Premprop Pty Limited v Mandalong Projects Pty Limited
[2011] NSWADT 274
•21 November 2011
Administrative Decisions Tribunal
New South Wales
Medium Neutral Citation: Premprop Pty Limited v Mandalong Projects Pty Limited [2011] NSWADT 274 Hearing dates: 14 October 2011 Decision date: 21 November 2011 Jurisdiction: Retail Leases Division Before: R Fox, Judicial member Decision: 1. Declare that:-
(a) Each of the relocation notices dated 26 October 2010 in respect of the Mosman Village Plaza ("the Centre") is invalid and of no effect, and
(b) Each of the demolition termination notices dated 29 March 2011 is invalid and of no effect, and
(c) The Respondent has no entitlement to terminate either of the Leases for shops 10 & 12 ("The Shops") on the basis of the matter set out in the relocation notices or the demolition termination notices.
2. Order that the Respondent:-
(a) Be restrained from excluding the Applicant from the Shops, and
(b) Be restrained from interfering with the Applicant's occupation and use of the Shops, and
prior to the termination of the Applicant's leases on 31 st January 2014, and
(c) Supply all services reasonably necessary for the use and occupation of the Shops until that termination
3. Grant either party 7 days liberty to apply to Registrar to have matter relisted before me for oral argument limited to the validity of the Car Park Licence Termination Notices.
4. Grant either party 14 days liberty to file written submissions in relation to costs, and if so filed, the other party has 7 days to make written submissions in response, question of costs then to be decided on the papers. If no application made, no order for costs.
Catchwords: S34A Relocation Notice, s35 Demolition Notice, Separate Licence Legislation Cited: Retail Leases Act 2004 Cases Cited: McCann v Switzerland Insurance [2000] 203 CLR 579
Provincial Insurance Australia Pty Limited v Consolidated Wood Product Pty Limited 25 NSW LR 451
Ragless v Prospect District Council [1922] SASR 299
Re Church of St Jude [1956] SASR 46
Toll (FGCR) Pty Ltd v Alphapharm Pty Limited [2004] 209 CLR 166Texts Cited: Macquarie Dictionary (3rd Edition)
Commercial Leases - Duncan LBC (2nd Edition)Category: Principal judgment Parties: Premprop Pty Limited (Applicant)
Mandalong Projects Pty Limited (Respondent)Representation: Counsel
H Insall SC (Applicant)
C Leggat SC (Respondent)
A Pickles (Respondent)
Robert Heyblok (Applicant)
Herbert Geer Lawyers (Respondent)
File Number(s): 115127
REasons for decision
General Background
The Applicant is the Lessee of the premises in a shopping centre known as Mosman Village Plaza in Mandalong Road, Mosman. The Respondent Lessor is registered proprietor of the freehold. The Applicant's leases are for a term of 5 years (without option) to end on 31 January 2014. The Applicant conducts a very profitable real estate agency from the premises. Although premises used as real estate agency do not per se fall within the Retail Leases Act, the parties acknowledged that Mosman Village Plaza ("the Centre") is a retail shopping centre for the purposes of the Act and so, pursuant to the definition of "retail shop" in s3, they:-
"(b) are used, or proposed to be used, for the carrying on of any business (whether or not a business prescribed for the purposes of paragraph (a)) in a retail shopping centre."
and so fall within the Act.
The Premises amount to two separate shops on the first floor of the Centre, being shops 10 and 12. The leases are for the same term, and are in identical terms. They were entered into with the then registered proprietor of the Centre:- AMP Capital Investments Limited, but that entity sold the Centre to the Respondent in April of last year. The Leases are registered pursuant to the Real Property Act and consist of a form of lease which incorporates a registered Memorandum. The effect of that (and the Retail Leases Act), is that the terms of the right of occupancy of the premises can only be found by consulting the actual Lease and the Memorandum, and then considering how (if at all) the provisions are modified or affected by the Act.
It is clear that the Respondent purchased the Centre as part of a larger plan. It has also acquired a residential flat building next door. In October of 2010 it achieved development consent from Mosman Council for the "demolition of existing structures and construction of a mixed use retail and residential development containing 22 residential units, 6 retail units and basement car parking over 2 levels for 49 car parking spaces" on the two adjacent parcels.
The Relocation Notice
Within days of the development consent the Respondent served the Applicant with notices headed "Relocation Notice". These referred to the Development Approval and then verbatim stated the words of clause 18 of the Memorandum. The parts of that which are of interest in these proceedings are:-
" Redevelopment and Relocation
Lessor to give notice
18.1 If the Lessor wishes to extend, alter or refurbish the Centre in a manner which affects a minimum of five hundred square metres of the Centre or five adjacent premises and:
(a) requires the demolition or alteration of the Premises; or
(b) results in the Premises not being in a suitable location on the Centre for the permitted Use,
the Lessor may give notice to the Lessee that it requires this Lease to be surrendered on a date which is not less than ninety-two days after the date of service of the notice. This Lease is surrendered on the date specified in the Lessor's notice.
Surrender
18.2 On the surrender of this Lease the Lessee must:
(a) comply with clause 19 of this Lease as if the date of surrender was the Expiry Date; and
(b) deliver to the Lessor:
(i) the Lessee's copy of this Lease;
(ii) the surrender of this Lease duly executed by the Lessee;
(iii) all keys to the Premises.
