Pastina Pty Ltd v Hosanna Excelsis One Universal Church Inc - [2019] SASC 18

SUPREME COURT OF SOUTH AUSTRALIA
(Magistrates Appeals: Civil)
PASTINA PTY LTD v HOSANNA EXCELSIS ONE UNIVERSAL CHURCH INC
[2019] SASC 18
Judgment of The Honourable Justice Doyle
22 February 2019
REAL PROPERTY - TORRENS TITLE - LEASES
The plaintiff is the registered proprietor of land situated on South Terrace, Adelaide. The defendant commenced leasing a portion of the premises on that land in May 2010. In September 2010 the parties executed an Addendum to Lease which expanded the size of the leased premises. The initial term of the lease expired at the end of April 2015, and the defendant held over on a monthly basis until it vacated the premises in October 2017.
The plaintiff commenced proceedings alleging inter alia that as the period of holding over exceeded six months, a lease for a term of five years came into effect by reason of s 20B(2) of the Retail and Commercial Leases Act 1995 (SA) (the RCL Act). The defendant sought, and a Magistrate ordered, summary dismissal of this aspect of the plaintiff’s claim.
The plaintiff appeals the Magistrate’s decision, and contends that the Magistrate erred in her construction and application of s 20B of the RCL Act.
Held (per Doyle J):
1. Whether a change in the arrangements between a lessor and a lessee results in a mere variation of the original lease or the creation of a new lease will depend upon the objective intention of the parties. In this case, the expansion of the leased premises through the Addendum to Lease, although material, did not create a new lease or otherwise give rise to any occasion for consideration of an extension to the term of the lease under s 20B(2) or the exceptions to such an extension under s 20B(3).
2. Generally, and upon the proper construction of the lease in this case, a tenancy by holding over that is expressly provided for in the original lease is a new lease, and is subject to the operation of s 20B, and in particular the requirement of a minimum term of five years under s 20B(1) and the extending effect of s 20B(2).
3. Each of the six exceptions in s 20B(3) of the RCL Act are separate and independent exceptions. Here, as the period of holding over extended well over six months, the exception in s 20B(3)(b) did not operate. Nor did the exception in s 20B(3)(d). The reference to “retail shop premises” in this subsection must be understood as a reference to the premises in respect of which the holding over lease has arisen, and not the original premises or some other more general or abstract notion of the premises. Further, the applicability of this exception must be determined as at the date of commencement of the lease by holding over, with the result that the exception in s 20B(3)(d) did not apply.
4. As none of the exceptions in s 20B(3) applied, s 20B(2) operated to extend the term of the lease by holding over to five years. The Magistrate thus erred in summarily dismissing the plaintiff’s claim premised upon a five year term for that lease.
5. Appeal allowed.
Retail and Commercial Leases Act 1995 (SA) ss 20A, 20B; Magistrates Court (Civil) Rules 2013 r 8; Supreme Court Civil Rules 2006 r 232, referred to.
Capital and Equity Group Pty Ltd v Hilton Central Ltd (2010) 107 SASR 424, considered.

PASTINA PTY LTD v HOSANNA EXCELSIS ONE UNIVERSAL CHURCH INC
[2019] SASC 18
Magistrates Appeal: Civil

DOYLE J: The plaintiff is the registered proprietor of land situated on South Terrace, Adelaide. The defendant leased a portion of that land. The initial term of the lease expired, and the defendant then held over on a monthly basis for in excess of two years. The plaintiff’s claim in these proceedings includes an allegation that as the period of holding over exceeded six months, a lease for a term of five years came into effect by reason of s 20B(2) of the Retail and Commercial Leases Act 1995 (SA) (the RCL Act).
The defendant sought, and the Magistrate ordered, summary dismissal of this aspect of the plaintiff’s claim. In this appeal from the Magistrate’s decision, the plaintiff contends that the Magistrate erred in her construction and application of s 20B of the RCL Act.
Background
The lease entered into between the plaintiff and defendant was for a term of five years, commencing 1 May 2010 and expiring on 30 April 2015.
The lease provided for one right of renewal for five years. In clause 4.8 (headed ‘Holding Over’) the lease also provided for the possibility of a tenancy by holding over. In particular, clause 4.8.1 relevantly provided:
… if the Lessee continues to occupy the Demised Premises after the expiration of the Term or any renewed term (‘the Expiry Date’) with the Lessor’s approval, it does so under a tenancy for a fixed term of one month and then from month to month which either party may terminate upon one month’s notice ending on any day.
