Richmond Football Club Ltd v Verraty Pty Ltd
[2019] VSC 597
•26 September 2019
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
JUDICIAL REVIEW AND APPEALS LIST
S ECI 2019 03674
| RICHMOND FOOTBALL CLUB LTD | Applicant |
| v | |
| VERRATY PTY LTD | Respondent |
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JUDGE: | CROFT J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 17 September 2019 | |
DATE OF JUDGMENT: | 26 September 2019 | |
CASE MAY BE CITED AS: | Richmond Football Club Ltd v Verraty Pty Ltd | |
MEDIUM NEUTRAL CITATION: | [2019] VSC 597 | Second revision 1 October 2019 |
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LEASES AND TENACIES – Retail Leases – Whether a retail premises lease within the meaning of the Retail Leases Act 2003 may, under that legislation, cease to be a retail premises lease within the meaning of that legislation and therefore not subject to its provisions – Effect of avoiding provisions of that legislation on such a lease and any renewed term – Retail Leases Act 2003, ss 1, 4, 7, 11, 35, 46, 50 and 94.
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APPEARANCES: | Counsel | Solicitors |
| For the Applicant | Mr D. Collins QC and Mr C. Northrop | BSP Lawyers |
| For the Respondent | Mr R. Hay QC and Mr L. Hawas | Millens Pty Ltd |
HIS HONOUR:
Introduction and background
This proceeding is brought pursuant to s 148 of the Victorian Civil and Administrative Tribunal Act 1998 (“the VCAT Act”). The applicant, Richmond Football Club Ltd (ACN 005 563 011) (“the Tenant”), seeks leave to appeal the Orders of Senior Member L. Forde of the Victorian Civil and Administrative Tribunal made on 18 July 2019 in VCAT proceeding number BP1233/2018. The Tribunal published reasons for the making of these Orders.[1]
[1]Verraty Pty Ltd v Richmond Football Club Ltd (Building and Property) [2019] VCAT 1073 (“Tribunal Reasons”).
The dispute concerns a lease (“the 1998 Lease”) between Verraty Pty Ltd (ACN 076 360 079) (“the Landlord”) whereby the Landlord leased to the Tenant property at 354–364 Stud Road, Wantirna for a term of ten years commencing on 7 May 1998, together with one option to renew for a further term of ten years.
By a Deed of Variation dated 30 January 2004 (“the Variation”), the parties agreed to vary the 1998 Lease by extending its term to 20 years, commencing on 7 May 1998 and to other variations as set out in that deed.
In VCAT proceedings R203/2010, the Tribunal found that the 1998 Lease was surrendered by operation of law upon the entry into the Variation; the Variation thus effecting the grant of a new lease (“the 2004 Lease”). The Tribunal also found that the 2004 Lease was subject to the substantive provisions of the Retail Leases Act 2003 (“the RLA” or “the Act”).[2]
[2]The “substantive” provisions of the RLA in the sense of not merely the dispute resolution provisions contained in Part 10 of that Act.
The Tenant exercised the option to renew the 2004 Lease for a further term of ten years commencing 7 May 2018.
A dispute has arisen as to whether the 2004 Lease ceased to be a “retail premises lease” within the meaning of the RLA as a result of the operation of, what might be termed, exclusionary or excepting provisions in that legislation which the Landlord claimed were attracted as a result of changed circumstances subsequent to the commencement of the 2004 Lease.
In the proceedings before the Tribunal, the Landlord claimed that if the 2004 Lease ceased to be a “retail premises lease” on 7 May 2016, it is entitled to be reimbursed for land tax payments and receive rent for the renewed term at the current rent plus 4%. If, on the other hand, the RLA continues to apply to the 2004 Lease, the Tenant will not be liable to pay land tax and the rent for the new term will be determined at a market rate.
The parties produced a Statement of Agreed Facts in the proceedings before the Tribunal. The Statement of Agreed Facts is attached as Appendix 1 to the Tribunal Reasons. Other than the quantum of interest that might be payable in connection with land tax payments, there were no factual matters in dispute before the Tribunal. There are no factual matters in dispute between the parties in these proceedings.
The Tribunal Orders relevantly provide:
(1)I find and declare that from 7 May 2016, the lease between the parties (the 2004 Lease) was not a “retail premises lease” within the meaning of s 11 of the Retail Leases Act 2003 (Vic).
(2)I find and declare that the Lease (as renewed by the Renewal) is not a “retail premises lease” within the meaning of s 11 of the Retail Leases Act 2003 (Vic).
(3)The respondent [the current Applicant] must pay the applicant [the current Respondent] $122,034.45 as reimbursement of land tax paid by the applicant.
…
By its Notice of Appeal dated 14 August 2019, the Tenant, as the Applicant, seeks leave to appeal orders (1), (2) and (3) of the Tribunal’s Orders.
Principles applicable with respect to appeals
Section 148(1) of the VCAT Act provides:
A party to a proceeding may appeal on a question of law from an order of the Tribunal in the proceeding—
(a)if the Tribunal was constituted for the purpose of making the order by the President or a Vice President, whether with or without others, to the Court of Appeal with leave of the Court of Appeal; or
…
(b)in any other case, to the Trial Division of the Supreme Court with leave of the Trial Division.
It follows from this provision that any appeal is dependent upon two important qualifications. First, that the appeal be on a question of law, and secondly, that the Court gives leave to appeal. The legislative policy underlying these provisions is that “VCAT decisions should not generally be disturbed where cases have been decided in that forum other than on questions of law and where there is something about the decision bearing upon the question of law which warrants a grant of leave to appeal.”[3] It follows that “[t]his Court is not entitled to enter into the fact finding exercise which the legislature has deliberately entrusted to a specialist tribunal.”[4]
[3]Commissioner of State Revenue v Frost (2011) 83 ATR 832 at 834 [5] citing Secretary to the Department of Premier and Cabinet v Hulls [1999] 3 VR 331 at 335–6 and Myers v Medical Practitioners’ Board (Vic) (2007) 18 VR 48 at 55–6 [28].
[4]Boucher v Dandenong Ranges Steiner School Inc (2005) 145 LGERA 21 at 26 [15] citing Spurling v Development Underwriting (Vic) Pty Ltd [1973] VR 1 and Whitehorse City Council v Golden Ridge Investments Pty Ltd (2005) 13 VR 275.
The leave requirement under s 148(1) of the VCAT Act is designed to maintain this position. As Pagone J said in Commissioner of State Revenue v Frost:[5]
The requirement for leave under s 148(1) of the [VCAT Act] “is a safeguard that the appeal is on a pure question of law and that the grounds supporting the question of law articulated for determination by the court do found the subject matter of the appeal”.[6] It also confers a discretion about whether to grant leave[7] which an applicant must persuade the court to exercise in its favour. What must be shown will depend upon the particular case bearing in mind the statutory criteria being a grant of leave and not special leave.[8] It will ordinarily be necessary (in addition to a clearly articulated question of law)[9] for an applicant to make out a prima facie case[10] and in an appropriate case it may be necessary for the applicant to show that the question upon which leave is sought has public or general importance.[11]
[5](2011) 83 ATR 832 at 833–4 [3].
[6]Commissioner of State Revenue (Vic) v STIC Australia Pty Ltd (2010) 2010 ATC 20-232 at 11,839 [10];
81 ATR 682 at 687 [10] per Davies J.
[7]Department of Premier and Cabinet v Hulls [1999] 3 VR 331; Al-Hakim v Monash University (unreported, Court of Appeal, Vic, No 3707 of 2003, 28 March 2003); Myers v Medical Practitioners Board (Vic) (2007) 18 VR 48.