Offer of alternative premises
18.3 If the Lessor gives a notice under clause 18.1, the Lessor must offer the Lessee a lease of alternative premises in the Centre:
(a) having an area not more than ten per cent greater than nor more than ten per cent less than the area of the Premises;
(b) located in a position in the Centre which is, in the reasonable opinion of the Lessor, no less suitable for the conduct of the Lessee's Business than the location of the Premises;
(c) on the same terms and conditions as this Lease except that:
(i) the commencement date will be the opening date as defined in clause 18.12
[Provisions for calculation and adjustment of rent]
Contents to offer
18.4 The Lessor's offer under clause 18.3 must:
(a) be in writing; and
(b) be given with the Lessor's notice under clause 18.1 or within sixty days after the notice is given; and
(c) state the estimated commencement date of the lease of the alternative premises; and
(d) be accompanied by drawings and specifications indentifying the alternative premises and the finishes and services the Lessor is providing.
Notice of acceptance of offer
18.5.................................................................................
Acceptance of offer
18.6.................................................................................
Claim for Compensation
18.7 A claim for compensation for the termination of this Lease must be made to the Lessor no later than ninety days after the opening date (or if the Lessee has not accepted the Lessor's offer to lease the alternative premises, no later than ninety days after the surrender date of this Lease). The Lessee's claim must be accompanied by all relevant documentation and other evidence required by the Lessor in support of the claim.
Payment of claim
18.8 If the Lessee submits a claim for compensation under clause 18.7, the Lessor must pay to the Lessee by way of compensation for the termination of this Lease:
The Lessee's reasonable costs of the relocation including but not limited to:
(i) costs incurred by the lessee in dismantling the Lessee's Property; and
(ii) the costs incurred by the Lessee in replacing, reinstalling and modifying finishes, fitting, equipment or services in the Premises to the standard existing immediately before the relocation but only to the extent that they are reasonably required in the alternative premises to which the Lessee's business is relocated, and
(c) an amount equal to the net trading profits that the Lessee might reasonably have expected to earn from the Lessee's Business between the surrender of this Lease and the date on which the Lessee could have commenced business in the alternative premises; and
(d) the reasonable legal costs and disbursements in connection with the Lessee's execution of the surrender of this Lease and the lease of the alternative premises; and
(e) an amount equal to the stamp duty attributable to the unexpired portion of this Lease unless the Lessee is able to obtain a refund of the stamp duty.
Abatement of rent
18.9 The Lessor must allow the Lessee an abatement of rent and other occupancy costs for any period that the Lessee's Business cannot be carried on in the Premises solely because of the relocation of the Lessee's Business to the alternative premises.
Abandonment of claim
18.10 If the Lessee does not submit a compensation claim under clause 18.7 on time, the Lessee is taken to have abandoned all claims it may have against the Lessor arising from the termination of this Lease and the relocation to the Lessee to the alternative premises.
Acceptance of compensation
18.11 The Lessee accepts that the compensation paid to it by the Lessor under clause 18.8 is in full satisfaction of any claims which the Lessee may have against the Lessor arising from the termination of this Lease and the relocation of the Lessee to the alternative premises.
Interpretation
18.12 In this clause 18:
(a) "opening date" means the next day after the later to occur of:
(i) the end of the forty-two day fitting out period for the alternative premises; and
(ii) the date of completion of the Lessor's construction works in respect of the extension, alteration or refurbishment of the centre or if those works are carried out in stages, the date of completion of the stage in which the alternative premises are situated
But if the Lessee commences trading in the alternative premises before either of the dates in sub-clauses (i) or (ii) then the opening date is the day on which the Lessee commences trading. A certificate from the Lessor's architect or project manager is prima facie evidence of the opening date.
(b) "Depreciation Formula" means:
..........................................................................."
The notices annexed a full plan of the new building as approved.
Section 34A of the Retail Leases Act
The notice made no reference to section 34A of the Retail Leases Act and certainly did not seek to interpose its' terms into it.
Section 34A states:-
" Relocation
If a retail shop lease contains provision that enables the business of the lessee to be relocated, the lease is taken to include provision to the following effect:
(a) The lessee's business cannot be required to be relocated unless and until the lessor has provided the lessee with details of a proposed refurbishment, redevelopment or extension sufficient to indicate a genuine proposal that is to be carried out within a reasonably practicable time after relocation of the lessee's business and that cannot be carried out practicably without vacant possession of the lessee's shop.
(b) The lessee's business cannot be required to be relocated unless the lessor has given the lessee at least 3 months written notice of relocation and that notice gives details of an alternative shop to be made available to the lessee within the retail shopping centre. Such a notice is referred to as a "relocation notice".
(c) The lessee is entitled to be offered a new lease of the alternative shop on the same terms and conditions as the existing lease except that the term of the new lease is to be for the remainder of the term of the existing lease. The rent for the alternative shop is to be the same as the rent for the existing retail shop, adjusted to take into account the difference in the commercial values of the existing retail shop and the alternative shop at the time of relocation.
Note: Paragraph (c) only specifies the minimum entitlements that the lessee can insist on. It does not prevent the lessee from accepting other arrangements offered by the lessor when the details of a relocation are being negotiated.
(d) If a relocation notice is given to the lessee, the lessee may terminate the lease within 1 month after the relocation notice is given by giving written notice of termination to the lessor, in which case the lease is terminated 3 months after the relocation notice was given unless the parties agree that it is to terminate at some other time.
(e) If the lessee does not give a notice of termination as referred to in paragraph (d), the lessee is taken to have accepted the offer of a lease as referred to in paragraph (c), unless the parties have agreed to a lease on some other terms.
(f) The lessee is entitled to payment by the lessor of the lessee's reasonable costs of the relocation, including but not limited to:
(i) costs incurred by the lessee in dismantling fittings, equipment or services, and
(ii) costs incurred by the lessee in replacing, re-installing or modifying finishes, fittings, equipment or services to the standard existing immediately before the relocation but only to the extent that they are reasonably required in the premises to which the lessee's business is relocated, and
(iii) legal costs incurred by the lessee.
