PINZONE and PORTCARE INCORPORATED
[2023] WASAT 53
•4 JULY 2023
JURISDICTION : STATE ADMINISTRATIVE TRIBUNAL
ACT: COMMERCIAL TENANCY (RETAIL SHOPS) AGREEMENTS ACT 1985
CITATION: PINZONE and PORTCARE INCORPORATED [2023] WASAT 53
MEMBER: DR B DE VILLIERS, MEMBER
HEARD: DETERMINED ON THE DOCUMENTS
DELIVERED : 4 JULY 2023
FILE NO/S: CC 915 of 2023
BETWEEN: ALFREDO PINZONE
First Applicant
DOMENICA PINZONE
Second Applicant
AND
PORTCARE INCORPORATED
Respondent
Catchwords:
Retail commercial tenancy - Requirements for special circumstances for early termination of lease - Demolition - Redevelopment - Damage and destruction - Resumption
Legislation:
Commercial Tenancy (Retail Shops) Agreements Act 1985 (WA), s 13(6)(a), s 13(6)(b), s 13(6)(c), s 13(6)(da), s 14(6)(d), s 13(7)
Result:
Application dismissed
Representation:
Counsel:
| First Applicant | : | N/A |
| Second Applicant | : | N/A |
| Respondent | : | N/A |
Solicitors:
| First Applicant | : | Solomon Brothers |
| Second Applicant | : | Solomon Brothers |
| Respondent | : | N/A |
Case(s) referred to in decision(s):
Synicast Pty Ltd and Showroom X Pty Ltd [2023] WASAT 47
REASONS FOR DECISION OF THE TRIBUNAL:
Background
The applicant, who is the landlord of a retail commercial tenancy, has requested approval for several clauses to be included to the lease to allow the landlord to terminate the lease in a period shorter than the statutory guaranteed 5 years due to the existence of special circumstances. The relevant clauses are clause 5.2 (where that clause is engaged by the events set out in clauses 5.2.3, 5.2.4 and/or 5.2.5); and clause 5.4.1. The special circumstances the landlord says arise in these clauses relates to failure of the tenant to pay rent; breach by the tenant of a covenant contained in the lease; liquidation of the tenant; abandonment of the premises by the tenant, the premises being resumed; destruction or damage to the premises, or other default by the tenant. The address of the tenancy is Part 372 South Street, O'Connor, Western Australia.
Section 13(7) of the Commercial Tenancy (Retail Shops) Agreements Act 1985 (WA) (CTRSA Act) represents a departure from the tenant's right to the option of extending the term of the lease to a period of up to 5 years. The option for an extended period is an important and valuable right to the tenant. This importance is recognised by the CTRSA Act since it prohibits the landlord from terminating the lease short of that 5 year term, save in the limited circumstances set out in s 13(6)(a)-(d) of the CTRSA Act. One of those circumstances is where the Tribunal gives approval on a ground for the termination of a lease under s 13(7) of the CTRSA Act (Synicast Pty Ltd and Showroom X Pty Ltd [2023] WASAT 47 (Synicast Pty Ltd) at [21]).
I am now called upon to consider the special circumstances identified by the landlord, the response, if any, by the tenant, and to determine whether the approval is granted. My discretion is wide, which means I can take into account the totality of circumstances to assess whether they meet the threshold of 'special circumstances' (Synicast Pty Ltd at [27], [54] and [62]). It is noted that the tenant has consented to the proposed variations. The matter is determined on the documents.
Facts and consideration
The relevant facts giving rise to the decision are as follows:
1)The application was lodged on 23 June 2023.
2)The landlord had declared in the application that it had informed the tenant of its intention to lodge the application. The tenant has consented to the proposed variations.
3)The landlord seeks approval of the following clauses: clause 5.2 (where that clause is engaged by the events set out in clauses 5.2.3, 5.2.4 and/or 5.2.5); and clause 5.4.1, for reasons that a special circumstance exists in regard to each of the proposed variations pursuant to sub-section 13(7) of the CTRSA Act. For the benefit of completeness, the special circumstances as described by the landlord are quoted in full below:
…
Clause 5.2
4.Clause 5.2 of the Lease permits the Applicant landlord to terminate the Lease if any of the events set out in clauses 5.2.1 to 5.2.5 of the Lease occur.
5.The effect of clause 5.2.1, when combined with clause 5.2 as a whole, is that the Applicant landlord has the right to terminate the Lease if the Respondent tenant fails to pay rent on time under the Lease and that rent remains outstanding for seven (7) days after becoming due, whether formerly demanded or not.
6.The effect of clause 5.2.2, when combined with clause 5.2 as a whole, is that the Applicant landlord has the right to terminate the Lease if the Respondent tenant breaches any of its covenants under the Lease, and such breach is not remedied within fourteen (14) days (or such further time as the Applicant landlord may in any case specify) of the Applicant landlord giving written notice to the Respondent tenant to remedy that breach.
7.Clause 5.2, when engaged by clauses 5.2.1 and/or 5.2.2, falls within the exception in section 13(6)(a) of the Act, which provides that "the landlord under a retail shop lease is not entitled to determine such a lease … except by reason of default by the tenant or by failure of the tenant to remedy any such default in accordance with the lease".
8.By reason of the matters in paragraphs 5 to 7 above, it is submitted that the Applicant landlord does not require the Tribunal's approval under section 13(7) of the Act in respect of clause 5.2 of the Lease where that clause is engaged by any of the events set out in clauses 5.2.1 or 5.2.2 of the Lease.