By reason of clause 4.8.2, but subject to clause 4.8.1 and three exceptions identified in clause 4.8.2 (none of which are relevant in this case), any tenancy arising by holding over was to be on the same terms as the original lease.
The portion of the plaintiff’s land leased by the defendant was identified in a plan attached to the lease. It consisted of approximately half of the ground floor of the building on the land, and the entirety of the first floor. The lease provided for an annual rent of $70,000 (excluding GST), payable in monthly instalments of $5,833.33.
On 25 September 2010, the parties executed an ‘Addendum to Lease’. It referred to the original lease and recited the parties’ desire and agreement to incorporate the remainder of the ground floor “within the said Lease”. The plan attached to the Addendum had the area the subject of the original lease marked as ‘Area 1’, and the additional area incorporated by the Addendum marked as ‘Area 2’. In these reasons I shall refer to both ‘the original premises’ (Area 1) and ‘the combined premises’ (Areas 1 and 2) as ‘the premises’, except where it is necessary to distinguish between them.
The Addendum recorded the parties’ agreement that the annual rent for Area 2 was $45,000 (excluding GST), payable in monthly instalments of $3,750, and that “[t]he Commencement Date with regard to the incorporation of Area 2 into the said Lease shall be the 20^th September 2010”. The Addendum also provided (clause 3(v)):
The Term of the Lease and any rights to extend to the same, as they apply to Area 2 shall be the same as those that apply for the balance of the Term as contained in the said Lease for Area 1.
And (clause 3(vii)):
Apart from the foregoing, the terms and conditions as contained in the said Lease shall apply to Area 2 as though they formed part of the Leased Premises and included in the said Lease from the Commencement Date of the said Lease …
The lease came to an end on 30 April 2015. The right of renewal was not exercised. However, the defendant remained in possession of the premises, and thereafter commenced holding over on a monthly tenancy pursuant to clause 4.8 of the lease. It continued doing so until it vacated the premises over two years later on 21 October 2017.
In paragraph 10 of its statement of claim, the plaintiff alleges that as the defendant held over possession of the premises for a period exceeding six months, then by operation of s 20B(3)(b) of the RCL Act, a (second) lease for a term of five years was taken to have come into effect upon the commencement of the holding over. This five year term thus commenced on 1 May 2015 and was due to expire on 30 April 2020.
The plaintiff claims various breaches of lease by the defendant including by reason of its vacation of the premises on 21 October 2017, and the condition in which it left the premises. The plaintiff’s claim exceeds the jurisdictional limit of the Magistrates Court, and it sought the transfer of the proceedings to the District Court.
The defendant, relying upon s 20B(3)(d) of the RCL Act, and its contention that it had been in possession of the premises for at least five years, denies that a (second) five year lease came into effect. The defendant counterclaims for breaches of the RCL Act by the plaintiff, and seeks restitution. The defendant has confined its counterclaim to the jurisdictional limit of the Magistrates Court.
The defendant brought an application for summary judgment in respect of the part of the plaintiff’s claim that alleged the existence of a five year lease commencing 1 May 2015. It was agreed that if this application were successful, then what remained of the plaintiff’s claim would not exceed the jurisdictional limit of the Magistrates Court, and the matter would remain in the Magistrates Court.
The defendant’s application for summary judgment was under r 8 of the Magistrates Court (Civil) Rules 2013 (SA). This rule empowers the Court to order summary judgment in respect of, or summarily dispose of, not only the whole of a claim but also part of a claim. The parties accept that the power under this rule should be exercised in accordance with the similarly worded r 232 of the Supreme Court Civil Rules 2006 (SA). It should thus be exercised with great care, and only in cases where there is no reasonable basis for the claim (or for the impugned part of the claim).
The legislation
Part 4A of the RCL Act is headed ‘Term of lease and renewal’. The objects of this Part are set out in s 20A (within Division 1, headed ‘Preliminary’):
20A—Objects
(1)The Parliament recognises that conflicts sometimes arise between a lessor's expectation to be able to deal with leased premises subject only to the terms of the lease and a lessee's expectation of reasonable security of tenure.
(2)The objects of this Part are to achieve an appropriate balance between reasonable but conflicting expectations and to ensure as far as practicable fair dealing between lessor and lessee in relation to the renewal or extension of a retail shop lease.