[8]See Morris v The Queen (1987) 163 CLR 454 at 475; 61 ALJR 588 at 597; 28 A Crim R 48 at 63-64; 74 ALR 161 at 176-177 per Dawson J.
[9]Osland v Secretary to the Department of Justice [No 2] (2010) 241 CLR 320 at 333 [21]; 84 ALJR 528 at 536 [21]; 267 ALR 231 at 240 [21] per French CJ, Gummow and Bell JJ.
[10]Morris v The Queen (1987) 163 CLR 454 at 475; 61 ALJR 588 at 597; 28 A Crim R 48 at 63-64; 74 ALR 161 at 176-177 per Dawson J; Department of Premier and Cabinet v Hulls [1999] 3 VR 331 at 335 [10]; 15 VAR 360 at 366 [10].
[11]Department of Premier and Cabinet v Hulls [1999] 3 VR 331 at 335-336 [11]; 15 VAR 360 at 366 [11] per Phillips JA; Commissioner of State Revenue v Challenger Property Nominees Pty Ltd (2006) 63 ATR 65 at 69 [20] and 77 [65] per Hollingworth J.
An additional safeguard has since been imposed. Effective from 1 May 2018, the VCAT Act was amended to include s 148(2A).[12] The section provides:
The Trial Division of the Supreme Court may grant an application for leave to appeal under this section only if it is satisfied that the appeal has a real prospect of success.
[12] Justice Legislation Amendment (Court Security, Juries and Other Matters) Act 2017, s 31(3).
This amendment sees the replacement of the requirement that an applicant seeking leave to appeal from VCAT to the trial division of the Supreme Court must show that there is a real or significant argument to be put that an error below exists,[13] sometimes referred to as the Hulls test.[14] Instead, all applicants under s 148 are now subject to the same and more burdensome requirement: they must demonstrate that the appeal has a real prospect of success.[15] With respect to applications subject to the same test,[16] the Court of Appeal has said:[17]
the test under s 63 of the Civil Procedure Act should be construed as one of whether the respondent to the application for summary judgment has a “real“ as opposed to a “fanciful“ chance of success; that the “real chance of success“ test is to some degree a more liberal test than the “hopeless“ or “bound to fail” test; and that, as the law is at present understood, the real chance of success test permits of the possibility that there may be cases, yet to be identified, in which it appears that, although the respondent’s case is not “hopeless“ or “bound to fail”, it does not have a real prospect of succeeding.
[13]Myers v Medical Practitioners’ Board of Victoria (2007) 18 VR 48 at 55 [28], citing Secretary to the Department of Premier and Cabinet v Hulls [1999] 3 VR 331 at 335.
[14]See Emrys Nekvapil, Pizer’s Annotated VCAT Act (Thomson Reuters, 6th ed, 2017) 871.
[15]The same requirement is imposed upon applicants for leave to appeal a VCAT decision before the Court of Appeal under s 148(1)(a) of the VCAT, with the additional requirement to such an application set out at s 14C of the Supreme Court Act 1986; see Emrys Nekvapil, Pizer’s Annotated VCAT Act (Thomson Reuters, 6th ed, 2017) 874–7.
[16]Section 63(1) of the Civil Procedure Act 2010 empowers a court to give summary judgment in a civil proceeding if the defence, inter alia, has “no real prospect of success”.
[17]Lysaght Building Solutions Pty Ltd v Blanalko Pty Ltd (2013) 42 VR 27 at 39 [29]. See also Kennedy v Shire of Campaspe [2005] VSCA 47, [3]–[14].
The new requirement of s 148(2A) makes express the restraint this Court ought exercise when reviewing decisions of VCAT, a restraint long and more generally recognised in case authority. In considering applications of this nature, courts have been concerned to respect the role entrusted by the legislature to the particular tribunal and not, in effect, subvert this position by seeking out error. Thus, Kirby J in Roncevich v Repatriation Commission said:[18]
[18](2005) 222 CLR 115 at 136 [64].
Courts conducting this form of review have been repeatedly enjoined by this Court to avoid overly pernickety examination of the reasons.[19] The focus of attention is on the substance of the decision and whether it has addressed the “real issue” presented by the contest between the parties.
Similarly, in Vegas Nominees Pty Ltd v Werribee Sports & Community Club Inc, Ashley J said:[20]
This Court has said more than once that it should not examine briefly stated reasons by an expert Tribunal in an over-legalistic manner or by the over-zealous drawing of inferences in order to disclose some supposed error; although where unambiguous language is used, the user should be taken to mean what the words say. I should add that the Court is not entitled to interfere with the Tribunal’s decision unless it is satisfied that there was in fact a vitiating error of law. It is not enough for the appellant to show that the Tribunal’s reasons for its decision are so expressed as to suggest the possibility that it proceeded upon a wrong view of the law. In support of the several propositions that I have just stated I refer to Portland Properties Pty Ltd v Melbourne & Metropolitan Board of Works,[21] Michaelis Bayley (Vic) Pty Ltd v Melbourne & Metropolitan Board of Works[22] and Teston Investments Pty Ltd v Melbourne & Metropolitan Board of Works.[23]
Additionally, “[o]n appeal this Court must recognise the forensic realities of the way in which the case was put to the Tribunal. It is these realities to which a Tribunal must respond in its reasons.”[24]
[19]Minister for Immigration and Ethnic Affairs v Guo (1997) 191 CLR 559 at 575, 597; cf Minister for Immigration and Multicultural Affairs v Yusuf (2001) 206 CLR 323 at 348 [74].
[20](Supreme Court of Victoria, Ashley J, 21 December 1994) at 13.
[21](1971) 38 LGRA 6 at 18.
[22](1980) 44 LGRA 65 at 67–8.
[23](1985) 62 LGRA 346 at 349–50.
[24]The Gombac Group Pty Ltd v Vero Insurance Ltd [2005] VSC 442, [59].
In terms of the parties’ submissions, it is clear from the authorities to which reference has been made that the role of a specialist tribunal, such as VCAT, is not to be usurped by the Court and that a decision of such a tribunal is not to be interfered with absent a vitiating error of law.
For the reasons which follow, I am satisfied that the Tenant, the Applicant, has established that the appeal has a real prospect of success. Consequently, leave to appeal is granted. Moreover, as these reasons indicate, the appeal is entirely successful.
The appeal
Leave to appeal is sought with respect to the following questions of law as put by the Tenant, as the Applicant, in the Notice of Appeal:
A.On the proper construction of the Retail Leases Act 2003, does a lease to which the Act applies when the lease is entered into, being a lease of retail premises, cease to be a lease to which the Act applies if during the term of the lease the premises cease to be retail premises as defined in s 4 of the Act?
B.On the proper construction of the Act, if a landlord seeks to rely on an estimate of outgoings for the purposes of s 4(3)(b) of the Act, does the estimate have to be given to the tenant before the estimate can be taken into account as part of occupancy costs?
C.On the proper construction of the Act, if a lease to which the Act applies ceases to be a lease to which the Act applies during the term of the lease, do provisions of the lease which are made void at the time the lease was entered into by:
(a)section 35(3) of the Act;
(b)section 50 of the Act –
cease to be void?
These grounds divide into three issues:
1.The Tribunal erred in finding that the lease which commenced in 2004 between the applicant as tenant and the respondent as landlord ceased to be a lease to which the Act applied during the final two years of its term on the grounds that:
(a)the premises the subject of the lease ceased to be “retail premises” within the meaning of s 4 of the Act;
(b)the lease ceased to be a “retail premises lease” within the meaning of s 11 of the Act.
2.The Tribunal should have found that the landlord’s estimate of outgoings in respect of the final year of the 2004 lease had to be given to the tenant in order to constitute a component of occupancy costs for the purposes of s 4(3)(b) of the Act.
