ROBERTS and ZHAO
[2008] WASAT 67
•18 FEBRUARY 2008
ROBERTS and ZHAO [2008] WASAT 67
| STATE ADMINISTRATIVE TRIBUNAL | Citation No: | [2008] WASAT 67 | |
| COMMERCIAL TENANCY (RETAIL SHOPS) AGREEMENTS ACT 1985 (WA) | |||
| Case No: | CC:1458/2007 | 12 FEBRUARY 2008 | |
| Coram: | DR B DE VILLIERS (MEMBER) | 17/02/08 | |
| 9 | Judgment Part: | 1 of 1 | |
| Result: | Application dismissed | ||
| B | |||
| PDF Version |
| Parties: | TIM ROBERTS DONG HUA ZHAO |
Catchwords: | Commercial tenancy Notice of renewal Does oral communication constitute renewal of lease Minimum five year term of lease |
Legislation: | Commercial Tenancy (Retail Shops) Agreements Act 1985 (WA), s 13 |
Case References: | Niesmann v Collingridge (1921) 29 CLR 177 Swanville Investments Pty Ltd & Ors v Riana Pty Ltd (2003) WASCA 121 |
Orders | The application is dismissed. |
JURISDICTION : STATE ADMINISTRATIVE TRIBUNAL STREAM : COMMERCIAL & CIVIL ACT : COMMERCIAL TENANCY (RETAIL SHOPS) AGREEMENTS ACT 1985 (WA) CITATION : ROBERTS and ZHAO [2008] WASAT 67 MEMBER : DR B DE VILLIERS (MEMBER) HEARD : 12 FEBRUARY 2008 DELIVERED : 18 FEBRUARY 2008 FILE NO/S : CC 1458 of 2007 BETWEEN : TIM ROBERTS
- Applicant
AND
DONG HUA ZHAO
Respondent
Catchwords:
Commercial tenancy - Notice of renewal - Does oral communication constitute renewal of lease - Minimum five year term of lease
Legislation:
Commercial Tenancy (Retail Shops) Agreements Act 1985 (WA), s 13
Result:
Application dismissed
(Page 2)
Category: B
Representation:
Counsel:
Applicant : Mr M Morgan
Respondent : Self-represented
Solicitors:
Applicant : Morgan Alteruthemeyer
Respondent : Self-represented
Case(s) referred to in decision(s):
Niesmann v Collingridge (1921) 29 CLR 177
Swanville Investments Pty Ltd & Ors v Riana Pty Ltd (2003) WASCA 121
(Page 3)
Summary of Tribunal's decision
1 The reasons for decision in this matter were handed down orally. This is a transcript of those reasons. Minor editorial changes were made.
The facts
2 The facts as agreed by the parties can be summarised as follows. Unit 2 of 1505 Albany Highway, Cannington was advertised for rent in August/September 2004. A draft lease was executed by the parties on 17 September 2004. Although Mr Tim Roberts (applicant), in his original statement and in his subsequent affidavit, disputed the existence of a final lease, he now acknowledges that a final lease had indeed been entered into on 18 October 2004.
3 The terms of the lease provided for a period of three years' tenancy, renewable for another three years, plus a further three years. The terms of the renewal were set out in the lease. The first term of the lease commenced on 7 October 2004 and ended on 6 October 2007.
4 An option existed for the lease to be renewed. The terms of the renewal - for example, rent increase in accordance with CPI - were set out in the lease and no further negotiations were required in order for it to be renewed. The option could therefore be exercised unilaterally by the applicant. The lease stipulated that the notice of renewal had to be given by the applicant no less than three months before the expiry of the lease. The date for the first renewal was therefore 7 July 2007.
5 The applicant did not, prior to 7 July 2007, give written notice of his desire to exercise the option. Mr Dong Hua Zhao (respondent) wrote to the applicant on 28 July 2007 to inform his that the lease would expire on 7 October 2007, since an intention to renew the lease had not been received in writing. The applicant wrote to the respondent on 1 August 2007, making a "formal application" for the renewal of the tenancy. The respondent refused for the option to be exercised at this late stage.
6 The parties have made several attempts to resolve the dispute on commercial terms, and it was referred to mediation by this Tribunal. No agreement has been reached.
7 The Tribunal asked the parties during the hearing if they required additional time to settle the dispute, or at least to agree on terms for the premises to be vacated should the application fail. Both parties declined for the proceedings to be adjourned to allow further negotiations.
