Pyrmont Point Pty Ltd v Westacott

[2016] NSWCA 33

Court of Appeal

Supreme Court

New South Wales

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• Amendment notes

Medium Neutral Citation:	Pyrmont Point Pty Ltd v Westacott [2016] NSWCA 33
Hearing dates:	1 February 2016
Date of orders:	09 March 2016
Decision date:	09 March 2016
Before:	Ward JA at [1]; Leeming JA at [50]; Emmett AJA at [92]
Decision:	1. Leave to appeal is granted and to the extent necessary leave is given to extend the time for the filing of the application for leave to appeal to the date on which it was filed. 2. Appeal dismissed with costs.
Catchwords:	STATUTORY INTERPRETATION – Retail Leases Act 1994 (NSW), s 6(1)(b) – meaning of “leases for a term of 25 years or more” where applicant’s registered lease had resulted from the exercise of an option contained in an earlier lease
Legislation Cited:	Civil and Administrative Tribunal Act 2013 (NSW), s 83(1) Interpretation Act 1987 (NSW), ss 7, 8(b), 33, 34 Real Property Act 1900 (NSW), s 42(1)(d) Real Property Act 1886 (SA), ss 153, 154 Retail Leases Act 1994 (NSW), ss 3, 4, 5, 6, 6A, 7, 8, 11, 16(1), 31, 32, 44(5), 80 Supreme Court Act 1970 (NSW), ss 75A, 101(2)(e)
Cases Cited:	Alcova Holdings Pty Ltd v Pandarlo Pty Ltd (1988) 15 NSWLR 53 Chan v Cresdon Pty Ltd (1989) 168 CLR 242 Cooper Brookes (Wollongong) Pty Ltd v Federal Commissioner of Taxation (1981) 147 CLR 297 Gnych v Polish Club Ltd [2015] HCA 23; 89 ALJR 658 Mercantile Credits Ltd v The Shell Company of Australia [1976] HCA 9, (1976) 136 CLR 326 Moweno Pty Ltd v Stratis Promotions Pty Ltd [2003] NSWCA 376 Pyrmont Point Pty Ltd (ACN 145 199 784) trading as “Red Bottle” v Albert Victor Westacott [2014] NSWCATCD 40 Pyrmont Point Pty Ltd v Albert Victor Westacott [2014] NSWCATCD 42 Pyrmont Point Pty Ltd v Westacott [2014] NSWCATAP 106 Pyrmont Point Pty Ltd v Westacott [2015] NSWSC 783 Radaich v Smith (1959) 101 CLR 209
Texts Cited:	A Bradbrook, C Croft and R Hay, Commercial Tenancy Law (3rd ed, 2009, LexisNexis Butterworths) New South Wales Legislative Assembly, Parliamentary Debates (Hansard), 20 April 1994
Category:	Principal judgment
Parties:	Pyrmont Point Pty Limited (Applicant) Albert Victor Westacott (Respondent)
Representation:	Counsel: DH Murr SC (Applicant) DA Smallbone (Respondent)   Solicitors: JDK Legal (Applicant) RJI Legal (Respondent)
File Number(s):	2015/00194997
Publication restriction:	Nil
Decision under appeal	Court or tribunal: Supreme Court of New South Wales Jurisdiction: Common Law Division Citation: [2015] NSWSC 783 Date of Decision: 18 June 2015 Before: Wilson J File Number(s): 2014/316028

HEADNOTE

[This Headnote is not to be read as part of the judgment]

In 2010 the applicant Pyrmont Point Pty Ltd (Pyrmont) acquired, by way of assignment, a lease of premises of which the respondent, Mr Westacott, is lessor. That lease had resulted from the exercise of an option contained in an earlier lease (the original lease), which was for a term of 5 years with 4 options to renew of 5 years each.

On application by Pyrmont in 2013 for a rent review under s 32 of the Retail Leases Act 1994 (NSW) for the purposes of the exercise of a further option to renew, the then Administrative Decisions Tribunal, now the NSW Civil and Administrative Tribunal (NCAT), held that the Retail Leases Act did not apply to Pyrmont’s lease because it was for a term of 25 years within the meaning of the exclusion in s 6(1)(b). Section 6(1)(b) excludes from the Retail Leases Act “leases for a term of 25 years or more (with the term of a lease taken to include any term for which the lease may be extended or renewed at the option of the lessee)”. The Appeal Panel of NCAT and, subsequently, Wilson J in the Common Law division of the Supreme Court, agreed that the effect of s 6(1)(b), on the basis of the plain meaning of the language there used, was that the Retail Leases Act did not apply to Pyrmont’s lease.

Pyrmont sought leave to appeal from her Honour's decision, arguing that “lease” in s 6(1)(b) directs attention only to the term (including any option term) of Pyrmont's registered lease, with the effect that the deemed term did not exceed 20 years; or, in the alternative, that the use of the singular “any term” in s 6(1)(b), in contrast to the different statutory language in ss 6A(2) and 16 of the Retail Leases Act, permitted regard to be had to only the next option to renew but not a second or later option to renew in the relevant lease.

Held: granting leave to appeal but dismissing the appeal with costs:

(1) by Ward JA at [44]-[45], Leeming JA at [50] and Emmett AJA at [111], the word “lease” in s 6(1)(b) does not refer to the ordinary concept of a lease at law but to the concept of a lease contained in the definition of “lease” in s 3, that being “any agreement under which a person grants or agrees to grant to another person for value a right of occupation”. This definition is inconsistent with the notion that each exercise of an option to renew brings into existence a new “lease” for the purposes of s 6(1)(b).

(2) by Ward JA at [46]; [49], Leeming JA at [50] and Emmett AJA at [111], the primary judge did not err in finding that the Retail Leases Act did not apply to Pyrmont’s lease. The relevant agreement to grant a right of occupation, for the purposes of s 6(1)(b), was that recorded in the original lease, because that was the commencement of the agreement to grant a right of occupation. The term of that agreement, which consisted of the original lease term plus any terms for which there was an option to renew provided for under that lease, was 25 years.

Judgment

1. WARD JA: The applicant, Pyrmont Point Pty Limited (Pyrmont Point), is the lessee of a bottle shop in Pyrmont. The respondent, Mr Westacott, is the lessor of the premises. Pyrmont Point acquired its leasehold interest in the premises in 2010 by way of assignment from another company, Pirrama Pty Ltd (Pirrama).

2. In 2013, prior to exercising an option to renew its lease, Pyrmont Point sought to invoke the jurisdiction of the then Administrative Decisions Tribunal (now the NSW Civil and Administrative Appeals Tribunal or NCAT) for the appointment pursuant to s 32 of the Retail Leases Act 1994 (NSW) of a specialist retail valuer to value the current market rent of the premises for the purposes of the option. That application was then amended, after Pyrmont Point had in fact exercised the option, to an application to similar effect under s 31 of the Retail Leases Act.

