Pastina Pty Ltd v Hosanna Excelsis One Universal Church Inc - [2020] SADC 43

DISTRICT COURT OF SOUTH AUSTRALIA
(Civil)
PASTINA PTY LTD v HOSANNA EXCELSIS ONE UNIVERSAL CHURCH INC
[2020] SADC 43
Judgment of His Honour Judge Burnett
17 April 2020
LANDLORD AND TENANT - LEASES AND TENANCY AGREEMENTS - TERM OF LEASE OR TENANCY - DURATION - HOLDING OVER AFTER EXPIRATION OF TERM
LANDLORD AND TENANT - RETAIL AND COMMERCIAL TENANCIES LEGISLATION - DEFINITIONS - RETAIL SHOP LEASE OR LEASE
LANDLORD AND TENANT - RETAIL AND COMMERCIAL TENANCIES LEGISLATION - OBLIGATIONS, PROHIBITED TERMS AND PROTECTION FOR LESSEES - MINIMUM TERM OF LEASE AND RENEWAL OF TERM
LANDLORD AND TENANT - LEASES AND TENANCY AGREEMENTS - CONSTRUCTION AND INTERPRETATION
LANDLORD AND TENANT - TENANCIES OTHER THAN FOR A TERM - LESSER PERIODIC TENANCIES - MONTHLY TENANCIES
COURTS AND JUDGES - PRECEDENTS - GENERALLY
STATUTES - ACTS OF PARLIAMENT - INTERPRETATION
STATUTES - ACTS OF PARLIAMENT - INTERPRETATION - GENERAL APPROACHES TO INTERPRETATION
The plaintiff was the owner and lessor of premises on South Terrace, Adelaide (the Premises).
The plaintiff and the defendant entered into a written Memorandum of Lease dated 1 May 2010 pursuant to which the plaintiff leased to the defendant part of the Premises, being the whole of the first floor and the rear portion of the ground floor (known as Area 1). The defendant used Area 1 for the purpose of conducting a community church and for education.
On 25 September 2010, the plaintiff and defendant entered into an Addendum to Lease pursuant to which the plaintiff leased to the defendant the remainder of the Premises, being the front portion of the ground floor (known as Area 2). The defendant conducted two retail shops from Area 2 and continued to conduct the church and educational activities from Area 1.
The term of the Memorandum of Lease, as varied, expired on 30 April 2010. The defendant did not exercise the option to renew the lease. The Memorandum of Lease, as varied, provided that the defendant held over, first pursuant to a fixed monthly tenancy of one month and thereafter pursuant to a monthly periodic tenancy that either party could terminate on one month’s notice. The defendant remained in possession of the whole of the Premises by holding over for about a further two years and five months.
By notice dated 21 September 2017, the defendant gave one month’s notice of its intention to vacate the Premises. On 21 October 2017, it vacated the Premises.
The plaintiff alleges that s 20B of the Retail and Commercial Leases Act 1995 (SA) (the Act) applied to the monthly periodic tenancy commenced by holding over (the holding over lease) so as to extend the term of that lease for five years until 30 April 2020. Accordingly, it claims that the defendant breached the holding over lease by giving notice on 21 September 2017 and vacating the Premises on 21 October 2017. The plaintiff seeks damages for the rent and outgoings for the balance of the term, that is until 30 April 2020, and further damages for painting work not done by the defendant on vacating the Premises.
The defendant argued that s 20B(1) does not apply to the holding over lease and that s 20B(1) applied only to the initial lease of the Premises and not a lease by holding over. Accordingly, the defendant argued that it was entitled to terminate the holding over lease on one month’s notice. In the alternative, the defendant says the exceptions to the operation of ss 20B(1) and 20B(2) provided for by s 20B(3)(b) or s 20B(3)(d) applied so that the term of the holding over lease was not extended for a period of five years. The defendant seeks to recover, by way of counterclaim or set off, duplicate payments of rent, payments of land tax and payments of rent in advance.
Held:
1. The plaintiff and defendant had, in relation to the holding over lease, entered into a retail shop lease, for the purposes of s 6 and s 20B(1) of the Act by beginning to pay rent as lessee under the holding over lease.
2. Sections 20B(1) and 20B(2) of the Act applied so as to extend the term of the holding over lease to five years. Section 20B(1) applied to a monthly periodic tenancy commenced by holding over.
3. The exception provided for in s 20B(3)(b) of the Act did not apply as the defendant had held over for a period that exceeded 6 months.
4. The exception provided for in s 20B(3)(d) of the Act did not apply as the defendant had not been in possession of the retail shop premises for at least five years at the time of the entering into the holding over lease. The holding over lease was entered into on 1 June 2015. At that time, the defendant had been in possession of the retail shop premises for about 4 years and 9 months, having entered into possession of the retail shop premises in September 2010 pursuant to the Addendum to Lease. The relevant time for assessing the period of the defendant’s possession of the retail shop premises was at the time of the entering into of the holding over lease.
5. The defendant breached the holding over lease by vacating the Premises before the expiration of the five year term of the holding over lease. The plaintiff is entitled to damages for rent and outgoings for the balance of the five year term, plus the cost of painting the Premises at the end of the lease.
6. The defendant is entitled to judgment on its counterclaim for the duplicate payment of rent, the payment of land tax and the payment of rent in advance.
7. Accordingly, after setting off the amounts due on the counterclaim, the plaintiff is entitled to judgment against the defendant in the sum of $383,207.16 (before pre-judgment interest).
Retail and Commercial Leases Act 1995 (SA) s 4, s 6, s 20B; Acts Interpretation Act 1915 (SA) s 22, referred to.
Gerraty v McGavin [1914] HCA 23; (1914) 18 CLR 152; 195 Crown Street Pty Ltd v Hoare [1969] 1 NSWR 193; Mercantile Credits Ltd v Shell Company of Australia Ltd [1976) HCA 5; (1976) 136 CLR 326; Hyatt v Griffiths [1851] 17 QB 505; Hamilton v Porta [1958] VR 247; CIC Insurance Ltd v Bankstown Football Club Ltd [1997] HCA 2; (1997) 187 CLR 384; SAS Trustee Corporation v Miles [2018] HCA 55; (2018) 361 ALR 206; Taylor v The Owners-Strata Plan No 11564 [2014] HCA 9; (2014) 253 CLR 531; Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 28; (1998) 194 CLR 355; NZI Insurance Australia Limited v Baryzcka [2003] SASC 190; (2003) 85 SASR 497; Pastina Pty Ltd v Hosanna Excelsis One Universal Church Inc [2019] SASC 18; (2019) 132 SASR 421; Businessworld Computers Pty Ltd v Australian Telecommunications Commission (1988) 82 ALR 499; Engebretson v Bartlett [2007] VSC 163; (2007) 16 VR 417; Ogden Industries Pty Ltd v Lucas [1970] AC 113; Comcare v Martin [2016] HCA 43; (2016) 258 CLR 467; Capital and Equity Group Pty Ltd v Hilton Central Ltd [2010] SASC 197; (2010) 107 SASR 424; R v Secretary of State for Social Services; ex parte Kahn [1973] 2 All ER 104; Orrong Strategies Pty Ltd v Village Roadshow Ltd [2007] VSC 1; Saarinen v University of Tasmania [1997] TASSC 125; (1997) 7 Tas R 154; R v Fowler [2006] SASC 18; (2006) 243 LSJS 285; Federal Commissioner of Taxation v Sara Lee Household & Body Care (Australia) Pty Ltd (2000) 172 ALR 346; Concut Pty Ltd v Worrell (2000) 75 ALJR 312, considered.

PASTINA PTY LTD v HOSANNA EXCELSIS ONE UNIVERSAL CHURCH INC
[2020] SADC 43
Introduction

This matter concerns the application of s 20B of the Retail and Commercial Leases Act 1995 (SA) (RCLA) to a monthly periodic tenancy that commenced on 1 June 2015 by holding over following the expiration of the five-year term of the initial lease (the holding over lease).