(Page 4)
Orders sought by the applicant
8 The orders sought by the applicant are as follows. The applicant sought an order that:
(a) he had validly exercised the option for renewal by the oral notices he gave the respondent; or
(b) he is entitled to a minimum of a five-year tenancy pursuant to s 13 of the Commercial Tenancy (Retail Shops) Agreements Act 1985 (WA) (CT Act).
The dispute
9 The following issues were in dispute and I briefly summarise those:
1) Was the oral communication between the parties, particularly those in January 2007 and March 2007, sufficient notice of renewal of the lease?
2) Did the respondent owe a legal duty to the applicant to remind him of the terms of the lease and the requirements for the lease to be renewed?
3) Did the respondent breach a legal duty by waiting for the renewal date to pass so he could establish his own furniture shop at the premises?
4) Are the provisions of s 13 of the CT Act applicable and, if so, should the Tribunal exercise its discretion to extend the lease for a period of five years at least?
10 The Tribunal's consideration follows. The Tribunal will deal with each of these questions separately.
Was the oral communication between the parties, particularly those in January 2007 and March 2007, sufficient notice of renewal of the lease?
11 The parties had several informal discussions during January 2007 and March 2007, but their recollection of exactly what was said differs. On one aspect they agree - there was no unequivocal statement by the applicant that he was exercising his option for renewal under the lease. There was general mention of renewal, of rent review, of possible purchase of the premises, but no formal notice, even orally, of "We are renewing the lease" or "We are exercising our option" was given.
(Page 5)
12 That requires the Tribunal to determine from the content of discussions if it could be adduced that the option had been verbally exercised.
13 The evidence does not support such a finding. Repeated mention was made by the applicant that the respondent, by having raised the issue of rent, by implication, exercised the option to renew. The Tribunal rejects the contention.
14 In fact, by raising the issue of rent review, it appears as if the applicant may have wanted to renegotiate the terms of the lease. Otherwise, he could have merely have stated he was exercising the option to renew, but he never did so. The rent for the second lease period was set out in the lease as CPI adjustment, and if the applicant wanted to renew the lease, there was no reason for him to discuss or negotiate the rent.
15 There was therefore no reason for the applicant to enter into these negotiations regarding the rent, unless he wanted to renegotiate the lease at a lower than CPI adjusted amount, and if that is the case, there was no agreement between the parties.
16 The reliance by the applicant on the matter of Niesmann v Collingridge (1921) 29 CLR 177, is therefore not well founded, since, in the matter under consideration, there was:
(a) no oral exercise of an option to renew the lease;
(b) no agreement between the parties that the lease may be renewed orally; and
(c) no agreement on the terms of the new rental sum.
17 If the applicant wanted to exercise the renewal option, there was no need for him to discuss anything with the respondent. He had everything in his favour. He merely had to give written notice of renewal. The Tribunal accepts that the applicant raised the issue to rent in a very general sense, but that does not constitute a notice of renewal or the exercise of an option.
18 Some mention was made by the applicant that due to the respondent not being a mother tongue English speaker, communication may have got lost or misunderstandings may have arisen as to what was said by the applicant.
(Page 6)
19 The Tribunal rejects this contention.
20 The respondent demonstrated during the hearing that his understanding of English was good, that he had a thorough grasp of the terms of the lease, and he would have honoured the renewal of the lease had the applicant complied with a notice of renewal. His evidence was consistent with the terms of the lease.
21 The possibility, as the Tribunal sees it, is that the applicant, in his efforts to establish a new business, had not paid diligent attention to the terms of the lease.
22 In fact for some time, in affidavit form and submissions to this Tribunal, the applicant explicitly disputed under oath that he had ever signed a lease. By not paying attention to the lease, he either forgot about the lease or was simply not aware of his right to renew it. As Mr Hannay, partner of the applicant, said in evidence, he was "naive", and they should have paid closer attention to the legal arrangements they had entered into.
23 The fact is that the applicant only realised after the letter of 28 July 2007 from the respondent that he had missed the opportunity to renew the lease, and even then, in his letter dated 1 August 2007, he did not make any mention of the purported oral agreement or purported oral notice he had given the respondent to renew the lease. He merely indicated in his letter that he wanted to enter into discussions. That falls far short from a notice of renewal or an agreement being reached.