9.The effect of clause 5.2, when engaged by clause 5.2.3, is that the Applicant landlord has the right to terminate the Lease where the Respondent tenant goes into liquidation, becomes bankrupt, or enters into any composition arrangement with or assignment for the benefit of the Respondent tenant's creditors. The effect of clause 5.2, when engaged by clause 5.2.4, is that the Applicant landlord has the right to terminate the Lease where the Respondent tenant has appointed under any act or instrument or by order of any court a manager and administrator, a trustee, a receiver, a receiver and manager, or liquidator in relation to any part of the Respondent tenant's undertakings, assets or property. It is submitted that these are all special circumstances which should permit the Applicant landlord to terminate the Lease because, otherwise, the Applicant landlord will be obliged to continue with the Lease in circumstances where it is very unlikely the Respondent tenant will be in a position to continue complying with its covenants under the Lease (including, without limitation, the covenant to pay rent and outgoings). In such circumstances, the Applicant landlord should be entitled to terminate the Lease so that it may attempt to re-lease the Premises and mitigate its potential loss.
10.The effect of clause 5.2, when engaged by clause 5.2.5, is that the Applicant landlord has the right to terminate the Lease in the event that the Respondent tenant abandons or vacates the Premises. It is submitted that these are special circumstances which should permit the Applicant landlord to terminate the Lease because, otherwise, the Applicant landlord will be obliged to continue with the Lease in circumstances where the Premises remain unoccupied and are no longer being repaired or maintained by the Respondent tenant (which would likely result in the Applicant landlord incurring loss). In such circumstances, the Applicant landlord should be entitled to terminate the Lease so that it may attempt to re-lease the Premises and mitigate its potential loss.
11.The Tribunal has previously approved clause 5.2 in this exact form in the Previous Lease, as well as in other prior leases (see, for example, Kalaui Pty Ltd v Subway Realty Pty Ltd CC 1230/2010).
12.By reason of the matters in paragraphs 9 to 11 above, the Applicant landlord seeks approval to include clause 5.2 of the Lease where that clause is engaged by the events set out in clauses 5.2.3, 5.2.4 and/or 5.2.5 of the Lease.
Clause 5.4.1
13.Clause 5.4.1 of the Lease gives the Applicant landlord the right to terminate the Lease if the Premises or any part thereof at any time during the term is resumed or taken for any public purpose by any competent authority or is declared unfit for occupation or ordered to be demolished by any competent authority or is destroyed or damaged so as to render the same substantially unfit for the use and occupation of the Respondent tenant or so as (in either case) to deprive the Respondent tenant of substantial use of the same or so as (in the case of damage or destruction) to render the rebuilding or reconstruction of the Premises in its previous form impracticable or undesirable in the opinion of the Applicant landlord. It is submitted that these are all special circumstances which should permit the Applicant landlord to terminate the Lease because, otherwise, the Applicant landlord would, among other things, be obliged to reinstate the Premises irrespective of how substantial the damage or destruction is and no matter the cost to the Applicant landlord (which could be significant, especially in circumstances where the whole of the Premises have been destroyed). This would place an undue burden on the Applicant landlord.
14.It is important to note that, pursuant to clause 5.4.1 of the Lease, should the Applicant landlord not make the Premises fit for the Respondent tenant's use within three (3) months after receiving notice in writing from the Respondent tenant, then, subject only to clause 5.4.6, the Respondent tenant also has the right to terminate the Lease (i.e. the Respondent tenant possesses a reciprocal early right of termination under the Lease)[.]
4)The landlord explains in its application the rationale why it says that all of those conditions constitute special circumstances.
5)I now proceed to determine the application on the documents.
6)I am not satisfied that a special circumstance exists for approval of clause 5.2 (where that clause is engaged by the events set out in clauses 5.2.3, 5.2.4 and/or 5.2.5); and clause 5.4.1.
7)The reasons for me not being satisfied that special circumstances as required in s 13(7) of the CTRSA Act exists are:
(a)The circumstances identified by the landlord may give rise to a termination of lease, but those are not 'special circumstances' as envisaged by s 13(7) of the CTRSA Act. As was explained by President Prichard in the matter of Synicast Pty Ltd, a special circumstance must refer to a circumstance that is indeed 'special' and for which another remedy is not available or suitable. In this proceeding the applicant seeks approval for a range of justifications to terminate a contract, but those potential events are not 'special' since they can be dealt with in the normal course of the landlord-tenant relationship. Events that may cause a lease to be terminated, for example, failure to pay rent; breach by the tenant of a covenant contained in the lease; liquidation of the tenant; abandonment of the premises by the tenant, the premises being resumed; destruction or damage to the premises, or other default by the tenant, are not special circumstances.
(b)It is further noted that President Prichard declared in Synicast Pty Ltd that the special circumstance for which approval is sought, must exist (at [30]). Approval by the Tribunal cannot be given in anticipation of an event that may occur sometime in the future. The special circumstance must therefore exist, or be under serious consideration, and evidence must be provided to the Tribunal as to why it is 'special'.
(c)The Tribunal does not have the power to approve the clause for resumption since that is not a special condition as anticipated by s 13(7) of the CTRSA Act because a resumption can also be dealt with by way of other remedies at the disposal of the parties. It is also noted that there is no actual proposal for resumption in this case and hence the circumstance, even if I had the power to approve it, does not exist.
Orders
The Tribunal orders:
1.On the application in respect of a retail shop lease between the parties relating to Part 372 South Street, O'Connor, Western Australia it is ordered that the application for the approval of the inclusion of clause 5.2 (where that clause is engaged by the events set out in clauses 5.2.3, 5.2.4 and/or 5.2.5) and clause 5.4.1 in the lease, is dismissed.
I certify that the preceding paragraph(s) comprise the reasons for decision of the State Administrative Tribunal.
DR B DEVILLIERS, MEMBER
4 JULY 2023
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