[Dispute Resolution]
Note: This section does not prevent the parties negotiating a new 5 year lease for the purpose of relocating the lessee. Paragraph (f) only specifies the minimum entitlements that the lessee can insist on and the parties can come to some other arrangement for the payment or sharing of the lessee's relocation costs when the details of a relocation are being negotiated."
Clearly enough that section applies because no matter how clause 18 of the Memorandum is read, it provides for relocation. Thus the notice, if it was to have strictly complied with the Lease as modified by statute, should have offered premises elsewhere within the Centre " for the remainder of the existing term of the Lease " in accordance with section 34A (c).
The Applicant did not react to the notice in any way envisaged by clause 18 (or for that matter, in any way envisaged by section 34A), and continued to trade.
The Demolition Notices
Without considering the correspondence or negotiations which ensued, it is acknowledged by the parties that second notices were issued on 29 th March 2011 headed "Demolition Notice", which also attached the plans of the new development and (at first blush at least) complied with section 35 of the Act which states:-
" Demolition
(1) If a retail shop lease provides for termination of the lease on the grounds of proposed demolition of the building of which the retail shop forms part, the lease is taken to include provision to the following effect:
(a) The lease cannot be terminated on that ground unless and until the lessor has provided the lessee with details of the proposed demolition sufficient to indicate a genuine proposal to demolish that building within a reasonably practicable time after the lease is to be terminated.
(b) The lease cannot be terminated by the lessor on that ground without at least 6 months written notice of termination.
(c) If notice of termination on that ground is given to the lessee, the lessee may terminate the lease by giving the lessor not less than 7 days written notice of termination at any time within 6 months before the termination date notified by the lessor.
(2) If the lease is for a term of 12 months or less, the period of 6 months in subsection (1) (b) and (c) is shortened in each case to 3 months.
(3) If a retail shop lease is terminated on such a ground and demolition of the building is not carried out within a reasonably practicable time after the termination date notified by the lessor, the lessor is liable to pay the lessee reasonable compensation for damage suffered by the lessee as a consequence of the early termination of the lease, unless the lessor establishes that at the time notice of termination was given by the lessor there was a genuine proposal to demolish the premises within that time.
(3A) If a retail shop lease is terminated on such a ground, the lessor is liable to pay the lessee compensation for the fitout of the retail shop if the lessee is required under the lease to fit out the retail shop, whether or not the demolition of the building is carried out.
(4) For the purposes of this section, "demolition" of the building of which a retail shop forms part includes any substantial repair, renovation or reconstruction of the building that cannot be carried out practicably without vacant possession of the shop."
Each notice was accompanied by another document headed "Notice of Offer of Alternative Premises", which restated the substance of clause 18.3 of the Lease, and yet another document purporting to give 3 months' notice of termination of the car parking licence.
Orders Sought
The Applicant did not vacate and, instead, made the Application at hand seeking:-
"1. A declaration that each of the Relocation Notices is invalid and of no effect.
2. A declaration that each of the Demolition Termination Notices is invalid and of no effect.
3. A declaration that each of the Car Park Termination Notices is invalid and of no effect.
4. A declaration that the Respondent has no entitlement to terminate either of the Leases or the Car Park Licences on the basis of the matter set out in any of the Relocation Notices, the Demolition Termination Notices or the Car Park Termination Notices.
5. An order that the Respondent be restrained from excluding the Applicant from the Premises as from 29 September 2011 or thereafter, up to the termination of the Applicant's Leases on 31 January 2014.
6. An order that the Respondent be restrained from interfering with the Applicant's occupation and use of the Premises, prior to the termination of the Applicant's Leases on 31 January 2014.
7. An order that the Respondent be restrained from locking up the Car Park of otherwise preventing the Applicant's customers from using the Car Park prior to the termination of the Applicant's Leases on 31 January 2014.
8. An order that the Respondent remove the hoarding surrounding the Mandalong Road frontage of the Centre and be restrained from erecting any similar hoarding or fencing around the Centre prior to the termination of the Applicant's Leases on 31 January 2014.
9. An order that the Respondent remove the signage below the Premises and be restrained from erecting and similar signage on any part of the Centre that refers to a completion date for the Respondent's proposed new development prior to the termination of the Applicant's Leases on 31 January 2014."
Interim Relief?
The Applicant also sought Urgent Interim Relief:-
"1. An order that the Respondent be restrained from excluding the Applicant from the premises as from 29 September 2011 or thereafter, up to the termination of the Applicant's Leases on 31 January 2014;
2. An order that the Respondent be restrained from interfering with the Applicant's occupation and use of the Premises, prior to the termination of the Applicant's Leases on 31 January 2014;
3. An order that the Respondent be restrained from locking up the Car Park or otherwise preventing the Applicant's customers from using the Car Park prior to the termination of the Applicant's Leases on 31 January 2014;
4. An order that the Respondent remove the hoarding surrounding the Mandolong Road frontage of the Centre and be restrained from erecting any similar hoarding or fencing around the Centre prior to the termination of the Applicant's Leases on 31 January 2014;
5. An order that the Respondent remove the signage below the Premises and be restrained from erecting any similar signage on any part of the Centre that refers to a completion date for the Respondent's proposed new development prior to the termination of the Applicant's Leases on 31 January 2014."
Interim Orders
That Application was heard on 28 th September when Montgomery JM ordered (as far as relevant):
"1. Until further order of the Tribunal
(a) the Respondent is restrained from excluding the Applicant from the premises;
(b) the Respondent is restrained from interfering with the Applicant's occupation and use of the Premises.
