Term (including any period of extension or renewal, if applicable) have expired.
(c)DevelopmentWA may terminate Lease to undertake Development
DevelopmentWA may terminate this Lease in accordance with this Special Condition 11.4 if the Premises or the Land is to be the subject of a Development and:
(i)DevelopmentWA reasonably requires vacant possession of the Premises to enable the Development to be carried out; or
(ii)DevelopmentWA cannot ensure safe access to the Premises while the Development is being carried out.
(d)Notice of termination for Development
(i)To terminate this Lease in accordance with this Special Condition 11.4, DevelopmentWA must give the Lessee written notice of termination of this Lease (a Termination Notice) under this Special Condition 11.4.
(ii)A Termination Notice must be given at least 6 months before the Termination Date.
(iii)A Termination Notice must contain the following:
(A)the details of the proposed Development; and
(B)the date on which this Lease terminates (the Termination Date).
(iv)The Termination Date does not need to coincide with the end of a rental period.
(e)Termination of Lease under this Special Condition
(i)On the Termination Date this Lease terminates.
(ii)Subject to the Lessee complying with its obligations under clauses 4 and 23 of this Lease, on termination of this Lease under this Special Condition 11.4, the Lessee is not under any obligation under this Lease to make good or reinstate the Premises.
The statutory framework
The basis for an application seeking approval from the Tribunal to the early termination special condition in the Lease arises from s 13(6) of the CTRSA Act. Relevantly, it provides:
The landlord under a retail shop lease is not entitled to determine the lease …
except —
and one of the exceptions by subclause 6(c) is:
(c)under and in accordance with … the approval in writing of the Tribunal given under subsection (7)[.]
Section 13(7) of the CTRSA 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 emphasis in italics)
As explained in 480 Hay Street Pty Ltd v Irwin St Lower Pty Ltd [2020] WASC 59 at [37], four jurisdictional facts are a necessary condition precedent to the Tribunal's exercise of power under s 13(7) of the CTRSA Act. They are:
(a)the application to the Tribunal is made by the landlord;
(b)notice of the application is given to the tenant;
(c)the retail shop lease contains a provision empowering the landlord to determine the lease before the date set out in s 13(6)(aa) or s 13(6)(ab) of the CTRSA Act; and
(d)the Tribunal is satisfied that 'special circumstances' exist by reason of which such approval ought to be given.
It is clear that MRA made the application to the Tribunal which includes the proposed special condition 11.4 for early termination of the Lease. Further, notice of the application was approved by Trinity College. Therefore, this matter will turn on whether 'special circumstances' exist by reason of which approval ought to be given.
Special circumstances
The following is a summary of the proper construction of the term 'special circumstances' in s 13(7) of the CTRSA Act as stated in Synicast Pty Ltd and Showroom X Pty Ltd [2023] WASAT 47 (Synicast) at [26] to [32]:
(a)'special circumstances' take their colour from their surroundings;
(b)the circumstances must be special and sufficient to justify a departure from the ordinary rule that a lease may not include a provision which permits its early determination;
(c)the Tribunal's discretion is broad in determining whether 'special circumstances' exit. However, it is not unfettered;
(d)special circumstances must be understood in the confines of the subject matter, scope and purpose of the CTRSA Act:
•the purpose of s 13(1) is to confer on the tenant a minimum five-year lease;
•the 'special circumstances' must exist at the time of the application to the Tribunal, or there must be an 'objective intention' that the special circumstances will arise during the term of the lease; and
•the 'special circumstances' 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';
(e)the tenant's attitude to a proposed early termination clause is highly relevant to the assessment of special circumstances; and
(f)the tenant's consent does not, of itself, constitute a special circumstance.
I have applied the above principles in my consideration of this matter.
Facts
Here, there is no question about the facts.
On the basis of the materials before the Tribunal, I make the following findings of fact:
(a)MRA is the registered proprietor of the premises.
(b)The premises are adjacent to the grounds of Trinity College.
(c)Trinity College is undertaking renovations of its school grounds which include the construction of a new uniform shop.
(d)The premises are in a semi-developed state with development currently paused due to market conditions and construction cost increases.
(e)On 8 December 2022, MRA and Trinity College entered into the Access Licence whereby Trinity College uses the former sales office located on the premises for the storage of school uniforms and other property.
(f)The premises are proposed to be subject to significant development by the State of Western Australia in consultation with the City of Perth. This will require vacant possession of the premises.
(g)MRA proposes to terminate the Access Licence and enter into the Lease with Trinity College with special condition 11.4 to enable early termination for the development of all or part of the premises before five years of the term (including any period of extension or renewal, if applicable) have expired.
(h)MRA provided the Lease to Trinity College and on 8 July 2024 the Chief Financial Officer and the Chief Executive Officer approved the inclusion of special condition 11.4 in the Lease.