Within Division 2 (headed ‘Initial term of lease’) of Part 4A, s 20B provides for a minimum term for retail shop leases of five years, and for the extension of lesser term leases. It is in the following terms:
20B—Minimum 5 year term
(1)     The term for which a retail shop lease is entered into must be at least five years.
The term of a retail shop lease is worked out under this section on the assumption that any right or option of renewal or extension under the lease or a collateral agreement will in fact be exercised. However, a right or option of renewal or extension will not be taken into account if it is given after the lease is entered into.
(2)A lease is not invalidated by contravention of this section but the term of the lease is extended to bring the term (or aggregate term) to five years.
Example—
If a lease is entered into for a term of three years, its term is extended by two years to five years. If a lease is entered into for a term of two years with an option for a further one year after that initial two years, the term of the lease is extended to four years (with the option for a further one year after that initial four years).
(3)     This section does not apply to a lease if—
(a)     the lease is a short-term lease (ie a lease entered into for a fixed term of 6 months or less); or
(b)     the lease arises when the lessee holds over after the termination of an earlier lease with the consent of the lessor and the period of holding over does not exceed 6 months; or
(c)     the lease contains a certified exclusionary clause; or
(d)     the lessee has been in possession of the retail shop premises for at least 5 years; or
(e)     in the case of a retail shop lease that is a sublease—the term of the retail shop lease is as long as the term of the head lease allows; or
(f)    the lease is of a class excluded by regulation from the ambit of this Division.
In broad terms, s 20B(1) of the RCL Act prescribes a minimum term of five years for a retail shop lease. The term of the lease includes the initial period of the lease together with any option of renewal or extension under the lease. Section 20B(2) gives effect to this prescription by extending any lesser term lease to bring the term to five years. However, ss 20B(3)(a) to (f) then set out six situations in which s 20B does not apply; that is, six ‘exceptions’ to the requirement of a five year minimum term and the extending effect of s 20B(2).
As reflected in s 20A, the evident purpose of s 20B, as one of the various provisions within Part 4A of the RCL Act, is to provide a lessee under a retail shop lease with reasonable security of tenure, while at the same time maintaining a balance with the lessor’s sometimes conflicting expectation to be able to deal with the premises subject only to the terms of the lease.
The parties’ contentions
The plaintiff’s claim is expressed in terms of a five year lease coming into effect from 1 May 2015 “by reason of the application of s 20B(3)(b)” of the RCL Act. Properly understood, however, the claim is more accurately articulated in terms of a five year lease coming into effect from that date by operation of s 20B(2). The reference to s 20B(3)(b) is merely an acknowledgement that during the first six months of holding over, that subsection operated as an exception to the extending effect of s 20B(2). But once that six month period had expired, and the defendant continued to hold over, the plaintiff’s claim is that there was nothing to prevent s 20B(2) operating to extend the lease to a five year term.
The defendant, however, contends that the plaintiff’s claim overlooks the operation of s 20B(3)(d). It contends that this is an independent exception to s 20B(2), and applies in this case with the result that no (second) five year lease came into effect.
The Magistrate’s decision
In concluding that there was no reasonable basis for the plaintiff’s claim to a five year lease commencing on 1 May 2015, the Magistrate accepted the defendant’s contention. Having reasoned that s 20B(3)(d) was an exception that operated independently from s 20B(3)(b), her Honour concluded that it applied in the circumstances of this case.
The operative paragraphs of her Honour’s reasons were as follows:
[The plaintiff] submits that in considering whether a lessee has been in possession of the premises for at least five years, the relevant time is at the commencement of the holding over period. Section 20B(3)(d) contains no such requirement. The intention of the legislation is to provide for security of tenure and a minimum term of five years for a retail shop lease. Where the tenant has been in possession of the retail shop for a period of five years, there is no requirement to imply another lease for a period of five years. Even if [the plaintiff] were to succeed in its argument that at the start of the holding over period, [the defendant] had only been in possession of the combined area of the lease for four years, seven months, s 20B(3)(d) applies to the exclusion of s 20B(3)(b) and there is no requirement to imply a five year lease as [the defendant] has been in possession of the combined premises for at least five years.
In the circumstances, I consider that there is no reasonable basis for [the plaintiff’s] claim that as [the defendant] held over for a period exceeding six months that a retail shop lease for a period of five years is taken to have come into effect. [The defendant] had clearly been in possession of the combined area of the retail shop premises for at least five years and s 20B(3)(d) applies to exclude the operation of s 20B(2).