3.The Tribunal should have found that provisions of the 2004 lease that were made void by the operation of s 35(3) and s 50 of the Act remained void even if the Act ceased to apply to the 2004 lease because the premises ceased to be “retail premises” within the meaning of s 11 of the Act.
In place of the orders made by the Tribunal, the Tenant, as the Applicant, seeks orders to the following effect:
1.A declaration that the annual rental payable during the first year of the renewed lease that commenced on 7 May 2018 is the current market rent as determined by a specialist retail valuer in accordance with s 37 of the Act.
2.An order that the landlord do all things necessary to allow the determination of the amount of rent.
3.An order that the landlord’s claim for reimbursement of land tax in respect of the final two years of the 2004 lease be dismissed.
4.Costs reserved.
Relevant sections of the Retail Leases Act 2003
The provisions of the RLA referred to and relied upon by the parties are as set out in the following paragraphs.
Section 1 provides:
Main purpose
The main purpose of this Act is to replace the scheme in the Retail Tenancies Reform Act 1998 with a new scheme to enhance—
(a)the certainty and fairness of retail leasing arrangements between landlords and tenants; and
(b)the mechanisms available to resolve disputes concerning leases of retail premises.
The expression “retail premises” is defined in s 4(1):
(1)In this Act, retail premises means premises, not including any area intended for use as a residence, that under the terms of the lease relating to the premises are used, or are to be used, wholly or predominantly for—
(a)the sale or hire of goods by retail or the retail provision of services; or
(b)the carrying on of a specified business or a specified kind of business that the Minister determines under section 5 is a business to which this paragraph applies.
There is no issue in these proceedings with respect to residential use or any “specified land of business”.
Section 4(2)(a) provides:
(2)However, retail premises does not include the following premises—
(a)premises in respect of which the occupancy costs (as defined in subsection (3)) under the lease concerned is more than the amount prescribed by the regulations for the purposes of this paragraph;
The expression “occupancy costs” is defined in s 4(3) to mean:
(3)In subsection (2)(a), occupancy costs means—
(a)the rent payable under the lease, not being rent (or any part of rent) that is to be determined by reference to the turnover of a business; and
(b)the outgoings, as estimated by the landlord, to which the tenant is liable to contribute under the lease; and
…
…
Section 4(3)(b) is followed by a footnote:
Note
Section 46 requires the landlord to give the tenant a written estimate of outgoings to which the tenant is liable to contribute.
For the purposes of s 4(2)(a), regulation 6 of the Retail Leases Regulations 2013 prescribes the amount as $1,000,000 per annum exclusive of GST.
28 Section 11 of the Act provides:
Application generally
(1)This Act applies to a retail premises lease that is—
(a)entered into after the commencement of this section; or
(b)renewed after the commencement of this section, whether the lease was entered into before or after that commencement.
(2)Except as provided by Part 10 (Dispute Resolution), this Act only applies to a lease of premises if the premises are retail premises (as defined in section 4) at the time the lease is entered into or renewed.
Note
Sections 36 and 76(1) extend the application of certain provisions of this Act to certain leases entered into or renewed before the commencement of this section.
[Emphasis added]
The provisions of s 11 must, particularly, be read with the provisions of s 7, which makes specific provision with respect to when a retail premises lease is to be taken to be entered into or assigned. The provisions of s 7 are as follows:
When retail premises lease is entered into or assigned
For the purposes of this Act, a retail premises lease is entered into or assigned when—
(a)under the lease or assignment, the tenant enters into possession of the premises with the consent of the landlord; or
(b)under the lease or assignment, the tenant begins to pay rent for the premises; or
(c)the lease or assignment has been signed by all of the parties to it—
whichever first occurs.
Like s 11, these provisions focus on the retail premises lease itself, rather than the leased premises and its characterisation for the purposes of the Act.
Section 35(3) (contained within a section headed “Rent reviews generally”) provides:
A provision in a retail premises lease is void to the extent that it purports to preclude, or prevents or enables a person to prevent, the reduction of the rent or to limit the extent to which the rent may be reduced.
Section 46 provides:
Estimate of outgoings
(1)A retail premises lease is taken to provide as set out in this section.
(2)The landlord must give the tenant a written estimate of the outgoings to which the tenant is liable to contribute under the lease that itemises those outgoings.
(3)The tenant must be given the estimate of outgoings—
(a)before the lease is entered into; and
(b)in respect of each of the landlord's accounting periods during the term of the lease, at least one month before the start of that period.
(4)The tenant is not liable to contribute to any outgoings of which an estimate is required to be given to the tenant as set out in this section until the tenant is given that estimate.
Section 50 (Recovery of land tax) makes provision in relation to the payment of land tax:
(1)A provision of a retail premises lease is void to the extent that it makes the tenant liable to pay an amount for tax for which the landlord or head landlord is liable under the Land Tax Act 2005.
…
Avoiding provisions are contained in s 94 to preserve the untrammeled operation of the Act:
The Act prevails over retail premises leases, agreements etc
(1)A provision of a retail premises lease or of an agreement (whether or not the agreement is between parties to a retail premises lease) is void to the extent that it is contrary to or inconsistent with anything in this Act (including anything that the lease is taken to include or provide because of a provision of this Act).
(2)A provision of a retail premises lease or of an agreement (whether or not the agreement is between parties to a retail premises lease) is void to the extent that it purports—
(a)to exclude the application of a provision of this Act; or
(b)to limit the right of a party to the lease to seek resolution of a retail tenancy dispute under Part 10 or otherwise to limit the application of that Part.
…
Relevant provisions of the 1998 Lease and the 2004 Lease
Clause 5.2(b) of the 1998 Lease and the 2004 Lease provides that the Tenant shall pay “all State Land Tax”.
More particularly, clause 15.1(b)(i) of the 1998 Lease and 2004 Lease provides:
In the event that the Lessee exercises an option for a Renewed Lease for a Further Term as referred to in Clause 16.1, then the Annual Rental for the first year of the Further Term shall be an amount to be determined by mutual agreement between the Lessor and the Lessee, and in default of agreement prior to the commencement of the Further Term shall be an amount determined as being the appropriate market rental by a valuer appointed by the President for the time being of the Real Estate and Stock Institute of Victoria or his nominee who shall act as an expert and not as an arbitrator and whose fees shall be borne equally by the Lessor and the Lessee and whose determination of the Rental shall be final and binding on the Lessor and the Lessee provided that such Annual Rental shall not be less than the Rental paid by the Lessee immediately prior to the rent review date plus 4 per centum.
[Emphasis added.]
Legislative materials
The RLA was the product of the Retail Leases Bill 2003, which was introduced into Parliament by Mr Brumby, the then Treasurer, in the Legislative Assembly on 27 February 2003. As has been observed, one “main purpose” of the legislation was to introduce a new legislative scheme in place of the then legislation, the Retail Tenancies Reform Act 1998, to enhance “the certainty and fairness of retail leasing arrangements between landlords and tenants.[25] Certainty and fairness were, expressly, “key elements” of the bill, as is made clear in the Treasurer’s Second Reading Speech:[26]
[25]RLA, s 1(a); see above, [22].
[26]Victoria, Parliamentary Debates, Legislative Assembly, 27 February 2003, 231 (John Brumby, Treasurer).
I now turn to the key elements of the bill.
Certainty and clarity
The bill introduces major improvements to how the coverage of the legislation is determined, so that small and medium-size tenants are not unfairly excluded. As promised by the government, the 1000-square-metre rule—a provision that is unfair and creates legal uncertainty—has been abolished. The review assessed a range of alternatives and concluded that a prescribed threshold is a fairer means of determining coverage. The figure will be determined following final consultations with the industry.