3. Mr Westacott denied that the lease was governed by the provisions of the Retail Leases Act and hence maintained that there was no jurisdiction in the Tribunal to appoint such a valuer. That jurisdictional issue was in due course determined in Mr Westacott’s favour (Pyrmont Point Pty Ltd (ACN 145 199 784) trading as “Red Bottle” v Albert Victor Westacott [2014] NSWCATCD 40; Pyrmont Point Pty Ltd v Albert Victor Westacott [2014] NSWCATCD 42); as was an appeal brought by Pyrmont Point to the Appeal Panel of NCAT (Pyrmont Point Pty Ltd v Westacott [2014] NSWCATAP 106).

4. Pyrmont Point then brought an application in the Common Law Division of the Supreme Court, seeking leave to appeal on a question of law from the decision of the Appeal Panel. Such leave was required pursuant to s 83(1) of the Civil and Administrative Tribunal Act 2013 (NSW). That application was refused for the reasons set out in the judgment of Wilson J published on 18 June 2015 (Pyrmont Point Pty Ltd v Westacott [2015] NSWSC 783).

5. Pyrmont Point now seeks leave to appeal from her Honour’s decision, such leave being necessary pursuant to s 101(2)(e) of the Supreme Court Act 1970 (NSW). Pyrmont Point also seeks leave to extend the time for filing its summons in this Court.

6. The central issue for determination (leaving aside an issue raised by Mr Westacott in a notice of contention filed by him in these proceedings) is one as to the statutory construction of s 6(1)(b) of the Retail Leases Act. Mr Westacott opposes leave to appeal. The application for leave was heard concurrently with argument on the substantive appeal (if leave be given), by direction of Beazley P.

7. The Court indicated at the hearing that it would not consider it appropriate, in the event that the appeal were to succeed, to proceed to consider the issue raised in the notice of contention (that being as to whether, even if the Retail Leases Act does apply, ss 31 and 32 do not apply in this case because the rent for the relevant renewed term had already been determined and agreed by the parties in accordance with the process provided for under the lease such that there was no scope for the operation of those statutory provisions) since that issue, though raised before the Tribunal and the Appeal Panel, was not determined by either. Accordingly, no oral submissions were heard on that issue.

8. For the reasons set out below, I am of the view that leave to appeal should be granted and the appeal dismissed with costs.

Background

9. The relevant background has largely been set out in the brief introduction above. At the outset, I should make clear that in the description of events that follows I am using the term “lease” in the sense that it is understood in accordance with the law of real property and not (if there be, as I think there is, a relevant difference) as the term is defined in the Retail Leases Act. That is a critical distinction when one comes to determine the issue in dispute between the parties in these proceedings.

10. The only additional matters to note at this point are as follows.

11. First, the lease the benefit of which was acquired by Pyrmont Point in September 2010 was itself a lease that had come into existence on the exercise of an option for renewal contained in an earlier lease (to which I will refer as the “original lease”). Pirrama had first acquired a leasehold interest in the premises in May 2006 when it took an assignment of the original lease.

12. The original lease was for a term of five years from 19 March 2004 to 18 March 2009. It provided for four options to renew, each for a period of five years.

13. Second, when Pirrama exercised the first of those options to renew, giving rise (as a matter of real property law) to a new lease commencing on 19 March 2009, a new lease was prepared and executed by the parties (and duly registered). That lease (to which I refer as the “second lease”) was the lease that was current at the time of the commencement of this dispute. It was for a term of five years and was relevantly on the same terms as the original lease but provided for an option to renew “for a period of 3 further terms of 5 years each”.

14. Third, each of the original and second leases made clear that the intent was that if all options for renewal were exercised the Termination Date of the final term would be 18 March 2029.

15. Finally, the now current lease is that which commenced on 19 March 2014, on the exercise by Pyrmont Point of the option for renewal contained in the second lease. I will refer to this as the “third lease” or current lease.

Relevant statutory provisions

16. Section 6(1) of the Retail Leases Act provides as follows:

6   Leases to which Act does not apply

(1)   This Act does not apply to any of the following leases of retail shops:

(a)   (Repealed)

(b)   leases for a term of 25 years or more (with the term of a lease taken to include any term for which the lease may be extended or renewed at the option of the lessee),

(c)   leases entered into before the commencement of this section,

(d)   leases entered into under an option granted or agreement made before the commencement of this section,

(e)   any other for lease of a class or description prescribed by the regulations as exempt from this Act.

17. Under the definitions section of the Retail Leases Act, s 3, the terms “retail shop lease” and “lease” are defined compendiously as follows:

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.

Tribunal/Appeal Panel decisions

18. Westacott objected to the appointment of a specialist valuer on the basis that the lease was excluded from the Retail Leases Act by reason of s 6(1)(b) of the Retail Leases Act. Its objection was on the basis that the lease had “commenced as a lease for five years with four options to renew of five years each” and, as such, was excluded as a lease for 25 years or more.

19. On 21 November 2013, the Tribunal ordered the hearing of a threshold jurisdictional question, namely the question as to whether s 6(1)(b) of the Retail Leases Act had the effect of excluding the second lease from being a “retail shop lease” under the Act.

20. On 25 March 2014, the Tribunal, constituted by a senior member, held that it lacked jurisdiction because the leases between the parties fell within the scope of s 6(1)(b) of the Retail Leases Act(Pyrmont Point Pty Ltd (ACN 145 199 784) trading as “Red Bottle” v Albert Victor Westacott [2014] NSWCATCD 40).

21. In the Tribunal’s reasons, at [11], it said:

It might have been argued by the applicant [Pyrmont Point] that once the head lease had expired the terms of the current lease and remaining options became less than 25 years and that para 6(1)(b) therefore does not apply. But such an interpretation of the provision is not open because of the words used. The intention of the draftsman is not to limit the application of the paragraph to the current lease term plus the terms of the remaining options for renewal is clear. It does not refer to “lease” but to “leases” and makes it clear that in deciding whether the paragraph applies one has to take the total of the terms of the original lease and the terms of any further leases under any options for extension or renewal, whether already exercised or remaining yet to be exercised. That total is 25 years.

22. Accordingly, the Tribunal held that s 6(1)(b) applied to exclude the application of the Act to the original lease, the current lease and any other lease that might arise if the lessee further exercised the option to renew the lease.

23. That was the first Tribunal decision. On 8 April 2014, of its own motion, the Tribunal (constituted by a different senior member) published a second Tribunal decision (Pyrmont Point Pty Ltd v Albert Victor Westacott [2014] NSWCATCD 42), similarly concluding that the Retail Leases Act did not apply to the lease. (The reason for a second decision was apparently that in the first it had been clear that the senior member had been of the misapprehension that no submissions had been filed on behalf of Pyrmont Point). In the second Tribunal decision (at [14]) it was said that the plain and literal meaning of s 6 was that the Act did not apply to any lease for a term of 25 years and that the term of the lease was to be taken to include “any term for which the lease may be … renewed at the option of the lessee”.