2. The Respondent's application for an order that the Applicant provide an undertaking as to damages is refused.
3. Leave is granted to the Respondent to have the application for an order that the Applicant provide an undertaking as to damages relisted if the substantive application is not determined on 14 October 2011."
The matter was then listed for urgent hearing, and so it came before me on 14 th October.
Mr. Insall SC appeared for the Applicant and Mr. Leggat SC and Mr. Pickles appeared for the Respondent.
I had before me the following Affidavits:-
For the Applicant:-
T Foote - 13.09.2011 and 11.10.2.011.
For the Respondent:-
H Geer 14.09.2011,
J Nakat - 15.09.2011
S Stephens - 16.10.2011
C Rose - 28.09.2011, 07.10.2011 and 15.10.2011.
Much of this not insubstantial volume of paperwork had already been canvassed in the interim hearing, and cross examination before me was limited to Mr. Foote in relation to his agency's signage as seen from the outside of the building, and Mr. Rose in relation to the service of the notices.
The Applicant's Argument and Discussion.
Mr. Insall argued that the relocation notices were invalid because the Lessors did not at the time of the notice have "a wish to extend, alter or refurbish" as required by clause 18 to trigger the right to require relocation. If I understood that proposition correctly, it was the case that the Respondent's wish, as proven by the Development Consent, was for demolition and building anew as opposed to "extend, alter or refurbish".
He further argued that the notice was made bad by the Act because it did not offer lease of alternative premises within the Centre for the rest of the existing Term . The offer contained in the notice was, as required by clause 18, for a new Term commencing on a day when the building was completed.
He went on to say that the demolition notice was of no effect because:-
1. It purported to be issued pursuant to section 35 which only has operation if a lease "provides for termination of the Lease on the grounds of proposed demolition of the building" and clause 18 (which is the only clause in the Lease or Memorandum referring to cessation of the Lease) does not provide for surrender because there is to be a demolition, it only applies if there is a proposed extension, alteration or refurbishment.
2. Even if it is found to be such a clause (providing for demolition) then clause 18 requires the Lessor to have a wish to "extend, alter or refurbish", and the same argument was to the effect that the wish was to demolish, and not to carry out the process authorized by clause 18; and
3. If the Respondent pressed (as is seems to) the earlier relocation notices then that is so inconsistent with the demolition notices that the latter must fail.
The Major Issue
That led to the issue at core of the matter - does "alter, extend or refurbish" have a wide enough meaning to include "demolish"? The submissions then gave the Shorter Oxford definition of the various of the words, but in this regard I prefer to rely on the more local usage as found in the Macquarie Dictionary. It defines:-
" Extend ..........., to stretch out in various directions:- Expand, spread out in area"
(words which are perhaps a little more limited than the definition found in the Shorter Oxford on which Mr. Insall relied).
" Alter - "to make different in some particular; modify".
This word was considered in Re Church of St Jude [1956] SASR 46 at 53, where Hannan J stated:
"As applied to a building ... 'alter' means to modify and change, and it presupposes an existing building of which the fabric will remain substantially unchanged after the alterations have been completed."
These comments were approved by Kirby P (as he then was) in Provincial Insurance Australia Pty Limited v Consolidated Wood Product Pty Limited 25 NSW LR 451.
Other relevant definitions from the Macquarie Dictionary are:-
Fabric :- "framework or structure, building or edifice"
Refurbish (relevantly) is given as "To furbish again, renovate, polish up again or brighten".
Furbish :- " To restore to freshness of appearance or condition".
The argument is that none of these words extend to:-
"demolish or completely destroy"
they all imply that a substantial part of the structure remains intact.
Mr. Leggat, in his submissions, warned me against relying on too heavily on dictionary definitions, and quoted the approval of Mahony JA in Provincial Insurance :-
"To adapt the much cited comment of Holmes J, a word is the skin of a living thought, and it is the thought which the Court must ascertain and apply".
Nevertheless, it seems to me that the dictionary definitions of words to be interpreted are a proper starting point. All of the following words also have a role to play in the quest for the meaning of the trigger, and so it is appropriate to indicate that the Macquarie Dictionary gives:-
Renovate : - "To make new or as if new again: restore to good condition, repair".
Repair : - "to reinstate to good condition or sound condition after decay or damage amend".
Reconstruct :- "To construct again, rebuild".
Develop :- ".....5, to build on (land)".
Demolish :- "to throw or pull down (a building etc.); reduced to ruins".
In closing this aspect of his submissions Mr. Insall called in aid clause 10.12 of the Lease which gives the Applicant the right to exhibit signage on the exterior of the building:-
" notwithstanding clause 18"
so again bringing about the suggestion that the clause simply does not contemplate a complete destruction of the building, it envisions allowing parts of it to remain. He also drew comfort from the heading to clause 18 which is for "redevelopment and relocation" (and not "demolition"). Further, relocation, pursuant to section 34 of the Act, must be within the Centre for the remainder of the Term, something which would not be possible if the building was to be demolished.
The Respondent's Argument & Discussion
Against that Mr. Leggat's argument was that I should take the interpretation approach stated by Gleeson CJ in the matter of McCann v Switzerland Insurance [2000] 203 CLR 579 at paragraph 22:
"... [A]commercial contract... should be given a business like interpretation. Interpreting a commercial document requires attention to the language used by the parties, the commercial circumstances which the document addresses, and the objects which it is intended to secure."
and by Gleeson CJ, Gummow, Hayne, Callinan and Haydon JJ in Toll (FGCR) Pty Ltd v Alphapharm Pty Limited [2004] 209 CLR 166 at 179 to establish:-
"what a reasonable person would have understood "[the words] to mean".