The current provision that excludes public corporations works against small businesses that operate under a company structure. The bill introduces a more readily identifiable means of distinguishing between small and large companies by excluding listed corporations and their subsidiaries. The bill also corrects an anomaly in the current legislation whereby a franchisee who is a party to a lease is not protected if the franchisor also happens to be the landlord. These changes deliver on the government’s commitment to ensuring that the public corporations and franchise provisions of the legislation do not unfairly exclude small and medium-size tenants.
The bill also provides greater protection for tenants who are on short-term leases, as they will be covered once the tenant has continuously been in possession for one year. This ensures that schemes such as 364-day leases that are continually revised will be covered by the legislation. The bill maintains existing provisions regarding the type of retail activity that is covered by the legislation.
The government considers that the most effective way of minimising retail tenancy disputes is to ensure that the parties have sufficient information to make a sound business decision about entering into and renewing a lease.
The bill includes improved provisions that require the landlord to give the tenant a disclosure statement at least seven days before entering into the lease. Tough penalties will apply where a landlord fails to give a disclosure statement or provides one that is misleading, false or incomplete. The content of disclosure statements is to be prescribed by regulation and will include the improvements suggested by the industry during the course of the review. Notification requirements in regards to a tenant’s option to renew are enhanced.
A major obstacle to informing landlords and tenants of their rights and obligations under retail tenancies legislation is that there is no systematic means by which to contact them. All jurisdictions except Victoria require leases to be registered. While the government has chosen to minimise the compliance burden on business by not adopting the interstate model of registering leases, the bill does require the landlord to notify the Small Business Commissioner of basic contact details of the parties to the lease within 14 days. This is a negligible impost on landlords, but the details will be invaluable for the commissioner to ensure that all landlords and tenants covered by the legislation have access to relevant retail tenancy information.
…
[Emphasis added.]
Clearly, the “main purpose” of the RLA was to enable parties, both the prospective landlord and prospective tenant, to know and understand their obligations under a proposed leasing arrangement for the term of that lease so they could make the commercial decision whether to enter into the lease in the first place or to renew the lease for a further term.
Grounds of appeal
I turn now to the three grounds of appeal raised by the Applicant; grounds which have their context in the three questions of law upon which the Applicant contends the appeal is brought. As will be appreciated from these reasons, the matters relied upon as constituting the questions of law upon which the appeal is brought are questions which go to the proper interpretation of significant provisions of the RLA and are questions which provide a proper jurisdictional basis for an appeal to this Court under the provisions of s 148(1) of the VCAT Act.[27]
[27]Secretary to the Department of Premiers and Cabinet v Hulls [1999] 3 VR 331; and see Emrys Nekvapil, Pizer’s Annotated VCAT Act (Thomson Reuters, 6th ed, 2017), 884–7.
Whether the 2004 Lease ceased to be a “retail premises lease” during its term
The first ground of appeal raises questions as to the proper interpretation and operation of, principally, s 11(2) of the RLA, in the context of the other provisions of this legislation to which reference has been made.
The Landlord submits, in summary, that the 2004 Lease ceased to be a “retail premises lease” within the meaning of s 11 of the RLA for the 12 months commencing 7 May 2016 and did not revert to being a “retail premises lease” during its term. In support of this position, it says that the effect of s 11(2) of the RLA is that the Act only applies to a lease where the premises were “retail premises” when the lease was entered into (and, presumably, renewal were that an issue). It submits that this section does not preclude a lease from ceasing to be a “retail premises lease” during the term of that lease. Thus, it says that a “retail premises lease” that ceases to be a “retail premises lease” during its term may revert to being a “retail premises lease” at a later date during the same term. In other words, during the term the lease could both “jump out” of the RLA and “jump back in” so long as it was a retail premises lease at its inception under s 11(2). The Tenant, on the other hand, submits that the effect of these provisions is that the application, or otherwise, of the RLA is to be determined at the time the lease is entered into or renewed, and that once it is determined whether or not the Act does apply, that position does not change during the term of the lease or renewed term, regardless of whether or not the circumstances with respect to the lease change such that, were the exclusionary or excepting provisions applicable at the time of such changes, the application of the RLA would be different. In other words, that during the term of the lease, there can be no “jumping” in or out of the operation of the Act.
More specifically, the Landlord submits that s 11(2) of the RLA, in contrast to the position under the Retail Tenancies Act 1986 (“the 1986 Act”) and the Retail Tenancies Reform Act 1998 (“the 1998 Act”), makes it clear that for the Act to apply to “retail premises”, the premises must be “retail premises” when the lease is entered into. However, it says there is nothing in s 11(2) to suggest that a “retail premises lease” cannot cease to be a “retail premises lease” during the lease term. Thus the Landlord says all that s 11(2) identifies is the point in time at which a lease must be a lease of retail premises for the Act to apply.
The application provisions of the 1986 Act and the 1998 Act are cast differently from the provisions of s 11(2) of the RLA. These provisions are as follows:
Section 4(1) of the 1986 Act
The whole of this Act applies to a retail premises lease that is entered into after the commencement of this section unless the lease is entered into under an option granted or agreement made before that commencement.
Section 4(1) of the 1998 Act
This Act applies to a retail premises lease that is entered into after the commencement of this section including one entered into under an option provided under a retail premises lease that was entered into before that commencement.
Having regard to these provisions of the earlier legislation, the Landlord refers to two decisions in support of the position that premises could “jump in” and “jump out” of the application of the retail tenancies then legislation—that is, could become “retail premises” or cease to be “retail premises” other than at the time the lease or renewed lease was entered into.
In Leung v Hungry Jacks Pty Ltd,[28] an arbitrator decided that whether the 1986 Act applied was to be determined at the date of formal commencement of the dispute and, consequently, that the 1986 Act applied where the premises were let by a proprietary company at that date even though the premises were excluded at commencement of the lease because the tenant was then publicly listed. The Court found no manifest error in the arbitrator’s decision.
[28](2000) V Conv R 54-614.
In the Supreme Court, in Towercom Pty Ltd v Strathfield Group Ltd,[29] it was held that premises which were “retail premises” at the commencement of the lease could “fall out” of the 1986 Act during the lease because the tenant became a publicly listed company (an exclusionary or excepting attribute under the provisions of the 1986 Act).[30] The converse—the Leung v Hungry Jacks situation—was also said to be possible.[31]
[29](2001) V Conv R 54-634.
[30]Towercom Pty Ltd v Strathfield Group Ltd (2001) V Conv R 54-634, [33].
[31]Towercom Pty Ltd v Strathfield Group Ltd (2001) V Conv R 54-634, [33].
Apart from the decision of the Tribunal presently the subject of this appeal, the only occasion in which the operation of s 11(2) of the RLA has been considered was in William Buck (Vic) Pty Ltd v Motta Holdings Pty Ltd.[32] In that case, Senior Member Riegler considered whether a “retail premises lease”, within the meaning of s 11 of the RLA, could cease to be a “retail premises lease” during the lease term. Although it was not necessary to make a finding on this issue, the Senior Member observed, after considering cases under the earlier legislation, that “jumping out” of the operation of the Act may be possible. Senior Member Riegler said, in this respect:[33]
[32][2018] VCAT 15.
[33] William Buck (Vic) Pty Ltd v Motta Holdings Pty Ltd [2018] VCAT 15, [54]–[57].
54.In my view, s 11(2) of the RLA prevents fluctuation to prevent late entry into the Act. Therefore, if the premises are not retail premises at the time the lease is entered into (because the occupancy costs exceed $1 million), then the premises cannot become retail premises later (if the occupancy costs fall below $1 million).
55.However, I do not consider that the reverse scenario applies. In particular, I am of the opinion that a plain reading of the provision does not prevent late exit from the Act. As submitted by the Landlord, to construe the provision so as to disallow late exit from the Act would require the word ‘only’ to be positioned differently within the provision, as follows:
... this Act applies to a lease of premises only if the premises are retail premises at the time the lease was entered into renewed.