The plaintiff’s challenge to the Magistrate’s approach in this appeal focusses upon the date at which the application of s 20B(3)(d) fell to be determined. The plaintiff contends that it fell to be determined upon the commencement of the tenancy by holding over; that is, on 1 May 2015. The plaintiff further contends that as at 1 May 2015 the defendant had not been “in possession of the retail shop premises for at least five years” for the purposes of s 20B(3)(d). The reason for this is that by reason of the variation of the lease the defendant had by 1 May 2015 only been in possession of the relevant premises (on the plaintiff’s case, the combined premises as opposed to the original premises) since 20 September 2010, and hence for a period of a little over four years and seven months.
As the plaintiff points out, it is not entirely clear what date the Magistrate used in determining the application of s 20B(3)(d). However, the plaintiff contends that it cannot have been 1 May 2015, because if it had been the Magistrate would have (or should have) concluded that s 20B(3)(d) did not apply.
The issues on appeal
It can been seen that the plaintiff’s claim requires acceptance of two propositions in relation to the operation of s 20B(3)(d). The first is that the reference to five years possession of the “the retail shop premises” in that subsection must, in the circumstances of this case, be understood as a reference to the combined premises, and not the original premises or some other more general or abstract notion of the premises. The second is that the operation of the subsection fell to be determined as at the commencement of the period of holding over on 1 May 2015 (when the defendant had only been in possession of the expanded premises for four years and seven months), and not some later date - such as the expiration of six months holding over (by which date the exception under s 20B(3)(b) had ceased to operate, and the defendant had been in possession of even the combined premises for over five years).
The impugned aspect of the plaintiff’s claim can only succeed if both of these propositions can be sustained. For the reasons which follow, I consider that both propositions should be accepted, and hence that the appeal should be allowed.
The change in the premises
Before directly addressing the two propositions upon which the plaintiff relies, it is useful to commence by making some observations in relation to the significance, in terms of the operation of s 20B of the RCL Act, of the change in the premises under the lease that occurred on 20 September 2010 (pursuant to the Addendum).
Both ss 20B(1) and (2) of the RCL Act assume the existence of a particular lease, and provide that the term of that lease must be at least five years (s 20B(1)) or it will be extended to five years (s 20B(2)).
If a lease has a five year term, then there will be no occasion for it to be extended under s 20B(2). Further, the mere fact of a change or variation in the terms or conditions of such a lease during its five year term does not give rise to an occasion for that lease to be extended under s 20B(2). In my view, that would be so even if there were a change or variation in the premises themselves; as long as that change or variation does not result in the creation of a new lease. If a new lease were to come into effect, then s 20B would need to be applied to that new lease.
Whether a change in the arrangements between a lessor and lessee results in a mere variation of the original lease, or the creation of a new lease (by way of surrender and re-grant), is not always straightforward. It depends upon the objective intention of the parties. While an assessment of the parties’ objective intention will often be informed by the nature of the changes to arrangements, the parties may choose (as they did in this case) to make their intention express.
Here, through the Addendum that they executed in September 2010, the parties agreed to expand the premises. The expansion was a material one, involving an increase in the area and rent by in excess of 50 per cent of what was provided for in the original lease. However, given the terms of the Addendum (summarised earlier in these reasons), I am satisfied that the parties intended to vary the original lease rather than create a new lease. While the commencement date of the lease in respect of Area 2 was given as 20 September 2010, the Addendum expressly provided for the lease in respect of Area 2 to be not only subject to the same terms and conditions as the original lease, but also for Area 2 to be incorporated within that original lease[1] and for the terms and conditions of that original lease to apply to Area 2 as though it had formed part of the premises, and had been included in the original lease, from the commencement of that lease.[2]
[1] Clause 2.
[2] Clause 3(vii).

Applying this reasoning and conclusion to the present case, the parties entered into a lease on 1 May 2010 that complied with the five year minimum term under s 20B(1) of the RCL Act. There was no occasion at that point in time to consider an extension of the term of the lease under s 20B(2), and hence also no occasion to consider the exceptions to such an extension under s 20B(3). When the parties varied the lease in September 2010 to reflect the expansion of the premises from the original premises to the combined premises, this did not result in a new lease for the purposes of s 20B(1), and hence did not give rise to any new or additional five year minimum term commencing in September 2010. A fortiori, it did not give rise to any occasion for consideration of an extension to the term of the lease under s 20B(2) or the exceptions to such an extension under s 20B(3).