At all relevant times, the plaintiff was the owner and lessor of the premises situated at 277-278 South Terrace, Adelaide (the Premises). The Premises consisted of a two-storey building, part of which was leased to the defendant from 1 May 2010 (that part being referred to as Area 1 and comprising the rear portion of the ground floor and the whole of the first floor). The remainder of the Premises, being the front portion of the ground floor (referred to as Area 2), was leased to the defendant from about 25 September 2010.
The defendant was an association incorporated under the Associations Incorporation Act 1985 (SA). In May 2010, it entered into the lease of Area 1 from which it conducted a church and educational activities. From about 25 September 2010, it also leased the front portion of the ground floor (Area 2) from which it conducted two retail shops (discussed below). The term of the initial lease, as amended, expired on 30 April 2015.
The plaintiff claims that pursuant to ss 20B(1) and 20B(2) of RCLA the term of the monthly periodic tenancy that commenced by holding over was extended to 5 years to 30 April 2020 (although it may be more accurate to say that the tenancy was extended to 31 May 2020 as the monthly periodic tenancy was preceded by a fixed monthly tenancy of one month). The plaintiff claims that it is entitled to the rent and outgoings for the balance of that five-year term following the notice of termination of the monthly periodic tenancy by the defendant on 21 September 2017 and the vacation by the defendant of the Premises on 21 October 2017. The plaintiff claims that the defendant breached the terms of the holding over lease when it vacated the Premises and ceased to pay rent and outgoings after that date.
The plaintiff claims the sum of $383,207.16. This sum represents: (1) payment of rent and outgoings for the remainder of the five-year term of the holding over lease from 21 October 2017 to 30 April 2020 and (2) the sum of $19,600 for painting, being an obligation that arose immediately prior to the expiration of the term of the Lease (clause 2.13.2 of the Memorandum of Lease). The sum of $383,207.16 is arrived at after deducting $84,879.23 for the counter-claim and set-off of the defendant. If the defendant is successful in these proceedings, it will be entitled to judgment in the sum of $65,279.23 being the amount of its counter-claim less the sum of $19,600 for painting.
The defendant contends that s 20B of RCLA does not apply to the holding over lease and therefore it could terminate the monthly periodic tenancy by providing the appropriate notice, which it did. It therefore says that no rent or outgoings are owed by it to the plaintiff. The defendant submits that the periodic monthly tenancy lease was lawfully terminated on 21 October 2017. The defendant further submits that it is entitled to recover duplicate payments of rent in the sum of $17,879.23 that it paid by mistake, payments of land tax in the sum of $28,500, and payment of rent in advance in the sum of $38,500. Therefore, if it is successful in these proceedings, the defendant will receive the sum of $65,279.23, being the above sums less the sum of $19,600 for painting.
The course of the trial
The defendant’s primary defence at trial was that s 20B(1) of RCLA does not apply to a lease that was entered into when the lessee holds over after the termination or expiry of an earlier lease. Therefore, the term of the holding over lease was not extended to five years pursuant to s 20B(2) of RCLA. The defendant also submitted that if that was not correct, s 20B(3)(b) or s 20B(3)(d) of RCLA applied to exclude the holding over lease from the operation of s 20B(1) and s 20B(2).
As part of the second defence that it filed in these proceedings, the defendant also alleged that the plaintiff was estopped from asserting that the plaintiff and defendant had entered into a new 5-year lease. The estoppels it relied upon were equitable promissory estoppel and common law estoppel by convention. During the trial, the defendant abandoned its defence based on estoppel so that its sole defence to the claim of the plaintiff (apart from the counter-claim or set-off) relied upon the statutory construction of s 20B of RCLA as outlined above.
The plaintiff and defendant also reached an agreement as to the quantum of both the claim and counter-claim. Specifically, the parties agreed the following sums (exclusive of GST):
(1)The quantum of the plaintiff’s claim for rent for the balance of the five-year term in the sum of $396,732.91;
(2)The quantum of the plaintiff’s claim for outgoings in the sum of $51,753.48;
(3)The quantum of the plaintiff’s claim for painting in the sum of $19,600 (being 50 per cent of the claimed sum of $39,200);
(4)The quantum of the defendant’s counter-claim and set-off for duplicated payments of rent and outgoings in the sum of $17,879.33 (being one half of the claimed amount of $35,758.47). The agreement reached reflected the defence of the plaintiff that the claim was statute barred.
(5)The quantum of the defendant’s counter-claim and set-off for payment of land tax in the sum of $28,500; and
(6)The quantum of the defendant’s counter-claim and set off for rent paid in advance to the plaintiff in the sum of $38,500.
The plaintiff and the defendant also agreed all material facts except for the one disputed fact as to whether the defendant was operating two retail shops, as defined in RCLA, from Area 2. The agreement as to facts is reflected in a Statement of Agreed Facts which became an exhibit in the proceedings.
The other evidence at trial consisted of an Agreed Book of Documents and the evidence of a director of the plaintiff, Mrs Rosina Alvaro. As the matter transpired, because of the withdrawal of the estoppel defence and the agreement as to quantum and the Statement of Agreed Facts, Mrs Alvaro was not cross-examined by the defendant. Therefore, I accept her evidence on the one topic left in dispute between the parties, namely whether the defendant conducted a retail shop business from the Premises. Her evidence on this topic, to which I refer below, is consistent with the documentary evidence.
Mrs Alvaro gave evidence that after the initial lease had been amended in September 2010 to include Area 2 (being the front area of the ground floor), she observed, when driving past the Premises, that the defendant was operating two shops from the front part of the ground floor of the Premises. She observed that one of the shops involved second-hand goods or antiques, the other, dresses and clothing. Photographs of the Premises (exhibit P1G) confirmed these observations. Further, the internet web pages of the defendant (exhibit P1D) described one of the businesses that the defendant conducted from the Premises as ‘Beautiful Bride on South’ and further referred to ‘Hosanna’ shops as:
(1)Beautiful Bride on South – 278 South Terrace Adelaide; and
(2)Beautiful Things on South – 278 South Terrace Adelaide.
The minutes of the meeting of the defendant held on 8 November 2010 (exhibit P1E) made further reference to the ‘Hosanna Shoppe’ (sic) and state that everything put in the shop is by ‘offering for sale’.
I note that the defendant made no submissions in its closing address that it was not conducting retail shops from the Premises and did not call any witnesses or tender any evidence on this issue.
In these circumstances, I find that the defendant was conducting two retail shops from the Premises from September 2010 pursuant to a retail shop lease.
The factual background
The plaintiff and defendant entered into a written Memorandum of Lease dated 1 May 2010. As I indicated earlier, the lease was for the entire first floor of the Premises and the rear part of the ground floor (described as Area 1).
The lease commenced on 1 May 2010 and expired on 30 April 2015. By clause 4.9, the plaintiff granted the defendant an option to renew the lease for a further period of five years. That option was not exercised by the defendant. The rent payment for Area 1 by the defendant, as lessee, to the plaintiff, as lessor, was $70,000 per annum net of GST, subject to review, and was to be paid monthly in advance by equal monthly instalments. The defendant covenanted and agreed with the plaintiff, throughout the continuance of the term of the lease as defined and any extended or renewed term and any period during which the defendant held over, to due and punctually pay rent and specified outgoings and utilities (clauses 2.1 and 2.2).