56.If the provision was expressed in that manner, then it would make no difference that the disqualifying characteristic subsequently arose, such as the occupancy costs increasing to over $1 million during the term of the lease because the characterisation of the lease is made at the time the lease is entered into.
57.Therefore, if leased premises do not fall within the definition of retail premises at the time that the parties entered into the lease (or its renewal), the premises cannot become retail premises later (for example if the occupancy costs reduced to under $1 million during the term of the lease). However, that does not prevent the reverse scenario. For example, if the occupancy costs were under $1 million at the time the parties entered into the lease, then the premises fall within the definition of retail premises. However, if the occupancy costs subsequently increased to over $1 million during the term of the lease, then the premises would no longer fall within the definition of retail premises.
Reference is also made by the Landlord to the commentary on s 11(2) of the RLA in Retail Leases Victoria:[34]
[34]Clyde Croft, Robert Hay and Luke Virgona, LexisNexis Butterworths, Retail Leases Victoria (at Service 35) [30.065.10].
It follows from these provisions that the application of the 2003 Act to any particular lease may fluctuate in some instances, but in a more limited way than under the 1986 Act or the 1998 Act. This is because the only time at which “fluctuation” can occur is between the date upon which the lease is first entered into and any date or dates upon which it is renewed. This is a more satisfactory situation than “fluctuation” at any time as a result of the determination of the application of the Act depending upon the time at which a dispute arises and proceedings are taken.
[Landlord’s emphasis.]
Reference is also made to the Retail Leases Victoria commentary with respect to s 4(2)(a) of the RLA (ie the “occupancy cost” exception):[35]
It seems unlikely that para 4(2)(a), the “occupancy costs” exception, will cause difficulties … as rents will probably not tend to reduce. Nevertheless, there remains the possibility of leases suddenly being caught if the prescribed outgoings and other costs or the prescribed “amount” is effectively increased from time to time.
In my view, however, these are in the nature of more general comments made in the absence of any particular decisions on the proper interpretation of provisions of s 11(2) of the RLA and, moreover, comments which are not inconsistent with these reasons. In any event, they do make it clear that the possibility of “fluctuation” in the application of the legislation is different and distinct from the position which existed under the 1986 Act or the 1998 Act. Were the position otherwise, I would rely upon the comments of Megarry J (as his Lordship then was) in Cordell v Second Clanfield Properties Ltd with respect to extrajudicial comment by judges.[36]
[35]Clyde Croft, Robert Hay and Luke Virgona, LexisNexis Butterworths, Retail Leases Victoria (at Service 35) [30.065.10].
[36]Cordell v Second Clanfield Properties Ltd [1969] 2 Ch 9 at 16–7.
Thus, the Landlord submits that where a lease was a “retail premises lease” when it was entered into, it can “jump out” of the RLA and, further, that the same lease can also revert to being a “retail premises lease” during the same term—that is, “jump back”. In support of this position, it is submitted that in enacting the RLA, Parliament could have chosen to remove entirely the possibility of leases “jumping in” and “jumping out” of the application of the RLA, but did not do so. Parliament decided, it is said, only to make one change to the position that existed under the 1986 Act and the 1998 Act: namely, to only define the moment when a lease had to be a “retail premises lease” for the RLA to apply, being the time at which the “retail premises lease” was entered into.
The Tenant, in its submissions, approached the proper construction of s 11(2) of the RLA with significantly greater emphasis on the purpose and context of the legislation.
In relation to the purpose of the Act, reference was made to provisions of s 1 which, as has been observed (particularly with respect to the contents of the Second Reading Speech of Mr Brumby[37]), is to enhance “the certainty and fairness of retail leasing arrangements between landlords and tenants”. Reference was also made to one of the features of the new statutory scheme, namely the manner in which its provisions are given legal effect; many of which operate by way of effectively implying provisions into a “retail premises lease”, rather than by direct statutory force. These are matters which, in my view, go to the third ground of appeal, which raises the effect of various avoiding provisions of the current legislation.
[37]See above, [36].
In terms of the application of the RLA, the Tenant draws attention to the provisions of Part 3 of the Act, ss 11 to 14, which identify the attributes of a lease to which the legislation applies. In the present case, the Landlord asserts that the 2004 Lease ceased to be a “retail premises lease” within the meaning of s 11(1), provisions which state (and are, for convenience, repeated):
(1)This Act applies to a retail premises lease that is—
(a)entered into after the commencement of this section; or
(b)renewed after the commencement of this section, whether the lease was entered into before or after that commencement.
The expression “retail premises lease” is not defined in the Act. In the context of s 11(1), it means “a lease of retail premises”. Having regard to these provisions, the Tenant contends that the relevant time to assess whether a lease is a lease of retail premises is the time the lease “is” entered into or renewed; and, of course, with reference to the provisions of s 7 of the Act.[38]
[38]See above, [29].
The expression “retail premises” as defined in s 4(1) of the RLA is subject to the exclusions or exceptions set out in s 4(2). One such exclusion or exception is where occupancy costs under the lease are more than the amount prescribed by regulations.[39] The expression “occupancy costs” was defined in s 4(3) of the RLA in 2003 as follows:
(3)In sub-section (2)(a), occupancy costs means—
(a)the rent payable under the lease, not being rent (or any part of rent) that is to be determined by reference to the turnover of a business; and
(b)outgoings of a prescribed kind to which the tenant is liable to contribute under the lease; and
(c)any other costs of a prescribed kind that the tenant is liable to pay under the lease.
[39]RLA s 4(2)(a).
In 2005, paragraph (b) was replaced by the current provision:[40]
[40]Section 5(6) of the Retail Leases (Amendment) Act 2005.
(b)the outgoings, as estimated by the landlord, to which the tenant is liable to contribute under the lease; and
Note:
Section 46 requires the landlord to give the tenant a written estimate of the outgoings to which the tenant is liable to contribute.
The 2005 amendment was deemed to have come into operation on 1 May 2003.[41]
[41]Section 2(6) of the Retail Leases (Amendment) Act 2005.
The Tenant submits that neither the text of s 11(1) of the RLA nor the definition of “retail premises” supports an interpretation of these provisions involving the requirement of an assessment whether a lease is a “retail premises lease” to which the Act applies at any time after it is entered into or renewed. Thus, it is said that s 11(2) of the RLA confirms that the relevant time to consider the nature of the premises is at the time of entry or renewal, and no other time or times. The text of these provisions says nothing about leases ceasing to be subject to the Act due to events that happen after the lease is entered into or renewed.
As the Tenant submits, once a lease is subject to the provisions of the RLA, the provisions of that legislation prescribe many contractual provisions of the lease that will affect the rights of the parties and their obligations throughout the term of the lease. Thus, where the phrase “retail premises lease” is used in Part 4 of the Act onwards to stipulate matters a lease is taken to provide, or provisions of a lease that are void, it means that a retail premises lease to which the Act applies at the time the lease is entered into or renewed. There is, in my view, much force in these submissions, as an interpretation that allows or requires the provisions of a lease to change from time to time or provides for temporal variations in statutory obligations or requirements attaching to that lease would hardly be supposed to promote certainty or fairness within the main purpose of the Act as stipulated in s 1 or as indicated in the Second Reading Speech on the introduction of the Retail Leases Bill 2003. It certainly does follow, in my view, that an interpretation which fixes the contractual terms and associated obligations with respect to a lease upon its entry or renewal provides both certainty and fairness.