I add for completeness that even if the September 2010 change in the premises had resulted in the creation of a new lease, and a requirement under s 20B(1) of a five year term commencing September 2010, this requirement would have been satisfied by reason of the right of renewal that existed under the original lease and was applied to Area 2 by dint of the Addendum. Thus even under this scenario there would have been no occasion for consideration of an extension of the term of the lease under s 20B(2), let alone the exceptions to any such extension under s 20B(3).
The tenancy by holding over
Upon the expiration of the five year term of the original lease on 30 April 2015, and in the absence of any exercise of the right of renewal, the defendant, by remaining in possession of the premises, commenced a tenancy by holding over. This tenancy did not arise by operation of the common law principles governing holding over. Rather, it arose by reason of clause 4.8 of the original lease. That clause provided for a tenancy for a fixed term of one month, and then from month to month thereafter.
At common law, a tenancy by holding over gives rise to a new lease, albeit on the terms and conditions of the original lease. In some cases it might be that a tenancy by holding over that is expressly provided for in the original lease operates merely as an extension of the original lease, rather than as a new lease. However, I consider that generally, and upon the proper construction of the lease in this case, a tenancy by holding over that is expressly provided for in the original lease will be a new lease, and treated as such by the RCL Act.
As a new lease, the tenancy by holding over in this case was itself subject to the operation of s 20B, and in particular the requirement of a minimum term of five years under s 20B(1). As it operated on a month to month basis and was able to be terminated on one month’s notice,[3] it did not comply with this requirement and so, subject to the operation of the exceptions in s 20B(3), s 20B(2) would operate to extend the term of the tenancy by holding over to five years.
[3] Clause 4.8.1.
I have considered the operation of the exceptions in ss 20B(3)(b) and (d) later in these reasons. But I observe now that I do not think that tenancies by holding over are excluded from the operation of s 20B by the exception in s 20B(3)(a). As Kourakis J explained in Capital and Equity Group Pty Ltd v Hilton Central Ltd,[4] a monthly periodic tenancy is not a short term lease for the purposes of that exception because it does not have a “fixed” term of six months or less.
[4] Capital and Equity Group Pty Ltd v Hilton Central Ltd (2010) 107 SASR 424 at [32]-[34].
While at first blush it might seem surprising that a tenancy by holding over would itself be subject to the requirement of a five year minimum term, and not be excepted from this requirement by s 20B(3)(a), this conclusion is supported by the very existence of the exception in s 20B(3)(b) in respect of tenancies by holding over that do not exceed six months. If tenancies by holding over were not intended to be caught by s 20B(1) (for example, because they were to be treated under the RCL Act as mere extensions of the original lease), or were intended to have been excepted from the operation of this section by s 20B(3)(a), there would have been no need for the exception in s 20B(3)(b). Further, to the extent that the extension of a tenancy by holding over to a five year minimum term might be seen as going beyond what is necessary to achieve the objective of ensuring reasonable security of tenure, the operation of s 20B in this context is – as will be seen below – limited by the exceptions in ss 20B(3)(b) and (d).
The s 20B(3)(b) exception
In the case of a lease arising by reason of holding over, s 20B(3)(b) operates to exclude that lease from the operation of s 20B (and in particular, the extending effect of s 20B(2)) unless and until the period of holding over exceeds six months. It thus provides for what is in effect a six month period of grace, during which period the tenancy by holding over might be brought to an end by either party (in accordance with the terms of that tenancy – and here by provision of one month’s notice). It is only after the expiration of that six month period that s 20B will apply, and in particular operate to extend the term of the lease to five years.
Here, the period of holding over extended well beyond the six month period, and so the exception is s 20B(3)(b) did not apply, or ceased to apply, so as to exclude the operation of the s 20B and the extending effect of s 20B(2). It is thus necessary to consider the potential application of the further exception in s 20B(3)(d).
The s 20B(3)(d) exception
Each of the six exceptions in ss 20B(3)(a) to (f) are independent exceptions to the operation of s 20B. If any one of them applies, it provides an exception to the operation of s 20B. Relevantly for the purposes of this case, the exception in s 20B(3)(d) operates independently from the exception in s 20B(3)(b). If the requirements of s 20B(3)(d) are made out, then this subsection operates to except the lease from the operation of s 20B, regardless of whether or not there has been a period of holding over in excess of six months for the purposes of s 20B(3)(b).