24. On 17 April 2014, Pyrmont Point filed a notice of appeal seeking orders setting aside both Tribunal decisions. The parties agreed that both of the decisions should be set aside: the first decision being flawed because the Tribunal’s decision made clear that the Tribunal had not given consideration to any of the submissions filed by Pyrmont Point and the second on the ground that, on delivery of the first decision, the Tribunal was functus officio.

25. Following the abolition on 1 January 2014 of the Administrative Decision Tribunal and the assumption of its functions by NCAT, an appeal panel considered the parties’ submissions as to the construction of s 6(1)(b) and concluded that the construction advanced by Mr Westacott was correct (Pyrmont Point Pty Ltd v Westacott [2014] NSWCATAP 106). At [68]-[69] the Appeal Panel said:

In reaching this conclusion, we take less account than the parties did of the implications of the word “lease” being used in both the singular and the plural forms within section 6. Although Mr Murr’s contention that an option lease must be regarded as a new lease, distinct from the lease from which it originated has much to recommend it, it does not determine the issue before us because section 6(1)(b) operates, as we interpret it, by attributing a notional term to the initial lease. The provision artificially inflates the initial term of the lease under consideration – on the facts before us, from five to twenty-five years.

In fact, the crucial question in this case as to whether the singular should be taken to include the plural does not relate to the word “lease” but to the phrase “any term” in section 6(1)(b). In our opinion, both in common parlance and under section 8(b) of the Interpretation Act, this should be construed as “any term or terms”. [my emphasis]

26. In other words, the Appeal Panel (at [66]) accepted that, when deciding whether a lease falls within the category leases for a term of 25 years or more, one is required by the parenthetical phrase in sub-s 6(1)(b) to aggregate with its initial term any subsequent term or terms for which it may be extended or renewed at the lessee’s option, the total thereby produced constituting the “notional term” of the lease. The Appeal Panel considered that this was a concept of relevance only to s 6(1)(b).

27. Having noted the defect in the procedure adopted by the Tribunal when preparing and delivering the first decision, the Appeal Panel recorded its conclusion that the first Tribunal’s order was correct in law and dismissed Pyrmont Point’s appeal.

28. The decision the subject of the present appeal is the decision of Wilson J to refuse Pyrmont Point leave to appeal from the dismissal by the Appeal Panel of its appeal ([2015] NSWSC 783). Her Honour did so on the basis that Pyrmont Point could not make good its appeal against the orders of the Appeal Panel and that since the appeal to the Supreme Court could not succeed leave to appeal should be refused. In the present proceedings Pyrmont Point does not contend that such an approach was inappropriate but challenges the correctness of her Honour’s construction of the relevant statutory provision.

Judgment now sought to be challenged

29. Her Honour at [33] posed the question of statutory construction as being “whether the section catches a lease which, cumulatively by reference to the available options for extension or renewal, has a term of 25 years or more” and answered that question in the affirmative, on the basis that the plain meaning of the language used had that effect. Her Honour considered that as a matter of logic, by including in the definition of a 25 year lease those leases containing an option for renewal or extension by the lessee only, s 6(1)(b) clearly aimed to achieve a balanced outcome and said that, without that exclusionary provision, lessors who provided a lease with options exercisable by the lessee capable of amounting to a lengthy tenancy would be bound by statutory provisions intended to regulate shorter term tenancies. Her Honour said that, since the lessor has no control over the exercise of the option by the lessee under relevant leases, this could result in a situation of prejudice to lessors ([40]).

Application for leave to appeal

30. Pyrmont Point maintains that her Honour erred in concluding that s 6(1)(b) did not apply to the lease under consideration for two reasons. Its first, and principal, argument is that the lease to be considered for the purposes of determining its term is the lease that came into existence on the exercise of the option and not the original lease. In the alternative, it argues that the use of the singular “term” in the expression “any term” in s 6(1)(b) means that the relevant term is taken only to include the term of the current lease plus the single term for which the current lease is renewable.

Submissions

31. Pyrmont Point argues that each lease that arises on the exercise of an option to renew is a new and separate lease (a contention which as a matter of real property law is unarguably correct) and that s 6(1)(b) in terms applies to a single lease and, if there is a series of leases, to each one individually. It maintains that, for the purposes of determining whether the Retail Leases Act does or does not apply to a particular lease, one does not aggregate the lease and options into a single lease. It thus submits that the deemed term of what I have referred to as the second lease (the term of which commenced in March 2014), however construed, did not exceed 20 years.

32. On its alternative argument, s 6(1)(b) permits regard to be had only to the next term in respect of which the lease might be extended, and not any additional extensions or renewals. As it was put in written submissions, “more remote options periods are disregarded”. The submission is founded, as noted above, upon the singular “any term” in the bracketed words in s 6(1)(b), and supported by the different language of s 16(1), which refers to “any further term or terms provided for” in the agreement or option. That difference in language is said to displace the rule of construction in s 8(b) of the Interpretation Act 1987 (NSW). On this argument, the term of the second lease (which Pyrmont Point maintains is the relevant “lease” for the purposes of s 6(1)(b) of the Act) is five years (the actual term of the second lease) plus five years (being the term for which the second lease may be renewed on the exercise of the first option to renew that is contained in that second lease); not five years plus the aggregate of the three option terms of five years each.

33. Mr Westacott argues that Pyrmont Point’s submissions misconceive the starting point for the purposes of determining whether s 6(1)(b) applies. He maintains that s 6(1)(b) supplies its own concept of the lease, different from the common law concept of “lease”.

34. Mr Westacott submits that it defeats the purpose of the exclusionary clause (s 6(1)(b)) to say that when one looks forward (i.e., at the outset of the original lease), there is an exclusion from the operation of the Retail Leases Act but that on the renewal of that lease the exclusion “evaporates” and points to the difficulty in discerning any legislative policy that would be served by the lease being outside the scope of the Act for the original term but included within the scope of the Act for subsequent terms.

35. Rather, Mr Westacott maintains that what s 6(1)(b) does is to aggregate the original term and the four option terms as “the lease” and that the successive terms are, on the special basis indicated by s 6(1)(b), still “the lease”. In other words, it is submitted that s 6(1)(b) has both a forward looking and backward looking operation. Mr Westacott argues that this departure from common law concepts is indicated by the expressed application of s 6(1)(b) both to extension as well as to renewal; and he submits that the statute adopts a concept applying indiscriminately to extensions of the original term and to additions of further terms by renewal. In pointing to the fact that s 6(1)(b) applies to extensions as well as renewals, Mr Westacott submits that:

An extension continues the original lease, whereas a renewal brings into existence a new lease. The statute is adopting a concept which applies indiscriminately to extensions of the original term and the addition of further terms by renewal. It aggregates the terms, both for the original and for the succeeding optioned terms, as one “lease” for the purpose of this section.