Holding over was dealt with in clause 4.8 of the Memorandum of Lease. Clause 4.8 provided as follows:
4.8.1Subject to the next sentence, 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. If the Lessee has a right of preference under section 20D of the Retail and Commercial Leases Act 1995 to a new lease and negotiations under section 20E of the Retail and Commercial Leases Act 1995 result in a new lease commencing the day following the Expiry Day or on some later day, the preceding sentence will not apply for the period when the new lease commences;
4.8.2Subject to clause 4.8.1 the monthly tenancy is on the same terms as this Lease including in relation to payment of rent and outgoings except:
(a)     rent will be varied on the first day of the first monthly tenancy in the same manner that the rent was reviewed at the commencement of the last year immediately before the Expiry date;
(b)     for those changes which are necessary to make this Lease appropriate for a monthly tenancy; or
(c)     for those changes which the Lessor requires as a condition of giving its approval to the holding over;
The Memorandum of Lease did not contemplate that the defendant would conduct a retail shop at the Premises at that time. Item 2 of Annexure A describes the permitted use as ‘Community Church and Education but excluding the sale of goods to the public by retail, the provision of services to the public and negotiation with the public for the supply of services’.
The plaintiff and defendant entered into a written addendum to lease dated 25 September 2010. The effect of that addendum was that the defendant leased the remaining portion of the Premises (described as Area 2 and consisting of the front portion of ground floor) from the plaintiff.
The annual rental for Area 2 was in the sum of $45,000 per annum (exclusive of GST), payable in advance in equal monthly instalments.
The recitals to the Addendum to Lease recorded that the parties desired to incorporate Area 2 within the Memorandum of Lease. The Addendum to Lease further provided in clause 3(iii) that the commencement date with regard to the incorporation of Area 2 into the Memorandum of Lease was to be 20 September 2010. The Addendum to Lease provided in clause 3(v) that the terms of the lease as they apply to Area 2, shall be the same as those that apply for the balance of the term as contained in the Memorandum of Lease for Area 1.
The Addendum to Lease also provided in clause 3(vii) that:
… apart from the foregoing, the terms and conditions as contained in the said lease shall apply to Area 2 as though they form part of the leased premises included in the said lease from the commencement date of the said lease excepting that no security bond shall be required for area 2 for full term of the lease.
The occupation of Area 2 significantly increased the area previously occupied by the defendant. In the Statement of Agreed Facts, the parties agreed that ‘the occupation of the new area increased the area previously occupied by the defendant by about one half’.
The Memorandum of Lease, as varied by the Addendum to Lease, expired on 30 April 2015.

The defendant continued to occupy the Premises after 30 April 2015.
There was no communication between the plaintiff and defendant relevant to the expiry, continuation, termination, renewal or extension of the Memorandum of Lease prior to 21 September 2017.
Following the expiry of the Memorandum of Lease on 30 April 2015, invoices for rent continued to be rendered monthly by the plaintiff to the defendant and were paid by the defendant. The plaintiff paid for various maintenance expenses that were incurred in relation to the Premises.
From 1 May 2015, and pursuant to clause 4.8.1 of the Memorandum of Lease, the defendant continued to occupy the Premises, first under a fixed tenancy of one month (from 1 May 2015 to 31 May 2015) and thereafter by way of a monthly periodic tenancy.
By letter dated 21 September 2017, the defendant advised the plaintiff that ‘we are giving 30 days notice of vacating these premises which will be fulfilled from 21-9-17’.
By email dated 29 September 2017, the plaintiff advised the defendant that the plaintiff ‘thought you still had another 3 years on your 5+5 lease and also we thought that the Church was very happy at this location’.
By letter dated 9 October 2017 from the plaintiff’s solicitors to the defendant, the plaintiff reiterated its position that the defendant was bound by a five-year lease. In that letter, the plaintiff’s solicitors advised the defendant that they considered that s 20B(1) of RCLA operated so as to extend the term of the holding over lease to 30 April 2020.
By letter dated 20 October 2017 the defendant returned the keys for the ‘main building’ and for the ‘Outreach for Christ (Shops)’.
The defendant vacated the premises on 21 October 2017.
By letter dated 4 December 2017 from the plaintiff’s solicitors to the defendant, the plaintiff gave notice that it considered that the defendant had evinced an intention to no longer be bound by the five-year lease arising by operation of the RCLA and that it accordingly gave notice terminating that five-year lease. The plaintiff further demanded payment of rent and outgoings for the balance of the term of the five-year lease.
There was no issue or plea in relation to any alleged failure to mitigate.
Retail and Commercial Leases Act and pleadings
The plaintiff’s claim is dependent on establishing that s 20B of RCLA applied to the monthly periodic tenancy that commenced by holding over following the expiry of the Memorandum of Lease dated 1 May 2010.
Section 4 of RCLA provides that the Act:
applies to a retail shop lease if the premises to which the lease applies consists of a retail shop or a retail shop together with an adjacent dwelling.
Section 6 of RCLA provides:
For the purposes of this Act, a retail shop lease is taken to have been entered into when—
(a) both parties have executed the lease; or
(b) a person enters into possession of the retail shop as lessee under the lease; or
(c)a person begins to pay rent as lessee under the lease or proposed lease (but not if the payment is an advance payment of rent made to secure the premises), (whichever happens first).
Section 20B provides:
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.
The defendant made two important admissions in its pleadings in relation to the application of RCLA and the creation of the monthly periodic tenancy.
First, the defendant admitted that the initial lease as varied (that is the Memorandum of Lease dated 1 May 2010, as varied by the Addendum to Lease), was a lease to which RCLA applied. That admission is made in paragraph 7 of its second defence and counter-claim. The defendant sought on two occasions prior to trial to withdraw the admission, but permission to do so was denied. The defendant also sought leave to appeal those decisions to the Supreme Court, but on both occasions permission to appeal was denied. At trial, the defendant accepted that it was bound by its admission and could not (and did not) advance a case that RCLA did not apply.
The defendant also admitted in its second defence that the initial lease (as varied), came to an end on 30 April 2015 and that the defendant thereafter commenced holding over on a monthly basis.
Holding over Lease - a new lease
Before embarking on the construction of s 20B, it is necessary to characterise the nature of the holding over lease and determine whether it was a new lease or an extension of the initial lease. There is a distinction between an extension of a lease and the exercise of a right of renewal. In the latter case, there is a new lease and a new demise upon the option being exercised.[1] However, in the case of an extension for lease, there is no new lease, but a variation of the term of the initial lease.
[1] Gerraty v McGavin [1914] HCA 23; (1914) 18 CLR 152, 163; 195 Crown Street Pty Ltd v Hoare [1969] 1 NSWR 193, 199; Mercantile Credits Ltd v Shell Company of Australia Ltd [1976] HCA 5; (1976) 136 CLR 326 per Gibbs J.
In the case of the holding over lease, when the tenant pays or agrees to pay any subsequent rent at the previous rate, a new periodic tenancy is created upon the same terms and conditions as that contained in the expired lease so far as they are applicable and not inconsistent with the monthly terms. That is the position at common law: see Hyatt v Griffiths.[2] In Hamilton v Porta,[3] Herring CJ reached the same conclusion and held:
A clause in the original lease prescribing the terms that will attach in the event of an overholding, presupposes that from the circumstances of the overholding a new tenancy can be properly inferred, for unless and until there is a new tenancy, the prescribed terms are left as it were in the air with no tenancy to which they can be attached. Without such a new tenancy, such a clause will not operate at all.
[2] [1851] 17 QB 505.
[3] [1958] VR 247 at 250.
Clauses 4.8.1 and 4.8.2 of the Memorandum of Lease also make it clear that that a new lease is created on the holding over. Clause 4.8.1 provides first for the imposition of a fixed monthly tenancy of one month and then the monthly periodic tenancy. Clause 4.8.2 provides that the monthly tenancy is on the same terms as the initial lease with certain exceptions.
I note also that Kourakis J (as he then was) in Capital and Equity Group Pty Ltd v Hilton Central Ltd[4] recognised that a monthly periodic tenancy was a new tenancy, which was not entered into for a fixed term of six months or less within the meaning of s 20B(3)(a), because a periodic tenancy has no fixed term.
[4] [2010] SASC 197; (2010) 107 SASR 424 at [32].
The defendant admitted in its second defence that the Memorandum of Lease (as varied) came to an end on 30 April 2015 and that the tenancy became a monthly periodic tenancy.