The effect of s 20B(3)(d) is to except a lease from the operation of s 20B in circumstances where the lessee has been in possession of “the retail shop premises” for at least five years. Thus, where a new lease comes into effect five years or more after the lessee took possession of the relevant premises under some earlier lease, then this exception applies to exclude the operation of s 20B. In the context of a lease arising by holding over, if the period of holding over was preceded by a period of possession of the relevant premises of five years or more under some earlier lease or leases, then the lease by holding over will be excepted from the operation of s 20B. The term of the lease by holding over will not be subject to any s 20B(2) extension to five years.
Putting to one side the situation of a change in the premises during the preceding five year period (which is what occurred here), a lease that arises by holding over after a five year lease has run its full course will thus not be subject to the extending effect of s 20B(2). The exception in s 20B(3)(d) will apply to except the lease by holding over from that extending effect.
There will nevertheless be circumstances in which the extending effect of s 20B(2) will operate upon a lease by holding over, thus giving the general inclusion of leases by holding over within the operation of s 20B work to do. For example, assume the existence of an original lease with a term of three years and a right to renew for two years. This would be sufficient compliance with the s 20B(1) requirement that the original lease have a minimum (aggregate) term of five years. However, assume further that the lessee did not exercise the right to renew at the conclusion of the initial three year period, but then commenced to hold over. The three years possession prior to the holding over would not be sufficient to trigger the exception in s 20B(3)(d). Once that period of holding over extended beyond six months (so that the exception in s 20B(3)(b) did not apply), then there would be nothing to prevent s 20B(2) operating to extend the term of the lease that had arisen by holding over.
I turn now to a consideration of the circumstances of this case, and in particular the two propositions (identified earlier) upon which the plaintiff’s case relies.
The plaintiff’s first proposition
The plaintiff’s first proposition is that the reference to five years possession of “the retail shop premises” in s 20B(3)(d) must be understood as a reference to the particular premises in respect of which the lease by holding over has arisen; that in the circumstances of this case, it must thus be understood as a reference to the combined premises, and not the original premises or some other more general or abstract notion of the premises.
The Magistrate did not squarely address this proposition in her reasons. In the passage extracted from her Honour’s reasons earlier, the Magistrate prefaced reference to the plaintiff’s contention to this effect with the words “Even if [the plaintiff] were to succeed in its argument …”. The plaintiff objected to the defendant’s attempt to agitate this issue on appeal. The plaintiff’s position was that if the defendant had wished to resist the appeal by contending that s 20B(3)(d) was triggered by five years possession of the original premises (rather than the combined premises), then it ought to have filed a notice of contention.
Strictly speaking, the plaintiff is correct. As the Magistrate did not determine the issue in favour of the defendant, the defendant ought to have filed a notice of contention. However, in circumstances where the issue was argued before the Magistrate, the plaintiff’s counsel was in a position to address it on the appeal, and I ultimately heard full argument on the issue, I consider it appropriate to address the issue.
I accept the plaintiff’s contention that the reference to the “the retail shop premises” under s 20B(3)(d) must be understood as a reference to the lease that it is said must have a five year minimum (under s 20B(1)) and is otherwise liable to be extended to five years (under s 20B(2)). In the circumstances of this case, that is the premises under the lease by holding over, and not the premises under the original lease. While ordinarily there will be no difference between the premises under an original lease and a subsequent lease by holding over, the position is complicated in circumstances, such as the present, where there has been a change in the premises during the period of the original lease.
The plaintiff contends that the five years possession required by s 20B(3)(d) must be in respect of the particular premises held over – that is, the combined premises. While allowing for the possibility of ignoring any de minimis change in the premises (which is not this case given the extent of the change to the premises under the Addendum), the plaintiff contends that the defendant’s five years possession of the original premises did not suffice to make out the exception.
I accept the plaintiff’s contentions in respect of this first proposition. In my view, there is no avoiding the clear terms of s 20B(3)(b). The original premises are simply not the premises under the lease by holding over, and hence not “the retail shop premises” for the purposes of s 20B(3)(d). It would be impermissibly ignoring or stretching the terms of s 20B(3)(d) to construe it as applying to five years possession of some similar premises, or part of the premises. In my view, that is so even though the parties in this case gave effect to the change in the premises through a variation of the original lease rather than the creation of a new lease.
