P SARDELIC NOMINEES PTY LTD and N & N PSALTIS NOMINEES PTY LTD and LENZO FISHING COMPANY and MICHAEL FALLACE

[2024] WASAT 61

JURISDICTION     :   STATE ADMINISTRATIVE TRIBUNAL

ACT: COMMERCIAL TENANCY (RETAIL SHOPS) AGREEMENTS ACT 1985 (WA)

CITATION:   P SARDELIC NOMINEES PTY LTD and N & N PSALTIS NOMINEES PTY LTD and LENZO FISHING COMPANY and MICHAEL FALLACE [2024] WASAT 61

MEMBER:   MS N FINDSON, MEMBER

HEARD:   DETERMINED ON THE DOCUMENTS

DELIVERED          :   28 JUNE 2024

FILE NO/S:   CC 262 of 2024

BETWEEN:   P SARDELIC NOMINEES PTY LTD and N & N PSALTIS NOMINEES PTY LTD

Applicant

AND

LENZO FISHING COMPANY and MICHAEL FALLACE

Respondent

Catchwords:

Commercial tenancy - Retail shop lease - Application for approval of early termination clause - Meaning of special circumstances - Damage or destruction

Legislation:

Commercial Tenancy (Retail Shops) Agreements Act 1985 (WA), 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	:	N/A
Respondent	:	N/A

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

Synicast Pty Ltd and Showroom X Pty Ltd [2023] WASAT 47

REASONS FOR DECISION OF THE TRIBUNAL:

Introduction

1. The applicant, P Sardelic Nominees Pty Ltd and N & N Psaltis Nominees Pty Ltd are the lessor (Lessor), and the respondent, Lenzo Fishing Company Pty Ltd and Michael Fallace are the lessee (Lessee), in relation to a lease of a retail premises located at Shop 6, South Fremantle Shopping Centre (Premises), which commenced on 1 August 2023 (Lease).

2. On 26 April 2024, the Lessor applied to the Tribunal, pursuant to s 13(7) of the Commercial Tenancy (Retail Shops) Agreements Act 1985 (WA) (Act) for the Tribunal's approval of the inclusion in the Lease of a clause – clause 14.2 – allowing early termination of the Lease.

3. Relevantly, the application states that clause 14.2 allows the Lessor to terminate the Lease prior to the statutorily guaranteed minimum period of occupation of 5 years, in the event substantial damage to or destruction of the Premises occurs.

4. The Lessee has consented in writing to the inclusion of an early termination clause in the Lease, in the form of clause 14.2.

5. For the reasons which follow, I have concluded that approval for the inclusion of clause 14.2 in the Lease should be declined and the Lessor's application dismissed.

Statutory framework

1. Subject to s 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. 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. 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'. 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

1. Implicit in the Lessor's application is the submission that the events described in clause 14.2 constitute 'special circumstances within the meaning of s 13(7) so as to justify the early termination of the Lease if those events were to occur'.

2. In Synicast Pty Ltd and Showroom X Pty Ltd [2023] WASAT 47 (Synicast), President 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 (at [30]):

   … 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).

3. 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 come to this conclusion because the circumstances contemplated by clause 14.2, being the destruction or damage to a substantial part of the Premises, neither currently exist nor are intended to come into existence during the term of the Lease.

4. Accordingly, for these reasons, I will decline to grant approval for the inclusion of clause 14.2 in the Lease and will dismiss the Lessor's application.

Orders

The Tribunal orders:

1.The application for the approval of the inclusion of clause 14.2 in the lease between the parties which commenced on 1 August 2023 in respect of premises Shop 6, South Fremantle Shopping Centre, is dismissed.

I certify that the preceding paragraph(s) comprise the reasons for decision of the State Administrative Tribunal.

MS N Findson, MEMBER

28 JUNE 2024