I therefore consider that the plaintiff has established that the monthly periodic tenancy that commenced by the holding over after the expiry of the Memorandum of Lease, was a new lease for the purposes of s 20B(1) of RCLA.
Issue for determination and approach to the construction of s 20B
I have found that the defendant had from 25 September 2010 conducted two retail shops from the Premises pursuant to a retail shop lease.
It follows from this finding (and based on the admissions of the defendant in its defence) that RCLA applied to the initial lease, as varied, and to the monthly periodic tenancy created on the holding over of the initial lease.
In these circumstances, the issue for determination in this matter can be framed as follows: do ss 20B(1) and (2) of RCLA operate to extend to five years the term of the monthly periodic tenancy that commenced on the holding over of the initial lease in circumstances where that holding over had continued for in excess of six months. A subsidiary issue arises as to whether the any of the exceptions provided for in s 20B(3), and in particular s 20B(3)(b) and s 20B(3)(d) are satisfied so as to exclude the application of s 20B(1) and (2).
Section 20B of RCLA must be construed according to the modern approach to statutory interpretation. In CIC Insurance Ltd v Bankstown Football Club Ltd,[5] Brennan CJ, Dawson, Toohey and Gummow JJ held:
… the modern approach to statutory interpretation (a) insists that the context be considered in the first instance, not merely at some later stage when ambiguity might be thought to arise, and (b) uses "context" in its widest sense to include such things as the existing state of the law and the mischief which, by legitimate means … one may discern the statute was intended to remedy.
[5] [1997] HCA 2; (1997) 187 CLR 384, 408.
In SAS Trustee Corporation v Miles,[6] Edelman J held:
… this Court said that the task of statutory construction must begin and end with the text of the statute. That statement does not mean that the text of a statute must be interpreted only according to the range of semantic meanings of the individual words. It means only that the interpretation of a statute, like any other legal instrument, is an interpretation of its words. Those words are interpreted in their context and in light of their purpose although legal rules can sometimes exclude or restrict the use of some context. In ascertaining the reasonably intended meaning of Parliament context is, literally, those matters to be considered (simultaneously) together with the text. Context can give words an interpretation that is the opposite of their ordinary meaning and grammatical sense. Context can also permit a construction of words that excludes their application to matters that would have fallen within the application of their literal meaning. However, as with contractual interpretation, where “the clearer the natural meaning the more difficult it is to justify departing from it”, so too in statutory interpretation “questions of degree arise” and it will be more difficult to displace an interpretation that “has a powerful advantage in ordinary meaning and grammatical sense”.
[6] [2018] HCA 55; (2018) 361 ALR 206, [64].
Further, s 22 of the Acts Interpretation Act 1915 (SA) is also relevant. It provides that:
(1)Subject to subsection (2), where a provision of an Act is reasonably open to more than one construction, a construction that would promote the purpose or object of the act (whether or not that purpose or object is expressly stated in the Act) must be preferred to a construction that would not promote that purpose or object.
The circumstances in which a Court may read additional words into legislation is also relevant to the construction of s 20B. The parties each made submissions to the effect that the construction proposed by the other involved the reading of additional words into s 20B(1).
The High Court in Taylor v The Owners-Strata Plan No 11564[7] (Taylor) discussed when additional words may be used. French CJ, Crennan and Bell JJ held:[8]
The question whether the court is justified in reading a statutory provision as if it contained additional words or omitted words involves a judgment of matters of degree. That judgment is readily answered in favour of addition or omission in the case of simple, grammatical, drafting errors which if uncorrected would defeat the object of the provision…..It is answered against a construction that fills ‘gaps disclosed in legislation’….or makes an insertion which is ‘too big, or too much at variance with the language in fact used by the legislature.
[7] [2014] HCA 9; (2014) 253 CLR 531.
[8] Ibid at [38].
Justices Gaegler and Keane in Taylor, although dissenting, also provided clarification as to when additional words may be added.[9] They held:[10]
Statutory construction involves attribution of legal meaning to statutory text, read in context. ‘Ordinarily, that meaning (the legal meaning) will correspond with the grammatical meaning….But not always’[11]. Context sometimes favours an ungrammatical legal meaning. Ungrammatical legal meaning sometimes involves reading statutory text as containing implicit words. Implicit words are sometimes words of limitation. They are sometimes words of explanation. The constructional task remains throughout to expound the meaning of the statutory text, not to divine unexpressed legislative intention or to remedy perceived legislative inattention. Construction is not speculation, and is not repair.
Context more often reveals statutory text to be capable of a range of potential meanings, some of which may be less immediately obvious or more awkward than others, but none of which is wholly ungrammatical or unnatural. The choice between alternative meanings then turns on less on linguistic fit than on evaluation of the relative coherence of the alternatives with identified statutory objects or policies (citations omitted)
[9] D Pearce, “Statutory Interpretation in Australia”, LexisNexis Butterworths, 9^th ed., (2019) noted at [2.55] that this passage has been frequently cited.
[10] [2014] HCA 9; (2014) 253 CLR 531 at [65]-[66].
[11] Project Blue Sky Inc v Australian Broadcasting Authority [1998] HC 28 at [78]; (1998) 194 CLR 355 at 384.
The parties have also submitted that I am bound by conflicting authority as to how I construe s 20B(1). The defendant had obtained summary judgment in its favour in the Magistrates Court[12]. That decision was overturned on appeal to Doyle J in the Supreme Court[13] (the summary judgment appeal). In his judgment, Doyle J expressed various views regarding the proper construction of s 20B.
[12] Reasons for the ruling of Magistrate Kennewell delivered on 17 August 2018, File number AMCCI-18-667.
[13] Pastina Pty Ltd v Hosanna Excelsis One Universal Church Inc [2019] SASC 18; (2019) 132 SASR 421.
The plaintiff submitted that I ought to follow the decision of Doyle J unless I was satisfied that it was plainly wrong. Conversely, the defendant submitted that I was bound to follow the decision of Debelle J (Duggan and Williams JJ agreeing) in NZI Insurance Australia Limited v Baryzcka[14] (NZI Insurance), which was directly contradictory to the decision of Doyle J. I will deal with that submission of the defendant later in these Reasons.
[14] [2003] SASC 190.
The decision of Doyle J was of course in the context of an appeal from the awarding of summary judgment in favour of the defendant. As such, the question on appeal was whether the Magistrate had erred in concluding that there was no reasonable basis for the action of the plaintiff pursuant to rule 8(1) of the Magistrates Court (Civil Rules) 2013 (SA). That rule is in substantially the same terms as rule 232 of the District Court Rules 2006 SA.
Being an appeal from a summary judgment application, the matter was also perhaps not as fully argued as it was at trial, at least in the case of the defendant.
Further, Doyle J was sitting as a single judge on an appeal from the Magistrates Court and in sitting in that capacity was not part of the judicial hierarchy of this Court. I do not consider that I am bound as a matter of law by his decision. As Gummow J held in Businessworld Computers Pty Ltd v Australian Telecommunications Commission:[15]
Stare decisis involves courts being bound by appellate decisions standing above them and in the same hierarchy.
[15] (1988) 82 ALR 499 at 504.
I also do not consider that I must follow the decision of Doyle J unless it is plainly wrong. Rather, it is a decision that I must consider with due respect. It is of persuasive authority and requires careful attention.[16]
[16] Engebretson v Bartlett [2007] VSC 163; (2007) 16 VR 417 at [54]-[56].
The decision of Doyle J does not relieve me from the task of construing s 20B of the RCLA. In this regard, I adopt the approach referred to in Ogden Industries Pty Ltd v Lucas,[17] which I will refer to later in these Reasons.
[17] (1970) AC 113.