I accept that this result is somewhat fortuitous so far as the plaintiff is concerned, and indeed appears to go beyond what would be necessary to achieve the s 20B objective of ensuring reasonable security of tenure. The result is to provide the plaintiff with, in effect, an overall period of tenure of significantly more than five years in respect of the original premises. For this reason, it is tempting to construe “the retail shop premises” as a reference to the premises under the original lease (regardless of any changes in the premises that might have occurred). However, there is simply no textual basis for reading s 20B(3)(d) in this way.
It follows from the above that if the operation of s 20B(3)(d) falls to be considered only at the commencement of the period of holding over, then it does not apply in this case. As at 1 May 2015,[5] the defendant had only been in possession of the combined premises since 20 September 2010, and hence a period of just over four years and seven months.
[5] Or, indeed, as at 1 June 2015 if the first month is to be treated as a separate short term lease with a fixed term excepted from the operation of s 20B under s 20B(3)(a).
The plaintiff’s second proposition
That brings me to the plaintiff’s second proposition, namely that the operation of the exception in s 20B(3)(d) must be determined as at, and only as at, the date of commencement of the lease by holding over (here, 1 May 2015). It is not to be determined as at some later date, such as the expiration of six months holding over (by which date the exception under s 20B(3)(b) had ceased to operate, and the defendant had been in possession of even the combined premises for over five years). Nor is it to be given some more flexible or ambulatory operation, taking effect on and from the date when five years possession has been reached so as to prevent any extension beyond an aggregate of five years possession of the relevant premises.
The defendant contests this second proposition. It points out that there is nothing in the terms of s 20B(3)(d) that prescribes or confines the timing of its application. It accepts that if the plaintiff’s first proposition is correct, then the exception was not made out as at the start of the period of holding over (1 May 2015). But the defendant says that this was of no consequence because s 20B(3)(b) provided an exception for the first six months. However, it contends that by the end of this six month period, when it next became relevant to consider whether s 20B applied (and, in particular, whether the extending effect of s 20B(2) applied), the exception in s 20B(3)(d) had been made out. The defendant had, by that point in time, been in possession of even the combined premises for over five years.
I accept the defendant’s contention that there is no express legislative prescription to the effect that the operation of the exception in s 20B(3)(d) must be considered and determined as at, and only as at, the commencement of the relevant lease. I also accept that the operation of the exception in s 20B(3)(b) cannot be determined in this ‘once and for all’ way. The application and effect of that exception is conditional upon subsequent events. In the context of that exception it cannot be determined whether or not the lease is to be extended under s 20B(2) until it is known whether the period of holding over extends beyond six months. In other words, while it can be determined whether s 20B(3)(b) applies as at the start of the lease, it cannot be determined at that time whether the exception will ultimately prevent an extension under s 20B(2). That exception is thus subject to a temporal constraint.
However, I do not think the exception in s 20B(3)(d) is to be given any similar or analogous temporal operation. I do not accept that there is any textual basis for reconsidering the application of that exception, in the case of a lease arising by holding over, as at the conclusion of the six month period contemplated by the exception in s 20B(3)(b). The exceptions in ss 20B(3)(b) and (d) are quite separate and independent exceptions. The latter is not confined in its operation to leases by holding over. While the effect of s 20B(3)(b), in the case of a lease by holding over, will be to delay the operative effect of s 20B(2) for a period of six months, I do not think there is any textual or other basis for construing s 20B(3)(d) on the basis that it may be considered afresh at that point in time. In my view, this would be to give s 20B(3)(b) an inappropriate role in the construction of s 20B(3)(d) in circumstances where the two are intended to have quite independent operation, and the latter is intended to have operation in cases where there has been no holding over and hence s 20B(3)(b) has no role to play.
While the defendant did not express its position this way, it might be argued that the exception in s 20B(3)(d) is intended to operate more flexibly, taking effect on and from the date when five years possession has accrued, regardless of the stage of the lease at which this is reached. In other words, s 20B(3)(d) should be read as providing that s 20B (and in particular, the extending effect of s 20B(2)) does not apply, or ceases to apply, once there has been five years possession. On this approach, there would be an extension of the lease by holding over, but only until 20 September 2015, this being the date by which the defendant would have been in possession of the combined premises for five years.
There is some attraction to this approach because it produces an outcome that s 20B(2) only ever operates to provide five years possession of any particular premises – which is probably sufficient to achieve the reasonable security of tenure intended by s 20B. However, I do not think that the language of s 20B permits this construction. Section 20B(2) is expressed as providing for an extension of the lease “to bring the term (or aggregate term) to five years”. It is not expressed in language that contemplates an extension for some lesser or different period so as to ensure five years possession of the premises. The terms of s 20B(2) support the plaintiff’s contention that the exception should be construed ‘once and for all’ as either applying or not applying at the commencement of the relevant lease.