24 The Tribunal therefore finds that the oral communications between the parties were not sufficient to constitute a conclusion that the option to renew had been exercised. The Tribunal does not accept the contention that oral notice could be given, even though the lease requires written notice, but even if that were the case, I find that:
(a) no such oral notice was given; and
(b) no agreement was reached on the new rent for the premises.
(Page 7)
Did the respondents owe a legal duty to the applicant to remind him of the terms of the lease?
25 Mr Mathew Morgan, counsel for the applicant, contended that the respondent had acted in an unconscionable manner during the course of 2007. The reason for this allegation is that there was, according to Mr Morgan, a legal obligation on the respondent to make the applicant aware of the terms of the lease.
26 The Tribunal does not accept this contention.
27 The parties were on equal footing. They had entered into a lease voluntarily, as a commercial transaction. The applicant could have exercised the option in writing at any time prior to 6 July 2007, and yet he had failed to do so. It is that simple. He may have intended in the back of his mind to exercise the option. He may also have considered other potential premises at a lower rate. We do not know, but the facts show that he never exercised his right of renewal.
28 The failure of the respondent to return a call of the applicant in March 2007 cannot be construed as unconscionable conduct. The applicant could have called him again. He could have left unequivocal messages that he was renewing the lease, or better even, he could have done what the lease required him to do, and that is to renew the lease in writing. He did not do any of these. The time simply slipped by.
29 The Tribunal cannot find any legal duty on the respondent to assist the applicant in understanding his rights under the lease. The failure to renew is entirely that of the applicant.
Did the respondent breach a legal duty by waiting for the renewal date to pass, so he could establish his own furniture shop at the premises?
30 Mr Morgan suggested that the fact that the respondent had been planning for some time to open a furniture shop on the premises, without informing the applicant of his intention, was indicative of the bad faith by which the respondent operated.
31 The respondent explained that he was merely looking at the use of the premises should the lease not be renewed. The respondent's wife said she had been thinking for some time about opening a furniture shop, and when the option was not exercised, these premises became available for such a purpose.
(Page 8)
32 The Tribunal cannot find any legal duty that was breached by the respondent. He was entitled to look at the future use of his premises, in anticipation that the lease might not be renewed. He may even silently have hoped the lease would not be renewed. But there was no legal duty on him to discuss such matters with the tenants.
33 It must be noted that the respondent only wrote to the applicant some few weeks after the date of renewal had passed to inform them that the lease had expired. It is not as if the respondent was anxiously waiting and sending a notice at midnight of the last date for renewal. The respondent appears to be an honest and open businessperson, who was making a commercial decision in anticipation that the lease may not be renewed.
34 The Tribunal therefore rejects the contention.
Are the provisions of s 13 of the CT Act applicable, and if so, should the Tribunal exercise its discretion to renew the lease for at least a total period of five years?
35 Mr Morgan contended that s 13 of the CT Act guarantees a minimum of five years' tenancy, and that as a result, the circumstances of this matter justify an extension of the lease to the period of five years.
36 The respondent contends that the lease already complied with the CT Act, in that a three plus three plus three year period had been agreed to. The applicant could have had the premises for a total of nine years, had he enforced the terms of the lease. In the tenant guide that was enclosed with the lease, it was explained that:
"If you are entering a new retail shop lease for the first time, the [CT] Act provides you with a right to a minimum of a five-year lease to help you establish and develop your business. This can be a combination of terms and options to extend your lease to the five-year period."
37 It was confirmed in the matter of Swanville Investments Pty Ltd & Ors v Riana Pty Ltd (2003) WASCA 121 that a lease for a three-year period, renewable for a further three years, complies with the minimum terms as required by s 13 of the CT Act.
38 The Tribunal therefore finds that the lease complied with the minimum terms set out in s 13 of the CT Act.
39 The relief sought by the applicant would only have been available if the lease was less than five years, or the current term, plus any renewal term, was less than five years. That is clearly not the case in this matter. The applicant's reliance on s 13 of the CT Act for the lease to be extended to five years must therefore fail.
(Page 9)
Conclusion
40 The Tribunal's conclusion is as follows. The Tribunal finds that:
(a) the applicant has not exercised his right for the lease to be renewed; and
(b) the applicant is not entitled to an extension of the lease under s 13 of the CT Act.
41 The application must therefore fail.
Orders
42 The Tribunal makes the following order:
1. The application is dismissed.
I certify that this and the preceding [42] paragraphs comprise the reasons for decision of the State Administrative Tribunal.
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DR B DE VILLIERS, MEMBER
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