Construction of section 20B(1)
The defendant submitted that s 20B(1) did not apply to the monthly periodic tenancy that commenced on the holding over following the expiry of the Memorandum of Lease for two reasons:
(1)first, because s 20B(1) only applies where a lease has been entered into. Section 6 sets out the circumstances when, for the purposes of RCLA, a lease has been entered into. The defendant submitted that the holding over lease had not been entered into within the meaning of s 6; and
(2)secondly, as a matter of construction, s 20B(1) only applies to the initial term of the initial lease and therefore did not apply to the monthly periodic tenancy commenced by holding over from the Memorandum of Lease.
Dealing first with s 6, if a retail shop lease had not been entered into for the purposes of s 6 of RCLA, s 20B(1) does not apply. The monthly periodic tenancy would not then be extended to a term of five years. It would then follow that the defendant had lawfully terminated the monthly periodic tenancy by giving one month’s notice in September 2017.
I do not consider this submission of the defendant can be sustained. I consider that s 6(c) of RCLA has been satisfied in that the defendant has begun to pay rent as a lessee under the monthly periodic tenancy. The evidence was that invoices for rent and outgoings were rendered monthly by the plaintiff and paid by the defendant (see paragraph 15 of the Statement of Agreed Facts).
In response, the defendant contended that s 6, including s 6(c), was not satisfied by a holding over lease because there had been no positive act by the parties under the holding over lease. The defendant submitted that what had occurred was by default. That is, nothing had changed and the invoices continued to be rendered and paid and there was no advertence by the parties to the holding over lease. In fact, the evidence established that the plaintiff had proceeded in the mistaken belief that in some way a new five-year lease had been entered into.
I consider that this submission of the defendant impermissibly seeks to inquire into the subjective intentions of the parties. The monthly periodic tenancy was created by clauses 4.8.1 and 4.8.2 of the Memorandum of Lease dated 1 May 2010 and by the fact of holding over. It did not require any positive act on the part of the parties. Once it had come into operation, it was a matter of objective enquiry as to whether the rent had begun to be paid under that monthly periodic tenancy for the purposes of s 6(c). In any event, the payment of the rent is a positive act.
Further, by letter dated 21 September 2017, the defendant gave 30 days’ notice of vacating the Premises. This letter indicates an understanding of the defendant that it was occupying the Premises under a monthly periodic tenancy and paying rent under that lease.

I note also that s 20B(3)(b) provides an exception to s 20B(1) in the case of a holding over of a lease for a period of not less than six months after the termination of an earlier lease. This provision implicitly recognises that, when there has been a holding over, the parties have entered into a lease for the purposes of ss 6(c) and 20B(1).
The plaintiff may also be able to rely upon s 6(b) of RCLA to establish that the parties have entered into a retail shop lease. That sub-section provides that a retail shop lease is entered into when a party enters into possession of the retail shop as the lessee under the lease. It could be argued that the plaintiff has entered into possession of the retail shop as a lessee under the monthly periodic tenancy that commenced by holding over following the expiry of the Memorandum of Lease, but considering my finding under s 6(c), I do not need to determine this point.
As to the construction of s 20B(1), the plaintiff contends that the monthly periodic tenancy that commenced by the holding over of on the expiry of the initial lease came within the express words of s 20B(1) and therefore by s 20B(2) its term was extended to five years.
The defendant, on the other hand, contends that s 20B(1) applies only to the initial term of the initial lease (i.e. the Memorandum of Lease) and does not apply at all to the subsequent monthly periodic tenancy that commenced on the holding over.
The High Court authorities referred to earlier in these Reasons, require me to construe the words used in s 20B(1) in their context and considering the purpose of the Act.
The wording of s 20B(1) refers to the ‘term of a retail shop lease’ being at least five years. The words ‘a retail shop lease’ do not limit, in accordance with their strict literal meaning, the application of s 20B(1) to the initial term of the initial lease. If Parliament had intended to limit the application of s 20B only to the initial lease between the parties, it would have been a simple matter to have done so.
The defendant contended that the plain, natural and ordinary meaning of s 20B was that it could only operate in respect of the first lease of the Premises by the defendant. I do not accept that contention. The words ‘a retail lease’ do not, in my opinion, limit the operation of the s 20B(1) to only the initial lease. The plaintiff does not need to notionally add the words ‘to all and any subsequent leases’ to achieve its desired construction of s 20B(1).
I am conscious that s 20B(1) must be construed in its context and considering the purpose of the section.
Section 20A of RCLA sets out the purpose or objects of Part 4A of the Act. That Part deals with the term of a lease, the renewal of shopping centre leases, notice to lessees of the lessor’s intentions at the end of the lease where the lease does contain a right or option to renew or extend the lease and certain miscellaneous matters such as certified exclusionary clauses and the prohibition of specified conduct.
Parliament’s objective, as set out in s 20A(2), was to achieve an appropriate balance between the reasonable but conflicting expectations of the lessor and lessee and to ensure as far as practicable fair dealing between the lessor and lessee in relation to renewal or extension of a retail shop lease.
In the case of the term of a retail shop lease, the appropriate balance was struck by providing for a term of at least five years in all retail shop leases and then providing for a serious of exceptions that reduces, in the prescribed circumstances, the absoluteness or harshness of that five-year term.
In construing the words in s 20B(1) in the context of this objective, two matters follow. First, is the absolute nature of the primary imposition of the five year term in s 20B(1) and secondly, s 20B(1) and s 20B(3) must be read together when assessing how Parliament has achieved the appropriate balance.
Section 20B(1) must be construed in its context. In construing s 20B(1), consideration should be given to other sections of RCLA, including s 6, the heading of Division 2, ‘Initial term of lease’ and s 20B(3). The defendant also made general reference to other provisions of the Act including ss 20D, 20E, 20G and 20H.
In my view, these other provisions do not assist in the construction of s 20B(1). Sections 20D, 20E, 20G and 20H all deal with the renewal of a retail shop lease of premises in a retail shopping centre, which are subject to a quite different regime than retail shop leases. In any event, it has not been demonstrated to me how these provisions assist in the construction of s 20B(1).
I have already considered whether s 6 operated to preclude the application of s 20B(1) to the periodic monthly tenancy that commenced on the holding over from the expiry of the Memorandum of Lease and held that it did not have that effect. The defendant further contended that s 20B(1) should, in any event, be construed in the context of s 6. It is difficult to see how s 6 can inform the construction of s 20B(1). Section 6 is expressed in wide terms as to when a retail lease is entered into and does not impose any significant restriction on the imposition of five year terms in s 20B(1).
In support of its construction of s 20B(1), the defendant referred to and relied upon the heading ‘Division 2 - Initial Term of Lease’.
Pursuant to s 19 of the Acts Interpretation Act 1915 (SA) chapter headings, part headings, division headings and sub-division headings form part of an Act, subject to any express provision to the contrary. Therefore, in construing s 20B the sub-division heading ‘Division 2 – Initial Term of Lease’ must be considered and forms part of the context in which the task of construction must be performed.
The heading does not refer to an initial lease, but rather the ‘Initial term of lease’. In my opinion, this phrase is equally apt to refer to a subsequent lease of the Premises as to the initial lease of the Premises. The heading therefore does not provide any assistance to the defendant in its construction of s 20B(1).
However, in my view s 20B(1) must be read in the context of s 20B(3). Those two sections, when together, define when a lease is extended to a five-year term. The High Court in Comcare v Martin,[18] adopted the approach of reading together the exception clause and the primary clause when considering the meaning of the phrase ‘as a result of’ in the exception clause. The Court held that this phrase in the exception clause was not to be read as imposing its own separate and free-standing test of causation, but rather as referring relevantly to the test of causation spelt out in the primary section.
[18] [2016] HCA 43; (2016) 258 CLR 467.
Commenting on this case, Pearce states:
… the approach in these cases seem logical as a matter of principle, particularly where the meaning of exception is uncertain, since if the requirements of the primary provision would not be satisfied in any event, it would be unnecessary to provide for an exception.[19]
[19] Pearce, “Statutory Interpretation in Australia”, LexisNexis Butterworths, 9^th ed., 2019.