Here the relevant lease was the lease by holding over, and as at 1 May 2015, when that leased commenced, the exception in s 20B(3)(d) did not apply. As it did not apply as at that date, the lease by holding over was extended under s 20B(2) to a term of five years (subject to the operation of any other exception). It was not extended for some lesser period to ensure five years possession. And the lease having been extended, I do not think s 20B(3)(d) can then be invoked at some later point in time to alter the position. Nor do I think that the peculiar circumstances of this case – namely where the exception in s 20B(3)(b) resulted in something akin to a six month deferral or suspension of the operation of s 20B(2) – alter this analysis.
I acknowledge that the construction of s 20B(3)(d) that I have reached will in some cases result in lessees receiving tenure for periods in excess of five years. While this seems a surprising result, and perhaps unnecessary to achieve the objective of ensuring a reasonable period of tenure, it is in my view the consequence of the language Parliament has used in drafting s 20B, and in particular s 20B(3)(d).
To illustrate the point more clearly, it is useful to put to one side the situation of a lease by holding over, and to take the more simple example of a month periodic tenancy by agreement. Let it be assumed that the parties enter into a lease that has a term of three years, with a right to renew for a further two years. As this lease has an aggregate term of five years, it complies with s 20B(1) and hence will not be extended under s 20B(2) However, assume further that after three years, the lessee does not exercise its right to renew, but instead the parties agree to enter into a monthly periodic tenancy in respect of the same premises. As a new lease, the second lease (the monthly periodic tenancy) will itself be subject to the operation of s 20B. None of the exceptions in s 20B(3) will apply. As the second lease does not have a term of five years, s 20B(2) will operate so that “the term of the [second] lease is extended to bring the term (or aggregate term) to five years”. Section 20B(2) thus specifies an extended term of five years. It cannot be read as merely extending the term of the second lease by whatever period (in this example, two years) might be necessary to ensure that the lessee receives a total (under both leases combined) of five years tenure or possession.

Further, I do not think the reference in s 20B(2) to an “aggregate” term of five years alters the analysis. The reference is to an aggregate term for the second lease and not an aggregate term for some combination of leases. As the example in s 20B(2) makes plain, the reason for including the concept of an “aggregate” term is merely to ensure inclusion of any right or option to renew or extend in calculating the term of a lease.
Finally, having determined that the second lease in this example would be extended to a five year lease, it may be observed that the practical effect of this will be to provide tenure through to a total of eight years. As mentioned, while this might seem a surprising result, I see no way around it without doing impermissible violence to the words used by Parliament. I do not think that those words permit a reading of s 20B(3)(d) that would confine the extension at the outset of the second lease to the period necessary to ensure five years tenure. Further, having determined as at day one of the second lease that its term is extended to five years, I do not think that Parliament can be taken to have intended that the exception in s 20B(3)(d) could be triggered at some later date so as to alter that the term of the second lease, and in effect take away that extension. In other words, I do not think one of the parties in the example I have set out could wait until two years had passed under the second lease, and then at that time rely upon s 20B(3)(d) to deny the existence of the extended term of five years. I do not think a lease can have a different term depending upon when the issue is addressed. Rather, I consider that the applicability of the exception in s 20B(3)(d) must be considered and determined once only, and at the commencement of the relevant lease.
If I am right in my analysis of the above example, then it supports my conclusion that the plaintiff’s approach should be accepted. The analysis I have applied to the example of a second lease that arises from an agreed monthly periodic tenancy should apply equally to a second lease arising by holding over. Assuming that the period of holding over lasts longer than six months so that there is no exception under s 20B(3)(b), the only issue will be the application of s 20B(3)(d) as at the commencement of the second lease. As there had not been five years possession of the premises being held over (the combined premises) as at that date, the exception does not apply and the second lease is extended to five years.
Conclusion
For these reasons, I consider that s 20B applied to the lease by holding over that commenced on 1 May 2015, and that none of the exceptions to the extending effect of s 20B(2) apply. At the very least this position is sufficiently arguable to prevent summary judgment being ordered against the plaintiff on the relevant aspect of its claim.
For these reasons I allow the appeal, and set aside the orders made by the Magistrate, and order that paragraph 1 of the defendant’s interlocutory application filed 9 July 2018 be dismissed.