In relation to the various decisions to which reference has been made in relation to the fluctuating operation of the legislation, the Tenant seeks to distinguish the decision of O’Bryan J in Towercom Pty Ltd v Strathfield Group Ltd[42] on the basis that provisions of the 1998 Act which were considered in that case are contained in a very different statutory scheme and one which may be said to be addressed and replaced by the regime under the RLA, particularly having regard to the provisions of s 11(2) and the main purpose as specified in s 1. As to the decision of the Tribunal in William Buck (Vic) Pty Ltd v Motta Holdings Pty Ltd,[43] it is observed that there, two points were relied upon in support of the conclusion that the RLA contemplates subsequent exit from its operation. One was the placement of the word “only” in s 11(2). However, the Tenant submits that the adverb “only” does not alter the meaning of the provision that serves simply to emphasise and to put beyond argument that the matters specified in s 11(2) are the sole (ie the only) matters to consider.[44] This is certainly the way I read these provisions as a matter of language. In any event, for the reasons which follow, I am not persuaded that a linguistic analysis of s 11(2) of the RLA alone provides a proper basis of interpretation without regard to the main purpose and context of this legislation.
[42](2001) V Conv R 54-634.
[43][2018] VCAT 15.
[44]Indeed, s 11(2) was likely inserted to quell arguments raised in a number of Supreme Court decisions such as Towercom. In much the same way, s 8 responds to counter O’Bryan J’s decision in Bradbun Pty Ltd v Bobo Nominees Pty Ltd (1994) V Conv R 54-501 to the effect that the assignment of a lease constitutes the entry into a new lease (see Clyde Croft, Robert Hay and Luke Virgona, Commercial Tenancy Law (LexisNexis Butterworths, 3rd ed, 2018) [23.13]).
The correct approach to the interpretation of legislation has been the subject of numerous decisions of the High Court of Australia. However, it is clear that primary importance is placed on the text of the legislation itself. Thus, in Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue,[45] the plurality summarised the principles:[46]
[45](2009) 239 CLR 27.
[46]Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue (2009) 239 CLR 27 at 46–7 [47].
This Court has stated on many occasions that the task of statutory construction must begin with a consideration of the text itself. Historical considerations and extrinsic materials cannot be relied on to displace the clear meaning of the text. The language which has actually been employed in the text of legislation is the surest guide to legislative intention. The meaning of the text may require consideration of the context, which includes the general purpose and policy of a provision, in particular the mischief it is seeking to remedy.
[Citations omitted.]
Similarly, in CIC Insurance v Bankstown Football Club Ltd, members of the High Court commented:[47]
Further, inconvenience or improbability of result may assist the court in preferring to the literal meaning an alternative construction which, by the steps identified above, is reasonably open and more closely conforms to the legislative intent.
[Citations omitted.]
[47](1997) 187 CLR 384 at 408.
Importantly, in the present context, regard should be had to s 35(a) of the Interpretation of Legislation Act 1984, which provides:
In the interpretation of a provision of an Act or subordinate instrument—
(a)a construction that would promote the purpose or object underlying the Act or subordinate instrument (whether or not that purpose or object is expressly stated in the Act or subordinate instrument) shall be preferred to a construction that would not promote that purpose or object
Consistently with this position, the Landlord submits that statutes must be construed beginning and ending with consideration of the text considered in context, including its legislative history and extrinsic material, but insofar as that context assists in fixing, rather than displacing, the meaning of the text.[48] Recent High Court authority has placed renewed emphasis on the actual text used in the provisions,[49] and in Certain Lloyd’s Underwriters v Cross, French CJ and Hayne J warned against the danger of overlooking the words used:[50]
A second and not unrelated danger that must be avoided in identifying a statute’s purpose is the making of some a priori assumption about its purpose. The purpose of legislation must be derived from what the legislation says, and not from any assumption about the desired or desirable reach or operation of the relevant provisions.
[48]The principles were helpfully summarised by Warren CJ in Lowe v The Queen [2015] VSCA 327, [9]–[18]. See Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue (2009) 239 CLR 27 at 46–7 [47]; Federal Commissioner of Taxation v Consolidated Media Holdings Ltd (2012) 250 CLR 503 at 519 [39]; Certain Lloyd’s Underwriters v Cross (2012) 248 CLR 378 at 389 [24]; Federal Commissioner of Taxation v Unit Trend Services Pty Ltd (2013) 520 CLR 523 at 539 [47]; Thiess v Collector of Customs (2014) 250 CLR 664 at 671 [22]; Alphapharm Pty Ltd v H Lundbeck A/S (2014) 254 CLR 247 at 264 [39] and at 287 [121].
[49]Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue (2009) 239 CLR 27 at 46–7 [47]; Federal Commissioner of Taxation v Consolidated Media Holdings Ltd (2012) 250 CLR 503 at 519 [39]; Thiess v Collector of Customs (2014) 250 CLR 664 at 671 [22].
[50]Certain Lloyd’s Underwriters v Cross (2012) 248 CLR 378 at 390 [26].
Reference was also made by the Landlord to the decision of then VCAT Deputy President Macnamara (as his Honour then was) in Ross-Hunt Pty Ltd v Cianjan Pty Ltd,[51] where the principles of construction relevant to the RLA were considered:[52]
The Retail LeasesAct and cognate legislation regulates the rights and liabilities between one another of landlords and tenants; it is a zero sum game. A right given to a tenant is an obligation imposed on the landlord. An immunity given to a landlord is a right removed from the tenant. The policy of a statute such as the Retail Leases Act is to draw what Parliament regards as a proper balance between the rights and liabilities of landlords and tenants in the particular area regulated by the Retail Leases Act. There is no broad outer area from which “beneficial” principles can be drawn. The only way in which it can be determined exactly how the balance between the rights and liabilities of landlords and tenants has been struck by Parliament is to analyse in accordance with normal statutory maxims the words which Parliament has used.
The last sentence of this passage emphasises the importance of the legislative text itself in the interpretation process, but does not, of course preclude in a particular context the importance of statutory purpose and context.
[51][2009] VCAT 829.
[52]Ross-Hunt Pty Ltd v Cianjan Pty Ltd [2009] VCAT 829, [33].
In my view, the position advanced by the Tenant with respect to the interpretation of s 11(2) of the RLA has considerable force and is supported by both the legislative purpose and the statutory context, and is not in any sense precluded by the words of s 11(2) itself. It is true that, as the Landlord submits, the Court should not be swayed by arguments of unsatisfactory consequences of a particular legislative interpretation. In this respect, Pearce and Geddes say:[53]
arguments by reference to unsatisfactory consequences are on shaky ground unless a more attractive alternative interpretation of the words used in the legislature is available … Another difficulty that is sometimes encountered when it is argued that the literal interpretation would produce unsatisfactory and unintended results is that this may be a matter on which opinions can differ.
The position here is not simply one of unsatisfactory consequences at large; it is, rather, in my view, a consequence at odds with the whole purpose and context of the RLA and is not, in any sense, mandated by the language of s 11(2). Rather, the gravamen of the argument put by the Landlord is merely that the language of s 11(2) does not clearly and expressly preclude the possibility for which it is arguing. Indeed, the consequences, to which I now turn by way of illustration, are quite profound.
[53]DC Pearce and RS Geddes, Statutory Interpretation in Australia (LexisNexis, 8th ed, 2014) [2.40].
First, of particular significance in this respect is the effect on rent review provisions and liability to land tax. Thus, if the RLA applies, provisions of s 35(3) apply in the following terms (repeated for convenience):
(3)A provision in a retail premises lease is void to the extent that it purports to preclude, or prevents or enables a person to prevent, the reduction of the rent or to limit the extent to which the rent may be reduced.