The exception provided for in s 20B(3)(b), namely the holding over after the termination of an earlier lease with the consent of the lessor for a period of less than six months, implicitly recognises that s 20B(1) may apply if there has been a holding over after the termination of an earlier lease. That is, it implicitly recognises that s 20B(1) applies not just to the initial lease, but also to the subsequent lease created by the holding over.
There would be no need for the exception created by s 20B(3)(b) if the lease created by the holding over did not come within s 20B(1) or if s 20B(1) only applied to the initial lease.
Doyle J in the summary judgment appeal reached the same conclusion. His Honour held at [38]:
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 s 20B(3)(b) and (d).
Kourakis J (as he then was) in Capital and Equity Group Pty Ltd v Hilton Central Ltd[20] reached a similar conclusion (although considering a slightly different issue, namely the term of a monthly periodic tenancy) when he held:
Nevertheless, the construction of s 20B(3)(a) to which I have referred above is supported by the very existence and terms of s 20B(3)(b). On a holding over, a fixed term tenant becomes a monthly tenant. However, because the monthly tenancy “arises when the lessee holds over after the termination of an earlier lease”, it is excepted from the operation of s 20B(2) unless the holding over continues for six months or more. It would not have been necessary to enact s 20B(3)(b) if a monthly periodic tenancy fell within s 20B(3)(a). Section 20B(3)(b) appears to have been enacted to modify the operation of s 20B(2) so that a monthly tenancy on a holding over is not, by force of s 20B(2), extended to five years unless it continues for six months or more.
[20] [2010] SASC 197; (2010) 107 SASR at [34].
The defendant further argued that the exception provided for in s 20B(3)(b) arose only after termination of an earlier lease (whether by agreement or for breach) and not on the expiry of the earlier lease. Obviously, if s 20B(3)(b) was interpreted in this way it would not apply to a holding over following the expiry of an earlier lease. This construction, the defendant submitted, influences how s 20B(1) is construed-that is, if the exception contained in s 20B(3)(b) is narrowly construed, then the primary clause, s 20B(1) can also be narrowly construed so as to exclude a holding over lease.
I do not consider that this argument of the defendant is sound, either as a matter of construction or as a matter of principle.
As a matter of construction, the defendant’s argument rests on two propositions; first, that the words ‘termination of an earlier lease’ do not include an expiry, by effluxion of time, of an earlier lease and secondly, that s 20B(3)(b) only applies where there has been a termination of an earlier lease ‘with the consent of the lessor’ (that is, the words “with the consent of the lessor” apply to the termination and not to the holding over).
I do not accept this construction of s 20B(3)(b).
Whether the phrase ‘termination of an agreement’ includes the expiry of an agreement by the effluxion of time depends on the context of the use of the word ‘termination’. In R v Secretary of State for Social Services; ex parte Kahn,[21] Lord Denning MR said:
The rival arguments are nicely balanced. I think that the word “terminate” or “termination” is by itself ambiguous it can refer to either of two things – either to termination by notice or to termination by effluxion of time. It is often used in that dual sense in landlord and tenant and in master and servant cases. But there are several indications in this paragraph to show that it refers here only to termination by notice …
In the same case, Buckley LJ held:[22]
A contract may be said to terminate when it comes to an end by effluxion of time or it may be said to be terminated when it is determined at notice or otherwise by some act of one of the parties. Here in my judgment the word terminated is used in this passage and paragraph 190 in the transitive sense and it postulates some act by somebody in which to bring the appointment to an end and it is not applicable to a case in which the appointment comes to an end merely by effluxion of time.
These passages were approved by Habersberger J in Orrong Strategies Pty Ltd v Village Roadshow Ltd.[23] They were also approved in Saarinen v University of Tasmania,[24] where the Full Court noted that depending on its context, ‘terminated’ may be used in the transitive sense (in the sense of requiring something to be done) or in the intransitive sense.
[21] [1973] 2 All ER 104, 106.
[22] Ibid at 107.
[23] [2007] VSC 1 at [336] and [337].
[24] [1997] TASSC 125; (1997) 7 Tas R 154 at 15.
The defendant also provided examples of the different use of the words ‘expiry’ and ‘termination’ in the Agreement to Lease and Memorandum of Lease. The use of those words in the Agreement to Lease and Memorandum of Lease cannot provide any assistance in the construction of s 20B(3)(b).
There is nothing to suggest that the word ‘termination’ is used in s 20B(3)(b) in the transitive sense. In this sub-section, termination does not depend on or require any action by the lessor or lessee. Further, s 20B(3)(b) is part of an Act that defines the rights and obligations of lessors and lessees. The authorities referred to above have held that where the subject matter of a statute or agreement involves landlords and tenants, the word ‘termination’ is often used in the dual sense as including termination by expiry. Thirdly, there does not seem to be any policy reason why s 20B(3)(b) should distinguish between a holding over lease that commenced following the expiry of an earlier lease and a holding over lease that commenced following the termination of the earlier lease. As the plaintiff submitted, why should a lessee who has been terminated for breach or by agreement, get the benefit of an additional term (where there has been holding over in excess of six months) while a lessee who has not had any disagreement, not get the benefit of that extension.
The defendant also contended that s 20B(3)(b) should be construed as applying only to a ‘termination of an earlier lease’ with the consent of the lessor. While as a matter of construction, it is perhaps unclear whether the phrase ‘with consent of the lessor’ applies to the holding over or to the termination, in my view common sense dictates that the words ‘with consent’ must apply to the holding over and not to the termination. It is not usual to use the concept of consent of one party in the context of termination for breach of a contract, but consent is readily used to describe the nature of the holding over. It is not uncommon in landlord and tenant law to distinguish between a holding over by consent and a holding over that is not by consent. For example, the consent of the landlord distinguishes a tenancy at will (where there is that consent)[25] and a tenancy on sufferance (where there is not that consent).[26] Further, it would be incongruous if a lessee who was not holding over by consent could obtain the protection of s 20B.
[25] W.Woodfall et al “Woodfall’s Law of Landlord and Tenant”, (Sweet and Maxwell, 28^th ed., 1978) at 1-0642.
[26] Ibid at 1-0662.
In any event, even if the defendant was correct in its construction of s 20B(3)(b), it would not, in my view, assist in its construction of s 20B(1). The defendant’s construction of s 20B(3)(b) has the consequence that there would be a more limited number of cases where that exception would apply to a holding over lease. It does not affect the construction of s 20B(1) and the question whether s 20B(1) applies to the holding over lease.
Although not argued before me, I have also given consideration as to whether s 20B(1) and s 20B(2) operate to extend the term of the holding over lease to five years over the combined Premises (Areas 1 and 2), when only a portion of the Premises was used for the purpose of conducting a retail shop.
I consider that s 20B(1) has the effect of extending the lease of the combined premises. There was only one lease (the holding over lease in the present case) and it was the term of that lease that is extended to five years. It is not possible under RCLA to extend only a portion of the lease.
Section 20B(1) applies to a retail shop lease. Section 3 defines a retail shop lease as meaning an agreement under which a person grants or agrees to grant another for value a right to occupy a shop for carrying on a business. The holding over lease falls within this definition.
Section 4 of RCLA supports this conclusion. It recognises that the Act applies to a retail shop lease if the premises consist of a retail shop or retail shop together with an adjacent dwelling. In the present case, the defendant has admitted that the RCLA applied to the Memorandum of Lease (as amended). The effect of that admission is an admission that s 4 was satisfied.
I note that the equivalent legislation in other states generally define retail shop to mean premises that are wholly or predominantly used for the carrying on of the retail shop. That may lead to a different result. For example, s 3 of the Commercial Tenancy (Retail Shops) Agreements Act 1985 (WA) defines a retail shop as any premises not situated in a retail shopping centre that are used wholly or predominantly for the carrying on of a retail business. Section 3 of the Retail Leases Act 1994 (NSW) provides a similar definition of retail shop. Section 4 of the Retail Leases Act 2003 (Vic) defines, inter alia, retail premises as premises that are used wholly or predominantly for the sale or hire of goods by retail.