36. As to Pyrmont Point’s alternative argument, Mr Westacott submits that there is nothing in the conceptual framework in the Retail Leases Act to prevent the ordinary meaning of the word “any” from applying both to singular and plural cases. Mr Westacott relies on the Interpretation Act and also the ordinary meaning of “any” term which comes into existence; he submits that those words were apt to include leases brought into existence by the exercise of second and subsequent options. He maintains that, for the purposes of calculating whether the 25 year term exclusion applies, all of the option terms must be taken into the calculation and that the original term and successive terms for which the tenant has options to renew are to be aggregated and regarded together as a lease for the entire period of the original and succeeding option or extension terms. It is submitted that Pyrmont Point’s construction would deprive the exception of the real and substantial effect that it is intended by the legislature to have.

37. Following the conclusion of the hearing, further submissions were invited by the parties as to the import of the definition of “retail shop lease” and “lease” in s 3 on the construction of s 6(1)(b). Written submissions were filed by Mr Westacott, with which Pyrmont Point agreed, though it added that the construction for which he contends is evident in the note to the said definition and that notes do not form part of the Act.

38. For Mr Westacott it was submitted that while, at first blush, the term “leases of retail shops” in the opening words of s 6(1) would seem to involve a broader concept than a retail shop lease (since theoretically a lease of premises which are a retail shop might be given for a purpose other than use as a retail shop), the definition of “retail shop” which is framed in terms of use, suggests that the words “of retail shops” in s 6(1) are excess verbiage and redundant.

39. He points to the fact that the definition expands the concept of “lease” to take in things which do not constitute a lease under the general law (such as mere licences or non-exclusive licences to occupy).

Determination

40. In the course of argument reference was made to Mercantile Credits Ltd v The Shell Company of Australia [1976] HCA 9; (1976) 136 CLR 326, where the question for consideration was whether a right of renewal gained priority over a mortgage by reason of the prior registration of the lease. Gibbs J, as his Honour then was, said at 345-346 that “the right of renewal is so intimately connected with the term granted to the lessee, which it qualifies and defines, that it should be regarded as part of the estate or interest which the lessee obtains under the lease, and on registration is entitled to the same priority as the term itself”. In that case, his Honour considered that the respondent’s right of renewal prevailed over the appellant’s mortgage and the rights as mortgagee could only be exercised subject to the right of renewal and any extension resulting from the valid exercise. Stephen J came to a similar conclusion.

41. In that context, Pyrmont Point referred to Alcova Holdings Pty Ltd v Pandarlo Pty Ltd (1988) 15 NSWLR 53, where Bryson J (as his Honour then was) considered a situation where a tenant had entered into possession under an unregistered and unregistrable lease for a period of two years containing an option for renewal for a further two years; the option was exercised but no formal grant was made; and a purchaser from the landlord became the registered proprietor with actual knowledge of the relevant matters.

42. Bryson J, on an application by the tenant for specific performance of the lease, held that under the general law the tenant had an equitable leasehold estate in the land for the renewed term of two years and that such an equitable estate was, within s 42(1)(d) of the Real Property Act 1900 (NSW), a tenancy which was excepted from indefeasibility by virtue of the notice held by the landlord of the unregistered tenancy. In the course of so doing, his Honour said at 63:

The exception of “a tenancy whereunder the tenant is in possession or entitled to immediate possession” exists irrespective of the earlier history of the relationship between the parties, and exists in whatever manner the tenancy came into existence, provided that the term for which it was created does not exceed three years; the exception exists irrespective of the fact that before the tenancy was created there was an earlier leasehold or tenancy, and that the tenancy was created pursuant to an option for which the terms of an earlier letting provided.

43. Neither of those authorities ultimately is of much assistance in construing s 6(1)(b). Rather, it is the definition of “lease” in the Act that points to the conclusion for which Mr Westacott contends.

44. The word “lease” in the opening words of s 6(1)(b) must incorporate the definition in s 3. Thus, when determining the term of a “lease” for the purposes of s 6(1)(b) the legislature is not confining the subject matter to a lease as that expression is understood under the general law of real property. Instead, it incorporates any agreement under which a person grants or agrees to grant a person for value a right of occupation of premises for the purpose of the use of those premises as a retail shop. If there is an agreement to grant a right of occupation of that kind for a term of or exceeding 25 years (taking into account any option to renew or extend the term of that agreement) it is not one that is governed by the legislation.

45. It is clear that the legislature is not looking to the leasehold estate as such but to the grant of a right of occupation. That incorporates a special notion of lease into the legislation and is inconsistent with the argument that each time a new leasehold estate is created by exercise of an option for renewal there is a new “lease” for the purposes of s 6(1)(b).

46. Here, the relevant agreement to grant a right of occupation was that which was recorded in the original lease. The term for which there was granted, or promised, such a right of occupation was (if the lessee exercised each of the successive options for renewal) to expire in 2029, 25 years from the beginning of that term. Once the notional concept of a “lease” is understood in that way, the difficulties in construing s 6(1)(b) fall away. It is not speaking in terms of a leasehold estate at law, so the proposition on which Pyrmont Point relies (that on each exercise of option a new leasehold estate arises) is no answer. Once it is determined that there is an agreement to grant a right of occupation (for value and otherwise falling within the definition of retail shop lease or lease in s 3 of the Act), then the fact that that right of occupation will involve successive leasehold estates is irrelevant.

47. Insofar as it is suggested that this is inconsistent with the principle that the law favours certainty, it must be remembered that in the present case the leases were registered and it would have been a simple task for a lessee taking an assignment of the lease to ascertain that the lease being assigned to it had arisen from the exercise of an option under an original lease (and hence to calculate the notional term of the “lease” for the purposes of the Act).

48. The alternative argument similarly fails. There is no warrant for reading “any term” as being only the term arising from the option to renew contained in the then current lease.

49. Therefore, I agree with the primary judge that an appeal on the question of statutory construction is one that does not succeed. As the matter is one where, had the primary judge granted leave but then dismissed the appeal (a course which would have been open to her Honour), there would have been an appeal as of right to this Court, and as Counsel was not able to draw to the Court’s attention any case in which this particular issue has been decided, I consider the appropriate course is to grant leave and to dismiss the appeal. Costs should follow the event. The orders I propose are therefore:

1. Leave to appeal is granted and to the extent necessary leave is given to extend the time for the filing of the application for leave to appeal to the date on which it was filed.

2. Appeal dismissed with costs.

50. LEEMING JA: This application for leave, heard concurrently with the appeal, raises a single question of construction arising from s 6(1)(b) of the Retail Leases Act 1994 (NSW) (the Act). The question is easily stated. It is whether the Act applies to the lease between the parties. I agree with Ward JA that the Act does not apply, and that although leave should be granted, the appeal should be dismissed. I agree with the key insight on which her judgment is based, namely, that s 6(1)(b) must be applied to the statutory definition of “lease”, which is significantly different from its ordinary legal meaning. Because this reasoning differs from that given by the primary judge and the Tribunal, I prefer to provide my own reasons, which are essentially by way of elaboration of those given by Ward JA.