The heading to clause 18 is "Redevelopment and Relocation", and Mr. Leggat proposed:-
"There is nothing in the Lease that provides that the headings are not to be taken into account in construing its terms. Neither is there any principle of statutory or contractual construction that would require them to be ignored."
It followed that, although clause 18 only uses "Relocation" once and does not use "Redevelopment" at all, the heading can be used to import a wider meaning to the words "alter, extend and refurbish" to also connote "demolition". He then relied on the words from Ragless v Prospect District Council [1922] SASR 299 at 311:
"(a) If the language of the sections is clear, and is actually inconsistent with the headings, the headings must give way.
(b) If the language of the sections is clear, but, although more general, is not inconsistent with the headings, the sections must be read subject to the headings.
(c) If the language of the sections is doubtful or ambiguous, the meaning which is consistent with the headings must be adopted."
That argument fails if the first of the three choices proposed in Ragless applies - if the language is clear, the headings have no effect on those words. Thus if the words "alter, extend or refurbish" do not, to a reasonable person, mean "completely destroy and start again" then I do not see how I can refer to the heading to seek to expand and alter that plain meaning.
If I were to say to a reasonable person "I have altered that building" I am satisfied that that would connote to him or her that it had been changed in some way; it would not bring to mind a building site covered with the rubble remains of a building. Even if "demolish" is an absolute form of alteration as Mr. Leggat argued, that is not what "alter" is generally regarded as meaning.
Mr Leggat then relied on the definition of "the Centre" in the Leases to propose that "alter" could mean the complete demolition of the building. This was so because that definition included the underlying land as part of the Centre, and so, even with all the buildings gone, there would still be the land, and so part of the Centre remained. I am not satisfied that such a wide meaning falls within the business like interpretation postulated in McCann . Reference to the commercial circumstances of the Leases, seems to me to limit the word to its' more ordinary meaning, which falls short of complete destruction. Sight must not be lost of the context of the word, which is with "extend" and "refurbish". The postulated reasonable (or perhaps reasonable business) person would not, in my view, think that he or she was witnessing such an alteration of the Centre as the whole was being bulldozed.
Again, the reasonable person, on standing in front of the land in 1-5 Mandolong Road, seeing the fully demolished remains of the Centre and the adjacent residential flat building, would look askance at being told "we are refurbishing it". The response would probably be "no, you destroyed it".
That, I am satisfied, is the ultimate answer:- the word "demolish", missing as it is from the introduction to clause 18(1) and from the context of the words "alter, extend and refurbish" as they refer to the Centre, and missing as it is from the heading of clause 18, is fatal to the Respondent's attempt at relying on clause 18 to establish a right to demolish.
I agree with Mr. Insall that "alter, extend or refurbish" have only one thing in common and that is to allow some part of the original structure to remain. Further, as Mr. Insall observed, there is internal support for that conclusion because clause 18 does speak of "demolition" in relation to the Premises, so underscoring the difference of the words "alter, extend and refurbish" as applied in that same clause to the whole building.
Respondent's Argument out of Section 35
As an alternative Mr. Leggat argued for a wider interpretation of the concept in clause 18 because it does not set any maximum affectation, it simply triggers when the minimum of 500 square metres or 5 shops adjacent are affected. Thus, it was argued, if it is possible to affect 100% of the Centre (because the clause sets no maximum), it must mean that the Centre can be demolished. It seems to me that this does not follow, simply because a 100% affectation would also occur were the Centre to be stripped back to walls, floor slabs and supporting internal structures. In other words (and again) the absence of the word "demolition" in reference to the Centre is fatal to this argument.
In my view, clause 18 (as amended by statute) does give a maximum level of affectation. That maximum is the point where all occupants who have exercised their choice of taking an immediate location elsewhere in the Centre have had their occupation requirements satisfied.
Mr. Leggat then advanced an interesting argument based on section 35 that a demolition notice need not envisage anything as drastic as a complete destruction. This comes from section 35 (4) which indicates that demolition can mean:-
"Any substantial repair, renovation or reconstruction of the building that cannot be carried out practicably without vacant possession of the shop."
So, obviously, it would not lie in the mouth of an aggrieved shopkeeper to complain that the whole Centre was not being demolished, as might well be the impression from the opening words of 35 (1):-
"Provides for termination of the Lease on the grounds of proposed demolition of the building of which the retail shop forms part".
That argument then developed to say that because clause 18 is triggered by a need to (in the circumstances under consideration) to affect more than 55% of the Centre for the purposes extension alteration or refurbishment, that fits within the concept of "substantial repair, renovation or reconstruction of the building" as set forth in section 35 (4). Thus that which is allowable under clause 18 amounts to demolition pursuant to section 35. It follows that the notice envisaged by clause 18 can apply to both a requirement for relocation as well as a requirement for demolition.
The drafter of clause 18 may have had this in mind, and if clause 18 stood alone, it could possibly have that effect. However, section 34A imports into any relocation notice a requirement of the availability of an alternative shop for the remainder of the term of the Lease. It is this requirement which must mean that the limitation on the rights of the Lessor (to force relocation) and the limitation on the rights of the Lessor effected by section 35 (in the case of proposed demolition) are mutually exclusive. It is at this point where the headings of the two sections of the Act give as good an indication as any of the difference.