There is no similar limitation in RCLA.
The defendant further submitted that I must follow as a matter of law the decision of the Full Court in NZI Insurance Australia Limited.[27] In that matter, the respondent (who was the plaintiff in the initial hearing in the Magistrates Court) was successful in the Magistrates Court in establishing that it had an equitable lease over premises at the corner of King William Street and Waymouth Street, Adelaide. The defendant (as appellant) appealed the decision, first to a judge of the Supreme Court (who dismissed the appeal) and then to the Full Court. The respondent argued on appeal that there was an equitable lease (as found by the Magistrate) or in the alternative there was a five-year statutory lease under the RCLA. This alternative claim was made by way of notice of contention.
[27] [2003] SASC 190.
The Full Court allowed the appeal. The Full Court dismissed the respondent’s claim for an equitable lease over the property. In relation to the notice of contention, the respondent submitted that as she had held over under the lease for a period in excess of six months, she was entitled to renewal of the lease on the same terms and conditions as are contained in the lease for a period of five years. Debelle J (Duggan and Williams JJ agreeing) held as follows:[28]
Pointing to ss (3)(b) Mr Manetta submits that as the respondent held over under the lease which expired on 31 December 1999 for a period in excess of six months, she is entitled to a renewal of that lease on the same terms and conditions as are contained in the lease for a period of five years.
I do not think that s 17(3)(b) has the effect for which Mr Manetta contends. It is not clear to what s 17(3)(b) means. I will assume it applies in the circumstances of this case where the respondent held over as a monthly tenant with the consent of the appellant. Although it is provided that s 17(3) does not apply where a tenant holds over for a period less than six months, I do not think that it is intended that a lease of five years will come into existence if the period of the holding over exceeds six months. It is a very serious step to impose a renewed term of five years upon the lessor. I do not think it was intended to achieve it by a legislative side wind of this kind. Furthermore, the respondent has held a lease of these shop premises for more than five years. The intention of s 17 is to provide a minimum term of five years for a retail shop lease. It is not concerned with the term of a renewed lease. That intention is clearly expressed in the note at the end of s 17(3) and is reinforced by the terms of s 17(3)(d). For these reasons, I do not think that the terms of s 17(3) apply.
Another reason why Mr Manetta’s submission must fail is to be found in amendments for the Retail Shop Leases Act.
Further at [43], Debelle J concluded:
It will have been noticed that s 20B(3)(d) provides that a minimum term of five years is not required in those circumstances where the lessee has been in possession of the shop premises for at least five years. In my view s 20B(3)(d) applies to the exclusion of s 20B(3)(b). To conclude otherwise would result in an absurdity. As at 31 December 1999 the respondent had been in possession of these premises since 1991. Section 20B was in force when the lease came to an end. For the reasons which follow, s 20B applied to all retail shop leases then in force but by reason of s 20B(3)(d) did not apply in the circumstances of this case.
[28] Ibid at [41]-[42].

Read in this context, I do not consider that Debelle J had come to any concluded view as to the extension of the term of the lease to five years where a tenant holds over for a period in excess of six months. In paragraph 42 of the judgment, Debelle J expresses his opinions in relation to that question in terms of ‘I do not think’ which phrase is used on three occasions. Debelle J does not provide any of the detailed reasoning that would accompany a decision or determination of this point.
Debelle J, after discussing the application of the five-year extension to a lease created by a holding over, then stated ‘[f]urthermore, the respondent has held a lease of these shop premises for more than five years. The intention of s 17 is to provide a minimum term of five years for a retail shop lease. It is not concerned with the term of a renewed lease’. That conclusion was very much influenced by the terms of s 17 of the Retail Shop Leases Act (as it then was) and before it was amended in 1997. Section 17 of the old Act included in s 17(3)(d) which provided that the primary section (section 17(1)) did not apply if:
(d)the lease results from the renewal of an earlier lease so long as there is no break in entitlement of the lessee to possession of the retail shop and the option was granted by that earlier lease or by agreement entered into before or at the same time as that earlier lease was entered into.
[note] A lease will not be required to be for five years if it is a renewal of an earlier lease (because the minimum five year term requirement applied to the earlier lease and the availability of the renewal will have been taken into account in determining the term of that earlier lease).
Neither the old s 17(3)(d) nor the note to s 17(3) referred to above have found their way into s 20B(3) of RCLA.
The reasoning of Debelle J is based on the presumed intention of the legislature (as only applying to the initial five-year term) because the Act then expressly excluded renewed leases being granted the five year term. It is implicit in this statement, that, in the opinion of Debelle J, a holding over lease should not be treated differently from a renewed lease. Debelle’s J rejection of the notice for contention is therefore based on the wording of the old Act and his finding that s 17 was not concerned with the term of a renewed lease.
The notice of contention was also rejected by Debelle J on the basis that the respondent had been in possession of the premises for more than five years.[29]
[29] Ibid at [42].
Those two reasons form part of the ratio of the decision of Debelle J.
The comments made by Debelle J that a five-year lease will not come into existence if the period of holding over exceeds six months do not form part of the ratio. They were clearly not expressed in terms of a finding and must be read in the context of his findings as to s 17(3(d) and the Note at the end of s 17(3) of the old Act.
For those reasons, I do not consider that I am bound by the decision in NZI Insurance in relation to the application of s 20B(1) to a holding over lease. Of course, I must give the judgment due respect. The decision is persuasive and requires very careful attention.[30]
[30] Engebretson v Bartlett (2007) 16 VR 417 at [56].
In these circumstances, I consider that I should follow the approach taken in Ogden Industries Pty Ltd v Lucas,[31] where Lord Upjohn, delivering judgment for the Privy Council in an appeal from the High Court, held:[32]
it is quite clear that judicial statements as to the construction and intention of an Act must never be allowed to supplant or supersede its proper construction and courts must beware of falling into the error or treating the law to be laid down by the judge in construing the Act rather than found in the words of the Act itself.
No doubt a decision on particular words binds inferior courts on the construction of those words on similar facts, but beyond that the observations of judges on the construction of statutes may be of the greatest help and guidance but are entitled to no more than respect and cannot absolve the court from exercising its duty of exercising independent judgment. It is with these principles in mind that their Lordships approached this very considerable body of authority.
[31] [1970] AC 113.
[32] Ibid at 127.
This passage was approved by the Court of Criminal Appeal in R v Fowler (per Gray and Layton JJ):[33]
[33] [2006] SASC 18 at [56]; (2006) 243 LSJS 285.
Therefore, for the reasons that I have expressed above, in construing the words in their context and considering the legislative purpose of the provision, I find that the holding over lease comes within the terms of s 20B(1).
My finding accords with the decision of Doyle J on the summary judgment appeal where he held:[34]
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, 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.
[34] [2019] SASC 18 at [36].
Although Doyle J did not directly refer to the NZI Insurance decision, it is obvious that he was aware of it as it formed the basis of the decision of the Magistrate in awarding summary judgment in favour of the defendant.[35] It was the appeal from this decision that was determined by Doyle J.
[35] Pastina Pty Ltd v Hosanna Excelsis One Universal Church Inc, AMCCI-18-667, 17 August 2018 at [13] and [14].
My finding also accords with the decision of Kourakis J, as he then was, Capital and Equity Group Pty Ltd v Hilton Central Ltd.[36]
Exceptions to the creation of a five-year lease
[36] [2010] SASC 197; (2010) 107 SASR 424 at [34].
General
It follows therefore from my finding that s 20B(1) applies to a holding over lease, that, unless one of the exceptions set out in s 20B(3) applies, the term of the holding over lease will be extended to five years.
Subsection 20B(3) sets out six separate exceptions, which if applicable, will exclude the operation of s 20B(1) to extend the term of the holding over lease to five years. As Doyle J observed in the summary judgment appeal,[37] each of the six exceptions operate independently of each other. The defendant need only satisfy one of the exceptions.