It is clearly a most unsatisfactory state of affairs for parties not to know whether any agreed rent review provisions in a lease are subject to this restriction or not. Moreover, uncertainty as to whether a lease is affected by the RLA would leave parties in a very invidious position in relation to the other requirements of s 35, namely, those contained in s 35(1) and (2), which provide as follows:
Rent reviews generally
(1)If a retail premises lease provides for a review of the rent payable under the lease or under a renewal of the lease, the lease must state—
(a)when the reviews are to take place; and
(b)the basis or formula on which the reviews are to be made.
(2)The basis or formula on which a rent review is to be made must be one of the following—
(a)a fixed percentage;
(b)an independently published index of prices or wages;
(c)a fixed annual amount;
(d)the current market rent of the retail premises;
(e)a basis or formula prescribed by the regulations.
Note
For reviews based on the current market rent of the retail premises, see section 37.
As the Note to s 35(2) indicates, there are also issues with respect to the possible application, or not, of the requirements of s 37 of the RLA in relation to rent reviews based on current market rent. Section 37(1) requires that a “retail premises lease” that provides for a rent review to be made on the basis of the current market rent of the premises is taken to provide as set out in ss 37(2) to (6).
In my view, the Landlord’s interpretation of s 11(2) would produce an impossible situation for both landlords and tenants with respect to rent review as I have indicated with reference to, particularly, ss 35 and 37. Similarly difficult issues arise with respect to uncertainty in relation to the application or otherwise of the provisions of ss 26 to 28 of the RLA with respect to renewal of a “retail premises lease”. The consequences of misstating the position with respect to the operation of these provisions may, depending on the particular circumstances, have very serious and prejudicial consequences for both landlords and tenants. Other difficult issues would arise with respect to other obligations imposed or avoided by the Act, such as those with respect to refurbishment, relocation and demolition,[54] damage and refurbishing,[55] and liability for repairs more generally.[56]
[54]See ss 53 to 56.
[55]See ss 57 and 58.
[56]See s 52.
In terms of financial obligations, one of the principal difficulties which would be posed by what might be termed the “fluctuating uncertainty” of the application of the RLA, arises with respect to the provisions of s 50 with respect to land tax (repeated for convenience):
Recovery of land tax
(1)A provision of a retail premises lease is void to the extent that it makes the tenant liable to pay an amount for tax for which the landlord or head landlord is liable under the Land Tax Act 2005.
There are also issues with respect to outgoings and notification of outgoings, matters which are probably more conveniently discussed in relation to the second ground of appeal. And there are also more general issues in relation to the effect of the avoiding provisions of the Act in many of the provisions to which reference has already been made, noting that there are also a number of other provisions which operate in this way. Moreover, it should be remembered that s 94 of the Act prevents contracting out so it is not possible for parties to avoid the difficulties to which reference has been made by express provisions in their lease.
For these reasons, I am of the opinion that neither the provisions of the RLA nor their context nor the overall purpose of the legislation support the position put by the Landlord. In my view, the interpretation it would put on s 11(2) would produce a situation completely at odds with a main purpose of certainty and fairness of retail leasing arrangements. Moreover, it would produce significant uncertainty both with respect to whether or not the legislative regime under the RLA applies at any particular time to a lease which was a “retail premises lease” at its commencement or renewal, and also significant uncertainty in relation to the consequences of its application and non-application in the event that “jumping out” and “jumping in” were conceivable under this legislation. The latter uncertainty is also considered and apparent in the reasons which follow in relation to the third ground of appeal. Consequently, the first ground of appeal is made out.
When landlord’s estimate of outgoings is required to be given
The second ground of appeal raises questions with respect to the proper construction of the RLA in relation to a landlord seeking to rely on an estimate of outgoings for the purposes of s 4(3)(b) of the Act and the timing of the giving of that estimate to the tenant before the estimate can be taken into account as part of the occupancy costs.
It is common ground that the outgoings and rent for the last two years of the 2004 Lease were more than $1 million. The issue with respect to this ground of appeal is whether the outgoings can be included in the occupancy costs calculation under s 4(3) of the RLA. The Tenant argues on a number of bases that the quantum of outgoings could not be considered in determining the occupancy costs for the last two years.
The Tenant submits that there is no basis for construing s 4(2)(b) of the RLA as referring to outgoings in respect of the Landlord’s accounting periods as described in s 46(3)(b). The Landlord submits that the provisions of s 46 are irrelevant to the process of determining whether or not a lease is a “retail premises lease”, as s 46 is concerned only with a “retail premises lease”. As the Landlord says, the section provides that a “retail premises lease” is “taken to provide” as set out in ss 46(2) to (4). Sections 46(2) and (3) require a landlord to give the tenant a written estimate of outgoings “before the lease is entered into” and “in respect of each of the landlord’s accounting periods during the term of the lease, at least one month before the start of that period”. Section 46(4) provides that the “tenant is not liable to contribute to any outgoings of which an estimate is required to be given to the tenant as set out in the section until the tenant is given that estimate”. Thus, in my view, it is clear that there are two separate requirements provided for in s 46(3), namely, to give the tenant an estimate of outgoings before the lease is entered into and then in respect of each of the landlord’s accounting periods during the term of the lease. As the Landlord submits, s 46 is one of the provisions of the RLA which operates by, in effect, implying its provisions into the lease in circumstances where that lease is a “retail premises lease” under the provisions of the Act. So, in this sense, I accept that this is a somewhat circular argument insofar as the question is whether or not the particular lease is a “retail premises lease” under s 4 of the RLA.
As the Tenant observes, the exclusionary or excepting provisions of s 4(2)(a) of the RLA are informed by the definition of “occupancy costs” to be derived from the provisions of s 4(3), particularly in the present context the provisions of s 4(3)(b) (set out for convenience):
(3)In sub-section (2)(a), occupancy costs means—
…
(b)the outgoings, as estimated by the landlord, to which the tenant is liable to contribute under the lease; and
Note:
Section 46 requires the landlord to give the tenant a written estimate of outgoings to which the tenant is liable to contribute.
…
This note does, as the Tenant observes, refer to the landlord’s obligation to give “a written estimate” in the singular. Although, as a matter of statutory construction, the singular may include the plural, as provided for in the Interpretation of Legislation Act 1984,[57] it is submitted that the use of the singular is deliberate and refers to a single estimate; namely, the estimate given before the lease is entered into as required by s 46(3)(a). Thus, the Tenant submits there is no basis to construe s 4(2)(b) as referring to outgoings “in respect of each of the landlord’s accounting periods” as described in s 46(3)(b). In my view, there is much force in these submissions, which are consistent with what, in my view, is the correct interpretation of s 11(2) of the RLA as fixing the operation of the Act at the time of commencement or renewal of the relevant lease.[58] In this respect, it should be observed that the provisions of s 4(3), particularly s 4(3)(b), are not determinative of the operation of s 11(2), but they are, for these reasons, consistent with the view I have formed in relation to the operation of s 11(2). Moreover, there is nothing in these provisions which points to an interpretation of s 11(2) as contended for by the Landlord, particularly as the interpretation contended for by the Tenant avoids the problems of circularity in relation to s 46 and the determination whether or not the lease is a “retail premises lease” and, consequently, whether s 46 applies in any event. Finally, it should be observed that the note to s 4(3)(b) is just that, a note. It is helpfully informative as to the obligations under s 46, but nothing in its content does, in my view, suggest that it is intended to be determinative in any way or at odds with the interpretation of these provisions as I have indicated.
[57]See s 37.
[58]Cf Respondent’s Outline of Submissions (11 September 2019), [30]–[42].