It think it follows that a giver of the notice must make an election to either have the notice take into account the limitations of section 34 A, or, as an alternative, have it comply with the limitations imposed by section 35. The fact that both may be triggered by an intention to have a substantial effect on part of the building is irrelevant, because the end result of that intention is different. In the one case if it is to allow the occupant to almost immediately be elsewhere within the same building, and, in the other, it is for the occupant to quit the building for a substantial period of time. The fact that there may (after demolition) be a right to occupy some other part of the new building is irrelevant for the purposes of section 34A.
The proper analysis is that clause 18 (as modified by statute) gives the lessee a very clear election of either remaining within the building, or accepting that it is preferable to move out altogether, and take up the offer of later occupation in the finished product, for the remainder of the initial term. The Applicant has opted for the former.
The Disclosure Statements
Yet another consideration flows from the words of the High Court in Toll :-
"[40] The meaning of the terms of a contractual document is to be determined by what a reasonable person would have understood them to mean. That, normally, requires consideration not only of the text, but also of the surrounding circumstances known to the parties, and the purpose and object of the transaction."
Part of the context of any examination of a retail lease must be the prescribed Disclosure Statement. This is yet another document which should be interpreted from the view point of what a reasonable person embarking on the commitment of a lease would think it to mean. The relevant part is the page headed:-
"DETAILS OF ANY CHANGES OF PLANNED DEVELOPMENT OF THE CENTRE AND ANY ANTICIPATED DISTURBANCE TO TRADING:
The Lessor draws the Lessee's attention to likelihood of the following occurrences during the lease (including any extension):
Development
Specific Description of Nature of Potential Disturbance from Extension
The Lessor may redevelop the whole or part of the centre and may undertake works including the reconfiguration of existing shops and the creation of additional retail area.
Likelihood of Disturbance Occurring and Basis on Which the Assessment was Reached
It is possible that the development will occur. Whether or not the development proceeds will be dependent on:
(1) the Lessor finalizing its master plan for the precinct;
(2) the Lessor obtaining Council approval to the development.
Timing and Duration and effect of development (as far as can be predicted at this time)
The Lessor considers it is possible that the development will take place during the term of the lease. The Lessor cannot advise of the duration of the development as its plans have not yet been crystallized. If the development proceeds it is likely that the works will create noise and dust.
Section 34 (3) of the Retail Lease Act 1994 may limit a Lessee's claim for compensation if an event disturbing a Lessee's trade was brought to the attention of the Lessee in writing, before the lease was entered into. A general written statement made to the Lessee before the lease is entered into will not be enough to limit the liability of the Lessor. A statement must specifically describe the nature of the disturbance, include an assessment of the likelihood of the disturbance taking place (including an indication of the basis on which the assessment was reach) and have regard to its timing, duration and effect during the lease term. The Lessee should be aware that it is not always possible to predict the timing and duration of the disturbances with certainty."
The word "demolition" is notably absent from the whole page. Further, the absence of a reference to section 35 of the Act, in a context where section 34 (3) (a section which [in it's context] deals with interference with trade, not its' compete cessation) is summarized, seems to me to heavily underscore the fact that the possibility to which it draws attention does not extend to the wholesale demolition of the Centre.
The reasonable person on reading the Disclosure Statement would be directed to a risk that during the term of the Lease there might be works which would interfere with trade, and might require them to cope with the inconvenience of a short interruption to the trade followed by a relocation to elsewhere within the Centre, and that there would be compensation for that. It would not alert such a person to the risk of a complete break in trade for the time span of a complete demolition and rebuild, a process which would in all probability take more than a year. Further, should such a reasonable person not simply rely on the Disclosure Statement, but accept it as a guide which led to a careful reading of clause 18, they would still not have contemplated that they might be off the site for a year or more; at best (even ignoring the statutory insertion effected by section 34A(3)) they would have assumed that, within a matter of months, he or she would be trading from another location in the revamped shopping Centre.
Decision
The notices failed to comply with the requirements which would have made them valid for relocation, and the requirements which would have made them valid for demolition. The Applicant is entitled to orders substantially in accordance with prayers 1, 2, 5 and 6 (and 4, limited to the Leases).
Covenant for Quiet Enjoyment
It seems to me that different considerations come into play for prayers 7, 8 & 9. These seek to enforce the covenant for quiet enjoyment. The covenant is found in the opening words of clause 17, and (as is usual) is then quite seriously limited by it:-
"LESSOR'S OBLIGATIONS AND RIGHTS
Quiet enjoyment
17.1 While the Lessee complies with its obligations under this Lease, it may:
(a) occupy and use the Premises during the Term without interference by the Lessor; and
(b) use the Common Areas for the purposes for which they were intended,
Subject to the Lessor's rights reserved by this Lease.
Obligations
17.2 The Lessor must:
(a) conduct, manage and operate the Centre in a proper manner; and
(b) keep the Common Areas clean and in good order; and
(c) use reasonable endeavours to ensure the Utilities and Services operate during the Core Hours; and
(d) use reasonable endeavours to ensure the Lessor's plant and equipment in the Centre is in good working order; and
(e) use reasonable endeavours to maintain the Premises in a watertight condition.
Rights
17.3 The Lessor may:
(a) exclude or remove any person from the Centre; and
(b) restrict access to delivery and pick-up area, if the Lessor takes reasonable steps (except in emergencies) to minimize interference with the Lessee's Business; and
(c) permit functions, displays, parades, marketing and other activities in the Centre provided that those functions, displays, parades, marketing and other activities do not substantially impede access to or visibility of the Premises; and
(d) install and use a public address system throughout the Common Areas; and
(e) change the name or logo of the Centre; and
(f) advertise, publicise and promote the Centre in any way; and
(g) put up advertising or directional signs in or on the Center; and
(h) grant leases of licences to use any part of the Common Areas provided that those leases or licences do not substantially impede access to or visibility of the Premises or the Lessee's signage on the exterior of the Premises.