[37] [2019] SASC 18 at [41].
Section 20B(3)(b)
The defendant’s primary position was that s 20B(1) did not apply to the holding over lease. It further submitted that s 20B(3)(b) should be construed so that it did not apply to a holding over lease formed on the expiry, rather than the termination, of the initial lease. I have dealt with that argument above and found against the construction propounded by the defendant.
The defendant did not separately argue that if s 20B(1) applied (contrary to its primary argument), its operation was nevertheless excluded by virtue of s 20B(3)(b).
As to subparagraph (b), Doyle J held on the summary judgment appeal:[38]
In the case of a lease arising by holding over, s 20B(3)(b) operates to exclude the lease arising by reason of the holding over 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 the terms of that tenancy-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.
[38] Pastina Pty Ltd v Hosanna Excelsis One Universal Church Inc [2019] SASC 18 at [3].
I adopt that statement as setting out the operation of s 20B(3)(b).
In the present case, the holding over period was for about two years and five months and therefore s 20B(3)(b) does not apply.
Section 20B(3)(d)
The defendant submitted that it is entitled to the benefit of the exception provided for in s 20B(3)(d) as it had, at the relevant time, been in possession of the retail shop premises for at least five years. The defendant submitted that whatever date is determined to be the relevant time, it had been in possession of the Premises for at least five years and in fact considerably longer.
The application of s 20B(3)(d) is a question of fact, the resolution of which depends on two matters: first, determining when, as a matter of fact, the defendant went into possession of the retail shop premises and secondly, determining on what date it is to be assessed whether the lessee has been in possession of the retail shop premises for the five years.
As to the first of these matters, the defendant submitted that it had been in possession of the retail shop premises since 1 May 2010. Therefore, it argued that whatever view was taken of the time at which that period of possession is to be assessed, it had been in possession of the retail shop premises for five years. The defendant further argued that the effect of the amendment to the Memorandum of Lease that was made in September 2010 had the effect of deeming it to have been in possession of the combined premises since 1 May 2010.
The phrase ‘retail shop premises’ is not defined in the RCLA although ‘retail shop’ means the business premises at which goods are sold to the public by retail.
In this matter, the phrase ‘retail shop premises’ must mean the area at the front of the ground floor of the building (being the area described as Area 2) being the premises from which goods are sold to members of the public.
This construction accords with s 4 of RCLA which refers to the Act applying to a retail shop lease, if the premises to which the lease applies consists of a retail shop or a retail shop together with an adjacent dwelling.
The defendant had been in possession of the retail shop premises since 20 September 2010. It would be a fiction to say that it was in possession of retail shop premises from 1 May 2010 when that simply was not the case.
Doyle J in the summary judgment appeal reached the same conclusion when he held that the relevant lease that the plaintiff was seeking to extend by the operation of s 20B(1) was the holding over lease over the combined premises.[39] The plaintiff was not in possession of the combined premises until 20 September 2010. The original lease, as at 1 May 2010, was not the lease which the plaintiff is not seeking to extend.
[39] [2019] SASC 18 at [51].
The defendant further argued that the variation of the contract through the Addendum to Lease should be deemed to take effect from the commencement of the lease on 1 May 2010. This would then have the consequence that the defendant had been in possession of the entire property, including Area 2, (being the area at the front of the ground floor where the retail shops were conducted) for five years at the time of the commencement of the holding over and would therefore come within the exception created by s 20B(3)(d).
That argument depends on the expressed or inferred intention of the parties as to whether a variation of a contract involves termination of the prior contract and creation of a new contract or merely alters the contract without affecting its existence.[40]
[40] Federal Commissioner of Taxation v Sara Lee Household & Body Care (Australia) Pty Ltd (2000) 172 ALR 346; Concut Pty Ltd v Worrell (2000) 75 ALJR 312 at 20.
It is clear that the terms of the Addendum to Lease objectively demonstrate an intention to vary the existing memorandum of lease and not terminate that lease and create a new lease. I have had regard to the following matters in making that finding:
(1)First, the variation is headed ‘Addendum to Lease’ thereby suggesting it is to be added to the lease;
(2)Secondly, recital 2 expresses a desire to incorporate Area 2 within the initial memorandum of lease;
(3)Thirdly, clause 3(iii) provides for the incorporation of Area 2 into the lease.
Clause 3(iii) of the Addendum to Lease makes it quite clear that the variation is to take effect from 20 September 2010.
The defendant relied upon clause 3(vii) of the Addendum to Lease to argue that the variation should be deemed to apply from 1 May 2010. That clause provides:
apart from the foregoing, the terms and conditions as contained in the said lease shall apply to Area 2 as though they form part of the leased premises and included in the said lease from the commencement date of the said lease accepting that no security bond shall be required for Area 2 for the full term of the lease.
The difficulty with the defendant’s argument is that clause 3(vii) is premised with the words ‘apart from the foregoing’. The foregoing includes clause 3(iii) which makes it clear that the commencement date in relation to the incorporation of Area 2 shall be 20 September 2010. That date accords with the date on which the defendant, pursuant to the Addendum to Lease, took possession of Area 2. Any other date would be a fiction.
The defendant raised a further argument regarding the time at which it must be assessed whether the lessee had been in possession of the retail shop premises for five years or more. The defendant submitted two alternate dates as the date for that assessment; first, a flexible date being the date upon which a party seeks to hold the other party against its will or understanding to an extended five-year term. The defendant submitted that the assessment as to whether the lessee had been in possession for 5 years should be made at the time that the termination of the lease took place, being October 2017. Secondly, the defendant submitted that the relevant date for the assessment should be the date at which the holding over lease had exceeded six months, so as to satisfy the requirement in s 20B(3)(b).
The defendant further submitted that the selection of these dates accorded with the objects and purposes of RCLA, namely that s 20B(3)(d) should apply if in fact the lessee had been in possession of the Premises for five years.
Dealing first with the former argument, I agree with the decision of Doyle J in the summary judgment appeal that the language of s 20B does not permit this approach to be taken.[41] Sections 20B(1) and 20B(2) operate so to extend the holding over lease for a period of five years, not some lesser period. The exceptions contained in s 20B(3) must, in my view, be considered at the same time as the extension provided for in s 20B(2)-that is, when the holding over lease is entered into. It is at that time that the holding over lease is extended for the period of five years. In this matter, the holding over commenced on 1 June 2015 and it was at that time, subject to the operation of s 20B(3)(b), that the lease was extended to 1 June 2015. It cannot be the case that the term having been extended, the exception can apply at a later stage to reduce the term. This would create great uncertainty and would be contrary to the purpose of the RCLA.
[41] [2019] SASC 18 at [59]-[60].
Doyle J in the summary judgment appeal rejected the second argument, namely that the time of possession should be assessed at the expiration of the six month period of holding over referred to in s 20B(3)(b). Doyle J held:[42]
I do not accept that there is any textual basis for reconsidering the application of that exception, in the case of a lease 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 holding over, will be to delay the operative effect of s 20B(2) for a period of six months, I do not think that 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 of time. In my view, that 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)(d) has no role to play.
[42] [2019] SASC 18 at [57].
I adopt that passage. In my view, the application of s 20B(3)(d) must be assessed at the commencement of the holding over. That is the date when the lease is otherwise extended to a term of five years. An assessment at any other time would create uncertainty. Making an assessment at that date, possession of the retail shop falls short of five years and the exception provided for by s 20B(3)(d) does not apply.
Conclusion
For the above reasons, I consider that the holding over lease was extended to a period of five years expiring on 30 April 2020 (or 30 May 2020). It therefore follows that the defendant breached the holding over lease when it vacated the lease premises on 21 October 2017. The defendant is therefore liable to the plaintiff for damages for breach of the lease in the agreed sum of $383,207.16 plus interest.
I will hear the parties as to GST, interest and costs and the formal orders to be made.