Factual and procedural background

51. The facts are uncontroversial and concise. In 2004, the previous owner of premises granted a five year lease, with four options to renew each for five years, to the original lessee. During the first five years, there were assignments by both lessor (to the current respondent, Mr Westacott) and lessee. The original lessee’s assignee exercised the first option, and the lease was then transferred to the current lessee and applicant for leave, Pyrmont Point.

52. The original 2004 lease made provision for the exercise by the lessee of the right to bring into existence a new document itself containing three further options. That occurred, the document was executed and registered, and a new legal lease was thereby created. In 2013, during the term of that lease, Pyrmont Point sought to invoke rights under s 32 of the Act, which gives a right to obtain a determination of current market rent in the months preceding the date on which an option to renew or extend may be exercised. Pyrmont Point subsequently exercised the option for a third term, is presently in possession pursuant to the third five year lease contemplated by the original 2004 lease, and has purported to exercise the right under s 31 of the Act to apply for the appointment of a specialist valuer to determine current market rent. Section 31 provides for the Tribunal to appoint a valuer, if the lessor and lessee cannot agree.

53. Mr Westacott promptly filed a notice of objection, maintaining that by reason of s 6(1)(b), the Act did not apply, because the original lease was for a term of five years with four options of five years each. Section 6 is relevantly in the following terms:

“6 Leases to which Act does not apply

(1) This Act does not apply to any of the following leases of retail shops:

(a) (Repealed)

(b) leases for a term of 25 years or more (with the term of a lease taken to include any term for which the lease may be extended or renewed at the option of the lessee), ...”

54. The subsequent procedural background and parties’ submissions are contained in the judgment of Ward JA.

The Act

55. Section 7 of the Act unambiguously provides:

“This Act overrides leases

This Act operates despite the provisions of a lease. A provision of a lease is void to the extent that the provision is inconsistent with a provision of this Act. A provision of any agreement or arrangement between the parties to a lease is void to the extent that the provision would be void if it were in the lease.”

56. The Act overrides the private bargains of lessor and lessee in many respects. One notable way in which it does so is by providing, in certain circumstances, that a lessee of a retail shop in possession for more than a year is entitled in certain circumstances to a five year tenancy: see for a recent example Gnych v Polish Club Ltd [2015] HCA 23; 89 ALJR 658 at [10]-[15]. There are many other ways in which the Act alters the general law rights of lessor and lessee. As Hodgson JA concisely put it in Moweno Pty Ltd v Stratis Promotions Pty Ltd [2003] NSWCA 376 at [9]:

“The Act appears to impose obligations or restrictions on ‘lessors’ as defined (for example, in ss 9, 11, 13, 14, 25A, 25B, 39, 40, 41A, 44 and 45), to impose obligations on and give rights to ‘lessees’ (for example, in ss 11A, 22, 30 and 48), and to regulate and adjust the terms of retail shop leases (for example, in ss 15-20, 23, 24B, 26-29, 31-38, 41-43, 46 and 47).”

57. Hence ss 5, 6 and 6A are important provisions. Their purpose is to determine whether or not the Act applies. Section 5 excludes certain classes of retail shops (including ones exceeding 1,000 square metres, cinemas, bowling alleys and skating rinks, and shops used wholly or predominantly for carrying on a business by the lessee on behalf of the lessor). Section 6A excludes short-term leases (broadly, leases not exceeding six months). Section 6 excludes leases entered into before the section commenced, and leases whose term is 25 years or more.

58. Section 6(1)(b) refers, repeatedly, to “lease”. Much of the difficulty in this appeal arises from the fact that there are at least three meanings of “lease” in play.

59. In addition to the ordinary concept of a lease at law, it is also commonplace to refer to the physical document executed by the parties as a “lease”. The execution and registration of the parties’ document gives rise to a legal lease (beforehand, there will commonly be an equitable lease, which as Chan v Cresdon Pty Ltd (1989) 168 CLR 242 shows will have identical terms but is distinct from the legal lease). But the physical document and the legal concept, although both described as a “lease”, are two distinct things. And neither of those things is the “lease” referred to in s 6(1)(b), for the Act contains its own definition of “lease”.

60. The words “retail shop lease” and “lease” have a special meaning in this Act. Section 3 provides that:

“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.”

The note confirms that s 6 deals with retail shop leases, as defined in s 3. (The note does not form part of the Act (see s 4) however regard may be had to it in accordance with s 34 of the Interpretation Act 1987 (NSW).)

61. The broader definition of “retail shop lease” and “lease” flows through to the analogous definitions of lessee and lessor:

“lessee means the person who has the right to occupy a retail shop under a retail shop lease, and includes a sublessee and a lessee’s or sublessee’s heirs, executors, administrators and assigns.

lessor means the person who grants or proposes to grant the right to occupy a retail shop under a retail shop lease, and includes a sublessor and a lessor’s or sublessor’s heirs, executors, administrators and assigns.”

62. Three things follow from the definition of “retail shop lease” and “lease” in s 3 which are of present relevance. First, the reference to “lease” with which s 6(1)(b) commences is a reference to the defined term. I do not consider that any distinction can be drawn between “leases of retail shops” in the opening words of s 6(1) and the defined term “retail shop leases”. Both are grammatical forms of the same expression which are to be given the same meaning: Interpretation Act, s 7. Nor is there a basis for discerning a contrary intention so as to displace the defined meaning of “lease” in s 6(1)(b). In other words, the expression “leases for a term of 25 years or more” in s 6(1)(b) is taken to mean “retail shop leases” or “leases” for a term of 25 years or more, as those words are defined in s 3.

63. Secondly, the Act eschews familiar notions of the law of leases such as the distinction between lease and licence, the need for exclusive possession, and the requirements of writing: cf Radaich v Smith (1959) 101 CLR 209. Importantly for present purposes, the Act casts aside the distinction between contract and property, and insists that a lease means an agreement to occupy. What matters is not the leasehold estate, nor the document which, when registered, creates the legal leasehold estate, but instead the promise to grant a right of occupation. If that promise is for value and in respect of premises for the purpose of their use as a retail shop, then there is a “lease” for the purposes of the Act.

62. Thirdly, the definition in s 3 has two disjunctive limbs. The definition is not merely an “agreement under which a person grants ... to another person for value a right of occupation”. It is also “an agreement under which a person ... agrees to grant to another person for value a right of occupation”. The first limb is apt to describe an ordinary lease (as well as an ordinary licence). The second limb is apt to describe an ordinary option to renew.