Lessor's rights to alter Centre
17.4 Subject to this Lease the Lessor may extend, alter, renovate or refurbish the Centre or any part of it and:
(a) erect additional floors above or below any part of the Centre; and
(b) change the location of the Common Areas or any facilities including mall furniture and planting in them; and
(c) change the layout, direction, level or position of any premises, malls, walkways, travelators, elevators, escalators or pathways; and
(d) change the tenancy mix of the Centre or relocate any existing tenants from their current positions in the Centre to other positions in the Centre; and
(e) construct new parking areas including above and below ground level; and
(f) vary the size, arrangement, location and direction of the Car park and vehicular driveways and ramps; and
(g) construct buildings and the Car Park; and
(h) temporarily close all or part of the Car Park if the Lessor thinks it is necessary to do so and in doing these things or carrying out these works, limit access to or close the Common Areas and allow workmen and their machinery on to the Common Areas, if the Lessor takes reasonable steps (except in emergencies) not to substantially impede access to or visibility of the Premises."
In this context Section 34 of the Act also has relevance:-
" Lessee to be compensated for disturbance
(1) A retail shop lease is taken to provide that if the lessor:
(a) inhibits access of the lessee to the shop in any substantial manner, or
(b) takes any action that would inhibit or alter, to a substantial extent, the flow of customers to the shop, or
(c) unreasonably takes any action that causes significant disruption of, or has a significant adverse effect on, trading of the lessee in the shop, or
(d) fails to take all reasonable steps to prevent or put a stop to anything that causes significant disruption of, or which has a significant adverse effect on, trading of the lessee in the shop and that is attributable to causes within the lessor's control, or
(e) fails to rectify any breakdown of plant or equipment under the lessor's care or maintenance, or
(f) in the case of a shop within a retail shopping centre, fails to adequately clean, maintain or repair the retail shopping centre (including common areas),
and the lessor does not rectify the matter as soon as reasonably practicable after being requested in writing by the lessee to do so, the lessor is liable to pay the lessee reasonable compensation for any loss or damage (other than nominal damage) suffered by the lessee as a consequence.
(2) In determining whether a lessor has acted unreasonably for the purposes of subsection (1) (c), due consideration is to be given to whether the lessor has acted in accordance with recognised shopping centre management practices.
(3) A retail shop lease may include a provision preventing or limiting a claim for compensation under the provisions implied by this section in respect of any particular disturbance if a written statement specifically drawing the attention of the lessee to details of the anticipated disturbance was given to the lessee before the lease was entered into, and the statement included the following:
(a)a specific description of the nature of the disturbance,
(b)a statement assessing the likelihood of the disturbance occurring, including an indication of the basis on which the assessment was reached,
(c)a statement of the timing, duration and effect of the disturbance, so far as they can be predicted.
(3A) A general statement to the effect that disturbances may occur during the term of the lease without setting out the matters referred to in subsection (3) is not a statement to which that subsection applies.
(4) The provisions implied by this section do not apply to any action taken by the lessor:
(a) as a reasonable response to an emergency situation, or
(b) in compliance with any duty imposed by or under an Act or resulting from a requirement imposed by a public or local authority acting under the authority of an Act."
In "Commercial Leases" (LBC) 2 nd Edition) Duncan states at page 116 (in relation to the previous section 15 (now section 43) of the Queensland Retail Shop Lease Act, which is in the same terms as section 34):-
"As a covenant for quiet enjoyment invariably appears in a retail shop lease, the necessity for such a provision in the Statute, given the state of the general law [which provides remedies], is questionable."
The point was not argued, but it seems to me that section 34 may operate to actually place a limit on the remedies which might otherwise be available to the Lessee claiming a breach of the covenant. Notably, section 34 does not use words to the effect:- "in addition to any other remedies at law", but then again, it does not use the word "only" in its' opening either. Whatever be found to be the ultimate effect, because the section inserts its words giving a remedy into the Leases, as a matter of logic that remedy should be considered first, and only if the compensation which it gives is shown to be inadequate is it appropriate to explore the wider powers given the Tribunal by section 72 of the Act, seeking other remedies based on common law.
In my view the statutory right to compensation for deleterious interference with the prominence of the premises will be an adequate remedy so long as the respondent so places its' hoardings that there is reasonably safe pedestrian access to the premises, and keeps all usual services (such as power, water, toilets etc.) available. Reduction in business flowing from that kind of limitation is the very thing which section 34 compensates.
It follows that, perhaps for entirely different reasons, I agree with Mr. Leggat that prayers 8 and 9 should be declined. Prayer 8 seems to focus on the customer car park (as opposed to the indentified parking spaces covered by the licences, to which I will turn next). The interference sought to be prohibited is simply allowed by clause 17.4(e), (f) and (h), and possibly falls within the section 34 compensation regime. See section 34(1) (c) and (d), once it has been established that the notice required to be given by the lessee was not heeded by the lessor.
The question of entitlement to that compensation, or its quantum was not raised in these proceedings; I only raise the matter to indicate why I decline to make the orders sought.
The Car Parking Licenses
Lastly, there are the car parking Licences. These are granted by clause 29 of the Lease and cover 5 spaces. As far as relevant the text is:-
" Car Park Licence
29.1 Licence to Use
The Lessor grants to the Lessee the right during the Term of this Lease or any sooner determination to the use of [5 in all] car park space (Lessee's Car Park Space) in such a location as is agreed by the parties acting reasonably.