It follows that the requirements of s 46 with respect to the payment of outgoings are applicable to the 2004 Lease for the whole of the term of that Lease, and that the Tribunal’s reasoning with respect to these obligations is, in my view, erroneous, save that I do agree with the view expressed by the Tribunal as to the effect of non-compliance with the requirements of s 46(3)(b), as follows:
52.I accept Verraty’s [the Landlord’s] submission that it is irrelevant that the notice was not given within the time prescribed by s46(3)(b). The only penalty for not giving notice by that time is that the liability to contribute to outgoings does not arise. I reject Verraty’s submission that even when the estimate is given late, the tenant remains liable to pay outgoings that relate to the period before the estimate is given. Such an interpretation makes the consequence of a landlord not giving a notice meaningless.[59]
[59]Phillips v Abel[2019] VCAT 1031.
It follows, for the preceding reasons, that the second ground of appeal is made out.
Effect of the avoiding provisions of the Retail Leases Act 2003
This third ground of appeal raises for consideration the effect of the application of the provisions of the RLA which have the effect of implying provisions into leases to which the Act applies—that is, “retail premises leases”—according to the formula “a retail premises lease is taken to provide as set out in this section”. This “device” is to be found in many provisions of the Act, an example of which is s 46(1) with respect to the estimate of outgoings. These provisions are to be read with the provisions of s 94 of the RLA, which renders void a provision of a retail premises lease “to the extent that it is contrary to or inconsistent with anything in this Act (including anything that the lease is taken to include or provide because of a provision of this Act)”.[60]
[60]Section 94(1); set out above, [33].
Critical in the present context are the provisions of s 35(3) with respect to rent review and the provisions of s 50 with respect to the recovery of land tax.[61]
[61]See above, [30] and [32], respectively.
As I have found that s 11(2), properly construed, does not allow for the fluctuating application of the RLA as contended for by the Landlord, the issue does not arise. It follows that, once the Act applies to a lease, its provisions avoiding inconsistent provisions in a “retail premises lease” apply to that lease for the remainder of its term. Whether or not this position continues in the event of its renewal is another question, and not one which is raised on this appeal. Nevertheless, doubts that may arise in relation to the possibility of renewal of a lease to which the provisions of the Act have applied. Having regard to the submissions the parties have made in relation to this issue in the context of the findings of the Tribunal in relation to the fluctuating operation of the provisions of the RLA, it is desirable to express some views on these issues.
The Tenant’s position in this respect is that if the 2004 Lease ceased to be a lease to which the RLA applied from 7 May 2016 until the end of the lease, the terms of that lease did not change in the sense of reviving to include provisions which were rendered void by the operation of s 94 of the RLA when that lease commenced and attracted the operation of the Act at that time.
As the authorities indicate, the effect of avoiding provisions in legislation depends upon the nature and purpose of the particular legislation and, of course, the particular legislative provisions. In the present context, it follows, in my view, from the approach I have taken with respect to the interpretation of s 11(2) of the Act, at least in general terms, that if the legislature had intended and provided for the fluctuating application of the Act, it would seem to follow that the avoiding effect of the provisions of s 94 would only apply for so long as the lease was subject to the operation of the Act. On this basis, it would follow that the provisions initially rendered void by the application of the RLA would “revive” once the Act ceased to apply to the lease. This, however, assumes the interpretation of s 11(2) as contended for by the Landlord which, for the preceding reasons, I have rejected. Consequently, the prospect of revival of previously avoided provisions does not arise.
There does, however, remain questions in relation to the position on renewal of a lease to which provisions of the RLA did apply.
The position with respect to the provisions of a renewed lease depend, in general terms, on the provisions for renewal, if any, contained in the lease which is being renewed. The relevant provisions of the 2004 Lease are contained in clause 16.2, as follows:
16.2Terms and Conditions of Renewed Lease
The renewed Lease granted pursuant to Clause 16.1 hereof shall be subject to the same covenants, conditions, agreements, stipulations and providers contained in this Lease save and except that:
(a)the Annual Rent reserved by and payable for the first year of the renewed Lease shall be the Annual Rental determined in accordance with the provisions of Clause 15.1(b) of this Lease and, where appropriate, the provisions of Clause 15 shall be incorporated in full into any such renewed Lease and for the purposes of Item 13 of the Schedule hereto as incorporated into any such renewed Lease the term “lease year” shall mean each consecutive twelve (12) month period during the term created by such renewed Lease with the first such period commencing on the commencement date of such renewed Lease; and
(b)such new renewed Lease shall omit from Item 11 of the Schedule to that lease the first further term (if any) of this covenant for renewal.
These provisions are in relatively usual form, particularly those contained in the chapeau which, in effect, provide for a renewed term pursuant to a lease containing the same provisions for the term being renewed as are contained in the original lease, with some updating and amendment as provided for in a provision such as clause 16.2.
Provisions of this nature must also be read with s 27(1) of the RLA, which provides as follows:
Option to renew
(1)If a retail premises lease contains an option exercisable by the tenant to renew the lease for a further term, the lease must state—
(a)the date until which the option is exercisable; and
(b)how the option is to be exercised; and
(c)the terms and conditions on which the lease is renewable under the option; and
(d)how the rent payable during the term for which the lease is renewed is to be determined.
On the basis of provisions such as clause 16.2 of the 2004 Lease and having regard to the provisions of s 27 of the RLA, in particular s 27(1)(c)—a provision which will operate as soon as the application of the Act to the lease as a “retail premises lease” occurs by reason of the operation of s 11(2)—the position would appear to be that the provisions of the lease being renewed for the purpose of a provision such as clause 16.2 would be the lease is effectively revised by the implication of the various provisions of the Act which apply the formula discussed—“a retail premises lease is taken to provide as set out in this section”. This would, in the present circumstances, and having regard to the provisions of clause 16.2 of the 2004 Lease and s 94 of the Act, include the provisions of s 37 of that legislation.
There would not, however, appear to be any difficulty with the parties directing their minds to this possibility when the lease was first entered into if they contemplated the possibility of the RLA not applying at the time of renewal and, consequently, providing express terms to the effect that the provisions contained in any renewed term are to be those contained in the original lease unaffected by the operation of the RLA. There would be no problem with the application of s 94 of the RLA on this basis because, on renewal—the other point of time at which the operation of s 11(2) becomes relevant—the renewal is not a “retail premises lease” and therefore there is nothing to attract the operation of s 94 of the Act.
It is not necessary in the present circumstances to express any view with respect to the Landlord’s submissions with respect to the operation of the avoidance provisions and any Ministerial Determinations under the Act.[62] The difficulty contended for is hypothetical and it is far from clear that the construction of the Act implicit in these submissions is necessarily correct.
[62]See Respondent’s Outline of Submissions (11 September 2019), [48].
So, concluding with respect to the third ground of appeal, it follows from the preceding reasons that if the 2004 Lease did cease to be subject to the application of the RLA during the last two years of its term, the provisions in that lease that were made void by the operation of s 35(3) and s 50 of the Act did remain void. On that basis, the third ground of appeal is made out, but, as indicated, the issue does not arise having regard to the proper interpretation of s 11(2) of the Act.
Conclusion
For the preceding reasons, the appeal in this matter is successful and it is, in my view, appropriate that I make a declaration and orders as sought by the Tenant, the Applicant, as follows:
(1)A declaration that the annual rental payable during the first year of the renewed lease that commenced on 7 May 2018 is the current market rent as determined by a specialist retail valuer in accordance with s 37 of the Act.
(2)An order that the Landlord do all things necessary to allow the determination of the amount of rent.
(3)An order that the Landlord’s claim for reimbursement of Land Tax in respect of the final two years of the 2004 Lease be dismissed.
The parties are to bring in orders to give effect to these reasons.
I otherwise reserve the question of costs and will hear the parties further in relation to this issue.
Having regard to the nature of this appeal, it is, in my view, desirable to make the orders sought, as indicated, and there is no need or utility in ordering the remitting of the proceeding to the Tribunal under s 148(7)(c) of the VCAT Act.
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