63. The application of the definition has quite significant consequences. It is rightly observed in A Bradbrook, C Croft and R Hay, Commercial Tenancy Law (3rd ed, 2009, LexisNexis Butterworths) at 826 that “[t]he application of the Act is significantly affected by the statutory definition of ‘lease’ in s 3.” Those consequences may be seen immediately by reference to something which is quite clear, and which does not matter for the resolution of this appeal, namely, the position in 2004 when a five year lease with four five year options to renew was granted. If one moves from the conventional language of property law and uses the terms employed in the definition in s 3, it will be seen that Mr Westacott’s predecessor in title granted a right of occupation for five years to Pyrmont Point’s predecessor in title in 2004. Also in 2004, Mr Westacott’s predecessor in title agreed to grant up to four additional rights of occupation, each for five years. It seems to follow that although as a matter of property law, there was in 2004 a single lease with four options to renew, there were in 2004 five “retail shop leases” or “leases” within the definition of the Act.

Pyrmont Point’s fallback submission: Do the words “include any term” in s 6(1)(b) exclude a second or later option?

66. It is convenient, because it can be addressed quite concisely and because it simplifies the reasoning on the principal submission, to address Pyrmont Point’s fallback submission first.

67. Pyrmont Point contrasted the plural “any further term or terms” in s 16(1) in support of a narrower construction of s 6(1)(b). Although there is force in Pyrmont Point’s submission, that seems to me to be a matter which is insufficient to displace the interpretative presumption that the singular in s 6(1)(b) includes the plural, when s 16(1) is considered in full. Subsection 16(1) provides:

“The term for which a retail shop lease is entered into, together with any further term or terms provided for by any agreement or option for the acquisition by the lessee of a further term as an extension or renewal of the lease, must not be less than 5 years. An agreement or option is not taken into account if it was entered into or conferred after the lease was entered into” (emphasis added).

68. Pyrmont Point relies on the words “further term or terms”. However, little turns on that once it is seen that later in the same sentence there appear the words “of a further term” as an extension or renewal. The words “of a further term” must include the plural because “further term or terms” earlier in the same sentence necessarily contemplates the possibility of two or more successive options.

69. Likewise, s 6A(2) refers to “an extended or renewed lease or leases”, in contrast with the language of s 6(1)(b), but I do not consider the textual difference material, especially since s 6(1)(b) appeared in the Act as originally enacted, while s 6A(2) was inserted subsequently.

70. More generally, Pyrmont Point’s submission devalues the generality of the word “any” in s 6(1)(b), which on its ordinary meaning is apt to include not merely the term immediately following the exercise of the first option but also the second or third or subsequent term brought about by the exercise of another option.

71. Further, it is important to bear in mind that the bracketed words in s 6(1)(b) are dealing with two different sorts of options: options to extend and options to renew. In the case of an option to extend, it would not be accurate to refer to “term or terms” because there will only ever be a single lease (albeit one whose term may be extended).

72. Finally, it is plain that at a high level, the legislative policy discernible from s 6(1)(b) is to leave parties which are presently bound to a very long relationship, or which may through the unilateral exercise of rights by the lessee be in a very long relationship, to their rights at general law. The Minister said when introducing the bill which became the Act:

“The bill applies to leases for a term of between six months and 25 years where the retail shop concerned has a lettable area of less than 1,000 square metres. Lease agreements of less than six months were considered to be either temporary or transient leases. Those over 25 years often involve a substantial outlay to build or renovate retail premises prior to the commencement of the lease and in any case would only be entered into on a fully informed basis with appropriate professional advice” (emphasis added), New South Wales Legislative Assembly, Parliamentary Debates (Hansard), 20 April 1994 at 1548.

73. This Court is required to prefer a construction which promotes the purpose of the Act: Interpretation Act, s 33. The construction for which Pyrmont Point contends would mean that, say, a 10 year lease, with four 10 year options to renew, would remain subject to the Act, because the “term” for the purposes of s 6(1)(b) would only ever be 20 years, even though the lessee by exercising the options could remain in possession for half a century. That construction would not promote the purpose of the Act.

74. I conclude that “any term” includes not merely the first renewal or extension, but all subsequent renewals or extensions, pursuant to one or more options exercisable by the lessee.

Pyrmont Point’s principal submission

75. None of the foregoing addresses Pyrmont Point’s principal submission, which I regard as much more persuasive and gives rise to considerations which are much more finely balanced.

76. There is considerable force in Pyrmont Point’s submission that its exclusive possession of the premises in 2013 derived from the then presently existing five year lease, with three options, and that the ordinary meaning of the admittedly artificial notion of “term” in s 6(1)(b) means that it is to be taken to enjoy a term of only 20 years, with the consequence that the Act applies. The submission has the merits of concision and simplicity and corresponds with the ordinary meaning of the words in s 6(1)(b).

77. Nevertheless, it is easy to see that acceptance of the submission carries with it some consequences which are anomalous or problematic. For it is common ground that, in order to determine in 2013 the “term” of Pyrmont Point’s lease, one looked backwards at least to 2009 (for s 6(1)(b) does not involve any concept of the remaining term of a lease). Why then does one look backwards only until 2009? Why not look backwards to the earliest time at which it can be said that these parties or their predecessors in title first entered into the relationship which brought about the present retail shop lease?

78. Another way of putting the position is this. If the “term” of the “lease” in 2004 was taken to be 25 years because of an assumption that all of the options would be exercised, why in 2013 when one of the options has in fact been exercised should the “term” of the “lease” be any different?

79. Pyrmont Point’s answer to those matters was that a different lease was in place between the parties in 2013 as opposed to in 2004, and so it is to be expected that there will be a different determination of the “term” of that different lease. It pointed to the physical document which had been registered, and the familiar notions of property law. In doing so, Pyrmont was invoking the first two meanings of “lease” to which I have referred above.

80. However, s 6(1)(b) turns on a different notion, namely, the artificial notion of “lease” for the purposes of the Act. Section 6(1)(b) requires the calculation of an artificial concept (term) of another artificial concept (lease). What that involves is first asking whether there is a “lease” as defined by the Act. That is to say, one asks whether there is either an agreement for value under which the lessor granted the right of occupation of a retail shop or an agreement under which the lessor agreed to grant the right of occupation of a retail shop. If so, then one asks whether the term of that agreement is for 25 years or more. This latter question is controlled by the internal definition of “term” in s 6(1)(b).

81. In 2013, Pyrmont Point had been granted a right of occupation of the premises. The question is not what is the term of the right of occupation. To ask that question is to ask what is the term of the lease as a matter of ordinary legal usage. The correct question is what is the term of the “agreement under which a person grants or agrees to grant to another person for value a right of occupation”.

82. In order to answer the correct question posed by s 6(1)(b) read with the definition in s 3, one does not ask what was the term of the legal lease then in existence between the parties. One asks instead when did the parties or their predecessors in title agree to grant a right of occupation of the premises and for how long did that last. (I am conscious that the original 2004 agreement was between the predecessors in title of the lessor and lessee. However, the definition of “lease” is any such agreement, which is apt to include an agreement between the current lessor’s and lessee’s predecessors in title.) In the present case, a right of occupation in the premises was agreed to in 2004 and for 25 years. The year 2004 was the commencement of the agreement under which a person has granted or agreed to grant to another person for value a right of occupation.