Issue
The issue that arises for determination in these proceedings, where MRA seeks the approval of an early termination special condition, is whether the Tribunal is satisfied that 'special circumstances' exist by reason of which such approval should be given pursuant to s 13(7) of the CTRSA Act.
There is nothing in the materials before the Tribunal that indicate s 13(6)(a), s 13(6)(b) or s 13(6)(da) which are referred to in s 13(7) of the CTRSA Act are relevant in this case.
I turn now to consider if 'special circumstances' exist in this case warranting the approval of special condition 11.4.
Consideration
It is incumbent on the landlord, in this case, MRA, to establish why 'special circumstances' exist which warrant the Tribunal approving special condition clause 11.4 for the early termination of the Lease (Synicast at [68]).
If the special circumstances are said to arise from some factual situation which exists at the time of application, or which it is intended will arise during the term of the Lease, the landlord, MRA in this case, must prove that factual situation by evidence (Synicast at [68]).
Finally, as explained in Synicast at [54] it is the totality of the circumstances that are to be taken into account to determine if 'special circumstances' exist.
Bearing in mind my findings of fact (see above at [27] to [28]), as well as the terms of the Lease, including special condition 11.4, in my view, 'special circumstances' exist in this case as explained below.
First, special condition 11.4 provides for the early termination of the Lease before the expiry of five years from its commencement. In addition, this special condition contemplates the early termination of the Lease but without any obligation on the landlord to relocate the tenant's retail shop (being a shop for sale of school unforms). Such a special condition falls within the ambit of s 13(7) of the CTRSA Act, which subject to the Tribunal being satisfied as to the existence of 'special circumstances' may grant the approval of the special condition.
Second, special condition 11.4(b) makes it clear that the early termination of the Lease is intended to permit the landlord, MRA, to develop (which is defined in special condition 11.4(a)) to include the construction of buildings, facilities and infrastructure including the sale of the land in whole or in part) the premises. Having regard to Mr Panegyres' letter of 8 June 2024, I am satisfied and I find that the premises are semi-developed but the development is currently paused due to market conditions and construction cost increases and that the ability of MRA to terminate the Lease on six months' notice is critical to MRA being able to progress the State of Western Australia's significant development plans for the premises is properly considered part of the special circumstances which presently exist.
Third, while no compensation is payable by MRA to Trinity College upon early termination of the Lease, the rent payable under the Lease is significantly discounted (nominal) at $1 plus GST for the duration of term of the lease. Further, on early termination of the lease, Trinity College has no obligation to make good or to reinstate the premises (apart from obligations under clause 4 - repair and maintenance and clause 23 rights on termination). The effect is that Trinity College would enjoy the benefit of a significantly discounted (nominal) rent for the duration of the term of the Lease and would enjoy that benefit from the commencement of the Lease and before any termination of the Lease. From Trinity College's perspective, as the tenant, there is clear commercial benefit from the arrangement.
Fourth, a minimum six months' notice of early termination must be provided by MRA to Trinity College. This is provided for in special condition 11.4(d). Such a provision supports the conclusion that Trinity College, as the tenant, is satisfied with the six months' lead time and is therefore satisfied with the minimum term for the Lease in all of the circumstances (including the financial benefit the tenant would enjoy from the significantly discounted (nominal) rent payable).
Nothing in the materials before the Tribunal suggests that special condition 11.4 represents anything other than a legitimate bargain reached as between two commercial parties to a leasing transaction.
Fifth, Trinity College by its Chief Financial Officer and Chief Executive Officer approve the inclusion in the Lease of special condition 11.4. I am satisfied that this approval adds another basis to the overall commerciality underlying the approval that is sought for special condition 11.4 in the Lease.
Therefore, in my view, viewed as a whole, special condition 11.4 provides for MRA to compensate Trinity College by way of a significantly discounted (nominal) rent payable by Trinity College, the requirements for MRA to give to Trinity College six months' notice and that there is no requirement for Trinity College to make good or reinstate the premises on termination of the Lease in consideration for the early termination of the Lease.
Taking into account all of the above matters, it is in my view, that 'special circumstances' exist warranting the approval of special condition 11.4 [as set out above [20]) in the Lease.
Conclusion and orders
For all of the above reasons, the following order is made.
The Tribunal orders:
1.Pursuant to s 13(7) of the Commercial Tenancy (Retail Shops) Agreements Act 1985 (WA), the application to include special condition 11.4 titled 'Termination to develop Premises or Land' in the proposed retail shop lease between the applicant and the respondent, is approved.
I certify that the preceding paragraph(s) comprise the reasons for decision of the State Administrative Tribunal.
MS R PETRUCCI, MEMBER
24 JULY 2024
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