29.2 Licence Fee
The Lessee must pay to the Lessor $105.00 (plus GST) per month (Licence Fee) for each of the Lessee's Car Park Space in the same manner as at the same time as the Base Rent is payable under the Lease. The Licence Fee shall increase at the same time and in the same manner as any increases to the Base Rent.
29.4 No Exclusive Possession
The Lessee acknowledges that it is not entitled to exclusive possession of the Lessee's Car Park Space and the Lessor may enter the Lessee's Car Park Space at such times and for purposes as the Lessor considers appropriate.
29.9 Termination
(a) In the event that the Lessor requires the Lessee's Car Park Space for redevelopment purposes, the Lessor may terminate this licence by giving not less than 3 months written notice to the Lessee.
(b) The Lessor shall have no obligation to grant the Lessee another licence for car park spaces in this clause 29.9 applies"
The Memorandum defines "Premises" in clause 1.1 and item 1D of the Reference Schedule to the Leases to be the identified shop, and makes no reference to the car parking spaces. It follows that those are not governed by the terms of the leases but instead are governed by the specific requirements and limitations of clause 29.
In the preliminaries to the hearing I indicated that, in my view, the wide definition of Retail Shop Lease as found in section 3 of the Act:-
"'Retail shop lease' or 'lease' means any agreement under which a person grants or agrees to grant to another person for value a right of occupation of premises for the purpose of the use of the premises as a retail shop:
(a) whether or not the right is a right of exclusive occupation, and
(b) whether the agreement is express or implied, and
(c) whether the agreement is oral or in writing, or partly oral and partly in writing.
Note: Sections 6, 6A and 84B limit the retail shop leases to which this Act applies."
means that it is very likely that any document purporting to be a licence of any part of a retail shop, is itself a retail shop lease. The point was not argued, but the prospect remains that clause 29 is a retail lease within a retail lease.
My preliminary view is that instead of these spaces being used ' for the purposes of a retail shop' , they are used as an adjunct to a retail shop. It has long been my view that, if a shop is granted development approval by the Local Council on the basis that there be a number of onsite car parking spaces available, then that can have the effect of making those car parking spaces part of the retail enterprise, and that, in turn, makes those spaces part of the retail shop premises. Some support for this conclusion is found in the specific exception found in the Retail Leases Act of car parking spaces from the definition of "lettable area" (see section 3). However, I have no evidence in this matter about the approval given the premises for their present trading purposes, and so am not able to draw a conclusion.
If the car parking spaces are not part of the retail shop, then it appears that the notices of termination given are valid. If I am wrong in this assessment, and it transpires that the car parking spaces are so closely related to the retail enterprise that they themselves are a retail shop then I note Mr. Insall's proposal that the notices to terminate the car park licences were invalid for the same reason as those issued in respect of the leases were invalid. However, the licences (see clause 29.9) are terminable in the event that the Lessor requires the space "for redevelopment purposes". Mr Leggat argued that the word "redevelopment" is wide enough to cover "demolition". I agree, because the word is used alone and not in conjunction with "relocation" as is it in the heading of clause 18. It follows that I do not accept that these notices are bad because of the limits of the section 34A trigger.
If the Act applies to the Licences, then it follows that the notices, triggered by a desire to demolish, are in truth demolition notices, and so do not fail because they do not comply with section 34A. However they fail because they do not comply with section 35 because they do not give 6 months notice.
I stress that the point was not argued, and consequently I make no order in relation to the car park Licences other than to simply refuse to make the declaration sought. However, in the interest of achieving a result between the parties, I do grant them 7 days liberty to apply to the Registrar to have the matter listed before me for oral argument; the matter should not take more than 2 or 3 hours. I have given an admittedly short time period in this regard, the whole matter is of obvious commercial significance, and consequently, just as the matter was granted an urgent hearing, so should this aspect of the matter be dealt with expeditiously.
Damages
Mr Leggat's final submissions were that I should not make the restraining orders because "there is an adequate remedy in the payment of a sum of money" and because of the hardship which would be suffered by the Respondent. The Respondent is committed to the development, has called other shops to be vacant, and cannot obtain construction finance until there is total vacancy. That, in my view is relevant. The Respondent has to be regarded as fully on notice of the leases which "clog" the title, and so aware of the fact that two of the shop leases did not terminate until 2014. Those Leases are, after all, the Applicant's title to be in the shop for a term, I take the law to be that that right of occupancy should not be interfered with without very good cause indeed. Mere financial hardship to the lessor is not, in my view, even if I had a discretion (which I doubt that I do) such good cause.
I make the following orders:-
1. Declare that:-
(a) Each of the relocation notices dated 26 October 2010 in respect of the Mosman Village Plaza ("the Centre") is invalid and of no effect, and
(b) Each of the demolition termination notices dated 29 March 2011 is invalid and of no effect, and
(c) The Respondent has no entitlement to terminate either of the Leases for shops 10 & 12 ("The Shops") on the basis of the matter set out in the relocation notices or the demolition termination notices.
2. Order that the Respondent:-
(a) Be restrained from excluding the Applicant from the Shops, and
(b) Be restrained from interfering with the Applicant's occupation and use of the Shops, and
prior to the termination of the Applicant's leases on 31 st January 2014, and
(c) Supply all services reasonably necessary for the use and occupation of the Shops until that termination
3. Grant either party 7 days liberty to apply to Registrar to have matter relisted before me for oral argument limited to the validity of the Car Park Licence Termination Notices.
4. Grant either party 14 days liberty to file written submissions in relation to costs, and if so filed, the other party has 7 days to make written submissions in response, question of costs then to be decided on the papers. If no application made, no order for costs.
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Decision last updated: 21 November 2011
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