83. The conclusion I have reached by applying the definition in s 3 is strengthened by the consideration that the problematic or anomalous matters to which I have referred above no longer arise. It is also confirmed by an additional textual consideration, based on the words “extended or renewed” in s 6(1)(b).

84. An option to renew is distinct from an option to extend. The exercise of an option to extend does not involve the creation of a new legal lease. Instead, it involves the variation of an existing lease (I put to one side because it does not presently matter whether the variation may itself be treated as a surrender and grant of a new lease).

85. That said, there is a very considerable similarity between an option to renew and an option to extend. Mercantile Credits Ltd v Shell Co of Australia Ltd (1976) 136 CLR 326, which was mentioned in argument, was a case involving both. The covenant gave the lessee rights to renew the lease for a further five years, which when exercised led to a memorial being indorsed on the certificate of title in the following terms: “Extension of lease for 5 years commencing on 2.3.69 and expiring on 1.3.74 with varied covenants”, reflecting a mechanism authorised by ss 153 and 154 of the Real Property Act 1886 (SA). The lessee, if it was not in breach, was permitted by notice to “renew” the lease.

86. The Act repeatedly equates an option to extend and an option to renew. That is consistent with a general approach of eschewing technicalities. Thus ss 31 and 32 (the two sections which Pyrmont Point sought to invoke) confer additional rights upon a tenant where there is a retail shop lease which “provides an option to renew or extend the lease”. Likewise, s 44(5) treats identically a lease containing an option to renew and an option to extend.

87. Moreover, s 6A(1) – a section whose purpose, like that of s 6(1)(b), is to determine whether or not the Act applies in any particular case – conflates the legal notions of extension and renewal. It relevantly provides:

“... this Act does not apply to a lease of a retail shop for a term of less than 6 months without any right for the lessee to extend the lease (whether by means of an option to extend or renew the lease or otherwise).”

88. It will be seen that s 6A(1) expressly proceeds on the basis that both an option to extend and an option to renew amount to a right for the lessee to “extend” the lease. As originally enacted, the words reproduced above were found in s 6(a), and the current s 6(1)(b) was originally s 6(b).

89. Thus it may be seen that throughout the Act, an option to extend and an option to renew are treated identically. A further matter telling against Pyrmont Point’s submission is that the Act would not apply to leases containing options for extensions capable of producing a total term exceeding 25 years, but would apply to leases containing options for renewals capable of producing a total term exceeding 25 years. For example, take a 10 year lease with two 10 year options. If those options are options to extend the original lease, then on Pyrmont Point’s primary submission, the Act does not apply, irrespective of when the inquiry is made. If however those options are options to renew, then on Pyrmont Point’s primary submission, the Act would not apply during the first 10 year term, but would apply thereafter. Such a result is at odds with the central idea in s 6(1)(b), which is that where a lessor/lessee relationship can extend for 25 years by reason of the unilateral action by the lessee, then the Legislature saw no need to alter the private bargain struck by the parties. It also is contrary to the identical treatment of options to extend and options to renew in s 6(1)(b), and the Act more broadly.

90. I do not think the Legislature should be taken to have intended that the deemed exercise of an option to extend should mean that the Act does not apply, but the deemed exercise of an option to renew means that the Act does apply when both the legislative test and purpose conflate options to renew and options to extend. Such a result is appropriately described as “capricious” or “irrational”, and sustains the process of construction to which Mason and Wilson JJ referred in Cooper Brookes (Wollongong) Pty Ltd v Federal Commissioner of Taxation (1981) 147 CLR 297 at 321.

Conclusion and orders

91. Ultimately, I am persuaded that Pyrmont Point’s construction is to be rejected, because it disregards the very different definition of “lease” which the section invokes, because it involves a differential treatment of options to renew and options to extend, and because it gives rise to other results which I regard as anomalous. I agree with the orders proposed by Ward JA.

92. EMMETT AJA: The question in these proceedings is whether a rent review under a tenancy arrangement in relation to premises situated in Harris Street Pyrmont NSW (the Demised Premises) is regulated by the provisions of the Retail Leases Act 1994 (the Leases Act). The parties to the arrangement are Pyrmont Point Pty Ltd (Pyrmont) and Mr Albert Westacott (Mr Westacott).

Background

93. By lease dated 19 March 2004 (the Original Lease), Dukest Property and Investments Pty Ltd (Dukest Property) demised the Demised Premises to Dukest Trading and Investments Pty Ltd (Dukest Trading) for a term of 5 years commencing on 19 March 2004 and terminating on 18 March 2009. Clause 8 of the original lease provided that, if Dukest Trading gave Dukest Property not less than 3 months nor more than 6 months written notice before the expiry of the term that it wished to renew the lease for the further term of 5 years, Dukest Property must grant to Dukest Trading a lease for the further term on the same terms and conditions, amended as follows:

• The landlord will be the then registered proprietor of the Demised Premises;

• The term of the renewed lease will be that specified in item 13;

• The minimum rent will be the minimum rent determined under clause 4.3;

• Clause 8 and Item 13 will be deleted and marked “Not Applicable” but only for the lease of the term ending 18 March 2009 otherwise clause 8 and Item 13 were to remain unchanged.

94. The reference to 18 March 2009 appears to be an error. Item 13 was in the following terms:

4. Options for renewal each for a period of 5 years with the intent that if all options for renewal are exercised the Termination Date of the final term will be 18 March 2029

Initially “18 March 2009” appeared in handwriting in item 13. That date was amended by hand to read 18 March 2029. It appears that the reference in clause 8 to 18 March 2009 was intended to be a reference to “18 March 2029”.

95. The intended effect of the original lease was to grant a leasehold term of 5 years from 19 March 2004, on the basis that Dukest Trading or its successor as tenant would be entitled to the grant of a further term commencing at the expiration of a first term under a lease that contained a similar option “for renewal”. There would then be successive options for “renewal” up to a maximum of 4 renewals. The result would be an occupation of the demised Premises for 25 years if all options were exercised.

96. On 20 April 2004 Dukest Property assigned the reversion in respect of the Original Lease to Mr Westacott. On 10 May 2006, Dukest Trading assigned the leasehold interest under the Original Lease of 19 March 2004 to Pirrama Pty Limited (Pirrama). Pirrama exercised the option conferred by clause 8 and Mr Westacott thereafter demised the Demised Premises to Pirrama for the term of 5 years commencing on 19 March 2009 (the New Lease). Under clause 8 of the New Lease, Mr Westacott was obliged to grant to Pirrama a lease for a further term of 5 years at a minimum rent determined in accordance with clause 4.3.

97. On 22 September 2010, Pirrama assigned the leasehold interest under the new lease to Pyrmont. On 17 December 2013, Pyrmont gave notice to Mr Westacott of its intention to exercise the option to renew in accordance with Item 13 and Clause 8 of the new lease. If the Leases Act does not apply in the circumstances of this case, the rent would be determined in accordance with clause 4.3. However, if the Leases Act does apply, the rent would be determined in accordance with s 31 of the Leases Act.

98. The procedure provided for in s 31 contemplates that if a lessor and lessee do not agree as to what the actual amount of rent is to be, the amount of the rent is to be determined by valuation carried out by a specialist retail valuer appointed by agreement of the parties to the lease or, failing agreement, by the Civil and Administrative Tribunal (the Tribunal). Pyrmont applied to the Tribunal for an order appointing a specialist retail valuer under s 31 of the Leases Act.

99. On 25 March 2014, the Tribunal dismissed the application on the ground that it had no jurisdiction. On 16 December 2014, the Appeal Panel of the Tribunal dismissed an appeal from the order of 25 March 2014. By summons filed in the Common Law Division of the Supreme Court, Pyrmont sought leave to appeal against the decision of the appeal panel. Under s 83 of the Civil and Administrative Tribunal Act2013 (NSW) and s 75A of the Supreme Court Act1970 (NSW), the Supreme Court has power to hear an appeal by leave, on a question of law, against any decision made by the Tribunal in internal appeal proceedings. On 5 June 2015, for reasons published on 18 June 2015, a Judge of the Common Law Division refused leave to appeal and dismissed Pyrmont’s summons.

100. By summons filed on 26 August 2015, Pyrmont seeks leave to appeal to this Court from the orders made in the Common Law Division. The proposed grounds of appeal are that the Tribunal and primary judge erred in misconstruing s 6(1)(b) of the Leases Act. A direction has been given that the application for leave to appeal and the appeal if leave is granted be heard concurrently.

Scheme of the Leases Act

101. The Leases Act applies to leases of retail shops, with certain limitations. Under s 3, the term ‘retail shop’ is defined as premises that are used, or are proposed to be used, wholly or predominantly for the carrying on of one or more of the businesses prescribed for the purposes of that definition. Sections 6, 6A and 84B then exclude certain leases from the operation of the Leases Act. Section 84B is concerned with exemptions regarding Sydney (Kingsford Smith) Airport and is not presently relevant.

101. Under s 6(1), the Leases Act does not apply to any of the following leases of retail shops:

1. Leases for a term of 25 years or more (with the term of a lease taken to include any term for which the lease may be extended or renewed at the option of the Lessee),

2. Leases entered into before the commencement of s 6,

3. Leases entered into under an option granted or agreement made before the commencement of s 6,

4. Any other lease, class or description prescribed as exempt from the Leases Act.

Under s 6(2), the Leases Act does not apply to any lease referred to in s 6 that is assigned to another person after the commencement of s 6.

103. Section 6A is concerned with short term leases. Under s 6A(1) the Leases Act does not apply to a lease of a retail shop for a term of less than 6 months without any right for the lessee to extend the lease (whether by means of an option to extend or renew the lease or otherwise). However, under s 6A(2), if the Lessee has been in possession or entitled to be in possession of the retail shop without interruption for more than one year, the Leases Act applies to:

• the lease on and from the day on which the lessee has been in possession or entitled to be in possession of the shop for more than one year and

• any succeeding lease or leases of the shop to the Lessee, where possession or entitlement to possession is not interrupted.

104. Under s 7, the Leases Act operates despite the provisions of the lease and a provision of the lease is void to the extent that the provision is inconsistent with a provision of the Leases Act. A provision of any agreement or arrangement between the parties to a lease is void to the extent that the provision would be void if it were in the lease.

105. Under s 8, a retail shop lease is considered to have been entered into when a person enters into possession of the retail shop as lessee under the lease or begins to pay rent as lessee under the lease, whichever happens first. However, if both parties execute the lease before the lessee enters into possession under the lease or begins to pay rent under the lease, the lease is considered to have been entered into as soon as both parties have executed the lease.

106. The term ‘lease’ is not defined as such in the Leases Act. However, s 3 relevantly provides as follows:

‘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 the premises for the purpose of the use of the premises as a retail shop…

It is not clear whether the provision is intended to constitute a definition of the term ‘lease’ or the term ‘retail lease’. Clearly enough it is intended to define the term ‘retail shop lease’.

107. Section 11 of the Leases Act provides for lessors’ disclosure statements and s 11A provides for Lessee’s disclosure statements. A disclosure statement is a statement in writing that contains prescribed information. A lessor’s disclosure statement must be given at least seven days before a retail shop lease is entered into. A lessee’s disclosure statement must be given not later than seven days after receiving a lessor’s disclosure statement. However, both s 11 and s 11A provide for the circumstance where a lease is entered into by way of the renewal of the lease. Under s 80, a reference in the Leases Act to the renewal of the Retail Shop Lease is a reference to the Lessee and Lessor under such a lease entering a new retail lease for the retail shop to which the lease relates, whether or not on the same terms as that lease.

108. Section 16 of the Leases Act provides for the term for which a retail shop lease is entered into, together with any term or terms provided for by any agreement or option for the acquisition by the lessee of a further term as an extension or renewal of the lease, must not be less than 5 years. If the lease is entered into in contravention of s 16, the validity of the lease is not thereby affected by the term of the lease and is extended by such period as may be necessary to prevent the lease contravening s 16. Under s 6A(4), s 16 does not apply to a lease referred to s 6A(2)(a) unless the lessee notifies the lessor that the lessee elects to have the benefit of s 16.

The Appeal

109. The question that will be raised in the appeal is whether the Leases Act applies to the New Lease in circumstances where the term of the New Lease is five years. That depends upon the meaning of the term ‘leases’ when used in s 6 and other parts of the Leases Act. If the term is to be understood as referring to the term ‘lease’ as that term is used and understood under the general law, the new lease would not be excluded from the operation of the Leases Act. That might be thought to be a curious consequence in circumstances where the Original Lease was excluded by the operation of s 6(1) such an anomalous result would be avoided, however, if the term ‘leases’ were to be understood as referring to the arrangements under which continual exclusive occupancy by reason of the demise and renewals pursuant to contractual arrangements contained in the original demise. Thus, in the present case, the term ‘lease’ should be understood as applying to the original lease and any further arrangement concerning a leasehold interest brought into existence as a result of the exercise of options contained in the original lease and subsequent leases, including the new lease.

110. I have had the advantage of reading in draft form the proposed Reasons of Ward and Leeming JJA. I agree with their Honours for the reasons proposed by them, that there was no error on the part of the Primary Judge in reaching her conclusion that the Leases Act does not apply to the new lease. I agree that the case is the appropriate one in which leave to appeal should be granted. However, the appeal should be dismissed.

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Amendments

01 August 2016 - Par 90 - 'Gibbs CJ' replaced with 'Mason and Wilson JJ'

Par 40 - 'appellant's mortgagee' replaced with 'appellant's mortgage'

11 March 2016 - Typographical amendments to pars 44, 45, 46, 85 and 90

Decision last updated: 01 August 2016